Response to LDEQ Consolidated Compliance Order and Notice of Potential Penalty

1. Response to LDEQ Consolidated Compliance OrderandNotice of Potential Penalty

2. LPDES Overview ♦ Wastewater system discharges to the Mississippi River. ♦ Requires a Louisiana Pollutant Discharge Elimination System (LPDES) permit. ♦ Permit requires operating the collection and treatment facilities under the terms and conditions of the LPDES permit or face civil fines. ♦ The Louisiana Department of Environmental Quality (LDEQ) is responsible for enforcement all permit requirements. CORRECTIVE ACTION PLAN

3. LDEQ Background ♦ LDEQ conducted several inspections of wastewater facility records and discovered 444 overflows had occurred within the system. ♦ Age of the system, poor soil conditions causing subsidence, and lack of maintenance over the years contributed to the overflows within the sewer system. ♦ On August 26, 2009, the City received a Consolidated Compliance Order and Notice of Potential Penalty Enforcement Tracking No. WE- CN-09-0174 for noncompliance activities from February 1, 2004 through May 31, 2009. CORRECTIVE ACTION PLAN

4. Summary of Overflows CORRECTIVE ACTION PLAN

5. Importance of RegulatoryCompliance • Why is it important for the COK to meet its LPDES permit requirements? • ♦ Overflows discharge raw sewerage into nearby roads, drainage, and waterways • ♦ Threat to public health, animals, the environment and the federal and state waterways. • ♦ Violation of the Federal Clean Water Act • ♦ The City’s failure or refusal to comply with the Compliance Order could result in the assessment of a civil penalty in an amount of not more than $50,000 for each day of continued violation or noncompliance resulting in possible millions of dollars of fines. CORRECTIVE ACTION PLAN

6. Response to the Compliance Order • ♦ In response to the Compliance Order, related to the reported Overflows, the City was required to prepare a Sanitary Sewer System Overflow Corrective Action Plan. • ♦ Purpose of Corrective Action Plan • -mitigate, reduce, and prevent Overflows in the City • -comply with LPDES discharge permit requirements, related Louisiana Laws, and the Federal Clean Water Act. • ♦ $62,137,196 total in capital improvements to reduce and prevent future overflows • ♦ Corrective Action Plan only considered the SSO’s cited in the LDEQ compliance order and was not meant to correct every deficiency in the City’s system. CORRECTIVE ACTION PLAN

7. Corrective Action ImprovementsFunded Funded Improvements ♦ These improvements will be completed without any additional tax or fee increase ♦ LRA/CDBG Grant Money does not have to paid back. ♦ A list of funded improvements is available separately CORRECTIVE ACTION PLAN

8. Corrective Action ImprovementsFuture Funded ProjectsContingent Upon Sewer Fee Increase Future Funds Required ♦ A list of future projects is provided separately ♦ $6,900,000 planned for “Green Project” + Discharge to La Branche Wetlands + Provides wetland restoration and enhanced Hurricane Protection CORRECTIVE ACTION PLAN

9. Budget Observations and Comparisons ♦Last user rate increase 19 years ago (1991) ♦ Cost of equipment, repair, services and electricity, chemicals and inflation have risen significantly. ♦ City does not collect enough revenue currently to operate and maintain the system ♦ There is insufficient funds within the City to pay for the plan along with operation and maintenance costs CORRECTIVE ACTION PLAN

10. Proposed Rates ♦ An estimated $44,053,053 of additional funding is needed. ♦ Necessary to consider a user rate increase or face possible civil penalties. ♦ Phased increase to meet future expenditures for principal and interest. ♦ Pay as you go for citizens through increases over four years ♦ Two separate bond issues proposed to spread out the increase CORRECTIVE ACTION PLAN

11. Proposed Rates ♦ 2011 increase to $2.01 per 1,000 gallons covers operating and maintenance and remaining LDEQ loan money ♦ 2012 increase to $2.63 per1,000 gallons covers first municipal bond of $16 million ♦ 2013 increase to $2.68 per 1,000 gallons covers the estimated CPI increase in 2013 ♦ 2014 increase to $3.031per 1,000 gallons covers second municipal bond of $16 million CORRECTIVE ACTION PLAN

12. Proposed RateChart CORRECTIVE ACTION PLAN

13. Sewer Rate Comparisons CORRECTIVE ACTION PLAN

14. Utility Comparisons CORRECTIVE ACTION PLAN

15. Options ♦ Do nothing – Millions of dollars in possible fines from LDEQ and EPA plus the City still will be expected to pay for repairs to the system ♦ Increase fees to levels shown + Fair to users because proportionate use pays for system + Few City services produce revenue to pay for itself CORRECTIVE ACTION PLAN

16. Consequences of No Action ♦ If sewer fee increase is not approved outstanding bills owed to system operator (Veolia) will continue to increase ♦ LDEQ will take back the remaining $11,000,000 in low interest (0.95%) loan money ♦ EPA will step in for violation of Clean Water Act ♦ Taxes may increase to pay fines ♦ City services may be cut that don’t generate revenue (Recreation, Community Services, etc.) CORRECTIVE ACTION PLAN

17. Conclusions ♦ Fee increases are not popular but to take no action would be irresponsible and cost more over time ♦ 2014 the average residential homeowner would pay $26.45 per month for its wastewater services. ♦ Comparable to other utilities and municipalities the proposed rates are not out of the ordinary CORRECTIVE ACTION PLAN