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Home My WebLink About2012-06-21 - Board of Directors Meeting Agenda Packet Yorba Linda Water District AGENDA YORBA LINDA WATER DISTRICT BOARD OF DIRECTORS SPECIAL MEETING Thursday, June 21, 2012, 6:30 PM 1717 E Miraloma Ave, Placentia CA 92870 1. CALL TO ORDER 2. PLEDGE OF ALLEGIANCE 3. ROLL CALL Phil Hawkins, President Gary T. Melton, Vice President Michael J. Beverage Ric Collett Robert R. Kiley 4. PUBLIC COMMENTS Any individual wishing to address the Board is requested to identify themselves and state the matter on which they wish to comment. If the matter is on the agenda, the Board will recognize the individual for their comment when the item is considered. No action will be taken on matters not listed on the agenda. Comments are limited to matters of public interest and matters within the jurisdiction of the Water District. Comments are limited to five minutes. 5. PUBLIC HEARING 5.1. Public Hearing to Consider Proposed Water Rate Increase A. President Opens Public Hearing B. Secretary Provides Proof of Public Hearing Notification and Correspondence C. Report by General Manager and Finance Manager D. Public Testimony E. President Closes Public Hearing F. Discussion 6. ACTION CALENDAR This portion of the agenda is for items where staff presentations and Board discussions are needed prior to formal Board action. 6.1. Water Rate Increase and Fixed Charge Rate Restructuring Recommendation: That the Board of Directors adopt Resolution No. 12-13 Setting Water Rates Effective July 1, 2012 and Rescinding Resolution Nos. 07-17, 08-02, 09-15 and 10-13. 7. ADJOURNMENT 7.1. The next regular meeting of the Board of Directors will be held Thursday, June 28, 2012 at 6:30 p.m. Items Distributed to the Board Less Than 72 Hours Prior to the Meeting Pursuant to Government Code section 54957.5, non-exempt public records that relate to open session agenda items and are distributed to a majority of the Board less than seventy-two (72) hours prior to the meeting will be available for public inspection in the lobby of the District's business office located at 1717 E. Miraloma Avenue, Placentia, CA 92870, during regular business hours. When practical, these public records will also be made available on the District's internet website accessible at http://www.ylwd.com/. Accommodations for the Disabled Any person may make a request for a disability-related modification or accommodation needed for that person to be able to participate in the public meeting by telephoning the Executive Secretary at 714-701-3020, or writing to Yorba Linda Water District, P.O. Box 309, Yorba Linda, CA 92885-0309. Requests must specify the nature of the disability and the type of accommodation requested. A telephone number or other contact information should be included so the District staff may discuss appropriate arrangements. Persons requesting a disability-related accommodation should make the request with adequate time before the meeting for the District to provide the requested accommodation. ITEM NO. 6.1 AGENDA REPORT Meeting Date: June 21 , 2012 To: Board of Directors From: Ken Vecchiarelli, General Manager Presented By: Stephen Parker, Finance Dept: Finance Manager Reviewed by Legal: Pending Prepared By: Stephen Parker, Finance Manager Subject: Water Rate Increase and Fixed Charge Rate Restructuring SUMMARY: The Board has held several workshop meetings on short and long range financial planning and considered the need to increase water rates to complete the capital improvements required to obtain operational and water resource reliability. Furthermore, the Board has determined the need to pass through to our customers rate increases that have been imposed upon the District from its water and power utility providers. Staff has prepared a Resolution for the Board to consider adopting a rate increase and fixed charge restructuring effective July 1 , 2012. Additonal proposed increases in the fixed charges effective July 1 , 2013, and July 1 , 2014 will be acted upon by the Board along with any rate increases caused by pass throughs, at the time of considering future budgets for FY 2013 through 2015. STAFF RECOMMENDATION: That the Board of Directors adopt Resolution No. 12-13 Setting Water Rates Effective July 1 , 2012 and Rescinding Resolution Nos. 07-17, 08-02, 09-15 and 10-13. DISCUSSION: During the April 2011 Budget Workshop, projected financial information was presented to the Board of Directors. That information showed that without a rate increase, the District was a few years away from being in danger of falling below its minimum reserve threshold and its debt service ratio would reach levels that would likely trigger a bond rating downgrade. As a result of that information, the Board decided to defer all non-priority Capital Improvement Projects (CIP's) for a three year period, recommended obtaining a line of credit to help finance existing CIP's in the short-term, recommended adjusting our fixed charge from a flat charge to a graduated charge based on meter volume capacity, and recommended a small but consistent rate increase to be made on the fixed charge over the next three years. On April 26, the Board received and filed the 2012 Water Rate Study 2012 which supported the need for a rate increase and separately authorized staff to mail a Notice of Proposed Water Rate Increase to the District's customers. On May 4, the Notice was mailed to our customers. At the time this staff report was prepared, the District had received written protests from approximately 20 customers, or 0.08% of the District's customers. STRATEGIC PLAN: FR 2-C: Implement an Approach to Ensure Reserves are Responsibly Funded PRIOR RELEVANT BOARD ACTION(S): The Board considered several water rate options at their workshop on April 11 , 2012 and gave direction to staff to move forward with certain changes including adjusting the fixed charge and a proposed rate increase over the next three fiscal years. On April 26, the Board received and filed the 2012 Water Rate Study 2012 which supported the need for a rate increase and separately authorized staff to mail a Notice of Proposed Water Rate Increase to the District's customers. ATTACHMENTS: Name: Description: Type: Resolution 12-13 Setting Water Rates.doc Resolution 12-13 Backup Material Public Hearing Proposed Rate Increase FY 2012 Summary Presentation Backup Material 13.pdf RESOLUTION NO. 12-13 RESOLUTION OF THE BOARD OF DIRECTORS OF THE YORBA LINDA WATER DISTRICT SETTING WATER RATES EFFECTIVE JULY 1, 2012, AND RESCINDING RESOLUTION NOS. 07-17, 08-02, 09-15 AND 10-13 WHEREAS, pursuant to Water Code Section 31007, the Board of Directors of the Yorba Linda Water District (YLWD) is required to set water rates at a level which will pay for the provision of water services; and WHEREAS, pursuant to Government Code Section 53756, YLWD may adopt a schedule of fees or charges authorizing automatic adjustments that pass through increases in wholesale charges for water; and WHEREAS, the Board of Directors previously adopted Resolution No. 10-13, which established water rates effective August 1, 2010; and WHEREAS, YLWD has determined the unit cost of changes in rates from the Metropolitan Water District of Southern California (MWD), the Municipal Water District of Orange County (MWDOC) and Orange County Water District (OCWD) for FY 2012/13; and WHEREAS, YLWD has prepared a draft budget for FY 2012/13, which includes the unit cost of the MWD, MWDOC and OCWD pass-through applied to the commodity charge of YLWD rates in accordance with Government Code Section 53756; and WHEREAS, the Board of Directors considered the FY 2012/13 Budget and the Water Rate Study 2012 and the Board of Directors hereby determines that the water rate increase described in the Water Rate Study 2012 is necessary and sufficient to cover, without exceeding, the cost to provide water service to each customer; and WHEREAS, the Board of Directors previously adopted Resolution No. 08-02 determining the basic service charge component of the water rate to be set at 21% of fixed supplies, services, and salaries and benefits of personnel costs effective February 28, 2008; and WHEREAS, establishing the basic service charge as a set percentage of fixed supplies, services and salaries and benefits of personnel costs is incongruent with current budgeting practices; and Resolution No. 12-13 Setting Water Rates 1 WHEREAS, pursuant to and in compliance with Proposition 218 (California Constitution Art. XIII D), the District mailed notice of a water rate increase to all customers and the Board of Directors has received a proof of mailing; and WHEREAS, pursuant to Proposition 218 the Board of Directors has held a hearing regarding water rate and pass-through changes and heard and considered protests. NOW THEREFORE, the Board of Directors of the Yorba Linda Water District does hereby find, determine, and resolve the following: Section 1. Resolution Nos. 07-17, 08-027 09-15 and 10-13 are hereby rescinded. Section 2. Water rates for service defined in Section 3.8 of the Rules and Regulations of the Yorba Linda Water District are hereby amended as follows, to take effect on July 1, 2012: For All Potable Water Service: All Water Usage shall be charged at $2.57 / 100 Cu. Ft. Basic Service Charge for: 5/8" and 3/4" Meters $7.56 / Month 1" Meters $12.60 / Month 1 1/2" Meters $25.20 / Month 2" Meters $40.32 / Month 3" Meters $88.20 / Month 4" Meters $158.76 / Month 6" Meters $352.80 / Month Section 3. Additional rates and fees for service are as follows: 3.a Permanent Untreated Water Service: The current MWD Untreated Full rate, plus charges by MWDOC, plus any other fees, charges or penalties as may be imposed by MWD and/or MWDOC, plus $13 per acre foot. 3.b The charge for Temporary service as defined in Section 3.5.1 of the Rules and Regulations for Water Service shall be as follows: 3.5.1 TEMPORARY SERVICE: The rate per hundred cubic feet shall be two times the rate specified for all water service plus $2.50 per day for each day that the meter is available for use by the customer. A security deposit of $1,000 is required at the time of rental and the deposit will be returned within 15 days of the return of the meter. Resolution No. 12-13 Setting Water Rates 2 3.c The monthly rates for Private Fire Service Protection, as defined in Section 3.6 of the Rules and Regulations for Water Service, shall be as follows: Meter Size Monthly Charge 4 inch $16.00 6 inch $35.00 8 inch $59.00 10 inch $94.00 PASSED AND ADOPTED this 21St day of June, 2012 by the following called vote: AYES: NOES: ABSTAIN: ABSENT: Phil Hawkins, President Yorba Linda Water District ATTEST: Ken Vecchiarelli, Secretary Yorba Linda Water District Reviewed as to form by General Counsel: Arthur G. Kidman, Esq. Kidman Law, LLP Resolution No. 12-13 Setting Water Rates 3 "j - r Yorba Linda Water District Proposed Rate Increase Hearing FY 2012/ 13 Presented By: Stephen Parker, Finance Manager f 30 June 21, 2012 _%/ • Variable Water Costs & Water Revenue — Assumption of 19,000 AF for Current Year — 19,000 AF Consumption = 3 year average • MWD — MWD Rate Increase 6.7% (eff. January 1, 2013) • OCWD BPP r; 1; 3 — Up to 68% with RA up to $267/AF (eff. July 1, 2012) • $ 13 .0 Million -- Total Variable Water Costs — Includes MWD Pass-Through Costs • $ 1 .0 Million -- Depreciation Increase — Completion of Improvement and Replacement Projects — Taking on infrastructure from City of Yorba Linda Sewers • ($292,000) — Decrease in Salary-Related Expenses — Includes 76 FTE's for Full Year, plus 3 PTE — After reduction of $365,000 for Capitalized Salaries a ' Mw- tv • $ Total Vehicle Equip . & Capital Outlay — Includes Sewer Vactor Truck Orig. Budgeted in FY 11/12 — Includes Replacement 1988 Dump Truck • ( $ 171,000) -- Reduced Overall Supplies & Services — Reduced Consulting and Support Services — Decrease Professional Services by $67,000 — Added in $63,500 Board Election for Nov. 2012 �--f - -,. •� y Total Operating Revenue Total Non-Operating Revenue Total Revenue Variable Water Costs Salary-Related Expenses Supplies & Services Current Budget (FY 2011112) $29,257,767 $1,921,369 $31,179,136 $13,671,538 $7,941,306 $4,020,834 Forecast Proposed Budget (FY 2011112) (FY 2012113) $26,482,429 $2,325,766 $27,409,026 $1,908,757 $28,808,194 $29,317,782 $12,011,361 $12,953,024 $6,935,992 $7,648,891 $3,634,637 $3,849,602 Total Operating Expenses $25,633,678 $22,581,990 $241451,517 Total Non-Operating Expenses $2,029,619 $2,030,358 $2,135,605 Total Expenses $27,663,297 $24,612,348 $26,587,122 Depreciation • Capital Contributions Income (Loss) $5,561,699 $6,594,246 $6,602,339 $422,565 $16,976,316 $0 ($1,623,295) $14,577,917 ($31871,678)' , t U FY 2012/13 N6b 12% 20% 23% 39% Depreciation Variable Water Costs Salaries & Benefits Supplies & Services Long Term Debt Other Expense Total Budget: $ 26,587,122 • _ t . FY 2012/13 9% . „ ■ Power ■ Groundwater Import Water Total Budget: $ 12,953,024 U $700.0 $600.0 $500.0 $400.0 $300.0 4 $200.0 $100.0 $_ FY 2009/10 FY 2010/11 FY 2011/12 FY 2012/13 ■ Eng. ■ Fin. I.T. ■ 0 ps. FY 09/10 Total: $628,300 FY 10/11 Total: $334,550 FY 11/12 Total: $776,834 FY 12/13 Total: $830,300 tv ,� <7*) - $aoo.o $700.0 $600.0 $500.0 $400.0 $300.0 $200.0 $100.0 FY 2011/12 Operations Dept. FY 2012/13 Carryover Current Year FY 11/12 Total: $776,834 FY 12/13 Total: $830,300 ' ts • In June 2007, the Board approved the CIP for FY 2007-12 with a long-term plan of being able to deliver groundwater to our entire service area . • Key water supply elements of the Plan included : ➢ Provide flexibility to switch between water sources ➢ Maximize use of lower-cost groundwater ➢ Add facilities to be able to deliver either source to all areas of the District • FY 2012-18 Projects will complete this Plan - tv • Completion of YL Pipeline & Booster Pump Station • Fairmont Booster Pump Station Replacement — New, larger pump building and other service facilities — Equipment & material storage facilities — Replace two old pumps with 4-6 new ones — Pipelines and appurtenant improvements • New Well 21 � Total estimated cost: $13. 1 million over 3 years Jr - tv AOLProposed CIP Projects Project Description Total Project FY 12/13 FY 13/14 FY 14/15 FY 15/16 FY 16/17 FY 17/18 $ - Budget Budget Budget Budget Budget Budget Budget 2010 Waterline Project-Phase II $ 1.17 $ 1.12 $ - $ - $ - Green Crest Dr. Sewer Lift Stn Upgr $ 0.14 $ 0.10 $ - $ - $ - Sewer Facilities GIS Conversion $ 0.02 $ 0.02 $ - $ - $ - Press. Reg. Stations Upgrade $ 1.00 $ 0.65 $ 0.25 $ - $ - Fairmont BPS&Site Improvements $ 6.00 $ 0.50 $ 3.00 $ 2.20 $ New Well No. 21 $ 2.30 $ 0.80 $ 1.00 $ 0.45 $ - Computerized Maint & Mgmt. Syst. $ 0.40 $ 0.05 $ - $ - $ - YL Blvd Pipeline $ 2.25 $ 1.90 $ - $ - $ - YL Blvd BPS (Booster Pump Station) $ 2.65 $ 0.69 $ 1.90 $ - $ - Highland BPS Upgrade $ 6.10 $ 0.35 $ - $ - $ Well No. 20 $ 2.30 $ 0.30 $ - $ - $ - GIS- Phase II $ 0.09 $ 0.05 $ 0.04 $ - $ - GIS- Phase II (Sewer) $ 0.03 $ 0.02 $ 0.01 $ - $ - Lakeview Fencing $ 0.50 $ - $ - $ - $ 0.05 New Well No. 22 $ 2.50 $ - $ - $ - $ 0.25 2012 Pipeline Project $ 2.56 $ - $ - $ - $ 0.26 Disinf. Bstr. at Hidden Hills Res $ 0.20 $ - $ - $ - $ 0.20 Meter Replacement Program $ 0.35 $ - $ - $ - $ 0.35 Annual Routine Capital R&R 5.83 $ - $ - 1.79 -. TOTAL $36.39 $ 6.55 $ 6.20 $ 2.65 $ 2.90 �>. Aft- '' $ 3.97 $ 4.62 tV � $ 1.00 $ 1.25 $ 1.80 $ 0.50 1.17 2.87 ' $ 3.97 $ 4.62 tV � • Retained AA Rating & Stable Outlook from Fitch on Bonds • Rating Agencies Are Looking For: • Debt Service Ratios at 2 .0 or Above • "Cash-on-Hand" of 1 Year Operating Expense • Commitment to Consistent Rate Increases • Currently: • Projected Debt Service Ratios Around 1.5 • "Cash-on-Hand" of 6 months Operating Expense • Small Yet Consistent Proposed Increases for Next 3 Years � ' V- idL Line of Credit Option • 3 Year Renewable Term with Wells Fargo • Would Not Negatively Effect Debt Service Coverage • Costs — Legal : $25-30K — Unused Costs: 35 Basis Points ($24,500/yr on $7M ) — Interest Rate: 1 Month Libor (.24) Plus 90 Basis Points Mw- tv • Capacity-based Monthly Service Charge • Projected Revenue Increase - 1. 5%, 2.5%, 2.5% On Monthly Service Charge • $7M Line of Credit- Deferred CIPs • Pass-through Increase from Water Suppliers — On Water Use Charge (5 cents/unit) - tv C O Defer CIPs — 1 . 5°/a, 2. 5%, 2.5% 3 Year Effect Millions Total Reserve Chart $25 $20 $15 $10 $5 $0 FY 2012 FY 2013 Ending Balances Target 4�i� 1 FY 2014 FY 2015 Alert Balances I 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Rev Ad j Revenue Adjustments & Coverage Chart 2.5% - 250% 2.5% 0.0% FY 2012 FY 2013 FY 2014 ME 200% 150% 100% 50% 0% FY 2015 Coverage Rev Adj 0 Coverage Ratio Required Coverage-110% • Alert Coverage r - • �� Pass-Through Projections • Pass-through of Variable Water Cost Increases V_ — $.05 /Unit (Beginning July 1, 2012) -- ACTUAL $.06/Unit (Beginning July 1, 2013)-- ANTICIPATED $.04 /Unit (Beginning July 1, 2014)-- ANTICIPATED tv vb _ t Pass-Through Only 1.39 1.29 1.26 Rate Increase 1.49 (1.5%, 2.5%, 2.5%) MOV * Water Fund Only "W:% tv V • Recommendation : Rate Increase on Fixed Charge — Cost of Water Availability to Larger Pipes is Higher — YLWD Only OC Agency with Flat Meter Charge — 14% of Revenues From Fixed Charges vs. 49% of Costs — By FY 14/15, 17% of Revenues From Fixed Charges Recommendation — 1.5%, 2.5%, 2.5% FY 14/15 ( Flat on Fixed Charge) $ 17 . 30/mo FY 14/15 (AWWA on Fixed Charge) & 5/bin = $ 10.06 1 in Z �zln 2 in = 516 . 77 _ $33 .54 _ $53 . 66 tv n - Agenc Golden State WD Tiered East Orange CWD El Toro WD Mesa WD Moulton Niguel WD Santa Margarita WD $2.23/ccf Budget Based $2.85/ccf Budget Based Tiered $37.80 $42.80 $20.74 $22.50 $10.36* $7.77* Serrano WD $3.01/ccf $32.31 South Coast WD Tiered $49.16 Yo rba Linda WD $2.67/ccf# $16.77# ^ Information Current as of July 1, 2011 for 1 Inch Meters # FY 14/15 Numbers, with Staff Recommendations �— Only 62% of Revenue Collected From Rate Payers _U41 $50.00 $40.00 $30.00 $20.00 $10.00 $0.00 YLWD East Orange CWD Standard Residential Meters (5/811, 3/4" & 1") -d El Toro WD Mesa WD t ' Moulton Niguel Santa Margarita WD WD 5/8" 3/4" 1" Serrano WD South Coast WD ' tv $180.00 $160.00 $140.00 $120.00 $100.00 $80.00 $60.00 $40.00 $20.00 $0.00 I ALLocal Agency Comparisons Large Residential/Commercial/Irrigation Meters (11/211 & 211) ,P .1 1P YLWD East Orange CWD El Toro WD �� Mesa WD Moulton Niguel Santa Margarita Serrano WD South Coast WD WD WD �- �j,�ai P � 11/211 2" $1,200.00 1 $1,000.00 $600.00 $400.00 $200.00 ;M Commercial & Landscape Meters (31 , 411 & 611) YLWD East Orange CWD El Toro WD Mesa WD Moulton Niguel Santa Margarita Serrano WD South Coast WD WD WD q ■311 ■411 611 IL ' =,itv