The Philadelphia Water Department (PWD) has enacted a new method for charging customers for Storm Water Management Services (Services). It is important to understand the new rating system, as it could significantly impact all property owners in Philadelphia, especially nonresidential property owners, by charging considerably higher rates.

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Terms you Need to Know

In the past, the charge for Services was based on an account’s meter size. As of July 1, 2010 the PWD began calculating the Services on an individual account basis, using the square footage of the Gross Area of the property and square footage of the Impervious Area of the property. PWD defines the Gross Area (GA) as the entire property area contained within the legally described boundaries of a property, not including portions of sidewalks that are in the public “Right-of-Way.” PWD defines the Impervious Area (IA) as the total square footage of any hard surface area, including buildings, any attached or detached structures, paved or hardscaped areas, and compacted dirt and gravel that either prevent or restricts the absorption of water into the soil, thereby causing water to run off the surface.

For each property that is 5,000 square feet or greater, IA will be calculated by using Philadelphia’s Geographic Information System, along with ortho-images of each property. For undeveloped properties that are less than 5,000 square feet, the IA is 25% of the GA of the property. For developed properties that are less than 5,000 square feet, the IA is 85% of the GA of the property.

Calculation of Charges

The new rate structure will be phased over a four year period as follows:

Year

Existing Meter-based Charge

New Parcel-based Charge

7/1/10 to 6/30/11

75%

25%

7/1/11 to 6/30/12

50%

50%

7/1/12 to 6/30/13

25%

75%

7/1/13 to 6/30/14

0%

100%

Under the new rate structure, the GA factor and IA factor are determined by dividing the GA and IA of a property by 500 and rounding up to the next whole unit. Each unit is then multiplied by the unit charge, which for example, the period from July 1, 2011 through June 30, 2012 will be 0.528/500 square feet per month for GA and 4.169/500 square feet per month for IA.

Available Credits

PWD offers a variety of ways to receive credits. There are three categories of credits:

  • Impervious Storm Water Credits (IA Credits)
  • Gross Area Storm Water Credit (GA Credit)
  • National Pollutant Discharge Elimination System Industrial Permit Storm Water Credit (NPDES Credit)

Storm water credits involve the utilization of methods such as green roofs, porous paving, rain gardens and storm water harvesting, including: irrigation, fire suppression systems, toilet and urinal flushings, and custodial uses.

Even if a property receives the maximum amount of any available individual credits and/or combination of credits, it will still be subject to a monthly minimum charge. Credits will be in effect for a four year period and can be renewed so long as the renewal application is made at least 30 days prior to the expiration of the credit. The effective date for a credit is the first day of the month when the fully completed credit application and all supporting documents were filed.

Appeals

Property owners may appeal Services charges for technical accuracy, such as:

  • Incorrect parcel
  • Inaccurate property classification
  • Inaccurate GA
  • Inaccurate IA
  • Residential side yard
  • Water and Sewer Rents

Before property owners can submit an appeal, their water and sewer bill must be paid in full and their account must be up-to-date.

The new rate structure is anticipated to be costly for nonresidential property owners in Philadelphia. All property owners, developers and contractors affected by the changes should study the rate structure and be sure to identify how your future buildings plans may be altered and also how to appeal and/or mitigate the charges.

The attorneys at Cohen Seglias are prepared to advise companies regarding how these new rates will affect them, as well as how they can plan for future changes. For more information about the new rate structure, or other real estate issues, please contact Lonny S. Cades at (215) 564-1700 or lcades@cohenseglias.com, or the Cohen Seglias attorney with whom you normally consult.

In 2006, Duke Energy Corp. (Duke) estimated that it would cost $1.6 billion to build a massive 630-megawatt power plant in Edwardsport, Indiana (the Project). From 2006 to the present, the price for constructing the Project has grown to $2.9 billion. As a result of the price increase, Duke has made numerous requests for additional funds, which, if granted, would be passed onto consumers in the form of future rate increases.
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What is Currently Happening with the Project

Consumer and environmental groups have opposed the plant since its inception, claiming that “it’s unnecessary, uses unproven technology, and is too expensive”. In January 2011, several of these groups, including, Citizens Action Coalition of Indiana, the Sierra Club, Save the Valley and Valley Watch filed a complaint, with the Indiana Regulatory Commission which asks the Commission to “investigate whether Duke mismanaged the project, committed fraud or concealed vital facts.” If the Commission finds that Duke mismanaged the project, then Duke would be expected to bear a large portion of the cost overruns.

The complaint shed light on some of the causes for this steep price increase and included as an exhibit a letter dated October 5, 2010, from Bechtel Corp., (Bechtel) Duke’s engineering contractor. The note raised a number of concerns related to Duke’s management of the project. Specifically, Bechtel claimed that Duke breached the parties’ contract by:

  • Demobilizing Bechtel’s workers and severely limiting oversight of Bechtel’s support and engineering services.
  • Stopping monthly project reports and monthly review meetings.
  • Consolidating certain engineering functions.
  • Taking personnel action against Bechtel management’s recommendation.
  • Reducing documentation of certain work.

Lessons Learned

Assuming Bechtel’s accusations are true, Duke’s management of the Project provides an example of how not to handle a project that faces significant cost increases, especially one involving a high dollar value contract that directly affects the public. Duke’s most glaring error was decreasing documentation and stopping monthly project reports and review meetings as costs on the Project increased. This left little or no record of the events transpiring on the Project which led to the cost increases. Such conduct immediately raises a red flag. Contemporaneously documenting events that have cost impacts is the best way for a contractor to establish that they are not liable for the cost increases. Duke’s actions to reduce documentation as the Project progressed, suggests that it decreased its documentation for a reason – i.e., it was responsible for cost impacts and did not want a record in the event a dispute arose as to who should bear the costs. On the other hand, if Duke is not responsible for the cost impacts, it has an uphill battle of proving its case without proper documentation. Either of these scenarios will be difficult for Duke.

Contractors should learn from the mistakes made by Duke and ensure that all cost impacts on construction projects are thoroughly documented. By staying mindful of the need to document, contractors will increase the likelihood of getting paid for work performed and avoid liability for the acts of others.