DOWNRIVER UTILITY WASTEWATER AUTHORITY
NOVEMBER 10, 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 11 communities: Allen Park, Belleville, Dearborn Heights, Lincoln Park, River Rouge, Riverview, Romulus, Southgate, Taylor, Van Buren Township, and Wyandotte. A quorum (at least 7 members) was present.
2. APPROVAL OF AGENDA
Copies of the revised Agenda were made available prior to the meeting (Attachment 1). Motion by Mayor Bill Bazzi (Dearborn Heights) and supported by James Krizan (Lincoln Park) to approve the revised Agenda. The revised Agenda demonstrated a change in name for Agenda Item 4b. The motion passed unanimously by all attending members.
3. APPROVAL OF MINUTES FROM OCTOBER 13, 2022 BOARD MEETING
Copies of the meeting minutes from the October 13, 2022 Board meeting were distributed by email prior to the meeting (Attachment 2). Motion by Mayor Tim Woolley (Taylor) and supported by Greg Mayhew (Wyandotte) 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 the legal team has been assisting the System Manager with matters related to the biosolids dryer project as well as the UV disinfection project and has been participating in various committee meetings. Attorney Fausone added that he has been trying to contact the Wayne County Corporation Counsel to follow up on DUWA’s request for a waiver of the $3.5M payment that is due to Wayne County in 2023. A response from Wayne County has not yet been received.
Mayor Tim Woolley (Taylor) asked if DUWA is requesting both a waiver of the $3.5M payment and ARPA funding. Attorney Fausone confirmed that DUWA currently has both of these requests in to Wayne County. Chairperson McLeod (Allen Park) suggested that Attorney Fausone next reach out to Wayne County Executive Warren Evans and Deputy Wayne County Executive Assad Turfe regarding these requests.
b. Wastewater Exemption Policy Revision
Attorney Fausone presented the Wastewater Exemption Policy Revision to the Board (Attachment 4). The Board previously approved this policy in 2021 to allow industrial users to request an exemption from wastewater disposal charges if they can demonstrate that all or a portion of purchased water does not enter the sanitary sewer system. The policy allowed exemptions to be implemented immediately upon approval, which created difficulties in predicting future revenue expectations as the flow volumes continuously changed. Thus, the revised policy states that exemption applications can be submitted at any time throughout the year, but exemptions will not take effect until the following July 1st so that the reduced revenue can be accounted for during the rate setting process that occurs each spring. Exemption requests submitted by the end of February will be implemented on July 1st, but exemption requests submitted after the end of February will not be implemented until the July 1st of the following year. The revised policy also increases the application fee from $1200 to $1500 to account for the level of effort it takes to review the applications. This policy revision was reviewed by the Legal, Technical, and Finance Committees, and is recommended for approval.
Attorney Kerry Morgan (Riverview’s attorney) asked if this policy will apply to the industries that currently hold exemptions. Attorney Fausone confirmed that this policy will apply to existing industries with exemptions as they are required to renew their exemption requests each year to verify that no processes have changed. Attorney Kerry Morgan suggested that the revised policy be shared with the industries that currently hold exemptions, and Attorney Fausone confirmed that this policy will be shared and will be posted to DUWA’s website. Chairperson McLeod (Allen Park) asked how many exemptions are currently in place. System Manager Tercala responded that there is currently only one exemption in place and it is for Wyandotte Municipal Services.
Motion by Jeff Dobek (Riverview) and supported by Roberto Scappaticci (Romulus) to approve the revised Wastewater Exemption Policy. The motion passed unanimously by all attending members.
c. Annual System Manager Evaluation Results
Attorney Fausone presented a summary of the Annual System Manager Evaluation results to the Board. Six of the thirteen member communities submitted responses. Generally, voters agreed or strongly agreed with the adequacy of management by the System Manager. One survey item received neutral responses as it related to the System Manager’s management of Veolia to ensure an appropriate level of service is being achieved per the contract. OHM also shared a memo providing a comprehensive list of the System Manager’s functions and activities to provide additional insight for newer Board members (Attachment 5). Chairperson McLeod (Allen Park) asked that a summary of the survey questions and results be shared with the Board, and Attorney Fausone confirmed that this would be shared.
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:
- Veolia prepared their Annual Biosolids Report and Asset Management Plan and submitted these to EGLE.
- The UV disinfection replacement RFP was publicly posted on October 31st, and bids are due on December 12th. DUWA’s three as-needed engineers were also notified of the RFP.
- Veolia’s flow metering contract expires at the end of 2022, so Veolia will prepare a flow metering contract renewal request that will be reviewed by the Technical Committee before being brought to the Board for approval.
- EPA has developed a new program to assess utilities’ resilience to climate change (Attachment 7). DUWA agreed to participate in the program, and EPA plans to proceed with the analysis in May 2023. Regional workshops will be held to share findings and best practices for the utilities in the region.
- OHM has been working with Constellation and DUWA’s natural gas utility consultant to determine how much natural gas will be needed each month and how much to sell back to the market until the dryers are online. A tracking summary of the purchase and sale of natural gas was presented (Attachment 8).
- Aon provided projections on the insurance premiums for 2023. The property insurance premium is expected to increase by about 5%, the liability insurance premium is expected to increase by about 10%, and the Inland Marine (collection system) insurance premium is expected to remain at a flat rate. The actual 2023 premiums will be presented at the December Board meeting.
- EPA has advised that the remaining Project 4 projects funded by the WIFIA loan can be cancelled or postponed without material default of the loan. DUWA had also asked the EPA if the amortization schedule could be adjusted so that payments could be deferred to later years; however, the increased monthly payments in later years would not provide much of a cost benefit to DUWA, so this option will likely not be pursued.
- Due to the strong relationship between US Bank and DUWA, US Bank offered to move DUWA’s funds to a market with higher interest rates, and DUWA’s Treasurer approved the transfer of funds to this market.
- The Intent to Apply form was submitted to EGLE for SRF funding for the UV disinfection replacement project. DUWA hopes to receive both ARPA and SRF funding assistance. Principal forgiveness is also expected to be provided to a greater extent this year than before.
- A joint meeting with the Technical and Finance Committees was held to review DUWA’s rate projections over the next five years. A summary of the items discussed will be shared with the Board after this meeting.
b. Biosolids Dryer Facility Project
Jason Nash provided an update on the Biosolids Dryer Facility project to the Board (Attachment 9). The use of alum instead of ferric chloride to mitigate reheating events in the dried solids began on October 11th. A small amount of polymer is being added to assist with the settling of particles, and a small amount of ferric chloride is being added for odor control. Initial sampling results show that the iron content in the solids has been reduced from 6.1% to 2.7%, which is below the desired threshold of 3.1%.
A leveling screw fell into the cake bin due to a failure in the bearing. A root cause analysis confirmed that the bearing failure was due to an error in how it was manufactured. Two new screws are currently in production and are covered under warranty by Kruger. These screws are expected to be installed the week of November 28th. Kruger is also looking into options for installing a vibrating device to address bridging issues in the cake bin to ensure the material drops into the bin, and Kruger plans to complete this installation next week.
The dryers are planned to be run 24 hours a day next Monday through Friday for training of operation and maintenance staff. Samples will also be taken throughout the week for evaluation of reheating. Once the leveling screws have been installed, the dryers are planned to be run continuously for the first three weeks of December to fine tune the transportation and hauling of the solids.
Attorney Kerry Morgan (Riverview’s attorney) asked if there have been any reheating issues since alum has been used. Jason Nash responded that the dryers have been offline due to the cake bin issues so there have not been any samples to evaluate. Samples will be evaluated for reheating next week when the dryers are online. Attorney Kerry Morgan (Riverview’s attorney) asked if polymer is contributing to the bridging issues. Jason Nash responded that some bridging issues were experienced before the polymer was added, but it is possible that the increase in polymer may have contributed to increased bridging.
c. Pro Forma Update
Bill Hanley, of Veolia, presented the pro formas to the Board (Attachment 10). Based on the updated pro formas, DUWA can expect an operating cost savings of about $1.7M in 2023, and an average annual operating cost savings of about $4M over the next 25 years with the completion of the biosolids dryer project compared to the status quo. This cost savings equates to about a 40% cost savings. Operating costs for 2023 were based on current costs for utilities plus inflationary factors. The pro formas include consideration for repair and replacement of parts. The pro formas also show the cost comparison between using ferric chloride and alum for phosphorous removal. Attorney Fausone added that the pro formas are based on landfill disposal of sludge, but other beneficial reuse options such as land application may be available in the future.
System Manager Tercala asked why the ferric chloride and alum costs are similar as she understood that there would be about a $300k cost increase with the use of alum. Bill Hanley responded that Veolia had initially projected a significant cost difference between the two chemicals, but then recently learned that the cost for ferric chloride was projected to increase by about $1/gallon in 2023, thus minimizing the cost difference between the two chemicals. Dan Marsh (Southgate) asked if the use of polymer was included in the pro formas. Bill Hanley responded that Veolia stockpiles a significant amount of polymer onsite (two- or three-years’ worth), thus the small amount of polymer that is being used has no impact on DUWA’s cost.
Roberto Scappaticci (Romulus) asked if there was a certain cost-savings guarantee included in the contract, noting the large difference between the $1.7M savings in 2023 and the $4M savings per year over the next 25 years. System Manager Tercala responded that while these pro formas demonstrate the expected cost savings, there was no cost savings guarantee in the contract as the contract is tied to performance requirements, not operating costs. Bill Hanley added that the projected cost savings are largely attributed to the increased costs for hauling and disposal as the dryers will offer DUWA flexibility with solids disposal. Roberto Scappaticci (Romulus) requested that a short-term (5-year) pro forma be provided, and System Manager Tercala confirmed that it will be provided to the Board.
6. OTHER REQUESTS FOR AUTHORIZATIONS AND APPROVALS
a. EGLE High Water Infrastructure Grant Resolution
EGLE recently announced their High Water Infrastructure Grant Program that provides grants for projects that address the impacts of severe wet weather events, specifically as they relate to system resiliency, flooding, and storm water management. DUWA could use this grant funding to fund efforts to reduce the impacts of sanitary sewer peak flows within the system and at the plant.
The proposed scope of work under this grant includes updating DUWA’s hydraulic sanitary sewer system model so that it can be used for emergency planning to evaluate options for improving the performance of the regional collection system during wet weather events as well as to minimize blending events at the plant. The scope of work also includes some contingency for collection system repairs that may be needed per the findings of this year’s CCTV inspection efforts. Based on the proposed scope of work, the amount of funding requested totals $320,520, 80% of which would be funded by EGLE through the Grant Program and 20% of which would be funded by a local match (Attachment 11). The cost split between the model update and the sewer repair effort is still being finalized.
As a part of the grant funding application, it will be requested that the 20% local match be satisfied by the costs that have already been paid by DUWA for the flow metering program since the flow metering data would be used to update DUWA’s model. DUWA would also have the option to discontinue pursuit of this grant funding should the flow metering expenses be ineligible for the local match. Grant program applications are due by November 30th and a Resolution of Support by the Board is required to be submitted along with the application. The Resolution of Support outlines the proposed scope of work and the total amount of funding requested.
Motion by Mayor Bill Bazzi (Dearborn Heights) and supported by Rick Rutherford (Belleville) to authorize the Chair or Vice Chair to sign the Resolution of Support that will be included with the EGLE High Water Infrastructure Grant Program application. The motion passed unanimously with all attending members.
b. DNS Contract Renewal
Doug Drysdale, of DNS Financial Services, has served as DUWA’s Accountant since August 2018. His tasks have included invoice processing, year-end reporting, budget preparation, rate setting, and audit coordination. His existing contract now requires renewal, and it is requested to extend his contract through December 31, 2024, to align his contract with the other Professional Services contracts. The contract extension request includes a proposed annual not-to-exceed fee of $50,000 (Attachment 12). Accounting services are budgeted for in DUWA’s Other Services and Charges – Accounting Services budget line item.
Motion by Mayor Bill Bazzi (Dearborn Heights) and supported by James Krizan (Lincoln Park) to authorize the Chair or Vice Chair to sign the DNS Financial Services contract extension request subject to the acceptance of its terms and conditions by DUWA Legal. A roll call vote is required, and the motion passed with 89.67% of the vote. The motion passed unanimously with all attending members.
7. CONTRACT OPERATOR UPDATE
Veolia’s General Manager Jason Tapp provided the Contract Operator update.
a. September 2022 MOR
The September 2022 Monthly Operating Report (MOR) was provided in the Board’s pre-meeting packet (Attachment 13). Highlights from the summary and other updates included the following:
- Plant operations remain in compliance.
- The month of September had very little rainfall, with just under 1-inch of rain. The average flow this month was about 26 MGD and the maximum flow received was 64 MGD.
- The six-month phosphorous average was within compliance of the permit limit.
- There were four open positions available, and two of the positions have recently been filled. Application reviews and interviews will continue to be conducted to fill the remaining positions. There will be no vacancy credits for this month.
- Dry weather and subsequent low flows have allowed Veolia to take some processes out of service for maintenance, particularly the secondary clarifiers.
- The gas monitoring system that monitors LEL and H2S in the Tunnel Pump Station was replaced in-house.
- Staff was trained on taking system processes out of service and getting them back online.
- A new chemical feed line was installed to dose into the recycle stream.
- Lightbulbs continue to be replaced with LED lightbulbs throughout the plant.
- 223 Miss Dig tickets were submitted in September; 29 of which were emergency and 59 of which required site visits for marking.
- The abandoned parking lot on the DWTF property was covered with soil from the biosolids dryer construction activities so that this area can be converted into a pollination garden. This resulted in the need to raise two manholes that are located in this area.
- Many safety trainings have taken place via in-person and online. Training topics included fall protection, confined space entry, crisis management, and traffic control with the collection system team.
Chairperson McLeod (Allen Park) asked for a status update on the inventory of the replacement bulbs for the UV disinfection system. Program Manager Tapp responded that Veolia ordered and stockpiled as many bulbs, ballasts, and quartz sleeves as they could from Trojan once Trojan ceased supporting the existing system in July 2022. Wade Trim performed a remaining useful life analysis of the existing system and estimated a remaining useful life of 20 months based on the inventory of spare parts. The alternative of ordering non-OEM spare parts is not desired due to the high failure rate experienced with these parts.
Attorney Kerry Morgan (Riverview’s attorney) asked what happens when the inventory of spare parts runs out. Program Manager Tapp responded that the estimate of 20 months is assuming the system is run at 100% capacity, so he estimates that they may be able to get a few extra months out of the system if they do not run it at 100% capacity all the time. Once the inventory of spare parts is depleted, there are some alternative disinfection options that could be considered for temporary use pending approval by EGLE. However, the concern is that the timing for construction of a new disinfection system is not currently known and the DWTF is only one of many Trojan UV facilities so alternate providers of UV resources may be stretched thin as they see higher demands.
b. Chemical & Sludge Price Updates
Jason Tapp presented the summary of commodity unit price changes to the Board (Attachment 14). A column was added to the unit rates summary table to show the percent change from the budgeted unit prices set in Amendment 7 to the current month’s actual unit prices. All commodity unit prices have significantly increased compared to the prices set in the budget.
8. TREASURER’S REPORT
a. Quarterly Financial Report 2022 Q3
Doug Drysdale (DUWA’s Accountant; DNS Financial Services) presented the Quarterly Financial Report for Q3 of 2022 (Attachment 15). Revenues are at about 80%, which is above the targeted amount of 75% for Q3. Revenues include 100% of funds received from SRF billings to communities. Financial services expenditures exceed the targeted amount due to the additional rate methodology effort by Raftelis. The Wyandotte nuisance fees have not yet been applied, and Veolia’s unit cost reconciliations are slightly delayed. The sludge hauling and disposal costs significantly exceed the targeted amount due to the dryers not yet being online. Several of the utility costs also exceed the targeted amounts due to the increased costs on commodities. The electrical and natural gas usages are less than expected due to the dryers not yet being online and due to the relatively low flows experienced this year. The largest capital outlay expense is the biosolids dryer project. Most other small capital projects were postponed this year. Overall, DUWA is experiencing a net deficit of $312k.
The balance sheet shows that DUWA has $36.7M in cash compared to $37.1M in cash at the beginning of the year. The WIFIA and senior lien bonds paid in October will also result in another $1.7M cash decrease. There is currently about $3.7M in accounts receivable for sewage disposal charges. The amount in fixed assets has not changed much since the beginning of the year, and prepaid insurance will not be applied until Q4. The accounts payable is higher than what it was at the beginning of the year due to the bond payments that were paid in October, but not reflected on this Q3 balance sheet. Bonds payable are not reconciled until the end of the year during the audit.
b. CY2023-2024 Budget Preview
Doug Drysdale (DUWA’s Accountant; DNS Financial Services) presented the CY2023-2024 Budget Preview (Attachment 16). The budget was reviewed by both the Technical and Finance Committees. The operating revenue budget is increasing from $24.7M to $27.5M for 2023 and $29.2M in 2024 based on inflation and increased costs. These increased costs include the 9% rate increase for sewage disposal charges and excess flow charges. Industrial surcharge revenue is expected to decrease as the Wayne County Airport Authority will likely be installing a treatment system so DUWA will no longer receive its flow with high BOD concentrations. Interest earnings are expected to increase. SRF bond proceeds have been included for funding of the UV disinfection replacement project. The $3.5M payment to Wayne County is also expected to be paid in 2023 from the rate stabilization reserve. The first principal payment on the WIFIA loan will be paid in 2023. There will be some increases in insurance premiums as the dryer system will result in additional assets to insure.
Plant operating expenses, including utilities, are expected to continue to increase. A 5.5% increase in Veolia’s O&M fee was projected based on several factors. Veolia prepared an MOU that demonstrates that Veolia will continue to waive their 10% markup for commodities through 2023. The capital outlay includes $2M to be used for small capital projects as well as $1M to be used for the UV disinfection project in 2023. It should be noted that even with the increased costs and the $3.5M payment to Wayne County, DUWA will still meet its debt covenant ratios for 2023 and 2024.
Roberto Scappaticci (Romulus) asked how Veolia’s O&M fee increase is calculated. Doug Drysdale (DUWA’s Accountant; DNS Financial Services) responded that the O&M fee is recalculated each year based on the formula that is stated in the O&M contract. The formula includes three inflation factors from the U.S. Bureau of Labor Statistics. System Manager Tercala added that the O&M fee would not go down if the inflationary factors decreased, but the O&M fee increase could equate to a 0% increase. OHM Advisors reviews the fee increase calculation by Veolia. Attorney Kerry Morgan (Riverview’s attorney) added that System Manager Vyto Kaunelis previously prepared a 20-year projection of Veolia’s O&M fees and suggested that this projection be reviewed to compare to the actual fee increases experienced.
c. Aging AR
Treasurer Jason Couture (Taylor) presented the Aging Accounts Receivable report (Attachment 17). Treasurer Couture stated that the total amount in the Accounts Receivable is approximately $1.375M, and about $1.314M is current within 60 days. All communities appear to be staying current with their payment of invoices.
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 18). The invoice register included 36 invoices due for a total of $300,678.81. Largest invoices included those to Wyandotte for utility services. The invoice register total is lower than usual as not as many invoices were received by the cutoff date. It is expected that the invoice register total next month may be higher than normal as it will include invoices that were submitted after this month’s cutoff date.
Motion by James Krizan (Lincoln Park) and supported by Mayor Tim Woolley (Taylor) to pay the invoice register. The motion passed unanimously with all attending members.
9. PUBLIC COMMENT
Mayor Tim Woolley (Taylor) cautioned that DUWA should not expect to receive both the ARPA funding and the waiver of the $3.5M payment to Wayne County. Attorney Fausone stated that the attempt to obtain both the payment waiver and ARPA funding will show DUWA’s member community residents that DUWA has explored every possible option to try to minimize their rate increases, even if these requests are denied.
10. OTHER BUSINESS
System Manager Tercala reminded the Board that officer elections will take place in January, and encouraged Board Commissioners to reach out if they are interested in holding an officer position. System Manager Tercala also encouraged the Board Commissioners to reach out if they would like to be a part of the selection committee that will review bids and conduct interviews of select bidders for the UV disinfection replacement project.
11. NEXT BOARD MEETING DATE: THURSDAY, DECEMBER 8, 2022 (9:00AM; IN-PERSON)
Chairperson McLeod (Allen Park) reminded the Board that the next meeting would take place on Thursday, December 8, 2022 at 9:00 AM in-person at Taylor City Hall.
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 Jeff Dobek (Riverview) to adjourn the meeting. Motion passed unanimously at 10:38 AM.
Meeting Minutes Prepared by:
Mackenzie Johnson, OHM Advisors, Engineer
Meeting Minutes Reviewed by:
Lambrina Tercala, OHM Advisors, DUWA System Manager
- Meeting Agenda
- October 13, 2022 DUWA Board Meeting Minutes
- Monthly Legal Update (by Fausone Bohn)
- Revised Wastewater Exemption Policy, dated November 10, 2022 (by Fausone Bohn)
- System Manager Self-Evaluation (by OHM Advisors)
- System Manager Report for November 2022 (by OHM Advisors)
- EPA Climate Resilience Evaluation Tool Flyer (by EPA)
- DUWA Natural Gas Expense Tracking (by OHM Advisors)
- Biosolids Dryer Facility Project October 2022 Monthly Progress Summary (by Veolia)
- Pro Formas (by Veolia)
- Resolution of Support for EGLE High Water Infrastructure Grant Program Application
- DNS Contract Extension Request
- Monthly Operating Report for September 2022 (by Veolia)
- DWTF Unit Price Changes Summary (by Veolia)
- Quarterly Financial Statement for 2022 Q3 (by Doug Drysdale)
- Proposed CY2023-2024 Budget (by Doug Drysdale)
- Aged Accounts Receivable Report, dated October 30, 2022 (by Doug Drysdale)
- Invoice Register, dated November 3, 2022 (by Doug Drysdale)