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HomeMy WebLinkAboutMinutes - Water Utility Commission - 7/13/2009 i'Lt(!-tii' t , , , ---A 1 th,,f ,t.,1,J F f.( �� f� t f r Irr-11,; :.:io { .it Li ft ki : h Fi [t rs, y.. Iti MINUTES -71- ,Ot) . AwittploW ___, ORO VALLEY WATER UTILITY ,. ��w COMMISSION REGULAR SESSION MONDAY, JULY 13, 2009 HOPI CONFERENCE ROOM 11000 N. LA CANADA DRIVE CALL TO ORDER Chair Powell welcomed newest member Mr. Richard Reynolds to the Commission as the Commercial/Turf representative. Mr. Reynolds stated that he was the Maintenance Manager for Ventana Medical Systems. He explained that 90% of all chemistry shipments for cancer diagnosis from Ventana Medical are water and that a cleaner and reliable source of water is critical to the product and customers. ROLL CALL PRESENT: David Powell, Chair Winston Tustison, Vice Chair Rick Davis, Commissioner Robert Milkey, Commissioner Richard Reynolds, Commissioner Elizabeth Shapiro, Commissioner EXCUSED: John Hoffmann, Commissioner STAFF PRESENT: Philip C. Saletta, Water Utility Director Shirley Seng, Utility Administrator David Ruiz, Engineering Division Manager Robert Jacklitch, Project Manager Others Present: K.C. Carter, Vice Mayor Stacey Lemos, Finance Director CALL TO AUDIENCE No Call to Audience. 1. APPROVAL JUNE 8, 2009 MINUTES Commissioner Milkey requested a change to page #5 under question and answers Ref: groundwater pumpage (insert per af). Commissioner Davis pointed out correction on page #6 (Commissioner Milkey's name). 7/13109 Minutes-, ariiNalley Water Utility Commission MOTION: A motion was made by Commissioner Shapiro and seconded by Commissioner Davis to approve the June 8, 2009 minutes as amended. MOTION carried, 6-0. 2. WATER RATES ANALYSIS Mr. Saletta thanked Commissioner's R. Milkey, R. Reynolds and Vice Chair Tustison for attending the Council Study Session. Mr. Saletta gave a Power Point presentation. -Factors Affecting Water Rates Analysis: -Reduced Water Sales (Less water use per customer, Increase in vacant residences and businesses, Reduction in projected growth -Levelizing Water Rates (Avoid rate shock in future years) -Moratorium on Impact Fees (Affects ability to pay debt service for expansion related projects) -Graph Review: Average for past three and half years O.V. Water Sales -2006-2008, and 2009. Mr. Saletta indicated that the Utility has experienced a substantial reduction in potable water usage. The majority of data was taken from well production not actual billing information. -Direction Regarding Water Rates Analysis: -Staff requests Council direction regarding whether to include in the Water Rates Analysis possible increases in the Base Rate, Commodity Rate and the Groundwater Preservation Fee (GPF). Mr. Saletta indicated that Council has supported staff with the rate analysis and alternatives with respect to avoiding rate shock to customers. -Council Study Session Discussion: -Review reduction and/or spreading out of Capital Projects -Review 5-year with GPF and with Base & Commodity increases -GPF increase fine but Water Utility should also reduce expenditures -Take into consideration inflation particularly CIP -Current budget allows for increase in revenues but not increase in expenditures -Water Utility salaries currently do and will follow Town salaries Question and Answer Session: -Has the reclaimed water usage decreased? (Commissioner Milkey). Mr. Saletta indicated that the Utility is beginning to review and work on the analysis based upon potable and reclaimed sales to turf. -How are you basing inflation on capital projects? (Chair Powell). Mr. Saletta explained there will be more inflation down turns affecting capital projects and at some point it will escalate. Commissioner Milkey was concerned about deferring infrastructure maintenance and that it would drive costs even higher. He mentioned that financing was good at this time and it would be a shame to miss this opportunity. He felt that ultimately the Utility could be facing higher liabilities in the future. 2 7/13/09 Minutes, Oro Valley Water Utility Commission Mr. Saletta commented that Staff discussed all Capital projects and they were mostly existing infrastructure improvements, however there's still opportunity to spread things out over time. At this time, there are five to six major projects the Utility is working on and would not like to extend them more than three years. There are also expansion related projects involving growth which will be moved further out. -Commissioner Shapiro commented that if rate increases do not occur now residents will experience double digit increases the next few years creating rate shock. She felt that Council wanted to know whether residents will in fact experience double digit increases. -Vice Chair Tustison pointed out various important factors: The Commission must understand that rate increases compound and one year without a rate increase will affect all other years. The Utility will have to raise rates consistently in order to get back to schedule. The Utility spent significant cash reserves for CIP this past year, and is presently experiencing a $2.5 million shortfall in Cash Reserves. He also pointed out that it was not a one year recession that economist are predicting at least a 3-5 year recession which needs to be conveyed to Council. -Commissoner Milkey was concerned about Council's discussion regarding the Utility reducing its operating expenditures he felt it was unrealistic. Staff should be prepared to explain to Council that the cost for delivering water isn't at Staff's discretion and will not change. Mr. Saletta mentioned that all expenses will be explained in the rate analysis such as debt service, regulatory requirements, Purchase of water, Tucson's Reclaimed water, and power costs. -Proposed Scenarios All 5-year Projections: -Baseline -No Water Rates Increases -Only GPF increase over 5-years -One-year GPF Increase -4 years increase in Base, Commodity & GPF -Increase in Base, Commodity & GPF over 5-year projection Commissioner Milkey asked about the tier rates/commodity increases and which sort of scaling factor was going to be used. Ms. Seng indicated that the rate design had not been developed, but will be reviewed in future Commission and Finance Subcommittee meetings. Staff has worked on the proposed baseline scenarios at this time. Mr. Saletta did not anticipate changing any tiers in the analysis; they may also be reviewed for subsequent years. Ms. Seng gave a brief explanation about the proposed GPF increases for the next 5 years. Ms. Seng reviewed the following: -Water Rates Analysis - Proposed Schedule 2009 -August Staff prepares initial scenarios -August 12 Finance Subcommittee -September 14 WUC meeting -September 17 Finance Subcommittee -September 23 Council Study Session -September 28 WUC meeting Recommendation on Water Rates -October 7 Council consider Notice of 3 7/13/09 Minutes, Oro Valley Water Utility Commission Intent to Increase Water Rates -October 26 Publish NOI Resolution -November 2 Mail Public Hearing Notice to customers -November 18 Public Hearing (Council consider Resolution for Water Rates) -12/19 if adopted, new rates become effective -1/19/2010 Billing of rates to customer Mr. Saletta requested some feedback about the September 28 Commission's Special meeting. Mr. Milkey concurred with the schedule and felt it was a good process especially the staggering of dates. Chair Powell and the Commission had no objections to the Proposed Work Schedule. In answer to Commissioner Reynold's question, Ms. Seng explained that the revenue derived from the GPF was applied to the Alternative Water Development Infrastructure studies such as Reclaimed Water, CAP Water and infrastructure financing. The GPF revenue does not affect the O&M budget. Mr. Saletta explained that the GPF rate is currently $0.55 per thousand gallons. Vice Chair Tustison reinforced Commissioner Milkey's comment that the Utility's operating expenses were not flexible. These expenses cannot be cut if we're going to provide adequate services. We need to be prepared to explain to Council how much of the Water Utility's budget is not flexible. Chair Powell agreed that the integrity of the Water Utility must not be compromised. Commissioner Davis requested a future agenda item: -Information on the recession it effects on foreclosures -effects on customer water bills -Non payment of HOA fees. Chair Powell recognized the request as a future agenda item. Mr. Saletta noted the request and that it would be included in the water rate analysis projections for the next Commission meeting. There were no further questions, Ms. Saletta ended his report. No Action required on this item. 3. UPDATE ON THE ARIZONA WIFA LOAN APPLICATION Ms. Seng reported the following: Under the Commission's recommendation Staff was able to present the WIFA Loan request to Council. Council authorized the loan debt up to $11 million. Staff was able to revise the project list prior to submittal reducing the loan amount to $3.4 million. On June 25th WIFA approved the $3.4 million loan. The approved projects under this loan - replacement of existing infrastructure were: -Replacement of 16" main Innovation -Replacement for Sheraton Booster -Replacement Well E-1 The Water Utility did not receive any Stimulus Funds. Projected interest rate = 4.25% 4 7/13/09 Minutes, Oro Valley Water Utility Commission As Staff moves with its financial projections during the rates analysis, we may revisit CIP projects per Council's direction and see what can be deferred, determine whether to finance these projects or finance more down the road. Ms. Seng indicated there may be some rate scenarios with or without additional financing. In answer to Chair Powell's question, Ms. Seng indicated that WIFA had not contacted Staff with a loan package but closing could occur as late as September or October. There were no further questions, Ms. Seng ended her report. No Action was required on this item. 4. NW WATER PROVIDERS CAP WATER TREATMENT AND DELIVERY SYSTEM Mr. Saletta presented numerous Northwest CAP Delivery System routing alternatives. Outlined B-3-2, B-4-2, and B-5-2 Alternative Maps. The Routing Analysis is almost complete. -Preferred Routing Alternative B-3-2:A-zone — Participants Metro Water, Flowing Wells, C-zone Oro Valley and Town of Marana. Mr. Saletta stated that this was the best route for Oro Valley. Oro Valley's point of delivery Naranja & Shannon. -Each provider will be responsible for their individual delivery costs. Mr. Saletta pointed out that right of ways and easements were taken into consideration with all three alternatives. He also stated that Oro Valley, Metro Water and Town of Marana are sharing the system's infrastructure such as the pipeline line as well as the treatment plant. All of the Northwest Providers are looking to minimize costs such as power. Other issues: -The Northwest Reservoir is still in the Federal Budget. The Bureau of Reclamation is preparing an updated cost analysis on the reservoir. -Staff met with Northwest Town Managers, M. Stratton, B. Despain, D. O'Brian, D. Crockett, G. Davidson, and D. Andrews to discuss the Intergovernmental Agreement (IGA) and to establish a committee to work out details such as Financing, O&M expenditures, a Steering committee and appointed representatives. There being no further questions, Mr. Saletta ended his report. No Action was required on this item. 5. UPDATE ON DISCUSSIONS WITH TUCSON WATER Mr. Saletta indicated that he met with Mark Stratton from Metro Water and Jeff Briggs of Tucson Water to discuss on an interim basis the possibility of CAP Water delivery to through Tucson Water's System. Concept: Deliver CAP Water to the N.W. Water providers (Oro Valley, Metro Water and Town of Marana) through Tucson Water's facility for recharge at Central AVRA Valley 5 7/13/09 Minutes, Oro Valley Water Utility Commission Storage and Recovery Project. Tucson would then deliver the water to their Naranja and Shannon C-zone reservoir. The N.W. Water providers may be able to work out a Capital payment and O&M payment to Tucson Water for the delivery of 3,000 af per year. The Utility will need to build facilities from the reservoir to tie into the system. Staff is currently working out several of these details. Mr. Saletta indicated that he wanted to pursue the discussions and requested comments from the Commission. A question and answer session occurred: Vice Chair Tustison asked what would be the most optimistic time frame to get the project going? Mr. Saletta indicated that once the proposals are forwarded to the Commission and Council for approval and the agreements are in place several projects need to be completed, such as plumbing into the system, water quality and system delivery issues. This could take about a year to year and one-half. In answer to Vice Chair Tustison question, Mr. Saletta indicated that costs could range from $300-$400 per af(acre-feet), but he was very hesitant to discuss this issue without Tucson's Water input. Tucson Water would like to have a Joint Study Session with Metro Water and Oro Valley to discuss electric power costs, O&M staff and capital repayment obligations. Vice Chair Tustison asked whether the capital payment was based on the amount of water used not as a cash advance to Tucson. Mr. Saletta indicated that the capital payment would be based on the number of af (acre- feet) delivered. Commissioner Milkey asked about CAP delivery up to Shannon and to our distribution system and whether it was compatible to CAP's final plan for delivery. Mr. Ruiz indicated that the reservoir at Naranja was compatible to both plans Tucson Water and CAP Water deliveries. Commissioner Shapiro asked will Oro Valley be blending CAP Water and groundwater as Tucson Water does. Mr. Saletta indicated that Tucson Water delivers its CAP Water to their Central AVRA Valley Storage and Recovery project and then blends it when it is delivered to the distribution system. There was discussion regarding Tucson Water CAP water and blending of groundwater, Oro Valley's blending process, water quality and chlorine levels. Mr. Saletta mentioned that all these issues will be addressed by Oro Valley. It is important to remember that the Utility will be preserving the aquifer and reducing its cost to the Central Arizona Groundwater Replenishment District. There being no further questions, Mr. Saletta ended his report. No Action was required on this item. Commissioner Shapiro pointed out that timing of the project is essential because people are searching for work, and we also need to move forward with wet water not just paper water. 6 7/13/09 Minutes, Oro Valley Water Utility Commission 6. TOWN COUNCIL MEETINGS/COMMUNICATIONS Vice Mayor K.C. Carter commented: Rate Increases - The Commission needs to analyze cut backs, and set up cost projections for the next 1-2 years. He was concerned about rate shock to the customers and its effect to future rate increases. The Commission must be prepared to justify the proposed rate scenarios to Council. He was concerned about the cuts to the CIP budget and possible adverse to the Utility and he supported the Commission. Vice Mayor Carter ended his report. 7. SUBCOMMITTEE/COMMISSIONER REPORTS a. Finance Subcommittee Vice Chair Tustison had no reports b. Conservation Subcommittee Commissioner Davis reported that the Landscape Ordinance Committee met July 8th. Commissioner Milkey reported that the review process continues on the draft ordinance. Issues such as plant preservation, salvage mitigation, landscape design, irrigation and water management and administration were also discussed. The Committee continues to discuss the requirements of plant utilization. The goal is to obtain low water use landscaping throughout new developments, primarily commercial development and some residential areas particularly through the use of passive water harvesting. The Committee will meet again before the item is presented to the Commission and Council. It seems that all the interested parties agree with the restrictions in terms of water conservation. Mr. Milkey felt that the Landscape Ordinance will achieve a better water conscious landscape ethic for the Town. The next meeting will focus on irrigation and the water management sections. Commissioner Milkey ended his report. Commissioner Davis also stated that the Conservation Subcommittee will meet in August. c. Renewable Water Resources Subcommittee Chair Powell indicated that Commissioner Hoffmann was not present. He reported that Commissioner Reynolds would be participating in the Renewable Water Subcommittee. At the previous meeting the following items were discussed: -N.W. Providers pipeline routing alternatives -Presenter Buck Schmidt - BasinWells gave a power point presentation of Oro Valley's Geology and its declining ground water levels. Mr. Saletta highlighted the details of BasinWells presentation and the aquifer ground 7 7/13/09 Minutes, Oro Valley Water Utility Commission water levels. The R.W.R Subcommittee supported staff regarding the discussions with the City of Tucson and possibility of CAP water delivery. Mr. Saletta ended his report. 8. STAFF REPORTS a. Customer Service Report Ms. Seng reported the following: Meter Installations - Connections as of 6/30/09 = 18,373 Actual New Meter Installations as of 6/30/09 = 196 -Projections FY 08-09 = 250 Shortage by 54 or 21% Projected EDU's for FY 08-09 was 312. Through 6/30/09 there are 612 EDUs. Projections Over by 300. This exceedance was largely due to the installation of commercial meters at the O.V. Market Place Meter Replacement Program FY 08/09 - 776 meters replaced. This includes 287 meter replacements at the Highlands and 489 regularly scheduled replacements. Packet attachment: Beginning Mid August 2009 -Customer Online Billing & Payment Notification. A $1.50 convenience fee will be charged to customers. The convenience fee is paid to a third party that processes all the payments. Customers without a computer may call a 1-877-309-6033 toll free number to pay their bill via credit card. Reverse 911: The Utility is reusing Reverse 911 capabilities to make delinquent phone calls. These courtesy calls notify the customer to avoid shut off. Since June 1 through July 10, 2009 Reverse 911 has made a total 1,089 calls. Drought Monitor Water Year 08/09 - The Town of Oro Valley maintains Stage 1 drought conditions for this Third Quarter. Ms. Seng ended her report. b. Capital Projects Innovation Park Drive 16-inch Main - The contract will begin 1st of August. The contract will entail replacement of 2000 feet of 16-inch main near Tangerine Hospital. -Issue Notice to Proceed for Well (E-zone) replacement near Tangelo and 1st Ave. The contract will begin 1st week of August. The rigg equipment will be on site for over two months. Drilling process will take approximately 10 days. -In ground concrete 3 million gallon reservoir- This project will be advertised by the end of July and will be going out to bid. Location: King Air and Moore Road. A 24-inch water main will also go out to bid connecting to the reservoir. 8 7/13/09 Minutes, Oro Valley Water Utility Commission Lambert Lane Pipeline Relocation Design Project: Public Works will be planning road improvements and the Utility must be prepared to be out of the way of the road construction. Mr. Jacklitch ended his report. c. Potable and Reclaimed Water S stem Resort Mr. Ruiz reported on the Potable System: June 2009 Daily Demand and Precipitation MGD Chart -No precipitation activity for the Month of June 2009 -Average Daily Demand 8,000,000 to 9,000,000 gallons Within the Daily Demand you could see the system peak hour of approximately 15,000,000 gallons. June 2009 Daily Demand Overall Reservoir Storage (MG) Chart -Potable System maintains 7,000,000 gallons. The storage demand must be maintained for emergency outages and fire flow capacity. The Utility has the capability of pumping its wells at roughly 14,000,000 gallons we are using 7,000,000 to 8,000,000 gallons. Mr. Ruiz mentioned since the onset of reclaimed water and because of the slow down in construction the system's capacity is doing very well. June 2009 Reclaimed Water Chart -Demand increase 76,953,000 gallons for June. The Hilton El Conquistador south pond has under gone a series of leak test. The Utility finished its last test July 10th. The test was at a water surface level right at the bottom of the shot crete shelf which proved to be successful. The next test will be performed in two weeks and will be at a water level midway between the shot crete shelf and the full level mark. Mr. Ruiz ended his report. 9. DIRECTOR'S REPORT a. Upcoming Meetings Mr. Saletta reported the following: -7/15: T.C. Meeting -8/10: Water Utility Commission -8/12: Finance Subcommittee Mr. Saletta indicated he will email a schedule to the Commission of the upcoming meetings per Commissioner Hoffmann's request. Packet handout: Updated Commissioner's Quick Reference Information List. Mr. Saletta requested that the Commissioner's review the information and forward any appropriate changes to Staff. 9 7/13/09 Minutes, Oro Valley Water Utility Commission 10. FUTURE AGENDA ITEMS -Election of officers in August or September. (P. Saletta). Chair Powell indicated he would be out of Town for the next meeting. -Discussions with Tucson Water Ref: CAP deliveries (Commissioner Shapiro) 11. CALL TO AUDIENCE No Call to Audience. 12. NEXT MEETING: AUGUST 10, 2009 LOCATION: HOPI CONFERENCE ROOM Chair Powell indicated that Vice Chair Tustison would chair the meeting. 13. ADJOURNMENT MOTION: A motion was made by Commissioner Davis and seconded by Commissioner Milkey to adjourn. MOTION carried, 6-0. Meeting adjourned 7:26 p.m. Prepared by: Iris L. Chaparro Senior Office Specialist 10