September 1990 Virginia User Charge Study ------- Introduction Purpose of the Survey Part of the State’s ongoing responsibility is to acquire financial and tedhnical information about its communities. The information acquired from this user charge survey allows the State to monitor the ability of its communines to achieve financial self-sufficiency for waste water treat- ment operations. There is an especially strong need for the State to look even more closely at user charges since local municipalities will be financing their future wastewater construction without the assistance of federal grants. The future success of wastewater pollution control in the State will depend on the ability of local cornmunmes to maintain financially self-suffi- cient wastewater treatment operations. Do’communines have healthy user charge systems that pfovide adequate revenues to support operations and debt repayment? To answer this question and plan for the future. State and local officials must know where communities stahd in running self-sufficient wastewater systems. To obtain information on the financial solvency of its communities, the State of Virginia under- took a suz vey of user charges following the procedures given in the United States Environ- mental Protection Agency’s publication Looking at User Charges. A State Survey and Report (EPA 430/09-87-0008). The survey’s 11 ques- uons, although deceptively simple, generate a wealth of information on residential unit costs. A copy of the survey form is provided in Appen- dix t. The survey was mailed to statically significant municipal wastewater systems during November 1989. The response rate of 61% was sufficiently large that confidence can be placed in the results. Responses on demographic and utility character- istics were used to calculate ’unit costs and flows. examine economic impact and ensure valid comparisons between communities. Costs data provided the basis for comparing user charge systems and the, costs of operation, maintenance. replacement and capitalization. Revenue ques- tions allow the examination of whether the systems were recovering enough money o operate in the black Not all respondents answered all the survey questions, this resulted in different sample sizes being used for the various analyses Organization of Reoort This report is divided into eight sections to evaluate the financial self-sufficiency of munici- pal wastewater treatment operations- !. Covering the Costs of Operation II Unit Costs by Treatment Level III. Average Annual Total Residential Costs and Sewer Service Charges per Household IV Equitability of Residential User Charges ‘V. Ability of Residential Sector to Cover Residential Costs V i. Planning for Equipment Replacement VII Debt Burden Without Grant Contribution VIII. Summary Findings A summary table ot each communucys responses to the survey is presented in Appendix B I. Covering the Costs of Operation The most basic question is “Are sewer service charges adequa e to cover the costs of operation and to achieve clean water goals?” This analysis shows the ratio of revenues to costs. For com- munities where revenues are not adequate to cover costs, i.e., the ratio is below 100%, the communities should reassess their user charge systems and other sources of revenues to ensure proper funding. In this analysis, 39% of the communities showed revenues below their costs. These communities had an average overall revenue shortfall of 36% ------- MA I I A) OF KFLVE LES 10 COSTS :: 0 50% 50* - 74% 75% - 9 * ‘00* - I 23* ‘23% P .4 1 . Si Sw ... I. C. . ,. 4 %) DISTRIBUTION OF TOTAL REVENUES TO TOTAL COSTS TREATMENT NO. OF ABOVE BELOW LEVEL COMMUN 100% 100% PRIMARY 50% SECONDARY 36 r ADVANCED 50% OVERALL (\ote: In this report. the level of analysis is the community. Some communities have more than one treatment plant, and these different plants may use different levels of treatment. In this survey, two communities reported using both primary and secondary treatment and three communities reported using both secondary and advanced treatment. For purposes of this report. the former are analyzed with communities using only secondary treatment and the latter with communities using only advanced treatment.) 47 59 50% 61% is tOTAL COSTS OM&R COSTS TOTAL COSTS BY TREATMENT LEVEL 55 50+ 20 0 — ‘I d l d l d l [ 1 Ji 11. Unit Costs by Treatment Level OM&R COSTS BY TREATMENT LEVEL Analysis of unit costs (cost of treatment per 1000 gallons) helps identify communities where costs are usually high or low. Unit costs for individual communities vary dramatically and the analysis reflects this fact. Communities with secondary treatment averaged $2.64 per 1000 gallons, and advanced treatment systems averaged S2.21 per 1000 gallons. 70 * — f.U4 30 + 40 ‘U .— :0. 10 : 0! :rI 1 T T iL k r SI UU 51 OIl 5 ’ 99 $/ UU 5/19 53 IJu 0+ ‘49 34 uI 0.1 sr. p . r 111114 1444S , I resiel 20 • $1 QU $1 00 $ 1 99 3 / D l i - $2 I I $3 UU $3 +‘# . $4 III 55 50 ‘5 1- 21 ) 10 • 1+ uU II 00- $1 #9 $Z UU - $e99 $3 uu $3 . 14 UU 4,1 1.,. 5Sf 1 .UUI ) bill ,.. II.si -* . •_, ‘_._• ,:++.+. *e ------- AVERAGE UNIT COSTS BY TREATMENT LEVEL AVER AVER TOTALUNITCOSTS NO. OF OM&R CAPITAL STD COMMUN COSTS COST AVER MEDIAN DEV 4 ¶3.00 5:24 ¶42.6 S4.66 ¶2.04 47 ¶2.01 ¶0.63 ¶2 .64 ¶2.03 ¶2.16 10 ¶1.32 50.89 5221 ¶1.91 SI 77 61 ¶1.95 S0.73 52.68 ¶2.09 ¶2.14 III. Average Annual Total Residential Costs and Sewer Service Charges per Household The average annual total residential treatment costs and sewer service charges per household serves as a basis for later analyses such as (1) the percentage it represents of median household income, and (2) whether costs are covering actual costs. Here, the data has been arrayed to show the disthbution by treatment levels. The results of this survey showed a steady cost increase as one goes from primary to secondary to advanced treatment. The secondary treatment residential costs were concentrated in the $101 to $250 range, while advanced treatment costs were in the $101 to S150 and greater then $250 ranges. The user charges for secondary were concentrated in the S 101 to $250 range, while sewer charges for advanced treatment were generally $151 or greater. AVERAGE RESIDENTIAL COST PER HOUSEHOLD tREATMENT LEVEL PR (MARY SECONDARY .DVA .NCED OVERALL I 25 ° + Is 150 - 1100 $101 - 1150 $151 - $250 £ .r.4. A• I C S,3S U , $s .IsId ($1 A\ERAGE ANNUAL CHARGE PER HOUSEHOLD T 30 AVERAGE ANNUAL CHARGE PER HOUSEHOLD Ij IJL• $50 $50- $1.0 $101 - $150 $151 - $250 . $2S0 £ q ,.qu £... C .r3. pr l 3l0 (1) U -‘ $* s I * S d I II — AVERAGE RESIDENTIAL COST PER HOUSEHOLD 45 15 — lu 25 20 10 S DISTRIBUTION OF RESIDENTIAL COSTS AND USER CHARGES TREATM E .VT LEVEL PR (MARY SECONDARY ADV ANCED OVERALL \VE TOTAL LN RESID SAMPLE COST/IIH 4 5205.21 35 5210.99 5243.09 . VERAGE USER CHARGES PER HOUSEHOLD AVERAGE MEDIAN S1D DES 5593.45 S 58.00 5952 9 ¶135.92 ¶130.00 S s S17943 5194.00 S ‘ ,- 97 S109 $3 S137 10 S2 1 0 20 IS I A $50 $50 . $100 $101 $130 $151 1250 . $250 AVer,,. 0•s,$ssI,sl C1 f 1$) ------- IV. Equitability of Residential User Charges Are residential customers paying their fair share of the costs? Or is one class of users subsidizing another Analysis of data on the portion of the flow, costs, and revenues attributable to residen- tial users allows answers to these questions. Based on the analysis, communities may restruc- ture their user charge systems to distribute costs more equitably. This analysis shows that in many communities residential users (58%) may be paying less than their share of treatment costs. For communines utilizing secondary treatment, about 57%of communities charge residential customers less than their estimated share of treatment costs: for advanced treatment, this figure is 67%. ------- TOT RESIDENTIAL COSTS PER HH AS % OF MHI 40 - r fl St. •t* IOOt-14fl 1502-200t •20flt •..$taIliI tnt p.r tilt p. t f P 1* 11 •5n lp.r4Inl”tW tmo-.npii,. ------- EQUIPMENT REPLACEMENT FUNDS TOTAL NO OF COMMUNITIES 62 PERCENT OF COMMUNITIES WITH EQUIPMENT REPLACEMENT FUNDS 55% AVERAGE PERCENT VALUE OF REPLACEMENT FUNDS 13% MEDIAN VAUJE 10% VII. Debt Burden Without Grant Contribution The effect of grant funding on capital costs was examined by making adjustments to the debt financing cost figure (as reported in the surveys) to reflect ‘tota1” costs of capital without Federal or Stale grant assistance This roughly deter- mined theimpact of grant assistance on commu- nity treatment costs. This analysis showed that the average debt financing costs for advanced treatment would have increased from S.91 to $1.49 per 1000 gallons, while it would have increased from S.64 to $2.48 for secondary treatment. In this analy- sis. grants reduced the average treatment costs from $4 23 per 1000 gallons to $2.58 or 39%. ------- VIII. Summary Findings Some of the more interesting findings from this survey were: 1. Thirty-nine (39%) percent of the communi- ties are not collecting enough wastewater revenues to meet their total expenses. 2. The average wastewater revenue shortfall for the deficient communities was 36 percent of their total treatment costs. 3. The unit wastewater treatment costs averaged 2.58 dollars per 1,000 gallons. Operation. maintenance, and equipment replacement averaged 1.95 dollars per 1,000 gallons. 4. The average residential treatment cost was 216 dollars per household per year while the average residential user fee was 170 do lars per household per year. - 5. The average sewer service charge was 0 7% of the median household income (MFII), however, the total residential treatment cost was 1.1% of the MHI. 6. Fifty-eight (58%) percent of the residential users appear to be paying less than their appropriate share of the total costs. 7. Fifty-five (55%) percent of the communities have equipment replacement funds with an average value of 13% of operating funds. 8 Federal and State grants have reduced the average total cost of wastewater treatment by 39% for secondary and adv nced treatment systems. ------- Appendix A Model Survey Form ------- 4 ip Dear (State Name) Community Official, The budget problems you’ve faced in paying for community ser’nces will probably increase in the future. This means your local residents and in ustry must. pay more for wastewater treatment. Your challenge will be how to raise money to meet your current and future wastewater treatment needs. The information requested in the attached survey can help you meet this challenge. STRIKING A BALANCE As you know, every community needs to continuously examine its wastewater costs and revenues to make certain they balance. The results of this survey will help you decide if your current service charges are adequate for operating, maintaining, and improving your wastewater treatment facilities. HOW DO YOU COMPARE? The information you and others provide will be analyzed to show how much communities in the state pay for wastewater service. You’ll be able to compare your community’s costs with others. If you return this survey to us, we’ll send you-a copy of the survey analysis report. DO YOU HAVE QUESTIONS? Instructions are attached to help you answer the survey questions. To answer some of the questions, you may need to involve various people in your organization who know about the special aspects of.your wastewater system. Even if you àr others don’t know the exact answers to all the questions, please use your best estimates and return the survey to us by (date). Please feel free to call (name of contact ) at ( telephone number) if you have any questions. The survey should be returned to ( name of contact and address) . Thank you or your help. Sincerely, ( Name of Official ) Attachment Al ------- Comiiunity Name Wastewater Service District (If your community does not treat its wastewater) ______________________________ Contact Person(s) Address Phone No. __________________ 1. How many households (not population) in your community rece’ive wastewater treatment services? — 2. What is the current estimated median household income,in your- community? $__________________ 3. What is the current average flow treated at your facility? ____________ Gallons per day 4. What is your current estimated average wastewater flow per household per day? _____________ Gallons per day 5. What Is the level of treatment at your wastewater treatment facil I ty? — primary — secondary — advanced A 2 ------- 6. , bout how mucn of the money needed to construct your facility came from state or federal- grants? S_________________ 7. How much does it cost to operate your facilities for a year? (operation, maintenance, and equipment replacement costs -- DO NOT include the costs of wastewater loans and bonds, or depreciation) S_____________ Year of data 8. About how much money are you putting aside (as a percentage of operating costs) each year for equipment replacement? 9. How much are you paying each year to cover wastewater loans or bonds? (principal and interest costs only) $____________ Year of data ______ - 10. How much money (revenue) are you currently collecting to pay for wastewater collection, treatment and’ disposal, plus principal and interest costs on wastewater debt? S___________ Year of data 11. What is the current average annual sewer service charge per household? S____________ Year of data A3 ------- INSTRUCTIONS FOR COMPLETING SURVEY These 1 instructions include information plus directions to help you comolete some of the questions. If something does not fit your situation, answer as best as you can and explain the problem or c’all the number shown in the cover letter for mare help. QUESTrONS 1-6 There are several possible sources of information to complete Questions 1-6. Use the most current source that ‘corresponds best to’ your wastewater facility’s service area. Sources for data include the census,, surveys conducted by a regional planning agency, etc. In all cases, provide the best information you have; give us your best estimate if actual numbers are not available. — 1. Households. This should be the total number of households (residential customers) serviced, not the number of people or population. (Residential apartment buildings should be treated as equivalent dwelling units.) 2. Median Household Income. - This should be the most recent census value or current estimate. Your local Bureau of CensUs, Data’ User Center, can provide this information. 3. Current Average Flow Treated. This value represents flow from all sources. Flow should be reported in gallons per day. If your flow is calculated in cubic feet per day, multiply the flow by 7.481 to convert it to gallons per day. - ‘4. Average Wastewater Flow Per Household Per Day. Calculate as follows: gallons daily . number of residential daily flow per household residential flow ‘ ‘customers (gallons per day) Your figure for gallons daily residential .astewater flow might come from your water supply department or your billing office. The wastewater: flow figure should include an adjustment for infiltration/inflow. QUESTIONS 7-11 Cost and revenue information you provide in Questions 7-11 should Include all parts of the was.tewater system: collection (sewers, pumping stations), the treatm!nt plant, and disposal (outfalls, sludge disposal). 7. Annual Costs. This number shoutd include annual ‘operating tosts, ‘maintenance costs,’ ‘replacement costs’ for wastewater collection and treatment, and any charges from Regional systems. (It DOES NOT include the costs of wastewater loans and bonds, or depreciation). A4 ------- Ooerating costs include labor, materjals and supplies, utilities, and overnead (sucn as office rent). - Maintenance costs include preventive and corrective maintenance. - Reolacement costs include costs to maintain but not to extend the useful [ ife of the faciHties (like pumps and motors). 8. Equipment Replacement. This question is intended to determine what percentage of the operating costs you i.ncluded in Question 7 are being put aside to maintain but not extend the useful life of the facilities (like pumps and motors). 9. Costs of Loans or Bonds. This number should include all principal and interest payments you are making annually to pay for your wastewater treatment facilities. 10,. Money (Revenues) Collected Annually. This should Include all the money you collect for operat ng and financing all pa rts of the wastewater facilities--collection, treatment, disposal and debt service. 00 NOT Include grant monies. 11. Annual Sewer Service Charge Per Household. This should be an estimate of the typical total annual sewer service bill for a residential customer. One method of calculating this charge would be to use the wastewater treatment rate established in your sewer use ordinance andthe av’erage wastewater flow per household. A5 ------- Appendix B Formulas and Data ------- 1. Ratio of Revenues to Costs = Total Revenue (10) / [ OM&R Costs 7) ± Debt Financing Costs i 9-)I 2. Total Unit Costs per 1000 Gallons = [ OM&R Costs (7) + Debt Financing Costs (9) * 1000 Current Average Flow i3) 365 3. OM&R Cost per 1000 Gallons Processed - = (OM&R Costs (7) / [ Current Average Flow (3) 365]) 1000 4. Average Annual Charge per Household = Current Average Annual Sewer Service Charge (11) 5. Average Residential Cost per Household = Residenbal Flow Proportion * EOM&R Costs (7) + Debt Financing Costs (9)1 Nuniber of Households (1) Where Residential Flow Proportion = Flow / Household (4) Number of Households (1J Current Average Flow (3) 6. Ratio of Revenues to Costs: Residential = [ Number of Households (1) * Average Annual Sewer Charge (11)1 Cost of Treating Residential Flow Where Cost of Treating Residential Flow = [ OM&R Costs (7) + Debt Financing Costs (9)] Residential Flow Proportion 7. Total Residential Cost per Household as a Percent of MHI = Average Residential Cost per Househoid / Average v [ H1 (2) 8. Sewer Service Charge as a Percent of MHI - = Current Average Annual Sewer Service Charge (11)! Average MHI (2) 9. Equipment Replacement Funding = Equipment Replacement as a Percent of OM&R (8) 10. Annual Debt Financing Cost Adjustment = Total Grant Dollars (6) * Capital Cdst Recovery Factor Where the Capital Cost Recovery Factor is assumed to be 0.102, representing the equivalent annual cost of borrowing the grant funding over 20 years at 8 percent interest per year. Note that in compu’urig these measures, any system which was missing one or more parts of the data was excluded from the calculation. thus, sample sizes vary from measure to measure. ------- SUMMARY CHAR [ OF USER COSTS SURVEY INFORMATION Community Average Level’ of Treatment Operation Debi Financing Total Cost Average Annual blat Res Cobt boldI F1e rdeniiul Number Flow (GPO) Costs Costs per Year $11000 Gal Service Charge per Household Cost us ol Ml II - per Household 1 1.460.000 secondary $250000 $58.pOO $0 58 $25 00 $128 33 073% 2 41.000.000 advanced $13,814,000 $1,851,300 $105 $13000 $11872 032% 3 250.000 secondary $135,000 $0 $148 $1300 $24281 229% 4 280.000 secondary $65,745 $36,000 $100 $14300 $10901 044%. 5 161.150 secondary $178,215 $54,000 $395 $17800 $14842 052% 6 1.100.000 secondary $426,901 $172,806 . $1 49 $21780 $136 30 0 37% 7 2.860.000 secondary $506,400 $298,887 $0 77 $139 20 $63 35 0 26% 8 11 .000 secondary $18,000 $0 $4 48 $200 00 $229 09 2 29% 9 613,000 secondary $63,000 $96,000 $071 $1100 $7937 051”/o 10 263.000 secondary $220,000 $43,300 $2 74 $330 00 276 31 I 59%. Ii 125,000 secondary $75,808 $13,750 $196 $8400 $10317 062% 12 60.300 secondary $73,282 $38,990 , $510 $10057 $21385 143% 13 20.600 secondary $15,000 $10800 14 92.468 secondary $210,383 $108,000 $943 $9944 - 15 22.000 secondary $13,000 $0 $162 $19200 $11404 039% 16 17,000.000 advanced $5,430,071 $5,426,600 $1 75 $21948 $14369 17 1.300,000 advanced $460,566 $521,550 $207 $14189 $22664 . 227°k 18 28.000’ secondary $33,038 $17400 19 35.000 secondary $58,655 $45,552 $8 16 $24 12 $27423 20 14.800.000 secondary $3,227,658 $607,002 $071 $91 00 $214 02 1 55% 21 130.000 secondary $40,000 $23,856 $135 $19200 $14736 Ô94% 22 1,100,000 secondary $410,000 $210,000 $154 - $16500 $10568 052% 23 800.000 secondary $126,889 $0 $043 $13000 $8849 034% 24 190.000 secondary $125,000 $45,000 $245 $25332 $16374 1 13% 25 130.000.000 prImary, secondary $40,304,000 $10,373,000 $1 07 ‘ $7800 $9356 032% 26 30.000 secondary $80,000 $10,126 $8 23 $30000 27 322,425 secondary $156,244 $60,527 $184 , $12649 $17749 047% 28 33.000.000 secondary $5,713,000 $0 $0 47 $108 00 $34 62 0 tS% 29 35,000 secondary $38,000 - $11850 30 65.000 secondary $40.000 $14,964 $232 $12000 31 200.000 secondary $340,000 $64,000 $5 53 $135 00 $404 00 I 26% 32 15.000 secondary $0 $12000 33 1.885.000 secondary, advanced $1,151,370 $361,979 $220 $15200 $32515 090% 34 69,000 secondary $39,000 $16800 35 34,000,000 advanced $12,300,000 $19600 36 12,000.000 secondary $1,900,000 $1,600,000 $080 $16500 $13125 053% 37 8.000.000 secondary $1,886,000 $0 $065 $5760 $47 15 022% 38 100.000 secondary $48,690 $65,458 $313 $21600 $20547 107% 39 24.000 Primary $22,510 $9,814 $369 $2.24280 $14950 ------- SUMMARY CHART OF USER COSTS SURVEY INF0RMArI0N Couiinuiii I y Average Niliiber How (GPD) Level ol It eatinunt Operation Debt Frnancing Costs Costs per Year ToiiI Rus Cost Fold I tJ 5ltloiIlkIt er I lousel ioltl Cosi as ‘ /., ul Mt II Total Cost Average Annual $/IOQO Gal Service Charge per Household 40 4 1 185.000 140,000 - se.ondary primary, secondary $159,000 $53,700 $0 $125,000 $235 $3 50 $22500 $177 50 $22346 $174 17 I 0 73% 42 93,300 advanced - $203,317 $0 $597 $3000 $32949 146% 43 110.000 secondary $77,558 $43,512 $302 . - $15432 , $26262 44 45 14.000,000 250,000 secondary, advanced secondary $5,900,000 $549,709 $19,060,000 $0 $488 $6 02 $25680 $3000 $59547 $427 79 I 2/u/a I 90% 46 47 800,000 27,186.247 primary advanced - $350,000 $5,537,384 - $0 $437,690 $1 20 $060 $96 00 $4754 -$84 44 $9670 0 5t% 040% 48 700.000 secondary $189,695 $0 $074 $12599 $15808 263¼ 49 85,000 secondary $80,500 - $23,400 $335 . $17 00 $27057 2 16% 50 - 53,000 se ondary - $89,623 $0 $463 $12000 $50730 405% 51 18.800 secondary - $17,000 - $16800 52 75.000 secondary $60,000 $0 $219 $18000 - $30000 214% 53 150.000 secondary $45,000 $33,000 $142 $15000 $9360 066% 54 120,000 primary, secondary $75,650 $35,000 $253 $19078 I 91% 55 663 secondary $20,000 $0 $36000 $1,508 30 189% 56 70.000 secondary $62,419 $6,963 $272 $502 $212 II ‘ I 00% 57 40.000 primary $50,000 $45,000 $651 $2000 $26363 I 32¼ 58 54,000 primary $95,000 $15,888 $563 $1500 $32329 209% 59 200.000 secondary $,70,000 - $84,756 - $2 12 $34 49 $233 68 60 61 600.000 127,785 second ry secondary - $119,162 - $94,561 $Q .$0 $054 $203 $1600 - $8400 $6786 $141 34 038% 060% 62 - 82.000 secondary - $91,616 $93,114 - $617 $19800 $22528 093% 63 .240,000 secondary $100,000 $0 $1 14 $2920 $12917 006% 64 940,000 secondary $404,880 $741,595 $334 $27500 $24393 0 79% 65 31,000,000 advanced $763,933 $956,750 $015 $27000 $1887 007% 66 - 450,000 secondary $207,107 $60,000 - $163 $12000 $17807 082%. 67 4.810,000 - advanced $1,250,000 $3,000,000 $242 $19400 $33305 107% 68 270.500 advanced $60,000 $33600 69 - 791,418 secondary $129,411 $49,846 $062 $151 44 $1518 009% AVERAGE MEDIAN , $268 $209 $16988 $13710 $21557 $17583 110% 080% ------- |