HomeMy WebLinkAbout05/21/2002, 2A - 2002 WATER FUND REVIEW i 1
counclt Mce CH"
May 21 2002
ACjendA Repoat 2A
CLTY OF SAN LUIS OBISPO
FROM: John Moss, Utilities Direct
Prepared By: Sue Baasch,Administrative Analyst
SUBJECT: 2002 WATER FUND REVIEW
CAO RECOMMENDATION
Review and file the 2002 annual water fund financial review.
DISCUSSION
This annual rate review for the water fund reviews our 2001-03 Financial Plan assumptions and
confirms the water fund can maintain fiscal health in 2002-03 without a rate increase. Last year
we projected that the water fund would not need a rate increase in July 2002, and this analysis
confirms that water fund is fiscally strong and compliant with all City policies and able to
support the proposed activities without a rate increase. The water rates have remained at this
level since 1999.
The recent water impact fee discussions noted that stepped water rate increases would be
necessary to achieve the revenue to fully support the current water policies and.sources of supply.
We do not recommend beginning this series of stepped increases until Council has had an
opportunity to review the policies. If there are any changes in the water planning figures, the
reserve or the proposed sources of supply, these will be reflected in next year's analysis. This
analysis does assume a higher level of revenue from water impact fees, the result of the recently
adopted water impact fees that become effective July 1, 2002.
In addition to fully funding the basic operations and capital improvement projects, this fund
analysis shows that the City is positioned to pay for its newest source of supply—the water reuse
project. The fund analysis reflects the recent $3.39 million state grant and $8.85 million dollar
low interest state loan that will pay for this project.
Within this analysis are two prior years of financial information, an update to projections for the
2001-02 year end, and a forecast for the next four years through 2004-05, based on identified
assumptions for future City growth, inflation and water demand patterns
Rate Review Exhibits
Financial schedules providing detail for the Water Fund analysis are provided in Exhibits A.1
through A.3. These include an analysis showing changes in working capital from 1999-00 to
2004-05; summary of key assumptions by year for fund projections; and the proposed four year
capital improvement plan.
2A-1
Council Agenda Report —2002 Water Fund Rate Review
Page 2
Rate Setting Methodology
In determining water revenue requirements and setting recommended rates, the following general
methodology is used:
Step 1: Determine Water Fund revenue requirements for:
■ Operations and maintenance
■ Capital improvements and replacements
■ Debt service obligations (existing and projected)
Step 2: Subtract from this amount "non-rate revenues" such as:
s Interest earnings
■ Connection fees and meter sales
■ Revenues from other agencies (Cal Poly)
■ Other service charges (service start-up fees,late charges, etc.)
Step 3: Identify water rate requirements.
■ Revenue needed to be generated from water rates is the difference between water
revenue requirements (Step 1) and "non-rate" revenues (Step 2).
Step 4: Determine new rates:
■ Model the rate base (consumption and customer account assumptions) against the
existing rate structure and rate requirements identified in Step 3.
Because this analysis is performed over a multi-year period, other factors are considered, such as
working capital available to support capital projects, debt service requirements, and minimum
working capital policy.
Summary of Key Assumptions
The following is a summary of key assumptions for expenditures and revenues:
1. Operations and maintenance costs are based on the 2002-03 Budget with an inflation rate of
3%thereafter.
2. Sales to Cal Poly are based on historic use and the 1998 Agreement with Cal Poly. This
agreement set the proportion of the commercial rate the University pays to account for the
University's difference from other customers (own water supply and ownership percentage at
the treatment plant). This agreement is currently under review as its five year time frame will
end June 30, 2002.
3. Water customer growth rate is projected at 1.0%.
2A-2
Council Agenda Report—2002 Water Fund Rate Review
Page a
4. Debt Service is increased by $354,000 in 2002-03 to pay for the construction of the water
reuse project. It is further increased by $394,100 in 2004-05 to pay for groundwater
development and master plan improvements.
5. Capital improvement charges (development impact fees) are estimated based on inflation and
customer growth assumptions. The analysis uses the newly approved impact fee schedule for
the base year calculations. Some reduction in the actual collection of these fees is due to
development occurring under previously approved vested maps.
FISCAL IMPACT
No changes are recommended to the approved rate schedule as follows:
Current 16tes
Inside the City
■ 1 —5 ccf's $2.51
Outside the City
$5.02
Inside the City
■ More than.5 ccf's $3.15
Outside the City
$6.30
EXHIBITS
A. Water Fund Review
1. Changes in financial position
2. Assumptions for fund projections
3. Capital improvement plan
2A-3
i
Exhibit A.1
I? c o 0 0 0 0 0 0 0 o O 0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
m O N 7 O O vi qT a � � vi N ri 00 O
.W O h N - - �O M O 00 Q\ N V h N
N ^ — R
C4 rq
O O O O O O O OOO O O O O O O O O O O O O i O 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 O O O O O
M u e 10o O 00 M O
O \. N ri — N O r- O h as 00 — O W 06 Pi tr te l- 00
O r 0 O v1 N — O - - v, h O\ �O O\ h �n h �c — t-
o V = ^ 1e O - - O V l� N N — lO l'
00 O 7 — Vl r- — M Vl VI N r- O\
M N O O O O O O O O O O O O O O O O O O O O O
Oi O O O O O O O O O O O O O O O O O O O O O
N m O O N vl v1 V 0 0 7 �n IO — O N N1 M rI 00 cl r
vi C N N t� ��77•• O h N nco lr 00 N r r
00 h [�
iE
N CO O O O O O O O O O O O O O O O O O O O O O O
Oi o O O O O O O O O O O O O O O O O O O O O O O O
•> ?� W vi r N o0 O 01 kr C' O\ h O\ \e O O O b 7 r
1 vl N N N O O N = m O M M vi m vi aN 7 O r �c
N M 1O v O — — �c O, '— O �c — w 00 m N O\ 00 O,
W 00 4 a0 N
— N
p O O O 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 O O O O
O O O O O O
-- O O O
O U C1 C\ V1 C O 7 e+t M' 00 O DD o0 M r 00 O h r
G Q. v1 vi No N V O M o0 M' �O v1 l� Nr.-
b b O V 7
Zhc,•�oroc% a .• M — v roM m a h
N — O M V' — O N — n v1 N .+ 00 C\ 00
00 lz 00
LL
W O O O 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 O O O O
N — o0 00 r r O r
Q 00 00 ON M O\ ON v1 v1 00 — W3 M R
V1 N DO N M'� N a 01 O �/1 N �O W Vl O 00 7 00 01
p� 7 T
rz n r
Z
_O
'F
vI
O
CL
a
V ;D L °
z
aL ¢ N N G N O p L N
Z a W G C w 00 1
c0
�' � � •G � 00 4 y c d .� L ° r i
G
A _ _ 3
O0. R L 00 r- w N E toov, N E d' � ? ^ co L w O L d p
U ¢ E P° ri s 3 m v E °q E o w ^� w O oa W �-
V w z > s ,m U w a°i n`q ': > 'm > Q'm. E L] y d c R is w
LLIm ° L m � � E.0 ti 02 Z > a w iioO m O E V u � w � O a `°"
Z L Z L v N L U U
" •c aUi � d v coy iia o .E •`-' iori a m ° C7
a E m e 7M " c. Y
a a > >o Z m 3 n c c v ° s L E a ' CL. M.Z 6 O o r Ee c a
= 7 N m o o W u a an d y u a+ Y .i
> EV2 A UU ¢ ¢ f� (� a0 UO r � 0. > a p p +
2A-4
— Exhibit A.2
m
In
o o 0
Oi to a N0 e N e o\° ch O CO
Q V d: O O T O G f` fA
N CO C7 r CO) Clr On O N Co C7 O N N
CA CA C N
64 to
- - m
Cl
N
O O
O N O \° o o o @7 t� M
O o C \ O
oi
O ` M 'Cr p R7 Co MN O CO
COV Co M C° O N O r In
CA Ch e-
Efl Efl
m
'a o p o o p o o °
O N O \ o Opo \ 0 0 0 G
CV O m Q, O o p o o O ao M N .`
p O C O �' O N CCoo CND 0) t1
N. CO = Cr) Cn O N O O O V-
U).
U) N N60,
u1.
CD C
> [C
C
m Co C
N m O o O o ?� m O O E U
m Oj CCD C'i O h' N o C Co O LO C rn C
O Co 7 r r' Or4. 0 O ,C'7 O „ M Co W Co 7 a
N m Efl 69 CCI CM f-- Cl) E L
N Ca
C m 3
f6 m L1
= y CL CD m C.
tC a Um
U Co m _ C C
CA cc U m
_ ^ G c C O
_m U
Z m W M C` O O` C `
O j Co Co f� N 'm w
_ m E rn
U C Z Um C p
W m C m O C
O Mmi a ° o U m on
c :3U Co m x
o m a am
rn L 0) a) E m m
d o Co N c
O c CO o C' f0
w C 01 H y
Z o a m m ma
p y EU W -mp
LL y � rL j C U
W O N Cu S m E m °
C m G O > C E. C o
W m N N = m Of a • m E N
I— W 0 O N ��l ; E E Ca O >
Q Cca E
U � 7 ` V �' m O O m d E
CD
m CT w Ca
m N 'U = U V m
m = a g m E m ° v CD . m
O Q m m m tm m d Ca _ = m
LL U c v � r. Co CL a) U a w m ° U a m
Co 3 L m m c M o m o o °'
Z c m a� ° c Cm U c E rn co 0 -0 m m g
(D 0)O .m ° ' ET _
m; o
m °
m N O ° a 0 y coo c m m E a > Q
m
aZi ani m = E Z a) m :a
aTi m `_' S m m m
Cl) m CoCD CL
U :° 00i y `m �° m c y m ° E
� a� a m °= > U Co LL
Q o 0 0 V -n ry 3 � N
�' 2A-5
\ Exhibit A.3
00 Coco 0
o Lo 0 0 0 0 0 0 0 w
PZ o cr) 00 co000O v
64 N EA m C7 r 0 e M
OEfl
H � � � N _
CA
m O
O O O O O O
o 0 0 0OC 0 m
60 0 0 N N c0M O
N
O. �7 N
av
$ 4 0 0 0 0 0000 0
mo 0 0 o O 0000 Cl
O` N N 0 0 N 0 N N CD O
IL N fh 17 IZ
m CD O O O O O O O
m C 0 0 0 0 0 0 O
LO o N T L6 LO COOCD
Q O` N M O N N CA
IL 17 V
M
LL
V
LLJ 0 0 00 0 0 0 0 O
Q m o 0 0 0 0 0 0 0 0 0
is 0 � Ch CO N N LO n COQ'
N
r r �
W
_ w
F-
O
U. a
` o z ca C w
Q �
J C E
CL N a) U
❑ 0 Rl
Z m N �
d
7 m
C c U C E m C
co !. C j 0 Q U O
a� ° �
co
E C
� � � m00 75 E CD m
IL = � a � o a=i M E c LSE
N LL
LL J O i tY vy. d ca. e0 m yL.. E c ami —�°
M Q y
c O mC Eo
12 w
mmLfv M O I6d > cn ❑ 2
N H
1A_6
Q