Alcosan's $3 billion Settlement:
Issues and Cost to You
Public Meeting Presentation by Alcosancost October, 2012
D:\uploadedFiles\hDeGE3cZZD41_ZmOKLEmjm_ZfFCbgUj76UpvVx3lXnMN4_I\CommentsBOLD w Appendix A.pdf
Public Comments on the ALCOSAN Wet Weather Plan
ALCOSAN Public Meeting
Sheraton Station Square
October 17, 2012
Richard H McClelland
Ross Township
Introduction
I am Dick McClelland, a 30-year homeowner in Ross Township. As a way of background, I have a
Bachelor Degree in Civil Engineering …and… a Masters Degree in Engineering Administration.
Both are from Case Institute of Technology. I have substantial gas utility management experience
from which I’ve retired.
I have also put a site on the web: www.alcosancost.com
That’s…
alcosancost
…all stuck
together. My comments today can be viewed and even downloaded from this site.
Thank you for the opportunity to briefly comment on the Alcosan $2 billion Wet Weather plan. Its
1,200 plus pages are a comprehensive and impressive document. Obviously, a lot of effort went into
it. However, I think there is a significant danger that it will cost a lot more than $2.8 billion dollars
when the construction dust settles …but… I’ll get into that later.
In my written comments, color graphics are included that make them more understandable. To
make life easier, they are in the hard copy …and…. on the CD that I have submitted.
To those of you in the audience, I have a few copies that you can look at …and… I will be around for
a couple of hours if you have comments or questions.
Probably more usefully: I have put these remarks with full color graphics on the web at alcosancost-
dot-com. Simply Google alcosancost all stuck together.
The applicable site will be your first hit. Simply go to its main page and look for the green arrow with
red type at the top of the page. Clicking will enable you to view and even print these comments
…as well as even supporting materials like the Reading List documents in Figure 11.
Firstly, a Typical Alcosan Home and it’s billing
Typical Alcosan Home (use and billing) * . . .
For a typical 30 year old home totaling 1,700 square
37 inches per year rainfall
feet, 52,000 gallons of water use a year would be
equivalent to filling the living area 4.1 feet deep!
Average annual water use = 4 feet
Sewer:
Water Meter:
Rain Runoff:
52,000 gallons / year
Roof = 19,500 gallons / year = ~40% of home's sewer
Today $180 Local
52,000 gallons /year
= 2,275 square feet of rain surface
260 Alcosan
= Roof plus 70 foot driveway
$440 per year
Today $295 per year (West View Water)
= 7 commercial parking lot spaces
2027
$330 Local
210 Local (Wet Weather Addition)
410 Alcosan
390 Alcosan (Wet Weather Addition)
$1,340 per year
* Average is 52,000 gallons per year of sewer billing. Sewer use is based directly on water meter readings.
Figure 1
-- 1 --
As a start, it might be useful to those of you who are new to get a bit of an understanding as to how
we got here.
Figure 1 shows a Typical Alcosan Home and residential user. In this case I’ve shown a typical 30-
year-old residence. It’s a two story with 17 hundred square feet of living area. As an average
customer, it puts 52 thousand gallons a year into the sewer.
That’s tough to visualize. However, imagine its living area is filled with four feet of water. That’s 52
thousand gallons worth.
As shown, all that water that’s going to the sewer is supplied through a water meter. If, like me, you
live in the North Hills, your water company is West View Water. They are an efficient, competent
and low cost supplier. They pump it from the river, filter it, chlorinate it, pump it through pipes they
own, and also own and read the water meter. Those 52 thousand gallons cost me $295 a year.
Pittsburgh Water would be about 30 percent more; American Water in the south would be over 100
percent more expensive.
If you look around your house, you will find a water, a gas, and an electric meter. You won’t find a
sewer meter! The assumption which is generally reasonable is that all the water you use goes
down the sewer. In effect, your water meter is also your sewer meter. Alcosan or your local sewer
provider gets the meter info from your water company to make up your sewer bill.
Of course, the hook is if you have an underground lawn sprinkler system and use it frequently in the
summer. That outside water isn’t going down the sewer. The solution is a deduct sprinkler meter
which you install and Alcosan reads. The downside is that a plumber’s installation is around $500
…and… you will have to pay Alcosan $110 a year to come read it every three months! I’ve added a
deduct meter it and found the Alcosan people to be very competent and quite pleasant to deal with.
In any event, the sewer flow from your home typically flows down toward the river. Then Alcosan
picks it up in tunnels it installed along the river, treats it, and puts it back in the river hopefully
below your water company’s intake!
For the average Alcosan customer as shown in Figure 1, this sewer service costs $440 per year. An
average of $180 of this goes to your local municipality or sewer authority. Some municipalities take
more like $300. In any event, Alcosan gets $260 of your sewer bill …and… all their customers pay
the same rate per thousand gallons of sewer use.
The bottom line is that the water which costs you $295 to buy …will cost you $440 to throw away
back into the river from which it came!
As shown in the bottom left, by 2027 that throw-away sewer cost will be $1,340 per year. In other
words, what cost you $295 to buy will cost you almost five times as much to throw away!
As shown, $600 or almost 50% of that $1340 per year are the Wet Weather Plan costs we’re
discussing today.
Before we leave Figure 1, look at the right hand side! This shows the home’s roof. Rain will make
about 19,000 gallons a year into your downspouts. That’s 40 percent of your sewer flow!
Indeed, the annual runoff from your roof and a 70-foot drive way would about equal the sewer flow
from your home! Moreover, just the rain on seven parking spaces at a local store or mall will equal a
home’s sewer discharge. Furthermore, the rain flows occur in a few hours … rather than spread over
a month like your sewer use. If rain flows get into a sewer carrying your home’s own sewer
discharge, that’s a serious change.
-- 2 --
Secondly, a Typical Alcosan Home and it’s sewer connections
Typical Alcosan Home (sewer connection) . . .
Average annual water use = 4 feet
Sewer
Home Roof Runoff
Street Curbs, Parking Lots, Com'l Roofs, etc
52,000 gallons/year/home
52,000 gallons /year
Ground
= 2,275 square feet of rain surface
= Home roof plus 70 foot driveway
= 7 commercial parking lot spaces
Suburbs (145,000 Households):
Urban Areas Pittsburgh, etc. (155,000 Households):
Curb
Separate
Storm
Combined
Sanitary
Sewer
Sewer
Sewer
Wet Weather
Diverter
Overflow
Alcosan
Alcosan
Alcosan
Rivers
Treatment
Treatment
Treatment
Plant
Plant
Plant
Figure 2
Figure 2 shows a typical Alcosan home and its sewer connections. The upper half shows potential
sewer inputs. These are: a typical Alcosan home, it’s roof, and nearby roads and parking lots. The
arrows show how these flows are connected to the region’s sewer types and resulting issues if any.
The bottom half of the figure shows our area’s two sewer types. The left half is a typical county
suburb. As shown, suburbs typically have a separate sanitary sewer and also a storm sewer for
rainwater. There are around 145 thousand households using this type of separate system. Most were
built after the 1940’s as suburban population boomed and environmental sewer rules started to
tighten.
Moreover, just the rain on seven parking spaces at a local store or mall will equal a home’s sewer
use. Furthermore, the rain flows occur in a few hours … rather than spread over a month. These
flows go into a separate storm sewer. If excess rain flows get into a sanitary sewer carrying your
home’s own sewer discharge, that’s a serious change that needs repaired.
The bottom, right-hand side of Figure 2 shows an older combined sewer system. Here, both sewage
from your home and rain from street curbs go into a single pipe. This applies to around 155 thousand
households in Alcosan’s service area. Up to the 1900’s these old pipes ran directly into the river
without treatment. In the 1950’s, Alcosan was formed due to environmental pressure. It built tunnels
along the rivers to pick up sewer flows and transport them down-river to a new treatment plant. This
is on the north shore of the Ohio River near Pittsburgh’s Brunot Island.
-- 3 --
Diverters, called regulators, were then installed in the region’s combined sewer river outlets. A
regulator is a fancy version of a flat horizontal plate in the sewer. Flows underneath the plate go to
Alcosan for treatment.
During rainstorms, known as Wet Weather, the excess flow of mixed sewage and rainwater are
discharged to the rivers. This might be from a few to over 50 locations depending on the rainfall
event. Depending on the specific sewer, the total annual overflow duration could range from a half
day to over 10 days. Obviously in combined sewer areas, a major problem are roofs, parking lots,
and streets feeding into the sewers. Remember: an area equaling only seven parking spaces produces
as much sewer input as a home!
Again I apologize for not having poster charts. However, I’m an interested home owner albeit with
an engineering degree and background. I don’t have a budget for a fancy show and tell posters.
However, as I said in the introduction…
You can go to alcosancost.com via Google. From the top of that site’s main page, you can easily view
or download all of this including all of the illustrations, graphs, and tables.
Basin Profiles and implications
Figure 3
Figure 3 shows the seven Alcosan Planning Basins. These include Pittsburgh known as Main
Rivers in the center. The six surrounding basins border rivers like slices of a pie. They are named
-- 4 --
for the key river or creek in them. If you want to know which basin that you are in, you can refer to
Figure 3 …or look up the Plan’s Figure 1-7 on page 1-10.
Planning Basin Households, Sewer Profiles, Billing, and Alcosan Capital Costs . . .
Alcosan
Investment
Households
Overflow (Mil Gal/Yr)
Wet Weather Cost Allocation
($mil)
Combined
Separate
Combined
Separate
Equal per
Equal per
Basin
Todays
Sanitary w
Sanitary
Total
Sanitary w
Sanitary
Overflow Gal
Household
Change
Dollars
Alcosan Planning Basin:
Storm
Sewer
Storm
Sewer
($/year/home)
($/year/home)
($mil/yr)
Chartiers Creek
15,975
4,685
20,660
1,034
184
$1,850
$1,340
-$10
$354
Lower Ohio / Girty's
7,728
29,814
37,542
334
324
$1,070
$1,340
+$10
0
Main Rivers (Pittsburgh)
66,077
2,267
68,343
2,825
0
$1,518
$1,340
-$12
0
Saw Mill Run
16,168
28,190
44,358
434
0
$924
$1,340
+$18
0
Turtle Creek
6,319
29,485
35,803
148
45
$842
$1,340
+$17
0
Upper Allegheny
19,365
27,021
46,387
2,208
43
$1,654
$1,340
-$14
0
Upper Monongahela
13,245
35,176
48,421
1,954
76
$1,529
$1,340
-$9
0
Total
144,877
156,638
301,514
8,937
672
Both produce $404 mil per year
Basin Subtotal $354
Regional Conveyance Tunnels
613
Woods Run Treatment Expansion
484
Total Alcosan
$1,451
Municipal Capital Costs
$530
Total Wet Weather Capital Cost (Today’s 2012 Dollars)
$1,981
Total Wet Weather Capital Cost (2026 Completion at 3.1% Inflation)
$2,772
Source:
Table 3-3, Table 4-2, and Table 10-1 in the ALCOSAN Wet Weather Plan. Households are based on 2.4 persons each. Manhole overflows
have been allocated back to Sanitary Sewers on the basis of overflow gallons. Wet Weather cost portion of household billing in 2026 is
$600 annually per Table 11-12 plus $740 for other costs.
Table 1
Table 1 shows the Alcosan planning basins and highlights their profiles. It is pulled together from
key information scattered throughout the Plan. The data shows that 23 percent of the households are
in the Main Rivers (Pittsburgh) basin. As could be expected, households here in Main Rivers are 97
percent on older combined sewers, the main source of river pollution. The other six basins
individually range from 7 to 15 percent of Alcosan households. Within this ring of six basins, two-
thirds of the households are on far less-polluting separate sewers.
The next columns show combined and separate sewer overflows to the rivers. This is the cause of the
Wet Weather Plan that we are talking about today. Combined sewer overflows total over 8,300
million gallons per year. In comparison, overflows from separate sewers are only 672 million gallons
a year. Thus, combined sewer overflows represent an astonishing 93 percent of the problem. Main
Rivers (Pittsburgh) represents nearly 30% of the problem. The Upper Allegheny basin is not far
behind at 23 percent.
Essentially Alcosan proposes in 2027 that all of today’s homeowners will have a sewer bill averaging
$1,340 a year. As shown in Table 1, all would pay the same for equal water meter use. This is how
things are done now.
Alternately you could imagine a concept where the new Wet Weather costs are allocated back to
basins based on their sewer overflows. This, after all, is what caused the problem in the first place
…and… its total cost. Table 1 shows the resulting costs to homeowners if allocated by basin
overflows. Then, the annual homeowner cost would range from $842 in Turtle Creek to $1,850 in
Chartiers.
Thus, in the equal homeowner Alcosan billing lottery, some basins win and some loose. The winners
are the Chartiers, Main Rivers, Upper Allegheny, and Upper Mon basins all shown in green. Each
sees their basin’s total household cost go down by some $10 million annually. Under equal household
-- 5 --
cost billing, the losers subsidizing other basins are: Lower Ohio Girty’s, Saw Mill Run, and Turtle
Creek. Their total household’s subsidization of other basins ranges from $10 to $18 million per year.
The “Third Party Review of the ALCOSAN Regional Long Term Wet Weather Control Concept
Plan” is a remarkable 2002 report. It is an innovative and thoughtful report whose Section 9
addressed cost issues like uniform household cost versus inter-basin overflow allocation billing.
While no longer on the Alcosan site, it remains available at alcosancost-dot-com.
However and as Alcosan indicates in the Plan, essentially nothing has been done to consider anything
other than uniform billing throughout the basins using homeowner water meters. Alcosancost has
looked at a couple of options. For example, a $250 dollar a year vehicle tax would bring in about 40
percent of the Alcosan 2027 consumer revenues. This would essentially start to address the runoff to
combined sewers from parking lots and streets. It might also take some pressure off seniors who are
unlikely to own multiple cares per household.
Alternately, an impervious-area combined-sewer tax of $600 dollar per year per 1,000 square feet on
commercial and industrial sites would bring in the same amount per gallon that residential owners
are paying for their own sewer use.
Another option would be to say to the state or federal government: “You have X miles of roads
whose runoff contributes Y gallons of combined sewer overflows. Our homeowners will be paying Z
million dollars a year to fix their share. Send Alcosan a check of “D” dollars each year for your
share.”
However, given the current state of play …and… lack of interest by any of the parties, it is unlikely
that any innovative revenue approaches will be considered unless one or more key municipalities
aggressively seize this issue.
Lastly, the far right column of Table 1 shows the related Alcosan and municipal Wet Weather Plan
capital costs.. These total $1.981 billion essentially for-all-intents-and-purposes $2 billion dollars
in 2012 money. Inflation and escalation will bring this to at least $2.8 billion by 2027!
It’s tough to grasp those kinds of costs. Here are a couple of ways put the billions of dollars in
perspective.
That $2.8 billion is equivalent to an $8.5 thousand dollar investment by you that you must pay off in
twenty years.
Alternately, the cost and complexity is equivalent to building a new Hoover Dam and related canal to
California. Hoover was the largest and most complex construction of the 1930’s decade. Except that
Hoover Dam was paid for by 30 million households …and… it had design, planning, and
construction legends doing it. This ‘Pittsburgh’ Hoover Dam is going to be paid for by only 330,000
families including yours.
Customer Billing in 2027 Initial Issues
The previous table provided a sneak preview of the $1,340 annual homeowner sewer bill in 2027.
This Table 2 surfaces a few initial issues in that proposed bill.
The upper bullet section has to do with Alcosan’s normal non Wet Weather cost. It is expected
to increase from $260 dollars a year now to $410 dollars a year by 2027. This is principally due to
normal Alcosan Operations and Maintenance expenses that are increasing by 4 percent a year.
Indeed, during the previous ten years to 2009, these costs actually grew a 4.7 percent rate! In
contrast, future customer incomes are projected to grow at 2.5 percent a year. As shown by the
upper red action arrow, Alcosan needs to better control its O&M expense growth.
-- 6 --
Plan’s Customer Billing in 2027 (initial issues) . . .
G
Projections show Alcosan’s residential customer ‘normal’ billing rising
from $260 per year in 2012 to $410 in 2027
 Alcosan should
better control
¯
Operation & Maintenance is a major component of today’s Alcosan customer bill.
annual Operating
It is projected to rise from $151 per customer today to $267 in 2027, an increase of
and Maintenance
4% per year!
cost increases.
¯
Instead, if this O&M cost were controlled so as to not exceed a 2.5% household
income inflation, Alcosan ‘normal’ residential customer bills in 2027 would decline
by $48 to $362 a year.
G
The Wet Weather Plan requires spending $1,451 million on Alcosan
capital costs …and… $530 million on municipal capital costs
 Alcosan should
promptly tabulate
¯
The Plan’s resulting homeowner Wet Weather annual bills in 2027 are $390 from
and release the
Alcosan and $210 from the municipalities. That’s $0.27 ($390/$1,451) to the
preliminary
customer’s bill per million capital spent by Alcosan compared to $0.40 ($210/$0.530)
projected
per million for sewer capital spent by the municipalities.
municipal costs
¯
Why are customer’s bills 47% higher when a municipality makes a capital dollar
portion of the Plan.
sewer expenditure compared a similar Alcosan expenditure? Is it O&M cost?
This should include
If applicable, what can be done to reduce that inefficiency?
municipality by
municipality: project
What are the projected Wet Weather capital cost expenditures by municipality?
summaries, estimated
What are the resulting annual cost increases on residential homeowners by the
capital costs, and the
municipality?
projected resulting
costs to residential
Do significant inequities exist between projected local customer cost increases
homeowners.
between municipalities?
Table 2
The lower bullet section has to do with how similar municipal and Alcosan Wet Weather Plan costs
yield different homeowner sewer bill markups. There are $530 million of projected municipality
capital costs in the Wet Weather Plan. Yet, the Wet Weather Plan outlays by municipalities are
estimated to cost residential households a new $210 dollars a year in 2027! However, this projected
consumer bill cost is almost 50 percent higher when a municipality spends a dollar on Wet Weather
Plan construction …compared to when Alcosan spends a same dollar on Wet Weather Plan
construction! Why the difference? Is it municipal operating costs …or… is it inefficiency?
There are essentially no cost details for these municipal outlays in the Plan. Indeed, they are not even
tabulated by municipality. Nor is their any indication of the cost impacts on customers by
municipality.
As the red action arrow indicates, Alcosan should promptly tabulate and release the preliminary
projected municipal cost portion of the plan. For each municipality this should include: project
summaries, estimated capital costs, and projected annual costs to homeowners.
There will be more on capital costs and their reliability in a few minutes. But first, a few comments
on estimating the affordability of these costs to consumers.
Projecting Median Household Income in 2027
Median Household Income or MHI for short is the middle household income. For example,
assume that you grab 21 people from this audience and line them in order of increasing income. Then
the middle person in the line is the median or middle income. This is felt to better represent the
-- 7 --
Over Estimating 2027 MHI Understates Cost Impact . . .
$70,000
Alcosan Study present cost impact point:
$67,300 MHI
Impact of Lower MHI
$65,000
n
t
i o
$63,200 MHI
f
l a
n
6% Greater Cost Impact
l a
t i
o
i
n
r
f
$61,200 MHI
n
9% Greater Cost Impact
e
r
i n
$60,000
a
t
i o
/
y
/
y e a
f l a
%
2
. 5
%
r
i n
2 .
1
e a
/ y
%
1 . 9
n
$55,000
t i o
f l a
r
i n
n
e a
l a
t i o
/ y
f
%
i n
a r
1 . 9
/ y e
Pennsylvania
%
2 . 1
$50,000
Median Household
Income
$45,000
Alcosan Study
start point is
$45,300 MHI in
2011. Delta vs
Allegheny County
is due to Pittsburgh
impact.
$40,000
Allegheny County
Median Household
Income
$35,000
Also, Allegheny County has an exceptionally large proportion of fixed income retirees
Figure 4
typical income than calculating an average which would usually be biased upward by a small number
of high-end incomes.
The EPA measures cost impact by dividing the applicable sewer bill increase by the MHI. The first
part of the Plan costed the impact by keeping everything in today’s 2012 dollars and using present
MHI’s. However, the final part of the Plan projected costs out to 2027 and then compared those costs
with a projected MHI in 2027. To make that projection, the Plan assumed that incomes would grow
at 2.5 percent per year based on long term historic data. In comparison, Figure 4 shows MHI growth
for Pennsylvania and for Allegheny county from 1999 to 2011. The growth rates measured 1.9
percent a year for Pennsylvania and 2.1 percent a year for Allegheny County. As a matter of fact,
Pennsylvania MHI has been flat for the last three reporting years. Considering how the economy is
still stalled, I think the Plan could have made a convincing case for using 1.9 or 2.1 percent growth a
year rather than the 2.5% growth that the Plan used.
The result would have been a projected MHI of $61 to $63 thousand rather than the $67 thousand
used in the Plan to measure sewer bill impacts. This would have raised the resulting cost impact by
six to nine percent. Thus, the Alcosan Plan potentially left cost impact dollars ‘on the table’ by using
too high a projected MHI..
Furthermore, as noted at the bottom of Figure 4, Allegheny County has an exceptionally large
population of fixed income retirees. Sixty five and older represents 16.6 percent of the population.
This was relegated to one page in Section 6 of the Plan. Even more noteworthy but uncovered is
that 31.7 percent of the county’s households are on some type of Social Security income. These
factors make these households particularly sensitive to increased costs like sewer bills. It would have
been useful to weave these elements into the final affordability section of the Plan.
-- 8 --
Median Household Income and Alcosan Cost Impact
The Wet Weather Plan has very impressive maps showing the impact of future sewer cost increases.
The EPA requires this impact be measured by sewer cost as a percent of the Median Household
Income or MHI for short. Impacts are considered objectionably high when the sewer cost is over 2
percent. Section 11 of the Plan shows that this would apply to about three fifths of households. A four
percent impact would apply to one in every 20 households.
Household Income and Alcosan Impact . . .
PghOwner
64,807 Hsehlds $51,915 MedHsehldInc
PghRenter
71,410 Hsehlds
$22,160 MedHsehldInc
SubOwner
147,588 Hsehlds $64,776 MedHsehldInc
SubRenter
61,625 Hsehlds $26,573 MedHsehldInc
16%
14%
12%
10%
8%
6%
4%
2%
0%
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
Annual Household Income
Alcosan Impact as Percent of Median Household Income:
Pgh Owner
2.2%
Pgh Renter
5.1%
Sub Owner
1.9%
Sub Renter
4.0%
Composite
3.0%
Figure 5
The Plan also looks at the 83 municipalities in Alcosan’s service area. Almost half are rated as high
impact over 2 percent and four municipalities have a sewer cost over 4 percent. However, a look
at detailed census data reveals a much more alarming sewer cost impact.
The top of Figure 5 tabulates the household incomes for Pittsburgh and for Suburban Owners and
Renters in Alcosan’s service area. The red lines are for Pittsburgh; blue lines are for the surrounding
suburbs. Solid lines are for Owners; dashed lines are for Renters.
How was the data developed? Many people don’t realize that all of the census data is reported by
numbers of people in various categories. Moreover, both Pittsburgh and Allegheny County are
reported. Thus, suburban data can be calculated by simply subtracting Pittsburgh numbers from
Allegheny County numbers. For example, this yields 130,000 households in Pittsburgh and 390,000 in
Allegheny County suburbs.
-- 9 --
Moreover, census tabulations are available for both owners and renters at stated income bands.
Since Alcosan’s households are known, the net result is that Pittsburgh plus 52.6 percent of
Allegheny County suburbs is an excellent proxy for Alcosan service area households. More detailed
work yields the resulting household income distributions shown in Figure 5.
The curves show the percent of the groups that are within $5 thousand dollar income bands.
Pittsburgh and Suburban Renter household incomes are the two upper curves on the left. Owners
are the lower flatter curves. Two things are striking.
Pittsburgh and Suburban Renter curves look markedly alike; as do Owner curves to each other. The
difference is that Renters have a lot more members in households under $30 thousand dollars of
income. In contrast, the Owner curves are much flatter and more spread out to the high end.
Given the curves and their percentages, getting an accurate median or middle household income or
MHI for short is a remarkably trivial exercise. The results are tabulated at the top of the chart.
This includes the number of households for each group and its related Median Household Income.
Pittsburgh Owners as well as Suburban Owners and Renters are each about equal in size at 65
thousand households each. The big contrast is that Suburban Owners represent twice as many
households as each of the other groups.
Median incomes for Renters are in the $25 thousand range …but… as might be expected, Owners
have much higher incomes. Owners are in the $50 to $65 thousand MHI range. Generally, Suburban
MHI’s are about 20 percent higher than those of the equivalent Pittsburgh group.
Instead of using census tables to roughly approximate the Alcosan cost impact, exact census records
can be used. This powerful tool is downloadable geographic census database called PUMA short
for Public Use Microdata Area. This is a custom set of actual census records for individual
households that also include applicable statistical weighting data.
For example, PUMA household census records for Allegheny County are described by 3,600 records
with weights ranging from 15 to almost 500 people per record. Moreover unlike census record tables,
available companion information can be custom tailored for each record such as: own or rent;
incomes; number of people living in the household; complete costs such as rent, mortgage payments,
utility bills, sewer and water; and many other items.
Because these form a database set, companion calculations can also be performed. For example,
sewer bills based on the number of persons in the household! For this analysis, the $1,340 per
household bill in 2027 was deescalated back to 2010 dollars by 2 percent per year and then divided
by the average 2.38 persons per household. This yields $402 dollars of sewer cost in 2010 per
household member. Records can also be sorted and totaled by such things as household income
bands. Thus, operating on PUMA databases yields a very powerful tool for ‘actually opening the
hood and inspecting how key parts of the car’s engine actually work’.
Based on stated MHI’s and Own-Rent database segregation, very specific Alcosan cost impacts can
be discovered and refined with remarkable accuracy. The results are shown at the bottom of
Figure 5.
Pittsburgh and Suburban Owners show a sewer cost impact of 2.2 and 1.9 percent of MHI. The
impact on renters is even more dramatic. The Alcosan Plan’s cost impact on Renters is 5.1 percent in
Pittsburgh …and… an almost equally excessive 4.1 percent in the Suburbs. Indeed the household
weighted cost impact on all four groups is a very high 3.0 percent!
These Alcosan cost impacts appear far more concerning than those actually discussed in the Plan. A
minor reason for the increase is the selected 2.0 percent income adjustment. However, the dominant
factor appears to be that the persons per household at the Median Household Incomes are generally
higher than expected from group census averages. This increases the applicable Alcosan sewer costs
-- 10 --
in the MHI sectors. Thus, a lot could be gained by a discussion in the Plan about the impact on
Pittsburgh and Suburban Owners and Renters.
Additional Sewer Cost Impacts Need to be Included
Figure 6 shows the water use breakdowns and thus sewer billing for the two key suppliers within
the Alcosan system. These are for Pittsburgh Water and Sewer …and… for West View Water.
Residential use is shown in blue. Commercial and local uses are in shades of red. What little
industrial use left is shown in yellow.
Additional Household Costs (due to pass thru) . . .
Pittsburgh Water and Sewer Authority
West View Water Company
Customer Annual Water Use = 11,500 Mil gal
Customer Annual Water Use = 4,600 Mil gal
Industrial
Industrial
2%
Municipal
1%
4%
Commercial,
Commercial
Health, Education,
23%
Government
34%
Residential
Residential
64%
72%
Added Household Costs =
34
23+4
64
= 53%
Added Household Costs =
72
= 38%
Added Household Costs adjustment = 44% based on a weighting of 39% to Pittsburgh and 61% to Suburban (West View)
Should be discussed and quantified in Plan ...and... raised with EPA for valid cost impact inclusion
Should be included in Alcosan cost discussions with its consumers*
* Also: At a $1,000 added annual cost inside Alcosan’s service territory and all other things being equal, a smart home buyer
would pay $14,400 less for a home inside Alcosan’s service territory as compared to a similar home outside it’s territory!
Figure 6
In making this analysis, some commercial use in Pittsburgh Water was moved to residential. It was
obvious from internal numbers that some apartment building master metering was classified as
commercial. Again, the charts report water meter use …and… thus show sewer bills.
Residential households have no recourse when their sewer costs go up. However, most commercial
users do …and… will pass their cost increases thru to their own customers! One way or another due
to such cost increases, the chicken will ultimately come home to roost on the door step of residential
users.
To the area’s tax payers chagrin, schools and municipalities have become very good at raising taxes
to cover costs including water and sewers. One reason is they are not hampered by the
inconvenience of tax rate increases being subject to voter approval. Increased sewer costs will rapidly
appear on residential users door step from these groups.
-- 11 --
Significant health care users exist in the system. These organizations will be just as good at marking
up sewer bills as they are at marking up aspirin. The residential consumer will wind up paying that
tariff in either insurance costs or direct bills.
Restaurants and the full gamut of commercial establishments will also pass increased sewer costs
along to customers. It’s a fallacy to assume that any commercial enterprise has excess profits laying
around to simply absorb these kinds of costs as the EPA might assume.
Thus, most if not all, of the increased commercial sewer costs will also come out of the residential
household’s pocket in the end. The only exceptions to local household impacts might be office
buildings and hotels. However, a Florida and a national EPA composite survey put office building
water use at only 10 percent of commercial; hospitality, at 10 to 15 percent!
These household pass-thru commercial sewer costs are significant! They total another 44 percent of
the direct sewer cost to households. In other words, the planned $1,340 in 2027 may actually become
something like $1,930 cost to residential households!
As Figure 6 indicates: Alcosan can, and should, make the argument in the Plan that these indirect
costs add another potential $590 dollars a year on residential households …and… that the $590
addition is both real and significant. Failure to cite this adder also misleads consumers as to what the
real cost actually is when the Plan’s construction is complete.
An interesting side note is the possible impact on home prices as shown in the bottom of Figure 6. If
the Wet Weather plans increase a homeowner’s sewer cost by a $1000 dollars: then all other things
being equal, a smart home buyer would pay $14 thousand less for a home inside Alcosan’s service
territory as compared to a similar home outside Alcosan’s service territory!
A major problem: cost overrun likelihood
Recent Project Problems . . .
Jefferson County Sewer System
  • Signed EPA Consent Decree
  • Original estimate was $1.2 billion, Final expenditure was $3.3 billion
  • Final cost had a 175% overrun
  • Plagued by construction mismanagement, cronyism, bribery, questionable financial practices
  • New treatment plant had to rebuilt, under river tunneling cost increased 67% and was abandoned
  • Now in bankruptcy
  • Pittsburgh PAT North Shore Connector Tunnel
  • 1.2 miles long
  • Original estimate was $350 million, Final expenditure was $550 million (after an $80 million scope reduction)
  • Final cost had an 80% overrun
  • Harrisburg Incinerator
  • Relatively simple, commonplace technology
  • Initial facility cost $104 million but failed new environmental regulations
  • Revamp and expansion cost $80 million plus $25 million for a different contractor to finish
  • Debt now $320 million incl $50 million of financing fees
  • Harrisburg Authority board member ‘pleads’ ignorance; city faces Bankruptcy
  • Figure 7
    -- 12 --
    As if all this wasn’t enough, I would like to spend the last few minutes discussing a significant key
    concern that overhangs all of the aforesaid issues. The Plan and its cost to households is based
    on a predicted construction cost of $1.981 billion dollars today which will cost $2.772 billion in
    2026 when construction is complete at the work sites.
    What if the estimated cost is wrong? What if there are substantial cost overruns? Is either likely?
    How have other projects fared?
    This is indeed the ‘elephant in the room’!
    What could go wrong …and… How bad could it get?
    Remember that the projected future homeowner costs are a direct result of construction costs. If
    construction costs go up 40 percent, then the projected $600 dollars a year Wet Weather component
    increases $240 dollars a year …and… your annual household sewer bill is no longer $1,340 dollars a
    year; but is rather, $1,600 dollars a year!
    Figure 7 shows how some key projects have fared two of which are of local interest.
    The poster child of what can go wrong with an EPA consent decree is Jefferson County Alabama.
    When they signed the consent decree they thought the project cost was $1.2 billion. When the dust
    settled, their construction cost was $3.3 billion a 175 percent cost overrun! Their project
    implementation was plagued with mismanagement, cronyism, and questionable financial practices.
    Their new treatment plant had to be rebuilt; and under-river tunneling costs increased 67 percent
    before being abandoned. Jefferson County is now bankrupt.
    The second is of significant local interest: PAT’s North Shore Connector. It is only 1.2 miles long and
    was initially estimated at $350 million dollars. The final cost will be $550 million dollars even after
    deleting parts of the project. This is an 80 percent overrun. More significantly, it a significant
    warning to Alcosan. Thirty percent of Alcosan’s projected construction cost is for deep conveyance
    tunnels along Pittsburgh rivers. A similar overrun would increase Alcosan’s projected 2026
    construction cost by almost $700 million dollars. Not a happy prospect.
    The third project is the infamous Harrisburg incinerator. Estimated to cost $104 million, it failed
    new
    Major Project Cost Overruns . . .
    environmental
    regulations. After
    a revamp and
    Anonymous Contractor:
    expansion
    “Engineer’s
    projected at $80
    estimates
    million and even
    represent the cost
    switching
    of construction in
    contractors,
    Harrisburg is now
    heaven.
    $320 million in
    debt of which
    Murphy’s Law:
    an astonishing $50
    million dollars is
    “Anything that can
    for financing fees!
    go wrong will!“
    The city now faces
    bankruptcy.
    The icing on the
    cake is that one of
    Source: Government Schemes Cost More Than Promised
    Edwards Cato Institute 2003
    the Harrisburg
    Authority board
    Figure 8
    -- 13 --
    members is publicly ‘pleading’ ignorance in knowing what was going on! To my mind, any public
    authority board member that screws up this badly with public dollars should go to jail for at least a
    year.
    Major Project Cost Overruns
    Major construction cost overruns are unfortunately not uncommon. In fact as shown in the table on
    the right of Figure 8, Boston ‘Big Dig’ was expected to cost $2.8 billion dollars. By the time it was
    done, its cost was $14.6 billion dollars. That cost overrun was an astounding 460 percent! Inept cost
    estimating combined with poor some say almost criminal construction management created its
    cost overrun.
    The Denver Airport overran almost 200 percent; Seattle’s light rail system overran by over 50
    percent! Indeed, it looks like a relative of the PAT North Shore tunnel. DoD overruns like the Raptor
    are perhaps understandable …but… things like roads, bridges, and airports are pretty well defined.
    They should be relatively easy to accurately cost estimate. After all, they are all above ground
    unlike tunnels where you can’t see the project work area.
    Why do so many projects have significant cost overruns? The basic answer is ‘hubris’. Hubris is
    essentially thinking you know things that you really don’t. As one contractor put it: “Engineer’s cost
    estimates are for projects built in heaven.” Helping the effect of hubris along is Murphy’s Law.
    We have all run into it. It basically says that: “If anything can go wrong it will!” Both interfere with
    making good project cost estimates and with successful project management to help control costs.
    Either is bad enough; but taken together, they yield catastrophic cost overruns like Boston’s Big Dig.
    Typical Bridge and Tunnel Cost Overrun Experience
    Typical Project Experience w Bridge / Tunnels . . .
    33 Bridge / Tunnel Projects of which 18 were in North America
    36%
    12%
    6%
    4%
    Percent of projects
    exceeding stated cost
    increase.
    Seventy percent of
    the projects had an
    overrun with the
    average being a 55%
    cost increase .
    -80%
    -40%
    0%
    40%
    80%
    120%
    160%
    200%
    240%
    280%
    Underruns
    Overruns
    Percent Cost Increase =
    Final Constructed Cost
    Estimated Cost When Construction Authorized
    Flyvbjerg:
    “The evidence shows that it is sound advice for policy and decision makers as well as investors, bankers, media,
    and the public to take any estimate of construction costs with a grain of salt, especially for rail and fixed-link
    [bridge and tunnel] projects.”
    Source: Underestimating Costs in Public Works Projects
    Flyvbjerg APA Journal 2002
    Romero:
    “Cost estimating for underground transit [is] too dangerous to ”Guesstimate”.
    Source: Article Title
    Romero Jacobs Associates Capital Projects Process
    Figure 9
    -- 14 --
    Even normal projects experience major cost overruns. Bent Flyvberg, a well published Danish expert
    looked at 258 large transportation projects. Their average size was $350 million. Thus, each was
    large enough to have spent substantial amounts on getting good cost estimates. They, no doubt, used
    quality estimating procedures and tools.
    Figure 9 shows the results for the applicable 33 bridge and tunnel projects. The estimated cost at the
    time the project was approved for construction was compared with the project’s actual cost at
    construction completion.
    The results are striking. As shown on the green side, only 30 percent of the projects had cost under
    runs. In contrast, 70 percent of the projects had over runs …with the average being a 55 percent cost
    increase over the initial construction estimate. Thus, bridge and tunnel projects were consistently
    under estimated even with the best of tools.
    Flyvberg cautions that decision makers and the public should take any estimate of construction cost
    with a grain of salt, especially for bridges and tunnels! Indeed, there seems to be a bias toward under
    estimating completion costs …or… perhaps Murphy’s Law simply happens more often to bridges
    and tunnels.
    The title to another instructive article worth reading by Victor Romero pretty much says it all: Cost
    estimating for underground transit [is] too dangerous to “Guesstimate.” Again, underground tunnels
    along the rivers represent a troubling $850 million of Alcosan’s projected costs.
    Alcosan Capital Cost Estimate Procedure
    Alcosan Capital Cost Estimate Procedure . . .
    Construction cost estimates are based on ACT (Alternatives Costing Tool)
  • Initially developed by Philadelphia Water with mods by Alcosan, etc
  • Alcosan developed special tunnel template
  • In the Plans’s 1,245 pages, only 4 pages are devoted to construction cost estimates and their accuracy
  • Plan indicates ACT yields a Class 4 estimate accuracy (Actual Cost would be within -30% to +50% of estimate)
  • The Plan provides no real validation information or tables of ACT Estimated versus
  • Actual construction costs. Alcosan needs to provide such a report.
    Construction cost contingency amount
  • “Contingencies are added because experience has shown that such costs are
  • likely, and expected, to be incurred even though they cannot be explicitly
    determined at the time the estimate is prepared.”
  • For an ordinary power plant the contingency on a Class 4 estimate might be up to 30 percent. Field
  • construction of tunnels and the like is entirely different.
  • Contingency is not mentioned anywhere in the entire Plan, let alone in the construction or capital cost area.
  • Thus, it is not clear if ANY construction cost contingency allowance is even added anywhere.
  • Alcosan needs to promptly report and justify the size -or non use- of construction
  • cost contingencies in the Plan’s capital estimates.
    Figure 10
    -- 15 --
    Alcosan’s cost estimates are developed through a Philadelphia Water model called ACT as shown as
    the first bullet in Figure 10. Alcosan and some of the consultants have updated it. It’s description
    which occupies four pages in the Plan states it yields a Class 4 estimate. This means the final
    actual constructed cost should be in the range from 30-percent-less to 50-percent-more than the
    Alcosan estimate in the Plan.
    This is shown in bullet points and black text. Recommended Alcosan action items are shown in red
    along with an action red arrow.
    The Plan itself provides no real validation information or tables of ACT estimates versus actual
    construction costs. Thus, Alcosan needs to provide needed assurance via a published report.
    The second bullet deals with a key element called “construction cost contingency.” As highlighted in
    the Figure, contingencies are added to a Stage 4 estimate because experience shows that these added
    costs are likely and expected to be incurred even though they can not be explicitly determined at
    the time the estimate is prepared.
    In other words, a contingency is not merely a nice to have comfort; for a good estimate it is
    absolutely necessary! For example, even a run-of-the-mill utility power plant will often have a 30
    percent contingency at this stage of the estimating process.
    Such a contingency is not even mentioned anywhere in the Plan, let alone in the construction or
    capital cost sections. Thus, it is not clear if any construction cost contingency has been added any
    where or any place to the Plan’s estimates.
    Alcosan Capital Cost Management Procedures
    Alcosan Capital Cost Management Procedure . . .
    Plan’s Adaptive Management ( Section 11)
  • Principally deals with demographic, financing, and municipal flow factors
  • Does not mention cost overruns or their impacts except obliquely as %MHI customer impacts
  • Any “Adaptive Management” plan should include construction cost as a component
  • Alcosan needs to clarify with the EPA what happens if cost overruns exceed 10%
  • Engineering, Estimating, Bidding, and Construction Management
  • Largely unaddressed except for one page in Section 11
  • Basically says that Woods Run previously used Alcosan internal design and construction management
  • supplemented with external consultants. Intends to do the same with WWP.
  • Alcosan needs to develop and release a detailed construction design, estimating,
  • bidding, and management plan that assesses resources, performance, costs, and
    risks. Municipality engineers should review and comment.
    Recommended Reading*:
  • Government Schemes Cost More Than Promised Cato Institute
  • Underestimating Costs in Public Works Projects pdf Flyvbjerg APA Journal
  • Cost Estimating For Underground Transit: Too Dangerous to “Guesstimate” pdf Romero Jacobs Associates
  • Estimate Accuracy: Dealing with Reality Hollmann AACEI
  • MaPro’s take on Contingency and Management Reserve Valgarosson Mannvit
  • Document Project Readiness by Estimate Class Using PDRI Zaheer Fluor
  • Broken Buildings, Busted Budgets: How to fix America’s Trillion Dollar Construction Industry LePatner
  • *Use Google to locate by word search on title with pdf added where listed
    Figure 11
    -- 16 --
    Thus, as highlighted in red, Alcosan needs to promptly report and justify the size or non use of
    construction cost contingencies in the Plan’s capital estimates.
    This next figure assesses some key capital cost management procedures. This goes to the heart of the
    customer cost issue.
    Section 11 of the Plan refers to Adaptive Management as highlighted at the top of Figure 11.
    However, this Adaptive Management refers to demographic, financing, and municipal flow changes.
    Conspicuously absent are adaptive plans for capital cost overruns except for a few sentences
    dealing with cost impact as a percent of Median Household Income.
    As highlighted by the red action arrow …and… by the red text, any Adaptive Management plan
    should include construction cost as a distinct component even if the EPA isn’t particularly
    interested in it.
    As keyed by the second red arrow, Alcosan also needs to clarify with the EPA what happens if and
    more likely when when construction costs overrun. Is Alcosan supposed to keep blindly building to
    its customers billing detriment? Is there even a reset button? If so, at what point?
    A second critical cost management issue is how Alcosan will perform: design, estimating, bidding,
    and construction management. All are vital components. As you have seen in Figure 7, Figure 8, and
    Figure 9; a less than stellar performance can and will cost Alcosan customer’s hundreds of
    millions of dollars.
    This area is largely unaddressed in the Plan except for one page in Section 11. Alcosan indicates that
    for Woods Run, it used internal design and construction supplemented by outside consultants.
    Alcosan then states it will do the same for this Wet Weather Plan which I suspect is ten times larger.
    Is this a good idea? Maybe or maybe not!
    As shown by the red action arrow, Alcosan needs to develop and publish a detailed construction plan.
    It should look at design, estimating, bidding, and construction management from the viewpoint of
    resources, performance, costs, and risks. Then, municipality engineers should review and comment.
    As indicated, these are highly important …and… potentially quite expensive issues. Even an
    informed public is highly desirable. In blue at the bottom of Figure 11 is some recommended reading.
    These are listed in a suggested order of reading. Rather than give complicated links, simply type the
    name in Google and you will be taken to the article. All the searches have been tested. Use pdf where
    shown to get the best link.
    Alcosan Board of Directors
    Alcosan is about to embark on a very serious cost endeavor unlike anything they have ever
    undertaken in magnitude. Boards of Directors are supposed to be experienced ship captains that
    guide such things to untraumatic conclusion.
    The top of Figure 12 highlights the Present Status. While not meaning to be disparaging, Alcosan’s
    Board is mostly composed of elected politicians and union organizers. None appear to have an
    engineering degree. No objective person could reasonably conclude that such a composition is
    qualified to oversee capital construction undertakings costing hundreds of millions a year.
    There are also some warning flags. Alcosan’s O&M budget has been growing a four percent a year
    for a decade …and… that four percent annual cost increase is embedded in the Plan. In contrast, the
    -- 17 --
    income of Alcosan’s customers has been growing at only two percent a year. Minutes of Board
    meetings are not even available on Alcosan’s web site.
    The first red action item and arrow simply throws some sunshine into the mix with easily available
    minutes. Actually, the video taping is also critical. It gives you a good idea of what is really going on
    in terms of interactions and experience without having to trudge down to Alcosan’s plant in the dark
    hoping to get a seat.
    Alcosan Board of Directors . . .
    Present Status
  • Mostly composed of elected politicians and union organizers. None with engineering degrees.
  • Not well qualified to lead a major construction undertaking costing hundreds of millions a year
  • No Board Minutes published on Alcosan internet site. Alcosan O&M increasing at 4% per year and now embedded in
  • Plan’s future
  • All Board Minutes should be published on the Alcosan www site. Board meetings
  • should also be video taped and then posted on the Alcosan www site.
  • Because Alcosan is entering a new $3 billion construction future, it is timely that the
  • Board should commission a published assessment detailing the current practices and
    potential future savings and issues associated with such construction options as: PLAs
    or nonPLAs, union or nonunion construction, and any other such money saving or risk
    reduction options deemed even remotely possible.
    Future Status
  • In the likely event that the Board can not be reconstituted with more suitable construction
  • and capital project experience, a special Capital Project Supervisory Committee (CPSC)
    should be formed under the Board. The CPSC will have responsibilities for monitoring,
    reviewing, assessing, and recommending elements to, and for, the Board relating to the
    design, estimating, bidding, and project management of Capital Project constructions.
  • CPSC reports to Board. Board must accept/reject any proposal within 30 days. Also, m unicipalities may
  • request a CPSC meeting to broach an issue of concern. CPSC w ill post minutes on Alcosan www site with
    sunshine type confidentiality protections.
  • Five members. One by the Board; one by the Municipalities; three by CPSC search with approval by Board
  • and CPSC. The Alcosan Board member can not function as Chairman of the CPSC.
  • All members must have engineering degree, substantial management experience with $100 million per
  • year responsibility, must not be holding political office, or affiliated with any key contractor, etc.
  • Must select and participate in in-house AACEI or similar seminars. Board members and municipality
  • engineers may also attend these.
    Figure 12
    The CPSC would report to the Board. The Board would have to accept or reject any CPSC proposal
    within 30 days. Also, municipalities could request a meeting with the CPSC to broach an issue of
    concern.
    This CPSC would have five members. One would be appointed by the Board …and… one by the
    Municipalities. The other three would be by a CPSC search whose results were approved by the
    Board and the CPSC.
    Moreover, a CPSC member would have to have an engineering degree; substantial management
    experience with $100 million a year responsibility; must not be holding political office; or affiliated
    with any key contractor; etc. Additionally a CPSC member would have to select and participate in
    AACEI or similar seminars. Board members and municipal engineers could also attend these.
    In effect, establishing the CPSC should add a valuable additional resource to successful
    implementation of the Plan and potentially broaden municipal support. Moreover, the CPSC has the
    -- 18 --
    potential to detect and solve a lot of problems while potentially mitigating if not avoiding tens of
    millions of misspent customer dollars or cost overruns.
    Conclusion
    I appreciate your and the audience’s patience and attention.
    I hope these comments will prove useful and helpful. The Wet Weather Plan is an awesome
    responsibility and cost. It will be the equivalent of building Hoover Dam paid for by only 300
    thousand families. In the end, success will depend not on hope; but rather, on good people, on good
    plans, and on good contractors …and… still even then, on a fair amount of luck. As PAT found out
    with their North Shore Connector, Murphy is very much alive and well.
    Again, I apologize for not providing handouts. However, you can download a virus safe pdf of this
    presentation at alcosancost for viewing or printing.
    Again: simply Google alcosancost that’s a l c o s a n c o s t all stuck together as one word. The
    top of its main page has a green arrow button with red letters to view and even print these
    comments and graphic material.
    Again the website is www-dot-alcosancost-dot-com with alcosancost all stuck together.
    Thank you.
    Richard H McClelland
    www.alcosancost.com
    October 17, 2012
    -- 19 --
    Appendix A
    Presentation Tables and Figures
    Full Size 8 ½ x 11 in the Order Presented
    Typical Alcosan Home (use and billing) * . . .
    For a typical 30 year old home totaling 1,700 square
    37 inches per year rainfall
    feet, 52,000 gallons of water use a year would be
    equivalent to filling the living area 4.1 feet deep!
    Average annual water use = 4 feet
    Sewer:
    Water Meter:
    Rain Runoff:
    52,000 gallons / year
    52,000 gallons / year
    Roof = 19,500 gallons / year = ~40% of home's sewer
    Today $180 Local
    52,000 gallons /year = 2,275 square feet of rain surface
    260 Alcosan
    = Roof plus 70 foot driveway
    $440 per year
    Today $295 per year (West View Water)
    = 7 commercial parking lot spaces
    2027
    $330 Local
    210 Local (Wet Weather Addition)
    410 Alcosan
    390 Alcosan (Wet Weather Addition)
    $1,340 per year
    * Average is 52,000 gallons per year of sewer billing. Sewer use is based directly on water meter readings.
    Figure 1
    Typical Alcosan Home (sewer connection) . . .
    Average annual water use = 4 feet
    Sewer
    Home Roof Runoff
    Street Curbs, Parking Lots, Com'l Roofs, etc
    52,000 gallons/year/home
    52,000 gallons /year
    Ground
    = 2,275 square feet of rain surface
    = Home roof plus 70 foot driveway
    = 7 commercial parking lot spaces
    Suburbs (145,000 Households):
    Urban Areas Pittsburgh, etc. (155,000 Households):
    Curb
    Separate
    Storm
    Combined
    Sanitary
    Sewer
    Sewer
    Sewer
    Wet Weather
    Diverter
    Overflow
    Alcosan
    Alcosan
    Alcosan
    Rivers
    Treatment
    Treatment
    Treatment
    Plant
    Plant
    Plant
    Figure 2
    ALCOSAN Wet Weather Plan
    Section 1 - Introduction
    Figure 1-7: ALCOSAN Planning Basins
    1 - 10
    Figure 3
    Planning Basin Households, Sewer Profiles, Billing, and Alcosan Capital Costs . . .
    Alcosan
    Investment
    Households
    Overflow (Mil Gal/Yr)
    Wet Weather Cost Allocation
    ($mil)
    Combined
    Separate
    Combined
    Separate
    Equal per
    Equal per
    Basin
    Todays
    Sanitary w
    Sanitary
    Total
    Sanitary w
    Sanitary
    Overflow Gal
    Household
    Change
    Alcosan Planning Basin:
    Storm
    Sewer
    Storm
    Sewer
    ($/year/home)
    ($/year/home)
    ($mil/yr)
    Dollars
    Chartiers Creek
    15,975
    4,685
    20,660
    1,034
    184
    $1,850
    $1,340
    -$10
    $354
    Lower Ohio / Girty's
    7,728
    29,814
    37,542
    334
    324
    $1,070
    $1,340
    +$10
    0
    Main Rivers (Pittsburgh)
    66,077
    2,267
    68,343
    2,825
    0
    $1,518
    $1,340
    -$12
    0
    Saw Mill Run
    16,168
    28,190
    44,358
    434
    0
    $924
    $1,340
    +$18
    0
    Turtle Creek
    6,319
    29,485
    35,803
    148
    45
    $842
    $1,340
    +$17
    0
    Upper Allegheny
    19,365
    27,021
    46,387
    2,208
    43
    $1,654
    $1,340
    -$14
    0
    Upper Monongahela
    13,245
    35,176
    48,421
    1,954
    76
    $1,529
    $1,340
    -$9
    0
    Total
    144,877
    156,638
    301,514
    8,937
    672
    Both produce $404 mil per year
    Basin Subtotal $354
    Regional Conveyance Tunnels
    613
    Woods Run Treatment Expansion
    484
    Total Alcosan
    $1,451
    Municipal Capital Costs
    $530
    Total Wet Weather Capital Cost (Today’s 2012 Dollars)
    $1,981
    Total Wet Weather Capital Cost (2026 Completion at 3.1% Inflation)
    $2,772
    Source:
    Table 3-3, Table 4-2, and Table 10-1 in the ALCOSAN Wet Weather Plan. Households are based on 2.4 persons each. Manhole overflows
    have been allocated back to Sanitary Sewers on the basis of overflow gallons. Wet Weather cost portion of household billing in 2026 is
    $600 annually per Table 11-12 plus $740 for other costs.
    Table 1
    Plan’s Customer Billing in 2027 (initial issues) . . .
    l
    Projections show Alcosan’s residential customer ‘normal’ billing rising
    from $260 per year in 2012 to $410 in 2027
    3 Alcosan should
    better control
    ¯
    Operation & Maintenance is a major component of today’s Alcosan customer bill.
    annual Operating
    It is projected to rise from $151 per customer today to $267 in 2027, an increase of
    and Maintenance
    4% per year!
    cost increases.
    ¯
    Instead, if this O&M cost were controlled so as to not exceed a 2.5% household
    income inflation, Alcosan ‘normal’ residential customer bills in 2027 would decline
    by $48 to $362 a year.
    l
    The Wet Weather Plan requires spending $1,451 million on Alcosan
    capital costs …and… $530 million on municipal capital costs
    3 Alcosan should
    promptly tabulate
    ¯
    The Plan’s resulting homeowner Wet Weather annual bills in 2027 are $390 from
    and release the
    Alcosan and $210 from the municipalities. That’s $0.27 ($390/$1,451) to the
    preliminary
    customer’s bill per million capital spent by Alcosan compared to $0.40 ($210/$0.530)
    projected
    per million for sewer capital spent by the municipalities.
    municipal costs
    ¯
    Why are customer’s bills 47% higher when a municipality makes a capital dollar
    portion of the Plan.
    sewer expenditure compared a similar Alcosan expenditure? Is it O&M cost?
    This should include
    If applicable, what can be done to reduce that inefficiency?
    municipality by
    municipality: project
    What are the projected Wet Weather capital cost expenditures by municipality?
    summaries, estimated
    What are the resulting annual cost increases on residential homeowners by the
    capital costs, and the
    municipality?
    projected resulting
    costs to residential
    Do significant inequities exist between projected local customer cost increases
    homeowners.
    between municipalities?
    Table 2
    Over Estimating 2027 MHI Understates Cost Impact . . .
    $70,000
    Alcosan Study present cost impact point:
    $67,300 MHI
    Impact of Lower MHI
    $65,000
    $63,200 MHI
    n
    6% Greater Cost Impact
    tio
    $60,000
    r
    in
    fla
    $61,200 MHI
    n
    9% Greater Cost Impact
    e a
    flatio
    / year inflation
    / y
    r in
    2 .1%
    e a
    / y
    2.5%
    1.9%
    n
    $55,000
    tio
    fla
    r in
    n
    ea
    / y
    in
    flatio
    1.9%
    / y
    e
    a r
    Pennsylvania
    2 .1%
    $50,000
    Median Household
    Income
    $45,000
    Alcosan Study
    start point is
    $45,300 MHI in
    2011. Delta vs
    Allegheny County
    is due to Pittsburgh
    impact.
    $40,000
    Allegheny County
    Median Household
    Income
    $35,000
    Also, Allegheny County has an exceptionally large proportion of fixed income retirees
    Figure 4
    Household Income and Alcosan Impact . . .
    PghOwner
    64,807 Hsehlds $51,915 MedHsehldInc
    PghRenter
    71,410 Hsehlds
    $22,160 MedHsehldInc
    SubOwner
    147,588 Hsehlds $64,776 MedHsehldInc
    SubRenter
    61,625 Hsehlds $26,573 MedHsehldInc
    16%
    14%
    12%
    10%
    8%
    6%
    4%
    2%
    0%
    $0
    $20,000
    $40,000
    $60,000
    $80,000
    $100,000
    $120,000
    $140,000
    Annual Household Income
    Alcosan Impact as Percent of Median Household Income:
    Pgh Owner 2.2%
    Pgh Renter 5.1%
    Sub Owner 1.9%
    Sub Renter 4.0%
    Composite 3.0%
    Figure 5
    Additional Household Costs (due to pass thru) . . .
    Pittsburgh Water and Sewer Authority
    West View Water Company
    Customer Annual Water Use = 11,500 Mil gal
    Customer Annual Water Use = 4,600 Mil gal
    Industrial
    Industrial
    2%
    Municipal
    1%
    4%
    Commercial,
    Commercial
    Health, Education,
    23%
    Government
    34%
    Residential
    Residential
    64%
    72%
    Added Household Costs =
    34
    23+4
    64
    = 53%
    Added Household Costs =
    72
    = 38%
    Added Household Costs adjustment = 44% based on a weighting of 39% to Pittsburgh and 61% to Suburban (West View)
    Should be discussed and quantified in Plan ...and... raised with EPA for valid cost impact inclusion
    Should be included in Alcosan cost discussions with its consumers*
    * Also: At a $1,000 added annual cost inside Alcosan’s service territory and all other things being equal, a smart home buyer
    would pay $14,400 less for a home inside Alcosan’s service territory as compared to a similar home outside it’s territory!
    Figure 6
    Recent Project Problems . . .
    Jefferson County Sewer System
    - Signed EPA Consent Decree
    - Original estimate was $1.2 billion, Final expenditure was $3.3 billion
    - Final cost had a 175% overrun
    - Plagued by construction mismanagement, cronyism, bribery, questionable financial practices
    - New treatment plant had to rebuilt, under river tunneling cost increased 67% and was abandoned
    - Now in bankruptcy
    Pittsburgh PAT North Shore Connector Tunnel
    - 1.2 miles long
    - Original estimate was $350 million, Final expenditure was $550 million (after an $80 million scope reduction)
    - Final cost had an 80% overrun
    Harrisburg Incinerator
    - Relatively simple, commonplace technology
    - Initial facility cost $104 million but failed new environmental regulations
    - Revamp and expansion cost $80 million plus $25 million for a different contractor to finish
    - Debt now $320 million incl $50 million of financing fees
    - Harrisburg Authority board member ‘pleads’ ignorance; city faces Bankruptcy
    Figure 7
    Major Project Cost Overruns . . .
    Anonymous Contractor:
    “Engineer’s
    estimates
    represent the cost
    of construction in
    heaven.
    Murphy’s Law:
    “Anything that can
    go wrong will!“
    Source: Government Schemes Cost More Than Promised
    Edwards Cato Institute 2003
    Figure 8
    Typical Project Experience w Bridge / Tunnels . . .
    33 Bridge / Tunnel Projects of which 18 were in North America
    36%
    12%
    6%
    4%
    Percent of projects
    exceeding stated cost
    increase.
    Seventy percent of
    the projects had an
    overrun with the
    average being a 55%
    cost increase .
    -80%
    -40%
    0%
    40%
    80%
    120%
    160%
    200%
    240%
    280%
    Underruns
    Overruns
    Percent Cost Increase =
    Final Constructed Cost
    Estimated Cost When Construction Authorized
    Flyvbjerg:
    “The evidence shows that it is sound advice for policy and decision makers as well as investors, bankers, media,
    and the public to take any estimate of construction costs with a grain of salt, especially for rail and fixed-link
    [bridge and tunnel] projects.”
    Source: Underestimating Costs in Public Works Projects Flyvbjerg APA Journal 2002
    Romero:
    “Cost estimating for underground transit [is] too dangerous to ”Guesstimate”.
    Source: Article Title Romero Jacobs Associates Capital Projects Process
    Figure 9
    Alcosan Capital Cost Estimate Procedure . . .
    Construction cost estimates are based on ACT (Alternatives Costing Tool)
    - Initially developed by Philadelphia Water with mods by Alcosan, etc
    - Alcosan developed special tunnel template
    - In the Plans’s 1,245 pages, only 4 pages are devoted to construction cost estimates and their accuracy
    - Plan indicates ACT yields a Class 4 estimate accuracy (Actual Cost would be within -30% to +50% of estimate)
    - The Plan provides no real validation information or tables of ACT Estimated versus
    Actual construction costs. Alcosan needs to provide such a report.
    Construction cost contingency amount
    - “Contingencies are added because experience has shown that such costs are
    likely, and expected, to be incurred even though they cannot be explicitly
    determined at the time the estimate is prepared.”
    - For an ordinary power plant the contingency on a Class 4 estimate might be up to 30 percent. Field
    construction of tunnels and the like is entirely different.
    - Contingency is not mentioned anywhere in the entire Plan, let alone in the construction or capital cost area.
    Thus, it is not clear if ANY construction cost contingency allowance is even added anywhere.
    - Alcosan needs to promptly report and justify the size -or non use- of construction
    cost contingencies in the Plan’s capital estimates.
    Figure 10
    Alcosan Capital Cost Management Procedure . . .
    Plan’s Adaptive Management ( Section 11)
    - Principally deals with demographic, financing, and municipal flow factors
    - Does not mention cost overruns or their impacts except obliquely as %MHI customer impacts
    - Any “Adaptive Management” plan should include construction cost as a component
    - Alcosan needs to clarify with the EPA what happens if cost overruns exceed 10%
    Engineering, Estimating, Bidding, and Construction Management
    - Largely unaddressed except for one page in Section 11
    - Basically says that Woods Run previously used Alcosan internal design and construction management
    supplemented with external consultants. Intends to do the same with WWP.
    - Alcosan needs to develop and release a detailed construction design, estimating,
    bidding, and management plan that assesses resources, performance, costs, and
    risks. Municipality engineers should review and comment.
    Recommended Reading*:
    - Government Schemes Cost More Than Promised Cato Institute
    - Underestimating Costs in Public Works Projects pdf Flyvbjerg APA Journal
    - Cost Estimating For Underground Transit: Too Dangerous to “Guesstimate” pdf Romero Jacobs Associates
    - Estimate Accuracy: Dealing with Reality Hollmann AACEI
    - MaPro’s take on Contingency and Management Reserve Valgarosson Mannvit
    - Document Project Readiness by Estimate Class Using PDRI Zaheer Fluor
    - Broken Buildings, Busted Budgets: How to fix America’s Trillion Dollar Construction Industry LePatner
    *Use Google to locate by word search on title with pdf added where listed
    Figure 11
    Alcosan Board of Directors . . .
    Present Status
    - Mostly composed of elected politicians and union organizers. None with engineering degrees.
    - Not well qualified to lead a major construction undertaking costing hundreds of millions a year
    - No Board Minutes published on Alcosan internet site. Alcosan O&M increasing at 4% per year and now embedded in
    Plan’s future
    - All Board Minutes should be published on the Alcosan www site. Board meetings
    should also be video taped and then posted on the Alcosan www site.
    - Because Alcosan is entering a new $3 billion construction future, it is timely that the
    Board should commission a published assessment detailing the current practices and
    potential future savings and issues associated with such construction options as: PLAs
    or nonPLAs, union or nonunion construction, and any other such money saving or risk
    reduction options deemed even remotely possible.
    Future Status
    - In the likely event that the Board can not be reconstituted with more suitable construction
    and capital project experience, a special Capital Project Supervisory Committee (CPSC)
    should be formed under the Board. The CPSC will have responsibilities for monitoring,
    reviewing, assessing, and recommending elements to, and for, the Board relating to the
    design, estimating, bidding, and project management of Capital Project constructions.
    - CPSC reports to Board. Board must accept/reject any proposal within 30 days. Also, m unicipalities may
    request a CPSC meeting to broach an issue of concern. CPSC w ill post minutes on Alcosan www site with
    sunshine type confidentiality protections.
    - Five members. One by the Board; one by the Municipalities; three by CPSC search with approval by Board
    and CPSC. The Alcosan Board member can not function as Chairman of the CPSC.
    - All members must have engineering degree, substantial management experience with $100 million per
    year responsibility, must not be holding political office, or affiliated with any key contractor, etc.
    - Must select and participate in in-house AACEI or similar seminars. Board members and municipality
    engineers may also attend these.
    Figure 12
    Here you can read or print my recent testimony at the ALCOSAN public meeting on October 17, 2012
    "Recommended Reading" to View or Print
     (21.7meg)
    The Comments Document displayed on the left is created by the fairly complex and tricky HTML code that is required for all web pages. This code generation is done by a PDF-to-HTML converter like Zamzar, which is online in the web. This free converter takes PDF pages and converts them into HTML web page language. However, like most code converters, it is not perfect all the time; but, is better than most. At least the document is very viewable for those of you just want to read it on the web ...and... who don't like to download anything.

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    Download Presentation's Appendix C
    "PUMA MHI Impacts"
    Oct Mtg Presentation
    Main Page
    Alcosan Map

    What You Can Do
    Discussion Group
    Meetings, etc.
    Updates
    Links
    incl Appendix A  w  8 1/2 x 11 copies of Figures and Tables
     (5.7meg)
    This Presentation, viewable and downloadable below, has been entered into the hearing Public Comment's record at the recent October 17, 2012 Alcosan Meeting. It primarily analyzes the Wet Weather Plan's cost impact on consumers; and also, the potential cost overrun risks within the Alcosan-municipal $3 billion of new construction underlying these consumer impacts.

    It begins with two key illustrations placing a typical Alcosan consumer's home into needed perspective. It puts annual residential sewer use into context (4 feet of water in the living area), explains present and future sewer bills, and puts rainfall into perspective (roof equals one-half of sewer discharge and seven parking spaces equal a home's sewer volume). It explains how these flows tie into separate and combined sewers and generate the resulting Wet Weather issues.

    Next, the Plan's various basins are examined in terms of sewer use and cost-causing overflows. Consumer costs are shown for the present uniform Alcosan billing. A comparison then shows the impact when these new costs are reallocated back to the various basins based on their actual overflows causing the Alcosan Wet Weather new construction. Total basin costs, along with winners and losers under uniform billing, are also reported and alternates explored.
    Customer impacts are quantified in terms of various household income projections. In addition, the Plan's higher impacts on a new, previously unexamined set of classes (Owners and Renters in Pittsburgh and in Suburban areas) are developed and reported. Furthermore, the significant cost impacts on households due to pass-through of commercial and governmental new sewer costs are assessed, as well as the potential reduction of home sale prices.

    Then, the Presentation explores the cost overrun potential of the $3 billion of new construction in the Plan. This begins with an interesting recap of cost underestimates within notable construction and governmental programs. Three key project cost overruns of significant import are examined: the Jefferson County sewer consent decree bankruptcy, the PAT North Shore Connector, and the Harrisburg incinerator. Significant real world experience with routine cost overruns in bridges and tunnels is detailed, the latter forming a substantial portion of Alcosan's planned construction. Because overruns of cost estimates for new construction are a significant issue, a suggested reading list is provided.

    In light of the above risks, the Presentation examines the Plan's reported efforts. Specific targeted reports from Alcosan are described and recommended in the Presentation including:

       
        - better control of future O&M costs;
        - delineation of the content and impact of
           the one-half billion dollars of municipality
           construction;

        - validation of the ACT construction cost
           estimating model underpinning the Plan;

        - explanation of the use, or non-use, of
           construction cost contingencies within the
           Plan;

       - development of a construction cost control
          management plan and resolution with EPA;

       - development of a resource and risk
          assessment on proposed design,
          estimating, and construction management
          practices; and,

       - a Board commissioned report on the
          benefits and risks of union vs nonunion,
          PLAs and nonPLAs, and other key $3 billion
          construction options. 

    Lastly, the Presentation assesses the likely ability of the ALCOSAN Board to guide such a major $3 billion new construction endeavor. As a result, it suggests forming a Capital Project Supervisory Committee under the Board. This CPSC would be composed of: one Board member, one member appointed by the municipalities, and three highly experienced members selected from private industry. Specific ground rules on how such a CPSC would be selected and work are detailed in the Presentation.
    Descriptive Preview of the Alcosancost Presentation given at the October 17, 2012 ALCOSAN Public Comment Meeting . . .