MINUTES
ORO VALLEY WATER UTILITY COMMISSION
REGULAR SESSION
Monday, November 9, 2009
HOPI CONFERENCE ROOM
11000 N. LA CAÑADA DRIVE
CALL TO ORDER: 6:01 P.M.
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PRESENT: |
David Powell, Chair
Rick Davis, Vice Chair
Robert Milkey, Commissioner
Elizabeth Shapiro, Commissioner
Richard Reynolds, Commissioner
Winston Tustison, Commissioner
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| EXCUSED: |
John Hoffmann, Commissioner
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STAFF PRESENT:
Philip C. Saletta, Water Utility Director
Shirley Seng, Utility Administrator
David Ruiz, Engineering Division Manager
Chair Powell indicated that Ms. Malecki Oro Valley resident could speak on water rates after Item 2 was presented.
MOTION: A motion was made by Commissioner Shapiro and seconded by Commissioner Reynolds approve the October 12, 2009 minutes.
MOTION carried, 6-0.
Ms. Seng reported the following on the Water Rates.
-Ms. Seng thanked Commissioners Tustison, Shapiro, Milkey and Reynolds for their support and attendance at the October 14th Town Council Study Session.
-Public Hearing on Water Rates Wednesday, November 18 @ 6 p.m. Location: Town Council Chambers.
-Town Council packets emailed to Commissioners. Ms. Seng reviewed some of the concerns raised during the Town Council Study Session.
-Describe the distinct differences between the Preferred and Alternate scenarios
Comments and responses from the Council Study Session held October 14, 2009.
-Preferred Scenario proposes increases in the base rates, commodity rates, Groundwater Preservation Fees and several other existing service fees.
-Financial impact to the average residential customer using 8000 gallons per month would be an increase of $2.06 (5.6%) in their monthly bill.
-This scenario proposes incurring debt in FY 09-10, using cash for capital improvements in FY 10-11 and incurring debt in FY 12-13 in the amount of $3.580,000.
-Alternate Scenario proposes increases in the Groundwater Preservation Fees and several existing service fees.
-Financial impact to the average residential customer using 8000 gallons per month would be an increase of $1.60 (4.4%) in their monthly bill.
-Alternate Scenario proposes incurring debt in FY 09-10 for existing system improvements. Borrowing additional funds FY 10-11 in the amount of $5.910,000.
-A discussion and clarification of the operations/maintenance costs categories defined as Least control, Minimal control and Most control was given.
-Provided a graph outlining the Water Utility’s O&M Budget Comparison for FY 08-09 & FY 09-10 Least control, Minimal control and Most control categories.
Council’s questions and concerns:
-How much revenue revenue will an increase in the base rate generate -Existing New Service Establishment Fees and revenue increases -Explained Security deposits are not considered a revenue source -Bad Debt is written off on residential accounts. There are no bad debts on commercial accounts in FY 08-09. -Water Conservation Program will remain unchanged. The reduction in water use was a key component in the Water Rates Analysis Report.
Public Comments on rates
-Do not increase Base Rates but increase Commodity Rates, GPF and Service Fees thereby promoting conservation without affecting the customers base rates.
Ms. Seng felt that the customer’s comment was an option to consider. She requested feedback from the Commissioners.
Questions and answers session occurred
-Would the suggestion provided by the resident still be covered by the existing Notice of Intent presented to Council? (Commissioner Milkey). Ms. Seng indicated that the option would not affect the Notice of Intent and could still be an alternative for Council to consider.
-Do you anticipate having an exact revenue model for the Commodity Rate scenario as indicated in the Base rate revenue scenario? Ms. Seng said there would be $77,000 less revenue under the customer’s proposed Commodity Rate Scenario. Commissioner Milkey felt that the customer’s suggestion could work.
-Commissioner Tustison commented that that the customer’s idea was a good one; however he thought introducing a new scenario to Council could create some confusion. He preferred waiting and bringing it back into next years equation. Commissioner Tustison also felt that the majority of Council understood the proposed scenarios quite well.
-Commissioner Reynolds asked about the existing timetable and whether a new scenario could create a delay. Mr. Saletta did not foresee a delay and felt that some changes could be made to the existing resolution but, if Council requested more scenarios it could delay the water rate process. Ms. Seng believed that the change could be done without impacting Staff or the rate increases effective date. Mr. Saletta indicated that the scenario had already been completed reflecting the $77,000 difference.
-Commissioner Shapiro stated, if we can’t have everything we want in the Preferred Scenario, I would like to keep as much of it as we can in case the Base Rate changes.
Ms. Seng stated that staff was recommending the Preferred Scenario at this time as the best option.
Commissioner Milkey agreed to wait until next year’s Water Rate Analysis before introducing any new ideas to Council.
COMMISSION CONSENSUS
The Commission agreed to hold the resident’s idea for next year’s Water Rate Analysis report.
Mr. Saletta felt it was important to make the Commission aware of all public comments in case the issues were raised with Council. Council may choose to do nothing or act on the Preferred Scenario in terms of rate increases. He felt that the increases to the GPF, Service Fees and Tiered rates were a critical essential component for reclaimed water debt service.
-Commissioner Milkey mentioned that Staff should be prepared to answer questions about the capital improvements incurring debt, future growth plans and existing infrastructure improvements. Mr. Saletta clarified that all the debt incurred from the WIFA Loan is for existing system improvements. Ms. Seng also mentioned that all expansion related project improvements were paid through existing impact fees.
-Commissioner Milkey thought it would be beneficial if someone from the Commission attended the Public Hearing and make a statement to Council in support of the proposed rate increases. Chair Powell felt it was a good point and asked who would be attending.
Commissioners, Shapiro, Milkey and Davis indicated that they would attend.
-Commissioner Tustison commented that one of the key questions raised by Council was what were the key differences between the Preferred & Alternate Scenarios. He explained the three major differences between both scenarios and their estimated ending cash balances end at the end of five years. There were no further comments or questions, No action was required on this item.
Call to Audience: Ms. Barbara Malecki, Oro Valley resident & representative Vistoso Village HOA Board asked if the gallons in each tier were going to change in the proposed rate increase. Ms. Seng indicated that the usage in each tier would not change.
Ms. Malecki asked if the Commission could assist in helping HOA’s communicate in sharing water conservation ideas, tracking water usage and saving water. Chair Powell indicated that the Conservation Subcommittee members were present and would take her suggestions into consideration.
Mr. Saletta reported the following:
Packet Information - Council Communication and Resolution regarding a Cost of Service Study for wheeling of Oro Valley’s CAP water through Tucson Water’s system. A suggested motion is also attached.
-Primary purpose of the Cost of Service Study is to provide a basis to determine what payments would be paid to Tucson Water for the wheeling of Oro Valley’s CAP water. The Commission has discussed this concept at previous meetings and Oro Valley Water Utility is planning Council’s approval at the November 18, 2009 meeting. A separate agreement for the actual wheeling of the water would be presented to the Commission and Council at a later time.
-Oro Valley Water Cost Share would be approximately $20,000. Tasks would include the development and review of the Scope of Services. The contract will be administered by Tucson Water. This is an important first step in moving forward with a short term agreement to acquire wet water instead of paper water. Additional work regarding flow capacity, pressure, water quality and system improvements will be made after the Cost of Service Study is complete.
Staff recommends that the Commission consider a motion to approve the Cost of Service Study resolution for approval to Town Council.
Question and answer session occurred:
-How does the Cost of Service Study affect Oro Valley and how does the NW Water Providers feel about this. (Chair Powell) Mr. Saletta explained that Metro Water and Oro Valley agree in terms of wheeling of CAP water and Metro Water is participating in the proposed IGA. In addition, the other N.W. Water Providers Flowing Wells and Marana have been briefed. This is a short-term interim agreement. Oro Valley and Metro have experienced greater water level drops than the Town of Marana and Flowing Wells Water District.
Is there a time frame for the completion of the COS Study? (Commissioner Milkey). Mr. Saletta indicated that it could take as long as 3-4 months.
-Does the COS Study include the cost of construction and the pipeline or is it only associated with the costs for wheeling CAP water? (Commissioner Reynolds). Mr. Saletta explained that those other expenses would have to be treated independently from the COS Study. Mr. Ruiz and Mr. Jacklitch are working on another study specifically for Oro Valley that is similar and addresses those types of construction projects.
MOTION: A motion was made by Commissioner Reynolds and seconded by Commissioner Milkey recommend that the Town Council approve the resolution regarding an Intergovernmental Agreement Between the City of Tucson, Town of Oro Valley and Metropolitan Domestic Water Improvement District for Joint Funding of a Cost of Service Study for Wheeling Central Arizona Project Water.
MOTION carried, 6-0.
Mr. Saletta reported the following:
-Packet Information: Commission Communication and a draft Intergovernmental Agreement to purchase groundwater extinguishment credits.
-Introduction: Vince Vasques representative for Diamond Ventures, Rocking K Holdings, LP and Rincon Valley Holdings, LP was in attendance.
Background: Oro Valley Water Utility proposes to purchase an additional 4,000 af to increase its Groundwater Allowance Account balance. Mr. Saletta gave a brief explanation on the use of Groundwater Extinguishment credits and how it helps reduce Oro Valley’s payments to the Central Arizona Groundwater Replenishment District (CAGRD). Oro Valley is proposing to purchase extinguishment credits from Rocking K Holdings, LP and Rincon Valley Holdings, LP. He explained that for every acre foot of groundwater extinguishment credits used in the Groundwater Allowance Account will essentially will be one less af the Town is obligated to replace through CAGRD. However, there will always be a minimum payment requirement to CAGRD.
-Proposed purchase of 4,000 acre-feet of groundwater extinguishment credits should not exceed $540,000 at $135.00 per acre-foot. This is paper water not wet water. If the Water Utility Commission supports this concept it will be presented to Council on December 2 or in January depending on Council’s Agenda. Staff has provided the Commission with a suggested motion.
Question and answer session occurred:
-Since this is a one time purchase of 4,000 af will the 4,000 be applied to CAGRD payments in the future? (Commissioner Milkey). Mr. Saletta explained the Groundwater Allowance Account, the Arizona Department of Water Resources conveyance process and transfers to Oro Valley Groundwater Allowance Account. In addition, Mr. Saletta explained that this will increase the GW Allowance Account balance and allow for a reduction in future payments to CAGRD and a direct monetary savings to Oro Valley during the next 4 to 6 years.
-Do we have enough money to purchase the 4,000 acre-feet of groundwater extinguishment credits? (Commissioner Milkey). Mr. Saletta indicated that the purchase would come from the ending fund balance FY 2009-10 Budget - Cash Reserves.
-Was this expenditure included in the budget? (Commissioner Tustison). Mr. Saletta stated that it was not in the FY 2009-10 but would be paid from the Ending Cash Balance however it still needs Council’s approval.
-Commissioner Shapiro supported staff and felt that using paper water instead of cash transactions was a good alternative.
-Commissioner Tustison was unclear about the total savings. Is it saving every year for 4-5 years or is it a one time benefit? Mr. Saletta explained that for every acre foot purchased Oro Valley would save an additional $100 - $150 acre-foot, after we pay the initial $540,000.
-Commissioner Tustison asked will the savings go back into the Enterprise Fund ending balance over the next 4-5 years? Mr. Saletta explained that once the money is taken out of the ending cash balance there would be lower payments to CAGRD in future years and therefore, less depletion to the Enterprise Fund ending fund cash balance in subsequent years.
Mr. Saletta explained that Oro Valley has an existing 4,000 acre feet of extinguishment credits through Tucson Water by approving this purchase it would increase Oro Valley’s Groundwater Allowance Account balance to 8,000 acre feet. Mr. Saletta indicated that even though there will be CAP water deliveries in the future, the Groundwater Allowance Account balance would still be available for the future.
Ms. Seng explained the extinguishment credit process and the Groundwater Allowance Account. As long as these credits offset the groundwater pumping we can minimize payments to CAGRD. If we deplete these credits then every drop that is pumped must be paid to CAGRD. The Utility is trying to increase the account because in the past there have been no recovery wells. This is a piece of our water portfolio that will keep us from paying exorbitant amounts of money to CAGRD.
Commissioner Milkey recommended having an outline projection of the ending cash balance year by year in the Preferred Scenario before going to Council to assure there was ample cash balance in the Enterprise Fund. Mr. Saletta mentioned they could run a scenario using the extinguishment credits and that Staff has already made some of those projections. If the Commission wishes staff to present this again in December or January they would do so.
Commissioner Milkey stated he was not suggesting that Staff wait, but was simply making a statement that it would be clearer if a scenario was presented and only wanted Staff’s assurance on the yearly ending cash balance other than that, he was prepared to move forward with the item.
Commissioner Tustison agreed with Mr. Milkey’s statement and felt that the ending cash balance scenario was a good idea before presenting it to Council.
Mr. Saletta suggested setting up a Finance Subcommittee meeting before Town Council’s meeting December 2, 2009. Commissioner Tustison mentioned he would be out of Town. Mr. Saletta will email the Commission the yearly ending cash balance analysis. Ms. Seng also indicated that the use of the groundwater extinguishment credits would be factored in the Water Rates Analysis Report for next year.
Chair Powell stated there was a motion available for approval.
MOTION: A motion was made by Commissioner Shapiro and seconded by Vice Chair Davis move to recommend that Town Council approve the agreement to purchase up to 4,000 acre-feet of groundwater extinguishment credits with an expenditure not to exceed $540,000 from the FY 2009-10 Budget -Cash Reserves.
MOTION carried, 6-0.
Mr. Saletta gave the following update:
-The Town closed on the Arizona WIFA Loan October 23rd at a rate increase of 3.171% lower than anticipated, and all of the loan documents and disbursement forms will be mailed. Mr. Saletta extended his appreciation to WIFA’s Staff especially Angie Valenzuela, Financial Consultant, Mark Reader of Stone & Youngberg and Town Bond Counsel, Sarah Smith of Gust Rosenfeld. Staff participants: Finance Director, Stacey Lemos, Town Attorney, Tobin Rosen, Water Staff: S. Seng, D. Ruiz and B. Jacklitch. Mr. Saletta also thanked the Commission and Council for supporting the Water Utility in moving forward with the loan. It benefits our Community to obtain this low interest rate loan and be able to move forward with these existing system improvement projects. There were no comments, Mr. Saletta ended his report. No Action was Required on this Item.
Chair Powell thanked Mr. Saletta and Staff for their work in executing the WIFA Loan process.
No report, Vice Mayor Carter was not present.
Chair Tustison had no report.
Chair Davis reported the following:
Discussion of water volunteers
-Comments from a citizen indicated that he would like to see more marketing of water conservation and using volunteers to do audits, offer literature at different events e.g. (Farmers Market).
-Provide power point presentations to HOA, Schools, etc.
-Discussed issues that would need to be evaluated with volunteers such as qualifications, liabilities, overall cost, vehicles & liabilities etc.
-The Subcommittee will assess the need and appropriateness of a volunteer program and prioritize potential tasks.
Discussion on the Drought Response Plan (DRP)
-Discussed water levels on Lake Meade/Powell and that water levels were down 100 feet
-Discussed the need to:
1) Standardize where the climate data comes from
2) Clarify the "Actions" that are to be taken by customers as stated in the DRP
3) Evaluate additional triggers such as water consumption, delivery of reclaimed water, and consider CAP Water an additional trigger
Discussion of Future Grant Funding
-Evaluate Bureau of Reclamation Grant (BOR). The Subcommittee will see if the grant could be used in conjunction with other future projects (water conservation or improvements). There are monies available but we must be able to match the funding which could be an issue. Chair Davis suggested meeting with Mr. Saletta to discuss this issue. Chair Davis ended his report.
Chair Powell thanked Commissioner Davis and Milkey for their participation and doing such a superb job.
No report, Chair Hoffmann was absent.
Ms. Seng reported the following on Meter Installation as of 10/31/09:
-Projected New Meter Installations FY 09-10: Projection = 60 Current Month = 20
-FY 09-10 Projected EDUs = 90 Actual = 22 Fiscal Year to date
-Current Meter installations CY 2009 = 63 -Last CY 2008 = 270
Ms. Seng ended her report.
Mr. Ruiz reported for Mr. Jacklitch.
-Innovation 16-inch Water Main Installation - Contract awarded to Arizona Underground, Inc. To date, they have installed 500 feet of pipe. Completion: In 4 months
Replacement Well E-1B- The re-drilling is complete. A structured wall was installed to minimize the noise. -Geophysical testing is being performed to determine the recommended gpm (gallons per minute) rate. The site and well equipment design work is underway and scheduled for completion by January 2010. This well should be operational by May 2010.
La Canada 3.0MG Reservoir - Reservoir site location: Moore and King Air Drive. Reservoir capacity 3.0 million gallons. The contract was awarded to MGC, Inc. Issues regarding accessibility to the site are being resolved.
North 24-Inch Water Main Installation - Public bid opening November 6, 2009. There were 14 bidders on this project, the lowest bidder was out of Phoenix. The bid came in half of the cost it was projected to be. Location: La Canada/Moore Rd. intersection to King Air.
Design Projects
-Lambert Lane water main relocation. Brown and Caldwell consultants will be putting together a cost proposal for the redesign on this project.
-Three pressure reducing valve station modifications. These stations will be built above ground making it easier for accessibility.
-Sheraton Booster Redesign - Very old station in dire need of repair.
CAP Water Delivery and Distribution Study - Consultants, CH2MHill. An important component is the distribution and implementation of CAP water from the City of Tucson. Staff has already reviewed this proposal and made some modifications, the proposal will be available for Mr. Saletta’s comments.
October Reports
Operations Report Daily Demand = 8.0 million gallons (mgd)
Overall Reservoir Storage = 6-7.0 million gallons (mgd)
Reclaimed Water Report
-Daily Demand = 81.0 million gallons (mgd) Six end users -Yearly Grand Total = 582.0 million gallons (mgd)
-Hilton El Conquistador South pond - Staff is currently working with Hilton El Conquistador staff on the pond’s conversion to reclaim water.
Mr. Ruiz ended his report.
-Central Arizona Water Conservation District (CAWCD) - A meeting was held at the El Conquistador Resort. Mr. Saletta thanked Commissioner Shapiro for attending. Training credits will be received.
Mr. Saletta discussed some of the topics.
-NW Providers Reliability Reservoir - The Board supports moving forward with the construction of this project. Major issues- Federal Government Funding
-Concept: The need to have CAWCD representatives from Pima County (W. Tenney, C. Zimmerman, P. Jacobs, S. Megdal) meet with the N.W. Water Providers to discuss reliability issues.
-Packet: Letter from Carol L. Erwin & David Modeer dated 10.28.09 -Ref: Northwest Reliability Reservoir.
-Navajo Generating Station -This is a coal powered plant which supplies 95% of the power for CAP’s pumping of project water. The Environmental Protection Agency (EPA) is promulgating regulations for Nitrous Oxide (NOX) emissions.
CAP and CAWCD will be submitting comments to EPA on these methodologies. If this methodology is passed by EPA the power costs to NGS will be significantly high, currently CAWCD has 24% partnership in this plant and would ultimately have to pay for these higher rates.
Mr. Saletta ended his report.
Mr. Saletta reported on claims filed against the Water Utility.
-Impact Fee Law: This law includes options for developers to claim credits against impact fees, additionally credits can only be claimed for projects that would be paid with funds from impact fees. Mr. Saletta explained the developer’s claim against the Water Utility and clarified that none of the developer’s facilities were in the Utility’s infrastructure plans and would be paid for with impact fees. The Utility went into partnership with the developer to oversize the reservoir and paid its fair share. The developer is claiming impact fee credits on all of the underground pipes, reservoir and pumping station that the developer needed to install for its development. The Water Utility has denied the developer's request. The developer filed a formal claim against the Water Utility for approximately $2.2 million.
Mr. Saletta emphasized that the Water Utility followed its standard operating procedure and will not pay this claim.
Commissioner Milkey asked what sorts of projects would be paid by impact fees? The Water Utility will only pay for facilities such as a new well, new source of supply, new transmission line for a new development. These are the sort of projects included in our Development Impact Fees, smaller projects or developments for a specific development are not included.
Chair Powell suggested including this topic as an Agenda Item if the Commission had further questions.
Mr. Saletta reported the following:
-CAP staff and interested water users and providers are in the process of looking into acquiring additional water supply that can be delivered through the CAP canal, pump station and facilities from the Colorado River. This is a long process that may take a year. Mr. Saletta mentioned he was a SAWUA representative and has been attending the CAP ADD Water meetings. One of the issues is that CAP ADD Water deliveries must not interfere with existing CAP deliveries and project costs.
Packet - Discussed letter to CAWCD Board Director. OVWU Staff continues to discuss and work on the IGA. The Town Manager’s met today and discussed the possibility of a Project Manager or Program Manager to assist with the technical, environmental and land aspects of this project.
FUTURE AGENDA - To be determined
CALL TO AUDIENCE - None
NEXT MEETING: Decemer 14, 2009 (Tentative)
MOTION: A motion was made by Commissioner Tustison and seconded by Commissioner Shapiro adjourn the meeting.
MOTION carried, 6-0.