HomeMy WebLinkAbout[05] St. Bens Sewer Usecrr~' f3F 5T. Jf~SEYEi I
MEETING DATE:
AGENDA ITEM:
SUBMITTED BY:
April 16, 2009
Council Agenda Item 5
St. Benedict Sewer Use
Administration/Attorney
BOARD/COMMISSION/COMMITTEE RECOMMENDATION:
PREVIOUS COUNCIL ACTION:
BACKGROUND INFORMATION: Previously we have informed the Council that the College/Monastery is
contesting the formula for calculating their apportionment of the Sewer Costs. The City entered into an
agreement in 1986 with the College/Monastery to contract sewer services with St. Joseph. Since that
time the City has been billing the College/Monastery 45% of applicable costs and those bills have been
paid until 2007. I have included some of the correspondence that has been going back and forth and the
City Attorney will be at this meeting to discuss this matter further. This subject does not qualify for a
closed meeting so we will be discussing this item during the open portion of the meeting. We have
volumes of information on this matter and have tried to provide you with the summary information. If
you have questions please feel free to contact me at the office. The City Attorney will be providing
additional information at the meeting.
BUDGET/FISCAL IMPACT:
ATTACHMENTS: Various letters between the City Attorney and St. Benedict Attorney.
REQUESTED COUNCIL ACTION:
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t t 7th Avenue North Thomas G. Jovanovich
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St. Cloud, MN 56302
32o.25t.to55 March 25, 2009
800.445:9617 toll-free
320.251.5896 fax Mr. Thomas E. Mathews
Attorney at Law
www.rajhan.com 110 Sixth Avenue South
Suite 200
P.O. Box 548
St. Cloud, MN 56302-0548
}tE: College of Saint Benedict
City of St. Joseph
Sewer Charges
Your File No. 103-00040
Dear Mr. Mathews:
This letter is in response to your letters of January 7, 2009, and January 27, 2009,
addressed to me as St. Joseph City Attorney regarding sewer charges incurred by
the College, of St. Benedict. This letter will address the request for reimbursement
from the College of St. Benedict's/Sisters of the Order of St. Benedict's
(CSB/SOSB) for past sewer payments. I will also address the request to
renegotiate the agreement or develop another method for determining the charges
to CSB/SOSB for sewer use.
GENERAL COMMENTS REGARDING CSB/SOSB'S SEWER USE
In order to arrive at a resolution of this matter and enter into an agreement which
both parties have confidence in for future billings, it is important to establish what
is not at issue.
In 1987 CSB/SOSB purchased 45% of the total sewer capacity purchased by St.
Joseph from the City of St. Cloud. Currently, St. Cloud is in the process of
upgrading and expanding the sewage treatment plant. CSB/SOSB will have to
share in St. Joseph's cost with respect to the planned upgrade at a rate of 45% of
St. Joseph's total cost which is assessed for the proposed upgrade by St. Cloud.
As a separate project, the City of St. Cloud is repairing sections of the conveyance
system, including pipes and lift stations. CSB/SOSB will have to share in 45% of
those costs which are assessed against the City of St. Joseph. If St. Joseph
decides to purchase additional expansion capacity in the St. Cloud plant,
CSB/SOSB will not have to share in that cost, unless CSB/SOSB decides to
purchase additional capacity.
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Page 2
There are a number of sewer costs for which CSB/SOSB is not assessed a percentage of the costs
incurred by the City. CSB/SOSB is not assessed a percentage of the infrastructure costs that do
not benefit CSB/SOSB. For instance, lift station maintenance and repair, costs for residential
billing, maintenance and repair of sewer lines throughout the St. Joseph system are costs which
CSB/SOSB does not share in. The only costs that are assessed to CSB/SOSB are those which
provide a benefit to CSB/SOSB.
REQUEST FOR REIMBURSEMENT FOR PAST SEWER CHARGES
It is the recommendation of City staff that no reimbursement be made to CSB/SOSB as
requested in your letter of January 7, 2009. There are a number of reasons why CSB/SOSB's
request for reimbursement is not appropriate.
The CSB/SOSB request for reimbursement is based on two arguments. First, CSB/SOSB argues
that the billing statements contain a number of accounts which are not appropriate. Second,
CSB/SOSB claims that it was over-billed for its sewer use.
Account Issue
CSB/SOSB claims that the billing statements contain itemized accounts which aze not authorized
under the Sewer Use Agreement. CSB/SOSB claims that the "Administration and General
Account" (Note 3), the "Depreciation Account" (Note 6), and the "Administration Fee" (Note 7)
are not proper.
It must be pointed out that both the "Administration and General Account" (Note 3) and the
"Administration Fee" (Note 7) have always been billed to St. Bens from the inception of the
Agreement. During that past number of years, these two costs have been set forth separately to
provide greater detail in the billing.
The "Administration and General Account" (Note 3) includes fees and costs which are incurred
by and paid to outside vendors. For other noncontract users, these costs would normally appear
under the "Collection System Operation and Maintenance Account" (Note 1) as established
under the Ordinance. These are not additional fees or charges that are specific to CSB/SOSB.
The "Adminstration Fee" account (Note 7) contains charges that otherwise would also appear
under "Collection System Operation and Maintenance Account" (Note 1). These are internal
expenses incurred for maintaining the administration of the sewer facility, include auditing fees,
books, accounting of charges, and billing. Again, these are items that are allowed to be billed
pursuant to the Ordinance.
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Page 3
The depreciation itemization in the billings is part of the accounts allowed by the Ordinance.
When the City was required to conform to the GASB 34 Standard, depreciation had not been
charged as an expense on the bill to CSB/SOSB. The finance staff reviewed each line item on
the depreciation table to determine if CSB/SOSB benefited from the asset. CSB/SOSB is not
charged for other infrastructure within the City or the following lift stations: DBL, CR 121 or
Northland.
The City accounting system uses a structure that includes a fund, department and object code.
The Ordinance refers to departments and says nothing about specific items within each
department. The depreciation is part of the sewer system account. It is an object code as part of
that account. The item was listed separately so that it could be balanced easily with the
depreciation tables. 1t should be pointed out that all entities in the City pay for depreciation for
the City sewer system. It seems that St. Bens has taken the position that it should not have to pay
for a portion of the sewer service it receives that all other citizens must pay for. This is not fair
and would impose an additional cost on other citizens which directly benefits CSB/SOSB.
Overpayment Issue
Since the inception of the Agreement in 1987, CSB/SOSB has been billed for sewer use at the
rate of 45% of the St. Joseph sewer use. CSB/SOSB has not objected to this unti12008.
The Sewer Use Agreement provided that CSB/SOSB was to pay a user fee of 45% of the tots]
City sewer cost, initially. The. Agreement also provided the sewage would be metered the first
two years to determine if the 45% was an accurate assessment of the amount St. Bens was
purchasing in St. Joseph's share of the St. Cloud sewer. This amount was to be readjusted in
] 989 based on metering of CSB/SOSB's use. If the use was less than 45%, CSB/SOSB's
pa}nnent would be reimbursed to the extent of use less than 45%. If the use was more than 45%,
CSB/SOSB would have to pay a surcharge.
A review of City records indicates that the sewer metering did not go as expected. The metering
took place over the first two years and was to measure sewage on a periodic basis between
September through May of each year. Based on the metering of sewage during the first two
years, it was determined that the 45% figure was accurate in terms of St. Bens' use of the overall
St. Joseph sewage use.
After metering of sewage was completed for the two years, it was decided to discontinue
measurements. The reason for this is that the process was difficult to keep in operation based on
high-maintenance needs of the operation and safety issues with respect to the manhole. The
meters required a substantial amount of maintenance to keep in operation. The metering
required atwo-person crew to be on-site during the metering. The metering required an
individual enter the manhole to retrieve data and service the meters. The sanitary sewer manhole
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by the elementary school was in extremely poor condition and it was the opinion of the engineer
that it should be reconstructed before anyone continues to enter it on a regular basis. Based on
these considerations, there was an understanding by all parties that metering would be
discontinued. Since that time, CSB/SOSB has been billed 45% of the St. Joseph sewage use and
CSB/SOSB has paid the amounts without objection, until very recently.
The Sewer Use Agreement does not support CSB/SOSB's ac•gument that it should receive
reimbursement for sewer charges for 2005-2008. The pertinent language of the Agreement reads
as follows:
...St. Benedict agrees to pay to the City a user fee as determined by this aereeme~rt and
by the Sewer Rate Ordinance...as maybe amended from time to time. The user fee
shall be computed on the volume of discharge into the system by St. Benedict as
determined b_y meterirsP, or other methods as may be mutually agreed by the
ap rties•
Subd. 7.
The Agreement does not exclusively require that the user fee be calculated by metering (the
procedure by which is fully set forth in Section 10 of the Agreement). It can be calculated by any
other method as may be agreed to by and between the parties. By acquiescing to the ongoing
method by which the City calculated the user fee for a period of more than 20 years demonstrates
the "mutual agreement" of the parties to do so.
Just as importantly, the Agreement provides:
...If volume is determined by metering, payment shall be based uaon actual discharge
levels as metered during the billing period throughout the entire year.
Subd. 7.
The requirement that St. Ben's pay for actual use only comes into play if and wizen volume is
determined by metering. There is no similar provision that St. Ben's payments be based upon
actual discharge levels if "other methods as may be mutually agreed by the parties" is
implemented. Thus, because metering was not implemented by the mutual agreement of the
parties, and some other method was mutually acquiescenced to, there is no requirement under the
Agreement that the user fee be based "upon actual discharge levels".
As indicated above, meters were not the only means by which the user fee could have been
calculated under the terms of the Agreement. They could have been calculated "by any other
means" agreed to by the parties. Here, the "other means" adopted by the parties for the last 20
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March 25, 2009
Page 5
years was to continue to charge/pay the 45% fee initially established following one year of
metered service.
Waiver by St. Bens to Claim Overpayment
Regardless of what "method" was used, there is case law which supports the proposition that
CSB/SOSB, by continuing to pay the user fee, and the City, by continuing to calculate the user
fee at 45% for the past 20 years after the meters were discontinued, without objection, supports a
modification to the contract, thereby precluding either party from now disputing the
charges/payments made. Not only is there law to support modification of the contract by past
practice over the past 20 years, there is law to support a wavier of any claim by CSB/SOSB's for
reimbursement.
If CSB/SOSB takes the position that they are entitled to reimbursement for use less than 45%,
then CSB/SOSB is also responsible for a use which is greater than 45%. The City Engineer has
reviewed the calculations made by you in your letter of January 7, 2009. In order to facilitate
this review by the City Engineer, I had requested that you provide the City with the DNR reports
for the past 20 years. You refused to provide these reports stating that reports prior to 2005 were
inaccurate for purposes of determining CSB/SOSB's percentage. You also indicated that the
DNR reports are not easy to reproduce. Nevertheless, the DNR was contacted and we obtained
these reports. The City's review of these reports casts doubt on your calculations for a
reimbursement based on your letter. of January 7, 2009.
Using the DNR reports, the City Engineer has calculated CSB/SOSB's percentage of sewer use
based on the formula which you used in your January 7, 20091etter. This calculation shows that
CSB/SOSB's percentage of sewer use was at 45% or greater prior to 2005. After 2005, the
percentage drops substantially. This does not make sense in light of the perceived increased
utilization of campus and monestery facilities.
The City Engineer's calculation of CSB/SOSB sewer percentage is as follows:
MONTH/YEAR PERCENTAGE
January/February 2000 66.6%
November/December 2000 -
January/February 2001 56.4%
November/December 2001 -
January/February 2002 56.3%
November/December 2002 -
January/February 2003 53.5%
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March 25, 2009
Page 6
November/December 2003 -
January/February 2004 44%
November/December 2004 -
January/February 2005 38%
November/December 2005 -
January/February 2006 34.1
November/December 2006 -
January/February 2007 40.1
November/December 2007
32.5%
A review of the DNR data and computation of the percentage to CSB/SOSB's use from 2000
through 2008 raises concerns about your analysis. First, you simply disregard any percentage
prior to 2005 on the grounds that the metering system was inadequate. You provide no support
for this. Based on the City Engineer's review of the data, there are questions about the validity
of data from 2005 through the present. There has been no agreement that the water use was to
determine the amount of sewer charges. If there is to be some agreement on water use
measurements in the future, both parties will have to agree as to what months will be used and
the type of monitoring devices to be employed.
In conclusions, the City believes that it is entitled to the amounts it has billed CSB/SOSB based
on the 45% formula over the past 20 years. CSB/SOSB has acquiesced in this method of billing
and has paid these amounts up through 2007 without objection. The City believes that it is in
everyone's best interest that the 45% formula be utilized at least until a new agreement is entered
into.
RENEGOTIATION OF THE AGREEMENT
The City is not adverse to renegotiating the Agreement and in fact recommends that CSB/SOSB
and the City negotiate a new method of billing as soon as possible to resolve these issues. The
City is willing to treat CSB/SOSB either as a commercial user under the Ordinance, or enter into
a new agreement. However, under either method, the City and CSB/SOSB will have to agree on
an appropriate system of metering water usage at CSB/SOSB. The months of metering must be
determined, the type of water metering system must be determined, and the location of the
meters must be determined. Until a new agreement is worked out, it is the City's position that
CSB/SOSB is responsible for the past unpaid billings made by the City to CSB/SOSB.
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Page 7
PAST DUE PAYMENTS
The City has not received payment on the sewer use fees from CSB/SOSB for the years 2007
and 2008. The City Administrator has contacted CSB/SOSB about the matter. Representatives
from CSB/SOSB have indicated that the bills would be paid.
During the last City audit, the City Auditor raised concern about the fact that these bills were not
paid. Also, all other residents of the City receive a 5.5% interest charge per month for all bills
that are not paid within one month.
Accordingly, if arrangements are not made by May 1, 2009, to pay the sewer use charges for
2007 and 2008, the City will assess a 5.5% late fee per month for these unpaid bills. This would
be the same late fee that is assessed to all other .sewer users within the City.
After reviewing this matter with your clients, we should discuss methods of resolving the various
issues raised in your letter of January 7, 2009 and the City's response.
I look forward to discussing this matter with you.
Sincerely,
RAJKOW HANS EIE LTD.
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By
Th as G. Jo o
TGJ/baw
Judy Weyrens
Randy Sabart
Terry Thene
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A."1'TOP.N EYS A7' L A\~
KEVIN J. HUGHES
THOMAS E. MATHL'\VS
JOHN 1.. GREER
1AMes EA. N10ItILI(vHAN
April 8, 2009
Thomas G. Jovanovich
Rajkowski Hans~neier, Lid.
Daniel Building
11 Seventh Avenue North
P.O. Box 1433
St. Cloud, MN 56302-1433
RE: College of Saint Benedict - City of St. Joseph
Sewer Charges
Our File No.': 103-00040
Dear Thomas:
As I mentioned to you on the telephone yesterday, I will be meeting next week with
representatives of the College and the Sisters. I have asked the College to review the water
production information that you have provided in your recent cor•espondence. Our consultant,
Milce Benusa, is not able to be of assistance until after the close of the tax filing season.
I have reviewed the request for information that was made from the early start of this matter.
What has not yet been produced are the audit financial statements of the sewer account (or
enterprise account) for aII years tinder review (i )87 to the present). This request was first made
u1 my correspondence to you dated February 20, 2008. In addition, Mike Benusa sought these
statements when he visited the City's office in June 2008.
Please provide these statements at the earliest opportunity. If the City is not able to locate the
items, I gum certain that its auditor would have copies.
Very__truly yours,
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Thomas E. Mathews
Enclosures
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$-~t,.l~: artorneysC~hughesmuhe~.5.com • w~nv.lnlghesmathews.cora
TELEPHONL: X20.251.4399 • F:~\: 320.251.5731
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1 i 7th Avenue North
P.O. Box 1433
St. Cloud, MN 56302
Apri19, 2009
320.251.1055
800.445.9617 toll-free VIA EMAIL AND REGULAR MAIL
320251.5896 fax
Mr. Thomas E. Mathews
www.rajhan.com Attorney at Law
110 Sixth Avenue South
Suite 200
1'.O. Box 548
St. Cloud, MN 56302-0548
RE: College of Saint Benedict
City of St. Joseph
Sewer Charges
Your File No. 103-00040
Dear Mr. Mathews:
Thomas G. Jovanovich
tiovanovich(c~raihan.com
I am in receipt of your letter, dated Apri18, 2009. I Have called the City and
inquired about the audited financial statements of the sewer account for the years
1987 to the present.
The City will have available for inspection all audited financial statements from
1987 to the present at 9:00 a.m. on Monday, April 13, 2009. We understand that
you may not be able to inspect the audited financial statements on April 13, 2009,
however, please notify Judy Weyrens as to when }you will have someone review
the audited financial statements and determine what information you want from
them. The City will then make copies of any pages of the statements you request
at a cost of 5.25 per page.
If you have any questions, please advise.
Sincerely,
RAJKOW HANS EIER~ LTD.
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c. Judy Weyrens
ATTORNEYS A T L A W
January 7, 2008
City of St. Joseph
Attn: Judy Weyrens
25 College Avenue North
St. Joseph, MN 56374
RE: College of Saint Benedict
Sewer Charges
Our File No.: 103-00040
Dear Judy:
KEVIN J. HUGHES
THOMAS E. MATIIEWS
PAUI. R. HARRIS
]ACQUEUNE M.SCHUH
JOHN 1.. GREER
I have been asked by the College of Saint Benedict to review the sewer charges for payments
made in 2005, 2006, and 2007. In addition, I will review charges to be paid in 2008.
As of this date I have reviewed the following items:
1. Statements and invoices from the City dated Apri15, 2005, 1/17/2006, and
2/27/2007.
2. Report to St. Benedict's, disbursements and back-up accounts, for the periods of
December 2005 and December 2006.
3. The Sewer Construction and Use Agreement between the City and CSB dated
April 16, 1987.
4. City of St. Joseph, Ordinance 43, Sewer Rate Ordinance.
5. City of St. Joseph Comprehensive Plan, 2002, Chapter 7, Public Utilities: Sewer.
It is my understanding that CSB would be considered a "contract" user under the terms of the
City's ordinances. 1 am not aware of any agreement or contract between the City and CSB other
than the 1987 agreement, identified above as item 3. If there is any agreement currently in place
regarding sewer usage with CSB, please provide me with a copy. RECEIVEp
JAN 0 8 2008
1 10 SIXTH AVENUE SOUTH, $UTTE 200 • P.O. Box 548 • $T. CLOUD, MINNES07A 56302-0548 ^~~ 'l
E.-Mw,c attorneys~hughesmathews.com • www.hughesmathews.com V r~r - . ,. ,_ _
TELEPHONE: 320.251.4399 • Fax: 320.251.5781
City of St. Joseph
Attn: Judy Weyrens
January 7, 2008
Page 2
The City has invoiced CSB for sewer charges on the basis of a cumulative total for seven
separate items:
Item 1: Collection system operation & maintenance.
Item 2: Plant operation & maintenance.
Item 3: Administration & general.
Item 4: St. Cloud operation/St. Joseph user fees.
Item S: Equipment replacement.
Item 6: Depreciation.
Item 7: Administration fee.
Items 2, 3, 4, 6, and 7 are assessed to CSB at a rate of 45%; Item 1 at 5%, and Item 5 at a flat
rate.
The Sewer Service Fund is made up of following accounts (established by ordinance Sec. 43.04):
Item A: St. Cloud Cost Account.
Item B: Plant operation and maintenance account.
Item C: Equipment replacement account.
Item D: Collection system operation and maintenance account.
Item E: Debt Service Account.
Item F: Capital Improvement Account.
The back-up to the CSB invoices does not match the accounts that are required by the ordinance.
Item 3 (administration & general), Item 6 (Depreciation), and Item 7 (Administration fee) are
charged to CSB and not part of the Sewer System Fund. Please provide an explanation.
Ordinance 43.03, subd. 2 and subd. 4 provides for the determination of plant operation, St. Cloud
fee and collection system and how those are billed to contract users. The City's invoices to CSB
do not appear to be in compliance with this procedure. Please provide an explanation.
Ordinance 43.02, subd. 6 requires that the Sewer Charge System shall be adopted by resolution
of the City and shall be published. Contract users are not treated differently than general users.
Please provide a copy of the charges as established by city resolution.
Ordinance 43.02, subd. 2 requires that the operation and maintenance, replacement, and St.
Cloud fee for normal domestic users be established on proportionate basis. Section 43.05
requires the council to make a determination that the charges are distributed proportionately.
Section 43.02, subd. 1 requires that the cost of constructing and operating the system be
established on an equitable basis.
City of St. Joseph
Attn: Judy Weyrens
January 7, 2008
Page 3
CSB does not believe that the sewer charges are being assessed to it on a proportionate or
equitable basis. Since 1987 CSB has been allocated 45% of certain major costs. There has been
no analysis or study or back-up of such percentage. That amount was established in 1987
principally to address the capital cost identified in that agreement. There are many provisions in
the 1987 that appear to be changed by operation of the city's services. Fvr instance, if the City
creates new accounts, the parties agree to negotiate an equitable contribution, see page 7. See
also page 5:
... St. Benedict agrees to pay to the City a user fee as determined by
this agreement and by the Sewer Rate Ordinance of the City of St.
Joseph as maybe amended from time to time. The user fee shall be
computed on the volume of discharge into the system by St. Benedict
as determined by metering, or other methods as may be mutually
agreed by the parties.
At this point, I have no evidence of any mutual agreement other than the 1987 agreement. If you
have any evidence of any agreement with CSB regarding charges, please provide a copy of such.
It appears that the chazges have been made by the city without agreement of CSB. Also, it
appears that the charges do not comply with the city's policies.
The 2002 comprehensive plan states that as of July 2002, the City provided service to 1,111
accounts, of which 83 were commerciaUindustrial customers. Please provide the number of
current accounts and the number of eommercial/industrial customers. Please also provide the
names of those customers that are contract users. For each contract user please provide a copy of
the invoice or assessment of the sewer charge for the current year.
CSB and the monastery do wish and intend to pay the City for their appropriate fee for the sewer
services. From the information that is currently available, the fee is based on the 1987 document
and is not properly assessed according to the City's ordinances and policies. CSB will withhold
making any future payments for sewer services until it can be assured that the charges are
appropriate.
Very truly yours, ~ c
Z
Thomas E. Mathews
cc: Anne Oberman, Controller, CSB
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F:tC[JEM11o)ioooao S~vcr Uti111YChps•S1Ja~mn10t010TC.itY Of Sy Jce•Iao.xgfd
RECEIVED
7 Rajkowski
r Hansmeier Ltd.
t t Seventh Avenue North AT fORNEyS Al LAW
P.O. Box 1433
St. Cloud, MN 56302-1433
January 18, 2008
3zo-zst-toss
Tol! Free 800-445-9617 Mr. Thomas E. Mathews
Attorney at Law
Fax 3zo-zst-sB96 110 Sixth Avenue South
Suite 200
P.O. Box 548
rajhan@rajhan.com $t. Cloud, MN 56302-0548
www.rajtran.com
RE: .College of Saint Benedict
City of St. Joseph
Sewer Charges -
Your File No. 103-00040
JAN 2 2 2008
CITY OF ST. JGSEPH
Dear Mr. Mathews:
Frank 1. Rajkowski "'
I received a copy of your January 7, 2008, letter addressed to Judy Weyrens concerning
Gordon H. Hansmeier your audit of the sewer charges incurred by the College of Saint Benedicts in 2005, 2006,
Thomas G. Jovanovich` and 2007.
Paul A. Rajkowski'
To Ms. Weyrens' knowledge, there is no written modification to the Sewer Construction
Kevin F. Gray and Use Agreement dated April 16, 1987. CSB is considered a "contract user" under the
William J. Cashman terms of the Ordinance.
Richard W. Sobalvarro
The "Administration and General" (item 3) account includes fees and costs which are
I.eAnne D. Miller incurred by and paid to outside vendors. For other non-contract users, these cost would
Peter J. Fuchsteiner normally appear under the "Collection System Operation and Maintenance Account"
(Item D) as established under the Ordinance. They are not additional fees or charges that
Susan M. Dege are specific to CSB. The "Administration Fee" account (Item 7) contain charges that
Sarah L. Smith-Larkin' otherwise would also appear under "Collection System Operation and Maintenance
Account" (Item "D). These are internal expenses incurred for maintaining the
Troy A. Poetz administration of the sewer facility. This would inciude auditing fees, books, accounting
Gregory J. Ilaupert of charges, billing and the like.
Jason T. Brelto
The accounts listed on CSB's billing invoices are different only in name, not in
Matthew W. Moehrle substance. They were created 20 years ago under the Sewer Construction and Use
Melissia R. Christianson Agreement. After the Sewer Rate Ordinance was enacted on January 1, 2005, the City
continued to maintain the same accounting methods and "accounts" when billing CSB so
Kristi D. Stanislawski as to maintain consistency and to provide a more detailed breakdown of the charges. The
Lori L Athmann
Eric 5. Oelrich
frank 1. Rajkowski andJason L Brelto are admitted to practice in North Dakofa, Gordon H. Hansmeier in NoRh Dakota, South Dakota and Wisconsin,
Paul A. Rajkowski and Sarah L. Smith-Larkin in Wisconsin, Willian;l. Cashman in South Dakota, Richard W Sobalvarro in North Dakota and South Dakota,
and Melissia Christianson in Wisconsin and Michigan.
Mr. Thomas E. Mathews
January l 8, 2008
Page 2 of 4
City is providing more detailed billing information to CSB than that which is required under the
Ordinance. The City views this as a benefit to the CSB.
CSB can fall into one of two categories under the Sewer Rate Ordinance. A general user or a
contract user. The Sewer Construction and Use Agreement of 1987 clearly places CSB into the
category of a contract user. As such, any provisions contained in the ordinance relative to general
users simply do not apply.
Under 43.03, Subds. 2 and 4 of the Ordinance, there exists a three step method for determining the
plant operation, St. Cloud fee and collection system charges. However, the Ordinance specif cally
provides that all users shall be considered General Users unless the City Council has determined
that a particular use should be subject to a separate agreement. It essence, this provision removes
those users that are. "subject to a separate agreement with the City". CSB is one of those such users.
The costs are determined based on the ternis of the parties' agreement, not the Ordinance.
Under 43.02, Subd. 6, the City is required to adopt by resolution and publish in the official
newspaper, any subsequent changes in the rate of charges. The City has fully complied with this
provision. The Ordinance does not require that it adopt or publish rates which are not governed by
Ordinance, but rather by Contract. Contrary to your assertion, CSB is to be treated differently than
residential and general users. Its usage rate is not controlled by the Ordinance, but rather by the
terms of their agreement with the City. If CSB is to be treated the same under the ordinance as you
contend, then the 1987 contract would be obsolete. There is no basis upon which to argue that the
terms of the contract between CSB and the City is void or otherwise unenforceable.
Finally, 43.02, Subd. 2, requires that the operation and maintenance, replacement, and St. Cloud
fees be established on a proportionate basis. When the 1987 agreement was entered into, it was
agreed that meters would be installed and used for a period of two years to determine the actual
usage for CSB. After one year, it was determined by both the City and CSB that the meters were
not working. The results of the meters for the first one year period, however, demonstrated that the
45 percent agreed upon usage rate was in line with the actual usage. Currently, there is no way to
determine the actual usage by CBS. Approximately one month ago, the City met with
representatives of CSB to discuss this precise issue. It was acknowledged by both the City and CSB
that the cost of installing meters at this point would not be feasible. The estimated cost of so doing
exceeded $100,000.00 and required modification to the manholes.
CSB expresses its desire to be charged on the same basis as residents -contrary to the agreement it
entered into and by which it is currently bound. Specifically, CSB proposes that its usage be based
upon its daily pumping records. As the City has repeatedly indicated, using such records will not
represent accurate and actual usage by CSB. -They do not take into account such variables as water
leaks or spills, which can be significant.
Mr. Thomas E. Mathews
January l 8, 2008
Page 3 of 4
By even entertaining CSB's request to be treated as a resident or general user under the Ordinance
reveals that it will produce little, if any, difference. Residents and general users who are billed on a
consumption basis are charged an additional $3.00 per month for each writ. This fee makes up a
portion of the variables described above. These consumption based customers include rental
housing and apartment complexes who are billed an additional $3.00 per month for each and every
living unit contained within the apartment complex. Each resident, in a sense, is billed this fee.
CSB would be treated no differently under this scenario. SCB cannot argue that it should be treated
as a resident as if there is no written agreement, and yet claim it should not be subject to the $3.00
fee, tike everyone else, because of this same agreement.
In comparing the current 45 percent proportionate fee as established by the contract with the actual
consumption based upon pumping records, there does not appear to be any significant difference in
the amount CSB would pay. For example, in 2005, CSB paid $174,209.55 under the contract. By
treating CSB like all other users (including multiple housing units/apartment complexes) and basing
the fee on actual consumption, along with the monthly $3.00 fee, would have resulted in a cost of
$167,819.94, or about $6,400.00 less. These calculations are based on there being 1,500 living
units at the college, which is believed to be quite conservative. It is more likely that the units are
closer to 2,000.
CSB is the only contract user. Currently, there are 1,435 sewer accounts, of which 93 commercial
and 6 industrial customers.
Finally, you indicate that it appears that charges have been made by the city without the agreement
of CSB, and that the charges do not comply with the city's policies. The agreement specifically
states that CSB will pay the percentage of the project costs. You give no indication or description
of what charges CSB is claiming to have been charged without its agreement. The City is unable to
respond to such a blanket claim. If there is any particular charge which CSB is concerned, please
let the know and I will attempt to obtain information to respond to such concern.
The majority of the issues raised in your letter stein frotn bouncing between the Contract and
Ordinance, depending upon which scenario best accommodates CSB. The written agreement
controls.
Mr. Thornas E. Mathews
January 18, 2008
Page 4 of 4
If you have any questions or concerns, or wish to discuss this matter further, please let me know.
Sincerely,
RAJKOW HA1)1~I~fI IER LTD
By: / :~^
Thomas G. J9vano ich
By:
LLA
C: Ms. Judy Weyrens
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