THAT THE LOCAL
A RESOLUTION
OF
AGENCY
OF
FO
THE
NO.
CITY
137- 2022
CO
COMMISSION TAKE PROCEEDINGS
TO ESTABLISH THE EAST PALO ALTO
PU
SANITARY DISTRICT SUBSIDIARY OF
CITY OF EAST PALO ALTO
NOW, THEREFORE, BE IT RESOVLED
A
THAT THE COUNCIL OF TY CITHE OF EAST SanitaryPALO
HEREBY approves the application and adopts this resolution, and the Local Agency Formation of
Commission of San Mateo County is hereby requested totake proceedings forthe establishment the East
p
Palo Alto subsidiary district • « . City of East Palo provisionsAlto tothe x
5 of •••
Resolution
No. 137- 2022 1 of 2
BE IT FUTHER RESOLVED that the City Council authorizes the City Manager to make any necessary amendments to the application and plan for service in the course of the LAFCo process.
BE IT FUTHER RESOLVED that the City Council authorizes the expenditure of up to $ 15,000 dollars for any processing costs.
PASSED AND ADOPTED this 18" day of October 2022, by the following vote:
AYES: Abrica, Gauthier, Lopez, Romero,
NOES:
ABSENT:
ABSTAIN: Wallace -Jones
ATTEST:
Ja olin, City Clerk
Ruben Abrica, Mayor
APPROVED AS TO FORM:
It - - Zj. 14- _. Af
IffValerie J. Arm ( to,' Interim City Attorney
Resolution No. 137- 2022 2 of 2
APPLICATION FOR A CHANGE OF ORGANIZATION, REORGANIZATION, OR OUTSIDE
SERVICE AGREEMENT
TO THE SAN MATEO LOCAL AGENCY FORMATION COMMISSION
A. GENERAL INFORMATION
1. Briefly describe the nature of the proposed change of organization, reorganization, or outside service agreement.
Establish East Palo Alto Sanitary District as a subsidiary district of the City of East Palo Alto
2. An application for a change of organization or reorganization may be submitted by individual in the form of a petition or by an affected public agency in the form of a certified resolution. This application is submitted by ( check one):
Landowners or registered voters, by petition
x , An affected public agency, by resolution
W
if this application ' is submitted by petition of landowners or registered voters in the affected territory, complete the petition form.)
The reason for the proposal is to transfer governance and operation of sanitary sewer serviGo, to the City of East Palo Alto in the form of a subsidiary district to provide for more efficient operation and coordinated planning of sewer service, infrastructure and capacity to accommodate planned growth and to improve transparency, accountability and environmental health to meet the current and future needs of all District ratepayers.
4. Does this application have 100% consent of landowners in the affected areaj Yes x No
5. Estimated acreage: 1. 84 square miles
1. List the name or names of all existing cities and special districts whose service area or service responsibility would be altered by the proposed change of organization or reorganization.
Establishing the EPASD as a subsry district of the City of East Palo Alto would riot alter' service area because EPASD would continue to exist as a subsidiary district of the City wit the City Council as governing body. I
2. List all changes to the pattern of delivery of local services to the affected area. For each service affected by the proposed change(s) of organization, list the present source of service state
it
none" if service is not now provided), the proposed source of service and the source of funding for construction of necessary facilities ( if any) and operation. Example is given on the first two lines of the space provided for your response. tow t
PRESENT
SOURCE I
PROPOSED
SOURCE
VID 1 11
CONSTRUCTION OPERATING
IIISanitary Sewefr-,East Palo Alto East Palo AltoDevelopment Fees, Sewer Service Fees Sanitary ISanitary District, Grants and Reserve and Property Tax District, an asubsidiary
Revenue Independent " district of the
Special City of East
Palo Distr ict ItoC.
PROJECT PROPOSAL INFORMATIgI
1. Please describe thegeneral
location oftheterritory which isthe subject ofthis proposal. Refer to major highways, roads and topographical features. The boundaries of theEast Palo Alto Sanitary District which include the City ofEast Palo Alt and a portion of the City of Menlo Park bounded by the East Palo Alto/Menlo Park Boundary San Francisquito Creek and Menalto Avenue. (Please see attached map) I
2. Describe the present land
use( s) in the subject territory. The City of East Palo Alto, which is 2.6square miles, is a mostly built out city, with the exception of open space, marshlands and vacant land in the Ravenswood Industrial area. Of the developed areas, residential uses are the most common land use in the City. Approximately % of the land are residential uses, with the majority being single family, along with asmaller percentage of multi -family uses. Commercial and office account for approximately six percent ofthe landarea. The greatest mix of uses occurs where residential neighborhoods are near University Avenue'
also
sretail uses, or near the Ravenswood 101 Shopping Center. There is arelatively significant amount of vacant land, primarily concentrated along Bay Road within the 350-acre Ravenswood Business District/ 4 Corners Transit Oriented Development Specc Plan ( RBD), where previously industrial businesses were located. Institutional uses, public facilities, and parks and recreational facilities account for approximately tenpercent of the land areas inthe City. 3. How are adjacent lands
used? North: Baylands, Open Space South:
Residential ( the cities of
Palo Alto and Menlo Park) East: Baylands, Open Space (including the City ofPalo Alto)
West: Residential and Office Park ( including the city of Menlo Park and Facebook)
4. Will the proposed change of organization result in additional development? F so, how is the, subject territory to be developed?
The intent of establishing EPASD as a subsidiary district of the City is to allow development consistent with the City' s General Plan, Zoning Ordinance and Ravenswood Specific Plan.
The City has not been able to issue building permits without confirmation of capacity from the EPASD. Additionally, the City is also processing an update to the RBD Update to potentially allow between two to three million square feet of commercial use as well as up to 1600 residential units within the Specific Plan area. The update is scheduled to be heard by the City Council in mid- 2023.
5. What is the general plan designation of the subject territory? The entire city has the following General Plan designations, encompassing residential, mixed use, commercial, parks, industrial, public/institutional and open space categories: Low Density Residential ( 0- 12 units/ acre), Medium Density Residential ( 12. 1- 22 units/ acre), High Density Residential ( 22. 1- 43 units/ acre), Urban Residential ( 43. 1- 86 units/acre), Mixed Use Low, Mixed Use Corridor, Mixed Use High, Neighborhood Commercial, General Commercial, Office, General Industrial, Industrial Buffer, Parks/ Recreation/ Conservation, Resource Management and Public/ institutional.
The specific definitions of the General Plan designations can be found in the land use chapter of the City' s General Plan Vista 2035:
https:// www.cityofepa. org/ sites/default/files/fileattachments/ community_amp_economic — devel opment/page/2731/ epa_ gp_ chapter- 4—land—use—and—urban—design—final- 20180727172121 4683. pdf
6. What is the existing zoning designation of the subject territory? The entire city has the following Zoning designations: Residential Low Density ( R- LDj, Residential Medium Density ( R- MD), Residential High Density ( R- HD), Residential Urban High Density ( R- UHD), Mixed Use Corridor ( MUC), Mixed Use Low { MUL), Mixed Use High IVIUH), Commercial General (C-G}, Commercial Neighborhood ( C- N), Commercial Office ( CO) Public Onstitutional ( PI), Parks and Recreation ( PR), and Resource Management ( RIVI).
The City also has specific zoning designations within the RBD Specific Plan area. The districts include the following: 4 Corners, Bay Road Central, Ravenswood Employment Center, Industrial Transition, Waterfront Office, Urban Residential, University Village ( single family), Ravenswood Open Space, and Ravenswood Flex Overlay.
A definition of all these districts can be found in the City' s development code Chapter 18, Article 2, which is part of the City' s Municipal Code:
https:// library. municode. com/ ca/east—palo_ aIto/ codes/ code—of ordinances? nodeld= EAPAAL DECO2018EDCUORN009- 2020ADDE1 52020TIT1 8 D ECO—ART2ZOALUS DEST.
Definitions of the RBD zoning designations can be found in the land use section of the Specific Plan:
https:// www. cityofepa. org/ sites/ default/ files/ fileattachments/` community_ amp_ economic—devel opment/page/281 1/ land—use—section- 6. pdf.
7. What prezoning, environmental review or development approvals have already been obtained for development in the subject territory?
The entire City is governed by the General Plan Vista 2035, Development (Zoning) Code, and the RBD Specific Plan. Each of these had environmental clearances, including the program level environmental impact report ( EIR) for the General Plan and the RBD Specific Plan. The City is also in the process of preparing an update to the RBD Specific Plan, including its own programmatic EIR. The City anticipates the Specific Plan and EIR to go before the City Council for a decision in mid 2023.
The LAFCo application is exempt from the California Environmental Quality Act (CEQA) under Section 15320 of State CEQA Guidelines because it consists of establishment of a subsidiary district, which does not change the geographical area in which previously existing powers are excercised.
i Irlill IIIII III Iiiii lilip
Execution of a contract for operation of the sewer system with a private or public sewer entity.
I Does any portion of the subject territory contain any of the following -- agricultural preserves, sewer or other service moratorium or wetlands subject to the State Lands Commission jurisdiction?
10. If no specific development projects are associated with this proposal, will the proposal increI`se the potential for development of the property? If so, how? The proposal will accommodate development already approved by the City of East Palo Alto.
This proposal will accommodate approved development by increasing the capacity of the sanitary sewer system and providing much needed service for new land uses, including development proposed by residents. Many recently approved entitlements have not been able to proceed to building permits because will serve letters have not been issued by the EPASD. LAFCo will consider
the person signing this application as the proponent ofthe proposed action(s). Notice and other communications regarding this application ( including fee payment) will bt. iirected tothe proponent at: I" Ti AW 'mjM
X&11 O
Signature of Proponent
Applica blk.doc
10/ 6/ 2000}
A. AFFECTED PUBLIC AGENCIES
Please complete this section if this application if submitted by resolution of one or more affected public agencies. Certified copies of resolutions listed below must accompany this application.
The names and resolutions of agencies applying for the change of organization or reorganization described above are as follows:
FFECTED AGENCY ESOLUTION NO. DATE ADOPTED
City of East Palo Alto Ote
2. Does this application have 100 % consent of landowners in the affected area? Yes No x ( if Yes, include proof of consent.)
Enumerate and describe the services to be extended to the affected territory.
Wastewater collection pursuant to the Sanitary District Act ( California Health and Safety Code §6400 — 6982 by operating and maintaining the collection system via a private or public entity and sewage treatment via a contract with the City of Palo Alto for capacity at its Regional Water Quality Control Plant.
Describe the level and range of those services
The collection system would continue to be operated in accordance with Statewide SSO Waste Discharge Requirements and RWQCB Sewer System Management Plan guidelines. Operation and maintenance of the sanitary sewer collection system consisting of approximately 30 miles of gravity sewer lines, of which approximately 70 percent are 6 inches in diameter and the balance ranging from 8 to 24 inches in diameter. Operation will include replacement of deficient lines to serve existing customers and capital improvements to accommodate planned development.
The City engaged Freyer & Laureta ( F& L) to identify potential capital improvements to improve the overall reliability and resiliency of the existing sanitary sewer collection system; identify potential capacity improvements required to provide service for future development as approved by the City; develop an annual operation and maintenance budget for the sanitary sewer collection system including the expenses associated with wastewater treatment at the Palo Alto Regional Water Quality Control Plant PARWQCP); develop potential annual sanitary sewer service charge to support ongoing operation ofthe sanitary sewer collection system and Develop connection fee for new developments to receive sanitary sewer service. (Please see F&L Memo labeled Attachment #) Todevelop
an estimated annual operating and maintenance budget, F&Lreviewed the published Fiscal Year 2022/2023 budget from WBSD. Table 7
presents our methodology for
developing a budget for operating expenses for labor and other overhead costs applying a ratio calculated by dividing the totaI miles of pipes within tht EPASD collection system by the total miles of pipe within the WBSD collection system.
In addition to the labor costs for operating the collection system, EPASD contributes the operating and capital costs for the PAWRQP as outlined in the existing agreement. In reviewing the East Palo Alto Sanitary District, 2019 Sewer Rate Study (Rate Study), F& L identified that the study include a summary of anticipated treatment operation, capital, and debt service costs'. The costs listed in the Rate Study were consistent with information that F& L found from a November 17, 2020 presentation to the City of Palo Alto Finance Committee.
Please see summary of the anticipated costs for PARWQCP treatment and capital improvements in Table 8.
3. Indicate when those services can feasibly be extended to the affected terri The City will contract with a private or public ento tity operate the system. The Contract will be negotiated tobegin on the effective date the district is established as a subsidiary district ofthe City. The application to LAFCo requests that the effective date be the first day of a fiscal period (month, quarter, year). 4.
Indicate any improvements or up -grading of infrastructure orfacilities such a structures, roads, sewer or water facilities, or other conditions tobe imposed orrequired within the affected territo[y. Describe indetail, the size, location, and capacity onew infrastructure that will be necessa[ yto provide service.. Establishing the District as a subsidiary district of the City in itself, does not require improvements.
The purpose of establishing the District asa subsidiary district isto implement improvements forboth public health and safety and to accommodate planned growth. The attached tables provide detail on planned improvements tocorrect system deficiencies for current customers and capital improvements toaccommodate planned development. These plans were prepared based on publicly available information.
EPASD is in the process of televising the sewer system. The outcome ofthe completed televising ofthe system will further inform these plans. F& L has developed asuggested list of capital improvements that match the improvements identified inthe 2015 Master Plan. Although we concur that performing the improvements suggested inthe 2021 Master Plan would provide additional contingency capacity when compared tothe 2015 Master Plan, the PWWF design condition isthe peak design event that will only occur for a short duration as described in the 2015 Master Plan. The improvements identified inthe 2015 Master Plan do allow for some portions ofthe collection and conveyance system to flowunder surcharge conditions (e.g., pressure flow) but the predicted HGL isatleast four - feet lower than the sanitary sewer manhole rimelevations. Table 1 lists
the pipe segments and Figure 1highlights the same pipe segments that are required to be upgraded to reduce the risk of SSOs during PWWF conditions. Table 2presents the Conceptual Opinion of Probable Project Cost toimplement the improvements listed in Table 1and highlighted on Figure 1F&Ldeveloped
a capital improvement plan that includes both the existing system capacity deficiencies and the development related capacity deficiencies as shown or Figure 3. Figure 4 includes a suggested timeline to address the existing system capacity eficiencies as shown on Figure 4. The suggested timeline is intended to allow the existing system capacity deficiencies to be built over 15 years, which will allow for grant and low interest loan funding sources to be secured to fund the necessary improvements. The actual timeline toimplement the capacity assurance improvements mayneed to be adjusted based on proposed development approval, permitting, and construction process.
Because the
development related deficiencies willbeimplemented based onactual development approvals and construction, F&Lhas not identified a specific timeline to implement the development related deficiency improvements. Figure 5does present the anticipated developments over the next five years listed in Table 5 with the development related deficiency improvement to allow the City to begin understanding where improvements may be required prior to issuing final Cercates of Occupancies for anyofthe identified developments. The ultimate timeline to construct the capital improvements required to address development r related deficiencies willbe determined once the proposed development has paid itsconnection fees and provided afirm timeline for occupancy.
5. Describe financial
arrangements for construction andoperation ofservices extended tothe affected territoa ttach proposed operations budget if available). Willtheterrito[y be subject to any special taxes, charges or fees? (if so, please speci Establishing EPASID asa subsidiary district does not constitute an extension of servic rather atransfer of governance and service responsibilityothe Cityof East Palo Alto. The following details financial arrangements for operation and construction. IINe have summarized the anticipated costs for PARWQCP treatment and capital improvements in Table 8.
IT"
F& L reviewed existing information from the EPASD web site and identified that the current Annual Sewer Charge (ASC) is $ 600 per EDU3. The current ASC is consistent with the suggested ASC from the Rate Study for Fiscal Year 2019/20 but EPASD has not implemente, the recommend 5-percent annual increase thatwas included in the Rate Study4. F&L calculated a potential ASC based on the current estimated operating and capital costs that would be required to fund all expenses for one fiscal year with only partial contribution from the EPASD reserves. Table 9
provides a potential ASC that is more than the current EPASD published ASC but we do not recommend that the larger ASC be implemented in the near term.
We have presented the calculated ASC toconfirm that what the EPASD Rate Study that indicates itis a necessary annual rate increase to account for the projected annual increase in operating costs that will continue to be experienced in future years. Without implementing a regular annual ASC increase, there will be a shortfall between revenues and expenses that will need to be funded from current reserves. For purposes of developing the Plan, we Suggest that the ASC be established at $600 per EDU for Fiscal Year 2022/23 and then be increased by5-percent per year in accordance with therecommendations of the EPASID' s Rate Study. However, F&L does anticipate thatat some point in the future the ASC will be required to be raised to alevel similar to what is presented in Table 9 to ensure that there is adequate revenue to provide safe and reliable sanitary sewer service to all current and future customers while not diverting funds from reserves that can otherwise fund critical capital improvement projects. EPASD's
published connection fee5 is $6,060 although F&Lcould not find a study that outlined the methodology used todetermine the connection fee. F&L did develop a potential connection fee that considers: 050-
percent of capacity assurance improvements identified inTable 2 will be a benefit to new development because byimplementing the recommend projects provides a more reliable and resilient system for existing customers but also creates additional capacity forthe benefit of new 00-
development.
percent of
0 development
1 related capacity deficiencies identified inTable 4. 0 Buy - in cost of $5 million p er 1.0 MGD of treatment capacity toreflect developers paybackofexisting PAWRQCP capacity that is available for new development. 0 Application review fee. Table 10
presents the calculation methodology todevelop a potential Connection Fee, which is 61100. Because the potential Connection Fee presented in Table 10 is similar to the current publish EPASD connection fee, wesuggest that theconnection fee bekept at $6,060 for the first year and then increased by5-percent per year similar to the ASC. However aregular review of the connection fee should becompleted toensure that connection feereflects actual costs incurred to accommodate City approved development. zx rAs
final a
step in developing the Plan, F&L evaluated the year over year cash flow foroperations and improvements of the sanitary sewer collection system. Table 11 presents Fa/FL'scash flow project for
five fiscal
years beginning with Fiscal Year 2022/ 23. The cash flow analysis includes the following key items:
r
Aft, Ah AM: A& Am
AM ft Alk
Ior each fiscal,,,,ear Y I the project expenses and projected revenues are calculated and presented. If expenses in a given fiscal year are greater than the project revenues, the Reserve Funds are used to balance the expenses and revenues.
By utilg portions of the existing Resery Ie
Funds
each fiscal year, the existing customers contributions tothe reserves over the years is utilized to fund the existing customers' 50- percent share of the Capacity Assurance Improvements identified inTable 2. The primary purpose of holding collected ASC and connection fees over several years is to allow for an agency to develop sufficient available funds toimplement capital improvement projects. Therefore, beginning todraw from reserves to fund the existing customers' portion of the recommended annual capital improvement program and capacity assurance capital improvement program that is forthe benefit of the existing customers. At the end of the five- year evaluation period, the projected Reserve Fund balance is equal to the annual operating and debt service costs. Because EPASID receives its revenue payments twice per yearas part of the property tax collection, sufficient reserves to fund atleast six months of operation is suggested. The cash flow evaluation presented in Table 11 maintains a minimum of 12-months of Reserve Funds for each given fiscal year. The cash flow review above will be impacted by the actual beginning balance of EPASID Reserve Funds. If additional information on the actual Reserve Fund balance becomes available, the cash flow analysis will be updated. 6. In as much
detail as reguired tea clear explanation, e lain why this prop sal is necessa[ y at this time.
Since incorporation in 1983, the City has struggled to achieve economic growth and financial sustainability, especially in comparison to other nearby communities. To address this, the City' s leadership has organized around actions that strengthen the City' s economic profile, with the ultimate goal of improving the lives and enhancing the well- being of East Palo Alto residents. To that end, the City became successor to the Ravenswood Lighting and Drainage Maintenance Districts in 2005 and the East Palo Alto County Waterworks District in 2001. Most recently the City successfully negotiated a water rights transfer agreement with the City of Mountain View to provide adequate water supply to support the City' s future development objectives. Establishing the EPASD as a subsidiary district of the City, an alternative supported by the LAFCo MSR and State policies favoring multi -purpose government over single purpose government in urban areas, would further these efforts and make the City whole as a land use agency and utility provider.
The Draft MSR provides an accurate account of the inability of the East Palo Alto Sanitary District to meet the needs of existing District ratepayers by failing to implement a Capital Improvement Plan ( CIP) to replace and upsize pipe aging pipe sections to eliminate surcharges and sanitary sewer overflows ( SSOs) that pose a health and safety risk to current rate payers and residents. Additionally, current residents are unable to obtain " will service letters" for accessory dwelling units permitted by State law and the City' s General Plan.
Aew development that is obstructed due to failure to implement a Capital Improvement Plan •(CIP) includes a variety of projects that are criticalto meet the City' saffordable housing andeconomic developme6 tgoals, employment opportunities and provide for essential services including ahealth 'clinic and job training center. The City is
well positioned to contract with a private or public sanitary sewer entity for operation and maintenance of the sewer system that serves the majority of the City. The City also has a successful record in obtaining grant funding that will be of benefit to sewer rate payers.