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Resolution 77-15401 RESOLUTION NO. 77-15401 A RESOLUTION RELATING TO CHARGES FOR TREATMENT OF SEWAGE AT VIRGINIA KEY PROPOSED BY THE MIAMI DADE WATER AND SEWER AUTHORITY. BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF MIAMI BEACH, FLORIDA, That pursuant to the recommendation to the City Council contained in Council Memorandum No. 6448, dated August 2, 1977, a copy of which is attached, the City Manager and the City Administration is authorized to advise the Miami-Dade Water and Sewer Authority that the City of Miami Beach chooses to adhere to the terms of the existing agreement for the rates to be charged for treating sewage at the Virginia Key Treatment plant. BE IT FURTHER RESOLVED that the City Administration and the City Attorney are hereby authorized to take necessary steps to have Metropolitan Dade County apply the proceeds from the Decade of Progress Bond issue to satisfy any costs owed by the Authority regarding the matter; and further providing that this action is without prejudice to Mr. Garrett Sloan coming forth with additional data as to the advantages of proposal "B" of the Authority that the City of Miami Beach be considered in the same manner as all other Authority Volume Contract customers. Passed and Adopted this 3rd day of August, 1977. 117;,57. - Mayor ATTEST: + (A4/?4(-( City Clerk er,f 4 wievod eatedi .� ; FLORIDA 33139 • y� "VAC4TIO NLAND U. S. A. - tiY OFFICE OF THE CITY MANAGER CITY HALL 1130 WASHINGTON AVENUE D.A.SOUTHERN TELEPHONE:673-7010 CITY MANAGER COUNCIL MEMORANDUM NO. 6448 TO: Mayor Harold Rosen and Date: August 2, 1977 Members of City Council FROM: D. A. Southern City Manager SUBJECT: CHARGE FOR TREATMENT OF SEWAGE AT VIRGINIA KEY BY MIAMI DADE WATER AND SEWER AUTHORITY On January 10, 1977, Mr. Garrett Sloan of the Miami Dade Water and Sewer Authority advised the City of Miami Beach that based on its contracts with the Authority for enlargement of Virginia Key Treatment Plant to accommodate the City of Miami Beach, approximately $7,635,700 would be due the Authority and that the potential commitment would be approximately $12,000,000. Mr. Sloan indicated that the City has one of two choices: (a) Does the City of Miami Beach desire to adhere to the terms of the existing agreements? (b) Does the City of Miami Beach wish to be considered in the same manner as all other Authority Volume Contract customers? Also, that in the event the City should select Item (b) , the payment of cost participation funds due the Authority would be eliminated. On February 15, 1977, Mr. Sloan advised us that the two alternates presented to the City of Miami Beach involved substantial funding and they would like to know if additional time is needed for review, and on March 24, 1977 he was advised that the minimum time required would be 60 days. Our preliminary review of the matter indicates that Item (a) would result in a cost of approximately 28 per thousand gallons as compared to Item (b) of 53per thousand gallons to treat sewage at Virginia Key. Our meetings and discussions with the Miami Dade Water and Sewer Authority that followed resulted in them presenting information on May 10, 1977 that the cost of treating sewage at Virginia Key in the year 1980 for Item (a) would be 37per thousand gallons, and Item (b) would be 39per thousand gallons. As a result of this difference in cost involved, Mr. Thomas Merlow was consulted and engaged to review the entire matter based on existing informa- tion, and on July 20, 1977 Mr. Merlow presented us with a report indicating that in the last fiscal year, the City would save approximately $1 ,440,000 by selecting Item (a) over Item (b) . Attached is a copy of his report. The Decade of Progress Bond Issues that were approved by the voters on November 7, 1972 included $50,000,000 for sanitary sewer improvements matched by federal aid, specifically to assist in the expansion and up- grading of the Virginia Key Treatment Plant. These bonds would, therefore, be available to pay for the City's share of expanding Virginia Key. (Page 1 of 2) T AGENDA ITEM DATE a 3 77 The City Attorney has reviewed this matter and advised that the Miami Dade Water and Sewer Authority is responsible for the contracts that were entered into between the City of Miami Beach and the then Miami Water and Sewer Authority. Therefore, it is recommended that the Council authorize the Administration to advise the Miami Dade Water and Sewer Authority that it chooses Item (a) "to adhere to terms of the existing agreements" for the rates to be charged for treating sewage at Virginia Key Treatment Plant, and that the Adminis- tration be authorized to take the necessary steps to have the County apply the proceeds from the Decade of Progress Bond Issue to satisfy any costs owed the Authority regarding this matter. Mr. Sloan, in a letter to the City Manager, stated that if the City selected proposal (b) it need not be concerned with payment of "cost participation" monies, which could amount to $12,000,000. However, it is the City' s position that Dade County Decade of Progress Sewer Bonds are committed for this purpose. DAS:FA:em Attachment (Page 2 of 2) 1{ THOMAS J. MERLO & COMPANY CERTIFIED PUBLIC ACCOUNTANTS 3530 BISCAYNE BOULEVARD. SUITE 300 MIAMI. FLORIDA 53187 • ME TELEPHONES 573-0324 573-0331 AMERICAN INSTTTVTV OF CERTIFIED PU•LIC ACCOUNTANT• THOMAS J. MERLO. C.P.A. FLORIDA INSTITUTE OF DAVID LEBOE. C.P.A. CERTIFIED PUSLJC ACCOUNTANTS July 20, 1977 Mr. Joseph Wanick, Esquire City Attorney City of Miami Beach 1130 Washington Avenue Miami Beach, Florida 33139 • Dear Mr. Wanick: We have reviewed Mr. Frank Aymonin's memo of April 8, 1977 to you concerning contracts with the Miami-Dade Water and Sewer Authority and offer the following for your information. This letter will only address itself to item 1 of the memo concerning the sanitary sewer agreements with the Authority. The other items will be discussed under a separate letter and sent to you shortly. At the present time, the City of Miami Beach has two contracts with the Miami-Dade Water and Sewer Authority, both of which are dated May 1 of 1972. One pertains to the service contract for the disposal of sewage and the other is a cost participation contract for the enlargement of the existing sewage treatment plant on Virginia Key and the extension of the ocean outfall. Each contract, however, had a provision that made the effective date of the contract the date on which the sale of City of Miami Sewer Revenue Bonds, Series 1972, took place. The Authority, through Mr. Sloan, states that these bonds were never sold and no rights or obligations have arisen under these agreements. (Mr. Sloan's letter to Mr. Southern of January 10, 1977). However, in Mr. Sloan's letter of February 15, 1977, he states the City of Miami Beach still has this contract as an alternative if they want it. Therefore, we will proceed on the premise that the contract signed on May 17, 1972, may still be utilized by the parties at this time. f Oto July 20, 1977 Mr. Joseph Wanick, Esquire City Attorney City of Miami Beach - Page Two A close review of the two documents signed in 1972 reveals that the City of Miami Beach would participate fully in the setting of rates by all funds received by the Federal government, either received directly or through the Miami-Dade Water and Sewer Authority. Moreover, if any decade of progress bond issue money was utilized for this sewage project, the City of Miami Beach would receive full credit in its rate structure for these funds. • We did not, however, determine how much the City of Miami Beach would have to pay for capital improvements under the contract because from the available information at hand it was not possible. The Authority estimates the City of Miami Beach's contribution to be between eight and twelve million dollars. The Authority estimates the user charge based on these two contracts at the present time to be $.30 per thousand dollars. Their estimate is high. Based upon the Authority's 1976-77 budget of $7,800,000 for operations and maintenance expense and 35,000 M gallons sewage,it would only cost the City $.22 per M gallons of treated sewage. ALTERNATIVES The Miami-Dade Water and Sewer Authority is offering the City of Miami Beach an alternative to be charged for sewage the same as its other large volumn users as stated in its proposed wastewater user charge report to United States Environmental Protection Agency of September, 1976, page 28, Section VII. A close review of this section shows that the provision of this rate structure would give the City of Miami Beach no credit for Federal or matching funds; would require Miami Beach to pay about 3% for depreciation on these same funds and furthermore pay the Authority's interest cost and debt amortizations on its outstanding debts. Under the contract, .the City of Miami Beach would have to maintain a renewal and replacement fund of $250,000 per year and pay for its share of additions, improvements and major replacements in addition to its proportionate share of operating, maintenance, and general expense. For the fiscal year ending in 1977, the cost per M gallons of treated sewage is estimated to be $.23 per M gallons under the 1972 contract and an initial rate of $.40 per M gallons if the City of Miami Beach elects to be charged pursuant to Section VII of User Charge Report filed with the Federal Government. THOMAS J. MERLO & COMPANY CERTIFIED PUBLIC ACCOUNTANTS 41 July 20, 1977 Mr. Joseph Wanick, Esquire City Attorney City of Miami Beach Page Three Based upon the sewage flow at the 73rd Street station for the last fiscal year of 8,140,954 M gallons, the City of Miami Beach would have an estimated savings in annual user service charges the first year of $1,440,000. Therefore, from the information made available, it is our opinion that the City of Miami Beach rely on the contract dated May 17, 1972 for the installation of lines and setting of rates at this time. The City of Miami Beach should also take up Mr. Sloan's offer to meet and discuss this matter to determine if the Authority has additional facts that would alter the situation as stated to us. (1 Si care , I ME 0, C.P.A. TJM/go THOMAS J. MERLO & COMPANY CERTIFIED PUBLIC ACCOUNTANTS UKIUIIVHL RESOLUTION NO. 77-15401 (Authorizing Administration to advise Miami-Dade Water & Sewer Authority that CMB wishes to adhere to terms of exist- ing agreement for rates to be charged for treating sewage at Virginia Key Sewage Treatment Plant; also authorizing necessary steps to have County apply pro- ceeds from Decade of Progress Bond Issue re costs)