Item 5: Resolution Adopting Amended SDC Methodologies and Rates

Home Browse Search

Methodology Element Two: Develop Cost Basis The cost basis represents the total costs that the SDCs are intended to recover. .The following methodological issues . were addressed in developing the reimbursement and improvement fee cost bases: . Existing System Valuation (Reimbursement Fee) -- The method for valuing existing facilities with capacity to serve growth. --.. . Existing System Allocation (Reimbursement Fee) - The method for allocating existing system "facility value to growth. . Pro.ject <;ost Valuation (Improvement Fee) The method for valuing future projects. . Project Cost Allocation (Improvement Fee) - The method for all~ating future projects to growth. . Adjustments - Deductions or additions to the cost basis to recognize past or future capital funding methods: Each issue is discussed below. Step One · Existing System Valuation Calculation of the reimbursement fee begins with a review of MWMC's fixed asset records to determine the value of the existing system. The system is valued based on the inflation adjusted original cost approach. Under this approach, the original cost of existing system assets is adjusted by the Engineering News-Record national20-city average Construction Cost Index from the time of construction to estimate current values. The inflation adjusted cost approach recogt}izes appreciation in the system since assets were constructed and assumes that the wastewater system is maintained in perpetuity. Step Two · Existing System Allocation The existing system allocation methodology, for use in determining the reimbursem~nt fee cost basis, is a three-step allocation process 1 comprised of the following steps, as illustrated in Figure 2: R-l. Allocate existing facility costs to facility process components (e.g., primary treatment, secondary treatment)~ R-2. Allocate costs by component to system capacity parameters (e.g., average flow, peak flow). R-3. Allocate costs to growth based on estimated C}vailable capacity by service parameter. The allocation of existing facility costs to facility process components is fairly straight- forward, as most projects relate directly to an individual co~po~ent (e.g., secondary clarifiers are .a part of secondary treatment), or support the entire treatment system (e.g., control systems). Existing facility costs (valued in terms of inflation-adjusted costs) by 1. The numbering of the steps for the existing system allocation process is preceded by an -R- to identify these steps as relating to the Reimbursement Fee calculation. Later processes relating to the Improvement Fee calculation are indicated by an -I" in. the number sequence.