Reimagining cost sharing for the Kline’s Island Sewer System

With a regional network of communities facing substantial infrastructure needs, and a new regulatory-driven infrastructure plan, the time had come to revisit how those costs are distributed. Raftelis is working with Lehigh County Authority (LCA), the City of Allentown, and more than a dozen contributing municipalities to navigate a complex challenge: developing a fair, sustainable, and transparent cost-sharing framework.

Why cost sharing needed a fresh look

The existing cost-sharing structure for the KISS is the product of dozens of decades-old agreements, each reflecting different customer profiles, infrastructure, and investment timelines. Over time, that layering has created inconsistencies and complexity that make billing and financial planning difficult to manage. As the region looks ahead to a period of significant capital investment through 2035 and beyond, these outdated structures threaten to hinder consensus and delay critical improvements.

In response, Raftelis worked with LCA and stakeholders to develop a planning process rooted in open dialogue, shared priorities, and practical financial modeling. The result: a set of cost-sharing alternatives tailored to support the next phase of the KISS’s regional evolution.

Balancing simplicity, fairness, and regional equity

Through a series of stakeholder workshops, Raftelis helped the group define a common set of objectives for future cost allocation. The most frequently cited priorities were:

• Simplicity – Reducing administrative and billing complexity
• Fairness – Ensuring all communities pay proportionate and understandable shares
• Affordability – Addressing the needs of rate-sensitive communities and vulnerable populations
• Incentives for inflow and infiltration (I&I) reduction – Rewarding communities that invest in system improvements
• Regional economic balance – Acknowledging different community roles in population growth, industrial use, and infrastructure needs

These shared principles helped guide the development and evaluation of three cost-sharing alternatives, each representing a different balance of complexity, precision, and administrative feasibility.

A structured process for stakeholder input

Raftelis presented multiple cost-sharing building blocks that could be used to structure billing across the KISS system. These included options for combining or separating treatment and conveyance costs, as well as different methods for allocating those costs, such as using sewage flow, pipe miles, loadings, or existing capacity.

Each of the resulting alternatives was modeled and presented for review:

The tradeoffs between alternatives were made transparent through detailed modeling of projected revenue requirements, impacts on typical customer bills, and administrative considerations.

A shift toward regionalization

One of the major shifts underway in the KISS planning effort is the move toward a more regionalized cost-sharing approach. While many communities have historically focused on the specific assets serving their residents, the system’s current and future needs point toward a broader, more integrated model.

A regionalized approach supports simplified cost pools, shared infrastructure investment, and systemwide incentives for performance and stewardship. In a shared utility environment, treatment capacity, interceptor maintenance, and industrial load management benefit all participants, regardless of jurisdictional boundaries. The preferred alternatives aim to reflect that reality, helping to align planning and billing structures with the operational interdependence that already exists.

The preferred path forward

In a recent work session, stakeholders reviewed refined financial analyses of each alternative and participated in a facilitated ranking exercise. The results were clear: nine out of ten participating municipalities ranked Alternative 1 – Simple as their preferred approach, citing its clarity, fairness, and administrative feasibility. Only one community expressed a preference for a more complex, asset-specific cost-sharing model.

The preferred alternative includes:

• A single cost pool for treatment and conveyance costs
• Allocation of costs based on each municipality’s sewage flow
• A centralized surcharge program to recover excess-strength costs from commercial and industrial users

This model offers multiple benefits: it simplifies billing, reduces administrative burden, and ensures that high-strength users pay their fair share, while allowing the remainder of the system costs to be allocated using consistent, flow-based metrics.

However, as the discussion progressed and Raftelis prepared financial model results for review, the KISS municipalities’ views shifted toward a hybrid approach. This alternative separates treatment and conveyance cost pools so that specific groups of KISS municipalities will contribute equitably toward large pipeline projects based on geographic location. This alternative preserves many of the benefits described above but is viewed as more easily approved by the municipalities’ governing bodies.

Next steps for implementation and planning

With a strong preference for a simplified, flow-based cost-sharing model, the next phase of work focused on translating this conceptual agreement into actionable steps. The following tasks were completed or are underway:

1. Model refinement: Additional financial modeling was conducted to reflect updated flow data, surcharge program design, and changes in customer usage patterns, including reduced revenues from certain high-volume users.
2. Surcharge program development: A centralized surcharge methodology, including flow and strength estimation methods, customer eligibility, and billing procedures, will be further detailed.
3. Capital planning integration: The cost-sharing model was applied to the finalized capital plan to generate long-term projections of revenue needs and customer impacts.
4. Governance and policy review: Municipalities will continue to evaluate how a shared approach aligns with local policies, existing agreements, and governing board expectations.
5. Consensus building: While broad agreement was reached on the preferred alternative, some municipalities still require internal reviews and legal consideration before formal adoption.
6. Act 537 submission: With the cost-sharing framework largely defined, the team developed the detailed financial plan and final cost allocation documentation required for the Act 537 Plan submission.

Building a foundation for future investment

The process undertaken by the KISS is a powerful example of how complex, multijurisdictional utilities can evolve toward more transparent and equitable systems. The region is positioning itself to make critical infrastructure investments that will serve current and future generations by centering the conversation around shared values, simplicity, fairness, and long-term viability.

As the plan moves closer to completion, the work done through this collaborative, data-driven process provides a strong foundation for financial planning and regional trust.

For more information on regionalization, contact John Mastracchio at jmastracchio@raftelis.com, Rocky Craley at rcraley@raftelis.com, or Zachary Green at zgreen@raftelis.com.