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A University of Tennessee
Muncipal Technical Advisory Service
workshop
Managing Your
Utility's Money
The Participant's Manual
Sponsored
through a
grant from
<>EPA
United States
Environmental Protection
Agency
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ABSTRACT
How can communities protect their multi-billion dollar water and
wastewater treatment investments and give citizens clean, safe water? The
key lies with municipal officials' ability to acquire sufficient operating
revenues.
Sound financial management allows communities to acquire the necessary
revenues to maintain financially self-sufficient water and wastewater
operations.
The best source of revenue for paying water and wastewater treatment costs
is user fees. Unfortunately, raising user fees is one of the most dreaded
actions undertaken by local officials. If not done correctly, the resulting
political backlash and public resistance can be harmful for water and
wastewater operations.
This purpose of the workshop is to present financial management and user
fee training for local officials. These seminars provide local officials with
information they can understand and use in improving the financial health
of water and wastewater treatment operations. The workshop will help
participants establish sound financial management practices, assess the
financial health of water and wastewater systems and raise revenues
through increasing user fees.
ACKNOWLEDGEMENTS
This notebook was prepared by Haig Farmer of the United States
Environmental Protection Agency and Sharon Rollins of The University of
Tennessee Municipal Technical Advisory Service. This notebook is available
as EPA Office of Water publication number EPA 430/09-91-015.
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TABLE OF CONTENTS
I. Welcome, Introductions, Purposes and Agenda 1.1-6
II. The Importance of Good Financial Management II.1-5
III. Principals of Good Financial Management III. 1-14
IV. Evaluating User Service Charge Systems IV.1-19
V. Determining User Service Charge Rates V.l-22
VI. Selling a User Charge Increase to Customers VI.1-5
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FIGURES
Page
Figure 1 ... Operating Ratio Worksheet HI-3
Figure 2 ... Coverage Ratio Worksheet HI-4
Figure 3 ... Revenue - Budget vs. Actual IH-5
Figure 4 ... Expense - Budget vs. Actual HI-6
Figure 5 ... Capital Investment Ratio Worksheet III-7
Figure 6 ... Financial Reporting Checklist 111-10
Figure 7 ... Purchasing Checklist III-ll
Figure 8 ... User Service Charges Checklist 111-12
Figure 9 ... Wastewater Expense Budget IV-4
Figure 10 .. Wastewater Revenue Budget IV-5
Figure 11 .. List the Documents Needed IV-7
Figure 12 .. Worksheet 1 - Management/Policies/Compliance IV-9
Figure 13 .. Worksheet 2 - Financial Information IV-10
Figure 14 .. Worksheet 3 - Financial Information IV-11
Figure 15 .. Worksheet 4 - Financial Information IV-12
Figure 16 .. Worksheet 5 - User Service Charge System IV-13
Figure 17 .. Worksheet 6 - User Service Charge System IV-14
Figure 18 .. Worksheet 7 - Wastewater Facility Tour IV-15
Figure 19 .. Sample Follow-up Letter IV-17
Figure 20 .. Example Town Wastewater Expenses V-5
Figure 21 .. Example Town Wastewater Other Revenues V-6
Figure 22 .. Example Wastewater Flow, BOD and SS Data V-7
Figure 23 .. Example Un-metered Water Customers V-8
Figure 24 ..Example Metered Water Customers Rate Schedule V-9
Figure 25 .. Annual Metered Water Flow V-10
Figure 26 .. Worksheet 8 - Calculating New Rates Manually V-ll
Figure 27 .. Worksheet 9 - Calculating New Rates Manually V-12
Figure 28 .. Worksheet 10 - Calculating New Rates Manually V-13
Figure 29 .. Worksheet 11 - Calculating New Rates Manually V-14
Figure 30 .. Worksheet 12 - Calculating New Rates Manually V-15
Figure 31 .. Normal and Actual BOD and SS Loadings V-16
Figure 32 .. Excess BOD and SS Loadings V-17
Figure 33 .. Costs Attributable to Excess BOD and SS V-18
Figure 34 .. Actual User Service Charge Rate V-19
Figure 35 .. New User Service Charge Rate V-20
Figure 36 .. Actual Industrial Rate V-21
Figure 37 .. New Industrial User Charge Rate V-22
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• B •
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I. INTRODUCTION
A. WELCOME
B. TRAINING TEAM INTRODUCTIONS
C. WORKSHOP OBJECTIVES
D. WORKSHOP AGENDA
E. PARTICIPANT INTRODUCTIONS
********************#***#^^
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***********************************************************.;:$.;:*;!:$:!::]:
I.A. WELCOME
Notes:
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I.B. TRAINING TEAM
Staff from The University of Tennessee Municipal Technical Advisory
Service (MTAS) will lead this seminar. MTAS provides technical assistance
to Tennessee cities and towns in the areas of finance and accounting, law,
engineering and public works and municipal management.
MTAS provides field based assistance, sponsors and administers research
projects, produces publications and houses a technical reference library.
Your participation in this course is vital. Please feel free to share your own
experiences, comments and questions during the workshop.
**************************************************************
1-3
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i.e.
WORKSHOP OBJECTIVES
(1) To emphasize that communities' abilities to protect their investment
in water and wastewater infrastructure and to maintain sound
operations depends on generating sufficient operating revenues.
(2) To emphasize that the best source of revenues is user fees.
(3) To demonstrate how to determine if a financial management system is
healthy.
(4) To demonstrate how to evaluate a user service charge system.
(5) To demonstrate how to determine rates through use of a computer
rate model.
(6) To demonstrate how to sell a rate increase.
*************************************»***#************##*#»#»****»*
1-4
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I.D. WORKSHOP AGENDA
8:30 - 9:00 Registration
9:00 - 9:30 Introductions and Workshop Objectives
9:30 - 9:45 The Importance of Good Financial Management
9:45 - 10:30 Principals of Good Financial Management
10:30 - 10:45 Break
10:45 - 12:00 Evaluating User Service Charge Systems
12:00-1:15 Lunch
1:15 - 2:15 Determining User Service Charge Rates
2:15-2:30 Break
2:30 - 3:30 Selling a User Charge Increase to Customers
3:30 - 4:00 Summary
*********************************^^
1-5
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**************************************************
*****************
I.E.
PARTICIPANT INTRODUCTIONS
Notes:
1-6
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II. THE IMPORTANCE OF GOOD FINANCIAL MANAGEMENT
A. WHY COMMUNITIES MUST WORK HARDER AT FINANCIAL
SELF-SUFFICIENCY
B. THE IMPACT OF FINANCIAL SELF-SUFFICIENCY ON
COMMUNITIES
C. HELP FOR COMMUNITIES
D. WHAT COMMUNITIES MUST DO
11-1
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*******************************************************************
II.A. WHY COMMUNITIES MUST WORK HARDER AT FINANCIAL
SELF-SUFFICIENCY
* 1987 Clean Water Act Amendments
Out with Grants
In with SRF Loans
$ Spent in the Wastewater Grants Program Since 1972
Federal $53 Billion
States $20 Billion
Local $20 Billion
* $ in Needs for Wastewater Facilities
Wastewater Needs $83 Billion
***************************************************************£ 5J..J..J.
11-2
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***********************************************************
.B. IMPACT OF FINANCIAL SELF-SUFFICIENCY ON
COMMUNITIES
* $5 billion surplus in 1986 to $45 billion deficit in 1990
* 37% EPA wastewater funded systems experiencing shortfalls in
wastewater revenue (user fees, hookup/impact fees)
*
Water systems confront new monitoring costs
I *******************************************************************
11-3
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i.e.
HELP FOR COMMUNITIES
*
Small Communities Outreach and Education Program
(SCORE)
Information Assistance
EPA Regional Office Coordinators
Networking other Federal and National Organizations
National Small Flows Clearing House
1-800-624-8301
11-4
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II.D. WHAT COMMUNITIES MUST DO
*
Implement Financial Self-Sufficiency
Improve Over-all Financial Management
Raise User Service Charges
11-5
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********************************#*#*#*####********************
III. PRINCIPALS OF GOOD FINANCIAL MANAGEMENT
A. CHECK FINANCIAL HEALTH
B. IMPROVE FINANCIAL HEALTH
C. BUILD FINANCIAL HEALTH
D. ADDITIONAL FACTORS THAT AFFECT FINANCIAL HEALTH
111-1
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III.A. CHECK FINANCIAL HEALTH
* Introductions
* Ratios
* Definitions
Revenue Components
User Service Charge
Hookup/Impact Fee
Taxes/Assessments
Interest Earnings
Other
Operating Expense Components
Salaries and Benefits
Administrative Costs
Utility Costs
Chemical Costs
Supplies and Parts
Equipment Replacement Costs
Principal and Interest
Other
(Operating expenses do not include new capital
facilities and depreciation)
* Operating Ratio
* Coverage Ratio
* Budget Versus Actual Comparisons
* Capital Investment Ratio
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111-2
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OPERATING RATIO WORKSHEET
(Year to Date)
TOTAL REVENUE
User service charges $
Hook-up/Impact Fees
Taxes/Assessments
Interest Earnings
Other Revenue
Total Revenue $
TOTAL OPERATING EXPENSES
Administration $
Wages _
Benefits _
Electricity _
Chemicals _
Fuel & Utilities _
Parts _
Equipment Replacement Fund _
Principal and Interest Payments _
Other
Total Operating Expenses $
OPERATING RATIO
Total Revenue $_
divided by
Total Operating Expenses $_
equals
Operating Ratio
111-3 FIGURE 1
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COVERAGE RATIO WORKSHEET
Total Revenue $_
minus
Non-Debt Expenses $_
equals
Revenue Available
for Debt Service $_
divided by
Debt Service Expenses $_
equals
Coverage Ratio
1-4 FIGURE 2
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Revenue
Budget vs. Actual
% of Year
Completed to
Date:
User Charges
Taxes/
Assessments
Hook-up Fees
Impact Fees
Interest
Other Revenue
Total Revenue
$ Budget
Total
$ Received
Current
Year
To Date
% of Budget
Received
Current Year
To Date
% of Budget
Received
Last Year
To Date
111-5
FIGURE 3
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Expense
Budget vs. Actual
% of Year
Completed to
Date:
Administration
Wages
$ Budget
Total
Benefits
Electricity
Chemicals
$ Spent
Current
Year
To Date
% of Budget
Spent
Current Year
To Date
% of Budget
Spent
Last Year
To Date
Fuel & Utilities
Parts
Equipment
Replacement
Fund
Principal &
Interest
Payments
Other
Total
Operating
Expenses
111-6
FIGURE 4
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CAPITAL INVESTMENT
RATIO WORKSHEET
TOTAL CAPITAL OUTLAYS $.
divided by
TOTAL REVENUE $
equals
CAPITAL
INVESTMENT
RATIO
1-7 FIGURE 5
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III.B. IMPROVE FINANCIAL HEALTH
Financial Reporting
Operation accounted for as a separate enterprise fund
Use accrual accounting methods
Monthly reports are a must
Report actual and budgeted figures
Receive reports by the 10th of the following month
Keep reports for at least 4 years
* Purchasing
The purpose is to receive goods and services (1) on time
and (2) at the lowest price
Centralize purchasing
Develop good specifications for goods and services
Use a standard bid form
Use purchase orders
Develop emergency purchasing procedures
Inspect goods upon delivery
Develop inventory records/controls
******************************^
111-8
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* User Service Charge Systems
Largest revenue component - user charges account for
80 - 90% of total revenue
* User Service Charge Structures
Uniform Rate
Single Block Rate
Decreasing Block Rate
Increasing Block Rate
* Key Elements of a User Service Charge System for Wastewater
Account for the costs of transporting I/I
Add surcharges for high strength wastewater
Examine the user service charge yearly
Knowledge of federal, state and local requirements
111-9
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FINANCIAL REPORTING CHECKLIST
Is this done at your utility?
Yes
No
Unsure
Water and wastewater
operations are accounted for
in separate enterprise funds.
Each utility uses accrual
accounting methods.
Each utility receives monthly
reports of revenues and expenses.
Reports show both budget
and actual figures.
Reports arrive by the 10th day
of the following month.
The utility keeps its financial
reports for at least four years.
111-10
FIGURE 6
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PURCHASING CHECKLIST
Is this done at your utility?
Purchasing Is centralized.
Yes
Major purchases are based on
specifications that define
requirements.
,
No
Unsi
Standard quote/bid forms are used,
No purchases are made without
a purchase order.
Exceptions are specified for
emergency purchases.
Goods are inspected immediately
for quality and damage.
Stock quantities are specified
for all inventory items.
1-11
FIGURE?
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USER SERVICE CHARGES CHECKLIST^
&
Is this done at your utility? JF
All costs are identified.
Costs are allocated proportionately
based on use.
Flow characteristics are known
for each customer class.
Each customer's use is known or
fairly estimated.
Customers are billed
proportionately to use.
Billing cycle provides timely
revenues.
Established procedures assure
collection of delinquent bills.
Yes
No
Unsure
1-12
FIGURES
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III.C. BUILD FINANCIAL HEALTH
* Improve Budgeting
Develop a Financial Road-map
Plan Early
Estimate Revenues
Estimate Expenses
* Long Range Budgeting
Capital Planning
ill-13
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III.D. ADDITIONAL FACTORS THAT AFFECT FINANCIAL HEALTH
* Organizational Structure
* Staff Training
* Personnel Turnover
* Operating Procedures and Policies
* Customer Relations
111-14
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IV. EVALUATING USER SERVICE CHARGE SYSTEMS FOR
WASTEWATER
A. EVALUATING REVENUES
B. EVALUATING EXPENSES
C. A STEP-BY-STEP EVALUATION PROCESS
D. USER SERVICE CHARGE WORKSHEETS
E. REPORT ON FINDINGS
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IV-1
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*****#******************************************#*****#************
IV. A. EVALUATING REVENUES
* User Service Charges
* Hookup/Impact Fees
* Taxes/Assessments
* Interest Earnings
* Other
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IV-2
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IV.B.
EVALUATING EXPENSES
* Salaries & Benefits
* Utilities
* Chemicals
Equipment Replacement Costs
* Administrative
* Other Expenses
**************************************^^
IV-3
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WASTEWATER EXPENSE BUDGET
199
ADMINISTRATION $
WAGES $
BENEFITS $
ELECTRICITY $
CHEMICALS $
FUEL AND UTILITIES $
PARTS $
EQUIPMENT REPLACEMENT FUND $
PRINCIPAL AND INTEREST PAYMENTS $
OTHER $
TOTAL OPERATING EXPENSES $
IV"4 FIGURE 9
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WASTEWATER REVENUE BUDGET
199
USER SERVICE CHARGES
HOOK-UP/IMPACT FEES
TAXES/ASSESSMENTS
INTEREST EARNINGS
OTHER
$
$.
$
$.
$
TOTAL REVENUE
$
IV-5
FIGURE 10
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***********************#*****************#**************#**********
IV.C. A STEP-BY-STEP EVALUATION PROCESS
1. Understand Why the Evaluation of the Community's User
Service Charge System is Important
2. Recognize the Components of the User Service Charge System
3. Prepare for Appointment with Financial Management Staff
4. Accomplishments of the Review
5. Clearly Understand the Problems
6. The Report
7. Follow-up on the Report
*********************************************************
IV-6
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LIST THE DOCUMENTS
YOU'LL NEED:
Most recent audit
Current budget
Current year-to-date revenues and expenses
Rate schedule
Sewer use ordinance
Contracts with other utilities
Debt service schedules
IV-7
FIGURE 11
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IV.D. USER SERVICE CHARGE WORKSHEETS
* Management/Operating Policies/Compliance
Worksheet 1
* Financial Information
Worksheets 2-4
* User Service Charge System
Worksheets 5-6
* Wastewater Facility Tour
Worksheet 7
IV-8
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Utility/Community Name:
Name of Local Contact:
Telephone Number: (
Worksheet-!
Date
User Service Charge Worksheet
Management/Operating Policies/Complianbe
1. Describe any NPDES permit violation(s) which occurred within the
last 12 months and the reason(s) for the violation(s).
2. Did insufficient operating revenues contribute to the NPDES
violation(s)?
3. Does the utility receive monthly accounting reports for wastewater
revenues and expenses?
——-
4. Does the utility have a pretreatment ordinance?
—. ^ •l^HH_
5. Does the organizational structure of the wastewater utility present
any operational problems?
6. What is the annual personnel turnover rate?
7. Are the procedures for collecting delinquent wastewater bills
adequate?
IV-9
FIGURE 12
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Worksheet-2
1 Financial Information
-. . . i
1 . Does the wastewater budget show revenues and expenses by line
item? (Note: The wastewater budget should be separate from other
governmental utility budgets like water, garbage disposal, etc.)
irar
2. What are the
operation?
3. What are the 1
operation?
total annual budgeted revenues for the was
tewater
TOTAL BUDGETED REVENUES
User service charges
Hookup/impact fees
Taxes/assessments
Interest earnings
Other
Total Budgeted Revenues
:otal annual budgeted expenses fnr the was
$
tewater
TOTAL BUDGETED OPERATING EXPENSES
Salaries and benefits
Utilities
Equipment replacement fund
Chemicals
Supplies and parts
Contract services
Administration
Principal and interest payments
Other
Total Budgeted Operating Expenses
$
IV-10
FIGURE 15
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Worksheet-3
4. What are actual revenues to date? How do they compare with
budgeted revenues to date?
BUDGETED REVENUES VS. ACTUAL
Total Revenues
$ Budgeted
$ Actual
5. What are actual expenses to date? How do they compare with
budgeted expenses to date?
BUDGETED EXPENSES VS. ACTUAL
Total Operating Expenses
$ Budgeted
$ Actual
6. Does the wastewater utility show a cash flow problem?
ACTUAL REVENUES & EXPENSES
Total Revenues
Total Operating Expenses (-)
Cash Available
7. How does the utility cover a revenue deficit?
IV-U
FIGURE
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Worksheet-4
8. Does the utility review user service charges and adjust them
annually to reflect budgeted or actual expenses?
9. Does the utility have an equipment replacement
fund (ERF)?
10. What percentage of operation, maintenance and equipment
replacement funds are set aside for equipment replacement?
Equipment
Replacement ERF Costs
Fund = ~
(ERF) (%)
(Total Operating Expenses) - (P&I Payments)
X 100%
ERF (%) =
11. Does a certified public accounting firm review
the utility accounts?
IV-12
FIGURE 15
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Worksheet-5
User Service Charge System
1. Does the utility distribute the wastewater collection and treatment
costs proportionally to each user, user class or political jurisdiction?
2. Does the utility use a sewer use ordinance that incorporates a
proportionate wastewater rate schedule? (Attach a copy.)
3. Does the utility distribute the I/I costs proportionally to each user,
user class or political jurisdiction?
4. Does the rate schedule specify a uniform rate for wastewater
treatment based on the volume of usage?
Rate = $
/1000 gal
5. Does the rate schedule provide for a minimum charge?
6. What is the minimum charge?
7. Are customers notified annually of the wastewater rates?
8. What is the actual total operation, maintenance, equipment
replacement and debt service costs per 1000 gallons of wastewater
treated by the utility?
OM&R + Debt Service Costs r™™™_m_i
" ~ = $ I I /1000 gal
Total Flow ^™~^™^
Treatment Rate =
IV-13
FIGURE 16
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Worksheet-6
9. How does the utility determine wastewater user fees? (Check one)
Water meter readings?
Equivalent dwelling unit?
Other? (Specify)
10. Does the rate schedule specify surcharges for high-strength wastes?
11. How does the utility determine surcharges?
12. What is the average annual wastewater bill for a typical residential
user?
$
13. Are users billed separately for wastewater services?
14. Do all political jurisdictions served by the utility have a sewer use
ordinance which incorporates a proportional wastewater rate schedule?
15. Do users outside the utility's political boundary pay the same rate
inside users?
as
16. Do all serviced political jurisdictions meet the same user service
charge system conditions as the wastewater treating utility? (If No,
describe.)
IV-14
FIGURE 17
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Worksheet-7
Wastewater Facility Tour
1. What is the current average flow treated at the facility (gallons per
gpd
2. Does the facility appear to operate normally?
3. Is any equipment out of service? (Specify)
4. Does maintenance appear satisfactory?
5. Is good housekeeping evident?
6. Is the laboratory clean and well-organized?
7. Are adequate chemicals, supplies and parts on hand?
8. Is staffing adequate for the operation?
9. Are operators certified?
10. Does the staff receive formal training?
11. Do operational and compliance records appear adequate?
12. Note other comments or problems:
IV-15
FIGURE 18
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IV.E.
DRAFT A REPORT OF FINDINGS
Follow-up the evaluation by writing a report:
Cite Problems
* Recommend Solutions
* Establish Response Deadline
* Follow-up
****************************^^
IV-16
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Follow-up letter after a user charge evaluation
(Date)
Mr. James Sullivan
Finance Director
City of Anytown
100 S. Main St.
Anytown, USA
Dear Mr. Sullivan:
It was a pleasure to meet with you and your staff on (date) to discuss
your wastewater utility's financial operations. As a result of our
discussions and the tour of the wastewater treatment facility, I noted
the following concerns.
1. The wastewater and water accounting systems are not separate.
The water and wastewater operations need to be financially
independent and self-sufficient. The Anytown wastewater
treatment facility was partially financed by a grant from the U.S.
Environmental Protection Agency. This means Anytown must
establish a financial management system which separately
accounts for wastewater revenues and expenditures. The system
must also identify the basis for determining operation,
maintenance, equipment replacement, debt service costs and
user service charges.
2. The wastewater utility does not collect surcharges from users
discharging high-strength waste although the city's wastewater
system's sewer use ordinance requires a surcharge on those
users whose wastes increase operation and maintenance costs.
This ordinance must be enforced as a condition of your EPA
grant.
FIGURE 19
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3. The actual wastewater expenses to date at the half-way point in
this fiscal year are $125,000. The total budgeted amount for the
fiscal year is $200,000. This results in a projected deficit of
$50,000 for the year. User service charges must be increased to
provide the needed operating revenue since collection of
surcharge revenues will not be sufficient to eliminate the deficit.
4. The wastewater unit volume rate is insufficient to cover the
operational costs of the utility. A rough calculation showed that
the OM&R costs are $1.20/ 1,000 gallons and debt service costs
are $0.60 for a total rate of $1.80/ 1,000 gallons.
5. The accounting system does not budget for an equipment
replacement fund. You need an equipment replacement fund to
pay for equipment and accessories that wear out during the life of
the treatment facility. The fund is not to be used for expanding
the capacity or enhancing the treatment facility's performance. It
must be used to keep the facility operating at the level for which it
was designed and constructed. This is an EPA requirement.
6. At the treatment facility, the secondary clarifier sludge return
pump was inoperable and a backup pump was not available. The
sludge return pump is essential to proper operation. As we
discussed during the visit, you should install a temporary pump
as soon as possible and repair or replace the inoperable sludge
pump. You need a backup pump to prevent this circumstance
from reoccurring.
7. The treatment plant grounds were poorly maintained. The grass
needed mowing; discarded equipment was lying around; spillage
from the sludge hauling operation created a nuisance. The
appearance of a wastewater treatment facility is usually a good
indicator of the level of professionalism, motivation and training of
the staff. It also may be an indicator of inadequate
funding/staffing of the treatment facility. As a result of our
discussions and tour of the facilities, it appears that additional
staff is needed to achieve proper operation and maintenance.
FIGURE 19A
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S. At the treatment facility, there was only a two-day supply of
chlorine and a limited supply of laboratory reagents and
chemicals on hand. Good management practice requires an
adequate supply of essential chemicals and reagents on hand to
operate and maintain the facility properly. From our discussion, it
appears the Anytown utility should revise its purchasing
procedure to allow the superintendent to order routine supplies
directly without waiting for governing body approval.
9. This system had exceeded its monthly average BOD NPDES
permit limit for two consecutive months. The major cause of this
violation appears to be inadequate sludge return. The pump
outage discussed above should be rectified immediately.
Many of the above concerns are consistent with the conclusion that
Anytown's wastewater treatment facility needs more financial resources
for proper operation and maintenance. I have enclosed a copy of
EPA's publication Building Support for Increasing User Fees that tells
how to increase the facility's revenue base.
Please develop a corrective action plan with compliance dates to
address the above findings, and submit the plan to this office no later
than (date).
Our office will be glad to work with the City of Anytown to protect its
water quality and improve its wastewater financial operations. If you
have questions about this report, please feel free to call me.
Sincerely,
Anne Taylor
Utility Board Manager
enclosure
FIGURE 19B
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V. DETERMINING USER SERVICE CHARGE RATES
A. GETTING STARTED
B. UNDERSTAND THE THEORY
C. CALCULATE USER CHARGES
V-1
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*******************************************************************
V.A. GETTING STARTED
* Financial Statements
*
Expenses
Revenues Other Than User Charges
* Current User Service Charge Rate Schedule
Residential
Commercial
Industrial
Data on Total Wastewater Collected and Treated
Total Annual Plant Flow
Biochemical Oxygen Demand (pounds/yr.)
Suspended Solids (pounds/yr.)
V-2
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V.B. UNDERSTAND THE THEORY
*
Balance Revenues and Expenses by Adjusting the User Charge
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*******************************************************************
V.C. CALCULATE USER CHARGES
* Use EPA's Computer Program
Assumptions Can Be Easily Changed
* Or, Calculate User Charges Manually
Step 1 - Gather Information
Financial Records
User Charge Schedules
Sewage Treatment Data
Step 2 - Delineate User Charges, Expenses, Revenues,
BOD and SS
List AH Expenses
List All Revenue Other Than User Charges
Determine the Basis for User Charges - Metered?
Un-metered?
List Theoretical and Actual Annual Plant Flow
List Theoretical and Actual BOD (pounds/yr.)
List Theoretical and Actual SS (pounds/yr.)
Step 3 - Calculate Rates
Calculate Excess Flow
Calculate Excess BOD and SS
Calculate Current and Proposed Basic User Service
Charge Rate
Calculate Current and Proposed Basic Industrial
Surcharge Rate
*******************************************************************
V-4
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WASTEWATER COLLECTION
AND TREATMENT EXPENSES
FY 1990
Salaries and Fringe Benefits $450,000
Utilities 175,'oQO
Equipment Replacement Fund 200,000
Chemicals, Supplies and Parts 50,'oOQ
Contract Services ' rj
Administrative Costs & Office Supplies 125,000
Principal and Interest Payments 450,'oOQ
Other Costs 25,'oOO
TOTAL EXPENSES: $1,475,000
V-5 FIGURE 20
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DETERMINING
USER SERVICE CHARGE RATES
OTHER WASTEWATER REVENUES
Connection Fees $15,000
Special Assessments 10,000
Transfers from Other Funds ' o
Interest on Investments 50,000
Other Revenues 15,000
Minimum Service Fee 20,000
TOTAL, OTHER REVENUES: $110,000
v'6 FIGURE 21
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FROM STP RECORDS ...
TOTAL ANNUAL FLOW = 700,000,000 GALLONS
TOTAL ANNUAL BOD = 2,200,000 POUNDS
TOTAL ANNUAL SS = 2,200,000 POUNDS
V-7 FIGURE 22
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DETERMINING USER SERVICE
CHARGE RATES
NUMBER OF USERS BY TYPE -
UNMETERED WATER
TYPE OF CUSTOMER
NUMBER OF
CUSTOMERS
Single-Family Residences
Apartments (1-2 bedroom)
Apartments (3 or more bedrooms)
Commercial/Institutional
Restaurants and Taverns
Industrial
8,000
1,500
1,000
900
100
100
V-8
FIGURE 23
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DETERMINING USER SERVICE
CHARGE RATES
METERED WATER
Minimum Bill = $2.50
Current Wastewater Services
Billing Schedule
Monthly Rates
Total Gallons Treated Rate per
From... To... 1,000 gallons
0
2,001
5,001
10,001
25,001
2,000
5,000
10,000
25,000
Over
$3.50
3.50
3.50
3.50
3.50
V-9 FIGURE 24
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ANNUAL METERED
WATER FLOW
Residential 250,000,000 gallons
Commercial 100,000,000 gallons
Industrial
TOTAL
Annual Total
Wastewater
Flow
150,000,000 gallons
500,000,000 gallons
(WORKSHEET 8, LINE 4)
700,000,000 gallons
(WORKSHEET 8, LINE 4a)
V-10
FIGURE 25
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WORKSHEET 8
If you meter fresh water, fill in items 1 through 4.
If you don't meter fresh water, enter only item 4a.
Annual Residential Metered Water Flow (gallons)
Annual Commercial/Institutional Metered Water Flow (gallons)
Annual Industrial Metered Water Flow (gallons)
Total Annual Metered Water Flow (1+2+3)
Total Annual Wastewater Flow
If you don't meter fresh water, fill in Items 5 -11 a.
1
2
3
4
4a
Number of
Type of Unit Units
Single family residences
Apartments (1-2 bedrooms)
Apartments (3+ bedrooms)
Commercial/Institutional
Restaurants and taverns
Industries
EDUs
per unit
1.00
0.75
1.00
2.50
10.00
Total EDUs
(Units x EDUs per)
5
6
7
8
9
Grand Total EDUs (5+6+7+8+9)
10
V-11
FIGURE 26
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WORKSHEET 9
Theoretical Non-Industrial Wastewater Flow
[Item 10 times 2.6 people times
100 gallons per day times 365 days]
Theoretical Industrial Wastewater Flow
[Item 4 minus Hem 11]
. 11 a
For both metered and unmetered systems, fill in Items 12-19, and 20 - 23 or 26 - 32.
Total Annual Influent BOD (pounds) 12
Calculate Normal Annual Influent BOD (pounds)
[Item 4a times .002294 pounds per gallon] 13
Calculate Excess BOD
[Item 12 minus Item 13] If Item 12 is less than Item 13, enter 0. 14
Percentage Excess BOD
[(Item 14 divided by Item 13) x 100] 15
Total Annual Influent SS (pounds)
Calculate Normal Annual Influent SS (pounds)
[Item 4a times .002294 pounds per gallon] 17
Calculate Excess SS
[Item 16 minus Item 17] If Item 16 is less than Item 17, enter 0. 18
Percentage Excess SS
[(Item 18 divided by Item 17) times 100] 1 g
If both Items 15 and 19 equal zero, then complete Items 20 through 23 and the appropriate
metered item (24) or unmetered items (25 through 25e).
Total Expenses (see pages 11-16) 20
Other Revenue (see pages 17-18) 21
Net Expenses [Item 20 minus Item 21] 22
1,000s of Gallons Wastewater [Item 4a divided by 1,000] 23
V-12 FIGURE 27
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WORKSHEET 10
Metered Water
Actual Wastewater Rate (per 1,000 gallons)
[Item 22 divided by Item 23] 24
New User Service Charge Rate (per 1,000 gallons)
[Item 24 times (Item 4a divided by Item 4)] 24a
Unmetered Water
New User Service Charge Rate (per 1,000 gallons)
[Item22rf/v/cted6yltem23] 25
Residential, per month
[Item 25 times 7.8 thousand gallons/month] 25a
Apartments, 1 -2 bedroom, per month
[ftem 25a times 0.75]
Apartments, 3+ bedrooms, per month)
[Item 25a times 1.00]
Commercial/Institutional, per month
[Item 25a times 2.50]
Restaurants/Taverns, per month
[Item 25a times 10.00]
If either item 15 or 19 is greater than zero, then complete Items 26 through 32 and the
appropriate metered items (33 and 34) or unmetered items (35 through 36).
Total Expenses (see pages 11-16) ' 26
Other Revenue (see pages 17-18) 27
Net Expenses [Item 26 minus Item 27] 28
1,000s of Gallons Wastewater [Item 4a divided by 1,000] 29
Enter Item 15 or 19, whichever is greater % 30
25b
25c
25d
25e
V-13 FIGURE 28
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WORKSHEET 11
Portion of Treatment Costs Attributable to Normal Strength
Wastewater [100 divided by (100 plus Item 30)] 31
Portion of Treatment Costs Attributable to
Excess BOD or SS [Item 30 divided by (100 plus Item 30)] 32
Metered Water
Actual Wastewater Rate (per 1,000 gallons)
[(Item 28 times Item 31) divided by Item 29] 33
New User Service Charge Rate (per 1,000 gallons)
[Item 33 times (Item 4a divided by Item 4)] 33a
Actual Industrial Wastewater Surcharge Rate (per 1,000 gallons)
[(Item 28 times Item 32) divided by (Item 3 divided by 1,000)] 34
New Industrial Wastewater Surcharge Rate (per 1,000 gallons)
[Item 34 times (Item 4a divided by Item 4)] 34a
Total New Industrial User Service Charge Rate
(per 1,000 gallons) [Item 33a plus Item 34a] 34b
V-14 FIGURE 29
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WORKSHEET 12
Unmetered Water
New User Service Charge Rate (per 1,000 gallons)
[(Item 28 times Item 31) divided by Item 29] 35
Residential, per month
[Item 35 times (7.8 thousand gallons/month)] 35a
Apartments, 1-2 bedroom, per month
[Item 35a times 0.75] 35b
Apartments, 3+ bedrooms, per month
[Item 35a times 1.00] 35c
Commercial/Institutional, per month
[Item 35a times 2.50] 35d
Restaurants/Taverns, per month
[Item 35a times 10.00] 35e
New Industrial Wastewater Surcharge Rate (per 1,000 gallons)
[(Item 28 times Item 32) divided by (Item 11 a divided by 1,000)] 36
Total New Industrial User Service Charge Rate
(per 1,000 gallons) [Item 35 plus Item 36] 36a
V-15 FIGURE 30
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Normal BOD and SS loadings
0.229 lbs./100 gallons of wastewater
0.229 lbs./100 gallons x 500,000,000 gallons
1,147,000 Ibs. BOD or SS
(WORKSHEETS, LINES 13AND 17)
Actual BOD or SS = 2,200,000 Ibs.
(WORKSHEETS, LINES 12AND 16)
V-16
FIGURE 31
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Excess BOD and SS
2,200,000 Ibs.
-1,147,000 Ibs.
o/
/o
1,053,000 Ibs.
— ' >
v -j r\r\o/ __ Q-I po/
x 100 /o - 91.8/o
(WORKSHEETS, LINES 15AND 19)
V-17
FIGURE 32
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Portion of treatment cost
attributable to
normal strength wastewater
100 -r (100 + 91.8)
.521 or 52.1%
(WORKSHEET 11, LINE 31)
Portion attributable to
excess BOD or SS
100.0%
- 52.1%
47.9%
(WORKSHEET 11, LINE 32)
V-18
FIGURE 33
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ACTUAL WASTEWATER
RATE/1,000 GALLONS =
Net expenses x portion attributable to normal BOD or SS
1,000s of gallons of wastewater treated
$1,365,000x0.521
700,000 gallons
= $1.02
(WORKSHEET 11, LINE 33)
V-19
FIGURE 34
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NEW USER
SERVICE CHARGE RATE
$1.02
1,000 gals.
700,000,000 gals,
500,000,000 gals.
$1.43
1,000 gals
(WORKSHEET 11, LINE 33a)
V-20
FIGURE 35
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Actual Industrial
Surcharge Rate/1,000 gals.
Net expenses
portion attributable
to excess BOD or SS
1,000s of gallons treated industrial wastewater
$1,365,000 x .479
150,000 gallons
= $4.36/1,000 gallons
(WORKSHEET 11, LINE 34)
V-21
FIGURE 36
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NEW INDUSTRIAL WASTEWATER
SURCHARGE RATE
$4.36 700,000,000 gals.
1,000 gals. X 500,000,000 gals.
$6.10
(WORKSHEET 11, LINE 34a)
1,000 gals
TOTAL INDUSTRIAL USER
SERVICE CHARGE RATE:
$1.43/1,000 gals.
+ $6.10/1,000 gals.
$7.53/1,000 gals.
(WORKSHEET 11, LINE 34b)
V-22 FIGURE 37
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*****************************************************:l:***:l:***#:i.*:!::i..!.
VI. SELLING A USER CHARGE INCREASE TO CUSTOMERS
A. A GOOD PUBLIC EDUCATION PROGRAM IS THE KEY TO
SUCCESS
B. HOW DO YOU CONDUCT A PUBLIC EDUCATION
CAMPAIGN?
C. ONCE YOU'VE INCREASED USER CHARGES, HOW DO
YOU KEEP ON TRACK?
*******************************************************************
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*******************************************************************
VI.A. A GOOD PUBLIC EDUCATION PROGRAM IS THE KEY TO
SUCCESS
* Many Water and Wastewater Operations Are Facing Very
Serious Financial Problems
* Improving Overall Financial Management Is a Way Out of
Those Problems
An Important Component of Good Financial Management
Is Adequate User Service Charges
* Increasing User Service Charges Can Equate to Political Suicide
Just Ask West Carolina Regional Sewer Authority in
Greenville, S.C.
* Or Local Government Officials Can Raise Rates and Live to
Tell About It
Kokomp Knows How to Do It
* The Difference Between Suicide and Success Is PUBLIC
EDUCATION!
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*******************************************************************
VLB. HOW DO YOU CONDUCT A PUBLIC EDUCATION
CAMPAIGN?
* Plan Ahead
Think Through What You've Been Doing and Why
Decide on Other Steps to Take
Get Ready to Meet the Public
* Budget for the Public Education Program
Staff
Materials and Services
Overhead
* Shape the Message
What Do You Want To Say?
What Methods Will be Used?
* Choose Spokesperson(s)
Who are
Organized
Enthusiastic
Great Communicators
Natural Leaders
Familiar with the Subject
VI-3
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*****************************************************************
**
Get the Message Out
Target Audiences
Start with the Workplace
Local Government Officials
Community Groups
Media
Youth
General Public
* Evaluate and Document
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X******************************************************************
VI.C. ONCE YOU'VE INCREASED USER CHARGES, HOW DO
YOU KEEP ON TRACK?
* Make Small Annual Adjustments
* Move the Utility Operations Out of the Political Realm
* Use Monthly Billing
* Bill Separately for Water, Wastewater, Trash Disposal, Etc.
* Continue PUBLIC EDUCATION
*******************************************************************
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The University of Tennessee does not discriminate on the basis of race, sex, color, religion, national origin,
age, handicap, or veteran status in provision of educational opportunities or employment opportunities and
benefits.
The University does not discriminate on the basis of sex or handicap in the education programs and
activities, pursuant to requirements of Title IX of the Educational Amendments of 1972, Public Law 92-318,
and Section 504 of the Rehabilitation Act of 1973, Public Law 93-112, and the Americans With Disabilities
Act of 1990, Public Law 101 -336, respectively. This policy extends to both employment by and admission
to the University.
Inquiries concerning Title IX, Section 504 and the Americans With Disabilities Act of 1990 should be
directed to Mr. Gary W. Baskette, Director of Business Services, 109 Student Services Building, Knoxville,
Tennessee 37996-0212, (615) 974-6622. Charges of violation of the above policy should also be directed
to Mr. Baskette.
Authorization Number R14-1050-22-001-92
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