RULES AND REGULATIONS REVIEW COMMITTEE

 

ITEM:

DISCUSSION ITEM

 

 

5.

INTERNALIZING WELL TESTING/MONITORING SERVICES AS DISTRICT FUNCTION

 

Meeting Date:

January 18, 2012

Budgeted: 

 N/A

 

From:

David J. Stoldt,

Program/

N/A

 

General Manager

Line Item No.:

 

Prepared By:

David J. Stoldt

Cost Estimate:

N/A

 

General Counsel Review:  N/A

Committee Recommendation: N/A

CEQA Compliance:  N/A

 

SUMMARY:  At the October 19, 2011 Rules & Regulations Review Committee meeting, Director Markey queried staff about the possibility of the District taking control of the well testing and monitoring process by becoming the entity that hires the contractor and charges the property owner for the test.  There are several issues with respect to the hiring process, billing, financial impact, staffing, and liability that must be considered.

 

RECOMMENDATION:  Staff recommends that Rules & Regulations Review Committee reject or defer this concept, primarily due to the budgetary impacts of the set aside of a reserve for uncollectibles and increased staff costs.

 

DISCUSSION:  There are several issues that need to be addressed before incorporating the well testing and monitoring process into an internal District function.

 

Hiring Process:  The District would not want to be perceived as “tilting the playing field” for the well testing marketplace by hiring one or two specific firms to be the District’s subcontractor(s).  Rather, the District would need to annually “qualify” well consultants and let the property owners select the contractor based on timing, availability, and cost.  This would require a standing annual contract with each contractor, but then a separate supplemental contract enacted for each applicant.  Because each supplemental contract will likely be in excess of the District’s spending minimum of $2,000 each payment will require board approval.  This could create an inefficiency inasmuch as the well contractors have narrow windows to perform such work and applicants need to plan for the testing dates.  Additional staff time for staff notes and approvals will also be required. 

 

Billing:  Presently, the District collects the permit fee at the end of the permit process.  Because the well contractor will now be working for the District, we will have to pay the contractor within a reasonable timeframe of the work being performed.  That means there will have to be an additional billing to the applicant for the cost of the test.  The processing of such will require developing and approving a billing process, and then ongoing staff time to monitor and execute.  It is also possible that the Board approval process for expenditures over $2,000 will delay some payments to over 30 days, depending on when bills are received.

 

Financial Impact:  A big unknown is how the billing and collection process will impact District finances.  The District will be obligated to pay its contractor in a timely fashion, but there are challenges with collection from the applicant.  Applicants may be slow to pay or fail to pay.  For example, instances where the applicant’s well fails or where the sufficiency or connectivity data are unsatisfactory, may result in a failure to pay.  Or simple slowness to pay results in the District “fronting” the money.  The District would have to budget for a reserve against nonpayment, which moneys do not exist in the current budget, and which take away from other programs in future budgets.  Alternatively, the District could require payment up-front based on a well consultant’s estimate, but that may require an additional billing or refund process depending on actual costs incurred.

 

Staff impact:  There will be increased ongoing staffing required for the additional billing, collections, and payables roles.  Also affecting staff time are staff notes for Board approvals of each expenditure, supplemental contracts, and annual contracts.  Finally, the District could be drawn into managing the often changing testing schedules.

 

Liability:  It is unknown at this time if the District takes on any additional liability.  Likely, the master contract with qualified well consultants could be crafted to ensure that the District does not accept an additional liability.  The District would however be injecting itself into the dispute resolution process between an unhappy applicant and the performance of the well consultant.

 

IMPACT ON STAFF/RESOURCES:  See “DISCUSSION”

 

EXHIBITS 

None

 

 

 

 

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