DOWNRIVER UTILITY WASTEWATER AUTHORITY
JUNE 9, 2022 MEETING MINUTES
CITY OF TAYLOR COUNCIL CHAMBERS WITH VIRTUAL OPTION

1. Roll Call and Introductions
DUWA Chair Gail McLeod (Allen Park) called the hybrid meeting to order at 9:00 AM and asked for roll call to be taken. At the time of roll call, voting representatives were in attendance from 10 communities: Allen Park, Belleville, Dearborn Heights, Lincoln Park, River Rouge, Romulus, Southgate, Taylor, Van Buren Township, and Wyandotte. A quorum (at least 7 members) was present.

2. Approval of Agenda
Copies of the Agenda were made available prior to the meeting (Attachment 1). A revised agenda was provided to the Board at the meeting. Motion by Mayor Bill Bazzi (Dearborn Heights) and supported by Dustin Lent (Southgate) to approve the revised Agenda. The motion passed unanimously by all attending members.

3. Approval of Minutes from May 12, 2022 Board Meeting
Copies of the meeting minutes from the May 12, 2022 Board meeting were distributed by email prior to the meeting (Attachment 2). Motion by Mayor Tim Woolley (Taylor) and supported by James Krizan (Lincoln Park) to approve the minutes. The motion passed unanimously by all attending members.

4. Legal Update
Attorney Jim Fausone, of Fausone Bohn, provided the Legal Update.

    a. General Counsel Monthly Report
Attorney Fausone stated that a written summary of the monthly legal update was provided in the pre-meeting Board packet (Attachment 3). Attorney Fausone stated that it was a typical month of activities for Fausone Bohn in their assistance to the System Manager. Certain legal items will be discussed in detail later in the meeting.

    b. Emergency Authority Memo
Attorney Fausone (Fausone Bohn) presented the 2021 Emergency Authority Memo (Attachment 4) to the Board. He stated that this memo is to serve as a reminder of the interplay of emergency authority between DUWA, the Contract Operator, and System Manager. This is a reminder to existing Board members and also advisement to the new Board members. This memo is intended to address the question that was raised at the last Board meeting regarding roles and responsibilities of Veolia and OHM during an emergency situation. Veolia has discretion to take emergency action to protect public health and safety. OHM, as DUWA’s System Manager, is advised of these emergency decisions. The memo also provides details on the purchase limits and associated spending requirements of the System Manager. Exclusions to the System Manager’s purchase limits include emergency purchases necessary to protect the health, safety, and welfare of the communities and their people.

    c. Major Water Loss Policy
Attorney Fausone (Fausone Bohn) presented the Major Water Loss Policy (Attachment 5) to the Board. This policy was reviewed and recommended for approval by both the Technical and Legal Committees. The policy defines a major water loss as a single water main break of 100 gpm or more. The designated period means the major water loss went undetected for at least two months. The policy states that communities have one year from the repair of a water main break to request a flow adjustment. This policy will encourage communities to quickly identify and correct water loss or water main breaks within their local systems, noting that sometimes water main breaks can go undetected for a long time depending on their locations. The policy is applicable only to future major water loss occurrences, and does not apply to any major water loss occurrences that have happened in the past. No interest will be applied to payment adjustments. It is recommended that the policy be reviewed every five years.

Jim Taylor (Van Buren Township) asked if this policy is specific only to water main breaks as there was an instance of a major water loss that resulted from inappropriate operation of water tower equipment. He asked if an exclusion could be included in the policy to account for major water loss from inappropriate operation or units such as a water tower or other facility. Attorney Fausone (Fausone Bohn) responded that the policy specifically defines major water loss as water loss from a water main break. Dustin Lent (Southgate) asked how long the water tower overflow lasted, and Jim Taylor (Van Buren Township) responded that the overflow was detected immediately and was corrected within several hours. Approximately 5,000 gallons of water were lost. Per the Major Water Loss policy, the major water loss would have had to go undetected for at least two months to qualify. System Manager Lambrina Tercala added that self-reported volumes should also be considered, and to consult DUWA’s Overpayment and Underpayment Policy and the Exemption Policy.

Motion by James Krizan (Lincoln Park) and supported by Roberto Scappaticci (Romulus) to approve the Major Water Loss Policy. The motion passed unanimously with all attending members.

5. System Manager Update
System Manager Lambrina Tercala, of OHM Advisors, provided a verbal summary of activities since the last meeting. A written summary was provided in the pre-meeting Board packet for the System Manager Report (Attachment 6).

     a. System Manager Monthly Report
System Manager Tercala noted the following highlights from the System Manager Report:

• Concerns have been raised about the rate increase. Rates have increased in part due to the increased costs of commodities and sludge hauling and disposal, as well as the lingering impacts of COVID-19 on the market. A memo was provided to the Board Commissioners earlier this week detailing the factors that impacted the proposed rates. Board Commissioners are encouraged to share this memo with their elected officials to inform them of the factors involved in the 8.55% rate increase.
• System Manager Vyto Kaunelis shall present at SEMCOG’s Regional Task Force meeting on the topic of blending and how water quality standards are still met when blending occurs. Discussion of this topic helps gain support within the region as DUWA continues to work with EGLE on the minimization versus elimination of blending events.
• The roof repair work is complete, however there is disagreement on the date of substantial completion. DUWA’s legal team is working with the Contractor’s legal team to resolve this issue. Payment of the final pay application is being withheld until this issue is resolved.
• At the last Board meeting, the Board authorized a payment of up to $75k for replacement of the emergency generator HMI and PLCs. Michigan CAT is now refusing to honor their initial quoted price of $75k and is increasing their quoted price to $450k to perform a complete replacement of the generators instead of replacing just the HMI and PLCs. The System Manager plans to work with a utility consultant to better understand the DWTF’s natural gas and electricity needs in order to determine how best to move forward with the generator repair/replacement, so this project is on pause for the time being.
• Raftelis will update the Alternate Rate Methodology cost model once the winter flow data from 2021-2022 is provided from the communities. Dick Hinshon, of OHM Advisors, will provide Raftelis with the inputs for the cost model based on the refinements from the communities.
  • Of note, Romulus continues to investigate possible overreporting of flows. A flow reduction request is anticipated to be forthcoming. This request will be presented to the Technical Committee at their next meeting.
• Meetings have been held with Wyandotte Municipal Services and Franklin Energy to learn about DUWA’s rate classification with WMS and also the Energy Smart Program, which is administered by Franklin Energy. Franklin Energy verbally committed to performing an energy audit at the DWTF in August, which would be a good time to look at the buildings, processes, and the UV disinfection system that could provide an energy savings which would earn a credit back to DUWA as a part of the incentive program. The System Manager is continuing to work with Veolia on identifying operational improvements that could save energy.
• The EPA is considering adding PFAS to the list of CERCLA-regulated contaminants. This would result in increased costs for biosolids disposal. A letter template was provided to the Board Commissioners last week to request their Senators to support a legislative fix that would provide water and wastewater treatment facilities with an exemption from Superfund liability. AWWA is also monitoring this situation and is encouraging the proposed exemption.
• The System Manager met with GLWA’s CFO to learn about their rate projections into the future considering inflation. GLWA is experiencing similar commodity and utility cost increases as DUWA, and is looking to compensate for these increases by reducing capital spending. The System Manager will continue to stay in touch with GLWA on this matter.
• Wyandotte Municipal Services was approved for a water exemption per DUWA’s Wastewater Exemption Policy.
• An additional item titled “System Manager Authorizations” was added to the System Manager Report to summarize any items that were authorized by the System Manager without Board approval per the contracts in place.
  • A 3-year SAN warranty renewal was purchased for an annual rate of $2,241.40 per the Board’s recommendation at the last Board meeting.
  • As-needed manhole repairs are anticipated to be authorized by the System Manager per the contractual purchase limits currently in place. No new manhole repair requests have yet been received.

Attorney Kerry Morgan (Riverview’s attorney) asked if the System Manager can identify the nearest location(s) where biosolids containing PFAS could be disposed of if PFAS substances are classified as hazardous substances under CERCLA. This will help DUWA better understand the anticipated costs for disposal if PFAS substances are considered hazardous. System Manager Tercala responded that the System Manager can research this.

    b. Updated Rate Methodology Timeline
System Manager Tercala presented the updated Rate Methodology Implementation Timeline to the Board (Attachment 7). Updated input data will be compiled this month from each of the DUWA communities to be provided to Raftelis who will update the Rate Methodology calculations. A Town Hall meeting is planned to be held in July to review the updated Rate Methodology calculations and outputs. Attorney Fausone (Fausone Bohn) encouraged the Board Commissioners to share this timeline with their elected officials to make them aware of the proposed timeline for implementing the new Rate Methodology. He added that the Board should be prepared to approve the new Rate Methodology at the November Board meeting.

    c. Biosolids Dryer Facility Project
The biosolids dryer facility monthly progress report is provided in the pre-meeting Board package (Attachment 8). Jason Nash, Veolia’s Director of Capital Program Management, stated that sludge was scheduled to be placed on the North dryer this past Monday, but sludge has not yet been introduced as the team is still working through the system check on the dryer. All items related to safety and operation have been approved. A pressure test is being completed on the dryer as a negative pressure must be maintained for dust control. The original substantial completion date was March 17th, but the anticipated substantial completion date is now July 11th. It is expected that both dryers will be optimized to handle 100% of the DWTF’s sludge by July 11th, which is when the 30-day acceptance test will begin. Jason Nash (Veolia’s Director of Capital Program Management) will continue to provide weekly updates on the biosolids project to the Technical Committee via Basecamp.

6. Other Requests for Authorizations and Approvals
System Manager Mackenzie Johnson, of OHM Advisors, provided the following requests to the Board.

    a. Industrial User PFAS Charges
DUWA pays Veolia for PFAS sampling performed at the industrial user sites as part of their monthly 2022 fee. DUWA recoups these expenses by charging a retail rate to the industrial users. The retail rate for PFAS is $750 per sample, which is an all-in cost inclusive of labor and sampling. The total anticipated cost for PFAS sampling in 2022 is $51,000 (Attachment 9). PFAS sampling costs are paid from DUWA’s Plant Operations – Miscellaneous Expenditures line item of the budget.

Motion by Dustin Lent (Southgate) and supported by Rick Rutherford (Belleville) to approve the 2022 PFAS retail rates for industrial user sampling. The motion passed unanimously with all attending members.

    b. Annual Disclosure & Financial Model Updates by PFM
PFM serves as DUWA’s financial advisor. PFM is currently authorized to prepare an Annual Disclosure Form, per federal laws, for an annual fee of $2,500 for up to 15 hours of work. Upon the closing of the WIFIA Loan Agreement with the EPA in February of 2021, additional financial assistance is now necessary to satisfy the post-closing loan requirements. One of these requirements is to provide the EPA with an updated Base Case Financial Model on an annual basis. PFM has updated their existing Retainer Engagement letter to include the annual update of the Financial Model. PFM proposes to perform the Financial Model Update and Annual Disclosure Form for an annual fee of $7,500 for up to 35 hours of work (Attachment 10). This cost will be paid from DUWA’s Professional Services line item of the budget.

Mayor Bill Bazzi (Dearborn Heights) asked if the approved Retainer Engagement Letter will be circulated to the Board. System Manager Tercala responded that the approved Retainer Engagement Letter will be the same as what is provided in the Board’s pre-meeting packet.

Motion by Mayor Bill Bazzi (Dearborn Heights) and supported by James Krizan (Lincoln Park) to authorize the Chair or Vice Chair to sign the updated Retainer Engagement Letter prepared by PFM for financial services, inclusive of an annual update of the Base Case Financial Model, for an annual fee of $7,500. This fee will be paid from DUWA’s Professional Services line item of the budget. The motion passed unanimously with all attending members.

    c. Natural Gas
        i. Energy and Utility Consulting Services                                                                                       Due to the increased pricing of natural gas and electric utilities, it is desired to utilize a consultant to advise DUWA on different natural gas and electric purchase options as well as assist with negotiations with utility suppliers in order to minimize utility expenses. OHM has held conversations with both SourceOne and Transparent related to natural gas hedging opportunities. Transparent is also a gas supplier, like Constellation. With the information and advisements that have been received, it is desired to utilize an expert in the field to assist DUWA in making decisions related to utility purchases.

Ali Dib, from the City of Dearborn Heights, provided OHM with contact information for Joe Moylan at MEA, Inc., whom Ali worked with while at the Wayne County Airport Authority (WCAA). OHM held several phone calls with Joe and was impressed with his utility expertise especially within the Southeast Michigan market. He is also familiar with the jurisdiction interface between DTE and local municipal electricity providers.

Joe Moylan provided a proposal to assist DUWA with utility matters related to natural gas and electricity for a not-to-exceed fee of $6,000 (Attachment 11). His fee is based on a public hourly billing rate of $150, which is less than his typical hourly rate for a private entity. This fee would be paid from DUWA’s Other Services and Charges – Professional Services line item of the budget. His services will include identifying natural gas hedging opportunities as well as reviewing DUWA’s electrical consumption trends.

Roberto Scappaticci (Romulus) asked if DUWA/Veolia is committed to working with Michigan CAT on the generator repairs/replacements considering that they will not repair the HMI, but will only provide a complete replacement as was mentioned during the System Manager update. General Manager Jason Tapp, of Veolia, responded that Veolia does not have to use Michigan CAT to perform the work. Michigan CAT indicated that the current generators have an old processor that does not communicate with the newer technology, thus the entire system needs to be brought up to current technology standards. Two other companies have indicated that they can perform this work for a cheaper price, but the generators need to be programmed from the ground up.

System Manager Tercala added that the current generators are diesel-fueled, but there is potential for these generators to be used for peak shaving of electricity in the future. If they are to be used for peak shaving, the most cost efficient fuel is expected to be natural gas. As such, the generators would need to be converted to natural gas-fueled, thus it is not desirable to invest in upgrading the controls until it is determined whether the existing generators can be converted to natural gas or if new generators need to be purchased. Permitting of the generators also needs to be reviewed.

Motion by Jim Taylor (Van Buren Township) and supported by Rick Rutherford (Belleville) to approve the proposal for Energy and Utility Consulting Services from MEA, Inc. for a not-to-exceed fee of $6,000. This fee will be paid from DUWA’s Other Services and Charges – Professional Services line item of the budget. The motion passed unanimously with all attending members.

        ii. Extension of Natural Gas Contract with Constellation
DUWA’s existing natural gas supply agreement has a fixed price through the end of 2022. This existing agreement does not include the additional natural gas demand that will be realized once the dryers come online. The additional natural gas demand due to the dryers has been incorporated into a modified supply agreement (basis only) that is in place through the end of 2023. This additional natural gas volume has significant market pricing exposure, and the increases in the market pricing will result in a significant cost increase to DUWA that is forecasted to last through March 2023.

Veolia’s energy expert, SourceOne, recommends that DUWA extend its existing basis only contract through December 2025 (from 2023). They are also recommending DUWA purchase certain quantities of natural gas now for the rest of 2022 and future years. This will allow DUWA to better budget and prepare for natural gas costs for future years instead of being susceptible to the high volatility of market pricing. The natural gas market is speculative, however prices are expected to trend down in future years.

This approach is expected to lower the average cost of natural gas supply from July 2022 to March 2023. Veolia’s energy expert prepared a request for authorization to extend the basis contract (Attachment 12). Since the Board approved of MEA, Inc. as DUWA’s energy expert (previous agenda item), MEA, Inc. will review this recommendation before it is authorized.

Jim Taylor (Van Buren Township) asked what pricing would be extended through December 2025. System Manager Tercala responded that the basis only plus the hedged supply would be extended through December 2025.

Motion by Mayor Bill Bazzi (Dearborn Heights) and supported by Dustin Lent (Southgate) to extend the natural gas basis and supply contract modifications through December 2025, as presented or as otherwise recommended by MEA Incorporation. The motion passed unanimously with all attending members.

    d. IPS Pump No. 4 Casting Critical Repair
Cracks were discovered on the drive shaft of Influent Pump Station Pump No. 4, which is the main pump for dry weather flow through the plant. These cracks caused stress cracks to develop on the upper casting of the pump as well. The pump was taken out of service and the rotating assembly was sent to Kennedy Industries for emergency inspection. Kennedy Industries confirmed the need for replacement of the drive shaft, and estimated a 16-week lead time to acquire the repair materials. However, Veolia was able to source the necessary materials the following day and provided these to Kennedy Industries to perform the repair. The upper casting was sent to Delray Mechanical for repair.

The cost for repairs is a pass-through cost of $60,245, and Veolia is waiving their 10% markup for this work (Attachment 13). Veolia already authorized this repair due to its criticality as the plant’s capacity was reduced by 100 MGD while this pump and another pump were out of service simultaneously. The need for repair of IPS Pump No. 4 was presented to the Technical Committee, but a recommendation for approval was not requested as quotes for the repair work had not yet been received.

Attorney Kerry Morgan (Riverview’s attorney) asked what caused the stress crack and if there are any warranties on the new equipment. Veolia’s General Manager Jason Tapp, of Veolia, responded that Veolia staff initially thought there was an issue with the bearings, but upon inspection, it was learned that a small shaft vibration caused the cracks in the housing. This pump previously passed vibration tests during pump maintenance, so it is suspected that it was manufactured with a bad drive shaft. This is the first time this vibration issue has been identified. The casting was then sent to a cast iron repair specialist in the City of Taylor, who provides a 1-year warranty on their equipment.

Motion by Greg Mayhew (Wyandotte) and supported by Mayor Bill Bazzi (Dearborn Heights) to authorize Veolia to perform the casting repair on IPS Pump No. 4 for a not-to-exceed fee of $60,245. This fee will be paid from DUWA’s Capital Outlay – Other Critical Repairs line item of the budget. The motion passed unanimously with all attending members.

    e. Riverview Tunnel Connection – Design Review by Wade Trim
The City of Riverview has experienced localized basement backups in an upstream portion of their local sanitary sewer system during large rain events. A flow metering and modeling analysis of this area was performed by Riverview’s consultants, CE Raines and Fishbeck, and the recommended alternative was to construct a relief sewer from the area experiencing basement backups to the DRSTS (Tunnel). A hydrologic analysis also showed that this proposed connection would have negligible impact on DUWA’s ability to convey peak flows during wet weather events, thus it was determined to allow Riverview to move forward with installing a new connection to the Tunnel.

CE Raines developed the construction plans for the proposed 24-inch relief sewer. Wade Trim will provide technical assistance to DUWA to review the proposed construction plans for this relief sewer. Wade Trim will review the structural design and constructability of the proposed connection as well as future operation and maintenance considerations. Wade Trim proposes to complete their review of the construction design for a not-to-exceed fee of $7,750 (Attachment 14). The expense will be billed back to Riverview in accordance with the DUWA-Riverview Tunnel Agreement, so this work is expected to be a net zero cost to DUWA. DUWA’s Technical Committee did not have the opportunity to review this request based on when this proposal was received.

Motion by Rick Rutherford (Belleville) and supported by Mayor Bill Bazzi (Dearborn Heights) to approve Wade Trim’s proposal for review of the Riverview Relief Sewer Tunnel Connection design plans for a not-to-exceed fee of $7,750. This fee will be paid from DUWA’s Engineering Services line item of the budget. The motion passed unanimously with all attending members.

    f. IPS Pumps 5 & 6 – Replace VFDs with Soft Starts
Influent Pump Station Pumps No. 5 and 6 are the two largest raw sewage pumps with capacities of 50 MGD each. Both pumps can be controlled by a constant speed drive (soft start) or by a Variable Speed Drive (VFD). However, the VFDs have failed on both pumps, and one of the existing soft starters has also failed. The VFDs will not be replaced due to their estimated cost of over $200k each as well as the limited functionality that replacement would allow. To improve on system resiliency, a couple different options are being considered to either power each soft starter from two different power feeds or provide redundant (two) soft starters per pump on the same power feed.

DUWA’s three as-needed engineering firms were contacted to quote the work. Both HRC and Wade Trim provided proposals, however Wade Trim sought to split the scope into two phases, with the potential to opt out of the second phase (detailed design) if the scope was beyond their engineer’s skillset. HRC was selected to perform the work for $18,650 (Attachment 15). It is expected that the Veolia electrical team will perform the work once design is complete. DUWA’s Technical Committee did not have the opportunity to review this request based on when this proposal was received.

Motion by Jim Taylor (Van Buren Township) and supported by Dustin Lent (Southgate) to authorize HRC to provide engineering services associated with soft starters at IPS Pumps No. 5 and 6 to improve system resiliency. The not-to-exceed cost for this work is $18,650 and will be paid from DUWA’s Engineering Services line item of the budget. The motion passed unanimously with all attending members.

7. Contract Operator Update
General Manager Jason Tapp, of Veolia, provided the Contract Operator update.

    a. April 2022 MOR
The April 2022 Monthly Operating Report (MOR) was provided in the Board’s pre-meeting packet (Attachment 16). Highlights from the summary and other updates included the following:

• The April MOR was shared with the Technical Committee at their last meeting.
• No blending events occurred this month, and none have occurred yet this year. Our NPDES permit limits DUWA to no more than 4-6 blending events per year, and the DWTF is currently projecting to have fewer than that. Typically, the DWTF struggles to handle flows when there are back-to-back storm events.
• There was a large rain event that occurred last night, but the DWTF handled the flows well as wet wells were already at low levels and the operators did a good job of operating the system.
• There are currently two positions open; one for a maintenance person/operator and the other for a laborer. There will be a $6,500 vacancy credit applied to the operator position as it is now in its 4^th month of vacancy. That vacancy credit will be applied to next month’s invoice. Several other positions have recently opened that Veolia is looking to fill.
• Veolia is holding weekly process control meetings and group sessions to train staff on the various warnings and flags that come up and how to address them. Veolia has a Standard Operating Procedure on how to address each warning.
• The operations team is performing cross-training in the Solids Handling Building so everyone knows how to operate and fix equipment related to the dryers. Classroom training has been performed with the contractors and manufacturers so that Veolia staff is trained and ready to operate the dryers when they are online.
• Veolia staff has been draining the various tanks at the DWTF to clean and inspect them and perform any maintenance necessary.
• Veolia staff disassembled IPS Pump No. 4 and sent it for repair. The lead time is currently 3-weeks from today.
• There were 366 Miss Dig tickets submitted this month, with 92 tickets requiring a site visit and 15 tickets being classified as emergency.
• Veolia finally received the vent stack material from the local manufacturer after three months. Veolia plans to stockpile some vent stacks for as-needed replacements.
• There has been a lot of safety training conducted at the DWTF including refreshers on the lockout/tagout process.

    b. Chemical & Sludge Price Updates
System Manager Tercala stated that increasing commodity costs are resulting in increased operating costs, referencing the memo that was provided to the Board Commissioners earlier in the week detailing the factors that influenced the rate increase. PFM and Plante Moran are using these cost increases in their 3-year and 5-year budget projections for DUWA. The Quarterly Report indicates that there may be a budget shortfall this year, thus it is desired to bring both the Finance and Technical Committees together to develop a strategy on how best to mitigate the impacts of these increased costs and how to compensate for the overages. Volunteers from each of these committees will be asked to participate in these discussions. System Manager Tercala reminded the Board that, generally, DUWA takes the risk for unit price increases while Veolia takes the risk on volume consumed. Thus, Veolia will provide a monthly report on the current unit price increases for the Board’s awareness.

General Manager Jason Tapp, of Veolia, stated that the cost for Ferric Chloride has increased four times this year so far, whereas the price for this chemical typically only changes once every three to four years. A price increase for Ferric Chloride is expected to take effect on July 1, 2022 increasing the price from $1.55/gal to $1.80/gal. The pricing for polymer used to be $0.85/lb, but is now $1.50/lb. Sludge hauling costs have increased significantly since January of this year. Costs to transport biosolids to the local landfill have increased due to increased fuel costs, employee shortages, truck maintenance, as well as the increased distance to the new landfill. Sludge hauling unit costs have increased from $14 to $53.40. The tipping fee remains constant at $55/ton, but that is because DUWA was already paying a high fee compared to the tipping fee for normal trash disposal. The landfill is currently DUWA’s only option for disposal, however Veolia is exploring other landfill options farther away, such as in Ohio. Veolia is also looking into options for long-term partnerships with land application companies.

Roberto Scappaticci (Romulus) asked what the contractual limit is for DUWA to pay for sludge hauling and disposal. System Manager Tercala responded that DUWA pays Veolia an annual fee which includes a set amount for sludge hauling and disposal. Any costs above that set amount are paid by DUWA. Roberto Scappaticci (Romulus) asked if sludge hauling and disposal costs are expected to decrease later in the year. General Manager Tapp responded that sludge hauling and disposal costs are expected to decrease once the dryers are online. System Manager Tercala responded that an amendment (Amendment 7) to Veolia’s contract was prepared and authorized by the Board at the beginning of this year to demonstrate the anticipated sludge hauling and disposal costs and limits once the dryers are online. Amendment 7 amended Veolia’s annual fee recognizing that the dryers will be coming online and also reconciled the commodity costs and unit rates to minimize the overages paid by DUWA.

Dustin Lent (Southgate) asked if an updated estimate of the payback period can be provided to compare the anticipated payback in 2019 when the project began compared to the estimated payback with current dollar values. Mayor Tim Woolley (Taylor) stated that a refreshed proforma would be helpful to compare costs of hauling wet cake to the landfill to the cost of hauling dry solids after the dryers are online. System Manager Tercala stated that the value of the dryer system will still be realized, especially considering the increased sludge hauling and disposal costs, as status quo costs are significantly higher. An updated proforma using current year dollar values and quantities will be provided to the Board.

Jim Taylor (Van Buren Township) asked if Veolia has had any issues with chemical deliveries. General Manager Tapp responded that there were some issues with delays in chemical deliveries at the beginning of COVID, so Veolia now orders chemicals in advance and stores them in surplus tanks. Veolia tries to maintain 90 days’ worth of chemicals and orders more as the chemicals are used up to maintain the 90-day supply.

8. Treasurer’s Report

    a. Approval of Audit and Single Audit
        i. Audit for 2021                                                                                                                                Beth Bialy, of Plante Moran, presented the 2021 Audit to the Board (Attachment 17). DUWA maintains about $18M in restricted assets, which is for funding specific items related to the system, such as Tunnel repair and replacement. DUWA maintains about $195M in capital assets. Of these capital assets, some are subject to depreciation and others are not (such as land assets). The unearned revenue of $500k is related to the Allen Park repayment. DUWA maintains about $129M in long-term debt, which includes bonds that are not due for payment until future years. Net position includes investments in capital assets as well as restricted and unrestricted funds. DUWA maintains about $12.1M in restricted funds for debt service. DUWA also maintains $2M in restricted funds for rate stabilization, which was put in place a few years ago to allow DUWA to use some funds as a cushion to smooth out rate increases if needed. DUWA will use $1M from this rate stabilization fund this year, but this amount will be immediately replenished. DUWA maintains restricted funds for Tunnel repairs as this fund is replenished by the communities that use the Tunnel.

DUWA maintains about $18.3M in unrestricted funds, however $1M will be used for rate stabilization, $4M will be used for additional costs related to the WIFIA project if the projects are not substantially complete by the end of 2022, and $3.5M will be used to pay the Wayne County promissory note in 2023. Thus, about $10M is left in reserves. DUWA desires to maintain $5M in the operating reserve and $5M in the emergency and capital replacement reserve, so no more than $1M was used for rate stabilization in order to maintain a total of $10M in reserve. It should also be noted that DUWA budgeted more revenue from the sewage disposal and excess flow charges than what was actually received due to the decrease in flow units. This contributed to the rate increase.

Motion by Mayor Tim Woolley (Taylor) and supported by Mayor Bill Bazzi (Dearborn Heights) to approve the 2021 annual audit performed by Plante Moran, along with the end of audit letter, and to direct Plante Moran to upload the financial statement and letter to the Michigan Department of Treasury, as required by Public Act 2 of 1968. The motion passed unanimously with all attending members.

       ii. Single Audit for 2021
Beth Bialy, of Plante Moran, presented the 2021 Single Audit to the Board (Attachment 18). A single audit was required to be completed in order to meet the post-closing WIFIA loan and federal compliance requirements. This audit was completed to demonstrate that the WIFIA loan funds were spent appropriately per the loan requirements. DUWA received $17.85M from the EPA as a part of the WIFIA loan. A few findings were made during the audit process, such as the lack of segregation of duties considering that DUWA does not have any employees. Another finding was made regarding an invoice that was included in the incorrect year. Measures have since been taken to address and correct these findings.

Motion by Dustin Lent (Southgate) and supported by Greg Mayhew (Wyandotte) to approve the 2021 single audit performed by Plante Moran, and to direct Plante Moran to upload necessary documents to the Michigan Department of Treasury and/or EPA to fulfill WIFIA funding requirements. The motion passed unanimously with all attending members.

    b. Cash Reserve Policy
The WIFIA loan agreement requires a formal Cash Reserve policy be adopted within two years of the agreement date.  Beyond the loan requirement, it is also a best policy to establish and adopt a Cash Reserve policy.

Beth Bialy presented the Cash Reserve Policy that was included in the Board package (Attachment 19). The reserve thresholds in the policy are inline with the informal practices with DUWA.

Motion by Dustin Lent (Southgate) and supported by James Krizan (Lincoln Park) to approve the Cash Reserve Policy as presented. The motion passed unanimously with all attending members.

    c. Aging AR
Treasurer Jason Couture (Taylor) presented the Aging Accounts Receivable report (Attachment 20). Treasurer Couture stated that the total amount in the Accounts Receivable is approximately $949k, and most communities are up to date on their payments. River Rouge has an outstanding payment of about $150k related to bond allocation that is over 90 days. Accountant Doug Drysdale (DNS; Riverview) reached out to the billing department at River Rouge, and they plan to pay the invoice as a part of their next check run, which should occur before the next Board meeting.

    d. Pending Invoices
Treasurer Jason Couture (Taylor) presented the invoice register for a request for payment. The invoice register was provided in the pre-meeting packet (Attachment 21). The invoice register included 30 invoices due for a total of $757,508.10. Largest invoices included those to Walsh for the biosolids dryer facility project, Veolia for flow monitoring and capital outlay projects, and Wyandotte for utility services. Treasurer Jason Couture (Taylor) noted that Veolia’s O&M invoices for May and June were received after the deadline to be included on this month’s invoice register, so these invoices will be included on next month’s invoice register.

Motion by Rick Rutherford (Belleville) and supported by Mayor Bill Bazzi (Dearborn Heights) to pay the invoice register. The motion passed unanimously with all attending members.

9. Public Comment
There was no public comment. 

10. Other Business
System Manager Tercala updated the Board on the request for ARPA funding for the future UV Disinfection project. DUWA’s Board Commissioners are encouraged to consider DUWA when talking to Wayne County Commissioners and State Senators or Representatives in consideration of future project funding.

System Manager Tercala also advised on operating costs that are expected to impact future rates, as it did for the 2022-23 rate year. Multi-year rate and budget projections (3- or 5-yr) are being prepared to help advise communities of potential future year cost impacts.

11. Next Board Meeting Date: Thursday, July 14, 2022 (9:00 AM; In-Person)
Chairperson McLeod (Allen Park) reminded the Board that the next meeting would take place on Thursday, July 14, 2022 at 9:00 AM in-person at Taylor City Hall.

12. Adjournment
There being no other business, Chairperson McLeod (Allen Park) announced that a motion to adjourn would be in order. Motion by Rick Rutherford (Belleville) and supported by Dustin Lent (Southgate) to adjourn the meeting. Motion passed unanimously at 10:48 AM.

 

Meeting Minutes Prepared by:
Mackenzie Johnson, OHM Advisors, Engineer

Meeting Minutes Reviewed by:
Lambrina Tercala, OHM Advisors, DUWA System Manager

Attachments

1. Meeting Agenda
2. May 12, 2022 DUWA Board Meeting Minutes
3. Monthly Legal Update (by Fausone Bohn)
4. Emergency Authority Memo (by Fausone Bohn)
5. Major Water Loss Policy (by Fausone Bohn)
6. System Manager Report for April 2022 Board Meeting (by OHM Advisors)
7. Timeline for Implementing New DUWA Rate Methodology (by Dick Hinshon, OHM)
8. Biosolids Dryer Facility Project May 2022 Monthly Progress Summary (by Veolia)
9. Industrial User PFAS Charges
10. PFM Annual Disclosure and Financial Model Updates Proposal (by PFM)
11. Energy and Utility Consulting Services Proposal (by Joe Moylan, MEA, Inc.)
12. Natural Gas Basis Only Contract Extension (by Veolia)
13. IPS Pump No. 4 Casting Repair (by Veolia)
14. Design Review of Riverview Tunnel Connection Proposal (by Wade Trim)
15. Proposal for Engineering Services Associated with IPS Pumps 5 & 6 for Replacement of VFDs with          Soft Starters (by HRC)
16. Monthly Operating Report for April 2022 (by Veolia)
17. 2021 Audit (by Plante Moran)
18. 2021 Single Audit (by Plante Moran)
19. Cash Reserve Policy
20. Aged Accounts Receivable Report, dated June 3, 2022 (by Doug Drysdale)
21. Invoice Register, dated June 3, 2022 (by Doug Drysdale)