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Home My WebLink AboutMinutes - Water Utility Commission - 7/10/2014 ACTION SUMMARY MINUTES ORO VALLEY WATER UTILITY COMMISSION FINANCE SUBCOMMITTEE MEETING JULY 10, 2014 WATER UTILITY CONFERENCE ROOM 11000 N. LA CANADA DRIVE ORO VALLEY, AZ 85737 CALL TO ORDER at 10:05 a.m. PRESENT: Robert Milkey, Chair, Finance Subcommittee Elizabeth Shapiro, Member, Finance Subcommittee Richard Verlaque, Member, Water Utility Commission Javier Arriaga, Member, Water Utility Commission Shirley Seng, Water Utility Administrator Jeffrey Kane, Meter Operations Supervisor Philip Saletta, Water Utility Director Stacey Lemos, Finance Director Call to the audience No public attendance at the meeting. Discussion of the following items occurred and no action was taken: 1. Discussion and possible action regarding the water rates analysis a. Discussion regarding water rate analysis process i. Reviewed the Summary of All Funds proforma from 2013 ii. Reviewed assumptions for upcoming water rates analysis 1) Included single family residential growth; inflation forecasts; and interest rates iii. Discussed the schedule to complete the water rates analysis b. Handouts included a the Summary of All Funds proforma from 2013; assumptions to for rates analysis; and schedule for rates analysis 2. Discussion and possible action regarding the cash reserve policy of the water utility a. Discussed the existing cash reserve policy of the utility i. Discussed the need to amend the existing policy for clarity ii. Discussed the steps to amend the existing policy 1) Finance Subcommittee review and recommendation 2) Water Utility Commission review and recommendation 3) Town Council adoption by resolution iii. Finance Subcommittee to review the existing policy after the water rates analysis for 2014 is completed. 3. Discussion regarding the groundwater preservation fee a. Discussed the purpose of the groundwater preservation fee (GPF) b. Discussed the changes occurring regarding capital projects and related debt for alternative water resources i. Future CAP water projects to be funded with impact fees only ii. The GPF will be used to repay debt associated with the reclaimed water system c. Discussed the need to evaluate how to use the GPF funds after the debt service payments d. Finance Subcommittee will revisit this discussion after the water rates analysis is complete Future Agenda Items The following item will be placed on the agenda for the next Finance Subcommittee meeting: 1. Water rates analysis Adjourned at 11:38 a.m. I hereby certify that I prepared the foregoing minutes and that they are a true and correct copy of the minutes of the Finance Subcommittee meeting held on the 10th day of July 2014. I further certify that the meeting was duly called and held and that a quorum was present. Prepared by: Shirley Seng, Wate Utilit Adm 'str or . ITEM Table B-4 Oro Valley Water Utility I Summary of All Funds Preferred Financial Scenario-Revenue-Neutral Rate Restructuring FY 2013/14 FY 2014/15 FY 2015/16 FY 2016/17 FY 2017/18 Revenues Water Service Potable Water Sales $ 10,455,321 $ 10,730,919 $ 11,014,118 $ 11,244,884 $ 11,455,342 Groundwater Preservation Fee-Potable 2,269,294 2,299,552 2,328,638 2,356,582 2,390,656 Total Potable Water Sales 12,724,615 13,030,471 13,342,756 13,601,466 13,845,998 Reclaimed Water Sales 1,451,555 1,462,061 1,483,231 1,493,895 1,493,895 Groundwater Preservation Fee-Reclaimed 318,980 318,980 318,980 318,980 318,980 Total Water Service 14,495,150 14,811,511 15,144,967 15,414,341 15,658,873 Other Operating Revenue Potable Water Impact Fees $ 603,000 $ 804,000 $ 804,000 $ 804,000 $ 904,500 Alternative Water Impact Fees 1,213,500 1,618,000 1,618,000 1,618,000 1,820,250 Interest Income 98,276 73,164 82,147 93,740 99,093 Other Income 792,026 792,026 792,026 792,026 792,026 Total Other Operating Revenue 2,706,802 3,287,190 3,296,173 3,307,766 3,615,869 Total Operating Revenue $ 17,201,952 $ 18,098,701 $ 18,441,140 $ 18,722,106 $ 19,274,741 Operating Expenses Potable Operating Expenses Personnel 2,688,464 2,782,560 2,879,950 2,980,748 3,085,074 Operations&Maintenance 2,960,914 2,748,525 2,813,511 2,879,602 3,085,681 Water Resource Management Costs 405,000 405,000 405,000 - - CAP Wheeling Costs(includes TW+CAP water Costs) 718,065 718,065 918,065 962,512 962,512 CAP Recharge Costs 1,043,250 1,101,500 1,301,000 1,321,000 1,329,000 CAGRD Costs 150,000 285,000 359,000 - - Contributions to AWRD Funds-GPF 2,588,274 2,618,531 2,647,618 2,675,562 2,709,636 Total Potable Operating Expenses $ 10,553,967 $ 10,659,181 $ 11,324,143 $ 10,819,424 $ 11,171,903 Reclaimed Operating Expenses Operations&Maintenance 839,861 857,862 876,218 894,937 923,722 Total Reclaimed Operating Expenses $ 839,861 $ 857,862 $ 876,218 $ 894,937 $ 923,722 Total Operating Expenses $ 11,393,828 $ 11,517,043 $ 12,200,361 $ 11,714,362 $ 12,095,624 Net Operating Revenue $ 5,808,124 $ 6,581,658 $ 6,240,779 $ 7,007,745 $ 7,179,117 Appendix D Preferred Financial Scenario Tables 1 of 2 Summary of All Funds Preferred Financial Scenario-Revenue-Neutral Rate Restructuring Debt Service-Potable(P&I) Refunding-Excise(2003) 1,563,536 1,234,411 1,228,211 1,225,611 940,030 MOC Land-Excise(2005) 152,565 152,516 152,227 151,691 152,417 Refunding-Excise(2007) 790,822 1,255,948 1,258,530 1,259,936 1,255,326 WIFA-Sr.Lien(2009) 150,820 150,820 150,820 150,820 150,820 Refunding-Sr.Lien(2012) 581,458 582,285 589,493 586,716 589,759 Proposed Debt Service(Potable) 50,000 348,189 378,189 557,103 557,103 Total Portable System Debt Service $ 3,289,202 $ 3,724,170 $ 3,757,470 $ 3,931,877 $ 3,645,455 Debt Service-Alternative Water(P&I) Reclaimed.WIFA-Sr.Lien(2008) 320,044 320,044 320,044 320,044 320,044 Refunding-Sr.Lien(2012) 1,059,864 1,061,642 1,074,511 1,069,449 1,074,995 Proposed Debt Service - - - - - Total Alternative Water Debt Service 1,379,908 1,381,686 1,394,555 1,389,493 1,395,039 Debt Service-Potable Expansion Related(P&I) Refunding-Sr.Lien(2012) 326,959 327,424 331,477 329,916 331,627 Proposed Debt Service - - - - - Total Potable Expansion Related Debt Service $ 326,959 $ 327,424 $ 331,477 $ 329,916 $ 331,627 Total Water System Debt Service $ 4,996,069 $ 5,433,280 $ 5,483,503 $ 5,651,286 $ 5,372,121 Capital Improvements Existing System 2,611,200 2,835,090 3,533,823 3,517,905 745,255 Expansion Related - - - - - CAP Facilities Engineering&Construction 790,000 300,000 400,000 610,000 3,500,000 Total Capital Improvements $ 3,401,200 $ 3,135,090 $ 3,933,823 $ 4,127,905 $ 4,245,255 Net Balance From Operations $ (2,589,145) $ (1,986,712) $ (3,176,547) $ (2,771,446) $ (2,438,259) Operating Fund Ending Cash Balance $ 5,964,126 $ 4,540,799 $ 3,731,680 $ 3,618,782 $ 3,603,118 AWRDIF Fund Ending Cash Balance $ 4,599,383 $ 6,720,572 $ 8,758,069 $ 10,628,341 $ 9,842,099 PWSDIF Fund Ending Cash Balance $ 4,439,791 $ 6,068,217 $ 7,699,125 $ 9,332,520 $ 11,169,666 Total Cash $ 15,003,300 $ 17,329,588 $ 20,188,874 $ 23,579,643 $ 24,614,883 Debt Service Coverage 1.33 1.41 1.27 1.45 1.60 Percent Impact to average customer bill: 0.60% 0.80% 0.60% 0.00% 0.00% Dollar Impact to average customer bill: $ 0.23 $ 0.33 $ 0.26 $ - $ - Appendix D Preferred Financial Scenario Tables 2 of 2 Seng, Shirley From: Gomez, Wendy Sent: Wednesday, July 02, 2014 11:28 AM "r . • To: Seng, Shirley rt.4 Subject: Growth rates for five-year forecast Here you go: SFR Forecast(we obtained from DIS, although we used slightly lower numbers for FY 15 through FY 17 than they had projected) FY 14/15—200 FY 15/16—300 FY 16/17—275 FY 17/18—200 FY 18/19—100 Population growth rate projection from PAG: FY 14/15-.9% FY 15/16—1% FY 16/17—1.1% FY 17/18—1.2% FY 18/19—1.3% Inflation forecast- rates provided by the Arizona Department of Revenue: FY 14/15—1.7% FY 15/16—1.6% FY 16/17—1.7% FY 17/18—1.8% FY18/19-1.7% Interest Income—we assumed growth of 2%per year As I mentioned earlier,we use current trends in commercial activity for the forecast, because those projects are much more volatile,so DIS really cannot predict with any high certainty what projects may or may not come to fruition over the next few years. Hope this helps and please let me know if you need anything else. Wendy Gomez Senior Budget Analyst Town of Oro Valley, AZ 520.229.4733 wgomez@orovalleyaz.gov 1 1TEAA Oro Valley Water Utility Commission # 2014 Water Rates Analysis Work Schedule As of July 10, 2014 07/10/14 Finance Subcommittee Meeting 08/19/14 Finance Subcommittee Meeting(actual date TBD) 09/08/14 WUC Meeting—review rates analysis 09/23/14 Finance Subcommittee Meeting(if needed) 10/13/14 WUC Meeting—make rate riecommendation 11/05/14 Town Council—Notice of Intent Publish NOI on To n.WebMte.(statutory requirement) 12/15/14 Publish NOI in Daily Territorial 01/07/15 Town Council—Public Hearing 02/07/15 New rates become effective 03/10/15New rates;ar,..e billed r.- • ,qq fik 5y }i 1 p Y ITEM II. POLICIES F-51 A. Finance 1. Enterprise Basis a. The Utility shall be a financially self-supporting enterprise with all costs associated with operation of the Utility to be funded from revenues derived from the sale of water and other water-related income sources. b. An annual average debt service coverage of 1.3 times or 130% shall be maintained. c. Water revenues collected in excess of operating needs of the Utility shall be carried forward for future operating or future bond funding requirements and shall not be transferred to the Town's General Fund. d. The Utility shall maintain cash reserves for known future obligations plus an allowance for unbudgeted contingencies set at 5 percent (5%) of the total annual budget. e. Should the Mayor and Council determine the need for a minimum amount of water at reduced rates or other forms of subsidized water service for low income water users within the service area, the costs of such subsidies will be funded from the Town's J General Fund and not from water rates, fees and charges. f. The Town shall not enter into a development agreement for any purpose that permits the developer to pay reduced water rates and/or reduced development impact fees. 2. Water Rates and Charges a. Cost-of-Service Basis (1) Insofar as possible, charges for potable water shall be made on a cost-of-service basis. (2) Marginal cost factors of the Utility will be continually studied by staff and considered in the setting of rates. (3) The substitution of reclaimed water for non-potable uses is an important element in future achievement of safe yield in the TAMA. Rate setting for reclaimed water shall be in accordance with the following precepts: (a) Charges for reclaimed water shall be based on the cost-of-service whenever - 2 -