Fort Walton Beach Council agenda — 10-09-2007 regular agenda — reading text

the City' s ability to " dispose" of the property, a careful analysis of the Utility System' s net revenues must be performed in order to ensure compliance with the ordinance. Specifically, the Ordinance states: ".. . the Consulting Engineer shall that the Net Revenues the certtfj 0/ System will not be materialfy 4ftcted l?Y reason such 0/ sale or dispositiO? l." This analysis is beyond the scope of this report and should be addressed by the City' s Bond Counsel, Financial Advisor, and Consulting Engineers. Combined with this effort, staff would also recommend that the consultant review the proposed interlocal offered the agreement by County to ensure all provisions of the agreement are mutually beneficial to the City. Staff has not solicited quotes for this service; however, the cost for a properly conceived study would surpass the City Manager' s approval authority and could be significant. 3. Unknown Costs Associated with Eliminating Wastewater Treatment Certain costs are inherent if consideration is given to abandoning the City' s WWTP. The City currently enjoys free use of 490- acres of government land licensed from the Department of the Air Force for sewage effluent disposal. The City' s current license agreement ( AFMC- EG- 3- 05- 010) expires November 13, 2010. In the event of abandonment, the license contains a provision for restoration of the premises. Specifically, the City is required to " remove its proper!J... a1td restore the Premises to their original condition without expense to the United States." Staff has not evaluated these costs at this time, but the impacts of this provision could be substantial. 4 Abandoning the City' s trea1ment facility creates another unknown cost. The City owns the 18- acre site where the plant is located and the land is likely not suited for anything other than an industrial or commercial activity. Once the plant is abandoned, the City must dispose of the existing equipment and structures if the property is to be marketed for resale. There is not a market for demolished concrete structures and only a limited market for used equipment. Staff believes there will be very little residual value in what remains, and any revenue drawn from resale will be offset substantially by the cost of demolition. Additionally, the City will need to correct environmental damage to the property, if any, resulting from the operation of the sewage treatment plant over the 27 years that the plant has been in service. In most cases, the cost of cleanup will be proportional to the level of contamination, if any, found on the site. 4. Need to Maintain Existing Sewage Collection System In addition to the WWfP, the City maintains over 100 miles of sewage gravity and force mains, 44 lift stations, and 2 pump stations. This system must be maintained regardless if the City continues to operate a wastewater trea1ment plant. As a result, the City would still need to assess users a monthly charge for wastewater on their utility bilL This fee would cover the operation and maintenance cost, personnel cost, and capital improvement cost for the Sewer Collections Division. The additional cost for wastewater trea1ment would be determined by the City based on the agreement with the County. Based upon the County's current proposal, these costs appear to exceed what is currently charged to the City' s users. Again, this evaluation is beyond the scope of this report and would require an independent evaluation. Note: The budget for the Sewer Collections Division exceeds the annual budget for the Sewer Operations Division. The proposed agreement with the County only addresses sewage treatment As a result, the City would srill need to collect approximately 1/ 2 of its current wastewater rate to fund the Sewer Collections Division. Please refer to the discussion on proposed rates provided earlier in this report.) 5. Need to Maintain Tertiary Treatment Capability for Golf Course Irrigation The County' s WWfP currently in development does not have a tertiary component and will only have the ability to treat wastewater to a secondary standard. The City' s Golf Club relies on treated sewage effluent for irrigation water at their 36- hole facility. Since this is a public- access facility, the water used for irrigation must be treated to a higher standard, commonly referred to as tertiary treatment. The City currently has this capability with its Parkson DynaSand@ effluent sand filtration system. The City would require a provision in the interlocal agreement with the County to maintain tertiary capability for the irrigation needs at the Golf Club. Since the City currently owns this component of the treatment system and it would not be feasible to relocate the equipment and structures to the County site, an arrangement would have to be made to continue to operate this portion of the WWfP. In all likelihood, the County would want to assume ownership of this facility and modify their FDEP operating permit to include a tertiary component. The City could leverage this system to lower the proposed rate for trea1ment to the City, or sell the system to the County for its prorated residual value. Both alternatives would need to be further evaluated by the City' s consulting engineers before determining what option is most beneficial to the City. 6. Similar Environmental Concerns No Matter the Path 5 The City has in place an Industrial Pretreatment Program mandated by the FDEP. If the City abandons its WWfP, this program must remain in place as required through the facility' s current FDEP Operating Permit. The program is administered by a Pretreatment Coordinator and this position will need to remain to monitor the City' s industrial sites and prepare the annual reporting documentation. The City will have to either negotiate for the transfer of this program and position to the County in the agreement, or continue to fund this element of the Sewer Operations Division budget to ensure compliance. The FDEP and the U.S. Environmental Protection Agency ( EPA) require an enonnous amount of monitoring for public wastewater collection and treatment systems. In the event that the WWfP is abandoned in favor of an interlocal agreement with the County, the City must continue to operate a certified laboratory in order to meet testing requirements for drinking water, wastewater, and stonnwater. The facility is staffed by one Laboratory Manager who, along with equipment and supplies, will need to be relocated to either the Water Operations office on First Street or the Utilities Department Administration office on Hollywood Boulevard. The City has an existing Agricultural Use Site in Walton County (Earl King Farms) for disposal of sewage biosolids. If the City elects to transfer its wastewater influent to the County for treatment, the biosolids generated from the proposed County facility will be transferred to a different location for disposal. Staff will research all applicable rules and regulations regarding biosolids disposal to detennine if any remediation requirements exist for abandoned sites. If so, the City could face added costs for site cleanup. 7. Loss of Local Control Any interlocal agreement entered into by the City with the County for wastewater treatment would require the City to establish a premium rate for wastewater treatment since assessments are tied to water use and not actual sewage flow. Again, this would be a " pay- as- you-go" arrangement with the County. In this type of arrangement, the County would bill the City monthly for the metered flow entering the County's treatment facility. During a wet weather month, considerably more flow enters the sewer collection system due to inflow and infiltration 1/ 1) than would be expected during a dry month. This additional flow through 1/ 1 is not metered flow to the customer. Therefore, sufficient revenues would not be collected to cover the full cost of treatment. As a result, the City would negotiate an agreement of a cap on metered flow during weather related events and pay for that treatment at a discounted rate. However, the City would still need to build a cost into our treatment rate to account for this weather-related flow. Currently we are able to absorb these kinds of anomalies and the City does not charge its customers for metered flow to the treatment plant The increased flows to the treatment plant during times of inclement weather do not require additional manpower to process and represent only a minimal increase in cost related to chemical use and utilities. Furthennore, it would be impossible to calculate wet-weather flow increases from the customer since sewer lines are not individually metered for each property. 8. Comparison of Rates An evaluation of the City' s wastewater rate indicates the City compares favorably with other utilities in the region ( see attached table).The average wastewater charge for the 14 utilities evaluated is $ 26. 89 based on an average water consumption of 5, 000 gallons. The City' s rate for an average monthly use of 5, 000 gallons is $ 26. 68, versus the County' s rate of $29.68 for the 6  same volume. This difference in the two calculated bills relates to the City' s allowance for the first 2, 000 gallons in the base rate to customers. The County' s rate structure does not have a minimal flow allowance built in to the base rate. Staff does expect that the City' s gallonage rate will increaseslightly if additional debt is taken on to finance the remainder of the WWTP improvements. What this rate will be is beyond the scope of this report and would be developed by an independent rate consultant prior to issuance of new debt. 9. Combining Operations with the County as a Future Option Given the complexity of developing an interlocal agreement with the County for wastewater treatment, staff would not recommend making any decision at this time without adequate evaluation of the proposed agreement from the County. As with any evaluation of this nature, it will take a considerable amount of time to evaluate the proposal offered to ensure the City' s interests are protected. Any outside evaluation will take several weeks to compile and is a prudent and necessary step given the issues presented in this memorandum. Furthermore, the County' s facility is not yet under construction and will not be operational for another 14- 18 months. Staff would recommend using this period to accurately evaluate the County' s proposal prior to abandoning the City' s WW 11-'renovation project.