0506 ocs dannual_web

Making Everyday Possible

2005/06 Annual Report

Orange County Sanitation District

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Table of ContentsLetter from the General Manager 1Caring for your Neighborhood 3Protecting your Environment 7Serving your Business 11Looking to the Future 15OCSD Financial Results 18Looking Ahead 21OCSD Board of Directors 22

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Letter from the General ManagerThe Orange County Sanitation District has spent the past 50 years making everyday possible by protecting

the health and the environment of the people we serve. This year, with the support and leadership of the Board

of Directors, we added to an impressive list of accomplishments.

■ We were awarded the prestigious 2005 Governor’s Environmental and Economic Leadership Award in

Ecosystem and Watershed Management.

■ We celebrated the completion of the first of seven major milestones when our massive trickling filters began

operations as part of our commitment to move to full secondary treatment by 2012.

■ Through our creative resourcefulness, staff implemented 67 new proposals resulting in savings of $10 million.

We also reaffirmed our $2.4 billion capital improvement program and reduced the proposed capital

improvement budget by $490 million by deferring, rescoping or eliminating various projects. This change

allowed us to reduce next year’s proposed sewer rate increase from 20 percent to 9.8 percent.

We’re proud of these and many other accomplishments because we strive every day to work in the best interests

of the community while continuing to maintain our fiduciary responsibility.

Our future offers many challenges, but that’s what brings out the best in us. There’s no question the Sanitation

District can and will meet those challenges. We’ll continue to focus on protecting the environment, researching

new technologies, looking for ways to increase productivity and investing in our work force to prepare them

for what lies ahead.

Combined, these efforts will allow us to play an important role in making every day possible for the people

of Orange County.

1OCSD - Making Everyday Possible

James D. RuthGeneral Manager, Orange County Sanitation District

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Caring for “There have been lots of changes in Orange County over the

years and although things here are bigger and more complicated

than it used to be, we still wouldn’t want to live anywhere else.

There’s always something to do all the time, every single day of

the year. That makes this a great place to be for people like us

and our family.”Larry and Margaret MurpheyFountain Valley

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your Neighborhood


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“What we do is real important for everybody who lives in the

areas that we take care of. Things would not be as nice as they

are if we didn’t do the best job we could all the time. That’s

why I take pride in my work, knowing that I’m helping make

the lives of other people better every day.”Ray NavarroOCSD Maintenance Worker

Working for you every single dayEvery single day, much of what we do goes by with little

fanfare. But without fail, we work hard to protect the

lives and lifestyles of the 2.5 million people we’re charged

with serving.

Quite simply, we do that by treating about 240 million

gallons of wastewater – enough to fill Anaheim Stadium

three times – every day. Nearly 80 percent of that water

comes from homes – sinks, toilets, showers, laundry and

dishwashers. The rest

comes from businesses,

retail stores, hotels,

offices, restaurants,

manufacturers and

other industries.

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For over 50 years, we’ve made

sure this essential system works

24 hours a day, seven days

a week. That’s no small task,

considering we safely collect,

treat and dispose of wastewater

from 470 square miles in central

and northwestern Orange County. It’s a big job covering

a big area, making us the third largest wastewater agency

west of the Mississippi River.

Our 644 employees maintain a complex system of pipes,

pumps stations and processing facilities so that people

can go about living, working and playing without giving

us more than a passing thought. But the reality is that

Orange County’s sewer system is a multi-billion dollar

public investment that must be constantly monitored to

preserve the public’s health and the quality of life. We

oversee a large and diverse network of facilities including

581 miles of pipelines, 16 pumping stations, treatment

plants in Fountain Valley and Huntington Beach and a

58-foot ocean monitoring boat out of Newport Harbor.

We work hard, we work smart and we’re efficient in what

we do. We reclaim up to 10 million gallons of treated

water every day, which is ultimately used for landscape

irrigation and injection into the seawater intrusion barrier.

We operate our own central power plant that generates

more than 14,000 kilowatts of energy every day from

burning natural gas and methane gas. We also recycle

more than 230,000 tons of biosolids every year for

agricultural uses.

Our rate payers benefit from the efforts of our Board and

staff. Residential user fees average less than $14 per

month, one of the lowest rates in the state. That is quite an

accomplishment since the average Californian spends

more than double that amount for sewer service. In short,

we have dedicated

ourselves to taking care

of you every single day,

doing our part in making

everyday possible for

the people we serve.

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“I love going out to the beach whether its for a long quiet walk,

or to do some sketching or to just play in the surf. For me

the beach is one of the most beautiful, natural advantages about

living in Orange County and that’s why I try to come here

as often as I can.”Yuri CampbellNewport Beach

Protecting

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your Environment


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Reaching out to the communityWe think the best way to

protect our environment is

by partnering with other

agencies and the public

to keep Orange County

clean and safe. Our

employees actively work at forming strong coalitions for

the sole purpose of ensuring our beaches, ocean waters

and wildlife are protected.

For more than 30 years, we’ve partnered with the United

States Environmental Protection Agency and the California

Regional Water Quality Control Board in an extensive

ocean monitoring program. Our ocean monitoring vessel,

the 58-foot Nerissa, crisscrosses 35 square miles of ocean

“The environmental protection work we do must be complemented

by teaching others to protect the environment as well. Taking

care of special places like our beaches and the oceans at our back

door is a big job and we can’t do it alone. The more people

get involved, the easier it is to preserve and protect a place we all

call home.”Jeff ArmstrongOCSD Senior Scientist

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along 11 miles of coastline, from Seal Beach to Corona

Del Mar. Sampling locations include 17 shoreline

water quality stations, 17 offshore water quality stations,

49 stations to assess bottom-dwelling organisms and

sediment chemistry, and nine trawl stations to evaluate

fish and macro-invertebrate communities.

We participate in special regional studies that cover a

much broader area ranging from Point Conception,

west of Santa Barbara, to Mexico. We also work closely

with the University of Southern California Sea Grant

Program, Scripps Institution of Oceanography, the

University of California, Los Angeles and other universities.

Public education is a critical part of our outreach efforts.

By educating the public, they help us by becoming

ambassadors for cleaner air, land and water. With that

in mind, this year we launched

a pharmaceutical outreach

program called “No Drugs

Down the Drain” to teach

people the right way to dispose

of their prescriptions and

medications. Almost one million

information cards were

distributed to pharmacies.

We also contacted 300

home-owner associations,

and worked with the

media to raise awareness

about this growing environmental concern.

Another way we educated the public was through the

creation of our Fats, Oils and Grease Program, because

one of the largest causes of beach closures are sewer

overflows caused by fats, oils and grease.

We also think it’s important for the public to understand

the importance of wastewater treatment in protecting

public health and the environment. To accomplish this,

we conducted 70 tours of our treatment plant facilities for

close to 1,000 people over the past year. More than

70 employees also volunteered 635 hours of community

service by participating in speaking engagements and

working on events such as Earth Day, Arbor Day and

the Children’s Water Festival.


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Serving “Orange County is a great place to own a restaurant because

the opportunities for success are everywhere. Part of that success

comes from wanting to do your part for the community by

taking the right steps to ensure this is a better place for all of us

at the end of the day. So we appreciate the checks, the balances

and safeguards put in place to protect our families, our homes

and our businesses.”Zov KaramardianOwner, Zov’s Bistro, Tustin

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your Business


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Our scientific approach protects the publicA big part of our job at OCSD is protecting the public’s

health by closely monitoring treatment processes at our

plants and working with businesses to prevent problems

before they occur.

Our award-winning source control program closely

regulates the amount of toxic pollutants that can enter the

sewer by issuing permits

to businesses to ensure

that pollutants are

eliminated or significantly

reduced in the sewer

system. Businesses that

“We are always working towards finding better ways to balance

protection of public health with the business needs and the

lifestyles of the people of Orange County. Two of our current

goals include developing ways to test for previously undetectable

levels of contaminants in recycled water, and same-day

bacteria testing methods for beach water.”Charlie McGeeOCSD Lab Supervisor

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release wastewater into our

sewers must meet strict

regulations and are routinely

sampled and inspected. If

violations occur, the District

responds swiftly with warnings,

fines and criminal charges.

An integral part of our compliance and monitoring efforts

are centered around OCSD’s state-of-the-art Environmental

Sciences Laboratory. It is staffed by highly qualified and

experienced professionals to ensure businesses meet all

regulations for water quality as well as monitoring OCSD’s

air emissions and the processing of biosolids.

Each year, our lab analyzes more than 100,000 samples,

testing for bacteria and over 100 other compounds that

can be harmful to people and the environment. That

means we can guarantee only highly treated wastewater

is released through our 200 foot deep, five mile long

ocean pipeline.

As part of our compliance and testing efforts, we also

take samples from the ocean at 17 sites extending up to

six miles offshore. We also test ocean sediments to assess

bottom-dwelling organisms and sediment chemistry. The

combined analysis from these samplings gives us a clear

picture of the health of the ocean on a daily basis and

helps us protect people and marine life from potential

harmful situations.

Research projects are currently under way to improve our

operations by identifying new or different processes or

equipment that can be used. For example, laboratory

processing methods currently require 24 hours to complete.

During this time, swimmers may be exposed to poor

water quality, placing their health in jeopardy. To alleviate

that, OCSD is working with the Southern California

Coastal Water Research

Project Authority to

develop new, more rapid

assessment methods that

would allow for same-day

water quality warnings.


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Looking “Clean air, nice beaches and parks, and lots of outdoor activities

all year round. Those are some important reasons why we

live in Orange County. It’s very important to my husband and

I that this area stays that way for my children as they grow

up. We care deeply that everything possible is being done to

ensure that they’ll have a healthy place to call home for many

years to come.”Erin and Mathew BaxterLa Habra

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to the Future


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Making tomorrow possibleOur commitment to

preserve a healthy way

of life for the people of

Orange County extends

well into the future with

an aggressive, ongoing

series of capital improvements, programs and partnerships.

More than $2.4 billion in projects are already being built

or in the planning stages over the next several years as

part of our Capital Improvement Program. This includes

almost 140 projects at both of our treatment plants, 16

pump stations and 44 large sewer trunklines. We also

have a number of cooperative projects underway to help

local cities upgrade their sewers.

“My children are my world and their future means everything to

me. That brings special meaning to my work because I make sure

emissions we’re releasing from generators are within health and

safety standards. By doing my job, I’m doing my part to make

sure my children grow up in a clean and healthy environment, and

that keeps me motivated to do my job well every day.”Chloe DaoOCSD Engineer

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During the past year alone, we completed 16 capital

improvement projects and laid 20,000 feet of new

pipe. These accomplishments were highlighted by the

commissioning of a new trickling filter facility, the first in

a series of milestone events as part of the district’s move

to full secondary treatment.

Another important project that will protect our future is

in the final phases of construction. The Groundwater

Replenishment System, a jointly funded project of OCSD

and the Orange County Water District, is slated to begin

operation in Fall 2007. It will produce 70 million gallons

of purified water every day and return it to the Orange

County Groundwater Basin, either by injection along the

coast to protect the basin from seawater intrusion, or by

percolation in ponds in Anaheim. As a result, Orange

County will have a quality, reliable, local water supply

for decades to come.

Our ability to effectively protect

the region’s environment well into

the future was also strengthened

by the creation of a partnership

with EnerTech Environmental, Inc.

this past year. The 10 year

agreement with four

5-year options calls for

OCSD to supply EnerTech

with 200 daily tons of

biosolids that will be

recycled into a high-grade

renewable fuel to augment a nearby cement plant’s

power supply. Ash from the fuel will be used as a cement

additive resulting in zero solid waste. EnerTech is building

a facility in Rialto, and they expect to begin converting

biosolids to fuel by early 2008.

Complementing this new energy efficient effort is our

ongoing program of generating electric power from gases

produced by the wastewater treatment process. Recycling

captured methane generates more than 14,000 kilowatts

of energy daily, roughly the equivalent of enough power

to supply the needs of a city the size of Brea or Cypress.

Instead, we use this power to run our central generation

power plants. This year, OCSD saved $8.3 million in

power that would otherwise have to be purchased from

Southern California Edison.


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18 Making Everyday Possible - OCSD

OCSD Financial Results■ The Capital Improvement Program (CIP) is a series of large construction improvements in progress or planned

over the next several years that will allow the District to provide an appropriate level of service to our rate

payers. The CIP provides for the management and implementation of these improvements. The outlay for the

CIP in FY 2005-06 was $260.8 million.

■ Debt Service is the cost of repaying long-term debt. Long-term debt financing allows the District to complete

large multi-year capital projects by providing funds not always immediately available. The outlay for debt

service in FY 2005-06 was $41.9 million.

■ Operating Expenses allocates resources to operate, maintain and manage our sewage collection, treatment

and disposal system and any associated administrative or technical requirements. Operating expenses for

FY 2005-06 were $109.7 million.

■ Intradistrict Transfers are expenditures related to other affiliated agencies. Intradistrict Transfers for FY 2005-06

were $9.3 million.

■ The District’s “AA” Rating is one of the highest for a government agency. To maintain this rating, the District

adheres to its 2001 Debt Policy and coverage ratios requirements. This Board-adopted policy serves as a

guide in the management of existing debts and in the issuance of future debt.

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Where the money comes from Where the money goes

BeginningDesignatedReserves$472M

52%

CIP$260.8M

29%

Debt$41.9M

5%

Operating$109.7M

12% Intradistrict$9.3M

1%

EndingDesignatedReserves$490M

53%

Fees$185M

20%

Property Tax$40M

4%

Interest$10.4M

1%

Debt Proceeds$200M

22%

Other$4.3M>1%

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OCSD Financial Results (continued)

In FY 2005-06, total revenues increased $41.5 million, or a 22.7 percent increase over the prior year,

primarily due to the $33.4 million in service charges.

District total expenses increased $18.6 million, or 10.6 percent primarily due to increases of $7.5 million

in depreciation, $7.3 million in non-operating expense, and $3.8 million in operating expenses. The

increase in depreciation is due to the recent completion of $141.9 million in construction project assets that

have entered their first year of depreciation. Operating expenses alone have increased only 3.7 percent

over the prior year.

Net assets increased $47.9 million, or 4.6 percent, to $1,089 million in FY 2005-06 over the prior year. Net

capital assets increased $189.5 million, or 16.1 percent, due primarily to the continuing Capital Improvement

Program that includes construction of the Groundwater Replenishment System. The Groundwater Replenishment

System project continued to move forward with an estimated commissioning slated for Fall 2007. This joint

project with the Orange County Water District will be the largest water reclamation project in the nation and

divert up to 70 million gallons of water a day from the District’s ocean discharge during peak winter storms.

The District has budgeted $248.6 million for this project through FY 2007-08. Through FY 2005-06,

$150.9 million had been incurred including an additional $83.7 million in outlays for FY 2005-06.

Long-term liabilities increased $186.4 million, or 30.6 percent due to the issuance of $200 million in

bonded debt to assist in the financing of the District’s 10-year $2.4 billion Capital Improvement Program.

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Looking AheadIn June 2006, the Board of Directors approved the District’s FY 2006-07 operating and capital improvement

budget at $545.1 million, or a 19.5 percent increase over the prior year. This overall increase is comprised

of a $6.5 million, or 5.1 percent increase in the operating budget, an $11.1 million, or 20.3 percent

increase in debt service requirements, and a $70.9 million, or 26.2 percent increase in cash outlays for

construction projects.

The increases in both debt service and CIP outlays is related to the completion of the District’s $2.4 billion

Capital Improvement Program including the Board’s mandate to meet secondary treatment standards by

December 31, 2012. Increases in the operating budget consist of the following:

■ Salaries and Benefits, $4.8 Million – Costs will increase $1.8 million as a result of existing collective

bargaining agreement impacts, including health and welfare increases. The other significant impact is a

$2.4 million, or 25 percent increase in retirement premiums. Our rising retirement premiums are consistent

with increased costs throughout California.

■ Operating Materials and Supplies, $1.4 Million – As the requirement for better quality effluent increases,

so does the need for chemicals (primarily bleach) to treat the region’s wastewater. These chemical increases

reflect price increases of 34 percent partially offset by staff’s optimization of treatment facilities.

■ Repairs & Maintenance, $2.2 Million – Various repairs at the OCSD operation plants, including diffuser

replacement and digester cleaning, will increase the repairs and maintenance budget.

■ Contractual Services, $2.9 Million – The major component of this category are biosolids removal and

transportation costs. These costs continue to increase as acceptable locations for biosolids disposal become

less accessible.

■ Utilities, $2.7 Million – Despite reductions by using natural gas, total utilities costs will increase due to rising

electricity costs.

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Steve AndersonChair, Board of Directors

City of La Habra

James M. FerrymanVice Chair, Board of DirectorsCosta Mesa Sanitary District

Harry SidhuCity of Anaheim

Roy MooreCity of Brea

Patsy MarshallCity of Buena Park

Phil LuebbenCity of Cypress

Larry CrandallCity of Fountain Valley

Don BankheadCity of Fullerton

Bill DaltonCity of Garden Grove

Dave SullivanCity of Huntington Beach

Sukhee KangCity of Irvine

Mark WaldmanCity of La Palma

Ken ParkerCity of Los Alamitos

Tod RidgewayCity of Newport Beach

Carolyn CaveccheCity of Orange

Norman Z. EckenrodeCity of Placentia

Alberta ChristyCity of Santa Ana

Charles AntosCity of Seal Beach

David ShawverCity of Stanton

Doug DavertCity of Tustin

Rich FreschiCity of Westminster

Michael DuvallCity of Yorba Linda

Joy L. NeugebauerMidway City Sanitation District

Darryl MillerIrvine Ranch Water District

James SilvaOrange County

Board of Supervisors

OCSD Board of Directors Fiscal Year 2005-06

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Orange County Sanitation District10844 Ellis Avenue

Fountain Valley, CA 92708(714) 962-2411www.ocsd.com

District OfficialsJames D. Ruth

General Manager

Dr. Robert P. GhirelliAssistant General Manager

Nicholas J. ArhontesDirector of Operations and Maintenance

James D. HerbergDirector of Engineering

Edward M. TorresDirector of Technical Services

Lorenzo TynerDirector of Finance and Administrative Services

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