Ms. Seng reviewed some of the water rates preliminary major assumptions. All the revenue was projected on water use patterns last fiscal year 2010/11. The average water use increased from 8,000 to 8,400 gallons after 4-5 years of continuous decline. As of June 30 there are 246 outstanding vacant accounts and approximately 100 are irrigation accounts which probably will not be back on line. We assume the remaining residential accounts will come back on line at 5% per year.
Growth estimates: 35 meters connections are estimated every year over the next five year period which equates to 44 EDU’s (Equivalent Dwelling Units).
The interest rates is 0.5% percent for all five years. We are proposing to cash fund all capital improvements with the exception of those in FY 2015/16. During this period a WIFA loan will be assumed $2.9 million at 4.25% percent for 20 years. The Utility would elect to finance the projects so that the cash balance doesn’t drop below $2.0 million.
Potable Water Development Impact Fee Fund: includes completion of the La Canada Reservoir and Main project. There are no other projected projects. This fund is simply paying off debt.
Alternative Water Impact Fee Fund: Capital = $515,000 for CAP Project . We anticipate $430,000 for the expansion of the reclaim water main, Location: east of La Canada on Naranja to the Naranja Town park.
-Do we anticipate development at the Town site? (Commissioner Davis). Ms. Seng mentioned she did not have any details about the site.
Personnel Costs: No additional staff throughout the 5 years, No merit increases. Ms. Seng mentioned there was a 2% overall cost increase each year stemming from health insurance and other benefits.
Operations & Maintenance Cost: Additional 2.2% inflationary increase for each year. In year 12/13 the Reclaimed Water IGA will have to be renewed affecting a significant increase in reclaimed water costs. The cost per acre foot for reclaimed water could increase to as much as $500 per AF. Current rate $270 - $300 per AF. Mr. Saletta will update the Commission as he negotiates the agreement.
In FY 2011/12 we assumed 5,000 AF of recharge however next year’s projection could be as much as 6,000 AF. Ms. Seng explained that the Utility must continue to maintain its long term storage credits for its recovery wells. This helps reduce our financial obligation to the Central Arizona Groundwater Replenishment District (CAGRD). By using recovery wells and transferring long term storage credits to offset the cost of CAGRD we reduce our projected payment from approximately $800,000 to $260,000.
-Tucson Water Wheeling Costs: Comprises of O&M, Administrative and Capital expenses. The capital component is $71.18 per AF reflected in the Alternative Water Resources Development Impact Fee Fund (AWRDIF). The remaining $428.71 AF for O&M and Administrative costs will be paid for out of the Enterprise Fund.
Power Cost Savings: Decrease pumping costs by $113 AF for CAP water delivered. The Utility’s CAGRD obligation will also decrease because of CAP water deliveries.
Ms. Seng mentioned that the initial scenario indicates that a rate increase for FY 2011-12 is not needed based upon the 5-year projection period for the water rates analysis. She will be rechecking all the formulas and will be meeting with the operations superintendents to check if they have projected all extraordinary operationg costs.
Ms. Seng explained that under this scenario the Utility meets its debt service coverage requirements and cash reserve requirements but we still need to proceed cautiously. Staff will be meeting with the Finance Subcommittee in September to review the final scenarios before a formal recommendation is made to the Commission in October.
She also mentioned that even if we have no rate increase this year, we still have to complete a Water Rates Analysis Report. Staff would like to present the report to Council November 2nd.
A question and answer session occurred.
-If there is an increase in the cost of reclaimed water will it require an increase in the reclaimed rate? (Commissioner Milkey). Ms. Seng explained that the Utility already charges its reclaimed users the Tier 1 rate which is approximately $700 per AF.
-With personnel costs and no merit increases, is this a town wide policy? (Chair Powell). Ms. Seng stated that it was consistent with the Finance Director’s projections for the general fund.
-What are the plans for the cost of CAP delivery long term after the 5 years of the CAP wheeling is completed? (Commissioner Shapiro). Ms. Seng explained that Staff has discussed this issue before and given the exisiting IGA with Tucson Water we will probably be wheeling CAP water through Tucson Water for up to 10 years. We may increase our deliveries from 1,500 AF to 3,000 AF at an unconfirmed cost of $6.0 - $8.0 million. This project can be funded through the Alternative Water Impact Fee Fund which in year 5 could have close to $7.0 million. However, it is possible that we may finance about $2.5 million through WIFA. We should receive a lower interest rate because renewable water projects are considered green projects.
It would benefit us to consider Tucson’s CAP wheeling as a long term option before spending $60.0 - $80.0 million on a treatment plant. Staff continues to discuss these issues.
-Are we not looking to recharge in AVRA Valley at this time? (Commissioner Shapiro). Ms. Seng mentioned there is still a study being performed at Red Rock but we must ask ourselves how financially viable is it in the next 10 years. Do we want to begin construction on something like this? We have an opportunity now to have Tucson Water wheel our CAP water for the next 5 to 10 years at a modest amount of money compared to a $60.0 - $80.0 million CAP Project.
-Commissioner Shapiro questioned the studies with Northwest Providers and doing the project jointly. Ms. Seng mentioned that Metro Water had already purchased their recharge facilities and they are moving forward with their own recharge and recovery project.
Ms. Seng explained that wheeling our CAP water through Tucson was much more cost efficient. We must evaluate the ultimate CAP project and how will it be financed and be aware that it is a very expensive option. Tucson Water has been a great regional partner. We do not foresee any problems wheeling CAP water through Tucson's system until the Town decides what the next step is.
Commissioner Milkey agreed there was no need to go with the more expensive option until the need arises. If growth resumes or the Arroyo Grande project is annexed and developed than we can reconsider this alternative. At the present rate of growth it might be wise to move up to 3,000 AF in some reasonably expedient time just to preserve our groundwater.
Commissioner Milkey asked is there any prospect of using more than 10,000 AF of recharge allocation? Ms. Seng commented that recharge was very expensive. We are currently accumulating credits for all our recharged water. Until we actually begin to accept delivery of our CAP water we are not actually using "wet water". It probably will not be economically feasible to recharge the entire 10,000 AF of our allotment. In addition the cost of recharge will continue to increase.
In answer to Commissioner Shapiro’s questioned, Ms. Seng explained that the agreement with Tucson Water would secure Oro Valley’s water rights and capacity in their system. Any other water provider would be subordinate to us. She also felt that Tucson Water would not over commit their capacity.
Ms. Seng will report the status on the rates at the next Commission meeting. There were no further questions. No action was required on this item.
Ms. Seng reported the following:
-Fitch Bond Rating Company - Completed their process of doing a three year surveillance with regard to the Water Utility’s original $31.0 million 2003 Senior Lien Bond Issue. These bonds are backed solely by water revenues. They have issued a press release affirming the Town’s AA- rating with a stable outlook.
-Customer Service Report
Total Metered Connections as of 8/31/11: 8
Projected Meter Installations for FY 11-12: 35
Actual New Meter Installations as of 8/31/11: 23
Projected EDU’s for FY 11-12: 44
Actual EDU’s as of 8/31/11: 30
Current Month Meter Replacements: 58 as of 8/31/11
Total Meter Replacements since inception: 1,589
Ms. Seng ended her report.
Mr. Jacklitch reported the following:
-Lambert Lane 16-inch Water Main: This is a roadway improvement project between La Canada, Lambert Lane and Pusch View Bridge. -A 16-inch water main will also be installed. -General construction began week of 9/5/2011. -Contractor: Eagle Rock -Water main completion date: FY 2012
-EL Conquistador Booster Station: A Notice to Proceed was issued in July. Contractor: Smyth Steel. A temporary booster station will be built after the existing facility is demolished.
-North La Canada 3.0 MG Concrete Buried Reservoir: This potable water project is 90% complete. -Location: La Canada -The project will require the building of a masonry wall and landscaping. The reservoir has been filled and over 90% of all our regulatory requirements have been met. The reservoir will be scheduled to go on line by the end of this week.
Councilmember Hornat asked about the Lambert Lane 16-inch main installation. Mr. Jacklitch mentioned that the main could be utilized for CAP water deliveries in the future. Mr. Jacklitch also mentioned that the (E-zone) La Canada reservoir will serve customers between Tangerine and Naranja to La Cholla to Oro Valley Hospital. This reservoir could be used for storage and future CAP blending.
Mr. Jacklitch report for Mr. Ruiz.
2011 Pumpage Monthly Report - August 2011
Sustainable rate: 5,500 AFY
2011 Annual Well Pumpage Report - August 2011
Sustainable Rate: 5,500 AFY
Reclaimed Water System - August 2011
Total pumpage was down. There were also several rain events.
Daily Demand Total: 534.7 million gallons
Potable Water System Demand and Precipitation - August 2011
Daily Storage: 6.5 million gallons
End of month demand increase: 8.5 mgd
-Precipitation: Several rain events
-Daily Demand: 8.5 million gallons
Water Watch Streamflow for Arizona and Colorado - August 2011
-Stream flow percentile classes were displayed.
Mr. Jacklitch ended his report.