MINUTES
ORO VALLEY WATER UTILITY COMMISSION
REGULAR SESSION
Monday, February 14, 2011
HOPI CONFERENCE ROOM
11000 N. LA CAÑADA DRIVE
 
 
 
CALL TO ORDER - AT OR AFTER 6:00 P.M.

ROLL CALL: 6:01 p.m. 

PRESENT:
Dave Powell, Chair
Rick Davis, Vice Chair
John P. Hoffmann, Commissioner
Robert Milkey, Commissioner
Richard Reynolds, Commissioner
Elizabeth Shapiro, Commissioner
Winston Tustison, Commissioner

STAFF PRESENT:
Philip C. Saletta, Director
Shirley Seng, Utility Administrator
David Ruiz, Engineering Division Manager
Robert Jacklitch, Project Manager

CALL TO AUDIENCE - At this time, any member of the public is allowed to address the Water Utility Commission on any issue not listed on today’s agenda.  Pursuant to the Arizona Open Meeting Law, individual Commissioners may ask Town Staff to review the matter, ask that the matter be placed on a future agenda, or respond to criticism made by speakers.  However, the Water Utility Commission may not discuss or take legal action on matters raised during "Call to Audience."  In order to speak during "Call to Audience" please specify what you wish to discuss when completing the blue speaker card.

There was a call to audience question from Mrs. Weise regarding frozen pipes during the cold weather that was addressed in the Director's Report.

1.

APPROVAL JANUARY 10, 2011 MINUTES  Discussion and/or possible action.


Click here for Item #1

MOTION: A motion was made by Commissioner Tustison and seconded by Commissioner Shapiro to Approve

MOTION carried, 7-0.

2.

PRESENTATION BY CENTRAL ARIZONA PROJECT      (P. Saletta/Tom McCann)  Discussion and possible action regarding a presentation from the Central Arizona Project (CAP) Staff regarding CAP Water Supply Status and Shortage Outlook.


Click here for Item #2

Mr. Saletta introduced Tom McCann, CAP Assistant General Manager.

Mr. McCann was very instrumental in the settlement of the Tucson Area Central Arizona Reliability agreement. Mr. McCann gave a presentation regarding Water Supply Shortage Status and CAP issues.  

His presentation discussed the current conditions on the Colorado River and that snowpack is 120% above normal. There no expected shortages until at least 2016. Releases are made to Lake Mead from Lake Powell to equalize the volumes of each. The Secretary of the interior declares a shortage condition. If a shortage occurs then the shortage is shared based upon an agreement between the seven basin states. There are three levels in Lake Mead that trigger shortages. These are 1075 feet, 1050 feet and 1025 feet. There are shortage guidelines that are followed for each of these. In Arizona, there is a priority of use for Colorado River water users. Municipal and Industrial users in Arizona have a high priority and impacts of shortages to their deliveries is very low. In addition to the shortage sharing agreement, Colorado River water has been stored underground in Arizona for future use to protect against future shortages.

Mr. McCann ended his presentation. The following were questions from the Commission:

-How accurate have the January 1st projections been historically? (Commissioner Milkey). The Bureau knows by its recurrent year how much water has been ordered by every one down stream and knows how much water will be released by Lake Mead. The same concept is applied with Lake Powell. The only unknown is what happens with side inflow between Lake Powell and Lake Mead because there are substantial fluctuations.

-Are Lake Powell increases based on Snowpack in the mountain states? (Commissioner Tustison). Mr. McCann indicated that it was and gave a brief explanation on the current snow pack.  

-Does the level of Lake Mead have any bearing on equalization or is it just the level of Lake Powell? (Commissioner Hoffmann). It's the level of Lake Powell but the amount of equalization could be affected by the Level of Lake Mead. (Mr. McCann)

-Since Lake Mead was filled what’s the lowest its ever reached? (Commissioner Hoffmann) Mr. McCann estimated  about 1082 feet a few months ago. 

-How does Mexico figured into the CAP Shortage sharing? (Chair Powell) Mr. McCann explained an existing treaty between Mexico and the U.S. indicates that under extraordinary drought, deliveries to Mexico can be reduced by the proportions used in the U.S. Mexico states that they can only be reduced as long as the existing states receive a reduction. There have been ongoing discussions with Mexico for voluntary reductions. No agreement has been reached but a temporary agreement is in place allowing Mexico to store its water they couldn’t’t use in Lake Mead from a recent earth quake. The agreement could be expanded to include Mexico’s contribution to CAP water shortage guidelines. The basin States fully expect that the U.S. will reduce CAP deliveries to Mexico when the time comes. Under normal conditions Mexico receives 1.5 million AF per year.

-When are CAP deliveries scheduled relative to shortages if they occur? (Commissioner Hoffmann). Mr. McCann explained that the Secretary informs CAP July of each year what the outlook is for next year. CAP can determine and tell what their status is by the 24 month study. The schedule of deliveries for CAP customers are due by October 1 each year. By mid November customers are issued their relative schedules.

-Are there legal ramifications with weather modification for example taking moisture that is moving? (Commissioner Hoffmann). This is an argument that has been made but cannot be proven. However nothing we do in the weather modification brings out all of the moisture from the clouds. It’s a topic that’s been discussed but no legal actions have been taken challenging any of these programs. We believe this is an inexpensive program. (T. McCann).

-Is it true the upper basin states do not use their 7.5 million water supply? (Commissioner Hoffmann). Their usage has declined during the current drought for the last ten years because the water has not been in the river. They are heavily dependant on actual stream flow. In 1999-2000 the upper basin was using about 4.8 million AF. They have been consistently using about 4.0 million AF a reduction of approximately 800,000 AF.

Mr. McCann explained that the equalization line is based on what the upper basin thinks needs to be in storage to be able to protect their uses and growing methods.  

-Is it true that studies performed at the University of Arizona indicate we are in a wet cycle rather than a drought cycle? (Commissioner Davis). The tree rate studies can show the dry cycles but are not that accurate with wet cycles. We need to take a closer look at the long term trends.  

Mr. Saletta pointed out that Oro Valley was included in the M&I portion of the graph and is classified as one of the highest priority within CAP. Mr. Saletta pointed out we need to plan for our future water supply and part of it is continued groundwater storage. Mr. Saletta indicated that Oro Valley has long term storage credits and its own account for underground storage and that it does not have to solely rely on the Arizona Water Banking Authority firmed water practice.

The Commission thanked Mr. McCann for his presentation.

3.

UPDATE AND REVIEW OF COMPREHENSIVE PLAN FOR THE DEVELOPMENT OF CENTRAL ARIZONA PROJECT WATER       (Commissioner Hoffmann/P. Saletta)  Discussion and/or possible action regarding the planning for the development of Central Arizona Project Water.  This discussion may include future water use projections and a framework for comparing alternatives for CAP water delivery.  Discussion may include interim delivery of Oro Valley’s CAP water through the Tucson Water system, recharge and recovery, and direct treatment and delivery.  Various studies, costs, impacts to water rates and next steps regarding CAP water delivery may also be discussed.


Click here for Item #3a

Click here for Item #3b

Commissioner Hoffmann reported that the Renewable Water Resources Subcommittee met Wednesday, February 9th. Included in the packets is a revised table outlining several Short Term and Long Term options for delivery of CAP Water. Last month when this item was presented there were a few undetermined values. Staff has provided additional information for this table and the subcommittee has reviewed the table in detail. Commissioner Hoffmann indicated that he would make a motion after Mr. Saletta’s report.

Mr. Saletta thanked the Finance and Renewable Water Subcommittees for their input. He mentioned that he would be asking for a motion in order to move forward with discussions with Tucson Water.

Mr. Saletta reviewed the Short Term and Long Term Options:
1,000 AF/Year -Adjusted Cost per AF $387 
1,500 AF/Year -Adjusted Cost per AF $445
3,000 AF/Year -Adjusted Cost per AF $678 (higher capital costs and sunk cost $1,686,000)  

Long Term Options
Option 1 - Recharge & Recovery Phase 1
5,000 AF/Year -Adjusted Cost per AF $1,180
Option 2 - Treatment & Direct Delivery Phase 1
5,000 AF/Year -Adjusted Cost per AF $1,099
These both have very high capital costs and the second phase for both these projects will be more expensive and will be determined in future plans.

Short Term Options 1,000 & 1,500 AF/Year Timeline: Earliest January 2012
3,000 AF/Year -Timeline: January 2013

The 3,000 AF/Year option is the most expensive of three Short Term options and there may be additional construction costs in order to address delivery capacities.  

Councilmember Gillaspie are these additional costs beyond what is shown in the table?  Mr. Saletta said yes, but Staff does not know what the additional actual costs are at this time. Tucson Water discovered problems with their system and the delivery of 4,000 AF or more to Oro Valley could hamper delivery. This issue will be addressed in the future.

Councilmember Hornat asked how much water do we use currently in our system? Mr. Saletta explained that groundwater pumping was approximately 8,000 AF per year and Reclaimed Water was 2,200 AF.

Short Term - Advantages & Disadvantages
Advantage: delivery of wet water instead of paper water 
-Reduces CAGRD obligation  -No significant change in water rate projections

Disadvantages 1,000 and 1,500 Short Term AF/Year: -1,000 AF Minor reduction in end of year cash balance, 1,500 AF Moderate reduction,  3,000 AF Significant reduction in end of year cash balance

Reviewed 1st year budget increases and Average Annual Budget Increases 1,000 - 3,000 AF
1,000 AF at $335,500  -Average annual budget increase at $401,358    -1,500 AF at $1,349.110 -Average annual budget increase at $473,500   -3,000 AF at $1,053,625 -Average annual budget increase at $1,460,067. 

Projected financial impact to customers using 8,000 gallons of water are the same as what was projected previously in the recent Water Rates Analysis. These are as follows:
-Commodity Rates Projections: 0.6% - 1.8% over a five year period
-GPF Rate Projections:  0.7%-1.8% over a five year period 

Councilmember Hornat asked are the rate projections for the total of over five years?  Mr. Saletta indicated that these are range of rate projections for each year in the five year period. These rates are not considered fixed and are just projections at this time.

Are these rates the same as indicated in the water rates study? (Commissioner Milkey). Ms. Seng confirmed there were no modifications to the rates in the rate analysis. The increases shown represent the impact to the average  residential customer that would be reflected on their bill. They are not the rate increase percentages.

Commissioner Tustison mentioned that the Finance Subcommittee met and spent a considerable amount of time going over the options and the five year projections. We concluded that the Short Term Wheeling solution was a viable option if phased in over a three year period. It could be managed satisfactorily from a financial point of view with our present five year plan. He emphasized that it does decrease cash reserves, and it is strictly dependent on Council’s approval of water rate increases every year for the next five years. It probably won’t work if Council holds off on rate increases.

In answer to Councilmember Hornat’s question, Mr. Saletta explained that the sunk costs were included for each project. Commissioner Hoffmann explained that the sunk costs were not additive costs.

Mr. Saletta also explained that these projects were evaluated on a comparative basis as stand alone projects. When we did our financial analysis we took into consideration the phasing in of these projects.

Commissioner Shapiro indicated that it was feasible to go from one project to the next and we would not lose any cost. She supported moving forward with the projects. 

Proposed Schedule -CAP Short-Term Delivery Options
3/16: Present to TOV Council 
3/17-5/20/11: Negotiate IGA with Tucson Water
6/13: OV WUC review of Draft IGA
7/??/11: Tucson Council consideration of IGA (to be determined)
7/20/11: TOV Council consideration of IGA
8/11/11: OVWU Staff commence design
10/1/11: OVWU Staff commence construction
1/1/12: Short-term 1000 af option in operation

Mr. Saletta mentioned that Tucson believes they could reduce costs to approximately $500 per AF however this is still under negotiations.

Councilmember Hornat asked we have a Groundwater Preservation Fee increase coming in October 2011, when will you come forward with increases to both the Groundwater Preservation Fee and commodity rates to make this work? Mr. Saletta indicated that staff would be evaluating the water rates on schedule in the Fall 2011. Staff suggests that Council implement the increases shortly after approval and not delay implementation. Town policy states that water rates increases be forwarded to Council annually unless the Council or Commission directs Staff to do otherwise.

Commissioner Shapiro stated that we should not hamper any cost negotiations with Tucson Water for the CAP delivery. We should give Staff the ability to negotiate this price.

Chair Powell made the request for a Motion.

MOTION: A motion was made by Commissioner Hoffmann and seconded by Commissioner Reynolds move and recommend that Oro Valley Water Utility Staff to move forward with discussions with Tucson Water regarding the options for short-term interim delivery of Central Arizona Project Water.

MOTION carried, 7-0.

4.

WATER UTILITY COMMISSION ANNUAL REPORT         (P. Saletta)  Discussion and/or possible action regarding the proposed schedule, preparation and review of the Oro Valley Water Utility Commission Annual Report.


Mr. Saletta discussed the tentative Annual Report Proposed Schedule. 
2/18: First draft from OVWU
2/28: Compile all sections for final review by Staff
3/4:  Draft Report to WUC
3/14: WUC approval of Report to forward to Council
4/6:  Council acceptance of Report 
Mr. Saletta ended his report.

5.

TOWN COUNCIL MEETINGS/COMMUNICATIONS                (Councilmember Gillaspie)


Chair Powell moved Agenda Item #5.

Councilmember Gillaspie had no report.

6.

SUBCOMMITTEE/COMMISSIONER REPORTS


a.

Finance Subcommittee             (Commissioner Tustison)


Commissioner Tustison had no report.

b.

Conservation Subcommittee             (Commissioner Davis)


Commissioner Davis reported that the subcommittee met last week.
Topics: -How does the Utility fit into the Landscape Code 
-Rainwater Harvesting project: Parks & Recreation Department is planning to initiate a project at Town facilities. Ms. Boyce will meet with J. Gardner at Parks and Recreation department. 
-Vestar O.V. Market Place: Obtain results from Vestar about their rainwater harvesting project to determine if it is  really working. Commissioner Davis suggested having Vestar give a short presentation about rainwater harvesting. The Commission agreed to have the topic as a future agenda item. 

c.

Renewable Water Resources Subcommittee (Commissioner Hoffmann)


Commissioner Hoffmann had no report.

7.

STAFF REPORTS


a.

Customer Service Report             (S. Seng)


Click here for Item a.

Customer Service Report - Meter Installations/Replacements
New Meter Installation: 4
Actual New Meter Installations as of 1/31/11: 37
Tracking: 55
Projected New Meter Installations for FY 10-11: 75
Actual EDUs as of 1/31/11: 63

New meter installation summary:
Residential:  29  Commercial: 5     Irrigation: 3
Total: 37

Meter Replacement Program: 
CY 2011:  24
Total since inception in 2008: 1,120
Ms. Seng ended her report.

b.

Capital Projects                (B. Jacklitch)


Construction Projects
-Well at Tangelo           -Location: Tangelo and First Avenue 
This project is about 90% complete and the well will be running by March or early April.

-N. La Canada $3.0 Million Concrete Buried Reservoir:  This project is about 60% complete. The concrete roof will be constructed by March. -Location: Moore Rd. & King Air Drive

-N. La Canada 24" Pipeline: The project is about 50 % complete. Completion: March or April

Design Projects
-Lambert Lane Water Main: The design is complete. Bidding will take place in March. This project will be combined with Public Works Lambert Lane Road widening project. Public Works will be advertising this project in March.
-El Conquistador Booster Station: Design is 100% complete  Advertisement for this project is scheduled in March.
Mr. Jacklitch ended his report.

c.

Potable and Reclaimed Water System Report                        (D. Ruiz)


Click here for Potable Water System Report-January 2011

Click here for Reclaimed Water System Report- January 2011

Potable Water System - January 2011
-Reservoir levels: 7.0 million gallons
-Daily Demand:  4.5 to 5.0 million gallons

Reclaimed Water System -January 2011
-January Usage: 26.5 million gallons per day
Mr. Ruiz ended his report.

8.

DIRECTOR’S REPORT                   (P. Saletta)


Audience: Mr. Saletta addressed Mr. Weise Oro Valley resident question regarding the cold weather experienced on the 3rd through 4th of February.  He explained that Customer Service staff responded to over 950 Customer calls over both days. In addition, Operation’s Staff reported there were a substantial amount of frozen pipes associated with the monitoring system. All field staff and meter readers were responding to Customer frozen pipe problems. It was a great effort from Staff.  Overall there were only 11 customers out of water due to pump station repairs. All 44 sites were checked for potential leaks and pipe problems. It was estimated that there was a 6%-8% water use increase detected during the period of below freezing temperatures. 

a.

Proposed WIFA Loan Prepayment Policy


The Utility has several loans through WIFA. WIFA will be changing their policies regarding prepaid loans. If revenues from their borrowers come in early they will also incur charges. We are concerned because we were never notified up front that there would be any premiums or fees for early loan payments. Oro Valley does not plan pay these loans earlier than scheduled. Staff will keep the Commission posted regarding WIFA’s decision. 

b.

ADWR funding proposal


Mr. Saletta reported that Arizona Department of Water Resources has a proposal out requesting that  municipalities help fund their budget in the next year by paying an additional fee. If this is passed through the state legislature Oro Valley could pay an additional $52,000 per year. Staff will monitor the State legislature’s progress on this budget proposal item.

c.

Upcoming Meetings


2/17: Town Council Regular meeting
2/23: Town Council Budget Study Session
3/02: Town Council Regular meeting
3/16: Water Utility Commission
3/16: Town Council Regular meeting 
Mr. Saletta ended his report.

FUTURE AGENDA ITEMS

Vestar Water Harvesting Project

CALL TO AUDIENCE - At this time, any member of the public is allowed to address the Water Utility Commission on any issue not listed on today’s agenda.  Pursuant to the Arizona Open Meeting Law, individual Commissioners may ask Town Staff to review the matter, ask that the matter be placed on a future agenda, or respond to criticism made by speakers.  However, the Water Utility Commission may not discuss or take legal action on matters raised during "Call to Audience."  In order to speak during "Call to Audience" please specify what you wish to discuss when completing the blue speaker card.

There were no speakers.

 NEXT MEETING:  MARCH 14, 2011    LOCATION: HOPI  CONFERENCE ROOM

ADJOURNMENT: 7:45 P.M. 

MOTION: A motion was made by Commissioner Milkey and seconded by Commissioner Shapiro to Approve to adjourn the meeting.               
                       

MOTION carried, 7-0.