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HomeMy WebLinkAboutWater Rates Analysis Report - 10/7/2009L RQW.. ok Oro Valley Water Utility Commission Water Rates Analysis Report October 7, 2009 I I I ORO VALLEY TOWN COUNCIL Paul Loomis, Mayor K.C. Carter, Vice Mayor Paula Abbott, Council Member Bill Garner, Council Member Barry Gillaspie, Council Member Al Kunisch, Council Member Salette Latas, Council Member TOWN OF ORO VALLEY WATER UTILITY COMMISSION WATER RATES ANALYSIS REPORT OCTOBER 7, 2009 ORO VALLEY WATER UTILITY COMMISSION Dave Powell, Chair Richard Davis, Vice Chair John Hoffmann, Commissioner Robert Milkey, Commissioner j Richard Reynolds, Commissioner J Elizabeth Shapiro, Commissioner Winston Tustison, Commissioner TOWN STAFF Jerene Watson, Assistant Town Manager Philip C. Saletta, P.E., Water Utility Director Shirley Seng, Water Utility Administrator Stacey Lemos, Finance Director JArt Cuaron, Finance Analyst n f I!I LJ I I I I I I TABLE OF CONTENTS SECTION TITLE PAGE Index of Appendices i List of Acronyms ii Executive Summary 1 Introduction 4 Water Use Trends 5 Vacant Homes and/or Disconnected Meters 6 Growth Trends 7 Debt Service Coverage Requirement 8 Enterprise Fund 8 Alternative Water Resources Development Impact Fee Fund 12 Potable Water System Development Impact Fee Fund 15 Preferred Financial Scenario 17 Recommendation on Water Rates, Fees & Charges 19 Alternate Financial Scenario 21 Other Service Fees and Charges 23 Conclusion 24 Appendices INDEX OF APPENDICES APPENDIX A. Assumptions for Preferred Financial Scenario A-1 Enterprise Fund A-3 Alternative Water Resources Development Impact Fee Fund A-4 Potable Water System Development Impact Fee Fund B. Preferred Financial Scenario B-1 Enterprise Fund B-3 Alternative Water Resources Development Impact Fee Fund B-4 Potable Water System Development Impact Fee Fund B-5 Summary of all Funds C. Rate Schedules & Tables for Bill Comparisons for Preferred Financial Scenario C-1 Potable Water Rates C-2 J Reclaimed Water Rates C-3 Tables for Bill Comparisons by Meter Size 1 D. Alternate Financial Scenario D-1 Assumptions for Alternate Financial Scenario D-5 Proforma: Enterprise Fund D-7 Proforma: Alternative Water Resources Development Impact Fee Fund D-8 Proforma: Potable Water System Development Impact Fee Fund D-9 Proforma: Summary of all Funds D-12 Water Rate Schedules for Alternate Financial Scenario 1 D-14 Table for Bill Comparisons by Meter Size for Alternate Financial I Scenario E. Rate Schedules for Other Service Fees & Charges E-1 New Service Establishment Fees E-2 Reconnect Fees E-4 Backflow Permit Fees E-5 Security Deposits l E-6 Meter Installation Fees J LIST OF ACRONYMS LIST OF ACRONYMS USED IN THIS REPORT AF Acre Feet AMR Automated Meter Reading AWRDIF Alternative Water Resources Development Impact Fee AWWA American Water Works Association CAGRD Central Arizona Groundwater Replenishment District CAP Central Arizona Project COLA Cost Of Living Allowance CY Calendar Year EDU Equivalent Dwelling Unit FTE Full Time Employee FY Fiscal Year GPF Groundwater Preservation Fee LTS Long Term Storage Credits O&M Operating and Maintenance PWSDIF Potable Water System Development Impact Fee WIFA Water Infrastructure Finance Authority ii l IEXECUTIVE SUMMARY TOWN OF ORO VALLEY WATER UTILITY COMMISSION WATER RATES ANALYSIS REPORT OCTOBER 7, 2009 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 j assure the recommendations meet Town policies and bond covenants. J The Utility has based its financial analysis on the American Water Works Association (AWWA) Cash Needs Approach. The AWWA is the largest national organization that develops water and wastewater policies, specifications and rate setting guidelines accepted l by both government -owned and private water and wastewater utilities worldwide. _J This Water Rates Analysis Report contains detailed information on the three funds that comprise the Oro Valley Water Utility: • Enterprise Fund • Alternative Water Resources Development Impact Fee Fund 1 • Potable Water System Development Impact Fee Fund Each fund is individually analyzed with regard to revenue and revenue requirements. There were significant changes in assumptions used to prepare this report than what has been used in the past. The changes include water use trends, vacant homes and/or disconnected meters, growth trends and debt service coverage requirements. All of these will be addressed individually within this report. ] The Water Utility Commission has made a recommendation for a Preferred Financial Scenario. The Preferred Financial Scenario generates the revenue needed to maintain an adequate cash balance of $2.5 million for the Enterprise Fund over the projected five year period. Additionally, the Preferred Financial Scenario reduces the amount of future financing by using available cash for capital projects. Coupled with the reduction in financing, modest rate increases annually allows the Utility to avoid rate shock in future years. The Preferred Financial Scenario also builds the cash balance of the Alternative Water Resources Development Impact Fee Fund over the five year period while we continue to pay off our current debt on the Reclaimed Water Delivery System. Building this cash balance will be important as the Town moves forward with the treatment and delivery of Central -1- Arizona Project (CAP) water. More information on the Preferred Financial Scenario may be found on page 17. �- 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 and fees that the Utility could assess in FY 2009-10. Those recommendations are as follows: • Increase the base rates for both the potable and reclaimed water rates by 2.0%. • Increase the commodity rates for the potable water rates as follows: o Tier 1 increase of 1.0% o Tier 2 increase of 1.5% o Tier 3 increase of 2.0% o Tier 4 increase of 2.5% • Increase the commodity rate for the reclaimed rates by 1.0%. • The construction rate for potable water will increase from $6.25 to $6.38 per 1,000 gallons. • The construction rate for reclaimed water will increase by 1.0% and will remain equal to the reclaimed commodity rate. • The water use contained within specific tiers will remain the same. • Increase the Groundwater Preservation Fee by $0.20, from $0.55 to $0.75 per 1,000 gallons for potable water use. • Increase the Groundwater Preservation Fee by $0.10, from $0.30 to $0.40 per 1,000 gallons for reclaimed water use. • Increase the existing new service establishment fees to recover labor and material costs. • Increase the existing reconnection fees to recover labor and material costs. • Increase the existing backflow permit fees to recover labor and material costs. • Increase the existing refundable security deposits to minimize bad debt write off. • Increase the existing meter installation fees to recover labor and material costs. The Water Rates Analysis Report also includes an Alternate Financial Scenario for the Council's consideration. The Alternate Financial Scenario does not propose any increase in the base rates or the commodity rates for FY 2009-10 but does include an increase in the Groundwater Preservation Fee of $0.20 for potable water use and $0.10 for reclaimed water use. The Alternate Financial Scenario incorporates most of the same basic assumptions as the Preferred Financial Scenario. More information on the Alternate Financial Scenario may be found on page 21 of this report. The Commission presents this Water Rates Analysis Report for the review and consideration of the Mayor and Council. The Commission and Water Utility Staff are available to discuss this report in greater detail at the Council's request. Utility Staff are planning to request Council's approval of a Notice of Intent on October 7, 2009 which will set a Public Hearing date for November 18, 2009 and make the report available for public review. The Notice of Intent initiates the process and does not approve any changes or increases in water rates. -2- Approval of any rate increases would be considered by Town Council at the Public Hearing on November 18, 2009. The Oro Valley Water Utility Commission is proud to serve the Town of Oro Valley, its 1 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. -3- TOWN OF ORO VALLEY WATER UTILITY COMMISSION l WATER RATES ANALYSIS REPORT OCTOBER 7, 2009 I Q1I .Tlllisle] _I ffle1 The Oro Valley Water Utility was established in 1996 as a self-supporting enterprise of the Town. The Utility is comprised of three separate funds that have been established for specific purposes. The Funds are as follows: • Enterprise Fund • Alternative Water Resources Development Impact Fee Fund • Potable Water System Development Impact Fee Fund The Enterprise Fund is the operating fund for the Utility. The expenditures managed from this fund include personnel, operations and maintenance for both potable and reclaimed water systems, capital costs for existing potable water system improvements and related debt service. Revenue for this fund includes water sales, service fees and miscellaneous charges and interest income. The Utility does not receive any funds from the Town General Fund. The Alternative Water Resources Development Impact Fee Fund was established in 1996 to manage capital expenditures related to alternative water resources including reclaimed water and Central Arizona Project (CAP) water. Expenditures include acquisition of water rights required for growth and capital costs, including debt service, to deliver reclaimed water and CAP water to the Town. 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 transferred to the Alternative Water Resources Development Impact Fee Fund to pay for capital costs and debt service. The Potable Water System Development Impact Fee Fund was established in 1996 to 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. 4- I I I I 1 J Each fund is addressed in more detail in the report. Figure 1 illustrates the relationship between the three funds. Figure 1 Enterprise Fund I I AWRDIF Fund Rev: Water sales, service Rev: AWRDIF impact fees and charges fees & Groundwater Preservation Fees Exp: Operating costs, Exp: Alternative water existing system capital resources (CAP & improvements and reclaimed water), related debt service capital improvements & debt service Summary of All Funds The Utility combines all funds to determine the overall debt service coverage ratio required by Town Policy & bond covenants. PWSDIF Rev: PWSDIF impact fees Exp: Growth related potable water capital improvements and related debt service There were changes in key assumptions used to prepare this report other than what had been used in the past. The changes include water use trends, vacant homes and/or disconnected meters, growth trends and debt service coverage requirements. All of these will be addressed individually within this report as they have a significant impact on the analysis and projected water rate increases. 1`LI VYDI:i1MAI Y;7x►f�y The Utility has experienced an overall reduction in water use, both potable and reclaimed, over the last two years. The chart below illustrates a 4.7% reduction in water use from calendar year 2007 to 2008. This data is based on actual water use for both years. The 2009 reduction in water use is projected using actual water use for January through August of 2009 and estimating the same water use as in 2008 for the months of September through December. The reduction in water use for 2009 is estimated at 2.1% less than in 2008. The combined 2 year reduction in water use is estimated to be 6.9%. The reduction in water use is a result of a combination of occurrences including conservation, reduction in growth, vacant homes and/or disconnected meters. The average single family residential customer -5- with a 5/8 x 3/4-inch water meter reduced their monthly water use to 8,093 gallons, down from 9,000 gallons in 2008. For the analysis in this report, the average monthly water use for a single family residential customer with a 5/8 x 3/4 inch water meter will be calculated at 8,000 gallons per month. Monthly water use was also reduced in all other customer classifications. Revenue projections for this analysis included this reduction in water use. r 3 YEAR WATER USE HISTORY Potable & Reclaimed Water 3,450,000,000 - 3,300,000,000 z 3,150,000,000 3,000,000,000 2,85Q,000,000 2007 3,135,575,000 3,070,722,000 (estimated) q:: 0 2008 YEAR VACANT HOMES AND/OR DISCONNECTED METERS 2009 To ascertain why water use has declined, the Utility's customer base was analyzed. The analysis revealed that 238 meters were disconnected or had the water service turned off and locked as of August 20, 2009. The following is the classification of those meters: ➢ Residential 160 ➢ Commercial 9 ➢ Irrigation 59 ➢ Construction 10 Each account was categorized by user classification and meter size and then analyzed to project if and when the water service would be restored. It was assumed that 20% of all residential meters would be re -activated annually beginning in FY 2010-11. After review, it was determined that all construction meters were homes that were under construction when the water service was disconnected thus it was assumed that 20% of these meters would also be re -activated annually. Analysis of the commercial accounts revealed that it was highly unlikely that any of these meters would be re -activated. Likewise, the majority of irrigation meters were for common areas which are not likely to be re -activated in the near future. These meters are not being billed; therefore, there has been a negative impact on water sales revenue. This impact was factored into the 5 year projections as a reduction in water sales H I■ IF-V l 1 and Groundwater Preservation Fees (GPF) revenue. As the meters are projected to be re- activated, the reduction in revenue is minimized proportionate to the number of meters, meter J size and projected water rates on an annual basis. The following table shows the projected financial impact on an annual basis: I! I I I Fiscal Year Water Sales Revenue Reduction GPF Revenue Reduction Total Annual Revenue Reduction 2009-10 $161,338 $31,281 $192,619 2010-11 $146,244 $35,911 $182,155 2011-12 $142,911 $37,282 $180,193 2012-13 $135,162 $35,983 $171,145 2013-14 $128,514 $33,901 $162,415 GROWTH TRENDS The Utility's growth rates have decreased significantly over the past several years. The growth projections used for this report were provided by the Town's Finance Director and are consistent with the Town's overall financial planning. The chart below illustrates the Utility's growth rate based on new metered connections over the last 4 years plus the projected growth for FY 2009-10. It is projected that growth rates will increase to 75 new metered connections annually from FY 2010-11 through FY 2013-14 which is also consistent with the Town's financial planning. 5 YEAR GROWTH RATES fi00 Z 500 1508 - i 400 u 368 346 p 300 w w 200 196 f w 100 Z fi0 0 2005-06 2006-07 2007-08 2008-09 2009.10 FISCAL YEARS 7- DEBT SERVICE COVERAGE REQUIREMENTS During this water rates analysis process, staff modified the method for calculating the debt service coverage ratio pursuant to Town Financial Policies adopted by the Town Council in 2008. The adopted policy with respect to debt service coverage ratios states the following: "When utility revenues are pledged as debt service payments, the Town will strive to maintain a 1.3 debt service coverage ratio or the required ratio in the bond indenture (whichever is greater) to ensure debt coverage in times of revenue fluctuation." The Water Utility currently pays debt service on a number of outstanding debt issuances and loans. For the Series 2003 Senior Lien Water Revenue Bonds, the 2007 Water Infrastructure Finance Authority (WIFA) Loan, and the anticipated 2009 WIFA Loan, water utility revenues are specifically pledged as the repayment source for these obligations at 1.3 times coverage per the Town's adopted financial policy. The remaining outstanding debt obligations of the Water Utility are excise tax pledged obligations meaning that the Town's unrestricted sources of sales taxes, fines, permit fees and state shared revenues are pledged as the repayment sources for these bonds in the bond indentures. Even though the bond indentures pledge these excise taxes as the repayment source, the Water Utility will continue to be responsible for and budget for these debt service payments at a calculated debt service coverage ratio of 1.0, rather than the 1.3 times coverage. It is important to note that the bond indentures for the excise tax -backed bonds require that the Town's excise tax collections each fiscal year total at least 2.5 times the annual debt service requirements in order to avoid having to fund a debt service reserve fund. These conditions have been met annually in the past and are expected to continue in the future. This methodology of segregating the water utility revenue -pledged debt from the excise tax - pledged debt in the rates analysis process is an accepted practice in the industry and has been reviewed by the Town's Finance Director and the Town's financial advisors with Stone and Youngberg. The debt service coverage ratio is determined by dividing the annual net operating revenue by the annual debt service payments. Using the methodology described above is in accordance with the 2008 policy and reduces the amount of the debt service coverage requirement amount. ENTERPRISE FUND REVENUE The Enterprise Fund had a cash balance of $10.4 million at the beginning of FY 2009-10. On July 1, 2009 the Utility paid off the Series 1999 Bonds in the amount of $1.9 million leaving a balance of $8.5 million for FY 2009-10 expenditures. Enterprise funds may be l: -8- r-, used for operating costs including personnel, operations and maintenance, capital n improvements for the existing potable water system and debt service. J The following table provides the Utility's budgeted revenue compared to the actual revenue n for FY 2008-09: I Revenue Source FY 2008-09 Budgeted FY 2008-09 Actual Difference Over (Under) Water Sales $ 11,547,900 $ 11,434,787 ($ 113,113) Service Fees/Charges $ 553,000 $ 617,858 $ 64,858 Interest Income $ 275,000 $ 138,333 ( $ 136,667) Total $ 12,375,900 $ 12,190,978 ( $ 184,922) The reduction in water sales resulted in the Utility not meeting the budgeted revenue amount. The $64,858 received in excess of the service fees budget is due largely to the increase the Utility received for providing sewer billing services for Pima County Wastewater rj Reclamation Department. The reduction in interest income is a result of lower interest rates J experienced with the downturn in the economy. Revenues projected for FY 2009-10 were based on anticipated annual growth in the customer base of 60 single family residential customers and water consumption patterns similar to calendar year (CY) 2008. Analysis of the water use trends for CY 2008 indicated the average monthly use for a single family residence with a 5/8 x 3/4 inch water declined from 9,000 gallons to 8,093 gallons per month. For this analysis, 8,000 gallons per month was used to project water sales revenue. This reduction may be a result of increased water conservation by our customers coupled with the number of homes that are currently vacant, and commercial and irrigation meters that have been disconnected. The reductions in water use, along with the vacant and/or disconnected metered accounts, were taken into consideration when projecting future water sales revenue. The following table indicates the amount of water sales revenue that would be realized with the existing rate structure and no water rate increase: FY 2008-09 FY 2009-10 Difference Actual Water Sales Revenue Projected Water Sales Revenue Increase (Decrease) $11,434,787 $10,768,200 ($ 666,587 ) Under the existing rate structure, the projected revenue decrease is a result of a projected reduction in water sales. REVENUE REQUIREMENTS The following table is a comparative summary of operating expenses for the Water Utility Enterprise Fund. Actual expenses (excluding depreciation and amortization) for FY 2008-09 �I are compared to the projected expenses for FY 2009-10 used in the financial analysis: OV WU Expenditures FY 2008-09 Actual FY 2009-10 Projected Change Increase(Decrease) Personnel $ 2,447,642 $ 2,517,450 $ 69,808 O & M $ 3,094,147 $ 3,512,446 $ 418,299 CAP Allotment $ 185,490 $ 154,575 ( $ 30,915) CAP Recharge $ 632,870 $ 475,000 ( $ 157,870) CAGRD $ 834,035 $ 616,117 ( $ 217,918) Debt Service $ 3,597,312 $ 3,261,863 ( $ 335,449) Subtotal Expenditures $10,791,496 $10,537,451 ( $ 254,045) Capital Outlay $ 2,747,860 $ 4,790,000 $ 2,042,140 Total Expenditures $13,539,356 $15,327,451 $ 1,788,095 Projected personnel costs do not include any new personnel and there are no merit increases or Cost of Living Allowances (COLA). In FY 2008-09, some vacant positions were filled resulting in partial -year salaries and benefits for those affected employees. In FY 2009-10, those positions will be at full -year salaries and benefits thus the increase of $69,808 for personnel. The projected operations and maintenance (O&M) costs include the O&M costs for both the potable water system and the reclaimed water system. Although CAP allotment costs, CAP Recharge costs and CAGRD costs are included in the O&M budget for the Enterprise Fund, they are segregated above because of the significant costs of each line item. To appropriately manage the Utility's financial and water resources, the Utility is limited in the amount of control it has over these specific costs. The rates are set by the Central Arizona Project and the Central Arizona Groundwater Replenishment District on an annual basis with projections for 4 years in the future. The CAP allotment costs will be less as a result of a rate decrease by Central Arizona Project. The CAP recharge costs are projected to decrease based on the specific types of CAP water (incentive priced vs. subcontract priced) and the volume of water that will be recharged at the Kai Farms Groundwater Water Savings Facility and the Central Arizona Water Conservation District Facilities. In FY 2009-10, the Utility is proposing to recharge 4,000 AF. Of this amount 2,500 AF will be at subcontract pricing and 1,500 AF will be at incentive pricing. The projected decrease in costs for the Central Arizona Groundwater Replenishment District (CAGRD) is a result of the reduction in water use and continued management of water and -10- financial resources. The Utility will use Long Term Storage (LTS) credits to offset a portion of the costs charged by the CAGRD through permitted recovery wells. In addition, the recent purchase of groundwater extinguishment credits will help to reduce payment (j obligations to the CAGRD. J There are a number of other annual O&M expenses that the Utility has the least control over and therefore is unable to reduce anticipated expenditures. In addition to the CAP and j CAGRD costs, some of the other expenses that the Utility has the least control over include: electrical power for pumping, water quality testing, chemicals for disinfection, potable and reclaimed water purchased from other providers, software maintenance on existing software, regulatory permits, insurance, office lease, services provided by other Town departments and costs directly related to billing. The billing costs include printing of the billing forms, envelopes, postage, outsource vendor for bill insertion and delivery to post office, lockbox 7 and other bank charges for processing payments. Where applicable, the materials and/or services have been bid or quotes have been received to assure the lowest price. The O&M expenses that the Utility has minimal control over include maintenance on production and distribution facilities such as wells, boosters, reservoirs, and water mains. The Utility includes known preventative maintenance costs in the budget as well as contingency funds for unknown repairs and maintenance. The majority of these facilities are underground which allows for unforeseen malfunctions. Additionally, water mains develop leaks that must be repaired immediately. The Utility budgets for these specific items based on historical data; however, it is difficult to predict the exact amount that may be spent in any given year. The O&M expenses that the Utility has the most control over include office supplies, field supplies, memberships and subscriptions, printing, telecommunications, uniforms, rentals, training, conservation education and outside professional services. The Utility reduced the J requested budget for these costs in the FY 2009-10 as compared to last year's budget. Projected debt service will decrease for FY 2009-10 as a result of paying off the Series 1999 Bonds on July 1, 2009. Although the Utility plans on incurring additional debt in FY 2009- 10, it is projected that the initial debt service payment for the proposed WIFA loan will not be made until the beginning of FY 2010-11. Debt service payments are established by debt amortization schedules prepared by the Town's Bond Underwriters for all past bond issues. Likewise, WIFA also provides debt amortization schedules that the Utility must adhere to. All debt service payments are pre- defined for any given fiscal year unless funds are available to pay off the debt like the Utility did in July of this year. The Utility has financed capital projects in the past and proposes to continue to finance l projects as necessary in order to spread the costs out over time. This allows the Utility to Jmaintain the required cash reserves and minimize water rate increases. 1-1 The chart below illustrates the O&M costs with regard to the level of control the Utility has over these costs. n 01 Operating Expenses for FY 2009-10 (excluding capital outlay) O&M Most $267,392 O&M Minimal 3% $1,001,188 Personnel 10% ; _$2,517,450 24% O&M Least $3,489,558 Debt Service 32% — $3,261,863 31% Projected capital outlay for existing system improvements in FY 2009-10 include drilling and equipping 1 replacement well, construction of a 3 million gallon reservoir, water main replacements and relocations. The reservoir was designated at 50% existing system improvement and 50% expansion related. As such, the total project cost is split 50-50 with the Potable Water System Development Impact Fee Fund. Capital outlay also includes the purchase of water meters, security equipment and other minor assets. Projected expenditures in the Enterprise Fund are proposed to be funded with revenue generated from water rates, fees, charges, cash reserves and a loan from the Water Infrastructure Finance Authority of Arizona (WIFA). ALTERNATIVE WATER RESOURCES DEVELOPMENT IMPACT FEE FUND REVENUE The Alternative Water Resources Development Impact Fee Fund (AWRDIF) had a cash L balance of $1.6 million at the beginning of FY 2009-10. AWRDIF funds may be used for capital expenditures related to alternative water resources including reclaimed water and CAP water. The revenue sources for the AWRDIF Fund are from impact fees collected l when a water meter is purchased and from interest earned on cash balances. The Groundwater Preservation Fees (GPF) collected through the Enterprise Fund are transferred to the AWRDIF Fund to help repay outstanding debt for the reclaimed water delivery system l _ and for future debt on the CAP water delivery system. The following table provides the budgeted revenue for FY 2008-09 compared to the actual revenue for FY 2008-09: j -12- n I■I 11 Revenue Source FY 2008-09 Budgeted FY 2008-09 Actual Difference Over(Under) Impact Fees $ 632,580 $ 812,740 $ 180,160 GPF $ 1,656,560 $ 1,323,549 ($ 333,011) Interest Income $ 15,800 $ 24,422 $ 8,622 Total $ 2,304,940 $ 2,160,711 ($ 144,229) The Town Council adopted new impact fees in 2008. The increase in impact fee revenue 7 occurred as a result of the number of large commercial meters that were purchased as well as the increase in the impact fees. The decrease in GPF revenue is a result of customers using less water. The water use trends are discussed in more detail on page 5 of this report. j Revenues projected for FY 2009-10 were based on anticipated annual growth in the customer 11 base of 60 new connections or 90 Equivalent Dwelling Units (EDUs). An EDU is equivalent to one single family residence with a 5/8 x 3/4 inch meter. For impact fee projections, the J Utility converts the estimated new connections to EDUs at a ratio of 1.50 EDUs to 1 new J connection based on ten year historical trends. In FY 2008-09 the actual growth rate was 615 EDUs. The following table indicates the amount of impact fee and GPF revenue that would be realized with the current impact fees and with and without a GPF increase: FY 2009-10 FY 2009-10 Revenue Projection Revenue Projection Difference With GPF Increase Without GPF Increase Impact Fees $ 298,920 $ 298,920 $ 0 GPF $2,038,641 $1,500,048 $ 538,593 REVENUE REQUIREMENTS The AWRDIF Fund was allocated a portion of the Series 2003 Bond proceeds to finance construction for the first phase of the reclaimed water system. The second phase of the 1 reclaimed water system was financed by a loan through the Water Infrastructure Finance J Authority of Arizona (WIFA). i J -13- �1 The acquisition of 3,557 AF of CAP water rights in FY 07-08 will continue to be funded through the AWRDIF Fund over the next three years. The final payment on the water rights will be made in December 2011. The costs associated with this acquisition are the capital costs to build the CAP canal plus interest from inception of the repayment schedule to the date of acquisition by the Town. This additional water will be necessary to meet the demands of future customers and as such will be paid from this Fund. The following table is a comparative summary of expenditures for the AWRDIF Fund. The following table provides the budgeted expenditures for FY 2008-09 compared to the actual expenditures for FY 2008-09: Expenditures FY 2008-09 Budget FY 2008-09 Actual Change Under(Over) Professional Services $ 396,000 $ 159,064 $ 236,936 Capital Improvements $ 737,000 $ 706,181 $ 30,819 Debt Service $ 1,752,010 $ 1,752,010 $ 0 Total $ 2,885,010 $ 2,617,255 $ 267,755 The professional services are expenses incurred for renewable water studies including the CAP water pilot study for treatment techniques and the pipeline routing studies for delivery of CAP water. The capital improvements in FY 2008-09 represent the completion of construction costs for the second phase of the reclaimed water system. The debt service is repayment of the portion of the Series 2003 Bonds used to finance Phase 1 of the Reclaimed Water Delivery System and the 2007 WIFA loan used to finance Phase 2 of the Reclaimed Water Delivery System. Projected expenditures in the AWRDIF Fund are proposed to be funded with revenue generated from impact fees, groundwater preservation fees and interest income. In the table below, actual expenses for FY 2008-09 are compared to the projected expenses for FY 2009-10 used in the financial analysis. Expenditures FY 2008-09 Actual FY 2009-10 Projected Change Increase(Decrease) Professional Services $ 159,064 $ 273,200 $ 114,136 Capital Improvements $ 706,181 $ 0 ($ 706,181) Debt Service $ 1,752,010 $ 1,700,630 ( $ 51,380) Total $ 2,617,255 $ 1,973,830 ( $ 643,425) -14- The Utility's FY 2009-10 budget included $3 million for capital improvements related to land acquisition and engineering and design services for the CAP treatment and delivery system. It is unlikely that these costs will be incurred in FY 2009-10; therefore, the costs were not included in the 5 year projection for this Report. When the Utility incurs costs related to the CAP treatment and delivery system, it is assumed that the project will be financed through WIFA or the sale of bonds. A partial year of debt service for the project has been included in FY 2013-14 of this report. POTABLE WATER SYSTEM DEVELOPMENT IMPACT FEE FUND REVENUE The Potable Water System Development Impact Fee Fund (PWSDIF) had a cash balance of 7 $8.9 million at the beginning of FY 2008-09. The PWSDIF 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 due to reduced growth have left sufficient bond proceeds available to construct the needed improvements for FY 2009-10. It is projected that growth -related improvements after this time will be paid for with cash. The revenue sources for the PWSDIF Fund are from impact fees collected when a water meter is purchased and from interest earned on cash balances. The Town Council adopted new impact fees in 2007. These new fees became effective in September 2007. The following table provides the budgeted revenue compared to the actual revenue for FY 2008- 09: Revenue Source FY 2008-09 Budget FY 2008-09 Actual Difference Over(Under) Impact Fees $ 800,900 $ 1,588,084 $ 787,184 Interest Income $ 315,200 $ 122,903 ($ 192,297) Total $ 1,116,100 $ 1,710,987 $ 594,887 -, The increase in impact fee revenue in FY 2008-09 is a result of numerous new commercial Jconnections during 2008. Revenues were projected for FY 2009-10 based on anticipated annual growth in the customer base of 60 new connections or 90 EDUs. An EDU is equivalent to one single family residence with a 5/8 x 3/4 inch meter. For impact fee projections, the Utility converts the t estimated new connections to EDUs at a ratio of 1.50 EDUs to 1 new connection based on Jten year historical trends. The following table indicates the amount of impact fee revenue that is projected for FY 2009-10 compared to actual revenue received in FY 2008-09: -15- FY 2008-09 Actual Revenue FY 2009-10 Projected Revenue Difference Increase(Decrease) $ 1,710,987 $ 154,020 ($ 11556,967) The estimated decrease in impact fee revenue is a result of significantly fewer commercial connections projected for FY 2009-10 and in general, a lower projected growth rate for FY 2009-10. In FY 2008-09 the actual growth rate was 615 EDUs. REVENUE REQUIREMENTS Growth -related potable water system improvements are managed through the PWSDIF 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 PWSDIF Fund and provides the budgeted expenditures compared to the actual expenditures for FY 2008-09: Expenditures FY 2008-09 Budgeted FY 2008-09 Actual Change Under(Over) Capital Improvements $ 570,000 $ 0 $ 570,000 Debt Service $ 637,646 $ 637,646 $ 0 Total $ 1,207,646 $ 637,646 $ 570,000 The capital improvements budgeted in FY 2008-09 were not constructed because with slowed growth, the demands of new development were diminished. In the table below, actual expenses for FY 2008-09 are compared to the projected expenses for FY 2009-10 used in the financial analysis. Expenditures FY 2008-09 Actual FY 2009-10 Projected Change Increase(Decrease) Capital Improvements $ 0 $ 1,920,000 $ 1,920,000 Debt Service $ 637,646 $ 634,021 ($ 3,625) Total $ 637,646 $ 2,554,021 ($ 1,916,375) The capital improvements for FY 2009-10 include the construction of a 3-million gallon reservoir and related piping. This project was designated at 50% existing system improvement and 50% expansion related. As such, the total project cost is split 50-50 with the Enterprise Fund. Projected expenditures in the PWSDIF Fund are proposed to be funded with the remaining Series 2003 bond proceeds and cash reserves generated from impact fees. The debt service payments are pursuant to the repayment schedule provided by the bond underwriters. 16- II PREFERRED FINANCIAL SCENARIO Prior to developing financial forecasts, financial considerations were evaluated relating to significant short and long tern capital expenditures, the Utility's existing cash reserves, n existing outstanding debt, proposed future debt and the related debt service payments. To l J 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. In prior years, a key component in �J the rate setting process was the calculation of the debt service coverage ratio. A 1.3 debt service coverage ratio was established by Council policy with the adoption of Resolution No. (R)05-09. With the implementation of the new methodology to calculate the debt service coverage ratio, the required debt service coverage ratio is not as difficult to achieve, resulting in lower rate increases than previously projected. The Commission's finance subcommittee j� and Utility Staff evaluated different financial scenarios prior to forwarding a L J recommendation to the Commission. The Water Utility Commission has made a recommendation for a Preferred Financial Scenario. The Preferred Financial Scenario generates the revenue needed to maintain an adequate cash balance of $2.5 million for the Enterprise Fund over the projected five year period. Additionally, the Preferred Financial Scenario reduces the amount of future financing by using available cash for capital projects. Coupled with the reduction in financing, modest rate increases annually allows the Utility to avoid rate shock in future years. The Preferred Financial Scenario also builds the cash balance of the Alternative Water Resources Development Impact Fee Fund over the five year period while we continue to pay off our current debt on the Reclaimed Water Delivery System. Building this cash balance will be important as the Town moves forward with the treatment and delivery of Central JArizona Project (CAP) water. With regard to the Preferred Financial Scenario, the following are key assumptions used to develop the financial projections. The entire set of assumptions may be found in Appendix A. • Annual growth is estimated at 60 new connections annually which equates to 90 EDUs for FY 2009-10. Projected growth for future years has been estimated at 75 new connections annually which equates to 112 EDUs annually. • Reduction in water use for FY 2009-10 remains constant throughout the 5 year period. • Vacant homes and/or disconnected residential meters will be re -activated at 20% per 1 year beginning in FY 2010-11. J • The Utility will use cash reserves and a WIFA loan to fund existing system capital improvements in FY 2009-10. j • The Utility will continue to use cash reserves to finance existing system capital J improvements through FY 2011-12. • The Utility will finance existing system capital improvements beginning in FY 2012- 13. J -17- • All 18-hole golf courses will be delivered reclaimed water throughout the 5 year projection period. • Debt service for CAP water development begins in FY 2013-14. • Projected operating costs in FY 2009-10 are similar to the Utility's budget request. Future years include annual inflation factors after one time expenditures have been deducted. • Projected operating costs for direct delivery of CAP water begin in January 2014. • The Potable Water System Development Impact Fees are not projected to increase within the 5 year projection period. • The Alternative Water Resources Development Impact Fees were increased to $4,982 per EDU effective in December 2008. These fees are not projected to increase within the 5 year projection period. Analysis of the Preferred Financial Scenario indicates that the Enterprise Fund can utilize cash reserves to finance a portion of the proposed existing system capital improvements for FY 2009-10 but will need to finance $3.4 million to complete the capital improvements in later years. The Preferred Financial Scenario proposes using cash to finance capital improvements in FY 2010-11 and FY 2011-12. New debt is proposed in FY 2012-13. These financing assumptions result in a slow decline of the Utility's projected cash balance ranging from $6.5 million in FY 2009-10 to $2.6 million in FY 2013-14. The projected average ending cash balance of the 5 year period is $4.4 million. The Preferred Financial Scenario includes modest increases in the base and commodity rates in each year throughout the 5 year projection period. The operating and maintenance costs for direct delivery of CAP water will be paid through water rates; however, the capital costs to construct the CAP water delivery system will be funded with revenue derived from Groundwater Preservations Fees and Alternative Water Resources Development Impact Fees. The financial projections detailed in the Preferred Financial Scenario for the AWRDIF Fund include assumptions that the repayment of capital costs for the reallocation of 3,557 AF of CAP water will be funded through the AWRDIF Fund. These payments for the reallocation began in FY 2007-08 and continue through FY 2011-12. Construction of the CAP water delivery system will be managed through the AWRDIF Fund. It is estimated that debt service for this project will begin in FY 2013-14. To help meet the revenue requirements of this Fund, it has been assumed that the Groundwater Preservation Fees will increase annually for the five year projection period. The Alternative Water Resources Development Impact Fees were increased pursuant to Ordinance No. (0) 08-14 adopted in 2008. The financial projections detailed in the Preferred Financial Scenario for the PWSDIF Fund include assumptions for growth related capital improvements as detailed in the Potable Water System Master Plan adopted by the Town Council in 2006. In order to pace water infrastructure construction with new growth demands, some of these projects have been delayed over the last several years resulting from a growth rate slower than projected. As such, there are 2003 bond proceeds remaining to fund the capital improvements for FY 2009- 10. The Potable Water System Development Impact Fees were increased pursuant to Ordinance No. (0) 07-31 adopted in 2007. 18- li The projections for the Enterprise Fund, AWRDIF Fund and the PWSDIF Fund were � combined to evaluate the overall debt service coverage at the end of each fiscal year. I l Analysis indicates that, under the Preferred Financial Scenario, the Utility will meet the debt service coverage requirement established by the Mayor and Council Water Polices and Bond rj Covenants for all five years. Proformas for the Preferred Financial Scenario may be found in J Appendix B. I 1 RECOMMENDATION ON WATER RATES, FEES & CHARGES n After reviewing the analysis of the three Funds and their respective revenue requirements `J contained in the Preferred Financial Scenario, the Water Utility Commission is recommending: �J • Increase the Groundwater Preservation Fee by $0.20, from $0.55 to $0.75 per 1,000 gallons for potable water use. n • Increase the Groundwater Preservation Fee by $0.10, from $0.30 to $0.40 per 1,000 J gallons for reclaimed water use. • Increase the commodity rates for potable water rates o Tier 1 increase of 1.0% o Tier 2 increase of 1.5% o Tier 3 increase of 2.0% o Tier 4 increase of 2.5% • Increase the commodity rate for the reclaimed water by 1.0%. • The construction rate for potable water will continue to be $1.00 greater than the highest tiered rate and will increase from $6.25 to $6.38 per 1,000 gallons. • The construction rate for reclaimed water will increase by 1.0% and will remain equal to the reclaimed commodity rate. • The water use contained within specific tiers will remain the same for each meter size. • Increase the existing new service establishment fees to recover labor and material J costs. • Increase the existing reconnection fees to recover labor and material costs. • Increase the existing backflow permit fees to recover labor and material costs. J • Increase the existing refundable security deposits to minimize bad debt write off. • Increase the existing meter installation fees to recover labor and material costs. l J The detailed schedule of the proposed water rates may be found in Appendix C. The following table illustrates the proposed water rate changes for a single family residential customer with a 5/8 x 3/4 inch water meter. Approximately 87% of the customers fall into this category. Other water providers in the region are included for 1 comparison. 19- H Water Provider Monthly Base Rate Tier 1 Cost Per 1,000 Gals. Tier 2 Cost Per 1,000 Gals. Tier 3 Cost Per 1,000 Gals. Tier 4 Cost Per 1,000 Gals. Oro Valley Current 13.91 2.18 2.95 3.95 5.25 Oro Valley Proposed 14.19 2.20 2.99 4.03 5.38 Metro Water 14.31 2.28 3.57 4.50 5.99 Marana Water 15.12 2.32 3.24 4.21 5.18 Tucson Water 5.62 1.85 6.85 9.69 13.23 Oro Valley Water, Tucson Water and Metro Water no longer include water usage in their base rates; however, Marana Water includes 1,000 gallons. Oro Valley, Metro and Marana all base their rates on 1,000 gallons. Tucson Water's commodity rates are based on the use of 100 cubic feet which is equivalent to 748 gallons. To simplify the comparison, the rates for Tucson Water have been converted to represent the charge for 1,000 gallons. For the most part, the tiered rate structures for all the Water Utilities are similar. A table providing proposed rates for all Oro Valley Water Utility meter sizes may be found in Appendix C. Appendix C 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 inch meters and a variety of increments for larger meter sizes. For comparison purposes, the following table provides a calculation of a monthly bill amount for a single family residential customer with a 5/8 x 3/4 inch meter for the water utilities surrounding the Oro Valley Water Utility service area. Direct comparison of raw base rates and commodity rates is less 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, Groundwater Preservation Fees and similar renewable water resource fees charged by other water providers. Water Utility Cost for 8,000 Gallons Cost for 15,000 Gallons Cost for 25,000 Gallons Cost for 40,000 Gallons Oro Valley - Current 32.15 52.80 91.30 160.95 Oro Valley - Proposed 32.58 53.51 92.77 164.02 Metro Water 32.55 52,38 92.73 172.15 Marana Water 31.36 52.20 89.45 162.30 Tucson Water 20.49 52.38 128.22 296.12 LI P �I lszlle I The typical single family residential customer averaged 8,093 gallons of water per month j over the course of 2008. As mentioned earlier in this report, for purposes of this analysis, it J is assumed that the average single family residential water use is 8,000 gallons per month. Based on this water use, they would experience an increase of $0.43 per month for water -j used and an increase of $1.60 for Groundwater Preservation Fees. The total monthly J increase for 8,000 gallons of water used in a month would be $2.03. This represents an 5.6% increase of which 1.2% is for water use and 4.4% is for the GPF. Each individual customer's increase in their monthly bill will depend on the volume of water they use. Tables that calculate the dollar increase and the percentage increase that a customer would experience on a monthly bill under the proposed rates may be found in Appendix C. 7 The following table illustrates the proposed financial impact for the 5 year projection period: I Preferred Financial Scenario FY 09-10 FY 10-11 FY 11-12 FY 12-13 FY 13-14 Water Rates 1.2% 1.2% 1.7% 2.0% 2.5% GPF 4.4% 4.2% 3.0% 2.0% 1.9% Total Impact 5.6% 5.4% 4.7% 4.0% 4.4% Monthly Bill $38.58 $40.65 $42.57 $44.26 $46.19 Monthly Increase $2 03 $2.07 $1.92 $1.69 $1.93 The proposed increase in the GPF will help repay the debt on the reclaimed water system, the capital charges associated with the reallocation of 3,557 AF of CAP water and ultimately, repay the debt for the costs to construct the CAP water delivery system. It is proposed that the GPF be increased gradually over a five year period. In keeping with the Town Council's direction in prior years, the reclaimed water customers will pay a reduced rate for the GPF. ALTERNATE FINANCIAL SCENARIO Appendix D presents an Alternate Financial Scenario to allow for a comparison with the 1 Preferred Financial Scenario. Both scenarios used identical assumptions for growth, water J use trends and operating costs. A significant difference is the timing and amount of the proposed future debt. In the Alternate Financial Scenario, it is assumed that the Utility l would borrow money for capital projects in FY 11-12 and FY 12-13 and use cash for all J projects in FY 13-14. This financing assumption results in the Utility maintaining approximately $5 million projected cash balance in all years except FY 13-14 in which the projected cash balance would drop to $2.2 million. The projected average ending cash balance of the 5 year period is $4.9 million. 21- The only other difference between the two scenarios is that there are no increases in the base and commodity water rates. The proposed increases to the GPF are the same in both scenarios. The Alternate Financial Scenario includes the following: • Increase the Groundwater Preservation Fee by $0.20, from $0.55 to $0.75 per 1,000 gallons for potable water use. • Increase the Groundwater Preservation Fee by $0.10, from $0.30 to $0.40 per 1,000 gallons for reclaimed water use. • Increase the existing new service establishment fees to recover labor and material costs. • Increase the existing reconnection fees to recover labor and material costs. • Increase the existing backflow permit fees to recover labor and material costs. • Increase the existing refundable security deposits to minimize bad debt write off. • Increase the existing meter installation fees to recover labor and material costs. Given the current economic conditions, the Water Utility Commission and Utility Staff wanted to provide an option for the Council to consider with regard to water rates. The Alternate Financial Scenario proposes no rate increase for the base rates and the commodity rates in FY 2009-10 as opposed to the 1.2% rate increase that is proposed in the Preferred Financial Scenario. The Alternate Financial Scenario does not have the rate increases that will generate needed revenues and therefore further reduces the ending cash balance in FY 2013-14. In order for the Alternate Financial Scenario to meet all the financial requirements, the scenario included debt financing of $5.9 million in FY 2011-12. The following table illustrates the proposed financial impact of the Alternate Financial Scenario during the 5 year projection period for proposed rate increases, GPF increases, the total financial impact and the projected monthly bill for a single family residential customer using 8,000 gallons of water per month. Alternate Financial Scenario FY 09-10 FY 10-11 FY 11-12 FY 12-13 FY 13-14 Water Rates 0.0% 0.0% 0.0% 2.5% 2.8% GPF 4.4% 4.2% 3.0% 2.0% 1.9% Total Impact 4.4% 4.2% 3.0% 4.5% 4.7% Monthly Bill $38.12 $39.72 $40.92 $42.78 $44.79 Monthly Increase $1.60 $1.60 $1.20 $1.86 $2.01 Both the Preferred Financial Scenario and the Alternate Financial Scenario meet all revenue requirements and debt service coverage requirements. -22- n Ii n OTHER SERVICE FEES & CHARGES n Both the Preferred and Alternate Financial Scenarios include the same increases in other service fees and charges as listed below. The schedules for these proposed increases are n included in Appendix E. None of these service fees and charges are development impact i J fees. NEW SERVICE ESTABLISHMENT FEES New service establishment fees provide the Utility a means of recovering labor and material costs related to performing new service establishment procedures. The costs related to new service establishment procedures include staff labor, printed forms and vehicle costs. It is recommended that the new service establishment fees be increased to recover the costs to provide the service. RECONNECTION FEES Reconnection fees provide the Utility a means of recovering labor and material costs related to performing delinquent turn off procedures. The costs related to delinquent account turn off procedures include staff labor, vehicle costs, printed forms, out -source mailing expenses and postage. BACKFLOW PERMIT FEES Backflow permit fees provide the Utility a means of recovering labor and material costs rl related to inspect new backflow assembly installations, maintain a backflow data base, J notification to owner of testing requirements and following up to insure that the testing was completed and is in compliance with State regulations. The costs related to backflow permit fees include staff labor, vehicle costs, printing costs and postage. SECURITY DEPOSITS Security deposits are required of all new customers establishing water service with the Utility for the first time and are refundable after one year if the account has not been delinquent. Security deposits are also required if an existing account becomes delinquent. Currently, the Jsame deposit is required regardless of the customer classification. Recent trends indicate that the majority of customers closing accounts without paying their final water bill are tenants. These customers frequently have delinquent accounts prior to leaving, thus the amount owned is typically more than one month's water use. "1 METER INSTALLATION FEES J There are currently over 18,000 water meters in the water distribution system. Water meters are the equipment that measure the volume of water used in order to bill each customer for l their specific water use. Water sales revenue represents 93% of the total revenue collected J for the Enterprise Fund. The meter installation fees need to be increased to recover the labor j and material costs related to meter installations. J 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. j -23- C� r CONCLUSION The Commission presents this Water Rates Analysis Report for the review and consideration of the Mayor and Council. The Commission and Water Utility Staff are available to discuss this report in greater detail at Council's request. Utility Staff are planning to request Council's approval of a Notice of Intent on October 7, 2009 and approval of any rate ( , increases at a Public Hearing on November 18, 2009. r l The Oro Valley Water Utility Commission is proud to serve the Town of Oro Valley, it t 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. -24- APPENDIX A Assumptions for Preferred Financial Scenario A-1 Enterprise Fund A-3 Alternative Water Resources Development Impact Fee Fund A-4 Potable Water System Development Impact Fee Fund 1 J I PREFERRED FINANCIAL SCENARIO n ASSUMPTIONS FOR ENTERPRISE FUND (� Growth J FY 09-10: 60 new metered connections for water rates FY 09-10, 10-11, 11-12 & 12-13: 75 new metered connections for water rates n Growth rates provided by S. Lemos, Finance Director, Town of Oro Valley l J Water Rate Structure 4 Tiers - all usage in each tier to remain the same n Base Rate l FY 09-10 = 2%, FY 10-11 =2%, FY 11-12 = 2%, FY 12-13 = 2% and FY 13-14 = 3% Commodity Rate Increases FY 09-10 FY 10-11 FY 11-12 FY 12-13 FY 13-14 Tier 1 1.0% 1.0% 2.0% 3.0% 3.5% Tier 2 1.5% 1.5% 2.5% 3.5% 3.5% j� Tier 3 2.0% 2.0% 3.0% 4.0% 4.0% LJ Tier 4 2.5% 2.5% 3.5% 4.5% 4.0% Construction Water Rate $1.00 more than Tier 4 in each year Potable GPF Rates (cost per 1,000 gallons) FY 09-10 = $0.75, FY 10-11=$0.95, FY 11-12 = $1.10 FY, 12-13 = $1.20 FY 13-14 = $1.30 Reclaimed GPF Rates (cost per 1,000 gallons) FY 09-10 = $0.40, FY 10-11 = $0.50, FY 11-12 = $0.60, FY 12-13 = $0.65 FY 13-14 = $0.70 Water Use Trends Used same water use trends as those in CY 2008. The average monthly water use for a residential customer with a 518 x 3/4 inch water meter dropped to 8,093 gallons per month in CY 2008 from 9,000 gallons in CY 2007. For this analysis 8,000 gallons were used as the average monthly water use. l Vacant Homes and/or Disconnected Meters J There were 238 known vacant home and/or disconnected meters at 8/20/09. The residential (160) and construction (10) are projected to be re -activated at 20% per year beginning in 1 FY 2010-11. The remaining commercial & irrigation (68) are projected to remain J disconnected. Other Revenue JBased on FY 09-10 proposed budget. Did not project increases as mist. charges fluctuate (NSF fees, reconnect fees, sewer billing, stormwater billing, plan review) Beginning Cash Balance Taken from 6/30/09 Balance Sheet of respective funds. Refer to Beginning Cash Balance Worksheet. Interest Income The average interest rate for the Local Government Investment Pool in FY 08-09 was 1.280%. Based on recent trends, the interest rate projected for FY 09-10 is 1.0% followed by 0.5% increase each year thereafter. Interest projections were provided by J S. Lemos, Finance Director, Town of Oro Valley A-1 rPREFERRED FINANCIAL SCENARIO � ASSUMPTIONS FOR ENTERPRISE FUND (continued) Personnel Costs r Based on Utility's proposed budget for FY 09-10. No new employees were added over the 5 year projection period. For FY 10=11 a 2.5% increase over FY 09-10 budget. For all [ remaining years a 5% increase was added to the prior FY. Potable O&M rl Based on Utility's proposed budget for FY 09-10; 2.2% inflation for FY 10-11 and 2.4% inflation for all remaining years. Reclaimed O&M Based on Utility's proposed budget for FY 09-10; 2.2% inflation for FY 10-11 and 2.4% inflation for all remaining years. CAP Capital Costs Based on 10,305 AF at rate schedule adopted by CAP 6/19/08 & amended 6/04/09. CAP Treatment & Delivery Costs Assumed that direct delivery of 2500 AF of CAP water will begin in January 2014. Costs estimated by P. Saletta using data from Carollo Study dated July 2007 CAP Recharge Costs Based on rate schedule adopted by CAP 6/19/08 & amended 6/04/09. Recharge as follows: FY 09-10=4,000 AF FY 10-11=4,000 AF For all remaining years, 2,500 AF is projected to be recharged annually. CAGRD Costs Based on S. Seng worksheet and rate schedule adopted by CAP 6/19/08 & amended 6/04/09 Debt Service P&I debt service for 2001 & 2003 Excise Tax Bonds taken from amortization schedules r provided by Stone &Youngberg (S&Y). P&I debt service for 2003 Sr. Lien Bonds taken from amortization schedules provided by S&Y. l P&I debt service for 2005 Excise Tax Bonds taken from amortization l schedules provided by S&Y. P&I debt savings for 2007 Excise Tax Bonds taken from schedules provided by S&Y. r P&I debt service for proposed 2009 WIFA loan was estimated by S. Seng using $3,403,000 at 4.25% for 20 years. P&I debt service for proposed 2012 WIFA loan was estimated by S. Seng f using $3,580,000 at 4.25% for 20 years L Debt Service Coverage 1.30 coverage ratio for 2003 Sr. Lien Bonds & WIFA Loans f 1.00 coverage ratio for all Excise Tax Pledged Bonds Capital Improvements Projects are identified in 5-Year CIP and Potable Water System Master Plan. /:N l; F PREFERRED FINANCIAL SCENARIO n ASSUMPTIONS FOR AWRDIF FUND �I � Growth I l FY 08-09: 60 new connections for water rates, 90 EDUs for impact fees (60 x 1.50 = 90) FY 09-10, 10-11, 11-12 & 12-13: 75 new connections for water rates, 112 EDUs for impact n fees (75 x 1.50 = 112) J Growth rates provided by S. Lemos, Finance Director, Town of Oro Valley AWRD Impact Fees n Increased to $4,982 per EDU, Ordinance No. (0) 08-14, effective 12/2/08 l Not projected to increase in the five year projection period. Revenue n FY 09-10 revenue derived from 90 EDUs at $4,982 J For all remaining years revenue derived from 112 EDUs at $4,982 Potable GPF Rates (cost per 1,000 gallons) FY 09-10 = $0.75, FY 10-11=$0.95, FY 11-12 = $1.10 FY, 12-13 = $1.20 FY 13-14 = $1.30 Reclaimed GPF Rates (cost per 1,000 gallons) j FY 09-10 = $0.40, FY 10-11 = $0.50, FY 11-12 = $0.60, FY 12-13 = $0.65 J FY 13-14 = $0.70 Water Use Trends Used same water use trends as those in CY 2008. The average monthly water use for a residential customer with a 5/8 x 3/4 inch water meter dropped to 8,093 gallons per month in CY 2008 from 9,000 gallons in CY 2007. For this analysis 8,000 gallons were used as the j average monthly water use. J Vacant Homes and/or Disconnected Meters There were 238 known vacant home and/or disconnected meters at 8/20/09. The residential (160) and construction (10) are projected to be re -activated at 20% per year beginning in FY 2010-11. The remaining commercial & irrigation (68) are projected to remain disconnected. Beginning Cash Balance Taken from 6/30/09 Balance Sheet of respective funds. Refer to Beginning Cash Balance Worksheet. 1 Interest Income J The average interest rate for the Local Government Investment Pool in FY 08-09 was 1.280%. Based on recent trends, the interest rate projected for FY 09-10 is 7 1.0% followed by 0.5% increase each year thereafter. Interest projections were provided by S. Lemos, Finance Director, Town of Oro Valley Debt Service P&I debt service for 2003 Sr. Lien Bonds (reclaimed phase 1) taken from amortization schedules provided by Stone & Youngberg. P&I debt service for 2007 WIFA Loan (reclaimed phase 2) estimated by S. Seng using $5,000,000 at 3.536% interest over 20 years. P&I debt service for CAP project estimated by Stone & Youngberg with project costs identified in the Carollo Study dated July 2007 Debt service for reallocation of 3,557 AF of CAP water was provided by CAWCD. j A-3 FINANCIAL SCENARIO ASSUMPTIONS FOR PWSDIF FUND Growth FY 08-09: 60 new connections for water rates, 90 EDUs for impact fees (60 x 1.50 = 90) FY 09-10, 10-11, 11-12 & 12-13: 75 new connections for water rates, 112 EDUs for impact fees (75 x 1.50 = 112) Growth rates provided by S. Lemos, Finance Director, Town of Oro Valley PWSD Impact Fees Increased impact fees to $2,567 per EDU effective 10/01/07, Ordinance No. (0) 07-31. Not projected to increase in the five year projection period. Revenue FY 09-10 revenue derived from 90 EDUs at at $2,567 Revenue for all remaining years derived from 112 EDUs at $2,567. Proceeds from Series 2003 bonds are completely used by end of FY 09-10 Beginning Cash Balance Taken from 6/30/09 Balance Sheet of respective funds. Refer to Beginning Cash Balance Worksheet. Interest Income The average interest rate for the Local Government Investment Pool Based on recent trends, the interest rate projected for FY 09-10 is 1.0% followed by 0.5% increase each year thereafter. Interest projections were provided by S. Lemos, Finance Director, Town of Oro Valley Debt Service P&I debt service for 2003 Sr. Lien Bonds (expansion related projects) taken from amortization schedules provided by Stone & Youngberg. No further financing is projected. Capital Improvements Capital projects (growth related) are identified in the Potable Water System Master Plan and the 5-Year CIP. A-4 APPENDIX B Preferred Financial Scenario B-1 Enterprise Fund B-3 Alternative Water Resources Development Impact Fee Fund B-4 Potable Water System Development Impact Fee Fund B-5 Summary of All Funds I l 1 lJ I I I V M m V V w ry 1 M r O, O VW w O O O O V O V 1� N N O S MiO I�OOO wMMO O W W �N 00mOI�O a�N C'1 06 N OI M N M O' O M W m W A O M I S W O 1�� 1' N' M O i m W M I C O N V d I S M O - 0 V V V N M M N V M O cO N M V O N N M N M r w w V V Of M N M O Ip V N O O) M M M O O a 0 0 LL N M V � N tV � .- CO N �- V w w w w w V M N MOM W V M V M O M O W M M O V V N M w W M M M O, O M M V M O M M aa I� r O M V w 1� N V O V 1 — 7 N V M O O) N O cG V O M iO O N O! V c[i W O V V tD c0 OWN N V M M N V V M M M M W M4G ._. 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F F z W ui LO vi LO 0 u 0 W I- �wU) 0 0 0 v_mN a s � N m J [n U c-NMV 0 q = 0 0 0 0 ? o 0 0 0 0 p z J W O o 0 O 0 0 D O N O C M O N C-8 I l J -1 J APPENDIX D Alternate Financial Scenario D-1 Assumptions for Alternate Financial Scenario D-5 Proforma: Enterprise Fund D-7 Proforma: AWRDIF Fund D-8 Proforma: PWSDIF Fund D-9 Proforma: Summary of All Funds D-12 Potable Water Rate Schedule D-13 Reclaimed Water Rate Schedule D-14 Tables for Bill Comparisons by Meter Size F I 1■I f■I I I I I ALTERNATE FINANCIAL SCENARIO ASSUMPTIONS FOR ENTERPRISE FUND Growth FY 09-10: 60 new metered connections for water rates FY 09-10, 10-11, 11-12 & 12-13: 75 new metered connections for water rates Growth rates provided by S. Lemos, Finance Director, Town of Oro Valley Water Rate Structure 4 Tiers - all usage in each tier to remain the same Base Rate Increases FY 09-10 = 0%, FY 10-11 =0%, FY 11-12 = 0%, FY 12-13 = 3% and FY 13-14 = 4.5% Commodity Rate Increases FY 09-10 FY 10-11 FY 11-12 FY 12-13 FY 13-14 Tier 1 0.0% 0.0% 0.0% 3.0% 3.0% Tier 2 0.0% 0.0% 0.0% 5.0% 5.0% Tier 3 0.0% 0.0% 0.0% 6.0% 6.0% Tier 4 0.0% 0.0% 0.0% 6.0% 6.0% Construction Water Rate $1.00 more than Tier 4 in each year Potable GPF Rates (cost per 1,000 gallons) FY 09-10 = $0.75, FY 10-11=$0.95, FY 11-12 = $1.10 FY, 12-13 = $1.20 FY 13-14 = $1.30 Reclaimed GPF Rates (cost per 1,000 gallons) FY 09-10 = $0.40, FY 10-11 = $0.50, FY 11-12 = $0.60, FY 12-13 = $0.65 FY 13-14 = $0.70 Water Use Trends Used same water use trends as those in CY 2008. The average monthly water use for a residential customer with a 5/8 x 3/4 inch water meter dropped to 8,093 gallons per month in CY 2008 from 9,000 gallons in CY 2007. For this analysis 8,000 gallons were used as the average monthly water use. Vacant Homes and/or Disconnected Meters There were 238 known vacant home and/or disconnected meters at 8/20/09. The residential (160) and construction (10) are projected to be re -activated at 20% per year beginning in FY 2010-11. The remaining commercial & irrigation (68) are projected to remain disconnected. Other Revenue J Based on FY 09-10 proposed budget. Did not project increases as misc. J charges fluctuate (NSF fees, reconnect fees, sewer billing, stormwater billing, plan review) Beginning Cash Balance 1 Taken from 6/30/09 Balance Sheet of respective funds. Refer to Beginning Cash Balance J Worksheet. Interest Income The average interest rate for the Local Government Investment Pool in FY 08-09 was 1.280%. Based on recent trends, the interest rate projected for FY 09-10 is l 1.0% followed by 0.5% increase each year thereafter. Interest projections were provided by S. Lemos, Finance Director, Town of Oro Valley D-1 J ALTERNATE FINANCIAL SCENARIO ASSUMPTIONS FOR ENTERPRISE FUND (continued) Personnel Costs Based on Utility's proposed budget for FY 09-10. No new employees were added over the 5 year projection period. For FY 10=11 a 2.5% increase over FY 09-10 budget. For all remaining years a 5% increase was added to the prior FY. Potable O&M Based on Utility's proposed budget for FY 09-10; 2.2% inflation for FY 10-11 and 2.4% inflation for all remaining years. Reclaimed O&M Based on Utility's proposed budget for FY 09-10; 2.2% inflation for FY 10-11 and 2.4% inflation for all remaining years. CAP Capital Costs Based on 10,305 AF at rate schedule adopted by CAP 6/19/08 & amended 6/04/09. CAP Treatment & Delivery Costs Assumed that direct delivery of 2500 AF of CAP water will begin in January 2014. Costs estimated by P. Saletta using data from Carollo Study dated July 2007 CAP Recharge Costs Based on rate schedule adopted by CAP 6/19/08 & amended 6/04/09. Recharge as follows: FY 09-10=4,000 AF FY 10-11=4,000 AF For all remaining years, 2,500 AF is projected to be recharged annually. CAGRD Costs Based on S. Seng worksheet and rate schedule adopted by CAP 6/19/08 & amended 6/04/09 Debt Service P&I debt service for 2001 & 2003 Excise Tax Bonds taken from amortization schedules provided by Stone &Youngberg (S&Y). P&I debt service for 2003 Sr. Lien Bonds taken from amortization schedules provided by S&Y. P&I debt service for 2005 Excise Tax Bonds taken from amortization schedules provided by S&Y. P&I debt savings for 2007 Excise Tax Bonds taken from schedules provided by S&Y. P&I debt service for proposed 2009 WIFA loan was estimated by S. Seng using $3,403,000 at 4.25% for 20 years. P&I debt service for proposed 2011 WIFA loan was estimated by S. Seng using $5,910,000 at 4.25% for 20 years Debt Service Coverage 1.30 coverage ratio for 2003 Sr. Lien Bonds & WIFA Loans 1.00 coverage ratio for all Excise Tax Pledged Bonds Capital Improvements Projects are identified in 5-Year CIP and Potable Water System Master Plan. D-2 ALTERNATE FINANCIAL SCENARIO ASSUMPTIONS FOR AWRDIF FUND Growth j FY 08-09: 60 new connections for water rates, 90 EDUs for impact fees (60 x 1.50 = 90) FY 09-10, 10-11, 11-12 & 12-13: 75 new connections for water rates, 112 EDUs for impact n fees (75 x 1.50 = 112) JGrowth rates provided by S. Lemos, Finance Director, Town of Oro Valley AWRD Impact Fees n Increased to $4,982 per EDU, Ordinance No. (0) 08-14, effective 12/2/08 1 Not projected to increase in the five year projection period. Revenue n FY 09-10 revenue derived from 90 EDUs at $4,982 J For all remaining years revenue derived from 112 EDUs at $4,982 Potable GPF Rates (cost per 1,000 gallons) FY 09-10 = $0.75, FY 10-11=$0.95, FY 11-12 = $1.10 FY, 12-13 = $1.20 FY 13-14 = $1.30 Reclaimed GPF Rates (cost per 1,000 gallons) FY 09-10 = $0.40, FY 10-11 = $0.50, FY 11-12 = $0.60, FY 12-13 = $0.65 J FY 13-14 = $0.70 Water Use Trends Used same water use trends as those in CY 2008. The average monthly water use for a J residential customer with a 5/8 x 3/4 inch water meter dropped to 8,093 gallons per month in CY 2008 from 9,000 gallons in CY 2007. For this analysis 8,000 gallons were used as the average monthly water use. Vacant Homes and/or Disconnected Meters There were 238 known vacant home and/or disconnected meters at 8/20/09. The residential J (160) and construction (10) are projected to be re -activated at 20% per year beginning in FY 2010-11. The remaining commercial & irrigation (68) are projected to remain disconnected. J Beginning Cash Balance Taken from 6/30/09 Balance Sheet of respective funds. Refer to Beginning Cash Balance Worksheet. Interest Income The average interest rate for the Local Government Investment Pool in FY 08-09 was 1.280%. Based on recent trends, the interest rate projected for FY 09-10 is l 1.0% followed by 0.5% increase each year thereafter. Interest projections were provided by J S. Lemos, Finance Director, Town of Oro Valley Debt Service P&I debt service for 2003 Sr. Lien Bonds (reclaimed phase 1) taken from amortization schedules provided by Stone & Youngberg. P&I debt service for 2007 WIFA Loan (reclaimed phase 2) estimated by S. Song using $5,000,000 at 3.536% interest over 20 years. P&I debt service for CAP project estimated by Stone & Youngberg with project costs identified in the Carollo Study dated July 2007 JDebt service for reallocation of 3,557 AF of CAP water was provided by CAWCD. J D-3 ALTERNATE FINANCIAL SCENARIO P ASSUMPTIONS FOR PWSDIF FUND n Growth n FY 08-09: 60 new connections for water rates, 90 EDUs for impact fees (60 x 1.50 = 90) FY 09-10, 10-11, 11-12 & 12-13: 75 new connections for water rates, 112 EDUs for impact fees(75 x 1.50 = 112) rl Growth rates provided by S. Lemos, Finance Director, Town of Oro Valley L J PWSD Impact Fees Increased impact fees to $2,567 per EDU effective 10/01/07, Ordinance No. (0) 07-31. n Not projected to increase in the five year projection period. l J Revenue FY 09-10 revenue derived from 90 EDUs at at $2,567 Revenue for all remaining years derived from 112 EDUs at $2,567. Proceeds from Series 2003 bonds are completely used by end of FY 09-10 Beginning Cash Balance Taken from 6/30/09 Balance Sheet of respective funds. Refer to Beginning Cash Balance L Worksheet. Interest Income The average interest rate for the Local Government Investment Pool Based on recent trends, the interest rate projected for FY 09-10 is 1.0% followed by 0.5% increase each year thereafter. Interest projections were provided by S. Lemos, Finance Director, Town of Oro Valley Debt Service P&I debt service for 2003 Sr. Lien Bonds (expansion related projects) taken from amortization schedules provided by Stone & Youngberg. No further financing is projected. Capital Improvements Capital projects (growth related) are identified in the Potable Water System Master Plan and the 5-Year CIP. 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Costs: The costs related to new service establishment procedures include staff labor, printed forms, and vehicle costs. The following are the steps involved for the establishment of new services and the related costs to perform the function for every new account: • Receive customer phone call & take account information (5 min) • Write up out -going account information (3 min) • Data entry of new account & closed account (4min) • Sort field copies for distribution (4 min) • Operations staff to turn on water service (25 min) • Vehicle costs: 5 miles @ $0.55 per mile • Update new account information prior to billing (10 min) • Prepare billing for new accounts & outgoing accounts (6 min) • Refund security deposits prior to billing (1 min) Total costs for new service establishment — regular hours: • Less operations staff to turn on during regular hours • OPS reconnect service after hours (2 hour minimum pay) Total estimate cost to new service establishment — after hours: $ 1.81 $ 1.08 $ 1.45 $ 1.45 $ 9.77 $ 2.75 $ 12.48 $ 2.17 $ 0.36 $ 33.32 - 9.77 $ 46.90 $ 70.45 Due to increased costs to perform this service, it is recommended that the New Service Establishment Fees increase as shown: Description Current Proposed New Service Establishment Fee $20.00 $30.00 New Service Establishment Fee After Hours $70.00 $70.00 E-1 SERVICE FEES & CHARGES Reconnection Fees: Purpose: To provide the Utility a means of recovering labor and material costs related to performing delinquent turn off procedures. Costs: The costs related to delinquent account turn off procedures include staff labor, printed forms, out -source mailing and postage Refer to page E-3 for an itemized description of all costs. Due to increased costs to perform this service, it is recommended that the Reconnection Fees increase as shown: Description Current Proposed Reconnection Fee $40.00 $80.00 Reconnect Fee After Hours $70.00 $115.00 E-2 SERVICE FEES & CHARGES Reconnection Fees Cost Itemization: n The following are the steps involved with the issuance of delinquent turn-offs and the related l cost to perform each function per customer. This procedure is performed twice each month. • Print Delinquent notices and preparation time (15 min) $ 6.25 Form $ 0.02 Envelope $ 0.03 j 7 Return Envelope $ 0.02 �J Sort for errors or duplicate notices (20 min) $ 8.33 • Sorting, folding, mailing of notice (out -source costs) "j Insert Notice $ 0.01 J Insert Return envelope $ 0.01 Fold Notice before insertion $ 0.01 �j Meter and Seal Envelope $ 0.02 JJ Postage $ 0.36 • Answering calls resulting from delinquent notices sent (4-5min) $ 1.81 • Print Delinquent Notice Report (25 min) $ 8.48 • Underline Delinquent Report for customer calls (20 min) $ 6.79 • Reverse 911 setup & notification to OV Police Dept. $ 0.03 • Write up pink door hangers (3-4 min) & re -run report $ 1.45 Stamp meter # on door hanger, cut, staple, check accounts • Pink Door Hanger form $ 0.57 7 • Update/marking Delinquent Report & Door Hangers (10 min) $ 3.61 • Arrangements/follow-up with customers (10 min) $ 3.61 • Copy Turn-off list & number (10 min) $ 3.61 Cost per copy $ 0.01 • Empty drop box for payments & update (10 min) $ 1.23 • Update & review on-line and credit card payments (5 min) $ 1.81 • OPS Turn-off: Average 25 min drive time & lock service off $ 9.77 • Vehicle costs: 5 miles at $0.55 per mile $ 2.75 • Collection of payment/writing receipt/updating master list (4 min) $ 1.45 • Calling OPS to reconnect service (2 min) $ 0.72 • Delinquent turn-off fee adjustments to customers account (5 min) $ 1.75 • J Approval/update to spreadsheet (4 min) $ 2.11 • OPS reconnect service 25 min drive time to restore service $ 9.77 • Vehicle Costs: 5 miles at $0.55 per mile $ 2.75 Total estimated cost to perform delinquent account turn off - regular hours: $79.14 • Less OPS reconnect service during regular hours $- 9.77 • OPS reconnect service after hours (2 hour minimum pay) $46.90 Total estimate cost to perform delinquent account turn off - after hours: $116.27 E-3 SERVICE FEES & CHARGES Backflow Permit Fee: Purpose: The purpose of the fee is to recover the Utility's costs 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. Costs: The costs to perform duties associated with inspection of new backflow assembly installations and the related follow-up are as shown: Labor 2 hours at $22.74 per hour $45.48 Benefits at 30% of gross wage 13.64 Vehicle costs: Estimate 5 miles round trip at $0.55 per mile 2.75 Printed forms, postage, letterhead, envelopes 3.00 Total Costs $64.87 Due to increased costs to perform this service, it is recommended that the Backflow Permit Fee increase as shown: Description Current Proposed Backflow Permit Fee $50.00 S65.00 E-4 r, l l SERVICE FEES & CHARGES Security Deposits: l l Purpose: To provide the Utility a means of recovering water sales revenue when a customer closes a water service account without paying their final water bill. Security deposits are charged to all new customers that do not have an existing account with the utility. These deposits are refunded to the customer after one year unless the account has been delinquent. Recent trends indicate that the majority of customers closing accounts without paying their final water bill are tenants. These customers frequently have a delinquent accounts prior to leaving, thus the amount owed is typically more than one month's water use. With regard to commercial accounts, other regional water providers increase the amount of the security deposit based on meter size or two times the estimated monthly water bill. Costs: There are no costs associated with security deposits; however, if there is no security deposit when a customer leaves without paying their final bill, the Utility loses that water sales revenue. Due to the increase in the number of customers leaving the service area without paying their final water bill, it is recommended that Security Deposits increase as shown: J i J Description Current Proposed Security Deposit — Residential - Owner $40.00 $50.00 Security Deposit — Residential - Tenant $40.00 $100.00 Security Deposit - Commercial $40.00 2 times estimated monthly usage E-5 SERVICE FEES AND CHARGES Meter Installation Fees Purpose: To provide the Utility a means of recovering labor and material costs related I to installing water meters. Costs: The costs related to installing water meters include staff labor, water meters and travel. Refer to page E-7 for an itemized decription of all costs. Due to increased costs to perform this service, it is recommended that the Meter Installation Fees increase as shown: Proposed Meter Installation Fees Meter Size Meter Type Current Fees Proposed Fees 5/8 x 3/4 standard $ 247.00 $ 260.75 3/4 x 3/4 standard $ 251.00 $ 268.75 1 standard $ 319.00 $ 325.00 1.5 irrigation (turbo) T2 S 750.00 $ 1,062.00 1.5 high use (compound) C2 $ 1,000.00 $ 1,536.00 2 standard $ 918.00 N/A 2 irrigation (turbo) T2 $ 1,258.00 $ 1,240.00 2 high use (compound) C2 $ 1,760.00 $ 1,765.00 3 irrigation (turbo) $ 1,530.00 $ 1,560.00 3 high use (compound) $ 2,200.00 $ 2,230.00 4 irrigation (turbo) $ 2,838.00 $ 2,838.00 4 high use (compound) $ 3,537.00 $ 3,537.00 6 irrigation (turbo) $ 4,662.00 $ 4,662.00 6 high use (compound) $ 6,360.00 $ 6,360.00 8 irrigation (turbo) $ 6,473.00 $ 6,473.00 Meter installation fees are paid by developers at the time a new meter is purchased. Meter installation fees are subject to 8.1% sales tax. The proposed fees include the cost of meter plus labor costs to install. ME I I I n J I J I Meter Size Meter Type 5/8 x 3/4 standard 3/4 x 3/4 standard 1 standard 1.5 irrigation (turbo) Omni T2 1.5 high use (compound) Omni C2 2 standard 2 irrigation (turbo) Omni T2 2 high use (compound) Omni C2 3 irrigation (turbo) 3 high use (compound) 4 irrigation (turbo) 4 high use (compound) 6 irrigation (turbo) 6 high use (compound) 8 irrigation (turbo) Oro Valley Water Utility Meter Installation Costs Total Labor Total Total Meter Personnel Hours to Cost Labor Labor & Meter AMR Equip. Costs Required Install Per Hour Costs Materials $ 102.00 $ 140.00 $ 242.00 1 0.75 $ 25.00 $ 18.75 $ 260.75 $ 110.00 $ 140.00 $ 250.00 1 0.75 $ 25.00 $ 18.75 $ 268.75 $ 160.00 $ 140.00 $ 300.00 1 1.00 $ 25.00 $ 25.00 $ 325.00 $ 822.00 $ 140.00 $ 962.00 2 2.00 $ 25.00 $ 100.00 $ 1,062.00 $1,296.00 $ 140.00 $1,436.00 2 2.00 $ 25.00 $ 100.00 $ 1,536.00 will discontinue use of this type of meter $ 975.00 $ 140.00 $1,115.00 2 2.50 $ 25.00 $ 125.00 $ 1,240.00 $1,500.00 $ 140.00 $1,640.00 2 2.50 $ 25.00 $ 125.00 $ 1,765.00 $1,270.00 $ 140.00 $1,410.00 2 2.50 $ 30.00 $ 150.00 $ 1,560.00 $1,940.00 $ 140.00 $2,080.00 2 2.50 $ 30.00 $ 150.00 $ 2,230.00 $2,428.00 $ 140.00 $2,568.00 3 3.00 $ 30.00 $ 270.00 $ 2,838.00 $ 3,127.00 $ 140.00 $ 3,267.00 3 3.00 $ 30.00 $ 270.00 $ 3,537.00 $ 3,982.00 $ 140.00 $ 4,122.00 4 4.50 $ 30.00 $ 540.00 $ 4,662.00 $5,680.00 $ 140.00 $5,820.00 4 4.50 $ 30.00 $ 540.00 $ 6,360.00 $5,613.00 $ 140.00 $5,753.00 4 6.00 $ 30.00 $ 720.00 $ 6,473.00 Assumptions: Sensus Meter & AMR equipment costs quoted by Dana Kepner. Average meter reader labor is $21.53 per hour including 30% benefits. Rounded labor costs to $25.00 per hour to include costs for gasoline, uniforms, phones, & administration. Average distribution labor is $27.50 per hour including 30% benefits. Rounded labor costs to $30.00 per hour to include costs for gasoline, uniforms, phones, & administration. Use of Omni meters for 1.5 and 2-inch meters are proposed because of the following reasons: C2 meters measure flow as low as .5 gpm and up to 200 gpm The current meters being used measure flow from 2 gpm to 200 gpm T2 meters measure flow as low as 1.25 gpm up to 200 gpm (1.5-inch) The current meters being used measure flow from 4 gpm to 120 gpm T2 meters measure flow as low as 1.5 gpm up to 200 gpm (2-inch) The current meters being used measure flow from 4 gpm to 160 gpm Additionally C2 & T2 meters can be tested without removing the meter and has data logging capability to record up to 31 days of of water use on an hourly basis. E-7