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August 11, 2006
Mayor and Councilmembers:

This is the weekly report for the week ending August 11th, 2006.

1.      Meeting Notes

There are no City Council meetings scheduled until Tuesday, September 12, 2006.  As a reminder, there will be a public meeting on Tuesday, August 15th in the Bermuda Room of the Richmond Auditorium from 6:00 PM to 9:00 PM to review and hear comments concerning the Civic Center Master Plan.

2.      Latest Honor for Monique LeConge

I am pleased to report that Monique LeConge, Director of Library and Community Services, was elected by her peers to be the President of the California Library Association.  Monique will serve as President-elect during the coming year, and will assume the office of President in November 2007.  The Library Association members have clearly made an outstanding choice, and the City of Richmond is indeed fortunate to be served by her talent and dedication to the profession.  She was appropriately feted by her management colleagues here at the City this past week, wearing a tiara and wielding a scepter, both of which had been provided by Leslie Knight, Director of Human Resources/Assistant City Manager, at the weekly manager’s meeting.

3.      Rating Agency Update – Sewer Revenue Bonds

This past week, Standard & Poor’s (S&P) affirmed the City’s Wastewater Revenue Bond rating of BBB with a “stable outlook.”  Regarding the interest rate swap portion of the bonds, the City received a DDP (debt derivatives profile) score of 1.5, which is a good indicator of their view of the City’s capability and exposure to swap risk.  A DDP score of 1-2 is considered low risk, a score of 3 is moderate risk and 4-5 is high risk.  Therefore, the City’s swap position is categorized as being in the low risk category.

You may recall that this is the underlying credit rating from S&P; the Bonds will be insured by AMBAC, and will thus be sold as a AAA debt.

Attached to this weekly report (below) is S&P’s credit report on the upcoming fixed-rate Series A wastewater bonds (the Series B will be variable rate, and are not explicitly covered in the enclosed report).  You will note that S&P has identified several credit strengths (good location for the City, stable customer case, improved performance under Veolia, strong debt service coverage in ’04 and ’05, and projected strength in ’06 (although declining thereafter), and the recently approved rate increases.

 Credit weaknesses include:  limited cash liquidity, significant rate increases needed to maintain operations, heavy initial reliance on the rate stabilization fund, very high debt burden with more bonds to come, and significant operating cost increases.

 Of particular note is the last sentence in the “Outlook” section of S&P’s report:  “If reserves fall significantly below current levels without timely rate increases necessary for adequate debt service coverage, there’s a downside risk to the rating.”

Jean Buckley, the City’s financial advisor indicated to us that S&P typically says something about “downside risks” in their reports, so we should not be overly alarmed by this sentence.  However, it is obviously important that the City manage to a sound reserve level for the enterprise and, if necessary, get out in front of needed rate increases as the City did several months ago.

 Jean Buckley has indicated that she believes the credit report is fairly balanced.

<<Richmond 07-Aug-2006.pdf>>

4.      Rating Agency Update – Richmond Housing Authority

Tim Jones, Susan Segovia and Jim Goins reviewed with Moody’s Rating Agency the Westridge Hilltop Housing bond rating, and what efforts the City and the Richmond Housing Authority are taking to improve the development’s creditworthiness.  As a result, Moody’s has upgraded the rating from Ba1 to Baa3 on the outstanding bonds.  This will allow the Authority to entertain proposals for restructuring the existing debt on the housing development in order to reduce the annual debt payments.

5.      Veolia Mitigation Fund Grant Program

As you may recall, a 1997 City of Richmond imposed condition of approval for Onyx Environmental Services, now known as Veolia Environmental Services (Veolia), located at 1125 Hensley Street, requires the establishment of a Community and Information Panel (Panel).  Since Veolia provides a complete range of services for industrial and municipal customers needing to dispose of hazardous waste, the Panel was created to mitigate for the potential impacts of transporting such waste through the North Richmond community.  Veolia is required to pay $25,000 per year as a hazardous waste license fee to the City to fund local projects through grants that are administered by the Panel.

The purpose of the Panel is two-fold:

·       Meet with Veolia to review site operations and any concerns of the community, when requested by the City of Richmond, Panel members, or Veolia itself.

·       Allocate funds to non-profit community organizations in the North Richmond and Iron Triangle neighborhoods through a competitive grant process.  The Panel will review grant proposals and award money to chosen organizations.

After a two year hiatus, the Veolia Mitigation Fund Grant program has been resurrected.  The Community and Information Panel contemplated in the condition of approval has two new volunteer North Richmond business members: Leonard Holoday, Plant Manager, Air Liquide America, Corp., and Michael Temple, President, Grape Expectations.  There is currently $93,750 in the fund to be spent on North Richmond and Iron Triangle services.  Application packets will be available on September 8, 2006 and are due November 3, 2006 at 5:00 p.m. Money will be available at the start of 2007.  If Councilmembers are aware of any non-profits serving those neighborhoods that should receive an application, please contact LaShonda Wilson in the City Manager’s office.

6.      Port Planning Activities

Jim Matzorkis and Jim Goins met with JP Morgan and Moffatt & Nichol, port   consultants, to develop a work plan to assess the feasibility for a strategic expansion of the Port of Richmond.  As you recall, the City Council directed staff to bring a specific proposal for such a feasibility study back to the Council in September for its consideration.

JPMorgan is proposing to work with Moffatt & Nichol to undertake a pre-feasibility study to evaluate the suitability of properties along the north shoreline adjacent to the Chevron refinery for maritime and related uses.  Those uses may include containerized and/or non-containerized freight and value-added services that are frequently linked to the processing of automobiles.  The process of evaluating these properties would include a review of physical, environmental, and economic aspects to port development and operation.

7.      Utility User Tax Administration

Based on the recommendation of Don Maynor, the City’s legal consultant for administration of the Utility Users Tax (UUT), the City sent out letters to all companies which collect this tax for the City of Richmond and directed them to continue collecting the UUT in the same manner as it did prior to a recent IRS Ruling 2006-50 (May 25, 2006).  This IRS ruling affects the legality and administration of some types of municipal UUT’s, but, according to Mr. Maynor, it does not impact the City of Richmond’s ordinance.  The letter states that the City does not believe IRS Ruling 2006-50 renders either long distance charges or bundled charges exempt from the UUT.

8.      Enterprise Zone Legislative Update

Dan Boatwright, the City’s Sacramento lobbyist, reported this past week that he attended the Senate Transportation and Housing Committee the afternoon of August 8th, at which time AB 485 (Arambula), the Enterprise Zone bill, was heard.  During the hearing, the author submitted 12 additional amendments to the current measure.  The Committee did not have time to analyze the amendments, nor did Mr. Boatwright.  As a result, after a lengthy discussion, the bill was continued for a further hearing, at which time the new amendments will be considered. 

Mr. Boatwright testified on behalf of the City of Richmond in support of the bill.  He recommended to the Committee that they consider extending Enterprise Zones that are set to expire, as is Richmond’s.  Senator Machado picked up on this issue and got a commitment from Assembly Member Arambula to work with him on a 2-year extension.

Hopefully an extension can be worked out and adopted at the next meeting.  The Enterprise Zone bill, AB 485 (Arambula), has been set for the continued hearing on Tuesday, August 15th at 1:30 PM before the Senate Transportation and Housing Committee.  Mr. Boatwright is planning, once again, to testify on behalf of Richmond.

9.      Biosolids Project Update

Janet Schneider has been working diligently on the project to abandon the City’s sludge ponds (biosolids handling) that are located on West County Sanitary District property.  On July 26, 2006, Veolia submitted a preliminary design report and cost estimate for a dewatering facility at the treatment plant. Tetra Tech, Inc (the City’s consultant) and Janet met with Veolia on August 9, 2006 to clarify its proposal and request additional information.  Veolia agreed to supply the additional information requested by September 6, 2006. 

Our objective is to provide a City Council study session on September 26, 2006 to:

1)      Provide an update on the City’s progress towards developing an alternative dewatering process,
2)      Discuss the various issues raised by the many agreements (among and between the West County Wastewater District, the West County Landfill, East Bay Municipal Utility District, West County Agency, and Veolia) governing the biosolids infrastructure and the various agencies’ rights and responsibilities regarding biosolids disposal and leachate treatment, and

3)      Ask for further City Council direction.


Feel free to contact me if you have any questions or comments about these or any other items of interest to you.

Have a great week.