1969
SEWERAGE
CHARGES
68
70
71
72
U.S. DEPARTMENT OF THE INTERIOR
Federal Water Pollution Control Administration
-------
TOE COST OF CLEAN WATER AND ITS
ECONOMIC IMPACT
Volune III
SEWERAGE CHARGES
U. S. Department of the Interior
Federal Water Pollution Control Administration
January 10, 1969
For sale by the Superintendent of Documents, U.S. Government Printing Office
Washington, D.C. 20102 - Price $1
-------
UNITED STATES
DEPARTMENT OF THE INTERIOR
OFFICE OF THE SECRETARY
WASHINGTON, D.C. 20240
Dear Mr. Chairman:
This transmits our complete report on sewerage charges, in response to
the Senate Committee on Public Works' request for such a study. That
request was contained in Senate Report No. 1370, dated July 8, 1968.
The sewerage charge study has been included as Volume III, Sewerage
Charges, in a four-volume report to the Congress, The Cost of Clean
Water and its Economic Impact. Volume III addresses itself to methods
of financing wastewater collection and treatment systems and discusses
the considerations pertinent to the selection of a user charge program
by local governmental units as a means for raising needed revenues.
Based upon a hypothetical model approach, the impact of various user
charge methods on each of several classes of users of wastewater systems
is analyzed. The findings of this report support the application of
user charges to finance a portion of the costs of sewage collection
and treatment systems. The choice of the most favorable user charge
method should be made on an individual basis by the local governmental
unit concerned due to the myriad factors to be considered in such a
choice.
Volume I, The Report, updates our 1968 analysis of costs contained in
the first report, The Cost of Clean Water, submitted to the Congress last
year. The 1969 report recognizes the progress made in providing waste
treatment for sewered communities while pointing up the need for continu-
ing high levels of investment in upgrading, expanding, and replacing
the capital base which has been provided. It concludes that the
current and expected short-run rate of investment in municipal waste
treatment facilities is inadequate to meet water quality improvement
requirements by 1973- Although industrial expenditure data are sketchy,
they indicate that, in general, industry has a correspondingly more
adequate rate of investment in wastewater treatment facilities.
Volume H, Appendix, provides supporting summary data from the 1962
and 1968 Federal Water Pollution Control Administration Municipal
Waste Treatment Inventories, and the State water quality standards
implementation plans. In addition, the Appendix contains State and
industrial comments on the 1968 report.
ii
-------
A fourth volume is an industrial waste profile of the organic chemicals
industry which was prepared by several well-qualified firms in the
industrial water pollution control field. The profile includes (l) a
five year projected range of cost estimates for attaining various levels
of water pollution control by this important industry sector and (2)
improved methodology for projecting treatment cost estimates for other
industries.
We feel that the work reported on here is a significant step forward in
the understanding of the economic aspects of water pollution control.
theInterior-
Hon. Jennings Randolph
Chairman3 Committee on Public Works
United States Senate
Washington, B.C. 20^10
Enclosure
ill
-------
TABLE OF CONTENTS
Page
INTRODUCTION 1
OUTLINE 2
SOURCES OF INFORMATION 3
DEFINITIONS 4
SUMMARY AND CONCLUSIONS 6
THE CURRENT POSITION OF USER CHARGES 6
DISTRIBUTION OF COST RESPONSIBILITY BETWEEN
USERS AND NONUSERS 8
THE DISTRIBUTION OF COST RESPONSIBILITY AMONG
CATEGORIES OF USERS 10
THE CURRENT POSITION OF USER CHARGES 12
HISTORY OF USER CHARGES 12
TYPES OF USER CHARGES 15
Sewer Service Charges 15
Sewer Connection and Tap Fees 24
CHARGES TO OUTSIDE CUSTOMERS 25
SEWER ADDITIONS 27
JOINT TREATMENT AND INDUSTRIAL SURCHARGES 27
REVENUE FROM USER CHARGES 32
DIVISION OF COST RESPONSIBILITY BETWEEN USERS AND NONUSERS 35
NATURE OF THE SEWAGE SERVICE 35
ALLOCATION THEORIES 37
Public Utility Theory 38
Diffused Benefits Theory 38
-------
TABLE OF CONTENTS (Continued)
Historical Theory 39
Added Expenditure Theory 39
Alternative Revenue Theory 40
Capital and Operating Cost Theory 40
Differential Benefits Theory 40
Relative Use Theory 41
Joint Committee Theory 41
ROLE OF FEDERAL AND STATE GRANTS 45
THE DISTRIBUTION OF COST RESPONSIBILITY AMONG CATEGORIES
OF USERS 46
GENERAL CRITERIA 46
Equity 46
Economic Efficiency 47
Administrative Simplicity 48
Revenue Adequacy , 48
CONFLICTS AND FORMULAS 49
Flat Charges 49
Joint Committee Formula 50
Water Use 51
Fixed and Variable 51
Fixtures, Water Meters and Sewer Connections 52
DISTRIBUTION OF CHARGES AMONG RESIDENTIAL, COMMERCIAL
AND INDUSTRIAL CUSTOMERS 52
Qualifications of the Model 58
INCIDENCE OF USER CHARGES 59
APPENDIX 61
ALABAMA 61
FLORIDA 63
GEORGIA 65
IDAHO 66
IOWA 66
KANSAS 68
MICHIGAN 70
MINNESOTA 72
MISSISSIPPI 74
-------
TABLE OF CONTENTS Continued)
NEBRASKA 76
NEW YORK 77
NORTH CAROLINA 78
NORTH DAKOTA 79
OHIO 80
OREGON 81
SOUTH DAKOTA 82
TENNESSEE 86
TEXAS 88
VIRGINIA 92
WASHINGTON 93
WISCONSIN 95
REFERENCE CITED 98
VI
-------
LIST OF TABLES
Table Page
1 Percentage Distribution of User Charge Burden
By Type of Customer and Charge Formula 54
2 Percentage Distribution of User Charge Burden
By Type of Customer and Charge Formula 55
3 1961 Sewerage Charges in Alabama By Number of
Local Units 62
4 1961 Sewerage Charges at Various Water Volumes
for Alabama Municipalities 63
5 1959 Sewerage Charges in Iowa By Number of
Local Units 67
6 1968 Sewerage Charges in Kansas By Number of
Municipalities 69
7 1959 Sewerage Charges in Michigan By Number of
Local Units 70
8 1965 Sewerage Charges in Minnesota By Number of
Municipalities 73
9 1965 Sewerage Charges in Mississippi By Number of
Municipalities 75
10 1964 Sewerage Charges in Nebraska By Number of
Municipalities 76
11 1963 Sewerage Charges in North Dakota By Number of
Municipalities 80
12 1962 Sewerage Charges in Ohio By Number of
Municipalities 81
13 1964 Commercial Sewer Charges in Oregon By Number
of Municipalities 83
14 1967 Sewerage Charges in South Dakota By Number of
Municipalities 85
15 1967 Sewerage Charges in Tennessee By Number of
Local Units 87
vn
-------
LIST OF TABLES (Continued)
Table Page
16 1967 Sewerage Charges in Texas By Number of
Municipalities 89
17 Monthly Sewer Service Charges By Years in
Texas Municipalities 92
18 1964 Sewerage Charges in Washington By Number of
Municipalities 95
19 1963 Sewerage Charges in Wisconsin By Number of
Municipalities 97
viii
-------
INTRODUCTION
In the post-war period the rate of increase in State
and local expenditures has exceeded both the rate of increase
in Federal expenditures and the percentage increase in Gross
National Product. (1-5) To partially meet this large increase
in expenditure, State and local governments have raised the
rates of existing levies and introduced new taxes and charges.
In spite of these increased revenue efforts, revenues have not
generally kept pace with expenditures at the State and local
level. Resulting deficiencies in available funds either have
been covered by larger Federal grants or have resulted in
increased State and local debts.
Although some studies indicate that this revenue gap may
shrink in the next decade, many municipalities will continue
to experience large deficits unless Federal and State grants
are increased. The reason for these deficits is twofold.
First, expenditures are increasing because of greater
urbanization and increased demand for more and better local
public services. Urban renewal, fire and police, water, sewer,
'and public welfare costs all continue to rise at a fast rate.
Second, at the same time that such expenditures tend to
increase faster than income, it is difficult for municipal
revenues to keep pace with income. This is partly attributable
to the fact that real property tax is the main source of
revenue. The base of this tax is shrinking in many
municipalities because of a migration to the suburbs. As a
result, the yield of the property tax, at constant mill rates,
tends to be less responsive to increases in income than any
of the other major sources of State and local revenue.
Many municipalities are facing increased resistance from
taxpayers to new taxes and/or increases in existing levies.
In addition, municipalities are unable to use some levies
because the administration of them is too difficult or
because their use is prohibited by the States. Municipalities
are also running into financial, political, and legal limits
on increases in debt.
Given these difficulties in raising additional revenue
and the level of the debt, some municipalities have placed
(1) Numbers in parentheses refer to references cited on pages 98-103,
The description of the fiscal position of municipalities is
based on references 1 through 5.
- 1 -
-------
greater emphasis on service charges. In addition to being
more acceptable politically than taxes in some municipalities,
service charges are superior to taxes from the viewpoints of
equity and economic efficiency grounds in many cases.
As indicated in Volume 1 of this report, municipalities
will face significant expenditures for providing sewage
service. These large expenditures will likely require
municipalities to seek additional sources of revenue. One
possible source of additional revenue is a charge on sewer
users. Although sewer user charges have been in existence
for several decades, recently there has been increased
interest in them. President Johnson advocated the use of
them in his 1968 Congressional Message on Conservation and
Water Management.(6) Professional organizations are also
interested in the topic. For example, the American Public
works Association, the American Society of Civil Engineers
and the Water Pollution Control Federation are preparing a
joint report on the financing of wastewater systems.
The purpose of this volume of The Cost of Clean Water
and its Economic Impact is to examine the role of user
charges in the financing of sewer services. The analysis
covers many topics but special attention is given to the
following three questions: (1) What is the current position
of user charges?; (2) What proportion of capital and operating
costs should be covered by user charges?; (3) How should the
revenue required to pay for the user share of the
costs be distributed among categories of users? Although
precise answers cannot be given to these latter two questions,
the analysis indicates the solutions which would result from
the implementation of various theories or points of view.
OUTLINE
The first section is devoted to describing the current
position of user charges in municipalities. First, a brief
history of user charges is given, including an explanation
of why municipalities have adopted these levies. Second,
the types of user charges are described and some quantitative
information is presented regarding the frequency of use of the
various charge methods. Third, joint treatment of industrial
and municipal wastes is discussed. Municipal restrictions and
surcharges on industrial wastes are given particular attention.
Fourth, the revenue obtained from user charges and the
relationship between costs and user charge revenue is described,
- 2 -
-------
In the second section, the division of sewerage costs
between users and nonusers is discussed. First, the nature
of the sewerage service is analyzed to determine whether a
case can be made for employing user charges. Next, various
theories and points of view regarding the distribution of
cost between users and nonusers are described. The allocation
of the nonuser share of costs among categories of nonusers
is then examined.
The third section takes up the question of allocating
the user share of the costs to the various categories of
users. General criteria or tests that can be applied
against user charges are described. These tests are equity,
economic efficiency, administrative simplicity and revenue
adequacy. Various charge formulas that are currently employed
or which have been suggested are analyzed in terms of these
tests. Then, using a comparatively large city in the Eastern
U.S., the distribution of revenue burden that would be
assigned to the residential, commercial, and industrial
sectors of the municipality under various charge formulas
is computed. Finally, the impact of user charges on the
distribution of income is discussed.
SOURCES OF INFORMATION
The description of user charges is based primarily on
studies conducted by the American City Magazine, the Municipal
Finance Officers Association of the United States and Canada,
the American Public Works Association and 21 State reports.
Most of the State reports are based on surveys conducted by
the League of Municipalities in the respective States.
Unfortunately, these data sources do not give an up-to-date
picture of user charge practices. The studies were undertaken
by different groups for different purposes at different times.
Comprehensive studies were conducted by the American Public
Works Association but, unfortunately, the studies are more
than 13 years old. The other general studies, based on
smaller samples, were conducted over eight years ago.
The reports vary widely. Not only do they differ in
terms of the date of the survey, and the proportion of
municipalities sampled, but also in the questions asked and
the method of presenting the results. Because reports are
not available for more than half of the States and because
the information is so varied in the reports which were
- 3 -
-------
obtained, State comparisions are omitted. \j Thus, the
description of user charge practices does not have the
desired degree of precision and, in a few instances, the
material may be out-of-date.
The Federal Water Pollution Control Administration
is attempting to provide up-to-date data on user charges
by supporting a comprehensive survey of municipalities on
this topic. More than 2,000 local government units will be
surveyed and the questionnaire is being designed to provide
information on major questions relating to charges. However
because of the time involved in developing a satisfactory
questionnaire, conducting the survey, and tabulating,
summarizing, and analyzing the survey results, the report
based on the survey will not be available until later.
Data for the model that illustrates the proportion of
total user revenue that would be paid by various groups of
users under different charge formulas were obtained from
diverse sources. Water consumption, residential property
assessment values, and number of industrial employees were
obtained from Hittman Associates, Inc. of Columbia, Maryland.
Information on BOD per industrial employee was supplied by the
FWPCA Ohio Basin Region, Cincinnati, Ohio. Commercial
property assessment values and part of the information regarding
industrial assessment values were obtained from the Department
of Assessment in Baltimore, Maryland. The number of commercial
establishments was obtained from the 1963 Census of Business,
U.S. Department of Commerce. The numb~er anct~pfoperty value
of industrial firms were taken from the U.S. Department of
Commerce, 1965 Census of Manfactures.
DEFINITIONS
User Charges - Several definitions of user charges could
have been utilized in this discussion. One view is that
user charges include all taxes and charges that are utilized
in paying for sewers. Another view is that user charges
include only the charges that are related to the degree of
use of the sewer system. The definition adopted here is that
user charges include all levies that are designated as sewer
charges by the municipalities. Thus where there are no desig-
nated user charges, and sewer costs are financed from special
I/ Summaries of the State reports are given on a State by State
basis in the appendix.
- 4 -
-------
assessments and property tax proceeds, municipalities are
classified as not employing user charges. User charges do
include levies that are not related to the amount of sewer
use, such as a flat monthly charge as long as the municipalities
label them as applying to the sewerage system.
Users and Nonusers - Users normally discharge wastes into the
sewer system.They are often subject to charges designated
as sewerage charges by municipalities. Nonusers include those
who may obtain some benefits from the sewerage system and who
may pay for part of the sewerage costs, but whose contribution
is not dependent on discharge of effluent into the system.
The most important groups of nonusers are property owners and
the general public which is represented by Federal, State, and
municipal governments.
Property owners may pay part of the sewerage costs through
the general property tax and special assessments. When a
special assessment or part of the property tax is earmarked for
sewerage purposes, the line between a user charge and a nonuser
levy becomes blurred. However, proceeds from special assessments
and the property tax, even through earmarked for the sewerage
system, are generally regarded as nonuser levies.
The State and Federal Governments may contribute by
providing grants, financed from general tax revenue, to
municipalities for the construction and operation and
maintenance of the sewerage system. Municipalities may
cover some sewerage costs from general revenue sources.
Sewerage - Sewerage refers to the entire collection, inter-
ceptor, and treatment system.
- 5 -
-------
SUMMARY AND CONCLUSIONS
THE CURRENT POSITION OF USER CHARGES
The description of user charge practices is based on four national
studies and 21 State reports. The following conclusions may be drawn
from these studies:
1. There are two major types of user charges - - sewer
service charges and tap fees. Sewer service charges are
monthly or quarterly levies which represent the source
of more than 90 percent of the user charge revenue. Tap
fees are levied only when a customer is first connected to
the sewer system. Although tap fees account for less
than 10% of total user charge revenue they may be
important in financing construction of the initial sewerage
system and of additions for some municipalities.
2. Approximately 70% of the municipalities over 5,000 in
population and a substantial number of municipalities
below this size employ sewer service charges of some
type. Over three-fourths of these municipalities have
adopted such charges in the last 20 years. There also
are several sewer and utility districts which levy sewer
service charges.
3. There are several reasons for the recent growth in the
adoption of user charges, the most important of these
being: (1) State and local legal limitations on the
amount of general obligation debt; (2) limitations on
municipal tax sources and on the taxing power of
special districts; and (3) a rapid increase in the
demand for public services at the municipal level. When
user charges are combined with revenue bonds, State and
local debts are not normally increased. The financing
of sewerage services through user charges therefore
allows a municipality to employ its taxing power.in
meeting the cost of other public services such as
education, roads and urban renewal.
4. The formulas used to determine sewer service charges
are varied but they can be placed into five general
categories: (a) water use, (b) number and type of
- 6 -
-------
plumbing fixtures, (c) uniform flat rate (an identical
charge for each customer), (d) modified flat rate(the
charge varies by type of customer), (e) size of water
meter, and size and number of sewer connections. The
most commonly used formula is a uniform or modified
flat rate. However, its use is concentrated in the
municipalities below 5,000 in population. For municipal-
ities above 5,000 population, approximately 65 percent
base the charge on water use. The percentage of
municipalities employing a water use charge also appears
to be increasing. Many municipalities that base the
levy on water use exclude water used for lawn sprinkling
from the charge. The number of municipalities that base
the entire charge on the number and type of plumbing
fixtures, size of water meter and size and number of
sewer connections is estimated at less than 10 percent.
However, some municipalities levy a minimum charge based
on one of these factors and a variable charge on water use.
5. Over 35 percent of the municipalities provide sewerage
service to customers residing outside the municipal
boundaries and the percentage is probably increasing.
Two-thirds of the municipalities that service outside
customers charge them 50 to 100 percent more than the
customers residing inside the municipality.
6. Nearly all municipalities have provisions in their
ordinances that prohibit the discharge of certain wastes
into the sewer system. However, there are variations in
restrictions and enforcement severity. Most municipalities
do not require pretreatment.
7. Approximately 100 to 200 out of the largest 3,000
municipalities levy a surcharge on industries that
discharge effluents of above average pollutant levels.
The charge is commonly based on biochemical oxygen
demand and suspended solids but acid concentration
and chlorine demand are also included in some formulas.
Many of the cities which have employed these surcharges
indicate that such charges have had some impact on
reducing the volume and the strength of effluents
discharged by industries.
8. The annual per capita yield from sewer service charges
ranges from less than $1 to over $60 but the average
yield is estimated at $7, excluding municipalities
that levy a uniform flat charge. The annual per capita
yield where a uniform flat rate is used is about $5.
- 7 -
-------
9. Statistics relating user charge revenue to sewerage
costs are sparse, but it is likely that over two-thirds
of the municipalities employing user charges more than
meet the operation and maintenance costs of the sewerage
system from this revenue source. In Texas, for which
the most extensive data were available, user charge
revenue exceeds operation and maintenance costs for more
than 901 of the municipalities employing user charges.
It is likely, however, that less than one-third of
these municipalities obtain enough revenue from user
charges to meet both operation and maintenance and debt
service costs. The ratio of revenue to costs appears
to be the smallest for municipalities below 5,000 and
above 500,000 in population.
10. Sewerage charges as a revenue device must be considered
within the context of total local government expenditures
for all purposes. In spite of increased revenue efforts by
State and local governments, revenues have not generally
kept pace with expenditures. The income shortage has
been covered by larger Federal grants and increases in
State and local debts greater than increases in gross
national product. The waste treatment cost covered by
local governments is usually local cost after deducting
State and Federal grants; thus the revenue to cost
picture presented is even less clear in this light.
The ability to finance all costs in the absence of grants
is not known.
DISTRIBUTION OF COST RESPONSIBILITY
BETWEEN USERS AND NONUSERS
11. In the second section of Volume III, various formulas for
dividing sewerage costs between users, (individuals and
businesses who discharge wastes into the system) and
nonusers (property owners and Federal, State and municipal
governments) are discussed. It should be noted that an
individual or business may be assessed costs as a nonuser
and also as a user if wastes are discharged. One finding
is that no matter what opinion one may have about this
division of costs he can find a theory to support it
because the formulas vary so widely in terms of where the
responsibility for the collection and treatment of wastes
is placed. However, this report concludes that there
is a strong case for dividing the costs between users and
nonusers. On this basis, a well-designed user charge
- 8 -
-------
system should not cover all of the total construction,
operation, and maintenance costs of a sewerage system.
There are several reasons why users should meet a
substantial share of the costs of the sewerage systems.
One, users benefit from the collection and treatment of
their wastes and it is equitable that they pay for this
service.- A properly designed user charges system will
enhance the equity charteristics by distributing costs
in a manner more closely related to service provided than
will other ways of raising revenue.
Second, effectively administered user charges can
also improve the management of industrial wastes. Charges
on volume, and sometimes strength of wastes, can create
an incentive for industrial users to pre-treat, change
processes and manage wastes more effectively.
Third, user charges provide a relatively stable
source of revenue with which to meet sewerage costs
which allows for a business-like management of the
sewerage system and provides for an orderly expansion
and upgrading of the system.
The case for assigning some of the costs to nonusers
is less obvious but is no less valid. First, property
owners gain from having a sewerage system through an
appreciation of property values whether or not they
discharge wastes. Second, storm water collection in
combined systems and the availability of sewerage
service both are likely to have a positive influence on
property values. Third, the general public benefits
from improved water use, disease control, recreational
opportunities and esthetics.
The reports suggest that nonusers should bear a
much greater share of capital costs than operation and
maintenance costs. However, no exact division of costs
between users and nonusers can be specified. Each
situation must be examined in terms of the relevant
characteristics. For example, property owners should
bear a smaller proportion of the costs in areas where
storm and infiltration water is unimportant as compared
to areas where this water volume is important. Also,
policy considerations related to ability to pay and the
desired rate of investment for controlling pollution
influence the shares borne by higher levels of govern-
ment. Nor can any universal method of collecting the
- 9 -
339-679 0-69-2
-------
revenue be specified; there are several types of user
charges. On the nonuser side, property owners may
meet their responsiblity through a number of means.
Often, these costs will be met through special assessments
or through the price of property in cases where de-
velopers install the sewer system. Sometimes, nonuser
costs will be met through general property taxes.
Some of the formulas described in the report do not
discuss the role of Federal and State governments in
the financing of sewer systems. However, there are
several reasons why Federal and State grants should be
used in this area. These grants will enable the nec-
essary standard of water quality to be obtained more
quickly and will encourage municipalities to plan and
construct sewage systems. The grants aid municipal-
ities over the difficult transition period when treatment
plants are being constructed, the system is under-
utilized, user charges have not or cannot be depended
upon to cover the costs, large increases in the property
tax are politically unacceptable and debt limits are
nearly reached. On balance, Federal and State grants
coupled with regulatory action have tended to stimulate
investments in waste treatment facilities.
THE DISTRIBUTION OF COST RESPONSIBILITY
AMONG CATEGORIES OF USERS
12. The third section of the report is devoted to examining
various charge formulas in terms of generally accepted
tax or charge canons and in terms of the impact on various
types of customers and the income distribution. No
charge formula is clearly superior to all of the others
in terms of equity, economic efficiency, ease of
administration, and revenue adequacy. For example, a
uniform or modified flat rate charge is the easiest
to administer but is deficient in other ways to other
types of charges. The so-called Joint Committee
Formula (a charge based on the volume and strength
of sewage) appears to be a highly equitable system
but it is difficult to administer. A charge based on
water use scores between the uniform flat rate and the
Joint Committee formula when all considerations are
taken into account.
13. A model was constructed to measure the impact of different
charge formulas on the various categories of users. Users
- 10 -
-------
were classified into residential, commercial, and industrial
groups and the charges studied were; (a) a uniform flat
charge, (b) a charge proportionate to water volume, and
(c) a charge proportionate to biochemical oxygen demand
discharges. It is recognized that a uniform flat rate
would likely not be used in an actual situation as that
modeled; however, it serves to delineate the limits of
cost distribution. The amount paid by each user
category if sewerage costs were met by the property
tax was also computed. Residential users would pay the
most under a flat rate and the least under a charge
based on biochemical oxygen demand. Industrial users
would be in the opposite position. Commercial users
would pay the most if costs were covered through a
property tax and the least if a flat charge was used.
14. Under any of the charge formulas, the proportion of
income paid by an individual in user charges is inversely
related to the level of his income. Charges based on
water volume and plumbing fixtures are not as likely to
widen income differentials as a uniform charge.
15. A municipality, when choosing a charge formula, has to
examine the alternatives in the light of its own
situation; no general recommendation that can be made
at this time would be of much value. In particular, such
evaluations must examine the trade-off between
administrative simplicity and equity. A water use charge
appears to be a good compromise choice if water is already
metered; in cases where a variety of industrial wastes
form a large part of the sewage brought to a treatment
plant, such as may occur in a regional system, a charge
based on both volume and strength of waste may be
appropriate.
- 11 -
-------
THE CURRENT POSITION OF USER CHARGES
This section of the report describes the current practices
of municipalities in regard to user charges.
User charges employed by municipalities can be placed into
two main categories of levies. One type of levy is called a
sewer service charge or sewer rental and it is generally paid
monthly or quarterly. The basis for this levy varies among
municipalities. Commonly used bases include: size of the
water meter; number of plumbing fixtures; quantity of water
purchased; percentage of water bill; and flat rate per period
of time.
A second category of levies includes charges that are made
at the time the property is connected to the sewer system or
when the property changes hands. These charges are generally
labelled as connection or tap fees, and inspection fees. The
charge may be a flat fee but often it is related to the frontage
of the property, the size of the sewer pipe and whether the
street is paved.
HISTORY OF USER CHARGES
A large majority of the municipalities with populations
of 5,000 or more currently levy sewer service charges.
Municipalities with populations below 5,000 also make ex-
tensive use of this source of revenue.
From an examination of State reports and other literature,
it is estimated that, of the municipalities which responded to
various surveys, 70 percent of those 5,000 in population levy
sewer service charges and nearly all municipalities charge
a tap or connection fee. (19-43) This estimate of 70 percent is
higher than estimates made by earlier studies reflecting the
growth in the use of sewer service charges in the last decade.
The 1953 study estimated that over 30 percent of the local
Government units above 5,000 in population levied sewer
service charges.(22) The 1962 study by the Municipal Finance
Officers Association indicated that 63 percent of the local
Government units included in its survey had sewer service
charges.(19)
The popularity of user charges is comparatively recent.
Although the City of Quebec, in Canada, first levied a charge
in 1810 and Brockton, Massachusetts and Boulder, Colorado
instituted charges at the turn of the century, very few
- 12 -
-------
municipalities employed sewer service charges until the
depression years.(19)-(20)
During the 1930-39 period, many municipalities adopted
sewer service charges. One reason for the institution of
charges was the shortage of revenue experienced by all levels
of Government during the depression. Several new charges and
taxes were adopted by State and local Governments during this
period. A second reason for the rapid growth in charges
during this period was that many sewers were constructed in the
depression years and user charges were viewed as a method of
paying for them. During the war years, there were few charges
adopted. After World War II, the rapid growth of nearly all
expenditure items at the local level caused municipalities-many
for the first time-to insitute new charges and taxes. The
additional costs associated with sewage treatment caused part of
this growth in the use of charges.
In the 1960-68 period, there was some increase in the
number of municipalities employing sewer service charges and
many municipalities made changes in the sewer levies. Most
of the changes were increases in rates, but in some cases the
structure and basis of the charge was altered.
The pattern of sewer charge adoption is demonstrated by the
.survey conducted by the Municipal Finance Officers Association
in 1962.(19) The survey indicates that, of 163 municipalities
which gave the date of adoption, 8 instituted charges prior
to 1930, 23 during the 1930-39 period, 33 during the 1940-49
decade, 93 during the 1950-59 period and 6 during the 1960-69
period. The rate of adoption by decade is shown in Figure 1.
The reason for the uneven growth in the number of municipalities
employing sewer service charges is that the pressure for
additional revenue came during the depression when revenues
declined and in the postwar period when municipal expenditures
increased at a rapid rate.
There are several reasons for the recent growth in the
adoption of sewer service charges. Many local governments have
reached or are approaching the legal limit on the amount of
general obligation debt that can be issued. The combining
of sewer service charges with revenue bonds allows
municipalities to build sewage facilities without affecting
the general obligation debt limits. This method of
financing sewerage facilities permits municipalities to
use general obligation bonds in financing other public
facilities, such as schools, where revenue bonds are not
generally practicable. Because of debt limitations
- 13 -
-------
100 -
90 -
80 -
70-
60
50-
40-
30 -
20
10 H
NUMBER OF U.S. MUNICIPALITIES
ADOPTING SEWER SERVICE
CHARGES BY DECADE 1900-1961
1900-29
1930-39
1940-49
1950-59
1960-S9
SOURCE: Lennox L. Moak. Sewer Service Charges.
Municipal Finance Officers Association of
the United States and Canada, Chicago ,1962
- 14 -
-------
municipalities have placed increasing emphasis on revenue
bonds in financing facilities other than sewers as well.(17)(18)
Another reason for the recent attention given sewer
service charges is that municipalities are often restricted
in terms of the tax sources available to them. Special
districts are also limited in their taxing power. For
example, income and sales taxes often cannot be levied because
of legal or administrative limitations. There are also
political limits on the revenue that can tie obtained from
the property tax. With the rapid growth in the demand for
public services at the municipal level, these limitations on
revenue sources have become more important. Sewer service
charges have been a relatively popular way of obtaining revenue.
They can be defended on equity ground because they are related
to a service received. The increase in sewage treatment has made
the relationship between sewerage costs and use of the sewerage
system even more apparent. Sewer service charges also have
become popular because they often include the entire municipality
and substantial amounts of revenue can be raised with moderate
rates.
TYPES OF USER CHARGES
The nature, basis, and magnitude of user charges vary
greatly among municipalities. Some municipalities employ
a complex formula for sewer service charges that includes the
type of customer, the number of plumbing fixtures, and the
quantity of water purchased. Other municipalities levy a
flat monthly charge against all customers. In some municipal-
ities residential customers are charged on one basis and
commercial customers on another basis. Similarly, the tap
or connection fees vary among municipalities and are based
on a combination of frontage, number of connections, and
the size of the water meter in some municipalities, and
are simply fixed fees in other local units.
Municipalities also differ in the treatment of customers
located outside the municipal boundries. Some local government
units charge both inside and outside customers at the same
rate, while others charge outside customers three times as much
as customers located inside the municipalities.
Sewer Service Charges(19-45)
Although municipal sewer charges are based on many
different factors and, in some cases, a combination of factors,
- 15 -
-------
most of the charges can be grouped into five broad categories.
Each category includes several variations of a particular
charge method. When all municipalities are considered, the
most common levy is a flat charge. This is by far the most
frequently used charge method for municipalities below
5,000 population. However, the most frequently used charge
in municipalities above 5,000 population is based on water
use. This percentage is even higher if only municipalities
above 25,000 population are considered.
1. Water Use
The rationale for basing service charges on water
use is that sewer costs are related to the volume of sewage
and most of the water purchased by a customer eventually
ends up in the sewer system. It is generally regarded
as the most equitable method of distributing sewer costs
by experts in the field. However, it is more complex
than most other methods. The popularity of these charges
varies among States but, in general, formulas based on
water use are most commonly employed by large cities
and cities that have large commercial and industrial
customers. There is also some evidence to indicate
that, on balance, municipalities are replacing other
charge formulas with formulas based on water use.
There are many different types of charges based on
water use but the two most commonly used formulas involve
a percentage of the water bill and the volume of water.
In a few cases, a combined sewage and water charge is
made. For some municipalities that treat industrial waste
the charge is based on both the volume of water and the
characteristics of the sewage.
a. Percentage of Water Bill. For municipalities
that charge in relation to water use, the most
common basis for the levy is a percentage of the
water bill. This charge is simpler to compute
and easier for customers to understand than a
charge based on water volume. It also simplifies
billing because the sewer charge can easily be
calculated and submitted to customers along with
the water bill. The simplicity of this charge method
is also a cause of some of its problems. The
criteria used in designing the water rate schedule
may not be appropriate to use in setting sewer
service charges. For example, the water rates may be
designed to distribute equitably the operation,
- 16 -
-------
maintenance, and capital costs of the water system
among the various categories of users. This
distribution of costs may not correspond to an
equitable division of sewer costs, however.
This problem can be alleviated to some extent by
charging a different percentage of the water bill to
various classes of customers. However, it is difficult
to arrive at tlie correct percentage for a group of
customers and customer reaction is often unfavorable.
Few municipalities employ this variable percentage
method in practice. Another difficulty with charging
in proportion to the water bill is that the percentage
must be changed when the water rates are changed if
a given amount of sewerage service revenue is desired.
This gives an appearance of a change in sewerage
charges and is difficult to explain to customers.
The range in the percentage of the water bill
selected by municipalities is from 5 percent to 300
percent. Most of the municipalities are in the 50
percent to 100 percent interval. In some municipal-
ities there is a flat sewerage service charge in
addition to the variable charge that is based on the
water bill. This flat charge is normally less than
$2.00 per month and is designed to obtain a fee from
customers for having the right to use the sewerage
system, independent of the volume or amount
discharged.
b. Volume of Water . Municipalities that charge dir-
ectly on the volume of water purchased utilize one of
two types of rate schedules, A small number of
municipalities use a flat rate per unit of volume
where volume is measured in gallons or cubic feet. A
typical charge is $,10 per thousand gallons. This
method is simple to compute and easy to understand
since it results in a distribution of charges that
is proportional to the volume of water purchased. This
distribution may not be equitable, however, if
sewerage costs are not proportional to the volume
of water.
The majority of municipalities that base the
service charge on water volume have a rate schedule
that varies inversely with the volume of water used,
that is, as the quantity of water purchased increases,
the rate decreases. All of the rate schedules are in
- 17 -
-------
terms of blocks of water but the number of blocks
varies. Some municipalities have only two blocks
while others have more than eight blocks. The average
number of blocks is approximately five and the rate
(per. thousand gallons) in the first block is generally
a little more than twice the rate in the fifth block.
In some municipalities the blocks are identical
to the blocks used in computing the water bill and the
rates are roughly proportional to the water rates. In
these cases, the service charge is similar to a charge
based on a percentage of the water bill. Most munici-
palities, however, have a rate and block schedule that
is quite different from the schedule used in calcu-
lating the water bill. This charge method does allow a
municipality to base the charge on one of the deter-
minants of sewer cost,i.e., water volume. It also
permits the rates and blocks to be related to sewerage
costs rather than water cost.
c. Combined Charges. A few municipalities make a
combined sewer and water charge. This has the
advantage of simplifying the billing procedure from
the standpoint of the municipality and presenting
customers with one bill instead of two. One
disadvantage is that the rate schedule is normally
geared to water costs and incremental sewerage costs
are given little attention. Another possible dis-
advantage is that customers are not able to make a
distinction between the charges for the two services
and, consequently, cannot relate the charge to the
level or quality of each service.
d. Volume of Water and Characteristics of Sewage.
Several municipalities base the charge on the volume
of water and the characteristics of the sewage.
Charging in relation to the characteristics of the
sewage is an attempt to place the extra costs asso-
ciated with the treatment and disposal of certain
types of sewage on the customer discharging the
sewage. In most cases, the charge associated with
the strength of sewage is in the form of an extra
charge or surcharge. It is generally applicable only
to businesses which discharge industrial waste that
is difficult and costly to treat.
There are some difficulties with each of the
charge methods based on water use but, in most cases,
- 18 -
-------
satisfactory solutions have been found. One difficulty
is that some customers may obtain water that is not
metered but is discharged into the sewer system.
Generally, this problem is limited to a few cus-
tomers, usually industrial firms, and is normally
solved by installing sewage meters or by estimating
the volume of sewage.
Another problem is the water that is purchased
by the customer but does not find its way into the
sewer system. The most obvious example of this is
lawn sprinkling. Another example is the water that
becomes embodied in a product during the production
process. Allowance is often made for water used in
sprinkling by basing the sewer charge on the water
used during the winter. For example, a municipality
may base the sewer service charge on the average of
of the water bills for January, February, and March.
Occasionally, the municipalities solve this problem by
placing a maximum on the service charge. No
adjustment is usally made for water that becomes
embodied in the product; nor do municipalities nor-
mally charge unpolluted water at a different rate
even though they place surcharges on sewage that is
above a certain strength. The charging for water that
does not reach the sewerage system could be elim-
inated if sewage meters were installed for all cus-
tomers. However, this would be a very expensive under-
taking and the gain in accuracy would probably not be
worth the cost in most instances.
2. Plumbing Fixtures
The number of plumbing fixtures is not a commonly used
basis for levying service charges in most States. In a
few States, however, it is used by several cities, and in
Texas it is the most frequently used charge method. In
some municipalities, the charge is based on the type of
fixture as well as on the number. It is quite common, for
example, to charge more for commodes, garbage disposals, and
washing machines in commercial establishments than for
other fixtures. Nearly all of the municipalities have a
minimum charge that includes a certain number of fixtures.
The minimum charge is frequently between $.50 and $3.00
and includes from one to four fixtures.
Municipalities also differ in that some charge a
flat rate per fixture and others charge less per
- 19 -
-------
fixture as the number of fixtures increases. Typical
charges are $2.00 plus $.25 for each fixture over
four; or $2.00 plus $.35 for the fifth through the
eighth fixture and $.25 for each fixture over eight.
A few municipalities base the minimum charge on the
number of fixtures and the variable charge on water use.
There are several reasons why a municipality may
want to consider basing the service charge on the
number of plumbing fixtures. In cases where the munic-
ipality would like to base the charge on water use but
is prevented from doing so because the water works is
privately owned or water is not metered, it may be that
the number of fixtures is the best indicator of water use.
A second reason is that some of the sewer costs, like the
diameter of the pipe, are related to the peak load that can
be placed in sewers. The larger the number of fixtures,
the larger the demands that can be put on the sewer system
at any one time. Consequently, it could be argued that
sewer costs should be apportioned according to the number
of fixtures. Three, it may be public policy to dis-
tribute the burden of sewer costs in a way that favors low
income families. The number of fixtures almost certainly
increases with family income. A charge based on the
number of fixtures is likely to be higher for high
income families than a charge based on any of the other
commonly used formulas. Fourth, the mix of fixtures gives
a rough indication of the characteristics of the effluent
discharged into the system. A charge that varies by the
type of fixtures can be viewed as a levy that is related
to the strength of the sewage.
For each of the advantages there are disadvantages
that are generally offsetting. The number of fixtures
is at best a very crude measure of water use. Sewer costs
are not related to the peak load of sanitary sewage in
places where a combined sewer system exists because it is
constructed to take storm water as well as sanitary
sewage. Peak loads, in any event, are dependent on many
factors, only one of which is the number of fixtures. A
sewer service charge is a rough tool with which to re-
distribute income and it is questionable whether a
municipality should attempt to redistribute income through
a charge based on a service. The type of fixture is also
a very crude indicator of sewage strength and it is not
clear that any household sewage should be subjected to
a special charge. A charge based on the number of fix-
tures is administratively complex in that frequent
- 20 -
-------
inspections are needed to make certain that the charges
are up-to-date and accurate. The best case for basing
the charge on the number of fixtures appears to be where a
measure of water use cannot be obtained.
3. Flat Rate
The most popular form of a sewerage service charge
among small municipalities is a flat rate levy where the
same amount is charged to each customer. A large majority
of the local government units below 5,000 in population
employ a uniform flat charge, while large municipalities
seldom use such a levy.
Service charges based on a flat rate are paid less
frequently and are generally less than charges based on
other formulas. The billings are often made on a quartly,
semi-annual, or annual basis. When placed on a monthly
basis, the rates are generally in the $.50 to $3.00 range.
The median charge is approximately $1.00.
Over the past decade, there has been a slight trend
toward substituting charge systems based on water volume
and type of customer for a flat rate charge. One reason
for this is that all sewerage costs have increased and
sufficient revenue cannot be obtained from a flat charge
on all customers because of the resistance of large
increases in rates by owners and renters of single family
dwellings, A second reason for the trend toward more
sophisticated charge formulas is that waste treatment
plants have become more common. The cost of these plants
is more directly related to the volume and strength of sewage
than is the cost associated with the collection system.
A third reason for this trend is that commercial and
industrial firms and apartments are becoming larger and
increasing numbers of these establishments are being
serviced by municipal systems. As a consequence, the
inequities resulting from a flat charge are more apparent.
The chief advantage of a flat rate charge method is
its simplicity. It does not require any metering or
inspections and the billing is simple because the same
charge is levied against each customer. On the negative
side, the charge is not related to costs, especially
treatment plant costs. Where large quantities of
effluents are discharged by industrial and commercial firms
or large apartment houses, and costs are met by service
charges, families residing in single family units are
- 21 -
-------
subsidizing these large users of the sewerage system.
Thus, since simplicity appears to be its only virtue, the
scope and usefulness of a flat charge is limited to very
small municipalities that do not have any large users. This
is consistent with the current practice; as pointed out
earlier, this charge formula is found most frequently in
small municipalities.
Modified Flat Rate
A sophisticated version of the flat rate charge
method is a system where the rate varies by the type
of customer. Single family homes may be one type,
apartments another, and industries still another. The
two systems are very similar in that both charges are
a fixed amount per unit of time. In municipalities
where there are only two or three customer classes, the
difference between the two systems is slight. In many
of the studies and reports on user charges, the two methods
are placed in one category.
Although there are many similarities between charges
based on a flat rate and those based on the type of
customer, there also are many differences. The revenue
yield is generally higher under the scheme that varies the
charge by the type of customer. Increased revenue is
possible because rates can be increased for certain user
categories while maintaining the standard rates for
residential customers. The modified system can take into
account the average volume and strength of the sewage
discharged by the customers in each category. A detailed
customer classification system increases the complexity
of the levy, but a charge based on a customer category
is easier to administer than one based on water volume and
the strength of the sewage. A system with several
categories can be more easily adjusted to include new types
of commercial and industrial customers with hard to treat
wastes than can a flat charge system because the principle
of charging different rates to various customers is
already established.
The number of customer categories varies greatly
among municipalities, In some municipalities there
are only three or four categories and in other local
units there are over 15 categories. A typical small
municipality would have the following monthly rate
schedule: single residences-$2.00; apartments-$1.50
for the first unit and $1.00 for each additional unit;
- 22 -
-------
cafes and drugstores- $4.00; service stations- $5.00;
schools- $40.00; hospitals- $50.00; creamery- $30.00;
others- $3.00. Larger municipalities generally have
many commercial and industrial customers and, consquently,
have a more detailed classification scheme. A few
municipalities base the charge to industrial and commercial
customers on the number of employees as well as the
type of business.
Basing the service charge on the type of customer
has many advantages. The charge system is comparatively
simple to administer, the revenue potential is high, and
it can take into account the average volume and strength
of the effluent of the customers in each category. In
terms of charging according to the volume and strength
of the sewage, however, this, method does have some
shortcomings. It is crude in that the charge to the
different customer categories may be based on some rule
of thumb rather than on an examination of the effluent
discharged by that category. The charge may also be
inequitable in that all customers in a given category
are charged the same amount, even though they may vary
in their use of the sewerage system. A fixed charge
does not provide any incentive for a customer to reduce
the amount or improve the strength characteristics
of the sewage. The modified flat charge method appears
to be most appropriate where water use statistics
cannot be obtained or a water use method is judged to be
too complex.
5. Water Meter and Sewer Connections A small number of
municipalities base the service charge on the size of
the water meter or the number and size of the sewer
connections. The reasoning behind these charge methods
is similar to that described for plumbing fixtures.
The size of the water meter and the size and number
of sewer connections indicate the actual and potential
use of the sewerage system.t Thus, it is argued,
costs associated with the average and peak load
volumes of sewage can be best distributed in relation
to use by charging in relation to water meter or connect-
ions. Although this line of argument has some merit, these
charge methods are crude. They do not consider the strength
of the sewage and they are only a very rough measure of
volume. These charges are, however, easy to administer.
Less than five percent of the municipalities use only
charges based on the size of the water meter or sewer
- 23 -
-------
connections and this five percent is concentrated in the
less than 5,000 population category. Some municipalities,
including a few above 5,000, have a minimum charge based
on the size of the water meter or sewer connections and a
variable charge based on water use. A typical schedule
of monthly rates for a municipality charging on the basis
of the size of the water meter exclusively would be as
follows; 5/8" - $1.50; 4" - $50.00; 8" - $100.00; and,
12" - $800.00. The rates charged by most municipalities
are similar for the small meters but there are sizeable
rate variations for large meters. Monthly service charges
based on connections range between $1.50 and $3.00 per
connection.
Sewer Connection and Tap Fees
Nearly all municipalities have connection or tap fees.
These fees are levied at the time the customer is connected
to the sewer system to cover the costs of making the
addition to the system. However, the large variation in the
charges among municipalities indicates that costs are probably
not covered in some places and that revenues exceed costs in
other municipalities. Some municipalities levy permit,
inspection, and reinspection fees. These inspections are made
when the customer is connected to the system, when the property
changes hands, and at certain time intervals (e.g., every
five years).
As is the case with sewerage service charges, the basis
of the connection fees varies among municipalities. The
most frequently found levies are flat fees that range from
less than $5 in some municipalities to over $400 in others.
A common charge is $100. Some municipalities differentiate
between commercial and residential customers in setting the
connection fee. In most cases, the commercial fee is nearly
double the residential fee.
Several municipalities have variable charges and the
charge usually depends on one or more of the following factors:
(1) the size of the sewer connection or water meter; (2) the
frontage; (3) the condition of the street; and (4) the location
of the customer. Under these four conditions, the highest
charges would be levied against a customer who has a large
lot, and lives on a paved street outside the boundries of the
municipality.
In some municipalities that base the charge on the size
of the sewer connection, the rate varies from less than $5
- 24 -
-------
for a four-inch sewer to over $1,.000 for a twelve-inch sewer.
Where the amount of frontage affects the fee, a charge of
between $2.00 and $4.00 per foot is common. If pavement must
be broken and replaced, the charge often increases as much as
100 percent. A few municipalities dispense with formulas and
charge a fee that is equal to the cost of the connection. In
these municipalities and some others, when the formulas are
designed to cover costs, the fee is reduced if some of the
labor and material is supplied by the customer.
The permit and inspection fees are generally small and
are intended to cover the costs of the inspection and issuing
of the permit. Nearly all of these charges are less than $10.
CHARGES TO OUTSIDE CUSTOMERS
There is a large variation among municipalities in the
service provided and the charges made to families and firms
residing outside the corporate limits. According to the 1953
survey conducted by the American Public Works Association,(22)
65 percent of the cities with over 25,000 population did not
provide service outside the corporate limits. Of the local
units that provided service outside the municipal boundaries,
over 60 percent charged higher rates to outside customers.
Since 1953, there has been an increase in the proportion of
local government units that provide sewage service to families
and firms residing outside the municipalities. In some cases,
this is because a sanitation or utility district has taken
over the sewer function from cities and has expanded the area
of service. In other cases, cities themselves have expanded
the service area to include customers outside the corporate
limits.
The state reports indicate that over 50 percent of the
municipalities above 5,000 population provide service to
outside customers.(23-43) A majority of these levy a higher
service charge against the outside customers. In some
municipalities the service is provided free to inside
customers but a charge is made to outside customers. In
others, where a charge is made to both sets of customers,
the basis of the charge is different for each type of customer.
Although this procedure makes it difficult to compare charges,
it appears that the charge is generally higher for outside
customers.
- 25 -
339-679 O - 69 - 3
-------
The most common method for charging a higher rate for
outside customers is simply to set some multiple of the rate
for inside customers. The multiple used varies among
municipalities. The most frequently found practice is to
charge a rate to outside customers that is between 150 and
200 percent of the inside rate. In some municipalaties, however,
the outside rate is over three times the inside rate.
Municipalities also tend to charge higher connection
and tap fees to outside customers. The difference in
connection charges levied against the two different types of
customers varies even more among municipalities than the dif-
ference in service charges. In some cases, the inside and outside
charges are the same. In other cases, the inside fee is a token
charge while the outside charge is substantial. On the average,
the outside connection fees are approximately 80 percent higher
than the inside fees.
The levying of higher user charges against outside customers
can be justified on several grounds. Most of these arguments
are based on the assumption that charges should be related to
sewer costs. One reason for charging a higher rate to outside
customers is that the businesses and residences located outside
the municipality are placed on larger parcels of land. The
larger lots mean that both the construction and the operation and
maintenance costs may be higher for each outside customer. A
second reason for the differential in charges is that outside
customers may be located farther from the interceptor sewer and
treatment plant. This again causes the costs involved in
servicing users located outside the municipality to be higher.
A third reason is that the sewer rates levied against inside
users may not be high enough to cover the operation and main-
tenance cost. The municipality can obtain additional revenue
from inside customers through special assessments and the
property tax. This alternative is not open in the case of
outside users, however, so the municipality must levy higher user
charges against them. Another reason is that the construction
costs may be partially financed through property tax and
special assessment proceeds, and higher user charges are a
method of obtaining a share of the capital costs from outside
customers. Finally, the sewer system inside the municipality
may have been built at a time when construction costs were
lower than when the outside portions of the system were added.
In addition, some of the inside system may be fully amortized.
In this situation, the outside sewer rates should be higher
than the inside rates.
- 26 -
-------
SEWER ADDITIONS
Although many local governments distinguish between
inside and outside customers in their rate schedules, a large
number do not distinguish between old and new customers when
additions are made inside the municipality or sanitation
district. The increased costs of additions are generally spread
among all customers. This procedure is administratively simple
but it can be criticized on equity grounds. The construction
costs associated with the addition are likely to be higher than
the construction costs of the orginal system. The construction
costs of the old system may also be fully amortized. Additions
may cause other costs to increase because of greater strain
on the entire system. If the costs resulting from additions
are spread among all the users, the old customers are
subsidizing the new customers unless the operation and
maintenance costs of the old system are much higher than
for the new. The subsidizing of the new customer by the
old customer also tends to affect the income distribution.
The sewer additions will serve primarily the relatively
high income families who live in suburbs, whereas the
old system serves, for the most part, the low income
individuals who reside in the core of the city. Consequently,
income differences will be increased if old customers pay part
of the cost of servicing new customers.
JOINT TREATMENT AND INDUSTRIAL SURCHARGES
A growth in joint treatment (municipal and industrial
wastes treated in the same system) has been observed in recent
years and is described in Volume I of this report.
Primary reasons for the growth in joint treatment are the
increase in number of sanitary districts and the increase in
the number of industries willing or permitted to join the
waste treatment systems owned by the cities and towns.(18) The
growth in sanitary districts has been important in the joint
treatment picture because such districts usually take a much
broader view of their responsibilities in pollution control.
By the same token, if the responsibility for water quality
management shifts to river basin authorities, a further increase
in joint treatment is likely.(57)
Although a description of the various approaches of
municipalities toward industrial wastes is imprecise because
of lack of data, some generalizations can be made about such
approaches. In constructing waste ordinances, more and more
- 27 -
-------
municipalities are following the format suggested in
"Guide Lines for Drafting a Municipal Ordinance on Indus-
trial-Waste Regulations and Surcharges", a 1959 report of the
American Public Works Association.(7) Most municipalities have
at least a general provision in their waste ordinances
stipulating that harmful and objectionable materials may not
be discharged into the sewer system. In some cases there are
several items which are specifically prohibited. Commonly
prohibited wastes include; certain dairy, meat packing, and
poultry wastes; specific concentrations of oil, grease, paint,
and acids; inflammable items; ashes; liquids above a certain
temperature; and some radioactive materials. A few munici-
palities will not allow, or allow only with special permission,
the discharge of wastes that have abnormal concentrations of
suspended solids or BOD. However, the allowable concentrations
vary significantly among municipalities.
For the 24 cities listed in the 1955 American Public Works
Report on Industrial Waste Disposal,(21) the range of allowable
concentration of BOD and suspended solids is from 250 to 1200
(parts per million) and 200 to 1500 (parts per million)
respectively. For the 15 cities that indicated specific limits
on oil and grease, the allowable concentration is from 100 to
400 (parts per million). If the sewage is above these con-
centrations, it must be pretreated before being discharged.
In the 34 cities that gave data on pretreatment, the percentage
of industries within each city that pretreated wastes ranged
from less than 1 percent to 100 percent. The median is 20
percent.
To enforce restrictions on waste discharges, periodic
tests are conducted. For the 21 cities reporting on this
topic, the frequency of tests ranged from less than one month
to 36 months.(21) Seventeen of the cities conducted tests at
six-month intervals or less. The methods of testing also vary.
Although some cities have very detailed restrictions and
vigorous enforcements, the majority of the municipalities accept
industrial wastes with no examination or pretreatment. There
are, almost certainly, some municipalities that are incurring
large costs by accepting certain types of industrial wastes.
These costs are then passed on to the local taxpayers or other
users. The full extent of this problem is not known.
Another approach that municipalities have taken toward
industrial wastes is to levy special charges on specific types
of waste. Although surcharges might be thought of an an
alternative to restrictions, in practice many of the munici-
palities with detailed lists of restrictions also employ
- 28 -
-------
surcharges. There are several industrial charge formulas that
are in existence or that have been advocated by experts. These
formulas are normally grouped into four categories,(11)
The constant rate formula is the most commonly used type
of formula and includes some of the charge methods that have
been previously described. It involves charging on the basis
of a unit such as; water use, number of fixtures, number of
employees, or time period,, Most sophisticated versions of the
formula include varying the rate by the type of business. One
example of this latter variation is a charge which is based
on the percentage of the water bill, where the percentage
varies by the type of business.
Constant rate formulas are simple to administer and they
take into account the differences in the strength of sewage.
They do, however, have some disadvantages. The rate schedules
are generally constructed on the basis of some crude operating
rules, negotiation with the business in question or, at best,
industrial averages. Since testing the effluent of the firms is
not usually involved in setting the rates, the charge is not
directly related to the effluent. Consequently, it is not
likely to induce a business to improve the quality of its
effluent. Charges that vary by the type of business are,
however, an improvement over charges that are identical for
all businesses. For small municipalities where the gain in
accuracy from testing is small in comparison to the expense
involved, this type of charge may be the best choice.
A Q-Q (Quantity-Quality) formula is usually what is meant
when the term surcharge is used. Approximately 100 to 200
municipalities use a formula of this type and the number is
increasing,(19-43) Surcharges based on this formula take into
account both the volume and the characteristics of the sewage.
Generally, the concentrations of suspended solids and BOD are
included in the formula. Some formulas also include chlorine
demand and other factors. In most municipalities it is only
the concentrations that are above the "normal" levels which
are subject to the charge.
The definition of normal concentrations varies among
municipalities. For the 15 cities presented in the American
Public Works Association Report, (21) the concentrations above
which a charge is levied range from 200 to 1,000 ppm of BOD
and 150 to 1,000 ppm of suspended solids. The median is 250
for BOD and 300 for suspended solids. Thus, although the range
is large, most of the municipalities tend to use the average
- 29 -
-------
concentration of BOD and suspended solids found in domestic
sewage as the "normal" level.
A typical Q-Q formula (14) would have the following form:
C=V(Y! +Y2(B-Bn)+Y3(S-Sn)) where C is the charge, V is the
volume, YI, Y2, YS , are the surcharge rates, B and S are
the actual concentrations of BOD and suspended solids, Bn
and Sn are the normal concentrations of BOD and suspended
solids. Instead of computing the charge for each, some
municipalities have volume charges that vary by ranges
of BOD and suspended solids concentrations. The rates
chosen usually reflect an estimate of the cost involved in the
collection and treatment process. Since the levels of BOD
and suspended solids do not greatly affect the collection
system, the rates for these factors are determined primarily
by treatment costs.
There are several advantages of employing the Q-Q
formula. It is an equitable charge in that the characteristics
of the business effluent and the costs associated with those
characteristics are directly taken into account. Another
advantage of this type of formula is that it provides an
inducement for businesses to reduce the strength and the
volume of their effluent. The reduction in BOD and/or
suspended solids that followed the introduction of sur-
charges in Cincinnati, Ohio; Otsego, Michigan; Winnepeg,
Manitoba, Canada; some Oregon cities, and other municipalities,
is described in the literature.(9-13) The officials in these cities
have been very satisfied with the industrial reponse to the
surcharge. In Otsego, the volume of BOD fell from 28,000 to
22,000 to 15,000 pounds per day in the three billing periods
that followed an introduction of a surcharge.(9) In Cincinnati,
there was a large reduction in surcharge revenue, which was
based on the amount of BOD and suspended solids in the effluent,
in the first few years that the surcharge was in existance. (13)
This would, of course, indicate that the waste loadings were
substantially reduced as the effects of the surcharge were felt
and industry could make changes to minimize these effects.
Although the incentive for reducing the amount of BOD
and suspended solids continues as long as the surcharge is in
effect, it appears that most of the reduction is obtained in
the first few years after the surcharge is introduced, A
surcharge causes industrial firms to immediately improve their
housekeeping procedures and possibly to introduce some waste
pretreatment. The charge als.o may induce firms to adopt new
processes which produce less waste or that recover the wastes.
After this initial period, however, it appears that the chief
- 30 -
-------
effect is to restrain businesses from introducing practices that
would greatly increase the amount of BOD and suspended solids.
In Cincinnati, which introduced a surcharge in 1953, the amount
of the charge has increased for some businesses and decreased
for others over the last decade. The annual amount of revenue
obtained from surcharges has been usually between $400,000 and
$600,000 during this period.(12), (15)
The chief disadvantage of the Q-Q formula is that the
administration of the charge is complex. When the surcharge
is introduced, either the wastes of all firms must be tested,
or an initial charge is made on the basis of other information
and the accuracy of the charge verified by later tests. In
addition, periodic tests must be performed to make certain that
the charge base continues to be accurate.
The effluent sampling and testing practices vary by
municipality. In some cases, samples of the effluent are taken
at wide intervals of time. In other cases, samples are taken
several times an hour on a twenty-four hour basis for a week
or more. The samples are then analyzed or composited and
analyzed to determine the effluent quality. The cost of the
sampling and testing procedure for a single firm may exceed
$500. The total administrative cost can be reduced by sampling
only a few firms in each industry, and basing the charges for
all firms in the industry on these samples.(8) However, this
method tends to diminish the incentive for an individual firm to
reduce the concentrations of BOD and suspended solids in its
effluent since such a reduction would not lower the effluent
charges. Inequities among firms would also rise if charges
are not related to costs.
Another difficulty in developing a Q-Q formula is in
determining the rates to be applied to each factor in the
formula. Rate development requires considerable engineering
analysis of the relationship between effluent characteristics
and treatment costs. In addition, a decision has to be made on
the levels of concentration that will be defined as "normal".
On balance, the Q-Q formula has much to recommend it. It
matches charges for the effluent with the cost of handling it
for each firm and it provides an inducement for firms to reduce
the quantities of undersirable substances discharged into the
sewer system. However, the complexities in sampling and other
administrative factors severely limit the number of munici-
palities that can utilize this surcharge formula. The complex-
ities also limit the number of businesses that a municipality
will find it worthwhile to sample and subject to the surcharge.
- 31 -
-------
The California formula, as it is applied, has two inter-
pretations. One interpretation is that a municipality should
examine various flat rate and Q-Q charges and select the one
that is most appropriate. Another interpretation is that
the amount or proportion of municipal taxes paid by the
business should enter the formula.
The Joint Committee formula (52) requires that all sewer
costs be divided into user and nonuser categories. A firm's
responsibility for sewer costs would be its share of the nonuser
costs, payable through the property tax or special assessments,
plus its share of user costs, payable through Q-Q type of charge
This formula will be described at greater length in the next
section since it deals with several broad issues.
REVENUE FROM USER CHARGES
The revenue from user charges is only a small proportion
of total municipal revenue. However, the amount of such
revenue is substantial for some municipalities. For the 43
largest cities, the revenue from all sewerage sources totalled
$109 million in 1965-66.(16) This was equal to less than two
percent of total municipal revenue for the 43 largest cities;
however, New York obtained more than $16 million and Detroit
more than $7 million from this source. In per capita terms,
Cincinnati and Seattle were the leaders with over $10 per
person per year.
In most cities revenue from sewerage service charges
comprises approximately 901 of total user charge
revenue. (23-43) The remainder of the revenue is obtained from
connection fees, inspection fees, sale of sludge effluent, and
investment income.
The yield, on a per capita basis, from service charge
varies greatly among municipalities but a few generalizations
can be made. The yield does not appear to depend on the type
of formula employed. Municipalities that charge a uniform rate
to each customer generally obtain less than the average but
the yields from charges based on water use, fixtures, and type
of customer are very similar.
Excluding the municipalities that levy a uniform rate,
the average per capita yield for all municipalities is approx-
imately $7 per year as estimated from available informa-
tion. (19-43) This shows an increase from the 1953 Public Works
Study(21) which indicated a per capita yield of approximately
- 32 -
-------
$3 per year and the 1962 Municipal Finance Officers Study(19)
which reported a figure of $4.37. One reason why this current
estimate is higher than those given in previous studies is that
municipalities have increased sewer service rates to take
account of increased costs which have increased both because of
inflation and because of the increase in waste treatment. A
second reason is that this $7 estimate excluded uniform flat
charges whereas the other estimates included all sewer service
charges. A third reason is that the proportion of the population
that is serviced is increasing and per capita figures are
generally based on the entire population, rather than the
serviced population. A fourth reason is that it is likely that
businesses are paying an increasing share of the sewerage
revenues. The per capita yield is generally below average for
cities over one million population and for municipalities under
10,000 population.
The variance in the yield increases as smaller munici-
palities are examined. In municipalities under 10,000 pop-
ulation, many obtain more than $20 per person while many others
receive less than $2. A very few small municipalities obtain
more than $40 per person.
In most municipalities, the revenue from user charges
is greater than the operation and maintenance costs of the
entire sewerage system, but is less than the sum of operation,
maintenance, and debt service costs or the sum of operation
maintenance and capital expenditures. For the bulk of
municipalities there are no data available that indicate whether
the revenue from user charges is greater than the operation,
maintenance, and debt service costs associated with treatment
facilities only.
For municipalities over 50,000 population, operation
and maintenance expenditures averaged $3.29 per person in
1965-66.(16) Total sewerage expenditures averaged $9.45 in
the same period.(16) The per capita revenue from user charges
usually fell somewhere between these values for most munici-
palities.
In Texas, where current statistics are available, revenue
from sewer service charges in approximately 90 percent of the
municipalities is greater than the operation and maintenance
costs of their sewer systems.(40) In some municipalities, the
sewer service charge revenue is more than twice the operation
and maintenance costs. There is some evidence that a few
municipalities derive revenue from user charges that surpasses
the debt service and the operation and maintenance costs.
- 33 -
-------
The 1962 study of City Finance Officers Association
indicates that two-thirds of the cities reporting on the
question stated that sewer services are completely
self-supporting.(19) This is a much higher percentage than is
suggested in the information given in the previous paragraphs.
There are however, some possible explanations for this dif-
ference. Many municipalities intend only to meet operation
and maintenance costs from user charges. This is evidenced
by the fact that in some of the State studies, municipalities
that do not cover debt service and operation and maintenance
costs from sewer service charges still indicate that the
yield from these charges is satisfactory. Another possible
explanation may be that the respondents to the 1962 survey
excluded storm sewer costs in their calculations thereby
lowering the cost with which user revenue was being compared.
This examination of user charge revenue and costs shows
that most municipalities are currently obtaining enough revenue
from user charges to completely cover the operation and main-
tenance costs of the entire sewerage system and to make some
contribution toward debt service costs. The relation between
revenue and cost varies among municipalities, but there is
some pattern to the relationship among population size
categories. The ratio of revenue to costs is lowest for the
municipalities over 500,000 and under 5,000 population.
- 34 -
-------
DIVISION OF COST RESPONSIBILITY BETWEEN USERS AND NONUSERS
The division of the burden involved in providing funds to
pay for a Government supplied good or service depends on many
factors. Important factors include the nature of the good or
service; and the interpretation and relative weight placed on
commonly accepted tax canons such as equity, economic efficiency,
administrative simplicity, and revenue adequacy. In this
chapter, the division of cost responsibility between users
and nonusers and among nonusers is examined. The following
chapter takes up the question of dividing the user share of the
cost burden among categories of users.
NATURE OF THE SEWAGE SERVICE
Governments provide many goods and services that could
be classified in several ways. They could be classified by
function, type and location of beneficiary, Government depart-
ment, or similarity to goods and services produced and marketed
in the private sector of the economy. It is the last class-
ification system, similarity to privately marketed goods and
services that is of relevance here. At one extreme, Government
provides goods and services like national defense and justice.
These goods and services, which are often called public goods
or pure public goods in the economic literature, (44-55) possess
qualities that prevent them from being marketed through the
price system because the benefits are widespread and indi-
visible. Thus, it is difficult to determine the amount each
individual or family is willing to pay for the good or service.
Even if the amount could be determined, there is no way of
excluding an individual or family from enjoying the benefits
from the good or service if he refuses to pay for it. For such
goods and services any relationship between costs and benefits
on the individual level is very tenuous; the costs are usually
covered from general tax levies.
At the other extreme, some goods and services supplied by
Government are similar or even identical with commodities sold
by businesses. Examples of these commodities include electricity
and the postal service. Electricity is supplied by both
private firms and Government. Likewise, packages are delivered
by private firms and some have even advocated turning the postal
service over to a private corporation. These services can be
easily marketed using the price mechanism because they can be
sold on an individual, basis and the benefits accrue almost
solely to the purchaser. When these services are provided by the
Government they can be marketed in such a way that they are
self-supporting.
- 35 -
-------
In an intermediate position are goods like education.
Education is divisible and thus, can be sold on an individual
basis, but it yields general social benefits over and above
the financial benefits obtained by the initial recipient. If
these good or services, called quasi-public or merit wants in
the economic literature,(45),(54) were marketed through the price
system, consumers would only take into account the direct
financial benefits they receive. Consquently, an insufficient
quantity of such goods and services would be produced. In these
situations Government often increases the production and con-
sumption of the commodities either by supplying them directly
or by subsidizing consumers and producers of them. Thus, the
cost of supplying these commodities is met partly through the
charges or taxes on the users or consumers and partly through
general tax levies.
The position of the service provided by the sewage
collection and treatment system is not clear. On one extreme
it could be argued that the sewage service is similar to
electricity or the postal service in that the service can be
marketed using the price mechanism. It could also be argued
that the benefits accrue almost exclusively to those that
discharge wastes into the system because they would have to
find an alternative way of discharging wastes in the absence
of the system. On the other extreme, it could be argued
the sewerage service is nearly a pure public good. Sanitary
waste, at least, is a normal consequence of living. The
disposal of it should be a public responsibility because the
benefits resulting from disease control and the preservation
of recreational facilities are widespread. In a more moderate
position is the argument that the sewerage service is
similar to a merit want. Those that discharge wastes into
the system would likely purchase some of the sewage service,
particularly the collection system, becuase it is an efficient
method of disposing of wastes. However, if the sewerage
service is marketed using the price mechanism, it is likely
that waste dischargers would purchase virtually no sewage
treatment and not as much collection service as compared to
the amounts thought to be socially desirable in terms of
disease control and preserving recreational facilities. The
nature of the sewerage service is further complicated because
the sewerage system may yield a joint product in that storm
and infiltration water, and sanitary and industrial wastes
are often collected and treated in the same system.
Given the lack of agreement about the nature of the
sewerage service there are several views that have been
expounded or could be advocated in regard to the division
- 36 -
-------
of sewerage costs among groups in the economy. One division
commonly made is between users and nonusers. Users generally
include households and businesses that discharge effluent
into the sewerage system. Nonusers include groups that may have
some obligation to pay for the sewerage system because it aids
in draining property. The availability of sewerage service
may increase property values. The sewerage system may also
provide services that yield general benefits such as disease
control. These services may provide benefits that vary
in scope from a community to the entire country.
The division of costs into user and nonuser categories may
appear, at first examination, to be irrelevant since many
individuals and businesses are both users and nonusers. They
discharge wastes into a sewer system, own property and pay
Federal, State, and municipal taxes. However, individuals and
businesses do differ in the amount and value of property
owned, the amount of State, municipal and Federal taxes paid,
and the volume and type of waste discharged. Thus, not only
does the form of payment for the sewerage system depend on the
division of cost responsiblity among users and nonusers, but
the amount paid by an individual or business depends on
this division.
ALLOCATION THEORIES
There are many points of view that could be put forward
regarding the division of sewerage costs between users and
nonusers. Many of these points of view have been previously
advocated in regard to other Government suoulied goods and
services.(46),(53) In some cases, the point of view has been put
forward as a single argument rather than as a comprehensive
theory with the assumptions and consequences explicitly stated.
However, an attempt has been made to construct several theories
from commonly held points of view in order to illustrate the
different solutions that could be obtained, and to determine
whether there is any consensus regarding the division of cost
responsibility between users and nonusers.
The following theories regarding the division of
sewerage costs stress equity, but economic efficiency and
administrative simplicity are also considered. Equity
considerations are more complicated for sewage service
than most other Government supplied goods because there are
differences of opinion regarding the responsibility that
an individual (business) should assume for the waste he
(it) creates. There are also differences regarding the
interpretation of benefits received.
- 37 -
-------
Public Utility Theory
One view is that sewage service is similar to electric
or postal service and that the sewerage system should be
operated according to the commerical principle. User charges
should be set at a level where the revenue obtained from
them will cover the entire cost of collecting and treating
sewage. This theory would encourage the use of revenue bonds so
that the user charges and sewage costs would be directly linked.
The only justification for a government body supplying the
service is that the Government is likely to be more efficient
than a private corporation or that there is some likelihood
that a private firm would act as a monopoly. This theory
places the responsiblity for sewage with the creators of it.
It also assumes that the costs associated with the collection
and treatment of storm water and infiltration water should be
paid by users. This public utility concept has been suggested
for many services provided by government. The argument for
applying this concept to the sewerage system is especially
strong because sewage and water services are often operated
by the same municipal unit. Water service has been operated on
the commercial principle in many municipalities and it is
argued that this principle should be simply extended to
sewage service.
Diffused Benefits Theory
Supporters of this view conclude that the benefits of
sewage service are diffused throughout the economy. They
believe that the collection and treatment of storm water
benefits every individual and business in the municipality.
They also believe that the benefits from collection and
treatment of sanitary sewage and industrial wastes extend
to individuals far outside of the municipality as well as those
inside. This is because individuals in one area are benefited
if another area employs disease control practices and prevents
recreational areas from becoming polluted. Since the benefits
are so diffused the sewerage costs would be met by the Federal,
State and municipal Governments through general tax levies.
This theory assumes a "right to pollute" and does not
place any of the responsibility for sewage collection and
treatment on those that create it; consequently, it does not
support the employment of user charge levies. This theory
may have some merit but it certainly is an oversimplification.
Although it may be difficult to identify the beneficiaries
of the system with a great deal of precision, some individuals
and businesses benefit more than others.
- 38 -
-------
Historical Theory
This theory states that the division of cost responsibility
should be the same in the future as it has been in the past. The
theory does not have any explicit supporters and it has a weak
theoretical basis. Nonetheless, even when the orginal cost
division has had no logical basis but simply grew like Topsey,
there is often a tendency to perpetuate it. This is partly
because customers especially businesses, have made decisions,
such as the location of a plant, on the basis of existing
conditions. Changes may be viewed as altering the rules in
the middle of the game, thus, this theory may provide the best
political solution.
Added Expenditure Theory
This theory has two variations. One variation is that
sewers exist primarily to handle storm sewage; the second
variation is that collection and treatment of sanitary and
business wastes is the prime function of the sewage system.
This theory has the most relevance, of course, where there
is a combined system. In this situation, which is relatively
common in the United States, (50) the user share of the costs is
likely to be greater if the second variation of the theory
is implemented.
Under the idea that sewers exist primarily to handle storm
sewage it is argued that the cost that would occur if the
system handled only storm water should be allocated to nonusers;
primarily property owners. Users would then be liable only for
the additional costs resulting from collection and treatment of
industrial, commercial and sanitary wastes. Because these
additional costs are related to use, they would be financed by
user charges. One basis for this variation of the theory is
that storm sewers existed before sanitary sewers.
The second variation would argue that costs of the
sewerage system, if it carried only sanitary and business
wastes, should be allocated to users and financed by user
charges. The additional cost resulting from a combined system
would then be allocated to nonusers. The rationale for this
variation of the theory is that the collection and treatment
of sanitary and business wastes are more important because of
disease and pollution control than is the collection of
storm water.
- 39 -
-------
Alternative Revenue Theory
This theory yields the same conclusion as the public
utility theory; this is, users should pay the entire cost of
the system. The reasoning behind this theory is that municip-
alities are faced with large expenditure demands for items
that yield benefits which are usually more diffused than
benefits from sewage services. Since these programs must be
financed through the property tax, it is better to finance
sewage services through user charges because they generally
encounter less resistance than do increases in the property tax.
Consequently, user charges should be high enough to completely
finance the sewerage system. The theoretical underpinnings
for this formula are weak but it may be a good approach in
terms of public acceptability.
Capital and Operating Cost Theory
This theory assigns the responsiblity for the capital
costs of the system to nonusers, primarily property owners,
and the responsibility of the operating and maintenance costs
to users (those who discharge wastes into the system). The
reasoning behind this theory is that the sewers are generally
connected to each unit of property and, consequently, the
right to use the sewer is related to property. The amount
discharged into the sewer relates to the degree of use and the
cost of this should be borne by the user. This formula is
simple but is very crude and arbitrary.
Differential Benefits Theory
Under this theory the cost is divided in proportion to
the benefits obtained from the sewerage service. Property
owners benefit from the collection of storm and infiltration
water through prevention of damage from floods and leakage
and improved appearance of the property. Businesses and
individuals, who create the sewage, gain the most from the
collection of sanitary and commercial sewage because they
would have to find other means of disposing of it. All
individuals, in and out of the city, obtain some benefits from
the collection and treatment of sewage in terms of disease
control and the maintenance of unpolluted streams and lakes
for recreation and other uses. In a broad sense, the further
an individual lives from the municipality in question,
the less he benefits from the sewage system. User charges would
only be related to the benefits measured by the cost of alter-
native methods of waste disposal. Nonusers would pay in
- 40 -
-------
relation to the benefits obtained by property owners and
the general public in the form of drainage, disease control,
and greater recreational and other use benefits.
This theory has a sound base but it does not place any
direct responsibility for pollution control on the creators
of the wastes and it is difficult to implement. It involves
computing the hypothetical cost, if there were no sewerage
system, of: (1) storm and subsurface water, (2) waste
disposal, and (3) disease. In addition, the reduction in
recreational benefits and other water uses would have to
be computed.
Relative Use Theory
This theory requires that the sewerage system be divided
into parts such as the collection system and the treatment
plant. The cost for each part is then divided in proportion
to the relative volumes of sewage flowing through that part
of the system. Nonusers, primarily property owners, pay for
the portion allocated to storm and infiltration water while
users pay for the share allocated to sanitary and commercial
sewage. This formula appears simple but it would be difficult
to implement. The volume of the two types of sewage flowing
through different parts of the sewer is difficult to determine
at any given time. It is even more difficult to determine the
average flows over a period of time.
Joint Committee Theory
This sophisticated theory was formulated by a joint
committee of representatives from eight national organizations:
American Society of Civil Engineers, American Bar Association,
American Water Works Association, National Association of
Railroad and Utilities Commissioners, Municipal Finance Officers
Association, Federation of Sewage Works Associations, American
Public Works Association, and Investment Bankers Association
of America.(47)
The formula divides the costs between property and users.
It involves dividing the annual costs into fixed and operating
categories. The fixed costs are further divided into the
collection, interceptor, pumping station, and treatment plant
categories. The components of these subcategories are itemized
in detail. These costs are then allocated to user, storm water,
future growth, and infiltration categories on the basis of the
volume and characteristics of each type of sewage. Property is
assigned the responsiblity for the future growth, infiltration,
- 41 -
339-679 O - 69 - 4
-------
and storm water totals. Roughly the same procedure is followed
for operating costs. They are divided into the collection,
interceptor, pumping station, and treatment plant categories
and allocated to users and property on the basis of volume
and waste characteristics. The operating and fixed costs are
then totalled for the use and property categories. The
property share is to be obtained from special assessments and
the property tax and the user share by user charges.
This formula has much to commend it. It attempts to
relate costs and benefits in a detailed and logical fashion.
The cost allocation is determined by analyzing the impact of
the different types of sewage on the various components of the
sewerage system. In this process both the volume and the
strength of the different types of sewage are considered. (48-49)
More recent studies have expanded this analysis. One difficulty
with the formula is that it is complex to implement.
This formula has a good deal of merit but there are two
aspects of it that are worthy of more consideration. One is
the assignment of the future growth costs to property. If the
growth is expected to result from an expansion in areas where
sewers are already installed, but not used, the procudure is
correct. If, however, the increased growth is to result through
an increase in the sewage discharged, due to an increase in
water consumption, the costs should be allocated to users. If
the expansion is expected to result from further development
of land, the cost should be shared between users and nonusers.
The second aspect of the formula that might be examined is
the allocation of the costs associated with sanitary and
commercial sewage to the users. The case is strong for
allocating the collection costs to the users because, in
collecting the sewage, the municipality is performing a function
that would otherwise have to be performed by the users
themselves. Wastes have to be disposed of some way and the
municipality can likely do it at least as well and at as low
a cost as the user.
This is not the case with treatment, however. Users would.
not generally treat sewage as a normal course of events. The
case for charging users for treatment rests on the argument
that water is owned by the public and the quality of it should
not be reduced by individuals and firms who use it. If this
argument is accepted, it is clear that the cost of treating
commercial waste should be charged to users. Otherwise, the
financial costs to the business that discharges waste into the
system would be lower than the social costs. This would not
- 42 -
-------
conform to accepted definitions of equity and efficiency.
Under this argument, individuals should also pay for the cost
of treating domestic sewage. If they do not pay for this
treatment, they would be shifting costs associated with the
sewage to future generations if water quality is reduced or
to other individuals if treatment is performed.
These1theories yield varied results. The users share
varies from 100 percent under the public utility and alter-
native revenue theories to zero in the diffused benefit
theory. The share allocated to the three levels of gov-
ernment varies from zero in many cases to 100 percent under
the diffused benefit theory. There is also a great deal of
variance in the share allocated to property owners.
Conclusions are difficult to make in light of such
varied results. However, many of the formulas assign some
cost to users and some to nonusers and any consensus or
compromise formula would allocate some of the costs to each
group. in addition to the factors considered in the discussion
of the theories, strong support can be marshalled on other
grounds for allocating sdme of the sewerage costs to users
and some to nonusers,
There are several reasons why users should meet a
substantial share of the costs of sewerage systems. Users
benefit from the collection and treatment of their wastes
and it is equitable that they pay for this service. If
municipalities did not operate a sewage system, users
would have to find other means of disposing of their wastes.
It may be that an alternative way of disposing of wastes
would be more expensive for users than if they met the full
costs of the municipal system. Users charges can also be
defended on grounds of economic efficiency. If businesses
were not subjected to user charges, the financial costs of
production for businesses discharging large amounts of
waste would be lower than the social costs of production.
This would result in profits of these businesses being too
high and/or the prices of the products produced by these
businesses being too low. This, in turn, would likely
distort production and consumption patterns away from an
optimal position.2/ A properly designed user charge system
conforms more to equity and economic efficiency criteria than
other ways of raising revenue. This is because_a properly
designed user charge relates the cost of providing the
service to the amount or level of service for each customer.
•^
—^ This point is covered in more detail in the next chapter.
- 43 -
-------
Effectively administered user charges also can improve
the management of industrial wastes. When industrial
businesses are first faced with charges based on the volume
or strength of the effluent they generally change house-
keeping procedures to reduce the amount of waste discharged.
Over a longer period, they further reduce the amount of
waste discharged into the municipal system by changing prod-
uction processes or by pretreating the waste. Some examples of
this are presented in the previous section of this volume under
the heading "Joint Treatment and Industrial Surcharge".
User charges also provide a relatively stable source of
funds for sewerage authorities. This facilitates planning
and allows for an orderly expansion and upgrading of the
sewerage system. In the absence of user charges, the funds
available for the sewerage system may be subject to
fluctuations from year to year because of the dependency
on annual appropriations. This disrupts planning and may
result in many short-run solutions that are cheap at the
time but costly in the long-run.
There are also several reasons for assigning some of the
costs of the sewerage system to nonusers. Property owners
gain from sewerage systems because of the collection of
storm and infiltration water where combined systems exist
and because property values are positively affected by the
availability of a sewerage system.
The general public also benefits from improved water
use, disease control, recreational opportunities and esthetics.
If users were left to their own devices in waste disposal, it
may be that disease control and recreational opportunities
would be at a lower level and odors and unsightly views at
a higher level.
A case can be put forward for allocating some of the
costs to users and some to nonusers but no exact division
of costs between users and nonusers can be specified. Each
situation must be examined in terms of the relevant charac-
teristics. For example, property owners should bear a smaller
proportion of the costs in areas where storm and infiltration
water is unimportant as compared to areas where this water
volume is important. Policy considerations related to ability
to pay and desired rate of investment for controlling
pollution also influence the shares borne by higher levels of
government. For example, it may be the Federal and State
government policy to redistribute income by giving greater
grants to poor rather than wealthy municipalities for the
- 44 -
-------
construction of sewerage systems. It may also be that the
Federal and State governments will give larger grants at one
period of time, as opposed to another, in order to quickly
meet some goal such as a standard of water quality.
The exact division of costs between users and nonusers
cannot be specified, but it can be argued that users should
bear a larger proportion of operation and maintenance costs
than of capital costs. This is because many of the operation
and maintenance costs are related to volume and other
characteristics of the waste discharged into the system.
Once the division of the cost responsibility between
users and nonusers is determined, the question of how the
revenue will be collected still remains. Again there is
no universal method of collecting the revenue that can be
specified. There are several types of user charge that could
be employed to meet the user share of the costs. Similarly,
on the nonuser side, there is also a choice of revenue sources.
Property owners may meet their responsibility through a
number of means. Often, the property share is met though
special assessments or through the price of property in cases
where developers install the sewer system. The property share
can also be met through the property tax.
ROLE OF FEDERAL AND STATE GRANTS
Some of the formulas described in the previous pages
do not assign any role in the financing of sewer systems
to State and Federal Governments. Others assign a small role
at most. The nonuser share is generally regarded as the
responsibility of the property owners. However, there are
several reasons why Federal and State grants should be used in
this area. These grants will enable the necessary standard of
water quality to be obtained more quickly and will encourage
municipalities to plan and constuct sewage systems instead
of devoting effort to other projects. The grants aid the
municipalities over the difficult transition period when
sewage treatment plants are being constructed, the system
is under utilized, user charges have not or cannot be depended
upon to cover costs, large increases in the property tax are
politically unacceptable and debt limits are nearly reached.
The use of the Federal and State grants are likely to place more
of the burden on meeting sewer costs on high income receivers
than if the costs were completely met by user charges because
the Federal and State taxes are more income equalizing, on the
average, than user charges. On balance, Federal grants coupled
with regulatory actions have tended to stimulate and make
financially possible, investments in waste treatment facilities.
- 45 -
-------
THE DISTRIBUTION OF COST RESPONSIBILITY
AMONG CATEGORIES OF USERS'
In previous section the problem of allocating sewerage
costs between users and nonusers was discussed. Once it is
determined how much revenue must be obtained from user charges
in order to cover the sewerage costs allocated to users, the
question of designing a suitable system of charges to collect
this revenue must be considered, A user charge, like any
Government levy, should be designed to meet the tests of
equity, economic efficiency, administrative simplicity and
revenue adequacy.
GENERAL CRITERIA
Equity
Equity is often defined in terms of one of two principles
of taxation: ability to pay and benefits received. The ability
to pay principle suggests that a levy should be related to the
capacity or ability of an individual to pay the tax or charge.
In practice, capacity or ability to pay a levy is often defined
in terms of income. This principle, although important in
analyzing the effect of many individual levies and the total
tax system, is not usually given very much consideration in
the examination of user charges.
User charges are generally justified by employing the
benefits received principle. This principle suggests that
charges or taxes should be related to the benefits that the
economic unit receives from Government. In the case of
sewage collection and treatment, the implementation of this
principle means that individuals and firms should be charged
in relation to the benefits received from the sewerage system.
The benefits of sewage collection and treatment, like the
benefits of many other goods and services provided by the
Government, are difficult to quantify.
It is usually difficult for an individual to quantify the
benefits received from a service. The problem is further
complicated because the benefits received are likely to be
different for each individual receiving the same service. Evefl
if individuals could quantify the benefits received, it is
impossible to make comparisons among individuals in benefit
terms. If one person states that sewage service is worth
60 benefit units and another states that it is worth 40
- 46 -
-------
benefit units, no conclusions can be drawn because the scales
of measurement may be different.
It is also difficult to measure the benefits received in
money terms. There is no easy way of observing the amount
that individuals are willing to pay for the service. If asked,
each individual will likely give a low figure in order to
reduce his charge, and the validity of the answers cannot be
checked. Another method of determining benefits is to estimate
the cost of the best alternative method of sewage disposal. As
pointed out in the last chapter, however, it is extremely
difficult to judge what method would be selected as a reasonable
alternative to a sewerage system.
Because of the difficulties in estimating benefits, the
benefits received principle has often been interpreted as
a cost occasioned method. Under this method, those using
the service are charged an amount equal to the cost of
providing them with the service. Thus, if it is judged that
equity can best be served by implementing the benefits
received principle, each individual (business) should be
charged an amount equal to the expenditure that the
Government makes in providing sewage service to him (it).
Economic Efficiency
Taxes and charges levied by governments are often used
as tools to accomplish certain economic goals. Although
they may be introduced to pursue specific objectives, they
should also be designed to interfere as little as possible with
the generally accepted economic goals of society. Goals
commonly mentioned include price stablility, full employment,
rapid economic growth, equitable income distribution, viable
balance of payments, and economic efficiency.3/
The type of user charge employed is not likely to have
any large impact on any of these goals and any undesirable
impact can be easily counteracted by other fiscal weapons
except in the case of economic efficiency. The charge method
employed by a municipality may affect a business's decision
regarding location, production process, and level of output.
These decisions, in turn, have implications for the efficiency
A/Economic efficiency implies an economic system that maximizes
the production of goods and services which best satisfy the
preferences of society.
- 47 -
-------
of the economic system. Usually, economic efficiency can
best be served if the price of each good and service is
equal to the cost of producing and marketing the last unit of
it. This rule or condition holds for many Government supplied
goods and services as well as those supplied by the private
sector of the economy. Hence, a user charge for sewage with
given characteristics should normally be set so that it is
equal to the cost of collecting and treating the last unit
of it.
If the charge is set above this level several distortions
occur. Businesses that require a large amount of sewer
service in their production processes are placed at a dis-
advantage with other businesses. The costs of the affected
firms will rise and their profits fall unless they can increase
the price or decrease the production cost of their product. If
the prices rise, the distortion is shifted to the consumer
market and individuals who make large purchases of these
items are penalized. Similarly, individuals who are served
by the sewerage system are penalized if the charges are set
above the cost of collecting and treating the last unit of
sewage. The reverse situation would occur if the charge is
below the cost of the last unit.
If the revenues obtained from charges levied on this
basis are insufficient to cover the user portion of sewer costs
additional levies that do not affect the charge for the last
unit of sewage may be placed on users. Connection fees are
independent of charges on the last unit of sewage. Minimum
charges also fit this criterion in most cases.
Administrative Simplicity
The user charge should be as simple to administer as
possible. For the customer, it should be on a base that is
viewed as fair and easily understood. From the point of view
of the municipality, a charge should be selected that does
not require overly expensive and time-consuming inspections.
In addition, the charge should be amenable to a computation
procedure that is inexpensive.
Revenue Adequacy
The chief purpose of charges is to obtain sufficient
revenue to meet the sewage system costs allocated to users.
It is not enough, however, to design a system of charges that
- 48 -
-------
will cover current costs. The charge system should be
flexible so that it can easily respond to meet changes in cost
conditions.
Costs will likely rise in the future through inflation.
Costs will also likely rise because improvements in the
quality of the service, such as a greater degree of sewage
treatment, are likely to occur.
Costs may also be altered through predictable preference
and technological trends. For example, it may be that garbage
disposals and commercial water cooled air conditioners are be-
coming more popular, toilets are being designed that use less
water; individuals are taking longer showers; and the price of
chemicials used in treating certain types of wastes is de-
creasing. The composition of sewerage customers may change so
that there will be fewer single family units and more high-rise
apartments. There may also be an increase in the number of
industries that will use the municipal system.
A charge system should be designed so that the revenue will
expand with increases in costs. It should also be flexible
enough to take into account other changes, some of which are
indicated above, with a minimum of restructuring.
CONFLICTS AND FORMULAS
It is very difficult to design a charge system that meets
all four of these tests (equity, economic efficiency, admin-
istrative simplicity, revenue adequacy). A system that scores
well in terms of equity is administratively complex. A system
that is easy to administer does not promote maximum economic
efficiency. These conflicts are clearly indicated in the charge
methods described in previous chapters. The following discus-
sion tests the various charge methods against the four criteria
just discussed.
Flat Charges
Flat charges per month or quarter that are identical for
all sewer customers are the easiest of all the charge methods
to administer. The charge is clear and predictable for the
customer. For the municipality, the billing procedure is simple.
No calculations are required and the bills can be printed in
advance of the billing period. The revenue yield is also pre-
dictable.
- 49 -
-------
Flat charges are not adequate, however, when evaluated by
the other standards. The revenue obtained from these charges
tends to be small because those families living in single units
will not accept a high charge. They are also unresponsive to
change unless the rate is changed. Equity, as defined earlier,
is greatly violated by a uniform charge. There is no relation
between the charge and the cost of treating the sewage of an
individual or business. An individual living alone pays the
same amount as a hotel or a service station. The charge does
not support the goal of economic efficiency. The charge for
additional units of sewage is zero and this is not likely to
be the actual cost.
Varying the charge by type of customer improves the
formula's rating on the revenue and equity tests without signif*
icantly making the system more complex. Although it is more
equitable than a uniform charge, it does not take into account
the difference in the volume and characteristics of the sewage
discharged by businesses in the same category. In addition,
the rate schedule is often constructed so that there is only
a rough relationship between the charge and the cost of col-
lecting and treating the sewage for each category.
Charging different rates to various categories of customers
does little to improve the score on the economic efficiency
test. The charge for additional'units of sewage remains at
zero.
Joint Committee Formula
The Joint Committee Formula described in the last chapter
is also used to distribute costs among users.(47) The fixed and
operating costs allocated to users are apportioned among volume,
suspended solids, and chlorine demand. (More recent studies
include BOD as well) (52) Then rates per gallon, per pound
of suspended solids, and per pound of chlorine demand are
computed. The charge per user is obtained by multiplying
these rates by the three measures of his sewage. This formula
attempts to equate the charge with the cost of the sewage
collection and treatment for each user. Consequently, it
conforms to the benefits received criterion of equity. This
charge is similar to a volume plus surcharge levy.
The charge is based on the average rather than the
incremental cost of collecting and treating sewage so it does
not score perfectly on the economic efficiency test. However,
it does rank higher than nearly any other charge system. This
charge system also is responsive to changes. It is designed
- 50 -
-------
to take account of changes in volume and waste characteristics
as a matter of course.
The chief weakness of this charge is its complexity. It
requires a detailed engineering study to ascertain the relation-
ship between cost and waste characteristics. It also requires
frequent and detailed sampling if the charges are to be accurate.
Water Use
A charge based on water use scores between the two previous
methods on all four criteria for sewer charge formulas. It does
not score perfectly on any test but neither does it score badly
on any.
In general, volume is the characteristic of sewage that
most influences costs. The collection system is affected
very little by most sewage concentrations, and volume is the
primary determinant of sewage treatment costs in nearly all
municipalities. Therefore, charging on the basis of a water
use formula ranks close behind the Joint Committee Formula
on the equity and economic efficiency tests. However, these
water use formulas charge on the basis of average rather than
incremental costs and they are not as accurate measures of cost
as the Joint Committee Formula, even when the rates vary by
type of business. Another drawback is that they are not as good
as the Joint Committee Formula in terms of adaptability to
change. This is because they do not make special charges for
wastes that cause above average treatment costs.
In terms of administrative simplicity, charges based on
water use formulas are not as good as uniform charges but
they rank far above the Joint Committee Formula. They do
not require a detailed analysis of the sewerage system or
wastes. However, they do require that water consumption be
metered.
Fixed and Variable
Under this method, the capital part of the costs assigned
to users is obtained through tap fees and minimum charges.
The operating cost assigned to users is recovered through a
charge on volume.
This formula adds the dimension of tap fees to the charges
and, consequently, is not directly comparable to the other
methods. Although it is not explicit, the other charge formulas
assign a relatively low importance to tap fees. Since capital
- 51 -
-------
costs are often a large proportion of total cost, tap fees and
minimums would likely be higher under this formula.
As compared to using water volume alone, this formula would
score higher on economic efficiency and equity grounds, lower
in terms of revenue flexibility, and roughly the same on
administrative grounds.!/
Higher tap fees and minimum charges would lower the costs
associated with volume, and likely bring the cost based on
volume closer to the incremental cost of collecting and treating
the last unit of sewage. In terms of equity, the formula
attempts to relate costs and charges for each customer. As
for revenue, placing more emphasis on fixed charges and less
on variable charges makes it less likely that revenue will
expand with volume and time.
Fixtures, Water Meters and Sewer Connections
These formulas compare very closely with each other and with
flat charges that vary by the type of customer. There are, how-
ever, some differences. On the consideration of equity, fixtures
measure the concentrations in the sewage better than water
meters and sewer connections but they may be less accurate as a
measure of volume. These formulas are all nearly identical
when examined on economic efficiency grounds. The incremental
cost for sewage is zero in all cases. As for revenue, fixtures
are much more responsive than water meters or connections.
Fixtures tend to increase with increases in income and popula-
tion. In terms of administration, fixtures require freauent
inspections and changes in billings, whereas charges in water
meters and sewer connections seldom vary unless there is a
change in the level of rates.
DISTRIBUTION OF CHARGES AMONG RESIDENTIAL, COMMERCIAL AND
INDUSTRIAL CUSTOMERS
In the preceding pages, various charge formulas were
examined in terms of general criteria or tests. In addition to
these general tests which apply to many charges and taxes,
municipalities may have specific tests or conditions that they
wish to impose on a charge system. Municipalities frequently
4/
-This is the case if higher tap fees and minimum charges resulted,
If these fixed charges are not required, there is no difference
between the formula and a formula based on water use.
- 52 -
-------
wish to avoid placing a large charge on an individual customer
or group of customers. It may be that the municipality is
reluctant to place a heavy charge on residential customers but
often the reluctance to charge higher prices is directed toward
the business sector. For example, a municipality may hesitate
to place a high sewerage charge on a particular business or
group of businesses, even though justified by the general tests,
because of a concern that the business(es) may move or expand
its (their) facilities in another location. This situtation is
likely to be the most common in municipalities that have one or
a few large businesses which employ a large proportion of the
population.(57) The problem is further accentuated if the
businesses are already faced with decreasing profits or sales and
are also large sewer users.
To provide more information on user charges, a model has
been constructed to illustrate how the revenue burden from
user charges would be distributed among categories of users
under various charge methods. Users are divided into four cate-
gories: residential, commercial, industrial, and other. The
commercial and industrial categories are further subdivided.
The commerical category is first subdivided into retail, whole-
sale, and service classes. The retail and service classes are
subclassified to show the charges on businesses that use larger
than average amounts of water in providing their products. The
industrial category is subdivided according to the Standard
Industrial Classification System. The residential category
includes apartments as well as other types of dwellings. The
other category includes hospitals, churches, schools, and insti-
tutions of a similar nature. In this model it is assumed that
these institutions pay user charges but no property taxes.
The charge formulas selected are water volume, flat
uniform charge, and one based upon discharge of Biochemical
Oxygen Demand. In the case of water volume and BOD, it is
assumed that the charges are proportional to these factors.
These relatively simple charge methods are selected partly
because there are statistics available with which to analyze
them. Other charge methods such as the number of fixtures and
the Joint Committee Formula are not presented because the re-
quired data are not available.
The distribution that would occur if the revenue is obtained
by the property tax instead of bv user charges is also presented
for the purpose of comparison. If user charges are not employed^
it is likely that the sewer costs would be financed by property
tax proceeds.
- 53 -
-------
The model is based on a large Eastern city, which was
chosen for several reasons. One is that it has a diversified
industrial and business base. A second and very important
reason is that detailed data on water consumption are available
from the work of Linaweaver and Howe(59) and from Hittman Assoc-
iates, Inc.(60) Although many aspects of the model are based on
a particular city, it is not a complete and accurate description
of any city, since some of the required data are not available
in sufficient detail and national averages are used, and because
of simplifying assumptions.
The results of the analysis are presented in the two
following tables. In Table 1, the percentage distributions
for the major user categories are illustrated. Table 2 is
more detailed and shows the percentage distributions by user
subcategory as well as by maior category.
TABLE 1
PERCENTAGE DISTRIBUTION OF USER CHARGE
BURDEN BY TYPE OF CUSTOMER
AND CHARGE FORMULA
Uniform Water Volume
Flat rate Sprinkling (Sprink-
Included ling
B.O.D. Prop.
load Assess
Type of Customer
Residential
Commercial
Industrial
Other
TOTAL
94.2
5.3
0.4
0.1
100.0
59.5
9.2
27.4
3.9
100.0
Excluded)
45.7
12.3
36.7
5.2
99.9
32.4
'l5.6
47.2
4.9
100.1
69.8
22.2
8.0
.0
100.0
Source: Computed using data from: 1963 Census of Business,
1963 Census of Manufactures; Hittman Associates, Inc.;
Baltimore Department of Assessment; FWPCA Ohio Basin
Region, Cincinnati, Ohio
Totals may not add to 100 due to rounding.
Table 1 shows that the percentage of the burden on resi-
dential customers ranges from 94 percent if a uniform flat
- 54 -
-------
TABLE 2
PERCENTAGE DISTRIBUTION OF USER CHARGE BURDEN
BY TYPE OF CUSTOMER AND CHARGE FORMULA
en
tn
TYPE OF CUSTOMER
Residential
Commercial
Retail
Gasoline Service Stations,
Carwashers
Restaurants, Night Clubs,
etc.
Other Retail
Wholesale
Services
Hotels, Motels, etc.
Laundries, Barber Shops, etc.
Other Services
Industries
Food and Kindred Products
Meat Products
Dairies
Canned and Frozen Foods
Grain Mills
Bakery Products
Candy
Beverages
Mis c . Foods
Tobacco Mfg.
Textile Mill Products
Apparel Industry
Lumber and Wood Products
Furniture and Fixtures
UNIFORM WATER VOLUME
FLAT RATE SPRINKLING
INCLUDED EXCLUDED
BOD LOAD
0.2
0.6
0.8
1.5
PROPERTY
ASSESSMENT
94.2
5.3
3.0
59.5
9.2
4.0
45.7
12.3
5.4
32.4
15.6
7.2
69.8
22.2
15.1
0.7
0.7
2.0
.0
1
0.0
0.9
0.8
0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0
0
0
0
0
.7
.7
0.4
.0
.0
.0
.1
.0
.0
1
2
0
1
1
2
1
0
0
0
0
0
2
.2
.3
1
3
.5
.'5
.6
7
.1
.5
.5
.1
.0
.7
.1
.3
0
0
0
0
0
.5
.6
27.4
.3
.9
.1
.2
.1
.3
1
3
0
2
2
2
2
0
0
0
0
0
3
.6
.1
2
4
.6
.1
.2
9
.9
.0
.7
.1
.0
.9
.1
.1
1
0
0
0
0
.0
.9
36.7
.8
.2
.1
.2
.2
.4
2.9
2.9
1
6
0.6
3.8
2.0
10
5.9
0.9
2.0
0.2
0.0
0.2
0.4
0.9
0
0
0
0
0
.9
.4
47.2
.4
.0
.0
.0
.0
.0
1
12
0
1
3
0
0
0
0
0
0
0
0
.6
.8
2.3
4.9
.5
.1
.3
1.1
.2
.2
.1
.0
.0
.1
.4
.2
0.3
0.0
0.1
0.0
0.1
8.0
-------
TABLE 2 (Continued)
PERCENTAGE DISTRIBUTION OP USER CHARGE BURDEN
BY TYPE OF CUSTOMER AND CHARGE FORMULA
TYPE OF CUSTOMER
UNIFORM WATER VOLUME
FLAT RATE SPRINKLING
INCLUDED EXCLUDED
BOD LOAD
Paper and Allied Products
Printing Industry
Chemicals and Allied Produc.ts
Petroleum and Coal Products
Rubber and Plastic Products
Leather and Leather Products
Stone, Clay and Glass Products
Primary Metal Industry
Fabricated Metal Products
Machinery, Except Electrical
Electrical Machinery
Transportation Equipment
Instruments and Related Equipment
Miscellaneous Manufacturing
Other
Notes: 1. Source:
0.0
0.1
0.0
0.0
0.0
0.0
0.0
o.o
0.0
0.0
0.0
0.0
0.0
0.0
0.8
0.1
7.9
0.1
0.7
0.0
1.3
2.5
2.2
0.7
0.5
1.4
0.1
0.2
1.1
0.1
10.6
0.1
0.9
0.0
1.7
3.3
3.0
1.0
0.7
1.9
0.1
0.2
1.2
0.0
31.9
0.3
0.2
0.0
0.3
2.0
0.2
0.1
0.1
0.3
0.0
0.0
0.1
3.9
5.2
4.9
PROPERTY
ASSESSMENT
,4
,5
0
0
1.7
0.0
0.2
0.0
0.3
1.2
0.8
0.3
0.2
0.6
0.0
0.0
0.0
2.
3.
1963 Census of Business; 1963 Census of Manufactures; Hittman Associ-
ates, Inc.; Baltimore Department of Assessment; FWPCA Ohio Basin
Region, Cincinnati, Ohio.
Values may not add to total due to rounding.
0.0 implies less than 0.05 of one percent.
-------
rate is employed to 32 percent if the charge is based on the
amount of BOD discharged. The uniform charge places a large
burden on residential customers because there are many more
residential than commercial, industrial, and other customers.
The median rate of 60 percent is obtained if the charge is
based on water volume, with no reduction for sprinkling allowed.
There is a marked difference in the burden borne by residential
customers if an allowance for sprinkling is allowed -- 60 percent
as compared to 46 percent. Part of this difference may result
from the assumption that the industrial, commercial, and other
customers did no sprinkling.
In the commercial sector, the percentage ranges from
5 percent if a flat rate is employed to 22 percent if property
assessment is used. The median is 12 percent which occurs if
a charge based on water volume, with sprinkling water excluded,
is employed. As shown in Table 2, retail customers would also
pay the most if property assessment is used and the least if the
charge is based on a flat rate. Customers that are in the
service industries would pay most if a BOD charge is used.
Industrial customers bear the heaviest burden (47 percent)
when the charge is based on BOD and the lightest burden when
the charge is a uniform rate (0.4 percent). The median burden
for industry exists if the charge is based on water volume with
no allowance for sprinkling (27 percent). A flat rate uniform
charge on each customer places a small burden on industry because
the number of industrial firms is very small, relative to the
total number of sewerage customers. The burden on industrial
customers is also low if sewerage costs are financed by the
proceeds of the property tax. This is partly because assess-
ments are usually low due to the difficulty in determining the
value of industrial property. The charge based on BOD places
a large burden on industries because the concentration of BOD
is higher for industrial wastes than for sanitary wastes.
Industrial customers that would pay the most under the BOD
charge are those that produce chemicals (32 percent) and food
(10 percent). These customers are large water users and also
discharge effluents that have strong concentrations of BOD.
The category labelled "Other" includes chiefly hospitals,
schools, and universities. These customers may not be subject
to any sewerage charges by municipalities. If they are charged
like all other customers, however, the charge would be the lowest
under a uniform rate and the highest under a water volume charge,
where there is an allowance for sprinkling. No burden is shown
under the property assessment column because it is assumed that
these customers would not be subject to the property tax.
- 57 -
339-S79 O - 69 - 5
-------
Qualifications of the Model
The results presented in the previous pages may indicate a
degree of precision that is not warranted. The figures in the
table reflect the general magnitude of the relevant percentages
but they are only estimates. There are four qualifications that
should be explicitly noted.
First, the data in the tables are partly based on a
specific city and the numbers would be different for most other
cities. However, the relationship among columns would likely be
similar for most municipalities. Consequently, attention should
be focused on the relative magnitudes in each row rather than in
the precise numbers.
Second, the data used in the analysis were not gathered for
this model but were collected from many sources. Some of the
statistics describe an Eastern city, some describe an area in the
midwest, and some describe the entire United States. Collectors
of the data include various branches of the Federal Government,
a city government, and a consulting firm. Combining these
divergent pieces of data introduces an unknown amount of error
into the results.
Third, and more important, these results do not measure the
response of customers to various charges. If a BOD charge was
implemented it may be that businesses would reduce the amount of
the BOD that they discharge. If the residential and commercial
customers did not react in a similar manner, the percentage of
revenue, but not necessarily the total revenue obtained from
them, would increase. The city modelled currently charges most
of its customers on the basis of water volume, so these results
indicate an "after adjustment" distribution of revenue burden.
Fourth, the charges in the model are not as complex as the
ones that currently exist in many municipalities. Municipalities
that charge on the basis of water volume generally have minimum
charges and a schedule of rates that declines with the volume.
As compared to a charge of this nature, the charge used in the
model tends to underestimate the burden on residential customers
and overestimate the burden on industrial customers. The opposite
is likely true for flat charges. No municipality as large as
the one in the illustration would use a uniform flat rate. It
is even unlikely that a city of this size would employ a modified
flat rate. If a flat rate that varies by type of customer is
employed, however, the burden on industry would rise and the
burden on residences would fall as compared to the situation
under a uniform flat rate. Municipalities that charge in relation
to BOD, have volume in the charge formula as well. In addition,
- 58 -
-------
only industrial customers are generally subject to the BOD
charge.
INCIDENCE OF USER CHARGES
It was pointed out in the discussion of equity that the
"ability to pay principle" is not an important factor in the examin-
ation of user charges. The incidence of these charges may, how-
ever, be at least a marginal consideration in choosing between
user charges and other levies and among various user formulas.
The incidence of a tax or charge refers to the ultimate bur-
den or final payer of the levy.(56) In some cases, it is not the
individual or business who has the legal responsibility for the
levy who actually bears the burden of the charge or tax. For ex-
ample, many excise taxes, like the gasoline levy, are paid by
businesses but the ultimate or final burden rests with the consumer
of the taxed product.
The burden of user charges paid by businesses could be
shared by three groups of individuals. The burden of the charges
could be shifted forward to the consumers of products sold by
businesses through higher prices. It could be shifted backwards
in the production process, chiefly to workers, in the form of
lower wage, interest, and rental payments. The charges many also
remain unshifted. In this case, the burden is borne by the
owners of the businesses who obtain reduced profits. In
measuring the incidence of the charges, the test is not whether
prices, wages, and products change but how much of any change can
be associated with a user charge.
The distribution of the burden among these groups depends
on many factors. One important factor is the supply and demand
conditions in (1) the markets for the products sold by businesses
and (2) the markets for resources such as labor. A second factor
is the length of the period analyzed during which price and wage
adjustments could be made. In general, the longer the period
after a charge has been introduced the more likely it is that
the charges are shifted. The charge is also more likely to be
shifted if the charge depends on the level of output, rather
than a fixed amount.
The allocation of the burden among the three groups -
consumers, business owners, and resource owners (chiefly workers)
- has a weak but varied impact on the income distribution. User
charges tend to increase income differences if shifted forward
to consumers, reduce differences if unshifted, and have a mixed
effect if shifted backwards.
- 59 -
-------
The burden of user charges paid by residential customers is
likely to be unshifted, and consequently, borne by them. It is
likely that all of the charge formulas discussed in this report
take a smaller proportion of income as the level of income rises.
Each of these charge methods also tends to increase income
differences more than a property tax which raises the same
amount of revenue.
In this section of the report, several types of service
charges have been examined. However, no general recommendation
can be given. Each charge method has some virtues and some defects.
A municipality, when choosing a charge formula, has to examine
the alternatives in the light of its own situation. In particular,
such evaluations must examine the trade-off between administrative
simplicity and equity. A water use charge appears to be a good
compromise choice if water is already metered. In cases where
water is not metered, a modified flat rate may be best. In cases
where a variety of industrial wastes form a large part of the
sewage brought" to a treatment plant, such as may occur in a
regional system, a charge based on both volume and strength of
waste may be appropriate.
- 60 -
-------
APPENDIX
This appendix supplements Section One on the current position
of user charges. The description of existing user charge practices
presented in Section One is based on the existing literature.
This literature includes studies which were conducted in the
1953-1962 period, journal articles, and State reports.
State comparisons were not presented in Chapter One because
reports were obtained for fewer than half the States and the
material was not reported on any consistent basis. The reports
differ in terms of proportion of municipalities included, the
type of information presented, and the year in which the statis-
tics were obtained. Some of the reports include nearly all of
the municipalities in the States, while others only include a
sample of the large cities. All of the reports indicate the
basis of the user charge, some indicate the variation in charges
that are levied against different categories of users, but very
few reports give any indication of the revenue obtained and the
costs of the sewerage system.
The following pages summarize the twenty-one available
State reports on a State by State basis. The scope, topics,
and detail given in the summaries vary from State to State due
to differences in the reports.
ALABAMA(23)
Information on user charges in Alabama is taken from a
report of the Alabama Water Improvement Commission, The data
were collected during 1960 and 1961.
The Alabama report includes service charge information on
135 municipalities. Forty-eight municipalities do not have a
service charge and 25 of the 48 do not provide sewage treatment.
Some of these municipalities that do not have a sewer service
charge have a water charge that is high enough to cover some of
the costs of the sewer system. Of the 87 municipalities with
sewer service charges, 21 do not provide treatment. These 21
municipalities charge a flat monthly fee and use the proceeds
of the charge to finance the operation and maintenance costs of
the collection system.
The most frequently used method of charging for sewage
service is a flat fee. Over 60 percent of all local units use
this method, including all with populations under 2,500.
Municipalities with populations over 10,000 tend to rely on
- 61 -
-------
charge methods that are based on water use. Many of the
municipalities that base the charge on water volume are served
by Birmingham and Bessemer, both of which charge according to
water volume. The following table shows the number of munici-
palities using each charge method:
TABLE 3
1961 SEWERAGE CHARGES IN ALABAMA
BY NUMBER OF LOCAL UNITS
Basis for Charge
Percentage of
Population Flat Rate Water Volume Bill Total
Over 100,000 1 1
10,001 - 100,000 25 9 16
5,001 - 10,000 10 7 4 21
2,501 - 5,000 16 7 0 23
Under 2,500 26_ £ £ 2£
TOTAL 54 20 13 87
Source: A Summary of Municipal Water and Sewer Rates, State of
Alabama Water improvement Commission, 1961.
The range in flat monthly rates is from $.50 to $2.50 and
the median is $1.00. A few of the municipalities that charge a
flat rate to residential customers levy a charge based on volume
to commercial customers.
For municipalities that base the charge on a percentage of
the water bill, the percentage ranges from 25 to 70 percent
and the median is 50 percent. Nearly all of the local units
that charge according to water volume have a schedule that
declines as the quantity of water increases and all of these
municipalities have a minimum charge. The minimum ranges from
$.43 to $3.00 per month and the median rate is about $1.70. The
following table has been constructed to show the range of
charges and the median charge at various volumes of water. All
of the municipalities included in the table charge on the basis
of water volume or the water bill.
Several of the municipalities levy surcharges on industrial
waste. Anniston has no sewerage charge except for commercial and
industrial waste that exceeds a Biochemical Oxygen Demand of
210 parts per million. The charge is related to the strength of
the effluent. Boaz has a charge to industrial plants that is
- 62 -
-------
based on volume and strength. Decatur, Athens, and Jasper have
an extra charge for firms discharging burdensome sewage.
TABLE 4
1961 SEWERAGE CHARGES AT VARIOUS WATER VOLUMES
FOR ALABAMA MUNICIPALITIES
Gallons Per Month
High Charge
Median
Low Charge
4,000
$2.04
.90
.52
12,000
$5.50
2.00
1.14
50,000
$16.84
7.40
3.62
200,000
$45.00
23.75
12.89
Source:
A Summary of Municipal Water and Sewer Rates. State of
Alabama Water Improvement Commission, 1961.
Approximately 60 percent of the municipalities charge a flat
sewer tap fee. This fee ranges from $1.50 to $225.00. The most
common fee charged is $50.00. Decatur bases its fee on the size
of the sewer. The charge ranges from $250.00 for a four inch
sewer to $1,125.00 for a ten inch pipe.
Some information is also given on the type of bonds that
are issued to finance treatment plants and connection systems.
In financing sewage treatment plants and outfall sewers, 61
municipalities issued revenue bonds and 44 used public improve-
ment bonds and 48 issued other forms of bonds. In approximately
40 percent of the local units, property is assessed to pay for
the collection system.
FLORIDA(24)
Information on user charges in Florida is taken from a
1967 survey conducted by the Florida League of Municipalities.
The Florida report is based on the survey and it includes infor-
mation on 125 municipalities.
Over 60 percent of reporting Florida municipalities base
the sewer service charge on a flat rate. Of these, three-fifths
vary the charge by the number of residential units. For the
39 percent not charging on a flat rate, approximately 21 percent
- 63 -
-------
charge on water volume, 9 percent use a percentage of the water
bill, and most of the remaining 9 percent charge on the number of
plumbing fixtures attached to the system.
The monthly rate for a single residence is in the $2-$3 range
for most municipalities. The rate for additional residences is
generally the same or a little below the rate charge for a single
dwelling. In Pompano, for example, the rate is $2.75 for each
residence. In Edgewater, the rate is $3.50 for a single residence
and $2.50 for each additional unit. Small municipalities that
employ a fixed charge often charge commercial establishments the
same rate. Large municipalities tend to charge a higher flat
rate for commercial establishments or else switch to a charge
based on water use.
Municipalities that base the charge on water volume also
have a minimum rate. Most of the minimum charges are in the
$2-$3 range. The price per thousand gallons declines as the
quantity of water increases in nearly every municipality.
In local units where a percentage of the water bill is used
as the basis for the user charge, the percentage ranges from
75 to 110 and the median is 100 percent.
Some of the municipalities that charge in relation to the
number of plumbing fixtures have a minimum monthly charge and
other local units charge at flat rate for each fixture. For
example, Wauchula charges $2.50 for the first six fixtures and
$.25 for each fixture between seven and twelve. Tallahasse has
a charge of $.75 for each fixture. The price per fixture declines
in many municipalities; in West Palm Beach, the price for the
first four fixtures is $1.50 and $.25 for each of the next six.
A few municipalities combine a charge for fixtures with one of
the other charge methods. Tallahassee, in addition to charging
$.75 per fixture, charges in relation to water volume.
More than 80 of the 125 municipalities have a connection
charge. Most of the connection charges are a flat fee, but 11
base the charge on street surface and lot frontage, and three
base the charge on sewer pipe size. The range in flat fees is
from $2 to $300 and the median is approximately $75. In a few
of the local units, both connection and service charges are
higher for outside customers than for those residing within the
municipality. The charge is 100 percent higher for outside
customers in one or two cases but the typical increase is
25 percent.
Florida municipalities raise a substantial amount of revenue
from user charges. Seven cities received more than $500,000 from
- 64 -
-------
this source in 1967. Tampa received over $3 million, Miami almost
$2 million, Saint Petersburg nearly $1 million, Fort Lauderdale
$875,000, Daytona Beach $658,000, Lakeland $634,000, and
West Palm Beach $590,000. In per capita terms the range is from
less than $1 to nearly $60. Most of the municipalities obtained
yields between $8 and $17 and the median yield is approximately
$12.
GEORGIA(25)
The description of user charges in Georgia is taken from a
study by the Georgia Municipal Association in 1965. The study
is limited to cities with population between 5,000 and 10,000.
Data on sewer service rates are given for 21 cities.
Five of the cities make no charge for the sewage services
that are provided for residential customers residing inside the
municipalities. Two of these five cities do make flat monthly
charges to outside customers, however.
Twelve of the cities levy flat monthly charges to residential
customers residing inside the city boundaries. The charge
ranges from $.75 to $6.00. All except one of the cities charge
from $.75 to $1.00. Two of these cities charge commercial and
industrial customers a percentage of the water bill and a third
municipality bases the commercial charge on the number of sewer
connections.
Two of the municipalities charge on the basis of the water
bill. In Monroe, each customer is charged a monthly amount equal
to one-half of the monthly winter water bill. Elberton charges
residential, commercial, and industrial customers an amount
equal to 40 percent, 25 percent, and 5 percent of the water bill,
respectively.
One municipality charges in relation to water volume and the
remaining city included in the survey, Rifton, charges residential
customers in relation to the number of taps, and commercial
customers in relation to the number of taps and volume of water.
The arrangements regarding the acceptance of industrial
waste vary among cities. Five cities accept industrial wastes
with no extra charge; three accept with payment on a volume or
strength basis; two accept waste with industry paying capital
cost of additions to the treatment facility necessitated by
wastes; two accept wastes with industry paying a surcharge
if the strength is above that of domestic waste; and, three
refuse to accept industrial waste.
- 65 -
-------
IDAHO(26)
The information on municipal sewerage charges in Idaho is
taken from a report of the Idaho Municipal League entitled
Idaho Water and Sewer Ratest January 1966. The report includes
over 50 municipalities but information on charges is given
only for approximately 30 local units.
The most common basis for charges in Idaho municipalities
is a flat monthly amount to all customers. Approximately
one half of the municipalities charge on this basis. Another
quarter of the local units use a monthly charge, but vary
the charge according to the number of residences in a building
and the type of commercial establishment served by the system.
Most of the remaining municipalities charge according to the
quantity of water purchased, but a few use a percentage of
the water bill and other forms of charges. A few of the local
units use a combination of charges. Residences and small
commercial establishments are charged a flat amount and large
businesses are charged in relation to quantities of water
used. The municipalities which employ charges based on water
use also generally have a minimum charge. As is true in most
States, it is the smaller municipalities which use the flat
monthly charge method.
For municipalities levying a flat charge per month or
quarter, the average charge is approximately $1.75 per month.
The largest number of municipalities charge $1.50 but a> few
charge substantially more than this. Some of the local units
that vary the monthly charge by the type of establishment
have only two or three categories and others such as Kamiah
have a very detailed list of categories. The charge for
most commercial establishments is less than twice the charge
for single family homes. For municipalities that charge in
relation to water use, the rate declines as the amount of
water used increases. For example, Boise has a minimum charge
of $.80 and charges $.13 for the first 1000 cu. ft. The rate
then declines to $.09 for amounts over 5,000 cu. ft.
IOWA(27)
The information on Iowa is taken from a 1959 report of
the Iowa State Department of Health on municipal sewer rental
ordinances. This material is supplemented by 1968 statistics
for 19 municipalities. Some municipalities have no doubt
changed the form and amount of their sewerage rates since
1959. However, using other States as a guide, it seems safe
- 66 -
-------
to conclude that at least three-fourths of the local units
are currently employing the same charge as they did in 1959.
Charge methods based on water use are very prevalent
in Iowa. All of the municipalities with population over 2,500
and approximately 85 percent of all local units base the sewerage
charge on water use. The remaining 15 percent of the municipalities
levy a flat fee. Nearly two-thirds of the local units employing
a water use measure base the charge on the water bill and
the other one-third charge according to the volume of water.
The following table illustrates the distribution of charge
methods by size of municipality.
TABLE 5
1959 SEWERAGE CHARGES IN IOWA
BY NUMBER OF LOCAL UNITS
Charge Basis
Volume ofPercentage of
Population Flat Rate Water Used Water Bill Total
Over 100,000 1
10,001-100,000 8 8
5,001-10,000 5 7
2,501-5,000 8 13
1,000-2,500 10 11 24
Under 1,000 \2_ _6 2±
TOTAL 22 39 73 134
Source: Sewer Rental Ordinances in Iowa Cities and Towns, Iowa
State Department of Health, Division of Public Health
Engineering, January 1959.
For the municipalities basing the charge on a percentage
of the water bill, the range in percentages is from 10 to
100 percent. Over two-thirds of the local units use a percentage
between 25 and 50 percent and the median is 40 percent. Many
of the municipalities also levy a minimum charge that is roughly
$.50 per month.
The local units which base the charge on the volume of
water generally have a rate schedule that declines as the
quantity of water increases. There is, however, a higher
percentage of municipalities in Iowa that charge a flat rate
per gallon than in most States. The rate per gallon commonly
ranges between $.05 and $.10 per thousand gallons. Nearly
- 67 -
-------
all of the local units that base the levy on water volume
have an additional flat fee or minimum charge. The flat fee
generally ranges between $.50 and $1.00 per month.
The municipalities that charge a flat fee for residences
often have a schedule of rates for commercial customers. For
example, Lake Mills charges residences $1, schools $50, a
creamery $30, and banks $2 per month.
Surcharges for industrial effluents are much more prevalent
in Iowa than in most other States. More than ten municipalities
have explicit charges for industrial effluent above a certain
strength and another 20 to 30 local units have provisions
for making extra charges for industrial wastes. These charges
take many forms. In Charles City and Hampton the Biochemical
Oxygen Demand (BOD) above 400 parts per million is multiplied
by the volume of sewage and a rate of $.002 per gallon. Boone
ranks industries on a BOD scale and charges an industry a
higher percentage of the water bill the higher it is on the
scale. Des Moines takes into account both BOD and suspended
solids in its charge scheme. Iowa City, which bases its
sewerage charge on the volume of water, varies the rate according
to the BOD of the industrial effluent. Coon Rapids gives
a credit for unpolluted water.
KANSAS(28)
The material on Kansas is taken from the 1968 League of
Kansas Municipalities report titled: Sewage Service Charges
in Kansas Cities.
Many of the current sewerage charges levied by Kansas
municipalities are derived from,recently enacted ordinances.
Nearly all of the municipal ordinances pertaining to sewerage
charges were enacted since 1955 and the majority of the
ordinances were enacted after 1960.
A flat monthly rate is the most frequently used sewerage
charge in Kansas. Second in frequency of use is volume of
water, and the percentage of water bill charge ranks third.
As is true in most States, nearly all of the small municipalities
- 68 -
-------
employ a flat rate charge. The following table indicates
the use of the various charge methods by Kansas municipalities:
Population
Over 50,000
25,001-50,000
10,001-25,000
5,001-10,000
2,501-5,000
1,000-2,500
Under 1,000
TOTAL
Source:
TABLE 6
1968 SEWERAGE CHARGES IN KANSAS
BY NUMBER OF MUNICIPALITIES
Basis for Charge
Flat Rate
6
3
24
43
87_
164
Volume of
Water Used
2
2
9
5
8
6
37
Percentage or
Water Bill
2
5
3
14
Total
3
2
15
10
37
52
96
215
League of Kansas Municipalities, Sewerage Service Charges
in Kansas Cities, June 1968.
The rates vary among municipalities that employ the same
method of charging for sewage services. The flat rates vary from
$.25 to $5 per month. The median monthly charge is approximately
$1. Nearly all of the municipalities which base the user
charge on volume of water have minimum charges. The median
average charge is $1 per month but the amount ranges from
$.70 to $2.50. Some of the municipalities charge for water
at a fixed rate per gallon or cubic foot and others charge
at a declining rate as more water is used. A common fixed
rate is $.10 per thousand gallons. For municipalities that
base the charge on a percentage of the water bill, the median
percentage is 50 percent and the range is from 20 percent
to 100 percent,
The above statistics are for a single family within the
city. Many of the municipalities that use a flat rate also
increase the charge for multiple family units. The increased
charge usually takes the form of increasing the rate, often
100 percent. A few municipalities that levy a flat charge
on single family dwellings also levy a charge on water use
for multiple dwellings.
- 69 -
-------
Nearly half of the municipalities charge customers outside
the city more than those inside. The extra charge varies
from one municipality to another. The highest extra charge
is 100 percent and the average additional charge is approximately
SO percent.
There are no revenue figures given in the Kansas report but
using average family water use statistics, it appears that per
capita revenue from residential customers is lower for municipal-
ities that use a flat rate charge than for those local units
that base the charge on water use.
MICHIGAN(29)
The description of user charges in Michigan is taken from
a bulletin published by the Michigan Municipal League in 1959.
It is likely that many of the municipalities have changed their
charges in the last nine years.
Flat rate charges are less frequently used in Michigan than
in most other States. Less than six percent of all municipalities
charge a flat amount. Over 85 percent of the local units base
the charge on water use. Sixty percent use water volume and
another 25 percent base the charge on the water bill. One large
municipality, Bay City, charges according to the size of the
water meter. The following table presents the distribution of
charge methods among municipalities:
TABLE 7
1959 SEWERAGE CHARGES IN MICHIGAN
BY NUMBER OF LOCAL UNITS
Basis for Charge
Population
Over 50,000
25,001-50,000
10,001-25,000
5,001-10,000
2,501-5,000
Under 2,500
Flat Rate
3
2
TOTAL
Source:
Volume of
Water Used
8
8
15
9
9
11
61
Percentage of
Water Bill Other
1
3
2
9
6
5
1
2
1
2
26
Total
10
11
20
19
20
19.
99
Sewer Service Charges and Related Data in Michigan
Municipalities7 Michigan^fainicipal League, Information
Bulletin No. 91, October 1959.
- 70 -
-------
Nearly all of the municipalities that charge in relation
to water volume have minimum charges. The minimum charges
are related to meter size much more frequently than in other
States. The minimum monthly charge for a one family residence
is approximately $1 in most local units. Although most of
the municipalities have a rate schedule that declines as the
quantity of water increases, flat rate charges per 1,000 gallons
or 100 cubic feet are more common in Michigan than in most
other States. The flat rate per unit of volume varies from
$.05 to $1.00 for 1,000 cubic feet of water.
For municipalities charging on the basis of the water
bill, the percentage ranges from 40 to 200 percent but most
of the percentages are concentrated from 40 to 100 percent.
The median is 50 percent.
Approximately one-half of the municipalities charge a
connection fee. However, the proportion of local units charging
a fee is not the same in each population category. Nearly
all of the municipalities with population under 2,500 employ
a charge but most of the local units over 2,500 provide the
service free. Many have a variable charge. The fixed charges
range up to $300. The median fixed charge is about $90.
Forty-five municipalities have extra charges for customers
residing outside the municipal boundaries. The ratio of outside
to inside charges varies a great deal among the municipalities.
Nine charge the regular inside rate, 10 charge 150 percent
and 19 charge 200 percent of the regular rate. Seven other
local units have different forms of extra charges to outside
customers. Kalamazoo, for example, charges according to property
valuations.
Several of the municipalities provide adjustments in
the charge for domestic users. The most common example of
this is the allowance for sprinkling. Seventeen municipalities
base the charge on the winter water consumption. Others make
adjustments for air conditioners and water that is not discharged
into sanitary sewers.
Thirty-one of 82 municipalities require industries to
pretreat at least some of the wastes. Twenty-eight of these
local units require pretreatment before the waste can be discharged
into any body of water. Six municipalities have extra charges
for industrial waste. The charges are based on the strength
or concentration of the sewage.
- 71 -
-------
The Michigan report gives some financial data on user
charges and the sewer system. Data on per capita revenue
from sewer service charges is given for 69 municipalities.
Twenty obtain $7 and above, 25 receive from $4 to $6.99, 17
obtain $2 to $3.99, and 7 receive less than $2. On the
expenditure side, data on per capita operation and maintenance
costs are given for 57 municipalities. The cost is $7 or
more for eight municipalities, from $4 to $6.99 for 18 local
units, $2 to $3.99 for 20, and less than $2 for 11 municipalities
Therefore, an average municipality covers all of the operating
and maintenance costs with sewer service charges and has about
$1 per capita left to cover debt service charges. Many
municipalities gave more than one answer to the query about
the purpose of the charges. The most frequently mentioned
purpose was to provide funds for the operation of the treatment
plant (63 out of 93 municipalities). This answer was closely
followed by "retire revenue bonds" (51 municipalities) and
"operation of sewer systems" (46 municipalities).
Eighty-five local units also indicated the source of funds
for construction of the sewage treatment system. Forty-five
issued general obligation bonds and 40 sold revenue bonds. In
general, the municipalities over 5,000 population issued
revenue bonds and the local units under that size relied on
general obligation bonds.
MINNESOTA(30)
The description of sewerage charges in Minnesota is taken
from a report written by the League of Minnesota Municipalities
and Municipal Reference Bureau. The report includes information
obtained in a 1965 survey. The report also compares the results
of the 1965 survey and a previous survey conducted in 1959.
According to Minnesota legislation, municipalities are
allowed to finance sewer improvements by issuing general
obligation bonds payable from general taxes, special assessments,
sewage service charges, and other non-tax revenues. The service
charges can be based on the cost of the sewerage service,
the quantity of water consumed, the quantity and quality of
the sewage, a classification of the premises served by the
system, and by any other equitable basis. All of the revenue
received from sewerage charges, sale of sewerage facilities
or sewage must be placed in a separate fund. The fund must
Be used first to cover operating and maintenance costs. Any
revenue remaining may be used to service the sewerage debt.
- 7.2 -
-------
Minnesota municipalities tend to rely on charges based on
water use more than the municipalities in most States. Thirty-
four Dercent of the municipalities use a percentage of the
water bill and 20 percent, base the charge on water volume.
Forty-five percent use a flat rate and the remaining one percent
charge according to the size of the water meter. A table
presenting the distribution of municipalities by charge method
and population size is shown below.
Population
Over 100,000
10,001-100,000
5,001-10,000
2,501-5,000
1,001-2,500
Under 1,000
TOTAL
TABLE 8
1965 SEWERAGE CHARGES IN MINNESOTA
BY NUMBER OF MUNICIPALITIES
Flat
Rate
8
1
11
21
22
Bas
Volume of
Water Used
2
9
4
3
7
1
is of Charge
Percentage of
Water Bill
5
9
17
15
6
Other
1
1
Total
3
22
15
25
43
29
62
26
46
136
Source: Informationfor Municipal Officials: Sewer Service
Charges (sewer rentals) in Minnesota Municipalities,
League of Minnesota Municipalities and Municipal
Reference Bureau, Revised December 1965.
Most of the municipalities that employ a monthly or quarter-
ly flat levy charge a monthly rate between $.50 and $2.50,
Fifty-four of the 62 municipalities are in this range. The
rate for each unit in multiple-unit dwellings tends to be
lower than the rate for single family dwellings in most
municipalities. For example, Columbia Heights charges $1.25
per month for a single family and $.75 for each additional
family. Approximately 15 of the 62 municipalities change to
a charge based on water use for commercial and industrial
customers. They divide about equally between using the water
bill and the volume of water. These local units that change
the basis of the charge are the larger municipalities. Most of
the smaller municipalities charge the commercial customers the
same rate as the residential customers. Consequently, very few
- 73 -
339-679 O - S9 - 6
-------
of the Minnesota municipalities have the detailed classifications
of commercial establishments that are found in many other States.
For municipalities employing the percentage of water bill
method, the percentage ranges from 25 percent to 140 percent.
The median rate is 50 percent but there also is a substantial
number of local units at 100 percent.
St. Paul and Litchfield base the user charge on the size
of the water meter. In St. Paul, the monthly rate varies from
$1.50 for a five-eighths inch meter to $181.20 for a 12 inch
meter for customers inside the city. The rate ranges from $2.50
to $298.20 for outside the city.
There are a few Minnesota municipalities that have sur-
charges for industrial wastes. In the case of small municipal-
ities, the surcharge is related to a specific industry.
Winnebago, Rochester, Duluth, Owatonna, and Fergus Falls all
base the charge on the volume and strength of the industrial
effluent. Other municipalities such as Mora and Lake Benton
have provisions for levying a special charge on industrial
wastes.
The Minnesota report made some comparisons of its 1959
and 1965 surveys that give some indication of trends in user
charges. Forty percent of the municipalities made no changes
in their sewer rates for residential customers. Eighty percent
of those municipalities that changed their charges only altered
the rate and not the basis for the charge. The 16 municipal-
ities that did change charge formulas are distributed as
follows: three changed from a flat charge and two from a
percentage of the water bill to water volume, one changed from
water volume and eight from a flat rate, to a percentage of the
water bill and two changed from percentage of the water bill to
a flat rate. This represents a net change of 14 from a flat
rate to a water use method. In terms of commercial charges, the
net change is 13. The change from a flat rate to a charge based
on water use has occurred primarily in larger municipalities
where there has been an influx of industry.
MISSISSIPPI(31)
The Mississippi State Board of Health provided the infor-
mation regarding municipal sewer charges in Mississippi for 1965
This report is based on forms filled out by the municipalities
for the State Board of Health.
- 74 -
-------
The most commonly used basis for sewerage charges in
Mississippi is a percentage of the water bill. This charge
basis is chiefly utilized by the larger municipalities and by
the smaller municipalities in which the commercial and industrial
users are important. The smaller local units tend to employ a
flat rate charge if the sewer system is primarily used by
residential -customers. The following table illustrates the
number of municipalities employing each type of charge by
population size.
TABLE 9
1965 SEWERAGE CHARGES IN MISSISSIPPI
BY NUMBER OF MUNICIPALITIES
Basis for Charge
Percentage of
Population Flat Rate Water Rate* Total
Over 50,000 1 1
25,001-50,000 1 34
10,001-25,000 1 67
5,001-10,000 3 10 13
2,501-5,000 7 5 12
1,000-2,500 10 20 30
Under 1,000 l&_ _5_ 23^
TOTAL 41 49 90
*There may be some charges based on the quantity of water used
included in the percentage of water bill category.
Source: Municipal-Residential Sewer Rates, Mississippi State
Board of Health, 1965.
The rates charged vary within each category. Many munici-
palities have a different rate schedule for customers inside the
city than for customers located outside the municipality. The
outside rate is almost always higher and in some cases no charge
is made to inside customers. The largest difference appears to
be in Lucedale where insiders are charged an amount equal to
50 percent and outsiders are charged 150 percent of the water
bill. Also, the charge varies among cities. The median inside
rate for municipalities employing the percentage of water rate
basis is 33 percent of the water rate but the range is from 5 to
67 percent. The median flat rate is between $1 and $2 per
month and the range is from zero to $3 for inside customers.
The maximum flat rate for outside customers is also $3. Several
- 75 -
-------
of the municipalities have a maximum amount that can be levied
against customers who are charged according to their water bills.
A common maximum is $5,00 per month.
NEBRASKA(32)
The information on Nebraska is taken from a survey published
by the League of Nebraska municipalities, December 1964.
Water use is the most frequent basis for sewerage charge in
municipalities above 500 population. The smaller cities and
villages depend almost entirely on a flat monthly charge.
Although nearly all of the first class cities (population 5,000
or more) levy a service charge almost a quarter of the smaller
cities and villages make no charge for sewage services. The
following table describes the pattern of charge methods among
municipalities.
TABLE 10
1964 SEWERAGE CHARGES IN NEBRASKA
BY NUMBER OF MUNICIPALITIES
Basis of Charge
Volume of Percentage of
Population Flat Rate Water Use Water Bill Total
Cities
5,000 $ Over 75 4 16
Under 5,000 37 2 5 44
Villages _5_3_ _2_ _1 55
TOTAL 97 9 9 115
Source: William L. Wilke Survey of Rates Charged for
Electricity, Water, Gas, and Sewerage, The League
of Nebraska Municipalities in cooperation with
the Department of Economics of the University of
Nebraska, December 1964.
Most of the first class cities employing a flat charge vary
the charge according to the type of customer. For example, in
Columbus the monthly rate varies from $1 for residences to $9 for
factories. York has a $1 charge for residences and a rate
schedule for business that ranges from $1.10 to $75. The
- 76 -
-------
municipalities that base the charge on water volume generally have
a minimum charge of $1, and a schedule of rates that declines
with the quantity of water. Municipalities that charge in
relation to the water bill levy a monthly charge that ranges from
20 percent of the March water bill to 75 percent of the average
monthly bill for the winter months. A frequently used value is
50 percent.
The flat monthly charge used by small cities and villages
ranges from $.35 to $3 per month. The average charge per month
is about $1.50.
Nearly one half of all the municipalities in Nebraska tie
some of the property tax proceeds to financing the sewerage
system. The villages attach a higher mill rate to sewers than
do the cities. The mill rate for most of the cities is about
one mill but some of the villages devote six to eight mills.
NEW YORK(33)
The information on user charges in New York is taken from
a report prepared by the New York State Conference of Mayors
and other municipal officials. The New York report is based on
a questionnaire survey conducted in 1966. There were 23 cities
and 95 villages that responded to the survey.
New York municipalities tend to place less emphasis on
sewerage charges than local units in other States. This
absence of user charges is especially noticeable in cities.
Eight out of 23 cities and 31 out of 95 villages do not levy
service charges. The cities include Albany, Syracuse, and
Corning, Another five cities and 19 villages charge only
customers residing outside the municipality.
Nearly all of the municipalities base the charge on water
use. Six cities and 21 villages use a percentage of the water
bill. Three cities and 11 villages base the charge on the volume
of water. The remaining municipalities levy a flat rate or
base the charge on assessed valuation of the property and the
number and type of fixtures. One city, Plattsburgh, and 13
villages levy a flat rate. Three villages and the city of
Buffalo, which uses several charges, base the levy on the
assessed valuation of property. Four villages that use a flat
rate for residential customers change to water volume for
commercial units.
- 77 -
-------
The percentages used by municipalities that base the
charge on the water bill vary from 25 percent to 100 percent
for cities and 25 percent to 106 percent for villages. The
median percentage for cities is between 70 and 75 percent and
for villages 50 percent.
For municipalities that levy a flat rate, the charge per
month ranges from $10 for Geneseo to less than $1 for Waddington.
The median charge is between $4 and $5.
Basing the user charge on assessed valuation is similar to
using property tax proceeds to cover sewer costs. Making a
separate charge on property for sewers does, however, indirectly
tie sewer revenues to sewer costs. The rate varies from one
municipality to another, depending on costs and assessments.
One example, Patchogue, charges a rate of $.99 per $100 of
assessed value.
New York municipalities tend to charge outside customers
more in relation to inside customers than do the municipalities
in other States. It is common for outside rates to be twice as
much as inside rates and, occasionally, outside customers are
charged more than three times the amount charged inside
customers.
NORTH CAROLINA(34)
The user charge information for municipalities in North
Carolina is taken from a survey conducted by the North Carolina
League of Municipalities in 1964. This information is more
limited than for most States, however, because the survey
covered only the municipalities with populations over 10,000.
Nearly all of the 28 cities included in the survey use a
percentage of the water bill as the basis for the charge. The
only city with a population over 25,000 that does not use this
method is Asheville, which has no sewerage service charge. All
of the cities with a population between 10,000 and 25,000 base
the charge on the water bill, except Hickory, which levies a
flat monthly charge. The percentage of the water charge varies
from 25 percent to 100 percent. For the cities over 25,000 in
population, the range is 50 percent to 100 percent and the
median is 60 percent. The range for the cities with populations
between 10,000 and 25,000 is 25 to 75 percent and the median is
40 percent. The rate for outside customers ranges from 150 to
250 percent of the rate for inside customers. The typical
outside rate is double the inside rate.
- 78 -
-------
Approximately one quarter of the cities base the minimum
charge directly on the size of the water meter. Greensboro's
minimum monthly charge which varies from $.85 for a five-eighths
inch meter to $95.55 for an eight inch meter indicates a typical
schedule of rates.
Most of the cities charge a connection fee that depends on
one or more of these variables: (1) the size of the pipe;
(2) the condition of the street; and (3) the location of the
customer. The highest rates are charged to customers who are
located on paved streets outside the city and who require a large
sewer pipe. A paved street adds from 20 to 100 percent to the
connection charge and a customer will pay from 30 to 80 percent
more if he is located outside the city. In Fayetteville, for
example, the connection charge for a four inch sewer is $110
inside the city and $150 outside the city. In Winston Salem
the charge for the same sized sewer is $115 if the street is
paved and $75 if not paved.
NORTH DAKOTA(35)
The information on the sewer service charges levied by
North Dakota municipalities is derived from a bulletin published
by the League of North Dakota Municipalities. The bulletin
describes the rates that existed March 31, 1963.
Nearly all of the municipalities with populations over
2,500 base the service charge on water use. Municipalities
under 2,500 utilize a flat monthly charge. The distribution
of charge methods by size of municipality is presented in
table 11.
The municipalities basing the levy on water volume all have
minimum charges. The minimum charge ranges from $.45 to $2.75
per month for residential customers and from $.50 to $3.25 for
commercial customers. For local units that use a percentage of
the water bill, the percentage ranges from 10 to 30 percent.
Nearly all of the municipalities that employ a flat levy
charge a higher rate for commercial customers than for resi-
dential customers. In many cases, the charge for a commercial
customer depends on the business of the customer. The charge
for residential, customers range from $.25 to $3 at a monthly
rate. The median charge is about $1. For commercial customers,
the range is from $.25 to $25 and the median rate is roughly
equal to $2. The variation in rates is greater among the
smaller municipalities but the average rate is lower.
- 79 -
-------
TABLE 11
1963 SEWERAGE CHARGES IN NORTH DAKOTA BY
NUMBER OF MUNICIPALITIES
Basis of Charge
Volume ofPercentage of
Population Flat Rate Water Use Water Bill Total
Over 2,500 2 10
1,501-2,500 10 3
1,001-1,500 18 4
500-1,000
Under 500
TOTAL 120 18 5 143
Source: Water and Sewerage Rates in North Dakota Cities and
"Tillages, as of March 1963, League of North Dakota
Municipalities,Special Bulletin No. 33, July 1963.
OHIO(36)
The summary of user charges in Ohio is based on a 1962
report published by the Ohio Department of Health. The report
includes material on over 340 municipalities.
The most common form of sewerage service charge in Ohio
is one based on water volume. Approximately 50 percent of the
local units base the user charge on the volume of water used.
Most of these municipalities have a schedule of rates that
declines as the quantity of water increases but approximately
10 percent of the local units charge a flat rate per cubic
foot or 1,000 gallons of water. The remaining 50 percent of
the municipalities are almost evenly divided between a flat
charge and a levy based on the water bill. Of the municipalities
levying a flat amount per month or quarter, two-thirds charge
the same amount to all customers, and one-third have a rate
schedule that differentiates among various types of property
(e.g. schools, apartments, retail stores, etc.). The following
table illustrates the number of municipalities employing each
charge method.
The municipalities that base the charge on the water bill
indicate a wider variation in the percentage used than do the
municipalities in most other States. The range in percentages
- 80 -
-------
is from 15 to 200 percent and the median is between 60 and
70 percent. For the municipalities that charge a flat rate
per unit of volume, a common charge is $.225 per cubic foot.
TABLE 12
1962 SEWERAGE CHARGES IN OHIO
BY NUMBER OF MUNICIPALITIES
Basis for Charge .
Volume ofPercentage of
Population Flat Rate Water Used Water Bill Total
Over 100,000 7 18
10,001-100,000 7 52 28 87
5,001-10,000 6 31 15 52
2,501-5,000 14 26 18 58
1,000-2,500 40 49 20 109
Under 1,000 1£ 12 _5_ 53
TOTAL 83 177 87 347
Source: Status of Sewer Rental in Ohio, Ohio Department of
Health, May 1962.
All of the municipalities have a minimum or flat charge. On a
monthly basis this ranges from $.13 to $5. The median is between $1
and $1.50.
The primary purpose of the recently created Ohio Water Development
Authority is to aid in financing facilities to control water pollution.
The Authority has the power to acquire, construct, maintain, and operate
water pollution control facilities and make them available to private
industries and municipalities. These facilities are to be financed
through revenue bonds issued by the Authority. In November 1968, a
$120 million bond issue was passed for water pollution control and
water development (the allocation of funds is to be made by the Assembly).
Revenues used to pay debt service charges and operation costs are to be
based on contracts between the Authority and the participating munici-
palities and industries.
OREGON(37)
The material for Oregon is taken from a survey conducted
by the Bureau of Municipal Research and Service, University
- 81 -
-------
of Oregon, in cooperation with the League of Oregon Cities.
The survey included 133 cities and 28 sanitary districts and
most of the information was collected for the year 1964.
Oregon utilizes charges, special assessments, and property
tax proceeds to meet the costs of sewers. Charges are used
chiefly to meet the costs of treatment plants and to maintain
the system. Special assessments are used in financing sewer
laterals and the property tax proceeds are often used to retire
bonds which were issued to provide construction funds.
Sewerage charges came into existence over 30 years ago in
Oregon to help meet the construction and operation and mainte-
nance costs of sewage treatment plants. Periodic surveys have
indicated a growth in the use of municipal charges. There were
13 cities that used a charge in 1942, 102 cities by 1957, and
currently 127 cities and 25 sanitary districts employ a service
charge. There are two cities with populations over 5,000 that
do not utilize charges. In many municipalities, one does not,
in fact, have to use the sewer to be subject to the charge.
In 44 of the cities, all with access to the sewer system are
charged, and in 61 of the cities all water users are charged.
In most instances, however, water users and those with access
to the sewer system are connected to the system.
Most of the municipalities have separate charge schedules
for residential and commercial customers. Thirty-nine
municipalities used the same schedule for two types of customers
and 88 used separate schedules. Some of the municipalities
also levy a special surcharge on industrial waste that is above
normal strength. For example, Salem's charge is based on volume,
suspended solids, and biochemical oxygen demand.
Over 90 percent of the municipalities employ a flat charge
for residential customers. For commercial accounts, flat
charges are the commonly used basis, but water use, percent of
water bill and type of business are also extensively used. The
table shows the distribution of commercial sewer charges by size
of municipality and sanitation district, the table also indi-
cates the number of local units employing a special surcharge
on industrial sewage of greater than normal strength.
As is true of most States, the larger municipalities tend
to use the volume of water and a percentage of the water bill as
the basis for a sewerage charge, and small municipalities base
the charge on a flat rate. The table also indicates that the
large municipalities utilize a special surcharge on industrial
waste more than small local units.
- 82 -
-------
TABLE 13
1964 COMMERCIAL SEWER CHARGES IN OREGON BY NUMBER OF MUNICIPALITIES
Population
Over 100,000
25,001 - 100,000
10,001 - 25,000
5,001 - 10,000
2,501 - 5,000
1,001 - 2,500
501 - 1,000
Under 500
Total Cities
Basis
Volume Number
Flat of Water Percent of of
Rate Used Water Bill Fixtures
4
2
4
13
13
8
44
Sanitary Districts* 7
*Many sanitary districts did
Source : Sewage
Policy
4
3
7
3
2
1
20
1
not
System Financing
and Service
1
3
2
5
5
1
17
indicate
1
3
2
2
1
8
1
a charge for
and Service Practices
Practices in
Oregon Cities
for Charge
Special Surcharge
Type for
of Industrial
Business Other Total Sewage
1
3
7
9
1
21
1
1
4
11
11
2 20
1 30
2 28
10
5 115
10
1
3
1
1
1
7
2
commercial units .
: A Survey of
and Sanitary
Sewage Rates ,
Financing
Districts, Bureau of
Municipal Research and Service, University of Oregon in cooperation with League of
Oregon Cities, Information Bulletin No. 155, 1960.
-------
All municipalities employing a charge have a minimum for
residences. This charge ranges from $.25 to $5 per month. The
minimum charge has increased over time. The median charge was
$.75 in 1952, $1 in 1967 and rose to $1.75 in 1964.
Most cities charge a connection and/or a permit fee when
the sewer connection is authorized. The permit fee is used to
meet the cost of inspection. The connection charge is often
used to offset the cost of the connection to the city. Over
70 cities and 11 sanitary districts charge a connection fee.
The connection fee for cities ranges from under $20 to over
$400, and the median is a little less than $100 for cities
and approximately $250 for sanitary districts.
The revenue from sewerage charges is substantial in most
local units. Portland obtained over $2 million and Eugene and
Salem each received over $500,000 in 1964. Many of the
municipalities in the 10,000-25,000 range of population obtained
over $100,000. In per capita terms the high was the $46.65
obtained in Cannon Beach, and over 26 cities received more
than $10, The per capita yield was between five and six dollars
for most of the population groups in the table. Much of this
revenue goes toward retiring bonds which were issued to obtain
funds for the construction of the sewers and sewage treatment
plants. In 1964 approximately 44 percent of the funds used
for debt service funds came from sewerage charges. Debt service
charges will be at a high level over a period of years because
over 45 cities issued bonds for sewers and treatment plants
in the 1959-64 period.
SOUTH DAKOTA(38)
The information on South Dakota is drawn from reports
publiished by the University of South Dakota and the South
Dakota Department of Health, in cooperation with the South
Dakota Municipal League. The most recent report is based on a
survey conducted in 1967. However, this report does not include
any information on the revenue raised by service charges for
cities under 500 population and these data are based on a
1964 survey.
Approximately one-third of the municipalities in the State
do not have any sewerage service charges. Although most of these
municipalities have populations of less than 500, some large
cities including Aberdeen and Rapid City, have no sewage service
charges. Nearly all of the first class cities (population
exceeds 5,000) base the user charge on a percentage of the water
- 84 -
-------
bill but the most commonly used charge in South Dakota is the
flat monthly charge. Approximately one-sixth of the municipal-
ities employing a flat charge vary the charge by type of
customer. For example. Lake Norden charges residences $1 and a
creamery at a rate of $90 per month. Some of the municipalities
that levy a flat charge on residential customers base the charge
for commercial and industrial customers on water use. The
following table illustrates the type of charges employed by
South Dakota municipalities.
TABLE 14
1967 SEWERAGE CHARGES IN SOUTH DAKOTA BY NUMBER OF MUNICIPALITIES
Basis for Charge
Volume of Percentage of
Population Flat Rate Water Used Water Bill Total
5,000 and over 116 8
500 - 4,999 34 57 46
Under 500 15 _1 16
TOTAL 50 7 13 70
Source: Wastewater Facilities in South Dakota Municipalities,
Statewide EducationalServices,The University of
South Dakota, in cooperation with the Department of
Health. Report No 767, August 1967.
For the first class cities that base the charge on a
percentage of the water bill, the percentage ranges from 35
percent to 100 percent of the average winter bill. Many of
the muncipalities charging a flat rate base the charge on
a quarter rather than a month. On a monthly basis, however,
the charge ranges from $.33 to nearly $4. Most of the
charges fall between $.50 and $1 per month.
The first class cities that employ user charges received
between $33,000 and $78,000 in 1966.S/ In per capita terms,
most of the cities obtained approximately $7. In nearly all
cases, the municipalities believed that the yield was adequate
i/
Sioux Falls did not begin its system of charges until
after 1966.
- 85 -
-------
in terms of meeting costs. For municipalities with population
between 500 and 5000, the per capita yield varies greatly.
Some municipalities obtain only about $1 per person. At
the opposite end of the scale Mission receives $20. Wall
receives more than $13 and Moonsocket more than $12. The
median yield is approximately $5.
The per capita yield for municipalities with populations
below 500 ranges from $2 to over $20 with the median about
$4. The municipalities that receive a high yield judge it
to be adequate to cover costs but most of the local units
receiving a low yield view the revenue as inadequate.
Some of the municipalities have issued revenue bonds
to provide construction funds. These bonds are retired
through the revenue obtained from the service charges.
This method of financing sewerage systems has been used
more by the smaller municipalities than by the larger cities.
Although Sioux Falls expects to cover its construction costs
with the newly instituted system of charges, most of the first
class cities expect to rely on assessment and general obligation
bonds.
TENNESSEE(34)
The description of sewerage charges in Tennessee is based on
a 1967 report by the Tennessee State Planning Commission.
The report covers utility districts -as well as munici-
palities. It is estimated that there are 180 utility districts
in the State. They range in size from those serving 60 people
to those serving many thousands. Most of them, however, do not
appear to levy sewerage charges.
The most commonly used basis for service charges in
Tennessee municipalities is a percentage of the water bill.
Approximately 60 percent of the local units use this charge
method. The next most popular method is a flat charge. Over
20 percent of the municipalities employ this form of user charge
and the remainder base the charge on the volume of water. The
following table illustrates the use of each method by size of the
local unit.
The range'in percentages for municipalities that charge on
the basis of the water bill is from 10 to 100 percent. The
median percentage is 50 percent. In general, large municipal-
ities charge a higher percentage than do small local units.
- 86 -
-------
Gatllnburg has an unusual charge scheme in that the percentage
applied to the water bill rises as the amount of the bill
increases.
ranges
For municipalities employing a flat monthly charge, the levy
s from $.50 to $5. The median charge is approximately $2.
TABLE 15
1967 SEWERAGE CHARGES IN TENNESSEE
BY NUMBER OF LOCAL UNITS
Charge Basis
Population
Over 40,000
15,001-40,000
10,001-15,000
5,001 -10,000
3,001 - 5,000
1,000 - 3,000
Under 1,000
Utility Districts*
Total
Flat Rate
1
1
1
3
8
9
5
28
Volume of
Water Used
2
4
1
5
3
5
3
3
26
Percentage of
Water Bill
6
10
14
14
26
6
4
80
Total
2
11
12
20
20
39
18
12
134
* These vary in size
Source: Sanitary Services in Tennessee 1967, Tennessee State Planning
Commission, Nashville, November 1967.
The municipalities basing the charge on volume of water all
have minimum charges and a schedule of rates that declines as the
quantity of water increases. The minimum charge is between
$1 and $2 in most cases.
- 87 -
-------
The majority of the Tennessee municipalities levy a tap or
connection fee but many of the smaller municipalities appear
to provide this service free of charge. The Nashville-Dawson
County Metropolitan Government charges from $3 for a four inch
sewer to $1,000 for a 12 inch sewer, but nearly all of the
municipalities charge $100 or less.
The revenue yield from user charges is given for some
of the municipalities in the Tennessee report. Several other
local units show a combined water-sewerage figure. Over
two-thirds of the local units obtain a per-capita yield of
between $8 and $13. There are, however, some local units that
are well outside this range, A few municipalities obtain less
than $1 and Gatlinburg obtains over $50 per person.
TEXAS(40)
The information on user charges in Texas is based on a 1967
report published by the Texas Municipal League. The League
report summarizes data obtained from a survey of 357
municipalities.
Many of the Texas municipalities charge commercial and
industrial customers according to a formula that is different
from the formula used for residential customers. For
residential customers 52 percent of the municipalaties employ
a flat rate. Another 40 percent base the levy on the number
of fixtures and less than eight percent charge in relation to
water use. Flat rates and charges in relation to the number
of fixtures are less commonly used, and charges based on water
use are more commonly used in assessing commercial and industrial
customers. Thirty-nine percent of the municipalities base
commercial charges on the number of fixtures. Twenty four per-
cent charge in relation to water use, 22 percent levy flat rates
and another 12 percent levy a flat rate that varies with the
type of business. The remaining three percent of the local
units charge on the basis of number of taps or number of
employees. The following table presents the number of municipal-
ities using each form of charge for commercial and residential
customers.
The range in flat monthly charges for residential customers
is from $.50 in Junction to $3.15 in Port Neeches. The median
charge for the 184 municipalities is $1.50 per month. Nearly
one-half of these municipalities service customers who reside
outside the city. The ratio of inside to outside charges varies
from one municipality to another. Many municipalities levy
- 88 -
-------
TABLE 16
1967 SEWERAGE CHARGES IN TEXAS BY NUMBER OF MUNICIPALITIES
Residential
Population
Over 25,000
10,001 - 25,000
5,000 - 10,000
Under 5,000
Total
Population
Over 25,000
10,001 - 25,000
5,000 - 10,000
Under 5,000
Total
Flat
Rate
14
32
28
110
184
Number of
Fixtures
17
24
41
60
142
Basis
Water
Volume
11
7
1
_2
21
for the Charge
Percentage of
Water Bill Other
1
1 1
!_ _
3 1
Total
43
63
72
173
351
Commercial*
Flat
Rate
1
6
13
55
75
immercia]
Service
Number of
Fixtures
13
23
38
56
130
L schedule
Basis
Water
Volume
20
18
12
13
63
for the Charge
Percentage of
Water Bill Other
6 2
7 7
3 3
3 34
19 46
Total
42
61
69
161
333
or unknown - 18 cities
in Texas Cities , Texas Municipal League ,
Austin
December 1967, P.Viii.
- 89 -
339-679 O - 69 - T
-------
the same charge against both inside and outside customers and
the outside rate is less than double the inside rate for nearly
all municipalities. One exception is El Paso, which charges
$1.50 to inside customers and $6.50 to customers residing outside
the city. The monthly rates levied against commercial customers
range from $.25 in Fayettsville to $10 in Windcrest. The median
charge is $2.50 and the most common charge is $1.50. The range
is greatest for the municipalities under 5,000 population but
the median for this category is the same as the median for all
municipalities.
In addition to the 75 municipalities that charge the same
rate to all commercial customers, there are 41 local units
that vary the charge by the type of commercial customer. Most
of these municipalities are in the smallest population category.
The local units generally have from three to seven categories
of establishments. The charges do not generally exceed $10
a month for any category except schools and hospitals. Charges
for these two categories range up to $25 and $30 in some
municipalities.
All of the municipalities that base the charge to
residential customers on water use have a minimum levy. The
minimum ranges from $.30 to $2 a month. The variable charge
takes one of three forms. The most common form is a rate
schedule where the rate for additional units of water decreases
as the quantity of water increases. A second form is a
percentage of the water bill. The third form of charge is a
combined water and sewerage charge. This third form of charge
is used in Austin but is not common. The three municipalities
that charge on the basis of the water bill use three different
percentages (25, 50, and 75 percent).
Most of the local units that charge commercial and
industrial establishments according to water use also have
minimum charges. A few of the large municipalities base
the charge on the size of the water meter. In Fort Worth the
minimum monthly charge ranges from $.90 for a five-eighths
or three-fourths inch meter to $106 for a 10 inch meter.
The precentage used by municipalities that base the charge
on the Water bill ranges from 5 to 80 percent but nearly all
the local units use 40 percent or less.
The charge by municipalities that base the levy on water
use ranges from $.50 to $4.05 for 5,000 gallons. The median
charge is between $1.50 and $2.
- 90 -
-------
All of the municipalities that base residential and
commercial charges on the number of fixtures have a minimum
monthly charge. The minimum charge for residential customers
ranges from $.10 for one fixture in Coleman to $3 for five
fixtures in Commerce. The commercial minimum ranges from
$.10 to $4. The rate ranges between $.10 and $1 for each
fixture above the number included in the minimum. For four
fixtures, the .charge ranges from $.50 to $4.75 to residential
customers and $.55 to $6 for commercial establishments. The
residential median is approximately $1.50 and the commercial
median $2.
Two municipalities charge commercial customers according
to the number of employees and three charge on the basis of
the number of taps. Commerce charges $,30 for each two
employees, Sulphur Springs charges $.50 for each tap over two
and Hughes Springs charges $3 for each tap.
A few of the municipalities have a special charge for
industries. The charge varies by type of industry rather
than by any measure of the strength of the effluent. For
example, Waco charges a higher percentage of the water bill
to packing, poultry, and milk plants than to laundries and
bottling works. Most municipalities do have ordinances that
regulate the wastes that can be discharged into the sewer
system. In addition to regulations on specific wastes, some
municipalities limit the concentration of grease, suspended
solids, and biochemical oxygen demand. Fifty four or 15
percent of the local units require pretreatment of industrial
wastes.
Most of the municipalities have fees for permits and
sewer connections. Fifty-two local units charge a flat
plumbing permit fee and 185 levy a fee that depends on the
number of fixtures. The flat fees range from $.50 to $20
and the median is between $2.50 and $4. In municipalities
where the number of fixtures enter into the fee, the charge
ranges from $,75 to $13 for four fixtures and $1.35 to $24
for 12 fixtures. The tap fee is based on the actual cost
in some municipalities. The flat rate charges range from
$0 to $85.
The reported revenue obtained from user charges ranged
from over $6 million for Dallas to less than $1,000 in some
municipalities. In over 90 percent of the municipalities,
the revenue from user charges was greater than the operating
and maintenance costs of collection and treatment. In Dallas,
- 91 -
-------
the revenue was three times the costs and in some municipal-
ities the ratio of revenue to operating and maintenance costs
was greater than two to one. The per capita yield ranged
from less than $1 to over $30 but most of the municipalities
obtained between $5 and $8 per person.
The Texas Report includes the monthly charge levied
by 36 municipalities on four dates: 1939, 1950, 1960,1967.
The charge is for 5,000 gallons per month. The high, low
and median rates are shown for each year in the following
table.
TABLE 17
MONTHLY SEWER SERVICE CHARGES BY YEARS IN
TEXAS MUNICIPALITIES
Year
1939
1.50
.50
0
0
1950
1.50
1.00
0
1.00
1960
$2.00
1.0.0
0
1.00
1967
$2.25
1.25
.68
1.00
High
Median
Low
Most common charge
Source: Sewer Service in Texas Cities, Texas Municipal League,
Austin, December 1967, Page Vi and Vii.
The table shows that rates have moved steadily upwards. In
1939 only three local units charged more than $1 and 13 had
no charge. In 1967 all levied a charge and over twenty charged
more than $1. The table does not indicate, however, whether
rates have risen as fast as costs.
VIRGINIA(41)
The material on Virginia is taken from a report by the
Virginia Municipal League. The information in the report is
based on a survey of towns conducted by the League in 1963.
The most commonly used basis for sewer service charges In
Virginia towns is a percentage of the water bill. For the 50
towns surveyed, 19 used a percentage of the water bill, 11 used
- 92 -
-------
a flat monthly charge, 8 used water volume, 1 charged in relation
to the number of fixtures, and 11 had no sewer service charge.
For municipalities that charge in relation to the water
bill, the percentage ranges from 20 to 100 percent, and the
median is 50 percent. Some of these municipalities also levy a
minimum charge. The minimum charge does not exceed $2 per
month for any residential customer inside the municipality.
The range for flat rates is $.50 to $2 and the median rate
is $1.25. The towns basing the charge on water volume are
almost evenly divided between charging a fixed rate per thousand
gallons and a declining rate. A typical fixed charge is $.15
per thousand gallons.
The Virginia towns also charge a sewer connection fee. The
charge varies from $5 if labor and material are supplied by the
customer or $15 if supplied by the town, to $300. The median
fee is in the $75-$100 range.
Some of the municipalities levy a higher connection fee
and service charge on customers outside the city. This
additional charge averages about 33 percent in most cases.
The League study did not include the larger municipalities
in its survey. However, some information on these larger
municipalities can be gleamed from other sources. For example,
Richmond, Roanoke, Harrisonburg, Martinsville, Virginia Beach,
and Wythevilleuse the volume of water or water bill as the basis
for their charges. Alexandria, Pulaski, and Winchester use a
flat monthly charge,
WASHINGTON
The material on sewerage charges in Washington is taken
from a 1964 bulletin published by the University of Washington.
The bulletin was sponsored by the Association of Washington
Cities in cooperation with the Bureau of Governmental Research
and Services.
In general, municipalities in Washington finance lateral
extensions through local improvement districts, major trunk
lines by a general tax levy or a general obligation bond issue,
and treatment and disposal facilities by revenue bonds. The
operation and maintenance costs are covered primarily by service
and connection charges. This financing system is an attempt
to connect local charges with expenditures that yield primarily
- 93 -
-------
local benefits, and general charges with the benefits that are
essentially general in nature. In keeping with this philosophy,
municipalities are allowed to charge a lower rate in areas where
the system has been fully amortized than in areas where
extensions are being made.
Many of the large municipalities base the user charge on
volume of water but the predominant method employed in Washington
is a flat monthly charge. Nearly all of the municipalities vary
the charge by the number of units in the dwelling. In some
cases, the rate per unit is constant and in others it declines
after the first unit. Approximately six of the municipalities
charge a flat rate to single family dwellings but shift to
volume of water for dwellings with multiple units. The monthly
charge for a single family residence within the city ranges from
$.75 to $5, but nearly all of the municipalities charge between
$1 and $3.
The municipalities that charge a flat rate to commercial
and industrial customers generally have a detailed schedule of
rates. Richland for example has 12 classifications. In
addition, some categories like restaurants are further classified
according to the number of seats. The monthly charge ranges
from $2 for churches, clubs and garages, to $25 for some
hotels and motels. The highest rate in most municipalities is
charged to schools. In a small number of local units, the
charge is based on average daily attendance.
The municipalities that charge in relation to water volume
have a minimum charge and a rate schedule that declines with the
quantity of water used. The minimum is approximately $200
for most municipalities. For local units that employ a
percentage of the water as the method of charging users, the
percentage ranges from 35 percent to 80 percent and the median
is 75 percent. Spokane and Bellingham base their charge on
the size of the water meter. In Bellingham the monthly charge
ranges from $1.50 for a three-fourths inch meter to $48 for
a 24 inch meter. The following table indicates the number
of municipalities employing each charge method, by size of
municipality.
Nearly all of the local units charge customers residing
outside the municipality more than the inside customers. The
amount of the additional levy varies among municipalities but
the most common formula employed is a 50 percent surcharge on
outside customers.
Municipalities in Washington tend to employ variable
connection charges more than municipalities in other States.
- 94 -
-------
Seattle and many other local units make a charge that is equal
to the actual cost of the connection and other municipalities
charge in relation to number of front feet. Takoma, for
example, charges $4.50 per front feet (minimum charge $225).
TABLE 18
1964 Sewerage Charges in Washington by
Number of Municipalities
Basis of Charge
——Size of
Volume of Percentage of Water
Population Flat Rate Water Use Water Bill Meter Total
Over 100,000 2 13
10,001-100,000 9 33 1 16
5,001- 10,000 31 4
2,501- 5,000 833 14
1,000- 2,500 17 17
Under 1,000 12 12
Total 49 9 6 2 66
SOURCE: David W. Stevens and Richard A Cornils, Sewer Rates in
Washington Cities, Association of Washington Cities
in Cooperation with the Bureau of Government Research
and Services, Univ., of Wash., Seattle, Inf., Bui.
No. 263, November 1964.
WISCONSIN
The description of user charges in Wisconsin is based on
a summary of sewer service charges published by the Wisconsin
Department of Natural Resources, dated July 1963.
Over two-thirds of the municipalities in Wisconsin base
the charge on a percentage of the water bill. For the
municipalities with a population that exceed 1,000, over 80 percent
charge in relation to the water bill. Although the percentage
ranges from 25 percent to 300 percent, most of the municipal-
ities are concentrated around 100 percent. A large majority
of the municipalities base the charge on the average of the
winter bills or make allowance for sprinkling.
- 95 -
-------
Approximately 25 percent of the municipalities base the
user charge on a flat rate. These local units tend to vary
the residential rate by the number of housing units in a
dwelling. For example, Brookfield charges a monthly rate
(most Wisconsin municipalities charge by the quarter) of
$4 for a single family and $4 for each additional unit. The
rates range from less than $1 to nearly $5 at a monthly rate.
The median charge is approximately $3 for a single dwelling.
Many municipalities employing a flat charge have a very
detailed schedule of rates for commercial customers. The
community of Osceola has nine categories and rates range
from $.50 per month for churches to $25 for hotel and
$35 for a school. A typical municipality has five categories
and the rates range from $3 to $10. The highest charge is
generally assessed against a school or hospital. In some
municipalities this charge exceeds $100 per month. Another
variation of the fixed charge is found in Wisconsin. In
some municipalities the commercial charge is based on both
the type of establishment and the number of employees. Nearly
all the municipalities employ either the flat rate or percentage
of the water bill methods. However, a few municipalities base
the charge on water volume, size of water meter and number
of connections. One variation is a minimum charge based
on the size of the water meter combined with a variable charge
which is related to the volume of water used. For example,
Baldwin's minimum ranges from $1.67 (monthly rate) for
a 5/8" meter to $28.33 for a 4" meter. The variable charge
is from $.10 to $.45 per thousand gallons.
The following table indicates the number of municipal-
ities employing each type of charge. The table is based on
the charge made to residential customers. The charge to
commercial customers is on the same basis as for residential
users in most municipalities. The major difference between
commercial and residential users is that the monthly charges
are higher and there are more rate categories for commercial
customers.
Approximately one-third of the Wisconsin municipalities
have special charges for industrial wastes. A few of the
local units employ general charges but most municipalities
tailor the charge to the specific industry that is connected
to the municipal system. The general formulas take the
form of a charge per employee as in Maxomanie, a charge per
pound of biochemical oxygen demand, as in Fontana, or a charge
base'd on an effluent of greater than normal strength as in
Madison. In municipalities where the charge is tailored to
an industry, the levy may be a flat rate, or it may be based on
- 96 -
-------
water use, number of employees, or output. In Broadhead,
cheese factories are assessed $100, cheese packing plants
$50, and industries that discharge sanitary effluents only
$25. Bertin charges a tanning company by the volume of water
used, a brewing company by the number of barrels of beer
produced, and a canning company a flat rate plus a percentage
of the water bill.
Virtually no information on revenue is given in the
Wisconsin summary. However, since the most common charge
method is a percentage of the water bill and since the
average percentage is higher than for most cities, it is
likely that the per capita revenue from sewer charges is
higher in Wisconsin than in most other states.
TABLE 19
1963 SEWERAGE CHARGES IN WISCONSIN BY
NUMBER OF MUNICIPALITIES
Population
Over 100,000
10,001 - 100,000
5,001 - 10,000
2,501 - 5,000
1,001 - 2,500
Under 1,000
Total
Flat Rate
1
3
11
27
42
Basis of Charge
Percentage of
Water Bill
1
8
14
22
41
30
116
Other
2
1
1
6
11
Total
1
11
15
26
58
58
169
Source: Summary of_ Sewer Service Charge in Wisconsin, July 1963,
Wisconsin Department of Natural Resources, Division of
Environmental Projection, 1963.
- 97 -
-------
REFERENCES CITED
1. Break, George F., Intergovernmental Fiscal Relations in the
United States. The Brookings Institution, Washington,B.C.,
1967.
2. Maxwell, James A., Financing State and Local Governments,
The Brookings Institution, Washington, B.C., 1965.
3. Revenue Sharing and its Alternatives: What Future Fiscal
Federalism?Prepared for the Subcommittee on Fiscal Policy
of the Joint Economic Committee, Congress of the United
States, 90th Congress, 1st Session, Washington, B.C.,
July 1967.
4. Harris, C. Lowell (ed.) Federal-State-Local Fiscal
Relationships. Tax Insitute of America, Princeton,
New Jersey, 1968.
5. Unshackling Local Government, Revised ed. , 24th Report by
the Committee on Government Operation, House Report 1270,
90th Congress, 2nd Session, Washington, B.C., April 1968.
6. Johnson, Lyndon B., Conservation and Water Manage-
ment - Message f rom tHe President of the United°St~ates,
House Document No. 273, 90th Congress, 2nd Session,
Washington, B.C., March 1968.
7. Guide Lines for Drafting a Municipal Ordinance on In-
dustrial-Waste Regulations and Surcharges,American
Public Works Association, Special Report No. 23,
Chicago, 1959.
8. Imbelli, Charles Pressman, William B., Radiloff, Harold.
"The Industrial Wastes Control Program in New York City."
Paper - New York State Water Pollution Control Association,
January 1966.
9. Smalla, R. Bean, "One Way to Control Wastes,"
Water and Wastes Engineering, Vol. 4, No. 3, 1967.
10. Bubbis, N.S., "Industrial Waste Control in Metropolitan
Winnipeg," Journal of Water Pollution Control Federation,
Nov. 1963.
11. Symons, James M., "Rate Formulas for Industrial Wastes,"
Water and Sewage Works, Becember 1954.
- 98 -
-------
12. Taylor, Dean M., "Industrial Waste Ordinances - Parts I
and II," Water Sewage Works, August and October 1956.
13. Fisher, C. E., "Cincinnati Industry Reduces Sewer Surcharges,"
Sewage and Industrial Wastes, Volume 28, No. 9, 1956.
14. Division of Water Pollution Control, Information,
Ordinances, Rules and Regulations of the Metropolitan
Sewage Disposal System^Cincinnati, January 21. 1953-
Juhe 1, 1962,
15. Division of Water Pollution Control, Reports on Water
Pollution Control, 1964 through 1968.City of Cincinnati.
16. Bureau of the Census. City Government Finances in 1965-66.
U.S. Department of Commerce, Washington, D.C., July 1967.
17. Federal Water Pollution Control Administration, Water and
Sewer Bond Sales in the United States, Jan.-Dec. 1967"^
Department of the Interior, Washington, D. C.
18. Federal Water Pollution Control Administration, The Cost of
Clean Water, U. S. Department of the Interior, Washington,
D. C., January 1968.
19. Moak, Lennox L., Sewer Service Charges, Municipal Finance
Officers Association of the United States and Canada,
Chicago, 1962.
20. U, S. Congress, Senate, Committee on Public Works,
Hearings Before a Special Subcommittee on Air and Water
Pollution, Part I,, 90th Congress, 2nd Session,
Washington, D. C., March 27, 1968.
21. Industrial Waste Disposal Charges in Cities Over 5,000
PopulationTAmerican Public Works Association, Special
Report No. 18, Chicago, 1955.
22. Sewage Service Charges in Cities over 5,000, American
Public Works Association, Special Report No. 18,
Chicago 1955.
23. A Summary of Municipal Water and Sewer Rates, State of
Alabama Water Improvement Commission, Montgomery,1961.
24. Sewer Rates: Municipal Utility Rate Survey, Florida
League of Municipalities, Jacksonville, 1967.
- 99 -
-------
25. A Study of Municipal Water and Sewer Utility Rates and
Practices in Georgia^Georgia Municipal Association,
Atlanta, 1965.
26. Idaho Water and Sewer Rates, Idaho Municipal League,
January 1966.
27. Sewer Rental Ordinances in Iowa Cities and Towns,Iowa
State Department of Health, Des Moines, 1959.
28. Sewage Service Charges in Kansas Cities, League of Kansas
Municipalities, Topeka, June 1968.
29. Sewer Service Charges and Related Data in Michigan
Municipalitie's^ Michigan Municipal League, Information
Bulletin No. 91, Ann Arbor, October 1959.
30. Information for Municipal Officials: Sewer Service
Charges (Sewer Rental's) in Minnesota Municipalities,
League of Minnesota Municipalities and Municipal
Reference Bureau, Minneapolis, December 1965.
31.
Municipal - Residential Sewer Rates, Mississippi
State Board of Health, Jackson, 1965.
32. Wilke, William L., Survey of Rates Charged for Electricity,
Water, Gas, and Sewerage.The League of Nebraska
Municipalities in Cooperation with the Department of
Economics, University of Nebraska, December 1964.
33. Sewer Service Charges and Sewer Charge Billing Procedures
in New York State Cities and Villages, New York State
Conference of Mayors and Other Municipal Officers, Report
No. 66-13, Albany, 1966.
34. Water and Sewer Service Charges in North Carolina
Municipalities Over 10.000 Population as of September 1964,
North Carolina League of Municipalities, Report No. 100,
Raleigh, September 1964.
35. Water and Sewerage Rates in North Dakota Cities and
Villages, as of March 1963": League of North Dakota
Municipalities, Special Bulletin No. 33, Bismarck,
July 1963.
36. Status of Sewer Rental in Ohio, Ohio Department of
Health, May
- 100 -
-------
37. Sewage System Financing and Service Practices: A
Survey- of Sewerage Rates, Financing Policies and Service
Practices in Oregon Cities and Sanitary Districts^Bureau
of Municipal Research and Service, University or Oregon
in Cooperation with the League of Oregon Cities,
Information Bulletin No. 155, Eugene, 1960.
38. Wastewater Facilities in South Dakota. Municipalities,
Statewide Education Services, the University of South
Dakota, in Cooperation with the South Dakota Municipal
League and the State Department of Health, Report No.767,
Vermillion, 1967. Sewer Facilities Data in South Dakota
Cities and Towns, The Extension Division, University of
South Dakota,in Cooperation with the South Dakota Municipal
League, Vermillion, 1965.
39. Sanitary Services in Tennessee 1967, Tennessee State
Planning Commission, Nashville, November 1967.
40. Sewer Service in Texas Cities, Texas Municipal League,
Austin, December 1967.
41. Sewer Charges in Virginia Towns, Virginia Municipal
League, Richmond, 1963.
42. Stevens, David W. , and Cornils, Richard A., Sewer Rates in
Washington Cities. Association of Washington Cities in
Cooperation with the Bureau of Government Research and
Services, University of Washington, Information Bulletin
No. 263, Seattle, November, 1964.
43. Summary of Sewer Service Charges in Wisconsin, July 1963.
Wisconsin Department of Natural Resources, Division of
Environmental Projection, Madison, July 1963.
44. Due, John F. Government Finance: Economics of the Public
Sector, Fourth Edition. Richard D. Irwin, 1968,
Homewood, Illinois.
45. Berber, Bernard, Modern Public Finance, Homewood,
Illinois: Richard D. Irwin, 1907.
46. St. Clair, G. P. "Suggested Approaches to the Problems
of Taxation." Paper supplied by U. S. Department of
Public Roads, Proceedings, 27th Annual Meeting of the
Highway Rearch Board, Washington, 1947.
47. Joint Report of Committees of the American Society of
Civil Engineers, Section of Municipal Law of the
- 101 -
-------
American Bar Association and Representatives of Six
Other Groups, "Fundamental Considerations in Rates
and Rate Structures for Water and Sewage." Ohio
State Law Journal, Spring, 1961.
48. Smith, Robert, Preliminary Design and Simulation of
Conventional Wastewater Renovation Systems Using the
the Digital Computer,Federal Water Pollution Control
Administration, U. S. Department of the Interior,
Cincinnati, 1968.
49. Frankel, R. J. Economic Evaluation of Water Quality,
Sanitary Engineering Research Laboratory, University
of California, Berkely, SERLR Report No. 653, 1965.
50. American Public Works Association, Problems of Combined
Sewer Facilities and Overflows, Prepared for the
Federal Water Pollution Control Administration, U, S.
Department of the Interior, December, 1967.
51. ABT Associates, Incentives to Industry for Water Pollution
Control: Policy Considerations,Prepared for the Federal
Water Pollution Control Administration, U. S. Department
of the Interior, 1967.
52. Walter, C. Richard. "Determination of Charges and
Surcharges for Waste Treatment." Paper presented at
the 34th Annual Meeting of the New York Water Pollution
Control Association, New York City, January 1962.
53. Zettel, Richard M. "Objectives and Concepts of Highway
User Taxation," Highway User Taxation, Highway Research
Board Bulletin No. 92, Washington, D. C., 1954 Pp. 1-14.
54. Musgrave, R. A. The Theory of Public Finance, New York:
McGraw-Hill, 1959.
55. Newman, Herbert E., An Introduction to Public Finance,
John Wiley and Sons, New York, 1968.
56. Johnson, J. A. The Incidence of Government Revenue and
Expenditure Programs,Ontario Committee on Taxation,
Toronto, 1968.
57. Howarth, Don, The Federal Water Pollution Control Program:
A Case Study of"Two New England Towns,ABA Thesis
sponsored by the Harvard Water Program, Harvard University,
1968.
- 102 -
-------
58. Bureau of the Census, Census of Manfactures, 1963,
Vol. 1-3, U. S. Department of Commerce, Washington,
D. C., 1966,
59. Wolf, Jerome B. and Linaweaver, F. P. Jr., Report on The
Commercial Water Use Research Project, Environmental
Engineering Science, John Hopkins University, Baltimore,
June 1966.
60. Unpublished Material Supplied by Hittman, Associates,
Inc. Columbia, Maryland.
61. Unpublished Material Supplied by the Baltimore Department
of Assessment, Baltimore, Maryland.
62. Unpublished Material Supplied by FWPCA, Ohio Basin
Region, Cincinnati, Ohio.
63. U. S. Bureau of the Census, Annual Survey of Manufactures,
1964, Book Value of Fixed Assets and Rental Payments for
Buildings and Equipment,M64(AS)-6, U.^."Department
of Commerce, Washington, D. C., 1967.
64. U. S. Bureau of Census, Census of Business 1963,
Vol. 1-7, U. S. Department of Commerce, Washington,
D. C., 1966.
- 103 -
U. S. GOVERNMENT PRINTING OFFICE : 1969 O - 330-619
------- |