Okaloosa County BOCC — October 16, 2012 — Action Item Printout

BOARD OF COUNTY COMMISSIONERS AGENDA REQUEST DATE: November 20, 2012 TO: Honorable Chairman and Members of the Board FROM: Jeff Littrell SUBJECT: Niceville Reclaimed Water System - Amendment to Interlocal Agreement DEPARTMENT: Water and Sewer BCC DISTRICT: 1, 3, and 5 STATEMENT OF ISSUE: OCWS requests BCC approval to have the Chairman execute an Amendment to the Interlocal Agreement and Sale Agreement (along with associated attachments) with the City of Niceville for the transfer of reclaimed water facilities. BACKGROUND: The City of Niceville and Okaloosa County currently own a reclaimed water system in Niceville, where ownership and maintenance is shared 50/50. It has not always been that way. When the reclaimed water system was first constructed, the County was the sole owner. At that point in time in 1994, OCWS owned 36.37% of the NVOC Regional Sewer Board/Plant, but only 20% of the disposal capacity. Because of the lacking disposal capacity, FDEP informed Okaloosa County that they would impose a moratorium on building permits in Bluewater Bay if the County did not acquire additional effluent disposal capacity. That was the reason the reclaimed water system was originally implemented. To expand the disposal capacity, OCWS entered into an agreement with Rocky Bayou Country Club (RBCC) in 1994 to supply reclaimed water to the golf course. Because the County had a need in 1994, OCWS pays RBCC monthly to take reclaim water (per the agreement). The agreement with RBCC was re- negotiated in 2000, but still remains in affect until May 2014, and OCWS is still paying RBCC monthly to take reclaimed water. Other areas in Niceville began to develop that desired reclaimed water. In the early 2000s, agreements were executed and construction projects occurred that made the following possible: 1) reclaimed water supply to Swift Creek Subdivision, 2) reclaimed water supply to Rocky Bayou Christian School, 3) reclaimed water supply to an Eglin AFB golf course, and 4) OCWS and the City of Niceville became 50/50 partners. Since then, the system infrastructure and demand has grown as other developments have connected, such as Swift Creek Plantation and the Wal Mart Commercial Area. These developments are located in the City of Niceville water and sewer service area, and not all were authorized by Okaloosa County to provide reclaimed water service. As a result of the system growth and demand, the system experiences capacity problems on summer days. In May 2012, an interlocal agreement was executed by the parties of the NVOC Regional Sewer Board (the facility that produces reclaim water). By this agreement, Okaloosa County is no longer an owner in the NVOC Regional Sewer Board, and all OCWS flows will be diverted from the NVOC plant to the Arbennie Pritchett Water Reclamation Facility. When the diversion project is completed, an average of close to 800,000 gallons per day (GPD) of wastewater will no longer be available to produce reclaimed water. As the system already has capacity issues listed above, removing approximately 800,000 GPD has grave implications for the future sustainability of the system. Furthermore, after this interlocal agreement was executed, with strong recommendations from Eglin Environmental, the decision was made to keep the NVOC sprayfield instead of constructing RIBs. This means that at least 1 MGD will go to the sprayfield to keep the grass alive. Under the RIBs scenario, most of the flow would have been available to send to the reclaimed water system. This will further exacerbate the shortfall between capacity and demand. Now that OCWS is no longer an owner in the NVOC Regional Sewer Board, we do not have the need for the reclaim water system, that we had in 1994 when it was established. The attached agreement with the City of Niceville transfers our 50% ownership of the reclaimed water system to the City. If the County does not transfer its ownership share of the reclaimed system, the diversion of OCWS flow will result in a situation where the County owns half of the system assets but will not be contributing any flow to the reclaimed system. All of the flow going into the reclaimed system will be coming from the Cities of Niceville and Valparaiso. The County has received an excellent return on investment of the expenditures, both capital and O&M, required to construct, expand, and maintain the system. Now that Okaloosa County is only a customer of the NVOC Regional Sewer board, the reclaimed water system has no value as an effluent disposal system and only represents a financial liability to the County. Since the reclaim water system does not and cannot produce sufficient revenue to pay for the expenses and given the capacity issues, the monetary value of the system is zero. Furthermore, the local and state market ("going rate") for reclaimed water doesn't allow for revenue to exceed the expenses. There are other challenges to the current arrangement. With both the City and the County splitting ownership 50%, it is very difficult to resolve philosophical differences, such as metering and billing. The proposed Sale Agreement is also best for the public/customers, all of which are City water and sewer customers, not County. To summarize the benefit to the County of this proposed agreement, by the County conveying our 50% ownership of the system to the City, it will save OCWS an estimated $650,000 total over the next 10 years (approximately $65,000/year). Annual expenses that will no longer be needed include the following: repair & maintenance, groundwater sampling, power costs (for high horsepower pumps), line locates, CIP projects, and payments to RBCC. The reclaimed water agreement with RBCC expires in May 2014. Future agreements with the golf course may be problematic, due to the unusual financial stipulations in the existing agreement and the shortfall between capacity and demand when the OCWS flow is diverted. The proposed agreement was unanimously approved by the Niceville City Council on November 13, 2012. OPTIONS: Approve or deny. RECOMMENDATIONS: OCWS recommends the BCC authorize the Chairman to execute the attached Amendment to the Interlocal Agreement and Sale Agreement (along with associated attachments) with the City of Niceville for the transfer of reclaimed water facilities. RECOMMENDED BY: APPROVED BY: James D. Curry, County Administrator