HomeMy WebLinkAbout01/20/2009 Council Presentation - Water Utility BriefingWater Utility Briefing
Growing Into a Self- sufficlent
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Water Utility Enterprise System
January 20, 2009
Discussion Objectives
• Tonight
— Overview
— Threshold Rates
— Consideration of public forum for 2/20/2009
• January 27 —Study Session
— Historical information
— Current situation —rate options evaluated
— Future impacts
Historical Perspective
• Prior policy decision to underwrite the
water utility
• Infrequent and small water rate increases
- 2006 implemented current conservation
usage fees with no change to the base
rate
• Tonight discuss transition to self- sufficient
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water utility enterprise fund
What does a self- sufficient water
utility enterprise fund look like?
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Planning for a self- sufficient Water Enterprise
Utility Fund is similar to a vehicle purchase:
— Cash outlay
— Debt
— Insurance
— Depreciation
— Maintenance
— Repair
— Breakdown
— Replacement
Why transition to a self- sufficient
water utility enterprise?
• Water is important for economic development,
sustainability and to control the Town's destiny
is Consistent with best practices of larger (or
growing) municipal utilities
• Provides future bonding capability in water fund
• Financial Transparency (distinct and separate
from the General Fund; fee for service)
Costs included in a seif- sufficient
water utility enterprise:
• Operational costs
is Central Arizona Ground Water District Costs and
facility savings replenishment operations related
to water
• Repair costs
•
Technical consulting fees (minimize FTE overhead)
• Administrative — indirect cost recovery
• Debt payments
• 2 - Months of contingency
• Depreciation
Other components of a self-
sufficient water utility enterprise:
• Master planning
• CIP planning
— Replacement of aging infrastructure
— Facility upgrades for redundancy
— Planned growth needs
• Annual evaluation of financial health
— Revenue review and rate review
— Impact fee review
Benefits of a self- sufficient water utility
enterprise fund:
• Best practices consistent with industry standards
• Activities are financed and operated so that all
costs of providing the services are recovered
and apportioned from those who use the system
is The Enterprise can borrow money based upon
its own revenue
Developing a self- sufficient water
utility enterprise fund requires:
• Critical examination of financial status on a
regular and planned basis
• Development of a master plan and regular
updates
Development of an implementation plan to
address revenue requirements
Self- sufficient utility enterprises
perform:
• Annual evaluations to ensure the health of their
f inancial structure including the need for any rate
adjustments to fully fund the following expenses:
— Operating cost increases (personnel, operating
supplies, utilities)
— CAP allotment /wet water fees
— Capital improvements to system
— Provide coverage requirements for future debt
— Emergency replacement reserves
— General Fund reimbursement of central service costs
TOM evaluation of current financial status:
$12,000,000
$10,000,000
$8,000,000
$6,000,000
$4,000,000
$2,000,000
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Revenues
Cost of Service
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Evaluation summary
• Staff from utilities and finance along with the
Town's economic rate consultant evaluated
various options in the development of the
proposed threshold rate option
• A discussion of the options considered will be
presented on January 27
Proposed Rate Plan
Effective Effective Effective Effective Effective
Current Mar -09 Jan -10 Jan -11 Jan -12 Jan -13
Residential Monthly Charges -- 3/4
7 $ 26.90 $ 29.05 $ 30.21 $ 31.12 $ 32.05 $ 33.02
Increase 2.15 1.16 0.91 0.93 0.97
10 33.35 36.02 37.46 38.58 39.74 40.93
Increase 2.67 1.44 1.12 1.16 1.19
Commercial Monthly Charges -- 2"
50 172.85 186.68 192.28 198.05 203.99 210.11
Increase 13.83 5.60 5.77 5.94 6.12
Bill Comparison — 7,000 gallons
Marana*
Current Proposed
Base $14.00 $ 15.12
Usage 12.90 13.93
Total
Difference
Oro
$13.91
Metro
Water **
$35
$ $26.90
$14.31
$25
$20
15.96
$15
$10
$30.27
$5
$0
$29.04
$33.02
$30.27
$ 2.15 $ 3.97 $x.22 Current Proposed Oro Valley Metro Wtr
* Marana's base rate includes 1,000 gallons ** Base rates include ZERO gallons
Comparison of
Surrounding Providers
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$200
$180
$160
$140
$120
$100
$80
$60
$40
$20
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Existing Marana Rates 000000 -000
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i Tucson Water 00000 '000/z-.0000�0000�
- Metro
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Proposed Marana Rates l ;0�
Oro Valley /J � -.900
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0 5 10 15 20 25 30 35
Monthly Water Usage (1000 gallons)
40 45
TOM Self- Sufficient Water Utility
Enterprise Fund
$12,000,000
$10,000,000
$8,000,000
$6,000,000
$4,000,000
$2,000,000
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2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
� or I Cost of Service
Summary
• Average water and wastewater utility rates in the
industry are increasing 5 -6% per year
• Rate adjustments are required to eliminate operating
deficit and fund expense increases expected over next
five years
• Acquisition of Tucson accounts expected to result in
economies of scale that will benefit ratepayers
• Town should review rate plan on an annual basis and
make adjustments only if necessary
Quarterly Updates
• Utilities and Finance will develop a
quarterly report indicating:
— Revenues: projected and received
— Expenditures: projected and actual
— Deviations: potential reasons and actions
being taken
— Unplanned challenges
— CIP development process
— Partnership opportunities
Review
• This is the first meeting of several where
we will be discussing the transition to a
self- sufficient water utility enterprise
• More detailed information regarding rates
will be discussed on January 27
• With the adoption of tonight's Notice of
Intent, a public forum will be scheduled for
February 20, 2009
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