HomeMy WebLinkAbout09-26-16 UtilitiesOFFICE OF THE CITY CLERK
KAREEMAH FOWLER, CITY CLERK
UTILITIES
Committee Members Present:
Other Council Present:
Others Present:
Agenda:
SEPTEMBER 26,2016 5:04 P.M.
Dr. David Varner, Oliver Davis, Randy Kelly,
Regina Williams- Preston, Dr. Fred Ferlic (Citizen Member)
Tim Scott, Jo M. Broden, Gavin Ferlic, John Voorde
Karen White
Kareemah Fowler, Joseph Molnar
Kathleen Cekanski - Farrand, Adriana Rodriguez
Long -term Control Plan Update
Bill No. 48 -16 — Development fees
Committee Chair Dr. David Varner called the meeting to order with two (2) items on the agenda.
Long -term Control Plan Update
Kieran Fahey, Department of Public Works with offices on the 13'' Floor of the County -City
Building, gave an update to the Committee on the Long -term Control Plan. This is a plan to
change the nature in which the City interacts with the river and the manner in which we send our
water to the St. Joseph River. This is a problem that is shared throughout seven - hundred (700)
cities across the country. Back in the 1950s interceptors were installed with an overflow device
which basically means if the system is overloaded it combines with sewage from homes and
bathrooms and flows into the St. Joseph River. This is an outdated solution. The City is in breach
of the Clean Water Act (Sections 301 & 309) but we do have a consent decree which is an
agreement that we have with the EPA and IDEM which says if we comply with this Long -term
Control Plan we are not doing anything illegal right now. This is the largest public works project
the City has ever attempted and is significant to everyone in the community.
This Consent Decree is from May 2nd 2012. Phase One (1) will be completed this year at a cost
of $148 million. That is in 2016 dollars and includes all spending since work started even
predating Consent Decree. As currently written, Phase Two (2) will cost $713 million. That
includes what we have already spent and what we would still have to spend.
455 County -City Building • 227 W. Jefferson Boulevard • South Bend, Indiana 46601
Phone 574- 235 -9221 • Fax 574- 235 -9173 • TDD 574- 235 -5567 • www.SouthBendiN.gov
JENNIFER M. COFFMAN ALKEYNA M. ALDRIDGE EMILY SEXTON
CHIEF DEPUTY/ CHIEF OF STAFF DEPUTY/ DIRECTOR OF POLICY ORDINANCE VIOLATION CLERK
What we are doing right now is less engineering on trying to solve the water quality issue but
trying to come up with an aggressive plan to make sure this amount of money does not have to
be spent.
Mr. Fahey detailed what that $148 million spent did for the City. That money reduced our
overflow by approximately eighty percent (80 %). In 2008 South Bend's annual combined
sewage overflow was 2,054 million gallons. By 2015, that figure was down to 399 million
gallons. We have had such huge success getting that number down, that is the motivation to think
there is a smarter way to get it to the lowest dollar amount possible. ,
Phase Two (2) involves nine (9) pieces of major infrastructure. Those include seven (7) large
storage tanks, an underground storage conduit, and a new storage and conveyance interceptor.
We have achieved such great success at a fraction of the cost, so we don't believe that the current
Phase Two (2) is the best option. Mr. Fahey provided a map of where the points the City
overflows into the river are. The map is on file with the City Clerk's Office. When the agreement
was first made it was estimated that it could be done for $500 million but since then things have
changed for a number of reasons. First of all inflation, when the agreement was initially made
they were using 2007 dollars. Second, at that time there was a less competitive construction
industry and now there is a much more competitive environment.
Mr. Fahey detailed the problems with the current plan. The plan is too expensive with high
capital and operating costs. It is also inflexible and cannot be adapted to react to our successes.
The big thing we would like to change in a new plan is to make it more adaptive. The current
plan is also very disruptive to the public parks which is something we would of course like to
avoid. These problems have given us the motivation to come up with this relook.
The relook started in 2015 and will be completed at an interim level by December of this year.
We have aggressively reengineered the solution and arrived at three (3) alternatives. Each of-the
alternatives involves green infrastructure. We are proposing to do a different configuration of
tanks. Obviously if you can do one (1) large tank instead of two (2) smaller tanks you can save a
lot of money. One (1) of the alternatives plans is for a full deep rock tunnel while another calls
for a half deep rock tunnel. These plans can save approximately $100 to $300 million depending
on which one is chosen. Each plan includes a large contingency where we could possibly achieve
greater savings.
As of last week, the City made contact with IDEM and requested a meeting for later in 2016 to
discuss findings. That's the kick -off of the regulatory renegotiation process. We are not just
looking at three (3) alternatives to say how good they could be in terms of complying with the
EPA wants us to do. We are also going to say what if we don't comply with exactly what they
wanted to do and that could save money as well.
Mr. Fahey presented a slide detailing the financial impact of the current Phase Two (2) plan. The
South Bend's residential indicator is three point seven percent (3.7 %), meaning the cost of
implementing this current plan is three point seven percent (3.7 %) of the median household
income for everybody. Twenty percent (20 %) of South Bend households would pay ten percent
(10 %) of their income on Clean Water Act compliance in the current plan. Greater than fifty
2
percent (50 %) would pay as much as four point three percent (4.3 %). South Bend's residential
indicator is off the charts considering that the EPA believes two percent (2 %) is high. We are
almost double what they consider to be a high indicator. Our median household is thirty three
percent (33 %) less than the national average. If you take these drivers which are very frightening
and very motivating and combine that with the success we had so far with local South Bend
innovations that gives us the motivation to continue to look for alternatives.
Mr. Fahey stated that our combined plan is so high compared to other local cities because out of
South Bend, Mishawaka and Elkhart we send approximately eighty percent (80 %) of the
combined sewer overflow that is entering the river.
Mr. Fahey summarized that this is a massive federally mandated project, currently the City is
trying to re- engineer different options and come up with a final alternative by the end of the year.
With that plan they will be regulators in late 2016 and start the renegotiation process. Hopefully
in the end we will have a plan that is cheaper, greener, more flexible, adaptive, and socially
beneficial.
There is some other positive news as well that it's going through at a national level. There is the
Water Resources Development Act which is potentially going to change things nationally to
some extent. It would mean that the EPA has to revise the manner in which it undertakes the
financial capability assessment. That could work in favor because they no longer will be able to
use the median household income as a benchmark but other figures as well. Right now is not the
most exciting time for an update because a lot of the results at the moment are still being honed
in on and we have a lot of things coming up very soon.
Committee Chair Dr. Varner stated for the benefit of the new Councilmembers he is going to
give a really quick background as far as the Council is concerned. The Consent Decree, when it
was signed, did not have a Council signature on it anywhere. That is something that has to be
noted, nor does it have an ordinance in support of it. When the Mayor decided to sign it, it was
an executive session where the Public Works Director at the time asked the Council to pass a
resolution in support of clean water. No Councilmember in the twenty (20) years this has gone
on was involved in any of the discussions. The original proposal was that once we got to the four
(4) year deadline, we would have this review. With regard to what has transpired recently, there
is a number of people alarmed at the size of the costs and have encouraged the Administration to
go back and take a serious look at this project. Carrying this out to the five (5) year deadline for
review makes absolute sense. It looks like there has been progress but there is a lot more the
Councilmembers will need to know as this progresses.
Committeemember Oliver Davis asked about the other benchmarks besides the median income
and asked Mr. Fahey to elaborate on that.
Mr. Fahey responded that at the moment the proposed legislation says that they must consider
other alternatives. Some of the new things looked at could include the personal income tax
collected, the bond rating of the City, the unemployment rate relative to the national average and
a few other criteria. We have not really assessed which would be most beneficial to the City
because it is still aspirational at this stage to see the Federal Government want to start looking at
other criteria.
Committeemember Davis stated he is asking because if there is a process for public participation
with our congresswoman and senators there could be a particular variable for the City of South
Bend to advocate for which we know would help us.
Mr. Fahey responded there would be some that would certainly give us a better outlook.
Committeemember Davis stated it would be nice for the City to be proactive because we have
mostly been reactive in this process over the years. He asked if the argument four (4) years from
now will be that this project will cost even more than Phase Two (2) currently because we are
now using 2016 dollars. Inflation should already be taken into account because it is frightening
how much they have increased.
Mr. Fahey stated once we come up with the final alternative that will all be considered including
inflation. The issue was the figures we are now working with are almost a decade old.
Committeemember Davis stated he is still concerned that our Administration signed off on a plan
that did not have inflation factored in.
Committeemember Randy Kelly thanked Mr. Fahey for his presentation and breaking down this
involved project in a digestible manner. He asked what has been the success rate for other
communities in renegotiating their agreements and how he saw South Bend faring in trying to
renegotiate ours.
Mr. Fahey responded if we come back with an adaptive plan which is the idea that we will do
something for around five (5) to six (6) years and then reassess. If we also show we are heavily
doing green infrastructure that will be more difficult than saying we are going to build three (3)
miles of a deep tunnel. It seems the experience of other communities is that the EPA likes the
concepts it is much easier to quantify to what the details of a tunnel will be because the specifics
are much easier to quantify. Green infrastructure involves hundreds of pieces of small
infrastructure across the City. It is very hard to quantify that. We are weighing all of this when
looking at the three (3) alternatives. We are working with attorneys who have fought this in other
communities as well.
Eric Horvath, Public Works Director with offices on the 13th Floor of the County -City Building,
stated what we are trying to do is create a compelling argument on the financial matters and
trying to take it far enough that we can argue a level of control. What we have seen is that the
communities that have gone and renegotiated to date have all kept that same level of control and
worked hard to do either better in terms of the environment or quicker. We may get to the point
when we start looking at this that financially we are not able to afford the level of control in our
current consent decree. If we get there we are going to have a really compelling argument. That
will take the Council being onboard with the Administration and the community all speaking as
one (1) saying this is too big of a burden for us and we need the EPA to help us and consider
alternate levels of control. There is only so much we can do if we stay at that four (4) overflows
per year. It was a high burden before but we got twenty (20) year to do it instead of fifteen (15)
which while that is helpful it has its own issues because it pushes it off further. If you have an
affordability issue it doesn't go away by adding time to the project.
Committee Chair Dr. Varner stated he believes it begins with information which was totally
lacking in the initial process. The fact that the Administration is able to do this and keep people
informed is a good start. Regarding affordability it is something that is pretty easily defined. He
stated it is his opinion that the City never should have signed the consent decree because the City
was restricted on the decree to two point six one percent (2.61 %) when the EPA already
considered two percent (2 %) as being unaffordable. The big burden is we were never asked to
sign this but are being asked to fund it. The willingness to keep people informed is a good start
and if we have to go to litigation someone has to be able to go ahead and do it because
unaffordable is still unaffordable.
Committeemember Dr. Ferlic stated Committeemember Davis is exactly right. Even with the
2007 numbers when the decree was signed in 2012 there were two (2) studies done that showed
economically we could not afford anything over $400 million. From the engineering standpoint
they are doing a tremendous job and we also have a legal firm working with us in Washington
D.C. It is the accounting that is a disaster. This three point seven percent (3.7 %) is probably one
(1) of the highest in the nation. We basically cannot afford this. We are still dealing with a $600
million project without financing. That is where we get the really big numbers. You also cannot
file bankruptcy in the State of Indiana. We have a problem where people will not be able to live
in South Bend and companies will not be able to locate here unless we develop a solution to this.
Councilmember Tim Scott stated other cities along the St. Joseph River have to do this as well.
He asked where they are on this.
Committee Chair Dr. Varner stated Mishawaka and Elkhart were done somewhere in the
neighborhood of $140 or $150 million dollars. They got nine (9) overflows as opposed to our
four (4). The economic issue is not that someone could not find the money it's that business will
not be able to operate here. What will eventually happen is each business wanting to come in will
have a special water rate or they will just go to Mishawaka. The economic issue is much bigger
than people realize.
Committeemember Dr. Ferlic stated you can kick the can down the road only so far but you are
financing it all along.
Committeemember Davis stated when we first had this come to us we saw back in 2012 this
wasn't going to work. He stated almost five (5) years ago he was in favor of making a legal
argument.
Committee Chair Dr. Varner stated there is a natural opening in the consent decree at five (5)
years where the City can request a reassessment. He stated he believes from day one (1) the plan
was to do Phase One (1) and then argue for this reassessment.
5
Mr. Horvath stated the thing that is most important is that we get the data right. We cannot go
make an argument unless we know with some certainty that what we are going to build is going
to do what we are going to say. In our previous plan, we now know it was flawed because it we
had an eight (8) million gallon tank that only needed to be $3.5 million gallons. We would have
spent millions and millions of dollars more by building a tank much larger than it needed to be.
We know that because we have real data to tell us that. We had to go back and redo the model
and now we are going to have to prove that to them with these new numbers. They are still going
to argue for the old numbers. There does need to be some urgency here and the department wants
nothing more than to be at that answer because it will take some time with the EPA and DOJ.
Committee Chair Dr. Varner stated if anyone from the public wishes to speak they can do so
now.
Richard Pfeil, Office in Downtown South Bend, stated he got involved with this issue because
it's the only billion dollar problem he's got. It is a billion because these numbers shown are
without any interest in financing. The other thing which is obvious is that the Public Works
Department is working very hard on this issue and are very sincere about it. He stated he is proud
of the work the engineers are doing and he has no problem with the work they are doing. The
hard work though has yet to show that we can take $100 million off of this. The big issue we
have is our large surface area with the river, much larger than Mishawaka. The surface area is a
bigger deal than the number of people in the City. That is why we found out it will cost about
twice the average per person of what other communities will pay. The EPA lets you take longer
but if you take longer it will eventually cost more. We are basically discussing whether we get a
chance to run this City or whether people from Washington are going to run the City. That is at
the bottom of all of this plus all the good engineering the City has been doing. We are going to
end up with a fight about who runs South Bend. Mr. Pfeil asked is it the people of South Bend or
a bunch of people who don't live here and have a fixed opinion that we have to go down to four
(4) overflows no matter what it costs us and that we also have to treat every overflow. We are the
only, people on the St. Joseph River that have to also treat all the overflows which adds a huge
amount of money. This is the biggest threat to the future of South Bend since Studebaker left.
We should not let anyone say this is not a big deal because it is the only billion dollar problem
the Council has.
Mr. Pfeil continued by stating the political side of this is wild because we are talking about
people's restrooms. We are not talking about abstract issues we are talking about people flushing
their toilet. That then brings in Notre Dame, Saint Mary's and Holy Cross who all use our sewer
system. This affects what happens when we have a stadium full of people on Saturdays. A lot of
people have to do a lot hard work and people in Public Works are doing an awfully good job of
trying to work this out and try to come out with an engineering answer. He stated he believes
engineering will get us part way there because every $100 million is a huge deal but this thing is
going to get much bigger than what we can engineer ourselves out of and that's why we have to
figure out what we are going to do.
Paul Kemp, 204 Peashway South Bend, stated he does work at Notre Dame and wants to echo
Mr. Pfeil's comments. He stated it has been a much more open process than last time. Notre
3
Dame is one (1) of the largest users of South Bend's system and it is important that we find an
economically feasible way to handle this and will help however we can during this process.
Chuck McCoy 1857, Overlook Court South Bend, stated he is a senior citizen and they built a
new home in South Bend to retire. He stated this is the most devastating news they have
received. He stated his background is in engineering. Mr. McCoy stated all the Councilmembers
should really read the consent decree because the City is really bound to what it says and are
designing towards it. It is not flexible at all. The only flexibility is how long it can take to do it.
At this point if we follow the three point seven (3.7 %) a person will pay more in a sewer bill than
their taxes. That doesn't make any sense. Mr. McCoy stated that when Mayor Luecke announced
this to the public in the December of 2011 this was a $509 million project of which $107 million
had already been spent. We have gone from a $400 million remainder to $800 million remainder
and that doesn't make sense. It is happening because the Public Works Department has to do
exactly what the consent decree states and there is no flexibility. He stated he is very concerned
as a citizen and will voice his opinion until this comes to a resolution.
Committeemember Dr. Fred Ferlic asked Mr. Horvath how much money outside of the CSO they
have projected on projects over the next ten (10) years.
Mr. Horvath responded he doesn't have a firm number but it is probably around $3 million a
year. We still have to keep the City up and running in all the other areas.
Committee Chair Dr. Varner stated people are finally starting to understand what is going on and
getting interested. We will get more updates once an alternative plan is decided upon.
Bill No. 48 -16 — Development fees
Committee Chair Dr. Varner stated this a new proposal in response to the compact fees issue.
Eric Horvath, Public Works Director with offices on the 13th Floor of the County -City Building,
served as the petitioner of this bill. He stated he will be as brief as he can. We went back and
looked at the original ordinance and we originally set the September 1St date to talk to interested
parties. In the meantime we did start a discussion with Barnes and Thornburg who does utility
work for cities across Indiana and also a financial consultant. Working with them, they
recommended we get away from compact fees and assessments and move towards a system
development charge. They also recommended we replace the compact fees with a surcharge. It is
a much simpler system and that is what this ordinance does. It completely eliminates compact
fees and puts a fourteen percent (14 %) surcharge on sewer the way it is currently written. In
terms of assessments, sewer used to be square footage of property and water was lineal foot of
frontage. We now take essentially the asset value of our POTW or our Water Works and we take
the depreciation that occurs and then subtract the debt that we owe and get a value and divided
by the number of equivalent residential units that we have in the system. This creates a cost per
residential unit. It is essentially $1,145 per residential unit for sewer and $500 for water. There
are two (2) other pieces as well. If the developer is an apartment complex, they pay that
equivalent amount per unit. On the other uses such as commercial and industrial, we take the
flow on that equivalent basis and divide it by their estimated flow to get an equivalent number of
7
V
residential users. The thought behind this is that it is a more equitable method that is going to be
the same inside and outside the City. What we are trying to say is that the folks who have been
paying into the system have paid for the system. This makes any new person who is tapping into
our existing system has to pay a buy -in charge essentially. These developments are buying into a
system that has been paid for by others. For the large users, we also do a peak factor discount.
That essentially says we have to build our infrastructure for it to be used at peak uses. A lot of
our residential use comes all at once. There is one (1) exemption for similar use development
where a property was on the system before and had already been paying into the system.
Committee Chair Dr. Varner asked about the special rate contract.
Mr. Horvath responded they only have one (1) special rate contract and that would supersede this
as it is written. We are trying to figure out where that goes when it expires.
Committee Chair Dr. Varner stated they will have to do another meeting on this but he invited
the public to comment at this time. No one from the public spoke on the issue.
Councilmember Davis stated our congressperson, senators and governor all need to be given a
packet after the election detailing this issue. That has to happen on both sides of the isle,
Democrat and Republican. This consent agreement is a big deal.
Committee Chair Dr. Varner stated the Utilities Committee can help with that. Simple cold hard
facts have not been available to express the nature of this issue and we can do a better job at that.
We have some big issues ahead of us and we can keep working on them and make some
progress.
With no further business before the Committee, Committee Chair Dr. David Varner adjourned
the meeting at 6:05 p.m.
Respectfully Submitted,
D avid Varner, Committee Chair