Water Utility Director Philip Saletta introduced the Water Utility Commissioners that were in attendance:
~Chair Winston Tustison
~Commissioner Betty Shapiro
~Commission Bob Milkey
~Rick Reynolds
Mr. Saletta began with a PowerPoint presentation. He reviewed the timeline for the analysis.
He reviewed the policies that were adopted by resolution for the water utility. He noted the highlights as:
~The Water Utility should be self supporting with rate based revenues
~Limiting the debt service coverage ratio of 1.30
~Cash reserves of at least 5% of budget
*This percentage was low in terms of cash reserves
~Minimize and avoid rate shock
He noted that by following the policies, the Oro Valley Water Utility (OVWU) would not have an impact on the General Fund.
He explained the Enterprise Fund Operating Revenue sources as:
~Base rate
*Monthly flat rate based on meter size
~Commodity rate
*Based on water usage
~Other fees and charges
~Interest income
~Groundwater Preservation Fee (GPF)
*Used to pay debt for the reclaimed water project and the future development of Central Arizona Project (CAP) water
Revenue Requirements
~Debt service
*31% of Enterprise Fund budget
~Personnel
*24% of budget; $2.5M per year
~Operations and Maintenance
*45% of total budget
*Costs with Least Control:
-Power (to pump the water)
-Billing and postage
-Central Arizona Groundwater Replenishment District (CAGRD) obligations
`Required to replenish the groundwater supply
-Water disinfection costs
-Reclaimed water payments for Tucson Water Utility to treat effluent water
-Central Arizona Project (CAP) capital repayment
-Water quality testing
-Insurance to protect water and the Town
Mr. Saletta noted the following:
~Every acre foot of water must be replaced to the Tucson Active Management area
*This is a requirement for an assured water supply.
~Some of the replacement water came from recovery wells and Groundwater Extinguishment credits.
*The balance was paid through CAGRD.
-The contract with CAGRD required a minimum payment every year.
Cost with Minimal Control:
~Water management and recharge costs
~Maintenance and repair costs
*Wells, reservoirs, pumps, pipelines
*Staff is on call 24/7 to repair items that must be repaired immediately such as pipelines.
~Vehicle operations and maintenance
*No new vehicles budgeted for this fiscal year.
Council Member Abbott arrived at 6:16 p.m.
Cost most able to control:
~Office supplies
~Uniforms
~Training and travel
~Telecommunications
*Saved considerably on cell phones working with the Information Technology department
~Memberships and subscriptions
~Outside services
It was noted that:
~The Water Utility had a 4.1% Operations and Maintenance (O&M) reduction from Fiscal Year (FY) ’08-’09 to FY ’09-’10 which equated to $205,000.
~Fixed costs remain the same for the same level of production.
Mr. Saletta discussed the financial scenarios:
~5 year revenue and expense projections
~Key assumptions in Water Rates Analysis report
~Phase-in Groundwater Preservation Fee
~Base rates based on meter size
~Commodity rates
~Other fees and charges
Customer Analysis
~Preferred scenario - increase to average customer is 5.6%
*Increase in Base rates of 2.0%
*Increase in Commodity rates:
-Tier 1 = 1.0%
-Tier 2 = 1.5%
-Tier 3 = 2.0%
-Tier 4 = 2.5%
*Increase in GPF of $.20 per 1,000 gallons or 4.4% of total monthly bill
~Alternate scenario - increase to average residential customer is 4.4%
*No base or commodity rate increases
*Increase in GPF of $.20 per 1,000 gallons or 4.4% of total monthly bill
The average residential customer uses 8,000 gallons per month.
~Preferred scenario
*$2.06 increase per month from $36.52 to $38.58 per month
~Alternate scenario
*$1.60 increase per month from $36.52 to $38.12 per month
Other Fees and Charges
~Included in all financial scenarios
~Increase to recover associated costs
*New service establishment fees
*Reconnection fees
*Backflow Permit fees
-Important to keep water safe
*Security deposits
*Meter installation fees
Mr. Saletta clarified that these fees were not development impact fees, but rather fees for services.
He reviewed the timeline for approval noting that, once approved, the first bill reflecting the increase would be in January.
It was noted that:
~Service fee charges were increased approximately three to four years ago.
~Bad debt is written off at less than 1% annually
*Slowly increasing
*Projected to $16,000.
~The Water Utility is required to submit water analysis results in summary form to the public for review annually in June.
Council Member Garner stated that he believed that renters should pay a higher security deposit. He reasoned that renters could leave the property without paying the utility bill. It was confirmed that the deposit would be applied to any bills that were unpaid.
It was noted that the commercial bad debt had not been written off in many years.
Council Member Gillaspie stated that he wanted staff utilized to aggressively educate the public on water conservation. Mr. Saletta stated that the amount of water that customers used was tracked and base projections were compiled by those numbers. He noted that the reduction in use had been taken into consideration and customers were saving water and money.
Mr. Saletta stated that he wanted to avoid rate shock with higher increases. Council Member Garner stated that he wanted to raise rates to fully recover costs, particularly as personnel costs rise. Mr. Saletta stated that he will review this next year in the water rates analysis.
Conservation and Sustainability Manager Bayer Vella introduced the item stating that the Sustainability Plan Categories had nine elements:
~Sustainability
~Land Conservation & Planning
~Building
~Water Conservation
~Renewable Resources
~Waste Reduction
~Stormwater
~Procurement
He noted that the elements had been refined based on Council’s suggestions. He stated that the three general areas were organization, conservation and efficiency.
Mr. Vella identified cost saving opportunities:
| Consumption | 2009 Expenditures |
| Paper | $20,000+/- |
| Fuel | $477,893 |
| Water | $153,656 |
| Energy | $1,200,000 |
He noted that in the future, when the Town is in a position to purchase vehicles again, attention should be paid to fuel economy.
Mr. Vella stated that the audit was necessary to form a strategy to meet the requirements of the Department of Energy in order to acquire the grant in its entirety of $164,000.
Mr. Vella stated that Arizona Public Service (APS) Energy Solutions was hired to conduct the audit. He noted that the cost of the audit was $21,000 less than anticipated. He introduced Leonard Byrd of APS Energy Solutions. Mr. Byrd stated that his task was to save customers energy.
Mr. Byrd explained the Town’s existing conditions:
~$1.2M in annual electricity and gas expenditures
*Pumping water accounted for over 60% of electricity costs
~The fifteen year old Council Chambers’ cost to maintain was growing and would continue to grow as it ages and replacement parts become more difficult to find.
~The Town possessed a wide array of equipment due to acquisition over different periods of time.
Evaluation of Energy Conservation measures:
| Interior & exterior lighting | Cool roof | Lighting controls |
| HVAC zone control | Water conservation | High efficiency packaged units |
| Solar photovoltaic | Variable Frequency Drives (VFD’s) | Solar thermal |
| Preventative maintenance | Rate analysis | Demand-controlled ventilation |
| Low E window film | Pump efficiency measurement | Ceiling fans |
| Premium efficiency motors | Direct Digital Controls (DDC) | Data energy management |
| Central plant | | |
He noted that the study was 60% complete and would be 100% completed by the end of the month.
It was noted that:
~Anything implemented as a result of the study was financially guaranteed.
~Per statute, should any item fail, APS must have it repaired.
It was recommended that:
~The Town should save money spent on utilities and invest cost reductions into Town infrastructure without capital costs
~American Recovery and Reinvestment Act (ARRA) funds should be utilized where appropriate
~The Town should pursue alternative financial resources, such as Clean Renewable Energy Bonds (CREBs) to maximize Town benefits
*CREBs were based on solar credits.
Discussion noted the following:
~The target would be to pay for debt service out of energy conservation only
~The grant amount is $164,200.
*Unused funds for the audit would be used to pay down the debt
~Currently, the audit was 60% completed and projected reducing energy costs by 20%
*The typical goal for cost reduction was 10%
Mr. Vella stated that there would not be a request for money from the General Fund.
It was noted that the Internal Revenue Service (IRS) required a reservation for CREBs funds. Mr. Vella stated that the reservation had been made and a solar plan has been provided to them. He stated that he anticipated a response in the next three weeks.