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M We also met with City staff and the City's rate consultant to discuss the study. Our review and meetings with City staff have revealed several aspects of the study that need to be readdressed. The most important item, which we discussed at our October 15 meeting with City staff, was the rate study's assumption regarding the County's capacity allocation. Based upon our interpretation of the agreement between Indian River County and the City dated August 18, 1989, -the County has a permanent right to 400,000 gallons per day of treatment capacity. The City's rate study allocates costs to the County based upon an assumption of 600,000 gallons per day. In addition to the 400,000 gallons -per -day permanent allocation, the -- August 18, 1989, agreement provides for the County to treat wastewater from the "Hospital Service Territory" in return for additional capacity of up to 200,000 gallons per day. The County believes that the essence of the provision for increased allocation is to promote efficiency in providing wastewater service to the City's and the County's retail customers by exchanging the responsibility for treating certain customers' wastewater flows. In the past, the County has treated wastewater for certain City customers, from which the City bills and collects revenues. In return, the City was to treat wastewater flows for certain County customers, from which the County would bill and collect revenue. This exchange was intended to make both the City and the County's wastewater system operations more efficient. The increased capacity allocation of 200,000 gallons per day was never intended to be billed to the County, but was provided because the County was similarly treating City sewer customer flows. However, the City has been billing the County for wholesale service based upon an allocation of 600,000 gallons per day without giving the County any credit for treating wastewater flows from the City's customers. Not only do we believe that the City has been overbilling the County for its capacity allocation, the use of the 600,000 gallons -per -day assumption in the rate study results in excess costs being allocated to the wholesale sewer rate. The County Attorney has advised me that the City is adjusting the allocation to 400,000 gallons per day, which will have a major impact on the level of the proposed wholesale rate increase, and the County's payments for services may also need to be assessed. At this time, the'County is no longer treating wastewater from the Hospital Service Territory. The City's rate. study also allocates a portion of the sewer system's budgeted transfer to the City's General Fund to the wholesale rate. The County does not believe that it is fair or appropriate for the County's sewer customers to contribute to the City's General Fund beyond those costs that are clearly associated with administering the wastewater utility. Given the permanent status of the County's capacity allocation and the financial benefits to the City's ratepayers from this arrangement, it is not appropriate for the wholesale rates to include "profits" for the City's General Fund. In addition to the issues involving the appropriate capacity allocation and payment of transfer to the City's General Fund, the County staff and its rate consultants have, also identified several other concerns with the rate allocation process, which we have discussed with the City's staff. These issues include: .. 1. OCT 191993 Revising the rate study's net depreciation to be recognized flow measuring adjustments. 49 plant allocation to allow for in the deep injection well and BOOK c`• o F'�GF. B�,'s� A