5600
United States
Environmental Protection
Agency
Office of Municipal
Pollution Control (WH-595)
Washington DC 20460
December 1985
Reducing the Co$t
of Operating
Municipal Wastewater
Facilities
U.S. Environmental Protection Agency
Reg
ion V, LI;
uli [
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Rising Operations
Co$ts Strain
Wastewater
Budgets
Operating a wastewater
facility can have significant
economic impact on a
municipality, particularly in
smaller communities. In
recent years, operating
expenses have escalated to a
point where many
communities do not believe
they can afford to operate
their existing facilities.
Rather than cut back on O&M
and risk reducing the life of
the plant or facing an
enforcement action,
communities should evaluate
approaches to reducing costs
and increasing productivity.
Balance
Your Budget
Much can be done to lessen
the financial burden of a
wastewater facility on the
community. Simply stated,
the aim is to minimize
operating costs and maximize
revenues. Specific means of
accomplishing'this will
vary from one com-
munity to another.
Minimize Co$ts
• Restructure outstanding
debt to reduce debt service
• Maximize staff efficiency
• Conserve energy
• Minimize maintenance
costs
• Reduce administrative
costs
oucr
Cutting CoSts -
How to Begin
Facilities can cut costs and
still supply good treatment.
But it demands efficient
management, and a system
that takes in enough money
to cover costs. This can mean
simple changes in operations
or management. Or it can
The Method
Step 1: Identify High Co$t Areas (Line Items)
Review previous years' spending. Look at items such as labor.
utilities, materials, supplies. Compare these costs with current
spending.
Indicators of potential high cost areas include:
• Items that use more than 20 percent of your operating
budget
• Items consistently over budget
• Items subject to price escalation (e.g. chemicals, fuel oil.
utilities, etc.)
• Expected increases in operating costs or capital outlays (e.g.
renewal of service contracts, major equipment replacement.
etc.)
Use the following chart or your own more detailed chart to
list these costs.
Typical Expenditures
Labor
Chemicals
$
$
$_
Utilities
Equipment
Materials
Miscellaneous
$ S_
Maximize Revenues
• Assure maximum use of
facilities
• Collect all user charges
• Pursue supplemental
income
• Collect special assessments
U'S-
Agency
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mean long-range capital
improvement or restructured
financing. Regardless of the
scale of the cost reduction
program, one basic method
for identifying cost reduction
opportunities is
recommended.
Step 2: Itemize High Co$t Components
Now determine why costs are so high for specific items. Once
high cost items are identified they need to be allocated to the
system components to further pinpoint the source of
excessive expenditures. The table below can be used to
identify high cost components. A complete itemized record of
operating costs may need a special facility audit. Small
communities especially may need this if detailed accounting
records are not kept.
Revenue data should also be reviewed to identify potential
shortfalls.
Example of an Audit Cost Breakdown:
System Component Costs
Cost Treatment Pump
Item
Collection General Other
Plant Stations System Adminis-
tration
Labor
Operation
Maintenance
Support
Services
Utilities
Electricity
Fuel Oil
Natural Gas
Water
Materials and Supplies
Chemicals
Laboratory
Supplies
General
Equipment
Replacement
Contractual
Services
Debt Service
Misc.
Total
Step 3: Look at all Co$t Reduction Opportunities
Pinpoint specific ways to cut expenses of identified high-cost
items. Encourage your whole staff to come up with practical,
affordable ideas. Look at all possibilities. Get expert technical
and financial advice if necessary.
Step 4: Develop and Evaluate Co$t Reduction
Programs
Develop a set of cost-cutting proposals. These could range
from simple changes in operation and management to
long-range plans that call for significant capital outlays.
Compare the various proposals' life cycle costs and the
number of years each takes to recoup the initial investment
(simple payback period). The following formulas can help
make this comparison:
Simple Capital Investment
payback =
period Annual net savings-Annual Replacement Costs
,. j Present Worth
Cvcle Savings in
Costing = Operating Costs
Savings Present Worth Replacement Costs
Present Worth
Capital Investment
Present Worth
Salvage Value
Step 5: Have a Plan
Determine:
• "What" cost reduction measures you will implement.
"Who" will be responsible for implementing them.
"When" the measures will be put into operation.
"How" they will be carried out.
"How much" it will cost.
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Co$t Reduction
Options
Here are some ways to cut costs in various high-cost problem
areas:
High • Reduce total staff requirements by
Labor maximizing individual productivity and using
Costs: automated processes where possible.
• Share staff with othei agencies.
• Reduce overtime by instituting flexible work
schedules and provide "comp-time" in lieu of
overtime pay.
• Use contract services.
High
Energy
Costs:
High
Chemical
Costs:
Excessive
Water
Use:
High
Repair
Co$ts:
High
Adminis-
trative
and
Overhead
Costs:
More Information:
For detailed discussion on ways to identify] high-cost
problems and to cut operating costs, (EPA's "Cost Reductioi
and Self-Help (Handbook" is available from the Environmen
Quality Instructional Resources Center; Ohio State Universi
1200 Chambers Road; Room 310; Columbus, Ohio 43212;
614-422-6717.
"THIS HANDBOOK WILL BE
AVAILABLE SUMMER '86."
• Reduce energy consumption through
plant-wide energy conservation measures.
• Use low cost alternative energy sources, fuel
conversion, and energy recovery systems.
• Control use during high demand periods.
• Make process modifications to reduce or
eliminate use of chemicals.
• Substitute less expensive chemicals that
accomplish similar treatment functions.
• Seek lowest purchase price; award chemical
supply contracts based on competitive bidding.
• Institute water conservation measures such as
flow restrictions.
• Reuse plant effluent for non-potable uses.
• Rely on onsite water supply to avoid utility
charges.
• Institute an active preventive maintenance
program. Maintain spare parts inventory in
order to minimize equipment down time.
• Take advantage of service contracts and
life cycle equipment bidding.
• Eliminate unnecessary administrative
positions or reduce to part-time.
• Get administrative and clerical support from
other public agencies.
• Shop around for less costly employee benefit
packages providing equivalent benefits.
• Evaluate outside contracts to determine if
services can be provided for less by in-house
staff or other contractors.
• Utilize low maintenance building and
landscape features.
Revenue • Establish "enterprise operations" accounting
Shortage which requires wastewater operations to be
Remedies self-supporting.
• Aggressively seek payment of delinquent user
fees.
• Expand service base if adequate capacity
exists.
• Invest monies in operaiing revenue accounts
and reserve funds if allowable under State law.
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