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HomeMy WebLinkAbout; ; 1985 CAPITAL IMPROVEMENT PLAN; 1985-12-23CAPITAL IMPROVEMENT PLAN FINAL DRAFT Costa Real Municipal Water District 5950 El Carnino Real, Carlsbad, CA 92008 Telephone: (619) 438-2722 Costa Real Municipal Water District CAPITAL IMPROVEMENT PLAN Final Draft December 23, 1985 Prepared by William C Meadows, General Manager Geoffrey A. Poole, Administrative Analyst TABLE OF CONTENTS Page I. Summary 1 II. Introduction 3 III. Growth Forecast and Land Use 6 IV. Water Demands 11 V. Project Phasing and Estimated Costs 15 VI. Funding 18 VII. Financing 23 VIII. Conclusions 31 IX. Partial List of Sources Consulted 32 IX. Appendixes 35 LIST OF FIGURES Figure t Page Title 1. 2. 3. 4. 5. 6. 5 7 10 14 CRMWD Serice Area SANDAG and City of Carlsbad Population Projections SANDAG regional forecast for CRMWD CRMWD Land Use Comparison for the Years 1980 and 2000 San Diego County Water Authority population projections for its member agencies CRMWD water sales projections LIST OF TABLES Table # 1. 2. 3. 4. 5. 6. Paae 6 11 12 12 13 16 Title Land Use Projections Average Day Water Demand Minimum Fire Flow Requirements Required Fire Flow Durations Total Water Demand Master List of Proposed Projects, 7. 8. 17 21 24 Cost Estimates and Allocations Master List of Proposed Projects and Cost Estimates per Phase City of Carlsbad Contributions for Enhancement Projects Security Pledged to COP Financing LIST OF APENDIXES Appendix Title A. Computerized Spreadsheet Represent- ing Financial Projections Through Phase I Using the Fee at Time of Previous Draft ($880 per EDU) B. Graphic Representation of Appendix A. C. Computerized Spreadsheet Represent- ing Financial Projections Through Phase I Using the Adopted Fee Effective Jan.'86 ($1590 per EDU) D. Graphic Representation of Appendix C. E. Capital Improvement Plan Map SUMMARY Costa Real Municipal Water District must provide facilities to accommodate rapid urbanization in Carlsbad. The Capital Improvement Plan identifies projects that will satisfy the future demands on the water system. The projects identified in this report fall into two main categories: 1. Construction of new facilities and enlargement of existing ones to accommodate the increase in demand from new development. Costs of new or enlarged reser- voirs, increased pipeline capacities and other projects necessary for their operation can be attributed to new development. 2. Replacement and rehabilitation of facilities that have depreciatied by operation of the system. The cost of improving facilities currently in use is the responsibility of the consumers. In addition to the projects shown in this plan, developers must contribute facilities which are built privately, according to District specifications, and which serve new development. These facilities have a special benefit to those developments. This report identifies the major facilities to be undertaken by the District. Together, the developer-contributed facilities and the District-built facilities will constitute the complete water system. In order to allocate the cost of District projects equitably between developers and water users, the benefits to be provided by the proposed projects have been analyzed. This report identifies total improve- ments costing $41,750,000 (current value) to buildout. The respective allocation between new development and water users is: New Development $24,510,000 Water Users $17,240,000 The major facilities charge (MFC), a connection fee paid by new development, has been set at $1,590 per equivalent dwelling unit as of January 1986. The amount of this fee was determined by analysis of revenue required to finance the proportionate cost of projects the District must undertake to accommodate new development in the immediate future. Additional adjustments in the MFC might be recommended as the exact project costs of construction and financing are determined through implementation of this plan. A water rate surcharge of $0.10 per 100 cubic feet ($43.56 per acre foot) would complement the increased major facilities charge in accordance with the propor- tionate share of benefit to water users, and allow the District to undertake the immediate projects. However, the Water Service Agreement between the District and the City of Carlsbad provides for the transfer of substantial funds for water system improvement, and this report recommends settling pending issues with the City before considering a specific water rate surcharge. The use of City reserves could significantly reduce the amount of a water rate surcharge. It is also recommended that no work on the village area rehabilitation program, adopted by the City prior to the Water Service Agreement, be undertaken until the matter of fund transfers is addressed. The District has the resources to implement its capital improvement program in a timely manner. Doing so will assure existing and future citizens that the water system is in place to serve their needs. INTRODUCTION Purpose The purpose of the Capital Improvement Plan (CIP) is to identify the major water facilities that must be provided by the District to serve anticipated demands at buildout; to consider appropriate financial methods; and to describe policies which would carry out the plan. The CIP recognizes the need to build new facili- ties and replace existing ones to ensure an adequate future water supply for CRMWD's area. The portion of Carlsbad served by CRMWD is shown on Figure 1. In addition to the practical need, the CIP is required by the Water Service Agreement between CRMWD and the City of Carlsbad, entered into in 1983. Re- garding capital improvements, the agreement provides: Per Agreement 1. The District will be responsible for the plan- ning, financing and construction of all major capital facilities to provide potable water service within the District. 2. The District will coordinate the capital im- provement program with the City. 3. The District, with input from the City, will adopt a master plan of facilities. 4. The City will contribute the proceeds from the sale or lease of Lake Calavera, together with any undesignated reserves in the City's water utility fund, to the District's capital development fund. Policies This report is based on the following policies: 1. New development will pay for facilities not needed to serve existing water users. Payment will be by: A. Contributing facilities providing specific benefits to new developments, such as in- tract pipelines B. Paying major facilities charges to fund projects of District-wide benefit, the need for which is required by new development 2. Existing water users will pay for the replace- ment or improvement of facilities they have used, the need for which has not been created by new development. Methodology The CIP is based on information from a variety of sources. The draft report entitled "Master Plan of Public Water System Facilities" prepared for CRMWD by Woodside/Kubota and Associates updates information on the capital requirements of the District. Other subarea master plans adopted by the District in the past have the same function, and have been used as a guide for the preparation of the CIP. Additional engineering analysis was provided by the District's staff. The consultants' report itself is based on input from the City of Carlsbad and other sources. Population and land use data were initially gathered from the report prepared by the San Diego County Association of Governments (SANDAG). The City of Carlsbad subsequently released its revised Public Facilities Management System Monitoring Report which includes population projections. Both the SANDAG and City projections are presented in this report. Financial analysis by CRMWD's staff was based on the consideration of various financial methods and current policies of the District. Long-term revenue and expense projections were developed with the aid of computerized spreadsheets that represent CRMWD's existing and potential revenue sources, and based on growth and water sales projections which are explained in the appropriate sections that follow. Figure 1 COMMON BOUNDARY AREA (COSTA REAL MWO & CITY OF CARLSBAD) BUENO COLORADO MWO OLIVENHAIN MWO BOUNDARY-CITY OF CARLSBAD OUTSIO; DISTRICT SERVICE AREA BOUNDARY-COSTA REAL MUNICIPAL WATER DISTRICT GROWTH FORECAST AND LAND USE CRMWD is San Diego County's fastest growing water agency in terms of assessed valuation, and is on the forefront of an urban expansion that will nearly double its population in the next ten years. Population within the District may reach nearly 47,000 by the year 1990, an increase of 17,000 in that ten year span. Develop- ment occuring within the District is projected to increase the developed land by 151% over the next 15 years. Figures 2-5 are graphic representations of these projections, made by SANDAG and the San Diego County Water Authority, that were considered in the engineering of the CIP projects. Growth Forecasts There is a potential for significant descrepencies between 20 year growth forecasts and actual growth rates. Therefore, implementation of the CIP requires a more detailed analysis into the projects that are of an immediate concern. These projects will supply the current users as well as new developments that are currently planned or expected to occur in the near future. The remaining projects are components of the water system that will supply a buildout population. The actual growth trends will determine the date, pre- cise location and actual sizing of those projects. Land Use Land use analysis aids in the determination of gross water demand on the transmission system. The figures in Table 1 were used in the Woodside/Kubota report to determine anticipated sizing and location of the facilities. In addition to actual growth trends, actual development in accordance with the City land use plan will determine precise sizing and location of future facilities. Table 1-Costa Real Municipal Water District Land Use Projections Residential 14,000 acres Agricultural 1,500 acres Industrial 2,500 acres Commercial 1,000 acres Recreational 1,000 acres Total 20,000 ac±es -r!.. Costa. Real Population 1975-2000 Roundsd to Nearest 1000 9 0 80 - 70 30.000G / 7.000 tl / 375 87.0000 74,00 OB 59.0000 -#7,000 ,96* J / 990 1 99.3 'Actions by City of Carbihad 2000 (D NJ SAN DIEGO REGIONAL FORECAST POPULATION. . . HOUSING. . . EMPLOYMENT. . . LAND USE CC19TA REAL M. W. D. VEM 1980 1990 1995 2000 TOTAL 30190 39315 73788 86777 P O P U L HOUSE HQLP 29073 57900 72213 85053 A T (X) (96. (97. (97. (98. I 3) 6) 9) 0) 0 N GROUP QTBi 1117 1413 1573 1722 (X) ( 3. 7) ( 2. 4) ( 2. 1) ( 2. 0) YEA.fr 1980 1990 1993 2000 0 C C U P TQTAl 11782 23489 32913 39668 I E D H SINGLE pAflJLY 6428 13438 16730 22269 0 U 8 I (X) (34.6) (32.7) (30. 9) (36. 1) NO UN MULTI- FAtflLY. 3334 12031 16163 17399 I T (X) (43. (47. (49. (43. 8 4) 3) 1) 9) YEAR 1980 1990 1993 2000 TOTAL 13613 23202 29355 33359 (mis. 1677 1433 1328 1241 (X) (12. 3) ( 3. 7) ( 4. 3) ( 3. 7> C HEft 3317 600O 7403 8603 I V I L (X) (24. 4) (23.8) (23. 1) (23. 6) IAN gqvT 1043 1617 1876 2082 E H P L (X) ( 7. 7) ( 6. 4) ( 6. 3) ( 6. 2) 0 Y M E N T BEIAIL (X) 2033 (14. 9) 4783 (19.0) 6009 (20. 3) 6984 (20.8) SEBVJCE <X) 3031 (22. 4) 3818 (23. 1) 6988 (23. 6) 7966 (23. 7) qTHER 2488 ' 3331 3949 6683 (X) (18.3) (22.0) (20. 1) (19. 9) TOTAL UNIFORMED MILITARY:1980. . .1990. . .1993. .2000. . YEAR I960 1990 1993 i 2OOO 1 LAND USE A C R f DEVELOPED RES I- NON- TQTAU, C/.) PENTIAL (X) ElSIfi <X> FREEHftY <X> 5018 (23.1) 3152 (62.8) 1620 (32.3) 246 ( 4.9) 8818 (44.2) 6097 (69.1) 2473 (28.1) 246 ( 2.8) 10709 (53.7) 7681 (71.7) 2781 (26.0) 246 ( 2.3) 12575 (63 0) 9266 (73 7) 3063 (24.4) 246 ( 2. O) I't\ G E 8 UNDEVELOPED DEVEL- NOT IQIA.L (X) QEABLE <*> USABLE <x> 14939 (74.9) 11372 (76.1) 3367 (23.9) 11139 (33.8) 7371 (68.0) 3367 (32.0) 9248 (46.3) 3681 (61.4) 3367 (38.6) 73B2 (37.0) 3813 (31.7) 3367 j (4B. 3) oo Note: All information presented is based on gridcells uihlch approximate city or district boundaries as of January. 1983. n n it f i n h t (1980)LAND USE ACREAGES 37% DEVELOPABLE Figure 4 16% RESIDENTIAL ^ 8%"NONRESIDENTIAL DEVELOPED Residential (3,l52ac.)- 16% Nonresidential (l,620ac.J- 8% Freeway ( 246ac.}- I % Total (5,01 Sac.)-25% 1% FREEWAY UNDEVELOPED Developable UI,372ac.)-57% Not Useable ( 3,567ac.)-18 % Total (!4,939ac.)-75% TOTAL ACREAGE (I9,957ac.) (2000) / NONRESIDENTIAL DEVELOPED Residential ( 9,266ac.)-47% Nonresidential ( 3,063ac.)-15 % Freeway ( 246ac.)- 1% Total (12,575 ac.)- 63% 1% FREEWAY UNDEVELOPED Developable ( 3,8l5ac-)-l9% Not Useable ( 3,567ac.)-l8% Total ( 7,382ac.)-37% TOTAL ACREAGE (I9,957ac.) 10 Growth Rate in Percent from 1980-2000 Figure 5 San Diego County Water Authority Agencies MWU*.WC»~JOV>oHMW£WJg£° Eueno Colorado M.W.D. Costa Real M.W.D. Del Mar, City of De Luz Heights M.W.D. Escondido, City of Fallbrook P.U.D. Eelix W.D. National City, City of Oceanside, City of Olivenhain M.W.D. Otay M.W.D. Padre Dam M.W.D. Pendleton Mil. Res. Poway, City of Rainbow M.W.D. Ramona M.W.D. Rincon del Diablo M.W.D. San Diego, City of San Dieguito W.D. San Marcos C.W.D. Santa Fe I.D. South Bay I.D. Valley Center M.W.D. Yuima M.W.D. San Diego Regional Avg. 61.8 |1 ^\ \\\\\\\\\\! 13.7 | 1 11.11 1 35.2 | 1 39.9 | 1 8.91 1 12.0 | 1 69.0 | 1 49.6 | 1 81.5 | ~" 1 71.4 I 1 1-5.5 1 49.6 | 1 139.8 | I "4.5 | 1 211.8 31.6 | 1 42.7 | 1 170.0 I 1 82.7 | 1 23.0 | 1 130.8 | 1 50.2 | 1 45. 4 | 1 11 WATER DEMANDS Average Day Demand Approximately 530 water meter records from the City of Carlsbad and CRMWD were reviewed for the period July, 1979, through June, 1982. The residential meter records were converted to gallons per day per dwelling unit and compared with the number of dwelling units per gross acre (including streets). The result was an indication of average day demands based on the number of dwelling units per gross acre at buildout. Usage is shown in gallons per day per acre (gpdpa). The water flow calculations for all catagories of use were deter- mined as follows: Table 2-Costa Real Municipal Water District Average Day Water Demand Water Demand Land Use Gal. Per Day Per Acre Agricultural 2,500 gpdpa Industrial 3,000 gpdpa Commercial Auto Retail 980 gpdpa Regional Retail 840 gpdpa Restaurants 2,910 gpdpa Motels 3,360 gpdpa Schools Elementary 1,840 gpdpa Junior High 2,215 gpdpa High School 2,190 gpdpa Freeway Landscape 2,900 gpd/1000' Peak Demand (Fire Flow) The City of Carlsbad Fire Department's recommenda- tions for minimum fire flow requirements were used to determine peak demands. Minimum flow and required duration were used to determine overall fire flow demands. The required flows are shown on the following page. 12 Table 3-Costa Real Municipal Water District Minimum Fire Flow Requirements Land Use Gallons per Minute R.L.— Low Density 1500-1750 R.L.M.— Low Medium Density 1750 R.M.— Medium Density 2500 R.M.H.— Medium High Density 3500 R.H.— High Density 3500 N.— Neighborhood Commercial 3000-4000 C.— Community Commercial 3000-4000 PI — Industrial 3000-4000 E,J,H,HC,P — Schools 3000 RRI — Intensive Regional Retail 6000 Required Fire Flow Duration Sizing and location of future facilities have been determined per fire flow volume requirements for the following durations: Table 4-Costa Real Municipal Water District Reqiured Fire Flow Durations Required Fire Flow (GPM) 10,000 and greater 9,500 9,000 8,500 8,000 7,500 7,000 6,500 . 6,000 5,500 5,000 4,500 4,000 3,500 3,000 2,500 and less Duration (Hrs) 10 9 9 8 8 7 7 6 6 5 5 4 4 3 3 2 13 Total Water Demand The projects that are proposed in the CIP are designed to satisfy the requirements of the District at buildout population of an estimated 109,000. The total water demands of buildout population have been calculated and used as design parameters for future projects. The District's current pipeline capacity from the aqueduct system of the San Diego County Water Authority (SDCWA) is 58 cubic feet per second (cfs). Projected annual total water demand within the District, shown in Figure 6, is based on the assumptions that (1) anticipated population increases will occur as projected by SANDAG, and (2) the per capita demand of both existing and future populations for urban water will remain at .221 acre feet (197 gallons per capita per day). These calculations have been made for CRMWD by the San Diego County Water Authority. Total water demand on the CRMWD system at buildout will produce a total capacity requirement of 93 cfs from the SDCWA aqueduct system into the District's distribution system. Therefore, pipeline and reservoir capacities of the CIP projects are designed to meet these future needs. The data in Figure 6 are summarized as follows: Table 5-Costa Real Municipal Water District Total Water Demand Projected Water Use (Acre Feet) Estimated Year 1990 1995 2000 Population 59,000 74,000 87,000 Urban 13,100 16,300 19,200 Agric. 3,600 3,600 3,600 Total 16,700 19.900 22,800 30,000 25,000 _ U| ujoco 20,000 _ , 15,000 _ Ui ro,ooo_ 5,000 _ PROJECTED WATER USE TO YEAR 2000 -— PAST AGRICULTURE DEMAND 7970 1980 1990 2000 H- l-i(D cn FISCAL YEAR 15 PROJECT PHASING AND ESTIMATED COSTS Improvements have been planned to adequately serve the Disrict at buildout. Multi-year increments are used, from which the overall plan may be divided into yearly segments, or annual budgets. This process allows the District to plan for the long term while preserving the flexibility to adapt to actual circumstances on a short term basis. The three plan- ning phases are: 1985-1990, 1991-2000, 2001-buildout. No year for buildout has been established by the City of Carlsbad, although it is assumed to occur after the year 2005 for water system planning purposes. Although the consulting engineers list the La Costa Hi, Tri-Agencies Terminal and Santa Fe II reser- voirs within Phase I of their report, this report has deleted them since they are already financed and under construction. The nature and total cost estimate of the Squires Reservoir project has been changed. Originally planned as two projects, it is now concei-ved as a 20 million gallon reservoir which would double as additional storage (a benefit to future development) and replacement storage (a benefit to existing resi- dents). Adjusting the engineer's report to show future financial requirements only, by changing the nature of the Squires Reservoir project ($800,000 less) and by deleting participation in Olivenhain Municipal Water District's Mount Israel Reservoir ($1,000,000) gives a grand total of $41,750,000 for the CIP. Projects listed in the CIP are those that are to be financed, designed, and constructed by CRMWD. In- tract projects, those that benefit specific developments, are the responsibility of the developers to finance and construct. Hence, they are not described in the CIP. The project list on page 16 (Table 6) identifies all CIP projects, cost estimates and allocation of the costs between new development (MFC) and water users. A further breakdown of the projects into their respective phases follows on page 17 (Table 7). 16 Table 6-Costa Real Municipal Water District Master List of Proposed Projects, Cost Estimates and Allocations 1986-2005 Pro ject ( Phase ) Squires Reservoir (1) Evans Point Reservoir (1) TAP Chloramination Sta. (1) Telemetry/Control (1) Village Rehabilitation (1) "D" Reservoir Expansion (1) Santa Fe III (2) Village Rehabilitation (2) San Luis Rey Well Field (2) Replace/Enlarge PAR (2) Point "D" Cogeneration (2) Squires I Cogeneration (2) Telemetry/Control (2) "D" Reservoir Expansion (3) Replace/Enlarge ECR Line (3 Replace/Enlarge PAR Line (3 Replce/Enlrg Squires Line ( Agua Hedionda Basin (3) La Costa II Reservoir (3) Village Rehabilitation (3) Telemetry/Control ( 3 ) Grand Total All Phases MFC-Qualifying- (New Development) 5,600,000 700,000 112,000 98,000 3,000,000 4,500,000 640,000 462,000 4,000,000 ) 2,189,000 ) 1,450,000 3) 879,000 600,000 280,000 24,510,000 Enhancement- ( Water Users) 4,400,000 . 500,000 88,000 77,000 1,350,000 2,000,000 1,500,000 452,000 600,000 600,000 363,000 1,411,000 1,558,000 621,000 1,000,000 500,000 220,000 17,240,000 Total 1985$ 10,000,000 1,200,000 200,000 175,000 1,350,000 3,000,000 4,500,000 2,000,000 1,500,000 1,092,000 600,000 600,000 825,000 4,000,000 3,600,000 3,008,000 1,500,000 1,000,000 600,000 500,000 500,000 41,750,000 Totals per Phase Phase MPC-Qualifying- (New Development) Enhancement- (Water Users)Total 1985$1- 2- 3- (1986-1990 (1991-2000 (after 2000 projects ) projects ) projects ) 9,510,000 5,602,000 9,398,000 6,415,000 5,515,000 5,310,000 15,959,000 11,117,000 14,708,000 All Phases 24,510,000 17,240,000 41,750,000 17 Table 7-Costa Real Municipal Water District Proposed Projects and Cost Estimates by Phase PHASE I (1985-1990) Project Year 1985 Cost Squires Reservoir Evans Point Reservoir TAP Chloramination Station Telemetry-Control System Village Area Rehabilitation "D" Reservoir Expansion (8 MG) 1986 1986 1986 1987 1987 1989 10,000,000 1,200,000 200,000 175,000 1,350,000 3,000,000 Subtotal $15,925,000 PHASE II (1991-2000) Project 1985 Cost Santa Fe III (9 MG) 4,500,000 Village Area Rehabilitation 2,000,000 San Luis Rey Well Field Rehab. 1,500,000 Replace/Enlarge PAR Line (1st Stage) 1,092,000 Point "D" Cogeneration Sta. 600,000 Squires I Cogeneration Sta. 600,000 Telemetry-Control System 825,000 Subtotal:$11,117,000 PHASE III (after 2000) Project Subtotal GRAND TOTAL ALL PHASES 1985 Cost "D" Reservoir Expansion- 2nd Stage 4,000,000 Replace/Enlarge ECR Line (36") 3,600,000 Replace/Enlarge PAR line (39") ' 3,008,000 Replace Squires Dam Line 1,500,000 Agua Hedionda Basin Rehab. 1,000,000 La Costa II Reservoir (1.5 MG) 600,000 Village Area Rehabilitation 500,000 Telemetry-Control System 500,000 $14,708,000 $41,750,000 18 FUNDING In 1984, the District financed three reservoirs with certificates of participation. The "full faith and credit" of the District was pledged as security, meaning revenues from major facilities charges, water sales, property taxes, interest earnings and other available sources be used for funding as necessary. There are many options that might be cost effective at the time of financing the Phase I projects. The key question to answer when the projects are undertaken is "who pays?". The certificate of participation program was designed to spread costs among the project beneficiaries. This policy is addressed by this report, which has allocated costs proportionately, subject to modification as the District proceeds with the actual work leading to construction. The various projects in the CIP will benefit both existing and future water users. Table 6, page 16, shows the complete list of projects and the allocation of responsibilities between developers and water users. The cost allocation represented in Table 6 results from the analysis of individual projects to determined the respective benefits for new development and water users. A 56% to 44% benefit ratio between new development and water users was determined by analysis of the relationships between replacement cost, due to existing demands, and enlargement cost, due to future demands, of pipeline and reservoir improvements. Phase I projects where this cost-benefit ratio applies are Squires Reservoir, TAP chloramination station, and telemetry/control system improvements. In other cases, projects will benefit new development exclusively (e.g. "D" Reservoir Expansion) or water users exclusively (e.g. Village Area Rehabilitation) and are cost- allocated accordingly. The revenue generated by the Major Facilities Charge which is paid by new development will finance the portion of Phase I projects that benefit new development (Table 6). Adequate revenue must also be generated to finance the enhancement project list (Table 6). These revenues will either be generated through funds from the City that are to be transferred to the District for this purpose or through a capital surcharge, an increase on the water rate. Descriptions of these revenue alternatives follow. 19 Major Facilities Charge A discussion of specific funding sources can begin with the major facilities charge, which is a connection charge levied against new development. The MFC was established as part of the 1984 certificate of participation program which financed three reservoirs currently under construction. This charge is assessed against equivalent dwelling units at the time the City issues building permits. Based on information which indicated the need to proceed with projects of an immediate concern, the MFC has been set at $1,590 per EDU as of January 1986. This will enable the District to proceed with the immediate projects while the long term capital plan is being finalized. To calculate the amount of the charge, growth estimates for CRMWD service area were analyzed to determine the potential revenue from the MFC. In 1984 approximately 2,000 EDUs were added to the CRMWD system. The City's latest population projections show a rate of approximately 1,100 EDUs per year for CRMWD's area. Therefore, 1,000 EDUs was judged to be a realistic number which should generate an adequate revenue stream to meet fixed debt service for projects that benefit new development. During the review of an earlier draft of this report, a question was raised regarding determination of a charge to support ultimate MFC requirements. An average annual debt service for the entire project list was calculated, and it yielded a MFC of over $5,000 per EDU for MFC qualifying projects. There are several problems with this approach. This method would make changes in the project list and estimated costs extremly difficult, if not virtually impossible to justify. One must question the accuracy of population projections that go for some twenty years into the future. Variations in the actual population growth or more detailed studies into the Phase II and III projects could possibly eliminate or substantially alter some projects. Therefore, such a charge could be exhorbitant and overly speculative. The shorter the planning period relied upon to set rates, the more accurate the forecasting will be. Required financing for Phase I MFC-qualifying projects was thereby used in considering the major facilities charge. 20 Capital Surcharge During design of the certificate of participation program, the District considered a capital surcharge on the water rate. This wasn't done, although pledging the "full faith and credit" of the District acknow- ledged the availability of a surcharge if needed for payments. A capital surcharge on the water rate of $0.10 per 100 cubic feet ($43.56 per acre foot) would fund the Phase I enhancement project list. However, no surcharge is recommended at this time because the District is due (pursuant to the Water Service Agreement of 1983) to receive undesignated reserves from the City's water enterprise fund plus the proceeds from the sale or lease of Lake Calavera, to be used for capital improvements of the water system. If City funds received by the District are insufficient to meet the total construction costs of the list of enhacement projects, an increase on the water rate will have to be considered at that time. The discussion has so far addressed Phase I MFC- qualifying projects, the need for which is created mostly by new development. The remaining projects shown in Table 6, totalling $17,240,000, are needed mainly because of wear on the system which has created the need to replace or enhance facilities. As previously mentioned, City reserves for water system improvements and proceeds from the sale or lease of Lake Calavera are to be transferred to the District as stated in the Water Service Agreement. The estimated $3,000,000 million dollar in City reserves coupled with the estimated $15,000,000 that could be generated by the sale of Lake Calavera approximately $18,000,000 in assets. This would result in a surplus of funds of $760,000 if applied to the construction of the enhancements projects in Table 6. As shown on the following page Table 8, the transfer of City funds from the sources just described could avoid the cost of financing, thereby saving a substantial amount in interest costs, while not having to increase water rates. 21 Table 8-Costa Real Municipal Water District City of Carlsbad Contributions for Enhancement Projects City Reserves $3,000,000 . -f\jj.t^U Sale of Other Property $1,500,000-£«P«^ 4*-********* < Sale of Lake Calavera $15,000,000 Total $19,500,000 Enhancement Projects (Table 7) $17,240,000 Surplus of Funds $1,529,000 While it is recommended that no surcharge be le- vied at this time, work on the enhancement projects should not be undertaken until the issues of City contributions are resolved. One exception to the recommendation is the Squires Reservoir project. The rehabilitation of Squires Reservoir should be addressed for water quality reasons as soon as possible. For this reason the District may have to move ahead with this work by arranging short- term or interim financing. Lake Calavera The sale of Lake Calavera has been recommended in two City reports. A 1984 publication entitled "A Report on the Evaluation of Lake Calavera and Mission Basis Well Field as Water Resources," by Glenn M. Reiter, & Associates concluded "the cost involved in putting the limited quantities of water available to beneficial use for domestic purposes are obviously prohibitive," and that "sale of the property surrounding the lake with retention of the 'flooded' area for its limited flood control value (and residen- tial development enhancement) would appear to be in the best interest of the City." A 1969 "Water System Engineering Study" by Jack Y. Kubota and Wayne P. Li 11 recommended that "Water Department properties not needed for water supply purposes in the expanded future system should be liquidated as advantagous1y as possible with the object of facilitating the financing of needed new works." This report recommends that action be taken as soon as possible to resolve this matter. 22 The ultimate use of Lake Calavera may be a politically sensitive matter, as recent opposition to the idea of draining the lake indicated. Yet the conversion of this non-functional asset to cash as a way to pay for water system improvements should be feasible by taking steps to preserve the enviornmental amenities of the lake and surrounding 200-plus acres. 23 FINANCING In undertaking a program involving the construction of public facilities, a factor of major importance is the ability to obtain sufficient financing. The District's certificate of participation program has been discussed relative to its affect on existing debt service requirements and CRMWD policies regarding funding this debt. Other financial methods are available to the District and will next be discussed. Debt security, which has been mentioned in the section on funding, will first be covered since it is fundamental to arranging financing. Debt Security Consideration of the security CRMWD can offer for its anticipated debt is important when evaluating financial alternatives. One financial method might be chosen over another because of market conditions which would be expected to favor one method (i.e. attract a lower interest rate). The national credit rating agen- cies, Standard & Poor's Corporation and Moody's Investors Service, analyze several factors in order to rate a prospective debt issuer's credit worthiness. According to Standard & Poor's "Credit Overview" report on municipal ratings, there are four broad areas of concern covering established sectors of credit: economic, debt, administrative and fiscal. Economic factors include the area's economy which ultimately generate's the most important criteria: the agency's ability to repay debt. The analysts believe it is important for an area to offer economic diversity in its revenue base along with diversity and growth in employment opportunities. The creation of jobs and adequate income levels are considered. Debt factors include the type of security being pledged to repay the debt, overall debt burden, debt history and trend. Standard & Poor's says the debt burden must be measured against the income and the agency's total budget resources. Debt history and projected debt needs must also be considered, and a community, as represdented by its public agency, "should also be able to demonstrate a regular planning program for capital improvements." Administrative factors include an examination of the type of government involved and an assessment of its ability to accomplish the job it's supposed to be doing. Limitations on the agency's ability to generate revenues, debt limitations, and current unused margin 24 (income in excess of current expenses) are also consi- dered, with revenue resources having to at least equal expense requirements. The analysts also evaluate such management factors as personnel turnover, labor-manage- ment relations history, and legal and political constraints that are present in the structure and environment of the entity. Fiscal factors include an examination of fiscal performance. The balance sheet for the general operat- ing account of the district would be looked at to see if current assets of cash and investments exceed current liabilities. Financial statements are examined to see if an agency has its finances under control. As stated in a 1983 report prepared for the County of San Diego, "The underlying security of an issue of a public debt obligation is the prime determinant of annual borrowing cost." The rating agencies evaluate security to determine the credit worthiness, which in turn attracts investors. Various financing options, both traditional and irinovative, are available to CRMWD, and will next be discussed, starting with the program begun by the District in 1984. Certificates of Participation CRMWD issued tax-exempt certificates of participa- tion (COPs), under terms of an Installment Sale Agree- ment. This agreement was between Imperial Securities Corporation, the seller of the COPs, and CRMWD, the agent for the seller and owner of the facilities to be financed. Security for the COP's was called the full faith and credit of the District, meaning all revenue sources available to CRMWD would be used if needed to pay off the debt. The actual mix of revenues designed to service the debt is detailed in Table 9. Table 9-Costa Real Municipal Water District Security Pledged to COP Financing Source Est. Percent Connection Charges (new development) 36% Interest Earnings (on all dist. funds) 33% Property Taxes (Dist. share of 1% levy 17% allowed by Prop. 13 and allocated by the County) Water Sales (capital surcharge) 14% Total 100% 25 As previously stated, a capital surcharge has not been used to service the COP debt although it is available in case of revenue shortfalls in the other areas. The ratings from Moody's Investors Service and Standard & Poor's Corporation, the national credit rating agencies, were considered adequate by the District's financial advisors in light of market condi- tions and the innovative nature of the COPs. The ratings were "Baa" from Moody's "BBB+" from Standard & Poor's. Essentially the same rating by both rating agencies, CRMWD's issue was considered neither highly protected nor poorly secured, with interest payments and principal security appearing adequate for the present but with certain protective elements possibly lacking or unreliable over any great length of time. Such "bonds", or certificates in this case, are said to lack outstanding investment characteristics and to have speculative characteristics. The COP issue attracted three bidding syndicates at the competitive sale, with the winning group offer- ing an average interest rate of 10.04 percent over the 20-year life of the certificates. The COP program has been judged by the CRMWD staff and advisors to be sucessful. Revenues have been adequate to meet debt service. Although it formed the basis of the District's capital financing program, the COP program is but one of several methods the District may ultimately consider as it proceeds to implement the capital improvement program. Other financing techniques relevant to the CIP will next be discussed. General Obligation Bonds Proposition 13 (Article XIIA of the Constitution of the State of California) has limited taxation to one percent of full market value of real property. This has eliminated the use of general obligation bonds unless voter authorization was obtained prior to July 1978. CRMWD has $300,000 of voter approved, unissued G.O. bonds which could hypothetically be issued; how- ever, issuance costs and the marketability of this relatively small amount would reduce the net value of the bonds. A legal opinion from bond counsel would also be required. For these reasons G.O. bond financ- ing is not a meaningful option for the District. Pay As You Go A major benefit of using cash on hand to pay for improve-ments is the substancial savings in interest 26 expense. The ability of the District to pay for cer- tain capital improvements from current funds is a func- tion of cash on hand, future cash flow conditions and the equitability of using funds generated by current residents to pay for facilities which might benefit future water users. An evaluation of benefits received by different classes of water users has been done and is reflected in Table 6. As described heretofore, CRMWD has established a major facilities charge for new development. The future replacement and rehabilitation of existing faci- lities could be financed on a pay-as-you-go basis by creating a sinking fund from a water rate surcharge; however, this report recommends the issues of transferring City reserves and disposition of Lake Calavera be resolved prior to levying a surcharge. The liquidation of real property assets presently controlled by the City and the transfer of earmarked City reserves for water system improvements would allow the District to employ pay-as-you-go financing for the rehabilitation (water user) category of projects. A recent article in the Journal of the American Water Works Association (September 1983) provided a general rule: cash-finance items of a recurring nature, like routine improvements or replacement of mains and hydrants, but debt-finance major nonrecurring projects, like treatment plants and reservoirs. Use of major facility' charge revenues to fund the MFC-qualify- ing improvements and cash financing of enhancement/re- placement projects as proposed would follow this general rule. Revenue Bonds The Revenue Bond Law of 1941 may be used to finance water system improvements. The primary securi- ty for this debt is the revenue produced by the project to be financed. For CRMWD primarily this means water sales, and since the 1984 COP program established a blend of debt service revenue sources, including a small percentage from water sales, the use of revenue bonds could conflict with established policy. The issuance of revenue bonds requires authorization by a majority vote in a public election. Revenue bonds were considered by CRMWD in 1983 and ultimately rejected in favor of certificates of participation. Revenue bonds may be attractive depending on CRMWD's future requirements. 27 Special Assessments Special assessment financing is applicable when the benefit of the improvement can be assigned to a specific property. The CIP projects are of a District- wide benefit, with certain exceptions, like the Village Area Rehabilitation. Special assessments may be used by the District to provide other facilities, though, and should be briefly described. Assessments pursuant to various statutory provi- sions may be levied against the benefitting properties according to the share of benefit. The assessments may be calculated according to acreage, front footage along a pipeline, number of dwelling units or similar basis. Such financing is often initiated by property owners needing facilities to serve new development, or to upgrade existing facilities. Special assessment districts could be formed by the CRMWD to finance facilities serving subareas of the District. However, the use of special assessment District financing would not conform to the District-wide nature of the capital improvement plan, and for this reason is not recommended for CIP financing at this time. CRMWD has traditionally required developers to install water facilities to serve new developments. The existing District policy is to accept such facili- ties as contributions to the public water system once they are completed according to District specification. The District often requires developers to oversize a pipeline or other facility so that additional proper- ties can be served. In such cases, the developer is required to pay for his share only. The District adopts an area of benefit map and a reimbursement agreement which establish charges to be collected when new parcels develop. These proceeds cover the remain- ing costs of the facilities. Lease Financing Public agencies have used lease financing to cope with restrictions on the use of other methods (e.g. G.O. bonds), or when market conditions favor it. Lease financing establishes the public agency as the lessee of a facility financed by another party and ultimately owned by the agency. In many ways a lease revenue program would be structured similar to CRMWD's certificate of participation program. Lease revenue bonds would be authorized by the lessee, typically a non-profit corporation or joint powers authority created for the purpose. The bonds would be authorized without an election, but subject to the referendary 28 provisions available to the public which could terminate the proceedings. Security for the bonds would be the ability of the lessee (CRMWD) to meet its financial obligations. Pledged sources of security could include the general fund of the District, major facility charges, user fees, a reserve fund and insurance. In other words, the District's funding policies established by the 1984 certificate of participation program could be main- tained. Once the lease was paid in full, the District would own the facility or facilities. Not only does CRMWD's COP program seem compatible, but the similarity goes beyond appearance. Some transactions using "certificates of participation" have actually been forms of lease financing which, although labeled the same as CRMWD's program, have been structured differently. Such a "COP" program would involve a lease with a purchase option or conditional sales agreement. The similar structure and same label created problems when CRMWD's COP program was put together. The New York rating agencies viewed it as lease financ- ing, for which different credit evaluation criteria are used. CRMWD representatives emphasized the differences to help overcome the confusion. Additionally, the tax- exempt status of CRMWD's certificates was questioned when the IRS ruled a COP issue by another agency to be non tax-exempt. Bond counsel to CRMWD dealt with the IRS and rating agencies to solve this problem. Although CRMWD's program was not a lease financing arrangement, the lines of distinction were blurred. For this reason the role of bond counsel in reviewing the structure of the program and certifying its tax- exempt status was particularly important, and the District's program was successfully marketed. Government; Grants and Loans The potable water industry does not benefit from the same level of governmental assistance as the waste- water industry, where Federal and State grants are often used to finance major projects. The California Safe Water Bond Law of 1984 provided low interest loans up to ?5,000,000 and grants up to $400,000 for eligible projects, defined as improvements needed to bring water systems to minimum drinking water standards. In 1985 CRMWD applied for a loan to rehabilitate Squires Dam and Reservoir, for which the California Department of Heath Services has urged covering and 29 lining to meet current standards. Ranking of each application was based on the seriousness of each system's deficiencies related to public health. CRMWD was ranked far down on the priority list and notified that funding was not available because of its ranking. It is possible future loans will be -available but the likelihood of CRMWD qualification is not considered good at this time because of the lack of identified water quality problems affecting public health. Mello-Roos Community Facilities Act The Mello-Roos Community Facilities Act became law in January 1983. It is available to local agencies as an alternate method for financing a wide range of public services and capital improvements, including water system facilities. Whereas special assessment financing is limited to local improvements where it can be clearly demonstrated that specific properties re- ceive a direct benefit, Mello-Roos provides for special taxes to be levied without such precise restrictions. They can be used for any governmental facilities which the legislative body is authorized by law to construct, own or operate, as necessary to meet increased demands placed upon the agency by development or the need for rehabilitation. The act also sets forth procedures for changing the originally intended uses of the tax pro- ceeds, a major difference between Mello-Roos and special assessment financing. Under Mello-Roos a community facility district is formed by the public agency, subject to abandonment of the proceedings if 50 percent of the qualified voters or landowners protest, with approval required by a two- thirds majority vote of the qualified electors. The vote is by registered voters except where less than 12 registered voters live within the proposed community facilities district, in which case each landowner has one vote per acre or portion thereof. The voting provisions facilitate public approval in situations where less than 12 registered voters reside and where the landowners want development of their property. For this reason Mello-Roos has been used more often in these circumstances. Advantages of Mello-Roos 1. Considerable flexibility is available in the establishment of any special tax formula. 2. The taxed property is not subject to a specific lien as it would be with assessment proceedings. 30 3. Special taxes can be structured so payment accrues only upon development (i.e. upon occupancy of dwelling units), in which cases if development doesn't occur, there would not be any reason for the public facilities, and no need for taxes. 4. The special tax levy can be used to pay as you go as well as to pay principal and interest on long- term bonded indebtedness. This offers greater . flexibility than assessment bonds, meaning opportunities for lower financing costs. 5. The structuring of the tax is not limited to benefits to land, but can be more closely related to users of the service, allowing for payment based on the benefits received by those other than landowners. Disadvantages of Mello-Roos 1. There is no express procedure to notify a buyer or new homeowner his property is subject to a special tax. 2. A requirement for reserve fund replenishment could create an inequity where a few property owners would pay for the delinquency of others, with no procedure for solving this problem. 3. The structure of the special tax might produce confusion as new people move into the territory. 4. The procedure for adopting the community facility district allows for the financing to be arranged so quickly that potential problems cannot be adedquately dealt with. Confusion and the specter of inequity, when raised prior to an election, would make Mello-Roos financing difficult to sell to two-thirds of the voters. How- ever, if a water shortage were imminent, pending re- habilitation of existing facilities or construction of new ones, and if it were evident such improvements would benefit all classes of users, voters might provide the necessary approval. In this case the District would be able to take advantage of the positive aspects of the Mello-Roos Community Facilities Act. 31 CONCLUSIONS 1. The District has identified the major facilities needed to meet the ultimate demands on the water system. 2. The costs of the required facilities have been identified in current dollars, and apportioned to the respective project beneficiaries. Exact project costs will become known as the projects are developed. 3. The District has the funding mechanisms in place, through its Major Facilities Charge, water sales and other revenue sources to support a major construction program. 4. There are several financial vehicles available as the District proceeds with its capital improvement program. 5. By adoption of this report, the District is in a position to proceed with its capital improvement program. 32 PARTIAL LIST OF SOURCES CONSULTED Andersen, Ralph, & Associates; Jones Hall Hill & White; Rauscher Pierce Refsns, Inc. "County of San Diego: A Review of Financing Methods for Capital Facilities and Equiptment, Final Report" March 1983. Bartle Wells Associates. "Costa Real Municipal Water District : Major Facilities Financing Plan and Rate Study." June 1983. Bartle Wells Associates. "Official Statement, Costa real Municipal Water District, $12,600,000 1984 Certificates of Participation." February 1984. Blakesley, William E., P.E. Engineer, Costa Real Municipal Water District. Brammell, Thomas L., C.P.A. Controller, Costa Real Municipal Water District. Brown, F. MacKenzie, Attorney at Law. Unpublished (typewritten, undated) analysis of Mello-Roos Community Facilities Act of 1982. Burzell, Linden R., P.E. District Engineer, Costa Real Municipal Water District California Legislature, Senate Committee on Local Government, Senator Milton Marks, Chairman. "Closing the Gap: Infrastructure Needs And Our Ability To Pay For Them: Summary of the testimony received at the interim hearing of the Subcommittee on Infrastructure and Public Works, November 27, 1984. California Legislature, Senate Committee on Local Government, Senator Milton Marks, Chairman. "Public Infrastructure Financing Methods: Helping Communities Get What They Are Willing To Pay For: Summary Report." Summary of the testimony received at the interim hearing of the Subcommittee on Infrastructure and Public Works, November 2, 1983. California Office of Planning and Reasearch. Paying ill6. ZiE^-EJL Ne_w Wa^.s _t£ ZiLY. f.P.J. £ub^ijc Infrastructure in California. Sacramento: 1983. 33 City of Carlsbad. Numerous documents and meetings with several staff members and department heads. Cole, Lisa A.; Duven, Dawn R.; Owen, Samuel H.; and Vogt, John A. Guide to Municipal Leasing. Foreward by John E. Petersen. Chicago: Municipal Finance Officers Association, 1983. Costa Real Municipal Water District. Financial and general records. Costa Real Municipal Water Distrtict. Urban Water Management Plan. December 1985. Government Finance Research Center, Municipal Finance Officers Association. Bu^_ldijn2 Prosperity; Financing Public Infrastructure for Economic Development. Washington, D.C.: Government Finance Research Center, 1983. Chap.2. Horler, Virginia L. "Guide ro Public Debt Financing in California." Los Angeles: Rauscher Pierce Refsnes, Inc., 1982. Kubota, Jack Y. and Lill, Wayne P. "Water System Engineering Study: City of Carlsbad." January 1966. Lemieux, Wayne K., Attorney at Law. Handbook for li°9.§L:L A.5e_Hc.Y P_f. f.i .2 i <*.!.§.• Sacramento:Association of California Water Agencies, 1984. McKinley, J. Rowe. "Financing Water Utility Improvements." Ame_r_^c_a_ri Wa__te_r_ Wor_ks^ Association Journal. September 1983. Miller, James W. "Old Water-New Water: Setting Equitable Water Rates for Surburban Customers." American Water Works Association Journal. September 1984. Moser, Gregory V., Attorney at Law. Legal Counsel, Costa Real Municipal Water District. Reiter, Glenn M. & Associates. "A Report on the Evaluation of the Lake Calavera and Mission Basin Well Field as Water Resources." City of Carlsbad, April 14, 1984. 34 Reiter, Glenn M. & Associates. "Diagnostic Analysis of the City of Carlsbad and Costa Real Municipal Water District Areas." City of Carlsbad, September 22, 1981. San Diego Association of Governments. San Diego County Water Authority Member Agencies." Report issued January 1985. Standard and Poor's Corp. £££<li;t Over v:Lewj_ Municipal Ratings. New York: Standard and Poor's Corp., 1983. Part Two. Water Service Agreement. City of Carlsbad and Costa Real Municipal Water District. May 25, 1983. Wells, Edwin A., Principal Consultant. Bartle Wells Associates. Municipal Financing Consultants. Woodside/Kubota & Associates, Inc. "Draft Master Plan for Public Water System." Costa Real Municipal Water District, February 1985. COSTR 8[f!L HOMICIPflL UfHER DISTRICT Append! X A ZO YERR CRPITRL IHPROUEflEHT PROJECUGHS STORY 1986-2005 1586 36-90 Hunker of EDO's Major Facility Charge MFC I Inflation Factor MFC $ Inflation Factor Property Taxes Property Tax I Inflation ftanual Hater Sales (R.F.) Hater Sales I Increase Capital Surcharge Capital Surch I Inflator Capital Surch $ Inflator Capital Fund Interest Ongoing Capital Projects Master Plan Projects at'. No Construction Inflation Projects constructed at nid-phase year 10", Financing for 20 years 1st paynent in year following construction 1000 $880 O.OOX $0 $250,000 5.00X 12,000 1.QOZ $0.10 o.oo;; $0 $300,000 $250,000 50GO $880 1,00 $0 $1 ,381 ,108 1,05 61,996 1.Q4. $0,10 1.00 $0 $1,500,000 $1 ,250,000 5000 $880 1.00 $0 $1,763,065 1.05 79,077 1.01 $0.10 1.00 $0 $1,500,000 $1,250,000 5003 $880 1,00 $0 $2,250,168 1.05 96,210 1,31 $0.10 1.08 $0 $1,500,000 $1,250,000 5000 $880 1.00 $8 $2,371,818 1. 85 117,351 1.01 $8.10 1.00 $3 $1,500,000 $1,250,083 2GGOO $880 1.00 $0 $8,266,189 1.05 357,337 1.01 $0,10 1.00 $0 $6,000,030 $5,830,000 5 VERR 5YERR 5 YERR 5 VERR 20 YESR PROJECTIONS TOTflL IOIRL TQTBL TOTRl TOTftl 86-90 91-95 96-00 01-05 86-05 Revenues Major Facility Charges $1,100,000 $1,100,000 $4,100,000 $1,^0,030 $17,600,1100 Property faxes $1,381,108 $1,763,365 $2,250,168 $2,871,818 $8,26b,1B<i Capital Surcharge $2,331,220 $3,111,612 $1,190,897 $5,098,868 $15,565,597 1981 COP Reserve Interest $725,000 $725,000 $725,000 $725,000 $2,900,000 Capital Fund Interest $1,500,000 $1,500,000 $1,500,000 $1,500,000 $6,000,000 Lake Calawra Proceeds $0 $0 $0 $0 $0 City Utility Funds $0 $0 $0 $0 $0 Total Revenues $10,837,628 $11,832,673 $13,066,065 $11,595,715 '550,332,036 Expenditures 1981 CBP Financing $7,325,253 $7,633,653 $7,617,225 7 W 3"0 ;29 'cc C2C Other Instalment Debt $81,300 $0 '£0 :n $i' lr Operating Capital Itens 51 ^fl/Cl) *l A 5 V rt C " r n i L j A 1937 Phase I Financing <8b-9G projects $11,3n5,CEO} U 3r, '991 Phase II Financing (91-00 projects) 2001 Phase III financing '^aftcr 2000 project?) ?otai Expenditures $15,176,236 $17,G37,bss $17,Gib..3:3 {l5r:'H,t.GS $61,l.:fl5..;j5 Met Sain or (Loss) ($1,338,608) ($5,231,980) vS3;)80,768) '$618,S93) •511,173,213) Capital Fund Balance $3,000,000 '$1,338,838) ($6,513,583) ($10,521,356) ($11,173,219) ($11,173,219) 1986-20O5 FINANCIAL PROJECTIONS ro - >< .1 - ,o - 1 O 19S6—1990 Cash Flows ihru Phase i K'L VtNl.lt; -199^ 1996 —20OO 2OO1--2O05 1936 —2GOf.i QOO E.D.U,'s/"YR, <8? $8SO/tI,.p. U, ;PtMD!TURt,S r^' 1 CAP. FUND BAL, T3TDfD3 CL.u. X DO COSTS FOL NUNiciPflL URTER Gismcj 20 YEiK CRPITflL IHPRQUEHENT PROJECTIONS mw;< 1986-2005 Appendix C Nunber of EGLI's Major Facility Charge HFC X Inflation Factor MFC $ Inflation Factor Property Taxes Property Tax X Inflation flnnual Uater Sales (B.F.) Uater Sales ,'.Increase Capital Surcharge Capital Surch Hnflator Capital Surch $ Inflator Capital Fund Interest Ongoing Capital Projects •tester Plan Projects at: Ho Construction Inflation Projects constructed at nid-phase year 10" Financing for 20 years 1st paynent in year following construction PROJECTIONS Revenues Major Facility Charges Property Taxes Capital Surcharge 1981 COP Reserve Interest Capital Fund Interest Lake Calauera Proceeds City Utility Funds Total Revenues Expenditures 1981 COP Financing Other Installment Debt Operating Capital I tens 1987 Phase I Financing (86-90 oro.eets $11,075,333; 1991 Phase a financing '91-30 projects) lOOi Phase ill financing softer 2303 orojects) Total Expenditures Net Sain or (Lass) Capital Fund Balance S3,000,0 1000 $1,590 fl.OOX $0 $250,000 s.oor. 12,000 UQX $0.10 O.ttOX $0 $300,000 $250,000 5000 $1 ,590 1.00 $0 $1 ,331 ,108 1.05 61,996 1.01 $0.10 1,00 $0 $1,500,000 $1 ,250,000 5 YERR TOTfiL 86-90 $7,950,000 11,381,108 $2,831,220 $725,000 $1,500,000 $0 $0 5000 $1,590 1,00 $0 $1,763,065 1.05 79,077 1.01 $0.10 1,00 $0 $1 ,500,000 $1 ,250,000 5 YERR TOTRL 91-95 $7,958,000 $1,763,065 $3,111,612 $725,000 $1 ,500,000 $0 $0 5000 $1 ,590 1.00 $0 $2,250,168 1.05 96,210 1.31 $3.10 1.00 $0 $1 ,500,000 $1,250,000 5 YERR IfllfiL 96-30 *n ,Trn rinn•»l ,:jU,iJUU $2,250,168 $1,190, 897 $725,000 $1,500,300 $0 $0 5000 $1 ,590 1.00 $0 $2,871,818 1,05 117,051 1,01 $0,10 1.00 $0 $1,550,000 $1,250,000 5 YERR TOTRL 01-05 »7,9;.0,000 $2,871,318 $5,098,368 $725,030 $1,500,300 $0 $0 20000 $1 ,590 1.00 $0 $8,266,189 1.05 357,337 1.01 $0.10 1.00 $3 46,030,800 $5,000,800 20 YERR TOTRL fir r*rdrub 531 ,808,003 $8,266,189 $15,565,59? $2,900,000 $6,000,000 SG $0 $11,387,628 $15,382,678 $16,616,865 $18,115,715 $61,532,036 $7,325,250 $7,638,050 $7,617,225 $5,815,388 $28,155,525 Sol ,300 $0 ifi iO 4fi!.308 $1,258,800 $1,250,000 51 250 COG - r< '.H iL r3 W $6,519,686 $6,119,608 ^ 1J" M i i $3 :c £:; iG i:] £3 515,176,236 -417,337,658 $!7;;iifci3- $15,211,b08 »64,£G5,i3;; ($788,608) ($1,651,980) ($130,768) $2,301,18? $2b,7S1 $2,211,392 $556,111 '$125,611 $3,026,751 $3,326,751 COSTA REAL FINANCIAL PROJECTIONS $1,59O/EDU & $,10 CAP, SUR, »&£•;-19SO 1991 - 1995 1996-2OOO RLV'tlHUt FISCAL YEARS ENDING [L_1:J EXPENDITURES ^ !O01 -2005 CAP, FUND BAL- TST3fD Q. —jtX o '*-«7wE* JANUARY 16, 1986 JOINT COMMITTEE MEETING COSTA REAL MUNICIPAL WATER DISTRICT CITY OF CARLSBAD Capital Improvement Plan Executive Summary SUMMARY Costa Real Municipal Water District must provide facilities to accommodate rapid urbanization in Carlsbad. The Capital Improvement Plan identifies projects that will satisfy the future demands on the water system. The projects identified in this report fall into two main categories: 1. Construction of new facilities and enlargement of existing ones to accommodate the increase in demand from new development. Costs of new or enlarged reser- voirs, increased pipeline capacities and other projects necessary for their operation can be attributed to new development. 2. Replacement and rehabilitation of facilities that have depreciatied by operation of the system. The cost of improving facilities currently in use is the responsibility of the consumers.. In addition to the projects shown in this plan, developers must contribute facilities which are built privately, according to District specifications, and which serve new development. These facilities have a special benefit to those developments. This report identifies the major facilities to be undertaken by the District. Together, the developer-contributed facilities and the District-built facilities will constitute the complete water system. In order to allocate the cost of District projects equitably between developers and water users, the benefits to be provided by the proposed projects have been analyzed. This report identifies total improve- ments costing $41,750,000 (current value) to buildout. The respective allocation between new development and water users is: New Development $24,510,000 Water Users $17,240,000 The major facilities charge (MFC), a connection fee paid by new development, has been set at $1,590 per equivalent dwelling unit to be phased in during 1986. The amount of this fee was determined by analysis of revenue required to finance the proportionate cost of projects the District must undertake to accommodate new development in the immediate future. Additional adjustments in the MFC might be recommended as the exact project costs of construction and financing are determined through implementation of this plan. A water rate surcharge of $0.10 per 100 cubic feet ($43.56 per acre foot) would complement the increased major facilities charge in accordance with the propor- tionate share of benefit to water users, and allow the District to undertake the immediate projects. However, the Water Service Agreement between the District and the City of Carlsbad provides for the transfer of substantial funds for water system improvement, and this report recommends settling pending issues with the City before considering a specific water rate surcharge. The use of City reserves could signifcantly reduce the amount of a water rate surcharge. It is also recommended that no work on the village area rehabilitation program, adopted by the City prior to the Water Service Agreement, be undertaken until the matter of fund transfers is addressed. The District has the resources to implement its capital improvement program in a timely manner. Doing so will assure existing and future citizens that the water system is in place to serve their needs. INTRODUCTION Purpose The purpose of the Capital Improvement Plan (CIP) is to identify the major water facilities that must be provided by the District to serve anticipated demands at buildout; to consider appropriate financial methods; and to describe policies which would carry out the plan. The CIP recognizes the need to build new facili- ties and replace existing ones to ensure an adequate future water supply for CRMWD ' s area. In addition to the practical need, the CIP is required by the Water Service Agreement between CRMWD and the City of Carlsbad, entered into in 1983. Re- garding capital improvements, the agreement provides: Per Agreement 1. The District will be responsible for the plan- ning, financing and construction of all major capital facilities to provide potable water service within the District. 2. The District will coordinate the capital im- provement program with the City. 3. The District, with input from the City, will adopt a master plan of facilities. 4. The City will contribute the proceeds from the sale or lease of Lake Calavera, together with any undesignated reserves in the City's water utility fund, to the District's capital development fund. Policies This report is based on the following policies: 1. New development will pay for facilities not needed to serve existing water users. Payment will be by: A. Contributing facilities providing specific benefits to new developments, such as in- tract pipelines B. Paying major facilities charges to fund projects of District-wide benefit, the need for which is required by new development 2. Existing water users will pay for the replace- ™ .^ ment or improvement of facilities they have used, the T^ need for which has not been created by new development. PROJECT PHASING AND ESTIMATED COSTS Improvements have been planned to adequately serve the Disrict at buildout. Multi-year increments are used, from which the overall plan may be divided into yearly segments, or annual budgets. This process allows the District to plan for the long term while preserving the flexibility to adapt to actual circumstances on a short term basis. The three plan- ning phases are: 1985-1990, 1991-2000, 2001-buildout. No year for buildout has been established by the City of Carlsbad, although it is assumed to occur after the year 2005 for water system planning purposes. Although the consulting engineers list the La Costa Hi, Tri-Agencies Terminal and Santa Fe II reser- voirs within Phase I of their report, this report has deleted them since they are already financed and under construction. The nature and total cost estimate of the Squires Reservoir project has been changed. Originally planned as two projects, it is now conceived as a 20 million gallon reservoir which would double as additional storage (a benefit to future development) and replacement storage (a benefit to existing resi- dents). Adjusting the engineer's report to show future financial requirements only, by changing the nature of the Squires Reservoir project ($800,000 less) and by deleting participation in Olivenhain Municipal Water District's Mount Israel Reservoir ($1,000,000) gives a grand total of $41,750,000 for the CIP. Projects listed in the CIP are those that are to be financed, designed, and constructed by CRMWD. In- tract projects, those that benefit specific developments, are the responsibility of the developers to finance and construct. Hence, they are not described in the CIP. The project list on page 16 (Table 6) of the report identifies all CIP projects, cost estimates and allocation of the costs between new development (MFC) and water users. A further breakdown of the projects into their respective phases follows on page 17 (Table 7) of the report. Tables 6 and 7 have been included in the Executive Summary and are displayed on the following pages. costa Keal Municipal water District Master List of Proposed Projects, Cost Estimates and Allocations 1986-2005 MFC-Qualifying- Enhancement- Project (Phase) (New Development) (Water Users) Squires Reservoir (1) Evans Point Reservoir (1) TAP Chloramination Sta. (1) Telemetry/Control (1) Village Rehabilitation (1) "D" Reservoir Expansion (1) Santa Fe III (2) Village Rehabilitation (2) San Luis Rey Well Field (2) Replace/Enlarge PAR (2) Point "D" Cogeneration (2) Squires I Cogeneration (2) Telemetry/Control (2) "D" Reservoir Expansion (3) Replace/Enlarge ECR Line (3) Replace/Enlarge PAR Line (3) Replce/Enlrg Squires Line (3 Agua Hedionda Basin (3) La Costa II Reservoir (3) Village Rehabilitation (3) Telemetry/Control (3) 5,600,000 700,000 112,000 98,000 3,000,000 4,500,000 640,000 .. 462,000 4,000,000 2,189,000 1,450,000 ) 879,000 600,000 280,000 4,400,000 500,000 88,000 77,000 1,350,000 2,000,000 1,500,000 452,000 600,000 600,000 363,000 1,411,000 1,558,000 621,000 1,000,000 500,000 220,000 Total 1985$ 10,000,000 1,200,000 200,000 175,000 1,350,000 3,000,000 4,500,000 2,000,000 1,500,000 1,092,000 600,000 600,000 825,000 4,000,000 3,600,000 3,008,000 1,500,000 1,000,000 600,000 500,000 500,000 Grand Total All Phases 24,510,000 17,240,000 41,750,000 Totals per Phase Phase MFC-Qualifying- (New Development) Enhancement- (Water Users)Total 1985$ 1- 2- 3- (1986-1990 (1991-2000 (after 2000 projects) projects ) projects ) 9 5 9 ,510 ,602 ,398 ,000 ,000 ,000 6 5 5 ,415, ,515, ,310, 000 000 000 15 11 14 ,959 ,117 ,708 ,000 ,000 ,000 All Phases 24,510,000 17,240,000 41,750,000 -Costa Real Municipal water District Proposed Projects and Cost Estimates by Phase PHASE I (1985-1990) Project Year 1985 Cost Squires Reservoir Evans Point Reservoir TAP Chloramination Station Telemetry-Control System Village Area Rehabilitation "D" Reservoir Expansion (8 MG) 1986 1986 1986 1987 1987 1989 10,000,000 1,200,000 200,000 175,000 1,350,000 3,000,000 Subtotal $15,925,000 PHASE II (1991-2000) Project 1985 Cost Santa Fe III (9 MG) 4,500,000 Village Area Rehabilitation 2,000,000 San Luis Rey Well Field Rehab. 1,500,000 Replace/Enlarge PAR Line (1st Stage) 1,092,000 Point "D" Cogeneration Sta. 600,000 Squires I Cogeneration Sta. 600,000 Telemetry-Control System 825,000 Subtotal:$11,117,000 PHASE III (after 2000) Project Subtotal GRAND TOTAL ALL PHASES 1985 Cost "D" Reservoir Expansion- 2nd Stage 4,000,000 Replace/Enlarge ECR Line (36") 3,600,000 Replace/Enlarge PAR line (39") 3,008,000 Replace Squires Dam Line 1,500,000 Agua Hedionda Basin Rehab. 1,000,000 La Costa II Reservoir (1.5 MG) 600,000 Village Area Rehabilitation 500,000 Telemetry-Control System 500,000 $14,708,000 $41,750,000 CtTf TO CONCLUSIONS 1. The District has identified the major facilities needed to meet the ultimate demands on the water system. 2. The costs of the required facilities have been identified in current dollars, and apportioned to the respective project beneficiaries. Exact project costs will become known as the projects are developed. 3. The District has the funding mechanisms in place, through its Major Facilities Charge, water sales and other revenue sources to support a major construction program. 4. There are several financial vehicles available as the District proceeds with its capital improvement program. 5. By adoption of the report, the District is in a position to proceed with its capital improvementprogram.