Devise New Fee Plan For City Sewer Rates

At an action packed meeting on Monday, July 9, Peshtigo’s Sewer and Water Committee agreed to recommend City Council approval of a contract agreement with Kaempfer & Associates, Inc. to completely revise the way rates are computed for sewer use in the city.

The new user charges will be intended to generate sufficient revenue to offset debt service costs (including those for the $2.3 million wastewater treatment facilities upgrade that is currently underway), along with replacement fund costs and annual operation and maintenance costs for the entire wastewater management system.

Kaempfer said the fee structure they devise will be a new way of calculating costs so they reflect the new capital improvement project and can be updated on as-needed basis. Current prices are based only on operating costs. The new rates are to be based on a “per unit” charge, with a difference between charges for domestic strength wastewater discharge and discharge with pollutant concentrations greater than domestic strength.

Kaempfer is to bill for the fee structure work on a time and material basis with a “not to exceed” budget of $15,000. Committee Member Dale Berman stressed that the “not to exceed” provision be more clearly worded before the contract is approved, and recommendation to accept will apply only after contract wording has been reviewed and approved by the city attorney. He and committee member Dan Seymour both said they read the Kaempfer proposal as meaning the fee schedule work would cost $15,000, with anything over that to be charged on a time and material basis.

The new agreement replaces a proposal accepted at the June 11 committee meeting, and a draft of the new fee structure is supposed to be ready for committee consideration at the September meeting.

“I think this is an effort that we need to go through to make it fair to all users of the plant,” Committee Chair Fred Meintz commented.

The need to devise an equitable new sewer rate to address an existing $200,000 shortfall in operating revenues as well as cover the $2.3 million upgrade has faced the committee for some time.

A recent Peshtigo Times article incorrectly stated the shortfall was $800,000. Meintz pointed out the error and said they could never have let the utility get that far in the red without a rate increase. City Engineer George Cowell explained also that depreciation accounts for $160,000 of the shortfall in operating income, which reduces the actual cash operating deficit to $40,000.

The article also stated the Water and Sewer Committee has been considering what portion of the WWTP improvements should be paid by BPM, Inc., and Jim Koronkiewicz, the company’s general manager took exception to this.

In a letter addressed to the committee on Friday, June 29, and discussed briefly at their meeting on Monday, Koronkiewicz strongly reiterated his company’s position that it will not pay for major capital improvements at the wastewater treatment plant.

Koronkiewicz said his letter was in response to a Peshtigo Times article quoting comments made by Meintz after he and other BPM representatives had left a previous meeting that, “BPM uses two thirds of the capacity of the wastewater treatment plant and he feels they should pay two thirds of the improvement costs.”

“This is not the first time I have found out public comments were made by either Committee personnel or the City’s contracted engineering service representatives after BPM representatives had left,” Koronkiewicz had written. “BPM Inc. has emphatically stated that it has an “Operating and Maintenance” agreement to operate the Waste Water Treatment Plant. It will NOT PAY for major capital renovations to the facility.”

“The intent of the statements in the agreement regarding ‘major maintenance and capital expenditures’ were solely for maintaining existing operations,” the letter continued. “It was never intended to be a cost share of a major rebuild/expansion of the facility. BPM does not own the facility nor does it have the power to contract with any service providers including engineering firms regarding upgrades or capital expansions.”

The letter from Koronkiewicz said BPM has provided significant operational information, engineering services, electrical services and materials at no cost to the city during the past four years as discussions have occurred regarding the WWTP upgrade.

However, the letter went on, “The scope of the project continues to grow from the original improvements in the settling basins at a cost of approximately $900,000 to over $2,300,000. BPM does not agree with the expansion of scope and escalating costs of the improvements and engineering services.”

It concluded, “The improvements to the Waste Water Treatment Plant will be funded by the users of the facility. This includes residents, businesses, users of the services, as well as BPM. We will pay our share through higher quarterly bills from the City of Peshtigo due to increased rates.”

The letter added that BPM has agreed to review and negotiate an Operating and Maintenance agreement going forward, and is waiting for a timetable to discuss it. Copies were addressed to Water and Sewer Committee members as well as to the City of Peshtigo, Mayor Allan Krizenesky, and the Finance Committee.

“I don’t think there’s any question that the operating agreement doesn’t cover the rebuild costs,” Meintz told Koronkiewicz at the July 9 meeting. He referred to possible errors and misunderstandings in news articles, including the incorrect $800,000 figure for the operating shortfall, and declared, “$600,000 is a big difference.”

Koronkiewicz replied the reason for the letter “was to make very, very clear BPM’s position on this upgrade.”

Committee member Berman’s motion to accept the letter and place it on file was unanimously approved.

Physical work on the WWTP upgrade started during the week of June 24, when August Winter & Sons, a subcontractor for Oudenhoven Construction, Inc., began exploratory excavation work that continued through July 3, according to a report by Kaempfer Engineer Don Heikkila. Materials for the outside piping work were also delivered.

The letter says BPM, inc. indicated on June 25 that there are problems with aeration blower No. 2 and/or a motor control center that may require changing the construction sequence and create additional work for the contractor, unless BPM, Inc. can correct one or both problems. Kaempfer said changing the sequence of work just opens things up for the contractor.

Meintz asked if this was something the committee should have known before the construction sequence was laid out.

Wastewater Treatment Plant Operator Gary Motkowski said he had not known about intentions to use the blower in theplanned sequence, but did know that Blower No. 2 has been inoperable for quite some time.

“You and I need to talk to them and come back with a response,” Koronkiewicz told Kaempfer. He also asked if in future BPM, Inc., could receive copies of construction reports when they are sent to the city. Meintz agreed that should be done, “We work together on this.”

Kaempfer said they will receive a monthly status report on the project about a week before each meeting while the project continues.

Funding for the project was settled, at least on a temporary basis, when City Council at its monthly meeting Tuesday, July 3 agreed to obtain a 5-year loan from Farmers & Merchants Bank at 2.47 percent interest for the $1,677,000 left after TIF funds pay 29.1 percent of the cost, or $645,606. Mayor Krizenesky said the loan will need to be finalized at a special city council meeting after loan documents are prepared.

Developing a new Sewer Use Ordinance and Operation and Maintenance Manual had been suggested, but Kaempfer advised putting those projects off until they know where they are headed with a possible Clean Water Fund (CWF) loan. He said the Clean Water Fund loan would mean about $60,000 in engineering costs that would not otherwise need to be spent, so getting that loan would make sense only if the application for forgiveness of a portion of the principal is approved. Currently the CWF loan through the DNR carries higher interest than a regular bank loan, but repayment can be spread over a longer time period, and the application includes the possibility a significant portion of the principal could be forgiven, which would be the equivalent of a grant.

“I’ve been hearing ‘forgiveness’ in all the 26 years I’ve been on the council,” declared Berman, adding no forgiveness had ever come through for Peshtigo.

He asked if they have to take the loan if they apply, and at what point they would know if forgiveness was to become a reality.

Kaempfer said applications are due by Sept. 30, and by Nov. 1 they should know what the interest rate would be, and whether or not there would be any forgiveness.

He said the DNR had told him the TIF contribution would not affect the forgiveness ratio, as it is considered local funding, so the only deduction would be for the Focus on Energy grant if it is received. Also, once they know if they will get the forgiveness and what the interest will be, they can decide whether or not they want the CWF loan. If they do accept the loan, the DNR will have a say in city sewer rates, and will require a funded depreciation account, which will mean higher rates for the users. As to any answer to that question, Kaempfer said it is as if the Focus on Energy people “have just dropped off the face of the earth...They aren’t acting on anything, they’re just busy reorganizing themselves.”

Cowell said he was told during the application process that even if they start work before grant decisions are made the grant amount will not be affected.

Krizenesky asked if he had that in writing, recalling the city’s experience with grants, including an EPA grant that was supposedly granted but never materialized.

“Even if it’s in writing, there’s nothing to say they can’t send a letter later saying, ‘We’ve changed our mind,’” Kaempfer commented.

City utility users are also in for a rate increase on the water side of their bill. A public hearing is scheduled for 10 a.m. Tuesday, Aug. 28 at Peshtigo Municipal Building on a water rate increase. The actual rate documents are available for public review. Meintz commented the city started out requesting a 1 percent return on investment, and the DNR mandated a 1.5 percent rate of return, and that is the basis for the new proposed rates. Meintz suggested all committee members should review the documents before their next meeting, which will be on Tuesday, Aug. 20.

Cowell presented what he called “a very preliminary draft” of a sewer collection system budget for next year. There was brief discussion of budgeting for a sewer vac unit and replacing existing meters over time with those than can be read via radio, but no action was taken.

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