HomeMy WebLinkAbout11/8/1984Thursday, November 8, 1984
The Board of County Commissioners of Indian River County,
Florida, met in Special Session at the County Commission
Chambers, 1840 25th Street, Vero Beach, Florida, on Thursday,
November 8, 1984, at 1:30 o'clock P.M. Present were Don C.
Scurlock, Jr., Chairman; William C. Wodtke, Jr., Margaret C.
Bowman, and Richard N. Bird. Vice Chairman Lyons was absent due
to illness. Also present were Michael J. Wright, County
Administrator; Gary Brandenburg, Attorney to the Board of County
Commissioners; Terrance G. Pinto, Utility Services Director; and
Barbara Bonnah, Deputy Clerk.
Chairman Scurlock called the meeting to order and
Commissioner Bird led the Pledge of Allegiance to the Flag.
PUBLIC HEARING - BREEZY VILLAGE WATER & SEWER FRANCHISE - RATE
INCREASE
The hour of 1:30 o'clock P.M. having passed, the Deputy
Clerk read the following notice with Proof of Publication
attached, to -wit:
OV 8 1984 aooK 58 Fina 804
NOV 8 1984�
BOOK [ r,,v
'''ate NOTICiOF PUBLIC HEARING ' i .c • yT •Lt:
The Indian River Comfy Board of County Commissioners will hold a public hearing on November 8,
1884, at 1:30 p.m., In the Commission Chambers located at 1840 25th Street, Vero Beach, Florida, to
confider the following rate request from Breezy Village Water ,& Sewer Company Inc v
.� .�
g;ff$a+k,5}+ 'm .s�1i e - I WATER �' SENtER
Present rated
Ou_.stun7hg:'4Ye�
400
tf1, th1"neaterj�g=?7"+�> d� ' 3t? E �aA .kg i��v 8.78 i 'y �k = 1_4;, 117o '1 ;11.70 i
�( 72.60 .:22.60 .
2ur�y,��,-4 s r 4 K r 1
30.78 30.78
8" meter .'7itA N ` (i y ' Y � y g� jy � fi� .' r 64.00 r,'• �! ��
_ i :•b, 75.00 a
Nest 2Ned18,000 gallons, per 1.000 gattion, a, par 1.000 gallon' `", `# �'F 3W 1 114
+ a NM 35,000 gallons, par1,000 ga1101p d et a /"r . X78 r f? ti/i vyya P
A ttw 78,000 gallaIm Pe►1,000
i ,, 376.00. , 376.00-f^
•t.r , r„Freposw w; + tea i war ! tN iiaY w
VERO BEACH PRESS -JOURNAL P
flerria Arallabipty Changf = na ptlorr +
Published Daily I,ur aitowarla%tobepaid every mwgh,pagardipdv.•.
ofeonsnannpil" (*Ven If meta is por�fy
Vero Beach, Indian River County. Florida �i
+ b ±sy'y4. z8/8"mebr'+s, , .�"'12.87•� �.BT
�"bk.'h MU' cal =r 'ft'
COUNTY OF INDIAN RIVER: STATE OF FLORIDA I Iii" meth "� r - j 92.18 32:18::
Before the undersigned authority 2" Irhetar yam' A �' y e° ' ' � s r 64.38 64.36
9 y personally appeared J. J. Schumann, Jr. who on oath 9" nNbr p �s �iK a� 10285 ; $ J' 102.86=j
says that he is Business Manager of the Vero Beach Press -Journal, a dally newspaper published r i
o- - 4" metK 4 a.�:aa .. r.2Q8JD2 -208.62.:
at Vero Beach in Indian River County, Florida that the attached copy of advertisement, being a 6» Y(21J8?`- �'r321,7$
MuMi-family. mastp mehnd, pK wUt 843 60 :. s 843.60
Comps Cha►" '+¢F ver1k,t • 12.87 '.tits r 12.81'
'I � r Per 1 008onallans 5 "��qr�:+;i, �+ y . �s. �• �.�
////// • Berra Ml be bided on ( ' }` 1 �8. - fi
In the matter of4r � X-046 T �6a
! ' R ... ga)Iors. This "Cep"Is �kMd so�P-G'x>{if ,l lee `Vj a,,,.�,.JYi Viz-
e', : that s0 1 customers Will nqt beWsd lir4 t ,41
forWats not nbwned to OWSewsr. n ty a F;4
Ailutglty bilit must be paid In J within1W days of Bre date of the bill or`sernrbs may liein the Court, was pub Idrmirs<sd Sella wig not be restored all amounts owed the utility, Utctuding the tum off ani
, turn on charge, haw been paid. �4x x ' -
Iished in said newspaper in the issues of�G� Y 3 l/ rfl
+t 'j Connection charge q.atitf aP ' c p I i ,? i st
=I j 1/4 8wgw •: r tom! }<�i s 1°` "N,,
r+�rdlA4Yad Ott `1500.00 1,200.00
Affiant further says that the said Vero Beach Press -Journal Is a newspaper published at A 2. 2,600J80
Y P y*es 1 y1 ;'2"meta r A k syt -
Vero Beach, in said Indian River County, Florida, and that the said newspaper has heretofore Xl » !l�{iL 14,000.00 .•'4,0� 00
th 3"meter' LP ,
been continuously published in said Indian River County, Florida, each daily and has been 4"matair �r r+ -6,00000 6.00000
entered as second class mail matter at the post office in Vero Beach, in said Indian River Coun- 6„ nMter.r .,U �)y ri j�+>:12)600-W 12,50000
ty, Florida, for a period of one year next preceding the first publication of the attached copy of I �� u.. , r e 26,000.00 28,000.00
advertisement: and affiant further says that he has neither paid nor promised any person, firm�OK'•+''�' . + # 1
or corporation any discount, rebate, commission or refund for the purpose of securing this Meter ImtepatiOn fan ,, �tt.j , r Q•,e .
advertisement for publication in the said news P a Pe r. 3/4" z 8/Br fsdar }i�1x7a C ,
q 1" ; , s 12800
1'�c at 1u1 180.00","F +r
Sworn to and subscribed before me day of �+1YdG A.D.19 �yi mater i K' K fi r 370 00 t 5k ;
Over 2^ „� l a 4 (t 4 a;41 V.f 04ka �.#.:;` `D 'tUi 48000 t.�.�
f `"77 v , s t
Manager) • MaNn larger than 2" shag M provided
and Installed by the customer. Meter type.
and InsWtation shag be prescribed
(SEAL)
(Clerk of the Circuit Cour41nd4in2LM9erConty, Florida) approvadbyOnuti6ty r:}isri. , s ; yC•r,lr��ei ,9 �(Try z u2 ;i }tf l '{rit�Ei4Ea Y t : t
^Yl l',
MisaOa
neors Nsrges n
Y Water turn on -d
urirgragular for IF s. �g•f ;.•,++, me'•� { i
cudtomenorn•estabtishmardotesrv=86a,t a,-,.r'iY,d r:¢
customer'arequest orfor non.Ihaymsrd. s',+r 7^-)
Waterm tuoff - during
payment. atregeM�customer a Ir#r s<;• lel 'Et' s :?i4.� � �
Ncustomer dosing account r y ;' : 10.00.
ater tum on - dwl� oiler tihah ngutar hourst d ; .erg
Cudomwtampering VAthmebf-llldudtngluminB j}r;t,+rr q:1,r9,
on own Mehr alter turned off by tis utiltiy
far nonpsym,"
28 00
Retuned CMdtFlorida Statute
Damage to ut ny property or any flam not txvend
alhove - time, materials and administrative dhaW
(administrative charge to be $15.00 0►18% of
tbM and materlala, lllhldlena is
Indian Riveir County chargew
i Franchise County and shown separably on ell :' ` • 'Gip, s 1'
on bill.. RennW and ReplacemNd Fund - As est by the County and shown ;::.? , .:, lepers"
CIAC - As sat by the County unndw Ordinances 60••21 and 68-22 and WM apply to ail now
L ..,.'. ,
All Interested persons; we Invited to We meeting. H .m parson decides to appeal any dedston
maid by the Board of County/Commlwlonen with respect to any matter considered at Gds med-
Ing, he/she will need a record of the pro I - I ngs, and that for such purpose he/she may Mad to
shun that a verbatim record of the proceedings Is made, which ncon11M1udes8s lasWnony and
Bride ce upon the appeal Is to be heard.
Indian *4 Chairman
nty
Board of County Conan upgnpkTijj. $p
a _
• l^P''47 J" t94.• ..A• - .1 ... I �'•iY'. esti �.»4. }.!t`yTh•
OCL 31.1984.
Chairman Scurlock announced that today's public meeting is a
continuation of the public meeting of May 2, 1984 and that all
testimony and evidence given at that meeting will be made a part
of this record, which includes all the comments received from the
2
public regarding quality of service and other problems. He
informed those present that today's meeting would be limited to
presentations by the representatives of the Breezy Village Water
& Sewer Company, the Breezy Village Home Owners' Association, and
IRC Utility Services. Chairman Scurlock advised that the
Commission just will be receiving testimony and evidence today
and will issue an Order within sixty days.
County Attorney Brandenburg announced that anyone wishing to
give testimony will be sworn in and all evidence submitted will
be made a part of the record and placed on file in the Office of
the Clerk.
Presentation by Breezy Village Water & Sewer Company -
Attorney Brandenburg swore in Steve Henderson, attorney
representing Breezy Village Water & Sewer Company.
Attorney Henderson reported that since the meeting of May
2nd, they have had another filing of new financial information
which reflects the costs of contracting out services previously
performed by Dr. James Wilson. He explained that when Breezy
Village was purchased in 1978, Dr. Wilson and his partners also
acquired the water and sewer assets. After becoming certified in
the field of water and sewers, Dr. Wilson operated within the
bounds of a very small budget by doing much of the work himself.
However, it was necessary that some of the work be contracted
out. Now that Dr. Wilson wishes to retire, the work he has been
performing will also have to be contracted out which adds to the
cost of the operation. Even with Dr. Wilson doing much of the
work himself, the Utility has been losing out of pocket cash
expenses of approximately $4,000-$5,000 a year. Breezy Village
is a very small utility which is associated with a land
development where the initial franchise and rate structure were
developed by land developers, not utility owners, to accommodate
and induce sales and not necessarily to run a utility company on
a break-even basis. This situation was inherited by Dr. Wilson
and his partners.
It has economic and scale problems; therefore,
3
NOV 8 1984 5 8
NOV
8 1984
BOOK
58
F 'Ut. 807
the rate
schedules may seem rather high due to the fact
that
there are only 87 customers on the system. He pointed out that
even if the number of customers doubled, it would only increase
the cost by approximately 25-30%, but there are certain fixed
expenses that must be met regardless of the number of customers.
Chairman Scurlock understood then that Dr. Wilson went into
the partnership for the purpose of land development and the water
and sewer systems came with the package.
Attorney Brandenburg swore in Lorne W. Hunsberger, rate
consultant retained by the Utility, whose credentials were made
part of the record. Mr. Hunsberger advised that he is a
Certified Public Accountant in Florida and Tennessee and has been
working with financial matters in regard to water and sewer
utilities since 1968. He holds a Class B Practitioner's License
to practice before the Florida Public Service Commission, which
recognizes him as an expert. He has been involved in
investigating rate packages both as a franchise consultant and as
a city/county staff member. Mr. Hunsberger requested that
Exhibit "H" be made part of the record - Breezy Village Water &
Sewer Co., Inc. Indian River County Rate Case Revised Financial
Exhibit Proforma Year Ended December 31, 1984, which includes the
following material.
Page 1 - Accountant's Compilation Report
Page 2 - Proforma Rate Base - December 31, 1983
Page 3 - Statement of Income
Proforma Years Ended December 31, 1983 and 1984
Page 4 - Income Statement Adjustments
5 IN
"
6 it IT
Page 7 - Return on Rate Base
Page 8 - Present and Proposed Rates
Letter dated 7/20/84 to Joseph A. Baird from Lorne W.
Hunsberger, P.A.
Letter dated 6/5/84 to Breezy Village Mobile Home Park
from B & B Utilities
Mr. Hunsberger explained that CPAs basically look at things
after they happen and then give an opinion that the statements
are fairly presented. In working with water and sewer companies,
CPAs look to what might happen in the future but cannot give an
4
auditor's opinion as to what may or may not happen in the future,
and noted the reference to that on Page 1 of the Proforma.
LORNE LU FHUNSSEF -ER PR
CERTIFIED PUBLIC ACCOUNTANT
Breezy Village Water & Sewer Co., Inc.
Vero Beach, Florida
The accompanying revised Indian River County Rate Case Financial Exhibit of
Breezy Village Water & Sewer Co., Inc. for the proforma year ended --December
31, 1983 was compiled by me based on assumptions as to future transactions and
events and other information provided to me by management. This compilation
was limited to preparing the appropriate schedules for a rate increase
application from the Company's records. Because the scope of my engagement
and the uncertainty inherent in any projection of future events, I express no
opinion on this Financial Exhibit, the accuracy of the projections, or on the
validity of the assumptions on which they are based.
This report is intended solely for filing with Indian River County and is not
intended for any other purpose. Accordingly, it does not include all the
disclosures required for a fair presentation in conformity with generally
accepted accounting principles.
10:1e. J00A0
July 18, 1984
4601 W. KENNEDY BOULEVARD • SUITE 124 • TAMPA. FLORIDA 33609 • (813) 875-3864
Attorney Henderson questioned Mr. Hunsberger in re to the
Proforma Rate Base shown on Page 2 of Exhibit "H".
5
w ;5-w°ie
BOOK fa.Gt 8
BREEZY VILLAGE WATER & SEWER CO., INC.
PROFORMA RATE BASE
DECEMBER 31, 1983
SL
BOOK
Land
87
$ 7,000
Wells
Total potential customers
11,162,,,-
1,162„,'Water
Waterand sewer
plants
30,000, -
Water and sewer
lines and lift station
111,7171”
Generator
98
4,075`
Improvements to
sewage plant lines
8,640
Deep well turbine (submersible) pump-
6,422 (1}_
Accumulated depreciation
(51,038)loo-
Net utility
plant at original cost
127,978
Used and useful
adjustment (11.7%)
(14,973) (2)
Contributions in aid of construction (CIRC)
(12,750)
Amortization of
CIAC
1,377
Imputed CIAC
(52,500)
Amortization of
imputed CIAC
10,694
Net utility
plant used and useful
59,826
Working capital
allowance
3,560
Rate base . $ 63,386
(1) Deep well turbine (submersible) pump in well must be replaced. Per
McCullers & Howard Well Drilling, the cost will be $6,422.
(2) Present customers
87
Vacant lots
24
Total potential customers
111
Excess capacity percentage
10%
Excess capacity allowance
11
Present customers
87
Used and useful
98
Reserve for future customers
13 11.7%
Total
T
Mr. Hunsberger explained how he arrived at $127,978 for "Net
utility plant at original costs". The basic item that must be
dealt with when working with a utility is "original cost."
When that utility is subsequently purchased, the uniform system
of accounts put out by NARUC states that you must record on the
books of the purchaser the original cost of the person first
designating those assets to public service. Therefore, the
original costs received from the Mr. Karr, the original owner,
are shown on Page 2. A copy of the depreciation scheduled out of
the tax rate was given to staff and they understand where these
14
figures come from. Therefore, we have the land, the wells, the
plant, the lines, the generator and some improvements which were
made subsequent to the purchase from Mr. Karr. Mr. Hunsberger
next addressed the "contributions in aid of construction (CIACs)
and explained that this plant was sized to service that
particular development consisting of 111 lots, of which 24 are
vacant. Since the Utility built more plant than is needed to
service the existing 87 customers, he calculated the "Used &
useful adjustment at 11.7%, making a negative adjustment of
$14,973. After Dr. Wilson and his partners took ownership, they
collected 17 connection fees at $750 each, which amounts to
$12,750, which is amortized at $1,377. At the time of the
purchase, Mr. Karr told the new owners that he had not collected
any connection fees. Mr. Hunsberger introduced as evidence an
affidavit to that fact. The County Utility staff pointed out
that they should have collected connection fees according to the
approved franchise tariff. Therefore, in compromise with the
staff, they have inputed these fees as if they had been
collected. This has reduced the Utility's rate base
considerably. He pointed out that CIAO can be either cash or
other things, but in this case it is only cash, and they have
imputed the connection fees to the detriment of the Utility of
the net of $52,500 and $10,694, which has hurt the Utility's rate
base of over $40,000. Then there is the "Net Utility Plant used
and useful" figure of $59,826. In rate cases, the standard
working capital allowance is one-eighth of the operating
expenses. This Utility's rate base is calculated at $63,386,
which is the amount at which the Utility should be allowed to
earn a fair rate of return under the County's ordinances.
7
OV 8 w84 BOOK
t
BREEZY
VILLAGE HATER
& SEWER CO.,
INC.
<`
STATEMENT
OF INCOME
PROFORMA YEAR ENDED
DECEMBER 31,
1983
PROFORMA YEAR ENDED
DECEMBER 31,
1984
ae
400
PRESENT
RATES
1983
1984
1/1/83 - 6/30/83
7/1/83
-
PROFORHA
PROPORMA
PER
ADJUSTMENTS
12/31/83
1983
RATE
AT PROPOSED
AT PROPOSED
BOORS
DR.
CR.
ADJUSTED
PROJECTED
PROFORMA
ADJUSTMENTS
RATES
RATES t
REVENUE
Water
$ 3,785
$ 3,785
$ 3,145
(12)
$ 6,930
$ 15,169
(16)
$ 22,099
$ 22,099
Sever
3,785
3,785
3,145
(12)
6,930
15,169
(16)
22,099
22,099
Connection fees
1,500
1,500 (
1)
-0-
Total
9,070
1,500
7,570
6,290
13,860
30,338
44,198
44,198
OPERATING EXPENSES
Depreciation
3,180
$ 642
( 2)
2,538
3,180
(13)
5,718
5,718
•5,718
Electricity
1,575
1,575
1,575
3,150
3,150
3,150
Contract services
Plant operator
1,490
3,390 (
4) 380
( 3)
4,500
4,500
9,000
9,000
9,000
Accounting
1,995 (
5)
1,995
1,995
3,990
3,990
3,990
Operator
1,200
1,200
( 6)
.0.
Office supplies
883
750
( 7)
133
133
266
.266
266
Repairs
607
380 (
8)
987
2,867
(14)
3,854
3,854
3,854
Miscellaneous
432
232
( 9)
200
200
400
400
400
Ground maintenance
418
418
(10)
-0-
Sludge removal
250
250
250
500
500
500
Telephone
170
80
(11)
90
90
180
180
180
Chemicals
120
120
120
240
240
240
Insurance
452
(15)'
452
452
452
Taxes
450
450
450
450
Rate case expense
6,000
(17)
6,000
6,000
Total operating expenses 10,325
5,765
3,702
12,388
15,812
28,200
6,000
34,200.
34,200
INCOME (LOSS)
$ (11255)
7,265
3,702
$ (41818)
$ (9,522)
(14,340)
24,338
9,998
9,998
PROVISION FOR INCOME TARES
1,712
(1 8)
1,712
1,712
INCOME
$(141340)
$ 22,626
$ 8,286
_8,286
�.
RATE BASS
$ 63,386
63,386
RETURN ON RATS BASE
13.07%
13.07%
00
* 1984 Proforma figures based
upon 1983 proforma figures.
Referring to Page 3 - Statement of Income - Mr. Hunsberger
explained that the first column shows the actual figures used
through June, 1983 and Column B shows the figures on the books
from July 1, 1983. The last two columns reflect the proforma at
proposed rates for 1983 and 1984, assuming that nothing changed
from 1983 to 1984. Mr. Hunsberger then reviewed each of the
Adjustments shown on Page 3.
BREEZY VILLAGE WATER & SEWER CO., INC.
INCOME STATEMENT ADJUSTMENTS
PROFORMA YEAR ENDED DECEMBER 31, 1983
( 1)
Connection fees are not income, but are Contributions
in Aid of Construction (CIRC)
(1,500)
( 2)
Depreciation is adjusted as follows:
Reduction in expense to agree with depreciation
calculated by rate consultant
395
Amortization of CIAC
247
(642)
( 3)
Remove repairs from contract services - plant operator
(380)
( 4)
Contract services - plant operator -
Contract with B & B Utilities for 5 day per week
monitoring of plants, mowing and meter reading -
$750 per month - 6 @ $750
4,500
Cost per books
1,110
3,390
( 5)
Contract services - accounting -
Contract with Block Business Services
•
Monthly accounting and tax returns - per month
90
Utility billing and making deposits - per month
180
Total per month
270
Months
12
Total per year
3,240
CPA
Prepare financial statements for submission
to County as required by franchise and
prepare annual report for submission to County
750
Total accounting
3,990
1/2 year
1/2
Accounting for six months
1
1,995
( 6)
Remove amount paid to Jim Wilson as operator due
to contract with B & B Utilities
(1,200)
( 7)
Remove billing from office supplies due to
contract with Block Business Services
(750)
( 8) Add repairs removed from contract services
plant operator 03 above)
( 9) Reduce miscellaneous expense to $200 per agreement
with staff
(10) Eliminate ground maintenance as contract with
B & B Utilities includes mowing
0
380
(232)
(418) --
80®71 �'r�"
r NOV 8 19846
(11) Reduce telephone from $170 to $90 per agreement
with customers
(12) Water consumption during the first half of 1982 was
54.62% of total 1982 consumption. 1983 consumption
and revenue is estimated to follow the same pattern.
Therefore, $3,785/.5462 = $6,930. Adjustment
necessary
BOOK 8
(13) Depreciation is computed as follows:
Depreciation on existing plant 2,785
Amortization of CIRC (247)
Depreciation on new pump (5 yr. S.L., 1/2 yr.) 642
Total
(14) Repairs for last half of 1983 are estimated as
follows:
Routine - same as first half
Extraordinary repairs recommended by B & B
Utilities
Dual chlorinator scale (water)
Air compressor (water)
Pipe and fittings (water)
Blower unit (sewer)
Detecto scale (sewer)
Intake muffler
Sewage pond cleaning
Total
Cost amortized over 3years
Total
(15) Insurance - New Hampshire Insurance Company
General Liability:
Coverage - Water plant
Sewer plant
Pool
Total
Policy cost
Utility % (33,000/41,500)
Utility cost
Umbrella liability
Total
(16) Proposed increase in monthly water and sewer
rates to cover expenses and provide a 13.07%
return on rate base
Water
Sewer
1,027
1,081
455
1,950
410
232
484
5,639
1/3
17,000
16,000
8,500
41,500
323
79.5%
257
(17) Rate case expense is amortized over 2 years and
is estimated as follows:
Lorne W. Hunsberger, P.A.
Moss, Henderson & Lloyd, P.A.
Total estimated cost of rate case
10
987
1,880
2,867
257
195
452
9,500
2,500
12,000
1/2
I
(80)
3,145
3,180
2,867
452
15,169
15,169
6,000
M
(18) Income taxes are calculated as follows:
Revenue
44,198
Operating expenses
34,200
Income before income taxes
9,998
9,998
State income tax computation
State exemption Z
5,000
Taxable income, state
4,998
Rate
5%
State income tax
250
250
Federal income tax computation
Federal taxable income
9,748
Rate
15%
Federal income tax
1,462
State income tax
250
Federal income tax
1,462
Total
1,712 1,712
Proceeding to Page 7, Attorney Henderson pointed out that
under the Public Services Commission, Breezy Village would be
granted a rate of return of 13.07% on their rate base because it
is 100% equity.
BREEZY VILLAGE WATER-& SEWER CO., INC.
RETURN ON RATE BASE
The Company hereby requests that it be granted the same minimal rate of return
that the Company would be granted if it were regulated by the Florida Public
Service Commission (PSC). Annually, pursuant to the provisions of Chapter
367.081(4)(f), Florida Statutes, the PSC is required to establish a minimal
authorized rate of return on common equity for water and sewer utilities. On
February 18, 1983, the PSC issued Order No. 11629 in Docket No. 830006 -WS
setting the minimal 1983 rate of return on common equity for water and sewer
utilities. Under Order No. 11629, any water and sewer utility regulated by
the PSC that was 100' equity would be granted a rate of return of 13.07% on
rate base.
Breezy Village is 100% equity and therefore would be entitled to a 13.07% rate
of return on its rate base. -
11
NOV 8 199 600K 58-F:
J
a: 1
Mr. Hunsberger stated he would be glad to answer any
questions.
Commissioner Wodtke inquired as to the wording in Mr.
Hunsberger's cover letter in Exhibit "H" and asked if Mr.
Hunsberger was making everything available today to enable the
Board to make a fair rate determination because the last sentence
in Mr. Hunsberger's cover letter states: "Accordingly, it does
not include all the disclosures required for a fair presentation
in conformity with generally accepted accounting principles."
and Mr. Hunsberger advised that basically, the wording in that
statement is a standard disclaimer.
Commissioner Wodtke wondered if Mr. Hunsberger were
representing the Homeowners' Association, would he have prepared
his figures in the same way, and Mr. Hunsberger assured the Board
that he wants to be fair to both the rate maker and the rate
payer. He recalled his past experience as a third party in rate
cases, and felt his reputation is such that he tries to be fair
to everyone. He emphasized that he does not bring in a packed
price with the anticipation of ending up with one half of what he
requested.
Commissioner Wodtke asked if Mr. Hunsberger had projected
any expenses for customer growth and Mr. Hunsberger stated that
he had and that was shown in Adjustment #16.
Chairman Scurlock asked if there is a base facility charge
being charged to each of the lots that are yet to be developed,
and Mr. Hunsberger answered that there was not.
Chairman Scurlock also asked if Mr. Hunsberger had
considered the historical water consumption figures, as Breezy
Village seems to have a lower consumption level than the average
5500 gallons per unit consumption found throughout the County.
Mr. Hunsberger stated that he had looked back and found that
Breezy Village residents use an average of 2000-3000 gallons per
unit, and pointed out that most people water their lawns from
wells.
12
_I
Chairman Scurlock asked if it was possible that the
consumption pattern is low because the customers are not using
the water because of the poor quality.
Mr. Hunsberger did not believe that to be true and pointed
out that the Health Department has no record of any complaints
being filed by the residents of Breezy Village. He introduced
into evidence a letter to that effect from the Dept. of Health
and Rehabilitative Services.
Attorney Brandenburg asked if the $6400 deep well turbine is
in place and Mr. Hunsberger stated that he has advised his client
to install the turbine as soon as these rates are put into effect
as it is a contingency that should be taken care of immediately.
Attorney Brandenburg also asked if Mr. Hunsberger felt it
was fair to include in his calculations of rate base an
expenditure that has not been made as yet, and Mr. Hunsberger
stated he did.
Attorney Brandenburg wished to know how the County can be
assured of that expenditure considering the history of this
utility and its service.
Mr. Hunsberger stated that if the expenditure is not made,
the County will know it through the annual report, and would be
able to come back and rescind the rate order and order a refund.
Attorney Brandenburg questioned the rate case expenses, and
Mr. Hunsberger explained that the only changes between the
presentation made in May and today's presentation are due to Dr.
Wilson's retirement and the subsequent impact of the costs
involved in having third party contracts.
Attorney Brandenburg asked why Mr. Hunsberger felt that the
entire burden of the rate case expense should be borne by the
customers instead of the investors, and why the expense should
not be split 50-50.
Mr. Hunsberger believed that it is just a general thing that
all costs of doing business of a utility fall through on the rate
expense on the income statement of the utility unless the
13
NOV 8 1984 &OK 58 PP& 816
NOV 8 1984 BOOK 58
regulatory authority can prove that the expenditure was not
prudent. However, Attorney Brandenburg believed that it was
incumbent on the Utility to show the rate making authority that
the expenditure was reasonable.
Attorney Brandenburg felt that if the Utility had kept its
accounts and books correctly, then perhaps the preparation of the
rate case would have been easier and therefore less expensive.
Mr. Hunsberger pointed out that the County has never
required this information before a year or so ago, but Attorney
Brandenburg advised that the Utility's franchise written in 1975
contained a clause requiring the Utility to keep adequate books
and records.
Attorney Brandenburg questioned if the repairs mentioned in
Adjustment #14 on Page 5 have been made, and Mr. Hunsberger
replied that the rates have not been approved and confirmed that
some of these extraordinary repairs were capital items such as
the addition of a dual chlorinator scale.
Mr. Hunsberger explained that these repairs total $5,639 and
he is not asking for this to be recovered through the rates all
in one year. He is expensing one third and amortizing it over
three years. If he had not done that, it would have increased
the rate base.
Presentation by Breezy Village Home Owners' Association
George Collins, attorney representing the Breezy Village
Home Owners' Association, stated he would not be testifying today
and did not need to be sworn in.
Attorney Collins asked Mr. Hunsberger if in the depreciation
he had set up a sinking fund on the items that are going to wear
down, and Mr. Hunsberger stated that he had not and pointed out
that there is no requirement in the Utility's franchise to set up
any sinking fund through depreciation. He believed the Utility's
franchise, as amended back in May, requires a renewal and
replacement fund that is 2% of gross revenue. That will be done,
14
but if the Commission wishes an escrow account to be set up to
replace the facilities, then they could retain an engineer to do
a replacement cost study, which could jack up the rates another
$20 a month or so.
Attorney Collins asked Mr. Hunsberger if the Utility had
asked the customers if the reason they had cut back on their
water consumption was due to the quality of the water, and Mr.
Hunsberger stated that he had not questioned the customers, but
he had looked at the historical consumption and asked Dr. Wilson
to inquire as to whether there had been any water quality
complaints filed with the Health Dept.
Attorney Collins stated that rather than cross examine Mr.
Hunsberger any further, he would prefer to make an affirmative
presentation to the Commission.
Attorney Henderson interjected that he wanted to clear up
the matter of the sinking funds and explained that the County has
required a repair and replacement account which is similar to a
sinking fund into which the Utility would be paying monies. He
asked Utility Services Director Pinto what actually happens if
money is used from that account.
Director Pinto confirmed that the Utility is required to
have a 2h% gross revenue replacement fund which is controlled by
the County. That money cannot be expended unless it is approved
by the County. If the County allows any of that money to be
spent for repair or replacement of equipment, it will be shown as
CIACs in future rate cases and will reduce the rate base
accordingly. He further noted that to protect the customers, the
County can draw funds from that account and make the repair
itself if it finds that the Utility has not made proper equipment
repairs.
Attorney Henderson understood then that the Utility does not
actually benefit by this fund in terms of getting a higher rate
of return.
15
NOV 8 1984 BOOK 5 8 Ftk,E 81
Nov 8 1984 BOOK "'U' 8 t
Attorney Henderson noted that just recently a complaint had
been filed with the Dept. of Health & Rehabilitative Services in
regard to the chlorine and iron content of the water. He
reported that this has to do with the chlorine running out of the
tanks and the problem is being looked into. He introduced as
evidence a letter from Envirometrics dated November 5th showing
the result of the latest testing for iron content.
#= ENVIROMETRICS
705 S.W. 27th Avenue, #4 • Vero Beach, Florida 32962 • Telephone (305) 562-1968
HRS ID 83214 November 5, 1984
B & B Utilities
P.O. Box 983
Ft. Pierce. Florida 33450
Sample Identification: Drinking Water
Sample Location: Breezy Village, Indian River County
Sampled By: Richard Bass
Sample Date: November 5, 1984
Received Lab: November 5, 1984 1500 hrs.
Lab Log: #9270
Parameter mg/I
Total Iron, as Fe 0.12
Respectfully Submitted,
Grace Treadway, Cf;emist
Reference: "Standard Methods for the Examination of Water and
yastewater." 15th ed.
cvn3 Co It Fc
r S 7721 73 v Zri•✓ �'� S7>!y"I
C
Tam .G,znJ Cr1 cLi
16
M
I
. - Earhometd� AaagNeal tatRnatory
M S.W. 27th A"ne, #4
Vero Such, Fleddt 32962
(368)562-1968
NRS ID #83214
DRINKING WATER BACTERIOLOGICAL ANALYSIS
FOR LAB USE ONLY
4 -
RECEIVED 11-6-84 1505
coteLETm 1600
SYSTEM NAME: B'Y VILLAGE SYSTEM I.D. NO.: DER DISTRICT:
ADDRESS:
COUNTY: ITm=i RIVER COLLECTOR: RICHARD BASS
SAMPLE SITE (Locality or SubdivWon): SEBASTIAN
11-6-34 14-45
RAW OR T� DATE AND TIME COLLECTED:
TYPE OF SUPPLY (CIrcle one): Non -community Public wam sYstetn Otter Public wato notem
Prbm wen Swimming Pool Bottled water
TYPE OF SAMPLE (Circle am): ComPIlam Redmdc Main Clearance Wen Survey Odw (spedW)
REMARKS:
TO BE COMPLETED BY COLLECTOR OF SAMPLE
TO BE COMPLETED BY LAB
COLSAMPLE
NO.
POINT
Cl
PH
SAMPLE NUMBER
COLIFORM
NON
COLIFORM MFj1O9 ML (303)
(303)ML
TOTAL IFECAL
100 N
Ins)
CLUBHOUSE
1.5
9276
-1
LOT 67
0.3
9277 F
1m OVE.
INTERPRETATIONS -RECOMMENDATIONS BY DER OR NRS REVIEWER
C<r saTmaCToav
�?4 u WWACToatt
NAME AND MAILING ADDRESS OF PERSONIFIRM TO RECEIVE REPORT )
F—B u B UTILITIES LO'r 677 hrY a[sussur
P.O. BOX 900
ri. PT_ERCE, FLA 33450
INDIAN RNER COUNTY HFAlT1I U oFFICI `
Environ 8400th8010 t Street
Vero ge , Florida�3
The Chairman agreed to give Attorney Henderson and Attorney
Collins the opportunity to make a two -minute summation after each
side has finished their presentations.
17
Irk,
•
(/ L, B e �.58
BOOK f,�i�F Eaa+
A
N 0 V 8 1994 Boos 58 ikirKl
Commissioner Bird asked if the repairs are intended to
increase the quality of the water, and Director Pinto felt that
the repairs being made now were to improve the quality of the
water, not especially the taste of the water, but the purity and
safety of the water.
Attorney Collins outlined the presentation of Breezy Village
Home Owners' Association and explained that the residents in the
audience have authorized officers Eric Pollard and Sylvester
Strang to speak in their behalf.
Attorney Collins asked those in attendance who opposed the
rate increases to raise their hands, and approximately 138 people
responded. Approximately 75% of these indicated they would
increase their water consumption if the quality of the water is
improved.
Attorney Henderson objected to the two officers of the BVHA
speaking again at this meeting because they did speak at the May
meeting.
Attorney Collins believed that what the two officers would
say is new evidence and pointed out that today's meeting is a
continuation of the public hearing held in May. He noted that
the officers' testimony at that meeting has been made a part of
the record.
Attorney Brandenburg swore in Eric Pollard representing the
Breezy Village Home owners' Association.
Mr. Pollard noted that he worked for GM foraover 30 years
and that budgets and procurements were part of his daily routine.
After retirement in 1974 he joined the Public Works Dept. of St.
Clair County, Michigan. He advised that he did not enter this
rate case without some knowledge of financial exhibits, and felt
there is no doubt that this rate case has caused considerable
expense to everyone involved. He felt the blame for these
exorbitant costs must be placed where it belongs -- squarely on
the shoulders of the Utility company, and primarily on the
shoulders of Mr. Hunsberger.
Since September, 1983 there have
18
been three financial exhibits submitted by the Utility. It was
not the home owners' fault that in May,Attorney Henderson was not
prepared to move forward and that Dr. Wilson's bookkeeping has
always been less than substandard. In self defense the
homeowners have had to respond to each of the three exhibits and
engage the services of an attorney and a consulting engineer, and
this has placed a strain on the pocketbooks of the residents of
Breezy Village. Mr. Pollard believed that the home owners were
confident that the Commission will act in good judgment.
Attorney Brandenburg swore in Sylvester Strang, officer of
Breezy Village Home Owners' Association, who reported that they
had done a comparative rate study and could not find another
utility up and down the east coast of Florida with charges over
$26.00.
Attorney Henderson objected to the report on the grounds it
was hearsay.
Mr. Strang expressed concern over these investors making up
for their paid investment through the pocketbooks of the Breezy
Village residents. He emphasized that the home owners cannot
afford the legal and consultant fees and recommended that the
Utility pay their legal fees as it was not the home owners' fault
that the rate case was delayed.
Commissioner Bird understood that the high costs were due to
the small size of this utility and asked if anywhere in their
travels they had found rates comparable to Breezy Village and Mr.
Strang reported that they found comparable rates in Snug Harbor.
Mr. Strang asked those in the audience who use the water for
drinking to raise their hands, and approximately one half of the
people responded. Mr. Strang pointed out many residents
transport their water from Vero Beach in gallon jugs..
Attorney Henderson objected to these demonstrations of hands
and cautioned that if it continued, he would ask that everyone be
sworn in.
19
NOVi984 BOOK t E
� J
®v 8 1984 tornc 'y
Chairman Scurlock asked that the homeowners' comparative
rate study be made a part of the record.
Attorney Henderson pointed out that the homeowners were
making a comparison of just the rate structures of the various
franchises and not taking into account the differences of those
utilities.
Mr. Strang thought that the differences could be due to
either the number of customers or the poor management of the
utility companies. He agreed that there are a lot of things that
might have a bearing on the rate structure in these other
utilities. He felt that everyone would be willing to pay a fair
amount for improved water quality.
Attorney Brandenburg swore in John Robbins of Mosby -Robbins
and Associates, Inc., consultants retained by the homeowners
association, who entered into the record the "Analysis of Breezy
Village Water and Sewer Company, Inc. Proforma and Rate Proposal.«
Attorney Henderson objected to having the homeowners submit
a formal report at this late date as he has not had a chance to
review it and believed that it had not even been submitted to
Utility Services.
Director Pinto stated that it had not been submitted to his
department, but noted that it was not required.
Mr. Robbins presented his credentials and qualifications.
He is a Registered Professional Engineer in Florida and North
Carolina. He holds a B.S. degree in Engineering with
concentrated studies in environmental sciences. He has been in
the practice of environmental and utility engineers for nine
years, five of which were spent as a utility consultant to Indian
River County. He has been declared an expert witness in the
fields of civil, environmental, and sanitary engineering.
Attorney Henderson cross examined Mr. Robbins as to his
qualifications for preparing a rate proposal, and Mr. Robbins
admitted he was not an accountant but pointed out that a CPA had
certified the proposal.
20
Attorney Henderson objected to Mr. Robbins testimony on the
grounds that he is not qualified as an accountant even though he
is well qualified as an engineer.
Chairman Scurlock noted the objection.
Mr. Robbins reported that initially he was asked to review
the Utility's proforma and make an investigation himself. He has
obtained original contracts for construction of Breezy Village
and he has performed an on-site investigation of the Utility,
which is covered in Appendix A of the analysis. He distributed
color photographs of the water and sewer facilities which were
made part of the record. He noted that the overall condition of
the water plant is poor. The well pump is leaking and the
foundation supporting the pump is cracked. Bare electrical wires
are exposed to the elements and pressure gauges are
non-functioning. The ground storage tank is leaking. The
hydropneumatic tank is in very poor condition due to corrosion
and he did not believe it would remain in service much longer.
Mr. Robbins did not feel that the condition of the
wastewater treatment facility is quite as bad as the water plant.
The influent pumping station has a laundry basket as a rag
basket. The discharge silencer on the blower is covered with a
bucket to help reduce noise. The effluent disposal pond is
overgrown. No effluent is going out of the pond, however. The
gravity sewer lines and manholes were not inspected. It is their
opinion that the maintenance level for the overall Utility is
poor.
Mr. Robbins realized that he was not an accountant but
emphasized that he does have a knowledge of cost structure.
After doing the on-site investigation, he did a revenue extension
and figured out what revenues would be generated by what rate
structures. He referred to Pages 4 and 5 of the analysis:
21
8001( 58 FA,p 8?94
I
NOV 8 1984 BOOK E")'f l�; 825
III ANALYSIS OF UTILITY'S 1983 PROFORMA WITHOUT MODIFICATION
Reference is hereby made to the Breezy Village and Mater and Sewer Co.. Inc.
Indian River County Rate Case Revised Financial Exhibit Proforma Year Ended
December 31 1983.
In an effort to justify the rate structure presented in the above referenced
document, a revenue requirement to projected income analysis was performed.
A water and sewer useage of 5500 gallons per month was used to calculate
projected revenues utilizing 87 connections which are existing. 5,500 gallons
per month was used as a calculation as it is representative of average consumption
within Indian River County. In addition, similar calculations were made
at consumptive uses of 3,000 gallons per month and 2,000 gallons per month.
The results are shown below:
87 Connection Calculation At 5500 Gallons Per Month
Water Revenue
([5.5 (# of 1000 gals) x $5.54/1000 gals] + $12.87 (BFC))
87 conn.x 12 months = $45,246.96
Sewer Revenue
([5.5 (# of 1000 gals) x $5.54/1000 gals] + $12.87 (BFC))
87 conn. x 12 months = _$45,246.96
Total Projected Revenue - 90,493.92
Total Revenue Reg'd per Proforma - 44,198.00
Excess Revenue Per Year = $46,295.92
87 Connection Revenues at 3000 Gallons Per Month
Water Revenue
$30,787.56
Sewer Revenue 30,787.56
Total Projected Revenue 61,575.12
Total Revenue Req'd Per Proforma 44,198.00
Excess Revenue Per year = $17,377.12
87 Connection Revenues at 2000 gallons Per Month
Water
Revenue
$25,003.80
Sewer
Revenue
25,003.80
Total
Projected Revenue
50,007.60
Total
Revenue Req'd Per Proforma
44,198.00
Excess Revenue Per Year =
$ 5,809.60
22
_
r
Mr. Robbins realized that the Public Services Commission
does not set rates here in Indian River County, but he went to
them to document the Utility's proforma.
Attorney Henderson asked who Mr. Robbins contacted at PSC
and Mr. Robbins informed him he spoke with Barry Davis.
Attorney Henderson objected to this information on the
grounds it was hearsay as some of the information received from
the PSC was verbal, but Mr. Robbins replied that most of his
information was from printed material.
Mr. Robbins referred to Page 9 of the analysis:
REVISED RATE BASE CALCULATION
BY MOSBY-ROBBINS AND ASSOCIATES, INC.
Land
Wells
Water and sewer plants
Water and sewer lines and lift station
Generator
Improvements to sewage plant lines
Deep well turbine (submersible pump)
Accumulated depreciation
Net Utility at original cost
Used and useful adjustment (0)
Contributions in aid of construction
Amortization of CIAC
Imputed CIAC
Amortization of Imputed CIAC
Net Utility Plant Used and Useful
Working Capital Allowance
Rate Base
23
$ 7,030.40
9,300.00 (1)
31,842.00 (1)
96,842.00 (1)
4,075.00 (1)
8,640.00
Delete (2)
-36,132.94 (3)
$121,596.46
-0- (4)
-12,750.00
1,377.00
-52,500.00
10,694.00
$ 68,417.46
2,551.79 (5)
$70,969.25
BOOK U f 'j- 8 U
-I
BdQK '5 v � � 7
(1) Obtained from review of original contracts for construction and construction
summary from original design engineer.
(2) This is an item fundable from a renewal replacement account and has
not been installed. Therefore, can not be included as part of rate
base.
(3) Accumulated depreciation according to PCS for a small utility should
average three (3%) percent per year, therefore, the depreciation schedule
is as follows:
Utility plant at original cost less land cost is $150,699. (Note: Land
is not a depreciating item for rate making.) Original construction year
1974.
Year
Utility Value
Depreciation
0
$ 150,699.00
$ -
1975
146,178.05
4,520.97
1976
141,792.65
4,385.34
1977
137,538.91
4,253.78
1978
133,412.74
4,126.17
1979
129,410.36
4,002.38
1980
125.528.05
3,882.31
1981
121,762.21
3,765.84
1982
118.109.34
3,652.87
1983
114,566.06
3,543,28
Depreciated utility
Accumulated depre-
value less land cost
ciation on capital
through proforma yr.
$ 114,566.06
assets thru '83 $36,132.94
(4) We are of the opinion the water and wastewater systems are on demand
for service, are requiring greater than 50% of the capacity of the system
and is therefore 100% used and useful. This has been concurred by the
Public Service Commission.
(5) Working Capital Allowance should equal approximately one-eighth
(1/8) of the yearly operating and maintenance expense. This has been
concurred by the Public Service Commission.
We accept the rate of return requested by the Utility as being consistent
with rates of return allowed by the PSC. We have removed, modified qr footnoted
expenses associated with this utility and, subsequently, have arrived at
an operation and maintenance expense which now represents a revised proforma
prepared by Mosby -Robbins and Associates, Inc. We have performed a tax calcu-
lation for the purpose of presenting a revised proforma, however, we do recognize
the tax calculation could and most likely will change. We are of the opinion
the revised proforma presented below is consistent with good utility engineering
and we will use the Revised Proforma for calculation of a proposed rate structure.
Mr. Robbins pointed out the "Net utility at original cost"
figure of $121,596.46 and noted that they accept the Utility
system at 100% "used and useful". They also accept the CIACs,
their amortization, the imputed CIRC, the amortization of the
Imputed CIAC, giving an "Net Utility Plan Used and Useful figure
$68,417.46. They used one-eighth of operation and maintenance
expense for working capital allowance and came up with a rate
base of $70,969.25, and noted that the Utility has requested a
24
M
lower rate base.
He also noted that they calculated a slightly
different depreciation schedule, which is shown as footnote (3).
A depreciation rate for small utilities of around 3% per year is
generally accepted, and as a result, they have calculated
depreciation at $36,132.94. He reported that they also accept
the rate of return requested by the Utility because it is in line
with what is allowed by the Public Service Commission.
REVISED PROFORMA PREPARED BY MOSSY-ROBBINS AND ASSOCIATES• INC.
Operating and Maintenance Expense Analysis
Operating Expenses 1983 Proforma
Depreciation -0- (a)
Electricity $ 3,150
Contract Services
Plant Operator 91000 (b)
Accounting 3,990 (b)
Office suppies 266
Repairs 480.67 (c)
Miscellaneous expense 400
Sludge Removal 500
Telephone 180
Chemicals 240
Insurance 452
Taxes 450
Rate case expense 1,305.67 (d)
Revised Total Operating Expense $20,414.34
Proposed by Mosby -Robbins
Provision for income taxes $ 1,572.96
Income 9,275.68
Rate Base 70,969.25
Return on Rate Base 13.07%
(a) Depreciation is an allowance made to a utility to help offset the
cost of replacing spent capital components of a utility system for
the purposes of rate making. These monies are kept by the utility
and should be used for capital repair or replacement. Indian River
County per Franchise Resolution is requiring the users of the system
to escrow (fund) to the utility and the county jointly, 2-1/2% of
their monthly bill to serve as renewal and replacement funds. Since
the county is requiring the establishment of a renewal replacement
account which represents a percentage of the rate base and associated
expenses and rate of return, we do not believe funding of a separate
line item for depreciation should be allowed. If Indian River County
requires the users to fund a renewal replacement account, the utility
can pocket the depreciation which effectively represents excess revenue.
Users should not be required to pay twice and, therefore, we have
eliminated depreciation as an expense. It should also be noted,
if the users are required to fund renewal and replacement, this account
should represent contributions in aid of construction and should
reduce the utility rate base.
(b). We accept the proposed charges for contract services for operation
and accounting.
25
ma 58 SZ8
I
Fr -
BOOK 58 WWF 8"'?9
(c) Routine repairs accepted at $987 per year. Chlorinator scales are
capital items not maintenance and should come out of R & R account.
Air compressor should come out of R and R account. Pipe and fittings
accepted. Blower unit is a capital expense , not maintenance. Detecto
scale is a capital expense not a maintenance item. Sewage pond cleaning
Is a maintenance item. Mowing is included in plant operator expense.
Therefore, total of accepted repair items:
Routine $ 987
Pipe and fittings 455
Total $1,442
Amortized over three (3) years= 48� 0.67
(d) Rate case expense shown is considered excessive. The PSC has indicated
the historical allowance for small utility rate case expenses is
approximately $25 - $30 per connection. This allowance has been
supported by rulings of the First District Court of Appeals. Therefore,
allowing the high end of accepted ranges, recommend allowance of
$30 per connection as a rate case expense which is:
87 connections x $30/connection = $2,610
Amortized over two (2) years = $1,305
We have now presented a revised rate base and operation maintenance expense
calculation. Based on the revised rate base and expense calculations, we
propose a rate structure which would consist of a base facilities charge
which represents fixed costs per connection and a variable cost charge which
is associated with the cost per one thousand (1,000) gallons of water and
sewer service sold. As all water meters are 5/8"x3/4", we are only showing
a calculation for one meter size. If the structure needs to be expanded,
we recommend using the factors recommended by the American Water Works Association
to set rates at different meter sizes. The following is our rate calculation
based on our revised rate base and expense summary.
On page 11, which is a summarization of operation and
maintenance expenses, Mr. Robbins pointed out that he is of the
opinion that the depreciation that has been requested by the
Utility as an expense should be zero for the purpose of rate
making because IRC requires the customers of the system to fund a
renewal and replacement account of 2% of the preceding year's
gross revenues. Since depreciation is used as an expense to
cover worn out capital assets, he felt it is unfair that the
customers pay depreciation to the Utility and also pay 20 renewal
and replacement expenses on top of that. There should be some
money set aside for continuity of service, which explains their
zero line item for depreciation. It is their opinion that the
Utility has been very poorly maintained and it is not the
responsibility of the customers to fund these repairs. It is also
their feeling that capital items should not be included as
maintenance.
26
L��
RATE STRUCTURE CALCULATION
Base Facilites Charge: ,
Represents fixed cost per connection to utility taken from revised expense
summary and includes rate of return and provision for property taxes.
Item from Expense Summary
Cost Allowed
Contract services
Plant operator
$ 91000.00
Accounting
3,990.00
Office supplies
266.00
Repairs
480.67
Miscellaneous expense
400.00
Telephone
180.00
Insurance
452.00
Taxes (assumed as property tax)
450.00
Rate Case Expense
1,305.00
Fixed Expenses $16,523.67
o Base Facilities Charge:
$16,523.67 = $7.91 per month
87x2x12 per connection
Variable Cost Charge:
Represents costs associated with gallons of water or sewer service
sold.
Variable Cost Items
Electricity
Sludge removal
Chemicals
Income taxes
Return on rate base (NOI)
Gallonage Charge:
$14,738.64 =
(87 conn.) x (4.5 {# 1000 gals)) x 2 x 12
Recommended Rate for 5/8"x3/4" Connection:
Water Base facility charge @ 0 consumption
Rate:
Variable cost charge :
Sewer Base facility charge @ 0 consumption
Rate:
Variable cost charge:
Costs
$ 3,150.00
500.00
240.00
1,572.96
9,275.68
$14,738.64
$14,738.64 = $1.57/1000
9,396.00 gals.
$7.91 per month
$1.57 per 1000 gals.
$7.91 per month
$1.57 per 1000 gals.
UP to 12,000 gallons per month
Projected Water Bill Per Connection at 4,500 Gallons Per Month:
$14.97 per month
Projected Sewer Bill Per Connection at 4,500 Gallons Per Month:
$14.97 per month
Projected Monthly Water and Sewer Bill $29.94 per connection
Renewal and Replacement Requirement $0.75
@ 2-1/2% per Indian River County
Franchise Fee @ 6% = 1.80
per Indian River County
Total Projected Monthly
Water and Sewer Bill Per Connection $32.49
27
1
BOOK 58 F -A -UF 830
Nov 8 1984 pp
BdOK 58 `x.831-
REVISED SUMMARY PER MOSBY-ROBBINS AND ASSOCIATES, INC.
Utility Revenues Recommended:
Fixed expenses $16,523.67
Variable expenses 14,738.64
Total Revenue Recommended $31,262.31
Revenue generated by recommended rates:
87 x $29.94 x 12 $31,262.31
Revenue Differential -0-
Mr. Robbins reviewed the Rate Structure Calculations shown
on Pages 13, 14 & 15 and explained that based on their analysis
they have come up with the following conclusions:
1) The maintenance history of the Utility is poor;
2) The rate base that they have prepared is higher than
requested by the Utility; 3) The homeowners' expense summary
is considerably lower than
the Utility requested;
4) The rate structure presented by the Utility is totally
unacceptable;
In conclusion, Mr. Robbins recommended that the Utility be
allowed to establish a revenue allowance of $31,262.31, that the
Board consider the rate structure prepared by Mosby -Robbins, that
the Utility be required to submit a revenue extension with future
submittals and that the Utility be audited at the end of the year
to determine if there are excess revenues and if so, that they be
adjusted accordingly.
Attorney Collins advised that they have finished their
testimony.
Attorney Henderson wanted it understood that the Utility is
not here today claiming that their rate structure will accurately
produce the revenues which they are seeking. They are here today
to ask the Board to approve a revenue level to meet expenses and
a rate of return, and they fully expect the Utility Services
Dept. to custom fit that to a rate structure.
28
Staff Presentation
Assistant Utilities Director Joe Baird reviewed the Breezy
Village Rate Review Committee Report (Exhibit "G")
TO: The Honorable Members of DATE: November 1, 1984 FILE:
The Board of County Commissioners
THRU: Terrance G. Pinto SUBJECT: BREEZY VILLAGE RATE REVIEW
Utility Service i ctor COMMITTEE REPORT
1.
FROM: Josep A. Baird REFERENCES:
Assistant Utility Director
DESCRIPTION AND CONDITIONS:
After receiving the Breezy Village rate request, the staff had the
following comments:
1. The Utility Plant in Service is reasonably stated at a historical
cost of $179,016.
2. Accumulated Depreciation of $51,038 is properly stated, however
if the 1983 depreciation expense changes, the accumulated deprecia-
tion will also have to be changed.
3. Originally, staff had required the Utility to make -.a "Used and
Useful Adjustments" based on water and sewer flows, however,
Breezy Village Utilities rate consultant proved that this would
not be fair under the circumstances. The Utility constructed a
15,000 gpd water and sewer plant when they would have preferred
to construct 10,000 gpd plants. However, the larger facilities
were required.
4. Contributions -In -Aid -of Construction are correctly stated.
5. Water and Sewer Income was also correctly stated. A revenue
test using consumption records was used to verify the income.
6. It is difficult to determine whether or not Contributions -In -Aid -
of Construction have been depreciated. Our staff feels that the
Contributions -In -Aid -Of -Construction have been depreciated.
In prior rate cases, the Board of County Commissioners have
disallowed the depreciation of CIAC. To be consistent, it is
the feeling of the staff that the same policy be followed.
7. Breezy Village originally submitted expenses based on the owner
managing and performing various duties. According to the owner,
he has decided to contract services instead of performing
these duties, therefore, the plant -operator -and -accounting
expenses increased substantially. The amounts presented for
these contractual services do not seem out of line with costs
in the area.
8. Extraordinary repairs recommended by BSB Utilities in the amount
of $5,639 is justified, however, they could be amortized over a
five year period rather than three years. This would bring the
repair expense to $3,102 from $3,854.
W
N OV 8 1994 aooK 58 F,,�F. 83
1. J
BOHM 1100E,
800 58 w�. 83
9. At the original rate hearing, Breezy Village Utilities was not
:prepared and because of this incurred (7
rate case expenses
at the cost of the consumer. The rate case expense of $12,000
is high for a utility of this size and, therefore, the staff
recommends that only fifty percent of this should be absorbed
by the consumer and that it be amortized over three years instead
of two. The net affect is the rate expense would be $2,000
instead of $6,000.
10. The income tax calculation did not include any offsetting
adjustment for investment credit. However, it is understood
the investment tax credits are not for the purpose of rate
relief.
11. Breezy Village Utilities has requested a 13.09% rate of return.
Staff recommends that if after the public hearing the commission
feels that the Utility was operated under prudent and economical
management that they be allowed a maximum of 12% rate of return.
If the opinion is that the Utility has not used prudent and
economical management, it is recommended that rate of return not
be permitted for one year.
The staff established the following revenue requirement scenarios
based on specific circumstances. In each scenario, taxes are only
estimated since there was not enough information to compute them
exactly.
Utility Proposed Rate Request
Total. Operating Expenses $34,200
Provision for Income Taxes 1,712
Return on -Rate Base 8,286
(63,386 X 13.07%)
Total Revenue Requirement $44,198
Scenario 1•
Proposed Rate Request Modify
Extraordinary repairs amortized over 5 years instead of 3; rate case
expense over 3 years instead of 2 years; and 121 rate of return on
Rate Base:
Total Operating Expenses $313488
Provision for Income Taxes 1,549
Return on Rate Base 7,606
(63,386 X 12%)
Total Revenue Requirement $40,643
Scenario 2:
Proposed Rate Request Modify
Repairs amortized over 5 years; 50% of rate case expense amortized over
3 years; and 12% rate of return:
Total,Operating Expenses $29,448
Provision for Taxes 1,549
Return on Rate Base 7,606
(63,386 X 12%)
Total Revenue Requirement $38,603
30
- M _
M
Scenario 3•
Proposed Rate Request Modify
Repairs amortized over 5 years; 500 of rate case expense amortized over
3 years; and no rate of return:
Total Operating Expenses $29,448
For Taxes -0-
Return on Rate Base -0-
Total Revenue Requirement
Scenario 4:
$29,448
b
1
Proposed Rate Request<
3'
Extraordinary repairs amortized ov 1=`S years; 50% of rate case
expense amortized over 3 years; �9% of depreciation expense because
of Contributions -In -Aid -Of -Construction adjustment no rate of
return:
Total Operating Expense
Provision for Taxes
Return on Rate Base
$26,532
-0-
-0-
Total Revenue Requirement $26,532
Scenario 5:
Proposed Rate Request Modify U e
Extraordinary repairs amortized over 5 years; 50% of rate case..
expense amortized over 3 year;:;49" of depreciation expense because
of Contributions -In -Aid -Of -Construction adjustment and 12% rate of
return:
Total Operating Expense
Provision for Taxes
Return on Rate Base
(66,302 X 12%)
Total Revenue Requirement
RECOMMENDATION:
$26--,5-3-2-
1.9634 26, 53-2-1,634
7,956
$-3-6-,-H-2—
If
3-6,-H-2—
If there is no information produced at the public hearing which would
alter the financial data and the company can substantiate that they did no
depreciated Contributions-In-Aid-Of-Construction,'also in addition if
the Board of County Commissioners deem it proper that the rate of
return be.limited to zero for the first year, the staff recommends
that the allowable total revenue collectable by the Utility be
$26,-;532: After one year if it is deemed that the company be allowed
to receive a rate of return, then the allowable total revenue collect-
able by the Utility be $36;132.
Mr. Hunsberger noted a computation error on Page 3 of
Exhibit "G" in Scenario #4 re depreciation of CIAC, which he
brought to Mr. Baird's attention earlier. The reduction of the
depreciation of CIAC should not be 510, it should have been a
31
®V IZI &t BOOK 58 83
Nov
81984
BOOK
5 8 F 3
little closer to 36%.
He explained again that if he
had reduced
the depreciation of CIAC, he would have increased amortization of
the Utility plant acquisition adjustment and the figures were the
same. The $26,532 in Scenarios #4 and #5 really should be
increased by $972 to make that figure $27,504.
Mr. Baird confirmed this.
Director Pinto recommended that the Board write the Order
following Scenarios #4 and #5, as amended by Mr. Baird, and to
include in the Order a requirement for a revenue audit at the
time the Utility submits their annual report to determine if they
have excess revenue.
Commissioner Wodtke wondered whether the rate of return
should be subject to the completion of specific improvements.
Director Pinto explained that is why they would go back and
test the numbers to be sure that they are not receiving any more
revenue than they have been allowed.
Summation by Attorney Collins:
Attorney Collins stated that the Breezy Village Home Owners'
Association stands on the presentation made in Mr. Robbins'
report. He felt that if the quality of the water was better, if
there had been good accounting methods, and if the meters had
been read in an accurate manner, the water consumption in Breezy
Village would be substantially higher than what is reflected in
the proforma submitted by the Utility. Therefore, that should be
considered when the rate of revenue is applied as it would show a
gross profit. He asked that the Utility's Proforma not be
accepted for that reason.
Attorney Collins did not feel that 2h% would be sufficient
to upgrade the entire system and that the revenue amount could be
increased up to $36,000 in the second year. He recommended that
the Order follow the report prepared by Mr. Robbins and that no
increases should be granted until the Utility is brought up to
shape and is, in fact, providing quality service to its
customers. He felt the Order should be absolutely conditional on
32
that point and that the Utility should not be be allowed to come
,back before this Board until it is brought up to standard.
He believed that we are all here to see that the Utility is
brought up to standard and that the owners should be allowed to
make a fair return on their investment.
Summation by Attorney Henderson:
Attorney Henderson stressed again that the report submitted
by Mr. Robbins should be considered for what it is -- a report
done by someone who is not an accountant. He pointed out that
that there have been cases where other utilities did not have
sufficient revenues to meet expenses and abandoned them to the
County. They want to avoid that type of situation.
Attorney Henderson felt that the penalties recommended by
Utility Services in scenarios #4 and #5 are somewhat harsh:
1) Amortization of certain expenses over longer periods of time.
2) Lower rate of return than requested.
3) No rate of return for the first year.
4) Payment of half of the rate case expense.
5) Not being allowed to recover through depreciation real out of
pocket money spent for the system in the first place.
Attorney Henderson finished by saying that they certainly
intend to improve the condition of the plant, and pointed out
that if the customers have complaints there are numerous remedies
that they can resort to other than appearing at rate hearings.
He noted that the amended franchise gives them the ability to
complain about service at any time.
Chairman Scurlock thanked the audience for their
understanding and cooperation in this matter and advised that
an Order will be written within 60 days.
ON MOTION by Commissioner Wodtke, SECONDED by
Commissioner Bird, the Board unanimously (4-0)
made part of the record all the letters and graphics
received by staff and the Board.
33
0V 8 1994 WK 58 836
L
NOV 8 1994
ornc58
I�u
837
There being no
further business, on a Motion duly
made,
seconded and carried, the Board adjourned at 5:10 o'clock P.M.
Attest:
Clerk
34
W--/ F.�
a ,
r