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HomeMy WebLinkAboutMinutes - Water Finance Subcommittee - 12/3/2019 MINUTES ORO VALLEY WATER UTILITY COMMISSION FINANCE SUBCOMMITTEE REGULAR SESSION December 3,2019 WATER UTILITY CONFERENCE ROOM 11000 N.LA CANADA DRIVE REGULAR SESSION AT OR AFTER 10:00 AM CALL TO ORDER-Chair Tustison called the meeting to order at 10:00 a.m. ROLL CALL Present: Winston Tustison,Chair Chuck Holligsworth,Member Robert Milkey,Member Staff Present: Peter A.Abraham,P.E.,Water Utility Director Shirley Kiel,Utility Administrator Mary Rallis,CPA,Utility Administrator CALL TO AUDIENCE-No speakers. REGULAR SESSION AGENDA 1. REVIEW AND APPROVAL OF THE NOVEMBER 6,2019 REGULAR SESSION MEETING MINUTES Motion by Member Chuck Holligsworth,seconded by Member Robert Milkey to approve the November 6, 2019 minutes as written. Vote:3-0 Carried 2. DISCUSSION REGARDING THE RESULTS OF THE RECLAIMED COST ALLOCATION ANALYSIS AND THE 2020 WATER RATES ANALYSIS Ms.Rallis reviewed the packet materials and presented the Reclaimed Cost Allocation Analysis developed by Westland Resources,which is a revised cost allocation methodology template.Ms.Kiel said the figures in the reclaimed template will be updated every year with new budget data.She reviewed the FY 19/20 budget numbers detailed on the spreadsheet. Staff and the Subcommittee members discussed the following: -Reclaimed water purchased from Tucson Water vs.the reclaimed water shortage from Tucson Water -The debt assigned to the Groundwater Preservation Fee(GPF) -The Northwest Recharge and Recovery Delivery System(NWRRDS)project to be included in the potable system asset value Ms.Rallis reviewed the Water Rates Analysis as follows: -Baseline:The scenario includes no new debt or rate increases.In FY 22/23 cash reserve requirements are not met and we are in the red in FY 24/25 with the new reclaimed cost allocation methodology, reclaimed customers would subsidize potable customers by$1.7M over a 5-year period if no future rate increases were implemented. -Scenario A:Includes proposed borrowing of$10M in FY 21/22 for the NWRRDS Project and$4M in FY 23/24 for existing system capital projects.There is a decrease in the reclaimed commodity rate proposed of 41 cents which equates to approximately$4,100 per month less for turf customers.This scenario proposes an increase to the potable base rate of 82 cents for the average single family residential customer.The scenario meets cash reserve and debt service coverage requirements.It shows the potable system subsidizing the reclaimed system by$102K over a 5-year period. -Scenario B:Includes proposed borrowing of$10M for NWRRDS in FY 21/22 and$5M for existing capital projects in FY 23/24.The purpose of this increased borrowing is to increase cash reserves for unknowns and to provide opportunities to purchase Groundwater Extinguishment Credits in the future.It proposes the same decrease to the reclaimed commodity rate by 41 cents and it proposes an increase to the potable base rate of$1.00.Cash reserves and debt service coverage requirements are met.Potable customers are still subsidizing reclaimed by$102K over the 5-year period. -Scenario C:Includes proposed borrowing of$10M for NWRRDS projects and$5M for existing capital projects to increase cash reserves.It proposes a decrease in the reclaimed commodity rate from 41 cents to 35 cents which equates to approximately$3,500 per month less for turf customers.It proposes an increase to the potable base rate of$1.00 and debt service and cash reserve requirements are met.The scenario shows potable customers subsidizing$42K over the 5-year period with the subsidy gradually dropping off. Ms.Kiel discussed updating the reclaimed subsidy with the additional NWRRDS debt service for the reclaimed system.Member Milkey suggested phasing in capital as construction moves ahead and book it as it will be phased-in to reduce rate shock. Ms.Kiel said staff will work on another scenario to include NWRRDS with phased-in debt. Staff and the Subcommittee members agreed to meeting on Tuesday,December 17th at 10 a.m.to review another scenario. Ms.Kiel provided a schedule of the proposed impact fees. FUTURE AGENDA ITEMS-No items discussed. ADJOURNMENT Motion by Member Chuck Holligsworth,seconded by Member Robert Milkey to adjourn at 11:06 a.m. Vote:3-0 Carried I hereby certify that the foregoing minutes are a true and correct copy of the minutes of the regular session of the Town of Oro Valley Water Finance Subcommittee of Oro Valley,Arizona held on the 3rd day of December,2019. I further certify that the meeting was duly called and held and that a quorum was present. Dated this 3rd day of December,2019. Danielle Tanner Senior Office Specialist