AGENDA DATE: 7/8/2015
TITLE:
Title
Amendment of the 1973 Four Party Agreement Between the City of Charlottesville, Albemarle County, the Rivanna Water and Sewer Authority, and the Albemarle County Service Authority
BODY
SUBJECT/PROPOSAL/REQUEST: Resolution to approve Amendment No. 1 to the Four Party Agreement
ITEM TYPE: Consent Action Item
STAFF CONTACT(S): Foley, Davis
PRESENTER (S): N/A
LEGAL REVIEW: Yes
REVIEWED BY: Thomas C. Foley
BACKGROUND: In 1973, the City of Charlottesville, the County of Albemarle, the Rivanna Water and Sewer Authority (“RWSA”), and the Albemarle County Service Authority (“ACSA”) executed a service or operating agreement for the RWSA to provide potable water and wastewater treatment services to its two customers, the City and the ACSA. This agreement, which has remained unchanged since 1973, is commonly known as the “Four Party Agreement.”
At the request of City and ACSA staff, the RWSA has prepared a proposed amendment to the Four Party Agreement (Attachment B) that, if adopted, will change the billing methodology used by the RWSA. Section 8.1 of the Four Party Agreement provides that the Agreement can only be amended or modified with the consent of the City, the County, the RWSA, the ACSA and the Bond Trustee under RWSA’s Agreement of Trust. The proposed amendment was approved by City Council on June 15, 2015 and by the ACSA Board on June 18, 2015, and is scheduled to be presented to the RWSA Board of Directors on July 28.
STRATEGIC PLAN: Mission: To enhance the well-being and quality of life for all citizens through the provision of the highest level of public service consistent with the prudent use of public funds.
DISCUSSION: The proposed amendment will change how the RWSA bills the City and the ACSA for capital debt service costs. Currently, the RWSA includes an amount for debt service in the water and wastewater treatment rates it charges the City and the ACSA. Those wholesale rates are set in advance by the RWSA during its annual budget process, and are based on the estimated amount of water the RWSA anticipates selling, and the estimated amount of wastewater the RWSA anticipates treating, during the ensuing fiscal year. As contemplated by the Four Party Agreement, the rates are set as a specific amount for every 1,000 gallons of water sold and wastewater treated.
The problem with the current methodology is that the amount of water sold and the amount of wastewater treated can fluctuate significantly with the weather. For example, the amount of wastewater treated by the RWSA can increase significantly during wet weather, due to inflow and infiltration in the sanitary sewer collection system. During those times, the RWSA can collect significantly more (and the City and the ACSA pay significantly more) in debt service for payments. At the same time, the wet weather may mean that water usage is lower than anticipated, and that the RWSA collects less than what it needs for water capital project costs. On the other hand, when the amount of water usage is higher than anticipated because of very dry weather, the amount of debt service collected for water capital projects is higher than the amount needed, and the amount of debt service collected for wastewater projects may be too low. These fluctuations present significant challenges for the RWSA, the City, and the ACSA when setting water and wastewater rates based on predictions of future usage.
The proposed amendment would allow the RWSA to use a separate, fixed debt service charge when billing the City and the ACSA for water and wastewater capital costs. Separating the charge for debt service from the water and wastewater rates will mean that the amount of debt service charged and paid will not depend on the volume of water sold or wastewater treated. Weather will no longer be a factor, and because the RWSA knows in advance how much debt service it needs each year, budgeting for debt service will be easier and more accurate for all three entities. The justification for the proposed amendment is further articulated in the document entitled “Considerations for Amendment No. 1 to Service Agreement,” prepared by the RWSA and attached hereto (Attachment A).
The proposed amendment also contains several points of clarification:
-A definition of “Debt Service Charges” is added in Section 1.2;
-The amendments to Sections 7.2 (a) and (b) reinforce the existing rule that debt service charges for capital projects requested solely by the City or the ACSA will be allocated to the requesting party. These amendments also explicitly acknowledge that debt service charges will be allocated as provided in any cost allocation agreement executed by the City and the ACSA;
-Section 7.5 currently states that water and wastewater treatment charges are determined by applying the rates “to the total amount of water delivered to the City and the Service Authority as obtained by their respective customer meter readings.” For over 30 years the parties have implemented this section through the provisions of the “1983 Working Agreement on Urban Area Wholesale Flow Allocation and Billing Methodology between Rivanna, the Service Authority and the City.” This amendment specifically references and incorporates that 1983 Working Agreement as part of the Four Party Agreement;
-Section 7.1 of the Four Party Agreement provides a debt service formula for capital wastewater projects whereby the City pays ½ as much per 1,000 gallons as the ACSA pays, although the parties previously have disagreed on which projects are subject to this provision. The proposed amendment clarifies the application of that formula (to existing facilities as defined in Sections 3.3 and 3.5 and those described on Exhibit 6), in a manner that is consistent with the recent Wastewater Projects Cost Allocation Agreement. The amendment also eliminates the “per 1,000 gallon” metric, because debt service charges will no longer be based on usage or flow. Attachment C shows the affected articles of the 1973 Four Party Agreement with underline and strikeout.
BUDGET IMPACT: There is no budget impact to the County.
As noted by the RWSA in the “Considerations for Amendment,” the proposed amendment does not change debt service allocations under existing cost allocation agreements between the City and the ACSA, nor does it force allocations where none exist.
RECOMMENDATION:
Recommendation
Staff recommends that the Board adopt the attached Resolution (Attachment D) to approve the Amendment No. 1 to Agreement to amend the Four Party Agreement dated June 12, 1973 and to authorize the Chair to execute it on behalf of the County in a form approved by the County Attorney.
ATTACHMENTS:
Attachment A - Considerations for Amendment No. 1 to Service Agreement
Attachment B - Amendment No. 1 to Agreement
Attachment C - Affected Articles with underline and strikeout
Attachment D - Resolution