Meeting Date:           January 30, 2003                    Budgeted: N/A

                                                                                    Program/Line Item No.:  N/A

Staff Contact:             Henrietta Stern                      Cost Estimate: $80,000/year (estimate)


General Counsel Approval: Reviewed initial ordinance text and concurred; has not reviewed text changes and Notice of Exemption as of January 24, 2003.

Committee Recommendation: The Administrative Committee reviewed this item at its January 21, 2003 meeting and suggested clarifications and refinements that are reflected in the proposed ordinance, version 1.3.

CEQA Compliance: Notice of Exemption recommended; financial impact only. 



SUMMARY:   The Board will consider the first reading of Ordinance No. 106 (version 1.3 dated January 21, 2003), provided as Exhibit 17-A.  Ordinance No. 106 amends Rule 60 of the MPWMD Rules and Regulations that governs fees charged for District permits.  Development of this ordinance stems from Board direction on December 16, 2002 to update the fee structure for processing water distribution system permit applications so that the fees more closely match actual expenses.  The proposed ordinance also makes refinements to the modest fees associated with river work permits, and updates the rate per hour to be charged for MPWMD staff time for all permits.  Please refer to the “Discussion” section below for more details on specific changes.


RECOMMENDED ACTION:  District staff recommends that the Board: 


Ø      Approve the first reading of Ordinance No. 106 and set a second reading for the February 27, 2003 meeting;


Ø      Authorize District staff to file a Notice of Exemption for Ordinance No. 106 (Exhibit 17-B) in compliance with California Environmental Quality Act (CEQA).  Ordinance No. 106 is not considered a “project” under CEQA because it is solely financial in nature, and would not result in a physical effect to the environment.  


The Administrative Committee reviewed the January 10, 2003 draft of the ordinance (version 1.2) and suggested text refinements so that the fee schedule and payment process is more clear. Language was added to ensure that direct costs associated with permit processing (such as filings with the County Clerk) are paid by the applicant.  The text was also changed to show that there is no sunset date for permit fees.  These changes are incorporated into the version 1.3 text shown as Exhibit 17-A and/or will be incorporated into revised Implementation Guidelines for water distribution system regulation that reflect Ordinance No. 105 and 106. 


BACKGROUND:  Ordinance No. 96, approved by the District Board in March 2001 (effective April 18, 2001) included adjustments to MPWMD fees for water distribution system permits. Additional fee increases and a fee implementation plan were approved by the Board as part of the December 16, 2002 discussion on Ordinance No. 105, which expanded regulatory activities for water distribution systems.  After the December 2002 meeting, District Counsel advised District staff that changes to the fees must be done via ordinance.  To that end, Ordinance No. 106 was developed.  In the course of ordinance preparation, other fees discussed under Rule 60 were reviewed. 


DISCUSSION:  Applicants are currently charged $1,400 when submitting an application to create or amend a water distribution system, which covers 20 hours of District staff time.  If the application takes more than 20 hours to process, applicants are charged for staff time at a rate of $70 per hour for the twenty-first and subsequent hours.  Applicants are not charged for any consultations prior to submitting a written application, including meetings, water rights reviews, telephone assistance and related information.  There is currently no charge for District Counsel’s time or for direct costs incurred.   There is no refund if the application takes less than 20 hours (to date, all applications have taken at least 20 hours).


Actual costs to the District in terms of staff time are consistently greater than revenues from permit fees.  More importantly, no compensation occurs for the time required by District Counsel to review water rights information and staff work products, attend public hearings for the applications, provide CEQA oversight, and answer legal questions that arise during discussions with applicants.


Ordinance No. 106 is based on the funding implementation plan contained in the December 16, 2002 board packet, with some minor refinements.  The Ordinance 106 text focuses on specific fees; the Implementation Guidelines will provide more details about process and staff implementation, as follows:


Ø      No charge for first hour of telephone, e-mail or in-person assistance.  This covers the bulk of general questions.


Ø      Deposit of $560 for any consultation after the first hour.  This deposit covers up to eight hours of staff time for meetings to help the applicant go through application form in detail and other activities prior to submitting a formal written application.  The applicant must sign a statement acknowledging that he/she will pay for costs that exceed $560 as the application process continues, or the process will be terminated.  Unused deposit money will be returned if the application does not go forward.  If a formal written application is submitted, the remaining funds from the $560 deposit will be applied to the application fee.


Ø      Application fee of $2,450 when a written application is submitted.  This is about $1,000 more than the current $1,400 fee, and is based on 35 hours of cumulative staff time for each application at $70 per hour, and does not include legal time.   District staff time will be tracked for each application, and documentation will be provided to the applicant.  A refund would be provided if total staff time does not exceed the $2,450 amount. 


Ø      Deposit for unusually complex applications refer to applications that exceed 35 staff hours in order to process.  Upon reaching the 35th staff hour, the General Manager will make a determination about the expected number of District staff hours needed to complete the application process, based on the progress of the application to date and what additional steps are yet to be completed.  A deposit for the estimated number of hours needed to complete the process will be required in order to continue the process, based on a rate of $70 per hour.


Ø      Legal Fees Separately Invoiced.  Counsel will separately track his/her time for each applicant (including pre-application consultation) and provide a total as part of the fee documentation.  The applicant must pay for legal fees before the permit is issued.


Ø      Direct Costs.  The applicant will pay for direct costs incurred by the District, such as filing fees and public hearing notices.


Other Changes:  In general, Ordinance No. 105 changes Rule 60 so that hourly staff time is charged at a rate of $70 per hour.  This number is derived from a rough weighted consolidation of the actual costs of staff associated with permit issuance, from “front counter” employees to the General Manager. 


Staff also reviewed existing fees for river work permits, which currently range from $10 to $25 each.  The recommended new fees range from $25 to $50 for each permit.  These fees often do not reflect the true cost of staff time, but are kept low as an incentive to encourage public participation and coordination with the District river restoration programs.  One exception is charging the standard staff rate of $70 per hour as well as direct costs incurred for river work permits that take more than five hours of staff time due to their complexity.


The Administrative Committee also suggested that implementation guidelines be updated for Rule 60-B, C, D, H and I, which reflect water connection permits, water credits and other functions of the Water Demand Division.  The Committee recognized that a separate process and possible ordinance in the future would be the best means to address appropriate fees for these functions, including whether Rule 60-H (fees for water credit transfers) should remain.


IMPACT ON RESOURCES: Ordinance No. 106 will help offset the true cost of permit application processing by generating additional revenues so that the program can be more fiscally balanced.  At the December 16, 2002 Board meeting, the annual cost of implementing the water distribution system permit program was estimated at $80,000 per year.


The Fiscal Year 2002-2003 budget is being amended to include funds to implement Ordinance No. 105 (see agenda item 17); an amount of $51,000 is budgeted for consultant assistance (see agenda item 3).