5. Need for Replacement Facilities
The Application states that there is insufficient space in the Main Office, which diminishes SJWC's service and efficiency, that the Main Office lacks adequate security and infrastructure for modern technology, and that it is not in compliance with the Americans with Disabilities Act (ADA). However, according to the Application, the Main Office cannot be remodeled or expanded because the building is designated a historic landmark. Although SJWC continues to operate out of the facility, the Application states that the Main Office has reached the end of its useful life.
The Application states that SJWC has considered all reasonable alternatives and has determined that the most the most economic option is to dispose of the Main Office facility, purchase a new downtown property to serve as company headquarters and a walk-in customer service center, and consolidate all other functions at SJWC's South Bascom Avenue campus.
SJWC states that it periodically evaluates the resources needed to deliver a high quality, reliable drinking water supply and to maintain a high level of customer service, and in 1998, prepared a Strategic Facilities Plan (SFP) that was updated in 2006. The 2006 SFP evaluated alternatives to either modify existing facilities or relocate staff, and considered a range of alternatives, including:
· Remodeling and renovating the current Main Office to add additional space to accommodate current staffing needs and projected short term growth.
· Consolidating all operations at the South Bascom Avenue campus by constructing a new building to house all employees.
· Consolidating all operations at another site through the purchase or lease of new buildings or land in or around Santa Clara County.
· Bifurcating staff by locating the executive staff in one facility and all other employees in another facility.
· Maintaining a walk-up customer service site in downtown San Jose, while consolidating all other functions at another location.
SJWC retained a consultant to analyze several alternative scenarios, and to compare the capital outlay and net present value (NPV) of each to identify the most economically efficient alternative. The Application presents cost/benefit analyses for renovating the Main Office (the Base Case) and for what SJWC asserts are the two most viable alternatives. SJWC's states that its alternatives analysis was presented in the Application, not to obtain the Commission's advice as to how to address its space needs, but rather to show the process SJWC used to make its choice so that the Commission could review the reasonableness of SJWC's selection.37
Under the Base Case, current functions would remain in the Main Office building, and the Main Office would be remodeled and renovated to add additional space to accommodate current staff and projected short term growth. SJWC states that it included the Base Case in its analysis as the status quo for comparative purposes, but that the Base Case cannot actually be implemented.38
SJWC states that, under the Base Case, the type and extent of improvements possible to the Main Office building are severely limited due to the building's status as an historic landmark, and that substantial renovation costs would be incurred to modify this space for long-term future occupancy. In the Base Case, SJWC would continue leasing 11,800 ft.2 of space on the second floor of 1265 South Bascom Avenue, and would lease an additional 3,980 ft2 of space on the first floor of 1265 South Bascom Avenue.
Under Alternative 1, SJWC will sell the Main Office, and employees currently located there will be relocated to a newly leased office in downtown San Jose and to existing facilities on South Bascom Avenue. The facilities at 1221 and 1251 South Bascom Avenue will be renovated, and an additional 10,000 ft2 of space will be leased on the first floor of 1265 South Bascom Avenue and renovated to accommodate employees from the Main Office and for future expansion. Alternative 2 is identical to Alternative 1, except that a new office in downtown San Jose will be purchased instead of leased, and 1265 South Bascom Avenue will be purchased instead of leased.
SJWC asserts that Alternative 2 is the most economic option. As a result, SJWC seeks approval to sell the Main Office, and approval of the increased annual revenue requirement of $1,870,782 that will result from implementing Alternative 2. DRA recommends that these requests be denied because, according to DRA, SJWC does not need the additional space, and because SJWC has not selected the lowest cost alternative for ratepayers.
DRA contends that the Application is flawed because SJWC's current and future needs for office space can be accommodated through existing or soon to be available office space.39 DRA states that SJWC does not need the additional space proposed in the Application because the Base Case provides for more space than is actually needed to accommodate the six employees hired after its last GRC and any future growth.
DRA recommends that SJWC be required to remodel its Main Office and use space that will become available at 1251 South Bascom Avenue or lease additional space at 1265 South Bascom Avenue to accommodate future growth.40 DRA proposes that the cost of remodeling the Main Office be treated as Construction Work in Progress, accrue interest during construction, and be reviewed in SJWC's next GRC.
DRA states that SJWC's customer growth from 2001 through third quarter 2007 varied from 0.03% in 2002 to 0.7% in 3Q 2007, and that average annual growth in total employees averaged 2.1% over the same six-year period. DRA contends that the proposed increase in space over the Base Case is unnecessary and inconsistent with the historical growth in customer base or employee levels.41
SJWC responds that DRA does not appreciate the inadequacies of current employee work spaces, and DRA's assumption that additional employees can simply be housed at an alternative location more than three miles away does not consider departmental adjacency needs.42 SJWC states that leasing additional space at the 1265 South Bascom Avenue is not acceptable or feasible due to the organizational inefficiencies this would cause. SJWC contends that separating employees within a department is not appropriate and can cause greater difficulties for the organization.43
SJWC states that there is insufficient space in the Main Office to add to or modify the existing office space, and it has addressed the space shortage by creating inferior workspaces comprised of substandard cubicles in the Main Office and at the Bascom Avenue campus.44
SJWC contends that the Main Office cannot be renovated.45 SJWC states that the Main Office was designated a City Historical Landmark in 1991, and due to its historic status, the City requires an historic preservation permit to perform any work or cause any work to be performed on it.
SJWC states that, in 2005, SJWC's request for an historic preservation permit to replace the glass panes on one office to alleviate noise from Santa Clara Street was denied on the basis that the City does not want modifications of any kind made to the building. SJWC also states that a 2003 Environmental Impact Report (EIR) determined that no modifications or changes can or will be permitted anywhere on the building, and that no buildings can be built within 50 feet of the Main Office.
SJWC asserts that the Main Office is located directly under the flight path of Mineta San Jose International Airport traffic, with over 530 aircraft departures and landings per day, and near the major thoroughfares of Highway 87 and Santa Clara Street. SJWC states that the Main Office was built before existing airport and roadway traffic levels were anticipated, and the Main Office is not soundproofed from freeway or airport noise. SJWC contends that, although the work environment inside the Main Office is disrupted by aircraft and freeway noise, the historical status of the building makes it impossible to implement needed sound reduction improvements.46
SJWC states that, due to the age and historic landmark status of the Main Office, the building cannot reasonably be renovated to support other upgrades to the building's systems and infrastructure because reinforced concrete and asbestos was used in the original construction of the building. SJWC contends that, as a result, air conditioning, plumbing and heating improvements, or upgrades to electrical and communications wiring are difficult and costly to make.47
SJWC states that the Main Office lacks the security needed to ensure the safety of SJWC's employees and customers because the floor plan provides no effective separation between employees and the public. However, according to SJWC, security enhancements are difficult to make because of the architectural challenges inherent in the building, which make additional security measures cost prohibitive or impossible.
Finally, SJWC asserts that the Main Office does not comply with current ADA requirements because it does not have an elevator, and because ramps, handrails, fixtures, and bathroom stalls do not meet code. SJWC states that an elevator cannot be installed in the Main Office, and an ADA compliant ramp cannot be installed at the main entrance to the building.48 SJWC contends that DRA's analysis does not consider the severe limitations of the Main Office, and does not respond to any of SJWC's testimony concerning the near impossibility of renovating the Main Office.49
DRA acknowledges that renovating the Main Office would be difficult but contends renovations would be less costly than purchasing a new building.50 Concerning SJWC's ability to bring the Main Office into compliance with the ADA, DRA states that SJWC's witness Giordano admitted during hearings that ADA requirements are grandfathered.
Discussion
The Main Office cannot be satisfactorily remodeled to provide adequate security, install modern systems and infrastructure technology, provide a quiet work environment, and to ensure ADA compliant access for the disabled because the City will not likely grant historic preservation permits and because of the limitations imposed by the 2003 EIR.
SJWC's need to replace the Main Office has as much to do with providing adequate facilities as it does with providing additional floor space. We must take into account more than floor space needs when considering SJWC's request because factors such as building security, ability to upgrade the building's systems and infrastructure, level of workplace noise, and access for disabled persons with mobility challenges are necessary attributes to ensuring adequate facilities required by § 451.51 Therefore, even if enough floor space is available under the Base Case, the quality of that space is not sufficient to ensure adequate facilities.
Although the work environment in the Main Office is adversely affected by aircraft and freeway noise pollution, the historical landmark status of the building makes it very difficult, if not impossible, to implement adequate sound reduction improvements. The City denied SJWC's request for an historic preservation permit to replace the glass panes on one office to alleviate noise from Santa Clara Street, and it is not likely that the City will approve far more substantial modifications to the building that would be required to reduce noise pollution throughout the Main Office.
The Main Office cannot be renovated to support upgrades to the building's systems and infrastructure for modern technology, including the air conditioning, plumbing, heating, electrical and communications systems, due to the building's design, the materials used to construct it, given the limitations on improvements that can be made to the historic landmark. Thus, the limited remodeling that may be done to the building cannot make the Main Office an adequate or efficient facility.
While DRA acknowledges that renovating the Main Office would be difficult, it contends that renovating the Main Office is less costly than purchasing a new building. Although DRA disagrees that SJWC needs to replace the Main Office, DRA's analysis focuses almost entirely on floor space requirements and not on the adequacy of that space in terms of security, reasonable access for the disabled public, ability to upgrade the building's systems and infrastructure, or the adequacy of the work environment with respect to noise pollution.
It is undisputed that the Main Office does not have an elevator serving the second floor, or that it is not possible to install an elevator to provide access for the physically disabled. There is no dispute that the building's handrails, fixtures, door hardware and restrooms do not comply with ADA requirements, and that the existing interior ramps do not comply with the building code. It is also undisputed that, because the set back from Santa Clara Street does not allow for a ramp at the main entrance to the building, disabled customers and employees must use the rear entrance.
DRA appears to minimize the inadequacies of the Main Office in this regard. For example, during cross-examination of SJWC concerning its ability to bring the Main Office into compliance with the ADA, DRA asked the witness to confirm his understanding that the ADA requirements were grandfathered with respect to the Main Office. In support of its position that renovating the Main Office is less costly than purchasing the Replacement Facility, DRA then cites SJWC's testimony concerning the grandfathered status of Main Office with respect to compliance with ADA requirements.
While DRA does not take an explicit position regarding grandfathered ADA requirements, raising this issue in hearings and citing SJWC's testimony on this issue in its Opening Brief clearly suggests that the current inadequate access for the disabled is acceptable, and SJWC need do nothing further to accommodate persons with physical disabilities.
The inadequate access for the physically disabled to the Main Office cannot be rectified, given limitations to modifications that can be made to the Main Office as a designated historic landmark. If the Commission required SJWC to retain the Main Office, persons with mobility challenges would permanently be required to use the rear entrance to gain access to the building, would never have access to the second floor, and could not use the restrooms. In essence, physically disabled members of the public will be denied reasonable access to SJWC's customer service center, if SJWC were required to retain the Main Office.
Public utilities are required to furnish and maintain such adequate, efficient, just, and reasonable service, instrumentalities, equipment, and facilities52, and no public utility shall, as to rates, charges, service, facilities, or in any other respect, make or grant any preference or advantage to any corporation or person or subject any corporation or person to any prejudice or disadvantage.53 Government Code § 11135, which § 453(b) incorporates by reference, prohibits discrimination against persons with physical disabilities.54
Requiring disabled persons to use the rear entrance, ring a bell for access and wait for an escort is inconvenient and possibly demeaning to the disabled public, and unreasonably disadvantages them. It is disruptive to employees' normal work activities to serve as impromptu escorts, and is not an efficient use of utility personnel. Persons with disabilities should have adequate access to SJWC offices to pay bills and conduct other business with the utility, but the Main Office cannot be sufficiently remodeled to provide adequate access for persons with limited mobility.
We have previously taken actions to improve access for disabled persons. For example, D.07-03-044, finding the memorandum of understanding (MOU) between Pacific Gas and Electric Company (PG&E) and the Disability Rights Advocates to be reasonable and in the pubic interest, approved the MOU requiring PG&E to, among other things, maintain and improve access to its local offices and pay stations by disabled persons.
In adopting budgets, policies and program parameters for the Low Income Energy Efficiency and California Alternate Rate for Energy programs of PG&E, Southern California Edison Company, Southern California Gas Company (SoCalGas) and San Diego Gas & Electric Company (SDG&E) for 2007 and 2008, D.06-12-038 directed PG&E to develop a plan for working with local governments to establish Cool Centers and required that those Cool Centers be accessible to disabled customers.55
Thus, we have encouraged or required those under our jurisdiction to comply with the ADA or take other measures to ensure reasonable access for the disabled,56 and it is reasonable for SJWC to provide adequate access for physically disabled persons to its offices and customer service center.
Our recognition of the Main Office's inadequate access for the disabled is not intended to establish new standards for access to public utility facilities by disabled persons. Rather, we acknowledge here the importance of access for disabled persons with respect to utilities' obligation, pursuant to § 451, to furnish and maintain adequate facilities necessary to promote the safety, health, comfort, and convenience of patrons, employees, and the public.
Security at the Main Office is inadequate. Because the rear entrance should remain locked for security purposes, requiring disabled persons to use the rear entrance undermines SJWC's ability to ensure the security of the facility. Other modern security improvements such as card reader access locks or separation between customer and employee areas will be difficult or impossible to make because of limitations on the kinds of modifications that can be made to the Main Office as a designated historic landmark.
As a result, the Main Office cannot be adequately modified to ensure the safety of SJWC's employees and customers. Requiring SJWC to provide access for the public at another existing SJWC facility will not enhance the security of employees who remain at the Main Office.
Finally, requiring SJWC to retain the Main Office will negatively affect operational efficiency. Requiring SJWC to implement the Base Case unreasonably constrains SJWC's ability to situate its staff, and adequate facilities are required to provide the flexibility to locate and physically arrange staff to achieve optimal operational efficiency.
We have previously authorized utilities to sell office facilities when those facilities were determined to be inadequate. For example, D.87-09-076 authorized SoCalGas to sell its headquarters property. In doing so, the Commission found that SoCalGas' headquarters facilities, although necessary and useful in the conduct of its public utility duties, were located in buildings which were considered antiquated, inefficient, costly to maintain and operate, and required earthquake modification and asbestos removal if continued in use.57 D.87-09-076 also found that, because of space shortages in its current headquarters facilities, SoCalGas had to house some staff functions and operations in detached outlying facilities, causing inefficiencies and poor communications.58
Subsequently, in reviewing the reasonableness of SoCalGas' sale of the Flower Street headquarters buildings, D.90-04-028 found that SoCalGas' decision to move was reasonable because of the physical, functional, and technological obsolescence of the aging buildings and the unsuitability of the buildings for long-term use.59
As noted above, A.04-08-017 considered Cal Water's application for authority to replace its operations center and customer center in the Chico District, but found that, except for wells and related equipment, those centers were no longer necessary or useful utility property and their sale did not require approval pursuant to § 851.60 Cal Water's old Chico operations center was found to contain excessive mold and moisture due to water intrusion, and attempts to repair the leaks were unsuccessful. The building was also unable to accommodate all employees, requiring meetings to be held at alternate locations. Cal Water's old Chico customer center lacked adequate office space, and contained obsolete wiring.
Although SJWC's Main Office continues to be necessary and useful utility property, the Main Office is not an adequate or efficient facility because it cannot be remodeled sufficiently to provide reasonable access for disabled persons, a secure and adequate work environment, or the flexibility to collocate departmental staff. Therefore, it is reasonable for SJWC to sell the Main Office.
DRA contends that the Main Office can be satisfactorily remodeled, that SJWC failed to prove the Main Office suffers from noise pollution, that the Base Case addresses all ADA requirements and security concerns, and provides the same operational flexibility as the alternatives.61 DRA's comments re-argue issues previously addressed, and inappropriately introduce evidence not in the record.62
37 SJWC Reply Brief, p. 9.
38 TR 191: 1-9 and SJWC Opening Brief, p. 9.
39 Exh. DRA-1, pp. 10-11. DRA Opening Brief, pp. 1-2, 13, 15-16, 18-19.
40 Exh. DRA-1, pp. 7-8. DRA Opening Brief, p. 14.
41 DRA Opening Brief, pp. 16-18.
42 Exh. SJWC-3, p. 2.
43 Exh. SJWC-3, p. 6.
44 . SJWC Opening Brief, p. 4.
45 Exh. SJWC-3, pp. 3-5. SJWC Opening Brief, p. 10.
46 Exh. SJWC-1, Yoo, p. 5. SJWC Opening Brief, pp. 5-7, 10.
47 Exh. SJWC-1, Yoo, p. 5-6. SJWC Opening Brief, pp. 9-10.
48 Exh. SJWC-1, Yoo, pp. 5-6. SJWC Opening Brief, pp. 10-11.
49 SJWC Reply Brief, pp. 2-5.
50 Exh. DRA-1, p. 3. DRA Opening Brief, Footnote 3, p. 4.
51 Section 451 state, in part, "...Every public utility shall furnish and maintain such adequate, efficient, just, and reasonable service, instrumentalities, equipment, and facilities...as are necessary to promote the safety, health, comfort, and convenience of its patrons, employees, and the public..."
52 See § 451.
53 See § 453.
54 Government Code § 11135 states, in part:
(a) No person in the State of California shall, on the basis of race, national origin, ethnic group identification, religion, age, sex, sexual orientation, color, or disability, be unlawfully denied full and equal access to the benefits of, or be unlawfully subjected to discrimination under, any program or activity that is conducted, operated, or administered by the state or by any state agency, is funded directly by the state, or receives any financial assistance from the state...
(b) With respect to discrimination on the basis of disability, programs and activities subject to subdivision (a) shall meet the protections and prohibitions contained in Section 202 of the Americans with Disabilities Act of 1990 (42 U.S.C. Sec. 12132), and the federal rules and regulations adopted in implementation thereof, except that if the laws of this state prescribe stronger protections and prohibitions, the programs and activities subject to subdivision (a) shall be subject to the stronger protections and prohibitions.
(c) (1) As used in this section, "disability" means any mental or physical disability, as defined in Section 12926...
55 Mimeo., p. 33.
56 For example, D.92-12-065 requires all passenger stage and charter-party carriers to comply with the ADA.
57 See D.87-09-076, FOF 2.
58 See D.87-09-076, FOF 3.
59 See D.90-04-028, as modified by D.90-11-031, FOF 11 (38 CPUC 2d, 200).
60 See D.05-12-002.
61 Opening Comments of DRA on Proposed Decision of ALJ Smith, pp. 2-7.
62 See Opening Comments of DRA on Proposed Decision of ALJ Smith, pp. 3-5 in connection with footnotes 8-10, 14.
