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1 <br /> 5 <br /> Guidelines for developing a repair funding mechanism include basic <br /> assurances that: 1) the County General fund will not be the <br /> ultimate source of funding; 2) the funding process will be <br /> equitable to all citizens receiving benefits from the program; <br /> 3) the program can be administered without undue complication; and <br /> 4) the funding process utilizes every appropriate tool at the <br /> County' s disposal to leverage all of the required repair funds <br /> from owners. <br /> Orange County staff have reviewed several methods to provide <br /> financial surety. The methods reviewed include: a) performance <br /> bonding; b) up front payments by all system owners into "rainy <br /> day" or escrowed repair funds; c) acquisition of funds through a <br /> financial mechanism associated with the collection of property <br /> tax; d) leveraging repair funding from failing-system owners <br /> through a property lien process; and e) the lien process <br /> supplemented with the requirement that owners of treatment systems <br /> provide a long-term and renewable letter of credit or an escrow <br /> account in an amount sufficient to make major system repairs. <br /> Staff has concluded that the process combining the lien with the <br /> letter of credit/escrow fund would be most satisfactory. <br /> NEW SYSTEKS <br /> Developers of multi-home treatment systems and owners of <br /> individual systems would be required to provide the County with <br /> either a perpetual letter of credit or an escrow account repair <br /> fund. The amount provided by a letter of credit or escrow fund <br /> would be set at eighty percent of the construction cost of the <br /> system. To account for increased replacement or repair costs due <br /> to inflation, the amount of the fund or letter of credit would be <br /> increased periodically as indicated by increases in the Consumer <br /> Price Index (CPI) . In the case of a multi-user system, a <br /> percentage of the ownership of the fund or letter of credit would <br /> be conveyed from a developer to individual property owners as lots <br /> were sold. Eventually, ownership of a fund or letter of credit <br /> would be fully vested in the individual lot owners or an owners <br /> association. Initial costs of establishing a letter of credit or <br /> a repair fund would be built into the costs of lots, homes, etc. <br /> The owners of individual systems would probably be unable to <br /> establish a line of credit sufficient to secure a letter of <br /> credit. Financial surety for individual systems could be attained <br /> through the use of individual escrow funds. Owners of individual <br /> systems would also be required to provide funding equal to eighty <br /> percent of the replacement costs of their systems. However, <br /> individual systems owners would only be required to provide a <br /> deposit of one-half the total fund requirement initially, while <br /> the remaining half would be paid into the escrow fund at a rate of <br /> ten percent of the total required fund per year for five years. <br /> At the end of five years, the fund balance would have reached the <br /> required total. The required total of each fund would also be <br /> incrementally adjusted as per the CPI. <br />