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Home My WebLink AboutAgenda Packet - EVWD Board of Directors - 01/21/2015 SPECIAL BOARD MEETING January 21, 2015 – 5:30 pm 31111 Greenspot Road Highland, Ca 92346 AGENDA CALL TO ORDER PLEDGE OF ALLEGIANCE ROLL CALL OF BOARD MEMBERS PUBLIC COMMENTS Any person wishing to speak to the Board of Directors is asked to complete a Speaker Card and submit it to the District Clerk prior to the start of the meeting. Each speaker is limited to three (3) minutes, unless waived by the Chairman of the Board. Under the State of California Brown Act, the Board of Directors is prohibited from discussing or taking action on any item not listed on the posted agenda. The matter will automatically be referred to staff for an appropriate response or action and may appear on the agenda at a future meeting. 1. Budget Based Rate Review and Update Reports 2. General Manager/CEO 3. Legal Counsel Report 4. Board of Directors Comments ADJOURN Pursuant to Government Code Section 54954.2(a), any request for a disability-related modification or accommodation, including auxiliary aids or services, that is sought in order to participate in the above agendized public meeting should be directed to the District Clerk at (909) 885-4900. East Valley Water District Special Meeting Community Workshop January 21, 2015 Learn About Budget Based Rates 1 District at a Glance Water and sewer services 297 miles of water lines 219 miles of sewer lines 19 active wells 26 million gallons of water storage 97,000 people 22,000 meters $31 million budget 1 surface water treatment plant 2 Planning and Implementation Strategic Plan Updated Water and Sewer Master Plans Development Impact Fees Implement Operational Efficiencies 3 2014 Drought Update 100% of California is experiencing some form of drought. 4 2014 Drought Update Condition Percentage Impacted Exceptional Drought 39.15 % Extreme Drought 38.37 % Severe Drought 16.82 % Moderate Drought 3.78 % Abnormally Dry 1.88 % 5 2014 Drought Update January 2015 January 2006 6 2010 Conservation Requirements •SBx7‐7 •Each water agency must reduce water use 20% by 2020 •Baseline established in 2010 •Updated in 2015 •AB 1420 •Outlines minimum conservation programs to be made available to customers •Impacts ability to qualify for State grants and loans 7 State Response to the Drought •Governor’s Statewide Drought Declaration: Jan 2014 •Second Executive Order: April 2014 •Provided additional authorities to agencies to address drought •Mandatory Outdoor Conservation Regulations: Aug 2014 •Prohibits application of water to wash‐down hard surfaces •Prohibits outdoor landscaping run‐off or excessive waste •Authorized irrigation schedule limitations •Requires a shut‐off nozzle to wash a car •Requires all fountains to recirculate water 8 Providing Reliable Water Service RatesRates Emergency Drought Emergency Drought LegislationLegislation RegulationsRegulations Infrastructure Costs Infrastructure Costs Energy CostsEnergy Costs Treatment Costs Treatment Costs 9 Rate Study Rate StudyRate Study Cost of Service Analysis Rate Study Working Group Capital Improvement Plan 10 Capital Improvement Program 1. Pipeline Replacement 2. Water Storage Construction 3. Fixed Network Meters 4. Energy Efficiency Upgrades 5. Conjunctive Use Wells 6. Water Quality Retrofits 7. Well & Booster Rehabilitation 8. Hydroelectric Generation Facility 11 Proposition 218 Requirements 1. An agency cannot collect revenue beyond what is necessary to provide service 2. Revenues derived by the charge shall not be used for any other purpose other than that for which the charge was imposed 3. The amount of the fee may not exceed the proportional cost of service for the parcel 5. A written notice of the proposed charge shall be mailed to the record owner of each parcel at least 45 days prior to the public hearing 4. No charge may be imposed for a service unless that service is actually used or immediately available to the owner of property 6. Rates may not be passed in perpetuity, and must be updated at least every 5 years 12 Financial Plan Financial Plan Development Habib Isaac Raftelis Financial Consultants, Inc. 13 Current Water Financials •Positive cash flow in FY 2015‐2016, but depletes over time •Assumes no revenue adjustment •Deficits projected in Fiscal Year Ending (FYE) 2017 and beyond •Primarily driven by increases in O&M, purchased water costs and capital repair and replacement •Extensive capital investments over the next 5 years •Annual average approximately $4.4M •Low of $3.2M; High of $6.8M •Will need to use Reserves to make up difference for Operating •Currently, Reserve balance is not at minimum requirement •Not sustainable as operating reserves will be depleted by FYE 2019 14 Current Projected Revenue Requirements Revenues Total Revenue from Rates $19,441,776 $19,441,776 $19,441,776 $19,441,776 $19,441,776 $19,441,776 Other Operating Revenues $460,000 $460,100 $460,201 $460,303 $460,406 $460,510 Total Operating Revenues $19,901,776 $19,901,876 $19,901,977 $19,902,079 $19,902,182 $19,902,286 Operating Expenditures Source of Supply $3,509,200 $3,642,502 $3,750,989 $3,863,712 $3,981,460 $4,104,467 Pumps & Boosters $945,217 $996,019 $1,042,447 $1,090,961 $1,141,793 $1,195,054 Treatment $1,380,581 $1,443,239 $1,492,300 $1,542,820 $1,595,158 $1,649,383 Transmission & Distribution $2,069,583 $2,207,909 $2,282,052 $2,357,510 $2,435,657 $2,516,593 Customer Service $924,546 $982,109 $1,013,310 $1,045,095 $1,078,035 $1,112,174 Administration $5,201,060 $5,539,864 $5,729,544 $5,922,996 $6,123,461 $6,331,212 Total Operating Expenditures $14,030,186 $14,811,642 $15,310,643 $15,823,094 $16,355,564 $16,908,884 Total Non‐Operating /Debt Expenditures 3,574,069 3,975,066 4,998,725 4,974,910 4,955,917 4,958,535 Net Revenues $2,297,521 $1,115,168 ($407,391) ($895,926) ($1,409,299) ($1,965,133) Net Income •Deficit begins in FYE 2017 and grows FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 15 Reserves and Capital Improvements Operating Reserve Balances Beginning Balance $3,500,000 $3,507,547 $3,702,910 $3,295,520 $2,399,594 $990,294 Transfer to R&R Reserve ($2,289,974) ($919,804) $0 $0 $0 $0 Ending Blalance $3,507,547 $3,702,910 $3,295,520 $2,399,594 $990,294 ($974,839) O&M Reserve Target $3,507,547 $3,702,910 $3,827,661 $3,955,774 $4,088,891 $4,227,221 Capital R&R Reserve Balances Beginning Balance w/ Remaining Proceeds $0 $2,229,974 ($192,081) ($5,088,016) ($10,380,898) ($13,625,701) Net Balance less Proceeds $2,229,974 ($192,081) ($5,088,016) ($10,380,898) ($13,625,701) Transfer from Operating Reserve $2,289,974 $919,804 $0 $0 $0 $0 Capital R&R Expenses ($60,000) ($3,341,859) ($4,895,934) ($5,292,882) ($3,244,803) ($4,209,832) Debt Proceeds $0$0$0$0$0 Transfer to Emergency Reserve $0$0$0$0$0$0 Ending Balance $2,229,974 ($192,081) ($5,088,016) ($10,380,898) ($13,625,701) ($17,835,533) R&R Reserve Target $3,088,589 $3,088,589 $3,088,589 $3,088,589 $3,088,589 $3,088,589 Emergency Reserve Balances Beginning Balance $0 $0 $0 $0 $0 $0 Transfer from R&R Reserve $0$0$0$0$0$0 Ending Balance $0$0$0$0$0$0 Emergency Reserve Target $3,150,351 $3,267,470 $3,589,373 $3,896,282 $4,192,136 $4,261,028 Reserves •O&M: Recommend 90 days •Capital:1x Annual Depreciation •Emergency–2% of PP&E FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 16 Current Financial Position Net Income •Deficit begins in FYE 2017 and grows Operating Financial Plan •Stacked bars –expenses O&M, debt service •Line – revenues Green – Current rates 17 Financial Plan Scenarios •Two Options 1. PayGo Option 1. Meet minimum reserves within a 5‐year period 2. PayGo and Debt 1. Utilize debt to fund a portion of Capital 18 Scenario 1 –PayGo •Positive net income each Fiscal Year •Reserves build up over next 5 years –Fund balance meets Minimum Reserve Requirement –New capital is fully funded through PAYGO •Revenue adjustments •First adjustment occurs July 2015 •Recovers all costs and meets debt coverage requirements 19 Scenario 1 –Impact on Reserves Meet reserve requirement in 5 years 20 Scenario 1 – Reserve Balance Reserves begin meeting minimum requirement in 2020 21 Scenario 2 –PayGo and Debt •District has $21M in CIP over the next 5 years •Debt could be leveraged to mitigate rate increases •Additional equity between current and future customers •Funding CIP with debt would build up reserves more quickly •Minimum Reserve balance is satisfied in FYE 2017 as capital costs are not drawing down reserves 22 Scenario 2 –PayGo and Debt Positive Net Income each year 23 Scenario 2 –PayGo and Debt Higher levels of reserves in early years 24 Rate Design Water Rate Structure 25 CONSIDERATION WHEN REVIEWING RATES Equity Customer Understanding Conservation Affordability Defensibility Administrative Ease Financial Stability Rate Stability 26 Water Rate Structure Evolution Uniform Rate: Pros: Administrative ease, easy to understand Cons: Does not incentivize efficient users, does not assign lowest cost to essential use Price Information East Valley Water District $1.77 / hcf 27 Water Rate Structure Evolution Inclining Tiered Rate: Pros: Promotes conservation, affordable for essential use, easy to administer, easy to understand Cons: Penalize large users; Assumes large usage = wasteful usage Price Information Behavior Change 28 Water Rate Structure Evolution Water Budget Tiered Rate: Pros: Promote water efficiency, equitable, affordable for essential use, drought allocation tool, provides revenue stability Cons: High administrative costs, complicated process resulting in decreased ease of understanding Price Information Behavior Change Water Resource Management 29 Comparing Water Rate Structures Uniform Tiered Water Budget Revenue Stability Simple to Understand, Administer and Update Promotes Conservation Affordable for Essential Use Equity Customize rankings based on District’s current rates and results from pricing objectives 30 Budget Based Rates •Western Municipal WD •Eastern Municipal WD •Rancho California WD •Las Virgenes WD •El Toro WD •City of Corona •Elsinore Valley Water District •Coachella Valley Water District •San Juan Capistrano •Irvine Ranch Water District •Palmdale Water District 31 Scheduled Break The meeting will resume in 10 minutes 32 Rate Design Framework Rate Design Structure 33 What Is Included in Our Rate? •Two components: fixed and variable –Fixed revenue (monthly charge) –Variable revenue (charged based on usage) •Current Revenue Split – 25% / 75% –75% of revenue is collected from water usage •Promotes conservation, but is not in‐line with how costs are incurred •Increased potential for revenue shortfalls as a result of effective conservation 34 Proposed Fixed / Variable Split •Primary goal –Promote conservation while providing reliable services •Proposed adjustment – 40% / 60% –More in‐line with how costs are incurred –Continues to promote efficient use of water –Achieves objective of revenue stability –Minimizes rate spikes as conservation is achieved 35 Cost Components •Budget grouped by Cost Components –Water Supply $3,700,000 –Treatment $1,400,000 –Base (all water units) $4,000,000 –Max Day $2,100,000 –Max Hour $ 350,000 –Customer Service $2,700,000 –Capacity $6,000,000 –Fire Protection $1,400,000 –Conservation $1,825,000 36 Revenue Recovery of Costs Water Supply 100% Treatment 100% Base 100% Max Day 100% Max Hour 100% Customer Service 100% Capacity 70% 18% 12% Fire Protection 100% Conservation 100% 40.0% 60.0% Fixed Variable Cost Categories Tier Demand (Tier 1 = Base)Accounts Meters (Capacity Ratios) Fire Protection Water Supply Delivery 37 Fixed Cost Distribution Cost of Service ‐ Accounts Accounts Cost Calculations FY 2016 Total Customer Accounts Costs 2,462,201$ Number of Accounts 21,260 Monthly Charge per Account 9.65$ Cost of Service ‐ Meters Accounts Cost Calculations FY 2016 Total Meter Capacity 3,767,260$ Public Fire Protection Costs 2,051,618$ Number of Equivilant Meters 42,882 Monthly Charge per Account 11.31$ Cost for 5/8" Meters 20.96$ 38 Fixed Charge Schedule Meter Size Current Charge Meter Capacity Ratio FY 2016 FY 2017 FY 2018 5/8"13.71$ 1.00 20.96$ 23.06$ 24.67$ 3/4"13.71$ 1.50 26.61$ 29.27$ 31.32$ 1"20.87$ 2.50 37.92$ 41.71$ 44.63$ 1 1/2"38.60$ 5.00 66.19$ 72.81$ 77.91$ 2"88.48$ 8.00 100.12$ 110.13$ 117.84$ 3"163.25$ 17.50 207.54$ 228.30$ 244.28$ 4"270.06$ 31.50 365.85$ 402.44$ 430.61$ 6"537.09$ 65.00 744.67$ 819.14$ 876.48$ 8"857.52$ 120.00 1,366.62$ 1,503.28$ 1,608.51$ June 1, 2015 July 1, 2016 July 1, 2017 39 Proposed Budget‐Based Tiers Outdoor Water Budget Tier 2 Tier 3 P1 P2 P3 Quantity Tier 1 Indoor Water Budget Excessive Use (Over Budget) Rates 40 Tier 1: Indoor Water Budget Outdoor Water Budget Indoor Water Budget Excessive Use (Over Budget) Indoor Water Budget “IWB” Size Household Size – No. of Residents GPCD Gallons per capita per day Days Days of Service V indoor Indoor Variance 41 Determining Tier 1 Allotment Outdoor Water Budget Excessive Use (Over Budget) •“Indoor Water Budget” •Each person is allotted 60 gallons per capita per day (GPCD) •Multiplied by household size •Default assumption is 4 persons •2010 Census Data •Single Family: 3.3 Multi‐Family: 3.6 •Multiplied by number of dwelling units •Multiplied by days of service in the month •Adjust with drought factor, if needed 42 Example Tier 1: Indoor Water Budget Outdoor Water Budget Excessive Use (Over Budget) 1. Household size –4 occupants 2. Gallons per capita per day –60 3. Number of dwelling units‐1 4. Number of days in billing period –30 5. Drought Factor ‐1 6. Calculation: 4 x 60 x 1 x 30 x 1 = 7,200 gallons Convert to HCF – 7,200 ÷ 748 = 9.6HCF 43 Tier 2: Outdoor Water Budgets Outdoor Water Budget Excessive Use (Over Budget) Outdoor Water Budget “OWB” ET0 Weather Data ETAF ET Adjustment Factors LA Landscape Area DFout Outdoor Drought Factor V outdoor Outdoor Variance 44 Tier 2: Outdoor Water Budgets Outdoor Water Budget Excessive Use (Over Budget) GIS Data will be used to determine each parcel’s irrigable area. 45 Determining Tier 2 Allotment •“Outdoor Water Budget” •Evapotranspiration (ET0) •Varies by month due to weather (required water to maintain landscaping) •Multiply by Evapotranspiration Adjustment Factor •Multiplied by Landscape Area (Square Feet) •Based on aerial image in May 2014 •Can adjust allotment with outdoor drought factor, if necessary 46 Weather Station Readings •California Irrigation Management Information System (CIMIS) •Region specific weather readings 0 2 4 6 8 10 Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec 2014 Evapotranspiration Rate ETo ETAF 47 Irrigable Landscape Outdoor Water Budget Excessive Use (Over Budget) •Infra‐red aerial photography taken in April 2014 •Similar to Google Earth •Measured areas with photosynthesis •Identified swimming pools •Information from the San Bernardino County Assessor •Square footage of buildings •Parcel boundaries •Determined each parcel’s irrigable landscape •If inaccurate, can be modified by staff 48 Example Tier 2: Outdoor Water Budget Outdoor Water Budget Excessive Use (Over Budget) 1. Irrigable Landscape Area – 4,000 sq. ft. 2. Monthly Weather Data (July ET0) –8.63 inches 3. ET Adjustment Factor (ETAF) –.94 4. Outdoor Drought Factor ‐1 5. Outdoor Variance ‐None 6. Factor to convert sq. ft. to gallons –.62 7. Calculation: [4,000 x (8.63 x .94 x 1)] x .62 = 20,118 gallons Convert to HCF 20,118 ÷ 748 = 27 HCF 49 Example Annual Budget by Month Outdoor Water Budget Excessive Use (Over Budget) Ex: SFR with 4,000 sq. ft. of irrigable area Note: All units are in HCF, or one hundred cubic feet of water. One HCF is 748 gallons. Outdoor budget assumes turf land cover and no reduction for drought 27 >37 23 50 Variance Policies Outdoor Water Budget Excessive Use (Over Budget) •Examples of Exceptions •District staff evaluates and approves exceptions on a case‐by‐case basis 51 Variable Costs –Water Supply Outdoor Water Budget Excessive Use (Over Budget) Tiered Rates Source of Supply Production Quantity (Acre Feet) Water Supply Cost Recovery Treatment Cost Recovery Cost per Acre Foot Cost/HCF GW Re plenishment 1 5,860 $750,080 $0 $128.00 $0.12 Ground Water 2 12,326 $2,342,072 $0 $212.29 $0.49 Surface Water 3,350 $211,150 $805,808 $303.57 $0.70 Imported Water 2,650 $339,200 $637,431 $368.54 $0.85 24,186 $3,642,502 $1,443,239 1 Rate per HCF is derived by spreading total cost over total usage 2 Rate per AF accounts for System Water Loss at 6% •With 80% of water use from groundwater, we have a groundwater replenishment obligation cost. •Each of the 3 water supplies has a different cost associated with it. $526,147 $223,933 $3,418,569 $1,667,172 52 Variable Costs ‐Delivery Outdoor Water Budget Excessive Use (Over Budget) Cost of Service ‐ Delivery Customer Class Annual Use Percent of Use Delivery Cost Delivery Cost (HCF) Residential 5,388,312 79.2% $2,928,613 0.55$ Non‐Residential 811,492 11.9% $441,056 0.55$ Irrigation 605,068 8.9% $328,862 0.55$ 6,804,873 100.0% $3,698,530 0.55$ 53 Residential Allotments •Residential Tier 1 Allotment •Based on number of occupants •Residential Tier 2 Allotment •Based on irrigable landscape •Residential Tier 3 Use •All use beyond Tier 1 and 2 allotment 54 Non‐Residential Allotments •Dedicated Irrigation Meters –Indoor demand does not exist •Tier 1 allotment = N/A •Non‐Residential Customers –SBx7‐7 legislation points to a savings in Non‐ Residential of 10% from the baseline –Tier 1 = 90% of historical water usage –Can adjust with drought factor 55 Tiered Rate Components Tier Ground Water Surface Water Imported Water GW Recharge Delivery Conservation Tier Demand (Tier 1 =Base) Tier 1 9999 Tier 2 99 9 9 99 Tier 3 99 99 99 •Tiered rates will be built up using the listed rate components •Sound nexus and compliance with Prop. 218 56 Tiered Rate Components 57 •Well ‐designed rate structure to meet Prop 218 requirements •Each tier includes a proportionate share of cost components •Promotes efficient use of water 57 Variable Charges Tiers June 1, 2015 July 1, 2016 July 1, 2017 Tier 1 $1.45 $1.63 $1.83 Tier 2 $2.07 $2.32 $2.61 Tier 3 $2.89 $3.24 $3.64 Current Structure Current Rate (All Metered Water) Uniform Rate $1.77 58 $1.45 Value Comparison 748 gallons Tier 1 Water .48 gallon Gas .5 gallon Milk .39 gallons Bottled Water 59 Single Family Residential (SFR) Customer Impact 60 •Approximately 72% of SFR customers will see less than a $15 change 60 Multi‐Family Residential (MFR) Customer Impact 61 •Approximately 86% of MFR customers will see less than a $15 change 61 Multi‐Family Residential Over 4 Units (APT) Customer Impact 62 •Approximately 80% of APT customers will see less than a $15 change 62 Irrigation Customer Impact •60% of Irrigation customers stay within their Water Budget •Available assistance through conservation and education programs •Potential for minor adjustments to achieve water efficiencies 63 Non‐Residential Customer Impact (COM) •91% of COM customers will see less than a $15 adjustment 64 Current Indoor Conservation Rebates High Efficiency Washing Machine Rebate: Up to $150 Estimated Savings: 16 gallons per load High Efficiency Showerhead Rebate: Up to $30 each Estimated Savings: 30 gallons/ shower High Efficiency Toilet Rebate: Up to $100 each Estimated Savings: 19 gallons/ person per day 65 Current Outdoor Conservation Rebates Smart Controller Rebate: Up to $150 each Estimated Savings: 13,500 gallons per year Water Efficient Landscape Rebate: Up to $200 Estimated Savings: 200‐1,000 gallons per year High Efficiency Nozzles Rebate: Up to $4 each Estimated Savings: 20,000 gallons/year replacing 25 66 Comprehensive Efficiency Rebate Programs •Tier 3 revenue to fund enhanced conservation programs •Current rebate programs will remain in place •Complete Project Partnership from Start to Finish –Professional landscape evaluation and survey •Certified Landscape and Water Efficiency Professionals •Comprehensive landscaping review •Wide variety of efficiency recommendations •Larger scale programs •Estimated savings: Reduce water use by up to 2/3 •Landscape redesign services and financial assistance •Landscaping replacement and financial assistance •Irrigation renovation/replacement program 67 Next Steps • Community Workshop• Community WorkshopJan 21, 2015 • Authorize Public Hearing• Authorize Public HearingJan 28. 2015 •Notices sent to all property owners • Conduct additional community meetings •Notices sent to all property owners • Conduct additional community meetingsFeb 2015 • Public Hearing •Board Action • Public Hearing •Board ActionMarch 2015 • Shadow bills sent to customers• Shadow bills sent to customersApr/May 2015 •Proposed rates take effect•Proposed rates take effectJune 2015 68 Be a Part of the Process •Join us for regular board meetings on the second and fourth Wednesday of each month •Sign up for email or text message updates at www.eastvalley.org •Contact staff with questions and comments at (909) 889‐9501 69 Questions 70