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Elbridge, Village of - Decision, November 22, 1994

Decision, November 22, 1994

STATE OF NEW YORK : DEPARTMENT OF ENVIRONMENTAL CONSERVATION
50 Wolf Road
Albany, New York 12233-1550 In the Matter of

the Application of the

VILLAGE OF ELBRIDGE

for the Fixation of Water Rates

WATER SUPPLY APPLICATION NO. 9039

DECISION

November, 1994

Decision of the Commissioner

Pursuant to Environmental Conservation Law ("ECL") Parts 601, 602 and 603 Honorable Timothy S. Ganey, Mayor of the Village of Elbridge ("Elbridge"), by petition dated August 25, 1993 requested the Department of Environmental Conservation ("DEC") to fix a fair and reasonable water rate to be paid to Elbridge by the Village of Jordan ("Jordan") for the transmission of water from the City of Syracuse transmission line from Skaneateles Lake through Elbridge transmission lines to Jordan.

A hearing was convened before Administrative Law Judge ("ALJ") John H. Owen on April 27, 1994 at which Elbridge appeared by Edward W. Lavery, Esq. of Lavery & Lavery of Skaneateles, New York. Jordan appeared by Douglas H. Young, Esq. of Melvin & Melvin of Syracuse, New York, and the DEC appeared by Ms. Joanne L. March, Senior Environmental Analyst of DEC's Region 7 Staff at Syracuse, New York.

Upon review of the attached hearing report of ALJ Owen, I adopt its findings of fact and recommendations. I conclude that his recommendations concerning which costs should be incorporated in the water rate, the allocation of these costs and the methodology for calculating the rate are reasonable and result in a fair and reasonable charge. Selected issues of importance are addressed more fully below.

Jordan contended in this matter that the water system was overbuilt and that major portions of it were unnecessary. ALJ Owen cited in full a prior 1976 Commissioner's Decision which found that the entire system was needed. Once that determination was made and capital costs incurred in reliance thereon, the intended beneficiary is obligated to pay for its ratable share of those costs regardless of whether the projections upon which the determination of system needs was made are borne out in fact. If Jordan was of the view that some portion of the system was unnecessary to supply its needs, it should have made and supported that claim in the context of the review of the water supply permit application, not now.

The rate that is established as a result of this proceeding cannot be made retroactive to prior years that are governed by a contract between the two villages. Further any disputes over payment under a prior rate schedule is a matter of contract between the two villages. As such, it is beyond the jurisdiction of the Department to resolve them.

NOW, THEREFORE, having considered this matter and being duly advised it is DECIDED that: a fair and reasonable charge by the Village of Elbridge to the Village of Jordan for the 1990-1995 period shall be 3.5 cents per 100 cubic feet of water.

IN WITNESS WHEREOF, the Department of Environmental Conservation has caused this Decision to be signed and issued and has filed the same with all maps, plans, reports, and other papers relating thereto in its office in the County of Albany, New York this day of November, 1994.

New York State Department of Environmental Conservation
____________/s/____________
LANGDON MARSH, COMMISSIONER

TO: The Honorable Timothy Ganey
Mayor
Village of Elbridge
210 West Main Street
Box 267
Elbridge, NY 13060

The Honorable Richard Platten
Mayor
Village of Jordan
Village Hall
Jordan, NY 13080

Edward W. Lavery, Esq.
Lavery & Lavery
13 East Genesee Street
P. O. Box 104
Skaneateles, NY 13152-0104

Douglas H. Young, Esq.
Melvin & Melvin
220 S. Warren Street, 7th Floor
Syracuse, NY 13202-1686

Ms. Joanne L. March
Division of Regulatory Affairs
Region 7, NYSDEC
615 Erie Boulevard West
Syracuse, NY 13204-7400

STATE OF NEW YORK DEPARTMENT OF ENVIRONMENTAL CONSERVATION
50 Wolf Road
Albany, New York 12233-1550 In the Matter of

the Application of the

VILLAGE OF ELBRIDGE

for the Fixation of Water Rates

water supply Application No. 9039

HEARING REPORT

- by -

____________/s/____________
John H. Owen
Administrative Law Judge

Summary

This proceeding basically concerns determining 1) what portions of the overall water system are necessary to transmit through the Village of Elbridge ("Elbridge") to the Village of Jordan ("Jordan") all of the water to which Jordan is entitled, and 2) what is a fair and reasonable water rate to be paid by Jordan to Elbridge.

Based upon the evidence adduced at the hearing in this matter, I have concluded: 1) that the entire overall water system is necessary; and 2) that a fair and reasonable water rate is 3.5 cents per 100 cubic feet of water.

Proceedings

Pursuant to the Environmental Conservation Law ("ECL"), Parts 601, 602 and 603, Honorable Timothy S. Ganey, Mayor of Elbridge, by petition dated August 25, 1993 requested the Department of Environmental Conservation ("DEC") to fix the water rate to be paid to Elbridge by Jordan for the transmission of water from the City of Syracuse transmission line from Skaneateles Lake through Elbridge transmission lines to Jordan. Thereafter, a Notice of Public Hearing dated January 7, 1994 was issued and was published in both the DEC's Environmental Notice Bulletin, issue of January 12, 1994, and The Post-Standard newspaper of Syracuse on January 18, 1994. By answer to the petition undated and received in the DEC's Office of Hearings on February 14, 1994, Jordan objected, among other things, that Elbridge's petition did not comply with the applicable rules of the DEC. By amended petition verified February 9, 1994 Elbridge satisfied Jordan's concerns as to the rules.

The Notice of Hearing had set a public hearing upon the application for 10:00 A.M. February 23, 1994 in the Elbridge Village Fire Hall, 275 East Main Street, Elbridge, New York 13060. At the public hearing no oral or written comments upon the application were voiced or submitted. The Notice of Public Hearing also gave notice that an Issues Conference would be held at 11:00 A.M. upon the same date and at the same place both to define any issues for adjudication and to receive petitions for party status from interested parties. The Issues Conference was held as scheduled at which no petitions for party status were received and thereupon the Issues Conference was concluded to abide the issuance of a Ruling on Issues for Adjudication.

The Ruling on Issues for Adjudication was thereafter issued on March 10, 1994 and specified the issues for adjudication and set an adjudicatory hearing for 10:00 A.M. April 12, 1994 and day to day thereafter at the Elbridge Village Fire Hall. Following a request for adjournment by Jordan the hearing date was changed to April 27, 1994 with the assent of all parties and counsel.

The hearing was convened before Administrative Law Judge ("ALJ") John H. Owen on April 27, 1994 at which Elbridge appeared by Edward W. Lavery, Esq. of Lavery & Lavery of Skaneateles, New York. Jordan appeared by Douglas H. Young, Esq. of Melvin & Melvin of Syracuse, New York, and the DEC appeared by Ms. Joanne L. March, Senior Environmental Analyst of DEC's Region 7 Staff at Syracuse, New York. The hearing proceeded on April 27, 28, 29 and May 3, 1994. Elbridge called as witnesses Janette Horner, Elbridge Village Clerk/Treasurer, Carol Gassler, former Elbridge Village Trustee, Frederick H. Weisskoph, former Elbridge Trustee, Thomas King, Elbridge Department of Public Works, and Laurence W. Wormald, a Professional Engineer with Barton & Loguidice of Syracuse, New York. Jordan called as witnesses Frederick DiRisio, Jordan Superintendent of Public Works, The Honorable Richard Platten, Mayor of the Village of Jordan, and C. William Dunn, a Professional Engineer self-employed at Manlius, New York. Some 24 Exhibits were received in evidence. The hearing record closed upon receipt of the last of the parties' post-hearing memoranda on October 3, 1994.

The issues ruling specified issues for adjudication in three general categories:

1) what equipment and fixtures were necessary to transmit an adequate supply of water to Jordan;

2) what operation and maintenance (O&M) costs should be included and to what extent in the water rate computation; and

3) whether the contract between Elbridge and Jordan provided for retroactive fixation of the water rate for the 1986-90 period or only for the current period of 1990-95.

Description of the Water System

Attached to this report as Appendix A is a copy of a portion of a June, 1980 map entitled "Village of Elbridge Transmission System, General Plan", which was prepared by Barton, Brown, Clyde and Loguidice, P.C. and which was received in evidence as Exhibit No. 2.

The Village of Elbridge takes water from the City of Syracuse conduits which carry water from Skaneateles Lake to the City of Syracuse. Water from the Syracuse conduits flows generally north along Kingston Road through a 6" main installed in 1932 and a 16" main installed in 1977. The 6" main runs along Kingston Road to the intersection of West Main Street where it is connected to a 6" main and an 8" main which carry water west along West Main Street. The 16" main runs along Kingston Road to the intersection of Gorham Road where it is connected to a 12" main which runs west along Gorham Road and then north along Vinegar Hill Road. The 12" main is connected to a 6" main which was built in 1932 and a 10" main which was built in 1977. These two mains run north on Vinegar Hill Road to West Main Street where they are connected to the 6" main and the 8" main which run westerly along West Main Street. These two mains continue west to the Village of Jordan meter pit. A 10" main extends north from West Main Street to the Elbridge water tank.

The Village of Jordan is located northwest of Elbridge and takes water from the Village of Elbridge system through a 6" main which runs from the Village of Jordan meter pit westerly along West Main Street and then northerly along Hamilton Road to Jordan. The Village of Jordan also takes water through another main (diameter unspecified) which is connected to the Village of Elbridge system south of the Elbridge water tank.

Details of the Dispute

Elbridge has requested the rate hearing because of disputes raised by Jordan protesting payments for water it has used. Elbridge must show that its lines are necessary parts of its water system and that it is entitled to the costs incurred when transmitting this water. Jordan must show that portions of the water system should not be considered in the rate. Jordan has claimed throughout that certain major portions of the overall water system should be eliminated because they were providing water to the Elbridge homes and businesses and were not necessary to transmit an adequate supply of water to Jordan. Elbridge maintained that overall the system was designed and constructed to provide the maximum supply that Jordan could demand at any time (for major fires or other needs) as well as to supply Elbridge with adequate water.

Jordan also claims that population forecasts used to construct these conveyances were in error and, since the population has not met the forecast, there is no need for these portions of the water distribution system.

As to O&M costs, Jordan claimed that many of the expenses that Elbridge was seeking to include in the rate computation should not be included or were overstated.

Elbridge asserted that as a matter of the 1985 contract between Elbridge and Jordan and a 1986 amendment to it, as well as upon equitable grounds, Elbridge was entitled to have an increased rate fixed retroactively for the 1985-90 period as well as a current rate for the period of 1990-95. Jordan maintains that the contract and its amendment do control but do not provide for any retroactive fixation of the rate, that any inequity in the rate for any given period is to be addressed only in the negotiation or fixation of the rate for the succeeding period, and that where there is a clear and fair contract equitable considerations are not properly given any effect.

Discussion of the Water System, Population Forecasts, Back-Up Functions, and Bond Payments

As noted before, Jordan contends that the 6" water main or line"Original 6" Transmission main-1932" known as the "Kingston line" and as shown upon a "Village of Elbridge Water Transmission System, General Plan", Barton Brown Clyde and Loguidice, P.C., June 1980," Exhibit 2 marked at the issues conference and received in evidence at the hearing. and the 0.2M.G water tank located on Science Hill in or near Elbridge should not be considered in the rate computation because these conveyances are not needed to supply water to Jordan. In addition, they claim that the increase in population forecasted never materialized and therefore the system is overbuilt and major portions of it not needed. Each of these are discussed further below.

The 6" Line

A Decision of the Commissioner dated March 11, 1976,"In the Matter of the application of the Village of Elbridge for the approval of its financial and engineering plans for the construction of a water transmission line", DEC Project No. 730-07-0050"A", Water Supply Application No. 6499, Stream Protection Application No. 730-07-0050"B", Third Application. contained a Finding of Fact, Number 3, which reads as follows:

"3. The proposed project consists of the construction of a water supply pipeline extending from existing Conduit No. 1 of the City of Syracuse (Skaneateles Lake supply) located in the Town of Elbridge to the existing Elbridge system. The project will supplement the supply of water provided by an existing 6 inch diameter pipeline."

The Water Tank

The short answer to whether the water tank is part and parcel of the overall transmission system is also found in the Decision of the Commissioner.

In the "General" section, pages 7 and 8, of that Decision, the following appears:

"...

6. The existing and proposed water system is physically one system...

...

23. In view of the above Conclusions, it is recommended that the project be approved as modified by the following conditions:

A. The Applicant [Elbridge] is authorized to take up to a daily average of 0.77 mgd MGD means million gallons per day. and up to a total peak day demand of 1.39 mgd from the outlet conduits owned by the City of Syracuse.

...

I. In order to meet the water supply needs of the Village of Jordan, the Village of Elbridge shall provide, at the point of connection with the Jordan water system, a supply of water at an average rate of 0.37 mgd and at a peak demand rate of 0.67 mgd."

The import of the Commissioner's decision is that Elbridge has been directed and Jordan has been authorized to take a water supply of up to 0.67 mgd. The overall water system was designed and constructed to produce this supply of water and both the 6" line and the water tank are necessary to bring about this supply for Jordan and as well to satisfy Elbridge's needs.

Population Forecast

Jordan maintains that past population forecasts were in error by concluding that the number of residences of the two Villages and others entitled to water from the system would vastly increase in the period after 1976. The population never increased as forecasted and therefore, according to Jordan, the 6" line and water tank are not needed.

The fact that the demographers were wrong and that the peak demand is not being reached does not change the situation. Even though a substantial increase in population is unlikely before 1996, the end of the current period, that does not mean that it could not take place in the future. It would not make any sense to allow major portions of the overall system to be dismantled or deteriorate from lack of use and then later to bring them back on line.

Back-Up Functions

Quite apart from the Commissioner's decision and Jordan's right to demand at any time up to 0.67 mgd, Jordan's engineer conceded not only that a break in the 12" Gorham Road main would leave the 6" Kingston Road main as the only means to supply Elbridge or Jordan with any water but also that more and more breaks in the 17 year old Gorham Road line were likely as time goes on.

Jordan's engineer who stated that the 6" Kingston Road line and the West Main Street 6" and 8" lines were not at all necessary to transmit water to Jordan also stated, when discussing a certain pressure-reducing valve, that if that valve was not in place the houses further down the flow line, experiencing excessive pressure, would need "back-flow preventors" to prevent plumbing leaks and damage. Yet it is clear that back-flow preventors are designed to prevent back-flow from the homes or other structures into the mains, that back-flow preventors do not work in the other direction, and for that reason can have no effect against excessive pressure coming through the main toward the houses or other structures.

It is also significant that it was Jordan's engineer who designed the water transmission system from the Elbridge connections to Jordan which has dual mains, serving much the same function that Elbridge's Gorham Road-Vinegar Hill Road 12" main and the Kingston Road-West Main Street 6" and 8" mains serve.

Bond Payments

Lastly concerning what is necessary to transmit water to Jordan, both Jordan and Elbridge relied upon each other to pay the design and construction bond costs for the systems and Elbridge relied upon obtaining a fair and reasonable water rate payment from Jordan to offset somewhat its bond cost. For Jordan to come now, almost 20 years later, and seek to eliminate major portions of the system from the rate computation is so unfair as to border upon the absurd.

The O&M Components That Should Be Included In The Water Rate Computation And To What Extent

The issues ruling found that the following water rate components should be dealt with and allocated to transmission costs:

1. Salary and any expenses of any Trustee of Elbridge.

2. Salary and any expenses of the Elbridge Village Clerk.

3. Salary and any expenses of the Public Works Officer(s) of Elbridge.

4. Insurance costs.

5. The cost of legal services.

6. The cost of engineering services.

7. Maintenance costs.

8. Repair costs.

Both Elbridge and Jordan used the same categories of expenses. There is no dispute over Elbridge's actual expenses; rather the dispute is over the designation as and/or the allocation to transmission expenses.

The categories are:

ACCOUNT CODE ELIGIBLE ACCOUNT
1 PAYROLL
KING: TOTAL WAGES
ONE TRUSTEE
MAYOR
CLERK
FRINGE BENEFITS 25% OF AB
2 UTILITIES(100%) NY TEL & NYSEG 6/85-11/86
2.1 NY TEL 12/86 TO PRESENT
2.2 NYSEG 12/86 TO PRESENT
2.3 WATER FOR MUNICIPAL BLDG.
3 OFFICE EXPENSES
4 INSURANCE (PD. BY GENERAL FD)
5 WATER BILLING EXPENSES
6 TRAVEL (INC. SAMPLES TO SK)
8 TAXES
10.1 ENG'G/LEGAL: TRANSMISSION
12 TRANS. LINE & EQUIP REPAIRS
13 VEHICLE & EQUIP MAIN (100)
13.1 GASOLINE (100%)
13.2 VEHICLE PURCHASE (100%)
13.3 REPAIR & MAINTENANCE (100%)
13.4 MISCELLANEOUS

The agreed method of computation of the rate is to add, for a particular year, all of the expenses allocated to transmission (to Jordan as contrasted to distribution within Elbridge) and then divide that total by Jordan's total yearly purchase times 100 cubic feet.

In fixing the recommended water rate the method will be to rule on the designation as and/or allocation to transmission and then plug in those adjusted figures and re-calculate using the yearly rates the above method, and then determine a single rate.

Acct. 1 - Payroll

King

There is no reason to set out the amount of expenses, here salary, since these are agreed and will appear in the computation chart attached to this Report as Appendix B.

Thomas King was a part-time Elbridge laborer in 1985-86 rising in 1987-88 to full-time and in effect Elbridge's entire Department of Public Works.

King has many tasks concerning the water system in the Elbridge area, sometimes assisted by employees from Jordan. King's tasks include reading the master meter and Jordan meters to check on consumption, leak detection, adjusting valves, flushing hydrants, taking turbidity and chlorine samples, maintaining the system, repairing breaks, reading home meters, making bacterial checks for the Onondaga County Health Department, and purchasing supplies.

Elbridge claims that 20% of his salary should be allocated to transmission when he was part-time and 10% after he became full-time, with Jordan saying it should be 4% for both periods.

King performed many tasks for Elbridge not related to the water system and some of his water system-related work, for example, reading home meters, solely concerned distribution rather than transmission.

Elbridge kept no time records of Mr. King's activities and the estimate above is based upon Mr. King's recollection, dating back to 1985. I attribute some weight to his testimony however because of his demeanor. Jordan however, did not present substantive evidence supporting its 4% estimate. Rather, they simply attempted to show that King was exaggerating his time spent on transmission work.

It is difficult to accurately predict the just and equitable allocation based upon this qualitative information, largely unsupported with any quantitative information except for Mr. King's recollection of the time he spent working on portions of the system. In addition, Mr. King's intimate knowledge of the complete water system leads me to place more reliance upon his testimony than upon what Jordan requests. Moreover, Jordan offered no substantive information to detract in any large way from Mr. King's testimony. Nonetheless, I have reduced some of the allocation because of the reasons stated above. On balance and from all that appears, King's salary should be allocated 12% when he was part-time because most of his duties were on the complete water system and 6% when he became full-time since he had other competing duties in addition to his water system responsibilities, with 6% of a 40 hour week being a 2.4 hours per week average.

One Trustee

Trustee Carol Gassler was on Elbridge's Water Committee and Trustee Frederick Weisskoph was also on that Committee and worked with King. Gassler served during the entire 1985-90 period and Weisskoph, who also owned a hardware store, served about two years during this period.

A Trustee has no set hours of service and here the parties lumped the two trustees together as one.

Gassler attended extended negotiation sessions with Jordan and Weisskoph was at the site of water main breaks, he inspected valves, aided in obtaining repair parts and so forth.

Neither Gassler nor Weisskoph kept any records in any way speaking to the time they spent on transmission matters and, even if they had, we would also have to know what percentage this was of their total time serving Elbridge in any given period. There is no quantitative evidence to support the parties' estimates, Elbridge 10% and Jordan 2%, each for the entire period.

It is difficult to make an allocation here in the absence of any objective evidence; yet one must be made. Since it appears that it should be much less than 10% but much more than 2%, so it is 6% for the entire period. This is fair given their recollection and their demeanor. Jordan, however, did not support its 2% estimate with any significant information.

Mayor

Elbridge Mayor Ganey did not testify as to his involvement and there are no time records or other quantitative information to help set an allocation. Instead the record consists solely of estimates formulated for the litigation.

Elbridge estimates the allocation to be 5% and Jordan estimates it to be 2%.

Since the Mayor has a Water Committee, a Village Clerk, and a Public Works Department, it is doubtful that the Mayor spends much time himself on transmission matters except for negotiations over the rate. Since Elbridge has the primary burden but did not offer any significant proof, I find the 5% excessive and that it should be reduced to the benefit of Jordan, at 2%. In this case, Jordan made several convincing arguments that mitigated against Elbridge's 5% allocation. For example, the Mayor's time would more reasonably be spent on other matters more pressing than water transmission.

Clerk

Basically the Village Clerk/Treasurer's water transmission duties appear to consist of sending four water bills a year to Jordan, keeping the water expenses straight (but not for any accounting relating to time spent on the water system) and getting them into the right account codes, conferring with the Village engineer about what expenses are distribution and what are transmission, and taking and referring telephone calls about water leaks, breaks or other problems.

Elbridge says this merits 2% across the board, Jordan 1%.

The Clerk testified to nothing more than sending the water bills, but other testimony and documents indicated that there must have been more to her transmission functions, but not 2% worth. An average one-half hour per week over the year should cover the Clerk's transmission tasks, so that the recommended allocation is 1%.

Fringe Benefits

Fringe benefits are agreed at 25% of the salaries, so that these will simply be plugged into the attached calculation sheet, Appendix B.

Acct. 2 - Utilities (100%)

2. N.Y. TEL. 6/85-11/86

Elbridge proposes 2% for all telephone and electric/gas expenses); Jordan proposes 1% for these.

Here again it is difficult to apportion out the amount of Elbridge's telephone and power costs that are apportionable to the transmission system. Yet since the difference (2%-1%) is probably based upon Jordan's position that a great part of the overall water system is not necessary for transmission, and since it has been found here that the entire system is necessary, 2% is recommended whenever this appears.

2.1 N.Y. TEL. 12/88 to Present

2% is recommended whenever it appears.

2.2 NYSEG 12/86 to Present

2% is recommended whenever it appears.

2.3 Water for Municipal Building

Elbridge claims 2% for 1987-88 on; Jordan says 0%.

Here Elbridge's engineer conceded that he did not know the basis for including it. In any case, it would appear that water for Elbridge's municipal building is no different than water for an Elbridge home, and not chargeable to transmission. Thus it should be 0%.

Acct. 3 - Office Expenses

Here Elbridge requests 2% across the sheet and Jordan says 1%.

The office expense would appear to have a relationship to the time the Village Clerk spends on transmission matters, since the Clerk would be the only one of the included employees who spends all of her working time in the office. Therefore 1% is recommended.

Acct. 4 - Insurance (Pd. by General Fd.)

Elbridge desires a 10% allocation and Jordan 1%.

Here again the Elbridge engineer conceded that he had no basis for including it; however since the Elbridge transmission system must be covered by some insurance and Jordan is consenting to 1%, 1% seems fair.

Acct. 5 - Water Billing Expenses

Elbridge wants a 2% allocation and Jordan 1%.

Since the expense of Elbridge billing Jordan four times a year appears to relate only to the cost of stamps, envelopes and perhaps a small printing expense, 1% is more reasonable.

Acct. 6 - Travel (Inc. Samples to Skaneateles)

Elbridge puts it at 20% for 1985/86 through 1988-89 with no expense thereafter within the subject period; Jordan says 4% for the period when there were expenses.

Elbridge's engineer conceded that the underlying vouchers do not show how much of the charged time was taken up by delivery of water samples to Skaneateles. His estimate is based upon his familiarity with the area and taking the water samples to Skaneateles. I have discounted his estimate because there are not many trips per year and other tasks can be taken care of on the same trips, such that no more than the amount agreed to by Jordan should be apportioned, namely 4%.

Acct. 8 (there is no 7) - Taxes

Elbridge wants it at 100% allocation; Jordan 1%. The taxes at issue here are the real property taxes apparently paid by the Village of Elbridge to the Town of Elbridge on the water tank which is outside Village limits.

The original tank was built as part of the original system in 1932. Jordan did not hook up to the system until 1935. Between 1932 and 1935 the tank served only Elbridge's needs but in 1935 it became part of the transmission system while still serving distribution and storage functions for Elbridge. Jordan has two large storage tanks of its own. Also the point at which Jordan hooked up in 1935 aids the Elbridge water tank by preventing stagnation and freezing. Here again, there is no way to be precise based upon the proof presented, but balancing the conflicting engineering testimony seems to indicate that roughly one-third of the tank's function is related to transmission, so that a 35% allocation appears reasonable.

Acct. 10.1 (there is no 9) - Engineer/Legal: Transmission

Elbridge claims 100% to transmission across the sheet and Jordan 1%.

For 1985-86 there are engineering costs of $429.59 for adjusting a valve at Gorham and Vinegar Hill Road and $644.85 for engineering services for the rate negotiations; for 1986-87 there are engineering services of $401.50 for valve adjustment and $2,789.36 and $759.02 for tank inspection; for 1987-88 there is an attorney's fee of $450.00 which is a part of the attorney's bill, for 1988-89 there is a total of $1,822.20 made up of $90 in attorney's fee and $891.70 and $840.50 engineering fees, and for 1989-90 a total of $470.20 made up of $230.20 engineering fees and $90.00, $90.00 and $60.00 in attorney's fee.

For 1985-86 the valve adjustment relates to transmission but the negotiation services should not be allowed. Each party should pay its own engineering and legal costs for rate negotiations as they do for petitioning for the hearing, opposing the petition and preparing for and conducting the hearing. Thus for 1985-86 $644.85 should be deducted from the total expense.

In 1986-87 the valve adjustment and tank inspection should be allowed.

For 1987-88 the part of the attorney's bill apportioned to transmission appears to relate to bonding matters and approval of specifications and plans for the replacement of the tank and overall the entire amount set over to transmission appears reasonable.

For 1988-89 Jordan, rather than arguing about what was included, contended that some expenses left out would be related to transmission under Elbridge's definition, such that the entire amount included should remain.

For 1989-90 Jordan did not really contest the expenses but again claimed that some expenses excluded showed that Elbridge was not following its own position about what was part of the transmission system, such that here again what was included should remain.

Overall, with the one deduction noted, all expenses remaining in the amount code should be apportioned 100% across the sheet.

Acct. 12 (there is no 11) - Transmission Line and Equipment Repair

Elbridge claims a 100% allocation to transmission; Jordan claims it should be 4%.

The following is in chronological order.

For 1985-86 Jordan contested an underlying expense item $82.92 to "Fabricate wrench". Elbridge's engineer said it was made especially for a transmission job and was not usable elsewhere and Jordan did not pursue the matter further.

For the same year, Jordan contested a bill for $400.00 for repairs at 126 and 218 Kingston Road. Since the Kingston Road main serves both transmission and distribution purposes, all of the charge should not be assigned to transmission.

For 1986-87 Jordan contested $1,057.15 for valve work at the tank. Since the transmission function of the tank has already been fixed in connection with taxes (Acct. 8 above) the same percentage, 35%, should apply here.

For 1987-88 Jordan took issue with $5,000 (spread over 3 years) for a right of way to the water tank assigned entirely to transmission. For reasons set forth earlier only 35% of this should count as transmission expense. For the same period Jordan claimed that a device for detecting leaks ($1,669.95) should not go all to transmission since it operates over the entire system.

Jordan contested for 1988-89 a $38.00 hydrant adapter which relates to transmission only perhaps once a year when the mains are flushed. I agree that only a small portion of this expense should be allocated to transmission.

Expenses of $595.97 and $785.12 in the same period to repair the Kingston Road line, were contested as not relating solely to transmission. Since there are distribution lines off Kingston Road, probably no more than half this expense should be allocated to transmission.

For the 1989-90 period Jordan contested expenses of $28.00, $206.00 and $104.79 relating to hydrant repairs and equipment and hydrants do serve only a minor transmission function. Many of the expenses in this account code were not contested and, with the noted exceptions taken into consideration, the vast bulk of the expenses appear to relate to transmission functions.

The total expenses for 1985-86 were over $3,100, for 1986-87 again over $3,100, for 1987-88 over $8,200, for 1988-89 over $4,200, and for 1989-90 over $3,900.

Overall and considering all the expenses and taking into account the adjustments found reasonable based upon Jordan's objections, this account code should be allocated 85% to transmission across the sheet.

On the whole expense in this account code should be apportioned at 85% across the sheet.

Acct. 13 - Vehicle & Equipment (100%)

This item appears only in 1987-88 and 1988-89, is minor in amounts, and both entries relate to parts for the pick-up truck converted to a dump truck (See Acct. 13.2 below)

Elbridge proposes 10% and Jordan does not have these items in its rate computation sheet.

For the same reasons stated in discussing some other account codes, this expense should be apportioned as King's time has been apportioned since the truck was used by Mr. King, namely, 6% for the applicable periods.

Acct. 13.1 - Gasoline (100%)

Elbridge assigns 10% across the sheet and Jordan 4%, but neither dealt with it specifically at the hearing.

The vehicle consuming the gasoline is apparently the pick-up truck converted to a dump truck (See Acct. 13.2 immediately below) used primarily by King, so that a reasonable transmission assignment would be in accord with King's assigned transmission time, namely 12% for the first two periods and 6% thereafter.

Acct. 13.2 - Vehicle Purchase (100%)

This entire item across the sheet relates to a pickup truck purchased by Elbridge in 1985 and which they converted to a dump truck in 1987. The purchase cost was spread over five years and the conversion cost over three years.

Elbridge assigns 10% to transmission across the sheet and Jordan 0% across the sheet.

This vehicle was dedicated to uses other than strictly transmission; however it appears that employee King, who became full-time in 1987, would almost exclusively use this vehicle, so that it is not unreasonable to assign the transmission use of the vehicle according to the transmission time assigned to King, namely: 12% for the first two periods and 6% thereafter.

Acct. 13.3 - Repair and Maintenance (100%)

This expense is shown first in the 1987-88 period and thereafter and it consists of expenses for King's uniforms, road signs, a time clock and so forth.

Elbridge assigns 10% wherever these expenses appear and Jordan 0%.

The nature of these expenses is such that assignment to transmission time appears to be reasonable, that is 12% for 1985-86 and 1986-87 and 6% thereafter.

Acct. 13.4 - Miscellaneous

This item consists, for 1987-88, of $182.13 for a road sign and $143.62 for King's uniforms, for 1988-89, of $21.80 for a road sign, and for 1989-90 $309.24 for a time clock and $178.40 for King's uniforms.

Elbridge wants 10% wherever it appears and Jordan 0%.

Road signs and King's uniforms should be assigned the same transmission percent as King's time; however the time clock expense should not be allowed at all. Although Jordan failed to establish where the time clock was located or what it was used for, charging two time clocks to transmission within about a two year period(see Account 13.3 immediately above) is unreasonable.

Specifically the total expense should remain the same for 1987-88 and 1988-89 and reduced $309.24 for 1989-90, at 6% in accord with King's transmission time.

Computation of the Actual Rate

Significance of the Contracts

As previously noted, Elbridge and Jordan had entered into a contract concerning, among other things, the fixation of the water rate. The contract dated December 4, 1980 (Exhibit 3) fixed the rate from January 1, 1980 through December 31, 1985 at 4.5 cents per 100 cubic feet and an addendum (amendment) to the contract dated January 1, 1986 (Exhibit 4) fixed the rate from January 1, 1986 through December 31, 1990 at 3 cents per 100 cubic feet. There is no contract for any rate from January 1, 1991 though December 31, 1995. In this sense the contract has expired and the DEC having been petitioned to set the rate for this period pursuant to its rate-fixation authority, may set the rate by any method which result in a fair and reasonable rate. Yet the parties have continually referred to the prior contracts as if they were applicable. In these circumstance the prior contracts have been and shall be consulted for guidance concerning what the parties considered to be a fair and reasonable manner of setting rates in the past 10 years.

Elbridge and Jordan have each used expense data for five full years (1985-86 through 1989-90) and one-half year (July 1 to December 31, 1990) and it is on the basis of this data that they wish to have the rate fixed.

The rates in Appendix B for the five full years vary from a low of 2.1863407 cents per 100 cubic feet for 1985-86 to a high of 4.0281514 for 1987-88. The rate for the half year is higher yet at 4.3186061.

Elbridge and Jordan have presented their rate computation year for year. Elbridge's runs from a low of 3.3 (rounded off) for 1985-86 to a hearing of 5.9 for 1990-91. Jordan's runs from a low of 0.003 for 1985-86 to a high of 0.011 for 1990-91.

The contract between Elbridge and Jordan and its amendment provide:

"Any rate, revision or continuance of the existing rate shall be based upon operation and maintenance of such system during the prior five years." (Exhibit 3, page 5 and Exhibit 4, Page 1)

It should be noted that the contract speaks of the rate rather than rates for the five year periods. Further, the contract does not require that the rate be fixed year for year. Thus the contract allows for an averaging of the rate over five years (or as presented by the parties here, over five and one-half years) and averaging appears more sensible and equitable.

Thus the averaging method appears to be in accord with the contract but not in accord with the present wishes of Elbridge or Jordan but they have not explained why their methodology would result in final rates that are fairer and more equitable and therefore I choose to follow prior practice.

The Method Adopted

The method that shall be used is simply to average the rates for the full five years and the one-half year arrived at on Appendix B:

Year Period Rate
1. 1985-86 2.186 (deleting unnecessary decimal places)
2. 1986-87 3.636
3. 1987-88 4.028
4. 1988-89 3.665
5. 1989-90 3.118
6. 1990-91( yr.) 4.318
20.951
÷ 6
3.49

Inflation

Elbridge's proposed water rate increases every year by 4% as an inflation factor.

The contract does not provide for any inflation increases. The national inflation rate figure is not only quite different but neither it nor Elbridge's 4% rate represents actual increases in expenses.

The contract calls for the water rate to be set for particular 5 year periods based upon the actual expenses in the prior 5 years. Thus any actual inflation or deflation in expenses in the prior 5 years will be automatically reflected in the rate for the next 5 years, and so on.

Hence an inflation factor is neither provided for nor appropriate.

Retroactivity of the Water Rate to the 1986-90 Period

On December 4, 1980 Elbridge and Jordan entered into the contract (Exhibit 3) dealing with the water rate. By that contract the rate for 1981-1985 was fixed at 4c per 100 cubic feet (Section II(c)). Section III of the same contract provides:

Fee Negotiation of Operation and Maintenance Agreement

The agreement covering payment of expenses of operation and maintenance of the Elbridge Water Transmission Facilities set forth in paragraph II(c) hereof shall automatically renew for an additional five year period effective January 1, 1986 unless on or before July 1, 1985 either the Village of Elbridge or the Village of Jordan notifies the other that it desires to renegotiate a rate for a further five (5) year period. Any rate revision or continuance of the existing rates shall be based upon operation and maintenance of such system during the years 1981 to 1985 inclusive..."

By an addendum (amendment) to the contract dated January 1, 1986 (Exhibit 4) the rate for 1986-1990 was reduced to 3c per 100 cubic feet and it was further provided that the rate would remain the same for 1991-1995 unless either Elbridge or Jordan notified the other by July 1, 1990 that a change was desired.

As provided in the contract quotation above, a rate change for a five year period is to be based upon O&M expenses incurred during the prior five years. Thus if Elbridge is seeking a retroactive rate increase for 1985-1990 it should have submitted the O&M expense data for 1980-1985. Not only did Elbridge not submit any such data but neither the contract nor its amendment provide for any retroactive rate increase but only for rate determination to be made prospectively based upon prior experience. Indeed when Elbridge agreed to 3 cents per 100 cubic feet for 1986-1990 by signing up in May 1986 (effective January 1, 1986) it must have had the 1980-1985 O&M expense data.

Underpayments and Overpayments

Elbridge alleges underpayment by Jordan and Jordan alleges overpayment to Elbridge.

The DEC does not deal with civil claims between parties. For that the parties will have to bring action in a civil court.

Findings of Fact

  1. The 6" main is an integral part of the water system and is necessary to meet the peak demands of the Village of Jordan.
  2. The 0.2M6 water tank is an integral part of the water system and is necessary to meet the peak demands of the Village of Jordan.
  3. Under existing DEC directions the Village of Elbridge must stand ready to supply to the Village of Jordan and Jordan is entitled to demand a peak volume supply of 0.67 mgd.
  4. The entire water system was designed and constructed to be able to meet the Village of Jordan's peak demand and to satisfy as well the needs of the Village of Elbridge.
  5. The O&M expenses which should be included in the water rate computation and the amount thereof properly allocated to transmission to the Village of Jordan are as set forth in the water rate calculation attached to this report as Appendix B.
  6. Based upon the calculations as set forth in Appendix B a fair and reasonable water rate to be paid by the Village of Jordan to the Village of Elbridge for 1990-1995 is: 3.5c per 100 cubic feet
  7. An inflation factor is neither provided for in the contract between the Village of Elbridge and the Village of Jordan nor is one appropriate here given the terms of that contract.
  8. Neither the contract between the Village of Elbridge and the Village of Jordan nor its amendment provide or may reasonably be interpreted to provide any retroactive water rate adjustments.
  9. Even if the contract or amendment did so provide or could be so interpreted to so provide, the Village of Elbridge has failed to sustain its claim to such relief by failing to place in evidence any O&M costs data for the 1980-85 period.
  10. The Department of Environmental Conservation has no authority to determine whether the Village of Elbridge or the Village of Jordan are financially indebted to each other.

Recommendation

The Commissioner should set the water rate to be paid by the Village of Jordan to the Village of Elbridge for 1990-1995 at 3.5 cents per 100 cubic feet.

OPERATIONS & MAINTENANCE COST ALLOCATION
Acct. Eligible Code Account 1985-86 for 1st & 2nd qtrs of 1986 % CALC. 1986-87 % CALC. 1987-88 % CALC. 1988-89 % CALC. 1989-90 % CALC. 1990-91 for 3rd & 4th qtrs of 1990 % CALC.
1 Payroll
King - Total Wages 3600.00 12 432 4000.00 12 480 17500.00 6 1050.00 18200.00 6 1092 19800.00 6 1188 21600.00 6 1296
1 Trustee 1000.00 6 60 1000.00 6 60 1000.00 6 60 1000.00 6 60 1000.00 6 60 1000.00 6 60
Mayor 3500.00 3 105 3500.00 3 105 3500.00 3 105 3500.00 3 105 3500.00 3 105 3500.00 3 105
Clerk - Total Salary 15000.00 1 150 15750.00 1 158 16700.00 1 167 17360.00 1 174 19000.00 1 190 20400.00 1 204
Fringe Benefits 25% of Above 187 201 346 358 386 416
2 Utilities (100%)
2 NY TEL & NYSEG 6/85-11/86 2025.37 2 40.51 1112.32 2 22.25
2.1 NY TEL 12/86 to Present 545.14 2 10.90 581.76 2 11.64 605.82 2 12.12 746.34 2 14.93 2
2.2 NYSEG 12/86 to Present 1957.86 2 39.16 2439.20 2 48.78 2673.56 2 53.47 2565.31 2 51.31 3500.00 2 70.00
2.3 Water for Municipal Building 56.00 0 0 56.00 0 0 88.00 0 0 0
3 Office Expensees 695.04 1 6.95 578.49 1 5.78 1591.81 1 15.92 1638.50 1 16.39 1470.30 1 14.70 1195.00 1 11.95
4 Insurance (Pd by Gen. Fund) 5400.00 1 54.00 6000.00 1 60.00 5000.00 1 50.00 4500.00 1 45.00 5000.00 1 50.00 5500.00 1 55.00
5 Water Billing Expenses 183.60 1 1.84 393.70 1 3.94 926.10 1 9.26 944.88 1 9.45 764.00 1 7.64 350.00 1 3.50
6 Travel (Inc. Samples to Skan.) 191.22 4 7.65 117.80 4 4.71 117.60 4 4.70 5.88 4 .24 0 4 0 0 4
8 Taxes 1223.54 35 482.24 1218.98 35 426.64 1294.12 35 452.94 1464.79 35 512.68 1442.01 35 504.70 0 35
10.1 Eng/Legal: Transmission 429.59 100 429.59 3949.88 100 3949.88 470.85 100 470.85 1822.20 100 1822.20 470.20 100 470.20 1600.00 100 1600.00
12 Trans. Line & Equip.Repair(100%) 3188.23 85 2710.00 3183.90 85 2706.32 8200.34 85 6970.29 4289.95 85 3646.46 3900.16 85 3315.14 3600.00 85 3060.00
13 Vehicle & Equip. Main. (100%) 52.80 6 3.17 5.71 6 .34
13.1 Gasoline (100%) 1451.89 12 174.23 842.12 12 101.05 1266.30 6 75.98 877.21 6 52.63 1594.30 6 95.66 1300.00 6 78.00
13.2 Vehicle Purchase (100%) 2863.38 12 343.61 2863.38 12 343.61 4213.38 6 252.80 4213.38 6 252.80 4213.38 6 252.80 4400.00 6 264.00
13.3 Repair & Maint. (100%) 929.62 12 111.55 1588.94 12 190.67 1806.03 6 108.36 1996.27 6 119.78 2618.57 6 157.11 2200.00 6 132.00
13.4 Miscellaneous 325.75 6 19.55 21.80 6 1.31 178.40 6 10.70
Total Transmission Costs 5296.17 8868.91 10222.24 8333.87 6873.89 7355.45
Total Purchased (x 100 C2) 242,239 243,920 253,770 227,390 220,490 170,320
Transmission Rate 0.021863407 0.036359913 0.040281514 0.036650116 0.031175518 0.043186061
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