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INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 7055
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October 15, 1985
a�corr � To the Mayor and Members of the City Council
Subject: RENEGOTIATION OF WHOLESALE WASTEWATER CONTRACTS
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In 1963, Fort Worth formally acknowledged responsibility to provide facilities
for the conveyance and treatment of wastewater from neighboring communities. This
was done through the adoption of a uniform contracting policy for provision of
wastewater service to wholesale customers outside the City. The City of Fort
Worth currently provides wholesale wastewater treatment service to 22 local
governments, under the provisions contained within 21 wastewater contracts (West-
over Hills does not now have a wholesale contract with Fort Worth and is provided
service under an agreement to pay twice the Fort Worth retail rate) . An attach-
ment ("Table 1") details the major provisions of the wholesale wastewater con-
tracts.
In the two decades since adoption of a uniform contracting policy, numerous
changes have taken place that significantly impact the City's wastewater utility,
in terms of the overall cost of providing quality service, and the equitable
apportionment and recovery of these costs from retail and wholesale customers.
Significant growth has occurred, inside and outside the City. This has increased
the volume of wastewater conveyed for treatment, and hastened the need to make
extensive and costly additions to the existing treatment plant and system of
interceptor sewers. Inflation and higher interest costs associated with current
debt financing requirements make the present cost of financing plant and system
improvements significantly greater than 20 years ago. Increasing pollutant load-
ings from industrial and wholesale customers and more stringent state and federal
wastewater treatment requirements are forcing costly modifications to the Village
Creek Treatment plant. Cutbacks in federal grant assistance have further compli-
cated the matter of financing these modifications.
These factors combine to underscore several basic deficiencies in the existing
wholesale wastewater contracts. One major deficiency concerns the basis of
charges for service, rate adjustments, and billing now contained in the con-
tracts. For example, treatment and transport facility rental charges specified in
the contracts use a 35 year amortization period for capital costs and a 3-1/2%
interest rate. This is clearly inadequate to either provide a reasonable return
on investment, or recover the City's direct cash requirements associated with
current wastewater improvements that benefit wholesale customers -- that is,
improvements debt-financed over a 20 year period at interest rates that may be
three times that recognized in existing contracts.
Another major deficiency concerns the ability of Fort Worth to recapture the
costs associated with treating high-strength wastewater contributed by wholesale
customers. Amendments to the existing contracts allow Fort Worth to sample, test,
and charge for high-strength wastewater from the wholesale customers: the exist-
ing contracts, however, do not provide for any penalties for not paying waste-
water bills in a timely fashion or negotiation procedures for disputes over
wastewater strength charges. As a result, the Fort Worth Water Department was
carrying past-due balances for wholesale wastewater customers totaling over
$500,000 at the end of fiscal year 1985.
ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS
INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 7055 - P. 2
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.110VIA'o October 15, 1985
dog s0Rr To the Mayor and Members of the City Council
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x Trxr . Subject: RENEGOTIATION OF WHOLESALE WASTEWATER CONTRACTS
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In summary, the existing wholesale service contracts have numerous shortcomings
that prevent the equitable recovery of current and expected future costs of ser-
vice. Over the past year, Water Department staff conducted a number of activities
related to the renegotiation of wastewater contracts. Black and Veatch has com-
pleted its cost-of-service study of wholesale wastewater service. Water Depart-
ment staff has met individually and collectively with each of the wholesale cus-
tomers over the past year to discuss deficiencies in the contracts. Staff is now
prepared to recommend the City Council to authorize the City Manager to begin
active renegotiation of the wholesale wastewater service contracts. With the con-
currence of the Mayor and Council, City staff will work with the City Council
Water and Sewer Rate Advisory Committee to seek strategic guidance during the
renegotiation process. The Council will be updated regularly on the progress of
renegotiations.
Douglas Harman
City Manager
ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS