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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).

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One Step Ahead: Using a Finance Plan for Regional Water System Operations

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  1. 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

  2. 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

  3. 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

  4. 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

  5. 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

  6. 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

  7. 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

  8. 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

  9. Finance Plan Schematic

  10. Finance Plan Model • Requires data input • Forecasts revenue requirements • Estimates debt service payments • Determines water rates • Allows CWRWS to evaluate alternative financing scenarios

  11. 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

  12. 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

  13. 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.

  14. Establishing a Rate • Based on revenue requirements and water sales • Same rate for each customer • No rate decreases • Current rate= $1.09

  15. 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

  16. Conclusion (continued) • Model is accurate • Managers and policy makers can make informed decisions and be proactive • Provides credibility

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