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; ; Water System; 1981-10-13
WATER SYSTEM CONSOLIDATION PART 2 EXHIBITS COMPILED BY PACIFIC GOVERNMENTAL CONSULTANTS OCTOBER 13. 1981 SPECIALIZING IN: Government Relations, Organization and September 22, 1981 Management William C. Meadows Joe Zapotocky, Consultant SUBJECT: Proposition V - I„.pact on P . impact on Lxpenditure Limitati With the advent nf P>-^^ in CalifornirLCL that'th'^" Proposition 4 citiP. approach to fiscal r.i .^^^' ""^^^ forced to ch^na^^^^^^ would firs? prior to theJ ^ ^^^^^ whole w.-^ J^irst determine what If^woi ^"ese measures, citip<; vide the number of oersonnif °^ service they wished simplv'bv^"^^ ^^^^^ i-o- then'tL°y''°" sxnc^e'^th^ ornn'\''"^ ^^^^easing the ad'vJ''' '""^^ ^^ne nues in ^ property tax was the larPP^f 1^ ^f^Qrem tax rate nues m most cities. largest single source of reve- ons Under Proposition 4, cities hh^ u imposed upon "Proceeds of ^' ^^^^gh constrained by limit. iH'"-- and rh "^^^""^ "^ich could^brhl^d f^^^ produce In- Many cities are P-duc.ns funct.ons. Because Pr^^os\^^\L° 4Tr^est"rc^l-% 35.-8 Rancheros Or,Ve . San Ma,cos.C^ 92069 . ,44.8977 William C. Meadows September 22, 1981 Page Two As noted above, the principal purpose of Pron L t-. ^^ limits on the amount of money that could be s^c^nf hv \ ^1^'^'' government. Under this new law iq7« 7Q ^ ^ ^''''^^ year and in t-K^ P n • ' 1978-79 was used as a base only be exceeded bl?h^"f/^^f>-'^^ ^^"^^ expenditures could Index and/or ?hf the annual increase in the Consumer Price t'hf St^tef^'^As'LSr"" L^Mr°."5:: ^^.^P—^ ^-on-e in' lyze the measure i tllTf experts to tirst ana- basic intent of the Voters ^ ""^^ '° circumvent the By the time Proposition 4 became law (Article XTTT R ^-K legislation. Among those means suggested were: ^' ni^^^^ ^^^^ "^ys possible to avoid desie-nating their revenues as "Proceeds of taxes " ("pfo by^Prop' 4!r' "-""^^^ limited" 2. To supplement any revenues lost as a result of thp nilTtll'^rf th:ir'^.= "^^^ "^^^ encouraged to'scruti- ^stablL;:'^^^: onef!" ^"^^ -^^'^ "° ^' depreciaMon^nf°^ff^f- ^^'^blish systems for the t?nn i ^"^''^'^ assets valued at more than $100 where none existed. A. Cities were told that it would be wise to incren.;f. departmental overhead costs to as much as 25% o? actual cost to supplement the cost of operatinenon income producing departments, i.e., the'^buUdrL and safety departments would increase their fees for p?an check, inspection, etc., to a point where actual cc>tt<. bCt nn''! "^"overed then they wSuld add l 257. contri! bution for administrative overhead to defray the cost William C. Meadows September 22, 1981 Page Three for the operation of the City Council, the City Man- ager, the City Attorney and any others that do not produce any form of revenue. Since these fees or ser- vice charges are not proceeds of taxes, these monies were not subject to the expenditure limitations im- posed by Prop. 4. Cities were told to establish large revenue reserves in their enterprise funds. Enterprise funds usually include water, sewer, etc. The enterprise funds for the most part rely on service charges and fees for their operation, thus their revenues are exempt from the expenditure limitations as they are not "Proceeds of taxes." These large reserves generate sizeable interest for their depositor; based upon current rates of interest it is possible to earn as much as $500,000 on an annual deposit of 2.5 million dollars. Once earned, these reserves can be spent for any water de- partment related purpose; however, it can be said that many of the city functions are in some way water re- lated, i.e., the City Manager is the head of all City functions thus he is the principal head of the Water Department so it is possible to expend water funds to support part of his departmental cost. The City yard supports water department activities and the City recently expended 2 million dollars from the Water Department reserve fund to pay for a portion of a combination corporation yard and police station. SOURCES: 1. "California's Proposition 4," Ernst & Whinney, June, 1980, Sacramento. 2, Proposition 4 Implementation Workshop Papers, League of California Cities. V--' • 'T ;.n .:.'_Lll_l'Ji'.L niinsinkwniuMKi i PARKS L KLC. ^ » n PrNOv'Lv.T TJfLE POLICE I UTILITY SERVICES CENTER f..OJECT DESCRJPTIOrl Jhls project consists of the development of a site to liouse the lav^ Enforcement' Services Facility of approximately 37,500 S.F. and a City Service Center to replace "the existing•yard facilities at ^05 Oak and 1166 Elm. The City Service Center would include 5,000 S.F. of office space, 23,500 S.F of warehouses and shops and 3i<',-000 S.F. of outdoor sloraoe. PIMJLIT COS! 39S0-?n 39S]- 82 3 982-83 3 933-£^- ]9^^-£3 TQTAL LAK'D ( 2.050.000 A 2,030.000 DLSJGK' —. '-^ i^OO.OOO AOD.OOO CONSTRUCT) Git' 3,01^,000 . 1,620,000 176,000 ^,8lo'oOD OTHI:".^ 50,000 236,Oii5 236.0^^5 236.0i^5 536.0^^5 l,29^!l&0 . lO.'A!. COvST 2,100,000 .636.0ii5 3,250,0^15 1,-356,0^^5 7l2,0i<5 8,55^100 SOi!i;CE OF FUIID; (j^Eprrt^lD^ (^050^^. 2,050.000 T^IKT'.L-rUND -507000-^ 210.000 700.000 110.000 1 070 000 PUBLIC FACILITIES 236.0^15 2.010.0.^^5 1,7^6.01*5 712.01*5 li.'70l*;iE0 FED. RFV. SHARING 190.000 5^0.000 ' 730.OOO lUlAL FUh'DS 2.100,000 • ;.636.0l|.5-- 3.250.01*5 1.056.01^5 7l2,Oi*5 8.55M8D AlvK'UAL. OP£r:AT)NiS COSTS - ANNUAL 0PF.RAT3NG REVENUE - rOllNClL'GOALS AMD OBJECTIVES ;'.ET DY THIS PROJECT !, GOAL r-3 Provide Facilities to adequately house City operations. OBJECTIVE F-3-1 Acquire land in center of City for new po1ice faci1ity. / OBJECTIVE F-3-3 Select architect and develop building and financing program for I, police facility and service yard. I* KICH ri. //ATTHEW: ^ ^ ' ~~ J5\S2 Seo \- Dono Point, CQlifornio 92629 714/493-5254 January 13» I98I ^ill lueadows ^^eneral L'ianager 1:osta Real V.'ater District- ,5950 El Camino Real :ar3£bad. CA..92008 jjear Bill: ^ v.aTit to thanK you again for taking time out of your busy schedule to rr.eet with me. V.'e*ll have to get together again. ml can appreciate your Board's concern about the attempt by the City of Carlsbad to annex the District. From my prior experience as a '^DUGget officer with Huntington Beach, 1 can reaaiiy state tnat a city ^views a water utility as a valuable revenue source, especially m the era of Ixop 13. The rational used for transferring revenues from a ^••ater utility to a city's General Fund is that the city provides a ^ multitude of in-house services for the water utility, i.e., purchasing. *iegal services, accounting, billing, data processing, etc. Of course .the amount transferred far exceeds the actual cost for those services. The net result is that water rates, new services, acreage fees, etc, • "fielp subsidize the city's General FundT. ~~~ 'l have enclosed a breakdowTi of Huntington Beach's Water Department ^contributions to the City's General Fund as an example. The amount is determined administratively, not by ordinance, resolution, or 'Special City Council action other than the adoption of the buoget. J supeest that you survey other cities which operate water ^"tilities to get a better sample of the contributions water utilities add to the general funds. However, I think this example is the rule, not the C'xcepti on. Some of the other problems a water utility encounters when it is part *of a city are that it must compete for the availability of the in-house -services plus get the proper attention and understanding from elected officials and top management. ^ood luck in your efforts to keep the fox out of the hen house. If J can be of any further assistance please give me a call. trich H. I.'atthews End osure Rpr'n JAN ^ ^l9Bi CITY OF HUNTINGTON BEACH WATER DEPARTMENT Fiscal Year I98O/8I 1979/80 1978/79 1977/78 Expenditures $6,657,000(Est) 6,61+^,381 5,171,722 i+,48l,^3^ Revenues $6,051,000(Est) 5.6^+8,311 5.387.^17 5.100,230 City Transfers & Charges $ 897,000* 15^.338*^ 1.051,338 78^.795* 918.5^5 71+8,880* 121.323^^ 870,203 663,535* 117,00?** 780,5^^ Percentage of 7^-0---^ Water Revenue °' i-h«i tap l6.26fo l6.15f« * This transfer to the General Fund is called "Contributions to general fund in lieu of taxes" by City auditors Charpes to Water Department for accounting, billing, and data processing services. For IY79/80 it represents 25.6fa of the accounting and data processing budgets. For FY80/81 and 79/80 expenditures exceed revenues, City used Water Department surplus to cover deficits. f 1 # NAME AND ADDRESS OF ATTORNEY EXl^LD R. WDRLEY, ESQ. MCDONALD, HECHT, WORIEY & SOIBEPG 600 "B" street. Suite 617 ,T-^E^feq9*r,e9^1ifoi^ia 92101 TELEPHONE NO (714) 239-3444 FOR COURT USE ONLY Plaintiffs Insert name of court, judicial district or branch court, if any. and Post OHice and Street Address SUPERIOR COURT OF CALIFORNIA, COUNTY OF SAN DIEGO 220 West Broadway San Diego, California 92101 PLAINTIFF GeORGE R. BOLTm, I'm L. BOLTON, MICHAEL CARDOSA, NANCY CARDOSA, :4ANUEL C. HIDALGO, AVELINA HIDALQD, GUY S. MOORE, JR., JEAN M. MX)RE, V^ILLIAM R. LUIAN, VIRGINIA B LUJAN, FRANCES E. ALVAREZ, ALICE M. lAMPLUGH, ROBERT PADDOCK, BEIH M. LUX, LMVRENCE L. LLjX, MARVIN H. SIPPEL, LUCIA C. SIPPEL, ALLAN 0.. KELLY, KATHERII3E M. KELLY, IF5^N J. KELLY, DOROIHY KELLY, HIROSHI KATO, IDA F. KATO, BRIAN K. RCBERTSON, NANCY L. ROBERTSON, ROBERT |E. HICKS, INIS M. HICKS, ROBERT P. KELLY, JESSE H. PILLSBURY, GERALD G. VJEIAND, FRANCES A. —\^LAliD A^iD GBRALD G. WEIJ\^iD, JR. DEFENDANT CITY OF CARLSBAD, LCXZAL AGENCY PORI^TION OQt>JlISSION, and COUNTY OF SAN DIEGO SUMMONS CASE NUMBER^^^^rj.J NOTICE! You have been sued. The court may decide againet you without your being heard unleti you reapond within 30 days. Read the information below. {AVISO! listed ha sido demandado. El tribunal puede decidir contra Ud. tin audiencia a menos que Ud. re- sponda dentro de 30 di'as. Lea la informacldn que sigue. If you wish to seek the advice of an attorney in this matter, you should do so promptly so that your written response, if any, may be filed on time. Si Usted desea solicitar el consejo de un abogado en este asunto. debena hacerlo inmediatamente. de esta manera, su respuesta escrita, si hay alguna. puede ser registrada a tiempo. TO THE DEFENDANT; A civil complaint has been filed by the plaintiff against you. If you wish to defend this lawsuit, you must, within 30 days after this summons is served on you. file with this court a written response to the complaint Unless you do so, your default will be entered on application of the plaintiff, and this court may enter a judgment against you for the relief demanded in the complaint, which could result in garnishment of wages, taking of money or property or other relief requested in the complaint. AMERT 0 ZIJMV AUG 17 m\ 2. NOTICE TO THE PERSON SERVED: You are served a. cm As an individual defendant. b. d3 As the person sued under the fictitious name of: DATED , Deputy c • On behalf of: Under; • COP 416.10 (Corporation) i I CCP 416.20 (Defunct Corporation) I 1 CCP 416.40 (Association or Partnership) I I Other: d O By personal delivery on (Date): I I CCP 416.60 (Minor) I 1 OOP 416 70 (Incompetent) I I OOP 416.90 (Individual) A written response must be »n the form prescribed by the California Rules of Court It must be filed in this court with the proper filing (ee and proot of service of a copy on each plaintiff» attorney and on each plaintiff not represented by an attorney The time when a summons is deemed served on a parly may vary depending on the method of service For example, see CCP 413.10 through 415 50 The word " complainf includes cross-compiamt. "plaintiff' includes cross-complainant, "defendant" includes cross-defendant, the singular includes Ihe plural Form Adopted by Rule 982 Judicial Council of California Revised Effective January 1, 1979 (See reverse for Proof of Service) SUMMONS CCP 412 20 412 30. 415 10 Form 219 Co. Clk (Rev. 7-79) I 2 I 3' 4 ' 5 6 7 8 9 10 11 12 13 14 15 !! 16 17 ' is'! 19 ! • I i 20 ' 21 \ 22 ' I 23 ; 24 ' 25 26 27 I 28 ; Ij'.ji^nuu I f^OKLEY, ESQ. THOMAS C. NELSON, ESQ. MCDONALD. HECHT. WORLEY Ac SOLBERG ATTORNEYS AT LAW 817 FlNANCIAU SQURAK BOO "B'' STREET BAN DIEGO. CALIFORNIA 92101 TKUEPHONK 23B-S444 ATTORNKY* rOR_ Plaintiffs (SPACE BELOW FOR FILING STAMP ONLY) :^ a @ ° ^ ° ^ ORIGINAL FUED \3 eUSlNlSS DIVISION ROBERT D. ZUr^ VALT "LERK, SAN DIEGO COUNTY SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF SAN DIEGO GEORGE R. BOLTON, MUI L. BOLTON, MICHAEL CARDOSA, NANCY CARDOSA, MANUEL C. HIDALGO, AVELINA HIDALGO, GUY S. MOORE, JR., JEAN M. MOORE, WILLIAM R. LUJAN, VIRGINIA B. LUJAN, FRANCES E. ALVAREZ, ALICE M. LAMPLUGH, ROBERT PADDOCK, BETH M. LUX, LAWRENCE L. LUX, MARVIN H. SIPPEL, LUCIA C. SIPPEL, ALLAN 0. KELLY, KATHERINE M. KELLY, IRWIN J. KELLY, DOROTHY KELLY, HIROSHI KATO, IDA F. KATO, BRIAN K. ROBERTSON, NANCY L. ROBERTSON, ROBERT E. HICKS, INIS M. HICKS, ROBERT P. KELLY, JESSE H. PILLSBURY, GERALD G. WELAND, FRANCES A. WELAND and GERALD G. WELAND, JR., Plaintiffs, vs. CITY OF CARLSBAD, LOCAL AGENCY FORMATION COMMISSION, and COUNTY OF SAN DIEGO, Def en(3ants. NO. 474451 COMPLAINT FOR DECLARATORY RELIEF Plaintiffs allege: 1. Defen<aant CITY OF CARLSBAD (hereinafter "CARLSBAD") is -1- u m o >• J < J g (C h ID -•2 i < n -"•la H U 0 < -o o u • z * 0 21 10 UL n n < gov u u 5»" z < 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 an incorporated city within and political subdivision of the County of San Diego and State of California. 2. Defendant LOCAL AGENCY FORMATION COMMISSION of the County of San Diego (hereinafter "LAFCO") is a government agency organized and existing under the laws of the State of California, and in particular the Knox-Nisbet Act (Calif. Govt. Code §§54773, et seg.), and is charged with reviewing changes of organization and reorganizations under the terms of the District Reorganization Act of 1965 (Calif. Govt. Code §§56000, et seg.). 3. Defendant COUNTY OF SAN DIEGO (hereinafter "COUNTY") is a county and political subdivision of the State of California. 4. Plaintiffs, GEORGE R. BOLTON, MUI L. BOLTON, MICHAEL CARDOSA, NANCY CARDOSA, MANUEL C. HIDALGO, AVELINA HIDALGO, GUY S. MOORE, JR., JEAN M. MOORE, WILLIAM R. LUJAN, VIRGINIA B. LUJAN, FRANCES E. ALVAREZ, ALICE M. LAMPLUGH, ROBERT PADDOCK, BETH M. LUX, LAWRENCE L. LUX, MARVIN H. SIPPEL, LUCIA C. SIPPEL, ALLAN 0. KELLY, KATHERINE M. KELLY, IRWIN J. KELLY, DOROTHY KELLY, HIROSHI KATO, IDA F. KATO, BRIAN K. ROBERTSON, NANCY L. ROBERTSON, ROBERT E. HICKS, INIS M. HICKS, ROBERT P. KELLY, JESSE H. PILLSBURY, GERALD G. WELAND, FRANCES A. WELAND and GERALD G. WELAND, JR., and each of them, at all times mentioned herein were, and now are, registere<3 voters of, and reside in, the boundaries of the Costa Real Municipal Water District (hereinafter referred to as "Costa Real") and in the unincor- porated area of COUNTY. None of said plaintiffs are registered voters of, or reside within, the City of Carlsbad. The following plaintiffs also own taxable and assessable land which is located within the boundaries of Costa Real and outside the boundaries of -2- 0 m Ot lU m «. -J Q I/) m 10 >• kl K 0 * 5 U U • < Z Q O o < J ^ « L. ^ •« t i S ^ 0 z ID u. n : 3" w si 5 »" 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 j 19 1 20 21 22 23 ' 24 25 26 27 28 CARLSBAD: GEORGE R. BOLTON, MUI L. BOLTON, MICHAEL CARDOSA, NANCY CARDOSA, GUY S. MOORE, JR., JEAN M. MOORE, WILLIAM R. LUJAN, VIRGINIA B. LUJAN, FRANCES E. ALVAREZ, ALICE M. LAMPLUGH, BETH M. LUX, LAWRENCE L. LUX, MARVIN H. SIPPEL, LUCIA C. SIPPEL, IRWIN J. KELLY, DOROTHY KELLY, GERALD G. WELAND, FRANCES A. WELAND, and GERALD G. WELAND, JR. 5. Costa Real is a municipal water district organized and existing under the Municipal Water District Law of 1911 (Calif. Water Code §§71000, et_ seg.) . A portion of the area served by said district lies within the boundaries of the incorporated City of Carlsbad, and a portion lies outside of said boundaries and in the unincorporated area of the County of San Diego. 6. On January 15, 1980, defendant CARLSBAD initiated pro- ceedings to cause Costa Real to become a "subsidiary district" of CARLSBAD. 7. A "subsidiary district" is defined as "a district of limited powers in which the city council of the city shall be designated as, and empowered to act as, ex officio the board of directors of such district." (Government Code §56073.) 8. The District Reorganization Act, and in particular Government Code section 56403, provides as follows: "An order establishing a district of limited powers as a subsidiary district may be adopted if upon the date of such order: (a) The entire territory of such district shall be included within the boundaries of a city; or (b) A portion or portions of the territory of such district shall be included within the boundaries of a city and such portion or portions shall: (1) represent 70% or more of the area of taxable or assessable land within such district, -3- 13 ki CQ J 0 « Hi J J t z Z (£ U P y t z k Q < z o Q u r <5 3 « U. " at m < H J : U g » 5 ^ z 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 as shown on the last egualized assessment role; and (2) contain 70% or more of the number of registered voters who reside within the district as shown on the voters registrar in the office of the county clerk or registrar of voters." 9. Plaintiffs are registered voters, reside within Costa Real and do not reside in CARLSBAD. Plaintiffs' lands are included in territory of Costa Real and are not included within the boundaries of CARLSBAD. 10. On April 6, 1981, defendant LAFCO approved CARLSBAD'S application to make Costa Real a subsidiary district. Upon approval by the COUNTY'S Board of Supervisors, the proposal would then be submitted to the voters in Costa Real. 11. On July 1, 1981, the Board of Supervisors of defendant COUNTY approved the proposal of making Costa Real a subsidiary district of CARLSBAD, and said board ordered that the issue be submitted to the voters in the general election in November 1981. 12. By reason of the fact that plaintiffs reside outside of the city limits of defendant CARLSBAD, if the election of November 1981 results in rendering Costa Real a subsidiary district of CARLSBAD, then plaintiffs will be totally and com- pletely disenfranchised from voting for the board of directors of the municipal water district within whose boundaries they reside and where their land is located. 13. A controversy has arisen and now exists by and among the parties hereto concerning the section of the District Reorganization Act which authorizes an order making Costa Real a subsidiary district of defendant CARLSBAD, to wit. Government Code §56403. Plaintiffs contend that said Government Code -4- o a: in m 0 J .J 61 H 0 < ^ » . • u Z a U O Z < d < z 0 a o «c . < ^ 3 t 5 o K * n n s K < , P 0 « r « u. u . .J Z ffl < ^ < : O 5 C g d £ N S 0 S « 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 §56403, subparagraph (b), is unconstitutional on its face and as applied to plaintiffs in that it deprives plaintiffs of their right to vote and violates the one-person, one-vote requirement inherent in the equal protection clause of the Fourteenth Amendment to the United States Constitution. Defendants, and each of them, deny said contention of plaintiffs and contend that said Government Code §56403 is constitutional. 14. Plaintiffs desire a judicial declaration of their rights and obligations under said Government Code section 56403 and a determination as to the constitutionality of said section. WHEREFORE, plaintiffs pray judgment against defendants, and each of them, as follows: 1. For a judgment declaring that Government Code section 56403 is unconstitutional on its face and as applied to plain- tiffs, or otherwise declaring plaintiffs' rights and obligations thereunder. 2. For costs of suit. 3. For such other and further relief as the court deems just and proper. DATED: djixjBl ^McDONf^^D, HECHT, WQl^LEY & /SOLBERG By DONALD R. WORLEY At-torneys for Plaintiffs -5- 15 Ct: u GQ J 0 « w< J -i S» Z K S u t z < d < z 0 Q u Z 2 fc 2 " ••0 2 CO u. 2 r ^ N Z 0 < ¥ < : U 5 £ go 5 ^ lu III • Q H z < n 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 VERIFICATION I, DONALD R. WORLEY, declare: I am an attorney at law duly admitted and licensed to prac tice before all courts of this State and am a partner of the law firm Of McDonald, Hecht, Woriey . Solberg, attorneys for plain- tiffs in the above-entitled matter. I have read the foregoing COMPLAINT FOR DECLARATORY RELIEF and know the contents thereof. The same is true of my own knowledge, except as to those mat- ters which are therein stated on information and belief, and as to those matters I believe it to be true. I make this verification because the facts set forth in said COMPLAINT FOR DECLARATORY RELIEF are within my knowledge and because, as attorneys for plaintiffs herein, 1 am more familiar with such facts than are the plaintiffs. Executed at San Diego, California on August ji^, igai. I declare under penalty ofxperj^ry that the foregoing is true and correct. >bONALD R.' WORLEY 7T f,^. 7 9 TUESDAY, KAY 26. 1981 F.ESOLUTION OF THE BOARD OF SUPERVISORS OF SAN DIEGO COUNTY INITIATIKG PROCEEDINGS FOR THE ESTABLISHMENT OF THE COSTA REAL MUNICIPAL WATER DISTRICT AS A SUBSIDIARY DISTRICT OF THE CITY OF CARLSBAD ON MOTION of Supervisor Forciem . seconded by Supervisor Eckert _» the following Resolution is adopted: WHEREAS, pursuant to the District Reorgan i zat i Act of 1965. carvr.encing with Section 56000 of the Government Code, and in particular ^^^^ 7"%^'' and 56155, preliminary proceedings were conmenced by a resolution by the L.ty Co^ncil of the City of Carlsbad submitted to the San Diego Local Agency For.T.ation Commission for the change of organization of the Costa heal Kunicipal Water District fror, an independent district to a subsidiary district of the City of Carlsbad; and WHEREAS, on April 6. 1981. the Local Agency Formation Conjmission per Resolution Number SD 80-1. adopted its "Resolution of the Local Agency Formation Ccx^mission Approving the Proposed Establ I shment o the Cos^ ^Jf/ Municipal Water District as a Subsidiary District of the City of Carlsbad approving the proposed change of organization and authorizing the Board of Supervisors to ini-tiate and conduct proceedings for the P^^P^^^^,^^^?^^ organization pursuant to Government Code Section 561^00 et seq.; NOW THEREFORE IT IS RESOLVED, ORDERED AND DETERMINED, pursuant to Government Code Section 56^10 et seq.: (a) The name of the district for which the change of organization is proposed is the Costa Real Municipal Water District ^^^« f ^^I'V • n^'cfrlsbad- fro^. an independent district to a subsidiary district of the City of Carlsbad, and the City of Carlsbad, which has been designated in the terms and conditions adopted by the Local Agency Fomation Commission to act as ex officio Board of Director of the District. (b) The proceedings pertain to a nonsubsidiary district proposed to be established as a subsidiary of said city as may be determined during the course of the proceedings. (c) Preliminary proceedings were commenced by resolution of the City Council of the City of Carlsbad. (d) The reason for the proposed establishment of a subsidiary district a. set forth in the proposal is to consolidate water service operation and l^nd use authority under a single agency, thereby providing said functions in a more efficient and economical manner. (e) The terms and conditions of the proposed change of organization es adopted by the Local Agency Formation Commission, are as follows: Upon and after the effective date of the establishment of the Costa Real Municipal Water District as a subsidiary district of the City of Carlsbad: 1. The offices of the Board of Directors of the Costa Real MunicipalWater District shall be terminated, and the City Council of the City of Carlsbad shall be designated as, and empowered to act as, ex officio the Board of Directors of the district. Costa Real Municipal Water District shall continue in existence with all the powers, rights, duties, obligations and functions provided for by the principal act, except for any provisions relating to the selection or removal of the members of the Board of Directors of the District (Government Code Sections 56^70(k) and 56539)- 2. The establishment of the Costa Real Municipal Water District as a subsidiary district of the City of Carlsbad shall not affect or impair the status of any duly appointed employee of the District. All benefits and rights of the Costa Real Municipal Water District employees including employee contracts, seniority rights and retirement rights shall be continued at an overall level not less than currently enjoyed, and such other benefits as sick leave, vacation leave.' and retirement benefits shall be honored by the Costa Real Municipal Water District as a subsidiary district of the City of Carlsbad (Government Code Section 56^70(0). (f) The date, time and place of hearing on the proposed establishment, which shall be not less than 15 days nor more than 60 days afler the date of the adoption of this Resolution initiating proceedings, are hereby fixed at 10:00 a.m. on July 1 , I98l, in the Chamber of the Board of Supervisors, Room 310, County Administration Center, San Diego, California 92101. (g) Any interested person desiring to make written protest shall do so by written communication filed with the Clerk of the Board of Supervisors of the County of San Diego no later than the hour set for hearing. A written protest by a landowner shall contain a description sufficient to identify the land owned by him; a protest by a voter shall contain the residential address of such voter. IT IS FURTHER ORDERED that the Clerk of this Board of Supervisors sha11 give notice of the hearing hereby fixed In this Resolution by publication, posting, and mailing as provided in Government Code Sections 56^11 and 56^412. PASSED AND ADOPTED by the Board of Supervisors, County of San Diego, State of California, on thisgg;.^^ day of Hav > ^981. by the following vote AYES: Supervisors Fordem» Bates and Eckert NOES: Supervisors None ABSENT: Supervisors Hamilton and Hedgecock ^ATE OF CALIFORNIA ) ^ junty of San Diego ) m ^ I, PORTER D. CREMANS, Clerk of the Board of Supervisors of the County of San Diego, tate of California, hereby certify that I have compared the foregoing copy with the Original resolution passed and adopted by said Board, at a regular meeting thereof, at the tiiLe and by the vote therein stated, which original resolution is now on file in my Office; that the same contains a full, true and correct transcript therefrom and of the «ho}e thereof. * Witness my hand and the seal of said Board of Supervisors, this y^^h <^sy of J^ay^ J981 . . , PORTER D. CREMAKS Clerk of the Board of Supervleore m * By Beatrice Mitchell m ' Deputy LAFC Re: Costa Real March 12, 1981 Page Seven As described above, the City and District have had numerous dis- cussions over the past ten years to bring about a consolidation of water service responsibility. No solution has been found which is acceptable to both agencies. The City Council's position is that the City should be the primary water purveyor within the City, and the District's position is that it should be the water purveyor within its territory. MAJOR ISSUES Consolidation of District and City water services has been debated for more than ten years, and the two agencies have not been able to agree on a mutually acceptable plan. Although these discussions have generated a substantial number of reports and amounts of data, technical issues are not at the heart of this proposal. Both agencies agree that they have worked well together in providing water service in their respective service areas, and therefore the proposal is not the result of major past or present service provision problems. The major reasons for the proposal, as stated in the City's resolution of application, are to (1) "provide for a consolidated water service operation that may be more efficiently operated than the existing separate agencies," and (2) consolidate land use authority with responsibility for water service to "reduce fragmentation of responsibility for providing municipal services", and "improve political accountability." The City's complete reso- lution of application is attached to this report (Attachment C). The major issues to be considered in reviewing this proposal, then, are: (1) Potential for cost savings; (2) Potential for increased coordination of land use decisions and facilities planning; and (3) Political accountability. Cost Savings As noted above, the proposal, if approved would transfer responsi- bility for governing the Costa Real Municipal Water District from an independently-elected board of directors to the Carlsbad City Council. The District would remain a separate entity, with all the responsibilities and obligations of the existing municipal 1 LAFC I Re: Costa Real March 12, 1981 Page Eight water district. The 1979 City consultant's report estimated annual savings of $117,363 due to elimination of a separate board of directors, deletion of outside contracts with a law firm and consulting engineer, and elimination of several employee positions. Assuming that all District employees would be re- tained if the proposal were finalized, a more realistic estimate of annual cost savings is as follows: Elimination of board of directors $ 8,000 Elimination of contract for legal services 15,000 Elimination of workers' compensation insurance .. 1,163 Elimination of annual audit 3,500 Elimination of consulting engineering services 20,000. $47,663 Increased costs due to higher City salaries for some district employees .-13,500 _ TOTAL SAVINGS $34,163 Even these figures could be optimistic if the District continues to need outside engineering or legal assistance which could not be pro- vided by City or District staff. On the other hand, additional long-term savings could be gained due to consolidated billing and customer service, joint purchasing, City-District use of one main- tenance facility, and joint purchase and use of heavy equipment. The City consultant's report identified several positions that would not be required if the District's water service were con- solidated with the City's general manager, office manager, executive secretary, and receptionist. When these positions become vacant in the future, and if in fact none of these posi- tions proves to be needed, an additional savings of approximately $80,000 would be possible. Land Use and Facilities Planning The Legislature has declared in its most recent policy statement on local government organization that "a single government agency, rather than several limited purpose agencies, is better able to assess and be accountable for community service needs and .^1 r A (/, o • san dl€go Local agency formation commission I600 pacific highway • san dkgo. ca. 92K)I c.Hirman Lucill* V. Moor* ^Countv Board of Supervisors executive officer Willi»m 0. Davi» <» ( jnsel Bonald L. Clark r ««embers talph W. Chapman 0:av Municipal Water District "om Hamilton County Board of Supervisors *3r. CharlBS W. Hortltf Public Member Dr. Lucy Killwi , Councilwoman, City of San Diego Gloria McCieilan Councilwoman, CitY of Vista '^tanlay A. Mahr San Marcos County ». Water District *«ternate memberi Alex L. Adams Padre Dam Municipal ^ Water District *Paul Eckart County Board of "SI Supervisor! m Marjoria Harsom Alpine Fire Protecti District ^ Dall Lake Councilman, City of Lemon Grove August 13, 1980 TO: Cities and Special Districts Advisory Committees FROM: Special Subcommittee on the City of Carlsbad's Application for a Subsidiary District: Glenn Reiter, Chairman; Garry Butterfield, Councilman J. B. Bennett, and Councilwoman Dona Foster A proposal to establish the Costa Real Municipal Water District as a subsidiary district of the City of Carlsbad is scheduled to be heard by the Commission on October 6. In June, your Advisory Committees established a joint city/district subcommittee to study the issues involved with this complex and controversial proposal, and to bring any findings to the full advisory committees for review and recommendations. This subcommittee reviewed the application and resolution of the City of Carlsbad, and studied reports issued by the City and the District. Meetings were held separately with representatives of the City of Carlsbad and Costa Real Municipal Water District. On August 6, subcommittee members attended, by invitation, a meeting of the Associa- tion of Water Reclamation Agencies of North County to learn more about the plans for water reclamation in this region of the county. On August 7, the subcommittee held its final meeting, attended by both Carlsbad and Costa Real representatives. The consensus of the subcommittee at the August 7 meeting was not to make a recommendation to the full advisory committees. Subcommittee members felt that the City has not demonstrateaiihat significant economic advantages would result from reorganization of the District. Because the subcommittee could see no apparent benefits accruing to water users as the result of the proposed change, they expressed the belief that the key issues of the proposal are not of a technical nature, but are basically political. PPEfACE Inasmuch as fiscal 1972-73 fiiial figures were t.ot available, certain fioures usoa in this report had to L-e projected uy sanplino and averages to the best of oui- auility. However, as these projections were based on the latest figures available, this coi.ifiiittee is of the opinion such projections represent reasonable and con- servative expectations for 1973-74 operations. The combined one entity operations budget has been prepared including all of the present personnel positions of both trie City Water tepartment and C fl W D, as \;ell as upgrading of several supervisory positions. Iio cfianges in pay graces, retirement and other fringe benefits to present employees of either entity. In an effort to reduce our comparisons to a common denominator, there has ueen no allowaiice made in either revenues nor expenditures for Bond Service, Capital Improvements, Engineering studies or designs for future increased facili- ties, as these items are not common to tiie various Improvement Districts within ti^e Water District, nor has any property tax revenues been used in the conipilation of operating revenues. To assist in eliminating confusion in what constitutes a water unit, this re- port lias been prepared in units of 100 cubic feet. SECTlOi^ I - SCOPE OF STUDY Purpose: To determine the economic feasibility and possible operational sav- ings of a management and operations contract between City of Carlsbad Water Departiiient and the Carlsbad Municipal Water District for a single entity oper- ating unit. ^• Areas of Operations Studied: 1. Cost of water purchased from County Water Authority. 2. Contined cost of water treatment. 3. Combined cost of maintaining existing storage and distribution facilities. « 4. Combined cost of administration and accounting. i) C. Coinpan boi is ^'repared: 1. Combined 1973-74 budyet of City of Carlsbad Wator Depdrtiiient and Carlsbad Municipal Water District consisting of strictly opcraLional costs to pur- chase, treat, distribute water and maintain existing facilities, adminis- tration and accounting. 2. A composite of single entity proposed operating budret consisting of the higher of items as proposed by the City of Carlsbad Water Department and the Carlsbad Municipal Water District. UOTE: Inasmucli as these are pro- jected costs, we emphasize the higher cost projections were used to provide the minimum of savings to be realized from a single entity operation. D. Projected Water Sales Revenue: 1. Volume of water sales based on the average of water consumed per month per meter for the entire District. 2. Number of iiieter used in thfs computation were total number connected as of June 30. 1973. 3. Ready to serve revenue was based on meters in service up to 1" and meters in service over 1" as of June 30, 1973. 4. Multiple ready to serve revenue was based on Carlsbad Municipal Water District records as of June 30, 1973, plus City of Carlsbad Water Dept. records as of Decerrter 31, 1972, plus the City of Carlsbad, Building Dept. records of mul- tiple living units completed from January 1, 1973, through June 30, 1973. 5. Total dollar revenue for water sales was based on Carlsbad Municipal Water District rates in effect June 30, 1973: a. Meters up to 1" ready to serve $3.bO/mo. b. Meters over 1" ready to serve $6.00/mo. c. Multiple ready to serve (Including mobile home and camp park sites) $1.00/nio. living unit. d. First lOOOcu. ft. (10 units) (per living unit) .33/100 cu. ft./mo. e. Next 2000 cu. ft. (20 units) (per living unit) .24/100 cu. ft./mo. f. All over 3000 cu. ft. (30 units) (per living unit) .15/100 cu. ft./mo. SECTION II - FIKDINUS 1. The combined operations only budgets of the City of Carlsbad and the Carlsbad Municipal Water District, operating as two separate entities, as approved for fiscal year 1973-74, amount to $ 483,757.00 . (Exhibit 1) 'c. The one entity operations only budget prepared from a comuination of proposed oudgets submitted by the City of Carlsbad Director of Public Works and the Manager of Carlsbad Municipal Water District amount to >> 445,690.00 .(Exhibit 2) 3. These indicate a minimum operational savings of $ 38,067.00 . (Exhibit 1) 4. With a single operating entity using basic CMWD rates throughout the entire District, projected operating revenues would exceed projected operating costs, including net cost of water from the County Water Authority, without any over- ride or line charges. (Exhibit 4) 5. Projected revenues derived from the City Service area from basic C M W D rates would provide income slightly greater than derived from the same area by over- rides and line charges. (Exhibit 3) COHCLUSIOliS While we have made no attempt to establish a dollar value of side effect savings possible with a one integrated operating entity, complete with a manager and staff, we would be remiss in not bringing to your attention some of the areas to be consid- ered in your deliberations of this study: 1. Proposed need for additional space and facilities for City Water Department service yard. CMWD has approximately 6 acres available for this purpose. 2. Effect the relocation of some office personnel from the City Hall to C M W D facilities; thus at least postponing the time when additional City Hall space will be required. 3. Relieve the City Finance Director of dual responsibility for two sets of accounting records, thereby allowing for concentration of providing more efficient and economical City finance services. 4. An item of no si.iall dollar savings, for which no dollar vdlut. nds been con- sidered in this report, is the cost of preparing two water budgets eacii year as well as eliminating the cost of one of the tv/o v^ater audits each year. These savings would undoubtedly be extended to the cost of preparing state and Federal ii.andated reports. 'J. A coordinated planning and design effort for future requi roi^.ients of addi- tional capacity and facilities for tlie entire District. 6. By utilizing present Water Dept. equipment for construction and maintenance operations for the entire District, considerable savings in equipment rental could be accomplished. As you will note, we have confined our study of one entity feasibility to the equalizing of basic water rates within the entire District, inasmuch as the various Improvement Districts have different obligations for the payment of bonded indebted- ness. Wherever bond obligations are met with revenues derived from water sales, meter rates must be increased in the amount necessary to meet these payments. Within the City Service area the required revenue currently amount to average rates between .045 and .05 per 100 cy. ft. of water sold. This added to the basic CMWD rate, within the City Service area, of .33 per cu. ft. per living unit would amount to the present overall .38 per 100 cu. ft. of water for those consumers using less than 1000 cu. ft. of water per month per living unit. However, since surveys conducted by the City Staff indicates that less than ZQ% of all water used fall with- in the 1000 cu. ft. per month per living unit a substantial rate savings could be made on the remaining 80% of water used. The next 2000 cu. ft. of water per living unit, at the basic rate of .24 per 100 cu. ft. plus .05 for bond service revenue, would amount to an overall rate of .29 per 100 cu. ft., or a rate reduction in this category of .09/100 cu. ft. Applying the same fomiula to the large volume water users the all inclusive rate would be reduced for all water used over 3000 cu. ft. per month per living unit to .19 per 100 cu. ft. This saving could possibly have the effect of retaining some of our green area through continued utilization of non- developed land for agricultural purposes. In addition to savings in rate charges for volume users of water, operators of Multiple Units, would save a minimum of $2.85 per month per living unit in ready to serve charges. In the opinion of this cooimittee, the only truly effective rate reduction to all of the water consumers within the City service area is by utilizing existing City water Dept. land holdings in such manner as to pay off the bonded indebtedness or to provide revenue sufficient to meet the payment requirements. However, failure to utilize existing land holdings to accomplish this, we are of the opinion a more equitable basis of revenue for this purpose would be a water bond property tax rate rather than by water rates. Under the method of water rate revenue the present water users are paying the entire cost of providing facilities that will in the fu- ture be used for providing services to the presently unimproved property for which they have made no past or present contribution. The tax rate method of revenue for bond service is in effect a savings to the water consumer as it becomes a property tax, deductible on both State and Federal income tax; as a water rate cliarge it is a non-deductible item for residential water users. While it is apparent the incorporated boundaries of the City of Carlsbad will, in the forseeable future, encompass sufficient area of the Carlsbad Municipal Water District area for the electorate of the City of Carlsbad to elect to form a legally constituted single entity district, in the opinion of this cofiimittee, the many exis- ting problems that must be equitably resolved in this action will require both time and capital to accomplish. 1. The legal requirements, the expense involved and the time element, to make the Water District boundaries coterminous with the City of Carlsbad bound- aries, are of such complex magnitude as to make such action impractical for the immediate consideration of the Committee. In the opinion of the Committee, there are three catagories of action to be considered to form a legally constituted single entity operating Water District, however, determination as to the make-up of such District is an- other question requiring considerable time and study to arrive at the most efficient and economical method while insuring adequate future water supply, a. Formation of an Improvement District under C M W D, approved by the voters, of the City service area and place the entire Water District into one legally constituted operating entity. b. Formation of a District under the jurisdiction of the City Council of the City of Carlsbad, sitting as the board of Directors, and operated as an integral part of City personnel functions. c. Formation of a Water District under the jurisdiction of the City Council, sitting as the Board of Directors, with all water functions segregated from other governmental functions and services and reporting directly to the City Counci1. Inasmuch as it appears the resolution of the myriad of problems would require possibly years, this comnittee is of the opinion the possible savings to the water consumer should be accomplished now through an operating contractual agreement con- solidating all operations into one operating entity with equal basic meter rates to all of the water consumers of the entire District. This would in effect accomplish the consolidation of operational personnel, functions and equipment that would necessarily have to be accomplished under any formation of one entity district for the entire City of Carlsbad. CMWD Citizens Advisory Committee PROPOSED OPERATING AGREEMENT FOR WATER ENTERPRISE {I J CARLSBAD MUNICIPAL WATER DISTRICT (DISTRICT) CITY OF CARLSBAD (CITY) \\, DISTRICT to operate, maintain and repair water enter- prise of CITY. Items included in water enterprise: Water production, and distribution system of CITY. 1. Includes San Luis Rey well sites. 2. Includes additions under construction program. Items not included: 1. Any land or appurtenances not necessary to operation of existing water system. 2. Water Department yard. -^2. TERM - Indefinite. Either party may cancel the oper- ating agreement by written notice one year prior to effective date of cancellation. In the event CITY resumes operation of the water enter- prise, DISTRICT will return to CITY equipment and in- ventory of equal book value to the equipment and in- ventory received by DISTRICT from CITY at commencement of operating agreement, k 3. COMMENCEMENT DATE - Within six (6) months after execu- tion of operating agreement by both parties. RENTAL - DISTRICT will pay to CITY a sum equal to annual requirements of CITY for principal, interest and reserve for outstanding revenue bonds on water system. J>. EMPLOYEES OF CITY WATER DEPARTMENT a. Have the right to become employees of DISTRICT. .^ral Manager of DISTRICT, with coc, of CITY staff, will provide Table of Organization and list of employees. (Exhibit "A") ^6. EQUIPMENT a. CITY to turn over to DISTRICT equipment listed. (Exhibit "B") b. General Manager of DISTRICT, with cooperation of CITY staff, will provide Exhibit. c. DISTRICT to be responsible for insurance, repair, operating costs, maintenance and replacement of equipment during operating agreement. •7. INVENTORY a. CITY to turn over to DISTRICT inventory listed. (Exhibit "C") b. DISTRICT to assume any unpaid financial obligations on inventory. c. General Manager of DISTRICT, with cooperation of CITY staff, will provide Exhibit. v^-^ OPERATION a. DISTRICT to transfer operation and storage of equipment and inventory to DISTRICT headquarters. b. DISTRICT will bill and collect sewer collection charges, at no cost to CITY, and will deliver funds collected semi-monthly. c. DISTRICT will bill for mandatory trash collection charges and deliver funds collected semi-monthly. DISTRICT will receive the collection charge now received by CITY from trash collector. d. DISTRICT will establish collection service at lo- cal bank or banks for convenience of customers. f., ' be the water rates existinc? at the corrjnencernent ot the operating agreement, b. There will be j}0 increase in the consumer water < rates to consumers in CITY service area, without I'' •• ri prior approval of CITY, excepting therefrom any increase in said water rates caused by increase in costs of water purchased by DISTRICT. Such in- crease shall not require approval of CITY, but shall not be effective until after six (6) months notice from DISTRICT to CITY, c. DISTRICT would agree to reduce the water rates to CITY service area in the event the rental is re- w duced. ^^^10. WATER RIGHTS - DISTRICT will take necessary operational w^HH steps to preserve water rights of CITY in San Luis Rey uo mo River watershed. 11. CAPITAL IMPROVEMENTS Alternate 1. DISTRICT would continue capital improve- ment program of CITY of expending $50,000 a year from water operating budget for an estimated total of $300,000. In such event CITY would agree not to issue the remaining $575,000 of authorized and un- issued revenue bonds of 1970. Alternate 2. CITY would issue $300,000 of authorized and unissued revenue bonds of 1970 and additional capital improvements would be installed with such proceeds. Alternate 3. DISTRICT would establish an improvement district under the Municipal Water Dis- trict Act for the purpose of issuing $300,000 of general obligation bonds and the additional capital improvements would be installed with the bond proceeds. Discussion of City of Carlsbad - Carlsbad Municipal Water District Operating Agreement. I. The Practical and Political Aspects of Proposed Operating Agreement A. Under the terms of the operating agreement there is a contract for management and operations services between the City Council and the District. Accordingly, the City Council has ultimately the complete control over the destiny of the City water system in as much as all of the policies and all of the direction under which the City water department will be operated will be as a result of discussion and concurrence by the Council. In effect, the District is providing a management team that will act in behalf of the City in the same way that the management team provides services to the District for the operation and maintenance of the District's entire water system. B. Under the terms of the agreement there is a specific requirement with regard to water rates so that the Council at all times will have knowledge and concurrence as to what the District does in this arena. C. The City Council would enjoy the benefit of a management contract so that there is specific attention to the day-to- day operation of the City water system and City Council concerns would be limited to only those matters of policy which the management staff would provide complete and comprehensive reports to the City Council. This in turn would free the City Council to spend more time on those other aspects of City government which are progressively taking more and more time of the Council itself. Stated another way, the Board of Directors of the District and the management staff of the District are prepared to pro- vide complete and undivided attention to the needs of the City water department free from the interferences of those other public functions that seem to create diversions for the important needs of the City Water system. 7 - 1 - II. Development of Overall Efficiency of Operation Another basic function of the operating agreement is to bring to all of the rate payers within our water district a uniform level of service as well as the most efficient and economical program for the operation and maintenance of the water system. Although there is a considerable amount of conversation with regard to "What savings take place with the merger?" it must be said very specifically that the operation of the entire water system by one functional entity has to be a more efficient operation. In this arena, the District would have to rely on its past performance to demonstrate that its overall management and operation personnel have indeed provided an efficient and practical level of service. In addition, the District already has given examples of where "direct" savings can be made by the City Water Department. After the initial agreement for an operating agreement there should be a period of time in which there is permitted to be demonstrated certain specific efficiencies based upon certain specific goals that are established at the time of the merger. In any event, we can all speculate as to what the savings would amount to, but it must be emphasized that essentially that is the area of the challenge of the District to bring about savings on the basis of those management decisions that are deemed to be important for the overall enterprise. III. The Financial Program of the City Water System. The City Water Department has been plagued with financial problems from the time of their creation in 1958. The fact that revenue bonds were utilized and that all of the fiscal programs had to rely on water sales income only made it very, very difficult to pursue long-range and equitable financing program. There is an immediate water rate problem involving the differential for the various multiple dwelling units as well as the higher cost of agriculture water. In this regard, the Board of Directors and the management staff of the District have generally attempted to keep a uniform rate schedule for the types of uses that we have and that any increases in water rates has been somewhat distributed by our various categories of water users. This being the case, we are somewhat philo- sophically aligned with the view of the Mayor who feels very strongly that any financial burdens upon our rate payers should be somewhat proportioned so that there is not an added burden upon one class of user. The current financial program of water sales income only will be severely tested in the next few years as the cost of water continues to escalate. Accordingly, one specific assignment of the District in the event of a merger would be the promulga- - 2 - tion of a long-range and in-depth study of the entire financial program of the City water system which would include certain alternative methods of bringing about a total financial program that must include some ability to spread the cost of the water system upon the property owners who are benefiting from the modernization of the City water system as well as major extensions to undeveloped areas. Any financial evaluation of the City water system must also include a comprehensive evaluation of all of the current assets of the water department in terms of those properties that are still used by the water department and those proper- ties that can be liquidated so that the proceeds of those sales can reduce the bonded indebtedness. We have talked about this for a long time but to date there seems to be very little in the way of a complete appraisal and affirmative proposal of action. IV. Other Areas of Coordination and Cooperation with the District Much has been said about the fact that the City should control the public utility such as water service and sewer service to those areas that it is "annexing. What has been implied is that with the City controlling these utilities that overall develop- ment programs can be better administered by the City. In reality the City of Carlsbad has not, in our opinion, ever been hampered by the fact that retail water service or retail sewer service is not under their control. Specific examples of this include all of the La Costa area where water service is now provided by our District, San Marcos County Water District, and the Olivenhain Municipal Water District. In addition, all of the La Costa area is provided sewer service by the Leucadia County Water District. Getting back to the District service area, the new Beckman facility is in the retail service area of the District; all of the Rancho Carlsbad Mobile Home Park is serviced by the District; all of the new Altamira subdivision east of the Interstate 5 freeway is served by our District; all of Lake- shore Gardens is served by our District; and all of the area along the old coastal highway south of Terramar is served by our District. The new Hughes facility is likewise served by our facilities as well as all of Palomar Airport. In summary, wherever the City has gone out to the so-called "back country" and annexed new territory, water service is being provided by either our District or other special districts with no apparent hindrance to the best of our knowledge. Thus, in summary, we do not see any impedement for the City's ambition for growth and development by virtue of the fact that a special district is operating the water system. - 3 - V. Future Programs between the District and the City The District owns five acres of property at the important hub of El Camino Real and Palomar Airport Road and we are now negotiating for an additional acre of property. This site is already developed with a complete administration and operations center with ample provisions for expansion to accomodate the foreseeable needs of the District in providing this water service. There is also a capability to jointly work with the City to construct a branch civic center, fire station, communication center, small park area, or other such types of civic facilities that may prove to be beneficial The District owns this property in fee and there is complete flexibility to work mutually acceptable programs in this arena There is also a potential to become involved in public re- creational programs involving Water District and City water system properties. 1200 ELM AVENUE CARLSBAD, CALIFORNIA 92008 Office of the Mayor TELEPHONE: (714) 729-1181 Citp oC Carlibab April 24, 1973 R E C E I V E D /\PR 2 / 1973 IVOODSIDE • KUiJOTA ^ ni^r. Mr. Fred Maerkle, Chairman Board of Directors Carlsbad Municipal Water District 5780 El Camino Real Carlsbad, California 92008 Dear Chairman Maerkle: 1973, we At our regular C-1 ty Council meeting of April 17 ly/j, we discussed the proposed operating agreement with C.M.W.D. Our joint decision was that such an agreement should be considered subsequent to an Impartial study of th possible merger of the two systems by an outside firm. Thi study should address the following alternati the s 1. Continue the present course of District and City service. 2. Combine the District and City water services under District ownership and operation. 3. Combine the District and City water services under City ownership. Preliminary Inquiries Indicate that such a study would cost approximately $12 ,000-$!5 ,000. Should the City and the District share the costs equally, each entity would contribute $6,000 to $8,000 toward the study. We believe an outside. Impartial study by a firm knowledgeable In this field has much to recommend it. No matter how carefully our staff or yours prepares a study, bias could never be completely eliminated. An outside firm concurred in by the City and C.M.W.D. would be able to concentrate on what was best for the consumer without regard to the operating entity. '•vmciPAL APR Mr. Fred Maerkle, Chairman Page Two April 24, 1973 May I suggest your Board give this subject careful consideration and advise us of your decision. SIncerely, "^AVID M. DUNNE, Mayor DMD/mem cc: City Council City Manager Public Works Director Mr. Win F. Priday, General Manager, C.M.W.D." Mr. Fred Harris CITY OF CARLSBAD ^rl^^ (|C ^ Initial: ^ AGENDA BILL NO. ^rSi_^£lr:Jl^ Dept. Hd. p;^j£. Noveinber 21, 1978 C. Atty. ^^l^ DEPARTMENT: PUBLIC WORKS C. Mgr • I Siihipct- APPROVING AGREEMENT FOR CONSULTANT SERVICES ^ . ^^^p^ ANDERSEN AND ASSOCIATES Statement of the Matter Council approved a request for proposal for consultant services to^upport the application to form a subsidiary dU CMUD on September 19, 1978. I^ur proposals were receTvecl"arid evaTuateSf as desrriBe3'Tn''"txriibit A. The evaluation committee recommends awarding the contract to Ralph Andersen and Associates at a not to exceed fee of $14,600 plus fees at the standard rate for time and material for the development of assessors information. These rates and an alternate way of developing the information using City staff is outlined in a supplemental letter received from Ralph Anderson and Associates and included as Exhibit B.• Funds in the amount of $7,500 were approved by Council in Account 01-126-2450 in the FY78-79 Budget for Professional Services relating to preparation of this application. It is further recommended that additional funding in the amount of $8,500 be authorized for this contract from the iinapproprlated Water Fund 51-243-0900. Work associated with the consulting contract includes a watep,j:ate analysis as well as a review of the water fund financial practices. r-j Nuv01978 EXHIBIT ^^^^'^"^ihr-^k'UbOTA' * A^.SOC. CJi •.uLii;::- rr'Oifs'icns A. Report of Evaluation Committee. V-AI I ' 'JAD i B. Letter from Ralph Andersen Associates of November, 1978. C. Resolution No. S^(»QSL authorizing the Mayor to execute an agreement for consultant services with Ralph Anderson and Associates and authorizing transfer of funds. D. Proposal of Ralph Andersc^n and Associates. RECOnilENOAJION If Council concurs with the recommendation of the evaluation committee to award the contract for consultant services to Ralph Andersen and Associates, approve the recoinnenddtion and the transfer of funds by approving Resolution No. ;5:6JOJP_. authorizing the Mayor to execute the Agreement. SIAILMLI.I BV MAYOR kON PACKARD TO COSTA REAL MUNICIPAL WAlIR DlSTklCT BOARD OF DIRECTORS AT BOARD MEETING OF JULY 2, 1980 "I appreciate, in fact we all appreciate the chance to be here to meet with you. We're involved in some of the same kinds of activities and we felt that before things progressed to a point where communication became more and more dif- ficult it would be wise for us to get together to see if there are areas wht.re we can find a meeting point. As you well know, the City and the Water District have been involved in in a combined effort of providing water service to the cit- izens of Carlsbad and the surrounding areas for many years and obviously, for the past few years, perhaps ten years, there's been efforts made to perhaps combine that service, both from your point of view and from our point of view and even though there've been disagreements on the way the service ought to be provided to the citizens, essentially I think both the Council and this Board have agreed upon the one point and that is that it would probably be more economical and more., a better system if it were all done under one arrangement or one system. As a result there've been times when, at least to the public, it's probably appeared that this Board and the Council have been at odds with each other, and almost in adversary positions, when in reality our purposes are to serve the people of the cbnimunity and each of us have that purpose as our ultimate goal. So our objectives have been very similar and certainly not have been ddversary, often though our ends and the means to reach that goal have often dfipeared^ I'm surC; to the public as not being a cooperative effort. And that's not goodjWe don't think^and we feel badly about that, of course, that there is perhaps a diverse attitude in the two districts, the City and this District, in the means of providing that service. But and as you know, we are now in the process of trying to combine the service through the legal means at our disposal, which again. we feel is probably not the best way of resolving the problem. It will tend to divide the community; it will tend to divide the people, and they're the very people that you and I serve, and that have elected each of us, and it will become a divisive process in the community and that's not to the best interest of anybody So we thought it would be wise for us to come and see if there isn't some way that we can find a position that's a compromise position perhaps for each of us, that would make it a workable system and still not have to go through the process that has been initiated. Our goal, again, is to provide potable water and serve the needs, every need, of the coiiiinunity. As a result we've discussed it at the Council level and we have felt that there's perhaps a process that we'd like to present to you and then ask for your consideration and evaluation and perhaps discuss it at a time at your convenience and then let us know what your reaction to it is. Hopefully we will find through this suggestion a way of, at least, negotiating a position that is a compromise where we can both live with the outcome. Obviously the planning processes for water and all of the other needs of the community is a very complicated process and there certainly needs to be an interrelationship between the various planning processes that need to take place to provide the services for our community that's growing. We recognize that the land planning, the ser- vicing of all the various needs of the City and the people is not an uncomplicated process. We recognize also that you men and women are dedicated to your assignments as we certainly hope to be in ours. We recognize that you've had a great deal of experience. Many of you liave been on this Board for a long time and have been in- volved with the providing of water in our coiiiinunity for many, many years. We rec- ognize your expertise. We recognize your indepth understanding of the needs and the ways of providing the service you have been providing for some time. We.... we don't want to lose that and of course in the process of the struggle that might -2- be ahead we sense that we would if the City was successful in this venture, we would still be the losers in that we would lose the tremendous expertise and ex- perience that you and many of those that have been involved with this District over the many years have foovided. We would not be anxious to lose that expertise and that experience. And so, again, we sense that there may be better ways to resolve the issue and hopefully we will find that way. We....my visit today, accompanied by the rest of the Council and other fiieiiibers of the City staff, is to present to you a possibility and let you deliberate upon it to see if there isn't a way that we can sit down together and work on this principle to resolve the issue. Essentially what we v;ould propose for your review v/ould be the development in the City of a something that for want of a better name might be called a utilities commission. A commission that would be charged with the responsibility of coordinating the entire water program of the entire City. Also that would include all of the duties that you presently have and the responsibilities that you have as members of this Board. Also it would include all the responsibilities of the water system of the City, but in addition to that we would probably feel that it ought to include other important utilities that the City is involved in. For example, it would include the sewer systems of the City including the expansion of the Encina Plant and the locating of reclamation projects, the management of reclaimed water and its disposal and, of course, the management and disposal and service of all of the water systems that both you and the City provide. So it would be an expanded commission that would be involved in probably water and its treatment in every aspect and not just the purveying of potable water or reclaimed water. It would be, we think, an addition to the coiiuiiunity and to the City that would allow better coordination of planning processes and better coordination of the sewer and water systems. They seem to operate in a little bit of a disjointed method in that they're not a part of the same commission under the same leadership. As to how such a corwnission, a utilities commission, could be « -3- established, would be something that would need to be worked out between your Board and our Council. We're suggesting that perhaps we could sit down with a Council committee and a Board committee appointed to help work out the details to where it would meet the needs of both organizations, but we tfiink it has some possibilities to maybe resolve the issue. Where it would pull the entire planning and management process of water and sewer and all of its ramifications under one jurisdiction as both your Board and our Council have felt the need to do over many )^ar^7"butTT"wouTd^also^ and expanded duties that would correlate all of the various aspects of water treatment and water service. We we don't have any details we didn't intend to work out any details. We thought that the idea though might be a way the Board and the Council could move in the direction that would work out and alleviate the need of going through a long and difficult conflict in trying to unify the districts and the City. Again, the ideal would be for both the Board and the City to work together in working out any details or any variations of the concept. Conceptually it's just to pull all of the service under one commission and how that commission is organized and how it operates is something yet to be determined, but I think that it does essentially do what the conflict would end up trying to produce, either from one point of view from our point of view or from your point of view, and it perhaps would allow us to do it in a an arrangement where we work together in solving the problem rather than doing it through conflict. That, t)asically, is all that I have to present. I'm not asking for a response other than, unless you have questions or concerns or something that you'd wish to respond, but essentially we're asking for the Board to give it consideration and in time, after you feel that you've made a decision, just let us know." PRESIDENT MAC LEOD: "Thank you very much. I don't really think we should -4- get involved in questions and answers at this time. I think it'd be much better to get together with you. We're ready any time to sit down and talk. One suggestion, of course, that maybe you'd withdraw that petition first. Maybe you don't have to do that.' PACKARD: "That we do what, again, 1 MAC LEOD: "Withdraw the petition." BONAS: "To LAFCO." PACKARD: "Yes. We think that this can be done and our review of this concept could be done that would not interfere with either the progress or the delay of that. We I think the petition was served only to get the wheels rolling so that the issue can be resolved by the voters. And this this would alleviate the need of such a process bu'TTo withdraw it at this time when we don't even know whether it's a possibility or not may not be in the best interest of the entire process. In other words, we don't really feel that that ought to be an issue as to whether this is an acceptable compromise because again, there's no question that if the City can work it out amicably between the two boards, two bodies, there would certainly be no need for that to proceed and it would be withdrawn if it were worked out, ob- viously. MAC LEOD: "O.K. first, I don't think the Board is, at this moment, going to make any decisions, but we will take it under advisement iiiuiiediately and PACKARD: "We certainly wouldn't expect any response at this point and you certainly would need t\\e opportunity to meet together in your own circle and evaluate what the possibilities are. We hope you recognize that in this suggestion we are not -5- outlining what ought to be done; we are merely opening up a possibility, a concept that would, we think, be for the good of the City and we think that it very well could be for the good of the District. How you varied people would be involved and how our people would be involved would be something that would have to be worked out between the groups in trying to set up a detailed arrangement. We're not suggesting any special way or any special thing. The concept of a utilities commission, we think, has a proven is a proven concept in other communities and it very well may not only serve well for our community but also for the reso- lution of the problem that we are now faced with in trying to resolve the water question. And I might mention that we do appreciate the chance to, on very short notice, to come and perhap(^^Tr^er^ your regular scheduled agenda, but we just felt that if there was ever a time to talk it would be now. The further down the road it gets the more difficult it will be and so we thought that if compromise is to take place and negotiations and working out the problems is to take place, rather than continue the process that has been instituted, now would be the best time. " MAC LEOD: "We appreciate your coming. Paul, did you have any comments?" PAUL SWIRSKY: "Not today." PACKARD: "Thank you very, very much." MAC LEOD: "We're going to have a coffee break and you're all welcome to stay." -6- ORDINANCE NO. An ordif.utice of the City Council of the City of Carlsbad, (California, ai,H.tu1ing Title 2 of the Carlsbad Municipal Code by the addition of Chapter 2.42 to establish a Water Utility Services Coiiimission. The City Council of the City of Carlsbad, California, does ordain as follows: SECTION 1: Ti.at Title 2 of the Carlsbad Municipal Code is uinended by ttie addi- tion of Chapter 2.42 to read as follows: Chapter 2.42 Water Utjl i ty _Se r y i c e. ^ oniin i s si on Sections: 2.42.010 Established 2.42.020 Me.iibership 2.42.030 Terms of Members 2.42.040 Officers - Rule Adoption - Records 2.42.050 Coiiipensation of Members 2.42.060 Duties 2,42.010 -^Established: The Water Utility Service Commission is created as an advisory body to the city council and the board of directors of the Costa Real Municipal Water District. 2.42.020 - Membership: The Water Utility Service Commission shall consist of five members appointed by the mayor with the approval of the city council and two ex officio members who shall be the City Engineer and the Utilities & Maintenance Manager. The appointed members shall be residents of the City of Carlsbad sphere of influence as designated by the San Diego Local Agency Formation Commission. No ex officio meiiiber shall be entitled to a vote. 2.42.030 - Terms of Membe^rs,: The terms of office as coiranissioners of the Water Utility Service Commission shall be for four years provided, however, that three of the first appointees shall be for a term of two years and two shall be for a term of three years. The terms of the ex officio members shall correspond to their official tenures. 2.42J4J__-_0ifjc^^^^ ^''^^"^ ^^'^'^^ ^^""'''^ Coiiiilii ss ion shall elect from its a[»pointed iiieii:bers a chainnan and a vi i e-» ht; i nii,jn to serve for a term of one year. It shall adopt rules for the conduct of business and si.all keep a record of the resolutions, ti^msactions, findings and determinations, v.'hich record shall be a public record. The coinini ssi on shall liold meetings no less tnan once duriny each calendar month and shall send a report of cuch inonth's i^eeting to the city council. The Utilities & Maintenance Manager of the City of Carlsbad will serve as the secretary to the commission. 2.42.050 - Ccii.nensation of Jlenibers^ The Water Utilities Service Commission shall receive coirii^Misation at the rate of one hundred dollars ($100.00) per month. 2.42.060 - Duties The Water Utilities Service Coiiimi ssion shall have the power, and it shall be the duty of the commission, to make recoinniendations to the City Council and the board of directors of the Costa Real Municipal Water District in all matters pertaining to the construction^ efrd funding^ operation^^ maintenance, iiianageii;ent,^control of wastewater treatment, reclaiined water, local and imported potable water facilities. The commission shall nominate candidates for appointment as members of the San Diego Water Authority, Joint Advisory Commission (JAC Encina), North County Association of Reclamation Agencies, the Santa Margarita and San Luis Rey Watershed Planning Agency, the San Diego Water Reclamation Agency and such other agencies and groups which may be formed in the future, to the city council and the board of directors of the Costa Real Municipal Water District for appointment. The Water Utilities Service Commission shall review the rates for water service and sewer service annuaTly and submit a report to the city council by June 30 of each year with recommendations for adjustment of those rates during the ensuing fiscal year. 4i 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 RESOLUTIOl^ NO. 6063 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA ADOPTING A RESOLUTION OF APPLICATION TO THE LOCAL AGENCY FORMATION COMMISSION PURSUANT TO THE PROVISIONS OF THE DISTRICT REORGANIZATION ACT OF 1965 TO CREATE A SUBSIDIARY DISTRICT OF THE COSTA REAL MUNICI- PAL WATER DISTRICT. '__ — WHEREAS, the City Of Carlsbad and the Costa Real Municipal VJater District both supply v/ater service to portions of the City of Carlsbad; and ^•raEREAS, both the City of Carlsbad and the Costa Real Municipal Water District have expressed an interest in combining the operation and maintenance of the City and District water systems; and VJHEREAS, it has been a long standing goal of the City of Carlsbad to consolidate authority and responsibility for pro- viding water service to residents of the City and Costa Real Municipal Water District under the legislative and administrative control of the City; and WHEREAS, the establishment of Costa Real Municipal Water District as a subsidiary district of the City will provide for improved planning, coordination, and control of the development of water utility systems to serve patterns of urban development established by the City of Carlsbad; and WHEREAS, the responsibility for the provision of municipal servi::os is fragmented among numerous special districts in the City of Carlsbad; and .THEP^AG, this fragmentation creates confusion and difficulty for .--siclencs .hen seeking to afix responsibility for the pro- !vision of services; and Ill WHEREAS, the change of organization of the Costa Real 2 Municipal Water District as a subsidiary district of the City 3 of Carlsbad will provide for the more efficient provision of 4IIwater service to City and District residents; and 51] WHEREAS, Section 56403 of the (Government Code provides that 6a special district may be established as a subsidiary district 7 of a city if 70% or more of the district's taxable or assessable 8 land area and 70% of its registered voters are located within ^ the city's boundaries; and 10 WHEREAS, changes in local government organization which do 11 not change the geographical area in which existing powers are 12 exercised are categorically exempt from the requirements of 13II the California Environmental Quality Act pursuant to Title 14, 141'Division 6, Chapter 3, Article 8, Section 15120 of the California Administrative Code. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad, California as follows: 1. That the above Recitations are true and correct. 2. That the City of Carlsbad proposes to change the organization of the Costa Real Municipal Water District pursuant to Title 6, Division 1 of the Government Code of the State of California known as the District Reorganization Act of 1965. 3. That the City of Carlsbad proposes that the Costa Real Municipal Wa.er District be established as a subsidiary district of the City pursuant to Title 6, Division 1, Part 5, Chapter 6 of the Government Code. I 4. Thau 71% of the Costa Real Municipal Water District's taxable or assessable land area is located within the boundaries 15 16 17 18 19 20 21 22 23 24 25 26 27 28 0 1 2 3 4 5 6 7 9 10 11 12 13 T?! 15 16 17 18 19 20 21 22 23 24 25 26 27 28 of the City of Carlsbad. 5. That 99.54% of the registered voters of the Costa Real Municipal Water District reside within the City of Carlsbad. 6. That the boundaries of subsidiary district would be the same as the boundaries of the Costa KealMunicipal Water District as such boundaries will exist at the time the subsidiary, district is established. 7. That employees of the Costa Real Municipal Water District, employed full-time on the date of this resolution, will become * employees of the City of Carlsbad and that such employees trans- ferred to City employment will not suffer any reduction in wages or salaries, or any loss of fringe benefits as a result of such transfer. proceedings will be generally organized and operated in accord- ance with the plan outlined in a report entitled "Water Service in the Carlsbad Area" dated September 1979 and attached hereto as Exhibit "A" and incorporated herein by reference. 9. That this change in organization is requested for the following reasons: a. Provide for a consolidated water service operation that may be more efficiently operated than the existing separate agencies. b. Consolidate legislative control in a general purpose local government agency (the City of Carlsbad) in order to: (1) Reduce the fragmentation of responsibility for providing municipal services in Carlsbad. (2) Improve political accountability. (3) Provide for improved integration of land use planning and control with the planning and development of water service systems. T) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 (4) Better control of the premature development of undeveloped land or the premature con- version of economically productive agri- cultural land by the extension of the water service infrastructure prior to need. 10. That proceedings be taken by the Local Agency Formation Commission and the Board of Supervisors for the establishment of a subsidiary district as requested herein. PASSED, APPROVED AND ADOPTED at a regular meeting of the City Council on the ^day of , 1980 by the following vote, to wit: AYES: NOES: ABSENT: RONALD C. PACKARD, Mayor ATTEST: ALETHA L. RAUTENKRANZ, City Clerk (SEAL) PRdPOSITION V "Shall the order adopted on July 1, 1981, by the Board of Supervisors of the County of San Diego ordering the Costa Real Municipal Water District be es- tablished as a subsidiary district of the*City of Carlsbad be confirmed sub- ject to the terms and conditions specified in said order." SUMMARY AND CONCLUSIONS: , . 1. Would create financial windfall for City of Carlsbad. Would generate minimum of $1 million per year additional revenue for use by general City operations 2. Would not reduce size of combined water staffs. Would not produce savings through "consolidation."- 3. Would replace existing Costa Real Board with City Council, resulting in loss of expertise. DeTegation of current Board responsibilities to staff would result in loss of political accountability. 4. Would require hiring of additional staff to assume existing workload of Costa Real engineer and attorney. 5. Would require higher water rates to cover increased expenditures. SEE FOLLOWING PAGE FOR DOCUMENTATION REFERENCES. PROPOSITION V REFERENCES BY TOPIC 1. Financial Implications for City of Carlsbad A. "California's Proposition 4; The Law and Its Key Issues and Impli- cations," Ernst & Whinney, June 1980. B. "Questions and Answers About the Gann Appropriation Limit Initiative," League of California Cities, January 4, 1980. C. Working papers from League cf California Cities workshop. ' D. Analysis of Contributions to City's General Fund, City of Huntington Beach, by Erich H. Matthews, former budget officer. City of Huntington Beach, January 13, 1981. E. Analysis of Proposition V's Opportunities for the City of Carlsbad, by Joseph Zapotocky, former city manager. City of Vista, September 22, 1981. 2. Practical Effects of Proposition V As Ordered by San Diego County Board of Supervisors, July 1, 1981. Terms and Conditions A. The offices of the Board of Directors of the Costa Real Municipal Water District shall be terminated, and the City Council of the City of Carlsbad shall be designated as, and empowered to act as, ex officio the Board of Directors of the District. Costa Real Municipal Water District shall continue in existence with all the powers, rights, duties, obligations and functions provided for by the principal act, except for any provisions relating to the selection or removal of the members of the Board of Directors of the District (Government Code 56470 (k) and 56539. B The establishment of the Costa Real Municipal Water District as a subsidiary district of the City of Carlsbad shall not affect or impair the status of any duly-appointed employee of the District. All ben- efits and rights of the Costa Real Municipal Water District employees- including employment contracts, seniority rights and retirement rights- shall be continued at an overall level not less than currently enjoyed and such other benefits as sick leave, vacation leave, and retirement benefits shall be honored by the Costa Real Municipal Water District as a subsidiary district of the City of Carlsbad (Government Code Section 56470 (1). Proposition V material distributed by City of Carlsbad POTENTIAL COST SAVINGS WOULD RESULT IF THE CITY WERE TO ASSUME RESPONSIBILITY FOR DISTRICT WATER SERVICE 1978-79 1980-81 1981-82 ELIMINATION OF SEPARATE BOARD OF DIRECTORS $14,500 $18,000 ELIMINATION OF CONTRACT WITH PRIVATE LAW FIRM 12,000 15,000 SAVINGS IN WORKER COMPENSATION INSURANCE 1,163 1,163 © " DELETION OF CONTRACT WITH OUTSIDE CONSULTANT FOR GENERAL MANAGER'S SERVICE " DELETION OF GENERAL MANAGER'S POSITION DELETION OF POSITION OF OFFICE MANAGER/ "ACCOUNTANT, EXECUTIVE SECRETARY, AND RECEPTIONIST • SAVINGS IN AUDIT PREPARATION COSTS . • SAVINGS IN CONSULTING ENGINEERING COSTS TOTAL $28,533 20,000 yJ^^i^ 1,163 (est:),<i^ 16,000 37,200 .53,000 * 51,800 2,900 19 ,000 52,025 72,795 3,500 20,000 3,500 (es 33,000 ^ $117,363 $146,888^ $211,991 U^AJ.^^ * INCLUDES $250 PER MONTH CAR ALLOWANCE ** 25% FRINGE BENEFIT ESTIMATE 0 (U^c^f^"-"^^ ^^eCO^ /^.txr-^ September 22, 1981 TO: William C. Meadows FROM: Joe Zapotocky* With the advent of Proposition 13 and Proposition 4, cities in California found that they were forced to change their whole approach to fiscal planning; prior to these measures, cities would first determine what level of service they wished to provide, the number of personnel necessary to do so, then they would adjust their income levels to match. This could be done simply by increasing or decreasing the ad valorem tax rate since the property tax was the largest single source of revenues in most cities. After the voters approved the above propositions, it was now necessary to determine what the jurisdiction's appropriation limit was to be and then attempt to spread the available funds as far throughout the city structure as was possible. Under Proposition 4, cities, though constrained by limitations imposed upon "Proceeds of taxes" are not so constrained in the expenditure of monies generated by non-"Proceeds of taxes." Non-"Proceeds of taxes" in general are those revenues produced through fees for services, user charges and user fees. Because fees for service and user charges are exempted from appropriation limit, those cities with enterprise funds such as water and sewer funds, etc., found that they could raise fees to produce increased revenue which could be held in interest earning reserves and these funds would become available for use in many related ways. Water related ways can include a contribution from the water fund to the costs of operating the City Council, the City Manager, the City Joe Zapotocky is the former City Manager of Vista Attorney and the City Yard, or a myriad of other purposes. Many cities are using an administrative overhead charge to the enter- prise functions of as much as 25% to support non-revenue producing functions. Because Proposition 4 has restricted'the use of tax monies, cities now avidly seek ways to establish or expand their enterprise activities thus they_can effectively circumvent the main thrust of Proposition 4 - the control of ex- penditures! In 1979 the voters approved Proposition 4 as a Constitutional amendment. This measure is now Article XIII b of the California Constitution. The principal effect of Prop. 4 was to place limits on the amount of money that could be spent by local government. Under this new law. 1978-79 was used as a base year and in the following year, the 78-79 expenditures could only be exceeded by the annual increase in the Consumer Price Index and/or the percentage rate of growth in the personal income in the State. As soon as the measure was included in the ballot, the League of California Cities began to expend sizeable effort to try to defeat the passage of Prop. 4 while at the same time the League began putting together a committee of finance experts to first analyze the measure itself and to discover ways to circumvent the basic intent of the voters. Proposition 4 was approved and the League had its plans pretty well constructed so there began a series of seminars for city managers and finance directors where they were advised to use a variety of means to dull the impact of this legislation. Among those means suggested were: 1. Cities should seek all ways possible to avoid designating their revenues as "Proceeds of taxes." ("Proceeds of taxes" are the only monies that are limited by Prop. 4.) 2. 'TO supplement any revenues lost as a result of the expenditure limits, cities were encouraged to scrutinize all of their fees -2- for services and to increase all of them to obtain full cost re- covery and in instances where no fees existed, cities were urged to establish new ones. 3. Cities were encouraged to establish systems for the depreciation of all fixed assets valued at more than $100 where none existed. 4. Cities were told that it would be wise to increase departmental overhead costs to as much as 25% of actual cost to supplement the cost of operating non-income producing departments, i.e. the building and safety departments would increase their fees for plan check, inspection, etc., to a point where actual costs would be recovered then they would add a 25% contribution for administrative overhead to defray the cost for the operation of the City Council, the City Manager, the City Attorney and any others that do not produce any form of revenue. Since these fees or service charges are not proceeds of taxes, these monies were not subject to the expenditure limitations imposed by Prop. 4. 5. Cities were told to establish large revenue reserves in their enterprise funds. Enterprise funds usually include water, sewer, etc. The enterprise funds for the most part rely on service charges and fees for their operation, thus their revenues are exempt from the expenditure limitations as they are not "Proceeds of taxes'." These large reserves generate sizeable interest for their depositor; based upon current rates of interest it is pos- sible to earn as much as $500,000 on an annual deposit of 2.5 million dollars. Once earned, these reserves can be spent for any water department related purpose; however, it can be said that many of the city functions are in some way water related, i.e. the City Manager is the head of all City functions thus he is the -3- principal head of the Water Department so it is possible to expend water funds to support part.of his departmental cost. The City yard supports water department activities and the City recently expended 2 million dollars from the Water Department reserve fund to pay for a portion of a combination corporation i yard and police station. j -4- I REFERENCES (1) See June 1980 Ernst & Whinney Analysis titled "California's Proposition 4." (2) Implementation Workshops conducted by the League of California Cities re: Prop. 4. (3) Ernst & Whinney Analysis Section 8 (c) Page 2. -5- ERICH H. /v'ATTHEV/S 25152 Seo Vista Drive Dana Point, Colifornio 92629 714/493-5254 January 13t 1981 Bill Meadows General Manager Costa Real Water District- 5050 El Camino Real Carlsbad, CA..92008 ' Dear Bill: I v.-ant to thank you again for taking time out of your busy schedule to meet with me. We'll have to get together again. Tcan appreciate your Board's concern ahout the attempt by the City of^rlS to LJIex the District. From my prior experience as a budget officer with Huntington BeacHT^can readily state xnax a city, ^V,gr. nt.. htv as a valuable revenue source, especially in Lhe Irfof i^op 13. 'I'he rational used lor transferring- revenues from a ? „+T??+i +0 a citv's General Fund is that the city provides a :^imud 'of'in-h^u^fLrvi^efSr^he water utility, i--.^P-f^|-^. legal services, accounting, billing, data processing. ^^^^ °^^^°^^^3 thf amount transferred far exceeds the actual °^f^^l^^etc! The net result is that water rates new services, acreage fees, etc. le-lp subsidize tfie city's General Kuna. T have enclosed a breakdown of Huntington Beach's Water Department contributions to the City's General Fund as an ' JJ^/™"^" -e^c!rS?f crS=^clIr^o?he?Va^ genfral funds. However. I think this example is the rule, not the exception. So~ Of th. oth.r protl... • ..tjr utility "J"?"?'" ""JJ tS.'lnSSs. officials and top management. Good luck in your efforts to keep the fox of the hen house. If I can he of any further assistance please give me a call. Sincerely, Erich H. Matthews Enclosure CITY OF HUNTINGTON BEACH WATER DEPARTMSNT Fiscalj Year I98O/8I 1979/80 1978/79 1977/78 Expenditures $6,657,000(Est) 6,64^,381 5.171,722 Revenues $6,051,000(Est) 5,6^^8,311 5,387,^17 5,100,230 City Transfers & Charg;es $ 897,000-«- l,05l,33~5~ 784,795^ 113,750^^^ •918,5^^5 7i^}-8,880-»*- 870,203 663,535^ 117,00?^^^ 780,5^^ Percentage of ? ^-^^^^^ V/ater Revenue $ j-c^kc^ •—~ ^ +K'2. 17.37^ 16.Z6% 16.15% 15. * This transfer to the General Fund is called •'Contributions to general fund in lieu of taxes" by City auditors Charges to Water Department for accounting, billing, and data processing services. For FY79/80 it represents 25.6^ of the accounting and data processing budgets. For FY80/81 and 79/80 expenditures exceed revenues, City used Water Department surplus to cover deficits. • OcQ<x^sicL^ Joes 5^Me qlWoiN staff rducWt clo<:^r^c^t PROJECT TITLE POLICE L UTILITY SERVICES CENTER PJ^OJFCT DESCRIPTIOM This project consists of ^^^^ ^^^^ J°P^?;', ' I ..UJi.^.i -^i- ^-c^rv/lrP^ Facility of approximately 3/.500 S.F. and a house the Law Enforcement Services ^^^^ ^ /^3, n i t i es at i^05 Oak and ll66 City Service Center to replace ^he ex.s mg Y^^^ ^ 23,300 S.F nJ The Citv Service Center would include 5,000 S.F. oT oi T c P Elm. The tiiy :>er o> /)no S F of outdoor storage. of xvarehouses and shops and 3^.^uu OT PROJECT COST _}SZo-^n . FISCAL YE.^R 1981-82 J 982-83 1983-8^ UP±z31 TOTAI LAND DLSIGK' CONSTRUCT lOri OTHLR ^^^^^T^SO.OO^ 50,000 ^00,000 3,01^^,000 . 1,620,000 236,Oii5 236,0^15 236,Ol^5 2,050,000 176,000 11,810,000 536,0/45 1,29^,180 TOTAL COST 2,100,000 636,01^5 3,250,0/15 1,356,0^5. 712,0^5 8,55/:-,1^0 SOl!uCE OF FUifflS w^ER FUND"^ V^050,000" :KALTUND -50Tt)oo- PUBLIC FACILITIES FED. REV. SHARING 210,000 700,000 236,0^15 2,010,0.ii5 190,000 5'<0,000 110,000 l,7^6,Oii5 2,050.000 1,070,000 712,0^15 70^,180 730,000 I TOTAL FUNDS ..•2.:,oo..ooo ,636.0^.5 • 3.250.0.5:^^^35^^0;;^^ Al v'! \' I i A! _ - 0 P £ ^VA T 1 N G C 0 S T S • .. ANNUAL OPERATING REVENUE COUKTIL-GOALS AMD OBJECTIVLS '.-.ET CY THIS PROJECT 'GOAL r-3 Provide racilUles to ^^^^^^^;:':^^^lZJ'Z^l:'<lcUny^ police facility and service yard. " BEST COPY leralinq Fur.ds City Council City Kianager City Clerk . Insunince Admiriistraticn City Attorney Finnnce City Treasurer Central Services PurchDsing Personnel.' _C1 T Y_. OLX(i!^i-^-^'\ ^ 1930-81 Estiin-nted Building . . Fire-Administrati on Fire-Supprsssion •Fire-Prevention Fire-Paramedic D^veloorr.ent Services Utilities-Maintenance • Enaineering Street i'laintenance Hech'anicul Maintenance Buildino. Kiaintcnance-Sanitation bui o-jHq MaintenajTce General Gov c. bi-b; Solid V.'astes-Samtaion Library-Administrati on Library-Adult Services Library-Children Services . Library-Technical Services Library-Audio Visual Librarv-Outreach Planning-Adniimstrai-ion • Planning-Conviiiission planning-Current Parhs/Pecreation-ParL I.aini. pctrl'.s/Pecrcnt • parl-.s/Pecrent - parUs/iiccreat Porhs/Pccrcat Aqua llediondn Police-Admini Police-Field^ 28,751 '157,598 9,710 713,229 108,296 147,830 4,120 294,054 30,729 133,473 291,611 74-050 1,090,430 58,460 256,850 56,195 26,110 424,044 671,854 1,795 14,820 85,490 325,052 173,300 279,458 81,254 112,890 82,041 48,807 63,447 . • 7,100 . 157,782 210,534 114,900 455,790 1981-82 Department _JReciuest_ 34,055 219,409 18,200 245,000 133,262 182,080 4,110 395,562 . -80,285 163,684 378,405 - 95,530 1,-363,780 • 140,330 395,170 42,845 26,460 641,05'^- 1,098,970 -0- 19,800 119,540 328,680 217,056 352,269 • 87,260 • 140,743 104,915 61,338 . 122,090 7,600 294,405 258,055 • 339,994 589,200 ^7 0 OOO S'O O 00 o j \'i * II • 1981-82 City Manager Reconinie^^ 34 ,055'/^ 189,872 18,200 245,000 132,997 161,855 ^ 4,110 359,579v^ 47,13SV • 163,453 414,023 91,550 1 ,280,178 ( 116,838 376,210 42,57 24,563 569,925 943,288 -0- 18,330 103,39-'; 328,680 185,340 332,385 85,092 136,280 100,/13 61,012 99,470 7,600 233,158 . 172,732 135,903 . 547,388V^ i ^71: t 1 , i I i I ; 1! A/<rJ- Ycd^ // : fr-or^ f< Of . V j 4 8 T; Ii ! I 1 M