ENVIRONMENTAL PROTECTION AGENCY
ROCKY MOUNTAIN-PRAIRIE REGION
REGION VIII
FINANCIAL AND INSTITUTIONAL ARRANGEMENTS
FOR WASTEWATER MANAGEMENT - DENVER SMSA
APRIL 1973
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Ipfi - fc-7%//^
£
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EPA Review Notice
This report has been reviewed by the Environmental
Protection Agency and approved for publication.
Approval does not signify that the contents necessarily
reflect the views and policies of the Environmental
Protection Agency, nor does mention of trade names or
commercial products constitute endorsement of recommenda-
tion for use.
ii
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ABSTRACT
Field studies and office research were conducted to deter-
mine the existing institutional arrangements and financial
practices of sixteen wastewater management agencies within
the Denver SMSA. Data was compiled for each of the agencies
which portrayed types and amounts of current revenues and
expenditures, projected revenues and expenditures, and the
manner in which various classes of expenditures are currently
f inanced.
Legal research revealed a wide range of institutional and
financial arrangements available to areas and units of govern-
ment in the provision and operation of wastewater facilities.
No optimum form of institutional or financial arrangements
was sought, but various criteria are suggested by which the
selection might be made. Ample legal authority appears to
exist for meeting wastewater management needs within the
Denver SMSA provided that the selection of appropriate arrange-
ments can be made by the electorate.
It was found that policy and administrative considerations in
selecting financial arrangements are more critical to satis-
factory solution of needs than are statutory considerations.
Further it was found that the scale and scope of the selected
jurisdiction was more critical than the precise form of in-
stitutional arrangement. Strengthened roles for state, county
and municipal governments are foreseen, as well as a continuance
of the important function performed by the Denver Regional
Council of Governments.
This report was submitted in fulfillment of Contract No.
68-01-0734 under the sponsorship of the U. S. Environmental
Protection Agency.
iii
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CONTENTS
Section P&ge
I Summary of Findings and Recommendations 1
II Study Goals and Objectives 3
III The Context H
IV Current Wastewater Financial Practices 33
V Alternative Financial Arrangements 9 8
VI Alternative Institutional Forms 121
VII Toward A Financial Plan 1^6
VIII Acknowledgments 141
IX Bibliography 14 3
i v
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FIGURES
No. Page
1 Wastewater Service Area 4-
2 Sampled Wastewater Agencies 8
3 Sewage Agency Relationships 2 3
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TABLES
No. Page
1 List of Studied Wastewater Agencies 7
2 Demographic Characteristics - Denver SMSA 13
3 Units of Local Government - Denver SMSA 15
4 Projected Land Use Changes - Denver SMSA 18
5 Wastewater Service Areas - Sampled Agencies 26
6 Wastewater Facilities - Sampled Agencies 28
7 Membership in Metropolitan Denver Sewage
Disposal District No. 1 30
8 Wastewater Revenue Sources - Used and Not
Used 35
9 Wastewater Revenues - Sampled Agencies 37
10 Sewer Service Charges - Charge Basis and
Typical Charges 39
11 Typical Sewer Service Charge Schedules 1+2
12 Typical Sewer Service Charge Schedule -
Englewood 1+3
13 Sewer Connection (Tap) Charges - Sampled
Agencies 47
14 Typical Sewer Connection Charge Schedules 4.8
15 Typical Sewer Connection Charge Schedule -
Littleton 50
16 Long-Term Debt - Sampled Agencies 54.
17 Frequency of Rate Changes - Sampled Agencies 56
18 Sewer Connections by Class of User -
Sampled Agencies 59
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TABLES (Continued)
No. Page
19 Wastewater Expenditures - Sampled Agencies 64
2 0 Calculation of Unit Charges -
Metropolitan Denver Sewage Disposal
District No. 1 68
21 Volume, Strength, and Annual Charge -
Metropolitan Denver Sewage Disposal
District No. 1 69
2 2 Annual Treatment Charges to Members of
Metropolitan Denver Sewage Disposal
District No. 1 71
2 3 Volume, Strength, and Per Unit Charge
Trends - Metropolitan Denver Sewage
Disposal District No. 1 72
24 Expenditures by Function - Selected Agencies 74
2 5 Sources of Funds for Various Wastewater
Purposes - Sampled Agencies 78
26 Operating Cost/Revenue Analysis - Sampled
Agencies 81
27 Revenue/Expenditure Trends and Comparisons -
City of Longmont 84
28 Wastewater Billing Procedures - Sampled
Agencies 9 0
29 A Typical Capital Improvement Program -
City of Longmont 9 3
30 Operations and Maintenance Fund -
Metropolitan Denver Sewage Disposal District
No. 1 9 5
31 Acquisition and Construction Fund -
Metropolitan Denver Sewage Disposal District
No. 1 9 6
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Section I
SUMMARY OF FINDINGS AND RECOMMENDATIONS
F indings
1. Sufficient enabling authority is contained in the Colorado
statutes to permit the adoption, modification and effect-
ive use within the Denver SMSA of virtually any institution-
al form for wastewater management which the citizens
may elect.
2. With minor amendments, sufficient enabling authority is
contained in the Colorado statutes to permit the estab-
lishment of adequate and equitable financial arrangements
under whatever institutional form may be selected.
3. Continuing federal grant assistance is needed to finance
major wastewater treatment and disposal capital improve-
ment needs in the Denver SMSA to meet increasing demands
and standards for treatment; local revenues are found
generally sufficient to meet current operating needs
anticipated.
4. A significant variation exists in current financial and
institutional arrangements of wastewater agencies in the
Denver SMSA, which extends to the level of performance
of financial planning and management by these agencies.
5. Financial and physical planning by the smaller wastewater
agencies is hampered by lack of scale of the jurisdiction,
the absence of comprehensive jurisdiction, and the in-
ability to identify long-range needs.
6. The accounting and operating records of certain waste-
water agencies are not in a form which permits ready
identification or comparison of cost components and
revenues by class and category of user, or analysis of
rate and charge schedules.
7. With the exception of Metropolitan Denver Sewage Disposal
District No. 1, formal inter-governmental institutional
arrangements are not being employed as effectively or
as fully as is authorized by statute, or indicated by
the circumstances.
8. The number of agencies engaged in wastewater operations
in the Denver SMSA renders difficult the formulation and
implementation of a coherent plan for wastewater manage-
ment for the region.
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Recommendations
1. That the Colorado General Assembly make modifications
in various statutes to facilitate wastewater debt in-
currence and administration.
2. That the State of Colorado through its administrative
departments and agencies provide additional assistance
to wastewater agencies through the maintenance of data
services, and the rendering of advice and assistance
in financial policy and management, including accounting,
budgeting, rate formulation, capital improvement program-
ming, and debt administration.
3. That under appropriate circumstances, county governments
assume a larger role in wastewater management, primarily
as an interim financing agency and in administration of
the Special District Control Act.
4. That all current rate and charge schedules be reviewed
and revised, on a continuing basis, to insure their
adequacy and equity, particularly with respect to non-
domestic users; that financial and operating records be
maintained in a form which facilitates this review and
analysis.
5. That special purpose districts, of limited scope, be
actively discouraged, and the formation or expansion
of general purpose agencies or governments be fostered.
6. That wastewater planning and management be conducted only
within the context, if not the framework, of areawide
planning and management of other governmental services.
7. That through the auspices of the Denver Regional Council
of Governments, or similar agency, the entire Denver SMSA
become involved in a massive effort to define wastewater
goals and needs for the region, delineate logical service
areas, establish criteria for selection of institutional
approaches, and proceed with programs of formal and in-
formal cooperative action to mobilize the full resources
of the region to meet local and regional needs.
8. That fullest possible information be circulated to all
wastewater agencies, and training sessions conducted,
with respect to the content and impact of current and
future guidelines promulgated by the Environmental Protec-
tion Agency.
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Section II
STUDY GOALS AND OBJECTIVES
Several studies have previously been made of various aspects
of wastewater and wastewater systems within the Denver Standard
Metropolitan Statistical Area. Most of these studies have
focused on inventories of wastewater facilities, definition
of design capabilities, description of current and anticipated
flows, and other engineering and physical aspects of sewage
collection and treatment. While these studies have been
beneficial in developing understanding of facility needs and
problems, they have not been directed toward in-depth exam-
ination of financial and institutional aspects of wastewater
management.
This study attempts to complement these past studies by
developing the financial and institutional data and outlining
alternative arrangements to present a broader base for decision
on all aspects of wastewater service in the area. By means
of such information it may be possible for individual juris-
dictions to better evaluate the financial and institutional
means for meeting wastewater needs, and for others to evaluate
the total spectrum of wastewater services throughout the
Denver area.
Study Goals and Objectives
Within the study area (Denver SMSA) there are more than one
hundred agencies which provide sewage collection and/or treat-
ment and disposal. The combined wastewater service areas
of these agencies is depicted in Figure 1. These agencies
range from very small sanitation districts and municipalities
to large metropolitan agencies such as the City and County of
Denver and Metropolitan Denver Sewage Disposal District
Number 1. Some of these agencies perform full wastewater
services including collection, treatment, and disposal func-
tions, while others perform only a single or partial function,
contracting with another agency for the additional functions
required.
The great variety of organizational types and arrangements,
and in financial measures employed, render a simple or uni-
form description of each of the financial and institutional
arrangements quite impossible. The sheer number and com-
plexity of existing institutional and financial arrangements
has limited an objective regional approach to the problems
confronting wastewater services in general, and each agency in
particular.
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SERVICE AREA
WASTEWATER SERVICE AREA
DENVER SMSA
WtLr Sm.li SOUWCC DEHVtW WE GlOWAL COUNCIL OF
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The primary goal of this study is to provide data and in-
sights which will define and delineate wastewater manage-
ment constraints and opportunities within the Denver SMSA.
As such, the study emphasizes the development of a finan-
cial and institutional data base.
However, the study is intended to provide more than an
inventory of data and practices. The study has also sought
to identify the current financial and institutional policies
of the wastewater agencies; to examine the adequacy and
suitability of current and possible alternative arrangements
to meet future needs; and, to develop a comprehensive basis
for seeking effectiveness, continuity, responsiveness and
equity of financial and institutional arrangements on a
local and regional basis. In the regional approach to waste-
water management it is vital that there be full understanding
of and sensitivity to the institutional and financial con-
straints upon local jurisdictions in meeting their assigned
responsibilities. As such, institutional and financial con-
straints are examined and alternative solutions are explored
which could lead to the minimization or elimination of exist-
ing and anticipated problems.
Scope of Work
The scope of work entailed the compilation of existing data,
analysis of trends, practices, and constraints, evaluation
of alternative arrangements, and preparation of findings and
recommendations. No attempt was made to examine physical
facilities nor the composition or components of wastewater
itself. These are being investigated in separate but con-
current studies. For purposes of this study, the engineering
and physical aspects of wastewater and wastewater operations
are treated as "givens." Furthermore, no attempt has been
made to prepare detailed recommendations that specific in-
stitutional forms for wastewater management be adopted, this
being deemed beyond the auspices of Environmental Protection
Agency. Rather, this study has sought to identify and de-
lineate possible alternatives in such a manner as would
facilitate decisions at the local and regional levels.
There are two additional studies currently underway which
will complement this study. The Water Quality Management
Planning Program, being undertaken by the Denver Regional
Council of Governments (DRCOG) and its consultant, will
explore and recommend specific institutional forms and the
steps and procedures necessary to effect such forms. This
study is expected to be completed by late 1973. The second
study, entitled Lakewood, Colorado Water and Sewer Systems
Unification, is also being performed by DRCOG and its con-
5
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sultant in conjunction with the City of Lakewood. This
study, also scheduled for completion in 197 3, details the
legal and financial problems confronting consolidation
efforts in a specific portion of the Denver area.
Study Methodology
It was recognized prior to the study being authorized that
it would be impracticable to contact and analyze the opera-
tions of every agency dealing with wastewater in the five-
county study area. With well over one hundred such agencies,
such a plan would yield only superficial, inventory type
information, except at unreasonable cost. It was therefore
determined that an in-depth study of a selected sample of
agencies, representative of the total spectrum of waste-
water management in the Denver SMSA, would be preferable to
studying every agency, and produce the desired study inform-
ation .
The Denver Regional Office Environmental Protection Agency,
together with representatives of the Denver Regional Council
of Governments and its w. tewater consultants , compiled an
initial list of wastewate 1 agencies which appeared to be
representative of the many agencies engaged in wastewater
services in the area. his consultant contacted each of
these agencies and, wii. . the concurrence of Environmental
Protection Agency, furt.ier reduced the number of agencies to
a total of sixteen agencies as provided in the Statement of
Work for the project. These are constituted: nine cities
and townsj six sanitation or water and sanitation districts;
and one metropolitan sewage disposal district. A complete
list of these agencies is shown on Table 1. These sampled
agencies are deemed to be representative of the total universe
of agencies in the study area from size, geographic, admin-
istrative, functional, type, and operational standpoints.
The geographic location and relative size of each of these
agencies is depicted on Figure 2. As shown, the major portion
of the urban area is represented by the sixteen sampled
agencies.
During the course of the study numerous personal contacts
and in-depth interviews were held with representatives of
each of the sixteen sampled agencies. Discussions were held
with city managers, finance officers, wastewater agency
superintendents, billing clerks, maintenance men and others,
in an attempt to become thoroughly acquainted with relevant
aspects of wastewater management. In addition, numerous
follow-up contacts were made by telephone and correspondence.
In all cases, agency officials evidenced sincere interest in
the study and cooperated to the fullest extent possible. Con-
tacts were also established with such agencies as the Denver
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Table 1
LIST OF STUDIED WASTEWATER AGENCIES
Denver Standard Metropolitan Statistical Area
1972
MUNICIPALITIES (9)
City of Arvada
City of Boulder
City of Broomfield
City and County of Denver
City of Englewood
Town of Littleton
City of Longmont
City of Thornton
City of V jtTiinster
SANITATION DISTRICTS (6)
City of Brig! on
Fruitdale Sam .ution,District
City of Lafayette
Northwest Lakewood Sanitation District
Pleasant View Water and Sanitation District
South Adams County Water and Sanitation District
METROPOLITAN SEWAGE DISPOSAL DISTRICTS (1)
Metropolitan Denver Sewage Disposal District Number 1
Although cities, the wastewater functions for Brighton
and Lafayette are organized under the statutory pro-
visions for sanitation districts.
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A
-
cit\of arv
B
-
CITY \nD CC
>ujrrY OF D
c,
-CTTV. OPvTHC
«NTON
-
PLEASANT-/
(EW WATER
SANITATION
1 DISTRICT
E
-
SOUTH ADA#
IS COUNTY
SANlTATtOB
DISTRICT
F
-
FRUITDALE \
SANITATION
G
-
NORTHWEST '
Lake wood
SANITATION J DISTRICT
H
-
CITY OF WE!
¦¦MINISTER
1
-
CITY OF ENG
LEWOOD
J
-
CITY OF LITJ
1LETON
K
-
CITY OF BRf|
iHTON
I
-
CITY OF BOU
Lder
M
-
CITY OF BRO
N
-
OTY OF LAF,
sVOTE
O
-
QTY OF (jQM
WASTEWATER AGENCIES SAMPLED IN STUDY
DENVER SMSA
VU/L. £..ti .Jjm
FIGURE 2
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Regional Council of Governments, the Colorado Municipal
League, the Colorado State Association of County Commission-
ers, the Colorado State Department of Health, and other
agencies in an effort to fully coordinate and develop the
investigations, research effort, and the preparation of
findings. Direct citizen participation was not a necessary
element of this study.
During these investigations state statutes and local charter
provisions relevant to wastewater management were reviewed,
as were municipal and district budgets, audit reports, bond
resolutions, and other financial reports. In every case
the consultant was awarded easy access to such documents.
Future Action
It is anticipated that this study may have several important
uses. First, the results should add to the data inventory
of the Denver Regional Council of Governments and establish
an enlarged data base to facilitate regional planning and
coordinative efforts. Second, it will acquaint the in-
dividual agencies with the policies and practices of other
agencies. This may assist the individual agencies in re-
viewing and revising their respective financial and in-
stitutional arrangements. Third, the results should assist
the Environmental Protection Agency in establishing and re-
viewing content, guidelines, and monitoring procedures of
existing and future grant programs both in the Denver area
and in other areas of the United States. Finally, the study
may establish a basis for action within the Denver SMSA to
clarify and render more effective the wastewater management
arrangements.
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Section III
THE CONTEXT
This study investigates the financial and institutional
aspects of wastewater management in the Denver, Colorado
area. It will be read by persons from the Denver area
who may not be well acquainted with wastewater functions
and agencies, and by persons distant from the Denver area
who may not be acquainted with the characteristics of the
study area. For these reasons, a brief description of
the area, together with a description of the various
wastewater agencies is contained herein. This section's
material is descriptive, with little analysis, and is
meant to acquaint the reader with that which has been
studied.
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TEE DENVER STANDARD METROPOLITAN STATISTICAL AREA
The study area, which is coterminous with the Denver
Standard Metropolitan Statistical Area, consists of 3,651
square miles within five urban counties including and sur-
rounding the City and County of Denver, Colorado, namely,
Adams, Arapahoe, Boulder, Jefferson and Denver. The area
is a dynamic, rapidly-expanding area with many of the
problems and opportunities which confront an area with
rapid population and economic growth. Not the least of
the problems is the provision of public services such as
schools, transportation, recreation, water service, and
sewage collection, treatment and disposal.
Population
In 1970 approximately 1,227,529 persons resided in the five
county area, which represented 55.6 percent of the total
population of the State of Colorado. The study area's
population doubled between 1950 and 197 0, increasing from
612,128 persons to 1,227,529 persons. This growth account-
ed for 7 0 percent of the population growth of the State
during this period. Significant to the study is the fact
that population growth has occurred largely in the four
counties other than Denver.
Estimates made by many different agencies indicate that the
Denver SMSA's growth is expected to continue for quite some
time. For example, a reasonable estimate of future growth
might be that as projected for the Regional Transportation
District. That estimate projects the 1990 population to be
1,818,00 0, which indicates an increase of approximately
30,000 persons annually. Natural increase (births less
deaths) accounted for 4-6.6 percent of the 1960 to 197 0 in-
crease, and net in-migration accounted for 53.4 percent.
This migration factor is significant as it indicates that
the living amenities and employment opportunities exist
which likely will support a continued growth rate. Table 2
summarizes the historical and projected demographic changes
in the study area between 1950 and 1990. Also shown are
the means by which each of the five counties increased
in population between 1960 and 197 0.
Governmental Entities
Corresponding to this rapid population growth has been an
increase in the number of public and quasi-public agencies
charged with the provision of public services required by
the expanding population. In fact, the area has witnessed
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Table 2
DEMOGRAPHIC CHARACTERISTICS
Denver Standard Metropolitan Statistical Area
COUNTY
1950
POPULATION
1960
1970
1980
1990
PERCENT CHANGE
1950-1970
1970-1990
Adams
Arapahoe
Boulder
Denver
Jefferson
40,234
52,125
48,296
415,786
55,687
120,296
113,426
74,254
493,887
127,520
185,789
162,142
131,889
514,678
233,031
242,000
236,000
172,000
530,000
325,000
309,000
317,000
214,000
548,000
430,000
361.8
211.1
173.1
23.8
318.5
66.3
95.5
62.3
6.5
84.5
Total
612,128
929,383 1,227,529 1,505,000 1,818,000
100.5
48.1
POPULATION
INCREASE:
1960 to 1970
Natural
Net
Tota 1
3UNTY
Births
Deaths
Increase
In-Miqration
Increase
Adams
36,324
6,645
29,679
35,814
65,493
Arapahoe
27,323
7,455
19,868
28,848
48,716
Boulder
19,903
6,760
13,143
44,492
57,635
Denver
101,644
53,019
48,625
-(27,834)
20,791
Jefferson
37,948
10,179
27,769
77,742
105,511
Total
223,142
84,058
139,084
159,062
298,146
SOURCE: United States Department of Commerce, Bureau of the Census;
Regional Transportation District; Colorado Division of Vital
Statistics.
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a proliferation of such agencies to the point that there
are frequent instances of overlapping boundaries and
jurisdictions, duplication of efforts, and lack of clarity
as to authority and scope.
Table 3 lists the number of such agencies of record in
each of the study area's counties. As shown, there are
forty-four incorporated municipalities in the metropolitan
area, most of which provide and maintain their own sewer
systems. In addition, there are 238 special purpose
districts (excluding school districts). A majority of
these special purpose districts are sanitation, water,
or water and sanitation districts. Denver Regional Council
of Governments reported, in its 1971 application to
Department of Housing and Urban Development for a demon-
stration program grant, that there were 53 special districts,
private associations, mutual corporations and other entities
providing water and/or sewer services in the City of
Lakewood alone.
Very limited coordination and cooperation between the
municipalities and between the special districts has
historically occurred. The Denver Regional Council of
Governments, whose geographic area coincides with that
of the Denver Standard Metropolitan Statistical Area, was
formed to provide a catalyst for interagency cooperation
and coordination, and to provide a basis for a more regional
approach to the problems and opportunities of the metro-
politan area.
Economics
One of the reasons that the Denver area is attracting new
residents is its strong economy. During periods when
much of the country has experienced relatively high unemploy-
ment, Colorado and specifically the Denver area have had
unemployment rates of well under four percent. The Denver
area is a wholesale and retail center for a large geographic
area, a transportation center, has much employment in
finance and the services, and has a large number of govern-
mental employees. The manufacturing and industry sectors
of the economy do not employ as large a percentage of the
employed work force as does the United States as a whole,
which may account for the area's strength during periods of
limited economic expansion.
Development and Land Use
The Denver metropolitan area has expanded in the pattern
fashioned by most other urban areas. The area began from
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Table 3
UNITS OF LOCAL GOVERNMENT
Denver Standard Metropolitan Statistical Area
19 7 2
SPECIAL PURPOSE
INCORPORATED MUNICIPALITIES (a) DISTRICTS TOTAL
Home Rule
Cities
Cities
Towns
Non-
Functioning
Special
Districts
Special
Districts
Adams
3
2
2
1
36
7
51
Arapahoe
5
1
4
1
72
7
90
Boulder
3
2
5
3
30
2
45
Denver
1
0
0
0
10
1
12
Jefferson
3
2
3
3
90
1
102
Total
15
7
14
8
238
18
300
Cities and towns which cross county lines are included in county which
contains the city or town's largest percentage of assessed valuation.
SOURCE: "197 2 Local Government Financial Compendium," State of Colorado,
Division of Local Government.
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a mining/eri'i cu 1 tu re/Lranopor tat ioi: hose and exi-nUiK-d info
service:; , the laxl .itary , md nu Lacl'uri:.;' and cover recent. M or',
early growth occurred in the City gl Denver, with a lew
satellite communities, e.g., Boulder-, Fort Co J I in?;, Greeley,
Golden, Littleton, and L'nglewood. Almost all development
has since occurred bordering these existing urban areas.
This trend has occurred primarily because ol the employ-
ment available in these existing centers, and the avail-
ability of public and private services. Many areas have
since incorporated, but most of these new cities and towns
are actually extensions of the existing, developed areas.
Development patterns are the traditional ones, with a
commercial/industrial city center, residential suburbs
and, presently, the development of shopping centers and
other decentralized facilities outside of the center city.
As the area has developed, an extensive system of sewers
has evolved which covers most of the developed areas arid
which is administered by a great many autonomous and semi-
autonomous agencies.
Land use densities do not vary as widely as in many other
urban areas, because of the lack of densely-populated,
high rise residential units. Instead, the residential
sectors of the area primarily consist of single family
dwelling units. The more dense land uses are primarily
the commercial and office buildings in downtown Denver and
in a few scattered, commercial/office complexes in and near
the suburbs. As such, extension of new sewer service is
primarily the extension of service to new developments on
previously vacant land. One important exception to this,
however, is the City and County of Denver. Denver could
expand in two ways: annexation of fringe areas or the
development of higher densities. It is probable that the
rate and extent of annexation will decrease because of the
incorporated areas which nearly surround Denver. Con-
sequently, vertical growth will likely be the major growth
type, which will yield different wastewater demands than
does horizontal, low density growth in new areas.
Population densities in the five county study area are as
follows:
Total study area
335.
.4
persons
per
sq.
mile
Adams County
150.
, 2
persons
per
sq.
mile
Arapahoe County
203.
. 4
persons
per
sq.
mile
Boulder County
176.
, 3
persons
per
sq.
mile
City and County of Denver -
5417.
. 7
persons
per
sq.
mile
Jefferson County
297.
6
persons
per
sq.
mile
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These densities reflect the almost completely developed
nature of Denver City and County, and the fact that there
are still great expanses of vacant land in the four remain-
ing counties. In most of the suburban areas the densities
appear to be four or five dwelling units per acre. The
new developments are quite dense although most consist of
single-family, unattached houses. Much multi-unit develop-
ment has also occurred, although most apartment complexes
are not over four to six stories in height.
Some bypassing of vacant lands has occurred. This has
had some impact upon the cost of public services, such as
sewer collection, interceptor or pumping costs. This may
be of increasing concern as development extends into outer
reaches of the study area.
As already indicated, population growth and, consequently,
land use, is expected to continue much as it has in recent
years. The areas adjacent to Denver will undergo sub-
stantial residential development, particularly to the south,
southeast, southwest, and north. Growth in these areas
already is occurring and little is anticipated to hinder
development in these directions. This study has sampled
wastewater agencies in several of these growth areas, as
well as in areas that have not been expanding.
Commercial land uses will follow the movement of resident-
ial populations throughout the suburbs, while industrial
activities will likely continue near existing industrial
areas and in future industrial parks which may be developed.
Table 4 depicts an estimation of changes in land uses be-
tween 1970 and 1990 for each of the study area's five
counties. As is shown, most residential development will
occur in the non-Denver counties, while commercial, office,
and industrial uses will be mixed among the five counties.
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Table 4
PROJECTED LAND USE CHANGES
Denver Standard Metropolitan Statistical Area
C OUNTY
LAND USE INCREASE -
ACRES -
- 1970 to 1990
Residential Commercial
Office
Industrial
Total
Adams
7,470 230
80
270
8 ,050
Arapahoe
9,540 470
110
270
10 ,390
Boulder
3,820 190
70
190
4,270
Denver
2,380 290
100
560
3 ,330
Jefferson
11,470 470
140
440
12 ,520
Total Study
Area
34,680 1,650
500
1,730
38,560
SOURCE: Regional Transportation District.
18
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CURRENT ORGANIZATION FOR WASTEWATER MANAGEMENT
The successful removal of contamination and pollution from
the waters of the Denver area requires the proper collec-
tion, treatment and disposal of wastewaters which ulti-
mately find their way back to the streams, lakes, and ground
water of the area. In portions of the study area sewage
is treated by individual septic tanks. However, individual
provision of waste treatment and disposal is becoming less
prevalent and recent trends in local, state, and federal
regulations seem to indicate that public treatment and
disposal systems will increasingly replace them; further
that growth demands will render uneconomic the development
of lots of the sizes required to accommodate individual
septic tanks.
For the most part, wastewater is collected, treated, and
disposed of by municipal governments and special districts
under conditions which permit quality control to be super-
vised and maintained. This section of the report briefly
describes these wastewater agencies, their functions and
responsibilities, their internal organizational framework,
and their external inter-agency relationships. A more
detailed description of agency powers and responsibilities
is contained in Section VI.
Wastewater Agency Functions and Statutory Authorities
Each municipality and special district derives its basic
formation and operating authorities from the Colorado
Revised Statutes. In addition, certain municipalities
have been granted "home rule" city charters which confer
special powers not contained in the general statutes.
Cities, towns, and counties are authorized, without
referendum, to acquire, construct, operate, maintain,
improve and extend sewerage facilities, wholly within or
wholly without the City (town, county). These entities
have broad authority to accept loans and grants, to
prescribe and collect rates and charges for services
furnished, to issue revenue bonds to finance system
acquisition and improvement, and to enter into and perform
contractual agreements with other municipalities or
agencies for the provision or operation of wastewater
facilities.
A second type of wastewater agency is the sanitation or
water and sanitation district. This type of agency also
derives its powers from the Colorado Statutes. A sanitation
19
-------
district (or Wc?ter and sanitation district) may be formed
wholly 'within, wholly without , or par tially within or
without any municipality or county, and may consist of
noncontiguous parcels of property.
A sanitation district has much the same powers with
respect to sewerage systems as the previously described
municipalities and counties. It may acquire, construct,
operate and maintain the works and facilities necessary
to collect, treat, and dispose of sewage. It can extend
sewer lines to areas outside of the district. It can
incur indebtedness,' acquire real property, fix and collect
rates and charges , compel connection with the system if
a service line is within 4-00 feet of a property and,
under certain conditions, can levy and collect ad valorem
taxes to support operations.
The Colorado State Legislature has also granted the
authority whereby metropolitan sewage disposal districts
may be formed. Metropolitan sewage disposal districts,
e.g., Metropolitan Denver Sewage Disposal District Number 1,
may be organized for the purpose of acquiring, by construc-
tion or otherwise, improving, and operating a sewage treat-
ment and disposal system or systems to intercept, receive,
transport, treat and dispose of the outfalls of sewer
systems of other agencies. Metropolitan districts are
expressly forbidden from collecting sewage, having been
created for the specific purpose of treating and disposing
of wastes collected by member agencies.
The metropolitan sewage disposal district, in performing
a regional wastewater function, has powers and duties
pertaining to a public body politic and corporate, con-
stituting a quasi-municipal district.
Like the municipalities and districts, the legislation
concerning metropolitan sewage disposal districts is quite
comprehensive.
No attempt has been made in this study to cite all of the
legislative powers and duties given to any of the various
wastewater agencies. Rather, the basic enabling legis-
lation has been examined to ascertain its general content
and sufficiency. During the course of the interviews
held, no agency expressed the desire for any form of new
or expanded grant of legislative authority, although
several representatives expressed the belief that changes
in organizational form were inevitable, if not totally
desirable, to meet changing needs. There appeared to
exist, in several agencies, a lack of information concerning
opportunities for change or improvement in external or in-
ternal organization and management.
20
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Wastewater' Agencies' Organizational Framework
The various agencies concerned with wastewater management
in the Denver area are given some latitude in their
organizational structures. Despite this, there is sub-
stantial uniformity between the different municipalities
and between the various districts. Municipalities are
general purpose governments with a variety of functions.
The municipal wastewater function is thus usually per-
formed by a department of the city, sometimes also re-
sponsible for water treatment and distribution. Varying
arrangements exist with respect to engineering functions ,
and the relationship of the department to the engineering
or finance departments. The director of the wastewater
department normally reports directly to the city manager,
who is the administrative head of all departments and
agencies, and can thus organize and coordinate the re-
spective functions in accordance with the city charter,
or as may be approved by the City Council.
The municipal departmental or internal organization,
inter-relationships and degree of self-containment differ
considerably, with the principal cause being the differ-
ing size and complexity of the governmental unit, and
consequently differing professional and technical staff
needs.
The special sanitation districts are autonomous, single-
purpose entities, with no other functions. The waste-
water function is the reason for which the agency exists,
and there are consequently no other departments, although
certain internal divisions may exist in the larger
districts. Each district is governed by an elected
board of directors. In addition, there is a staff of the
size and composition deemed necessary to administer the
operations of the district. Few districts have more than
several employees as staff personnel, primarily because
of the small size of most of the districts. Highly
technical work, engineering design, construction super-
vision and other non-recurring work is usually performed
by consulting engineering firms. Every sampled district
had a private engineer on retainer to perform "these types
of functions. Several of the smallest districts had only
one part-time person for billing and collecting and one
part-time person who functioned in a repair/maintenance
capacity, with all other personnel on a retainer basis,
e.g., accountant, attorney, and engineer.
The organizational structure of Metropolitan Denver Sewage
Disposal District Number 1 (MDSDD #1) is far more sophist-
icated, primarily as a result of its large staff require-
21
-------
ments. In order to perforin its prescribed functions,
MDSDD #1 in 197 2 employed 120 persons. The district is
organized into four departments, all of which report
directly to the MDSDD #1 manager. The departments are
administrative services, engineering, operations and
maintenance, and laboratory services. Operations, in
terms of personnel, is far larger than the other depart-
ments .
The Colorado Revised Statutes require that any metro-
politan sewage disposal district be governed by a board
of directors. Each member agency and municipality is
represented on that board, with one board member re-
presenting every twenty-five thousand persons, or fraction
thereof, in his or her district or municipality. No one
member is entitled to more than one-half of the total
board membership, and each board member is appointed by
the governing body or executive of each member agency.
Because each member agency has a member of the board,
but no member agency can have more than half of the
members, each board member represents a different number
of people. For example, the Pleasant View board member
represents all 4,800 persons of that district; the
Northwest Lakewood member, 15 , 600 persons; a'nd each Denver
member represents 24,000 persons, assuming the same present
board membership. At present, the board of directors
is composed of approximately fifty members. In order to
allow such a large group to function, a committee structure
has been established, which includes an executive committee.
Wastewater Agency Interrelationships
As indicated, the agencies dealing with wastewater in
the Denver area are quite autonomous. This is not to say,
however, that there is no interaction between agencies.
To the contrary, many of the agencies functionally inter-
act by means of water supply source, use of other agency's
collection or treatment facilities, and so on. The total
extent of interaction is so complex that to fully describe
it would require a lengthy, confusing document. It is
possible, however, to depict the range of formal relation-
ships by use of several examples.
Figure 3 depicts these relationships for eight of the
sixteen sampled agencies. These agencies were selected
because they represent most of the types of interaction
between wastewater agencies within the study area. By
following the arrows on the figure, it is possible to
follow the water and wastewater flows for each agency and
22
-------
DENVER
WATER BOARD'
WATER SUPPLY
ho
CO
(s
LITTLETON
COLLECTION
LEGEND
0
-------
between the agencies. Also depicted on the figure azne
the wastewater processes performed by each agency, and
those functions performed for one agency by another.
The City of Englewood, as depicted on Figure 3, has no
formal relationship with any of the other agencies. It
obtains nearly all of its water supply from its own wells,
collects its own sewage, and operates its own primary and
secondary treatment plants.
The other seven agencies depicted on Figure 3 have some
type of formal working arrangement with at least one of
the other agencies shown on the figure. Littleton, like
Englewood, collects, treats and disposes of its own sewage.
However, Littleton receives its water by way of the Denver
Water Board, and has a direct relationship with that
agency. The City of Arvada also obtains some of its
water supply from the Denver Water Board, and collects its
own sewage. It also has its own primary and secondary
treatment plant. However, Arvada is a member of Metro-
politan Denver Sewage Disposal District Number 1 and
transmits part of its sewage to the MDSDD #1 for treat-
ment. As such, Arvada has a direct relationship with
these two agencies. In addition, Arvada has outside
connector districts which collect sewage and discharge
it through the Arvada system.
Northwest Lakewood is not served by the Denver Water
Board but, because it does not have its own secondary
treatment facilities, is a member of MDSDD #1 and trans-
mits sewage requiring secondary treatment on to MDSDD #1.
The City of Westminster has treatment facilities but is
also a member of MDSDD #1 and transmits part of its sewage
to that agency for disposal. The City and County of Denver
receives its water from the Denver Water Board and is
otherwise conncected to a great many other agencies. For
example, Denver operates primary treatment facilities but
then transmits the sewage to MDSDD #1 for secondary treat-
ment. In addition, a number of municipalities and districts
collect sewage which is transmitted through the Denver
system and, ultimately, to MDSDD #1, for treatment, even
though the originating agencies are not members of MDSDD #1.
Thus, Figure 3 is a very simplified example of the types
of arrangements by which the Denver area wastewater agencies
operate. It shows that there are many different arrange-
ments available to each of the agencies and there is con-
sequently considerable flexibility in selecting the means
by which particular needs of each wastewater agency may
be met.
24
-------
Note should be taken that the Denver Water Board, a large
regional supplier, has no direct wastewater responsibilities,
although its plans and operations have tremendous implica-
tions for the wastewater agencies and their operations.
Characteristics of the Sampled Agencies
As indicated, this study investigated the financial affairs
of the wastewater agencies in the Denver area by sampling
sixteen representative agencies. Included were municipal-
ities of differing sizes and characteristics, special
sanitation districts of varying sizes and characteristics,
and a large metropolitan sewage disposal district.
There are well over one-hundred municipalities and special
districts providing some .form or degree of wastewater
service within the Denver Metropolitan Statistical Area.
In addition, there are perhaps that many special contractual
users or agencies which supply their own service, e.g.,
military, large industries, and so on. The jurisdictional
and service area boundaries appear frequently to be
haphazardly drawn, overlapping the boundaries of districts
formed for other special purposes, and to occasionally
represent either a development decision or the failure of
a municipality to extend services beyond its boundaries.
The service area, population served, and number of connec-
tions (taps) of each of the sixteen agencies are depicted
on Table 5. As shown, the agencies vary in size, from
600 acres (Lafayette) to 90,048 acres (Denver); from 3000
persons (Fruitdale) to 601,300 persons (Denver); and from
576 connections (Fruitdale) to 161,200 connections (Denver).
Metropolitan Denver Sewage Disposal District No. 1 in 197 2
served an area of approximately 267 square miles. As is
shown on this table, several of the sampled agencies and
many of the non-sampled agencies are quite small in both
number of connections and geographically.
The services provided and the methods of providing these
services also vary among the different agencies. All of
the sampled agencies (excluding MDSDD #1) perform sewage
collection. These collection agencies provide laterals
to which are connected the service lines of residential
and other users, sub-mains which collect sewage from the
many laterals, and mains or trunk lines which carry sewage
from large areas of laterals and sub-mains.
All of the wastewater thus collected by the collection
agencies must be treated so that the effluent will meet
federal, state and local clean water standards. A range
25
-------
WAT'/.'A 7L' P .'-UP v 1C L A? HA..
Selected Mun ic i t;a 1 i t Is s ana ^nira::
JURISDICTION
Nun1c i pa1i ties
Arvdda
Boulder
Er'oorr.f ield
Denver
Englewood
Littleton
Longmont
Thornton
Westminster
Districts
MDSDD #1
Brighton
Fruitdale
Lafayette
N.W, Lakewood
Pleasant View
South Adams
SERVICE AREA
19?Q Acres
E;OF!JLATlui:
ZilRVZh
1 9 7 0
1972
2 3 ,040
10 ,000
1,000
90 ,048
32,000
6 , 400
2 ,630
12 ,800
3,230
140 ,000
2,080
1,200
600
1,400
1,220
5,000
46 ,814 58,70 3
6S,GOO 71,000
7 , 2 6 1 8 , 40 0
5 36 , 857 601 , 300
65,000 74,000
3 9,500 N . A.
23,000 26,000
57 , 0 2 2 68 , 300
21,540 22,10 0
879 , 5 5 2 944 ,400
8 ,700 9 , SO 0
2,760 3,000
4,200 5,500
13,825 15,600
4,386 4,800
20 ,000 25 ,000
POT. PEP
S^. MILL
19 70
.1,300
4,359
4 ,841
4,171
1 ,30 0
3,950
5 ,610
2 ,851
4,265
4 ,016
2 ,6 36
1,476
4 ,667
6 ,313
2,308
2 ,564
:orjML':Tio:js
19 7 3
13 7 2
1 j ,530 14,_ 8 3
iu,200 15,927
1,90C 2,2 00
121,083 161,200
18,628 21,161
6,723 8,000
6 ,000 8 ,000
12,500 18,664
5,500 5,629
(a)
199 ,00 0 246 , 501
2 ,000
469
9 50
3,512
700
5 ,290
2,63^
575
1,250
3 ,969
857
5 ,740
^ Metropolitan Denver Sewage Disposal District No. 1 does not collect
sewage itself. Rather, it treats the sewage collected by districts
and municipalities which have approximately 246,600 taps.
SOURCE: Contacts with district and municipal officials; "Areawide
Sewerage Master Plan Report - Phase I, Inventory" by Denver
Regional Council of Governments, February, 1970; Metropolitan
Denver Sewage Disposal District Mo. 1; Wilbur Smith and
Associates.
26
-------
of facilities and provisions exists for such treatment,
as shown on Table 6. Several of the collection agencies
do not maintain treatment facilities. When this is the
case, the sewage is transmitted for treatment to another
agency, usually the Metropolitan Denver Sewage Disposal
District Number 1, on a contractual basis. In addition,
several of the agencies which maintain treatment plants
also are members of MDSDD #1, either because the collec-
tion agency's treatment plant is of inadequate capacity,
or because it is only suitable for primary treatment.
Primary treatment,as defined herein, relates to the various
processes by which solids are settled and removed from the
liquid sewage. This is usually accomplished by means of
screening, a grit chamber, or sedimentation tanks. As
shown on Table 6, many of the agencies provide their own
primary sewage treatment facilities. Those which do not,
transmit sewage to an agency which can provide treatment.
Following primary treatment, the sewage enters the second-
ary treatment phase. In secondary treatment, the organic
matter in sewage is removed, usually by making use of the
bacteria itself. The principal means of secondary treat-
ment, both of which are in evidence in the sampled agencies,
are trickling filters and the activated sludge process.
Filters appear to be predominant in the smaller agencies,
while the largest secondary treatment facility (MDSDD #1)
utilizes the activated sludge process.
A third treatment stage may be provided, known as advanced
waste ("tertiary") treatment. This is the final treat-
ment process, which removes additional pollutants to meet
water pollution standards. On the basis of data generated
in this study, it appears that no agency is currently
providing advanced waste treatment.
By reviewing each agency's facilities, it is seen that the
small wastewater agencies have generally found it to be
uneconomical to maintain their own sewage treatment plants.
Consequently, the waste must be transmitted elsewhere for
treatment. In addition, the trend indicates a growing
differentiation of functions between collection and treat-
ment, with agencies specializing in each of these. MDSDD #1
has specialized in treatment and disposal (the Metro
District cannot legally serve as a sewage collection agency)
while many of the smaller agencies provide only collection.
Agencies with treatment facilities may accept sewage from
other collection agencies and provide treatment on a
contractual basis. Denver, Littleton, and Englewood each
serve these functions.
27
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Table 6
WA.'-'W A'i'LK FACILITTES
*lui; i c ira i. _L t i f ^ cir.'.l Sanitarian Dl-
Denver SMSA
1970
JURISDICTION
Nunic ipa.1 ities
Arvada
BouIder
Broomfleld
Denver
Englewood
Littleton
Longmont
Thornton
Westminster
SEWERAGE TREATMENT PLANTS
Number
Type
Tr ickl mg
Fi1te r
Pr imary
Primary and
Sec.F L1ters
Primary
Sec.F i1te rs
Primary and
Sec.FiIters
Primary and
Sec.Fi1ters
Primary and
Sec.Fi1ters
Capacity Operation
(MGD)
0.7 Own & Metro
LIFT STATIONS
Number Pumps
14.4
1.6
125.0
8.0
7.6
5.6
0.6
Own
Own
Own &< Metro
Own
Own
Own
Metro
Own & Metro
Districts
MDSDD #1 1
Brighton 1
Fruitdale 0
Lafayette 1
N.W. Lakewood 1
Pleasant View 0
South Adams 1
Activated
S ludge
Primary and
Sec.FiIters
Primary and
Sec.Filters
Primary
Primary and
Sec.Filters
98.0
1.0
N.A.
1.8
2.5
Metro
Own
Metro
Own
Own & Metro
Metro
Own
0
0
0
2
14
SOURCE: "Areawide Sewerage Master Plan Report, Phase I, Inventory.
Denver Regional Council of Governments, February, 1970.
28
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Metropolitan Denver Sewage Disposal District No. 1
On May 15, 1961, the Metropolitan Denver Sewage Disposal
District Number 1 was formed by thirteen charter members
(municipalities and special districts) as authorized by
Chapter 89, Article 15, Colorado Revised Statutes. The
purpose of MDSDD #1 is to receive, treat, and dispose
of all sewage, without limitation as to flow, which may
be delivered to the system from member districts and
municipalities. The district, then, treats and disposes
of the sewage of various agencies which choose not to
maintain their own treatment facilities, or do not have
adequate treatment capacity.
Table 7 lists all members of MDSDD #1 in 197 2, and their
dates of membership. Any municipality or special district
can be included in MDSDD #1 if the Metropolitan District
finds that inclusion of the applying agency is economic-
ally feasible and if the Board of Directors so approves.
Nine agencies have j'oined the district since its incep-
tion. It would appear that there is a trend toward
membership in or utilization of such regional facilities
and services. Although the vast majority of municipalities
and special sanitation districts are not yet members,
many non-members actually receive treatment of their
wastes by MDSDD #1 through physical connection and con-
tractual arrangements with member agency systems.
While MDSDD #1 directly serves only a few of the many
wastewater agencies in the Metropolitan Area, it serves
the majority of residences in the area through its member
collection agencies. For example, the population of the
five county Denver Standard Metropolitan Area in 19 7 0
was approximately 1.2 million persons. In the same year,
MDSDD #1 treated the sewage of member agencies which
served approximately 870,000 persons. Thus, while MDSDD #1
serves but a small percentage of the total municipalities
and districts, it serves as much as 7 2.5 percent of the
area's population. This, of course, is largely due to the
membership of Denver (1970 population of 521,000 persons)
in the district, and to those agencies who deliver wastes
to Denver which are subsequently transmitted to MDSDD #1.
MDSDD #1 also serves the major portion of the developed
area including and immediately adjacent to the City and
County of Denver. The only major developed areas not
served by MDSDD #1 are located to the south of Denver, e.g.,
the Englewood, Littleton, Cherry Hills and Greenwood
Village areas, and the areas north-west of Denver, e.g.,
the Boulder, Lafayette, Broomfield area. In addition,
29
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Table 7
MEMBERSHIP IN METROPOLITAN DENVER SEWAGE DISPOSAL DISTRICT NO. 1
Year Membership Attained
MEMBER
T964TaT
YEAR MEMBERSHIP STARTED
1965 1966lDJ 1967 1968 1969 1970 1971 1972
CO
o
Alameda Water and Sanitation District
Applewood Sanitation District
City of Arvada
City of Aurora
Bancroft Water and Sanitation District
Berkeley Water and Sanitation District
Crestview Water and Sanitation District
City and County of Denver
East Lakewood Sanitation District
Fruitdale Sanitation District
City of Golden
Highland Park Sanitation District
North Pecos Water and Sanitation District
North Table Mountain Water and Sanitation District
North Washington Street Water and Sanitation District
Northwest Lakewood Sanitation District
Packaging Corporation of America (Special Connector)
Pleasant View Water and Sanitation District
City of Thornton
City of Westminster
Westridge Sanitation District
Wheat Ridge Sanitation District
X
X
X
X
X
X
X
(J)
x(c)(d)
rU)
Original members of the district.
While the district was formed prior to 1966, the treatment plant did not become operational urttil 1966.
Fruitdale received approval to discharge sewage to the Metro plant, but did not receive approval for membership until lc72.
(d) All wastes transmitted without prior treatment.
SOURCE: Metropolitan Denver Sewage Disposal District No. 1
-------
Rocky Mountain Arsenal and the City of Brighton are also
excluded. Several small districts and municipalities,
which are not yet members, are surrounded by areas that
are served by MDSDD #1.
Because MDSDD #1 treats but does not collect sewage, it
is a special case which cannot be directly compared with
the operations^or statistics of the other sampled agencies.
Nevertheless, it is a very important wastewater agency in
the area which poses significant implications for all of
the wastewater agencies with respect to physical pro-
visions and financial arrangements.
31
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Section IV
CURRENT WASTEWATER FINANCIAL PRACTICES
Wastewater agency policies, plans, physical facilities,
and ability to meet standards are dependent on the agency's
willingness or duty to perform wastewater functions, and
its ability and capacity to do so. The ability to perform
is in turn dependent on two variables: extent of legal
powers and financial capability. This chapter deals with
the latter variable, that is, the financial constraints
and capabilities for wastewater management.
Public bodies and private citizens desire abundant clean
water, effective pollution abatement, and other goals,
standards and objectives which are beneficial from sanit-
ation, environmental, and economic viewpoints. In order
to achieve these purposes, legislation has been enacted,
regulations have been promulgated, loans and grants have
been issued, standards have been established, and con-
siderable technical investigations and construction
programs have been undertaken. These measures have been,
for the most part, beneficial in achieving many of the
goals and objectives of recent years.
However, the further attainment of these goals and object-
ives will continue to be dependent on the monetary re-
sources available with which to implement them. Monies
for implementation come from a variety of sources. The
users of service, the beneficiaries of service, various
levels of governmental, and other revenue sources have
all contributed. These sources of revenue, the constraints
upon revenue production, the type and magnitude of re-
quirements and the current use of available funds are the
wastewater factors with which this chapter deals. It
is hoped that a detailed understanding of these aspects
of wastewater management will lend insights into the
financial needs and resources of the wastewater agencies
and, consequently, knowledge as to what goals and objectives
are feasible and what methods are best suited to waste-
water agency financial requirements. If¦meaningful
financial planning can be accomplished, it is likely that
a principal obstacle to achieving the goals of effective
and efficient wastewater management will be lessened and,
in some instances, removed.
33
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SOURCES OF WASTEWATER REVENUE
Within the Denver Standard Metropolitan Statistical Area,
those agencies charged with the collection and/or treat-
ment and disposal of wastewater utilize a wide range of
revenue sources to finance their operations, maintenance,
and capital improvements. The sixteen sampled municipal-
ities and districts utilize a total of eleven different
significant sources of revenue. The trend appears to be
toward the expansion of revenue sources and the applica-
tion of higher revenue rates for each source.
Table 8 lists many of the revenue sources presently
available to the various wastewater jurisdictions. All
sixteen sampled jurisdictions use some type of service
charge. Fourteen use a connection (tap) charge (MDSDD #1
has no connections to individual users and as such has
no tap charge, while the City and County of Denver has
no tap charge as such but does charge the owner the cost
of the connection). All sixteen jurisdictions presently
have, or recently had, outstanding debt. Twelve of the
sixteen jurisdictions have revenue bonds outstanding,
while five have outstanding general obligation bonds.
No municipality uses a property tax levy to directly
support its wastewater operations, while four special
sanitation districts utilize a tax levy to help support
their sewerage systems. Special improvements to the
sewerage system are funded through the creation of special
improvement (benefit assessment) districts in six of the
sampled jurisdictions (the number may actually be more
than six because several of the officials may not have
understood exactly what constituted a special improvement
district). Federal funds have been used by half of the
sampled jurisdictions, and most of the agencies have
applied for federal funds for upcoming projects. No
agency has been granted direct state or county financial
assistance because such funds are not now available to
them. In addition, no wastewater agency receives a
direct appropriation of general fund monies (in fact
they often contribute to the general fund) nor have they
received any portion of the municipalities' annexation
fees. Seven of the jurisdictions have plant investment
fees, although these charges often have a different name.
In addition, six agencies reported that they levy special
assessments, five reported a connection permit fee
(usually included in the tap fee) and two districts re-
ported the use of an inclusion fee. No wastewater
agency anticipated receiving general revenue sharing monies ,
although the final use of such monies had not yet been
determined by most of the municipalities at the time of
this study.
34
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Table 8
WASTEWATER REVENUE SOURCES
Used and Not Used
Selected Municipalities and Sanitation Districts
Denver SMSA
1967 - 1972
JURISDICTION
Municipalities
Arvada
Boulder
Broomfield
Denver
Englewood
Littleton
Longmont
Thornton
Westminster
REVENUE SOURCES
<(b)
Districts
KDSDD #1
Brighton
Fruitdale
Lafayette
N.W. Lakewood
Pleasant View
South Adams
X
X(a)
Commercial users only.
(k) Only where the city has front-ended an extension.
Buy-in fee, often not labeled Plant Investment Fee.
An "X" indicates that source of revenue is being used.
A blank indicates that source of revenue is not being used.
-------
While most wastewater agencies use service charges and
tap fees, plus a scattering of other revenue sources,
there is a great variance between the charges imposed
and the revenues accruing from these various sources.
Table 9 depicts the total revenues accruing to each
wastewater agency in 1970, and depicts the major sources
of such revenues- No comparisons have been made of
revenue per capita or per tap-, such comparisons could be
misleading as industrial and commercial revenue sources
and cost factors would be included which would distort
the data.
As shown, the service charge produces the greatest
revenues to the agencies, varying between 9 5.4- percent
of all City and County of Denver wastewater revenues and
6.6 percent of all Northwest Lakewood wastewater revenues.
These two jurisdictions are unique, however, because
Denver has no tap charge nor mill levy, while Northwest
Lakewood levies a sewer service charge for commercial use
only. MDSDD #1 receives all of its operating revenues
from users through the service charge. The average
service charge, excluding MDSDD #1 and the City and County
of Denver, constitutes 62.6 percent of the remaining
fourteen agencies' revenues in 1970.
The next major generator of revenue is the connection
(tap) charge. Included in this revenue class on Table 9
is the tap charge, plus any plant investment fee and permit
fee as reported. The connection charge, as a percent of
total revenues, varies between a high of 39.4 percent
(Westminster) and a low of 2.7 percent (South Adams County),
again excluding MDSDD #1 and the City and County of Denver.
By excluding these two agencies, it is found that the
connection (tap) charge constituted an average of 22.9
percent of the remaining fourteen agencies' revenues in
1970.
Interest income, as reported on Table 9, is that revenue
generated by investment of temporarily idle funds that
were previously derived from other revenue sources.
The interest is generally earned from monies invested in
short-term federal securities and bank or savings and
loan certificates of deposit.
As indicated, four of the districts use a tax levy as a
source of current revenue. The mill levy, as a percent of
each of the four agencies' total revenues, ranges between
54.4 percent (Northwest Lakewood), and 30.5 percent
(Pleasant View). Of the four agencies utilizing this
revenue source, the tax revenue constitutes an average of
48.1 percent of total revenues.
36
-------
Table 9
WASTEWATER REVENUES
Selected Municipalities and Sanitation Districts
Denver SMSA
1970
JURISDICTION
Municipalities
SSRVICE CHARGES
Amount Percent
TAP FEES
CO
•o
Arvada
Boulder
Broomfield
Denver
Englewood
Littleton
Longroont
Thornton
Westminster(1971)
Districts
MDSDD #1
Brighton (1971)
Fruitdale 11*7 3)
Lafayette
N.W. Lakewood (1971) 17,214
Pleasant View
South Adams
$368,753 68.1%
771,533 58.4
60,000 87.4
5,547,886 95.4
275,825 66.3
155,661 74.6
183,819 61.4
644,809 88.6
(a) 168,161 55.0
4,978,765
90,182
25,000
45,169
95.7
77. 0
30.6
90.9
6.6
44,993 56.0
140,000 46.7
(c)
Amount Percent
5126,238 23.3%
442,811 33.5
8,000 11.7
0 0.0
64,002 15.4
52,720 25.3
88,585 29.6
62,663 8.6
120,693 39.4
3 0.0
24,146 20.6
12,000 14.7
4,500 9.1
72> 734 27.7
8,000 10.0
INTEREST
Amount Percent
$46,354 8.6%
MILL LEVY
Amount Percent
Amount Percent
103,629
625
29,000
7.9
0.9
0.5
75,239 18.1
0 0.0
8,000
2.7
23,732
18,604
17,085
192,716
1,650
0
0
13.027
1, 250
9,000
7.9
2.6
5.6
3 . 8
1.4
0.0
0.0
5.0
1.5
3.0
0. ov
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0 0.0
None 0.0
$40,000 49.0
None 0.0
142,759 54.4
24,493 30.5
140,750 47.0
None
None
None
None
None
None
None
None
None
$ 0
2 ,454
0
236,000
652
155
3,159
0
0
0.2
0.0
4 . 1
0.2
0.1
1 . 1
0.0
0.0
27,277 C.S
1,130 1.0
4,700 5.7
0 0.0
16,390 6.3
1.650 2.0
2,000 0.6
TOTAL
AtTiQi: r. t
3541,345
L , 320,427
68,62 c
5,812,886
415,716
208,536
299,295
7 26,07 6
305,939
5 ,196,756
117, 108
81,700
49, 669
262, 124
80,386
299,750
(a) Sewerage and water records are combined. Figures shown here are approximations of actual v;an-.ew-iter revtr.uei.
(M Service charge on commercial users only. Residential users do not have a service charge but rather pay via
the mill levy. This figure includes revenue from a $10,000 service agreement with College Park.
Note: Several of these figures represent budgeted estimates rather than actual revenues.
SOURCE: Contacts with district and municipal officials: official records.
-------
The sewer service charge, connection (tap) fee, and tax
levy constitute 92.8 percent of the revenues of the
agencies (excluding MDSDD #1 and the City and County of
Denver). Even though the agencies utilize many different
sources of revenue, it appears that these three are the
only significant operating revenue sources used by the
sixteen sampled agencies. In addition, of course, is the
issuance of long-term debt for capital improvements by all
of the agencies. Each of these major revenue sources is
described in detail as follows.
Sewer Service Charges
All of the sixteen sampled municipalities and districts
charge a fee for supplying sewer service to the individual
residential, commercial, industrial and public users
connected to the sewerage system. In most cases the sewer
service charge is a major source of revenue, as already
depicted on Table 9. The service charge yields approx-
imately 67.6 percent of all revenues accruing to the
municipal wastewater agencies (excluding MDSDD #1 and the
City and County of Denver), and 37.3 percent of that
accruing to the districts. While the service charge as
a revenue producer varies widely among the districts, it
is more standard with the municipalities, usually ranging
between 60 and 80 percent of total municipal wastewater
revenues.
The sewer service charge, while not a new concept, has
come under increasing use as municipal and district
wastewater agencies have had to search for ever-expanding
sources of revenues. In a 1963 study by the Colorado
Municipal League, Municipal Sewer Service in Colorado, as
many as 7 8 percent of the municipalities in Colorado re-
ported using a sewer service charge. That number has un-
doubtedly increased in the intervening years.
There are a variety of means for deriving a sewer service
charge including flat rates per unit, a percent of the
water bill, or rates based on the number of employees or
inhabitants, the number of rooms, the number of fixtures,
metered water consumption, the size of the meter, the
number of sewer connections, or contribution of sewage to
the system by volume and/or composition. The type and
rate of user charge will often differ according to the
type of user, e.g., residential, commercial, industrial,
or public and institutional.
Table 10 indicates that only several of these methods of
computing the service charge are in use on the part of the
sampled districts and municipalities. Of the nine municipal-
38
-------
Table 10
SEWER SERVICE CHARGES
Severe; Mur.ic ipal iriea and _ar.itr.tic;. Listri;:
Denver SMSA
1972
CO
CD
JURISDICTION
Municipalities
Arvada
Boulder
Broomfleld
Denver
Englewood
Littleton
Longmont
Thornton
Westminster
Districts
Brighton
Fruitdale
La fayctte
N.W. Lakewood
Pleasant View
South Adams
BASIS OF SERVICE CHARGE
Residentia1
Per Unit plus
per Water Use
Percent of water
Bill
Percent of Water
Bill
Percent of Water
Bill
Per Unit
Per Unit
Per Unit
Per Unit
Per Unit
Per Unit
Per Unit
Commercial
Meter Size
Meter Size plus
Per Water Use
Per Unit plus Per-
cent cf Water Bill
Percent of Water
Bill 1b *
Number of Fixtures
Meter Size
Percent of Water
Bill
Percent of Water
Bill
Per Water Use
Percent of Water
Bill
Per Unit or Per-
cent of Water Bill
Fixture
Exam mat ion ' ^ ^
Fixture
Examination
Percent of Metered
Water ConsumDt lor.
Industria1
Meter Size and
Type cf Discharge
Meter Size plus
per Water Use
Per Ur.it plus Per-
cent of Water Bill
Percent cf Water
Bill tb>
Percent of Water Bill
Meter Size
Percent of Water Bill
Negotiable Contract
Negotiable Contract
Contract
Fixture Units;or
Percent of Water Bil
or Negotiated
Negotjable Contract
Fixture
Examina tion '° '
Fixtu re
Exam l nat ion ')
Percent of Metered
Water Consumpt:on
TYPICAL MONTHLY SKrVI Lii '.:HARG
Res: i e t. .1 .
Inside City l_-b--e
or Dlstnet City
$2.23
2 . ~ 5
3.50
3.2 5
1 .25
2.50
3.50
3.00
Assumes 7,000 gallons of water per month in winter, 10,000 gallons per month average annually,
(b) Percent of water bill if inside city; per gallon or per unit if outside of city.
Unit has 19 fixture units.
(d)
Examination of quantity and type of contribution to sewer.
SOURCE: Contacts with district and municipal officials.
-------
ities, five use a flat charge per residential dwelling
unit which averages $2.70 per month. The other' l our
municipalities charge a percent of the water bill or a
flat charge plus a percent of the water bill. Regard-
less of the method used, the applicable rates are quite
similar on the average. However, on an individual agency
basis, the typical municipal service charge for residen-
tial units varies between a low of $1.25 per month
(Englewood) and a high of $3.50 per month (Broomfield and
Thornton).
All six districts sampled (excluding MDSDD #1) charge a
flat rate per unit for residential use. This rate
averages $2.25 per month, which is less than the municipal
average rate.
When there is sewer service to areas outside of the city
limits, most municipalities charge a slightly higher than
inside-city rate to outside-city users. For example,
residential service charges average $3.22 per month out-
side of the municipality compared to $2.7 6 per month in-
side. Not all municipalities provide this type of rate
differential. This differential is usually justified on
the basis of the higher costs to serve outlying areas,
or that city residents are ultimately responsible for
retiring bonded debt or have had heavier prior investment
in the system, or sometimes as purely an incentive to
annexation. The courts have generally held that outside
users constitute separate classes of users and that such
differentials are lawfully established.
The service rate charged commercial and industrial users
is usually more complex than that charged residential
users, with an attempt to charge the commercial and in-
dustrial users more in line with the demand each user
places upon the sewer system. For example, only one
agency charges a flat fee for commercial use and no agency
charges a flat fee for industrial use. Three agencies
charge commercial users on the basis of meter size, six
charge as a percent of the water bill, and three charge
according to the number of fixtures in the commercial
establishment.
For industrial users, the rate is based on the water bill
or volume of water use, an examination of the number and
type of fixtures, the size of the meter, and the type of
sewage discharged. There is also a trend toward special
negotiated contracts for industrial users. The use of
special, negotiated contracts is coming under increased
use because the agencies desire to charge a service^fee
that is adaptable to the cost of supplying the service and
40
-------
treating the waste discharged by the industry. This cost
of service varies greatly because of the large variations
in flow and loadings of wastes discharged by the different
industries. Investigation of the extent to which industrial
users are individually bearing the cost of treating wastes
of particular volumes and composition was beyond the scope
of study.
Tables 11 and 12 depict four service charge schedules
which are typical but yet illustrate the different approaches
taken in defining service charge rates. As shown, the
City of Thornton charges a flat fee per residential unit
and charges the same rate regardless of whether or not the
user is within the city limits. On the other hand, the
City of Boulder charges a minimum flat charge plus a fee
per unit of water use for residential users, and charges
a fee based upon water use plus a flat fee based upon
meter size for commercial and industrial users. In
addition, Boulder charges customers located outside of
the City limits at a rate one and one-half times that
charged customers within the City boundaries. South Adams
County, on the other hand, charges its commercial and
industrial users a percent of their water bills, with a
minimum bill stipulation. It does not supply services
outside of its district boundaries.
Each of the three service charge rate schedules on Table 11
are relatively simple. Some agencies attempt to levy
flat rate service charges which are scaled to reflect
type and volume of anticipated use. An example of this is
the City of Englewood, whose rate schedule is depicted on
Table 12. Englewood levies a different annual service
charge for each of many different types of users in
accordance with their varying use characteristics. In
this way the City attempts to place equitable rates accord-
ing to the load placed upon the system.
In addition to the above-described sewer service charges,
Metropolitan Denver Sewage Disposal District No. 1 derives
its revenue from a service charge upon its members. This
charge will be described in the section of this report
dealing with contractual payments and is dealt with as a
cost to member agencies rather than as a revenue source.
However, its form and application are suited to any agencies
having other than residential users.
The sewer service charge is an important source of municipal
and district revenue, and one which offers numerous ad-
vantages .
41
-------
Table 11
TYPICAL SEWER SERVICE CHARGE SCHEDULES
Thornton, Roulder, and South Adams County
Denver SMSA
197 2
JURISDICTION
City of Thornton
Residential
Residential
Mobile Home
Commercia1
Industrial
MONTHLY
SEVfER SERVICE CHARGE
Inside City Liir.its Outside City Limits
- Single Family
(a)
Multi-family(per unit)
$ 3.50/mo.
$3.50/mo.
$ 3 . 50/mo.
$3.50/mo. or $5%
of water bill
Negotiated
Contract.
All service charges
to areas outside of
the City are the
same as the rate
charged inside the
Ci ty.
City of Boulder
Residential
Commercial
$ 1. 50/mo. plus
$.18/1000 gallons
average winter
consumption ^ ^
$.34/1000 gallons
average winter
consumption
(d)
3/4"
1"
IV
ih"
2"
3"
4"
6"
8"
1.50
2.55
3.75
4.95
7.95
15.00
25.05
49.95
79.95
South Adams County Water and Sanitation District
Residential
Mobile Home
Commercial
Industrial
per unit
$2.00
$1.00
25% of monthly
water bill
($2.50 minimum)
25% of monthly
water bill
($2.50 minimum).
(a)
-------
Tabic 12
TYPICAL SEWER SERVICE CHAPCIE SCHEDULE
Eng1ewood
Denver SMSA
1^72
JTJR.I S DICTION
CJty of EngJowood
ANNUAL
S EWF.R SERVICr CHARGE
insic
unit or dwe 111 ng
inq, apartment houses, motels (, tourist Courts:
in excess
of two
Sinqle famaly
Multiple dwi->l !
1st un 11.
2nd un i t
All units
Trailer courts •.
1st tra iler unit
2nd tra iler un i t
Each additional trailer unit
Filling and service statior.f. and commercial garages:
1 st toi let or urinal
2nd toilet or urinal
Each additional toilet or urinai
Each lavatory, sink, shower or equivalent
Each wash rack
Churches
Office buildings, hotels, or business establishments:
1st toilet or urinal
2nd toilet or urinal
Each additional toilet or urinal
Each lavatory, sink., shovjer or equivalent
Restaurants and cafes (Without liquor and/or beer license):
Class "A" (seating capacity for 40 or more patrons)
Class "B" (seating capacity for 25 to 40 patrons)
Class "C" (seating capacity for less; than 25 patrons)
Restaurants and Cafes (With liquor and/or beer license):
Class "A" (seating capacity for 40 or more patronr.)
Class "8" (seating capacity for 25 to 40 patrons)
Class "C" (seating capacity for less than 25 patrons)
Boer" Parlors (Not in cormertion with restaurant or cafe)
Laundries (Including serve-yourself laundries)
Cleaning plants (When cleaning is done on premises)
Hospitals, sanitariums, rest "homes, dairies, dairy processing
plants, automatic car wash establishments, industries,
multiple dwelling complexes of more than one structure
when served water throuqh a master meter and not other-
wise provided for in this schedule; and, shopping center
complexes when served water through a master meter:
The rates and charges for the above shall be based on
70% of the consumption of metered water during the pre-
ceding calendar year.
Schools:
The rates and charges for schools shall be based on
70% of the consumption of metered water during a nine
month period commencing September first and ending
May thirty-first of the preceding calendar year.
$15.0C
§ 1 i.OG
512.00
S 7.50
$15.00
$ 9.00
$ 1.75
$15.00
$12.00
$ 7. 50
$ 1.50
$30.00
$22.50
$15.00
$12.0C
$ 7.50
$ 1 . 50
$45.00
$37.50
$30.00
$60.00
$52.50
$45.00
$30.00
$72.00
$39.00
$30.00 minimum
for first 250,000
gallons of sewage
and $105.00 per
mill ion gallons
for all in
excess of
250,000 gallons.
(lilts 1 Jo
Citv Limits
$ 2:.00
$21.00
$lf>.tj0
$10.50
$ 19.50
$11 . 70
$ 4 .88
$19.50
$15.60
$ 9.75
$ 1.95
S39.Q0
$29.25
$ 19.50
$15.60
$ 9.75
$ 1 .95
$58.50
$48.7 5
$39.00
$78.00
$68.25
$58.50
$39.00
$93.60
$50.70
$39.00 minimuw
for first 250,000
gallons of sewage
and $136.SO per
million gallons
for all in
excess of
250,000 gallons.
$30.00 minimum
for 250,000
gallons of
sewage and
$105.00 per
million gallons
for all m
excess of
250,000 gallons.
$39.00 minimum
for 250,000
gallons of
sewage and
$136.50 per
million gallons
for all in
excess of
250,000 gallons.
if 3
-------
1. It reduces or eliminates the need for waste-
water agencies to draw funds from general
revenues and, as such, may relieve property
taxes;
2. It tends to be levied in accordance with extent
of use and benefit;
3. The service charge tends to reflect the public
utility nature of sewer service, with rates
patterned after the electric utility or even
the highway form of taxation (highway users
trust fund) ;
4-. A user charge is usually more acceptable to the
general public and is therefore politically
expedient;
5. Organizations which are normally exempt from
other forms of taxation, e.g., churches, schools,
and military installations, must pay the service
charge thereby expanding the revenue base-,
6. Such a charge and changes in this revenue form
need not go to the voters for public approval.
Hence, the sewer service charge has received widespread
use and has much merit. However, there are aspects of
the service charge and its computation which conceivably
could limit or even negate some of its advantages.
1. It can be an expensive revenue to collect if
billed with unnecessary frequency, requires
sizeable record-keeping files, and monitoring
of user class and possibly sewage outflows;
2. That sewage charge basis which requires the
measurement of wastewater use, e.g., MDSDD #1
formula, would appear to be the most equitable.
However, few agencies could afford, and perhaps
none could find economic justification in
separate metering of sewage flows of all users.
Consequently, the equity of a charge based on
the cost of rendering the service must be com-
promised ;
3. Many agencies use the amount of water use or the
amount of water bill as a basis for computing
the sewer service charge. However, this method
44
-------
penalizes several users, e.g., that homeowner who
might use above-average amounts of water for
lawn sprinkling, swimming pools or gardening.
Several of the sampled agencies do recognize
this problem, however, and levy a sewer service
charge that is based upon average winter water
use, e.g., Boulder and Denver;
4-. The actual rates established are sometimes
arbitrary and may tend to favor a particular
class of user. This is the result of not being
able to meter the sewage contribution of each
user, and to thus not being able to satis-
factorily differentiate between users;
5. The use of sliding scales or block rates, while
not overly prevalent, could create possible in-
equities if it enables one class of user (heavy
user) to pay less than the cost of service to
that class at the expense of another user class.
Many factors influence local determination of
rates and charges, such as location or cost of
service to particular users, decreasing unit
costs, the attraction of industry, public
acceptance or historical contracts. The pure
"quantity discount" is more and more being
rejected as acceptable practice.
It appears, then, that all agencies using a service charge
attempt to calculate that charge on a reasonably equitable
basis with respect to relevant costs. In most cases the
sewer service charge is sufficient to pay operating and
maintenance cost, debt service, and, to varying degree,
recurring capital improvements and system replacement.
Sewer Connection (Tap) Fees
A second important source of revenue for the sampled waste-
water agencies is the tap, or connection charge. This fee
is payable once, at the time the unit is connected with
the sewer main. Of the sixteen sampled agencies, only
MDSDD #1 (which has no connections directly to the user)
and the City and County of Denver have no tap fee. As
previously noted, when Denver actually makes the tap,
it charges a fee to cover actual costs.
Table 9 previously listed the revenues generated for each
of the sampled agencies in 197 0. As shown there, the tap
fee revenues constituted an average of 24.9 percent of total
revenues for the municipalities (excluding the City and
County of Denver), and 13.3 percent of total district
revenues (excluding MDSDD #1).
45
-------
The tap or connection charge is usually designed to recover
the costs incurred in constructing and making the connection
to the system, perhaps including all or a portion of the
costs of the service main. In addition, a permit charge is
often included in the tap fee (Arvada, Boulder, Englewood,
Pleasant View, and South Adams County) which is meant to
recover the cost of the inspection which is made, and which
sometimes covers some of the administrative costs. This
permit fee is usually about $15-20 per tap. Additionally,
some agencies charge what has come to be known as a "plant
investment fee." This fee also is included in the tap fee,
is a one-time payment, and is used to cover previous (or
future) capital investments in sewerage system facilities
required to serve the new user. As such it is a "buy in"
fee and is somewhat arbitrary in its exact amount. Both
the permit fee and the plant investment fee are included
in the tap fee data reported on Table 9.
While the service charge has been gaining in use over the
years, it appears that the wastewater agencies in Colorado
have utilized the tap fee for quite some time. For example,
all agencies in the State which responded to a Colorado
Municipal League questionnaire in its 1963 study, previous-
ly referred to, indicated some form of tap fee in effect.
Just as there are several methods of calculating the sewer
service charge, so are there several methods of calculating
the sewer connection (tap) charge. Table 13 depicts the
bases for the tap fees charged by the sampled agencies and
also lists typical residential connection fees.
Of the eight municipalities having a tap charge, five levy
a flat per unit charge per residential dwelling unit. These
charges vary between $100 (Englewood) and $300 (Littleton
and Thornton). Pipe size is used as the basis by one agency
(Westminster), pipe size and length dictate another (Boulder),
while one bases its residential tap charge on the size of
the property served (Englewood). Most of the municipalities
charge a higher tap fee for units located outside of the
city limit. The districts tend to levy residential tap fees
more uniformly than do the municipalities, with five of the
six using a flat fee per unit.
For commercial and industrial users the basis for tap fee
is more in line with type of use, with only two agencies
using a flat fee. Pipe size is the most popular method,
while meter size, fixture units and size of unit served are
used by other agencies.
The tap fees charged by the various agencies tend to be
quite simple, with three typical rate schedules (Thornton,
Arvada, and South Adams County) being depicted on Table 14.
46
-------
Table 13
SEWER CONNECTION (TAP) CHARGES
Selected Municipalities and Sanitation Districts
Denver SMSA
1972
-F
JURISDICTION
Municipalities
Arvada
Boulder
Broomfield
Denver ^
Englewood
Littleton
Longmont
Thornton
Westminster
Districts
MDSDD #1 (f)
Brighton
Fruitdale
La fayette
N.W. Lakewood
Pleasant view
BASIS OF CONNECTION CHARGE
(g)
(g)
S. Adams County
Residential
Main Size and
Length
Per Unit
None
Per Sq. Ft., front
foot, or Acre
Per Unit
Per Unit
Per Unit
Per Pipe Size
Per Pipe Size
Per Unit
Per Unit
Per Unit
Per Unit
Per Unit
Commercial
Per Pipe Size
Main Size and
Length
Per Unit
None
Per Sq. Ft. or
Acreage
Per Sq. Ft. or
Negotiated
Meter Size
Per Pipe Size
Per Pipe Size
per Pipe Size
Fixture Units
H of water Tap Fee
Per Fixture Unit
Per Fixture Unit
Per Un.it
Industrial
Per Pire Size and
Location
Main Slze and
Length
Per Unit
None
Per Sq. Ft.
Acreage
Negotiated
Meter Size
Negotiated
Per Plpe Slze
Per Fipe Size
Fixture Units (Contract)
4 of Water Tap Fee
Per Fixture Unit
Per Fixture Unit
Per Unit (Negotiable)
Ir.Sxde City
or Dj.str.ct
5115
230 (b>
150
0
1.00
200
300
160
1 50
300
400
300
In addition, the Plant Investment Fee is based on Meter Size.
In addition, there is a frontage charge based on actual cost which averaqes SR.00 per front foot.
(c) Tap cost only; all other work done by developer,
includes §100 Plant Investment Fee.
Denver has no tap or PIF. There is a charge of approximately $40 if the city does the connection
(f) Metropolitan Denver Sewage Disposal District No. 1 has no connection charge as s:ch.
-------
Table 14
TYPICAL SEWER CONNECTION CHARGE SCHEDULES
Thornton, Arvada, ana South Adams County
Denver SMSA
1972
JURISDICTION
City of Thornton
Residential - per unit
Apartments - per unit
Mobile Home - per space
Commercial - 4" main
6" main
Industrial - 4" main
6" main
SEWER CONNECTION(TAP) CHARGE
(a)
Ins xde
City Limits
$300
$150
$300
$500
$1000
$500
$1000
Outs ide
City Limits
All hap fees
in areas out-
side of the
City limits
are double
that charged
inside the
City.
City of Arvada
Residential - inspection fee
- Permit fee-first unit
- Permit fee-each additional unit
Commercial - inspection fee
- Permit fee; 4"
6"
8"
Surcharge Fee (**)
Surcharge Fee - Residential
Surcharge Fee - Commercial
(b)
(b)
$ 15
$100
$ 75
$ 15
$100
$200
$300
$100
$ 50
50% of
Permit Fee
$ 15
$225
$150
? 15
$225
$325
$425
$100
$ 50
50% of
Permit Fee
South Adams County
All classes^0)
4" main
6" main
8" main
$200
$400
$600
Includes churches
(k) A surcharge which is added in certain geographical areas when the
cost of serving that area is greater than normal.
( c) Mobile home parks and multi-units are also charged
$100 per additional unit or space.
M-8
-------
However, some agencies have formulated rather detailed tap
fee schedules, with an example of such a schedule on Table
15 (Littleton). The City of Thornton charges a flat fee
per residential unit and a graduated fee for commercial
and industrial users depending on the size of the main.
Thornton doubles its tap fee for those connections made
with users located outside of the City limits.
The City of Arvada is an example of an agency which charges
a permit fee, an inspection fee, and a surcharge. For
residential users the fee is a flat rate per unit, with a
lower rate for multiple units so as to recognize lower per
unit costs of making the tap. For commercial and in-
dustrial users the permit fee is based on pipe size. In
addition, Arvada places a surcharge on certain geographical
areas where the tap or extension is more difficult and
costly to make. Arvada also charges a higher tap fee out-
side of the City than it does inside.
South Adams County, by comparison, charges a differential
fee according to pipe size, but does not recognize, for
connection charge purposes, the different user classes.
Just as some agencies have extremely complex service charge
schedules, so do some have complex and detailed connec-
tion charges. Table 15 depicts the tap fee schedule for
the City of Littleton. As shown, the residential fee is
a flat charge per unit, while flat charges are also applied
to commercial and industrial users. However, Littleton
recognizes fourteen different types of users with fourteen
different applicable rates. Littleton also charges a
greater tap fee in areas outside of the City limits, with
that fee being generally one-third greater than the
applicable fee inside the City.
The original purpose of the connection (tap) fee was to
pay for the costs incurred in making the tap. These costs
would include administration, inspection, and the cost of
physically making the tap. To this is often added the
permit fee and the plant investment fee. However, a change
from this original conception of the fee has gradually
occurred. At present, many of the jurisdictions charge
a tap fee which is well above the actual cost of making
the tap. The additional revenue which is generated is
often deposited into general operating revenues, often
is used to help defray costs of new plant or sewer main
construction and expansion, and is sometimes used to
retire debt.
4-9
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TabLc 15
TYPICAL SEWER CONNECTION CHARGE SCHEDULE
Li ttleton
Denver SMSA
JURISDICTION
Littleton
SEWER CONNECTION (TAP) CHARGE
Residential - sinyle family
Apartments - per unit
Mobile Homes - per unjt
Hotels and Motels - per unit
Commercial - class I (a)
Commercial - class II (t>)
Commercial - class II (c)
Commercial - class II (d)
Restaurants - 100 seats and over
- 75 to 100 seats
- 50 to 75 seats
- up to and including 50 seats
Commercial and industrial - class III
Multiple Uses
Ins:d c
City Limits
$300
$300
$ 300
$300
$ 300
$ 7GG
$ 6,000
$ 1,000 per
10,000 sq.ft.
$]2,250
$ 5,600
$ 3,500
$ 1,750
Negotiated ^e ^
Largest
Appli cable
Outs ide
Caty Limits
$450
$450
$450
$450
$ 4 50
$ 1,050
$ 9,000
$ 1,500 per
10,000 sq.ft.
$ 18,395
$ 8,400
$ 5,250
$ 2,625
Negotiated^)
Largest
Applicable
Commercial uses add no chemicals, solids, or other materials which would
place unusual demands upon the sewer system, e.g., drug stores, furniture
stores, camera and photography shops where processing is not done, dry
goods stores, shoe stores, etc.
(k) Class II uses place unusual demands on the sewer system. This category
of class II would include barber and beauty shops, bakeries, donut shops,
photographic studios doing film development, etc.
-------
Special Assessments
Many of the sampled districts and municipalities use
special assessments as a means of funding certain improve-
ments to the sewerage system. These assessments are
usually levied on a frontage foot basis against those
properties which will receive the benefits of the improve-
ment .
The use of a special assessment assures some degree of
equity of payment, and also assures that all costs will
ultimately be paid. When a special assessment is to be
levied, the municipality must give ample notice of the
improvement to be made. The assessment is often paid over
a period of time and constitutes a lien on the property
until it is paid.
Tax Support
A great many different types of tax support might con-
ceivably be used as revenue sources for wastewater systems
in Colorado. These could include property taxes, sales
taxes, cigarette taxes or other measures. However, the
only tax which is presently utilized by any of the sixteen
sampled agencies is the ad valorem property tax. The
ad valorem tax is the general property tax levied annually
on real and personal property as listed with the county
assessor.
All of the various wastewater agencies or their parent
agencies have the legal authority to levy an ad valorem
tax. However, of the sixteen agencies sampled, only four
do employ such a tax. These four are all small, special
purpose districts,which for various reasons lack an adequate
base of wastewater revenues. Fruitdale Sanitation District
levies a property tax of 10 mills; Pleasant View Water and
Sanitation District levies a property tax of 5 mills;
Northwest Lakewood Sanitation District levies a property
tax of 5 mills; and South Adams County Water and Sanitation
District levies a property tax of 3 mills. For each of
these districts the ad valorem tax is a major source of
wastewater revenue: Fruitdale 49 percent of all revenues
in 197 3; Pleasant View 3 0.5 percent of all revenues in
19 70; Northwest Lakewood 89 percent of all revenues in
197 0; and, South Adams County 47 percent of all revenues
in 1970 .
While no other agency reported having a tax levy for
direct support of sewerage systems, the City and County of
Denver and the City of Longmont have general obligation
51
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bonds outstanding which were used to construct waste-
water facilities. The retirement of these bonds is paid
via the general tax levy rather than from wastewater
revenues. As such, these two cities are receiving ad
valorem tax support for their wastewater systems.
Of the agencies not receiving tax support, all felt that
tax revenues were not required or desirable because
other sources of revenue (service charges, tap fees, bonds)
were adequate or more equitable. As such, the use or lack
of use of the ad valorem tax for wastewater purposes would
appear to be a revenue policy question more than anything
else. The four agencies that use the property tax have
lower sewerage service charges than do the agencies that
have no mill levy. Perhaps the cost or responsibility to
the County is less than that for the agency to collect
service charges.
The mill levy revenues accruing to the four agencies are
used primarily to pay off debt service, with some monies
going to system replacement and new plant construction.
Fruitdale, Northwest Lakewood, and Pleasant View use mill
levy monies for operations also, but South Adams County
does not.
Federal Sources of Revenue
The primary sources of wastewater revenues are the service
charges, tap fees, and long-term debt. However, there are
other sources of revenue which are used, or could be
used, by the various municipalities and districts studied.
One such source is the federal government, with various
programs of financial support for wastewater purposes.
During the course of this study it was found that eight of
the sixteen agencies received federal grant funds in the
last few years. These grants were generally for plant
expansion, but some were used for major line extensions.
Federal funds were not sought by several of the agencies
because no major plant expansion was required. However, in
a few cases the agency either failed to apply for the funds
or the application was turned down. Nearly all of the
agencies presently have pending applications for various
types of federal funds. The federal agencies to which
the agencies have applied tend to be the Environmental
Protection Agency and the Department of Housing and Urban
Development. There are several federal programs of grants
and loans which can be or have been applied to the planning
and implementation of wastewater improvements. However,
52
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federal grants, agencies administering grant funds, and
the programs themselves have undergone significant changes
over the years. The present trend is toward reducing the
number of programs and agencies, or curtailment of their
funds. This is reflected in frozen funds for such agencies
as Farmers Home Administration, Department of Housing and
Urban Development, and Economic Development Administration.
While the future of these programs is not clear, it is
likely that some type of funding for similar program
objectives will again be available. At present, only the
Environmental Protection Agency is funding wastewater
proj ects.
General revenue sharing is a possible source of monies
for wastewater purposes, especially for plant expansion
and other capital improvements. However, it does not
appear likely that any of the wastewater agencies sampled
will be awarded general revenue sharing funds.
Proceeds from Bond Sales
The primary means by which the sixteen sampled agencies
pay for major capital improvement and expansion is the
issuance of long-term debt. All of the agencies have
legal authority to incur debt and all have made use of this
authority. Table 16 describes the status of each of the
sampled agencies' bonded indebtedness, bond character-
istics and an abbreviated bond retirement schedule.
Of the twenty-three bond issues listed, fifteen are revenue
bonds, three are refunding revenue bonds, and five are
general obligation bonds. A revenue bond is debt which is
secured by a pledge of revenue which is to be derived from
the revenue-producing sewerage system. A general obliga-
tion bond is secured by the full faith and credit and by
the general taxing power of the issuer. Refunding bonds
are issued to obtain money to retire other outstanding
bonds, usually in order to secure a more favorable
interest rate or to change the conditions of the indenture.
The reasons for the heavy use of revenue bonds are probably
numerous, but they appear to revolve around the fact that
revenue bonds do not constitute an indebtedness "within
the meaning of any constitutional or statutory limitations."
In other words» revenue bonds are not subject to the legal
debt limit. This enables the general obligation bonds
that are subject to the legal debt limit to be used for
such non-revenue producing public needs as schools and
libraries. Another reason why revenue bonds are so frequent-
ly utilized, particularly by municipalities, is that they
53
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Table 16
LONG-TERM DEBT
nicipalitie^ and
Denver SMSA
1972
Kuntcition
JURISDICTION
Districts
SEWERAGE SYSTEM
BONDED
INDEBTEDNESS-1972
BOND CHARACTERISTICS
BOND RETIREMENT
Type
Year
Maturitv
Issue Amount
1972 "
1 076
1980
Arvada
$ 815,000
Revenue
1965
N.A.
$330,000
Revenue
1968
700,000
$85,000
$ 86,425
$ 95,300
BouIder
3,375,000
Ref.Rev.
1962
1980
600.000
Revenue
1966
1990
2.775,000
247.027
248.215
247,105
Broomf ield
321,000
Revenue
1963
1983
104,000
Revenue
1968
1996
250.000
23,087
23.867
23,5)8
Denver
20,320,000 (a)
Gen.Obiig.
1955
1975
N.A.
N.A.
N.A.
Gen.Obiig.
1972
20.000,000
Englewood
651,000
Ref.Rev.
1962
1980
595.000
72,412
75,650
77,251
Littleton
710,000
Revenue
1959
N.A.
N.A.
N.A.
N.A.
N.A.
Revenue
1970
Lonqmont
803,000
Gen .ObL ig.
1964
1976
338,000
Revenue
1969
1989
650.000
7 8 , 3115
77,650
70,300
Thornton
Revenue
1963
2003
1 . 705,000
Revenue
1971
1992
800,000
126,593
148,093
148,211
Westminster
1,450,000
Ref.Rev.
1971
1991
1,450,000
24,047
(b^99,965
3 32,405
31,665,000
32,500,000 1,339,995 1,492,870 1 ,642,260
Brighton
Fruitdale
Lafayette
N.W. Lakewood
Pleasant View
South Adams
1.071,000
None
307,000
40,000
97,715
5 3 3,000
Revenue
Revenue
Revenue
Revenue
1972
1952
1965
1971
Gen.Oblig. 1958
Gen.Oblig. 1957
1991
1972
1985
1989
1974
1978
1973
875.000
165,000
136,000
190,000
297,000
224,000
1,800,000
76,027
0
19,237
21,950
18, 125
N.A.
74,340
0
24,787
0
17,650
0
76,665
0
30, 115
0
0
0
(a)
(b)
These are obligations of the City and County of Denver and not of the Wastewater Division.
Interest only>
N.A. - Not Available.
54
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need not be put to a vote of the public and the provisions
for their issuance are sometimes less stringent than those
for general obligation bonds.
Most of the outstanding bonds of the sampled agencies are
issued for a period of twenty years, although there are
some thirty and even forty year bonds outstanding, partic-
ularly in the case of the larger issue amounts. The
longest period for which debt can legally be issued is
forty years.
The annual retirement cost of outstanding debt (principal
and interest) varies, of course, depending on the rate
of interest, retirement schedule and the maturity dates.
However, there is also great variation in the use of
debt. For example, the cost of debt retirement (principal
and interest) in 1970, as a percentage of total 1970
wastewater expenditures, varied between 53.8 percent for
South Adams County and 10.2 percent for Northwest Lakewood.
The average debt payment as a percent of total expenditures
for all the sampled agencies (excluding MDSDD #1 and the
City and County of Denver) in 197 0 was 20.7 percent.
The bonds which are presently outstanding were used primari-
ly for new plant construction and in a few instances for
major interceptors and main extensions. The debt service
is normally paid off via general system revenues (usually
service charges), although the agencies using a mill levy
tend to dedicate this revenue to bond retirement. Indeed
in a few cases, if new bonds were issued, the tax levy
would increase by the amount necessary to pay the projected
debt retirement cost.
Revenue Trends
During the course of this investigation, certain trends
regarding wastewater revenues were observed. Most of them,
however, are quite obvious and logical. The overall
revenue trend is, of course, upward. Gross receipts from
service charges and tap fees are increasing for all agencies,
partly because of increasing service charge rates and tap
fees, but primarily because of the growth within the Denver
SMSA.
Table 17 summarizes the frequency with which service charge
and tap fee charges are increased. The near-term trend
appears to be to change such rates frequently, usually
every three years or so, with the frequency being related
to the pace of growth and costs. It appears that it is
55
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Table 17
FREQUENCY OF RATE CHANGES
SEWER CONNECTION (TAP) FEES AND SERVICE CHARGES
Denver SMSA
1968 - 1973
JURISDICTION
Municipalities
Arvada
Boulder
Broomfield
Denver
Englewood
Littleton
Longmont
Thornton
Westminster
Districts
MDSDD #1 U)
Brighton
Fruitdale
Lafayette
N.w. Lakewood
Pleasant View
South Adams
S - Service charge rate change
T - Tap fee rate change
P - Plant investment fee change
©; ©<" ®/' _ "ew revenue source instituted
MDSDD #1 service charge changes every year, although the formula does not change,
(k) Mobile homes only.
(c) Single-family residential remained constant.
(d) Commercial only.
le) Denver Water Board increased water rates. Therefore sewer charges also increased,
(f) Service charge decreased from $3.00 to $2.00 per month.
(?) Residential only.
SOURCE: Contacts with district and municipal officials.
HISTORIC RATE CHANGES
1973 1972 1971 1970 1969 1968
S&T
s'b'&T
S
S&T S
S
S s
S&T T
S S s s s
S&T ®S©8© S
T S
S^d'&T s(g)
T
S&T(c)
T
-------
relatively simple to obtain small rate increases in both
the service charge and the tap fee, but governing bodies
of both municipalities and districts display the same
aversion as their constituents to large rate increases.
In addition, there is a trend toward the utilization of
new revenue sources. For example, some agencies have
instituted new fees rather recently, and several other
agencies are presently looking for new sources of revenue.
One reason for the need for increased revenues entails
the increasing demands placed on the system. Another,
however, is increased costs which are coming about as a
result of inflation, plus those costs attendant to in-
creasingly stringent federal and state regulations.
Revenue trends and projections of this nature are not
meaningful except when compared with similar expenditure
estimates and their causes. Revenue and expense pro-
jections and trends are discussed together in a later
section of this report.
Revenue by User Class
An important variable in this study and one about which,
unfortunately, there is very little information, is
revenue by user class. The traditional user classifica-
tion consists of residential, commercial, and industrial,
with public or institutional use sometimes a fourth
category. By comparing sewage contribution and costs of
supplying service to each class with revenues generated
by each of these classes, it is possible to determine
whether or not the existing rate structure is equitable.
Every attempt was made to generate the data necessary
to determine the equity of the rate structures. However,
of the agencies sampled in this study, (excluding MDSDD #1),
only two had the data necessary to indicate revenues by
user class.
When classifying different types of land use, structures,
or other forms of development or use, the traditional method
is to classify along the lines of structure use. For
example, a living place would be residential, any form of
retail or wholesale outlet or office building would be
commercial, and industrial might be light or heavy industry.
In classifying types of sewer users, however, a different
classification criteria scheme may be required. For waste-
water purposes the most appropriate indicator of user type
is the volume, strength, and type of demand placed on the
sewer system. As such, it is not the use of the structure
itself, but is rather the characteristics of t}ie demand
57
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upon the sewerage system, which most aptly permits
assigning users to classes. The Standard Industrial
Classification Manual, Office of Management and Budget,
1972, affords guidance in subclassifications which recogn-
ize variations in industrial wastes.
The City and County of Denver maintains records by user
class, with the classes differentiated according to
demands placed on the sewer system. In 1970, of $4,710,700
collected in service charges from within the City and
County, 5 5.7. percent came from residential users, 0.6 per-
cent from City and County use, 3 3.7 percent from commercial
and industrial users, and 10.0 percent came from industrial
users which discharged industrial wastes into the sewer
system.
Unfortunately, few agencies maintain such detailed records.
Nearly every agency contacted felt that it would be use-
ful to have such user-revenue information but, because of
their limited size or resources, could not afford to main-
tain such records. As there is a trend toward electronic
data processing, however, and opportunities for cooperative
action, it may be that such information could be generated
in the future.
This is not to say, however, that this type of information
cannot now be obtained. Each jurisdiction has in its
files the data necessary to compile user class information.
However, it would be a very tedious job to go through
every account to compile the necessary information. In
addition, the definitions of what constitutes a residential,
commercial, or industrial user appear to vary considerably
from agency to agency.
In addition to revenue by user class, the sampled agencies
also had very little information regarding other aspects
of wastewater service by user class. Every agency was
asked for the number of sewer connections by user class.
Only three agencies maintained records showing the number
of residential, commercial, and industrial connections
they had, although the rest of the agencies could estimate
the user connections by class fairly adequately. Table 18
depicts the approximate number of connections by user class
for each of the agencies. As is to be expected, the
residential users greatly outnumber the other classes of
users.
Failure to recognize the differing wastewater character-
istics of user classes may connote that preferential treatment
occurs to some. However, no agency policies were detected that
sought other than equity or to grant rates that appeared
58
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Table 18
SEWER CONNECTIONS BY CLASS OP USER
Selected Municipalities and Sanitation Districts
Denver SMSA
1972
NUMBER OF TAPS
RESIDENTIAL
COMMERCIAL
INDUSTRIAL
Municipalities
Number
Percent
Number Percent
Number
Percent
Arvada
N.A.
-
N.A.
-
17
0.1
14.392
Boulder
14.627
91.8
1, 100
6.9
200
1.3
15.927
Broomfield I®)
2,135
97.0
60
2.7
5
0.3
2,200
Denver
110.229
85.5
18.520
14.4
121
6.3
_
-------
on the surface to be out of line with the cost of supply-
ing the service. This is not to say, however, that no
such instance exists. Several instances of sliding rate
scales (quantity discounts) do exist which might tend to
favor one user class over another. Several agencies enter
into negotiated contracts with specialized users. These
individual contracts were not reviewed during this study,
and their effects cannot be reported.
A very real alternative to "total equity" might occur
where a municipality desires to attract a specific
employer and, to obtain the relocation, grants that
commercial or industrial establishment a preferential
(lower) rate. Again, while no examples of such an action
were found, it may be that preferential treatment does
exist. However, given the trend toward less emphasis on
industrial expansion, it is likely that the motivation for
preferential rate-making is on the decline.
Constraints on Revenue Production
Representatives of each of the sixteen agencies were
asked for comments regarding constraints and problems re-
garding the production of wastewater revenues. Every
agency acknowledged that there were constraints, but that
the constraints were very reasonable and that there were
no undue problems affecting their ability to raise
sufficient revenues.
All agencies expressed the desire to receive federal
grants for various wastewater projects, but many indicated
a belief that they would have difficulties in obtaining
such loans and grants, primarily because of size and scale
of operation. However, the general tone of the comments
indicated little criticism of the manner in which federal
programs were implemented. Rather, the agencies appeared
to be appreciative of the programs available to them and
expressed the hope that the amounts of federal monies
available through such programs could be expanded. One
constraint on the use of federal funds that did appear
in the discussions, however, is the initial failure of
local agencies to apportion general revenue sharing monies
for wastewater purposes. This, however, is a decision made
by the local governmental entities rather than by the
federal government.
There are legal and practical constraints on the production
of revenue which must be observed by the wastewater agencies,
but no agency indicated any hardship resulting from such
constraints. For example, annual tax levies by municipalities
60
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and special districts are prohibited by statute (Chapter 88,
Article 3) from being raised by more than five percent
from the preceding year, except to provide for the payment
of bonds and interest. As already indicated, only four
agencies levy a property tax for wastewater purposes, and
these four use much of the levy to pay off bond principal
and interest. In addition, any increase in the levies
would be a result of a new bond issue and consequently
would be exempt from this revenue restriction. The statutes
also stipulate that the municipality or district may in-
crease the levy by more than five percent with the approval
of the Colorado Tax Commission, or upon a simple majority
vote of the electors. Of the wastewater agencies with no
property tax support, none expressed interest in the ad
valorem tax as a revenue source. As a result of these legal
and policy practices, the statutory constraint on the mill
levy is not really a constraint on wastewater revenue
production.
As already discussed, the revenue bond is a major source
of revenue for capital improvements for the wastewater
systems in the Denver area. The legal constraints on
the issuance of revenue bond are not severe. All municipal-
ities and special districts have the authority to issue
revenue bonds for wastewater purposes, which do not
constitute an indebtedness of the municipality as regulated
under the bonded indebtedness limitations. One constraint
that does apply is the maximum allowable interest rate of
six percent per annum. This, however, has not proved to
be a deterrent to revenue bond financing because the rates,
as a result of tax exemptions on municipal bonds, can be
less than six percent and yet make it possible for the
bonds to be readily sold.
Municipalities also have the authority to issue general
obligation bonds for wastewater purposes. The general
obligation bond is one which pledges the full faith and
credit (taxing power) to the retirement of the bonds. The
total indebtedness of the municipality cannot exceed three
percent of the total assessed valuation of the taxable
property, except such debt as may be incurred in water
supply and waterworks. This would appear to be a size-
able constraint on this source of wastewater revenue,
except that municipalities can increase the debt ceiling
by majority vote of the tax-paying electors. In addition,
the trend appears to be toward the use of revenue bonds
rather than general obligation bonds for financing sewerage
systems. One important constraint on the use of bonds is
the response of the electorate to bond issues which, for
the most part, must be placed before them for approval.
61
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Constraints on the use of, and increase of, tap fee and
service charge rates also do not appear to hinder the
operations of the wastewater agencies. As depicted
earlier, almost all of the agencies have been able to
increase service charge rates and/or tap fees as the need
arises. Normally the city council (for the municipalities)
and the Board of Directors (for the districts) can in-
crease these rates quite easily. Very seldom do such rate
changes go before the public for a vote. The apparent
rate policies appear to be to charge whatever rate is both
needed and"reasonable.
It has been suggested in several sections of this report
that a comparison, agency by agency or on a per capita
basis, of rates charged is an invalid exercise unless
pertinent cost factors are also applied. Without proper
consideration of these variables, the only appropriate
conclusion is that every agency charges its users some-
thing and some charge more than others. Even among certain
agencies, however, there is a tendency to refer to their
rates as being "in line"_with those of a neighboring agency,
which is hardly a criterion for evaluating rates.
62
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WASTEWATER EXPENDITURES
Analysis of wastewater expenditures, in contrast to
wastewater revenues, is a relatively difficult task because
of the lack of uniform accounting procedures for the
various agencies. The cost of contractual treatment
charged by the Metropolitan Denver Sewage Disposal District
No. 1 is readily analyzed, as is long-term debt. Capital
outlays, costs of operations and maintenance, transfers
between funds, and so on, however, are more difficult.
An attempt was made to categorize the expenditures of the
sampled agencies and this is summarized on Table 19. The
expenditure classes are very broad because of the problems
encountered due to accounting systems. The annual cost
of debt is quite accurate because of the bond retirement
schedules required when issuing bonds. As shown, the cost
of debt as a percent of total annual expenditures (exclud-
ing MDSDD #1 and the City and County of Denver) averages
approximately 20.7 percent. This cost varies between a
high of 53.8 percent in South Adams County and a low of
10.2 percent in Northwest Lakewood.
Contractual treatment payments to MDSDD #1 also vary con-
siderably as a percent of total annual expenditures. The
variance here is between 33.7 percent (Northwest Lakewood)
and 60.7 percent (Denver). In addition, of course, are
the agencies which have no such charge because they are
not members of MDSDD #1.
The capital outlay classification is not exacting because
of the difficulty in defining capital outlays, and the
problems in differentiating between recurring and non-
recurring capital expenditures. An attempt was made to
exclude major, one-time capital expenditures but this was
not always possible.
The general fund classification consists of those monies
which are appropriated and transferred from wastewater
agency revenues to the general fund, either the water and
sewer general fund or the municipality's general fund.
The amount transferred usually represents the wastewater
agency's cost for billing and accounting if centrally
performed with other billings, e.g., water, garbage, or
taxes, but may include an amount to reimburse other
departments for construction or administrative costs in-
curred in support of the wastewater system. As shown,
only in Brighton and Longmont is this transfer very large
(22.9 and 22.3 percent of annual expenditures respectively).
While occasionally referred to as a "payment in lieu of
63
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Table 19
WASTEWATER EXPENDITURES
Selected Municipalities and Sanitation Districts
Denver SMSA
1970
OPERATIONS AND CONTRACTUAL
JURISDICTION
MAINTENANCE
GENERAL
FUND
CAPITAL
OUTLAY
TREATMENT
DEBT
Municipalities
Amount
Percent
Amount
Percent
Amount
Percent
Amount
Percent
Amount
Percent
Amount
Arvada
$111,756
21.1%
$28,000
5.3%
$117,275
22.2%
$187,352
35.4%
$84,315
16.0%
$528,698
Boulder
449,470
29.4
25,600
1.7
818,887
53.6
None
0.0
234,684
15.3 ,
1,528,841
Broomfield
29,850
16.9
8,897
5.0
114,900
64.8
None
0.0
23,640
13.3
177,287
Denver
2,032,066
36.3
0
0.0
170,145
3.0
3,405^481
60.7
0(d>
0.0
5,607,692
Englewood
181,376
46.5
11,486
3.0
121,479
31.1
None
0.0
75,851
19.4
390,192
Littleton
75,273
43.9
7.500
4.4
35,363
20.6
None
0.0
53,465
31.1
171,601
Longnont
129,242
41.2
70,000
22.3
29,070
9.2
None
0.0
85,600
27.3
313,912
Thornton
107,669
17.2
0
0.0
4,047
0.6
418,224
66.9
95,346
15.3
625,286
Westminster
89,712
27.1
0
0.0
4,193(*>
1.3
121.593!j>
36.6
116,121
35.0
331,619
Districts
MDSDD #1 (f)
3,018,196
62.7
0
0.0
436,193
9.1
0
0.0 1,
,360,606
26.2
** ,814 ,995
Brighton
22,980
35.0
15,000
22.9
8.639
13.2
None
0.0
19,000^>
26.9
65,619
Pruitdale (1971)
35,224
40.5
0
0.0
990
1.1
35,361
40.6
15,520
17.8
87,095
Lafayette
34,192
68.8
5,5G0*9>
11.1
500
1.0
None
0.0
9,477
19.1
49,669
N.W. Lakewood(1971) 76,095
36.0
0
0.0
42,470
20.1
71,302
33.7
21,568
10.2
211,435
Pleasant View (c)
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
18.753
N.A.
17,950
N.A.
N.A.
South Adams
90/660
34.7
0
0.0
30,000
11.5
None
0.0
140,750
53.8
261,610
(a) Treatment cost charged by Metropolitan Denver Sewage Disposal District No. 1
Main extension which Broomfield paid through a developed area. Normally the developer would pay this.
Sewer and water records are co*nbined. Figures shown here are approximations of actual wastewater expenditures.
jd) Denver has wastewater bonds outstanding, but they are paid out of the mill levy, not out of wastewater revenues.
(e) Excludes bond issue and consequent major capital expenditure in 1970.
(f) Metropolitan Denver Sewage Disposal District No. 1 is 1971 data.
19) Approximation because general fund transfer not detailed in 1970.
Principal only.
Estimate includes other expenses. Amount actually paid MDSDD #1 is $255,495 or 40.9 percent of total 1970 Thornton expenditures.
Estimate includes other expenses. Amount actually paid MDSDD #1 is $82,332 or 24.8 percent of total 1970 Westminster expenditures
Botes Several expenditures are budget estimates rather than actual amounts;because of inter-fund transfers,total expenditures and total
SOURCE: Contacts with district and municipal officials; official records. revenues may not be same amount.
-------
taxes," no instance was found of a specific calculation
of the amount of taxes the system would pay if it were
a private utility, so that the reference appears to be
figurative only.
The operations and maintenance classification is a catch-
all account of all remaining expenditures. Included is
the cost of collection, administration, and treatment
(for non-MDSDD #1 members). It had been planned to analyze
the expenditures associated with each functional area,
e.g., administration, collection, treatment, and disposal.
However, only a few of the sampled agencies maintain
records of a detail from which such information can be
accurately derived. Additionally, cost comparisons like
rate comparisons are not valid without full examination
of all cost factors. In the following sections a more
detailed description of expenditures and expenditure
trends is made.
Contractual Payments
An important element of expense is the cost of membership
in MDSDD #1. While no detailed analysis was made of this
expense, the trends and statistics should be of interest
to members and non-members alike.
All of the fifteen sampled wastewater agencies which
collect sewage must provide for its subsequent treatment
and disposal. Eight of the agencies provide their own
treatment, while seven of the sampled agencies transmit
at least a portion of their sewage to the Metropolitan
Denver Sewage Disposal District No. 1 for primary and/or
secondary treatment. The seven agencies which transmit
their sewage to the MDSDD #1 do so on a contractual and
membership basis. It is the financial arrangement between
these seven agencies and the MDSDD #1 with which this
section is concerned.
Each of the twenty-one members of MDSDD #1 are charged
an annual service charge (actually paid quarterly) in
accordance with a service contract. The annual service
charge is uniform for each user classification and is
based on the volume and strength of^wastewater delivered
to the system. The service charge is calculated, prescribed,
and can be revised, and is collected so that the charge
will be sufficient:
To pay at all times all Operation and Maintenance
Expenses and at the end of each Fiscal Year to
maintain therefore reserve requirements;
65
-------
To provide in each Fiscal Year a sum equal to the
Debt Service for the Bond Year commencing in such
Fiscal Year computed as of the beginning of such
Bond Year;
To provide at all times for any deficits of the
District resulting from failure to receive any
Annual Charges or any sums payable to the District
by any Municipality or from any other cause;
To provide at all times such sums for reserves and
for sinking funds as may be fixed by this Service
Contract or other contract of the District or as
may be otherwise determined from time to time by
the Board (subject to any existing contractual
limitations);
To provide moneys required by any contract of the
District or otherwise for any capital expenditure,
including without limitation Acquisitions, Improve-
ments, Extensions, and Alterations, or any other
purpose authorized by the Act (not hereinabove
provided) and as so determined by the Board; and
To comply at all times in all respects with the terms
and the provisions of any resolution of the Board
and of the Act and to pay and to discharge all other
charges or liens payable out of the income of the
System when due and enforceable (Article V , Section
503, Sewage Treatment and Disposal Agreement,
January, 1964).
In order to uniformly charge its members for the volume
and composition of sewage transferred to the MDSDD #1
system, the District has the right to "enter upon and to
inspect the Sewer System of the Municipality or any
industrial or commercial installations connected thereto
or any other connections which contribute sewage or
wastes to the local Sewer System and to take normal samples
under ordinary operating conditions and to make tests,
measurements, and analyses of sewage or other wastes in
entering, or to be discharged to the Sewer System."
(Article IV, Section 4-0 5, Sewage Treatment and Disposal
Agreement, January, 19 6 4).
In order to charge uniform and equitable rates, a formula
is used and is applicable to all members of the MDSDD #1.
This formula entails three variables upon which the
annual charge is based.
66
-------
Flow - The measurement, in millions of gallons
annually, which is placed into the MDSDD #1
system from each member district.
BOD - Biochemical Oxygen Demand which is the labor-
atory determination of the quantity of oxygen
utilized in the biochemical oxidation of
organic matter in a given time and at a
specified temperature, being expressed in
parts per million (ppm) or (mg/liter) of
oxygen used in a period of five (5) days at
20° C.
SS - Suspended Solids which is the laboratory
determination of dry weight expressed in
parts per million (ppm) or (mg/liter) of
solids that either float on the surface
or are in suspension in sewage and can be
removed from sewage by filtration.
MDSDD #1, before the discharge ana aelivery of wastes
into its system, calculates an initial schedule of unit
charges and distributes this to each member. From it,
annual charges are estimated for the forthcoming year for
each member. This schedule serves as the basis for that
year's charge. After the year is over and actual flow,
Biochemical Oxygen Demand (BOD) and Suspended Solids (SS)
are known in total and for each member, the actual charge
can be computed. Any overpayment or underpayment is then
debited or credited to the account of the member agency.
Overpayments are not usually refunded but rather are
deducted from the next year's estimated annual service
charge.
Table 20 summarizes the computation of the estimated
annual per unit charge for 197 3. As shown, the total
estimated cost is, as always, divided 4-5.51 percent for
flow, 3 0.88 percent for BOD, and 2 3.61 percent for
Suspended Solids. Total volume and strength are then
estimated and per unit charges (per million gallons of
flow, per ton of BOD, and per ton of SS) are calculated.
This per unit figure is applied to the estimated flow,
BOD, and SS accruing from each member agency and each
agency's charge can then be estimated.
Table 21 summarizes the calculation of each of the sampled
agencies' 197 3 estimated service charge to MDSDD #1.
Shown on this table is each agency's estimated flow, BOD,
and Suspended Solids, plus the result of the applied unit
charge. This is the charge that each agency will pay in
67
-------
Table 20
CALCULATION OF UNIT CHARGES
Metropolitan Denver Sewage Disposal District No. 1
Estimated 1973
Total Annual Charges (estimated)
Less: Availability of Service Charge
Remainder Allocated to Members
$5.774,452
2.000
$5,772,452
Allocation Percentages:
Flow 45.51%
BOD 30.88%
SS 23.61%
$2,627,043
$1,782,533
$1,362,876
Total Volume and strength:
Flow (MG)
BOD (Tons)
SS (Tons)
46,347
35,899
29,748
Calculation of Unit Charges (Volume and Strength)
Flow = Total Annual Flow Charge
Total Flow to System
Unit Charge per Million Gallons (Flow)
S 2.627.043
46,347
$ 56.6820
gQjj _ Total Annual BOD Charge
Total Tons BOD to System
Unit Charge per Ton (BOD)
$ 1,782,533
35,899
$ 49.6541
gg _ Total Annual SS charge
Total Tons SS. to System
Unit Charge per Ton (SS)
$ 1.362.876
29,748
$ 45.8140
SOURCE: Metropolitan Denver Sewage Disposal District No. 1
S8
-------
Table 21
VOLUME, STRENGTH, AND ANNUAL CHARGE
Wastewater Treated By Denver Metropolitan
Sewage Disposal District No. 1
Sampled Agencies
Estimated 1973
AGENCY
FLOW
BIOCHEMICAL
OXYGEN DEMAND
SUSPENDED
SOLIDS
TOTAL
CHARGE
Million Gallons
Charae
Tons
Charqe
Tons
Charge
Arvada
1,767
$ 100.157
1,325
$
65.792
1,590
$
72,844
$ 238.793
Denver
35,541
2,014,537
25,577
1
,270,004
16,782
768,851
4,053,392
Northwest Lakewood
803
45,516
369
18,322
369
16,906
80,744
Pleasant View
307
17,401
209
10,378
384
17,593
45,372
Thornton
2,409
136,547
2,409
119,617
3,011
137.946
394,110
Westminster
785
44,495
722
35,850
1,021
46,776
127,121
Fruitdale
281
15.928
360
17,875
174
7,972
41,775
Subtotal (sampled members)
41,893
$2,374,581
30,971
$1
,537,838
23,331
n,
,068,888
$4,981,307
Total MDSDD #1 (all 21 members)
46,347
$2,627,043
35,899
$1
,782,533
29,748
51,
362,876
$5,774,452
SOURCE: Metropolitan Denver Sewage Disposal District No. 1
-------
1973. In 1974, the exact figures will be calculated for
1973 and adjustments will be made.
While the rates charged each member are uniform per unit,
the annual payment by the member agency for treatment as
a percentage of its total operating budget varies con-
siderably. For example, as a percent of total expenditures
(excluding major capital outlays) , the MDSDD #1 treatment
charge was 33.7 percent of Denver's expenditures in the
same year. In addition, the contractual treatment charge
was 3 5.4 percent of Arvada's total expenditures, 40.9 per-
cent of Thornton's, 24.8 percent of Westminster's, and
40.6 percent of Fruitdale's. These percentages, however,
should not be compared without examining the character-
istics of the respective wastes, and whether all or only
part of their treatment is provided by MDSDD #1.
The formula, using present percentages of flow, BOD and SS,
has not changed since its inception in 1964. However,
the annual charges levied against each member have in-
creased gradually. Table 22 depicts these increases for
each of the seven member sampled agencies. The total
annual charge increase between 19 6 7 and estimated 19 7 3
is a gain of approximately 59.8 percent for the sampled
agencies. The effect of decreased buying power of 197 3
vs. 1967 dollars is evident. Also, due to area growth,
this increase could be the result of any one or more of
four cost factors: 1) increasing flow volumes from the
member agencies; 2) increasing BOD tonnage; 3) in-
creasing suspended solids tonnage; 4) increased costs of
providing and operating the MDSDD #1 system. All of these
costs are passed on to the members. The changes in each
of the four variables between 1967 and estimated 197 3
are depicted on Table 23. Because several members were
added after 1967, the initial figures refer only to members
in 1973 that were also members in 1967.
As shown on Table 23, the increasing service charges passed
on to the MDSDD #1 members are primarily attributable to
increasing flows and to increasing costs per unit. BOD
has not increased significantly from the sampled members,
and suspended solids have actually declined. As noted
previously, the formula for calculating charges, based
on pre-set percentages of flow, BOD and SS, has not been
revised since its inception. Whether the formula provides
incentives to members to pre-treat their wastes before
delivery to MDSDD #1 was not determinable from this study.
This would seem to indicate that the costs of operating
Metropolitan Denver Sewage Disposal District No. 1 may be
increasing faster than originally anticipated. However,
70
-------
Table 22
ANNUAL TREATMENT CHARGES TO MEMBERS OF
METROPOLITAN DENVER SEWAGE DISPOSAL DISTRICT NO. 1
Denver SMSA
1967 - 1973
ANNUAL CHARGE
1967
Adjusted
$ 158.474
2,706,693
54,711
SAMPLED MEMBER
Arvada
Denver
Northwest Lakewood
Pleasant view
Thornton 146,943
Westminster 51,303
Fruitdale -
Subtotal (sampled members) $3,118,124
Total MDSDD #1 (all 21 members) $3,313,022
1968
1969
1970
1971
1972
1973
Adjusted
Estimated
Estimated
Adjusted
Estimated
Estimated
$ 143,806
$ 171,786
$ 200,827
$ 194,816
$ 197,808
$ 238,793
3,004,453
2,981,737
3,451,370
3,571,344
3,940,241
4,053,392
42,662
37,417
50,080
70,362
70,712
80,744
15,681
26,013
19,904
37,953
34,699
45,372
225,069
293,394
263,369
316,780
297,124
394,110
53,300
37,174
40,836
121,593
128,358
127,121
14,081
15.281
19,678
33,848
35,590
41,775
$3,499,052
$3,728,408
$3,562,802
$4,023,857
$4,046,064
$4,537,142
$4,346,696
$4,978,765
$4,704.532
$5,283,276
$4,981,307
$5,774,452
SOURCE: Metropolitan Denver Sewage Disposal District No. 1
-------
Table 23
VOLUME, STRENGTH, AND PER UNIT CHARGE TRENDS
Sewage Intercepted by Metropolitan Denver
Sewage Disposal District No. 1
1967 and Estimated 1973
Volume
Flow (mg)
BOD (tons)
SS (tons)
1967
Adjusted
29,768
27,051
25,042
1973
Estimated
41,305
29,680
22,773
PERCENT CHANGE
1967 - 1973
38.8
9.7
- (9.1)
Annual Charge per Unit
Flow Charge per mg
BOD Charge per ton
SS Charge per ton
$49.0755
$35.5458
$27.7811
$56.6820
$49.6541
$45.8140
15.5
39.7
64.9
Includes only Arvada, Denver, Northwest Lakewood, Thornton,
and Westminster. Excludes Pleasant view and Fruitdale because
they did not belong to MDSDD #1 in 1967.
SOURCE: Metropolitan Denver Sewage Disposal District No. 1.
72
-------
in 1972 the District served approximately 944,000 persons
for a per capita annual service charge of approximately
$5.59. This cost estimate includes all wastes treated,
including commercial and industrial. This calculates to
be a service charge of approximately $0.47 per person per
month. In addition, stricter federal and state waste-
water regulations would appear to be causing some of the
increasing cost trend, as is inflation. It would appear,
then, that the cost trend is upward but that the cost per
person or per tap may still be quite reasonable as a
reflection of treatment and disposal costs.
Expenditures by Function
The principal functions associated with wastewater service
are collection, treatment and disposal. To these are
added other expenditure elements which are associated
support functions: administration, billing, accounting; plus
capital expenditures, and the payment of debt service.
The analysis of expenditures, to focus upon pertinent
costs of operation, must distinguish between the function-
al costs of collection, treatment and disposal.
These various cost elements were compared for the various
sampled agencies, permitting certain conclusions to be
reached. However, it must be emphasized that the comparisons
were quite difficult and, indeed, quite impossible in some
instances. This is because the agencies individually
exercise substantial freedom and flexibility in their
systems of accounts. The agencies do nominally comply
with the State Auditor's uniform system of accounts, but
both the degree of compliance and the basic system pose
inadequacies for comparative analyses, or for realistic
budgeting and cost accounting.
Most of the sampled agencies do not organize their
classification of expenditures to reflect the costs of
collection, treatment and disposal. Even those which do
differentiate the costs of the various functions do so
with varying definitions and practices as to what is in-
cluded in the established cost categories. For example,
some agencies allocate administrative costs between treat-
ment and collection and some do not.
Nevertheless, some analysis was possible. Table 24 lists,
as well as possible, the expenditures for certain of the
sampled agencies. Host of the sampled agencies that are
not listed on Table 24 have accounting practices which do
not separate treatment and collection, or do not separate
73
-------
Table 24
EXPENDITURES BY FUNCTION
Selected Municipalities and Sanitation Districts
Denver SMSA
COST ITEM
BOULDER
LAFAYETTE
DENVER
LITTLETON
ENGLEWOOD
(1970 Actual) (1970 Estimated) (1970 Estimated) (1971 Actual) (1970 Actual]
Administration
Sewage Collection
Sewage Treatment
Billing
Debt
Capital
General Fund
Engineering
Contracts
Quality Control
General Expense
TOTAL
16,490
109,064
253,777
70,139
234,884
818,887
25,600
$1,528,841
$20,443
12,075
13,005
9,477
$55,000
? 308,016
726,972
4,049,496
348,972
207,255
$5,640,711
$ 10,368
148,812
75,508
69,428
5, 000
$223,240
; 24,492
34,645
92,863
16,351
75,851
121,479
11,486
13,025
$390,192
Note: Because an agency lists no expenditure for a specific cost item does not necessarily mean
that agency incurred no such cost. Rather, it might mean that the accounting system does
not separate that cost category from the other cost categories.
SOURCE: Audits or budgets of respective agencies.
-------
water and sewer expenses, or maintain a system of accounts
that cannot be compared with those of the other agencies.
As shown, treatment operating costs constitute a major
portion of each agency's total annual expenditures, with
the operating costs of collection usually being much less.
Treatment operating costs compared to collection operating
costs vary considerably, however, between the agencies.
This is due to the different methods and arrangements by
which sewage is treated, the variance in collection
systems and types of users, the fact that some agencies
are expanding thereby requiring sizeable investments in
collection or treatment facilities, and the effect upon
members of Metropolitan Denver Sewage Disposal District No. 1
as compared to those who are not. Costs of administration
also appear to vary, although the method of accounting for
or apportioning costs by a particular agency doubtless
causes some of this variation.
75
-------
REVENUE/COST AND FINANCIAL POLICY COMPARISONS
Thus , there are many sources of wastewater revenues ,
although only three appear to be significant. In addition,
there are many demands for wastewater expenditures. For
both revenues and expenditures, the trend is upward. Yet,
revenues and expenditures mean little when separated from
each other. This section, then, relates revenues to
expenditures by comparing and projecting the two, and by
examining which revenues are devoted to which expenditure
purposes.
Sources of Funds for Specific Expenditures
In this study, a partial cash flow analysis was performed,
to the extent of defining which revenues from which revenue
sources are used for which expenditure purposes. Only
in a few instances, however, are specific revenue sources
ear-marked for specific purposes. This is because each
agency maintains a general sewer or a general sewer and
water fund into which is placed most revenue collected and
from which come the appropriations for almost all expendit-
ures. This co-mingling of funds renders difficult to trace
the flow of funds from revenue source to expenditure
item, although this is not intended as a criticism of
that practice.
For bond funds, it is statutorily required that all funds
derived from the sale of bonds be used only for those
purposes for which the bonds were issued. As a result,
bonds are nearly always issued for rather broad purposes
such as plant expansion and other major categories of
capital outlays. When the proceeds from a bond issue
exceed the anticipated expenditure requirements for which
the bonds were issued, the excess is usually devoted to
pay some of the annual bond retirement costs (interest and
principal). In addition, interest generated via invested
bond receipts remains in the bond fund and is usually used
to defray the costs of the debt.
The expense of constructing main extensions is also reason-
ably easy to trace to specific revenues. This is because
those users for whom the extension is made are the usual
direct sources of the funds to finance or recover the costs
of the extension. This payment is usually required before
the connection is made, particularly in the smaller agencies,
and the transaction is therefore quite simple.
76
-------
Other expenses incurred by the wastewater agencies
(operations, maintenance, debt service and system replace-
ment) are usually met from the sewerage system general
fund. As such, revenues from a particular source are not
necessarily used for a particular expense. However, the
question of using specific revenues for specific expendit-
ure purposes was posed to each agency and several general-
izations were forthcoming. The results are briefly
summarized on Table 25.
As depicted on this table, the costs of operation and
maintenance are usually paid from general operating revenues
arising from service charges and, at times, tap fees.
In thirteen instances the operations are self-supporting
solely from operating revenues, while three agencies
(Fruitdale, Northwest Lakewood, and Pleasant View) use a
tax levy to help finance operating costs. The fourth agency
employing a mill levy (South Adams County) does not devote
these revenues to finance operations and maintenance.
Major plant construction and expansion is nearly always
financed through long-term debt. All agencies expressed
eagerness to secure federal grants to assist in financing
these major capital outlays. Most of the agencies, through
their operating revenues (service charges and tap fees),
are able to accumulate at least small sums as reserve
funds which, if sufficiently large, are appropriated to
meet capital improvement needs. This is particularly
true for less-than-major capital needs.
All of the sampled agencies report devoting current opera-
ting revenues to regularly pay for the costs of system
replacement. There appears to be no use of bond funds to
finance system replacement or deferred maintenance.
It must be noted here, that several agencies (Westminster,
Pleasant View) maintain records which do not separate
water and wastewater accounts. Sewer tap fee revenues and
sewer service charge revenues are readily distinguishable
from the water receipts, as are bond funds, but other
sources of revenue and many of the expenditure items are
not neatly divisible from the accounting records. Frequent-
ly the accounting system reflects the organization for
work; e.g., the same work crews might maintain both water
and sewer mains. As a result, it becomes difficult to
trace precisely the flow of funds within these agencies.
Adequate cash flow analysis could be accomplished by
means of an audit, but such a task is well beyond the
scope of this study.
77
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Table 2 5
SOURCES OF FUNDS FOR VARIOUS SEWERAGE PURPOSES
Selected Municipalities and Sewerage and Sanitation Districts
Denver SMSA
1972
JURISDICTION
Municipalities
OPERATIONS AND
MAINTENANCE
Primarily service
charges:
se1f-supporting.
MAIN EXTENSIONS
Developer does all work and
pays all costs: lines turned
over to municipality; if city
does the work, owners reim-
burse city on a front footage
basis.
NEW PLANT
CONSTRUCTION
Revenue bonds for
major work: service
charges and tap fees
for minor expansion.
DEBT SERVICE
Service charge
and tap and
permit fees.
SYSTE
rRPL-iCc.
P r :iT".a r : i
charges.
Service charges
and tap fees;
self-supporting.
Special assessment if new
district is formed; developer
pays total cost if no district:
city pays for oversizing with
most money coming from plant
investment fees.
Revenue bonds, fed-
eral grants, and
operating funds (ser-
vice charges, tap
fees, and plant in-
vestment fees).
General revenue
(service charges
and tap fees).
Genera 1
!cr;rar:
fees an>i
"barges)
Broomfield
vj
00
Service charges;
self-supporting.
Service charges:
self-supporting.
Developer either builds
extension, or City does it
and developer pays for it via
a reimbursement agr
Developer will pay; mams al-
ready exist in nearly all of
the city; vertical growth re-
quires oversizing of mains.
Revenue bonds and
service charges.
Service charges as
much as possible;
General Obligation
bonds when necessary.
Primarily
service charges.
City, net paid
out of sewer
fu nds .
Pr:ra rii y se
charges and
Englewood
Service charges;
self-supporting.
Developer does the work and
pays for the extension, city
will then take it over and
provide the service.
Service charges, tap
fees, bonds, and
federal grants.
Serv:ce charges
and tap fees.
Service charges
and tap fees;
self-supporting.
Developer does the work and
pays for the main; alternative
is to form a special improve-
ment district.
Bonds, federal funds, Service charges
and/or tap fees. and tap fees.
Longmont
Service charges
and tap fees;
self-supporting.
Service charges
and tap fees;
self-supporting.
Developer puts mams m him-
self; if oversize city pays
difference from general
revenue (service charges and
tap fees.
Developer reimburses City;
City front-ended recent ext-
ensions but anticipates re-
covering all costs from develop-
ers through tap fees.
Bonds and general
revenues (service
charges and tap fees), fees tc cover
debt.
Raise service
charge and tap
Revenue bonds.
Tap fees.
uer.eral rever.
and tan foes)
-------
Table 25
SOURCES OF FUNDS FOR VARIOUS SEWERAGE PURPOSES
(Continued)
JURISDICTION
Municipalities
Westminster
Districts
MDSDD #1
Brighton
CO
Lafayette
N.W. Lakewood
Pleasant View
South Adams
OPERATIONS AND
MAINTENANCE
Service charges
primarily;
se1f-supporting.
Operating revenues
(service charges).
Operating revenue
(primarily service
charges)j
self-supporting.
MAIN EXTENSIONS
Subdivider does work and pays;
City pays for oversizing and is
reimbursed via a recovery con-
tract paid by tap fees.
Bonds if to an existing member;
individually negotiated con-
tract if a new member.
Developer puts in and pays for
extensions; City pays over-
sizing out of operating reve-
nues .
General fund (mill Developer normally makes the
levy, service charges, extension, district then takes
and tap fees);
self-supporting.
Operating revenue
(tap fees and
service charges);
self-supporting.
Primarily mill levy,
with some general
revenues.
General fund (mill
levy and service
charges).
Service charges and
tap fees; (not mill
levy);
self-support ing.
NEW PLANT
CONSTRUCTION
Bonds plus tap fees.
Bonds only.
Bonds, federal
funds, operating
revenues.
it over. Few new extensions
anticipated.
Developer builds line and pays
for it, deeds over to city? if
'city builds line - bonds are
used and paid back via tap
charge; oversizing city would
pay (haven't done it to date).
Developer does the work and
pays; district then takes over
the mains.
Developer usually pays total
cost, although mill levy used at
times when extension isn't to a
specific development.
Developer pays - District
builds? developer is required
to pay costs before service
starts? District would pay for
oversizing from operating levies
(service charges and tap fees).
Kill levy or bonds.
Mill levy, bonds,
but no expansion ant-
icipated.
Bonds, federal aid.
DEBT SERVICE
Service charges
and tap fees.
SYSTEM
REPLACEMENT
General revenue
(service charges
and tap fees).
Service charges. Service charges.
PLant investment
fee and general
revenues.
Mill levy and savings,
although no plant
expansion is anticip-
ated .
Bonds, and currently
applying for federal
funds.
Mill levy and
general revenue,
although no debt
now outstanding.
General operating
revenue (tap fees
and service
charges).
Mill levy and
tap charges.
Mill levy and
operating reve-
nues .
Mill levy only.
Prior years used
some operating
revenues.
General revenue
{service charges
and tap fees)
General fund (tap
fees, service
charges, and mill
levy).
Operating revenue
(tap fees and
service charges).
Mill levy and
general revenues.
General fund
(mill levy and
service charges).
Service charges
and tap fees.
-------
Uses of Operating Funds
Operating revenues, consisting of those monies generated
by means of the service charge, tap fee, and mill levy,
are used, at least at times, to cover almost all expenses
incurred on the part of the wastewater agency. The general
policies of the agencies seem to be to cover all operating
costs (operations, maintenance, general fund, collection,
and treatment) with operating revenues, and accumulate
surplus operating revenues as a reserve for debt retirement
or to defray the costs of capital expansion and improvement.
There appears to be little regulation of operating funds
except to limit their use to within the wastewater agency
or to transfers to the general fund to cover the costs of
wastewater administration, billing, accounting or other
support services.
Table 26 depicts operating revenues and operating expendit-
ures for each of the sampled agencies for 1970. Also shown
are the operating revenues divided by the operating costs.
As shown, in every case in 1970 there occurred an excess of
operating revenues over operating costs. Each agency
retires its debt out of operating revenues, and also, wisely,
utilizes the operating revenues to finance certain capital
expenditures. The amount of excess revenue, after operating
costs are paid, varies substantially for the sampled agencies.
For example, the City and County of Denver has a very small
margin, with operating revenues being 10 2 percent of opera-
ting costs. However, the Denver Wastewater Division does
not use its funds to retire debt (Denver's debt is general
obligation bonds payable from property tax revenues) ,
and does not require debt service reserves. On the other
hand, South Adams County has a sizeable "surplus." How-
ever, South Adams County in 197 0 had a sizeable debt re-
tirement obligation (bonds to be paid off in 1973), and
also had relatively large capital improvement needs relative
to total expenditures. Consequently, this agency needs a
large reserve to meet these requirements. Skillful employ-
ment of excess revenues can effectively "shave" peak
revenue requirements and avoid rate increases or fluccuations.
Hence, each agency is able to currently meet its operating
costs with operating revenues. In addition, each jurisdic-
tion maintains a rate structure (service charge, tap fees,
tax levy) which allows it to derive current operating
revenues sufficient to provide for bond retirement and defray
at least part of the costs of recurring capital improvement
needs. Several instances were noted where tap or connection
charges provided a substantial portion of the revenues needed
for operating and maintenance expense. It is presumed that
service charges will be adjusted in the future so that
operating revenue requirements will be less dependent on
continued growth.
80
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Table 26
OPERATING COST/REVENUE ANALYSIS
Selected Municipalities and Sanitation Districts
Denver SMSA
1970
AGENCY
Municipalities
Arvada
Boulder
Broomfield
Denver
Englewood
Littleton
Longmont
Thornton
Westminster
Districts
CURRENT
OPERATING REVENUES
$ 49 4,991
1,214,344
68,000
5,547 ,886
339,827
208,381
272 ,404
707 ,472
288,854
MDSDD #1 (1971) $4,978,765
Brighton $ 114,328
Fruitdale 77 ,000
Lafayette 49,669
Northwest LakewoodC1971) 23 2,707
Pleasant View 77,486
South Adams 288,750
CURRENT
OPERATING COSTS
$ 327,108
475,070
38,747
5,437 ,547
192 ,862
82,773
199,242
525,893
211,305
$3,018,196
$ 37 ,980
N.A.
39,692
147,397
N.A.
90,860
OPERATING REVENUES
DIVIDED BY
OPERATING COSTS
1. 51
2.56
1.75
1.02
1.76
2.52
1.37
1.35
1. 37
1.64
3.01
N.A.
1.25
1. 58
N.A.
3 .18
(a) Operating Revenues:
Operating Costs :
service charges, tap fees, mill levies; excludes
interest and miscellaneous revenues,
operations, maintenance, transfers to
general fund, treatment, and collection
costs.
81
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Uses of CaDital Funds
As indicated, at least limited capital funds can usually
be generated from current operating revenues. If excesses
of revenue over expenditures accumulate at the end of
the fiscal year, these are typically placed in a capital
reserve account, to be used as the need dictates. When
monies accumulated in the account are insufficient to meet
immediate capital improvement needs, debt is incurred to
make up the difference. In a few cases, funds may be
transferred from the municipality's general fund for these
purposes,¦ but reportedly this procedure is not often used.
The capital reserve account, in conjunction with long-term
debt issued for capital investment purposes, is used for
such major items as plant expansion and improvement, main
construction, improvements to meet federal standards, and
so on. In addition, the capital reserve accounts can be
used for annually recurring capital needs, and for system
replacement and upgrading.
As noted previously, the monies generated via debt in-
currence are legally used only for those purposes described
in the bond issue. The reserve account, on the other hand,
can be used for almost any wastewater purpose. For example,
if operating costs are abnormally high for one year or
contingencies encountered, the money accumulated in the
reserve account could be used to cover it. Thus, the
capital reserve account in practice may function much like
a contingency fund, to be used wherever and whenever
needed. Most municipalities, by ordinance, place some
restrictions on their capital reserve funds, as do the
restrictive covenants in certain of the district revenue
bond issues.
Revenue and Expenditure Trend Analysis
Generalizations regarding revenue and expenditure trends
and implications are, on the surface, quite difficult to
generate. Upon more detailed analysis, however, it was
found that the problems confronting the sampled agencies
are quite similar. The larger agencies tend to have
adequate professional staffs to analyze and project costs
and revenues, whereas the smaller agencies cannot on a
continuing basis. For example, few of the smaller agencies
forecast future revenues and expenditures on a detailed
basis. They know their future schedule of debt service
and, by means of capital improvement programming, may
establish some schedule of future capital requirements.
However, projections of operational costs and revenues are
82
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usually not well established, so the demands upon revenue
sources are not well defined. Agencies typically anti-
cipate that periodic rate increases will meet all costs
of operations, and that periodic bond issues will meet
capital costs not financed by federal grant. In other
words, few of the agencies have a well formulated financial
program regarding wastewater systems.
The financial trends and problems can be illustrated by
means of an example. The City of Longmont has forecasted
its various revenue sources and the demands to be placed
on these revenues. What is found in the examination of
this forecast is similar to that of most of the other sampled
agencies.
Table 27 summarizes the historic (1967-1972) and projected
(1973-1976) revenues and costs of the City of Longmont
sewerage system. The service charge revenues are anti-
cipated to increase continuously as a result of community
growth. In addition, it is forecast that a service charge
increase from 27 percent to 40 percent of the water bill
will have to be implemented as of January 1, 197 3. One
reason that the service charge increase is necessary is
that, while water rates increased steadily during the
period, each increase in water rate had a corresponding
decrease in sewer rate as a percent of the water bill.
The net result was a decreasing percentage of an in-
creasing water bill so that the sewer service charge,and
wastewater revenues, remained constant between 1967 and
1972 .
The connection (tap) fee revenues also are seen to be
increasing. This also is the result of growth, plus an
increase in tap fee from $150 to $200 in 1972. A larger
than normal increase in tap fee revenue in 1971 and 197 2
is the result of a large mobile home park constructed and
connected to the system during those years. In 197 3, the
connection fee revenues are shown to be back to the pre-1971
trend. Interest and other revenue are shown to be relative-
ly stable.
Longmont's expenditure patterns are also seen to be in-
creasing between 19 67 and 197 6. Total operating costs
are seen to entail an increase of 29 3.5 percent between
19 67 and 197 3. Of this amount, the cost of administration
entails the largest increase, although this increase is
not accurately illustrated by the statistics reported on
Table 27. This is because of a change in accounting
procedures between 1971 and 197 2, and the reallocation
of costs resulted in a substantial decrease in recognized
administrative costs but an increase in disposal and
83
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Table 27
REVENUE/EXPENDITURE trends AND COMPARISONS
An Example - City of Longmont
1967 - 1976
REVENUE
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
Service Charges
$121,326
$141,684
$153,536
$183,819
$207,299
$221,486
$411,600
$445,000
$46i, UU'j
$5xS,000
Tap Fee and Line Charges
50,019
58,823
68,001
89,735
166,391
190,482
158,000
171,000
185,000
200,000
Interest
2,338
2, 200
a, 806
669
162
-0-
±, ooo
1 ,UOO
1,000
1, uuu
Other Revenue
1,188
274
2,136
3,092
1,566
11.442
4,000
4,000
4, 000
4, 000
TOTAL REVENUE
$174,871
$202,981
$225,481
$277,315
$375,438
$423,410
$574,600
$621,000
$671,000
$724,000
EXPENSES
OPERATING:
Administration
$ 36,530
$ 27,520
$ 68,827
$ 81,706
$128,185
$ 34,573
$ 48,437
$ 53,400
$ 58.700
$ 64,600
Disposal Plant
38,812
49,230
17,890
32,751
33,141
91,961
116,654
128,300
141,100
155,200
Repair and Maintenance
10,152
17,407
14,224
14,335
13,898
38,282
108,634
119,500
131,500
144,700
Garbage Collection
9,600
9,600
9,600
9,600
9,600
9,600
9, 600
10,000
10,000
10,000
Lift Station Expense
193
2
340
450
564
1,000
2, 000
2,000
2,000
2,000
Irrigation Expense
404
214
-0-
-0-
137
-0-
-0-
-0-
-0-
-0-
TOTAL OPERATING EXPENSE
$ 95,691
$103,973
$110,881
$138,842
$185,525
$175,416
$285,325
$313,200
$343,300
$376,500
NON-OPERATING:
Transfer to General Fund
$ 10,020
$ 15,000
$ 20,000
$ 70,000
$ 25,000
$ 30,000
$ 57,460
$ 62,100
$ 67,100
$ 72,400
Transfer for Debt Retirement
38,400
38,400
53,400
85,600
95,600
86,200
86,200
86,200
86,200
75,000
TOTAL NON-OPERATING
$ 48,420
$ 53,400
$ 73,400
$155,600
$120,600
$116,200
$143,660
$148,300
$153,300
$147,400
CAPITAL
42,808
87,887
(67,950)
29,070
48,778
54,122
137,625
517,400
120,400
90,500
TOTAL EXPENSES
$186,919
$245,260
$116,331
$323,512
5354,903
$345,738
$566,610
$978,900
$617,000
$614,400
NET CHANGE IN FUNDS
$(12,048)
$(42,279)
$109,150
$(46,197)
$ 20,535
$ 77,672
$ 7,990
$(357,900)
$ 54,000
$109,600
Adjustment
(42,453)
OPERATING FUNDS AVAILABLE
$ 46.637
$ 4,358
$113,508
$ 67,311
S 45,393
$123,065
$131,055
$(226,845)
$(172,845)
5(63,245)
-------
repair and maintenance expenses. Under operating expenses,
two costs are included which are not normally wastewater
costs: garbage collection and irrigation expense. Both
of these are included herein because they are reported as
sewage costs in Longmont's reporting procedures. These
costs are minor and therefore do not significantly change
the trend, but point out the problems encountered due to
the lack of a uniform system of accounts.
A generally increasing trend in transfers to the general
fund is also noticed. This, as indicated earlier, is to
cover the costs of billing and accounting and some over-
head (administrative) costs. As the use of debt increases
(new issue in 1969 - 1970), the cost of debt also increases.
In addition, it is common practice to schedule principal
and interest payments (bond retirement) in such a manner
as to spread the costs among more users as the number of
users of the sewer system continue to increase.
Capital outlay costs also tend to increase, although the
annual capital costs vary considerably because of the
non-recurring costs included in this category. It should
be noted that the capital expenditure in 1969, in parentheses,
is the year that the city booked plant and inventory for
the first time; further, that the large capital outlay
programmed for 1974 is for a new digester, new trickling
filter, and other smaller capital items.
The historic and projected revenues and expenditures,
however, are most important when compared with each other.
This comparison is indicated by the Net Change in Funds. As
shown, there is a year-end deficit for half the years and
a year-end surplus for the other years. The revenue trend
for these years remains quite constant, so the reason for
the fluctuating deficit/surplus is the fluctuating
expenditure pattern. The net change in funds, as of the
end of the year, plus or minus the previous year's
surplus/deficit, is depicted as "Operating Funds Available."
The monies in this row are what is to be carried over to
the next year.
This rather detailed example is quite typical of all of
the sampled agencies. It shows several things worthy of
note:
1. It is deemed necessary to raise tap fees and
service charge rates from time to time so as
to cover increasing construction and operating
costs;
85
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2. Reliance on tap fees and,to some degree, service
charges is in turn a reliance on the continued
growth and expansion of sewer service and users;
3. Accounting procedures vary from agency to agency;
4. Large capital expenditures, often for plant
expansion, are required from time to time;
5. Operating revenue "surpluses" are not sufficient
to pay for these large capital expenditures. As
a result, long-term debt is requisite for plant
expansion.
6. Deficits accumulate quite often and only rate
increases or additional debt can meet system
needs at times;
7. Inflation is causing many of the cost increases;
8. It is readily forecast that debt will have to
be issued so as to negate projected total system
deficits;
9. There has not been an attempt to regulate growth
via increased tap fees , although this is an
apparent possibility;
10. Repair and maintenance and treatment plant costs
are rising rapidly even when the changes in
accounting practices are excluded.
86
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FINANCIAL MANAGEMENT PRACTICES
The management of wastewater funds is generally similar
in all of the agencies studied. The most important
fiscal practices, with emphasis given to those which deal
with financial planning and control, are described below.
Budgeting, Auditing, and Accounting Practices
An extremely important financial planning tool, which
every agency must formulate, is the annual budget. The
Colorado Revised Statutes prescribe that every unit of
local government prepare and adopt an annual budget for
the ensuing fiscal year. It must set forth all proposed
expenditures, show any deficits from prior years, and
indicate all anticipated revenues for that upcoming
fiscal year. All of the sampled agencies comply with the
basic requirement, and it was possible to analyze the
budgets of mos-t of these agencies in the course of this
study.
The sanitation districts formulate budgets which usually
separate water and sewer revenues and expenses. However,
two of the sampled districts combine their water and sewer
financial records. Municipalities prepare city-wide
budgets, with appropriations and revenues for the waste-
water department being only one part. In the typical
municipal budget, the appropriations and expenditures for
each department are separated, with revenue-producing
departments usually being further separated into self-
sustaining "funds." Some budgets include a balance sheet
which indicates assets and liabilities, an income state-
ment, and detailed tables of anticipated revenues and
expenditures. Some agencies are moving toward a "program"
or "performance" budget.
Certain budgetary considerations, and problems, are worthy
of note here. The budget is the principal policy and
management tool available to the local unit of government.
While each department or agency head would normally pre-
pare the budget request, the ultimate decision by the
governing body must accomplish a balance of needs and
goals with available resources.
The manager or finance officer of the agency submit
balanced budgets for all activities and programs recommend-
ed. However, the final budget represents priorities and
policies of the organization as established by the govern-
87
-------
ing body. There may occur instances in which excessive
requests are used as a bargaining device to obtain desired
fund allocations. However, the budgets reviewed appeared
to be based on realistic expectations, and incorporating
some balance between competing demands, and between needs
and public acceptability of rate and charge levels to be
levied.
The budget should be sufficiently flexible to allow for
unusual or unanticipated circumstances. Some of the budgets
provided no appropriation for contingencies or insurance.
Budget procedures sometimes tend to hide inefficiencies
by continuing initial expenditures in succeeding periods
without proper evaluation. Consequently, frequent re-
examination of the various allocations is needed so that
precedence and trend should not become the sole tools used
for budget preparation and review. The format of budgets
can, over time, become so complete and detailed that the
budgets become burdensome, expensive, and even meaningless.
Finally, budgets are tools, not ends in themselves. There-
fore, budget execution, and appropriate accounting therefor,
become equally important to budget preparation and adoption.
A second financial requirement of every unit of local
government is the annual external audit. This audit,
prepared by an independent outside agency or individual,
depicts all financial affairs and transactions of the
agency and is set forth as public record. A copy of the
annual audit is sent to the State Auditor for his review.
Each audit is made in accordance with generally accepted
accounting practices, with a series of tests utilized to
judge the records of each agency. Many of the audits for
the sampled agencies were reviewed in this study, and
appropriate information is used in various parts of this
report. Unfortunately, the annual audit is too frequently
a certification of the accuracy of the records, rather
than a document which points to improvement of financial
policies and practices.
A third financial tool, as set forth in the Colorado Revised
Statutes, is a uniform classification of accounts. The
State Auditor formulates, prescribes, an4 publishes a
system of accounts which is to be uniform for every level
of government. Review of the audits, budgets, and other
financial statements indicates that there is some uni-
formity of accounting practices and classification systems
on the part of wastewater agencies. However, there is
sufficient flexibility that all account classifications
are not necessarily uniform. This has made the comparisons
of expenditures and revenues rather difficult. This, how-
ever, should not be necessarily a criterion: the primary
88
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purpose of an accounting system is to produce useful
management information for the agency, not necessarily to
facilitate comparisons.
In addition to budgets, audits, and uniform accounting
procedures, each local governmental agency is required to
maintain an internal system of records of all expenditures ,
revenues and transfers of money between funds, so that in-
ternal audit and analysis of financial affairs can be
performed at any time within the fiscal year.
Billing and Collecting
Each municipality and district has adopted prescribed
methods of billing for sewer tap fees and service charges.
Billing procedures are generally uniform among the agencies,
although the billing frequencies for service charges vary
considerably. The tap fee billing period and the frequency
of service charge billing are shown on Table 28. As
depicted, most agencies levying a tap charge require the
payment to be made before the tap is physically made.
Only three agencies permit a tap to be made with the fee
deferred to a later date. This deferral is infrequently
permitted and only in severe hardship cases.
Sewer service charges by the agencies vary in their fre-
quency of billing. Most agencies appear to favor billing
on a monthly basis, while three bill bi-monthly and several
bill quarterly. Northwest Lakewood collects a service
charge semi-annually, but this is not a service charge per
se, but is rather the mill levy which is used in lieu of
a service charge. Three agencies also bill special users
annually. It appears that all agencies bill their water
and wastewater users jointly whenever both services are
supplied. In all cases, however, the joint billing separates
the sewer service charge from the water charge although both
are contained on the same bill.
In the event a user does not pay his sewer service charge,
the statutes authorize the municipality to disconnect
service to users located outside of the city limits. If
the user is located inside the city, the municipality may
not disconnect service but can place a lien on the property
to be payable as if it were a property tax. This is the
action taken by most of the sampled agencies when users
become delinquent in payment of service charges.
89
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Table 28
WASTEWATER BILLING PROCEDURES
Selected Municipalities and Sanitation Districts
Denver SMSA
1972
JURISDICTION
Municipalities
Arvada
Boulder
Broorofield
Denver
Englewood
Littleton
Longmont
Thornton
Westminster
CONNECTION (TAP) FEE BILLING
Prior to Tap Deferral Possible
SERVICE CHARGE BILLING
X
X
X
X
X
X
X
X
None
X
X
X
Monthly Bi-Monthly Quarterly Semi-Annually Annually
X X
X
X
X
X
X
(b)
JOINT BILLING
Sewer and Water
X
X
X
vo
o
Districts
MDSDD #1
Brighton
Fruitdale
Lafayette
N.W. Lakewood
Pleasant View
South Adams
Negotiated
X
X
X
X
X
X
X
X
x(e)
XU)
v(d)
X
X
(a) For those without water accounts.
If inside City.
(c) if outside City.
(<3) Mill levy.
(e) Commercial only.
(f) Residential only.
SOURCE: Contacts with district and municipal officials.
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Capital Improvement Programming
The programming of capital investments is a separate but
yet related element in the annual budgeting procedure and
the act of financial planning. While operating budgets
are prepared for one year in the future, capital improve-
ment programming looks several years into the future. In
the case of the sampled agencies, the capital improvement
programs typically covered a period of five or six years
into the future. Hence, a program developed in 19 7 2 would
generally indicate those capital needs to be required
through 1977 or 1978.
Where the annual budget process reviewed, in detail, all
costs and revenues for the forthcoming year, the capital
improvement program reviews only one form of expenditure:
capital outlays. The capital program should, but in
practice does not necessarily consider anticipated sources
of revenues, although cost estimates are prepared for each
capital item. Operating costs resulting from capital out-
lays are less-frequently estimated, and staging of outlays
(land purchase, design, construction, etc.) is frequently
ignored.
A capital improvement program is very essential to the
well-being of the wastewater agency. The capital improve'
ment is a long-term investment, with long physical and
economic life, and it is a number of years before the
results of the investment are fully realized. The decision
maker, once the funds are committed, is a hostage to future
events. Consequently, the preparation, adoption and
periodic updating of the capital improvement plan cannot
be taken lightly. The need for most capital investments
is predicated on the forecasted need for the facility, with
that forecast entailing projected community or district
growth, anticipated wastewater volumes, and the useful
life or adequacy of existing facilities. Consequently, an
adequate projection of needs is requisite to the capital
improvement plan. For example, over-investment in assets
can create undue, and sometimes unacceptable, long-term
costs; under-investment might result in failure to meet
needs on a timely basis resulting in undercapacity or un-
necessary repair and maintenance.
Capital needs expressed in the capital improvement program
are generally quite large. As such, considerable investiga-
tion and planning, and consideration of alternatives, must
precede the commitment to expenditures. The timing for
funding such expenditures is also important. The climate
for bond approval or for satisfactory bond sale, varies
over time, and it is usually Dossible to make a large
91
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capital improvement in any of a number of years. With
adequate programming, the agency can avoid situations
where plant expansion or other needs are required immediate-
ly. Suddenly-needed items almost invariably entail greater
costs than planned, scheduled outlays. Finally, a variety
of capital needs is always present. If sufficient, long-
range planning is made, it is usually possible to rank and
phase the needs according to a realistic priority schedule.
The wastewater agency must be an active participant in all
planning affecting its service; typically it possesses
little or no contrc>l over the extent or pace of growth.
Most of the sampled agencies recognize the need for capital
improvement programming, those which anticipate capital
needs have some form of capital improvement plan. An
example of a capital improvement program is shown on Table 29.
This example is for the City of Longmont wastewater depart-
ment, and depicts the detail in which a good plan is
programmed. By means of this plan, Longmont is able to
forecast its financial needs and is able to anticipate its
cash flow and future revenue needs.
The projected needs and revenues will indicate if increased
revenues from rates and charges will be required, and what
bond issues should be anticipated. The results of this
capital improvement program can then be incorporated into
the projection of revenues and costs, as previously shown
on Table 27.
Metropolitan Denver Sewage Disposal District No. 1, as
part of its 197 3 annual budget, has prepared a detailed
statement and 5-year projections of revenues and expenditures
for each of its four Funds: Operations and Maintenance;
Acquisition and Construction; Debt Service; and General
Reserve. Table 3 0 and Table 31, taken from that budget,
depict sources of funds and expenditure summaries for the
Operations and Maintenance Fund and the Acquisition and
Construction Fund, respectively.
In addition to these summaries, the budget contains detailed
documentation of estimates by each expenditure object or
function, for each of the MDSDD #1 activities and programs.
This provides an extremely comprehensive grasp of costs and
revenues anticipated, and basis for allocation of actual
costs subsequently incurred.
The budget message, prepared by the Manager and his staff,
points up significant features or changes in anticipated
outlays, describes their causes and what measures are pro-
posed. For example, the 19 73 message takes note of sharply
92
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Table 29
A TYPICAL CAPITAL IMPROVEMENT PROGRAM
City of Longmont Sewer Department
1973 - 1977
NAME AND LOCATION
YEAR IN WHICH CONTRACTED
1973
1974
1975
1976
1977 & after
Trickling filter $
-0-
$150,000.00
$ -0-
$ -0-
$ -0-
New digester
-0-
200,000.00
-0-
-0-
-0-
Build new manholes
1,500.00
1,500.00
1,500.00
1,500.00
1,500.00
Main Replacement
No. to 9th Avenue on Bowen
10,000
-0-
-0-
-0-
Alta & Pratt, 9th to 11th
-0-
-0-
18,000.00
-0-
-0-
Alley west of Judson, 7th to 3rd
-0-
-0-
-0-
10,000.00
-0-
Bross, 8th to 11th,
-0-
-0-
-0-
-0-
12,000.00
Alley west of Francis, 7th to 6th
-0-
-0-
6,000.00
-0-
-0-
Sludge Circulating pumps
20,000.00
20,000.00
-0-
-0-
-0-
Return sludge pump
1,800.00
-0-
-0-
1,800.00
-0-
Move grit chamber and grinder
-0-
-0-
20,000.00
-0-
-0-
New pipe to gas burner
1,200.00
-0-
-0-
-0-
-0-
Sensor controls for lift stations
2,000.00
-0-
-0-
-0-
-0-
Customer services
9,000.00
9,900.00
10,900.00
12,800.00
14,000.00
Equipment (Replacement & New)
29,150.00
66,000.00
4,000.00
4,400.00
4,800.00
Oversize and Main Improvements
60,000.00
60,000.00
60,000.00
60,000.00
90,000.00
TOTAL
$124,650
$517,400.00 $120,400.00
$90,500.00
$122,300.00
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increased costs of hauling sludge cake as the cause of
increases in sludge processing expenditures for 197 3, but
that proposed plant expansion (Table 31) and transmission
of liquid sludge by pipeline for soil conditioning will
reduce costs substantially, as reflected in sludge pro-
cessing costs after 1974 (Table 30).
The comprehensive planning which has gone into the prepara-
tion of the 1973 Budget and 1973-1977 Program Summary is a
credit to MDSDD #1, and should be an example to, as well as
facilitate the physical and financial planning by, member
agencies as well as other wastewater agencies within the
Denver SMSA.
94
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Table 30
OPERATIONS AND MAINTENANCE FUND
SOURCE OF FUNDS AND PROPOSED EXPENDITURES
Metropolitan Denver Sewage Disposal District No. 1
Operations and Maintenance Fund
Balance, January 1
Annual Charges
Interest Income
Other Income
Transfer from General Reserve Fund
Gross Revenue
1971
Actual
1972
Current
Estimate
1973
Budget
Estimate
19714
Program
Estimate
1975
Program
Estimate
1976
Program
Estimate
1977
Program
Estimate
$1,266 ,039 $1,617,150 $1,814, 573 $2 ,012 ,355 $2 ,012 , 355 $2 ,012 ,355 $2,012,355
4,978 ,765
192,716
2,277
25 ,000
5,198,758
5,283,276
165,000
500
0
5,448,776
5,774,452
167 ,700
0
0
5 ,783 ,134
188 ,400
0
0
6 ,0 57 ,498
186 ,600
5,000
0
6 ,039 ,640
187,200
5,000
0
6 ,444 , 066
191,800
5,000
0
5,942,152 5,971,534 6,249,098 6,231,840 6,640,866
CD
cn
Less Transfer to Other Funds
Debt Service Fund
Acquisition and Construction Fund
(Platte River II Project)
General Reserve Fund
Total Transfer Amount
Total Funds Available for Operatio/is
and Maintenance
Less Expenditures
Wastewater Transmission
Wastewater Treatment
Sludge Processing
General and Administrative
Capital Outlay
Total Expenditures
Less Provision for 0 £ M Contingencies
Adjustment to Prior Year Annual Charges
Change in Reserve for Authorized Expend.
Operations and Maintenance Fund
Balance, December 31
0 6 M Reserve
0 6 M Working Capital
1,343,970 1,381,020 1,416,720 1,461,070 2,248,770 2,288,670 2,524,158
238 ,077
238 ,077
1,620 ,124
170 ,757
170 ,756
1,722 ,533
173 , 502
173 , 501
1,763 ,723
72,112 100,010
686,655 789,830
1,499 ,728 1,677 ,020
759,701 915,740
16,220
3,018,196 3,498,820
(6,100)
(3 ,227)
$1,617,150 $1,844 ,573
6l0,&95 838,318
1,006 ,255 1,006 ,255
89,940
846 ,800
1,952 ,700
983 ,680
44,560
3,917,680
92 ,967
$2,012,355
1,000 ,000
1,012 ,355
177,112
177,112
1,815,294
4 ,644 ,673 5 ,343 ,393 6,023 ,002 6 ,168 ,595
100,400
889,860
2 ,100 ,740
1,041,740
23 , 500
258,089
258,089
2 ,764,948
5 ,496 , 505
114,080
1,364,810
697,430
1,284,280
23 ,550
2 B 2 ,630
122,530
1 ,438 ,720
712,480
1,356,170
30,640
276,108
2,571,300 2,800,266
5,672,89 5 5,852,955
129,760
1,511,980
747,410
1,434,430
17 ,020
4,156,240 3,484,150 3,660,540 3,840,600
$2 ,012 ,355
1,000 ,000
1,012 ,355
$2 ,012,355
1 ,000 ,000
1,012 ,355
$2 ,012,355
1,000,000
1,012,355
$2 ,012 ,355
1 ,000 ,000
1,012,355
SOURCE: MDSDD #1 1973 Budget.
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Table 31
ACQUISITION AND CONSTRUCTION FUND
SOURCE OF FUNDS AND PROPOSED EXPENDITURES
Metropolitan Denver Sewage Disposal District No. 1
1972 1973 1974 1975 1976 1977
19 71 Current Budget Program Program Program Program
Actual Estimate Est imate Est imate Est imate Estimate Estimate
Source of Funds
Acquisition and Construction Fund
Balance, January 1 $1 , 552 ,781 $1,222 ,433 $1,060 ,070 $8 ,078 , 572 $2,439,191+ $2,429 ,09 3 $4, 734 ,743
Transfer from 0 S M Fund 238,077 170,757 173,502 177,112 258,089
Transfer from General Reserve Fund 200,000 200,000 200,000 200,000
Federal Grants in Aid of Construction 242,131 663,600 7,445,500 17,447,500 4,826,500 7,102,200 4,955,300
State Grants in Aid of Construction 129,400 1,063,600 1,500,000 1,500,000 1,196,600 707,900
Proceeds of 1973 Bonds 10,635,000
Proceeds of 1977 Bonds 3,000,000
Interest Income 121,131 50,000 360,000 180,000 120,000 120,000 120,000
Miscellaneous Income 6,921
Release of Res. of Author. Expend. 469 ,374
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Section V
ALTERNATIVE FINANCIAL ARRANGEMENTS
The Colorado Statutes provide for and authorize a wide
range of financial measures for the support of sewerage
system construction, operation and maintenance.
Tap Charge
The tap charge is the most common form of charge or levy.
It is a one-time cash charge, levied as a pre-requisite
to initial sewer service. Beyond that, there is con-
siderable variation in practice within the Denver SMSA
as to the particular type, amount and purpose of the charge.
In some instances the charge is termed an "inclusion"fee,
which is in effect an initial assessment of allocated in-
vestment costs for inclusion in the group of users of the
sewerage system. In other instances it is a "connection"
charge, designed only to cover the actual cost of the
physical connection between the sewer main and the property
of the user. In still other instances the tap charge is
designed to cover the alloted cost of the service main,
based either on property frontage or some otherwise-devised
proportionate share. Finally, the tap charge is sometimes
utilized as a "plant investment" fee, designed to cover the
cost of a present or future unit of capacity of one or more
components of the sewerage system. In actual practice, the
tap charge may occur as general revenues to the system, may
have been pledged revenues under bond covenants, may have
been established to cover any one or more of the cost
factors described, may not have been revised as cost factors
changed, and may reach a substantial dollar amount. The use
of tap charges is authorized for any wastewater agency
operating a collection system, and generally constitute a
lien upon the property until paid. This latter provision
is somewhat unique to Colorado.
Special Assessment
The special assessment, for specific system improvements,
is designed to recover all or a part of the costs of system
extensions or improvements which are of special benefit
to a particular group of users. The Statutes provide
legal procedures by which notice is published and public
hearing conducted on the nature, scope and financial implica
tions of the improvement, both prior to the ordering of
the improvement and prior to the levy of the assessment.
Assessments may be levied on an actual cost, property front-
98
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age or area, property valuation enhancement, or other selected
bases of benefit, and until paid constitute a perpetual
lien on the property of the beneficiary. Assessments may
be levied only upon property within the jurisdictional
boundaries of the agency. While the assessment procedure
may create, in specific instances, the same effect as the
tap charge, it has two important distinctions. The first
is that the cost of the improvements are spread and levied
upon all benefitting properties, inhabited or uninhabited,
simultaneously, and with provision for time payments. The
second is that the wastewater agency may create special
improvement districts in which special assessments might
be levied for improvements other than service mains which
are of special benefit to the properties. In both instances,
however, the wastewater agency initially finances the im-
provements. Assessment collections may be lawfully applied
only to the costs of the improvements and are not general
revenues.
Service Charge
The service charge is designed to finance the annual opera-
ting costs of the system, such as administration, mainten-
ance and repair, collection, treatment and disposal opera-
tions and, usually, debt service. Some agencies provide
further that the service charge cover the cost of annually-
recurring capital improvements, which may include system
extensions. The service charge, basically, is a cost-of-
service charge, designed to produce continuing general
revenue to meet continuing system operating costs.
The service charge, sometimes called "sewer rent," is almost
invariably based upon some measure of use or demand upon
the system. We therefore find charges based upon the number
of connections or fixtures, units of area or number of
occupants, or a portion of the water charges if the water
use is metered. The Statutes further provide that the
derivation of charges "may give weight to the characteristics
of sewerage," and a number of agencies accordingly provide
a charge for non-domestic wastes based upon those measured
characteristics. In some jurisdictions, the charges for
BOD, SS, etc., which are levied in addition to volume
charges, are called "surcharges."
Tax Levy
The Colorado Statutes permit sanitation districts to levy
ad valorem taxes for wastewater purposes, for a period not
to exceed five years, provided that the aggregate taxes
may not exceed 3/4 mill during that period, for the initial
support of the sewerage system. This enabling authority
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recognizes that , in early years, revenues from tap and
service charges usually are not sufficient to meet debt
and operating requirements, and thus require additional
support to be economically self-sufficient.
Cities, towns and counties may also finance wastewater
systems through property taxation, but without limitation
on the rate of levy or the period of time. City and County
of Denver, as a regular practice, meets debt service on
general obligation bonds for wastewater system improvements
from general (i.e., tax) funds, but there is no regular
use of tax funds by cities and towns for the general
support of-their wastewater systems despite the legislative
authorization.
These four basic types of revenue sources constitute the
principal current revenue sources available to wastewater
systems. There appear to be few reasonable alternatives
available as to sources of current revenue, other than
federal general or special revenue-sharing or proprietary
income (investment of temporarily idle funds, sale of
materials, etc.). The alternatives arise basically in the
design and application of the revenue measures.
Non-current Revenue; Debt
The Colorado Statutes provide that wastewater agencies may
receive grants and contributions and, under certain condi-
tions , may dispose of real estate or other surplus property
and apply the proceeds to support of the system.
The Statutes also provide for incurring indebtedness in
the form of general obligation bonds, revenue bonds, bond
anticipation notes or tax anticipation notes. General
obligation bonds, while usually retired from system revenues,
constitute a pledge of the faith and credit of, and an in-
debtedness against, the unit of government, and therefore
require a majority vote of the electorate.
Revenue bonds are not a debt of the unit of government,
but only of the wastewater system, and may,under limited
conditions, be issued without referendum. Colorado state
law is somewhat more stringent in this regard than that of
most states. Only revenues of the system can be pledged
to their retirement, (although surplus revenues of other
municipal utilities may also be pledged). Consequently,
interest rates are normally higher than those for general
obligation bonds, and some finding of economic feasibility,
plus a range of restrictive covenants on disposition of
revenues, are usually required by the bond purchasers.
TOO
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The Statutes provide for maximum net interest rates which
are allowable, and also prescribe maximum and, in some in-
stances, minimum maturities of the bonds. The Statutes
and various court decisions generally prohibit short-term
or "casual" borrowing.
Other than basic statutory provisions, very little control
and supervision is exercised by the State in debt incurrence
and administration. This has caused reliance by the units
and agencies upon the advice of private consultants and
brokerage houses. An opportunity would appear to exist
for the State to perform a genuine assistance to the local-
ities in preparing issues for sale, and in the conduct of
the actual administration of the sale.
Following is a review of the basic statutes with respect
to revenue measures available under the various institution-
al forms.
Cities
Cities are authorized to issue either general obligation or
revenue bonds for the construction of sewerage facilities.
However, the Statutes provide that no debt may be incurred
without a vote of the people, except in the instance of
bonds for water purposes. This "debt," however, refers to
general obligation bonds where the full faith and credit
of the city is pledged, and not to revenue bonds. Cities
are also empowered to levy special assessments, such assess-
ments to constitute a lien against the property, to cover
either in whole or in part the cost of construction (other
than intersections or general benefits). In the issuance
of revenue bonds, cities may collect tolls, fees and charges
and pledge the revenues to debt retirement. There is a
maximum interest rate of 6 percent permitted and a maximum
limit of 40 years on the life of the bonds. Restrictive
covenants may provide for rates and charges, disposition
of revenues, sinking or reserve funds, or for the pledge
of surplus revenues of other municipal utilities.
The Statutes provide that all tap or service charges con-
stitute a lien upon the property, (Colorado law on this
point being more liberal than that of most states), but that
service may not be disconnected for non-payment, except in
the case of an outside-city user. Rates for outside
service may be fixed at a differential from inside rates,
with the governing body being the appeal board on rate
structure.
101
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The net indebtedness of the city government (excluding
water debt) may not exceed 3 percent of assessed valuation,
unless special charter provisions increase this limit.
"Net indebtedness" does not include revenue bonds outstand-
ing.
Counties
Counties may also fix and collect rates, fees and charges,
issue revenue bonds and bond anticipation notes and pledge
revenues to their retirement. Revenue bonds do not con-
stitute an indebtedness of the county, may be issued at
interest rates not to exceed 6 percent and at maturities
of not greater than 4-0 years. Fees and charges also con-
stitute a lien upon the property, and collected "as though
they were a part of taxes," but service may not be dis-
connected for non-payment unless the user's property is
outside the county. No authority was found in the general
statutes for counties levying special assessments or
issuing general obligation bonds for sewerage system im-
provements, but presumably either could be authorized by
vote of the electorate, or as a provision in a county home
rule charter.
Special Improvement Districts within Cities
The Colorado Revised Statutes provide that the cost of
district sewers may be assessed "upon all the real estate
in the district, in proportion as the area of each piece
of real estate is to the area of all real estate in the
district, exclusive of public highways."
Metropolitan Districts
Metropolitan Districts, which are multi-purpose districts,
may levy fees, rates and charges for sewer service and,
during the first five years, may certify to the County
Commissioners the necessary tax levy, provided the aggregate
levy does not exceed 3/4 mills for the period. This tax
has been found by the courts to be a general tax rather
than a special benefit tax. No statutory authority was
found for levying of special assessments or for the issuance
of general obligation bonds; revenue bonds are authorized
under the same limitations of the statutes as apply to
sanitation districts where the wastewater function is one
of the multiple purposes for which the Metropolitan District
is formed.
Water and Sanitation Districts
Water and sanitation districts are empowered to borrow
money, incur indebtedness, levy taxes to create a debt
102
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reserve fund, and issue bonds at an interest rate not to
exceed 6 percent and for maturities of not more than 20
years. Any indebtedness of greater than $5,000, or one
percent of the assessed valuation, must be submitted to
the electorate. Where bonds are issued for extensions
of facilities into territories annexed to the district,
the question shall be submitted only to the taxpayers of
that territory, and taxes for repayment shall be levied
only against that annexed property.
The district is also empowered to fix rates, tolls and
charges and to pledge revenue therefrom to the payment of
indebtedness. Until paid, such charges constitute a
perpetual lien against the property. One unique provision,
differing from those for other units, is that the district
"shall shut off or discontinue service for delinquencies
in payment." The Board of Directors is empowered and
authorized to levy and collect ad valorem taxes against al.
taxable property within the district in an amount sufficient
to meet the operating and debt requirements of the district.
The actual collection is performed by the county and re-
mitted to the district. Where the special district tax is
levied against all property in a county, the board of
county commissioners is authorized to make an appropriation
in that amount from the general fund in lieu of levying
the special tax.
Metropolitan Sewage Disposal Districts
Chapter 98, Article 15, is a very comprehensive section
with respect to financial and other powers, the Act stipula-
ting that such districts shall be a governmental subdivision
of the state with such powers expressly granted and implied,
necessary and proper. Many of the powers are not unique
to this type of district, but certain differences do exist.
Disposal districts are empowered to borrow money, issue
securities as direct and general, or special, obligations,
refund bonded debt without an election, levy taxes for not
more than five years in an aggregate levy not to exceed
3/4 mill, fix rates and charges to municipalities or other
member agencies, pledge revenues and enforce collection
by mandamus or other civil action. Municipalities are em-
powered to levy general ad valorem taxes, without limita-
tion, to pay such rates and charges. Additional authority
granted includes the investment of temporarily idle funds,
accepting of loans and grants, providing working capital
for improvements, and creating reserves for future improve-
ments or obligations. The Act provides that revenues
shall be adequate for operations and maintenance (including
reserves and cost of improvements), debt service and any
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reserves or sinking funds therefor. One unique provision
is that service charges may be collected in advance from
any owner or occupant of real property which has been or
will be connected or who originates waste which may or has
entered the system. The Act further stipulates that charges
shall be reasonable with respect to class, type and amount
of use, and may give weight to such characteristics of
sewage as chlorine demand, BOD, suspended solids and chemical
composition.
The Act provides that no bonded indebtedness may be created
without first submitting the proposition to the tax-paying
electors, and provides that the district may pledge "full
faith and credit" or specific revenues to debt retirement.
In event of default, one of the remedies is to establish a
receivership. A 40 year maximum maturity and 6 percent
maximum interest for indebtedness is provided.
Regional Service Authority
Chapter 98, Article 25 (The Colorado Service Authority Act
of 1972) enables an Authority to levy taxes and/or service
charges, provided that tax limitations are established by
the voters at the time the Authority is created. In
addition, special taxing districts are authorized to be
created when the services to be provided therein may vary
from those provided elsewhere in the jurisdiction. Local
improvement districts may also be created, and the costs of
improvements assessed against those special beneficiaries
in accordance with the measure of benefit. Regional service
authorities may issue general obligation or revenue bonds,
but the incurrence of indebtedness (general obligation
bonds) must be submitted to the voters. A 3 0 year maximum
maturity for either general obligation or revenue bonds is
provided.
Budgeting and Auditing
Chapter 88 of the Colorado Revised Statutes provides certain
additional controls over financial administration by local
governmental units. Article 1, the Budget Law, and Article
6, the Audit Law, prescribe the preparation, general form
and reporting procedures for an annual budget and audit
by the various units. Adherence to a uniform system of
accounting or classification of accounts, nor to a stipulated
form of audit report, is not expressly prescribed. Consequent-
ly, a wide variation in budgeting, accounting and auditing
practices was noted in the review made of various budgets,
financial statements and audit report. With some notable
exceptions, the status of local budgeting and accounting
leaves a great deal to be desired. Many agencies have no
104
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procedure for allocating current costs or budgeted expend-
itures to functions or components of the wastewater system,
and have no capital improvement program or budget for long
range needs. Consequently, a great deal of cost and
revenue data is simply not available.
The foregoing has been a general review of the financial
powers of various institutional forms for undertaking
wastewater management. It can be seen that constraints
are provided by the Statutes, but primarily in the incurrence
of debt and the levying of taxes for system support. With
some exceptions, the inadequacies which may be noted are
primarily in policy and administration rather than in
statutory authority. Further, it is the scope of juris-
diction, both geographic and functional, rather than in-
stitutional form which creates major limitations in financial
administration.
105
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EVALUATION OF REVENUE MEASURES
By its very nature, the provision of wastewater collection
and treatment services falls into a somewhat "gray" area,
as viewed by courts and legislatures, between necessary
governmental function (i.e., protection of public health
and welfare) and proprietary function (operating a revenue-
producing enterprise). While any distinction between the
two types of functions has become muddled, the statutes
and court decisions in many states still tend to treat
wastewater management as a proprietary function. The
distinction is important to the considerations of this
study primarily because it supports the "benefit" theory
of deriving revenue, and the application of "utility"
principles in so doing. Yet several of the Colorado Statutes
provide for the levy of ad valorem taxes throughout the
jurisdiction, (thereby inducing some "ability to pay"
measures), because a "general" benefit was found to result
from the establishment of wastewater systems. The finding
by the Colorado Supreme Court, (Gordon v. Wheatridge Water
District, 1941, 107 C. 128, 109 P. 2d 899), that a tax
levied on real property only was unconstitutional, gives
added weight to the "ability to pay" theory, to the extent
that property valuation represents that "ability" and thus
is an equitable measure.
The foregoing is undoubtedly of more academic than practical
consequence and concern, but is utilized to suggest that
there has not been a uniform commitment to any particular
theorem or philosophy. Many of the philosophical conflicts
might be resolved by developing relatively simple criteria
to guide governing bodies and administrative staffs in the
selection, design and application of revenue policies
measures. Following are some possible criteria which might
be employed:
1. Are the revenue measures sufficiently productive
to meet system needs and operating commitments
on a certain and timely basis?
2. Is the burden distributed fairly and equitably
among the various classes of users, and in
accordance with the respective costs and benefits?
3. To what extent shall the system be financially
self-sufficient? By what definition?
4. Are the revenue measures simple and economical
in administration and enforcement?
106
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5. Is the time period over which the cost of improve-
ments is spread reasonable and equitable insofar
as the burden upon users is concerned?
Financial Considerations
A number of financial alternatives are available to finance
acquisition or extension of systems and facilities, applied
either singly or in combination. These may be further
categorized into measures for financing initial invest-
ments, and measures for recovering all or a part of that
investment from beneficiaries of the service. In neither
category is it intended to present an exhaustive list of
alternative measures but rather to discuss principal
features of a range of measures.
Financing of Initial Investment
The following indicate a range of alternatives of financing
considerations:
General Obligation bonds - General obligation bonds are
a widely-used instrument for financing major capital expend-
itures and, with a favorable vote of the electorate, may be
employed to finance wastewater facilities by various
agencies, as noted previously. The general obligation
bond is one in which the full faith and credit (taxing
power) of the governmental unit is pledged to the retire-
ment of debt. This pledge produces the lowest possible
interest rate consistent with the state of the bond market
and the credit standing of the issuing governmental unit.
It is not necessary that the issue be retired by use of
the taxing power; in most instances water and wastewater
debt is retired from revenues from user rates and charges.
A continuing plan of financing under general obligation bonds
is not without potential pitfalls. Primarily, this relates
to questions of political feasibility, since an approving
vote of the electorate is required. Whether residents in
community "A" or along road "B" will vote favorably to
issue bonds for a service they are already receiving, or
which they might not receive under that particular program,
is problematic.
Secondly5 there is a danger in using the bonding power
unwisely» either to finance frequently recurring capital
expenditures and thus pyramid debt, or in creating a
"feast famine" climate in which the program can be im-
plemented during the rich years yet must be curtailed
during "the lean. There is, after all, a practical limit to
the frequency at which bond proposals can be submitted to
"the electorate for approval.
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Revenue Bonds - Revenue bonds are backed only by the pledge
of revenues from the particular system or facilities
financed by those bonds. Revenue bonds thus command a
higher interest rate than general obligation bonds even
though the normal sources of funds for debt retirement may
be the same. Revenue bonds are, generally, more politic-
ally palatable in that only those revenues derived from the
users or beneficiaries are pledged toward debt repayment.
Although water debt, for example, does not apply against
state constitutional debt limitations, revenue bonds may
be a practical answer when total debt approaches those
debt limitations.
Although revenue bonds may not require the approval of the
electorate, it is necessary to produce a study of economic
feasibility, and a finding that the ratio between anticipa-
ted annual net revenues and annual debt service affords
adequate debt "coverage" to satisfy requirements of the
bond buyers and bond attorneys. Under properly controlled
circumstances, it is difficult to see the reason a refer-
endum is requisite to revenue bond issues. Administrative
review by a State agency would appear to offer sufficient
control.
Tax Levies - Water and wastewater systems are customarily
financed on a "utility" rather than a "governmental service"
basis. Counties, cities and districts in Colorado are,
however, authorized to levy taxes within certain limitations
for the acquisition, extension and operation of water and
wastewater facilities. Provided levies are adequate ,
realistic, and continuing, this may be an appropriate and
effective means of financing these facilities. It does
raise basic questions of equity in that those taxpayers
may already benefit from, or may not be scheduled to benefit
from, the facilities, or that property tax evaluations are
not appropriate measures of benefit received. This question
of equity may thus raise possible questions of political
feasibility.
Surplus Funds or Earmarked Revenues - The use of surplus funds
or of earmarked non-tax revenues generally avoids problems
of political feasibility, if not equity, but the more basic
question is whether such funds can be amply provided on a
continuing basis to implement the desired program of facilit-
ies and services.
Utility Operating Capital - Most water and wastewater systems
are operated as self-supporting utilities, with the term
"self-supporting" defined as producing annual revenues
sufficient to meet operating costs, debt service requirements,
and annually-recurring system extensions and improvements.
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This practice has much to commend it. It does require
schedules of rates and charges at a sufficiently high
level to finance needed extensions and other capital
improvements in addition to operating expenses. In a
community that strives to keep rates low, perhaps to in-
duce industrial development, such a practice may not be
deemed politically desirable. Forthright policy de-
cisions are required to maintain balance between community
needs, goals, and financial burden.
These financial forms might be considered in the light
of various types or classes of system expenditures.
Fixed Plant - For purposes of this section, "fixed plant"
will refer to treatment plant facilities and appurtenances,
and major pumping facilities, interceptors and outfalls.
The construction, acquisition or expansion of such facilit-
ies is normally financed by bond issues because of their
high cost and relative permanence. State statutes pre-
scribe maximum periods for which bonds may be issued,
generally related to the expected life of the improvement.
Some students suggest that, in rapidly growing areas, the
maturities should be related to the period of adequacy of
the improvement rather than to its useful life, to avoid
pyramiding debt.
Replacements and Upgrading - Portions of the system must be
replaced from time to time because of physical depreciation,
obsolescence or inadequacy. This may constitute a major
one-time expenditure or perhaps may be anticipated and
spread over a period of several years. When the total out-
lay can be foreseen as substantial, the question may arise
as to whether the financing should be from bonds or from
system revenues. Questions of equity as between present
and future customers can be raised and, likely, can only
be resolved within the context of all present and anticipa-
ted future demands upon customers. The plan which appears
most fiscally sound, and which avoids interest costs and
(theoretically) a perpetual utility debt, is to make orderly
provision for replacement and upgrading out of current
system revenues.
Extensions and Expansion - A distinction should be made be-
tween financing expansion of (or additions to) fixed plant,
and expansion of the collection system through extensions.
Fixed plant provisions are considered to be of general or
system-wide benefit, and only in rare cases could a partic-
ular addition be directly related to specific users.
The collection system is of decidedly localized benefit.
Although, in the case of a particular municipality or
district, the basic collection system may have been initially
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financed by bond issue, the financing of extensions does
not necessarily follow the same approach. Bond issues
financed from pledges of tap charges, assessment collect-
ions, or other revenues, are frequently employed, but offer
several distinct disadvantages. For one, they are more
costly because of interest charges; for another, the tap
charges and assessment collections, by law, can only be
utilized to retire the debt. Finally, in a growing
community, the frequency with which bonds must then be
issued creates substantial administrative and legal expense
and may cause some distrust of the bonds in the market.
A sounder financial plan would appear to be that of pro-
viding for annually-recurring capital improvements from
current revenues, through the process of creating a re-
volving fund for construction of extensions. From the fund,
contracts are let for the extensions, and into the fund are
deposited the proceeds from tap charges and assessment
collections as the source of funds for future contracts.
Some municipalities report that, with occasional "sweetening
of the pot," a revolving fund can become self-perpetuating.
Operations and Maintenance - There should be no question
that operating, maintenance and administrative expenses
must be financed from a continuing source of current income.
However, at least one instance was detected in this study
in which operating expenses within a district were being
partially met from tap charges, a one-time revenue source.
In the case of a general government providing the sewerage
system, current operating expense may, and should, also in-
clude the appropriate costs for the utility's use of the
general government's purchasing, accounting, legal or other
services, including, for example, reimbursing the street
department for pavement cuts. The utility should also be
reimbursed for service furnished to the general government
and its departments. "Current expense" should also include
an appropriation or reservation of funds to meet possible
contingencies or emergencies.
Fixed Charges - Fixed charges largely refer to principal and
interest payments on debt. While sinking funds, or reserve
funds, may be created from deposits of tap charges, assess-
ment collections or other revenues, fixed charges are very
decidedly current expenses which must be provided for as
necessary or possible from current revenues.
Working Capital - Working capital may be defined as the
excess of current assets over current liabilities. There
is always a lag between the incurring of expense and the
collection of revenues. The system user, or customer, in
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effect is always "in arrears." Funds must be available to
meet necessary expenses in advance of the collection of
revenues.
The same general principle applies in the case of making
certain capital expenditures from current revenues, (for
example, main extensions) in advance of collection of tap
charges or assessments. Several of the wastewater agencies
in the SMSA maintain capital reserve funds into which
current revenues are appropriated as necessary.
Since the wastewater agency is, in effect, a monopoly, the
amount of revenue which will be derived can, within limits,
be planned in advance. Because frequent alterations in
current rates and charges are not desirable, it is necessary
to plan these revenues for at least several years in advance.
This calls for projecting probable expenditures so as to
estimate how much revenue will be required to meet current
operating expenses and provide sufficient additional money
to:
1. Meet working capital requirements
2. Meet debt service requirements
3. Finance fixed plant additions
4. Finance system extensions
5. Meet maintenance, replacement and upgrading costs
6. Meet emergency conditions.
Having made the estimates of revenue requirements, based on
probable schedule of expenditures, the next step is to
determine by what form and in what amount each class of
user should be called upon to pay.
Recovery of Investment - Equity and financial soundness
generally dictate that an investment, which directly benefits
specific users or properties, be produced by or recoverable
from those users or benefited property owners. Several
typical measures might be cited.
"Cash on the Barrelhead" - No plan possesses the adminis-
trative simplicity and effectiveness of one in which, say,
a land developer tenders cash in payment for the extension
of a water and/or sewer line to serve his property. In
practice, however, the apparent simplicity, fairness, and
effectiveness may be questionable.
Such a plan might be attacked on the grounds that it tends
to favor the rich while penalizing the poor who may have
greater actual needs.
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Further, such a plan cannot be considered to be comprehensive
in scope in that it operates only when individuals appear
with cash, and this hardly constitutes a "plan" for meeting
needs or implementing programs on a broad scale.
Finally, there may be beneficiaries other than the indi-
vidual producing the cash: property owners on the opposite
side of the street or road; property owners by whom the
extension is made along the route; property owners just
beyond the affected property. Fairness dictates some re-
covery to the initial developer as these owners may actually
utilize the service. The mechanics by which this recovery
is accomplished may prove to be a cumbersome administrative
procedure.
As an alternative to requiring cash, there may be contractual
arrangements under which the developer repays the cost over
a period of years. This procedure also becomes administra-
tively cumbersome as the number of contractual agreements
grows.
Recovery Through Rates and Charges - It is common practice
to levy a charge for connection to the system, and this
charge may be designed to cover not only the actual cost of
making the physical connection but a portion of the benefit
as well. Commonly, the "benefit" is gauged to be the cost
of the required water and/or sewer main to serve the full
frontage of the property. Additional charges may be levied,
perhaps on an acreage basis , when the property is of such
depth as to be suitable for extensive, multiple development.
The use of current revenues to produce funds for extensions
has been discussed earlier. While these rates may be
sufficient to finance the initial investment, it is not
practical to assume that rates could continue to be so in
a rapidly urbanizing area without there being some recovery
from the user or benefited property owner.
Connection charges which provide for recovery of full cost
may become quite" large, and governing bodies frequently
enact provisions that such charge is to be paid only when
connection is actually made. This produces the marked
effect of slowing or creating irregular patterns of land
development, and thereby delaying recovery of the investment.
Frequently, health regulations require that connection be
made to the public sewer system when the property is within
a prescribed minimum distance.
Parenthetically, fairly rapid recovery of system investment
is essential to the making available of further funds for
continuing extension programs.
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Special Assessments - Cities and towns are authorized to
levy special assessments against benefiting properties for
all or part of the cost of the improvement. This is
normally done on either a front-foot basis or an acreage
basis, although it is not uncommon to establish a benefit
district in which the total costs are apportioned among
the properties within that district either equally or on
the basis of property valuation or lot size.
Assessments constitute a lien upon the property, and may
be paid over, say, a period of five years or of ten years
at the option of the governing body. The governing body,
if it so elects, may order assessments held in abeyance
either for a period of time stipulated, or until the service
is actually connected. It may also grant appropriate
exemptions in the instance of properties having double
frontages or other special circumstances.
The use of special assessments insures that all costs
levied are ultimately recovered. Further, it affords
equity among the beneficiaries (past, present, and future),
encourages more orderly and uniform development of land,
and provides a mechanism for the relief of temporary hard-
ships .
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REVENUE PRINCIPLES
A 19 51 Joint Report of Committees of the American Society
of Civil Engineers and the Section of Municipal Law of
the American Bar Association, and representatives of various
other professional organizations, found this fundamental
principle:
"The needed total annual revenue of a water or
sewage works shall be contributed by users and
non-users Cor by users and properties) for whose
use, need and benefit the facilities of the
works are provided approximately in proportion
to the cost of providing the use and the benefits
of the works."
Several traditional principles of utility rate structures
might also be stated:
1. Each class of customer should contribute to
revenues in proportion to the relative cost
of rendering service to that class;
2. Rates should be designed to produce maximum
net revenues;
3. Rates should be designed to promote the use of
utility services;
4. Utilities are ordinarily enterprises with in-
creasing returns at decreasing unit costs.
The remainder of this section will focus primarily on
the first principle cited above, which is, in effect,
embraced by Section 204- of the 197 2 Amendments to the
Federal Water Pollution Control Act. However, those same
Amendments contest the current validity of No. 3, by calling
for alternatives such as pricing or incentives which would
reduce the volume of wastes and use of the service. Finally,
it should be noted that principle No. 4 holds true only
up to the point of maximum capacity, a point being con-
stantly reached or exceeded in most wastewater treatment
facilities.
Service Charges - It is suggested herein that service
charges, based upon usage, should be the predominant, if
not sole, source of system revenues to meet current admin-
istrative, operating, maintenance and working capital re-
quirements for the collection, treatment and disposal
components of the wastewater system. In the design of the
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service charge, it should be made sufficient to meet
programmed, annually-recurring capital expenditures such
as replacement and up-grading, main extensions, and equip-
ment, as well as appropriate reserves for future improve-
ments. The service charge should also supply necessary
funds and reserves for principal and interest payments on
system-wide improvements.
The levy of a sewer service charge based upon metered water
use is by far the most equitable for most utility users,
and should be utilized wherever possible. Cost factors
for water and wastewater services are not necessarily
similar, so that a charge based upon water usage (rather
than a percent of the water bill) should be more equitable,
at least in theory, even if more difficult from an admin-
istrative standpoint.
It should be noted that several of the sampled agencies
base sewer service charges on the volume of metered water
use during the winter months. This has been done to recognize,
or to overcome the objections of, users who use large quant-
ities of water in summer months, perhaps in watering lawns,
which is not placed into the sewer system. To the extent
that metered winter use is representative of year-round
demand upon the sewerage system, and equity and accuracy
thus achieved, (and if water conservation is no problem),
no quarrel could be raised in the application of this formula
to domestic users.
Where flat rate charges must prevail, a charge based upon
occupancy and type of use would appear to be more equitable
and realistic than one based upon floor area or number of
fixtures. The charges must be simple to administer, so that
limited variables can be employed. Every effort should be
made to insure that flat charges become replaced by metered
charges for all users, with non-domestic users being re-
quired to be metered as to flow and loadings.
In the derivation of service charges, many inequities can
be reduced. For example, certain system costs, (such as
billing, accounting, etc.) are the same for each customer
regardless of use, and can be spread as "customer charges"
among all the users. Other costs, such as the demand a
user might place upon the system, can be represented by
minimum charges based upon size of connection. Finally,
certain costs are occasioned by the volume and composition
of wastes actually placed in the system.
In allocating costs among "classes" of users, it is suggested
that the traditional classes of "domestic," "commercial"
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and "industrial" may no longer provide realistic or suit-
able distinction. Once the basic "customer" charges have
been spread among all users equally, additional charge
components should be based upon "demand" (size of connec-
tion), and the volume and composition of waste. A
"commercial" user, or a warehouse ("industrial"), does not
inherently place greater burden upon the wastewater system
than a "domestic" user, other than the potential demand
which the size of connection might reflect. Here again,
the Standard Industrial Classification Manual may offer
guidance. Rigid, local control of connection sizes can
also assist in insuring appropriate allocation of burden.
Tap Charge - It is reasonable and proper that the user pay
the cost of connection from the service main to his property.
Because the actual cost of each connection will differ
(because of distance, depth, soil or rock conditions, etc.),
most agencies develop a flat rate connection charge, based
upon size of connection, which represents the average cost
of materials, labor and equipment in making such connections,
and provides for reimbursement to the agency in this amount.
For cost control and for financial administration, it is
suggested that this "connection charge" be separate and
apart from any other "tap" charges. A "permit fee," for
inspecting the house connection, might also be separated,
so as to represent the cost of making that inspection.
With these charges separated, we may now examine the design
and application of the "tap charge" as it relates to pro-
vision of sewer service.
As noted earlier, the tap charge is a one-time charge,
usually required cash-in-full, which represents the cost of
the addition of a particular property to the wastewater
system users. It has one known and obvious component:
one-half the cost of constructing the sewer main for the
frontage of that property (assuming the opposite frontage
will also be charged). The size and cost of the main
actually constructed may be greater than that actually
necessary to serve that particular group of users.
Most agencies base charges passed on to the user on the size
of a standard main (say 8" for residential service) and ab-
sorb the added cost of "oversize" mains required to serve
system-wide needs.
In the instance of a new user connected to a system financed
by revenue bonds, the terms of a revenue bond resolution
may also require that the tap charge include a one-time
payment for the proportionate share of fixed plant, system-
wide facilities which were concurrently or previously con-
structed. and on which bonds are outstanding. (The context
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in which this is prepared assumes that debt retirement for
fixed plant is desirably financed from service charges
rather than tap charges.)
There are other costs which directly or indirectly the user
will occasion, e.g., pumping, maintenance, treatment, and
administration. He may contribute to the necessary sub-
sequent enlargement or expansion of fixed plant facilities.
The first of these are operating costs, the proportionate
share of which will be paid in service charges.
The proportionate share, or the basis for deriving that
share, of future capital costs is extremely difficult to
establish. Practical or even ingenious financial prac-
tices may require that a cash contribution be exacted from
each new property served as a hedge against future capital
outlay requirements, but it would seem more reasonable to
establish service charges at a sufficiently high rate to
derive the needed funds from each user, but in accordance
with usage or continuing burden placed upon the system.
It is suggested herein that in a model revenue system the
"tap" charge might be replaced by a "frontage" or "acreage"
charge directly related to the apportioned user cost of
collection facilities only. Thus the frontage charge and
the special assessment for main extensions would be
identical in derivation and effect, differing only in their
administration.
Special Assessments - It has been noted previously that
special assessments may be applied to main extensions only,
or may be applied to district-wide improvements which may
include interceptors, pumping stations or other special
features.
Only one point need be made about the use of special assess-
ments . While Colorado law provides that rates and charges,
as well as assessments, constitute a perpetual lien against
the property until paid, special assessments appear to
offer two distinct features as a device for recovering in-
vestment:
1. The assessment can be levied so as to immediately
attach to all property benefited, without regard
to when connection may actually be made. This
permits the agency to recover its investment
more quickly, and will likely cause more orderly
and consistent development of the benefited
property parcels.
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2. The assessment can be levied to be payable over
a period of time, with interest. This affords
the less-affluent property owner the option to
arrange payment schedules to fit his means.
Whether the agency shall seek to recover all or only a
portion of the costs of main extensions is a policy question
for its governing body. Many agencies, in other parts of
the nation, levy assessments at full cost but not to exceed
a stipulated rate per front foot (usually less than actual
cost expected). The result is that the rate actually levied
becomes uniform throughout the jurisdiction, which is much
more understandable and acceptable to the beneficiaries.
New Subdivisions - To reduce the financial outlays required
of an agency, many are requiring the developers to install
water and wastewater facilities throughout the development,
to the specifications of the agency, and to dedicate these
to the agency as a condition to receiving service. Developers
frequently also find this a convenience, when the financial
limitations or other commitments of the wastewater agency
do not permit meeting the developer's desired schedule.
Usually this is accomplished under some form of contrac-
tual agreement, which may include some provision for the
developer to recover portions of his costs. Care should be
taken to insure that the financial commitment of the agency
to that development is equal to, or no greater than, its
comparable commitment if the agency constructed the improve-
ments and collected charges from the beneficiaries.
Tax Levies - It is quite apparent that there are community-
wide benefits resulting from the provision and operation
of a sewerage system. Certainly these benefits are experien-
ced in the maintenance or enhancement of property values
and usefulness. The alert County Assessor will be adding
an increment of value to a previously unsewered property
instantly upon taking notice that sewers have been installed.
Assuming that the property owner has paid for this added
increment of value once, through frontage charges, there is
no clear reason why the wastewater agency should benefit
from the added tax valuation. If the agency needs additional
fundsj it should increase its service charges, both as an
alternate to increasing tax levies and as a fairer and more
direct means of apportioning those revenues.
There are obviously occasions in the life of a struggling
new wastewater system when revenues derived from its
operations will not be sufficient to meet its requirements.
These circumstances are recognized in the statutes, and tax
support is authorized.
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There would appear to be no case which could be iriade for
direct tax support, even for system-wide improvements or
benefits, other than for emergencies, unless it could be
demonstrated that tax value was truly a measure of the
burden upon, or benefits from, the wastewater system.
It is strongly suggested, however, that the guarantee of
tax support (or full faith and credit) should be uniformly
accorded wastewater debt obligations, including revenue
bonds, purely to secure the more favorable interest rates.
Other Taxes and Revenue Support - Struggling wastewater
agencies (and other governmental units) frequently look
longingly toward other special levies, such as alcohol
or tobacco taxes, sales taxes, etc., as a means of addition-
al financial support. If the relative needs and priorities
for the total community permit assigning these revenues to
the wastewater system, no fault could be found. However,
the assignment of such revenues should be regarded as
temporary "windfalls," and devoted exclusively to capital
improvements.
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Section VI
ALTERNATIVE INSTITUTIONAL FORMS
There exists in Colorado law a substantial body of enabling
authority for the organization of areas for the provision
of water and/or wastewater services. Areas and units of
government have a wide range of options for selection of
institutional form. These begin with the municipality and
its authority to exercise its corporate powers in the pro-
vision of necessary services, the construction, operation,
and maintenance of sewerage system, the extension of
facilities to provide services outside the municipal bounda-
ries, and to insist upon annexation as a condition of
service.
County governments may also exercise statutory powers in the
construction and operation of sewerage systems both within
and beyond their boundaries. Sanitation districts may be
formed to establish sewerage systems, to include or exclude
portions of municipalities, and as an alternate institu-
tional form which may be utilized by cities or counties to
establish such systems.
Other forms of district organization for wastewater manage-
ment , authorized in the statutes, include Metropolitan
Districts, Metropolitan Sewage Disposal Districts and, most
recently, the urban or regional Service Authority.
There is also ample authority for exercise of joint powers
on a contractual basis, whereby two or more units or
agencies (including districts) of government may join to-
gether for the common provision and administration of
necessary or proprietary governmental functions, including
waste collection and disposal.
Following is a brief review of the powers of various units
and agencies of government to perform wastewater management
functions.
City Governments
While Colorado is known as a "strong home rule state," its
cities remain "creatures of the legislature." An 1891
Colorado State Supreme Court decision (City of Durango vs.
Reinsburg, 16 C-327, 26 P. 820) which still stands, found
that a "municipal corporation can exercise only such powers
as are granted to it by its charter or the general laws of
the state."
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Chapter 139 of the Colorado Revised Statutes prescribes the
basic powers of cities. With respect to wastewater manage-
ment, various Articles of that Chapter provide that cities
may construct, lease, maintain, improve and extend sewer-
age facilities, both within and without the municipality,
regulate the use thereof, including requiring connections
to the system, require annexation as a condition to extension
of service, and enter into joint construction and financing
arrangements with other local or state public bodies. A
1920 Court decision (Hack vs. Town of Craig, 68 C-337,
191 P. 101), however, would appear to limit the authority
of cities to exercise eminent domain outside their bound-
aries to acquire land or rights-of-way for sewerage facili-
ties. The power to extend services outside corporate limits
is deemed to be discretionary rather than a duty.
County Governments
County governments are also empowered to provide sewerage
systems and facilities. Chapter 36, Article 29, of the
Statutes authorizes counties, without referendum, to acquire,
construct, operate, improve and extend sewerage facilities,
both within and partially without the county boundaries.
Counties may also enter into joint operating, construction
and financing agreements with other governmental units,
may require connections by inhabited properties within 400
feet of a sewer main, and exercise other broad powers in
the operation and regulation of such sewerage systems. Added
to county powers by the Special District Control Act
(Chapter 89, Article 18) is the review, approval, conditioned
approval or disapproval of the service plan of proposed
special districts. Counties in 1970, by Constitutional
Amendment, were also granted authority to adopt home rule
charters.
Improvement and Service Districts
Four basic types of local improvement and service districts
for wastewater management are authorized under Chapter 89
of the Colorado Revised Statutes.
Special Improvement Districts in Cities and Towns -
(Articles 2 and 4) Cities of any class may construct sewer-
age facilities to serve a specified district within their
boundaries, order the construction of sewers to connect
with the public sewer or with the disposal plant, require
connections to the public sewers, and join with contiguous
cities or towns in the construction and joint use of common
sewers. The governing body of the municipality is the
creating authority of the special improvement district.
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Metropolitan Districts - (Article 3) Metropolitan
Districts may be created "to secure for the inhabitants
thereof any two or more" stipulated public services, among
them the furnishing of water and sewerage systems. The
district may be entirely or partially within or without
one or more municipalities. The statutes provide procedures
for the organization of districts upon satisfactory petition
and referendum, and delineate their powers with respect
to any existing district. The governing body is elected
by the qualified resident electors. Metropolitan Districts
have all the powers granted water, sanitation, hospital
or other special districts when performing that specific
function.
Water and Sanitation Districts - (Article 5) Water and
sanitation districts may also be created upon satisfactory
petition and referendum to provide water and/or sewerage
systems. Under the Statutes, the District Court performs
a monitoring function over districts and may, for example,
order territory excluded from the district upon annexation
by a municipality, if the municipality provides or agrees
to provide comparable service. Districts may, but are not
obligated to, serve property outside the district, and
properties comprising the district need not be contiguous.
The Courts have ruled that lack of a special benefit is
not a basis for excluding property from a district, since
districts are presumed to be created for the benefit of
the entire community. The governing body is elected by
and from the qualified electors residing in the district.
Metropolitan Sewage Disposal Districts - Article 15) The
enabling legislation contains a statement of "intent and
purpose that municipalities retain full power and authority"
to provide sewer service to their inhabitants, and to
authorize a district to intercept, receive, treat and dis-
pose of the "outfalls" of the municipal sewer system from
both within and without its corporate limits or as such
may be expanded. A district may be composed of territory
included within the corporate boundaries of two or more
municipalities, which need not be contiguous. The district
is designated as the exclusive agent for the purposes and
area for which it is created, and no treatment or disposal
facilities may be acquired or improved without its approval.
Action to create a district may be initiated by ordinance
by the governing body of any municipality, setting forth
various particulars including the names of other municipal-
ities proposed for inclusion. Only such municipalities as
favorably respond by affirming ordinance may be joined in
the district. The district possesses quasi-municipal
powers, rights and immunities, including power of eminent
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domain. Its governing body (Board of Directors) is com-
posed of representatives named by its member agencies,
apportioned on the basis of population.
Special District Control Act
Chapter 89, Article 18 of the Colorado Revised Statutes
provides that the petitioners for any proposed special
district shall file a service plan with the county commission-
ers of the county in which the district is proposed. This
plan shall contain a financial survey and preliminary
engineering data showing how the services are to be provided,
together with a map of the proposed district, population
and assessed valuation contained therein, proposed facili-
ties ,construction standards, cost estimates, and details
of arrangements and agreements with cities, towns or other
districts
The board of county commissioners, after public hearing,
may approve, disapprove or conditionally approve the service
plan. Specified criteria for disapproval include a finding
that there is insufficient existing or projected need, that
adequate service is or will be available through extensions
by other agencies, that the proposed district is incapable
of providing economic or sufficient service or lacks
financial capacity, or that the proposed facilities and
service standards are incompatible or inadequate. A resolu-
tion by the board of county commissioners approving the
service plan is a requisite to the district court calling
an election on the question of formation of the proposed
district. This legislation, not enacted until 1965, is an
important means of control of the spread of special purpose
districts.
Joint Powers
Chapter 88, Article 2, provides that any one or more local
governments may contract with any one or more other local
governments for the performance of any governmental service,
activity or undertaking which each of the local governments
entering into the agreement is authorized by law to perform.
"Local government" is defined as any county, city, town,
special improvement district, water or sanitation district,
or "any other kind of district or political subdivision".
Thus wastewater management functions can clearly be per-
formed under whatever contractual basis with whatever unit
of local government is deemed most appropriate. This could
involve the joint planning, engineering, construction,
financing and staffing or management of wastewater facilit-
ies. Thus the joint management agency, joint planning
agency, or management contract institutional approaches would
all appear to be authorized.
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Regional Service Authority (Chapter 89, Article 25)
The Colorado Service Authority Act of 197 2 followed as a
direct result of the 1970 State Constitutional Amendment
on local government. The Denver Regional Council of
Governments has prepared an analysis of this Act under a
DHUD grant, entitled "An Approach to Regional Services,"
Hay, 197 2. It terms the Regional Service Authority as
"a new form of government designed especially to provide
a number of specified services on a regional basis, but
without granting the usual law-making powers normally
associated with general purpose governments." How these
functions are desirably separated is not made clear.
The Service Authority is regarded as an alternative in-
stitutional form of major promise. The DRCOG report notes
that its purpose "is to provide for the more efficient
delivery of those services, or portions thereof, which best
lend themselves to regional administration." While city
or county governments would not be replaced, the opportunity
is offered for absorbing and reducing the number of small,
single purpose districts, at the option of the voters.
A service authority may be created only with voter approval
as to territory and services; the governing body "directors"
are also subject to district election. The Act provides
that any service authority created within the Denver area
must contain all of the territory of City and County of
Denver and all or portions of the Counties of Adams,
Arapahoe and Jefferson.
Private Utility
An individual, company, or corporation may establish and
operate water and sewerage facilities, subject to state laws
regulating public utilities, state health laws and regula-
tions, and to findings that public services and facilities
are not reasonably available. Several private or coopera-
tive utilities exist in the study area, but none were in-
cluded in the sampled agencies.
Direct State Action
Although not now provided for by law, the Colorado General
Assembly might create a state agency (perhaps similar to
the Maryland Environmental Service) with broad statewide
powers to construct, acquire, operate, or intervene in the
operating of proposed or existing wastewater treatment and
disposal facilities. Alternatively, the General Assembly
could create one or more regional authorities within which
these functions would be directly performed by the State.
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State grant funds for capital improvements might then be
authorized and channeled through such agencies to facilitate
conformance with established plans or criteria.
Federal Study Finding
The Environmental Protection Agency Study, National Capital
Region Water and Waste Management Report, April, 1971, an
investigation of similar problems in the Washington Metro-
politan Area, found that "major obstacles to these problems
are institutional and financial rather than technical or
engineering." This report saw major weaknesses, including
"continuing reluctance to recognize relationships between
land use and development policies... and established environ-
mental quality goals"separation of water supply and
waste management programs,"..."uncertain... arrangements to
provide the funds...required...for construction of new
facilities ... and... upgrading, and lack of authority ... to
achieve adherence to regional priorities and plans."
The report also found that "a major issue in creating new
institutional arrangements to correct these weaknesses
is the question of the level of government at which these
arrangements should be established and controlled."
While related specifically to the District of Columbia
Region, from among various alternatives the report tended
to advocate:
1. A Regional Council for comprehensive planning
and policy decisions;
2. An area-wide governmental corporation (Environ-
mental Service Corporation) for water supply
and waste management functions.
Organizational Criteria
In the evaluation and selection of institutional form,
recognition of certain basic criteria, such as the following,
may be useful:
Comprehensive Jurisdiction - The selected arrangements
should provide an organization (or organizations) with
clearly defined authority to plan and provide facilities
throughout the prescribed service area. The jurisdiction,
program and organizational capacity should desirably be
equal to the scope of the problem.
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Administrative Simplicity - The task of wastewater manage-
ment will likely be a public responsibility. Therefore
the organizational arrangement should be one which is
responsible and ultimately accountable to the citizens
of the area in an appropriate manner, and its policies,
procedures and programs established in a manner permitting
full public review and knowledge.
Financial Capacity - The selected arrangement should be
one which affords the capacity to derive adequate revenues,
and with flexibility in financing arrangements as necessary
to meet changing conditions, and the responsiveness to
assure equity among present and future users and taxpayers.
The organization should also possess the authority and
working capital to undertake limited investments in facilit-
ies required to serve the health or welfare of the area
or its development, even on a risk basis.
Cooperative Plan- and Policy-Making - Water and wastewater
services are necessary to urban development, but so are a
number of other public services such as health and housing
inspections, streets and highways, solid waste collection
and disposal, fire and police protection, and zoning and
development controls. Decisions on water and wastewater
facilities are not unrelated to these activities, and the
selected arrangements, therefore, should assure the
necessary coordination in the comprehensive planning as
well as the provision of all these public services. Arrange-
ments for wastewater management should not impair the
orderly extension of other urban services nor of municipal
boundaries, nor should these actions unreasonably commit,
or fail to provide, necessary wastewater facilities.
Operational Coordination - Wastewater construction and
operations require coordination with other public services
at the operational level, particularly with such services
as water supply and distribution, storm drainage, streets
and highways, and electric and gas utilities. The selected
arrangements should recognize this need and facilitate the
necessary coordination.
Institutional Flexibility - The organizational arrangement
should not perpetuate an institutional form which may it-
self become outdated and unable to respond to future
conditions and circumstances which cannot be fully anti-
cipated. The arrangement selected should therefore be one
which can be appropriately adapted or modified as changes
in scope or magnitude of its program may occur.
Dependent upon circumstances, some of these criteria or
characteristics may be deemed more important than others.
Further, no particular arrangement will be likely to fully
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satisfy all criteria. Obviously, the wastewater function
cannot be regarded independently. As the U.S. Advisory
Commission on Intergovernmental Relationships has stressed
in a number of its reports, wherever possible wastewater
(and Water) services should be provided by general purpose
governments.
In considering alternative institutional forms, a logical
division might be made between the two principal wastewater
functions: collection; and treatment and disposal. Collec-
tion is largely local in nature, while treatment and dis-
posal involve the centralized handling of area-wide wastes.
Collection and treatment also represent two principal needs
now being faced by the SMSA:
1. The need for timely extension of collection
mains to new or presently unsewered develop-
ments, to avoid public health problems attendant
to or arising out of individual provisions by
homeowners;
2. The provision of treatment and disposal facilities
to meet increasingly higher standards for effluent
control.
Following is a brief discussion of possible handling of
wastewater functions under alternate institutional forms.
Cities - Within the urbanized or urbanizing fringe areas of
municipalities, the extension of municipal collection
systems is by far the most logical of physical arrangements.
This avoids the duplication of facilities, staff and organ-
ization, and tends to advance the single urban character of
the area. To those who subscribe to the maxim that "what-
ever is urban should become municipal", the taking of any
steps toward full urban services and ultimate annexation
would be viewed as rational and desirable. The control by
the municipality of the location and extent of extensions
offers control by the municipality of growth patterns and
development standards outside its corporate limits. In a
dynamic urban setting the municipality is constantly faced
with plant upgrading, additions or relocation. The economics
of plant construction and operation, difficulties in loca-
ting suitable sites, the likelihood that the plant(s) will
not be located within the corporate limits, and the problems
of sludge processing and disposal, all give some suggestion
that treatment has regional connotations.
Counties - Outside municipal boundaries, county governments
could perform valuable functions, not now being performed,
within a range of possible institutional roles, including:
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1. Construction, operation and maintenance of
collection systems and/or treatment facilities;
2. Construction of facilities, but with either
dedication of facilities or contractual arrange-
ments with the municipality for operation and
maintenance;
3. Serve as an interim financing agent for extension
of facilities by the municipality into the county
area.
While the term "municipality" has been employed above, a
county role with respect to extensions beyond sanitation
district boundaries would be equally appropriate.
This is not to suggest that County governments should create
county sewerage systems, or that County resources or juris-
dictions are equal to the task, but that the enabling
authority might beneficially be utilized in special circum-
stances. In the overall planning context it should be
recognized that county boundaries are no more magical than
municipal boundaries when considering the scope of the
problem or the configuration of a particular drainage basin.
Sanitation Districts - In relatively isolated developments,
the sanitation district device has been useful in providing
sanitary sewer service where other public sewer service is
not reasonably available. In addition to other character-
istics and possible shortcomings of special districts which
might be noted, it should be observed that the principal
financial base of districts is that finding of economic
feasibility which permits the sale of revenue bonds, and
which provides protection to the bond holders. This causes
districts to be, by necessity, unresponsive to those needs
for service on which full and timely return on the invest-
ment is not assured. Thus the special-purpose district
device can be viewed as possessing only limited application
to needs arising from urbanization, in terms of both re-
sponsiveness and capability for furnishing full urban
services.
Metropolitan Districts - The metropolitan district has much
of the same limitations as the sanitation district. It does
offer opportunity for organized adjacent communities to
join together for two or more common purposes, or for un-
organized communities to provide for themselves the services
of a limited purpose district. In the former case, how-
ever, another level of government is created, whereas the
services and facilities might have been provided under the
"Joint Powers" act. Therefore limited application is also
seen for the Metropolitan District in meeting wastewater
needs.
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Metropolitan Sewage Disposal Districts - In wastewater
treatment and disposal, MDSDD #1 is the current major
example of such a district, with a record of demonstrated
competence and effectiveness in its operations. How many
districts, or how many treatment facilities, are desirable
within a given metropolitan area, is beyond the scope of
this study. Several observations might be made, however,
based upon current experience.
Because a Metropolitan Sewage Disposal District has little
or no influence or control over the planning or provision
of collection systems, and the growth which occasions them,
such districts tend to become merely "receivers" of wastes -
in whatever volumes or compositions, and at whatever times
the member agencies may deliver. On the other hand, certain
member agencies report a difficulty in planning for the growth
of their areas (and collection systems) because of the un-
certainty as to the schedule or configuration of the district's
physical plant expansion. Founded or unfounded, this some-
what awkward system of "checks and balances" should be re-
fined by appropriate administrative and planning mechanisms.
Regional Service Authority - This institutional form has not
yet been employed, but does hold much promise. As noted
previously, it does not replace city or county governments,
is not a "super" government, and possesses no law-making
function. It can perform comprehensive planning, but can
only implement and effect plans relating to its specified
services. The continued divisions in responsibility for
planning and implementation for those services, and that
for other services performed within the service area, is to
continue one of the problems now besetting the SMSA.
The regional service authority is intended to supply a
scale of operation, however, as well as a step toward com-
prehensiveness. Therefore it is unlikely that the service
authority would be created to merely construct service
mains in city streets or to reach out to pockets of develop-
ment which were unsewered. Assuming that a service authori-
ty was found to be the most logical agency to, say, main-
tain all water and sewer mains or staff all treatment plants
within a given area, then it might likely have the staff
and equipment to perform more localized functions as well.
Given these broad functions, the service authority could,
in theory, continue to observe local jurisdictional policies
for provision or extension of service. In practice, how-
ever, it is inevitable that authority-wide policies would
soon have to be drawn for uniform application throughout the
area.
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Joint Powers - None of the agencies in the sample reported
effective use of the enabling authority contained in the
"joint powers" legislation. It is believed that the smaller
districts and municipalities in particular would benefit
from exploration and use of this authority. Accordingly,
it is recommended that the DRCOG initiate studies to
identify candidate agencies and the appropriate form for
undertaking the exercise of these powers.
A joint management contract could offer many benefits. Such
a contract could provide for joint administration, account-
ing, budget preparation and execution, billing and collect-
ing, public information services, etc. Such a contract
might subsequently be extended to include maintenance of
facilities, operation of plants, procurement of engineering
services, supervision of construction, or other services.
The authority of the respective boards of directors or
other governing bodies would have to be clearly preserved.
This can be insured, however, under a variety of management
forms, such as: an existing agency performing services for
fellow agencies; a new "service bureau" agency collectively
formed by the contracting agencies; agencies entering into
management contract with a private firm, etc.
The benefits of such arrangements are foreseen to be in-
creased efficiency and effectiveness, decreased costs (at
least decreased unit costs), and introduction of a technical
and management capability not otherwise available to the
agencies acting individually. Finally, such an undertaking,
properly staffed, would doubtless be more responsive to
both user and agency needs.
Regional Planning - The institutional forms for multi-
jurisdictional or regional provision of wastewater facilit-
ies all provide for a planning function to be performed
within that institutional form. Given the condition that
a district or service authority will perform only a few
functions which may not be performed throughout the entire
area, the need will continue for mechanisms to achieve
coordination of plans and programs throughout the area.
The Denver Regional Council of Governments has performed
an important and valuable role in the Denver SMSA. It is
not, nor was it intended to be, an operating governmental
agency. It is a voluntary association of local govern-
mental units, although organized under enabling state
legislation. Nevertheless, the DRCOG has certain status
and performs certain functions in the SMSA which directly
relate to wastewater management:
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1. It is the officially-designated planning agency
for water quality management planning;
2. It is the officially-designated A-95 review
agency for all federal grant programs;
3. It is the official representative of the State
Water Pollution Control Commission for review
of proposed treatment plant sites ;
4. It has an active on-going planning program, and
a substantial inventory of vital data relating
to the region;
5. Lt provides an active forum for discussion of
technical and policy matters of concern to the
region and its agencies, and for consideration
of cooperative approaches to common problems.
Whatever institutional arrangements may be selected, no
matter how sweeping, the DRCOG would appear to remain as a
desirable and necessary agency, continuing its role as an
independent association of units of government but , by its
nature, closely involved in all inter-governmental unit
concerns.
There are other regional planning forms available. For
example, Chapter 106, Article 2, of the Colorado Revised
Statutes provides that county commissioners may provide
that a regional planning commission may perform the func-
tions of a county planning commission. Among those func-
tions is the review of proposals for wastewater facilities
and services to be established in new developments. Con-
ceivably a "regional planning commission" within the Denver
SMSA would be the DRCOG, but the Act does not so stipulate
and another level of planning could be created. In such
instance, it may be desirable to seek a division in plan-
ning responsibilities, distinguishing between those
functions and activities defined as "regional" and those
tending to be more local in nature and concern.
Regulatory Agencies
The Colorado Water Pollution Control Commission is the
agency responsible for water pollution control activities
and enforcement in the state. The Commission promulgates
rules and regulations which are administered by the
Colorado Department of Health, primarily through its Water
Pollution Control Division. The Water Pollution Control
Division has, in turn, delegated water pollution control
planning responsibilities within the Denver SMSA to the
Denver Regional Council of Governments.
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On the local levels, several regulatory agencies have
active programs in water pollution control activities:
1. Water Pollution Control Division, Environmental
Health Service, Denver Department of Health
and Hospitals
2. Boulder City-County Health Department
3. Jefferson County Health Department
4. Tri-County District Health Department
(urbanized areas of Adams, Arapahoe and
Douglas Counties)
The programs of these agencies include such activities as
identifying and mapping pollution sources, developing and
insuring compliance with abatement measures, issuing permits
for septic tanks or package plants when connection to public
systems is not feasible, and performing inspections, labor-
atory investigations and monitoring programs.
State Action
Should the state government engage in wastewater operations,
it would likely be in the function of providing and opera-
ting treatment and disposal facilities rather than collec-
tion systems. The state could probably be expected to per-
form these functions at least as efficiently as a district,
and could establish arrangements to insure local representa-
tion on the boards of direction. Given a failure on the
part of local agencies to take necessary actions, the state
might elect to directly intervene and take over those re-
sponsibilities. Unless there were substantial reasons for
performing these functions state-wide, there would likely
be reluctance to intervene in a single area. The Maryland
Environmental Service, a state agency created in 19 70, has,
for example, been granted broad and comprehensive powers in
wastewater management. It has taken a state-wide approach,
undertaking the planning of a system of regional treatment
and disposal plants. However, it is also taking steps to
preempt construction and staffing of private or inadequately-
operated public plants, utilizing its resources to finance,
consolidate and operate such plants where necessary. MES
is an operating rather than regulatory agency, however.
Direct Federal Action - Direct federal action would likely
occur in multi-stateareas where interstate compacts or co-
operation had failed to meet the problem. It is not fore-
seen that direct federal action exists as an institutional
alternative in the case at hand.
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Summary
There is a more than adequate basis in Colorado law for
creating institutional forms for wastewater management,
and for insuring the coordination of wastewater planning
and provisions with other functions. The selection of
institutional arrangements becomes a choice for the citizens
of the local units of government, based upon the nature and
scope of need, resources which must be applied, and the
perceived effectiveness and representative nature of the
particular form.
No serious problems in financial arrangements are foreseen
under the various institutional forms, although certain
constraints., and recommendations will be noted in succeeding
sections.
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Section VII
TOWARD A FINANCIAL PLAN
In the previous sections there has been considerable review
of statutory provisions for institutional and financial
arrangements, and of possible deviations from current
practice which might clarify, simplify or render these
financial arrangements more productive under alternative
institutional forms.
The Denver SMSA is a diverse region, and the current pract-
ices and policies found therein have arisen under, or to
meet, widely differing circumstances. It seems a fair
statement to say that there are too many agencies attempt-
ing to furnish wastewater services within the SMSA, and
that the financial capacities of many of these agencies
are insufficient of themselves, or until joined with the
resources of others, to perform the task ahead. These
agencies tend to merely exist, rather than to plan and
implement to meet goals.
It is to state the obvious to point out that a financial plan
is an instrument in a vacuum unless it is designed to meet
specified targets. The definition of these targets cannot
be made unless there is a clear statement of goals, needs
and priorities; an evaluation of the resources available;
and some control over the circumstances influencing needs
and resources, which means control over growth and develop-
ment .
The people within the SMSA, through their existing institu-
tions, are perfectly capable, and have full authority, to
group themselves together under whatever institutional form
they may choose. The statutes provide a wide range of
options, which include consolidation of or annexation by
general purpose governments, or formation, consolidation of
or annexation by single or multiple purpose districts which
parallel or cut across the jurisdictional lines of general
purpose governments. Therefore, the financial plan, being
but a means to achieve desired ends, is dependent upon
the scope and scale of the institution to identify its
needs and exercise meaningful control over the causes and
effects.
To the extent that the Denver SMSA is a community, there
exists a further need that the sum or thrust of the indi-
vidual institutional actions will satisfy the total needs
of that Denver "community". In this study, the question
has frequently emerged as to whether, or to what degree, the
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proliferation of wastewater agencies will pertain attaining
rational regional goals. To do so, requires physical and
financial planning and implementation which are compatible.
It further suggests that financial arrangements, while not
necessarily uniform throughout the jurisdictions, must be
consistent and complimentary if regional interests are to
be advanced.
The financial plan (or plans) should contain these essential
features:
1. Be based upon clearly enunciated goals, standards
and policies;
2. Be directed toward the fulfillment of specified
needs, the form of which has been determined
after careful analysis of alternatives;
3. Recognize both capital and operating needs of
the agency;
i+. Provide for the timely production of revenue
to meet those needs;
5. Apportion the revenue equitably among the various
classes of users in accordance with burdens
placed upon the system;
6. Insure sufficient financial stability as to not
pose widely-fluctuating or frequent changes in
financial burdens upon the users;
7. Possess sufficient flexibility to be revised
as needs or circumstances may change;
8. Provide maximum economy and efficiency to its
users and citizens;
9. Provide for budgeting, accounting, reporting and
monitoring in a manner which reflects the cost
of performing the various types of functions and
services of the system;
10. Permit the agency to operate and meet its needs
on a sound and self-sufficient financial base.
It has been earlier suggested that the financial, or revenue,
measures basically be composed of:
1. Service charges, based on usage and composition
of waste, in a total amount sufficient to meet
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operating, maintenance, replacement, fixed
charge, working capital and reserve fund needs;
2. Frontage charges, based upon the cost of pro-
viding a segment of collection system to serve
or benefit the property;
3. Connection charges and permit fee, to cover the
actual cost of that service;
4-. Fiscal management practices, which seek maximum
investment of temporarily idle funds, maximum
discounts and most favorable price on purchases,
and adequate cash flow to meet obligations;
5. Debt policies and practices, which provide for
issuance for only major long-term improvements,
at the most favorable interest rates , and at
least cost of administration;
6. Full utilization of grant programs for construc-
ting improvements.
To secure the most favorable conditions for financial manage-
ment, it is suggested that:
1. The General Assembly place "sewer" or "wastewater"
bonds in the same category as "water" bonds with
respect to debt limitations;
2. The General Assembly create a category of water
and sewer bond which is retired from system revenues
but contains guarantee or pledge of full faith and
credit in the event of default;
3. The General Assembly designate a state agency to
supervise and provide financial advice and
assistance in the preparation of bond issues,
and in actual administration of local government
bond sales;
4. The Colorado Water Pollution Control Commission
establish and maintain a continuing data base on
wastewater systems and their physical and financial
operations;
5. The Auditor General develop and prescribe a system
of accounts classification, budgeting and auditing
for wastewater management to reflect cost and
revenue categories in operations;
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6. The Auditor General render assistance to waste-
water systems in rate schedule derivation and
review by establishing recommended guidelines,
with appropriate reference to future guidelines
of Environmental Protection Agency.
7. The General Assembly strengthen general County
powers with respect to wastewater management;
8. The units and agencies make greater utilization
of contractual agreements to provide common
services-, such as billing and accounting, labor-
atory testing, monitoring of flows, and operator
training and staffing.
9. The Denver Regional Council of Governments continue
and enlarge its function as a forum for technical,
financial and planning considerations relating to
wastewater management.
Under conditions of full regionalization, limited regional-
ization, or expanded jurisdiction of a more limited total
number of wastewater agencies, - and on the assumption that
federal grant funds will be available to finance major plant
additions, - the utilization of available revenue sources
and enlightened financial management would appear to be
adequate bases for implementing the goals, plans and programs
of the region.
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Section VIII
ACKNOWLEDGMENTS
A study of this nature can only be as good as the informa-
tion and insights provided by representatives of the
studied wastewater agencies. Fortunately for this study,
the officials of each of the sixteen agencies eagerly gave
their time and support to this effort. We acknowledge
this cooperation and give many thanks.
Special thanks must be given to Mr. George G. Collins,
Project Director, U. S. Environmental Protection Agency,
for his support and guidance throughout. In addition,
two representatives of the Denver Regional Council of
Governments, Mr. William W. Johnston, Director of Administra-
tion, and Mr. Alan L. Foster, Director, Public Facilities
and Environmental Services Office, readily gave their time
and support in coordination of data collection and waste-
water agency cooperation.
Many other agencies and individuals were of incalculable
help during the preparation of this document. In all cases
we would like to express our sincere appreciation and thanks.
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Section IX
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