Sewers

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SCIO TOWNSHIP SEWER SERVICES

UPDATE - See Background Information below.

September 2009

By Marty Mayo, member Scio Township Sewer Service Advisory Committee

Overview of Scio's Sewer Services. Ever since sewer services were first provided in Scio in 1986, the Township has purchased these services from the City of Ann Arbor. In 1986, the Township contracted with the City for a specific quantity of treatment capacity and levied a special assessment on property owners in the Jackson Road Sewer Service District to pay for construction of the transport pipelines.

More than four years ago Scio Township learned that the treatment capacity currently under contract with the City would be inadequate to cover the needs of all property owners in the Jackson Road District. Additionally, the Township found that the remaining sewer capacity would not cover the needs of future development along the Jackson Corridor, in accord with the Township’s future land development plan and existing zoning. Reasons for the shortfall are many, but the most prominent factor was the addition in the 1990’s of several large residential developments to the sewer district, which were not included in the original calculations.

The Township appointed a Sewer Services Advisory Committee (SSAC) in 2005 to advise the Board of Trustees on solutions to the impending capacity problem, and how the remaining units of treatment capacity should be allocated. This committee made a policy decision that the Township would not extend the size of the sewer district beyond its current borders, but would examine alternatives for providing additional capacity to meet the Township’s obligations as determined by the 1986 assessments and the Township’s master plan.

The SSAC reviewed several alternatives, including purchasing services from the YCUA system in Ypsilanti, requesting service from the Dexter sewer system, joining forces with Sylvan and Leoni Townships in western Washtenaw County, requesting additional capacity from Ann Arbor, joining forces with Lodi Township to build a new treatment plant for the two townships, and finally building a Scio-only plant. Each of these options was priced out and examined for feasibility. The committee concluded, after looking at the pro’s and con’s of each that only two options were truly viable for the Township: 1) requesting additional capacity from the City of Ann Arbor and 2) building a Scio-only plant to provide treatment services to all sewer districts within the Township.

The SSAC’s analysis determined that the Scio-only treatment plant would enable the Township to provide sewer treatment services to Scio’s users at a significantly lower price than the option of remaining with the Ann Arbor City system, assuming that the city actually could provide additional capacity. The price differential would make it possible to pay for the new plant out of current user charges, without requiring the Township to levy additional taxes or fees, and without adding any new users.

A key factor in the price difference is the fact that Ann Arbor’s current processing price is substantially higher than the processing price associated with a new treatment plant. Additionally, Ann Arbor is expected to increase the charges for its service at a higher annual rate than would be necessary for a new Scio plant, should it be built. (Note: for a more thorough discussion of the many factors involved, see below.)

The Township is required to state its intentions regarding continuation of the contract with Ann Arbor for sewage treatment services five years before the time when the contract actually concludes. That five-year deadline occurs on January 1, 2010.

After the 2008 Election. There have been several changes in the Sewer Service Advisory Committee (SSAC) following the November 2008 election. The newly elected supervisor, Spaulding Clark, assumed the role of chair for the committee and replaced trustees who were not re-elected. New trustees include Jack Knowles and Dick DeLong. Continuing members include Scott Martin, Scio utilities director, Kent Early, from Scio’s engineering consultants OHM, Darrell Fecho, the Township manager, and community representatives Jim Dries and Marty Mayo.

The new committee has required time to review the work of the previous SSAC, to learn how the pricing model was developed and to re-examine other considerations related to the project. However, several steps have been taken toward the ultimate goal of increasing Scio’s sewer treatment capacity:

	A property on Staebler Road is under consideration as a location for a potential new Scio treatment plant. Scio has paid a deposit on the property and is in the process of doing due diligence on it. If the plant were to be built on this property, the effluent from the plant would go into Honey Creek somewhere upstream from the I-94/Zeeb Road intersection.
	Communications with the Ann Arbor Utilities Dept. have been improved. The City has agreed to extend the deadline for committing to continued sewer services by one year, to give the Township more time to examine its options.
	The Township commissioned a hydrology study to determine the impact of additional flow from the treatment plant on Honey Creek. This study was completed in July 2009 and concluded that there would be minimal impact on the creek resulting from the planned additional flow. Although the amount of flow from the plant sounds large when considered independently, it would represent only 2%-3% of the total flow in the creek.
	The SSAC has learned that the Township will have to apply for an MDEQ permit for the treatment plant, but that the MDEQ has promised to act quickly on the permit request.
	The committee has requested its engineering and planning consultants to determine the exact amount of additional capacity the Township will need to meet its obligations. Once this figure has been identified, the Township plans to ask Ann Arbor if it will be able to provide this additional amount in the future. If Ann Arbor cannot provide the additional capacity, then the decision of which option to pursue will be clear. If it can provide the additional capacity, then the Township must decide which option is best.

The previous SSAC committee was impressed by the large amount of savings that Scio could provide to its sewer treatment customers if it were to construct a new, Scio-based treatment plant. At election time, this committee was almost ready to make the choice to build in Scio. The potential savings accruing to users were estimated at approximately $90 million over the 20-year period considered by the analytic model, and this amount included the capital, interest and operating costs for the new plant.

Approximately 45% of Scio’s residents live within the sewer service area. These include people residing in the Jackson Corridor, and residents in the southeastern quadrant of the Township (Uplands, Meadowinds, Ravines, Polo Fields, Country French, Arbor Pointe, and other larger developments.) These residents and the existing businesses along Jackson Boulevard stand to benefit from lower sewer service charges in the long run, if Scio decides to construct and operate its own plant.

Before a final decision is made there are several issues to be resolved. These include:

	Deciding whether or not Scio should be “getting into the sewer business” which would mean that the Township’s government would have to expand to manage the construction and operation of the plant. It also would mean that Scio would have total responsibility for the plant once it is constructed.
	Determining the extent to which higher sewer charges, as a result of using the Ann Arbor’s system, would deter new businesses from locating along Jackson Boulevard and jeopardize Scio’s ability to pay the bonds for construction of the boulevard.
	Assessing the environmental impact of having the treated effluent flow into Honey Creek. (It should be noted that the proposed plant would involve tertiary treatment to meet the high standards set for waters entering the Huron River. The MDEQ requires that any inflow to the river must have extremely low phosphorus content.)

The actions taken by the committee since November are necessary no matter which course is taken – to construct a new treatment plant for Scio or continue contracting with Ann Arbor for treatment services.

BACKGROUND INFORMATION

This issue summarized by members of the SSAC:
Jim Dries, Scio Trustee and chair of the committee
Marty Mayo, Planning Commission representative
Scott Martin, Director of Scio’s Utilities Department
Kent Early, Engineering Consultant, OHM
September 2008

Scio Township faces a potential crisis in providing sewage treatment services to its current and future users. Sewer capacity is severely limited in the Jackson Road sewer service area. Scio’s Land Use Master Plan calls for commercial and industrial developments along Jackson Road so that other parts of the Township can remain more rural and residential. The Jackson corridor boulevard is being constructed to facilitate this commercial/industrial development. The severely limited sewer capacity will prevent expansion among existing businesses and make further development in undeveloped properties impossible. Scio must find a way to provide additional capacity in the Jackson Road sewer services district.

How Scio Provides Sewer Services

There are four sewer service districts in Scio: the Walnut Ridge Sewer District in the east along Miller Road, the W.I.S.D Sewer District in the southeastern corner between Liberty Road and Scio Church, the Jackson Road Sewer District, which extends from Wagner Road to Parker Road along the Jackson Corridor and the Loch Alpine Service Area in the north along Huron River Drive. The first three districts convey sewage to Ann Arbor for treatment, based on a contract that limits the amount of flow, which is set at 2.05 million gallons per day (MGD). Loch Alpine has its own treatment plant (0.14 MGD), however this capacity, based on the contract, is still counted against total contract capacity. The contract with Ann Arbor runs through January 1, 2015, but Scio must indicate whether it will continue with this contract in 2010.

To see a map of the sewer district, click here.

Click here for a primer on how sewer flow is measured.

A Little Background

Scio’s sewer system was designed to serve the Jackson Road corridor and the densely populated neighborhoods in our southeast sections (Uplands, Meadowinds, Ravines and Woodchase Apartments.) The original design sought to avoid “urban sprawl” by targeting these areas for denser commercial and residential growth, preserving the land outside the sewer districts for low-density housing, agriculture and recreational open space.

In the 1970’s Scio constructed the Washtenaw Intermediate School District Sewer System and then later, in 1984 Scio built the collection system along Jackson Road and contracted with Ann Arbor for sufficient sewage treatment capacity to serve the districts as designed. Scio expected to channel new development into the areas designated for sewer service. Jackson Road was a key component of the plan, as the boulevard was initiated around the same time to provide an improved environment for commercial development. Originally, there was sufficient capacity in the plan to cover the needs of new developments in the entire Jackson Road Service District.

During the late 1980’s / early 1990’s , Township leaders expanded the sewer districts to serve new, higher density developments that were not in the original sewer services plan. These included portions of The Polo Fields, Country French and Arbor Pointe and Scio Farms subdivisions. These new developments required approximately 132,000 gallons of sewer capacity per day, which meant that this capacity was no longer available to serve the Jackson corridor sewer district.

Scio’s current contract with Ann Arbor is a limit of 2.05 MGD (million gallons per day). These are distributed among the districts as follows: Jackson Road District -1.30 MGD; W.I.S.D. District – 0.57 MGD; Walnut Ridge District – 0.04 MGD; and Loch Alpine District – 0.14. The last district has its own treatment plant and does not send effluent to Ann Arbor.

A Capacity Shortfall is Discovered

An analysis of the Township’s sewer system, conducted in the spring of 2004 at the request of township officials, revealed that the capacity to serve future businesses and homes in the sewer district was severely limited. Some of the shortfall was caused by leakages in the system (called Infiltration and Inflow – I and I – by engineering professionals.) The Township contracted to have these leakages repaired, which helped relieve some of the peak capacity issues but did not totally resolve capacity shortfall in the W.I.S.D Sewer District.

The Jackson corridor was another story. An analysis conducted by Scio’s engineering consultants looked at the previous purchases of users in the designated sewer district, the Master Plan and current zoning for the area to determine future needs. The analysis showed that to serve properties already in the sewer district, whose owners had paid to be in the Special Assessment District (SAD) back in the 1980’s, the Township would need to provide an additional 650,000 gallons of sewer capacity per day.

This shortfall has serious implications. First, property owners who paid to be in the SAD have a legal right to expect sewer services in the event they decide to develop their properties or expand their businesses. The Township could face costly litigation if the capacity is not available. Second, without sewer service Scio cannot attract the high quality of commercial and industrial enterprises that it has targeted for this area in its Master Plan. Without expanded development along Jackson, the Township might not be able to repay the bonds it purchased to develop Jackson Road into a boulevard. Third, and the most concerning, new developers may be tempted to provide private on-site sewer systems for their commercial developments in the Jackson corridor. These private sewage treatment plants would not be subject to municipal supervision and environmental control.

Township Actions

In October of 2006, the Scio Board of Trustees appointed a Sewer Service Advisory Committee (SSAC), chaired by Trustee Jim Dries. Other members included Trustee Jean King, Clerk Kathy Knol, Planning Commissioner Marty Mayo, Township engineer Kent Early and Township Utilities Director Scott Martin. This committee was charged with:

designing a method for allocating the remaining sewer capacity among:

existing users

new developments;

examining alternatives for providing additional sewer capacity;

recommending a preferred solution for Township action.

Sewer Service Advisory Committee Actions

Allocation of Remaining Capacity

As a first step, the SSAC determined that the remaining capacity would be given to developers on a first come, first served basis. This appeared to be the most unbiased decision rule. Several new projects received access to sewer services initially with the understanding that all requirements were met and proper permits were obtained. However, the past two years have seen very few new projects in the Township due to the economic downturn.

Alternatives for Expansion

Next, the SSAC started examining alternatives for expanding the sewer capacity for the Township. These included:

Purchasing treatment from the YCUA plant in Ypsilanti, which would require a forced main pipeline along I-94 or upgrading various pipelines in Pittsfield and Ypsilanti Townships.
Joining with Sylvan and Leoni Townships in western Washtenaw/ eastern Jackson Counties. This plan would require installing a pipeline west along I-94 to carry Scio’s wastewater.
Purchasing additional capacity from Ann Arbor, which would require expanding and upgrading pipelines in Ann Arbor that would carry Scio’s wastewater.
Constructing a Scio-owned treatment plant. This might involve one of the following options: a) a small plant built near the proposed Honey Creek PUD to serve that new project and a the additional needs in the Jackson Road district; b) a larger plant built somewhere along Jackson Road to serve all of Scio’s needs; c) a joint plant with Lodi Township to handle Lodi’s needs and some limited service for Jackson Road; or d) a larger joint plant to serve all of Lodi’s and Scio’s needs.

Preliminary discussions with Dexter Village revealed that the Village was not interested in collaborating with Scio on the provision of sewer treatment. All of the other options were examined carefully by the SSAC together with the engineering and financial consultants of the Township. Preliminary cost estimates were prepared, and alternative types of treatment plants evaluated.

Scio has an additional wrinkle in solving its sewer capacity needs. The State’s Dept. of Environmental Quality (DEQ) has declared that the middle Huron River cannot receive any treated sewage with a phosphorus concentration of more than 0.05mg/l (milligrams per liter)– a very demanding requirement for treatment plants. In order to evaluate the various options, the committee concluded that purchasing additional service from Ann Arbor should be the base line against which other options were tested.

The Ann Arbor Option

Currently, Scio Township pays Ann Arbor $3.39 to treat each 100 cubic feet of raw sewage Scio sends to Ann Arbor. SSAC asked Ann Arbor’s Utility Department about the possibility of increasing the amount of sewage they process for us. The City, in turn, asked Scio to pay for an engineering study to determine required upgrades if Scio were to route more sewage to Ann Arbor for treatment. The study cost Scio $15,000. After the study was completed in May, Ann Arbor’s utility director indicated that Scio Township could purchase more capacity, but would be required to fund the capital costs to upgrade pipelines within the City to carry the extra load, an estimated cost of $6 million. In addition, Scio might have to pay for future Waste Water Treatment Plant upgrades at the Ann Arbor plant.

The Ann Arbor Utilities Department has indicated that it anticipates annual increases to the effluent processing charges of approximately 5% per year. Thus, the current 2007/8 charge of $3.39 per 100 cubic feet, compounded at 5%, will become $9.44 in 2029 and $15.38 in 2039. An average household uses about 21.5 CCF per quarter. Ann Arbor charges Scio about $72.90 to treat this effluent. In 2029, the Ann Arbor charge will be $203.00 and in 2039 it will be $331.

Pro’s and Con’s of the Ann Arbor Option

	The strongest advantage of the Ann Arbor option is that Scio would not have to assume responsibility for financing, constructing and operating its own sewage treatment plant.
	The capital costs for upgrading pipelines within the City’s boundaries could be covered by monies in the Township’s sewer fund.
	A disadvantage of the Ann Arbor option is that Scio would be paying for improvements within Ann Arbor’s boundaries.
	Another disadvantage would be the increasing charges for treatment of Scio’s sewage and the fact that Scio would have no control over the factors involved in the price increases or over other charges that Ann Arbor might require.
	Additionally, Ann Arbor’s sewage treatment plant fails the stringent DEQ phosphorus standard for the Huron River: it currently discharges treated effluent with 0.6mg/L , twelve times the required phosphorus discharge rate for new plants.

Other Options

The committee explored the possibility of sending Scio’s effluent to YCUA in Ypsilanti or to the Sylvan/Leoni plant. Besides the necessity of building very expensive conveyance pipelines, there were other practical concerns that made these options undesirable. At this point, SSAC decided to look into building a Scio-owned plant (Alternative 4 in the list above.) The preliminary cost estimates had revealed that some form of Scio-based treatment plant would cost less in the long run than all the other options considered, including the Ann Arbor option. Among the Scio-based options, the most cost effective would be a joint facility together with Lodi Township. Discussions with Lodi revealed that the township would not be ready to move ahead on the construction of a sewer facility for several years. Scio has more immediate needs and must move ahead in the very near future. This discovery eliminated Alternatives 4c and 4d.

The Scio Option – Alternative 4

There were two remaining options, 4a) a smaller plant to cover the unmet needs of Jackson Road users plus the proposed Honey Creek PUD or 4b) a larger system that would cover all of Scio’s needs, including the W.I.S.D. sewage. After much discussion, the SSAC decided that if Scio develops its own treatment plant, the plant should treat all of Scio’s sewage, making the Township completely independent of Ann Arbor. The reason? If part of Scio’s effluent remained with Ann Arbor, there would be differential charges for users remaining with Ann Arbor than for users of the new Scio system. The choices were thus reduced to option 4b – build a Scio plant to serve all of Scio’s needs. Alternative 4b became the option to test against the Ann Arbor Alternative.

SSAC chairman, Jim Dries, prepared a financial model to compare in greater detail the costs of the Scio option to those of the Ann Arbor option. Parallel assumptions were used for both options – the same quantities of effluent and number of users, the anticipated capital costs and bond repayments for both options. The Ann Arbor charges were inflated at 5% per year – the amount that Ann Arbor’s Utility Dept. has predicted. The Scio costs were inflated at 3% per year, a fairly conservative estimate of the inflation rate for operation and maintenance of the system over the coming twenty years. The 3% figure was suggested by the engineering and financial consultants, based on their knowledge of costs for similar new plants. Capital charges for the project would not inflate, since the bonds would be financed with low-interest municipal bonds at a constant rate. The model assumed, for comparison purposes, that the township would borrow the entire cost of construction.

The Scio treatment plant could be constructed for approximately $18 million. The cost model assumes that the full $18 million would be borrowed, and paid back at an interest rate of 5.5% over a period of 20 years. (Note: the cost model does not include the costs of purchasing land for the plant.) Scio’s plant would be constructed somewhere along Jackson Road and would send its effluent into a branch of Honey Creek. The plant would be sized to include all of Scio’s current capacity needs plus additional capacity to complete the Jackson Road build-out and to provide service to a proposed Honey Creek PUD on the former Farmer Grant property. Except for the Honey Creek PUD, the original boundaries of the sewer service area would be retained – a Scio-based plant would not significantly expand the current sewer district boundaries. The plant would include tertiary treatment to remove phosphorus down to the State’s required level.

When communities fund new sewage treatment facilities “on spec” with the expectation that new developments will pay for the development of the plant, they run the risk that the anticipated development doesn’t occur. This problem could not happen in Scio, where there is a large community of sewer users already in existence.

Pro’s and Con’s of the Scio Alternative

The most significant negative of the Scio Alternative is that the Township would have full responsibility for its sewage treatment plant. Scio would have to float a large bond issue to pay for the plant, in addition to the DDA bonds that are currently paying for Phase III of the Jackson corridor boulevard.

A second disadvantage of having a Scio-owned plant is that the effluent would be sent into a branch of Honey Creek somewhere along Jackson Road. There is potential for the amount of effluent to erode the vulnerable creek bed. And there is a remote possibility that the effluent could be contaminated due to a system failure at the plant.

On the positive side, the analytic model comparing the two options yielded the following:

	A new Scio plant could process effluent for $1.31 per 100 cubic feet at today’s costs according to estimates developed by Scio’s financial consultants. This compares to $3.39 currently charged by Ann Arbor for processing Scio’s effluent.
	With Ann Arbor’s processing charges inflating at 5% per year (their stated expectation) and Scio’s charges inflating at 3% per year, after 20 years the Ann Arbor charge would be $9.44 and Scio’s charge would be $2.44 to treat 100 cubic feet of effluent.
	The difference between these two charges grows larger each year given the two inflation rates. This difference can be applied to paying for the capital costs of constructing the new treatment plant.
	Within four years, the difference between the Ann Arbor and Scio charges will be larger than the annual amount required to pay back the capital costs for the new sewer plant.
	After the initial period of payback, the savings to Scio’s users would be significant – over $70 million for the 20-year period (a present value of about $34 million.)
	The effluent from Scio’s plant would meet the stringent phosphorus requirement for flow into the Huron River, whereas Scio effluent passing through Ann Arbor’s system currently does not.

Next Steps

After reviewing the two alternatives for providing additional sewage capacity to the Township and the pro's and con's for each, the SSAC concluded that the Scio alternative represented the best choice for the Township. The committee is now in the process of reviewing in finer detail these two options and sending them out for independent review. The financial model has been sent to a bonding lawyer to ensure that the model’s financial components are reasonable and correct, and that the bonding request from Scio would be favorably reviewed. The preliminary engineering designs have been examined by the County’s Dept. of Public works, and are being sent for review to an independent outside engineering firm with experience in the design and operations of municipal sewer systems. Once these outside reviews are completed, the SSAC plans to recommend to the Township Board that Scio proceed with plans to build the new sewage treatment plant.

At the Loch Alpine Sewer Treatment Facility

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