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 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
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 Quality of Service During the test year Petitioner provided sewer service to an average of 533 multi-family customers, nine residential customers and two general service customers. Foxmoor Condominium Association, Inc., a customer of Petitioner, has indicated its willingness to cooperate with the utility in its attempt to obtain a copy of the water bill for the condominium from Lee County, which provides the water service. This information will enable the utility to utilize a base facility charge type of rate structure. Evidence of record indicates that Petitioner is in compliance with regulations of the Florida Department of Environmental Regulation, although the utility, through testimony, acknowledged the existence of a consent order between DER and the utility, whereby certain changes should take place regarding the utility operations. The evidence in the record, therefore, supports a finding that the utility's sewer service is presently satisfactory. Rate Base A rate base of $170,087 suggested by PSC staff was acceptable to the utility (see Tr. 84-87). In accepting the rate base figure, the utility did not abandon its request that certain overheads be capitalized and added to rate base. However, necessary information to accomplish this was not timely filed, and, rather than delay this proceeding for presentation and audit, it was agreed that this issue be left open for a future rate case proceeding (see Tr. 20, 21, 41). The complete rate base schedule is attached as Schedule No. 1. Net Operating Income After eliciting the testimony of the various witnesses and considering the various stipulations between the parties, the sole issue remaining in dispute in this proceeding was the appropriate level of compensation for the chief executive officer of the utility. The utility had requested a salary of $13,000 per year. However, based upon the fact that the chief executive officer was actually paid only $3,400 during the test year, that figure is determined to be the appropriate amount of compensation to be allowed in this proceeding. Upon reaching that conclusion the appropriate amount of gross annual revenues is $63,133 (see Schedule No. 2, attached) Cost of Capital The utility had 100 percent debt at a cost of 10.59 percent (see Exhibit R-4), a figure which the utility agreed to as the accepted cost of capital finding for the purposes of this rate case proceeding only (see Tr. 79). Revenue Requirement As indicated in Schedule No. 2, the revenue requirement for the sewer system is $63,133. The revenues produce an overall rate of return of 10.59 percent on sewer rate base. Accordingly, the utility should file revised tariff pages containing rates designed to produce the above-noted amount of gross revenues. Rate Structure The evidence in this proceeding establishes the utility has been improperly billing some customers, and that the utility should be required to make refunds (see Tr. 65). The utility has agreed to make the refunds requested (see Exhibit 3-R). Petitioner's master metered, multi-family customers should be billed on a base facility charge type rate structure. Residential customers should be billed on a flat rate basis because of the relatively small number of these customers during the test period, and because of the difficulty of obtaining information concerning the water consumption due to the fact that water service is provided by the county.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That the application of Old Bridge Utilities, Inc. be granted and the utility be authorized to file revised tariff pages, containing rates designed to produce gross annual sewer revenues of $63,133; That the utility be required to utilize the rate structure described in the body of this Recommended Order; That the issue of capitalization of overhead be left open for resolution in a future proceeding; That the rate refunding-bond, filed by the utility, be returned for cancellation, and That the refunds reflected in the attached schedules discussed herein be made. DONE and ORDERED this 7th day of April, 1981, in Tallahassee, Florida. WILLIAM E. WILLIAMS 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 7th day of April, 1981. COPIES FURNISHED: William H. Harrold, Esquire Florida Public Service Commission 101 East Gaines Street Tallahassee, Florida 32301 William E. Sundstrom, Esquire Myers, Kaplan, Levinson, Kenin & Richards 1020 East Lafayette Street Tallahassee, Florida 32301 Karl L. Johnson, Esquire Nuckolls, Parsons, Johnson and Fernandez 2701 Cleveland Avenue Fort Myers, Florida 33902 ================================================================= AGENCY FINAL ORDER ================================================================= BEFORE THE FLORIDA PUBLIC SERVICE COMMISSION In re: Application of OLD BRIDGE DOAH CASE NO. 80-1577 UTILITIES, INC. for a rate DOCKET NO. 790677-S increase to its sewer customers ORDER NO. 1-10152 in Lee County, Florida. ISSUED: 7-21-81 / The following Commissioners participated in the disposition of this matter: JOSEPH P. CRESSE, CHAIRMAN JOHN R. MARKS, III SUSAN W. LEISNER Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, WILLIAM E. WILLIAMS, held a public hearing on January 15, 1981, in Fort Myers, Florida, on the application of Old Bridge Utilities, Inc. for a rate increase to its sewer customers in Lee County, Florida. The Division of Administrative Hearings assigned Case No. 80-1577 to the above-noted docket. APPEARANCES: WILLIAM E. SUNDSTROM Attorney at Law Myers, Kaplan, Levinson, Kenin & Richards 1020 East Lafayette Street Tallahassee, Florida 32301 On behalf of Petitioner, Old Bridge Utilities, Inc. KARL L. JOHNSON Attorney at Law Nuckolls, Parsons, Johnson and Fernandez 2701 Cleveland Avenue Fort Myers, Florida 33902 On behalf of Intervenor, Foxmoor Condominium Association. WILLIAM H. HARROLD Attorney at Law 101 East Gaines Street Tallahassee, Florida 32301 On behalf of the staff of the Florida Public Service Commission and the public generally. The Hearing Officer's Recommended Order was entered on April 7, 1981. The time for filing exceptions thereto has expired and no exceptions have been filed. After considering all of the evidence in the record, we now enter our order.
The Issue The matter to be resolved by this Recommended Order concerns the Petitioner's Notice of Violation and Order of Corrective Action filed against the Respondent on the subject of alleged violations by the Respondent of the "Florida Safe Drinking Water Act", Sections 403.850 through 403.864, Florida Statutes. Within this complaint document there are six counts constituted of the following allegations: Count I. The Respondent does not continually apply effective disinfection measures to the water distributed to the service connections of the Respondent's water system. Respondent's water system has chlorination equipment installed but a chlorine residual is not continually maintained. This condition has existed since at least February, 1979. These facts show a violation of Rule 17- 22.106(3)(c), Florida Administrative Code. Count II. The Department has not received reports from the Respondent which contain information about the operation and maintenance of the water system. This condition has existed since at least April, 1978. These facts show a violation of Rule 17-22.111(2), Florida Administrative Code. Count III. The Respondent's water system has a daily flow of more than 2,500 gallons per day but less than 0.1 million gallons per day. The operation, maintenance and supervision, if any, of the water system is not performed by a person who has passed an examination that entitled such person to be a certified operator. This condition has existed since at least April, 1978. These facts show a violation of Rule 17-22.107(3)(b), Florida Administrative Code. Count IV. The slab surrounding the well casing has been broken exposing the system to possible contamination. This condition has existed since at least February, 1979. These facts show a violation of Rule 17-22.106(2)(c)2.e., Florida Administrative Code. Count V. The Respondent`s water system has no flow meter for accurately measuring the volume of water distributed by the public water system. This condition has existed since at least February, 1979. These facts show a violation of Rule 17-22.106(3)(g), Florida Administrative Code. Count VI. The Petitioner has incurred costs and expenses in the amount of $57.22 in the course of investigating the case and is entitled to be reimbursed pursuant to Subsection 403.860(3), Florida Statutes.
Findings Of Fact This case is presented for consideration based upon the Notice of Violation and Order of Correction filed by the Secretary of the State of Florida, Department of Environmental Regulation, on August 24, 1979. The action is taken against Arnold H. Parker, an individual who resides in Escambia County, Florida. On September 17, 1979, the Respondent, Parker, by and through his counsel answered the allegations of the Petitioner and requested a Subsection 120.57(1), Florida Statutes, hearing. The request for hearing was granted and on December 6, 1979, in Florida, a formal hearing was held to consider the Petitioner's complaint. (The essential elements of that complaint are reflected in the synopsis reported in the Issue statement of this Recommended Order.) The facts reveal that Daniel C. Walker, an employee of Petitioner, went to Perdido Key, Escambia County, Florida, in February, 1979, for the purpose of inspecting a water system owned and operated by the Respondent and to ascertain the number of service connections associated with the system. When Walker arrived at the location of the Respondent's well, he observed that the above-ground equipment utilized in pumping the water out of the ground was housed in a building. This building had a hole in the roof and the concrete slab surrounding the well casing was broken at the surface allowing for possible contamination by influent. At the time of the inspection a device for introducing chlorine into the extracted water was noted but that device was not connected and no chlorine residual was found in the water system. The water system was not being operated by a certified operator within the meaning of Rule 17-22.107(3)(b), Florida Administrative Code. In addition, the Respondent had not submitted operational reports to the Petitioner since April, 1978. The reports referred to are those reports required by Rule 17- 22.111(2), Florida Administrative Code. While Walker was at the general location of the well in onestion, he observed forty individual lots on which various types of trailers, campers and mobile homes could be found. Walker did not determine if persons were living in these shelters and he does not recall seeing persons in the area of the lots. The witness, Walker, did not observe any restaurant or public food establishment in the area of the well house and lots. On September 25, 1979, Robert Court, another employee of the Petitioner, went to the site of the well house and lots. At that time he counted thirty-two trailers, campers and mobile homes and each of those shelters had a service connection from the well of the Respondent located somewhere on the lot where the shelter was found. The service connection was in the form of a spigot. Court observed several people in the north-east section of the general area which is constituted of the well location and lots. Court returned to the location on November 30, 1979, and in a random survey saw approximately thirty-two trailers, campers and mobile hones. Subsequent to the visits of the employees, the Notice of Violation and Order of Correction was prepared by the enforcement section of the Petitioner and the cost of that preparation was $57.22. The Respondent, Arnold H. Parker, testified in the course of the hearing and his testimony established that there are nine persons who live in the area of the well on a year-round basis and these persons are served by the well during that period of time. Of the nine persons one family, the family of the Respondent, lives in a mobile home and the family is constituted of three persons, the Respondent, his wife and son. In a second mobile home the Respondent's daughter and her husband are found to reside. The final group of persons constituted of the nine full-time residents are the Respondent's daughter, her husband and two children in a third mobile home. Each lot on which the three mobile homes are found is served by a service connection. The remaining lots at the location in question were subdivided approximately two years prior to the hearing date and sold separately with the exception of the three lots where the nine permanent residents reside and two lots where other children of the Respondent resided prior to the February, 1979, inspection by the Petitioner's employee. Respondant sold twenty-four mobile home lots and twelve camper sites to persons other than family members and each of the mobile home lots and camper sites has a service connection to the well. Those persons who use the water system other than the nine permanent residents, use the system from mid-March through mid-September in the calendar year. During that time of usage, there are two families at two separate lots who come down during the week and use the water supply. The number of members in those families was not indicated in the course of the hearing. The balance of the persons using the water supply, excluding the above-mentioned two families and the nine permanent residents, use the shelters for vacation purposes and on the weekend. Some of this latter group would be vacationing in their summer home for a period as long as two weeks. The highest number of persons using the water from the well during the vacation period would be approximately forty persons during holiday weekends in the vacation cycle. From the testimony of the Respondent there would never be more than ten days during the vacation period in which twenty-five or more persons would be utilizing the water supply from the well. The water is brought into the trailers, campers and mobile hones by hoses attached to the spigot service connections and the hoses are removed when the individual owners are not in attendance. The lot owners who are served by the water system of the Respondent pay a fee of $18.00 a year, which the Respondent uses to repair the well pump, for pipe and for the cost of electricity to run the well. The well generating device is a two-horsepower electric pump and the well source is tapped by a two-inch service pipe. A one-half-inch line runs from the main to the service connectors (spigot). After the inspection of February, 1979, the Respondent repaired the broken slab around the well casing and these repairs were made in March or April, 1979. The repairs were depicted in the Respondent's Exhibits 1 and 2 admitted into evidence which are photographs of the well casing after the repair.
Recommendation It is recommended that the action taken by the Petitioner against Respondent pursuant to the Notice of Violation and the Order for Corrective Action be dismissed, to include the Petitioner's claim for costs and expenses. DONE AND ENTERED this 7th day of January, 1980, in Tallahassee, Florida. CHARLES C. ADAMS, Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675 COPIES FURNISHED: William Hyde, Esquire Department of Environmental Regulation 2600 Blair Stone Read Tallahassee, Florida 32301 Barne J. Morain, Esquire 113 North Palafox Street Pensacola, Florida 32501
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
The Issue The issues for consideration in these cases concern whether the Petitioners are entitled to an on-site sewage disposal system ("OSDS") permit, or the grant of a variance from the permitting requirements embodied in the statutes and rules cited herein, so as to authorize installation of an OSDS for property they own near the Suwanee River in Dixie County, Florida. See, Section 381.272, Florida Statutes, and Chapter 10D-6, Florida Administrative Code.
Findings Of Fact The Petitioners are the owners of certain real property located in Dixie County, Florida, in close proximity to the Suwanee River, more particularly described as Lots 22 and 37, High Point Suwanee Riverfront Estates, a subdivision platted and recorded in 1983. Lot 22 is approximately 150 feet by 127 feet by 121 feet, and Lot 37 is approximately 100 feet by 175 feet by 176 feet in dimension. The lots were purchased on September 22, 1987 and December 10, 1987, respectively. The parties have stipulated that evidence and factual testimony adduced in this proceeding shall apply equally to the circumstance of both lots since they are in close proximity to each other and have similar elevations and other site characteristics. Accordingly, these Findings of Fact will be based upon that stipulated, combined evidence; and all Findings of Fact will apply to both lots, except as to elevation figures peculiar to each lot and as otherwise noted in these Findings of Fact. The Petitioners purchased Lot 22 for $14,995.00 and Lot 37 for $12,500.00. They were purchased in September and December of 1987, respectively. The Petitioners purchased them with the intent of holding them for investment and building a retirement-type home on one of the lots. On March 22, 1990, the Petitioners applied for an OSDS permit for the lots in question. The new systems applied for would be for a frame-type "stilt home", which would contain three bedrooms and a heated and cooled area of 1,232 feet, which equates to a 350-450 gallons per day sewage flow under the standards contained in the Respondent's rules. Hubert H. Raker, a certified, land surveyor of Cross City, Florida, performed a survey on the property, shown by Petitioners' Exhibit NO. 1 in evidence. That survey establishes a benchmark elevation for Lot 22 of 11.79 feet above mean sea level ("MSL"). That benchmark is actually six inches above the grade level elevation of the property at the benchmark location. Lot 37 was established to have a benchmark elevation of 12.25 feet above MSL, also six inches above the actual grade level of the lot at the benchmark elevation site. The site of the proposed installation of the OSDS has an elevation of 11.19 feet above MSL, as to Lot 22, and 11.75 feet above MSL, as to Lot 37. The ground water level, at the time the site evaluation was made by the Respondent's representative, was 60 inches below the surface of the grade for Lot 22 and 54 inches below the surface of the grade for Lot 37. The wet season water table for both lots was shown, by "mottling" existing in the soil beneath the surface of the lots, to be 54 inches below `:he surface of both lots. The soil type for both lots, starting with six inches below the surface, is of a "slight limited" soil characteristic and is fine sand down to approximately 48 inches and from 48 inches to 72 inches, consists of "loamy-sand". Such soils are well adapted to OSDS installation and operation. The property was shown, by the Respondent's own Composite Exhibit NO. 2 in evidence, to not be subject to frequent flooding. The property is, however, as to both lots, beneath the ten-year flood elevation established by the Suwanee River Water Management District's calculations and admitted into evidence in this proceeding as a part of Respondent's Composite Exhibit NO. 2. The ten-year flood elevation for both lots was shown to be 15 feet above MSL. Thus the surface elevation of both lots is somewhat below the 15-foot, ten-year flood elevation. The bottom of the drain-field or absorption-bed trenches, if the systems were installed on the lots, would be a greater distance beneath the ten- year flood elevation. Thus, the property is located within the ten-year flood elevation of the Suwanee River and is also located within the regulatory floodway of the Suwanee River. Other properties and lots in the immediate proximity of the Petitioners' two lots are equipped with OSDS's, including a number of "mounded systems", involving the placement of septic tanks and drain fields in elevated earthen mounds in order to elevate them above the ten-year flood elevation. Petitioner, John W. Holian, testified in a general way that such a system might be feasible and advisable in his situation, as well as the possibility of installing an aerobic septic tank treatment and disposal system, involving the injection of air into the septic tanks so that aerobic, (as opposed to anaerobic), bacteria could perform the sewage treatment function, which typically perform the function better than does a conventional anaerobic system. Petitioner Holian, did not offer any detailed testimony or evidence which would explain and establish how such a system could work without endangering the health of the Petitioners or members of the general public, if placed on the lots in question below the ten-year flood elevation, nor if or how such a system would protect against degradation of the ground or surface waters involved in the proximity" of the sites. If the system were mounded above the ten-year flood elevation, the Petitioners did not establish, through proper engineering testimony and other evidence generated by a registered engineer, that the use of the fill for the earthen mound for such a system would not raise the level of the "base flood." In summary, although the Petitioners suggested such a mounded system or an aerobic system or such a system possibly used in combination, the Petitioners did not go beyond suggesting an alternative and did not offer evidence which could establish that such an alternative would be a reasonable operationally feasible one and would adequately protect the ground or surface waters and the members of the general public from health hazards associated with sewage effluent. See, Rule 10D-6.47(6), Florida Administrative Code. On May 1, 1990, the Respondent, by letter, advised the Petitioners that they should pursue a formal administrative proceeding upon the initial denial of their OSDS permit application and advised them that an application for a variance from the requirements of Rule 10D-6.47(6), Florida Administrative Code, regarding the ten-year flood elevation problem at issue, should not be pursued but rather, the formal hearing process before the Division of Administrative Hearings should be employed by the Petitioners. The Respondent asserts, that the Petitioners were not accorded the opportunity to avail themselves of the variance procedure because of the Respondent's interpretation of the Governor's Executive Order 90-14, which it opines precludes it from granting any variances or permits for OSDS within the ten-year flood elevation. The Governor's Executive Order, which incorporated the "Suwanee River Task Force" recommendation to preclude such systems beneath the ten year flood elevation was entered on January 17, 1990. The Respondent has, in effect, interpreted that Executive Order as precluding it from exercising its discretion to entertain and grant or deny variance applications. The Petitioners apparently took-that advice because no variance application was filed. It is noted, somewhat parenthetically, however, that in terms of the requirements for the establishment of a right to a variance, the Petitioners have not shown that no reasonable alternatives exist to a standard subterranean septic tank and drain field OSDS, (such as those alternatives referenced in the paragraph next above, which efficacy was, nonetheless, not established by the Petitioners). Neither did the Petitioners establish, in terms of the variance requirements in the authority referenced below, that the installation of an OSDS would not have an adverse effect on the public's health or the quality of the ground or surface waters involved at the sites. Because these two necessary elements of proof necessary to establish the right to a variance, through hardship, were not proven by the Petitioners, the elements of proof necessary to establish the right to a hardship variance have not been made out by the Petitioners and one could not be granted under the proof of record in this proceeding, even had the Petitioners made formal application for such a variance. That is not to say, however, that with proper preparation and presentation of evidence, entitlement to a variance could not be established in the future.
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 denying the Petitioner's application for an OSDS permit. DONE AND ENTERED this 19th day of December, 1990, in Tallahassee, Leon County, Florida. P. MICHAEL RUFF Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 20th day of December, 1990. APPENDIX TO RECOMMENDED ORDER IN CASE NO. 90-3109 AND 90-3445 The Petitioners filed no proposed findings of fact. Respondent's Proposed Findings of Fact 1-9. Accepted. COPIES FURNISHED: Sam Power, Agency Clerk Department of HRS 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 Linda K. Harris, Esquire General Counsel Department of HRS 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 John W. Holian 466 South Lake Triplet Drive Casselberry, Florida Frances S. Childers, Esquire Assistant District III Legal Counsel Department of HRS 1000 N.E. 16th Avenue Gainesville, Florida 32609
Findings Of Fact Cooper City Utilities, Inc. provides water and sewer service to its customers in Broward County, Florida, under the jurisdiction of the Commission pursuant to Chapter 367, Florida Statutes. The company was incorporated in 1973. All of the outstanding stock of the utility was owned by Moses Hornstein until his death on October 28, 1979, when ownership thereof became vested in the estate of Moses Hornstein, deceased. The personal representatives of this estate are Gertrude Hornstein, S. Lawrence Hornstein, and Judith A. Goldman. Gertrude Hornstein serves as president of Cooper City Utilities, Paul B. Anton as vice president, and Lawrence Lukin as secretary. Quality of Service At the hearing, a representative of the Broward County Health Department testified concerning the quality of service. Although some customer complaints had been received, there are no outstanding citations against Cooper City Utilities, Inc., and the quality of the utility's service will be improved when its new lime-softening plant, under construction, is completed in approximately August, 1980. The investigation by the Commission's staff engineer did not reveal any outstanding citations against either the water or sewer treatment facilities. Accordingly, on the basis of the entire record, the evidence supports a finding that the utility is in compliance with all state standards, and that the quality of its water and sewer service is satisfactory. Rate Base and Operating Statement Between the time in July when public hearings commenced, and September 24 when the hearings concluded, the utility abandoned its position on several matters which had been in dispute, leaving only two controverted subjects for resolution. These two remaining areas of disagreement are, (1) the cost of money [because of a pending petition for approval of additional financing (Docket No. 800562-WS)], and (2) the expense for an additional field laborer hired subsequent to the test year, which the utility seeks to have included as a pro forma expense. Based on the stipulation of the parties, the following schedule sets forth the rate base of Cooker City Utilities (Exhibit 15): Water Sewer Utility plant in service $2,331,137 $3,723,347 Plant held for future use (47,989) (166,375) Accumulated depreciation (286,651) (460,297) CIAC (net of amortization) (1,322,487) (2,302,707) Working capital allowance 51,083 37,680 Rate Base $ 725,093 831,648 Based on the stipulation of parties, prior to any consideration of the allowance of any expense for the laborer hired subsequent to the test year, the following schedule sets forth the utility's operating statement (Exhibit 15): Water Sewer Operating Revenues $ 368,562 $ 489,886 Operating Expenses: Operation 346,916 232,406 Maintenance 61,750 69,030 Depreciation 22,447 25,543 Amortization -0- -0- Taxes other than income 55,853 75,043 Other expenses -0- -0- Income taxes -0- -0- Total Operating Expenses $ 486,566 $ 402,022 Operating Income (Loss) $ (118,404) 87,864 5. On the matter of allowance of sufficient revenue to cover the cost of one additional laborer hired after the test year, the estimated annual expense is approximately $7,240. However, to the extent that this employee was hired due to an increase in the number of customers subsequent to the test year, or due to plant capacity not used and useful, it is not a proper pro forma adjustment. Without an affirmative showing that the laborer was necessary during the test year for existing customers, the adjustment should be disallowed, and there is insufficient evidence in this record to support such a finding. On the issue of cost of money, during the test year the utility's capital structure was composed of one hundred percent debt at a stated cost of ten percent. In Docket No. 800562-WS the company seeks Commission authority to borrow an additional sum of $450,000, and it plans to amend this application to include authority to borrow $400,000 more in order to make refunds to customers in compliance with a Commission order which was upheld in Cooper City Utilities, Inc. v. Mann (Fla. Sup. Ct. Case No. 58,047, September 12, 1980). However, the utility's proposed debt has not yet been approved by the Commission, and will not be incurred until some time in the future, if approved. In these circumstances, it is not appropriate to take the cost of new debt into consideration in determining cost of capital in this rate case. The evidence in the record supports a ten percent cost of capital. The earned rate of return for the water system is a negative 16.33 percent. The earned rate of return for the sewer system is 10.57 percent. Therefore, the utility's water rates should be increased, and its sewer rates should be decreased, to achieve an overall ten percent rate of return. Accordingly, the annual revenue requirement for the water system is $564,370, which amounts to an annual revenue increase of $195,808. The annual revenue requirement for the sewer system is $485,067, which amounts to an annual revenue decrease of $4,819. Rate Structure The present rates of Cooper City Utilities are structured in the conventional manner, consisting of a minimum gallonage charge and a one-step excess rate over the minimum. The utility proposes. rates with the same basic structure, but with changes in the minimum charge and the minimum gallonage allowance. However, the Commission has consistently taken the position that any rate that requires customers to pay for a minimum number of gallons, whether used or not, is discriminatory. Invariably, a base facilities type of rate structure has been required to be implemented in these circumstances. Under the base facilities charge, each customer pays a pro-rata share of the related facilities cost necessary to provide service, and in addition, pays only the cost of providing the service actually consumed under the gallonage charge. The evidence in this record supports the implementation of the base facilities charge form of rate structure. Under its tariff, Cooper City Utilities is authorized to charge guaranteed revenues in an amount equal to the minimum rate for water service and the applicable rate for sewer service for each equivalent residential connection to be served for a period of one calendar year in advance. Under the base facilities charge type of rate structure, the utility should be authorized to collect guaranteed revenues solely in the amount of the base facilities charge.
Recommendation Based upon the findings of fact and conclusions of law set forth above, it is RECOMMENDED that the application of Cooper City Utilities, Inc., 3201 Griffin Road, Suite 106, Fort Lauderdale, Florida, 33312, be granted for the water system and denied for the sewer system, and that the utility be authorized to file revised tariff pages, containing rates designed to produce annual gross revenues of $564,370 for its water system and $485,067 for its sewer system. It is further RECOMMENDED that the utility be required to implement a base facility charge type of rate structure. It is further RECOMMENDED that the utility be required to make appropriate refunds to its sewer customers in amounts to be approved by the Commission. It is further RECOMMENDED that the rate-refunding bond filed in this docket be maintained until the utility has accomplished the refunds indicated above. THIS RECOMMENDED ORDER entered on this 18th day of November, 1980, in Tallahassee, Florida. WILLIAM B. THOMAS 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 18th day of November, 1980. COPIES FURNISHED: Andrew T. Lavin, Esquire Post Office Box 650 Hollywood, Florida 33022 Sam Spector, Esquire Post Office Box 82 Tallahassee, Florida 32302 James L. Ade and William A. Van Nortwick, Esquires Post Office Box 59 Jacksonville, Florida 32201 John W. McWhirter, Jr., Esquire Post Office Box 2150 Tampa, Florida 33601 Alan F. Ruf, Esquire 2801 East Oakland Park Boulevard Fort Lauderdale, Florida 33306 William H. Harrold, Esquire Florida Public Service Commission 101 East Gaines Street Tallahassee, Florida 32301 ================================================================= AGENCY FINAL ORDER ================================================================= BEFORE THE FLORIDA PUBLIC SERVICE COMMISSION In re: Application of Cooper City DOCKET NO. 800415-WS (CR) Utilities, Inc. for a rate increase ORDER NO. 9699 to its water and sewer customers in DOAH CASE NO. 80-1188 Broward County, Florida. ISSUED: 12-16-80 / The following Commissioners participated in the disposition of this matter: WILLIAM T. MAYO GERALD L. GUNTER JOSEPH P. CRESSE JOHN R. MARKS, III Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, William B. Thomas, held public hearings in this matter on July 16 and 17, and on September 23 and 24, 1980, in Cooper City, Florida. The Division of Administrative Hearings assigned Case No. 80-1188 to the above-noted docket. APPEARANCES: Andrew T. Lavin, Esquire Post Office Box 650 Hollywood, Florida 33022 and Sam Spector, Esquire Post Office Box 82 Tallahassee, Florida 32302 for the Petitioner, Cooper City Utilities, Inc. James L. Ade and William A. Van Nortwick, Esquires Post Office Box 59 Jacksonville, Florida 32201 for PCH Corporation Intervenor in opposition. John W. McWhirter, Jr., Esquire Post Office Box 2150 Tampa, Florida 33601 and Alan F. Ruf, Esquire 2801 East Oakland Park Boulevard Fort Lauderdale, Florida 33306 for the City of Cooper City, Florida, Intervenor in opposition. William H. Harrold, Esquire Florida Public Service Commission 101 E. Gaines Street Tallahassee, Florida 32301 for the Respondent, Florida Public Service Commission and the public generally. The Hearing Officer's Recommended Order was entered on November 18, 1980. The time for filing exceptions thereto has expired and no exceptions have been filed. After considering all the evidence in the record, we now enter our order.
The Issue The issues in this case essentially are whether the Respondent, the Department of Environmental Regulation (DER), should reimburse Anthony F. Kopp, Owner, La Casa Del Sol, for the difference between the cost to him of the DER's remedy for the EDB contamination of the drinking water supply at La Casa Del Sol and the remedy that is least costly to the Petitioner, together with the cost of a new irrigation system, engineering and attorney fees, and other incidental costs to the Petitioner.
Findings Of Fact The Petitioner, Anthony F. Kopp, is the owner of La Casa Del Sol (La Casa), a 40-acre development at 1255 U.S. Highway 27 North, Davenport, Florida. La Casa is divided into 309 mobile home lots, a clubhouse and five acres of common green space. In January, 1987, the Petitioner received a permit for construction of a water supply system for both drinking water and irrigation needs at La Casa. The construction permit was granted with the proviso that, when La Casa's population reached 350, a second backup drinking water well, six inches in diameter at 410 feet, with a casing to 366 feet, and an auxiliary power source would have to be installed. It would cost La Casa approximately $65,000 to install the backup well and auxiliary power source. La Casa did not reach a population of 350 until January, 1991. The St. Johns River Water Management District permitted the construction of the backup well, but the well never was constructed, and the construction permit now has expired. The auxiliary power source also was not installed. The main water supply system for La Casa was installed during the summer of 1987. It included a well and a system of lines for carrying water to each of the 309 lots. It also included hose bibs (faucets) at each lot so that the water also could be used for irrigation at each lot. The system also supplied water for irrigation of the common green space. Although all of the lots at La Casa were connected to the water supply system in the manner described, not all the lots had homes on them. During the summer of 1989, only about 175 of the lots had homes on them; by January, 1991, 198 lots had homes on them. Although not all of the lots were occupied, the entire water supply system was permitted, and no additional permits were required to provide water to the lots. However, when La Casa's population reached 350, the backup well and auxiliary power source would have to be installed under the permit conditions. In about May, 1988, DER tests showed that the La Casa water supply system was contaminated with ethylene dibromide (EDB) at levels in excess of the maximum allowable for drinking water. In October, 1988, the Petitioner completed and filed a Grant Application for EDB Clean-Up Funds. As part of the application, the Petitioner agreed that DER could: arrange for the purchase and installation of appropriate filters and inhibitors; provide a new well; or arrange for the connection of [the Petitioner's] well to an existing public supply system, whichever is more cost-effective as determined by the Department of Environmental Regulation. DER contracted with Continental Water Systems to provide a temporary carbon filter system for La Casa's water supply system to remove the EDB and supply uncontaminated drinking water to the development, pending a permanent solution to the EDB contamination. The temporary filter system was designed to provide 100 gallons per minute of water, which should have been adequate for drinking water needs at La Casa. However, water pressure problems arose due to algal growth and the use of the system for irrigation purposes in addition to the drinking water purposes for which it was designed. DER is a member of the Ground Water Task Force, which met biweekly or monthly to discuss, among other things, potable wells contaminated with EDB. Other member agencies are the Department of Heath and Rehabilitative Services, the Department of Agriculture and Consumer Services, the Department of Transportation and the Department of Community Affairs. The Task Force discussed the La Casa contamination problem and agreed that the possibility of having La Casa connected to an existing water supply should be explored. DER began negotiating both with Polk County and with Haines City for a water line connection. Connection with the Polk County line would have been more expensive, and Polk County was not particularly interested in extending its line. Negotiations continued with Haines City. Negotiations with Haines City progressed to the point that DER was able to present for consideration by the Task Force cost figures for a permanent filter system at La Casa, with ten years of projected cost of operation and maintenance, as compared to the cost of extending the Haines City line. The Task Force agreed with DER that extending the Haines City line north to La Casa and connecting La Casa to it was the most cost-effective use of state funds to remedy the EDB problem at La Casa, particularly in view of other EDB-related drinking water supply problems in the area and anticipated future drinking water supply problems in the area. The Petitioner was not invited to participate in the negotiations with Polk County and Haines City and did not participate in them. Nor was the Petitioner invited to participate in either the DER or the Task Force decision- making process, and the Petitioner did not participate in those processes, either. However, the Petitioner, through his engineering consultant, was made aware in early 1989 that DER was exploring options to have La Casa connected to an existing water supply. DER paid approximately $400,000 for the Haines City water line extension and La Casa connection. This included $90,000 for Haines City impact fees to cover the 175 then existing mobile homes at La Casa (DER actually paid $450 per unit for 200 units), as well as the plumbing contractor fees for connecting La Casa to the extended city water line. It also includes the cost of installing a water meter at La Casa. The ten-year cost to the DER to solve just the La Casa drinking water problem using an EDB filter system would have been less than the cost to the DER of extending the Haines City line and connecting La Casa to it. But the evidence is clear that, in the long run, and taking into consideration other EDB-related drinking water supply problems in the area, and anticipated future drinking water supply problems in the area, the most cost-effective use of state funds to remedy the problem was to extend the Haines City line and connect La Casa to it. (Even the Petitioner's expert witness agreed that the Haines City extension and connection was the most cost-effective use of state funds to remedy the area's EDB problem.) DER advised the Petitioner of its agreement with Haines City in approximately May or June, 1989. By letter dated July 27, 1989, DER explained to the Petitioner the details of the agreement, specifically what DER would pay and what DER would not pay. By the fall of 1989, the Petitioner knew that work was beginning. At the time, the extension of the Haines City line and connection to La Casa was projected for completion in January, 1990, but there were delays, and the city water supply was not ready to be connected to La Casa until August, 1990. By this time, a dispute had arisen between the Petitioner and DER as to the cost to the Petitioner of connecting to the city water, and actual connection was further delayed. Finally, by letter dated October 11, 1990, DER gave the Petitioner an ultimatum: either be connected to the city water supply; or forfeit any state contribution to the cost of remedying the EDB contamination of the Petitioner's water supply. Faced with the prospect of having to open the winter peak season without any drinking water, the Petitioner agreed, under protest, to be connected to the city water supply, and initiated formal administrative proceedings to challenge DER's intended decision to limit the extent to which the DER would cover the Petitioner's costs. There was evidence that the plumbing contractor hired by DER may have caused damage to the landscaping and one mobile home that has not yet been repaired. However, DER acknowledged its responsibility for the damage and intends to have the plumbing contractor repair the damage. There also was evidence that the Petitioner received a bill from Haines City for the installation of a water meter at La Casa. But the evidence also was that DER may already have paid the bill. In any event, DER acknowledges its responsibility for the cost of the water meter as part of the cost of connecting La Casa to the extended city water line. Although DER had the Haines City water line extended in response to the Petitioner's Grant Application for EDB Clean-Up Funds, two commercial properties south of La Casa were connected because of EDB contamination, and the line also was extended north of La Casa in preparation to address anticipated future EDB contamination problems. Under the DER's response to the Petitioner's Grant Application, each additional mobile home unit over 200 connected to the city water supply will require the payment of a $450 impact fee. In addition, Haines City will charge monthly water fees of $1.80 1/ per 1000 gallons for the use of water at La Casa, with a $1,000 minimum charge per month. 2/ Based on current occupancy of 200 lots, the Petitioner estimates water fees of $42,000 per year, figured at approximately $5,000 per month for six peak months (based on a recent peak season monthly bill) and $2,000 per month for six off-peak months. However, it is not clear whether some of that estimated usage includes irrigation. If, in order to save gallonage fees, the Petitioner puts in a separate irrigation system supplied by its well, it will have to put in a separate distribution system since the current system is being used to bring city water to the lots. This would cost approximately $90,000. The Petitioner has paid approximately $2,100 in engineering fees to assess the problem with the temporary filter and to propose solutions, to estimate the cost of installing a separate irrigation system, and to estimate the cost to the Petitioner of connecting to the Haines City water supply. There was no evidence as to the reasonableness of those fees. The Petitioner also has paid approximately $4,500 in attorney fees to negotiate with the DER for payment of a larger portion of the Petitioner's cost of connecting to the Haines City water supply. There was no evidence as to the reasonableness of the attorney fees.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Department enter a final order dismissing the Amended Petition for Formal Hearing in this case. RECOMMENDED this 14th day of March, 1991, in Tallahassee, Florida. J. LAWRENCE JOHNSTON Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 14th day of March, 1991.
