HomeMy WebLinkAbout1943_06_VILLAGE OF EDINA_COUNTRY CLUB DIST SERVICE CO PROPOSALS (2)2—T /"V,
Flow
w.
0007TRY CLUB DISTRICT SERVICE CO.
PROPOSALS
TO
THE VILLAGE OF EDINA
June, 1943
Mr. EPri C. Shame, President,
Edins V ill:n;ve Council,
4612 Edwebrr)'ok Place
City
Dees Mr. Sharpe:
As requested by the Council there is attached hereto two prop -
ositions covering future operation of our water and sewer utilities
in Edina. These Are (1) continuance of operation by the Country
Club District Service Co._ And. (2) sale of r.,11 utility physical
:assets in Edina to the Village.
In this connection it might be mentioned here that seversl
apparent ,nisi ?nderettndings should be cleared up. Our water rate,
except 29 consumers in the Hidden Valley district, is below that.
o° other villages adjacent to Minneapolis and below that charged,-,,,
by Ninneepolis to consumers outside of the city limits. In the
Hidden Valley district we,purehase water from the City of Minne-
cpolis at 4 wholesale rate hither than our regular retail water
rate. Our minimum charge is considerably less than any of the
municipal water systems in the Twin City area, In fact our water
;ate is one of the lowest in the State of Minnesota.
In recent years we have repaired T,,rater meters free of cherge
ire the universal custom is to charge consumers for this service,
Our nat income on the basis proposed for operation, inclading.
ycr`r :, rental, will be considerably below the allowance of 6*%
by the Federal Poser Commission for electric and gas utilities.
Without. by c.rent rental the return has been in the neighborhood of
1 on the ortion of the water system F.11ocated by the court to
tl:e Country Club District Service Co. No preferred or common
stn -_k dividen -'.s have been raid since finFl ennuisirion of X1.1 the
stock by the :resent owner.
Operation by the Village would. hsve a tremendous advantr �Pe
from the stanenoint that no tuxes would hr,7ve to be paid end Pi.so
from the standpoint that the Village woulft he.ve no investment in
new distribution lines, With the 11111AgP personnel setup Fs it
now exist,, rich Village Engineer, an of ice clerk and street
and sewer mFintenance crews, the sddi`:ionel labor item would be
small. A eeparete 'sheet attached hereto shows an estimate of the
revenue available for bond -payments. These vary from $12,000 to
'`0,000 per yesr, *L►ith the present 900 consumers. It varies from
1,5,800 to W35,000 per year with probable future growth,
At the price of y140;000 the proceeds from operation should
pay off the bonds in relatively few years.
14
reNnsining for the -,,r : ze .'t
W4 11 be -trcn�',:
f t t. zpd taxes are pnir!-,
le not LA1,,.;'-'ia-'ent for the swep.t and
e.ALYN = i-s f set duri: g the C. t-1 eir-
;0 C-£k F. price which would pay him a re&.Go-.:
t,.!e se- ml�EIA not appear Fttractive from the s
z Vj3.1;-Sr-- The owner recognizes the complpxity of th2
py-eac-ntv of this utility and is willing to ra�lke i,:,ha-44- he
exi" �!�6 e.. :�4,-'arous conceeEion In or .der to help work out a
LIG
n Z°feztly . ,illin; '.o c.-irry on the raper=ticns of
for t`e s�.'e of the water aaers in to h c
Vlili.�_e 'as &!-1 ;z.z-, thle, Viij.-rl-le lts�if that a definite voricretiF.
php.se oth n Ee operation
S c,,;rl-erning Pv#-,rlr f
-1
the char ea tbei r-pply.
T- Y,%Cu ;.Cr YOU.0 d,-cislon in the matter, beg to re7--p-li-4
Yours very truly,
President
9
t�
As requested.by the Edina Village Council there are submitted
herewith two propositions in connection with its water and sewer
utility properties in the Village of Edina The two propositions
are outlined below
Proposition No. 1 -,Continuance of Operation by present oimero
Proposition No, 2 Sale of Utility Properties to the Village by
present owner.
Complying with the above requests the Company proposes the
following:
Proposition Noo 1 - Continuance of Operation
The Company will continue operation of the water utility
for domestic service-at the present rate of 17.1 gross and 15.39%
net per 100'eubic feet per quarter, subject to adjustments as
provided for in the franchise. The Company proposes also to con -
tinue its policy of repairing water meters without charge for the
._time being but reserves the right to make charges on a cost basis
at any time it deems this course advisable.
(In this connection it might be mentioned here that rates in
other neighboring villages -are higher and they all make charges
for meter repairs on a basis similar to that of the City of Minne-
apolis. The Company now has minimum rates considerably below that
of Minneapolis and neighboring villages,)
The Company further proposes to continue to furnish .fire
protection hydrant service for a period of five years at the 1 olloiu
n g rates : — ----� ;
For 9.new hydrants installed by
the Village south of 54th St. $3.75 per hydrant -per quarter yea
For 35 hydrants in Country,
Club District $4.50 per hydrant per quarter yes.
,For 62 hydrants installed by
Company $10.00 per hydrant per quarter ye=ar
Hydrant rental at above rates to be made retroactive to
January 1, 1943,
. It'is' further proposed that the Company lease to the Village
its portion of the sanitary and storm sewer systems on the basis
of seven per cent (7 %) per annum on the .estimated original cost
thereof to cover .depreciation and return on the investment, the
amount to'. be payable quarterly. On computations m,:. ne by the Coin --
pany this vrill amount to $422,,15 per,'
er ,quarter year, This charge to
begin Jan, 1, .9 43'. � �
In the dete.rmination.of eater rates the basis of calculation
shall be at the rate of six and one half per cent (6=M) on the oriF-_
ins.l cost of utility property after allowances for cost of operstic'a
and depreciation. If original coat_ ia_no • LU. iy available an es-
timate thereof sh ill. be Y..ade on P basis allowed by the Federal F�►, *Fr ,
Commission.
In connection with Proposition No. 1 it is understood that the
Village Council s1w 11 use its influence and shall eo'opera,te T.,,ith thr
Comna.ny in the securing of desiraole sites for the location of future
wells end pump houses deemed necessary to maintain proper w €ter
supply and pressure for both domestic consumption and 'fire protectjo:
It will be noted that the proposed rate for the hydrant rent &?
is a little more for the old type hzyd.rants in the Country Club ?.i �-
trict than for the new type installed on the more recent extensions
This is explained by the fact that valve seats freouently stick so
tightly that new leether seats cannot be replaced without digging, uy
the hydrant and chipping out the bronze seat with a cold chisel. T'
cost of servicing the old hydrants is therefore somewhet more
that for the newer type of hydrants.
Proposition No. 2 - Sale of Utility Properties to the Village
The Country Club District Service Company proposes to sell
all its physical assets in the Edina water L-rnd sewer systems,
together with any claims it may have for past adjustments and
for services, for the rash sum of 140,000.00. The property
Is to be delivered free of all encumbrances.
In the offered prices the company has allowed the Village
credit for contributions in aid of construction. If the com-
pany is obligated, through court action or otherwise, to- return
any of these.contributions it requests, as a part of the pur-
chase contract, that the Village assume payment of such reim-
bursements in addition to the price offered above. It is be-
lieved by the company that the only requests for reimbursement
would come from 42 contributors in South Harriet Park. 41 of
these were billed $50 for contribution in aid of construction.'
One paid $100 because of extra cost for extension of water main
in frozen ground, extension being made at his request. One con -
sumerA Mr. Karl Houschild, of 5200 Oaklawn Ave., brought suit
against the company. for return of a t50 payment in aid of con-
struction. The District Court has not yet handed down its de-
cision though hearing was held many months ago. It is believed
by the company that all the homeowners or the contractors con-
structing the homes had full understanding regarding the charge
for aid of construction before any connection was made to the
water main. It is believed, therefore, that reimbursements,
if any, would be small.
A schedule of actual and estimated original costs, together;
with certain services not yet paid for by the Village, is attacliea
hereto. This will shove the method of arriving at sale price as
It effects property cost and value-of services.
L-;__1
Dy
VALUE OF PROPERTY AND SERVICES TO BE DELIVERED
TO VILLAGE UNDER PROPOSITION NO. 2 (SALE)
Y Item Original Coat
Construction Before OctIS-M-35 `
Tenk. and 50th St. ?later Linee ✓ $2 ;399.35' 1
30% of Brown snd Fair4'rP,y 'dater Lines 1,793,1;
30% of Brown Storm and -Sanitary Sewers / 12,029.96
50th St. Sanitary -Sewer Line J 11,,632.92
Total - 4 63,843a92
EnEineerin,_and Refinancing Services
Complete revampin.z of eater system to put it °
on an earnings basis, plans for
new welle , rete invest�gp.tiors , replacing
personnel, ne%, lry;nuts!', etc.
15ee ex)1nn^tion unA.er Item Ho.6 on follow-
ing pP:�e )
Construction Since Oct. 1o, 3c 10,000.f:0
Pump House, Lan", rn6 Equipment 11,954.00
Disvribution Lines 57,270,29
Of ice Equip, Tool,- , S�pplies, Meters 2,270.98
Sewer Dert. Additioris F',hd Tools 46o.�o
i o
ustments Considered Fair Total 71 ;9'55-7 - u
bu �
Franchise•Exoend.itures (Est.) 7,000.00 /
Hy"rent Rental Oct. 1, 1935 to 6/3o/43 ,_7,996,30 ,
Operating only - Storm SeTwer 10/1/35 toll /31,!'i1 1,75000
Council Reauest of 4/16/37- Donation to
E41und with int. 1 00.n0
Ope Ling Sanitary Se? -•er 1941 2,000.00
Tote1
Gr. rnd Total 1175,94a.09
Offered, S82c 'Price - '14o ,oO O
Note - See follociing ps-�es for fell explar.s.tion of esch item.,
Note - Original Cost s:,o *T n oboe e r o
Original Cost po : t9on:,nted to 7.1, by Cou•t "9 y7c "�
Total acoulrew b- Vil . ith Prao .?�:. 2 >74,7 �c . �
5/p4/43
70
EXPLANATIONS OF ITEMS UNDER PROPOSITION FOR SALE
Items 1 to 5 Inclusive---Old Construction
The values given in these items represents the original cost
according to the Graber report for the physical assets of the portion
of the system belonging to the Country Club District Service Combany
and constructed.before October 1, 1935.
Item No, _6
Prior to Oct. 1, 1935, the system was losing money and lacked
proper records. Considerable planning had to be done to revamp the
system and put it on an earning basis and to install proper records,
Well locations and bids had to be planned. Plans for serving future.
loads hall to be made, buildings had to be erected, pressure improved,
valve layouts, tank and pump house, piping layouts and financing hsd
to be planned. These projects had to be installed i•rhile existing
consumers were supplied with water. The many details to be worked
out over a period of three years Are conservatively valued at
$10,000.00 but has never been paid for or charged into the capital
account.
Items,7 to 11 Inclusive - New Construction
�+► These figures represent the new construction work since_ Oct, 1,
19^2h It is believed that t'�e , 71,955.76 represented by these items
is considerably less than the average cost as a great deal of effort
was put forth to get the lowest cost for first -class material and
workmanship. Judging by the cost of similar work done by
the Vills.ge it Would he.ve cost 30% to 40% more if every effort had
not been made to keep costs down.
Item No. 12 - Franchise Expenditure
This item represents the estimated cost for legal services,
office.expense, etc. in preppring the franchise and its extension,
pro ted for the 10 years the franchise has to run. Such cost hr s
noween included in any of the property appraisals. In case of
purchase it is only fair that this item should be included
Item No. 13 - Hydrant Rental Oct. 1, 1935 to June 30, 194+3
This represents the value of $19.00 per hydrant-year for the 35
hydrants owned by,t're Village in the old portion of the system, they
being much more difficult to service and repair than the new hydrants_
The 9 new Village -owned hydrants are figured at $15.00 per hydrant -yea7_'.--
and those owned by the Company. at $40.00 per hydrant -year. The earn-
ings represented by this hydrant rental added to the net profit from
domestic service would be considerably less than a fair return on t }se
property investment owned by the Company and even less than a fair
R
return on the actual investment by the present oi�rnerr t is therefore
only fFit that this item should be included in P sale as the Village
has paid nothing for this service and residents are saving about four
times the cost of this service each year in insurance•rates. Yhen
domestic rates were determined in 1936 full allowance for collection
of hydrant rentals. Tras deper..c.ed on.
Item No, 14-- Operating Storm Sewer Oct, 1: 1935 to-Dec. 14_2
During this 7 -year period the Company operated the storm eewer
system, after being told. by the Council thF.t it should do so, no nay
was received. The charge of 2r-0.00 per year is low for the service
and in C11 fairness should be Included in a sale.
Item Fo, 15 - Council Reauest for Donntion
On April 16, 1937, . the CotTjr�7ny paid J„ F.rPnk Ecklund of 9 Brif:r7e
Lsne, Edina., the sum of ,,1,000.00 at the request of the Village Cour-
b �
cil. This was �n settlement of a lava suit between Mr. Ecklund Fn'.
+�
Village in which the Company , -!vs n ^t involved in any way. The sum
paid in fear of reprisal a.s the Company eras to ask for a 5 -yeas exten -
�—,eion
of its franchise soon thereafter. The sum with interest P- mounts
to s.bout It is
;11,400.00. only fair that the Company should be reim-
l
,.cursed for this sum. The sower sump at Arden Ave- Bridge Street;.
,,*high was relieved by the White Oaks sewer, tires not the property of
the Company tho operated by the Company at Village request.
Item No. 16-- Operating Sanitary Sewer During 1941.
� 4
As of January 1, 191,1 the Village and the Company signed a cont.rart
in which the Company agrEed to discontinue serving the aan-itary'seiner
system in'the Country Club District and to-discontinue billings to
residents for this service. Thie. waq to prevent a conflict ?• .,rith
the Village was sending out in connection with Metropolit2.n SeuP.v.e
District charges-. -
The Village failed to live up to the contract and cells continued
to come to the Company to service the sewer mains. The Vi112ge crews
did not perform the service until about December 1941. The value of
the service was about _ 2,000.00. The Company should be reimbursed for
this service.
t �.
i
1 i
r
5/12/43
TUNA MATER SYSTEM '
Estims re,. Revenue Under Village Operation
` With 900 consumers With 1200 consumers With 1500 cuatomers
(Present) (Future) (Future)
Wet year Avmyear Dry ,year Wet year Av.yevr Dry Tar et vear Ky.year ry yeas
Gross Operating Revenue $1 ,500 122,000 128,000 124 X29,300 X37,400 "31,000 $37,000 D�-7,000
Opersting Costs
Electric Power
Pump Main. & SupplieE
Maint . of Lines
Water Purchased
Office Supplies do Expo
Extra Labor
Miscellaneous
Taxes
Total Operating Cost
Bal. Avallsble for
. Financing
r 24.00>
2700-
33.00
X3000
3400
X3900
3r-00
>3430
4500,-
50
?75
35o
50
X75
45o
400
450
X50
1
050'
1
3 00
1
100
.1
'00
1
.150
1
450
1
750
1X50
1
900
350
475r
400
450
575
500
500+
�50
550.
650
700
700
800
goo
goo
1
5�,
1
00,
1
800
1
Zoo
1
600
600
1
800
600
2
000
2
200
2
300
500r
500
500
00
900
800
Boo
0r
0
0
0
0
0
0
0
0
6
:o0
7
075
7
675
7
900
8
575
9
375
9
750
10
68o
1x50
w12
ooc
X14
L
�? 25
"20
125
"16
800
120
750
28
o25
X21
250
� 2F
32o
k35
2Fo
0