Federal Guidelines Equitable Recovery of Industrial Waste Treatment Costs in Municipal Systems ------- 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 ------- 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 ------- 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 ------- 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. ------- 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. 2 ------- 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. 3 ------- 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. 4 ------- 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 5 ------- 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. 6 ------- 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). 7 ------- 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. 8 ------- 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. 9 ------- 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. ------- 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. ------- 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. ------- 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. ------- 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 ------- 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 ------- 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 ------- 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- ------- 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 ------- 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- ------- 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- ------- 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 $500,000 ------- 1500 SEWAGE AND INDUSTRIAL WASTES December, 1951 4. Construction costs units are as follows: of the various 1 unit Consb . CoM ($) 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 ------- 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, ------- 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 References 1. “Water Pollution in the United States.” U. S. Public Health Service, Pubi. No. 64, U. S. Govt. Printing Office (1951). 2. National Association of Manufacturers, “Water in Industry” (Dee., 1950). 3. Joint Conunittee Report, “Fundamental Considerations in Rates and Rate Struc- tures for Water and Sewage Works.” Ohw State Law Jour., 12, 151 (1951). 4. Greeley, S. A. Proc., Am. Soc. for Mum- cipal Improvement, p. 278 (1926—27). 5. Marston, F. A. Proc., Am. Soc. for Muni- cipal Improvement, p. 377 (1929—30). 6. Calvert, C. K., and Parks, E. H., “The Population Equivalent of Certain In- dustrial Wastes.” Sewage Works Jour., 6, 6, 1159 (Nov., 1934). 7. Mohiman, F. W., “The Industrial Waste Problem.” Sewage Works Jour., 8, 2, 317 (Mar., 1936). 8. Mohlman, F. W., “The Disposal of In- dustrial Wastes.” Sewage Works Jour., 11, 4, 646 (July, 1939). 9. Mohlman, F. W., “The Growing Impor- tance of Industrial Waste . Disposal.” Water Works and Sewerage, 87, 3, 93 (1940). 10. Hoinmon, C. 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H., “Industrial Waste Con- trol.” Twa Joce.N&L, 22, 11, 1399 (Nov., 1950). 43. Veatch, F. M., “Financing Sewage Works —A Sewage Works Jour., 13, 3, 379 (Mar., 1941). 44. Sweeney, B. C., “Sewer Rentals.” Sew- age Works Jour., 11, 2, 271 (Mar., 1939). 45. Bankson, E. E , “Computation of Equit- able Charges for Treatment of Muni- cipal Sewage.” Proc., A.S.C.E., 76, Separate No. 15 (Apr., 1950). 46. Baukson, E. E., “Allegheny County, Pa., Sets Sewer-Service Charges.” Aivier City, p. 88 (Jan., 1949). 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. 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