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One Step Ahead: Using a Finance Plan for Regional Water System Operations. Deena Hood Central Wyoming Regional Water System Carol Malesky Integrated Utilities Group, Inc. September 18, 2002 RMSAWWA/RMWEA Joint Annual Conference. Central Wyoming Regional Water System (CWRWS).

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one step ahead using a finance plan for regional water system operations
One Step Ahead: Using a Finance Plan for Regional Water System Operations

Deena Hood

Central Wyoming Regional Water System

Carol Malesky

Integrated Utilities Group, Inc.

September 18, 2002

RMSAWWA/RMWEA

Joint Annual Conference

central wyoming regional water system cwrws
Central Wyoming Regional Water System (CWRWS)
  • Located in Casper, Wyoming
  • Serves eight wholesale customers
  • Governed by Joint Powers Board (JPB)
  • Annual rate setting is crucial
  • Computerized finance plan is a critical tool
challenges faced by the regional water system
Challenges Faced by the Regional Water System
  • Issuing revenue bonds
  • Using a Capital Construction Reserve Fund
  • Change from contract to in-house operations
  • Establishing a Rate Stabilization Fund
  • Responding to drought conditions
issuing revenue bonds
Issuing Revenue Bonds

Issue:

  • Refinanced $23 million loan
  • Saved ratepayers $12 million over 30 year period

Finance Plan:

  • Savings estimated
  • Coverage calculated
  • New rate determined
using a capital construction reserve fund
Using a Capital Construction Reserve Fund

Issue:

  • Reserve needed for major construction project

Finance Plan:

  • Raised sufficient revenues to set aside necessary funds over 2 years
changing from contract to in house operations
Changing from Contract toIn-House Operations

Issue:

  • A number of options for operations exist for Regional Water

Finance Plan:

  • Compared rate impact of city operations vs. regional operations
  • Impact did not differ significantly
establishing a rate stabilization fund
Establishing a RateStabilization Fund

Issue:

  • Revenue bonds provided for the establishment of this fund
  • Rate changes needed to be levelized

Finance Plan:

  • Established the fund
  • Provided mechanism for tracking transfers
responding to drought conditions
Responding to Drought Conditions

Issue:

  • Call placed on North Platte River
  • Water purchases necessary

Finance Plan:

  • Projected for future water purchases and zero growth in usage
  • Alternate scenarios answered “what if” questions
  • Projected rate increases under scenarios
finance plan model
Finance Plan Model
  • Requires data input
  • Forecasts revenue requirements
  • Estimates debt service payments
  • Determines water rates
  • Allows CWRWS to evaluate alternative financing scenarios
tool for planning
Tool for Planning
  • Budgeting process
    • One year of history, current budget year, 10 years of forecasting
    • Used every year to prepare and justify budget and rate
  • Shows expected changes
    • Capital improvements
    • Water sales
    • Rates
model inputs
Model Inputs
  • Project expenditures to date
  • Budgeted and actual O&M expenditures
  • Bond issue sizing
  • Beginning fund balances
  • Water rate revenues
  • Non-rate revenue
  • Water usage billed
  • Interest rates on fund balances
  • Transfers to other funds
assumptions used in the model
Assumptions Used in the Model
  • Expected water sales
    • Growth factor
    • Actual sales
  • Coverage ratio
    • Net annual revenues over annual debt service
    • Minimum of 1.10
  • Maintain 25% of annual revenue requirement in operating fund.
establishing a rate
Establishing a Rate
  • Based on revenue requirements and water sales
  • Same rate for each customer
  • No rate decreases
  • Current rate= $1.09
conclusion
Conclusion
  • Finance plan is part of long-term financial management strategy
  • Allows JPB to control rates
  • Shows how different financial planning scenarios impact rates and fund balances
  • Flexible model matures with the regional water system
conclusion continued
Conclusion (continued)
  • Model is accurate
  • Managers and policy makers can make informed decisions and be proactive
  • Provides credibility
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