HomeMy WebLinkAbout1980 Desch Memorandum of Joint Wastewater Treatement FacilitiesMEMORANDUM
TO: Members of Ithaca and Dryden To\m Boards
FROM: Noel Desch, Supervisor, Toxm of Ithaca^^^/#'*'
RE: Joint Ownership of the new Wastewater Treatment
Facilities.
DATE: December 9, 1980
I enclose .two papers for your information. The first is a
number of comments prepared by Ithaca Tovm Attorney James V.
Buyoucos, on the matter of the City Charter. These comments
show that the Common Council already has the authority to
enter into a joint ownership agreement without a charter
change.
The second paper is an attempt by me to place in perspective
our concerns and to summarize the elements of the service
agreement and joint ownership proposals. I believe you will
find this useful. If you detect any errors or omissions,
please call me or drop me a note.
The Ithaca Town Board held a public hearing to discuss the
matter on December 8, 1980, and adjourned the hearing until
January 12, 1981. There is a strong consensus that we must
acquire the equity afforded by joint ov7nei*ship, but we are
willing to consider having the City operate the plant in
recognition of the existence of an operating organization,
providing that we can change operators in the event we all,
as governing bodies unanimously agree to do so.
I expect we soon will have another joint meeting with the
City of Ithaca. If in the interim, it does not appear that
we are converging on an acceptable compromise it may be
necessary to have a joint meeting of our Town Boards. In
the meantime, I will be writing to the Town of Ithaca bonding
attorneys to get their opinion as to our authority to borrow
the Towns local share of a capital project, which we would
not own, in the case of the service agreement approach.
Best wishes for a most happy holiday season.
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CO>JMENTS ON THE EFFECT OF CHAKTER
PROVISIONS CREATING THE DEPARTMENT
OF PUBLIC WORKS ON A PROPOSED
AGREEMENT BETl^EN THE CITY AND THE
TOWN l^THICH WOULD PROVIDE FOR JOINT
OWNERSHIP OF SEWER FACILITIES
1. Section 5.13 of the Charter entitled "SCOPE OF AUTHORITY
OF BOARD OF PUBLIC WORKS", provides that the Board of Public
Works "shall take .charge and, subject to the limitations herein
contained, have control, subject to the direction and review of
Common Council... of the Sewer Department." This section
does not give absolute, uncontrolled authority to the Board.
Such authority is subject to the direction and review of Common
Council.
A. This means that the Board of Public Works is subject
to whatever directions the Common Council deems appropriate to
the maintenance, operation and improvement of its sexier system.
B. If the City decides to enter into an intermunicipal
agreement for the joint ownership of sewer facilities with the
Town, this is a matter for decision by the Common Council as
the governing and legislative body of the City.
C. Section 5-13 of the Charter has assigned the Sewer
Department to the Board of Public Works as one of the divisions
of the City's government which the Board takes charge of and
controls. So long as the City operates and maintains its o^m.
separate sewer system the Board of Public Works has charge of
and controls the operation of that system. This means that no
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other department: of the City can interfer with or pre-empt
the Board's power to control and operate that separate sewer
system (except, of course> that the Charter reserves to the
Common Council the superior powers to direct and review the
actions of the Board as stated in Section 5-13) . On the other
hand, this does not mean that the City cannot adopt a plan of
joint ox^ershlp vrith another municipality.
D. The argument for the power of the Common Council to
enter into an agreement providing for joint ownership can be
found in the following premises:
(1) Section 15-3 of the Charter has reserved t.o the
Common Council the power to direct the activities of and
control the exercise of authority by the Board of Public
Works. If joint ovmership is adopted, the Board of Public
Works will continue to be the sole agency within the City
which will have control of that portion of the City sewer
system which will continue to be owned by the City, such as
the collectors and some of the trunk and interceptor mains.
E. Because of the extremely high cost of construction,
operation and maintenance of modern sewage treatment facilities,
it is no longer economical for each municipality to construct,
operate and maintain its own separate plant. Because of
increased population and the spread of residential and
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commercial development into areas beyond the City, it is
necessary for the health, safety and welfare of the entire
area that proper facilities be available to areas outside
the City, Joint o^^nership of sewer treatment plants is the
only equitable and responsible manner of maintaining and
operating such facilities. It is a strained interpretation
of the Charter to insist that its provisions prevent the City
from entering into an agreement providing .for joint ownership.
Section 5.18, for example, simply states that the Board of
Public Works shall have the power to adopt and execute plans
for the extension and improvement of the present sewer and
water system. The phrase "extension and improvement of the
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system" would seem to refer to the present system or any
other system and facilities which are separately owned and
maintained by the City. Obviously one of the powers of the
Board is to keep in good operating condition any system, over
which it has control by- improving it and, of course, the
Board should have the power to extend within the City the
facilities of any such separate sewer system. These powers
to extend and improve a system are naturally and logically
required by the municipal body operating the system. But
this does not mean that the City cannot undertake and adopt
a nev7 concept for a jointly operated treatment plant in
response to current demographic, social and economic realities
Such a joint operation requires operation and management by
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an intermunicipal body composed of members of the participating
municipalities. To the extent that powers are not delegated
to such intermunicipal body by the joint agreement, such
powers may continue to be exercised by the Board of Public
Works. . ,
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How does one create a long term partnership to provide the n
most cost effective municipal services? , Joint oxTnersIilp or
service agreement for vraste water collection, treatment and
disposal?
The City of Ithaca and the Toxm of Ithaca and Dryden are about
to make a long term expensive commitment to replace the waste
vzater collection, treatment and disposal facilities serving
the City, the Varna area of the Toxm of Dry.den and the Toxm
of Ithaca except Cajruga Heights and the northeast. The
mechanism created to provide this service will significantly
influence the likelihood and nature of long term arrangements . '
for fire service, youth service, mass transit, etc.
Extensive engineering, economic and environmental analyses
have been accomplished over the past two years and the facilities
plan or preliminary, design phase has been completed by Stearns
and VJheler, approved by the participating municipalities, the
New York State Department of Environmental Conservation and
the U. S. Environmental Protection Agency. The facilities plan
not only determines the capacity and selection of treatment
processes and location of the 54" outfall pipe but also the
environmental assessment and estimates of life cycle costs.
Over a 30 year bond retirement period, users can expect to pay
approximately $50,ODD,000 for the operation, maintenance and
financing of these sewer services excluding the $28,000,000
federal and state share of the construction cost. Town of
Ithaca and Town of Dryden users are expected to pay approxi'-
mately 40% of the local costs or $20,000,000 over the 30 year
period, if the grov;th projections identified in the engineering .
report prove to be accurate.
Follov/ing several years of negotiations, the governing bodies
of the three municipalities In March 19/9, appointed a Sewer
System Planning Committee and charged the Committee to develop .
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at least two alternatives for the financing, o^'mership and,
operation of the Waste Water Treatment Facilities. The
Planning Committee consists of equal representation from the.
City and Towns, namely 4 members from the City, 3 from the . % :
Tovm of Ithaca and 1 from Dryden. Toto and City engineering .
support was provided during the deliberations. The design ! ,
consultants provided relatively little guidance on the matter " " '
of governance, except to say "I'Thy would the Town want to get *" ■
involved in. such a complex, messy operation, as a sewer ' . . ;i
system?" * •:
As a member of this Planning Committee, I can attest that all
■participants ware required to involve themselves in a con
siderable amount of sole•searching,into the inadequacies of ■ ■ "
the past contractual and operating arrangements. The tv70
alternatives now before us respond to the pitfalls of the past -
and where possible, offer common solutions to past and future
planning, policy and operating needs. .
All Planning Committee participants agree that the approach
adopted by the three governing bodies must include the ■
following elements, common to both alternatives developed by
the Committee: ,
1. . Provide one uniform sewer rate schedule for users
throughout the system (no more rate and one-half) and include ■
a provision wherein rate changes shall be subject to ratification
by each participating municipality.
2, Provide one mechanism for retiring new and remaining.
local jointly used sewer system debt (--$4,840,000) so that no
municipality would be subsidizing the others use or growth.
3, Reserve spare capacity for each municipality x-zithout
any party controlling the use of the others capacity within
the constraints of a mutually acceptable uniform set of standards
incorporated in a common sexver use ordinance. ;
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^'rovide facilities for the treatment of septap^e''
generated in Tomplcins County. Contractors handling these
septic tank purfipings would be required to deliver them to the
new Waste Water Treatment Facility and a charge would be ' ' .
assessed for treatment per load. * "
Ptovide that the share of the system annual operating'
and maintenance cost due from each municipality shall be deter
mined from quarterly readings of master meters located on the
trunk sex^ers at the Tox\rn line.-Each municipality will bill its"'
ox^m customers.
Provide that the duration of the agreement shall be • '
at least as long as the life of the bonds for the: local share . .
• of the improvement, probably 30 years.
.t^at are the implications of these common elements?"
1. A uniform sexier rate schedule for xiraste x-zater treat
ment and disposal services is mandated by EPA and.it assures
that each user X'/ill pay the same cost for the same service.
Each municipality retains its authority to match the method
of collecting the "sex-zer rents" from individual users, com- .
mensurate x-7ith the neiture of its oxm profile of users, (i.e., -'
residential, institutional, commercial, etc.). The Towns,
for example, may not wish to include its entire share of debt.,
retirement in the sewer rate, reflected on bills to users, '
but rather assess debt retirement costs against real estate
as a benefit assessment because of the large amount.of un
developed but benefitted property. On the other hand, the City
X7Lth a higher property tax rate and little undeveloped land
may x^/ish to include all of its share of- the debt retirement n
in the sexier use rate, ultimately charged to users.
The ratification requirement for changes in the uniform sewer
^ate schedule x-^ill reduce the opportun3,ty to commingle expenses
for x^ork actually performed on other than jointly used facilities,.
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or unrelated to the sewage treatment function. For example/
the $95,000 spent by the City from sewer fund surpluses for
the Fall Creek flooding problem would not have been possible ■
since it was of no benefit to this operation. (Under the
existing contract, it probably is illegal; also). .. ■ .
2. The debt retirement shares should be in balance with ■
the portion of the system utilized and reserved for each '
municipality. The City does not v^ant to "front end" the cost • .
for future Town growth. The participating municipalities :- '
agree that each should pay for the capacity each needs during
the first year of operation as a base load and fixed for the
life of the bonds. If such usage later decreases from the
base load, the said municipality still pays on the. basis of" • ^
the first year base load. If such usage increases.beyond their
base load, a portion of their spare capacity is used up; ,
This approach encourages all municipalities to repair' their *
sevyers before the new plant is completed and suggests the
desirability of completing construction of the master meter . '
installations in advance of the main plant improvements, so
that the best data possible will go into the initial rate
determinations. •. *
The facilities report estimates that BVL of the new plant *
capacity will be utilized on the first year of operation and ' '
distributed as follows: 55% City of Ithaca, " 20% XoxTn
of Ithaca, 1.2% Town of Dryden, 17.4% Industries,
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6.4% Septage.
3. Spare capacity consists of the remaining 197o of the
nev/ plant capacity and shall be allocated on a fixed basis
as follows: 20.6% City of Ithaca, 48.6% Tow of Ithaca,
0.67» Town of Dryden, 27,8% Industries, 2.4% Septage. /* '
In the event one of the parties needs more than its allocation •
of space capacity, the other parties agree to make available ' ~
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a portion of its remaining spare capacity and be reirabnrsed
for its previously paid debt cost value in dollars of that
year. No longer will one municipality be able to control how
the others use their spare capacity, or limit such use. The
City Board of Public Works will not be able to prohibit an
extension in the Towns under the guise that the Town sub- *
division "does not meet City subdivision criteria,"
4, The nex7 facility will assure the proper treatment of '
septage. No longer will this material be placed in landfills •. ~ :\'-
or spread on open fields to the detriment of our surface and ^
n ground water supplies. T-
5. The use of master meter readings for determining the.
municipal shares of the annual operation and maintenance cost
will create" incentive for each municipality to keep its . " '
collector sewers in good condition, since the higher amount.of
extraneous flox'/ (i.e., inflow and infiltration) the higher will . '
be its total share of the $500,000 annual operating, and
maintenance cost. The approach is critical because the operating
expenses for the new plant are almost double the existing, and
will continue to increase because of their energy, chemical
■' • ' * •"and labor intensive nature. : ' . ■ ; •. ./ • .
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H^at are the Advantages and Disadvantages of the Two Alter- • . v
natives ■'
1. The eligibility for reimbursement by'the State for , . . ' /-
operating and maintenance cost increases if the joint ovmer-
ship approach is adopted, since revenues from outside users
are no longer considered "profits" which under the service " .
agreement approach are deducted from the gross 0 & M costs..
Had joint ownership been implemented five years ago, all users
would have shared $76,158 more in State Aid. ' With the new
plant, the State Aid revenue loss under the service agreement
will be approximately $25,000/year. ^
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•v^ It should be pointed out that although the State legislature
U has approved such aid for over 15 years, there are no guaran- :
tees it will continue for the life of the agreement.
2. Both the City and Totm of Ithaca have recent AA Moodys
ratings. Hov/ever, the total annual City debt load and property*
tax load is considerably higher than the Toi^m. Further, the
1 difference between the total assessed value of the City and
the Tovm is expected to continue to diminish. For example, in 1970
the ratio was 69% City, 31% Town and in 1980, 63% City and
377o (both Town numbers excluding the Village of Cayuga Heights).
Bond buyers will recognize the combined strength of the three,
communities when offered, as a joint borrowing with the full
faith and credit of all three pledged on the issue. This
increased competitiveness will result in lower interest rates.
At the same time, the reduced amount of the borrowing for which
the City will be directly chargeable will make room for ...
financing other critical City capital projects for which there
is a recognized need. We also recognize that new sewer debt,
in any case, would be outside any statutory debt limits. How
ever, bond buyers are interested in total outstanding debt.
In the service agreement, the City would have to borrow the
total $4,800,000 local share plus sufficient cash flow (—$2,000,000)
during the project to assume timely payment pending reimbursement
from the State. Further, in the service agreement, City users
V70uld receive no credit for the To\m*s purchase of remaining,
equity in the existing land and facilities being.incorporated
in the new facilities. In the service agreement, the To\m
would have nothing .at the end of the contract period -after having spei
$20,000,000 to amortize, operate and maintain the plant for 30 years.
3. The joint ownership arrangement dictates a heavy
time commitment by all the members of the sewer board. The
City representatives are understandably concerned that the Town
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members interest: will wane once the hard vjork of building a'nd
operating the new facility become a reality. Six years ex
perience with the five municipalities making up the water
commission tells us otherv-/ise. For example, the four repre
sentatives from the Toxm of Lansing and Dryden, communities
whoso share of the cost is less than 37^, contribute the* same
extensive level of effort as each of the members of the
municipalities making up the other 977.! ! Xlhy does this
happen? The municipal representatives know the importance of
having the best water operation possible for their community,, u
at the least cost*. Their attention is focused on specific
needs and not distracted by unrelated budget pressures. The • .
operation, is called upon to stand on its own feet.
The joint ownership approach will remove the opportunity for
the Town to second guess operating decisions since their rep
resentative will be directly involved with those decisions. '
The same will be true with the City relationship to the sewer
board. This is the primary reason for having elected repre
sentatives from each group. In the City's case, one or two
of the non-elected representatives on the sewer board could
be members of the water and sewer committee of the Board of •
Public Works, thereby, building an effective bridge between
BPW and Common Council,
4. Operational liability under the joint, omership
approach will be shared, whereas in the service agreement the
Tovms V7ill be held harmless from negligent acts arising out of
the operation. While joint liability may be a disadvantage to the
Town, Cayuga Lake belongs to all of us and we should, therefore,
share in the x"esponsibility to protect it.
5. In the service agreement, the City has offered to
provide a number of services without cost to the To\ms, namely
indirect administrative services, such as Purchasing, Personnel,
Public Works and other central City administrative services
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such as Planning, Legislative, Legal or other costs. In the ; ^
joint ownership approach such services as are needed,' and in
direct .relation to the Wastcwater Treatment Facility, may be
legitimate expenses but there is incentive to keep demands
for such service to a minimum because the City users will
pay about 607^, of such costs. Experience with the water
commission teaches us that such charges, except a direct need
for legal services, are very small.' If a truck from the. • * ..
highway department is needed. It can be billed on an equip- ■ . ■
mental rental basis. '
How do the governing bodies control the quality and cost
effectiveness of the- service? ' ;•
In the joint ox'/nership agreement, the sewer board is made up
of seven representatives. Of the four from the City, two must
be elected officials. Of the three from the Towns, one from
each municipality must be elected officials. These represen- »
tatives serve at the pleasure of the governing body which
appoints them. Sewer Board action requires the affirmative
vote of four members," one of which shall be from other than a
City representative.
All rate changes are considered as amendments to the joint
ownership agreement and, therefore, subject to ratification
by each governing body. There is also a mechanism for handling
deficits so that sufficient cash flow is available at all timesi .
Each municipality must pay the amount owed when due and if a dis
pute arises it is resolved by the sewer board in most cases, if not,
then by arbritration or court action, as the final agreement
shal.l determine.
6. The joint ownership approach gives the user community,
through the sewer board, the option of having the sewage treat
ment facility operated on a competitive basis by a private
contractor, if this can be shown to be the most cost effective
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approach. The National Council of Mayors has undertaken studies
and evaluation of a number of municipal services, such as sewer,
water, fire protection, trash collection being performed on
service contract basis, in part, because of the high cost of ;
municipal fringe benefit packages. In the Ithaca area, we
already have tv7o good parallel examples, namely, the Village
of Cayuga Heights Sewage Treatment Facility and the Community
Hospital. The current version of the joint ownership agree- ' V.
ment provides for a five year period, from the date, the plant - .
starts up, V7herein the plant would be operated by City employees.' ; ,
The Towns are willing to consider a modification, which would
require legislative approval by all the governing bodies, to
> . change operating organizations. It is our view that both parties
working together will recognize if and when it makes sense to.
consider alternatives.
7. The City believes the joint ovmership approach will
fragment the water and sewer division of the Department of
Public Works and increase costs through loss of economy of
scale. The real problem is that joint ownership would require
that services provided by sewage treatment operation to other
municipal departments would have to be charged out. No longer
could the need for a water rate increase be accomodated at the ",
expense"and the detriment of the sewer operation,, thus
ultimately increasing the potential for major deferred mainte
nance costs in the sewer operation. Each operation from an
accountability standpoint would have to stand oh its own feet.
The policymakers V70uld be required to seek the most cost ef
fective source for services, including purchasing, billing,
engineering, etc. This does not mean duplication. For ex-
n ample, at Bolton Point we have two persons to handle.all
purchasing, billing, accounting, customer service, financial,
reporting, payroll, and insurance.
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Conclusions
All parties have made an earnest and sincere effort to develop
tv7o approaches which V70uld be satisfactory to both parties.
The pitfalls of the past and needs of the future are addressed "
in both the service agreement and the joint ovmership documents,.
The fundamental shortcoming of the service; agreement approach
is the basic static nature of such agreements. Once locked
into a long term provider/recipient or landlord/tenant arrange
ment, there is a built-in barrier unless the recipient has the.
opportunity to change "providers."
On the other hand, the partnership which vzill derive from joint
ownership and attendant joint responsibility will assure con
tinued sensitivity to the needs of the end users, for they
retain direct control over the selection of their representatives
For example, the policy making sewer board is made up of
representatives that serve at the pleasure of their respective .
governing board, all of the users representatives will have
equal incentive to protect and improve their investment. No
tenant/landlord relationship will occur. For example, it
would not be possible for the City to unilaterally commit" the
Totm to the Step II Agreement, in excess of $1,500,000, without
our having even seen it. There will be more incentive for
the City, as operators of the plant, to keep on the most cost
effective competitive group possible. We all owe it to ourselves
and our user constituents to make this not only possible but
the ruling factor on this and other basic services.
Its time to put the strengths of the City and To\-m together
forever, rather than permitting them to work at cross purposes.
Whatever the City or the To\m can do alone, the two can do in a
synergistic way together. We have an opportunity to forge a
long lasting partnership, a fluid, dynamic mechanism, one which .
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can be fine tuned to incorporate the ever changing needs of'
the coimnunity for the best technology, training, administration
and accountability, and sensitive to the long range plans of
the participating municipalities. We cannot afford an arrange
ment which will stagnate and quickly become obsolete.
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