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HomeMy WebLinkAboutMinutes - Water Utility Commission - 3/9/2009 k1-01310iowit 3 .. MINUTES C(90) ORO VALLEY WATER UTILITY COMMISSION REGULAR SESSION Monday, March 9, 2009 HOPI CONFERENCE ROOM 11000 N. LA CANADA DRIVE CALL TO ORDER ROLL CALL PRESENT: David Powell, Chair Winston Tustison, Vice Chair Rick Davis, Commissioner Robert Milkey, Commissioner Elizabeth Shapiro, Commissioner John Hoffmann, Commissioner STAFF PRESENT: Philip C. Saletta, Water Utility Director Shirley Seng, Utility Administrator David Ruiz, Engineering Division Manager COUNCIL PRESENT: Vice Mayor Carter CALL TO AUDIENCE Chair Powell recognized resident Erica Reise. Ms. Reise requested that the Commission review the tier rate schedule and consider raising the rates. She indicated that she was on the homeowners association for Vistoso Community. She mentioned that 5 million gallons of water a month is used by the community to water three parks. She believed the only way to reduce usage was by economizing. 1. APPROVAL FEBRUARY 9, 2009 MINUTES MOTION: A motion was made by Vice Chair Tustison and seconded by Commissioner Shapiro to approve the February 9, 2009 Minutes MOTION carried, 7-0. 2. FINANCIAL PROJECTIONS FOR WATER UTILITY Mr. Saletta reviewed his information and mentioned that Ms. Seng would report on the financial projections and its impact to the Water Utility. Report: -Town's Projected Shortfall: The Town has projected a 4.2 million dollar shortfall in revenues for FY 2009-10. Several areas impacted by the shortfall: reduction in revenue sales taxes, construction sales taxes, building permit fees, and state shared revenues. • 3/9/09 . Minutes, Oro Valley Water Utility Commission -Utility Tax: A 2% Utility Tax recently approved with no sunset clause by council on 3/4/09, however this still creates a shortfall for development related revenues. The Town is estimating only 100 new building permits in 2009-10 as opposed to 200 - 300 in previous years. Due to the onset of reduced revenues, the Town has recommended a reduction in staff approximately 27 employees of which 3 are from the Water Utility. Council did not approve the proposed reductions at the Council Meeting on 3/4/09, but directed Staff and Town Manager to address the concerns as the Town moves forward with the 2009-10 budget process. -Building Permit Reductions: The reductions have a direct impact on the Water Utility in terms of projected meter sales and equivalent dwelling units (EDUs). Mr. Saletta explained the relationship between meter sizes and EDUs. The Utility takes the Town's projection in terms of growth based upon an analysis; the Utility applies EDUs based on that information. At this time the Utility has projected 150 EDUs less than one-half of last year's projection and less than one-quarter of the actual EDUs. Mr. Saletta welcomed the Finance Subcommittee members to share some of their comments at the end of his report. The Utility estimated 312 EDUs for meter sales FY-2008-09; however the Utility exceeded its projection primarily because of the Oro Valley Market Place. Because of projected decrease in EDUs the Alternative Water Resources Impact Fee Fund and the Potable Water System Development Impact Fee Funds revenues will be affected. Mr. Saletta pointed out although the Water Utility was experiencing decreases in revenue it was not in a budget deficit. The Utility could experience a problem maintaining its debt service coverage ratio of 1.3 as required by Town Policy, but the Utility's revenue stream will cover expenditures. Mr. Saletta indicated that the Water Utility significantly reduced its O&M budget and eliminated the purchase of vehicles. Mr. Saletta ended his report. Ms. Seng reviewed Scenarios A & B - Comparison/Budget Revenue Projections for Enterprise Fund, AWRDIF Fund and PWSDIF. Review Funds Scenario A -Enterprise: (Operating) -AWRDIF: (Renewal Water Resources, Reclaim Water & CAP) -PWSDIF: (for growth related projects) All funds were compared to April 2008 rate analysis revenue projections and projections for FY08-09. Ms. Seng explained that the interest was not going to be as close as projected and the GPF and the water rates were down because they were implemented in January 1 versus July 1 . The AWRDIF & PWSDIF increased as expected mainly due to the purchase of commercial meters. -FY 2008-09 Rates Analysis & Budgeted Projections = $15,796,940 (Totals for all funds) -FY 2008-09 Estimated Actual = $15,953,977 -2009-10 Rates Analysis Projections = $17,832,229 (Totals for all Funds) FY 2009-10 Budget Projections = $15,111,605 -Review: -Major Assumptions: No growth assumed for water sales -identical water revenues as of FY 08-09 3/9/09 Minutes, Oro Valley Water Utility Commission -Review: -150 EDUs for impact fees -No increase in water use rates -Increase in potable GPF begins in January 2010 (increased from $0.55 to $0.75/1000 gals). -Increase in reclaimed GPF begins in January 2010 (increased from $0.30 to $0.40/1000 gals). Question and Answer Session: -Why is the PWSDIF taking the largest hit down by $385,000? (Commissioner Hoffmann). Ms. Seng explained that the price per EDU for PWSDIF is about $2500 compared to the AWRDIF at $4800. All impact fees were adjusted based upon the Master Plan, analysis and infrastructure needs. -Reviewed: -Revenue 2009/10 -Water Sales -GPF -Other/Interest = $567,200 (majority consists of Billing fees for sewer and storm water, reconnection fees, NSF, Turn-on & Turn-off fees, Engineering Design & Construction Inspection Review fees). -AWRDIF -PWSDIF Total Revenue = $15,111,650 -Reviewed: Expenditures -Personnel -O&M -CAP -CAGRD Total Expenditures = $7,188,784 Net Operating Revenue = $7,922,866 Current Debt Service = $5,753.075 per year Proposed WIFA Debt = $186,329 (interest payment on approximately 11,000,000 debt) -Debt Service Coverage Ratio = 1.38 based on current debt service -Debt Service Coverage Ratio = 1.33 based on current + proposed WIFA debt service Reviewed Fund Scenario B Ms. Seng explained that Scenario B assumptions were identical to Scenario A with the exception of the Groundwater Preservation Fee (GPF). -Major Assumptions: No growth assumed for water sales - identical water revenue as FY 08-09 -150 EDUs for impact fees -No increase in water use rates -Increase in potable GPF begins in January 2010 (increased from $0.55 to $0.80/1000 gals). -Increase in reclaimed GPF begins in January 2010 (increased from $0.30 to $0.40/1000 gals). Question and Answer Session: -Commissioner Shapiro asked was anything being done about the idea of not raising the water rates. She was very concerned about the double digit increase to customers the following year. Mr. Saletta explained that one of the main objectives for the Utility in the near future is to increase the GPF and to avoid increases down the road. It is important because the AWRDIF Fund is funded by the GPF as well as Impact Fees. It is one of the areas which we'll be paying off higher debt service because of the Reclaimed Water Project. Having the GPF applied to this fund where the resources are needed is why Staff is considering increases to the GPF. The water increases could be discussed when performing the water rates analysis. -Commissioner Milkey asked if the Expenditures include the reduction of 3 staff members. Mr. Saletta explained that Council did not approve Staff reductions at this time. 3 3/9/09 Minutes, Oro Valley Water Utility Commission -Vice Chair Tustison requested clarification about the Enterprise Fund water sales and whether or not it was increasing in FY 2009-10. Ms. Seng replied that it was not. Vice Chair Tustison indicated that the Finance Subcommittee had a lengthy discussion regarding water rates and it was the opinion of the Committee and Commissioner Milkey that it would be a mistake not to raise rates this next year. Implications: If rates are not raised the customers will experience double digit increases the following years, the Committee recommended gradual increases every year. Vice Chair Tustison mentioned that the Utility would be experiencing huge expenses in the future and it would need to move along progressively and be prepared for bigger expenses. Commissioner Shapiro agreed. -Chair Powell asked when the 5 year projections were developed last year what was the projected increase. Ms. Seng indicated that it was 6%. Mr. Saletta indicated that staff would review the water rates analysis. There were no further questions. No Action was Required on this Item. 3. ARIZONA WATER INFRASTRUCTURE FINANCING AUTHORITY DEBT AUTHORIZATION Mr. Saletta reported the following: -The Water Utility was planning to borrow money through loans or bonds in CY 2010 for existing system improvements. However since the Arizona Water Infrastructure Finance Authority (State Revolving Fund) will be receiving dollars from American Recovery Reinvestment Act Economic Stimulus the Utility is considering borrowing now at lower interest rates. -WIFA: WIFA is indicating that in addition to low or no interest loans there could be "forgiven principal". A portion of ARA money received for water and waste water infrastructure improvements could be forgiven. Mr. Saletta indicated that even though the Utility is experiencing difficult financial times it may be wise to look at borrowing money now. Mr. Saletta explained that the first year payment would be very low because of the loan and construction schedule. -Packet item: TCC dated 3.9.09, Attachment: WIFA overview of Loan Application Process. Mr. Saletta indicated that Staff was requesting that the Water Utility Commission recommend to Town Council the approval of the WIFA Debt Authorization. The financial assistance would be in the amount and not to exceed $11,000,000. List of Projects WIFA Priority List: -Phase 1 - $6,570,000 -Phase 2 - $5,300,000 Mr. Saletta indicated that the Utility was requesting authorization for only Phase 1 = $ 6,570,000 and NW Water Providers CAP Water Treatment and Delivery System = $4,000,000 for a Total debt authorization of$10,570,000, however the loan would not exceed $11,000,000. Mr. Saletta reviewed the handout for "WIFA Overview of Loan Application". Ms. Seng explained WIFA's Loan approval process for the Reclaimed Water Project. 4 3/9/09 Minutes, Oro Valley Water Utility Commission Commissioner Hoffmann asked, "How does WIFA prioritize their loans for projects they have selected?" Mr. Saletta explained that the Utility would request a WIFA loan and he emphasized that any portion of the loan may be "forgiven principal" or if WIFA adjusts their rate based upon ARRA Economic Stimulus than the Utility would also receive those benefits. Mr. Saletta stated that the Town has very good credit and WIFA would probably not deny the application. Chair Powell asked "Is the $4,000,000 Oro Valley's portion for the NW Water Providers Design & Delivery project?" Mr. Saletta explained that the $4,000,000 included only the design portion for the project. This design Includes: the pump stations, pipeline and associated facilities but not treatment. The estimated design cost will also be split between Metro Water ($4,000,000) and Oro Valley ($4000000) Total cost =$8,000,000. IGA's will be written for reimbursement for the remaining 3 parties: Flowing Wells Water District, Metro Water and Town of Marana. In answer to Chair Powell's question, Mr. Saletta explained that the loan is also contingent upon Metro Water getting WIFA loan approval. Vice Chair Tustison commented that it was reviewed by the Finance Subcommittee and they agreed to proceed with the loan application and present it to Council but there are still some unknowns such as the "forgiven principal" and interest rate. It was the Subcommittee's feeling that Council go ahead with the application, but with the provision that they would come back to the Water Utility Commission or Finance Subcommittee before the final contract was approved. Mr. Saletta mentioned that if the Commission agrees that the Finance Subcommittee review WIFA's contract, the Subcommittee could proceed with its review and not have to bring it back to the Commission. Chair Powell mentioned that there were enough safeguards in the application and felt comfortable with the Finance Subcommittee's final review. Commissioner Shapiro agreed with Vice Chair Tustison and Chair Powell. Mr. Saletta indicated that the item would be presented to Council at their April 1st meeting. MOTION: A motion was made by Vice Chair Tustison and seconded by Commissioner Milkey to recommend to Town Council approval of a WIFA Debt Authorization application for Phase 1 Projects and Northwest Water Providers CAP Water Treatment and Delivery System Design in an amount not to exceed $11,000,000. MOTION carried, 6-0. 4. NW WATER PROVIDERS CAP WATER TREATMENT AND DELIVERY SYSTEM Mr. Saletta reported: -Staff will be working with Metro Water to develop an IGA for all the providers to include reimbursement for the WIFA Loan application as approved by Council and the Water Utility Commission. -N.W. Reliability Reservoir: The U.S. Bureau of Reclamation has put $2.2 million in the federal budget for construction ready design work in FY 2009-10 beginning October. The Central Arizona Water Conservation District (CAWCD) supports moving forward with this project. Council members Gillaspie and Latas, Town Manager, D. Andrews and Assistant 5 3/9/09 Minutes, Oro Valley Water Utility Commission Town Manager, J. Watson will be in Washington D.C. for the National League of Cities Conference this week and will be visiting with state representatives, senators and the Bureau of Reclamation staff regarding this matter and to lobby for its support. -Letter of Support: The Town has received a letter from the Arizona State Lands Department supporting the NVVWP CAP Water Treatment and Delivery System. -Staff continues to work on the sub alternatives with the Northwest Water Providers (NVVWP) and will be finalizing the scope of work, and associated cost share for any additional work. Mr. Saletta ended his report. No Action Required on this Item. 5. PURCHASE OF GROUNDWATER EXTINGUISHMENT CREDITS Mr. Saletta explained the concept behind the purchasing of extinguishment credits and its financial advantages. Mr. Saleltta gave the following update: Tucson Water has approximately 423,000 acre-feet of Groundwater Extinguishment Credits. Oro Valley is interested in purchasing 4,000 acre-feet. The purchase of these credits will help minimize the Utility's CAGRD payment expenses. Staff contacted ADWR to verify if the GW Extinguishing credits could be used and they concurred via email that once the credits are purchased they could be pledged by conveyance and transferred to the Town's Assured Water Supply and Groundwater Allowance Account. The Arizona Department of Resources mentioned that they were not certain if the extinguishment credits could be applied to pumpage in year 2008. With respect to discussions with Tucson Water and their credits, the Utility has tentatively agreed on a price of$175 per acre-feet. The Water Utility Commission and Council has already approved this item and expenditure of $700,000 by motion, but if Tucson Water needs an IGA it will then be forwarded to Council for approval. Question and Answer Session Commissioner Shapiro asked "In the future will Tucson Water still have excess water credits in case Oro Valley wants to continue this process?". Mr. Saletta believed they would have the credits, but they are interested in selling previously recharged CAP Groundwater Storage credits. Mr. Saletta indicated that the only two water providers interested in purchasing credits were Community Water and Oro Valley. Mr. Saletta explained the financial advantages and remarketing concept of extinguishment credits. Mr. Saletta ended his report. No Action Required on this Item. 6. TOWN COUNCIL MEETINGS/COMMUNICATIONS Vice Mayor Carter had no report. 6 3/9/09 Minutes, Oro Valley Water Utility Commission 7. SUBCOMMITTEE/COMMISSIONER REPORTS Commissioner Davis reported the following: -Conservation Subcommittee met March 2, 2008. Attendee: K. Boyce, Commissioner Milkey Discussion Topics: -Seminar attended by K. Boyce on The Modified Non-Per Capital Conservation Program. -Education program requirements -Conservation efforts and adoption of more Best Management Practices (BMPs) -Drought Report: Review climatic conditions for the first quarter of the water year -Potential of global warming and its impact to future water management -Weather Station Status: loss of funding on weather station, possible alternatives for funding or cooperative efforts. Commissioner Davis ended his report. -Renewable Water Subcommittee: Commissioner Hoffmann indicated there was no meeting or report. 8. STAFF REPORTS a. Customer Service Report Ms. Seng reported the following: Packet attachments: -Schedule of the 15 Largest Water System Customers FY 2007-2008. This information was provided per Commission's request. -Meter Installations Monthly Report -Total Metered Connections as of 2/28/09 = 18,345 -Actual New Meter Installations = 168 for FY 08-09 year-to-date Ms. Seng ended her report. b. Capital Projects Mr. Ruiz reported the following: -Well El B redrill: The Utility has received bids from two drillers which are being evaluated. -Bid Projects: -3 million gallon capacity reservoir at King Air Reservoir, and 16 Inch Main, Location: Innovation Drive. -Sheraton Booster: Bid packet in progress. The booster will need updating and replacement of its electrical system. -Big Wash Wall replacement: Bid opening will take place March 20. -Location: Near O.V. Market Place 7 3/9/09 Minutes, Oro Valley Water Utility Commission -CAP Request for Qualifications: Currently working on packets for Professional Engineering Services. Scope includes a pilot study, groundwater and surface water quality studies within the distribution system. Mr. Ruiz ended his report. c. Potable and Reclaimed Water System Report Mr. Ruiz reported the following: -February 2009 -Potable System Graph -Monthly demand decreased as low as 4.6 million gal. per day and as high as 6.0 million. Only 2 rainfall events. -February 2009 - Potable Overall Reservoir Storage Graph -Storage level demand is doing well. Keeping levels consistent is very important for fire flow demand. -Reclaim Water -2009 -February demand slightly higher than January. EU5 Pond zero usage. Staff is currently working on a leak at the south pond. Reclaimed water is currently not being delivered. Staff is working with the contractor and golf course management to remedy this problem. All work is under the contractor's warranty. Mr. Ruiz ended his report. 9. DIRECTOR'S REPORT a. Annual Report Schedule -First draft of the WUC Annual Report will be forwarded to the Water Commission by March 20, 2009 -Comments from Commissioners back by March 27, 2009 -WUC Annual Report back to Commission April 13, 2009 -WUC Annual Report to Council April 15, 2009 b. Update on Boards & Commission -Council did not approve any changes to the selection process for Boards and Commissions. The current selection process still stands. c. WUC Commercial/Turf Vacancy -Staff plans to advertize for vacancy week of 3/16/09. The position is only opened to a commercial or turf representative. d. Upcoming Meetings -3/17: Water Resources Research Conference: Attendees: Winston Tustison, Bob Milkey, John Hoffmann. Commissioners will receive training credits. Mr. Saletta has registered but is tentative at this time. -3/25: Council meeting (rescheduled from 3/18) -411: Council meeting -4/13: WUC meeting -4/15: Council meeting Mr. Saletta ended his report. 8 3/9/09 Minutes, Oro Valley Water Utility Commission 10. FUTURE AGENDA ITEMS -Local Field Trips: -Suggested a Field trip once a new Commercial/Turf representative is appointed in May 09.(Commissioner Hoffmann) -Reclaimed Water Project and Future Sites (Commissioner Shapiro) -Highland Mobile Park Automatic Meter Reading demonstration (Ms. Seng) -Outside Trips -Central Arizona Recharge Facilities CALL TO AUDIENCE: Mr. Art Reise Oro Valley resident requested an explanation regarding the potable water usage and decrease (4.6 million gpd). Mr. Saletta explained that the decreases in years 2006-2007 were approximately 8% however in 2008 there was about a 4% decrease which could have been due to several factors including customers conserving water. Mr. Saletta indicated that staff could provide more details via email if requested. ADJOURNMENT: MOTION: A motion was made by Commissioner Davis and seconded by Commissioner Shapiro to adjourn meeting. MOTION carried, 6-0. Respectfully, (14, ailet4-‘c Iris L. Chaparro Senior Office Specialist 9