CONSULTING ENGINEERS ANNUAL REPORT FOR THE SEWER SYSTEM. 369 East Park Drive Harrisburg, PA (717)

Transcription

1 369 East Park Drive Harrisburg, PA (717) OCTOBER 2014 CONSULTING ENGINEERS ANNUAL REPORT FOR THE SEWER SYSTEM CAPITAL REGION WATER DAUPHIN COUNTY, PENNSYLVANIA HRG Project No

2 TABLE OF CONTENTS Page INTRODUCTION... 1 REGULATIONS AND COMPLIANCE... 4 MAINTENANCE, REPAIR AND OPERATION... 5 PLANNED CAPITAL IMPROVEMENTS... 6 SYSTEM DEMAND AND CAPACITY ENGINEER ESTIMATED EXPENSES APPENDICES APPENDIX A Sewer System Map APPENDIX B Municipal Wasteload Management Report Calendar Year 2013 APPENDIX C Wholesale Wastewater Rate Study Report APPENDIX D 20 Year Capital Improvements Plan

3 CONSULTING ENGINEERS ANNUAL REPORT October 2014 INTRODUCTION PURPOSE Capital Region Water ( CRW ), formerly known as The Harrisburg Authority ( THA ) owns and operates sewer collection, conveyance and treatment facilities serving the City of Harrisburg and surrounding suburban municipalities. In 2014, the Authority issued a Wastewater System Revenue Note with Manufacturers and Traders Trust Company to provide interim financing for their Advanced Wastewater Treatment Facility Improvements Project. The Note was secured through a Trust Indenture dated March 1, Specific engineering duties as outlined in Section 808 of the Indenture are as follows: It shall be the duty of the Consulting Engineer, in addition to the other duties prescribed elsewhere in this Indenture, to prepare and file with the Authority and with the Trustee on or before 90 days prior to the beginning of each Fiscal Year while this Indenture is in force, a report setting forth the following: (a.) Its advice and recommendations as to the proper maintenance, repair and operation of the System during the next Fiscal Year; (b.) Its advice and recommendations as to the Capital Additions that should be made during the next Fiscal Year, and its estimate of the amounts of money that should be expended for Operating Expenses and its estimate of the amounts of money necessary for such purposes; and (c.) Its finding whether the properties of the System have been maintained in good repair, working order and condition and its estimate of the amount, if any, required to place such properties in such condition and the details of such expenditures and the approximate time required therefor. The contents of this report have been prepared in accordance with the stated Indenture requirements and are intended to provide a consolidated overview of the system and key operational matters. The following pages include a description of the existing sewer system and information relative to ownership, operations, regulations, revenues and expenses. 1

4 SYSTEM DESCRIPTION The wastewater system is comprised of (1) the collection system portion of the sewer system (separate sanitary and storm sewer facilities as well as combined stormwater/sanitary sewer facilities; (2) and conveyance facilities and the Advanced Wastewater Treatment Plant. The conveyance and treatment system provides wastewater conveyance and treatment to City retail customers and suburban wholesale communities. The suburban communities account for approximately 60% of the flow through the conveyance and treatment system and include Susquehanna Township, Lower Paxton Township, Swatara Township, Paxtang Borough, Penbrook Borough, and Steelton Borough, all of which are located in Dauphin County. The conveyance and treatment system includes interceptors, pumping stations, and a wastewater treatment facility, a High Purity Oxygen Activated Sludge plant, which is known as the Advanced Wastewater Treatment Facility ( AWTF ). The conveyance system carries wastewater from the collection system along with wastewater from surrounding communities to the AWTF. In August 2009, DEP approved THA s 537 Plan which called for an upgrade to the AWTF including a combination of innovative technology and nutrient credit trading. The technology involves side-stream treatment with bio-augmentation to overcome space limitations of the AWTF site and cost-effectively achieve the nitrogen and ammonia removal requirements. In order to comply with the Chesapeake Bay Tributary Strategy and meet new National Pollution Discharge Elimination System (NPDES) permit discharge requirements, CRW has secured financing and commenced upgrades to its AWTF in The facility is one of the largest publically owned treatment facilities in the Commonwealth and currently the largest in Pennsylvania within the Chesapeake Bay watershed. The requirements for nitrogen, phosphorus and ammonia removal outlined in their current NPDES permit, which have reduced by half in recent years, have necessitated the current facility upgrade. The current AWTF Improvements Project will employ biological nutrient removal technology to the existing processes of the 37.7 MGD activated sludge plant to cost-effectively achieve the nitrogen and ammonia removal requirements associated with the new NPDES discharge permit. Integration includes the modification and addition of multiple tanks and processes. The sewer system is comprised of approximately 250,800 feet of sanitary sewers, 152,000 feet of stormwater sewers and 457,000 feet of sanitary and stormwater sewers. CRW is in the process of completing a GIS and Asset Management System project to locate and inspect all sanitary, storm and combined sewer features in addition to completing mapping, condition assessment and connectivity analysis. Information will be used to expand CRW s current Capital Improvement Plan through the use of an in depth Asset Management System. Capital Region Water s current system serves approximately 82,470 EDUs located in the City of Harrisburg along with Steelton Borough, Paxtang Borough, Penbrook Borough, Susquehanna Township, Swatara Township and Lower Paxton Township. 2

5 Financial stress facing the City of Harrisburg caused the City and Authority to re-evaluate their ownership, operation and management relationship. The long-term Capital Improvement Plan, included in Appendix D, outlines approximately $117 million of proposed infrastructure improvements over the next twenty (20) years. Borrowings through the capital market were necessary to finance current regulatory driven improvements and additional borrowings are anticipated in future years to finance other necessary improvements. Change in Ownership and Operations: Prior to November 2013, the City of Harrisburg owned the sewer collection system while The Harrisburg Authority owned the conveyance and treatment facilities. These facilities were operated and maintained by the City of Harrisburg through an Agreement of Lease dated September 15, As part of the financial recovery plan of the City, The Office of the Receiver of the City of Harrisburg, THA, and the City administration agreed to terminate the Agreement of Lease and transfer ownership of all sanitary and storm collection systems to The Harrisburg Authority. On November 4, 2013, the agreements pursuant to which the City previously operated the water system and the wastewater system were terminated, and certain operating personnel were transferred and the Authority became exclusively responsible for the water system and wastewater system operations. On December 4, 2013, the remaining collection system assets were fully transferred from the City to the Authority. This change in ownership and operations provides the following: 1. Independent Personnel Authority: The Authority directs and controls its labor force, subject to applicable labor agreements. Certain City employees became direct employees of the Authority. The Authority has established new personnel rules and new benefit plans, including a pension plan, subject to applicable labor agreements. 2. Independent Contracting Authority: The Authority has the ability to contract with outside parties to provide services and support. 3. Operational Control: The Authority controls all operations (including utility operations, billing and collection, customer service, finances, human resources, IT, legal, etc.) related to the sewer utility, either through Authority personnel or contracting with the City or outside parties. 4. Access to Capital Markets: The Authority now has independent control of the resources of the sewer facilities to provide assurances to the bond market that it will make full and timely repayment. The Harrisburg Authority becomes Capital Region Water: In March 2014, as part of this transition and rebranding process, the Harrisburg Authority formally changed its name to Capital Region Water to reflect the Authority s mission of providing potable water services and the management and treatment of wastewater and storm water in the south-central Pennsylvania capital region. 3

6 REGULATIONS AND COMPLIANCE As mentioned in the introduction section of this report, Capital Region Water s staff now directly operate and maintain the Sewer System. Sewer quality is regulated by the Federal Clean Water Act, enforced through laws and regulations administered by the Pennsylvania Department of Environmental Protection (DEP). National Pollution Discharge Elimination System (NPDES) Permit Renewal The AWTF is permitted to discharge to the Susquehanna River under NPDES Permit No. PA issued on January 1, 2010 which expires December 31, An NPDES renewal application was submitted in July of Necessary Improvements to Comply with State and Federal Regulations The conveyance and treatment facilities are regulated by the Clean Water Act enforced by the United States Environmental Protection Agency (USEPA) and the Pennsylvania Department of Environmental Protection (PADEP). The three (3) major regulatory drivers currently faced by CRW relative to the sewer facilities for compliance with the Clean Water Act include the following: 1. NPDES Permit Compliance Ammonia (NH 3 ) Discharge Limit. 2. NPDES Permit Compliance - Chesapeake Bay Tributary Strategy (CBTS) Compliance for total nitrogen (TN) and total phosphorus (TP) cap loadings. 3. CSO Control Policy Compliance Nine Minimum Controls and Long Term Control Plan Updates. Compliance with these regulations is the top priority for the Capital Improvements Plan. Transfer of DEP Permits All sewer system operating permits were previously held by The Harrisburg Authority, therefore, no permit transfers were required in order for The Harrisburg Authority (now Capital Region Water) to terminate the 1976 Agreement of Lease. 4

7 MAINTENANCE, REPAIR AND OPERATION Through the termination of the 1976 Lease Agreement, Capital Region Water Staff are now directly responsible for providing the following services: general supervision and control of operations; employment and supervision of employees; contracting and purchasing of supplies and services; extensions, alterations and improvements to the sewer system; and preparing and filing of reports. In addition to the items listed above, CRW Staff strived to ensure the sewer collection, conveyance and treatment facilities are all properly operational and maintained. The cost to provide routine and preventive maintenance is included in CRW s annual operating budget. Major rehabilitations and replacements are financed by CRW through the use of system reserve funds or future borrowings. 5

8 PLANNED CAPITAL IMPROVEMENTS In April of 2013, HRG prepared a Five Year Capital Improvement Plan (CIP) for Sewer Conveyance and Treatment Facilities. That document serves as the basis for recommended improvements to the system. Updated projects scopes and costs to be implemented in the upcoming fiscal year are outlined below. CRW is in the process of investigating separate sanitary and storm collection facilities, along with combined sewers in order to evaluate the current facilities and prioritize repairs. This work is being completed as part of CRW s Geographic Information and Asset Management System project in addition to Technical Assistance being completed for CRW by the United States Army Corps of Engineers. Capital Improvements Completed in 2014 In March 2014, CRW awarded contracts to three (3) construction contractors (General, Electrical, Mechanical) totaling $36,455, for upgrades to the AWTF relative to the BNR Upgrade Project, referred to as the 2014/2015 AWTF Improvements Project. Total project cost of the BNR Upgrade is approximately $49.2MM. Notice to Proceed was issued in March 2014 and construction is anticipated to be complete in In July 2014, CRW awarded an additional contract totaling $161,000 relative to HVAC Improvements at the AWTF which will be completed in Sanitary/Storm GIS and Asset Management work completed in 2014 included continued survey level data collection of above grade sanitary, storm, and combined sewer features, including manholes, inlets, and outfalls and incorporation of the information into CRW s GIS. Work completed also included NASSCO PACP data collection and assessment by Redzone Robotics of approximately 75,800 feet of CRW s interceptor piping. NASSCO MACP Level 2 data collection and assessment of approximately 200 interceptor manholes is also to occur in The USACE is also completing data collection, assessment, and inventorying of CRW s MS4 facilities. The Authority also continued discussions with EPA and provided focused efforts related to updates and revisions to its Long Term Control Plan along with MS4 Permit compliance. Capital Improvements Planned for 2015 On September 15, 2014 HRG met with CRW Staff to discuss updates to the 2013 Capital Improvement Plan and reprioritize system repairs, upgrades and improvements based upon investigation, condition assessments, regulatory requirements and other related drivers. The meeting resulted in reprioritization of projects and identification of additional improvements to be included in the 2015 Capital Improvement Budget budgeted costs also include investigation and condition assessment of the Authority s sanitary, storm and combined collection facilities in order to identify and prioritize improvements in upcoming years. The updated table outlining 20 Year Planned Capital Improvements for sewer collection, conveyance and treatment facilities is included in Appendix D. Refer to Table 2 on page 14 of this report for a listing of Year 2015 Proposed Capital Improvements and associated estimated costs. Those projects include: 6

9 AWTF - BNR Upgrade Project As previously discussed, in accordance with the Chesapeake Bay Tributary Strategy (CBTS), PADEP issued an NPDES permit to the Authority on December 4, 2009 which set an annual total nitrogen (TN) discharge loading limit for the AWTF of 688,575 pounds per year, roughly one half of the typical nitrogen discharged by the facility in recent years and a total phosphorus (TP) discharge loading limit of 91,810 pounds per year. The NPDES permit also includes a seasonal effluent ammonia limit of 11 mg/l. The requirements of the NPDES permit necessitated a major plant upgrade. As an update to the 2013 Five Year Capital Improvements Plan we offer that design of the AWTF Improvements Project was completed in 2013, the construction contracts totaling $36,455, were awarded in March 2014 and construction will continue into The 2015 Estimated Budget of $27,000,000 identified in Table 2 will cover construction, engineering, administrative and legal fees associated with this project in AWTF - Headworks Screening/ Trucked-in-Waste Receiving Station Study A screening study is necessary in order to evaluate and select the best alternative for providing the necessary screening equipment at the AWTF. Screens are necessary at the AWTF to protect downstream equipment, particularly the grit removal pumps. In addition to providing screening at the AWTF, the existing screening systems at the Front Street and Spring Creek Pump Stations have reached the end of their useful life and are in need of replacement. The Screening Study will evaluate upgrading the existing pump station screening equipment with new course screening equipment, as well as evaluation of alternatives for a new fine screening system and trucked-in-waste screening facility at the AWTF. As an update to the 2013 Five Year Capital Improvements Plan we offer that CRW has entered into a contract with Hazen & Sawyer, P.C. to complete the study for a total not to exceed fee of $46,750. Work on the study will commence in October 2014 and continue into the first quarter of The 2015 Estimated Budget of $16,667 identified in Table 2 will cover the engineering fees associated with this study in AWTF Headworks Screening/Trucked-in-Waste Receiving Station Design Adequate screening at the AWTF is necessary to maximize the efficiency of the existing grit removal system as well as protect downstream components such as pumps, primary clarifier mechanism, etc. from unnecessary wear and failure. Damage to downstream components, as a result of the lack of influent screening, has resulted in an increase in operation and maintenance costs, as well as downtime for process-sensitive treatment systems. The new headworks screening facility would include various components such as a new fine screen and compactor equipment, a new headworks screening building, and ancillary electrical and control work necessary to provide automation and remote monitoring of the screening system. 7

10 Installation of a trucked-in waste receiving station at the AWTF will provide the operations staff with a better means of managing the contract waste hauling system and controlling the discharge of trucked-in-waste to the facility. This facility would provide pre-treatment of the trucked-in-waste prior to discharge to the AWTF for ultimate treatment and disposal. The new trucked-in-waste facility would include various components such as septage receiving equipment and treatment for contract waste haulers, new process piping connections, revision to truck traffic routings and waste discharge locations, and manual and automatic sampling equipment. The annual revenue received from trucked in waste at the AWTF is approximately $600,000. As identified in the 2013 Five Year Capital Improvements Plan the total estimated project cost for the Headworks Screening is $4,100,000 and the total estimated project cost for the Trucked-in- Waste Receiving Station is $2,300,000. It is anticipated that these projects will be designed, bid and constructed as a single project which may also include the Front Street and Spring Creek Pump Station Improvements project described below after completion of the Headworks Screening/ Trucked-in-Waste Receiving Station Study in The 2015 Estimated Budget of $652,000 identified in Table 2 will cover the engineering fees associated with preliminary and final design of the Headworks Screening/Trucked-in-Waste Receiving Station Project in GIS Mapping CRW continues to implement the GIS Mapping and Asset Management System Project for both the water and sewer facilities in accordance with the phasing outlined in the 2013 GIS Data Collection and Implementation Plan. CRW intends to commence with Phases 5 and 7 of the Project in 2014 which will extend into late Phase 5 includes the completion of a detailed subsurface investigation of all sanitary sewer manholes and a rapid assessment of all sanitary sewer mains to identify system connectivity, material, size, and general condition as observed from the manholes. Phase 7 includes the completion of a detailed subsurface investigation of the storm sewer facilities and identification of system connectivity, material, and size, and condition as can be observed from the inlets or manholes. The total estimated cost for this work in 2015 is $1,364,250. Sewer Maintenance & Repair Due to Deferred COH Action -- Equipment Needs Evaluation & Procurement This budgetary item if for the identification and purchase of equipment necessary to effectively operate and maintain the collection and conveyance facilities budgeted amount is $216,817. Capital Investments (Renewal and Replacement) -- Collection System This project relates to the repair and/or replacement of collection system facilities in a critically deteriorated state as identified in the GIS and Asset Management System inspection and condition assessment. The 2015 budgeted amount is $1,111,690. 8

11 Legal, Regulatory, Community Relations This includes work associated with CSO NMCP Implementation, NMCP Notification procedures, MS4 MCM #1 and #2 Plan, Ongoing public Outreach/Involvement/Notification, Legal document preparation related to sewer use/illicit discharge regulations/code, development/construction regulations/codes, agreements/mous with Suburban Municipalities, Consent Decree interaction with Government Agencies, document preparation and the like budgeted amount is $307,214. Flow, Rain and Water Quality Monitoring This project includes the implementation of Characterization Monitoring and supplemental monitoring (as needed), H/H model refinement, model testing/sensitivity, and model calibration. The amount budgeted for this project in 2015 is $1,124,414 Integrated Long Term Control Planning This line item includes various items associated with the Long Term Control Plan including initial system optimization assessment and project definition, high priority capital investments for system optimization, source control demonstration projects, and assessment of financial capabilities for Plan implementation. The amount budgeted for 2015 is $565,791. Misc. AWTF Improvements Projects This budgetary item is for up to $150,000 of high need repairs/replacement/improvements to the AWTF identified during facility operation in Misc. Conveyance Facilities Projects This budgetary item is for up to $150,000 of high need repairs/ replacement / improvements to the conveyance facilities identified during facility operation in AWTF Anaerobic Digester Rehabilitation Due to the importance and age of the equipment, improvements are necessary in order to effectively rehabilitate the existing anaerobic digesters. These improvements generally include roof replacement of the primary digesters and primary digester control building; cleaning and inspection of Primary Digester No. 1 and both secondary digesters; replacement of primary and secondary digester sludge valves and replacement of piping. Additional work may be necessary depending on the condition of the digesters identified during inspection. It should be noted that Primary Digester No. 2 is required to be operational prior to isolating, cleaning, and inspecting Primary Digester No. 1. The total estimated project cost to replace both primary digester roofs as well as the primary digester control house, boiler building and cogeneration building roof is $330,000 and this work will be completed in Piping improvements, secondary digester sludge valve replacement and additional improvements to the digestion facilities will be summarized and quantified after completion of a detailed inspection and cleaning of the digester facilities. 9

12 AWTF Primary Thickener & Gravity Thickener Sludge Pump Replacement After review with CRW Operations Staff, it was identified that the three (3) existing 25 horsepower thickener pumps and the two (2) 25 horsepower primary sludge pumps have outlived their useful life and are in need of replacement. In addition to replacing the pumps, the operations staff has identified a need to replace the existing starters with variable frequency drives in order to provide improved operational control and reduce electrical consumption. This work will be completed in 2015 and the estimated project cost is $215,

13 SYSTEM DEMAND AND CAPACITY System demand and capacity are reported yearly through the annual Municipal Wasteload Management Report, which can be found in Appendix B for calendar year

14 2015 ENGINEER ESTIMATED EXPENSES 2015 Budget Requirements included in Section 808 of the Trust Indenture which secures the Authority s Sewer Revenue Bonds require a sewer system budget to be prepared each year for adoption by the Authority. CRW is currently reviewing this budget, along with operation, maintenance, administrative, debt service, capital improvement, and other Authority operational costs to develop a proposed 2015 Authority budget. Generally, the Authority adopts a finalized budget in November of each year. Listings of engineer estimated Operating Expenses and Capital Improvements for 2015 are included in Table 1 and Table 2 below. The below budgets makes several assumptions relative to the Capital Improvements Plan, Authority operational costs, and other related items. An update of the 20-year anticipated capital improvements can be found in Appendix D. 12

15 Table 1 - Sewer System Comparison of Past and Proposed Operating Budgets Description Actual Actual Projected Budget Estimated OPERATING EXPENSES: PERSONNEL EXPENSES: Salaries and Wages 1,815,212 1,992,744 2,054,473 2,439,596 2,446,100 P/R Taxes 139, , , , ,600 Employee Benefits 536, , , , ,716 Other Subtotal Personnel Expenses 2,492,033 2,753,833 2,876,378 3,350,881 3,389,416 OPERATING AND MAINTENANCE EXPENSES: Equipment Repairs and Maintenance 57,405 96, , , ,000 Vehicle Repairs and Maintenance 47,119 62,750 74, , ,672 Infastructure Repairs and Maintenance 8, , , , ,500 Chemicals, Lab Supplies 365, , , , ,200 Building, Grounds Maintenance 16,000 12,000 12,985 12,000 14,400 Utilities 2,026,053 2,291,400 2,116,100 2,098,400 1,806,000 GIS 15,724 16,876 17,000 71,250 52,800 Lease Expense Insurance 403, , , , ,055 Computer and Softw are 9,584 9, Administrative Expenses 7,309, , ,538 65,600 1,150 Other Operating Expenses 871,616 5,945,290 5,084,310 2,859,250 3,494,165 Street Cleaning ,544, ,496 Community Relations 92,308 Subtotal Operating and Maintenance Expenses 11,130,723 10,429,311 9,425,606 8,960,034 7,872,746 Total Operating Expenses 13,622,756 13,183,144 12,301,984 12,310,915 11,262,162 CAPITAL PROJECTS FUNDED WITH CASH OR NEW DEBT ,933,239 3,073,693 TOTAL O&M and CI EXPENSES 13,622,756 13,183,144 12,301,984 14,244,154 14,335,855 Note: 2013 Actual Expense budget not yet consolidated (City of Harrisburg/THA) by CRW, therefore the projected budged is reflected above. 13

16 Table 2 - Sewer System 2015 Proposed Capital Improvements CAPITAL PROJECTS 2015 Estimated Budget AWTF - BNR Upgrade Project 27,000,000 AWTF - Headworks Screening/Trucked-in-Waste Receiving Station Study 16,667 AWTF - Headworks Screening/Trucked-in-Waste Receiving Station Design 652,000 General - GIS Mapping 1,364,250 Sewer Maintenance & Repair Due to Deferred COH Action Equipment Needs Eval & Procurement 216,817 Capital Investments (R&R) Collection System 1,111,690 Legal, Regulatory, Community Relations 307,214 Flow, Rain and Water Quality Monitoring 1,124,414 Integrated Long Term Control Planning 565,791 Miscellaneous AWTF Projects 150,000 Miscellaneous Conveyance System Projects 150,000 AWTF - Anaerobic Digester Rehabilitation 330,000 AWTF - Primary Thickener & Gravity Thickener Sludge Pump Replacement 215,200 Total Funds Expended for New Projects $ 33,204,043 Less Amount Funded by Ex. Debt Issues 29,130,350 Less Amount Funded by 2014 Nutrient Credit Carry-Over 1,000,000 Capital Funded by Cash or New Borrowing 3,073,693 The Authority is currently evaluating system revenues and developing an appropriate strategy for financing Year 2015 Capital Expenditures through rate revenue, funds on hands or debt financings. Rates Malcolm Pirnie - The Water Division of ARCADIS, completed a Wholesale Wastewater Rate Study Report for the sewer system on January 6, 2014, attached herein as Appendix C. As part of the Authority s current budgeting process, a rate study is being conducted to determine if a revenue increase in 2015 is necessary to meet requirements of the Trust Indenture. Rate increases will likely be necessary over the next few years in order to recover the cost of operations, maintenance, repairs, debt service and capital improvements. We recommend CRW fully implement rates proposed through these studies accordingly. 14

17 APPENDIX A SEWER SYSTEM MAP

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19 APPENDIX B MUNICIPAL WASTELOAD MANAGEMENT REPORT CALENDAR YEAR 2013

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47 APPENDIX C WHOLESALE WASTEWATER RATE STUDY REPORT

48 Imagine the result The Harrisburg Authority Wholesale Wastewater Rate Study Report January 6, 2014

49 Wholesale Wastewater Rate Study Report John Mastracchio, P.E., CFA Associate Vice President Prepared for: The Harrisburg Authority Prepared by: Malcolm Pirnie, Inc. 855 Route 146 Suite 210 Clifton Park New York Tel Fax Our Ref.: Date: January 6, 2014 This document is intended only for the use of the individual or entity for which it was prepared and may contain information that is privileged, confidential and exempt from disclosure under applicable law. Any dissemination, distribution or copying of this document is strictly prohibited.

50 Table of Contents 1. Introduction Rate Study Scope and Objectives Background Inter-Municipal Agreement and Existing Suburban Wholesale Rates 2 2. Sewer Rate Revenue Requirements 5 3. Cost Allocations Cost Categorization Cost Allocation 8 4. Wholesale Rate Calculation 10 Tables Table 1 Summary of Existing FY2013 Wholesale Rates 5 Table 2 Sewer Rate Revenue Requirements 6 Table 3 Summary of FY2014 Cost Categorization Results 8 Table 4 Units of Service (FY2014) 9 Table 5 Units of Service Allocated to Cost Factors 9 Table 6 Unit Cost of Service (FY2014) 10 Table 7 Calculated Wholesale Rates (FY2014) 10 Appendices A Wholesale Rate Calculation Details final - wholesale rate report (1-6-14) i

51 Table of Contents Acronyms and Abbreviations AWTF Advanced Wastewater Treatment Facility CIP Capital Improvement Plan O&M Operations and Maintenance THA FY The Harrisburg Authority Fiscal Year final - wholesale rate report (1-6-14) ii

52 Whosale Wastewater Rate Study Report 1. Introduction 1.1 Rate Study Scope and Objectives This Wholesale Wastewater Rate Study report was prepared for The Harrisburg Authority ( THA ) for the purposes of developing a Wholesale rate for fiscal year ( FY ) THA s fiscal year begins on January 1 of each year. The Wholesale Rate Study and Wholesale rate for FY 2014 was developed by completing the following steps: 1. Determination of THA Sewer Fund Revenue Requirements 2. Allocation of Revenue Requirements to Cost Factors 3. Calculation of Wholesale Rates based on Revenue Requirements, Units of Service, and Inter-Municipal Agreement terms 1.2 Background THA is an operating authority that was formed in 1990 under the Municipal Authorities Act and provides wastewater, water, and solid waste services. THA provides wastewater service to the City of Harrisburg ( City ) and Suburban communities surrounding the City consisting of Penbrook Borough, Paxtang Borough, Swatara Townshop, Lower Paxton Township, Susquehanna Township, and Steelton Borough (the Suburban communities or customers ). THA provides conveyance and treatment services to the Suburban communities in accordance with an inter-municipal agreement, the Second Supplemental Agreement between the City and the Suburban customers dated September 5, 1976 (the Inter-Municipal Agreement ). THA owns and operates an Advanced Wastewater Treatment Facility ( AWTF ) and conveyance system, which it leases to the City. The wastewater and stormwater collection systems within the City limits are currently owned and operated by the City. Under the terms of a transfer agreement between the City and THA, the existing lease and operating agreements between the City and THA are anticipated to be terminated prior to the end of FY 2013, and the ownership and operation of the City s wastewater and stormwater collection systems will be transferred to the THA. 1 The transfer agreement also identifies ongoing services that will be provided by the City to THA, 1 Agreement in Principle between the City of Harrisburg and The Harrisburg Authority, Water, Wastewater, and Stormwater Systems, dated August 14,

53 Whosale Wastewater Rate Study Report including street cleaning and leaf removal, vehicle maintenance and repair, and information technology support. The estimated cost of these services has been included in THA s FY 2014 budget. 1.3 Inter-Municipal Agreement and Existing Suburban Wholesale Rates The Inter-Municipal Agreement contains pricing provisions that specify how the Wholesale rates are established. A summary of the pertinent sections of the Inter- Municipal Agreement is provided below Each Municipality agrees to pay the City for sewage transport, treatment, and disposal services rendered by the City with respect to sewage and wastes emanating from each such Municipality in accordance with Schedule A of the Agreement Each Municipality agrees to pay to the City for each Industrial Establishment, a surcharge for pollutant load for all sewage and waste discharged to the Harrisburg Facilities and emanating from or containing a pollutant load of such strength character as to be classified as high strength by application of generally accepted engineering principles, or provisions of any Grant Agreement, or any state or federal law or regulation, which surcharge shall be determined by the City City agrees to deliver to each Municipality, a statement of any adjustments to the rates and charges for the next calendar year no later than December 1 of any year. The City will cause its Consulting Engineers to prepare and deliver to it no later than October 1 of each year, a report which shall include estimates of Operating Expenses, and other expenditures, costs, revenues, and changes to the rates for the next calendar year Each Municipality covenants to pay all taxes and assessments including income, profits, property, franchise, excise, and/or other taxes levied or assessed by Federal, State or any municipal government against the City upon or by reason of payment or receipt of any sums payable by such Municipality hereunder to the City Each of the Joint Municipalities agrees to pay to the City for sewage transportation, treatment, and disposal, the following separate and 2

54 Whosale Wastewater Rate Study Report distinct charges for customers of any of the Joint Municipalities discharging sewage and wastes to City sewer collection lines referred to in Section 6.01:. A. An amount equal to the amount charged per customer for sewage and wastes discharged through the Harrisburg Conveyance System; and B. An amount equal to the separate amount charged per customer in the City as a sewer maintenance charge (as distinguished from sewer treatment charge) If the City during the term hereof shall incur extra-ordinary costs in repairs to or in replacement of that part of its sewer lines governed by Article VI, to which sewage and wastes are discharged by one or more of the Joint Municipalities, any such Joint Municipality using that part of the sewer lines shall pay to the City such increased annual fees as are adequate to compensate the City for such additional costs If any Joint Municipality during the term hereof shall incur extraordinary costs in repair to or replacements of that part if its sewer collection system used jointly with the City, the City agrees to equitably share in the costs of such extraordinary repairs or replacements or to reduce annual fees paid by such Joint Municipality to the City under this Article VI... Schedule A Rates and Charges for Sewage Services 1. The categories of rates and charges to be paid to the City for sewage transportation, treatment, and disposal services in accordance with Section 5.02 are as follows: (a) Separate rates shall be applied to customers of the City, to customers of the Municipalities discharging wastes through the Harrisburg Conveyance System, and to customers of the Municipalities discharging wastes through the Steelton Conveyance System. (b) For each Residence served by metered water service and for each Non-Residential establishment, a rate per 1,000 gallons of water used shall be charged, subject however to minimum charges. Water used for Non-Residential establishments shall be determined by water meter 3

55 Whosale Wastewater Rate Study Report or by estimates made by the Municipality in accordance with generally accepted engineering standards and practices. (c) For each Residence not served by metered water service, a flat rate shall be charged. 2 The rates and charges described above shall be determined in accordance with the following: (a) Rates apply to all customers of the Municipalities and the City shall be based upon a uniform distribution of the estimated amount to be received allocable to the Operating Expenses of the Harrisburg Facilities, subject to (c). (b) Rates applied to customers in the Municipalities shall equal the rates applied to customers of the City, plus 15 percent of the portion of the City rates that is based on upon the estimated amount to be received allocable to Lease Rental payments and a margin of the same, as required under the Lease, subject to (c). (c) Rates applied to customers of the Municipalities discharging wastes through the Steelton Conveyance System shall be based on the Harrisburg Facilities annual revenue requirements allocated only to the sewage treatment plant. (d) The flat rate for Residences shall be based on the rate for customers with metered water service and an average water usage applicable to Residences in the service area of the Harrisburg Facilities. (e) The minimum rates shall be those minimum rates which are imposed within each of the Municipalities and the City, respectively. The Suburban Wholesale rates that were calculated in FY 2013 are provided in Table 1 for comparison purposes. 4

56 Whosale Wastewater Rate Study Report Table 1 Summary of Existing FY 2013 Wholesale Rates Rate Component City Suburban Steelton O&M Rates Treatment $ $ $ Conveyance Collection Total O&M Rates $ $ $ Lease Rental Rates Treatment $ $ $ Conveyance Collection Total Lease Rental $ $ $ Total $ $ $ Sewer Rate Revenue Requirements THA s sewer rate revenue requirements for a five year period from FY 2014 through FY 2018 ( the forecast period ) were developed based on THA s FY 2014 draft budget dated September 30, 2013, with subsequent modifications provided by THA, and capital improvement plan ( CIP ). Operating expenses for the years subsequent to FY 2014 were estimated by applying cost escalation factors ranging from 2.5 percent and 6.0 percent to individual budget line items, depending upon the type of expense. The rate revenue requirements include operations and maintenance ( O&M ) expenses, existing and projected debt service, pay-as-you-go cash funded capital expenditures, and amounts needed to satisfy a minimum debt service coverage target of 1.20 times, and a working capital target of 90 days. A summary of the rate revenue requirements projected over the forecast period is provided in Table 2. 5

57 Whosale Wastewater Rate Study Report Table 2 Sewer Rate Revenue Requirements Line Fiscal Year Ending December 31 No. Description Operation and Maintenance Expense $ 13,921,196 $ 14,591,271 $ 14,809,071 $ 15,301,347 $ 15,811,116 Capital Expenditures 2 Debt Service 1,709,642 3,009,227 5,881,534 6,411,305 7,123,902 3 Pay-Go Cash Funded Capital 1,933,239 1,877,339 1,526,341 1,579,763 1,653,533 4 Total Capital Expenditures 3,642,881 4,886,566 7,407,875 7,991,068 8,777,436 5 Total O&M and Capital Expenses $ 17,564,077 $ 19,477,838 $ 22,216,945 $ 23,292,415 $ 24,588,552 Less Revenue From Other Sources 6 Miscellaneous Revenue $ (710,000) $ (729,880) $ (750,317) $ (771,326) $ (792,923) 7 Interest Income (14,011) (16,411) (18,375) (18,819) (19,445) 8 Sources & Uses of Funds 228, ,147 54, , ,442 9 Net Rate Revenue Requirements 17,068,938 19,462,693 21,502,703 22,625,340 23,903,626 Rate Revenue Increase From Prior Year 51.0% 14.0% 10.5% 5.2% 5.6% The calculated revenue requirements include both debt service and pay-as-you-go cash funded capital as part of the capital expenses for each year. In prior Wholesale rate calculations, THA included a separate revenue requirement line for meeting a debt service coverage target of 1.1 times, which is in accordance with Schedule A 2(b) of the Inter-Municipal Agreement. THA s financial advisor, Public Resources Advisory Group, has advised THA that it may need to plan to achieve a debt service coverage target of 1.2 times or more in order to be able to execute its capital financing plan. Therefore, the revenue requirements projection shown in Table 2 was established to achieve at least 1.2 times coverage. In FY 2014 and FY 2015, THA plans to fund a sufficient amount of capital projects on a pay-as-you-go basis, which is anticipated to exceed the 1.2 coverage target. In the remaining years of the forecast, the amount of pay-as-you-go cash funding was adjusted from what was contained in THA s capital plan in order to forecast debt service coverage of at least 1.2 times coverage. As a result, a separate revenue requirement line item for debt service coverage was not included in the revenue requirement forecast, as was done in prior Wholesale rate calculations. It is important to note that due to the anticipated transfer agreement between the City and THA, which contains new shared service provisions between the City and THA, there is a greater level of uncertainty regarding the FY 2014 budget than in the past. In addition, the amount and terms of the capital financing anticipated for FY 2014 has not been finalized, and may result in future changes to the FY 2014 budget. However, for the purposes of this study, we have used the current budget information provided by THA to determine the rate revenue requirements as described above. Furthermore, a projection of rate revenue requirements for FY 2015 through FY 2018 is provided for 6

58 Whosale Wastewater Rate Study Report informational purposes only, and the remaining sections of this report focus on the development of the FY 2014 Wholesale wastewater rate calculations. These projected revenue requirements may be subject to change based upon receipt of additional information from THA. To the extent the THA budget or revenue requirement projections change, they may have a material effect on the Wholesale wastewater rates calculated herein. 3. Cost Allocations 3.1 Cost Categorization The rate revenue requirements for FY 2014 were allocated to several different cost factors. These cost factors consist of the following categories: Treatment Related to wastewater treatment, which such costs are shared by all users of the system. Conveyance Related to shared use conveyance facilities, which such costs are shared by all users of the system, except customers whose wastewater flow is conveyed through the Steelton Interceptor. Collection Related to the City s collection system, which such costs are shared only by City customers Other Related to system costs or revenues associated with City-only customers and not shared by other users of the system. In addition, administration costs were first categorized into a separate administration cost category and then subsequently re-allocated to the four categories listed above. The details of the cost allocations and basis for the allocations are provided in Appendix A. A summary of the resulting revenue requirement categorizations for FY 2014 is provided in Table 3, and additional details are provided in Appendix A. O&M revenue requirements are annual O&M costs less miscellaneous revenue offsets. Capital revenue requirements are annual capital costs less miscellaneous revenue offsets. 7

59 Whosale Wastewater Rate Study Report Table 3 Summary of FY 2014 Cost Categorization Results Description Treatment Conveyance Collection Other Total Operating Revenue Requirement $ 7,347,562 $ 2,712,759 $ 2,904,608 $ 232,606 $ 13,197,535 56% 21% 22% 2% Capital Revenue Requirement $ 1,619,168 $ 806,084 $ 1,169,690 $ 47,589 $ 3,642,531 44% 22% 32% 1% Total $ 8,966,730 $ 3,518,843 $ 4,074,298 $ 280,195 $ 16,840,066 53% 21% 24% 2% As described above, the allocation of the capital revenue requirements for FY 2014 includes capital items budgeted in FY 2014 related to GIS mapping and THA s Non Minimum Control Plan and Long-Term Control Plan Update. These items include characterization of wet weather flows in the conveyance system, as well as assessment and planning costs associated with meeting wet weather regulatory requirements. These items were allocated to the cost categories based on current available information and estimates provided by THA. As more characterization and assessment information becomes available in the future, these cost allocations should be re-evaluated. 3.2 Cost Allocation The categorized costs were then allocated to City and Suburban customers based on each customer s estimated proportionate usage of the system. A summary of the units of service associated with City and Suburban customers is summarized in Table 4. 8

60 Whosale Wastewater Rate Study Report Table 4 Units of Service (FY 2014) 1 Non-Metered Non-Metered Metered Total Consumption Consumption Consumption Consumption Customer Class EDU's (1,000 gallons) (1,000 gallons) (1,000 gallons) City of Harrisburg - - 1,473,126 1,473,126 Penbrook Borough 1,332 86,580 10,838 97,418 Paxtang Borough ,550 5,669 49,219 Swatara Township - via Harrisburg , ,829 Swatara Township - via Steelton ,366 70,366 Lower Paxton Township 12, , ,393 1,027,028 Susquehanna Township 10, , , ,316 Steelton Borough ,074 97,074 Total 25,606 1,664,390 2,469,986 4,134,376 1 Based on FY 2012 billing data provided by the City. 2 One EDU w as assumed to equal 65,000 gallons of residential non-metered consumption per year. According to the City, a significant number of City customer water meters were not recording water readings properly in FY 2012 because some of the electric water meters had batteries that were expired. For the purposes of billing, the City used estimated consumption from prior periods to bill these customers. We have incorporated these estimated readings in the units of service shown in Table 4. The unit cost of service was calculated by dividing the categorized costs by the units of service. The units of service were distributed to each cost category as shown in Table 5 based on the system characteristics associated with each customer type. A summary of the unit cost of service is provided in Table 6. Table 5 Units of Service Allocated to Cost Factors Allocation (%) Customer Class Treatment Conveyance Collection Other City of Harrisburg 100% 100% 100% 100% Penbrook Borough 100% 100% 0% 0% Paxtang Borough 100% 100% 0% 0% Swatara Township - via Harrisburg 100% 100% 0% 0% Swatara Township - via Steelton 100% 0% 0% 0% Lower Paxton Township 100% 100% 0% 0% Susquehanna Township 100% 100% 0% 0% Steelton Borough 100% 0% 0% 0% 9

61 Whosale Wastewater Rate Study Report Table 6 Unit Cost of Service (FY 2014) Description Treatment Conveyance Collection Other Units of Service (1,000 gallons) 4,134,376 3,966,936 1,473,126 1,473,126 Operating Revenue Requirement $ 7,347,562 $ 2,712,759 $ 2,904,608 $ 232,606 Capital Revenue Requirement $ 1,619,168 $ 806,084 $ 1,169,690 $ 47,589 Operating Unit Cost ($/1,000 gallons) $1.78 $0.68 $1.97 $0.16 Capital Unit Cost ($/1,000 gallons) $0.39 $0.20 $0.79 $ Wholesale Rate Calculation Wholesale rates were calculated for the Suburban customers for FY 2014 based on the calculated unit cost of service, each Suburban customer s units of service, and the terms of the Agreement. A summary of the calculated Wholesale wastewater rates for FY 2014 is provided in Table 7. Table 7 Calculated Wholesale Rates (FY 2014) Customer Class Description City Suburbs 1 Steelton 2 O&M Rate Treatment $1.78 $1.78 $1.78 Conveyance $0.68 $0.68 $0.00 Collection $1.97 $0.00 $0.00 Other $0.16 $0.00 $0.00 Total O&M Rate ($/1,000 gallons) $4.59 $2.46 $1.78 Capital Charge (Lease Rental Rates) 3 Treatment $0.39 $0.45 $0.45 Conveyance $0.20 $0.23 $0.00 Collection $0.79 $0.00 $0.00 Other $0.03 $0.00 $0.00 Total Capital Charge ($/1,000 gallons) $1.42 $0.68 $0.45 Total Rate ($/1,000 gallons) 4 $6.01 $3.15 $ Penbrook and Paxtang Borough, and Sw atara, Low er Paxton, and Susquehanna Tow nship. 2 Steelton Borough and a portion of Sw atara do not share in the conveyance system costs. 3 Reflects a 15% adjustment to the unit costs per Section 2b of Schedule A of the Agreement. 4 The Wholesale Rate Report prepared in November 2013 calculated a total Suburban rate of $3.00 per 1,000 gallons. This report assumed higher nutrient credit costs, w hich increased the Suburban rates as show n above. For revenue forecasting purposes, a rate of $3.00 per 1,000 gallons w as assumed for Wholesale customers. 10

62 Whosale Wastewater Rate Study Report In preparing the Wholesale rate calculations, we have assumed that the Inter-Municipal Agreement between the City and the Suburban customers, and associated pricing terms, would be transferred to THA. We have also assumed that the lease rental rates shall be replaced by a capital charge, consisting of annual wastewater debt service and pay-as-you-go capital expenditures, since it is anticipated that the lease agreement between the City and THA will be terminated with the transfer agreement that is anticipated to be executed by the end of FY

63 Appendix A Wholesale Rate Calculation Details

64 Table A.1 Operating Expense Allocation The Harrisburg Authority Wholesale Cost Allocation Study FY2014 Alloc Allocation % Allocation $ Line Dept Description Projected Ref Treatment Conveyance Collection Administration Other Treatment Conveyance Collection Administration Other 2010 Sewerage Administration Division Administration - Personnel: Salaries & Wages $ 158, % 17.1% 5.0% 0.0% 0.0% $ 123,699 $ 27,231 $ 7,944 $ - $ Overtime % 17.1% 5.0% 0.0% 0.0% Sick Leave Buy-Back % 17.1% 5.0% 0.0% 0.0% Social Security 12, % 17.1% 5.0% 0.0% 0.0% 9,463 2, Medical % 17.1% 5.0% 0.0% 0.0% Severance Pay % 17.1% 5.0% 0.0% 0.0% Pension 5, % 17.1% 5.0% 0.0% 0.0% 4, Leave Payout 78, % 17.1% 5.0% 0.0% 0.0% 61,189 13,470 3, Unemployment Comp % 17.1% 5.0% 0.0% 0.0% Workers' Comp-Adj % 17.1% 5.0% 0.0% 0.0% Loss Time & Med % 17.1% 5.0% 0.0% 0.0% State Fees & Assess % 17.1% 5.0% 0.0% 0.0% Excess Policy & Bon % 17.1% 5.0% 0.0% 0.0% Administration - Operating: Advertising $ 2, % 0.0% 0.0% 100.0% 0.0% $ - $ - $ - $ 2,000 $ Printing 8, % 0.0% 0.0% 100.0% 0.0% , Telephone 12, % 0.0% 0.0% 100.0% 0.0% , Postage 1, % 0.0% 0.0% 100.0% 0.0% , Legal - 0.0% 0.0% 0.0% 100.0% 0.0% Audit - 0.0% 0.0% 0.0% 100.0% 0.0% Consulting 20, % 30.0% 10.0% 0.0% 0.0% 12,000 6,000 2, Collection (Opt & LI - 0.0% 0.0% 0.0% 100.0% 0.0% Other Professional 90, % 0.0% 0.0% 0.0% 0.0% 90, Stop / Loss Premium - 0.0% 0.0% 0.0% 100.0% 0.0% Automobile Prem - 0.0% 0.0% 0.0% 100.0% 0.0% Auto Deduct - 0.0% 0.0% 0.0% 100.0% 0.0% General Liability - 0.0% 0.0% 0.0% 100.0% 0.0% Boiler - 0.0% 0.0% 0.0% 100.0% 0.0% Property & Crime - 0.0% 0.0% 0.0% 100.0% 0.0% Property Deduct - 0.0% 0.0% 0.0% 100.0% 0.0% Inland Marine - 0.0% 0.0% 0.0% 100.0% 0.0% Flood Prem - 0.0% 0.0% 0.0% 100.0% 0.0% Public Off Prem - 0.0% 0.0% 0.0% 100.0% 0.0% Excess Liability - 0.0% 0.0% 0.0% 100.0% 0.0% Terrorism - 0.0% 0.0% 0.0% 100.0% 0.0% Uniform Rentals 10, % 29.0% 27.7% 0.0% 0.0% 4,322 2,904 2, Service Contracts - 0.0% 0.0% 0.0% 100.0% 0.0% Maint Serv Contract - 0.0% 0.0% 0.0% 100.0% 0.0% Tuition/Training 7, % 0.0% 0.0% 100.0% 0.0% , Admin/Trustee Fee - 0.0% 0.0% 0.0% 100.0% 0.0% Laundry - 0.0% 0.0% 0.0% 100.0% 0.0% Travel - 0.0% 0.0% 0.0% 100.0% 0.0% Conferences 1, % 0.0% 0.0% 100.0% 0.0% , Memberships - 0.0% 0.0% 0.0% 100.0% 0.0% Disaster Recovery - 0.0% 0.0% 0.0% 100.0% 0.0% Misc Contract Srv - 0.0% 0.0% 0.0% 100.0% 0.0% Bank Serv Charges - 0.0% 0.0% 0.0% 100.0% 0.0% Software 71, % 59.2% 31.0% 0.0% 0.0% 6,949 42,212 22, Subscriptions % 0.0% 0.0% 100.0% 0.0% Photography - 0.0% 0.0% 0.0% 100.0% 0.0% Data Processing - 0.0% 0.0% 0.0% 100.0% 0.0% Office 2, % 0.0% 0.0% 100.0% 0.0% , Misc Supplies - 0.0% 0.0% 0.0% 100.0% 0.0%