HomeMy WebLinkAbout11 Water meter finance plan Agenda Item # 11
Public Utility District I
WORKSHOP
To: Board of Directors
From: Bob Mescher
Date: October 019 2008
Subject: Discussion of Water Meter Implementation Finance Plan
1. WHY THIS MATTER IS BEFORE THE BOARD
AB 2572 requires the District to begin reading all water meters and billing on a volumetric
basis. Implementation of new meters will require a number of Board actions and will have a
financial impact on the District.
2. HISTORY
In 1991, the Water Measurement Law (SB 229) was enacted. This law required that water
meters be installed on all new commercial and residential water connections as of January 1,
1992. SB 229 did not require the retrofit of meters onto previously existing customers. SB
229 does not require that the water meters be read and does not require billing of customers
on a volumetric basis. The District has been installing water meters on all new connections
since 1992 and is in compliance with this law.
On September 29, 2004, AB 2572 was signed into law. AB 2572 requires that the District
begin reading the water meters installed since 1992 and commence billing on a volumetric
basis by January 1, 2010. AB 2572 also requires that all connections be equipped with water
meters and billed on a volumetric basis by January 1, 2025.
On April 16, June 18, July 2, and July 16, 2008, workshops were held to discuss the metering
of water services. A three phase approach was identified to cover the implementation of
metering and volumetric billing:
• Phase 1 is a pilot program to be completed by November 2008
• Phase 2 will achieve compliance with the 2010 deadline of AB 2572
• Phase 3 will achieve compliance with the 2025 deadline of AB 2572
There is no flexibility in the scheduling of Phase 1 and Phase 2 since the deadline to begin
meter reading is January 1, 2010.
On July 23, after reviewing several options, the Board authorized the District to proceed with
an expedited implementation plan, but to continue to look for other ways to finance it. The
Board indicated financing the plan with no or little external debt would be desired.
The expedited implementation plan would begin installing approximately 2,000 meters per
year in 2010 and completing the implementation by 2012.
3. NEW INFORMATION
The water meter reserve fund has a current balance of $1.3 million.
The District owns a surplus vacant parcel (Steele property) valued over$3.0 million.
It is estimated that $1.5 million will be saved through energy conservation between 2011 and
2017, once volumetric billing begins and leak detection improves.
Operational expenses will be reduced by $1.5 million over the next 9 years through labor
savings.
Utilizing the above resources and savings, the District would need to borrow only $2.5 million
for 5 years and charge a $5.00 monthly surcharge for 5 years (beginning January 2009) to
finance the expedited meter implementation plan. See the attached cash flow projection.
The proposed $5.00 monthly surcharge falls under Proposition 218. To be effective in January
2009, the District would need to mail information to every property owner by October 17,
2008, hold a hearing on December 3, 2008 and adopt the surcharge at the first meeting in
January 2009.
4. FISCAL IMPACT
The fiscal impact of fully implementing the new water meters is estimated (in FY 08 dollars) to
be $10,000,000 over the next four years.
The debt service costs of a 5-year 2.5 million loan would be approximately $300,000.
The meter implementation and debt service would be paid:
35%from a surcharge paid by customers
27%from reduced expenses and conservation paid by rates
27%from the land sale
11%from the existing meter reserve
100%Total
5. RECOMMENDATION
Review this report and provide comments to staff.
Mary Chapman Michael D. Holley
Administrative Services Manager General Manager
Truckee Donner Public Utility District
Projected Cash Flow of Meter Compliance Project&Financing-$5 Surcharge
September 26,2008
Year 2008 2009 2010 2011 . 2012 2013 2014 2015 2016 2017 Total-
Beginning - - - 663,000 - - 647,000 541,000 443,000 129,000
Monthly Surcharge - 752,000 760,000 767,000 775,000 783,000 ,510,000
1
Reduced Expenses 200,000 206,000 212,000 218,000 224,000 225,000 225,000 , 10,000
Conservation - - - 146,000 176,000 208,000 218,000 229,000 241,000 253,000 1,471,000
816,000 1,729,000 2,545,000
External Loan
1,272,000
Meter Reserve 266,000 1,006,000
Land Sale 3,000,000 3,000,000
Interest Earned - - 20,000 - - 19,000 16,000 13,000 4,000 72,000
Meter Expenditures (266,000) (2,300,000) (2,961,000) (2,624,000) (2,716,000) (10,867,000)
Internal Loan
342,000 (342,000)
Loan Repayments (182,000) (568,000) (568,000) (568,000) (568,000) (386,000) (2,840,000)
` 663,000 - - 647,000 541,000 443,000 129,000 - -
E Ending - -
I Assumptions
C Customers 2008 12,535
Monthly surcharge $ 5.00 5 years
Debt interest rate 4.29%
Customer growth 1.00%
Conservation 10.00%
Purch power inflation 4.00%
Other inflation 3.50%
Debt Requirements
External Loan#1 $ 816,000 5 years starting 2011
External Loan#2 $1,729,000 5 years starting 2012
Internal Loan#1 $ 342,000 1 year starting 2009
Internal Loan#2 $ - starting 2015