Julv 1989
Rhode Island  User Charge Study

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Introduction
Purnose of the Survey
Part of the state’s ongoing responsibility is to
acquire financial and technical information about
its communities. The information acquired from
this user charge survey allows the state to monitor
the ability of its communities to achieve financial
self-sufficiency for wastewater treatment opera-
dons. 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 assis-
tance of federal grants. The uwre success of
wastewater pollution control in the state will
depend on the ability of local communities to
maintain financially self-sufficient wastewater
treatment operations.
Do communities have healthy user charge systems
that provide adequate revenues to support opera-
tions and debt repayment? To answer this ques-
tion and plan for the future, state and local officials
must know where communities stand in running
self-sufficient wastewater sysiems.
To obtain information on the financial solvency of
its communities, Rhode Island undertook a survey
of user charges following the procedures given in
the United States Environmental Protection
Agency’s publication Lacking at User Charges: A
State Survey and Report (EPA 430 109-87-0008).
The survey’s 11 questions 1 although deceptively
simple, generate a wealth of information on resi-
dential unit costs. A copy of the survey form is
provided in Appendix A. . This survey was mailed
to municipal wastewater treatment systems during
May 1989. All municipalities responded to the
questionnaire.
Responses on demographic and utility characteris-
tics were used to calculate unit costs and flows,
examine economic impact and ensure valid com-
parisons between communities. Costs data pro-
vided the basis for comparing user charge systems
and carefully segregated the costs of operation.
maintenance, replacement and capitalization.
Revenue questions tested whether the systems
were recovering enough money to operate in the
black. All graphs show percents and numbers of
communities (about the bar) for each data range.
Organization of Report
This report is divided into eight sections to evalu-
ate the financial self-sufficiency of municipal
wastewater treatment operations:
I. Covenng the Costs of Operation
II. Unit Costs by Treatment Level
II I. 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
VI. Planning for Equipment Replacement
VII. Debt Burden Without Grant Contribution
VIII. Summary Findings
A summary table of each community’s responses
to the survby is presented in Appendix B.
L Covering Costs of Operation
The most basic question is “Are sewer service
charges adequate to cover the costs of operation
and to achieve clean water goals?” This analysis
shows the ratio of revenues to costs. For cominu-
nities where revenues are not adequate to cover
costs, i.e., the ratio is below 100%, the communi-
ties should reassess their user charge systems and
other sources of revenues to ensure proper
- funding.
In this analysis, 87% of the communities showed
revenues below their costs. These communities
had an average overall revenue shortfall of 43%.
I

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RATIO OF REVENUES TO COSTS
=
3
E
E
0
0
0
6.
TOTAL COSTS
RATIO OF TOTAL REVENUES
TREATMENT
LEVEL
PRIMARY
SECONDARY
ADVANCED
OVERALL
IL Unit Cost
TO TOTAL COSTS
NO. OF ABOVE BELOW
COMMUN 100% 100%
2 0% 100%
13 15% 85%
1 0% 100%
16 13% 87%
b Treatment Level
Analysis of unit costs (cost of ueam ient 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
$2.07 per 1000 gallons, arid advanced eatment
systems averaged $5.51 per 1000 gallons.
AVERAGE UNIT COSTS BY TREATMENT LEVEL
AVE. Av!R. TOTAL UNTT ( STS
OM&.R CAPITAL TD.
COSTS COST AV L S 1AN 06V.
50.7$ $017 $145 $145 $0.24.
$1.05 $1.02 $2.07 $1.60 $132
$2.05 $346 $5.51 $5.51 $3.00
SlOS $1.14 $2.22 $1.61 $1.44
TR2ATh 4T NO. OP
L1V3 CO 5JN
ARY 2
SECONDARY :
ADVA14
OV .AU.. 7
M
3
B
B
0
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0
0
6.
Ii
0
3
B
B
0
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0
5 1
0
3
B
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0
U
0
0
1 .
3..
OM&R COSTS
::

I OI GaOx*Tr*IG
TOTAL COSTS BY TREATMENT LEVEL
LJS .31S 2114 .SS 311.S.4S L61
xiiar, c,r • .ljJuaIIos ruc
[ Zr, U mcaca, U
OM&R COSTS BY TREATMENT LEVEL
5S.74 7 5 -W 115
oW to Costs 1*1
I
LIS.LII 2.51.3.11 3. 1 1. 515
D £ L O d
11
11
7,
S.
a
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ii
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1 l
71
I I
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I
.3 5.35 LIS.li I
( a s or .000 Ga c i ’s trnt.0
Prmxv U 5icci v U Oi’TC
2

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ILL Average Annual Total Residential Costs
and Sewer Service Charges oer Household
The average annual total residential treatment
costs and sewer service charge per household
serves as a basis for Later analyses such as (1) the
percentage these represent of median household
income, and (2) whether user charges are covering
residential costs. Here, the data have been arrayed
to show the distribution by treatment levels. The
results of this survey showed a steady user charge
increase as one goes from primary to secondary to
advanced treatment.
The secondary treatment residential user charges
were generally less than $200, while the advanced
treatment costs were all in the $100 to $200 range.
The user charges for primary treatment systems
were less than $100 and in the $201 to $400
ranges.
DISTRIBUTION OF RESIDENTIAL COSTS AND USER
CHARGES
AVI. TOTAL AV .A(Z US O4ARCWS
TREAT 4T NO. OF RES . PER HO(JSEHOLD
L.BVU. CO! .O4UN. CO$TI1*I AV A L*.M S1D. D€V.
PRIMARY 2 $132.54 $212.00 $212.00 $152.00
SECONDARY 4 $110.17 $14 6l $120.02 $11327
ADVAN 1 321140 3150.00 3150.00 3000.00
V
OVERALL 17 3004.71 *137.04 3123.04 3175.21
0..
AVERAGE
4.
=
2
E
E
0
=
4.
I-
4.
0..
RESIDENTIAL COST PER
HOUSEHOLD
-
1IS. I 211.411
.ISSCS s c’ hi Ccs: w P %. 5 CIC $1
4.
2
E
E
0
0
V
4.
I ”
4 1
g
2
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E
0
0
2
V
V
AVERAGE ANNUAL CHARGE PER
HOUSEHOLD
I i I
‘44
‘ ‘4 ‘ ma4 Chrg. (S)
AVERAGE ANNUAL CHARGE PER
HOUSEHOLD
I I I
11
. 4
U ima , U U W d
AVERAGE RESIDENTIAL COST PER
HOUSEHOLD
2
44
I I
7.
‘4
21
11
IV. Equitability of Residential User Charges
Are residential customers paying their fair share of
the costs? Or is one class of users subsidizing
another? Analysis of data on the portion of the
flow, costs, and revenues attributable to residential
users allows answers to these questions. Based on
the analysis, communities may restructure their
user charge systems to distribute costs more
equitably.
1l0.2 1 2l1 -4 1S
Avef$Ø. Re3Idei1 si Cost oer P efloid
I Secctioay U
I
411 1 1 1.21 1
.m.as Ctiw . s P aW Id (5)
(ill
3

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This analysis shows that in many communities
residential use rs may be paying less than their
share of neatment costs. This is true for primary
treaunent, where one-half of the communities
appear to be charging their residential customers
more than their “share.” About two-thirds of
secondary treatment communities and all advanced
treatment communities charge residential custom-
ers less than their estimated share of treatment
costs.
DISTRIBUTION OF
TOTAL REVENUE VS. TOTAL COSTS
FOR RESIDENTIAL SECTOR
RATIO OF REVENUES TO COSTS:
RESIDENTIAL
TREATMENT NO. OF
LEVELS COMMIJN
PRIMARY 2
SECONDARY 14
ADVANCED I
TOTAL 7
M
.
B
B
0
1
‘I
0
B
B
0
0
RATIO OF REVENUES TO COSTS:
RESIDENTIAL
?sm
:r,oo- rw ,ai :oC 35)
rIma’ • • AØ
ABOVE
100%
50%
36%
0%
35%
V. Ability of Residential Sector to Cover
Residential Costs
Average cost per household as a percentage of
median household income can be used to indicate
whether the cost of wastewater treatment is be-
coming burdensome for community residents.
These data can also be used to predict the ability of
the community to generate more revenue by
increasing its sewer service charges.
In this analysis, communities had an average total
residential cost which was 1.2% of the MHL but
BELOW their average sewer service charge was about 80%
100% of that value.
50%
64%
100%
65%
M
0
B
B
0
14
TOT. RESIDENTIAL COST PER HH AS %
OF MHI
TOT. RESIDENTIAL COSTS PER HU AS %
OF MHI
iiL J
1 : Issdvr,ad Cos: Dr s - ‘ ?1-
r ‘mr’, • ‘ xs v U Ai7,gte’
M
0
0
B
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14
‘$4
N
5I
7.
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S.
4.
3.
2$
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ri— I
£.39 LIS.L5I
ot wøvsa CoO Mr ,44 * o ri .is
55.74 75. • $
: o V :o Co.s 5)
I
4

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SEWER SERVICE CHARGE AS % OF MHI
M
1.’
=
=
E
=
$1
‘P
I-
SEWER SERVICE CHARGE AS % OF MI II
ill
=
H
E
! ‘4
H
_ 4.
- 31
2$
1l
‘ S
TREATh
PRIMARY
SECONDARY
ADVANCED
OVERALL
TREATMENT
LEVEL
PRIMARY
SECONDARY
ADVANCED
OVERALL
ABIUTY OF RESII)ENTIAL SECTOR
TO COVER RESIDENTIAL COSTS
ST P HOUSEHOLD
AS OF !‘OU
NO. OP S1D
COM EJN AV DIAt4 0EV
2 1.0 1.0 0.2
14 1.0 1.0 0.6
1 3.4 3.4 0.0
17 1.2 0.9 0.8
NO. OF
COMMUN
2
14
17
SEWER SERVICE CHARGE
AS % OF MHI
STD
AVER MEDIAN DEV
VI. Planning For EauiDment Replacement
Examination of how communities are
planning for future equipment replacement identi-
fies those communities that may need to reassess
their user charge systems. Communities may be
shortening the life expectancy of their facilities
and possibly causing future compliance problems
by not providing adequate funds for equipment
replacement.
This analysis shows communities with
equipment funds set aside 8% of their operating
costs for equipment replacement.
FUNDS FOR EQUIPMENT REPLACEMENT
M
S I
=
E
E
3
0 5 —
= _____
II 1
I
.c 3 3.11 .1 5
‘ £ ai I ns Y o C14F.
EQUIPMENT REPLACEMENT FUNDS
TOTAL NO. OF COMMUNiTIES
PERCENT OF COMMUNITIES WITH
EQUIPMENT REPLACEMENT FUNDS
AVERAGE PERCENT VALUE
OF REPLACEMENT FUNDS
14
93%
8%
4%
ABILITY OF RESIDENTIAL SECTOR MEDIAN VALUE
TO COVER RESIDENTIAL COSTS
The effects of grant funding on capital costs are
examined by making adjustments to the debt
financing cost figure (as reported in the surveys) to
1.5 1.5 - 1.1 - reflect “total” costs of capital without Federal or
0.9 0.6 .1.1 State grant assistance. This roughly determines
the impact of grant assistance on community
0.9 0.9 0.0 eatment costs.
1.0 0.6 1.1
VII. Debt Burden Without Grant Contribution
.5..ti.
Siwer Since a ¶ f 114
1
.SS .LSI ‘IN
Prwnan, • .c a -i S ‘ w
5

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This analysis showed that the average debt financ-
ing costs for advanced treatment would have
increased from $3.46 to $5.30 per 1000 gallons,
while it would have increased from $1.02 to $2.60
for secondary treatment. In this analysis, grants
reduced the average treatment costs from $3.95 per
1000 gallons to $2.30 or 42% for secondary and
advanced treatment systems.
M
=
=
=
I-
AVG ADJUSTED DEBT BY
TREATMENT LEVEL
ADJUSTED COST OF DEBT
AVERAGE ADJUSTED COSTS FOR GRANT
CONTRIBUTION BY TREATMENT LEVEL
AVG. OM&R
COs
TREATh (T NO. OF PER 1000
LEV . COhQ.IUN GALLONS
SECONDARY 14
ADVA$ 3 1
AVG. ADJ.
DEIT T
PER 10
GALLONS
AVG. AOl.
TOT COST
PER 1
GALLONS
S1D.
MEDIAN 0EV.
$1.05 $2.M $3.71 $2.h3 $3.39
$2.05 $3.30 $7.33 $7.33 $0.00
OVERALL 15 $1. . 12 $2J4 $3.13 12.06 13.39
VTIL Summary Findings
Some of the more interesting findings from this
survey were:
1. About 87% of the communities are not col-
lecting enough revenues to meet their ex-
penses.
2. A significant portion of residential users
(65%) appear to be paying less than their fair
share for wastewater treatment.
3. Most communities (93%) have equipment
replacement funds with a median value of 8%
of operating costs.
4. Average residential cost of treatment was
1.2% of the median household income. But,
the average sewer service charge was only I %
of the median household income.
5. Federal and State grants have reduced the
average total cost of wastewater treatment
by 42% for secondary and advanced treatment
systems.
ADJUSTED TOTAL COST
100.
II 4
•0
4. 4
50 4.
40
344
4
104.
C L I I
LI US 3 . 0l LaI
A0 ,dT0U Cost. 1/I000G
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6
44
3.
1.
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U C rrsnt Osol U A0 Osot
100.
9 14
094
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5.4
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LW L W 3. 01-LOS
MC V C.b . t/I CCjII s
U ! .w U
I
6

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Appendix A
‘Model Survey Form

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‘ 9 41p
Dear (State Name) Community Official,
The budget problems you’ve faced in paying for community services will
probably increase in t: e future. This means your local residents and industry
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 or others don’t know the exact answers to all the questions,
please use your best estimates and return the survây 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 0 f Official )
Attachment
Al

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Community 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 receive 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 facility?
— primary — secondary — advanced
AZ

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6. About how much of the money needed to construct your facility came from
state or federal grants?
$_________________
7. How much dces 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)
$____________ ‘fear 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 far
wastewater collection, treatment and disposal, plus principal and interest
costs on wastewater debt?
$____________ ‘fear of data ______
11. What is the current average annual sewer service charge per household?
S____________ Year of data ______
A3

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INSTRUCTIONS FOR COMPLETING SURVEY
These Instructions include information plus directions to help you complete
some of the questions. If something does not fit your situation, answer as
best as you can and explain the problem or cafl the number shown in the cover
letter for more help.
QUESTIONS 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 front 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 wastewater 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 wastewater system: collection (sewers, pumping stations), the
treatment plant, and disposal (outfalls, sludge disposal).
7. Annual Costs. This number should include annual “operating costs,”
“niaintenance costs,” “replacement costs” for wastewater collection and
treatment, and any charges from Regional systems. (It DOES QI include
the costs of wastewater loans and bonds, or depreciation).
A4

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Operating costs include labor, materials and supplies, utilities, and
overhead (such as office rent).
Maintenance costs include preventive and corrective maintenance.
Replacement costs Include costs to maintain but not to extend the useful
life of the facilities (like pumps and motors).
8. Equipment Replacement. This question Is intended to determine what
percentage of the operating costs you Included 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 operating and financing all parts of the wastewater
facilities--collection, treatment, disposal and debt service. Q !.j I
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 and the average
wastewater flow per household.
AS

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Appendix B
Formulas and Data

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1. Ratio of Revenues to Costs -
= Total Revenue (10) / [ OM&R Costs (7) ÷ Debt Financing Costs (9)]
2. Total Unit Costs per 1000 Gallons
= OM&R Costs (71 + Debt Financing Costs (91
Current Avenge Flow in thousand of gallons per day (3) * 365
3. OM&R Cost per 1000 Gallons Processed
= (OM&R Costs (7) / [ Current Avenge flow in thousand of gallons per day (3) * 365))
4. Average Annual Charge per Household
= Current Avenge Annual Sewer Service Charge (I I)
5. Avenge Residential Cost per Household
= Residential flow Proportion * [ OM&R Costs (71 ÷ Debt Financing Costs (911
Number of Households (1)
Where Residential Flow Proportion
= Flow I Household (41 * Number of Households (11
Current Avenge flow (3)
6. Ratio of Revenues to Cpsts: Residential
= Number of Households (11 “ Average Annual Sewer Charge (ill
Cost of Treating Residential Flow
Where Cost of Treating Residential flow
= [ OM&R Costs (7) + Debt Financing Costs (9)] * Residential flow Ptvportion
7. Total Residential Cost per Household as a Percent of MHZ
= Average Residential Cost per Household / Average MHZ (2)
8. Sewer Service Charge as a Percent of MHZ
= Current Avenge Annual Sewer Service Charge (11)1 Average Mlii (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 Cost Recovery Factor
11. Adjusted Debt Cost=
Annual Debt Financing Cost Adjustment + Debt Financing Costs (91
Current Avenge flow * 365
81

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12. Adjusted Total Cost=
Adjusted Debt Cost + OM&R Cost per 1000 Gallons Processed
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 compuiing 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.
B2

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Suuary of User Costs Survey Inforeation
Average Annual
o.aunity Average Level of Operation flebt Financing Total Cost Service Charge Total Res Cost Total ResLdentaal
iusber F1o SP0) Treatient Costs Costs per Year $11000 6a1 per Household per Household Cost as a 2 of MM!
1 22,600 Secondary $5,428,784 $1,481,778 $0.85 $85.00 $62.53 0.482
2 2,600 Pricary $534,000 $1,265,262 $1.90 $60.00 $139.44 0.862
3 780 Advanced $584,000 $984,830 $5.51 $150.00 $566.60 3.422
4 11,900 Secondary $2,770,000 $3,328,270 $1.40 $140.00 1137.44 0.792
5 980 Secondary $278,175 $765,618 $2.92 $123.04 $263.08 1.102
6 6,100 Secondary $1,649,027 $621,813 $0.93 $0.00 $76.26 0.422
7 149 Secondary $155,411 $102,478 $4.74 $150.00 1453.82 2.551
B 53,500 Secondary $8,200,000 $1,970,000 $0.52 $65.00 138.02 0.292
9 792 Secondary $380,600 $67,146 $1.55 $782.00 $199.00 1.221
10 121 Secondary
11 6,000 Pricary $2,222,980 $872,927 $1.41 $364.00 1165.63 1.172
12 1,300 Secondary $695,000 $1,047,617 $3.67 $124.20 $331.10 1.551
13 2,400 Secondary $993,836 $933,899 $2.20 $117.00 $172.69 0.942
14 1,600 Secondary $451,992 $475,570 $1.59 $0.00 $193.05 1.262
15 2,800 Secondary $1,458,244 $3,000,000 $4.36 $184.23 $318.45 1.702
16 4,850 Secondary $1,973,640 $1,607,559 $2.02 $158.17 $202.61 1.302
17 2,000 Secoi dary $650,000 $524,259 $1.61 $102.00 $111.14 0.632
18 10,700 Secondary $2,139,750 $191,250 $0.60 $65.00 $47.23 0.301
$2.22 $157.04 $204.71 1.182
$1.61 $123.04 $123.04 0.942
B3

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