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MINUTES
ORO VALLEY WATER UTILITY COMMISSION
REGULAR SESSION
MONDAY, AUGUST 10, 2009 Ii4
HOPI CONFERENCE ROOM
11000 N. LA CANADA DRIVE
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CALL TO ORDER At 6:03
ROLL CALL
PRESENT: Winston Tustison, Vice Chair
Rick Davis, Commissioner
Robert Milkey, Commissioner
Rick Reynolds, Commissioner
Elizabeth Shapiro, Commissioner
John Hoffmann, Commissioner
EXCUSED: David Powell, Chair
STAFF PRESENT: Shirley Seng, Utility Administrator
David Ruiz, Engineering Division Manager
Robert Jacklitch, Project Manager
OTHERS PRESENT: K.C. Carter, Vice Mayor
Stacey Lemos, Finance Director
Jim Peterson, Water Utility Regional Coordinator
Doug McKee, Planning & Zoning Chair
CALL TO AUDIENCE -- Mr. Doug McKee Planning and Zoning Chair requested to speak on
Item 2 after its presentation.
1. APPROVAL JULY 13, 2009 MINUTES
MOTION: A motion was made by Commissioner Davis to approve the minutes as
amended seconded by Commissioner Reynolds.
MOTION carried, 6-0.
2. WATER RATES ANALYSIS (S. Seng)
Vice Chair Tustison reported that one of the members of the Town Council at the Study
Session regarding water utility fees made an emphatic speech that in his opinion the way to
control rates is to cut expenses. In light of the Council's thoughts, he encouraged the
Commission members to pay close attention to which items or expenses were flexible or the
Utility had control over, and which items were costs that could not be controlled. Vice Chair
Tustison emphasized that there had been some discussions of cutting capital expenditures.
8/10/09 Minutes, Oro Valley Water Utility Commission
He reminded the Commission that removing capital improvement projects from the budget
could ultimately delay them, but would not eliminate them in future budgets.
Ms. Sen lotted that in the Water Rates Analysis there are several different financial
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.consideration teat must be analyzed. Ms. Seng gave a power point presentation.
-Overview - O.V. Water Utility comprised of 3 Funds, Water Utility Budget, Capital Projects,
Financing, Debt Service Coverage, Reduced Growth Projections, Reduction in Annual Water
Use, Financial Scenarios, Proposed Schedule.
-Water Utility Summary of Funds
Enterprise Fund Coverage: Revenue: Water Rates, Expenses: Personnel, Operations
& Maintenance, Existing System, CIP & Debt Services
-Alternative Water Resources Development Impact Fee Fund (AWRDIF) Revenue:
Impact Fees & GPF, Expenses: CIP & Debt for Reclaimed & CAP projects
-Potable Water System Development Impact Fee Fund (PWSDIF) Coverage:
Revenue: Impact Fees, Expenses: CIP & Debt for Growth-related projects
All three funds are combined to determine debt service coverage and cash reserve balance.
-Oro Valley Water Utility Budget Graph: (Combination of Enterprise, AWRDIF & PWSDIF)
Capital Budget ($11 million) -Debt Service ($6.4 million) -Personnel ($2.4 million) -O&M
($4.6 million)
-Enterprise Fund O&M Budget Major Components: Administration- includes Water
Resource Management & Conservation, CAP Charges, CAGRD Charges, Subtotal $1.6
million, Customer Service/Meters - General O&M & Billing Related Costs Subtotal
$313,000 Engineering & Planning- subtotal $142,751, Production, General O&M,
Reclaimed Water Purchased, Power for Pumping Subtotal $2.2 million, Distribution,
General O&M & Water Quality Testing Subtotal $304,000
Total O&M Budget $4.6 million
Ms. Seng pointed out that the General O&M expenses for all divisions are $1 .1 million which
represents 25% of the Utility's Total Operations & Maintenance Budget.
-Capital Projects Components
Enterprise Fund - Budget: ($6.3 million) Estimated Actual: ($4.9 million)
PWSDIF Fund - Budget: ($1.9 million) Estimated Actual: ($1.9 million).
AWRDIF Fund - Budget: ($3.0 million) for CAP expenses. Estimated Actual ($0)
The estimated actuals are subject to change based upon the level of activity and contracts
approved this fiscal year. At this time this is the best estimate that will be used for the water
rates analysis.
-Financing
-WIFA approved the Water Utility's loan. for $3.4 million on 6/25/09. Ms. Seng explained
that Council originally approved borrowing up to $11.0 million however the Utility reduced
the loan by removing CAP & other projects. -Received loan documents 8/3/09 -Potential
interest rate 3.6% - 4.25%. Staff is not certain if this loan will take place, because interest
rates may be too high. The Utility will know the actual interest rate at the loan's closing
date. Analysis considerations: -Finance thru WIFA or pay cash for FY09-10 projects -pay
off 2001 existing bonds -finance future projects.
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-Debt Service Coverage
-Mayor & Council Water Polices: requires the Utility to carry a 1 .3 debt service coverage
ratio (operating revenue must be e:ual to 1.3 times debt service coverage for each year)
-TOV Financial & Budgetary ===elides: General Fund will meet debt service coverage for
bonds where excise taxes are pledged. This includes all OVWU bonds with the exception
of Series 2003 bonds. These 2003 bonds are backed solely by water revenues. The
bond covenant requires a 1 .2 debt service coverage, but if the debt service coverage drops
below 1.3 the Utility would have to fund a debt service reserve amount.
-The Water Utility will meet debt service coverage for 2003 bonds at 1 .3 and all other
bonds at 1 .0. Ms. Seng explained that under this scenario the Utility net revenues
would have to be $5.8 million for FY 09-10 .
-Reduced Growth Projects
-Growth projections from the last rates analysis: FY 09-10 thru FY 12-13 was 320 new
meters or 400 EDUs annually.
-Revised growth projections from the Finance Department: Ms. Seng explained that the
Utility was projecting 75 meters for FY 09-10 but will now be estimating 75 new meters
annually for the entire five year projection period.
-Need to consider current vacancy rate: From January 2006 - July 2009 there were 629
more service terminations than service establishments. These figures need to be analyzed
in the Utility's projections.
-Reduction in Annual Water Use (Graphs)
-For 2006, 2007 & 2008 actual water use figures were used. For 2009 actual water use
from January - July then assumed same water use in August - December that occurred in
2008
-Non-turf (potable) decline between 2007 to 2009 = 7.3% -Turf decline between 2007
to 2009 = 7.6%
-Average residential usage in 2008 dropped from 9,000 gals. to 8,093 gals.
-Financial Scenarios
-Typically prepare 1 baseline scenario
-This analysis will have 2 baseline scenarios: With WIFA funding as authorized by
Council, Without WIFA funding because of the potential interest rate
-Baseline scenarios do not include any rate increases
-Will develop several scenarios with increases in GPF, Base rate & Commodity rates
-No change in any thresholds in the commodity tiers
Commissioner Davis asked what were the commodity tiers thresholds based on? Ms. Seng
explained they were based on meter size and capacity of the meters.
-Water Rates Analysis Proposed Schedule - 2009
-July: Staff compiles information -August: Staff prepares initial scenarios
-8/25/09 Tentative Finance Subcommittee -9/14/09 WUC meeting -9/17/09 Finance
Subcommittee
-9/28/09 WUC meeting- Recommendation on Water Rates -9/30/09 Council Study Session
-10/07/09 Council to consider Notice of Intent to Increase Water Rates
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11/18/09 Public Hearing-Council to consider Resolution for Water Rates
Ms. Seng ended her report. No Action required on this Item.
Vice Chair Tustison requested a brief update from Ms. Lemos Finance Director. Ms. Lemos
indicated she was working closely with Staff on the Financial Scenarios and assumptions
making sure they were consistent with tax base funds.
Commissioner Shapiro asked why does the reclaimed water usage decline in 2009. Ms.
Seng explained that the golf courses are conserving more water.
Vice Chair Tustison stated that all golf courses are cutting back on expenses, the
superintendents are being stressed to control their water usage, he also emphasized that
cost of living continues to rise.
Mr. Ruiz indicated that the golf courses were being more efficient by practicing better water
management techniques, reducing areas of irrigation by converting the areas to lower water
usage and more desert vegetation. The Hilton El Conquistador is now using other types of
grasses requiring less irrigation. He mentioned that several of the Golf Course Managers and
Water Providers attended a golf course irrigation and reclaimed water presentation in Oro
Valley given by Dr. Kopeck, University of Arizona.
Commissioner Shapiro asked about CAGRD's finances and funding. Ms. Seng explained
they were responsible for recharging CAP water for their members.
CALL TO AUDIENCE: Vice Chair Tustison recognized Mr. Mckee.
Mr. Mckee voiced his concerns:
-Reviewed other town's budget statements, they did not anticipate rate increases
-Utility must do a better job of justifying why the rate increases are necessary. Staff has done
a good job discussing the increases but the whys need explaining.
-Concentrate on decrease revenue and how conservation & water reduction practices are
continually affecting revenue stream.
-Explain to Council that CAP expenses are not administrative costs but are actual operating
costs.
-Reevaluate Growth Projection - 75 meters for 5 year period not realistic and could bottom
out. Project 75 meters for 2-3 year period. Mr. McKee ended his report.
Vice Chair Tustison stated, we as the Commission must focus on these issues for the next
several years and think in longer terms. We must be careful and find resolutions to these
problems.
3. NW WATER PROVIDERS CAP WATER TREATMENT AND DELIVERY SYSTEM
(D. Ruiz)
Mr. Ruiz gave a brief overview on the MOU between the NW Water Providers, Town of
Marana, Flowing Wells Irrigation District, Metro Water and Town of Oro Valley.
-The MOU will be signed by all the NW Water Providers and Councils. This MOU will reaffirm
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the NW Water Providers commitment to cooperate in the development of a northwest
regional water system to treat and deliver renewable water resources with its focus on the
Central Arizona Project Water.
-Cost Study Estimate was completed in February 2008. In June 30, 2009 a Pipeline Routing
Study was completed.
-NW Water Providers will develop an Intergovernmental Agreement (IGA) formalizing and
implementing the goals and objectives set in the MOU. The IGA will include a structure for
governance, administrative and financial issues, technical and operational procedures.
-Commissioner's Packet included the Draft Copy of the MOU
-The Water Utility sent out Request for Qualifications (RFQs) for a study to be conducted on
the Delivery and Distribution of CAP Water to the Town of Oro Valley. Five consultants
submitted their RFQs. Interviews were conducted last Wednesday. The Utility has selected
CH2M Hill consultants to conduct the study.
-A meeting with CH2M Hill will take place next week to discuss the Scope of Services.
Mr. Ruiz ended his report. No Action Required on this Item.
A question and answer session occurred:
-Vice Chair Tustison asked about the schedule and timeline of the project and wanted to
know who will be overseeing the administration and operations of the system. Mr. Ruiz
indicated that Mr. Saletta is working with the other NW Water Providers coordinating a
schedule. He was not certain of the timeline but felt that year 2014 was more of a realistic
date. The schedule will have to be revisited. There are a lot of issues that must be
worked out such as governance, water treatment methods, TDS levels, water quality, and
delivery. This will be an ongoing process.
Mr. Ruiz indicated that all the NW Water Providers are also interested and concerned about
the operations of the facility and need to be represented.
-Commissioner Shapiro asked about Tucson's CAP water recharge process and delivery to
Oro Valley. Mr. Ruiz responded that if the Water Utility were able to come to an agreement
with Tucson Water, the Water Utility could deliver an agreed upon amount of CAP water to
Tucson Water's recharge basins in AVRA Valley and would take an equal amount of water
from Tucson Water through their distribution system. This would be done on an interim basis
until the NW Treatment and Delivery System is constructed. These details must be worked
out with the City of Tucson. They are receptive to this idea.
Mr. Ruiz mentioned that Mr. Saletta will keep the Commission informed about the City of
Tucson negotiations.
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4. CUSTOMER SERVICE UPDATE (S. Seng)
Customer Methods for Payment
Walk-in with check -Cash or credit card -Phone in with credit card -Mail in check-
ACH - Automatic withdrawal from checking account -Place in 24-hour drop box by Utility's
front door.
Implementation of 2 more ways to pay water bill
8/6/09 - Went live with Interactive Voice Response (IVR). Customers do not need to call the
Utility but can call a toll free number to make payments. This system will discontinue credit
card payments over the phone to Customer Service. (Received 8 payments since system
was activated).
8/7/09 - Went live with On-Line Credit Card Payments (Received 11 payments since the
system was activated). There is a $1.50 convenience fee for any credit card payments made
on-line or by telephone.
E-Bill Option
9/2/09 - E-Bill option anticipated to go live. If customers register for E-Bill they will no longer
receive a paper bill but can print a bill if needed.
Chase Bank
Chase Bank is re-programming the processing of on-line checks made by customers.
Currently it takes 7-10 days for the customer's online check to reach the Utility's account.
Chase Bank is making arrangements with various vendors and accounts to deposit the on-
line checks electronically into the Town's bank by the next business day. This type of manual
check will no longer have to be entered by Customer Service.
Meter Installations
-July 09 Meter Installations total of 4 (all were 5/8" residential meters). The new Fiscal Year
began in July.
-FY 09-10 Meter Projections per year (75 new meters per year and 112 EDUs)
Ms. Seng ended her report. No Action Required on this Item.
5. CAPITAL PROJECTS UPDATE (R. Jacklitch)
Mr. Jacklitch gave an overview on Capital Projects:
-Enterprise Fund and CIP projects - The Enterprise Fund helps pay for existing system
infrastructure improvements such as wells, reservoirs, boosters and mains.
CIP Projects
-Innovation Park Drive 16-inch Main - Replacement and installation of 2,000 feet of 16-inch
main on Innovation Park Drive was awarded to Arizona Underground. Contract amount
$360,000. This project will take 4-5 months -Completion Date: November or
December 2009
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E-zone Well (E-1) replacement - Location: Tangelo and First Ave. This contract started last
week. A 16 foot sound barrier wail was built. The wall is temporary and will help reduce
noise levels to nearby residents. The drilling process is a 24-7 operation and will only take
2-3 weeks. Once this portion of the work is done, the wall will be removed but the drill
will stay.
-La Canada Reservoir - This 3MG in ground reservoir project will be funded by two
funds 50% from the Enterprise Fund and 50% from Potable Water System Development
Impact Fee Fund. This project could be changed to a 2 million gallon reservoir and reduce
costs. The project is currently out for public bid and is being advertised. There are two
bids: Base bid 3MG reservoir, alternative bid 2MG reservoir. Opening Bid Schedule:
September 17th.
Design Project -Enterprise Fund
Lambert Lane Pipeline Relocation Design Project - Public Works Department will be working
on widening the Lambert & Push View Lane to four lanes. The Utility needs to determine
which existing water mains have to be moved away from the construction area. Public
Works Roadway Construction Schedule: August/ September 2010.
Mr. Jacklitch ended his report. No Action Required on this Item.
Question and answer session occurred:
-Commissioner Milkey asked if the La Canada Reservoir site will need more capacity in the
future. Mr. Jacklitch stated that based on the Master Plan a 6MG booster station is planned
in the future, however the projects are being phased in. Reservoir location: King Air and
Moore Road.
-Vice Chair Tustison was interested in visiting the E-1 well drilling site. Commissioner
Hoffmann agreed but thought it be best in cooler weather.
6. POTABLE AND RECLAIMED WATER UPDATE (D. Ruiz)
Mr. Ruiz reported on the Potable System:
-July 2009 Daily Demand Report Chart
-July 2009 Precipitation - 6 rainfall events
-July 2009 Overall Reservoir Storage Chart
Potable Water Demand up to 9.0 MGD.
Overall Reservoir Storage Average 7.0 MG. The storage is maintained primarily for
operational efficiency, emergency outages and fire flow. The Water Utility System has the
potential of pumping roughly 14.0 million gallons per day (MGD).
-July 2009 Reclaimed Water Chart
Delivered a total of over 53,000,000 gallons of reclaimed water. The Hilton El Conquistador
south pond will undergo its next leak test this week. If the leak test proves to be successful
the pond will revert to reclaimed water by mid August. Mr. Ruiz stated there was reduction in
water use indicating that people are managing and conserving water.
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A brief discussion occurred regarding: golf course watering, evaporative transpiration and the
reseeding of golf courses.
Commissioner Shapiro asked about Oro Valley's drought situation. Ms. Seng indicated that
Oro Valley was still in a Stage l Drought condition.
Mr. Ruiz ended his report. No Action Required on this Item.
7. TOWN COUNCIL MEETINGS/COMMUNICATIONS (Vice Mayor Carter)
Vice Mayor Carter had several concerns and comments regarding Agenda Item 3.
Comments & Questions:
-Delivery of the 3,000 af CAP water will it affect other agreements with the NW Water
Providers?
-Are the NW Water Providers agreeing to the negotiations with the City of Tucson?
-Will the other providers receive part of the 3,000 af of CAP Water that is delivered to Oro
Valley?
Mr. Ruiz mentioned that the 3,000 af from Tucson Water is only an interim alternative of
getting CAP Water delivered to Oro Valley. He also mentioned that the other NW Providers
are aware of the negotiations and that Metro Water is also entering into discussion
with Tucson Water.
Mr. Ruiz gave a description of the system delivery points, existing infrastructure and future
construction of the Dove Mountain C-zone reservoir.
Commissioner Shapiro asked about the costs of CAP delivery to Tucson Water Avra Valley
facility (wet water) versus CAGRD (paper water). Ms. Seng indicated that she was not sure
of the exact savings but CAGRD costs may never go away 100%.
Mr. Peterson explained that as groundwater is blended the water will take the
characteristics of Tucson's CAP water. He thought that since the inception of CAP delivery
one of the alternatives could be that Tucson Water be the sole supplier of CAP for this area.
Mr. McKee asked why was the delivery of the 3,000 af an interim solution not a permanent
solution. Mr. Ruiz explained that the Director could only answer these questions and they
also must be addressed to Council.
Commissioner Milkey asked how the 3,000 af was derived upon. Mr. Ruiz indicated that Oro
Valley potable demand was around 8,500 AFY and 3,000 AFY would get us down to
the sustainable groundwater pumpage amount of 5500 AFY. Mr. Milkey also asked if the
Bureau of Reclamation was aware of the negotiations and how did it affect them. Mr.
Ruiz indicated this would not affect our development of the NW Treatment and Delivery
System.
Mr. Ruiz emphasized that there were a lot of unanswered questions and Mr. Saletta was
still negotiating with Tucson Water. The NW Water Providers all meet once a month. The
time frame for this project could take about a year and half.
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There were no further questions or comments.
8. SUBCOMMITTEE/COMMISSIONER REPORTS
a. Finance Subcommittee (Chair Tustison)
Chair Tustison indicated the Finance Subcommittee would be meeting in the near future.
b. Conservation Subcommittee (Chair Davis)
Chair Davis reported the following:
The Conservation Subcommittee met 8/5/09, Attendees: K Boyce, R. Milkey.
Meeting Objective: Improve the current audit program by developing a Water Management
Program specifically for businesses and HOAs.
Issues and Concerns:
-Schools and large turf users (golf courses) are not governed by water allocations
-Reviewed the top 15 water users to determine their interest to participate in a water audit
program. Water audits will include analysis of water over a 3 year period, if applicable
determine a pattern of use.
-Research important statistical information to be used in various applications for example, tier
water rate structures.
Landscape Committee - No meeting has been set.
Issues and Concerns
-How will Oro Valley be able to regulate customers that are out of the Town's boundary?
-Will Oro Valley be able to sub meter non Oro Valley Water Utility services?
-Water Harvesting - can this apply to "real world" situations?
Future Agenda Item- Identify the top 15 water users, Discuss the Water Management
Program inquiries and continue with landscape code draft review.
Upcoming Meeting - August 28th
Chair Davis ended his report.
c. Renewable Water Resources Subcommittee (Chair Hoffmann)
Chair Hoffmann indicated there was no meeting.
9. STAFF REPORTS
a. Upcoming Meetings (D. Ruiz)
-8/19: T.C. Meeting
-8/25: Finance Subcommittee Meeting (Tentative)
-9/14: WUC meeting
Mr. Ruiz ended his report.
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FUTURE AGENDA ITEMS:
Commissioner Shapiro requested an update on the drought situation.
CALL TO AUDIENCE: There were no other calls to the audience.
NEXT MEETING: September 14, 2009 Location: Hopi Conference Room
ADJOURNMENT: 7:45pm
MOTION: A motion was made by Commissioner Shapiro and seconded by
Commissioner Milkey to adjourn the meeting.
MOTION carried, 6-0.
Prepared by:
CA,0
IrisChaparro
Senior Office Specialist
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