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Borrego Water District Revenue Workshop

Borrego Water District Revenue Workshop. Potential Revenue Sources. Background Service Area Relatively Small Largely Undeveloped Absentee Owners Low Growth Rate Community Sensitivity to Rate Increases Most Costs Fixed and Not Directly Related to Amount of Water Sold

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Borrego Water District Revenue Workshop

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  1. Borrego Water District Revenue Workshop

  2. Potential Revenue Sources • Background • Service Area Relatively Small • Largely Undeveloped • Absentee Owners • Low Growth Rate • Community Sensitivity to Rate Increases • Most Costs Fixed and Not Directly Related to Amount of Water Sold • Benefits Flow to Current Users as Well as Future Users Glenn M Reiter & Associates

  3. Current Situation • Basin in Overdraft • Recent Legislation SBX7-7 • Mandates a 20% reduction in urban per capita demand by 2020 • Loss of Major Customer • Funding Needs • Adequate funds for Operation and Maintenance • System replacement • Eventual augmentation of basin supply Glenn M Reiter & Associates

  4. Revenue sources Glenn M Reiter & Associates

  5. California Water Use By Percent Bul. No. 3 1957 Cal Water Plan 2005 Cal Water Plan 2009 Bul. No. 3 Bul. 160-98 Bul.160-93 Glenn M Reiter & Associates

  6. California Water Use by Acre Feet Glenn M Reiter & Associates

  7. Equitable Apportionment of Cost and Benefit • There Are Two Major Beneficiaries • Current Water Users • Residential • M & I • Recreational • Agricultural • Future Water Users • Residential • M & I • Recreational • Agricultural Glenn M Reiter & Associates

  8. Identification of Amount of Benefit to All Users • Existing Users • Benefit of receiving a reliable water supply • Maintain property value • Maintain business and income • Vacant Property within Service Area • Maintain property value • Water available when needed Glenn M Reiter & Associates

  9. Identification of Costs • There are two broad categories of costs • Operating Costs: (Day to Day Operations) • Energy • Labor • Insurance • Supplies • Equipment • Outside Services • Non-Operating Costs: (Long Term Sustaining) • Capital Replacement (Pipe, Pumps, Wells, Tanks) • Capital Outlay (Vehicles, Tools, Computers) • Capital Improvement (System Enlargement, New Water Supplies) • Debt Glenn M Reiter & Associates

  10. Types of Cost • Two Broad Categories • Fixed (Expense not driven by water delivered) • Labor • Insurance • Communications • Maintenance • Equipment • Variable (Expense driven by water delivered) • Energy • Treatment Glenn M Reiter & Associates

  11. Who Benefits From A Reliable Water Supply? • Current Users • Future Users Glenn M Reiter & Associates

  12. How Can Non-Users Participate? • Parcel Charges • Special Taxes Glenn M Reiter & Associates

  13. Parcel Charge Features • Ability to distribute cost and benefits to all property within service area • Stable revenue sources not dependent upon water sales • Nexus required • Requires weighted vote of property owners • May include exemptions for non-benefiting property Glenn M Reiter & Associates

  14. Special Tax • Must be for specific purpose • 2/3 of registered voters must approve • District has approximately 1,440 registered voters • Does not require a Nexus since it is a tax Glenn M Reiter & Associates

  15. Cost Allocation to Non-Users • The District experiences costs that are related to future water users • Preservation of facilities • Maintenance of capacity for future users • Planning studies to address overdraft situation • Planning studies to examine potential new water supplies • Labor costs associated with the above Glenn M Reiter & Associates

  16. FY 10-11 Fixed versus Variable Variable Costs Fixed Costs

  17. The General Plan for Borrego Valley Glenn M Reiter & Associates

  18. Land Inventory Glenn M Reiter & Associates

  19. Current Revenue Needs • Annual Operating & Non-Operating Budget • Funded by rates and charges that provide a stable revenue stream • Address the issue of reduced per capita consumption • Identify that portion of the Budget that is of benefit to future users (Vacant Property) • Determine how much of the Operating Budget should be collected from the Service Charge versus the Commodity Charge Glenn M Reiter & Associates

  20. Future Cash Needs • Replacement of Capital Facilities • Expansion of delivery capability • Fund studies for the development of future water supplies • Examine what assets the District has that can be turned in cash or a revenue stream Glenn M Reiter & Associates

  21. Financial Policies • Establish minimum operating coverage of 1.2 times Operating Expenses • Develop emergency reserve sufficient to replace critical system facilities after a disaster • Set rates and charges in each service area that reflects the cost to service that area • Develop rates or charges for properties that benefit from the availability of a water supply • Fund $_??__ per Year for facility replacement in accordance with GASBS State 34 Glenn M Reiter & Associates

  22. Water Rates • In complying with SBX7-7, need to develop rates that will be equitable to all customers, taking into consideration lot size • Avoid rate shock by phasing increases over time • Adjust rates annually to avoid large sudden rate increases Glenn M Reiter & Associates

  23. Financial Impacts of Conservation • Fixed Costs are not reduced • Cost could increase implementing conservation Programs • Only reduction is in variable portion of Operating Costs Glenn M Reiter & Associates

  24. Cost Per AF Based on Sales of 3,000 af Glenn M Reiter & Associates

  25. Recommended Approach • Determine revenue requirements for: • Short Term 5 Years • Possibly Long Term 20 Years? • Study and select appropriate revenue sources • Develop Long Range cash flow • Distribute Costs to appropriate benefitting properties • Develop rates • Public education • Proceed with Prop 218 requirements Glenn M Reiter & Associates

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