Form revised: December 6, 2011
FISCAL NOTE FOR NON-CAPITAL PROJECTS
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Department: |
Contact Person/Phone: |
CBO Analyst/Phone: |
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Seattle Public Utilities |
Andrew Lee /3-9066 |
Karl Stickel/4-8085 |
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Legislation Title: AN ORDINANCE relating to Seattle Public Utilities; authorizing the Director of Seattle Public Utilities to sign and to fulfill the obligations in a Consent Decree by the United States Environmental Protection Agency and the State of Washington Department of Ecology. |
Summary of the Legislation:
The proposed ordinance would authorize the director of Seattle Public Utilities to sign and implement a Consent Decree with the Environmental Protection Agency (EPA) and the State of Washington Department of Ecology (Ecology) to reduce overflows from the City’s 90 Combined Sewer Overflow (CSO) outfalls.
Background:
The City of Seattle owns, maintains and operates a system of sanitary sewers and storm and surface water drainage as part of Seattle Public Utilities’ drainage and wastewater system. The EPA determined sewage discharges from Seattle’s combined sewers violate the federal Clean Water Act and the conditions and limitations of the National Pollutant Discharge Elimination System (NPDES) issued by the Ecology. The EPA made Findings and Conclusions and issued a Consent Decree pursuant Section 402 of the Clean Water Act, 33 U.S.C. §1342(b).
To bring about compliance with the Clean Water Act, the City, EPA and Ecology have been negotiating the Consent Decree since early 2011. The Consent Decree requires the City to pay a civil penalty of $350,000 for past violations of the Clean Water Act. The Consent Decree also requires the City to develop and implement a combined sewer overflow (CSO) long-term control plan by 2025, but includes provisions which allow the City to defer CSO investments if alternative projects which yield greater benefit to the receiving waters can be identified by 2018. The Consent Decree allows the City to use a significantly more cost-effective asset management approach to performing operations and maintenance of sewerage infrastructure. For example, SPU has the flexibility to clean its sewer pipelines based on risk, as opposed to following a prescriptive cleaning schedule (e.g., once every 10 years). The Consent Decree calls for coordination and optimization between the City and King County on their current and future wastewater system operation.
Please check one of the following:
____ This legislation does not have any financial implications.
_X _ This legislation has financial implications.
No 2012 appropriation actions are required by this proposed Council Bill. There are, however, significant financial impacts that result from the regulatory requirements being placed on SPU by Ecology and the EPA, which are the subject of the Consent Decree.
The Consent Decree requires the City to pay a civil penalty of $350,000 for violations of the Clean Water Act. The $350,000 penalty will be paid for with money appropriated in the Environmental Judgment & Settlement Account #744736, Activity #N010202 in the General Expense BCL in the Drainage and Wastewater Fund (Fund 44010).
The Consent Decree also requires the City to implement its combined sewer overflow (CSO) reduction program by 2025. The budget estimate for completing SPU’s CSO Reduction Program by 2025 ranges from $182 million to $627 million (2010 CSO Reduction Plan Amendment, p. 5-18). For purposes of estimating the financial impact of the Consent Decree, SPU has conservatively assumed remaining program expenditures will be approximately $500 million. Supporting appropriations will be proposed to Council for consideration and approval during the development of future CIPs. More information about estimated costs by fiscal year and rate impacts on drainage and wastewater rates are provided in the attachment to this fiscal note.
Other Implications:
a) Does the legislation have indirect financial implications, or long-term implications?
Yes, the legislation has long-term financial implications. Those implications are described in Exhibit A.
b) What is the financial cost of not implementing the legislation?
The alternative to signing a Consent Decree is for EPA to sue the City. The resulting court order would likely impose much more stringent and costly requirements. The nature of these requirements is unpredictable and would make it difficult for the City to plan its projects. An order also would impose heavy penalties, which can be up to $25,000 per day for each violation of the Clean Water Act. Criminal prosecution is possible against the City and against individuals. To prove a criminal case, the federal government only has to prove that the defendant was aware that pollutants were being discharged.
c) Does this legislation affect any departments besides the originating department?
This legislation primarily impacts SPU. However, the types of projects implemented to comply with the Consent Decree (e.g., pipelines, pump stations, small retrofits, green stormwater infrastructure, and underground storage structures) may have impacts on the Department of Planning and Development, the Department of Parks and Recreation, the Seattle Department of Transportation, and other City departments. Coordination with other City departments will be necessary to ensure successful implementation of the Consent Decree requirements. The Department of Parks and Recreation and the Seattle Center also are major drainage and wastewater ratepayers and, like all rate payers, will be impacted by the rate increases that are discussed in the attachment to the fiscal note.
d) What are the possible alternatives to the legislation that could achieve the same or similar objectives?
There are no alternatives to the legislation that could achieve the same or similar objectives.
e) Is a public hearing required for this legislation?
No.
f) Is publication of notice with The Daily Journal of Commerce and/or The Seattle Times required for this legislation?
No.
g) Does this legislation affect a piece of property?
This legislation does not have an immediate impact on a particular piece of property. However, the types of projects that will be implemented to comply with the Consent Decree (e.g., pipelines, pump stations, small retrofits, green stormwater infrastructure (GSI), and underground storage structures) will have impacts on both private and public property. These projects will be constructed in the public right-of-way, in City-owned lands, and/or on private property.
h) Other Issues:
None.
List attachments to the fiscal note below:
Exhibit A – Financial Impacts Summary
City of Seattle Combined Sewer Overflow Reduction Program
2012 Environmental Protection Agency Consent Decree
Financial Impacts Summary
4/24/2012
Background
The City of Seattle (City) owns, maintains and operates a system of sanitary sewerage and storm and surface water drainage as part of Seattle Public Utilities’ Drainage and Wastewater System. The Environmental Protection Agency (EPA) has determined that the City has violated Sections 301 and 402 of the Clean Water Act, 33 U.S.C. §§ 1311 and 1342, and the conditions and limitations of its National Pollutant Discharge Elimination System (NPDES) permit issued by the State of Washington Department of Ecology (Ecology). The EPA has made Findings and Conclusions and issued a Consent Decree pursuant Section 402 of the Clean Water Act, 33 U.S.C. §1342(b).
The City, EPA and Ecology have been negotiating the Consent Decree since 2011. The Consent Decree requires the City to pay a civil penalty of $350,000 for violations of the Clean Water Act. The Consent Decree also requires the City to implement its combined sewer overflow (CSO) reduction program by 2025, but includes provisions which allow the City to defer CSO investments if alternative projects which yield greater benefit to the receiving waters can be identified by 2018. The Consent Decree allows the City to use a significantly more cost effective asset management approach to performing operations and maintenance of sewerage infrastructure. The Consent Decree calls for coordination and optimization between the City and King County on their current and future wastewater system operation. Lastly, the Consent Decree provides protection for the City from certain 3rd party lawsuits.
Financial Impact of Implementing the Consent Decree Requirements
The budget estimate for completing SPU’s CSO Reduction Program by 2025 ranges from $182 million to $627 million (2010 CSO Reduction Plan Amendment, p. 5-18). For purposes of estimating the financial impact of the Consent Decree, SPU has conservatively assumed remaining program expenditures will be approximately $500 million.
The current projected spending path from 2012-2025 is shown in Figure 1 (page 2) and Table 1 (page 3).
Figure 1. Annual CIP Expenditures for Implementing Consent Decree Requirements
In October 2010, SPU submitted a long-range spending projection (2011-2025) in a memorandum to the City Council that accompanied an ordinance to approve a State of Washington Department of Ecology Administrative Order. The spending path shown in Figure 1 is similar to the 2010 projection in that the total program expenditures are still estimated to be approximately $500 million. However, the current spending path differs from the projection in 2010 in several ways:
· Expedited Schedules for Genesee & Henderson Projects: In 2010, SPU’s timelines for implementing projects had project durations that were longer than are necessary. SPU has identified that it can shorten the duration of its projects by 1-3 years. As a result, the Genesee and Henderson projects are being implemented on a faster schedule. The expediting of schedules has led to projected spending in 2013-2016 that is higher than what was anticipated in 2010. However, the overall program costs have not increased as a result in the schedule acceleration. (CIP expenditures are lower than originally projected from 2017-2019.)
· Added Emphasis on Green Stormwater Infrastructure (GSI) Projects: In 2011, through its Long-Term Control Plan (LTCP) project, SPU identified additional opportunities to construct green stormwater infrastructure (GSI) in CSO basins early on to reduce the size of underground storage projects, which would be constructed from 2017-2025. This correlates to a $12 million increase in green stormwater infrastructure (GSI) spending from 2011-2016 above the 2010 projection. The size of the GSI investments from 2012-2016 is still being analyzed and will depend on a number of factors including public involvement and rates.
· Outfall Rehabilitation Program: In the late Fall of 2010, SPU received a new requirement in its NPDES permit to rehabilitate deteriorated outfalls. Two of those outfalls are located in the Henderson CSO Basin (Outfall #45 and Outfall #44). SPU is planning on replacing those two outfalls as part of the S Henderson project, which is leading to an increase in that project’s budget.
Rate Impact of Implementing the Consent Decree Requirements
Regardless of the program completion date, rate increases will be necessary to fund the CSO capital program. Executing the requirements of the Consent Decree will require a cumulative maximum rate increase of approximately $8 per month for a typical drainage and wastewater customer by the year 2025. This is consistent with the long-range rate projection that was presented to the City Council in 2010.