Regular Council Meeting
April 4, 2006
Recorded by Carol Brzeczek

Because there are official minutes of this meeting I will not provide a complete set of minutes. What I have recorded is what we deem to be the highlights. As usual, our comments are in italicized print.

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The most important agenda item for the evening was the topic of sewer rates and tap fees. The chamber was full. The City started the discussion with Charlie Blosten, Public Services Director, giving a short history of the sewage treatment plant.

Prior to 1947 the sewage was treated by several settling ponds. A real treatment plant opened in 1947 and served Littleton until the 1970s. The Clean Water Act of 1972 required treatment of sewage to higher standards. With the extensive growth of Littleton and the new treatment requirements, Littleton and Englewood were faced with needing new facilities. It was determined by both cities to build the Littleton Englewood Wastewater Treatment Plant (LEWWTP) in April 1977.

This facility currently can treat 33.6 million gallons per day and complies with all permit requirements.

Blosten made it perfectly clear that the current users in the City are not subsidizing the expansion of the LEWWTP. “Your sewer charges are not subsidizing growth.” Developers are paying for the capacity expansion at the sewer plant. He explained that the user fees would have to be increased to meet the future discharge requirements and the repairs and maintenance of the current facility.

He said that current users pay 50 cents per day for their wastewater treatment. He then compared our user rates and tap fees with Highlands Ranch and Englewood.

Littleton
User Rate – 184.13
Tap Fee – 1,342.00

Englewood
User Rate – 179.12
Tap Fee – 1,412.50

Highlands Ranch
User Rate – 287.94
Tap Fee – 960.00

He explained that sewer costs were going down based on the audited figures to operate the facility. In 2000 the cost was $7,426,051 compared to 2005’s cost of $10,768,201. (What Blosten did not use in his figures was the number of users in 2000 and 2005.)

He told us that everybody pays the same for the treatment of their sewage – in 2005 it would be $184.13. (Blosten continues to ignore that the inside city users paid more than the outside users last year based on an error in the calculation. Remember, we were told we were paying the 12% increase on treatment, just the same as the outside users, but they calculated a 19% increase on treatment for the inside city users.)

Blosten’s presentation ended, Councilman Clark asked what percentage of the plant’s operation was Littleton’s and Englewood’s.

Stu Fonda, Director of Utilities in Englewood, responded – 45%/55% up to a 48%/52% split. He said that the flow has decreased since 2001 due to the water table dropping along the Platte River.

Clark asked Fonda to explain why the costs have increased 30% while flows have gone down 25% during the same time. Fonda said that most costs are fixed and the flow component has little to do with the cost of treating sewage.

Costs include the separation of the solid from water, the digestion of sewage and the hauling to the farm and spreading those solids. There is no economy of scale – flows don’t change the cost much.

Clark asked Fonda to explain why the costs have increased 30% while flows have
gone down 25% during the same time.

Clark asked Jim Harmon, Littleton Finance Director, to explain the difference in the figures presented by Blosten and what we actually pay to Englewood for the operation of the plant.

Harmon explained that figures are based on the audited financials and that the numbers on the sewage treatment are generated by the LEWWTP. There are also things that get capitalized that could account for the $200,000.00 difference.

Clark addressed Blosten and asked if he knew how much the Roxborough District charged customers for their water and sewer tap fee. Blosten said that he didn’t know and Clark told him that it was $27,000.

Clark stated that the sewer fund received income from tap fees, user fees and interest income. If expenses are more than what tap fees are bringing in where does the revenue come from to satisfy the expenses? Rick Giardina, Red Oak Consultant, responded. In the event of any given year, to the extent that we do not generate enough revenue to cover expenses, the difference is made up of accumulated funds the reserve has compiled over the years.

Clark stated that according to Giardina’s report, at the end of 10 years it is projected to be a $27 million difference – where does that money come from?

Giardina said that there is $15 million in the reserve today and that projections used in the report are based on the best information we have today. In any given year we will generate more or less than what is required. The fact is the reserve balance will pay the difference.

Clark reminded Giardina that of the $15 million in the reserve, $8 million comes from borrowed funds for the plant expansion and has to be spent on plant expansion. Giardina said that the City is under no obligation to assess a tap fee. Tap fees are a secondary source of revenue and tap fees are not guaranteed – they only occur to the extent that growth occurs.

If growth does not occur then there is only one other revenue source – user fees. However, tap fees proposed will be sufficient when the final tap fee is sold but to fund growth related costs every year there is no such guarantee.

Councilperson Conklin asked Giardina to explain how rates are determined.

Giardina explained that it is a “specialty” – a process to ensure financial stability. The primary source of revenue is the user charge. As a community grows and needs to expand it will look for other revenue sources – in this case tap fees, which are not a guaranteed revenue stream. Methods used in Littleton are consistent with industry standards and guidelines and have met the legal parameters.

… the last tap won’t be paid off until 2063, according to Giardina’s studies, and between now and 2063 the difference is being made up by the current users.

Clark asked to go back to a chart showing the calculated tap fee, based on how many units connect in the 20-year life span of the loan. If tap fees don’t come in there will not be enough revenue in the 20 years to cover the expansion costs. No one knows the future and the revenue prediction before us tonight show that the last tap won’t be paid off until 2063, according to Giardina’s studies, and between now and 2063 the difference is being made up by the current users.

Giardina said that Clark was “entirely correct.”

Mayor Jim Taylor asked if there was another illustration and Giardina said, “There is not.”

Giardina said based on information provided and recent history about growth rate the tap plan is good for 2006.

In 2006 user charges are not subsidizing growth and that reserves will be used to meet the costs of the project. In the late 80’s and early 90’s Littleton had significant growth and tap fee revenue was generated and interest on that revenue was used to subsidize user charges.

Now, the 2006 rates do not fully cover costs of service. Over time we will begin to approach cost per service. When you reach the trigger mechanism you need to start design and construction of a new plant. If you don’t have the money you have to borrow and use tap fees to pay the debt service.

If you have lots of growth you have more revenue than is needed, but if it doesn’t come…. unfortunately, we are not projecting that type of growth for this community. I can’t tell you if it will be 60, 15, or 25 years for enough development to cover the costs involved with the expansion.

We cannot just arbitrarily implement a large tap fee because we need to meet the debt. Users have to cover the shortfall and future tap fees will be used to pay the current users back. There is “clearly some risk in this.” But absent these fees we know for certain that 100% would be paid for by user charges.

Users have to cover the shortfall and future tap fees will be used to pay the current users back.

Councilperson Cronenberger asked what portion of the project is for expansion for new customers and what is the rest?

Kirk Petrik, Project Engineer from Brown & Caldwell explained that there were three parts of the project.

1. Regulatory – $32,200,000.00 mandated requirements
2. Infrastructure – $23,000,000.00 improvements
3. Capital – $58,000,000.00 expansion

Littleton’s share of the expansion was $29,000,000.00. He said that they had considered the separation of the mandated and improvements from the expansion but thought it would be more economical to wrap it all into one project. It wasn’t a good decision, as they haven’t had a cost savings.

Conklin addressed the compliance portion of the project saying that the removal of the nitrates and the disinfection numbers were more stringent than what the old permit allowed. She asked what would happen if we ignored the mandate.

David Robbins, attorney for the LEWWTP, cited the $37,500 per day fine for noncompliance, the disservice the citizens for not complying.

When asked about the suit, Robbins said that Littleton was not sued but their permit was challenged and the Court agreed that the permit was appropriate for Littleton.

Councilman John Ostermiller asked Dennis Stowe, LEWWTP Manager, to explain the 1991 1A Project that cost $26 million. Stowe said it was part of the long-range plan of the late 80’s.

The old plant was too antiquated and beyond service and had to be replaced. The 1A project expanded the plant but the capacity was reduced to 32 million gallons per day.

Ostermiller asked about the 1B expansion that added 4.3 mgpd in 1997 that cost $17 million and did that include environmental upgrades to the infrastructure? Stowe said that $5 to $6 million was for the plant increased capacity cost and the rest was for odor control and equipment replacement.

Cronenberger asked Larry Muggler, DRCOG, to explain the “triggers” that prompted the beginning of the design and construction for greater capacity and what choices did the City have? Muggler explained that DRCOG’s role was to oversee plants statewide to ensure they are meeting federal and state guidelines and requirements.

There are two trigger points.

1. When 80% of the plant’s capacity is met, plans need to be in place.
2. When 95% of the plant’s capacity is met, it needs to be under construction.

If these conditions are met and there are no plans, then a moratorium on tap fees is put into place. Generally, when one condition is met, you have to look at where you think you will be and work backwards for a construction start.

Cronenberger asked when we hit the 80%. Muggler said in 2000 and 2001. Taylor said that we hit 80% in 1998 and exceeded the 95% mark for 22 days in 1999.

Conklin asked about the connection of Roxborough Park to Littleton’s interceptor line. Muggler told her that the state likes consolidation of facilities and that larger facilities operate more efficiently. Roxborough was asked to evaluate a consolidation option and it was a reasonable option for them. DRCOG approved the request.

(Pay special attention to this next section because it is very important, not just for the content, but because Clark has offered this as an amendment to the proposed minutes and he has been told that his amendment will not be accepted at the Tuesday, May 2, 2006 meeting.)

Clark said, “A little clarification on the 95%, or I should say let’s be a little more precise. The actual regulation is that when they reach 95% they either have to start construction or stop issuing building permits.

Muggler: “Right.”

Clark, “And the 95% is measured on a 30-day average.”

Muggler: “Correct.”

Clark: “And we never reached the 95% on a 30 day average.”

Muggler: “Okay.”

Clark: “And the flows have been going down since the high point in 1999 to reach a high of what according to you …. reached a high of 31.7 mgpd maximum monthly average is actually.

Flows have been going down since then. The 95% figure would be 34.4 mgpd so we were 3mgpd off of that. In 2000 we went down to 28.5mgpd, 2001 stayed at 28, we are now flowing about 22.4 mgpd so the trend from the high point in 1999 has actually been down.

We didn’t start construction until 2004. So we were no where close to the 95% at the point we started construction. Is that correct?

Muggler: “I believe so.”

Conklin asked if the 95% was based on projected rather than actual flows. Muggler replied that because you have the long lead time you want to make sure that you do not hit the 95% and have to go into the moratorium so you will always anticipate the construction time. If we knew we were going to have a drought when we were making those projections, we might have postponed the construction.

Cronenberger said that some citizens think Littleton is facilitating sprawl by allowing Roxborough to connect. Muggler said that they look at Roxborough as an existing development and therefore it is not sprawl. However there will need to be good land control along the interceptor line to discourage sprawl. Littleton has to say there’s no room for you in the system to discourage sprawl.

Conklin asked what is likely to happen if we stop construction of the plant? Larry Berkowitz, attorney for Littleton, said that Littleton borrowed $53 million from the Colorado Water Resources and Power Development Authority, and is committed to pay it back. The city could raise rates, fees and other charges to pay the money back. If the city did not do so, the Water Quality Control Commission could come in and take action and impose rates on their own.

Conklin also asked about growth expectations. Blosten said that in a few days Littleton would be receiving $5 million from Roxborough that would go to the plant expansion that would accommodate their district. (Roxborough is motivated to pay ASAP to get the old tap fee rate rather than the increased rate that would result once the motion before Council is passed.) Littleton Village wants to proceed quickly with their tap fees (900 residential units) (again, this would get them the lower tap fee), Lowes and Littleton Station. Blosten said he knows there are developments that are pending that will cover the expansion through tap fees.

Taylor stated, as on over simplification, for the year 2006 the increase is to cover the increase in operating costs, maintenance, collection, federal and state regulations. Tap fees will be increased for new users and will pay for expansion costs. Blosten said yes that is correct. Clark said that’s different from the testimony we heard tonight.

At this point the meeting was opened for citizens to speak. If you are interested in what the citizens had to say, please refer to the official minutes either on-line or in the library. Suffice it to say that the majority of the speakers were not in favor of the rate increase.

Taylor told the audience that the majority of their questions would not get answered and to email Blosten for a response.

Clark said that there had been a number of references to the massive reserves from the past tap fees implicating that tap fees had been subsidizing treatment fees. At the September 13, 2005 meeting tap fees had been looked at and it was concluded that the tap fees had been set at the appropriate level from 1978 to 2004. That meant that the tap fees were approximately the same as the expansion costs during that time and that no reserves would have been built. He referred to the color brochure that was prepared by the city that shows that tap fees should cover the expansion. However, the regulatory expense should be shared by current users and new users (tap fees) because the new denitrification process is designed to handle 50mgpd.

“Ostermiller said there really have been a lot of numbers thrown around tonight and I might as well throw around some more. I think one of the issues is all the examples we have looked at are from either 2001or 2005 forward. This plant had been in operation for almost 30 years and the initial construction of the plant was $22 million the EPA paid for $13 million of that. Since that time we added, in 1981, 5mgpd for $1.6 million, 1985 we added 3mgpd capacity for $2.166 million, and again then in 85 we added 5mgpd, ah, for $5.657 million, and then in 1997 we added 4.3 mgpd capacity for $6 million, ah, there was a full…. basically in 1997 the same type of project we have now where there was a $17 million cost, you heard Dennis speak, ah, earlier this evening, about $6 million of that was for expansion and $11 million for improvements and meeting tougher standards. Anyhow, if I take all those costs for expansion plus the initial cost of the plant, Littleton’s share of that is $12.5 million. That should have been covered by tap fees, and it was. Tap fees collected from 1973, when we started building the plant, to 2004 is $40 million in tap fees since _______ (3:34) of that plant. $12.500 o f that was spent for expansion over the years. That means there’s quit a bit of money sitting there. Charlie. Would you please put your on the screen the page out of the, ah, council communication? Charlie: Which one John? Ostermiller: The one that shows the history of the plant ______rates. Charlie: This one. Ostermiller: No. The chart…..”

“During the first 6 years of operation of the plant the sewer rates more than tripled. At that time the city council was probably looking ahead realizing improvements that they knew would have to be made to this plant, clean water standards were going to become tougher and tougher. And in 1983 there was a city council directive that rates would not be increased – rates were to be subsidized by growth and ________(3:37:20) thru tap fees. Ah, that’s obvious from that chart. During the period of 1978 thru 2002 there were $30 million worth of environmental improvements and infrastructure improvements made to that plant. During that time there was one rate increase of $4. So, where did all the funds come from for the to pay for that $30 million worth – Littleton’s share $15 million in improvements? As I mentioned we had collected $40 million in tap fees from 1973 to 2004. We spent $12.5 on expansion and increased capacity. That makes $28 million. Well, when we started looking at expanding and improving the sewer plant, we had $19 million in the sewer fund that was excess tap fees that had accumulated over the 20 year 22 year period of the plant up to that time. I think it is safe to say that the $19.1 million came from tap fees that should be used for expansion. That’s what they were collected for. People pay those to hook into our sewer plant and to pay for expansion. Since, ah, during the four years of 2002-2005 we collected another $2.9 million in tap fees and, as mentioned tonight, we are going to collect, in the next week or two, another $5 million in tap fees from Roxborough and Lockheed Martin. That gives us a total as of, ah, today, based on tap fees that are available for expansion of $27 million. That should go toward expanding the LEWTP. So where does that leave us? Well, if we’ve already generated or have _____________ (3:40) $27 million in tap fees and we collect $1 million a year, as has been suggested, for the next 20 years there’s another $20 million. Right now we are up $47 million in tap fees ___________ to pay off the expansion project with interest which totals $41 million. So, yes, I think tap fees have paid for the expansion of this plant. They are not tap fees that will necessarily be collected in the next year or the year after. A lot of them were collected over the last 10 years. People buying into the plant, raising the usage, and basically necessitating the expansion.”

“So, I think, ah, as I mentioned, there’s also been $15 million worth of environmental improvements over the last, ah, 15-20 years – well since 78 thru 2002 and we are (Yes, I think this is the verb he used) also have another $28 million in compliance that has to be paid for, ½ of that by Littleton and another, ah, so that’s another $14 million, so there’s $30 million in improvements in that plant that tap fees paid by the rate users _____________ (3:41:40) raises and unfortunately this council has a difficult situation and with that chart we have to overcome what I think were some mistakes made by previous councils. When you have a facility such as a sewage plant, anything that has that kind of life, the equipment we are putting in there now has anywhere from a 30 to 50 (3:42:10) years depreciation. You have to set aside funds to make improvements to take care of appreciation of that plant and you also have to save money in the future for further expansion as long as we are going to continue to grow. And that’s what the tap fees are for and that’s what the tap fees are being used for on this project. So, I think we are looking at the tap fees going up some this year. When council looks at rates next year the tap fees may go up again and also the treatment fees. When we started this project we knew we were going to have to have annual increases probably __________ (3:43:15) for 4 to 5 years and that was taken into consideration by previous councils that made the determination to go on with this project. Hindsight is 20/20. Is the plant needed? I think it will be. I thin we are going to see growth. And so I think it is one of the issues, ah, that we, ah, dealt with – that there were economies of scale by increasing capacity at the same time we were doing all these other improvements to the plant. So I guess with that I am in favor.” (I have transcribed Ostermiller’s comments from the recording of the meeting just as I did with Clark’s. Where you see blanks and a time notation (3:43) that indicates language that I couldn’t understand and the approximate time in the recording if you are inclined to check it out for yourself. I have done so because Ostermiller is now amending the minutes to reflect comments he did not make in the meeting and changing the meaning of what he actually said. Clark has amended the same minutes to reflect what he actually said during the meeting and he has been told they will not be accepted. What’s is going on – just use your imagination.)

Conklin Moved to accept the rate increases as proposed and Ostermiller seconded.

Conklin expressed her concern for those on fixed incomes and that a mistake was made when they called the project a plant expansion. She believes it is necessary because we met the triggers based on projected flows rather than actual flows. DRCOG projected we would exceed the 95% and we needed to complete the project. It would be more expensive to stop the project no matter how you feel. Growth has been paying its way and subsidizing our treatment costs. She then went on a dissertation about pollutants in the water and water quality like that was an issue that was in disagreement. She ended by saying that we needed to “trust the professionals.”

Councilman Mulvey said he didn’t hear anyone say they didn’t want clean water. He doesn’t understand why user rates need to be raised every year. We can raise the tap fee and he doesn’t know why people already here have to pay for the plant expansion. He recommended a new ordinance with increased tap fees needed to come back before council and discussed further.

Cronenberger said that Ostermiller and Conklin had been far more eloquent and articulate than she and because there has been such an extended exploration, shall we say, of what we are doing that she looked at the numbers far more closer than she would have ordinarily. In doing so, it has become more apparent to her that the project is needed. Besides, they had no choice but to embark on its construction. She believes it is also clear that growth is paying its own way but has been paying our way for several years. She reminded the group that they are only setting rates for 2006. On one hand this extended exploration has given us a chance to look at the numbers far more closely. However there had been a negative outcome. Our partners in this project have been “caused a lot of discomfort and confusion” and she is concerned about these relationships – which they will need to be smoothed over and they have been beneficial for Littleton for many years. She admitted that she was part of previous councils that were loath to increasing rates and that we have all gotten “a little spoiled.” People are confused and upset about what they are reading. “We don’t have any choice” and she predicted that there would be 4 council members that will do the right thing.

Taylor said that they had spent a lot of time in the last few months on sewer rates and tap fees. In 2007 they will look at the rates again but they are too far down the path to turn around now. “We don’t have to make a decision based upon the testimony tonight.”

Clark amended the motion to include new tap fee rates. Mulvey seconded. Motion failed on a 2-4 vote.

Prior to the vote Taylor said, “Doug, you present this to us in a lengthy study session and you had 5 votes against it. It makes me wonder why you are bringing this up again unless maybe for publicity purposes.” (We thought this was an interesting admission. They did vote against Clark’s proposal in a study session. But, council will tell you that they do not take votes in study sessions. This is important because they regularly vote in study sessions. If you refer to their minutes of that study session you will not see any reference to a vote.)

The motion, as presented by Conklin passed 4-2 with Clark and Mulvey opposed.

The final item on the agenda dealt with the designation of the Louthan House as a historic landmark. Motion passed 6-0

Note:
During council members comments Conklin mentioned that she would like to have three future study sessions: campaign rules, de-Brucing pros and cons and a youth council. We believe that the campaign rules (currently the city does not abide by the fair campaign practices – they use tax payer money to campaign for their own issues – we think that will be the topic to be discussed) and de-Brucing study sessions will be important to witness. Because they are study sessions there will not be a true record of the meeting in minutes. We will keep you informed if they do come up as topics.