HomeMy WebLinkAbout2005-07-21 - MinutesMayor Dan Coody
City Attomey Kit Williams
City Clerk Sondra Smith
City Council Water & Sewer Meeting Minutes
July 21, 2005
Page 1 of 8
Member Aldermen
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AR KA N SA 5
City of Fayetteville Arkansas
City Council Water & Sewer Committee
Meeting Minutes
July 21, 2005
Ward 1 Position 1 - Robert Reynolds
Ward 2 Position 1 - Kyle B. Cook
Ward 3 Position 2 — Robert Ferrell
Ward 4 Position 2 - Lioneld Jordan
A meeting of the Fayetteville City Council Water & Sewer Committee was held on July 21, 2005
at 5:30 p.m. in Room 326 of the City Administration Building located at 113 West Mountain
Street, Fayetteville, Arkansas.
MEMBERS PRESENT: Robert Reynolds, Kyle Cook, Robert Ferrell, Lioneld Jordan
Staff Present: Steve Davis, Gary Dumas, David Jurgens, Tim Conklin
David Jurgens talked to the committee about the positive aspects of moving forward with the
WSIP project with a project team rather than with an individual.
Alderman Cook asked if all the information is now out as far as staff knows.
David Jurgens said some things will always be discovered as we move along and piece
everything together. Some of it will be good and some won't, but it is what it is and we will
move forward, with consensus of the team.
Gary Dumas responded to a question regarding Ron Petrie's role on the team by saying that he
will be in a consulting capacity for right now.
Alderman Reynolds expressed his concerns about staff burnout with the staff absorbing all the
extra responsibilities of this project. He said the Committee needs to know if extra staff needs to
be hired.
Steve Davis said when contractors are actually out there working, staff will be asking for some
positions to oversee that work, such as on-site inspectors for plan review (QAQC) to make sure
things are going as the plans were drawn and clerks to keep detailed minutes of project meetings
so everyone stays fully informed of the progress on the job site and the project as a whole.
Before the Master Facility Plan was done in 1997, Cyrus Young asked for an independent
verification that the Noland Plant was constructed according to the plans and specifications that
were developed for that plant. What we want to do this time is to have that verification occur as
we are building the plant.
Alderman Cook said he was comfortable with that. He feels it is very important we look out for
the interests of the City during the project.
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July 21, 2005
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David Jurgens explained that because these projects are very large and we want to track them as
a whole for the entire project and by each component, a financial analyst working for Water &
Wastewater has already been brought into the project to evaluate and process the payments and
develop a system for tracking all costs as they occur.
Steve Davis talked about the "global" WSIP project, which has at least three funding
mechanisms — a $25 million bond issue that has already been paid off, a second $35 million bond
issue and a $65 million Arkansas Soil & Water loan. The Soil & Water Loan has specific
requirements that prevent some things on the west side from being paid for with their monies.
The billing from the contractor on this project will have to be split between what is appropriate
and what is not appropriate for this loan. This type of accounting will require more financial
staff when the project is further along.
Alderman Reynolds asked for examples of what the Arkansas Soil and Water will pay for.
Steve Davis explained that Soil & Water won't pay for Broyles Road and they won't buy any
land except for the land the plant physically sits on. As far as he knows, it will pay for all bricks
& mortar (construction).
Gary Dumas told the committee that an item for the next meeting will probably be seeking
recommendations for in-house staffing, rather than of hiring outside project management which
would be several times more expensive.
Alderman Cook agreed that he would feel more comfortable with that also.
Steve Davis said that there is $1.5 million in the program budget and the only number found in
the file is a little over $3 million for a consultant. He thinks staff can do it in-house for quite a
lot less. It is important to watch the pennies, which will eventually add up.
In response to a question from Alderman Ferrell, Gary Dumas explained that the Project Team
created by the Mayor will consist of himself, Steve Davis, David Jurgens, Tim Conklin, Ron
Petrie and Susan Thomas.
Alderman Ferrell asked about what procedure will be used to communicate between the team
and the Water & Sewer Committee.
Gary Dumas assured Alderman Ferrell that the team will meet with the Committee as often as
they would like to meet and will try to get information to the Committee in whatever timeframe
is desired by the Committee.
Alderman Ferrell asked for a commitment from staff that the Water & Sewer Committee will
hear about any issue or change that might occur before they read about it in the paper.
Gary Dumas said that is certainly the goal. There may be times the media gets ahead of staff,
but that should be the exception rather than the rule.
David Jurgens said that staff is just beginning to try to establish methods whereby information
can be shared more efficiently so the committee has access to it more immediately. The website
was lost with Burns & McDonnell and now staff is looking at ways to replace that function.
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July 21, 2005
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City of Elkins' request for a sewer rate reduction.
Steve Davis said meeting with representatives from Elkins began as part of the City of
Fayetteville's effort to enter a contract with the new operations and rate consultant. Under the
existing contract with Elkins, they have a right to participate in that selection committee. The
City of Farmington was also included in that committee. The City of Greenland was invited.
The City of Goshen participated as well as the University of Arkansas and the Chamber of
Commerce, representing the industrial community. A firm called HDR/EES was selected by this
group. During some of the conversations, the representative from Elkins requested that HDR
look at the 2003 rate study and examine certain issues related to an inflow and infiltration
calculation that Elkins did not understand. They were also concerned about the assets that Black
and Veatch used to assess to Elkins for the rate calculation method. Steve has had several
meetings with representations from Elkins and the consultant from HDR did review the Black &
Veatch rate study to see if they could determine the methodology for I & I assessment used by
B&V. B&V sent more detailed calculations which were handed over to the consultant. When
Steve spoke to the consultant last week about this, he said he still didn't fully understand the
calculations B&V used. The last request made by Elkins was that the sales tax contribution
made by the residents of Elkins which is used to pay off the bonds on the $125 million bond
issue somehow be recognized in their rate structure. Our consultant said there were several
legitimate issues that could be examined if the City wanted to spend money at this time to do a
detailed rate study. But they did not recommend doing a detailed rate study at this time because
of the significant uncertainty on the total value of the WSIP at this point and the fact that we
don't know what the operating costs will be after it is built. They recommended instead that we
enter into some sort of negotiation that allocates some rate relief to Elkins based on their meter
and the fact that their meter is now measuring I & I within Elkins and that they are paying for
every gallon of that. They also suggested the City might make a policy decision to recognize
sales tax contribution by residents of Elkins to the total WSIP. They felt that would be
acceptable under the AWWA rate making standards. It is not a requirement under those
standards but it is acceptable. This would mean looking at the sales taxes paid inside
Fayetteville by Elkins residents as a contribution to the Fayetteville sewer system. Assets
contributed are not used for rate of return calculation purposes but they are used for depreciation
purposes. Steve asked Mayor Ladymon of Elkins if he would like to address the committee.
Mayor Ladymon repeated what Steve had said about issues Elkins has with I & I, with the flow
meter and with the allocation of the sales tax. Most services are not available in Elkins so
residents come to Fayetteville for those services. Elkins residents feel they should get credit for
those sales tax dollars. Mayor Ladymon said Elkins citizens need immediate rate relief and he
feels that the data compiled to this point shows a need for that relief. Using some of
Fayetteville's numbers, the City of Elkins has paid a lot more than was projected in the rate
study. The City of Elkins would like to formally present to the City of Fayetteville a request for
rate relief. He presented an amendment, along with some backup data to the Committee stating
this request.
Steve Davis stated that, if it is the desire of this Committee, it would be appropriate for the
Committee to name a negotiating team to meet with the City of Elkins to work through some of
these questions. He recommended that a negotiating team might consist of one alderman from
the committee and at least one staff member.
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Alderman Cook asked for input from the Committee regarding this issue.
Alderman Ferrell said he is all for moving forward to try to work out something with Elkins.
He said he is not opposed to setting up a negotiating team as Steve recommended. But he is
concerned that somewhere in the language used in any agreement it should state that it cannot
have the affect of raising the rates of Fayetteville citizens. That would be unacceptable.
Alderman Reynolds said he had met with the mayor and Council members before and through
this process he has felt we needed to be working with the City of Elkins more closely and work
out a little better package for them. As the money man, he feels Steve should be on the
negotiating team.
Alderman Cook said he would be happy to serve on the negotiating team as well.
Mayor Ladymon said he agrees with the direction being taken but asked that it be done
expediently. The current rates have been in place for almost a year and Elkins needs relief.
Alderman Cook asked if the line study being done in Elkins had been completed.
Mayor Ladymon said the study has been completed. The pipeline analysis has been completed.
The camera work done showed no major problems. There are some minor problems that can be
fixed in-house. The final report is not yet available but they should have it soon.
Steve Davis said that another issue that must be negotiated is the water contract with Elkins,
which has expired.
Alderman Reynolds asked Mayor Ladymon if Elkins is still working on an impact fee for future
growth.
Mayor Ladymon said there is a special committee on impact fees and they are moving forward
on that.
Alderman Reynolds said that Fayetteville citizens are paying impact fees and he would expect
Elkins to get on board to help themselves in that way also.
The Committee concurred that they want to move forward with negotiations with Elkins to
resolve the issues discussed.
Steve Davis, Alderman Cook and Mayor Ladymon set a date for next Wednesday for their first
meeting to discuss the issues with Elkins.
Memo of Understanding concerning ownership of the Farmington Sewer System
Alderman Cook asked for any comments or questions regarding the Memo of Understanding
concerning this issue.
Alderman Reynolds asked for information regarding the system, what condition it is in and
what it is going to cost Fayetteville if they take it over.
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Steve Davis said that the number discussed in mediation according to the pipeline analysis
(which was done by the same group that did the Elkins study), was that the combined Phase 1
and Phase 2 fixes to the sewer system would cost $710,000. We have already $145,000 of that so
we would have about $450,000 to $500,000 to spend. Of the $710,000, $160,000 was estimated
for what we got for $145,000.
Alderman Reynolds asked if the City would get the rights-of-way with all the lines.
David Jurgens said if the City gets ownership of the system, they would get the rights-of-way.
They go with the system.
Alderman Cook asked if this would affect Fayetteville rate payers.
Steve Davis said that as we go through this process, we will have to run those numbers and that
will be defined.
Alderman Jordan arrived at the meeting and was briefly filled in on the discussions.
Alderman Cook questioned whether support by the Committee of the Memorandum of
Understanding would start the negotiating process.
Steve Davis said that the mayors of the two cities have reached what they thought was a good
memorandum of understanding. Now the two cities have to get in the same room together to
negotiate. From what he reads, he understands that the negotiating team from Farmington wants
a detailed contract. He is not sure that that is the best option.
Alderman Cook asked if he is correct that the options are either to move forward and write a
new contract based on the Memo of Understanding or move forward with the contract that we
have in place and work that out.
Steve Davis agreed that those are the options. Because of the issues with Fayetteville's
discharge permit and the FONSI, which contain specific wording regarding the Illinois River
watershed, Fayetteville is basically in a position where we can either negotiate a deal to assume
ownership of the Farmington Sewer System, or in order for us to comply with the terms of our
federal permit, we would have to construct other facilities that would completely bypass
Farmington. The second is not a really good option since we will be looking long-term at many
lift stations dotting the landscape. We would then have to be concerned about the capacity of
each one of those little lift stations as it comes up the chain until it gets to the treatment plant.
However, if we own the system, we could potentially look long range and develop solutions that
would mitigate some of those bottlenecks that little lift stations would create.
Alderman Ferrell said that other communities obviously have taken on issues similar to this. He
said he would think it would be a good idea to look at some of their contracts and see how it has
been done.
Steve Davis said that HDR was instrumental in merging the North Little Rock and Little Rock
wastewater systems into the Central Arkansas water utility, and one of their major tasks in their
consultation with us is to give us those standard agreements.
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David Jurgens explained that from an NPDES and regulatory side, Farmington is what is called
a "satellite system". They don't have a permit so any problems are reported under our permit.
There is still uncertainty at the federal and state regulatory level as to the best way to handle
satellite systems. For example, if there is an overflow in the
Farmington system, Fayetteville reports it under its permit. So we have some
liability/responsibility for that even though we are only responsible for operations and
maintenance, not capital improvements. So even though we don't own the system, by virtue of
the permit, we have some of the vulnerabilities and liabilities anyway.
Alderman Ferrell said that he would expect there to be some language that if it can be proven
beyond a shadow of a doubt that a problem that results in a complaint on our permit, that there
should be some sort of structure built in that any satellite system would pay for it, not the citizens
of Fayetteville or the central provider.
David Jurgens explained that one of the problems with the sewer system is that it is almost
totally "shadow" — what is maintenance, what is capital — it is very hard to resolve
responsibilities. It has not been resolved at the federal level because it is so difficult.
Steve Davis said that we would have to address those issues as part of the negotiation.
David Jurgens said that it is very likely that ADEQ and the Health Department will want to look
at any contract reached between the two cities.
Alderman Reynolds said that is evident that Elkins doesn't have a moratorium or an impact fee
and it is evident that although Farmington has a moratorium, there is still significant
development doing on there. Under this contract, are we going to ask them to put into affect an
impact fee with the money coming to the City of Fayetteville?
Steve Davis explained that in the case of Farmington, we get the water impact fee now on
anything that hooks up to our water system in Farmington. If we take over the Farmington Sewer
System, we would collect our impact fee on every hookup that occurs in Farmington.
Alderman Reynolds asked what we would do in the event of a water shortage when we are
responsible for Elkins, Greenland and our own residents.
Steve Davis said that under existing conditions, there would be no difference in how
Farmington, Greenland or Fayetteville residents are treated. We don't have a contract with
Greenland or Farmington because we own that system and have owned it since 1951 or 52.
Decisions on shutting down car washes, for example, due to water shortage would not be a call
made by the cities, but by the water utility. The mayors of those cities might declare an
emergency, but the water utility would implement it.
Alderman Jordan said the thing that concerns him about the Farmington situation is if they are
able to get the moratorium lifted under what we presently have and they start growing by leaps
and bounds, it would come out of Fayetteville's sewer capacity. But if we take over their system
then we are allowed to charge impact fees. If the moratorium is lifted under the present contract,
we cannot charge impact fees.
Steve Davis agreed that that is correct.
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Alderman Jordan said though at first he could not understand why Fayetteville would take on
Farmington's sewer problems, this was a deciding factor for him.
David Jurgens explained that currently virtually all of Farmington's sewer flows to one lift
station. But there are subdivisions going in now where Phase 1 is in Farmington and Phase 2 is
in Fayetteville. The ability to separate the two city's wastewater is blurring and becoming more
challenging. That separation is contributing more to the potential of leapfrog lift systems.
Merging the two systems would simplify those issues.
Alderman Cook questioned whether the Committee wishes to move forward with this Memo of
Understanding.
Alderman Reynolds moved that this be forwarded to the full City Council for debate and to
write and settle the contract and solve this problem with the City of Farmington.
The Committee voted and approved the motion unanimously.
Steve Davis said that Kit Williams had already added this to the Council agenda. He also said
he will be having a conversation with the administrator of Arkansas Soil & Water regarding the
loan closing. The existing loan has an Oct. 2008 deadline for drawing all the money down. With
the uncertainties right now on the west plant, we may need to postpone that loan closing. It
would require amending the existing ordinance with a different loan closing date. In response to
a question from Alderman Reynolds, he said that the rates are locked in.
Alderman Ferrell suggested that the resolution regarding the Farmington issue include wording
to the effect that the rate payers in Fayetteville would be held harmless for any upward charge
for water or sewer in dealing with the satellite communities.
Alderman Jordan said he feels if we take over the water and sewer system for Farmington, we
need to be able to control the growth. Is that possible? He clarified his question to state that if
they start to really grow to the point that it begins to put a strain on the infrastructure that we
have, do we have anything in place to control that growth?
Steve Davis answered that at this point, no. That would be a point that the Council might want to
have in the negotiating resolution. He understands that Farmington may be concerned about
Fayetteville wanting to control their growth. Fayetteville's concern is Farmington having
unbridled growth and taking up all the capacity that is available. Somewhere during the
negotiations between the two cities, some common ground will have to be found so each
community feels that they have growth potential. This would have to be on paper.
Alderman Ferrell made a motion that the Water & Sewer Committee recommend to Kit
Williams that wording be included in any agreement that the Fayetteville citizens be held
harmless to any rate increases as a result of providing sewer services to the other communities.
Steve Davis asked that since we already own the water system, this be focused in on the sewer
rates and not water rates.
The Committee voted and approved the motion unanimously.
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Rate Development Policy.
Steve Davis talked about the background of this issue and how the need for discussion came
about. He distributed some information regarding possible financial policies for rate
development for consideration.
The Committee talked about current processes used by the City. Steve reviewed the information
presented to the Committee and explained some of the financial implications. He said the City
will use cost allocation methodology that is generally accepted by either the American
Waterworks Association, Water Environment Federation or some other recognized policy group.
We are required by bond documents to do an operations study every three years. This
independent view of our rate structure and operations study is a check and balance for the staff,
preventing the building up of too much deferred maintenance or too much cash.
Steve Davis explained rate -of -return calculation. He talked about the difference in Fayetteville
rates compared to rates for Elkins, Farmington, Greenland and Johnson and how that comes back
to what is included in the rate -of -return calculation.
Alderman Cook asked how sales tax from residents in each jurisdiction can be determined.
Steve Davis said there is no document or study available to tell us, predictably, what that number
is. The UA, over a two or three month time period, surveyed shoppers and got zip codes in
various locations around the city. Based on their report, they determined percentages of
shoppers from outlying areas. These results could be added to other standard reports on per
capita income or disposable income and you could then interpolate some contributions. The
alternate plan as outlined in the information distributed is a much easier calculation.
It was generally agreed that the Committee was most comfortable with the alternate calculation
method.
The Committee continued to review and discuss the information about the possible financial
policies presented for consideration.
Alderman Reynolds asked if Steve could fill in the dollars and percentages so the Committee
could move forward with this.
Steve Davis said he would get some comparisons drawn up and some numbers put together.
There was some general discussion about the bids for the Westside Treatment Plant and the
expectations for future bids.
The next meeting of the Water & Sewer Committee was set for Monday, August 1, 2005.
Approved Date
Kyle Cook, Chairman
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