Jun 20 2014

Council might back off of a tax measure for new money to fix sewers.

Recent information from Alameda County  shows an unprecedented increase in the Real Property Transfer Tax flowing into Piedmont’s budget causing the City Administrator and Council to take another look at placing a sewer tax measure on the November 2014 ballot.  The City has been considering a ballot measure to generate new money derived from an increase in the tax on real estate transfers. For cost effectiveness and water quality, the City seeks to expedite the 30% remaining of the sanitary sewer rehabilitation  program.

The matter will be considered at a Special Meeting of the City Council in the Council Chambers on Tuesday, June 24 starting at 7:30 p.m. The meeting, open to the public, will be broadcast on KCOM Channel 27 and available live streamed from the City’s website.

“At the June 2nd meeting, the staff report for the first public hearing on the 2014-15 Budget included an update to Real Property Transfer Tax (RPTT) receipts. Based on the information provided by Alameda County through May 15, 2014, the City was estimated to receive
approximately $2.95 million and on pace to have a record year. At that time, staff continued to propose that funds in excess of budgeted amounts be allocated for unfunded retiree medical liabilities, facilities maintenance, and equipment replacement.

Based upon receipt of new data provided by the Alameda County Assessor’s Office, FY 2013-14 will be unprecedented, with RPTT receipts through June 9th at $3.78 million. This is largely due
to an historic total of approximately $972,000 for the month of May. The total for May is only $43,000 less than what the City received for April through June combined for Fiscal Year 2012-13. The previous record for a single month of transfer tax was June 2006, with receipts of $694,840.”

City Administrator Paul Benoit’s Report to the Council

The voter approved Sewer Fund originally was intended to rebuild and maintain Piedmont’s sanitary sewer system, however it was soon changed to include the City’s storm drain system. Both systems are recognized as important to protecting waterways from damaging effluent.

Historically, the City has used excess General Funds for purposes other than sewers: beautification projects, recreation facilities, employee compensation,  $2.5 million for private undergrounding problems, etc.

The City Council offered a 2011 ballot measure to complete the remaining 30% of the aged sanitary sewers. The tax proposed would have essentially doubled property owners ‘ Sewer Fund Taxes from $471 to $849  and $707 to $1,274 depending on lot size. Piedmont voters rejected the tax increase when they learned of errors in the City’s cost estimates and incorrect statements on Environmental Protection Agency (EPA) requirements.  Supporters of the sewer tax were undeterred by the new information and continued to support the sewer ballot measure that would have provided the City with new funds of approximately $11 million.

In a recent turn around on how much money was needed to accomplish EPA requirements, the City reduced the needed amount from approximately $11 million to approximately $1 million. City explanations of the dramatic change in needed funds to complete the sewer rehabilitation included overstated and incorrect calculations.

For years records were not kept by the Public Works Department on specific work hours or various projects charged to the Sewer Fund.  Council members did not have information on the actual work charged the Sewer Fund.

A priority list weighing various uses, including sewers, with available City funds has not been produced by the Council.

Former Mayor Al Peters stated in an opinion:

“The City has an annual general fund budget of approximately $22 million.  Allocating two percent a year to this project for three years would produce over $1.3 million.  As of June 30, 2013, the City had over $10 million in reserves, including over $4 million undesignated and an additional $4 million set aside for capital improvements and equipment replacement.  Why not use a portion of these funds to loan to the Sewer Fund rather than requesting an additional tax?  If reserves are inadequate, the Council should address that issue in a comprehensive way, not by this piecemeal approach.”

As the City looks for new money for sewers, it places other projects ahead of sewers.

Capital Improve Project (CIP) funds are generally used for special projects. There is no information indicating the City  prioritizes projects based on unavoidable expenses such as the completion of EPA required sewer work.

Although CIP funds and General Funds can be used for sewers, it is unknown if CIP allocations for sewer projects will be considered by the City Council.  As of this writing, the significant infusion of funds supplied by the Real Estate Transfer Tax changes the budget numbers. Without a new sewer tax, it appears special projects could be implemented and the Sewer Fund could be provided with the funds necessary for renovation of the remaining sanitary sewers in a cost effective, expeditious manner.

To read detailed analysis on Piedmont’s Sewer Fund, go to the left side of this page and click on “Sewer Fund”.

Read the City Administrator’s Report to the Council

May 21 2014

Former Council Member Garrett Keating comments on the City Council’s May 19 consideration of funding for sewers, maintaining recreational facilities, employee health benefits, the Budget and General Fund Reserves.

Sewers:

Council chose not to go forward with the “no tax”option and will likely choose one of the two tax options at the next Council meeting, June 2.

 The Budget Advisory and Financial Planning Committee (BAFPC) had no issues with the no tax option, so it is odd that Council felt there was some risk associated with it.   Other reasons were offered to accelerate the replacement program by adopting a tax rather than draw from the General Fund.  Environmental stewardship?

Sewer emergencies are declining and honestly, those concerned with Bay water quality would do better to contribute to the repair programs of other cities that are far greater polluters than Piedmont.

Maintain recreational facilities?  The biggest recreational need for Piedmont is field space and hours of use, not maintenance, but there are no proposals for that before City Council.

Increased contributions for retiree health benefits? A definite problem for the city.   Staff suggested Council would not address this need until 2021.

The Sewer Fund only needs $1M within the next 3 years, after which it is quite stable and an accelerated replacement program can likely be achieved. Piedmont has historically maintained high reserves, 20% of the General Fund. The current reserve for 2014-2015 is estimated at 21.5% and this would decline to 15% with the $1M loan from the General Fund.

The General Fund dropped $1M between 2006-2007 and 2007-2008 with virtually no impact on city services and $2M was found in city accounts to address undergrounding over-runs. There are more than adequate reserves to address this short-term loan. And Council could lower that need even more when year end transfer tax receipts come in. Transfer tax receipts are headed for $3.4M and Council has budgeted for $2.8. That $0.4 – 0.6 excess could be transferred to the Sewer Fund and offset a loan from the General Fund. That excess will manage to find its way into city balance sheets, no doubt, but Council could help that “15%” by using it to reduce this new tax.

Editors’ Note:  The opinions expressed are those of the author and not necessarily those of the Piedmont Civic Association.  Comments are welcomed below.

Prior PCA article.

Jan 9 2014

Cost overruns, unidentified risks, legal and engineering oversight are addressed in the finally adopted Risk Assessment Policy.

Following Piedmont’s unplanned expenditure of well over 3 million tax payer dollars, a result of the  failed Blair Park/Moraga Canyon sports complex project and faulty private underground utility project, residents and groups such as the Piedmont League of Voters (LWV) were concerned and offered suggestions on how to protect Piedmont from future unplanned financial impacts.  The City Council finally unanimously approved a Risk Assessment Policy.

Risk problems centered on the lack of step-by-step monitoring and reporting of risks and costs.  The new policy lays out actions to alert the Council, the public and the staff when capital projects costing over $300,000 are considered, approved and implemented. Public knowledge early in project development was specifically requested by the LWV and others.

The policy is intended to provide a thorough review of projects prior to expending large amounts of City time and money on projects without public knowledge and involvement.

Rob Hendrickson, a construction law attorney and civil engineer who served on the LWV’s Task Force on Civic Governance, repeated the monthly accounting recommendation presented in April, 2013 by then LWV President Julie McDonald.  He urged that as a project was being implemented a monthly accounting should be presented to the Council to assure staff was monitoring the project and the public was aware of problems.  This request was echoed by High School student Julie Adams, who felt this was common in business and should be a part of the policy.

Tim Rood, candidate for City Council, agreed with the accountability measures noted in the LWV communication.

Acting City Attorney Michelle Kenyon cautioned against including specific timelines for the City Administrator, such as monthly reporting, as this could result in further risk if the timeline was not met. Council member  Jeff Wieler stated the responsibility for compliance rested with the City Administrator as part of the job description and non-compliance would be dealt with through personnel evaluations and ultimately through the  Council election process.

Public Works Director Chester Nakahara who was responsible for drafting and redrafting the much belabored policy responded to concerns. Numerous “and/or” clauses in the policy language were at issue as to when and what would be presented to the public and Council during the conceptual and implementation phase of a project.  Nakahara pointed out that the requirement that the City Attorney and City Engineers review projects would be an expense for the City.

Excerpts from the City Charter:

The City Administrator, “Shall keep the Council fully advised as to the financial condition and future needs of the City…”

The City Attorney is to “Represent and advise the Council and all City officers in all matters of law pertaining to their offices;” “Approve the form of all contracts made by and all bonds given to the City, endorsing approval thereon in writing;” “All contracts shall be drawn under the supervision of the city attorney.”

The City Engineer description states, “There shall be a city engineer who shall have supervision over all matters of an engineering character as required by State law, or as assigned by the City Council.”

Council member Garrett Keating supported contract review by the City Attorney to protect the City from risks on public and private projects.

Review by the City Engineer is intended to make certain all projects are properly engineered and contracts are appropriately specified.

Consultants employed to oversee or advise on projects would be an additional cost of any project.

City Administrator Geoff Grote, who is retiring within weeks, stated that the policy would not prevent all future problems, while acknowledging the policy would be helpful and could be modified as needed in the future.

Mayor John Chiang was repeatedly thanked for bringing the policy to the Council for approval prior to his February retirement from the Council.

Click for the staff report and communications.

Click for draft minutes to view changes approved by the Council.

Apr 15 2013

Resident Urges City Council  to Reconsider Risk Management Policies – 

The following is an open letter to the Piedmont City Council.

Re: Risk Management Policies

To the Piedmont City Council:

I urge you to reconsider some of your members’ stated opposition to reviewing the risk management oversights which were made in connection with the City’s consideration of the Moraga Canyon project, as understanding how and why they occurred will help guide your review and consideration of the recently proposed risk management policies.

As a preface, these issues are independent of the political wisdom for or against the Moraga Canyon project. They deal solely with the project risks presented, some of which were similar to the risks which surfaced in the Piedmont Hills Undergrounding project. I will confine my comments to three principal aspects of the project: 1) The contracting arrangement was not legal because Blair Park LLC was not properly licensed; 2) design responsibility and liability was omitted from the agreements; and 3) the bond requested was not required to be posted by the proper party and so would have not protected against the appropriate risks.

First, while creating a new entity – Blair Park LLC – to be the contracting party was apparently done in an attempt to insulate the City from potential construction cost overruns, because Blair Park LLC was agreeing to cause to have the complex constructed, it was required to be a licensed contractor, but was not. It was immaterial that all the actual construction work was to be performed by Webcor, a licensed contractor. Vallejo Development Company v. Beck Development (1994) 24 Cal.App.4th 929, 941 (“The fact that [the developer] subcontracted with licensed contractors to provide the actual labor, equipment and materials to construct the infrastructure improvements is irrelevant. [Business & Professions Code] Section 7026 plainly states that both the person who provides construction services himself and one who does so ‘through others’ qualifies as a ‘contractor’. The California courts also long held that those who enter into construction contracts must be licensed, even when they themselves do not do the actual work under the contract.”) Because Blair Park LLC was the contracting party with the City, it was obligated under California Business & Professions Code Section 7028 to be licensed.

Indeed, under Business & Professions Code Section 7028.7, the City itself could have been issued a citation and fine by the State Contractors License Board Registrar for entering into a contract with an unlicensed contractor. A contract with an unlicensed contractor is considered to be illegal and unenforceable. I brought this issue up with the City staff and the project proponents prior to the Council meeting at which the project was approved.

Second, notwithstanding the fact that Blair Park LLC had design/build responsibilities, because the City’s proposed agreement with Blair Park LLC, and Blair Park LLC’s conditions of contract with Webcor were apparently modeled on the Webcor-Havens School contract model (under which the school district owner provided the design, unlike here where Blair Park LLC was obligated to provide the design), the agreements and conditions for approval and site Lease completely omitted any reference to design liability and professional liability insurance. Public owners are used to providing the design, and being responsible for it, so it is perhaps easy to understand how this important risk factor would get completely overlooked when the City was contemplating the use of a different contract delivery model (i.e., design/build), but it also highlights why a risk management assessment of not just the detailed procedures but also more importantly, the big picture items, is so important.

Lastly, although the contract required Webcor to obtain a performance bond (and there was to be a further requirement to provide unspecified neighboring property damage security regarding potential future damage to houses), the exact risk which was at the center of Piedmont Hills Undergrounding – unforeseen subsurface conditions requiring extra work – was a Blair Park LLC risk, not a contractor risk, and would therefore not be covered under Webcor’s performance bond. Blair Park LLC was responsible for providing the design of the significant retaining walls, which design was necessarily dependent on unknown subsurface conditions.

Webcor was to be responsible for constructing what was depicted in the design and shown on the plans. If the subsurface conditions actually encountered were different than what was shown on the plans, and the design had to be modified and required extra work, those extra work claims – that cost over $2.5 million on the Piedmont Hills Undergrounding project – would not have been covered by Webcor’s performance bond (nor any damage security bond). Blair Park LLC was the only party to have design responsibility, and it was not required to post any performance bond. By analogy, requiring the undergrounding contractor on Piedmont Hills to post a performance bond did not mitigate its $2.5 million in extra work claims. The City had to pay for the extra work to complete the undergrounding because it could not leave the streets with open trenches. So too on Moraga Canyon, if the contractor encountered unknown subsurface conditions requiring extra work in the middle of constructing the retaining walls and re-routing sewers, somebody would be required to pay for the extra work because the work would have had to have been completed for safety reasons. Blair Park LLC was not required to provide any security demonstrating any ability to pay beyond the agreed upon contract construction costs. As occurred on Piedmont Hills, the City, as owner, would have been responsible to cover the extra costs to allow the construction to be completed. However, the City has demonstrated that it cannot even recover from the project proponents its out of pocket consultant costs under the Indemnification Agreement. There was no agreement to cover this real risk. Thus, while the Moraga Canyon project called for a bond, it was the wrong party being required to post the bond, and so the City remained at risk if the project required extra work to deal with unforeseen subsurface conditions. This was a repeat of the same exact risk as on Piedmont Hills.

These risk issues could have and should have been caught and addressed in a risk management analysis. The presently proposed Risk Management Procedures did not, and would not have caught these material oversights. As the old cliché provides, those who cannot remember the past are condemned to repeat it. If these types of risks were not addressed on the Piedmont Hills Undergrounding project, or on the proposed agreements for the Moraga Canyon project, on what basis does the Council think the present City project team, procedures and proposed risk management policies will catch them in the future? A change in paradigm is needed if one wants a different result. Learning from past mistakes is more productive than simply trying to ignore them, and focusing on minutiae to the exclusion of understanding the big picture is bad policy.

Respectfully submitted,

Rob Hendrickson

cc: Piedmont Civic Association

Piedmont Patch

Piedmont Post

Piedmonter

LWVP

Editors Note: The opinions expressed are those of the author and not necessarily those of the Piedmont Civic Association.

Mar 30 2013

Litigation with Harris and Gray returns to trial court – 

Legal procedures continue as the City of Piedmont attempts to recover funds spent on the Piedmont Hills Undergrounding Assessment District (PHUAD) established for undergrounding of utilities.  The City is charging two engineering firms with liability for the over $2.4 million spent to complete the project after rock was discovered in the area. > Click to read more…

Nov 20 2012

The City of Piedmont has recently updated available legal documents associated with the lawsuit against consulting engineers to the Piedmont Hills Underground Utility District (PHUUD).

The cost overruns and street collapse arising from the private undergrounding of utility services in the Glen Alpine and Sotelo Avenues area have resulted in City General Fund expenditures of approximately $2. 5 million on behalf of the PHUUD.   Legal documents can be viewed here.  The City is hoping some of the loss can be recovered through the litigation. 

Feb 13 2012

The City of Piedmont has invited public comment on the recommendations of the Municipal Tax Review Committee, the League of Women Voters Task Force, and the City Council Audit Subcommittee.  The full reports, along with a matrix of the recommendations prepared by Vice Mayor John Chiang, are linked below.

The City Administrator’s response to the recommendations is provided in his Discussion of Reports and Recommendations . . . ,  The City Council has allowed time to implement the recommendations prior to a vote on the renewal of the City’s General Parcel Tax by delaying the measure until the June, 2012 ballot.

Did you miss the LWV forum on these issues?   Watch the video here.

Written comments should be directed to the City Council, c/o Piedmont City Clerk, 120 Vista Avenue, Piedmont, CA 94611 or by email to:jtulloch@ci.piedmont.ca.us.  Correspondence received by the City Clerk is considered part of the public record. > Click to read more…

Jan 30 2012

At its meeting on January 18, the City Council voted unanimously to reimburse the Sewer Fund for $275,000 used for Crest Road repairs.   Piedmont residents Rick Schiller and Rob Hendrickson thoroughly investigated the payment of $275,000 from the Piedmont Sewer Fund for road repair work on Crest Road.   > Click to read more…

Jan 30 2012

At its meeting on January 17, 2012, the City Council extended the moratorium on utility undergrounding districts for two more years, until March 2014. This was the Council’s first step in implementing  recommendations of  the Council’s own Audit Subcommittee and the League of Women Voters Task Force, both of which  investigated and reported on the serious and costly flaws in the City’s management of the Piedmont Hills Utility Undergrounding District.

> Click to read more…

Jan 14 2012

Special note: the Council meeting is being held Tuesday, January 17, 2012 at 7:30 p.m.  City Council Chambers, 120 Vista Avenue, Piedmont, California. > Click to read more…