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Sanitary Sewer System Rate Study September 2012 Keystone Municipal Services.

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Presentation on theme: "Sanitary Sewer System Rate Study September 2012 Keystone Municipal Services."— Presentation transcript:

1 Sanitary Sewer System Rate Study September 2012 Keystone Municipal Services

2 East Vincent Township Sanitary Sewer System Rate Study Background  East Vincent Township assumed responsibility for ownership and operation of two sanitary sewer collection and treatment systems in January  The systems had been owned and operated by the East Vincent Municipal Authority since the 1980’s.  The systems are known as the Barton’s Meadows plant and the Veterans Center plant.  Each treatment plant operates under a permit issued by the PA Department of Environmental Protection (DEP).  The Township entered into a Consent Order & Agreement with the DEP to construct a new treatment plant at the Veterans Center site.  The Township assumed $4.7 Million in Authority debt and issued bonds totaling $10.5 Million to refinance the debt and construct a new plant as required by DEP. September 2012 Keystone Municipal Services

3 East Vincent Township Sanitary Sewer System Rate Study Purpose  The Township retained Keystone Municipal Services to develop a long range, comprehensive wastewater system financial plan and rate study.  Conduct and independent analysis of wastewater rates and finances.  Develop a financing plan for necessary sewer system capital improvements.  Develop long-term cash flow projections incorporating reasonable estimates of future operating expenses to determine annual revenue requirements.  Propose a rate structure based on the cost of providing service.  Prepare a report and recommendations on appropriate short and long term rates to fund operations, maintenance, capital improvements and debt service to support the long-term financial health of the wastewater utilities.  Prepare future annual budgets based on the projected costs of service.  Recommend prudent fund reserve balances. September 2012 Keystone Municipal Services

4 East Vincent Township Sanitary Sewer System Rate Study What Are These Systems? September 2012 Keystone Municipal Services

5 East Vincent Township Sanitary Sewer System Rate Study Veterans Center System  Sewage Treatment Plant with a design capacity of 500,000 gallons per day (GPD) constructed in the 1930’s.  40,000 linear feet or 7.58 miles of 8, 10, 12, 14, and 15 inch diameter gravity sewer lines and countless manhole structures.  Four sewage pumping stations connected to a 32-inch brick interceptor line sending flow to the treatment plant.  Serves 798 residential customers, 53 commercial customers and the Southeastern Pennsylvania Veterans Center.  Approximately 1,510 equivalent dwelling units (EDU’S).  Each EDU equals 250 gallons per day of sewage flow.  This system will require an estimated $828,000 in capital improvements over the next 10 years. September 2012 Keystone Municipal Services

6 East Vincent Township Sanitary Sewer System Rate Study Barton’s Meadows System  Sewage Treatment Plant with a design capacity of 53,000 gallons per day (GPD).  19,461 linear feet or 3.69 miles of 8inch diameter PVC gravity sewer lines and countless manhole structures.  Three sewage pumping stations.  One sewage pumping station owned by the School District and operated by East Vincent Township.  Serves 158 residential customers, and the Vincent Elementary School.  Approximately 166 equivalent dwelling units (EDU’S).  Each EDU equals 250 gallons per day of sewage flow.  This system will require an estimated $274,000 in capital improvements over the next 10 years. September 2012 Keystone Municipal Services

7 East Vincent Township Sanitary Sewer System Rate Study Sewer Utility System Finances September 2012 Keystone Municipal Services

8 East Vincent Township Sanitary Sewer System Rate Study Current Sewer Rates  Sewer system users are billed a flat fee based on the number of allocated EDU’s and may vary by customer class.  Two customer classes in the Barton’s Meadows system:  158 Residential customers  1 Commercial customer (Vincent Elementary School)  Four customer classes in the Veterans Center system:  798 Residential customers  32 Commercial customers  21 Commercial 1 customers  1 Commercial 2 customer (Vincent Heights Senior Housing Complex)  Commercial 1 customers have a special arrangement for billing by water consumption and receive a 25% discount on each sewer bill for usage that is less than the EDU allocation. There is a surcharge for usage above the EDU allocation. September 2012 Keystone Municipal Services

9 East Vincent Township Sanitary Sewer System Rate Study Current Sewer Rates  The Commercial 2 customer rate is fixed by agreements dated June 8, 1993 and February 7, 1995 and is tied to the rate charged by the Borough of Spring City.  The term of each agreement is perpetual.  The current sewer rates are: Barton’s Meadows Residential $900/EDU/year Commercial$900/EDU/year Veterans Center Residential$660/EDU/year Commercial$660/EDU/year Commercial 1$495/EDU/year (with a 25% discount) Commercial 2$402/EDU/year  All customers are billed semi-annually in January and July. September 2012 Keystone Municipal Services

10 East Vincent Township Sanitary Sewer System Rate Study Sewer Utility Budgets  Based on the 2012 Budget, the Township expects to collect $1,010,000 in total revenue for both systems.  Barton’s Meadows total revenues are projected at $152,750.  Veterans Center total revenues are projected at $897,000.  Sewer user fees account for 97% of total revenues. Other revenue sources include tapping fees, investment income, and grants.  These revenue projections do not include any capital appropriation transfers or grant funds.  Capital expenditures are currently included in the operating budgets (these should be in separate funds).  Capital improvements have traditionally been funded by borrowing or use of available operating reserves. September 2012 Keystone Municipal Services

11 East Vincent Township Sanitary Sewer System Rate Study Analysis of Future Revenue Requirements  This study estimated future revenue requirements by examining historical trends in spending from 2008 through 2011 and projecting future expenses from 2012 through  Annual revenue requirements are based on the cost to provide services and maintain the system.  Service costs include:  Operating Expenses – personnel and other administration costs professional services, supplies, equipment maintenance, utility costs, contracted services, repairs, and insurance.  Capital Improvement s – Improvements with a life expectancy of more than 5 years  Debt Service – the annual principal and interest payments on bonds, notes, and loans.  Reserve Fund Balances – an unrestricted cash reserve for emergencies. September 2012 Keystone Municipal Services

12 East Vincent Township Sanitary Sewer System Rate Study Analysis of Future Revenue Requirements  Study Assumptions:  Medical Benefits - projected to increase by 8% per year  Personnel costs - projected to increase by 3% per year  Professional Services – projected to increase by 5% per year  Other operating expenses – based on historical trend  Capital Improvements  CKS Engineers developed 10 year Capital Improvement Plan and Capital Budget for each system  Recommends $874,000 in capital improvements in the Veterans Center system  Recommends $447,000 in capital improvements in the Barton’s Meadows system  Plan was developed to determine an annual allocation from each operating budget to a Capital Improvement Fund for the recommended improvements. September 2012 Keystone Municipal Services

13 East Vincent Township Sanitary Sewer System Rate Study Analysis of Future Revenue Requirements  Outstanding Debt:  Barton’s Meadows system has no outstanding debt. Recent Treatment Plant improvements were funded with existing operating reserves.  Veterans Center system has $10.5 Million in outstanding bonds issued by the Township.  Bonds refinanced $4.6 Million in existing Authority debt; the balance will be used to construct a new Treatment Plant.  The bond issue term is 20 years with an average interest rate of 3%.  Principal and interest payments total $735,000.  Reserve Funds  Currently no Reserve Fund policy.  Government Finance Officers Association (GFOA) recommends maintaining minimum reserve fund balances of 10% - 12% of total expenditures. September 2012 Keystone Municipal Services

14 East Vincent Township Sanitary Sewer System Rate Study So What Does This All Mean? September 2012 Keystone Municipal Services

15 East Vincent Township Sanitary Sewer System Rate Study Barton’s Meadows System Fund Balance $82,931 $71,181 $48,181 $13,181 $(31,819) Projected Revenues 152, ,000 Projected Expenses 152, , , , , ,000 Fund Balance $82,931 $70,931 $47,931 $12,931 $(32,069) $(88,069) September 2012 Keystone Municipal Services Veterans Center System Fund Balance $469,294 $136,294 $(170,706) $(487,706) $(830,706) $(1,183,706) Projected Revenues 904, ,000 Projected Expenses 1,237,000 1,208,000 1,218,000 1,244,000 1,254,000 1,248,000 Fund Balance $136,294 $(170,706) $(487,706) $(830,706) $(1,183,706) $(1,530,706)

16 East Vincent Township Sanitary Sewer System Rate Study Summary of Financial Analysis  Current rates are not adequate to fund future operating costs and debt service.  There is no future funding of capital improvements.  Current rates do not provide sufficient revenue to maintain adequate reserves.  Each Fund will experience an operating deficit in the short term.  Rate increases are required in both systems over the next 5 years.  Separate budgets should be developed for operating and capital expenses for each system.  A new rate structure is needed to provide adequate revenue for the future fiscal soundness of the systems. September 2012 Keystone Municipal Services

17 East Vincent Township Sanitary Sewer System Rate Study September 2012 Keystone Municipal Services Proposed Sewer Rates: Barton’s Meadows System Veterans Center System Residential $900$935(3.9%)$970(3.7%)$1,005 (3.6%)$1,040 (3.5%)$1,075 Institutional $900$1,200(33.3%)$1,400(16.7%)$1,700(18%)$2,000 (17.6%) $2,000

18 East Vincent Township Sanitary Sewer System Rate Study Barton’s Meadows System Fund Balance $82,931 $71,181 $48,181 $13,181 $(31,819) Projected Revenues 152, , , , ,000191,000 Projected Expenses 152, , , , , ,000 Fund Balance $82,931 $78,931 $70,931 $58,931 $44,931 $26,931 September 2012 Keystone Municipal Services Veterans Center System Fund Balance $469,294 $136,294 $84,294 $85,294 $111,294 $127,294 Projected Revenues 904,000 1,156,000 1,219,000 1,270,000 Projected Expenses 1,237,0001,208,000 1,218,000 1,244,000 1,254,000 1,248,000 Fund Balance $136,294 $84,294 $85,294 $111,294 $127,294 $149,294

19 East Vincent Township Sanitary Sewer System Rate Study 2010 Survey of Area Sewer Rates Municipal System Annual Rate West Vincent Township $1,375 East Brandywine Township $1,012 East Vincent Township (Barton’s Meadows) $900 West Goshen Township $764 London Grove Township $755 New Garden Township $732 Avondale Borough $711 Upper Uwchlan Township $700 West Bradford Township $675 East Vincent Township (Veteran’s Center) $660 West Goshen Township $640 Westtown Township $640 Willistown Township $600 September 2012 Keystone Municipal Services

20 East Vincent Township Sanitary Sewer System Rate Study Sewer Tapping or Connection Fees  A one-time fee charged to new customers by a sewer utility to connect to the system.  A “fair share” purchase of capacity in the system.  Based on the cost of providing capacity and changes with system improvements.  The fee is determined on an EDU basis.  Cannot exceed the estimated reasonable cost of providing capacity.  Often used to fund capital improvements and offset costs paid by existing users.  A separate fee should be calculated fro each system.  Current Tapping fee is $6,638. September 2012 Keystone Municipal Services

21 East Vincent Township Sanitary Sewer System Rate Study Recommendations: 1. Convert to quarterly or monthly billing cycles for both sewer systems. 2. Implement the flat fee rate structure proposed in this report for all sewer system customers. 3. Eliminate the credit for certain commercial customers and classify commercial customers into one rate class. 4. Reclassify the Vincent Elementary School in the Barton’s Meadows System from Commercial to Institutional. 5. Reclassify the Vincent Heights housing complex in the Veteran’s Center System from Commercial 2 to Multi-Family Residential. 6. Consider implementing a usage-based rate structure in the next 5 to 10 years. 7. Separate the Veterans Center and Barton’s Meadows operating budgets in the Township financial accounting system. September 2012 Keystone Municipal Services

22 East Vincent Township Sanitary Sewer System Rate Study Recommendations: 8. Separate all operating revenues and expenses from capital appropriations and develop separate capital appropriation budgets for each system. The capital budgets should funded by transfers from the operating budgets and any special revenue such as grants and loans. 9. Conduct separate annual audits of each sewer fund to include a “Statement of Revenues and Expenditures and Changes in Fund Balance” on a cash basis of accounting. 10. Adopt the Capital Improvement Plans for 2013 to 2023 prepared by CKS Engineers, Inc. and update the plan annually to maintain a ten (10) year horizon. 11. Maintain a minimum 10% to 12% of total annual operating expenses as a reserve in each sewer operating fund. September 2012 Keystone Municipal Services

23 East Vincent Township Sanitary Sewer System Rate Study Recommendations: 12. Renegotiate the Agreements between the East Vincent Township Municipal Authority and the Borough of Spring City dated June 8, 1993 and February 7, 1995 governing the rate East Vincent Township can charge to the Vincent Heights Senior Complex and reclassify the complex as Residential 1 in the Veterans Center system. 13. Undertake a study to determine if current tapping fees are appropriate for each system. 14. Consider acquisition of a new financial accounting system designed for governmental fund accounting and utility billing. 15. Adopt resolutions annually for each system setting forth the sewer rate for each customer class. September 2012 Keystone Municipal Services

24 East Vincent Township Sanitary Sewer System Rate Study Questions? September 2012 Keystone Municipal Services


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