HomeMy WebLinkAbout61-07 RESOLUTIONRESOLUTION NO. 61-07
A RESOLUTION APPROVING A CONTRACT BETWEEN THE CITY OF
FAYE I I EVILLE, ARKANSAS AND THE CITY OF FARMINGTON,
ARKANSAS TO PROVIDE WASTEWATER COLLECTION AND
TREATMENT SYSTEM SERVICE AND OPERATIONS AND
MAINTENANCE SERVICE TO THE CITY OF FARMINGTON; AND
APPROVING A BUDGET ADJUSTMENT IN THE AMOUNT OF
$650,000.00 TO IMPLEMENT THE REFUND OF A PORTION OF RATE
PAYMENTS MADE FROM FEBRUARY 9, 2004 THROUGH APRIL 30,
2007
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF
FAYETTEVILLE, ARKANSAS:
Section 1. That the City Council of the City of Fayetteville, Arkansas hereby
approves a contract between the City of Fayetteville, Arkansas and the City of
Farmington, Arkansas to provide Wastewater Collection and Treatment System Service
and Operations and Maintenance Service to the City of Farmington. A copy of the
contract, marked Exhibit "A" is attached hereto, and made a part hereof.
Section 2. That the City Council of the City of Fayetteville, Arkansas hereby
approves a Budget Adjustment in the amount of $650,000.00 to implement the refund of
a portion of rate payments made from February 9,2004 through April 30, 2007.
PASSED and APPROVED this 3rd day of April, 2007.
APPROVED:
By:
ATTEST:
By:
DAN COODY, Mayo4 SONDRA E. SMITH, City Clerk/Treasurer
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CONTRACT BETWEEN THE CITIES OF
FAYETTEVILLE AND FARMINGTON TO PROVIDE WASTEWATER
COLLECTION AND TREATMENT SYSTEM SERVICE AND
OPERATIONS AND MAINTENANCE SERVICE FOR
THE CITY OF FARMINGTON
THIS CONTRACT is entered into by and between the CITY OF
FAYETTEVILLE, a municipal corporation of the State of Arkansas (hereinafter
referred to as "Fayetteville"), and the CITY OF FARMINGTON, a municipal
corporation of the State of Arkansas (hereinafter referred to as "Farmington"), with both
municipal corporations hereinafter referred to collectively as the "Parties".
RECITALS
WHEREAS, Fayetteville owns and operates its sewage collection system and
treatment plants pursuant to A.C.A. §14-235-203 and is authorized to collect and treat
wastewater from its own inhabitants and also persons and customers outside the corporate
limits of Fayetteville; and
WHEREAS, Fayetteville recognizcs that its sewer collection system and
treatment plants are integral to the health and welfare of the greater Fayetteville area, as
well as Fayetteville, and intends to collect and treat wastewater to meet the current and
future needs of the greater Fayetteville area when such service is requested and the
provision of such service is in the best interests of the citizens of Fayetteville; and
WHEREAS, Fayetteville and Farmington have established a long-term
contractual relationship as evidenced by sewer maintenance and operations contracts
between the cities beginning in 1974. The present contract was executed in 1994
pursuant to A.C.A. §14-235-212. This well established working relationship is further
evidenced by the mediation agreement entered into in 2004 to clarify the 1994 agreement
concerning sanitary sewer rehabilitation. Each city has agreed to implement its
individual part of the mediation agreement, with the remaining construction programmed
for the year 2007. The total estimated cost of the sanitary sewer rehabilitation that was
agreed upon in the 2004 mediation is estimated at $1,420,640 with approximately
$942,657 to be incurred by Fayetteville and approximately $477,983 to be incurred by
Farmington; and
WHEREAS, Fayetteville operates Farmington's Wastewater Collection System,
receives wastewater from Farrnington customers, and transports and treats the wastewater
in Fayetteville's wastewater facilities under Fayetteville's NPDES permits; and
WHEREAS, Farmington desires to contract with Fayetteville in accordance with
A.C.A. §14-235-212 to continue providing operation and maintenance services for thc
Farmington Wastewater Collection System, and transportation and treatment of
wastewater produced by Farmington customers; and
WHEREAS, in meeting this service commitment, Fayetteville must ensure that
this role does not place a financial burden on Fayetteville's customers for which the
Fayetteville customers do not receive a corresponding benefit, and there should not be a
financial burden on Farmington's customers for which the Farmington customers do not
receive a corresponding benefit.
NOW, THEREFORE, in consideration of mutual covenants and conditions
contained herein, it is hereby agreed as follows:
SECTION 1.
DEFINITIONS
1.1 Arkansas Department of Environmental Quality (ADEQ) — The State of
Arkansas' Department whose mission is to protect and enhance the state's environment.
1.2 Arkansas Department of Health and Human Services (ADHHS) — State
agency whose mission is to protect the health of all of Arkansascitizens and visitors.
1.3 Arkansas Natural Resources Commission (ANRC) — State agency whose
mission is to manage and protect our water and land resources for the health, safety and
economic benefit of the State of Arkansas.
1.4 Collector Sewers — Pipes used to collect and can -y wastewater from
individual sources to an interceptor sewer that will carry it to a treatment facility.
(USEPA On -Line Glossary of Terms)
1.5 CMOM — CMOM stands for "Capacity, Management, Operations, and
Maintenance". It is a flexible, dynamic framework for municipalities to identify and
incorporate widely accepted wastewater industry practices to. (i) better manage, operate,
and maintain collection systems; (ii) investigate capacity constrained areas of the
collection system; (iii) respond to sanitary sewer overflow (SSO) events. (Water
Environment Federation CMOM Reference Manual)
1.6 Capacity Improvements — Any investment in facilities that cause or allow
the Fayetteville West Side Wastewater Treatment Plant, Farmington Lift Station #12, or
any other components of the sewer collection system to carry or process wastewater
which provide a benefit to Farmington by increasing the capacity of the West Side
Wastewater Treatment Plant or by extending or increasing the useful life or initial design
capacity of the West Side Wastewater Treatment Plant.
1.7 Facilities — Publicly owned components of the sewer collection system and
treatment plants including but not limited to sewer pipes, manholes, pump stations, odor
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control structures, power generators, electrical components, and attendant support
facilities thereto.
1.8 Farmington Customers — All sewer customers located within the City of
Farmington.
1.9 Farmington Wastewater Collection System — Farmington Publicly Owned
Treatment Works including any device or system used in the collection, transportation, or
treatment of municipal sewage or industrial wastes of a liquid nature that is owned by
Farmington. This definition shall include, but is not limited to, the gravity sewer pipes,
collector sewers, transmission mains, force mains, manholes, and all appurtances within
the corporate boundaries of Farmington, the Farmington Branch Interceptor, Lift Station
#12 and relocated Lift Station #12; Lift Station #12 Force Main located within the
corporate boundaries of Farmington and Fayetteville and all other appurtances which are
being financed and constructed. Service laterals are generally the responsibility and
ownership of the Retail Customer and are thus excluded from this definition.
1.10 Fayetteville Policies — Those policies, procedures, ordinances and
resolutions as adopted by the City of Fayetteville City Council, City of Fayetteville Water
and Sewer Committee, and/or the City of Fayetteville Water and Wastewater utility.
1.11 Force Main — A sanitary sewer main that operates under pressure,
transporting wastewater from one location to another. Taps cannot be made onto Force
Mains.
1.12 Infiltration and Inflow — Infiltration: The penetration of water through
the ground surface into sub -surface soil or the penetration of water from the soil into
sewer or other pipes through defective joints, connections, or manhole walls. (USEPA
On -Line Glossary of Terms) Inflow — Entry of extraneous rain water into a sewer system
from sources other than infiltration, such as open elements, roof drains, basement drains,
sump pumps, manholes, and storm drains. (USEPA On -Line Glossary of Terms)
1.13 Independent Consultant — A consultant who is not an employee of an
entity, but who has a contractual relationship with that entity to provide a professional
service.
1.14 Interceptor Sewers — Large sewer lines that collect the flows from main
and trunk sewers and carry them to treatment points. (USEPA On -Line Glossary of
Terms)
1.15 Lift Station #12 — The sanitary sewer lift station owned by Farmington and
located in the northwest portion of Farmington that pumps the majority of the wastewater
from the City of Farmington sanitary sewer collection system to the point of connection
to the City of Fayetteville sanitary sewer system.
1.16 Net Plant — Net Plant is the sum of the cumulative investments in the
Fayetteville sewer collection system and treatment plants' assets less accumulated
depreciation on those assets.
1.17 Operational Capacity — The firm wet weather capacity of a portion of the
sewer collection system and treatment plants. In the case of lift stations, firm capacity is
defined as the true pumping capacity when the largest pump is out of service. In all
cases, operational capacity must allow for wet weather flow, which is defined based on
the size of the watershed area. For the West Fayetteville — Farmington basin, operational
capacity is defined as a five year one hour storm in which 2.5" of rain falls within any
one hour period. For the West Side Wastewater Treatment Plant, operational capacity is
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defined as a two year one hour rainfall event embedded into a five year twenty four hour
rainfall event.
1.18 Sewer Collection System and Treatment Plants — Any municipally owned
device or system used in the collection, transmission, storage or treatmcnt (including
recycling and reclamation) of municipal sewage or industrial wastes of a liquid nature.
This definition includes lift stations, sewers, pipes, or other conveyances only if thcy
convey wastewater to a sewer treatment plant. A.C.A. §14-235-203
1.19 Pretreatment — Processes used to reduce, eliminate, or alter the nature of
wastewater pollutants from non-domestic sources before they are discharged into a
municipal sewer collection system.
1.20 Project — Sewer system improvements including the Farmington Branch
Interceptor, Relocated Lift Station #12 and the Lift Station #12 Force Main and
easements acquired to re-route the areas tributary to the City of Farmington Lift Station
(LS 1/12) to the City of Fayetteville West Side Wastewater Treatment Plant.
1.21 Pump (Lift) Station — Mechanical device installed in sewer or water
system or other liquid -carrying pipelines to move the liquids to a higher level. Pumping
stations can be either municipally owned components of the sewer collection system or
privately owned pumping units serving individual customers.
1.22 Retail Customer — The ultimate consumer of either water or wastewater
services who is individually connected to the water distribution or wastewater collection
system and receives periodic billing directly from Fayetteville for the services provided
irrespective of governmental jurisdictions.
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1.23 Sanitary Sewer Overflow — A sanitary sewer overflow (SSO) is any
overflow, spill, release, discharge or diversion of wastewater from a sanitary sewer
system. Sanitary sewer overflows include:
(i) overflows or releases of wastewater that reach waters of the United States;
(ii) overflows or releases of wastewater that do not reach waters of the United
States; and
(iii) wastewater backups into buildings and on private property that are caused by
blockages or flow conditions in a sanitary sewer, other than a building lateral.
Wastewater backups into buildings caused by a blockage or other malfunction of a
building lateral that is privately owned is a sanitary sewer overflow when sewage is
discharged off of private property into streets, storni drains, or waters of the State. (Water
Environment Federation CMOM Reference Manual)
1.24 Sanitary Sewer Rehabilitation — The work involved in studies, designs, or
construction projects with the objective of identifying and/or repairing an existing sewer
collection system with the intent of restoring the system to near its original capacity by
repairing and/or replacing system facilities with a focus on removing sources of
infiltration and inflow from the system.
1.25 Sanitary Sewer Collection System — Any municipally owned system of
pipes, pump stations, sewer lines, etc., used to collect and convey sewage to a sewer
treatment plant. Temporary storage and conveyance facilities (such as vaults, temporary
piping, construction trenches, wet wells, impoundments, tanks, highline, etc) are
considered to be part of the sanitary sewer collection system, and discharges of sewage to
these facilities are not sanitary sewer overflows.
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1.26 United States Environmental Protection Agency (USEPA) — The Agency
of the United States Government that is charged with the responsibility to develop and
enforce regulations that implement environmental laws enacted by Congress whose
mission is to protect huinan health and the environment
1.27 United States Army Corps of Engineers (USACE) — The Agency of the
United States Government that is charged with, among other tasks not germane to this
agreement, planning, approving, designing, building and operating water resources and
managing the nation's wetlands.
1.28 Utility Basis — The allocation of revenue requirements or total cost of
service to be derived from rates among the classes of customers served.
1.29 Wastewater System Impact Fee — The existing Fayetteville sewer impact
fee assessed upon new development for sewer connections and any other sewer impact
fee imposed by a municipality upon new development to generate funding or for
recouping expenditures of the municipality that are reasonably attributable to the
increased sewer capacity needs of the development. (A.C.A. §14-56-103)
1.30 West Side Wastewater Treatment Plant — The City of Fayetteville owned
Wastewater Treatment Plant located on Broyles Road in Fayetteville.
SECTION 2.
TERM OF CONTRACT
2.1 Term of Contract
Fayetteville agrees to provide capacity, management, operations and maintenance
services for the Farmington Wastewater Collection System and receive, transport and
treat the Farmington's wastewater for a term of fifteen (15) years from the date of
execution of this contract. Farmington agrees to provide all of its sewage received
through its sewer collection system to Fayetteville's sewer collection system and
treatment plants for a term of fifteen (15) years from the date of execution of this contract
and pay for or require its sewer customers to pay for Fayetteville's sewer collection and
treatment pursuant to this contract at the rates set by the Fayetteville City Council.
2.2 Farmington's Notice of Future intent
At the end of the tenth (1Oth) year of this contract, Farmington shall either provide
notice of intent to discontinue purchasing capacity, management, operations and
maintenance services from Fayetteville for Farmington's Wastewater Collection System
at the end of the term of this contract or provide notice of its intent to negotiate a
replacement contract with Fayetteville.
2.3 Farmington Right to Negotiate Capacity
Farmington shall have the right to request an increased percentage level of the
Operational Capacity as defined herein, upon mutual agreement of all parties for the
remaining five (5) years of the contract.
2.4 Fayetteville's Notice of Future Intent
At the end of the tenth (101) year of this contract, Fayetteville shall either
provide notice of intent to discontinue providing capacity, management, operations and
maintenance services for Farmington's Wastewater Collection System at the end of the
term of this contract or provide notice of its intent to negotiate a replacement contract
with Farmington.
2.5 Mutual Agreements
At the end of the tenth (10th) year of this contract, either Farmington or
Fayetteville may elect not to renew the contract for services upon the expiration of the
fifteen (15) year term herein. If a City elects not to renew, that city shall notify the other
City's Mayor, in writing, via certified mail, return receipt, post marked no later than
ninety days after the date of the tenth (10th) anniversary of the execution of this contract
at the City's address listed below. The parties further recognize the potential that, if
mutually agreed, the two wastewater systems may consolidate into one singly owned
wastewater system. Nothing in this agreement shall compel the merger of the systems.
SECTION 3.
COLLECTION AND TREATMENT OF WASTEWATER
3.1 Residential and Commercial Wastewater
Fayetteville agrees to accept, transport and treat all domestic and commercial
wastewater produced by Farmington Customers by utilizing Fayetteville's sewer
collection system and treatment plants.
3.2 Industrial Wastewater
Industrial wastewater containing toxic or other matter that may be incompatible or
harmful to the waste treatment process shall not be discharged into the Fayetteville sewer
collection system and treatment plants without the express written consent of
Fayetteville. Consent to the industrial wastewater discharge shall not be unreasonably
withheld.
As a condition to the consent being granted, Fayetteville may require that
concentration of such substances in waste discharge to its system be eliminated or
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reduced to limits acceptable to Fayetteville's sewer collection system and treatment
plants. Farmington agrees it shall adopt a sewer use ordinance for pretreatment of
industrial waste at least as stringent as Fayetteville's ordinances. This ordinance must be
revised as required to reflect changes in Fayetteville's ordinances. Fayetteville will
conduct all routine operational pretreatment activities. Implementation and enforcement
of the Farmington sewer use ordinance, above and beyond that required by Fayetteville's
ordinances, shall be at Farmington's cost.
3.3 Operational Capacity
Throughout the term of this contract, Farmington customers shall be granted 8.2%
of the Operational Capacity of the Fayetteville West Side Wastewater Treatment Plant.
Until such time as the construction of the West Side Wastewater Treatment Plant is
completed, Farmington retail and industrial customers shall continue to utilize the Noland
Wastewater Treatment Plant and present facilities.
SECTION 4.
CAPACITY, MANAGEMENT, OPERATIONS AND MAINTENANCE
4.1 Operations and Maintenance
Fayetteville agrees to operate and maintain the Farmington Wastewater Collection
System in compliance with all applicable federal and state laws, permits and regulations.
Fayetteville shall furnish all labor, equipment and materials to provide a predictive,
preventative, routine and corrective Capacity, Management, Operations and Maintenance
program and replacement schedule for the Farmington Wastewater Collection System,
which includes but is not limited to, the municipally owned gravity sewer pipes, force
mains, manholes, lift stations and all appurtenances within the corporate boundaries of
Farmington, the Farmington Branch Interceptor, Lift Station #12, and relocated Lift
Station #12, Lill Station #12 Force Main and all other appurtances which are being
financed and constructed. All costs associated with service laterals shall be bome by
Farmington customers.
4.2 Access and Inspection
Fayetteville shall have full access to inspect the Farmington Wastewater
Collection System, and all users' facilities for purposes of inspection, sampling, and any
other duties deemed necessary to enforce sewer use ordinance or ensure discharges being
made to the sewer system meet all requirements of the ordinance, and for purposes of
implementing and performing a Capacity, Management, Operations and Maintenance
program and replacement schedule; to monitor, maintain and repair the Farmington
Wastewater Collection System to minimize infiltration and inflow into the system and
prevent sanitary sewer overflow. Farmington agrees to fully and promptly implement
and enforce Farmington Wastewater Collection System ordinances and grants
Fayetteville the right to terminate sewer/water service to any Farmington customer who is
in violation of these ordinances.
4.3 Regulations and Ordinances
Farmington customers shall comply with wastewater rules, regulations and
ordinances enacted by the City of Fayetteville. Fayetteville agrees to provide copies of
all applicable wastewater usage ordinances enacted before and after the execution of this
contract to Farmington. Farmington grants Fayetteville the right to terminate sewer/water
service to any Farmington customer who is in violation with Fayetteville's ordinances.
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4.4 Adoption and Enforcement of Sanitary Sewer Ordinances
Farmington shall adopt and enforce ordinances that meet or exceed Fayetteville's
wastewater usage ordinances and shall adopt and enforce ordinances to effectuate the
terms and conditions of this contract.
SECTION 5.
COMPLIANCE WITH LAWS, PERMITS AND REGULATIONS
5.1 Wastewater Treatment
Fayetteville shall be responsible for complying with all federal and state laws and
regulations and reporting requirements pertaining to the treatment of wastewater.
5.2 Planning
Fayetteville shall be responsible for developing, implementing and maintaining a
Wastewater Master Planning document and a Capacity Management, Operations and
Maintenance (CMOM) Manual that complies with applicable published standards issued
by the following regulatory agencies: USEPA, USACE, ADEQ, ADHHS, ANRC and
any successor agencies. The plan will include regulatory compliance, Best Management
Practices and public health protection. All the aforementioned plans and documents shall
be made available to Farmington upon request.
5.3 Fines and Penalties
Fayetteville shall be liable for fines and penalties that may be imposed by any
regulatory agency for violations of permits, regulations or any other applicable laws
related to the operation of its sewer collection system and treatment plants. Farmington
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shall be liable for fines and penalties imposed for failure to enact or enforce its
ordinances or otherwise its failure to comply with the requirements of this contract.
SECTION 6.
CUSTOMER BILLING
6.1 Utility Service Charge
Fayetteville shall be responsible for preparing and issuing monthly utility bills to
Farmington customers for sewer service and shall be responsible for administration and
collection. Any service charges or surcharges imposed by Farmington shall be a part of
Fayetteville's combined water and sewer utilities billing and shall be detailed as "City of
Farmington Sewer Surcharge." Any service charges or surcharges imposed by
Farmington shall be properly recorded, accounted for separately and remitted as provided
herein. Fayetteville shall maintain municipal accounting records in accordance with
Arkansas law and shall have the authority to collect amounts owed in accordance with
Fayetteville Policies and Arkansas law.
The amount charged in monthly utility bills to Farmington customers shall be full
compensation for all services provided by Fayetteville under this contract (except as
noted below and for required sewer impact fees), which includes wastewater treatment
and disposal in accordance with Section 3; operation and maintenance of the Fannington
Wastewater Collection System in accordance with Section 4; and customer billing and
administration.
6.2 Delinquency
Fayetteville shall have the authority to collect delinquent accounts in accordance
with Fayetteville Policies and Arkansas law and shall assess late fees and disconnection
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charges to reimburse for actual cost of disconnection and reconnection of services.
Farmington shall not be liable for the cost of collecting delinquent accounts, and
disconnection and reconnection charges.
6.3 Sewer Tap Connections
Fayetteville is authorized to charge and collect for sewer tap connections to
Farmington's Wastewater Collection System in amounts established by the Fayetteville
City Council, subject to adjustments during the term of this contract to reflect change in
costs. The connection fee shall be based on the cost of providing the service.
6.4 Street Cut and Other Tapping Related Fees
Fayetteville is authorized to collect a street cut fee, state highway permit fee and
other specific required fees, if applicable, when a sewer tap fee is collected. Fayetteville
shall be authorized and responsible to make street cuts as needed for the execution of
sewer service improvements and repairs. Upon the completion of the sewer
improvements and repairs, Fayetteville shall repair all wastewater utility street cuts
within sixty (60) days, weather and asphalt availability permitting, in compliance with
Fayetteville ordinances, policies and procedures for street construction and repair.
6.5 Plumbing Permits
Farmington shall enact ordinances requiring all of its customers to obtain
plumbing permits from the City of Fayetteville and to install all residential, commercial
and industrial plumbing in accordance with Fayetteville plumbing code regulations and
ordinances.
6.6 Retail Rate Surcharges
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Farmington is authorized to add a surcharge to sewer rates imposed by
Fayetteville. Farmington shall comply with A.C.A. §14-235-223 for these sewer charges.
Surcharges shall be collected by Fayetteville and remitted to Farmington monthly.
Farmington shall have the right to designate the basis for computing the surcharge (billed
water volume, billed sewer volume, flat fee, etc.).
All rate surcharges shall be the property of Farmington. Fayetteville will
administer and collect the Farmington utility customer surcharge and collect the
Farmington Sewer Impact Fee for a fee of 4% annually of the amount collected for both
charges. Remittance shall be no more frequently than monthly on the amount collected.
The remittance will include documentation of the "Annual Percentage Yield Earned for
the month of collection as computed on Fayetteville's current monthly bank statement."
Fayetteville shall invest the moneys collected in a manner consistent with Fayetteville's
investment of cash and shall remit all investment earnings earned on Farmington's
Customer Surcharge. Fayetteville shall invoice Farmington for the 4% service fee on the
same frequency as the remittance. Fayetteville shall reflect Farmington's surcharge as a
separate line item on monthly utility billings to Farmington's customers. All surcharges
shall be properly recorded and accounted for separately. All records will be made
available to Farmington upon request.
6.7 Sewer Connections for Customers Receiving Alternate Water Service
Farmington customers who do not receive Fayetteville water services shall be
provided sewer service during the term of this contract upon the agreement of the Parties
to a mutually acceptable method of billing for sewer service which may include a service
charge or higher fee to offset increased meter reading or billing costs. Sewer service for
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Farmington customers receiving alternative sources of water shall receive the same sewer
services provided Farmington customers who receive Fayetteville water services as
provided hereinabove.
6.8 Taxes and Fees
Farmington shall not be authorized and agrees not to impose, levy or charge a
franchise tax, surcharge, fee or any other form of exaction upon Fayetteville for the
services provided during the term of this contract.
SECTION 7.
COST OF WASTEWATER COLLECTION AND TREATMENT
AND CMOM SERVICES
7.1 Principles and Policies
The Parties acknowledge that deterrnining rates based on costs is a wastewater
industry practice and historically accepted practice of Fayetteville and its outside city
customers. Principles, policies and methodologies to determine rates for wastewater
collection and treatment and Capacity, Management, Operations and Maintenance
services as described herein are intended to meet the objective of providing fair and
equitable cost -based rates.
The following general principles and policies are intended to provide guidance to
formulating rate studies and associated documentation during the term of this contract
and shall be utilized to the extent feasible in setting rates:
1. Adjusting rates upon abrupt changes in financial policies should be
avoided.
2. Prepare rate formulations that are easy to administer and
understand.
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3. Determine rates that are "fair and equitable" while balancing the
needs of all Parties.
7.2 Framework for Determining Rates
After taking into consideration the basic principles set forth above, retail
wastewater treatment and collection system rates shall be developed by Fayetteville for
Farmington customers based on the following framework:
1. Fayetteville and Farmington agree to collaborate on the criteria for
rate adjustments to be utilized by an independent rate consultant to develop rates which
are fair and equitable across all customer classes.
2. Utility rate studies require professional judgment. The Independent
Consultants shall be instructed to use their professional judgment to develop a rate study
that is fair and equitable and neither overly favorable nor burdensome to either Party.
3. The Independent Consultants shall possess a national reputation
with demonstrable expertise in water and wastewater utility rate making and employ
registered professional engineers and such other professionals as needed to develop the
necessary criteria for rate making purposes to ensure that wastewater utility rates are fair
and equitable across all customer classes computed on a cost of service basis.
Fayetteville will incur the cost of the Independent Consultants. The Fayetteville
Independent Consultant Selection Process shall include a Farmington representative
designated by the Farmington Mayor.
4. The rate study analysis shall conform to generally accepted rate
setting practices and be in compliance with the mutually agreed upon rate methodology
based in whole or part on published rate making standards adopted and published by the
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American Water Works Association (AWWA), Water Environment Federation (WEF)
and other rate setting methodologies of authoritative organizations and practice manuals.
5. The cost of services rate calculation shall be a Utility Basis
approach. It shall include all cost of service and the operations, maintenance and
replacement cost for facilities which provide capacity enhancement or extend utilization
of the existing capacity of Westside Treatment Plant and shall contain a rate of return
allocation on the Net Plant required to provide service to Farmington customers. The rate
of return percentage shall be computed by determining the average of interest rates for all
outstanding Fayetteville water and sewer revenue bond issues at the time of each rate
study and then adding to the average interest rate computation a premium of 1.5% to
arrive at a total rate of return. The rate of return percentage provides compensation to the
Fayetteville rate payers for Fayetteville's investment in the Fayetteville sewer collection
system and treatment plants, and recognizes Fayetteville's ownership, risk and
contributions. The determination of Net Plant shall exclude monies acquired and assets
purchased with USEPA Grants or other forms of contributed capital, assets purchased
utilizing loans supported in part or whole by USEPA Grants or other types of giants and
assets purchased with a sales and use tax enacted by either Fayetteville or Farmington.
7.3 Rate Adjustments
If the current wastewater rate study (estimated completion date in the second
quarter of 2007) recommends a system -wide rate change prior to 2009, the rate may be
adjusted accordingly in 2007 or 2008. Otherwise, the rate schedule established in Section
8 below is subject to adjustment by Fayetteville in 2009 and thereafter when Fayetteville
rates are adjusted on a system -wide basis. Fayetteville agrees to provide Farmington a
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