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Agenda Packet - EVWD Board of Directors - 07/07/2008
ES i East Valley ,,, Water District SPECIAL MEETING JULY 7, 2008 — 2:00 p.m. EAST VALLEY WATER DISTRICT 3654 HIGHLAND AVE #12, HIGHLAND, CA. AGENDA CALL. TO ORDER PLEDGE OF ALLEGIANCE 1. Public Comments 2. Review and possible action regarding proposed 2008/2009 budget. 3. Discussion regarding proposed rate adjustments for 2008/2009. 4. 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's Administrative Manager at (909) 885 -4900 at least 72 hours prior to said meeting. Fable of_Contents N 11 R M N M Cash Analysis EVWD — Staffing Summary 2008/2009 Capital Projects 2008/2009 Financing Plan 2008/2009 Proposed Water /Sewer Rates EVWD Proposed Operating Budget EVWD Draft Water Rate Analysis EVWD Draft Sewer Rate Analysis J� t . 0 C 0 0 r O 0 0 0 0 C N N O O N N O O N Of O O r N rn O T M T O rn rn T N T T OD I,. CD T N n W N UOv�i M 0 O bA rA W zoo 0 M 0 � W U � III"""OIII 30 I�,,gg �rrc Z � �ts G is S 33 4 1 tl Y: P as i ++ k Y .. f .�� � f d i A fl� { AN on" t n 0 C 0 0 r O 0 0 0 0 C N N O O N N O O N Of O O r N rn O T M T O rn rn T N T T OD I,. CD T N n W N UOv�i M 0 O bA rA W zoo 0 M 0 � W U � III"""OIII 30 Ewol N by i� O V``1MVj `/ O II ■ ct O Ewol N by i� O V``1MVj `/ O II ct O Ewol N by i� O V``1MVj `/ O II O (O1 ell ■ U s t ' V U `/. Yry � t . r, n Cl3 t i C/] CC t� r� F--1 I-1 M� r1 V) ■ uuI 1u R$ .ti U U 0 ■ ■ r.( i H H M� �O v ■ V c� O c �I �� `V P O I� U W N 4 W M W N Cd �U U ■ ■ s ■ II. I I ct 0 � bq �'w W N ". 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'Tt " N _. a� ct r N ct U O O N O � �. 'Tt " N _. r N ct U O O N ■ CnI ■ 0 ■ N d' M + + N U COD Ct N �D bbl Z O cc C CD O In •� d b , bl) U E� E- U E-4 E° ■ CnI ■ 0 ■ �r t :- O O 00 ..� � IC M -Es } 00 d' ' O M d- 00 0 _bq -&S -G� -6q -EPS �c 00 �r t :- OD 0 O N f0 O O N cl' O O N N O O N O O O N co O O r O O O r et O O T N O O r O O O T A T T N W w T O O O r OD n rn T W U x� �x M � M Ej W U w 4 t 'ate i�iz` r. O O N co N v�t t N O v O N o ti N co `kx��i3 r EY #" 33t�1%n di YR P�t � Oi V r tiny xi �t� s N 4 r y: o) OD ;x 0) r r. 00 OD � O t' N +� d OD Q to In OD i,. p yss a � b � C % 0 0 N O O O N O O N N O O N O O O N O O O T O O W T a) a) T N O O T O M O T 00 CD a) T c OD a) T Go 0) T N co CDO T co T OD n O r co n rn O r 0 0 N � � N N H3 W U ƒ \ k ( E ( ( 9 m v N d 3 0 J_ C d N d d O C N O O O Cl O" O 5fi T 7 N EA m v N d 3 0 J_ C d N d d O C N ❑ U ❑ v m v Q O N Q O aC m R fp ❑ i O O O Cl O - 7 N EA ^fA to 6% ❑ U ❑ v m v Q O N Q O aC m R fp ❑ i . N VAM z :\y- EVWD OPERATING BUDGET FISCAL YEAR 2008 -2009 EAST VALLEY WATER DISTRICT 2008-09 Operating Budget Non Operating Revenue Interest Income 341,237 539,720 450,000 2007 -08 250,000 Gain on Disposal of Assets 2005 -06 2006 -07 2007 -08 Projected 2008 -09 Cooperative Agreements - Power Actual Actual Budgeted Actual Proposed Operating Grants 77,886 195,089 Operating Revenue Other 14,284 106,293 Water Sales 9,212,942 10,469,676 10,599,456 10,743,529 12,474,900 Water System (Meter) Charge 2,587,104 2,641,663 2,827,944 2,832,688 3,334,000 Sewer System Charges 2,252,027 2,532,459 2,898,200 2,943,230 3,602,000 Sewer Treatment Charges 5,481,880 5,607,142 5,554,000 5,561,830 5,610,000 Service Initiation Charges 80,560 65,400 50,000 59,825 50,000 Collection Charges 167,436 162,646 170,000 207,246 163,000 Installation Charges 109,834 102,508 75,000 372,520 75,000 Permit & Inspection Fees 9,747 11,087 50,000 109,092 50,000 Connection Charges 250,805 419,466 250,000 403,344 200,000 Capacity Charges 613,573 649,928 1,000,000 1,291,293 700,000 20,765,908 23,474,600 24,524,597 26,258,900 22,661,975 Non Operating Revenue Interest Income 341,237 539,720 450,000 609,772 250,000 Gain on Disposal of Assets 1,907,327 28,142 10,093 - Cooperative Agreements - Power 30,000 100,000 Operating Grants 77,886 195,089 Other 14,284 106,293 70,000 25,348 70,000 2,340,734 869,244 550,000 645,213 420,000 Total Revenue 23,106,642 23,531,219 24,024,600 25,169,810 26,678,900 Operating Revenue Water Sales Water System (Meter) Charge Sewer System Charges Sewer Treatment Charges Service Initiation Charges Collection Charges Installation Charges Permit & Inspection Fees Connection Charges Capacity Charges Non Operating Revenue Interest Income Gain on Disposal of Assets Cooperative Agreements - Power Operating Grants Other Category Descriptions Retail Water Sales - 3% Growth in sales and 12% increase in rates Charge based on meter size - 4% increase in meters and re- alignment of meter charges Maintenance /up keep District lines - 13% increase in rate and 1 % increase in commercial sales Treatment charges collected for the City of SB - 1% increase in commercial sales Administrative fee for setting up new customer account Delinquent Fees, Returned Check Charges, Disconnect Charges Main Extensions, Fire Hydrants, Meter Upgrades etc. - Fewer new building starts Fees for new construction and upgrades - Fewer new building starts Installation costs of new services - Fewer new building starts Fees for new construction and upgrades - Fewer new building starts Interest on Investments - less investment capital and lower rates New Enernoc Agreement FEMA reimbursement of emergency repair costs Transmission & Distriubution Supervision & Labor 558,491 623,196 EAST VALLEY WATER DISTRICT 691,793 632,700 Facilities Maintenance 2008 -09 Operating Budget 204,973 155,000 142,293 190,000 2007 -08 156,788 203,770 2005 -06 2006 -07 2007 -08 Projected 2008 -09 117,896 Actual Actual Budgeted Actual Proposed 1,149,835 1,178,200 1,224,340 1,165,700 Operating Expenses Source of Supply 197,368 204,108 225,500 228,495 364,500 Supervision & Labor 57,270 50,004 61,500 62,997 71,500 Vehicle Maintenance & Fuel 6,101 6,547 - 1,365 2,000 Purchased Water 226,800 - - - 50,000 Groundwater Replenishment 106,120 129,172 100,000 150,000 140,000 North Fork Assessments 58,295 58,295 61,500 58,295 60,000 Water Testing 185,362 146,106 160,000 166,559 185,000 Water Supply Studies 170,000 156,000 75,000 639,948 390,124 553,000 595,216 583,500 Pumping Supervision & Labor 381,031 428,843 429,100 424,624 498,800 Facilities Maintenance 587,610 666,412 220,000 211,000 220,000 Materials & Supplies 36,301 46,839 45,000 52,255 50,000 Fuel & Power 1,982,767 2,309,282 2,190,000 2,168,731 2,250,000 Treatment Chemicals 160,000 121,624 140,000 Vehicle Maintenance & Fuel 52,000 36,868 55,000 2,987,709 3,451,376 3,096,100 3,015,102 3,213,800 Water Treatment Supervision & Labor 100,094 98,752 119,800 101,701 139,300 Facilities Maintenance 47,814 126,731 30,000 32,660 35,000 Materials & Supplies 10,641 10,649 14,000 8,036 12,000 Fuel & Power 146,651 160,000 150,805 160,000 Contract Treatment 73,411 115,547 290,000 304,570 1,452,500 Treatment Chemicals 55,845 32,971 45,000 40,195 45,000 Vehicle Maintenance & Fuel 2,105 2,000 2,085 3,000 Water Treatment Studies 25,000 287,805 533,406 660,800 640,052 1,871,800 Sewer Treatment Contracted Services 5,473,390 5,607,172 5,554,000 5,561,830 5,610,000 Transmission & Distriubution Supervision & Labor 558,491 623,196 704,200 691,793 632,700 Facilities Maintenance 200,237 204,973 155,000 142,293 190,000 Materials & Supplies 156,788 203,770 208,000 274,742 225,000 Vehicle Maintenance & Fuel 111,880 117,896 111,000 115,512 118,000 1,027,396 1,149,835 1,178,200 1,224,340 1,165,700 Wastewater Collection Supervision & Labor 197,368 204,108 225,500 228,495 364,500 Facilities Maintenance 25,525 50,256 60,000 43,713 60,000 Materials & Supplies 43,279 51,324 43,000 42,808 50,000 Vehicle Maintenance & Fuel 68,527 105,866 95,000 70,583 90,000 334,699 411,554 423,500 385,599 564,500 Category Descriptions Operating Expenses Source of Supply Supervision & Labor Water Quality Staff - See Schedule 1 Vehicle Maintenance & Fuel Vehicles driven by Water Quality Staff - See Schedule 5 Purchased Water Muni water for Treatment Plant Groundwater Replenishment SBVWCD pump tax at 6.65 per AF - increased rate for groundwater extraction North Fork Assessments Assessments for East Valley shares of North Fork Stock Water Testing Compliance with DHS - Increased regulatory mandates Mater Supply Studies New reclaimed water master plan study Pumping Supervision & Labor Facilities Maintenance Materials & Supplies Fuel & Power Treatment Chemicals Vehicle Maintenance & Fuel Production Staff - see schedule 1 Maintenance and Repairs at Pumping Plants Materials for maintenance and repairs to Pumping Plants Electrical power to extract and transfer water Wellhead treatment - overbudgeted for last year Vehicles driven by the Production Operators - See Schedule 5 Water Treatment Supervision & Labor Treatment Plant Operators - see schedule 1 Facilities Maintenance Maintenance and Repairs at the Treatment Plant - increased repair costs Materials & Supplies Materials for use at the Treatment Plant Fuel & Power See Schedule 2 Contract Treatment New Wells (treatment units) coming online Treatment Chemicals Chemicals used at Treatment Plant Vehicle Maintenance & Fuel Vehicles driven by Treatment Plant Operators -See Schedule 5 Water Treatment Studies Support work for Corp of Engineers Water Quality study Sewer Treatment Contracted Services Remittance to City of SB of Treatment Fees Collected rransmission & Distriubution Supervision & Labor Field crew, Meter Shop, sewer crew - see schedule 1 Facilities Maintenance Maintenance to main lines, services lines - increased paving costs / oil Materials & Supplies Small tools, inventory used to repair mains, services Vehicle Maintenance & Fuel Construction vehicles and Pickups driven by Field & Meter crew - see schedule 5 Wastewater Collection Supervision & Labor Sewer Crew - see schedule 1 Facilities Maintenance Maintenance to sewer lines Materials & Supplies Inventory and supples used for sewer line repairs and maintenance Vehicle Maintenance & Fuel Vehicles driven by the Sewer Crew - see schedule 5 EAST VALLEY WATER DISTRICT 2008.09 Operating Budget 2007 -08 2005 -06 2006 -07 2007 -08 Projected 2008 -09 Actual Actual Budgeted Actual Proposed Customer Accounts Supervision & Labor 433,070 449,318 437,500 491,093 528,900 Postage 98,054 105,150 120,000 107,374 115,000 Contracted Services 81,365 84,652 84,000 113,516 102,000 Materials & Supplies 13,463 30,000 10,000 7,650 - 65,000 612,489 639,120 651,500 719,633 745,900 General & Administrative Supervision & Labor Taxes and Benefits Directors Fees Directors Expenses Telephone and Utilities Dues & Subscriptions - Schedule 3 Postage Office Supplies Office Equipment Leases Vehicle Maintenance & Fuel Outside Services Legal Fees Audit / Accounting Trustee Fees Election Fees Regulatory Fees / Compliance Rents & Leases Licenses & Certifications Employee Programs General Insurance Education / Seminars / Conferences Meals, Lodging, Travel, Mileage Safety Equipment Disaster Emergency Miscellaneous Total Operating Expenses Non - Operating Expense 1996 COP Interest 2001 COP Interest 2004 Headquarters / Infrastructure Interest 2006 Capital Project Financing Interest 2008 Capital Project Financing Interest Contingency 1,162,108 1,286,383 57,125 15,306 111,254 78,323 27,150 65,355 34,799 89,402 856,814 76,643 34,390 35,145 84,641 42,921 124,832 1,018 12,428 597,747 76,758 35,671 18,858 7,486 359 4,932,916 1,256,908 1,352,974 53,124 12,872 117,562 73,515 36,300 56,447 44,376 59,792 735,736 67,958 29,367 39,174 44,097 132,548 648 21,101 398,133 81,702 43,168 7,503 18,214 430 4,683,649 16,296,352 16,866,236 147,985 110,605 403,979 376,460 439,339 424,585 64,000 294,785 86,500 25,000 1,206,435 991,303 1,550,800 1,368,628 1,875,400 1,642,000 1,562,989 1,906,000 64,000 55,375 86,500 25,000 21,788 25,000 136,000 114,148 136,000 112,300 98,415 122,900 10,000 13,463 30,000 80,000 63,032 80,000 65,000 69,975 60,000 45,000 66,911 47,000 1,025,500 974,566 986,000 85,000 41,773 85,000 35,000 29,060 35,000 40,000 30,631 50,000 70,000 48,228 90,000 147,000 142,048 145,000 3,000 1,708 3,000 ' 24,000 27,948 28,000 280,000 251,417 270,000 70,000 34,130 70,000 44,000 40,722 45,000 15,000 19,150 30,000 8,000 8,000 411 5,576,600 5,076,517 6,215,800 17, 693,700 17,218,289 19,971,000 77,455 77,455 48,448 347,772 347,772 317,810 409,160 409,160 393,033 285,702 285,702 276,165 890,000 10,000 1,120,089 1,120,089 1,935,456 Total Operating & Non - Operating Expense 17,287,655 18,072,671 18,813,789 18,338,378 21,906,456 Customer Accounts Supervision & Labor Postage Contracted Services Materials & Supplies General & Administrative Supervision & Labor Tuxes and Benefits Directors Fees Directors Expenses Telephone and Utilities Dues &. Subscriptions Postage Office Supplies Office Equipment Leases Vehicle Maintenance & Fuel Outside Services Legal Fees Audit / Accounting Trustee Fees Election Fees Regulatory Fees / Compliance Rents & Leases Licenses & Certifications Employee Programs General Insurance Education / Seminars / Conferences Meals, Lodging, Travel, Mileage Safety Equipment Disaster Emergency Miscellaneous Won - Operating Expense 1996 COP Interest 2001 COP Interest 2004 Loan Interest 2006 Loan Interest Contingency Category Descriptions Customer service department labor, including meter reading - see schedule 1 Delivery costs for bills and delinquent notices - increase in postage rates Bill Print & Mailing, Electronic Payment Settlement Fees - new mailing service Administration, Finance and Engineering Labor - see schedule 1 Daily Director Fees - reflects increase in daily rate to $175.00 per day Reimbursable Director Expenses Telephones, gas, electric and refuse service See schedule 3 Office postage including Prop 218 notices - increase in postage rates General office and computer supplies Leases on general office equipment Vehicles driven by the General and Administrative staff See Schedule 4 Legal Representation Financial audit - RAMS New COP Issue No election in 2008 Business Plans, AQMD fee increases and Dump Truck Retrofit Office suites 12, 1a, & 19, Storage units on 5th Distribution and Treatment Certifications Employee incentives, 25 year awards etc. Policy w/ SDRMA, Caldwell broker / Decr due to dropping earthquake in 2006 Registration fees and education reimbursements Employee meals, lodging and travel expenses Safety equipment - new air monitoring equipment for confined spaces Employee first aid kits and disaster kits Semi annual pmts in June, December. Retires in 12/2009 Semi annual pmts in June, December. Retires in 1212020 Semi annual pmts in February, August. Retires in 8/2024 Semi annual pmts in March, September. Retires in 3/2026 EAST VALLEY WATER DISTRICT 2008-09 Operating Budget 2007 -08 2005 -06 2006 -07 2007 -08 Projected 2008-09 Actual Actual Budgeted Actual Proposed Other Uses Of Funds Capital Replacement 385,000 577,000 724,000 576,700 516,500 Contrib To Capital Improvement Reserve 1,390,000 1,275,000 2,712,100 2;712,100 2,530,000 Debt Service Principal 1,679,209 1,940,203 1,774,711 1,774,711 1,865,375 3,454,209 3,792,203 5,210,811 5,063,511 4,911,875 Total Expenditures 20,741,864 21,864,874 24,024,600 23,401,889 26,818,331 Net Cash Flow 1,767,921 (139,431) 2,364,778 1,666,345 Category Descriptions Other Uses Of Funds Capital Replacement See Capital Replacements section Contrib To Capital Improvement Reserve See Captial Improvement Program section Debt Service Principal BUDGET CATEGORY Operating Expenses (Supervisiono and Labor) EAST VALLEY WATER DISTRICT 2008 -09 Operating Budget Salaries and Benefits 2007 -2008 Proposed Proposed Budgeted Water Sewer Source of Supply 61,500 Pumping 429,100 Water Treatment 119,800 'Transmission and Distribution 624,200 Customer Accounts 455,000 Sewage Collection 225,500 Total Operating Expenses (Supervisiono and Labor) 1,915,100 71,500 498,800 139,300 632,700 398,100 130,800 364,500 1,740,400 495,300 Schedule 1 2008 -2009 Proposed Combined 71,500 498,800 139,300 632,700 528,900 364,500 2,235,700 General and Administrative Supervision and Labor 1,613,300 1,081,600 793,800 1,875,400 'Total District Benefits 1,642,000 1,144,800 763,200 1,908,000 Total General and Administrative 3,255,300 2,226,400 1,557,000 3,783,400 Supervision and Labor in Capital Improvement 876,600 611,500 407,700 1,019,200 Program TOTAL SALARIES AND BENEFITS 6,047,000 4,578,300 2,460,000 7,038,300 Salary Adjustments Salary Survey (Exempt and Non - Exempt) 446,000 Cost of Living Adjustment 175,000 Step Increases 64,000 New Position 40,000 Total 725,000 Benefit; Cafeteria Plan Increases 24,000 Workers Compensation Increase 54,000 Pers Contribution 172,000.00 New Position 16,000.00 Total 266,000.00 BUDGETCATEGORY Pumping Fuel and Power (Electrical) Treatment Fuel and Power (Electrical) General and Administrative Utilities Electric Natural Gas Telephone Trash Total General and Administrative TOTAL UTILITIES EAST VALLEY WATER DISTRICT 2008 -09 Operating Budget Utilities 2008 -2009 2007 -2008 Proposed Proposed Proposed Budgeted Water Sewer Combined 2,190,000 2,250,000 2,250,000 160,000 160,000 160,000 2,350,000 2,410,000 - 2,410,000 65,000 45,000 20,000 65,000 2,000 1,300 700 2,000 55,000 40,000 15,000 55,000 14,000 10,000 4,000 14,000 136,000 136,000 96,300 39,700 2,486,000 2,546,000 2,506,300 39,700 Pumping Fuel and Power (Electrical) Treatment Reel and Power (Electrical) General and Administrative Utilities Electric Natural Gas Telephone Trash Category Descriptions Rehabilited Plants coming on line - Plant 107 and Plant 40 Electricity cost for Del Rosa and Highland Ave offices Heating costs for Del Rosa and Highland Ave offices Telephone charges Refuse pick up at Del Rosa and Plant 39 Schedule 2 EAST VALLEY WATER DISTRICT 2008 -09 Operating Budget Dues and Subscriptions 2008 -2009 2007 -2008 Proposed Proposed Proposed BUDGETCATEGORY Budgeted Water Sewer Combined General and Administrative ACWA 16,000 12,000 4,000 16,000 Association of S.B. County Special Districts 300 200 100 300 AutoCad Subscriptions 2,600 1,200 3,800 AWWA 2,800 3,000 3,000 AW WARF Subscriptions 15,000 18,000 18,000 Matthew Bender Co. 1,200 600 600 1,200 California Municipal Utilities Association (CMUA) 3,600 2,000 1,600 3,600 California Water Public Education 10,000 - Califomia Utilities Emergency 500 250 250 500 CSDA 3,000 2,200 1,300 3,500 Internet Service 10,000 6,700 3,300 10,000 Foundation for Cross Connection 700 700 700 Government Finance Officers Association 300 150 150 300 Highland Chamber of Commerce 2,000 2,000 1,000 3,000 Inland Counties Water Association 400 350 150 500 IDS Holding 1,500 1,000 500 1,500 LAFCO 10,000 7,000 3,000 10,000 Miscellaneous 4,500 3,200 1,300 4,500 First American Real Estate 4,000 3,000 1,000 4,000 S.B. Chamber of Commerce 300 150 150 300 S.B. Chamber of Commerce (Copper Theft) 500 - Southern California Water Committee 750 750 750 TRW 1,000 500 500 1,000 Underground Service Alert 2,800 2,000 800 2,800 Upper Santa Ana 100 100 100 Water Education Foundation 3,500 2,200 1,300 3,500 Water Environment Federation 350 350 350 Water Resources Institute 15,000 10,000 5,000 15,000 Water Trax 12,500 12,500 WESTCAS 2,200 1,400 800 2,200 112,300 94,900 28,000 122,900 Schedule 3 Category Descriptions ACWA Association of S.B. County Special Districts Reward for Copper Theft -one time AutoCad Subscriptions Computer aided drafting software subscriptions AW WA Credit Checks AW WARF Subscriptions Research Foundation - Larger operating base and higher rate Matthew Bender Co. Deering Codes California Municipal Utilities Association (CMUA) California Water Public Education Steve Hall Scholarship - one time only California Utilities Emergency Water Resources Institute CSDA Water Trax Internet Service WESTCAS Foundation for Cross Connection Government Finance Officers Association Highland Chamber of Commerce Inland Counties Water Association IDS Holding Snap On online manual LAFCO Miscellaneous First American Real Estate Property owner information used in the collection process S.B. Chamber of Commerce S.B. Chamber of Commerce (Copper Theft) Reward for Copper Theft -one time Southern California Water Committee TRW Credit Checks Underground Service Alert Upper Santa Ana Water Education Foundation Water Environment Federation Water Resources Institute Cal State Water Trax New Water Quality Sampling Data Base WESTCAS EAST VALLEY WATER DISTRICT 2008-09 Operating Budget Outside Services 2008 -2009 2007 -2008 Proposed Proposed Proposed BUDGET CATEGORY Budgeted Water Sewer Combined GENERAL AND ADMINISTRATIVE: Security 210,000 160,000 50,000 210,000 Automated Data Processing 14,000 11,900 5,100 17,000 Computer Consultant /Programming 35,000 24,500 10,500 35,000 Answering / Paging Service 10,000 3,500 1,500 5,000 Building Maintenance 14,000 10,000 5,000 15,000 Grounds Maintenance 175,000 150,000 25,000 175,000 Janitorial Services / Supplies 24,000 18,200 7,800 26,000 Office Equipment Maintenance 65,000 40,000 25,000 65,000 Citizens Business Bank 10,000 5,000 5,000 10,000 Uniforms 18,000 12,000 3,000 15,000 Medical Fees/ First Aid 15,000 12,000 3,000 15,000 Public Information / Education 150,000 105,000 45,000 150,000 General Engineering / Safety 50,000 35,000 15,000 50,000 Federal Representation 50,000 45,000 20,000 65,000 State Representation 54,000 53,000 22,000 75,000 Outside Labor - Temporary 30,000 20,000 10,000 30,000 Prop 50 Regional Resource Planning 18,000 - - - Outside Storage 16,000 12,000 6,000 18,000 Water Trax 12,500 - - - Administrative Consultants 40,000 5,000 5,000 10,000 TOTAL GENERAL AND ADMINISTRATIVE 986,000 263,900 722,100 1010,500 Security Automated Data Processing Computer Consultant / Programming Answering / Paging Service Building Maintenance Grounds Maintenance Janitorial Services / Supplies Office Equipment Maintenance Citizens Business Bank Uniforms Medical Fees / First Aid Public Information / Education General Engineering / Safety Federal Representation State Representation Outside Labor - Temporary Prop 50 Regional Resource Planning Outside Storage Water Trax Administrative Consultants Schedule 4 Category Descriptions Building alarms and guard service at Del Rosa and the Treatment Plant Payroll service - includes new FSA modifications Consulting for Software programs and general computer programs After hours answering service Maintenance to District offices Maintenance to all District facilities Janitorial services to District offices at Del Rosa, Highland Ave and the Treatment Plant Maintenance agreements and repairs to office equipment Monthly service charges Uniform maintenance cost for field staff First Aid fees and required physicals Public relations consultant and public awareness programs General Engineering consulting and consultant for required Safety meetings Increase in monthly fee Actual cost higher than budget estimate for last year Office Team Temporary Labor Work is complete Stoarge of District records Moved to Subscriptions Salary Survey and Classification Study completed BUDGETCATEGORY 2007 -2008 Budgeted VEHICLE / EQUIPMENT MAINT AND FUEL 160,000 Source of Supply - Pumping 52,000 Water Treatment 2,000 Transmission and Distribution 111,000 Sewage Collection 95,000 General & Administrative 45,000 TOTAL VEHICLE / EQUIPMENT MAINT AND FUEL 305,000 EAST VALLEY WATER DISTRICT 2008 -09 Operating Budget Vehicle Maintenance and Fuel Vehicle and Equipment Maintenance 160,000 2008 -2009 Proposed Proposed Proposed Water Sewer Combined 200,000 TOTAL VEHICLE / EQUIPMENT MAINT AND FUEL 305,000 2,000 105,000 2,000 55,000 55,000 3,000 3,000 118,000 118,000 - 90,000 90,000 32,000 15,000 47,000 210,000 105,000 315,000 Vehicle and Equipment Maintenance 160,000 80,000 35,000 115,000 Fuel 145,000 130,000 70,000 200,000 TOTAL VEHICLE / EQUIPMENT MAINT AND FUEL 305,000 210,000 105,000 315.000 Schedule 5 Category Descriptions Source of Supply Pumping Water Treatment Transmission and Distribution Sewage Collection General & Administrative Vehicle and Equipment Maintenance Newer fleet requiring less maintenance Fuel Higher fuel costs EAST VALLEY WATER DISTRICT 2008 -09 Operating Budget - By Fund Non Opoiating Revenue Interest Income Proposed Proposed Gain on Disposal of Assets - - Water Sewer Combined Operating Revenue Operating Grants Water Sales 12,474,900 70,000 12,474,900 Water System (Meter) Charge 3,334,000 3,334,000 Sewer System Charge 3,602,000 3,602,000 Sewer Treatment Charges 5,610,000 5,610,000 Servace Initiation Charges 25,000 25,000 50,000 Collection Charges 91,000 72,000 163,000 Installation Charges 75,000 75,000 Permit & Inspection Fees 50,000 50,000 Connection Charges 200,000 200,000 Capacity Charges 550,000 150,000 700,000 16,749,900 9,509,000 26,258,900 Non Opoiating Revenue Interest Income 150,000 100,000 250,000 Gain on Disposal of Assets - - - Cooperative Agreements - Power 100,000 100,000 Operating Grants Other 50,000 20,000 70,000 300,000 120,000 420,000 Total Revenue 17,049,900 9,629,000 26,678,900 EAST VALLEY WATER DISTRICT 2008 -09 Operating Budget - By Fund Pumping Supervision & Labor Proposed Proposed 498,800 Facilities Maintenance Water Sewer Combined Matelots & Supplies Operating Expenses 50,000 Fuel & Flower Source of Supply 2,250,000 Treatment Chemicals Supervision & Labor 71,500 71,500 Facilities Maintenance 2,000 2,000 Purchased Water 50,000 50,000 Groundwater Replenishment 140,000 140,000 North Fork Assessments 60,000 60,000 Water resting 185,000 185,000 Water Supply Studies 75,000 75,000 160,000 583,500 583,500 Pumping Supervision & Labor 498,800 498,800 Facilities Maintenance 220,000 220,000 Matelots & Supplies 50,000 50,000 Fuel & Flower 2,250,000 2,250,000 Treatment Chemicals 140,000 140,000 Vehicle Maintenance & Fuel 55,000 55,000 3,213,800 3,213,800 Water Treatment Supervision & labor 139,300 139,300 Facilities Maintenance 35,000 35,000 Materials & Supplies 12,000 12,000 Fuel & Power 160,000 160,000 Contract Treatment 1,452,500 1,452,500 Treatment Chemicals 45,000 45,000 Vehicle Maintenance & Fuel 3,000 3,000 Water Treatment Studies 25,000 25,000 1,871,800 1,871,800 Sewer Treatment Contracted Services 5,610,000 5,610,000 Transmission & Distriubution Supervision & Labor 632,700 632,700 Facilities Maintenance 190,000 190,000 Materials & Supplies 225,000 225,000 Vehicle Maintenance & Fuel 118,000 118,000 1,165,700 1,165,700 Wastewater Collection Supervision & Labor 364,500 364,500 Facilities Maintenance 60,000 60,000 Materials & Supplies 50,000 50,000 Vehicle Maintenance & Fuel 90,000 90,000 564,500 564,500 EAST VALLEY WATER DISTRICT 2008 -09 Operating Budget - By Fund Proposed Proposed Water Sewer Combined Customer Accounts Supervision & Labor 370,000 158,900 528,900 Equipment Expenses Postage 80,500 34,500 115,000 Contracted Services 64,400 37,600 102,000 Materials & Supplies - 514,900 231,000 745,900 General 8, Administrative Supervision & Labor 1,081,600 793,800 1,875,400 Taxes and Benefits 1,144,800 763,200 1,908,000 Directors Fees 42,750 43,750 86,500 Directors Expenses 15,000 10,000 25,000 Telephone and Utilities 96,300 39,700 136,000 Dues & Subscriptions 94,900 28,000 122,900 Postage 15,000 15,000 30,000 Office Equipment Leases 42,000 18,000 60,000 Office Supplies 61,000 19,000 80,000 Computer System Maintenance - Vehicle Maintenance & Fuel 32,000 15,000 47,000 Outside Services 722,100 263,900 986,000 Legal Fees 50,000 35,000 85,000 Audit /Accounting 20,000 15,000 35,000 Trustee Fees 35,000 15,000 50,000 Election Fees - Regulatory Fees / Compliance 51,000 39,000 90,000 Facility Rents & Leases 80,000 65,000 145,000 Licenses & Certifications 2,000 1,000 3,000 Employee Programs 14,000 14,000 28,000 General Insurance 174,000 96,000 270,000 Education / Seminars / Conferences 40,000 30,000 70,000 Menus, lodging, Travel, Mileage 30,000 15,000 45,000 Safety Equipment 20,000 10,000 30,000 Disaster Emergency 5,000 3,000 8,000 Miscellaneous 3,868,450 2,347,350 6,215,800 Total Operating Expenses 11,218,150 8,752,850 19,971,000 Nona :iperating Expense 1996 COP Interest 48,448 48,448 2001 COP Interest 317,810 317,810 2004 Headquarters / Infrastructure Interest 263,332 129,701 393,033 2006 Capital Project Financing Interest 276,165 276,165 2008 Capital Project Financing Interest 611,875 278,125 890,000 Contingency 10,000 10,000 1,527,630 407,826 1,935,456 Total Operating & Non -Operating Expense 12,745,780 9,160,676 21,906,456 EAST VALLEY WATER DISTRICT 2008 -09 Operating Budget - By Fund Other Uses CN Funds Capital Replacement Conhrib To Capital Improvement Reserve Debt Service Principal Total Expenditures Proposed Proposed Water Sewer 374,000 142,500 1,742,860 122,515 2116,860 265,015 14,862,640 9,425,691 Combined 516,500 2,530,000 1,865,375 4,911,875 26,818,331 Net Cash Flow 2,187,260 203,309 (139,431) CAPITAL REPLACEMENTS Administration Mutual Water Company Stock Web Site Upgrade Emergency Response Planning Production Copier Finance Warehouse Truck Water/ Sewer Rate Investigation Computer Hardware Upgrades PC Software Upgrades Customer Service IVR Software Reporting Software Upgrade Customer Billing Software Update Engineering Backflow, Software Construction Drawing Printer 3rd Autocad License Plant 133 - Reservoir Demolition Pipe Locator kAiscellaneous Equipment Production New Pickup Trucks SOADA System Upgrade Field Sewer System Video Equipment Sewer System Video Inspection New Pickup Trucks 04500 Flatbed w /Pipe Rack Miscellaneous Equipment Caterpillar 430E Backhoe Nlodis Scanner - Garage EAST VALLEY WATER DISTRICT Capital Replacement Schedule Fiscal Year 2008 -09 2007 -08 2008 -09 Proposed Budgeted Amended Water Sewer Total 10,000 10,000 10,000 10,000 6,000 7,500 7,500 15,000 49,000 75,000 6,000 5,000 5,000 10,000 4,000 2,500 2,500 5,000 50,000 20,000 20,000 20,000 40,000 16,000 7,500 7,500 15,000 7,500 7,500 15,000 50,000 50,000 2,500 2,500 5,000 2,500 2,500 5,000 70,000 35,000 35,000 75,000 75,000 175,000 10,000 169,000 22,750 12,250 35,000 43,875 23,625 67,500 54,000 12,500 12,500 25,000 66,625 35,875 102,500 3,250 3,250 6,500 724,000 142,500 516,500 374,000 EAST VALLEY WATER DISTRICT Capital Replacement Justifications Administration Water Company Stock — The District has a standing offer to North Fork Water Company shareholders to purchase their shares. In the past, a price of $175 per share has been offered, but with the current pipeline replacement project costing shareholders approximately $90 per share, the District will currently offer an adjusted price of $85 to buy shares. This is a perennial budget line item. No shares are currently being offered for sale. New Copier - The Districts large Minolta copier was purchased in 1999 and has produced just under 1.2 million copies. Staff has requested repair services three times this fiscal year and each time have been warned by the technician that parts are increasingly hard to find — replacements for our machine are no longer manufactured. Staff has solicited and received two quotes for large Color copier / printers with like capabilities: 1) Konica Minolta BizHub C550 - $14,595, and 2) Canon ImageRunner C4080 - $19,648. Staff requests $15,000 be included in the budget to purchase the BizHub. Finance Hardware upgrades of $10,000 and software upgrades of $5,000 are also perennial Capital Replacement budget line items due to changing technology and rapid obsolescence. Upgrades planned by the IT department for 2008 -09 include upgrading more workstations with Outlook 2003, purchasing a new SQL database server for the billing software, and purchasing 22" monitors for AutoCAD users in the Engineering Department. Customer Service Billing Software Update - Customer Service is requesting funding to migrate the Harris billing software to Northstar version 6.0. Version six does have enhanced features for the users, such as the ability to view multiple screens at once, but the primary reason for the request is that version 6.0 is available on a Microsoft Sequel platform. The current version runs on Linux, and the billing server is the only one that runs on this platform. Our IT department is much more familiar with Sequel and therefore must rely heavily on Harris to pull information from the Linux data tables. The cost of this migration was approved in last year's budget, but it was removed in the mid -year budget review when a revised quote from the vendor more than doubled the original quote. The current quote of $39,860 is lower than the original quote. Engineering Department Construction Drawing Printer - The department is in need of a new construction -size drawing printer to replace the one now in Justin's and Victor's area. The old Xerox copier is over 10 years old and becoming outdated in terms of parts replacement and more frequent repairs. The new copier will be able to will provide many more options to make copies as well as make them quicker. The new copier is also a scanner that will allow us to scan drawings into an electronic format. The cost of the printer is based on a single quote from one manufacture (although it will EAST VALLEY WATER DISTRICT Capital Replacement Justifications probably be the one we select to purchase). comparison. The price of the quote is $13,028. worst -case scenario. However, staff will get another quote as a Staff is recommending a budget of $15,000 as a 3rd Autocad License - Currently, the Engineering department has two Autocad user licenses and two viewer licenses. The viewer licenses allow a staff person to view a drawing but not make any changes to it. We now have five staff members that are experienced on Autocad and at times they need to wait to complete their Autocad work until one of the two user licenses becomes available. Autocad will continue to be used more frequently and become the primary tool to draft new drawings by the end of this coming fiscal year. The estimate for a new license is $15,000. Plant 133 Reservoir Demolition - This site needs to have two (2) 40' Steel Reservoirs demolished and removed from the property. (EXTREMELY High Liability Risk). The old pump house and split -case booster pumps, motor controls and associated in -plant piping should be removed. This is a large lot on the corner of Pacific/Mansfield, and could probably be sold by the District as a residential property. Estimated cost of the demolition is $50,000. Pipe Locator - The department is requesting a new water main locating device to replace the one Norm currently uses in the field. The existing locator is old and tired while the current locating devices have much more to offer making the job much easier to accomplish with higher accuracy. The quoted price for this device is $4,055. Staff is recommending a budget of $5,000 as a worst - case scenario. Production Department New 3/ Ton Pickup — Unit 103, a 2003 Silverado 1500 4x4 has 110,000 miles on it and has never required any major repairs. The engine is burning a little oil between oil changes and may need to be replaced soon. The transmission is still in fair shape but the transfer case will soon need to be overhauled. Also, the front and rear axle bearings will need to be replaced. Estimated cost for repairs on Unit 103 for next fiscal year is $10,000. EVWD's Equipment Mechanic recommends replacing Unit 103 with a 3/ Ton 4x4, with service body at an estimated cost of $35,000. SCADA (Telemetry) - In 1986 East Valley Water District migrated from a "first generation" SCADA operating program (Conwat), to a "Wonderware" based program that has been in use at the District ever since. Over the years EVWD has upgraded this operating system once, added multiple sites, upgraded the RTU packages (radios, and control modules at each plant), and generally has been very successful at keeping our telemetry system operating. In order, however, to make our SCADA system more compatible with other systems such as Basin Water's Treatment SCADA, to reduce time to facilitate future programming additions and upgrades, but most importantly, to enable EVWD to have a fully redundant control system at the Del Rosa Office and the Treatment Plant for the fist time, I am recommending the installation of an operating program called C1earSCADA. The installation does not affect the existing RTU packages at each plant site, as they are fully compatible with the new system. ClearSCADA should be implemented as a means to meet the current system requirements, with the ability to grow and integrate many years of additional EAST VALLEY WATER DISTRICT Capital Replacement Justifications telemetry needs. With the New East Valley Water District Offices in the not - too - distant future loondng ahead of us, the need to consider how to make the transition without service interruption is paramount. The ClearSCADA system is capable of incorporating security and employee productivity monitoring and automatic report writing. The fully redundant system enables East Valley Water District to lose one front -end processor (either Treatment Plant or Office), and operate exactly the same throughout the entire Production System. Currently, if we lose the Office front -end processor, we must have ATSI out to our location and physically make operational changes to the system, including alarm notifications, which may take hours or days to fully protect our distribution system. In the meantime, we are vulnerable to a missed alarm or shut down notification. This has been the main source of concern for our SCADA system throughout its life. ClearSCADA resolves that issue. I have enclosed both an advertisement for ClearSCADA and an East Valley Water District system application proposal from ATSI for your review. The estimated cost to implement ClearSCADA is $75,000. Field Ouerations New Trucks — The Field Superintendent is planning to divide the water service work force into two crews during the coming fiscal year. To facilitate this, the Equipment Mechanic is recommending the addition of tow additional trucks to the fleet, 1) a 3/4 Ton 4x4, with service body at an estimated cost of $35,000, and a C4500 flatbed truck with a pipe rack at an estimated cost of $67,500. Caterpillar 430E Backhoe — This tractor would replace Unit 59, a Cat 436E backhoe purchased in June 1992. It is in fair condition but will need major work soon according to District mechanics. The cost of the replacement backhoe is estimated at $102,250. Modiss Scanner — the diagnostic machine currently utilized by the Equipment Mechanics to troubleshoot our fleet vehicles is becoming obsolete. The vendor who designed it, and has been updating the software to accommodate the District's newer fleet vehicles has notified the District that they will not be writing any more updates for our machine. The garage staff is requesting authorization to purchase a new Modis Scanner in order to maintain their ability to acquire updated diagnostic software for new fleet vehicles. The estimated cost for the new scanner is $6,500. CAPITAL IMPROVEMENT PROGRAM EAST VALLEY WATER DISTRICT Capital Improvement Reserve Cash Outflows Capital Improvement Program 2007 -08 18,671,192 42,353,000 14,820,000 Budgeted 2008 -09 2009 -10 2010 -11 14,820,000 Amended Proposed Forecasted Forecasted Net Cash Flow Cash Inflows 28,259,067 (14,386,220) (10,261,175) Projected Beginning Reserve Balance Contribution From Operations 2,712,100 2,530,000 3,500,000 3,500,000 Transfers From Undesignated Reserves 3,700,000 17,030,022 Unspent Proceeds - 2004 Loan 1,941,801 31,416,242 Unspent Proceeds - 2006 Loan 1,215,374 Investment Income 211,865 466,780 1,058,825 Grants 2,062,500 1,688,394 Revenue COP Proceeds 42,500,000 24,000,000 Other 27,966,780 4,558,825 11,631,775 46,930,259 Cash Outflows Capital Improvement Program 8,474,600 18,671,192 42,353,000 14,820,000 14,820,000 42,353,000 8,474,600 187671,192 Net Cash Flow 3,157,175 28,259,067 (14,386,220) (10,261,175) Projected Beginning Reserve Balance 3,157,175 31,416,242 17,030,022 Projected Ending Reserve Balance 17,030,022 6,768,847 3,157,175 31,416,242 2011 -12 2012 -13 2013 -14 Forecasted Forecasted Forecasted Thereafter 3,500,000 3,500,000 370,500 135,000 3,500,000 14,000,000 133,125 153,750 3,870,500 3,635,000 3,633,125 14,153,750 5,400,000 5,325,000 6,150,000 25,150,000 25,150,000 6,150,000 5,325,000 5,400,000 (1,529,500) (1,690,000) (2,516,875) (10,996,250) 6,768,847 5,239,347 3,549,347 1,032,472 (9,963,778) 1,032,472 3,549,347 5,239,347 EAST VALLEY WATER DISTRICT Capital Improvement Program 13,489,192 4,735,000 2,801,192 Treatment Facilities Plant 134 - Upgrade Technology, Exp to 8MGD C 2007 -08 Preliminary Design Priority 300,000 Budgeted 2008 -09 Final Design Level Total Amended Proposed Supply Facilities 65,000 65,000 Plant 40 - Rehab and Expansion C 12,800,000 200,000 Install Nitrate / Uranium Treatment Units C 1,310,000 1,160,000 150,000 16" main extension in Alley 224,000 650,000 - Storm Drain Project w/ City of Highland 554,000 50,000 North Fork Canal - Pipeline Replacement C 22,950,000 Phase 1 - Canal less Arnott 2 2,750,000 2,750,000 Phase 2 - Arnott Property 2,251,192 2,251,192 Plant 151 -new 2,000 gpm well on 6th street C 5,550,000 Drilling & Drain Line C 825,000 825,000 Equipping the Well 350,000 650,000 350,000 Plant 150 - new 2,000 GPM well at plant site 2 46,065,000 7600,000 2,165,000 Drilling 1,000,000 Equipping 925,000 Lower Zone - Two new 2,000 GPM Wells 2 Drilling 2,350,000 Equipping 950,000 13,489,192 4,735,000 2,801,192 Treatment Facilities Plant 134 - Upgrade Technology, Exp to 8MGD C Preliminary Design 300,000 300,000 Final Design 750,000 750,000 IDSE Stage 2 DBP Consultant Fee 65,000 65,000 Construction 12,800,000 200,000 Plant 150 - Ph 1, 12,000 gpm Perchl Trtmt C Preliminary Design Report 1,050,000 650,000 400,000 Final Design 1,100,000 750,000 Construction 22,950,000 Plant 150 - Ph 2, 5,000 GPM Addl Capacity 2 Design 850,000 Construction 5,550,000 Plant 107 - Relocation of leased Ion Exchange C treatment plant 650,000 650,000 46,065,000 7600,000 2,165,000 2009 -10 2010 -11 2011 -12 2012 -13 2013 -14 Forecasted Forecasted Forecasted Forecasted Forecasted Thereafter 224,000 504,000 1,000,000 925,000 1,100,000 1,250,000 450,000 500,000 728,000 1,000,000 925,000 1,550,000 1,750,000 10,000,000 2,600,000 350,000 13,000,000 9,950,000 850,000 5,550,000 23,350,000 12,550,000 6,400,000 EAST VALLEY WATER DISTRICT Capital Improvement Program General GIS Implementation C 2007 -08 118,000 200,000 Priority Budgeted 2008.09 Level Total Amended Proposed Pumping Facilities 95,000 400,000 Land Plant 127 - 1,500 GPM Lower to Inter Zone Transfer 1 Design & Other Costs 90,000 Construction Water System Master Plan 210,000 120,000 Plant 40 - Intermediate to Upper zone 1 Sewer System Management Plan C Add two additional 1,000 gpm boosters 100,000 100,000 Plant 12 - Replace Booster Station or Wells 3 1,000,000 Plant 9 - Rehabilitate Forebay and Booster Station 1 250,000 50,000 Plant 134 - 2,500 GPMUpper to Canal Zone Transfer 2 Design 400,000 Construction 900,000 Plant 39 - 6,000 GPM Inter to Upper Zone Transfer 2 Design & Other Costs 700,000 Construction 17500,000 Plant 25 - 1,200 GPM Inter to Upper Zone Transfer 3 Design & Other Costs 130,000 Construction 270,000 Plant 143 - 9,000 GPM Inter to Upper Zone Transfer 3 Design & Other Costs 900,000 Construction 2,000,000 8,450,000 50,000 General GIS Implementation C 1,118,000 118,000 200,000 Headquarters Building C Design / Permitting / Bidding 495,000 95,000 400,000 Land Construction 24,600,000 9,600,000 Water System Master Plan C 120,000 120,000 Sewer System Management Plan C 255,000 100,000 80,000 26,588,000 433,000 10,280.000 2009 -10 2010 -11 2011 -12 2012 -13 Forecasted Forecasted Forecasted Forecasted 90,000 40,000 170,000 100,000 200,000 500,000 500,000 400,000 900,000 2013 -14 Forecasted Thereafter 700,000 1,500,000 130,000 270,000 900,000 2,000,000 330,000 270,000 500,000 1,800,000 2,200,000 3,300,000 200,000 15,000,000 75,000 200,000 200,000 200,000 -5,275,000 200,000 200,000 200,000 Transmission & Distribution System Annual Main Replacement Program Rogers Ln / Newcomb / 11th Harlan Lane Pipeline Live Oak / PI 137 / PRV Pipelines Union & Vine Street east of Tippacanoe Cunningham / Hillview / Crest / Bruce Sterling Pipeline Phase 2 6th Street Section Date Street Section 6th St / 3rd Street 30 -inch Pipeline Phase 1 - Lankershim to Plant 40 Phase 2 - Plant 40 to Plant 143 9th Street 12 -inch Pipeline Del Rosa Drive to Sterling AMR Meter Replacement Program Plant 101 - Recoating Plant 59 - recoating Plant 143 - 10 MG Storage Facilities - Inter Zone Construction Design & Other Costs Collection System Annual Main Replacement Program Conejo Sewer Main Replacement EAST VALLEY WATER DISTRICT Capital Improvement Program 2007 -08 Priority Budgeted 2008 -09 Level Total Amended Proposed A 800,800 300,800 120,000 250,000 250,000 500,000 C 1,300,000 500,000 600,000 1 2 1 re C 1 2 C 5,400,000 7,700,000 700,000 1,775,000 250,000 300,000 7,500,000 3,200,000 275,000 250,000 500,000 250,000 800,000 600,000 500,000 30,645,800 1,325,800 2,650,000 1,105,800 380,800 725,000 1,105,800 380,800 725,000 Annual Capital Expenditures 126,343,792 8,474,600 18,671,192 2009 -10 2010 -11 2011 -12 2012 -13 2013 -14 Forecasted Forecasted Forecasted Forecasted Forecasted Thereafter 120,000 250,000 500,000 1,000,000 300,000 600,000 2,400,000 1,300,000 700,000 500,000 1,400,000 1,000,000 2,400,000 3,000,000 7,500,000 3,200,000 2,670,000 1,800,000 3,700,000 2,400,000 2,400,000 13,700,000 42,353,000 14,820,000 5,400,000 5,325,000 6,150,000 25,150,000 DEPARTMENTAL GOALS EAST VALLEY WATER DISTRICT Accomplishments and Goals Finance / Information Systems Responsibilities The Finance Department is responsible for correctly recording the District's financial transactions, and preparing financial reports In accordance with state controller guidelines, and requirements of the District's creditors and board of directors. This includes payroll and accounts payable disbursement functions, accounts receivable, purchasing, the collection of district revenues, investment and debt management, and internal auditing. The Information Systems department is responsible for the management, support and maintenance of the critical operations of the District's information network, providing users with software support and determining the need for new equipment. Accomplishments During 2007 -08 • Worked with Muni Financial to obtain 10 year water / sewer rate study • Initialized transition to new multi -year budget format for the 2008/2009 fiscal year • Financial Audit for 2006/2007 fiscal year was without exceptions • Installed filtering software to reduce the amount of spam and unwanted a -mails • Installed a new server to aid in the development of a disaster recovery and test database • Implemented a program for user profile backups for workstation recovery • Installed a wireless network at the Highland offices • Started development of the new District website • Installed a new server for Customer Service and migrated the Harris billing programs • Implemented wireless access of the SCADA monitoring software for the Production operators Objectives for Fiscal Years 2008 -09 and 2009 -10 • Implementation of GASB 45 reporting, OPEB (Other Post Employment Benefits) • Obtain funding for our capital projects • Complete the reconciliation of Fixed Asset Ledger for Office Equipment & Vehicles EAST VALLEY WATER DISTRICT Accomplishments and Goals Finance / Information Systems • Reconcile the Fixed Asset Ledger for Land, Treatment Plant and Reservoirs and Tanks • Reduce the number of audit journal entries • Monthly Financial Statements to the Board of Directors within 2 board meetings following month end • Create and implement a budgeting calendar • Distribute budget to actual reports to all departments monthly • Continue work on implementing a disaster recovery program • Research alternative backup solutions to include complete server and workstation imaging • Research shelving which best utilizes space in new warehouse building • Continue development of the Harris programs test database • Research alternative communication systems and develop recommendation for network/ wiring infrastructure for new building Departmental Personal Approved Positions Chief Financial Officer 1.00 Senior Information Systems Coordinator 1.00 Information Systems Coordinator 1.00 Accounting / Warehouse Supervisor 1.00 Accounting Specialist II 2.00 Lead Storekeeper/ Buyer 1.00 Storekeeper Buyer 11 1.00 EAST VALLEY WATER DISTRICT Accomplishments and Goals Customer Service Responsibilities The Customer Service Department is responsible for billing customers in accordance with District Ordinances, receiving, posting and depositing customer payments, and representing the District to it's customers in a friendly and professional manner. Accomplishments During 2007 -08 • Reviewed bill print and mailing vendor relationship and recommended change in favor of reputable company that had opened a plant in Redlands. Previous company's plant was in Oxnard. Realized savings of 20% per piece. • Worked to reduce number of written customer complaints to no more that 6 annually • Reduced average customer wait time while in phone system queue to 30 seconds through implementation of automated payment system (IVR) • Implemented Check 21 processing system to reduce customer check float time to 1 day — improved cash flows • Increased number of customers signed up for Pre - Authorized Payment (PAP) program to 1,127, a 9.3% increase during the fiscal year. PAP is the most cost - effective form of payment collection / processing at .100 per transaction and no customer interface required. Objectives for Fiscal Years 2008 -09 and 2009 -10 Look for efficiencies in the billing process by taking advantage of installed AMR meters. • Train 3 staff members on new Check 21 processing system by June 2009. • Refine District credit policies to reduce the number of payment extension requests — particularly by chronically delinquent customers. u Reduce the number of customers locked off for non - payment, possibly by implementing a reverse 911 system to give customers 48 hour notice • Clean up customer database by inquiring about updated contact phone numbers and standardizing street names and abbreviations used 40 Work with engineering to link Billing database with GIS system EAST VALLEY WATER DISTRICT Accomplishments and Goals Customer Service Implement web -site solution to allow customers to turn on/ turn off service without calling or visiting the District office. • Introduce and encourage customers to utilize electronic bill presentment. Departmental Personnel Approved Positions Customer Operations Supervisor 1.00 Senior Customer Service Representative 2.00 Customer Service Representatives II 4.00 Meter Service Workers —Turn on/off 2.00 Meter Service Workers charge time to Customer Accounts for meter reading based on actual time spent. Time spent by Meter Service Workers on meter and service line repairs is charged to Transmission & Distributions, which is the default cost - center for Meter Shop labor EAST VALLEY WATER DISTRICT Accomplishments and Goals Engineering / Production Responsibilities The Engineering / Production Department is responsible for providing our customers with a reliable flow of safe and clean drinking water 365 days a year. This involves ensuring the smooth operation and maintenance of the District's Source of Supply, Pumping, and Treatment facilities and expansion of those facilities to meet demand. • Water Quality and storage levels are monitored 24hours per day —7 days a week. • Groundwater levels are monitored and Wells maintained • Water is distributed efficiently throughout the system with boosters • Surface water is treated efficiently and economically • Various Treatment Techniques (GAC Treatment, Ion Exchange, Blending and Corrosion Control) are operated and maintained on various Groundwater Sources • Responding to Customer's questions and concerns regarding water and sewer service • Required water and sewer regulatory reports are completed and submitted by their respective deadlines. • New development projects are designed and constructed to District Standards and assimilated as smoothly as possible into the existing distribution system. Accomplishments During 2007 -08 • Implemented a new water quality monitoring computer program, which will allow for more reliable reporting. (Watertrax) • Installed a new computer backflow monitoring application and updated backflow program operations to improve and expand the water backflow program (XC -2) • Successfully Implemented Ion Exchange Treatment at Plant 27 and soon to be Plant 107 for the reduction of Nitrate and Perchlorate Concentrations • Successfully equipped the new Well 132 -5 for a new water supply source. • Successfully equipped Plant 101 to accommodate a reservoir rehabilitation project in 2008 • Successfully operated the Philip A Disch Surface Water Treatment Plant at the greatest production level in its history; in a manner that exceeds all regulatory requirements • Successfully implemented EPA required Long Term 2 Enhanced Surface Water Treatment and Initial Distribution System Evaluation Sampling Schedule and testing protocols. EAST VALLEY WATER DISTRICT Accomplishments and Goals Engineering / Production • Successfully drafted and gained approval of new Perchlorate Sampling and Notification Rule from CA -DPH • Designed and constructed soundproofing structure at Plant 27, in- house, at significant savings to EVWD over contractor's quote. • Successfully designed the Sterling Pipeline Phase 2 project and bid the materials to begin construction in 2008. • Successfully completed all required Water Quality Testing plus additional Sample Analysis for Pending Projects such as Plants 134, 150, 151, 107, 40 and Seven Oaks Dam. • Successfully completed all Scheduled Pump and Plant Electrical Maintenance Programs. • Successfully implemented Pilot Program for Bacteriological Treatment of Perchlorate at Plant 28A (ESTCP Project by CDM and Pat Evans) • Successfully designed, constructed and tested Northfork replacement pipeline project Phase I, per specifications and requirements of FEMA grant. Oblectives for Fiscal Years 2008 -09 and 2009 -10 • 2008 -2009 • Optimize Watertrax program to increase efficiencies of Water Quality Reporting and In -house Data Recording /Organization; • Complete XC -2 Backflow, Data inputting, implement Backflow Surveys and System Needs Assessments and expand the backf low program. • Set up Water Quality Monitoring Program in Watertrax with Schedule for improved tracking of Sampling Requirement status. • Purchase and Implement "Clear SCADX Program to replace Wonderware Based Program with inherent weaknesses, which could significantly affect SCADA telemetry controlling Production Stations; • Successfully add Plant 40A (Nitrate and Uranium Removal); and Plant 151 (New Well) into Distribution System; • Completely reorganize all Engineering / Production Reporting Systems and Data Collection Reports; O Begin to build redundant Telemetry system for eventual transfer from Del Rosa yard to Sterling Headquarter location. EAST VALLEY WATER DISTRICT Accomplishments and Goals Engineering / Production • Design, bid, construct and test Northfork pipeline project Phase II, by March 31, 2009, deadline. • Construct Sterling Phase 2 pipeline project along Date Street and 6'h Street utilizing mostly in -house staff. • Design, bid, construct and test pipeline replacement projects along Rogers Lane, Harlan Lane and Live Oak Street. • Obtain Engineering Report for Tank Rehabilitations at Plant #59 (900,000 gal.) and Plant #9A Forebay (50,000 gal.) for Projects to be completed in 2009 -2010. • Continue the next phases of design and permitting for the Plant 150 centralized perchlorate treatment facility. 2009 -'2010 • Rehabilitate Reservoir Plant 59. • Rehabilitate Fore bay and Booster Station at Plant 9A. • Construct the drain line project at Plant 40 as well as tie the 16 -inch main in Alley way to Plant 40. • Complete the final design of Plant 150 and begin construction. • Upgrade Well and /or Booster Station at Plant 12 in preparation for the Plant 150 project. • Investigate a complete Security Package to implement at all Production Stations, with alarm and security camera equipment tied to SCADA. • Install a new 1500 gpm booster at Plant 27. • Install a new 12 -inch pipeline along g1h Street from Del Rosa Drive to Plant 127. EAST VALLEY WATER DISTRICT Accomplishments and Goals Engineering / Production Departmental Personnel Approved Positions Engineering District Engineer Assistant District Engineer Associate Engineer Senior Engineering Assistant Engineering Technician II Executive Assistant Office Specialist II Production Water Production Superintendent Water Production Supervisor Lead Water Production Operator Lead Water Treatment Plant Operator Water Production Operator II Water Quality Supervisor Water Quality Operator 11 1.00 1.00 1.00 1.00 4.00 1.00 2.00 1.00 1.00 1.00 1.00 4.00 1.00 1.00 EAST VALLEY WATER DISTRICT Accomplishments and Goals Field Operations Responsibilities The Field Operations Department is responsible for ensuring the integrity of the District's water Transmission and Distributions mains, customer services lines and meters, and Wastewater Collection mains. The Districts Transmission and Distributions system covers all underground and above ground pipes from our Storage tanks to each service connection. The current system includes 250 miles of water mains and 25,000 service connections. The Wastewater Collection system includes 200 miles of gravity -flow sewer mains that collect wastewater at each customer's property and carry it to the City of San Bernardino's trunk lies at various locations within the District. The meter shop is responsible for reading meters, installing radio read meters, repairing service leaks and general customer service. Accomplishments During 2007 -08 • Installed 3400' of pipe at various plant sites • Fixed 65 main leaks and repaired or replaced 145 services • Replaced 13 fire hydrants and repaired 14 fire hydrants • Installed 7 — 3" meters, 3 — 8" DDC's and 1 — 10" DDC for new and existing schools O Installed 6 fire hydrants and 18 water meters and vaults of various sizes for new commercial development Relined 900' of 8" sewer main on Sterling Ave p Installed 18 new services on Lynwood Way between Byron and Amanda Trained 3 staff members on operation of new sewer video truck and implemented a Sewer Video Program Lowered or raised sewer laterals on 6`h St between Pedley Rd and Fairfax to prepare for the installation of a 30" pipeline Worked with vendor to resolve AMR meter problems 0 Replaced 1245 meters with AMR meters EAST VALLEY WATER DISTRICT Accomplishments and Goals Field Operations • Replaced various vault lids with new spring assisted lids to make them easier to operate Objectives for Fiscal Years 2008 -09 and 2009 -10 • Install 11 00' of 8" water main on Harlan Ln between Palm and Church • Install 4000' of 8" water mains on Rogers Ln, 11`" St and Newcomb • Install 1600' of 8" of water mains on Live Oak to connect at Plant 137 • Video 50 miles of sewer mains and make necessary repairs • Complete Phase II of Perchlorate Pipeline Project • Replace 3000' of 8" sewer main on Conejo Dr • Install plumbing for Plants 40 and 151 • Install AMR meters on 5 new books or approx 1,100 services • Work with vendor to install new registers and radios in the existing 6 AMR books • Replace larger meters with radio reads — 2 8" x 4" FM meters, 4 3" x 3/4" compound meters and 2 4" x 3 /d' compound meters • Replace 6 vault lids with the new spring assisted lids • Reduce misreads to 9 and 8 over the next two years EAST VALLEY WATER DISTRICT Accomplishments and Goals Field Operations Departmental Personnel Approved Positions Field Superintendent 1.00 Water Service Super visor 1.00 Water Service Lead 3.00 Water Service Lead / Welder 1.00 Water Services Workers 9.00 Equipment Operator 2.00 Equipment Mechanic 2.00 Meter Shop Supervisor 1.00 Meter Service Lead 1.00 Meter Service Worker 8.00 Meter Service Workers — Turn on /off 2.00 Meter Service Workers charge time to Customer Accounts for meter reading based on actual time spent. DRAFT REPORT —FOR DISCUSSIONPURPOSES ONLY EAST VALLEY WATER DISTRICT WATER RATE ANALYSIS DRAFT REPORT .DUNE 17, 2008 L* 0 EastValley Water District MuniFinanciai Corporate Office 27368 Via Industria Suite 110 Temecula, CA 92590 Tel: (951) 587 -3500 Tel: (800) 755 -MLJNI (6864) Fax: (951) 587 -3510 Office Locations Anaheim, CA Lancaster, CA Oakland, CA www.muni.com Orlando, FL Sacramento, CA Seattle, WA DRAFT REPORT — FOR DIscUSSIONPURPOSEs ONLY TABLE OF CONTENTS Table of Contents ExecutiveSummary ............................................................................ ............................... I Assumptions................................................................................. ............................... 1 Findings........................................................................................ ............................... 2 Recommendations.................. •..................................................... ............................... 2 Chart El: Projections Using Current Rates ................................ ............................... 3 Table El: Proposed Water Rate Schedule ................................... ............................... 4 Chart E2: Projections Using Proposed Rates ............................. ............................... 5 Introduction......................................................................................... ............................... 6 CurrentRates .................................................................... ............................... Table 1: Current Water Rates ........................................... ............................... CurrentCustomers ............................................................ ............................... Table 2: Number of Customer Accounts (FY 200612007) ........... ............................... 8 Table 3: Monthly Water Consumption by Customer Class (FY200612007) .............. 9 Annual Revenue Requirements ........................................................ ............................... 10 Approaches to Determining Revenue Requirements ................. ............................... 10 Current and Future Revenue Requirements ............................... ............................... 11 Historical Revenues and Expenses ............................................ ............................... 12 Table 4: Historic Financial Results ........................................... ............................... 12 Future Revenue Requirements ................................................... ............................... 13 Table S: Capital Improvement Projects ..................................... ............................... 14 Table 6: Estimated Debt Service ................................................ ............................... 16 Water Revenue Requirements .................................................... ............................... 18 Table 7. Water Utility Revenue Requirements ........................... ............................... 19 Allocationof Water Costs ................................................................. ............................... 20 Cost of Service Procedure .......................................................... ............................... 20 Classification of Expenses to Cost Components ....................... ............................... 21 Table 8: Functionalization of Water Utility Revenue Requirements ........................ 22 Table 9: Allocation of Water Utility Revenue Requirements ..... ............................... 23 Developmentof Water Rates ............................................................. ............................... 24 Table 10: Projected Number of Equivalent Meters ..................... .............................25 Table 11: Projected Water Usage (in HCF) .............................. ............................... 26 Table 12: Calculation of Water Rates ....................................... ............................... 27 Table 13: Proposed Water Rate Schedule ................................. ............................... 28 Conclusion......................................................................................... ............................... 29 DRAT -T REPORT - FOR .DISCUSSION PURPOSES ONLY EXECUTIVE SUMMARY _ - This study of water rates was conducted for the East Valley Water District (EVWD) to determine water revenue requirements, costs of services, appropriate, fair and equitable rates and rate structure, and to maintain the water utility on a financially sound and stable basis over the next ten fiscal years. The study was conducted using historical and projected data on operating and non- operating expenses, debt service, and capital expenditures. The EVWD retained MuniFinancial to prepare a water rate analysis that will include a new water rate schedule that meets current and near -term projected system revenue requirements. For purposes of determining annual revenue requirements as a basis to set future water rates, we used a projection period of ten years, spanning fiscal years 2008 /2009 through 2017/2018 (the study period). Assumptions This section presents the assumptions used in the water rate analysis. 1. The budget for fiscal year ending June 30, 2008 was used as the base year. 2. The beginning operating fund balance for fiscal year 2007/2008 is estimated at $1,320,000. 3. The annual customer growth rate for the system as a whole is assumed to average one percent (1.0 %) throughout the study period. 4. An inflation factor of six percent (6 %) was used to project all operating expenses. 5. The water utility currently pays debt service on: Certificates of Participation - Series 2001 Certificates of Participation - Series 1996 2004 Project Installment Sale Note Department of Water Resources Construction Loan 2006 Project Installment Sale Note 6. The EVWD current water rate structure consists of fixed monthly meter charge, a fire standby charge, and a consumption charge. MuniFinancial East Valley Water District Water Rate Analysis 1 DRAFT REPORT — FOR DIscussioNPURPOSEs ONLY Findings This section presents the findings of the water rate analysis. 1. Water acquisition costs are expected to significantly increase during the study period. 2. Due to increasing expenses, the current revenues are insufficient to finance the utility's operations. 3. Projections indicate that the utility operating fund balance will become negative during fiscal year 2010/2011. The deficit will continue to accumulate thereafter unless water rates are adjusted to meet revenue requirements (see Chart ES1 on page 3). 4. Existing rates will not adequately fund system replacement and major capital project needs. 5. Existing rates will not adequately fund recommended reserve fund balances. Recommendations Based on the findings of this water rate analysis, we recommend that the EVWD adopt the following items: 1. The proposed water rate structure (see Table ES -1 on page 4). The rate structure adequately provides for ongoing costs and debt service and allows for funding of reserves for unscheduled expenses (see Chart ES -2 on page 5). 2. A policy of targeting an operating fund balance of 90 days of annual operations and maintenance expenses to ensure that funds are available for emergency purposes and to mitigate future rate shocks. 3. A policy of setting aside funds annually in a repair & replacement reserve account to provide for unscheduled system maintenance and rehabilitation. MuniFinancial East Valley Water District Water Rate Analysis 2 b u' n Q� V ^U A, Q� u' i F, o' ^5' A\+ 1 M y z Q d Q r d W s CO O N } I El N � W c to am Om I � mo m c E fit": p 0 Q � -} O I LL m E v I } i LL O r OI{ i N } . LL , �W N R W O m E LL LL v i w N � W VIr O O I N • oy o 0 0 0 0 C C. o 0 0 C 0 C 0 0 0 0 0 0 0 0 0 0 .o' o 0 0 o O L o 0 0 0 0 0 0 C 0 0 C' A 6A 69 M y z Q d Q r d W s a ,V^ vJ d W m r^iov �mn o m co rio of ei criov � N M V M M In OJ N M V M M M M mCi IR(q -M 0n OSt' MMOO � N M V Eli tl1 61 I� Q O O r M N MMO V M(0O0 O .- �- ss E» tO M O V 0 (n N O D7 N M U M M — O N M � M M O K M M 0 0 O> eH 4i N M V W M 0 M N M V y, en m N M 7 M O M m co N M V fA E9 V N O O> O M V O M M Ni 0 0 M V N 47 M �t V vi Ui I M 0 f 0 0 0 M M V 0 M M M D) 0 N O V tUO (DAM .- � N M (A fli U LL � U W a - O C M _ N _ _ _ _ _ W � Wa =m� Z3 (D O o2 � U U 5 tl S Q d Q Y d U y Q N d 6 O s co r \ 5 ) / \ ) d \ \ ) ( ; R 2 $ \ § i � 3 \ / � � i 3 \ / j / f ) ZE ^�T77 7777 \\ \\ « ; /t> yw » ®�3, ^^ ^ ^` \^ &C5 ] ■!\ .v� f � \ \ { d :: / \ / } ƒ\ \ / j / f ) ZE ^�T77 7777 \\ \\ « ; /t> yw » ®�3, ^^ ^ ^` \^ &C5 ] ■!\ \ / j / f ) ZE ^�T77 7777 yw » .v� f � \ \ / j / f ) ZE DRAFT REPORT - FOR DISCUSsroNPURPOSEs ONLY INTRODUCTION This report documents the results of the water rate study conducted for the East Valley Water District (EVWD) by MuniFinancial. The primary purpose of this study is to develop a water rate structure that will adequately fund the annual operations and capital needs of the water utility. The rate study incorporates utility revenues, operating expenses, debt service, and capital expenditures data provided by the EVWD. The objective of the rate study is to develop rate schedules for the water utility during the ten -year study period. The projected rate schedule is designed to produce revenues for the water utility to pay administrative, operations, maintenance, capital improvement, and debt service expenditures, in addition to maintaining fund balances at reasonable levels and within guidelines endorsed by the American Water Works Association (AWWA). The results of the rate study are derived from projected financial analyses of the water utility based upon the budgeted revenues and expenses of fiscal year ending June 30, 2008 (the base year). A ten -year projection of operating results to determine future revenue requirements was developed for the water utility for the fiscal years ending June 30, 2008 through 2018 (the study period). The projections also determine the amounts required to maintain sufficient balances in the Water Utility Fund. Current Rates The EVWD current water rate structure consists of fixed monthly meter charge, a fire standby charge, and a consumption charge. Note that each unit represents one hundred cubic feet (HCF) of water. Table 1 illustrates the current water rate schedule. Table 1: Current Water Rates METER RATES $1.20 Per 100 Cubic Feet plus System Charge 3/4" $8.40 /mo 1" $15.70/mo 11/2" $33.00 1mo 2" $47.60 1mo 3" $83.50 /mo 4" $139.00 /mo 6" $270.00 1mo 8" $405.00 /mo Initiation of Service Charge: $25.00 /Service Address FIRE STANDBY CHARGE: Per Inch Diameter per Month $5.60 Temporary Service Charge: $1800.00 deposit plus $1.20 per HCF* of metered water *HCF - hundred cubic feet MuniFinancial East Valley Water District Water Rate Analysis 6 DRAPT REPORT - FOR DISCUSSIONPURPOSES ONLY Current Customers Table 2 shows the current number of water customer accounts for fiscal year 2006/2007 by meter size. Table 3 depicts the monthly water consumption for fiscal year 2006/2007 for each customer class. MuniFinancial East Valley Water District Water Rate Analysis 0 0 N <O O O N U- 0 V V Q i N w y U w O L a� a Z N y IT iY O V� R� R� Q� 2; V� l O R, I F. Ch R a3 is V V a Q W U O A 2 CV h i gill! Ina gig Inv S2 m m��om 1G o V N y N m O O N N m N'` lm0 15 Qm1A.-VIE m W Q I N O O O N N in N N 0 n O Q N nom. -m nNlg m noQ m m <66 00oM! m ^ °�Y°v "°n °v °m °m F M V Z` d �i N y S d R x s z 0 W O R4 R4 h Q O U ^L` W 3 U 3 y t� m r m m m r V O)m ON m m m rn v rn r O C'i n W r V CJ FO- M m O m M 61 m m N O r M m m M O r V 0 �-6) m N6i m J � mN mOJ to m m N (O N V N m W OJ r N � m m N m r N D7 t0 P W EdW O m r V r N N m mrrm rn r m o °m r v m m N V m m m L m N O O 6 O O N Y J V V m0 MM (�9 m T m N m r O N O m m N N r M O N (O 2 6 m r r M m � �2 N M m LL N 1n m T m V r N m O m �p 07 (O M O O J m m r o w o c me or �n � M r E V M V N m m m r (O W N m M r a ° crcrn LQ w Z OOJN O d) 1A O r 47 O � M N O V (O Cli O M N r n N N m (O r W M Iq E r � rn m rn m r m ri ri v N m r o m r O N r N N D) N m a T N O> N NNWO" m J N O m t O (O m Q N O O N N r m V N M 1n m Mr 014 D (O m co V 4 V r N N U � T C N O N Y E N N J J O C� d F U tt1U W =K 0 h r e d C v U y h_ Q d 3 a w C Q fi DRAFT REPORT — FOR DISCUSSIONPURPOSES ONLY ANNUAL REVENUE The EVWD water utility fund must receive sufficient total revenue to ensure proper operation and maintenance of the department as well as preserve the financial integrity of the utility and the fund. Adequacy of water revenues can be measured by comparing the water system's revenue requirements to be met from the water rates it charges to its customers. /approaches to Determining Revenue Requirements In order to develop adequate revenues from a system of water rates, the annual revenue requirements of the water utility must be determined. There are two commonly accepted bases for determining annual revenue requirements in order to develop a financially sound water rate structure. These approaches are the "cash needs" approach and the "utility" approach. Both approaches are endorsed by the AWWA. The "cash needs" basis is typically used by public water utilities when establishing rates for their customers. Under this approach, the basic revenue - requirement components include: • Operating and maintenance (O&M) expenses • Debt service costs (principal and interest on water utility - related debt instruments) • Capital expenditures funded directly from current revenues or accruals on a pay -as- you -go basis • Other elements such as interdepartmental expenses (cost allocation), in -lieu taxes, and interest earnings (considered as a credit to the expenses) The "utility" basis for determining annual revenue requirements is typically used by regulated investor -owned utilities and regulated municipal utilities. Items normally included in annual revenue requirements based on this approach include: • Operating and maintenance (O&M) expenses • In -lieu taxes • Depreciation expense • Fair rate of return on the rate base As the East Valley Water District is a public water agency, we have used the "cash" basis in this analysis. MuniFinancial East Valley Water District Water Rate Analysis 10 DRAFT REPORT — FOR DIscussIONPURPOSEs ONLY Current and Future Revenue Requirements The annual revenue requirements are derived from maintenance and operations costs, debt service expenses, and projected capital expense items. Interest earnings, fines and forfeitures, and other miscellaneous income may offset some of these expenses, but the majority of the costs should be recovered via customer rates and charges. The EVWD prepares an annual budget for the water system that itemizes all the expenditures for each fiscal year. These expenses include personnel costs, maintenance and operations, equipment repair and replacement, and Capital Improvement Program (CIP) costs. For the study we also established two new reserves and added line items within the budget analysis to account for the collection of funds in these reserve accounts. The two reserve funds are as follows: 1. A Repair & Replacement Reserve Collection - to set aside funds for the replacement of major systems in the EVWD's facilities 2. An Operating Reserve - to ensure that funds are available for emergency purposes and to mitigate rate shocks The water system activities included in our analysis were gathered from the EVWD annual operating budget and audited financial statements. MuniFinancial Gast Valley Water District Water Rate Analysis 11 DRAT7'REPORT — FOR DISCUSSIONPURPOSES ONLY Historical Revenues and Expenses Base year income and expense data for the water system were obtained for fiscal year 2007/2008 using the water system budget for that year, in addition to audited financial statements for fiscal years 2002 through 2007. The historic financial results of the water system are shown in Table 4. Table 4: Historic Financial Results OPERATING REVENUES Water sales Bulk sales Connection charges Other water services TOTAL OPERATING REVENUES OPERATING EXPENSES Source of Supply Pumping W aler Treatment Tmnsmasion and Distribution Customer Accounts Administrative and General DEPRECIATION Depreciation TOTAL OPERATING EXPENSES OPERATING INCOME NON - OPERATING REVENUE Investment income Rents Perchlorate research grant Gam from disposition of fixed assets Miscellaneous TOTAL NON - OPERATING INCOME NON - OPERATING EXPENSES Interest expense Loss from disposition of fixed assets Perchlorate research administration Amortization - issuance costs Amortization expense - lease costs Loss on lease termination TOTAL NON- OPERATING EXPENSES 2007 Actual 2006 Actual 2005 Actual 2004 Actual 2003 Actual 2002 Actual $ 12,928,581.00 $ 11,681,350.00 $ 10,629,544.00 $ 10,369,032.00 $9,670,505 $ 9,685,235.00 $ 182,758.00 $ 125,696.00 $ 225,374.00 $ 221,547.00 $ 175,701.00 $ 232,095.00 $ 425,825.00 $ 266,817.00 $ 326,584.00 $ 181,527.00 $ 301,222.00 $ 264,926.00 $ 289,978.00 $ 304,573.00 $ 378,750.00 $ 251,888.00 $ 273,170.00 $ 262,585.00 $ 13,827,142.00 $ 12,378,436.00 $ 11,560,252.00 $ 11,023,994.00 $ 10,420,598.00 $ 10,444,841.00 $ 390,124.00 $ 639,948.00 $ 668,306.00 $ 616,986.00 $ 734,001.00 $ 360.827.00 $ 3,451,376.00 $ 2,987,709.00 $ 2,839,783.00 $ 2,824,273.00 $ 3,003,996.00 $ 2,748,623.00 $ 626,770.00 $ 381,846.00 $ 405,668.00 $ 344,407.00 $ 279,918.00 $ 273,029.00 $ 766,082.00 $ 695,088.00 $ 682,225.00 $ 571,027.00 $ 574,447.00 $ 587,833.00 $ 403,493.00 $ 397,014.00 $ 391,700.00 $ 390,095.00 $ 368,594.00 $ 333,969.00 $ 3,812,194.00 $ 3,964,444.00 111 3,924,142.00 $ 3,390,016.00 $ 2,890,789.00 $ 2.488,534.00 $ 9,450,039.00 $ 9,066,049.00 $ 8,811,824.00 $ 8,136,804.00 $ 7,851,745.00 $ 6,792,815.00 $ 2,192,052.00 $ 2,040,938.00 $ 1,977,242.00 $ 1.764,996.00 $ 1,585,450.00 $ 11492,700.00 $ 11,642,091.00 $ 11,106,987.00 $ 10,789,066.00 $ 9,901,800.00 $ 9,437,195.00 $ 8,285,515.00 $ 2,185,051.00 $ 1,271,449.00 $ 771,186.00 $ 1,122,194.00 $ 983,403.00 $ 2,159,326.00 $ 323,256.00 $ 208,893.00 $ 144,775.00 $ 58,932.00 $ 205,051.00 $ 539,227.00 $ - $ - $ 5,000.00 $ 30,000.00 $ 31,221.00 $ 41,722.00 $ - $ - $ - $ 626,014.00 $ 510,451.00 $ 1,498,040.00 $ 15,855.00 $ 1,245,794.00 $ 118,996.00 $ - $ 2,817.00 $ - $ 106,269.00 $ 14,144.00 $_ _68434.00 $ 14.760.00 $ 98,337.00 $ 18,489.00 $ 445,380.00 $ 1,468,831.00 $ 337,205.00 $ 729,706.00 $ 847,877.00 $ 2,097,478.00 E 554,914.00 $ 620,130.00 $ $ 35,280.00 $ 35,280.00 $ $ 2,675.00 $ 2,676.00 $ $ $ $ $ 592,869.00 $ 658,086.00 $ 681,134.00 $ 695,616.00 $ 607,321.00 $ 803,530.00 - $ 15,795.00 • $ 57,106.00 - $ 626,014.00 $ 559,936.00 $ 1,498,040.00 35,280.00 $ 35,280.00 $ 35,280.00 $ 35,280.00 2,676.00 $ 2,676.00 $ 2,675.00 $ 2,675.00 $ $ $ 26,667.00 719,090.00 $ 1,375,381.00 $ 1,205,212.00 $ 2,423,298.00 INCOME BEFORE CONTRIBUTIONS $ 2,037,562.00 $ 2,082,194.00 $ 389,301.00 $ 476,519.00 $ 626.068.00 $ 1,833,506.00 CONTRIBUTIONS Utility plant dedicated $ 1,737,873.00 $ 1,151,890.00 $ 717,423.00 $ 1,066,279.00 $ 2,020,846.00 $ 817,741.00 Capacity charges $ 516,619.00 $ 467,687.00 $ 967,048.00 $ 1,121,038.00 $ 758,770.00 $ 705,190.00 Grant $ 195,089.00 $ 77,886.00 $ 597,751.00 $ - $ - $ - Local Governments $ - $ - $ - $ 133,648.00 $ 170,890.00 $ - Perchlorate Conference $ $ $ $ $ 20,035.00 $ 29,450.00 TOTAL CONTRIBUTIONS $ 2,449,581.00 $ 1,697,463.00 $ 2,282,222.00 $ 2,320,965.00 $ 2,970,541.00 $ 1,552,381.00 CHANGE IN NET ASSETS $ 4,487143.00 $ 3779657.00 $ 2677523.00 $ 2797484.00 $ 3,596609.00 $ 3385887.00 Source: East Valley Water District MuniPinancial East Valley Water District Water Rate Analysis 12 DRAFT REPORT —FOR DzscussroNPURPOSEs ONLY Future Revenue Requirements An evaluation of future revenue requirements should focus on four specific areas. These areas are increases in operating expenses, capital improvement costs, requirements for debt service, and the maintenance of reserves. The following sections discuss the impact of these four factors on the water utility revenue requirements. Operating Expense Projections For the purpose of determining annual revenue requirements as a basis to set future water rates, we used a projection period of ten years. During this period (FY 2008/2009 through FY 2017/2018), costs are naturally assumed to increase due to inflationary pressures. In projecting future expenses, we have used the cost estimates provided by the EVWD. Per EVWD direction, we are using an expenditure growth rate of six percent (G %) to project the future costs of the system. This is in line with our experience with similar -sized utility systems. Capital Improvement Costs The EVWD maintains a Capital Improvement Plan (CIP) for the funding of annual capital projects. The values used in this analysis are based on cost estimates provided by the EVWD. Construction costs were escalated annually by a factor of 4.50 %, based on the annual percentage change between 2002 and 2007 in the ENR Construction Cost Index. Table 5 presents the CIP costs over the ten -year planning period of this study (note that it is assumed that all CIP costs are operations - related, i.e. not driven by growth, and will be funded through the issuance of revenue bonds). MuniFinancial East Valley Water District Water Rate Analysis 13 p 4� V CJ F4 CG y p 40 G� F. Gy 4� q lyj aryl Mmmmm NT�NN R mNV mn p N m N m N m F ^NNNN r W {p N m O W N N O N O NmA nNn h NmPN� O � mmmOm m O N N (7 W TN LL H �9 X O)NNNN m O ONnmN V N mOi 01 N M N m N m N CJ V yN N N N p1 C LL � N f9 J 5 �p Om Nmm O C ACIOmN N p mmmoo c U N vmHmm p' K N c n P h N rn Z N N NN ro W } G m N W N O P O O M m N m n N NNm OANN a N N N P P m C N N NN m N } p N P NMmOV N 2� p CJ p1N NN A L NN(00 AN � m NNNM�N NANNN N N NMnmm M mm�pnm m � N eN- m Cq m N N N N A A LL y tq @ N N OOy�mNO $ O N ('N')CON� N O NN O Oi Oi "p ^ 1] N 0 mnmMrn o O M O m N JR N a N 1nM(pm O � N m � � 0 0000 o a�i N 0000 O d ONNN N d m OANN N 0o Mc01nNN 3 LL w m E m H a O J D_' OLL y C y 2 ET N O N G dCN NO in a'yF =w 2U a 42 y Q 01 d U ^w y \N S �y Q O r DRAFT REPORT — FOR DiscussIONPURPOSEs ONLY Debt Service The water utility currently pays debt service on: Certificates of Participation - Series 2001 Certificates of Participation - Series 1996 2004 Project Installment Sale Note Department of Water Resources Construction Loan 2006 Project Installment Sale Note It is assumed that the EVWD will issue new debt to fund all of the capital improvement projects listed in Table 5. The total new debt issuance is estimated at $125,310,000 with an annual debt service payment of $9,708,000 (based on financing $100,875,466 in construction costs, an interest rate of 6.5 %, an underwriter's discount of 2 %, a cost of issuance of 1 %, a reserve fund requirement of 10 %, and a 30 -year term with one year of capitalized interest). In addition to the CIP costs illustrated in Table 5, the EVWD will be financing the construction of the new headquarters. Half of the headquarters' construction costs are allocated to the water utility, this results in an estimated debt issuance of $18,500,000 with an annual debt service payment of $1,433,000 (based on financing $14,888,726 in construction costs, an interest rate of 6.5 %, an underwriter's discount of 2 %, a cost of issuance of 1 %, a reserve fund requirement of 10 %, and a 30- year term with one year of capitalized interest). These estimates are based on the current interest rate environment and industry standard costs of issuance figures. Total estimated debt service for the study period is summarized below in Table 6. MuniFinancial East Valley Water District Water Rate Analysis 15 •a C) C� ^0� b V Vj A) U ^A� k; 1 a; G\ a3 A' U co t� w �O Q M� R YRos% � m � N w IW m �� -NNOtO ;q, q m m O O z z m m rn � C C a 3 d o d� m v0`m o �'opp ❑ U� a m� d o m N W O p N O U a 5 ti fi `C d O �i i d V i y Q Y 3 w fiC fi 4L fi I DRAFT REPORT — FOR DiscussIONPURPOSEs ONLY Reserve Funds Repair dam' Replacement Reserve Collection Fund We recommend that the EVWD establish a repair and replacement reserve collection to set aside funds for the construction and replacement of major systems in the EVWD water facilities. Developing adequate reserves allows for emergency cash for the system and helps mitigate future rate shocks. Water Operating Fund. The operating fund for the water utility is projected to have a balance of $1,320,000 as of July 1, 2007, according to the EVWD. We recommend that the EVWD adopt a policy of maintaining a balance of 90 days of operating expenses in the operating fund in order to satisfy expense obligations as cash flow fluctuates during the year. This reserve fund target is within industry standards for similar -sized utility systems. MuniFinancial East Valley Water District Water Rate Analysis 17 DRAFT REPORT — FOR DlscussIONPURPOSEs ONLY Water Revenue Requirements Table 7 presents the ten -year projected revenue requirements for the water utility. This table includes annual revenues projected to be raised using the current rate structure, the additional revenue required to meet projected water utility expenditures utilizing rate increases, the projected operating and non - operating expenses, and fund balance information based on the revenues generated from rate and fee increases. Row 3 of this table shows the revenue generated using current rates and fees. We utilized a population growth factor of one percent (1 %) to project operating revenues. Current rates and fees do not produce enough revenue to maintain a positive operating fund balance. The section below the current revenues (rows 5 through 17) incorporates the revenue generated by the proposed rate and fee increases. As the table illustrates, in order to maintain a positive cumulative fund balance during the study period, total system revenues must be increased by twenty percent (20 1/o) in fiscal year 2008/2009; twenty percent (20 %) in fiscal year 2009 /2010; fifteen percent (15 %) in fiscal year 2010/2011, ten percent (10 %) in fiscal year 2011/2012, and five percent (5 1/6) fiscal year 2012/2013. Total operating expenses are shown in row 30, net income is presented in row 51, and the ending operating fund balance is detailed near the bottom of the table in row 57. Row 59 shows the targeted operating fund balance, which is the minimum amount of funds the EVWD should maintain in its operating fund to address any emergency requirements that may arise for the water utility. MuniFinancial East Valley Water District Water Rate Analysis 18 W 0 a Q w h GaO' ^4 d G _: L w IT °axxxx o S " a o8888oxo$oo o z° - �' rc _ s` a o° a° n-2 INB� �n a H ti fi Q' O C �S U Q 3 J W r 4L r �moW a m n o1r m _ $ 1W m a � qo xP n m�$sx n m to o$...... e e n' $ "s e8 .. e o m'n �" a �mw sl °axxxx o S " a o8888oxo$oo o z° - �' rc _ s` a o° a° n-2 INB� �n a H ti fi Q' O C �S U Q 3 J W r 4L r DRAFT REPORT - FOR DIscussioNPURposm ONLY ALLOCATION OF WATER COSTS In Bighorn- Desert View Water Agency v Verjil, the California Supreme Court held water agency's rates were subject to repeal by initiative pursuant to Section 3 of Article XIIIC of the California Constitution. Because of the Bighorn decision, water rates in California are now considered property- related fees, therefore the substantive and procedural requirements of California Constitution Articles XIIIC and XIIID (Proposition 218) apply to water rate setting. Section 6 of Article XIIID states: The amount of a fee or charge imposed upon any parcel or person as an incident of property ownership shall not exceed the proportional cost of the service attributable to the parcel. This utility rate study was performed to allocate the costs of providing service to users in order to ensure that rates are equitable and not unduly discriminatory, thereby satisfying the Proposition 218 requirements. The total cost of serving each customer class is determined by distributing each of the utility cost components among the user classes based upon the respective service requirements of each customer class. Therefore, a true cost of service rate study enables a water utility to adopt rates based on the true costs to each user class. The purposes of this water utility cost of service study include: Proportional allocation of the costs of service to users. Derivation of unit costs to support the development of water rates. Cost of Service Procedure To design equitable water rates, it is necessary to allocate costs among the various customer classes commensurate with the cost of providing service. Revenue requirements are allocated to customer functional characteristics in the first step of a three -step process and then distributed to customers proportionate to their share of each of the functional characteristics. The second step of the allocation process classifies operating and non - operating expenses to the cost components of water costs and customer costs. Water costs are those that are associated with the consumption of water by users. Customer costs vary with the number of customers served by the system, or number of equivalent meters connected to the system. The final step of the process translates these costs of service into water rates. MuniFinancial East Valley Water District Water Rate Analysis 20 DRAFTREPORT- FOR DISCUSSIONPURPOSES ONLY Classification of Expenses to Cost Components Operating and non - operating expenses are allocated directly to functional cost components to distribute the costs to the various user classes. Table 8 presents the allocation of each expense component based on its functional category of water or customer -based costs. Customer costs are costs that occur regardless of the amount of water used, such as customer service or administrative costs. We recommend that customer costs be covered by the customer's monthly meter charge. Water costs are usage -based costs, such as water supply, pumping, treatment, and transmission and distribution costs, and are addressed by the customer's monthly consumption charge. Table 9 presents the allocation of the revenue requirements calculated for each year of the study period into their customer and water components. This allocation is based on the functionalization percentages calculated in Table 8. MuniFinancial East Valley Water District Water Rate Analysis 21 :Y ci 49 C� 0� Q, Y R� �y 4j U 4� Q� r CY 0• R� V� RC, y'Y A� W L O LLG Q O LL 00 ,d •a O U m ob � � U � N N O � N U N E � o � � Eo U N m J c Um M U O x U W N m �5 w � i m d U � [ `m U o. N � U x U W [ C M r ON M v I m O o r O O O m O M n m m W .1. m m m O IA m NI m M m m e V O Ol�im min m O Y) M N m in I m v a a v n n vl a N to m r v N N m O O W, m N 1p m V m N m m N O O (O (O r (O v � r 0 0 0 0 0 0 0 0 0 0 0 0 0 0 ....... 0000000 0 e o 0 o O o 0 0000000 0 0 e0 0 0 O o o O O o OM 0 0 0 0 0 0 0 ...S.2. m m N N V O N V n O(O mN m m (O 1U V m M W V N O H"R N OO W N O V r O m � N O 0 O N M W, O V m M m r 0 0 0 0 0 0 O o 0 0 0 0 00000. 000000 0 0 0 0 0 0 000000 0 0 0 0 o e 0 0 0 0 0 0 0 0 0 0 0 0 000000 N N m e m to m o O O N p n N N N M e N H ' M o m n a � n a ' N e m N C7 O N N O O N Qj N N N w 0 0 0 d o 00 o e 0 0 0 0 O O 0 0 0 0 0 0 9 � 0 0 0 0 o e o 0 0 O O O° 0 ° 0 0 0 0 0 0 O O O O O� Q N d y N N U n X o O W c Z Z N N p .c m N c c p O In � m p c 6 m Q Jo O c U c N N IL Q m d Z CO N J C C y < _ J- d [I 2N d 9 0 d o d� w w (} O y o u o 0 o p_ U Lm O y EL C m u a m E N O � o o O m O o o 0 m w U p U C O 0 U r uJ. N N 5 Z Q r cl Q C a m U y Q d L4 Q �L DRAFT REPORT — FOR DISCUSSION PURPOSES ONLY Table 9: Allocation of Water Utility Revenue Requirements Water Costs Customer Costs Customer Meters & Base Extra- Capacity Billing /Admin Services Functionalization Factors 79.2% 1.1% 17.7% 2.0% Sources: East Valley Water District; MuniFinancial. MuniFinancial East Valley Water District Water Rate Analysis 23 Water Costs Customer Costs Customer Meters & Base Extra- Capacity Billing /Admin Services Total FY 08/09 $ 13,466,384 $ 179,517 $ 3,007,945 $ 347,363 $ 17,001,209 FY 09/10 16,321,257 217,575 3,645,629 421,004 20,605,465 FY 10/11 18,957,140 252,713 4,234,398 488,997 23,933,248 FY 11/12 21,061,382 280,764 4,704,416 543,275 26,589,838 FY 12/13 22,335,596 297,750 4,989,033 576,143 28,198,523 FY 13/14 22,558,952 300,728 5,038,924 581,905 28,480,509 FY 14115 22,784,542 303,735 5,089,313 587,724 28,765,314 FY 15116 23,012,387 306,772 5,140,206 593,601 29,052,967 FY 16117 23,242,511 309,840 5,191,608 599,537 29,343,496 FY 17/18 23,474,936 312,939 5,243,524 605,533 29,636,931 Sources: East Valley Water District; MuniFinancial. MuniFinancial East Valley Water District Water Rate Analysis 23 DRArT REPORT - FOR DISCUSSIONPURPOSES ONLY DEVELOPMENT OF WATER RATES _ -� Following the distribution of the revenue requirements to the classification factors, these requirements are used in the development of new water rates. The water costs are accounted for through each customer's monthly consumption charge. Customer costs are allocated based on the number of equivalent meter ratios within the entire system. Table: 10 illustrates the projected number of equivalent meters for each year of the study period. Equivalent meter factors represent the burden each user group places upon the water utility as measured by an equivalent meter index. This index should reflect the level of service to each customer group based on their potential commodity demand (the index used in the study was obtained from the AWWA M1 Manual). The total number of equivalent meters was used in determining the monthly meter charges shown in Table 12. Table 11 illustrates the projected water consumption in hundred cubic feet (HCF) by customer class for the study period. The total consumption for each year was used in determining the commodity charges shown in Table 12. The proposed water rates are designed to increase the water system's revenue in order to meet rising operating costs, to enhance the financial condition of the water utility, and to provide funds for needed rehabilitation of the water system infrastructure. The proposed rates are expected to recover all of the customer and water costs of the system. Table 12 illustrates the calculation of the proposed water rates. The baseline (5/8" and 3/4 ") meter charge is calculated by dividing all customer costs of the water system by the total number of equivalent meters. The monthly meter charge for all other meter sizes are calculated by multiplying the baseline meter charge by each meter size's respective meter - equivalent ratio. The consumption charge is calculated by dividing the water - related costs by the estimated total water consumption for the water system. The resulting water rate schedule is illustrated in Table 13. ManiFinancial East Valley Water District Water Rate Analysis 24 YY 2 O ti a U PLI ti O w i F O i Sd k 0 d .Q Z C a dlorvn °W °'��el Wi ci .c NIY S.I� &inwNeSmm�e i 10 o'n fn cmin of N Nm�r Wao m�� Y OIn NN W' mmlN LL W ONW Y" LL y B MmV Ww�t; i7N r Y �m eW�mm�n� w° x< m �oeW w M - M<Fo� o N�� r N O C N Y Q d ,y Q 0 x W I \ ( § k § \ ) d \ \ ) / �Ugg �4¥ :©!w° § ® }! ® §! ( �2, 22 g > ) } / \ \ $ 2 O w 0 ^4i V 0 h U ti Q O O r r Im Iw W O G O �Y U N P j nM m mIQOOA�M m Q W 1@ O W W M O Q W {O N O n Q m O N gyp' W t v OO W l�l M O Q W. W _ h N w w w w M Q� m WmoeW W Wo �`n m m moo' rb �c riomm ev '° 'o n W o m a7 IV N w w w w N A m m m A Q O O m w O N (O W M O Q N W N O (O N m W m (O W M O W M M O e N M 06 N M Q W M W W m (O M N N M Q n c� m vi m N � w w N w w n Q m m A 0 0 0 A M (p N M Q (O WMR A Q Q n N N M Q W W O m N M N w w w F» w N m m 1A e 0 0 A W M O W Iq O M O 1@ 01 W (O Q W m M OO W m n �@ N N � w w w w w c6 rd aiom 'y' W N N M O W N W W m h (V N w w w w w m� m wNm� Wm Q n V N N N e c tNV M V V � N Q W N r w w w w w m M Q Q N O m m M e O m w w w w w M m n A m N e M N m N IA n M (O N 1(! w ( Wy Q N m W Q W Q (O f0 N �� NtW+�tWirmN W O Q (O E9 w N F9 y M O O Q Q m m OS t00 m W O M N M M w w w f9 w LL E I W d d N K m @ W N Q m Umm @ Q N_ @"`m o; U FOJmm 0•- �NM Qf04t ZON G U =° `E y @ Z E m @ £ U Fo Z O w V m° N H Q fi m Q C d V Q \N S d w fi iJ i CJ Lq v ij 4` c Q] Y Q 4� 4] 4� �a L Y I /Lry L` Gy aY �a ry (00 M O t00 l^9 In O m �- N O N LL U3 fA p (O M O a (O (D q N O W N M V O N C NMOC(O (O �(J O m N (O M O M M M O V � N N M V 01 M I f> M N M V O N LLUi M N N (D M O W M M O et a- d N M V W N m V O N LLt9 fA m1? V OO i0�M -y On 0UO f9 M O m (q C? ( N M V r o e N � LL to M � M p (m0 M O It (00 (r0 � O m y N M C O YN } 5_2 ~ N 0 O N O W a N M (D O N !O c OJ tl) W M M M N r- O N M V 3 N LLfA fA Q p 14:NOmmM V' O t0 y w LL Y" 4i d3 YIl) (O V N m OJ at N �cNtO W NM�t O N M N R 0 n (D lnhm0OM M C O V M w m— w w w ` c N O V M`` ,O O N M O LL K A 9 Q ¢ 5 T m IX U a LU4J W } as m Q 1tl O o 2 ou DRAFT REPORT — FOR DiscussIONPURPOSEs ONLY CONCLUSION The proposed water rate schedule is based on the EVWD projected revenue requirements over the next ten fiscal years. The proposed rates are designed to generate additional water revenues to promote revenue adequacy throughout the ten fiscal year planning period. In addition, the rates were designed to satisfy proposition 218 regulations. We recommend that the EVWD adopt the proposed rate structure to ensure that the water system has a stable cash flow stream in order to provide for ongoing costs and debt service and allow for the funding of reserves for unscheduled expenses. We also recommend setting a policy of targeting an operating fund balance of 90 days of annual operations and maintenance expenses to ensure that funds are available for emergency purposes and to mitigate future rate shocks. Finally, we recommend setting a policy of collecting funds annually in a reserve account to provide for future system repairs and replacement. MuniFinancial East Valley Water District Water Rate Analysis 29 Draft Report — For Discussion Purposes Only EAST VALLEY WATER DISTRICT SEWER RATE ANALYSIS DRAFT REPORT .dune 17, 2008 East Valley Water District MuniFinanciai Corporate Office: 27368 Via Industria Suite 110 Temecula, CA 92590 Tel: (951) 587 -3500 Tel: (800) 755 -MUNI (6864) Fax: (951) 587 -3510 Office Locations: Anaheim, CA Lancaster, CA Oakland, CA www.muni.com Sacramento, CA Orlando, FL Memphis, TN Draft Report — For Discussion Purposes Only TABLE OF CONTENTS TABLEOF CONTENTS ............................................................................ ............................... i EXECUTIVESUMMARY .......................................................................... ............................... 1 Findings........................................................................................ ............................... 2 Recommendations........................................................................ ............................... 2 Chart El: Projections Using Current Rates ................................ ............................... 3 Table El: Proposed Sewer Rate Schedule ................................... ............................... 4 Chart E2: Projections Using Proposed Rates ............................. ............................... 5 INTRODUCTION..................................................................................... ............................... 6 CurrentRates ............................................................................... ............................... 6 Table 1: Current Sewer Rates ...................................................... ............................... 7 CurrentCustomers ....................................................................... ............................... 8 Table 2: Number of Sewer Connections (FY 20061 2007) ............ ............................... 8 Table 3: Estimated Annual Sewer Discharge by Customer Class (FY200612007) ... 9 Annual Revenue Requirements .......................................................... .............................10 Approaches to Determining Revenue Requirements ................. ............................... 10 Current and Future Revenue Requirements ............................... ............................... 11 Historical Revenues and Expenses ............................................ ............................... 11 Table 4: Historic Financial Results ........................................... ............................... 12 Future Revenue Requirements..., Revenue Requirements Analysis Table 5: Revenue Requirements ... ............................... ....... 12 ....... 15 ....... 16 ALLOCATION OF SEWER COSTS .......................................................... .............:................. 17 Cost of Service Procedure .......................................................... ............................... 17 Cost Classification Methodology ............................................... ............................... 18 Table 6: Functionalization of Sewer Utility Revenue Requirements ........................ 19 Table 7: Loading and Unit Rate Calculations ........................... ............................... 20 Table 8: Allocation Factors ....................................................... ............................... 21 Table 9: Required Revenue Allocations ..................................... ............................... 22 DEVELOPMENT oFSEWER RATES Projected Number of Connections and Sewer Discharge . ............................... Table 10: Projected Number of Connections .................... ............................... Table 11: Projected Sewer Discharge (HCF) .................. ............................... Sewer Rate Calculations ................................................... ............................... Table 12: Proposed Sewer Rate Schedule .............................................. :........ CONCLUSION 16Munnnancial ......... 25 ......... 25 ......... 26 ......... 27 ......... 28 ......... 29 ......... 30 Draft Report — For Discussion Purposes Only EXECUTIVE SUMMARY =m This study of sewer rates was conducted for the East Valley Water District (EVWD) to determine sewer revenue requirements, costs of services, appropriate, fair and equitable rates and rate structure, and to maintain the sewer utility on a financially sound and stable basis over the next ten fiscal years. The study was conducted using historical and projected data on operating and non - operating expenses, debt service, and capital expenditures. The EVWD retained MuniFinancial to prepare a sewer rate analysis that will include a new sewer rate schedule that meets current and near -term projected system revenue requirements. For purposes of determining annual revenue requirements as a basis to set future sewer rates, we used a projection period of ten years, spanning fiscal years 2008/2009 through 2017/2018 (the study period). Assumptions This section presents the assumptions used in the sewer rate analysis. 1. The budget for fiscal year ending June 30, 2008 was used as the base year. 2. The beginning operating fund balance for fiscal year 2007/2008 is estimated at $880,000. 3. The annual customer growth rate for the system as a whole is assumed to average one percent (1.0 %) throughout the study period. 4. An inflation factor of four percent (4 %) was used to project all operating expenses. `i. The EVWD's current sewer rate structure consists of a monthly fixed charge per equivalent dwelling unit for residential customers and a volumetric rate per hundred cubic feet (HCF) of water based on type of use in one of two areas (West of City Creek or East of City Creek) for commercial users. nMuniFnancial Draft Report — For Discussion Purposes Only Findings This section presents the findings of the sewer rate analysis. 1. Expenses are expected to significantly increase during the study period. 2. Due to these increasing expenses, the current revenues are insufficient to finance the utility's operations. 3. Projections indicate that the utility operating fund balance will become negative during fiscal year 2008/2009. The deficit will continue to accumulate thereafter unless sewer rates are adjusted to meet revenue requirements (see Chart ESl on page 3). Recommendations Based on the findings of this sewer rate analysis, we recommend that the EV WD adopt the following items: The proposed sewer rate structure (see Table ES -1 on page 4). The rate structure adequately provides for ongoing costs and allows for funding of reserves for unscheduled expenses (see Chart ES -2 on page 5). 2. A policy of targeting an operating fund balance of 90 days of annual operations and maintenance expenses to ensure that funds are available for emergency purposes and to mitigate future rate shocks. 3. A policy of setting aside funds annually in a repair & replacement reserve account to provide for unscheduled system maintenance and rehabilitation. JNMuniFnandal W ti 0 .�y N U 'h LLq {0 Q^yd 1 W .0 Y i'•`I s W N 21 m LL / p O a W O � 1 r m j N N I H r . L 4f p v O ` LL i O O O O O O O O p O O W .0 Y i'•`I fi O 0 •y U ti Q rLL`O l �1 A l� 1 Q a, W V w ^3, �J y 0 O CL L CL I" '1' LLf 0 N LL m n N h �O M n W cctt m �O V m m V N m N O O M 0 0 0 q 0 i eI R Lq.o�.$B�xS�pB O N LL m O N LL m N m -0 (O n W V M 10 V M 10 C M — — N O O M m O— O] O N M M O N LL 9 C m N O m u) R O O co m 0 (9 4) O N M N O N LL � a s v ad 2 583e8 NI � M O N LL m � a- N n i0 t0 h a7 V' m VJ V m N V � M °o N LL � 2 N U N m J - 41 m E. U -c E 0 `c E i0 L p - E mE c m "U n E E LL L : N N m o U>> N N E 0 0 Z` U O O O J N> J d p`�Ud'J 22000 W N N O J a O N N N O N N 3 O O n E C O V T .t_ E LL U_ N v a U 9 N C O m v m U E E 3 L E N 6 O m E N U N N R a m � Z �I m W U'. Ji a C C V. C u \y CJ In fu 0 .y U �h �a 0 �4 O �y G� 4 Ga h V m C LE C i i m m N Ix C L1. N lL W HW W. y O % � 1 $p 'I N LL N N N P+ N N W � . U oW rnm e LN o¢oo � Ty } LL o � e o e oo a o0 0 oe e qe h V m C LE C Draft Report — For Discussion Purposes Only INTRODUCTION This report documents the results of the sewer rate study conducted for the East Valley Water District (EVWD) by MuniFinancial. The primary purpose of this study is to develop a sewer rate structure that will adequately fund the annual operations of the sewer utility. The rate study has used utility revenues, operating expenses, debt service, and capital expenditures data provided by the EVWD. The objective of the rate study is to develop a rate schedule for the sewer utility during the ten -year study period. The projected rate schedule is designed to produce revenues for the sewer utility to pay administrative, operations, maintenance, capital improvement, and debt service expenditures, in addition to maintaining fund balances at reasonable operating levels and within guidelines endorsed by the American Water Works Association (AWWA). The results of the rate study are derived from projected financial analyses of the sewer utility based upon the budgeted revenues and expenses of the fiscal year ending June 30, 2008 (the base year). A ten -year projection of operating results to determine future revenue requirements was developed for the sewer utility for the fiscal years ending June 30, 2009 through 2018 (the study period). The projections also determine the amounts required to maintain sufficient balances in the sewer utility's operating fund. Current Rates The EVWD's current sewer rate structure consists of a monthly fixed charge per equivalent dwelling unit for residential customers and a volumetric rate per hundred cubic feet (HCF) of water based on type of use in one of two areas (West of City Creek or East of City Creek) for commercial users. Table 1 illustrates the current sewer rate schedule. INMuniFnanciai 6 Draft Report — For Discussion Purposes Only Table 1: Current Sewer Rates West of City East of City Creek Creek Residential * $24.25 $26.25 Commercial Multi Family $1.32 HCF $1.41 HCF Commercial, Retail 2.19 HCF 2.28 HCF Restaurant 2.33 HCF 2.42 HCF Laundromat 1.64 HCF 1.73 HCF Dry Cleaners 2.19 HCF 2.28 HCF School, Church 1.11 HCF 1.20 HCF Government, Municipal 1.81 HCF 1.90 HCF Hospital, Convalescent 1.33 HCF 1.42 HCF Hotel 2.33 HCF 2.42 HCF Office Bldg, Motel 1.81 HCF 1.90 HCF Auto Repair 1.66 HCF 1.75 HCF Car Wash 1.66 HCF 1.75 HCF __plus a flat charge of $2 00 per month _ *Per EDU- Equivalent Dwelling Unit ** Hundred Cubic Feet * ** Rates for the hotel categories are based on hotels with restaurants. Hotels /Motels without restaurants fit in the Office Building /Motel category on this table. JoMuniFnancial Draft Report — For Discussion Purposes Only Current Customers Table 2 shows the current number of sewer connections for fiscal year 2006/2007 by customer class. Table 3 depicts the estimated annual sewer discharge for fiscal year 2006/2007 for each customer class. Table 2: Number of Sewer Connections (FY 200612007) Customer Class FY 2006 -2007 Residential 19,805 Commercial: Multi Family 604 Commercial, Retail 453 Restaurant 89 Laundromat 8 Dry Cleaners 4 School, Church 100 Government, Municipal 11 Hospital, Convalescent 18 Hotel - Office Bldg, Motel 28 Auto Repair 50 Cat-Wash 7 EV W D 26 Total 21,204 Sources: East Valley Water District; MuniFinancial EMuniFinancial 8 Draft Report — For Discussion Purposes Only Table 3: Estimated Annual Sewer Discharge by Customer Class (FY 200612.007) Projected Discharge to the Customer Class Sewer System (hco Residential Commercial: Multi Family Commercial, Retail Restaurant Laundromat Dry Cleaners School, Church Government, Municipal Hospital, Convalescent Flotel Office Bldg, Motel Auto Repair Czar Wash EVWD Total 4,728,105 1,474,652 359,822 52,305 27,054 1,752 252,598 12,440 41,834 22,950 10,629 7,034 1,061,280 8,052,455 Sources: East Valley Water District; MuniFinancial ZIMuniFinancial Draft Report — For Discussion Putposes Only Annual Revenue Requirements The EVWD sewer utility fund must receive sufficient total revenue to ensure proper operation and maintenance of the utility as well as preserve the financial integrity of the utility and the fund. Adequacy of sewer revenues can be measured by comparing the sewer system's revenue requirements to be met from the sewer rates it charges to its customers. Approaches to Determining Revenue Requirements In order to develop adequate revenues from a system of sewer rates, the annual revenue requirements of the sewer utility must be determined. There are two commonly accepted bases for detemzining annual revenue requirements in order to develop a financially sound sewer rate structure. These approaches are the "cash needs" approach and the "utility" approach. Both approaches are endorsed by the AW WA. The "cash needs" basis is typically used by public sewer utilities when establishing rates for their customers. Under this approach, the basic revenue - requirement components include: • Operating and maintenance (O &Nl) expenses • Debt service costs (principal and interest on sewer utility- related debt instruments) • Capital expenditures funded directly from current revenues or accruals on a pay -as- you -go basis • Other elements such as interdepartmental expenses (cost allocation) and interest earnings (considered as a credit to the expenses) The "utility" basis for determining annual revenue requirements is typically used by regulated investor -owned utilities and regulated municipal utilities. Items normally included in annual revenue requirements based on this approach include: • Operating and maintenance (O&M) expenses • Depreciation expense • Fair rate of return on the rate base As the East Valley Water District is a public sewer agency, we have used the "cash" basis in this analysis. INMuniFnandai 10 Draft Report — For Discussion Purposes Only Current and Future Revenue Requirements The annual revenue requirements are derived from maintenance and operations costs, debt service expenses, and required fund balances. Interest earnings, fines and forfeitures, and other miscellaneous income may offset some of these expenses, but the majority of the costs should be recovered via customer rates and charges. The sewer utility prepares an annual budget that itemizes all the expenditures for each fiscal year. These expenses include personnel costs, maintenance and operations, and equipment repair and replacement, and Capital Improvement Program (CIP) costs, if applicable. For the study we also established two new reserves and added line items within the budget analysis to account for the collection of funds in these reserve accounts. The two reserve funds are as follows: 1. A Repair & Replacement Reserve Collection - to set aside funds for the replacement of major systems in the EVWD facilities 2. An Operating Reserve - to ensure that funds are available for emergency purposes and to mitigate rate shocks The sewer system activities included in our analysis were gathered from the EVWD annual operating budget and audited financial statements. Historical Revenues and Expenses Base year income and expense data for the sewer utility were obtained for fiscal year 2007/2008 using the sewer utility budget for that year, in addition to audited financial statements for fiscal years 2003 through 2007. This analysis is not a restatement of the EVWD audits or budgets, but does rely heavily on these data sources. The historic financial results of the seiner system are shown in Table 4 ImMuninnancial > f Draft Report — For Discussion Purposes Only Table 4: Historic Financial Results OPERATING EXPENSES BEFORE DEPRECIATION $ 7,483,935.00 2007 2006 2005 2004 2003 2002 OPERATING REVENUES $ 568,463.00 $ 560,912.00 $ 532,155.00 Total Operating Expenses $ 8,106,71100 $ 7,93,647.00 $ 7,619,191 00 $ 6.810239.00 $ 6,414,951.00 $ 6,320,689.00 Service Charges $ 8,139,60000 $ 7,733,908.00 S 7,423,533.00 $ 6622,588.00 $6,085.516 $ 6,001,710.00 Othersewerservices $ 11.087W S 9,746.00 $ 106,325.00 $ 4,062.00 $ 18,082.00 $ 23,534.00 Total Operating Revenues $ 8,150,687.00 $ 7,743,654.00 S 7,529,858.00 $ 6,666,650.00 $ 8,103,598.00 $ 6,025,244.00 OPERATING EXPENSES $ (14.0) $ (143.00) $ (7100) $ (53.00) $ (16.00) $ (22.00) Gain from disposition of lied assets $ 12,287.00 Sewage Collection: 115,04400 $ (255.00) $ 41,960.00 S 878.00 Total Non -Operating lnteme(Expenses) $ 262,956.00 $ 830,980.00 $ 238,274.00 Salaries and wages $ 20,108.00 $ 197,368.00 $ 182,815.00 $ 155,583.00 $ 156,260.00 $ 169,240.00 Uncollectible accounts $ 6,067.00 $ 1,47100 $ 3,321.00 $ 3,254.00 $ 1,842.00 $ 2,357.00 Oper4tirg supplies $ 41,92400 $ 68,350.00 $ 37,875.00 $ 29,052.00 $ 32,743.00 $ 31,233.0 Repairs and maintenance $ 125,820.00 S 68,981.00 $ 88,496.00 $ 60,353.00 $ 72,055.00 $ 73383.00 $ 377,919.00 $ 336,171.00 $ 312,507.00 $ 248,242.00 S 262,900.00 $ 276,213.00 Sewage Treatment S 5,607,172.00 $ 5,473,390.00 $ 5,288,21200 S 4,771,339.00 $ 4,557,909.00 $ 4,495,040.00 Administrative and General Salaries and wages S 500,774.00 $ 473,534.00 $ 459,908.00 $ 437.403.00 $ 405,440.00 3 376,515.00 Taxes and beneri6s $ 350,595.00 $ 305,852.00 $ 282,197.00 S 209,063.00 S 172,02300 $ 98,171.00 UOlities S 34,9W.W $ 33,230.00 $ 45,022.00 $ 32.924.00 $ 40,665.00 $ 36,14300 Outside services $ 147,478.00 $ 181,642.0 S 110,536.00 S 118,551.00 $ 67,200.00 $ 72,938.0 Legal end axxxuining $ 29.09900 $ 30,773.00 $ 26,80100 $ 3,127.00 $ 24,581.00 $ 23,927.00 Directors fees S 18,224.00 S 47,053.00 $ 19,609.00 $ 23,238.00 $ 25,362.00 $ 23094.00 Insurance S 115.654.00 $ 201,340.00 $ 16625100 $ 142,749.00 S 115,469.00 $ 176,030.00 Office supplies and expense S 107,715.00 $ 62,527.00 $ 65,766.00 $ 76,142.00 $ 61,888.00 $ 61,599.00 Meetings, seminars, and travel $ 51,789.00 $ 0.5,858.00 $ 32,801.00 $ 41,596.00 $ 21,357.00 $ 36,383.00 Equipment maintenance and supplies $ 29,903.00 $ 25,606.00 $ 40,017.00 $ 28,789.00 $ 33,783.00 $ 30,166.00 Vehicle and equipment $ 19.58500 $ 26,328.00 $ 43,160.00 $ 33754.00 S 38,616.00 $ 39,219.00 Regd.toryfees $ 6,65500 S 1,891.00 S 8,162.00 $ 735.00 $ 415.00 $ 90.00 Disastedurnergencysxpense S 1,193.00 $ 2,263.00 $ 62,704.00 $ 1.265.00 $ - $ 15000 Dues and subscriptions $ 16,263.00 $ 12,830.00 $ 14,990.00 $ 16,600.00 $ 9,083.00 $ 7,615.00 General plant maintenance $ 15,436.00 $ 13,001.00 $ 12,244.00 $ 13,219.00 $ 12,48400 $ 24,094.00 Rent $ 39,764.00 $ 37,330.00 S 33,360.00 $ 4,920.00 $ - $ 8,051.00 Bank service chary.. $ 13,781.00 $ 11,154.00 $ 13,570.00 $ 6.826.00 $ 4,640.00 $ 2,852.00 Mis.elimmous expenses $ 30.00 $ 9.00 $ 222.00 $ 294.00 S 224.00 S 244.00 S 1,498,844.X) S 1,512,221.00 $ 1,436,322.00 $ 1,222,195.00 $ 1,033,230.00 $ 1,017,281.00 OPERATING EXPENSES BEFORE DEPRECIATION $ 7,483,935.00 $ 7,321,782.00 S 7,037,061.00 $ 6,241 776.00 S 5,85,039.00 $ 5,788,534.00 Depredation $ 622,77800 $ 612,865.00 S 582,15000 $ 568,463.00 $ 560,912.00 $ 532,155.00 Total Operating Expenses $ 8,106,71100 $ 7,93,647.00 $ 7,619,191 00 $ 6.810239.00 $ 6,414,951.00 $ 6,320,689.00 Operatng Insome $ 43,974.00 S (190,993.00) $ (89,333.00) $ (143,589.00) $ (311,353.00) $ (295445.00) NON -OPERATING REVENUE (EXPENSES) Investment inceme S 216,464.0 $ 132,344.00 $ 97,290.00 $ 41,31800 $ 102433.00 $ 71,030.00 Penalties and shut oft charges $ 3,219.00 $ 37,246.00 $ 26,01100 $ 26332.00 $ 20,927.00 $ - Miscellaneous $ (14.0) $ (143.00) $ (7100) $ (53.00) $ (16.00) $ (22.00) Gain from disposition of lied assets $ 12,287.00 S 661,533.00 S 115,04400 $ (255.00) $ 41,960.00 S 878.00 Total Non -Operating lnteme(Expenses) $ 262,956.00 $ 830,980.00 $ 238,274.00 $ 67,342.00 $ 165,304.00 $ 71,886.0) Interne Before COntribidens $ 306,930.00 $ 639,937.00 $ 148,941.00 S (76.247.00) $ (146,049.00) $ (223,55900) CONTRIBUTIONS Utility plant dedicated $ 947,525.00 $1,188740.00 S 592,89.00 $ 605,561.00 $ 747,525.00 $ 856,600.00 Capacitycharges $ 133,309.W $ 146886.00 $ 266,059.00 $ 278,872.00 $ 361,419.00 $ 145,454.X) $ 1,080.834.W $ 1,33,626.00 $ 858,916.X) $ 88,433.00 $ 1,108,944.00 $ 802,054.00 CHANGE IN NET ASSETS $ 1,387,764.00 $ 1,974,613.00 $ 1,007,857.00 $ 808.166.00 $ 962.895.00 $ 578,495.00 Source: East ValleYWaler District Future Revenue Requirements An evaluation of future revenue requirements should focus on three specific areas. These areas are increases in operating expenses, requirements for debt service, and the maintenance of reserves in the operating fund. The following sections discuss the impact of these factors on the sewer utility revenue requirements. Operating Expense Projections For purposes of determining annual revenue requirements as a basis to set future sewer rates, we used a study period of ten years. During this period (FY 2008 /2009 through FY SwMuniFinancial 12 Draft Report — For Discussion Purposes Only 2017/2018), costs are naturally assumed to increase due to inflationary pressures. In projecting future expenses, we have used the cost estimates provided by the EVWD. Per EVWD direction, we are using an expenditure growth rate of four percent (4 %o) to project the future costs of the system. This is in line with our experience with similar -sized utility systems. MMuniFnancial 13 Draft Report — For Discussion Purposes Only Debt Service The sewer utility currently is paying debt service on the 2004 Project Installment Sale Note (2004 Headquarters /Infrastructure Project). The portion funded by the sewer utility equals approximately $253,000 per year. In addition, the EVWD will be financing the construction of the new headquarters. Half of the headquarters' construction costs are allocated to the sewer utility, this results in an estimated debt issuance of $18,500,000 with an annual debt service payment of $1,433,000 (based on financing $14,888,726 in construction costs, an interest rate of 6.5 %, an underwriter's discount of 2 %, a cost of issuance of 1 %, a reserve fund requirement of 10 %, and a 30 -year term with one year of capitalized interest). MMuniFnancial 14 Draft Report — For Discussion Purposes Only Reserve Funds Repair & Replacement Reserve Collection Fund We recommend that the EVWD establish a repair and replacement reserve collection to set aside funds for the construction and replacement of major systems in the EVWD sewer facilities. Developing adequate reserves allows for emergency cash for the system and helps mitigate future rate shocks. Sever Operating Fund. The operating fund for the sewer utility is projected to have a balance of $1,320,000 as of July 1, 2007, according to the EVWD. We recommend that the EVWD adopt a policy of maintaining a balance of 90 days of operating expenses in the operating fiend in order to satisfy expense obligations as cash flow fluctuates during the year. This reserve fund target is within industry standards for similar -sized utility systems. Revenue Requirements Analysis Table 5 presents the ten -year projected revenue requirements for the sewer utility. This table includes annual revenues projected to be raised using the current rate structure, the additional revenue required to meet projected sewer utility expenditures utilizing rate increases, the projected operating and non - operating expenses, and fund balance information based on the revenues generated from rate and fee increases. Row 4 of this table shows the revenue generated using current rates and fees. We utilized a population growth factor of one percent (1 %) to project operating revenues. Current rates and fees do not produce enough revenue to maintain a positive operating fund balance. The section below the current revenues (rows 5 through 17) incorporates the revenue generated by the proposed rate and fee increases. As the table illustrates, in order to maintain a positive cumulative fund balance during the study period, total system revenues must be increased by thirty -five percent (35 %) in fiscal year 2008/2009. Total operating expenses are shown in row 29, net income is presented in row 46, and the ending operating fund balance is detailed near the bottom of the table in row 52. Row 54 shows the targeted operating fund balance, which is the minimum amount of funds the F.VWD should maintain in its operating fund to address any emergency requirements that may arise for the sewer utility. SIVIuniFnancial 15 0 �w A� rLL`0 ' l �1 Q r� -- ---- -0 m` mu a � NN a ! nV Ec3.oZ�$co m $�¢ m m p8 E EOc mOa u � p � ?OS- -O pup y m o >8 0`0`00`0`000- � m�ma'e_Eoo m -oSo a m Exmo eaA- ca w`'c wmF v LLLLLLUY.uu}. uY.uuu� uc �r �'� >Fi` O ao Qomma ., m c agw O Q Z U 2~ My Nm nm v NMN NNN MNnN m MMMm m mm�mvv vvvv vvv vnurm n�i i0 C tL � w1m N 99- 7 W a��e �o t 8 2 1� �1 PgoM &go �m m�mam 8 m r� -- ---- -0 m` mu a � NN a ! nV Ec3.oZ�$co m $�¢ m m p8 E EOc mOa u � p � ?OS- -O pup y m o >8 0`0`00`0`000- � m�ma'e_Eoo m -oSo a m Exmo eaA- ca w`'c wmF v LLLLLLUY.uu}. uY.uuu� uc �r �'� >Fi` O ao Qomma ., m c agw O Q Z U 2~ My Nm nm v NMN NNN MNnN m MMMm m mm�mvv vvvv vvv vnurm n�i i0 C tL Draft Report — For Discussion Purposes Only AixoCATION OF SEWER COSTS Sewer rates in California are considered property- related fees and are, consequently, subject to repeal by initiative pursuant to Section 3 of Article XIIIC of the California Constitution. Furthermore, the substantive and procedural requirements of California Constitution Articles XIIIC and XIIID (Proposition 218) apply to sewer rate setting. Section 6 of Article XIIID states: The amount of a fee or charge imposed upon any parcel or person as an incident of property ownership shall not exceed the proportional cost of the service attributable to the parcel. This utility rate study was performed to allocate the costs of providing service to users in order to ensure that rates are equitable and not unduly discriminatory, thereby satisfying the Proposition 218 requirements. The total cost of serving each customer class is determined by distributing each of the utility cost components among the user classes based upon the respective service requirements of each customer class. Therefore, a true cost of service rate study enables a sewer utility to adopt rates based on the true costs to each user class. The purposes of this sewer utility cost of service study include: Proportional allocation of the costs of service to users. Derivation of unit costs to support the development of sewer rates. Cost of Service Procedure A cost of service analysis converts enterprise - related financing documents to costs incurred by user classes for which rates can be developed. The cost of service study for the EVWD is performed in three basic steps. The first step is called functionalization, which categorizes cost data in terms of functions performed by a sewer utility system. The functions identified in this study include operating costs, capital projects to be funded by rates, debt service, and reserve requirements. The second step classifies operating and non - operating expenses of the utility to the cost components of flow and strength of sewer effluent. The cost components are defined as follows: Flow Costs: Volume or flow related costs vary with the discharge of sewer by users over a specified period of time, typically a year. Strength Costs: Strength costs vary with the quality of sewer discharged as measured by the biochemical oxygen demand (BOD) and suspended solids (SS) content of the discharged sewage. The final step in this analysis allocates costs of service to each customer class. This step is accomplished through the development of volume and strength related allocation factors for each customer class. JaWluniFnancial 17 Draft Report —For Discussion Purposes Only Cost Classification Methodology For compliance with State and proposition 218 guidelines, a sewer utility is required to utilize a cost allocation approach that fairly allocates costs among customer classes. This is accomplished by allocating costs into the treatment parameters of flow and strength. These costs are to be allocated in proportion to the percentage that each cost parameter represents. When divided by the sewer loadings of each user class, unit costs of service are obtained. All costs incurred by a sewer utility system can be allocated to one or more cost parameters. The allocation of each cost item between flow, BOD, and SS is based on industry standards of treatment parameter data. Tables 6 and 7 present the functionalization and loading calculations, respectively, used to determine the allocation factors (shown in Table 8). The required revenue allocations for each customer class are shown below in Table 9 for each year of the study period. 13MuniFnancial 18 O 0 N N M e N N M e v M C 0 a LL C 0 N O U IL m c 3 L? m o(orr co o(6 v r LL 1: r co M M W V T -1 M (D N� 47 M N N A r r MctD r (NO (ND T (O N O N p O O } F LL @ @ Q � M � (DAM M r0 r T T O Ito O N M M T r N (D M <D (D M fn M r O N M O� T � tT0 dM' T N M M fA � O N C (O (D r M O OJMMT M r r 0 N(O A M T T (D (D M O O N M c wV N m T m N M (D OJ T T N CO IQ N A M M N T M M N @ m M M T M M N W M M N Q (y H o 00000 00 00 �r 4) m o 00000 00 00 �k o i- a ooaoo 0 00000 ao 00 C; 00 C, 1 de � o ooaoo 00 00 fi 0 0 0 0 0 0 0 0 y N N N N N y Q] O � 3 e ooaoo oe o0 �� Q7 D o 00000 00 00 c� GS y LL >' a y M a U v x 4i is 0] y d m y LL m LL @ C m C N @ �� U a 0 du,mo �' .Z c o d a o C N U Q aU nm t Oc Q / p Y U (` C Q W m U E ° = ¢'�° o O 2 w a F - O .c n F N m of L) F O 0 N N M e N N M e v M C 0 a LL C 0 N O U IL m c 3 L? 9 ca N C C 7 IRIII o e a oo°00000000000 N� N m N O O 0 0 0 0 0 0 N O m n o n m m r o m 1n m m Q n a o mrnln <o InNO Q In mm r of of i6 'ri of � r m i6 � w co of r O W T O J a W � o au Q m M O« - n O N — O O Q U❑ � � co M O O N O O O O O O m O O m (O O M YJ (O W N W M ' N 10 f0 61 n .� O R m r N m M O N (O O) M (O r m mw m — Q O m m O p m m m N N O .- m (O O N � m m m m N m m rtl m � m O O O O O O O O O O O O O O G N O C O E O O�Om ^' ^'OOMmNfO U O m y Q O O O M O 0 0 0 0 0 O VO o V ww,, W Y O �O N O N t0 m Q m t0 N M m m m W M O n N V m W m O N Q O O N n r N N N N` 'NO Q N m w � W E Vyi � O m � 3 om Q C tC a O � = ad a L4O N N C E ` U W m N O U N N M O W C W C11 N W cti i E 0 55 g o 0 W 0 33: �Owo m 0 0 0 W 5 _ U U2UK F- Q 9 ca N C C 7 IRIII Draft Report - For Discussion Purposes Only Table S_ Allocation Factors Customer Class Flow Factor Flow Factors ss Factor Customer Class Flow Factor BOD Factor SS Factor Residential 58.72% 61.44% 65.20% Commercial: Multi Family 18.31% 19.16% 20.34% Commercial, Retail 4.47% 3.51% 3.72% Restaurant 0.65% 3.40% 2.16% Laundromat 0.34% 026% 021% Dry Cleaners 0.02% 0.02% 0.02% School, Church 3.14% 2.13% 1.74% Government, Municipal 0.15% 0.11% 0.07% Hospital, Convalescent 0.52% 0.68% 029% Hotel 0.00% 0.00% 0.00% Office Bldg, Motel 0.29% 019% 0.13% Auto Repair 0.13% 0.12% 0.21% Car Wash 0.09% 0.01% 0.07% EVWD 13.18% 8.96% 5.85% Sources: East Valley Water District; MuniFinancial Functionalization Factors Flow Factor BOD Factor SS Factor FYE 2009 to 2013 AVG 34.87% 32.56% 32.56% Customer Class Flow Factor Allocation Factors BOD Factor ss Factor Residential 20.48% 20.01% 2123% Commercial: Multi Family 6.39% 6.24% 6.62% Commercial, Retail 1.56% 1.1401. 1.21% Restaurant 0.23% 1.11% 0.70% Laundromat 0.12% 0.09% 0.07% Dry Cleaners 0.01% 0.01% 0.01% School, Church 1.09% 0.69% 0.57% Government, Municipal 0.05% 0.03% 0.02% Hospital, Convalescent 0.18% 0.22% 0.09% Hotel 0.00% 0.00% 0.00% Office Bldg, Motel 0.10% 0.06% 0.04% Auto Repair 0.05% 0.04% 0.07% Car Wash 0.03% 0.00% 0.02% EVWD 4.60% 2.92% 1.91% Sources: East Valley Water District; MuniFinancial ftMuniFinancial 21 Draft Report — For Discussion Purposes Only Table 9: Required Revenue Allocations SMuniFnandal 22 FY 2008 -2009 Flow Factor BOD Factor SS Faster Total Residential $ 2,437.952 $ 2,382,156 $ 2,527.865 $ 7.347,972 Commemal: Motu Family 760.375 742,972 788.417 2.291.764 Commerdal, Retail 185,535 135,967 144283 465,785 Restaurant 26.970 131.764 83,894 242,628 Laundromat 13.950 10,223 7,955 32.128 Dry Cleaners 903 662 703 2,268 School, Ctardr 130.247 82,723 67,525 280.495 Government. Municipal 6,414 4,074 2,660 13,149 Hospital, Convalescent 21.571 26.346 11,163 59.101 Hotel - - - - Ot6oe Bldg, Motel 11,834 7,516 4,908 24,258 Auto Repair 5,481 4,820 7,956 18,256 Car Wash 3.627 354 2,821 6.802 EVWD 547.226 W.557 226,964 11121,749 Total $ 4,152.086 $ 3,8F?134 $ 3,877,134 $ 11.906,355 FY 2009 -2010 -2012 Flow Factor BOD Factor SS Fader SS Factor Total Residential $ 2,462.332 $ 2.405,977 S 2,553.143 $ ? 421,452 Commecial: Commercial: Multi Family Mu10 Family 767.978 750,402 796,302 812,307 2.314682 Commerdal. Ratan Commercial, Retail 187,390 137.326 145726 148,655 470.443 Restaurant Restaurant 27,240 133,081 84,733 86.436 245,054 Launtlromat Launtlromat 14,089 10,325 81035 8,196 32,449 Dry Cleaners Dry Cleaners 912 669 710 724 2,291 School. Church School, Chuch 131,550 83,550 68,201 69,571 283.300 Govemmenl, Municipal Government. Mmidpal 6,479 4,115 2,687 2.741 13,280 Hospital, Convalescent Hospital, Convalescent 21.787 26,610 111295 11,522 59,692 Hotel Hotel - - - - OIRce 8140, Motel Office Bldg. Motel 11.952 7,591 4,957 5,057 24.500 Auto Repair Auto Repair 5.535 4,868 8.035 8,197 18,439 Car Wash Car Wash 3.663 358 2,849 2,906 6,870 EVWD EVVJD 552.700 351,033 229,233 233.841 1.132,966 Total E 4,193,607 $ 3.915.906 $ 3.915,906 $ 12,025,418 SMuniFnandal 22 FY 20102011 Flow Fedor BOD Factor SS Factor Total Residential $ 2,486,955 $ 2.430,037 $ 2.578,675 $ 7.495.667 Commercial: Multi Family 775,656 757.906 804.265 2,337,829 Commerdal, Retail 189,264 138,699 147,183 475.147 Restauant 0,512 134412 85,580 247,505 Launtlromat 14.230 10,428 8.115 32.774 Dry Cleaners 922 675 717 2.314 School, Church 132.865 84386 68.883 286,133 Govemmmo, Municipal 6,543 4,156 2.714 13.413 Hospital, Convalescent 22.004 26,876 11,408 60,288 Hotel - - - - Moo Bldg, Motel 12,072 7,667 5.007 24.745 Au[. Repair 5,591 4,917 8,116 18,623 Car Wash 3,700 362 2.877 6.939 EV 558,227 354.543 231.526 1.144296 Total $ 4.235.543 $ 3,955,065 S 3,955.065 $ 12,145,672 FY 2011 -2012 Flow Fader 800 Factor SS Factor Total Resitlamiil $ 2.511,824 $ 2,454,338 $ 2,604,461 $ 7,570.623 Commercial: Mu10 Family 783.415 765,485 812,307 2.361,207 Commercial, Retail 191,157 140,086 148,655 479,898 Restaurant 27,787 135)56 86.436 249,980 Launtlromat 14.373 10,533 8,196 33,102 Dry Cleaners 931 682 724 2,337 School, Chuch 134194 85.230 69,571 288,995 Government. Mmidpal 6,609 4,197 2.741 13,547 Hospital, Convalescent 22.224 27145 11,522 66.891 Hotel Office Bldg. Motel 12,192 7,744 5,057 24.993 Auto Repair 5.647 4,966 8,197 18,609 Car Wash 3.737 365 2,906 7.008 EVVJD 563.809 358.089 233.841 1.155,739 Total E 4.27/,898 $ 3,994615 $ 3,994615 $ 12,267.129 SMuniFnandal 22 Draft Report - For Discussion Purposes Only Table J: Required Revenue Allocations FY 20142015 BOB Factor - - -- FY 2012 -2013 Flow Factor BOD Factor SS Factor Total Flow Factor SOD Factor SS Factor 2,683.3]9 $ Total Reaidential $ 2.536,943 $ 2,478,881 S 2,630,506 $ 7.646,330 Commercial: Muth Family 791,249 ]]3,140 820,430 Restaurant 2,384.819 Commercial, Retail 193.066 141,487 150,142 14,808 484.697 Restaurant 28,085 137,114 87.300 703 252A80 Laundromat 14,516 10.638 8,278 71,679 33,433 Dry Cleaners 410 689 731 13,958 2.360 S0.0, Church 135.536 86,082 ]0,26] Hotel O ce Bldg, Motel 291.885 Government, Municipal 6,675 4,239 2,768 5.818 13.683 Hospital, Convalescent 22,44] 27,416 11,637 376 61,500 Hotel W. Bid'. Maw 12,314 7,821 5,107 24+927 25,243 Auto Repair 5,703 5,015 8,279 12,638.835 18,997 Car Wash 3.774 369 2,935 7,078 EMD 569.447 36100 236,179 1167.296 Total $ 4.320,6]7 It 4.034,562 $ 4,034,562 $ 12,389,800 FY 20134014 From Factor BOB Factor SS Factor Total ResidenBal $ 2.562,312 S 2,503,670 $ 2.06,811 $ 7,722,793 Commercial: Multi Family 799,161 ]80,8]1 828.635 2,408.667 Commercial, Retail 194,999 142.902 151.643 489,644 Restaurant 28.346 138,485 88,173 255,004 Laundromat 14,661 10,744 8,361 33.]6] DryCleaoels 949 696 738 2,384 School. Church 136,891 86,943 70,970 294,803 Govemment, Municipal 6,742 4,282 2,796 13,820 Hoapile,C .Icacom 22.6]1 27,690 11,754 62,115 Hotel OBico Bldg, Motel 12,437 7,899 5.158 25,4% Auto Repair 5,760 5,066 8.362 19,187 Car Wash 3,812 372 2,964 7,149 EVWD 575,142 3651286 238.541 1178969 Total $ 4,363.884 $ 4,074,90 $ 4,074.907 S 12,513,60 FY 2015 -2016 FY 20142015 BOB Factor SS Factor Total Flow Factor BOD Factor SS Factor Total Residential -S 2,58].935 $ 2,528,]0 $ 2,683.3]9 $ ].800.021 Commercial: Multi Family 80,153 788,680 836.921 2,432.]54 Commercial, Retail 196,949 144.331 153,159 494,440 Restaurant 28.629 139.870 89,055 25].54 Laundromat 14,808 10,852 8.45 34.105 Dry Cleanem 959 703 746 2,407 Scholl, Church 138.260 87,812 71,679 297,752 Govemment. Municipal 6,809 4,325 2,824 13,958 Hospital, Convalescent 22898 27,967 11,871 62,736 Hotel O ce Bldg, Motel 12,562 7.978 5.210 25.750 Auto Repair 5.818 5.116 8.445 19.379 Car Wash 3.850 376 2,994 7.220 EVVM 580,893 368.939 24+927 1.190.759 Total $ 4,407,523 $ 4,115,656 $ 4,115,656 $ 12,638.835 FY 2015 -2016 MMuniFinancial 23 Flow Factor BOB Factor SS Factor Total Reatdonlial $ 2,613.815 $ 2,553,994 $ 2,710,213 $ 7,878.021 Commercial: Multi Family 815224 ]96,56] 845,290 2,457.082 Commercial. Retail 198,919 145,7]5 154,691 499,384 Realavmnt 28.916 141,269 89.946 260,130 Laundromat 14,956 10,960 8,529 34.46 DryCleanme 969 710 753 2,432 School. Church 139.642 88.690 72,396 300,729 Government, Municipal 6187] 4.36B 2,852 14,097 Hosptal,f mmlaaceot 23,127 28247 11,990 63,364 Ho6d Office Bldg. Metal 1207 8,058 5,262 26,007 Auto Repair 5,876 5,10 8,530 19.573 Car Wash 3,889 no 3,024 7.293 EV\VD 586.702 372,628 243.336 1202,667 Total $ 4,451,598 $ 4,156,813 $ 4,156,813 $ 12.765221 MMuniFinancial 23 Draft Report — For Discussion Purposes Only Table 9: Required Revenue Allocations mMuniFnancial 24 FY 2016 -2017 Flow Factor BOD Feeler SS Factor _ Total Residential $ 2,639,953 5 2,579,536 5 2,737315 S 7,956.801 Commercial: Model Family 823,377 804.533 853,743 2,81,652 Commercal, Retail 200,908 147,232 156,238 504378 Restaurant 29.205 142.881 90.865 262.731 lOUnCromat 15,106 11,070 8,615 34.790 Dry Cleaners 978 717 761 2,458 School. Church 141.039 89,577 73,120 303,736 Govemmant, Municipal 8,946 4,412 2,881 14,238 Hospital, Convalescent 23.358 28,529 12,110 63,997 Hotel - - - OIfiWBldg, Metal 12,814 8,139 5,315 26268 Am. Repair 5.935 5,219 8.615 19.769 Car Wash 3.927 384 3.054 7,365 EVWD 592.569 376,355 245.769 1,214.693 Total $ 4,496,114 S 4.191 $ 4,198,381 5 12.892,876 FY 2017 -2018 Flow Factor SOD Factor SS Factor Total Residential S 2.666.352 5 2.605329 $ 2.7"688 S 8,036,369 Commoo,W Multi Family 831.610 812,578 862.281 2.506.469 Cemmercal, RAml 202,917 148.705 157.800 509,422 Resamant 29,497 144,106 91.754 265,359 laurMromat 15,257 11,181 8.701 35.138 Dry Cleaners 988 724 768 2,80 School, Church 142,449 90,473 73.851 306,774 Covemment Municipal 7,015 4,456 2,910 14,381 Hoepiml, Convalescent 23,592 2$815 12.231 64,637 Hotel - - Office B14g, Motel 12,942 8220 5,368 26.530 Auto Repair 5,994 5.271 8,701 19.967 Car Wash 3,957 388 3,085 7,439 EVWD 598.95 380,118 248227 1226.840 Total $ 4,541.075 5 4,240,365 $ 4.240.365 $ 13,021.805 Sources: East Valley Water Dismal; Mumi'manoal mMuniFnancial 24 Draft Report — For Discussion Purposes Only DEVELOPMENT OF SEWER RATES Based on the analysis conducted for the sewer utility in this rate study, a rate schedule has been developed which, if implemented by the EVWD, should generate enough revenue to cover estimated expenses and maintain the desired sewer fund balances depicted in Table 5. {projected Number of Connections and Sewer Discharge Tables 10 and 11 show the projected number of sewer connections and the projected amount of discharge for each customer class, respectively. Note that the number of connections and discharge for each customer class were projected using a growth factor of one percent (1 %). f MuniFnancial 25 � 2 ; ; ^ ; � j/ ! � o m § J a \ v [ ); z;���l =r•!a� „ ƒ � - } g R W ) \ § \ � 2 � \ $ / j \ \ / ± / $ \ / k 2 \r & * *l ; ;ep :r� :� ! li ;m�<�, #: ^ff ; \ ®; m;r�} / §q�aG \m /\ r;�;;�® a ;�l� ° � , � ���E! [_ , �a ! ,r� : „�; ��_�; \\ } : \ \Z \ \\ 4 /k =r §a � .z !&&&# !;;#, \\ 2( §,I \ \\ \ \.�; ^4f!l�Ri74! ��l =; ; :�r2 ;: f® ;,! \f\ ;\!)§ \/ y9S}2 wTj\ _ 1 ;,=,r,: lk ;K; �\ \K \ \1 \\/� }_. ;� !, � �a *�!§ :! ! &;¥® )}:� ;! »,� �, =a� \� \ \/ w2\ - ,mm °=$e lrf ;! }\ ( , � , ; \�)\ �� �, §� , =!'#r §Z« \ \_��� ^)} \$ � \, )/� /� /9 ° \- & wR� � °� ~ ^,! ) k � 2 Draft Report — For Discussion Purposes Only Sewer Rate Calculations The required revenue from the residential customer class (shown in Table 9) are first divided by the number of residential connections and then divided by twelve (12) to calculate the monthly residential rates. The rates for the commercial customer classes are determined by dividing the required revenue of each class (shown in Table 9) by the corresponding amount of projected discharge of each class. The proposed Sewer Rate Schedule is shown below in Table 12 (note that the residential rates shown in the table are per customer, while the commercial rates are per 100 cubic feet monthly consumption of water for sewage flow purposes). ImMuniFnancial 28 wy CJ v j C� r 0 V �h Ga �1 0 LY„ c� !Wn u w� �a CV1 s� F� M N n H t0 n W V OJ M Q M �O V n m 0 N LL � O N LL � (O N n 1U W n W 'V M LO Q M M V N N � N O O M N O M m O � M O N M N n W (D n W Q M h V W M V N�NOOM to O W W O V O N } LL � Q N n 10 t0 n W W �O Q W CO V M N N �O � N O� M h O (O W O N m m O N O (7 10 N i0 O (O M W O M N O N LL � N N n N m N LL � N O O m M 0 (O W O O O N o � Nn�nMn W QM�nQ W �nQ W M O N W N n M (U n W M N Q W 1 Q O M VJ N M N O M� O W W O N M O yNy fi » a `m V N m � m � m N T N N N� O U Wm U mmE EmE mU EU Eri m m m c m LL E m c U O d n — m a p N p L> N V Ui0X O to U' 2 = O¢ U w N N d 3 O m m 3 m `o m A 3 O C O n E N O U T L G E LL V_ N m V n V a b a` c L m O 2 m N N woEO U L C O pa U U E U `m n C m a m z N m .0 LL �C 7 Draft Report — For Discussion Purposes Only CONCLUSION The proposed sewer rate schedule is based on the EVWD projected revenue requirements over the next ten fiscal years. The proposed rates are designed to generate additional sewer revenues to promote revenue adequacy throughout the ten fiscal year planning period. In addition, the rates were designed to satisfy proposition 218 regulations. We recommend that the EVWD adopt the proposed rate structure to ensure that the sewer system has a stable cash flow stream in order to provide for ongoing costs and debt service and allow for the funding of reserves for unscheduled expenses. We also recommend setting a policy of targeting an operating fund balance of 90 days of annual operations and maintenance expenses to ensure that funds are available for emergency purposes and to mitigate future rate shocks. Finally, we recommend setting a policy of collecting funds annually in a reserve account to provide for future system repairs and replacement. IMMuniFnancial 30