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Golden Valley's Hidden 13.1 Million Dollar Tax

Golden Valley shares the same problem as 45 other communities in the Twin Cities: during rainfall events, Golden Valley discharges a significantly higher amount of sewage than it is allowed to due to excessive inflow and infiltration (I/I).  In essence, the city is being fined nearly $400,000 per year by the Metropolitan Council for excess I/I flow and has until 2013 to eliminate the excess I/I and be credited for every dollar spent on repairs to reduce the annual fine.  Any excess I/I beginning in 2013 will lead to an automatic unrefundable fine to the city.

For background on the problem, please see my previous articles: Golden Valley’s Inflow/Infiltration Conundrum and Golden Valley Revises I/I Inspection Requirements.  For more info on the I/I issue metro wide, please see the Metropolitan Council’s web site.

On August 15th Golden Valley offered an information session at city hall regarding the process & a summary of what they’ve learned so far.  From previous meetings that I attended with city staff, I learned that approximately 40% of sewer inspections were failing.  Based off a map provided by the city of compliant and non-compliant systems inspected so far, it appears that a 40% failure rate is still a good estimate.  At the most recent meeting I also learned that the average cost to bring the sewer into compliance was $3600 per non-compliant system and that there are approximately 8000 private sewer connections in the city.  This cost does not include the expenses for repairing or replacing the landscaping damaged in the process.

If you do basic math with these figures, 40% failure rate x $3600 average repair x 8000 connections = $11,520,000 in estimated expenses if all private lines are inspected and repaired and that current trends continue.  If you add the $200 – $500 inspection fee to that ($200 x 8000) you have a minimum of $1,600,000 in city inspection fees (and possibly much more since $200 is the minimum fee).  Can 8000 inspections really cost the city $1.6 Million?

Add $11,520,000 and $1,600,000 and you get an estimated total cost to residents and businesses of up to $13,120,000 if/when all private sewer lines are inspected and brought into compliance.

That’s a whole lot of money!  To look at it another way, that’s an average cost of $1640 per private sewer connection, or like adding $1640 to the average property tax bill in Golden Valley.  Granted, 60% of property owners will have only the $200-$500 fee, but the other 40% of property owners will have expenses that average $3600 and could go as high as $10,000!

So, for this $13,120,000+ bill, what will residents receive in return?  By reducing or eliminating the city’s excessive I/I, Golden Valley will save $1.9 Million in surcharges from 2007 to 2011 ($380,000/yr), as well as future surcharges for further excess I/I.  Sounds somewhat reasonable, doesn’t it?  Well if you calculate it out, even if all the excess I/I is eliminated, it would take 34+ years at the current surcharge level to repay the inspection and repair cost to the property owners!

How bad is this deal?  If the city were to invest that $13.1 Million into an interest bearing account at 5%, they would earn $655,000 per year in interest… 1.7x the amount needed to cover the annual surcharge!  Or, owners of the 8000 private sewer connections could each pay a little less than $50 annually to cover the $380,000 surcharge.  On a typical single family home in Golden Valley valued at $277,000, that would be an annual property tax bill increase of less than 5%.  Either of those options sound a lot better than replacement to me!

What really stinks about this deal is that the city has failed to provide any quantifiable data regarding just how much I/I is coming from roots and/or cracks in the sewer line.  This could vary dramatically as well based upon soil type and water table level; if the sewer line is above the water table in sandy soil I would assume it would leak a lot less clear water into the line than if it were in clay soild below the water table.  While it is clear to see and understand how sump pumps and foundation drains could put massive amounts of water into the sanitary sewer, I’ve heard it triples the annual output of wastewater from a home, to the best of my knowledge there have been no studies to determine how much of the I/I problem can be attributed to the most costly item to repair: sewer line replacement or relining.

Further, the city has tied the inspections to only a few circumstances: their street rehabilitation project (where the inspection is optional but the $200 fee is also waived), when plumbing permits are pulled for remodeling (not currently being enforced due to staffing issues), and when the owner of the home puts the home up for sale.  Over the last 10 years the city has averaged only 328 home sales per year via the MLS.  If you take into account business sales and for-sale-by-owner properties you are still likely under 400 properties per year.  At that rate it will take significantly longer than 5 years to inspect even half the properties in the city, which is the time in which the city has to correct the I/I problem before the fines become unrefundable.

When the city is already tearing up the streets and sewers in a community, why wouldn’t the city make the sewer inspection mandatory?  Homeowners would have less expense in repairing the lines and the city would have less damage to the newly rebuilt street if the work was all done at one time.

The other question many of us familiar with the issue have asked is: “What happens to the program once we’ve eliminated the excess I/I?”  Does the program continue even with no financial benefit to the city or its property owners or does it abruptly end?  If it does end, it could be seen as very unfair to the property owners that were forced to repair/replace their systems.  If they don’t end the program, it seems like a waste of money for owners impacted in the future.

A few years ago the city ran a concerted effort to search for cross-connected sump pump connections when they replaced water meters throughout the city.  Unfortunately this wasn’t comprehensive as the inspections were optional.  When the sump pump inspections were done it was only a visible inspection and so some cross connections may have been missed.  Consequently it is safe to assume there could be a significant number of homes that are still discharging sump pumps into the sanitary sewer system.

As for foundation and roof drains, to the best of my knowledge there has never been a concerted effort to weed out these contributors to I/I… especially since many of these issues cannot be seen without the video inspection of the sewer line that the city is now requiring.

In regards to the potential for raw sewage leaking into the soil through root penetrations into the pipe, I would imagine that most of the roots entering the pipe are from above and do not penetrate the bottom of the pipe (since they found the water they were seeking) and therefore not likely to leak out but only leak in, but of course the inspector would know that better.

I have heard this question posed before and my concern with using it as a justification is that from the documentation I have read from the Met Council is that we are being charged solely for the excess I/I.  I also do not recall having read that the DNR or EPA consider leakage out of the lines to be a big issue at this point.

The other justification I’ve heard is that it is a buyer protection issue… that a line with significant root penetration is failing and will be a significant cost to the buyer of the property.  In my office of 90+ agents this does not seem to be an issue… in fact I do not recall having heard it discussed at all.  What is common is a seller discloses to a buyer that they have Roto Rooter come out every 1, 2, or 3 years to clean the main sewer line due to slow drains or a previous backup.  Most consumers are perfectly fine with that and the cost to clean a line is a small fraction of the cost to replace it.  There’s a huge industry built around providing that service so this is obviously a common issue around the metro and one that most consumers are likely aware of.  If it is a significant issue to a buyer, they have the ability to negotiate with the seller whatever terms they find mutually agreeable.

If there are ancillary benefits to replacing sewer lines that is wonderful but for justifying the significant cost to the property owner for replacement of their private line I feel that we need to focus solely on the I/I issue, as this is the reason why the city is being charged and is the reason the inspection program was implemented.

I’m not advocating for the elimination of the inspection program.  What I am advocating for is the following:

  • A change in the program to focus on what appears to be the biggest causes of I/I first, which also are the cheapest to remedy, before requiring extremely costly repairs that have no quantitative data to show their effectiveness.
  • Prepare some kind of quantitative report of the potential I/I from a degraded sewer line.  Put flow meters on several of the homes that fail the inspection and see what happens.
  • A reduction in the inspection fees.  The fee should only cover the true cost to the city and should not be a revenue generator.
  • Make inspections mandatory for homeowners undergoing street repairs to increase likelihood of group discounts from vendors, reduce redundant work and lessen damage to new streets.
  • With the above measures in place, accelerate the program to assure that all private lines are inspected within the next five years.

I do not believe that the Golden Valley city council nor its citizens fully understand the costs of the program that has been implemented.  If they did, I am quite certain that there would be a concerted effort to make changes to this program.

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This website is a service of Aaron Dickinson of Edina Realty, a broker Participant of the Regional Multiple Listing Service of Minnesota, Inc.