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HomeMy WebLinkAbout6 Glenshire Water Rate Agenda Item # DONNER Public Utility District Memorandum To: Board of Directors From: Peter Holzmeister Date: July 11, 2002 Subject: Glenshire water rate ordinance A public hearing is scheduled to receive comments regarding a draft ordinance setting a $10.75 per month rate component for Glenshire customers. I will be prepared to discuss the entire issue with the Board and members of the public. Attached are a copy of the draft ordinance and a copy of information that I plan to use as an overhead transparency presentation. s Public Ordinance No. 2002-_ Establishing a Glenshire Water System Upgrade Rate Component WHEREAS, the Board of Directors of the Truckee Donner Public Utility District, hereinafter referred to as District, has entered into an agreement with the Glenshire Mutual Water Company for acquisition of the Glenshire water system; and WHEREAS, the Glenshire water system is experiencing water quality and quantity problems; and WHEREAS, the agreement requires that the Glenshire water system customers pay he cost of water system upgrades by means of a Glenshire Water System Upgrade Rate Component; and WHEREAS, the Board of Directors of the District has determined that the Glenshire Water System Upgrade Rate Component should be set at $10.75 per month; and WHEREAS, a public hearing was held on July 17, 2002 to receive written and oral comments from the public regarding the proposed ordinance establishing the Glenshire Water System Upgrade Rate Component; NOW, THEREFORE, BE IT ORDAINED by the Board of Directors of the District as follows: 1. Effective with the effective date of this ordinance, all portions of prior ordinances and/or resolutions that are inconsistent with the provisions of this ordinance are hereby repealed insofar as they are inconsistent. 2. Glenshire Water System Upgrade Rate Component: There is hereby established a Glenshire Water System Upgrade Rate Component in the amount of$10.75 per month applicable to all customers within the territory of the former Glenshire Mutual Water Company. 3. This Glenshire Water System Upgrade Rate Component shall be a monthly charge that is in addition to any other monthly water charge in effect for customers of the District. 4. If no protest is made pursuant to Public Utilities Code Section 16078, then this ordinance shall be effective thirty days after the date it was 5. The Glenshire Water Upgrade Rate Component shall be reviewed each year in conjunction with adopting of the District budget and shall be amended as appropriate. 6. The Clerk of the District shall immediately cause a copy of this ordinance to be published in a newspaper of general circulation and posted in three places within the District. PASSED AND ADOPTED by the Board of Directors of the Truckee Donner Public Utility District at a meeting duly called and held within the District on the 17th day of July 2002 by the following roll call vote: AYES: NOES: TRUCKEE DONNER PUBLIC UTILITY DISTRICT By Nelson Van Gundy, President ATTEST: Peter L. Holzmeister, District Clerk July 9, 2002 GLENSHIRE WATER SYSTEM DISCUSSION What problem has the Glenshire water system experienced? (1) Glenshire water system wells were experiencing high levels of arsenic. The water quality failed to meet federal government drinking water standards. (2) The Glenshire water system wells did not have the capacity to pump enough water to meet demand of the customers. The Glenshire area does not have the ability to yield enough water in new wells to meet capacity. How did Glenshire approach the problem? Glenshire Mutual Water Company prepared an engineering report that concluded that the arsenic could be removed from the water through treatment, but that the cost would be high. The cost would be approximately $3,000,000. However, disposal of arsenic once it is filtered out would be expensive and the water quantity problem would not be addressed. It would cost at least an additional $1,000,000 to develop the additional water supply to meet the Glenshire water demand. What alternative did Glenshire Mutual Water Company consider? Glenshire Mutual Water Company approached Truckee Donner PUD with the suggestion that we talk about the PUD becoming the water purveyor in Glenshire. After lengthy discussions and a vote of the Glenshire property owners, the Glenshire water system was conveyed to the PUD for ownership, operation and maintenance. The transfer required the PUD to solve the water quality and water quantity problem, and required the customers of the Glenshire water system to pay the cost to install the facilities needed to solve the problem. The cost was to be spread over the Glenshire property owners as an add-on to the monthly water bill. Is the cost to the Glenshire property owners less under the PUD alternative than under the arsenic treatment alternative? Yes. As stated above, the cost for Glenshire to solve its problems on its won would be approximately $4,000,000. The PUD can solve the problems for approximately $2,700,000. Under the arsenic treatment alternative water rates in Glenshire were projected to be $76.66 per month. Under the PUD alternative rates are expected to initially be $51.57 per month, decreasing as the land owned by the Glenshire Mutual Water Company is sold. What about the assets of the Glenshire water system? Did the Glenshire property owners get any credit for the assets in plant materials and cash? Yes. The Glenshire water distribution system is in fairly good condition. It is twenty years old, but it is not experiencing significant structural problems. The PUD agreed to assume ownership, operation, repair and replacement of that system. The system does not need to be fully replaced at this time as a condition of service. The material and equipment is being sold by the PUD and the proceeds of that sale will be placed into a separate fund that will be used to pay for the system improvements installed to solve the water quality and water quantity problems. The cash that the Mutual Water Company had on hand at the time of the transfer to the PUD was conveyed to the PUD and is placed in that same separate fund and will be used only to help pay the cost to solve the water quality and quantity problems. How much cash did Glenshire Mutual Water Company give to the PUD to help cover the costs to solve the water quality and quantity problems? The PUD received $768,902.72 at the time of the closing. Since that time the PUD has received an additional $5,897.35 in proceeds from the sale of materials that had been owned by Glenshire. The PUD paid $58,848 for equipment that we chose to keep. We also credited Glenshire with $57,396.90 that we collected in our first billing to Glenshire customers, which occurred prior to the closing. Thus, the entire cash amount received to defray the cost of solving the problem is $891,044.97. What is that status of the cash? $334,000 has been used as buy-in to the well that will serve Glenshire. $51,000 is reimbursement for the conduit in the Truckee River Bridge that will allow the water pipeline to be constructed. $19,000 is transferred to the PUD general fund to pay for accrued benefits that Glenshire employees bring to the PUD. The remaining $525,044.97 will be used to help defray the cost of implementing the solution to the water problems for Glenshire. How was the proposed additional rate component of$10.75 determined? The PUD has borrowed $1.74 million to correct the water quality and quantity problem. We borrowed that money for fifteen years at 5.98 % interest. The principal and interest payments total $177,318 per year. That amount is spread over the current Glenshire customers: $177,318 divided by 1,375 customers divided by twelve months equals $10.75 per month. Will the additional rate component of$10.75 ever be changed or eliminated? Yes. The rate component will be reduced as other Glenshire property owners connect to the Glenshire system. It will also go down if other land near Glenshire is developed and connect to the water system. They will need to pay their share of the improvements. It will go up or down as the actual costs of construction of the needed improvements are known. The entire additional rate component will be repealed when the debt is fully paid. What is the status of the construction of the facilities needed to solve the water quality and quantity problem? We are opening bids for construction of the pipeline on July 27. We plan to award a contract on August 7. Construction will occur during August, September and October, provided we get an acceptable bid. This is not the ideal time to be bidding pipeline projects. If the bids are too high we will consider re-bidding the project in the spring, a time when we tend to get more competitive bids. (What about the well and pump station?)