EAST PALO ALTO
CITY COUNCIL
STAFF REPORT
DATE: May 16, 2023
TO: Honorable Mayor and Members of the City Council
VIA: Melvin E. Gaines, City Manager
BY: Melvin E. Gaines, City Manager
Greg Henry, Senior Management Analyst
SUBJECT: Status Update on the Local Agency Formation Commission (LAFCo) Process and Results for Request for Qualifications (RFQ) for Sanitary Sewer Services Recommendation
Receive and file this report on the update of the LAFCo process for establishing East Palo Alto Sanitary District (EPASD) as a subsidiary district of the City Adopt a resolution.
Adopt a resolution:
1. Authorizing the City Manager to issue a request for proposals (RFP) from the qualified vendor list to provide sanitary sewer services should EPASD become a subsidiary district the City ; and
2. Approving a list of vendor(s) pre-qualified to submit a proposal in response to the Request for Proposals, with West Bay Sanitary District as the sole vendor on the list.
Alignment with City Council Strategic Plan
This recommendation is primarily aligned with:
• Promote Housing, Economic and Workforce Development
• Promote Health & Public Safety
Background
Status Update on the Local Agency Formation Commission (LAFCo) Process On October 18, 2022, the City Council approved an application requesting that the San Mateo Local Agency Formation Commission (LAFCo) conduct proceedings concerning the establishment of the East Palo Alto Sanitary District (EPASD) as a subsidiary district of the City (Attachment 3, Resolution 137-2022). This request was one of the recommendations in the LAFCo municipal service review and was the result of 15 public meetings held by the City and LAFCo, as well as four intergovernmental committee meetings held by the City and EPASD over a two-year period.
The application, prepared by the City’s contract engineering firm, Freyer & Laureta, Inc. (F&L), included a detailed plan for providing service, which outlined recommended system improvements, revenue and expenses, funding sources, and the impact on sewer service charges if the subsidiary district is established. F&L previously served as the EPASD contract engineer between February 2016 and January 2018 and based the plan for providing service and sewer service charges on publicly available information.
F&L presented the plan for service1 under Item 9.3 of the October 4, 2022 City Council meeting (link) which continued to the October 18, 2022 City Council Meeting (link), as Item 9.1.
As detailed in the October 18, 2022 staff report and in the City’s application to LAFCo, once approved by LAFCo, EPASD would continue as a going concern, except as a subsidiary district of the City. The City Council would serve as governing body but all EPASD’s funds, assets and liabilities would be segregated for the purpose of sanitary sewer service.
The City Council, as governing body, would set annual sewer service charges pursuant to Proposition 218. The sewer service charges proposed in the Plan for Service incorporate sewer service charges recommended in the EPASD 2019 Sewer Rate Study (Rate Study).
Despite this, EPASD had not raised rates as recommended in the Rate Study. The methodology for Connection fees and sewer service charges for new development are contained in Table 10 attached to the LAFCo application (link, page 39).
After the City submitted its application on December 9, 2022, LAFCo requested additional information/clarifications concerning the City’s application. The City responded to LAFCo’s requests on December 22, 2022 and March 23, 2023 (Attachment 2). LAFCo has recently informed City staff that the Commission will consider the City’s application at a noticed public meeting to be held on July 19, 2023.
According to LAFCo regulations, the notice of hearing must be published at least 21 days prior to the LAFCo hearing on July 19, 2023. The Executive Officer’s report with recommendations must be published at least five days prior to the LAFCo meeting. The City, EPASD and other interested parties will have an opportunity to comment on the Executive Officer’s report and application in writing and at the Commission hearing. At the hearing, the Commission has the discretion to approve the application, approve it with modifications or conditions, deny it, or continue the hearing for up to 70 days.
If approved (as is or with modification or conditions), the Executive Officer must schedule a noticed, public protest hearing at which written protests may be submitted by registered voters or landowners residing within EPASD boundaries. Protests must be written and follow specific guidelines to qualify.
• If more than 25% of the registered voters or 25% of the landowners owning 25% of the assessed value of land submit valid written protest, an election must be ordered. The election would be a simple up or down majority vote as to whether EPASD will become 1 Some adjustments in revenue and expenditures may be necessary. Adjustments could be based on subsequent financial decisions by EPASD, the details of fiscal health of EPASD, and status of infrastructure of which the City is not privy.
a subsidiary district of the City.
• If less than 25% of the registered voters and less than 25% of the landowners owning 25% of the assessed value of land submit valid written protests, LAFCo must order establishment of the subsidiary district.
Upon conclusion of the hearing, the Executive Officer has 30 days to determine the results of written protests.
Based on LAFCo’s scheduled hearing on July 19, 2023, it is estimated that if approved, the establishment of EPASD as a subsidiary district of the City could become effective within five months from the Commission’s hearing if there is less than 25% valid written protest, and up to 10 months if an election is required.
Sanitary Sewer Services
As noted above, LAFCo requested additional information/clarifications from the City’s application. One such request was that the City provide:
A general timeline for the initiation of sanitary sewer services overseen by the City, including the timing of when the City may seek proposals for contracting services for the subsidiary district. Provide information about the timing of when the City would start the contracting process and when a contract would be entered into.
A prerequisite to respond to this request is identifying eligible entities interested contracting with the City to provide sanitary sewer services if EPASD becomes a subsidiary district of the City. Thus, on February 7, 2023, the City Council directed staff to issue a Request for Qualifications (RFQ) to identify entities with capability and capacity to provide sanitary sewer services if EPASD becomes a subsidiary district of the City. The intended process following the RFQ was to then solicit specific proposals from the entities deemed most qualified to provide the services requested. At that point, staff would return to the Council with a recommendation on which entity the City should partner with if EPASD becomes a subsidiary district of the City.
On March 3, 2023 the RFQ was issued and on April 14, 2023, the City’s RFQ closed with only a single respondent, West Bay Sanitary District (West Bay).
Analysis
Though the City only had a single respondent, West Bay meets all the qualifications from the request. West Bay provides sanitary services of the type needed by the City for multiple other municipalities on the peninsula. In particular, West Bay provides contracted sewer services with the towns of Woodside and Los Altos Hills, both of which were listed references in the West Bay’s response. City staff and F&L met with the provided references and both municipalities reported they were happy with the services provided by West Bay.
Given that West Bay meets the conditions required by the City, staff recommends the City establish the pre-qualified list of proposer(s), with only a single entrant, West Bay. The next step is issuance of a Request for Proposals (RFP) from which West Bay could submit as the lone respondent. Staff are developing the RFP with F&L and, with City Council direction, will issue it shortly. It is important that the City continue through this process while LAFCo continues to consider if EPASD should become a subsidiary district of the City.
Fiscal Impact
There is no fiscal impact for the proposed action.
Public Notice
The public was provided notice by making the agenda and report available on the City’s website and on a bulletin board located at City Hall: 2415 University Avenue, East Palo Alto.
Environmental
The proposed action is exempt from the California Environmental Quality Act (CEQA) pursuant to Guideline Section 15320(b), Class 20 because establishment of the EPASD as a subsidiary district involves organization or reorganization of a local agency and would not alter the geographic area in which previously existing powers (sanitary sewer services) are exercised.
Attachments
1. Resolution Sanitary Services Request for Propsals
2. City of East Palo Alto LAFCo Comment Responses
3. Reso.137-2022