Study Session
April 17, 2024
Transcript
Describer:
Study Session Agenda
Wednesday, April 17th, 2024, at 5:30 p.m.
7404 Yorkshire Drive, Castle Pines, CO 80108
I.Call study session to order.
II.SSO violation & civil penalty:
1.Summary and discussion of settlement offer.
2.Discussion regarding supplemental environmental project option.
III.Adjourn
Board President Jason Blankaert:
Good evening, and welcome to Castle Point's North Metro District study session. This is Wednesday, April 17th, approximately 5:35pm. And we are going to call the study session to order. So the first, or the second article on our agenda is the SSO violation and civil penalty. Later, I'll turn this over to you.
Take a take your time.
District Manager Nathan Travis:
All right. yeah. So we, following the last board meeting, we had talked about using this study session to just take a closer look at the, civil penalty. That was. That is being, levied against us for the sanitary sewer overflow violations. And so there's, a number of documents that I've given you. I'm going to focus.
if we kind of go through this on this little front to back one, we've kind of doubled our work a little bit here or doubled up our work a little bit. So mine is a much more general overview that we can kind of flow through a little bit more easily. and then if there's any questions or kind of background information, a lot more specific, heavy, in the document that, Joel put together for us, also as everybody met Joel before, I don't know if he's been here in person with everyone or not.
Joel from Kim Seter's Office Off mic:
Okay. Once or twice. It's good to see you all again.
Nathan:
So. So, his sign is lying. He is, in fact, not a much younger Kim Seter. Okay. so this is just a summary of the settlement here conference that we had with the state three weeks ago. Now, a little bit more than three weeks ago. And so the purpose of this was really to kind of go over the process that the state used, what their settlement offer is and what our options are.
and so we initially we did have after they issued the violation, they, we did have an opportunity if we elected to, to, basically request a formal hearing to discuss or dispute the violation. There really wasn't anything to dispute. So we did forego that here, forgo our opportunity to do that hearing. And so that makes this a final agency action.
So we're we're kind of past the the did we do it part in in to like now that it's done where do we go. so there are three pathways to resolve a formal enforcement enforcement case, the one that we're mostly focused on today is the informal settlement, informal settlement offer. and that's the divisions. Exactly what it sounds.
It's the division presenting us with a potential settlement. Settlement offer. And then we'll either respond to it and we'll kind of work through the details. if we decide not to accept the informal settlement settlement offer. the next step that would come as a unilateral penalty order. And so that would be the.
The basically the settlement offer without all of the concessions that the state has made put in place. And then we could either pay that penalty, in full or we could go before a, what do they call it? yeah. And administrative law judge is where that would go. the third option is to do a supplemental supplemental environmental project.
so in lieu of payment, we can identify and create a supplemental benefit beneficial project. There's a few more than a few kind of caveats that come with it. first, before we can even really start that discussion with the state, we have to come to an agreement and conclusion with the, final penalty amount. So we have to agree or disagree, get all of that settled and get that final total amount, because that's information that the program coordinator, that the SEC Corps supplemental, the SCP coordinator needs before they can really move forward.
it can't be anything that's already been identified, budgeted or anything that is compliance required. It has to be separate from anything that will that we do. And it also has to be located in Douglas County. it does not have to be, a direct have a direct impact related to the SSO, as long as it's generally environmentally good, it can be a, an air quality project, it can be training program or it could be training programs, it could be stormwater, it could be a number of any number of things.
Board Member Tera Radloff:
So just to clarify, it doesn't even have to be within our district. It can be anywhere in Douglas County. Oh, okay. Good.
Nathan:
Yep. so those are kind of the the three ways of. Oh, thank you so much. the three ways that we can resolve them. and we'll kind of move through now, like the civil penalty calculation.
So how did they get to that $130,978 mark? So the civil penalty calculation generally speaking, is based on, actual harm done to the environment or waters of the state, potential harm done to the environment or waters of the state. fault. Meaning, did you know about this? Should you have known about it? Did you do something about it?
the compliance history. So do you have a long history of compliance issues or violations or citations? the impact or threat to the environment and then the, the financial benefit and then aggravating factor. So financial benefit is moneys that we theoretically saved by not maintaining these facilities or not doing capital projects. And then, that last one is any aggravating circumstances.
So is there any actions take malicious taken maliciously or very egregiously that can basically act as like a multiplier. So through that, as part of their kind of settlement considerations that, the division did not include, in their penalty calculation, any actual harm, any administrative, fines, any they didn't include any noncompliance history, which was kind of a non factor.
We didn't have any violations prior to this. So they didn't include it. And also they probably wouldn't have and then they also didn't hit us with any aggravating factors. So they're not going to add any multipliers to that. So each
Jason:
so Nathan just for a second. So they're only hitting us with potential harm. right.
Nathan:
So we're going to be yeah.
So we'll be looking at, potential harm. potential harm fault. And the number of days of the violation is the third, third component. But.
And so inside of that, they give they have under those that, under those categories, they give kind of like a maximum penalty amount, a mid penalty amount and like a minimum penalty amount. So they put them in categories one through three, three being the most egregious, one being the least egregious.
So along those lines, for the for the category of fault. So, like, did we know about these circumstances? Should we have taken action to, to to to mitigate them? the state has, has given us a category two. So they gave us the maximum fine of that midpoint. This is, another thing to point out.
This isn't, settle another settlement offer that they're making. So we we hit every metric to be a full blown category Three. We've obviously we've known about these SSOs for a number of years. There were no capital projects put in place. We can't go back and show that we have capital planning in. We've got decent maintenance records. But really once these once these lift stations started to have a high number of sanitary, SSO events we, we were made aware.
So there's not really anything we can say that's, that can back us away from that red. Like, we obviously knew this was an issue. And then prior to 2022, we really hadn't taken any action before we engaged Kennedy Jenks to start doing the initial preliminary designs for the lift station project. So they they assigned us a category two, even though a category three, fault was warranted.
And that is part of the settlement consideration. So if we turn down the settlement, and move to a unilateral penalty order, that's something that would be included as a category three. So anytime you see like that settlement offer, what they're really saying is that if we don't accept the settlement like or settlement consideration, if we don't accept the settlement consideration when they move to the unilateral penalty order, they'll just move all of those to that highest level, and then it would be stuff up to us to try and convince a judge otherwise.
there were seven. There were eight total events that were listed in our violation when we got it. One of those events has fallen out of the five year statute of limitations, so it's not included. So if you read the original violation order, it talks about eight events. This only, factors in seven of those. so we got each with six out of seven of those events.
All took place within a calendar day. One of them started later at night, moved in the next day. So that gives us a total of eight days of violation. So you they're calculating the basically the fine per day. and so that's done under a category two for fault. And then eight days of violation. And all of those penalty calculations came up to a base penalty of $78,752.
From there, the next thing that the state looks at is mitigating factors. So these are things, actions that we've taken that can actually reduce that penalty amount. And there were two specifically that the state looked at. the first one is adhering to the schedule, outlined in the violation report can give us up to a 25% deduction from that original from that, total of 78,000 and some change.
And the state gave us the full 25% deduction, for our prompt response, because we proactively did a lot of and because we little proactively did a lot of water quality testing, and we have hit every one of their, scheduled metrics since then.
The other mitigating mitigating factor that they looked at is when, as we're moving through to bring these stations into compliance, it's kind of like the above and beyond. So are you doing things doing more than it requires just to resolve this violation? And so we do have projects planned at lift stations seven lift stations four and lift station six, because none of those were included in the violation.
Those are all considered going above and beyond for that category. They can give us a maximum of a 50%, deduction deduction. And they gave us an additional 25% for those actions. So the mitigating factors that they included basically gave us a 50% overall reduction. so the total deductions are $39,376. And that leaves us with the same, that same dollar total for, the ultimate civil penalty.
Joel and Jason Off-mic:
And if I could jump in, please go for it. Open it up. Yeah. there you go. I just want to.
Joel:
Sorry about that. just wanted to note that, there were two different 25% deductions, as Nathan mentioned, 50% is the absolute maximum that they'll do under their guidelines. So that was the whole total, the most discount you can get. So pretty good.
Nathan:
Thank you for yeah I actually misunderstood that. So I'm glad that you clarified it. so the last thing that they looked in that looked at it is the.
Gotcha. is the economic benefit. And so the division will seek to recover cost savings, realizes, realized by non-compliant, realized by noncompliance through delaying activities that are required for compliance. so to do these calculations, they use an EPA financial model that's based on actual project costs. And then they use the project costs that were supplied by our engineering firm, Kennedy Jenks, and their cost estimate that was submitted to the state.
interestingly enough. So they they did us another another settlement consideration would be taking the sites lift station two and five and combining them into one site. So the state, rather than look at those two sites separately, because we are as part of our plan to become into compliance, we're eliminating Lift Station two and consolidating it with Lift Station five.
They combined those into one site, which had a pretty heavy impact. on the economic benefit line. And then they also have the non-compliant date date ranges. So for Lift Station two, February 3rd, 2021 is the first sanitary sewer overflow event at that site, that is included in this violation. And then March 20th, 2022 was the last one.
And so they're using those for the compliance dates. And so in terms of the settlement consideration, they generally could hold that last date to the date that the lift station project is completed. So through construction. So they're taking multiple years off of our compliance or compliance window. And that goes into this calculation. The way that these calculations have been done is also changed.
In the last couple of years. It used to have kind of a flat $10,000 per day cap they've sent to adjusted that to match like more the EPA model, which is also directly related to inflation. the reason that that's important is because the compliance date being in March 20th of 2022, we were seeing 10% inflation. And so when they by the time they combined all of that into the into their, into their model, it actually showed.
And like a negative balance, it was like a -$30,000. and so I apologize for not having my phone muted. so because of that, because of the concessions that they've offered to make, there's no economic benefit component assigned for either the lift station two or lift station five violations or SSOs. that brings us to lift station three.
So they did the same thing. November 11th, 2018, which is the first spill in the violation to June 23rd, 2023, which is the last bill. So those are our dates of dates that we are out of compliance. they also adjusted the asset life in these. So, rather than using a 15 year projected as asset life, they used a 25, which is 25 year projected asset life, which is the maximum that they're allowed to and all said and done when they put it into their calculation.
And that came out with an economic benefit to the district of $91,602. And so the components of the settle, the settlement offer are the civil penalty of $78,752, minus the mitigating factors of $39,376, plus the economic economic benefit of $91,602. And that brings us to the total of $130,978. As the settlement offer.
Okay, so that was that was kind of the process to, like Jana had mentioned with the the example that she and I were using is like doing your taxes with TurboTax. While we're going through this presentation and we're like, oh man, it's a huge amount of money. And then we're like, yeah, we got $40,000 worth of deductions. And they're like, we don't have to do anything for lift stations two and five.
That's great. Then we're going to pop up. So it was kind of a kind of a little bit roller coaster. But it really does help to understand that step by step process to see how they get there. and then the memorandum put together by, Joel and Kim Seter's office basically has the same outline, but with just a lot more, a lot more meat and details.
Tera:
So thank you, because that really does walk us through the process and appreciate, Jana, you guys attending that meeting, is it fair to say that they really, worked with us to I mean, it seems like a really fair settlement when you explain all that, everything that went into it.
Nathan:
So. Yeah, absolutely. I think it was I think it's.
Yeah, at least in my opinion, I thought it was a very fair offer, all things considered.
Tera:
So then what? we have to wait. I mean, I know we can't take any action at this meeting because it's a study session, but what would be the next steps that we would need to do when we bring this forward?
And on Monday,
Nathan:
I will let Joel take over on that kind of process.
Joel:
yeah. Next steps would be at the board meeting. basically just giving, our firm authorization to enter into, consent order with, Jocelyn Brink and, and her counterparts over at CDPHE And then, we would have the district sign off on, the consent order.
I believe it would be Jason. And then, from there, from there, it would just be complying with the rest of it. So, yeah.
Tera:
So then they would accept it and then when would we get to the point where we would talk about potential projects, and how long do we have to identify those potential projects?
Nathan:
If, if we decide to go down. So once we have that final settlement offer and all of that is finalized, and we do want to do the supplemental project, the timelines are a little bit mushy there. so something that I think is worth can worth it at least looking at is, There is a there's a chance that we're going to be that will end up spending.
I don't have a rough estimation even, but substantially more than just the penalty getting this project moving. So $130,000 is a lot, but it's also not a lot depending on the the potential benefit. And, this is something we'd have to work through with the program coordinator. So there are also all kinds of multipliers. So if there's direct or indirect benefits to our organization, that will increase the amount of money that we have to spend.
We're also looking at design costs, project implementation costs, all of these things. We're going to have to go through a pretty substantial design process to get there. to kind of further complicate that process. And one of the reasons that I don't have a lot more information is that the entire, SCP program set program is, administered by one state employee.
today is their last day. tomorrow there will be an interim, person put in in position to try and kind of manage that. And they're hoping to get somebody hired in that position by the end of June. And so there's going to be if we decide to go down that path, there's going to be kind of a difficulty to get some traction.
and move down in my I talked to Jocelyn a little bit about it last week. And had they, had they known that we, we were going to be in kind of this program. Like, I don't know, kind of like purgatory, I guess, with the court, with the coordinator. The SCP program is probably something they would not have offered us as an option if they had been in place.
Jason:
Can I stop you for just a second.
I thought that this, project cannot be any part of the, making this, mitigation. Thank you. But that's great. Mitigating this violation can't be anything related to that. It's going to be something completely separate, something that we haven't even budgeted for. Correct?
Board Member James Mulvey:
Yeah. I mean, can you go through these SCP categories? it's just, you know.
It's, paragraph five, I guess it starts, page nine of 15 of this thing.
And, you know, and I don't know if you can talk to this directly, or maybe we just will look at it and come back Monday or something. But
Nathan:
yeah, I mean, I, I don't have, I mean, beyond like, reading them page five, ....
I'm sorry. Jim, which page we're on ....gotcha.
Yeah. And so beyond, like reading through and going through the individual definitions. I don't really know much beyond that, because I haven't been able to touch base with the actual coordinator. I wish I had more detailed information. I certainly hope to coming into tonight's meeting, given that's kind of like what we were discussing. But the human I need to talk to is just not there.
James:
if I may, is there any, current or existing list, from the state that would essentially, you know, we can reference for types of projects have done in the past. Yeah. So if you go, if you go to the website and you can just type in supplemental environmental projects and Google and it pulls up this page, they have a list of like kind of available current projects or projects that are waiting to be done.
When I went through there, I didn't see anything that was tagged for Douglas County. So nothing that we can go through. But it does give you kind of a general feel. they really do cover a very wide scope. So there's some that are like educational programs. There are stormwater projects. There's a huge, huge variety of things that are in there.
so we we really do have a lot of opportunities. we just won't really know what they are until we can get the settlement taken care of or get the this final penalty taken care of, and then get really somebody in that office that we can start having those conversations with. And so, the, new hire is going to or the I'm sorry, not the new hired, the interim, person.
Their name is, Cameron Morgan. So I do have their contact info. I was able to get that from Jocelyn, so I'll, I'll reach out to them and shoot them an email and see, you see what kind of engagement we can have while they look for their, their full time hire, kind of get some traction and get things moving, assuming that's the direction of the board would like to go.
Tera:
So if we accepted the settlement, it would be the the 130 that we would write a check.
Nathan:
yeah. We could write a check for the full amount, or we could put a payment plan together that covers up to like three years. But yeah, we would pay the fine and then that would be done. the money form from that goes into the it doesn't go into the state general fund.
It goes into their specific program for, rehabilitating water, wastewater, facilities, water quality projects and water quality and quality and stormwater training programs.
James:
Okay. And I had one question here only because, Tera and I both saw the same thing. First party SCP, a project within regulated entities, owned facility. These projects typically include a mitigation ratio of 1.5 to 1 or greater.
is that, you know, again, if, you know, I don't quite understand, you know, within a regulated entities owned facility, I'm assuming that's like a water treatment or a lift stations or something associated with that. And we would have to essentially take 1.5 times 130 or.
Nathan:
Correct. Yeah. And so in each there's a, there's a pretty long table.
I can't remember if it's in this document or if I found it online, but they have a pretty solid breakdown of types and types of projects and what the accompanying mitigating factor is that comes with those. so for, you know, if we did some sort of, you know, stormwater stabilization project, for example, that wouldn't necessarily fall under that 1.5 project because we are no longer respondent responsible for parks, trails and open space.
You know, the outfalls from many of our lift stations and creeks leave our district boundaries completely. And so there could be, you know, opportunities for something like that or kind of looking at those, and those, those mitigating factors are just really, really, really variable and kind of a little bit difficult to understand, which is another reason I want to try and get it some face time, or at least a phone call with the program coordinator.
James:
But if we worked with, say, the, you know, the town itself and we did project with the town, that would be something that would, you know, work towards this, you know,
Nathan:
potentially. the the caveat being, the city as well, it can't be a project that they have already identified. That needs to be. It has to be something that we create of our own volition.
Board Member Jana Krell:
I have a question, but either way, it sounds like, Kim's team proceeds with the first negotiations. And then we kind of paused until June. And there's a new person in staff.
Nathan:
We can we can start. We can start having those conversations with, the interim, with the interim program director. I just wouldn't expect to get a lot of traction until they have somebody full time in place.
Jana:
Okay. Is the board at all interested in just paying the fine since it does go to water quality and improvement in the state? Only throwing that out there because at some point that does cost us less than looking for a new investment.
Tera:
And so we I mean, I certainly would be something I would be open to discussing on Monday.
Nathan:
Oh yeah. I mean we can, we can we can have discussions about all of it. We just can't call call for a vote. So if that's something you guys want to talk through.
Tera:
Yeah. I mean, if my understanding is if we even had a project, it would have to be one and a half times. What just writing a check would be.
Is that,
Nathan:
potentially at a maximum, that would be the maximum level and then that doesn't. And that's the actual dollar spent on the project. So we'd still have to go through the process of designing and all of that. I don't think any of those costs count toward it at all. It's the actual capital investment project.
Tera:
I mean, I think certainly without, you know, coming to a vote today, I would certainly consider writing a check because it seems like we have one employee.
They have one employee that they don't even have yet. You know, they work to make it really, really fair. And I'm not saying it's not a lot of money, but,
If where would we find it in our budget? I mean, I guess that would be my next question, right?
Jason:
To piggyback on that, yeah, we've got these other, budget expenses that, have come up in the last couple of meetings that are above and beyond what we anticipated. So this might be something we're talking about. It's just paying this and, and moving forward.
So good point,
Nathan:
Joel. Joel can kind of weigh in here too. That's not that's not necessary. I can certainly include that on the agenda for Monday night, but it isn't something that necessarily even has to be included in that board meeting. We could kick that to the May board and a board meeting if we want to get like in touch with the coordinator, get a little bit more information.
What really needs to be resolved in the more immediate term is just, do we accept the settlement offer and go forward from there once that's in place? This is kind of the the step after that, do we want to just pay it or do we want to do the SCP program. So we we have more time on that part of it than we do?
with just the settlement, if I'm understanding,
Jason:
Leah, I didn't want to leave you out either. I know you're online, and, I didn't know if you had any questions for this.
Board Member Leah Enquist:
No, thanks for checking in. Jason, can you guys hear me? Okay. Yes, we can. Yeah. No, I'm. I'm tracking. So I would definitely support accepting the settlement when we get to that point.
And then, I'm in following kind of the rationale of of just paying. I don't have a strong opinion either way, but I would be open.
Jason:
Great. Thanks for your feedback.
Tera:
So it sounds like there's no timeline that we would have to. Will you just say whether we accept the settlement or not and then we don't know what the timeline is from there?
Joel:
Yeah, I can answer that. that's the problem with them not having adequate staffing because, you know, when we were in the settlement conference, they made a point to say, step number one is accept the settlement offer, step number two, SCP agreement. And when we kind of pushed back a little bit, I don't remember. I might have been you were it might have been I'm not sure who it was, but we said, well, you know, logistically what do we need to do here?
And Jocelyn Brink over at CDPHE said you'd have to talk to the SCP coordinator, who is basically unavailable. So, it's a known unknown, essentially.
James:
not that I disagree with anybody in the expediency of just paying the fine, but I think it would be smart just to look at what's available to us project wise and see if, yes, it's going to cost more money ultimately, potentially.
But we could also look at, you know, what positive benefit we can do with that money locally. and size the project accordingly so that we're not, you know, spending $500,000 that we don't have, you know, to get above this threshold. I think just just to look at our options as far as the scale of a project and keeping it reasonable that it kind of falls within that, you know, in these categories.
But it's something that we could maybe partner with the town or do ourselves, or it just worth a conversation at least looking at what projects have been done in the past and what those scale those projects are, and seeing if it makes sense. And if it doesn't make sense, then we pay the fine. Yeah.
Jana:
And I, I agree, Jim, I think it's all worth our time to listen or to look into options.
I just know how expensive everything is right now. I mean, $100,000, $130,000 project is beans. And so to me, I think, well, I'm open to what's best for the town, what's best for, you know, the the area. But there's some point where I'm with Jason. where will we get the money to do more than this? So open though, open to hearing.
Tera:
Great. Thank you. Yeah. Go ahead. It's great to be open. I hear exactly what you're saying. And I think that you brought up my same concern, which is, you know, it's that that's a that's actually a tiny project. I mean, I get that that that's a lot of money, but we've had projects that we've even sent out for bid and in that range, and people won't even respond to, just like you said, inflation, everything costs are obviously we want to do what's best for the district and, you know, the greater community if we can.
Jason:
Now just spitballing here, what if we take that money and, we have a big party and we call it an environmental awareness party, and that might
Nathan:
and we have it in Jason's house and call it the Jason Blank or Environmental Taxpayer Money Extravaganza.
Jason:
I might need partial all of that to pay for some landscaping, but then we're all funding.
Joel:
I think the EPA would go for it. You know, their their rules are the ones that CDPHE follows. So.
Jason:
Okay. Nathan. Thanks. are we done with the subject for tonight?
Nathan:
yeah. If there aren't any other questions, that's all I have to present. All. Did you have anything else you wanted to touch on?
Joel:
I am reviewing I drafted this memo for you, which basically tracks what Nathan went through, but it's a bit more comprehensive. It's got a lot more legalese in there. I thought it would be nice to confuse everyone a little bit. but, the things in bold are specific to the district. My thought was that you can go ahead and digest this between now and the regular board meeting, and then, if there are any lingering questions or concerns, then that might be a good time to raise it.
But I don't see anything that really stands out as untouched on so.
Nathan:
you're meeting to call.
Jason:
Sorry I was just looking over everything. yeah. Thank you very much for coming tonight. And, we will adjourn the meeting. Thanks, everyone. Thank you.
Leah:
Bye, everyone....