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using public money to subsidize industries that discharged
to grant funded POTWs. While our studies have shown that
many of the economic objectives have not been met, the
social objectives remain. Accordingly, it is appropriate
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to consider a series of alternatives to ICR as it now exists.
At this time I will ask everyone to turn their
3 attention to a document entitled "Preliminary Compilation
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M of Possible Study Alternatives" dated October 10, 1978,
£ II which vou should have copies of. The document presents 16
1
!2 alternatives, ranging from leaving ICR as it now is to out-
right elimination of ICR. These alternatives are not
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5 necessarilv mutually exclusive. That is, some of them could
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I be combined for concurrent use.
7. Since not all of you have had the time, in fact
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probably most of you have not had the time to look at these
alternatives, what we would like to do is adjourn the
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meeting for 20 or 30 minutes, give people time to read through
the alternatives, get some personal reaction, and sort of
• stretch your legs a bit, if people will take 20 or 30
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minutes to read this and then take statements or questions.
MR. PAI: If we could come back at eleven o'clock.
Those who want to make a statement, register with the lady
down there.
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- fShort recess)
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MR. PAI: Ladies and gentlemen, would you kindly
sit down and let's continue with the meeting.
MR. DONAHUE: If everybody could take a copy of
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MR. NIELSON: Could you explain some abbreviations?
MR. DONAHUE: I guess when you get involved in
this, you fall into the jargon habit. We have a glossary
of terms that we used that we stole from an EPA publication,
for those people who are not familiar with engineering and
accounting jargon that gets used and thrown around here.
We have several copies of the glossary of terms. I apolo-
gize, we-all apologize for falling into jargon.habits.
If we could come back together at eleven o'clock.
the alternatives, possible alternatives, Alan is going'
to go through them one at> a time. There are a lot of
subtleties in some of them, and some are not very subtle
like the first one. But one of the things we want to stress
is these are just a list of alternatives that we were
able to come up with among ourselves from a management
financial point of view, among people from EPA in Washington
and some of the regional offices, among some people from
our Advisory Group, including some industrial people, envir-
onmental people.
If anyone can propose additional alternatives or
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variations on these, or combinations of these, we would
be glad to hear from you later on in the meeting. This is
not intended to be a comprehensive list of alternatives.
I would like Alan to discuss the alternatives.
MR. BROWN: -As Ed told you, we tried to come up with
a. laundry list of everything we could possibly think of from
all different sources. What Z will try to do is go over
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means as we envision it, what some advantages are and what
x some disadvantages are. The list of advantages and disadvan-
i tages are by no means comprehensive. We just tried to put
down some very basic ideas to give people enough to think
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about and to be able to discuss the points.
For instance, on some of the disadvantages, you
will notice that a lot of times one of the things we talk about
<
§ is eliminate ZCR reveneus returned to the Federal and local
governments. Z guess some discussion of that is called for.
j We are not trying to quantify actually how much
is going to be lost to each local government or to the Fed-
eral Government, but we estimate that ZCR revenues, once
** this whole thing gets on line, are going to be between $1-2
billion, which is significantly lower than was estimated
earlier. Z think the public Works Committee or someone
estimated $4-1/2 to 7 billion a year. Now we estimate the
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total ICR revenues of between :$1 billion and $2 billion.
And that means the amount of money returned to the Federal
Government will be half a billion to a billion dollars a
T^ar. Over 30 years—excuse me—not a year.
That could have been a significant problem later on,
That is over 30 years.
The first alternative, and these things are not
ranked in-any order of preference or anything like that, we
are numbered so we can talk about them—the first one
and moat obvious alternative is just to abolish XCR, get rid
of it, not substituting for it, just throw it away.
Some of the advantages are that it would eliminate
i
complaints from grantees that we have heard that ICR is not
3 cost effective, it is difficult to monitor and enforce
and administer. It is going to eliminate complaints from
industry that ICR is really double taxationr and in some
cases adds an unfair economic burden based upon whatever
geographic area you are in. It is also going to eliminate
some inconsistent ICR charges that can be seen across the
country, based on the same type of treatment plan.
Some -0f the disadvantages, I remember one of the
criteria we talked about earlier, ICR was designed to put a
cap on construction of excess capacity, and one of the
disadvantages will be that without some control over design
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parameters allocated to industry, abolishing- ZCR nay
encourage seme grantees to plan and construct treatment works
that are larger than necessary.
Another disadvantage will be lost revenues.
Alternative No. 2 is to base the grant funding
for eligible project costs, and this includes industrial
capacity, on a sliding scale, funding current needs at 75
cost as grantees plan treatment works that are larger than
current needs indicate.
ICR would be computed the same way it is today
on current regulations.
* 11 Now when we talk about current needs, what we are
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.. talking about here is secondary, and if a state or local
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community decides that they want to build a tertiary or
advance treatment plant, then the federal portion would be
based only on the -cost of the secondary. Your grant funding
would go down proportionately. If you need a 10:BSD plant
for current needs and you build a 20 MGD plant to meet excess
capacity, your grant funding is going to be downbased on
some formula. That is the total project cost.
Some of the alvantages here would be to encourage
more front end planning, reducing excess capacity that you
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sometimes see designed and constructed. It is going to
encourage industry to participate in planning,in identifying
treatment works needs.
Some of the disadvantages are that it may not be
cost effective when you are designing treatment works for
large, rapidly growing areas and going to increase the total
share of cost for grantees building treatment works larger
than their current needs indicate.
Alternative No. 3 is very similar to Alternative
No. 2 and it is to base grant funding for eligible project
costs once again on a sliding scale.
But the only thing that would be federally funded
would be domestic needs. The industrial share of the treat-
ment works would be funded by the grantee.
This alternative differs from Alternative No. 2,
in that No. 2 we find industrial and other capacity based
on current needs. This Alternative No. 3 would eliminate
ICR because there would be no federal grant for industrial
share, and therefore there would be no ICR. The advantages
would be to eliminate grantee complaints that you have
heard before that it is not cost effective and difficult to
monitor. It would eliminate industry's complaints about
double taxation, it would eliminate the costs associated
with implementing and monitoring ICR systems and would
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encourage better planning.
The major disadvantage was, it is going to
increase local share of project costs which could be signifi-
cant in many cases. These costs could be added on and
passed through to industrial users and might exceed the total
ICR costs because there is going to be no federal funding
at all for industrial capacity.
§
0 Alternative No. 4 is to charge ICR only on treat-
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o ment works, and eliminating any charge on interceptor
(9
sewers.
1 The advantage here would be reduce administrative
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work grantees often have to go through now in attempting
to identifv and allocate costs to industries on specific
interceptor systems.
w The major disadvantage would be to reduce revenues,
No. 5 would be to base industry's share of the
federal grant on an incremental cost basis rather than
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proportional cost basis as is the case now. This means
if you have, to build a 10 MGD plant, and 2 MGD of that is
allocated to industry, you base the cost of ICR on an
incremental basis rather than a proportional basis; if you
figure that additional 2 MGD for industry it costs you
$1-1/2 million. That is what you base the ICR portion on.
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The advantage here would be to allow industry
to receive benefits of economies of scale using an incremental
cost basis, and major disadvantage would be to make it very,
very difficult to determine what these incremental costs
B really are.
And it would be very difficult to determine
o incremental costs.
CM
d Alternative 6 would be to allow the costs
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§ of constructing industry's portion of the treatment works to
z
X
< be grant eligible based on grantee's option. If the
grantee elected to have federal"fundina for industry's share,
there would be ICRs as currently constituted. If the
x grantee used an alternative source of funds to fund
3
industry's share of treatment works, there would be no ICR.
Grant eligibility could be based either on proportional
or incremental, depending on how it is determined.
The advantage here would be to allow grantees to
make a local decision on ICR. If the grantee wanted ICR,
then he could accept federal funds, and if he didn't want
jjj ICR, then he would have to identify additional sources of
income.
And another advantage would be to encourage
industry participation and planning, because industry would
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be greatly impacted depending upon how the grantee
decided to go.
A disadvantage here would be that industry may
still complain that there is double taxation in that you
2 have inconsistent and unfair economic burdens of ICR depend-
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§ ing on where you are located.
^ Alternative No. 7 is to establish a uniform ICR
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•" rate, and'all the things you see listed below are the
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5
you could do it nationally, regionally,on a state basis
I
or city basis; all of those would be reasonable.
The rate could bemodified and based on the level
of treatment from the plant, treatment type or level of
discharge from POTW. For instance, an industry discharged
ft to a secondary treatment plant, then possibly his ICR would
be adjusted upward, so that it is equitable in relationship
_ to other industries that have to introduce to, say, a
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tertiary plant.
One of the advantages would be to reduce incon-
sistencies of ICR rates aci/oss the country, but major
a.
disadvantage is"'that it is ('going to be very, very difficult
to develop and administer.
Alternative No. l) is to establish what is known
as a circuit breaker type l^R exemption. As local conditions
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exceed a certain threshold level, then ICR would drop out
and would not be collected. As conditions went below
threshold, ICR would kick back in and would be charged to
industry. Now some of the thresholds that you might want
„ to base ICR on would be local economic conditions, such
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or geographic area; level of pollutant discharge or even
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jj dollar level of ICR payments.
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Now currently EPA has a level of pollutant dis-
_ „ charge exemptions which is equivalent of 25,000 gallons per
i II day Domestic sewage. That is a circuit breaker. That gives
you an idea of what we are talking about here.
Some of the advantages would be to reduce the
« I! number of industries required to pay ICR, and to allow
52 flexibility based on special circumstances.
A disadvantage would be, it would be difficult
to administer and develop and it would result in inconsistent
charges from section to section.
Alternative 9 and 10 are basically the same.
Alternative 9 is to allow a tax credit for ICR payments and
Alternative 10 is to allow tax credits for pretreatment costs.
The tax credit for ICR payments would eliminate industry
complaints about double taxation, and the tax credit would be
in addition to normal write-off that industry is normally
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taking for ICR as a business expense.
The disadvantage would be, it would be difficult
to administer and it is going to reduce revenues and it is
also-going to require some legislative changes.
Alternative 10, tax credit for pretreatment would
be a tax credit pertaining both to capital investment and
OSM 'costs. And industry would be able to take a credit for
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" its capital investment in equipment and for the amount it
cost to operate and maintain that equipment each year.
y The major advantage here would be to encourage
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industry to pre£reat waste.
Disadvantages are it would be difficult to adminis-
ter and once again reduce revenues.
Alternative 11 is to return to the requirements of
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< Public Law 84-660, abolishing ICR as it is now.
One of the complaints that we have heard from
grantees and industry alike is that communities that had
treatment works funded under Public Law 84-660 do not have
ICR, and therefore it is less expensive for industries
u in those areas, adding unfair economic edge.
65 II
What Public Law 84-660 required was that there
be proportionate charge for grantees' local share of capital
cost, so that is what we are talking about.
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The advantage would be, it would eliminate complain
from industries that there is an inequitable charge,
depending on which law provided funds for public treatment
works. There is a possibility it would reduce the administra-
tive burden on grantees, because it is less difficult to
comply with requirements of 84-660 than 92-500.
Disadvantages are reducing revenues and there is
the possibility that it would encourage excess capacity,
lacking other controls.
Alternative 12 would be to abolish ICR aft it is
now, and have no ICR payments and require that the local
jj share of project costs be recovered through proportionate
Oser Charge. This would extend control over the User Charge
and it is going to mean that EPA currently does not look at
debt service. If this alternative were adopted, it would
mean debt service would have to go into User Charges just as
you*re on.
The advantage here would be to achieve equity in
establishment of rates, if thoroughly and consistently
monitored.
Major disadvantages are it would reduce grantees'
flexibility in designing rates. The grantee would not have
the choices and options available that he has today.
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It is going to increase the grantee's administrative cost
Because it would make the User Charges more complex.
It is going to.increase costs to the large
users where the grantee currently uses a sliding scale
rate, and it nay require major changes in bond covenants
where grantees have used revenue or general obligation
bonds to finance the local portion.
Alternative 13 is to add the interest component
to current ICR requirements. This would eliminate the-
perceived subsidy to industry through an interest-free
loan for treatment capacity.
The advantages would be to increase industry
participation in facility planning because their ICR costs
are going to go up, and it would eliminate that perceived
subsidy.
The disadvantage would be that by increasing
your ICR cost, it may encourage industry to seek other
alternatives to using POTW and would increase capital and
O6M cost for those people that remain on the system.
Alternative No. 14 is to extend the moratorium.
We feel that the advantages and disadvantages are basically
the same here. By extending the moratorium, you just post-
pone the date from making a final decision, and you really
do not accomplish much.
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The advantage would be,, it would encourage more
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precise planning on both grantee and industry's part, and
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Alternative 15 is to maintain ICR in its
current form, 'making no changes t$ it. The major advantage
would be that it requires no administrative or regulatory
changes to levy CR as it is, and the disadvantage would be
that it would eliminate none of the problems that are cur-
rently ascribed to ICR by grantees and by industry.
And No. 16, Alternative 16 is to require a letter
of commitment in a contractual form for industries or for
industrial users of POTWs when POTW is sized in the begin-
ing.
the disadvantage would be that it would commit industry
for a -longer term than most of them are willing currently
to commit themselves, and may drive them out of POTW to
alternative sources.
I have gone through very quickly here the 16
alternatives that we have identified, some advantages and
disadvantages. Now I would like to turn it back over to
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John Pai.
MR. PAI: Thanks. I think by briefly summarizing
those alternatives, we will try to address two key issues.
No. 1 is that we need for industrial users to be more
responsible or to participate earlier in the planning process
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of a sewage treatment plant.
No. 2, try to eliminate administrative problems
for both municipal grantees and for the industrial users.
That is basically the key of any of these recommen-
dations. If you want to think in any other terms which would
| address these 'issues, that is what our emphasis is; what
we would like to present to Congress is, is better planning or
more responsible planning process; earlier stage of planning
o process, and simplification of administrative aura.
_ At this point I would like to open the floor
i for those who reserved time to make a statment. I will go
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by the list we received from the register counter. After
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" we finish with them, anybody who wants to have further
statements to be made, we will have time for them.
u At this time I will call the first gentleman who
wishes to make a statement, Donald Kirk-
^ A VOICE: Before we begin, are participants here
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going to receive a copy of the minutes of this meeting and
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what is said, or are we going to have to take notes?
_ MR. PAI: We will send out a summary of this
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meeting to every participant. We will also make copies of
the transcript available in the regional office. I am not
sure we can send everyone a complete text of the transcript,
but we definitely would have a summary for this meeting.
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If anybody who wishes to receive that copy would please
register with the desk down there.
I made that commitment for the regional office.
» We will make that available to you.
STATEMENT OF DONALD KIRK, MANAGER
I "ENVIRONMENTAL ENGINEERS, HEINZ, U.S.A.
I
3 Mr. Kirk: My name is Donald G. Kirk,
Manager, Environmental Engineers, Heinz, U.S.A., Division
of H.J. Heinz Company.
Today I am representing the National Food
Processors Association, a trade .association whose members
companies process about 85 percent of the nation's canned
foods for human consumption. I also represent Heinz U.S.A.,
Division of the H.J. Heinz Company which conducts food
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|= processing operations at 14 locations across the country,
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S Several of these locations, in this region and elsewhere,
have been affected by the industrial cost recovery program.
Many food processors which discharge to publicly
owned treatment works have reported excess increases in
wastewater treatment costs. Most of these are a result of
industrial cost recovery and related grant requirements under
the Clean Water Act. I should like to cite three examples
from the experience of Heinz U.S.A.
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In one situation the municipal plant was upgraded from
primary to secondary treatment. Sewer costs increased from
$35,000 annually prior to construction to $150,000 following
establishment of the industrial cost recovery system after
project completion. Further refinements have escalated the
costs to $240FflOO, or nearly seven times what they were four
years ago.
§
In-a second case, the municipal plant underwent an
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costs increased from pre-projct levels of $40,000 per year to
$610,000 after establishment of industrial cost recovery.
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These are now- increasing to $820,000, or an increase of twenty-
fold over four years.
In the final example which I wish to cite, the
municipality had completed final design and cost estimates
on a proposed upgrading of secondary treatment. Treatment
costs were projected to increase from $55,000 to $300,000
annually, or more than 5 times, A long term commitment for
these costs would.have been required. Since the factory was
not highly profitablef the facility was old, and some future
loss of production was expected, it was judged to be a mistake
to make such a long term commitment. Therefore, the factory
was closed, resulting in a loss of over 500 full-time and
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a municipality,
4, The seasonal nattre of food processing often
requires that the municipality provide a large treatment
capacity which is unused much of the year. This requires
a disproportionate commitment to capital and industrial
I cost recovery chargesf amplifying the industrial cost recovery
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impact. This often occurs in small towns, where the industry
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becomes even more vulnerable to a heavy commitment.
5. The current high costs discourage the use of joint
municipal-industrial treatment systems with their advantage of
economy of scale and the regulatory advantage of fewer dischar,
and treatment control points,
Because of the aforementioned problemst it is
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2 recommended that the industrial cost recovery program be
V)
discontinued. It is realized that there are many alternatives
which could result in partial relief. However, the magnitude
* of the inequity is such that total abolition is necessary to
remedy the problem.
If total abolition of the industrial cost recovery
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manner in which wastewater treatment cost sharing between
industries and municipalities is conducted, some changes are
needed. A more flexible system is suggested which would
allow industry to payf as a miniumr the incremental costs
incurred by their presence in the system.
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This incremental cost is the difference between the
cost of the joint industry-municipal system and the expected
cost of a system designed to handle only municipal flows if no
industry were participating. This will eliminate any subsidy
of the municipality by industry, and indirectly urge some
reduction of the inflated industrial share of local capital
costs.
^ Mr;' Donahue r"-..,!/*- •'--. The data that Mr. Kirk cited
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o aboet food processors is contained in the last three pages of
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the National Food Processors Association, We came up with soim
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statistics and averages. That is the data he is talking about,
You do have copies of it.
Mr. Pair Mr. Boyd Mills please.
MR; .MILLSi My apologies. He asked me if I had a
prepared statement, I don't.
A couple of comments. My name is Boyd Mills. I am
City Administrator in Arnold, Missouri, over near St. Louis.
This Industrial Cost Recovery has cost the city quite
a bit, in staff time as well as our consultants'time. We
tend to feel iE'is a mite unreal. We are a suburb, a satellite
if you will, of the City of St. Louis. We have gone to great
lengths to attract industry. I am happy to say we have one of
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the top industries coining into our area and building at this
time. They have a representative here today because of their
interest in Industrial Cost Recovery, and some questions I an
sure, of the inequities in it. Our consultant is here, and I
am here.
Because of this one industry that is coming in, we have
to get up to our eyeballs in Industrial Cost Recovery. If this
qame. a.rea. was to be developed by a private developer, with all
residential homes, I venture to say none of us would be here
and we wouldn^t have to worry- about Industrial Cost Recovery,
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The one thing that bothers me a little bit. and I see
it crop up here in the meetingsf the use of the word Industrial
Cost Recovery, the ICR and user fee are used almost interchangeably.
You $ust go from one to the other and back and forth, just as
if the fence had been driven into the ground. We feel that we
have a good user fee in force, everything considered. We have
I a proposed user fee before the EPA, I believe, because we are
that far along in our grant, and we feel anyhow that we can more
fthan adequately handle industry coming in, their participation
Ln sewage treatment, if you will, and we would like to see it
stay at the user fee level, and not be saddled withthis Industrial
lost Recovery,
At such time as EPA can make up their minds and get
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job done.
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Thank you.
MR. PAI: Thank you,
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away from this interchangeability of user fee and ICR, well,
maybe we can get some of the kinfls ironed out and get this
thing off the ground.
The ICR is a burden that we don't want to be saddled
with as a city and I am sure that, as Mr. Kirk said, the
industry doesn't. I personally feel very strongly that the
same principles or same intent, if you will, can be put into
user fee and we can go from there and we can get the doggone
MR, DONAHUE: The one comment I would like to make is
that we refer to User Charge, Industrial Cost Recovery, sort of
simultaneously in the same breath, because it is really sort
of hard to separate them.
The purpose of the study is to look at Industrial Cost
Recovery if you read the law, Section 75 says EPA shall study
efficiency of and need for repayment, and so forth.
Some of the questions asked in the Congressional Record,
legislative history related to User Charge as well. So we
are really trying to look at total cost of sewage treatment,
with an emphasis on ICR, and any of the alternatives that we
have posed are based on a premise that even if you do away with
or modify Industrial Cost Recovery, you are still going to have
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to maintain a User Charge system^ so that la the point of
departure for any of our alternative*.
John..
MR. PAXi Thank you, Ed,
Mr. Richard Miller, please.
STATEMENT OF RICHARD R, MILLER,
SOUTH ST, JOSEPH, MISSOURI INDUSTRIAL SEWER DISTRICT
MR. MILLER; My name is Richard R. Miller. I am the
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0 Chairman of the Board of Supervisors of the South St. Joseph,
Missouri Industrial Sewer District. I offer the following
comments concerning Industrial Cost Recovery.
* " Without the opportunity to review the Coopers & Lybrand
Report, we can only comment on the potential impact of IndustriaJ
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* I Cost Recovery on the industries within the South St. Joseph
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Industrial Sewer District, The South St. Joseph Industrial
Sewer District was created on May 7, 1962 and pursuant to the
provisions of the Statutes of Missouri, is a political
subdivision of the State of Missouri. The Industrial Sewer
District provides primary treatment'to 14 industries and
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businesses within the District. Five of the Industrial
establishments he^r total responsibility for the payment of
principal and interest on bonds sold in 1963 to finance construe-
tion of primary treatment facilities.
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In. 1977, the Industrial Sewer District incurred costs
§
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of approximately $187,000 in providing primary treatment to
the industries and businesses served by the District. In 1980,
the costs for primary treatment incurred by the District and
charges for secondary treatment provided by the City are
" projected to total $543,900, an increase of about 190 percent
52
In order to comply with the discharge requirements of
Public Law 92-500, the Industrial Sewer District will transmit
the effluent from the primary treatment facilities to the City
of St. Joseph treatment works for secondary treatment. The
City of St, Joseph anticipates that the secondary facilities
now under construction will be complete in the spring of 1979.
over the 1977 costs for primary treatment.
In addition to the costs for secondary treatment, the
Industrial Sewer District will be subject to Industrial Cost
Recovery charges associated with the City's secondary treatment
facilities. The ICR charge to the District in 1980 is projected
to be approximately $124,000. The resultant total annual
treatment bill for the" District in 1980 is projected to be
$686,900, over 3^-1/2 times the 1977 costs incurred by the
District,
Since 1970, two major production facilities served by
the Industrial Sewer District have closed while others have
curtailed production and 75 percent of the anticipated load for
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our primary treatment plant has failed to develop.
As can be seen by these figures, the economic impact
of secondary treatment on the remaining industries within the
District will be substantial. The additional costs for secondary
treatment, both in user charges and ICR, will, without doubt,
adversely affect the cost picture of industry within the
District.
The" Industrial Sewer District recognizes that secondary
treatment is expensive,However, the District feels that
Industrial Cost Recovery unfairly discriminates against the
industrial customers of the treatment works. The additional
at
burden of ICR is not related to costs incurred by the City of
St. Joseph, Missouri in providing secondary treatment and can
5 only inhibit economic growth in the Industrial Sewer District.
MR, PAI: Thank you. I want to make one comment on the
statement, which I think is not a very uncommon example, in a
way that the industrial capacity was provided for before the
industrial users had an opportunity to know what are the costs
to them. As a result, there have been examples where a plan
was designed for the purpose of treating industrial users,and
when the time comes down to make User Charge and industrial cost
repayment, they had a second thought of it. As a result we had
large excess capacity not being used, which is not only a waste
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We try to encourage industrial users to know what they have to
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pay before they say I want to use capacity, before grantees
agree to provide capacity to them, I think between Mr. Mills
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of federal money, but also a waste of local citizens' money.
That is one of the things we are very concerned with, and I
think every one of us should be very concerned with this. That
brings me back to my original intention of these alternatives,
and Mr. Miller, they show two examples of how one case can work
out, where you have industry that wants to come into town, and
in the other case, they decide not to come in.
We will particularly emphasize alternatives to the
*
in
Congress,
Mr. W.C. Nielson, please,
.MR. NIELSON: I would like to pass at this time, if
I mayy
MR. PAI: Mr. Richard Wuttke,
MR. WUTTKE: I would like to pass at this time, too,
MR, PAI: Mr, Don Boyd.
MR, BOYD: Pass,
MR. PAI: Mr*" George Sallwasser.
MR. SALLWASSER: My name is George Sallwasser, I am with
Horner and Shifrin, Consulting Engineers. I would like to make
a comment with regard to the discussion of advantages and
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-•^advantages listed on the alternatives that is put out in
this draft report. I think it is important that we not take as
a "given" that excess capacity is a detriment. For those plants
that are expanding or those facilities having to expand their
capacity, at 1978 prices, the most cost effective capacity that
they have is the capacity they built five, ten or 15 years ago
And I think that obviously there is a point where excess
capacity is not warranted. But I think that a disadvantage of
s ome of the concepts is that sufficient excess capacity will
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annual base.
User Charges, if they are as low as 30 cents per thousand
gallons will be $110 on an annual basis for a thousand gallons,
and they can go up to a dollar. Then of course that gets up to
$365 on an annual basis for a thousand gallons.
o it seems to me that the Industrial Cost Recovery certain.1.}
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for small users is--well, small and large users, is a small
S
° ''^percent of the total cost, and for small users, the dollars are
Q
x relatively insignificant and therefore will not have any effect
§
1 in controlling the industrial decision making, and so to the
VI
* extent that it Was intended to control industrial decision
•
making, it seems obvious to me from my limited experience that
this would be true, and Coopers & Lybrand's report reinforces
this. So my primary concern is with regard to administrative
costs of administering Industrial Cost Recovery.
My suggestion would be that there be a circuit breaker
involved in terms of the minimum Industrial Cost Recovery bill
that would have to be paid. I would say it ought to be between
$2,000 and $5,000 « year, and if this is—this could be further
modified by giving perhaps the city the option, make the
regulations so £fcat no bill less than $2,000 a year would have
to be rendered and giving the city the option of making it,
say, between $2,1(10 *nd $5,000, make it at the city's option,
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and then perhaps over $5,000 a year, or some other figure, it
might be mandatory,
I think this would be fully in accordance with the
review of regulations that EPA is trying to implement and which
was published,in their quarterly report on October 12, saying
I they are trying to give flexibility to their regulations and
i
put umbrellas over situations rather than put a mandatory
a
regulation, I think this type of approach would accomplish
£ what EPA says they are trying to do with or has indicated that
*?
they are doing with all of their regulations, and would recommend
it to your consideration. Thank you,
MR. BROWN: Thank you.
Just for your information, EPA has recently changed
the regulation, exempting anybody under 25,000 gallons per day
V)
H sanitary sewage, which would tend to mean that the community
would have to collect a rather sizeable portion or sizeable
dollar amount before they are going to bill ICR,
But just as an aside, a lot of communities, even though
it wasn't strictly legal, have gone ahead and instituted some
_ n other kind of exemption in the past. For instance, they have
set a floor, say,- 5,000 or 10,000 gallons per day before they
will bill somebody, ICR, or the ICR bill must be $25, $50 or
$100 before they will bill it. This is a fairly common
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situation, and a lot of communities' have already extralegally,
I guess, instituted it,
MR, PAIt I was just informed that copies of the summar
we are talking about here are now available at the registration
desk. Whoever wants a copy may help themselves to a copy there
The next gentleman is George Milligan.
MR. MILLIGAN: I will pass at this time.
MR;; PAI: Now, the floor is open to whoever chooses to
maks> a statement, please just come forward. It is not limited
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only to comments and suggestions. Any questions you want to
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" ask or things you want to discuss we will be happy to hear
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MR, ROBERTSONi I would like to ask a question, I guess,
to the consultants that did the study. It appears that many of
w. I the comments or complaints appear to be not related to ICR,
but more related to the additional cost of beyond what they
paid five years ago, like they are complaining more about
secondary treatment than they are about Industrial Cost Recovery
Was that your findings on your national survey?
ID
MR. DONAHUES Yes, A lot of industries are complaining,
They are complaining about the total cost of sewage. .There
are a couple things you have to consider. Most everybody is
upgrading to secondary treatment who didn't have secondary
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treatment before. This means you are going to spend more on
local debt nervise and more for operating a sewage treatment
plant, once you build it.
The other thing industries particularly are seeing the
impact of, and Mr, Kirk Alluded to it before, the requirement
8 for proportionality, a lot of places used to give industries—
not just industry, but anybody,-a declining block rate. So
industry is feeling the double barreled impact of upgrading
the level of treatment and elimination of declining block rates,
O
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M So even though a city may not be spending a whole lot
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1 more to operate sewage treatment than it did before, doing
away with declining block rates makes industries really notice
the increase in sewage costs.
Somebody must have questions or comments.
MR. PAIj Yes, sir.
MR, MILLS: One more question. I will direct this to
« EPA people, and Coopers & Lybrand. A community sets up an
8?
ICR program. You gentlemen from Coopers & Lybrand said some
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communities are already taking exceptions already, making
allowances. Are EPA auditors when they come down, are they
going to have hard and fast guidelines and take communities to
task for the ICR program or are they going to be instructed to
allow for variances that the community built into their own
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ICR program?
The auditors, when they come down, if they allow or
don't allow, that is two different tvnarldfl two different ball
games.
MR. DONAHUE: EPA -^.atiditors,when they are looking,--*
are talking about a couple things, okay? When you have the
User Charge system or in this case Industrial Cost Recovery
system reviewed and approved by EPA, they are doing it before
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you actually implement the thing. You tell them how you are
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going to charge people and how you are going to send out bills.
Their auditors, when they go out looking at our construction
grantf and allowable costs( and nonallowable costs, may look at
your ICR system as well. But they are not going to pay as
much attention to your ICR system and how you send out bills as
they are to how you charge your construction grant.
Legally, you are obligated to send an ICR bill to any-
body, no matter how small the amount. The likelihood of EPA
spending a lot of time to find out if you are doing that is not
as great as the likelihood of them spending a lot of time to
audit the cost charge of your construction grant.
MR, ROBERTSON: I think I could give him some relevant
information for Region VII. We have recently been concerned
over the lack of checks coming into the office. We have set upi
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the procedures for doing the auditing that you are talking
about, but due to the lack of manpower we have not been able
to implement.
So the municipalities may be doing some alleged
inappropriate activities. There is a mechanism set up to
investigate, but as yet we have not done that.
MR, PAI: Thank you.
§
Identify yourself,
Q
MR. RESNICK; My name is Jim Resnick, I am the Waste-
water Engineer for the City of Davenport, Iowa. We have already
billed and collected and sent in one year's Industrial Cost
Recovery. We have billed for a secondt It will be paid here
next year, TWO years and eight months ago we submitted an
ordinance to Kansas City and that is the second reason I am here
a dialogue
jjj / tdday. There are two sections that have' been continuing/between
our city and this region, and the one that is still left is
the Industrial Cost Recovery formulation. And the question
that was just asked was super. I am still here to defend my two
years and eight months status quo, with the third person who
Etas assumed the job since I have been dealing with this.
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" Everybody that I have dealt with has been very sincere,in what
they proposed. They have moved on to other pastures, and I am
down here again to go over two years and eight months.
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levels, and they have ranged^ anywhere from 10 to 20
percent of the annual User Charge collections. And it does
depend on flow and charge. Everything is there, and it is all
a case of knowing what your values are going to be, based on
what your federal grants are, so you can calculate them ahead
of time as we did, and they are coming out as we suspected.
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None of this is the problem with us.
The problem is a matter of interpretation of your own
rules and regulations, as they relate back to individual
communities. And as a result apparently, as best as I have
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most of them were small communities, assuming apparently ICR
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been able to get information, and I have been to a lot of
meetings, whether they have been Water Pollution Control
Federation meetings or meetings like this, and I am still getting
what I am getting today, that is there is no degree of uniformity
ip -the interpretation, even in this region or nationally. That
is a bitter pill. It also results in not having an ordinance
that has been okayed after two years and eight months.
Now, I noticed the list that came out of the number of
communities in our region that have had ordinances that were
was no problem or a minor one, and two, almost all of them
were in Missouri. I can only assume that ready access to
regional headquarters plays a pretty good role in getting that
job done. That is not right.
This is my second trip this year, and it isn't—we
don't mind making the trip—I do, I don't like this travel, I
am talking about the city—if we can only get it done. But
I left Kansas City several months ago in the spring, thinking
that all was right with the world and I submitted my amendments
as I understood-them from the meeting and back it came later
again saying, no, and here I am today.
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I don't know what the problems are out here. You talk
caae histories all day long, and have every person here and not
here, and an individual story, but those are the things I have
noticed, that access to headquartersf the size of the community
all seem to have played a rolef more in approbations that have
§ || been given than anything else, I don't doubt the sincerity
across the table from me, and I don't think anybody has doubted
8 SI our sincerity. What I would like to see is, why don't we let
some of this stuff work first, and then see what happens. That
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happen. Sometimes you can do that. Here is a case where I
suggest because of the myriad number of problems we have gotten,
with a problem that really, as has been indicated monetarily
at least, is not that big, has been expanded beyond all reason.
I am- glad you had this meeting todayf and I hope I can
get my business done right, too.
MR. PAI: Certainly we hear you this time.
Is there any other statement from the floor?
MR. NIELSON: Did I understand you to say that the
estimated return from all of this Industrial Cost Recovery would
only be a half-billion a year?
MR, DONAHUE: Half-billion dollars in total. When Public
Law 92-500 was enacted back in 1972, if you read some of the
legislative history in testimony that was taken, some people on
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the Public Works Committee staff, estimated $4,-5cto 7 billion
would be recovered out of the original $18 billion worth of
grants that were to be awarded. Based on data we have collected
« from 241 communities, you can scale that up to a national basis,
grants thatrwere expected to be awarded. It appears that only
$1 billion to $2 billion in the total would be collected which
S half of that, it is one to two billion over a ^jjro -year period,
o
meaning anywhere from a few billion dollars a year up.
It doesn't look like tit is going to be a whole lot of
!S money falling back to the Federal Treasury or local government.
MR. NIELSON: That is really amazing, isn't it? All
this hassle for that much money.
MR. DONAHUE: You will find a few communities that very
strongly support ICR. I admit there aren't very many of them,
but there are a couple, particularly if you have a small town,
one industry, I can thing of an example in Massachusetts, where
there is a paper mill, that uses 95 percent of capacity in the
sewage treatment plant. There are only HQO^people in town, and
the
the industrial paper plant operates/sewage treatment plant for
lit
^ the city for a dollar a year, coincidentally provides services
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to the residences of the community. People on that town council^
wrote a very forceful letter to their two Senators and their
Representatives encouraging EPA to recommend ICR be maintained
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and EPA jointly arbitrarily implemented a secondary treatment.
Here again there is no rationale besides that, except trying
to make everybody treat it the same. There is no cost benefit
to that rationale at".all. Here again we had a lot of industries
5 in Cedar Rapids, a lot of industries and communities throughout
the country were arbitrarily charging money to go into secondary
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treatment programs,
§
<-> As we looked throughout our Cedar Rapids project, and
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2 right now we are in the final throes of developing our
— II
S Industrial Cost Recovery and our User Charges and our local
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financing costs, we have a good handle on what is causing the
ma-jer industries in the City of Cedar Rapids to foresee in
I
S their next year's budget. When we talked about this 25,000
I
gallon-a day elimination, anybody below that thing, for the
H City of Cedar Rapids as an example, anybody with 25,000 gallons
day which we would call typical sanitary domestic, their
charges would be $5,200 a year for ICR. Anybody that is 25,001
ce.
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Pays $5,200 a Year» Anybody that is 24,999 pays nothing.
There is one recommendation I would like to see. If
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t we are talking about this exemption, theoretically we should
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subtract this from anybody above that. Why arbitrarily pick
25,000, and let those below off, and the people one gallon
above pay the other number? If we are going to exempt, let's
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take the 25,000 across the board and anybody larger.
We are talking overall for the City of Cedar Rapids,
User Charges coming into play. If we add wp the User Charge
a-nd local capital financing, our rates for standard typical
damesfcic will be 34 cents pefc '.hufidred cubic feet; Additional
charge
ICR/ls ffVe cents per hundred cubic feet, YOU can take a
ratio there, it looks like it is roughly a little over 16 or
17 percent would be additional charge for ICR, We have got
in addition to these other than domestic commercial users,
as we shall classify them, five major industries in the City
of Cedar Rapids, which contributes on a proportional basis over
design roughly 40 plus percent.
Talking ICR with them, we are anticipating their repay
every year will be $550f000 a year or over a 30-year period,
we are talking over $16 million, of which $8 million would go
to Uncle Sam, which makes up^quite a majority of the half or
$500 million you are talking about in your total anticipated
reveneus. So Cedar Rapids is one of the major suppliers of
revenue funds to the Treasury.
We have one major industry in particular which is a wet
processor, which is a meat packer, which, as you all know,is
a marginal operation. We have talked their rate—their rate
increases, talking about four or five years before we increased
a ur operational expenses, probably around $150,000 a year. Now,
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recommend what I would say about the ICR program, I would say
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they are paying roughly $600f000 a year, which is strictly
O&M to operate a high degree secondary treatment plant,
We are talking next year starting up of charging them
$1,500,000 a yeary breaking this down, it looks like it will be
$950f000 for O&Mr which is giving the city a higher degree of
treatment than we are doing right now, because we have tertiary
requirements. They will be paying roughly $350f000 capital
cost back to the city for their local financing, and will be
paying over $200^000 a year ICR cost.
So it gives you the relative aspect of what we are
charging one major industry,
I guess as an overall recommendation, if I had to
abolish it.
For what reasons?
One, I think it is double taxation. No matter what
you sayf industry does pay taxes.
The implementation program is quite difficult to
do,
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_ Secondly, as £ think we all know, we have all dealt
CL
with different regions of EPA, it is arbitrary. We are dealing
with personnel, We are dealing with ten different regions
throughout the country, And there is a manpower problem. It is
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a subjective interpretation of each regulation. Nobody can
tell me—you can go to ten different regions and you get
different answers on your ICR program. They will change. Even
within the region, as Mr*" Resnick showed, even a region
S interpretation will change.
in
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across the nation in implementation. I think this can be done
easily enough, taking all total dollars and pounds and flow
5 treated, divide it up and get a rate. At least it would be
19
a flat rate and everybody would know what it would be, now and
forever, there would be no favoritism by anybody, no judgments
made by any region or any bending of the rules by local munici-
S
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3
palities. Thank you very much.
MR. PAI: Very good statement.
Any other statements from the floor?
MR. SNEAD: My name is Willis Snead. During the
presentation by Coopers & Lybrand, vou indicated a certain
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00
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a.
Cost Recovery; and I believe a thousand employees put out of
work. Would you explain briefly to us how you made the
determination ^§ to these plants being closed due to Indus-
trial Cost Recovery and determine the number of workers put
out of employment?
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KR. DONAHUE: Everywhere we went we asked people
from the local Chamber of Commerce, local labor unions
if we could talk to them, and the city administration to
« identify any industrial plants that had closed, even a1leg-
al
S edly or even maybe possibly because of sewer charges. We
would try to track them down and talk to people. We have
g maybe a -Half-dozen specific cases, a couple food processors.
In every case, when we talked to people, they
would say they would give us a letter from their company,
« public information people or whoever, some spokesmaji, copies
of press clippings from newspapers, announcing the plant's
»
5 |[ closing because of sewer costs and things like that.
In many cases they blame sewer cost, not ICR, but
sewage cost. In every case we wrote to those people and
jjj asked specific permission from them to cite that plant clos-
ing, take a copy of their letter, press clippings, whatever,
and include them as an appendix to our final report to Congress,
And in every case, they wrote back very politely and said,
0 you of course are welcome to do this, this is all public
bl
* information; things tiave been in the newspapers and whatever;
fcowever, we wouTd like to point out there were other factors
that affected our decision to close the plant.
We are not saying plants have not closed, but we
can't find any plant to close solely because of ICR costs.
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So it is a matter of other matters affecting things
as well. Many times local industries use sewage costs or
ICR as- something to 'blame it on. They don't want to take the
wrath of local governments.
MR. SNEAD: Thank you.
MR. ROBERTSON: I was curious, were revenue estimates
from the average daily loading from industries or of peak
type of number?
MR. DONAHUE: The revenue estimates were based on
whatever local governments had used to collect ICR, scaling up
their projections to full implementation, and different
cities used different bases for calculating ICR charges,
whether they, used peak or average daily or annual or what-
ever.
MR. SALLWASSER: George Sallwasser. I would like
to recount for you some specific instance so that you might
develop some documentation with regard to the effect of ICR
on regionalization. This happened to be in Region V in the
East St. Louis regional area. There is a regional plant
being implemented, and the National City, which is essentially
an industrial community, was asked to participate in the
sewer system evaluation survey. They have indicated they
are not going to do so because among other factors, if they
go into it, they would get the advantage of a 75 percent
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grant, but they said because it would be subject to Indus-
trial Cost Recovery, that is not really an advantage.
I am relating this merely to you to document an
instance where ICR affected the industry's decision to partici-
pate in one facet of the regionalization plan.
MR. DONAHUE: We appreciate that. I guess really
that is the kind of situation EPA is trying to foster.
As ^ohn says, EPA wants industry to realize up front what
they are getting into. It is really a double-edged sword,
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of capacity for that plant expansion in five years. It is
really a double-edged sword. I think EPA would really like
to get industry to think very precisely and very carefully,
you know, what they are getting out of a publicly funded sewer
system vereuff what it's editing th«m. If it is cheaper for
industry to treat its own sewage over the long run, that
is waht industry is going to do, whether public sewer systems
are built or not.
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| MR. WASSERMAN: If I may respond to that, that is
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«"• very good except sometimes you are too far down the line.
For instance, an industry, municipality present in the room,
have agreed that the industry will locate, but they have
no idea what the User Charge is going to be, because the
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regional plan is now under construction. And there is no
w«y for that industry to have factored into their decision
what their sewage treatment charges will be because the 201
Study is not complete, so there is no opportunity. They have
already made a commitment. This is equally true of many
industries. They made a commitment under Public Law 84-660,
and they are now into a regional plan. They no longer have
any contrc-l.
As you pointed out, they are now landlocked and
they can't get out of the regional plan, where maybe a few
years ago a decision to expand or to relocate could have been
made.
It is always subject to review.
The further into it you get—it is fine to say
industry should have the information to make the decision, but
it may be five years late when they get it, and that may not be
their fault. It may be the fault of the overall program,
but that is a real problem for industry.
MR. DONAHUE: Thank you very much.
MR. NIELSON: My name is W.C. NIelson. I do not
have a prepared statement. I operate a cheese plant in a town
I of 6,500 people. WE employ an average of 45 people, and we are
not a large enough company for me to be an expert in energy,
sewer, et cetera. Neither can we afford to hire consultants
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for all of these areas of government which we must be
experts in. Approximately half of what we make goes for
federal income tax.
In our industry, most of our competition is
cooperatives who pay very little income tax. We compete
for raw material with these plants, both in small and large
communities. We do not have the privilege of pricing our
products. The government sets a floor on our raw material
o costs; we sell on the market, of which we have very little
5
or no input. Five years ago or four years ago, we had to
1 sign a letter of intent to go into the municipal sewage plant.
k
The information that we submitted in that letter of intent
was submitted by the engineering firm that the City of
Independence had hired. We found out later that their figures
were very much on the high side. The estimated cost of the
plant at that time was about $2.5 million. Now it is up to
« $6.2 million.
The engineering firm tells us that all the delay
is due to getting approval by I believe the D.E.Q., which
is part of EPA.
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At the initial cost, our initial cost was $65,000
a year—these are rough figures—we at that time figured that
by paying attention to detail we could cut both our flow and
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BOD load in half. So in my mind that ends up with about
$50,000 a year, multiplied by approximately three times—
we are in for $90,000 a year. We find that very hard to take.
We think that if we lived in a larger town—and I have got
the figures from Cedar Rapids here—that our cost would be
P
less.
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0 When I came to the meeting, I didn't realize there
P
was a difference between UC and ICR. In fact, I didn't even
know what POTW was. In our community the engineers figure
| that it is easier to treat infiltration by building a larger
i
plant than to seal up the sewer line. As I understand, infil-
2 tration is water seepage under the system.
^ Presently our sewage people tell us we are running
a million gallons a day, sometimes over, sometimes under.
v>
Of that we have put in a flow meter and we are running from
40,000 to 82,000. We find the situation we're in is that
we really don't know what our costs are going to be. That
makes it very difficult for us to plan ahead.
Our industry unfortunately is a high volume user.
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We donjt know where to go. We would like to stick
our neck out and put in some energy efficient equipment. We
don't know whether we can stay in business. We don't know
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what our costs are going to be.
I understand now they are going to let the bid
in December. What is going to come out we don't know.
We really don't know what our share of the cost is going to
I be.
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It more or less leaves us up in the air as
far as any planning is concerned.
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the information that the industry had and the papers had
was that that was the sole reason for their closing. I have
no documentation to back'up that statement.
I think in my statement you must realize that we
are not an H.J. Heinz Company. We are just a small industry,
but I have a very strong feeling that goes something like
this: America is made up of small companies like ours.
I thank you.
MR. DONAHUE: Thank you very much.
MR. PAI: You don't know what your User Charge
costs are, industrial costs? If the Industrial Cost Recovery
was indeed abolished, would that help the situation a lot?
MR. NIELSON: I think what we would like to know
j2 is how much it is going to cost to treat it. We know how
<
much we are putting down. We have some control over this, but
« we don't know how much it is going to cost.
et
MR. PAI: The question I am asking is do you more
m or less know how much you are paying for User Charge now or
z
would abolishing ICR help your situation?
MR. NIELSON: I can't honestly answer.
MR. PAI: Keep in touch with us. One of the
purposes of course was to determine whether abolishing ICR
or improving ICR would help companies like yours. Keep
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because there are various paramaters assigned, and I haven't
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in touch with us. Thank you.
MR. ROBERTSON: Mr. Nielson brought up an issue that
is fairly common in snail communities, and that is the letter
°f intent requires, or EPA requires a letter of intent from
industry which has essentially asked him to say I will pay
my fair share, however you determine that.
To make a business decision at the industry's
level, he needs to know what his costs are going to be.
However, we have heard complaints about the number of ways
you can allocate the costs for Industrial Cost Recovery,
heard any of the industries or representatives or munici-
palities talking of the ability to come together and reach a
decision during the planning state of what the cost recovery
may be.
Can industry commit themselves to staying in the
system for 20 years?
Our experience has been that most industries don't
have the ability to project what their waste load will be
much more than two or three years into the future. In this
region the vast-majority of our industries are Mr. Nielson's
type of arrangement. We don't have a heavy industrialized
region.
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MR. FREDERICK: As you guys talk, you bring up more
ideas that we have had in past history in Cedar.Rapids.
We started this project back in 1970. That is under old 660.
We were ready to submit plans and receive our final Step 3
grant. That is when President Nixon impounded the money, so
our industry sat on their hands. By the time we got the grant.
Industrial Cost Recovery was a new thing.
Through the new rules they were hit with Industrial
iCost Recovery which they did not know. We gave them those
numbers three years ago. All of a sudden we got hit with
tertiarv treatment. It is hard to tell an industry when a
project drags on and EPA review and rule changes, to tell an
[industry small or large what their costs are going to be.
With any project now, it is probably dragged out at
Least five or six years. It is hard for us as consultants to
sll a client or industry what their costs are going to be.
can tell them, we bring them in every six months and tell
hem what new costs are going to be. That is just about as hard,
tilling them we have 20 percent increase every six months.
lhat is a lot of jobs we have seen, with rule changes, and the
leriod of time between initial inception, when we talk to a
itter of intention, to when the concrete is poured. You have a
>t of inflation and rule changes. Even though we try to keep
lem abreast, they are still hesitant to sign up.
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On this ICR study we were not addressing the
issue whether or how big the growth will be in the future.
That is another segment of EPA that will do that. But we
have to be concerned that if we did have that capacity for
future users, the impact to existing users, which may include
residential users as well as existing industrial users.
So that is the key thing we will have to face; in other words,
N
§
j to provide for the future growth. How is paying for it now,
a
that is the question. That is something you should think
about.
Does anybody have any more comments?
MR. ROBERTSON: During your study, did you find
any local communities with local Industrial Cost Recovery
provisions?
MR. BROWN: NO.
For those of you that have reserved the right
to make a statement or changeyour mind or have something to
say in future, our Coopers & Lybrand address in Washington
is 1800 M Street, Northwest, Washington, D.C., and the zip
code is 20036. Or the telephone number there is Area Code
202, 223-1700.
MR. PAI: Since there are no further statements at
this time, the meeting will recess for an hour and we will be
back here around 1:30.
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MR. MILLS: Is there going to be something sub-
stantive after lunch? A number of us have planes to catch
and have to head back to*work and believe it or not,
there is another EPA meeting over in St. Louis.
MR. DONAHUE: AFter lunch we are looking, if
people have specific quetions or problems or statements,
or complaints—we are not going to unleash any more findings
or conclusions—we will answer people's concerns, and if
we can't, we will try to point them to somebody who can;
We are not talking about making any recommendations or
anything revolutionary.
MR. PAI: We will have a recess until 1:30
this afternoon.
(Whereupon, at 12:30 p.m. the meeting was
recessed, to be reconvened at 1:30 p.m. the same day.)
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AFTERNOON SESSION
MR. PAI: Good afternoon, ladies and gentlemen.
The meeting is officially started again. Of
course that does not limit, your discussion. However, we
will play by ear and see how many new participants for this
afternoon's session there are. For whatever discussion you
have, you can continue.
MR. REAM: We have the Federal Register here
of Wednesday, September 27—my name is Rick REAR. *
am Chief of Wastewater Pollution Control, City of St. Joseph,
Missouri, and concerning the Federal Register, September 27,
they redefined Industrial Cost Recovery, and what an indus-
trial user is. Would you clarify that for us.
MR. PAI: That means simply that the old industrial
user definitions will stay -except we were authorized to exempt
§ | those who discharge less than 25,000 gallons effluent a day,
V)
„ In other words, this just makes it much fewer users who will
pe
"be included as industrial users now.
MR. REAM: We understand that, as of April 26 —
MR. PAI: That is the interim. This is final.
MR. DONAHUE: The regulations that came put in
April exempted people who had 25,000 gallons per day or less
of discharge from ICR. But under the definition of industry
that was in effect before that, only certain kinds of
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industry had to pay ICR, and those were people who fej.1
in certain divisions of the Standard Industrial Classification
Code that the Commerce Department and w*** put out, things
like manufacturing, mining, whatever' the rest of them were.
But the definition that was used in April in the
interim regulations that came out said that it was no longer
just those kinds of industries that had to pay ICR. Everybody
who was a nongovernmental user of a sewer system and had
more than 25,000 gallons a day of discharge would now be
considered an industry, so it did remove small users but
broadened the definition of industry.
What the definition of September 27 did was go back
to the first definition and said only certain kinds of people
S || would be considered industry, only those in those divisions
of the Standard Industrial Classification Code that the
Commerce Department uses. Even within that narrow definition
* I the April regulations set forth, even within that narrow band
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j I of industries, people with 25,000 gallons per day or less would
not have to pay ICR. It significantly reduced the number of
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people who have to pay ICR.
For example, we are working on an Industrial Cost
Recovery system for the City of Washington, D.C. Under the
April regulations, there were two homes for the elderly and
seven hospitals that were nonprofit, but privately owned, not
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publicly owned, and they had discharges of more than 25,000
gallons per day. Under the April regulations they would
have had to pay ICR. Under the new definition, the final
definition, September regulations, they don't fall in any of
those five categories of industry, so they don't have to
pay ICR.
MR. REAM; what we were instructed to take non-
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governmental out of our sewer—out of our ICR program.
MR. DONAHUE: Right.
MR. REAM: Does this mean we now put it back in?
MR. DONAHUE: No.
MR. REAM: Define exactly what is nongovernmental.
MR. DONAHUE: You don't have to worry about nongovern-
mental. The only thing you have to worry about is those
J2 | industries that fall in those categories, and somewhere in the
regional office of EPA or public library you should be able to
get a table of the Standard Industrial Classification Code.
MR. REAM:- we have that.
MR. DONAHUE: What you do is pick those customers
that fall in those five categories and they are the ones
potentially liable to pay ICR. You have to determine which
ones of those discharge less than 25,noO gallons per day of
sanitary sewage. Those people are excluded from ICR.
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MR. BESOTs Your example confused me a little bit.
It doesn't matter if the hospital is privately owned?
MR. DONAHUE: It doesn't matter. They are no
longer an industry.
MR. REAM: This is the. only essential difference
that we have?
MR. DONAHUE: Yes, it is the only difference.
MR. HOWARD: I might point out, definition of domes-
tic waste depends on the particular municipality. It can
s || vary from town to town.
MR. ROBERTSON: I also believe in your situation in
St. Joseph, you have adopted your ordinance and you have
them approved with a definition which isn't applicable any
longer.' That may be creating a real problem for you.
t/>
MR. REACT: Tentatively approved, provided we take
that out—
MR. DONAHUE: I don't think anybody in your city council
as I will complain about reducing the number of people who have to
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pay ICR.
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that.
MR. REAM: No, I don't think anyone will complain about
MR. DONAHUE: Are there any other questions or
|comments- or whatever from anybody? That is why we are here.
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MR. WUTTKE: My name is Richard Wuttke. I
am with the milk business in northeast Iowa. In reference
to possibly the last item or question that was on the
floor, before we took a lunch break, a 20-year plan or
4 1 20-year planning stage for wastewater treatment, I would
*> ii
like to point out that in Fredericksburg, Iowa, if it
sounds like a metropolitan area, believe me it is not. We
have a population of 1,000 people. We built a wastewater
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treatment plant 16 years ago, and it was planned at the time
-
_ to handle a population of 5,000 people. Currently we
*
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„ to over double its size in order to handle the facilities
5 there, and our contribution as the industry has increased
less than 10 percent.
So a 20-year plan or a plant that was actually
built approximately five times too large 16 years ago is now
„, half as big as it needs to be. Yet part of the problem, as
at
was stated here this morning, is that 68 percent of the plants
are operating larger than necessary.
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- Now somewhere along the line the criteria have
changed drastically in 16 years, which I would like to point
out, I don't feel is part of industry or the municipality's
problem. I think it has been caused by the federal guidelines
and state guidelines, I might add.
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Another thing I would like to point out here,
in our particular cast, the State of Iowa, it has a great
deal of difference on outlet streams from a plant. We are
very unfortunate to be on a small stream that feeds a. conser-
vation area by the state, and therefore they, are asking
that our discharge be pure, more pure than the well water.
This takes a lot of m oney to maintain this.
bility of building a holding pond or lagoon, like
pumping your discharge in on a 24-hour basis, rather than—
MR. WUTTKE: I have a booklet in my briefcase.
I have $20,000 invested in for that purpose, hopefully to be
s
Q able to incorporate with the municipality. We have failed
to be able to reach agreement at this point. But we are
both working on this point and this is our plan, but it still
requires investment on both of our parts of a million dollars.
Our plan is requiring investment of a million dollars.
Theif plan at this point requires investment of $1,800,000.
They are asking us as an industry to contribute or to
stand 73 percent of this cost.
Now we in a town of a thousand people employ 65
people. If we are required to invest 73 percent of $1,800,000,
which is approximately $1,400,000 or $1,500,000, that will
build a lot of brick and mortar. Region VII, as I understand,
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represents Iowa, Missouri, Kansas and Nebraska; and this
is down home country people in small towns. We are killing
*them. If we move, we are going to kill the toww.
3 Mr. Nielson gave testimony here this morning,
5
and before we got out of this room, he was approached by
a metropolitan area to move his plant, and he would be given
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92
share plus ZCR, and superimposing on that the estimated
User Charges, which the city had furnished us at that time,
over the 20- or 25-year, whatever period of time we choose
to make the comparison, and then we compared that against
capitalizing the cost, of a relatively permanent type spray
field for ourselves, along with the projected cost of
b N operating for that total term, and we did a—what is it
8
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called—a net present value analysis, I believe—Coopers &
§ || Lybrand will understand this. And I frankly don't very well.
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The upshot was that two were very nearly equal, and that
assumed that we would have to capitalize immediately the
cost of our own treatment system.
Were industrial bonds available to us—and we
did not make the assumption they were—in some cases they
may have been—could we have gotten industrial bond financing,
which would have put financing of our system more on a par
with the type of financing that POTW could have, it may have
looked as though going by ourselves would have been the
better alternative.
There is another thing that has to be taken into
account on this1-in every case. Two of these were in a
relatively cold climate. We thought the idea of operating
a winter spray system was not a good idea. We only looked
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10 93
summer
for spray irrigation for our in season/high discharge rate.
We assumed we would stay with the city system and discharge
relatively a minimal amount during the other eight or nine
_ months of the year.
The only situation where the climate would have
possibly been beneficial for all year-round irrigation,
because of temperatures, we were told by the state we could
not have a discharge in that area. Therefore the spray field
would have had to have been a no discharge installation,
and the rainfall is not high in the areas as California;.
Central Valley} the rainfall is not high in winter, but
there are a lot of days of realtively low temperatures,
which would have required large storage for us to run all
winter and therefore this tended to deflate the cost of the
H spray field assumingwe would break all of our ties with the
city and go into our own treatment system.
* I might say something else, however. These cost
comparisons were made based on the city's consultants'
m analysis of what it would cost us to go into their system,
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at a period some months before the time in which we had to
sign on the dotted line and make a commitment.. That
doesn't really have to be said because obviously we wouldn't
be making comparisons had we already made a commitment.
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I would like to point out that these costs,
I think in virtually every case, have turned out to be grossly
underestimated. They have been underestimated to a much
5 j greater degree than normal inflationary pressures would
dictate. I will give you just a few figures off the top
of ray head. Please don't regard these as exact. These
§ come from the worst situation which we have encountered,
which doesn't happen to be in each region.
At the time in which we wrote a letter of intent
| I and made more or less a verbal commitment to the city
to go ahead and proceed with the final design of the
system that we intended to participate, we were given a
total cost of approximately $250,000 a year, as a likely
sewer, bill at the time the plant would be completed,
which would have been probably 2-1/2 or 3 years hence from
that time. This was already a raise from some $40,000 we
were currently paying in sewer bills. We made our own
analysis, and at that time we decided to go ahead and proceed
with the project. It was still better than branching out
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When"it came time to sign the final agreement,
that number had approximately doubled. I believe it was
about $460,000 a year, as compared to something like
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In this particular system, we are even seriously
considering the possibility even of pulling out now,
having committed ourselves to a total local share of the
project. It might still be cheaper to back out and build
our own system. It is a possibility. I think it is unlikely
but it is getting to the point where it is going to have to be
reconsidered.
MR. PAI: Did you increase your flow in the mean-
time? Your flow is the same?
MR. KIRK: Our flow is the same. I can tell you
something, that is a different situation, and I will tell
you something about that that illustrates something else that
was brought up earlier today. That was inability of
industry to plan for long range. This is an interesting
story. The plant was designed for a hydraulic load, BOD
load and suspended solids load. The hydraulic load has been
very constant and has gone as predicted and there has been
no problem with it. The suspended solids load has fluctuated
a bit. The BOD load during the first year of operation
of the new facility from our industry was exactly double what
projected. At the time we made the projection, we had
three or four years' worth of back data. This is daily data
and not.very many companies have daily data.
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We have made several internal surveys to show
this increase was entirely due to a change in characteris-
tics of the incoming crop. There was nothing whatsoever
we could have done about that BOD nor could we have in
any way foreseen what would have happened. And that BOD
load went on for two years, and during that time the city
modified a $13 million plant to accommodate an almost
doubling-of BOD during three months of the year. They used
a different engineer, used some input from us, which--cost
them exactly $400,000, of which they are going to get
$100,000 grant from different sources than EPA. That tells
us something about it.
If one can double the BOD load during our seasonal
bulge and only have to cost just something less than 5
percent in addition to the total cost of the plant, that
points out two things: one, it points out we don't have very
much ability to predict what our loads are going to be.
We just do the best we can. The costs are getting to the
point where we are afraid to try to reserve ourselves any
5
* kind of contingency at all because we just simply can't
afford to pay^for it any more.
The other point is in direct answer to your
question, John, the fact that we did have an overage of BOD has
not made a huge amount of difference in the kind of rates we
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98
are paying now. This has not been a major factor.
MR. FAX: You charge the same thing, you would
pay more too?
MR. KIRK: Yes, these rates would have gone up
considerably regardless.
§ I might comment on Mr. Robertson's comment this
morning that really what I and some of the other speakers
are doing is complaining about the high cost of secondary
treatment. I don't argue with that at all. I guess what can
be said- based on this kind of exercise is, yes, we are
complaining about the high cost of secondary treatment. We
a are looking for any way that we can to reduce that high
2 cost of secondary treatment. ICR is just one of several
things that could be rolled back to make the burden a
5 little bit easier to bear. I think maybe that will help
rt put the thing in its proper perspective.
* MR. DONAHUE: Thank you very much.
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MR. PAI: Do you- get involved in the planning
process, or are you just sitting there waiting for —
a MR. KIRK: Let me first explain I came on board with
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the company aiJb'ut half-way through the planning process
for every one of these examples that I gave you, and therefore
I might not have performed in behalf of the company as well,
perhaps, as I could have otherwise. But my predecessor
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in each case was involved with preliminary plans and took the
trouble to find out what the design of the facility would be,
and what it would be based on; and in many cases he argued
with them at considerable length as to whether the type
of technology they were going to use was most cost effective
or would do the job best, or whatever. I got into all
three of these projects at about the time that the preliminary
cost estimates were finished and the consultants were about
ready to embark upon the final design phase.
I was kept informed of the general type of plant
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the plant.
I find out through my wonderful hindsight that that
may have been the place where we could have made the largest
influence on what our ultimate costs would be.
MR. PAT: You mean at Step^ rather than Step 1?
MR. KIRK: I am not sure that I am completely
clear what your steps are.
MR. BROWN: John is talking about plans and
specification stage.
MR. PAI: That is Step 2. Step 3 is construction.
MR. ROBERTSON: If nobody else has any question,
maybe I can pick on some people that I know.
I know Harry Griswold is here for the City of
Springfield. They have done some substantial investigation
on ICR and impacts of their industries on the city. How
about giving us some of your experiences down there?
MR. GRISWOLD: Tom, I had planned to take the
discussion received here home, and possibly submit some
written comments. I didn't make a formal presentation ahead
of time because I didn't really know what the Coopers & Lybrand
report was going to present to us. But I think it is fair to
say that at least in our preliminary estimates, that the costs
that we have seen so far to individual industries are not
that substantial. But the cost to the City of Springfield
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to administer the program is substantial. In fact,
under some of the definitions that were being considered, such
as for circuit breakers at various levels, the cost to
administer the program would have been more than the total
receipts that we would have gained from it.
Aside from that, I didn't bring figures with me.
I hate to quote from memory.
MR. ROBERTSON: Thank you. I got what I was look-
MR. DUFFIELD: My name is Davy Duffield. I
work with Harry. I am a revenue technician. I have had con-
«, siderable experience in community development work, and also
s
worked witjh the Department of Natural Resources. In the
Department of Community Development, I dealt mostly in
grant programs, specifically public works grant programs,
designing industrial parks, locating them for communities,
and figuring out the cost benefit package to them.
The ICR programs seems to have an algorithm
with the Public" Works Nonrelocation Act. My question is,
if you are familiar with that, does the ICR program actually
have much to do with the decision of industry moving from
one area to another, either as prevention or as subsidizing
it in that respect or are we not looking at a long enough
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102
19
time frame with that?
MR. BROWN: We haven't been able to identify
specific circumstances where an industry has moved from
one 'location to another solely because of ICR. We mentioned
this morning a couple reasons. One, ICR just hasET't been in
effect that long; and in places that do have approved
systems, they either haven't implemented them or they have
u
0 postponed implementation until after the moratorium.
We really aren't able to identify specific instances
* of that.
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* MR. DONAHUE: The other thing we looked for and
were not able to find, nobody would specifically cite a
plant that they decided not to expand that they had
m previously planned to expand, because of Industrial Cost
Recovery. A couple places people decided not to expand
plants, but they would not attribute it to Industrial Cost
£ Recovery. They would attribute it to a bunch of things that
might include ICR, but never did we find one case where that
oa
was the reason for doing it.
£
** MR. DUFPIELD: I think your point about looking at
expansion possibilities is very relevant here, since most
people do not realize that 80 percent of all new jobs in
Missouri, in the years 1974 through 1976, were developed
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20 103
from expansion and not from relocation. This is an area
that people unfailiar with that particular aspect—
MR. ROBERTSON: I am aware of at least one dairy
cheese plant in this region that was located in an Iowa
town that signed a letter of intent and a facility was built
and then moved out of town because of ICR to a town that
| I! did not at that time have a federal grant. They have now
been caught up with, and they are threatening to leave
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21 104
it is quite possible, if it were not for sewer charges/ many
of these plants would still be operating. Nevertheless,
the jobs are lost.
The other situations had already come to pass,
or were at least certainly on the books, and it was known
that they were going to come to pass and the industry,
at least in our case, we had not made the decision to close
the plant down. The thing that triggered the decision was
the necessity of signing a 20»year agreement to pay ICR
and to pay back the local share of the capital charges.
* I would like to think that that is a situation where those
* jobs are no longer there because of sewer rates. It is
quite possible those jobs would have disappeared two years
later or some ten years or whatever from these other causes
or some other pressures anyway, and neither you nor I -have
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a crystal ball to be able to say that.
But I think perhaps you are being a little bit too
£ I reluctant to put the blame. As long as you explain the situa-
tion, I think it is perfectly all right to say these plants
did close right now as a result of sewer charges, even though
ft I there were other things. This points out perhaps the healthy
industry can perhaps withstand sewer charge, whereas relatively
unhealthy industry can't. Sometimes unhealthy industry goes
along for years and years, and staggers on its own and never
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meets its end until something comes up to polish it off.
In some of these cases it happens to be fcewer
charges.
MR. DONAHUE: That could very well be the situation
you are describing. It is just our training and inclination of
accountants never to overstate something. We prefer to under-
state something than to overstate something. That is why
we stated it as we did.
MR. PAI: Have you ever been refused to locate in
a new area or expansion because there is no capacity avail-
able to you?
MR. KIRK: We haven't run into that situation,
John, because I don't think we have pushed relocation—
MR. PAI: Or expansion?
MR. KIRK: To have to come to grips with precisely
that at this time. Each time we have looked into an expansion
or new plant, we have wound up buying an existing facility
u
which had operated previously probably in some kind of food
processing line. So essentially capacity would have already
been there.
MR. PAI: My question is, people say we have a
tendency the way we try to make plant size more reasonable,
have a tendency to stop their industry from expanding or
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106
23
coming to town. My question is, has it ever happened to you?
MR. KIRK: I can perhaps answer it for slightly dif-
ferent circumstances. We are located in two or three munici-
pal 'systems where we have deliberately not bought any
excess capacity because we can't afford it. The costs are
becoming more and more out of line, and I think we would tend
to take the position now that we will not expand at those
u
0 plants in any kind of product line which has high water
useage. We may expand in some things—you see, we have two
8
* kinds of operations: one is processing of fresh vegetables,
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* which takes a lot of water, produces a high pollutant.
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« The other is filling materials in cans and bottles,
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- and the only pollutant load one gets from that is daily
clean'up operation. You could increase your capacity 50
§
S percent, and it won't make much difference.
We could do some expanding in terms of field
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MR. KIRK: No, the one we shut down was the only
one we made the mistake of projecting a fairly large
future capacity. That was the first one that hit us. We
learned our lesson.
MR. PAI: What happened to the sewage treatment
Plant? What happened to POTW?
MR. KIRK: The real answer is, I don't know.
The immediate reaction was, all right, do we need to build
this thing or can we fix the old one up and stay with it?
They were going to completely forget about the old one,
start over, and break ground all over again on a new plot
of ground because the inference was there wasn't room to
expand where the existing treatment plant was. The existing
treatment plant was a fairly good treatment plant. It was
probably removing about 85 percent of the BOD. It wasn't
just a primary plant. I believe it was a-.trickling: filt-er
system.
MR. PAI: Where was this?
MR. KIRK: Bowling Green, Ohio.
MR. DONAHUE: I think one of the questions John
had, have you ever had a situation where a community just
refused you capacity to expand, where there was not capacity
available or they wouldn't—
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MR. KIRK: My answer was no because we haven't really
asked that question very often.
MR. DONAHUEi Okay,
MR. KIRK: We have several plants which we would tend
no/t to expand, because of the current cost situation, and where
there would be no capacity for us to expand unless we asked
them to provide more for us. We would have to give them about
| a three-year lead to do that, and we are aware of that fact.
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p
we put a plant there, and had it depend on whether or not they
(9
* had treatment capacity. We just actually haven't asked that
*• question. We bought up a couple of old facilities, and have
i, gone back into business with them. They were discharging before
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3
OT way. It wasn't particularly relevant. We haven't tried to
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put a tomato plant in the community and said can you make sewer
capacity for us. That hasn't come up yet.
£j MR, NIELSON: W.C, Nielson, The question I have is on
overbuilding a plant. We talked to an engineer that designed
our local plant and said it is too big. We really don't know,
but we think it is too big. He says at this stage of the game
when they are ready to let contracts soon that it would cost
more to redesign the plant, cut the flow down, than you would
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save because by the time you mess around another year, costs
will be up. Is that true?
MR. ROBERTSON: It is an argument often used because
AE's design fee is such that it costs you more to design a
new plant than it does what you will h.ave in construction cost.
g It is a very real possibility.
MR. NIELSON: Why does each plant have to be designed
«• separately? Why can't EPA, say, put this plant out there,
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that is it. They are all the same kind of plants.
5
MR. BROWN: Like a dress pattern.
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, MR. ROBERTSON: There are many different size dress
patterns.
MR. NIELSON: You can make size 10, 12, 14, 16?
MR. DONAHUE: A couple things that affect the design of
w> the plant, sewage treatment plant. One is, what is coming
into the sewage treatment plantfmix of the population. If you
have got a heavy industrial population, you are going to find
y certain things in your sewage. If you have 90 percent
residential population, you are going to find something else.
That is one thing. You have to design the sewage treatment
I
E> plant to remove from the sewage those things that are coming
in, in different parts of the country, an agricultural community
with a tomato packing plant versus a residential community with
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a bottling plant. You are going to find different things.
Another thing is, how clean does stuff have to be when
you dump it back into a river or stream, the water and quality
standard you have to comply with. You have to clean up your
discharge from the sewage treatment plant more in some areas
than you do in other areas,
MR, NIELSONi If the plant was 100 percent over
desighed, then the Industrial Cost Recovery—it wouldn't cost
twice as much, maybe 70 percent.
MR. DONAHUE: It wouldn't cost you any more. The
Industrial Cost Recovery you are paying is only for that portior
of the capacity that you are using. Okay?
&
MR. NIELSON: The capacity run through the plant or
capacity capable?
MR. DONAHUE: Design capacity. How much was builtibr
you. If you build a plant of a million gallons and you are
using—you are only putting a half million gallons of sewage
through the plant, your Industrial Cost Recovery bill is not
going to change for your 10,000 gallons, whether the community
as a whole puts half a million gallons through the plant or
800,000 gallons-*- If you are only $sing 10,000 gallons of
capacity, out of a desgn capacity of a million gallons, and
that cost per gallon of capacity, the capital cost, fixed cost,
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is there, so your bill isn't going to change.
MR, PAI: The User Charge on local debt service would
double,
MR, DONAHUE: That is one thing.
The User Charge would increase: You have a couple
kinds of costs. Operating costs might stay the same.
If you divide by the number of gallons that flow through
the plantr the rate per gallon would be up, so your bill would
be up for operating cost, The bill for Industrial Cost Recovery
would stay the same,
MR. NIELSON: If you build one for a million, and it
costs you $2 million, If you build one for $2 million, it
costs you $4 million. You would have twice as much to pay
back,
MR. ROBERTSON: That is not true. It is a geometric
type of construction curve. You can construct a million gallons
a day plant for so many dollars, and 1-1/2 million gallons a
day plant doesn't cost you 1-1/2 times. It may cost you .1-1/3
or 1-1/4 times.
MR. NIELSON: We still have to pay more.
MR, DONAHUE: Obviously if the plant is too big, you
are going to pay more than if it were sized appropriately.
There is not much you can do about it. Once you build the
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thing, somebody has to pay for it. Unfortunately some people
in the community are stuck with it.
MR. PAI: Oversizing does not increase your ICR payment.
It does increase your local debt service payment. It will
increase your User Charge payment, which in many cases far
exceeds your 1C* payment. The majority of your sewer costs
are in User Charge and local debt service. So that is the
thing you .have to look at.
MR, ROBERTSON: I was just wondering if we could maybe
take a short survey, and if anybody here knows what their
residential bill is at their home for User Charges, and if you
are an industry, what is your monthly or annual User Charge and
ICR?
MR. CRISWELL: Larry Criswell. Our User Charge is the
most prevalent. The median residential bill would be for 500
hundred cubic feet. We have a customer charge plus volume
charge. The charge for that rate would be $4.80,
MR. PAI:, A month?
MR. CRISWELL: Per month.
It is difficult to tell you, for example, what the
industrial bill would be unless you can give me some parameters
There is no such thing as an average industry. We have
industrial type billings anywhere from $100 to $200 a month,
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all the way to $20,000 or $25,000 per month,
The Industrial Co«t Recovery is somewhat difficult to
tell you without reference. We have two programs in implementa-
tion at the present time, The first was in effect November
5 || 1976, There is one substantial contributor to that project.
5
S His bil,l last year was roughly $2,200. The larger project
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§
year's history of billing. We will of course, as I understand
the regulations now, collect actual receipts for the time per
I November 1 through January 1, which is the rough implementation
*
date of the moratorium, and we have elected then to send
deferred bills showing what ICR payments would have been, and
• that will be coming up here in the next month.
5
g I am groping, I think maybe the largest of the ICR
J3 bills for the Southwest plant project would have been in the
^ neighborhood of $10,000 to $12,000.
MR. PAIs Per year?
MR. CRISWELL: For one year, right.
CD
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The total ICR receipts this coming year were projected
to be $75,000 to $78,000.
MR. DUFFIELD: I would like to expand on that. The
5 ccf that we quoted was the average residential use. It was
the median. The easiest way to think of it we have a fixed
charge of $2.95 for the residential customer. Easiest way to
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think of it and $4,90 a month for the nonresidential customer.
We bill then at 37 cents per hundred cubic feet after that.
It is just a straight line and use more and costs more.
That is probably the largest contributor to the sqme-
Suspended
times large industrial bills, the volume charged, /solidscharge
and our BOD charges are really affected when there is; 3 fairly
high strength, and then they can be quite substantial, They do
not rise at' the same geometric progression.
MR. WUTTKE: Richard Wuttke. Could I deviate away from
your survey just a second? I have a couple questions, Number
one, does EPA have a definite guideline that they use in deter-
mining percentage of Public Owned Waste Treatment? Do they
flow or
go by /the BOD or both or does the EPA refrain from being
involved in determining this?
MR. HOWARD: As a minimum we go by flow, BOD and
suspended solids. If there are any other unusual pollutants,
or -toxic materials, those would also be considered in the
definition.
MR. WUTTKE; Is EPA involved to the point of helping
a
2 determine this in a proposed plant? Do they become involved
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width the consultants? Is EPA a factor?
MR. HOWARD: We are a factor in the manner that we
review what the municipalities and consultants submit.
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MR. WUTTKE: You do not make suggestions or recommenda-
tions to change?
MR. HOWARD: We will make suggestions / recommendations
if what is submitted by the municipality doesn't seem to agree
with what the actual percentage, the industry is contributing
3 to the municipality.
oj
MR, WUTTKE: Therefore you have recommendations but no
hard data.
MR. HOWARD: That's correct, due to the variable nature
of the situation in each community.
MR, WUTTKEi Secondly, I might add, the question was
brought up here before in regard to being refused access to a
wastewater treatment plant by industry, and I think in particular
your case in Iowa, it is just the opposite, due to the fact that
our industry, my industry in trying to prepare and plan a treat-
ment plant has been approved by other areas, and encouraged
to relocate and use existing facilities. We are being approached
now with a repayment plan for a 20-year period of $30,000 per
year plus our share of O&M to be another $25,000, We are looking
at $4,000 to $5,000 costs where we are at. We have been
guaranteed to be less than that if we will relocate.
It isn't a matter, I don't think, in our particular
area of being refused a place to go. In fact, we are being
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encouraged to change. Yet, the municipal plant tfcat is there
where we are currently serving is going to be required, should
we leave it, to invest another $400,000,which of course will
mean federal and state monies, but it does not let them off
the hook.
MR. HOWARD: I don't know the particular town you are
talking about, but I would venture to say if industry would
leave the community, and this has happened in other cases, that
perhaps the municipality would not be required to upgrade or
expand their treatment facility. In other words, existing
facilities may be adequate to meet their discharge requirements
That is exactly the situation where we would suggest that the
municipality require a contract from the industry to commit
them to the use of that facility, where ym are considering a
tf "go or no go" situation, to build or not to build,
<
MR, CRISWELL: On that particular statement that you
just made, you said you would suggest that contract. Is EPA
in a position to require such a contract? Can you under the
« I regulations now?
MR. HOWARD: I think we have required a few instances
in the past, contracts on the basis that if the industry did
leave the city, and the city was still required to upgrade or
expand, they may not have the financial capability to do so.
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Other than that, I am not sure of any other authority,
MR. CRISWELLs THis is something over and above the
letter of intent required from a substantial user?
MR. ROBERTSON: Yes, regulations require a treatment
plant to be operable, and there are a couple of cities in the
region where an industry constituted 90 percent or so of the
capacity. And if they were to leave town, the plant would be
inoperable', due to lack of flow through the pla.ntt So in thos s
cases we have required a contractual agreement betweehcthe'-pity
and the industry. But it is not between EPA and the industry,
MR. PAI: Both of you gentlemen are from the city.
How do you feel about this contractual requirement? Do you
favor it, or to a certain degree do you favor the contractual?
MR. CRISWELL: It is hard to put yourself into a
position, a situation like Tom described, where the industrial
contribution is so significant from the population of roughly
165,000, so we don't obviously have that type of problem. I
don't think it really is applicable to our situation if we
wouldn't be able to see any substantial reasoning behind the
need for such a contract, such as was just brought out, I
think my own pejr.sonal view would be that I would not favor a
contractual agreement of that type, simply because it is
seemingly an overwhelmingly burden on the industry.
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MR, PAI: Have you ever rejected an industry's coming
into your town or expansion for additional capacity?
MR, CRISWELL: We don't know whether we have rejected
them or not. We have asked them a number of questions and
found them not to locate.
MR. PAI: Such as what?
MR. CRISWELL: Such as the possibility of retention
time at least 24 hours of the total daily discharge,probably
the question which scared more people than any other,
But primarily the type of questions we ask a,re those
t ypes of things that we would find out through routine
surveillance of monitoring, anyway.
I can't really say that anybody has failed to locate
because of that type of prelocation screening, if you will.
We were much more sensitive to that type of question before the
recent upgrading which increased capacity of both of our treat-
ment plants than we are now. We are presently right about the
averages that Coopers& Lybrand found out, using roughly 70
percent of capacity of one plant and 72 percent of the other.
MR, PAI;. You feel that the EPA guideline is adequate
you to size your_plant correctly or the way you feel it should
be sized? Is the cost of guidelines too tight or loose?
MR, CRISWELL: I can't speak to that question because
I am not involved in any way in the design.
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MR. KIRK: Donald Kirk. I have in round numbers two
rate structures, so y>u get a percentage of various components.
Case one, local capital share is $65,000 a year.
ICR is $25,000 a year, and the User Charges are $150,000 a yaa:-
That is for the total of $240,000.
In that case* ICR is about 10 percent of the total.
MR, ROBERTSON: What size discharge?
d MR: KIRK: Discharge runs up to two million gallons
z
p during-the the" height of the season. It goes into a community
serving about 30,000 people.
Our portion of the total design of the plant is some-
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jj thing like ten perdent.
MR, PAI: It is more than that, isn't it? You have
300,000 people, you would have—
"' MR, KIRKs Thirty thousand.
MR, PAI: Thirty thousand people, you would have about
3 MGD plant of domestic flow.
MR. KIRK: It is a 13 MGD plant. There-are other-ihdust
ries. YOU have different BOD and suspended solid ratios;.
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ffl MR. PAI: You have other industry? I thought you meant
«
a one-industry town.
MR. KIRK: The other case, Case 2, the capital is
$240,000 a year. ICR is $185,000 a year. The User Charges arc
$395,000 a year, for a total of $820,000. So you have got a
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little over 20 percent ICR in that case.
I might add that in the case where we are only paying
contract,
10 percent, we do not have an absolute fixed capacity/ so we
are paying ICR based on the actual discharge. In the second
case we do have a complete, firm, fixed capacity, and we are
taking ICR on our design whether or not we use it all year.
That is probably the main reason for the difference between
10 percent*in one case and 20 percent in another case.
MR. ROBERTSON: You used a phrase that I would like foj:
you to define for me. What is your actual discharge? Is that
daily average, peak daily average?
MR. KIRK: The total number of pounds discharged to
system all year.
MR. DONAHUE: I think one of the comments we would lik£
to make, talking about rates and what people pay, to use a
statement that one of my colleagues likes to use all the time,
that rate making is an art, not a science. You are going to
find, depending upon EPA for all its regulatory responsibility
and its active involvement, in looking at the User Charge and
Industrial Cost Recovery systems, basically is in a position
where if a community comes in with somthing that
seems logical, EPA is likely to approve it.
If a community wants good engineering judgment and
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good accounting judgmentf put two of them togetherf and allow
the community to really allocate cost and rate structure, they
can do just about anything they want to do.
Even with ICR regulations as presently drawn, the User
Charge regulations as presently drawn, the community still has
an awful lot of flexibility in how they do things.
i
Probably without too much difficulty, the community,
if it chose, could allocate debt service in some different
basis other than proportional basis.
You could take your local debt service and do it on a
declining block rate basis. You could do all kinds of things,
except for a couple states where there are state requirements.
MR. KIRK: Donald Kirk, again. I agree with your
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comment on local capital. Unless you happen to be in a state
that has special requirements for it, that has no'• federal
requirements at all. And one can do anything he wants with it
The problem with that is, it is very difficult to tell a
community that he should share ICR on one basis and share loca]
capital on another basis. Frankly, from my own point of
view, about three years ago or so, when we started putting
these agreements-together, I was even under the preliminary
assumption they -had to be done the same way. Many people who
were a lot better acquainted with the situation than I did also
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tend to think that 'Way. It was somewhat of a revelation to
me later that we could have theoretically done anything we
wanted to with local capital. The User Charge is bound by
« certain proportionality requirements. They are fairly loose
~ and sloppy and have a lot of room for local maneuvering, but
3
§ nevertheless you must show some reason for what you are doing
and you can't arbitrarily do something.
MR. DONAHUE: That is true. But you canr once you
define what actual Q&M costs a,rer the User Charge rate base,
| engineering judgment you use in allocating those costs to
1 volume or BOD /suspended solids or to grease or whatever you
want, gives you a lot of leeway,
8 MR. KIRK: Yes. We found some interesting inventiveness
I
in some of our communities. When cost escalation, inflation
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rates begin to get severer they find interesting ways to raise
industrial rates and not have to put through a rate increase
* for their citizenry. I am never sure whether these things are
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j purposeful or whether they are just an accident of the type of
revenue plan that they happen to start with at the beginning.
a. We are now in the process of going back to two different
8
communities anch-saying, hi, look, we are getting an unreasonable
amount of impact from your cost increases. Let's go back and
reconsider this User Charge allocation, and get something that
gets us a more equitable share of the inflation that is going
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on out there.
MR,DONAHUE; I think communities generally are learning
they have to pay more attention, put more thought into the
designing of rate structures, and cannot any longer sit down
with their one-man accounting shop and their one-man consulting
engineering shop and dome up with a rate structure. They
s have to think the thing through.
p
MR. ROBERTSON: I believe, I don't know his name, the
gentleman from St. Joseph, they had substantial negotiations
with the community of industries up there, and it is a function
of how knowledgeable industtiea are, how much flexibility they
havef as to what goes down. They spent probably a better part
of a year just negotiating allocation procedures.
MR. BROWNs Did they approve that?
MB. ROBERTSON: Yes, finally, conditionally, I believe,
is the word he used.
MR. PAI: Any other comments or discussion from the
floor?
Wellf just a last reminder that you can send your
jcomments, whatever you may have, by the end of this month to
Tom. And you also can call me in Washington, D,C., my Area Codle
is 202-, 426-8945.
So if there is no other comment or discussion, the
meeting is adjourned. Thank you all for coming.
(Whereupon, at 2;50 p.m, f the meeting was adjourned)
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INDUSTRIAL COST RECOVERY PUBLIC MEETING
Quality Inn
Denver, Colorado
Thursdayr October 19, 1978
The public meeting was convened at 10:10 a.m.,
Harvey Hormberg presiding.
STEPHEN B. MILLER ft ASSOCIATES
T4» TMIMB STRUT. •. W.
WASHINGTON. D.C. 20024
(202) 334-B148
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6
C^ONT^ENTS.
Opening Statement by Harvey Hormberg
Presentation by Alan Brown
Presentation by Ed Donahue
Discussion of 16 Alternatives
Statement of William E. Korbitzf Manager, Metro
Denver Sewage District
Questions and Answers
page
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7
17
27
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PERSONS PRESENT:
Dennis T. Cafaro, Mgr., Wastewater Division,
8H E. Las Vegas, Colorado Springs, Colorado
William E. Korbitz, Manager, Metro Denver Sewage
District, 6450 York Street, Denver, Colorado 80229
Moe Tabatabai, Chief, Operation Engr., Waste-
I water Management Division
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John P. Hurst, Environmental Engineer, 310
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Capitol Life Center, Denver, Colorado. Hdq. Engineers*,
2
J'. Thomas Adams, Operations Consultant, McCall,
Ellingson & Morrill, Inc., 1721 High Street
Richard 0. Davis, Mgr., Environmental Engrg. Depart
ment, M&I, Inc., Consulting Engineers, 4710 S. College Ave.,
Fort Collins, Colorado.
Tommy O'Brien, Sellands & Grigg, Inc., Engineer
for Sellands & Grigg, Lakewood, Colorado 80215
Errol K. Stevens, Wastewater Management, 3840-6
York, Denver, Colorado
w Robert J. Madden, Chief, Government Affairs, County
and City of Denver, Wastewater Management Division, 3840 York
Street, Denver, Colorado 80205
Bob Kocarha, Operations Specialist, Camp, Dresser
ft McKee, 1660 S. Albion St., Denver, Colorado 80222
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James F. Dunn, Sanitary Engineer, EPA.
Dallas K. Stephens, Assistant to Utilities Director
Englewood Utilities Department, 3400 S. East Street,
Englewood, Colorado 80110
George D. Sellards, Sellards & Grigg, Inc., 8745
W. 14th Avenue, Lakewood, Colorado
Robert Greaneyr Project Manager, Del-Mont
Consultants, Inc., P.O. Box 486, Montrose, Colorado 81401
Dick Johnson, Metro Denver Sewage Disposal
19
District, 6450 York St., Denver, Colorado
Jonathan Downing, Laboratory Director, City of
Colorado Springs, 18 S. Nevada Avenue, Colorado Springs,
Colorado 80947
S Robert L. Arnold, City of Westminster, 8777 W.
88th Avenue
Dan Uhl, Sanitary Engineer, City of Rapid City,
22 Main Street, Rapid City, So. Dakota, 57701
IK
3
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Paul E. Williamson, Senior Public Health Engineer,
Colorado State Health Department, WQC, 79 Julian St., Denver
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Colorado 80219
FrankrOrthmeyer, Director Public Works, City of
Grand Porks, North Dakota
Richard Zajac, Administrative Assistant, City of
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Pueblo Public Works Department, 211 "E" D Street, Pueblo,
Colorado 81004
Bruce Smith, Administrative Assistant,-Pueblo
Public Works, 211 "E" D Street, Pueblo, 81003
Fred A. Nagel, Assistant Director, Operations,
Denver Wastewater Management, 3480-G York Street, Denver,
Colorado 80205
John T. Pai, Project Officer, EPA, 401 M
Street, S.W., Washington, D.C., 20460
Alan Brown, Consultant, Coopers 6 Lybrand, 1800 M
St., N.W., Washington, D.C. 20036
Edward J. Donahue III, Consultant, CoopeK&»& Lybran
1800'M St., N.W.,Washington, D.C. 20036
MR. HORMBERG: Good morning. My name is Harvey
Hormberg. I am the EPA Director of the Office of Grants, which
means that I am Ye-sponsibleSror EPA' s grants activity in the
states of Colorado, Montana, North Dakota, South Dakota,
Utah and Wvoming. It is ?y pleasure to welcome you today
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ft || to participate in this met ting which is part of EPA's
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study of Industrial Cost Recovery.
It is EPA's sincere intention that the public be
involved in the study, and'that public statements and concern
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be reflected in the final report to Congress in December.
In order to make certain that everyone has the
opportunity to be heard, we must have a simple understandable
and. orderly meeting. To assure this, we will observe the
following order of procedure.
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A brief explanation of the purpose of the*. ICR
I study and of this meeting will be made by Jerry Burke, who
is our regional specialist for User Charge and Industrial
Cost Recovery.
A briefing of the project scope and methodology
» will b e presented by Alan Brown on my far left, of Coopers
and Lybrand, the management consulting and accounting firm
I hired by EPA to assist us in this study.
Presentation by Ed Donahue who is on my immediate
left, of Coopers & Lybrand, of the findings and conclusions
of the study as well as some of the possible recommendations
which could be made as a result of the study.
Prepared statements by those individuals who have
m
z scheduled a statement in advance will then be handled
next.
Then'any prepared statements by anyone else who
has a written statement.
Then questions and answers in an open discussion.
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We intend for everyone to be heard who wishes to
speak, but I must insist that we follow the format that I
have just outlined.
« ICR is a topical issue and we want the Congress
to be aware of the grass roots concerns relating to ICR.
will stay as long as necessary to conclude this discussion
3 We have a court reporter with us today and a transcript
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of the meeting will be appended to the final report which
goes to Congress. For that reason I must ask you to speak
clearly and slowly and one at a time. We are also recording
on tape.
& Without further ado, I will turn the meeting over
g to Jerry Burke who will explain the basic purpose.
MR. BURKE: I just subcontracted my speech to
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^ Alan Brown, mainly because a lot of it is to do with
Congressman Roberts' report, so he will take it from there,
* MR. BROWN: Good morning. My name is Alan Brown.
oe
I am with Coopers & Lybrand. I was responsible for the data
• collection effort that we conducted in the western half
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of the country. I would like to briefly tell you why the
ICR study is -being conducted and why we are having this
meeting.
As you all know, the passage of the Federal
Water Pollution Control Act amendments of 1972, Public Law
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92-500, intended that wastewater treatment facilities
be operated as a nonprofit public utility. Section 204(b)
of the Act required the grantees to develop and maintain two
basic kinds of revenue systems.
3 It The first kind was a User Charge system which
was designed to recover the operating, maintenance and
replacement cost of the treatment system from all users of
the system on a proportional basis related to useage.
The second kind of revenue system was the Indus-
trial Cost Recovery, designed to recover from industry
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the portion of the EPA grant allocable to construction of
sewage treatment capacity for industry. While some juris-
dictions tend to disagree with EPA's regulations and guide-
lines related to User Charge, most grantees agree in
principle with the idea of an economically self-sufficient
wastewater treatment system.
ICR, on the other hand, is a topic which has caused
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j considerable debate over the last six years.
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In response to many questions and Mich discussion,
Congress in December 1977 enacted the Clean Water Act of
1977, Public Law 95-217. This Act makes several modifications
to the 1972 Act, and one of the requirements of the 1977
Act was set forth in Section 75, which specified that EPA
would study the efficiency of and need for ICR. The study
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was to include but not be limited to analysis of the impact
of ICR on rural communities and on industries in economically
distressed areas or areas of high unemployment.
The report mus-t be delivered to Congress by
December 31, 1978.
In May of this year EPA contracted with Coopers &
Lybrand to conduct this study for the agency.
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The purpose of the study was to carry out the
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instructions of Congress and the basis for our scope of work
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«s was the questions inserted in the Congressional Record of
December 15, 1977, by Congressman Roberts. We have got
a copy of Congressman Roberts' questions here.
a Congressman Roberts said, "It has long been the
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3 intent of Congress to encourage participation in publicly
owned treatment works by industry. The conferees are most
concerned over the impact the Industrial Cost Recovery
provision of existing law may have on industry participation
on these public systems. Accordingly, the Industrial Cost
Recovery study. Section 75, has been incorporated in the
conference report, and EPA is encouraged to submit the
results of thjp, study as soon as possible so that Congress
can take action on any recommendations that are forthcoming.
"It is expected that the Administrator will
consult with all interested groups in conducting this study
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and that the study will address at least the following ques-
tions :
"First. Whether the Industrial Cost PEcovery
Program (ICR) discriminates against particular industries
or industrial plants in different locations, and do small
town businesses pay more than their urban counterparts? What
is the combined impact on such industries of the User Charge
and ZCR requirements?
"
Second. Whether the ICR program and resultant
User Charges cause some communities to charge much higher
costs for wastewater treatment than other communities in the
same geographical area? Some communities have indicated
that disparities in ICR and User Charges affect employment
opportunities. Whether a mechanism should be provided
whereby a community may lower its User and ICR Charges to a
level that is competitive with other communities in order to
restore parity?
"Third. Whether the ICR program drives indus-
tries out of municipal systems, the extent and the community
impact?
"Fpurth. Whether industries tying into municipal
systems pay more or less for pollution control than direct
dischargers?
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"Fifth. Whether the ICR program encourages con-
servation, the extent and the economic or environmental
impact?
"Sixth. Whether the ICR program encourages cost
« effective solutions to water pollution problems?
^
2 " "Seventh. How much revenue will this program
produce for local, state and federal governments, and to
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what use will or should these revenues be put?
"Eighth. Determination of the administrative
costs of this program, additional billing costs imposed,
costs associated with the monitoring of industiral effluent
for the purpose of calculating the ICR charges, ancillary
benefits associated with the monitoring of industrial effluen
B 1
3 procedures necessary to take account of changes in the number
** U of industries discharging into municipal plants, and the
impacts of seasonal or other changes in the characteristics
and quantity of effluents discharged by individual indus-
tries?
"Ninth. Whether small industries should be
exempted from ICR? How should small be defined? Is there a
reasonable fldtfr that can be established for ICR based upon
percentage flow?"
We at Coopers & Lybrand have been busy for the
past five months asking questions and 'gathering data from
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a cross-section of viewpoints. As a final action in
their data collection phase, ten, regional meetings are being
held in all EPA regional offices to present a summary of the
data gathered to date, as well as a preliminary.set of con-
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elusions.
g We would like to gather data and statements from
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those interested parties with whom we have not had a chance
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to talk in the past. We want to present a list of some of the
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alternatives to ICR which could be recommended.
Finally, we want to answer as many of your questions
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as we can.
* Our primary purpose, though, is to listen to your
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• comments.
With that, I will tell you a little bit about the
project scope and nethodology. When EPA first asked us to
conduct the ICR study, the first thing we did was to read the
1972 legislative history related to User Charge and Indus-
trial Cost Recovery to find out just exactly what was
ICR supposed to accomplish. Stated briefly, we found two
major ideas contained in the legislative history. The
first was the idea of equity or the equalizing of the
assumed economic advantage; namely, less expensive sewage
treatment costs with those industries using public sewer
systems as opposed to those industries treating their own
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sewage.
And the second idea concerned capacity, or appro-
priate sizing of wastewater treatment plants with adequate
but -not excess future capacity.
A third idea, but not as central to ICR as the
first two, was to encourage water conservation.
I This background material, together with the legis-
lative history from the 1977 Act, especially Congressman
Roberts' questions which I just read, and Congresswoman
Heckler's statements on ICR, served as the framework for us
to plan the study.
The initial step that we took in late May of this
year was to sit down with EPA personnel, including John
Pai, John Gall from Region I, and Ted Horn from Region V,
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< and put together a large shopping list of every piece of
data that we could think of that would be helpful in answerinc
«
specific questions already asked about ICR and User Charges,
3
i as well as what data could help us in addressing more general
issues that were involved.
o We took this list of data elements that we had
drawn up and converted it into two draft surveys, one
survey questionnaire for industry and one for grantees,
The draft industrial questionnaires were reviewed
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with the National Association of Manufacturers and the
National Food Processors Association and other public and
industrial associations in groups just to be certain that the
information we wanted was available and could be provided
5 to us.
After refining the questionnaires, we developed a
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d list of people to survey. With EPA regional office assistance
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we compiled a list of approximately 100 cities which we plan
to visit and interview in person. These cities ranked in sii«
from Ravenna, Nebraska, with a population of approximately
560, to cities as large as New York and Chicago.
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5 We eventually ended up visiting approximately 120
iome of them twice if there was strong local interest
in the study.
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first with the local agency responsible for wastewater and
* then with any other interested group, such as industries and
civic associations later in the day. We mailed survey
questionnaires out ahead of time to the people we were going
to meet with, so that they knew the kinds of data we were
looking for anA-could prepare. We stressed that participatior
in the survey was voluntary, and in many cases people mailed
in completed questionnaires rather than meeting with us
personally.
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After we drew up our list of 100 cities to be
visited in person, we cane up with a list of 200 additional
cities, with telephone surveys. The same questionnaires
were used and they were mailed in advance to the people who
were to be surveyed. A group of five industries, later
expanded to six, was selected for detailed study. Now
although we were interested in the impacts on industry in
general, we were particularly interested in the impacts on
I industry which met one or more of the following criteria:
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3 It was a labor-intensive industry, had a low..
^
operating margin, was a high water user, was affected greatly
S by seasonality or affected greatly by extent of pretreatment
regulations.
The industries that we eventually selected for
detailed study were meat packing industry, dairy products,
paper and allied products, secondary metal products, canned
~~ II
* and frozen fruit and vegetables, and the textile industry.
G I
A list of selected establishments in those industri
located in the cities we were going to visit in the telephone
survey was prepared and survey forms mailed to those estab-
lishments.
The entire data collection -effort was accomplished
in six weeks, using ten teams of C&L consultants.
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The second step in the study after the data
collection phase, and just as important as the first, was to
develop mechanisms for public participation in the study.
We wanted grass roots involvement and wanted an open study.
We put together an ZCR Advisory Group of approximately 40
individuals representing industrial groups, environmental.
civic, local government, and Congressional interests, and
relied on them to keep their local chapters involved in the
study. Monthly meetings were held in Washington, and
transcripts of the meetings mailed to anyone wanting them.
The third step in the project was to summarize
and analyze this data collected. We are currently completing
this task and have reached some preliminary conclusions as
? to what the data means. Several computerized statistical anal
ses were developed and are currently being refined. We feel w<>
have looked at enough data to be able to formulate possible
alternatives to ICR as it is presently constituted, and one
of the purposes of the meeting today is to relate to you what
we found, and to get your reaction to it.
After these ten regional meetings are held, we will
put together a draft final report which will be widely cir-
culated.- This report is scheduled to be written in mid-
November. Then in December we will begin to write our final
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I am Project Manager for Coopers 6 Lybrand, the ICR study.
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report which will be delivered to Congress in late December.
The final report will contain recommendations to Congress
concerning ICR.
We cannot of course guarantee that Congress will
act on our recommendations.
Now, since you are all interested in our findings
and conclusionsr I will turn the meeting over to Ed Donahue,
who will relate to you what we found, what we think it means,
and what possible alternatives could be suggested.
MR. DONAHUE: Good morning. My name is Ed Donahue.
I am here to tell you what we found during the course of the
study, what we think it means, and then to present some
possible alternatives.
The data and statistics that I will be using
are based on the data we collected during our study currently
being studied, validated and refined in our Washington office
Rather than hand out raw data or computer printouts
that are understandable to only a few people, we summarized
our data into a handout entitled "ICR Study Data" dated
October 10, 1978. You should have received copies of this
handout earlier.
The final version of the data analysis will be much
more detailed, much more extensive, and will be appended
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to, and included in, our final report.
Without further delay, let's look at the data.
Remember, though, that the data is mostly average data and
requires careful thought before using it, or it can be very
misleading.
We eventually got data from 241 cities or munici-
palities, or EPA grantees. The best data came from places
where we actually visited. The data we obtained from
the telephone surveys was not as complete or precise.
We also obtained data from 397 industrial facilities, most
of it through the effort of trade associations. The
industrial data is at plant level, rather than company level.
Looking at the major issues before looking at
3
specific data, the first thing we want to address is the
B
< issue of equity, or the assumed economic advantage (namely,
less expensive sewage costs) for industries using POTWs,
Publicly Owned Treatment Works, versus those treating and
discharging their own wastes. We used a computerized model
which we had developed for industrial clients, and modified
it to reflect User Charge and ICR situations. And:we used
Camp Dresser fr McKee to develop some cost equations for us on
cost of self-treatment versus POTW treatment for industries.
Basically, the model incorporates a series of
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equations which reflect the cost of doing business, and
enable a company to evaluate alternatives—in essence, a
"make or buy" decision—should the company use a POTW, or
should it treat its own sewage? What we found was that
for some medium or large industries having compatible wastes,
it is cheaper in the long run to self-treat, even without
including ICR, just including User Charges as a basis of com-
parison. This is a very significant finding. What it means
is that even without ICR or pretreatment costs, large
industries should from an economic viewpoint treat their
own sewage. This is based on several tax changes that were
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not really known to the Public Works Committee when they
wrote the User Charge and ICR provisions of 92-500, since
these tax provisions were enacted after passage of Public Law
92-55, and basically there are three:
First, accelerated depreciation over a five-year
period for pollution control facilities.
The second is investment tax credit for capital
equipment.
And third is use of tax-free IDBs or Industrial
Development Bonds to finance self-treatment facilities.
The proposed and current tax law changes just
recently enacted by the last Congress, and to be carried on
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in the next Congress, if enacted make it more attractive for
industries to self-treat because of the increased investment
tax credits which those tax changes include.
What this finding says is, that for many industries,
3 it is cheaper to self-treat than to use POTW. If this is
| the case, why don't more industries self-treat? There
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could be several reasons:
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•First and most obviously, these are not geographi-
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cally located on a river or stream or other receiving body.
in where they can discharge.
The second is they don't want the hassle of self-
B treatment. They don't want the NPDES permit. They don't
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want to have their own treatment works, sewage plant opera-
is tions, et cetera.
jjj Third, the User Charge and ICR havenot been in effec
long enough to really see their impact. The significant
thing to bear in mind, though, is that if ICR and pretreatment
costs are added on top of the User Charges, they could be the
m final straw that drives industry out of POTWs, thus making
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it more expensive fore the remaining POTW customers to use
a public sewer-system. In particular, EPA1s application
of pretreatment standards is likely to make many industries
consider self-treatment.
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The second major issue is that of POTW capacity.
Baaed on the survey of 241 facilities from which we obtained
data, the average POTW uses only 68 percent of its design
capacity. The usage ranges from a low of 4 percent to a high
of 120 percent. It appears that ICR, as presently formulated
has not acted to put a cap on construction of excess
future capacity in POTWs.
The third issue, that of water conservation, is not
as clear. BAsed on the industries we surveyed, water
consumption has dropped an average of 29 percent, but the
industries with whom we talked attributed the water conserva-
tion to higher water dates and User Charges, not to ICR,
because ICR as a percentage of the water bill and User Charges
is not that significant at this time.
H The economic impact of ICR to date is not significan
in most locales because:
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Most grantees have suspended ICR billings while the
moratorium is in effect.
The exception to the insignificance of ICR is
those cases where there are seasonal users and/or AWT. In
those cases, total sewage costs for industries have increased
by several times.
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The incremental impact of ICR above User Charges
is generally not great with the exception of the two cases
just mentioned; the combined impact of User Charges and
ICR can be very significant.
We can find only a few scattered instances of
8 plant closings due to sewage costs and none attributable
solely to ICR. The total jobs lost in the plants that did
close was1 less than a thousand. In every case, there were
o other factors such as plant age which affected the plant
19
closing also.
The impact of ICR appears to be greatest in older
s- cities, particularly in the Northeast, and particularly in
small to medium sized cities and in agricultural communities.
I
9 There does not appear to be any impact of ICR on industrial
13 growth patterns to date. We were not able to differentiate
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the impact of ICR on small versus large businesses, because
very few industrial plants were willing to disclose production
or sales data. The cost to industry of sewage treatment
is much greater, by about 50 percent per gallon in AWT
plants as compared to secondary plants.
£
Theincremental cost to grantees to maintain and
operate ICR, that is, the "eliminatable cost" above and beyonjl
the cost of maintaining and operating User Charge systems is
small when compared to the total cost of sewage treatment
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averaging only about $15,000 per grantee per year. Average
ICR revenues per grantee per year are approximately $88,000,
of which $8,800 is retained for discretionary use by the
grantee.
There is more data which might be of interest to
you that is included in the handout, and we will be pleased
to discuss specific data during the question and answer
period at the end of our meeting.
briefly:
To summarize our findings and conclusions very
ICR is not doing what it was supposed to do.
• Relatively few cities have implemented ICR.
Most of those who have implemented ICR have sus-
pended collections.
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grant funded POTWs. While our studies have shown that many
of the economic objectives have not been met, the social
objectives remain. Accordingly, it is appropriate to
consider a series of alternatives to ICR as it now exists.
At this time I will ask everyone to turn their
attention to a document entitled "Preliminary Compilation
of Possible Study Alternatives" dated October 10, 1978,
which you should have copies of. The document presents 16
alternatives, ranging from leaving ICR as it is now to
outright elimination of ICR. These alternatives are not
necessarily mutually exclusive. That is, some of them could '
jj combined for concurrent use. They are also not comprehensive
* Other alternatives could be proposed and we hope will be.
We are also not arranging them in any order of preference.
I would like to adjourn the meeting for 20 or 30
minutes to allow everyone the opportunity to read this
document. Stretch your legs a bit and come up with some
ideas and reactions to these alternatives.
We will be available to answer questions or discuss
informally with anybody any other questions about these
alternatives. If we could adjourn to eleven o'clock, we will
be available to discuss informally with anybody, any of their
questions. Thank you.
(Short recess)
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MR, HORMBERG: We are ready to pick up again.
John Pai has some comments he wishes to make.
MR, PAI: Good morning. I am John Pai, from Washingtoiji,
D.C., EPA, and I am the Project Officer for this study. I
__ just have a few statements to make relative to the project.
g
Number one is I heard many people feel they don't have any times
to review the material we sent to them and they wanted the
comment period extended. Vfe* decided that the comment period
2 for this study is extended up to the end of this month.";.-October
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« 31. So any written comment after this meeting can be forwardec
to Jerry Burke, here in Denver, or to me in D.C. I will make
my address available to you, or to Coopezs & Lybrand in
S Washington, D.C. Again they will make their address available
I
to you.
H The key thing is we have to receive it by that date- to
be properly considered.
Another thing I want to point out to you is I encourage
you to make-your comment. The reason is the approach to this
study is a little unique, we come to the meeting without a set
mind or what we feel is the best way to do it. We want you to
think along with,-us and to make a group decision such that it
would reflect indeed this is what people wanted and this is
indeed what Congress wants us to proceed with the study.
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So we want you to think about it, and I think it is a
demand on you, but I think it is the very best opportunity that
you can have your opinion in a decision making process.
Another point I want to make is that we are having
similar public meetings all over the ten regions, EPA ten
regions. And so the final decision will be based on the input
from all these ten public .meetings as well as from some of the
decision making people in D,C, as well as in some of the trade
associations, and other interested public groups. The final
decision will be made by EPA, but when we make that decision,
I think you probably know where the decision comes from.
3 1 want to,at this point, thank Harvey and his very
| able staff who put on this meeting for us. We did give them
very short notice to arrange this meeting and I want to apologiz
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time to arrange a meeting, and I want to thank you all for
coming again.
I give this back to Ed Donahue.
MR. DONAHUE: We would like to take these alternatives
As I said, they are not the only alternatives to be arrived at
They are the ones we put together, talking with some people
from the trade associations and some people from EPA. They
are not ranked in any order of preference. The advantages
are not all-inclusive. You can probably think of some more
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advantages and disadvantages for each of them.
J.A1 Brown is going to go through the 16 alternatives
that we have been able to come up with, and-there are variations
on all of them, too. You could combine'-theminor modify them,
whatever, These are alternatives we have been able to think of.
S 1 If you can think of some others, we would like to hear them.
Alan, do you want to go through them,
MR, BROWN: First of all, am I speaking loudly enough
£>r everyone to hear me? Okay, As Ed said, these aren't rankec
in any order of preference. You can combine two or three
possible alternatives to come up with one final recommendation,
Something I should make clear to you ahead of time,
a uider the disadvantages, for instance, under a lot of the
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alternatives, one of the disadvantages eliminate.ICR revenue
IS returned to government based on the interviews we did, total
ICR revenues to be collected over 30 years is going to be
between $1 billion and $2 billion. This is significantly lower
than $4-1/2 to 7 billion that was estimated when the program
was originally established. When you consider that 50 percent
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that cuts down £he share to a half-billion from a billion
[dollars over 30 years. So over a 30-year period, we are really
>t talking about a significant amount of money. But that is
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listed as a disadvantage and I wanted to explain that to you
early
The first and most obvious alternative to ICR as
presently consituted is just to abolish ICR, get rid qf it
totally. Do nothing with it. Substitute nothing for it.
Some of the advantages here would be to eliminate the complain
that we often hear from grantees that ICR is not cost effectiv
and it is.difficult to monitor and administer. It would
eliminate the complaints from industry that ICR is double
I
taxation and adds an unfair economic burden depending upon
58
, where the industry is located and who they discharge to. And
it would also eliminate the inconsistencies that we see in
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ICR charges from one part of the country to another or from
one grantee to another.
Some of the perceived disadvantages of this are
considering that one of the prime motivators behind ICR was to
put a cap on design size, without ICR and without some other
form of control on design parameters allocated to industry,
abolishing ICR may encourage grantees to plan and construct
treatment works that are larger than necessary.
And then the disadvantage of eliminating revenues.
The second alternative is to base grant funding for
eligible project costs, including industrial capacityf on a
sliding scale, with EPA funding current need at 75 percent and
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reducing project funding as grantees plan treatment works that
are larger than current needs indicate. ICR would be based on
current regulations.
What this is talking about is identifying the needs of
today and having EPA fundr;those just as they do today. And up
to Secondary treatment. Now, if the local community or state
required advanced waste treatment or tertiary treatment, EPA
wouldn't fund that portion of the project cost, and as a grantee,
design and develop projects that are larger than current needs
5
as they start building for future capacity, EPA's total grant
funding would go down.
Now, what this would do would be to encourage more front
end planning, and reduce the amount of excess capacity that is
designed and constructed and it would encourage industry to
participate early on in planning and identifying treatment
works needs.
A large disadvantage is that it may not be cost effec-
tive to design treatment works this way, when you are designin<
for a large and rapidly growing area, and in many cases anothe:
disadvantage is to increase the total local share of cost for
grantees building treatment works.
Alternative No. 3 is similar to Alternative No. 2. Yo
base grant funding for eligib,l£ project costs on a sliding
scale. However, you would not include any funding for
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industrial capacity,
The major difference here is that there is no Industrie
capacity whatever that would be grant fundable or project
eligible, This would eliminate ICR totally, because there
would be no federal grant allocable to industry.
A major advantage would be to eliminate grantee complaj
that ICR is not cost effective and difficult to monitor. It
would eliminate industry's complaint that it is double taxatior
and an unfair economic burden of ICR, It would eliminate the
costs associated with implementation and monitoring ICR systems
a facility planning.
?
One of the major disadvantages is it would increase th«
local share of project costs. These added costs may be passed
through to the industrial vsers, and in many cases would exceec
ICR costs, because there is going to be no federal funding
for industrial capacity.
Alternative No. 4 is feo charge ICR strictly on treat-
ment works, eliminating ICR charges for interceptor sewers
a. The advantage to this %a that it would reduce the
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administrative -^requirements that ^grantees often must perform
to identify which industries discharge to which interceptors
and how much of the interceptor to charge ICR on-
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Many grantees have complained that it is very, very
difficult for them to come up with specific allocations for
industry,
The one disadvantage we can see here is that it is
going to reduce ICR revenues.
| Alternative. 5 is to base industry's share of the
federal grant on an incremental cost basis rather than on a
proportional cost, basis as is now the case, and what this
e would do is allow industry to receive the Benefits of economic
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of scale, using an incremental cost basis. If we need design
i your facility it would take 8 MGD to provide capacity ior
*
residental and commercial classes, and an additional 2 MGD for
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industry, The incremental cost of building that 2 MGD would
3 be the grant portion allocable to industry and it's what would
« be recovered, using this method,
The major disadvantage, it is going to be very, very
difficult to determine incremental cos.t of constructing a
treatment plant, and it is going to be difficult to monitor.
Alternative 6 is to allow' the costs of constructing
industry's portion of treatment works to be gr.,ant e.liglfel§
based on grantee's option. If. industry's share is elected to
be grant eligible, EPA would fund, as they currently do, the
project and the amount it cost to build indu?tryJ-s
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You could set it up on a state bases or you could even go down
as low as a city basis.
Now, this uniform rate could be modified based upon
adjustments for treatment level that the plant goes to, for
instance, secondary versus tertiary^ type of treatment, like
activated sludge versus trickling filter, or leve of discharge
from the POTW. For instance, we found that the Industrial Cost
Recovery rates and payments are higher from industries that
discharge to a tertiary plant, and using a uniform rate you
(9
could establish a uniorm law that would adjust the rate up and
i down depending upon the kind of plant that you discharged to.
9
* One of the advantages here would be to reduce inconsis
tencies of ICR rates depending upon the level of uniformity yoi
adopt, but it would be difficult to administer and develop the3<
12 uniform rates.
Alternative No. 8 is to attempt to establish a circuit
breaker exemption, meaning once you reached a certain threshol1
3 ICR -would kick back in and would be collected. EPA currently
has a threshold or circuit breaker of 25,000 gallons per day,
the equivalent of sanitray waste. That is what we are talking
about here. That is an example of a circuit breaker. We have
tried to list once again fscbme of the situations that a circuit
breaker exemption could be based on.
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It could be based on local economic conditions; for
instance, if unemployment went above a certain level, ICR woul<
not be collected.
It could be based on an industry group method. For
instance, bakers might pay ICR if certain conditions were met
or canners might not.
e
N
I
And it might be based on a geographic area, lumping
§
three or four states or a region together.
EPA currently has a circuit breaker based on the level
of pollutant discharge, and you can also base it on a dollar
level of ICR payment.
If industry is not going to pay more than a certain
number of dollars in ICR payments, then you just don't collect
it. The advantages here would be to reduce the number of
industries required to pay ICR, and reduce the costs associatec
with billing and collecting it, and would allow flexibility
based on special circumstances.
The disadvantage, once again, is, it is going to be
difficult to develop and administer, and it will result in
inconsistency of ICR charges from one area to another, one
industry to another.
MR, CAFARO: Are you saying anything less than 25,000
gallons equivalent sanitary waste is not included in the
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ICR? Is that what this alternative is stating? I am not sure
I understand what you said about circuit breakerr 25,000 gallor
MR. BROWN: Currently EPA regulations' are saying that
you do not have to charge ICR to an industry that discharges a
process waste that is less than the equivalent of 25,000 gallor
per day sanitary waste. That is a circuit breaker. If in 1978
an industry discharges 24,000 gallons per day they don't pay
ICR, If next year they go up and discharge 26,000 gallons, thej'.
do pay ICR. Once you get above a certain level or below a
(9
certain level, ICR goes in or goes out
Does that help you?
*
Alternative Nd. 9 and 10 are very, very similar. No.
g 9 is to allow a tax credit for ICR, and No. 10 is to allow a
I
Z tax credit for pretreatment cost that industry pays.
Basically No-;',9, tax credit for ICR payments, would be
in addition to the normal write-off that business gets
on ICR as a regular business expense
j It would eliminate industry's complaints concerning
double taxation. It would be difficult to administer, and
once again would reduce revenues, and -it would require tax
changes by Congress,
No. 10 would allow tax credits for pretreatment costs
and when we talk about pretreatment costs here, what we are
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talking about are both capital costs associated with building
pratreatment facilities, and with operations and maintenance
cost associated with running those facilities.
MR. NAGEL: Did you say some of those are alteady a-
available?
MR, BROWN: Some of the are, yes.
MR. PAI: Yes. Identify yourself.
MR. NAGEL: Fred Nagle, from Denver.
MR. BROWN: Yes.
The major advantage would be to encourage industry to
pretreat their waste. The major disadvantage, it would-be
difficult to administer and it would reduce revenues.
Alternative No. 11 is to return to the requirements of
Public Law 84-660, abolishing ICR as it is now. One of the
complaints we heard from industry is that depending upon what
kind of funding a grantee received, there are inequities
between the types of charges an industry must pay. Jf a treat-
ment works were funded using Public Law 84-660, there is no
ICR. If it was funded using P.L. 92-500, there is an ICR pay-
ment. What this requirement would do would be to return to th«
fc
requirements of«Public Law 84-660 which requires industry to
pay a proportionate share of^ local capital cost put up by the
grantee. This would eliminate the complaint of inequitability
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depending upon the type of funding, and it would tend to reduc^
the administrative burden on the granteesf because complying
with. 84-660 was less complicated thafc 92-500.
The disadvantage would be to reduce revenues, and it
may even encourage the development of excess capacity, lacking
other kinds of controls.
Alternative No. 12 is to abolish ICR as it currently
u exists, and require that thelocal share of project cost be
Q
recovered through proportionate User Charges,
Currently EPA only looks at Operation and Maintenance
*
1 and replacement costs when they approve!' the User Charge systejn
*
Wha,t this alternative suggests is that debt service
be included as a proportionate part of your User Charge and
that ICR be abolished. What this would do would be to achieve
equity in the method of establishing rates, if it is thorough!
and consistently monitored.
But it is—it has several disadvantages. One would be
to reduce the grantee's flexibility in designing rates, it
would increase the grantee's administrative cost because it
would make User Charges more complex. It would increase cost
I
to large users-.where grantees currently use a sliding scale
method of recovering debt service.
And it may require major changes in some bond
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covenants where grantees have used revenue or' general obliga-
tion bonds to fund their local share.
Alternative No. 13 is to add an interest component to
the current ICR requirements.
What this would do would be to eliminate the perceived
subsidy with an interest-free loan to industry. And it toould
increase industry's participation in facility planning, because
it is going to increase potential cost to industry, and it
would eliminate that subsidy or interest-free loan component
of ICR.
The disadvantage is by increasing cost to industry,
it may encouarge industry to seek other alternatives to
discharging to a POTW, possibly increasing both capital cost
and Q&M costs associated with-;those users that remain in-:.the
system.
Alternative No. 14 is simply to extend the ICR mora-
torium for an indefinite period and we feel., the advantages and
disadvantages are basically the same. It just postpones the
date when a decision must be made on ICR, and really doesn't
accomplish much.
Alternative 15 is to do nothing about ICR and maintain
it in its current form.
The advantage would be that it would require no
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administrative or regulatory changes.
The disadvantage would be that it would eliminate none
of the problems we have already discussed concerning ICR.
No. 16 is to require a letter of commitment in contrac*
5
tual form from industrial users of POTWs, when a facility is
in
sized, this is a step beyond the letter of intent concept that
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more precise planning on the part of the grantee and on
S
industry's part,
*
«
EPA is currently using. This would require industry to make a
contractual arrangement with the grantee and this would encour4g
But the major disadvantage is that it would commit
industry for a longer term contract than most businesses are
willing to or able to commit themselves to.
S
* MR. DONAHUE» That is our list of prepared alternatives
If during the course of meeting and discussing, if anybody has
others to propose, that is one of the reasons why we are here.
I would like to turn the meeting back over to John.
a MR, PAI: Clearly there are four major thrusts that we
tried to think of in the ICR requirement.
The first one is to simplify the administrative burden
a.
to to grantees.
The next one is encouraging industry users to partici-
pate early in the planning stage for better planning and
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sizing of the sewage treatment plant.
Number three is to try to give the grantee more
discretion to fit his local conditions.
And number four, and I think it will become more
evident, is trying to protect existing users, be it domestic
users or existing industrial users, that they have reasonable
charges to them and are not paying for too much future growth
which they clearly don't get the benefit of at this present
time.
o
So particularly the last point in a certain area, has
become a very hot issue. In other words, there is too much
capacity for future growth. Maybe it is reasonable. Maybe
there is future growth in this area. However, the current
payment makes the existing users pay an extraordinary amount,
more than they are willing to pay at this time.
So these are the four major considerations that we
established in going through these alternatives that you feel
would more or less satisfy one or more of these major thrusts
or any other major considerations we shquld have, please feel
free to relate it to us.
That is jphat we are looking for in the alternatives.
In sending your written comments or for the meeting
today, you do not necessarily have to make a very sophisticated
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comment, we are fielding questions, we open discussion, and
in a way we bring people to think about certain things that
we may ignore or certain people may ingnore. A written eommen
or anything like that, you don't have to send it in very
formally. It is an informal notification to us, and we will
put it in the record. You don't have to be careful about you£
wording. The same thing goes for the discussion here, just
any comments you have, bring it upr and maybe stimulating
thinking on other people's part.
MR. KORBITZi Bill Korbitz, Metro Denver, on Alterna-
tive 16, is that last word supposed to be "sized"?
MR, BROWNt Yes.
MR. NAGEL: Fred Nagel, Denver. I have another
question on this 8th alternative. You are saying that you
have estimated the cost of administering the ICR program at
$20,000 per grantee per year, How many grantees are you
figuring' about, 20,000 nationwide?
MR. BROWNi We received information from 243 grantees,
That is what our statistics are based on.
MR, NAGELt You are not saying 243 grantees times 20,(|OC
is the cost to-administer the system?
MR. BROWNi No, we are not saying that. We are sayim
of the people that we interviewed, that cost was $20,000 to
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administer ICR.
MR. NAGEL: Per grantee?
MR, BROWN: Yes.
MR. NAGEL: Is there any estimate of the national
number of grantees, multiply that by 20,000 and you get a
1 1 national cost to administer the system.
MR. BROWN: One thing you have to be very careful about
there, is that the information we received from a lot of gran-
tees was very sketchy, it ranged from as low as zero dollars a
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It is really not—I don't think you can make a significant
year up to in the neighborhood of $300,000 or 400,000 a year
comparison that way,
MR, PAI: What Alan is'trying to say, unless we have
a good base for projections, we try to avoid making projections
because it has no solid base. All statistical data you see
today are based on actual data. We try to avoid speculations
or projections without a large enough sampling size. As you
know, ICR is really being implemented in very few communities
and for a very short period of time. So we try not to project
_ that over, except for what has presently happened up to this
I
point.
MR. DONAHUE: The other thing about the cost to the
grantee to administer an ICR program, we said that is
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"eliminatable* cest. Anything we did related to the cost of
ICR, as far as administering it, in any of our alternatives,
was all within the ffranewordt. that a User Charge system would
still be there, whether or*not there was an ICR system. So what
we are talking abijut, we say the cost to the grantee is how
much cost the grantee could eliminate if he could do away with
ICR. You still would have a User Charge system. Okay, that is
really an .incremental cost for ICR. What kind of administra-
tive cost could he eliminate if he did away with ICR? Dependii
^ upon the way you allocate cost, if you used a full-cost kind
*
of method, it might say that ICR costs more than an incrementa
cost kind of method.
MR. PAI t Basically the incremental cost, as an exampl
is a collection of ICR and the fund management received the
u ICR payment. That is an example of what are incremental costs
to ICR. For instance, monitoring industrial users, if you had
to do that under the User Charge system, then you have to do
that anyhow. That is a given cost, not an incremental cost.
So just to give you an example of what are incremental costs.
MR. NAGEL: If you are estimating return of something
like $2 billion over a 30-year period, and half of that would
accrue to the local government, what I am trying to arrive at,
if it is $20,000 per grantee, and if you estimate 20,000 grant
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nationally, you are coming up with $400 million.
MR, BROWN: Okay, based on our statistics, I think
another way to look at it would be to say that on the average
of the people that we interviewed, ICR payments are going to
5 run roughly $88,000, it is also going to cost roughly $20,000
5
| a year for the grantee to administer the ICR program. Of the
$88,000, the grantee gets to keep $10,000 or $8,800. Ten
§
percent—what did I say—10 percent to be used in any way he
§ wants.
I
5 MR, PAI: Of course the new law provides that you use
I
the retained 50 percent offset of such administrative cost for
ICR.
MR, BROWNs If it costs $20,000 for you to administer
that program, half of $88,000 can be used to recover your
13 administrative costs. So what you are looking at here basica
iy
is about $24,000 a year after you subtract the administrative
costs that the grantee can put into a fund to be used for
future expansion or operating a treatment plant. And what we
are saying is, it is really not cost effective to generate onj.y
x $24,000 a year, considering where you can use the money, and
when you compare it to , for instance, overall O&M or your
overall capital expansion budgets in a lot of grantee situa-
tions .
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of the wastewater was probably less costly than being part of
a POTS?. Also that the Industrial Cost Recovery system as a
water conservation measure is just not there. That is, there
has been no evidence to support that position. As such, I
would suggest that these two considerations be removed as
3 reasons for Industrial Cost Recovery system.
I realize what the Congressional history showed. But
this would be the price advantage for one industry as opposed
to another and water conservation as a reason for Industrial
Cost Recovery should be no longer considered.
i
i The first major point I would make concerning Industrial
Cost Recovery requirements is that the one area which is
" completely lacking is a listing of what, if there are any,
benefits coming from the Industrial Cost Recovery program
. We
12 realize that there would be a great deal of money needed to
implement and run the Industrial Cost Recovery system. I havt
seen estiamtes of about $400 million per year. I feel there
must be some benefit to justify that program. If the cost
is $20,000 per year for the average grantee, I think there
should be some benefit to this nation resulting from that,
benefit to water quality, air quality, economy, all the
sociological concerns and so on. We have been unable to
identify benefits to anyone coming from Industrial Cost Recov
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I think that should be addressed.
Second, the October 4 Preliminary Compilation of
Possible Alternatives identifies the elimination of Induatria
Cost Recovery revenues as a disadvantage to the termination of
Industrial Cost Recovery requirements, Heee again I propose
of
that if the raising/revenues by the federal government is any
of the many reasons for the Industrial Cost Recovery system,
t
I propose that that reason again no longer be considered,
Because as has been pointed out, to spend 50 cents to collect
a dollar is much more expensive than any of the revenue raising
methods that the federal government has. As such, I say if
any of the reasons for ICR is to raise revenue, that reason
a again be discontinued from consideration completely.
Third, I understand there is a concern, I see there is
S8 llconcern in- the October 4 draft that the elimination of Industrie
Cost Recovery could lead to the oversizing of treatment works.
Again I think from our experience the 201 facility plan system
is a much better procedure, much better control over the over-
sizing of treatment works than Industrial Cost Recovery possibly
could be. Based on our experience, just several years delay in
having a facility plan approved is one of the moat effective
methods I have ever seen to control the size of a facility,
But I do believe there is a much better mechanism for controllin
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metropolitan agencies of this country, the local agency who is
d
a member of a metro."agency has certain responsibilities for
„ administration, monitoring and so on. In our case, the Metro
*
Denver Sewage District also has administrative responsibilitie
costs and monitoring to at least some extent, so we can check
a
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the oversizing of treatment works than Industrial Cost Recover'
The fourth point, dealing with Congressman Roberts'
question 7, dealing with the cost of the collection of Industrial
Cost Recovery revenues, the cost of $20,000 per grantee per
year does not relate, I think, to agencies such as Metro Denve
Sewage District. That could relate to each of our 21 member
municipalities. Keep: this in mind that in many, many
up on our member municipalities. Also the federal costs are
there for also administering, providing administration of this
system. So we do feel that probably a cost of $20,000 to
30,000 per year for the Metro District member municipalities,
and Metro District and federal government would go at least
several times that great. The cost to industry probably
would be minimal, but I think really that the cost at the
federal level would not be minimal.
m
CL
I would like to recommend a course of action for
Congress, Primarily our recommendation is elimination of al!
Industrial Cost Recovery requirements. There are other ways
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that I have mentioned to take care orf the other problems,
revenue, sizing of treatment works, water conservation and so
on, I would suggest then that the alternative which should be
considered of the 16 or any others which may surface, only
abolishment of Industrial Cost Recovery makes any sense whateve:
The two disadvantages which I see mentioned listed on October
4,1 think have been addressed. The construction of treatment
§
works larger than is necessary, I am convinced that the 201
11
0
facility plan procedure would handle that one hundred percent
better than Industrial Cost Recovery. Elimination of Industrie
1
Cost Recovery revenues at the federal government, I think that
just does not hold any water whatever, because with virtually
no administration, much more money than this can be collected
by the federal government.
Also in conclusion, I would suggest that all of the
alternatives through 16 would do nothing more than merely
extend or increase paper work and administrative costs, again- <
no resulting improvement in water quality, air quality, or the
social status of anybody in our country.
ID
I think the system should show that the major disadvante
to the system is this tremendous administrative cost, administia
tive difficulty which faces all levels of government, except
the state in this case, with no resulting benefit resulting
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8 MR, SMITH: No, I wouldn't care to speak.
01
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treating their own sewage; sizing of treatment works and water
conservation issue,
We didn't feel it was our privilege to challenge
whether or not Congress really was right in saying that these
were the reasons for having ICR. So what we did is examine
ICR in the light of those three reasons, and basically we find
it lacking in respect to all three of them. So we suggest that
ICR as presently formulated does not appear to be doing what
original objectives are valid.
MR. SELLARDS: Perhaps there was a reason prior to
92-500 that industry and commercial facilities were segmented
And maybe the ICR and all of the other works, User Charge,
Industrial Cost Recovery, and so on, have kind of brought a
focus to industry that perhaps has changed the need for that
discrimination. And I suspect that that could in fact be a
part or an advantage or disadvantage to what we have already
experienced, ICR might have done its job, and may no longer
be needed.
MR. DONAHUE: If there had not been the tax changes
enacted that have been enacted, it is very possible, I don't
really have the data to support it, that ICR may have been an
equalizer, that it may have been cheaper for industries to
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use a public sewer system than to treat their own sewage.
Because of the tax changes that were enacted by other parts of
the Congress, the Finance Committee as opposed to the Public
„ Works Committee, now in some cases and sometimes in many cases
Ok
it is cheaper to self-treat sewage than it is to use the publi
sewer system* So that that reason probably as such no longer
- exists.
2
e
o The issues of sizing of treatment works and water
d
conservation still exists and what we said from data we have
collected is that ICR does not appear to be an effective way
to control sizing of facilities, and it doesn't appear to have
a whole lot of impact on water conservation.
MR, SELLARDS: Thank you.
MR, STEPHENS: Stephens, Englewood, Colorado. My
question is, what if any constituency does ICR have other than
Congress?
A consumer agency or—
MR. DONAHUEi None.
MR. BROWN: We haven't identified any constituency
for it.
MR. DONAHUE: The Advisory Group we have in Washingtoi
made up of about 40-odd individuals; about half of the organis
tions belonging to that Advisory Group are environmental groups
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Friends of the Earth, the Wildlife Fund, Conservation Fund,
Clean Water Action Project. We talked to their people, and
their representatives on the Advisory Group, and they don't
feel particularly strongly about ICR itself. They are interestjec.
in what were the original reasons for ICR, the sizing of,plants
water conservation, but they don't really feel strongly about
ICR as such. They just see it as a means to an end, not an end
it
in itself. TlfAs not an appropriate means to get to that end1,.
I don't think they would feel strongly about finding another
w means,
MR, CAFARO: Dennis Cafaro, City of Colorado Springs.
Let me pose a question to you. Given an equitable user system
one that generates revenues to pay off revenue bonds for
expansion, how do you deal with the question when an industry
says, well, listen, I am paying my fair share for O&M. and also
(O
5
a portion for expansion or pay off on the debt service. Why
do we have to pay again for Industrial Cost Recovery?
MR, BROWN) How do you explain it to an industry?
MR, CAFARO; How do you respond to that?
MR, BROWN: About the only way you can respond right
now is to say it,,is a Congressional mandate in the law. Publi<
Law 92-500 requires that industry repay whatever grant monies
are used to build capacity for industry on a Publicly Owned
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Treatment Works, and you really don't have to justify it any
more than that.
MR, DONAHUE: That is not a requirement that EPA
"invented. EPA is administering the law. EPA didn't write the
law.
MR. CAFARO: It seems unreasonable.
MR, DONAHUE: It may be unreasonable. It is the law.
O
You have to abide by the law.
MR. PAI: The major intent was not to subsidize industry,
as we discussed many times. Whether that is still the case
or notf I don't know.
a MR. CAFARO: It doesn't seem fair. If they are paying
&
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for that debt service out of User Charge, then they are paying
* twice.
en
MR. PAI: Generally your debt service or User Charge,i
a
is not really/sinking fundr accounting system. What you do is
you really have replacement costs which are just to maintain
not
the operation of the plant itself. It is/for future expansion
I don't know your User Charge system or local debt service,
Q
£ I but generally it does not include that future expansion
component in cost allocated by industry.
MR. CAFARO: I would think it would. I would think
if you spent $3 million to build a plant, and you have to pay
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those bonds off on the plant you just built, then that has to
be reflected in User Charge. I don't know if all of them do
it that way. We certainly do.
MR, PAI: That is for an existing facility. That is
not for future expansion,
MR, CAFARO; The one we just built. We got a grant and
built a plant to last us ten years.
MR; PAI: Your point is well taken. Primarily the intern
was not to subsidize industry. That is what we are looking at
now.
MR, CAFARO: One other point. If we did have to have
an Industrial Cost Recovery system, I like the idea of the
I
circuit breaker. It seems to me, though, that 25,606 gallons
isn't a good way to approach it. I would think something to
the effect of a significant discharge. Now, depending upon
what profession you are in, you get into arguments over what is
significant. An accountant would say to the penny, someone else
might say 15 percent. But it seems to me that 25,000 gallons-
to a plant like Denver Metro, a population equivalent of 25,00(
gallons wouldn't have the same effect as it would on a 1-MGD
plant. It seems-to me a percentage figure would be the one thai
would be used. I would throw out something between 1 and 5 per-
cent, something of that nature,
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MR, DONAHUE: Thank you. That is a good point.
MR, KOSBSS8: Bill "teJrbiteS, Metro .Denver;. The
Association of the Metropolitan Sewage Agencies tried hard and
long to go for, say, first they said 10 percent of total flow
3 through and then 5 percent, and then we could see a percent
was no dice in the Congressional Consnittee, and we said, all
brsvof we will settle for 100,000 gallons per day, and we
o wound up'with a pittance, 25,000 gallons per day which is stii:.
O I
| something. But it is not much.
0
5 MR. DONAHUE: it:>Roh Linton and Andy Ellicott have
*
'. been very -active in our Advisory Group meeting in Washington.
S MR, PAI: Since you are heref Billr we thank you for
5
S some of your members over the country today, they have been
i
S very helpful to us, including Chicago, I guess San Francisco,
Los Angeles, they are very helpful to us,
MR, KORBITZ; For a good reason,
MR, PAI: Unless we find out what is the real situatioji,
ae
-* there is very little we can do about it. We do want to do a
« real thorough fact-finding in order to give credibility to the
Id
study.
MR. HORMBERG: Do we have any other questions?
(Discussion off the record)
MR. HORMBERG: Back on the record.
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MR, KORBITZ: Bill Korbitz, Metro Denver. This might
sound facetious, but I have done a lot of thinking since late
1971 on industrial Cost Recovery, when it first reared its
ugly head. I am convinced that Industrial Cost Recovery is
terribly discriminatory against one segment of our wastewater
society, industry.
X think if Congress does not eliminate Industrial Cost
Recovery, .the least they can do is establish commercial
connector cost recovery and residential connector cost recovery
S
which .leads to the obvious conclusion that with cost recovery
(O
* of all monies, taking out 50 percent for administrative
purposes, from all segments of our society leads to, I think,
the proper conclusion that the entire federal grant program
J should be abolished, I think then we would save money,
MR. PAI; I always appreciate our thinking in this
regard that generally domestic discharge is easier to project
than discharge from industrial users, A large industrial user
j can double his capacity or triple his capacity, which may have
a significant effect on the operation of a sewage treatment
plant. I think one of the reasons that we are always talking
industrial users is just because of that very basic reason,
they have so much flexibility in increasing their capacity
any time or reducing their capacity at any time, whereas the
domestic user simply doesn't have that alternative. He either
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has to flush the toilet or else—
So I would appreciate your thinking in that regard.
What do we do to help anybody, everybody, our existing users,
our future users. What is the best way to put that industrial
component in our facility planning or in whatever construction
program,
MR, KORBITZ: I would think inverted rate structure
would solve the whole problem, that entire problem.
MR. PAIt You mean a User Charge system?
MR. KORBITZ: Yes. The first million gallons cost hall
i of what the second million gallons cost; the third million
*
^ gallons cost ten times as much as the first. The fourth million
3
0 gallons costs a hundred to a thousand to a million times as
3 much. It is a relatively simple thing.
MR. PAI: If you are talking about scale of economies,
one of the findings we have in this study is,we find that the
rcale of economy is generally not there. In other words, people
say a 2-MGD plant is not twice the cost of a 1-MGD plant. In
nany cases it is. We come out with a unit cost
on a given size plant and we find there is not really a scale o
economy there.
I may not say the same thing for o&M cost. The point
is,straight User Charges would encourage the industrial user to
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save water. But in the meantime, the overhead cost is still
there, which will take care of the capacity that is not being
currently used.
So what we are saying is more or less we are looking
for future customers, and in the meantime existing users are
paying for itr and there are times that existing users feel th
don't have the obligation,it is a general— I don't know about
the situation in Denver, We just came from D.C. and in Manass
Virginia, they built some capacity for future growth and when
the bill comes inf residential customers say, I'm not going to
i pay. They had a very strong demonstration and they said, we
" are not going to pay it. It is oversized, it is too high a
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o level of treatment than what we need, so that we won't pay. I
» has hit the headlines in Washington, and I wouldn't want to sa
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!3 that is the only case where it would happen.
So we are looking for, what we are looking for is some
reasonable way in which we can accommodate growth for industri
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I
put too much existing financial burden on the existing
x customers. This is something I know is very hard to do. It
looks good on paper, and this is the time that again we need
people with your expertise, t® help us out on this. I don't
know whether you agree with my concern or not.
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MR. KORBITZ: No,
(Laughter)
MR. ORTHMEYER: I am Frank Orthmeyer, Director, Public
Works, City of Grand Forks, North Dakota.
Before we get too far running down the Industrial Cost
Recovery, I would like to say that Industrial Cost Recovery
has done some good for the cities; and a city,for instance,
our size, 40,000 about, there was a time when the industries
were being subsidized almost 100 percent for their sewage
«?
treatment, in cities our size and smaller. Since the advent of
*
Industrial Cost Recovery, it has got to industries and people
who govern the cities, commissioners, to sit down with industries
end decide now we have got a problem. You are going to have to
5 help us solve this problem, because some of the sewage—as a
|2 matter of fact, in our case, up to 40 percent of the sewage
gj that the city is treating is industrial sewage. We have a poin
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« and a place to sit down and start talking to the industries so
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3 that we can say to them, now, if we are going to have to apply
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«ri for a grant to get our sewage treatment plant expanded, so that
" we can treat your sewage, it is necessary for you to give us
a commitment on-what you are going to do, even. In many cases
we didn't even know what they were going to do two years from
the date we were talking about. So we build a plant, and then
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we should go to 20 percent or whatever it takes to administrat
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it is undersized, because industry didn't sit down and talk to
us about it. If Industrial Cost Recovery has done nothing
elaer it has given us a place to talk to industry. I think
that is an important point to make, if Industrial Cost Recover
is that much of a problem, maybe we should go to Alternative 6,
where cities themselves could make a choice if they wanted to
have industry participate, And get that refunded.
If'we are having a problem with the amount of money to
administrate this, then instead of refunding the ten percent,
the cost of getting back the 50 percent to the federal govern-
ment.
MR. DONAHUE: For the most part, the cities we have
talked to, cities or sanitary districts, whoever the grantee^-
was, have been opposed to Industrial Cost Recovery. There are
a few isolated cases where people very strongly support
Industrial Cost Recoveryf and particularly I think of a small
mill town in Massachusetts, population of 300 people, big
sulphide paper mill, At the time they applied for a grant,
they met the criteria for getting the plant. The industry likis
it because industry would have had to build its own self-treat
ment capacity, Instead of that, they got a federal grant to
build the thing. They got an interest-free loan for 30 years
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eventually to the consumer, and it appears to me that one impact
of the ICR is that it is inflationary,
MR. DONAHUE: You're right, industry obviously when it
gets a cost, is going to try to pass it on to its customers.
One of the questions Congressman Roberts addressed, particular
those places where you have an industry really on the brink of
going under—to be specific, the textile industry in New Englau
where you-have old mills, where you have an old city sewer
system, where the city for a long time neglected to do anythin j
about upgrading or maintaining the thing. You have an industr
that is marginal, competing not only with other parts of the
United States, but also competing with foreign producers, and
in that kind of case, industry says we just can't pass along
ICR charges, the price of our product isn't necessarily fixed
by its cost, but by what the market will bear, and in order for
us to sell any product at all, we can't charge prices that are
much more than foreign producers charge; so we can't always
pass along ICR, and it just eliminates whatever slight profits
we made already and can be the thing that pushes us under.
So if an industry is in a situation where it can pass
along its costw,it certainly will, and it will be like every-
thing else, every other cost increase adds to inflation.
There are a lot of cases where you have got industries
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thing, but you have a whole pile of things to influence their
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decision to close the plants. It could just as readily be an
increased electric bill, increased union contract, increased
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However, you should be aware there are other factors which als
influenced the closing of the plant,
So what we found was that industry in those cases was
using this—industry didnjt want to take the heat locally for
closing a plant and laying people off, and they were using thi
as an excuse. We really couldn't find anybody who said that
this is what made them close the plant.
Now, somebody can say, okayf well, if you didn't have
ICR, they may have stayed in business. That may have been one
water billfan increased sewer bill; it could be any of them.
So it could be the thing that pushes people under, but
it is really hard to pin it down.
MR. PAI: We can say this generally, the Industrial
Cost Recovery portion is about 10 to 20 percent of his total
sewer bill.
MR. DONAHUE: Right.
MR. PAI: So that gives you an indication as to how
significant that ICR is, or how insignificant it is. It
generally runs to around 10 to 20 percent of your total sewer
cost.
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MR, KORBITZ: A couple questions. Bill Korbitz, Metro
Denver.
Is it late enough in the Industrial Cost Recovery game
for any significant impact of ICR to have surfaced anywhere in
the country? I wasn't aware anybody in the country was far
enough along so that any plant could possibly have been impacted
MR. DONAHUE: A lot of places people said we know what
our share is going to cost us. We talked to our local waste-
water treatment agency and they told us what we are going to
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"have to pay. I guess the worst case of that that I am aware o:
Taunton, Massachusetts, gone to AWT, and they have got some
people there with some pretty—they have some textile dyers
and Reed and Barton silverplaters, and a couple other real goo<
industries and they are talking an average industrial sewage
rate, including debt service, User Charge and ICR of $9.20
a thousand gallons.
MR. KORBITZ: I think that should be included in jour
report.
MR, DONAHUE: Ohf it is,
MR, kORBTTZ.: The main reason you have not found
evidence of ICR having a big impact is because there is no
possible way that it could inasmuch• as it has not been in
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sector a little bit more removed from political considerations,
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effect.
MR, BROWN: We stated that earlier in our discussion.
HHf said there were two things to consider here. One, it hasn't
been around very long. No. 2, because of the moratorium,
virtually no one is charging it.
MR, DONAHUE: If we were operating in the private
we would probably have said it was too early to do this study.
Obay. But Congress by law said, you will do this study, to
6
EPA. So we are doing it. The conclusions we have reached and
the estimates we have made are based on the data we have, and
.-• we have a pretty good sample of data that exists, but there jus"4-
|
a isn't that much data that exists,
I
? MR. PAIs One of the things, Bill, we did very exten-
sively, is really getting enough cooperation from the trade
associations, like for the industry in the paper mills. So,
« sometimes, as you point outf they may not see paying ICR yet,
at
but some of them know how much ICR cost they are going to pay.
So that is again in our consideration. We are not completely
i II without any data base. We do have some data base. As you
point out, unless he starts paying it, he may not feel as bad
as he will when he is actually paying it. But we do have some
data as to how much they will be paying.
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MR, KDRBITZ; In this area of course the slaughterhouse
meat packing industry is big to us, Do you have any idea about
what impact Industrial Cost Recpyery wpuld haye on those? Because
I know years ago in Qma.ha, We worked with them and set up a
separate system^ because they sa.id if we must just take care of
pretreating our own waster we are all, 18 of us are going out
N Of business. I was wondering if the same sma,!! margin of profi
§
" situation exists today?
MR. DONAHUE: ft& don't have the, data with us. We do
have data about meat packing plants that wi,ll be included in
i
the appendix t,P. our final report-. It will, be about a foot
thick, putting all the data in..
2
a MR, PAT: As fer as I know, the six. industries we are
going to study, the six industries which, ha"vev been identified
u as having the most impact by ICR, as we po^ht out, heavy metal-•
plating is another one, food processing is another, textiles
is one, and meat packing is o.ne,t
As I sayf we do get very good, cooperation from the
trade associations. They give us data on how, much they would
lay for ICR, and how much it would cos,t them for pretreatment
and to do their own treatment. Tha.t's why we come out with
this number and say they may be better off f just to go ahead
self-treat.
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We got a lot of data and all of that will be
reflected in our final report, and will be available as a
matter of public record, to anybody who wants it.
MR, PAI: Another thing, I don't know if you
pointed this out, a lot of the cost increases are due to
fj I not only the upgrading of the system, but due to a more
uniform charge on ICR and User Charge system. Many of them
were getting a discount before and don't get a discount
now. That alone will increase payment by two times or three
times.
There are a lot of reasons contributing to the
increased cost to industry; not the least is ICR, I don't
think, There are many factors involved in that.
* If you come to D.C. next time, during this time, we
ate going to have a draft report —
MR. DONAHUE: The draft report in mid-November. We
are planning to have a meeting of our Advisory Group, I think
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u November 29.
MR, PAI: In the meantime, if you drop by in D.C.,
we will be happy to share some of the data with you, and show
you what we have done at that point. You come to D.C. very
often, don't you?
MR. KORBITZ: Too often, but it isn't that often.
(Laughter)
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industries which really were not discharging a very bad waste
MR. PAI: Are you referring to the September Regs?
Did you see the new September Regulation?
MR, O'BRIEN: Yes, it classifies-them according to
A, B, D, E and I, 20,000 gallons per day, which grocery store
I believe, I don't have the manual with me--
i
MR. PAI: They would take out first of all the
I
sanitary 'waste.
MR. O'BRIEN: A lot of commercial establishments,
w most of their waste is not sanitary in the sense of sanitary
'. waste coming from a sanitary facility or restroom or somethin
M
j; MR. PAI: To answer your question, the definition
5
of industrial user has been a very, very difficult one for
us. I hope that eventually we can address that question
v>
further, depending on what the ICR study will come out with.
There i3 indeed much concern about who are indeed industrial
* users, because the law gives the Administrator some latitude
ee
in defining who1they are, but who is to say who is a significant
user or who is a significant industrial user or not.
I think the point of confusion is when people say
industrial user,, they think only industries are industrial
users. That is not what is provided in the law or in the reg.
Generally I think that is what is leading to a lot
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of confusion.
Z agree that the definition of industrial user has
been very difficult, even under the old reg, and the same
thing under the new reg.
MR. O'BRIEN: Even today, someone gave an example
of 8 million gallons, and 2 million gallons, they were talkingf
about a different way of setting up the charges. They lumped
residential and commercial in one category, and industrial
into another category by themselves. According to the
definition, that is really—you have got residential and
nonresidential users, not residential and commercial—
MR, BROWN; Take a look at the EPA guidelines that
are out now. There are really about five classes of users.
Residential, commercial, and institutional, governmental and
industrial. And then anybody else you can dream up.
There is one point that I want to make to you which
is that in talking to grantees across the country, there is
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=i a great deal of flexibility in how you define domestic waste
or waste from sanitary conveniences, and if it—if you are
having a problem, I suggest you take a look at your definitior
MR.^O'BRIEN: It is defined, sanitary waste is de-
fined. I am asking the question. It is defined. I missed
that definition.
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MR, BROWN: Nor you define it,
MR, KORBITZt That is even better.
MR. BROWN: That gives more leeway. That is what
I am trying to tell you. It gives you a great deal of
flexibility,
MR. PAI: If you are addressing the definition of
industrial user under ICR or under User Charge, that is really
two different matters. In a way that industrial user's
definition in the User Charge, they do not cause them to pay
anything different, rather than to have to be monitored
differently. In other words, it is not a different rate to
them.
•
MR. BROWN: I am talking about ICR, the September
i
Federal Register.
MR. PAI: One of the things people are saying about
ICR is that we provide too much flexibility.
MR. GREANEY: My name is Bob Greaney, I am with
Del-Mont Consultants, Montrose, Colorado.
Have you had any additional comments or inputs
regarding impact to seasonal industrial users? Obviously
they pay more over a 12-month period but are only in operatior
for six months. Have you received any input on that?
MR. BROWN: We have received a great deal.
MR. PAI: Particularly from food processors, like
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canneries in California, Wfe knew all along that they are the
most heavily impacted industry. The same thing with the sea-
food industry in the New England area. They are very seasonal.
When they are using water, they use a lot of it; and when they
don't use it,they. don*t use it at all.
The problem of course is two things. You can argue
from both sides. Number one, capacity is there. Just becauso
you don't use it, we close down the facility. Number two,
it is not actually using it all year long. So this is a very
fine argument, there.
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MR, DONAHUE: The three sheets of data from the
food processors that were handed out showing cost of self-
treatment versus self-treatment with land application versus
POTW, it shows pretty clearly the cost of using a public sewe :
system seasonally.
if
The seasonal user, they can get away from it;/they
can use a land application, it is probably in their best
interest to do so, the community has to build a sewage treat-
ment?- plant that is empty a lot of the yearr and they are
getting hit with really high cost for the short amount of timn
they do use it,. Particularly if you get some place like
California, where you combine seasonal users, food processors
with AWT, it is just *n incredible amount of money.
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MRi BURKE: Can they subcontract eff^sef&on theirs
reserve capacity?
MR, BROWN; Nobody uses it, Jerry,
MR. BURKE; I am thinking of the ICR or User Charge
MR, PAX: Unless you know,we have somebodyusing^
from January to March, and another group comes and takes over
from April to June, that would be okay.
MR, BURKEi Any instance where this would happen?
MR. PAI: Of course that would be ideal. As a matter
of fact, everything would be taken care of, and if the
seasonal operation branched out, it would be wonderful.
MR, DONAHUE: You get that kind of situation in a
users, you are talking about peak demand. If you have a larg<
metropolitan system, like Denver, okay. You have lots of
people having peaks, but there are enough of them in differen
times so that it averages out that you don't have to consider
that peak demand kind of thing is a factor in setting a rate
for them, You are not building an extra piece of plant just
for them, If you could findf— I don't think that EPA would
object-, I think I can make a pretty good case in arguing witli
EPA, if you have a situation like that where you have several
different seasonal people who peak at different times, and it
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averages out, you don't really have that—
MR. BURKE: If a cannery were obligated for 2 milli
gallons a day reserve capacity three months of the year, you
could find somebody else who could take part of that capacity
during the winter time, during the off season, there is
nothing to keep them from going—
MR. DONAHUE: That's right.
MR. PAI i That is a good point. We can do it
administratively.
MR. BURKEi Nothing to keep them from selling their
reserve capacity to somebody else during the off season if
they can find a customer to do it.
MR, PAI: Any other questions?
Are you associated with the Del Monte Company?
MR. GREANEY: No, just a consulting firm.
<
MR. PAI: Just curiousr because pel Monte is one
of the big food companies,
MR,' DONAHUE: They cooperate with us pretty
extensively,
MR. PAI> Any other? I think this is a very
stimulating discussion today. I enjoyed it. I hope nobody
would give up at this point. Before you leave, just to say
the comment period is extended to October 31, and I will give
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AFTERNOON SESSION (1:23 p.ItlU. '
MR. BURKE: The meeting is now open.
Does anybody have any further discussion?
Let's adjourn the meeting.
5 CWhereupon, at 1:25 p.m. the meeting was adjourned.)
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