April 19, 2005

SUBJECT: Funding Request for the Underground Storage Tank Containment Testing Project in the Amount of $49,470, Upgrading of Fuel Stations Project in the Amount of $40,000, and Budget Modification No. 30

REPORT IN BRIEF

Staff is requesting budget modifications for two closely related capital projects:

1.     Appropriate $49,470 to complete the Underground Storage Tank Containment Testing Project.  This request is prompted by ongoing changes in State air and water quality regulations requiring  enhanced testing procedures and resulting repairs and modifications for underground fuel tanks and delivery systems as mandated by AB 989 and Bay Area Air Quality Management District (BAAQMD.)  Funds are available in the General Services Fund, Fleet Services Sub-fund due to unanticipated equipment expenditure savings realized in FY 2003/04. 

2.     Appropriate $40,000 to the Upgrading of Fuel Stations project by moving General Fund monies that were planned to be transferred in FY 2005/06 to the current year.  This request is prompted by an earlier than expected deadline to complete the upgrade of the Public Safety Emergency Generator fuel tank piping system. The upgrade is mandated by AB 989 and must be completed by July 1, 2005.   

During the FY 2003/04 projects budget cycle, $40,000 was planned in FY 2005/06 for the Upgrading of Fuel Stations project.  At that time, staff believed the project funding timeline slated for FY 2005/06 would be sufficient to meet the mandated deadline.  Since that time, staff has learned that in order to meet the deadline, project funds must be available in FY 2004/05 to secure a purchase order that will ensure timely completion of the project.  

BACKGROUND

Underground Storage Tank Containment Testing

The City of Sunnyvale (City) owns and operates three fuel stations (City Hall, Corporation Yard and Golf Course) and three fuel facilities (Public Safety Emergency Generator, City Hall Annex, and SMaRT Station.)  All of these sites use underground storage tanks to store fuel for City owned vehicles/equipment and the SMaRT station contractor.   Like all other underground storage tank operators in California, the City’s underground tanks, piping and fuel dispensing equipment are strictly regulated by a variety of federal, state, air district, water district and local regulations designed to minimize the risk of a product spill. Regulations include requirements for annual testing; constant electronic monitoring; repairing double containment systems for tanks, piping and dispensers; and upgrading certain fuel delivery systems.

This project has been very expensive due to the limited pool of qualified contractors certified to perform the new testing procedures and limited access to the specialized equipment required for testing. Because all California fuel facilities are subject to AB 989 and various air district regulations, the lack of qualified contractors has contributed to a sellers market with long lead times for required testing and subsequent repairs/modifications.

To further complicate matters, as reported in RTC 03-250 (July 22, 2003), cost for the first phase of BAAQMD vapor recovery standards required for this project was unknown when the project was established because necessary equipment for the upgrade had not yet been developed by tank manufacturers.

Staff has been working on this project continuously for the past several years.  During this time, all facilities have gone through three full cycles of testing resulting in a number of repairs to correct deficiencies. At this point, cost has exceeded planned expenditures due to:

1.     The need to replace an inadequate electronic leak detection monitoring system at the City Hall Annex emergency generator fuel tank ($2,900);

2.     The unexpected failure and subsequent replacement of the electronic tank monitoring systems at the City Hall fuel station ($4,100);

3.     The unexpected failure and planned replacement of the electronic tank monitoring system at the Golf Course fuel station ($4,970);

4.     Recent cost information received for required BAAQMD vapor recovery modifications at the Corporation Yard ($22,500.)

5.     Unexpected diesel fuel soil contamination at the Corporation Yard underground emergency generator tank – estimated remediation cost expected to be ($15,000.)     

Upgrading of Fuel Stations

The piping system for the Public Safety emergency generator requires a fuel piping upgrade to comply with AB 989.  Although the existing piping system is tight, and passed a very specialized testing procedure, the upgrade is mandatory and must be completed by July 1, 2005.

The project has funds slated in FY 2005/06 for the construction costs associated with the piping upgrade.  When the project was proposed in FY 2003/04, staff believed that the project funding timeline slated for FY 2005/06 would be sufficient to meet the mandated deadline.  Since that time, staff has learned that in order to meet the deadline, project funds must be available in FY 2004/05 to secure a purchase order that will ensure timely completion of the project.  

As stated above, the entire process for both projects has been very expensive due to the limited pool of qualified contractors certified to perform the new testing procedures and limited access to the specialized equipment required for testing. Because all California fuel facilities are subject to AB 989 and various air district regulations, the lack of qualified contractors has contributed to a sellers market with long lead times for required testing and subsequent upgrades/modifications.

To further complicate matters, cost for the first phase of BAAQMD vapor recovery standards was unknown when the project was established because necessary equipment for the upgrade had not yet been developed by tank manufacturers.

EXISTING POLICY

Both projects are supported by the Air Quality Sub-element of the General Plan through Goal C, "Make a contribution towards improving regional air quality"; through the Water Resources Sub-element of the General Plan through Goal 3.1G.6. "Support legislation and regulations that establish beneficial water quality standards that are based on scientific facts, benefit-risk analyses, and other supportable evidence."

DISCUSSION

City fuel stations and facilities have been subject to three cycles of mandated annual testing.  During this span of time, several fuel system components have required repair, several monitoring systems have needed to be replaced and unexpected soil contamination needs to be cleaned up.  If approved, this budget modification will allow for timely completion of remaining work and allow the City to continue fuel operations past July 1, 2005.

Failure to perform the upgrades/modifications by July 1, 2005 will place the City in a position where the Corporation Yard, Golf Course and Public Safety fuel tanks would be ‘red tagged’ and placed out of service as mandated by the State regulation.

Staff has researched this issue and has found that the level of upgrades and modifications required in Sunnyvale is consistent with other local agencies and private operators of underground fuel tanks. The City of Sunnyvale fully complied and passed all required federally mandated tests in 1998 and has performed all upgrades/modifications and retrofits to comply with the strict 1998 regulations. The City has also passed subsequent spot checks by the water and air districts for our fuel sites. The 1998 federal requirements were considered to be the ultimate standard. However, due to the concerns surrounding ground and surface water contamination from Methyl Tertiary-Butyl Ether (MTBE), the State of California found it necessary to exceed the 1998 federal standards by a wide margin.

It is anticipated that underground fuel tank regulations will continue to require increasingly stricter measures to comply with federal, state and local air and water quality measures. While necessary for responsible operation, compliance with these regulations is costly and will continue to drive up the cost of fuel for anyone buying fuel in California.

Further, as a point of information, it appears that the City may be required to perform a second phase of BAAQMD vapor recovery upgrades/modifications by the end of 2006 or 2007. At this point, cost for this work is unknown as new equipment necessary to meet future criteria is currently being developed by tank manufacturers.  Our best estimate for new BAAQMD requirements, if required, ranges from $6,000 to $12,000 to modify city owned gasoline dispensing systems at City Hall, Corporation Yard and Municipal Golf Course fuel stations.

FISCAL IMPACT

To complete the required upgrades and modifications as discussed in this report, an additional $49,470 would need to be appropriated to the Underground Storage Tank Containment Testing project.  Funds are available in the General Services Fund, Fleet Services Sub-fund due to unanticipated equipment expenditure savings realized in FY 2003/04.  Furthermore, $40,000 would need to be appropriated to the Underground Storage Tank Upgrades project by moving General Fund monies that were planned to be transferred in FY 2005/06 to the current year. 

Conclusion

A budget modification is requested to complete required work for the Underground Storage Tank Containment Testing Project and the Underground Storage Tank Upgrades Project.  The work must be completed by July 1, 2005 to assure compliance with the law and continued fuel operations.

PUBLIC CONTACT

Public contact was made through posting of the Council agenda on the City’s official notice bulletin board, posting of the agenda and report on the City’s web page, and the availability of the report in the Library and the City Clerk’s office.

ALTERNATIVES

1. Approve Budget Modification No. 30 and increase the budget for the Underground Storage Tank Containment Testing Project by $49,470 and the Underground Storage Tank Upgrades Project by $40,000.

2. Do not approve the budget modification request.

RECOMMENDATION

Staff recommends Alternative #1: Approve Budget Modification No. 30 and increase the budget for the Underground Storage Tank Containment Testing Project by $49,470 and the Underground Storage Tank Upgrades Project by $40,000.

Reviewed by:

Marvin A. Rose, Director, Public Works

Prepared by: Gene Waddell, Fleet Manager

Reviewed by:

Mary J. Bradley, Director, Finance

Approved by:

Amy Chan

City Manager