HomeMy WebLinkAboutKIA Pt_Had_Policy_Background_DR_REV 070909Port Hadlock Wastewater System
Policy Background
Draft for Sewer Advisory Group Discussion – 7/9/09
1. Overview
Owner of system – Jefferson County will be the owner and responsible for any debt associated with Pt. Hadlock wastewater system.
Management Options – While Jefferson County will be the owner, they may choose to operate the system in-house or contract for services:
Sewer utility – If operating the system in-house, a Sewer Utility will be established to organize the operations, administration and financing of the system. This will be an enterprise
fund in the County’s budget. As an enterprise fund, it is expected to be self-supporting. Thus rates, fees, charges and contributions should generate sufficient revenue to operate
the system and repay the necessary debt. The revenue will be deposited into the Sewer Utility for current sewer use and held for reserves or future capital. The rate-setting authority
will be with Jefferson County.
Contract for Services – The County may also choose to contract for services with other providers. This can be in a number of forms including: full service, maintenance and operations
of treatment and/or collection system, billing and collection, etc.
Debt responsibility – The debt incurred for the wastewater system is intended to be repaid by the properties benefiting or served. The debt is not intended to be a general obligation
of the County.
New system – The Wastewater Utility will be a new system that does not currently have a revenue stream or customers. This means that, in the beginning, some of the funding methods may
be different from typical utility methods that have a customer base already in place. This is particularly important in the borrowing and repayment of financing and loans.
Capital funding vs. monthly rates - Typical sewer systems have monthly rates that customers pay to fund maintenance, operations, debt, capital and reserves. Because this is a new system
and the intent is to grow the system and customers over the years, care should be taken to ensure that the first customers are not overly burdened and subsidize the later customers.
The capital funding assumes that new connections will be paying their share of the capital costs upon connection to the system. Once connected, all customers will pay a monthly rate
for operations and maintenance, administration, billing and collection, and reserves. At some point, the monthly rates will include replacement or depreciation and may also include
debt repayment.
Billing System – The billing and collection of payments are important responsibilities of operating a wastewater utility. The County may not have a billing system available for use
other than the property tax billing system that will not work for sewer service. Opportunities will be investigated for efficient use of the ratepayers funds and may include contracting
with a private billing agent, the PUD or other. The ultimate rate structure should be developed with a billing system in mind to ensure the development of efficient and effective systems
that work well together in providing customers with fair and balanced service.
Cost allocation – The allocation of costs is necessary when constructing the funding mechanisms to ensure that customers are being treated equitably. Depending on the funding mechanism,
there may be cost allocations issues to be discussed, including connection charges, ULID assessments, how far back to recapture the County’s contribution, spreading costs in the early
years to ensure that first customers do not pay more than is reasonable, etc.
ULID process – The Utility Local Improvement District (also Local Improvement District) ULID process is a mechanism to allow the property owners to finance their fair share of the capital
cost instead of paying up front at the time of connection. The ULID process is strictly defined by law and must be followed. There are benefits and costs to the system and it has
historically been used to help communities finance collection systems.
2. General Philosophies & Principles
Simple vs. complex
Balance equity and cost/ease of administration
Long-term outlook - stability of revenue and rates
Rate principles:
Earlier you raise rates leads to less overall rate increase needs
Annual adjustment vs. every few years
Build reasonable reserves
Ease of implementation and clarity to users
3. Policy Topics
Connection –
When/where required – The development standards are included in JCC Chapter 18.18, Irondale and Port Hadlock UGA Development Regulation Implementation. This specifies that all new development
or major modifications are required to connect to the sewer system as a condition of development. If the sewer is not currently available (within 200 feet of the closest property line),
the property owner can be approved for an interim on-site system until up to 1 year after the sewer system is available and must sign an agreement to not protest a future local improvement
district (LID) or other pro rata sharing of costs to extend the public sewer. Typically, public health regulations specify what can happen in a current home or business with a non-functioning
septic system. What is not yet specified is when will existing homes and businesses be required to connect to the public sewer? Possibilities include within 30 or so days (immediately),
within 1 year (same as interim system requirement), when septic system fails, or other.
Prohibitions/restrictions on use – these are technical elements of the sewer code (cannot put x down the sewer without separate permission). Choices include whether to exclude stormwater
or roof drains, allow discharge from mobile tanks and requiring grease traps for facilities that have food preparation.
Pre-treatment – specified by DOE and a technical element of the sewer code. This may also include the requirement of grease traps and the proper maintenance of such privately-owned
and installed elements.
Standards & construction specs – technical element of the sewer code, will likely be determined as design of the system progresses, for example minimum pipe size, type of pipe to be
used, minimum slope or grade, etc.
Permits and inspection – The County will issue a sewer permit for all connections and all physical connections to be inspected.
Side sewer policy – must specify where the public and private responsibility changes. Options include: at edge of right-of-way, at stub/tap to sewer main, including the stub itself.
There are reasons to go either way – check PUD, Pt Townsend.
Grinder pumps may be required on certain properties due to the location of their structure and plumbing fixtures that there is no way that sewage will flow by gravity to the collection
system, therefore there is a need for a grinder pump that can grind and then pump the solids along with the water to the collection system. The County may be required by DOE to own
and maintain any grinder pumps required to serve properties that would have to pump up to the sewer system. Grinder pumps will be included in the standards section, including which
model to be used, connection detail, location requirements on property, etc..
Decommissioning of private systems - After connecting to public sewer, old septic tanks should be properly decommissioned by disconnecting, pumping and removal/crush/filling existing
tank. Requirement should be addressed, either in sewer code or as a reference to standards in Public Health. Carnation coordinated this to ensure it was done properly and certificates
were issued by the health dept, cost was included in the connection fee.
Cost Allocation –
The financial plan has assigned costs as general ($23.0 M), local ($9.6 M) or on-site ($3.2M), for a total of $35.7 M.
General costs include treatment plant elements, influent pump station and force main to the treatment plant. The financial plan also allocated 10% of the collection system cost for
those pipe lines greater than 8-inches in diameter. This is referred to as oversizing of pipes.
The local costs include the collection lines up to 8” in diameter, manholes and local lift or pump stations with the associated force mains.
On-site costs are assumed to be paid for by the property owner. This includes installing the side sewer, installation of a grinder pump and electrical controls if necessary, disconnecting
and abandoning the septic tank.
It may be possible to include some on-site costs in the amounts borrowed but the use of such funds for private property could only be a loan and would have to follow strict public bidding
practices and would have to be repaid.
Financing plan calls for general costs to be paid by connection charges and local costs to be funded through ULID assessments.
Extension of system –
Treatment plant capacity, including the addition of membranes, will be expanded in general accordance with the Facility Plan and as necessary depending on the actual
growth in connections and the resulting flow. This is expected to require additional borrowing or may be funded with reserves from connection charges.
The collection system will be extended in general accordance with the Facility Plan. This will be accomplished in one of several ways: developer extension, latecomers’ agreement, ULID.
The exact details are not cast in stone. The system plan may be modified in the future, but this would be done through regular updates and amendments to the Facility Plan.
Local Improvement District (LID or ULID) is expected to be the primary method of extending the collection system. ULID’s will be formed and the properties within the ULID will share
the costs of the public local improvements in an assessment that can be paid annually over 10-20 years.
Another method of extension is the Developer Extension (D/E) method. This is useful when a property wants to develop or connect to the system but waiting for a ULID is not practical
or preferred. With a Developer Extension, the developer signs a D/E agreement with the County to install the sewer extension according to approved plans and specs to the farthest edge
of his/her property. The extension is funded by the developer and when complete, the extension is deeded over to the County. This often includes the use of a latecomer agreement as
specified below.
Latecomers’ Agreement is related to the Developer Extension and is a tool that allows the developer to be reimbursed by any other properties that connect into the extension funded by
the developer within the time period specified by law.
It is also possible for the sewer utility to extend the system by paying for extensions through existing customers, but it is not an anticipated approach for the 20-years. Placing the
financial burden on the existing customers for expansions is not a likely approach.
ULID Process – This process sets up a legal district with the intention that it will provide a benefit to the participants within the district. For Port Hadlock Sewer this benefit would
likely be building phases of the sewer collection system that would serve a specific area of the overall sewer system. The district can borrow money with the intent of paying back
the borrowed money, with interest, over time requiring those who benefit from the improvements to pay.
Process specified by law
Assessment cannot exceed the special benefit
Assessments filed against the property and are paid annually
Assessments by individuals can be pre-paid without interest
Connection Charges, Permit fees, Development Review
The financial plan presented in the Facility Plan calculated the average cost per Equivalent Residential Unit (ERU) over the 20-year period.
Connection charges are paid upon connection to the system. The financial plan assumes that the general costs would be included in the connection charge.
Permit fees are typically charged to financially support the sewer permit process.
Developer Extension – it is typical for jurisdictions to charge a fee for signing the developer extension agreement that includes copies of the construction standards, and
directly charge for staff time, design approval, right-of-way permits and inspections related to the developer extension. A deposit is often collected upfront to help ensure that the
county is paid for its services.
Development review – some jurisdictions charge for development review. The policy for the sewer utility should be consistent with development in the rest of the county.
Rate structure –
Classes of customers – the sewer ordinance must identify and define the classes of sewer customers, such as residential, commercial, multi-family, etc. All customers within a class
must be treated equally in setting sewer rates.
Definition of ERU’s – The equivalent residential unit (ERU) is a method of setting all sewer users on an equal basis. The facility plan used 4,000 gallons per ERU (60 gallons per person
per day, with 2.2 people per dwelling unit).
Flat rate per month – One method of charging for sewer is a flat rate per month regardless of volume. This is more common among residential sewer rates on a per dwelling unit basis.
Because commercial usage can vary widely from a small office to a restaurant, there is typically some method of differentiating charges for commercial.
Average Winter Water Use (AWWA) – For those seeking to introduce some measure of variation among residential users, a common method is to use average winter water use (AWWA). Each year,
the utility will calculate the average usage per month for residential customers from November – February and use this to bill for sewer throughout the year.
Base and/or volume charges – One common rate structure includes base and volume charges. The base is a fixed amount (per ERU or dwelling unit, by meter size, etc.) per month. The volume
charges would be per volume of usage, typically measured by water usage because sewer is not metered. Meters are set to measure in either cubic feet or gallons (100 cubic feet = 748
gallons). The volume rate should be in the same units as the meters providing the information – per 100 cubic feet or per 100 gallons.
Variations by strength – It is common among commercial users to make additional charges that are related to the strength of the waste sent to the treatment plant. This method seeks
to spread the costs over the customer base at a higher level of equity by recognizing that a restaurant may have higher strength waste than a small office with a toilet and sink. Thus
the actual cost of treatment might be higher for the restaurant. In order to charge based on strength, a consistent method of determining the strength must be used.
Rate discounts – Some utilities consider low income senior, disabled, or other disadvantaged groups and how to make rates more feasible for their situation. The utility would enact
some discount after the applicant provides proof that they meet the criteria. In order to offer discounts to some customers, the others will need to make up the difference for the
reduction in revenue from the discounts.
Administrative
Billing and payment procedures
Delinquencies – lien process, fees and charges, as well as some amount of ability to managers to arrange a payment plan
Associated fees – new accounts, account transfer to new ownership, duplicate billing of owner/tenant (owner is responsible, some allow tenant to also be billed)
Appeal process, hearings