SEWER USER RATE SYSTEM UPDATE

Sewer Rate Summary Sheet

The purpose of this report is to document the Wells Sanitary District’s present system of sewer charges and to describe a proposed new system.  The proposed system is intended to simplify customer billings, which will minimize increased administration costs, and apportion system charges in the most equitable manner based on individual water consumption.

In general, sewer user rates are set up to recover all the costs associated with providing wastewater treatment services to the system’s customers.  This is required by state statute, Title 38, M.R.S.A., Section 1202.  Costs include operation and maintenance costs, financed debts, equipment replacement, and any other costs associated with the wastewater treatment facilities. In addition, sewer user charges are set up to distribute these costs to each user in proportion to the contribution to the total wastewater loading of the treatment  works, and must distribute these costs amongst the customers in a fair and equitable manner. Wastewater loading can be volume and/or strength based. The sewer user rates should be reviewed and revised periodically to ensure adequate and equitable cost recovery.

The Wells Sanitary District was initially established in 1970 and became operational in 1979. The District’s present system of user rate charges is based on a report prepared in 1983. During the 19 years that the current sewer user rate system has been in effect, it has largely remained unchanged. There has been only the addition of the “Equipment Replacement Fund” to the original sewer user rate system. The District has experienced one rate decrease and three rate increases while utilizing the current sewer user rate system. In addition to sewer rates, the District also collects revenue from septage fees, connection fees and impact fees. These fees generally do not affect the sewer user rate system.

Charge Categories

The revenue required annually to operate the Wells Sanitary District (WSD) system consists of: (1) debt repayment; (2) support system expenses; (3) operation and maintenance expenses for the collection and treatment facilities;  and (4) equipment replacement fund, which is included in the operation and maintenance charge. These charges are described below.

·        Debt Retirement

The debt retirement charge is the cost of interest and principal on loans that were incurred to build wastewater treatment facility infrastructure. WSD had previously received, as part of the original facility, a FmHA grant/loan (USDA Farmer’s Home Administration) which could not be used to benefit non-residential users. As a result, the non-residential user rate included an additional charge to conform to the FmHA regulations.  The District’s present debt retirement charge has no such constraints, because the FmHA loan was recently retired.

·        Support Systems

The support systems charge is the cost of fixed operation expenses.  Fixed operation costs are items that are not a function of the quantity or strength of wastewater treated by the WSD.  Examples of support system expenses include insurance, legal, audit and wages/salaries of certain District personnel.

·        Operation and Maintenance

The operation and maintenance charge is the variable cost of operating and maintaining the WSD facilities and is a direct function of the volume of flow of the wastewater. Examples of operation and maintenance expenses include power, water, chemicals, repairs, and wages/salaries of certain District personnel. The operation and maintenance charge also includes the equipment replacement fund.

·        Equipment Replacement Fund

Required by statute and included in the operation and maintenance charge. It is intended to collect funds in advance to be available to purchase new equipment or repair worn out or replace obsolete equipment without incurring additional debt.

The present sewer user rate system adopted by the WSD uses the “equivalent unit (EU)”.  Regardless of the user classification, one equivalent unit is equal to 4,900 cubic feet (cu. ft.) of water consumption, which is the average annual residential water consumption. Meter readings are obtained from the local water district.  Each user class is assessed a charge that is approximately proportional to usage. The existing rate schedule recovers the operational costs which are somewhat different depending upon user classification. 

User Classes

The WSD’s present user rate system recognizes five classes of users: residential user, unconnected residential user, commercial user, unconnected commercial user and vacant land user. Both seasonal and year-round users are treated by the system of sewer rates indiscriminately.

A “Residential User” is defined as a single family dwelling, two family dwelling, or a three family dwelling. 

An “Unconnected Residential User”  (ready-to-serve) is defined the same as a “Residential User” above; however, the residential property abuts the sewer but is not connected to the sewer system.

A “Commercial User” can be a four or more family dwelling and any commercial user. A commercial user is one which is defined to be neither a residential user nor a vacant land user.

An “Unconnected Commercial User” (ready-to serve) is defined the same as a “Commercial User” above; however, the commercial property abuts the sewer but is not connected to the sewer system.

A “Vacant Land User” is a parcel of land that abuts the sewer but has not been built upon. Vacant land is charged based on a “per linear foot of frontage” along the sewer.

Application of Sewer User Rates

The WSD’s present user charge system is provided in Appendix A. As can be seen from this rate schedule, the residential users who are connected to the sewer system provide the WSD with debt retirement, support system, and operation and maintenance/equipment replacement income. The residential users who are not connected to the sewer system provide debt retirement funds only.

The non-residential users who are connected to the sewer system provide the WSD with debt retirement, support system, and operation and maintenance/equipment replacement income.   Commercial users are charged higher debt retirement fees than residential users.  This is due to the original FmHA grant/loan,as previously described. The commercial users who are not connected to the sewer system provide debt retirement funds only.

Vacant land is charged $1.00 per year per linear foot of frontage on the sewer system, which is applied to debt retirement.

Residential sewer rates are based on a single family residential dwelling being equal to one user, whereas duplex and triplex residential dwellings are considered to be two and three users respectively. Residential users are charged $75.00 per user for debt retirement and $79.00 per user for support systems charge and $0.027 times the number of cubic feet of water used annually for operation and maintenance/equipment replacement.

Commercial sewer rates are based on the “equivalent unit” (EU).  A commercial user is charged for a minimum of one EU, regardless of actual water usage.  The debt retirement charge is $75.00 plus $40.00 times the number EU’s. The support system is $79.00 times the number of EU’s.  Operation and maintenance/equipment replacement is $0.027 times the number of cubic feet of water used annually.

Samples of present billings are included in Appendix B.

Based in part on specific items presented below, the WSD is proposing an update to the present system of sewer user rate:

1.)     The existing sewer rate system structure charges commercial users a higher portion of debt retirement than residential users to account for the former FmHA grant/loan used to help finance the original facility. The WSD has repaid this loan and now seeks a structure to reflect a more equitable debt retirement structure for all sewer users.

2.) The WSD wishes to conform its billing practices with the Maine Condominium Act, M.R.S.A. §1601-101, et seq., which in effect, states that each condominium unit should be treated as a separate piece of real estate and is required to be billed individually. The local water district is presently requiring individual water meters for new condominium units within the WSD’s service area.

Commercial condominium developments are currently billed as one commercial account. Under the statutes, condominium units should be billed individually.  The new definitions will correct this.The WSD already bills individual owners of residential condominium units. 

User Classes

The proposed new sewer rate system will be restructured to eliminate the distinction between residential and commercial users.  The new rate system will use an equivalent unit (EU) of 4,900 cubic feet of water consumption.  Because there will no longer be a difference between a commercial or residential account, the new system will only have three user classifications (instead of five): connected users, unconnected (ready-to-serve) users and vacant land users.

Definitions:

A “connected user” is defined as any person, whether an individual, firm or corporation, public, private or municipal, who owns or is in legal possession of real estate that is built upon and that is served or benefited by connection to the sewer system of the WSD.

Other factors include:

a. The owner or person in possession of each separately titled parcel of real estate (for example, a separate house or business or a condominium unit) connected to the sewer system shall be a “connected user”.

b.  The owner of multiple wastewater sources on a single parcel of real estate (for example, two houses on one lot) may request separate accounts for each source, which accounts will then be considered to be separate “connected users”.

c.) If more than one connected user is located within a single development (for example, motel condominium units) the billing of the District shall be based upon water usage for each unit. If data for the water usage for each user is not available, the District shall make a reasonable estimation of water consumption for each user based upon such information as is available. These estimations will include equal proration to each unit from the total usage, or by other reasonable means. Billing may be done through the owners association or central management, where appropriate. Liens and other enforcement rights of the District for payment to the District of sewer user charges shall not be waived by such an arrangement of billing through the central management or association.

d. If there is more than one connected user for a single parcel of real estate (for example, time-shared unit ownership), the billing of the District shall be based upon a proration of the water usage for the billing period. Whenever possible, by agreement or otherwise, the District may bill the time-share management for the connected user charges for each unit for the whole billing period, regardless of the number of actual “connected users” (separate time-share owners). Liens and other enforcement rights of the District for payment to the District of sewer user charges shall not be waived by such an arrangement of billing through the time-share management.

An “unconnected user” (ready-to-serve customer) is defined as the same as a connected user except that the property abuts the sewer, would be served or benefited by connection to the sewer, but is not connected to the sewer system.

A “vacant land user” is defined as the owner or person in possession of a parcel of land, as described in “connected user, which land abuts the sewer and has not been built upon.

Application of Sewer User Rates

The proposed rates included herein are based on existing debt, the 2002 budget and the estimated number of equivalent users as determined by the WSD based on a review of system users and recorded water usage. Numbers may be adjusted in the future to reflect increased or decreased debt and/or operational costs.

Connected User

For the connected user, there is a minimum debt retirement charge of $63.00.  This is a charge equivalent to water consumption of 4,900 cubic feet per year. Whenever water consumption exceeds this amount, the charge for debt retirement is directly proportional to water usage.  (See summary below)

For the connected user, there is a minimum support system charge of $69.00. This is a charge equivalent to water consumption of 4,900 cubic feet per year. Whenever water consumption exceeds this amount, the charge for support systems is directly proportional to water usage.  (See summary below)

For the connected user, the operation and maintenance charge (including the equipment replacement) is directly proportional to water consumption, at a rate of $0.027 times the number of cubic feet of water used. (See summary below)

Unconnected User

For the unconnected user there is a minimum debt retirement charge of $63.00.  This is a charge equivalent to water consumption of 4,900 cubic feet per year. When water consumption exceeds this amount, the charge for debt retirement is directly proportional to water usage. (See summary below)

Vacant Land User

The vacant land user is charged a rate of $1.00 per linear foot of frontage abutting along the sewer for debt retirement.

No new charge categories have been proposed as a result of this rate system update. (see “Charge categories” on page 1)  The new sewer rate structure for each classification of user is outlined below.  Note, all charges and water consumption figures are annual.

Summary of Proposed Sewer Rates

Connected User Charges

• Debt Retirement Charge

< 4900 cu. ft. of water consumption => $63

• > 4900 cu. ft. of water consumption => $63 * (water consumption cu. ft. /4900 cu. ft.)

• Support Systems Charge

< 4900 cu. ft. of water consumption => $69

> 4900 cu. ft. of water consumption => $69 * (water consumption cu. ft. /4900 cu. ft.)

• Operation & Maintenance / Equipment Replacement Charge

= $0.027 * (water consumption cu. ft.)

Unconnected User Charges

• Debt Retirement Charge

< 4900 cu. ft. of water consumption => $63

> 4900 cu. ft. of water consumption => $63 * (water consumption cu. ft. /4900 cu. ft.)

Vacant Land User Charge

• Debt Retirement Charge

=> $1 per linear foot of frontage along the sewer

Appendix B provides a summary of example billings comparing the present and the proposed new systems.