The Issue Whether Petitioner's application to increase its water and sewer rates to its customers in Palm Beach County should be granted; and Whether Petitioner failed to comply with Florida Public Service Commission Orders Nos. 0924 and 8382 directing Petitioner to comply with information submission requirements in connection with its application for rate increase. CONCLUSIONS and RECOMMENDATION Petitioner's rate increase request should he granted in accordance with the findings in this recommended order. Such rates are just, reasonable, not unjustly discriminatory and consistent with Section 367.081, Florida Statutes (Supp. 1980) Commission Orders No. 8924 and 0382 did not, by their terms, direct Petitioner to comply with minimum filing requirements by a date certain. Therefore, Petitioner's lengthy and unexcused delay in complying with such requirements does not constitute a violation of the Orders.
Findings Of Fact Background In May, 1978, Petitioner, Mangonia Park Utility Company ("UTILITY"), filed with the Respondent, Florida Public Service Commission ("COMMISSION"), applications to increase, on an interim basis, its sewer and water rates to its customers in Palm Beach County, Florida. By Order Nos. 8924 and 8382, issued on June 21 and July 7, 1978, respectively, the COMMISSION suspended the proposed rates, approved interim water and sewer rate increases, found that the UTILITY's application did not comply with the COMMISSION's minimum filing requirements, and acknowledged the UTILITY's statement that it would file an application which meets filing requirements by September 1, 1979. Between November, 1979, and April, 1980, the UTILITY supplied additional information but did not fully comply with the minimum filing requirements. On May 15, 1980, the COMMISSION issued an Order requiring the UTILITY to show cause why the interim rates should not be repealed and monetary penalties imposed for the UTILITY's alleged failure to comply with Order Nos. 8924 and 8382. The question of the UTILITY's compliance with those Orders was set to be heard in conjunction with its rate increase application. It was not until May 29, 1980 that the UTILITY submitted a completed application and complied with the minimum filing requirements. On November 5, 1980, the COMMISSION forwarded this case to the Division of Administrative Hearings for the assignment of a Hearing Officer to conduct a formal Section 120.57 hearing. This case was then set to be heard on January 21, 1981. At hearing, the UTILITY called Philip D. Mitchell and Boyd D. Ellis as its witnesses and offered Petitioner's Exhibits No. 1 through 6 into evidence. On February 16, 1981, the COMMISSION timely submitted its proposed findings of fact and conclusions of law. (Testimony of Willis, Ellis, P-2, R-1). II Rate Increase Application The UTILITY owns and operates water treatment facilities consisting of three wells, two pumps, a lime softening unit, and two storage tanks. Since April, 1979, the City of Riviera Beach has provided treatment to the UTILITY's sewage. The UTILITY's sewage facilities now consist of a master lift station, pumps, and sewage lines. The approved test period for this rate proceeding is the twelve months prior to June 30, 1979. During the test year, the UTILITY provided water service to 113 residential customers, 49 general service customers, and one multiple dwelling customer; it provided sewer service to 75 residential customers, 47 general service customers, and one multiple dwelling customer. As a result of its analysis of the UTILITY's application, together with its books and facilities, the COMMISSION proposed various adjustments, almost all of which were accepted and agreed to by the UTILITY. At hearing, issues involving the UTILITY's request for pro forma salary adjustments and recovery for income tax liability were eliminated when it withdrew its request. The only factual issue which remains concerning the requested rate increase is the useful life and depreciation rate which should be applied to the UTILITY's plant and equipment. Useful Life and Depreciation Rate The COMMISSION contends the standard 40-year useful life with a 2.5 percent depreciation rate is appropriate; the UTILITY contends that such a depreciation rate does not take into account changing technology and obsolescence, and that a 25 to 30-year useful life with a 3.3 to 4 percent depreciation rate is more appropriate. The UTILITY acknowledged that the determination of useful life of utility equipment required engineering judgment. However, it presented no testimony by a qualified engineer on the subject. Its evidence consisted solely of its accountant's long- standing "conceptual objection" to use of a 40-year useful life for utility plants. The only competent and credible evidence on the question was presented by the COMMISSION. Its qualified engineer testified that he conducted an on-site independent study of the UTILITY plant and concluded that, in this instance, a 40-year useful life, with a 2.5 percent depreciation rate, was appropriate. In view of the foregoing, it is determined that a 40-year useful life, with a 2.5 percent depreciation rate, should be applied against the UTILITY's plant. (Testimony of Mitchell, Munt). Having thus determined the appropriate depreciation rate for use in this case, the parties have agreed to the following rate- making factors: Rate Base The adjusted test year rate base for the UTILITY's water system is $210,799; the rate base for its sewer system is $65,151. Both are calculated below: RATE BASE TEST YEAR ENDED 06/30/79 WATER SEWER Utility Plant in Service $ 386,611 $ 287,939 Plant Held For Future Use -0- (3,750) Acquisition Adjustment 18,990 -0- Accumulated Depreciation (42,485) (28,541) Amortization of Acquisition Adjustment (4,600) -0- Contribution in Aid of Construction (Net of Amort.) (154,349) (203,069) Working Capital Allowance 6,632 12,572 Income Tax Lag -0- -0- Rate Base 210,799 65,151 (Testimony of Willis, Mitchell, R-3) Net Operating Income The UTILITY's adjusted operating income for the test year - a $15,673 loss (water) and a $46,837 loss (sewer) - together with its rate of return, are depicted below: OPERATING STATEMENT TEST YEAR ENDED 06/30/79 WATER SEWER Operating Revenues $ 46,441 $ 60,192 Operating Expenses Operation 43,759 94,572 Maintenance 9,297 6,002 Depreciation (sic) 4,716 993 Amortization 541 -0- Taxes Other Than Income 3,801 5,462 Income Taxes -0- -0- Total Operating Expenses 62,114 107,029 Operating Income $(15,673) $(46,837) Rate of Return (7.44 perct) (Testimony of Willis, Mitchell, R-3) Capital Structure and Cost of Capital (71.89 perct) The UTILITY's capital structure, and weighted cost of capital, are as follows: COST OF CAPITAL COMPONENT RATIO COST RATE WEIGHTED COST Long-Term Debt Customer Deposits 99 perct 9.84 perct 1 perct 8.00 perct 9.74 perct .08 perct 100 perct 9.82 perct (Testimony of Mitchell, Clinger, R-5) Rate of Return Based on its cost of capital, the parties have agreed that percent constitutes a fair rate of return on the UTILITY's rate base. The UTILITY has a deficit in common stock equity; a return on negative investment is inappropriate. (Testimony of Mitchell, Clinger, (sic), R-5) Rate Structure The UTILITY's current water rates are conventionally structured using a minimum monthly charge which includes a minimum number of gallons and a one-step excess rate over that minimum; its residential and general service sewer rates are structured using a flat rate. The parties agree that the rates should be revised in accordance with what is known as the base facility charge (BFC) rate design. The purpose of this design is to recover the costs of providing service to each particular customer. Its monthly charges consists of two components: A base charge which covers expenses not related to actual water use, such as depreciation, billing and collecting, property taxes, debt interest, maintenance, etc., and a gallonage charge based on the allocated costs associated with pumping, treating and delivering the water to the customer. Sewer rates are similarly structured and directly related to actual water consumption. The BFC rate design structure equitably distributes the fixed and variable costs of providing service to customers and allows them to exercise greater control over the rates which they pay. In implementing the BFC rate design, the COMMISSION makes two specific recommendations which are not opposed by the UTILITY, are reasonable, and should be followed: (1) that public fire hydrants not be charged, and (2) that the monthly charge for private fire lines be one-third of the BFC charge for the particular sized connection. (Testimony of Taylor, R-4A) Required Revenue In order to be allowed the opportunity to earn a 9.82 percent return on its rate base, the UTILITY should file rates which generate annual gross revenue at $83,747 for the water system and $114,792 for the sewer system. This revenue should produce net operating revenue of $20,700 and $6,398, respectively. (Testimony of Mitchell, Willis, R-3) III Alleged Violation of Commission Order Nos. 8924 and 8382 The COMMISSION contends that the UTILITY violated Order Nos. 8924 and 8382 by its failure to comply with minimum filing requirements until May 29, 1980. For such violations, the COMMISSION seeks to impose a penalty of $200. The orders in question do not explicitly direct or order the UTILITY to file an application which complies with the minimum filing requirements by a date certain. Consequently, the UTILITY's lengthy and unexcused delay in complying with such requirements does not constitute a violation of or refusal to comply with the orders in question. (Testimony of Mitchell, Willis, R-1)
The Issue The issues to be determined are whether the water service provided by Lands, Inc. of Rhinelander meets all pertinent quality standards of the Public Service Commission and the Department of Environmental Regulation, the establishment of an appropriate rate structure for the utility, and a determination of the amount of revenue which will be lost, reasonable and compensatory, but not unfairly discriminatory, pursuant to Section 367.081 of the Florida Statutes.
Findings Of Fact Quality of Service Two customers of the utility, a representative of the utility, as well as a Public Service Commission engineer, testified regarding the quality of water service provided. Water quality meets all pertinent regulatory standards; however, the public witnesses have experienced problems with low pressure during peak usage periods of the day. This intermittent problem with insufficient water pressure will soon be alleviated by the installation and operation of an additional supply well. Thus, the company's water production, treatment and delivery efficiency complies with all regulatory standards and is found to be satisfactory. Rate Base The utility alleged a valuation of $15,552.00 for its plant in service "used and useful" in serving the customers. Adjustments to that figure to allow for accumulated depreciation, contributions-in-aid-of-construction, accumulated depreciation on contributions-in-aid-of-construction, a working capital allowance, as well as an allowance for income tax lag established the correct rate base for the water system, upon which a rate of return may be earned, to be $13,143.00. The adjustments supportive of that figure appear in more detail in Schedule I attached hereto and incorporated by reference herein. The utility ultimately agreed with that figure for rate base. It is appropriate and should be accepted. Cost of Capital Representatives from the Public Service Commission presented evidence on the issue of cost of capital. The utility presented no independent evidence on this issue but agreed with the position espoused by the Public Service Commission. Lands, Inc. of Rhinelander is the parent company of which the utility is a division, and consequently the capital structure of the parent company was appropriately employed. The capitalization consists of 56.58 percent debt and 43.42 percent equity, with a debt cost rate of 7 percent. The cost rate or appropriate return ascribed to the equity portion of the capital structure is 14.75 percent. Employment of this capital structure then results in a calculated weighted cost of capital or return on rate base of 10.36 percent. No evidence was offered in opposition to this demonstrated capital structure nor the ultimate rate of return on rate base derived therefrom. Thus, the use of this capital structure in this proceeding and the resultant return on the utility's rate base is appropriate and should be allowed. Revenue Requirement Schedule II, attached hereto and incorporated by reference herein, details the various operation and maintenance expenses, such as chlorine, electric power purchased, salaries and administrative expenses and others, as well as depreciation on invested plant, taxes other than income, and income taxes, for a total actual operating expense of $5,014.00. In order to achieve the appropriate 10.36 percent rate of return on rate base, a net operating income of $1,362.00 is required. Accordingly, the sum of the two figures demonstrates that a total annual operating revenue for the utility of $6,376.00 is necessary. This revenue figure represents an increase of $3,571.00 over the test year revenue actually received by the utility ($27,805.00), and which resulted in an operating loss posture for that test year. The above figures and calculations were essentially uncontroverted by the utility. Rate Structure At the time of the initial petition in this cause, the customers of the utility were unmetered and were charged a flat rate for water service. The Public Service Commission thereafter entered Order No. 8455 on August 29, 1979, ordering installation of water meters and implementation of a base facility charge rate design. In order to allow the Commission to obtain data on metered rates over a twelve-month time span, the utility also agreed to waive the eight- month time period during which a decision should be entered in the cause pursuant to Chapter 367.081(5), Florida Statutes. The meters were installed on March 1, 1979, thus the utility has in excess of a year's experience operating under the interim and metered rates. The rates thus put into effect for the test period produced annual revenues at the rate of $2,805.85. During this test period, the utility supplied water to an average of 46 single family residential customers and all customers are metered. Approximately 28 percent of all customers billed are seasonal, so that a substantial portion of their bills are for zero consumption. The interim rates were structured using the base facility charge (BFC) rate design. The rationale for this type of rate design is to establish a monthly charge whose foundation is based on the actual fixed cost of providing service to the residential customer. Such a charge provides coverage for expenses such as depreciation, an allocated portion of billing and collecting expense, property taxes, debt interest, maintenance of mains and services, etc. The amount of the charge is determined by an "equivalent residential connection" (ERC) formula, using a standard five-eights inch by three-quarter inch meter as the basis. There is no charge for gallonage consumed included in the framework of this base charge. The second portion of this type of rate structure is designed to establish a charge for the pumping, treating and delivery of the water to the customer. Thus, this additional charge would cover associated costs such as pumping expenses, treatment expenses, the unallocated portion of billing and collecting expenses, meter reading expenses, and other varying costs. The basic reason for such a charge is that each customer will thus pay his prorata share of the related facility cost necessary to provide service and then would pay for only the gallons actually consumed under the gallonage portion of the charge. This design helps alleviate the discriminatory charge problem associated with part-time residents, since such residents are required to pay their prorated share of the cost of providing service. Such an approach is an important factor in this utility's rate design since a substantial number of the customers are seasonal or part-time residents. The base facility charge rate design should thus be continued in the permanent rates. The utility is presently collecting a $30.00 per year "standing fee" for vacant lots. The Commission has in the past allowed the utility to collect this type of fee up to the amount of the actual meter installation charge. Thus, when a customer taps into the system, the meter installation charge is the difference between the charge and the fees previously collected for the vacant lot. The utility has requested increased meter installation charges. The present meter installation fees include the cost of the meter, the meter box, the labor and the cost of tapping into the water main. Such service availability charges should be divided into a meter installation fee and a tap fee. The meter installation fee would be in a fixed dollar amount representing the average cost incurred by the utility to install the meter, meter box, and the associated labor. (Rule 25-10(17), Florida Administrative Code.) The tap fee would then be the actual cost to the utility of tapping into the water main and extending the service pipeline from the main to the customer's installation. (Rule 25-10(22), Florida Administrative Code.) The Public Service Commission has agreed to the utility's request for the increased service availability charges and they should be allowed, separated into separate charges for meter installation and tapping fees.
Recommendation Accordingly, in consideration of the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That the application of Lands, Inc. of Rhinelander, Route 1, Box 425-B1, Floral City, Florida 32636, be GRANTED and that that utility be authorized to receive gross annual revenues for its water service of $6,376.00, to be achieved by rates filed with and approved by the Public Service Commission. It is further RECOMMENDED: That the utility be required to adopt a base facility charge concept of rate design for its water rates and to make concomitant changes in its tariff. It is further RECOMMENDED: That service availability charges be increased and separated into two portions, a meter installation fee and a tap fee, with the meter installation fee to be a fixed amount representing the average cost incurred by the utility to install meters, meter boxes and attendant labor. The tap fee should he the actual cost to the utility of tapping into the water main in extending the service line from the main to the customer's residential installation. DONE and ENTERED this 3rd day of September, 1980, in Tallahassee, Florida. P. MICHAEL RUFF, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 3rd day of September, 1980. COPIES FURNISHED: C. J. Parker Route 1, Box 425-B1 Floral City, Florida 32636 Arthur R. Shell, Jr., Esquire Public Service Commission Legal Department 101 East Gaines Street Tallahassee, Florida 32304
Findings Of Fact Although numerous customers were present, four of them testified at the hearing. No service quality problems were described with regard to either water or sewer service. Indeed, several of the customers described water quality as being good or excellent. The primary concern of the customers was the magnitude of the proposed rate increase, although a number of then opined that some increase in rates may he necessary. Expert engineering witnesses presented by both the Comission and the Petitioner established that the Utility has not been cited by any local, state or federal agency for health or environmentally related violations. No corrective orders are in force either by the Department of Environmental Regulation, the Lee County Health Department, or the Public Service Commission. The water and sewer treatment exceeds all governmental quality standards extant. In order to enhance service quality, the company has constructed a one million gallon ground storage tank and has installed an additional high-service pump. All parties agree that the cost of these improvements should be added to the Utility's rate base for purposes of this proceeding. Rate Base The Utility propounded evidence alleging its proper water rate base to be $1,872,470.00 and the appropriate sewer rate base to be $1,917,931.00. In arriving at the Utility's net investment in property used in the public service (rate base), it is necessary to calculate the amount of contributions-in-aid-of-construction, which serve to decrease the Utility's investment. Normally, where there has been a previous rate case for a utility in which the utility's net investment would have been determined by the Commission, the calculation of the utility investment in a current rate case is generally competed by adding additions to plant-in-service and subtracting additional contributions-in-aid-of construction in order to arrive at the current net "return yielding" investment. In the instant proceeding, however, Lehigh has elected to take issue with the amount of contributions-in-aid-of-construction (CIAC) previously determined by the Commission in the last rate case. In that last case (Docket No. R-73384-WS), the amount of CIAC was determined by multiplying water connections by $350.00 and sewer connections by $400.00. (See Exhibits 10, 19 and 20) The Utility in the prior proceeding agreed with that method of calculation and, further, two land sales contracts in evidence show that a charge of $750.00 for "sales price of water and sewer" to purchasers of houses in the service area has been imposed by the Utility or its predecessor, Lehigh Corporation (development company), when the Utility was merely a division of the development company. Notwithstanding that prior position, the Utility in this proceeding has elected to attempt to prove its level of CIAC ab initio and has conducted a "Special CIAC Study" in an attempt to show that the amount of contributions is now substantially less than the amount it and the Commission agreed to be applicable in the last rate proceeding and that which the Commission maintains is germane to this proceeding. The Utility thus is alleging that the appropriate charge per connection for CIAC is $650.00 for a water and sewer connection as opposed to the Commission's contention that the figure should be $750.00 per connection. Although a developer's agreement with an affiliated company shows a water and sewer connection charge of $650.00, the testimony of a senior officer of the Utility establishes that there were a total of 1,308 such contracts indicating a sales price for water and sewer service of $750.00. The Utility contends that only $650.00 of the $750.00 charge in question was actually transferred to the utility company and that, therefore, the $650.00 is the appropriate amount to attribute to CIAC. There is no question, however, that with regard to these 1,308 land sales contracts, that $750.00 was actually collected from the lot purchasers involved as the sales price of water and sewer service. Thus, the actual amount of CIAC paid by those 1,308 customers was $750.00 each, for a total of $981,000.00 for water and sever service and that figure represents in its entirety contributions-in-aid-of-construction. The contracts for which the customers involved paid $750.00 for water and sewer service, were entered into in the latter 1960's and early 1970's. Prior to that time, the same type of contracts carried an amount of $650.00 for water and sewer and following the period of time when the fee was $750.00, the line item in the contract was changed so that there was no longer any separate item providing for "sales price of water and sewer." The water and sewer charge was thereafter included in the amount charged for "sales price of improvements." Thus, contrary to the position of Lehigh, because of the segregation of the items in the purchase price shown in these land sales contracts into separate figures for price and for the sales price of water and sewer service, there have been shown to be definite, proven amounts of contributions-in-aid-of-construction supported by company records. The remaining portion of the contributions attributable to the Utility and not represented by these contracts were contributed in the sum of $650.00 per connection, with which figure both parties agree. An additional issue regarding contributions and the "Special CIAC Study" concerns contributions recorded as income from the inception of the Utility operation until November 30, 1964. As demonstrated by Exhibit 12, the amount of contributions recorded as income equals $756,656.00. The Utility's own "Special CIAC Study" refers to contributions recorded as income and Lehigh received sums of money for the availability of water and sewer service in the early 1960's which it treated as income. During the early 1960's when the Utility was regulated by Lee County, the Lee County regulatory board allowed it and other water and sewer utilities to receive and record service availability fees as revenue. This was done in order to enhance the apparent financial posture of the utilities and therefore improve their credit status as an aid to financing improvements. There is no question that those fees during this time period were paid into the Utility or its predecessor for water and sewer service availability and hence should properly be accounted for as CIAC. It might be argued, as the Utility does, that if Lehigh declared the contributions it received to be revenues with the Internal Revenue Service, then the benefit of those contributions or the amount of revenue they represent to the Utility would be reduced by the amount of the resulting income tax, and that if they are now determined to be contributions instead of revenue that an additional detriment to the Utility would occur by the reduction by that amount of its rate base and, therefore, its dollar return. It should be pointed out, however, that because of the tax advantages of the Utility's demonstrated operating loss carry-overs and investment tax credits, as well as accelerated depreciation, all of which tax advantages this Utility has been able to employ, no actual income tax has been paid on such "revenue." Further, Lehigh is depreciating this $756,655.00 in assets in its returns to the Internal Revenue Service and is thereby recovering the costs of the assets. If the Utility is permitted to treat them for regulatory rate-making purposes as revenue instead of CIAC, then the effect would be to maintain rate base and return at a correspondingly higher level than if these amounts are determined to be CIAC, which would reduce rate base and thereby the net investment upon which a return could be earned for regulatory purposes. Thus, the appropriate amount of contributions-in-aid-of-construction for the water system as of the closing date of March 31, 1979, equals $1,057,000.00. The amount of contributions-in-aid-of-construction attributable to the sewer system as of that date equals $1,389,977.00. (Net of amortization). The detailed calculations and adjustments supportive of the above findings with regard to rate base are attached hereto and incorporated by reference herein as Schedules I, II and II. The first issue to be concerned with in calculating the operating expense basis for the revenue requirement is the cost of the above-referenced CIAC study. The Utility prepared this special CIAC study because of its fear that, in view of the Commission's decision in Tamarac Utilities, Inc. v. Hawkins, 354 So.2d 437, that it would not otherwise be able to meet its burden of proof on the issue of contributions and therefore would suffer a dismissal of the petition. In the Tamarac case, the Public Service Commission auditors encountered numerous problems resulting from a lack of primary data supporting the amount of contributions and the Commission issued an order allowing the Utility to provide clarifying evidence. When the Utility failed to satisfactorily perform this task, it ultimately suffered a dismissal of its petition and a refund of monies collected under interim rates. In this case, however, it has been demonstrated that there is no dearth of primary data or books and record supportive of the level of CIAC; nor has an order been issued requiring this Utility to provide such clarification or a "study" of its CIAC. Moreover, in the case of this utility, a previous rate case has been finalized wherein it was found by the Commission that there was a definite, specific level of contributions which were also consistent with those alleged by the petitioner in that proceeding. Thus, there is adequate primary data upon which a determination of CIAC can be computed in this proceeding without resort to a "Special CIAC Study" and the additional increment of rate case expense it represents. It should be further noted that even if the instant case involved a "Tamarac situation" where financial books and records were not adequate to properly document contributions-in-aid-of-construction that, in that event, if a CIAC study were made, then the proper rate-making treatment would be to amortize tile cost of that study over several years, since it is a large, nonrecurring expense in the Utility's operation, as opposed to allowing the entire expense to be written off (and charged to the customers through rates) based upon one year. The Utility has alleged that certain additional pro-forma adjustments to various expense items should be accomplished in order to arrive at the appropriate revenue which will support an adequate rate of return. Thus, the increased costs alleged for purchases of lime, chlorine and gasoline, depicted in the attached schedules incorporated herein, were undisputed, agreed to, are reasonable and therefore should be accepted. The alleged pro-forma cost for payroll is a mere estimate and not supported by competent, substantial evidence. Additionally, it was established by the Commission's accounting witness that certain rate case expenses arose from a prior rate case and therefore should be removed from consideration in arriving at revenue requirements for purposes of this proceeding. This adjustment was not contested, nor were similar adjustments to remove depreciation expense on construction work in progress, to remove depreciation expense on the contributed property, to remove unsupported property taxes, and to remove property tax as an expense and depreciation expense attributable to non-used and useful portions of the Utility's invested plant. None of these adjustments were disputed by the Utility. They are appropriate and reasonable and should be adopted. The Utility has also requested allowance of a $55.00 annual fire hydrant charge and a $10.00 charge for the initial commencement of service. The Utility submitted evidence (Exhibits 6 and 7) supportive of the actual number of water and sewer connections made during the test years as well as the costs upon which the initial commencement of service charge requested is based. The Commission did not dispute, therefore, the requested $10.00 charge for initial commencement of service and, inasmuch as the current $25.00 annual fire hydrant charge was established in the late 1960's and was shown to be no longer sufficient to cover costs, the Commission also did not dispute the increase in the annual fire hydrant charge from $25.00 to $55.00, which accordingly should be increased. Cost of Capital The Utility has requested a rate of return of 11.76 percent which includes an attrition allowance of .78 percent. There is no dispute as to the debt-equity ratios in the capital structure of the Utility. The common stock equity represents approximately 49.57 percent of the total capitalization. Long-term debt makes up 35.96 percent of capital and cost-free capital items make up 14.47 percent. The cost rate of the equity in the capital structure was established by the Commission's financial expert witness to be 14.5 percent or the midpoint in a range for companies and utility companies possessing a similar degree of risk to equity investors of 13.5 percent to 15.5 percent. The 14.5 percent cost of equity figure represents an accurate assessment of the opportunity costs of equity capital for such a company. The imbedded cost of long-term debt is 8.3 percent, which is a very advantageous rate to be enjoyed by such a company in today's money market and reflects a high degree of management efficiency on the part of the operation and management personnel of the petitioner. These two items, when combined with a zero cost factor shown to be appropriate for the cost-free capital items, results in a calculated rate of return of 10.35 percent, which does not take into account an attrition allowance due to inflation. The Utility advocated an attrition allowance equal to 10 percent of the weighted cost of equity capital to help offset the erosion in earnings caused by inflation. There can be little doubt that attrition of earnings due to significant inflation in costs of operation experienced by such companies is a very real factor. However, this record contains no substantial and competent evidence to demonstrate whether the utility wants coverage of capital attrition or attrition of its ability to cover operation and maintenance expenses nor which could justify the alleged 10 percent factor or any other quantification of attrition of earnings which may be experienced. Thus in the absence of a definitive establishment of the appropriate attrition factor, a cost of equity and a corresponding return on rate base in the midpoint of the range found above is appropriate. Thus, the proper return on rate base for this Utility has been shown to be 10.35 percent, which is within the range 9.85 percent to 10.84 percent. A summary of the cost of capital structure and weighted cost of capital calculation is depicted as follows: CALENDAR YEAR 1979 COMMON STOCK EQUITY RATIO 49.57 COST RATE 14.5 WEIGHTED COST 7.19 LONG TERM DEBT 35.96 8.8 3.16 COST FREE 14.47 -0- -0- 10.35 Floor CSE at 13.5 9.85 Ceiling CSE at 15.5 10.34 In summary, the required operating revenue for the Utility's water system should be $658,451.00 which results in an operating income of $211,407.00. The sewer system requires an annual, gross operating revenue of $475,629.00 in order to obtain a return or operating income of $130,017.00. The operating expenses and adjustments supportive of these figures are depicted in more detail in Schedules IV, V and VI attached hereto and incorporated by reference herein. The sewer revenue requirement found herein is less than the interim revenues authorized for sewer service, thus a refund is in order.
Recommendation In consideration of the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the application of Lehigh Utilities, Inc. be granted in part, and that the Utility be authorized to receive a gross annual water revenue of $658,451.00 and gross annual sewer revenue of $475,629.00 to be achieved by rates filed with and approved by the Public Service Commission. It is further RECOMMENDED that the Utility be required to file revised tariff pages containing rates designed to produce annual revenues in the above amounts. It is further RECOMMENDED that the Utility be required to refund the interim sewer revenues previously authorized in this proceeding which exceed those sewer revenues determined to be appropriate herein. It is further RECOMMENDED that the above refunds be accomplished within ninety (90) days. This Recommended Order entered this 13th day of October, 1980, in Tallahassee, Florida. P. MICHAEL RUFF Hearing Officer Division of Administrative Hearings 101 Collins Building Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 13th day of October, 1980. COPIES FURNISHED: R. M. C. Rose, Esquire 1020 East Lafayette Street Tallahassee, Florida 32301 William H. Harrold, Esquire 101 East Gaines Street Tallahassee, Florida 32301
Findings Of Fact Petitioner is the receiver for Bayside Club, Islamorada, Inc., a dissolved Florida corporation ("Bayside"). Mr. Joseph Popplewell is a general contractor and former president of Bayside. Respondent is the governmental entity authorized by Chapter 76-441, Section 14(1), Laws of Florida, to adopt impact fees for the water system in the Florida Keys, to equitably adjust the financial burden of a new pipeline, and to expand it or improve appurtenant facilities between existing customers and new water users. In 1986, Bayside sought to construct a 30 unit hotel on approximately one acre of land in Monroe County, Florida. The development project was formally classified as an expansion of an existing eight unit hotel. The existing hotel, however, had little, if any, useful life, and, in substance, the project involved the development of a new 30 unit hotel. Bayside obtained a building permit on June 4, 1985. In the same month, the building permit was challenged by an adjacent land owner. The challenge asserted that the existing hotel constituted a grandfathered nonconforming use and that the building permit improperly treated the development site as if it were located in a zoning district which permitted hotel usage and subsequent expansion. During the last half of 1985, the Monroe County Commission considered the challenge to the building permit and found that the building permit was valid. The adjacent landowner filed suit against Bayside. The circuit court upheld the validity of the building permit. The suit was finally decided on May 29, 1990, when the Third District Court of Appeal reversed the lower court's decision that the building permit was valid. Dowd v. Monroe County, 557 So.2d 63 (Fla. 3d DCA 1990). On May 29, 1990, the circuit court entered its order declaring the building permit invalid. In 1986, Bayside was advised by Respondent that unit water system development fees ("impact fees") were scheduled to increase from $1,500 to $2,000. Bayside chose to avoid paying impact fees at the increased unit rate and to achieve a savings in development costs. On or about April 18, 1986, Bayside executed an Agreement For Water Service. On or about April 29, 1986, Bayside issued a check payable to Respondent in the amount of $36,840, which included impact fees in the aggregate amount of $33,000. As provided in Florida Administrative Code Rule 48-3.002 2., the Agreement For Water Service expressly stated in paragraph 1 that "SAID SYSTEM DEVELOPMENT CHARGE SHALL NOT BE REFUNDABLE." Construction of the proposed hotel stopped sometime in 1986. A receivor was appointed for Bayside by the appropriate circuit court on June 14, 1991. Sometime in early 1992, the receiver for Bayside requested a refund of the impact fees. Respondent denied that request in a letter dated February 27, 1992, but refunded amounts paid by Respondent in excess of the impact fees. Respondent's denial of Petitioner's request for a refund did not constitute an unreasonable classification and did not establish a differential rate that was either unjust or inequitable. Respondent has consistently applied Florida Administrative Code Rule 48-3.002 2. to prohibit the refund of impact fees regardless of the classification or rate charged the person who paid the impact fee. Petitioner had adequate notice in Rule 48-3.002 2. and the Agreement For Water Service that the impact fees were nonrefundable. Respondent reasonably anticipated that the projected costs for expanding the water system would be incurred. The county commission and circuit court both upheld the validity of the building permit. If Bayside reasonably anticipated that projected costs for expanding the water system and appurtenant facilities would not be incurred due to a suit challenging the building permit, Bayside had the option of not paying the impact fees until the final conclusion of litigation. Bayside was on notice that the impact fees were nonrefundable and chose to forego its option not to pay the fees until the conclusion of the suit challenging the building permit. Bayside made a business decision to save money and time by paying the impact fees when it did. Viewed in the light of hindsight, that business decision was imprudent. Bayside did not notify Respondent that the costs of expanding the system were not reasonably anticipated until six years after Bayside chose to pay the impact fees. The nonrefundable impact fees imposed by Respondent in 1986 were just and equitable. Expansion of the water system pipeline and appurtenant facilities was reasonably required as a result of the development proposed by Bayside at the time that the impact fees were imposed. The costs attributable to such expansion were reasonably anticipated by Respondent at the time that the impact fees were imposed. The use of the impact fees was limited to meeting such reasonably anticipated costs of expansion. The impact fees imposed by Respondent in 1986 did not exceed a pro rata share of reasonably anticipated costs. Expansion of Respondent's water system was necessary irrespective of the proposed hotel. The expansion of Respondent's water system and appurtenant facilities was financed through the sale of debentures. The indebtedness incurred is made good through revenues in the form of rates, fees, and other charges. Under such circumstances, rates and fees were set with a view towards raising the money necessary to repay the loan. The impact fees did not cease to be just and equitable merely because they were set high enough to meet the water system's reasonably anticipated capital requirements.
Findings Of Fact The Petitioner is a utility regulated by the Commission that is in the business of acquiring and operating water and sewer systems in Florida, principally in Central Florida. It now operates 39 systems, of which at least 30 water systems and 5 sewer systems are located in Orange, Lake and Seminole counties. In this case, the utility serves 547 water customers and 528 sewer customers in a subdivision known as University Shores. Southern commenced operating these systems in June, 1978, purchased them from University Shores Utilities, Inc. in September, 1978, and applied to the Commission for a transfer, which application was approved November 1, 1978, by Order 8550. The rates for service by these systems were granted by Order 6822 on August 6, 1975. Notwithstanding customer complaints of the quality of the water service (smell, taste, excess chlorine, sediment and no-noticed interruptions), the systems are in compliance with governmental standards. No customer complaints had been made to regulatory agencies, and the utility had handled only five for 1979 and to date in 1980. Due to a large increase in number of customers, a year end, rather than average, test year is appropriate; and the facilities are used and useful. Petitioner's rate bases are computed as follows: WATER SEWER Year end test year plant $526,737 $957,176 Construction Work in Progress 2,500 -0- Acquisition adjustment (net of amortization) (41,490) (78,300) Accumulated depreciation (67,172) (128,393) CIAC (net of amortization) (186,470) (489,438) Working Capital 5,476 6,386 Income tax lag (2,951) (4,225) $236,630 $263,214 The following capital structure and rate of return is that agreed to by the Petitioner and Respondent prior to intervention by the customers: WEIGHTED TYPE AMOUNT RATIO COST COST Common Stock $1,882,055 60.44 14.0 percent 8.46 Long Term Debt 1,037,372 33.31 8.89 2.96 Cost Free 194,768 6.25 0 0 TOTAL $3,114,195 100.00 11.42 percent The above rate bases and rate of return provide an authorized constructed net operating income from water service of $22,523 and from sewer service of $30,059. Although the return on water service is only 9.52, the revenue is limited to that in the application. This results in the following constructed statement of operations for year ended June 30, 1979: WATER SEWER Operating Revenue $94,550 $117,814 Operating Expense Operation 41,853 49,838 Maintenance 1,950 1,244 Depreciation 5,964 7,451 Amortization (860) (1,598) Taxes, other than income 8,363 9,726 Income taxes 14,757 21,124 TOTAL $ 72,027 $ 87,785 Net Operating Income $ 22,523 $ 30,059 Rate Base $236,630 $263,214 Rate of Return 9.52 11.42 percent It is noted that the above revenue requirement is more than the interim authorized revenue of $68,841 for water and $81,720 for sewer. The staff proposed that the rate structure should be changed from the present block structure for water and flat rate for sewer to a base facility charge for both water and sewer. This concept is appropriate since it serves to conserve water and insures that each customer pays his fair share of the costs of providing service. No evidence opposing this type rate structure was presented.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the application of Southern States Utilities, Inc., University Shores Division, be granted and that the utility he authorized to file new tariffs to be approved by the Florida Public Service Commission that would have provided for the test year ending June 30, 1979 annual gross revenues of $94,550 for water service and $117,814 for sewer service. It is further RECOMMENDED that the refund bend be returned to utility. DONE and ORDERED this 25th day of November, 1980, in Tallahassee, Florida. H. E. SMITHERS Hearing Officer Division of Administrative Hearings 101 Collins Building Tallahassee, Florida 32301 (904) 488-9675 COPIES FURNISHED: R. M. C. Rose, Esquire 1020 East Lafayette Street Tallahassee, Florida 32301 William H. Harrold, Esquire Florida Public Service Commission 101 East Gaines Street - Fletcher Bldg. Tallahassee, Florida 32301 Jack Shreve, Esquire Stephen C. Burgess, Esquire Benjamin H. Dickens, Jr., Esquire Office of Public Counsel Holland Building - Room 4 Tallahassee, Florida 32301 Steve Tribble, Clerk Florida Public Service Commission 101 East Gaines Street - Fletcher Bldg. Tallahassee, Florida 32301 Robert T. Mann, Chairman Public Service Commission 101 East Gaines Street - Fletcher Bldg. Tallahassee, Florida 32301
The Issue Whether Respondent committed the violations alleged in the Administrative Complaint. If so, what action should be taken against him.
Findings Of Fact Based upon the evidence adduced at hearing and the record as a whole, the following findings of fact are made: The Department is a state government licensing and regulatory agency. Respondent is registered with the Department as a septic tank contractor. Gayle Gibson owns and resides in a three-bedroom, two- bath single-family home located at 2425 Riverlane Terrace in Fort Lauderdale, Florida (Gibson's property). In late 1993 or early 1994, Gibson was experiencing problems with the septic system on her property (in the form of sewage backup and resultant unpleasant odors). Gibson contacted Respondent (who is the son of Gibson's former mailman) and asked him to come to her property to ascertain what was wrong and to take whatever remedial action was necessary. Respondent complied with Gibson's request and went to her property. After examining the situation, he told Gibson that she needed to have the septic tank on the property pumped and a new drainfield installed. Respondent recommended that the new drainfield be installed on the side of Gibson's home, instead of in the front yard (where the existing drainfield was located). Gibson made arrangements for Respondent to perform these services in exchange for money and art work. These arrangements between Gibson and Respondent were not reduced to writing. On or about January 20, 1994, Respondent pumped out the septic tank on Gibson's property and Gibson paid him $200.00, by check, for having performed such work. In late February of 1994, Respondent installed a new drainfield on the side of Gibson's home and Gibson paid him $500.00, by check, for having performed such work. At no time did Respondent obtain a permit to install the drainfield. The heavy equipment that Respondent used to perform the work was unloaded in Gibson's front yard. The unloading of the heavy equipment damaged the front yard. It cost Gibson a total of $175.00 to have the damage repaired. The drainfield that Respondent installed was an EEE ZZZ Lay Drain system comprised of Styrofoam material. Considering the size of Gibson's home, the drainfield was grossly undersized, as Respondent should have realized. It was approximately one-third the size it should have been. Predictably, shortly after this undersized drainfield was installed, Gibson again experienced sewage backup and related problems on her property. Gibson informed Respondent of the reoccurrence of these problems. Respondent told Gibson that he would take remedial action if Gibson paid him another $500.00. Gibson refused to make any additional payments to Respondent. Respondent never returned to Gibson's property to correct the error he had made in installing an undersized drainfield. Gibson contacted the Department and advised it of the problems she was experiencing with her septic system. Following an investigation of the matter, the Department issued the Administrative Complaint described in Preliminary Statement of this Recommended Order. Subsequently, on January 13, 1998, in an unrelated case, the Department issued and served on Respondent a citation imposing a $500.00 fine against Respondent for abandoning, without good cause, a septic system installation project he was contractually obligated to complete. The citation contained a "Notice of Appellate Rights," which indicated that "[t]his citation becomes a Final Order of the Department if you have not contested the Citation within thirty (30) days of the date which the Citation was served upon you." Respondent has neither "contested" the citation, nor paid the $500.00 fine it directed him to pay.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department enter a final order finding Respondent guilty of the unlawful conduct alleged in the Administrative Complaint and disciplining him therefor by suspending his septic tank contractor's registration for 90 days and fining him in the amount of $1,000.00. DONE AND ENTERED this 29th day of June, 1998, in Tallahassee, Leon County, Florida. STUART M. LERNER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 29th day of June, 1998.
Findings Of Fact Quality of Service There were no customers of the utility present at the public hearing, except for the Department of the Navy. As a result, there is no public testimony in the record relating to the quality of the water and sewer service provided by the utility. However, a representative of the Department of Environmental Regulation and an engineer from the Public Service Commission agree that the utility's water treatment meets all relevant quality standards, and its sewage treatment is within acceptable limits. Nevertheless, there exist problems of infiltration into the company's sewage lines which have resulted in variations in its level of treatment efficiency. The Department of the Navy acknowledges that some of these infiltration problems originate at the Navy housing facility, and the Navy asserts that corrective measures will be undertaken. In the meantime, the Navy contends that the sewage flows from its housing facility have been underestimated, resulting in an overstatement of revenue to the utility. However, there is insufficient specific evidence in the record to support a finding of fact resolving this issue. Since the variations in the utility's sewage treatment efficiency are within acceptable levels, the Company's wastewater treatment is found to be satisfactory. Rate Base By its exhibits, the utility has alleged its adjusted rate base to be $59,401 for water and $87,134 for sewer. Public Service Commission adjustments reduce and correctly state the water rate base to be $19,356 and the sewer rate base to be $65,552. The utility contests the removal of $16,530 from sewer rate base as a contribution in aid of construction (CIAC). This amount is the difference between the $155,000 paid by the Duval County School Board to a partnership consisting of the utility's partners and others, and the $138,170 recorded on the books of the utility. It contends the $16,330 represents a contractor's profit to one of the former partners of utility, but this amount is properly recordable as CIAC and should be removed from rate base. Other adjustments are either not contested, or make no material difference in the utility's revenue requirements, and should be accepted. The accompanying schedules 1 and 3 detail the rate base for both water and sewer with appropriate explanations for the adjustments. Cost of Capital Representatives from the utility and from the Public Service Commission presented evidence on the issue of cost of capital. The major area of disagreement relates to the company's capital structure. The Commission contends that the utility is 100 percent debt, while the utility asserts the capital structure to be 52.97 percent equity and 47.03 percent debt. The Commission's contention is based on the annual reports filed by the utility wherein a deficit is reported in the equity account. The utility, however, has made several adjustments to the investment shown in the annual reports which it alleges increase equity from a deficit of $39,804 to a positive amount of $92,727. The first adjustment made by the utility is in the amount of $22,700 to make the amount of investment equal to rate base, in accordance with principles of double entry bookkeeping. However, because revenue requirements of public utilities are based on used and useful plant in service rather than on total assets, it is not uncommon for the rate base to be different in amount from the total capitalization. Thus, this adjustment is unnecessary and improper. The utility's second adjustment increases the amount of investment by $39,464 as the Unrecovered Cost of Abandonment of Utility Plant. The plant to which this adjustment refers was abandoned, and because of the hazards presented by the abandoned structure, it was disassembled and scrapped. The unrecovered costs were written off for tax purposes, but were not written off for regulatory purposes. This amount should be treated as any other loss, and the adjustment to increase investment should be disallowed. When a utility has recovered the cost of a loss due to abandonment through a write off against income, the placement of the amount of the investment in the capital account results in accounting twice for the loss. The third adjustment involves an amount of $57,067 representing loans procured by the utility's partners from a financial institution. Although these loans were made directly to the partners, the proceeds were used by the utility and the company services the debt. The utility contends that these funds are equity, and it has increased the investment account by the amount thereof. However, the intent of the parties to the transaction was that the funds borrowed by the partners were loaned to the utility, not invested in it. Accordingly, the utility's adjustment is improper; the amount of the loan should be considered as debt in the utility's capital structure; and it should be allowed to earn the embedded cost of this debt, but not an equity return on the amount thereof. In summary, since this utility's equity account has a deficit balance, the appropriate capital structure is 100 percent debt. The cost of this debt is its embedded cost, estimated to be 11.75 percent overall, and the weighted cost is 10.21 percent, as shown in the following table. CAPITAL STRUCTURE COMPONENT PERCENT OF AMOUNT CAPITAL COST RATE WEIGHTED COST Mortgage Note $36,593 20.9 8.00 2.312 Loans Outstanding 48,162 38.0 9.69 3.681 Proposed Note 41,870 33.1 12.76 (est) 4.220 TOTAL $126,625 100.0 10.213 perc. These "Amounts" are the non-current portion of the debt. Operating Statements The accompanying schedules 2 and 4 detail the operating statements for both water and sewer, with appropriate adjustments. The utility contests the Commission's disallowance of depreciation on its proforma plant acquisition. However, the plant has not yet been constructed. Thus, although the proforma plant adjustments have been agreed to, depreciation expense thereon cannot be allowed. The utility further challenges a Commission adjustment disallowing depreciation expense on contributed assets. This adjustment is proper and should be allowed. The utility also contends that it should be allowed income taxes, asserting that an unincorporated proprietorship is entitled to the same income tax expense as a corporation, and that the related income taxes do not have to be paid, merely accrued. However, the purpose of the income tax accounts in the NARUC Uniform System of Accounts is to allow entities which pay income accounts in which to record them. There is no provision in the uniform system for recordation of a nonexistent expense. Since the utility admits that the partnership has paid no income taxes, the disallowance is proper. Finally, the utility contests what it claims is disallowance by the Commission of all its proposed amortization of abandoned plant. However, the exhibits reflect that the Commission increased the amount of amortization expense from $2,790 to $3,284 for water, and from $3,016 to $6,468 for sewer, to allow for amortization of the abandoned plant. Revenue requirements The application of a 10.21 percent rate of return to the adjusted rate base for both water and sewer requires that the utility receive gross annual revenues of $33,752 for water and $81,432 for sewer. These revenues represent increases of $9,381 and $23,446 for water and for sewer, respectively. See Schedules 2 and 4 attached). Rate structure The utility provides water service to an average of 67 residential customers, 12 general service customers and 11 multi-dwelling customers (Average 346 Units). It provides sewer service to an average of 26 residential customers, 12 general service customers and 4 multi-dwelling customers (Average 645 Units). The present residential water rates are structured to provide for a minimum quarterly charge, which includes a minimum number of gallons, and a one- step excess rate over that minimum. The proposed rates follow the same basic structure. The present general service water rates are structured in the same manner, except that the rates for this classification are approximately 25 percent higher than residential. The proposed rates follow the same basic structure. The present multi-dwelling water rates are structured in compliance with the provisions of the old Rule 25-10.75, Florida Administrative Code, which provided that the rate for master metered multiple dwelling structures should be 66 2/3 percent of the minimum residential rate, with an equal minimum gallonage allowance included within the unit minimum charge. The total number of gallons to be included within the minimum gallonage allowance was determined by the number of units served, with excess gallons over the cumulative allowance to be billed at the excess residential rate. The proposed races follow the same basic structure for determining the minimum gallonage allowance and excess gallonage over the minimum allowance. The proposed minimum charge per unit has been structured approximately 25 percent higher than the proposed minimum unit charge for residential service. The proposed excess rate has been structured at the same level as general service, which is approximately 25 percent higher than the residential service rate. Any rate structure that requires a customer to pay for a minimum number of gallons, whether those gallons are used or not, is discriminatory. Over 27 percent of this utility's basic residential customers did not use as much as the minimum gallonage allowance during the test year. The average number of gallons consumed in the gallon brackets below the minimum allowance bracket was 3,197 gallons per customer per quarter. A rate structure that requires the general service customers to pay a higher rate than the other classifications of service is also discriminatory. Since the Cost of Service to Multiple Dwelling Structures Rule 25- 10.75, Florida Administrative Code, was repealed by Commission Order No. 7590, issued January 18, 1977 in Docket No. 760744-Rule, it has been the practice of the Public Service Commission to structure this type customer in the general service classification, and to structure water rates under the Base Facility Charge form of rate design. The basic concept of this type rate design is to determine a base charge whose foundation is based on the associated costs of providing service to each type customer. The charge covers associated costs such as transmission and distribution facility maintenance expenses, depreciation, property taxes, property insurance, an allocated portion of customer accounts expenses, etc. The amount of the charge is determined by an equivalent residential connection formula using the standard meter size as the base. There are not any gallons included within the frame of the Base Facility Charge. The second structure is to determine the appropriate charge for the water delivered to the customer. This charge would cover related costs such as pumping expenses; treatment expenses, an allocated portion of customer accounts expenses, etc. The primary reasoning supporting this type structure is that each customer pays a prorata share of the related facility costs necessary to provide service, and thereafter the customer pays for only the actual number of gallons consumed under the gallonage charge. The present residential sewer rates are structured in the manner of a quarterly flat-rate charge for all residential customers. The proposed rates are structured with a minimum charge, which includes a minimum number of gallons and an excess rate above that minimum. The present general service sewer rates are structured so that a percentage factor is applied to the water bill to determine the sewer charge. The rates for this classification are structured approximately 25 percent higher than residential. The proposed rates are structured with a minimum charge, which includes a minimum number of gallons and an excess rate above the minimum. The proposed rates are structured approximately 25 percent higher than residential. The present multi-dwelling sewer rates are structured in compliance with the provisions of the old Rule 25- 10.75, Florida Administrative Code, which provided that the rate for sewer service to multiple dwelling units should be 66 2/3 percent of the basic charge for sewer service to single residential units. The proposed rates are structured with a minimum charge for each unit, which includes a minimum number of gallons, and an excess rate over the minimum. The minimum charge per unit and the excess rate are structured approximately 25 percent higher than residential. Since the repeal of Rule 25-10.75, Florida Administrative Code, it has been the practice of the Public Service Commission to structure this type customer in the general service classification of customers, and to structure sewer rates under the Base Facility Charge form of rate design. This should be implemented by the utility for both water rates and sewer rates. The utility has been misapplying its schedule of rates for the commercial sewer classification of service. The schedule calls for 250 percent of the water bill with a minimum charge of $0.15 monthly ($24.45 quarterly). However, the utility has been billing its commercial sewer customers 250 percent of the water bill plus the minimum charge. This amounted to an overcharge to this customer classification of approximately $1190 during the test period. The utility should be required to make the appropriate refund to each commercial sewer customer, and the amount of this overcharge has been removed from test year revenues on the attached schedule 4. The utility is collecting a meter installation charge of $200, and a charge of $246 for each connection to the sewer system, without any apparent tariff authority. Further, the charges made for customer reconnect after disconnection for nonpayment are not adequate to cover the associated costs of this service. An investigation docket should be opened to consider the appropriateness of the meter installation charge, and to receive evidence of actual costs of service restoration. Finally, insufficient facts were presented to support a finding relative to the validity of the utility's sewer service contract with the Navy or the compatibility of the charges for sewer service to the Navy with the utility's tariff. These issues should be revisited during the course of the investigation docket. However, the utility's practice of requiring customer deposits when service is billed in advance should be discontinued.
Recommendation Based upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the application of Buccaneer Service Company, 1665 Selva Marina Drive, Atlantic Beach, Florida 32233, be granted in part, and that the utility be authorized to receive gross annual water revenue of $33,752, and gross annual sewer revenue of $81,423, by rates to be approved by the Public Service Commission. It is further RECOMMENDED that the utility be required to adopt a Base Facility charge form of rate design for both water and sewer rates, and to make appropriate changes in its tariff. It is further RECOMMENDED that the utility be required to refund to each commercial sewer customer a prorata portion of the total amount of overcharges collected since the beginning of the test year. It is further RECOMMENDED that an investigation docket be opened for the purpose of making further inquiry into the appropriateness of the utility's meter installation charge, to receive evidence of actual costs of service restoration, and to determine the validity of the utility's contract for sewer service with the Navy and the appropriate rate to be charged for this service. And it is further RECOMMENDED that the utility be required to discontinue the practice of collecting customer deposits for service which is billed in advance. THIS RECOMMENDED ORDER entered on this 6th day of August, 1980. WILLIAM B. THOMAS, Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675
The Issue The issue is whether Petitioner's request for a variance from agency rules governing daily domestic sewage flow so as to authorize an increase in the number of seats for his restaurant located in Howey in the Hills, Florida, should be approved.
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: Petitioner, Fletcher C. Bishop, Jr., is the owner of a parcel of property located at Lot 22, Block C-2, Lakeshore Heights Subdivision, 102 South Palm Avenue, Howey in the Hills, Florida. The property consists of .0946 acre, or approximately one-tenth of an acre, and is one of several parcels located in Block C-2. Since January 1997, the property has been leased to Robert P. Jencic, who now operates a pizza restaurant on the premises known as Hungry Howies Pizza Shop. According to Jencic, he has a contract to purchase the property from Bishop at the end of his lease, or on March 1, 1998. Whether the property was actually purchased by Jencic on that date is not of record. Lakeshore Heights Subdivision is not served by a central wastewater treatment system; rather, each lot is served by a septic tank and drainfield system. Lot 22 adjoins several other commercial or business establishments situated on Lots 20, 21, 23, and 23A in the western half of Block C-2, and all share a common drainfield easement located to the rear of the lots. Except for Lot 20, all lots have tied into the drainfield and now use the easement for waste disposal purposes. Because they share a common easement, each lot has been allocated a portion of the easement for its respective septic tank and drainfield. In Petitioner's case, he has been allocated approximately 990 square feet. After Jencic signed a commitment in January 1997 to lease and purchase the property, he made extensive renovations in order to convert the property to a restaurant. On or about February 20, 1997, Jencic met with a representative of the Lake County Health Department, an agency under the direction and control of Respondent, Department of Health (Department). At that time, Jencic filed an application for a site evaluation concerning the replacement of the existing onsite sewage disposal system. The application noted that he intended to operate a pizza restaurant with 56 proposed seats. On February 21, 1997, a site evaluation was conducted by Robin Gutting, a Lake County Department of Health environmental supervisor. According to her report [t]he property size of 4120 square feet with available central water will allow a maximum 236 gallons of sewage flow per day . . . This will allow a 12 seat restaurant using single service articles and operating less than 16 hours per day. . . The size of the Onsite Sewage Treatment and Disposal System would be a minimum 900 gallon tank with 197 square feet of drainfield trench configuration. (emphasis added) Jancic received a copy of the report on or about March 12, 1997, and it clearly conveyed to him the fact that he could operate no more than 12 seats in his restaurant due to sewage flow limitations on his property. Despite being on notice that the restaurant would be limited to only 12 seats due to the lot flow restrictions, on March 19, 1997, Jencic filed an application with the Lake County Health Department for a construction permit to replace the existing septic tank with a 900 gallon septic tank, install a 900 gallon grease trap, and utilize a 197 square-foot primary drainfield and a 200 square-foot bed system. The application indicated that Jencic intended to operate a restaurant "for 12 seats, single service, open less than 16 hours per day." On May 28, 1997, Jencic's application was approved for "12 seats, single service, open less than 16 hours per day." After installing the new tank and grease trap, Jencic began restaurant operations subject to the above restrictions. After operating his pizza restaurant for a short period of time, Jencic determined that he could generate a profit only if the restaurant could be expanded to allow more seats, and he could use china and silverware (full service articles) rather than single service articles (throwaway utensils). To do this, however, he would need a larger sewage treatment system. By letter dated November 9, 1997, Jencic requested a variance from various Department standards for onsite sewage treatment and disposal systems so as to "increase the seating from 12 seats to a maximum of 36 seats and [authorize] the use of china, silverware, and dishes." Although the letter does not refer to any rules, the Department has treated the letter as seeking a variance from three of its rules found in Part I, Chapter 64E-6, Florida Administrative Code. First, Rule 64E-6.001(4)(c), Florida Administrative Code, provides that an establishment cannot exceed the lot flow allowances authorized under Rule 64E-6.005(7)(c), Florida Administrative Code. If the seating capacity in the restaurant were increased, Jencic would exceed the lot flow allowances in violation of this rule. Second, Rule 64E-6.005(7)(b), Florida Administrative Code, prescribes the manner in which a determination of lot densities shall be made. Among other things, daily sewage flow cannot exceed an average of 2,500 gallons per day per acre. The easement which Petitioner shares with other lots is far less than an acre, even counting the space allocated to the adjoining lots. Finally, Rule 64E-6.008(1), Florida Administrative Code, provides that minimum design flows for systems serving a structure shall be based on the estimated daily sewage flow as determined by Table I of the rule. That table specifies an estimated daily sewage flow of 20 gallons per seat for restaurants using single service articles only and operating less than 16 hours per day. Therefore, a 12-seat restaurant with those operating characteristics would require a system that could handle at least 240 gallons of sewage flow per day. The table further provides that a restaurant operating 16 hours or less per day with full service will generate an estimated sewage flow of 40 gallons per seat. Thus, a restaurant with up to 36 seats, as Jencic has requested, would require a system handling at least 1,440 gallons of sewage flow per day. In order to qualify for a variance, an applicant must show that (a) the hardship was not caused intentionally by the action of the applicant; (b) no reasonable alternative exists for the treatment of the sewage; and (c) the discharge from the onsite sewage treatment and disposal system will not adversely affect the health of the applicant or significantly degrade the groundwater or surface waters. In its letter denying the variance, the Department asserts that Jancic has failed to show that items (a) and (c) have been satisfied. Jencic, who recently immigrated to this country, will suffer considerable financial hardship if the request for a variance is denied. Indeed, he demonstrated at hearing that his life savings have been invested in the restaurant, and his parents have placed a substantial mortgage on their property to assist him in his endeavor. If he does not purchase the property as required by his contract, he will be forced to restore the property to its original condition at great expense. In short, given his investment in renovations and equipment, unless the restaurant is expanded, he fears he must file for bankruptcy. Both parties agree that Jancic will suffer a hardship if the variance is not approved. However, Jancic was aware of the lot flow limitations before he made application to replace the existing septic tank in March 1997, and well before he began operating the restaurant in May 1997. Unfortunately, then, it must be found that the hardship was intentionally created by Jencic's own actions. If the variance were approved, it would result in a much larger amount of sewage being discharged into the easement, which could not handle that amount of flow. This in turn could cause the system to fail, thus creating a sanitary nuisance and the leaching of sewage into the groundwater. In this respect, Jancic has failed to show that the discharge will not adversely affect the health of the applicant or significantly degrade the groundwater or surface waters. Jencic offered into evidence a summary of his water usage during a representative period in 1997. That document indicated that metered water usage was approximately 3,000 to 4,000 gallons per month, even when he temporarily (and without authority) expanded his restaurant to 24 seats during a recent two-month period to test water consumption at the higher seating capacity. However, because the sewage strength of a restaurant is far greater than that of a residence, a sewage system must be sized on estimated waste flow, and not metered water flow rates. Therefore, the fact that Jancic's monthly metered water usage is less than 4,000 gallons is not relevant to a determination of the issues. The same finding must be made with respect to Jancic's well-intentioned efforts to decrease water flow by installing high pressure toilets and timed spring systems on his hand sinks. Jencic also requested that he be allowed "spike time" during the hours of 11:30 a.m. to 1:00 p.m. and 6:00 p.m. to 7:30 p.m., which are his peak hours of the day. In other words, the undersigned assumes that he is asking that consideration be given to the fact that he has virtually no business during the other hours of the working day, and that the flow during the peak hours alone would not be excessive on a daily basis. However, the Department's rules are calculated to maximum usage, and thus a "spike" allowance is not allowed.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Health enter a Final Order denying Petitioner's request for a variance. DONE AND ENTERED this 11th day of March, 1998, in Tallahassee, Leon County, Florida. DONALD R. ALEXANDER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 11th day of March, 1998. COPIES FURNISHED: Angela T. Hall, Agency Clerk Department of Health Building 6, Room 102 1317 Winewood Boulevard Tallahassee, Florida 32399-0700 Robert P. Jencic 102 South Palm Avenue Howey in the Hills, Florida 34737 Marya Reynolds Latson, Esquire Post Office Box 2408 Ocala, Florida 34478 James Hardin Peterson, III, Esquire Department of Health Building 6, Room 102 1317 Winewood Boulevard Tallahassee, Florida 32399-0700
Findings Of Fact The Petitioner is a wholly owned subsidiary of Florida Land Company which is, in turn, a wholly owned subsidiary of the Continental Group, Inc., a New York corporation. The parent developer companies are providing and will continue to provide the required financial backing. The Utility served 421 primarily residential customers at the end of 1979, the test year agreed to by the parties. This was the first rate proceeding involving the Utility since it was established in 1975. Service The Utility is providing satisfactory water and sewer service. There were no service complaints presented at the public hearing by the customers, nor were there any citations or corrective orders outstanding. Rate Base The Utility experienced rapid growth during the 1976 - 1979 period, increasing the number of customers served from 62 to 421. Therefore, year end rate base rather than average rate base should be utilized. 1/ The water and sewer rate bases are $155,920 and $179,360 respectively. These amounts are based on the computations detailed below and incorporate proposed Commission adjustments to which the utility stipulated. In addition, reductions to plant in service and construction work in progress (CWIP) were made by the Utility to reflect excess plant capacity which is of no benefit to current customers. The Utility replaced its reverse osmosis water treatment plant with a lime softening system in 1979. The new facility will be somewhat more expensive to operate but will improve water quality and fire flow (pressure). Because of the reverse osmosis water treatment plant retirement, the $3,615 in building and $34,541 in treatment plant assets remaining on the Utility books should be removed. This is a total adjustment to Utility Plant in Service of $38,156. A further reduction in both water and sewer rate base is needed to adjust the working capital allowance to the standard authorization, which is one-eighth of operation and maintenance expenses. The proper amounts to he authorized in these accounts are $5,338 water and $2,931 sewer. TEST YEAR PER UTILITY UTILITY ADJ. TEST ADJ. TO YEAR PER COMM. ADJ. & CORRECT. TO UTILITY ADJ. UTILITY TEST YEAR EXHIBIT BALANCE TEST YEAR $820376. $-551059. $269317. $-38156. $231161. 57866. -57866. 0. 0. 0. -18841. 17155. -1686. 0. -1686. -238419. 159526. -78893. 0. -78893. Water Rate Base Plant in Svc. C.W.I.P. Accum. Depr. C.I.A.C. Net of Amort. Working Capital Allowance 4755. 1421. 6176. -838. 5338. Income Tax Lag 0. 0. 0. 0. 0. Rate Base $625737. $-430823. $194914. $-38994. $155920. Sewer Rate Base UTILITY COMM. ADJ. TEST UTILITY ADJ. TEST & CORRECT. YEAR PER ADJ. TO YEAR PER TO UTILITY ADJ. UTILITY TEST YEAR EXHIBIT BALANCE TEST YEAR Plant in Svc. $591945. $-205690. $386255. $0. $386255. C.W.I.P. 77919. -77919. 0. 0. 0. Accum. Depr. -2815. 2551. -264. 0. -264. C.I.A.C. Net of Amort. -321611. 112049. -209562. 0. -209562. Working Capital Allowance 2558. 401. 2959. -28. 2931. Income Tax Lag 0. 0. 0. 0. 0. Rate Base $347996. $-168608. $179388. $-28. $179360. Operating Revenues The Utility is seeking water revenue of $41,429 and sewer revenue of $35,550. Computations and adjustments in support of these amounts along with test year expenses are detailed below. Because of the extraordinary expenses associated with replacement of the water treatment plant, it would not be appropriate to utilize test year data to determine operating costs. Therefore, a projected or pro forma operating expense of $42,789 removing replacement expenses is proper. A further adjustment to water operations is required to eliminate $1,987 of depreciation expense on contributed property as not authorized by current law. 2/ In addition, the useful life of various items of equipment should be increased to periods of 20 to 40 years. These extended depreciation periods are based on an engineering study which the Utility does not challenge. Finally, the requested revenue increase of $27,432 and the associated gross receipts tax of $686 are reversed to show test year operating results. The requested sewer revenue increase of $19,413 and gross receipts tax of $485 are also reversed on the sewer operating statement to show test year operating results. As with the water plant, depreciation on contributed sewer plant is disallowed, reducing depreciation by $5,261. Water Operating Statement UTILITY COMM. ADJ. TEST UTILITY ADJ. TEST & CORRECT. YEAR PER ADJ. TO YEAR PER TO UTILITY ADJ. UTILITY TEST YEAR EXHIBIT BALANCE TEST YEAR $ 14006. $ 27423. $ 41429. $-27423. $ 14006. 38039. 11368. 49407. -6678. 42789. 0. 0. 0. 0. 0. 6325. 3762. 10087. -5525. 4562. 0. 0. 0. 0. 0. 1979. 500. 2479. -686. 1793. 0. 0. 0. 0. 0. 0. 0. 0. 0. 0. Oper. Revenues Oper. Expenses Operation Maintenance Depreciation Amortization Taxes Other Than Income Other Expenses Income Taxes UTILITY COMM. ADJ. TEST UTILITY ADJ. TEST & CORRECT. YEAR PER ADJ. TO YEAR PER TO UTILITY ADJ. UTILITY TEST YEAR EXHIBIT BALANCE TEST YEAR Total Operating Expenses $46343. $15630. $61975. $-12889 $49084. Oper. Income -32337. 11793. -20544. -14534. -35078. Rate Base $ 825737. $ 194914. $ 155920. Rate of Return -5.17 pct. -16.54 pct. -22.50 pct. Oper. Sewer Operating Statement UTILITY COMM. ADJ. TEST UTILITY ADJ. TEST & CORRECT. YEAR PER ADJ. TO YEAR PER TO UTILITY ADJ. UTILITY TEST YEAR EXHIBIT BALANCE TEST YEAR Revenues $16137. $19413. $35550. $-19413. $16137. Oper. Expenses Operation 20462. 3208. 23670. -233. 23437. Maintenance 0. 0. 0. 0. 0. Depreciation 619. 9060. 9679. -5261. 4418. Amortization 0. 0. 0. 0. 0. Taxes Other Than Income 1747. 630. 2377. -485. 1892. Other Expenses 0. 0. 0. 0. 0. Income Taxes 0. 0. 0. 0. 0. Total Operating Expenses $22828. $12898. $35726. $-5979. $29747. Oper. Income $-6691. $6515. $-176. $-13434. $-13610. Rate Base $847996. $179388. $179360. Rate of Return -1.92 pct. -10. pct. -7.59 pct. Capitalization Debt $ 555,624. 60.96 percent Customer Deposits 6,195. .68 The capitalization of the Utility is as follows: Amount Percent to Total Common Equity 349,627. 38.36 $ 911,446. 100.00 percent Rate Design Both parties seek adoption of a base facility charge rate structure. This rate design provides a fixed charge to each customer served computed on that customer's share of fixed operating costs. The second element of the base facility charge represents the variable cost of water actually used. This rate design provides an equitable method of allocating service costs and has been adopted in virtually all recent water and sewer rate proceedings. The base facility charge should also be utilized where there is a temporary discontinuance of service. The Commission proposes a tariff revision incorporating a monthly standby charge equal to the base facility charge. Again, this method allocates the Utility's readiness to serve costs equitably among both active and temporarily inactive customers.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the petition of Sugar Mill Utility Company be granted in part, and that Petitioner be authorized to file new rates structured on the base facility charge concept, designed to generate gross water revenue of $41,429 annually, and gross sewer revenue of $35,550 annually, based on the number of customers served at the end of the test year. It is further RECOMMENDED that the Petitioner be permitted to retain interim revenues collected pursuant to Respondent's Order No. 9392, and that tie rate refunding bond requirement of said order be cancelled. DONE and ENTERED this 20th day of November, 1980, in Tallahassee, Leon County, Florida. R. T. CARPENTER, Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675
The Issue The issue to be resolved in this proceeding concerns whether the Petitioner is entitled to the grant of a variance for the installation of an onsite sewage disposal system ("OSDS") for his property on the Santa Fe River in Gilchrist County, Florida, in accordance with Section 381.272, Florida Statutes, and Chapter 10D-6, Florida Administrative Code.
Findings Of Fact The Petitioner is the owner of certain real property located in Gilchrist County, Florida, more particularly described as Lot 4, Unit 4, Ira Bea's Oasis, a subdivision. The evidence is not clear concerning whether the plat of the subdivision was actually recorded, although the evidence and the Petitioner's testimony indicates that the lots in the subject subdivision were subdivided in 1965. The evidence does not clearly reflect whether the subdivision was ever platted, however. On April 2, 1990, the Petitioner filed an application for an OSDS permit regarding the subject property. The application was for a new OSDS on the above-described property; and the system was intended to serve a single- family residence, which the Petitioner desires to construct on the subject property for a vacation and retirement home. The proposed residence would contain three bedrooms and a heated or cooled area of approximately 1,100 square feet. In the permit application process, at the Respondent's behest, the Petitioner had a survey performed by Herbert G. Parrish, registered land surveyor. That survey, in evidence as the Respondent's Exhibit 1, reveals a benchmark elevation of 21.65 feet above mean sea level ("MSL"). The proposed installation site is at an elevation of 22.5 feet above MSL. A report by the Suwannee River Water Management District, which is admitted into evidence and was submitted to the Respondent by the Petitioner with the application for the OSDS permit, shows a ten-year flood elevation for the subject property, and River Mile 10 of the Santa Fe River, at 31 feet above MSL. Thus, the subject property is located beneath the ten-year flood elevation. The property is also located within the regulatory floodway of the Santa Fe River, as that relates to required engineering certification and calculations being furnished which will assure that if OSDS's are constructed employing mounding or sand filters, and like constructions, that such related fill deposited on the property within the regulatory floodway will not raise the level of the "base flood" for purposes of the rules cited hereinbelow. No evidence of such certification by an appropriately-registered engineer was offered in this proceeding concerning the installation of a mounded system and its effect on the base flood level. The surface grade level of the subject property at the installation site is 9.5 feet below the ten-year flood elevation. The grade elevation of the subject property is also .5 feet below the "two-year flood elevation", and the property has been flooded once in the past three years and has been flooded approximately four times in the past 15 years. It has thus not been established in this proceeding that the property is not subject to frequent flooding. On April 18, 1990, the Respondent denied the Petitioner's application for an OSDS permit by letter of that date. The Petitioner did not make a timely request for a formal administrative hearing to dispute that denial. The Petitioner maintained at hearing that this was, in essence, because the Respondent's personnel informed him that he should seek a variance instead, which is what he did. The testimony of Mr. Fross reveals, however, that, indeed, he was advised of his opportunity to seek a variance but was also advised of his right to seek a formal administrative hearing to contest the denial of the permit itself. Nevertheless, either through the Petitioner's misunderstanding of his rights or because he simply elected to choose the variance remedy instead, the fact remains that he did not timely file a petition for formal proceeding to contest the denial of the OSDS permit itself. Even had a timely petition for formal proceeding concerning the denial of the OSDS permit application been filed, the evidence of record does not establish the Petitioner's entitlement to such a permit. As found above, the property lies beneath the ten-year flood elevation and, indeed, lies below the two-year flood elevation, which subjects the property to a statistical 50% chance of being flooded each year. This and the other findings referenced above indicate that the property has not been established to be free from frequent flooding; and although appropriate "slight-limited" soils are present at the proposed installation site, those soils only extend 50 inches below the surface grade. That leaves an insufficient space beneath the bottom of the drainfield trenches where they would be located so as to have a sufficient volume and distance of appropriate treatment soil available beneath the drain field, if one should be installed. Below 50 inches at the subject site is a limerock strata which is impervious and constitutes a barrier to appropriate percolation and treatment of effluent waste water. Thus, for these reasons, especially the fact that the property clearly lies beneath the ten-year flood elevation and because adequate proof in support of a mounded system which might raise a septic tank and drainfield system above the ten-year flood elevation has not been adduced, entitlement to the OSDS permit itself has not been established. Concerning the variance application actually at issue in this proceeding, the Petitioner has proposed, in essence, two alternative systems. The Petitioner has designed, and submitted as an exhibit, a plan for a holding- tank-type- system. By this, the Petitioner proposes a 250-gallon holding tank, with a venting pipe extending approximately three feet above the level of the ten-year flood elevation, with an attendant concrete retaining wall and concrete base to which the tank would be securely attached. The Petitioner thus postulates that flood waters would not move or otherwise disturb the holding tank and that he would insure that the holding tank was pumped out at appropriate intervals and the waste there from properly deposited at a treatment facility located above the ten-year flood elevation. The precise method of such disposal and its location was not disclosed in the Petitioner's evidence, however. Moreover, the testimony of Dr. Hunter establishes that the deposition of waste water and human waste into the tank, either through pumping, or by gravity line, if the residence were located at an elevation above the inlet to the tank, might well result in a hydraulic condition which would cause the untreated sewage to overflow from the vent pipe of the tank. Moreover, such systems do not insure that public health, the health of the occupants of the site, and ground or surface waters will not be degraded since it is very costly to pump such a tank out which would have to be done on a frequent basis. This leaves the possibility that the user of such a holding-tank-facility could surreptitiously drain the tank into nearby receiving waters or otherwise improperly empty the tank. Even though the Petitioner may be entirely honorable in his intentions and efforts in this regard and not violate the law and the rules of the above-cited chapter in his manner of disposal of the holding-tank effluent, there is no practical, enforceable safeguard against such illegal activity, especially if one considers that the property may later be conveyed to a different landowner and user of the system. The Petitioner also proposes in his testimony and evidence the possibility of using a nondischarging, composting-toilet-type system to handle sewage involving human excreta. Such a system has been shown by the Petitioner's evidence to adequately treat human sewage so that public health and the ground and surface waters involved in and near the site could be adequately safeguarded. The problem with such a system, however, is that the "gray water", that is, waste water from bathtubs, showers, lavatories and kitchens, cannot be disposed of in the composting-toilet system. Such gray water, which also contains viruses, coliform bacteria and nutrients, must be disposed of, according to the rules at issue, in an appropriate sewage disposal system, be it in a septic tank and drain field or through pumping to an appropriate disposal and treatment facility located above the ten-year flood elevation. The Petitioner's proof does not establish how such gray water could be appropriately and safely disposed of in the environmental and public health context at issue herein. Thus, the proposed alternatives suggested by the Petitioner's proof do not constitute minor deviations from the minimum requirements for OSDS's specified in Chapter 10D-6, Florida Administrative Code. Ironically, the composting-toilet system, coupled with a proper disposal system for household gray water, could constitute a reasonable alternative to a conventional system. Thus, the Petitioner's proof, itself, shows that a reasonable alternative may exist, which militates against the granting of the variance, although he did not prove how it could feasibly be accomplished. In summary, therefore, the Petitioner's proof failed to establish that no reasonable alternative exists and that the proposed system would only be a minor deviation from the minimum requirements of the Respondent's rules concerning OSDS's and their installation and operation. The Petitioner established that a reasonable alternative to a conventional OSDS might exist for purposes of granting an OSDS permit itself, had that issue been formally placed before the Hearing Officer, but did not prove how it could feasibly be accomplished and operated. This proof shows, however, that such a reasonable alternative might be found operable which, thus, fails to justify the granting of a variance based upon hardship. If the Petitioner could come forward with proof to establish the feasibility of disposal and treatment of the household gray water involved in an appropriate treatment and disposal site and facility above the ten-year flood elevation, in conjunction with use of a composting- toilet system, a later permit application might be entertained in which could be justified the granting of an OSDS permit.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, the candor and demeanor of the witnesses, and the pleadings and arguments of the parties, it is therefore, RECOMMENDED that a Final Order be entered by the Respondent denying the Petitioner's application for a variance from the statutory and regulatory requirements, cited above, for the issuance of permits. At such time as the Petitioner is able to show changed factual circumstances, as for instance, that a reasonable, feasible alternative system, which will adequately treat and dispose of all household waste water effluent in a manner comporting with the rules of Chapter 10D-6, Florida Administrative Code, a permit application should be entertained. DONE AND ENTERED this 27th day of February, 1991, in Tallahassee, Leon County, Florida. P. MICHAEL RUFF Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 27th day of February, 1991. APPENDIX TO RECOMMENDED ORDER IN CASE NO. 90-4569 The Petitioner did not file proposed findings of fact. Respondent's Proposed Findings of Fact 1-16. Accepted. 17. Rejected, as not supported by the preponderant evidence of record. COPIES FURNISHED: Sam Power, Agency Clerk Department of HRS 1323 Winewood Boulevard Tallahassee, FL 32399-0700 Linda K. Harris, Esq. General Counsel Department of HRS 1323 Winewood Boulevard Tallahassee, FL 32399-0700 Mark Moneyhan, pro se Route 3, Box 407 Perry, FL 32347 Frances S. Childers, Esq. Department of HRS District III Legal Office 1000 Northeast 16th Avenue Gainesville, FL 32609
