Federal Guidelines
Equitable Recovery
of Industrial Waste
Treatment Costs
in Municipal Systems
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Federal Guidelines
Equitable Recovery
of Industrial Waste
Treatment Costs
in Municipal Systems
October 1971
U. S. ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF WATER PROGRAMS
WASHINGTON, D. C. 20242
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FOREWORD
These Guidelines are issued to supplement and interpret Regulation
18 CFR 601.34, as published in the FEDERAL REGISTER on July 2, 1970.
The objective of the Regulation is to ensure that the industrial share
of the allocable treatment costs, ie., the local capital, operation and
maintenance, and debt service charges, to be recovered is proportionate
to the costs of treating industrial wastes. The most important element
in the Guidelines is equitable cost recovery of the costs of treating
industrial wastes in municipal systems.
These Guidelines are intended to assist local and State agencies in
administering the provisions of Regulation 18 CFR 601.34.
Many have contributed to the development of these Guidelines. We
particularly wish to thank the Ad Hoc Technical Advisory Group to
the Division of Facilities Construction and Operation, composed of
representatives of the American Society of Civil Engineers, the Assoc-
iation of Metropolitan Sewerage Agencies, the Association of State and
Interstate Water Pollution Control Administrators, the Conference of
State Sanitary Engineers, the Great Lakes-Upper Mississippi Board of
Sanitary Engineers, the U.S. Council of Consulting Engineers, the Water
and Wastewater Equipment Manufacturers’ Association, and the Water
Pollution Control Federation, for their advice and counsel in reviewing
the Guidelines.
‘ V “- —
j
Eugene 1. Jensen
Deputy Assistant Administrator for Water
Office of Water Programs
Environmental Protection Agency
111
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TABLE OF CONTENTS
Page
Foreword ii
Purpose i
Allocable Costs 3
A. Capital Costs 3
B. Operation and Maintenance Costs
Recovery Systenis Criteria
A. Basis of Cost Allocation
B. Methods of Allocating Costs
C. Payment Procedures 7
0. Recovery Systems and Sources of Revenue 8
E. Situations Where Inequities May Arise 8
Exclusions and Additions 9
Appendix
V
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FEDERAL GUIDELINES FOR EQUITABLE RECOVERY OF
INDUSTRIAL WASTE TREATMENT COSTS IN MUNICIPAL SYSTEMS
P ujpos
These Guidelines are issued to supplement and interpret Regulation 18
CFR 601.34 (see Appendix), and nothing herein should be construed to
be in variance with the cited regulations. In addition, the Guidelines
do not supersede or replace conformance with other Federal regulations
to the awarding of a grant. The provisions of the regulations and these
Guidelines are applicable to all PL 84-6601 (as amended) grant applications
for municipal facilities treating effluent’ from manufacturing activities
(those activities as identified in the Standard Industrial Classification
Manual, Bureau of the Budget, 1967, as ame ded and supplemented, under
the category DivIsion D - Manufacturing 0 ) and such other wastes as the
Administrator deems appropriate for consideration.
The Guidelines are designed to clarify the general provisions of the
applicable regulations. Emphasis is on the scope of the provisions and
criteria of acceptable compliance. The Guidelines are int nded to specify
the minimum acceptable revenue to be derived from industry for its share
of the facility costs. Cost-recovery formulas which result in amounts
collected from industry greater than the attributable costs of treating
industrial wastes will not be in conflict with the regulations.
The emphasis throughout is on the necessity for use of average cost pricing
for industrial (as defined) users and all other users as distinct classes.
Average cost pricing is that technique which allocates total system costs
to attributable classes o users by establishing a uniform price per identi-
fiable unit of discharge. Any significant deviation from average cost
1. The effluent from industrial waste contributors is the influent to the
municipal treatment works.
2. Questions relating to included activities may be referred to regional
EPA offices for determinations where definitional problems arise. The
SIC Manual is available at the U.S. Government Printing Office or the
U.S. Department of Commerce.
3. Possible examples are wastes high in concentrations of ammonia, phos-
phorus, and toxic poll utants.
4. It is here emphasized that the regulations of cost recovery are applied
to industry as a class rather than to individual industries. In other
words, some industries may be paying more or less than their appropriate
share based on contributory costs; if, however, the total sums collected
from industries meet the requirement for minimum recovery of attributable
costs, then the cost-recovery system is equitable under 18 CFR 601.34.
5. See example #3 P.6, which demonstrates this technique.
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pricing which results in industrial payments less than the costs attri-
butable to the treatment of industrial wastes will be construed as
being in conflict with the requirements of the regulations. Although
EPA will approve any system that satisfies the intent of the regulations,
the Guidelines will serve to ease the determination of compliance with
the equitable cost-recovery requirement.
The primary Agency interest with respect to the intent of the regulation
is:
1. to implement the Agency’s basic principle of imposing
the cost of waste treatment directly upon the source of
pollution.
2. to encourage the use of user charges based upon volume,
loading, and character of the wastes.
3. to promote equity in terms of improved knowledge and
acceptance by the system’s users of the necessity of
paying for waste abatement.
4. to promote self-sufficiency in the operation of the
treatment system.
In order for EPA to determine compliance with an equitable cost recovery
system the applicant must furnish complete information on new facilities
and on any existing facilities and proposed expansion or modification
thereof, including:
1. general information about manufacturing establishments
located and served (or to be served) by the city,
2. approximate flow, loading, and character of waste from
industry, as defined, and from all other sources (i.e.,
the hydraulic volume and the amounts of BOD, COD, suspend-
ed solids, and such other wast s affecting the operation
of the facilities),
3. treatment works design capacity, in terms of hydraulic flow
and loadings,
4. proportion of total excess capacity 6 reserved for industrial
users’ wastes,
6. The unused capacity over and above peak requirements of the current
loading.
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5. condition of financing for capital improvements including
amount and amortization schedule,
6. conditions of financing for fixed charges,
7. conditions for financing and the amount of operation and
maintenance charges including special costs created by
industrial wastes,
8. source of the revenues to be collected by class of user,
9. method of collection of revenues, and
10. provisions in the cost—recovery system which will take
into account significant variations in waste treatment
costs associated with volume and/or loading requirements
that change over time.
Allocable Costs
The provisions of the regulation are applicable to the total costs
(project costs exclusive of grants that do not have to be repaid) incurred
by the applicant in construction, funding, and operation and maintenance of
its waste treatment works (i.e., all “out of pocket t ’ treatment costs borne
by the applicant). Treatment works include the various devices used in
the treatment of sewage or industrial wastes of a liquid nature, including
the necessary intercepting sewers, outfall sewers, pumping, power, and
other equipment, and their appurtenances, and includes any extensions,
improvements, remodeling, additions, and alterations thereof (as defined
in FWPC Act PL 84—660 as amended).
In cases where State or Federal grants involve no provisions for reimbursement,
these funds are not construed as being allocable costs incurred by the
applicant and, therefore, they need not be included as part of the total
costs borne by the latter.
A. Capital Costs
Examples A, A’, and B in the appendix denote the basic procedure of
determining allocable capital costs that must be shared by the
applicant and participant industries (In example B, the allocable
capital costs are reduced by the amount of the non—reimbursable
State grant). Ineligible costs, comprised of land, site acquisition,
industrial pre—treatment, and collection sewer costs must be sub-
tracted in order to determine grant funds; 7 these costs, however,
be added back at the discretion of the applicant.
Total capital costs included in the formulations are those of the design
facilities which frequently include excess capacity. Reducing the cost—
recovery system base by that portion attributable to excess capacity is
7. Site preparation , however, is an eligible cost.
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an acceptable practice in that excess capacity has benefits which relate
to the coimiunity as a whole rather than to existing users only (see example
c).If, on the other hand, it is evident that a portion of the excess capacity
is assignable to a particular industry or industries then it is necessary
to include that portion of capital costs in the total to be allocated under
the cost-recovery system. As utilized capacity approaches the design
capacit.y (i.e., as flow increases) the cost-recovery system should reflect
the shifting distribution of costs and charges between classes of users.
B. Operation and Maintenance Costs
These costs are determined as they accrue, but they must he estiriated
to comply with the regulations. The annual operation and maintenance
costs for a given year can be estimated with little variation from the
costs of the previous year. This would be necessary in order to set
the basis for each year’s charge. All operation and maintenance costs,
of course, must he allocated between the applicant and contributing
industries.
Recovery Systems Criteria
A. 3asis of Cost Allocation
The intent of the renulation with respect to the basis for distributing
costs between the applicant and contributing industries is focused
upon volume, loading, the character of the wastes, and any other
unusual factors. This means simply that the total annual waste
treatment costs should be allocated to industry for recovery in pro-
portion to the industrial contribution to the total waste volume
and/or loadinri of the treatment works. Cyclical operations necess-
itate that higher costs associated with having reserve capacity
available through a portion of the year be assigned to the industry
(or industries) whose operations create the reed for the peaking
capacity (therefore, the industrial users should be charged for
total capacity needed for their operations). If two or more indus-
trial users can be serviced with peak flows occurring at different
times, then special considerations can be ‘liven in this situation.
The volume of influent 8 is usually expressed in standard units of
flow. Loading or concentration of influent may he expressed in
several units of measurement. Pounds of solids and pounds of B( D
are customary and acceptable expressions of loading; average daily
utilization at cyclical peaks is the acceptable determinant of rates.
8. The effluent from the industrial waste contributors is the influent
to the municinal treatment works.
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Although any practicable degree of refinement that enhances equity is
encouraged by the intent of the regulations, EPA will approve any
rate method that expresses a reasonable measure of flow and loading
and assigns attributable costs accordingly.
B. Methods of Allocating Costs
Once the costs to be distributed between the applicant and
contributing industries have been adequately estimated or
determined, these costs may be distributed or allocated by
several acceptable methods. Any allocation method which results
in a distribution reasonably in proportion to volume, loading,
and/or character of wastes will be acceptable. All allocation
methods based on volume or concentration of industrial effluent
imply technical knowledge of the extent to which component costs
are attributable to the components of volume and loading. This
technical knowledge will vary considerably by components and is
not generally a precise determination for any component of total
project costs. Three coriiuonly used methods of cost allocation
based on volume and loading are discussed and illustrated as
follows:
1. Capital costs allocated by volume; operation and
maintenance costs allocated by loading
This is perhaps the most simple method that is used
to distribute costs roughly in proportion to volume
and loading. The effectiveness of this method is
directly related to its simplicity. Obviously,
capital costs, particularly construction costs,
are not directly proportional to volume, nor are
O&M costs directly proportional to the quality of
flow. However, for conventional facilities designed
for ordinary conditions, results of this method are
reasonably equitable and often will not vary widely
from allocation results of more sophisticated methods.
In essence this method is summarized as follows: If
industrial users contribute 10 percent of the utilized
volume of the proposed facility, industry is allocated
10 percent of the allocable capital costs. If indus-
trial users contribute 20 percent of the total loading
of the proposed facility, then industry is allocated
20 percent of the O&M costs.
2. Component costs allocated by either volume or loadinci
This method distributes allocable costs of facility
components on the basis of the parameter to which
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the costs are primarily attributable. For instance,
both the capital costs and the O& i costs of pumps are
allocated on the basis of the percentage distribution
of volume or flow. Both the capital costs and O&M
costs of digesters may be allocated on the basis of
BOD loading (or total settleable solids).
Many variations and modifications of this general
procedure will give reasonably equitable results.
This method requires considerable computation
because allocable costs must be computed by con-
stituent components. A problem with this method
of allocation is that there are components of
both capital costs and O& i costs which are not
directly associated with either volume or loading.
Furthermore, some of these component costs are not
easily or properly attributable to any particular
combination of volume and loading. Capital cost
components of this nature are land costs, site
development, control buildings, and capi tal i zed
reserve. Some O&M components, such as supervisory
costs present similar problems. tinder this method
of cost allocation, it is suggested that cost corn—
ponents of this nature be allocated on the basis of
the average percentage allocation of all other costs.
3. Quantity or quality formulas based on total cost or
average uni _ t costs
This method of cost allocation or derivation of indus-
trial charge is computed by several forms of the generalized
formula:
Ci = v 0 Vi + b 0 Bi + s 0 Si
Note: the principle applies equally well with
additional terms (eq., chlorine feed rates)
or less terms ( e.g., y 0 Vi only).
Where Ci = charge to industrial users, s/yr.
= average unit cost of transport and treatment
chargeable to volume, $/qal.
9. An explication of the foregoing is presented in an article by
George J. Schroepfer which is reprinted and included as an attach-
ment to these Guidelines.
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b 0 = average unit cost of treatment, chargeable to
BOD, $/lb.
s = average unit cost of treatment (including sludge
treatment) chargeable to SS, $/lb.
Vi = volume of waste water from industrial users,
gal/yr.
Bi = weight of BOD from industrial users, lb/yr.
Si = weight of SS from industrial users, lb/yr.
The terms b 0 and s 0 above may include charges (surcharges)
for concentrated wastes above an established minimum
based on normal load criteria.
Inasmuch as it is an objective of the Guidelines to
encourage the initiation and use of user charges, this
general method of allocation is both preferable and
acceptable.
C. Payment Procedures
1. Amortization and debt service charges
Unless industrial users make lump sum payments for their
portion of the system’s costs, all allocable capital
costs are represented in the debt to be funded, and
debt service charges must reflect the total amount finan-
ced by debt obligation including interest.
2. Evaluation period
The period of the bond issue is the basis for computation
of the cost allocation and cost sharing proposals.
Allocable capital costs are ordinarily funded, often entirely,
by debt obligation in the form of revenue bonds. Such bonds
are frequently issued in series form or for terms shorter than
the life of the project. This would result in annual debt
service charges in excess of the annual amortization costs
(over the expected life of the facility).
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D. Recovery Systems and Sources of Revenue
In accord with a primary intent of the regulations, an average
unit cost user—charge system which distributes the cost of
waste treatment equitably among contributors of wastes to be
treated (and therefore makes as direct as possible the incidence
and impact of these costs) is, by definition, an equitable cost
recovery scheme. This notwithstandj 5 g, acceptable recovery schemes
will not be limited to user charges or surcharge schedules.
Recovery schemes which reasonably meet the general criterion
(equitable distribution of treatment costs between classes of
users) and are within the context of State and local laws and
institutions will be acceptable to EPA.
E. Situations Where Inequities May Arise
1. Property taxes
Tax advantages to industrial users which result in their
paying less than their share for treatment costs will not
be equitable. Consequently, in those cases where some
portion of the treatment costs are recovered from property
taxes, the applicant must show that the industrial share
to be recovered is in fact proportionate to the costs of
treating industrial wastes.
2. Quantity discounts
Quantity discounts to industries with large volumes of
wastewater will not be acceptable unless the applicant
shows that the industrial share to be recovered is
proportionate to the costs of treating industrial wastes.
Economies of scale are an integral feature of large volume
systems and, therefore, assignment of savings at the mar-
gin to large users is incompatible with the general
principle of distinguishing not among individual discharges,
but between industry and other classes of users.
10. Revenues to recoup allocable costs are usually in the form of property
taxes (or other general municipal revenues) or user charges. The portion
of volume attributable to excess capacity for future use should ideally
be charged to property to the extent that the entire coninunity benefits.
As utilized volume approaches the design capacity, and loading require-
ments concomitantly increase the operation and maintenance costs, the
portion of recoverable costs paid for from general revenues may be
gradually reduced until at design flow all revenues result from the user
charges.
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Exclusions and Additions
The foregoing Guidelines relate to the general provisions of the regulations.
These are within the context of the regulation provision that the applica-
tion shall assure the Administrator that the applicant will require
pretreatment of any industrial waste which would otherwise be detrimental
to the treatment works or its proper and efficient operation and
maintenance, or will otherwise prevent the entry of such waste into the
treatment plant.
In addition to provisions set forth herein, EPA evaluation of cost
recovery systems will follow general principles previously set forth
by interim Guidelines and any subsequent provisions.
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APPENDIX
Examples
EXAMPLE A
Project Costs $2,500,000
Ineligible Costs* - 500,000
Eligible Costs 2,000,000
PL 660 Grant (30%) - 600,000
Eligible Costs exclusive of
PL 660 Funds 1,400,000
Ineligible Costs* + 500,000
Total Allocable Capital Costs
(Local )** 1 ,900,000
* Ineligible costs are subtracted out before the PL 660 grant computa-
tion is made; these costs MAY be added back if in fact they are
costs to be borne by the applicant, in computing the base for the
allocation formula (EPA CANNOT REQUIRE THE INCLUSION OF COSTS OF LAND,
PRE-TREATMENT, AND COLLECTION SEWERS IN THE RECOVERY BASE).
** To be shared by the applicant and participant industries.
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EXAMPLE A’
Total Allocable Capital Costs
(Local) (From Example A) $1,900,000
.065k
Uniform Annual Arnount** $ 123,500
* Capital Recovery Factor, 30 years at 5%--See Grant and rreson,
Principles of Engineering Economy , Fourth Edition.
(The capital recovery factor, when multiplied by the present value
of the capital costs, gives the uniform annual end-of-year payment
necessary to repay the debt in n years with interest rate i.)
Operation and maintenance costs are added to this total to arrive
at total annual costs, the base of the cost-recovery formula.
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EXAMPLE B
Project Costs $2,500,000
Ineligible Costs* - 500,000
Eligible Costs 2,000,000
PL 660 Grant (50%) - 1,000,000
Eligible Costs exclusive of
PL 660 Funds 1,000,000
State Grant (25%) - 500,000
Eligible Costs exclusive of
all Grants 500,000
Ineligible Costs* + 500,000
Total Allocable Capital Costs
(Local )** 1,000,000
* Ineligible costs are subtracted out before the PL 660 grant computation
is made; these costs MAY be added back if in fact they are costs to
be borne by the applicant, in computing the base for the allocation
formula (EPA CANNOT REQUIRE THE INCLUSION OF COSTS OF LAND, PRE-TREATMENT,
AND COLLECTION SEWERS IN THE RECOVERY BASE).
** To be shared by the applicant and participant industries.
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EXAFIPLE C
Total Allocable Capital Costs
(Local )* $1 ,000,000
Less excess capacity portion** - 300,000
Utilized capacity portion of
allocable capital costs*** 700,000
* Total capital costs to be funded, from Example B.
** Excess capacity portion, assume 30% of design facility; 30% of
capital costs should therefore be paid for out of cjeneral revenues.
*** Annualized capital costs of this portion are included in the cost
recovery formula.
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RULES AND REGULATIONS
T1 rTl
Title 18—CONSERVATION OF
POWER AND WATER RESOURCES
Chapter V—Federal Water Quality
Administration, Department of the
Interi ot
PART 601—GRANTS FOR WATER
POLLUTION CONTROL
Subpart B—Grants for Construction
of Treatment Works
On March 31, 1970, notice of proposed
rule making was published in the FEDERAL
REGISTER :35 FR. 5346) which set forth
the text of regulations, proposed to
amend Subpart B relating to basin plans.
regional or metropolitan plans, industrial
waste treatment, design and inspection
of waste treatment facilities.
Pursuant to the above notice, a num-
ber of comments have been received from
interested persons, and due consideration
has been given to all relevant matter pre-
sented. In light of the preceding, a num-
ber of revisions have been made in the
z’ules as proposed.
In accordance with the statement in
the notice of proposed rule making, Sub-
part B of Part 601, as set forth below, is
hereby adopted effective on publication.
Subpart B—Grants for Construction of Treatment
Works
Sec.
601.32 Ba j control.
601.33 Regional and metropolitan plan.
601.34 Industrial waste treatment.
601 35 Inspections.
601.36 Design.
AuTunarry: The provisions of this Sub-
part B issued under section 8 of the Federal
Water PoHutI n Control Act, as amended (70
Stat 502: 33 U S.C. 466e) and section 22 ( 5)
of the Act, as amended (75 Stat. 204: 33
U.S.C. 466).
§ 601.32 8ai in control.
ia No grant shall be made unless the
Commissioner determines, based on in-
formation the State, or where appro-
priate, the interstate agency, for the
areas within their respective jurisdic-
tions, furnishes to him pursuant to para-
graph (b of this section that a project is
inóluded in an effective current basin-
wide plan for pollution abatement con-
sistent with applicable water quality
standards.
b In reaching such determination,
the Commissioner may require informa-
tion in such manner as he prescribes
concerning the total basin plan, or por-
tion thereof, as he deems adequate to
evaluate the effectiveness of the project.
Such information shall be furnished
within one year of the date of the Com-
mission’s request for such information.
The Commissioner may extend this
period for proper cause. For this purpose,
the affected river basin waters shall be
deemed not to include any waters outside
the State in which the project is located
but shall include waters in another State
if an interstate agency has jurisdiction
of the additional affected basin waters.
The Commissioner shall consider whether
the plan adequately takes into account
all, or such as may be appropriate, of the
following:
Il Sources of pollution. An identifi-
cation list of all significant point sources
of waste discharges; municipal, Indus-
trial. agricultural and others.
(2i Volume of discharge. The average
daily volume of discharge produced by
each waste discharger. Cooling water, or
cooling water which is contaminated by
industrial waste or sewage shall be re-
ported separately. Storm water and
mixed storm water and sewage shall be
identified and reported separately in
terms of frequency-volume relationships.
3r Character of effluent. The major
characteristics of each such waste dis-
charge together with a measurement of
their relative strength or corn ntrat1or .s,
Including but not limited to:
mg/I.
mg/i.
Piatl turn cObSil
scee.
Jac1c on candle
sCfl.le,
mg /j.
mg/i.
mg/
ppm.
C.
pci/i.
mg/I.
mg/I.
(4 Present treatment. A brief descrip-
tion of the type of treatment being given
by each discharger, together ith a state-
ment of the degree of treatment cur-
rently being achieved.
(5 Water quality effect. A brief de-
scription of the effect of discharges and
abatement practices upon the quality of
the water in the basin, and the antici-
pated effectiveness of the proposed proj-
ect in improving the quality of the water.
(6) Detailed abatement program.
Identify all waste discharges for which
present treatment is less than required
by standards, or which will degrade water
quality below standards. For each such
discharge so identified, furnish an abate-
ment schedule containing the following:
(i) Level of treatment to be required
expressed in percentage of reduction of
BOD and/or any other significant pa-
rameters required pursuant to applicable
Federal, State and interstate laws, regu-
lations and orders.
lilt Volume of flow for which waste
treatment facilities will be designed.
(iii) Estimated completion dates for
preliminary plans, for final design, for
construction, and for operation of waste
treatment facilities,
(iv) Estimated cost of design and con-
struction if available.
(c) If the proposed project is. not In-
cluded in an effective basin-wide plan for
pollution abatement, and the Commis-
sioner determines that such project will
nevertheless effectively contribute to the
improvement of the quality of the water
or prevention of water pollution in the
basin, he may waive the limitation of
paragraph (a) of this section. In making
his determination the Commissioner may
require all or a part of the information
identified in paragraph (b) of this
section.
(d) The Commissioner’s discretion in
determining the deslrabilit y of any proj-
ect shall not be limited by any provision
of any basin-wide abatement plan pursu-
ant to this section.
601.3% R g ion al and metropolitan
plan.
a) A grant for a project shall not be
made unless the Commissioner deter-
mines that such project is Included in an
effective metropolitan or regional plan
developed or in the process of develop-
ment. and certified by the Governor, or
his designee as being the official pollution
B005
cop
Color
Turbidity
Solids
Toxic substances -
Metal Ions
Fluorides
Dissolved substances
Temperature
pH
Radioactivity
Chlorides
Nutrients
z
I. -.
C,.
p
>
-a
-s
1
- 5
—
rf)
C
FEDERAL REGISTER, VOL. 35. NO. 128—THURSDAY, JULY 2, 1970
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RULES AND REGULATiONS
10757
abatement plan developed or In the proc-
ess of devebpment for the metropolitan
area or region within which the project
is proposed to be constructed. In the case
of an 1nters ate metropolitan or regional
area, the plan shall be certified by the
respective Governors or their designees.
(b) In reaching such determination
the Commissioner shall consider whether
such plan adequately takes into account:
Anticipated growth of population and
economic activity with reference to time
and location; present and future use and
value of the waters Within the planning
area for water supplies, propagation of
fish and wildlife, recreational purposes,
agricultural. Industrial and other legiti-
mate uses; adequacy of the waste collec-
tion systems in the planning area with
reference to operation, maintenance and
expansion of such systems; combination
or integration of waste treatment facili-
ties into a waste treatment system so as
ta achieve efficiency and economy of such
treatment; practicality and feasibility of
treating domestic and industrial waste in
a combined waste treatment facility or
integrated waste treatment system; need
for and capacity to deal with waste from
sewers which carry storm water or both
storm water and sewage or other wastes;
waste discharges presently in, or antici-
pated for the planning area; effect of the
proposed waste treatment facility upon
the quality of the water within the plan-
ning area with refea nce to other waste
discharges and to applicable water
quality standards.
(C) If the proposed project is not In-
cluded In an effective metropolitan or re-
gional plan for pollution abatement, and
the Commissioner determines that such
project will nevertheless effectively con-
tribute to the prevention of pollution or
Improvement of the quality of the water
In the metropolitan area or region, he
may waive the limitation of paragraph
(a) of this section. In making his deter-
aninatlon the Conimissloner may require
all or a pert of the Information identi-
fied In paragraph (b) of this section.
(d) The Commissioner’s discretion In
determining the desirability of any
project shall not be limited by any provi-
sion of any metropolitan or regional plan
pursuant to this section.
§ 601,34 Industrial waste treatment.
(a) Where a project will treat indus-
trial wastes, a grant may be made In the
discretion of the Commissioner for such
project provided that It Is included In a
waste treatment system treating the
wastes of the entire community, metro-
politan area or’ region concerned. For the
purposes of the section “waste treatment
system” means one or more treatment
works which provide Integrated, but not
necessarily interconnected, waste dis-
posal for a community, metropolitan
area or region.
(b) If industrial waste Is to be in-
chided In the waste treated by the pro-
posed project, the applicant shall assure
the Commissioner that such applicant
will require pretreatment of any Indus-
trial waste which would otherwise be
detrimental to the treatment works or
its proper and efficient operation and
maintenance, or will otherwise prevent
the entry of such waste Into the treat-
ment plant.
(c) Where industrial wastes are to be
treated by the proposed project the ap-
plicant shall assure the Commissioner
that it has, or win have In effect
when the project will be operated, an
equitable system of cost recovery. Such
system of cost recovery may include
user charges, connection fees or such
other techniques as may be available
under State and local law. Such sys-
tem shall provide for an equitable
assessment of costs whereby such as-
sessments upon dischargers of indus-
trial wastes correspond to the cost of the
waste treatment, taking into account the
volume and strength of the Industrial,
domestic, commercial wastes and all
other waste discharges treated, and
techniques of treatment required. Such
cost recovery system shall produce reve-
nues, In proportion to the percentage of
industrial wastes, proportionately, rela-
tive to the total waste load to be treated
by the project, for the operation and
maintenance of the treatment works, for
the amortization of the applicant’s In-
debtedness for the cost of such treatment
works, and for such additional costs as
may be necessary to assure adequate
waste treatment on a continuing basis.
For purposes of this section “industrial
waste” shall mean the waste discharges
(other than domestic sewage) of indus-
tries Identified in the Standard Indus-
trial Classification Manual, Bureau of the
Budget, 1967, as amended and supple-
mented, under the category “Division
D—Manufacturing,” and such other
wastes as the Con’mi&cloner deems ap-
propriate for purposes of this section.
§ 601.35 Inspections.
No grant shall be made for any project
unless the State water pollution control
agency assures the Commissioner that
the State will inspect the treatment
works not less frequently than annually
for the 3 years after such treatment
works are constructed and periodically
thereafter to determine whether such
treatment works are operated and main-
tained In an efficient, economic and ef-
fective manner and unless the applicant
assures the Commissioner that the treat-
ment works will be maintained and oper-
ated In accordance with such require-
ments as the Commissioner may publish
from time to time concerning methods,
techniques and practices for economic,
efficient and effective operation and
maintenance of treatment works.
§ 601.36 Design.
No grant shall be made for any proj-
ect unless the Commissioner determines
that the proposed treatment works are
designed so as to achieve economy, effi-
ciency and effectiveness In the preven-
tion or abatement of pollution or en-
hancement of the quality of the water
Into which such treatment works will
discharge and meet such requirements
as the Commis.sioner may publish from
time to time concerning treatment works
design so as to achieve efficiency, econ-
omy and effectiveness In waste treat-
ment.
Dated: June 24, 1970.
FRSD 3. B.IISSELL,
Acting Secretarz, of the Interior.
IF.R. Doc. 70-8396; Piled, July 1, 1970;
8:46 a.m.J
FEGERAL REGISTER, VOL 35, NO. 128—THURSDAY, JULY 2, 1970
-------
“Reprinted with permission fran Sewage and _ Industrial
Wastes , Vol. 23, No. 12, Page 11193, (Decembe 1951) ,
Washington, DC. 20016.”
Industrial Wastes
DETERMINATION OF FAIR SEWAGE SERVICE
CHARGES FOR INDUSTRIAL WASTES *
By Gsoiw J. Scusoi aa
Professor of 8anitery Engineering, Universi j of Minnesoia, MinneapoZis, Minn.
The increasing consciousness of the
seriousness and the magnitude of the
industrial waste problem in this
country has awakened interest in the
corollary consideration of raising the
revenue requirements for remedial
works.
The magnitude of the problem is
pointed up by a survey of the Public
Health Service (1), which finds that
there are 10,401 industries discharging
wastes into the watercourses of the
United States. Another survey by the
National Association of Manufactur-
ers (2) of more than 3,000 industries
indicates that 82 per cent of the indus-
tries provide no treatment whatsoever.
One interesting finding of this survey
is that more than two-thirds (69 per
cent) of the industries discharge all
or a part of their wastes into the mu-
nicipal sewage works. It is with this
fraction that this paper is concerned.
With 11,811 municipalities having
sewer systems, and 6,628 having sew-
age treatment plants (1), and recog-
nizing that most receive industrial
wastes to some extent, the magnitude
of the present problem is apparent.
And with 4,209 municipalities requir-
ing new sewage treatment plants (1),
the problem of the future will be mag-
nified. This is particularly true be-
cause annual costs, usually quite low
proportionately when sewage is dis-
* Presented at 24th Annual Meeting, Feder-
ation of Sewage ami Industrial Waste Associ-
ations; St. Paul, Minn.; October 8—11, 1951.
charged untreated through sewer sys-
tems, increase markedly when treat-
ment facffities are provided.
This paper is concerned, therefore,
with the problem of presenting a fair
basis of charges to industry in the
usual situation where its wastes are
discharged into the municipal system.
it is limited to a consideration of those
wastes which are amenable to treat-
ment in conventional plants, and ex-
cludes such wastes which because of
their toxicity or chemical composition
would cause serious difficulties in the
plant or subsequently in the receiving
waters.
The approach to this problem as
presented herein lies in the principles
enunciated by a Joint Group of 24
members consisting basically of com-
mittees of the American Society of
Civil Engineers and of the Section of
Municipal Law of the American Bar
Association, but with representation
by six other participating organiza-
tions, including this Federation. Sam-
uel A. Greeley and John D. McCall
served as general chairmen of the en-
gineering and law committees, respec-
tively. Other members of the Federa-
tion who served on the Joint Commit-
tee were Francis S. Friel, Thomas M.
Niles, Myron W. Tatlock, and the
writer. After more than three years
of work the Committee has issued its
report entitled “Fundamental Coiisid-
erations in Rates and Rate Structures
for Water and Sewage Works” (3).
1493
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1494
SEWAGE AND INDUSTRIAL WASTES
December, 1951
Inasmuch as the report has not as
yet been widely circulated, this paper
of necessity must review the basic prin-
ciples upon which it is founded to in-
troduce the reader to the procedures
involved as applied to the determina-
tion of fair charges for the handling of
industrial wastes. However, for a com-
plete discussion of the problem, the
author recommends the report as rep-
resenting the considered thought and
judgment of a representative group of
engineers, lawyers, and finance authori-
ties interested in the question.
Certain Basic Considerations
Preliminary to a consideration of the
methods of charging for industrial
wastes handling in a municipal sys-
tem, it is important to give considera-
tion to certain basic factors involved.
A municipality, in determining a course
of action with respect to the reception
of industrial wastes into its system,
may consider, among others, the fol-
lowing possibilities:
1. To exclude industrial wastes:
(a) All industrial wastes.
(b) Certain industrial wastes which,
because of their constituents
(toxicity, acidity, etc.), impair
the functioning of the municipal
system.
2. To require pretreatment at the
source:
(a) All industrial wastes to a level
approaching the constituents in
normal domestic sewage.
(b) Certain wastes which, because of
their constituents or excessive
load variation, are harmful to
the system.
3. To receive industrial wastes:
(a) All industrial wastes.
(b) All wastes except those which
are not amenable to treatment or
would cause real difficulties in
the operation of the system.
The decisions made concerning this
question influence the financing prob-
lems confronting the city. Obviously,
if course 1(a) is followed, no direct
financial decisions need be made con-
cerning the charges. But, because of
the importance of industry in a com-
munity, this procedure is unrealistic.
The costs of separate treatment by each
industry are likely to be much greater
than combined treatment, not to men-
tion the administrative problems con-
fronting regulatory agencies. Course
2(a) apparently simplifies the problem,
because after pretreatment by industry
to the level of ordinary sewage the
industry can be charged at the rate for
other general users of the system. It is
subject, perhaps to a lesser extent, to
the same objections as course 1 (a)—
namely, higher total costs and adTninis-
trative difficulties. Course 3(a) is
likely to result in certain wastes se-
riously destroying the efficiency of the
sewage works or markedly increasing
costs beyond a point of reasonableness.
The admittance of very toxic wastes
would be an example.
Thus, it will be apparent to most that
the proper procedure, and that fol-
lowed by most municipalities, is the
middle ground represented by courses
1(b), Z(b), or 3(b), alone or in com-
bination. According to the Public
Health Service (1), more than 60
per cent of the industries contribute
organic wastes. Most of these are sus-
ceptible to treatment in conventional
processes. However, increased costs of
construction and operation are in-
volved, and this brings up the topic of
charges.
Methods of Charging in Use
In the approximately 12,000 com-
munities in this country having sewer-
age facilities, a number of methods are
employed for raising the revenue re-
quired to construct and operate them;
and, therefore, for charging industry
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Vol. 23, No. 12
PAIR SEWAGE SERVICE CHARGES
1495
for the reception of its wastes. Some
of these methods are:
1. The ad valorem tax on property.
Historically (since colonial days) this
has been the commonly accepted
method (in more than 80 per cent of
U. S. communities) of raising the reve-
nue requirements. When the sewage
works were limited to sewer systems
with disposal into the nearest water-
course, operation budgets were small
and, in general, this method brought
few objections.
2. Special assessments. Special as-
sessments on a front footage basis
against abutting property are quite
commonly used as a method of payment
for all or a part of the cost of construc-
tion of sewer systems.
3. Sewage service charges. From the
time of first application in Broekton,
Mass., in 1894, sewage service charges
have come to be used as a method of
raising revenue. Although no complete
recent surveys are available, it is esti-
mated that approximately 1,000 munici-
palities (or one-sixth of those having
treatment plants) now use this method
of charging. A number of procedures
are employed (as many as 12), the
principal one being related to the vol-
ume of water consumed on the premises.
In a few cases constituents in the sew-
age are included in the rates, in one
way or another.
4. Special negotiated contracts with
industry. The bases for these contracts
vary, but in several the incremental
(added cost) method has been em-
ployed.
5. Combinations of two or more of
the above metboas.
It is desirable to discuss certain of
these methods in some detail. It is
obvious that when the property tax
basis is used to raise the total annual
revenue (fixed charges and operation
and maintenance costs), the use of, and
the benefits received from the works is
not measured. Used alone, this meas-
ure of ability to pay, rather than of
service rendered, is no more valid than
the old English system of taxing on the
basis of number of windows on the
premises. Fairness to all users and
properties is not achieved by this
method as the sole basis of charge.
However, because the value of prop-
erty, both developed and undeveloped,
is enhanced by reason of the existence
of the sewage works, this is some meas-
ure of benefit, the extent of which is
discussed in a later section.
Attention is called to the use of the
term “sewage service charge” rather
than “sewer rental charge” or “sewer
service charge.” The Joint Committee
believes that this terminology is more
descriptive of what is included in the
charge and leads to fewer necessary
explanations. With this out of the
way, it can be stated with equal validity
that to base all charges on a schedule
of sewage quantity or some similar base
is improper. Under this method pres-
ent users of the system pay an unfair
proportion of the cost of the system,
which is designed partly as a benefit
to property. This aim is discussed at
length later. This method becomes
even more unfair when excess collec-
tions are paid into the general fund,
or are used to finance new construction
or extensions of the sewer system.
Several writers have called attention
to the incremental method of negotiat-
ing contracts with industry. This
method involves determining the charge
to industry on the added or excess cost
basis, wherein the costs of a combined
system are estimated, and by subtract-
ing the costs of a system without in-
dustry being included, the incremental
costs are determined. This method can
be used in reverse. In some situations
the industrial wastes make up half or
more of the load. Ii! the cost of a com-
bined system is estimated and the cost
of a plant for the industrial wastes is
subtracted, a quite different answer re-
sults. Which is proper? This method
is indefinite and not susceptible of ac-
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1496
SEWAGE AND INDUSTRIAL WASTES
December, 1951
curate analysis, particularly on a long-
established system. And it changes
with time, as industry and coinniunity
growth is often different.
Where a combination of methods 1,
2, and 3 has been used, the allocation
of costs sometimes approaches fairness.
In the past, this has been happenstance
only. Thus, where general obligation
bonds have been issued, and a property
tax employed for debt service, with
sewage service charges for operation
and maintenance costs, both property
and users share in the costs, although
not very often in a fair proportion.
Some of the methods of determining
charges have been discussed in a gen-
eral way. It was first planned to pre-
sent in detail the methods of charging
employed by a number of communities.
Because of space limitations and in
view of the wide variance in practice,
it was finally decided that this would
serve no useful purpose. Influenced by
political expediency and precedent, and
affected by the social philosophy of gov-
erning bodies in their outlook towards
present and potential industry, charges
vary from extremely low ones (a sub-
sidy to industry, and unfairness to
other classes of users and property) to
burdensome and confiseatorially high
ones. In general, past practice is of
little aid in approaching the subject of
fairness in charges.
Suggestions for Charges
to Industry
Many articles have been published on
the subject of charges for industrial
wastes in a municipal system. These
take many points of view. The litera-
ture is replete with suggestions that not
only volume, but also strength, should
be considered in making charges.
Chronologically, and to mention only a
few, Greeley (4), Marston (5), Calvert
(6), Mohlnian (7)(8)(9), Hoinmon
(10), Mahlie (11), Knowlton (12), Bes-
seievre (13), La Due (14), Russell
(15), and Laboon (29) have suggested
the desirability of considering sewage
composition in determining charges.
The methods proposed for accomplish-
ing this have varied widely.
A number of writers have discussed
and some have advocated the incre-
mental method of charging for indus-
trial wastes. Among these may be men-
tioned Warrick (16), Green (17),
Enslow (18), Cohn (19), Gray (20),
and Haseltine (21). Several have em-
ployed or advocated the use of formulas
to determine service charges, includ-
ing Symons (22)(23)(24)(25)(26),
Wright (27), Reaves (28), and Laboon
(29).
In general, these articles do not dis-
cuss the question of just what propor-
tion of the total annual charges should
be or are covered by the methods sug-
gested or employed. Furthermore, in
later years very little reference is made
to the share which should properly be
borne by property. Nor to the writer’s
knowledge is mention made of a reason-
able allocation of the total annual costs
except in papers by Greeley (30) (31)
(32).
En foreign countries attention is also
being given to this problem. Mohiman
(8) discusses practice in the Emscher
and Rulir Districts, in Germany, where
surcharges for industrial wastes based
on production and type are made. The
1937 Public Health Act (Drainage of
Trade Premises) (8) (33) in England
states that in setting rates,” . . . re-
gard (shall be) had to the volume and
composition of trade effluents and to
any additional expense incurred in con-
nection with their reception.” And
even England has its formula develop-
ers in the person of Townend (33).
The Council of the South African
Branch, Institute of Sewage Purifica-
tion, adopted the following statement
of policy (34):
“The charges for industrial waste dis-
posal should be in relation to the waste
load contributed by the industry.
“The charge levied against an industry
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Vol. 23, No. 12
FAIR SEWAGE SERVICE CHARGES
1497
for the load contributed should not be
made with a view to profit or loss, but
should be based on the established cost
price of treatment of the mixed sewage
entering the works.”
A rather unusual viewpoint (to
many), but not surprising, perhaps, in
view of the nationalization program in
England, is the suggestion by Hurley
(35) of a national basis of solution to
this problem, with every manufacturer
contributing to a central fund a stand-
ard amount based on charactei and vol-
ume. From the central fund local
authorities would be reimbursed for
treating the industrial wastes in their
plants. It is hoped that neither our
aims nor our tendencies are in that di-
rection.
Returning to practice in the United
States, the implications of the follow-
ing statement in the Report of the Ohio
River Committee (34) published in
1944 are intriguing:
“There are several basic considerations
which underlie the problem of equitably
distributing the cost of pollution abate-
ment works. Among these considerations it
may be contended that industries exist only
in response to public demand for their
products and, therefore, that the public is
indirectly responsible for all stream pollu-
tion, both industrial and dome tie, and
ultimately must bear the cost of all pollu-
tion-abatement activities, either by direct
expenditures or partially by direct ex-
penditures and partially in the form of
increased costs for industrial products.”
In view of what has already been
discussed concerning the confusion in
practice and in the thinking on this sub-
ject, is it a 1 ny wonder, therefore, that
municipal officials and industries ex-
perience difficulty in approaching this
problem? Fundamental considerations
have been, and are being, more and
more lost sight of.
Fundamental Principles Involved
The aim of engineers and adminis-
trators involved is to establish fair
rates and rate structures which meas-
ure the benefits from, and use of, the
sewage works. The approach to the
problem can be found in a statement
of fundamental principles involved,
prepared after considerable thought
and discussion by the Joint Commit-
tee:
“The needed total annual revenue of a
water or sewage works shall be contributed
by users and non-users (or by users and
properties) for whose -use, need, and bene-
fit the facilities of the works are provided,
approximately in proportion to the cost of
providing the use and the benefits of the
From what has already been written,
it is obviously unfair to raise the an-
nual revenue requirements entirely by
a charge on property, as is done when
ad valorem taxes are employed to raise
the total annual amount. Similarly, it
is u ifair to expect the present users
to pay the entire cost, as is done when
sewage service charges are designed to
raise the entire annual revenue re-
quirements.
The report goes on to state:
“It is considered that rates and rate
structures for water and sewage works
should achieve fairness through payment by
each user or beneficiary of his fair share of
the total annual cost of the works required,
and no more.”
The above general statement is one
with which almost everyone wifi agree,
but depending on where one “sits at
the ball game” his viewpoint of what
approaches fairness wifi differ. As ap-
plied to the subject of this paper, even
the viewpoints of industrial representa-
tives, who for purposes of our analogy
should be on the same “team,” will
differ, depending on whether they rep-
resent a “dry” or a “wet” industry.
The governing bodies and the citizens
they represent may well be confused in
their thinking.
In approaching the problem pre-
sented by the Joint Committee state-
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1498
SEWAGE AND Th DUSTRIAL WASTES
Deeember, 1951
ment of fundamental principles, it be-
comes necessary to consider its various
component parts.
Total Annual Revenue Requirem.ents
The annual revenue requirements of
a sewage works may be divided for this
purpose into those which are needed
for (1) the collection system, including
pumping stations; (2) the intercepting
sewers; and (3) tJ.ie treatment plant.
The revenue requirements for these
major units are commonly subdivided
as follows;
1. Operation.
2. Maintenance and replacement.
(The latter item may be covered by a
depreciation expense item in some
case&)
3. Fixed charges or debt service, in-
cluding interest and amortization of
the bonds required to finance the con-
struction of the project. A deprecia-
tion allowance may be provided where
the useful life of the works, including
obsolescence, does not correspond to the
bond period.
All of the above three items of the
various component parts of the works
constitute important and essential items
of expense in constructing and operat-
ing the system and should be included
in any approach to a fair allocation of
costs.
Contributions by Users and Propertios
The Toint Committee report makes a
definite point, and is predicated upon
contributions by both users and prop-
erties. In justification of the premise,
it will be readily apparent that surface
and subsurface drainage is related to
area or property and has no relation
to use as represented by the discharge
of “spent” water or sewage; therefore,
a charge based upon area or property
is proper for this element of service.
Similarly, the provision of capacity in
the component parts of a sewage works
for the future provides for the security
and development of property and for
community growth, and is a proper
charge on property, as it is obviously
unfair to charge present users based
on sewage contribution for this cost ele-
ment. In fact, undeveloped property
in fairness should provide the major
portion of this cost, because capacity
is provided for this later use. The
amount allocated to property would de-
crease with time as the use of the works
approached capacity. The charge to
property can be distributed on a front
foot, area, or property valuation basis,
or on a combination method.
The user, on the other hand, is re-
sponsible for certain items of cost. A
portion of the collection and intercept-
ing sewer is allocated for his use. To
a greater degree the fixed. charges on
the plant, and to an even greater ex-
tent the operating cost of the plant, is
caused by his use of the works.
Allocation of Costs in Proportion o
Benefits and Use
At the thne of construction, or pe-
riodically thereafter, it is possible for
an engineer to determine with reason-
able accuracy the relative proportions
of the works and of the costs which are
chargeable to users and to property.
Thus, a building sewer renders a direct
service to the property benefited and is
chargeable to that property. In pro-
ceeding downsewer (figuratively), a
continually lesser proportion of the ca-
pacity of the sewer is chargeable
against that property. In the case of
the intercepting sewer it is possible to
determine and allocate the portion of
the cost chargeable to property (sur-
face runoff, ground-water infiltration,
future capacity, public use, etc.) and
that chargeable to the user (domestic
sewage, industrial wastes). Further-
more, in the case of the sewage treat-
ment works the various parts are af-
fected differently by the volume and
characteristics of the liquid wastes and,
therefore, the special service which par-
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Vol. 23, No. 12
PAIR SEWAGE SERVICE CHARGES
1499
ticular users and properties (such as
an industry, for example) receive, can
and should be evaluated. Thus, the sew-
age pumping and sedimentation costs
are affected in design and, therefore,
in resultant costs, principally by vol-
ume. Oxidizing processes, on the other
hand, are influenced principally by or-
ganic loading, and sludge disposal proc-
esses by solids content.
By attacking each unit of the sew-
age works in this manner it is possible,
first, to allocate the various portions to
use and to property, and then later
to distribute these allocated amounts,
depending on. the actual expenditures
which these cause. Having determined
the amount to be allocated to property,
it is possible to set up a schedule of
charges to property based on front
footage, area, or (more usually) as-
sessed valuation. A combination has
been used in at least one case. The
allocation to users can be distributed
on a volume, organic loading (repre-
sented by B.O.D.), and solids content
basis. Depending on the situation, chlo-
rine demand may replace or be used in
conjunction with the organic loading.
Because the aim is to achieve fairness
to all users and beneficiaries (domestic,
commercial, and industrial alike), it
becomes necessary to consider the ques-
tion as a whole and not simply from
the standpoint of any one class (such
as an industry). Therefore, what might
appear at first glance to be too broad
an approach to the subject of this
paper, should be justified to the reader
as the detailed procedures involved are
considered later.
Realizing the difficulty of consider-
ing this subject in abstract or general
terms, the author has prepared a typi-
cal example of a situation, which will
illustrate the procedures involved. Be-
fore considering this, it should be em-
phasized again that the basic consid-
eration involved is that both users and
properties should share fairly in raising
the needed revenue requirements. Hay-
ing determined this fair allocation, the
distribution between various users and
properties in a rate structure becomes
a detail, although admittedly an im-
portant one.
Illustrative Example of Procedures
Involved
Assumed Conditions
Assume that a rate schedule is to be
determined for a community, with a
present population of 30,000, in which
a system of intercepting sewers and a
sewage treatment plant have recently
been constructed. In this community
it is assumed that a large wet industry,
among others, is located; and it is de-
sired to determine the fair costs which
should be charged that major industry.
It is further assumed the wastes have
a variation with time similar to do-
mestic sewage, and - are amenable to
treatment.
1. Present flows and those used as a
basis of design of the plant and inter-
cepting sewers are as follows:
lilow Source
Aver-
age
Flow
(m.g.d.)
flow Basis of
Design (m.g.d.)
Plant Sewers
(1970) (2000)
Sewage’
Major industrial waste
Ground-water infiltration
Storm-water runo
Contribution from public use
Total
3.00
0.75
0.50
—
0.25
4.50
0.90
0.60
—
0.30
12.00
2.00
2.00
4.00
0.80
4.50
6.30
20.80
‘Sources exclusive of major industry.
2. The average strengths of the sew-
age and industrial wastes are assumed
as follows:
All sources cxci. of industry
Major industrial waste
3. Assessed valuations are as follows:
Entire community (mc i. major
industry)
Major industry
Susp.
Sol.
(p.p.m.)
250
350
5-Day
B.O.D.
(p.p.m.)
200
700
$20,000,000
$500,000
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1500
SEWAGE AND INDUSTRIAL WASTES
December, 1951
4. Construction costs
units are as follows:
of the various
1
unit
Consb .
CoM ($)
Intercepting sewers 1
700,000
Treatment plant:
Main pumping station
Equipment
30,000
Structures
25,000
Screen and grit chambers
30,000
Preliminary aed tanks
90,000
Trictkling filters
600,000
P nsi sed tanks
180,000
Recirculation pumps
15,000
Chlorination’
40,000
Dig. tanks and van, filters
160,000
Main control building
150,000
Plant water supply
50,000
Roads and grounds
50,000
Plumbing and heating
80,000
Total treatment plant
1,500,000
Total Construction Cost
2,200,000
‘For purposes of simplicity, costs of collect-
lag sewers are not included.
‘Contact tanks and equipment.
5. It is further assumed that the
fixed charges are limited to interest and
bond retirement, and that the bond pe-
riod corresponds to the useful life of
the structures. Assumed debt service
charges are bond retirement 4 per cent
annually, and interest charges at an
average of I per cent (2 per cent in-
terest rate), or a total of 5 per cent.
6. Operation and maintenance costs
are as follows:
Allocation of Charges Between Users
and Properties
ilaving set forth the assumed condi-
tions, it becomes necessary to apportion
the needed annual revenue require-
ments between users and property on
the basis of the fundamental considera-
tions that have been discussed. The
total annual revenue requirements are,
therefore, as follows:
}ked charges:
Intercepting sewers
Treatment plant
Operation and maintenance costs
Total annual cbarges
$ 35,000
75,000
70,500
;iso,5oo
1. Fixed charges—intercepting sew-
era. Considering the allocation (be-
tween users and property) in the case
of the intercepting sewers, it will be
seen that the proportion of the capacity
of the intercepting sewers used or oc-
cupied by storm-water runoff and
ground-water infiltration bears no rela-
tion to the use made by the direct con-
tributor of sewage or wastes and, there-
fore, is properly chargeable to prop-
erty. In the same way, the proportion
of the capacity provided for the future
(50 years from present) is also a
proper charge to property. It can
similarly be shown that the contribu-
tion of sewage from the public use of
water can reasonably be charged to
property. In Figure 1 are shown the
relative proportions which might be
allocated to users and to property in
Labor
and
8up vieion
Powor
end
Light
Mat&iale
and
8uppli
Maint,,
Repa m, and
Replacementa
Tota’
Intercepting sewers
Main pumping station
Preliminary treatment
Secondary treatment
Effluent chlorination
Sludge disposal
General
Supervisory
Collection and billing
$ 1,000
3,000
5,000
5,000
2,000
7,000
1,000
6,000
5,000
—
$ 5,000
1,000
3,000
—
2,000
2,000
—
—
—
1 200
200
500
3,000
4,500
1,000
200
—
$ 1,200
1,000
500
5,000
200
4,000
1,000
—
—
$
2,200
9,200
6,700
13,500
5,200
17,500
5,000
6,200
,ooo
Total
$35,000
$13,000
$9,600
$12,900
$70,500
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Vol. 23, No. 12
PAIR SEWAGE SERVICE CHARGES
1501
—
/
I
b.
C’
C.
1 ’
#4
FIGURE 1.—Allocation of fixed charges on the intercepting sewers.
the case of fixed charges on the inter-
cepting sewers. Of the total fixed
charges on the intercepting sewers
($35,000), 19.3 per cent is caused by
storm water (4.0 m.g.d. of the total
capacity of 20.8 m.g.d.), 9.6 per cent
by ground water, 32.7 per cent by fu-
ture provisions, and 2.4 per cent by
public use (municipal buildings, etc.),
or a total of 64 per cent chargeable to
property. The allocation to users is
28.8 per cent by domestic users and
others, and 7.2 per cent to the major
industry, or a total of 36 per cent.
2. Fixed charges—treatment plant.
In the case of the fixed charges on the
treatment plant (amounting to $75,000
annually), it will be seen that the
relative proportion which should prop-
erly be charged to users and property
will differ in the various units. Thus,
the proportion chargeable to property
in the case of screens and grit chambers,
pumps, sedimentation tanks, conduits,
and outf ails, in which the design is
based principally on volume, will be
considerably greater than for digestion
tanks, in which the principal design
consideration is the suspended solids
removed from the sewage. Similarly,
the principal design consideration in
the case of secondary treatment is the
B.O.D. of the sewage. Figure 2 illus-
trates the basic volume distribution be-
tween users and property for this part
of the problem, and indicates that 59.5
per cent can properly be charged to
present users and 40.5 per cent to
property for works that are principally
influenced by volume. It should be
pointed out that 28.5 per cent of the
total cost is chargeable to future use
on a volume basis. As time progresses
and subsequent allocations are made,
this proportion should be reduced until
it reaches zero in 1970 (the year for
which the plant is designed).
In the case of plant units affected by
organic and solids load, the proportion
of the fixed charges chargeable to the
future and, therefore, to property, can
be estimated as follows:
B.O.D.
(lb.)
Present load (1950) 10,600
Design load (1970) 14,200
Chargeable to property (%) 25.4
Susp.
Sot.
(lb.)
10,000
13,900
28.1
-.——--— __—
-------
1502
SEWAGE AND INDUSTMAL WASTES
December, 1951
Allowance should be made for the
load contribution from public use as
well, and this portion charged to prop-
erty. The ground-water infiltration is
assumed to carry no load and, there-
fore, is ineffective on these plant units.
Certain plant units having general
use, such as the main control building,
plant water supply, roads and grounds,
plumbing and heating, etc., are impos-
sible to apportion accurately unless the
details of a special situation are in
hand. In this illustrative case these
units are apportioned by the average
percentages arrived at for all other
units exclusive of these four items.
TABLE L—Allocatioa of Fixed Charges
cms e
(6)
Cbç to
(%) (6)
t
(6)
U er’e Share Chargeable to
Voiwne
Susp. Solids
—
(%) (6)
B.O.D.
—
(%) Cs)
—
(%)
(6)
bitereepting sewers
Treatment plant:
Main uinping station
quipment
Structurea
Screen and grit chambers
Preliminasy sed. tanks
Trickling filters
FInal end. tanks
Reebuntation pump,
Cblor. tanks and equip.
Dig, tanks and van, filters
Sub-total
Main control bldg.
Plant wster supply
Rosda and grounds
Plumbing and hasting
Total plant
Total fixed charges
35,000
1.500
1,250
1,500
4,500
30,000
9,000
750
2,000
8,000
640
40.5
64.0
64.0
40.5
25.0
30.0
25.0
350
30.0
22,300
600
800
950
1800
7,500
2,700
200
700
2.400
12,700
900
450
550
2,700
22,500
6,300
550
1,300
5,600
100.0
100.0
100.0
60.0
85.0
10.0
50.0
—
40.0
12.700
900
450
330
2.300
2,250
3,150
—
520
—
—
—
—
40.0
15.0
—
—
—
—
100.0
—
—
—
220
400
—
—
—
—
5,600
—
—
—
—
—
90.0
50.0
100.0
60.0
—
—
—
—
—
—
20.250
3,150
550
780
—
58.500
7,500
2.500
2,500
4,000
30.3
30.3
30.3
30.3
30.3
17,650
2.300
800
800
1,200
40,850
5.200
1,700
1,700
2,800
24.2
24.2
24.2
24.2
24.2
9.900
1,310
410
410
680
15.2
15.2
15.2
15.2
15.2
6,220
790
260
260
430
60.6
60.6
60.6
60.6
60.6
24,730
3,100
1,030
1,030
1.690
75.000
110,000
303
410
22.750
45,050
52.250
64.950
24.3
39.2
12.710
25.410
15.2
12.2
7,960
7,960
00.5
48.6
31.580
31,580
/
ITEMS AFfECrL O BY £0 8 LOIS ITEMS AfECTED BY St/S. SO!.. LOID
FIGURE 2.—Aflocation of fixed charges on the treatment plant
-------
Vol. 23, No. 12 FAIB SEWAGE SERVICE CifARGES 1503
TABLE IL—Allocation of Operation and Maintenance Costs
Structure or Function
Total
Oper.
and
Maint.
Coet
($)
Cbargeable to
Property
(%) (s)
able to
Users
($)
Use?s Share Chargeable to
Volume
Susp. Solids
B.O.D.
(%)
($)
(%)
(s)
(%)
(8)
Intercepting sewers
Main pumping station
Preliminary treatment
Secondary treatment
Effluent chlorination
Sludge disposal
General
Supervisory
Collection and billing
Total
2,200
9,200
6,700
13,500
5,200
17,500
5,000
6,200
5,000
60
17
50
15
15
5
15
15
15
1,300
1,600
3,400
2,000
800
900
800
900
800
900
7,600
3,300
11,500
4,400
16,600
4,200
5,300
4,200
60
100
50
10
10
—
25
25
25
500
7,61)0
1,700
1,200
400
—
1,000
1,300
1,000
4 O
—
50
—
—
100
43
43
43
400
—
1,600
—
—
16,600
1,800
2,300
1,800
—
—
—
90
90
—
32
32
32
—
—
—
10,300
4,000
—
1,400
1,700
1,400
70,500
17.8
12,500
58,000
25.4
14,700
42.1
24,500
32.5
18,800
In total, the proportion of the total able to property is 0.50 m.g.d. (inflitra-
fixed charges on the plant ($75,000) al-. tion) plus 0.25 ni.g.d. (public use) di-
located to property- is $22,750, or 30.3 vided by 4.50 m.g.d., or 16.7 per cent.
per cent of the total. For the entire sys- In the ease of sludge disposal facilities,
tent the distribution of the $110,000 however, because infiltration carries
fixed charges is $45,050 to property (or with it negligible suspended solids as
41 per cent) and the balance (59 per they affect this operation, a marirnum
cent) to users. The details of the of 0.25/4.50 (or 5.6 per cent) can prop-
cation of the fixed charges are shown erly be charged to property. The ma-
in the left-hand side of Table I jor fraction of the cost of this operation
3. Operation and maintenance costs. should properly be chargeable to users
The allocation of the operation and on the basis of the suspended solids
maintenance costs, although ap-
load.
proached in the same manner, results
in quite di erent proportions charged As shown in Table li (left-hand col-
to use and to property. Because deal- umns) the approximate allocations
ings here are with present costs, made herein result in 17.8 per cent, or
charges for future capacity disappear $12,500 of the total operation and main-
and the proportion chargeable to the tenance costs of $70,500, being charge-
present users increases. Thus, in the able to property and the balance to use.
ease of power for sewage pumping, as Summarizing the allocation of the
an illustration, the proportion charge- fixed and operation charges:
Chargeable to
Users
Property
%
Amount
%
Amount
Fixed charges:
Intercepting sewers
Treatment plant
Operation and maintenance costs
Totals and averages
36.0
69.7
82.2
68.1
$ 12,700
52;250
58,000
$122,950
64.0
30.3
17.8
31.9
$22,300
22,750
12,500
457,550
-------
1504
SEWAGE AND INDUSTRIAL WASTES
December, 1951
TABLE IIL—Allocation and Distribution of Total Annual Revenue Requirements
Fixed Charge5
Oper. and Maint.
Toted Annu& Chargee
(%)
(s)
(%)
( 5)
(%)
Cs)
Chargeable to property
Chargeable to users:
Total
Volume
Suep. solids
B.O.D.
Total
41.0
59.0
23.1
7.2
2&7
45,050
64,950
25,410
7,960
31,580
17.7
82.3
20.8
34.8
26.7
12,500
58,000
14,700
24,500
18,800
31.9
68.1
22.2
18.0
27.9
57,550
122,950
40,110
32,400
50,380
100.0
110,000
100.0
70,500
100.0
180,500
The amount allocated to property
($57,550) can be distributed as a sew-
age charge to different classes of prop-
erty in any one or combinations of
methods already mentioned. For pur-
poses of this illustration the ad val-
orem tax is employed. On the total
assessed valuation of $20,000,000 this
results in a millage rate of 2.88, or
$2.88 per $1,000 of assessed valuation.
this, then, is the first part of the sewage
rate structure.
It now remains to distribute the
user’s share of $122,950 among the
different classes of users.
Distribution of User’s $hare (Average
Method)
As already mentioned, the construc-
tion and operation costs of the various
unit of a sewage works are influenced
differently by the type of load they are
called to operate on. Some units, such
as the intercepting sewers, pumping
stations, and preliminary sedimentation
tanks, are principally affected by vol-
uine. The oxidizing units are primarily
influenced by B.O.D. content and the
sludge disposal works by suspended
solids. (Milorination is principally af-
fected by chlorine demand, which for
simplicity in this illustrative example
is assumed to be in proportion to the
B.O.D. loading.
Tables I and II illustrate a distribu-
tion of the user’s share by volume, sus-
pended solids, and B.OD. It should be
pointed out that in this distribution,
more so than in the case of the alloca-
tion to use and property, a considerable
amount of judgment, reinforced by ex-
perience, must be brought into play.
With the details of a particular situa-
tion in mind, however, the distribution
is susceptible of relatively close calcu-
lation. Thus, if one considers a trick-
ling filter unit with recirculation, the
design of the distribution and under-
drainage systems at first glance might
be considered as affected entirely by
volume. However, the quantity of flow
recirculated is influenced by the B.O D.
loading, which fact must be considered
in the distribution. The cost of the
filter bed proper is almost wholly
chargeable to B.O.D., as is the cost of
recirculation.
The distribution of the user’s share
of $122,950, as calculated above, results
in the following:
Chargeable to volume
Ch&geable to suep. solids
Chargeable to B.O.D.
Total
The allocation between users and
property, and the distribution of the
user’s share can now be summarized as
in Table III and Figure 3.
Determination of Rates and &hedul.es
(Average Method)
The sewage charge to property has
already been determined as being 2.88
$ 40,110
32,460
50,380
$122,950
-------
Vol. 23, No. 12
FAIR SEWAGE SERVICE CUARGES
1505
mifis. The rates to users can be calcu-
lated as follows:
Chargeable
to
Total
Amouz t
Quantitiea
ljnit Itate
Volume
Suap. Sot.
B.O.D.
40,110
32,460
50,380
1,370 m.g.
3,647,000 lb.
3.874,000 lb.
2.93t per 1,000 gaL
$0.89 per 100 lb.
$1.40 per 100 lb.
In the illustrative example the alloca.
tion and distribution has been calcu-
lated approximately, based on certain
assumptions. This was necessary for
purposes of simplicity, as otherwise the
statement of assumed conditions would
be undesirably long. In an actual situ-
ation certain other factors in addition
to those mentioned would be considered.
The example, nevertheless, illustrates
the basic principles involved. Engi-
neers might differ somewhat in the ap-
plication of this method, but the com-
mittee believes that the principles are
so eminently fair that courts and regu-
latory agencies will approve, even if
the details of calculations are not en-
tirely correct or fair.
In the illustration the contribution of
sewage by public use has been charged
against property. This amounts to be-
tween 2.4 and 4.0 per cent of the dif-
ferent parts of the works. A variation
in this method suggested by the Joint
Committee is based upon the reasoning
that there is a public benefit in the
form of improved general health and
welfare, and hi freedom from damage
suits, by reason of the existence of the
sewage works, and a percentage of cost
can properly be charged as a general
public benefit. This amount is intangi-
ble, but would be small (the Joint
Committee report employs 5 per cent
in an ifiustrative example.)
Furthermore, the above are the theo-
retical rates which would have to be
charged to raise the needed annual
revenue requirements. In an actual
situation they would be made slightly
higher to allow for possible non-collec-
tions and contingencies, or for dis-
counts if such were to be applied.
Having completed the calculations
for the illustration, it is interesting to
NOR.SCALE XLLA 3
0 5 Q0O
FIGURE 3.—Illustrative example. Allocation and distribution of total annual revenue
requirements to users and to properties.
-------
1506
SEWAGE AND IN1)USPftL L WASTES
December, 1951
consider in a general way what would
happen to the allocation for other sew-
age works involving differing units and
proportions. In the ifiustration the
construction cost of intercepting sew-
ers is a small percentage of the total.
In a situation where the sewers consti-
tute a larger percentage of the total
construction cost, the amount of the
fixed charge allocated to property
would increase from the value of 41.0
per cent determined herein. Also,
where the degree of treatment is kwer
than assumed (complete treatment with
effluent chlorination) the allocation be-
tween users and property and the dis-
tribution of the users share to quantity
and quality would be materially differ-
ent.
Depending on the situation, the rela-
tive proportions allocated to use and
to property might vary materially from
the values of 68.1 and 31.9 per cent
determined herein. In the usual situa-
tion, somewhere between ½ to % of
the revenue requirements will be
chargeable to users in the early years
of a project. From information avail-
able to the writer, the results of appor-
tionment made by one engineering
office for four municipalities compared
with the illustrative example as follows:
The municipalities are quite different
in type as related to industrial use and
other factors. The illustration results
in relatively low allocations to property
as compared to most of the other corn-
munities.
Modification of User’s Share Disirilnt-
tion on Readiness to Serve PriiwAple
The foregoing calculations are based
on the average method of distributing
the user’s share of the annual revenue
requirements. In general, this follows
the premise that users should. pay in
proportion to their average use of the
system. In other utility rate-making,
the tendency is to divide the costs based
on two elements of service—the readi-
ness to serve, or demand charge, and
the actual use charge based on the
quantity of the commodity consumed.
The Joint Committee sets up a pro-
cedure for doing this. Essentially, the
procedure involved is to divide the
user’s share into capacity costs (those
influenced by demand), customer costs
(buffing and collection), and produc-
tion costs (in this case pumping and
treatment). In this case the three ele-
ments of costs are $71,350, $4,500, and
$47,100, respectively. The Committee
suggests that one-half of the capacity
costs plus the customer costs be col-
lected by demand or readiness to serve
charges (or minimum bills) and the
balance by the use charge. In this
case then, the amount to be collected
by demand or readiness to serve charges
would be $71,350 X % + $4,500 =
$40,180. The balance of the ca-
pacity cost plus the production costs,
or $71,350 x % + $47,100 = $82,770
would be collected by the commodity or
use charge.
The demand or readiness to serve
charge might be distributed by a
method which includes both volume
and strength as reflected by the relative
proportions of the fixed charges on con-
struction. The maximum daily demand
during the previous year might serve
as a basis of this distribution, in the
case of the major wet industry under
discussion. For the usual contributors,
the size of the water meter could be
employed as a measure of this demand,
as is the practice in the waterworks
field.
In determining rates for use, in this
ease represented by $82,170 per year,
several blocks could be established, de-
pending on the sewage quantity and
quality. In distributing the rates
Munic ps1ity
Decathr, Ill.
Winona, Minn.
Au8Un, Minn.
Btiffalo, N. Y.
Illustration
P cw,t Q argeabIe to
Puböo ad Fru,,&ty Ueo
37.1 62.9
49.4 50.6
29.1 70.9
48.1 51.9
31.9 68.1
-------
Vol. 23, No. 12
FAIR SEWAGE SERVICE CHARGES
1507
among the various blocks the calcula-
tions would be made up of two parts.
First, the item of $47,100 representing
the user’s share of the cost of treat nent
and pumping (usually termed produc-
tion costs) would be spread uniformly
over all users. The amount of $35,670
(or one-half of the fixed charges allo-
cated to use) would, according to the
Committee method, be distributed over
all of the blocks, with the major por-
.tion chargeable to the first block, de-
creasing progressively in the other
blocks. Inasmuch as the details of the
assumed system (size and distribution
of meters and use) are not available,
the complete distribution of the user’s
share on this basis is not made herein.
For a complete discussion of the pro-
cedures involved in such a distribution
the reader is invited to review the
Joint Committee Report (3) referred
to. The underlying principle involved
is that service can be provided at less
cost per unit to the large user than to
the smaller one, and this principle can
be followed in distributing the user’s
share of the cost.
Determinati,on of Annual Charge to
Major Wet Industry
By applying the unit rates previ-
ously determined to the quantities ap-
plicable to the industry under consider-
ation, the following annual charges re-
sult:
Property charge
Volume charge
Suep. solids charge
B.O.D. charge
Total
Under the Joint Committee method,
therefore, this industry which has 2.5
per cent of the total valuation of the
community and contributes 20.0, 21.8,
and 41.2 per cent of the total volume,
the suspended solids, and the B.O.D.
loads, respectively, pays 20.6 per cent
of the needed total annual revenue of
the works.
Comparison of Method,s as Applied to
the Major Wet Industry
It is interesting to compare the
charges which might be assessed against
the industry involved in the illus-
trative example under several of the
methods now in use.
Method 1—All charges on general
property tax.
( 2 o° o ’ or 2.5%)
$4,520
Method 2—All charges based on sew-
age volume (uniform rate).
$180,500 x or 20.0%)
= $36,100
Method 3—All charges based on B.O.D.
contribution.
$180,500 X or 41.2%)
= $74,500
Method 4—Incremental method. Dif-
ferenc in cost of works to
handle all sewage and
wastes (including indus-
trial wastes) and the cost
of work to handle only do-
mestic sewage. These costs
have been estimated ap-
proximately as follows:
Total InaL
Total Exol.
Industry
Industry
Construction cost
$2,200,000
$1,852,000
Fixed charges, at 5%
110,000
92,500
Oper. and maint. costs
Total annual charges
70,500
180,500
63,100
155,600
Chargeable to industry
$24,900
$500,000 at 2.88 mills
274,000 thousand gaL at 2.93t
7,970 hundred lb. at $0.89
15,944) hundred lb. at $1.30
— $ 1,440
= 8,030
= 7,100
20,700
$37,270
-------
1508
SEWAGE KND INDUSTRIAL WASTES
December, 1951
Method 5—Fixed charges on property
by taxation; operation and
maintenance on volume
(uniform rate):
Fixed charges
Oper. and maint. costs
Fixed charges
Oper. and mamt costa
Total
A variation of more than 1,600 per
cent is observable between the lowest
annual charge ($4,510 on property tax)
and the highest ($74,500 on B.O.D.
contribution). Also, it should be
pointed out that the apparent equality
of the charges for Method 2 (volume
basis) and the Joint Committee
method is a coincidence only (because
of the assumption made as to volume
and strength for this particular in-
dustry). As will be seen later, there
is no correlation between the volume
basis and the Joint Committee method
for other types of users and property.
Comparison of Methods of Apportion-
nig on Different Users and
Property
The calculations heretofore indicate
the effect of different methods of ap-
portionment compared to the Joint
Committee method for one particular
class of user and property. Because
the aim is to secure fairness to all
classes, it is essential to ascertain how
the different methods affect the usual
question of “who pays the bilL” Cal-
culations have been made for three
other classes of users and properties
as follows:
1. A residence having an assessed
valuation of $5,000, with an annual
use of 108,000 gal. of water, equiva-
lent to 75 g.c.p.d. based on four persons
to the family. The B.O.D. load is as-
sumed at 180 lb. per year and the sus-
pended solids load at 225 lb. per year.
2. The major wet industry already
described.
3. A major dry industry having the
same assessed valuation as the major
wet industry ($500,000), but contribut-
ing 1,830,000 gal. per year having a
B.O.D. load of 1,830 lb. (at 120 p.p.m.)
$110,000
$ 70,500
$110,000 x 2.5% = $ 2,760
$ 70,500 x 20% 14,100
$16,860
and a suspended solids load of 2,190
lb. (at 145 p.p.rn.) annually.
4. A small wet industry having an
assessed valuation of $80,000, an an-
nual sewage volume of 36,500,000 gal.,
an annual B.O.D. load of 304,000
lb. (at 1,000 p.p.m.), and an annual
suspended solids load of 253,000 lb.
(at 800 p.p.m.)
The results of the calculations by the
different methods are shown in Table
IV and Figure 4. The wide difference
in the charges to various classes of
property by the different methods is
apparent. Considering first the resi-
dential property, tbe very high charges
based on Method 1 (property tax for
all charges) are observable. Although
somewhat reduced, -Methods 2, 4, and
5 result in high charges to the resi-
dential user and property. The major
dry industry, on the other hand, pays
as much as the wet industry if all
charges are apportioned on a property
valuation basis. It proportionately
pays a very small amount if costs are
apportioned in accordance with Meth-
ods 2, 3, or 4. The small wet industry
pays only a small fraction of its fair
share of the costs on a general tax
basis. On a B.O.D. basis (Method 3)
it pays proportionately too great a
share of the annual costs.
In a general way it can be stated
that when all revenue requirements are
raised by a general property tax, the
rssidential owner, the commercial prop-
erty, and industrial establishments of
the dry type pay more than their fair
share of the costs. The charges to
residential properties as shown in Fig-
-------
FAIR SEWAGE SERVICE CEARGES
nrc 4 indicate that the familiar state-
ment, “It’s father who pays the bill,”
becomes a. truism in this case. And
he might not be concerned if he was
employed in a wet industry, and ob-
tained from it as salary the wherewith-
1509
all to pay his taxes. But if he hap-
pened to be employed in a machine or
printing shop, he might very well ques-
tion the fairness of this method. Dis-
tributing all of the costs on the
strength of sewage places an unfair
RESiDENCE
—
7
-
,
7I
,
/
VA
/
MAJOR WET INDuSTRY
I
— 7
,
,
,
p..
p . .
I
n
—
fl
V72
SMALL
WET iNDUSTRY
FIGURE 4.—Comparison of various methods of allocating cost on different classes
of users and properties.
Vol. 23, No. 12
METHOO METHOD 2 METHODS METHOD 4 METhVD5 METHOD 6
ll
1
—‘
.. ;.
60 -
40
20
0
F , ’
75,000
50 ,000
25.000
-1
0
6000
4000
0
0
-------
1510
SEWAGE AND INDUSTRIAL WASTES
December, 1951
TABLE IV.—Comparison of Various Methods of Apportioning Coats on Different
Classes of Users and Properties
C11C
Major Wet
Induatty
Major Dry
Induatry
Small Wet
Industry
Assessed valuation ($)
Annual sewage (1,000 gal.)
Annual B.O.D. (lb.)
Annual suap. aol. (lb.)
5,000
108
180
225
500,000
274,000
1,594,000
79 ’,000
500,000
1,830
1,830
2,190
80,000
36,500
304,000
253,000
Method 1—all charges on general
property tax ($)
45.10
4,510.00
4,510.00
723.00
Method 2—all charges on sewage
volume, uniform rate
14.22
36,100.00
241.00
4,820.00
Method 3—all charges on B.OD.
conthbution ($)
8.40
74,500.00
85.30
14,200.00
Method 4—incremental method
15.30’
24,900.00
260.00’
20,700.00’
Method 5—fixed charges on prop.;
o & M costs on volume
33.06
16,850.00
2,844.00
2,320.00
Method 6—L C. 4-part rate
8.96
37,270.00
1,536.80
7,510.00
1 Based on volume.
‘Based on B.O.D. load.
burden on the wet industries in pro-
portion to the benefits and use re-
ceived. Most other methods result in
unfairness to certain classes of users
and property.
As approximately 30 per cent of the
capacity of the works is provided for
future use, it is desirable to consider
the effect of the different methods of
charging on undeveloped property. For
this purpose an undeveloped parcel is
assumed having an assessed valuation
of $500. With all charges on property
(Method 1) this parcel would pay
$4.51 annually. However, with all
charges made against users (Method 2
—volume basis, and Method 3—B.O.D.
basis) it would pay nothing, even
though almost one-third of the capacity
of the works is provided for later use
by undeveloped property. Under the
Joint Committee method (if assessed
valuation is used as the base) it would
pay $1.44 annually. As a matter of
fairness it should pay a greater share,
as it would if area or front footage
served as the basis. This may involve
certain complications, because an un-
developed property accessible to an ex-
isting sewer receives a greater benefit
than does another remote parcel, which
may not be serviced for some time in
the future.
In summarizing this comparison it
will be seen that the Joint Committee
method results in charges, which, for
different classes of users and property,
are in between the extremes of the
other methods which have been used.
Because of its fairness to all concerned
in distributing the cost of pollution
abatement, it should be accepted by in-
dustry, except perhaps by a minority
who may be looking for advantage.
Problems in Applying Joint
Committee Method
Lest the reader gain the impression
that the employment of this method is
extremely simple and that no adminis-
trative decisions and technical judg-
ment are involved, it is desirable to
point out certain problems, some of a
minor and others of a major nature,
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Vol. 23, No. 12
FAIR SEWAGE SERVICE CHARGES
1511
which present themselves. Some of
these are:
1. A decision on how the distribution
of the share of the costs allocated to
use should be applied to residential and
commercial users must be reached. Be-
cause, as suggested by the illustrative
example, approximately two-thirds of
the use share is to be raised by charges
based on constituents (B.O.D. and sus-
pended solids), and because it would be
impracticable to measure this contribu-
tion, it is necessary to develop a way
to raise this share of the funds. It
being desirable to have a volume sched-
ule of charges uniform in its applica-
tion to all, the fraction chargeable to
strength could be collected by a sur-
charge on the basic rate for this class
of user. As applied to the illustration,
there could be added to the volume rate
of 2.931 per 1,000 gal. a surcharge of
6.051 per 1,000 gal. to account for the
constituents in average domestic sew-
age.
Another approach which has been
used is to apply to the volume charge
the quality charge for sewage of nor-
mal characteristics and to make this the
basic quantity charge. For the illus-
tration used, this basic charge would
be 8.981 per 1,000 gal. Then a special
industry would be surcharged or dis-
counted on the quality charge, depend-
ing on whether its wastes were stronger
or weaker than sewage of normal
strength. This procedure may be sim-
pler in application, but both produce
the same end result.
2. Inasmuch as sewage characteris-
tics are a factor in the rate schedule
under the Joint Committee procedure,
as they are in other methods which in-
clude composition along with volume, it
becomes necessary to measure and ana-
lyze the various industrial wastes pe-
riodically. This costs money. Neglect-
ing the first cost of the measuring
devices, the costs of sampling and ana-
lysis may be in the range of $40 to
$80 per day of sampling. The fre-
quency of sampling has been variously
suggested as biennially, annually, semi-
annually, and quarterly, depending
somewhat on the size and type of in-
dustry. As one considers the small-
sized industries the expenses of sam-
pling may be prohibitive. As an il-
lustration, the cost of quarterly sam-
pling for one day each on our small
wet industry contributing 100,000
g.p.d. of waste would be approximately
$250, which is more than 3 per cent of
the income produced in the form of
rates. This industry contributes a
waste of 1,000 p.p.m. As the waste
from another industry of the same
volume contribution approaches the
strength of normal sewage (200 p.p.m.),
the cost of sampling would be about 15
per cent of the income. Or, consider-
ing an industry of the same type as the
small wet industry, but contributing
only 10,000 g.p.d. of wastes, the cost of
sampling on the same basis would be
more than 30 per cent of the income.
If one considers an average of two
days of sampling a year as necessary,
and if a top limit of 5 per cent of the
income from a user is set as a reason-
able cost of sampling, then it might be
proper to exclude from such procedure
all contributors whose annual bill is
less than $120 x 20, or $2,400. This
suggests two reasonable expedients
The first is to place a minimum limit on
quantity, below which sampling will
not ordinarily be done. Although not
for the same purposes, the Chicago
Sanitary District proposed such a limit
as 10,000 g.p.d. For the purposes of
this procedure, it would seem that the
limit might be higher (except for an
unusual waste), or about 50,000 g.p.d.
Another is to set up in the rate ordi-
nance a strength of sewage to be con-
sidered ’ as an industrial waste high
enough that it would exclude a number
of the lesser contributors. Thus, if a
top limit of 400 p.p.m. of either sus-
pended solids or B.O.D. (almost twice
the strength of the assumed ordinary
domestic sewage) were set as the divid-
ing line, a relatively large number of
-------
1512
SEWAGE AND INDUSTRIAL WASTES
Deeember, 1951
industries might be excluded from
consideration. An objection, of course,
is that this procedure would encourage
dilution with cooling, or condenser, or
other clean waters to. escape the
strength provisions of the rate sched-
ule. However, by so doing, the industry
would be penalized on the quantity por-
tion of the schedule, although in some
cases perhaps not in the same propor-
tion.
Obviously, then, the load in pounds
of B.O.D. or suspended solids would
be the more exact yardstick. If one
employs the two limits considered above
of 50,000 g.p.d. and 400 p.p.m. of sus-
pended solids or B.O.D., then the an-
nual load limit which might be ex-
cluded would be 60,000 lb. Such an
industry would contribute (assuming
both suspended solids and B.O.D. were
at 400 p.p.m.) $1,850 annually on the
user’s share of the schedule. Sampling
for a single day once a year would
amount to about 3 per cent of the in-
come from the industry, which might
be considered reasonable.
It should be understood that the lim-
iting values considered above are not
suggested for use, but are simply ii-
luatrative. The illustration does point
up the fact that in a rate ordinance
reasonable limits should be set on the
quantity and quality of wastes which
should be considered in this connection.
Otherwise, unreasonable expenditures
may be involved in sampling and
analysis.
3. A problem very frequently pre-
sents itself when the collecting system
has already been installed and has been
paid for on a property basis (either
by tax levy, or special assessment, or
both) and many years later the need
for intercepting sewers and a treat-
ment plant arises. The Joint Commit-
tee method includes such sewers in
determining the rate base. The amount
chargeable to this unit should be segre-
gated and considered separately in de-
termining the allocation of charges.
This difficulty is caused by early un-
fair practice, and should be corrected
on a fair basis as far as feasible.
4. It is recognized that municipal
sewage systems have a very poor load
factor, as variations in quality have
somewhat the same pattern as varia-
tions in quantity. Certain industries
may add to the peak loads, whereas
others, either inherently or by con-
trolled storage, may improve the load
factor. It is conceivable that the dis-
charge from an industry can be so
regulated by storage that it adds noth-
ing appreciably to the designed ca-
pacity of the works, and little to the
operation costs of certain parts of the
plant. In fairness, some adjustment in
the rates should be accorded this in-
dustry when compared to one which
adds its peaks, either normal or ab-
normal, to those of the balance of the
system. Conversely, the industry
which adds unreasonably to the peaks
should be required to provide storage
or should pay a higher rate.
5. It is also recognized that a great
number of factors of influencing or
controlling importance are involved in
these procedures. The Committee re-
port of the California Sewage Works
Association (38) discusses some of
these. Sometimes the governing body
will not feel that it can apply the prin-
ciples set forth in the Joint Committee
method, what with already high prop-
erty taxes and attempts to broaden the
tax base. Nevertheless, the results of
the Joint Committee method should be
recognized as a point of departure, so
that when the practicalities of a local
situation influence otherwise, adminis-
trative officials will be advised of just
how far they are departing from a fair
procedure.
6. Although this problem applies
equally to other types of rates and rate
structures, it should be recognized that,
to approach fairness, the allocation and
distribution made by the Joint Commit-
tee procedures, because they change
with time, should be reviewed pe-
riodically. Cànsidering just one ele-
-------
Vol. 23, No. 12
FAIR SEWAGE SERVICE CHARGES
1513
ment of the allocation (for example the
provisions for the future), it has al-
ready been pointed out that this pro-
portion becomes less as the continued
growth of the community approaches
the capacity of the works. The fre-
quency of review would depend on the
rate of development of the community
and its component parts, and intervals
of 3 to 10 years have been suggested.
However, once the basic facts have
been developed this becomes a rela.
tively simple problem.
Use of Formulas for Determining
Charges to Industry
In the past five years, more and more
references are found in the literature
to the use of formulas designed to
charge industry for the special service
it receives. Where an allocation of
costs between users and property is
made in advance (as in the case of
Buffalo, N. Y.) and a special formula
is applied to the user’s share which
measures the use and benefits, then
fairness is possible.
Engineers are inclined to accept a
formula as a mathematical expression
of facts. Obviously, what may be so
for the particular case for which it was
derived may be an invalid expression
when applied to others. Furthermore,
the formula may not be factual at all.
The author deprecates the continued
advocacy of this type of rate making.
Formulas are too easily seized upon
by the uninitiated, who, with a false
sense of security, apply them with dis-
astrous results, insofar as fairness is
concerned.
In an attempt to illustrate this, the
author has applied the Wright (27)
formula to the example previously con-
sidered. Incidentally, this formula has
been applied by at least one large
city (29) (45) (46) (with some reason-
able modifications, however) and one
small city (28) which have come to the
author’s attention. By applying the
formula as presented, as one city (28)
has done, the charge to the illustrative
major wet industry would be $75,300.
By modifying it to take into account
the differences in strength between the
illustration and those which the formu-
lator assumed, the charge to the wet
industry becomes $69,300. This com-
pares with charges of approximately
$37,000 by the Joint Committee
method. It approaches those which the
industry would pay on a proportional
B.O.D. basis. And considering the
method of development, it should be
so, because the formula is based on the
assumption that all costs of treatment
are proportional to the strength of the
sewage. Many of them are not, as
witness the fact that collection, pump-
ing, and sedimentation costs are based
almost wholly on volume and not on
strength.
Summary and Conclusions
1. A number of widely varying meth-
ods of determining charges for the
handling of industrial wastes are em-
ployed in United States municipalities.
2. Most of the methods employed
place too great a burden on prop-
erty on the one hand or users on the
other and, therefore, result in unfair-
ness to certain classes of properties and
users.
3. A sincere desire has been shown
by administrators and engineers of mu-
nicipalities and industries to achieve
fairness.
4. The Joint Committee procedure
presents a method of achieving fairness
in the allocation of costs between users
and properties in proportion to the use
of, and the benefits received from, the
sewage works.
5. Even with the adoption of a
method which fairly allocates the costs,
a number of factors of influencing or
controlling importance must be consid-
ered in each local situation.
6. The more general employment of
the Joint Committee method, admit-
tedly not as yet adequately tested in
all procedural details, will result in
improvements in its application.
-------
1514
SEWAGE AND INDUSTRIAL WASTES
December, 1951
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Vol. 23, No. 12
FAIR SEWAGE SERVICE CHARGES
1515
38. California Sewage Works Assu. Commit-
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CORRECTION
In the paper on “Color in Industrial Wastes. II. Determination
by Filterphotometrie Method” (Trns JOURNAL, 23, 10, 1291; Oct.,
1951), the sentence beginning on page 1295, line 15, should read:
“The total color cozitribution factors for the Y and Z transmis-
sion values were calculated to be, respectively, 0.3 16 and 0.374.”
-------
REFERENCES
1. Bureau of the Budget, Circulars A—76, A-87, A—94
2. Downing, Paul B., The Economics of Urban Sewage Disposal ,
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Sewage Works”, Ohio State Law Journal , Spring, 1951
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Institutions , Chi ter 7, pp. 131—T42
7. Metropolitan Sewer District of Greater Cincinnati, Rules and
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Charges for Industrial Wastes”, Sewage and Industrial Wastes ,
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