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    Opt Out Charges


    The City of Grand Rapids has completed Sanitary Sewer Evaluation Studies for both the E. Leonard Heights and Maryland Estates neighborhoods. Both of these studies have made recommendations that Footing Drain Disconnection (FDD) is the appropriate corrective actions for these areas to address problems with basement backups. To enable this work, ordinance language is under development.

    An important part of the ordinance addressing the cost to homeowners should then choose to not participate in the program. This choice can result in continuing claims, additional water that needs to be treated, potentially SSOs (Sanitary Sewer Overflows) that result in penalties, other projects that need to be performed to address basement backups, and costs to deal with these continued basement backups.

    Below we have documented the development of the costs associated with this decision to not participate in this program. Homeowners can make the decision to opt out and not participate in the FDD program, but would be responsible for these costs.

    This fee for opting out of the FDD program includes the following elements:

    • Avoided Claims
    • Avoided Treatment
    • Actual MDNRE Penalties for SSOs
    • Avoided Future Projects
    • Administration


    These different cost items are described in more detail in the following paragraphs:

    Avoided Claims

    The City of Grand Rapids pays claims when basement backups take place. These costs vary from year to year, so the City of Grand Rapids is using a sinking fund based on their average experience dealing with basement backup that is funded to the level of $400,000 per year to cover these costs. This sinking fund is available to address basement backups for any customers in the City of Grand Rapids or any of the other retail customers of the system. Information for 2009 on system customers shows that there are a total of 87,800 retail customers in the Program Opt Out Calculation system, 67,619 of which are in the City of Grand Rapids. The avoided cost for claims is therefore $4.56 per retail customer in Grand Rapids. Customers that opt out of the program are responsible for this cost.

    Actual MDNRE Penalties for SSOs

    If the FDD program is not implemented, there could be penalties for SSOs that the regulatory agencies could assess to Grand Rapids. Currently, there are no penalties, and as a result, there are no costs associated with this item. Future calculations may include these costs.

    Avoided Future Projects

    For two neighborhoods in Grand Rapids, E. Leonard Heights and Maryland Estates, basement backup analyses have been performed. These studies have both recommended that FDD is the most cost effective means for correcting the basement backup issues by removing inflow and infiltration generated by footing drains in the system. Based on the local conditions, these corrective programs developed unit costs for homes that need to have the FDD work performed. If these capital costs for this work are annualized using a payback period of 20 year and an interest rate of 5%, this results in an annual cost of $2,236 per FDD performed.

    Subsequent to the completion of this project cost analysis, the 2009 sanitary sewer master plan was reviewed to determine the total number of homes that would need FDD to be performed to correct the basement backup issues citywide. This analysis determined that a total of 25,598 homes would need to have FDD performed to correct the problem and allow the collection system to convey the generated systems flows without backups. Using the total number of FDDs needed to correct basement backups, this results in an annual cost of about $57,247,000 for the work. By dividing this annual cost by the total number of customers in Grand Rapids results in an avoided cost of $846.62 per customer.

    Administration Costs

    Since there are claims that take place in the City of Grand Rapids, staff needs to be provided to address the claims administration by legal staff and engineering evaluations by the engineering department. An estimate of the current level of staffing has been developed.

    When the FDD program is complete, it is expected that these administration costs would no longer be required. Therefore, customers that opt out of the program need to provide their share of the continuing administration costs. These costs are an estimated $5.92 per year for each customer


    The sum of these different costs results in the cost of opting out of the FDD program. This results in an annual cost of $938.3, which is a monthly charge of $78.19 per month. The detailed calculation sheet is attached to this memorandum.

    Monthly Fee Backup Calculation

    1. Avoided Claims for Sewage Backups Annual claim cost
      Annual Backup Claims $400,000 /year1 Estimated annual claims cost
      System Retail Customers 87,800 Total retail customers2
      Grand Rapids Retail Customers 67,619 Total retail customers in Grand Rapids2
      Annual Cost $4.56 /yr/customer Annual cost for claims in Grand Rapids
    2. Avoided Costs to treat the additional flow generated by footing drains Flow Estimate
      DWF 43,800 gal/year Average generation rate
      WWF 21,796 gal/year Average generation rate
      Total 65,596 gal/year Average per house
      Unit Conveyance & Treatment Costs
      Annual average FD flows 0.066 MG/yr Average per house
      Conveyance $420 /MG Unit conveyance cost3
      Treatment $818 /MG Unit treatment cost3
      Conveyance & Treatment $1,238 /MG
      Annual Cost $81.21 /yr/customer Annual cost for a connected FD
    3. Actual MDNRE penalties for SSO’s Penalties for SSO
      Grand Rapids Customers 67,619
      Penalties $25,000 Per occurrence
      Potential SSOs 0 /year Occurences
      Annual cost 0 $/year
      $0.00 /yr/customer Annual cost for penalties
    4. Avoided Transport & Future Projects Cost Per FDD
      Pilot Project Costs 2,236 $/yr/FDD customer Annual cost of FDD work5
      FDD Equivalents 25,598 FDD FDDs needed to correct backup problems
      Total Cost $57,247,398 Annualized Conveyance and Storage Costs
      Grand Rapids Customers 67,619 Customers in Grand Rapids
      Cost Per single Family Home $846.62 $/home/not removed Annualized cost for Grand Rapids Customers
    5. Avoided Administrative (Engineering & Legal) Costs Associated with Administration of claims, construction
      Legal 0.5 Citywide claims administration
      Engineering 1.5 Citywide engineering investigation
      Staffing 2.0 Total staffing
      Rate $200,000 /year Average loaded staffing rate4
      Total $400,000 /year
      Customers 67,619 In Grand Rapids
      $5.92 $/yr/customer
    6. Annual Cost Summary
      1. Avoided Claims $4.56
      2. Avoided Treatment $81.21
      3. Actual MDNRE Penalties for SSOs $0.00
      4. Avoided Future Projects $846.62
      5. Administration $5.92
      TOTAL $938.30 $/yr/customer
      $78.19 /month/customer Monthly fee for not disconnecting


    • 1Sinking fund annual budget
    • 22009 customer numbers from Collection System Master Plan
    • 3Value for sewer maintenance and WWTP costs from 2009 rate study.
    • 4Estimated staff rate with benefits
    • 5Total cost per FDD amortized over 20 years with 5% interest rate