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HomeMy WebLinkAboutWater Rates Analysis Report - 4/5/2006EYgR�� 9- o -� ,cOvLADED ,O'i o� Town of Oro Valley Water Utility Commission Water Rates Analysis Report April 5, 2006 TOWN OF ORO VALLEY WATER UTILITY COMMISSION WATER RATES ANALYSIS REPORT APRIL 5, 2006 ORO VALLEY TOWN COUNCIL Paul Loomis, Mayor Terry Parish, Vice Mayor Paula Abbott, Council Member K.C. Carter, Council Member Connie Culver, Council Member Helen Dankwerth, Council Member Barry Gillaspie, Council Member ORO VALLEY WATER UTILITY COMMISSION Michael Caporaso, Chair Gregg Forszt, Vice Chair Drue Hardy, Member Kelle Maslyn, Member Dave Powell, Member Winston Tustison, Member Harold Vaubel, Member TOWN STAFF Chuck Sweet, Town Manager David Andrews, Assistant Town Manager Philip C. Saletta, P.E., Water Utility Director Shirley Seng, Water Utility Administrator Stacey Lemos, Finance Director TABLE OF CONTENTS SECTION TITLE PAGE List of Acronyms i Index of Appendices Executive Summary 1 Introduction 3 Enterprise Fund 4 Alternative Water Resource Development Fund 7 Development Impact Fee Fund 9 Preferred Financial Scenario 10 Recommendation on Water Rates, Fees & Charges 12 Conclusion Appendices 14 LIST OF ACRONYMS LIST OF ACRONYMS USED IN THIS REPORT AF Acre Feet AWRD Alternative Water Resource Development AWWA American Water Works Association CAGRD Central Arizona Groundwater Replenishment District CAP Central Arizona Pro j ect CIP Capital Improvement Program COLA Cost Of Living Allowance CY Calendar Year DIF Development Impact Fee FTE Full Time Employee FY Fiscal Year GPCD Gallons Per Capita Per Day GPF Groundwater Preservation Fee LTS Long Term Storage Credits OVWID# 1 Oro Valley Water Improvement District # 1 INDEX OF APPENDICES APPENDIX A. Opinion on Rates Analysis Red Oak Consulting B. Assumptions C. Preferred Financial Scenario A Enterprise Fund Alternative Water Resource Development Fund Development Impact Fee Fund Summary of all Funds D. Rate Schedules & Tables for Bill Comparisons Potable Water Rates Reclaimed Water Rates Tables for Bill Comparisons by Meter Size E. Service Fees & Charges Backflow Permit Fees Hydrant Meter Relocation Fees New Construction Inspection Fees M TOWN OF ORO VALLEY WATER UTILITY COMMISSION WATER RATES ANALYSIS REPORT APRIL 5, 2006 EXECUTIVE SUMMARY The functions and duties of the Oro Valley Water Utility Commission include reviewing and developing recommendations for water revenue requirements, water rates and fee structures. The Commission annually evaluates staff recommendations based on a rates analysis to assure the recommendations meet Town policies and bond covenants. This year, the Utility has used the American Water Works Association (AWWA) Cash Needs Approach to financial analysis. The AWWA is the largest national organization that develops water and wastewater policies, specifications and rate setting guidelines accepted by both government -owned and private water and wastewater utilities worldwide. This Rates Analysis Report contains detailed information on the three funds that comprise the Oro Valley Water Utility: • Enterprise Fund • Alternative Water Resource Development Fund • Development Impact Fee Fund. Each fund is individually analyzed with regard to revenue and revenue requirements. The Preferred Financial Scenario includes five year projections for each fund. This allows the Utility to evaluate the impact of future costs and the revenue sources that will be required to meet those costs. Based on the data contained within the Preferred Financial Scenario, the Water Utility Commission has made recommendations on water rates, impact fees and other service fees that the Utility assesses for FY 2006-07. Those recommendations are as follows: • Increase the base rates and commodity rates by 5% for both the potable and reclaimed water rates. • Increase the Groundwater Preservation Fee by $0.04, from $0.21 to $0.25 per 1,000 gallons for both the potable and reclaimed water rates. • Establish a separate commodity rate for construction water usage at $4.76 per 1,000 gallons of water used. • Increase the Backflow Installation Permit Fee by $15.00, from $35.00 to $50.00. -1- • Increase the Construction Inspection Fees: $1,350 for 0-500 feet, $1.30 per foot thereafater. • Establish a "Time & Materials" rate for Hydrant Meter Relocation. • Perform an analysis on the Impact Fees charges by the Utility during 2006 The Utility employed Red Oak Consulting, a division of Malcolm Pirnie, Inc., to review this Rate Analysis and provide an opinion on the reasonableness and consistency of the assumptions contained within the analysis. They verified the calculations, tested the consistency of underlying assumptions, calculation methods and reviewed the consistency of the results with the Utility's current financial position and recent cash flow. Their professional opinion may be found in Appendix A. The Commission presents this Rates Analysis Report for the review and consideration of the Mayor and Council. The Commission is available to discuss this report in greater detail at a joint study session or other appropriate forum. The Oro Valley Water Utility Commission is proud to serve the Town of Oro Valley, it citizens and the customers of its water utility. The Commission extends their appreciation to the Mayor and Council for their consideration and guidance and looks forward to their continued direction. -2- TOWN OF ORO VALLEY WATER UTILITY COMMISSION WATER RATES ANALYSIS REPORT APRIL 5, 2006 INTRODUCTION The Oro Valley Water Utility was established as a self-supporting enterprise of the Town. The Utility is comprised of three separate funds, each being established for a specific purpose: • Enterprise Fund • Alternative Water Resource Development Fund • Development Impact Fee Fund. The Enterprise Fund is the operating fund for the Utility. Revenue for this fund includes water sales, interest income, service fees and miscellaneous charges. The expenditures managed from this fund include personnel, operations and maintenance for both potable and reclaimed water systems, capital costs for existing potable system improvements and related debt service. The Alternative Water Resource Development Fund was established in 1996 to account for and manage capital expenditures related to alternative water resources including reclaimed water and Central Arizona Project water. Expenditures include debt service for capital projects that were financed (reclaimed water system), acquisition of water rights required for growth and any related capital costs. Revenue for this fund is received from impact fees collected at the time water meters are purchased and from interest income. Additionally, the Groundwater Preservation Fees, which are collected through the Enterprise Fund, are contributed to the Alternative Water Resource Development Fund to assist with debt service. The Development Impact Fee Fund was established in 1996 to account for and manage capital expenditures related to expansion or growth -related potable water capital projects and related debt service. These projects include wells, pump stations, reservoirs and mains for the potable water system. Revenue for this fund is received from impact fees collected at the time water meters are purchased and from interest income. The revenue and expenditures of all three funds are combined primarily to determine if the Utility meets the debt service coverage requirement established in the Mayor and Council Water Policies and the 2003 Bond Covenants. Otherwise, each fund is independent with regard to revenue and expenses. The revenue from the individual funds may not be consolidated nor used for any purpose other than for which they were originally established. Each fund is addressed in more detail in the report. -3- ENTERPRISE FUND REVENUE The Enterprise Fund is projected to have a cash balance of $9.3 million at the beginning of FY 2006-07. In addition to this, it is projected that approximately $875,000 will be available for capital improvements from the Series 2003 Bonds. Enterprise funds may be used for operating costs including personnel, operations and maintenance, capital improvements for the existing potable water system and debt service. Water sales revenues are estimated to exceed the FY 2005-06 projections resulting from a decrease in normal winter rain. Revenue from other service fees and charges should meet the budgeted projections. Interest income is expected to exceed the budgeted projections by approximately $280,000. All Groundwater Preservation Fees collected will be transferred to the Alternative Water Resource Development (AWRD) Fund to help repay debt on the reclaimed water system and are not included in the revenue comparison. The following table provides the Utility's budgeted revenue compared to the estimated revenue for FY 2005-06: Revenue Source FY 2005-2006 Budget FY 2005-2006 Estimated Difference Water Sales $ 993079000 $ 994659300 $ 1589300 Service Fees/Charges $ 4259100 $ 4359800 $ 109700 Interest Income $ 2009000 $ 4809000 $ 2809000 Total $ 999329100 $1093819100 $ 4499000 Revenues were projected for FY 2006-07 based on anticipated annual growth in the customer base of 400 single family residential customers and water consumption patterns similar to calendar year (CY) 2005. The following table indicates the amount of water sales revenue that would be realized with no water rate increase: FY 2005-2006 Revenue Estimate FY 2006-2007 Revenue Projection Difference $994659300 $1090219478 $5569178 Under the existing rate structure, the projected revenue received from growth is estimated to be $70,000. The additional revenue that would be received with no rate increase is a result of reclaimed water sales to the golf courses owned by Vistoso Partners. While receiving potable water, the golf courses had a reduced water rate based on a 1996 agreement. That agreement was terminated upon the delivery of reclaimed water. The single family residential gallons per capita per day (GPCD) water use declined by 11 GPCD in 2005. This reduction in water use will have an impact on future water revenues. -4- Construction Water For the past several years, construction water demands have put significant stress on the potable water system. Construction water is typically obtained from fire hydrants and used for dust control and other construction related activities. A 3 -inch hydrant meter has the capacity to deliver 400 gallons of water per minute. When approximately 30 hydrant meters are being used by contractors on a daily basis, the potable water system has been significantly stressed trying to meet the residential demands during peak hours. The potable water system improvements related to growth are financed by impact fees collected when a water meter is purchased. Construction water meters are not purchased by contractors; they are essentially leased for the duration of their project. Thus, no impact fees are paid. Consideration needs to be given to the rate charged for construction water since existing rates only recover the actual water used and administrative costs without providing any funds that could be used for system improvements needed to meet seasonal demands created by the use of construction water. Hydrant Meter Relocation Subsequent to the events of 9/ 11, the Utility installed hydrant defenders on all of its fire hydrants. Hydrant defenders are locking mechanisms installed on fire hydrants that prevent tampering and water theft. Construction water meters are generally installed on fire hydrants and are used by contractors. Prior to the installation of hydrant defenders, the contractors were allowed to relocate water meters at their convenience. Now that the hydrants are locked, Utility personnel must relocate the meters for them. In order to recover the costs associated with this service, the Utility should establish a fee in an amount equal to the labor and material costs incurred. Backflow Permit and Construction Inspection Fees Review of service fees and charges indicate that some of the fees need to be increased to allow the Utility to recover the costs associated with providing the services. The Backflow Installation Permit Fee needs to be increased to recover rising costs associated with labor, materials, travel, postage and printed supplies. Additionally, the Construction Inspection Fee needs to be increased to recover rising labor and travel costs. REVENUE REQUIREMENTS Because of the timing of the preparation of this report relative to the Town's budgeting process, the Commission recognizes that both the projected revenues and the projected expenses may need to be revised. The amounts shown below and used in the financial analysis may differ slightly from those included in the Department Budget Request and the Manager's Budget Review because of the availability of more recent and reliable information. The Commission understands that Oro Valley Water Utility Staff, the Town Manager and the Mayor and Council will adjust expenses to fit the final estimate of revenues based on the action of Council on the rate structure for FY 2006-07. The following table is a comparative summary of operating expenses for the Water Utility Enterprise Fund. Budgeted amounts for FY 2005-06 are compared to the projected expenses for FY 2006-07 used in the financial analysis: -5- OVWU Expenses FY 2005-2006 Budget FY 2006-2007 Projections Change Increase(Decrease) Personnel $ 199029477 $ 291879600 $ 2859123 O & M $ 297439764 $ 390629600 $ 3189836 CAP Capital Costs $ 2889540 $ 1619900 ($ 1269640) CAP Recharge $ 1889944 $ 2059000 $ 169056 CAGRD $ 4729000 $ 4299500 ($ 429500) Capital Outla $ 596879805 $ 497869600 ($ 9019205) Interest Payments $ 199689789 $ 199109173 ($ 589616) Principal Payments $ 196429362 $ 196769880 $ 349518 Totals $1498949681 $1494209253 $ 4749428 Projected personnel costs include the addition of 4 full time employees (FTEs). Two of the proposed FTEs would be assigned to field operations, one FTE would provide conservation and/or technical assistance and one FTE would be assigned to the customer service division. Personnel costs also include annual merit and COLA increases. The Water Utility has not increased personnel since 2003 although it experienced growth of 1,428 new customers during this same time frame. The projected operations and maintenance costs include the O&M costs for both the potable water system and the reclaimed water system. Also included are costs to develop a comprehensive Water Resource Plan and a long range rates analysis to include an impact fee study. With the exception of extraordinary expenses, O&M costs were projected to have inflationary increases of 3 % annually. The projected decrease in Central Arizona Project (CAP) water capital charges are a result of a decreased cost per acre foot (AF) charged by CAP. Additionally, all costs associated with the reallocation of CAP water will be included in the AWRD Fund and will be discussed in that section of the report. The projected decrease in costs for the Central Arizona Groundwater Replenishment District (CAGRD) is a result of the Utility's plan to use Long Term Storage (LTS) credits to offset a portion of the costs charged by CAGRD for groundwater pumping. The credits have been acquired through an agreement with Kai Farms in which the Town sells them 2,500 AF per year of our CAP water allotment for irrigation. Kai's property has been approved as a Groundwater Savings Facility by the Arizona Department of Water Resources. Projected capital projects for existing system improvements in FY 2006-07 include a new well, chlorine generation system, design of a 2.2 million gallon reservoir, oversizing costs for another reservoir, upgrades to an existing booster station, completion of water main projects already in progress and design of water main replacement projects, fire hydrant replacements, machinery, equipment and vehicles. Projected principal and interest payments reflect debt service pursuant to repayment schedules for bonds related to acquisition of the Utility; assuming management of the OV WID# l ; the bond issue in 2001 for existing system improvements; re -financing the City of Tucson debt; and the 2003 bonds sold for existing potable water system capital improvements. ALTERNATIVE WATER RESOURCE DEVELOPMENT FUND REVENUE The Alternative Water Resource Development Fund (AWRD) is projected to have a cash balance of $1 million at the beginning of FY 2006-07. All proceeds from the Series 2003 Bonds were expended in FY 2005-06 for construction of the first phase of the reclaimed water system. Pursuant to Ordinance No. (0) 96-43, AWRD funds may be used for capital expenditures related to alternative water resources including reclaimed water and CAP water. The revenue sources for the AWRD Fund are from impact fees collected when a water meter is purchased and from interest earned on cash balances. The groundwater preservation fees collected through the Enterprise Fund are transferred to the AWRD Fund to help repay debt on the reclaimed water system. The following table provides the budgeted revenue compared to the estimated revenue for FY 2005-06: Revenue Source FY 2005-2006 Budget FY 2005-2006 Estimated Difference Increase(Decrease) Impact Fees $ 1329000 $ 2009000 $ 689000 GPF $ 6589062 $ 6659000 $ 69938 Interest Income $ 259000 $ 359000 $ 109000 Total $ 8159062 $ 8909000 $ 849938 Revenues were projected for FY 2006-07 based on anticipated annual growth in the customer base of 400 single family residential customers. The following table indicates the amount of impact fee revenue and groundwater preservation fees that would be realized with no rate or fee increases.- FY 2005-2006 Revenue Estimate FY 2006-2007 Revenue Projection Difference Increase(Decrease) $ 865,000 $ 807,100 ($ 579900) The decrease in projected revenue is a result of the Utility installing 17 meters larger than a single family residential meter (5/8 x 3/4") during FY 2005-06. When projecting impact fee revenue for the AWRD Fund, to be conservative, it is assumed all new connections are single family residential. The GPF is assumed to increase only by the -7- water usage of 400 new single family residences. This is the same assumption used for revenue projections in the Enterprise Fund. REVENUE REQUIREMENTS The AWRD Fund was allocated a portion of the Series 2003 Bond proceeds to finance construction for the first phase of the reclaimed water system. In order to expedite the design and construction of the second phase, it is proposed that the Enterprise Fund will advance the funds to the AWRD Fund in FY 2006-07. This will allow sufficient time to explore financing options during CY 2007. It is proposed that the second phase project will be financed in FY 2007-08. Upon receipt of the loan proceeds, the Enterprise Fund will be reimbursed the funds it advanced for construction and the AWRD Fund will repay the debt. Accurate accounting of this advance of funds will be performed to assure no commingling of these funds over the long term. The use of cash reserves will benefit the Utility in terms of deferring a bond issue for one year. It is also proposed that the acquisition of 3,557 AF of CAP water rights in FY 2007-08 will be done through the AWRD Fund. The on -going capital charges for this allotment will continue to be paid from this fund as well. The existing customers are paying for all capital costs related to the existing allotment of 6,748 AF of CAP water, thus new customers, through the new development process, will be paying for costs related to the additional 3,557 AF. The following table is a comparative summary of expenditures for the AWRD Fund. Budgeted amounts for FY 2005-06 are compared to the projected expenses for FY 2006- 07 used in the financial analysis: Expenditures FY 2005-2006 Budget FY 2006-2007 Projections Change Increase(Decrease) Professional Services S 429500 S 509000 $ 79500 Capital Im rovements $ 191209000 $ 594109000 $ 492909000 Debt Service S 5509242 $ 8789542 $ 3289300 Total $ 197129742 $ 693389542 $ 496259800 The professional services are expenses incurred for renewable water studies including the Lower Santa Cruz Managed Recharge Project, the CAP water pilot study for treatment techniques (slow sand filtration and reverse osmosis), and the U.S. Geological Survey study being conducted on recharge capabilities in the Big Wash and Canada Del Oro Wash. The capital improvements in FY 2005-06 represent completion of the first phase of the reclaimed water system and design of the second phase. The costs in FY 2006-07 represent the costs to construct the second phase of the reclaimed water system and to pay for the Town's share of the "in -line booster" that Tucson Water is constructing. The -8- funds to construct these two projects will be advanced to the AWRD Fund from the Enterprise Fund cash reserves. When these projects are financed, the loan proceeds will be used to repay the Enterprise Fund cash reserves and the AWRD Fund will repay the debt. The significant increase in debt service is because the Utility is not required to make a principal payment on the 2003 Bonds until FY 2006-07. The repayment schedule was provided by the bond underwriters. DEVELOPMENT IMPACT FEE FUND REVENUE The Development Impact Fee Fund (DIF) is projected to have a cash balance of $4.3 million at the beginning of FY 2006-07. The DIF Fund was allocated a portion of the Series 2003 Bond proceeds to finance construction of growth -related potable water system improvements and the refinancing of the Series 2000 Bond issue. Revisions to the capital improvement plan have left sufficient bond proceeds available to construct the needed improvements from FY 2006-07 through FY 2008-09. Improvements after this time will need to be financed. The revenue sources for the DIF Fund are from impact fees collected when a water meter is purchased and from interest earned on cash balances. The following table provides the budgeted revenue compared to the estimated revenue for FY 2005-06: Revenue Source FY 2005-2006 Budget FY 2005-2006 Estimated Difference Increase(Decrease) Impact Fees $ 9679560 $ 192929400 $ 3249840 Interest Income $ 259000 $ 509000 $ 259000 Total $ 9929560 $ 193429400 $ 3499840 Revenues were projected for FY 2006-07 based on anticipated annual growth in the customer base of 400 new service connections. The following table indicates the amount of impact fee revenue that would be realized with no fee increases: FY 2005-2006 Revenue Estimate FY 2006-2007 Revenue Projection Difference Increase(Decrease) $ 192929400 $ 9679560 ($ 2289840) The decrease in projected revenue is a result of the Utility actually installing more commercial meters with a high fire flow component in FY 2005-06 than has historically occurred. While revenue projections for the DIF Fund are based on the addition of 400 new service connections, it is assumed that some of the connections are for irrigation and commercial facilities that have a fire flow requirement. Because of the design of the development impact fees, the Utility uses historical data to assist with more realistic revenue projections. REVENUE REQUIREMENTS Growth -related potable water system improvements are managed through the DIF Fund. These improvements include new potable water reservoirs, pump stations, water mains and wells that are required to meet the demands of new customers. The following table is a comparative summary of expenditures for the DIF Fund. Budgeted amounts for FY 2005-06 are compared to the projected expenses for FY 2006-07 used in the financial analysis: Expenditures FY 2005-2006 Budget FY 2006-2007 Projections Change Increase(Decrease) Capital Improvements $ 197679000 $ 199009000 S 1339000 Debt Service S 6349194 S 6339794 (S 400) Total $ 294019194 $ 295339794 $ 1329600 The capital improvements for FY 2006-07 include a 500,000 gallon reservoir and the related water main. This reservoir will provide fire flow capacity and peak day demands for future customers in the Stone Canyon service area. The debt service payments are pursuant to the repayment schedule provided by the bond underwriters. PREFERRED FINANCIAL SCENARIO Prior to developing financial forecasts, financial considerations were evaluated relating to significant short and long term capital expenditures, the Utility's existing cash reserves, the existing outstanding debt and the related debt service payments. To arrive at a Preferred Financial Scenario, the goals of the Commission were to ensure that all existing rate setting policies were met, cash reserves were utilized to minimize future debt and proposed rate increases would not result in rate shock. The Commission's finance subcommittee and Utility Staff evaluated numerous financial scenarios prior to forwarding a recommendation to the Commission. With regard to the Preferred Financial Scenario, the following are some of the key assumptions used to develop the financial projections. The entire set of assumptions may be found in Appendix B. • The Utility will use cash reserves and remaining 2003 bond proceeds to fund capital improvements through FY 2008-09. -10- • The Enterprise Fund will advance funds from its cash reserves to the AWRD Fund to finance the design and construction of the second phase of the reclaimed water system in FY 2006-07. • The AWRD Fund will make a direct payment to the Enterprise Fund cash reserves when the reclaimed project is financed in CY 2007. • The E1 Conquistador Golf Courses (36 holes) will be removed from groundwater in July 2007. • Debt service for CAP water development is included in FY 2010-11. Annual debt service of $5 million is based on $70 million debt. • Increases in base rates and commodity rates for both potable and reclaimed water rates as follows: 5% in FY 2006-07, 6% in FY 2007-08 and 2008-09, 5% in FY 2009-10 and 2010- 11. • Groundwater Preservation Fees are increased by $0.04 per 1,000 gallons for both potable and reclaimed water rates. • Establish a commodity rate for construction water usage at $4.76 per 1,000 gallons. Analysis of the Preferred Financial Scenario indicates that the Enterprise Fund can successfully utilize cash reserves to finance the proposed capital improvements through FY 2008-09 thus deferring additional debt on the potable water system for three years. A long-term rates analysis will be performed to identify operating and maintenance costs that direct delivery of CAP water will have on ratepayers. To help offset larger rate increases in the future, the proposed annual increases will begin to rebuild cash reserves in later years as the development of CAP water nears. The financial projections detailed in the Preferred Financial Scenario indicate that the existing impact fees being charged to new development are not recovering the costs managed through the AWRD Fund and the DIF Fund. It is the Commission's recommendation that the Utility, through the use of a consultant, perform an analysis of the existing impact fees to ascertain what the increase in the impact fees should be. Upon completion of the analysis, the Commission will review the proposed fees and forward a recommendation to the Town Council. It is anticipated that this work will be completed in 2006. The projections for the Enterprise Fund, AWRD Fund and the DIF Fund were combined to evaluate the debt service coverage and total cash balances at the end of each fiscal year. Analysis indicates that, under the Preferred Financial Scenario, the Utility meets the overall debt service coverage requirement established by the Mayor and Council Water Polices and the Series 2003 Bond Covenants for the first four years. In year five, the coverage does not meet the requirement; however, it is anticipated that increased impact fees will generate the revenue needed to meet the requirement. The debt service coverage requirement means that the Utility's net revenues must exceed 1.30 times the annual debt service obligation. Proformas for the Preferred Financial Scenario may be found in Appendix C. -11- RECOMMENDATION ON WATER RATES, FEES & CHARGES After reviewing the analysis of the three Funds, their respective revenue requirements for the next five years, construction water issues and other service fees and charges, the Water Utility Commission is recommending: • Increase the base rates and commodity rates by 5 % for both potable and reclaimed water rates. • Establish a separate rate for construction water at $4.76 per 1,000 gallons. • Increase the GPF by $0.04, from $0.21 to $0.25 per 1,000 gallons for both potable and reclaimed water rates. • Increase the Backflow Installation Permit by $15.00, from $35.00 to $50.00 • Increase the Construction Inspection Fees: $1,350 for 0-500 feet, $1.30 per foot thereafter. • Establish a "Time & Materials" rate for Hydrant Meter Relocation. • Perform an analysis on the Impact Fees assessed by the Utility in 2006. The proposed revenue increase would allow the Utility to meet the revenue requirements for the operations and maintenance of a municipal utility as costs keep pace with inflation, growth issues are addressed, infrastructure is replaced as it is worn out and the level of customer service improves. The following table illustrates the proposed changes for a typical residential customer with a 5/8" x 3/4"water meter. Other water providers in the region are included for comparison. Water Provider Monthly Base Rate Tier 1 Commodity Rate Tier 2 Commodity Rate Tier 3 Commodity Rate Oro Valley Current 12.65 1.98 2.68 3.58 Oro Valley Proposed 13.25 2.08 2.81 3.76 Metro Water 12.44 1.98 3.11 3.91 Marana Water 14.00 2.15 3.00 3.90 Tucson Water 5.35 1.38 4.82 6.77 Oro Valley Water, Tucson Water and Metro Water no longer include water usage in their base rates; however, Marana Water includes 1,000 gallons. Tucson Water's commodity rates are based on the use of 100 cubic feet which is the equivalent of 748 gallons. Oro Valley, Metro and Marana all base their rates on 1,000 gallons. To simplify the comparison, the rates for Tucson Water have been converted to represent the charge for 1,000 gallons. A table providing proposed rates for all Oro Valley Water Utility meter sizes may be found in Appendix D. -12- Appendix D also contains tables that calculate the dollar increase and the percentage increase that a customer would experience on a monthly bill under the proposed rates. Monthly bill amounts are calculated in 1,000 gallon increments for the 5/8" x 3/4" meters and a variety of increments for larger meter sizes. The Preferred Financial Scenario recommendations result in modification of both the base rates and the commodity rates. The average consumption for customers with a 5/8" x 3/4" water meter is approximately 10,000 gallons per month. The proposed modification of the rate design will further encourage water conservation in that usage in excess of the average monthly usage for each customer class is charged at higher rates. The Commission's recommended rate design is intended to encourage voluntary water conservation practices. For comparison purposes, the following table provides a calculation of a monthly bill amount for a customer with a 5/8" x 3/4" meter for the water utilities surrounding the Oro Valley Water Utility service area. Direct comparison of raw base rates and commodity rates is not as effective because of the varying rate structures of each utility. A better comparison is to calculate the cost for specific consumption levels during a summer month. Please note that these charges only reflect water use fees and specifically exclude taxes and Groundwater Preservation Fees. Water Utility Cost for 10,000 Gallons Cost for 18,000 Gallons Cost for 27,000 Gallons Cost for 40,000 Gallons Oro Valley Current 32.45 53.89 79.81 126.35 Oro Valley Proposed 34.05 56.53 83.72 132.30 Metro Water 32.24 50.90 84.49 140.51 Marana Water 34.05 57.35 90.65 150.35 Tucson Water 19.12 53.42 105.61 211.01 The Commission is also recommending the establishment of a separate rate for construction water use. The proposed rate would apply to construction water use through meters larger than 1 inch. Tucson Water, Metro Water and Marana also have separate rates for construction water use. The following table is a comparison of the Utility's proposed rate and the existing rates of the neighboring water providers. Water Utility Construction Water Rate Oro Valley Water Utility Proposed $ 4.76 per 1,000 gallons Metro Water $11.73 per 1,000 gallons Marana Water $ 3.00 per 1,000 gallons Tucson Water $ 2.60 per 1,000 gallons -13- Details of the proposed rates that are being recommended for Backflow Installation Permits, Construction Inspection Fees and Hydrant Meter Relocation Fees may be found in Appendix E. No other adjustments to service fees and charges are necessary at this time; however, the Commission recommends that the service fees and charges continue to be reviewed on an annual basis. CONCLUSION The Commission presents this Rates Analysis Report for the review and consideration of the Mayor and Council. The Commission is available to discuss this report in greater detail at a joint study session or other appropriate forum. The Oro Valley Water Utility Commission is proud to serve the Town of Oro Valley, it citizens and the customers of its water utility. The Commission extends their appreciation to the Mayor and Council for their consideration and guidance and looks forward to their continued direction. - 14- APPENDIX A Opinion on Rates Analysis Red Oak Consulting A Division of Malcolm Pirnie PATHWAYS TO LASTING SOLUTIONS • i REa)AK CONSULTING A Division or MALCOLW PIRNIE March 21, 2006 Mr. Philip Saletta, Manager Oro Valley Water Utility 11000 N. La Canada Dr. Oro Valley, AZ 85737 Re: Independent Review of Internal Rate Study Dear Mr. Saletta: Red Oak Consulting (the "Consultant") is providing this letter summarizing our review of the Oro Valley Water Utility's (the "Utility") internal rate study. The Utility has provided a cash flow forecast, which includes the proposed rate increases, for our review. It is our understanding that the Utility intends to use the forecast to present the results of the proposed rate increases to the Town Council. We further understand that the forecast will not be used for the purpose of issuing additional debt nor will it be included in any Official Statement or used to support any financing. GENERAL We have reviewed the accompanying forecasted cash flows of the Utility for the fiscal years (FY) ending June 30, 2007 through June 30, 2011 (the Forecast Period). Our review included the following areas: • Assumptions underlying the analysis and consistency of the analysis with underlying assumptions. • Revenues from proposed rates. • Comparison of projected results with results presented in the Comprehensive Annual Financial Reports for fiscal years ending June 30, 2003, 2004 and 2005. • Ability of projected results to meet Utility's bond covenant requirements. • Ability of the projected results to meet Resolution No. (R) 05-09, Mayor and Town Council Water Policies. • Ability of proposed rate structure to meet generally accepted rate setting practices. The forecast provides for the financing of improvements to the Utility in accordance with the Capital Improvement Program (the "CIP"). The forecasted cash flows illustrate the operating costs, working capital needs and other financial requirements of the Utility, including the debt service requirements associated with the Utility's Series 1996, 1999, 2001 and 2003 Series Bonds and additional Bonds to be issued by the Utility during the Forecast Period. • 3300 South Parker Road - Suite 305 - Aurora, CO 80014 - T 303-369-3535 F 303-369-3540 - www.redoakconsulting.com Mr. Philip Saletta Manager March 21, 2006 Page 2 The estimated bond financing required for the Forecast Period includes any and all such costs related to the improvements and the costs of issuance. Debt service on the anticipated senior lien bonds is to be paid from revenues of the Utility. The accompanying forecasted cash flows are based upon numerous assumptions made by the Utility management. Our review procedures included analysis of the records and reports of the Utility and inquiries of management regarding the assumptions employed in developing the accompanying forecasted cash flows. The forecasted cash flows reflect the Utility's expectations, based on present circumstances, of future conditions and their expected course of action. Statements of financial position and results of operations are not presented as part of this forecast. The significant assumptions used in the cash flow forecast are summarized in the accompanying "SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS". These assumptions are integral and essential to an understanding of the financial forecast. Changes in these assumptions could materially affect the findings of our review. Additionally, changes to the CIP used in the cash flow forecast, including the costs of existing projects, may affect the annual debt service requirements projected in future years. EXCEPTIONS Resolution No. (R) 05-09, "Town of Oro Valley Mayor and Town Council Water Policies" states that "An annual average debt service coverage of 1.3 times or 130% shall be maintained". While this document does not provide specific definition of debt service coverage, it is the Consultant's understanding that this shall mean Net Revenues (as defined in the Series 2003 Bonds) in each Fiscal Year equal at least to 130% of the interest and principal for all outstanding obligations, both senior and junior. ADDITIONAL COMMENTS It is important to note several results of the forecasted cash flows. First, with the issuance of debt to fund the Central Arizona Project Water Delivery System (CAP) in fiscal year 2010- 11, projected revenues and rate increases are not sufficient to meet the minimum debt service coverage requirement in this year. It is our understanding that management is aware of this issue and that a review of the Utility's Alternative Water Resource Development (AWRD) Fee and Development Impact Fee are planned to address this projected shortfall. Additionally, the cash balance of the AWRD Fee Sub -Fund is expected to incur a negative cash balance starting in fiscal year 2008-09. While the Utility as a whole maintains positive cash reserves over the projection period, an adjustment to the AWRD Fee would be required to maintain this Sub-Fund's cash reserve during the Forecast Period. PATHWAYS TO LASTING SOLUTIONS Mr. Philip Saletta Manager OPINION March 21, 2006 Page 3 In our opinion, with exception of the items listed above, the accompanying forecast by management and the underlying assumptions provide a reasonable basis for the Utility's projections during the Forecast Period. However, there will usually be differences between the forecasted and actual results because events and circumstances frequently do not occur as expected and those differences may be material. Because of this, management should update the forecast and its financial management plan on an annual basis or when substantial changes in significant underlying assumptions occur, whichever is more frequent. We have no responsibility to update this report for events and circumstances occurring after the date of this report. Very truly yours, RED OAK CONSULTING A Division of Malcolm Pirnie, Inc. Richard D. Giardina, CPA Vice President PATHWAYS TO LASTING SOLUTIONS ORO VALLEY WATER UTILITY Forecasted Cash Flows, Fiscal Years 2006/07 through 2010/11 SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS Basis of Presentation The accompanying forecasted cash flows for fiscal years 2006-07 through 2010-11 (the Forecast Period), prepared by Oro Valley Water Utility (the "Utility"), are presented on the cash basis of accounting and are based on estimates of future revenues and expenditures and assumptions concerning future events and circumstances with respect to the most likely courses of action to be taken by the Utility. The forecast presents, to the best of the Utility's knowledge and belief, the cash flows to be expected from future operations of the Utility, including debt service assumptions, related to financing required by the Capital Improvement Program during the Forecast Period. Unanticipated events and circumstances are likely to occur subsequent to the date of the forecast, which will cause actual cash flows to be different from the forecasted cash flows. Such differences may be material. The significant assumptions used in preparing the accompanying forecasted cash flows are explained below. Cash Receipts Potable Water Sales: Potable water sales include the payments to be received from � customers of the Utility. Payments have been estimated based upon: (a) a customer base � growth of 400 residential units per year, (b) constant rates of water consumption, as a compared to calendar year 2005, within each customer class in the Forecast Period, (c) an � increase to both flat and metered water rates of 5% in fiscal year 2006-07, 6% in fiscal � years 2007-08 and 2008-09, and 5% in fiscal years 2009-10 and 2010-11. Reclaimed Water Sales: Reclaimed water sales include the payments to be received from reclaimed water users of the system (golf courses). Payments have been estimated based � upon: (a) connection of the El Conquistador-36 golf course to the reclaimed water system � starting in Fiscal Year 2007-08, (b) reclaimed water rates of consumption similar to � historical rates of consumption, (c) an increase to both flat and metered reclaimed rates of � 5% in Fiscal Year 2006-07, 6% in Fiscal Years 2007-08 and 2008-09, and 5% in Fiscal Years 2009-10 and 2010-11. Groundwater Preservation Fees: Groundwater Preservation Fees included payments received from customers of the Utility based on metered potable and reclaimed water usage. Payments have been estimated based upon: (a) a customer base growth of 400 residential units per year, (b) water consumption within each customer class, similar to historical rates of consumption, (c) an increase in the groundwater preservation fee from $0.21 to $0.25 per 1,000-gallons of potable and reclaimed water consumption in Fiscal Year 2006-07. Potable Water Impact Fees: The Utility charges potable water impact fees to new customers connecting to the system. Payments have been estimated upon: (a) a customer base growth of 400 residential units per year, (b) no increase in potable water impact fee payments. The Utility's historical Charges for Service, including Potable Water Impact Fees, obtained from year-end Comprehensive Annual Financial Report's, is summarized below. Historical Cash Receipts from Charges for Services Fiscal Year Ended Cash Receipts 2005 $1197889335 2004 $11,651,447 2003 $10,1621515 Alternative Water Impact Fees: The Utility charges alternative water impact fees to new customers connecting to the system. Payments have been estimated upon: (a) a customer base growth of 400 residential units per year, (b) no increase in alternative water impact fee payments. Interest Income: Interest income includes interest on investments from both the operating and impact fee funds of the Utility. Interest is based on 3.55% of the average annual balance of these funds. Other Revenue: Other revenue includes user fees for specific services provided. These revenues are derived from billing services for the Utility. This source of income has been forecasted to remain unchanged in each year of the forecast period. The assumed increase in user payments over the forecast period is predicated on the ability of the Utility to meet or exceed their debt service coverage ratio as established by the Mayor and Town Council Water Policy, Resolution No. (R) 05-09. The ratio must be at least 1.30. When the Utility falls short of this ratio rates are to be increased until the ratio is achieved. Revenue requirements are determined annually based on operating disbursements of the Utility, including payments for the debt service requirements, which are based on the anticipated Capital Improvement Plan expenditures. Dpht Service Municipal Water System Acquisition Bonds, 1996: The debt service payments for the 1996 Bonds reflect an aggregate principal payment of $28,400,000 with interest rates ranging between 4.700-5.375% and a 30-year term. The Bonds are junior obligation bonds, defined as having a lien on Utility revenues that is subordinate to the senior lien bonds, Town of Oro Valley Municipal Property Corporation Senior Lien Water Project Revenue Bonds, Series 2003. Junior obligation bonds are not included in the calculation of debt service coverage required by the senior lien bond covenants. 2 Town of Oro Valley Municipal Property Corporation Excise Tax Revenue Bonds, Series 1999: The debt service payments for the 1999 Bonds reflect aggregate principal payment ^} of $4,930,000 ($3,235,000, Utility's portion) with interest rates ranging between 3.500- �, 4.500% and a 20-year term. The Bonds are junior obligation bonds. Excise Tax Revenue Bonds, Series 2001: The debt service payments for the 2001 Bonds reflect an aggregate principal payment of $9,010,000 ($5,647,468 Utility's portion) with o interest rates ranging between 3.750-5.000 /o and a 19-year term. The Bonds are junior obligation bonds. .. g Excise Tax Revenue Bonds, Series 2003: The debt service payments for the 2003 Bonds reflect an aggregate principal payment of $10,237,500 with interest rates ranging between 2.000-5.000% and a 16-year term. The Bonds are junior obligation bonds. Senior Lien Water Project Revenue Bonds, Series 2003: The debt service payments for the 2003 Bonds reflect aggregate principal payment of $31,750,000 with interest rates ranging between 2.000-5.000% and a 25-year term. Anticipated Future Bond Issues: Debt service payments on anticipated future bond issues of the Town (needed to fund the expected Capital Improvement Plan) reflect a 25-year term with interest rate ranging from 5.000-6.000%. The principal amounts identified for funding using future bond issues, include funds necessary for water and reclaimed system upgrades and expansions. The projected principal amounts for each of the fiscal years 2006-07, 2009-10 and 2010- 11, with a scheduled mid -fiscal year borrowing is projected as follows: Fiscal Year Aggregate Principal Amounts 2007-08 $ 5,5201000 2009-10 $ 13,900,000 2010-11 $ 71940000 Operating Expenses Personnel: These expenses include all expenses pertaining to salaries and employee benefits. These costs include the addition of four fulltime employees in Fiscal Year 2006-07 and one new fulltime employee in Fiscal Year 2007-08. In addition to the new employees these costs are expected to increase 5% annually. Operations and Maintenance: These expenses include costs pertaining to operation of the potable water and reclaimed water production and distribution networks. These costs have been based on previous years actual and budgeted costs and are expected to increase by 3 % annually. CAP Capital Costs: Central Arizona Project (CAP) water represents a source of the Utility's raw water. This expense includes the Utility's portion of capital costs for the CAP canal infrastructure. CAP Recharge Costs: This expense represents the cost of recharging CAP to maintain the balance of Long Term Storage Credits. Increases in CAP Recharge costs are anticipated based mainly on increasing pumping costs incurred by CAP. CAGRD Costs: Central Arizona Groundwater Replenishment District costs are anticipated to increase according to increasing fees, increased withdraws and contractual obligations. Charges for excess groundwater pumping are anticipated to increase but will be offset with the use of Long Term Storage Credits. Rpwrvec Pursuant to the Town of Oro Valley Mayor and Town Council Water Policies, the Utility is required to "Maintain cash reserves for known future obligations plus an allowance for unbudgeted contingencies set at 5 percent (5%) of the total annual budget". Based on conversations with Utility management, "cash reserves for known future obligations" has not been defined by the Town Council. Further, from conversations with Utility management, Town Water Policy reserve requirements have been meet, since 1996, by maintaining 5% of the total annual budget in reserve. Capital Improvements Program The following table provides a summary of the Capital Improvements Program by funding source: Capital Expenditures FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 Cash -funded $ 914311600 $ 6,33800 $ 414961600 $ 6969600 $ 6961600 Debt- 2177500 6461875 292,250 M40,857 2,1871912 financed Total $ 12120600 $ 619853475 $ 45788,850 $ 916371457 $ 21884,512 Debt Service Coverage Requirements Pursuant to the 2003 Bonds, the Utility must "produce Net Revenues in each Fiscal Year which will equal at least 120% of the interest and Principal Requirements for the then current Bond Year on all Senior Obligations then outstanding...". This requirement is calculated as Net Revenues divided by Senior Obligation debt service in each Fiscal Year. Additional Parity Obligations required pursuant to the 2003 Bonds require "Net Revenue of the Project for the most recently completed Fiscal Year for which audited financial statements of the Town are available were equal to at least 120% of Parity Test Debt r.� Service for all outstanding Senior Obligations, including the obligations proposed to be issued". The Town of Oro Valley Mayor and Town Council Water Policies require "An annual average debt service coverage of 1.3 times or 130% shall be maintained". This requirement is calculated as Net Revenues divided by total debt, both senior and junior, in each fiscal year. The attached cash forecast is predicated on the ability of the Utility to achieve the debt service coverage ratio as established in bond covenants and by the Mayor and Town Council Water Policy, Resolution No. (R) 05-09. The ratio must be at least 1.20 considering only senior obligations and, based on Town policy, 1.30 considering both senior and junior loan obligations. When the Utility falls short of this ratio, the rates are anticipated to be increased until the ratio is achieved. Revenue requirements are determined annually based on operating disbursements of the Utility, including payments for the debt service requirements, based on the required Capital Improvement Plan. Billing Data Revenue from water service is calculated from billing data produced by the Utility. The billing data used in the cash forecast was provided in file "Revenue Proj ections.Baseline. Rate Increase 5%.6%.6%.5%.5%". 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CO r to Ll) T M M N r M M T- Ln 'd' qqr O � � N ~ to T to T O N O N Ln 00 0 r O to O O to M M O N to r M ti f` O o o Oo O N O N Cfl 6Fi 6:i 6f� d' co co co (Y) to ON O� O o o O ti O f` O O Ce) O d- CV (6 O T ti T ti 69. 69 6f). co Co N Oo W to O Oo 1` N O M ti r O o o p o 0 O M O N In r 69 69 6Fi N .O d O .O co N C a a a o E _ E ar O i IQ) ca m = :% .. 0 O 0 O U , 7-,;O d .0 o 4) d OA ca = m� Q 4-0 � N U J U a o L Q 0 L ^Cl) O ca V O L d ,dw d 4- J-+ -;C C .a U) cn V) O CU O OCD O -O O CDCD01-0 w-0 GN 0 = O O Ln 000 O N U) rO ' (0 Nr -C'Md' O r cr O 00 E N O L(� tt (.0 CD (D CO CO Ln ti CV) O O O O M O I� O 00 O N O N N 0 O ,;t O ' CO r L() 00 C'M r O CO L6 O C`7 r C.O r O N N r ti ti CO r ,;I- V- t` r CV CV r r Nt L6 N d' L6 T- O LO M 000 M 0) M 000 I` O ' N It fl- O 00 d- O O C.O O (:; ti r: O M O dp' C'ri CO Nt coOO O LO � N M LO � O O' O CM r� LO LO O ti 000) LO _OC'MCO C4MOO O f` d' r C) O d' ti CN 1` d' LO LO r�- N 61} QD- Efl ff} �- O O ";I- O O O C) O O O LO d' ti r r o 0 r 0 0 O 00 r r 0 O 0 O Ch CO 0 LO I- O m (0 LO d' LO O M r LO O N it N i s m o = i O v as O CL ca L _ i L 0 (V aWO 0 LL 00 0 Ri o ♦� s 0 Q �+'� O a- N MM� N 0 = L W �c�1 � LL E LL C� o o d N _ L UCL ++ ++ m .d .� N � CU 14 O O d C N p CD U U w z W W Q 0— APPENDIX B Assumptions ASSUMPTIONS — FINANCIAL SCENARIO A 1. Growth is based on 400 new connections annually over the 5 year period. To be conservative, it was assumed that all of the new connections would be single family residential customers. Annual water usage is based on water usage trends from CY 2005. 2. The El Conquistador Golf Courses (36 holes) will be removed from groundwater in July 2007. 3. Annual increases in base rates and commodity rates for both the potable and reclaimed water rates as follows: 5% in FY 2006-07, 6% in FY 2007-08 and FY 2008-0% 5% in FY 2009-10 and FY 2010-11. Rate increases would become effective at the beginning of each fiscal year. 4. Construction water rate established at $4.76 for all usage in FY 2006-07. Future increases will be as follows: 6% in FY 2007-08 and FY 2008-0% 5% in FY 2009-10 and FY 2010-11. Rate increases would become effective at the beginning of each fiscal year. 5. Groundwater Preservation Fees increased by $0.04 per 1,000 gallons in FY 2006-07 and remains constant each year thereafter. 6. Reclaimed water rates are equal to the potable water rates. 7. Personnel costs include 4 new FTEs in FY 2006-07 and 1 new FTE in FY 2007-08. Personnel costs are increased 5% annually for Merit & COLA. 8. Operations & maintenance costs increase by 3 % annually with the exception of extraordinary one time expenditures. 9. Charges from the CAGRD for excess groundwater pumping increase annually but are offset with the use of Long Term Storage Credits. Increase is due to increased pumping resulting from growth and CAGRD's projected rates. 10. Additional 3,557 AF of CAP water right acquired in FY 2007-08. Cost to be funded through the AWRD Fund. The on -going capital charges related to this allocation will also be paid through the AWRD Fund. 11. Continue to recharge 2,500 acre feet of CAP annually to maintain the balance of Long Term Storage Credits. 12. Utility will use cash reserves and remaining bond proceeds to fund capital improvements in FY 2006-07, 2007-08 and 2008-09. Future capital improvements will need to be financed. ASSUMPTIONS — FINANCIAL SCENARIO A continued 13. The Enterprise Fund will advance the funds from cash reserves to design and construct Phase 2 of the reclaimed water system in FY 2006-07. Phase 2 of the reclaimed water system will be financed in FY 2007-08. Once proceeds are received from the bonds or loan, the AWRD Fund will reimburse the Enterprise Fund cash reserves for the funds advanced. The AWRD Fund will repay the debt to design and construct Phase 2. 14. Debt service on the financing of the reclaimed water system is proposed to occur early in 2007, therefore, a half year of debt service will begin January 2008 followed by annual debt service thereafter. This financing has been projected with an interest rate of 5% and a 25-year term. Debt will be repaid with AWRD impact fees and Groundwater Preservation Fees. 15. Capital improvements to the potable system in FY 2009-10 and 2010-11 will be financed early in 2009, therefore, a half year of debt service will begin January 2010 followed by annual debt service thereafter. This financing has been projected with an interest rate of 6% and a 25-year term. Debt will be repaid with water sales revenue (existing system improvements) and impact fees (expansion related improvements). 16. Debt service for CAP water development is included in FY 2010-11. Annual debt service of $5,000,000 is based on $70,000,,000 debt. The financing has been projected with an interest rate of 6% and a 25-year term. 17. Debt service coverage does not fall below the required coverage of 1.30 18. The minimum cash balances meet or exceed 5% of budgeted expenditures each year. APPENDIX C Preferred Financial Scenario A Enterprise Fund Alternative Water Resource Development Fund Development Impact Fee Fund Summary of All Funds T" a U � L O � N O LL ca O t� O � O O = to LL C) N 0 O m a N v U U- S E LL .d+ a N C� cn I 0 +.. 00 O N CD CS Q E W N O >- 'C V N LL L v � M Cl) N N O 00 'a m O N N O �L N LLL C = U W ti Cl O N LL co N N r*_1l• qe 0 0 0 0 0 W 'e 0 0 0 0 0 r O O r M O N O r d' O N r M 0 CD M N CO O CO O O 0 � O M O N O O d' O O N w O tt 00 Il- 0 CO (0 CO O 00 d' O CO Nr N CO CO I (6 0 0 ti 00 Ln N d' 0 O O CD 1` 00 0 M 1` d' N cM L LA C) 00 CO T- 1` CO CO d' r- 'qe O 0) M M 0) tt CD N LO 0 LO LO M N 0 M CO r r"-1` w 0 1` 0 N 0 00 1` O O I,.-Nt C) C) 00 O O r N M r LA N N (09- 40 V). 44% to). 40-:� 0 0 T- CO 1` M 0 0 0 0 00 M N O O CO O O r- O O O O M 00 0 0 00 O 00 LO r LAM co M N 00 O O LO O LO C) C) ct' O N 0 0 0 0 0� w CO LO M 1` O O U') ' d' C) O O ' CD Re1` C) C) CO M O N LA r- 1` N IliL O 00 N 00 00 N r O CO N CN r CO CO 1` O 1` r CO LO r'.— N M O M 0 0 'e O 00 ";T 0 co co 1� d' d' r M M CM 00 O 00 CO 0 w N 0 'd' T- N 0 CO 00 O O 00 d' O O W N r d' N N tO 1` CD 60- 4rk 1` 0 M N LO (D O U) O CV CD 00 C) C)00 0 0 0) C) CDC) O CO t C) N CO 0) 0 co N C) C) d' M w CD CD CD C)O C0 CO O O CD 00 CO r N N qq N M tt 0 0 1` M 0 CO 1` I` O 0 O CD 00 LA N Ni L6 O f` M co O N 0 LO w O 1` O 1` LO d' d' ' r0 CO d' O W N `q N 'qt CO q;T ' LA O 'e O C) U C) O oo N V- N CO r 0 r 0 d. 1` O d' co 00 0 w w I;t it � N� 00 C) T- LA O r T- O LO O O O r r N r r C'M N N r CD 1` CD 69- d' M O CO � O CO O LO O (D I"- O O CO O O r O O O O 00 M N O w O I` co N N O CO r, M O O O O O 00 00 O O 00 d' 00 O CO M 00 00 0 0 Ln O r LO It 1` r 0 0 0 0 co CD N d' 'ge O 00 CO CO O O (D O O 0 1` O 00 co ' O CD 0 0 V-7 0 1` N O 0 'd' M co ' M 1` M CD I` O N CO r CO CO 1� r M (D 0 CM T- O w ti CO 14t r N d' CO C) 00 d' 00 00 00 00 M r d' O C) r- r r r N N CV r CO 1` LA O M O N N 4e 0 0 t C) O 1` r O O O O O O O O O O r 0 O O I` LC) N 0 0lq;t 0 0 LA O O O O O O O O O O O C) O Co M CO t O M O M T- r 1` 1` 00 O N Ln M cr V O N CO CO M 0 0 0 co ' M Ci I` Ni T- 0 O N CO co ' C� 00 M C) 00 00 ti O O 1` O N CO 00 r*--cD CDCD 00 O N 0 0 I,--O N 0 r 00 1` 0 CDN co w N r �t V- N d' 00 O 00 N 0 00 1- LO CO d' M 00 C) r O r N CV N CO CO LA 69 I I to I4a I60 40 I603 �N LO N _ N 0 ... 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O O O O M O I` O O— 'I-O ' OD VO LO ONO M O OO 0 t0 0 N N t0 O M r- r f` t` T- N;;r � ti N N � r LA N d' u 69 69 69 69 0 0 0 0 M CA O � O M I` O ' N 00 V M O M ti O 00 00 qe N 00 N O 000 O O O M O CA v d' CO M q4t 1` N V le 69 649. 69 69 .-. .-. T" LO O00 D O O LO N M V O O ' O M 1` LO LO 0 1` O a) N LO ti C00 000 � N O I` 44- � M O N t• t` M ti 14T Ltd ui f` N Ni 1` 69 69 69 6f3 M O O 'd' to0 d• to O O O C) O I` � O V- O O O O O M OD O 00 � � C) to CA 0 d• to OD 0 d' 0 0 M 0 0 V N � I` 1` 69 6F} 69 69 O N s O O U y = 70 0 v as C _ LLLL Cj -O Rt L = � Ri O Q�w0 = ULL op O Q o - N Cva N a) � }► ca 0 = o MMU- W E U mU- : .a- = c o000 LLQa= 's U An � _ = — E W .000'00c Inuuwzw a)o w < o — APPENDIX D Rate Schedules: Potable & Reclaimed Tables for Bill Comparisons by Meter Size LU J Q LU U CO LU - a W U) 0 0. 0 a W O a CU H W H Q a0 W0 1--o wF- F- � a� 0 ®. a m J Z 0 E p � H W a M a�p 0 wo�tititi�titi�ti to to to to to to to to to O ul o M M M M M M M M vi 0 a U a Z Q 0 M W (D p�0wo��������� 00 00 00 00 00 00 00 00 00 C) C'7 CIO CM C'7 C`7 C6 C� CM C'7 U O � Q J E- W Q N 0 � O O W or- E W oo CO 00 00 00 00 00 00 00 00 O p N N N N N N N N N 0 IW a CU a 0 N W O ry O W o co Cfl 00 (D 00 Cfl 00 CD 00 Cfl 00 (D 00 CO 00 (D 00 Cfl � N N N N N N N N N U OU LU W a O0 o 00 00 00 00 0o ao 00 00 00 E W o O O O O o O O O O O r CV N N N N N N N N 0 a CU M F- J 0 CD W O cj� O W o0 � 00 M 00 M 00 M 00 M 00 M 00 M 00 M 00 M 00 C� � � � U C r• r• r• r• r r• r• r r O ULLI a_ - �LOOOOOOOOo Q W C l N ICl) M o M 0 0 0 0 0 W Q 2 M Ci M to to N N M wi 0 o M to O r N M M W to N M a W 0 0 �a� am 5 ;LOUOoLO00000 w �CD mU') I -o0000 ~ Z Q N t- 00' r- r• M 0 Q0 T- o N O CD t- Ir- M N Cfl LU6� ml 0 r N M Cfl N W U � m U C qq* lie W W M X M X NM d' to 00 WN Fn 0`O d E Ul) M F- a w a Z 0 F- U z 0 C) p >- (C Q M OO�a O g W Z a0 U Z p CO � O cj� Q 75 W Z U O Lu p � Cl) p N OOa n. E W_ Z o 2 a0 CU Z p N cr O Q ry 2E W Z U O F: U LU W F- o 000)r., O g J w 0 � Z r LLJ O Q 2E W Z U O U O Q W O � IT- Q N 0 W N 0- LU 0 c) wa am w Z Q UJ ry Q W Z U) U m W W H- N M W � w LLL z a W LU w a W a p M 0 w 0 W Z w p z W C� a Cl) Q W O O O O O O O O O O O O o p U)O 00 W f� 0 d' O 0 d' O 0 r O 0 M O 0 O 0 W p a N N N tD M r r M o0 N O O O O O vM M L L L L L L L L L M a 0 0 0 0 0 0 0 0 0 z Z w U) W_ z~ ~ 00 O O O O O O O O 0 Z o 0 0 0 0 0 0 0 0 W J N N N � � r CO O 0 Co N O co O co U 0 0 0 0 0 0 0 0 0 p W 0 N 0 N 0 N 0 CD 0 cM 0 r 0 OMO 0 O 0 CD M N O O M M r r Q O o 0 0 0 0 0 0 0 0 W p a00 0 r o r co r 00 M o o0 co 0o a� co o 0 r r co J r r U N Z o 0 0 0 o o 0 0 0 0 0 0 0 0 0 0 0 0 U) W O O o N O (0 O O O O O O O Z Z Z N N (� M 0O0 o 0 O LU T- N M C,� 0 0 o 0 0 0 0 a o 0 0 0 0 0 0 0 0 0 0 C7 U o o c0! 00 � o Oo co 0o o co 0 00 Q o o O CD CD CD o co CDW U) o O 0 O 0 CC 0 0 o O O O Q O CL M r 0 r O 00 O co W 0 r r Q J aO O O o O O O o O � Z (n W Z Z o 0 0 0 0 0 0 0 0 0 W o e- o 0 00 m o 00 (6 00 m 0 o 0 o 0 0o 0o 0 D U o 0 0 o O o o o , 0 W W WN M X Ce) X T- LO . N M d- CU 00 C U5 00 111- � C LO M U) 0 a U IW— p a0 H 0 a U 06 W H a a� U W Wa Wm J H z 0 W - Cl) Q M oow oaaaaaaaaQ oEw ozzzzzzzzz 2 W0 a U a J Q M W � � Oct� o ui o Q Q Q Q Q Q Q Q Q .7E ~ Z Z Z Z Z Z z Z Z � U Oui U Q H J W Q N ( 0 0 w oaaaaaaaaa D2w W o ~ z z z z z z z z z Wo O a U a J Q N lc� W CD O o W Q Q Q Q Q Q Q Q Q o ~ � Z Z z Z Z z Z z Z U O Lli U Q H J W u)Q�� 00o��������� W CD 0 0 0 0 0 0 0 0 0 O N N N N N N N N N W0 0- U a J lz Q W0 oaoaomm00wmmw W o rn rn rn rn rn rn rn rn rn 100 U � -�LO00000000 Q W N M O M 1(6 0 0 0 0 0 o W of a; M 6 N N M 6 o O o N M tG M a W U 7(CI)3 n. m C W e U-) Cfl U-) M 0 U-) �- O CD IN O CD icy) O CD O CD IN O CD~ Z N 0o r (Y) N Cfl r N Q W j]� M (D O -- O c e) Cfl (D o of W U) 5 U) -� U CO W W WN M X M X��NM�t000 ao qqe M M w W z W Q Z W C� a W Q W Cl) O a a a a a a a a a Q o 0 z z z z z z z z z J � V M a. Z � cn W_ 0~ J z LU Q Q Q Q Q Q Q Q Q o z z z z z z z z z 0 D U W to O a a a a a a a a a o z z z z z z z z z w w Q a- N Z - w 1t- Cl) W z z o LU J elf z z z z z z Z z z O U Q W m m m w m w m Q 0 a > > > > Q 0 a a a a a a a a a Z � (1) W zi- I- z J W a O Q Q¢ a Q Q a Q U � d d IN W W WXN Ce) cM X r `n CM d- (D 00 (n 0`0 d U") co W C a O � o Q W o cp V-:, O a a) O 0. W Lo N a O E9)- W O cc Q O �o o z o LLJ U 0 cti Q z W V CO U) Z 0 U J Z J z O (D 0 J O 0� Z (9 O O J C)M 0 (D r � W O M j U) C) 0 w 00 o W �CflQ U 00 U) Z o �- z 000 W IL LL IL U 00 � (D � O 00 I� W 0' E0, ffl ff} p II II II z WCO N M W W W W W s M Q Q _ U = >" H o _ RON o .. F- co N Lu O w 60- Q >- 5 E II �OW� OLL CjQ0 0 J V W m U) QOQO LL m U O O O O O I--- UJ O I` m m C) J Z U) V) U{j LO LO LO U W O W � U 0- Z IL O J O C) O C)M 00 00 00 I� N J ~ = J z N -r- LO LO '-;I- I� N LO 00 I- J Opzm N � (D O r=� LO I- o O Q O O m I� } W O O O N 00 J J fl) O It (0 I` I- Q= Q r N M LO 00 LLI 0 z W O (.) �z LL O W oOd- O O d- �O '� O (n O � I� N 00 Q LL Z W O CU �z Q- p W Z C) C) LO O� C) LO CO 3:a ONdO~� WLLI 0 a LU Uj z LL O 0 Co w C� iL z OOCfl o W O O O O co VD z Q Q W O�rnL.n� N M Cfl O G W z W LL W U O o � o 0 0 i-LLJ 00000 W W a� W U Z LL 0W o0(D0co 0000 I-- Q oo00�tm Z W L 0 () ca Z Q W p O O 00 M I� = C) C) 00 � I� (w W N O 00 C)N Q a- Q N � LO O 11" J 0 m � = I- Z O O N N CA ~ W W o o� o 0 Q0� Q elf N d- LO O d^ J U m o O O O O C) C) C) C)Z Z O O O O Opz C)(D C) JWO C) 00 r ch d- Q U) � CD U) Z 0 U J Z J Z 0 .J_I O Z (D o J000000 J 00 N 0 0 M Cl� w O N j U) o 0 Q o) o W LLI cflOO O Q Z C)� p z 000 W IL IL I.I._ U CO � Cfl o00t� W p � II II II � � � N CO W W_ _W W_ (D _ U = I` o _ o .. %OF if OWE o LU 0 ~ p � m 0 J v W CO w cn 2 QO<C0 LL m U in � O � O O �- W � (D 00 00 00 J Z U) L6 U{j L6 LO, U'j U W O W � � U Z IL O O I` r- 00 O J C) C) [I,--C " -J N LO LO � M �~ = J co CD I` d' z J M Lo ti O M O p z m Q O C) (D d' 00 >. LLJ C) C) O O r-� J J Cl) CO C) C) M CO Q= Q r M M LO I� LLI 0 z �— O C� �z LL O O Cfl N O W O O I� M O U) O (D Z W CL LL r O U 0 �z Q- p W Z O O N I-, i.O W O LO N O I` U) j W N ItI` 00 O c W IL 0 � U LL C W O a W z O O m M O W O O O d- LO z a Q O�� 0) M W Lu N M LO I� G LLI z W LL UO Cl) a p o 0 0 0 0 �W �,��-�Oo wcoLO Vi �i LO L � W � W U 0- Z pW oornr°r`o Cfl Cfl N f` CA Z W Q �- N M V- LO Z L 7 c� U � �z Q - W p O O N Cfl 00 LO 00 l� (w CD CD W N O M M 6 M d' M C) U') 0- Q M LO (D O N 0 r m CL = F- (D T- C) C) O ~WWcflV-LOU)M Q�aMLOcflrn� J U m o O o O O O o O O z z O O O O 0pz C)CncYiC) JW0 OoC%o� � � N M Q U Opp APPENDIX E Service Fees & Charges Backflow Permit Fees Hydrant Meter Relocation Fees New Construction Inspection Fees SERVICE FEES & CHARGES Backflow Permit Fee: The existing Backflow Permit Fee was established in 1999. The purpose of the fee is to recover the Utility's cost to inspect new backflow assembly installations, maintain a backflow database, notification to owners of testing requirements and following up to insure that the testing was completed and is in compliance with State regulations. The costs to perform duties associated with inspection of new backflow assembly installations and the related follow-up are as shown: Labor 1.75 hours at $21.13 per hour $36.98 Benefits at 3 0% of gross wage 9.51 Vehicles, uniforms, cell phones 2.13 Printing of forms, postage, letterhead, envelopes 1.20 Total Costs $49.82 Due to increased costs to perform this service, the Utility is requesting an increase in the permit fee ass own: Description Current Proposed Backflow Permit Fee $35.00 $50.00 K Pik SERVICE FEES & CHARGES New Development Construction Inspection Fees The Oro Valley Water Utility recommends increasing inspection fees for new development based on the increased costs for providing inspection services. The fees are derived by using current wages plus a 4% allowance for COLA and merit increases in FY 2006-07 and a benefit factor of 30%. The laboratory cost for the required bacteria test is the actual cost incurred for testing. The following table itemizes the costs to be recovered: Length Constr. Sr. Civil Lead Utility Vehicle O&M, Of Water Inspector Eng. Tech. Operator Director Cell Phone & Total Proposed Current Main Uniforms Cost Fee Fee (in feet) $28.74/Hr $29.35/Hr. $25.78/Hr. $66.91/Hr. $1.42/Hr. 0-500 $1149.60 $58.70 $51.56 $33.46 $56.80 $1350.12 $1350.00 $ 365.00 The construction inspection fees are proposed to be a flat fee of $1,350.00 for 0 -500 feet of water main. The fees for inspection of water mains exceeding 500 feet will be the sum Of $1,350.00 plus $1.30 per foot of water main. The following are examples of fees that would be charged for inspection of water main exceeding 500 feet under the proposed rate: Length of Water Main (in feet) Current Fee Proposed Fee 200 $ 1,205.00 $ 39300.00 3 NO $ 1,465.00 $ 49600.00 400 $ 2,125.00 $ 59900.00 Proposed fee for repeat pressure tests: $72.00 per test (Const. Insp. 2.50 hrs. g $28.74/hr. _ $71.85) Current fee for repeat pressure tests: $60.00 per test Proposed fee for repeat bacteria tests: $85.00 per test (Const. Insp. 2.25 hrs. g $28.74/hr. + $20.00 lab = $84.67) Current fee for repeat bacteria tests: $75.00 per test (All fees must be collected prior to project acceptance)