HomeMy WebLinkAbout05-29-07 Board Packet1
Otay Water District
2008 Budget Workshop
May 29, 2007
Attachment H
2
Objectives of the Workshop
Present for approval a $66.2M Operating Budget
Present for approval a $34.5M CIP Budget
These budgets support:
z Strategic plan objectives
z The projected growth of the District
z A high level of service to our customers
z Maintaining reserves at target levels per the approved
reserve policy
z Maintaining the Debt Coverage Ratio
3
Objectives of the Workshop (Continued)
Budget Supported by:
z A 5.4% rate increase for potable and recycled customers
z A 1.7% rate increase for sewer customers
z Continued use of reserves in compliance with the Reserve Policy.
{Spending down some reserves to target levels
{Building up other reserves to target levels through fund transfers
totaling $16M
Budget approval is targeted for before the beginning of the new fiscal
year, while the rate increases can only be approved after a hearing.
4
z Rate Model Review (Joe Beachem)
{A Financing Plan / Rate Model
{Significant Sewer Changes (Pedro Porras)
z Implementation of Rate Changes (Rita Bell)
{Potable, Recycled, and Sewer Rates
z Capital Improvement Budget (Rod Posada)
{IT Projects (Geoff Stevens)
z Balanced Operating Budget (Rita Bell)
{Growth projections
{Management of Staffing Levels (Rom Sarno)
z Summary of Recommendations (Joe Beachem)
Workshop Agenda
5
RATE
MODEL
REVIEW
6
{Objectives
{Benefits
{Board Direction
{Changes in the Model
{Financing Plan
zReserves, Transfers, Debt, & Rates
{Comparisons
Rate Model Review
z The model is the
financing plan to
fund District
objectives
z The Budget process
has partnered with
the Rate Study to
present a
comprehensive and
mid-range Financial
Model for the
District.
z This model sets the
stage for the ongoing
fiscal health and
accountability for the
ratepayers.
7
Objective of the Rate Model
Underpinning assumptions in the Rate Model
z Meet reserve target levels in every reserve in every
year
z Increase the debt coverage ratio to above 150%
z Minimize rate increases
To continue with a financing plan that supports the
District’s budget and maintains financial strength
by using a mix of debt, rates, and reserves
8
Benefits of the Rate Model
z Promotes confidence in the District’s
financial direction
{Bond rating agencies
{Bond insurers
{Customers Opinion
{Opinion leaders
z A planning tool providing a financial
framework
9
Board Direction
z Pass-through CWA/MWD increases
z Steady small increases
z Meet the adopted target levels for each
reserve (defined in the Reserve Policy)
10
Changes to the Rate Model
{Water is On Target at 5.4% increases – Changes
present no significant net effect on the anticipated
rates
{Sewer rate increases are Down to 1.7% increases -
Sewer Costs have been reduced or reallocated
generating lower rate increases for the next 6 years.
{Future Uncertainties
{SD 17
{SD reclaimed water rate
{IRP Projects
{Growth Projections
{CWA & MWD meeting projections
11
Changes in the Sewer Model
z Labor Costs ($176,700) More accurate
information provided by the IMS system
Shifted Costs
z Power costs ($61,200)More accurate split between
sewer and recycled
Lowered Costs
z Metro Costs ($141,200)
12
Financing Plan
Tools for meeting the Objectives
z Manage the CIP and Operating budgets
z Set appropriate developer fees (last year we
reset the annexation fees, quarterly
adjustments
z Draw down reserves
z Transfer available reserves (reserve policy in
action)
z Issue Debt
z Adjust customer rates – last resort
13
Cash Reserves
Restricted and Designated Funds
Expansion Funds $23.8M to $10.8M
Betterment Funds(15 Funds) $3.6M to $2.0M
Bond Funds $1.4M to $0.1M
_____________________________________________________________________________________________________
Designated Funds
Replacement Funds $32.1M to $36.0M
Retirement Medical Fund $17.3M to $18.8M Trust
______________________________________________________________________________________________________________
General Funds
{Potable $20.1M to $18.0M
{Recycled $3.1M to $1.2M
{Sewer $1.5M to $2.1M
___________________________________________________________________________________
Total Reserves $102.9M to $89.0M
Reserve Targets $61.8M to $78.5M
Beginning 2008 - Ending 2013
14
Otay Water District
Overall Projected Reserve Balance to Target Comparison
$78.5 M
$61.8 M
$89.0 M
$102.9 M
$-
$20,000,000
$40,000,000
$60,000,000
$80,000,000
$100,000,000
$120,000,000
2007 2008 2009 2010 2011 2012 2013
Overall Reserve Target Overall Reserve Balance
15
Otay Water District
Debt Issuance
----
26.6 M
30.0 M
-
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
2008 2009 2010 2011 2012 2013
Expansion Potable Replacement Potable Betterment Recycled Betterment
16
$16 Million in Fund Transfers
z Adheres to the Reserve Policy Guidelines
z To maintain target reserve levels
Proposed 2007 Fund Transfers
Potable
General Fund to Replacement 2,245,000
General Fund to Designated Betterment 7,100,000
Designated Expansion to Designated Betterment 1,305,000
Recycled
General Fund to Replacement 1,380,000
General Fund to Designated Betterment 1,100,000
General Fund to Designated Expansion 2,575,000
Sewer
Designated Betterment to General Fund 255,000
General Fund to State Loan 25,000
17(5,000,000)
-
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
40,000,000
General Fund Expansion Replacement Betterement
Potable Transfers
Series3
Series2
Series1
$1.305M Expansion to Betterment
$2.245M General Fund to Replacement
$7.1M General Fund to Betterment
$13.5M Target
& Balance
$16.9M Balance
$13.5M Target
$17.3M Target
& Balance
$3.1M Target &
Balance
18-
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
16,000,000
18,000,000
Expansion General Fund Replacement Designated Betterment
Reclaimed Transfers
Series4
Series3
Series2$1,100,000 Transfer from General Fund to Designated Betterment
$2,575,000 from General Fund to Expansion
$1,380,000 Transfer from General Fund to Replacement
$13.5M Target
$830K Target
& Balance
$3.3M Target
& Balance $1.4M Target
& Balance
$16.9M Balance
19-
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
2,000,000
General Fund State Loan Betterment
Sewer Transfers
Series3
Series2$ 255K Designated Betterment to General Fund
$25K General Fund to State Loan
$0 Target
& Balance
$0 Target
& Balance
$650K Target
$1.95M Maximum
& Balance
20
Otay Water District
Rate Increases
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
2007 2008 2009 2010 2011 2012 2013
Potable and Recycled Sewer
21
$4
0
.
9
3
$4
1
.
7
5
$4
3
.
5
5
$4
5
.
8
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$4
6
.
7
6
$4
7
.
5
8
$4
8
.
2
5
$4
8
.
7
6
$5
1
.
5
3
$5
1
.
5
7
$5
1
.
7
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$5
4
.
1
4
$5
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.
1
8
$5
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.
2
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9
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$5
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.
1
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.
4
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$5
9
.
6
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$6
6
.
9
2
$6
9
.
0
9
$-
$10
$20
$30
$40
$50
$60
$70
O c e a n s i d e , C it y o f
C a rls b a d M u n i c i p a l W a t e r D is tric t
S a n t a F e Ir ri g a ti o n D i s t ric t
H e lix W a t e r D is tric t
(a )P o w a y , C it y o f
O liv e n h ai n M u n ic i p a l W a t e r D i s t ric t
(a )S a n D i e g u it o W a t e r D is t ric t
O t a y W a t e r D is t ri c t
F a ll b r o o k P u b lic U tilit y D is tric t
V a ll e cit o s W a t e r D is t ri c t
S a n D i e g o , C it y o f
Y u i m a M W D
(a )S w e e t w a t e r A u t h o rit y
E s c o n d i d o , C it y o f
(a )P a d r e D a m M W D - W e s t e r n
R i n c o n d e l D i a b l o M u n i c i p a l W a t e r D is tric t
(a )V is t a I rri g a ti o n D is t ri c t
V a ll e y C e n t e r M W D
P a d r e D a m M W D - E a s t e r n
R a m o n a M u n ic i p a l W a t e r D i s t ric t
D e l M a r M u n ic i p a l W a t e r D i s t ric t
(a )R a i n b o w M u n ici p a l W a t e r D is t ric t
22
$3
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.
9
9
$3
1
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6
5
$3
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.
1
6
$3
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8
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$3
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.
0
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$3
4
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8
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$3
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9
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$3
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7
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$3
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.
6
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$3
8
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$3
9
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9
$3
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3
3
$4
2
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3
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$4
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.
9
9
$4
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5
6
$4
4
.
4
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$4
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3
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$4
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.
4
0
$4
7
.
0
3
$4
8
.
4
4
$5
4
.
5
7
$5
6
.
3
3
$-
$10
$20
$30
$40
$50
$60
C a rls b a d M u n i ci p a l W a t e r D i s t ri c t
S a n t a Fe I r ri g a ti o n D i s t ric t
O c e a n si d e , C it y o f
S a n D i e g u it o W a t e r D i s t ri c t
R i n c o n d el D i a b l o M u n i c i p a l W a t e r D i s t ri c t
O t a y W a t e r D i s t ri c t
H e li x W a t e r Di s t ri c t
(a )P o w a y , C it y o f
O li v e n h a i n M u n i c i p a l W a t e r D i s t ri c t
(a )S w e e t w a t e r A u t h o rit y
S a n D i e g o , C it y o f
(a )P a d r e Da m M W D - W e s t e r n
E s c o n d i d o , C it y o f
(a )P a d r e D a m M W D - E a s t e r n
(a )Y u i ma M W D
V a ll e c it o s W a t e r D i s t ric t
(a )V is t a I r ri g a ti o n D i s t ric t
R a m o n a M u n i c i p a l W a t e r D it ri c t
F a ll b r o o k P u b li c U tilit y D is t ri c t
(a )V a ll e y C e n t e r M W D
R a i n b o w M u n ic i p a l W a t e r D i s t ric t
D e l M a r M u n i c i p a l W a t e r D i s t ri c t
23
15
.
2
6
16
.
8
4
25
.
1
8
26
.
9
2
26
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9
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27
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5
3
33
.
0
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33
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35
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9
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37
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38
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38
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38
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39
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40
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41
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41
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44
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$-
$20
$40
$60
$80
$100
$120
C a r l s b a d M u n i c i p a l W a t e r D i s t r i c t
L e u c a d i a W a s t e wa t e r D i s t r i c t
V a ll e c i t o s W a t e r D i s t r i c t
C o u n t y o f S a n D i e g o
E l C a j o n , C i t y o f
Oc e a n s i d e , C it y o f
C h u l a V i s t a , C it y o f
N a t i o n a l C i t y , C it y o f
E s c o n d i d o , C i t y o f
P a d r e Da m
R a m o n a M u n i c i p a l W a t e r D it r i c t (S t a . M a r i a )
P o wa y , C it y o f
Ot a y W a t e r D i s t r i c t
V i s t a , C i t y o f
E n c i n it a s , C i t y o f - E n c i n i t a s S a n it a r y D i v i s i o n
L a M e s a , C i t y o f
V a ll e y C e n t e r M W D : M o o s a - g r a v i t y
Oli v e n h a i n M u n i c i p a l W t r Di s t (F o r r e s t R a n c h )
S a n Di e g o , C i t y o f
S o l a n a B e a c h , C i t y o f
E n c i n it a s , C i t y o f - C a r d i f f S a n i t a r y D i v i s i o n
B u e n a S a n it a ti o n D i s t r i c t - C i t y A r e a
F a ll b r o o k P u b li c U t ili t y D i s t r i c t
R a i n b o w M u n i c i p a l W a t e r D i s t r i c t
D u d e k & A s s o c i a t e s - R n c h S t a F e C o m m D i s t
D e l M a r M u n i c i p a l W a t e r Di s t r i c t
V a ll e y C e n t e r M W D : M o o s a - p r e s s u r e
V a ll e y C e n t e r M W D - W o o d s V a ll e y
Sewer Rate Comparison in San Diego County
Proposed Rates effective Fiscal Year 2008 (with Special Assessment)
for residential customers with 10 HCF water usage
Water-consumption based sewer rate
Flat sewer rate
Otay Water District
24
Otay Water District
Debt Ratios
332%
302%294%295%
350%
409%
154%
130%132%127%
145%158%
125%125%
0%
50%
100%
150%
200%
250%
300%
350%
400%
450%
500%
2008 2009 2010 2011 2012 2013
Debt Ratio Operational Debt Ratio Minimum Debt Ratio
25
2008 Financing Plan
z $16 Million in Fund Transfers
z Rate increases
{Potable 5.4%
{Recycled 5.4%
{Sewer 1.7%
26
IMPLEMENTATION
OF RATE
CHANGES
27
Implementation of Rate Changes
zPotable & – 5.4%
zRecycled – 5.4%
zSewer – 1.7%
28
Potable Rate Changes
z Recommend a 5.4% rate increase which is primarily a
pass-through of supply cost increases and also to cover
increases in District programs
{Variable
z Water Rate Increase of 3.8%
z Energy Increase of 5.25%
{Fixed Cost
z System Fee Increase of 9.0%
z Pass-through 30 Cent Increase in CWA/MWD Fixed
Charge (8.5% Increase in Monthly Amount)
29
Potable Variable Rate Increase
* The lifeline rate is given on the first 5 units of consumption if the monthly consumption is less
than 10 units. Otherwise the 0-10 rate is used.
$2.01$1.9411 - 35
$1.85$1.780 - 10
$1.12$1.08Lifeline *
RateRateUsed
ProposedExistingUnits
30
Potable Energy Charge
z Energy charge is recommended to increase
5.25%
z This charge has not been changed since 2000
z This increase will ensure energy charge
collected matches potable pumping cost to
deliver the water
31
Fixed System Fee Increase
z The fee will increase 9.0% from $11.30 per
residential customer to $12.30
z The system fee was increased last year to
slowly bring the District closer to the norm
z The advantage of increasing the system
fee is that it gives the District more stability
in revenue stream and reduces financial
risks of demand fluctuations
32
CWA/MWD Fixed Charge
$300.30$276.75 10"
$115.50$106.45 6"
$63.15$58.20 4"
$36.95$34.05 3"
$20.05$18.45 2"
$11.60$10.651-1/2"
$6..15$5.65 1"
$3.85$3.55 3/4"
Fixed ChargeFixed ChargeSize
MWD & CWAMWD & CWAMeter
ProposedCurrent
33
Recycled Rate Increase
z Recommend a 5.4% rate increase which is primarily a
pass-through of supply cost increases and also to cover
increases in District programs
z 1% Variable Water Rate Increase
(to maintain variable rate to 85% of Potable)
z Energy charge increase of 5.25% to match Potable
z Fixed System Fee Increase of 26.5% (To bring the
Recycled System fee to the same level as Potable system fee
plus CWA/MWD Fixed Charge)
34
Recycled System Fee
529.90 418.90 10.00
277.60 219.45 6.00
138.90 109.80 4.00
121.30 95.90 3.00
75.40 59.60 2.00
60.30 47.65 1.50
42.90 33.90 1.00
$ 27.85 $ 22.00 0.75
RateRateSize
ProposedCurrentMeter
35
Sewer Rate Increase
z Recommended a 1.7% Increase in Monthly Sewer
Rate based on cost increases
z The Average Sewer bill will increase from $32.70 to
$33.25
z With the new winter-consumption based methodology,
this increase will be spread evenly to fixed and
variable charges
z Meets the legal requirement to have a nexus between
cost and rates
36
CAPITAL IMPROVEMENT PROGRAM BUDGET
Rod Posada, P.E.
Chief of Engineering
FY 2007 – 2008
37
Growth Projections
Otay has experienced
unprecedented growth
since 1998
The City of Chula Vista
remains one of the fastest
growing cities in the US;
however, the housing
market in the region is
slowing down to a normal
pace
Expected meter sales for
FY07 will be around 870
and projecting 1030 for
FY08
38
CIP Budget Development Process
CIP projects selected are based on CIP criteria,
WRMP, UWMP, and IRP
The CIP goes through an iterative process to meet the
criteria of financial, growth, and service levels
The CIP targets expenditures for the next six years
39
Project Development Process
Preliminary
Design
Operations Design
SAMP
Construction
Capital
Improvement
Program
Budget
Approval
Annual
6 Year
CIP PlanWRMP
Planning
Urban Water
Management
Plan
Integrated Water
Resources Plan
40
CIP Budget Assumptions
Growth has increased to 2.1%
Material and labor costs, as reported by SDCWA, will
increase by 5%for FY07 and by 5%for FY08
Facilities Expansion, Betterment, and Replacement
are included within the CIP
Six-year CIP expenditure plan to be as level as possible
41
42
Escalation Model for Labor and
Materials
The SDCWA commissioned an economic study;
statistical sampling prepared by an economist
estimates that costs will escalate by approximately
10%over a two-year period, for the type of
construction work similar to Otay’s (pipelines, pump
stations, flow control facilities, etc.).
According to ENR: Cement, aggregate, and concrete
prices have increased considerably. The price of steel
decreased last year and the first four months of this
year and started increasing in the middle of the year.
43
ENR News Articles - FY08
44
CIP Criteria
Existing Facility Conditions
Operating System Conditions
Water and Sewer System Deficiencies
Regulatory and Permitting Requirements
Developer Driven Schedules
Economic Outlook and Growth Projection
Board and Management Directives
45
Budget Estimates
$221.76-Year Rate Model
$36.2$45.6$32.7$37.4$32.7$37.1Total
FY 12FY 11FY 10FY 09FY 08FY 07Projects
FY 07 CIP 6-Year Budget Estimates ($ Millions)
$191.56-Year Rate Model
$25.7$29.8$28.3$34.8$38.4$34.5Total
FY 13FY 12FY 11FY 10FY 09FY 08Projects
FY 08 CIP 6-Year Budget Estimates ($ Millions)
46
CIP Budget Breakdown
Actual Actual Budgeted Budgeted
FY05 FY06 FY07 FY08
Capital Backbone …......……….$14.6 $30.9 $28.1 $24.9
Developer Reimbursement …. $ 7.9 $ 2.8 $ 3.4 $ 1.5
Replacement/Renewal....…….. $ 5.2 $ 1.1 $ 3.9 $ 6.6
Capital Purchases …….....….... $ 3.3 $ 1.5 $ 1.7 $ 1.5
Totals……..……$31.0 $36.3 $37.1 $34.5
($ Millions)
47
Capital Backbone Major Projects
POTABLE WATER ($ Millions)
PL – 36-Inch, SDCWA Otay FCF No. 14 to Regulatory Site $18.5
Res – 980-3 Reservoir 15 MG $14.2
Res – 640-1 Reservoir 20.0 MG $29.5
Res – 850-4 Reservoir 2.2 MG $ 3.3
SD17 Pump Station and Flow Control Facility $16.3
Otay River Groundwater Well Demineralization/Development $ 5.0
Otay Mountain Groundwater Well Development $ 6.5
Total: $93.3
RECYCLED WATER
RecPl – 20-Inch, 944 Zone, Lane Avenue – Proctor Valley/Pond No.1 $ 1.3
RecRes – 860-1 Reservoir 4 MG $ 3.8
RecPl – 24-Inch 860 Zone, Alta Road – Alta Gate/Airway $ 3.0
RecPL – 20-Inch, 944 Zone, Wueste Road, Olympic/Otay WTP $ 3.6
North District Recycled Water Regulatory Compliance $ 0.2Total: $11.9
48
Contingency, New, and Complete
CIP Projects for FY08 ($000)
FY 2008 Total
CIP Projected
Project Brief Project Title ProjectNo. and Description Cost
Contingency CIP Projects for FY 2008 CIP Budget
P2235 Res - 624-4 Emergency Reservoir 40.0 MG $27,750
P2258 PS - Lower Otay Pump Station Phase 1 (9,000 GPM) $7,805
Total: $35,555
New CIP Projects for FY 2008 CIP Budget
P2460 I.D. 7 Trestle and Pipeline Demolition $375
P2461 Records Management System Upgrade $150
P2462 Otay River Demineralization Feasibility Study $200
P2463 South Bay Regional Concentrate Conveyance Feasibility Study $125
P2464 San Diego 17 Pump Station and Flow Control Facility $16,250
P2465 Regulatory Site Material Storage Bins $250
P2466 Regional Training Facility $200
P2467 San Diego Formation Groundwater Feasibility Study $1,600
P2468 Finance Department Office Remodel $50
R2091 RecPS - 944-1 Pump Station Upgrade $325
R2092 Dis - 450-1 Reservoir Disinfection Facility $1,100
Total: $20,625
Complete in FY 2007 for FY 2008 Budget
P2008 PS - 980-2 Pump Station (25,000 GPM) $8,055
P2026 PL - 20-Inch, 850 Zone, Jamacha Boulevard - Regulatory Site/Trace Road $1,100
P2028 Res - 1485-2 Reservoir 1.6 MG $3,250
P2081 PL - 36-Inch, 980 Zone, Proctor Valley Road - PB Road/PB Bndy $546
P2168 Res - 803-4 Reservoir 6 MG $4,465P2205 PS - Rolling Hills Hydro Pump Station (1,400 GPM) $1,900
P2359 Operations EROC and Meter Shop Remodels and EROC Maps $190
P2399 PL - 30-Inch, 980 Zone, 980 Reservoirs to Hunte Parkway $2,740
P2449 Information Technology Business Continuity $300
P2454 Alta Road Vaults and Use Area Meter Bypass $465
R2003 RecRes - 680-1 Reservoir 3.4 MG $4,349
R2022 RecPL - 30-Inch, 450 Zone, Otay Valley - Dairy Mart/450-1 Reservoir $23,600
Total: $50,960
49
FY 07/FY 08 CIP Budget
Comparison Summary
26 CIP Projects Increased $ 5,722,000 3.0%
15 CIP Projects Decreased ($ 5,610,000) (3.0%)
24 CIP Projects Unchanged $ 0 0.0%
Net Change: $ 112,000 0.06%
Proposed 2008 CIP Budget $191,500,000
5 CIP Projects $ 4,142,000 2.0%
Three projects with an additional year of cost now showing in the 6-year view.
Two projects changed due to change in budget approach and scope.
50
CIP’s With Increased Budgets
Total: $5,722
P2037 Res - 980-3 Reservoir 15 MG $13,204 $14,205 $1,001
R2081 RecPL - 20-Inch, 944 Zone, Lane Avenue - Proctor Valley/Pond No. 1 $350 $1,290 $940
P2459 Olive Vista Drive Utility Relocations $420 $1,242 $822
P2441 NG/RAMAR Meter Replacements $1,519 $1,932 $413
P2363 Information Technology Utility Billing, Data Management, and Financial $6,300 $6,600 $300
P2191 Res - 850-4 Reservoir 2.2 MG $2,988 $3,285 $297
P2443 Information Technology Mobile Services $412 $652 $240
P2172 PS - 1485-1 Pump Station Replacement $1,997 $2,225 $228
S2016 Solar Panel Installation Phase I $475 $645 $170
P2267 36-Inch Main Pumpouts and Air/Vacuum Ventilation Installations $195 $345 $150
P2361 Information Technology GIS Enhancements $1,795 $1,945 $150
R2084 RecPL - 20-Inch, 680 Zone, Village 2 - Heritage/La Media $971 $1,100 $129
P2387 PL - 12-Inch, 832 Zone, Steele Canyon Road - Via Caliente/Campo $400 $525 $125
P2416 SR-125 Utility Relocations $700 $809 $109
P2190 PL - 10-Inch, 1485 Zone, Jamul Highlands Road to Presilla Drive $120 $228 $108
P2356 PL - 12-Inch, 803 Zone, Jamul Drive Permastran Pipeline Replacement $660 $765 $105
P2325 PL - 10" to 12" Oversize, 1296 Zone, PB Road - Rolling Hills Hydro PS/$46 $130 $84
R2053 RWCWRF - R.O. Building Remodel and Office Furniture $422 $495 $73
S2015 Calavo Lift Station Replacement $675 $726 $51
P2070 PL - 16-Inch, 980 Zone, Pacific Bay Homes Road- Proctor Valley/Rolling $500 $550 $50
P2370 Res - Dorchester Reservoir and Pump Station Demolition $100 $150 $50
P2447 Information Technology Meter Routing $80 $130 $50
P2455 Data Cleansing Project $300 $350 $50
P2038 PL - 12-Inch, 978 Zone, Jamacha, Hidden Mesa, and Chase Upsize and Rep $1,575 $1,600 $25
P2318 PL - 20-Inch, 657 Zone, Summit Cross-Tie and 36-Inch Main Connections $600 $601 $1
R2086 RWCWRF Force Main AirVac Replacements and Road Improvements $874 $875 $1
Brief Project Title Total Existing Total Proposed Dollar
CIP and Description Project Budget Project Budget Change
51
CIP’s With Decreased Budgets
P2143 Res - 1296-3 Reservoir 2 MG $3,379 $3,340 ($39)
P2397 PL - 12-Inch, 711 Zone, EastLake Parkway - Birch/Rock Mountain $265 $175 ($90)
R2031 RecPL - 12-Inch, 944 Zone, EastLake Parkway - Olympic/Birch $229 $125 ($104)
P2169 PL - 20-Inch, 980 Zone, EastLake Parkway - Birch/Rock Mountain $438 $325 ($113)
P2414 PL - 12" to 16" Oversize, 803 Zone, Dehesa Road - Dehesa Meadow/OWD Bn $275 $152 ($123)
R2041 RecPL - 8-Inch, 944 Zone, EastLake Parkway - Birch/Rock Mountain $282 $125 ($157)
R2089 North District Recycled Water Regulatory Compliance $415 $200 ($215)
P2435 PL - 16-Inch, 711 Zone, Birch Road - La Media/SR-125 $531 $280 ($251)
P2164 PL - 20-Inch, 980 Zone, EastLake Parkway - Olympic/Birch $500 $211 ($289)
R2033 RecPL - 12-Inch, 944 Zone, Birch Road - La Media/EastLake $788 $300 ($488)
P2133 PL - 16-Inch, 711 Zone, EastLake Parkway - Olympic/Birch $750 $151 ($599)
P2440 I-905 Utility Relocations $2,260 $1,660 ($600)
R2040 RecPL - 12-Inch, 680 Zone, Hunte Parkway - Olympic/EastLake $1,059 $450 ($609)
P2121 PL - 16-Inch, 711 Zone, Hunte Parkway - Olympic/EastLake $1,174 $551 ($623)
S2012 SVSD Outfall and RSD Replacement and OM Reimbursement $4,881 $3,571 ($1,310)
Total: ($5,610)
Brief Project Title Total Existing Total Proposed Dollar
CIP and Description Project Budget Project Budget Change
52
CIP’s With Unchanged Budgets
P2185 Res - 640-1 Reservoir 20.0 MG $29,500 $29,500 $0
P2009 PL - 36-Inch, SDCWA Otay FCF No. 14 to Regulatory Site $18,490 $18,490 $0
P2033 PL - 16-Inch, 1296 Zone, Melody Road - Campo/Presilla $1,826 $1,826 $0
P2040 Res - 1655-1 Reservoir 0.5 MG $2,055 $2,055 $0
P2129 Groundwater Exploration Program $2,530 $2,530 $0
P2258 PS - Lower Otay Pump Station Phase 1 (9,000 GPM) $7,805 $7,805 $0
P2295 624-1 Reservoir Disinfection Facility, Inlet/Outlet/Bypass and 613-1 R $4,500 $4,500 $0
P2353 Information Technology System Enhancements and Replacements $3,762 $3,762 $0
P2366 APCD Engine Replacements and Retrofits $2,438 $2,438 $0
P2367 PL - 16-Inch, 980 Zone, Olympic Parkway - East Palomar/EastLake $1,500 $1,500 $0
P2382 Safety and Security Improvements $1,317 $1,317 $0
P2450 Otay River Groundwater Well Demineralization/Development $5,000 $5,000 $0
P2451 Rosarito Desalination Facility Conveyance System $1,000 $1,000 $0
P2453 SR-11 Utility Relocations $2,300 $2,300 $0
P2457 Otay Mountain Groundwater Well Development $6,500 $6,500 $0
R2001 RecRes - 450-1 Reservoir 12 MG $9,967 $9,967 $0
R2004 RecPS - 680-1 Pump Station (11,500 GPM) $8,333 $8,333 $0
R2034 RecRes - 860-1 Reservoir 4 MG $3,800 $3,800 $0
R2043 RecPL - 8-Inch, 944 Zone, Rock Mountain Road - La Media/SR-125 $235 $235 $0
R2058 RecPL - 16-Inch, 860 Zone, Airway Road - Otay Mesa/Alta $2,000 $2,000 $0
R2077 RecPL - 24-Inch, 860 Zone, Alta Road - Alta Gate/Airway $3,000 $3,000 $0
R2082 RecPL - 24-Inch, 680 Zone, Olympic Parkway - Village 2/Heritage $1,747 $1,747 $0
R2087 RecPL - 20-Inch, 944 Zone, Wueste Road - Olympic/Otay WTP $3,598 $3,598 $0
R2088 RecPL - 20-Inch, 860 Zone, County Jail - Roll Reservoir/860-1 Reservoi $1,500 $1,500 $0
Total: $0
Brief Project Title Total Existing Total Proposed Dollar
CIP and Description Project Budget Project Budget Change
53
CIP’s – Additional Year, Approach
Change, Scope Change
P2458 AMR Manual Meter Replacement $7,513 $9,368 $1,855
P2456 Air and Vacuum Valve Upgrades $3,510 $3,744 $234
P2282 Vehicle Capital Purchases $2,172 $2,451 $279
P2286 Field Equipment Capital Purchases $1,170 $1,202 $32
P2422 Agency Interconnections $308 $2,050 $1,742
Total: $4,142
Brief Project Title Total Existing Total Proposed Dollar
CIP and Description Project Budget Project Budget Change
54
QUESTIONS?
55
IT Projects
z Improving Integration of OIS
z Improve Performance and Reliability of Data
Center
z Improving Quality and Accuracy of Data
z Adding GIS/GPS Based Applications
z Expand Field Mobile Computers
z Focus on support of business process change /
cost reduction
56
BALANCED
OPERATING
BUDGET
57
2008 Operating Budget
The Otay Water District is
facing water rate increases due
to rising cost of water from
CWA, mandated programs and
aging of infrastructure, these
cost increases are not unique to
Otay.
This presentation provides an
overview of our financial
outlook.
Budget Process
Budget Highlights
Growth Projections
Budget Details
Conclusion
58
Budget Process
z Challenge of aligning the Rate Model, Operating and CIP Budgets
z Examined growth and cost increases
z Analyzed budget methodology and past projections
z Review of all Operating and CIP budget requests
z Finance, General Manager, and Assistant GMs met with departments to determine reasonableness of budget requests and made adjustments where necessary
59
Budget Highlights
z Balanced budget
z Debt no longer shown in the General Fund, but is
shown in the funds that receive the debt funding
z Diversify Water Supply
{Budget includes purchases from CWA and City of
San Diego for potable and recycled
z Change property tax revenue assumptions based
on a better methodology
60
Growth Projections
The District is projected to serve approximately 48,640 individual
water customer accounts. We anticipate continued increases in
the number of water customers but at a slower rate of increase
as the District increases in size.
4.8%5.0%2.0%Reclaimed
0.0%0.0%-8.5%Construction (Temporary)
2.1%1.8%2.0%Publicly Owned
0.0%0.0%0.0%Agricultural
2.1%1.8%2.0%Landscaping
2.1%1.8%2.0%Commercial
2.1%1.8%2.0%Multi-family Residential
2.1%1.8%3.0%Single Family Residential
FY 07/08FY 06/07FY 05/06Customer Category
RateRateRate
Annual GrowthAnnual GrowthAnnual Growth
61
Historic Meter Sales
Meter Sales
-
500
1,000
1,500
2,000
2,500
3,000FY02/03FY03/04FY04/05FY05/06FY06/07FY07/08FY08/09FY09/10FY10/11FY11/12FY12/13Historical Sales Projected Sales
62
Budget Details - Revenues
12.0% 7,098,600 66,169,200 59,070,600 TOTAL REVENUES
(100.0%)(283,600)-283,600 General Fund Draw Down
2.2% 21,800 1,027,400 1,005,600 Interest#
0.4% 6,100 1,680,200 1,674,100 Non-operating Revenues#
16.8% 576,400 4,003,800 3,427,400 Tax Revenues
20.3% 247,600 1,464,500 1,216,900 Annexation Fees
100.0% 73,300 73,300 -Betterment Fees for Maintenance
41.4% 414,300 1,414,500 1,000,200 Capacity Fee Revenues#
14.4% 40,000 318,500 278,500 Meter Fees#
4.3% 111,000 2,679,100 2,568,100 Sewer Revenues#
33.8% 1,516,000 6,001,400 4,485,400 Recycled Water Sales
10.1% $ 4,375,700 $ 47,506,500 $ 43,130,800 Potable Water Sales#
REVENUES
%VarianceBudgetBudget11-
VarianceBudgetFY 2008FY 2007
63
Water Sales
UNIT SALES & METER TRENDS
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
FY02
Actual
FY03
Actual
FY04
Actual
FY05
Actual
FY06
Actual
FY07
Budget
FY08
Budget
Un
i
t
s
(
t
h
o
u
s
a
n
d
s
)
25,000
30,000
35,000
40,000
45,000
50,000
Me
t
e
r
s
Unit Sales Meters
64
Budget Details – Potable Revenues
z Potable Water Sales increase of 10.1% ($4,375,700)
{Water Sales (Variable) $2,465,300
{System Fees $1,067,000
{Energy Fees $165,000
{MWD & CWA Fixed Fees $530,800
{Penalties $147,900
65
Budget Details – Recycled Revenues
z Recycled Water Sales increase 33.3% ($1,491,900)
{MWD and CWA Credits $981,900
{Water Sales (Variable) $367,800
{System Fees $ 92,800
{Energy Fees $ 49,400
{Penalties $ 13,000
66
Budget Details – Sewer Revenues
z Sewer Charges increase 4.3% ($111,000)
{Sewer Charges $102,200
{Penalties $ 8,800
67
Budget Details – Revenues (cont.)
z Capacity Fee Revenues: Increase 41.4% (414,300)
due to under-budgeting of operating projects funded by cap fees
in the prior year
z Non-Operating Income: Increase 0.4% ($6,100)
{Grant revenue increase of $172,000
{Property rentals decrease of $230,000
z Tax Revenues: Increase 16.8% ($576,400)
{5% growth in FY 08
{11.8% adjustment to FY 07 projection
z Meter Fees: Increase 14.4% ($40,000)
due to higher meter sales estimates based on growth
68
Budget Details - Expenditures
12.0% 7,098,600 66,169,200 59,070,600 TOTAL EXPENDITURES
(95.4%)(4,333,300)206,700 4,540,000 Replacement Reserve
100.0% 3,468,800 3,468,800 -Betterment Reserve
100.0% 2,571,700 2,571,700 -Expansion Reserve#
(3.7%)(170,800)4,452,900 4,623,700 Materials & Maintenance#
25.6% 1,422,700 6,982,300 5,559,600 Administrative Expenses#
6.8% 998,200 15,604,500 14,606,300 Labor and Benefits#
4.7% 127,000 2,804,800 2,677,800 Power#
11.1% 3,014,300 30,077,500 27,063,200 Subtotal - Water Costs
7.9% 40,400 552,600 512,200 MWD - Net RTS and Standby Charges#
10.6% 54,600 569,400 514,800 MWD - Capacity Reservation Charge #
22.5% 277,200 1,507,800 1,230,600 CWA - Emergency Storage Charge#
12.2% 103,600 950,400 846,800 CWA - Customer Service Charge#
8.6% 86,300 1,090,200 1,003,900 CWA - Infrastructure Access Charge#
(18.1%)(313,700)1,423,000 1,736,700 Recycled Water Purchases
13.0% 2,765,900 23,984,100 21,218,200 Potable Water Purchases#
EXPENDITURES
%VarianceBudgetBudget11-
VarianceBudgetFY 2008FY 2007
69
Water Purchases
-
10,000
20,000
30,000
40,000
Ac
r
e
F
e
e
t
FY 03
Actual
FY 04
Actual
FY 05
Actual
FY 06
Actual
FY 07
Budget
FY 08
Budget
POTABLE WATER PURCHASES
70
New Sources of Water
WATER PURCHASES
CWA Purchases
Reclaimed
Production
LOPS CSD
SBWRP
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
FY03
Actual
FY04
Actual
FY05
Actual
FY 05-06
Actual
FY07
Budget
FY08
Budget
FY09
Projection
FY10
Projection
FY11
Projection
FY12
Projection
FY13
Projection
A
c
r
e
F
e
e
t
71
Water Costs Increase 11.1% ($3,014,300)
{Variable Cost Increase
zPotable $2,765,900
zRecycled ($ 313,700)
{Fixed Cost Increase $562,100
72
Potable Variable Cost of Water
z Variable Costs increase 13.0% ($2,765,900)
{This is Net CWA and City San Diego (CSD) purchases
{Growth Increase 2.1%
{City of San Diego (LOPS) cannot provide as much water as
assumed in last year’s rate model, an additional 3,496 AF
will have to be purchase from CWA at a higher rate
$25
$42
Increase
2008
4.8%$537$512CSD $Price/AF
7.3%$614 $572 CWA $Price/AF
% Inc20082007
2008ProposedCurrent
73
Fixed Cost of Water
Fixed Cost increase 13.7% ($562,100)
8.6%$86,300Infrastructure Assess ChargeCWA
$562,100Total Fixed Cost
22.5%$277,200Emergency Storage ChargeCWA
12.2%$103,600Customer Service ChargeCWA
7.9%$40,400Readiness-to-Serve ChargeMWD
10.6%$54,600Capacity Reservation ChargeMWD
74
Expenditures
12.0% 7,098,600 66,169,200 59,070,600 TOTAL EXPENDITURES
(95.4%)(4,333,300)206,700 4,540,000 Replacement Reserve
100.0% 3,468,800 3,468,800 -Betterment Reserve
100.0% 2,571,700 2,571,700 -Expansion Reserve#
(3.7%)(170,800)4,452,900 4,623,700 Materials & Maintenance#
25.6% 1,422,700 6,982,300 5,559,600 Administrative Expenses#
6.8% 998,200 15,604,500 14,606,300 Labor and Benefits#
4.7% 127,000 2,804,800 2,677,800 Power#
11.1% 3,014,300 30,077,500 27,063,200 Subtotal - Water Costs
7.9% 40,400 552,600 512,200 MWD - Net RTS and Standby Charges#
10.6% 54,600 569,400 514,800 MWD - Capacity Reservation Charge #
22.5% 277,200 1,507,800 1,230,600 CWA - Emergency Storage Charge#
12.2% 103,600 950,400 846,800 CWA - Customer Service Charge#
8.6% 86,300 1,090,200 1,003,900 CWA - Infrastructure Access Charge#
(18.1%)(313,700)1,423,000 1,736,700 Recycled Water Purchases
13.0% 2,765,900 23,984,100 21,218,200 Potable Water Purchases#
EXPENDITURES
%VarianceBudgetBudget11-
VarianceBudgetFY 2008FY 2007
75
Power
z Power Cost increase 4.7% ($127,000)
{Water demand increase 2.1%
{SDG&E rates increase 2.5% on 1/1/2008
{New SBWRP Pump Station for Recycled
76
Power
$0
$500
$1,000
$1,500
$2,000
$2,500
Thousands
FY03
Actual
FY04
Actual
FY05
Actual
FY06
Actual
FY07
Budget
FY08
Budget
HISTORICAL POWER COSTS & PROJECTIONS
Recycled Transmission
Sewer Lifts
Admin & Operations Buildings
Potable Transmission
77
Expenditures
12.0% 7,098,600 66,169,200 59,070,600 TOTAL EXPENDITURES
(95.4%)(4,333,300)206,700 4,540,000 Replacement Reserve
100.0% 3,468,800 3,468,800 -Betterment Reserve
100.0% 2,571,700 2,571,700 -Expansion Reserve#
(3.7%)(170,800)4,452,900 4,623,700 Materials & Maintenance#
25.6% 1,422,700 6,982,300 5,559,600 Administrative Expenses#
6.8% 998,200 15,604,500 14,606,300 Labor and Benefits#
4.7% 127,000 2,804,800 2,677,800 Power#
11.1% 3,014,300 30,077,500 27,063,200 Subtotal - Water Costs
7.9% 40,400 552,600 512,200 MWD - Net RTS and Standby Charges#
10.6% 54,600 569,400 514,800 MWD - Capacity Reservation Charge #
22.5% 277,200 1,507,800 1,230,600 CWA - Emergency Storage Charge#
12.2% 103,600 950,400 846,800 CWA - Customer Service Charge#
8.6% 86,300 1,090,200 1,003,900 CWA - Infrastructure Access Charge#
(18.1%)(313,700)1,423,000 1,736,700 Recycled Water Purchases
13.0% 2,765,900 23,984,100 21,218,200 Potable Water Purchases#
EXPENDITURES
%VarianceBudgetBudget11-
VarianceBudgetFY 2008FY 2007
78
Staffing Highlights
z Process
{Departments identified specific personnel
actions for HR review
{Senior Team conducted an analysis of:
zWork load requirements
zExisting vacancies
z Results
{Two vacant positions were deleted, reducing
FTE count from 174.75 to 172.75
79
Labor and Benefits
Salary and Fringe: Increase 6.8% ($998,100)
z Labor Cost: Decrease 0.2% ($24,500)
{Reduction in FTE by 2 positions ($152,700)
{Increase in vacancy factor ($341,000)
{In-Range Adjustments $156,400
{Cost of Living Increases of 3% $312,800
pursuant to current MOU
z Benefit Changes:
{Pension: Increase 4.5% $133,500
{Health and Dental: Increase 5.8% $91,900
{Workers Compensation: Decrease 2.7% $7,900
z Shift of Labor from CIP to Operating: $797,800
80
Expenditures
12.0% 7,098,600 66,169,200 59,070,600 TOTAL EXPENDITURES
(95.4%)(4,333,300)206,700 4,540,000 Replacement Reserve
100.0% 3,468,800 3,468,800 -Betterment Reserve
100.0% 2,571,700 2,571,700 -Expansion Reserve#
(3.7%)(170,800)4,452,900 4,623,700 Materials & Maintenance#
25.6% 1,422,700 6,982,300 5,559,600 Administrative Expenses#
6.8% 998,200 15,604,500 14,606,300 Labor and Benefits#
4.7% 127,000 2,804,800 2,677,800 Power#
11.1% 3,014,300 30,077,500 27,063,200 Subtotal - Water Costs
7.9% 40,400 552,600 512,200 MWD - Net RTS and Standby Charges#
10.6% 54,600 569,400 514,800 MWD - Capacity Reservation Charge #
22.5% 277,200 1,507,800 1,230,600 CWA - Emergency Storage Charge#
12.2% 103,600 950,400 846,800 CWA - Customer Service Charge#
8.6% 86,300 1,090,200 1,003,900 CWA - Infrastructure Access Charge#
(18.1%)(313,700)1,423,000 1,736,700 Recycled Water Purchases
13.0% 2,765,900 23,984,100 21,218,200 Potable Water Purchases#
EXPENDITURES
%VarianceBudgetBudget11-
VarianceBudgetFY 2008FY 2007
81
Administrative Expense
25.6% Increases due to 3 main categories:
z Significant long-term planning projects
z Conservation grants
z One-time legal expenses
82
Costs of Significant Long-Term
Planning Projects
z Water Resources Master Plan $250,000
{Program EIR
{Water Modeling
{Integration with GIS
z Rehabilitation and Replacement $150,000
{Integrated with GIS & Fixed Assets
{Integrated with Master Plan
83
Conservation Grants
z Incentive budget increases $250,900
{$90,000 for Valhalla High School artificial turf
{$120,000 for Monte Vista High School artificial turf
{$20,000 for Cash for Plants
{$18,500 for Large Landscape Program
z Grant revenue offset $172,000
{$50,000 for Valhalla High School artificial turf
{$100,000 for Monte Vista High School artificial turf
{$14,000 for Cash for Plants
{$8,000 for Large Landscape Program
z Net budget impact $78,900
84
One-time legal expenses
z Legal Services $538,000
{Pending litigation
{Potential insurance settlement
85
Expenditures
12.0% 7,098,600 66,169,200 59,070,600 TOTAL EXPENDITURES
(95.4%)(4,333,300)206,700 4,540,000 Replacement Reserve
100.0% 3,468,800 3,468,800 -Betterment Reserve
100.0% 2,571,700 2,571,700 -Expansion Reserve#
(3.7%)(170,800)4,452,900 4,623,700 Materials & Maintenance#
25.6% 1,422,700 6,982,300 5,559,600 Administrative Expenses#
6.8% 998,200 15,604,500 14,606,300 Labor and Benefits#
4.7% 127,000 2,804,800 2,677,800 Power#
11.1% 3,014,300 30,077,500 27,063,200 Subtotal - Water Costs
7.9% 40,400 552,600 512,200 MWD - Net RTS and Standby Charges#
10.6% 54,600 569,400 514,800 MWD - Capacity Reservation Charge #
22.5% 277,200 1,507,800 1,230,600 CWA - Emergency Storage Charge#
12.2% 103,600 950,400 846,800 CWA - Customer Service Charge#
8.6% 86,300 1,090,200 1,003,900 CWA - Infrastructure Access Charge#
(18.1%)(313,700)1,423,000 1,736,700 Recycled Water Purchases
13.0% 2,765,900 23,984,100 21,218,200 Potable Water Purchases#
EXPENDITURES
%VarianceBudgetBudget11-
VarianceBudgetFY 2008FY 2007
86
Material & Maintenance
z Overall Decrease 3.7% ($170,800)
{Metro O&M Decrease ($141,200)
{Increases in contracted $107,500
z janitorial painting
z air conditioning gates & fencing
z landscaping parking lot maintenance
{Fuel & Oil Decrease ($196,000)
zIncrease $13,400 LOPS decrease $209,400
{Increases in price and volume $58,900
z chemicals meters
z parts supplies
87
Expenditures
12.0% 7,098,600 66,169,200 59,070,600 TOTAL EXPENDITURES
(95.4%)(4,333,300)206,700 4,540,000 Replacement Reserve
100.0% 3,468,800 3,468,800 -Betterment Reserve
100.0% 2,571,700 2,571,700 -Expansion Reserve#
(3.7%)(170,800)4,452,900 4,623,700 Materials & Maintenance#
25.6% 1,422,700 6,982,300 5,559,600 Administrative Expenses#
6.8% 998,200 15,604,500 14,606,300 Labor and Benefits#
4.7% 127,000 2,804,800 2,677,800 Power#
11.1% 3,014,300 30,077,500 27,063,200 Subtotal - Water Costs
7.9% 40,400 552,600 512,200 MWD - Net RTS and Standby Charges#
10.6% 54,600 569,400 514,800 MWD - Capacity Reservation Charge #
22.5% 277,200 1,507,800 1,230,600 CWA - Emergency Storage Charge#
12.2% 103,600 950,400 846,800 CWA - Customer Service Charge#
8.6% 86,300 1,090,200 1,003,900 CWA - Infrastructure Access Charge#
(18.1%)(313,700)1,423,000 1,736,700 Recycled Water Purchases
13.0% 2,765,900 23,984,100 21,218,200 Potable Water Purchases#
EXPENDITURES
%VarianceBudgetBudget11-
VarianceBudgetFY 2008FY 2007
88
Continued Reserve Funding
z Prior year – Replacement Reserve
z Current year – Replacement, Expansion, &
Betterment Reserves
z In accordance with the Reserve Policy
89
Operating Budget Summary
66,180,100 2,819,400 6,125,200 57,235,500 TOTAL EXPENDITURES
235,400 235,400 --Replacement Reserve
2,590,900 -2,590,900 -Expansion Reserve5716
4,452,900 1,458,800 226,000 2,768,100 Materials & Maintenance
6,982,300 189,500 271,300 6,521,500 Administrative Expenses
15,604,500 832,600 895,400 13,876,500 Labor and Benefits
2,804,800 103,100 493,600 2,208,100 Power
30,077,500 -1,423,000 28,654,500 Water Costs
EXPENDITURES
66,180,100 2,819,400 6,125,200 57,235,500 TOTAL REVENUES
TotalSewerRecycledPotable
90
Conclusion
z Balanced budget which meets the needs of
our customers (Available for immediate approval)
z Supported by a 5.4% potable and recycled
water rate increases (Approval after the hearing)
z Supported by a 1.7% rate increase in
Sewer Charges (Approval after the hearing)
91
SUMMARY
OF
RECOMMENDATIONS
92
Summary of Recommendations
1.Adopt Resolution # 4097 to approve the
2008 Operating and CIP Budget
2.Approve the fund transfers
3.Direct staff to proceed with the Proposition
218 hearing and notices for the
recommended rate increases
93
QUESTIONS?