Contact: Mr. Tommy Smith, Mayor, City of Hampton, P.O. Box 400, Hampton, GA 30228, 770/946-4306, 770/946-8921 (fax)
Mr. Lindy Farmer, General Manager, Henry County Water and Sewage Authority, 533 Hampton Road, McDonough, GA 30253, 770/957-6659, 770/954-9080 (fax)
Description of Effort
Addressing future water and sewer needs is rarely simple for local governments but it seems to have gotten more complicated recently. The push toward reducing duplication of services, as set by the Service Delivery Strategy Act of 1997, is forcing local governments to cooperate in a process that looks at available capacity and opportunities for consolidation of services. In addition, more stringent Georgia Environmental Protection Division (EPD) regulations make regional approaches more and more attractive. Finally, the economic realities of expanding and providing services can also place multi-jurisdictional cooperation at the top of the short list.
The City of Hampton, along with Henry County and EPD, has been working through the ‘to build or not to build’ question in an attempt to position itself to meet future water and sewage needs. The city is located 40 miles south of Atlanta, about 10 miles west of Interstate 75, in Henry County. During the past three decades, the city has experienced modest growth, while the county has established itself as a fast growing bedroom community for metropolitan Atlanta that also has been successful in attracting large commercial and industrial companies.
Even with continued modest growth the city estimates it will soon need to double its wastewater treatment capacity. The Henry County Water and Sewage Authority (WSA), on the other hand, has available capacity at its Bear Creek Land Application System (LAS) that it is willing to sell. EPD would like to see a cooperative agreement reached that matches need to capacity. Or as an alternative, EPD supports the development of a city-owned LAS that directs wastewater improvements away from increased discharges to the area’s small streams, which already receive treated discharge, even if the loading is at stricter effluent standards.
The city has submitted a request to expand its existing 0.5 million gallons per day (mgd) sewerage treatment plant NPDES permit by adding 0.5 mgd of capacity and discharge. The increased capacity and more advanced treatment method of the upgraded plant will permit the city to meet service needs for a 20 year projection; and will also meet the more stringent effluent limitations imposed by EPD. The application is pending, however, while EPD attempts to facilitate a solution that steers the city away from increased stream discharges.
While the city and county have consolidated many services under the Service Delivery Strategy Act, this issue precedes those negotiations. In addition, several considerations contribute toward a difficult negotiation process in devising a regional solution. These include:
the impact of development and growth on capacity needs;
economic factors including rate structure, rate increases, and return on investment; and
the relationship of service thresholds to the economic factors.
Managerial Considerations
The Henry County WSA, created in 1961 by an Act of the General Assembly, offers water and sewer services countywide. The WSA currently provides 70 percent of the city's water at cost. The WSA is a revenue-producing enterprise fund governed by a five-member board that is appointed from each commission district. The WSA supports the county's rapid development agenda through its financial and planning functions. It collects a 2-mil property tax making it the only non-governmental entity in the state with this authority. In addition, it has planned for and positioned itself to provide water and sewer services 30 - 40 years out.
The City of Hampton began serious discussions of future wastewater needs in early 1997 when it contracted with an engineering firm to initiate planning, financial analysis, and development of technical alternatives.
Because the nuances of local government functions are unique, negotiations of service provision are greatly influenced by the details of the situation. A central factor in the city’s acceptance of a long-term contract with the Henry County WSA is the difference in the development rate and growth potential between the city and county and how those differences may influence service costs. The city has been growing at an annual rate of 3.5 percent. In 1990, the city’s population represented approximately 4.6 percent of the county population; however, the city does not have enough developable land to support growth at this continued rate. A conservative annual growth rate of 3.25 percent will end with the city’s total build-out in the year 2020 at an estimated population of 7,638.
Henry County has been growing at a rate of 18 percent per year, in large part because it has the available land and water and sewer capacity to support rapid development. The county must deal with its 18 percent growth rate in all of its operations including the LAS. It estimates that improvements to water and sewage operations will cost nearly $50 million for water supply and $30 million for wastewater treatment over the period from 1993 to 2002.
In the 1960’s, the Atlanta Motor Speedway was built within both the city and county boundaries but the county became the sole water and sewer service provider. It issued two bonds totaling approximately $4.4 million to develop a 12-inch water main and to construct 0.25-mgd sewage treatment capacity. The county would benefit from the city diverting 0.5 mgd of wastewater to the Bear Creek facility that supports the Speedway by reaching a more constant minimum service threshold to service its debt.
Technical Considerations
The engineering study projecting future population and wastewater needs concluded that the city ultimately will generate 1.0 mgd of wastewater and identified the following five alternatives.
Upgrade the city’s existing 0.5-mgd wastewater treatment facility to 1.0 mgd.
Retain the city’s existing 0.5-mgd wastewater treatment facility and construct a 0.5-mgd LAS facility.
Abandon the city’s existing 0.5-mgd wastewater treatment facility and construct a 1.0-mgd LAS facility.
Retain the city’s existing 0.5-mgd wastewater treatment facility and divert 0.5 mgd to Henry County WSA.
Abandon the city’s existing 0.5-mgd wastewater treatment facility and divert 1.0 mgd to Henry County WSA.
Following the receipt of unofficial cost data from the county and a public meeting, the city decided to pursue alternatives 1 and 4 in greater detail. Although EPD supports a LAS, the cost of the land, transmission lines, and plant redesign makes a city-owned LAS cost prohibitive. Alternative 4 "diversion of the additional 0.5 mgd of discharge to the existing available capacity at the county’s Bear Creek LAS" may be the best alternative overall if the two local governments can come to acceptable financial arrangements.
Financial Considerations
The consulting engineer completed a cost-effectiveness analysis in January 1998 based on the following terms provided by the county.
A wholesale user rate set at $2.65 per 1,000 gallons, analyzed annually and adjusted to account for operation and maintenance costs.
The combined operation and maintenance costs for all facilities within the county’s WSA system would establish user rates.
The city would remit its sewer impact fee to Henry County WSA.
Negotiations occurred between the city and county from February to May when the county proposed its ‘best offer’ that included the following conditions and financial terms.
The city would be responsible for the cost of construction of the metering station and interceptor sewer, whereas previously the WSA was responsible.
The wholesale rate was reduced from $2.65 to $2.22 per 1,000 gallons.
The frequency and method of adjustment of user charges was not addressed.
The condition remained that sewer impact fees would continue to go to Henry County WSA with a required increased to $1,680 per equivalent dwelling unit (EDU), whereas the city’s current impact fee is $1,000 per EDU (determined as a 300 gallon per day capacity). (At the time of printing, the WSA's current impact fee is $2300).
At this point the city council unanimously decided it was not in the community’s best interest to divert future flows of 0.5 mgd to the county in the absence of a more financially attractive offer. Based primarily on the sewer impact fee issue, which is applied to new development and is a pass-along cost, the city council decided to discontinue pursuing an alternative with the county and to further pursue alternative 1"upgrading the existing wastewater treatment facility to 1.0 mgd".
In February 1999, EPD facilitated a meeting to reopen negotiations between the city and county with the objective of reaching an acceptable arrangement to divert 0.5 mgd of the city’s wastewater to the county system. The city provided the following counterproposal to the county’s terms that outlines the conditions sought in a potential agreement.
The WSA designs and constructs the flow meter, while the city designs and constructs the diversion structure and connecting pipe.
The city raises its new customer impact fee from $1000 to $1760 per EDU.
The city remits 50 percent of its new customer impact fees to Henry County WSA, while retaining half to use in repair/replacement of its existing wastewater treatment plant.
The initial wholesale rate the city pays WSA would be $1.80 per 1,000 gallon, which is 63 percent of the current county residential retail rate of $2.87 per 1,000 gallons.
Future user charge increases would occur as the county residential rate increases, however, the city’s rate would remain at 63 percent of the county residential retail rate.
An agreement must contain a binding provision relative to Henry County WSA providing adequate treatment capacity to receive the necessary flow of up to 0.5 mgd from the city.
The city is willing to tie into the county’s Bear Creek LAS but the development and growth differentials and the city’s reluctance to underwrite the county’s outstanding debt impact the financial terms under negotiation as noted in the following.
The city estimates that the county’s ‘best offer’ terms will cost $1.2 million more over 20 years than the estimated cost of $5,361,549 to expand its existing sewage treatment plant to 1.0 mgd (alternative 1).
Hooking up to the county’s LAS at the $2.22 per 1000 gallon wholesale rate with a probable 2.5 percent annual rate increase plus remittance of 100 percent of the impact fee is projected to cost $7,558,616 ($1.2 million more that alternative 1) over twenty years.
Doubling the city’s wastewater treatment capacity to 1.0 mgd is expected to be adequate for another 20 years at its 3.5 percent growth rate. The city’s concern is that the county’s future operations and fees will be impacted by the county growth rate, at a factor of 18 percent. The city seeks an equitable percentage formula on which future rate structure increases will be based.
The county’s offer for the city to remit only 50 percent of the impact fees would set the city’s total 20-year payout at $5,961,814 bringing the negotiations within $600,000 of alternative 1.
The city’s counterproposal of reducing the user charge from $2.22 to $1.80 per 1000 gallons would reduce the 20-year payout by the $600,000 difference to $5,378,199, very close to alternative 1.
In March 1999, the WSA responded to the city's proposal with terms that it feels are fair to both the city and WSA's other customers. An offer of reduced rates and prorated impact fees representing the city's continued obligation to develop and maintain the collection system and to provide customer service was made by the WSA. The WSA feels it is in the best interest of all residents of the county including those within the city that its system be operated on a basis that no customer or class of customer is subsidized by others. WSA has addressed the concerns of the city regarding provision of adequate capacity in its offer. WSA's offer provides the city with an opportunity to have an established cost of wastewater treatment and disposal without the uncertainty of changing regulations and uncertain costs for construction of a plant expansion not yet approved by EPD. WSA's offer relieves the city of a requirement for long-term financing, while providing the ability to share costs over the entire base of county customers.
Outcomes
The City of Hampton and WSA continue to engage in formal and informal dialogue on addressing the city's capacity needs. Concurrently, the city has opened discussions on a county purchase of the city's wastewater treatment system. However, considering that the current city system is at capacity, the two governments may have difficulty coming to an agreeable purchase price.
If the two jurisdictions fail to reach a regional solution, the Hampton City Council is prepared to move forward in its request to EPD for an expansion of their discharge permit to 1.0 mgd. If EPD grants concurrence, the next phases for the city could include completion of a watershed assessment report and the process of seeking funds. The city has several options from which to seek financing for the wastewater facility expansion including the Georgia Environmental Facilities Authority State Revolving Fund and Georgia Loan programs or the Rural Development Georgia Community Loan program.
The city needs to double its wastewater treatment capacity and seeks to accomplish this in the most cost-effective arrangement. Furthermore, the duplication of wastewater treatment services in the city and county could be eliminated through a long-term agreement. While many details remain to be worked through, the two local governments are committed to seeking a mutually beneficial solution. |
