Democracy on the Front Lines
City Administrator's Blog
Walter Denton
May 14, 2009
At the May 4 City Council meeting, a sewer rate increase ordinance was approved on First Reading. The second and final vote on the ordinance is scheduled for the May 18 City Council meeting. A public informational meeting was held on April 23, and since then we have received several questions from residents and aldermen regarding why the increase is needed and how it will be administered.
The following is some information that has been gathered from staff discussions and responses to inquiries about the proposed wastewater rate increases.
How will the sewer rate increase benefit O’Fallon residents? The rate increase will allow the City to qualify for stimulus funding that will save $5 million over 20 years at today’s dollars. There is a unique opportunity through the federal economic stimulus plan to fund sewer projects with 0% interest loans. Qualification for stimulus funding under IEPA-guidance requires public utilities to show that they have a sufficient rate structure to support payback of the loan. Therefore, O’Fallon needs to increase its rates to ensure payback of the loans.
The rate increase will fund essential repairs to the sanitary sewer system and will allow for the establishment of a reserve fund for future capital needs. It will allow the fund to end the year in the black versus red as it did this past year. It will fund a sewer lateral program to address collapsed laterals, laterals needing replacement due to age and reconnection to repaired sewer mains, and address costly groundwater infiltration to be addressed in faulty laterals. And finally, it will dedicate an amount to the sewer ejector program, an unfunded mandate by the City Council some 10 years ago.
How will the proposed rates affect rate payers? The average household uses around 5,000 gallons per month, so the average increase is 34%.
How much additional funding will be generated? $1.1M.
How will it be spent? Based on additional funding in first full-year:
Does the tiered User Rate Fee attempt to have those who contribute more sewage to the system pay more for service? Yes. Those who use the service more do contribute to more stress on the system than the smaller users, and as a result do cause additional maintenance, repair, planning, engineering, and construction considerations and effort to service beyond the usage charge might cover. It attempts to surcharge to small extent the larger users of the service.
Will there be at a later date a water rate increase, and if so, will it also include a Water Lateral replacement program? No water rate increase other than that made as part of the annual CPI adjustment is contemplated at this time.
How would the sewer lateral program work? The program is designed to assist property owners with the cost of repairing or replacing their sewer lateral line. These costs normally range anywhere from $1,500 to $10,000 depending on the depth and length of the sewer lateral line and the significance of the repair or replacement required. The program is supported by a portion of the user fee that is collected as part of the monthly sewer bill. This is a break-even fund, with no tax or other fund support, and payments from the fund may be reduced due to the fund balance available. Homes and buildings not connected to the City of O’Fallon Sanitary Sewer District’s sewer mains are not covered by the program.
The assistance program as proposed covers 60% of the cost of the point repair, lateral replacement, or lining as needed, and the property owner is responsible for 40%. However, the maximum amount the City will pay is limited to $6,000. For example, if the total repair cost was $3,000, the City would pay $1,800 and the property owner would be responsible for $1,200 plus the cost of the initial cabling of the line and videotaping of a break or collapse of the sewer lateral line if such a problem exists. If the total repair cost was $12,000, the City would only pay $6,000 and the property owner would be responsible for the remaining $6,000 plus the cost of the initial cabling of the line. The City will reimburse the owner for the cost of videotaping, if it documents that the repair is needed. Payment to the contractor for the work accomplished
will be made by the property owner as the contract for repair will be between the property owner and the contractor. The City will provide the property owner reimbursement for the repairs via a two-party check when all requirements of the program are satisfied.
How will the lateral program benefit residents in the newer sections of the city? The unnecessary treatment of stormwater at the Wastewater Treatment Plant is expensive and this cost is paid by all rate payers. Last year, the newer residential sections of the City paid nearly $500,000 in their rates to treat inflow & infiltration (I&I) at the Wastewater Treatment Plant. Eliminating I&I in older sections of town will reduce the cost of the sewer system for everyone.
In addition, residents in newer homes are not immune to sewer lateral problems. Some of the more costly lateral problems encountered over the past few years involved homes less than 10 years old. Sewer laterals are subject to hidden conditions due to burial and other underground utility activities. The soils in this area are dramatically affected by the movement of surface and ground water.
How long would it take after the start of increased rate collection before funding could be applied to a sewer lateral repair? We estimate it would take at least a three months to get the information out about the program and a formal process for it in place before taking applications.
What is meant by an enhanced ejector pump program? Currently, the ejector pump program pays for 50% of the first $6,000 of the cost of an ejector pump installation. The $3,000 limitation has been effect for some time, and based on recent installations, the average cost has risen from the time the limit was set. Staff proposes that the sewer ejector pump program have the same limits for funding that the proposed sewer lateral program has. The new program would cover 60% of the cost, and the property owner would be responsible for 40%. However, the maximum amount the City would pay is limited to $6,000. For example, if the total installation cost was $6,000, the City would pay $3,600 and the property owner would be responsible for $2,400. If the total installation cost was $12,000, the City would
only pay $6,000 and the property owner would be responsible for the remaining $6,000.
Are all sewer users, residential and commercial, being proposed to pay for the lateral and ejector pump programs? Yes. The ejector pump program is currently funded in that manner.
If commercial properties are paying, are they eligible for lateral replacement? Yes. We recommend that commercial entities should be covered under the assistance program.
If they are eligible, how much do you estimate it would cost to replace a lateral at a large commercial establishment like Sam’s or Wal-Mart? Would they basically “break the bank” for the year? A complete replacement would be expensive. However, it is unlikely that an extremely long lateral would need replacement all at once. The program is meant to be primarily a point repair program. If 10 feet needs repaired, then 10 feet is repaired. For some older homes near the sewer main, it may just make more sense to do the whole lateral while there.
Are residents and businesses on the Caseyville Sanitary Sewer District System eligible for the O’Fallon lateral program? No, only rate payers of the O’Fallon Sanitary Sewer District are covered by the program as proposed.
Are unincorporated property owners covered by the proposed lateral program? Yes, if they are rate payers to the O’Fallon Sanitary Sewer District.
Are Shiloh property owners connected to Shiloh sewer mains that convey sewage to the O’Fallon Wastewater Treatment Plant eligible for the program? No, only rate payers covered by the proposed rate increase ordinance change are eligible.
Regarding the rate increase in general, what happens if we’re unable to get the 0% interest rate stimulus money? If O’Fallon doesn’t get the 0% interest money, then we go after the 2.5% IEPA money that we received for the water towers and pump station. As you might expect, it will cost more: $609,000 per year versus $358,000 for the stimulus package as 25% of that is really a grant. Most likely, we would try to stretch out our capital program at the WWTP from 10 to 15 years to 15 to 20 years. Maybe we only do the headworks in the first couple of years. Of course, we could steal from the other portions of the pie, or stagger in additional non-CPI rate increases. There a lot of considerations down the road that will be affected by the regulators and environmental legislation that is as of yet
unwritten.
What is our track record on sewer rate increases over the past years? In 1996, rates were increased 11% to qualify for the IEPA loan for the Treatment Plant improvements. In 2003, rates were increased 21% to maintain solvency. In 2006, rates were increased 15% to maintain solvency (consultant recommended a 50% increase at that time). In 2006, the CPI adjustment was 4.7%, in 2007 the CPI adjustment was 5.2%, and in 2008, the CPI adjustment was 5.1%. Sewer averaging was put in place in 2006, which cut into wastewater revenues.
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