HomeMy WebLinkAbout; ; 1983 Costa Real MWD Major Water Facilities; 1983-06-27Bartle Wells Associates
MUNICIPAL FINANCING CONSULTANTS
FINAL REPORT
COSTA REAL
MUNICIPAL WATER DISTRICT
Major Water Facilities
Financing Plan and Rate Study
June 1983
COSTA REAL
MUNICIPAL WATER DISTRICT
MAJOR WATER FACILITIES
FINANCING PLAN
AND RATE STUDY
BOARD OF DIRECTORS
Norman M. Almack, President
Donald A. MacLeod, Vice President
Fred W. Maerkle, Secretary
Margaret J. Bonas, Treasurer
Allan O. Kelly, Assistant Secretary
and Assistant Treasurer
William C. Meadows, General Manager
Thomas L. Brammell, Controller
Jack Y. Kubota,, Engineer
Paul Swirsky, Legal Counsel
June 1983
BARTLE WELLS ASSOCIATES
Municipal Financing Consultants
1636 Bush Street
San Francisco 94109
415/775-3113
Bartle Wells Associates
Municipal Financing Consultants
1636 Bush Street
San Francisco 94109
415 775-3113
June 27, 1983
Board of Directors
Costa Real Municipal Water District
5950 El Camino Real
Carlsbad CA 92008
Attention: William C. Meadows, General Manager
We are pleased to submit our final major water facilities financing plan
and rate study. This report is based in part on a tentative five-year
improvement program which will be upgraded by a new long-range
master plan. We will be happy to revise this report when the master
plan is completed. Our principal recommendations are summarized in
the front of this report.
We find that the district should segregate its operations into two account-
ing areas—wholesale water services and retail service. Our report
analyzes the cost of wholesale and distribution costs assuming the city
will handle all customer accounts.
The wholesale water rate should be charged both to the City of Carlsbad
and to the district's own retail water customers. Capital outlay charged
to all water customers should be limited to about 10.0 percent of the
actual cost of water.
Revenues for construction of new major facihties should come from "major
facilities charges" and "direct connection surcharges" paid by new devel-
opment. These revenues, interest earnings, reserves, and developer
contributions will support an ongoing improvement program without
impacting existing customers of either the district or the city.
We especially want to acknowledge the invaluable assistance we have
received from William Meadows, General Manager; Thomas L. Brammell,
Controller; and the helpful suggestions and advice of Roger Greer,
Director of Utilities for the City of Carlsbad.
Very truly yours,
BARTLE WELLS ASSOCIATES
Edwin A. Wells Audrey ^erlock
CONTENTS
SUMMARY RECOMMENDATIONS
INTRODUCTION 1
WATER SUPPLY AND RATES 2
Purchased Water 2
Agricultural Rebate (Interruptible Rate) 3
Water Rates 4
DISTRICT FUNCTIONS 6
Potable Water 6
Nonpotable Water 6
Water Treatment ^ 6
New Development Engineering Services 6
Improvement Districts 6
CAPITAL IMPROVEMENT PROGRAM 8
DISTRICT REVENUES AND EXPENSES 12
Wholesale Operating Expenses 14
1983/84 Budget Requirements 15
Revenues 16
FINANCING PLAN 17
Projected Capital Expenses 17
Connection Charge Revenues 17
Projected Wholesale Revenues and Expenses 20
Retail Water Costs 21
LIST OF TABLES
1. Water Purchase/Sales and Customer Growth 2
2. Imported Water Rates 3
3. Water Rates 4
4. Major Facilities 9
5. Major Facilities Financing Costs 10
6. Operating Expenditure Allocation 13
7. Wholesale Water Costs 19
8. Wholesale Revenues and Expenses 20
9. Retail Service Costs 22
COSTA REAL MUNICIPAL WATER DISTRICT
MAJOR WATER FACILITIES FINANCING PLAN
AND RATE STUDY
SUMMARY RECOMMENDATIONS
1. Wholesale Water Rate - To be based only on cost of purchased water, district
expenses of major facilities including operation, maintenance, planning, [depre-
ciation,] capital outlay (10%), less credit earned by district for interruptible
supply,
2. Retail Service Rate - To be based on wholesale rate plus additional costs of
billing, collection, and pubUc service.
3. Agricultural Rebate - Discontinue reduced agricultural rate and provide for
direct rebate to agricultural users when refund received from Metropolitan
Water District of Southern California.
4. New Development Approvals - Establish separate fund outside the general
fund to account for actual costs to be paid by developers for plan check and
inspection services.
5. Capital Improvements - Establish master plan program for major water facilities
financed by revenues from:
(a) Wholesale water rates (up to 10% of rate)
(b) Depreciation reserves
(c) Major facilities charges
(d) Direct connection surcharges
(e) Interest earnings on all district funds
(f) Existing water funds
(g) Developer contributions
6. Major Facilities Charge - Levy a one-time charge of approximately $880 per
equivalent dwelling unit (EDU) and $550 additional per EDU where no facilities
are contributed for each new development unit. Escalate charges at least 10%
annually.
7. Metered Rates - Set rates so that monthly base charges provide at least 50%
of actual retail service costs. Increase monthly base charge for multiple resi-
dential services to 75% of base charge for each additional EDU and 25% for
each room unit intended for transient occupancy. Set uniform quantity rate
for all water served sufficient to raise the balance of retail service costs.
8. District Reserves - Maintain cash reserves as part of the general fund suffi-
cient to:
(a) Provide approximately three months of wholesale water costs
(b) Maintain emergency capital improvement funds at no less than $500,000
INTRODUCTION
Costa Real Municipal Water District is an importer of treated water.
San Diego County Water Authority (SDCWA) provides the district's
sole source of water. Metropolitan Water District of Southern California
(MWDSC) is the source of water for SDCWA. MWDSC supplies a blend
of Colorado River water and state project water.
The district was originally formed in 1954 to provide for the procure-
ment, storage, and distribution of Colorado River water for approxi-
mately 20,000 acres in the Carlsbad area. The district supplies imported
water to the City of Carlsbad and adjacent unincorporated islands not
yet annexed to the city. The district's boundaries have not changed
materially since its formation. About 70 percent of the district is now
within the city. Future annexations will probably bring all district
territory within the city.
The City of Carlsbad purchased two water companies in 1958 and estab-
lished a water utility to provide service in the areas formerly served
by the Carlsbad Mutual Water Company and the Terramar Water Company.
This 7,000-acre service area is known as the "Original Carlsbad" area.
The district provides the city's water utility with all its water supply.
The city is the district's only wholesale customer and uses about 45
percent of the purchased water.
The district also provides retail water service within its boundaries
but outside the Original Carlsbad area served by the city. Retail water
service outside the district's boundaries but within the city (about 30
percent of the city's land area) is provided by San Marcos County
Water District, Olivenhain Municipal Water District, and Vista Irrigation
District.
The city and the district are planning a realignment of functions. The
city would provide customer service and billing. The district would
provide water supply and operate the distribution system. This report
analyzes costs under this new arrangement.
WATER SUPPLY AND RATES
PURCHASED WATER
The district purchases all its imported water for resale from SDCWA. Water pur-
chases and sales are shown in Table 1. The table shows purchases and sales
actually declining m spite of increased service connections. This is due in part
to land-use moving away from intensive agriculture and toward the smaller, sinale-
family dwelling unit. ^
TABLE 1
COSTA REAL MUNICIPAL WATER DISTRICT
WATER PURCHASE/SALES AND CUSTOMER GROWTH
Water purchased (acre-feet)
Agricultural use (total)
District:
Retail
Agricultural
Total
City (service area):
Retail
Agricultural
Total
Average city retail services (est.)
1979/80 1980/81 1981/82
Budget
1982/83
Est.
1983/84
12,223
3,821
13,308
4,615
12,715
4,145
12,500
4,000
12,500
3,800
3,588
3,402
6,990
3,419
4,295
7,714
3,496
3,875
7,371
3,350
3,750
7,100
3,600
3,500
7,100
4,818
420
5,238
5,274
320
5,594
5,074
270
5,344
5,150
250
5,400
5,200
200
5,400
.) 2,975
4,319
3,225
4,357
3,419
4,514
3,522*
4,603*
3,750
4,800
*Actual, 1/1/83,
Table 2 shows imported water rates for five years. MWDSC sets its rates each
year to produce necessary revenue from water sales. MWDSC has three classes
of water service: noninterruptible, interruptible, and emergency. Each class
has rates for untreated and treated water. The surcharge for treatment covers
operating costs associated with the treatment process and amortization of outstand-
ing and projected capital costs. SDCWA adds a surcharge to the MWDSC rate.
The district purchases only treated water. The 1982/83 cost of imported water
F^^f^o^o^^£ district is $155.50 per acre-foot. The cost is expected to rise
to $189.00 per acre-foot m 1983/84, an increase of 21.5 percent over 1982/83
The district currently adds a $16 override and a $2 water treatment charge to
the cost of water purchased from SDCWA in arriving at its wholesale rate for the
City of Carlsbad.
TABLE 2
COSTA REAL MUNICIPAL WATER DISTRICT
IMPORTED WATER RATES (DOLLARS PER ACRE-FOOT)
Cost of Treated Water to Costa Real MWD
Metropolitan Water District San Diego CWA Percent
Year Untreated Treatment Total MWD SDCWA Total Increase
1979/80
1980/81
1981/82
1982/83
1983/84 est.
$ 79
90
96
114
144
$25
25
25
26
28
$104
115 ^
121
140
172
$17.00
17.00
17.00
15.50
17.00
$121.00
132.00
138.00
155.50
189.00
9.0%
9.0
4.5
12.7
21.5
1979/80
1980/81
1981/82
1982/83
1983/84 est.
Interruptible Supply
(Agricultural Rebate)
$34
39
35
35
44
Note: CRMWD supply is entirely at the combined MWDSC plus SDCWA rate for
treated water. MWDSC repays the interruptible water rebate to the district
for agricultural use and for storage in water authority reservoirs.
AGRICULTURAL REBATE (INTERRUPTIBLE RATE)
The agricultural rebate has been discontinued. MWDSC is, however, continuing
to include agricultural uses under its interruptible water program. Because agri-
cultural users incur high peak seasonal usage levels, MWDSC may consider reduc-
tions in the agricultural rebate program.
MWDSC encourages water storage at the local level so that member agencies can
sustain interruptions of deliveries from MWDSC when deficiencies in their imported
suppUes occur. Member agencies are charged a lower rate for water purchased
under the interruptible water program. MWDSC rebates to the district the differ-
ence between the noninterruptible rate and the interruptible rate for water stored
and used for agricultural purposes. The district in turn charges its agricultural
customers the interruptible rate. The city, on the other hand, charges its agri-
cultural customers the noninterruptible rate and rebates the difference to its aari-
cultural customers when received by the district. Table 2 includes the interruptible
rate differential since 1979/80. MWDSC estimates the 1983/84 rebate at $44.
WATER RATES
Water rates were last adjusted on July 1, 1982, when the district increased its
quantity rate from $0.46 to $0,475 per hcf. The readiness-to-serve charge has
^'QQn if^f u'^''^ ^''^y ^' ^i^y l^st adjusted its rates in January 1980. Table 3 shows current retail rates charged by both the district and the
TABLE 3
COSTA REAL MUNICIPAL WATER DISTRICT
WATER RATES
Readiness-to-Serve
Quantity Rate
Per 100 cf
Meter
Size
District^
(7/1/79)
City
(1/15/80)
District
(7/1/82)
City
(1/15/80)
Agr.
Rate
District^
(7/1/82)
5/8"
3/4"
1"
IV
2"
3"
4"
6"
8"
$ 4.40
4.40
5.50
7.70
12.65
19.25
37.95
55.00
82.50
$ 5.20
5.30
5.45
5.90
6.40
12.30
15.40
15.40
23.70
0.475 0.47 0.395
1 - District adds $2.53 for each additional multiple residential unit and $1.10 for
each hotel room.
2 - City charges agricultural users at regular rate and credits rebate when received
(8<l^ per hundred cubic feet).
The district has a $300 connection charge for its 5/8" and 3/4" meters, increasing
with meter size. The water service connection charge covers the cost of supplying
the meter and meter installation. This connection charge was set in 1979 and
had not previously been adjusted since 1974. The district does not impose a charge
tor connection to its system to finance major facilities.
The inset below shows comparable rates charged by agencies providing retail water
service withm Carlsbad's city boundaries and nearby communities. Of these agencies
Costa Real MWD is the only water wholesaler. This comparison is based on 1 500
cubic teet per month—the average usage level for a typical single-family district-
served resident. City-served residents average slightly higher usage—1,700 cubic
feet per month. Generally, a detached single-family home uses more water than
condominium and other cluster-type development.
Typical Monthly Water Costs
Inside City
Costa Real MWD $11.53
City of Carlsbad 12.25
San Marcos CWD 11-15
Vista ID 14.15
Olivenhain MWD 17.60
Nearby Areas
City of Oceanside $14.65
San Dieguito ID " 15-47
City of Escondido 11-70
Note: Does not include property taxes
DISTRICT FUNCTIONS
POTABLE WATER
The district relies on imported water for all its potable water needs. The acqui-
sition of imported water is the district's most basic function. The defeat of the
Peripheral Canal ballot measure in June 1982, combined with rapidly escalating
energy costs and the impending loss of Colorado River water will produce imported
water reductions and much more expensive water in future years The district's
only source of imported water is through San Diego County Water Authority As
one of the water authority's 24 member agencies, the district participates in the
establishment of water policy for the county and, through the authority's reore-
sentation at MWDSC, for Southern California. ^ y
NONPOTABLE WATER
Both the district and the city are planning for nonpotable water supplies. Because
ot the likehhood of future water shortages, greater emphasis has been placed on
tne use of reclaimed wastewater and inferior groundwater supplies for nondomestic
purposes. Marketplaces for reclaimed wastewater have been identified. In addition
OA^L^^^^^^^^ agencies as sources of reclaimed wastewater, the city has access
to 3,400 acre-feet of nonpotable water at Lake Calavera
WATER TREATMENT
I^^J^i ^^}^^ received from San Diego County Water Authority has chlorine
added at the Santa Fe and Squires Dam chlorination stations, in accordance with
water quality regulations. Disinfection of imported water and monitoring of water
quality is performed continually. The district has consistently met water gualitv
standards for water delivered in the district and city retail service areas.
NEW DEVELOPMENT ENGINEERING SERVICES
The district engineer performs plan check, inspection, and contract administration
services for the design and construction of facilities to serve new developments.
The costs for such engineering services are paid by the developers.
For budgeting purposes, general engineering and special projects engineering are
distinct from new development engineering services, since all costs associated with
design and construction of facilities to serve new development are fully reimbursed
to the district The costs of these engineering services have no affect on the
district's overall expenses.
IMPROVEMENT DISTRICTS
Improvement districts were formed and, following voter approval, bonds were issued
JDegmning in 1957 to pay for system improvements. Costa Real MWD accounts sep-
arately for each improvement district's debt and construction reserves. Bond
service is paid for from property taxes. Improvement Districts No. 1 and No. 4
are districtwide. ID's No. 2 and No. 3 cover areas outside the city service area.
The maximum combined tax rate in 1981/82 in any improvement district was 0.05864.
Of this maximum rate, 0.00798 applies to the districtwide improvement districts.
ID No. 3 has a sinking fund provision to redeem $563,000 coming due in 1991.
The sinking fund balance is $294,000. In addition, the improvement districts have
combined reserves of about $1.4 million, of which $531,000 is held in construction
fund reserves in ID No. 2 and ID No. 3.
The inset below shows the bonds issued and balances outstanding. Improvement
Districts No. 1 and No. 3 have, respectively, $100,000 and $200,000 of authorized
but unissued bonds.
Outstanding Final
District Issued Date 6/30/82 Maturity
ID No. 1 $1,150,000 - 1957 $300,000 1987
ID No. 2 -Series 1 350,000 1958 120,000 1988
ID No. 2 -Series 2 425,000 1961 200,000 1991
ID No. 2 -Series 3 125,000 1968 20,000 1984
ID No. 3 1,000,000 1961 603,000 1991
ID No. 4 690,000 1961 330,000 1992 ID No. 4
$3,740,000 $1,573,000
CAPITAL IMPROVEMENT PROGRAM
As a suppher of imported water, Costa Real MWD has major facilities consisting
ot transmission mams, storage reservoirs or tanks, pressure-reducing stations
chlorination stations, and valve stations. The district buys only treated water
trom the fourth barrel of the San Diego Aqueduct. Future treatment facilities
tor the imported water supply will be limited to additional chlorination facilities,
treatment of local water supply or storage in open reservoirs may be required.
The district is also planning another reservoir near the existing Squires Dam
Reservoir. Additional local storage may entitle the district to the reduced inter-
ruptible water program rate offered by MWDSC.
The district's engineers, Woodside/Kubota & Associates Inc., are now preparing a
long-range water supply master plan. The basic grid for major imported supply
has long been established. Planning for facilities to meet new growth within the
district, and for building facilities that will provide adequate storage for peak use
withm each area, are major functions of the district.
Table 4 shows a preliminary estimate of the projects the district will consider within
100-,^^?^^ ^.f^r^- ^^^^ approximates the facilities discussed in the
1981 Glenn M. Reiter & Associates report prepared for the City of Carlsbad based
in part on information furnished by the district.
In Table 4 capital costs were estimated as of January 1, 1983. The estimated
year of construction was based on anticipated continuing growth in the district
Construction costs were then escalated 10 percent per year. Several of these
projects have already been initiated with preliminary planning, engineering, and
site selection.
The average annual cost of each project shown in Table 4 has been estimated using
a tactor representing the approximate bond service cost with municipal securities
at 10 percent amortized over 20 years. The factor includes allowances for financial
costs including bond reserve, interest during construction, bond discount, issuance
costs, and investment of proceeds during construction. Funding will be obtained
trom revenue bonds, of which several types are available.
Table 5 shows the approximate annual costs of the construction program outlined
generally in Table 4. The budget each year shows the approximate annual cost
ot the construction program shown in Table 4. For each project not already under
way, the preliminary engineering and other costs have been shown as capital in
the year expended. Other figures for each year show the approximate bond
service cost of amortizing each of the proposed projects.
In Table 5, for each project, the third year after completion of construction repre-
sents the average annual bonded cost shown in Table 4. As described in the
appendix, bond service the first year would be reduced by about 10 percent below
the average and the second year by 5 percent below the average; the fourth year
would be increased by about 2.5 percent, and the fifth and succeeding years would
be increased to about 5 percent above the average. The bond reserve created by
8
TABLE 4
COSTA REAL MUNICIPAL WATER DISTRICT
MAJOR FACILITIES
Cost
Escalated
Cost
Average
Annual
Bonded
Project No. & Description Year 1/1/83 (10%/year) Cost^
1. Hi Reservoir, La Costa
6.0 MG storage
1982/83
1983/84
$ 300,000*2
2,500,000
$
2,750,000 348,300
2. Squires Dam I
Cogeneration station
1982/83
1983/84
60,0002
340,000 374,000 47,400
3. TAP Extension 1982/83
1983/84
20,0002
200,000 220,000 27,900
4. Squires Dam 11^
Terminal reservoir
Emergency storage
1982/83
1983/84
1984/85
1985/86
1986/87
10,0002
200,000
1,000,000
1,000,000
1,000,000
220,0002
1,210,000
1,330,000
1,460,000 528,300
5. Santa Fe II
9.0 MG storage and
Transmission Main
1983/84
1984/85
1985/86
1986/87
30,000
300,000
2,000,000
2,000,000
33,0002
363,0002
2,662,000
2,924,000 727,000
• 6. Tap Reservoir
6.0 MG storage
1982/83
1983/84
1984/85
5,0002
250,000
2,500,000
275,0002
3,025,000 383,100
7. La Costa Reservoir II
1.5 MG storage
1987/88 600,000 966,000 122,300
w 8. Evans Point Reservoir
2.5 MG storage
1987/88 1,500,000 2,415,000 305,900
9. 'D' Reservoir
8.0 MG storage
1986/87
1987/88
5,000^
250,000^
7,300
403,000 —
$16,070,000
1-20 years at 10%, beginning in year following completion.
2 - Funded from current and prior revenues.
3 - Minimum project may be substantially greater in master plan
4 - Preliminary costs only.
TABLE 5
COSTA REAL MUNICIPAL WATER DISTRICT
MAJOR FACILITIES FINANCING COSTS
Project 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91 1991/92 1992/93
1 $ $313,500 $330,900 $348,300 $ 357,000 $ 365,700 $ 365,700 $ 365,700 $ 365,700 $ 365,700
2 — 42,700 45,000 47,400 48,600 49,800 49,800 49,800 49,800 49,800
3 25,100 26,500 27,900 28,600 29,300 27,900 27,900 27,900 27,900
4 220,000* — — 475,500 501,900 528,300 541,500 554,700 554,700
5 33,000* 363,000* — — 655,100 691,500 727,900 746,100 764,300 764,300
6 275,000* — 344,800 363,900 383,100 392,700 402,300 402,300 402,300 402,300
7 — — — — 110,100 116,200 122,300 125,400 128,400
8 — — --— — 275,300 290,600 305,900 313,500 321,200
9 — --— 7,000 403,000 — --—
Totals $528,000 $744,000 $747,000 $795,000 $2,351,000 $2,416,300 $2,508,600 $2,561,900 $2,603,500 $2,614,300
o
*Funded from current revenues.
Note - Total funding requirements are:
5 yrs 1983/84 to 1987/88 $ 5,165,000
5 yrs 1988/89 to 1992/93 12,705,000
Total $17,860,000
the proceeds of the bonds is self-supporting during the amortization period, and
would be used to retire the last year of bonds. The total financial pattern shown
would provide amortization of each project within the period from the year 2 to
year 20 of a 21-year maturity schedule. There would be no cost during the first
year.
Analyses shown in preliminary form in Tables 4 and 5 are used in this report to
demonstrate the approximate annual cost of a combination of separate projects.
Upon completion of the master plan, projects can be given a priority ranking and
scheduled in accordance with the district's changing growth pattern. This would
permit several financing plan combinations, depending on whether growth appeared
rapid or slow. Note that the major faciUties costs include no allowance for miscel-
laneous projects which will and should be expected on a recurring basis each year.
11
DISTRICT REVENUES AND EXPENSES
Costa Real MWD annually prepares a budget covering all of its operations. It com-
pletes Its financial affairs for each fiscal year with the preparation of a financial
statement, reviewed by an independent auditor. District operations include a
wide range of service functions. However, because the district sells water on a
wholesale or bulk basis to the City of Carlsbad, one of its primary concerns is
the basis on which such water should be priced.
Table 6 shows a summary and comparison of the actual financial report for 1981/82
and a budget for the same year. It also shows the budget for 1982/83. Note that
the financial report does not use the same categories used in the budget process
As frequently occurs in public agencies with variable expenses, mainly dependent
on actual usage of water supply, the financial report may vary from the budget
primarily because of the difference in budgeted versus actual usage.
In 1981/82, actual expenses were about 10 percent lower than budgeted primarily
because of the lack of utilization of the water supply.
The district's general fund is used to account for most of the major district func-
tions, which include wholesale water supply, retail service, and new development
engineering services. In the past, because of the relatively small size of the
districts retail and new development operations, it has not been necessary to
segregate expenses among various district functions.
Table 6 shows an allocation of district expenses between the two major services—
area supply and retail supply—provided by the district. New development engi-
neering costs have been excluded from the budgeted figures shown.
The principal assumption used to allocate district costs as shown in Table 6 is
that the district's primary function is to store and transport the imported water
supply Thus, a minimum level of operating costs is required for such a function
even if the district did not engage in any other service. The fourth and fifth
columns of Table 6 show an allocation of the 1982/83 budget as follows:
Column 4 - Shows the district's estimated cost of operation, assuming the district
would be a fully functioning special district providing a reasonable
level of ongoing operation and service as a wholesale water agency
Water would be delivered to other agencies for distribution and to
agricultural users. It also assumes that the district is a fully oper-
ating special district and would make additional expenditures for
planning and other activities related to its primary function as a
wholesaler of imported water.
Column 5 - Shows the incremental expenses applicable to retail service. These
are the costs which are assumed to be generated—but which should
not be included in the wholesale water rate—if the district were to
add a retail service.
12
TABLE 6
COSTA REAL MUNICIPAL WATER DISTRICT
OPERATING EXPENDITURE ALLOCATION
Budget Categories
Actual
1981/82
Buciget
1981/82
Total
Budget
1982/83
Area Supply
—— Wholesale
Area Retail Budget
Supply Service 1983/84
Acre-feet
M&I rate
Interagency activities
Potable Water
Labor
Material & supplies
Engineering
Nonpotable Water
Personnel
Publications
Materials & supplies
Water Conservation
Labor
Chlorine
Maintenance & equipment
Lab service
Cross-connection control
Power usage
Water Quality Control
Labor
Pipeline repair
Vehicle maintenance
Engineering
Utilities, etc*
Mapping & records - labor
Mapping & records - M&S
Miscellaneous maintenance
Minor equipment
Meter service & repairs
O&M
Labor
Postage & supplies
Customer Service
Board of Directors
Audit
Govt, relations
Miscellaneous
Special Services
Labor
Insurance
Office supplies/equipment
Computer
Public information
Custodial
Utility (telephone)
Miscellaneous
General Administration
Routine services
Litigation/special projects
Legal Counsel
General
Special projects
Engineering
Total
•Allocation of O&M utilities.
12.715.4 11.800
$1,564,232 $1,792,000 $1,650,000 $1,650,000
- 10,000 11.000 11.000
$1,564,232 $1,802,000 $1,661,000 $1,661,000
$
$ 20,000
$ 20,000
$ 10.000 $
40,000
23,429 $ 50,000 $
3.700 $ 10,235 $
4,160 10,000
364 15,000
3,194 2,750
1,537 3,500
12,955 $ 41,485 $
113,930 $ 109,541 $
31,035 40,000
16,778 9,600
59,361 11,679
27,206 2,500
— 17,639
--3,000
--2,500
5,000 $
25,000
20,000 _
50,000 $
10,000 $
20,000
5,000 _
35,000 $
10,351 $
8.000
1,000
3,520
1,657
5,000
25,000
20,000
50,000
5,000 $
5,000
10,000 $
5,000
15,000
5.000
12.544
$2,370,900
16.700
$2.387", 600
$
$ 11.000
20,000
5,280
$ 36,280
3,507
37,257
$ 289~D74
24,528 %
114,037 $
29,960
22,152
11,500
21,448
17,000
3,000
2,090
6,550
10.351 $ - $
8,000 --
1.000 —
3.520 —
— 1,657
3.500*
26,371 $ • 1,657 $
34,037 $ 80.000 $
19,960 10,000
11,152 11.000
5.500 6,000
3,000* 3,000*
4,000 13.000
1,000 2.000
1.090 1,000
2,500 4,050
11,073
6.000
2,500
5,400
1,643
26.616
370,384
27,500
54.200
11,000
23,630
7,125
2,875
51.425
2,000
196,459 $
77,108 $
227,737
67.916
73,840 $ 92.068 $ 60.016
11,247 $ " $ 15,000 $
$ 5,000 $
42,000
5,000 $
20,000
5,000
44,446 $ 47,000 $ 30,000 $
112,703 $
15,581
19,116
7,914
5,308
36,118
105,177 $
15,000
18,652
13,000
5,040
158,183 $
21.275
13.200
7,500
10,000
196,740 $ 156,869 $ 210,158 $
$
15,000
5.000
20,000 $
16.800 $
50,000
66,800 $
$ 15,000 $
18,000
20,000 $
15,000
82,239 $ 130,050 $ 550,139
$ 67.916
12.100
$ TO516
15.000
5.000 $
20,000
2.500 _
27,500 $
50,000 $
11,275
8,200
2,500
10,000
5,000*
86'575 $"
$ 19.650
2.500 _
27500 $
108,183 $
10,000
5,000
5.000
7.000
20,000
5,600
32,600
180,920
19,300
12,600
11,820
10,000
16,800 $
45,000 _
61,800 $
15,000 _
$ 78,672 $ $ 35',000 $ 30,000 $
6,948*
- 2.500
135,131 $ 237,14(5
— $ 16,800
5,000 30.000
5,000 $
5,000 $ 17,000
21,000
T8,0D0
$2,294,635 $2,458,881 $2,435,239 $2,050,885 $ 384,354 $3,374,825
13
The calculations below show the approximate allocations of wholesale and retail
expenses to the bulk and total water rates. Total cost per acre-foot on a guantitv
basis IS approximately $0,422 per hcf. The approximate revenue requirement for
the retail service after deduction of readiness-to-serve charges is approximately
$0,055 per hcf for a total of $0,477 per hcf. These costs do include some planning
expenses but do not include any capital outlay
Wholesale: Area supply and water planning
Water cost (12,500 acre-feet; Table 7)
Minimum expense
Discretionary
Total Expenses
Cost per acre-foot
Less SDCWA (after credits)
District expenses per acre-foot
(not including capital outlay)
Retail Incremental additional expenses (Table 6)
Readiness-to-serve charges:
Small (3,500)
Multiple
Large (20)
Total Readiness-To-Serve
Balance
Balance per acre-foot (7,100)
Total Water Rate
$1,897,300
248,385
152,500
$2,298,185
(83%)
(11%)
(6%)
$183.90
151.80
($0.422/hcf)
($0.349/hcf)
$ 32.10 ($0.073/hcf)
$ 384,350
$ 184,800
27,300
2,000
$ 214,100
$ 170,250
$24.00 ($0.055/hcf)
$0.477/hcf
WHOLESALE OPERATING EXPENSES
^^^.?^?S^T1^O°P^^^^^^^ expenses consist largely of charges to the district by SDCWA
and MWDSC These amount to more than 80 percent of the total operating budget
for wholesale service. As discussed earlier in Table 2, these expenses will increase
by 21 percent beginning in July 1983. Other district expenses are related to
operation and planning for distribution of the imported water supply. The 1982/83
budget does include some unusual costs because of discretionary services and activ-
ities required by the City of Carlsbad. The nonrecurring expenses account for
about 15 percent of the district's total wholesale budget, other than the cost of
water.
The district has unusual costs related to its middleman posture in the deliverv of
water to the ultimate user. These costs are as follows:
14
o Carrying Cost of Delivered Water - The district pays SDCWA within 10 days
for water deUvered each month. The City of Carlsbad (the only bulk water
customer) and the district's retail customers take much longer to pay when
billed. Analysis prepared by the district indicates that such carrying costs
range upward from 10 days after its payments to SDCWA.
0 Carrying Cost of Agricultural Rebate - District policy has been to anticipate
the agricultural rebate for its customers and to provide water service on a
reduced rate basis. Actually, the rebate to the district does not occur until
approximately four months after the water has been delivered and paid for
by the district. The City of Carlsbad charges an agricultural customer the
full rate and allows a credit for the rebate when received from the district.
The district should adopt a new poUcy in this regard, charging agricultural
customers the regular quantity rate and making a direct rebate or credit to
those customers as funds are received.
o Depreciation - The district's enterprise accounting system uses depreciation
as an expense and sets up depreciation schedules. Depreciation should be
continued as a budgeted expense in both the wholesale and retail rates. The
accruals to the depreciation reserve should be used on a cash basis whenever
possible for replacement or reinforcement of the basic facilities.
1983/84 BUDGET REQUIREMENTS
Pursuant to an agreement with the city, the district will provide all water system
operation and maintenance, and the city will provide all customer services. Both
agencies have prepared dual budgets which are compared below. Table 6 shows
the district's 1983/84 wholesale budget as anticipated under the agreement.
1983/84 Budget Comparisons
f Unadjusted
1983/84
Adjusted
1983/84
#
District*
General services
Operations
Total District
$ 394,554
333,880
$ 728,434
$ 410,474
576,755
$ 987,229
41
City*
Administration
Operations
Total City
$ 407,118
404,038
$ 811,156
$ 286,593
182,370
$ 468,963
Total City and District
Purchased water
$1,539,590
2,387,600
$1,456,192
2,387,600
Total Budget $3,927,190 $3,843,792
*Not including bond service or depreciation
15
REVENUES
The district now has a very limited number of revenue sources—namely: water
sales on a bulk or retail basis, ad valorem property taxes, and interest earnings.
Historically, district budgets have permitted substantial capital improvements from
interest earnings on various district funds and from the availability of funds not
actually needed or used for budgeted operating expenses.
A major source of revenue for capital improvements is subdivider contributions,
and appears on the district's books only as contributed capital. However, a review
of the facilities constructed by the district demonstrates that, because of this
basic policy regarding new development, major facilities required to provide services
for new customers have been provided primarily by developers on a project-by-
project basis.
16
FINANCING PLAN
The financing plan presented in the following section and shown in Tables 7, 8,
and 9 is an example of a long-range budget plan for the district's wholesale oper-
ations. The plan is based on the allocation of budgeted expenses between wholesale
and retail services discussed previously and shown in Table 6.
Table 7 shows the output of a computerized analysis deriving the estimated cost
of water and the proposed wholesale water rate for a five-year period. Each of
the many categories of district expenses can be expected to change in the near
future. The notes to Table 7 show the assumptions for the case example shown
in the table. The program can perform the same derivations for any combination
of other values.
PROJECTED CAPITAL EXPENSES
In addition to the substantial increases in the wholesale water cost, mainly from
increased charges by MWDSC and SDCWA as shown in Table 7, the district must
anticipate additional capital outlay. A reasonable allowance for such cost initially
is 10 percent of the average cost of water. This allowance for capital outlay allo-
cated to the wholesale water cost should be established by the board of directors
as a matter of general policy. The amount of revenues collected from this charge
is less than book depreciation, which is not included as an expense.
CONNECTION CHARGE REVENUES
The district does not now levy a connection charge for service to new development
g except as a charge to pay the cost of the meter and services line. The connection
or development charge has become almost universal in California and other western
states. The amount of the charge, while somewhat abitrary, is usually based
on a reasonable capital outlay component for the facilities required to serve new
development.
« Capital requirements from Tables 4 and 5 can be expressed on a single-family
unit basis. According to the engineering consultants, the planned capital improve-
ments needed in the next five years will cost about $16,070,000 escalated to the
time of construction. This will allow the district (and city) systems to expand
by about 10,000 services, mostly single-family units. Thus, if funds could be
collected in advance of construction, the cost per unit would average about $1,600
# per EDU, not including financing costs, which will more than double the cost per
unit.
Because such funds cannot be collected in advance over the next five years, bond
financing costs must be added. This permits construction in advance of need
and collection of revenues. The amount of revenue collected from new growth
t will depend on the amount of the charge, escalation, and growth rate. Taking
an initial charge of half the average cost with an escalation equal to at least the
cost of long-term financing will indicate a charge of $880 per EDU in 1983/84.
As shown below, these revenues will be far from the total revenues required.
# 17
Revenue Requirements
Required
From
Total Revenue User
1-5 yr. 6-10 yr. 10-yr. Shortfall Charges^
Required revenue^
Revenue produced:
At $880/EDU and
no escalation
- 200/year
- 500/year
At $880/EDU and
10% escalation
- 200/year
- 500/year
$5,165,000 $12,705,000 $17,870,000 $
880,000 880,000 1,760,000 16,110,000 $12,260,000
2,200,000 2,200,000 4,400,000 13,470,000 9,620,000
1,074,000 1,732,000 -^2,806,000 15,064,000 11,214,000
2,685,000 4,330,000 7,015,000 10,855,000 7,005,000
1 - From Table 5.
2 - Plus all property taxes (est. $3,850,000 in 10 years).
District and city growth rates have totaled about 200-400 new services per year
A growth rate of 2,000 EDU per year (at $1,600) would be required to fund the
program on a cash basis. At 500 EDU per year for 10 years with the escalating
rate suggested, major facilities charges will provide only about 40 percent of the
required funds.
This report will recommend a new charge, to be established in 1983/84, of $880 per
equivalent dwelling unit. This charge should be applied to subdivisions and other
development, as building permits are issued, before July 1, 1983. On each July 1
of succeeding years, the connection charge, to be referred to as a "major facilities
charge, should escalate on a regular basis. The escalation should be based on
the Engineering News-Record Construction Cost Index for Los Angeles, but should
not m any event be lower than 10 percent per year for some years to come, since
the amount of the original charge suggested here is substantially below the real
value of the availability of water. The board may then act to defer or raise the
increase each year.
Because most new development will contribute to district facihties through the con-
struction of in-tract distribution systems, financed either directly by the developer
or through assessment proceedings, a special surcharge should be added if the
development does not make such a contribution. This surcharge is called the
direct connection surcharge," and should be about $500 in 1982/83, escalating
on the same basis as the major facilities charge.
New development occurring as a redevelopment of lands already served would be
required to pay the major facilities charge with credit for any equivalent dwelling
units existing prior to January 1, 1983. The direct connection surcharge is not
applicable to redevelopment as compared to new development in outlying areas.
18
COS-ri=l FtElE^L- MUM I C I F=><2iL_ W^TER r> I STf^C I CHT
WHOLESALE WATER COSTS <e 12,500 ACRE-FEET)
. - -- - - • 1902/83 1983/84 1984/85 1985/86 1986/87
WATER USE 12,500 12,500 12,500 12,500 12,500
COST PER ACRE-FOOT 155.50 189.00 208-00 229.00 252.00
r:======5== ========= ========= ========= =========
TOTAL COST 1,943,800 2,362,500 2,600,000 2,862,500 3,150,000
LESS ADJUSTMENT* 46,500 0 0 0 0
========= ========= ========= ========= ====— 1
NET WATER COSTS 1,897,300 2,362,500 2,600,000 2,862,500 3,150,000
OPERATING EXPENSES:
- INTERAGENCY ACCT 11,000 16,700 18,700 20,700 22,700
•4_N0NP0TABLE -50,000 0 0 0 0
- WATER CONSERVATION 10,000 36,300 36,300 36,300 36,300
WATER QUALITY CNTL 26,371 26,600 28,700 31,000 33,500
--O&M -82,239 550,100 594,100 641,600 692,900
•''•h BOARD OF DIRECTORS 15,000 19,700 21,200 22,700 24,200
- SPECIAL SERVICES 27,500 32,600 32,600 32,600 32,600
VOENERAL MANAGEMENT 86,975 237,100 256,100 276,600 298,700 -
^ LEGAL 61,800 46,800 50,500 54,500 58,900
-T ENGINEERING 30,000 38,000 41,000 44,300 47,800
========= _ =========^ ========= =========, =========
TOTAL OPER EXPENSES 400,885 1,003,900 1,079,200 1,160,300 1,247,600
AVG COST PER AF 32.10 80-30 86.30 92.80 99-80
TOTAL EXPENSES 2,298,185 3,366,400 3,679,200 4,022,800 4,397,600
WATER CHARGE PER AF: -— — —
^ COST OF WATER/AF 183.90 269.30 294.30 321.80 351-80
^ CAPITAL OUTLAY 18.40 26.90 29.40 32.20 35.20
========= =========_ ========= ========= ========= „.
WHOLESALE RATE 202.30 296-20 323.70 354-00 387-00
ESCALATION FACTORS, THIS RUN:
Cost, per AF iVA - 10- O
Adjustment (7.) O-O
Interagency acct (*) 2,OOO
Nonpotable (7.) 0.0
Water conservation CA) 0-0
Water quality control (>C> 8.0
O&n (X) - - - 8-0
Board o-F directors (*) 1,500
Special services (%) 0-0
General management (%) 8.0
Legal (Z) 8.0
Engineering (%) 8.0
•Except direct rebate to agricultural users.
19
PROJECTED WHOLESALE REVENUES AND EXPENSES
Table 8 demonstrates a long-range program with a balanced budget that meets cost
ot water and other wholesale operating expenses together with the long-term capital
improvement program discussed previously (Table 5).
TABLE 8
COSTA REAL MUNICIPAL WATER DISTRICT
WHOLESALE REVENUES AND EXPENSES
1982/83 1983/84 1984/85 1985/86 1986/87
^2'^^^ 12,500 ' 12,500 12,500 12,500
EDU added 200 200 200 200 200
Wholesale rate $206.80 $296.20 $323.70 $354.00 $387.00
Major facilities charge $800 $880 $970 $1,060 $1 170
Direct connection charge $500 $550 $610 $670 $730
Revenues
Wholesale sales $2,585,000 $3,702,500 $4,046,300 $4,425,000 $4,837,500
Water facilities charge 160,000 176,000 194,000 212 000 234 000
Direct connnection
T f^^T/-,.ox ^^'^^^ l^'^O^ IS'300 20,100 21,900
Interest (10%) 100,000 99,400 101,800 102,300 116 300
Property tax 219,000 240,900 265,000 291,500 320*600
Contributions 50,000 50,000 50,000 SOioOO
Total Revenues $3,079,000 $4,285,300 $4,675,40U $5,100,900 $5,580^300
Expenses
Operating $ 400,885 $1,003,900 $1,079,200 $1,160,300 $1,247,600
Water purchase 1,897,300 2,362,500 2,600,000 2,862,500 3 150 000
Long-term debt 291,993 217,200 96,600 41,400 39 900
Miscellaneous projects 100,000 150,000 150,000 150,000 150'000
Capital program 395,000 528,000 744,000 747,000 795*000
Total Expenses $3,085,178 $4,261,600 $4,669,800 $4,961,200 $5,382^500
Net Revenue ($ 6,178) $ 23,700 $ 5,600 $ 139,700 $ 197,800
Balance, End of Year $ 993,822 $1,017,500 $1,023,100 $1,162,800 $1,360,600
*Does not include existing improvement district bond debt or taxes.
Revenues include funds from a variety of sources, including the major facilities
charge and direct connection surcharge just mentioned. Interest is shown from
earnings on the general fund balances. Property tax is shown as escalated at 10
percent per year.
i
20
The wholesale water rate derived in this example has been increased only to the
extent outlined previously in the notes to Table 7, based on the best information
available from the major supplier of imported water.
The total quantity of water —12,500 acre-feet per year — is unchanged in this
example (Tables 7 and 8). Also, the growth rate has been kept very low, at
200 new equivalent dwelling units per year. A more rapid growth rate would greatly
increase funds available for capital outlay. The net effect of this analysis of pro-
jections of wholesale revenues and expenses is that the district should be able to
have a balanced program by the inclusion of major facilities and direct connection
surcharges as a portion of its operating revenues.
RETAIL WATER COSTS
Table 9 shows the approximate future retail water costs based on the analysis
shown previously in Table 8 and an allowance for an increase of about 10 percent
per year in retail water delivery costs. This increase assumes added costs of 7
percent for inflation and 3 percent for customer growth. With a combined city/
district growth rate of 500 units per year, the number of retail services sharing
the fixed and variable costs of retail operations will increase by about 20 percent
in the next five years.
Retail customers served by the district and the city face substantial costs based
on anticipated increases in the cost of imported water. By adopting the financing
plan outlined, existing customers will not be called upon to underwrite the costs
of new facilities to a substantial degree. The major facilities charge revenue,
direct connection surcharge revenue, and interest earnings on district funds will
help to reduce the degree to which capital outlay funds are included in either
the wholesale or retail rates charged by the district and the city.
21
TABLE 9
COSTA REAL MUNICIPAL WATER DISTRICT
RETAIL SERVICE COSTS
1982/83 1983/84 1984/85 1985/86 1986/87
Customers 3,500 3,700 3,900 4,100 4,300
Wholesale rate (Table 7) $206.90 $237.50 $260.60 $286.10 $314.00
Retail Costs1 $384,354 $422,800 $465,200 $511,600 $562,800
RTS Charges^
Small ($4.40) $184,500
Multiple ($2.53) 27,300
Large 2,000
Total RTS Revenue^ $214,100 $211,400 $23^MJ $255,800 $281,400
Quantity charges $170,250 $211,400 $232,600 $255,800 $281,400
Per acre-foot^ $24.00 $29.80 $32.80 $36.00 $39.60
Estimated residential rates:
Wholesale 47.5(j: 5AM 59 M 65.7<r 72.14:
^^^^^i^ . 5.5<|: 6.84^ 7.5<t: 8.24^ 9.1<|: Total Quantity Rate
Monthly RTS charge $ 4.40 $ 4.40 $ 4.80 $ 5.30 $ 5.80
Quantity charge (15 hcf) 7.95 9.20 10.10 11.10 12.20
Total Monthly Charge $1235 $IO0 flOU flOO HHIKJ
1 - Escalated 7% for inflation, 3% for customer growth.
2 - Figures in parentheses are 1982/83 rates.
3 - Readiness-to-serve (RTS) adjusted to 50% of retail costs.
4 - Assumes 7,100 acre-feet.
22