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HomeMy WebLinkAbout2007-08-02 - MinutesCity Council Water & Sewer Meeting Minutes August 2, 2007 Page l of 16 Member Aldermen Mayor Dan Coady Ward 1 Position 1 — Adella Gray V10 Ward 2 Position l - Kyle rt Cook CityAttorney Kit Williams � 1 Ward 3 Position 2—Robert Ferrell Ward 4 Position 2 - Lioneld Jordan City Clerk Sondra Smith ARKANSAS City of Fayetteville Arkansas City Council Water & Sewer Committee Meeting Minutes August 2, 2007 A meeting of the Fayetteville City Council Water & Sewer Committee was held on August 2, 2007 at 4:30 p.m. in Room 326 of the City Administration Building located at 113 West Mountain Street, Fayetteville, Arkansas. MEMBERS PRESENT: Alderman Kyle Cook, Chair; Alderwoman Adella Gray; Alderman Lioneld Jordan; Alderman Robert Ferrell STAFF PRESENT: David Jurgens; Gary Dumas Chairman Kyle Cook called the meeting to order; 1. Approve Minutes Alderman Ferrell moved that the minutes of the Water & Sewer Committee meeting held on July 10, 2007 be approved as submitted. Alderman Jordan seconded the motion and it passed unanimously. 2. Beaver Water District Discussion David Jurgens introduced Larry Lloyd and Alan Fortenberry from Beaver Water District and said they were available to answer any questions the Committee might have. Alan Fortenberry voiced his and Mr. Lloyd's appreciation for the opportunity to be at the meeting. He distributed some information to the Committee. He said he would like to make it an annual occurrence for Beaver Water District to appear before this Committee to answer any questions and to improve lines of communication. He said they are proposing a 2 cent for 1000 gallons increase to the rates in fiscal year 2008. Beaver Water's fiscal year starts October 1. He said this 2 cents per 1000 gallons rate increase is part of a five-year plan spreading a rate increase of 11 cents over five years. That information was forwarded on to all four customers of Beaver Water (Springdale, Rogers, Bentonville, & Fayetteville). He said the 11 cent increase is predicated on a financial plan adopted by the Board which looked at the fixed assets and capital improvements as well as the replacement and refurbishment to be done over a 20 year period. He said there are no federal funds for replacement of aging infrastructure so we (along with everyone across the country) are faced with replacing that infrastructure. He said they anticipate that the funding for capital improvements will be 60% by revenue bonds and 40% by reserves. That is why they are building the reserves to offset that expense in order to minimize the rates in 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) accessfayetteville.org City Council Water & Sewer Meeting Minutes August 2, 2007 Page 2 of 16 the future. He said they will go back before the Board on an annual basis for each rate increase. If 2 cents is what is necessary each year, that is what the proposal will be. He said they have proposed 2 cents for the next four years and 3 cents in the fifth year. He said the need will be analyzed each year and the Board will vote on the rate increase each year. Beaver Water started an expansion project in 2001 to address additional capacity, not to change the nature of the treatment. He said the last phase of that project is the refurbishment of the old Joe?? Steele water treatment plant, which is a 40 million gallon a day treatment plant. This is a $26 million job to be completed in the Spring of 2009. It is projected that the average usage in 2010 will be in excess of 100,000,000 gallons a day. Currently BWD has the capacity to provide 100,000,000 gallons per day to customers with a 40 million gallon a day plant and a 60 million gallon a day plant. With the completion of the current project, another 40 million gallons a day will go on line. That is projected to be sufficient until 2020. He said one of things to note is the pumping capacity to Fayetteville. He said they just added a fifth pump to Fayetteville. He said these additions usually happen fairly seamlessly. Through communication with Mr. Jurgens and his staff they determine when the demand justifies the addition of a pump. He said Fayetteville is only limited by the capacity of our two rural water lines and through our master planning efforts, we determine when we will need more line capacity coming into town. In their 1969 Memo of Understanding with the City, Beaver Water committed to keeping our tanks full. Whatever amount of water we need, that is the amount they will provide. He said another item that might be of interest to the City is that BWD is starting right-of-way acquisition for what they call the western corridor. This is a right-of-way anywhere from 75' to 100' wide in which to install a pipeline(s) to get to the west of I540. Historically all customers have come out to the plant with their pipelines. That is the metering point. This western corridor will give customers an alternative point from which to purchase the water. They would put a large diameter pipeline in with a remote pumping facility. This project is for the express purpose of making it easier for their customers to get to the water. He said another item in the packet of materials given to the Committee is information on the BWD Board's position regarding watershed protection. He said there is an effort now beginning to get underway by the Northwest Arkansas Council to go into a two year program of looking at a watershed management plan. He said the Council will soon be executing a contract for this and he encouraged the City to stay up with this and be involved in this effort. He said the City's water source is Beaver Lake and he knows we are concerned about the quality of that water. He closed by saying he wants the aldermen to feel comfortable with using BWD as a resources if they have any questions. He invited the alderman to come out and take a tour of the BWD facility. Alderman Ferrell thanked Mr. Fortenberry for coming to the meeting. He asked if the rate increase will be the same for all BWD customers. Alan Fortenberry said that the rate is the same for all customers. They only have one rate. Alderman Ferrell asked if the other customers are participating in the watershed study costs. Alan Fortenberry said Beaver Water District is participating. He isn't sure whether the other cities are or not. He said the Northwest Arkansas Council is asking for participation and support. He said he is sure someone at each of the cities will be contacted. Alderman Ferrell asked if Mr. Fortenberry has any advice for the Committee in looking ahead with regard to the work on our water and sewer rates. 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) accessfayetteville.org City Council Water & Sewer Meeting Minutes August 2, 2007 Page 3 of 16 Alan Fortenberry said he knows through meeting with different people throughout the United States at professional meetings that entities are moving toward looking at rates on a more regular basis rather than having a big bang after longer periods. Alderman Ferrell asked how often BWD looks at its capital improvement. Alan Fortenberry said they look at this annually as requested by their board. Alderman Cook asked if Beaver Lake has enough water to provide for the growth that is going on in this area. Alan Fortenberry said that is one of the reasons they had a study performed looking at a 50 year period. Normally the window on a master plan is 10 to 20 years but they looked at what the population could be in 50 years. He said he does believe there is enough water in Beaver Lake. He said 80% of the conservation pool is paid for by the Southwestern Power administration. The rest of the conservation pool is taken up by Two Ton, Beaver Water District, Madison County Regional Water District and Carroll/Boone Regional Water District for municipal and industrial water supply. He said they pay annually to the Corps of Engineers. At some point in time it may be necessary to reallocate the percentages but it is Congress who does that. He said that would probably be about a ten year process. Alderman Cook asked if there is any kind of regulatory changes that might affect the Beaver water supply and how it is allocated at any point in the future. Alan Fortenberry said the Federal government deals with the Corps of Engineers in regard to the quantity regulations. He said quality regulations affect BWD all the time and it will impact the cost of our water if the government imposes certain requirements. In regard to quantity, he doesn't anticipate any regulations but he thinks there will be a need to reallocate between the Southwestern Power administration and drinking water. Congress will have to make that decision. Like most things, it will boil down to an economic analysis and it will be very political. With regard to the 50 year study, for our customer base and the proposed projected growth of our customer base we are in good shape. He said people got really worried when the lake was low last year. He said July and August are normally the biggest water production months because people are watering their lawns, etc. He said the Lake dropped four feet each month of July and August in 2005. He said three and one half feet of that drop each month was due to hydroelectric generation. He said a little over three inches was due to evaporation. A little less than three inches was due to the amount of water all the municipal/regional water districts combined (BWD, Two Ton, Carroll/Boone and Madison County water districts) pulled out to deliver to their customers. So the impact these groups have on the lake is a little less than the evaporation rate. Their impact on the lake level is insignificant. Alderman Cook said he is curious about the watershed protection. He asked what sorts of things are being looked at regarding this issue. Alan Fortenberry said Beaver Lake is a multi-purpose lake and the same thing is true about its watershed. He said there are some areas that are more critical than others and some matters that are more critical than other matters. One of the things they are getting deeper into is conservation or repairing easements, such as encouraging the maintaining of a buffer zone before it runs into the creek. They are also getting deeper into public education and public awareness programs. He 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) accessfayetteville.org City Council Water & Sewer Meeting Minutes August 2, 2007 Page 4 of 16 said there are new items and tools coming out all the time with regard to storm water management and they are encouraging those tools In response to a question from Alderman Cook, Alan Fortenberry said the lake being down low for a long time has caused the water quality to be unusual. He said even when it came back up it has been somewhat unusual. Certain loadings are changing and it is making some changes. In the fall of the year when it starts getting cool, the lake turns over and the taste of the water turns earthy. They do get some complaints then. He said it is an organic compound that is given off when certain algae are stressed but it is not harmful. The water quality is fine. At such a point in time that the City tells BWD that from an aesthetic or political standpoint we want something done about it then he will tell us the cost per thousand gallons to do that. David Jurgens said as a follow up, in the CIP and in the water master plan, the City is looking at identifying a corridor in which to buy easement early to get another transmission line to take advantage of the western corridor mentioned by Mr. Fortenberry. He said our pipeline capacity is good but there are two pipelines in one 40 to 50 foot wide easement and one of those pipelines is 40 years old. He said it is prudent to start planning now and identifying the route so that when the time comes that we need that extra pipeline it comes in west of I540, hooks into our 36 inch line up by Van Asche just south of Johnson. The sooner we get that route established and easement purchased, the more money we will save in the long run. That is part of our master planning right now for Fayetteville. 3. WSIP Update David Jurgens said we are continuing to make progress. He said we opened bids on EL -1 and EL -2. The projects had been estimated at about $16.5 million together and they came in just over $4 million under that projection. That money will go back into the contingency for the WSIP. As for progress on the construction projects, we are continuing as scheduled. He said he anticipates water flowing into the plant in May 2008 just like we have always said. The target remains to actually be discharging the first full week of May of that year. If we can't meet that goal, then we will have water going into the plant on the last week of May and start discharging the first week of June. Alderman Cook mentioned the bid openings and said he believes that at some point soon the Committee will need to start discussing the contingency money still in the WSIP. As we approach the end of the project and take all the variables out, we are going to have a good amount sitting there and this Committee needs to have a discussion about how we may want to use that money. David Jurgens said per guidance from a couple of meetings ago, staff has started putting together a list. A 2001 plan defined exactly what we planned to do as a part of the WSIP. But in that plan there were a number of items listed as part of the WSIP that were not first tier items and did not go into the funding package. He has started developing that list. No cost estimates have yet been done on these with current prices. Some of the projects, by the direction of ADEQ rolled automatically into the CIP. So a number of the unfunded projects listed in the CIP are in fact WSIP projects. He will have a preliminary list by the next meeting but he doesn't know how well the prices will be fleshed out at that time. 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) accessfayetteville.org City Council Water & Sewer Meeting Minutes August 2, 2007 Page 5 of 16 Alderman Ferrell asked if some of that could have an impact on rates, referring to some of the deferred projects discussed at the last meeting David Jurgens said we don't want to count the money yet because we're still nine months from plant opening and further than that from all the projects coming in that are being bid. We have another $6 million project to bid. But we can think a lot more about it now than we could two weeks ago. If we do spend some of that money on capital projects that are deferred, it will definitely reduce the unfunded capital that is causing some of the increase in rates in a couple of years. He said this is a prudent time to be making the decisions on what to do though we can't start executing until we are confident where we stand on the completed projects. Alderman Ferrell asked if the slow down of some work will make more companies hungry to bid on some of our projects. Alderman Cook said from his experience there is still a lot of big stuff going on. And there is still a lot of large infrastructure going on across the country. He thinks there could be some affect. David Jurgens said we had sixteen prime contractors pull plans on this job and that is one reason we got such a competitive bid. a. WSIP Farmington Area Work David Jurgens said they are proceeding on this. Easement acquisition is under way. They are still determining the exact location for the lift station. He said several years ago the potential of an Owl -Goose lift station was discussed. In this scenario we would not replace or rebuild the Owl Creek lift station but would relocate the Farmington lift station down at the Owl -Goose confluence and redo the piping. That is the one item that would need to be a quick decision. He said he will have price information on that available soon. That will drive what happens with Farmington. He said this would be the longest term solution but we just need to see what it would cost and whether it is worth the expenditure now. Since we last considered this option we have annexed land out there and that might change things some. He will try to get the preliminary numbers on this out next week before he leaves. Alderman Cook said he believes the annexation and the agreement with Farmington changes the parameter of that discussion. b. WSIP Easement Update David Jurgens said he had no easement update information. Our land agent had a death in the family and has been out of the office so no information was available. C. Subproject EL -1 LS, Mally Wagnon Lift Station and Force Main Replacement Information regarding bidders was distributed in the agenda packet. d. Subproject EL -2 LS, 42" Gravity Line 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) accessfayetteville.org City Council Water & Sewer Meeting Minutes August 2, 2007 Page 6 of 16 David Jurgens said the engineer has researched Rosetta Construction (the low bidder) and has come back with good reports. They used to be part of Jarnagan Construction and are out of Springfield. Mr. Jurgens said he will be on military duty from August 9 through 25. He said he would like to submit both EL -1 and EL -2 as agenda items for the first Council meeting in September. The Committee agreed to this request. e. Wetlands Mitigation Update David Jurgens said Bruce Shackelford from ECO is present. He has been doing our wetlands mitigation, Corp of Engineers permitting and storm water protection. He said we have spent over $85 million on this project and he doesn't believe we've had a single case where DEQ has cited us for a permit violation. That's pretty amazing and a lot of the credit goes to Bruce Shackelford. Bruce Shackelford talked about the wetland mitigation site that was done as a part of the WSIP. He said the effort they have undertaken takes the combined expertise of ecologists and engineers. ECO worked jointly with McGoodwin, Williams and Yates to develop the wetlands immediately north of the Westside wastewater plant. He showed slides taken out at the mitigation site. He said we are looking at the possibility of expanding it to the west because we have had such great success with this site and there is such a large area out there. He showed an aerial photo taken about 12 to 15 years ago, showing a more rural area. He said this area could potentially be "Central Park" in Fayetteville as the City has grown around it. He said they have been calling the site "Woolsey Wet Prairie" because the old Woolsey home place is out there as well as a cemetery with stones for Samuel and Matilda Woolsey who settled the farm in 1830. He thought it would be kind of nice to name the area after them. When they came here in 1830 there were many tall grass prairies in this part of Arkansas. There were originally about 2 million acres of tall grass prairies that went from the Texas coast up to Manitoba. There are only about 2000 acres of those prairies left. He said there was a large tall grass prairie extending from Fayetteville out towards Prairie Grove and Lincoln. There was an estimated 100,000 acres of tall grass prairie in this part of the state. But there was a big push in the late 1800's to raise wheat crops and that pretty much devastated the prairies. He said through the Corps of Engineers and our 404 permit for the impacts of altering wetlands for the WSIP we needed 80.8 credits. With the mitigation that we've done we're now looking to end up with 110 credits. He spoke to the Corps and asked if the City can cash out the extra credits for future projects. They agreed to this. He said at the site they have removed the cattle and built low elevation earthen berms to enhance the hydrology. They made it into a kind of terraced configuration so it isn't six feet deep at one end and bone dry at the other end. He said the berms are very simple, very low elevation, using on- site dirt that Brasfield and Gorrie is removing from the Westside plant site. After decades of overgrazing and overuse, the site was very degraded. He showed slides after they built the berms and said it had tremendously enhanced the habitat. Originally they had specifications to do seeding because we wanted more native plants in there and the site was extremely degraded. In the surveys done in 2001 and 2005 we had less than 50 species of plants there. The cattle were removed in May 2006 and by July of that year the berm construction was completed. By August there were 166 species of mostly native plants there. In May 2007 they found 265 species. He said the contract to seed has been cancelled, saving about $125,000. He said you never know what is out there in the seed bed. There are native seeds that can lay dormant for 50 years and then when you restore the proper environmental conditions, they can come back. He continued to show slides taken at the site and pointed out several plants, some fairly rare. He said they have 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) accessfayetteville.org City Council Water & Sewer Meeting Minutes August 2, 2007 Page 7 of 16 found seven plants that have never been found in Washington County until they started coming back at this site. He said with the restoration of the plant life, the animal life has also come back, including many birds and deer. He pointed out the existing mitigation site in a slide and asked why not continue on with a good thing. It has been such an excellent site with minimal effort. It lends itself to the City having a mitigation bank. In the future we will have a need for mitigation credits. Right now is the most cost effective time to build a mitigation bank. He said he has talked to the Corps of Engineers about it and shown them the site. They said it is a great site and said they need us to develop a prospectus and submit it to them. It will just indicate how we will do the hydrological modifications, about how many credits we think we can generate and what kind of implementation scheduled we have. In that, for the City of Fayetteville, we also need to include what the construction and design costs will be. The City should review the prospectus to make sure it is congruent with City policies then the Corps will review it. The next step is to take it to the multi -agency wetland planning team. This is a team put together to meet the Arkansas Wetlands strategies developed by the Governor's Office. Mr. Shackelford will also follow up with a site visit with the wetland planning team so they are on board with it. He said he thinks there can be some misconceptions about a mitigation bank. There are several different types of mitigation banks. You can have a private mitigation bank where you create a bank and sell it for so many dollars per credit. You can have public commercial banks or combinations of any sort — all of which he said were defined in the handout the Committee received. He said he thinks what would be the best thing for the City of Fayetteville is a single client bank where you generate credits for your own use. In years to come those credits can be cashed out for projects the City needs to do which will alter wetlands. Right now nationwide there are only 66 single client banks, five of those are in Arkansas. The Highway Department has already jumped on board with this strategy because they know in future years they will have highway projects that impact wetlands. There are no municipally owned single client banks in Arkansas. If the City chooses this alternative, we will be the first. Alderman Ferrell asked if Mr. Shackelford had any idea why there are no municipally owned mitigation banks in Arkansas. Bruce Shackelford said he really doesn't know. Maybe no one has ever taken the concept to them. David Jurgens said we wouldn't be discussing it either if it hadn't been for having been presented with this opportunity. We hadn't even considered it up until six months ago. Then things came together. Bruce Shackelford talked about the cost effectiveness of the idea. He said we have a huge pile of dirt at the Westside wastewater treatment plant, we have Brasfield & Gorrie and all their equipment and all the land. Looking to the future, if you need credits you can spend 2008 dollars to generate credits that could be cashed out in 2015 when the cost will probably be greater, especially if we don't have a contractor out there and we have to pay mobilization charges for one to come to the site. There has been some geotech work done on the material out there so we know we have suitable material; Brasfield and Gorrie is very experienced at building the berms the way we want them, and based on the success we've seen, we have a proven design strategy. He said he talked to Tom Markham of Brasfield & Gorrie about trying to duplicate the earthen berms we have now. He said it would cost about $115,000 to do the dirt work, not including the dirt. He said we might not have enough dirt. To build the existing wetlands took about 28,000 yards. So we are looking at coordinating with Crowder to use some of the dirt from the Broyles 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) accessfayetteville.org City Council Water & Sewer Meeting Minutes August 2, 2007 Page 8 of 16 Road construction. We have all the things you have to have for a mitigation site, the financial assurance and contingency plans, the hydrological model, etc. so we don't have to start from scratch. We can just move over to the other acreage and plug those things in. He would anticipate that the design and construction costs to essentially create a mirror image of the wetlands that we have now would be significantly less. He discussed the benefits of the City having the claim to be the first city -owned mitigation bank. It's the best use of the land because there are wetlands out there anyway and if you do anything else with the land you're going to have to generate some wetland mitigation somewhere. We would also be looking at restoring a very rare resource, a great habitat for wildlife in the middle of town and it lends itself to tremendous public education and recreation opportunities. It provides benefits for watershed protection and is a great demonstration project for a city building a wastewater plant. It will generate public support in meeting some of the goals the City has as far as preserving a network of natural areas. Because of his personal interest in this project, Mr. Shackelford said he would like to work on his own time at no charge to help put together the Woolsey Wet Prairie foundation to pay for things like kiosks and a bird observation tower, etc. on the site. He talked about going to large corporations to develop corporate sponsorship to help fund the maintenance of the mitigation bank. He said he appreciates the opportunity to bring this idea to the Committee. Alderman Ferrell asked how many more acres this would add to the existing wetlands. Bruce Shackelford said we have 43 acres in the mitigation site but with the gas line going through it, we actually only have 28 acres. If we scoot it over, we could get anywhere from 15 to 30 acres to add to what we already have. David Jurgens said the gas line area will still be accessible for the public to wander through, but the gas company has vegetation controls so we won't have any trees. The entire area would be probably around 70 acres total whereas the wetlands piece would be closer to 40 acres. Mr. Jurgens added that all the work Mr. Shackelford has done on this piece has been on a voluntary basis. He believes in what he is proposing. He said at the last meeting there was a discussion about getting authorization to expend some funds to do a more detailed cost analysis for doing the preliminary evaluation and developing the prospectus. He would like to get that authorization to go ahead with that. Mr. Shackelford had estimated that to cost around $10,000. Bruce Shackelford said this would include running through all the traps with the agencies, developing the conceptual design and the prospectus that goes to the multi -agency wetland planning team. Within that we will have a better defined design and construction cost. David Jurgens said that in addition to evaluating grants that could help us pay for this, he would like to get authorization to go ahead and develop that prospectus (not to exceed $10,000). Alderman Ferrell said he thinks this is a great idea but wanted to know if there would be any other use for this land. Bruce Shackelford said there are wetlands there that will require mitigation. So we would have to go to the Corps of Engineers and get a jurisdictional determination to see if it is isolated wetlands (not regulated) or if it is jurisdictional wetlands. If we do anything to those wetlands, we have to do something to generate credits. He said one of the task items in this preliminary evaluation would be to get with the Corps to see if they consider these to be jurisdictional 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) accessfayetteville.org City Council Water & Sewer Meeting Minutes August 2, 2007 Page 9 of 16 wetlands that would necessitate mitigation if you do any activity on that land. If they come back and say they are not jurisdictional wetlands, that leaves it open to do whatever we want to do with the land. David Jurgens said this would help with the trails system. There are jurisdictional wetlands along some of the trail corridors because we are going adjacent to the creeks. This would give the City the asset of not having to build a wetlands again in the future for a long time. He added that the wastewater utility would want to sell the credits to the other City organizations because it is a different fund issue. Alderman Ferrell said he understands that if this doesn't qualify as jurisdictional wetlands, then we have an option of deciding to take another course. The other issue is we are going to be required in the future to do some mitigation. He asked if we have anything in reserve to use for mitigation. David Jurgens said as far as he knows, we have nothing. The Committee agreed to give Mr. Jurgens authorization to move forward with this preliminary study. L Contract Legal Review — West Plant Construction Contract David Jurgens said the selection process is underway. The selection committee will meet at the end of August. g. WSIP Construction Schedule and Cost Update David Jurgens said the rainbow sheet was updated as of yesterday (August 1). The major changes are the EL -1 and EL -2 bids. The most exciting part is the "Subtotal Construction and Purchases" which is now up to $129.6 million (money either bid or awarded). Estimated construction cost of future work is now at $12 million. Our contract contingency for the top portion is $11.8 million. The project total for the Fayetteville area remains the same at $178,595,000. We never know what we might run into in the next year but we've got a lot of work done, a lot of work under contract and we haven't hit any speed bumps that have affected that number for about two years. Alderman Jordan asked if we have any idea yet what we can or cannot use the contingency money for. David Jurgens said we do have some ideas. He said in the full scope master plan we identified some east side sewer lines that will eventually need to be increased in capacity. He gave as examples the line that runs along Crossover Road and the one that runs west of I540, over by Cato Springs. One of the things very specifically identified was having a second fine screen at each plant. Right now we are putting in one fine screen and it is probably the only thing for which we don't have a parallel equal quality beside it. We are building the holes in the ground and the structure around it to put the second one in but we opted not to purchase the second screen at this time. 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) accessfayetteville.org City Council Water & Sewer Meeting Minutes August 2, 2007 Page 10 of 16 In response to a question from Alderman Cook, David Jurgens said these are projects that would meet the definition of the WSIP that would be legal within the bond definitions Alderwoman Gray asked if it is possible to replace old lines. David Jurgens said it would have to be the interceptors — the specific lines that were identified in the master plan. Some of those would be replaced. 4. Sanitary Sewer Rehabilitation Project Update a. Basins 1-5,18 & 19 Sewer Rehab David Jurgens said TG Excavating is now working on Doc Murdocks. That should be done in a few weeks. b. Farmington Area David Jurgens said TG Excavating will move to this area after completing the Doc Murdocks job. They should be starting work toward the end of August in Farmington. We're looking at October or November for completion of all the Farmington area rehab. 5. Water and Sewer Rate Study Schedule David Jurgens said he has several pieces of information to distribute. He said in going through all the information that was published last Thursday, the team found one error. Because of finding that error, HDR did another thorough review and staff has also looked at it in great detail. He handed out a letter from HDR that defines what was found. The bottom line is that the Farmington rate increase for wastewater only does not raise as much as was anticipated and it is their recommendation that all other rates remain the same. Mr. Jurgens said there was a cost component of total suspended solids for the Noland Wastewater plant that was attributed to Farmington. It was quite simply a mistake. Alderman Ferrell asked if the error was in the data provided by the City or if it was in HDR's extrapolation. David Jurgens said that information block was correct (at zero) at some time in the past but somewhere in making data entry, a number was put in there. It was not information that was from the City to them that was incorrect. Somewhere on their end there was a typing mistake and a number was put in that block that shouldn't have been there. They promised that they will not bill us for any hours that it took to correct that mistake or the time it took for the extra team to do the QAQC on the rest of the rate study in the last three days since the mistake was identified. The extra review gives us a higher confidence factor that there isn't any other mistake in there. The other impact of this is that per the agreement there is no restriction on Farmington only tying in at one point in the wastewater system because they are bearing part of the cost of the interceptors for Fayetteville. Alderman Cook asked if staff or Steve Davis have discussed this with Farmington 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) accessfayetteville.org City Council Water & Sewer Meeting Minutes August 2, 2007 Page 11 of 16 Steve Davis said Farmington is agreeable to the 10% adjustment because the 10% cost comes with access into other interceptors David Jurgens said staff is not asking for a decision tonight. In response to a question from Alderman Cook, David Jurgens said he has the updated technical backup available and can make copies for the aldermen. Alderman Cook said he would like to ask some questions on the technical background. He wondered if David could answer them or if Tom Gould would need to answer them. David Jurgens said Paul Becker is the lead on most of the financial pieces of this but Mr. Jurgens will answer what he can. Alderman Jordan said he has a few questions. He said he can ask the questions and staff can have an answer at the next Water and Sewer Committee meeting. He said he would like to know what it would take per 1000 gallons to do a flat rate. He said he would like to see the price comparison of what it would cost for a flat rate across the board from residential to industrial, regardless of volume. He also said, instead of percentages he would like to see a dollar amount on the increases. David Jurgens said a dollar amount is in the details of the study. Alderman Jordan said he would like to see how much subsidy is coming from the residential to the other entities. He also asked if there is a list of the deferred capital projects in the material. David Jurgens said it is in the CIP that we are updating right now. Alderman Jordan said what he would like to see is what we are deferring until this all plays out. He said he would like to get a little more detail on the issue of citizens inside the City limits paying cost of service but the recommendation that the outside communities not pay cost of service. David Jurgens said we are doing cost of service with a rate of return for outside communities such as Farmington and that is what is required by contract. Alderman Jordan said he was thinking Alderman Ferrell once brought something forward about this... Alderman Ferrell said it was a provision that rates for water & sewer to any outside community could not result in a rate increase to the citizens of Fayetteville. David Jurgens said he believes that by contract the outside communities are paying for their cost of service plus a rate of return. They are paying what it costs us to provide the service plus that rate of return, which meets that ordinance. Alderman Jordan said the aldermen have to be able to explain to their constituents why we are charging our citizens inside the City limits more than what we are charging outside cities. 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) accessfayetteville.org City Council Water & Sewer Meeting Minutes August 2, 2007 Page 12 of 16 David Jurgens said the increase is more but not what we are charging. Alderman Jordan said he is having a little trouble with the idea of going to a straight rate system instead of cost of service. David Jurgens said the full analysis is based on cost of service. Essentially the staff and HDR's recommendation follows the most current policy that has been established (by the Council). They figured the increase across the board because that is consistent with the policy to date. If there is a policy decision to change, then that would be the policy we would be looking at in the next sixty days. However, their recommendation followed exactly the policy in place right now. Alderman Jordan said he thought in the future we are talking about changing it over. David Jurgens said that is a decision that will have to be made — cost of service or not. He said he has some information to hand out to answer some of the questions of the past. He said staff has figured an average utility bill that includes water, wastewater and solid waste for 2007, 2008 and 2009 with all known and projected increases for all three. He also has that information for the top 20 users. Alderman Jordan asked if we could make the assumption that residential does pay for itself. David Jurgens said it is more than an assumption. Based off cost of service, residential does pay for itself. Alderman Jordan asked if residential is paying for itself, why are we raising the rates. David Jurgens said we are raising the rates because we need increased revenue in order to do business. Gary Dumas said we need it for the capital projects that are not going to be funded if we don't raise the rates. David Jurgens said it is also for the 11 cents that Beaver Water District is going to be raising our rates and to cover the price of the fuel that the meter readers use to read the meters. Alderman Jordan asked if we are saying that if we don't raise the rates, residential will not pay for itself in the future. Alderman Cook said the system will require additional revenue to complete the capital projects and to make up for the increases for Beaver Water District, inflation, O & M and all that stuff. The system itself will certainly need an increase. How it is allocated across customer classes is a decision we will make. Gary Dumas said that is a very good answer. Alderman Ferrell added that a consideration would also be over what period of time we raise the rates. He asked if it was a fair to consider that it is not set in stone how we raise the rates as long as they cover our costs for that period of time. 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) accessfayetteville.org City Council Water & Sewer Meeting Minutes August 2, 2007 Page 13 of 16 David Jurgens said for 2008 expenses we have a 14% shortfall in funds for water. Gary Dumas said that includes funding the capital projects that have been identified as necessary. Alderman Ferrell asked if there is an amount of money that the enterprise fund pays the City for management of the assets. He also asked whether that goes into the general fund, and if so, what for. David Jurgens said there is an amount of money in each annual budget called cost allocation. Each program pays that to the general fund. The calculation is based off the cost of running city business. For example, Water & Sewer interviews applicants but does not do the background checks, etc. for new hires. The City general fund provides the HR services. Gary Dumas said the "Application of Funds" section of the material distributed shows the cost allocation of the director, billing & collections, meter operators, etc. It is identified under each of the sub programs under water. Alderman Ferrell asked if all the money for each department goes back into the general fund and is it earmarked for anything. Gary Dumas said it does go into the general fund. It is not earmarked for anything. It goes back in to pay for the internal services for that division, such as finance, human resources, accounting, etc. All enterprise funds pay a cost allocation. Alderman Cook asked how the projects on the water & sewer side were selected and prioritized. David Jurgens said those projects came directly from the 2006 CIP. All those projects are identified needs but not all of them have to be done by 2010. Over the years we have done critical water infrastructure improvements but we have not done some others that are also pretty important. Those are the ones on the list. Also on the list are the projected or potential water and sewer relocations relating to highway or street widenings. Also on the list are the frequent breakers. Alderman Ferrell asked if they should assume that the CIP and the monthly rates will continue to ascend from 2010 to 2015 at the present rate. David Jurgens said one of the questions that has been raised is do we want to do the CPI type adjustment each year to avoid the big adjustments. He said in regard to matching inflation, the answer to Alderman Ferrell's question is yes. It is hard to continue to operate a utility when the dollars become less valuable every year. As far as the CIP, some of those projects would continue to be deferred until some of the street widenings occur. Some other projects would be added to the list. Alderman Ferrell clarified that he isn't talking about just rates going up from 2010 to 2015 for inflation. He asked if they will continue to ascend at the rates they have from now until 2010, both CIP and monthly service charge rates. 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) accessfayetteville.org City Council Water & Sewer Meeting Minutes August 2, 2007 Page 14 of 16 David Jurgens said the 14% catches us up with the inflation from ten years ago when we had our last significant rate increase for water Alderman Cook said to some degree it will continue to increase. He said outside of inflation, you're going to have increased O & M costs and so forth and projects will come on line that we didn't anticipate. Alderman Ferrell asked to be provided with what our CIP was for water and sewer in 2003, 2004 and 2005. David Jurgens said he can provide that. He said he would rather cover a longer period of time because what they typically do is bank the money for a year or so and spend it on larger contracts. Alderman Ferrell said the reason he thought this would be fair is that he was reading from some material Susan Thomas produced before the election which said there hadn't been any significant CIP done in sewer since 1997. David Jurgens said other than rehabilitation, which is just replacing and fixing existing lines, that is a correct statement. Alderman Ferrell asked if the figure of $2,900,000 in the HDR summary from last meeting for Summary of Sewer Revenue Requirements, for Capital Projects Funded from Rates in 2010 is in addition to sales tax and bond proceeds. David Jurgens said it is in addition to sales tax and independent of the WSIP bonds. Alderman Cook suggested setting up a meeting next week when Paul Becker is back in town and available to answer financial questions. Then a meeting could be set up after David Jurgens returns when both he and Paul are here. It might be necessary to bring Tom Gould back for that meeting. David Jurgens brought the Committee's attention to the information in the sample bill distributed. He said the bill represents from the year 2006 the actual averages for water and sewer and it includes all the cost components that a resident sees on their full bill. It includes taxes and solid waste (including the projected CPI increases for solid waste). This also reflects the 8%, the 6% and the 19.8% increases. In answer to a question from Alderman Jordan, David Jurgens said you cannot add the three numbers together. The 8% and the 6% are on the water piece only (1000 gallon and fixed rate) and the 19.8% is on the sewer piece only. It is not nearly as much as 34% on the whole thing. It is not anything close to that. Alderman Jordan said he understands. What he is saying is that it is 14% on the water and 20% on the sewer by 2009. He asked if the fixed prices, such as solid waste and recycling remain the same. David Jurgens said solid waste will go up per the resolution passed a couple of years ago for the CPI increase. That is reflected in the sample bill. He said the numbers are also roughly reflected 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) accessfayetteville.org City Council Water & Sewer Meeting Minutes August 2, 2007 Page 15 of 16 in the top 20 users list. As a caveat on the top 20 users, he asked that the Committee recognize that the water increase and the sewer increase apply to all components of the water bill. So it is both the per 1000 gallon portion and the fixed meter fee portion. The information on some of the users who have lots of meters is estimated by using information from one meter. Some of the users are on one meter and those numbers are precise. Alderman Ferrell asked if the amount of water the big users use has an affect on the dilution of what is put through the pipes in pretreatment. David Jurgens said the water these users put in the pipes has an affect on our treatment because of the strength of the BOD and the total suspended solids. He said Pinnacle Foods many years ago opted to spend several million dollars to build essentially a wastewater treatment facility on site and they operate that every day. The reason they do that is that we have limits (300 parts per million) of BOD and total suspended solids and they pre -treat their water before they discharge it to us to meet those limits. It is very uncommon for them to not meet those limits. He said every dollar they spend on pretreatment saves the City money. Alderman Cook asked why the rate revenues for water for industrial customers is a flat projection across all the years in the revised packet. David Jurgens said he doesn't know the answer for sure. He would say the primary reason is that the demand is very constant from the industrial users. The volume that they use is the same every day. Alderman Cook said when Mr. Gould made his presentation he mentioned that we might look at alternative ways of charging rates to try to encourage conservation. He said he is a little frustrated by the fact that the more water industrial customers use, the cheaper it gets. That doesn't seem to promote conservation in any way. David Jurgens said the rate structure for the industrial customers isn't designed to encourage conservation. The flip side is, the check they write for thousands of dollars each month might encourage conservation. They have every financial reason to conserve because they are spending a lot of money. Alderman Cook said that can be said of every customer class. Alderman Jordan said Alderman Cook brings up a good point. We talk about becoming a sustainable city and yet we reward some folks for the more water they use and then raise the rates on folks that use less. He mentioned in some places in California they have certain programs where if an industrial group can conserve a certain amount of water, then they get the break. David Jurgens said we do have four tiers. He said sustainability comes down to discretionary or what you can spend capital money on to not spend. For example we have the automatic light fixtures in the bathroom where when you walk in the lights come on. It comes down to what is the savings over time of the electrical costs versus the capital costs of buying and installing that piece of equipment in all the bathrooms. That's what we are looking at here. He said the sustainability question is not one he can answer. 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) accessfayetteville.org City Council Water & Sewer Meeting Minutes August 2, 2007 Page 16 of 16 Alderman Ferrell said when Tom Gould was here he said that in most communities where you have business and industry providing employment you find they get a rate on that Alderman Jordan said he doesn't disagree with that but he wanted to bring out the other point as well. 6. 24" Water Line -Custer and Morningside David Jurgens said there isn't much new on this. Work is proceeding on the Morningside Drive piece. All that is left over on Custer is a little clean up. They will start with the bores under the sewer lines and Town Branch on Morningside Drive within the next week or two. 7. Scheduling the Next Water/Sewer Committee Meeting The next meeting of the Water & Sewer Committee will be held Thursday, August 9, 2007 at 4:30 p.m. Paul Becker will attend this meeting to answer financial questions. A second meeting was scheduled for Tuesday, August 28, 2007 following the Council Agenda Session and the Equipment Committee meeting. This will be a Water & Sewer Rates discussion only. Mr. Jurgens will try to get Mr. Tom Gould here for this meeting. The next regular Water & Sewer Committee meeting is scheduled for September ll, 2007 at 4:30 p.m. There being no further business, the meeting was adjourned. 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) accessfayetteville.org