COUNTY OF SAN MATEO

Inter-Departmental Correspondence

Department of Public Works

DATE:

May 14, 2002

BOARD MEETING DATE:

June 4, 2002

TO:

Honorable Board of Supervisors

FROM:

Neil R. Cullen, Director of Public Works

SUBJECT:

Proposed Los Trancos Woods Sewer Assessment District

Recommendation

Determine if the County should aid the property owners in the Los Trancos Woods area by proceeding with the formation of an assessment district (District) and the preliminary design of a sewer collection system to serve the owners' property.

If your Board determines that the County should aid the property owners:

a)

determine:

1)

if all 53 properties that were included in the Local Agency Formation Commission's (LAFCO) application for annexation to the West Bay Sanitary District (West Bay) should be considered in the proposed District; or

2)

if only those properties of the 53 properties as described above, be included in the proposed District where the property owner submits a petition to your Board, and deposits funds with the County to finance the District process and an engineering study to determine if it is feasible to construct a gravity trunk sewer main through the lands of the Town of Portola Valley to provide sewer service to Los Trancos Woods; or

3)

another combination of the 53 property owners as determined by your Board; and

b)

adopt a resolution authorizing the Director of Public Works to enter into agreements:

1)

with property owners who will advance funds for the engineering study as described above, and the necessary engineering to bring the proposed Los Trancos Woods Assessment District to a public hearing before your Board; and

2)

with an engineering consultant to do the feasibility study and the necessary District engineering.

Key Facts

1.

A group of property owners in Los Trancos Woods have been working with West Bay, the sewer service provider for the area, over the past four years in order to obtain sewer connections for their property.

2.

The property owners approached Supervisor Gordon and have requested that the County aid them by contracting for the design of the system and in forming a District to finance the construction, as West Bay declined to process the formation of the District as they do not have the staff expertise, and the District process has become more complex with the changes in the State Constitution (i.e., Proposition 218).

3.

Our understanding is that all 53 property owners are "volunteering" to be assessed and be included in the District to share in the cost of financing the work.

4.

Assessment District law requires that assessments on property be in proportion to the benefit received. The formation of the District, based on benefit, could be challenged if a property owner later decided that they did not want to voluntarily be in the District, but were required to remain in the district.

5.

Financing of the construction of the sewer collection system will not be assured until after the District is confirmed, design and bidding completed, and any necessary bonds sold.

6.

The proposed agreement process will provide the vehicle to finance the work necessary to allow both the preliminary design and District proceedings to go forward, while limiting the amount of funds the property owners have at risk before the District is confirmed, and not commit County funds to finance the work.

Background

A core group of property owners has been representing owners of 53 parcels in Los Trancos Woods. These 53 property owners financed an environmental assessment/negative declaration and feasibility study of a sewer collection system that was approved by West Bay. At the writing of this report, LAFCO was considering the application of the 53 parcels to West Bay, and the conditions that would have to be met before the annexation could go forward. However, as stated under Key Facts above, West Bay is unwilling to process the District that is necessary to finance the construction. The District is necessary, as not all the property owners have the financial ability to pay their share of the proposed construction from their current assets.

Discussion

The core group met with staff and we have developed a plan to process the District in order to facilitate the construction of the sewer collection system. Attached is the process which is based on the respective agencies considering and approving the different steps.

Issues

Staff also attended a property owner meeting to discuss the County's role in the proposed District, and several issues were discussed as the wishes of some property owners cannot be guaranteed by the laws governing the District process. There is also some risk that the District would not go forward and that the property owners could lose any funds advanced if the formation of the District was successfully challenged at a later date. The following are the issues that we have heard to date, together with our responses:

We assume that all the property owners whose property is included in the proposed LAFCO annexation are voluntarily having their property included in the proposed assessment district. The assessment attorney (Attorney) believes that a property owner can challenge the "equal benefit" provisions of the assessment regulations if they later decide that they no longer want to participate, but their property is not withdrawn from the District. Reducing the number of parcels to be assessed can increase the assessments on those parcels remaining in the District. These higher assessments could be offset at a later date, if other property owners who wanted to connect their properties to the constructed system, were required to "buy in" to offset the original cost of building the sewer system.

The Attorney is also of the opinion that the District could also be subject to challenge, again on the basis of equal benefit, irregardless if all the property owners sign the petition or not, if at a later date a property owner decides that they no longer want to participate due to the costs involved or other issues, but their property is not withdrawn from the District.

Some property owners want to know the method of assessment prior to signing the petition to your Board requesting the District be formed. The Attorney advises that we not commit on the method of assessment until the question regarding crossing the Town of Portola Valley's property is known. This will only be known after the engineering study, proposed to be financed with funds advanced by the property owners, is completed.

Some property owners want assurance that they will be reimbursed by others that may later want to annex to West Bay and connect into the system that will be paid for by the property owners with property in the District. Buy-in agreements can be developed to require the payments as a condition of connection into the sewer proposed to be constructed, but it is unclear at this time if the County should manage the "buy in" agreements with the property owners or if they should be managed by West Bay, as assessment district financing complicates this issue.

Next Steps

The Attorney has prepared a form of petition that can be used by the property owners to petition your Board to form the District and move forward with the work to facilitate sewering the area as requested by the property owners. We will develop a form of agreement, if your Board authorizes the Director of Public Works to enter into agreements with property owners and to enter into an agreement with an engineering consultant. We will require the property owners to execute the agreement prior to our doing any additional work on the proposed District, in which the property owner acknowledges that the funds deposited with the County will be used to pursue the formation of a District, but the County makes no guarantees that a District will be formed, that assessments will be no more than the current estimated amount, or that a specific method of assessment will be used. We will also set a date certain for funds to be submitted and the agreements signed if we are to move forward with doing any work associated with a sewer system for the area.

Vision Alignment

We believe our recommendation is consistent with the Shared Commitment to "ensure basic heath and safety for all," as aiding the property owners in constructing a sewer collection system to serve their properties can result in providing effective sanitary sewer service in a suburban zoned area, which would otherwise continue to use "on site" methods to handle wastewater which can have an impact on neighboring properties.

Fiscal Impact

Preliminary estimates of the cost of the sewer collection system including assessment engineering costs but excluding bond and other related costs is estimated at $2,120,000, or $40,000 per parcel, based on 53 parcels being included in the District. The cost of processing an assessment district can add approximately four percent (4%) ($84,800 or approximately $1,600 per parcel) to the project costs. There is also an additional charge (estimated at 11% - $233,200 or $4,400 per parcel) to cover bond costs for those assessments that go to bond. The $4,400 would not be levied on those parcels choosing to pay in cash. The yearly cost of an assessment that goes to bond would be between $4,650 and $5,350, including administration fees (based on a 20 or 15 year bond length, 1% per year for bond administration, and 6.5 % interest on the bonds).

The costs are summarized as follows:

Description of Costs

Total Estimated Amount

Cost for an Assessment that is Paid in Cash

Cost for an Assessment that Goes to Bond

Project Costs

$2,120,000

$40,000

$40,000

Assessment District Costs

$ 84,800

$ 1,600

$ 1,600

Bond Costs

$ 233,200

N/A

$ 4,400

Total Cost with Bonds

$2,438,000

$41,600

$46,000

Cost Per Year to Pay Off Bonds (20 years)

N/A

N/A

$ 4,650

However, these estimates are based on very preliminary schematics and do not include a pump station that may be needed if a gravity sewer main cannot be installed across the Town of Portola Valley's property near Los Trancos Road.

The estimated cost to do the engineering to evaluate a gravity sewer main across the Town's property and to bring the District to hearing before your Board is $106,000 or $2,000 per parcel.

All the work involved in constructing the sewer system and forming the District is proposed to be paid with a combination of cash advances by the property owners, assessments paid in cash, and through bond proceeds on bonds levied against the property of those owners that choose not to pay cash.

There is no impact to the General Fund or other funds of the County.

A form of resolution has been approved by County Counsel.

Future Agreements

Future agreements will be necessary with the Town of Portola Valley, West Bay, an engineering consultant and the assessment attorney. These agreements will be brought to your Board for your consideration as the project develops.

A copy of our report has been sent to the core group of property owners and we have notified them when your Board will be considering our recommendations.