STAFF REPORT TO THE CITY COUNCIL
DATE: Regular Meeting of March 8, 2022
TO: Members of the City Council
VIA: Dante Hall, City Manager
SUBMITTED BY: Michael Roberts, Public Works Director/City Engineer SUBJECT: Willow Avenue Self-Storage Project – Sanitary Sewer Disposal System RECOMMENDED ACTION:
Receive a status update on the sanitary sewer disposal system that has yet to be installed by the Developer, provide feedback on staff’s proposed measures to allow the Self-Storage Facility to open in the interim, and authorize staff to enter into negotiations on an amendment to the Development Agreement for Council consideration that will facilitate the completion of a public system intended to serve all properties in the Willow corridor catchment basin.
FISCAL IMPACT OF RECOMMENDATION:
There would be no cost to the City for the Developer, Hercules Self-Storage Management LLC, to install temporary sewer disposal facilities (portable toilets and hand washing stations) to allow their business to open for an interim period and to submit a surety, either a bond or cash deposit for $550K, to provide the City the necessary assurances that the sanitary sewer disposal system will be completed in the future.
Over the last several years, as the challenges involved with installing a stand-alone private system became increasingly apparent, the Developer and City staff have had informal discussions on how a public system could be constructed instead that would ultimately serve all 7 properties in the Willow Corridor. Such a system is estimated to cost approximately $550K. The Developer has indicated they initially intended to spend $300K in collaboration with Valley Bible Church and would be amenable to expending another $150K if they were reimbursed from any future annual revenue stream to the City from the Facility greater than the $150K originally anticipated. In this arrangement, the City could contribute the remaining $100K given the public benefit of providing reliable sewer service to the remaining property owners in the Willow sewer catchment area that would avoid overflows and avoid adverse impacts on public health and safety.
DISCUSSION:
Construction on the Willow Self-Storage Facility is nearing completion. This project was fully entitled in September 2018 (Attachment #1) and consists of 4 buildings with a total of 821 mini-storage units and an office building. With regards to sewer effluent generation, the facilities are required to provide 2 toilets and 3 sinks in the office building.
The Self-Storage Facility is located on a 3.4 acre parcel at 1444 Willow Avenue. There is an adjacent 2.9 acre parcel at the same site which is currently vacant. The Developer plans to develop automobile-related services at this second site in the future, which would also be served by the sanitary sewer disposal system.
Currently, there is a private wastewater conveyance system in place that serves properties on the Willow Corridor (Atachment #3). It begins in front of Valley Bible Church, where effluent is conveyed in a gravity main in Willow Avenue onto the Singh (formally Carone) property. From there, a sewer lift station pressurizes the effluent through a short force main to a public gravity main that runs on the Singh property parallel to Willow towards the Hercules Transit Station.
The private system currently serves Valley Bible Church, West Coast Drilling, and Caltrans. It was installed in Willow Avenue (i.e. the old SR-4 highway) before the street was annexed by the City from Caltrans. From the City’s perspective, the lift station is in poor condition, is unreliable, and has had numerous sanitary sewer overflows in the past. The most recent overflow occurred last month when power was lost as the system does not appear to have an overflow alarm or a backup generator. Ownership and maintenance responsibilities have been contentious in the past and the City does not have any records of the facility on file.
Given the private sewer service for the Willow catchment area was considered unreliable, the Developer was required to secure their own sanitary sewer disposal system as a condition to gain their full entitlements. Per Condition of Approval No.2:
Applicant/Developer shall design and construct a sanitary sewer disposal system to the satisfaction of the City Engineer. The system shall comply with City and/or Contra Costa County Department of Environmental Health standards. Applicant/Developer shall secure necessary approvals and easements from private property owners and/or government agencies as required to construct and maintain the system. Applicant/Developer shall demonstrate the viability of the system to the satisfaction of the City Engineer prior to the issuance of any construction permits for the Project.
In June 2020 the Developer submitted a conceptual plan (Attachment #4) demonstrating the viability of the system, which consisted of a new lift station and piping on the north side of Willow Avenue, opposite the then Carone property (i.e. now Singh property). This option included running a new force main down the length of Willow Avenue to the Hercules Transit Center, which would be very costly, because the Developer was unable to secure rights from Carone to route the forcemain across his property to the point of connection with the public system. Since that time, the Developer has worked with Singh to secure the necessary rights. Due to all the challenges encountered to date, the Developer is now asking the City for relief (Attachment #5).
Given the contentious history of the private lift station, and the Developer’s and Valley Bible Church’s request for assistance from the City to find a workable solution, staff is recommending a public system be installed in the public right of way similar to what is shown on the conceptual plan. Due to the challenges of the site and requirements for a public lift station (i.e. overflow alarm and standby generation secured in a building), the cost for such a system is estimated to be $550K, which is $250K higher than the $300K originally budgeted by the Developer, who is partnering on the funding with the Church.
Per the Development Agreement (DA) with Hercules Self-Storage Management LLC (Att #2), the City is entitled to 10% of the gross revenue derived from the “Base Rent” as defined in Section 3.1 of the DA. This obligation for the owner begins 3 years after completion of the mini storage portion of the project or after 90% of the units have been rented, whichever comes first. At the time the DA was agreed upon, this revenue stream was projected to be within $150K - $200K per year. However, based upon current market conditions the Developer now believes the City’s share would be closer to $250K annually. To help bridge the funding gap, one option would be for the Developer to fund an additional $150K for the sewer system up front, then be reimbursed by the City from revenue that exceeds $150K per year in the future.
Lastly, the City could elect to fund the remaining $100K given the system will be sized to serve all the properties in the Willow catchment area, including Caltrans, Singh, and West Coast Drilling. With Council’s authorization, staff is prepared to formally negotiate the terms of such an agreement that would be captured in an Amended Development Agreement that could come back to Council for consideration within 4 months.
In summary form, staff is proposing the following:
Developer
Designs and builds sewer lift station facility to Hercules public standards.
Funds construction contract cost of the lift station as follows: $300K out of pocket, reimbursed up to an additional $150K by City from future annual revenue to City for the Self-Storage Facility above $150K per year (per DA, revenue to City is 10% of Base Revenue).
Secures easements needed across Singh property.
Provides interim sanitary sewer facilities on-site (i.e. portable toilets and handwashing facilities) until new lift station is fully operational.
Provides security of cash or bond equivalent to $550K, the anticipated construction cost of the new lift station.
Funds all design and project management costs.
City
In recognition of public benefit of the facility (i.e. future connections from properties in the vicinity that would need service, avoiding sanitary sewer overflows), contributes $100K to the construction contract cost.
For same reason, funds all plan check and inspection costs.
Issues a temporary certificate of occupancy until the new system is completed.
Reimburses Developer per 2. Above.
Owns and maintains new system, once accepted as complete.
This assumes a construction contract cost of $550,000. The Amended Development Agreement would be brought to Council for consideration within 4 months.
Financial Impact
Description: None at this time.
Funding Source:
Budget Recap:
Total Estimated cost: $ New Revenue: $
Amount Budgeted: $ Lost Revenue: $
New funding required: New Personnel: $
Council Policy Change: Yes No
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