Lake Huron Water Supply Study

Karegnondi Water Authority

o City of Flint
o Genesee County
o Lapeer County
o Sanilac County

Appendix 2
Planning Criteria

February 23, 2009

540 S. Saginaw Street Suite 200 P.O. Box 3748 Flint, MI 48502
Lake Huron Water Supply Study Appendix 2 – Planning Criteria

2.1 General
The Karegnondi Water Authority (KWA) is studying the feasibility of a new regional drinking water
supply. The alternative studied will provide raw Lake Huron water to central Michigan communities.
This memorandum summarizes the criteria used to develop the concept and resulting costs for the
alternative considered.

2.2 Design Criteria

2.2.1 Service Area

It is assumed that the following communities are supplied water by the KWA, and are
considered the customers of the KWA.
City of Flint
Genesee County
Lapeer County (Greater Lapeer County Utility Authority, GLCUA)
Sanilac County (Worth Township)

All proposed KWA customers are currently supplied finished water from other utilities. The
City of Flint and the GLCUA are direct customers of the Detroit Water and Sewerage
Department (DWSD). Genesee County is supplied water from the City of Flint and is
therefore considered a second-tier customer of DWSD. Worth Township is supplied by the
Lexington-Worth Townships Utility Authority (LWTUA); LWTUA is supplied by the
Village of Lexington. Copies of existing water supply contracts for the communities in the
service area are included in Appendix 16.

KWA customers may expand water service to other areas within their jurisdiction, in the
future.

2.2.2 Study Period

The study period is 25 years.

The proposed alternative will be developed to meet the projected 25 year maximum day
demands (MDD) of the Service Area, with consideration for future expansion as demands
increase beyond the projected 25 year MDD.

2.2.3 Demands
Appendix 1 summarizes the demands used for this study.

2.2.4 Capacity
The new water supply alternative is planned to provide adequate capacity to deliver raw
water to meet the maximum day demands of KWA customers. Peak hourly demands are
assumed to be met by local storage provided by individual KWA customers.

2.2.5 Proposed Alternative

Figure 2.1 is a schematic of the proposed water supply. The capacity required for the
projected 25 year MDD of the service are shown on the schematic.

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Fig 2.1 – Water Supply Schematic

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2.2.6 Design Criteria

The proposed water supply alternative is planned to meet the criteria established by Michigan
Department of Environmental Quality and other regulatory agencies with jurisdiction.

2.3 Economic Criteria

2.3.1 Opinions of Probable Cost

Estimates of construction cost are developed based on an assumed Engineering News-Record
Construction Cost Index of 8688.

Estimates of construction cost are increased by 37% to determine the proposed project
budget. The additional 37% accounts for the following project related costs.

Design Contingencies: 5%
Construction Contingencies: 15%
Engineering, Bonds, Legal, and Administration: 17%
Total 37%

2.3.2 Land
Proposed land procurement costs for the project are assumed as follows:

Easements: $0.15 per square foot

Land (purchase): $6,000 per acre (rural)

Genesee County purchased 230 acres of land in Worth Township, Sanilac County in 2002.
The land was purchased for the potential use as a water supply facility. The land was
purchased for $2.3 million. Because a portion of the property abuts Lake Huron, it is unique
and was purchased at a premium above the typical cost of property in the project area.

2.3.3 Capitalized Interest

Capitalized interest is not included during the construction period.

2.3.4 Commencement of Operations

It is assumed that the proposed facilities will become operational in January 2014.

2.3.5 Operating, Maintenance, and Administrative Costs

It is assumed that operating, maintenance, and administrative costs increase at an annual rate
of 3%.

Administrative costs of $200,000 during the initial year of the project, 2010. The
administrative cost has been assumed to increase at an annual 3% rate of inflation.

Electrical power rates are assumed to be $0.063 per kWh in 2014. Electrical power rates are
assumed to increase at an annual rate of 3%.

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Labor rates for operation and maintenance personnel in 2014 have been assumed as follows:
WTP Superintendent - $35 per hour
Supervisor - $30 per hour
Operators - $20 per hour
Maintenance Mechanics - $25 per hour
Mechanics Helpers - $20 per hour
Instrument Technicians - $25 per hour

It is assumed that fringe benefits add 62% to the above labor rates. It is assumed that labor
rates increase by 3% annually.

2.3.6 Depreciation
The lives of key components of the water supply have been assumed as follows:
Pipe – 75 years
Mechanical Equipment – 20 years
Physical Plant – 75 years

Depreciation expense is computed on a straight line basis, using the original installed cost of
the facilities. Depreciation expense is considered constant throughout the study period, based
upon the assumption that the price inflation will be offset by the rate-of-return on funds set
aside for depreciation. Depreciation expenses are presented but are not included in annual
operating and maintenance expenses.

2.3.7 Financing and Rate of Return

It is assumed that project financing will be at a rate of 6% over a period of 25 years.

2.4 Cost Distribution

The KWA will supply raw water to its customers and the costs thereof will be distributed amongst the
KWA customers. Project costs associated with the construction of facilities for supply of raw water
are divided proportionally on the basis of each customer’s maximum day demand to the total design
capacity of the facilities. Operating costs associated with the delivery of raw water are developed on
a unit price basis ($ per MCF); operating costs for each KWA customer are determined based on the
unit cost and each customer’s average annual demand.

Each KWA customer will be individually responsible for the cost of construction and operation of the
local facilities necessary to provide treatment other provisions necessary for local distribution. To
provide for a complete evaluation, the concept studied also considers the needs for local treatment
and supply to existing local distribution systems. Construction and operating costs associated with
specific customer communities are assigned to the specific community and combined with their share
of the KWA costs to determine the projected costs for each community.

Costs presented represent the additional costs which will be incurred by KWA customers if the
proposed alternative replaces their existing water supply. Operating and maintenance expenses of
existing facilities are not included in costs presented for the studied alternative.

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