August 1, 2024
Leon Firsht
City of Coronado | Director of Public Services and Engineering 101 B Ave
Coronado, CA 92118
SUBJECT: Rule 20B Portfolio | Preliminary Cost Estimates Dear Mr. Firsht,
Thank you for your continued partnership with San Diego Gas & Electric (SDG&E) to underground overhead electric power lines to meet our commitment to provide clean, safe and reliable energy to our customers.
Pursuant to the City of Coronado’s request dated July 2, 2024, this letter is intended to provide preliminary SDG&E cost estimates for the construction work associated with the City’s three Rule 20B projects: Adella-Ynez, First Street, and Silver Strand. Please note, SDG&E is providing these estimates for general reference purposes only and makes no representations, warranties or promises regarding the accuracy, timeliness, quality or completion of the estimates. The estimates are based on known, current information and existing circumstances.
SDG&E will not be liable for any damages, causes of action or losses arising or claimed to arise out of the use of these estimates. It is important to note the estimates are preliminary and are not based on construction bids which will dictate the final cost of the projects. SDG&E’s cost estimating methodology for Rule 20 conversions has been updated to account for current construction costs and overheads. As such, any previous estimates are now outdated and should not be used as a basis for future project decisions.
It is SDG&E’s understanding the City has opted to perform the Civil Construction scope of the three projects, also referred to as Municipal Trenching (Muni-Trench), using its own forces or through the use of its own contractors. The Muni-Trench scope includes the trenching, conduit and substructure placement, backfill, and paving for the projects. In selecting the Muni-Trench option, the City will also be responsible for Community Outreach efforts, coordination of Joint Trench Offers (JTOs) with applicable Communications Infrastructure Providers (CIPs), and Permit to Enter (PTE) coordination with private property owners.
The projects will utilize Actual Cost Billing Methodology, whereby in advance of construction, SDG&E will collect from the City an amount equal to the estimated cost of SDG&E’s conversion Attachment 2
work, including engineering fees. The conversion work will be tracked and billed on an actual cost basis, meaning that all costs will be reconciled at completion of the work and SDG&E will bill or refund to the City any difference larger than $100.00.
Adella-Ynez 20B
The City’s Adella-Ynez 20B Project includes approximately 1,500 linear feet of trenching, conduit placement, substructure placement, cabling, backfill, and paving, the installation of one cable pole to connect the newly established underground system to the nearby overhead facilities outside of the district boundary, and removal of eight electric distribution poles, associated crossarms, conductors, and other overhead equipment. SDG&E has completed the design modifications at the City’s request and will require a City Right-of-Way permit before soliciting competitive bids for SDG&E’s portion of the project’s construction scope. The estimate was compiled based on the current project boundary as designated by the City of Coronado in Resolution No. 2021-15. Changes to project boundaries will impact the estimate.
Adella-Ynez 20B | Cost Estimate
Coronado Civil Contractor – Trench & Conduit $0
SDG&E Electrical Contractor – Cable Pole Installations, Cabling & Connections, Service Cutovers
$799,000
SDG&E Electrical Contractor – Overhead Conductors & Equipment Remove from Service, Pole Removal (Non-Billable)
$249,000
Subtotal $1,048,000
Credit for Removals ($249,000)
Billable Subtotal $799,000
ITCCA tax (24% of Collectible Value) $191,760
ESTIMATED BILLABLE TOTAL $990,760
First Street 20B
The City’s First Street 20B Project includes approximately 3,975 linear feet of trenching, conduit placement, substructure placement, cabling, backfill, and paving, the installation of six cable poles to connect the newly established underground system to the nearby overhead facilities outside of the district boundary, and removal of 44 electric distribution poles, associated crossarms, conductors, and other overhead equipment.
As City staff is aware, SDG&E intends to underground a 69kV transmission line in this trench for which the City will bear no expense. The preliminary design work for this project is currently in progress and the First Street district boundaries will likely require slight modifications to the City’s Boundary Map and Resolutions documentation to support the selected design options.
The estimate was compiled based on the current project boundary as designated by the City of Coronado in Resolution No. 2022-49. Again, boundary changes may impact cost estimate.
Attachment 2
First Street 20B | Cost Estimate
Coronado Civil Contractor – Trench & Conduit $0
SDG&E Electrical Contractor – Cable Pole Installations, Cabling & Connections, Service Cutovers
$2,180,000
SDG&E Electrical Contractor – Overhead Conductors & Equipment Remove from Service, Pole Removal (Non-Billable)
$1,220,000
Subtotal $3,400,000
Credit for Removals ($1,220,000)
Billable Subtotal $2,180,000
ITCCA tax (24% of Collectible Value) $523,200
ESTIMATED BILLABLE TOTAL $2,703,200
Silver Strand 20B
The City’s Silver Strand 20B Project includes approximately 13,860 linear feet of trenching, conduit placement, substructure placement, cabling, backfill, and paving, the installation of three cable poles to connect the newly established underground system to the nearby overhead facilities outside of the district boundary, and removal of 38 electric distribution poles, associated crossarms, conductors, and other overhead equipment. SDG&E will require a copy of the City’s approved Caltrans permit before finalizing our design and preconstruction activities, followed by the solicitation of competitive bids for SDG&E’s portion of the project’s construction scope. The estimate was compiled based on the current project boundary as designated by the City of Coronado in Resolution 7662.
Silver Strand 20B | Cost Estimate
Coronado Civil Contractor – Trench & Conduit $0
SDG&E Electrical Contractor – Cable Pole Installations, Cabling & Connections, Service Cutovers
$5,220,000
SDG&E Electrical Contractor – Overhead Conductors & Equipment Remove from Service, Pole Removal (Non-Billable)
$1,050,000
Subtotal $6,270,000
Credit for Removals ($1,050,000)
Billable Subtotal $5,220,000
ITCCA tax (24% of Collectible Value) $1,252,800
ESTIMATED BILLABLE TOTAL $6,472,800
Potential Cost Saving Measure: ITCCA Tax Waiver
It is important to note that effective December 22, 2017, any Contributions in Aid of Construction (CIAC) and any contribution by any governmental entity or civic group shall be treated as taxable income to SDG&E, unless a specific exemption under the law applies. Therefore, if a Mixed-Use Agreement alternative is utilized, the California Public Utilities Commission has authorized SDG&E to collect from customers a charge to cover SDG&E’s estimated liability for income taxes related CIAC, also known as the Income Tax Component of Contributions and Advances (ITCCA). Currently, ITCCA tax is collected at a rate of 24% of the collectible value of the project. Please refer to the attached appendices if the City elects to request a waiver of ITCCA tax as a cost saving measure.
Attachment 2
Please note, the above cost estimates are preliminary. The Agreement for Replacement of Overhead with Underground Distribution Facilities for each project will be provided to City staff following City concurrence that the project will be moving forward as well as completion of all design and pre-construction activities, including but not limited, to easement acquisition, permit acquisition, environmental review and approval, and solicitation of firm fixed bids for construction activities.
Please contact me with any questions or concerns.
Sincerely,
Jonas Johnson
Project Manager, Contractor
Design & Project Management
cc:
Damien Ramirez – SDG&E | Design & Proj Mgmt | Franchise Planning Supervisor Michael McEachern – SDG&E | Design & Proj Mgmt | Project Manager II Roberto Alcantar – SDG&E | Regional Public Affairs | Public Affairs Manager Scott Huth – City of Coronado | Authorized Agent for City of Coronado Attachments:
• ITCCA Letter | Exemption Qualification
• SDG&E ITCCA Exemption Request Form | Master Development Plan • SDG&E ITCCA Exemption Request Form | Section 1033
Attachment 2
How to Request an Exemption from ITCCA
The invoice for this project will include a charge for the income tax component of contributions and advances (ITCCA) for this project. If you believe this project is not subject to ITCCA, please follow the instructions below to request an exemption.
Application of ITCCA
Effective after December 22, 2017, any contributions in aid of construction and any contribution by any governmental entity or civic group (CIAC) shall be treated as taxable income to San Diego Gas & Electric Company (SDG&E), unless a specific exemption under the law applies. The California Public Utilities Commission has authorized SDG&E to collect from nonshareholders a charge to cover SDG&E’s estimated liability for income taxes related to CIAC, also known as ITCCA.
Exemptions for ITCCA
Currently, there are two exemptions under the law that apply to ITCCA. All other exemptions that existed prior to December 22, 2017 are no longer available (e.g., the public benefit exemption for government agencies).
First, ITCCA shall not apply to any project where a governmental agency makes a threat of involuntary conversion under Internal Revenue Code section 1033. A threat of involuntary conversion exists if a representative of a governmental agency or a public official authorized to acquire property for public use informs SDG&E in writing that the governmental agency or official intends to involuntarily convert or condemn in whole or in part the property at issue to move forward with a specific project.
Second, ITCCA shall not apply to any project that is covered under a master development plan that has been approved prior to December 22, 2017.
How to Request an Exemption from ITCCA
If you believe the project at issue should be exempt from ITCCA, please provide SDG&E the required information described in one of the following options below:
Option #1: Send SDG&E a complete and executed copy of the attached ITCCA Exemption Request Form for IRC Section 1033 and Threat of Involuntary Conversion.
Option #2: Inform SDG&E in writing (email is sufficient) that the government agency intends to involuntarily convert or condemn in whole or in part the property at issue in order for SDG&E and Attachment 2
the government agency to proceed with the project pursuant to terms and conditions of their utility agreement or relocation agreement.
Option #3: Send SDG&E a copy of the master development plan covering this project that was approved prior to December 22, 2017. Also, please sign the attached ITCCA Exemption Request Form for Master Development Plans. The indemnification stated therein is required because the Internal Revenue Service (IRS) has yet to define which development plans qualify as “master development plans” and may determine under audit that SDG&E was subject to tax.
Option #4: Send SDG&E a copy of the master development plan covering this project that was approved prior to December 22, 2017. If the ITCCA Exemption Request Form for Master Development Plans is not signed, then SDG&E may require a Private Letter Ruling (PLR) from the IRS asking them to confirm that the project is covered under a qualified master development plan.
If this option is used, the government agency will be responsible for any filing fees and attorney costs relate to the PLR.
For any questions regarding ITCCA or requesting an exemption, please contact the following individuals below within Sempra’s Tax Department.
Contact Information:
Lauren Saket
Email: [email protected]
Phone: 619-696-2401
Amanda Tucker
Email: [email protected]
Phone: 619-696-2155
Attachment 2
Lauren Saket
Corporate Tax Department
Sempra Energy
488 8th Ave., HQ08N1
San Diego, CA 92101
Phone: 619-696-2401
Email: [email protected]
ITCCA Exemption Request Form
(Master Development Plan)
Name of Governmental Agency Work Order Authorization (WOA) # Project Name Project Location / Address
Information on ITCCA and Master Development Plans
Effective after December 22, 2017, any contributions in aid of construction and any contribution by any governmental entity or civic group (CIAC) shall be treated as taxable income to San Diego Gas & Electric Company (SDG&E), unless a specific exemption under the law applies. The California Public Utilities Commission has authorized SDG&E to collect from nonshareholders a charge to cover SDG&E’s estimated liability for income taxes related CIAC, also known as the income tax component of contributions and advances (ITCCA).
ITCCA shall not apply to any project that is part of a master development plan in effect prior to December 22, 2017. The IRS has not yet issued guidance on what types of plan(s) qualify as a master development plan.
Representations and Indemnification
The Governmental Agency listed above is hereby requesting an exemption from ITCCA, and hereby represents and warrants to SDG&E the following:
1. The Governmental Agency listed above has a master development plan in place which includes the Project Name and the Project Location / Address listed above, and such master development plan was in effect prior to December 22, 2017.
2. The Governmental Agency, through its authorized representative, is giving notice to SDG&E that the Project Name above is included in a master development plan that qualifies for an exemption from the ITCCA requirements for CIAC.
3. In the event that any of the representations made herein by the Government Agency, through its authorized representative, are false or inaccurate and ultimately affect the exemption from ITCCA for master development plans, or in the event the master development plan of the Government Agency does not qualify for ITCCA exemption, the Government Agency shall reimburse SDG&E for the full amount of such tax liability determined by the IRS, state, city, and/or local government authority, plus interest, penalties, fees, and related costs of defending the tax position before the IRS or another taxing authority.
Such amounts will be paid to SDG&E within sixty (60) days after written notification of such event by SDG&E to the Governmental Agency listed above.
Attachment 2
ITCCA Exemption Request Form
4. The undersigned individual, being an authorized representative of the Governmental Agency, has the full legal power and authority to make the foregoing representations, warranties and agreements, and to execute and deliver this Request Form on behalf of the Governmental Agency.
Please attest to the representations above and acknowledge your agreement to the foregoing terms by signing below and returning your signed copy to the undersigned via PDF email or by U.S. mail to the address provided above.
ACKNOWLEDGED AND AGREED:
Signature Dated
Name of Government Agency
Name of Authorized Representative
Title of Authorized Representative
Attachment 2
ITCCA Exemption Request Form
(IRC Section 1033 and Threat of Involuntary Conversion) Name of Governmental Agency Work Order Authorization (WOA) # Project Name Project Location / Address
Information on ITCCA and Threat of Involuntary Conversion Effective after December 22, 2017, any contributions in aid of construction and any contribution by any governmental entity or civic group (CIAC) shall be treated as taxable income to San Diego Gas & Electric Company (SDG&E), unless a specific exemption under the law applies. The California Public Utilities Commission has authorized SDG&E to collect from nonshareholders a charge to cover SDG&E’s estimated liability for income taxes related CIAC, also known as the income tax component of contributions and advances (ITCCA).
ITCCA shall not apply to any project where a governmental agency makes a threat of involuntary conversion under Internal Revenue Code section 1033. A threat of involuntary conversion exists if a representative of a governmental agency or a public official authorized to acquire property for public use informs SDG&E in writing that the governmental agency or official intends to involuntarily convert or condemn in whole or in part the property at issue to move forward with a specific project.
Representations and Indemnification
The Governmental Agency listed above is hereby requesting an exemption from ITCCA, and hereby represents and warrants to SDG&E the following:
1. The Governmental Agency listed above has legal authority or could receive legal authority to compulsorily or involuntarily convert or condemn in whole or in part SDG&E’s property found at the Project Location and Address listed above.
2. The Governmental Agency, through its authorized representative, is giving notice to SDG&E that it will involuntarily convert or condemn in whole or in part SDG&E’s property found at the Project Location and Address listed above, unless SDG&E removes, relocates, or otherwise complies with the work requested under the WOA listed above.
3. The Government Agency, through its authorized representative, represents and warrants that an exemption from ITCCA under IRC section 1033 applies.
4. In the event that any of the representations made herein by the Government Agency, through its authorized representative, are false or inaccurate and ultimately affect the exemption from ITCCA under IRC section Lauren Saket
Corporate Tax Department
Sempra Energy
488 8th Ave., HQ08N1
San Diego, CA 92101
Phone: 619-696-2401
Email: [email protected]
Attachment 2
ITCCA Exemption Request Form
1033, the Government Agency shall indemnify and reimburse SDG&E for the full amount of such tax liability determined by the IRS, state, city, and/or local governmental authority, plus interest, penalties, fees and related costs to defending the tax position before the IRS or another taxing authority. Such amounts will be paid to SDG&E within sixty (60) days after written notification of such event by SDG&E to the Governmental Agency listed above.
5. The undersigned individual, being an authorized representative of the Governmental Agency, has the full legal power and authority to make the foregoing representations, warranties and agreements, and to execute and deliver this Request Form on behalf of the Governmental Agency.
Please attest to the representations above and acknowledge your agreement to the foregoing terms by signing below and returning your signed copy to the undersigned via PDF email or by U.S. mail to the address provided above.
ACKNOWLEDGED AND AGREED:
_______________________________ ____________________
Signature Dated
_______________________________
Name of Government Agency
_______________________________
Name of Authorized Representative
_______________________________
Title of Authorized Representative
Attachment 2