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Consent

Brentwood City Commission Agenda

Meeting Date:	12/13/2021
Resolution 2021-148 - Approval of Water Supply Purchase Agreement with Metro/Nashville
Submitted by:	Chris Milton, Water & Sewer
Department:	Water & Sewer

Information

Subject

Resolution 2021-148 - Water Supply Purchase Agreement with Metro/Nashville.

Background

City staff is requesting approval of the enclosed water supply agreement with The Metropolitan Government of Nashville and Davidson County ("Metro") for the continued purchase and delivery of treated drinking water.

The City purchases treated drinking and irrigation water from two wholesale water providers, the Harpeth Valley Utility District located on the Cumberland River in the Bellevue area and Metro Nashville Water Services located in downtown Nashville. The City has long-term purchase agreements with each provider outlining the terms and conditions for delivery of water. On average, the City purchases approximately 5.7 million gallons (mg) per day from both providers combined. Peak summer usage typically averages around 10.5 mg and drier summer periods can exceed 12 mg. Historically, during a typical year, the City purchases about 90% of its water from Harpeth Valley and 10% from Metro Nashville.

The City first began purchasing water from Metro around 1985. In 2001, the City entered into a water purchase agreement to continue providing water for a period of 20 years, terminating in March 2021. Earlier this year in January, the Board approved an amendment to extend the term of the water supply agreement an additional year through March 2022 so that negotiations could occur to finalize contract terms and conditions for the new longer-term agreement.

For many months, City staff and the City's consultant have been discussing the best financial strategy that permitted compliance with water system water quality standards while also maintaining adequate fire flow volumes in the town center area. Early on, the evaluation included potentially expanding the capacity with Metro since its existing rate at that time was less than the Harpeth Valley rate. However, beginning in 2020, Metro implemented a significant rate increase as a result of a State audit that revealed water system financial shortfalls. Metro increased its water rates approximately 50% from 2.44/1,000 gallons to $3.68/1,000 for its larger commercial customers, which included Brentwood. This significant rate increase coupled with the estimated capital cost to expand capacity has made the prospect of increasing the volume of water purchased from Metro much less attractive. Therefore, staff and the City's consultant then focused on minimizing the volume of water supply to again negotiate the best terms and conditions to minimize costs while also providing adequate system hydraulics and water quality standards.

The enclosed proposed agreement is the result of those negotiations that focuses on an important financial objective for the City. It was important to reduce the volume of supply to a level that helped offset the cost associated with Harpeth Valley’s minimum bill. As has been discussed with the Board on several occasions, most recently during the presentation by the City’s rate consultant, the City pays a significant minimum bill to Harpeth Valley based on long-term supply projections. These projections are based on a continued effort to reduce volume from Metro. The agreed upon result was a reduction in the minimum volume from 810,000 gallons per day (gpd) to 320,000 gpd. At the rate of $3.68 per 1,000 gallons purchased, this equates to a potential reduction in annual water cost of around $650,000 annually.

The reduction in volume at the Metro connection is made possible as a result of many years of capital improvement projects that targeted both increasing system hydraulic capacity in areas where water is supplied from Harpeth Valley, but also projects targeting increased interconnectivity between north and south pressure zones that allows for greater flexibility in “moving” water where it is most needed. It’s worth noting that Metro’s interest was having Brentwood continue to purchase a larger volume which improves their system water quality. Other conditions of the agreement negotiated include:

A 10-year term versus a traditionally longer period to allow for renegotiation that might be warranted sooner that benefits both parties.
Related to the negotiated minimum volume reduction, the maximum volume that can be supplied was reduced proportionately from 2.5 million gallons per day (mgd) to 1.0 mgd. The agreement permits Metro to supply a greater volume than the maximum, but the rate doubles for water supplied above the maximum. This condition applied to the existing agreement as well. Exceeding the maximum volume would only occur during times of emergencies or drought conditions.

Accordingly, staff is recommending approval of the enclosed 10-year water supply agreement with Metro Nashville. Please direct any questions to the Water Services Director.

Staff Recommendation

Staff recommends approval.

Previous Commission Action

- Resolution 2021-08 Authorizing the Mayor to Execute an Amendment to the Metro Water Supply Agreement for a one-year extension.

- 2001 Approval of a 20-Year Water Supply Agreement.

Fiscal Impact

Attachments
Resolution 2021-148
Contract No. 2021-219
Water Sys Map
Signed Resolution
Signed Contract