The Ability of Small Communities to
Afford Constraetion of Wastewater Treatment Facilities
by
John Dale Gaeddert
March 1990
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REPORT DOCUMENTATION
PAGE
1.REPORT NO.
3. Recipient's Accession
4. Title and Subtitle
The Ability of Small Communities to Afford Construction of Wastewater Treatment Facilities
5. Report Date
Completed Spring 1990
John Dale Gaeddert
8. Performing Organization RepL No.
10. Project/Task/Work Unit No.
9. Performing Organization Name and Address
Utah State University
LAEP Department
Logan, Utah 84321
11. Contract(C) or Gram(G) No.
(C)
(G)
12. Sponsoring Organization Name and Address
U.S. Environmental Protection Agency
Office of Cooperative Environmental Management
499 South Capitol Street, SW A-101-F6
13. Type of Report & Period Covered
Technical Report
u.
15. Supplementary Notes
16. Abstract (Limit: 200 words)
90-2403 The Ability of Small Communities to Afford Construction of Wastewater Treatment Facilities.
This report is part of the National Network for Environmental Management Studies under the auspices of
the Office of Cooperative Environmental Management of the the U.S. Environmental Protection Agency.
This study investigates whether small municipal dischargers can afford to construct wastewater treat-
ment facilities to meet secondary standards. Officials in seven Utah communities were interviewed and each
communitie's financial data was reviewed to: characterize the wastewater treatment needs of the community;
the commuity's financial condition; evealuate community financial options; assess community "ability
;" and, identify market constraints. It was noted that a lack of population over which projected costs could
be spread negatively affects a community's ability to afford construction of needed wastewater treatment facili-
ties. Consequently, the point at which a project becomes unaffordable to a community is dependent on population,
as well as a series of additional factors, including, but not limited to: 1) the required local contribution to
project costs; 2) the economic state or fiscal strength of the community; 3) community opportunities to attract
outside investors or raise additional revenues for the proposed wastewater treatment project; and 4) viable
opportunities for the community to decrease project costs.
17. Docuement Analysis a. Docuement Dtecrptonj
b. Identifier'sAJpen-Ended Terms
c. COSATI Field/Group
1B. Availability Statement
19. Security Class (This Report)
Unclassified
20. Security Class (This Page)
Unclassified
21. No. of Pages
22. Price
OPTIMAL FORM 272 (4-77)
(Formerly NTIS-35)
Department of Commerce
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DISCLAIMER .._
This report was furnished to the U.S. Environmental Protection
Agency by the graduate student identified on the cover page, under
a National Network for Environmental Management Studies
fellowship.
The contents are essentially as received from the author. The
opinions, findings, and conclusions expressed are those of the author
and not necessarily those of the U.S. Environmental Protection
Agency. Mention, if any, of company, process, or product names is
not to be considered as an endorsement by the U.S. Environmental
Protection Agency.
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Acknowledgements
I offer my profound gratitude to: the United States Environmental Protection
Agency for funding this study; Craig Johnson, Larry Wegkamp, and Bob Drake for
their objectivity and realism; five excellent women, Nancy Hess, Christine Kelly,
Leah Ann Lamb, Carole Scott, and Elaine Greening for their expertise, enthusiasm
and spirit; and, most importantly, Claudia, my deepest friend (and editor) for
always being exactly who she is.
ill
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Executive Summary
This study investigates whether small municipal dischargers can afford to
construct wastewater treatment facilities to meet secondary standards. Officials in
seven Utah communities were interviewed and each community's financial data was
reviewed to: characterize the wastewater treatment needs in the community;
describe the community's financial condition; evaluate community finance options;
assess community "ability to pay"; and, identify market constraints. It was noted
that a lack of population over which project costs can be spread negatively affects a
community's ability to afford construction of needed wastewater treatment facilities.
In especially towns of 500 or less, the local financial contribution to wastewater
treatment projects is limited by a small population and a limited number of
households. Consequently, the point at which a project becomes unaffordable to a
community is dependent on population, as well as a series of additional factors,
including, but not limited to: (1) the required local contribution to project costs; (2)
the economic state or fiscal strength of the community; (3) community opportunities
to attract outside investors or raise additional revenues for the proposed wastewater
treatment project; and, (4) viable opportunities for the community to decrease
project costs (53 pages).
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Table of Contents
Sections Page
Background Information 1
Study Question 3
Study Design 3
Study Limitations 4
Case Studies
Hiawatha, Utah 5
Hyde Park, Utah 12
Kamas, Utah 17
Manila, Utah 22
Scofield, Utah 27
South Weber, Utah 30
Uintah, Utah 35
Discussion of Case Studies 39
Conclusions 46
Recommendations 48
References 49
Appendices
Appendix A- Interview Questions A-l
Appendix B-Indicator Tables B-l
Appendix C-Spreadsheet Formulas C-l
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The Ability of Small Communities to
Afford Construction of Wastewater Treatment Facilities
BACKGROUND INFORMATION
With passage of the Water Pollution Control Act in 1948, Congress authorized
federal loans to states and local governments for up to one-third of the construction
cost for wastewater treatment plants. An amendment to the Water Pollution Control
Act in 1956 made grants as well as loans available to states and interstate agencies
for "... establishing and maintaining adequate measures for the prevention and
control of water pollution." Although funds were appropriated for grants in 1956,
no money was provided for loans until the establishment of State Revolving Funds
in 1987.
In the 1970s, as public concern over the environment grew, federal
expenditures for wastewater treatment capital improvements grew as well. Passage
of the 1972 Federal Water Pollution Control Act Amendments (Public Law 92-500)
greatly expanded the system of federal grants for the planning and construction of
Publicly Owned Treatment Works (POTWs). The 1956 amendments authorized a
total of $3 million in construction grants appropriations compared to well over $ 1
billion in 1972. In 1977, "mid-course corrections" to Public Law 92-500 issued
under the Clean Water Act, permitted states to manage the construction grants
program. Although states managed the program, authorization of federal grant
money for up to 75 percent of construction costs continued.
As the strain on the federal budget increased in the late-1970s and into the
1980s, congressional debate began regarding reducing wastewater construction
grant aid to local governments. Enactment of the Water Quality Act in 1987 (Public
Law 100-4) culminated 5 years of congressional efforts to revise the Clean Water
Act. The construction grants program was a central and controversial issue, as
policy makers debated whether and how federal involvement should be phased out.
As amended, the 1987 Act extends the program of construction grants for sewage
treatment projects through fiscal year 1990. Title VI of the 1987 Act authorizes the
Administrator of the Environmental Protection Agency (EPA) to issue capitalization
grants through fiscal year 1994 to states for deposit in State Water Pollution Control
Revolving Funds (SRFs). From these funds states can provide loans, but not
grants, to municipalities for the construction of POTWs.
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The decision to discontinue the construction grants program introduced a major
change in the financing of wastewater treatment facilities. Prior to the 1987
amendments to the Clean Water Act, two fundamental types of assistance were
available to small communities for wastewater projects: grants and loans (either at
market or below-market interest rates). Starting in fiscal year 1990, only one of the
two fundamental types of federal assistance, loans, will be available for wastewater
projects. The financial assistance option which had been most attractive to
communities, grant financing, is now without federal backing. Without grant
financing, a community must generally borrow from the state at the state's rate, or
issue debt based on the state's or its own credit rating. As a result, the local share
of project costs can be expected to increase with the discontinuation of federal grant
financing.
Federal grant financing served another fundamental purpose besides reducing
the local portion of project costs: it targeted communities based on water quality
priority. Without grant financing, financially needy or hardship communities must
apply for larger loans, issuing larger debt in order to fund the necessary wastewater
facility. Because programs such as the SRF are to be self-sustaining, with loan
repayments assuring program perpetuity, communities must demonstrate an ability
to repay the principal and interest of a loan or bond within the given amortization
period, typically 20 years. Other project obligations, such as bond insurance, may
also be required by the lending institution to assure repayment. Good banking and
financial management practices mandate the use of such controls when investing
money. As a result, an issue has been raised regarding whether many
communities, particularly small communities, might not have the resources,
financially or otherwise, to assume long-term debt. Hence, small communities may
be unable to raise the necessary capital for a needed wastewater treatment
improvement project.
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STUDY QUESTION
This study investigates whether communities with less than 3,300 people have
the personnel and financial resources to program and pay for wastewater treatment
facilities to meet secondary discharge standards.t
STUDY DESIGN
Seven small communities in Utah with known wastewater treatment needs, as
documented in the 1988 EPA "Needs Survey," were sampled (EPA, 1988a).
Phase 1 of this sampling involved personal interviews with key informants
(mayors, council members, county planners/health administrators, and/or city
engineers) to determine, among other things, possible innovative financial options
to pay for the construction of needed wastewater facilities.ft Phase 2 involved the
compilation of financial information for each community dating from fiscal year
1985 to present.ttt Phase 3 involved following Utah Bureau of Water Pollution
Control (BWPC) guidelines to determine community ability to pay.tttt
t Secondary treatment discharge standards for municipalities are mandated in the Federal Water
Pollution Control Act, with the following maximum concentrations regulations being required by
the United States Environmental Protection Agency:
Maximum Monthly Average Concentrations
Biochemical Oxygen Demand 30 mg/L
Suspended Solids 30 mg/L
Fecal Coliform 200 count/100 mL
pH 6.0-9.0
' ' For a detailed listing of interview questions see Appendix A.
See Appendix B for additional information on the financial data compiled for each
community.
tttt For a selective listing of Utah BWPC guidelines see the assessing community "ability to
pay" section in Appendix A.
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Sampled communities, by county, include the following third class cities and
towns: t
Carbon County: * Hiawatha Town
Cache County: * Hyde Park City
Summitt County: * Kamas City
Daggett County: * Manila Town
Carbon County: * Scofield Town
Davis County: * South Weber City
Weber County: * UintahTown
STUDY LIMITATIONS
The ability of this study to represent all U.S. towns and third class cities with
wastewater treatment needs is limited by the following circumstances: (1) a limited
number of communities were sampled, 7; (2) all communities are located in one
state, Utah; and, (3) study communities were not statistically chosen. Rather, study
communities were chosen in an attempt to vary the following community
characteristics: level of wastewater treatment need; population growth during the
past decade; and, per capita income levels (communities were chosen with levels
both greater and less than the state's 1985 average of $8,535).
A third limitation is that the financial indicators used to estimate community
ability to pay may not accurately reflect a particular community's willingness to pay
for improved wastewater services. Also, some municipalities may have additional
capital improvement projects which may result in financial constraints not predicted
in the study.
The final limitation is that a community's fiscal condition will continually
change with changes in the national and/or regional economy. Because fiscal
balances for only 4 years (1985-1988) were analyzed for each community, it is
possible the data from 1985-1988 may not be representative of the financial
conditions that will exist during the proposed repayment period. Communities
assessed as able to assume long-term debt may, because of unforeseen changes in
the economy, be unable to fulfill debt obligations.
t The U.S. Department of Commerce, Bureau of the Census defines a Third Class City as
having between 800 and 60,000 in population and a Town as having 800 or less.
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CASE STUDIES
a, Utah
Hiawatha is an unincorporated coal mining town located in the mountains of
Carbon County, Utah. First settled in 1912, the town prospered while coal
reserves abounded and coal was the primary energy source in the nation. During
this period (1912-1954), six major coal mining shafts were active and provided
jobs to over 600 Hiawatha residents. Since 1954, the number of active mines
serving Hiawatha residents has declined. In 1988 only 2 Hiawatha mines were
active and the town's population was one-fifteenth of 1954 population levels.
Currently, there are 17 occupied homes and a total of 40 people who live year-
round in Hiawatha. The U.S. Fuel Company is the sole employer in the town,
owning and operating the 2 active shafts, the coal processor, and the Hiawatha
store.
Characterizing the community's wastewater treatment needs.
Every two years, as required by Sections 205 (a) and 516 (b) (1) of the Clean
Water Act, the State of Utah assesses the capital investment required to build or
improve needed municipal wastewater treatment facilities. A need is identified as a
municipality not currently meeting secondary discharge standards. In carrying out
this analysis process, the Bureau of Water Pollution Control (BWPC) uses three
techniques. The most advanced of these techniques uses an EPA approved cost-
curve program, the Computer Aided Process Design Evaluation Technique
(CAPDET). Input parameters to CAPDET are unit process variables (population
figures, flow rates, and effluent limitations). The program is adjusted for inflation
and estimates municipal wastewater costs to within 10 percent of actual construction
and planning costs (Bishop, 1989). Two less accurate methods are: (1) adjusting
the 1986 "Needs Survey" construction cost value for inflation and (2) using
CAPDET with default inputs or a limited number of specified input parameters.
With the above methods, municipal wastewater construction and planning costs are
estimated within 20 and 15 percent, respectively, of actual costs.
Using a simplified version of CAPDET, the EPA estimated Hiawatha's current
wastewater treatment need as $167,000 (EPA, 1988). Facilities construction would
provide secondary wastewater treatment for area residents and U.S. Fuel Company
employees. Project need was motivated by public health concerns and
environmental concerns. The BWPC notes that sewage in the town is presently
transferred in an open ditch and treatment facilities are not enclosed. This poses a
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potential health threat to area residents and workers (Hess, 1989). Although
Hiawatha's coal slurry/wastewater treatment pond is non-discharging, two pertinent
environmental concerns persist. First, Hiawatha's raw sewage drains into a coal
slurry pond, but, because of the incompatibility of the two treatments needed for
coal slurry and raw sewage, adequate treatment is not provided. Second, the soils
underlying the Hiawatha coal slurry/wastewater treatment pond are underlain by
Mancos shale, a non-water-bearing formation (USDA, 1970). Because the sides
and bottoms of the slurry pond were not sealed during pond construction,
impoundment seepage from the pond may be reaching and contaminating nearby
Miller Geek.
The Hiawatha facility is ranked number 17 on the 1989 Utah State Project
Priority List. It was hoped that Hiawatha's wastewater treatment needs would
receive funding in fiscal year 1988. Funding negotiations were stalled, however,
because community leaders in Hiawatha do not think there is a problemt and, in
part, because Hiawatha is not incorporated.
Describing the community's financial condition.
The operating budget of the Town of Hiawatha is below $50,000 per year.
Hiawatha in many respects is little more than a ghost town. Of the 600 residential
houses boasted to have occupied the community during the 1950s, less than 50 are
left standing. The others have been leveled to the foundation or abandoned. Many
of the 50 houses left standing are tenement houses. The town tennis court is all
weeds, the chain link fence around the court rusted, and, for the most part, ripped
down. The town appears impoverished, although a recent assessment using nine
key financial indicators to rate Hiawatha's financial condition showed Hiawatha to
rate either "strong" or "average" in eight of nine indicator categories (see Table 1).
t Southeastern Utah Association of Governments (SEUAOG) Water Quality Director, Leah Ann
Lamb, commented that "many local officials [in Carbon County] do not understand wastewater
treatment processes and are of the 'old boy' mentality: it has been done this way for years and that
there is no reason to change now." (Lamb, 1989). Consequently, the Water Quality Director
spends a great deal of time educating residents and local officials about the health consequences of
improperly treated wastewater.
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TABLE 1.
Assessment of Hiawatha's Current Financial Condition
Indicator tt
Actual
Indicator
Value
Indicator Rating
Weak Average Strom
1. Annual rate of change in population
2. General Fund Surplus/Deficit
3. Real Property Tax Collection Rate
4. Property Tax Revenues as %
of Full Market Value (FMV)
5. Tax-Supported Debt as % of FMV
6. Tax-Supported Debt as %
of Personal Income
7. Current Direct Net Debt per Capita
8. Overall Net Debt per Capita
9. % Direct Net Debt Due Within 5 Years
-9% <-!% -l%tol% > 1%
0% < 0% 0% to 5% > 5%
100% <96% 96% to 98% >98%
0.4% >4% 2% to 4% < 2%
0% >5% 3% to 5% < 3%
0% >12% 4% to 12% < 4%
$0 >$750 $250 to $750 <$250
$0 >$1,000 $450 to $1,000 <$450
NO DEBT <10% 10% to 30% >30%
t Refer to Appendix B (Table B.I) for additional information on the data sources and
methodology used to determine Hiawatha's financial indicators. Note: indicators 1-9 reflect the
community's current financial condition, not its financial condition were the proposed project debt
assumed.
it The financial capability indicators and rating system found herein are used with permission of
the EPA Office of Water Program Operations (Washington, D.C.) and can be referenced in the
March 1984 edition of the EPA Financial Capability Guidebook.
Hiawatha rated "strong" on indicators 2-9, and "weak" on indicator 1.
Hiawatha's "strong" rating on indicators 4, 5, 7, and 8 implies that town financial
independence is not being lost, but remains independent (EPA, 1984). Similarly,
positive ratings for indicators 3 and 9 indicate effective community financial
management practices.
EPA stresses, however, "the importance of evaluating the results of the
indicators, whether positive or negative, in light of the community's particular
circumstances." (EPA, 1984). In the case of Hiawatha, this is particularly
noteworthy because of the uncertain future of the community's single industry, as
represented by indicator 1.
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The uncertain future of Hiawatha's single industry is primarily revealed in
Hiawatha's annual rate of change in population (indicator 1). Indicator 1 shows an
estimated annual decrease in Hiawatha population at a rate of 9%. This very
"weak" rating, despite seven "strong" and one "average" indicator ratings, raises a
warning signal about the overall economic vitality of the community.
The vitality of Hiawatha's economic base, like most municipalities, is
dependent on personal income, retail sales, and the market value of real property
(Rosenberg, 1978). This vitality is significantly affected by large increases or
decreases in population. In Hiawatha, large population decreases have caused
personal income levels to remain relatively constant, despite four years of increases
in per capita income. Although data on retail sales were not collected in this study,
a decline in Hiawatha general fund revenues (see Appendix B, Table B.I, indicator
2) -revenues which, in part, are collected from taxes on retail sales- identifies a
general decrease in retail sales receipts. General fund expenditures in Hiawatha
decreased from $58,115 in Fiscal Year (FY) 1986 to $51,079 in FY 1987, and to
$41,311 in FY 1988. Similar declines were noted with respect to the sale value of
assessed property in Carbon County. The 1988 dollar-weighted mean of real
property in Carbon County was 106, meaning the actual sale price of real property
in Carbon County was 6 percent below its assessed value (Utah State Tax
Commission, 1988).
Evaluating community finance options.
As noted earlier, Hiawatha has an EPA estimated wastewater treatment need of
$167,000. Hiawatha Engineer Bob Eccly's comment on this amount was that
"Hiawatha does not have a wastewater treatment need, let alone a $167,000
wastewater treatment need. The current system," he continued, "is operational,
non-discharging, and sufficiently able to handle the town's wastewater needs."
(Eccly, 1989). Further discussion of community finance issues, i.e., ways of
reducing costs and/or raising additional revenues were not successful.
Nonetheless, different revenue-raising mechanisms are available to finance
Hiawatha's wastewater facility needs. Table 1, for example, shows that additional
revenues from either property or income taxes could be raised in Hiawatha because
of the town's primarily "strong" indicator ratings (see indicators 5-8 in Table 1). In
addition, indicator 9 which measures a community's current debt capacity as a
percent of direct net debt due within five years, reveals that Hiawatha is not over-
committing, let alone committing, future revenue to debt repayment. Hiawatha's
debt capacity is completely intact and, therefore, property and/or income taxes are
available as a revenue source to: secure a loan, repay a "full faith and credit"
general obligation bond, and/or build a capital improvement fund.
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Three additional revenue-raising mechanisms are potentially available to secure
the (loan) money necessary to finance Hiawatha's wastewater facility needs. One
possibility is "pay-as-you-go" financing which uses a proportion of current general
fund revenues to support a capital reserve account. However, as of fiscal year
1988, Hiawatha had not yet established a capital reserve account. The second
revenue-raising possibility is grant financing from the State Community Impact
Board (CIB). Again, this is not a reliable wastewater funding source. CIB grant
funding is, as a whole, declining (Clark, 1989). The CIB project committee is
preferentially issuing below-market rate interest loans over grants.
The third revenue-raising possibility is user fees. However, because Hiawatha
is a company-owned town this option is not particularly viable. In fact, company
control of residential property has created speculation by personnel in both the Utah
State BWPC and the SEUAOG that U.S. Fuel Company workers living in
Hiawatha would be moved to the nearby City of Price if enforceable action were
taken by the state requiring new sewer hook-ups to individual residences (Hess,
1989; Lamb, 1989).
Assessing the community's "ability to pay."
The Utah BWPC has developed a simple financial capability assessment model
to approximate the cost of sewer service to an average residential household or
equivalent household unit (EHU). This model demonstrates the effect of interest
rates on user fees. User fees between 0.75 and 1.5 percent of MHI signify a
reasonable local share of financial burden. The BWPC, however, identifies the
0.75 percent as a target or most desired level. If a proposed loan interest rate
results in a user cost greater than 1.5 percent of MHI, the Utah BWPC will not
make a loan unless other demographic conditions are unusually favorable (Hess,
1987).
The Town of Hiawatha's wastewater treatment estimated project cost is
$167,000. The town has approximately 16 households and 3 businesses to help
distribute the project cost. Because business are typically issued user charges twice
that of residences, each business is counted twice when determining an overall
number of EHUs. Therefore, Hiawatha has approximately 22 EHUs over which
the $167,000 project costs can be spread.
When preparing a community financial package, various funding scenarios can
be assumed. Table 2 demonstrates three funding scenarios for Hiawatha Town,
Utah. In each of the three scenarios, community MHI, the number of EHUs, the
loan amount, and the amortization period for the loan are held constant. Also, each
loan repayment schedule assumes equal payments per period, monthly or annually,
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until loan maturity 20 years later. Scenarios 1-3, therefore, are identical in all
respects, except one. In each scenario, different annual interest rates are assumed.
Scenario 1 assumes an annual interest rate of 0.0 percent; scenario 2 an interest rate
equal to 5.0 percent; and, scenario 3, a 10.0 percent interest rate.
TABLE 2.
Project Funding Scenario, Hiawatha Town, Utah.t
Community Name:
Community MHI, $:
Project Cost, $:
Number of EHUs:
Hook-up Fee, $:
Net Project Cost, $:
Hiawatha Town
24,952
167,000
22
N/A
167,000
Loan Amount, $:
Annual Interest Rate, %
Amortization Period, Yrs.
Monthly User Fee per EHU, $
Annual User Fee per EHU, $
User Fee as % of MHI
Scenario 1
167,000
0.0
20
31.63
379.55
1.52
Scenario 2
167,000
5.0
20
50.10
601.16
2.41
Scenario 3
167,000
10.0
20
73.25
879.05
3.52
' Refer to Appendix C for additional information on the methodology used to determine
monthly and annual EHU costs and percent MHI.
With interest rates ranging from 0 to 10 percent, the three scenarios yield
significantly different monthly and annual EHU charges and percent MHI
payments. A state loan at zero percent interest, for example, results in a percent
MHI of 1.52 and a $31 monthly payment per EHU. When loan interest rates are
increased to 5 and 10 percent, monthly EHU user fees are $50 and $73,
respectively.
Even scenario 1, the most affordable to Hiawatha residents, may not be
feasible. Two items are noteworthy. First, although a 1.52 percent MHI is in
excess of the desired 0.75 percent mark, the magnitude of public funds committed
10
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to the project remains low. Second, user fees might not prove a dependable, long-
term (i.e., 20 years) revenue source, given adverse economic conditions with the
town's primary employer. Consequently, a favorable loan determination for the net
project costs of $167,000 is contingent upon increased public expenditure at the
beginning of the project (i.e., year one) and improved economic conditions.
Community "ability to pay" for the proposed project is, therefore, possible using
the Utah state revolving fund. The state is assuming a risk, however, on the
principal amount of the loan because of Hiawatha's questionable economic stability.
Identifying market constraints to issuing debt.
The primary constraint to Hiawatha's ability to finance debt is a general lack of
community commitment to the project. Contributing factors to this lack of
commitment include:
(1) the uncertain future of Hiawatha's primary industry,
the U.S. Fuel Company;
(2) lack of education regarding project need;
(3) overriding philosophical/mental stance of the community
population, commonly referred to as the "old boy, miner,
or Cal Black mentality";
(4) possible problems with Hiawatha's not being an
incorporated government; and,
(5) historically small use of public expenditures for community
services.
11
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Hyde Park, Utah
Hyde Park is a city of 1,900 people and is located in Utah's fifth most
populated county, Cache County. Situated at the foothills of the timbered Bear
River Range which overlooks the diversified agrarian Cache Valley, Hyde Park
residents are employed in a variety of industries: forestry, farming, education, and
business. In general, city growth (income and population) has been in a positive
direction. The City of Hyde Park has an updated capital improvement program, has
recently retired nearly $256,882 in bonded debt, and is creating a reserve fund for
future capital improvement projects.
Characterizing the community's wastewater treatment needs.
Using the more complex version of CAPDETt, the EPA estimates Hyde Park's
current wastewater treatment need to equal $2,016,000 (EPA, 1988a).
Construction is needed to provide secondary treatment for the city's 502
households, 7 businesses, and future growth. A new interceptor, with lateral
hook-ups to occupied structures, is proposed. Secondary treatment would be
provided by the nearby City of Logan. Project need was motivated by three factors:
(1) desired growth along the business corridor of Highway 91, which, at present,
has a no development moratorium placed on it because of raw discharge rising to
the surface along the east side of the highway; (2) possible public health concerns
deriving from raw discharge rising to the surface along Highway 91; and, (3) a
desire to protect the water quality of the Cache Valley Marsh (Hyde Park's sewage
currently drains towards this area of protected wetlands).
Describing the community's financial condition.
A 1989 assessment of Hyde Park's financial condition notes that Hyde Park
rates "strong" on eight of nine indicator categories and "weak" on indicator 2
(general fund surplus/deficit) (see Table 3). These "strong" and "weak" indicators
combine to indicate that: (1) the economic vitality of Hyde Park is being
maintained; (2) municipal financial independence is not being lost; and, (3) current
municipal costs are not being deferred or postponed to the future.
t CAPDET, the computer-aided cost-curve program is explained in detail in the previous case
study.
12
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TABLE 3.
Assessment of Hyde Park's Current Financial Condition t
1.
2.
3.
4.
5.
6.
7.
8.
9.
Indicator
Annual rate of change in population
General Fund Surplus/Deficit
Real Property Tax Collection Rate
Property Tax Revenues as %
of Full Market Value (FMV)
Tax-Supported Debt as % of FMV
Tax-Supported Debt as %
of Personal Income
Current Direct Net Debt per Capita
Overall Net Debt per Capita
% Direct Net Debt Due Within 5 Years
Actual
Indicator
Value
3%
-14%
100%
1.0%
2.4%
0.4%
$39
$39
36%
Indicator Rating
Weak
<-!%
< 0%
<96%
>4%
>5%
>12%
>$750
>$1,000
<10%
Average
-l%tol%
0% to 5%
96% to 98%
2% to 4%
3% to 5%
4% to 12%
$250 to $750
$450 to $1,000
10% to 30%
Strong
> 1%
> 5%
>98%
< 2%
< 3%
< 4%
<$250
<$450
>30%
Refer to Appendix B (Table B.2) for additional information on the sources and methodology
used to determine Hyde Park's financial condition.
Indicators 1 and 6 indicate that Hyde Park's economic vitality is being
maintained. Indicator 1 determines the estimated annual rate of population change
in Hyde Park, 3 percent, to be "strong." Similarly, indicator 6 reveals Hyde Park's
ability to repay tax-supported debt, i.e., general obligation debt, to be less than 4
percent and, therefore, "strong."
Indicators 4, 5, 7, and 8 infer that Hyde Park City's financial independence is
being maintained. Indicator 4 (property tax revenues as percent of FMV), for
example, shows that the community is not taxing real property extensively. Thus,
revealing that future revenue growth from this source has potential. Indicator 5
compares the amount of tax-supported debt owed by a community with the FMV of
real property in the community. Hyde Park's "strong" rating indicates that the
community is capable of supporting additional debt. Indicators 7 and 8 reveal the
relative degree of general obligation debt owed by the community. Current direct
net debt and overall net debt owed by Hyde Park residents is "strong."
Indicators 3 and 9 indicate that Hyde Park city's financial management practices
are effective. Indicator 3 (real property tax collection rate) shows 100
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percent efficiency in collecting levied property taxes in three of the past four years
and, indicator 9 indicates an annual percentage payment on existing direct net debt
of 35 percent. This percent rates as "strong" because direct net debt payments are
well-within the useful life of the bonded facility.
The average general fund operating budget of Hyde Park in fiscal years 1985,
1986, and 1987 was approximately $200,000 (see Appendix B, Table B.2,
indicator 2). In FY 1985 and FY 1986, Hyde Park's general fund had surpluses of
$49,721 and $34,990, respectively. In FY 1987 the Hyde Park general operating
fund suffered a 14 percent deficit; expenditures exceeded revenues by $35,482.
Consequently, a "weak" indicator rating is attributed to Hyde Park for indicator 2.
However, surplus of the previous year allowed the fiscal budget ending June 30,
1988 to be balanced, as required by law. Peterson & Allred, an independent
Certified Public Accounting firm noted that "city officials [were] aware of this
violation and [were] taking actions to correct the matter...." (Peterson &Allred,
1988). Additional comments regarding city financial practices are referenced in:
Peterson & Allred, Certified Public Accountants, City of Hyde Park
Comprehensive Annual Financial Report for the Year Ended June 30. 1988. Logan,
Utah, September, 1988.
Proof that current municipal costs are not being deferred or postponed to the
future are evident in that the city has an updated capital improvement program, has
recently retired nearly $256,882 in water resources bonded debt, and is creating a
reserve fund for future capital improvement projects.
Evaluating community finance options.
As noted above, Hyde Park's EPA estimated wastewater treatment need is
$2,016,000. Mayor Ball's comment on this amount was that "a collection line
connecting Hyde Park to Smithfield could be put in at a fraction of the price as that
quoted by the 3 consulting engineers, if the collector was built neighborhood-by-
neighborhood and debt financing was kept to a minimum." (Balls, 1989).
Capital improvement projects are typically financed in Hyde Park through the
issuance of general obligation bonds. The last example of this was in the mid-
1980s when the community issued $664,227 in general obligation debt for the
construction of water supply facilities. Councilwoman Grunig stated that "the
proposed wastewater treatment facilities would, in part, involve the issuance of a
bond to be voted on by the entire Hyde Park population." (Grunig, 1989). To clear
the way for a general election on the proposed future sewer bond, the city
refinanced $551,882 in general obligation bonds in 1988. In 1987, Hyde Park had
$625,882 in general obligation bonds. In 1988, its Farmers Home Administration
14
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(FmHA) Water Bond was refinanced with $295,000 being issued in revenue bonds
and $74,000 being refinanced as a general obligation bond. A total of $256,882
was retired in this same year.
Mayor Balls indicated that there would be a series of individual equity issues to
solve before a referendum on a general obligation debt could be passed (Balls,
1989). Councilwoman Grunig felt, however, that the benefits of economic growth
along Highway 91 would override individual, isolated equity issues (Grunig,
1989).
Councilwoman Grunig believes that the Utah state revolving loan program
could be secured for the project if Hyde Park residents would vote to approve a
general obligation bond issued to the state. "In the past," Councilwoman Grunig
commented, "Hyde Park has been able to assume long-term debt using state
sources. I would foresee the state [BWPC] being able to help us with this project
as well." (Grunig, 1989).
Assessing the community's "ability to pay."
The overall economic vitality of Hyde Park, based on three years of financial
indicator data, appears unusually strong for a small Utah community. As
mentioned above, the city retired nearly $256,882 in bonded debt in 1987 and is
active in planning for its capital improvement needs. With 502 residential
households and 7 businesses, the City of Hyde Park has 516 equivalent household
units (EHUs) to support wastewater construction costs. Table 4 approximates the
cost of sewer and treatment services per EHU for different loan interest rates.
Scenarios 1-3 each reflect a large financial commitment by Hyde Park City
residents in the form of a one-time $1,000 connection fee. For all interest rates,
estimated user fees are in excess or just below the targeted 0.75 percent of the
median household income (MHI). Scenario 1, for instance, demonstrates that a
state loan for $1,500,000, with 20 year amortization period, and a zero percent
interest rate results in equal monthly payment per EHU of $12, 0.66 percent MHI.
This compares to $19 and $28 per month per EHU when interest rates are increased
to 5 and 10 percent, respectively.
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TABLE 4.
Project Funding Scenario, Hyde Park City, Utah.
Community Name: Hyde Park City
Community MHI, $: 22,041
Project Cost, $: 2,016,000
Number of EHUs: 516
Hook-up Fee, $: 1,000
Net Project Cost, $: 1 ,500,000
Scenario 1
Loan Amount, $: 1 ,500,000
Annual Interest Rate, % 0.0
Amortization Period, Yrs. 20
Monthly User Fee per EHU, $ 12.11
Annual User Fee per EHU, $ 145.35
User Fee as % of MHI 0.66
Scenario 2 Scenario 3
1,500,000 1,500,000
5.0 10.0
20 20
19.18 28.05
230.22 336.64
1.04 1.53
Strong economic and demographic conditions in Hyde Park reveal, however,
an ability on behalf of the community to finance more of the wastewater project than
indicated in scenario 1. Grant money will not be required to finance Hyde Park's
$2.016 million in wastewater project need. Hence, Hyde Park should be able to
secure a below-market interest rate loan for the project from the state revolving fund
or other wastewater project loan sources, such as FmHA.
Identifying market constraints to issuing debt.
Existing constraints on Hyde Park's ability to finance debt include (Grunig,
1989):
1) limited access to bond market; consequently, the need to
work with the BWPC and seek eligibility for state money;
2) potential questions about the community's willingness
to incur $2 million in wastewater debt; and,
3) lack of sales and business tax revenues.
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Kamas, Utah
In the arid and mountainous Summit County, approximately 130 miles east of
Salt Lake City, the incorporated City of Kamas is located. Incorporated on July 5,
1911, Kamas City development has always been moderate and greatly influenced
by lumber and agricultural commodity prices. The city's estimated 1989 population
is 1275 people.
Characterizing the community's wastewater treatment needs.
Kamas has a current wastewater treatment need of $1,673,000, as estimated by
the more complex version of CAPDET. Treatment and potentially new interceptors
are needed. The system is to serve existing residents and businesses, as well as
future developments installing a new sewage collection system. Project need was
motivated primarily by environmental concerns, as well as needs for future growth.
During early spring, recharged groundwater levels rise in the area near Kamas.
This groundwater infiltrates into the old and deteriorated city concrete pipes,
causing the town's wastewater lagoons to fill to capacity. "Spill over actually
occurred in the months of April and May during 1986, 1987, 1988, and 1989,"
commented Kamas Wastewater Superintendent Terry Atkinson (Atkinson, 1989).
Terry Atkinson continued, "only the floaters and the sinkers had already been
removed when the water spilled over. The semi-treated sewage then drained into
Beaver Creek which flows into the Upper Weber River above Rockport Lake. The
proposed facility which plans for 6 small new lagoons is designed to keep such
occurrences from happening again." (Atkinson, 1989).
Describing the community's financial condition.
A 1989 assessment of Kamas' financial condition notes that Kamas rates
"strong" on each of nine indicator categories (see Table 5). These indicators
combine to illustrate that: (1) the economic vitality of Kamas is improving; (2)
municipal financial independence is not being lost; (3) financial management
practices of the municipality are effective; and, (4) current municipal costs are not
being deferred or postponed to the future.
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TABLE 5.
Assessment of Kamas' Current Financial Condition, t
Indicator
1. Annual rate of change in population
2. General Fund Surplus/Deficit
3. Real Property Tax Collection Rate
4. Property Tax Revenues as %
of Full Market Value (FMV)
5. Tax-Supported Debt as % of FMV
6. Tax-Supported Debt as %
of Personal Income
7. Current Direct Net Debt per Capita
8. Overall Net Debt per Capita
9. % Direct Net Debt Due Within 5 Years
Actual
Indicator Indicator Rating
Value Weak Average Strong
2% <-!% -l%tol% > 1%
8% < 0% 0%to5% > 5%
100% <96% 96% to 98% >98%
0.4% >4% 2% to 4% < 2%
0% >5% 3% to 5% < 3%
0% >12% 4% to 12% < 4%
$0 >$750 $250 to $750 <$250
$0 >$1,000 $450 to $1,000 <$450
No Debt <10% 10% to 30% >30%
t Refer to Appendix B (Table B.3) for additional information on the sources and methodology used
to determine Kamas' financial condition.
Indicators 1, 2, and 6 indicate that the economic vitality of Kamas is being
maintained. Indicator 1 shows the estimated annual rate of change in population in
Kamas to be "strong". Indicator 2 reveals that in FY 1988, the Kamas City general
fund operated a 8 percent surplus. Revenues exceeded expenses by $14,031. For
indicator 2, an overall $62,847 operating surplus for the City of Kamas in FY 1986
and FY 1987 was determined. Indicator 6 strengthens the view that the economic
vitality of Kamas is being maintained. It reveals a "strong" ability on the part of
Kamas City to repay tax-supported debt.
Indicators 4, 5, 7, and 8 infer that Kamas City financial independence is being
maintained. Indicator 4 shows that the community is not taxing real property
extensively and that future revenues from this source are potential. Indicator 5
compares the amount of tax-supported debt owed by a community to the FMV of
real property in the community. Kamas' "strong" rating indicates that the
community is capable of supporting additional debt/borrowing. Indicators 7 and 8
reveal the relative degree of general obligation debt owed by the community.
Current direct net debt and overall net debt owed by Kamas residents is $0. Based
on national averages, a $0 per capital general obligation debt rates as "strong."
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Indicators 2, 3, and 9 indicate an overall effectiveness in Kamas City financial
management practices. As noted above, the Kamas City general fund has
efficiently raised revenues for its general fund, operating a net operating surplus of
an 8 percent surplus in FY 1988. Indicator 3 (real property tax collection rate)
shows 100 percent efficiency in collecting levied property taxes, while indicator 9
shows that the community has zero direct net debt outstanding. City disuse of
short-term borrowing practices is another example of the overall effectiveness of
Kamas City management practices. Additional comments regarding the strengths of
current city financial practices are referenced in: Crane, Davis & Johnson, Certified
Public Accountants, City of Kamas Comprehensive Annual Financial Report for the
Year Ended June 30. 1988. Salt Lake City, Utah, November, 1988.
In Kamas City during FY 1986, FY 1987, and FY 1988, capital items such as
highways and streets, parks and city hall, and public safety were regularly
appropriated. Use by city officials of an unofficial, but regularly implemented
capital improvement program reveals that current municipal costs are not being
deferred to future Kamas City residents.
Evaluating community finance options.
As stated above, Kamas has an EPA estimated wastewater treatment need of
$1,673,000. Asked how this figure could be reduced, Mayor Blazzard commented
that "by all consultation, the lagoon alternative seemed the most cost-effective for
the city. We looked at other alternatives," he continued, "but the lagoons were the
simplest and least energy intensive alternative applicable to Kamas. Also, the city
has personnel in place who are trained to manage these facilities. Lagoons are
Kamas1 best alternative." (Blazzard, 1989).
The previous two bonds issued in Kamas were in 1969 and 1964 for sewer and
water utility projects, respectively. In 1969, the FmHA issued $160,000 in sewer
revenue bonds to the City of Kamas. In 1964, the state issued $145,000 in water
revenue bonds to Kamas. To date, Kamas has $200,010 outstanding in revenue
bonds for sewer and water.
Kamas City has a water revenue bond ordinance and sewer revenue bond
ordinance requiring "sufficient revenues be set aside to pay principal and interest on
these bonds as they become due." Enterprise funds have been effectively used by
Kamas officials to assure compliance with both ordinances (Crane, 1987).
It is anticipated that the proposed wastewater treatment facilities would be
financed through user charges. "Issuance of a revenue bond," commented Mayor
Blazzard, "seems the most feasible way for the city to raise the necessary revenues
for the project. Revenue bonds have served the city well in the past. I don't think
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the residents will like the increase in user charges, but we cannot have our waste
going uncleaned into Beaver Creek. If the city receives good terms from the state
or maybe FmHA (again), user charges should not be too excessive for our residents
and merchants." (Blazzard, 1989). A general obligation bond will most likely be
issued to the state to secure project loan money.
Mayor Blazzard noted that Kamas has used impact fees in the past to help
provide city infrastructure. Regarding the two newly proposed developments,
Mayor Blazzard said, "impact fees will be assessed to the developer, and new users
will have to pay monthly user fees." (Blazzard, 1989).
Assessing the community's "ability to pay."
The economic vitality of Kamas is not plagued by past nor current difficulties in
meeting debt obligations. The city has $0.00 in current general obligation debt and
revenue bond repayments have occurred regularly since assuming project debt for
sewer and water utilities in 1969 and 1964, respectively. Assuming a $1.6 million
project cost, funding scenarios for the city's wastewater project are presented in
Table 6.
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TABLE 6.
Project Funding Scenario, Kamas City, Utah.
Community Name: Kamas City
Community MHI, $: 22,041
Project Cost, $: 1 ,673,000
Number of EHUs: 573
Hook-up Fee, $: N/A
Net Project Cost, $: 1 ,673,000
Scenario 1
Loan Amount, $: 1,673,000
Annual Interest Rate, % 0.0
Amortization Period, Yrs. 20
Monthly Payment per EHU, $ 12.17
Annual Payment per EHU, $ 1 45 .99
Payment as % of MHI 0.66
Scenario 2 Scenario 3
1,673,000 1,673,000
5.0 10.0
20 20
19.27 28.18
231.23 338.11
1.05 1.53
Table 6 approximates the cost of treatment services in the City of Kamas per
EHU. It indicates that the equivalent household unit will pay approximately $28
per month or 1.53 percent MHI, if a market-rate loan at ten percent interest and a 20
year amortization rate for a $1.6 million loan is awarded. This compares to $19 and
$12 per month EHU payments, as in scenarios 2 and 1, when interest rates are
decreased to 5 and 0 percent, respectively. These two lower MHI percentages
represent two reasonable funding scenarios for the community. Scenario 3, which
well-exceeds the desired 0.75 percent mark is still within the community's "ability
to pay," given the 9 "strong" financial indicators demonstrated in Table 5.
Consequently, Kamas City should not have difficulty in financing its wastewater
treatment improvements using state loan sources.
Identifying market constraints to issuing debt.
The assessed value of real property in Kamas has steadily increased over the
last decade. Consequently, property tax revenues in Kamas have increased without
an actual increase in property taxes. City ability to finance debt is not hindered by
excessive bond obligations. The city currently has $200,000 in outstanding
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revenue bonds due and zero dollars in general obligation debt. Enterprise funds are
effectively being used by Kamas officials to meet annual revenue bond payments
and, in general, all indications as to the financial condition of Kamas are favorable.
Market constraints on Kamas' $1,673,000 wastewater treatment project needs,
therefore, are quite basic:
(1) limited access to bond market; Kamas does not have a bond rating;
(2) possible confusion with application process;
(3) community preference not to have additional user fees; and,
(4) lack of large population base upon which to distribute
project costs.
Manila, Utah
Manila is the smallest county seat in the state of Utah. With a current year-
round population of 270, Manila is, in many respects, a small rural Utah town.
However, the establishment of the Flaming Gorge National Reservoir in the 1950s,
has helped Manila become the most populated portion of Daggett County during
summer holidays and weekends. Nearly 25,000 vacationers visit Manila over the
Fourth of July weekend. Consequently, many residents of Manila are employed
with the town's flourishing tourist trade in addition to working for the National
Forest Service or the the Daggett County government. Per capita income levels in
the town are above average for the State of Utah. Difficulties do, however, persist
regarding the town's ability to finance $1,300,000 in wastewater treatment needs.
Characterizing the community's wastewater treatment needs.
Having recently received bids for construction of its wastewater facilities,
Mayor Scott estimates that Manila has a current wastewater treatment need of
$1,300,000 (Scott, 1989). The facility is currently number 9 on the Utah State
Project Priority List. Construction is needed to assure system compliance with
secondary treatment standards.
Project need was motivated by environmental concerns. Manila's high summer
population, especially during major national holidays, nearly exceeds the capacity
of the town's 7-cell lagoon system. Additionally, engineering comments are that
the location of Manila's present lagoons are inappropriate due to existing soil
conditions (Scott, 1989). During high water seasons, the stability of the Manila
lagoons are threatened. Birch Creek and Flaming Gorge Reservoir could be
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negatively affected by organic loading if destabilization of the Manila lagoons
occurred. Engineering recommendations are for a new 3-celled lagoon system to be
built at a new location, with the existing lagoons being abandoned once
construction is complete.
Describing the community's financial condition.
As part of this study, an assessment of Manila's financial condition was
conducted. Using the financial capability indicators and rating system developed by
the EPA (see Table 7), financial data was compiled and the following was noted:
(1) the economic vitality of Manila is strong; (2) municipal financial independence is
not being lost; (3) financial management practices of the municipality are effective;
and, (4) current municipal costs are not being deferred or postponed to the future.
TABLE 7.
Assessment of Manila's Current Financial Condition,
Indicator
1.
2.
3.
Annual rate of change in population
General Fund Surplus/Deficit
Real Property Tax Collection Rate
4. Property Tax Revenues as %
of Full Market Value (FMV)
Tax-Supported Debt as % of FMV
Tax-Supported Debt as %
of Personal Income
Current Direct Net Debt per Capita
Overall Net Debt per Capita
% Direct Net Debt Due Within 5 Years
5.
6.
7.
9.
Actual
Indicator Indicator Rating
Value Weak Average Strong
-0.1% <-!% -1% to 1% > 1%
30% < 0% 0%to5% > 5%
100% <96% 96% to 98% >98%
0.1% >4% 2% to 4% < 2%
0% >5% 3% to 5% < 3%
0% >12% 4%to 12% < 4%
$0 >$750 $250 to $750 <$250
$0 >$1,000 $450 to $1,000 <$450
No Debt <10% 10% to 30% >30%
i Refer to Appendix B (Table B.4) for additional information on the sources and methodology
used to determine Manila's financial condition.
Manila rates "strong" on indicators 2-9, and "average" on indicator 1.
Indicators 1 and 6 indicate that Manila's economic vitality is being maintained.
Indicator 1 only slightly supports this statement by showing that the estimate annual
rate of change in population in Manila, -0.1 percent, to be only "average."
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Indicator 6, on the other hand, is an important factor in indicating the strength of
Manila's economic base. Indicator 6 is calculated by dividing tax-supported general
obligation debt by personal income to determine community tax-supported debt as a
percent of personal income. Manila rates "strong" on this indicator, revealing that
the town has per capita income levels above state averages (refer to Appendix B,
Table B.4, indicator 6) and that the town does not have a growing general
obligation debt burden.
Indicators 2, 3, and 9 indicate that Manila's financial management practices are
effective. Indicator 2, for example, reveals that in FY 1988, Manila's general fund
operated a 30 percent surplus, where revenues exceed expenses by $21,082.
Previous years analysis for the town of Manila reveals a net general fund operating
surplus of $24,321 for FY 1986 and $197 for FY 1987. Indicator 3 shows 100
percent efficiency in collecting levied property taxes and, indicator 9 shows Manila
to have no outstanding direct net debt.
Similarly "strong" rating on indicators 4, 5, 7, and 8 demonstrate that Manila's
financial independence is not being lost. The four indicators show a conservative
use of property taxes, zero percent use of property taxes to support community
long-term debt, $0 in current direct net debt per capita, and $0 in the community's
overall direct net debt due per capita, respectively.
Evaluating community finance options.
Innovative and alternative wastewater treatment processes were evaluated by
Manila Town as potential means to reduce project costs. Natural wetlands were
considered as a viable treatment alternative. A series of economic and regulatory
constraints, however, prevented this alternative from being chosen. A non-
discharging treatment plant was eventually chosen. Merits of this choice are (Scott,
1989):
(1) treated wastewater is not discharged to Birch Creek
or Flaming Gorge Reservoir;
(2) non-discharge is viable because evaporation exceeds
precipitation in Manila;
(3) spray irrigation and/or land application is not a
problem because agricultural land is available; and,
(4) wastewater treatment project costs were reduced from
an estimated $1.7 million (EPA, 1988a) to $1.3 million.
In the past, Manila has financed capital improvement projects using revenue
bonds secured with user fees. The Manila Water Resources Bonding Reserve
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Enterprise Fund annually collects $36,000 in user fees and in 1987 had $285,544
in principal outstanding on its Water Resource Bond. Full debt repayment of
Manila's Water Resource Bond is expected in the year 2010.
Mayor Carole Scott anticipates that the proposed wastewater project facilities
would be financed, in part, through revenue bonds. "An informed town council,"
Mayor Scott commented, "elected leadership to implement necessary capital projects
as long as the projects were done with revenue fees. Manila lacks reserve funds
and, a community unwillingness to incur debt requires that necessary capital
projects be financed, as in this case, without the vote of the people." (Scott, 1989).
The three local revenue sources most likely to be used in Manila for debt
repayment are (foremost) user charges, followed by new connection fees and,
potentially, annexation fees. An enterprise fund will be established to pay the
principal and interest due on the revenue bond. Mayor Scott believes either the state
or FmHA would issue the necessary wastewater treatment bond (Scott, 1989).
Assessing the community's "ability to pay."
It has been noted that Manila's economic vitality is strong: the town's financial
independence is not being lost; Manila effectively manages its financial resources;
and, current municipal costs are not being deferred. Yet, it is important to realize that
Manila has only 270 year-round residents and that $1.3 million in wastewater project
needs is not easily afforded by so few people. Table 8 explains this fact further.
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TABLE 8.
Project Funding Scenario, Manila Town, Utah.
Community Name: Manila Town
Community MHI, $: 28,244
Project Cost, $: 1,300,000
Number of EHUs: 94
Hook-up Fee, $: N/A
Net Project Cost, $: 1 ,300,000
Scenario 1
Loan Amount, $: 1 ,300,000
Annual Interest Rate, % 0.0
Amortization Period, Yrs. 20
Monthly Payment per EHU, $ 57. 62
Annual Payment per EHU, $ 691 .49
Payment as % of MHI 2.45
Scenario 2 Scenario 3
1,300,000 1,300,000
5.0 10.0
20 20
91.27 133.46
1095.25 1601.53
3.88 5.67
The Town of Manila has 64 full-time households and 15 businesses to be
served by the proposed wastewater facility, corresponding to an EHU of 94.
Referring to Table 8, it is noted that a state loan at zero percent interest and a 20
year amortization rate results in a user fee of 2.45 percent MHI per EHU. Similarly
high MHI percentages for the other two funding scenarios reveal that Manila's
strong demographic conditions (refer to Table 7) are not sufficient for the BWPC to
lend $1.3 million to Manila, even with a zero percent interest rate. Grant financing,
therefore, is required to meet the proposed project funding needs. A more detailed
analysis would be required to determine the exact loan amount which Manila
residents can afford. An amount equal to approximately one-third or $450,000 at
zero percent interest and a 20 year amortization rate is one possibility. This
scenario results in a MHI of 0.80 percent and monthly payments per EHU equalling
$18.94.
Identifying market constraints to issuing debt.
Neither public-private owner/operator arrangements nor privately issued bonds
were considered viable for the project (Scott, 1989). The Town of Manila does not
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have the fiscal strength, let alone a bond rating to attract private investors for major
capital improvement projects. Consequently, the primary constraints on Manila's
ability to finance debt include:
(1) limited access to bond market;
(2) lack of large population base to distribute project costs;
(3) variable demand for services;
(4) economic dependence on tourism; and,
(5) community preference not to have additional user fees.
Scofield, Utah
Scofield is a sparsely populated (150 people) coal mining town located near the
upper end of Pleasant Valley in Carbon County, Utah. At an elevation of 7,702
feet, the town is surrounded by towering hills on all sides but the north. To the
north of Scofield, 43,000 acre-feet of water are impounded. This large freshwater
impoundment, Scofield Reservoir, helps support economic activity in the arid State
of Utah. In the 1970s, with passage of the Clean Water Act and noticeable declines
in Scofield Reservoir water quality, an Area Wide Water Quality Plan for Scofield
Reservoir was quick to develop (Lamb, 1989). The Utah BWPC and Carbon
County Health officials targeted the Town of Scofield and six other Pleasant Valley
communities as needing wastewater treatment improvements for the water quality of
Scofield Reservoir to be protected. Construction of the Pleasant Valley and
Scofield wastewater facilities is underway and scheduled for completion by 1990.
Characterizing the community's wastewater treatment needs.
The BWPC notes in the 1989 Utah Wastewater Treatment Project Priority List
that new interceptors and treatment facilities are needed in Scofield Town. (BWPC,
1989). It was estimated in 1986 that it would cost $1,173,000 to build these
structures (BWPC, 1986). Adjusted for inflation, Scofield Town's current
wastewater treatment needs conservatively equals $1.2 million. The community is
presently served by individual septic systems and is planning to build a subsurface
drainfield (absorption trenches) with a collection system. The Scofield project is
ranked number 7 on the 1989 State of Utah Wastewater Project Priority List.
"Construction is needed," commented the SEUAOG Water Quality Director, "to
protect public health and to attain a high measurable improvement in water quality
[in Pleasant Valley Creek and Scofield Reservoir]" (Lamb, 1989).
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Describing the community's financial condition.
Scofield is an abandoned coal mining town that has maintained a small, year-
round population. Many retirees live in the town and, as a result (likely not
directly) large capital expenditures for schools and parks have not been required.
Through an assessment of Scofield's financial condition, it is noted that Scofield
has not accumulated long-term debt and that the operating budget of the town is
well-below $25,000 per year. Additional observations of this assessment are that:
(1) the Town of Scofield has managed its small financial resources effectively in the
past (refer to indicators 2, 3, and 9 in Table 9 as well as Appendix B, Table B.5)
and, (2) the population and economic base of the community are growing, though
moderately.
TABLE 9.
Assessment of Scofield's Current Financial Condition, t
Indicator
1. Annual rate of change in population
2. General Fund Surplus/Deficit
3. Real Property Tax Collection Rate
4. Property Tax Revenues as %
of Full Market Value (FMV)
5. Tax-Supported Debt as % of FMV
6. Tax-Supported Debt as %
of Personal Income
7. Current Direct Net Debt per Capita
8. Overall Net Debt per Capita
9. % Direct Net Debt Due Within 5 Years
Actual
Indicator Indicator Rating
Value Weak Average Strong
5% <-!% -l%tol% > 1%
10% < 0% 0%to5% > 5%
100% <96% 96% to 98% >98%
0.2% >4% 2% to 4% < 2%
0% >5% 3% to 5% < 3%
0% >12% 4% to 12% < 4%
$0 >$750 $250 to $750 <$250
$0 >$1,000 $450 to $1,000 <$450
No Debt <10% 10% to 30% >30%
t Refer to Appendix B (Table B.5) for additional information on the sources and methodology
used to determine Scofield's financial condition.
Evaluating community finance options.
The water quality problem affecting Scofield Reservoir transcends the Town of
Scofield's general-purpose governmental boundary. Accordingly, in dealing with
the water quality problem of Scofield and the Scofield Reservoir, local officials
established the Scofield Reservoir Special Service District (SRSD), a single-
purpose government to provide sewage treatment for five lakeshore communities in
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the unincorporated area north of Scofield Town. With the power to levy taxes, user
charges, and other fees, the SRSD offers Pleasant Valley communities a way to
cooperate in dealing with the Scofield Reservoir issue. As such, the SRSD has
aimed to ensure that the Scofield facility, as well as the other facilities in the district,
are constructed and operated on an optimal scale.
Establishment of the SRSD has helped the Town of Scofield to save an
estimated $104,000 in project costs (BWPC, 1986). For example, establishment of
the SRSD allowed for an agreement, whereby, an isolated coal mine owned by
Utah Fuel Company dispose of its domestic waste at Scofield Town's new
treatment facility. User fees are distributed between Utah Fuel Company and
Scofield Town residents, resulting in a lower monthly user charge for Scofield
Town residents than would have existed without the $20,000 per year Utah Fuel
contribution. Cost savings were realized in two additional ways. First, by pooling
project costs for each of the seven Pleasant Valley communities, a lower interest
borrowing rate was negotiated. Second, this pooling decreased each community's
proportionate share of financial, legal, and, engineering fees.
Assessing the community's "ability to pay."
Scofield Town's ability to pay for its entire wastewater treatment project need of
$1.1 million solely through user charges or property tax increases is not feasible.
Although economies of scale have helped to reduce project costs, new treatment and
sewer structures for Scofield remain expensive. Scofield Town was able to afford
the needed facilities, however, due to grant funding for roughly 91.5 percent of
project costs awarded by the BWPC and the EPA. The remaining project costs, 8.5
percent or $137,600, were financed using a Community Impact Board (CIB) loan
at a 2.5% interest rate and a 25 year amortization period. The following
circumstances made grant funding possible: a project need of $1.1 million; the
relationship of the proposed project to the Scofield Reservoir Area Wide Water
Plan; and, the fact that project negotiation began prior to 1987 Water Quality Act
amendments to Title II. With a median household income of $19,792, the
proposed wastewater service costs to Scofield residences will equal 0.78 percent of
MHI (BWPC, 1986).f It is likely that town residents could have absorbed a larger
portion of project costs. Nonetheless, it must be noted that grant financing
assumed a critical role in financing Scofield's wastewater funding needs.
t Because the BWPC conducted a 1986 assessment of Scofield's ability to pay, Table 10
or a "best scenario" analysis for Scofield's $1.1 million wastewater treatment need is not
included.
29
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Identifying market constraints to issuing debt.
With a combined general fund operating budget below $25,000, Scofield's
ability to issue debt is limited. Additiona factors which negatively affect Scofield's
ability to issue debt is a limited credit history, information constraints, personnel
constraints, and a lack of economic growth.
South Weber, Utah
South Weber (elevation 4,497, population 2208) lies in a cove at the mouth of
Weber Canyon. Its neat, rectangular farms of gold and green infer that South
Weber is a rural, agricultural community. South Weber, however, is located just
east of the Great Salt Lake Valley, only 30 miles north of Salt Lake City and 10
miles south of Ogden (Utah's third largest city). Consequently, the community in
South Weber has evolved to be more of commuter, suburban population than an
active farming community. Per capita income levels in South Weber are
approximately equal to state averages.
Characterizing the community's wastewater treatment needs.
The present method of wastewater disposal in South Weber is by individual
septic tank and drain field systems. There have been problems experienced in the
past with effluent from some of the septic tank drain fields surfacing into irrigation
ditches. Many other drain fields are installed in gravel areas which pose a threat to
aquifers supplying municipal wells. The Davis County Health Department has
expressed concern about the impact of increasing numbers of these systems on
existing wells (BWPC, 1984).
Despite local health official concerns, the citizens of South Weber voted down a
wastewater treatment general bond in 1984 by a ratio of 2:1. Mayor Rex
Bouchard's comment on the failed bond election was that "we [the city and the
BWPC] thought the $24.00/month proposed user charge was fair and that city
residents were in support of the project. If it would have been a narrow defeat, we
were willing to bring in public relations people to better sell the bond election. As it
turned out, the city had a Catch-22: need a sewer system for well-planned growth,
but need a population to support putting in a sewer system." (Bouchard, 1989).
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South Weber has a current wastewater treatment need of $2,226,000. This cost
estimate represents $1,525,000 in collection sewers; $290,000 in intercepter
sewers; $246,000 in lateral sewers; and $165,000 in engineering and legal fees
(BWPC, 1984).
Describing the community's financial condition.
An assessment of South Weber's financial condition (refer to Table 11) notes that
South Weber rates "strong" on eight of nine indicator categories and "average" in
indicator 9. These indicators combine to illustrate that: (1) the economic vitality of
South Weber is positive; (2) municipal financial independence is being maintained;
and, (3) the financial management practices of the city are effective. However, a
2:1 defeat of a general bond referendum for a sewer system in 1984 might be an
indication that needed capital improvement projects are being deferred to the future.
TABLE 11.
Assessment of South Weber's Current Financial Condition, t
1.
2.
3.
4.
5.
6.
7.
8.
9.
Indicator
Annual rate of change in population
General Fund Surplus/Deficit
Real Property Tax Collection Rate
Property Tax Revenues as %
of Full Market Value (FMV)
Tax-Supported Debt as % of FMV
Tax-Supported Debt as %
of Personal Income
Current Direct Net Debt per Capita
Overall Net Debt per Capita
% Direct Net Debt Due Within 5 Years
Actual
Indicator
Value
5%
30%
100%
0.1%
0.4%
2%
$174
$174
29%
Indicator Rating
Weak
<-!%
< 0%
<96%
>4%
>5%
>12%
>$750
>$ 1,000
<10%
Average
-l%tol%
0% to 5%
96% to 98%
2% to 4%
3% to 5%
4% to 12%
$250 to $750
$450 to $1,000
10% to 30%
Strong
> 1%
> 5%
>98%
< 2%
< 3%
< 4%
<$250
<$450
>30%
t Refer to Appendix B (Table B.6) for additional information on the sources and methodology
used to determine South Weber's financial condition.
Indicators 1, 2, and 6 indicate that the economic vitality of South Weber is
being maintained. Indicator 1 shows the estimated annual rate of change in
population in South Weber, 5 percent, to be very "strong." Indicator 2 reveals the
South Weber City general fund operated a $66,219 surplus in FY 1988; a $64,471
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surplus in FY 1987; a $66,245 surplus in FY 1986; and, a $66,245 surplus in FY
1985. Indicator 6 strengthens the view that the economic vitality of South Weber is
being maintained. It reveals that South Weber's ability to repay tax-supported debt
to be equal to 2 percent and, therefore, "strong."
Indicators 4, 5, 7, and 8 infer that South Weber City financial independence is
being maintained. Indicator 5 compares the amount of tax-supported debt owed by
a community with the FMV of real property in the community. South Weber's
"strong" rating indicates that the community is capable of supporting additional
borrowing. Indicators 7 and 8 reveal the relative degree of general obligation debt
owed by the community. Current direct net debt and overall net debt owed by
South Weber residents is $174. Based on national averages, a $174 per capital
general obligation debt rates as "strong."
Indicators 2 and 3 indicate an overall effectiveness in South Weber City
financial management practices. As noted earlier, the South Weber City general
fund has very efficiently raised revenues for its general fund over the past 4 fiscal
years (nearly $240,000 in surplus reserves). Indicator 3 reveals a similar degree of
efficiency, as the real property tax collection rate in South Weber equalled 100
percent in FY 1988. City disuse of short-term borrowing practices is another
example of the overall effectiveness of city management practices.
Evaluating community finance options.
In the past, South Weber has financed capital improvement projects using
reserve funds, revenue bonds, general obligation bonds, lease-purchase
agreements, and local loan sources. Regarding large capital improvement projects
involving long-term debt negotiations, Mayor Bouchard commented that "the
community had, to date, only issued revenue and general obligation bonds"
(Bouchard, 1989). He noted, "lease-purchase agreements were of interest for the
city's proposed wastewater facilities, but such agreements appeared less attractive
with the tax laws, were not commonly practiced [as far as he knew], and, were not
particularly suited for South Weber because South Weber would not be treating its
own waste, but running an out fall line to Central Weber" (Bouchard, 1989).
As stated above, South Weber has an EPA estimated wastewater treatment need
of $2,226,000. Asked how this figure could be reduced, Mayor Bouchard
commented that the interceptor to Central Weber sewer facilities, by all
consultation, seemed the most cost-effective alternative for the city.
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The 3 other alternatives evaluated for the project were: (1) treatment and
discharge (lagoons); (2) treatment and discharge (trickling filter plant); and, (3) land
application (irrigation).
Competitive bids were not solicited for engineering services. Utah BWPC
personnel reviewed the proposed engineering reports, however. It can reasonably
be assumed the proposed engineering option for the interceptor to Central Weber
sewer facilities and the associated costs were accurate.
Assessing the community's "ability to pay."
In 1984, South Weber citizens voted down a general obligation bond which
was to be issued to the BWPC in order to secure a $1.7 million wastewater loan.
BWPC evaluation of graduated repayments for the project showed that "user
charges would be $24 per month, increasing at a rate of 5 percent per year, for the
20 year term and $20 per month for the entire 25 year term." (BWPC, 1984). It
was shown that the increase in payments could have been covered for the 20 year
term by an annual population growth rate of 3.8 percent per year or an additional 18
connections. Similarly, the 25 year term, could have been covered by a 3.4 percent
per year growth rate or an additional 17 connections. South Weber's projected
population growth, at the time of the study, was 5.3 percent per year. Actual
growth rates in South Weber between 1980 and 1989 were 4.47 percent (refer to
Table 11). Commenting on the 1984 loan package, Utah BWPC fiscal specialist,
Nancy Hess remarked that she foresaw better financing for South Weber in the
future (Hess, 1989). An option that would reduce user fee costs as percent of
median household income from 1.33, as in 1984, to 0.69 percent would require a
zero percent interest rate loan and a 20 year date of maturity on the loan (see Table
12). It would also require that a one-time $1,000 hook-up fee be assessed to 526
EHUs. It appears a financial package between 1.33 and 0.69 percent of median
household income would be affordable to South Weber residents.
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TABLE 12.
Project Funding Scenario, South Weber City, Utah.
Community Name: South Weber City
Community MHI, $: 23,340
Project Cost, $: 2,226,000
Number of EHUs: 526
Hook-up Fee, $: 1,000
Net Project Cost, $: 1,700,000
Scenario 1
Loan Amount, $: 1,700,000
Annual Interest Rate, %
Amortization Period, Yrs.
Monthly Payment per EHU, $
Annual Payment per EHU, $
Payment as % of MHI
0.0
20
13.47
161.60
0.69
Scenario 2
1,700,000
5.0
20
21.33
255.95
1.10
Scenario 3
1,700,000
10.0
20
31.19
374.271
1.60
Identifying market constraints to issuing debt.
Constraints on South Weber's ability to finance debt are comparable to those
outlined earlier for the City of Kamas, Utah. These include:
(1) limited access to bond market; the city does not have a bond rating;
(2) possible confusion with application process;
(3) community preference not to have additional user fees; and,
(4) lack of large population base among which to distribute
project costs.
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Uintah, Utah
The Town of Uintah is located on the north-side of the Weber River,
approximately two miles from the City Center of South Weber. Having a
population of 510, Uintah has not witnessed the population growth of South
Weber. Developable land in Uintah is limited, primarily because soil conditions on
the remaining undeveloped land are not suitable for construction. Approximately
one-quarter of the land in Uintah is seasonally saturated with water. Five acre
minimum lot sizes are required for residential development in these areas. More
intensive development can result only with construction of a sewer collection
system in the town.
Characterizing the community's wastewater treatment needs.
Uintah is presently served by individual septic systems and is planning to build
a collection system. Wastewater will flow to Central Weber for treatment. Using
inflation-adjusted 1986 "Needs Survey" cost-estimates for Uintah, estimated project
costs are $2,387,000 to construct collection, interceptor, and lateral sewers for
Uintah's 170 households and 8 businesses (EPA, 1988a).
Describing the community's financial condition.
An assessment of Uintah's financial condition notes that Uintah rates "strong"
on eight of nine indicator categories and "weak" on indicator 2 (general fund
surplus/deficit) (see Table 13). These "strong" indicators combine to indicate that:
(1) the economic vitality of Uintah is being maintained and, (2) municipal financial
independence is not being lost.
Indicators 1 and 6 indicate that Uintah's economic vitality is being maintained.
Indicator 1 features an estimated 5 percent annual rate of change in population
Similarly, Uintah's indicator 6 rates "strong," reflecting an ability to repay tax-
supported debt general obligation debt equal to 0.6 percent.
Indicators 4, 5, 7, and 8 infer that Uintah's financial independence is being
maintained. Indicator 4, for example, shows that the community is not taxing real
property extensively; thus, revealing that future revenue growth from this source is
potential. Indicator 5 compares the amount of tax-supported debt owed by a
community with the FMV of real property in the community. Uintah's "strong"
rating indicates that the community is capable of supporting additional debt from
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TABLE 13.
Assessment of Uintah's Current Financial Condition, t
Indicator
Actual
Indicator
Value
Indicator Rating
Weak Average
1. Annual rate of change in population 5%
2. General Fund Surplus/Deficit -17%
3. Real Property Tax Collection Rate 109%
4. Property Tax Revenues as %
of Full Market Value (FMV) 0.2 %
5. Tax-Supported Debt as % of FMV 0.3%
6. Tax-Supported Debt as %
of Personal Income 0.6%
7. Current Direct Net Debt per Capita $62
8. Overall Net Debt per Capita $62
9. % Direct Net Debt Due Within 5 Years 54%
< 0%
<96%
-l%tol% > 1%
0% to 5% > 5%
96% to 98% >98%
2% to 4% < 2%
3% to 5% < 3%
4%to 12% < 4%
>$750 $250 to $750 <$250
>$1,000 $450 to $1,000 <$450
10% to 30% >30%
t Refer to Appendix B (Table B.7) for additional information on the sources and methodology
used to determine Uintah's financial condition.
this source. Indicators 7 and 8 reveal the relative degree of general obligation debt
owed by the community. Current direct net debt and overall net debt owed by
Uintah residents is $62.
Indicators 3 and 9 indicate that town financial management practices are
effective. Indicator 3 shows 100 percent efficiency in collecting levied property
taxes in 3 of the past 4 years and, indicator 9 shows a debt repayment schedule
well-within the useful life of the general obligation bonded facility.
The annual general fund/operating budget of Uintah is approximately $100,000
(see Appendix B, Table B.7, indicator 2). In FY 1986 and FY 1987, Uintah's
general fund had a $13,729 and $10,419 surplus, respectively. In FY 1988 the
Uintah general operating fund suffered nearly a 17 percent deficit, where
expenditures exceeded revenues by $17,380. Consequently, a "weak" indicator
rating is attributed to Uintah for indicator 2. The previous year general fund
surplus allowed the fiscal budget ending June 30, 1988 to be balanced. Additional
comments regarding town financial practices are referenced in: William A.
Dahlquist, Certified Public Accountants, Town of Uintah. June 30. 1988. Logan,
Utah, February 24, 1989.
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Evaluating community finance options.
In 1971, the Town of Uintah issued a general obligation water bond for
$70,000. In 1988, the town had $39,000 in principal and interest payments
outstanding on this bond. Debt payments, as well as ongoing operation,
maintenance, and replacement of the Uintah water system have successfully been
accounted for by the Uintah Water Enterprise Fund.
Mayor Kendell commented that "a sinking fund to meet sewer revenue bond
obligations would be established if the community decided to construct sewer
facilities." (Kendell, 1989). Asked how the necessary revenues would be
generated, Mayor Kendell responded, "with $2.3 million in sewer project need and
roughly only 200 households to pay for that need, we can't. Maybe we can avoid
conveying the wastewater to Central Weber and use absorption trenches or mound
the septic fields. Project costs, no doubt, would be considerably less.
$20.00/month user charges might then be possible. Engineering and financial
alternatives need to be evaluated before I can say more." (Kendell, 1989).
Assessing the community's "ability to pay."
The Town of Uintah is not in a strong financial position to pay for nearly $2.4
million in wastewater treatment improvements (see Table 14). Uintah has 170 full-
time households and 8 businesses to be served by the proposed wastewater facility,
corresponding to an EHU of 186. Referring to Table 14, it is noted that a state loan
at zero percent interest and a 20 year amortization rate results in a user fee of 2.74
percent MHI. Even higher MHI percentages exist for the other two funding
scenarios. Uintah's less than strong demographic condition will most likely
prevent the BWPC from lending money to Uintah. Consequently, despite the
predominantly strong indicators revealed in Table 13, Uintah would have difficulty
financing 1.7 million even at a zero percent interest rate and a much longer
amortization rate. Grant financing is required to meet the proposed project funding
needs. Additional calculations are required to determine the exact loan amount
which Uintah residents can afford. An amount equal to $650,000 at zero percent
interest and a 20 year amortization rate is one possibility. This scenario results in a
MHI of 0.81 percent and monthly payments per EHU equalling $14.56.
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TABLE 14.
Project Funding Scenario, Uintah Town, Utah.
Community Name: Uintah
Community MHI, $: 21,601
Project Cost, $: 2,387,000
Number of EHUs: 186
Hook-up Fee, $: 1,000
Net Project Cost, $: 2,201 ,000
Scenario 1
Loan Amount, $: 2,201,000
Annual Interest Rate, % 0.0
Amortization Period, Yrs. 20
Monthly Payment per EHU, $ 49.3 1
Annual Payment per EHU, $ 591 .67
Payment as % of MHI 2 . 74
Scenario 2 Scenario 3
2,201,000 2,201,000
5.0 10.0
20 20
78.09 114.19
937.14 1,370.33
4.34 6.34
Identifying market constraints to issuing debt.
Existing constraints on Uintah's ability to finance debt include: (1) limited
financial and engineering expertise; (2) high project costs but small population base;
and, (3) lack of commercial base.
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DISCUSSION OF CASE STUDIES
In the previous section, detailed case studies were prepared for each of the
seven study communities. In each case study, the community's wastewater
treatment needs, financial condition, "ability to pay," finance options, and
constraints to issuing debt were documented.
In this section, the research data used in the previous section's case studies are
summarized and compared. Comparisons between the study communities help
define which factors limit a small community's ability to afford construction of
wastewater treatment facilities. The following factors potentially limit ability:
(1) the cost of the wastewater treatment project;
(2) community size and the number of equivalent household units over
which project costs can be distributed;
(3) the current economic condition of the study community;
(4) the ability of the community to reduce costs and/or raise additional
revenues for the project; and,
(5) community long-term debt finance options for the wastewater
treatment project.
Before discussing the above five factors, it is helpful to summarize the
proposed wastewater treatment project of each of the seven study communities.
Table 15 summarizes each community's wastewater project and, where applicable,
gives the community's project priority rating.
As required by Public Law 92-500 Sections 216 and 303 (e), the Utah Bureau
of Water Pollution Control annually prepares a wastewater treatment project priority
list (PPL). This list helps the state determine the relative importance of community
wastewater treatment projects. Communities with the highest rating, i.e, a rating
close to one, are viewed as having the highest degree of wastewater treatment need
in the state. A high PPL rating, however, does not mean that a community will
receive preferential funding from the state. PPL ratings do not take into account a
community's current financial situation. Rather, PPLs are determined using a point
system, whereby, a community's proposed wastewater treatment project is
attributed points based on a series of environmental and health factors, such as the
number of people affected, the quality of the receiving water, and so forth. The
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community which tallies the most points, based on the established criteria, has the
highest PPL rating. The "State of Utah Wastewater Project Priority List for Fiscal
Year 1989" had over 100 rated projects.
TABLE 15.
1989 Wastewater Treatment Project Priority Listing
and Description of Project Need for 7 Utah Communities.
Project Description
Improve Existing System
Study Community
Hiawatha Town
Hyde Park City
Kamas City
Manila Town
Scofield Town
South Weber City
Uintah Town
Priority
Rating
17
35
21
9
7
34
not rated
to Meet Secondary
Treatment Standards
X
X
X
New
Interceptor
X
X
X
X
Treatment @
New Neighboring
Treatment Facility
X
X
X
X
X
Table 15 presents the project priority rating of each of the seven study
communities. As shown, all of the study communities except Uintah Town were
rated on the "State of Utah Wastewater Project Priority List for Fiscal Year 1989."
Scofield Town and Manila Town, for reasons detailed in the previous case study
section, have the highest PPL ratings. Less urgent projects, relatively speaking, are
South Weber City and Hyde Park City, which are rated 34 and 35, respectively.
Given the 1989 PPL, Uintah Town's wastewater treatment project is the least
urgent; it is not rated.
With an overall goal of meeting secondary discharge standards, Table 15
describes each community's specific wastewater treatment project. Four
municipalities, Hyde Park City, Scofield Town, South Weber City, and Uintah
Town, need new interceptor sewers to meet the 1972 Federal Water Pollution
Control Act discharge standards. Of these four municipalities only Scofield Town
proposes to provide its own treatment; Hyde Park, South Weber, and Uintah each
intend to provide treatment at neighboring treatment facilities. Hiawatha Town,
Kamas City, and Manila Town each propose to improve their existing wastewater
treatment system to meet secondary discharge standards. Manila will abandon its
40
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existing lagoon system upon completion of a new lagoon system at a more
favorable site.
A community's willingness and ability to afford construction of a wastewater
treatment facility to meet secondary discharge standards is significantly affected by
the cost of the proposed improvements. Figure 1 illustrates the total and net
wastewater construction costs for each of the seven study communities. The net
loan amount differs from the entire loan amount for Hyde Park City, Scofield
Town, South Weber City, and Uintah Town because a one-time $1,000 hook-up
fee for every currently existing EHU is assumed.
2500 T
2000"
1500..
Project Cost,
Thousands of Dollars
1000"
500..
Hiawatha Hyde Kamas Manila Scofield South Uintah
Town Park Citj City Town Town Weber Town
City
Net Cost
Total Cost
Figure 1. Total and Net Wastewater Construction Costs in Seven Utah
Communities (1988).
It is noted that project costs for each community, except Hiawatha Town, are
greater than $1 million. Hyde Park City, South Weber City, and Uintah Town
have the highest project costs, with approximately $2 million in proposed
collection, interceptor, and lateral sewers. Kamas City's lagoon expansion is the
next highest project cost with slightly over $1.6 million in need. This is followed
by Manila Town, then Scofield Town, followed by Hiawatha Town, which has the
lowest project costs.
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Given the discussion of Figure 1, it is noted that project costs increase with the
degree of construction required for the project. Hyde Park City, South Weber City,
and Uintah Town, for example have the highest project costs of the seven study
communities, even though treatment is provided at neighboring facilities. Extensive
collection systems have a high project cost attached with them. Lagoon
construction can also involve project costs well over $1 million; however, because
labor and materials are not as extensively used, as with collection systems,
construction costs are less.
The U.S. Environmental Protection Agency (EPA) and the Utah State Bureau
of Water Pollution Control (BWPC) are aware of the relative costs of the various
wastewater treatment technologies. In writing the 1987 Water Quality Act,
Congress showed its awareness of this issue, by creating financial incentives for
communities which implement alternative technologies for wastewater treatment
facilities. Alternative technologies, according to Title n Section 201 (g) (5) of the
Water Quality Act, are to be studied and evaluated and, include such technologies as
constructed wetlands, lagoons, and mounded septic fields. Such technologies, as a
general statement, are less expensive than traditional (urban) facilities. Table 16
summarizes, by community, the treatment option chosen by the project engineer,
the community, and the BWPC (Utah BWPC engineers review the proposed
wastewater facility construction plans for each community; the BWPC is also
involved in the planning, development, and financing of all wastewater projects in
the state).
TABLE 16.
Treatment Option, by Community.
Treatment Option
Hiawatha Town lagoon
Hyde Park City treatment @ neighboring facility
Kamas City lagoon
Manila Town lagoon
Scofield Town subsurface drainfield
South Weber City treatment @ neighboring facility
Uintah Town treatment @ neighboring facility
As reported by community leaders in each of the seven communities, innovative
and alternative wastewater treatment processes were systematically evaluated by
project engineers as a potential means of reducing project costs. As noted in Table
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15, Hyde Park City, South Weber City, and Uintah Town have proposed to
provide treatment at neighboring treatment facilities. In each of the three
communities, problems with seasonal saturation of possible building sites makes
treatment at a neighboring site the most cost-effective alternative.
Because lagoons and subsurface drainfields classify as alternative wastewater
treatment technologies, their use in Hiawatha Town, Manila Town, Kamas City,
and Scofield Town qualifies each community to receive preferential financing from
the Utah State Revolving Fund. Besides better financing, the use of alternative
technologies (as an improvement to the existing system or to provide new
treatment) has an additional benefit of reducing project costs. Mechanical and
maintenance costs are generally minimized when lagoon systems are used and
pumping station facilities are kept to a minimum. The proposed locations for
Hiawathas, Manilas, and Kamas's lagoons are at locations below the elevation of
each community's population center. Consequently, gravity flow is used to
conduct most of the wastewater to the treatment facility, thereby, minimizing
pumping costs.
Because every community has limited resources, the cost-effectiveness of their
wastewater treatment facility is important. In an attempt to evaluate each
community's finance options for the proposed wastewater treatment project, local
officials were asked how additional revenues could be raised and/or project costs
reduced. Responses of the community leaders (to these two general questions and
more specific questions outlined in Appendix A) are summarized below.
The four local revenue sources most likely to be used for debt repayment are, in
descending order of importance, user charges, new connection fees, annexation
fees, and developer impact fees. Use of special assessment fees, such as developer
impact fees and special use fees to groups using public facilities, however, were not
pervasive. These fees proved unattractive to the study communities because of the
fear that their use would dissuade developers, or other groups from choosing a site
for their activity within municipal boundaries. Consequently, local ordinances
requiring these groups to financially support general community infrastructure, let
alone on-site infrastructure, were nonexistent in all the study communities except
Kamas City.
There seems to be a consensus among community leaders about keeping debt
financing to a minimum, therefore, advocating "pay-as-you-go" financing. "Pay-
as-you-go" financing, however, uses a proportion of general fund revenues to
43
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support a capital reserve account. As of 1989, only two of the study communities
(Hyde Park City and South Weber City) had established capital reserve account. It
can thus be assumed that either (a) the five remaining communities will not
significantly phase the construction of their wastewater treatment facilities or (b) the
proposed facility is not intended for construction for a number of years.
Each study community has proved successful, though to varying degrees of
responsibility, in managing their enterprise funds and general obligation debt.
Consequently, none of the study communities are currently hindered by excessive
outstanding bond obligations.
A special service district was established north of Scofield Town to provide
sewerage for the lakeshore campsites. With the power to levy taxes, user charges,
and other fees, this special district helped to create lower monthly user charges in
the Town of Scofield due to the effects of economies of scale.
Figure 2 compares each community's net project cost to the number of EHUs
over which construction costs may be spread. It depicts annual EHU charges with
a "best scenario" financial loan package (zero percent interest and a 20 year
amortization period) for the net loan amount. The net loan amount differs from the
total loan amount as presented with Figure 1. The estimated number of EHUs per
community is given in parentheses under each community name (on the x-axis).
Annual EHU
Charge, dollars
Hiawatha Hyde Park Kamas Manila Scofield S. Weber Uintah
(22) '(516) (573) (94) (55) (526) (186)
Community Name
(# EHUs)
Figure 2. Annual Charge per EHU for Each Study Community.
44
-------
Monthly EHU charges for each community are one-twelfth the amount depicted
in Figure 2. These monthly charges and other project cost information are
presented in Table 17. BWPC guidelines state that user fees between 0.75 and 1.5
percent of MHI signify a reasonable local share of financial burden. Even this "best
scenario" financial loan package shows that only Hyde Park, Kamas, and South
Weber Cities can reasonably afford to construct wastewater treatment facilities to
meet secondary discharge standards. The Towns of Scofield, Manila, and Uintah
are unable to reasonably afford construction costs, because of limited EHUs and
other factors stated in the individual case studies. Although user fees for Hiawatha
approach the BWPC guidelines, adverse economic conditions, as documented in
the previous case study section, prevent Hiawatha from equitably affording the
project cost.
TABLE 17.
"Best Scenario" Loan Package for Each Study Community.
0% Annual Interest Rate and
20 Year Amortization Period for the Net Loan Amount
Study
Community
Hiawatha
Hyde Park
Kamas
Manila
Scofield
S. Weber
Uintah
Net Loan
Amount
(in thousands)
167
1500
1673
1300
1118
1700
2201
Annual
User Fee per
EHU. $
380
145
146
691
950
162
592
Monthly
User Fee per
EHU. $
32
12
12
57
79
14
49
MHI. $
24,952
22,041
22,041
28,244
21,192
23,340
21,601
Payment
as %
MHI
1.52
0.66
0.66
2.45
4.48
0.69
2.74
45
-------
CONCLUSIONS
Seven communities were studied in this report. Three of the study
communities are third class cities and have populations that range between 1,275
(Kamas City) and 2,208 (South Weber City). Hyde Park City, the third city
reported on in this report, has an estimated population of 1,900. The four
remaining study communities are defined as towns and, thereby, have populations
of 800 people or less. Explicitly, the populations of the four towns are 40 people in
Hiawatha, 270 in Manila, 150 in Scofield, and 510 in Uintah.
Of the seven study communities, none of the towns were able to reasonably
afford construction of wastewater treatment facilities to meet secondary discharge
standards using the "best scenario" loan package enumerated in Table 17.
Conversely, wastewater treatment user fees for each of the third class cities were
reasonable.'
The lack of a population over which project costs can be spread negatively
affects a community's ability to afford construction of needed wastewater treatment
facilities. In towns especially, the local financial contribution to wastewater
treatment projects is limited by a small population and a limited number of
households. At what point a project becomes unaffordable to a small community is
dependent on population (or, more precisely, equivalent household units), as well
as a number of factors, including, but not limited to the following:
(1) the required local contribution to project costs;
(2) the economic state or fiscal strength of the community
under consideration;
(3) community opportunities to attract outside investors or
raise additional revenues for the proposed wastewater
treatment project.; and,
(4) viable opportunities for the community to decrease
project costs.
t Reasonable in this context is defined to include Utah State Bureau of Water Pollution
Control guidelines, namely that user fees between 0.75 and 1.5 percent of MHI signify a
reasonable local share of financial burden.
46
-------
In none of the study communities were project costs reduced by greater than 20
percent of the EPA "1988 Needs Survey of Publicly Owned Treatment Works." In
each of the communities wastewater treatment technological alternatives were
evaluated by project engineers. Engineering evaluations proved valuable in terms
of providing viable treatment alternatives capable of meeting secondary treatment
standards for municipal dischargers. However, significant cost reductions as a
result of these evaluations were noted in only two of the case studies, Manila and
Scofield Towns.
In each of the study communities, either a "strong" or "average" indicator rating
for direct net debt per capita was recorded. These positive ratings identify an ability
on the part of each community to raise additional capital from traditional means,
i.e., increases in property taxes or issuance of a bond secured with user fees.
However, innovative financing techniques, such as the use of annexation fees,
exactions, and private-public arrangements were not implemented or proposed for
implementation in any of the study communities.
The required local contribution to project costs is a factor which affects the
affordability of a project to a given population. As the Utah State BWPC guidelines
suggest, 1.5 percent of MHI, given favorable economic and demographic
conditions, should be the maximum contribution per household unit. If the
economic health or fiscal strength of the community under consideration is
questionable, then the maximum contribution per household should be less in order
to ensure adequate repayment by the community and, subsequently, the on-going
maintenance of the state revolving fund.
To summarize, the point at which a project becomes (un)affordable to a small
community is dependent on project costs, a communities ability's to raise additional
revenues (either traditionally or with innovation), the fiscal strength of the
community, required local contribution levels, and population (or number of
EHUs).
47
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RECOMMENDATIONS
Recommended actions to improve the affordability of wastewater treatment
facilities for small communities and, particularly towns, are:
(1) to implement more cost-effective technologies in order to
reduce project costs;
(2) to develop a (training) program, whereby, local officials learn
to better fund capital improvement items using both traditional
and innovative revenue raising techniques. One possible program
would involve the development of a state/federal incentive
for communities to establish a wastewater treatment capital
improvement reserve fund in advance of construction;
(3) to develop a modified version of the EPA Financial Capability
Guidebook indicators that would more efficiently identify the
fiscal strengths and weaknesses of small communities; and,
(4) to identify criteria, whereby, required local contribution levels
could be waived given suitable determination of "hardship."
The waiving of contribution requirements could be manifested
in a number of ways. Two possibilities include: 1) the
re-institution of direct financial assistance grants for "hardship"
communities and, 2) the modification of the Clean Water Act to
exempt municipal dischargers from secondary treatment standards,
where the human health and environmental consequences of
relaxed standards would not be consequential.
48
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REFERENCES
Allen, Ray. 1989. Utah Municipalities. Supplemental Statement, Fiscal Year Ended
June 30.1988. South Weber City. Certified Public Accountant.
February 4.
— 1988. City of South Weber, Annual Financial Report. Fiscal Year Ended
June 30. 1988 (With Accountants Report Therein). Salt Lake City,
Utah. November 3.
-- 1987. City of South Weber. Annual Financial Report. Fiscal Year Ended
June 30,1987 (With Accountants Report Therein). Salt Lake City,
Utah. December 12.
— 1986. City of South Weber. Annual Financial Report, Fiscal Year Ended
June 30. 1986. Salt Lake City, Utah. November 7.
- 1985. City of South Weber. Annual Financial Report. Fiscal Year Ended
June 30. 1985. Salt Lake City, Utah. December 11.
Atkinson, Terry. 1989. Interview. City of Kamas Wastewater Superintendent and
Watermaster. August 4.
Balls, Robert J. 1989. Interview. Hyde Park City Mayor. July 3.
Blazzard, James. 1989. Interview. Kamas City Mayor. August 3.
Bouchard, Rex. 1989. Interview. South Weber City Mayor. August 1.
Bishop, Roger. 1989. Interview. Utah Bureau of Water Pollution Control Project
Engineer. October 2.
Bradfield, Gladys. 1989. Interview. Scofield Town Clerk. August 2.
- 1987. Scofield Town. Fiscal Year Ending June 30. 1986. Balance Sheet.
Scofield Town Clerk. January.
Briggs, Gene. 1989. Interview. Daggett County, Utah Assessor. August 7.
49
-------
Bureau of Water Pollution Control, Division of Environmental Health, Department
of Health, State of Utah. 1988a. Utah State Revolving Fund Annual
Report FY 1988. December 29.
-- 1988b. "State of Utah Wastewater Treatment Project Priority List, Federal
Fiscal Year 1989." September.
~ 1988c. "Drinking Water and Wastewater Funding Needs." Report Presented
to the Department of Health, September 21.
— 1986. Scofield Town Financial Capability Summary. Salt Lake City, Utah.
March 3.
-- 1984. South Weber Feasibility Report: Wastewater Loan and Credit
Enhancement Program. Salt Lake City, Utah. January 10, 1984.
Clark, Shirl. 1989. Interview. Fiscal Specialist Community Impact Board. October.
Crane, Davis, Johnson & Christenen, Certified Public Accountants. 1987. City of
Kamas with Report of Certified Public Accountants Year Ended June
30. 1987. Ogden, Utah. October 28.
-- 1986. City of Kamas with Report of Certified Public Accountants Year
Ended June 30. 1986. Ogden, Utah. November 26.
Dabb, Delbert. 1989. Interview. Weber County, Utah Assessor. October 2.
Dahlquist, William A. 1989. Town of Uintah. June 30. 1988. Logan, Utah.
February 24.
-- 1987. Town of Uintah. June 30. 1987. Logan, Utah. December 4.
-- 1986. Town of Uintah. June 30. 1986. Logan, Utah. December 24.
Davidson, Sidney and Weil, Roman L. 1983. Handbook of Modern Accounting.
New York: McGraw Hill Book Company.
Environmental Protection Agency. 1988a. "Needs Survey of Publicly Owned
Treatment Works." Washington, D.C.: Governmental Printing
Office, November.
50
-------
- 19885. "Municipalities, Small Business, and Agriculture: the Challenge of
Meeting Environemental Responsibility." Washington, D.C.:
Governmental Printing Office, September.
- 1988c. The Clean Water Act: 1987 Amendments. Washington, D.C.:
Governmental Printing Office, March.
— 1988d. Guidebook to State Revolving Funds. Washington, D.C.:
Governmental Printing Office, February.
— 1984. Financial Capability Guidebook. Washington, D.C.: Governmental
Printing Office, March.
Eccly, Bob. 1989. Interview. Hiawatha Town Engineer. August 3.
Every, Lona. 1989. Interview. Hiawatha Town Clerk. August 3.
-- 1988. Hiawatha Town. Fiscal Year Ending June 30. 1988. Balance Sheet.
Hiawatha Town Clerk. December.
Frazier, Blake. 1989. Interview. Summit County, Utah Auditor. October 10.
General Accounting Office. 1981. "User Charge Revenues for Wastewater
Treatment Plants: Insufficient to Cover Operation and Maintenance,"
CED-82-1, December.
Grizzle, Charles. 1989. "Municipalities Face Funding Shortfalls," Nations City
Weekly. February, p. 95.
Grunig, Marilyn. 1989. Interview. Hyde Park City Councilwoman. July 3.
Hawkins, Judy. 1988. Utah Municipalities. Supplemental Statement. Fiscal Year
Ended June 30. 1988. Hyde Park City. Hyde Park City Recorder.
November 16.
Hess, Nancy. 1989. Interview. Bureau of Water Pollution Control Fiscal
Specialist. October 2.
- 1988. "Implementation of the SRF Program: A Look from the State of
Utah," SRF Update. October, p. 1-2.
Kendell, Jay. 1989. Interview. Uintah Town Mayor. August 10.
51
-------
Kennington, Ruth. 1989. Interview. Davis County, Utah Auditor. October 3.
Kleinfeld, Ira H. 1986. Engineering & Managerial Economics. New York: Holt,
Rinehart and Winston, CBS College Publishing.
Krannich, Richard S. and Humphrey, Craig R. 1986. "Using Key Informant Data
in Comparative Community Research." Sociological Methods &
Research 14, May: 473-493.
Lamb, LeAnn. 1989. Interview. Carbon County Health Administrator. August 2.
Lasche, Bonnie. 1989. Utah Municipalities. Supplemental Statement. Fiscal Year
Ended June 30. 1988. Kamas City. Kamas City Clerk. February 14.
Lynch, Thomas D. 1979. Budgeting in America. New Jersey: Prentice-Hall, Inc.,
pp. 288.
Mildon, Sherma. 1989. Interview. Uintah Town Clerk. August 3.
Peterson & Allred, Certified Public Accountants. 1987. City of Hyde Park
Comprehensive Annual Financial Report for the Year Ended June 30.
I9JTL Logan, Utah. October 28.
— 1986. City of Hyde Park Comprehensive Annual Financial Report for the
Year Ended June 30. 1986. Logan, Utah. November 9.
— 1985. City of Hyde Park Comprehensive Annual Financial Report for the
Year Ended June 30, 1985. Logan. Utah. December 12.
Prichard, Norman. 1989. Interview. Carbon County, Utah Auditor. October 5.
Reeves, H. Clyde. 1984. Funding Clean Water. Toronto: Lexington Books, pp.
226.
Rosenberg, Philip. 1978. Is Your City Heading for Financial Difficulty: A Guide-
book for Small Cities and Other Governmental Units. Atlanta:
Institute of Government, pp. 44.
Scott, Carole. 1989. Interview. Manila Town Mayor. August 7.
Siedler, J.1974. " On Using Informants." American Sociology Review 39,
December: 816-831.
52
-------
Stones, Tamra. 1989. Interview. Cache County, Utah Auditor. October 2.
State of Utah, Department of Health, Division of Environmental Health. 1988.
"Wastewater Disposal Regulations, Part II: Standards of Quality for
Waters of the State." Revised by Action of the Utah Water Pollution
Control Committee, April 21.
United States Department of Agriculture. 1970. Soil Survey: Carbon-Emery Area.
Utah. Washington, D.C.: United States Government Printing Office.
December.
United States Department of Commerce, Bureau of the Census. 1970. U.S. League
of Cities and Towns: Population Figures. Washington, D.C.:
Governmental Printing Office. December.
United States Department of Labor, Bureau of Statistics. 1988. Consumer Price
Index. Washington, D.C.: Governmental Printing Office. December.
Utah Code Annotated, as amended. 1977. Public Debt. Article XIV, Sections 1 -7.
Utah Office of Planning and Budget, Data Resources Section. 1987. "Utah
Data Guide: A Newsletter of Data Users." Utah State Data Center.
6:4. December.
Utah State Auditor and Center for Public Affairs and Administration of the
University of Utah. 1988. Comparative Report of Utah Local
Government Revenues and Expenditures: Cities and Towns Fiscal
Years 1985. 1986. 1987. August.
Utah State Tax Commission, Property Tax Division. 1989. Assessment/ Sales
Ratio Studv: For the Period January 1. 1987 to June 30. 1988. Salt
Lake City, Utah. February.
Winward, Foley & Company. 1987. Town of Manila. Report of Audit. June 30.
1987. Vernal, Utah. December 21.
-- 1986. Town of Manila. Report of Audit. June 30. 1986. Vernal, Utah.
Novmeber 28.
53
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APPENDICES
-------
Appendix A.
Interview Questions for Each of the Seven Sampled Communities.
For each of the 7 sampled questions, information regarding the community's
wastewater treatment need, financial condition, perceived financial options, "ability
to pay," and market constraints to issuing debt were gathered and analyzed. The
types of information gathered, by category, are as follows.
Characterizing the community's wastewater treatment needs.
In order to adequately characterize the community's wastewater treatment
needs, the following questions were asked of key informants in each community:
(1) In general, how important is the proposed wastewater facility
construction project to the overall development of your community?
(2) Please describe your community's current wastewater treatment
facilities.
(3) What additional facilities are included in the proposed facilities plan?
(4) What was the motivation for the proposed facilities plan? I.e.,
discharge standards, public health requirements, anticipated community
growth, ...?
(5) Does the proposed wastewater facilities design account for anticipated
community growth?
(6) Which sectors of the community would the proposed facilities serve?
Describing the community's financial condition.
To allow for a common basis of comparison, each community's financial
condition has been assessed using the indicators presented in Appendix B. Taken
from the EPA Financial Capability Guidebook. Office of Water Programs
Operation, March, 1984, pages 52 and 59-68, these indicators require the following
information. Note that numerous sources, including personal interviews were used
to gather this information. Exact sources are referenced for each recorded value and
can be found at the end of appendix B.
(1) What is the median per capita income in your community?
(2) What is the current median family income in your community?
(3) What is the current assessed and equalized value of taxable real
property in your community?
(4) What do current retail sales in your community equal?
(5) What is the total number of private and public sector jobs in the
A-1
-------
community?
(6) What is the number of jobs offered by major economic sector?
(7) Have there been significant economic changes in the region over the
past five or ten years?
(8) What are the 3 largest employers and largest taxpayers in the vicinity
of your community?
(9) What is the current population in your community?
Evaluating community finance options.
In the process of interviewing local officials, considerable concern was given to
the questions of how community leaders perceived additional revenues could be
raise and/or project costs could be reduced to finance the proposed wastewater
structures. To this end, answers to the following types of questions were sought:
(1) If your community has a wastewater treatment facility, how was this
facility previously financed? Please identify the federal, state, and local
programs that provided assistance and the amount of total assistance. If a
loan was given, what were the terms of the loan?
(2) If your community has a water supply facility, how was this facility
financed? Please identify the federal, state, and local programs that
provided assistance and the amount of total assistance. If a loan was
given, what were the terms of the loan?
(3) How does your community usually finance capital improvements?
(4) Who will operate and own the facilities once constructed?
(5) Has your community considered other alternative financing
methods, such as using current revenues ("pay-as-you-go"), reserve
funds, g.o. bonds, revenue bonds, lease-purchase agreements, authorities
and special districts, special assessments, SRF loan money, other loan
sources, exactions, impact fees, public-private negotiations,
annexation fees, hook-up charges, and/or "minibonds."
(6) If your community has a treatment need, would a constructed
wetland or a natural wetland be a viable treatment alternative?
(7) Do you feel it was (or would be) a good use of your community's
money to have engineering firms review various treatment
alternatives?
(8) Do you feel engineering services for the proposed wastewater
project should be provided by the government?
(8) What limits are believed to exist for own-source funds?
(9) Are expenditures and revenues for wastewater and water supply
A-2
-------
facilities managed jointly or independently?
(10) Who operates and owns the wastewater and water supply facilities,
if applicable?
(11) Has your community considered a partnership between public and
private sectors to meet current or future needs?
(12) Assuming your community is able and willing to assume debt for a
wastewater project, which two revenue sources would your community most
likely use for debt repayment?
Assessing the community's "ability to pay."
The Utah BWPC evaluates a number of items when assessing a community's
"ability to pay.". In part, however, assistance from the BWPC is determined based
on: (1) the ability of the political subdivision to obtain funds for the project from
other sources or to finance such projects from its own sources; (2) the ability of the
political subdivision to repay the loan or other project obligations; (3) whether a
"good faith" effort to secure all or part of the services needed from the private sector
through privatization was made; (4) whether state financing is needed to keep the
overall financial impact of the proposed project from exceeding an annual user
charge greater than 1.5 percent of the annual mean household income of community
residents; (5) whether local political and economic condition in the community are
stable; and, (6) whether the community has an expressed environmental need that
will at least, in part, be abetted by implementation of the proposed wastewater
treatment structures (BWPC, 1988).
In an attempt to duplicate Utah BWPC thoroughness, information regarding the
above 6 items was gathered through personal interviews, review of community
financial reports, and application of the Macintosh spreadsheet program, Excel.
See appendix C for details on the formula and theory used for the spreadsheet.
Additional information was also sought regarding the community's debt
history. Community debt history questions included in this study were the
following:
•3
(1) Has your community ever experienced difficulty in meeting its debt
obligations? If so, how was this handled?
(2) Do state mandates exist that restrict your community's ability to
finance debt? I.e., limiting taxing authority, debt ceilings linked to
property value,...?
(3) Do local mandates exist that restrict the community's ability to
finance debt? I.e., limiting taxing authority, debt ceilings linked to
A-3
-------
property value,...?
(4) What changes in federal and state funding have affected your
community in the past five years? Do you anticipate changes in federal
and state funding in the next five years which will affect your community?
(5) What changes in own-source revenue generation have occurred
during the past five years? Do you anticipate changes in own-source
revenue generation during the next five years?
(6) Is your community considering other capital improvement projects?
Has the community established a priority list for the competing projects?
What does it entail?
(7) Has your community ever been rejected for either a state or federal
loan? If so, why?
Identifying market constraints to issuing debt.
In order to adequately identify the market constraints confronting small Utah
communities when issuing debt, both state and local statutes were reviewed and
personal interviews were conducted.
During personal interviews of local communty leaders, primarily three
questions were asked. These question were as follows:
(1) Is your community's ability to finance the proposed wastewater project
limited by: a lack of reserve funds; restricted access to bond market; past
difficulty meeting debt obligations; community unwillingness to incur debt;
other competing capital impects; a lack of financial guidance; confusion
regarding eigibility for state money; and, nonavailability of construction grant
money.
(2) What human resource constraints, if any, affect your community's ability to
issue debt?
(3) What degree of access does your community have to a bond market?
Review of local and state statutes were sought to identify existing municipal
limits on public debt.
A-4
-------
Appendix B.
Assessment of Cummunity's Current Financial Condition.
Enclosed in Appendix B are the following items:
(1) Table B, which demonstrates the formulas used to assess each
community's financial condition. The spreadsheet program Macintosh Excel was
used in this process, as well as for Tables B.I - B.7;
(2) Tables B.I - B.7, which assess each community's financial
condition based on the formulas and input data described in Table B;
(3) footnote references for Tables B.I - B.7.
For additional information regarding the indicators used in each community's
current financial assessment refer to:
Environmental Protection Agency. 1984. Financial Capability
Guidebook. Washington, D. C: Governmental Printing Office.
March.
B-1
-------
A 1 B
1
1
2
_3_
4 Indicator 1
S
6 Initial Population
7 Final Population
8 Annual Rate of Change. %
9
10
11 Indicator 2
12
13 Properly Taxes
14 Other Revenues
IS Total Revenues
16
17 Operating Expenditures
18 Debt Service Payments
19 Total Expenditures
.20
Zl_ Surplus/Deficit
22 Surplus as % of Expenditures
23
24
25 Indicator 3
26
27 Property Taxes Collected
28 Property Taxes Levied
29 Tax Collection Rate. %
30
1L
32 Indicator 4
33
34
35 Assessed Value of Real Property
36 Assessment Ratio
C 1)
* E 1 F G
Table B: Formulas Used to Assess Each Community's Financial Con dition
1980-1989
#
#
=(C7-C6)/9/C6*100
FY 1985 FY 1986
S $
$ S
=C13+C14 =D13+D14
S $
$ $
=C17+C18 =D17+D18
=C15-C19 =D15-D19
=C21/C19»100 =0217019*100
FY 1986 FY 1986
$ $
$ $
=C27/C28*100 =D27/D28*100
FY 1988 FY 1988
Lower Bound Upper Bound
$ $
# l#
FY 1987 FY 1988
$ S
$ $
=E13+E14 =F13+F14
S $
$ $
=E17+E18 =F17+F18
=E15-E19 =F15-F19
=E21/E19*100 =F21/F19*100
FY 1987 FY 1988
$ $
$ $
=E27/E28*100 =F27/F28*100
37 Full Market Value of Real Property =C35/C36 =D35/D36
38 Tax as % of Full Market Value =F13/C35»100 =F13/D35*100
39
40.
41 Indicator S
42
43 General Obligation (G.O.) Debt
44 Total Overall Net Debt
45 Debt Capacity, %
46
47
48 Indicator 6
49.
50 Per Capita Income
51 Personal Income
52 Debt as % of Personal Income
S3
54
55 Indicator 7
56
57 Direct Net Debt per Capita, $
FY 1985 FY 1986
!$ 1$
=C43 =D43
N/A N/A
FY 1985 FY 1986
Is 1$
FY 1987 FY 1988
1$ 1$
=E43 =F43
N/A =F44/C35»100
FY 1987 FY 1988
1$ 1$
=C50*($C$7-($C$7-$C$6)/9*4) =D50*($C$7-($C$7-$C$6)/9*3) =E50*($C$7-(SC$7-$C$6)/9*2) =F50*($C$7-($C$7-$C$6)/9* 1)
=C44/C51*100 =D44/D51*100 =E44/E51*100 =F44/F51»100
FY 1988
=F43/C7
-------
.ZE
60
62 Table B (Continued).
63
64
65 Indicator 8
66_ FY 1988
67 Overall Net Debt per Capita, $ =F44/C7
69
70 Indicator 9
21 FY 1989 FY1990 FY 1991 FY 1992
72 Existing G.O. Debt to be Repaid IS 1$ IS 1$
21 FY 1993
21 m
75
76 Total 5 Year Debt =C72+D72+E72+F72+C74
21
78 Direct Net Debt Due
22. Within 5 Years, % =C74/F43»100
80
81
jtt
83
84
85
-------
Table B. 1: Assessment of Hiawatha's Current Financial Condition
Indicator 1: Population Growth (1) (2)
1980-1989
Initial Population 249
Final Population 40
Annual Rate of Change, % -9.33
Indicator 2: General Fund Surplus/Deficit (3)
FY 1985 FY 1986
Property Taxes N/A 28.430
Other Revenues N/A 29.685
Total Revenues N/A 58,115
Operating Expenditures N/A 47.025
Debt Service Payments N/A 0
Total Expenditures N/A 47,025
Surplus/Deficit N/A 11,090
Surplus as % of Expenditures N/A 23.58
Indicator 3: Real Property Tax Collection Rate (3)
FY 1986 FY 1986
Property Taxes Collected N/A 28.430
Property Taxes Levied N/A 29,000
Tax Collection Rate, % N/A 98.03
FY1987
28355
22324
51,079
51.079
0
51,079
0
0.00
FY1987
28355
28.999
98.47
FY1988
23.963
17.348
41,311
41.311
0
41,311
0
0.00
FY1988
23,963
23,963
100.00
Indicator 4: Property Tax Revenues as % of Full Market Value (FMV) (4) (5)
FY 1988 FY 1988
Lower Bound Uooer Bound
Assessed Value of Real Property 6.646.446 6.646.446
Assessment Ratio 1.01 1.11
Full Market Value of Real Property 6,580,640 5,987,789
Tax as % of Full Maiket Value 0 36 0.40
Indicator S: Tax-Supported Debt as % of FMV of Real Property (3)
FY 1985 FY 1986 FY 1987
General Obligation (G.O.) Debt 0 0
Total Overall Net Debt 0 0
Debt Capacity, % 0.00 0.00
0
0
0.00
Indicator 6: Tax-Supported Debt as % of Personal Income (I) (6)
FY 1985 FY 1986 FY 1987
Per Capita Income 8,674 9358
Personal Income 1,144,968 1,051,380
Debt as % of Personal Income 0.00 0.00
10.553
918,111
0.00
FY1988
0 1
0
0.00
FY1988
11.606
731,178
0.00
Indicator 7: Current Direct Net Debt per Capita
FY 1988
Direct Net Debt per Capita, $ 0
Indicator 8: Overall Net Debt per Capita
FY 1988
Overall Net Debt per Capita, $ 0
Indicator 9: % Direct Net Debt Due Within S Years (3)
FY 1989 FY 1990
Existing G.O. Debt to be Repaid 0 0
FY 1993
0
Total 5 Year Debt, $ 0
Direct Net Debt Due
Within 5 Yeais, % 0.00
FY1991
0
FY1992
0 1
t Footnotes (1-6) are listed at the end of Appendix B.
Note: Indicators 1-9, as calculated, do not reflect the financial impact of the proposed project on the communi'
-------
Table B .2: Assessment of Hyde Park's Current Financial Condition t
Indicator 1: Population Growth (1
Initial Population
Final Population
Annual Rate of Change, %
Indicator 2: General Fund Surplu
Property Taxes
Other Revenues
Total Revenues
Operating Expenditures
Debt Service Payments
Total Expenditures
Surplus/Deficit
Surplus as % of Expenditures
Indicator 3: Real Property Tax C
Property Taxes Collected
Property Taxes Levied
Tax Collection Rate, %
Indicator 4: Property Tax Revenu
Assessed Value of Real Property
Assessment Ratio
Full Market Value of Real Property
Tax as % of Full Market Value
0(7)
1980-1989
1495
1900
3.01
a/Deficit (7) (8) (9)
FY 1985 FY 1986 FY 1987
27.740 28.032 27.206
193.116 173.131 190,747
220,856 201,163 217,953
145,755 166.173 253.435
25380 0 0
171,135 166,173 253,435
49,721 34,990 -35.482
29.0S 21.06 -14.00
Election Rate (7) (8) (9)
FY 1986 FY 1986 FY 1987
27.740 28,032 27,206
27.740 28,032 27,806
100.00 100.00 97.84
FY 1988
28.915
N/A
N/A
N/A
N/A
N/A
N/A
N/A
FY 1988
28.915
28.915
100.00
es as % of Full Market Value (FMV) (4) (10)
FY 1988 FY 1988
Lower Bound Upper Bound
3.044,017 3.044.017
1.01 1.07
3,013,878 2,844,876
0.96 1.02
Indicator 5: Tax-Supported Debt as % of FMV of Real Property (7) (8) (9)
FY 1985 FY 1986 FY 1987
General Obligation (G.O.) Debt
Total Overall Net Debt
Debt Capacity, %
664.272 645.100 625.882
664,272 645,100 625,882
N/A N/A N/A
Indicator 6: Tax-Supported Debt as % of Personal Income (1) (6)
FY 1985 FY 1986 FY 1987
Per Capita Income
Personal Income
Debt as % of Personal Income
1 7,663 8,444 9.304
13,180,360 14,903,660 16,840,240
5.04 4.33 3.72
FY1988
74.000 1
74,000
2.4310
FY1988
10,252
19,017,460
039
Indicator 7: Current Direct Net Debt per Capita
FY1988
Direct Net Debt per Capita, $ 39
Indicator 8: Overall Net Debt per Capita
FY1988
Overall Net Debt per Capita, $ 39
Indicator 9: % Direct Net Debt Due Within 5 Years (7)
FY 1989 FY 1990
Existing G.O. Debt to be Repaid I 5000 I
FY 1991
FY1992
5000
5500
5500
Total 5 Year Debt
Direct Net Debt Due
Within 5 Years, %
FY1993
5800
26,800
36.22
t Footnotes (7-10) are listed at the end of Appendix B.
Note: Indicators 1-9, as calculated, do not reflect the financial impact of the proposed project on the communi
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Table B .3: Assessment of Kamas's Current Financial Condition f
Indicator 1: Population Growth (1) (11)
1980-1989
Initial Population 1064
Final Population 1275
Annual Rate of Change, % 2.20
Indicator 2: General Fund Surplus/Dcficit (11) (12))
FY 1985 FY 1986
Property Taxes N/A 66,245
Other Revenues N/A 119.075
Total Revenues N/A 185,320
Operating Expenditures N/A 180.777
Debt Service Payments N/A 0
Total Expenditures N/A 180,777
Surplus/Deficit N/A 4,543
Surplus as % of Expenditures N/A 2.51
Indicator 3: Real Property Tax Collection Rate (11) (12))
FY 1986 FY 1986
Property Taxes Collected N/A 66,245
Property Taxes Levied N/A N/A
Tax Collection Rate, % N/A N/A
FY 1987
77.937
119.391
197,328
200,726
0
200,726
-3,398
-1.69
FY1987
77,937
77,937
100.00
FY 1988
91.073
102.895
193,968
179,937
0
179,937
14,031
7.80
FY 1988
91.073
91,073
100.00
Indicator 4: Property Tax Revenues as % of Full Market Value (FMV) (4) (13)
FY 1988 FY 1988
Lower Bound Upper Bound
Assessed Value of Real Property 21,848,139 21.848.139
Assessment Ratio 0.83 0.98
Full Market Value of Real Property 26,323,059 22,294,019
Tax as % of Full Market Value 0 35 0.41
Indicator 5: Tax-Supported Debt as % of FMV of Real Property (11) (12)
FY 1985 FY 1986 FY 1987
General Obligation (G.O.) Debt | 0 0
Total Overall Net Debt 0 0
Debt Capacity, % 0.00 0.00
0
0
0.00
Indicator 6: Tax-Supported Debt as % of Personal Income (1) (6)
FY 1985 FY 1986 FY 1987
Per Capita Income 7,663 8,444
Personal Income 9,050,003 10,175,020
Debt as % of Personal Income 0.00 0.00
9.304
11,425,312
0.00
FY 1988
0
0
0.00
FY 1988
10,252
12,835,504
0.00
Indicator 7: Current Direct Net Debt per Capita
FY1988
Direct Net Debt per Capita, $ 0
Indicator 8: Overall Net Debt per Capita
FY1988
Overall Net Debt per Capita, $ 0
Indicator 9: % Direct Net Debt Due Within S Years (13)
FY 1989 FY 1990
Existing G.O. Debt to be Repaid 0 0
FY1993
0
Total 5 Year Debt 0
Direct Net Debt Due
Within 5 Years, % 0.00
FY1991
0
FY 1992
0
t Footnotes (11-13) are listed at the end of Appendix B.
Note: Indicators 1-9, as calculated, do not reflect the financial impact of the proposed project on the co
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Table B.4: Assessment of Manila's Current Financial Condition f
Indicator 1: Population Growth (1) (13)
1980-1989
Initial Population 272
Final Population 270
Annual Rate of Change, % -0.08
Indicator 2: General Fund Surplus/Deficit (IS)
FY 1985 FY 1986 FY 1987
Property Taxes N/A 16,875 18.597
Other Revenues N/A 85.033 68.702
Total Revenues N/A 101,908 87,299
Operating Expenditures N/A 77.587 80.791
Debt Service Payments N/A 0 6.311
Total Expenditures N/A 77,587 87,102
Surplus/Deficit N/A 24,321 197
Surplus as % of Expenditures N/A 31 35 0.23
Indicator 3: Real Property Tax Collection Rate (15)
FY 1986 FY 1986 FY 1987
Property Taxes Collected N/A N/A 38.597
Property Taxes Levied N/A N/A 38,597
Tax Collection Rate, % N/A N/A 100.00
FY1988
19.210
71.529
90,739
69.657
0
69,657
21,082
30.27
FY1988
N/A
N/A
N/A
Indicator 4: Property Tax Revenues as % of Full Market Value (FMV) (4) (16)
FY 1988 FY 1988
Lower Bound Uooer Bound
Assessed Value of Real Property 10,866,886 10.866.886
Assessment Ratio 0.95 1.16
Full Market Value of Real Property 11,438,827 9,368,005
Tax as % of Full Market Value 0.17 0.21
Indicator 5: Tax-Supported Debt as % of FMV of Real Property (14) (15)
FY 1985 FY 1986 FY 1987
General Obligation (G.O.) Debt 0 1 0 0
Total Overall Net Debt 000
Debt Capacity, % 0.00 0.00 0.00
Indicator 6: Tax-Supported Debt as % of Personal Income (1) (6)
FY 1985 FY 1986 FY 1987
Per Capita Income 9.820 10.820 11,922
Personal Income 2,651,400 2,921,400 3,218,940
Debt as % of Personal Income 0.00 0.00 0.00
FY 1988
0
0
0.00
FY1988
13,137
3,546,990
0.00
Indicator 7: Current Direct Net Debt per Capita
FY1988
Direct Net Debt per Capita, $ 0
Indicator 8: Overall Net Debt per Capita
FY1988
Overall Net Debt per Capita, $ 0
Indicator 9: % Direct Net Debt Due Within 5 Years (15)
FY 1989 FY 1990 FY 1991
Existirm G.O. Debt to be Repaid 000
FY1993
0
Total 5 Year Debt 0,000
Direct Net Debt Due
Within 5 Years, % 0.00
FY1992
0
t Footnotes (14-16) are listed at the end of Appendix B.
Note: Indicators 1-9, as calculated, do not reflect the financial impact of the proposed project on the comr
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Table B.5: Assessment of Scofield's Current Financial Condition t
Indicator 1: Population Growth (1) (17)
1980-1989
Initial Population 105
Final Population ISO
Annual Rate of Change, % 4.76
Indicator 2: General Fund Surplus/Deficit (IS)
FY1985
Property Taxes 4,043
Other Revenues 20.130
Total Revenues 24,173
Operating Expenditures 25.834
Debt Service Payments 0
Total Expenditures 25,834
Surplus/Deficit -1,661
Surplus as % of Expenditures -6.43
Indicator 3: Real Property Tax Collection Rate (IS)
FY1986
Property Taxes Collected 4,043
Property Taxes Levied 4,043
Tax Collection Rate, % 100.00
FY1986
4.043
12.115
16,158
14.719
0
14,719
1,439
9.78
FY 1986
4.043
4.043
100.00
FY1987
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
FY 1987
N/A
N/A
N/A
FY 1988
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
FY 1988
N/A
N/A
N/A
Indicator 4: Property Tax Revenues as % of Full Market Value (FMV) (4) (5)
FY 1988 FY 1988
Lower Bound Upoer Bound
Assessed Value of Real Property 1,967,139
Assessment Ratio 1.01
Full Market Value of Real Property 1,947,662
Tax as % of Full Market Value 0.21
1.967,139
1.11
1,772,197
0.21
Indicator S: Tax-Supported Debt as % of FMV of Real Property (17) (18)
FY 1985 FY 1986 FY 1987
General Obligation (G.O.) Debt 0
Total Overall Net Debt 0
Debt Capacity, % 0.00
0
0
0.00
Indicator 6: Tax-Supported Debt as % of Personal Income (1) (6)
FY 1985 FY 1986
Per Capita Income 8.199
Personal Income 1,024,875
Debt as % of Personal Income 0.00
9.034
1,084,080
0.00
0
0
0.00
FY1987
9.954
1,144,710
0.00
FY 1988
0
0
0.00
FY 1988
10,968
1,206,480
0.00
Indicator 7: Current Direct Net Debt per Capita
FY1988
Direct Net Debt per Capita, $ 0
Indicator 8: Overall Net Debt per Capita
FY1988
Overall Net Debt per Capita, $ 0
Indicator 9: % Direct Net Debt Due Within 5 Years (IS)
FY 1989 FY 1990
Existing G.O. Debt to be Repaid 0
FY1993
0
Total 5 Year Debt 0
Direct Net Debt Due
Within 5 Years, % 0.00
0
FY1991
0
FY 1992
0
t Footnotes (17-18) are listed at the end of Appendix B.
Note: Indicators 1-9, as calculated, do not reflect the financial impact of the proposed project on the community.
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Table B.6: Assessment of South Weber's Current Financial Condition f
Indicator 1: Population Growth (1) (19)
1980-1989
Initial Population 1575
Final Population 2208
Annual Rate of Change, % 4.47
Indicator 2: General Fund Surplus/Deficit (20) (21)
FY 1985 FY 1986
Property Taxes 59.707 60.695
Other Revenues 224.339 207.294
Total Revenues 284,046 267.989
Operating Expenditures 193,385 221.396
Debt Service Payments 0 0
Total Expenditures 193,385 221,396
Surplus/Deficit 66,245 66,245
Surplus as % of Expenditures 34.26 29.92
Indicator 3: Real Property Tax Collection Rate (20)
FY 1986 FY 1986
Property Taxes Collected 59.707 60,695
Property Taxes Levied 62,900 63,000
Tax Collection Rate, % 94.92 96.34
FY 1987
73.023
193.971
266,994
202.523
0
202,523
64,471
31.83
FY 1987
73,023
73,000
100.03
FY 1988
78.414
207.112
285,526
219.307
0
219,307
66,219
30.19
FY 1988
78.414
78.414
100.00
Indicator 4: Property Tax Revenues as % of Full Market Value (FMV) (4) (22)
FY 1988 FY 1988
Lower B ound Upper B ound
Assessed Value of Real Property 89.503.230 89.503,230
Assessment Ratio 0.91 0.96
Full Market Value of Real Property 98,355,198 93,232,531
Tax as % of Full Market Value 0.08 0.08
Indicator 5: Tax-Supported Debt as % of FMV of Real Property (21)
FY 1985 FY 1986 FY 1987
General Obligation (G.O.) Debt 45 1 ,388 43 1.378
Total Overall Net Debt 451,388 431,378
Debt Capacity, % N/A N/A
Indicator 6: Tax-Supported Debt as % of Personal Income (1) (6)
FY 1985 FY 1986
Per Capita Income 8.114 8,941
Personal Income 15,632,973 17,855,177
Debt as % of Personal Income 2.89 2.42
407,103
407,103
N/A
FY1987
9.852
20,367,368
2.00
FY 1988
383.628
383,628
03900
FY 1988
10.856
23,206,509
1.65
Indicator 7: Current Direct Net Debt per Capita
FY1988
Direct Net Debt per Capita, $ 174
Indicator 8: Overall Net Debt per Capita
FY 1988
Overall Net Debt per Capita, $ 1 74
Indicator 9: % Direct Net Debt Due Within 5 Years (21)
FY 1989 FY 1990
ExistinEG.O.DebttobeReoaid 1 23.175 22.750
FY1993
21,400
Total 5 Year Debt 111,500
Direct Net Debt Due
Within 5 Years, % 29.06
FY1991
22.312
FY 1992
21.863
t Footnotes (19-22) are listed at the end of Appendix B.
Note: Indicators 1-9, as calculated, do not reflect the financial impact of the proposed project on the community.
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Table B.7: Assessment of Uintah's Current Financial Condition t
Indicator 1: Population Growth (1) (23)
1980-1989
Initial Population 439
Final Population 628
Annual Rate of Change, % 4.78
Indicator 2: General Fund Surplus/Deficit (24)
FY 1985
Property Taxes N/A
Other Revenues N/A
Total Revenues N/A
Operating Expenditures N/A
Debt Service Payments N/A
Total Expenditures N/A
Surplus/Deficit N/A
Surplus as % of Expenditures N/A
FY 1986
18.200
141.419
159,619
145.890
0
145,890
13,729
9.41
Indicator 3: Real Property Tax Collection Rate (24)
FY 1986 FY 1986
Property Taxes Collected N/A
Property Taxes Levied N/A
Tax Collection Rate, % N/A
18.200
17.001
107.05
FY 1987
19.514
65.729
85,243
74.824
0
74,824
10,419
13.92
FY 1987
19.514
17.911
108.95
FY 1988
20,878
66.353
87,231
104,611
0
104.611
-17,380
-16.61
FY 1988
20.878
N/A
N/A
Indicator 4: Property Tax Revenues as % of Full Market Value (FMV) (4) (25)
FY 1988 FY 1988
Lower Bound Upper Bound
Assessed Value of Real Property 13.531,059
Assessment Ratio 0.92
Full Market Value of Real Property 14,707,673
Tax as % of Full Market Value 0.14
13.531,059
1.03
13,136,950
0.16
Indicator 5: Tax-Supported Debt as % of FMV of Real Property (24)
FY 1985 FY 1986 FY 1987
General Obligation (G.O.) Debt 48.000
Total Overall Net Debt 48,000
Debt Capacity, % N/A
45,000
45.000
N/A
Indicator 6: Tax-Supported Debt as % of Personal Income (1) (6)
FY 1985 FY 1986
Per Capita Income 7,510
Personal Income 4,085,440
Debt as % of Personal Income 1.17
8.275
4,675,375
0.96
42.000
42.000
N/A
FY 1987
9.118
5,343,148
0.79
FY 1988
39.000
39.000
0.2652
FY 1988
10.047
6,098,529
0.64
Indicator 7: Current Direct Net Debt per Capita
FY1988
Direct Net Debt per Capita, $ 62
Indicator 8: Overall Net Debt per Capita
FY1988
Overall Net Debt per Capita, $ 62
Indicator 9: % Direct Net Debt Due Within 5 Years (24)
FY 1989 FY 1990
Existing G.O. Debt to be Repaid 4.000 1
FY1993
5,000
Total 5 Year Debt 21,000
Direct Net Debt Due
Within 5 Years, % 53.85
4.000
FY 1991
4,000
FY 1992
4.000
t Footnotes (23-25) are listed at the end of Appendix B.
Note: Indicators 1-9, as calculated, do not reflect the financial impact of the proposed project on the community.
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Appendix B.
References- Tables B.l-7.
(1) Utah Office of Planning and Budget, Data Resources Section. 1987. "Utah
Data Guide: A Newsletter of Data Users." Utah State Data Center. 6:4.
December.
(2) Every, Lona. 1989. Interview. Hiawatha Town Clerk. August 3.
(3) Every, Lona. 1988. Hiawatha Town. Fiscal Year Ending June 30. 1988.
Balance Sheet. Hiawatha Town Clerk. December.
(4) Utah State Tax Commission, Property Tax Division. 1989. Assessment/
Sales Ratio Studv: For the Period January 1. 1987 to June 30. 1988. Salt
Lake City, Utah. February.
(5) Prichard, Norman. 1989. Interview. Carbon County, Utah Auditor.
October 5.
(6) United States Department of Labor, Bureau of Statistics. 1988. Consumer
Price Index. Washington, D.C.: Governmental Printing Office. December.
(7) Hawkins, Judy. 1988. Utah Municipalities. Supplemental Statement. Fiscal
Year Ended June 30.1988. Hvde Park Citv. Hyde Park City Recorder.
November 16.
(8) Utah State Auditor and Center for Public Affairs and Administration of the
University of Utah. 1988. Comparative Report of Utah Local Government
Revenues and Expenditures: Cities and Towns Fiscal Years 1985. 1986.
1987. August.
(9) Peterson & Allred, Certified Public Accountants. 1987. City of Hyde Park
Comprehensive Annual Financial Report for the Year Ended June 30. 1987.
Logan, Utah. October 28.
— 1986. City of Hyde Park Comprehensive Annual Financial Report for the
Year Ended June 30. 1986. Logan, Utah. November 9.
- 1985. City of Hvde Park Comprehensive Annual Financial Report for the
Year Ended June 30. 1985. Logan, Utah. December 12.
(10) Stones, Tamra. 1989. Interview. Cache County, Utah Auditor. October 2.
(11) Lasche. Bonnie. 1989. Utah Municipalities. Supplemental Statement. Fiscal
Year Ended June 30.1988. Kamas Citv. Kamas City Clerk. February 14.
(12) Crane, Davis, Johnon & Christenen, Certified Public Accountants. 1987.
City of Kamas with Report of Certified Public Accountants Year Ended
June 30. 1987. Ogden, Utah. October 28.
— 1986. City of Kamas with Report of Certified Public Accountants Year
Ended June 30. 1986. Ogden, Utah. November 26.
(13) Frazier, Blake. 1989. Interview. Summit County, Utah Auditor. October
10.
-------
(14) Scott, Carole. 1989. Interview. Manila Town Mayor. August 7.
(15) Winward, Foley & Company. 1987. Town of Manila. Report of Audit.
June 30. 1987. Vernal, Utah. December 21.
-- 1986. Town of Manila. Report of Audit. June 30. 1986. Vernal, Utah.
Novmeber 28.
(16) Briggs, Gene. 1989. Interview. Daggett County, Utah Assessor. August
7.
(17) Bradfield, Gladys. 1989. Interview. Scofield Town Clerk. August 2.
(18) Bradfield, Gladys. 1987. Scofield Town. Fiscal Year Ending June 30.
1986. Balance Sheet. Scofield Town Clerk. January.
(19) Bureau of Water Pollution Control Committee. 1984. South Weber
Feasibility Report: Wastewater Loan and Credit Enhancement Program.
Salt Lake City, Utah. January 10, 1984.
(20) Allen, Ray. 1989. Utah Municipalities. Supplemental Statement. Fiscal
Year Ended June 30. 1988. South Weber City. Certified Public Accountant.
February 4.
(21) Allen, Ray, Certified Public Accountant.1988. Citv of South Weber.
Annual Financial Report. Fiscal Year Ended June 30, 1988 (With
Accountants Report Therein). Salt Lake City, Utah. November 3.
— 1987. City of South Weber. Annual Financial Report. Fiscal Year Ended
June 30. 1987 (With Accountants Report Therein). Salt Lake City, Utah.
December 12.
— 1986. City of South Weber. Annual Financial Report. Fiscal Year Ended
June 30. 1986. Salt Lake City, Utah. November 7.
— 1985. City of South Weber. Annual Financial Report. Fiscal Year Ended
June 30. 1985. Salt Lake City, Utah. December 11.
(22) Kennington, Ruth. 1989. Interview. Davis County, Utah Auditor. October
3.
(23) Mildon, Sherma. 1989. Interview. Uintah Town Clerk. August 3.
(24) Dahlquist, William A., Certified Public Accountant. 1989. Town of Uintah.
June 30. 1988. Logan, Utah. February 24.
--1987. Town of Uintah. June 30. 1987. Logan, Utah. December 4.
--1986. Town of Uintah. June 30. 1986. Logan, Utah. December 24.
(25) Dabb, Delbert. 1989. Interview. Weber County, Utah Assessor. October
2.
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Appendix C.
Figure C.I on the subsequent page calculates community "ability to pay"
using 3 project funding scenarios and the following formula:
where A = annual loan payments;
P0 = project loan amount;
i = interest rate (0, 5, and 10 per-
cent were used in the scenarios);
and, n = years until loan maturity
(i.e., 20 years).
For additional information regarding the exact calculations used in the
Macintosh Excel spreadsheet, see Figure C.I. Additonal information regarding the
theory and notation used are found in:
Kleinfeld, Ira H. 1986. Engineering & Managerial Economics.
New York: Holt, Rinehart and Winston, CBS College
Publishing.
C-1
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1
2
3
4
5
6
7
S
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
A
Loan Amount, $
Annual Interest Rate, %
Amortization Period, years
Monthly Payment per EHU,
Annual Payment per EHU, S
Payment as % of MHI
1 B
Community Name:
Community MHI, $:
Project Cost, $:
Number of EHUs:
Hook-up Fee, $:
Net Project Cost , $:
Scenario #1
=C11
0
20
$=B16/20/12/C9
=B22*12
=B24/C7*100
C
Figure C.I.
Formulas Used to Calculate Community
=C8-C9*C10
Scenario #2
=C11
5
20
=C12*(C14/12/100*(1+C14/12/100)*(C16*12))/
((1+C14/12/100)A(C16*12)-1)/C5
=C22*12
=C24/C7*100
D
"Ability to Pay."
Scenario #3
=C11
10
20
=D12*(D14/12/100*(1+D14/12/100)A(D16*12))
((1+D14/12/100)*(D16*12)-1)/C5
=022*12
=D24/C7*100
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