HomeMy WebLinkAboutAnnual Reports - 4/1/1998TOWN OF ORO VALLEY
WATER UTILITY COMMISSION
ANNUAL REPORT
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TABLE OF CONTENTS
TOWN OF ORO VALLEY
WATER UTILITY COMMISSION
ANNUAL REPORT
APRIL 1998
SECTION TITLE
• EXECUTIVE SUMMARY
• PREFERRED SCENARIO
• FINANCIAL CRITERIA
• DEPARTMENTAL STRUCTURE
• ALTERNATIVE WATER RESOURCES
• MASTER PLANNING REPORTS
• ORO VALLEY WATER IMPROVEMENT DISTRICT #1
• TUCSON WATER SYSTEM WITHIN ORO VALLEY
• REVENUE REQUIREMENTS
• O&M AND DEBT SERVICE REQUIREMENTS
• 5 YEAR CAPITAL IMPROVEMENTS PLAN (CIP)
• RECOMMENDATION ON WATER RATES
• FINANCIAL SUMMARY
• ALTERNATIVE FINANCIAL PROJECTIONS
• CONCLUSION
• APPENDICES
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INDEX OF APPENDICES
TOWN OF ORO VALLEY
F WATER UTILITY COMMISSION
1 ANNUAL REPORT
APRIL 1998
Il APPENDIX
n
A.
PREFERRED FINANCIAL SCENARIO
l J
1) ASSUMPTIONS
2) PROJECTED NET INCOME STATEMENT
3) PROJECTED DEBT SERVICE & CASH FLOW STATEMENTS
4) CONNECTION FEE FUND PROJECTED NET INCOME STATEMENT
5) CONNECTION FEE FUND DEBT SERVICE & CASH FLOW STATEMENTS
B.
ORGANIZATIONAL CHART
1) PROPOSED ORGANIZATIONAL STRUCTURE
C.
FIVE YEAR CAPITAL IMPROVEMENTS PLAN
1) RATES, BONDS AND CONNECTION FEES
2) •. COMMERCIAL READINESS CARRY FORWARD
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3) NEW PROJECTS
D.
PROPOSED RATE SCHEDULES
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1) PROPOSED RATE SCHEDULE FOR NON -CITY CUSTOMERS
ILJI
2) PROPOSED RATE SCHEDULE FOR CITY CUSTOMERS
3) TABLES FOR MONTHLY CHARGES & PERCENT INCREASE COMPARISONS
a) NON -CITY, 5/8 X %" METER, 0 — 40,000 GALLONS USAGE
a
b) CITY, 5/8 X %" METER, 0—10,000, 25,000 & 40,000 GALLONS
c) NON-CrrY, I" METER, 0, 5,000, 10,000, 25,000 & 40,000 GALS
d) NON -CITY, 1 V2" METER, 0, 5,000, 10,000, 25,000 & 40,000 GALS
(1
e) NON -CITY, 2" METER, 0, 5,000, 10,000, 25,000 & 40,000 GALS
u
i) NoN-CITY, 3" METER, 0, 5,000, 10,000, 25,000 & 40,000 GALS
g) NON -CITY, 4" METER, 0, 5,000, 10,000, 25,000 & 40,000 GALS
h) NoN-CITY, 6" METER, 0, 5,000, 10,000, 25,000 & 40,000 GALS
i) NoN-CITY, 8" METER, 0, 5,000, 10,000, 25,000 & 40,000 GALS
E.
ESTIMATED INCOME & CASH FLOW STATEMENTS
1) WATER ENTERPRISE FUND
fff
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2) CONNECTION FEE FUND
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3) ALTERNATIVE WATER RESOURCE DEVELOPMENT FEE FUND
F.
ALTERNATE SCENARIO: NO RATE INCREASE
1) ASSUMPTIONS
2) PROJECTED NET INCOME STATEMENT
3) PROJECTED DEBT SERVICE & CASH FLOW STATEMENTS
1
G.
ALTERNATE SCENARIO: ANNUAL INFLATION INCREASE
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1) ASSUMPTIONS
2) PROJECTED NET INCOME STATEMENT
3) PROJECTED DEBT SERVICE & CASH FLOW STATEMENTS
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EXECUTIVE SUMMARY
TOWN OF ORO VALLEY
WATER UTILITY COMMISSION
ANNUAL REPORT
APRIL 1998
INTRODUCTION
In October, 1996 the Oro Valley Town Council (Council) formed the Oro Valley Water Utility
Commission (Commission) to act as the official advisory body to the Council regarding water
related issues. The functions and duties of the seven member commission include reviewing
and developing recommendations for water revenue requirements, water rate and fee structures,
and water system capital improvement planning. The Commission is required to prepare an
annual report to the Council regarding its recommendations. This report is the Commission's
second Annual Report. It includes recommendations related to financial criteria, revenue
requirements, system operations and maintenance requirements, debt service requirements, a
five year capital improvements plan, possible rate adjustments, alternative water supply options,
system expansion and future organizational structures.
This Executive Summary contains a briefing on the implementation of the recommendations
presented in the 1997 Annual Report. It also contains a briefing on new recommendations
specific to water issues facing the Town in FY 1998/99. Explanations and financial analyses
that are more detailed may be found in the body of the report. The main body of the report
presents details related to the Commission's preferred scenario. For comparison purposes, a
section describing other alternatives is presented at the end of the report.
IMPLEMENTATION OF THE 1997 REPORT RECOMMENDATIONS
• Water Rates: A 3% across the board rate increase for all customer classes was
recommended by the Commission to the Town Council. The Town Council implemented
an adjustment to the minimum monthly rates and the commodity rate for the customers of
the Rancho Vistoso system, equalizing all rates for customers in both systems, except for the
`city' customers whose rates were adjusted with the phase -in formula established by Council
at the time of purchasing the two former private utilities.
• Consolidation of Water Operations: The Commission recommended that the operations
of both systems (CH & RV) be consolidated to take advantage of economies of scale in both
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field operations and administration. The Town Council approved a consolidated budget for
the FY 1997/98. The two billing systems have been consolidated and a new full -page bill
format with return envelopes has been implemented. The physical interconnects are
scheduled to begin this fiscal year and will be completed in FY 98/99.
Rancho Vistoso Depreciation Expense: The Commission recommended that the Town
update and perform long range financial projections to ensure the timely recovery of
depreciation and continued system reliability and capacity. Those projections are
incorporated into the 1998 Annual Report and allow for the full recovery of depreciation for
the entire system.
• Alternative Water Resources: The Commission presented three recommendations to the
Town Council involving alternative water issues: (1) Phased in use of reclaimed water to
irrigate golf courses; (2) continue joint planning with neighboring jurisdictions and other
water agencies; and (3) purchase incentive priced CAP water. Efforts to address all three
have begun and continued during the year.
• Master Planning Reports: The Commission recommended that the Master Planning
Reports be updated. A proposal from a consultant has been received and is under evaluation
by staff.
NEW RECOMMENDATIONS FOR FY 1998199
Water Rates: The Commission recommends a 5.50% revenue increase for FY 98/99. The
proposed revenue increase would allow the utility enterprise fund to meet sound financial
criteria regarding the operations of a municipal utility while costs keep pace with inflation,
growth issues are not ignored, infrastructure is replaced as it is worn out and the level of
service to the customer improves.
The manner in which this revenue increase is proposed to be accomplished includes the
following changes for all residential and commercial customers:
➢ The change in the monthly base rate is recommended to increase between $0.10/month
and $148/month, depending on the meter size. Most residential customers have a
5/8"X3/4" meter. These customers would realize a $0.10/month change in their monthly
billing under this proposal.
➢ The number of gallons included in the base rate is proposed to change to 1000 gallons
from 2000 gallons for all customers.
➢ The commodity rate for all customers is recommended to increase $0.02/1000 gallons.
More detailed discussion on water rate recommendations are included in the main body of
the report and in Appendix D, including residential and commercial customers as well as
`city' and `non -city' customers.
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• Financial Criteria: The Commission recommends that the Town Council adopt the
following criteria as policy to guide staff in operating the utility using sound business
practices that protect the long term interests of the rate payers:
➢ Retained earnings shall never become negative.
➢ The utility shall not operate at a net loss on the income statement for more than two
consecutive years.
➢ Cash flow shall be sufficient to pay personnel, O&M and debt service.
➢ Cash reserves for operation shall not normally be less than 15% of the expected cash
outlays, excluding capital. Cash reserves may fall below this threshold, but not for more
than 2 consecutive years.
➢ Debt service coverage shall not be less than 1.25 times the annual debt service as
required in the bond covenants.
➢ Depreciation shall be fully recovered through rates each year for reinvestment in the
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system, to be verified through an analysis of expected plant life every five years.
➢ In the case of unforeseen circumstances, every effort shall be made to avoid borrowing
funds. Instead, deferment of other expenses and use of cash reserves should first be
explored before consideration of incurring debt.
• Departmental Structure: The Commission recommends that the water utility be
established as a separate department. As Oro Valley continues to grow, the separation of the
water utility from the Department of Public Works is inevitable. Combined with the unique
r ' nature of operating a municipal water utility within the Tucson Active Management Area,
there is a need for staff to focus resources on strategic and tactical issues. A separate
departmental structure could be more effective in answering the utility's ability to fully
participate in regulatory and regional water issues and to provide improved overall service to
t J customers.
• Alternative Water Resources: Given the importance to the residents of Oro Valley of
1 J addressing alternative water resource issues and the progress made in the last year, the
Commission recommends that efforts on the same three points presented in the 1997 Annual
f J Report be continued. To reiterate the three points, they are (1) the phased in use of
l reclaimed water to irrigate golf courses, (2) the Town continue joint alternative water
resource planning with neighboring jurisdictions and other water resource agencies to take
advantage of economies of scale; and (3) purchase incentive priced CAP water while it is
LJ available for accumulating long term storage credits.
L • Master Planning Reports: The Commission recommends that the Town create two
separate Master Plan Reports. One report would be for the domestic water system,
L consolidating the two Master Planning Reports currently in place. The new second report
would be for alternative water systems, which currently have no master plan in place.
• Oro Valley Water Improvement District #I: The Commission recommends that the
Council provide proper notice to the Metropolitan Domestic Water Improvement District
and incorporate the management of the production and delivery systems within OV #1 into
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the new Utility Department if the Task Force established to study the issue determines that it
would be in the best interests of the Town and OV#1 customers to manage that system.
• Tucson Water system within Oro Valley: The Commission recommends that the Town
Council pursue an analysis of the acquisition of the delivery and production system currently
serving residents of the Town who are customers of Tucson Water.
The Oro Valley Water Utility Commission is proud to serve the Council and customers of the
Town of Oro Valley. We are pleased to present our Annual Report to the Town Council for
consideration. While much has been accomplished in the past year, the Commission looks
forward to direction from Council regarding those items mentioned in the Executive Summary
and detailed in the Report. We thank the Council for their consideration, direction and guidance.
TOWN OF ORO VALLEY
WATER UTILITY COMMISSION
ANNUAL REPORT
PREFERRED SCENARIO
F
The Commission has arrived at a recommendation that adheres to the sound financial criteria
described in detail below and incorporates the elements of the other recommendations detailed
in this report.
The Commission and staff performed extensive analysis of numerous scenarios prepared by a
rate consultant at their direction. To enable the Commission to more fully understand the long
term effect of known future variables that impact the utility's financial resources, projections
for revenue, 0 & M, capital expenditures and debt service have been forecast for a period of
J ten years However, for ease in evaluating the data, only five years have been presented in this
report. Examples of major future revenues and expenses having a long term impact are: costs
rl incurred with membership in the Central Arizona Groundwater Replenishment District; lost
l J revenue from the removal of golf courses from groundwater; costs for the necessary capital
improvements to the water system; growth factors; expenses and revenues associated with the
j management of Oro Valley Improvement District #1 (OV#1); and the acquisition debt service
-1 schedule.
The Commission developed a set of parameters for the rate consultant to use in developing
the preferred scenario. The parameters used for the preferred scenario are as follows:
➢ Revenue increases are proposed only when necessary.
` ➢ In addition to the major items identified in the paragraph above, projected
expenditures were adjusted for inflation, additional personnel, O&M related to new
(I customers, and non -growth related capital.
➢ Financial criteria must be met, setting the foundation for sound fiscal operation.
i ➢ No new debt permitted for capital projects. Construct on a "pay as you go" basis.
V➢ Golf courses are expected to be removed from groundwater over a period of years
beginning in January 2001.
(' ➢ Revenue projections include a residential customer growth factor of 780 in FY 98/99
and 675 connections per year thereafter as a conservative estimate developed from a
recent survey as well as historical data.
➢ Connection fees are proposed to be increased to meet the financial requirements of
L growth -related capital improvements. The recommended master planning report will
substantiate the increased value of the connection fee.
➢ Revenues and expenses related to incorporating the management of the Oro Valley
Water Improvement District #1 (OV#1) into the Oro Valley Water Utility have been
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included in the projections beginning July 1, 1999.
With the preferred scenario, the revenue increases occur in fiscal years 1998/99, 1999/00 and
2000/01. There are no increases projected for fiscal years 2001/02 and 2002/03. These
increases allow the utility to anticipate the major future revenues and expenditures as
described at the beginning of this section, including the loss of revenue when the golf courses
are phased off of groundwater. The following table will indicate the amount of additional
revenue created from the three proposed increases:
l
FY 1998/99
1 FY 1999/00
FY 2000/01
Additional
Revenue
$234,766
$267,769 J
$187,385
Fluctuation of projected revenues is a result of the addition of a new golf course customer in FY
1999/00 and the removal of two golf courses from groundwater in FY 2000/01.
The projected Income Statement, Debt Service Statement and Cash Flow Statement for the
preferred scenario can be found in Appendix A. The input data for the Projected Income
Statement assumes that personnel costs will increase 5% annually with operations and
maintenance costs increasing by an inflationary 2.3% annually with additional allowances for
power costs relating to the addition of new plant requiring power. Depreciation increases with
[ J the new plant that is installed each year. CAP and recharge costs increase dramatically;
however, the costs are established by State agencies over which the Town has no control.
r Interest on the acquisition debt will decrease according to the bond repayment schedule. Interest
and principal will increase over the 5 year period.
Under this preferred scenario, retained earnings maintain a positive value and the net income of
(, the utility does not reflect a loss for more than two consecutive years. The net revenues provide
debt service coverage in excess of 1.25 times the annual debt service as required by the bond
covenants and depreciation is fully recovered by the rates. The total cash reserves, including
connection fees, are maintained in excess of 15% of the expected cash outlays.
FINANCIAL CRITERIA
Utility staff consulted with the Finance Director, David Andrews, to obtain assistance with
identifying essential financial criteria to use in guiding the operations of the water utility and in
developing the preferred scenario. The following criteria were developed with sound business
practices in mind:
➢ Retained earnings shall never become negative. This allows for full cost recovery,
ensures that the utility's assets always exceed its liabilities and lends itself to "pay as you
go" capital expenditures. Therefore the utility may avoid incurring new debt and related
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interest expenses. However, should the utility find that additional borrowing is
necessary, positive retained earnings will allow that possibility, whereas, negative
retained earnings may hinder the borrowing process.
➢ The utility shall not operate at a net loss on the income statement for more than two
consecutive years. Net income is a factor in the debt service coverage for which the
utility must adhere to specific debt service requirements.
➢ Cash flows should always be sufficient such that the utility can, at a minimum, pay
personnel expenses, O&M expenses and pay any principal and interest related to debt
service requirements.
➢ Cash reserves that are available for operations shall not normally become less than 15%
of the expected cash outlays, excluding capital. Cash reserves may fall below this
threshold, but not for more than two consecutive years to enable the utility to meet
unforeseen circumstances that may arise.
➢ Net revenues should provide debt service coverage a minimum of 1.25 times the annual
debt service for any given year, in accordance with the compliance requirement in the
existing bond covenants.
➢ Recover 100% of depreciation through rates each year, with verification of the
appropriate plant values and plant life to be performed every five years. This enables the
utility to replace plant that has exhausted its useful life.
➢ In the case of unforeseen circumstances, every effort shall be made to avoid borrowing
funds. Instead, deferment of other expenses and use of cash reserves should first be
explored before consideration of incurring debt.
The criteria discussed above were used in developing the recommendations of the Commission
included in this report.
DEPARTMENTAL STRUCTURE
During the development of the FY 1997/98 budget for the utility, the Council took action to
consolidate the operating budgets of the two enterprise funds into one enterprise fund. This
action followed a recommendation included in the Commission's 1997 Annual Report. This
year, the Commission recommends that the Council consider another organizational change
regarding the water utility — establishing the utility as a separate department within the Town's
departmental structure with a department head appointed by, and reporting to, the Town
Manager. The proposed organizational chart may be found in Appendix B.
Additionally, the recommendations presented in this report lend support to the need for a
L' modification to the management structure of the water utility. Focused leadership on strategic
issues such as appropriate business principles, capital improvements for plant replacement and
expansion and master planning are all essential to the long-range welfare of the system.
Alternative water resource efforts are ongoing and more importantly, gaining momentum.
Tucson reclaimed water, CAP utilization, regional planning, obtaining of outside funding are all
critical to the future of Oro Valley's protection of its groundwater resources and compliance
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momentum. Tucson reclaimed water, CAP utilization, regional planning, obtaining of outside
funding are all critical to the future of Oro Valley's protection of its groundwater resources and
compliance with regulatory obligations.
If the Town is to fulfill its commitment to its customers to run the utility as a business and
operate the utility in the best interests of the rate payers, steps must be taken to provide the
adequate resources to staff. There are three new positions directly associated with the
n Commission's recommendation to establish a separate utility department. One position is the
l Utility Director to provide the strategic leadership as the department head. The departmental
restructure is designed with the expectation that the Utility Director will assume the water
related duties of the Town Engineer as well as those water related functions performed by the
former Government Relations Administrator. The other two positions are both clerical support
staff to management. These three positions are estimated to have a cost directly associated with
ff� the reorganization proposal in the amount of approximately $101,000.
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The current budget request for FY 98/99 submitted by the Town Engineer/Utility Director
( matches the details included in this report. Those details include other personnel changes
It unrelated to the departmental separation proposal totaling approximately $68,000.
The table below indicates the change in personnel costs associated with the proposed
departmental separation and other costs independent of the departmental separation.
FY 1997/98
FY 1998/99
Total
Change in
Change in
Budgeted
Proposed
Change in
Costs
Costs
Personnel
Budget
Budget
Related
Unrelated
Costs
Personnel
Costs
to new
to new
Costs
Department
Department
$565,614
1 $734,965
1 $169,351
$101,000
$68,351
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Other changes relate to the increased work load of staff, primarily associated with the aggressive
CIP currently underway. The initial operations and maintenance budget for Outside
Professional Services was reduced appropriately in anticipation of implementation of the Project
Manager position. Outside engineering services will still be required, but some of the tasks
i could be performed with appropriate utility staff. Additionally, there continues to be a need for
i_j staff to provide required and essential services that are either not being done at all or demand on
our human resources is growing in step with the growth and expansion of the system over the
last few years. Other minor changes relate to the reporting structure of existing utility staff.
The following table provides employee to customer ratio comparisons with other cities, towns
and water utilities within the State of Arizona. As shown in the table, Oro Valley Water Utility
currently has 1 employee for every 791 customers. When fully staffed at the end of the next
year, the proposed departmental structure would provide 1 employee for every 593 customers.
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This ratio will continue to increase as new customers are added to the system. The average ratio
n for those entities surveyed is 1 employee for every 536 customers.
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Municipality or
Water Utility
Number of
Employees
Number of
Customers
Employee To
Customer Ratio
Cave Creek, City of
8
1,460
1 : 183
Marana Water
5
1,031
1 : 206
Metro Water Dist.
43
14,500
1 : 337
Douglas, City of
13
5,800
1 : 446
Tucson, City of
442
220,000
1 : 498
Bella Vista Water
12
6,000
1 : 500
Oro Valley
Proposed @ 4-1-99
20
119850
1:593
Kingman, City of
21
13,000
1 : 619
Lake Havasu City
30
18,697
1 : 623
Prescott, City of
23
15,000
1 : 652
Avondale, City of
10
7,500
1 : 750
Oro Valley
Current Q 4-1-98
15
11,070
1: 791
Green Valley
4
3,325
1 : 831
ALTERNATIVE WATER RESOURCES
The Town of Oro Valley and its neighboring Southern Arizona jurisdictions have historically
relied on pumping groundwater as the sole supply of water for all uses. The Arizona
l Groundwater Management Act of 1980 requires that all water users participate in Arizona
Department of Water Resources (ADWR) Management Plans to annually replace, or
(' compensate for, groundwater pumping through the use of alternative water sources such as CAP
l and reclaimed water. The goals of the ADWR Management Plans require that the groundwater
tables be stabilized by recharging an amount of water equal to the amount that is pumped.
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For water users in areas where the groundwater supply is inadequate, the financial impacts are
immediate and sometimes severe depending on the availability of and proximity to alternative
J water sources. In other areas, like Oro Valley which is located over the Canada Del Oro Wash
water basin containing three to four million acre feet of groundwater, uses of alternative water
sources can be phased in over time according to ADWR plans and rules.
Progress has continued over the last year in implementing the recommendations of the
Commission included in the 1997 Annual Report. Staff has been involved in activities related to
the completion of the Northwest Replenishment Program, the initiation of the Southern Arizona
Regional Water Management Plan, reclaimed water utilization, feasibility analysis of recharge in
the CDO basin utilizing outside funding and involvement in the activities of the Arizona Water
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Bank and CAGRD. This progress is encouraging and essential to the long term operation of the
municipal water utility.
As such, the Commission reiterates its 3 recommendations of 1997:
➢ The Town continue joint alternative water resource planning for permanent long term
water supplies with its neighboring jurisdictions of Marana, the Metropolitan Domestic
Water Improvement District (MDWID) and the City of Tucson, along with the US
Bureau of Reclamation (BuRec), ADWR and the Central Arizona Project (CAP) to take
advantage of economies of scale.
➢ The first phase for alternative water use consider use of reclaimed water on turf areas,
particularly golf courses, located within Oro Valley Water Utility service area. Use of
reclaimed water would lower the total consumption of groundwater and allow continued
residential consumption of groundwater within the ADWR "gallons per capita per day"
requirements.
' ➢ The Town purchase incentive priced CAP water in the coming fiscal years, while it is
available for long term storage through agreements with local agriculture, for use in
l l future years during drought conditions or vastly increasing prices.
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The Town Council has adopted an alternative water resources development impact fee to
explore alternative water resource options. The impact fee fund balance is estimated to be
$411,377 by June 30, 1999. A cash flow statement and income statement are included in
Appendix E. It is acknowledged by the Commission that many specifics related to revenue
sources and implementation of construction and operation of a transmission and distribution
system are currently unknown.
At this time, several potential revenue sources have been identified for consideration in
implementing the construction of infrastructure and the operation of the new alternate water
systems for reclaimed water, CAP water or both. These potential revenue sources include
impact fees, commodity rates charged to customers of the alternative water systems, grants, low
interest loans, rates or fees charged to customers of the domestic water system and the sale of
bonds. It will be necessary for the master planning report discussed below to incorporate the
revenue and operations issues into the analysis and recommendations.
MASTER PLANNING REPORTS
UBecause of the importance of both the groundwater system and alternative water systems, the
Commission recommends that the Town create two separate Master Planning Reports.
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L The Commission recommends that one consolidated Master Planning Report be prepared for
the entire domestic water service area to ensure the sound expansion of a consolidated system
L and substantiation of connection fee values. This consolidated report would combine and
replace the existing separate reports for the two former private utilities.
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The Commission recommends that a second Master Planning Report be prepared for
alternative water systems. There is currently no master plan in place for an alternative water
system, although the concepts of an alternative water system are touched on in the two existing
reports prepared for the private utilities. This report would bring together, in one document, the
various efforts already underway or accomplished that provide information on what can best be
implemented to address the needs of Oro Valley.
Strategic issues to be addressed in both should include, at a minimum, the consolidation of the
two former private utilities, operational issues, rate structures, infrastructure needs through
system build -out (including related costs and priorities), funding methodology when
t infrastructure may be needed before accumulated connection fees are sufficient to support
expenditures and growth projections.
ORO VALLEY WATER IMPROVEMENT DISTRICT #1
L i Currently, the Town Council serves as the Board of Directors for OV #1, an area of about 1000
customers in the older areas of Oro Valley along the CDO Wash and La Canada Drive. Some
(� years ago, the Board entered into an IGA with the MDWID for the management and operation
l J of OV #1. During the ensuing years, the Board has provided input to the Board of Directors of
the MDWID on such issues as the annual budget, capital improvements, rates and bond
l elections.
This arrangement was structured because the Town was not able to manage a water utility at the
f 1 time OV#1 was created. Since the Town is now in the water business and has some experience
u in managing a municipal water utility, it is now capable of assuming management of systems
which serve our residents but are operated by others. The Commission supports the objective of
directly serving the residents of Oro Valley with the Town's water utility.
The Town has already formed a Task Force to evaluate the incorporation of the OV#1 system
J into the Town's water utility. If the Task Force determines the best interests of the Town and
the OV#1 customers will be better served by incorporation of the system, the Commission
r , recommends that the Town Council provide proper notice to the Metropolitan Domestic Water
lul Improvement District in accordance with its IGA, and incorporate the management of the
production and delivery systems within OV #1 into the Town's water utility by July 1, 1999.
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TUCSON WATER SYSTEM WITHIN ORO VALLEY
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Currently, the City of Tucson Water Department has approximately 700 customers within the
Town limits, mostly along the Oracle corridor south of Linda Vista. The infrastructure includes
Lwater mains and wells serving mostly residential customers.
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With the acquisition of two private water utilities and the experience of managing these utilities,
the Town is now able to assume management of systems which serve our residents but are
operated by others. The Commission supports the objective of directly serving the residents of
Oro Valley with the Town's water utility.
J The Commission recommends that the Town Council begin the analysis necessary to evaluate
the feasibility of acquiring the assets of the Tucson Water Department in this service area. The
j� results of this study would lead to further recommendations by the Commission regarding
possible incorporation of the administration of the production and delivery systems into the
Town's water utility.
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The Commission and Town staff, in conjunction with a rate consultant, analyzed the revenue
l l and cash flow requirements necessary to operate and maintain the system, fund needed capital
l 1 improvements and make debt service payments on the municipal water system acquisition
bonds. Revenues and cash flows were projected through June 30, 1999 based on anticipated
(� growth in customer base of 780 residential customers and water consumption patterns similar
t J to FY 1997/98. Projected operating expenses were developed by the water utility staff.
l J Capital expenditures will be funded with depreciation and connection fees. With the
II connection fee revenues equaling expenditures and the recommended revenue increase, no
borrowing will be necessary to meet the financial needs of the utility.
The following table indicates the amount of water sales revenue that would be realized by a
5.50% revenue increase and increased service connections of 780:
FY 1997/98
Revenue Estimate
FY 1998/99
Revenue Estimate
Dollar
Increase
$4,117,700
$4,503,246
$385,546
No adjustments to other fees and service charges are recommended until further studies are
conducted to justify potential changes.
U O&M AND DEBT SERVICE REQUIREMENTS
f The following table is a comparative summary of expenses and debt service requirements for
LJ the utility enterprise fund. Budgeted amounts for FY 97/98 are compared to the proposed
budgeted amounts for FY 98/99:
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Oro Valley
Water Utility
FY 1997/98
Budgeted
FY 1998/99
Proposed Budget
Change
Personnel
$ 565,614
$ 734,965
$169,351
O & M
1,501,222
1,501,413
191
Deprec. & Amort.
192279141
1,2040224
(22,917)
Interest Payments
1,494,100
1,487,438
(6,662)
Principal Pymnts.
100,000
325,000
225,000
TOTALS
4,8889077
59253040
364,963
The above figures are based on the Town Engineer's initial budget estimate. Because of the
timing of this report and the Town's budgeting process, the Commission recognizes that both
the estimated actuals and the projected budget will need to be revised. The Commission
understands that staff and the Council will adjust expenses to fit the final estimate of revenues
based on the action of the Town Council on the rate structure for FY 1998/99. Revised
figures not available at the time of preparation of this report will be included in the Town
Manager's review of the initial budget request. They are subject to further change based on
final action by Town Council
Estimated FY 98/99 personnel costs would be increased to fund a 5% salary increase (COLA
& merit) as well as additional staff required with the departmental restructure which has been
previously detailed in this report. As mentioned above, these costs are subject to change as
the iterative process of budget development is completed.
11
� The request for increased operations and maintenance costs reflect, among other items,
increased expenses for electrical power for pumping, water recharge costs, well testing,
lJ regulatory expenses, equipment repair. The line item for Outside Professional Services has
l been reduced based on the departmental restructure as detailed earlier in this report. Some
costs are fixed by outside agencies with no control by the Town. Others may be subject to
change as the iterative process of budget development is completed.
Principal and interest payments reflect debt service pursuant to bond repayment schedules. No
r additional borrowing is anticipated under the preferred scenario.
5 YEAR CAPITAL IMPROVEMENTS PLAN (CIP)
The Oro Valley Water Utility Commission, in conjunction with staff and engineering
L consultants, undertook extensive analysis and obtained public input to develop a 5 Year
Capital Improvements Plan (CIP). Funding sources include water rates, remaining bond
proceeds of approximately $137,430 and connection fees. The following table summarizes
total amounts by year for the CIP:
-13-
FY 98/99
FY 99/00
FY 00/01
FY 01/02
FY 02/03
5 YEAR
TOTAL
CONN'N
20,000
983,000
995,000
675,000
815,000
31488,000
RATES
2,344,888
19065,000
640,000
695,000
990,000
59259,888
TOTAL
2,364,888
1,833,000
29085,000
1,475,000
990,000
8,747,888
The Utility CIP identified $8,747,888 of system improvements and equipment purchases
i through fiscal year 2002/03. Recommended projects to be funded are identified in the
utility's operating budgets for rate -funded improvements and the connections fees budget for
In connection fee funded improvements. Fiscal years 2000/01 through 2002/03 include plant
additions for the Oro Valley Water District #1 (OV #1) in the aggregate amount of $670,000.
Should Town Council choose not to assume operations and management of the OV #1, this
t) amount would be deleted from the CIP with the preparation f future CIP updates.
t) To ensure the adequacy of connection fee revenues, the Commission is recommending that
l J the substantiation of the connection fee be addressed in the consolidated Master Planning
l 1 Report. This report is discussed in greater detail in the section pertaining to Master Planning
Reports.
Detail to the water utility Capital Improvements Plan may be found in Appendix C.
RECOMMENDATION ON WATER RATES
The Water Utility Commission recommends adjusting both the base rate and the commodity
rate for all residential and commercial customers for FY 98/99. The manner in which this
(� revenue increase is proposed to be accomplished includes the following changes for all
residential and commercial customers:
➢ The change in the monthly base rate is recommended to increase between $0.10/month
and $148/month, depending on the meter size. Most residential customers have a
5/8"x3/4" meter. These customers would realize a $0.10/month change in their monthly
(; base rate under this proposal.
➢ The number of gallons included in the base rate is proposed to change to 1000 gallons
from 2000 gallons for all customers.
1 ➢ The commodity rate for all customers is recommended to increase $0.02/1000 gallons.
The recommendation yields a 5.50% overall revenue increase for FY 98/99. The proposed
f j revenue increase would allow the utility enterprise fund to meet sound financial criteria
L regarding the operations of a municipal utility while costs keep pace with inflation, growth
issues are not ignored, infrastructure is replaced as it is wom out and the level of service to the
customer improves.
The following table illustrates the proposed changes for a typical residential customer with a
-14-
r�
5/8"x3/4" meter. A table providing proposed rates for all meter sizes may be found in
Appendix D.
Customer
Class
Current
Base Rate
Proposed
Base Rate
Current
Commodity
Proposed
Commodity
City
6.75
7.90
1.71
1.73
Non -City
9.75
9.85
1.71
1.73
Appendix D also contains several spreadsheets that calculate the dollar increase and the
percentage increase that a customer would experience on a monthly bill under the proposed
rate change. There is a separate table for each meter size. Two tables are presented for the
most common meter size (5/8"0/4"), one for `city' customers and one for `non -city'
l customers. Monthly bill amounts are calculated in 1000 gallon and other various increments.
The above recommendations combine to result in changes to monthly billings between $0.10
and $150.49, depending on meter size and consumption. These correlate to percentage increases
between 1.0 % and 19.6 %, for the same meter size and consumption.
[� As indicated, the base rate for the "City" customers (primarily the Highlands Mobile Home
Park residents) would be increased from $6.75 to $7.90. The Town Council, at the time of
acquisition of the two private water utilities, agreed to equalize the "City" customer rates over
a period of four years to avoid rate shock with this increase being the second of four.
The average consumption for customers with a 5/8"x3/4" meter is approximately 10,000
gallons/month. For the `non -city' customer, the proposed rate structure would increase their
monthly bill by $1.99 (8.5 %).
LA A cost of service study ascertained that the residential class of customers is currently not
paying rates that would provide revenues sufficient to recover costs incurred to serve them.
The proposed increase is the first step in achieving a more uniform rate of return for all
LJ customer classes.
U For comparison purposes, the following table provides a calculation of a monthly bill amount
for a 5/8"x3/4" meter for several of the other water utilities surrounding the Oro Valley Water
Utility service area. Direct comparison of raw base rates and raw commodity rates is not
U effective because of the varying rate structures of each utility. The best way to compare is to
calculate for certain consumption levels.
I�
-15-
■1
n
ll
Water
Utility
Cost For
5,000 Gallons
Cost For
10,000 Gallons
Cost For
25,000 Gallons
Cost For
40,000 Gallons
Marana
18.00
22.95
38.00
53.00
Metro Water
15.77
25.02
58.87
105.37
Tucson Water
11.60
22.20
71.40
136.40
Oro Valley
Current
14.88
23.43
1 49.08
1 74.73
Oro Valley
Proposed
16.77
25.42
51.37
77.32
As previously described, the proposed revenue increase would allow the utility fund to meet
sound financial criteria regarding the operations of a municipal utility while costs keep pace with
inflation, growth issues are not ignored, infrastructure is replaced as it is worn out and the level
of service to the customer improves. This recommendation is a result of a Cost of Service
Study and Rate Analysis performed by Mr. Ron Kozoman, CPA.
" FINANCIAL SUMMARY
11 Retained earnings is the cumulative measure used by enterprise funds to determine the amount
of earnings remaining after expenses are deducted from revenues since the inception of
operations.. For the preferred scenario, the following table represents the estimated retained
[ J earnings at June 30, 1999:
Oro Valley
Water Utility
7/1/98
Retained Earnings
Net Income
(Loss)
6/30/99
Retained Earnings
Consolidated
$543,601
($236,750)
$306,851
L� The Oro Valley Water Utility is projected to have positive retained earnings of $306,851.
l Maintaining positive retained earnings is an important element of the financial criteria used to
guide staff in arriving at proposed revenue increases. In an effort to keep the proposed revenue
Uincrease as low as possible, the retained earnings decreased dramatically.
Cash flow is an analysis of all changes that effect the cash account. The following table reflects
the estimated cash balances at June 30, 1999:
-16-
7/1/98
Cash Balance
Change in
Cash Balance
6/30/99
Cash Balance
$3,457,388
($1,702,414)
$1,754,974
The cash balance is estimated to decrease to-$1,754,974 at the end of FY 1998/99. The
projected cash decrease may be attributed to cash payment of $2,344,888 for proposed capital
expenditures and an increase in the principal payment of $225,000 for the acquisition debt.
Appendix E contains estimated income and cash flow statements and a comparison of funding
requirements with projected revenues for the utility enterprise fund for FY 98/99. Estimated
income and cash flow statements for connection fees and alternative water fees for FY 98/99 are
also included in Appendix E.
ALTERNATIVE FINANCIAL PROJECTIONS
Appendices F and G represent alternative financial projections to allow for comparisons with
Commission and staff recommended preferred scenario. The financial criteria used for these
alternate scenarios could not be adhered to because of the nature of the projections.
1 Appendix F consists of data reflecting the same projected growth in new residential customers
per year as the preferred scenario, no rate increases and no borrowing to fund capital or other
expenses. However, hook-up fees have been increased to $2,000 per residential unit from an
f , average of $562.50. Golf courses would be removed from groundwater in various years
J beginning January 2001. Using this data, the projected debt service coverage falls below the
1.25 requirement in FY 1998/99. Projected net income denotes a negative amount of
$462,181 in FY 1998/99 with negative amounts increasing in future years. Likewise, the
[ projected cash balance indicates a declining trend. Capital expenditures would be funded with
depreciation and connection fees. This scenarios violates most all the financial criteria set
forth.
Appendix G consists of data reflecting the same projected growth, with annual revenue
I 'II increases of approximately 2.5 %. Connection fees have been increased to $2,000 per
l..J residential unit from an average of $562.50. Golf .courses would be removed from
groundwater in various years beginning January 2001. OV#1 customers and plant additions
I are included beginning in fiscal year 1999/00. Using this data, the projected debt service
l.� coverage remains above the required minimum of 1.25. Projected net income indicates a loss
for the first four year period; however, no borrowing would be necessary to meet financial
L' obligations. New plant would be funded with connection fees and depreciation. Retained
earnings run negative in FY 2000/01 and remain negative for the next two years. As a result,
this scenario does not meet the financial criteria previously described in this report.
-17-
The three scenarios presented and discussed at length in this report are summarized in the
table below.
l l COMPARISON OF FINANCIAL SCENARIO PARAMETERS
I
LJ
P,
I
I
L
i
L
Key Parameters
Preferred
Scenario
No Rate Increases
Scenario
2.5% Annual
Increase Scenario
Growth Factor
780
780
780
OV#1Included
Yes
Yes
Yes
Expenses Adjusted
for Inflation
Yes
Yes
Yes
Borrowing
No
No
No
Increase Impact Fee
Yes
Yes
Yes
Golf Courses Off
Groundwater
Yes
Yes
Yes
Meets Cash
Requirements
Yes
Yes
Yes
Positive Retained
Earnings (# of yrs)
5
1
2
Positive Net Income
(# of years)
4
0
1
Meet Debt Service
(# of years)
5
4
5
The Commission presents this second annual report for the review and consideration of Council.
The Commission would be glad to discuss this report in greater detail at a joint study session or
other appropriate forum. Please advise if such a discussion is desired.
The Oro Valley Water Commission is proud to serve the Town of Oro Valley and the customers
of its water utility. Much has been accomplished in the second full year of operation. The
Commission looks forward to continued direction from Council, especially on those issues
discussed in this report.
The Commission extends their appreciation to the Council for its consideration, direction and
guidance.
NVE
APPENDIX A
PREFERRED FINANCIAL SCENARIO
THE FOLLOWING ARE THE ASSUMPTIONS USED IN PREPARING THESE PROJECTIONS:
GROWTH IS BASED ON THE ADDITION OF 780 RESIDENTIAL CUSTOMERS IN FY 1998/99 AND 675
NEW RESIDENTIAL CUSTOMERS PER YEAR THEREAFTER.
THE OV#1 CUSTOMER BASE (1,000) HAS BEEN ADDED IN FY 1999/00 WITH THE ASSUMPTION
THAT THE TOWN WOULD ACQUIRE THE SYSTEM.
PLANT ADDITIONS FOR THE OV#1 SYSTEM ARE INCLUDED IN THE CIP SCHEDULE BEGINNING IN
FY 2000/01.
CONNECTION FEES HAVE BEEN INCREASED TO $2,000 PER RESIDENTIAL UNIT BEGINNING IN FY
1999/00 AND ARE APPLICABLE TO ONLY 80% OF NEW CONNECTIONS TO ALLOW FOR
EXEMPTIONS AND PRE -PAYMENTS.
GOLF COURSES WILL BE REMOVED FROM GROUNDWATER IN VARIOUS YEARS BEGINNING IN
JANUARY OF FY 2000/01.
RATE INCREASES ARE EFFECTIVE AT THE BEGINNING OF EACH APPLICABLE FISCAL YEAR.
NO BORROWING IS REQUIRED TO MEET FINANCIAL OBLIGATIONS.
PERSONNEL COSTS INCREASE 5% ANNUALLY FOR COLA AND MERIT.
�J OPERATIONS AND MAINTENANCE COSTS INCREASE 2.3% ANNUALLY FOR INFLATION.
f 1 DEBT SERVICE DOES NOT FALL BELOW THE REQUIRED 1.25:1 RATIO.
(l THE UTILITY DOES NOT RUN AT A LOSS FOR MORE THAN 2 CONSECUTIVE YEARS.
U THE MINIMUM CASH BALANCES MEET OR EXCEED 15% OF CASH OUTLAYS EXCLUDING CAPITAL.
1 RETAINED EARNINGS MAINTAIN A POSITIVE BALANCE.
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APPENDIX B
WATER UTILITY DEPARTMENT
proposed organizational structure
draft of 4.27.98
shaded boxes represent new positions related to the reorganiztion
UTILITY DIRECTOR
ADMINISTRATIVE III RECORDS CLERK
SECRETARY m
CUSTOMER SERVICE
SUPERVISOR
CUSTOMER SERVICE
REPRESENTATIVE
CUSTOMER SERVICE
REPRESENTATIVE
CLERK RECEPTION
UTILITY ADMINISTRATOR
CIVIL ENIGINEERIPROJ. MGR. I I OPERATIONS SUPERVISOR -
PROJECT COORDINATOR
UTILITY SERVICE
WORKER III
UTILITY SERVICE
WORKER II
UTILITY SERVICE
WORKER II
UTILITY SERVICE
WORKER II
UTILITY SERVICE
WORKER II
UTILITY SERVICE
WORKER II
UTILITY SERVICE
WORKER I
UTILITY SERVICE
WORKER
UTILITY SERVICE
WORKER
APPENDIX C
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APPENDIX D
PROPOSED RATE SCHEDULE
NON -CITY CUSTOMERS
METER
SIZE
CURRENT
BASE RATE
PROPOSED
BASE RATE
PROPOSED
INCREASE
CURRENT
COMMODITY
PER 1.000 GALS.
PROPOSED
COMMODITY
PER 1,000 GALS.
PROPOSED
INCREASE
PER 1,000 GALS.
5/8 X 3/4
9.75
9.85
0.10
1.71
1.73
0.02
1
24.38
24.70
0.32
1.71
1.73
0.02
1.5
48.75
49.40
0.65
1.71
1.73
0.02
2
78.00
79.00
1.00
1.71
1.73
0.02
3
156.00
158.00
2.00
1.71
1.73
0.02
4
243.75.
250.00
6.25
1.71
1.73
0.02
6
487.50
500.00
12.50
1.71
1.73
0.02
8
702.00
850.00
148.00
1.71
1.73
0.02
THE CURRENT BASE RATE INCLUDES 2,000 GALLONS OF WATER
THE PROPOSED BASE RATE INCLUDES 1,000 GALLONS OF WATER
PROPOSED RATE SCHEDULE
"CITY" CUSTOMERS
METER
SIZE
CURRENT
BASE RATE
PROPOSED
BASE RATE
PROPOSED
INCREASE
CURRENT
COMMODITY
PER 1,000 GALS.
PROPOSED
COMMODITY
PER 1,000 GALS.
PROPOSED
INCREASE
PER 1,000 GALS.
5/8 X 3/4
6.75
7.90
1.15
1.71
1.73
0.02
1
16.86
19.70
2.84
1,71
1.73
0.02
1.5
33.71
39.95
6.24
1.71
1.73
0.02
2
53.93
63.00
9.07
1.71
1.73
0.02
3
107.85
127.80
19.95
1.71
1.73
0.02
4
168.53
200.74
32.21
1.71
1.73
0.02
6
337.05
401.48
64.43
1.71
1.73
0.02
8
N/A
N/A
N/A
1.71
1.73
0.02
THE CURRENT BASE RATE INCLUDES 2,000 GALLONS OF WATER
THE PROPOSED BASE RATE INCLUDES 1,000 GALLONS OF WATER
TABLE FOR MONTHLY CHARGES AND PERCENT INCREASE COMPARISON
FOR NON -CITY CUSTOMERS WITH A 518 X 314" METER
GALLONS
USED
IN 1 MONTH
MONTHLY
BILL AT THE
CURRENT
RATE
MONTHLY
BILL AT THE
PROPOSED
RATE
AMOUNT OF
INCREASE
PER MONTH
PERCENT OF
INCREASE
PERCENT
OF USERS
0
$ 9.75
$ 9.85
$ 0.10
1.0
1
1,000
9.75
9.86
0.10
1.0
4
2,000
9.75
11.58
1.83
18.3
4
3,000
11.46
13.31
1.85
16.1
6
4,000
13.17
15.04
1.87
14.2
7
5,000
14.88
16.77
1.89
12.7
9
6,000
16.59
18.50
1.91
11.5
9
7,000
18.30
20.23
1.93
10.5
9
8,000
20.01
21.96
1.95
9.7
8
9,000
21.72
23.69
1.97
9.1
6
10,000
23.43
25.42
1.99
8.5
6
11,000
25A4
27.15
2.01
8.0
5
12,000
26.85
28.88
2.03
7.6
4
13,000
28.56
30.61
2.05
7.2
4
14,000
30.27
32.34
2.07
6.8
3
15,000
31.98
34.07
2.09
6.5
2
33.69
35.80
2.11
6.3
2
35.40
37.53
2.13
6.0
2
37.11
39.26
2.15
5.8
2
R22,00000
38.82
40.99
2.17
5.6
1
40.53
42.72
2.19
5.4
1
42.24
44.45
2.21
5.2
1
43.95
46.18
2.23
5.1
1
23,000
45.66
47.91
2.25
4.9
1
24,000
47.37
49.64
2.27
4.8
1
25,000
49.08
51.37
2.29
4.7
<1
26,000
50.79
53.10
2.31
4.5
<1
27,000
52.50
54.83
2.33
4.4
<1
28,000
54.21
56.56
2.35
4.3
<1
29,000
55.92
58.29
2.37
4.2
<1
30,000
57.63
60.02
2.39
4.1
<1
31,000
59.34
61.75
2.41
4.1
<1
32,000
61.05
63.48
2.43
4.0
<1
33,000
62.76
65.21
2.45
3.9
<1
34,000
64.47
66.94
2.47
3.8
<1
35,000
66.18
68.67
2.49
3.8
<1
36,000
67.89
70.40
2.51
3.7
<1
37,000
69.60
72.13
2.53
3.6
<1
38,000
71.31
73.86
2.55
3.6
<1
39,000
73.02
75.59
2.57
3.511
<1
40,000
74.731
77.321
2.591
3.51
<1
THE "PERCENT OF USERS" COLUMN REPRESENTS THE PERCENTAGE OF CUSTOMERS
WHO RECEIVED A MONTHLY BILL FOR THAT AMOUNT WHEN COMPARED TO THE OTHER
CUSTOMERS WITH THE SAME METER SIZE DURING A 12 MONTH PERIOD ENDING NOV. 97.
TABLE FOR MONTHLY CHARGES AND PERCENT INCREASE COMPARISON
FOR CITY CUSTOMERS WITH A 518 X 3/4" METER
GALLONS
USED
IN 1 MONTH
MONTHLY
BILL AT THE
CURRENT
RATE
MONTHLY
BILL AT THE
PROPOSED
RATE
AMOUNT OF
INCREASE
PER MONTH
PERCENT OF
INCREASE
0
$ 6.75
$ 7.90
$ 1.15
17.0
1,000
6.75
7.90
1.15
17.0
2,000
6.75
9.63
2.88
42.7
3,000
8.46
11.36
2.90
34.3
4,000
10.17
13.09
2.92
28.7
6,000
11.88
14.82
2.94
24.7
6,000
13.59
16.65
2.96
21.8
7,000
15.30
18.28
2.98
19.5
8,000
17.01
20.01
3.00
17.6
9,000
18.72
21.74
3.02
16.1
10,000
20.43
23.47
3.04
14.9
25,000
46.08
49.42
3.34
7.2
40,000
71.73
75.37
3.64
5.1
TABLE FOR MONTHLY CHARGES AND PERCENT INCREASE COMPARISON
FOR NON -CITY CUSTOMERS WITH A I"METER
GALLONS
USED
IN MONTH
MONTHLY
BILL AT THE
CURRENT
RATE
MONTHLY
BILL AT THE
PROPOSED
RATE
AMOUNT OF
INCREASE
PER MONTH
PERCENT OF
INCREASE
0
$ 24.38
$ 24.70
$ 0.32
1.3
5,000
29.51
31.62
2.11
7.2
11,000
38.06
40.27
2.21
5.8
25,000
63.71
66.221
2.51
3.9
40,000
89.36
92.17
1 2.811
3.1
TABLE FOR MONTHLY CHARGES AND PERCENT INCREASE COMPARISON
FOR NON -CITY CUSTOMERS WITH A 1 1/2" METER
GALLONS
USED
IN MONTH
MONTHLY
BILL AT THE
CURRENT
RATE
MONTHLY
BILL AT THE
PROPOSED
RATE
AMOUNT OF
INCREASE
PER MONTH
PERCENT OF
INCREASE
0
$ 48.75
$ 49.40
$ 0.65
1.3
5,000
53.88
56.32
2.44
4.5
10,000
62.43
64.97
2.54
4.1
25,000
88.08
90.921
2.841
3.2
40,000
113.73
116.871
3.141
2.8
TABLE FOR MONTHLY CHARGES AND PERCENT INCREASE COMPARISON
FOR NON -CITY CUSTOMERS WITH A 2" METER
GALLONS
USED
IN 1 MONTH
MONTHLY
BILL AT THE
CURRENT
RATE
MONTHLY
BILL AT THE
PROPOSED
RATE
AMOUNT OF
INCREASE
PER MONTH
PERCENT OF
INCREASE
0
$ 78.00
$ 79.00
$ 1.00
1.3
5,000
83.13
85.92
2.79
3.4
10,000
91.68
94.57
2.89
3.2
25,000
117.33
120.621
3.191
2.7
40,000
142.98
1 146.471
3.491
2.4
TABLE FOR MONTHLY CHARGES AND PERCENT INCREASE COMPARISON
FOR NON -CITY CUSTOMERS WITH A 3" METER
GALLONS
USED
IN 1 MONTH
MONTHLY
BILL AT THE
CURRENT
RATE
MONTHLY
BILL AT THE
PROPOSED
RATE
AMOUNT OF
INCREASE
PER MONTH
PERCENT OF
INCREASE
0
$ 156.00
$ 158.00
$ 2.00
1.3
5,000
161.13
164.92
3.79
2.4
10,000
169.68
173.57
3.89
2.3
25,000
195.33
199.52
4.19
2.1
40,000
220.98
1 225.471
4.491
2.0
TABLE FOR MONTHLY CHARGES AND PERCENT INCREASE COMPARISON
FOR NON -CITY CUSTOMERS WITH A 4" METER
GALLONS
USED
IN MONTH
MONTHLY
BILL AT THE
CURRENT
RATE
MONTHLY
BILL AT THE
PROPOSED
RATE
AMOUNT OF
INCREASE
PER MONTH
PERCENT OF
INCREASE
0
$ 243.75
$ 250.00
$ 6.25
2.6
5,000
248.88
256.92
8.04
3.2
10,000
257.43
265.57
8.14
3.2
25,000
283,08
291.521
8.441
3.0
40,000
308.73
1 317.471
8.741
2.8
TABLE FOR MONTHLY CHARGES AND PERCENT INCREASE COMPARISON
FOR NON -CITY CUSTOMERS WITH A 6" METER
GALLONS
USED
IN MONTH
MONTHLY
BILL AT THE
CURRENT
RATE
MONTHLY
BILL AT THE
PROPOSED
RATE
AMOUNT OF
INCREASE
PER MONTH
PERCENT OF
INCREASE
0
$ 487.50
$ 500.00
$ 12.50
2.6
5,000
492.63
506.92
14.29
2.9
10,000
501.18
515.57
14.39
2.9
25,000
526.83
541.52
14.69
2.8
40,000
1 552.48
1 567.471
14.991
2.7
TABLE FOR MONTHLY CHARGES AND PERCENT INCREASE COMPARISON
FOR NON -CITY CUSTOMERS WITH A 8" METER
GALLONS
USED
IN MONTH
MONTHLY
BILL AT THE
CURRENT
RATE
MONTHLY
BILL AT THE
PROPOSED
RATE
AMOUNT OF
INCREASE
PER MONTH
PERCENT OF
INCREASE
0
$ 702.00
$ 850.00
$ 148.00
21.1
5,000
707.13
856.92
149.79
21.2
10,000
716.68
865.67
149.89
20.9
25,000
741.33
891.52
160.191
20.3
40,000
766.98
1 917.471
150.49
19.6
APPENDIX E
ORO VALLEY WATER ENTERPRISE FUND
ESTIMATED INCOME STATEMENT
Budget
FY 1997/98
Budget
Estimated
Actuals
FY 1997/98
Request
FY 1998/99
OPERATING REVENUES:
Water Sales:
Unmetered/Wholesale
$".
94,679
$
34,588
$
37,708
Residential
2,577,628
2,615,563
2,865,652
Commercial
218,914
228,944
249,589
Irrigation
326,594
315,828
344,308
Turf Related
824,851
804,187
876,705
Construction
37,035
118,590
129,284
Subtotal Water Sales
$
4,079,701
$
4,117,700
$
4,503,246
Other Revenue:
Miscellaneous Service
$
85,900
$
68,500
$
78,000
Meter Income
58,500
70,000
78,000
New Service Establsihment Fees
Reconnect Fees
Miscellaneous
Subtotal Other Revenue
$
144,400
$
138,500
$
156,000
Total Operating Revenues
$
4,224,101
$
4,256,200
$
4,659,246
OPERATING EXPENSES:
Personnel
$
565,614
$
498,121
$
734,965
Operations & Maintenance
1,380,807
1,350,492
1,501,413
Depreciation
1,182, 566
1,053,095
1,159,649
Amortization
44,575
44,575
44,575
Total Operating Expenses
$
3,173,562
$
2,946,283
$
3,440,602
Operating Income
$
1,050,539
$
1,309,917
$
1,218,644
NON -OPERATING REVENUES (EXPENSES):
Interest Revenue
$
90,000
$
250,000
$
32,044
Interest Expense
(1,494,100)
(1,494,100)
(1,487,438)
Total Non -Operating Revenues (Expenses)
$
(1,404,100)
$
(1,244,100)
$
(1,455,394)
Net Income (Loss)
$
(353,561)
$
65,817
$
(236,750)
Retained Earnings, beginning of year
$
477,784
$
543,601
Retained Earnings, end of year
$
543,601
$
306,851
ORO VALLEY WATER ENTERPRISE FUND
ESTIMATED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH:
Estimated
Actuals
FY 1997/98
Request
FY 1998/99
Cash flows from operating activities:
Cash received from water revenues
$ "
4,117,700
$
4,503,246
Cash received from other revenues
138,500
156,000
Cash payments for operating expenses
(1,848,613)
(2,236,378)
Net cash provided(used) by operating activity
$
2,407,587
$
2,422,868
Cash flows from capital & financing activities:
Improvements
$
(1,012,527)
$
(1,942,088)
Machinery & Equipment
(75,175)
(250,800)
Vehicles
(129,000)
(152,000)
Interest expense
(1,494,100)
(1,487,438)
Principal payments
(100,000)
(325,000)
Net cash provided(used) from capital &
financing activities
$
(2,810,802)
$
(4,157,326)
Cash flows from investing activities:
Interest
$
250,000
$
32,044
Net cash provided by investing activities
$
250,000
$
32,044
Net increase (decrease) in cash
$
(153,215)
$
(1,702,414)
Cash at beginning of year
$
3,610,603
$
3,457,388
CASH A T END OF YEAR
$
3,457,388
$
1,754,974
ORO VALLEY WATER CONNECTION FEE FUND
ESTIMATED INCOME STATEMENT
Budget
FY 1997/98
Budget
Estimated
Actuals
FY 1997/98
Request
FY 1998/99
REVENUES:
Connection Fees
$
241,250
$
300,000
$
351,000
Total Revenues
$
241,250
$
300,000
$
351,000
EXPENSES:
Capital Improvements
$
785,600
$
798,128
$
20,000
Total Expenses
$
785,600
$
798,128
$
20,000
Surplus (Deficit)
$
(544,350)
$
(498,128)
$
331,000
NON -OPERATING REVENUES (EXPENSES):
Interest Revenue
$
$
$
-
Interest Expense
(30,670)
Total Non -operating Revenues (expenses)
$
$
$
(30,670)
Loan Proceeds From General Fund
$
699,850
$
557,628
$
-
Net Income (Loss)
$
155,500
$
59,500
$
300,330
Fund Balance, beginning of year
$
162,361
$
221,861
Fund Balance, end of year
$
221,861
$
522,191
ORO VALLEY WATER CONNECTION FEE FUND
ESTIMATED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH:
Estimated
Actuals
FY 1997/98
Request
FY 1998/99
Cash flows from operating activities:
Cash received from connection fees
$
300,000
$
351,000
Cash payments for operating expenses
0
0
Net cash provided(used) by operating activity
$
300,000
$
351,000
Cash Flows from capital & financing activities:
Improvements
$
(798,128)
$
(20,000)
Interest expense
(30,670)
Principal payments
-
(55,763)
Loan proceeds from General Fund
557,628
Net cash provided (used) from capital and
financing activities
$
(240,500)
$
(106,433)
Cash Flows from investing activities:
Interest Revenue
$
$
Net cash provided by investing activities
$
$
-
Net increase in cash
$
59,500
$
244,567
Cash at beginning of year
$
191,323
$
250,823
CASH AT END OF YEAR
$
250,823
$
495,390
ORO VALLEY WATER ALTERNATIVE WATER RESOURCE FUND
ESTIMATED INCOME STATEMENT
Budget
FY 1997/98
Budget
Estimated
Actuals
FY 1997/98
Request
FY 1998/99
REVENUES:
Impact Fees
$
175,500
$
280,000
$
234,000
Total Revenues
$
175,500
$
280,000
$
234,000
EXPENSES:
Operations & Maintenance
$
100.000
$
20,000
$
120,000
Capital Outlay
188,000
-
124,000
Total Expenses
$
288,000
$
20,000
$
244,000
Surplus (Deficit)
$
(112,500)
$
260,000
$
(10,000)
NON -OPERATING REVENUES (EXPENSES):
Interest Revenue
$
-
$
10,000
$
10,000
Interest Expense
-
-
-
Total Non -operating Revenues (expenses)
$
-
$
10,000
$
10,000
Net Income (Loss)
$
(112,500)
$
270,000
$
-
Fund Balance, beginning of year
$
141,377
$
411,377
Fund Balance, end of year
$
411,377
$
411,377
ORO VALLEY WATER ALTERNATIVE WATER RESOURCE FUND
ESTIMATED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH:
Estimated
Actuals
FY 1997/98
Request
FY 1998/99
Cash flows from operating activities:
Cash received from impact fees
$
280,000
$
234,000
Cash payments for operating expenses
(20.000)
(120,000)
Net cash provided(used) by operating activity
$
260,000
$
114,000
Cash Flows from capital & financing activities:
Improvements
$
-
$
(124.000)
Interest expense
-
Principal payments
-
Net cash provided (used) from capital and
financing activities
$
-
$
(124,000)
Cash flows from investing activities:
Interest Revenue
$
10,000
$
10,000
Net cash provided by investing activities
$
10,000
$
10,000
Net increase in cash
$
270,000
$
-
Cash at beginning of year
$
140.886
$
410,886
CASH AT END OF YEAR
$
410,886
$
410,886
APPENDIX F
f
I NO RATE INCREASE FINANCIAL SCENARIO
THE FOLLOWING ARE THE ASSUMPTIONS USED IN PREPARING THESE PROJECTIONS:
GROWTH IS BASED ON THE ADDITION OF 780 RESIDENTIAL CUSTOMERS IN FY 1998/99 AND 675
NEW RESIDENTIAL CUSTOMERS PER YEAR THEREAFTER.
TrIE OV# 1 CUSTOMER BASE HAS NOT BEEN INCLUDED.
` I PLANT ADDITIONS FOR THE OV# 1 SYSTEM ARE NOT INCLUDED IN THE C1P SCHEDULE.
CONNECTION FEES HAVE BEEN INCREASED TO $2,000 PER RESIDENTIAL UNIT BEGINNING IN FY
1999/00 AND ARE APPLICABLE TO ONLY 80% OF NEW CONNECTIONS TO ALLOW FOR
�nI EXEMTIONS AND PRE -PAYMENTS.
GOLF COURSES WILL BE REMOVED FROM GROUNDWATER IN VARIOUS YEARS BEGINNING IN
JANUARY OF FY 2000/01.
TrIERE ARE NO PROPOSED RATE INCREASES.
THERE IS NO PROPOSED BORROWING TO MEET FINANCIAL OBLIGATIONS.
PERSONNEL COSTS INCREASE 5% ANNUALLY FOR COLA AND MERIT.
OPERATIONS AND MAINTENANCE COSTS INCREASE 2.3% ANNUALLY FOR INFLATION.
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