Citizen Advisory Committee Meeting 3 - phillywatersheds.org CAC Mtg 3 Summary... · Stormwater Utility and Rate Consultation – Credits Analysis and ... The committee agreed to hold

CAC Meeting #3 Summary June 9, 2011

Stormwater Utility and Rate Consultation – Credits Analysis and Recommendations Study June 9, 2011 PWD CAC Mtg 3 Summary 29JUN11 V2.docx 1

Citizen Advisory Committee Meeting # 3 Meeting Summary June 9, 2011 6:00‐8:30pm; ARAMARK Tower 1101 Market St. 15th Floor The third meeting of the Philadelphia Water Department’s Stormwater Citizen Advisory Committee (CAC) commenced at 6:30pm with a brief review of the previous meeting’s topics and outcomes.

Review of Charge to the CAC The meeting began with a review of the Charge to CAC: “To provide advisory opinions to PWD on topics related to rate structure, stormwater credits and incentives, and special ratepayer situations to be considered as a part of the PWD’s 2012 rates case.” The committee was reminded that “we don’t have to agree on ideas and desires, we only have to agree to have a mutually informative friendly discussion.”

Housekeeping The CAC was asked if the next meeting, which is currently scheduled for June 30th, would work for everyone given that the July 4th Holiday falls on the following Monday. The committee agreed to hold the meeting as schedule and those who are unable to attend will send an alternate. PWD provided an update on the proposed D‐Permits bill. D‐Permits (or Discontinuance Permits), as described in Handout #3, allow property owners to obtain a permit under existing City Code which allows them to permanently disconnect from water service and to stop being charged by PWD for water and sewer service. The proposed bill would revise the existing code to allow PWD to charge these properties for stormwater fees. The bill has moved out of committee. PWD will continue to inform the CAC of any upcoming policy developments. Green City, Clean Waters Update The CAC was provided with an update on Philadelphia’s Green City, Clean Waters Long‐Term Control Plan (LTCP) for which PWD signed a consent agreement on June 1 with the Pennsylvania Department of Environmental Protection (PaDEP). The final plan is a $2 billion 25‐year plan, rather than the $1.6 billion 20‐year plan referenced in Handout #6 and in the September 1, 2009 Summary Report provided to the CAC. It was noted that along with the ancillary benefits provided only a green approach could meet the City’s financial constraints, be implemented system‐wide, reduce overflows in all watersheds and have an immediate impact on PWD’s system. CAC members asked how the plan would be funded and if the affordability was reviewed. PWD stated that the plan will be paid for via the customer revenues. In addition, the U.S. Environmental Protection Agency (USEPA) defined affordability and that bills could not increase more than a 2.5% on an annual basis in costs related to support plan implementation. Review of Stormwater Costs At the previous meetings, several CAC members asked for additional information on the programs and services which account for PWD’s stormwater costs. As discussed in Handout #7, PWD will increasingly invest in

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• Option 2, which results in $29.0M cost reallocation by moving the conveyance pipe allocation from 70/30 stormwater to sanitary sewer to 50/50, making customer cost proportional to sanitary sewer and stormwater revenues and adjusting the strength factors

The CAC raised the following question/concerns regarding the proposed reallocation methodology following

• Changes in the Strength Factor / TSS/ BOD might adversely impact industry. It was noted that strength value is different for residential sanitary and stormwater volumes are taken into account.

• Revenue and cost are used interchangeably. Cost should be the driver vs. how revenue is captured. Goal should be to bring in enough revenue to cover stormwater costs.

• PWD needs to charge based on actual costs for stormwater and that the “people that cause the problems” pay their fair share. The flexibility to modify the allocation factors appears to undermine the validity of the $124M cost allocation presented in Handout #5.

• It may be difficult to achieve fairness in any category. A CAC member provided an example of an existing property with systems already in place and that some rate payers may feel they didn’t have complete information on their anticipated costs, which may have informed their property development decisions (e.g. purchasing a property).

Reallocation Basics The CAC then discussed the “reallocation basics” as presented in Handout #9. The following basics were noted:

• Any proposed reallocation will result in a “Zero Sum Game” • Every proposed change affects most ratepayers • Under any change some rate payers will be happy with the results while others will not be • Each rate payer will have a preference

Summary of Reallocation Analysis The CAC then reviewed the results of the reallocation analysis presented in Handout #9. It was noted that within the construct of zero sum game – there are a lot of potential options for reallocation and the impacts largely depend on how the reallocation is made. Under the two options studied: the fees don't change much for most properties; most properties facing large parcel area based charges would see their charges decrease under a reallocation; for a few, who are large sewer customers, the fees increase, particularly if they have small parcel‐based charges with significant water consumption; these customers can be identified and the degree of impact quantified. Table 1 as provided in Handout # 9 was reviewed. This table presents the categories of rate payers, preferred rate structure and average monthly fees. It was noted that averages presented can’t tell the whole tale and there may be customers in here that pay 1000% more than under the meter based stormwater charges. A member of the CAC noted that these averages were not representative of their properties and felt that a sub‐category was potentially needed under warehouses to represent large and small facilities. Table 2 as provided in Handout #9 was reviewed. This table presents the range of average monthly fees attributable to each category for the historical meter based charge, the current charges as of July 1, 2011 (FY2012), an all parcel‐based charge, reallocation option 1, reallocation option 2, and the theoretical all sewage based charge. It was noted that when looking at the reallocation proposed under option 2, most of the categories’ average fees are similar to their current fees as of July 1, 2011.



Table 3 as provided in Handout #9 was then reviewed. This table presents the “Dow Jones” list of properties, further discussed in Handout #9, and the impacts of any proposed rate change on the actual monthly fee for these actual properties across the range of rate bases and reallocation options. The impacts were discussed, noting that properties that utilize large amounts of water may see a large increase due to cost reallocation. It was noted that the average monthly fees presented account for the change in sanitary costs for each property category. The CAC asked that the additional increase in sanitary sewer charges be presented separately and the full costs to the customer be presented in a separate table. The CAC also requested copies of the current tables and any future table in excel format so that they can review and analyze the data on their own prior to the meeting. Additionally, the CAC was presented with the following table, which presents the properties which would be most burdened by the $29M reallocation option.

Property Category Total Parcels Parcels Impacted Under a 10% and $100 Threshold

Parcels Impacted Under a 20% and $200 Threshold

Parcels Impacted Under a 30% and $300 Threshold

Residential ‐ Row 349,808 n/a n/a n/aResidential ‐ Twin 70,451 n/a n/a n/aResidential ‐ Single 27,921 n/a n/a n/aAirport/Transit/Utility 464 70 36 22Apartments 17,489 180 102 61Auto Dealer 171 24 18 8Condominium 1,495 41 16 13Education 1,132 109 55 32Fast Food 292 11 3 2Government 18,224 415 247 172Healthcare 475 34 20 15Hotel 118 20 16 12Industrial Factory/Shop 1,710 215 127 82Industrial Warehouse 2,408 322 166 93Light Manufacturing 534 114 56 32Office Building 885 54 29 20Parking 4,473 58 20 11Religious/Charity 2,783 86 30 9Restaurant 694 9 1 0Shopping Center 86 45 25 17Small Business 14,137 259 139 74

Vacant 30,512 122 46 28

Total 546,262 2,188 1,152 703



The Properties Most Burdened by Reallocation Based on the available data and depending on what is deemed a measure of “significant impact” all of these potential options and their impacts are calculable. In short, many property owners do better if there is some reallocation of stormwater costs back to sanitary costs. But you will have some who go up – such as those that use a lot of water. Overall the reallocation would reduce the universe of properties that are hugely impacted compared to the path to full parcel area based charges. A member of the CAC suggested that if the number of big “losers” is relatively minor, that the reallocation funds might be better used to help the impacted parcels and do the retrofits; noting the need to consider the bigger picture and that at the moment we are considering shifting costs around to alleviate those most impacted. Thoughts – O’ – Meter The CAC was then polled along the “Thoughts‐O’‐Meter” on the range of reallocation options and asked to weigh in based on their own situations and their sense of fairness. The options and results of the poll are summarized in the table below:

“Is relocation a good step toward overall fairness and should it be pursued?” Number Option Votes

1 No Reallocation 2

2 Support $14M Reallocation (Option 1) 3

3 Support $29M Reallocation (Option 2) 1

4 Support Reallocation Higher than $29M 0

5 Other 5

The CAC members were encouraged to provide their thoughts and opinions on the options for which they voted. Those members, who voted for the “Other” option, were asked to provide an explanation as to why they voted for this option and what type of reallocation they would support. They were as follows:

• Establish the actual costs, set the rate, help outliers, extend out the phase‐in. Focus income from the fee on real expenses.

• Support for $29M reallocation or beyond while providing help to the outliers in the various categories, providing time based help/phase‐in coupled with significant incentives. People contributing sewage should pay more and help should be provided to the other groups impacted.

• Go beyond the $29M reallocation option, cap increases, make costs to implement retrofits economically viable with a quick return on investment for property owners ROI.

• More information is needed on the reallocation and how the constituency represented would be affected before a reallocation could be voted upon.

• Base the change in reallocation on reasonable science not just on helping those that may be aggrieved. The CAC asked if the reallocation options were supportable in the next rate making process and it was noted that $29M appears to be the upper limit for reallocation based on preliminary analysis. The CAC also asked if this exercise was undertaken because PWD felt that something was done wrong in the past or if it was just an adjustment to the methodology. PWD stated that they felt this was a tweak that may be justifiable as a result of



the shifting of stormwater to a parcel based charge and expressed their desire to address the properties being impacted the most. It was noted that any change undertaken by the rate case must be defensible and not arbitrary. The CAC requested that the same analysis be performed and provided to show the impact on the overall sewer bill for a given customer class. CAC Members who voted for other options provided the following commentary:

• Option 1 ‐ Going back to first principles – allocation based on peak flow seems to be a reasonable allocation and therefore supported the existing allocation

• Option 3 – Support for $29M reallocation but wants to take care of outliers as well.

Revised Meeting Topics and Schedule Based upon the previous CAC meeting, the Revised Meeting Topics are as follows:

Date Topic

April 28 Introduction

May 19 Stormwater Program and Costs

June 9 Program Cost Reallocation

June 30 IA/GA Split, Residential Charges Rate Relief Topics

July 21 Special Issues: Direct Dischargers

August 11 Incentives 1 – Review of Current and Possible Incentives

September 1 Incentives 2 – Incentives and Credits Integration

September 22 Credits 1 – GA, IA and NPDES Credits

October 13 Credits 2 –Residential and Other Credits

November 3 Final Meeting



Parking Lot The following questions were raised. As part of the CAC Meeting process, these questions will be answered and addressed either as part of the next CAC Meeting scheduled for June 30th if time permits or under separate cover.

Parking Lot

Details on billing, collection and other administrative costs.

Forward key tables presented in handouts and meeting as spreadsheets. Send any future tables prior to meetings.

Send all parcel area based use allocations version of tables presented.

How delta in charge spilt between stormwater and sanitary sewer as presented in Handout 9 – Tables 2 and 3 was determined and impact on full sewer bills.

Attendees List CAC Committee Members and Alternates

First Name Last Name Affiliation

Robert W. Ballenger Esq. Community Legal Services Thomas Becker Philadelphia University Paul Bonasch Perfecseal Philadelphia Jack Bonner Residential Property Owner Vincent Dougherty City of Philadelphia – Commerce Wesley Firkin UBOAP‐WTARF‐TCR; Thackray Crane Brian Franey Manko Gold Katcher & Fox (alternate for Joe Manko) Arthur Friedman Archdiocese of Philadelphia Brian Glass PennFuture Donald S Haas Brandywine Realty Trust Maia Jachimowicz City of Philadelphia – Finance Shelby Linton-Keddie Esq. McNees, Wallace & Nurick Sheilah M. Louis Esq. Philadelphia City Council – Legal Bob Martin Brandywine Realty Trust Richard McClure Kennedy Wilson Properties Anthony Tigano Chapman Auto Group David Wolf Wolf Investment Corporation

Other Attendees First Name Last Name Affiliation

Glen Abrams Philadelphia Water Department Joseph Clare Philadelphia Water Department Andre Dasent Philadelphia Water Department Joanne Dahme Philadelphia Water Department



Other Attendees Dave Jagt Black and Veatch Prabha Kumar Black and Veatch Gerald Leatherman Philadelphia Water Department Anna Lepchuck Philadelphia Water Department Amanda Lieberman Simon Public Relations Henrietta Locklear AMEC Earth and Environmental Brian Merritt AMEC Earth and Environmental Howard Neukrug Philadelphia Water Department Pat Perhosky Philadelphia Water Department Keith Readling AMEC Earth and Environmental Andy Reese AMEC Earth and Environmental Lisa Simon Simon Public Relations Casey Thomas Philadelphia Water Department Erin Williams Philadelphia Water Department Sydina Williams Simon Public Relations Jeffrey Wolf Wolf Investments

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Citizen Advisory Committee Meeting 3 - phillywatersheds.org CAC Mtg 3 Summary... · Stormwater Utility and Rate Consultation – Credits Analysis and ... The committee agreed to hold