COMMITTEE OF THE WHOLE Packet - 5/14/2019CITY OF MUSKEGO
COMMITTEE OF THE WHOLE AGENDA
05/14/2019
5:30 PM
Muskego City Hall, W182 S8200 Racine Avenue
CALL TO ORDER
PLEDGE OF ALLEGIANCE
ROLL CALL
STATEMENT OF PUBLIC NOTICE
APPROVAL OF AGENDA
NEW BUSINESS
Health Insurance Renewal Update
Reserve Capacity Assessment (RCA) Explained
MSP Heritage and Pinnacle Peak RCA Challenge and Process
COMMUNICATIONS AND MISCELLANEOUS BUSINESS AS AUTHORIZED BY LAW
ADJOURNMENT
The Committee of the Whole may possibly reconvene immediately following the Common
Council meeting of the same date to continue work on agenda items.
NOTICE
IT IS POSSIBLE THAT MEMBERS OF AND POSSIBLY A QUORUM OF MEMBERS OF OTHER GOVERNMENTAL BODIES OF
THE MUNICIPALITY MAY BE IN ATTENDANCE AT THE ABOVE-STATED MEETING TO GATHER INFORMATION; NO ACTION
WILL BE TAKEN BY ANY GOVERNMENTAL BODY AT THE ABOVE-STATED MEETING OTHER THAN THE GOVERNMENTAL
BODY SPECIFICALLY REFERRED TO ABOVE IN THIS NOTICE.
ALSO, UPON REASONABLE NOTICE, EFFORTS WILL BE MADE TO ACCOMMODATE THE NEEDS OF DISABLED
INDIVIDUALS THROUGH APPROPRIATE AIDS AND SERVICES. FOR ADDITIONAL INFORMATION OR TO REQUEST THIS
SERVICE, CONTACT MUSKEGO CITY HALL, (262) 679-4100.
Packet Page 1
Reports and Presentations to Finance Committee and Common Council
To: Committee of the Whole
From: Sharon Mueller, Finance & Admin. Director
Department: Finance & Administration Department
Subject: Health Insurance Renewal
Date: May 14th, 2019
Background Information:
In response to rising rates, various health insurance options were initially reviewed at the May
24th, 2016 COW meeting. This included a comprehensive overview of Health Savings Accounts
(HSA’s). Since that time, alternatives have been reviewed prior to each renewal.
Key Issues for Consideration:
1. The 7/1/19-6/30/20 WPS Health Insurance Renewal rate reflects an increase of 2%, which
equates to an additional $30,121 cost to the City. Please note 1% of the increase is
attributed to the Affordable Care Act (ACA).
2. 2018 Health Reimbursement Account (HRA) utilization decreased by 3.18% (from
31.81% to 28.63%).
3. In an effort to offset the increase, options are as follows:
a. Employee premium contribution increase
b. Copay Alternate Plans
c. HSA/HDHP Options (with and without City funding)
4. Summary and detailed information for ‘options’ are included in the following six pages.
Recommendation for Action by Committee and/or Council:
Review various options and provide Health Insurance renewal directive to staff.
Date of Committee Action: May 14th or May 28th, 2019.
Planned Date of Council Action (if required): N/A
Total $ Needed: See fiscal notes below.
Fiscal Note(s): Funds required will be dependent upon Committee action. Alternative
cost/savings amounts are detailed in following attachment.
$/% Budgeted: 5% increase.
Expenditure Account(s) to Be Used: #xxx.xx.xx.xx.5203
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Health Insurance Renewal Update
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CITY OF MUSKEGO
HEALTH INSURANCE RENEWAL OPTIONS - INITIAL REVIEW
EFFECTIVE JULY 1ST, 2019
Page #City Employee
1 WPS Health Insurance Renewal = 2% Increase $30,121 $3,348
2 Premium Contribution Increase Options
a.10% → 11%($17,058)$17,058
b.10% → 12%($34,117)$34,117
c.10% → 13%($51,175)$51,175
3 Copay Alternate Plans
a. Option 1 ~In Network Out of Network ($37,614)($4,179)
Out of Pocket - Single $500 $1,500
Out of Pocket - Family $1,000 $3,000
OV copay (primary/Specialist)$10 $20
ER copay
Rx copay
b. Option 2 ~In Network Out of Network ($43,296)($4,811)
Deductible - Single $500 $1,000
Deductible - Family $1,000 $2,000
Out of Pocket - Single $500 $1,000
Out of Pocket - Family $1,000 $2,000
c. Option 3 ~In Network Out of Network ($62,946)($6,994)
Deductible - Single $500 $1,000
Deductible - Family $1,000 $2,000
Out of Pocket - Single $500 $1,000
Out of Pocket - Family $1,000 $2,000
OV copay (primary/Specialist)$10 $20
ER copay
Rx copay
4 HSA/HDHP Alterative Plans (see pg 4 for Detailed Plan Descriptions)
a.Option 1 - Non-Embedded $2,500/$5,000 Deductible ($376,995) ($29,818)
b.Option 2 - Embedded $2,600/$5,200 Deductible ($259,091) ($16,718)
c.Option 3 - Embedded $3,000/$6,000 Deductible ($311,596) ($22,552)
5 City HSA Contribution Alternatives (based on plan options above)
Option 1 ~
a. 100% of Current HRA Funding ($110,210)
b. 25% Reduction ($176,907)
c. 50% Reduction ($243,603)
d. 75% Reduction ($310,299)
Option 2 ~
a. 100% of Current HRA Funding $18,762
b. 25% Reduction ($50,702)
c. 50% Reduction ($120,165)
d. 75% Reduction ($189,628)
Option 3 ~
a. 100% of Current HRA Funding $8,779
b. 25% Reduction ($71,315)
c. 50% Reduction ($151,409)
d. 75% Reduction ($231,503)
See pg 5 for
Employee
Exposure
Amounts
Cost / (Savings)
SUMMARY OPTIONS
Increased Amounts
$50
$0 / $5 /$5
$50
$0 / $5 /$5
Savings without HSA Contributions
Cost/(Savings) with HSA Contributions
Annual Premium
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Health Insurance Renewal Update
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1 - Current Health Reimbursement Account Plan (HRA):
~2% Premium increase (1% contributed to ACA fees)
Health Insurance Participant
Coverage Level Individual Individual
Monthly Monthly Annual Premium Monthly Monthly Annual Premium
Statewide Plan Descriptions:Current
City 90%$786 $18,875 $226,497 $802 $19,252 $231,027
Employee 10%$87 $2,097 $25,166 $89 $2,139 $25,673 Embedded
City 90%$1,653 $31,401 $376,813 $1,686 $32,030 $384,356 $3,000/$6,000
Employee 10%$184 $3,489 $41,868 $187 $3,559 $42,705 $6,000/$12,000
City 90%$2,348 $75,151 $901,812 $2,395 $76,655 $919,860 $3,500/$7,500
Employee 10%$261 $8,350 $100,201 $266 $8,517 $102,205 $7,000/$15,000
10%/30%
$125,427 $1,505,122 $127,937 $1,535,243 $7,350
$13,936 $167,236 $14,215 $170,583 $14,700
$10
$2,510 $30,121 $15/$30
$279 $3,348 $250
$10/$25/$55
Total Premium Increase - City OV Copay (primary/specialty)
Total Premium Increase - Employee ER Copay
Rx Copay
Total Premium Cost - City Maximum OOP Single (in)*
Total Premium Cost - Employee Maximum OOP Family (out)*
Teledoc Copay
Family 32 Out of Pocket - Single (in/out)
Out of Pocket - Family (in/out)
Coinsurance (in/out)
Deductible Basis
Limited Family 19 Deductible - Single
Deductible - Family
Contribution Total Participant Total Participant
Single 24
Current Rates Renewal Rates
Premium Effective 07/01/2018 Effective 07/01/2019
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Health Insurance Renewal Update
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2 - EMPLOYEE PREMIUM CONTRIBUTION OPTIONS:
2% Increase
Health Insurance Participant
Coverage Level Individual Premium Contribution Individual Premium Contribution Individual Premium Contribution Individual Premium
Monthly Monthly Annual Premium Adjustment Monthly Monthly Annual Premium Adjustment Monthly Monthly Annual Premium Adjustment Monthly Monthly Annual Premium
City 90%$802 $19,253 $231,030 89.00%$793 $19,039 $228,463 88.00%$784 $18,825 $225,896 87.00%$775 $18,611 $223,329
Employee 10%$89 $2,139 $25,670 11.00%$98 $2,353 $28,237 12.00%$107 $2,567 $30,804 13.00%$116 $2,781 $33,371
City 90%$1,686 $32,029 $384,354 89.00% $1,667 $31,674 $380,083 88.00% $1,648 $31,318 $375,813 87.00% $1,630 $30,962 $371,542
Employee 10%$187 $3,559 $42,706 11.00%$206 $3,915 $46,977 12.00%$225 $4,271 $51,247 13.00%$243 $4,626 $55,518
City 90%$2,395 $76,655 $919,859 89.00% $2,369 $75,803 $909,639 88.00% $2,342 $74,952 $899,418 87.00% $2,316 $74,100 $889,197
Employee 10%$266 $8,517 $102,207 11.00%$293 $9,369 $112,427 12.00%$319 $10,221 $122,648 13.00%$346 $11,072 $132,869
$127,937 $1,535,243 $126,515 $1,518,185 $125,094 $1,501,127 $123,672 $1,484,069
$14,215 $170,583 $15,637 $187,641 $17,058 $204,699 $18,480 $221,757
($1,422)($17,058)($2,843.04)($34,116.52)($4,264.57)($51,174.78)
Contribution Monthly Annual Premium Monthly Annual Premium Monthly Annual Premium Monthly Annual Premium
10%$2 $21 $9 $107 $18 $214 $27 $321
10%$4 $44 $19 $225 $37 $450 $56 $674
10%$5 $63 $27 $319 $53 $639 $80 $958
2%3%
11%
11%
11%
12%
12%
12%
13%
13%
13%
Contribution Contribution Contribution
Current Renewal Rates 1%
Single
Limited Family
Family
Annual Impact to Individual Employee:
Premium Contribution Increases
1%
Total Participant
Effective 07/01/2019
Total Premium Cost - Employee
Total Participant
Current Renewal Rates
Premium Effective 07/01/2019 2%3%
Single 24
Total Premium City Savings/Employee Cost:
Contribution Total Participant Total Participant
Total Premium Cost - City
Limited Family 19
Family 32
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Health Insurance Renewal Update
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3 - COPAY ALTERNATE PLANS:
Health Insurance Participant
Coverage Level Individual Premium Individual Premium Individual Premium Individual Premium
Monthly Monthly Annual Premium Monthly Monthly Annual Premium Monthly Monthly Annual Premium Monthly Monthly Annual Premium
City 90%$802 $19,253 $231,030 $783 $18,781 $225,369 $780 $18,709 $224,514 $769 $18,463 $221,559
Employee 10%$89 $2,139 $25,670 $87 $2,087 $25,041 $87 $2,079 $24,946 $85 $2,051 $24,618
City 90%$1,686 $32,029 $384,354 $1,644 $31,245 $374,937 $1,638 $31,126 $373,515 $1,617 $30,716 $368,595
Employee 10%$187 $3,559 $42,706 $183 $3,472 $41,660 $182 $3,458 $41,502 $180 $3,413 $40,955
City 90%$2,395 $76,655 $919,859 $2,337 $74,777 $897,323 $2,328 $74,493 $893,919 $2,297 $73,512 $882,144
Employee 10%$266 $8,517 $102,207 $260 $8,309 $99,703 $259 $8,277 $99,324 $255 $8,168 $98,016
$127,937 $1,535,243 $124,802 $1,497,629 $124,329 $1,491,948 $122,691 $1,472,298
$14,215 $170,583 $13,867 $166,403 $13,814 $165,772 $13,632 $163,589
-2.45%-2.82%-4.10%
($3,135)($37,614)($3,608)($43,296)($5,245)($62,946)
($348)($4,179)($401)($4,811)($583)($6,994)
Statewide Plan Descriptions:Current Alternate #1 Alternate #2 Alternate #3
$3,000/$6,000 $3,000/$6,000 $3,500/$7,000 $3,500/$7,000
$6,000/$12,000 $6,000/$12,000 $7,000/$14,000 $7,000/$14,000
$3,500/$7,500 $4,000/$9,000 $4,000/$8,500 $4,000/$8,500
$7,000/$15,000 $8,000/$18,000 $8,000/$17,000 $8,000/$17,000
10%/30%10%/30%10%/30%10%/30%
$7,350 $7,350 $7,350 $7,350
$14,700 $14,700 $14,700 $14,700
$10 $10 $10 $10
$15/$30 $25/$50 $15/$30 $25/$50
$250 $300 $250 $300
$10/$25/$55 $10/$30/$60 $10/$25/$55 $10/$30/$60
*Maximum in-network Out-of-Pocket for current plan includes deductible, coinsurance and all copays.
Rx Copay
ER Copay
Effective 07/01/2019 Option 1 Option 2 Option 3
Contribution Total Participant Total Participant Total Participant Total Participant
Limited Family 19
Family
Total Premium Reduction %
Coinsurance (in/out)
Maximum OOP Single (in)*
Maximum OOP Family (out)*
Total Premium Cost - City
Total Premium Reduction $ - City
Total Premium Reduction $ - Employee
Teledoc Copay
OV Copay (primary/specialty)
Deductible - Single
Deductible - Family
Out of Pocket - Single (in/out)
Out of Pocket - Family (in/out)
Premium
Copay Alternate Plans
Effective 07/01/2019Current Renewal Rates
Total Premium Cost - Employee
Single 24
32
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Health Insurance Renewal Update
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4 - HSA/HDHP ALTERNATIVE PLANS:
Health Insurance Participant
Coverage Level Individual Individual Individual
Monthly Monthly Annual Premium Monthly Monthly Annual Premium Monthly Monthly Annual Premium
City 90%$662 $15,887 $190,647 $724 $17,366 $208,389 $696 $16,707 $200,489
Employee 10%$74 $1,765 $21,183 $80 $1,930 $23,154 $77 $1,856 $22,277
City 90%$1,391 $26,431 $317,169 $1,521 $28,891 $346,687 $1,463 $27,795 $333,542
Employee 10%$155 $2,937 $35,241 $169 $3,210 $38,521 $163 $3,088 $37,060
City 90%$1,977 $63,256 $759,069 $2,161 $69,143 $829,713 $2,079 $66,521 $798,253
Employee 10%$220 $7,028 $84,341 $240 $7,683 $92,190 $231 $7,391 $88,695
$105,574 $1,266,885 $115,399 $1,384,790 $111,024 $1,332,284
$11,730 $140,765 $12,822 $153,866 $12,336 $148,032
Compared to Renewal:
($22,363)($268,358)($12,538)($150,453)($16,913)($202,959)
($2,485)($29,818)($1,393)($16,718)($1,879)($22,552)
-17.48%-9.80%-13.22%
($9,053)($108,638)($9,053)($108,638)($9,053)($108,638)
($31,416)($376,995)($21,591)($259,091)($25,966)($311,596)
Statewide Plan Descriptions:Option #1 Option #2 Option #3
Non-Embedded**Embedded Embedded
$2,500/$5,000 $2,600/$5,200 $3,000/$6,000
$5,000/$10,000 $5,200/$10,400 $6,000/$12,000
$5,500/$11,000 $3,600/$8,200 $4,000/$9,000
$11,000/$22,000 $7,200/$16,400 $8,000/$18,000
20%/40%10%/30%10%/30%
$0 $0 $0
$0 $0 $0
Deductible & Coinsurance Deductible & Coinsurance Deductible & Coinsurance
Deductible & Coinsurance Deductible & Coinsurance Deductible & Coinsurance
Deductible & Coinsurance Deductible & Coinsurance Deductible & Coinsurance
Deductible & Coinsurance Deductible & Coinsurance Deductible & Coinsurance
*Maximum in-network Out-of-Pocket for current plan includes deductible, coinsurance and all copays.
Out of Pocket - Single (in/out)
Out of Pocket - Family (in/out)
Limited Family 19
Family 32
Total Premium Cost - City
Deductible - Family
Total Premium Reduction %
Total Premium Savings - City
2018 HRA Utilization ($2,750 / $5,500) Plan
Termination Savings
Projected Net Savings - City
Deductible Basis
Deductible - Single
Total Premium Cost - Employee
Total Premium Savings - Employee
Rx Copay
** Non-Embedded vs. Embedded . This makes a difference with family coverage; and is different than the current coverage with a copay type plan. Under a non-embedded deductible plan, the total family deductible must be met
before WPS starts paying for healthcare services for any individual family member. This applies to deductibles < $2600. Any HDHP deductibles quoted at $2600 (single) or higher will be shown as an embedded deductible.
This means that for family coverage, an embedded deductible is the individual deductible amount for each covered person, embedded within the family deductible. So in this case, one person in the family can reach the
individual or single deductible amount and WPS will begin paying for services (similar to a copay plan).
Coinsurance (in/out)
Maximum OOP Single (in)*
Maximum OOP Family (out)*
Teledoc Copay
OV Copay (primary/specialty)
ER Copay
Single 24
Contribution
Effective 07/01/2019
Option 1 Option 2 Option 3
Total Participant Total Participant Total Participant
Premium
HSA/HDHP Alternative Plans
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Health Insurance Renewal Update
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5 - City HSA Contribution Alternatives (based on page 4 options):
Option #1
Single 24 $2,290 $54,960 $1,718 $41,220 $1,145 $27,480 $573 $13,740
Limited Family 19 $3,435 $65,265 $2,576 $48,949 $1,718 $32,633 $859 $16,316
Family 32 $4,580 $146,560 $3,435 $109,920 $2,290 $73,280 $1,145 $36,640
Total $10,305 $266,785 $7,729 $200,089 $5,153 $133,393 $2,576 $66,696
Net Estimated Cost / (Savings)($110,210)($176,907)($243,603)($310,299)
Employee Maximum Exposure (Family In-Network)$9,056 $10,201 $11,346 $12,491
Employee Maximum Exposure (Family Out-Network)$20,056 $21,201 $22,346 $23,491
Option #2
Single 24 $2,385 $57,240 $1,789 $42,930 $1,193 $28,620 $596 $14,310
Limited Family 19 $3,578 $67,973 $2,683 $50,979 $1,789 $33,986 $894 $16,993
Family 32 $4,770 $152,640 $3,578 $114,480 $2,385 $76,320 $1,193 $38,160
Total $10,733 $277,853 $8,049 $208,389 $5,366 $138,926 $2,683 $69,463
Net Estimated Cost / (Savings)$18,762 ($50,702)($120,165)($189,628)
Employee Maximum Exposure (Family In-Network)$5,311 $6,503 $7,696 $8,888
Employee Maximum Exposure (Family Out-Network)$14,511 $15,703 $16,896 $18,088
Option #3
Single 24 $2,750 $66,000 $2,063 $49,500 $1,375 $33,000 $688 $16,500
Limited Family 19 $4,125 $78,375 $3,094 $58,781 $2,063 $39,188 $1,031 $19,594
Family 32 $5,500 $176,000 $4,125 $132,000 $2,750 $88,000 $1,375 $44,000
Total $12,375 $320,375 $9,281 $240,281 $6,188 $160,188 $3,094 $80,094
Net Estimated Cost / (Savings)$8,779 ($71,315)($151,409)($231,503)
Employee Maximum Exposure (Family In-Network)$5,272 $6,647 $8,022 $9,397
Employee Maximum Exposure (Family Out-Network)$15,272 $16,647 $18,022 $19,397
Funding (100% of Current HRA)25% Reduction 50% Reduction 75% Reduction
Funding (100% of Current HRA)25% Reduction 50% Reduction 75% Reduction
Funding (100% of Current HRA)25% Reduction 50% Reduction 75% Reduction
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Health Insurance Renewal Update
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City of Muskego – Reserve Capacity Allowance (RCA) Explained
The City of Muskego Sanitary Sewer Ordinance, Section 290 of the Municipal Code, defines the
methodology of charges for sanitary sewer service. The charges are broken into several
components, a Consumption Charge, a Connection Charge and a RCA Charge.
The majority of the City of Muskego sewer system is tributary to the Milwaukee Metropolitan
Sewerage District (MMSD). Because of this service connection, a significant portion of the City’s
Sewer Ordinance is based upon charges and costs to convey and treat sewage by MMSD.
This includes an apportioned cost for previously constructed downstream facilities such as
trunk sewers, interceptor sewers, pumping stations, monitoring stations and treatment
facilities.
The Consumption Charge portion of the ordinance deals primarily with the current costs for the
conveyance and treatment of sewage. On an annual basis, and in accordance with its ordinance
and MMSD rules, the City of Muskego reviews and adjusts these costs. Portions of these costs
are computed in accordance with the MMSD Cost Recovery Procedures Manual (CRPM). The
CRPM is updated annually by MMSD. These updates are important as they take into account
population and occupancy factors. The updates also take into account per capita water usage.
It’s important to note that since 1991, the average daily water use in the broader MMSD service
area has dropped from 64 gallons per capita per day (gpcd) to 53 gallons per capita per day. The
Consumption Charge is not related to the RCA charge.
The second component of the Muskego Sewer Service Ordinance is the Connection Charge.
This is simply a flat fee charge for the cost recovery of infiltration and inflow into the sewage
system.
The third component of the Muskego Sewer Service Ordinance is the Reserve Capacity
Assessment (RCA) Charge. The RCA is wholly different than the Consumption Charge or
Connection Charge. The RCA was instituted to recover costs for all downstream facilities based
upon the potential peak usage of those facilities. Unlike a Consumption Charge, which can be
adjusted annually and is based on water usage and treatment costs, the RCA must pay for
facilities that are designed to have a life of 25 to 75 years. For this reason, RCA costs, whether
for a residential dwelling or a commercial or industrial use may appear high. This is because the
value must, on a one-time basis cover long-term costs. Additionally, because the RCA is
designed to cover costs for ultimate flow capacities, it appears to be a disproportionately higher
cost as most system users confuse it with daily consumption costs. This often occurs as most
current users of the sewage system incorrectly assume that current water saving, or water
efficient appliances and fixtures should reduce RCA costs.
As an example, an institutional use, such as a school or church may have a low average daily
use. As time goes on, that institutional use may undertake renovations and install more
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Reserve Capacity Assessment (RCA) Explained
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efficient plumbing fixtures. For this reason, their daily use will be lower. However, that same
facility has the potential for peak flow events such as a regular school day plus a parent/teacher
conference plus a large assembly or athletic event. The RCA charge assists to cover the capital
costs of conveyance facilities for the peak flow event.
The cost allocation for the Consumption Charge and the RCA charge are based upon Residential
Equivalent Connections (REC). The values of the REC are defined within the ordinance. The
values of the REC charges for the Consumption Charge and the RCA charge are different. All
Consumption Charge REC’s are based on the MMSD Cost Recovery Procedures Manual for
unmetered users and revised annually as determined by MMSD. All RCA REC’s are based upon
ultimate facility use and downstream facility costs. The RCA rates are determined by the City of
Muskego.
As an example, the MMSD REC cost for a nursing home with single bedroom units is assigned a
value of 0.75 REC/unit. The City of Muskego Ordinance RCA REC rate is 0.50 REC/unit, which
recognizes the difference between consumption flow and facility improvement/capital costs.
The RCA REC Chart also recognizes that there may be additional facilities within a nursing home
(laundry, dining facilities, etc.) as these items add to the peak flow demands.
All of the foregoing information provides a basis for the reasoning of the original
implementation of the RCA charge. It also provides the basis for the difference between the
Consumption Charge, Connection Charge and RCA. The next step is the analysis of the existing
RCA REC Chart and if the values represented are fairly allocated.
The RCA Charge Chart is based upon Residential Equivalent Connections (REC) values. The use
of REC values has long been established by the EPA and MMSD. There are multiple categories of
residential, commercial, industrial or institutional REC values within the Chart.
Refer to City of Muskego Sanitary Sewer Information Document (2019 Rate and
REC Chart)
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Reserve Capacity Assessment (RCA) Explained
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Reserve Capacity Assessment (RCA) Explained
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Reserve Capacity Assessment (RCA) Explained
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History of MSP Heritage and RCA charges
On August 8, 2016, Mr. Hammond reached out to the City of Muskego/Utility
Department to request an RCA fee for their proposed project. The Utility Department
provided him an RCA cost based on an estimated number of 130 beds provided by Mr.
Hammond. Furthermore, Mr. Hammond was provided a method to calculate the RCA
per a 1 or 2 bedroom unit. In an email on August 8, 2016 from Mr. Hammond, he was
able to calculate a cost estimate of $527,962 for a RCA for his development based on his
estimated number of beds.
September 6, 2016 Mr. Hammond provided letter to Dave Simpson (City of Muskego
Public Works Director at the time) to request all his units be treated as 1 bedroom units
for RCA.
On September 9, 2016, Mr. Hammond appeared in front of the City of Muskego Public
Works Committee to challenge RCA fees and request all units be treated as 1 bedroom.
Mr. Hammond was denied his request by Committee.
Early Building Permit (Footings and Foundation) was issued on February 14, 2017. Full
Building Permit issued on May 26, 2017.
Mr. Hammond’s initial RCA was based on an approximate room/bedroom count that
was provided by Mr. Hammond. In order to get an accurate count of beds, rooms, etc.
the City of Muskego asks the developer to fill out a survey once the building is
completed. The reasoning is because building plans submitted by developers usually get
revised during construction. This survey is the basis for determining the final RCA
count. The survey provided by MSP has a total bed count of 145 beds. The increased
bill from his estimate is due to the increase number of beds from his original estimate of
130 beds provided to us. The bill MSP received on September 24, 2018 was for
$629,613.75.
In the fall of 2018, Mr. Hammond reached out to the City of Muskego by means of
phone and emails with regards to the RCA charges. The City of Muskego reexamined
the RCA charges for MSP within the city codes and ordinances. The basis for this review
was to consider MSP not a nursing home but more of a hybrid development of multi-
family, nursing home, etc. On November 2, 2018, the City of Muskego sent out a
revised RCA for $419,268.75. City of Muskego staff internally reviewed our ordinances,
plans on file, and survey provided by MSP to come up with this new RCA.
On November 19, 2018, the City of Muskego received a letter from Mr. Hammond’s
lawyer. Due to this letter all communication needed to occur between the City Attorney
and Mr. Hammond’s lawyer.
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MSP Heritage and Pinnacle Peak RCA Challenge and...
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On December 6, 2018, a meeting was held between all parties at City of Muskego. The
result of this meeting was to have another meeting between MSP and City staff to go
over the RCA charges, answer questions that were not answered, and ensure all parties
were on the same page.
On December 11, 2018, all parties met to go over the RCA. MSP provided the latest
plans they were working off, which had addendum of CB #5. The plans on file with the
City of Muskego and State of Wisconsin had addendum of CB #1. The City of Muskego
was never provided the latest plan sets until this point. The RCA was able to be reduced
more due to plan revisions, room usage at MSP, and employee counts.
On December 12, 2018, Mr. Hammond received a final bill for RCA of $372,367.50.
Furthermore, Mr. Hammond’s payment is not due until November 1, 2019.
On December 28, 2018, the City of Muskego received a notice for an informal reviewed
of RCA charges by the PSC due to a complaint by MSP Real Estate.
On March 19, 2019, the City of Muskego received the PSC finding that the City of
Muskego’s RCA fee was reasonable for MSP.
On April 9, 2019, the City of Muskego Public Works and Safety Committee received a
letter from MSP Real Estate lawyer withdrawing their RCA appeal.
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Telephone: (608) 266-5481 Fax: (608) 266-3957
Home Page: http://psc.wi.gov E-mail: pscrecs@wisconsin.gov
Public Service Commission of Wisconsin
Rebecca Cameron Valcq, Chairperson 4822 Madison Yards Way
Ellen Nowak, Commissioner P.O. Box 7854 Mike Huebsch, Commissioner Madison, WI 53707-7854
March 19, 2019
Mr. Mark Hammond, Vice President of Development
MSP Real Estate, Inc.
7901 West National Avenue
West Allis, WI 53214
Email: mhammond@msphousing.com
Re: MSP Real Estate Informal Sewer Complaint Against the City of
Muskego Sewer Utility (CCS# 219988)
Dear Mr. Hammond:
Public Service Commission (Commission) staff has completed its informal analysis of MSP Real
Estate, Inc.’s (MSP Real Estate) sewer complaint regarding a one-time reserve capacity
assessment (RCA) fee of $372,368 charged to your newly constructed Heritage Senior Living
Community (Heritage) located at S64 W13780 Janesville Road, Muskego. Your complaint
against the City of Muskego Sewer Utility (Muskego) was emailed to the Commission on
October 24, 2018, and supplemented with additional emails on December 28, 2018, and
February 7, 2019. These documents include the following assertions:
1. It is unreasonable for Muskego to calculate Heritage’s RCA fee using the classification
found in Appendix A of Chapter 21 of City of Muskego’s ordinances, because MSP Real
Estate has provided water use data from similarly situated facilities in other communities
that shows each unit’s water use deserves a much lower RCA assignment.
2. It is unreasonable for Muskego to assign Heritage an additional $34,111 in RCA fees for
common areas, because Muskego never mentioned charging common areas in an email
exchange dated August 8, 2016. Also, Muskego has not charged similarly situated senior
housing developments for common areas.
3. Muskego did not adequately notify MSP Real Estate about the sewer RCA fees on or
before the building permit was issued on February 14, 2017, as required by Section
21.06(7)(b)(2) of the City of Muskego’s sewer utility ordinance.
Commission staff sent the first data request to Muskego on December 28, 2018, and received a
response on January 8, 2019. A second data request was sent March 5, 2019, and the response
was received on March 14, 2019.
Although the Commission does not regulate Muskego’s sewer utility, it does have the authority
under Wis. Stat. 66.0821(5) to review the reasonableness of Muskego’s sewer rates, rules and
practices. The standard of the Commission’s review in these cases is whether the rates, rules, or
practices are clearly unreasonable, not whether they are the most reasonable. The rate
methodologies used by unregulated sewer operations in the state may vary considerably from
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Mr. Mark Hammond
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that which the Commission employs on a regulated basis and believe to be the best. When
evaluating a concern involving unregulated sewer operations, a wider range of user charge
methodologies is recognized as meeting the test of reasonableness.
Issue #1 – Calculation of the RCA fee
On December 12, 2018, Muskego sent you a bill for $372,368 for RCA fees associated with your
Heritage development. It is Commission Staff’s understanding that Muskego used Appendix A
of Chapter 21 of City of Muskego’s ordinances to assign Heritage a total of 65.5 RCAs. This
included 0.5 RCA for each of the 86 one-bedroom units, 0.75 RCAs for each of the 22 two-
bedroom units, plus 7 RCAs for laundry rooms, dining rooms, and other common areas (less one
base RCA). The total RCA fee was then computed as the product of 65.5 RCAs and $5,685 per
RCA. You have argued that the Heritage development is a unique type of property with water
usage that is generally far less than other types of residences. While Commission staff
appreciates your water usage analysis, it is important to understand that Commission Staff’s job
is not to determine which is the “most reasonable” of two reasonable methods. Commission
Staff has determined that it is reasonable for Muskego to calculate Heritage’s RCA fee using the
classifications found in Appendix A of Chapter 21 of City of Muskego’s ordinances. Given that
this method is reasonable, Muskego is not required to use a “more reasonable” method for your
property. It is noteworthy that Muskego collects on average $254,000 per year in RCA fees
(based on data from 2011 to 2018). This amount only represents about eight percent of the
average annual bill of $3.3 million that it pays to the Milwaukee Metropolitan Sewerage District
in capital costs each year. So while the RCA fee of $5,685 is significant, it only pays a small
portion of the costs that is was designed to recover.
Issue #2 – Inclusion of RCA fee for Common Areas
Muskego sent you an email dated August 8, 2016, that stated it would be reasonable to assign
0.50 RCA per one-bedroom unit and 0.75 RCAs per two-bedroom unit. It did not discuss
common areas. On October 11, 2018, you sent a letter to Muskego stating that Heritage will
have a mix of independent living, assisted living and memory care. It is Commission staff’s
opinion that such a facility is neither a senior housing facility nor a nursing home, but something
in between. On December 12, 2018, Muskego sent you a bill for $372,368. This amount
represents the RCA fee for one and two-bedroom units as well as an additional $34,111 assigned
to common areas. It is Commission Staff’s opinion that just because the August 8, 2016, email
did not discuss common areas doesn’t mean that Muskego cannot charge for them when brought
to their attention through a subsequent plan submittal. Therefore, the additional $34,111 in
RCAs assigned to common areas is reasonable, as well as the total RCA fee of $372,368.
Issue #3 – Notification of the RCA fee
Section 21.06(7)(b)(2) of the City of Muskego’s sewer utility ordinance states, “The number of
residential equivalency units for all categories of future users reserve capacity assessment
purposes shall be determined by the City Engineer at the time of issuance of a building permit
based as far as possible on the residential equivalency, which determination may be appealed to
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Mr. Mark Hammond
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the City of Muskego Public Utilities Committee within 60 days of said determination. All
determinations of the number of residential equivalency units shall take into consideration
potential future use and necessary capacity.” The building permit for Heritage was issued on
February 14, 2017. You received your first notification of the number of RCAs assigned to
Caring Alternatives when you received an invoice on September 24, 2018. Commission Staff
does not consider the email exchange dated August 8, 2016, as meeting the requirements of
Section 21.06(7)(b)(2) of the City of Muskego’s sewer utility ordinance. Therefore, it is
Commission staff’s opinion that Muskego violated its own ordinance by not providing the RCA
calculation for Heritage at the issuance of the building permit. Please understand that the
Commission does not award sewer refunds for unreasonable rates of unregulated sewer utilities.
Rather, Commission staff directs Muskego to make the following changes to its policies and
procedures going forward:
1. Muskego shall provide a written estimate of all fees (connection, sewer, water, RCAs,
etc.) to applicants on or before the building permit is issued. The applicant must sign the
written estimate before the building permit is issued.
2. Muskego shall update its “Commercial Permit Application” to include a copy of the
“Sanitary Sewer Info Sheet” that shows how the RCA fees are calculated.
If you have any questions regarding this matter or need any clarification, please call me at
(608) 266-3768.
Sincerely,
Stephen P. Kemna, P.E.
Public Service Engineer
Division of Water, Telecommunications, Consumer Affairs
Tel: (608) 266-3768 ǁ Email: Stephen.Kemna@wisconsin.gov
SPK:jac DL:01675830
cc: Scott Kroeger, City of Muskego, Email: skroeger@cityofmuskego.org
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History of Pinnacle Peak and RCA charges
All new commercial business in the City of Muskego must complete a City of Muskego
Commercial Application. A copy of the “Commercial Permit Application General
Requirements” is attached for reference. Furthermore, on the City of Muskego website,
there is the following information provided as well: City of Muskego Business Approval
Procedures https://www.cityofmuskego.org/330/Business-Approval-Procedures
For the case of the Pinnacle Peak development, please focus on the top of page 2 of the
“Commercial Permit Application General Requirements” which says the following.
Sewer fees are determined by the type of business. For more information contact the
Utility Department at 262-679-4128. As soon as the developer calls the Utility
department and ask about sanitary sewer fees (which includes RCA fees), the utility
department can provide an estimate within a day or 2. This fee is an estimate at this
time because the developer usually does not have completed plans done and is in the
planning stages only. The City of Muskego has no records of Pinnacle Peak development
calling the utility department with regards to inquiring about sewer fees.
Pinnacle Peak development began construction in September 2017. On September 12,
2018 the City of Muskego calculated the sewer Reserve Capacity Assessment for
Pinnacle Peak and it was mailed out to Pinnacle Peak.
On September 25, 2018, the owners of Pinnacle Peak Development (Sherry Czisny and
Jay Schnorenberg) met with Kathy Chiaverotti, Adam Trzebiatowski, Scott Kloskowski,
and Scott Kroeger. The topic of this meeting was the sewer Reserve Capacity
Assessment that was received by Pinnacle Peak Development. During the meeting, Jay
and Sherry produced from their files a copy of “Commercial Permit Application General
Requirements” and admitted that they never called the Utility Department and asked
about sewer fees for their development. Also they were not aware that their
development was in the Milwaukee Metropolitan Sewer District (MMSD) area. Pinnacle
Peak Development said they were unaware of this assessment and did not want to pay
it. Pinnacle Peak Development was informed that they could challenge this assessment
in front of the City of Muskego Public Works and Safety Committee.
On October 2, 2018, Pinnacle Peak filed a complaint to the Public Service Commission
(PSC) of Wisconsin against the City of Muskego Sewer Utility with regards to their sewer
Reserve Capacity Assessment.
On October 16, 2018, Pinnacle Peak Development appeared in front of the City of
Muskego Public Works and Safety Committee to challenge their sewer Reserve Capacity
Assessment. The Committee denied their request for zero fees.
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On March 7, 2019, the PSC provided their findings which said the RCA fees were
reasonable.
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Telephone: (608) 266-5481 Fax: (608) 266-3957
Home Page: http://psc.wi.gov E-mail: pscrecs@wisconsin.gov
Public Service Commission of Wisconsin
Rebecca Cameron Valcq, Chairperson 4822 Madison Yards Way
Ellen Nowak, Commissioner P.O. Box 7854 Mike Huebsch, Commissioner Madison, WI 53707-7854
March 7, 2019
Ms. Sherry Czisny, Partner
Pinnacle Peak Properties, LLC
W182 S8320 Pioneer Drive
Muskego, WI 53150
Email: sherry.czisny@gmail.com
Re: Pinnacle Peak Properties Informal Sewer Complaint Against the
City of Muskego Sewer Utility (CCS# 218650)
Dear Ms. Czisny:
The Public Service Commission (Commission) Staff has completed its informal analysis of your
sewer complaint regarding a one-time reserve capacity assessment (RCA) fee of $135,975
charged to your newly constructed Caring Alternatives Assisted Living Center (Caring
Alternatives) property located at W182 S8320 Pioneer Drive, Muskego. Your complaint against
the City of Muskego Sewer Utility (Muskego) was emailed to the Commission on October 2,
2018, and includes the following two assertions:
1. Muskego assigned Caring Alternatives an unreasonable amount of 24.5 residential
equivalent connections (RECs) when calculating the RCA fee.
2. Muskego did not adequately notify Pinnacle Peak Properties about the sewer RCA fees
until Caring Alternatives was built and connected to the sewer.
Commission staff sent two data requests to Muskego. The first data request was emailed on
October 19, 2018, and the data response was received October 29, 2018. The second data
request was emailed on December 28, 2018, and the data response was received February 6,
2019.
Although the Commission does not regulate Muskego’s sewer utility, it does have authority
under Wis. Stat. 66.0821(5) to review the reasonableness of Muskego’s sewer rates, rules and
practices. The standard of the Commission’s review in these cases is whether the rates, rules, or
practices are clearly unreasonable, not whether they are the most reasonable. The rate
methodologies used by unregulated sewer operations in the state may vary considerably from
that which the Commission employs on a regulated basis and believe to be the best. When
evaluating a concern involving unregulated sewer operations, a wider range of user charge
methodologies is recognized as meeting the test of reasonableness.
Issue #1 – Calculation of the RCA fee
It is Commission Staff’s understanding that Caring Alternatives has 34 beds. Muskego applied
0.75 Residential Equivalent Connections (REC) for each bed per the “Nursing Home”
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Ms. Sherry Czisny
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classification found in Appendix A of Chapter 21 of the City of Muskego’s ordinances. After an
adjustment for “1 originally connected” RCA, the total RCAs applied to Caring Alternatives was
24.5. The current RCA fee of $5,550 was then multiplied by 24.5 RCAs to compute a total RCA
fee of $135,975. This amount matches the bill that you received on September 12, 2018.
Commission staff has determined that computing Caring Alternatives’ RECs based on 0.75
Residential Equivalent Connections (REC) for each bed per the “Nursing Home” classification is
reasonable. This is a reasonable classification for the sewer usage characteristics of operations
like Caring Alternatives, and it has been applied to similarly situated properties in the City of
Muskego. For example, in 1984, Muskego computed RCA fees based on 0.75 RECs per bed for
both the Tudor Oaks Nursing Home and the Muskego Nursing Facility. It is noteworthy that
Muskego collects on average $254,000 per year in RCA fees (based on data from 2011 to 2018).
This amount only represents about eight percent of the average annual bill of $3.3 million that it
pays to the Milwaukee Metropolitan Sewerage District in capital costs each year. So while the
RCA fee of $5,550 is significant, it only pays a small portion of the costs that is was designed to
recover.
Issue #2 – Notification of the RCA fee
Section 21.06(7)(b)(2) of the City of Muskego’s sewer utility ordinance states, “The number of
residential equivalency units for all categories of future users reserve capacity assessment
purposes shall be determined by the City Engineer at the time of issuance of a building permit
based as far as possible on the residential equivalency, which determination may be appealed to
the City of Muskego Public Utilities Committee within 60 days of said determination. All
determinations of the number of residential equivalency units shall take into consideration
potential future use and necessary capacity.” The building permit for Caring Alternatives was
issued on September 27, 2017. You received your first notification of the number of RCAs
assigned to Caring Alternatives when you received an invoice for $135,975 on September 17,
2018. Therefore, it is Commission staff’s opinion that Muskego violated its own ordinance by
not providing the RCA calculation for Caring Alternatives at the issuance of the building permit.
Please understand that the Commission does not award sewer refunds for unreasonable rates of
unregulated sewer utilities. Rather, Commission staff directs Muskego to make the following
changes to its policies and procedures going forward:
1. Muskego shall provide a written estimate of all fees (connection, sewer, water, RCAs,
etc.) to applicants on or before the date the building permit is issued. The applicant must
sign the written estimate before the building permit is issued.
2. Muskego shall update its “Commercial Permit Application” to include a copy of the
“Sanitary Sewer Info Sheet” that shows how the RCA fees are calculated.
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Ms. Sherry Czisny
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If you have any questions regarding this matter or need any clarification, please call me at
(608) 266-3768.
Sincerely,
Stephen P. Kemna, P.E.
Public Service Engineer
Division of Water, Telecommunications, Consumer Affairs
Tel: (608) 266-3768 ǁ Email: Stephen.Kemna@wisconsin.gov
SPK:jac DL:01675512
cc: Scott Kroeger, City of Muskego, Email: skroeger@cityofmuskego.org
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