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HomeMy WebLinkAbout2007-09-11 - MinutesCity Council Water & Sewer Meeting Minutes September 11, 2007 Page l of 19 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 September 11, 2007 A meeting of the Fayetteville City Council Water & Sewer Committee was held on September 11, 2007 at 5:30 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 Other Aldermen Present: Alderwoman Shirley Lucas, Alderwoman Nancy Allen STAFF PRESENT: David Jurgens, Paul Becker; Gary Dumas, Susan Thomas, Ron Petrie, Tim Conklin 1. Approve Minutes Alderman Jordan moved that the minutes of the July 26, 2007, August 2, 2007, August 9, 2007 and August 28, 2007 Water & Sewer Committee meetings be approved as presented Alderman Ferrell seconded the motion and it passed unanimously. At the agreement of the Committee, the Water & Sewer Rate Study Schedule discussion was moved to the top of the agenda. 2. Water & Sewer Rate Studv Schedule David Jurgens said he believes all the information regarding the rate study has been put out. He said staff is looking for discussion regarding the time line and where we stand in regard to getting decisions on the policy issues. Paul Becker said staff's question now is what they can do to help the Committee in making those decisions. Alderman Cook said it is possible this Committee will not make a final decision but may forward the issue to the Council for discussion and a decision at that level. In beginning the discussion tonight, Mr. Cook said that in the past we have typically funded some of our Water & Sewer capital projects through sales tax money. He said based on this rate study, we are shifting away from any sales tax money funding for any of those improvements. 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) accessfayetteville.org City Council Water & Sewer Meeting Minutes September 11, 2007 Page 2 of 19 David Jurgens said that is correct, other than the special dedicated sales tax for WSIP. Alderman Cook said that roughly fifty percent of our revenue from the water side comes from the residential customers according to the information before him (page 15 of the Water Utility, Exhibit 9). Paul Becker said that is correct. Alderman Cook asked if those percentages would hold the same based on any of the options available (since the table is based on projected 2006 revenues). Paul Becker said depending on which option is chosen, something will change. If we take Option 2, the percentage would stay the same. If we go to Option 1 (cost of service) the percentages would shift to the commercial and industrial customers. Alderman Cook asked if it is fair to say that the majority (or at least a large part) of the increase we are looking at is based on the fact that we have programmed in to the rate study some of the long standing capital improvement projects. In other words, will bringing these projects in to be completed sooner affect the amount of the increase in rates at which we are looking? Paul Becker said the timing of the projects does affect the rates. David Jurgens said that many of these projects had been deferred since the 1992 CIP. He mentioned as examples the Hwy 16 water line project which consists of a couple of projects going from Neal to Van Hoose Drive and the Mt. Sequoyah pressure plane elevated storage tank. Alderman Cook said he believes every one of the alderman want to develop and make sure the infrastructure of the City is sound and proper. But at the same time, it seems like accelerating those projects has increased this rate schedule to a point where he isn't sure people can afford it. He asked if it is imperative that all these projects be done within the time schedule at which they have been programmed in this study. David Jurgens said it is imperative that we do the highest priority projects and that we get them moving because we are continuously falling further behind in our number of water leaks. He said four or five years ago we were at 500 water leaks per year. Now we are having 700 to 750 a year. Some leaks we don't know about and that is causing our unmetered water rate to increase. The longer we defer these maintenance -based projects, the more water we are going to lose out of our system, the more repairs we will be making and the further behind we will get on executing the capital repairs. He said we have about 45 to 50 miles of 2" galvanized line, all of which is past its service life. He said our unmetered water rate is over 20% which is higher than it should be. It should be between 15% & 17%. And it is gradually getting worse. He said it is a false economy to defer the capital projects because we are simply paying another way. Alderman Cook said he agrees with that and wants the projects done also. But at the same time, how much burden can not only the residential customers but also the industrial and other customers bear. He said frankly, since we haven't been keeping up with the infrastructure all these years and now are accelerating these projects, the current customers are going to be the ones to bear the biggest brunt of the increase. He asked if even with the projects programmed in now it will get us up to where we need to be at the end of three or four years. 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) accessfayetteville.org City Council Water & Sewer Meeting Minutes September 11, 2007 Page 3 of 19 David Jurgens said he isn't sure he can answer that one but it will certainly get us moving in that direction. Some of the other projects we can't defer are the relocations related to the street widening projects and the highway improvements. He said the biggest project for next year is the 36" water line parallel to Hwy 265. That one is just over $6 million and can't be deferred because we have to relocate the water line based off the highway widening. Alderman Cook said we still have several million dollars worth of deferred projects even past 2010. David Jurgens said we have a lot in 2010 because they were unfunded in the CIP prior to that. As we redo the CIP every two years, we will reshift projects. Some will remain deferred and as the funding is available, we'll move more into the five-year plan. He said one of the things we are seeing a difference in is that through the 1990's our method of programming capital projects was to plug the projects in to match the funding that was available (as opposed to identifying all the needs). That is part of what has created the big backlog. It wasn't until the 2002 CIP that we started leaving the unfunded projects on the table to where they became an identified need. Alderman Cook said his concern with this is also going to carry forward with water & sewer impact fees. He said he has a feeling we're going to see a giant increase in those fees also. He said he believes that is related to the fact that we have scheduled and accelerated the need for those projects into this current review of our rates and "soon-to-be" impact fees. He said we're going to see significant increases across the board from that acceleration of projects. He asked Mr. Jurgens from his standpoint if there is no budging from the program schedule for the rate study. David Jurgens said some of the projects can probably be deferred. But the big ones really need to get done. He said this year we have been trying to do more projects in-house because in-house we can execute the projects in a more timely fashion and at a lower cost (since we don't have to contract out engineering). We also don't have to do formal plans and specs or buy insurance so we don't have a lot of the costs a contractor has. We're done more pipe laying in-house than we have done in previous years. That way we can go into subdivisions, replace the water tines and do it cheaper than a contractor can. We're trying to do more of that to reduce the maintenance - related replacements we have to do. Alderman Cook said we're going to have to bid out a lot of the projects on this schedule though. David Jurgens said we'll have to bid a lot of this out. He said we can probably do about three miles of pipe (in-house) each year. He said most of these capital projects average about a mile and a half to two miles of pipe. We will still have to bid the big ones out. Alderman Ferrell asked if it normal to build a new plant, retrofit an existing plant and accelerate CIP spending on water & sewer while we're still collecting sales tax to pay for the retrofit and expansion of a new plant. David Jurgens said he doesn't have enough broad-based experience of how other cities do their business in terms of funding and execution so he can't answer the question specifically. But all of that work is an on-going process. 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) accessfayetteville.org City Council Water & Sewer Meeting Minutes September 11, 2007 Page 4 of 19 Alderman Ferrell said if you take the part out about collecting the sales tax, would it be normal to accelerate your CIP spending on water & sewer and raise rates just as you are building and retrofitting other plants? David Jurgens said Springdale is doing it right now. They have significant road -widening projects similar to what we have and they are doing water & sewer lines with every one of those. They are also doing a major plant expansion. Rogers also has a major plant expansion underway and they are doing the same thing with their water & sewer. He believes the answer is yes. You can't pause or defer the routine capital jobs when you're in the process of executing the large ones. Alderman Ferrell said in his mind it is one of two things: are we overdue doing this and we're going to do it now because we're going to get the money to do it or is it that we have to do it for the integrity of the system. David Jurgens said in the project list he submitted to the Health Department as part of an EPA infrastructure needs survey (a twenty-five year project list) there were 240 pipeline maintenance and repair projects identified systemwide. This was based on pipes having problems now or which will be having problems. None were for expansion of service to new customers. He said what the Committee has in front of it is a pretty good sized list of projects but there is a much larger list out there of needs that are specifically identified and defined where lines need to be replaced. We have 600 miles of pipe and he said he can guarantee that at least 20% of that is way beyond its design length and is functionally obsolete. Alderman Ferrell said it is a never ending deal. He said we mentioned earlier that we will be removing sales tax money from supplementary water and sewer maintenance and CIP. He asked Mr. Dumas if this would result in a larger build up of enterprise funds. If so, what is the intent of the use of the enterprise funds? Gary Dumas said if he understands the question, sales tax has been used in the past and if we take it away, that will put a greater demand on the water & sewer enterprise fund. It will make any sales tax CIP that we collect or any sales tax we chose to use for the CIP potentially greater for use in those other things that are not enterprise funds. Right now the solid waste division gets no sales tax supplement. It is totally self sufficient. What we are trying to do is move water and sewer to be self sufficient. That will mean that there should be more resources available to those enterprises that do not have a way to generate revenue for themselves (such as streets, IT expansion and other things funded through the CIP) or for use as general operations of the City. That would be the Council's choice to make. Alderman Ferrell said he thought one of the main reasons we were going to step up our rates was so that we wouldn't have to supplement water & sewer as much with sales tax. Gary Dumas said the goal is to not supplement water & sewer with sales tax. But there are other activities in the City that use the sales tax CIP. The street division for example could utilize those resources. Or you could utilize them for other things that the Council so chooses. Alderman Ferrell said in the end we would be spending more money. Gary Dumas said yes, unless the Council chooses to reduce sales tax or not spend as much. 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) accessfayetteville.org City Council Water & Sewer Meeting Minutes September 11, 2007 Page 5 of 19 Paul Becker said the rates should in fact represent what it costs to run the system and the capital program should fairly be placed there. The Black & Veatch study should have in fact done that. The rates should be constructed based on capital requirements. Gary Dumas said there will always be major capital expansion — building a plant, a plant renovation, etc. Typically your rates may not compensate the fund for that. So there may be in the future dedicated sales tax such as we have for the WSIP now. But the on-going maintenance, the general operation of the system should be funded from the rates that enterprise generates. Alderman Cook said it seems like in the past we have tried to fund a lot of our major projects through sales tax. Some of those projects have languished. Now we're shifting from sales -tax based projects to more individual bond issue projects that are supported through special sales votes. Gary Dumas said for the major capital expenditures. Alderman Cook said we are looking at this list of projects that have always been in the sales tax CIP and those are going into something different than sales tax funding. Paul Becker said he doesn't think they were always funded through sales tax CIP. They were in the CIP but the funding for the CIP did come from multiple places. He said he can't speak to some of this (he wasn't here) but he said at one time there was sufficient sales tax revenue coming in that you could in fact allocate those resources to this. Now there is an increasing demand everywhere for infrastructure besides water and sewer. Alderman Ferrell said sometimes he thinks there is a difference in terminology - we speak of sales tax and of the general fund. He was thinking these things were coming out of the general fund before. Where does the general fund come from? Gary Dumas said it comes from sales tax. Alderman Cook said he questions whether we are still maintaining that 50150 split between operations and capital. Paul Becker said that is how the money is budgeted and that is how it has gone. Gary Dumas said he thinks that was the Council's last direction. Alderman Ferrell asked if all the information and material could be reduced into a short explanation of where we are and where we want to be. Gary Dumas said he thinks there are two parts to the answer. If you look back into the 1990's, Solid Waste was partially funded from rates and from the general fund (sales tax). The Council made a decision sometime in the `90's to move solid waste out of the general fund and to make it self sufficient. During the late `90's and early 2000's that was accomplished. He said he isn't sure what the discussions were back then but solid waste is now self sufficient and all we do is a rate analysis occasionally to make sure they are not charging too much or too little. That's what we're trying to get to with water and sewer, so that they will be self funded except for any major 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) accessfayetteville.org City Council Water & Sewer Meeting Minutes September 11, 2007 Page 6 of 19 capital expansion that we may chose to undertake. There may be a need for another major plant or major plant expansion in the next decade. That would logically come from sales tax. But normal operations should be funded, theoretically, from the rate structure for both water and sewer. Alderman Ferrell asked if we take into account when we migrate from the old way the impact on the customer base. He said as soon as that starts happening, the rates start heading north. Gary Dumas said he doesn't think solid waste rates headed north. He said one of the driving forces on the rates is the number of capital projects you want to accomplish. As was mentioned, some of those projects have stood out there for fifteen years. That is a part of the problem now that this Council is trying to address (those problems that were not addressed annually in decades past). That's a big bite to chew. He said he believes what Alderman Cook is asking is whether these projects right now are absolutely necessary in the time frame that is outlined here. He said he would have to rely on Mr. Jurgens and the engineers to say whether all these are absolutely necessary. David Jurgens said the answer to that is a little difficult. At what point do we tolerate service interruptions to our customers and continue to spend money in clamping a water line or having inadequate fire protection in an area. Can we continue that way? Yes. But our water leaks will continue to go up until we start having three a day instead of two and a quarter a day. Alderman Cook said he understands that. What is frustrating is that we have put so much capital into getting this sewage treatment plant and the WSIP project going and now we are all of a sudden hit with having to get this list of projects done within the next three to four years. How many times can we go to that well? Gary Dumas said you can't go to the well more than so many times in a given time frame. He said the Committee has the study, the rate analysis and the engineer's analysis. If this is too big a bite for the first year, then there has to be at least some way to get to the rates that are adequate to move the enterprise to a self sufficient status. Somehow we have to get there. There hasn't been much movement on that yet. Alderman Cook said he thinks we all agree on that. Gary Dumas said that is the challenge right now. How quickly can we get there? Moving it this fast may be too much for the public to handle. But there has to be a strategy to accomplish this. Alderman Ferrell said he thinks part of the challenge is how long can we go on with fixing these leaks. The other part of the challenge is being able to establish a rate where the rate payers can pay enough to fix some of these. Alderman Jordan said he remembers that we collected 29% starting in 2003 or 2004. He asked what that was for. Was it going to be used for maintenance on the new plant? David Jurgens said in 2003 there were three sewer rate increases that were projected to cover operational costs. At that time it was paralleled with the cost of bringing the west plant on line. Alderman Jordan asked how much we collected. He mentioned a figure of $4 plus million. 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) accessfayetteville.org City Council Water & Sewer Meeting Minutes September 11, 2007 Page 7 of 19 David Jurgens said he doesn't remember the numbers. Alderman Jordan said he would like to have that figure. He said we have had water & sewer impact fees since 2003. He asked how much we have collected from that. Tim Conklin said it is over four million. Alderman Jordan asked if that money is still there or if we used it somewhere else. Paul Becker said $2.5 million (on sewer side) was used on the wastewater plant. He said we have had three basic projects under the water side. Alderman Jordan said of the 29% we collected, how much of that was used in the overrun. Paul Becker said none. Susan Thomas said there was a portion ($5 million or so) that came out of the water and sewer fund. Alderman Jordan said the 29% basically went into the water and sewer fund. Gary Dumas said there is a memo that was distributed with that information and we can get a copy of that to the Committee. It has the exact amounts. Alderman Jordan said his question is if we had not taken that money and put it in on the overrun, how much would we have to raise the sewer rates now. David Jurgens said he isn't sure any of the staff can run that number off the top of their head. Alderman Jordan said he would like to have those answers before the next meeting. He said the thing that he is coming back to is we collected about 29% and then we collected another $4.4 million from impact fees. Then the people gave us another quarter cent to help with the overrun. He said he has a difficult time raising the rates another 14% on water and another 20% on sewer. He said we have talked a lot about money and about percentages but we also need to take into consideration the trust of the people. He said that is one of the reasons why he prefers a flat rate because you charge so much for every thousand gallons and you do it straight across the board and it's the same for everybody. He said he was looking through affordable housing rate information that Mr. Becker provided to him and it talks about folks being eligible for the affordable rates when the rates exceed 5% of their income. David Jurgens said that would be an interesting number to see. He said he doesn't have any idea what our rates would compare to. Alderman Jordan said that's what he would like to compare this with. He said the median income is around $32,000. He would like to know how the median bill compares to that and how it compares nationally. 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) accessfayetteville.org City Council Water & Sewer Meeting Minutes September 11, 2007 Page 8 of 19 Alderman Cook asked committee members about their thoughts on flat rates versus cost of service and if they have any comments on how we should move forward as far as our rate structure is concerned. Alderman Jordan said he prefers flat rate. Alderman Ferrell said he prefers the cheapest. Alderwoman Gray said she wants what is cheapest but she hears what Mr. Jurgens is saying. With the leak increase and 24% unmetered water use, we're going to have to start sometime taking care of some of these problems we haven't taken care of in many, many years. She said that is what she is struggling with — trying to figure out how to do our projects and some improvement on some of these old lines that are causing us so much trouble. Alderman Ferrell said as Mr. Dumas said earlier, if it is too big a bite too fast, we can't go that route. He said that's what we need to work toward and he thinks there were some questions asked tonight that might shed a little light. He's not ready to make an ultimate decision though. Alderman Cook said he understands that but he wants a little policy discussion because we haven't really done that yet. He wants to start getting a little feedback from the rest of the committee on where they stand on some of the issues. He said he doesn't agree with Alderman Jordan on the flat rate though he respects his opinion. He said he stands on cost of service. He thinks that is the most equitable way to distribute costs across all the customer classes. He wonders if there is some way to phase this in as opposed to just hammering out cost of service right off the bat. He said at the very end of Mr. Gould's presentation he offered what he thought was some middle ground. That discussion also would need to include what we feel as a committee or individually should be the policy regarding providing subsidy to other customer classes (for instance, industrial customers). He said he thinks there can be pros and cons to that. You can decide whether it is an economic development issue or whether the industries provide enough jobs and services within the community that they deserve some break. He said he is curious about what other committee members feel about that. As Mr. Gould pointed out, that one issue will drive a lot of the other issues as we move forward through these policy discussions. Alderman Jordan said he thinks we are going to have to decide on what sort of policy we are going to develop before we get into the discussion of whether we can even phase that in or not. If the Committee decides they want that 11.1% straight across then that wouldn't even be on the table. He said he thinks we have to decide which way we're going to go. Alderman Cook said if we decide on an option then we are done with our discussion. Then we would just forward it on to the Council and hash it out there. He said if we go with Option 2, it's really not cost of service any more. It's based on a cost of service study but it is shifting the cost around. And that is where the philosophy comes in — do we provide subsidies to other customer classes. Alderman Jordan said with that 11.1% we still have a decreasing block rate. So the more you use the cheaper it gets. Alderman Ferrell said he thought he read something about a recommendation of a change in the 58.2% for irrigation. 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) accessfayetteville.org City Council Water & Sewer Meeting Minutes September 11, 2007 Page 9 of 19 Alderman Jordan said he thinks they said the figure was okay but they didn't think it was doable. David Jurgens said he thinks the thought was that 58% was more than you could in one customer class at one time. It needed to be phased in. Alderman Jordan said basically the three things proposed were increasing block, decreasing block and a form of the flat rate — uniform. Alderman Cook said the bottom line is there is a certain amount of money you have to get to and almost fifty percent of that revenue is going to come from the residential side of the equation. He said he is not quite sure how to proceed from here with this Committee because he isn't sure they are all going to agree on anything. Alderman Ferrell said he thinks everyone understands what Alderman Cook is saying. He said it seems each alderperson has his or her own ideas about how to implement this. It's not going to be easy. Whatever we come up with he would like to see it phased in for the least impact on that fifty percent of the customer base. Alderman Cook said it is easy for him because he likes Option 1. He said he is a fan of cost -of - service. He said he knows that based on history the industrial customers don't want to see any increase. However he struggles with the fact that last time we were willing to give them a subsidy from the residential customers. He said he wasn't happy about that and did make comments that with the next rate study it wouldn't be that way. Based on those comments he said he is more apt to support cost of service because it is a true reflection of what it costs to service that class of customers. Cost of service is straight across the board; it is definable and covers the cost of servicing that class. He said to him it is the most defendable and equitable way to do this. Alderman Ferrell asked if Alderman Cook thinks there should be consideration for the impact the businesses/industries have in providing jobs (and revenue) for the community and whether the rate they are paying now may be helping to keep them in the community. He said he feels that should be considered. Alderman Cook said that goes back to his question of a few minutes ago. Do we want to discuss a policy decision about whether we will supply a subsidy to industrial customers? If we do, then we break away from cost of service and we go somewhere else - whether that is the middle ground that Mr. Gould proposed at the last meeting or with staff -proposed Option 2. It could go any direction at that point. Alderman Ferrell said he would hate to drive a significant employer out of our community. He said that could have a long term affect. He agrees that cost of service would be the simplest way to do this but he would hate to see people out of a job. Alderman Cook asked if the Committee believes they can come to some kind of consensus and whether they want to keep talking about it for another meeting or two. Alderman Ferrell said he would like to discuss it for one more meeting anyway. 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) accessfayetteville.org City Council Water & Sewer Meeting Minutes September 11, 2007 Page 10 of 19 In response to a question from Alderman Ferrell, Gary Dumas said the answer is what level of service delivery interruptions we can tolerate. We have been tolerating them in the past and Mr. Jurgens has presented the issues. What staff has proposed is an increase this year and an increase next year, looking for a way to begin to move toward cost of service (as discussed by Tom Gould at the last meeting) without driving business away or moving too abruptly. Mr. Gould proposed a compromise toward that and perhaps there is a way to move toward what he has proposed, rearranging the two years of increases, making it 6% this year and 8% next year. That would reduce the movement toward cost of service this year to make it a little less harsh. If you move directly to cost of service it is going to be pretty harsh on some of the users. Alderman Cook said the frustrating thing is that in 2010 or 2011 when the next rate study is done we will be short again. Gary Dumas said that is why, hopefully, if we can get a structure that is established (though it might take us three years to get that structure established) then this discussion won't be quite as difficult in 2010. Alderman Cook said ideally we can get to some structure that can basically just churn along and every three or four years we can do a cost of service study and see where the rates are and adjust them based on where they need to be. Then we won't have these discussions any more. But he said he doesn't know if we can get there as quickly as we want to. Alderman Ferrell said he thought that once we ever got close that the inflation factor would be built in and we wouldn't have to do a rate study. Alderman Cook said you would still have to justify the rates. Gary Dumas said the study would hopefully just reaffirm what the rates are instead of having the major fluctuation. He said Mr. Gould had proposed a plan to move toward cost of service. Assuming an 8% overall adjustment (in water rates) for this year, if we change the 8% to 6% and modify the changes on each of the classes appropriately, that would reduce all rates slightly. However, you don't get as much money in year one as needed. David Jurgens said the down side of that is that it puts a much larger impact in 2009 because the sewer rate increases will hit in 2009. If we do a 6% water increase in 2008 and an 8% increase in 2009, we will also have the 19% sewer increase in 2009 which creates a much bigger jump in 2009. Gary Dumas said that is true, he hadn't thought about that. David Jurgens said he would suggest the higher water increase in 2008 when there is no sewer increase. Alderwoman Gray asked if we would have any extra money for replacing lines to cut the leak numbers. David Jurgens said the rates presented with the 14% deficit will give us funds to do more capital improvements. He said 8% would give us a real good start but with 8% without the following 6% we will still be behind. 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) accessfayetteville.org City Council Water & Sewer Meeting Minutes September 11, 2007 Page 11 of 19 Alderman Cook said in 2010 (according to the tables presented) in water we will still be $4.6 million short and on the sewer side we will still be $742,000 short for our needs. That's even with the increases we are showing now. Gary Dumas said again, the 8% and 6% are based on the Committee's tolerance for service interruptions. David Jurgens said there is not just the water we lose (from both small and large leaks) that we don't receive revenue from, there is also all the ancillary impacts. He said a lot of the in-house street repairs we had to do in the transportation plan are because the streets were messed up due to water leaks underneath them. Alderman Ferrell said he wasn't here at the last meeting and wondered if the Committee got any feedback from the outside -city -limits users on the inter -class adjustments. Alderman Cook said the industrial customers don't want any increases. This is more palatable than Option 1 but they still weren't happy with it. Alderman Ferrell said he wondered it this could be a starting point for the Committee's discussion or if we are too far apart. Alderman Cook suggested scheduling the next meeting. He wondered if Mr. Gould is scheduled to come back any more per our contract with him. David Jurgens said we may have to do a change order on the contract but he believes we need him to come back as often as needed. Alderman Cook said he would like to have him back here for sure on Sept. 25. Alderman Jordan suggested that the next meeting in which the rate study is discussed have only the rate study on the agenda and no other water and sewer items. A meeting of the Water & Sewer Committee was scheduled for Tuesday, Sept 25, 2007 following the Council Agenda Session and a second meeting was scheduled for Thursday, Sept 27, 2007 at 6:00 am. 3. Cherry Hills Subdivision Request for Sewer Service David Jurgens said we have a request from the developer for Cherry Hills requesting that their subdivision be attached to our sewer system. We also have a letter from the Health Department requesting that the City allow this subdivision be attached to the sewer. It is therefore being brought before the Committee for consideration. From the wastewater standpoint, our wastewater system has a lot less long term impact than decentralized sewer or septic system. He said his position is the same as it has always been, the more systems that are tied to our sewer system the better off we are in the long run. The developer is here to speak if necessary. Nathan Young said he is here to represent the developer. He thanked the Committee for putting this item on the agenda for discussion. He said they realize from talking with Ron Petrie and Tim 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) accessfayetteville.org City Council Water & Sewer Meeting Minutes September 11, 2007 Page 12 of 19 Conklin in the past that there have been a couple of projects requesting something similar to this. He said his client purchased this property after the preliminary plat was approved and the decentralized system was approved. One of their first steps was to try to get away from the decentralized sewer system in order to provide the future homeowners with a better sewer system. He said the developer realizes there have been some issues in the past but they are willing to work with the City, possibly deeding some land for the fire station that the fire chief says is necessary in that area. He said he is open to any questions. Alderman Ferrell asked how far this development is from the City limits. Nathan Young said it is about a quarter mile away. He said the developer also owns property that extends to the City limits but not with this particular development. Alderman Ferrell asked if there is an offer on the table to deed property for a fire station. Nathan Young said they have talked with the fire chief. He said he would rather let his client answer that question. Gary Dumas said he believes Chief Johnson has been talking to several developers in that area about potential property for a fire station. He said he doesn't know if the chief has selected a specific location or not. Tim Conklin reminded the Committee of the Lierly Lane discussions. He said he is assuming that the adjacent property owners have not been notified of this request. When this subdivision came through there was a lot of discussion with regard to having an urban -type development in the county and smaller lots further out. He said Mr. Young has met with staff a couple of times and they have discouraged him from requesting sewer and proceed on with his approved plans with the County. Mr. Conklin said it has been his opinion not to extend the sewer and create urban development out in the County. He said from the planning side there are issues with tree preservation, etc. He said he thinks the Committee will hear from people who live out there and from people who move into this subdivision. Alderman Jordan said he has had several comments on this subdivision already. He asked Mr. Conklin if this subdivision was developed according to City standards. Tim Conklin said it was developed according to standards for County subdivisions. We don't have tree preservation in those standards. Alderman Jordan asked about streets. Ron Petrie said streets are but drainage isn't. In response to a question from Alderman Jordan, Tim Conklin said it is his understanding that the roads have been rough -cut in. Nathan Young said there are streets graded and there are utilities in place, though not all of them. The work was basically brought to a halt pending this request. He said he understands and agrees with the City's stance on requirements. He said when his clients bought this property the trees were already removed for the grading and clearing according to County requirements. It's 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) accessfayetteville.org City Council Water & Sewer Meeting Minutes September 11, 2007 Page 13 of 19 something that obviously can't be redone. The question at hand is can they tie into the sewer system. One of the concerns with a decentralized system is operation maintenance. The POA would be set up but POA's are not guaranteed to be there forever and he questioned how that would affect the City in the future. David Jurgens said the property owner would be responsible for the maintenance of the system. He said we had a failure on the Fox Trail decentralized sewer system and that was handled between the owners and ADEQ. The City did not get involved in that one. He said he hasn't seen one of these where our sewer system has been nearby so he isn't sure what the resolution would be. Ron Petrie asked if the treatment system would have to go by the new Washington County rules. Nathan Young said it has been approved. Ron Petrie asked if it was approved prior to the new County regulations. Nathan Young said it has been several months ago and he assumes it was before. Ron Petrie said there are a lot of requirements added on the bonding in those types of issues for maintenance with those regulations. Alderman Cook said when we have had these requests brought to the Committee in the past he has not supported them. He struggles with pushing our sewer outside our City limits. He said in some ways it is rewarding the fact that people go outside our city limits and build subdivisions then come back and ask us for city services. They aren't citizens of Fayetteville and don't follow the same regulations that we require of the developments within the City that we allow to hook onto those services. He said he just doesn't support the idea of extending our sewer service outside the City limits. David Jurgens said from a water & sewer standpoint he has always felt that the best long term environmental solution should be used. He said the City's municipal wastewater system provides a much higher level of treatment than any decentralized sewer system and has a much more reliable operations and maintenance factor. He strongly believes that in the long run the City will end up inheriting the decentralized sewer systems. His opinion is that if it is close, we should tie as many as possible on to it. In his opinion this will create fewer long-term impacts. He said in twenty years when this area is in the City and that sewer system starts failing, he believes we the City will end up spending money to fix the problem. Also, as the Health Department pointed out, if there are problems with the system (maintenance problems or POA legal problems) and they start having pollution issues it will go right into Clabber Creek and we the City will end up bearing the burden at some point. Alderman Ferrell said then that it doesn't make any difference to Mr. Jurgens whether it is in the City or not, it is close enough to tie in. David Jurgens said from the environmental standpoint if there is proximity, as many as possible should be hooked up to the best possible environmental system, which is our City sewer system. 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) accessfayetteville.org City Council Water & Sewer Meeting Minutes September 11, 2007 Page 14 of 19 Alderman Ferrell asked what the developer is looking at as a build out date on this. Nathan Young said construction has been halted right now pending this request. Once this is resolved they are ready go back into construction. He estimated that in seven to nine months the subdivision will be ready for lots to be built on. Alderman Ferrell asked what the guess would be for the subdivision to be built out. Nathan Young said we are in the situation we are in right now because people couldn't answer that question. There are 194 lots in all four phases on 35 acres approximately. Alderman Cook said the key words Mr. Jurgens used was the Fayetteville "municipal wastewater system". We are not a regional system though we act as one. He said we have this discussion every time someone comes forward with this request. We are a municipal system and if we allow people to keep connecting on, why wouldn't any developer go outside the City limits and do their development to County standards and then come back and ask the city for sewer. We are not giving anybody the incentive to make good development within the City of Fayetteville with our standards. Gary Dumas said with the current status of this a potential solution might be to annex and follow our rules as they are right now. Alderman Jordan asked if there have been any impact fees collected on this. Gary Dumas said the impact fees wouldn't occur until the certificate of occupancy Alderman Jordan asked if we run the sewer lines out there would we collect impact fees. Gary Dumas said we would. Nathan Young said we would if they hook up. Ron Petrie said we are collecting water impact fees already. Tim Conklin said the parks department would have to evaluate the park (dedication). He believes if the developers have the ability to annex, they should go through that process and the Committee could hear from their constituents also. Nathan Young said this was brought to the City as the first option and his understanding was that it was pretty much going to be a hard-fought battle. Tim Conklin said he has philosophical issues when you place a lot of houses in an area with a County system to provide services. He said people automatically expect the City of Fayetteville fire department to respond and there are other issues as well. If you want to be in the City you should be in the City. David Jurgens said the plant that was built at the site of the Noland facility was constructed in 1966. The Noland upgrade happened in 1985 and we are doing another upgrade now in 2006- 2007. Every twenty years the regulations have changed, we've had to meet much higher 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) accessfayetteville.org City Council Water & Sewer Meeting Minutes September 11, 2007 Page 15 of 19 standards and we've had to significantly renovate our system in order to meet regulatory requirements. One of his big concerns with decentralized sewers is that that is not going to happen. Ground water regulations and stormwater regulations are getting stronger and how is a POA going to wrestle with the capital costs we're wrestling with in our water & sewer rates. He thinks they will fall on their face and that's when the public will end up having to bear the burden somehow. Many of these areas at that point will have been annexed for one reason or another into the City and the City will be bearing that burden. Alderman Jordan said when we've done these annexations in the past we've been asked to annex into the City or they would put in a decentralized sewer. Some of that has to stop. We could go on until we annex to Tulsa but somewhere it has to end. Now people are developing outside the City limits and wanting our services without following our ordinances or codes. Alderman Ferrell asked if those in the City growth area would have to meet certain regulations. Ron Petrie said now it is back in our favor with annexations because now they have zoning requirements, a very large lot density they have to meet if they stay in the County. Tim Conklin said this has changed. They would have to go to the County and get a special conditional use permit in order to build what they're building today. Alderman Jordan said that from now on what happened on the tree preservation and things like that would not occur. Tim Conklin said it would depend - on a one acre lot you would maybe have septic systems instead of decentralized system. (There's a question of) whether or not you can sell a one acre lot and a three thousand square foot house today. Alderman Ferrell asked if the developers have made a run at annexation. Nathan Young said they have and the initial feedback when they first investigated it was that it would be a hard-fought battle. This was after Lierly Lane. Alderman Jordan reminded Alderman Ferrell that the Committee was told that if the City annexed the Lierly Lane development in, they would build according to City standards. Once the lines were run out there, the developers did not build anything according to City standards because it had already been approved by the County. Alderman Ferrell said he is ready to vote up or down but his idea was that if they apply for annexation that they would have to develop according to Fayetteville standards as opposed to County standards. Alderman Jordan said he thinks that is right. Gary Dumas said it could be that if you want sewer, you would annex and bring back a development proposal that is consistent with City standards. Tim Conklin said that way you would have the City park in the City and maybe a City fire station site. 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) accessfayetteville.org City Council Water & Sewer Meeting Minutes September 11, 2007 Page 16 of 19 Alderman Ferrell said he would support that before we give this any further consideration the developer would have to do this. Alderman Cook said he would agree. He is not going to support extending sewer service in this situation. Alderman Jordan said he would not support it either. Gary Dumas restated that the direction would be no to extension of sewer service and a suggestion that the developer seek annexation Nathan Young thanked the Committee for their time. 2. WSIP Update e. WSIP Owl -Goose Lift Station Discussion David Jurgens said when we realized that we might have funds available from other bids coming in low and we could begin to evaluate this alternative in more detail (also recognizing that circumstances have changed because this area is now within City limits), Hugh Kelso was asked to proceed with analyzing this issue. He is available to present his recommendations. Hugh Kelso said he reviewed the two options under consideration involving where the lift stations will be located. One option, which has been discussed in the past, is to build a lift station at the confluence of Owl and Goose Creek. Because of the recent annexation, a second option has been discussed, moving the lift station downstream approximately 4,500 feet to the western City limits line. He outlined on a map what this option would involve. He said there has always been the original cost of relocating the existing Farmington station to the confluence of Goose Creek and Farmington Branch, pumping it back to the plant and redirecting the flow. Steve Davis said he is here representing Farmington. He said this option has been discussed by Farmington officials. He said at this point with the significant sewer improvements they are already undertaking, they don't want to put any more on their plate. They are happy with Lift Station 12 where it is. They do think that in the future as growth occurs and the vacant land develops over the next twenty to thirty years, then the Owl -Goose Creek pump station would be called for at that time. Hugh Kelso said it is somewhat cost prohibitive now. He said we have some technical issues that are hard to overcome such as significant elevation differences. Because of these technical difficulties and the cost, he doesn't think this option is feasible. Another option is now being discussed (Alternative C on information presented to the Committee). This option would cost about $7 million plus the cost of some upgrading, or about $9 million. Option C involved relocating the existing Owl Creek lift station, currently located at Double Springs Road, west approximately 2,200 yards. This lift station has to be significantly renovated or completely replaced anyway, and moving it further west will allow more of the City to tie in by gravity and will allow another existing lift station to be removed. 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) accessfayetteville.org City Council Water & Sewer Meeting Minutes September 11, 2007 Page 17 of 19 David Jurgens said the current plan is about $9.3 million. If we move it down to the confluence (Alternative B) it would be about $14.2 million. The cost increase between those two is about $5 million. Gary Dumas asked where in the future would be the most logical location for the second lift station to reduce the dynamic head off the long line to the plant. Hugh Kelso said there are a couple of options. He would recommend proceeding on with the design in Option C, getting it designed, bid and built. That is relocating Lift Station 12 down to the confluence of Goose and Farmington Branch. All these pipelines are about 70% complete in design. He said their recommendation is alternative C, to move the Owl Creek lift station ( #22) down roughly 2200 yards to the City limits. Gary Dumas asked if one option is better for the future. Hugh Kelso said they are probably both about the same for the future except for the extra cost. Alderman Jordan said one of these options is the one discussed in the beginning when Bob Davis was here. It was estimated at that time to be about $12 million. David Jurgens said it is still the same — construction costs would be about $12 million. Hugh Kelso said it would still be $12 million as planned. But if we move it down to the newly annexed area to serve that whole area, it jumps to $17 million. Alderman Cook said our current cost is $9.4 million. If we move it down to Owl and Goose Creek, we would add an additional $5 million. Hugh Kelso repeated that Farmington is not willing to participate in the increased costs for moving it down. They would prefer to leave it at this location. David Jurgens said our rough estimate is about 50% of the cost would be attributable to Farmington. Alderman Cook asked if it would be a possibility if we continue with Alternative C where we are right now, and at some point in the future we decide to go ahead and move it down with Farmington participation? David Jurgens said that is certainly a possibility. He said as they started looking at this today he believes that moving it down is not feasible and that became a non option. Then looking at doing the alternative as currently planned, renovating the existing Owl Creek lift station, they realized they might be able to do better than that at a fairly minimal cost. He outlined an option involving building a lift station downstream from the area that is obviously developing (he pointed out locations on a map). He said this would get us a 20 -year solution in this area. However, that cost has not been evaluated. Alderman Jordan clarified that Mr. Jurgens' recommendation is to build one instead of redoing two. 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) accessfayetteville.org City Council Water & Sewer Meeting Minutes September 11, 2007 Page 18 of 19 Hugh Kelso said that the problem with the current plan of renovating the existing Owl Creek lift station is that it is a short term fix. You can upgrade it but not sufficiently enough to carry the whole build out area. So at some point it has to be replaced. There's not enough room to replace it in that location very easily. David Jurgens said we can have the numbers on this option for the next regular Water & Sewer Committee meeting. WSIP Update (Continued) David Jurgens said we are still operating within budget and on schedule for the WSIP. We have around $156 million under contract. We have less than $12 million left to go. We have a ribbon cutting scheduled for the Noland Plant (ArcherWestern contract) for September 24. He said he thinks there's about 50 ft. of pipe left to lay on WL -2. WL -3 and WL -5 are complete or substantially complete. The other projects are proceeding and going well. a. WSIP Farmington Area Work David Jurgens said they are proceeding on with design on this work. An easement matrix was attached to Committee information. b. WSIP Easement Update David Jurgens said we have a total of nine easements required and he believes we'll get a couple of those within the next week. Those we haven't been able to obtain will probably be brought forward for the 2nd meeting in October to begin the condemnation process. He hopes to get as many as possible before then. C. Contract Legal Review — West Plant Construction Contract David Jurgens said we received two statements of qualification for this. The Committee did not meet but we looked at the submittals. We wanted a broader appeal so we've extended that request for qualifications and are trying to find out who in the State has focused experience. We should have more answers on this in about two weeks. In answer to a question from Alderman Cook, David Jurgens said those submitting qualifications have to be licensed to practice in the State of Arkansas. d. Subproject WP -3, West Side WWTP Change Order Number 3 David Jurgens said most of the items in this change order had already been identified but not yet costed out. This change order creates no change in contract time but does have an increase in contract cost. This is well below the contingency for this contract and the only other thing we have seen as a potential additional issue is drilling a well to provide water for testing and for long-term operations of the wetlands mitigation site. It will take about $4,000 to $6,000 to drill a well. We think it will be better in the long run out there to be able to do that business without having to buy City water. 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) accessfayetteville.org City Council Water & Sewer Meeting Minutes September 11, 2007 Page 19 of 19 f. WSIP Construction Schedule and Cost Update David Jurgens handed out the rainbow sheet. He said the biggest thing is that our contingency is now right at the same as our estimated construction costs for the Fayetteville portion. He said the Archer Western contract for the Noland Treatment plant will come in with just over $100,000 left in contingency. When we close that contract out that money will be rolled back into the overall project contingency. 3. Sanitary Sewer Rehabilitation Project Update a. Basins 1-5, 18 & 19 Sewer Rehab David Jurgens said the pipeline is done at Doc Murdocks and now the owner's contractor will be doing the paving of the parking lot as was agreed. So the rest of that work is subject to the owner's schedule and not ours. b. Farmington Area David Jurgens said Farmington rehab is underway. T -G Excavating is now working out there. He thinks they are around 15% complete but they have not yet received an invoice so that is just a rough estimate. 6. Water/Sewer Committee Meetings The Water/Sewer Committee is schedule to meet on September 25, 2007 after the Council Agenda session. This is for discussion of water & sewer rates only. The next regular meeting of the Water/Sewer Committee will be October 9. 2007. 113 West Mountain 72701 (479) 521-7700 (479) 575-8257 (Fax) accessfayetteville.org