HomeMy WebLinkAboutOperating and Capital Budget FY 2014-2015
Otay Water District
Adopted Operating and Capital Budget
Fiscal Year 2014-2015
BOARD OF DIRECTORS
Jose Lopez, Division 4 President
David Gonzalez, Jr., Division 1 Vice President
Mitchell Thompson, Division 2 Treasurer
Gary Croucher, Division 3
Mark Robak, Division 5
MANAGEMENT TEAM
Mark Watton General Manager
German Alvarez Assistant General Manager
Joseph R. Beachem Chief Financial Officer
Adolfo Segura Assistant Chief, Administrative Services and IT
Geoff Stevens Chief Information Officer
Rod Posada Chief, Engineering
Pedro Porras Chief, Water Operations
Table of Contents
Page
Letter of Transmittal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iv
Budget Foreword
Otay Water District At-A-Glance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Statement of Values . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Strategic Performance Management Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Organization Chart . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Budget Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Resolution No. 4235 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
History and Community Profile
Past and Present . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Current Economic Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
The Future . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Demographics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Water Rate Comparison . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Sewer Rate Comparison . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Service Area Assessed Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Ten Principal Taxpayers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Ten Largest Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
San Diego Rainfall . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Financial Summaries
Budget Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Operating Budget Summary – General Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Operating Budget Summary by System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
General Fund Revenues, Expenditures and Transfers . . . . . . . . . . . . . . . . . . . . . . . 43
Fund Balance Summary by Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Revenues and Expenditures by Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Revenues and Expenditures by Type . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Five-Year Forecast
Five-Year Forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
General Fund Forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Fund Balances Forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Debt Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Schedule of Outstanding Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Projected Principal Payments by Debt Issuance . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Projected Interest Payments by Debt Issuance . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
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Table of Contents
Revenues and Expenditures
Potable Revenues and Expenditures
Potable Narrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Operating Budget Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Classification of Water Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Water Sales Summary by Service Class . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Unit Sales History and Meter Count by Customer Class . . . . . . . . . . . . . . . . . . . . 62
System Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
MWD and CWA Fixed Fees (pass-through) . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Meter Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Revenue History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Water Purchases and Related Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Power Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Administrative Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Materials and Maintenance Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Potable Water Service Area Maps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Recycled Revenues and Expenditures
Recycled Narrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Operating Budget Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Classification of Water Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Water Sales Summary by Meter Size. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Unit Sales History and Meter Count by Customer Class. . . . . . . . . . . . . . . . . . . . 78
System Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Meter Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Revenue History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Water Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Power Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Administrative Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Materials and Maintenance Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Recycled Water Service Area Maps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Sewer Revenues and Expenditures
Sewer Narrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Operating Budget Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Sewer Charges Summary by Service Class . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Revenue History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Power Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
Administrative Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Materials and Maintenance Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Formula for Sewer Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Sewer Service Area Map . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.
96
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Table of Contents
General Revenues and Expenditures
General Revenues and Expenses Narrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
General Revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
General Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1100
Departmental Operating Budget
Departmental Operating Budget Narrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
Labor and Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Labor and Benefits by Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Position Count by Department . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
Contract/Temporary Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
Administrative Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
Materials and Maintenance Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
Operating Expenditures by Department . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
Operating Expenditures by Object . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Departmental Budgets:
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
General Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
Administrative Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134
IT and Strategic Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147
Water Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156
Engineering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172
General Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182
Capital Budget
Capital Improvement Program Narrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184
Major CIP Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186
CIP Projects in Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187
CIP Reserve Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190
CIP Funding Source and Category . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191
CIP Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 192
CIP Justification and Impact on Operating Budget . . . . . . . . . . . . . . . . . . . . . . . . 194
Capital Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195
Policies
Summary of Financial Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 196
Reserve Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198
Reserve Policy Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 229
Investment Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232
Investment Policy Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 239
Debt Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 245
Debt Policy Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 259
Appendix
Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 263
List of Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 269
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 272
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September 3, 2014
Honorable Board of Directors
Otay Water District
I am pleased to present the Otay Water District’s Adopted Operating and Capital Budget for
Fiscal Year 2015. The budget supports the Otay Water District’s Strategic Plan to finance all
of the District’s services, programs, and capital needs during the 2015 fiscal year as well as
positioning the District for continued success in ensuing years.
The coming years will continue to pose challenges for those in California’s water
community. As you are aware, California is in the third year of a severe drought. This July,
the State Water Resources Control Board (SWRCB) adopted an emergency regulation to
increase water conservation practices for all Californians. The new conservation regulation
targets outdoor water use in urban areas. The regulation also establishes the minimum
level of conservation activity that residents, businesses, and water suppliers must meet as
the drought deepens. Despite extensive local efforts to promote conservation and reduce
waste, Governor Brown and the State Water Resources Control Board (SWRCB) are now
calling on all Californians to conserve more water and are requiring cities and water
agencies to do more to inform customers that water conservation goals are now
mandatory.
In addition to the drought, there is great uncertainty over the issues facing the Sacramento-
San Joaquin Bay Delta, the source of 30 percent of Southern California’s water supply.
Proposals to construct tunnels under the Bay Delta are extremely costly, face tremendous
environmental obstacles, and will be tested and challenged in the court as well as at the
ballot box.
The District, as a member of the CWA, is well-positioned for water coming from the
Colorado River, thanks to the QSA Agreement. As the cost of water has increased to the
retail customer, sales have decreased. As one would expect, water sales fluctuations
impact revenues and the District will continue to closely monitor sales as they affect overall
iv
District finances. The steep decline in sales has now ended and the District is seeing water
sales stabilize.
The District’s success as an organization throughout the economic recession, financial
crisis, slowdown in housing construction, and now this severe drought is significantly
enhanced by the practices and policies put in place by the Board of Directors to ensure the
strength and stability of the District. The management team is fully confident that with these
policies and practices, supported by dedicated and talented staff, we will achieve continued
success as an organization and thus, assure the well-being of the people we serve.
FY 2015-2018 Strategic Plan
We are now entering the first year of the FY 2015-2018 Strategic Plan. As with the FY 2012-
2014 plan, the focus has been on the District’s transformation from a growth-centric to a
maintenance-based organization. Where rapid growth had been a significant focus in the
early years of the District’s existence, and in its earlier strategic plans, today we are primarily
focused on managing long-term maintenance and replacement of infrastructure.
The change is based on the recognition that as an organization matures, fewer resources
are needed to support growth; but more effort is required to maintain and upgrade
infrastructure and assets. This is important because in this phase in its lifecycle, an
organization derives income more from customer rates and less from developer fees, and
the increased maintenance and replacement costs place increased pressure on customer
rates. To balance the customer’s interest in minimizing rate increases while also
maintaining an organization’s infrastructure investments and a strong financial position, the
management team must place greater emphasis on internal efficiency and the
development of technology assisted best practices. In effect, the organization must use
investments in technology to do more with the same or even fewer resources.
From a water supply perspective, this means determining the optimum mix of water supply,
treatment, and delivery solutions for customers. From a daily operating perspective,
efficiency improvements have become the primary source of competitive advantage and
cost optimization for utilities.
A goal of the District’s past strategic plans included capitalizing on technology investments
and utilizing those technologies to continually improve efficiency and productivity. The
success of this approach is evidenced by the gains in productivity and by the reduction in
staffing the District has experienced. The following charts show that since 2007, the District
v
has reduced staffing by 34.75 full-time equivalent positions, or 19.9 percent, while the
number of customer accounts increased by 1,905.
With increased efficiency and higher employee productivity, the District has been able to
continue absorbing some of the pass-through costs from its water suppliers, the San Diego
County Water Authority (CWA) and Metropolitan Water District (MWD). This helps to
address customer concerns about rising water rates.
Based on an annual survey of water and sewer rates conducted by District staff, Otay
continues to be one of the lower cost providers in San Diego County. The District has the
11th lowest water rate out of the 23 member agencies in San Diego County and the 8th
lowest sewer rate out of the 28 sewer service providers in San Diego County. The results
of the water and sewer surveys are shown on page 28 and 29, respectively.
The chart below shows that since 2007, the wholesale water supply costs have increased
90.6 percent while the District’s retail water rates have increased a lesser 82.4 percent.
17
2
.
7
5
16
8
.
7
5
16
6
15
9
15
6
14
8
14
3
14
0
52,903
53,492
40,000
45,000
50,000
55,000
60,000
0
20
40
60
80
100
120
140
160
180
200
2008 2009 2010 2011 2012 2013 2014 2015
Ac
c
o
u
n
t
s
Em
p
l
o
y
e
e
Co
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FISCAL YEAR
Employee Count and Number of Accounts
vi
The District currently delivers water service to nearly 49,105 potable and 708 recycled water
customer accounts. All of the potable water sold to customers is purchased from CWA. Fifty
eight percent of this water is in turn purchased from the region’s primary water importer,
MWD.
The District has been proactive in reducing its dependence on MWD water treatment
facilities. For example, in 2009 the District entered into an agreement with CWA that allowed
our neighboring Helix Water District to treat imported water on behalf of the District at their
Levy Water Treatment Plant. This has brought regional water treatment closer to our
customers, which reduces dependence on water treatment facilities located outside of San
Diego County.
The District also collects and recycles wastewater from approximately 4,679 homes and
businesses. Wastewater is collected and delivered to the Ralph W. Chapman Water
Recycling Facility (RWCWRF), which is capable of reclaiming wastewater at a rate of 1.3
million gallons per day. In addition to the Chapman facility, the District continues purchasing
up to 6 million gallons per day of recycled water from the City of San Diego’s South Bay
Water Reclamation Plant. The use of recycled water for landscape irrigation and industrial
processes reduces dependence on imported potable supplies, provides a local supply that
is drought proof, and diversifies District resources.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2007 2008 2009 2010 2011 2012 2013 2014 2015
Wholesale Water Supply Costs vs. District Retail Rate Increases
90.6%
82.4%
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Fiscal Year 2015 Operating Budget Summary
Otay Water District’s operating expenditures consist of three major sectors: potable water,
recycled water, and sewer budgeted at $91,640,000 for Fiscal Year 2015. Revenues from
potable and recycled water are projected to be $80,785,700, about $5,514,100 (7.2%) more
than the Fiscal Year 2014 budget. Water sales volumes are expected to increase slightly, by
less than one percent over FY 2014 actual sales as the economy slowly improves and due
to both hotter and drier than normal climatic conditions. Higher usage is expected to occur
even as efforts to promote water conservation ramp-up due to the adoption of emergency
drought regulations. Sewer revenues are projected to be $3,007,700, about $306,100 more
than fiscal year 2014. This increase from higher sewer rates is necessary to cover $17.3
million of capital projects over the next six years. The remaining budgeted revenues of $7.8
million come from various special fees, assessments, and miscellaneous income.
Significant aspects of the Operating Budget are:
A balanced budget supporting the goals of the Strategic Plan.
The use of an economist to project growth for the region.
An updated six-year Rate Model to ensure sound financial planning and reserve
levels.
Ongoing water supply rate increases of 7.7 percent from MWD and CWA because
of the high cost of supply programs, higher energy costs, and increasing operating
costs.
Implemented rate increases in potable, recycled water, and sewer. This included
pass-through rate increases from CWA and the County of San Diego.
In efforts to minimize rate increases, the District has again reduced staffing levels
from 143 full-time equivalent positions to 140.
Of San Diego County’s 23 water agencies, Otay’s water rates are below the county-
wide average.
viii
Fiscal Year 2015 Capital Improvement Program
The Fiscal Year 2014-15 Capital Improvement Program (CIP) Budget consists of 73 projects
and a budget of $10.6 million. The budget emphasizes long-term planning for ongoing
programs to meet population growth while functioning within fiscal constraints. This year’s
CIP budget decreased by $3.2 million compared to last year’s projection, due to the
completion of some large projects as well as the deferral of projects to match the timing of
land development.
Awards and Acknowledgments
The Government Finance Officers Association of the United States and Canada
(GFOA) presented a Distinguished Budget Presentation Award to Otay Water District,
for its annual budget for the fiscal year beginning July 1, 2013. In order to receive this
award, a governmental unit must publish a budget document that meets program
criteria as a policy document, as an operations guide, as a financial plan, and as a
communications device.
The California Society of Municipal Finance Officers (CSMFO) presented Otay Water
District the Certificate of Award for Excellence in Operating Budgeting for Fiscal Year
2013-2014.
The California Society of Municipal Finance Officers (CSMFO) presented Otay Water
District the Certificate of Award for Excellence in Capital Budgeting for Fiscal Year
2013-2014.
Conclusion
The challenges presented this year were met by the Otay Water District’s Board of Directors’
resolve to keep the stability and financial strength of the District as one of its highest
priorities.
This budget reflects the vision of the Board of Directors of the Otay Water District, its
management, and its employees. We will continue to strive to make improvements in our
budget processes, including an extensive review and analysis of projections for revenues,
expenditures, capital projects, and reserves.
ix
I would like to thank all the staff involved in this process for the efforts put forth in the
preparation of this budget to ensure a successful outcome.
To the Board of Directors, we acknowledge and appreciate their continued support and
direction in achieving excellence in financial management and District operations.
Mark Watton, General Manager
x
At-A-Glance
Mission Statement
To provide high value water and wastewater services to the customers of the Otay Water District in
a professional, effective, and efficient manner.
History
The Otay Water District was formed in 1956 to serve as a public water and sewer agency, authorized
as a California special district under the provisions of the Municipal Water District Act of 1911. The
District’s ordinances, policies, taxes, and rates for service are set by five Directors elected by voters
in their respective geographic area. The District joined the San Diego County Water Authority (CWA)
in September 1956 to acquire the right to purchase and distribute imported water throughout its
service area. The District is also responsible for the collection, treatment, and disposal of wastewater
from a portion of the northern region of the District. In 1980, the District started operation of the Ralph
W. Chapman Water Recycling Facility (RWCWRF)
and in May, 2007 a new source of recycled water
from the City of San Diego was obtained, allowing
the Otay Water District to supply 11.4% of total water
demand with recycled water.
Service Area
The District's boundaries encompass an area of
approximately 125 square miles in San Diego
County, lying immediately east of the City of San
Diego metropolitan area and running from the City of
El Cajon south to the international border, abutting
the cities of El Cajon and La Mesa and
encompassing most of the City of Chula Vista and a
small portion of the City of San Diego.
Organizational Structure
The General Manager reports directly to the Board of Directors. The Assistant General Manager
along with District management oversees day-to-day operations. The Assistant General Manager
oversees the five departments of Administrative Services; Finance; Information Technology and
Strategic Planning; Water Operations; and Engineering. These and other lines of reporting are shown
on the organization chart on page 13.
1
General Information
For Fiscal Year 2015, the District will have a staff of 140 full-time equivalent employees under the
leadership of the General Manager. The District provides water service to approximately 52% of its
expected ultimate deliveries with a population of more than 213,000 people. This percentage
increases as the District's service area continues to grow to ultimate build-out. The District is
projected to deliver approximately 29,192 acre-feet of potable water to 49,257 potable customer
accounts. By 2035, deliveries are expected to reach 56,600 acre-feet of potable water to serve 285,000
people or 69,000 accounts. The growth rate, as projected by the San Diego Association of
Governments (SANDAG), for the Chula Vista area of San Diego County, is approximately 1.6% per
year over the next decade. Using historical data and considering current economic conditions, staff
has moderated this projection to a growth rate of 0.25% for Fiscal Year 2015.
Since 1956, the District has provided high quality water to a semi-arid region of the southeastern San
Diego County. In 1971 the District constructed a small collection and treatment plant for sewer in
the northern section of the District, and in 1980 the District opened the Ralph W. Chapman Water
Recycling Facility (RWCWRF). For over 50 years, the available supply of water has helped transform
the District service area from a mostly scrub and cactus covered backcountry into a balance of
diverse environments.
Recycled water from the RWCWRF is used to irrigate golf courses, schools, public parks, roadway
landscapes, and various other approved uses in eastern Chula Vista. The RWCWRF is capable of
recycling wastewater at a rate of 1.3 million gallons per day (1,200 acre-feet per year). The District is
also in partnership with the City of San Diego to beneficially reuse an additional 2,906 acre-feet per
year of recycled water for fiscal year 2015, and ultimately up to 6,720 acre-feet per year. The District
continues to be the largest retail provider of recycled water in the County of San Diego.
The District also owns and operates a wastewater collection system providing public sewer service
to approximately 4,679 customer accounts within the Jamacha drainage basin. The sewer service
area covers approximately 8,797 acres, which is about 11% of the District’s total service area.
Residential customers comprise 97% of the sewer customer base.
1. Carlsbad Municipal Water District
2. City of Del Mar
3. City of Escondido
4. Fallbrook Public Utility District
5. Helix Water District
6. City of National City
7. City of Oceanside
8. Olivenhain Municipal Water District
9. Otay Water District
10. Padre Dam Municipal Water District
11. Camp Pendleton Marine Corps Base
12. City of Poway
13. Rainbow Municipal Water District
14. Ramona Municipal Water District
15. Rincon del Diablo Municipal Water District
16. City of San Diego
17. San Dieguito Water District
18. Santa Fe Irrigation District
19. South Bay Irrigation District
20. Vallecitos Water District
21. Valley Center Municipal Water District
22. Vista Irrigation District
23. Yuima Municipal Water District
24. Lakeside Water District
San Diego County Water Agencies
2
Statement of Values
As Otay Water District employees we dedicate ourselves to:
Customers
We take pride that our commitment to customer-centered service is our highest priority.
Excellence
We strive to provide the highest quality and value in all that we do.
Integrity
We commit ourselves to doing the right thing.
Ethical behavior, trustworthiness and accountability are the District’s foundation.
Employees
We see each individual as unique and important.
We value diversity and open communication to promote fairness, dignity and respect.
Teamwork
We promote mutual trust by sharing information, knowledge and
ideas to reach our common goals.
Otay Water District Employees
Dedicated to Community Service
3
DISTINGUISHED BUDGET
PRESENTATION AWARD
The Government Finance Officers Association (GFOA) presented a
Distinguished Budget Presentation Award to the District for its annual
budget for the fiscal year 2013-2014. In order to receive this award, a
governmental unit must publish a budget document that meets program
criteria as a policy document, as an operations guide, as a financial plan,
and as a communications device.
This award is valid for a period of one year only. We believe our current
budget continues to conform to program requirements, and we are
submitting it to GFOA to determine its eligibility for another award.
4
Financial Awards
The California Society of
Municipal Finance Officers
(CSMFO) presented Otay
Water District the Certificate
of Award for Excellence in
Operating Budget for Fiscal
Year 2013-2014.
The California Society
of Municipal Finance
Officers (CSMFO)
presented Otay Water
District the Certificate
of Award for
Excellence in Capital
Budget for Fiscal Year
2013-2014.
5
Awards
Otay Water District has
received the “District of
Distinction” accreditation by
the Special District
Leadership Foundation
(SDLF) for 2013/2014. By
receiving this accreditation,
the SDLF recognized Otay
for demonstrating a strong
commitment to practicing
sound policies in the areas
of governance, board
conduct, District finances,
transparency, reserve
management, and
continuing education for
board members and staff. This is the first time Otay has received this biannual accreditation.
The Special District
Leadership Foundation
presented the District
Transparency Certificate of
Excellence (2013/2015) to
Otay Water District in
recognition of the District's
completion of all
transparency program
requirements designed to
promote transparency in
operations and governance
to the public and other
stakeholders.
6
Strategic Performance Management Plan
Introduction
The strategic plan is the core document which guides the District’s efforts to meet and positively
adapt to change. The overall plan is extensively reviewed and revised every three to four years.
This current edition (covering fiscal years 2015-2018) is the fifth in a series of updated plans.
In order to develop the FY 2015-2018 Strategic Plan, the Senior Management Team carefully
reviewed the previous strategic plans and, in an interactive environment, examined future
opportunities and risks. After careful analysis, an overall direction is set for the plan. In this latest
plan, the team elected to use a two phase approach. Phase 1 focuses on four key enterprise wide
projects in FY 2015 that are critical to developing a solid foundation for the overall plan. Phase 2
(FY 2016-2018) will utilize this foundation to develop a more extensive and reliable performance
measurement that quantifies the value created by these efforts.
The General Manager presented the plan to the Board on May 19, 2014. With this plan, the Board is
able to make more informed oversight decisions about the utility’s direction.
7
Strategic Performance Management Plan
Mission
To provide high quality and reliable water and wastewater services to the customers of the Otay
Water District, in a professional, effective, and efficient manner.
Vision
A District that is innovative in providing water services at affordable rates, with a reputation for
outstanding customer service.
Key Challenge
Our key challenge, as District staff, is to quantify and demonstrate our commitment and ability to
optimize our resources, business processeses, and technology to achieve the strategic plan goals.
We, as a team, commit to regularly assess and document how our decisions and work practices
accomplish our goals and objectives.
Balanced Scorecard Goals
CUSTOMER
o Increase customer confidence in the District
o Improve and expand communications
o Provide effective water services
FINANCIAL: Manage the financial issues that are critical to the District
o Improve financial information and systems
o Maintain District financial strength
BUSINESS PROCESSES: Maximize efficiency and effectiveness
o Actively manage water supply as well as support for water and sewer services
o Identify and evaluate improvements to enterprise and departmental business
processes
LEARNING AND GROWTH: Provide leadership and management expertise
o Reinforce a results-oriented and accountable culture
o Focus on achieving a lean flexible workforce
Object Legend
Scorecard
Strategy
8
Strategic Performance Management Plan
Key Strategic Objectives - Phase 1 (FY 2015)
The following items are top priority and require enterprise wide participation and resources.
These are foundational items necessary to build required systems and infrastructure to
support Phase 2.
Water Operations - Implement Enterprise SCADA and Wireless Communications System
Asset Management - Implement GIS Centric Work Order System
Water Resources - Determine Infrastructure and Supply Needs to Support District Operations
Business Continuity - Be Prepared for Emergencies and Disasters
Expand and clarify the District’s Emergency Response Plan
Key Strategic Objectives - Phase 2 (FY 2016-2018)
The Board approved a two phase approach to implementing stronger performance measurement,
particularly as it relates to identifying and measuring items which documented the value that is
being added through the improvement of business processes and procedures. Based upon the
work done in Phase 1, and in consultation with the Management Team, additional or revised
measures will be introduced in FY 2016 to accomplish the objectives stated in the key challenge.
These items will be presented to the Board in conjunction with the FY 2016 budget.
Ongoing Objectives (concurrent in phase 1 and phase 2)
Influence developers to use practical water efficient practices in new construction.
Streamline Accounts Payable business processes.
Develop an effective asset management program.
Streamline meter related work processes.
Improve the operating cost and efficiency of data center and network services.
Streamline Finance business processes.
Evaluate opportunities to combine or transfer similar work functions.
Develop and implement a comprehensive meter testing program.
Improve response to extended power outages.
Finalize and implement new MOU.
9
Strategic Performance Management Plan
Strategic Plan Performance Measures FY 2015-2018
Performance metrics and targets are a critical element of the Strategic Plan but differ from strategic
plan objectives. Objectives identify the action items that are necessary to achieve the strategic
vision. Performance measures are designed to ensure the day-to-day operations of the utility are
meeting agreed upon expectations. We will advise the Board in June when the measures have
been thoroughly developed and meaningful targets have been identified.
Customer Satisfaction: Percent positive/Percent surveyed.
Health & Safety Severity Rate: Number of lost days/Number of injuries resulting in lost
time.
Employee Turnover Rate: Number of voluntary terminations/Average number of
employee.
Training Hours per Employee: Total qualified training hours for all employees/Average
number of FTE.
Safety Training Program: Number of safety training hours /Number of field employees.
CIP Project Expenditures vs. Budget: Actual quarterly expenditures/Annual budget.
Construction Change Order Incidence: Total cost of change orders/Total original
construction contract amount.
Markout Accuracy: Number of markouts performed without an at-fault hit.
Answer Rate: Number of all calls answered/Number of all calls received.
O&M Cost per Account: Total operations O&M costs/Number of accounts.
Billing Accuracy: Number of correct bills /Number of total bills.
Overtime Percentage: Actual overtime costs (including comp time)/Budgeted overtime
costs.
Sewer Rate Ranking: Otay percentage ranking for the average bill for sewer among
regional agencies.
Water Rate Ranking: Otay percentage ranking among regional agencies.
10
Strategic Performance Management Plan
Debt Coverage Ratio: Qualified net operating revenues/Debt service requirements.
Reserve Level: Number of reserve funds that meet or exceed fund target levels/Total
number of reserve funds.
Distribution System Loss: 100 [volume purchased – (volume sold + volume used) /Volume
purchased].
Customer Satisfaction with Website: % satisfied customers based on Customer Opinion
and Awareness Survey.
Network Availability: % Time availability of core applications during business hours/Total
time.
Website Hits: Average total visitors per month.
Unplanned Disruptions: Number of customer accounts experiencing unplanned
disruptions
Technical Quality Complaint: 1000 X (number of technical quality–associated complaints )
Planned Potable Water Maintenance Ratio in $: Total planned maintenance cost/Total
maintenance cost.
Planned Recycled Water Maintenance Ratio in $: Total planned maintenance cost/Total
maintenance cost.
Planned Wastewater Maintenance Ratio in $: Total planned maintenance cost/Total
maintenance cost.
Direct Cost of Treatment per MGD: Total O&M costs directly attributable to sewer
treatment /Total volume (in MGD).
O&M Cost per MGP – Wastewater: Total O&M cost (less depreciation) /Volume in MG
processed.
% PM’s Completed – Fleet Shop: Number of PM's completed/Number of PM's scheduled
to be completed.
11
Strategic Performance Management Plan
% PM’s Completed – Reclamation Plant: Number of PM's completed/Number of PM's
scheduled to be completed.
% PM’s Completed – Pump/Electric Section: Number of PM's completed /Number of
PM's scheduled to be completed.
% PM’s Completed – Valve Maintenance Program: Number of PM's completed /Number
of PM's scheduled to be completed.
Water Distribution System Integrity: 100 (annual total number of leaks or breaks / total
miles of distribution pipes).
Planned Water Service Disruption Rate: Number of customers experiencing disruption
per 1000 accounts.
Potable Water Compliance Rate: All primary health regulations are met.
Collection System Integrity: Collection system failure /Total miles of collection system
piping.
Recycled Water System Integrity: Leaks or breaks/Number of miles of distribution system.
Sewer Overflow Rate: Total number of sewer overflows /Total miles of pipe in the sewage
collection system.
Annual Recycled Water Site Inspections: Percentage of required recycled water use sites
inspected per year.
Recycled Water Shutdown Testing: Percentage of recycled water use sites per year vs.
the number required by the DOH.
Emergency Facility Testing: Number of facilities and generators tested on an annual basis.
Leak Detection Program: Percentage distribution system surveyed for leaks.
Reservoir Inspection and Cleaning: Number of water reservoirs cleaned annually.
Main Flushing and Hydrant Maintenance: Number of mains flushed and fire hydrants
maintained.
12
Organization Chart
District Position Count - (140 Positions)
GENERAL MANAGER (5)
Assistant General Manager
Administrative
Services (14)
Finance
(34)
Water
Operations
(56)
Engineering
(19)
Human
Resources
Purchasing and
Facilities
Safety and Security
Administration
Controller
and
Budgetary
Services
Treasury and
Accounting
Services
Customer
Service
IT Applications
IT Operations
GIS
Water System
Operations
Utility
Maintenance/
Construction
Planning Design
Environmental
Water Resources
Public Services
Survey
Inspection
Construction
Citizens and
Customers
Information Technology
and Strategic Planning (12)
BOARD OF DIRECTORS
Meter
Maintenance
13
Budget Overview
Budget Guide
The District views the budget as an essential tool for proper financial management. This budget is
developed with input from the various department levels of the organization and is set prior to the
start of each fiscal year. It is designed and presented for the general needs of the District, its staff,
and citizens. The budget is a comprehensive and balanced financial plan that features District
services, resources and their allocation, financial policies, and other useful information to allow the
users to gain a general understanding of the District’s financial status and future plans. To help
readers navigate this document, the following is a general description of each of the tabulated
sections of the budget.
Budget Foreword
This introductory section contains descriptions and general information about the District, strategic
focus areas highlighting major initiatives and accomplishments, and the Budget Calendar and
Process.
History and Community Profile
Included in this section is the history of the District, along with the current and projected economic
conditions. It also includes statistics on the District’s customers, the region’s tax base, San Diego
rainfall, future development and projects that will have an impact on the District in the coming years.
Financial Summaries
This section contains an overview of the District’s revenues and expenditures by fund for the current
budgeted fiscal year, the prior years’ actual amounts, and the future estimated amounts. The prior
year’s actual amounts are unaudited due to timing of the completion of the financial statement audit;
actual amounts may vary pending the completion of the audit. It includes a description of each of
the revenue and expense categories as well as charts depicting their relationships.
Five-Year Forecast
The District prepares a comprehensive Rate Model each year based on budget input, trends, new
programs, and requirements. Estimates are made for cost increases, rate increases, targeted fund
balances, capital needs, and debt requirements. Analysis for the current budget year plus five
subsequent years is conducted and a six-year forecast is prepared based on the Rate Model results.
14
Budget Overview
Revenues and Expenditures
The District budgets revenues and expenditures by Potable, Recycled, and Sewer Systems. General
revenues and expenditures that are not specific to one system or department are budgeted in the
General Revenues and Expenses section. An allocation of overhead costs is made to equitably
distribute the cost of running the District among the various business segments.
Departmental Operating Budget
This section provides a summary of each department’s operating expenditures and detailed budget
information including its mission, responsibilities, three-year staffing schedules, performance
indicators, accomplishments, and goals. Also provided are graphical presentations of departmental
budget percentages to District totals, as well as summary expenditure information by division for
three fiscal years.
Capital Budget
An overview of the District’s Capital Improvement Program (CIP), the Water Resources Master Plan
(WRMP), the Sewer Master Plan, major assumptions and criteria, a six-year listing of CIP project
expenditures justifications, and the impact on the Operating Budget and capital purchases budget
for the fiscal year are located in this section.
Policies
This section includes a summary of the District’s financial policies and practices, including the
Reserve Policy, Investment Policy, and Debt Policy.
Appendix
The last section consists of a Glossary of budget and financial terms, List of Acronyms, and an Index.
15
Budget Overview
Budget Process
The District has integrated the Capital Improvement Program (CIP) Budget and the Operating
Budget. These budgets are developed based on the District’s Water Resources Master Plan, the
Sewer Master Plan, and Strategic Business Plan. New initiatives and programs are categorized into
the Balanced Scorecard perspectives. Appropriate budget amounts are determined by using the
historical data of operations and new growth, developers’ input, SANDAG projections, and economic
outlook.
To assure reliable, high-quality service to the growing customer base, the District has committed to
a number of long-range strategies that drive the budgeting process. The strategies and assumptions
used to develop the District’s integrated budget are:
An average projected long-term growth rate of 1.4%
Pass-through rate increases for costs imposed on the District by the wholesale water
providers
Accurate projections of capital budget needs (including replacement needs)
Reserve funding in accordance with the Reserve Policy to meet future growth demands and
maintain financial stability
Funding of the Strategic Plan initiatives as categorized into the Balanced Scorecard
perspectives
Avoid rate spikes by leveling rate increases over a six-year period
The Finance Department prepares the budget for the Potable, Recycled, and Sewer Systems. This is
done using estimated cost increases from the District’s wholesale water providers as well as
estimated sewer charge increases provided by the County and City of San Diego. Other significant
factors in the budget development include projected growth in customer accounts and weather.
Additionally, all general revenue and expense budgets are calculated using trend analysis and any
external factors that may affect these items.
Each year, the Finance Department provides departments with a Budget Workbook which gives
instructions on how to budget for personnel, administrative expenses, and materials and
maintenance expenses. Included in this workbook are historical trends, assumptions, and training
on how to enter the expense data into the District’s budget system.
16
Budget Overview
Budget Calendar
February March April May July – January
2/01/14
Chiefs review Strategic
Plan objectives and
performance measures
to ensure they are on
target for FY 2014
2/12/14
Chiefs submit request
for new personnel,
personnel
reclassification
changes,
advancements, and
long-term staffing to HR
2/19/14
HR to complete
preliminary review of
new personnel,
personnel
reclassification
changes, requests, and
advancements
2/21/14
Project Managers
submit CIP Budgets for
new projects and
changes to existing
projects in CIP Budget
application
2/25/14
Chiefs to submit
Operating and Admin
Budget; capital
purchases and
justifications; Labor
Budget Worksheet
03/03/14
HR to review new
personnel,
reclassifications and
change requests with
GM
Finance to review
Operating Budget and
reconciliation with
departments
03/07/14
Finance to review
preliminary CIP Budget
with Chief of Engineering
03/13/14
Engineering Department
reviews all CIP Budget
requests with AGM
03/18/14
Finance review for
question and answer of
CIP eligibility and
feasibility
Finance to have second
review of CIP Budget with
AGM and Engineering
03/19/14
Finance to review
Department Operating
Budgets with GM and
AGM
3/28/14
Finance to review
personnel cost with
Chiefs, AGM and GM and
review CIP Budget with
GM
04/04/13
Chiefs submit Position
Analysis Questionnaire
to HR for GM approval
Personnel requests
and request for
reclassifications
04/14/14
Finance to review
assumptions and rates
with Chiefs, AGM, and
GM
04/25/14
Preliminary budget
review with General
Manager
05/08/14
Practice run of
budget
presentation with
Finance, Chiefs,
AGM, and GM
05/19/14
Budget Workshop
and Special Board
Meeting presenting
the 2015-2018
Strategic Plan and
adopting the FY
2014-2015
Operating Budget,
adopting the 2015-
2020 Capital
Budget and the
providing the draft
water and sewer
rate increase
notices
08/07/14
Board approval of
water and sewer
rate increase
notices
08/30/14
Chiefs provide FY
2014 performance
measures and
accomplishments
for FY 2015 budget
publication
09/08/14-09/30/14
Rate increase
message inserted
with water and
sewer billing
01/01/15
Water and sewer
rate increase
17
Budget Overview
Personnel Budget
The budgeting of salaries and benefits is performed in the position budgeting module of the
Enterprise Resource Planning (ERP) system. This tool allows the District to budget for each
authorized position and the associated benefits in an automated fashion. Departments submit
requests for new positions, reclassifications, or advancements to the Assistant General Manager.
These requests are reviewed by the Assistant General Manager and then presented to the General
Manager for approval. Upon their approval, the Finance Department enters these changes, as well
as negotiated pay increases and benefit rate changes, into the position budget system. Position
budgeting calculates the salaries and benefits to be included in the District’s budget.
Administrative and Materials and Maintenance Budget
Administrative and Materials and Maintenance expenses are entered into the budget model of the
ERP system by individual requests. These requests are compared to last year’s budget and expenses
to determine reasonableness by the Finance Department. All costs are justified and supported by
explanations. These budgets are then presented to the General Manager and the Board of Directors
prior to adopting the budget.
Capital Improvement Plan (CIP) Budget
The Engineering Department issues budget instructions for the CIP budget process. Each project
manager uses the CIP Budget module system to review year-to-date project expenses and then
estimates cost to the end of the fiscal year. They also project future costs to complete the project.
Costs are adjusted for scope changes as well as construction cost increases. Engineering then
compiles the CIP Budget and submits it to the Assistant General Manager and the General Manager
for review prior to presentation to the Board of Directors.
Rate Model
Once budgets have been calculated, the Finance Department inputs all of the operating revenues
and expenses, CIP expenses, reserve funding, and reserve levels into the District’s Rate Model.
Inflators for cost and volume are input into the Rate Model to project the next six years of revenue
and expenses. This debt coverage ratio is also evaluated to ensure adequate levels. Rates are then
set for the current fiscal year, plus five subsequent years, such that all financial targets are met. Using
this comprehensive modeling tool, the District is able to smooth future rate increases, determine
when debt should be issued, and maintain all of the reserve levels in accordance with the Reserve
Policy.
18
Budget Overview
The District has a three-year Strategic Plan, and each year in the spring, the portion of the plan that
pertains to the upcoming fiscal year is presented to the Board of Directors for review and direction.
This is followed by a coordinated presentation of the budget by all departments, to the Board of
Directors for their approval at a special budget workshop in May. The review of the Strategic Plan
and the adoption of the budget on an annual basis give the District its direction for the following fiscal
year.
During the year, each department receives monthly budget and cost reports that are essential to
monitor and control costs. As events occur or conditions change, modifications to or deviations from
the original budget may be necessary. In the event the General Manager determines that an
emergency exists which requires immediate action; he may transfer appropriation within the budget
allocations or request that the Board of Directors increase the current budgeted funds.
Due to the size of the District’s CIP, a separate budget book has been prepared outlining in detail the
projects and expenditures required to ultimate build-out. A synopsis of the CIP may be found under
the Capital Budget section of this report. As part of the integrated budget, capital purchases have
been included within the CIP Budget.
The Budget Report is intended as a financial guide and may be modified by the Board of Directors
during Fiscal Year 2015. All approved modifications to the budget will be documented in the form of
a staff report and noted in the board meeting minutes.
Water
and
Sewer
Rates
Strategic
Plan
MWD/CWA &
Sewer Rates
Year End
Balances
Operating
Budget Input
CIP Budget
Input
Assumptions
Interest Rates
Inflation
Growth
Sales
Targets
Debt Coverage
Reserve Levels
Rate
Model
Operating
Budget
CIP
Budget
19
Budget Overview
Budget Basis
The District utilizes the accrual basis for budgeting which is the same as the basis of accounting
used in the audited financial statements, recognizing revenues and expenses in the period in which
they are earned and incurred, respectively. The District reports its activities on an enterprise fund
basis, which is used to account for operations that are financed and operated in a manner similar to
a private business enterprise and conforms to the guidelines of Generally Accepted Accounting
Principles (GAAP). The intent of the District is that the costs (including replacement cost of existing
assets) of providing goods or services to the general public on a continuing basis, be financed or
recovered primarily through user charges.
Fund Structure
The District budgets services in one of the three business segments: Potable, Sewer or Recycled.
Each business segment categorizes revenue and expenditure as a function of the Operating Budget,
Capital Improvement Plan Budget, or Developer Deposits. Please refer to the District’s Reserve Policy,
beginning on page 198, which provides the detailed flow of funds.
Recycle
Sewer
Sewer
Operating
Budget
Sewer
CIP Budget
Sewer
Developer
Deposits
Recycle
Operating
Budget
Recycle
Developer
Deposits
Recycle
CIP Budget
Potable
Potable
Operating
Budget
Potable
CIP Budget
Potable
Developer
Deposits
20
21
22
Past and Present
The Otay Water District was formed in 1956 by a small group
of ranchers, farmers, and other property owners concerned
about the declining quality and quantity of well water. In
1957, developers in south Spring Valley created the La Presa
County Water District to obtain water from the San Diego
County Water Authority (CWA). The CWA is the water
wholesale supplier of the member agencies in San Diego
County. In the fall of 1969, these two districts merged into
the Otay Water District.
Since then, the District has grown from a handful of
customers and two employees to become an
organization operating a water network with more than
726 miles of potable and 102 miles of recycled pipelines,
44 reservoirs, a water reclamation plant, and one of the
largest recycled water distribution systems in the State of
California. The character of the service area has also
changed from predominantly dry-land farming and cattle
ranching to businesses, high-tech industries, and large
master-planned communities. The District’s boundaries currently stretch from Otay Mesa and
eastern Chula Vista to Spring Valley, southern El Cajon, and Jamul.
The District continues to face numerous challenges with the slow recovery from the largest
economic downturn since the Great Depression and now with the severe drought the State of
California is facing. Additionally, the region experienced large water supply cost increases totaling
more than 90% since 2007. Finally, the inaction in the State Capitol to address the crisis in the
Sacramento – San Joaquin Bay Delta, the source of 30 percent of Southern California’s water supply
adds further uncertainty to the future cost and availability of water. Fortunately, the District, as a
member of the CWA, is well-positioned for water coming from the Colorado River due to the
Quantification Settlement Agreements (QSA).
In June 2007, the District dedicated the Supply Link Project
connecting the recycled water system to the City of San
Diego’s City South Bay Water Reclamation Plant. Today,
the District purchases about 3 million gallons per day
(mgd) of recycled water from the City of San Diego,
increasing to 6 mgd ultimately. In addition, 1 mgd is
produced at the District’s RWCWRF Plant. With recycled
water meeting a large portion of the landscape irrigation
needs, this means in the future approximately 7 mgd of potable water does not have to be pumped
hundreds of miles from northern California or the Colorado River. Instead, enough drinking water to
serve more than 15,000 homes is being replaced by recycled water in the years to come.
La Presa County Water District (ca. 1957)
23
Current Economic Conditions
The District services the needs of a growing population by purchasing water from the San Diego
County Water Authority (CWA). The CWA purchases its water from the Metropolitan Water District of
Southern California (MWD) and the Imperial Irrigation District (IID). The District takes delivery of the
water through several connections of large diameter pipelines owned and operated by CWA. The
District currently receives treated water from CWA and from Helix Water District (HWD) by contract
with CWA. In addition to the treated water deliveries from CWA, the District has several emergency
agreements with the City of San Diego, Helix Water District and Sweetwater Authority that allows
agencies to have flexibility to deal with emergency shutdowns. Through innovative agreements like
these, benefits can be achieved by both parties by using excess capacity of another agency and
diversifying local supply, thereby increasing reliability.
For several decades, the District has collected and recycled wastewater generated within the
Jamacha drainage basin and pumped the recycled water south to the Salt Creek basin where it is
used for irrigation and other non-potable uses. However, the demand for recycled water out-paced
the supply, requiring the District to supplement the limited supply of recycled water with potable
water. Through the agreement with the City of San Diego, the District has discontinued
supplementing its recycled demand with potable water. Once again, this decreases the demand on
potable water and increases reliability of the District’s supply.
The District’s sewer service area is growing at a slow but steady rate of approximately 0.2% each
year. Most of this growth is from small development projects or homeowners converting their septic
system to sewer because of environmental issues.
The District’s water service area was one of the fastest growing regions in the nation. During the
past decade, the population of the service area has nearly doubled. It is estimated that the District
is currently serving approximately 213,000 residents. The local and national recovery from the global
recession of 2009 has been slow; however, due to San Diego County’s diverse economy, it is
forecasted to do better than most of the nation.
Over the past 11 years, the District has added more than 7,152 new customer connections, with
2,189 occurring in Fiscal Year 2004. In Fiscal Year 2014, the District sold 188 meters which is an
average of 16 meters per month.
24
The Future
The District continues to use the challenges presented by growth to create new opportunities and
new organizational efficiencies. By utilizing and continuing to refine its Strategic Business Plan, it
has captured the Board of Director’s vision and united its staff in a common mission. The
organization has achieved a number of significant accomplishments based on its successful
adherence to its Strategic Business Plan. The District is not only poised to continue successfully
providing an affordable, safe, and reliable water supply for the people of its service area, but is set
to reap the rewards of greater efficiencies and economies of scale.
Future Development
As in the previous fiscal year, the District employed an Economist to provide an Economic Outlook
of the national economy, San Diego County’s economy, the future of south San Diego County, and
an overview of the Otay Water District. Projections of future development indicate that the ratio of
multi-family units will increase because the remaining land is zoned for multi-family development.
Projected Units for Sale and Rental
Otay Water District Service Area
FY 2015 through FY 2020
Project FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 Total
Total Single-Family Units 129 288 419 634 693 793 2,956
Total Condominium 49 167 527 639 605 663 2,650
Total Rental 330 802 835 667 657 714 4,005
Total Units 508 1,257 1,781 1,940 1,955 2,170 9,611
% Multi-Family 75% 77% 76% 67% 65% 63% 69%
Source: The London Group Realty Advisors, April 2014
Using the economist report, the District’s engineering staff projects that over the next six years the
District will sell another 3,166 meters which translates to 4,380 equivalent dwelling units (EDUs).
These projections have been incorporated in the Five-Year Forecast on page 48.
Projected Meter Sales in EDUs
25
The Future
San Diego County Water Supply
San Diego County imports about 90 percent of its water from the Colorado River and Northern
California. Since these sources face legal and environmental constraints, the region has been
exploring other ways to ensure an adequate water supply, including increased water recycling,
more aggressive conservation programs, increased water storage, groundwater desalination, and
seawater desalination.
Carlsbad Desalination Project
The District’s water wholesaler, the San Diego County Water Authority, voted on November 29,
2012, to approve a water purchase agreement with Poseidon Resources Corporation (Poseidon).
Under the water purchase agreement, the County Water Authority will purchase 48,000 to 56,000
acre-feet of water annually from the desalination plant located in Carlsbad, California. The plant
is expected to produce up to 50 million gallons
of water a day beginning in 2016 and will
generate enough water to meet 7 percent of the
region’s demand. The total price for the
desalinated water, including related upgrades to
the Water Authority’s pipelines and treatment
plant, is projected to start between $2,014 and
$2,257 per acre-foot (in 2012 dollars). An acre-foot
is approximately 325,900 gallons, or enough to
supply two typical single-family households of
four for a year.
Rosarito Desalination and the Otay Mesa Conveyance and Disinfection
System Projects
The Rosarito Desalination Project is comprised of a 100 million gallons per day seawater reverse
osmosis desalination plant, together with a pump station and pipeline, to convey water to Tijuana
and to the District. This will be the first cross-border
water supply project of its kind and requires public
messaging to inform key stakeholders and the
public of the significance of the Project. If
successful, this Project will start delivering water to
District customers by early 2018. The Project
includes the construction of facilities on the U.S. side
to include a large diameter pipeline 3.5 miles long, a
pump station, a disinfection facility and the use of
the Roll Reservoir in Otay Mesa.
Carlsbad Desalination Project rendering
Rosarito Desalination Project rendering
26
Demographics
The District boundaries shown in the map encompass an area of approximately 125.5 square miles
in San Diego County, located immediately east of the City of San Diego metropolitan area and
running from the City of El Cajon south to the international border. SANDAG creates and maintains
a tremendous quantity of demographic,
economic, land use, transportation and criminal
justice information about the San Diego region.
The demographic data include population
characteristics like age, education, and
employment. Because of the overlapping of the
District’s service area with the cities of Chula Vista,
La Mesa, El Cajon, and the unincorporated areas
of Spring Valley and Jamul, the following
demographic data is from the City of Chula Vista
as it most closely represents the District.
Demographics of the City of Chula Vista
The population of Chula Vista has grown from 83,927 in 1980 to 249,382 in 2012. This represents an
increase of 165,455 in the past 30 years or a 197.1% increase, which correlates to the District’s rapid
growth for the same period. As shown in the table below, the ethnic/racial makeup of the City
consists of 58% Hispanic, 20% White, 14% Asian, 4% Black, and the remaining 4% is all other groups.
In a recent economic forecast conducted by The London Group, the District’s median age is 35.5 and
33.0% of adults have a four-year degree or higher. The average household income is $96,791 and
the median household income is $80,479.
2012 City of Chula Vista Demographics
Population 249,382
Persons/Household 3.17
Ethnic/Racial makeup
Hispanic 58%
White 20%
Asian 14%
Black 4%
Other 4%
Median Age 35.5
Percentage with 4 year degree or higher 33.0%
Average Household Income $ 96,791
Median Household Income $ 80,479
Source: SANDAG; The London Group, Claritas Demographics
27
Water Rate Comparison
The District strives to remain cost effective in its rate setting, by controlling operating cost, yet passing
through the full cost of supply. In June 2014, the District conducted a survey of the water rates of the
water providers within San Diego County. The following chart shows that the District is in the top 11
of the lowest water rates.
114.71
112.76
107.71
107.40
96.88
91.32
89.86
89.05
87.68
84.04
83.84
83.57
81.66
79.68
78.03
76.93
76.22
75.24
74.45
74.41
71.55
70.27
62.99
$- $20 $40 $60 $80 $100 $120
Rainbow
Padre Dam W
Ramona
Padre Dam E
Valley Center
Escondido
Fallbrook
Vista
Sweetwater
Del Mar
Rincon
San Diego
Otay
Carlsbad
Olivenhain
Helix
Vallecitos
Yuima
Santa Fe
Poway
Oceanside
San Dieguito
Lakeside
* At the time of the survey in June 2014, the member agency's FY 2015 rate was unavailable. The
estimated increase is equal to the FY 2015 average rate increase.
SURVEY OF MEMBER AGENCY WATER RATES
BASED ON 14 UNITS OF WATER USE AND ¾ METER SIZE
PROJECTED WATER BILL FOR FY 2015
*
*
*
*
*
*
*
28
Sewer Rate Comparison
123.32
86.11
84.92
81.68
79.74
72.67
69.40
68.58
66.67
62.58
60.91
59.82
59.82
58.31
57.87
56.54
56.31
56.24
54.08
50.26
45.16
45.19
37.45
35.06
33.88
29.57
26.03
23.67
$- $20 $40 $60 $80 $100 $120
Del Mar
Fallbrook
Olivenhain
Padre Dam
Rainbow
Imperial Beach
San Diego, City
Encinitas
Rancho Santa Fe
Buena
El Cajon
La Mesa
Lemon Grove
Chula Vista
Oceanside
Escondido
Ramona
Vista
Valley Center - MG
Solana Beach
Otay
Poway
Vallecitos
Coronado, City
National City
San Diego, County
Carlsbad
Leucadia
The District conducted a survey of the rates of the sewer providers within San Diego County. Sewer
rates are billed at either a fixed or variable rate. The following chart shows the various sewer
providers and the type of rate that is charged to the consumers. The District is among the lowest
sewer rates in the County of San Diego.
* At the time of the survey in June 2014, the member agency's FY 2015 rate was unavailable. The
estimated increase is equal to the FY 2015 average rate increase.
SEWER RATE COMPARISON, SAN DIEGO COUNTY
BASED ON 14 UNITS OF WATER USE AND ¾ RESIDENTIAL METER SIZE
PROJECTED SEWER BILL FOR FY 2015
*
*
*
*
*
*
*
*
*
*
*
*
*
29
Service Area Assessed Valuation
Actual Budget
Source: County of San Diego Auditor and Controller
Otay Water District’s service area encompasses property with over $23.3 billion of assessed valuation.
Properties are assessed at 100% of their full value less exemption from taxation under the law and
homeowner’s exemptions. The District receives its portion of the 1% property tax, according to
Proposition 13 and AB8. With the very recent increases in the assessed valuation, the District will benefit
by receiving its proportionate share of this increase.
Five-Year Service Area Assessed Valuation, in millions ($)
$-
$4,000
$8,000
$12,000
$16,000
$20,000
$24,000
$28,000
2010 2011 2012 2013 2014
$24,199 $23,519 $23,145 $22,836 $23,304
30
Assessed Percent
Value to Total
1. AVALON II CALIFORNIA VALUE IV LP 126,480,000$ 0.55%
2. GGP-OTAY RANCH LP 118,866,673 0.52%
3. REGULO PLACE APARTMENTS INVESTORS LLC 92,415,852 0.40%
4. CORRECTIONS CORP OF AMERICA 79,740,133 0.34%
5. SUNBOW PARTNERS LP 77,585,000 0.33%
6. SP LAVIDA REAL LLC 70,961,120 0.30%
7. CAMDEN USA INC. 65,411,407 0.28%
8. SSBTL CREV LLC 51,689,601 0.22%
9. BRE-FM CA LLC 51,478,982 0.22%
10. SPE TERRA NOVA VILLAS APARTMENT OWNER LLC 40,716,027 0.17%
Total $ 775,344,795 3.33%
Total Service Area Assessed Valuation $ 23,304,103,069
,,
Ten Principal Taxpayers 775,344,795$
Other Taxpayers 22,528,758,274
23,304,103,069$
Source: County of San Diego Auditor and Controller
Organization
Ten Principal Taxpayers as of June 30, 2014
31
Customer Customer Annual % of Water
Name Type Revenues Sales
1. CITY OF CHULA VISTA Publicly Owned 3,595,360$ 4.4%
2. STATE OF CALIFORNIA Publicly Owned 1,130,281 1.4%
3. COUNTY OF SAN DIEGO Publicly Owned 935,465 1.2%
4. EASTLAKE III COMMUNITY Commercial 841,818 1.0%
5. EASTLAKE COUNTRY CLUB Commercial 618,403 0.8%
6. CHULA VISTA SCHOOL DISTRICT Publicly Owned 510,535 0.6%
7. HIGHLANDS GOLF COMPANY LLC Commercial 464,298 0.6%
8. SANDAG Commercial 404,250 0.5%
9. SWEETWATER SCHOOL DISTRICT Publicly Owned 390,445 0.5%
10. CITY OF SAN DIEGO Publicly Owned 362,662 0.4%
Total 9,253,517$ 11.4%
*Actual FY14 Water Sales 81,287,163$
Ten Largest Customers 9,253,517$ 11.4%
Others 72,033,646 88.6%
81,287,163$ 100.0%
Ten Largest Customers - Fiscal Year 2014
*Actuals unaudited
32
San Diego Rainfall
Although San Diego received less than normal rainfall in Fiscal Year 2014, the District is expecting that
San Diego's rainfall will return to its average pattern and volume for Fiscal Year 2015. The 10-year
average of 9.24 inches for San Diego rainfall reflects the long-term drought conditions for our area. San
Diego's rainfall average over 20 years is 8.96 inches; the 30-year average is 9.74 inches; and the 40-year
average is 10.34 inches.
San Diego rainfall, while a contributing factor, is not the controlling factor for our potable water supply
shortage. The San Diego region imports 90% of its potable supply, so conditions elsewhere significantly
affect the actual amount of water available to the District. In the event the amount of water supplied to
the District is reduced, water sales revenues would decrease. Related water purchase expenses would
also be reduced, mitigating the impact of the decrease in revenues. The amount of any supply
reduction would dictate the magnitude of the District's response and type of reaction.
The San Diego rainfall information shown in the chart above uses data from the San Diego Airport at
Lindbergh Field and is provided by the Western Regional Climate Center. More information can be
obtained from their website: http://www.wrcc.dri.edu. The Western Regional Climate Center’s website
data, in turn, is derived from data received from the National Climatic Data Center, the National Weather
Service, the National Resource Conservation Service, the Bureau of Land Management, the U.S. Forest
Service, and other federal, state, and local agencies. Although the data reflects actual rainfall at
Lindbergh field, it is representative of rainfall for the area served by the Otay Water District.
22.50
5.42 3.85
7.49 9.17 11.01 12.66
8.03
6.48 5.74
0
5
10
15
20
25
30
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
In
c
h
e
s
Fiscal Year
Fiscal Years 2005-2014
Annual Rainfall 10-Year Average Rainfall (9.24 inches)
33
Budget Summary
The FY 2015 Operating Budget is summarized and presented in the Operating Budget Summary- General
Fund on pages 40-41. This schedule presents the District’s overall Revenues and Expenditures by type.
Also included in this section is the Operating Budget Summary by System on page 42 which presents the
General Fund budget in the business segments of Potable, Recycled, and Sewer. Additional schedules
provided in this section are the General Fund Revenues; Expenditures and Transfers; Fund Balance
Summary by Fund; Revenues and Expenditures by Fund; and Revenues and Expenditures by Type - All
Funds: and are presented on pages 43-47.
For Fiscal Year 2015, the District has approved an increase in water rates primarily to pass-through cost
increases from water suppliers. The District also approved an increase in sewer rates for the rehabilitation
of the aging sewer system. Cost increases are being experienced by our neighboring water agencies and
most are encountering similar rate increases.
The Operating Budget for Fiscal Year 2015 is $91.6 million in comparison to the previous fiscal year budget
of $86.1 million. The $5.5 million increase is a result of water supply rate increases of 2.5% from MWD
and 3.6% from CWA. CWA’s increase is due to the high cost of supply programs, including the early
delivery of Carlsbad desalination water. CWA also needs to secure a prudent financial position by
achieving the rate stabilization fund targets and smoothing the water rates.
GENERAL FUND REVENUES
Potable Water Sales
Potable water sales revenue collected from the sale of water including: system charges, energy charges,
and penalties, accounts for 78.5% of the District’s operating revenues. It is estimated that 29,192.4 acre-
feet of potable water will be sold during FY 2015, which is an increase of 207.5 from FY 2014. Budgeted
revenues from water sales are projected to be $71.9 million, an increase of 7.3% from FY 2014, which is
primarily due to necessary rate increases from CWA and MWD. Additional schedules relating to potable
water sales are included in the Potable Revenues and Expenditures section of this budget.
Recycled Water Sales
Recycled water sales revenue is generated from the sale of 3,955.5 acre-feet of recycled water. The
recycled rate is 15% less than the potable irrigation rate. The FY 2015 sales revenue budget is $8.8 million
which is an increase of $486,500 from FY 2014 and includes the incentive credits provided by MWD and
the CWA.
Sewer Revenues
Sewer charges are the monthly fees collected and represents 99% of the District’s sewer revenue. The
remaining 1% of revenue is derived from penalties. The monthly fees are determined by volume of flow
and the strength of solids discharged into the sewer system. The FY 2015 Sewer Revenues are
projected to be $3.0 million which is an increase from the prior year of $306,100.
34
Budget Summary
Meter Fees
Meter fees are charges collected for new water service connections. Fees vary depending upon meter
size and the type of service. The FY 2015 revenue from meter fees is $51,500, which is $30,100 less than
the FY 2014 budget. The costs associated with meter installations are included in the Operating Expenses
section.
Capacity Fee Revenues
These fees are earned by the General Fund for the Engineering Department’s support for expansion
functions. The FY 2015 capacity fee revenue is $1.1 million which is a decrease of $140,600 from
FY 2014.
Betterment Fees for Maintenance
These fees are earned by the General Fund for the Water Operations Department’s maintenance of
certain District assets. The FY 2015 Betterment Fees are $301,800, which is a decrease of $474,900 from
FY 2014. These fees have decreased because collections within Improvement Districts 1 and 3 expired
January 2013. The fees also decreased due to the discontinuation of collections within Improvement
Districts 9, 10 and the North District effective January 1, 2015.
Tax Revenues
The District receives 1% property tax revenues and availability fees on properties within the District’s
boundaries. These revenues are collected by the County of San Diego via the Property Tax Roll and are
remitted to the District annually. Based on the historical collections from the County of San Diego, the
District’s projected tax revenues of $3.7 million an increase of $166,600 compared to FY 2014.
Spending limits for the District are governed by the 1979 passage of California Proposition 4, Limitations
of Government Appropriations (Article XIII B of the California Constitution, commonly known as the GANN
limit). Proposition 4 places an appropriations limit on most spending from tax proceeds. The following
table shows that the District is below the Gann Limit.
Otay Water District Appropriations Limit (in thousands)
Fiscal Year 2010 2011 2012 2013 2014
Gann Limit $ 3,826 $ 3,787 $ 3,917 $ 4,120 $ 4,392
Appropriations subject to the limit $ 3,008 $ 2,924 $ 2,890 $ 2,892 $ 2,968
Non-Operating Revenues
Non-operating revenues are revenues that are not directly related to the operation of a water or sewer
utility and include such items as District property rentals and leases, and billing services for the City of
Chula Vista. The District projected $1.9 million in revenues for FY 2015 which is an increase of $101,800
compared to FY 2014.
35
Budget Summary
Interest
Interest is earned by each fund that has a positive balance and is paid by each fund with a negative
balance. Interest income on General Fund balances is considered general use revenue. Interest revenue
is projected to be $77,400 in FY 2015 which is $8,300 more than in FY 2014.
GENERAL FUND EXPENDITURES
Potable Water Purchases
Water purchases are the expenses of purchasing 30,793.3 acre-feet for the District's potable water supply.
A provision has been made to allow 1,600.9 acre-feet of water for District usage, leakage, and evaporation.
Total Potable Water Purchases are projected to be $34.5 million in FY 2015 which is an increase of $1.5
million compared to FY 2014.
Recycled Water Purchases
Recycled water purchases are the expenses of purchasing 2,906.4 acre-feet for the District's recycled
water supply which is a slight decrease of 9.6 acre-feet. In addition to the purchases there is a contractual
Take-or-Pay payment budgeted for 1,612.8 acre-feet which is 15.3 acre-feet more than FY 2014. Total
Recycled Purchases remain the same in FY 2015 at $1.6 million.
Infrastructure Access Charge
This charge was established in FY 1999 by CWA to finance a portion of its fixed annual costs including
annual payments of principal and interest on debt as well as 80% of all operation and maintenance costs.
This fixed charge is based on the number of "household meter equivalents." Infrastructure access
charges are projected at $1.9 million in FY 2015.
Customer Service Charge
This charge was established in FY 2004 by CWA as a fixed charge. The Customer Service Charge is set
to recover costs necessary to support CWA’s development of policies and implementation of programs
that benefit the region as a whole. Customer service charges are projected to remain at $1.8 million in
FY 2015.
Emergency Storage Charge
The Emergency Storage Charge was established by CWA in calendar year 2003, to recover costs
associated with non-agricultural water deliveries and is allocated based on each member agency’s share
of deliveries. Emergency storage charges are projected to be $4.7 million which is an increase of
$225,700 compared to FY 2014.
Capacity Reservation Charge
This charge was established in FY 2002 by the MWD, as a fixed charge on a member agency's requested
maximum daily capacity. The Capacity Reservation Charge is a charge per cubic-foot-second (cfs) and
is applied to the amount of capacity (daily flow) a member agency expects to use during the peak period
from May through September. Capacity reservation charges are projected to be $701,400 which is an
increase of $170,400 compared to FY 2014.
36
Budget Summary
Readiness-to-Serve Charge
This charge was established in FY 1996 by MWD, to recover the principal and interest payments on non-
tax supported debt service used to fund the capital improvements necessary to meet the continuing
reliability and quality needs associated with current demands. These costs are offset by standby charges
collected by MWD on the tax bills of District customers. These charges are projected to be $1.8 million
which is a slight increase of $59,500 compared to FY 2014.
Power Costs
Power costs are expenses associated with the transmission and distribution of water to customers. The
pumping costs to distribute water vary with elevation and will increase as water sales increase. Power
costs are projected to be $2.8 million, which is an increase of $145,100 compared to FY 2014.
Labor and Benefits
Labor and benefits are the wages and fringe benefits for FY 2015 Full-time Equivalent (FTE) employees.
Labor costs are reduced by the number of hours that are charged to non-operating Capital Improvement
Program (CIP) and developer deposit projects. The detail of actual personnel and payroll related
expenses is included in the Departmental Operating Budget section. Labor and benefits increased by
$1,072,100 from $18.7 million to $19.7 million in FY 2015.
Administrative Expenses
Administrative expenses are costs incurred by various departments that are directly related to District
operations. Administrative expenses are projected to be $5.4 million in FY 2015 which is an increase of
$336,600 compared to FY 2014. Additional details are supplied in the Departmental Operating Budget
section.
Materials and Maintenance Expenses
Materials and maintenance expenses are costs associated with the operation and maintenance of
District facilities. Materials and maintenance expenses are projected to be $3.6 million in FY 2015 which
is $86,900 more than FY 2014. Additional details are supplied in the Departmental Operating Budget
section.
37
Budget Summary
GENERAL FUND RESERVES
Expansion Reserves
These reserves are established to fund expansion needs including project costs, existing debt payments,
and new debt that will be issued in the future to fund expansion. For FY 2015, these reserves will be
funded with $2.5 million from Recycled Water.
Betterment Reserves
These reserves are established to fund the betterment needs of facilities including project costs, existing
debt payments, and new debt that will be issued in the future to fund betterment. For FY 2015, these
reserves will be funded from Potable and Recycled Water for a total of $3.5 million.
Replacement Reserves
These reserves are established to fund the replacement needs including project costs, existing debt
payments, and new debt that will be issued in the future to fund replacement. For FY 2015, these reserves
will be funded from Potable, Recycled Water, and Sewer Funds totaling $3.3 million. In addition, Potable
Water will fund the Sewer Replacement Reserve with $127,000, a repayment of borrowed funds.
New Water Supply Reserves
These reserves are established to fund new water supply needs including project costs, existing debt
payments, and new debt that will be issued in the future to fund expansion. For FY 2015, this reserve will
be funded with $705,000 from Potable Water.
FUND TRANSFERS
Fund transfers are necessary to ensure that each fund pays its fair share of costs, or to achieve required
fund balances per the District’s policy.
Transfer from Potable General Fund to Sewer General Fund
For FY 2015, the Potable General Fund is budgeted to send $553,800 as a repayment to the Sewer General
Fund. A corresponding transfer in to the Sewer General Fund is budgeted for the same amount.
Transfer to OPEB Trust
For FY 2015, the Potable General Fund is budgeted to fund the OPEB Trust $647,100 for retiree health
liabilities.
Transfer to Potable General Fund
For 2015, the Potable General Fund balance is budgeted to receive $1.6 million. This is the excess of
revenues, expenses, and fund transfers to meet reserve and debt coverage target levels.
38
Budget Summary
OTHER FINANCIAL SCHEDULES/PRESENTATIONS
Operating Budget Summary by System
The Budget Summary by System schedule reflects the separation of operating revenues and expenses
among potable water, recycled water, and sewer. This is provided as information but is necessary to
ensure sufficient revenue is collected from sewer customers versus water customers.
General Fund – Revenue, Expenditures, and Transfers
This schedule shows the General Fund’s total revenues, expenditures, and transfers showing the prior
year’s actuals, the prior year’s budget, and unaudited actuals, the current year’s budget, along with the
variance from the prior year’s budget.
Fund Balance Summary by Fund
This schedule shows each fund’s balance at June 30, 2014, and the projected balance for June 30, 2015.
These balances are based on the results of the budget and rate model. This includes transfers between
funds made to meet target levels as outlined in the Reserve Policy.
Revenues and Expenditures by Fund
The Revenues and Expenditures by Fund schedule reflects each fund’s revenues and expenditures by
business line, where appropriate. This schedule is reconciled to the Fund Balance Summary and
excludes transfers between funds.
Revenues and Expenditures by Type – All Funds
This is a consolidated schedule of revenues and expenditures, including sources and uses of funds but
excluding fund transfers.
39
FY 2013 FY 2014 FY 2014 FY 2015
11-Actual Budget Actual * Budget $ %
REVENUES
Potable Water Sales 63,669,294$ 67,033,500$ 71,272,396$ 71,959,100$ 4,925,600$ 7.3%
Recycled Water Sales 8,488,486 8,340,100 10,014,767 8,826,600 486,500 5.8%
Sewer Revenues 2,618,291 2,701,600 2,757,867 3,007,700 306,100 11.3%
Meter Fees 108,538 81,600 78,465 51,500 (30,100) (36.9%)
Capacity Fee Revenues 1,237,085 1,291,200 1,170,985 1,150,600 (140,600) (10.9%)
Betterment Fees for Maintenance 612,663 776,700 485,738 301,800 (474,900) (61.1%)
Tax Revenues 3,600,263 3,597,100 3,624,363 3,763,700 166,600 4.6%
Non-operating Revenues 1,859,023 1,846,000 2,057,519 1,947,800 101,800 5.5%
Interest 59,399 69,100 124,196 77,400 8,300 12.0%
OTransfer from OPEB Reserve 879,500 149,800 149,800 - (149,800) (100.0%)
ExTransfer from Potable General Fund - - - 553,800 553,800 100.0%
General Fund Draw Down 1,541,900 214,400 214,400 - (214,400) (100.0%)
TOTAL REVENUES 84,674,444$ 86,101,100$ 91,950,496$ 91,640,000$ 5,538,900$ 6.4%
EXPENDITURES
Potable Water Purchases 32,063,055$ 33,028,900$ 36,151,147$ 34,521,500$ 1,492,600$ 4.5%
Recycled Water Purchases 1,391,947 1,599,500 1,661,887 1,601,500 2,000 0.1%
CWA - Infrastructure Access Charge 1,818,204 1,856,100 1,856,202 1,901,400 45,300 2.4%
CWA - Customer Service Charge 1,688,369 1,753,600 1,753,840 1,792,200 38,600 2.2%
CWA - Emergency Storage Charge 4,086,425 4,515,500 4,515,596 4,741,200 225,700 5.0%
MWD - Capacity Reservation Charge 503,873 531,000 531,318 701,400 170,400 32.1%
MWD - Net RTS and Standby Charge 1,609,710 1,740,500 1,740,511 1,800,000 59,500 3.4%
Subtotal - Water Costs 43,161,582$ 45,025,100$ 48,210,501$ 47,059,200$ 2,034,100$ 4.5%
Power 2,430,461$ 2,693,300$ 2,808,846$ 2,838,400$ 145,100$ 5.4%
Labor and Benefits 18,361,022 18,675,500 18,876,033 19,747,600 1,072,100 5.7%
Administrative Expenses 4,254,758 5,082,600 4,085,394 5,419,200 336,600 6.6%
Materials & Maintenance 3,727,095 3,532,900 3,157,876 3,619,800 86,900 2.5%
Subtotal - Operations Costs 28,773,335$ 29,984,300$ 28,928,149$ 31,625,000$ 1,640,700$ 5.5%
Expansion Reserve 3,936,000 3,428,000 3,428,000 2,538,900 (889,100) (25.9%)
B Betterment Reserve 1,120,000 125,000 125,000 3,530,000 3,405,000 2724.0%
R Replacement Reserve 743,000 4,230,000 4,230,000 3,270,200 (959,800) (22.7%)
Transfer to Sewer General Fund 595,000 152,800 152,800 553,800 401,000 262.4%
TOOPEB Trust - 1,242,900 1,242,900 647,100 (595,800) (47.9%)
Potable General Fund 2,285,800 1,913,000 1,913,000 1,583,800 (329,200) (17.2%)
Sewer Replacement 2,099,000 - - 127,000 127,000 -
New Supply Reserve - - - 705,000 705,000 -
Subtotal - Reserve Funding 10,778,800$ 11,091,700$ 11,091,700$ 12,955,800$ 1,864,100$ 16.8%
TOTAL EXPENDITURES 82,713,717$ 86,101,100$ 88,230,350$ 91,640,000$ 5,538,900$ 6.4%
EXCESS REVENUES (EXPENDITURES)1,960,727$ -$ 3,720,146$ -$ -$ (100.0%)
Operating Budget Summary - General Fund
Budget to Budget
40
Operating Budget Summary - General Fund
Potable Water Sales 71,959,100$ 78.5%
Recycled Water Sales 8,826,600 9.6%
Sewer Revenues 3,007,700 3.3%
Meter Fees 51,500 0.1%
Capacity Fee Revenues 1,150,600 1.3%
Betterment Fees for Maintenance 301,800 0.3%
Tax Revenues 3,763,700 4.1%
Non-operating Revenues 1,947,800 2.1%
Interest 77,400 0.1%
Transfers 553,800 0.6%
91,640,000$ 100.0%
Potable Water Purchases 45,457,700$ 49.6%
Recycled Water Purchases 1,601,500 1.8%
Power 2,838,400 3.1%
Labor and Benefits 19,747,600 21.5%
Administrative Expenses 5,419,200 5.9%
Materials & Maintenance 3,619,800 4.0%
Reserve Funding 12,955,800 14.1%
91,640,000$ 100.0%
FY 2015 Operating Revenues
FY 2015 Operating Expenditures
41
Potable Recycled Sewer Total
REVENUES
Water Sales 71,959,100$ -$ -$ 71,959,100$
Recycled Water Sales - 8,826,600 - 8,826,600
Sewer Revenues - - 3,007,700 3,007,700
Meter Fees 51,100 400 - 51,500
Capacity Fee Revenues 1,150,600 - - 1,150,600
B Betterment Fees for Maintenance 301,800 - - 301,800
Tax Revenues 3,712,100 - 51,600 3,763,700
Non-operating Revenues 1,914,000 - 33,800 1,947,800
Interest 65,400 7,400 4,600 77,400
TF Transfer from Betterment - - 553,800 553,800
TOTAL REVENUES 79,154,100$ 8,834,400$ 3,651,500$ 91,640,000$
EXPENDITURES
Water Costs
Water Purchases 34,521,500$ 1,601,500$ -$ 36,123,000$
CWA - Infrastructure Access Charge 1,901,400 - - 1,901,400
CWA - Customer Service Charge 1,792,200 - - 1,792,200
CWA - Emergency Storage Charge 4,741,200 - - 4,741,200
MWD - Capacity Reservation Charge 701,400 - - 701,400
MWD - Net RTS and Standby Charges 1,800,000 - - 1,800,000
Subtotal - Water Costs 45,457,700$ 1,601,500$ -$ 47,059,200$
Operations Costs
Power 2,188,400 469,400 180,600 2,838,400
Labor and Benefits 17,663,500 1,181,800 902,300 19,747,600
Administrative Expenses 4,927,100 285,600 206,500 5,419,200
Materials & Maintenance 1,921,800 295,900 1,402,100 3,619,800
Subtotal - Operations Costs 26,700,800$ 2,232,700$ 2,691,500$ 31,625,000$
Reserve Funding
#Expansion Reserve - 2,538,900 - 2,538,900
B Betterment Reserve 2,805,000 725,000 - 3,530,000
ReReplacement Reserve 675,000 1,679,000 916,200 3,270,200
Sewer General Fund 553,800 - - 553,800
TOOPEB Trust 546,000 57,300 43,800 647,100
Potable General Fund 1,583,800 - - 1,583,800
Sewer Replacement 127,000 - - $127,000
New Supply Reserve 705,000 - - 705,000
Subtotal - Reserve Funding 6,995,600$ 5,000,200$ 960,000$ 12,955,800$
TOTAL EXPENDITURES 79,154,100$ 8,834,400$ 3,651,500$ 91,640,000$
EXCESS REVENUES (EXPENDITURES)-$ -$ -$ -$
FY 2015 Operating Budget Summary by System
42
FY 2013 FY 2014 FY 2014 FY 2015
11-Actual Budget Actual * Budget $ %
REVENUES
Water/Sewer Rates 74,776,072$ 78,075,200$ 84,045,030$ 83,793,400$ 5,718,200$ 7.3%
#Meter Fees 108,538 81,600 78,465 51,500 (30,100) (36.9%)
#Capacity Fee Revenues 1,237,085 1,291,200 1,170,985 1,150,600 (140,600) (10.9%)
#Betterment Fees for Maintenance 612,663 776,700 485,738 301,800 (474,900) (61.1%)
Tax Revenues 3,600,263 3,597,100 3,624,363 3,763,700 166,600 4.6%
#Non-operating Revenues 1,859,023 1,846,000 2,057,519 1,947,800 101,800 5.5%
#Interest 59,399 69,100 124,196 77,400 8,300 12.0%
Transfers 2,421,400 364,200 364,200 553,800 189,600 52.1%
TOTAL REVENUES 84,674,444$ 86,101,100$ 91,950,496$ 91,640,000$ 5,538,900$ 6.4%
EXPENDITURES
Water Costs 43,161,582$ 45,025,100$ 48,210,501$ 47,059,200$ 2,034,100$ 4.5%
#Power 2,430,461 2,693,300 2,808,846 2,838,400 145,100 5.4%
#Labor and Benefits 18,361,022 18,675,500 18,876,033 19,747,600 1,072,100 5.7%
#Administrative Expenses 4,254,758 5,082,600 4,085,394 5,419,200 336,600 6.6%
#Materials & Maintenance 3,727,095 3,532,900 3,157,876 3,619,800 86,900 2.5%
Transfers 10,778,800 11,091,700 11,091,700 12,955,800 1,864,100 16.8%
TOTAL EXPENDITURES 82,713,717$ 86,101,100$ 88,230,350$ 91,640,000$ 5,538,900$ 6.4%
1,960,727$ -$ 3,720,146$ -$ -$ (100.0%)
General Fund - Revenues, Expenditures and Transfers
Budget to Budget
EXCESS REVENUES
(EXPENDITURES)
General Fund Revenues, Expenditures and Transfers, in millions ($)
$60
$80
$100
Actual Budget Actual * Budget
FY 2013 FY 2014 FY 2014 FY 2015
Total Revenues Total Expenditures
*Actuals unaudited
43
Actual*Projected
Balance Interfund Balance
June 30, 2014 Revenues Expenditures Transfers (1)June 30, 2015
GENERAL FUND
Potable 19,778,730$ 79,154,100$ 79,154,100$ 1,583,800$ 21,362,530$
Recycled 5,326,085 8,834,400 8,834,400 (1,995,900) 3,330,185
Sewer 2,249,433 3,651,500 3,651,500 (1,088,300) 1,161,133
Total General Fund 27,354,248 91,640,000 91,640,000 (1,500,400) 25,853,848
EXPANSION FUND
Potable and Recycled (2)4,396,988 1,903,900 6,127,200 40,000 213,688
Sewer 66,206 200 - (40,500) 25,906
Total Expansion Fund 4,463,194 1,904,100 6,127,200 (500) 239,594 (3)
BETTERMENT FUND
Potable 3,737,710 1,098,500 3,699,800 2,805,000 3,941,410
Recycled (393,039) 4,200 175,400 725,000 160,761
Sewer 1,228,079 42,100 305,000 (530,000) 435,179
Total Betterment Fund 4,572,750 1,144,800 4,180,200 3,000,000 4,537,350
REPLACEMENT FUND
Potable 29,690,621 1,022,900 6,852,300 5,145,000 29,006,221
Recycled 3,829,668 27,500 831,400 1,679,000 4,704,768
Sewer 9,230,143 37,700 1,275,000 2,668,000 10,660,843
Total Replacement Fund 42,750,432 1,088,100 8,958,700 9,492,000 44,371,832
NEW SUPPLY FUND
Potable 333,403 191,500 467,600 705,000 762,303
Recycled 12,809 1,600 4,800 25,000 34,609
Sewer - - - - -
Total New Supply Fund 346,212 193,100 472,400 730,000 796,912 (3)
OPEB FUND 307,279 600 958,000 647,100 (3,021) (4)
DEBT RESERVE FUND 4,617,959 655,000 750,100 34,000 4,556,859
TOTAL 84,412,074$ 96,625,700$ 113,086,600$ 12,402,200$ 80,353,375$
3,915,002$
(1)The total for interfund transfers does not net to $0 because some transfers are already reflected in the Operating
Revenues and Expenditures for General Fund as follows:
General Fund 1,583,800$
Expansion Reserve 2,538,900
Betterment Reserve 3,530,000
Replacement Reserve 3,397,400
New Supply Reserve 705,000
OPEB Reserve 647,100
Total 12,402,200 ##
(2)Potable and Recycled funds are combined for expansion purposes.
(3)The fund balance is anticipated to change more than 10% due to the Districts ongoing current year CIP expenditures fund
by current years revenues and prior years debt issuance proceeds, as well as transfers made in accordance with the
Reserve Policy found on pages 198-231.
(4)This is a planned reduction of this reserve to fund the PERS OPEB trust in accordance with the actuarial analysis, as well
as fund salary and benefit cost in accordance with the Memorandum of Understanding with the labor union.
Fiscal Year 2015 Budget
Fund Balance Summary by Fund
*Actual unaudited
44
FY 2013 FY 2015
Actual Budget Actual* Budget
GENERAL FUND
Potable 71,775,592$ 74,687,600$ 78,857,522$ 79,154,100$
Recycled 8,767,111 8,407,800 10,093,330 8,834,400
Sewer 4,131,742 3,005,700 2,999,644 3,651,500
Total General Fund (1)84,674,445 86,101,100 91,950,496 91,640,000
EXPANSION FUND
Potable 1,947,226 2,332,400 4,158,840 1,788,700
Recycled 1,554,732 843,100 1,698,412 115,200
Sewer 406 - 7,803 200
Total Expansion Fund 3,502,364 3,175,500 5,865,055 1,904,100
BETTERMENT FUND
Potable 2,724,182 2,950,800 3,294,249 1,098,500
Recycled 73,192 112,900 - 4,200
Sewer 43,861 41,500 37,336 42,100
Total Betterment Fund 2,841,235 3,105,200 3,331,585 1,144,800
REPLACEMENT FUND
Potable 1,798,381 1,738,900 9,296,348 1,022,900
Recycled 24,950 122,300 122,907 27,500
Sewer 29,562 33,300 48,764 37,700
Total Replacement Fund 1,852,893 1,894,500 9,468,019 1,088,100
NEW SUPPLY FUND
Potable 174,964 986,500 385,982 191,500
Recycled 53,520 77,000 - 1,600
Sewer - - - -
Total New Supply Fund 228,484 1,063,500 385,982 193,100
OPEB FUND 3,056 800 4,829 600
DEBT RESERVE FUND 734,278 664,800 663,497 655,000
TOTAL REVENUES 93,836,755$ 96,005,400$ 111,669,463 96,625,700$
-$ -$
Revenues and Expenditures by Fund
FY 2014
*Actual unaudited
45
FY 2013 FY 2015
Actual Budget Actual* Budget
Revenues and Expenditures by Fund
FY 2014
GENERAL FUND
Potable 70,968,083$ 74,687,600$ 77,443,338$ 79,154,100$
Recycled 7,526,709 8,407,800 8,411,776 8,834,400
Sewer 4,218,924 3,005,700 2,375,236 3,651,500
Total General Fund 82,713,716 86,101,100 88,230,350 91,640,000
EXPANSION FUND
Potable 5,828,937 5,167,000 4,658,990 4,843,000
Recycled 2,270,550 2,399,500 1,557,915 1,284,200
Sewer 153,541 61,600 3,580 -
Total Expansion Fund 8,253,028 7,628,100 6,220,485 6,127,200
BETTERMENT FUND
Potable 4,219,470 4,802,100 3,352,161 3,699,800
Recycled 98,039 204,000 516,151 175,400
Sewer 1,155,420 333,000 180,310 305,000
Total Betterment Fund 5,472,929 5,339,100 4,048,622 4,180,200
REPLACEMENT FUND
Potable 4,903,562 7,308,800 5,640,438 6,852,300
Recycled 269,474 450,900 1,181,130 831,400
Sewer 1,343,206 2,117,000 777,199 1,275,000
Total Replacement Fund 6,516,242 9,876,700 7,598,767 8,958,700
NEW SUPPLY FUND
Potable 752,144 751,600 427,719 467,600
Recycled 56,106 134,400 500,023 4,800
Sewer - - - -
Total New Supply Fund 808,250 886,000 927,742 472,400
OPEB FUND 634,221 991,400 940,355 958,000
DEBT RESERVE FUND 3,287,611 3,753,700 13,650,886 750,100
TOTAL EXPENDITURES 107,685,997 114,576,100 121,617,207 113,086,600
SURPLUS (DEFICIT) (1)(13,849,242)$ (18,570,700)$ (9,947,744) (16,460,900)$
*Actual unaudited
46
FY 2013 FY 2015
Actual Budget Actual* Budget
REVENUES AND FUND SOURCES
Water Sales 72,157,781 75,373,600 81,287,163 80,785,700
Sewer Revenues 2,618,291 2,701,600 2,757,867 3,007,700
Meter Fees 108,538 81,600 78,465 51,500
Capacity Fee Revenues 3,098,524 3,530,000 2,703,862 2,293,500
Betterment Fee Revenues 770,672 904,800 709,986 340,500
New Supply Fee Revenue 329,192 321,800 225,038 180,300
Capacity Fees for Maintenance 1,237,085 1,291,200 1,170,985 1,150,600
Betterment Fees for Maintenance 612,663 776,700 485,738 301,800
Tax Revenues 3,600,263 3,597,100 3,624,363 3,763,700
Availability Fees 502,283 474,100 549,409 441,500
Non-Operating Revenues 1,859,023 1,846,000 2,057,519 1,947,800
GO Bond Debt Tax Revenues 650,587 597,000 641,798 651,700
Sewer Debt Tax Revenues 2,626 1,100 962 500
COPs Proceeds 3,365,724 3,762,900 14,395,229 770,400
Grants 183,565 92,000 209,873 111,100
Interest 318,537 289,700 407,006 273,600
Transfer from OPEB 879,500 149,800 149,800 -
General Fund Draw Down 946,900 61,600 61,600 -
Interfund Transfers 595,000 152,800 152,800 553,800
Total Revenues and Fund Sources 93,836,755$ 96,005,400$ 111,669,463 96,625,700$
EXPENDITURES AND USES OF FUNDS
Water Purchases 43,161,583 45,025,100 48,210,501 47,059,200
Power 2,430,461 2,693,300 2,808,846 2,838,200
Administrative Expenses 4,254,758 5,082,600 4,085,394 5,419,200
Materials and Maintenance 3,727,095 3,532,900 3,157,876 3,619,800
Labor Expenses 18,361,022 18,675,500 18,876,033 19,747,600
CIP Expenses 11,384,302 13,863,100 8,497,568 10,575,900
Debt Service 8,564,448 8,549,000 8,563,487 8,460,300
Capacity Fees for Maintenance 1,237,085 1,291,200 1,170,985 1,150,600
Betterment Fees for Maintenance 616,502 776,700 485,739 301,800
OPEB Retiree Health Expenses 634,221 991,400 940,355 958,000
COPs Proceeds Distribution 2,535,724 3,003,600 13,728,724 -
General Fund Transfers 2,880,800 2,065,800 2,065,800 2,137,600
Interfund Transfers 7,898,000 9,025,900 9,025,900 10,818,400
Total Expenditures and Uses of Funds 107,685,999 114,576,100 121,617,207 113,086,600
SURPLUS (DEFICIT) (13,849,244)$ (18,570,700)$ (9,947,745) (16,460,900)$
Revenues and Expenditures by Type - All Funds
FY 2014
Note: Consistent with the District's financing plan, the 2010 debt proceeds along with District reserves have been used to
fund capital projects, resulting in the expected deficits in Fiscal Years 2013 and 2014 shown above.
*Actuals unaudited
47
Five-Year Forecast – FY 2016 through FY 2020
The District updates its Rate Model to build the budget for the upcoming fiscal year and to forecast
the five subsequent years. This financial forecast is designed to provide a general understanding
of how revenues and expenditures are expected to influence the District and is reviewed in relation
to its effect on funding capital projects and reserve levels. Estimates for growth, water costs, and
others such as rainfall, and average water consumption per customer, are used throughout the
Rate Model to calculate various revenue and expense amounts in each year. The Engineering
Department is primarily responsible for the growth estimates as described in the budget overview
on page 18. Water cost estimates are obtained from District water suppliers, CWA and MWD, and
power cost inflators from San Diego Gas and Electric, the District power supplier. Labor and
benefit cost inflators are based on the Memorandum of Understanding with the District’s labor
union, estimates from the District’s health providers, as well as actuarial reports from the District’s
pension providers. Other general inflators are derived from statistical data from consumer price
indexes for the region.
The District must look at building new infrastructure to service the needs of its customers. The CIP
Master Plan looks at the service needs of all customers over the next six years and at the
betterment and expansion needs from now until ultimate build-out. The capital projects and the
funding for them are reviewed annually by the Engineering Department. As new capital assets are
brought into service, they are managed by an Infrastructure Management System (IMS) which is
crucial to tracking and maintaining the history of 726 miles of potable pipelines, 102 miles of
recycled pipelines, 88 miles of sewer mains, 40 potable and 4 recycled reservoirs, 21 potable and 3
recycled pump stations, and a 1.3 million gallons per day reclamation plant. Utilizing an integrated
database from the Geographic Information System (GIS) provides real-time work order planning,
execution, and consolidation of all maintenance history. These systems are also integrated with
financial software to allow asset tracking and management information. As the systems are further
developed, the District will be able to better anticipate operating costs associated with the capital
projects. The impact of the CIPs on the Operating Budget is addressed in the CIP section of this
budget.
Projected Cost of Water
The projected water cost is based on CWA’s Rate Modeling Program. This program evaluates
many options of the Regional Water Facilities Master Plan, which determines the most feasible
projects for water resources and incorporates these decisions into CWA’s Capital Improvement
Program. This cost is also based on CWA’s estimated water cost for purchases from MWD and the
Imperial Irrigation District (IID).
Projected Cost of Water per acre-foot
48
REVENUES
FY 2016 FY 2017 FY 2018 FY 2019 FY 2020
Water/Sewer Rates 87,701,600 92,533,400 97,920,700 103,680,500 109,924,700
Meter Fees 117,100 159,400 241,800 260,600 295,600
Capacity Fee Revenues 1,156,400 1,168,000 1,179,700 1,191,500 1,203,400
Non-operating Revenues 2,477,900 2,009,400 2,042,900 2,077,300 2,113,000
Tax Revenues 3,860,200 3,960,900 4,067,300 4,245,600 4,435,200
Interest Income 80,300 128,200 166,000 197,100 230,200
TOTAL 95,393,500$ 99,959,300$ 105,618,400$ 111,652,600$ 118,202,100$
31,343,700$ 30,944,500$ 31,721,900$ 33,046,300$
EXPENDITURES AND TRANSFERS
FY 2016 FY 2017 FY 2018 FY 2019 FY 2020
Water Cost 49,414,100$ 54,042,400$ 58,692,600$ 62,990,100$ 67,699,900$
Power 4,161,900 4,348,900 4,558,700 4,789,100 5,045,900
Labor and Benefits 20,120,300 20,384,300 20,589,400 20,881,900 21,180,300
Administrative Expenses 5,588,200 5,764,000 5,946,300 6,131,900 6,323,700
Materials & Maintenance 3,767,400 3,920,700 4,080,600 4,246,900 4,420,200
Reserve Funding , Net 12,341,600 11,499,000 11,750,800 12,612,700 13,532,100
TOTAL 95,393,500$ 99,959,300$ 105,618,400$ 111,652,600$ 118,202,100$
EXCESS REVENUES -$ -$ -$ -$ -$
General Fund Forecast - FY 2016 through FY 2020
This forecast incorporates both cost increases for expenditures and rate increases for revenues, as well as
growth projections.
$0
$20
$40
$60
$80
$100
$120
FY 2016 FY 2017 FY 2018 FY 2019 FY 2020
$9
5
$1
0
0
$1
0
6
$1
1
2
$1
1
8
$9
5
$1
0
0
$1
0
6
$1
1
2
$1
1
8
Revenues and Expenditures Forecast, in millions ($)
Revenues Expenditures
49
FY 2016 FY 2017 FY 2018 FY 2019 FY 2020
General Fund 18,090,900$ 18,143,900$ 18,114,200$ 17,925,500$ 17,731,200$
Betterment Fund 5,531,000 3,276,900 1,822,700 774,800 783,100
Replacement Fund 32,090,500 18,889,100 18,038,600 20,783,500 31,172,900
Expansion Fund 792,300 1,689,600 1,745,700 3,258,200 3,260,000
New Supply Fund 1,706,300 1,706,600 1,183,900 2,900 8,500
Debt Reserve 532,600 403,900 294,300 314,500 354,000
TOTAL 58,743,600$ 44,110,000$ 41,199,400$ 43,059,400$ 53,309,700$
(600) (600) (500) (417) (460)
Fund Balances Forecast - FY 2016 through FY 2020
$0
$20
$40
$60
FY 2016 FY 2017 FY 2018 FY 2019 FY 2020
Fund Balances Forecast, in millions ($)
General Fund Betterment Fund Replacement Fund Expansion Fund Debt Reserve
50
Debt Management
The District has been successful in financing capital improvements through a combination of long-
term and short-term financing plans. Financial tool used include General Obligation Bonds,
Certificates of Participation (COPs), Build America Bonds (BABs), developer fees, and pay-as-you-go
funding.
The District’s primary debt management objective is to keep the level of indebtedness within
available resources and within limits that will allow the District to meet the debt service coverage
ratios required by the bond covenant. Bonds have been and will be used to improve existing facilities
and to build the projects in the Capital Improvement Program (CIP). The District’s debt service
obligations have a significant effect upon the District’s current and future water rates. All efforts that
minimize the cost of debt have a corresponding effect that reduces water rates.
51
Debt Management
The District achieved a 148% actual debt coverage ratio for fiscal year 2013, which exceeded the
debt covenant minimum ratio of 125%. To meet the bond indebtedness obligation and maintain
stable rates, the rate model is used to forecast revenues and operating requirements. In the next six
years, the District does not anticipate the need to issue new debt and expects the District’s financial
performance to yield strong levels prior to any debt issued. The chart below show the District’s
projected debt coverage ratio from FY 2015 through FY 2020. The debt coverage ratios are growing
as rates are set to ensure adequate funding of the reserves.
The District’s Board of Directors believes that a strong debt coverage ratio will benefit the ratepayers
as it reduces the cost of water infrastructure; and therefore have been willing to support this with
necessary rate increases. The District has projected a schedule of rate increases designed to
generate sufficient revenue to pay off existing and planned future debt issues. See the Policies
section of the budget for the District’s complete Debt Policy.
Projected Debt Coverage Ratio
1.66
2.14 2.31
2.73 2.95
3.31
-
0.50
1.00
1.50
2.00
2.50
3.00
3.50
FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020
Co
v
e
r
a
g
e
R
a
t
i
o
Actual Ratio Minimum Ratio = 1.25
52
Outstanding
Year Maturity Original Balance
# Incurred Description Date Amount 6/30/2015
1 1996 Certificates of Participation (COPs)September 1, 2026 15,400,000$ 9,900,000$
2 2007 Certificates of Participation (COPs)September 1, 2036 42,000,000 36,790,000
3 2009 General Obligation (GO) Bonds August 31, 2022 7,780,000 5,700,000
4 2010 Certificates of Participation Series A (COPs)September 1, 2024 13,840,000 11,435,000
5 2010 Build America Bonds Series B (BABs)September 1, 2040 36,355,000 36,355,000
6 2013 Water Revenue Refunding Bonds September 1, 2023 7,735,000 7,735,000
Total Outstanding Debt 123,110,000$ 107,915,000$
Total Assessed Valuation - FY 2014
Percentage of Original Debt to Assessed Valuation 0.53%0.08%
Debt Limit per District Debt Policy (% of Assessed Valuation)15.00%15.00%
Total Outstanding Debt, in millions ($)
Schedule of Outstanding Debt
10,226,148,004$ 23,304,103,069$
All Debts GO Bonds
Note: The accounting for debt proceeds and payments is described in the District's Reserve Policy found on pages
198-231.
$0
$15
$30
$45
$60
$75
$90
1996 COPs 2009 GOBs 2007 COPs 2010A COPs 2010B BABs 2013 WRRBs
Principal Interest
53
1996 COPs 2009 GOBs 2007 COPs 2010A COPs 2010B BABs 2013 WRRBs Total
500,000 550,000 995,000 845,000 - 605,000 3,495,000
600,000 570,000 1,035,000 870,000 - 615,000 3,690,000
600,000 585,000 1,075,000 900,000 - 635,000 3,795,000
600,000 605,000 1,115,000 940,000 - 660,000 3,920,000
700,000 635,000 1,155,000 975,000 - 685,000 4,150,000
700,000 650,000 1,200,000 1,015,000 - 715,000 4,280,000
700,000 680,000 1,250,000 1,065,000 - 745,000 4,440,000
800,000 705,000 1,300,000 1,120,000 - 775,000 4,700,000
800,000 720,000 1,355,000 1,175,000 - 805,000 4,855,000
900,000 - 1,410,000 1,235,000 - 835,000 4,380,000
900,000 - 1,470,000 1,295,000 - - 3,665,000
1,000,000 - 1,530,000 - 1,365,000 - 3,895,000
1,100,000 - 1,595,000 - 1,450,000 - 4,145,000
- - 1,665,000 - 1,545,000 - 3,210,000
- - 1,735,000 - 1,640,000 - 3,375,000
- - 1,810,000 - 1,745,000 - 3,555,000
- - 1,890,000 - 1,855,000 - 3,745,000
- - 1,970,000 - 1,975,000 - 3,945,000
- - 2,055,000 - 2,105,000 - 4,160,000
- - 2,150,000 - 2,245,000 - 4,395,000
- - 2,245,000 - 2,390,000 - 4,635,000
- - 2,340,000 - 2,550,000 - 4,890,000
- - 2,445,000 - 2,715,000 - 5,160,000
- - - - 2,895,000 - 2,895,000
- - - - 3,085,000 - 3,085,000
- - - - 3,290,000 - 3,290,000
- - - - 3,505,000 - 3,505,000
9,900,000$ 5,700,000$ 36,790,000$ 11,435,000$ 36,355,000$ 7,075,000$ 107,255,000$
2040
2041
TOTAL
Combined Debt Service Through Maturity, in millions ($)
2039
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2015
2027
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
Projected Principal Payments by Debt Issuance
FY
$-
$1
$2
$3
$4
$5
$6
$7
$8
$9
2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041
Interest
Principal
54
1996 COPs (1)2009 GOBs 2007 COPs 2010A COPs 2010B BABs 2013 WRRBs
(2)Total
14,225 198,663 1,504,864 508,563 2,371,868 237,275 4,835,458
13,350 181,663 1,466,301 478,488 2,371,868 213,033 4,724,703
12,450 162,969 1,425,791 443,088 2,371,868 186,800 4,602,966
11,550 139,633 1,383,674 406,288 2,371,868 159,567 4,472,580
10,525 114,433 1,339,316 367,988 2,371,868 131,167 4,335,297
9,475 88,533 1,292,856 323,113 2,371,868 101,567 4,187,412
8,425 61,533 1,243,390 271,113 2,371,868 70,767 4,027,096
7,250 33,500 1,191,723 216,488 2,371,868 38,767 3,859,596
6,050 4,800 1,136,760 159,113 2,371,868 5,567 3,684,158
4,725 - 1,079,326 98,863 2,371,868 - 3,554,782
3,375 - 1,019,160 33,994 2,371,868 - 3,428,397
1,900 - 955,504 - 2,328,345 - 3,285,749
275 - 888,304 - 2,238,589 - 3,127,168
- - 818,038 - 2,143,093 - 2,961,131
- - 744,796 - 2,041,540 - 2,786,336
- - 668,402 - 1,933,609 - 2,602,011
- - 588,644 - 1,818,823 - 2,407,467
- - 505,485 - 1,694,728 - 2,200,213
- - 416,609 - 1,560,558 - 1,977,167
- - 323,240 - 1,417,508 - 1,740,748
- - 225,714 - 1,265,086 - 1,490,800
- - 124,031 - 1,102,634 - 1,226,665
- - 17,828 - 929,495 - 947,323
- - - - 745,010 - 745,010
- - - - 548,357 - 548,357
- - - - 338,716 - 338,716
- - - - 115,262 - 115,262
103,575$ 985,727$ 20,359,756$ 3,307,099$ 48,311,901$ 1,144,510$ 74,212,568$
(1)Interest on the 1996 Certificates of Participation is variable and is projected using an interest rate of .15%.
(2)The 2013 Water Revenue Refunding Bonds were an advanced refunding of the 2004 COPs, which was a refunding
of the 1993 COPs.
Projected Interest Payments by Debt Issuance
FY
2024
2015
2016
2017
2018
2019
2020
2021
2022
2023
2036
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2037
2038
2039
2040
2041
TOTAL
55
Potable Revenues and Expenditures
Potable Revenues
The District will provide water service to
approximately 49,257 potable customers by
the end of Fiscal Year 2015. Ninety-one
percent of the potable customers are
residential and the remaining nine percent
are comprised of multi-residential, publicly-
owned, commercial, agricultural,
landscaping, and construction. With the
decline in residential developments in
recent years, the District expects only
nominal growth of 0.25% for Fiscal Year
2015. Unit sales are anticipated to increase
0.7% compared to the previous year's
budget.
Water rates vary among the customer classifications. The water rates for all customers are based
on an accelerated block structure; as more units are consumed, a higher unit rate is charged on
units sold in the top tiers. These unit sales represent approximately 65% of the water sales budget.
Other revenue sources include: system charges, energy charges, penalties, and other pass-through
charges from the San Diego County Water Authority (CWA) and the Metropolitan Water District
(MWD).
All customers are required to pay fixed monthly fees, the MWD and CWA fixed charge, and the District
system fee. These fixed charges are based on meter size. These fees recover 30% of the potable
water sales revenue. Water rates, energy fees, and penalties recover the remaining 70% of revenues
necessary to fund operations. (Note: when potable and recycled revenues are combined the fixed
fees do not exceed 30% of the total revenues.)
Energy charges are based on the quantity of water used and the elevation to which the water has
been lifted to provide service. Energy charges are set so as to recover the power costs associated
with pumping. This charge is adjusted based on an annual review of these costs to ensure that
sufficient revenue is collected to offset pumping costs.
Penalties are charged to District customers when late payments are made on accounts. These
penalty revenues are budgeted based on historical trends.
624-2 Potable Reservoir
56
Potable Revenues and Expenditures
Potable Expenditures
In Fiscal Year 2015, the District estimates to purchase 30,793.3 acre-feet of potable water, sufficient
to meet the demands of its customers. Provisions have been made for District usage, leakage, and
evaporation in the amount of 1,600.9 acre-feet.
Today, the District purchases 100% of its potable water from the San Diego County Water Authority
(CWA); however, in the past the District purchased only treated water through the CWA’s treated
water pipeline. Then in 2006, to diversify the water supply and to become less reliant on treated
water from outside the region, Otay entered an agreement to purchase 10,000 acre-feet of raw water
treated by neighboring Helix Water District at their Levy Water Treatment Plant. This raw water
comes into the region through a CWA raw water pipeline which gives the District redundancy in
water supply. The reliability is necessary to ensure water deliveries can continue in an emergency
situation such as earthquakes or other natural disasters. The District’s agreement also brings
regional water treatment closer to our customers, which reduces dependence on water treatment
facilities located outside of San Diego County. Flow Control Facility No. 14 connects the Helix Water
District to Otay Water District through approximately 5 miles of 36” pipeline.
Although the District does not own a direct water supply reservoir that captures surface water, there
are cooperative agreements between CWA and the other member agencies to manage water
demands and supply the region in times of need.
The member agencies and CWA reservoirs serve multiple functions including: surface water capture,
seasonal shift water storage, carryover storage, and local sources of emergency water supplies.
Member agency and CWA reservoirs
function as system capacity buffers
during peak demand periods and
offer a level of security for short and
long‐term emergency situations. The
location of each reservoir as shown
on page 58 effects the extent to
which it can perform the various
functions, as does the individual
agencies’ operational plan
implemented at each location.
Concrete spool being disinfected for installation at the 624-2 Potable
Reservoir.
57
Potable Revenues and Expenditures
CWA purchases water for the County of San Diego from MWD and the Imperial Irrigation District
(IID). Any cost increases by CWA, MWD, or IID impacts the District's water purchases and directly
affects the District's fees, rates, and service charges.
58
FY 2013 FY 2014 FY 2014 FY 2015
11-Actual Budget Actual * Budget $ %
REVENUES
#Water Sales 63,669,294$ 67,033,500$ 71,272,396$ 71,959,100$ 4,925,600$ 7.3%
#Meter Fees 107,836 79,400 77,503 51,100 (28,300) (35.6%)
#Capacity Fee Revenues 1,083,545 1,229,600 1,167,405 1,150,600 (79,000) (6.4%)
#Betterment Fees for Maintenance 612,663 776,700 485,738 301,800 (474,900) (61.1%)
Tax Revenues 3,547,497 3,545,500 3,580,042 3,712,100 166,600 4.7%
#Non-operating Revenues 1,823,671 1,812,200 2,024,615 1,914,000 101,800 5.6%
#Interest 51,585 60,900 100,023 65,400 4,500 7.4%
O Transfer from OPEB 879,500 149,800 149,800 - (149,800) (100.0%)
TOTAL REVENUES 71,775,591$ 74,687,600$ 78,857,522$ 79,154,100$ 4,466,500$ 6.0%
EXPENDITURES
Potable Water Purchases 32,063,055 33,028,900 36,151,147 34,521,500 1,492,600 4.5%
#CWA - Infrastructure Access Charge 1,818,204 1,856,100 1,856,202 1,901,400 45,300 2.4%
#CWA - Customer Service Charge 1,688,369 1,753,600 1,753,840 1,792,200 38,600 2.2%
#CWA - Emergency Storage Charge 4,086,425 4,515,500 4,515,596 4,741,200 225,700 5.0%
#MWD - Capacity Reservation Charge 503,873 531,000 531,318 701,400 170,400 32.1%
#MWD-Net RTS and Standby Charges 1,609,710 1,740,500 1,740,511 1,800,000 59,500 3.4%
Subtotal - Water Costs 41,769,636$ 43,425,600$ 46,548,614$ 45,457,700$ 2,032,100$ 4.7%
#Power 1,775,213 2,068,100 2,057,945 2,188,400 120,300 5.8%
#Labor and Benefits 16,356,331 16,259,300 16,967,071 17,663,500 1,404,200 8.6%
#Administrative Expenses 3,622,171 4,480,500 3,616,667 4,927,100 446,600 10.0%
#Materials & Maintenance 1,969,932 1,855,700 1,654,641 1,921,800 66,100 3.6%
11 Subtotal - Operations Costs 23,723,647$ 24,663,600$ 24,296,324$ 26,700,800$ 2,037,200$ 8.3%
#Expansion Reserve - 3,418,000 3,418,000 - (3,418,000) (100.0%)
B Betterment Reserve 495,000 - - 2,805,000 2,805,000 100.0%
ReReplacement Reserve - - - 675,000 675,000 100.0%
swTransfer to Sewer General Fund 595,000 152,800 152,800 553,800 401,000 262.4%
TOTransfer to OPEB - 1,114,600 1,114,600 546,000 (568,600) (51.0%)
G Transfer to General Fund Reserve 2,285,800 1,913,000 1,913,000 1,583,800 (329,200) (17.2%)
SwTransfer to Sewer Replacement 2,099,000 - - 127,000 127,000 0.0%
N Transfer to New Supply Fund - - - 705,000 705,000 100.0%
Subtotal - Reserve Funding 5,474,800$ 6,598,400$ 6,598,400$ 6,995,600$ 397,200$ 6.0%
TOTAL EXPENDITURES 70,968,083$ 74,687,600$ 77,443,338$ 79,154,100$ 4,466,500$ 6.0%
EXCESS REVENUES (EXPENDITURES)807,508$ -$ 1,414,184$ -$ -$ -
Operating Budget Summary - Potable
Budget to Budget
Variance
* Actuals unaudited
59
FY 2014 FY 2014 FY 2015
Actual* Budget Budget $ %
Water Sales 46,856,253$ 42,668,000$ 45,669,500$ 3,001,500$ 7.0%
System Fees 11,152,291 11,184,200 12,337,500 1,153,300 10.3%
Energy Fees 2,114,844 1,958,100 2,145,600 187,500 9.6%
MWD and CWA Fixed Fees 10,309,983 10,399,700 10,936,200 536,500 5.2%
Penalties 839,025 823,500 870,300 46,800 5.7%
Total Water Sales 71,272,396$ 67,033,500$ 71,959,100$ 4,925,600$ 7.3%
Water Sales 45,669,500$ 64.0%
System Charges 12,337,500 17.0%
MWD and CWA Fixed Charges 10,936,200 15.0%
Energy Charges 2,145,600 3.0%
Penalties 870,300 1.0%
Total 71,959,100$ 100.0%
Water Rates: Rates vary among classes of service and are charged per unit of water. A unit of water is equal
to 100 cubic feet. On January 1, 2009, the District implemented a tiered rate structure for all customer types
to encourage conservation and bring equity among the classes.
System Fees: Each water service customer pays a monthly system charge for water system replacement,
maintenance, and operation expenses. The charge is based on the size of the meter.
MWD and CWA Fixed Fees: These pass-through charges are calculated to recover the MWD's and CWA's
fixed annual costs including the construction, operation and maintenance of aqueducts, and emergency
storage projects. These fixed charges are based on the size of the meter.
Energy Fees: The energy pumping fee is $ .050 per 100 cubic feet of water for each 100 feet of lift above the
elevation of 450 feet. All water customers are in one of 29 zones based on elevation.
Penalties: Charges and penalties are imposed on customer accounts for late payments and returned checks.
Classification of Water Sales - Potable
Budget to Budget
Variance
*Actual unaudited 60
Current Approved*Accounts Units Amount
Residential 44,943 7,674,100 26,702,500$
Conservation Tier (< 5 hcf)1.86$ 1.95$
6 - 10 2.90 3.04
11 - 22 3.77 3.95
over 23 hcf 5.80 6.08
Master Meter 798 1,427,500 5,180,000
0 - 4 2.86 3.00
5 - 9 3.71 3.89
over 10 hcf 5.73 6.00
Public and Commercial 1,439 1,853,100 5,862,900
Tier I 3.06 3.21
Tier II 3.14 3.26
Tier III 3.19 3.31
Agriculture, Landscaping, and Construction 1,339 1,761,700 7,524,600
Tier I 4.17 4.37
Tier II 4.25 4.42
Tier III 4.32 4.47
Total 48,519 12,716,400 45,270,000$
Government Fee 0.31 0.32 - - 399,500
Total Water Sales 48,519 12,716,400 45,669,500$
Residential 7,674,100 60%
Master Meter 1,427,500 12%Public and Commercial 1,853,100 14%Agricultural and Landscaping 1,761,700 14%
12,716,400 100%
Water Sales Summary by Service Class - Potable
FY 2015 Sales BudgetWater Rates
FY 2015 Unit Sales by Service Class
*Approved rates for water billed beginning in January 2015.
61
Budget
Customer Class FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015
Residential 7,679,494 7,486,069 7,507,214 7,836,873 8,050,828 7,674,100
Master Meters 1,371,244 1,389,616 1,409,515 1,495,057 1,536,902 1,427,500
Public and Commercial 1,798,277 1,771,396 1,859,571 2,031,253 2,056,075 1,853,100
Agricultural and Landscaping 1,644,130 1,537,304 1,581,243 1,723,839 1,931,856 1,590,400
Temporary and Fire Services 254,016 179,472 153,351 102,020 144,458 171,300
Total Unit Sales 12,747,161 12,363,857 12,510,894 13,189,042 13,720,119 12,716,400
Budget
Customer Class FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015
Residential 43,619 43,903 44,396 44,670 44,826 44,945
Master Meters 797 797 799 800 798 798
Public and Commercial 1,431 1,434 1,433 1,493 1,449 1,439
Agricultural and Landscaping 1,127 1,223 1,227 1,227 1,229 1,232
Temporary and Fire Services 790 797 810 772 846 843
Total Unit Sales 47,764 48,154 48,665 48,962 49,148 49,257
Unit Sales History and Meter Count by Customer Class - Potable
Unit Sales (in thousand) and Meter Count Trends
Unit Sales History (in hcf)
Meter Count
Actual
Actual
5,000
15,000
25,000
35,000
45,000
55,000
-
5,000
10,000
15,000
20,000
FY 2010
Actual
FY 2011
Actual
FY 2012
Actual
FY 2013
Actual
FY 2014
Actual
FY 2015
Budget
Potable Meters Potable Unit Sales
62
Meter Current Approved (1)
Size Estimated
6/30/2014
FY 2015
Growth Rates Rates Estimated
6/30/2014
FY 2015
Growth
FY 2015
Budget
0.75 43,667 150 16.19$ 19.39$ 9,322,000$ 18,100$ 9,340,100$
1.00 2,406 - 22.87 27.39 725,600 - 725,600
1.50 941 1 39.58 47.40 491,100 300 491,400
2.00 1,082 - 59.62 71.39 850,500 - 850,500
3.00 72 - 113.08 135.41 107,300 - 107,300
4.00 177 1 173.22 207.43 404,300 1,300 405,600
6.00 16 - 340.29 407.50 71,800 - 71,800
8.00 3 - 540.76 647.56 21,400 - 21,400
10.00 5 - 774.64 927.63 51,100 - 51,100
Sub-total 48,369 152 12,045,100 19,700 12,064,800
0.63 684 - 21.14 25.32 190,700 - 190,700
0.75 9 - 21.14 25.32 2,500 - 2,500
1.00 27 - 21.14 25.32 7,500 - 7,500
2.00 16 - 25.32 25.32 6,000 - 6,000
3.00 - - 28.49 34.12 - - -
4.00 - - 28.49 34.12 - - -
10.00 - - 28.49 34.12 - - -
Sub-total 736 - 206,700 206,700
Turn Over Fees 550 10.00 10.00 66,000 - 66,000
Total 49,105 152 12,317,800$ 19,700$ 12,337,500$
(1)Approved rates for water billed beginning in January 2015.
System Fees
System Fees - Potable
Meter Count
Historical System Fees, in millions ($)
All Service Types
Fire Services
$-
$2
$4
$6
$8
$10
$12
$14
FY 2010
Actual
FY 2011
Actual
FY 2012
Actual
FY 2013
Actual
FY 2014
Actual
FY 2015
Budget
63
Meter Current Approved(1)
Size Estimated
6/30/2014
FY 2015
Growth Rates Rates Estimated
6/30/2014
FY 2015
Growth
FY 2015
Budget
0.75 43,660 150 14.45$ 13.67$ 7,366,300$ 13,400$ 7,379,700$
1.00 2,397 - 26.79 25.35 749,900 - 749,900
1.50 935 1 60.61 57.35 661,800 400 662,200
2.00 1,080 - 103.08 97.53 1,300,000 - 1,300,000
3.00 72 - 219.23 207.44 184,300 - 184,300
4.00 94 1 351.09 332.20 385,400 2,200 387,600
6.00 16 - 718.69 680.02 134,300 - 134,300
8.00 3 - 1,160.59 1,098.15 40,700 - 40,700
10.00 5 - 1,670.55 1,580.67 97,500 - 97,500
Total 48,262 152 10,920,200$ 16,000$ 10,936,200$
(1)Approved rates for water billed beginning in January 2015.
Note: Contruction meters, Fire Services, and Recycled Meters are exempt from MWD and CWA Fixed Fees.
Landscape
Publicly-Owned
Agriculture
Historical MWD and CWA Fixed Fees, in millions ($)
MWD & CWA - Fixed ChargesMeter Count
MWD and CWA Fixed Fees (Pass-Through) - Potable
$-
$2
$4
$6
$8
$10
FY 2010
Actual
FY 2011
Actual
FY 2012
Actual
FY 2013
Actual
FY 2014
Actual
FY 2015
Budget
64
Meter Meter Installation Meter Total Budgeted
Size Sales Fee Fee Fees Amount
0.75 150 100.05$ 210.84$ 310.89$ 46,600$
1.00 - 100.05 272.07 372.12 -
1.50 1 100.05 442.23 542.28 500
2.00 - 100.05 633.66 733.71 -
3.00 - 602.41 1,974.74 2,577.15 -
4.00 1 602.41 3,429.81 4,032.22 4,000
6.00 - 951.55 5,924.22 6,875.77 -
8.00 - 1,459.11 7,401.87 8,860.98 -
10.00 - 1,459.11 10,645.27 12,104.38 -
Total 152 51,100$
Meter Fees:
Meter Fees - Potable
Meter Fees are charges collected for new water service connections. Fees vary depending upon
meter size and type of service. The costs associated with meter installations are included in the
Operating Expenses section of the budget. These charges are funded by developers.
Historical Meter Count
-
15,000
30,000
45,000
60,000
FY 2010
Actual
FY 2011
Actual
FY 2012
Actual
FY 2013
Actual
FY 2014
Actual
FY 2015
Budget
*Actual unaudited65
Budget
FY 2010 FY 2011 FY 2012 FY 2013 FY 2014*FY 2015
Water Sales 31,326,151$ 32,236,451$ 35,615,558$ 40,845,630$ 46,856,253$ 45,669,500$
System Fees 9,342,732 9,490,904 9,583,563 10,315,199 11,152,291 12,337,500
Energy Fees 1,662,233 1,693,186 1,881,776 1,964,062 2,114,844 2,145,600
MWD and CWA Fixed Fees 6,359,939 7,421,386 9,000,267 9,747,977 10,309,983 10,936,200
Penalties 853,279 665,931 703,081 796,426 839,025 870,300
Total Potable Revenues 49,544,334$ 51,507,858$ 56,784,245$ 63,669,294$ 71,272,396$ 71,959,100$
Revenue History - Potable
Revenue History - Potable, in millions ($)
Actual
$-
$20
$40
$60
$80
FY 2010
Actual
FY 2011
Actual
FY 2012
Actual
FY 2013
Actual
FY 2014
Actual*
FY 2015
Budget
Water Sales System Fees Energy Fees MWD & CWA Fees Penalties
*Actual unaudited
66
FY 2014
Actual*
FY 2015
Budget
FY 2014
Actual*
FY 2015
Budget
Acre Feet Acre Feet Rate (1)
Potable Water Purchases (CWA):
Budgeted Sales 31,650.5 29,192.4 $1,103/$1,143 34,287,306$ 32,710,200$
District & Unbilled Usage 55.2 61.2 $1,103/$1,143 62,278 69,100
Water Loss 1,701.2 1,539.7 $1,103/$1,143 1,798,711 1,725,300
Budgeted Sales (CSD)2.3 - 2,852 16,900
Total Variable Charges 33,409.2 30,793.3 36,151,147$ 34,521,500$
MWD and CWA Fixed Charges:
Infrastructure Access Charge 1,856,202$ 1,901,400$
Customer Service Charge 1,753,840 1,792,200
Emergency Storage Charge 4,515,596 4,741,200
Capacity Reservation Charge 531,318 701,400
Readiness-to-Serve Charge 1,740,511 1,800,000
Total Fixed Charges 10,397,467$ 10,936,200$
Total Variable and Fixed Charges 46,548,614 45,457,700
Average Cost Per Acre-Foot 1,393$ 1,476$
(1)The first rate applies to purchases from July to December of the fiscal year; the second from
January to June.
Water Purchases and Related Costs - Potable
Purchase Costs
-
10,000
20,000
30,000
40,000
FY 2010
Actual
FY 2011
Actual
FY 2012
Actual
FY 2013
Actual
FY 2014
Actual*
FY 2015
Budget
Historical Potable Water Purchases, in acre-feet
*Actual unaudited
67
Power Costs - Potable
Budget
FY 2010 FY 2011 FY 2012 FY 2013 FY 2014*FY 2015
Administrative and
Operations Buildings 177,651$ 158,657$ 165,099$ 164,785$ 179,919$ 189,600$
Potable Transmission 1,622,773 1,468,322 1,463,075 1,610,428 1,878,026 1,998,800
Total Potable Power Costs 1,800,424$ 1,626,979$ 1,628,174$ 1,775,213$ 2,057,945$ 2,188,400$
Historical Power Costs, in thousands ($)
Actual
$0
$500
$1,000
$1,500
$2,000
$2,500
FY 2010
Actual
FY 2011
Actual
FY 2012
Actual
FY 2013
Actual
FY 2014
Actual*
FY 2015
Budget
Potable Transmission Administrative and Operations Buildings
*Actual unaudited
68
FY 2013 FY 2014 FY 2014 FY 2015
Actual Budget Actual* Budget $ %
Administrative Expenditures
Directors' Fees 19,900$ 30,000$ 19,834$ 30,000$ -$ -
Travel and Meetings 126,979 190,900 147,068 207,700 16,800 8.8%
Conservation and Outreach 199,479 206,600 136,743 174,900 (31,700) (15.3%)
General Office Expense 290,648 321,200 258,732 280,800 (40,400) (12.6%)
Equipment 969,967 905,100 942,826 1,133,300 228,200 25.2%
Fees 476,561 491,400 489,867 498,700 7,300 1.5%
Services 1,280,658 2,047,800 1,286,792 2,042,300 (5,500) (0.3%)
Training 56,258 107,700 65,818 123,500 15,800 14.7%
Utilities 12,796 16,000 12,929 14,000 (2,000) (12.5%)
Bad Debt Expense 117,228 140,000 149,213 148,000 8,000 5.7%
Total 3,550,474$ 4,456,700$ 3,509,822$ 4,653,200$ 196,500$ 4.4%
Less: Overhead Allocation (781,755) (920,400) (737,254) (767,100) 153,300 0.0%
Subtotal 2,768,719$ 3,536,300$ 2,772,568$ 3,886,100$ 349,800$ 9.9%
General Expenses 853,452 944,200 844,099 1,041,000 96,800 10.3%
Total Expenditures 3,622,171$ 4,480,500$ 3,616,667$ 4,927,100$ 446,600$ 10.0%
4,403,925$ ######## 4,353,921$ 5,694,200$
Directors' Fees 30,000$ 0.5%
Travel and Meetings 207,700 3.6%
Conservation and Outreach 174,900 3.1%
General Office Expense 280,800 4.9%
Equipment 1,133,300 19.9%
Fees 498,700 8.8%
Services 2,042,300 35.9%
Training 123,500 2.2%
Utilities 14,000 0.2%
Miscellaneous 148,000 2.6%
General Expenses 1,041,000 18.3%
Subtotal 5,694,200$ 100.0%
Less: Overhead Allocation (767,100)
Total Administrative Expenses 4,927,100$
Administrative Expenditures - Potable
FY 2015 Administrative Expenditures - Potable
Budget to Budget
Variance
* Actuals unaudited
69
Materials and Maintenance Expenditures - Potable
FY 2013 FY 2015
Actual Budget Actual* Budget $ %
Materials and Maintenance
Fuel and Oil 188,902$ 281,000$ 187,861$ 289,300$ 8,300$ 3.0%
Meters and Materials 93,825 130,400 63,345 113,100 (17,300) (13.3%)
Fleet Parts and Equipment 151,767 131,000 111,271 128,400 (2,600) (2.0%)
Infrastructure Equipment & Supplies 443,642 381,600 358,877 367,900 (13,700) (3.6%)
Chemicals 259,981 241,000 208,743 223,500 (17,500) (7.3%)
Safety Equipment 31,381 26,300 31,888 41,300 15,000 57.0%
Laboratory Equipment and Supplies 33,276 35,000 35,057 35,000 - 0.0%
Other Materials and Supplies 127,727 150,700 126,227 126,300 (24,400) (16.2%)
Building and Grounds Materials 64,586 55,500 55,608 46,500 (9,000) (16.2%)
Contracted Services 574,845 423,200 475,764 550,500 127,300 30.1%
Total Expenditures 1,969,932$ 1,855,700$ 1,654,641$ 1,921,800$ 66,100$ 3.6%
Fuel and Oil 289,300$ 15.1%
Meters and Materials 113,100 5.9%
Fleet Parts and Equipment 128,400 6.7%
Infrastructure Equipment and Supplies 367,900 19.1%
Chemicals 223,500 11.6%
Safety Equipment 41,300 2.2%
Laboratory Equipment and Supplies 35,000 1.8%
Other Materials and Supplies 126,300 6.6%
Building and Grounds Materials 46,500 2.4%
Contracted Services 550,500 28.6%
$1,921,800 100.0%
FY 2015 Materials and Maintenance Expenditures - Potable
FY 2014 Budget to Budget
Variance
* Actuals unaudited
70
Potable Water Service Area
71
Recycled Revenues and Expenditures
In 1980, the District began operation of the Ralph W. Chapman Water Recycling Facility (RWCWRF).
The RWCWRF plant is capable of recycling wastewater at the rate of 1.3 million gallons per day
(MGD) to augment water supplies for irrigation purposes only. The treatment process consists of
primary, secondary, and tertiary treatment. The facility’s conversion time to treat raw sewage to full
Title 22 recycled water is approximately 20 hours.
The steps of the water recycling process are as follows:
Primary Treatment
The raw sewage flows in at the rotary screen, also known as the “headworks” which removes a large
amount of coarse organic and inorganic material that is either floating or in suspension. This is
followed by a grit chamber, which removes the heavy settled material.
Secondary Treatment
This is where the biological treatment begins. The first step takes place in the aeration tanks, also
known as reactors or sedimentation basins, which contain bacteria that feed on the organic material
in sewage. These bacteria are aerobic, and therefore require a great quantity of pumped-in air to
help them thrive. The second step in the process is clarification where the sludge from the aeration
tanks is allowed to settle to the bottom and the clear liquid, or secondary effluent, flows out over
weirs at the surface. Some of the settled sludge is disposed of and some is returned to the aeration
72
Recycled Revenues and Expenditures
tanks to keep the process in balance. The secondary effluent flowing over the weirs is now ready for
the next step. Solids, screenings, and sludge are discharged to the City of San Diego Metropolitan
Wastewater (Metro) system.
Tertiary Treatment
Just before filtration, a small amount of coagulant is added as a filter aid which helps suspended
material in the secondary effluent “clump” on the surface of the filters. The filters consist of a layer of
sand with a layer of anthracite coal on top. As the fluid moves through the filters, the flow goes
through a chlorine contact chamber where disinfection takes place, completing the process of
recycling wastewater into recycled water.
The District entered an agreement with the City of San Diego in October 2003, to purchase up to six
million gallons a day of recycled water from their South Bay Water Reclamation Plant (SBWRP). To
bring this plan to fruition, the District constructed a 30-inch six mile pipeline, a 12 million gallon
reservoir, and a pump station to bring this new source of recycled water into the District’s system.
These projects were completed in spring 2007 which eliminated the need for a potable supplement
into the recycled system. The benefits of this to the region as a whole are great, as less demand on
the potable system will be made, reducing future capacity and storage requirements. The $42 million
investment in capital outlay results in a significant reduction of water purchase costs and an increase
in system reliability. The District expects that 11.4 percent of its total water demand will be met using
recycled water.
Both the RWCWRF plant, owned and operated by the District, and the SBWRP plant, owned and
operated by the City of San Diego, supply the District’s recycled distribution system, as shown in the
diagram below.
73
Recycled Revenues and Expenditures
The District operates the largest recycled water distribution system in San Diego County and will
supply approximately 3,955 acre-feet of recycled water to 709 landscaping and construction
customers by the end of Fiscal Year 2015. The recycled water customer base consists primarily of
irrigation at golf courses, schools, parks, and open space. The geographic area of this water use
includes Eastlake, Otay Ranch, Rancho Del Rey, and other areas of eastern Chula Vista.
Producing and distributing recycled water is costly. To help offset the costs of supplying alternative
water sources, both CWA and MWD offer incentive programs. In Fiscal Year 1991, the District
signed agreements with CWA and MWD to take advantage of the programs they offered. A second
agreement was signed in 2000. In 2005, the District agreed to terminate both agreements and
entered into a new agreement which allows the District to maximize its ability to earn incentives
and to simplify the grant requirements. Currently, the District receives $200 from CWA and $185
from MWD for every acre-foot (AF) of recycled water sold.
927-1 Recycled Water Reservoir
74
FY 2013 FY 2014 FY 2014 FY 2015
31-Actual Budget Actual * Budget $%
REVENUES
#Recycled Water Sales 8,488,486$ 8,340,100$ 10,014,767$ 8,826,600$ 486,500$ 5.8%
#Meter Fees 703 2,200 962 400 (1,800) (81.8%)
#Interest 2,121 3,900 16,001 7,400 3,500 89.7%
General Fund Draw Down 275,800 61,600 61,600 - (61,600) 0.0%
TOTAL REVENUES 8,767,111$ 8,407,800$ 10,093,330$ 8,834,400$ 426,600$ 5.1%
EXPENDITURES
Recycled Water Purchases 1,391,947$ 1,599,500$ 1,661,887$ 1,601,500$ 2,000$ 0.1%
#Power 471,139 523,600 591,883 469,400 (54,200) (10.4%)
#Labor and Benefits 1,141,404 1,259,900 1,144,717 1,181,800 (78,100) (6.2%)
#Administrative Expenses 321,637 310,400 298,562 285,600 (24,800) (8.0%)
#Materials & Maintenance 264,582 282,500 282,827 295,900 13,400 4.7%
11 Subtotal - Operations Costs 3,590,710$ 3,975,900$ 3,979,876$ 3,834,200$ (141,700)$ (3.6%)
#Expansion Reserve 3,936,000 10,000 10,000 2,538,900 2,528,900 25289.0%
B Betterment Reserve - 125,000 125,000 725,000 600,000 480.0%
ReReplacement Reserve - 4,230,000 4,230,000 1,679,000 (2,551,000) (60.3%)
TOTransfer to OPEB - 66,900 66,900 57,300 (9,600) (14.3%)
Subtotal - Reserve Funding 3,936,000$ 4,431,900$ 4,431,900$ 5,000,200$ 568,300$ 12.8%
TOTAL EXPENDITURES 7,526,710$ 8,407,800$ 8,411,776$ 8,834,400$ 426,600$ 5.1%
1,240,401$ -$ 1,681,554$ -$ -$ - EXCESS REVENUES/
(EXPENDITURES)
Operating Budget Summary - Recycled
Budget to Budget
Variance
* Actuals unaudited
75
FY 2014 FY 2014 FY 2015
Actual* Budget Budget $ %
Water Sales 7,416,631$ 6,103,900$ 6,506,000$ 402,100$ 6.6%
System Fees 356,806 355,900 438,600 82,700 23.2%
Energy Fees 383,513 315,400 322,300 6,900 2.2%
MWD and CWA Rebates 1,828,134 1,526,600 1,522,800 (3,800) -0.2%
Penalties 29,682 38,300 36,900 (1,400) -3.7%
Total Recycled Water Sales 10,014,767$ 8,340,100$ 8,826,600$ 486,500$ 5.8%
Water Sales 6,506,000 73%
System Charges 438,600 4%
Energy Charges 322,300 4%
MWD and CWA Rebates 1,522,800 18%
Penalties 36,900 1%
Total 8,826,600 100%
Water Rates: Rates vary among classes of service and are charged per unit of water. A unit of water is equal to 100
cubic feet of water. On January 1, 2009, the District implemented a tiered rate structure for all customer types to
encourage conservation and bring equity among the classes.
System Fees: Each water service customer pays a monthly system charge for water system replacement, maintenance,
and operation expenses. The charge is based on the size of the meter.
Energy Fees: The energy pumping fee is $ .050 per 100 cubic feet of water for each 100 feet of lift above the elevation
of 450 feet. All water customers are in one of 29 zones based on elevation.
MWD and CWA Rebates: Incentive from MWD and CWA for providing recycled water. The District receives $200
from CWA and $185 from MWD for every acre-foot (AF) of recycled water sold.
Penalties: Charges and penalties are imposed on customer accounts for late payments and returned checks.
Classification of Water Sales - Recycled
Budget to Budget
Variance
*Actual unaudited
76
Fiscal Year 2015 Sales Budget
Current Approved* Accounts Units Amount
102 49,300 181,000$
Tier I3.56$ 3.73$
Tier II 3.61 3.79
Tier III 3.68 3.84
591 1,253,400 4,588,500
Tier I3.56 3.73
Tier II 3.61 3.79
Tier III 3.68 3.84
Recycled 3.0" and 4.0" Meter 12 87,100 318,700
Tier I3.56 3.73
Tier II 3.61 3.79
Tier III 3.68 3.84
4 333,300 1,223,900
Tier I3.56 3.73
Tier II 3.61 3.79
Tier III 3.68 3.84
709 1,723,100 6,312,100$
Government Fee 0.31 0.32 - - 193,900
Total Water Sales 709 1,723,100 6,506,000$
*Approved rates for water billed beginning in January 2015.
Recycled .75" and 1.0" Meter 49,300 3%
Recycled 1.5" and 2.0" Meter 1,253,400 73%
Recycled 3.0" and 4.0" Meter 87,100 5%
Recycled more than 6.0" Meter 333,300 19%
1,723,100 100%
Water Rates
Total
FY 2015 Unit Sales by Meter Size
Water Sales Summary by Meter Size - Recycled
Recycled .75" and 1.0" Meter
Recycled 1.5" and 2.0" Meter
Recycled more than 6.0" Meter
77
Budget
Customer Class FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015
Recycled .75" & 1.0" Meter 49,393 46,328 47,699 59,698 68,523 49,300
Recycled 1.5" & 2.0" Meter 1,295,264 1,220,953 1,201,012 1,366,238 1,474,879 1,253,400
Recycled 3.0" & 4.0" Meter 73,737 74,444 93,899 100,991 134,386 87,100
Recycled > 6.0" Meter 355,567 333,866 310,223 352,023 390,542 333,300
Total Unit Sales 1,773,961 1,675,591 1,652,833 1,878,950 2,068,330 1,723,100
Budget
Customer Class FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015
Recycled .75" & 1.0" Meter 96 95 101 103 100 102
Recycled 1.5" & 2.0" Meter 574 576 581 587 588 591
Recycled 3.0" & 4.0" Meter 10 11 11 11 11 12
Recycled > 6.0" Meter 3 3 3 3 3 4
Total Meter Count 683 685 696 704 702 709
Unit Sales History and Meter Count by Customer Class - Recycled
Unit Sales History (in hcf)
Meter Count
Unit Sales (in thousands) and Meter Count Trends
Actual
Actual
650
675
700
725
100
500
900
1,300
1,700
2,100
2,500
FY 2010
Actual
FY 2011
Actual
FY 2012
Actual
FY 2013
Actual
FY 2014
Actual
FY 2015
Budget
Meter Count Recycled Unit Sales
78
Meter Current Approved*
Size Estimated
6/30/2014
FY 2015
Growth Rates Rates Estimated
6/30/2014
FY 2014
Growth
FY 2015
Budget
0.75 2 - 16.19$ 19.39$ 400$ -$ 400$
1.00 99 1 22.87 27.39 29,900 300 30,200
1.50 396 - 39.58 47.40 206,700 - 206,700
2.00 195 - 59.62 71.39 153,300 - 153,300
3.00 4 - 113.08 135.41 6,000 - 6,000
4.00 8 - 173.22 207.43 18,300 - 18,300
6.00 3 - 340.29 407.50 13,500 - 13,500
8.00 - - 540.76 647.56 - - -
10.00 1 - 774.64 927.63 10,200 - 10,200
Total 708 1 438,300$ 300$ 438,600$
Budgeted Recycled System Fees 438,600$
*Approved rates for water billed beginning in January 2015.
Meter Count Budgeted System Fees
System Fees - Recycled
Historical System Fees, in thousands ($)
-
100
200
300
400
500
FY 2010
Actual
FY 2011
Actual
FY 2012
Actual
FY 2013
Actual
FY 2014
Actual
FY 2015
Budget
79
Meter Meter Installation Meter Total Total
Size Sales Fee Fee Fees Amount
0.75 - 100.05$ 210.84$ 310.89$ -$
1.00 1 100.05 272.07 372.12 400
1.50 - 100.05 442.23 542.28 -
2.00 - 100.05 633.66 733.71 -
3.00 - 602.41 1,974.74 2,577.15 -
4.00 - 602.41 3,429.81 4,032.22 -
6.00 - 951.55 5,924.22 6,875.77 -
8.00 - 1,459.11 7,401.87 8,860.98 -
10.00 - 1,459.11 10,645.27 12,104.38 -
Total 1 400$
Meter Fees:
Meter Fees - Recycled
Historical Meter Count
Meter Fees are charges collected for new water service connections. Fees vary depending upon
meter size and type of service. The costs associated with meter installations are included in the
Operating Expenses section of the budget. These charges are funded by developers.
-
200
400
600
800
FY 2010
Actual
FY 2011
Actual
FY 2012
Actual
FY 2013
Actual
FY 2014
Actual
FY 2015
Budget
80
Budgeted
FY 2010 FY 2011 FY 2012 FY 2013 FY 2014*FY 2015
Water Sales 4,417,995$ 4,645,719$ 4,999,441$ 6,148,619$ 7,416,631$ 6,506,000$
System Fees 261,946 266,547 268,937 292,201 356,806 438,600
Energy Fees 266,599 274,608 303,867 346,064 383,513 322,300
MWD and CWA Rebates 1,583,801 1,482,019 1,413,335 1,660,736 1,828,134 1,522,800
Penalties 92,545 93,146 33,323 40,867 29,682 36,900
Total Recycled Revenue 6,622,886$ 6,762,039$ 7,018,903$ 8,488,486$ 10,014,767$ 8,826,600$
Revenue History - Recycled
Revenue History - Recycled, in millions ($)
Actual
$-
$2
$4
$6
$8
$10
FY 2010
Actual
FY 2011
Actual
FY 2012
Actual
FY 2013
Actual
FY 2014
Actual*
FY 2015
Budget
Water Sales System Fees Energy Fees MWD and CWA Rebates Penalties
*Actual unaudited
81
FY14 Actual*FY15 Budget FY14 Actual*FY15 Budget
Acre Feet Acre Feet Rate Purchase
Costs
Purchase
Costs
% of
Total
SBWRP Recycled Water Purchases (CSD)
Recycled Water Purchases 3,821.5 2,906.4 350.00$ 1,337,489$ 1,017,200$ 63.6%
Meter Fee - - 1,646.50 18,107 19,800 1.2%
Take-or-pay contract (1)875.1 1,612.8 306,291 564,500 35.2%
Total 4,696.5 4,519.1 1,661,887$ 1,601,500$ 100.00%
Average Cost Per Acre-Foot (Effective Rate)434.87$ 551.03$
(1) This is the anticipated take-or-pay amount to be paid to the City of San Diego. The contract requires
the purchase of a minimum volume of water. The District does not anticipate meeting the
minimum, therefore a payment would be due to the City of San Diego.
Water Purchases - Recycled
HISTORICAL RECYCLED WATER PURCHASES, IN ACRE-FEET
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
FY 2010
Actual
FY 2011
Actual
FY 2012
Actual
FY 2013
Actual
FY 2014
Actual*
FY 2015
Budget
*Actual unaudited
82
Power Costs - Recycled
Budget
FY 2010 FY 2011 FY 2012 FY 2013 FY 2014*FY 2015
Treatment and
Recycled Transmission 422,780$ 462,031$ 440,069$ 471,139$ 591,883$ 469,400$
Historical Power Costs, in thousands ($)
Actual
$0
$100
$200
$300
$400
$500
$600
FY 2010
Actual
FY 2011
Actual
FY 2012
Actual
FY 2013
Actual
FY 2014
Actual*
FY 2015
Budget
*Actual unaudited
83
FY 2013 FY 2014 FY 2014 FY 2015
Actual Budget Actual* Budget $ %
Administrative Expenditures
Travel and Meetings -$ -$ 42$ -$ -$ -
Equipment 685 1,300 327 1,300 - -
Fees 32,572 35,300 27,046 24,000 (11,300) (32.0%)
Services 99,885 64,200 70,021 65,100 900 1.4%
Total 133,142$ 100,800$ 97,436$ 90,400$ (10,400)$ (10.3%)
Add: Overhead Allocation 188,496 209,600 201,126 195,200 (14,400) (6.9%)
Total Expenditures 321,638$ 310,400$ 298,562$ 285,600$ (24,800)$ (8.0%)
Equipment 1,300$ 0.5%
Fees 24,000 8.4%
Services 65,100 22.8%
Overhead Allocation 195,200 68.3%
285,600$ 100.0%
FY 2014 Administrative Expenditures - Recycled
Budget to Budget
Variance
Administrative Expenditures - Recycled
* Actuals unaudited
84
FY 2013 FY 2014 FY 2014 FY 2015
Actual Budget Actual* Budget $ %
Materials and Maintenance
Fuel and Oil 1,621$ 15,000$ 11,336$ 15,000$ -$ 0.0%
Meters and Materials 4,590 4,500 2,793 700 (3,800) (84.4%)
Infrastructure Equipment & Supplies 82,178 67,400 85,660 87,500 20,100 29.8%
Chemicals 161,867 180,600 160,146 169,100 (11,500) (6.4%)
Safety Equipment 1,585 - - 1,000 1,000 100.0%
Laboratory Equipment and Supplies 4,311 4,000 3,945 4,000 - -
Other Materials and Supplies 4,307 5,300 7,056 5,300 - -
Contracted Services 4,123 5,700 11,891 13,300 7,600 133.3%
Total Expenditures 264,582$ 282,500$ 282,827$ 295,900$ 13,400$ 4.7%
Fuel and Oil 15,000$ 5.1%
Meters and Materials 700 0.2%
Infrastructure Equipment & Supplies 87,500 29.6%
Chemicals 169,100 57.1%
Safety Equipment 1,000 0.3%
Laboratory Equipment and Supplies 4,000 1.4%
Other Materials and Supplies 5,300 1.8%
Contracted Services 13,300 4.5%
295,900$ 100.0%
Materials and Maintenance Expenditures - Recycled
FY 2015 Materials and Maintenance Expenditures - Recycled
Budget to Budget
Variance
* Actuals unaudited
85
Recycled Water Service Area
86
Sewer Revenues and Expenditures
The District provides sewer service to approximately 15,200 customers through 4,679 accounts
located in the northern section of the District. The District operates and maintains the sewage
collection system serving Rancho San Diego, Singing Hills, and portions of Mount Helix, all within
the Upper Sweetwater River Basin. This basin is also known as the Jamacha Basin. Residential
customers comprise 98.4% of the customer base. Modest growth of 0.2% is anticipated in Fiscal
Year 2015.
Wastewater collection within the Jamacha Basin is provided by two agencies: the Otay Water District
and the County of San Diego, (formerly the Spring Valley Sanitation District). Customers in the basin,
not served by either agency, dispose of their sewage through septic tanks. After the sewage has
been collected, it is sent to the District’s Ralph W. Chapman Water Recycling Facility (RWCWRF)
treatment plant where the District produces recycled water, see page 72 outlining the sewer process.
The by-product of the treatment process is called sludge and it is discharged through the City of San
Diego Metropolitan Wastewater (Metro) and the County of San Diego systems.
The District is a member of Metro Wastewater Joint Powers Authority and shares in the use of the
City of San Diego's regional wastewater facilities. A significant amount of the sewer operation costs
is for sewer service charges from the Metro Wastewater JPA which is budgeted at $1,020,300 for
Fiscal Year 2015. Additionally, the District will pay $274,600 for its share of the operation and
maintenance cost of the Rancho San Diego Outfall and the Spring Valley Outfall to transport sewage
to Metro for Fiscal Year 2015.
To meet State of California requirements, customers must pay their fair share of sewer costs. The
District is required to determine sewer rates in accordance with the State’s Revenue Program
Guidelines. During Fiscal Year 2013, the District performed a Cost of Service Study and Rate Study
(i.e. reviewed rates, fees, charges, costs, and the usage structure) and determined that increases in
rates, fees, and charges are necessary in order to recover sufficient revenues to operate and maintain
the public sewer system.
Sewer bills are based on the rate of discharge and the strength for non-residential customers. Due
to their higher discharge and strength, non-residential customers (comprising 1.6% of the customer
base) comprise 11.3% of the total sewer charges. The formula for sewer rates is shown on pages
94 and 95.
87
FY 2013 FY 2014 FY 2014 FY 2015
21-Actual Budget Actual * Budget $ %
REVENUES
#Sewer Revenues 2,618,291$ 2,701,600$ 2,757,867$ 3,007,700$ 306,100$ 11.3%
#Capacity Fee Revenues 153,541 61,600 3,580 - (61,600) (100.0%)
Tax Revenues 52,766 51,600 44,321 51,600 - 0.0%
#Non-operating Revenues 35,352 33,800 32,904 33,800 - 0.0%
#Interest 5,692 4,300 8,172 4,600 300 7.0%
TF Transfer from Potable General Fund - - - 553,800 553,800 100.0%
General Fund Draw Down 1,266,100 152,800 152,800 - (152,800) (100.0%)
TOTAL REVENUES 4,131,742$ 3,005,700$ 2,999,644$ 3,651,500$ 645,800$ 21.5%
EXPENDITURES
#Power 184,108$ 101,600$ 159,018$ 180,600$ 79,000$ 77.8%
#Labor and Benefits 863,286 1,156,300 764,245 902,300 (254,000) (22.0%)
#Administrative Expenses 310,949 291,700 170,165 206,500 (85,200) (29.2%)
#Materials & Maintenance 1,492,581 1,394,700 1,220,408 1,402,100 7,400 0.5%
11 Subtotal - Operations Costs 2,850,924$ 2,944,300$ 2,313,836$ 2,691,500$ (252,800)$ (8.6%)DS
B Betterment Reserve 625,000 - - - - 0.0%
ReReplacement Reserve 743,000 - - 916,200 916,200 100.0%
TOTransfer to OPEB - 61,400 61,400 43,800 (17,600) (28.7%)
Subtotal - Reserve Funding 1,368,000$ 61,400$ 61,400$ 960,000$ 898,600$ 1463.5%
TOTAL EXPENDITURES 4,218,924$ 3,005,700$ 2,375,236$ 3,651,500$ 645,800$ 21.5%
(87,183)$ -$ 624,408$ -$ -$ - EXCESS REVENUES
(EXPENDITURES)
Operating Budget Summary - Sewer
Budget to Budget
Variance
* Actuals unaudited
88
FY 2015
Accounts Current Approved(1)Current Approved(1)Budget
Single-Family 4,554 14.38$ 15.89$ 2.35$ 2.46$ 2,397,700$
Multi-Family 50 2.35 2.46 272,800
Commercial
Low Strength 55 2.35 2.46 221,600
Medium Strength 13 3.37 3.53 44,700
High Strength 7 5.37 5.63 41,100
Meter Size
0.75"25.83 27.07
1"38.03 39.86
1.5"68.53 71.82
2"105.12 110.17
3"190.52 199.66
4"312.51 327.51
6"617.48 647.12
8"983.46 1,030.67
10"1,410.42 1,478.12
Penalties 29,800
TOTAL SEWER CHARGES 4,679 3,007,700$
(1)Approved rates for sewer service beginning in January 2015.
Single-Family 2,397,700$ 79.7%
Multi-Family 272,800 9.1%
Commercial 307,400 10.2%
Penalties 29,800 1.0%
3,007,700$ 100.0%
Sewer Charges Summary by Service Class
Usage Fee
Sewer Charges by Service Class FY 2015
System Fee
89
Budget
FY 2010 FY 2011 FY 2012 FY 2013 FY 2014*FY 2015
Sewer Charges 2,271,879$ 2,363,313$ 2,368,192$ 2,588,991$ 2,736,867$ 2,977,900$
Penalties 39,707 23,287 27,173 29,300 21,000 29,800
Total 2,311,586$ 2,386,600$ 2,395,365$ 2,618,291$ 2,757,867$ 3,007,700$
Penalties
Revenue History - Sewer
Revenue History - Sewer, in thousands ($)
Actual
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
FY 2010
Actual
FY 2011
Actual
FY 2012
Actual
FY 2013
Actual
FY 2014
Actual*
FY 2015
Budget
Sewer Charges Penalties
*Actual unaudited
90
Power Costs - Sewer
Budget
FY 2010 FY 2011 FY 2012 FY 2013 FY 2014*FY 2015
Sewer Lifts Station 84,408$ 81,347$ 70,431$ 184,108$ 159,018$ 180,600$
Historical Power Costs, in thousands ($)
Actual
$0
$40
$80
$120
$160
$200
FY 2010
Actual
FY 2011
Actual
FY 2012
Actual
FY 2013
Actual
FY 2014
Actual*
FY 2015
Budget
*Actual unaudited
91
FY 2013 FY 2014 FY 2014 FY 2015
Actual Budget Actual* Budget $ %
Administrative Expenditures
Equipment -$ 500$ -$ 5,000$ 4,500$ 900.0%
Fees 1,571 2,000 292 2,000 - 0.0%
Services 160,869 94,500 30,664 44,900 (49,600) (52.5%)
Bad Debt Expense 3,105 6,700 5,380 7,000 300 4.5%
Total 165,545$ 103,700$ 36,336$ 58,900$ (44,800)$ (43.2%)
Add: Overhead Allocation 145,404 188,000 133,829 147,600 (40,400) (21.5%)
Total Expenditures 310,949$ 291,700$ 170,165$ 206,500$ (85,200)$ (29.2%)
Equipment 5,000$ 2.4%
Fees 2,000 1.0%
Services 44,900 21.7%
Miscellaneous 7,000 3.4%
Overhead Allocation 147,600 71.5%
206,500$ 100.0%
Administrative Expenditures - Sewer
FY 2015 Administrative Expenditures - Sewer
Budget to Budget
Variance
* Actuals unaudited
92
FY 2013 FY 2014 FY 2014 FY 2015
Actual Budget Actual* Budget $ %
Materials and Maintenance
Fuel and Oil 17,343$ -$ -$ -$ -$ -
Fleet Parts and Equipment 1,623 1,500 1,006 1,500 - -
Infrastructure Equipment & Supplies 169,014 50,000 51,627 69,600 19,600 39.2%
Chemicals 3,130 4,500 3,705 4,500 - -
Safety Equipment - - 77 1,900 1,900 100.0%
Laboratory Equipment and Supplies 5,591 5,000 4,936 5,000 - -
Other Materials and Supplies 1,613 200 198 200 - -
Contracted Services 24,102 35,500 36,335 24,500 (11,000) (31.0%)
Materials and Maintenance 222,416$ 96,700$ 97,884$ 107,200$ 10,500$ 10.9%
Sewer Charges
Metro O&M Costs 1,009,692$ 1,023,400$ 1,021,724$ 1,020,300$ (3,100)$ (0.3%)
Spring Valley Sewer Charge 260,473 274,600 100,800 274,600 - -
Total Sewer Charges 1,270,165 1,298,000 1,122,524 1,294,900 (3,100) (0.2%)
Total Expenditures 1,492,581$ 1,394,700$ 1,220,408$ 1,402,100$ 7,400$ 0.5%
Fleet Parts and Equipment 1,500$ 0.1%
Infrastructure Equipment & Supplies 69,600 5.0%
Chemicals 4,500 0.3%
Safety Equipment 1,900 0.1%
Laboratory Equipment & Supplies 5,000 0.4%
Other Materials and Supplies 200 0.0%
Contracted Services 24,500 1.7%
Metro O&M Costs 1,020,300 72.8%
Spring Valley Sewer Charge 274,600 19.6%
1,402,100$ 100.0%
Materials and Maintenance Expenditures - Sewer
FY 2015 Materials and Maintenance Expenditures - Sewer
Budget to Budget
Variance
* Actuals unaudited
93
Formula for Sewer Rates
To meet State of California requirements, customers must pay their fair share of sewer costs. The
District is required to determine sewer rates in accordance with the State’s Revenue Program
Guidelines.
Residential and Multi-Residential Sewer Service
To estimate sewer use, the District averages metered water use for the winter months of January
through April. A “winter average” is the basis of the sewer charges for the entire year. The winter
months are the best time to average water use because less water is used outdoors and most of the
water used flows to the sewer system. The District gives customers a 15% usage discount to
acknowledge that not all water purchased goes to the sewer system. The maximum consumption
charge is based on 30 units.
The following is the sewer bill formula for residential and multi-residential customers:
((Winter Average X .85) x Usage Fee) + System Fee
The current usage fee and system fee for single-family residential customers $2.35 and $14.38,
respectively. Effective January 1, 2015 the usage fee and system fee will be $2.46 and $15.89.
The current usage fee for multi-residential customers is $2.35 and effective January 1, 2015 it will be
$2.46. The system fee for multi-residential is based on meter size and is shown on page 89.
Commercial and Industrial Sewer Service
To estimate sewer use, the District averages metered water use. An “average annual consumption”
is the basis of the sewer charges for the entire year. The average annual consumption is defined as
the units of water billed from January through December of the previous year. The District gives
customers a 15% usage discount to acknowledge that not all water purchased goes to the sewer
system.
The following is the sewer formula for commercial and industrial customers:
(((Average Annual Consumption x .85 x Usage Fee x Strength Factor) + System Fee
The District calculates the monthly bill based on the customer’s water use, sewer strength and the
size of the customer’s water meter which is more equitable among customer classes. The rates and
charges by meter size are shown on page 89.
The District is required to determine sewer rates in accordance with the State’s Revenue Program
Guidelines. The State Water Resources Control Board (SWRCB) has grouped commercial customers
into various categories and has identified Strength Factors for each of these business categories.
94
Formula for Sewer Rates
The standard of measure for Strength Factors is the typical sewer strength of a single-family
residence (SFR). The Strength Factors established by the SWRCB are listed below and are used by
the District in the calculation of commercial sewer rates. These factors are in terms of the strength
relative to a SFR, with a SFR having a strength factor of 1.
The following are the Strength Factors:
1.000 Low-Strength Commercial *
2.000 Medium-Strength Commercial
4.000 High-Strength Commercial
*Schools and churches are categorized as Low Strength Commercial customers.
95
Sewer Service Area
96
General Revenues and Expenses
The District’s revenues and expenses in this section are not directly related to the services delivered
to potable, recycled, or sewer customers, yet they are operating expenses or revenues.
General Revenues
Capacity fees are restricted for the purpose of funding the District facilities. When collected these
fees may cover costs including but not limited to planning, design, construction, and financing
associated with facilities. The District uses a portion of capacity fee revenues to provide general
expansion planning and developer support. These fees reimburse the General Fund for the cost of
providing these services. For FY 2015, capacity fees are projected to be $1,150,600 which is $140,600
less than FY 2014.
Betterment fees are earned by the General Fund for facilities maintenance performed by the Water
Operations Department.
Annexation fees are collected when developers buy into the District’s potable or recycled water
facilities. The fee ensures that future users fund the portion of the facilities that were sized and built
for their future use by prior customers. Prior to FY 2010, annexation fees were unrestricted and
therefore included in the General Fund revenues. With the new fee methodology, these fees are now
restricted for the purpose of capital improvements.
The 1% property tax is a result of Proposition 13 that was approved in 1978, which limited the general
levy property tax rate for all taxing authorities to a total rate of 1% of the assessed value. Subsequent
legislation, AB8, established that the receipts from the 1% levy were to be distributed to taxing
agencies according to approximately the same proportions received prior to Proposition 13. These
general use funds are currently being used as a source of operating revenue. Tax Revenues are
projected to increase by $167,900 to $3,077,900.
The District levies availability charges each year in developed areas to be used for upgrades and
betterment and in undeveloped areas to provide funding for planning, mapping, and preliminary
design of facilities to meet future development. Current legislation provides that any availability
charge in excess of $10.00 per parcel or acre shall be used only for the benefit of the improvement
district in which it is assessed. Availability fees are projected to be $685,800.
Included in the General Revenues are a variety of Non-Operating Revenues. These revenues include
lease revenue, set-up fees, sewer billing fees, grants, and miscellaneous revenues. Lease revenues
make up a large portion of general revenues and are mainly from the lease of cell-sites on District
property. When the District enters a new lease there is a one-time fee charged with the set-up of
each cell-site. The District incurs expenses related to these leases and the purpose of the fee is to
recover the cost to set up the lease.
97
General Revenues and Expenses
In addition to the cell-site leases, the District leases land to the Highlands Golf Co., LLC. The lease
terms include a minimum annual rent guarantee plus a percentage of sales. This lease has a 40-
year term with two additional five-year options.
For most of the District’s water customers in the City of Chula Vista (CCV), the City of Chula Vista
provides the sewer services. The CCV sewer fees are based on water consumption. Because of the
shared customer base, the CCV contracts with the District for the billing of their sewer customers
who live within the District.
General Expenses
The expenses in this section are general operating costs not associated with an individual
department. These include legal costs, insurance premiums, changes in accrued employee leave
balances, and miscellaneous interest. These expenditures represent 7.8% of the total Departmental
Budget.
Legal expenditures are viewed as a District-wide general cost because they benefit all departments
and usually are not attributed to any one department. The District retains outside legal services
instead of in-house counsel.
Insurance premiums are also viewed as District-wide general cost because it benefits all
departments and cannot be attributed to any one department. The District participates in a program
where it can reduce its premium by implementing training sessions to reduce on-the-job accidents
and injuries.
Some employee benefits are charged to the General Expense Department because they are not
entirely attributable to a specific department or fiscal year in which they are incurred. For example,
when a pay rate increase occurs for an employee, his/her leave balances increase in value due to
this change. In this case, the cost is charged to the General Expense Department.
98
FY 2013 FY 2014 FY 2014 FY 2015
Actual Budget Actual * Budget $%
Fee Revenues
Capacity Fee Revenues 1,237,085$ 1,291,200$ 1,170,985$ 1,150,600$ (140,600)$ (10.9%)
Betterment Fees for Maintenance 612,663 776,700 485,738 301,800 (474,900) (61.1%)
Subtotal Fee Revenues 1,849,748 2,067,900 1,656,723 1,452,400 (615,500) (29.8%)
Tax Revenues
1% General Tax 2,892,382 2,910,000 2,894,402 3,077,900 167,900 5.8%
Availability Fees 707,881 687,100 729,961 685,800 (1,300) (0.2%)
Subtotal Tax Revenues 3,600,263 3,597,100 3,624,363 3,763,700 166,600 4.6%
General Revenues 5,450,011$ 5,665,000$ 5,281,086$ 5,216,100$ (448,900)$ (7.9%)
FY 2013 FY 2014 FY 2014 FY 2015
Actual Budget Actual * Budget $%
Property Rental 1,276,914$ 1,279,700$ 1,317,736$ 1,302,500$ 22,800 1.8%
Sewer Billing Fees 370,195 371,400 372,473 372,400 1,000 0.3%
Set-up Fee for Lease Site 4,000 - 22,500 - - 0.0%
Grants 13,944 - 40,867 - - 0.0%
Revenue from Shared Facility 35,352 33,800 32,152 33,800 - 0.0%
Miscellaneous 158,618 161,100 271,791 239,100 78,000 48.4%
Non-Operating Revenues 1,859,023$ 1,846,000$ 2,057,519$ 1,947,800$ 101,800$ 5.5%
Potable Recycled Sewer Total
Fee Revenues
Capacity Fee Revenues 1,150,600$ -$ -$ 1,150,600$
Betterment Fees for Maintenance 301,800 - - 301,800
Total Fee Revenues 1,452,400 - - 1,452,400
Tax Revenues
1% General Tax 3,077,900 - - 3,077,900
Availability Fees 634,200 - 51,600 685,800
Total Tax Revenues 3,712,100 - 51,600 3,763,700
Non-Operating Revenues
Property Rental 1,302,500 - - 1,302,500
Sewer Billing Fees 372,400 - - 372,400
Revenue from Shared Facility - - 33,800 33,800
Miscellaneous 239,100 - - 239,100
Total Non-Operating Revenues 1,914,000 - 33,800 1,947,800
Total General and Non-Operating Revenues 7,078,500$ -$ 85,400$ 7,163,900$
Note: For General and Non-Operating Revenues, the Potable Fund serves as the District's General Fund for
accounting purposes.
Budget to Budget
Variance
General and Non-Operating Revenues by Business
FY 2015 Budget
General Revenues
Budget to Budget
Variance
Non-Operating Revenues
* Actuals unaudited 99
FY 2013 FY 2014 FY 2014 FY 2015
Actual Budget Actual* Budget $ %
Administrative Expenditures
Legal Fees 279,625$ 380,000$ 280,069$ 410,000$ 30,000$ 7.9%
General Insurance 573,827 564,200 549,869 631,000 66,800 11.8%
Fees - - 14,161 - - 0.0%
Training - - 2,566 -
Total Expenditures 853,452 944,200 846,665 1,041,000 96,800 10.3%
Benefits
Benefits (1)1,490,161 1,205,400 1,367,499 1,290,800 85,400 7.1%
Total General Expense 2,343,613$ 2,149,600$ 2,214,164$ 2,331,800$ 182,200$ 8.5%
General Expense
Budget to Budget
Variance
(1) Benefits include District-wide labor and benefit costs not attributable to any one department, such as the
effect of cost of living raises on accrued leave liabilities or the Other Post Employment Benefit (OPEB) Costs.
These costs are netted against the District's anticipated Vacancy Factor. The Vacancy Factor for FY 2014 and
FY 2015 is $266,900 and $185,600 respectively. Additionally, the labor and benefits shown on this schedule are
those related to operating costs and does not include CIP labor and benefit costs.
* Actuals unaudited
100
Departmental Operating Budget
Labor and Benefits
Labor and Benefits represent 21.5% of the total Operating Budget. District personnel are assigned
to work in six departments: General Manager, Administrative Services, Finance, Information
Technology & Strategic Planning, Water Operations, and Engineering. The departments are further
categorized by functions into divisions. The Fiscal Year 2015 Budget includes funding for labor and
benefits for 140 Full-time Equivalent (FTE) employees.
The staffing level for Fiscal Year 2015 had a decrease of three (3) FTE employees from Fiscal Year
2014. The District has chosen to eliminate vacant positions in areas that have experienced a
reduction of workload requirements. Since 2007, the District has reduced FTEs by 19.9% due to
slowed growth and by focusing on efficiencies and automation. Efficiencies have been achieved by
strategic planning, goal setting, outsourcing, and leveraging advancements in technology.
A projected 7.8% of the labor and benefits costs will be charged to projects included in the Capital
Improvement Program (CIP) and Developer Deposits. These labor and benefit costs are not
considered operating costs and therefore reduce the Operating Budget by $1,728,600.
Administrative Expenses
Administrative Expenses represent 5.9% of the District's total operating costs. A detailed listing of the
Administrative Expenses for Fiscal Year 2015 is shown on page 108. The increase of $336,600 is due
to one-time equipment purchases, higher property insurance premiums, and a lower overhead
allocation to work orders. This increase is offset by decreased postage and printing costs as well as
the completion of some outside services contracts.
Administrative Expenses include such items as memberships, office supplies, staff training, Directors'
fees, water conservation programs, safety expenses, and regulatory agencies' fees. Some of the
administrative expenses are less discretionary than others such as insurance or regulatory fees
which are mandatory. The District is more able to control expenses such as training or business
meetings. The safety needs of the District's customers and employees and compliance with
regulatory agencies are of utmost importance, so related expenses are considered necessary.
Materials and Maintenance
Like all costs included by the District, the Materials and Maintenance Expenses allow the District to
provide reliable, high-quality products, services, and support to its customers.
As the District continues to grow and technology and regulations change, maintenance and services
will be adjusted, as needed. This year, there is a 4.0% increase in Materials and Maintenance
Expenses totaling $90,000. This increase is mainly due to emergency contracted services for breaks,
fixes, and related materials.
101
Departmental Operating Budget
The Water Operations Department uses an Infrastructure Management System (IMS) which allows
for better maintenance of existing assets and enhanced monitoring of all assets including new assets
coming on-line. It also facilitates planning for repair and replacement as well as assessing the
condition of infrastructures. The District is in the process of replacing IMS with a GIS Centric Work
Order System that will further improve the tracking and management of the Materials and
Maintenance Expenses.
Strategic Plan Implementation
Strategic goals and objectives as presented to the Board of Directors are incorporated into
departmental operating budgets to ensure adequate funds are available to implement the Strategic
Plan. The District updates its performance measurement program each fiscal year to provide
measurable results of progress on both strategic and key operational goals and objectives. (See the
plan objectives and measures in the department sections that follow.) Performance measures have
been developed by comparing key District activities with functional and available operational data
that provide reliable feedback on progress. Developed cooperatively with staff and the help of
outside consultants, the measures are designed to be comparable to measures commonly found in
similar industries.
The performance measures focus on “best practice” as applied to the District. Measures are
collected and reviewed quarterly by the Senior Management Team and reviewed by the Board at
least twice a year. Results are used to set new targets for the following fiscal year and to hold staff
accountable for the current fiscal year.
102
Board of Directors 115,100$ 0.4%
General Manager 1,562,300 5.2%
General Expense 2,331,800 7.8%
Administrative Services 2,995,600 10.0%
Finance 5,816,700 19.4%
Information Technology and Strategic Planning 3,373,800 11.3%
Water Operations 11,384,100 38.0%
Engineering 2,358,500 7.9%
29,937,900$ 100.0%
Departmental Operating Budget
Total FY 2015 Departmental Operating Budget
$29,937,900
103
FY13 FY 2015
Actual Budget Actual* Budget
Labor Costs 11,015,847$ 11,344,700$ 11,029,405$ 11,337,400$
Benefits
Pension 2,941,200 3,095,900 3,096,070 3,596,600
Employee Assistance Program 3,882 5,000 3,827 4,000
Workers' Compensation 165,713 247,700 230,015 267,300
Health/Dental/Life Insurance/OPEB 3,418,245 3,666,900 3,542,644 3,825,600
Social Security/Medicare 941,551 955,600 909,150 945,200
Salary Continuation Insurance 64,082 63,400 64,304 65,000
State Unemployment Insurance 39,656 60,000 43,492 60,000
Vacation/Sick/Holiday/Other Leave 2,193,636 2,101,800 2,140,833 2,103,800
Total Fringe Benefits 9,767,965 10,196,300 10,030,335 10,867,500
Total Labor and Benefits 20,783,812 21,541,000 21,059,740 22,204,900
Less: Non-Operating Labor and Benefits
Labor Costs 1,056,826 1,233,600 949,323 1,001,100
Fringe Benefits Allocation 598,471 736,100 544,962 729,200
Total Work Order Allocation 1,655,297 1,969,700 1,494,285 1,730,300
Operating Labor & Benefits 19,128,515 19,571,300 19,565,455 20,474,600
Total Overhead Allocation 1,215,350 1,418,600 1,091,721 1,151,300
Less: Overhead Allocation Personnel Portion 767,494 895,800 689,422 727,000
Admin Portion of Overhead (36.85%)447,856 522,800 402,299 424,300
Net Operating Labor and Benefits 18,361,021$ 18,675,500$ 18,876,033$ 19,747,600$
Labor and Benefits
FY 2014
Full-Time Equivalent (FTE)
Comparison by Department
0
40
80
120
160
5 16 29
12
61
20
143
5 14
34
12
56
19
140
FY 2014
FY 2015
104
Potable Sewer Recycled
Developer
Reimbursed-
CIP Total
Operating Labor Costs 9,527,200$ 348,500$ 460,600$ -$ 10,336,300$
Benefits 9,451,000 300,600 386,700 - 10,138,300
Overhead Allocation-Personnel (1,314,600) 253,100 334,500 - (727,000)
Total Operating Labor and Benefits 17,663,600 902,200 1,181,800 - 19,747,600
CIP Labor Costs 599,000 186,100 84,800 131,200 1,001,100
Benefits 442,200 125,800 59,700 101,500 729,200
Overhead Allocation-Personnel 435,000 135,100 61,600 95,300 727,000
Total CIP Labor and Benefits 1,476,200 447,000 206,100 328,000 2,457,300
Total Labor and Benefits 19,139,800$ 1,349,200$ 1,387,900$ 328,000$ 22,204,900$
Potable-Operating 17,663,600$ 79.6%
Potable-CIP 1,476,200 6.6%
Sewer-Operating 902,200 4.1%
Sewer-CIP 447,000 2.0%
Recycle-Operating 1,181,800 5.3%
Recycle-CIP 206,100 0.9%
Develeper Reimbursed-CIP 328,000 1.5%
22,204,900$ 100.0%
Labor and Benefits by Fund - FY 2015
105
FY 2013 FY 2014 FY 2015
General Manager 5 5 5
Total FTE - General Manager 55 5
Administrative Services Management 3 3 3
Human Resources 4 4 3 (1)
Purchasing 7 7 7
Safety 1 1 1
Conservation 2 1 0 (1), (2)
Total FTE - Administrative Services 17 16 14
Finance
Financial Management 3 3 3
Controller and Budgetary Services 4 5 5 (2)
Payroll and Accounts Payable 3 0 0 (2)
Treasury and Accounting Services 5 6 6 (2)
Meter Maintenance 0 0 8 (2)
Customer Service 15 15 12 (2)
Total FTE - Finance 30 29 34
IT and Strategic Planning
IT and Strategic Planning Applications 4 5 4 (2)
IT Operations 4 3 4 (2)
Geographic Information Systems 4 4 4
Total FTE - IT and Strategic Planning 12 12 12
Operations Management 22 2
Water System Operations 27 26 21 (2)
Utility Maintenance/Construction 28 26 26
Collection/Treatment/Reclamation Operations 8 7 7
Total FTE - Operations 65 61 56
Engineering Management 3 3 3
Engineering 16 17 16 (1)
Total FTE - Engineering 19 20 19
District Total FTE Position Count 148 143 140
Position Count by Department
(1) The District’s strategic planning efforts of streamlining business processes enabled the District to be
more efficient and provided an opportunity to reduce staffing.
(2) Positions were re-classified and/or transferred as part of streamlining the District's organizational
structure.
106
FY 2013 FY 2014 FY 2015
Water Conservation Technician 0 1 0 (1)
Utility Construction Assistant 1 0 0
Sr. Civil Engineer 1 0 1 (2)
Total Contract/Temporary Employees 2 1 1
General Manager 5 3%
Administrative Services 14 10%
Finance 34 24%
IT and Strategic Planning 12 9%
Operations 56 40%
Engineering 19 14%
140 100%
(2) Temporary positions to fill interim needs are identified and filled on an as-needed basis.
Contract / Temporary Employees
(1) The District’s strategic planning efforts of streamlining business processes enabled the District to be
more efficient and provided an opportunity to reduce staffing.
FY 2015 Position Count
107
FY 2013 FY 2014 FY 2014 FY 2015
Actual Budget Actual* Budget $ %
Administrative Expenditures
Directors' Fees 19,900$ 30,000$ 19,834$ 30,000$ -$ -
Travel and Meetings 126,978 190,900 147,110 207,700 16,800 8.8%
Conservation and Outreach 199,479 206,600 136,743 174,900 (31,700) (15.3%)
General Office Expense 290,648 321,200 258,732 280,800 (40,400) (12.6%)
Equipment 970,652 906,900 943,153 1,139,600 232,700 25.7%
Fees 510,704 528,700 517,205 524,700 (4,000) (0.8%)
Services 1,541,412 2,206,500 1,387,477 2,152,300 (54,200) (2.5%)
Training 56,258 107,700 65,818 123,500 15,800 14.7%
Utilities 12,796 16,000 12,929 14,000 (2,000) (12.5%)
Bad Debt Expense 120,333 146,700 154,593 155,000 8,300 5.7%
Total 3,849,160$ 4,661,200 3,643,594 4,802,500 141,300 3.0%
Less: Overhead Allocation (447,855) (522,800) (402,299) (424,300) 98,500 -
Subtotal 3,401,306$ 4,138,400 3,241,295 4,378,200 239,800 5.8%
General Expenses 853,452 944,200 844,099 1,041,000 96,800 10.3%
Total Expenditures 4,254,758$ 5,082,600$ 4,085,394$ 5,419,200$ 336,600$ 6.6%
4,702,612$ 5,605,400$ 4,487,693$ 5,843,500$
Directors' Fees 30,000$ 0.5%
Travel and Meetings 207,700 3.6%
Conservation & Outreach 174,900 3.0%
General Office Expense 280,800 4.8%
Equipment 1,139,600 19.5%
Fees 524,700 9.0%
Services 2,152,300 36.8%
Training 123,500 2.1%
Utilities 14,000 0.2%
General Expense 1,041,000 17.8%
Bad Debt Expense 155,000 2.7%
5,843,500 100.0%
Less: Overhead Allocation (424,300)
Total Administrative Expenses 5,419,200$
Administrative Expenditures - Total
FY 2015 Total Administrative Expenditures, in thousands ($)
Budget to Budget
Variance
* Actuals unaudited
108
FY 2013 FY 2014 FY 2014 FY 2015
Actual Budget Actual* Budget $ %
Materials and Maintenance
Fuel and Oil 207,866$ 296,000$ 199,197$ 304,300$ 8,300$ 2.8%
Meters and Materials 98,415 134,900 66,138 113,800 (21,100) (15.6%)
Fleet Parts and Equipment 153,390 132,500 112,277 129,900 (2,600) (2.0%)
Infrastructure Equipment & Supplies 694,834 499,000 496,164 525,000 26,000 5.2%
Chemicals 424,978 426,100 372,594 397,100 (29,000) (6.8%)
Safety Equipment 32,966 26,300 31,965 44,200 17,900 68.1%
Laboratory Equipment and Supplies 43,178 44,000 43,938 44,000 - -
Other Materials and Supplies 133,647 156,200 133,481 131,800 (24,400) (15.6%)
Building and Grounds Materials 64,586 55,500 55,608 46,500 (9,000) (16.2%)
Contracted Services 603,070 464,400 523,990 588,300 123,900 26.7%
Materials and Maintenance 2,456,930$ 2,234,900$ 2,035,352$ 2,324,900$ 90,000$ 4.0%
Sewer Charges
Metro O&M Costs 1,009,692$ 1,023,400$ 1,021,724$ 1,020,300$ (3,100)$ (0.3%)
Spring Valley Sewer Charge 260,473 274,600 100,800 274,600 - 0.0%
Total Sewer Charges 1,270,165$ 1,298,000$ 1,122,524$ 1,294,900$ (3,100)$ (0.2%)
Total Expenditures 3,727,095$ 3,532,900$ 3,157,876$ 3,619,800$ 86,900$ 2.5%
Fuel and Oil 304,300$ 8.4%
Meters and Materials 113,800 3.1%
Fleet Parts and Equipment 129,900 3.6%
Infrastructure Equipment and Supplies 525,000 14.5%
Chemicals 397,100 11.0%
Safety Equipment 44,200 1.2%
Laboratory Equipment and Supplies 44,000 1.2%
Other Materials and Supplies 131,800 3.6%
Building and Grounds Materials 46,500 1.3%
Contracted Services 588,300 16.3%
Sewer Charges 1,294,900 35.8%
3,619,800$ 100.0%
Materials and Maintenance Expenditures - Total
FY 2015 Materials and Maintenance Expenditures
Budget to Budget
Variance
* Actuals unaudited
109
FY 2013 FY 2014 FY 2014 FY 2015
Budget to
Budget
Actual Budget Actual* Budget Variance
Departmental Expenditures
B Board of Directors 87,128$ 108,700$ 100,367$ 115,100$ 6,400$
GGeneral Manager 1,419,489 1,444,500 1,353,831 1,562,300 117,800
GGeneral Expense 2,343,613 2,149,600 2,214,164 2,331,800 182,200
A Administrative Services 3,292,343 3,069,700 2,915,571 2,995,600 (74,100)
F Finance 4,650,792 5,863,200 5,463,210 5,816,700 (46,500)
IT IT and Strategic Planning 2,932,601 3,135,600 3,021,303 3,373,800 238,200
WWater Operations 11,015,311 10,912,500 10,314,869 11,384,100 471,600
E Engineering 1,816,946 2,025,800$ 1,827,709$ 2,358,500$ 332,700
T Total Departmental Expenditures 27,558,223 28,709,600$ 27,211,024$ 29,937,900$ 1,228,300
Less: Overhead Allocation (1,215,350) (1,418,600) (1,091,721) (1,151,300) 267,300
Net Departmental Expenditures 26,342,873$ 27,291,000$ 26,119,303$ 28,786,600$ 1,495,600
Non-Departmental Expenditures
Water Purchases 43,161,584$ 45,025,100$ 48,209,099$ 47,059,200$ 2,034,100$
Power 2,430,461 2,693,300 2,808,846 2,838,400 145,100
Expansion Reserve 3,936,000 3,428,000 - 2,538,900 (889,100)
Betterment Reserve 1,120,000 125,000 125,000 3,530,000 3,405,000
Replacement Reserve 743,000 4,230,000 4,230,000 3,270,200 (959,800)
Transfer to Sewer General Fund 595,000 152,800 152,800 553,800 401,000
Transfer to General Fund Reserve 2,285,800 1,913,000 1,913,000 1,583,800 (329,200)
Transfer to Sewer Replacement 2,099,000 - - 127,000 127,000
Transfer to OPEB - 1,242,900 1,242,900 647,100 (595,800)
Transfer to New Supply Reserve - - - 705,000 705,000
Total Non-Departmental Expenditures 56,370,845 58,810,100$ 58,681,645$ 62,853,400$ 4,043,300
Total Operating Expenditures 82,713,717$ 86,101,100$ 84,800,948$ 91,640,000$ 5,538,900
Operating Expenditures by Department
* Actuals unaudited
110
Operating Expenditures by Object
FY 2013 FY 2014 FY 2014 FY 2015
Actual Budget Actual* Budget Variance
Departmental Expenditures
Labor and Benefits 19,128,515$ 19,571,300$ 19,565,455$ 20,474,600$ 903,300$
Director's Fees 19,900 30,000 19,834 30,000 -
Travel and Meetings 126,979 190,900 147,110 207,700 16,800
Conservation and Outreach 199,479 206,600 136,743 174,900 (31,700)
General Office Expense 290,648 321,200 258,732 280,800 (40,400)
Equipment 970,652 907,000 943,153 1,139,600 232,600
Fees 1,364,156 1,472,800 1,361,304 1,565,700 92,900
Services 1,541,412 2,206,500 1,387,477 2,152,300 (54,200)
Training 56,258 107,700 65,818 123,500 15,800
Materials & Maintenance 2,456,930 2,234,900 2,035,352 2,324,900 90,000
Power and Utilities 12,796 16,000 12,929 14,000 (2,000)
Sewer Charges 1,270,165 1,298,000 1,122,524 1,294,900 (3,100)
Bad Debt Expense 120,333 146,700 154,593 155,000 8,300
Total Departmental Expenditures 27,558,223 28,709,600 27,211,024 29,937,900 1,228,300
Less: Overhead Allocation (1,215,350) (1,418,600) (1,091,721) (1,151,300) 267,300
Net Departmental Expenditures 26,342,873$ 27,291,000$ 26,119,303$ 28,786,600$ 1,495,600$
Non-Departmental Expenditures
Water Purchases 43,161,584$ 45,025,100$ 48,209,099$ 47,059,200$ 2,034,100
Power 2,430,461 2,693,300 2,808,846 2,838,400 145,100
Expansion Reserve 3,936,000 3,428,000 - 2,538,900 (889,100)
Betterment Reserve 1,120,000 125,000 125,000 3,530,000 3,405,000
Replacement Reserve 743,000 4,230,000 4,230,000 3,270,200 (959,800)
Transfer to Sewer General Fund 595,000 152,800 152,800 553,800 401,000
Transfer to General Fund Reserve 2,285,800 1,913,000 1,913,000 1,583,800 (329,200)
Transfer to Sewer Replacement 2,099,000 - - 127,000 127,000
Transfer to OPEB - 1,242,900 1,242,900 647,100 (595,800)
Transfer to New Supply Fund - - - 705,000 705,000
Total Non-Departmental Expenditures 56,370,845$ 58,810,100$ 58,681,645$ 62,853,400$ 4,043,300$
Total Operating Expenditures 82,713,717$ 86,101,100$ 84,800,948$ 91,640,000$ 5,538,900$
Budget to
Budget
* Actuals unaudited
111
Board of Directors
Mission Statement
To provide safe, reliable water, recycled
water, and wastewater services to our
community in an innovative, cost efficient,
water-wise and environmentally
responsible manner.
Mitchell Thompson
Treasurer
Division 2
Gary Croucher
Division 3
David Gonzalez, Jr.
Vice President
Division 1
Jose Lopez
President
Division 4
Mark Robak
Division 5
Board of Directors
The Otay Water District is a revenue-
neutral public agency established in
accordance with the California Water
Code. This not-for-profit status means
Otay has no private shareholders, pays no
dividends and therefore does not report
to, nor answer to the California Public
Utilities Commission. The District does,
however, answer to the public through a
five-member Board of Directors. Each
Director is elected by voters within their
respective division boundaries to
represent the public's interest with regard
to rates for service, taxes, policies,
ordinances, and other matters related to
the management and operation of the
Otay Water District. Directors serve four-
year, alternating terms on the Board.
112
Board of Directors 115,100$ 0.4%
General Manager 1,562,300 5.2%
General Expense 2,331,800 7.8%
Administrative Services 2,995,600 10.0%
Finance 5,816,700 19.4%
IT and Strategic Planning 3,373,800 11.3%
Water Operations 11,384,100 38.0%
Engineering 2,358,500 7.9%
29,937,900$ 100.0%
FY 2013 FY 2014 FY 2014 FY 2015
Actual Budget Actual* Budget
Board of Directors 87,128$ 108,700$ 100,367$ 115,100$
Board of Directors
Board of
Directors ,
$115,100
FY 2015 Total Departmental Budget
$29.9 Million
* Actuals unaudited
113
FY 2013 FY 2014 FY 2014 FY 2015
Actual Budget Actual*Budget
Benefits 62,475$ 62,100$ 71,935$ 68,500$
Director's Fees 19,900 30,000 19,834 30,000
Travel and Meetings 4,753 16,600 7,798 16,600
Training - - 800 -
Total 87,128$ 108,700$ 100,367$ 115,100$
Budget vs. Actual, in thousands ($)
Board of Directors
$-
$30
$60
$90
$120
2010 2011 2012 2013 2014 2015
98
87
10
7
11
2
10
9
11
5
63
75
75
87
10
0
Budget Actual
* Actuals unaudited
114
Director’s Division Boundaries
115
General Manager
Mission Statement
To provide high value water and wastewater services to the customers of the Otay Water District, in
a professional, effective, and efficient manner.
Key Challenge
Our key District challenge is to add increased value by improving our core business processes.
From a water supply perspective, this means determining the optimum mix of water supply,
treatment, and delivery solutions for our customers. From a daily operating perspective, efficiency
improvements have become the primary source of competitive advantage and cost optimization for
utilities. Adding value from this perspective means the entire team focusing on not only the highest
priority goals but also examining the details of what we do every day and be willing to alter how we
do it if it makes a positive difference. Our employees voice a high degree of personal and
professional satisfaction with our direction and the entire team is committed to meeting this key
challenge with distinction.
General Manager’s Vision
“A District that is at the forefront in innovations to provide water services at affordable rates, with a
reputation for outstanding customer service.”
CE
116
Position Title FY 2013 FY 2014 FY 2015
General Manager 1 1 1
Assistant General Manager 1 1 1
District Secretary 1 1 1
Sr. Confidential Executive Secretary 1 1 1
Communications Officer 1 1 1
Total 5 5 5
District Position Count - 140
General Manager Department - (5 Positions)
General Manager - Position Count
Board of Directors
1111
General Manager
1211
District
Secretary
1211
Sr. Confidential
Executive Secretary
1211
Communications
Officer
1211
Assistant
General Manager
2111
117
Board of Directors 115,100$ 0.4%
General Manager 1,562,300 5.2%
General Expense 2,331,800 7.8%
Administrative Services 2,995,600 10.0%
Finance 5,816,700 19.4%
IT and Strategic Planning 3,373,800 11.3%
Water Operations 11,384,100 38.0%
Engineering 2,358,500 7.9%
29,937,900$ 100.0%
FY 2013 FY 2014 FY 2014 FY 2015
Actual Budget Actual* Budget
TOTAL General Manager/Assistant
General Manager 1,419,489$ 1,444,500$ 1,353,831$ 1,562,300$
General Manager
General
Manager,
$1,562,300
FY 2015 Total Departmental Budget
$29.9 Million
* Actuals unaudited
118
FY 2013 FY 2014 FY 2014 FY 2015
Actual Budget Actual* Budget
Labor and Benefits 1,105,281$ 1,106,200$ 1,112,599$ 1,128,400$
Travel and Meetings 46,630 50,900 42,804 54,600
Conservation and Outreach 2,695 7,000 3,421 7,000
General Office Expense 4,390 5,300 3,164 5,300
Equipment - 1,500 2,700 4,000
Fees 59,993 48,000 47,303 64,000
Services 200,500 225,600 141,689 199,000
Materials & Maintenance - - - 100,000
Miscellaneous - - 151 -
Total 1,419,489$ 1,444,500$ 1,353,831$ 1,562,300$
Budget vs. Actual, in thousands ($)
General Manager
$1,000
$1,300
$1,600
$1,900
2010 2011 2012 2013 2014 2015
1,
6
6
7
1,
7
9
1
1,
7
2
1
1,
4
8
8
1,
4
4
5
1,
5
6
2
1,
5
3
0
1,
6
8
2
1,
6
6
9
1,
4
1
9
1,3
5
4
Budget Actual
* Actuals unaudited
119
General Manager
Services We Provide
The General Manager’s office provides staffing, scheduling, and other support to the Board of
Directors, General Manager, and Assistant General Manager. The office posts and
disseminates meeting notices, agendas, minutes, sets board meeting dates, and assists in
conducting board and committee meetings. It also manages public and media relations, bi-national
and legislative affairs, and provides liaison with local elected officials and community groups. The
General Manager’s office oversees the production and distribution of publications and notices to
inform the public of District functions, policies, and services. The office also coordinates special
events and provides staffing and support to local water associations.
Performance Measures – Strategic Plan FY 2012-2014
Accomplishments – Fiscal Year 2013-2014
Otay continues to be one of the lower cost water and sewer service providers among San Diego’s
23 water agencies and 28 sewer agencies.
Decreased labor costs by participating with other departments to reduce three (3) full-time
positions by instituting efficiency programs, which minimize the impact of higher water costs
from wholesalers, resulting in District-wide annual cost-savings of approximately $448,000.
Completed a review, evaluation and update of the District’s current Emergency Response
Programs: National Incident Management System (NIMS); Standardized Emergency
Management System (SEMS); and Incident Command System (ICS).
For the tenth consecutive year, the District has met nationally recognized guidelines and has
been awarded the Distinguished Budget Presentation award for the Fiscal Year 2013-2014
Budget by the Government Finance Officers Association (GFOA). In order to receive this award,
a governmental unit must publish a budget document that meets program criteria as a policy
document, a financial plan, as an operations guide, and as a communications device. This
CUSTOMER
Customer Satisfaction
Measures the level of overall
customer satisfaction with the
District. Survey is conducted
on an annual basis. Formation
of survey begins in Q1. Actual
survey measures calendar year
(January-December). Currently
reported quarterly.
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
FY 11-12 FY 12-13 FY 13-14 FY 14-15
Target Actual & Projected
120
General Manager
award is a significant achievement and is the highest form of recognition in governmental
budgeting.
For the tenth consecutive year, the District has been awarded the Certificate of Achievement for
Excellence in Financial Reporting by the Government Finance Officers Association (GFOA) for
the Comprehensive Annual Financial Report (CAFR) for fiscal year ending June 30, 2013. This is
the highest form of recognition in the area of governmental accounting and financial reporting,
and clearly demonstrates how the District takes great care in maintaining high financial
standards.
Standard & Poor’s (S&P) affirmed the District’s AA (Double A) rating and revised its outlook to
stable from negative. The outlook revision was based on S&P’s view of the District’s improved
financial performance during the past two fiscal years.
Continue to meet all water quality standards and provided continuous services to our customers.
Proactively maintained the sewer collection system resulting in no sewer overflows.
Continued the alignment studies for the Rosarito Desalination Facility Conveyance and
Disinfection System project. Environmental surveys for the alignments have been
completed. Worked with the CDPH to determine the permit requirements. Worked with
Consolidated Water to align the CDPH requirements vs. plant design. Submitted the Presidential
Permit Application for the project to the State Department which was published in the Federal
Register.
Completed construction on a number of notable Capital Improvement Projects including the 944-
1R Recycled Pump Station Upgrade & System Enhancements project, the 927-1 Recycled Water
Reservoir Cover and Liner Replacement project, the 12-Inch Potable Pipeline in Orange Avenue
Bridge, Crossing I-805 project, and the 803-3 & 832-2 Reservoir Coating and Upgrades.
Since 2007, the District has seen a reduction of 34.75 FTE positions or 19.9%. In addition, by
achieving greater efficiency the number of customers served per FTE has increased 29.2%.
121
Administrative Services - General
Mission Statement
To provide support to the Board of Directors, the General Manager, and District staff by identifying
and meeting objectives to satisfy the needs of our customers by providing, through best
management practices, the full range of employer and employee services, administrative services,
risk management, and safety and security.
Department Responsibilities
The Administrative Services Department, under the general direction of the Chief Administrative
Services, provides the following support services: Human Resources, Purchasing and Facilities, and
Safety and Risk Administration. It also coordinates assigned activities with other departments and
outside agencies, and provides highly responsible and complex administrative support to the District,
General Manager, and Board of Directors.
122
Position Title FY 2013 FY 2014 FY 2015
Chief, Administrative Services (Assistant Chief,
Administrative Services and IT) 111
Confidential Executive Secretary 111
Confidential Secretary 111
Human Resources Manager 111
Senior Human Resources Analyst 111
Human Resources Analyst 111
Human Resources Technician 1 1 0
Purchasing & Facilities Manager 111
Senior Buyer 111
Assistant Buyer 111
Lead Warehouse Worker / Facilities Worker 111
Warehouse / Delivery Worker 111
Facilities Maintenance Technician 2 2 2
Safety & Security Specialist 1 1 1
Water Conservation Manager 100
Water Conservation Specialist 1 0 0
Senior Water Conservation Specialist (2)010
Total 17 16 14
Administrative Services - Position Count
District Position Count - 140
Administrative Services Department - (14 Positions)
(2) Beginning in FY 2015, Senior Water Conservation Specialist position was moved to Finance.
(1) Interim position oversees Administrative Services and Information Technology (IT).
Purchasing and
Facilities
2231 (7)
Safety and Security
Administration
2241 (1)
Human
Resources
2221 (3)
Assistant Chief,
Administrative Services and IT
2211 (3)
(1)
123
Board of Directors 115,100$ 0.4%
General Manager 1,562,300 5.2%
General Expense 2,331,800 7.8%
Administrative Services 2,995,600 10.0%
Finance 5,816,700 19.4%
IT and Strategic Planning 3,373,800 11.3%
Water Operations 11,384,100 38.0%
Engineering 2,358,500 7.9%
29,937,900$ 100.0%
FY 2013 FY 2014 FY 2014 FY 2015
Actual Budget Actual* Budget
Administrative Chief 461,568$ 489,800$ 481,371$ 463,800$
Human Resources 679,097 882,300 720,522 703,300
Purchasing and Facilities 1,514,838 1,407,000 1,452,526 1,455,800
Safety and Security 208,676 290,600 261,152 372,700
Water Conservation (1)- - - -
TOTAL 2,864,179$ 3,069,700$ 2,915,571$ 2,995,600$
Administrative Services
(1) Beginning in FY 2015, Water Conservation has been moved to Finance. For comparative purposes,
prior year budget and actual expenses have been moved to Finance.
Administrative
Services,
$2,995,600
FY 2015 Total Departmental Budget
$29.9 Million
* Actuals unaudited
124
FY 2013 FY 2014 FY 2014 FY 2015
Actual (1)Budget (1)Actual*Budget (1)
Labor and Benefits 1,965,789$ 2,075,500$ 2,027,956$ 2,044,500$
Travel and Meetings 7,574 14,600 5,052 16,700
General Office Expense 132,071 145,400 106,291 108,000
Equipment 72,960 56,000 64,074 75,500
Services 219,538 376,500 294,272 316,000
Training 39,852 81,200 41,446 92,600
Materials & Maintenance 413,599 304,500 363,551 328,300
Power and Utilities 12,796 16,000 12,929 14,000
TOTAL 2,864,179$ 3,069,700$ 2,915,571$ 2,995,600$
Budget vs. Actual, in thousands ($)
(1) Beginning in FY 2015, Water Conservation has been moved to Finance. For comparative purposes,
prior year budget and actual expenses have been moved to Finance.
Administrative Services
$-
$1,000
$2,000
$3,000
$4,000
2010 2011 2012 2013 2014 2015
3,
9
1
3
3,
9
3
5
3,
7
2
7
3,
6
7
9
3,
0
7
0
2,9
9
6
3,
3
8
8
3,
4
0
9
3,
3
4
5
2,
8
6
4
2,
9
1
6
Budget Actual
* Actuals unaudited
125
Administrative Services – Human Resources
Administrative Services Objectives - Strategic Plan FY 2012-2014
Completed Objectives:
CUSTOMER
Regularly produce and evaluate communications tools and explore the effective use of
new media options including: electronic newsletters, auto-dialer services, video
streaming, social networks or web media to ensure the District’s outreach efforts are
cost-effectively reaching all stakeholders.
BUSINESS PROCESSES
Enhance security processes and planning.
LEARNING AND GROWTH
Update performance evaluation categories/program to ensure a results-oriented
workforce and update and provide training, if needed.
Evaluate pay-for-performance program to ensure the District is rewarding employees
for innovations and business processes.
Objectives behind schedule:
LEARNING AND GROWTH
Negotiate a successor Memorandum of Understanding (MOU) for represented
employees for 2014 and beyond, and related compensation and benefits for
unrepresented employees.
Legend
Completed
On Schedule
Behind Schedule
On Hold
No Reports
Not Scheduled to Start Yet
126
Administrative Services – Human Resources
Human Resources
Services We Provide
Human Resources, under the direction of the Chief of Administrative Services, provides the following
support services: recruits, selects and ensures the retention of qualified employees; develops,
implements and administers policies, procedures, collective bargaining contracts and employee
programs; ensures up-to-date classification plans and a competitive compensation program;
manages benefits programs for employees and retirees; manages the Workers’ Compensation
program; oversees employee performance through management staff to include employee training
and development; recognition and incentives; performance evaluation process and employee
discipline; ensures legal compliance; and implements work/life balance initiatives to include a
comprehensive wellness program.
Performance Measures – Strategic Plan FY 2012-2014
LEARNING AND GROWTH
Turnover Rate
Annual percent of voluntary
terminations. (Excludes
retirement)
0.0%
1.5%
3.0%
4.5%
6.0%
FY 11-12 FY 12-13 FY 13-14 FY 14-15
Target Actual & Projected
LEARNING AND GROWTH
Training Hours per Employee
Measures the quantity of general
and management formal training
hours employees are completing.
0
5
10
15
20
25
FY 11-12 FY 12-13 FY 13-14 FY 14-15
Target Actual & Projected
127
Administrative Services – Human Resources
Accomplishments – Fiscal Year 2013-2014
Decreased labor costs by participating with other departments to reduce three (3) full-time
positions by instituting efficiency programs, which minimize the impact of higher water costs
from wholesalers, resulting in District-wide annual cost-savings of approximately $448,000.
Developed management initiatives, policy updates, and conducted a comprehensive
compensation and benefits survey in preparation for negotiations of a successor Memorandum
of Understanding with the Employees’ Association with the goal of streamlining business
processes and increasing efficiency within the organization.
Worked with benefits consultant to price ancillary benefits in the market and changed Life and
Accidental Death and Dismemberment coverage, which resulted in a savings of approximately
$12,000 per year with a three-year rate guarantee.
Coordinated and received credit for the Special District Risk Management Authority’s (SDRMA)
Credit Incentive Program (CIP). The District received a combined credit of approximately $95,700
for the Property and Liability and Workers’ Compensation premiums. These credits included CIP,
longevity distribution, and a 5% multi-program discount. In addition to these credits, the District
also received a high-volume discount in the amount of $302,660.
128
Administrative Services – Purchasing
Purchasing
Services We Provide
The Purchasing Division, under general direction of the Chief of Administrative Services, oversees
the general purchasing standards used within the District; purchases and oversees the procurement
of supplies, equipment, and services; controls and administers the District’s standard materials
inventory; disposes of surplus materials, equipment, and supplies; assists in the acquisition and
disposal of non-infrastructure related real estate; performs non-structural facility maintenance work;
and administers and manages outsourced facility maintenance service contracts. Also, as needed,
provides complex purchasing related analysis and consultation to the District and General Manager.
Performance Measures – Strategic Plan FY 2012-2014
(1) Performance Measure discontinued in Strategic Plan FY 2015 Phase 1
Accomplishments – Fiscal Year 2013-2014
A total of 155 blanket purchase orders were maintained totaling $13,071,663 in value; and 807
regular purchase orders were processed totaling $2,938,713.
Directed the replacement of defective and hazardous heat exchanges at the Administration
Building’s HVAC rooftop units 2, 3, and 5.
Facilitated the replacement of defective fire sprinkler pipes and sprinkler heads in the
Administration Building to meet five-year fire/life/safety certification requirements.
Refreshed the paint at the 30 MG Reservoir and Treatment Plant buildings including doors,
windows, louvers, roll-up doors and metal roof fascia at the Laboratory and Effluent Pump
Station buildings. Removed and replaced decayed roof fascia at the Reservoir chlorine/aqua
and vault building.
Facilitated the upgrade of building alarm systems at the Administration Building, Water
Operations Building, Warehouse, 30 MG Reservoir, 8 MG, 1200, 850-2 and 850-4 tanks.
FINANCIAL
Blanket Order Activity
Percentage of material
purchases acquired via
blanket purchase orders.
Industry Best Practice Target is
at least 15%.
0.0%
10.0%
20.0%
30.0%
40.0%
FY 11-12 FY 12-13 FY 13-14 FY 14-15
Target Actual & Projected
(1)
129
Administrative Services – Purchasing
Assisted in the upgrade of SCADA monitoring systems at the 1200 tank, 1004 Pump Station
and tank, 850-1 and 850-4 tanks, 980-1 and 980-2 tanks, 944/680 Recycle Pump Station, 30
MG Reservoir, and Treatment Plant dissipation box.
To enhance security, completed the re-key of south District external buildings with "0" keys.
With the assistance of IT, established automatic monthly reports giving the project manager
notification of contracts expiring within 120 days.
130
Administrative Services – Safety and Security
Safety and Security
Services We Provide
Safety and Security, under the direction of the Chief of Administrative Services, provides the following:
assesses the occupational exposure to risk; evaluates hazards and mitigation of safety hazards and
risk to injury; directs and supervises accident investigations relating to occupational injuries, fleet
incidents and/or damage to, or theft of District property; develops hazardous materials business
plans, community right-to-know, Risk Management Prevention and Process Safety Management
plans; develops and implements procedures to ensure compliance with safe work practices and
determines training needs to address issues; develops, implements and manages safety programs;
manages the District’s security program; implements, schedules and coordinates recurring safety
training; coordinates the Department of Transportation (DOT), the District’s Drug Free Workplace,
and DMV Pull-Notice Programs; and plans and coordinates the District’s emergency preparedness
program.
Performance Measures – Strategic Plan FY 2012-2014
(1) Targets changed from 32 to 24 hours in FY 2012
0
10
20
30
40
FY 11-12 FY 12-13 FY 13-14 FY 14-15
Target Actual & Projected
LEARNING AND GROWTH
Safety Training Program
Safety & Security Administration
will provide a minimum of 24
safety training programs/hours
annually to all field employees.
CUSTOMER SERVICE
Health & Safety Severity Rate
Quantifies the rate of
employee days lost from
work due to illness or injury.
(1)
0
10
20
30
40
FY 11-12 FY 12-13 FY 13-14 FY 14-15
Target Actual & Projected
131
Administrative Services – Safety and Security
Accomplishments – Fiscal Year 2013-2014
Completed a review, evaluation and update of the District’s current Emergency Response
Programs: National Incident Management System (NIMS); Standardized Emergency
Management System (SEMS); and Incident Command System (ICS). In addition, provided an
introduction to the SEMS/NIMS/ICS emergency response programs to Operations, Engineering,
Administration, and Finance staff.
Implemented a consolidated and streamlined program for the District’s Emergency Response
Plans by combining NIMS and SEMS into one District document under a three-part Emergency
Response Plan, which includes:
o District-specific Emergency Response Action Plans
o Completion of all required employee training
o District's Emergency Command and Operations staff, review and development of group
specific organizational charts and individual areas of responsibility
Developed and completed a District-wide training plan to have all staff complete the initial
SEMS/NIMS/ICS courses (ICS 100 and 700).
Completed initial review of employee current safety training requirements and provided
suggestions and options.
Completion of safety training by staff on the following topics: Hazardous Communication Global
Harmonization System, First Aid/AED/CPR, Hearing Conservation, Confined Space, Fall
Protection, and Reporting Injuries and Illness. The HAZWOPER Team also completed Confined
Space Rescue, First Responders Emergency Incident Command System, and an 8-hour annual
refresher.
Participated in monthly WebEOC exercises sponsored and hosted by the San Diego County
Water Authority and County of San Diego’s Office of Emergency Services.
Developed a tracking tool for ease of evaluating the completion of safety training hours by
groups.
Reviewed an updated key District safety programs, with a focus on high hazard areas such as:
Confined Space, Fall Protection, Heat Illness Prevention, Hazard Communications, Chemical
Safety Data Sheets and Illness and Injury Prevention Program, which provides the foundation for
our safety program. The revised and approved programs are located on SharePoint and the
updated policies and procedures were communicated to Operations, Engineering and Customer
Service field personnel.
Reviewed and updated the District's Noise Conservation Program to include only those
employees who qualify and meet the noise threshold exposure of 85dB or above during an 8
hour time weighed average period.
Installed Cal/OSHA compliant First Aid Kits and upgraded AED units.
Coordinated a tour visit of the Treatment Plant with the County of San Diego’s Hazardous Incident
Response Team and developed a site-specific Emergency Response BMP informational
document for the Treatment Plant, which is to be used as guide by emergency first responders
(Fire, Sheriff, etc.) when responding to emergencies at the Treatment Plant.
132
Administrative Services – Safety and Security
Completed the Unified Program Facility reporting requirements for the District’s 25 qualified
facilities. Under the California Environmental Reporting System (CERS) and as required by the
Environmental Protection Agency via the County of San Diego’s Department of Environmental
Health, all regulated businesses are required by law (Assembly Bill 2286) to submit and update
business information electronically.
Completed a review and update of the District's fuel island documentation requirements in
preparation for the County of San Diego’s annual Underground Storage Tank inspection.
Successful completion of the County of San Diego’s regulatory California Accidental Release
Program (CalARP) and Spill Prevention Control and Countermeasure (SPCC) Program
inspections at the Treatment Plant, Regulatory, 30 MG Reservoir, and Central Area facilities.
Implemented access and gate control at key District facilities.
Completed an evaluation and assessment program for the District's electric gates and
implemented safety upgrades and enhancements as required.
Implemented remote video capability for burglar and fire alarms at the Treatment Plant.
133
Finance - General
Mission Statement
To provide timely, accurate, and clear
information that optimizes service to the
District’s staff and ratepayers. Through
continuous improvement, professional
service, and effective fiscal policies the
Finance Department will ensure that
financial resources are collected,
recorded, protected, and expended in a
fiscally responsible manner.
Department
Responsibilities
The Finance Department, under the general direction of the Chief Financial Officer, provides the
following support services: Controller and Budgetary Services, Treasury and Accounting Services,
Payroll and Accounts Payable, and Customer Service. The Department ensures the District’s
conformance with modern finance, accounting theory and practices, and compliance with
applicable state and federal laws. In addition, it provides customer support, meter reading and
maintenance, and water conservation outreach programs. The Finance staff provides highly
responsible and complex administrative and technical support to the District, General Manager, and
Board of Directors.
Meter Maintenance
Finance
Customer Service
134
Position Title FY 2013 FY 2014 FY 2015
Chief Financial Officer 1 1 1
Executive Secretary 111
Secretary 111
Finance Manager, Treasury and Accounting 111
Finance Manager, Controller and Budget 1 1 1
Finance Supervisor, Payroll and A/P 100
Customer Service Manager 2 2 2
Senior Accountant 4 4 4
Accountant 3 3 3
Accounting Technician 222
Lead Customer Service Representative 2 2 2
Customer Service Representative I, II and III 7 7 7
Lead Customer Service Field Representative 1 1 1
Customer Service Field Representative I and II 333
Lead Cross Connection/Meter Maintenance Worker (1)001
Meter Maintenance Worker I & II (1)003
Senior Conservation Specialist (2)001
Total 30 29 34
(1) Beginning in FY 2015, Meter Maintenance was moved to Finance.
(2) Beginning in FY 2015, Senior Conservation Specialist Position was moved to Finance.
Finance - Position Count
District Position Count - 140
Finance Department - (34 Positions)
Treasury and
Accounting
Services
2331 (6)
Customer
Service
2341/2343
(12)
Controller and
Budgetary
Services 2321 (5)
Chief Finance Officer - 2311 (3)
Meter
Maintenance
2342 (8)
135
Board of Directors 115,100$ 0.4%
General Manager 1,562,300 5.2%
General Expense 2,331,800 7.8%
Administrative Services 2,995,600 10.0%
Finance 5,816,700 19.4%
IT and Strategic Planning 3,373,800 11.3%
Water Operations 11,384,100 38.0%
Engineering 2,358,500 7.9%
29,937,900$ 100.0%
FY 2013 FY 2014 FY 2014 FY 2015
Actual Budget Actual*Budget (1)
Finance Chief 519,012$ 508,600$ 503,297$ 517,100$
Controller and Budgetary Services 977,807 853,900 820,598 827,600
Treasury and Accounting Services 1,162,894 1,274,600 1,283,993 1,293,900
Customer Service 1,991,078 2,148,200 2,048,685 2,148,900
Meter Shop (1)576,034 610,500 542,089 606,300
Water Conservation (1)428,164 467,400 264,548 422,900
TOTAL 5,654,989$ 5,863,200$ 5,463,210$ 5,816,700$
Finance
(1) Beginning in FY 2015, Meter Shop and Water Conservation have been moved to Finance. For
comparative purposes, prior year budget and actual expenses for these divisions have been moved to
Finance.
Finance,
$5,816,700
FY 2015 Total Departmental Budget
$29.9 Million
* Actuals unaudited 136
FY 2013 FY 2014 FY 2014 FY 2015
Actual (1)Budget (1)Actual*Budget (1)
Labor and Benefits 4,478,908$ 4,417,800$ 4,374,755$ 4,567,800$
Travel and Meetings 12,914 22,700 14,990 25,100
Conservation and Outreach 196,784 199,600 133,322 167,900
General Office Expense 152,322 167,700 147,820 164,700
Equipment - - - 200
Fees 347,545 365,900 368,200 362,200
Services 203,334 370,600 171,379 237,900
Materials & Maintenance 142,848 172,200 98,151 135,900
Bad Debt Expense 120,334 146,700 154,593 155,000
Total 5,654,989$ 5,863,200$ 5,463,210$ 5,816,700$
Budget vs. Actual, in thousands ($)
(1) Beginning in FY 2015, Meter Shop and Water Conservation have been moved to Finance. For
comparative purposes, prior year budget and actual expenses for these divisions have been moved to
Finance.
Finance
$2,500
$4,000
$5,500
2010 2011 2012 2013 2014 2015
4,
8
6
9
4,
7
3
0
4,
7
1
2
4,
8
8
7
5,
8
6
3
5,
8
1
7
4,
6
1
7
4,
5
5
9
4,
5
4
0
5,
6
5
5
5,
4
6
3
Budget Actual
* Actuals unaudited137
Finance – General
Finance Department Objectives – Strategic Plan FY 2012-2014
Objectives Completed:
CUSTOMER
o Continued promoting the Water Conservation Garden as a venue for new
homeowners, developers, businesses, and existing homeowners.
BUSINESS PROCESSES
o Ensured best practices were followed in meeting the 20 by 2020 conservation targets
including reclassification of industrial and commercial customers.
o Educated and worked with local agencies and others to influence developers and
builders, to incorporate practical water efficient practices in new construction.
o Improved and streamlined meter related processes.
Objectives on Schedule:
BUSINESS PROCESSES
Streamline Finance business processes.
Streamline accounts payable business processes.
FINANCIAL
Improve financial planning and communication regarding the expenditure of District
funds.
Evaluate the feasibility of replacing the existing customer information system or
migrating to the new version of the Eden software.
Objectives behind Schedule:
CUSTOMER
Enhance communications with customers using our new phone system.
Objectives on Hold:
FINANCIAL
Develop water and sewer capacity fees for expansion.
Legend
Completed
On Schedule
Behind Schedule
On Hold
No Reports
Not Scheduled to Start Yet
138
Finance – Controller and Budgetary Services
Controller and Budgetary Services
Services We Provide
The Controller and Budgetary Services Division is responsible for developing and publishing the
annual operating and capital budgets as well as preparing the six-year financial plan and proposing
rate changes. Staff prepares monthly and annual reports, monitors budget variances, and
coordinates interactions with outside agencies. This division is also responsible for the bi-weekly
payroll of 140 full-time and temporary employees using the District’s Integrated Financial Eden
System. Timesheets and pay stubs are collected and distributed electronically. Benefits and
deductions are processed bi-weekly. Federal and state tax returns are filed on a quarterly basis and
W2s are filed annually.
Performance Measures – Strategic Plan FY 2012-2014
FINANCIAL
O&M Cost per Account
Operations & Maintenance (O&M)
cost per account/per customer.
(QualServe)
FINANCIAL
Overtime Percentage
Comparing actual to budgeted
overtime to monitor costs.
$0
$100
$200
$300
$400
$500
$600
FY 11-12 FY 12-13 FY 13-14 FY 14-15
Target Actual & Projected
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
FY 11‐12 FY 12‐13 FY 13‐14 FY 14‐15
Target Actual & Projected
139
Finance – Controller and Budgetary Services
FINANCIAL
Sewer Rate Ranking
District's average customer bill
as compared to other agencies
in San Diego County. Otay is
ranked 8th of 28 agencies.
FINANCIAL
Water Rate Ranking
District's average customer bill
as compared to other agencies
in San Diego County. Otay is
ranked 11th of 23 agencies.
BUSINESS PROCESSES
Distribution System Loss
Percentage for unaccounted
Water. (QualServe)
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
FY 11-12 FY 12-13 FY 13-14 FY 14-15
Target Actual & Projected
0
4
8
12
16
20
24
28
FY 11-12 FY 12-13 FY 13-14 FY 14-15
Target Actual & Projected
5
8
11
14
17
20
23
FY 11-12 FY 12-13 FY 13-14 FY 14-15
Target Actual & Projected
140
Finance – Controller and Budgetary Services
Accomplishments – Fiscal Year 2013-2014
For the tenth consecutive year, the District has met nationally recognized guidelines and has
been awarded the Distinguished Budget Presentation award for the Fiscal Year 2013-2014
Budget by the Government Finance Officers Association (GFOA). In order to receive this
award, a governmental unit must publish a budget document that meets program criteria as
a policy document, a financial plan, as an operations guide, and as a communications
device. This award is a significant achievement and is the highest form of recognition in
governmental budgeting.
For the eighth consecutive year, the District has been awarded the Operating Budget
Excellence Award for the Fiscal Year 2013-2014 Operating Budget by the California Society
of Municipal Finance Officers (CSMFO). CSMFO recognizes agencies that have prepared a
budget document or a communication tool that meets established criteria.
For the ninth consecutive year, the District has been awarded the Capital Budget Excellence
Award for the Fiscal Year 2013-2014 Capital Improvement Program Budget by the CSMFO.
The CSMFO recognizes agencies that have prepared a Capital Improvement Budget
document or a communication tool that meets established criteria.
141
Finance – Treasury and Accounting Services
Treasury and Accounting Services
Services We Provide
The Treasury and Accounting Services Division coordinates and directs the activities of the general
ledger accounting; audit; banking and cash management; investments and treasury functions; debt
financing; job costing; cost accounting; fixed assets; and contract review. The division is responsible
for the accounts payable process which pays approximately 750 invoices on a monthly basis. It is
also responsible for completing the District’s annual financial audit and publishing of the
Comprehensive Annual Financial Report (CAFR). The division conducts an annual review of the
District’s Investment Policy, as required by law, with approval by the Board of Directors. It provides
financial analysis and review of staff projects and operational business proposals. It also assists in
the preparation of the District’s annual operating and capital budgets, along with updating the Rate
Model and the six-year financial plan.
Performance Measures – Strategic Plan FY 2012-2014
FINANCIAL
Debt Coverage Ratio
Measures level of debt coverage
ratio (ability to pay debt).
(QualServe) Includes growth
related revenue. The minimum
legal level is 125%.
FINANCIAL
Reserve Level
Measures all of the District's
reserves against the Board
adopted Reserve Policy levels.
70.0%
80.0%
90.0%
100.0%
FY 11-12 FY 12-13 FY 13-14 FY 14-15
Target Actual & Projected
100.0%
125.0%
150.0%
175.0%
200.0%
FY 11-12 FY 12-13 FY 13-14 FY 14-15
Target Actual & Projected
142
Finance – Treasury and Accounting Services
Accomplishments – Fiscal Year 2013-2014
For the tenth consecutive year, the District has been awarded the Certificate of Achievement
for Excellence in Financial Reporting by the Government Finance Officers Association (GFOA)
for the Comprehensive Annual Financial Report (CAFR) for fiscal year ending June 30, 2013.
This is the highest form of recognition in the area of governmental accounting and financial
reporting, and clearly demonstrates how the District takes great care in maintaining high
financial standards.
Standard & Poor’s (S&P) affirmed the District’s “AA” rating and revised its outlook to stable
from negative. The outlook revision was based on S&P’s view of the District’s improved
financial performance during the past two fiscal years.
143
Finance – Customer Service
Customer Service
Services We Provide
The Customer Service Division is responsible for providing billing, receipting, collections, and
customer care for water and sewer services in addition to assisting with water conservation. The
billing and customer care teams handle the coordination of billing and receipting of approximately
49,000 accounts per month. Customers have the choice of receiving either a paper bill or an
electronic bill. Various payment options include ACH, web, IVR (telephone), and the convenience of
multiple locations for walk-in payments. The District has an automated phone system and web
portal which give customers access to their account information 24/7. If they desire more personal
service, the customer care team handles an average of 5,000 customer calls per month. The water
conservation staff promotes and conducts residential and large landscape surveys, promotes the
Water Conservation Garden as a resource, participates in outreach events throughout the
community, helps fund and promote a variety of incentive and other programs available to its
customers, and manages the District’s Water Shortage Response Plan as well as its water waste
reporting program.
Performance Measures – Strategic Plan FY 2012-2014
CUSTOMER
Answer Rate
Percentage of calls as a
measure of all calls received.
The targets are set by industry
standards.
FINANCIAL
Billing Accuracy
Percentage of correct bills
issued. (QualServe)
The targets are set by industry
standards.
95.0%
96.0%
97.0%
98.0%
99.0%
100.0%
FY 11-12 FY 12-13 FY 13-14 FY 14-15
Target Actual & Projected
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
FY 11-12 FY 12-13 FY 13-14 FY 14-15
Target Actual & Projected
144
Finance – Customer Service
Accomplishments – Fiscal Year 2013-2014
Continued process improvements by implementing on-line check lists for the most critical
processes in the department. The advent of a formal process and review points ensures a
high level of efficiency and thoroughness.
Switched IVR payment processors which will save the District approximately $12,000
annually.
Created a formal process to notify customers of leak alarms gathered from AMR
meters. This new process allows for earlier notification to customers and is less time
intensive then when utilizing only pre-billing reviews.
Integrated Water Conservation staff into the Finance Department creating synergies and
improved customer outreach.
Efficiencies implemented in the Customer Service Department resulted in a Customer
Service position being transferred to the IT department to work on various projects.
CUSTOMER
Gallons per Capita per Day
Meet or exceed Department of
Water Resources and California
Urban Water Council targets for
per capita use of potable water.
FY 2013 is the first year for this
performance measure.
100
120
140
160
180
200
FY 11-12 FY 12-13 FY 13-14 FY 14-15
Target Actual & Projected
145
Finance – Meter Maintenance
Meter maintenance
Services We Provide
As part of the Finance Department, the Meter Shop is responsible for the installation and
maintenance of all meters in the District. They manage the District’s backflow/cross-connection
prevention which includes annual tests of devices and water meters to ensure the continued safety
of the potable water system. Staff responds to customer issues regarding meter accuracy,
conducts site audits, and maintains records as required by various regulatory agencies. The Meter
Reading team reads approximately 49,000 potable, recycled, and District meters a month using
automatic meter reading technology.
Accomplishments – Fiscal Year 2013-2014
Integrated Meter Shop staff into the Finance Department which will allow them to work
closely with the meter readers to eliminate duplicate efforts related to meter installations
and inspections.
Received a 100% compliance from the California Department of Public Heath which
oversees the District’s backflow program. This audit is conducted every three years.
Incorporated essential portions from Title 17 into the District’s Code of Ordinances to
ensure the cross-connection program is easily referenced.
146
IT and Strategic Planning - General
Mission Statement
To provide superior technology and strategic planning services in support of District goals, staff
and customer service.
Department Responsibilities
The Information Technology and Strategic Planning Department, under the general direction of the
Chief Information Officer, provides the following support services: development and implementation
of information technology; District’s Strategic Planning Process including the development of long-
term strategic initiatives and defining performance measurement metrics; information system
support; and complex administrative and technical support to the District, General Manager, and
Board of Directors.
147
Position Title FY 2013 FY 2014 FY 2015
Chief Information Officer 1 1 1
IT Manager 111
GIS Manager 111
GIS Programmer/Analyst 1 1 1
GIS Analyst 111
GIS Technician 1 1 1
Network Engineer 1 1 1
Database Administrator 111
Lead Business System Analyst 111
Business System Analyst I and II 222
Network Analyst 111
Total 121212
(1) Interim position is budgeted in Administative Services and oversees Administrative Services
and IT.
IT and Strategic Planning - Position Count
District Position Count - 140
Information Technology & Strategic Planning Department - (12 Postions)
IT Applications
2411 (4)
IT Operations
2421 (3)
GIS
2431 (4)
Chief Information Officer
2411 (1)
Assistant Chief,
Administrative Services and IT
2411
(1)
148
Board of Directors 115,100$ 0.4%
General Manager 1,562,300 5.2%
General Expense 2,331,800 7.8%
Administrative Services 2,995,600 10.0%
Finance 5,816,700 19.4%
IT and Strategic Planning 3,373,800 11.3%
Water Operations 11,384,100 38.0%
Engineering 2,358,500 7.9%
29,937,900$ 100.0%
FY 2013 FY 2014 FY 2014 FY 2015
Actual Budget Actual* Budget
IT Chief/Applications 939,325$ 973,500$ 899,920$ 957,000$
IT Operations 1,271,205 1,390,400 1,384,713 1,462,400
Geographic Information System 722,071 771,700 736,670 954,400
TOTAL 2,932,601$ 3,135,600$ 3,021,303$ 3,373,800$
IT and Strategic Planning
IT and Strategic
Planning,
$3,373,800
FY 2015 Total Departmental Budget
$29.9 Million
* Actuals unaudited
149
FY 2013 FY 2014 FY 2014 FY 2015
Actual Budget Actual*Budget
Labor and Benefits 1,937,986$ 2,028,000$ 2,056,743$ 2,042,200$
Travel and Meetings 10,393 26,700 20,276 26,700
General Office Expense 1,139 1,500 426 1,500
Equipment 864,973 812,900 844,062 1,017,700
Services 110,766 259,500 88,456 278,700
Training 7,344 7,000 11,340 7,000
Total 2,932,601$ 3,135,600$ 3,021,303$ 3,373,800$
Budget vs. Actual, in thousands ($)
IT and Strategic Planning
$1,000
$1,900
$2,800
2010 2011 2012 2013 2014 2015
2,
8
5
6
2,
9
6
4
3,
0
8
0
2,
9
9
6
3,
1
3
6
3,
3
7
4
2,
8
6
4
2,
9
7
7
2,8
7
2
2,
9
3
3
3,
0
2
1
Budget Actual
* Actuals unaudited
150
IT and Strategic Planning – Strategic Plan Objectives
IT and Strategic Plan Objectives – Strategic Plan FY 2012-2014
Objectives Completed:
BUSINESS PROCESSES
Update District-wide Records Management program.
Objectives on Schedule:
BUSINESS PROCESSES
Implement GIS-centric work order system.
Improve the operating cost and efficiency of data center and network services.
Develop a complete Asset Management Program.
Legend
Completed
On Schedule
Behind Schedule
On Hold
No Reports
Not Scheduled to Start Yet
151
IT and Strategic Planning – IT Applications
IT Applications
Services We Provide
The Information Technology and Strategic Planning Department provides the following support
services: development and implementation of information technology; the District’s Strategic
Planning process including the development of long-term strategic initiatives and defining
performance measurement metrics; and information system support to the District. The department
also provides highly responsible and complex administrative and technical support to the District,
General Manager, and Board of Directors.
Accomplishments – Fiscal Year 2013-2014
The FY 2015-2018 Strategic Plan was developed over the last year and approved by the Board
as part of the FY 2015 budget. The planning process was extensive, involving a complete
analysis of past plans, analysis of the mission, vision, and values of the previous plan. The
plan cycle was extended from three to four years with the addition of a one year high priority
plan to ensure the foundation needed for change is in place and receives appropriate
support. The existing performance measures program is included. The Senior Management
Team met repeatedly over a six month period to develop and finally approve the plan. The
strategic planning process has been in place since 2003 and is the foundation for most of
our efforts to improve and adapt to our changing business environment.
Completed the collection of core recycled assets such as pump stations and reservoirs. The
database for asset management was refined to include modifications necessary to support
the new work order system. In addition, a rating system for sewer pipes using a visual
detection mechanism and industry standard condition assessment methodology was
implemented.
Staff developed an online Meter Reading Edit Checklist for Customer Service for the purpose
of streamlining the meter reads/edits process. The checklist includes a number of integrity
checks and automated functions to ensure the accuracy of each bill mailed to our
customers. Key benefits of this improved process are enhanced knowledge via staff cross-
training, reduction in time spent reviewing reads and bills, and greater accuracy.
Staff successfully launched the District’s work order management system replacement
project, Cityworks. The project included enterprise participation from Operations, Finance,
Engineering, and IT departments. The project is expected to be complete by March 2015.
In conjunction with the Operations department, staff successfully launched the District’s
SCADA system replacement project, GE iFIX. The project is expected to be complete by
March 2015.
152
IT and Strategic Planning – IT Operations
Customer Satisfaction
with Website
Tracks customer satisfaction
with website through surveys.
IT Operations
Services We Provide
IT Operations is responsible for day-to-day functions of the District’s data center; network and
desktop hardware/software; disaster recovery; telecommunications; mobile and wireless networks;
website; and help desk. IT Operations has collateral responsibilities for access security control and
video surveillance.
Performance Measures – Strategic Plan FY 2012-2014
CUSTOMER
99.0%
99.2%
99.4%
99.6%
99.8%
100.0%
FY 11-12 FY 12-13 FY 13-14 FY 14-15
Target Actual & Projected
BUSINESS PROCESSES
Network Availability
Percentage of uptime for network
during normal business hours.
(1) Did not include customer online bill
payment services prior to 2015.
LEARNING & GROWTH
Website Hits
Tracks the number of visitors
to our website per month.
(1)
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
FY 11-12 FY 12-13 FY 13-14 FY 14-15
Target Actual & Projected
10,000
15,000
20,000
25,000
30,000
FY 11-12 FY 12-13 FY 13-14 FY 14-15
Target Actual & Projected
153
IT and Strategic Planning – IT Operations
Accomplishments – Fiscal Year 2013-2014
Configured architecture and search capabilities of the District’s SharePoint site allowing
users to fully take advantage of the ability to search for documents, within documents, and
locate documents across network file shares.
Upgraded the District’s Enterprise Resource Planning (ERP) solution to version 5.10.1.1. This
system provides core ERP financial and customer billing services, key results, improved
performance and reliability, and data optimization benefits.
Initiated the redesign of the District’s public facing website. The new website will leverage
the latest technology of HTML5, have a new look and feel, employ social media functions,
and Google type navigation and search features.
IT staff continues to streamline data center operations by reducing the amount of physical
servers. Leveraging virtualization technologies, staff has consolidated over 60% of our server
environment averaging ten virtual servers per physical servers resulting in over $200,000 in
server hardware savings.
Completed a comprehensive infrastructure upgrade of the District’s core network to include
replacement of existing Cisco switches, firewall and end-point support devices. The upgrade
also included a redesign of the network architecture to ensure data, voice, and Internet
service redundancy across Otay’s network.
Implemented Zetta enterprise backup and disaster recovery solution. This solution provides
backup and recovery of District application servers and user data. The deployment of this
solution helps to meet additional disaster recovery objectives.
Implemented Meraki wireless technology throughout the District for enhanced wireless
service and simplified administration.
154
IT and Strategic Planning – GIS System
Geographic Information System (GIS)
Services We Provide
The GIS division is responsible for the technical and administrative support to the Engineering and
Operations Departments on GIS/AM/FM and CAD systems. It is also responsible for the data
collection and data QA/QC of the District’s facility data and land-based data. In addition, it provides
technical support in designing, developing, documenting and maintaining the District’s database
systems and creates database structures that consolidate the conceptual, logical and physical
models of data.
Accomplishments – Fiscal Year 2013-2014
Completed the implementation of the new GIS mobile solution, InfraMap (field utility work
solution), and its associate end-user training. InfraMap provides new and improved mobile
utility technology, which replaced the District’s legacy Field Mapplet solution. The new
mobile solution provides enhanced field and activity collection functionality and optimized
communication architecture for improved connection reliability.
Completed the enterprise ArcGIS Suite upgrade from multiple versions to 10.1. This also
included the migration of the District’s ArcSDE database, or the core database management
system, for GIS.
Deployed the new web-based Automatic Vehicle Location (AVL) system, GPS Insight, and
completed end-user training. The new AVL system provides enhanced reporting and fleet
management features.
Upgraded the AutoDesk/CAD application to 2014 version to meet Engineering’s new design
requirements. Also completed department staff training.
GIS software and data models were used to create the new Water Resource and Sewer
Master Plan Sewer Master Plan. The Engineering Department updates the Water Resource
Master Plan periodically and the GIS based models are the primary templates for them to
perform network analysis and demand/supply studies to project future capital improvement
plans.
The District hosted the ESRI Fall Water/Wastewater User Group Meeting. Close to 70 GIS
professionals from the mid/south California region participated in the meeting. Otay’s GIS
efforts were acknowledged and well received by ESRI and the attendees.
Served as the U.S. Geological Survey (USGS) image acquisition steward for mid/south San
Diego County. Participants in the USGS Cooperative Agreement were Otay Water District,
City of Chula Vista, Sweetwater Authority, City of Coronado, City of El Cajon, City of Imperial
Beach, City of La Mesa, City of Lemon Grove, and City of Santee. Via the coordinator role of
the project, Otay saved more than $30,000 on image cost.
155
Water Operations - General
Mission Statement
To provide all operations and maintenance service in the most efficient, safe, and cost effective
manner to all internal and external customers, and to strive to continually improve the level of service.
Department Responsibilities
The Water Operations Department, under the general direction of the Chief of Water Operations,
provides the following support services: Potable and Recycled Water System Operations,
Construction Maintenance, Sewer Collection, and Wastewater Treatment. The department provides
highly responsible and complex technical and administrative support to the District, General
Manager, and Board of Directors.
156
Water Operations - Position Count
District Position Count - 140
Water Operations Department - (56 Positions)
Utility Maintenance/Construction 3231 (1)
Utility Maintenance 3232 (16)
Fleet Maintenance 3233 (4)
Pump & Electrical 3236 (5)
Water System Operations 3221 (1)
Water System 3225 (15)
Recycled System 3226 (5)
SCADA System 3227 (2)
Laboratory 3243 (1)
Reclamation Plant 3244 (4)
Chief, Water Operations 3211 (2)
157
Position Title FY 2013 FY 2014 FY 2015
Chief, Water Operations 1 1 1
Executive Secretary 1 1 1
Systems Operations Manager 1 1 1
Water Systems Supervisor 1 1 1
Pump Electrical Supervisor 1 1 1
Recycled Water Systems Supervisor 1 1 1
Meter Maintenance/Cross Connect Supervisor 1 0 0
Lead Water Systems Operator 2 2 2
Water Systems Operator I, II, and III 9 9 9
Valve Maintenance Worker 1 1 1
Senior Disinfection Technician 2 2 2
Senior SCADA Instrumentation Technician 1 1 1
SCADA Instrumentation Technician 1 1 1
Electrician I and II 2 2 2
Pump Mechanic I and II 2 2 2
Lead Cross Connection/ Meter Maintenance Worker (1)1 1 0
Meter Maintenance Worker I and II (1)4 4 0
Utility Services Manager 1 1 1
Utility Maintenance Supervisor 2 2 2
Utility Crew Leader 4 3 3
Utility Workers I and II 9 8 8
Senior Utility/Equipment. Operator 3 3 3
Fleet Maintenance Supervisor 1 1 1
Equipment Mechanic I and II 3 3 3
Reclamation Plant Supervisor 1 1 1
Lead Reclamation Plant Operator 1 1 1
Reclamation Plant Operator I, II, III 3 2 2
Recycled Water Distribution Operator 4 4 4
Laboratory Analysts 1 1 1
Total 65 61 56
(1) Beginning in FY 2015, Meter Maintenance was moved to Finance.
Water Operations - Position Count
District Postion Count - 140
Water Operations Department - (56 Positions)
158
Board of Directors 115,100$ 0.4%
General Manager 1,562,300 5.2%
General Expense 2,331,800 7.8%
Administrative Services 2,995,600 10.0%
Finance 5,816,700 19.4%
IT and Strategic Planning 3,373,800 11.3%
Water Operations 11,384,100 38.0%
Engineering 2,358,500 7.9%
29,937,900$ 100.0%
FY 2013 FY 2014 FY 2014 FY 2015
Actual Budget Actual* Budget
Water Operations Chief 416,786$ 432,600$ 426,459$ 445,900$
Water Systems 5,856,340 6,035,500 5,723,947 6,329,200
Construction Maintenance (2)4,166,144 4,444,400 4,164,463 4,609,000
TOTAL 10,439,270$ 10,912,500$ 10,314,869$ 11,384,100$
Water Operations
Water
Operations,
$11,384,100
FY 2015 Total Departmental Budget
$29.9 Million
* Actuals unaudited
159
FY 2013 FY 2014 FY 2014 FY 2015
Actual Budget Actual*Budget (2)
Labor and Benefits (1)6,789,741$ 7,321,200$ 7,160,946$ 7,744,600$
Travel and Meetings 34,923 46,500 38,385 49,300
General Office Expense 404 300 74 300
Equipment 32,719 36,500 32,317 42,200
Fees 62,429 72,800 75,652 65,500
Services 341,963 365,500 301,853 415,600
Training 6,446 13,500 9,096 11,000
Materials & Maintenance 1,900,480 1,758,200 1,574,022 1,760,700
Sewer Charges 1,270,165 1,298,000 1,122,524 1,294,900
Total 10,439,270$ 10,912,500$ 10,314,869$ 11,384,100$
(1) Excludes CIP labor and benefits.
Budget vs. Actual, in thousands ($)
(2) Beginning in FY 2015, Meter Shop has been moved to Finance. For comparative
purposes, prior year budget and actual expenses have been moved to Finance.
Water Operations
$-
$4,000
$8,000
$12,000
2010 2011 2012 2013 2014 2015
11
,
4
7
9
11
,
4
2
1
12
,
6
8
9
11
,
8
5
3
10
,
9
1
3
11
,
3
8
4
10
,
5
8
5
11
,
5
6
6
10
,
9
3
6
10
,
4
3
9
10
,
3
1
5
Budget Actual
* Actuals unaudited
160
Water Operations – Water System Operations
Water Operations Objectives – Strategic Plan FY 2012-2014
Completed Objectives:
BUSINESS PROCESSES
Develop and implement large meter vault retrofit programs.
Implement a water loss management program.
Evaluate opportunities to combine or transfer similar work functions.
Complete valve exercising program business processes.
Develop large and small meter test bench strategies.
Develop gen-set load bank testing.
Objectives on Schedule:
BUSINESS PROCESSES
Develop data collection and condition assessment for collection system facilities.
Objectives behind Schedule
BUSINESS PROCESSES
Replace SCADA software system.
Implement the recommendation for improving response to extended power outages.
Implement wireless radio and data network for field operations.
Legend
Completed
On Schedule
Behind Schedule
On Hold
No Reports
Not Scheduled to Start Yet
161
Water Operations – Water System Operations
Water System Operations
Services We Provide
The Water Systems Operations Division encompasses five sections which are responsible for
operations and monitoring of the potable and recycled water distribution systems as well as the
Ralph W. Chapman Water Recycling Facility. The water system operators monitor and operate the
water distribution system to ensure it provides safe, reliable drinking water to the District’s customers.
The SCADA staff performs installations, maintenance, updates, and modifications to the SCADA
control system and related communications equipment, both for existing facilities as well as CIP
projects. The treatment plant staff maintains and operates the District’s sewer treatment plant in
order to produce high-quality recycled water to the District’s recycled water customers. The recycled
system operators monitor and operate the recycled water distribution system to ensure it provides
adequate supply to the District’s recycled water customers and periodically conduct cross-
connection tests to ensure that the potable distribution system is completely isolated from the
recycled water system. Laboratory staff ensures all regulatory-required sampling, analyses, and
reporting is done to meet the requirements from the California Department of Public Health for
potable water and the Regional Water Quality Control Board for recycled water and the reclamation
plant treatment process. Laboratory staff works closely with the water system operators and
disinfection staff to monitor and optimize the water quality in the distribution system. They also
perform bacteriological sampling and analyses for Utility Maintenance and Engineering to ensure
proper disinfection was performed after maintenance or new construction.
Performance Measures - Strategic Plan FY 2012-2014
(1) The FY 2013 target was not met because 100 customers had their water shut-off for over four hours during main break
repairs. To meet this target, a maximum of 35 customers can be affected by unplanned outages in one year.
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
FY 11-12 FY 12-13 FY 13-14 FY 14-15
Target Actual & Projected
BUSINESS PROCESSES
Unplanned Disruptions
Quantifies the number of
unplanned water outages
experienced by the utility
customer expressed as number
of accounts affected per
1,000 accounts. (QualServe)
(1)
162
Water Operations – Water System Operations
0
2
4
6
8
10
FY 11-12 FY 12-13 FY 13-14 FY 14-15
Target Actual & Projected
Technical Quality Complaint
The number of complaints is a good
measure of customer service. Technical
quality complaints allow us to measure
the complaint rates we are experiencing
with individual quantification of those
related to core utility services. It is
expressed as complaints per 1,000
customer accounts.
BUSINESS PROCESSES
BUSINESS PROCESSES
Planned Recycled Water
Maintenance Ratio in Dollars
Compares how effectively the
District is investing in planned
maintenance.
BUSINESS PROCESSES
Planned Wastewater Maintenance
Ratio in Dollars
Percentage of planned
maintenance costs compared
to combined planned and
corrective maintenance costs.
50%
60%
70%
80%
90%
100%
FY 11-12 FY 12-13 FY 13-14 FY 14-15
Target Actual & Projected
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
FY 11-12 FY 12-13 FY 13-14 FY 14-15
Target Actual & Projected
163
Water Operations – Water System Operations
.
BUSINESS PROCESSES
Direct Cost of Treatment
per MGD
Measures the direct cost to
treat one million gallons of
wastewater and does not
include staff overhead or
fringe benefits, but it does
include their salaries.
(QualServe)
BUSINESS PROCESSES
O&M Cost per MG
Measure for the full operation
and maintenance cost to treat
one million gallons of
wastewater. (QualServe)
LEARNING AND GROWTH
Percentage of Preventative
Maintenance (PM) Completed
in the Reclamation Plant
Tracks the percentage of
scheduled PMs that are
completed in the
Reclamation Plant.
$800
$900
$1,000
$1,100
$1,200
FY 11-12 FY 12-13 FY 13-14 FY 14-15
Target Actual & Projected
$1,000
$1,300
$1,600
$1,900
$2,200
$2,500
FY 11-12 FY 12-13 FY 13-14 FY 14-15
Target Actual & Projected
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
FY 11-12 FY 12-13 FY 13-14 FY 14-15
Target Actual & Projected
164
Water Operations – Water System Operations
(1) Due to low staffing levels.
.
(2) Due to low staffing levels.
(3) Performance Measure discontinued in Strategic Plan FY 2015 Phase 1
0
1,000
2,000
3,000
4,000
5,000
FY 11-12 FY 12-13 FY 13-14 FY 14-15
Target Actual & Projected
50.0%
80.0%
110.0%
140.0%
170.0%
FY 11-12 FY 12-13 FY 13-14 FY 14-15
Target Actual & Projected
LEARNING AND GROWTH
Percentage of Preventative
Maintenance (PM) Completed
in the Valve Maintenance
Program
Tracks the percentage of
scheduled PMs that are
completed in the Valve
Maintenance Program.
BUSINESS PROCESSES
Valve Exercising Program
Actual number of valves exercised
per year for maintenance of
distribution systems' infrastructure
to ensure minimal interruption
of potable water delivery to
customers.
BUSINESS PROCESSES
Water Distribution System
Integrity
Measures the condition of the water
distribution system expressed as the
total annual number of leaks and
breaks per 100 miles of distribution
piping. (QualServe)
(2)
(1)
0.0
5.0
10.0
15.0
20.0
FY 11-12 FY 12-13 FY 13-14 FY 14-15
Target Actual & Projected
(3)
165
Water Operations – Water System Operations
Recycled Water System Integrity
Tracks number of leaks or breaks
per 100 miles of water distribution
system.
BUSINESS PROCESSES
BUSINESS PROCESSES
BUSINESS PROCESSES
Potable Water Compliance Rate
Quantifies the percentage of time
each year that the District meets
all of the health related drinking
water standards in U.S. National
Primary Drinking Water Regulations.
(QualServe)
Planned Water Service
Disruption Rate
Quantifies the annual average of
planned water outages experienced
by the utility customer expressed
as number of accounts affected
per 1,000 accounts. (QualServe)
0
2
4
6
8
10
FY 11-12 FY 12-13 FY 13-14 FY 14-15
Target Actual & Projected
80.0%
90.0%
100.0%
110.0%
120.0%
FY 11-12 FY 12-13 FY 13-14 FY 14-15
Target Actual & Projected
0
2
4
6
8
10
FY 11-12 FY 12-13 FY 13-14 FY 14-15
Target Actual & Projected
166
Water Operations – Water System Operations
Accomplishments – Fiscal Year 2013-2014
Spearheaded the revision of the District Emergency Preparedness Plan and recommended
organizing it into three volumes. Reviewed and expanded Volume I. Completely revised and
created fourteen (14) specific Incident Action Plans into Volume III and currently developing
Volume II to standardize it for all the departments.
Facilitated completion of the chlorine and ammonia Cal-ARP manuals by working with the
consultant and the Safety and Security Specialist. Participated in the Cal-ARP inspection by
the County of San Diego, which resulted in no violations and only a few recommendations.
Managed the leak detection survey in southeast Chula Vista. A total of 53 gpm of leaks were
found, which equates to 90 af/year. Trained the water systems supervisor, the lead water
system operators, and several water system operator IIIs on the operation of the leak-noise
correlation system. Also performed leak detection on the recycled force main, with no leaks
found.
Staff participated in the 2013 Master Reclamation Permit Inspection at the treatment plant by
the Regional Water Quality Control Board. No violations were noted and only a couple of
minor recommendations were made.
Wrote the Public Health Goals Report to obtain the Board or Directors’ approval for the
recommendation to take no further actions to reduce the seven constituents detected to
levels at or below the public health goals.
Obtained approval of a five-year Reservoir Floating Cover Maintenance Contract.
Transferred the Meter Maintenance/Cross Connection staff to Customer Service.
Completed the installation of a screenings compactor at the treatment plant which will
provide approximately 0.1 MGD more recycled water and reduce disposal costs paid to the
City of San Diego.
Completed installation of nitrate and total suspended solids analyzers at the treatment plant
to improve process control and reduced the time reclamation plant operators spent
performing lab analysis by 12 hours per week.
Continue to meet all water quality standards and provided continuous services to our
customers.
167
Water Operations – Water System Operations
Performance Measures - Strategic Plan FY 2015 Phase 1
The division will be implementing the following performance measures as part of Phase 1 of the
FY 2015-2018 Strategic Plan:
BUSINESS PROCESSES
Performance Measure Description
Annual Recycled Water Site
Inspections
Percentage of required recycled water use sites
inspected per year.
Recycled Water Shutdown Testing Percentage of recycled water use sites tested per
year vs. the number required by the Department of
Occupational Health.
Leak Detection Program Percentage distribution system surveyed for leaks.
Reservoir Inspection and Cleaning Number of water reservoirs cleaned annually.
Main Flushing & Hydrant
Maintenance
Number of mains flushed and fire hydrants
maintained.
Critical Valve Exercising Program Number of critical valves exercised annually.
168
Water Operations – Utility Services Maintenance
Percentage of Preventative
Maintenance Completed in the
Fleet Shop
Tracks the percentage of
scheduled PM's that are
completed in the Fleet Shop.
Planned Potable Water
Maintenance Ratio in Dollars
Compares how effectively the
District is investing in planned
maintenance. (QualServe)
Utility Services Maintenance
Services We Provide
The Utility Maintenance and Construction Division has three sections which provide vital
maintenance functions to ensure continuity of the drinking water, recycled water, and wastewater
services to District customers while adhering to all applicable regulatory compliance requirements.
Utility Maintenance staff maintains all collection and potable distribution and recycled distribution
systems, including regular inspection and cleaning of the wastewater collection system. They also
exercise valves, install and/or repair main pipelines and service lines expediently, while following all
established safety rules and regulations. The Fleet Maintenance staff implements active preventative
maintenance practices and repairs on all District vehicles and equipment to ensure optimum
performance while establishing fuel efficient operational practices and emissions compliance. Pump
and Electrical staff performs preventative, predictive and corrective maintenance on all pumps,
motors, switchgear, and control valves in the District and assists with electrical maintenance and
installation throughout the District.
Performance Measures – Strategic Plan FY 2012-2014
BUSINESS PROCESSES
LEARNING AND GROWTH
(1) The actual and projected maintenance is 100% complete.
75.0%
80.0%
85.0%
90.0%
95.0%
100.0%
FY 11-12 FY 12-13 FY 13-14 FY 14-15
Target Actual & Projected
(1)
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
FY 11-12 FY 12-13 FY 13-14 FY 14-15
Target Actual & Projected
169
Water Operations – Utility Services Maintenance
Collection System Integrity
Number of wastewater collection
system failures per 100 miles of
collection system pipeline.
(QualServe)
Sewer Overflow Rate
Measures the wastewater
collection system pipeline
condition and the effectiveness
of planned maintenance.
(QualServe)
Percentage of Preventative
Maintenance (PM) Completed
in the Pump/Electric Section
Tracks the percentage of
scheduled PM's that are
completed in the Pump/Electric
section.
BUSINESS PROCESSES
(1) The actual and projected number of system failures for FY 2012-FY 2015 is 0.0.
BUSINESS PROCESSES
(2) Both actual/projected and targets are at 0.0%.
LEARNING AND GROWTH
(3) The actual and projected maintenance is 100% complete.
0
1
2
3
4
FY 11-12 FY 12-13 FY 13-14 FY 14-15
Target Actual & Projected
0.0%
0.5%
1.0%
1.5%
FY 11-12 FY 12-13 FY 13-14 FY 14-15
Target Actual & Projected
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
FY 11-12 FY 12-13 FY 13-14 FY 14-15
Target Actual & Projected
(2)
(1)
(3)
170
Water Operations – Utility Services Maintenance
Accomplishments – Fiscal Year 2013-2014
Oversaw the emergency repairs of the 16-inch steel pipeline on Campo Road and the
30-inch steel pipeline on Cuyamaca College Drive East.
Over $111,000 of surplus items were auctioned, which does not include the money earned
from scrap and credit from vehicle parts that were returned. This surplus effort should result
in the transfer of more non-inventory items into the warehouse and additional internal
controls in the future.
Continue to proactively perform vibration analyses and pump efficiency tests on more than
75 pumps and motors throughout the District.
Oversaw the coordination of an electrical upgrade required at the Administration building.
Proactively maintained the sewer collection system resulting in no sewer overflows.
Performance Measures – Strategic Plan FY 2015 Phase 1
The division will be implementing the following performance measures as part of Phase 1
of the FY 2015-2018 Strategic Plan.
BUSINESS PROCESSES
Performance Measure Description
Emergency Facility Testing Number of facilities and generators tested on an
annual basis.
171
Engineering - General
Mission Statement
To provide Engineering, Construction, and Environmental services for the District and for the
development community, quality control of future District assets, and expediting of the
permitting process, through the use of our dedicated employees and innovative technology
with the goal of attaining excellent customer satisfaction.
Departmental Responsibilities
The Engineering Department, under the general direction of the Chief of Engineering,
provides the following support services: Planning, Design, Construction Management,
Inspection Project Management, Surveying, and Public Services of all District facilities. The
department is responsible for strategic planning; the capital budget; water resources
planning; support facilities planning; environmental services; quality control; construction;
developer designed and constructed facilities; along with coordinating assigned activities
with other District departments and outside agencies. It provides highly responsible and
complex administrative and technical support to the District, General Manager, and the
Board of Directors.
172
Position Title FY 2013 FY 2014 FY 2015
Chief, Engineering 1 1 1
Executive Secretary 1 1 1
Secretary 1 1 1
Engineering Manager 2 2 2
Senior Civil Engineer 2 2 2
Associate Civil Engineer 1 0 0
Construction Management Specialist 0 1 0
Assistant Civil Engineer I and II 1 1 1
Environmental Compliance Specialist 1 1 1
Permit Technicians 2 2 2
Senior Engineering Technician 2 2 2
Inspection Supervisor 1 1 1
Construction Inspectors I and II 2 3 3
Supervising Land Surveyor 1 1 1
Assistant Survey Technician 1 1 1
Total 19 20 19
Engineering - Position Count
District Position Count - 140
Engineering Department - (19 Positions)
Planning, Design & Water Resources
3321, 3331, 3341 (6)
Environmental Services 3451 (1)
Public Services 3421 (3)
Construction Services 3431 (4)
Survey Services 3441 (2)
Chief, Engineering
3311 (3)
173
Board of Directors 115,100$ 0.4%
General Manager 1,562,300 5.2%
General Expense 2,331,800 7.8%
Administrative Services 2,995,600 10.0%
Finance 5,816,700 19.4%
IT and Strategic Planning 3,373,800 11.3%
Water Operations 11,384,100 38.0%
Engineering 2,358,500 7.9%
29,937,900$ 100.0%
FY 2013 FY 2014 FY 2014 FY 2015
Actual Budget Actual* Budget
Engineering Chief 313,610$ 259,200$ 302,990$ 371,900$
Planning 168,754 285,000 74,454 305,000
Design 279,410 262,900 358,800 495,300
Water Resources 117,707 127,300 64,312 35,000
Public Services 340,605 340,400 340,682 363,800
Construction Services 158,080 202,800 185,958 228,600
Survey Services 249,053 327,100 322,950 356,400
Environmental Services 189,727 221,100 177,563 202,500
TOTAL 1,816,946$ 2,025,800$ 1,827,709$ 2,358,500$
Engineering
Engineering,
$2,358,500
FY 2015 Total Departmental Budget
$29.9 Million
* Actuals unaudited
174
FY 2013 FY 2014 FY 2014 FY 2015
Actual Budget Actual*Budget
Labor and Benefits (1)1,298,168$ 1,355,100$ 1,392,475$ 1,587,800$
Travel and Meetings 9,792 12,900 17,805 18,700
General Office Expense 322 1,000 957 1,000
Fees 40,737 42,000 26,050 33,000
Services 465,311 608,800 389,828 705,100
Training 2,616 6,000 570 12,900
Materials & Maintenance - - 32 -
Total 1,816,946$ 2,025,800$ 1,827,717$ 2,358,500$
(1) Excludes CIP labor and benefits.
Budget vs. Actual, in thousands ($)
Engineering
-
500
1,000
1,500
2,000
2,500
2,
0
7
1
2,
0
2
4
1,
8
3
7
1,8
6
2
2,
0
2
6
2,
3
5
9
1,
9
1
7
1,
9
8
4
1,
8
1
7
1,
8
1
7
1,
8
2
8
Budget Actual
* Actuals unaudited
175
Engineering - Strategic Plan Objectives
Engineering Strategic Plan Objectives – Strategic Plan FY 2012-2014
Objectives Completed:
BUSINESS PROCESSES
Continue working with the City of Chula Vista for the possible development of
a Membrane Bioreactor Plant (MBR) and for a potential agreement with the
City for recycled water supplies from the MBR Plant.
Evaluate incorporating selected San Diego Sanitation District Islands into
Otay service territory.
Strengthen CIP planning, budgeting, and cost-tracking processes.
Objectives on Schedule:
BUSINESS PROCESSES
Re-negotiate the South Bay Water Reclamation Plant (SBWRP) recycled
water supply agreement with the City of San Diego.
Objectives behind Schedule:
BUSINESS PROCESSES
Update the 2007 Integrated Water Resources Plan (IRP) to acquire and/or
additional potable and recycled water supplies and enhanced resource
reliability.
Update Water Facilities Master Plan.
Objectives on Hold:
BUSINESS PROCESSES
To evaluate and implement the recommended options for waste water
disposal in contract with the City of San Diego Metro System disposal option
while considering recycled water system supply requirements..
Legend
Completed
On Schedule
Behind Schedule
On Hold
No Reports
Not Scheduled to Start Yet
176
Engineering – Planning, Design
Planning / Design / Environmental / Water Resources
Services We Provide
The Planning, Design, Environmental, and Water Resources Divisions provide a variety of
services directly related to potable water, recycled water, and sewer services. Water
resources staff identifies, negotiates, and develops additional potable and recycled water
supplies. Planning staff develops the preliminary design of a project in order to facilitate final
design and ultimately construction of the facility. Planning staff also coordinates the review
of planning documents related to potential new development. Design staff prepares the
design of facilities and advertises projects for bid. Environmental staff coordinates and tracks
the project through the construction stage and for a period after construction, if long-term
mitigation is required. In addition, staff assists the Operations Department on special design
projects related to maintenance of existing facilities including the Ralph W. Chapman Water
Reclamation Facility. Additionally, water resources staff coordinates with other agencies on
regional issues and is responsible for obtaining grants, loans, and cost-sharing opportunities.
Accomplishments – Fiscal Year 2013 -2014
Continued the alignment studies for the Rosarito Desalination Facility Conveyance
and Disinfection System project. Environmental surveys for the alignments have
been completed. Worked with the CDPH to determine the permit requirements.
Worked with Consolidated Water to align the CDPH requirements vs. plant design.
Submitted the Presidential Permit Application for the project to the State
Department which was published in the Federal Register.
Completed the Draft Environmental Impact Report 45-day public comment period
as part of the Otay Interconnect Pipeline (also known as North District – South
District Interconnection) project. Then, gained the support of Supervisor Cox to
resume work on the Corral Canyon Alignment as part of the Pipeline project
(previously titled: “North District – South District Interconnection System”) through
extensive coordination with three active community groups and the San Diego
County Water Authority.
Prepared four Water Supply Assessment and Verification Reports for projects in the
County of San Diego, City of San Diego, and the City of Chula Vista. The report for
the City of San Diego was for the Otay Mesa Community Plan Update.
Completed the design of the 624-2 Reservoir Interior and Exterior Coating and
Upgrades project. This project removes and replaces deteriorating reservoir
coatings and provides upgrades to increase the service life and maintain
compliance with drinking water standards. The reservoir is scheduled to be placed
into service in July 2014. The estimated total cost of the project is $1,199,000.
177
Engineering – Planning, Design
Completed the design of the State Route 11 (SR-11) Potable Water Utility
Relocations – Sequence 1 project. This project consists of relocating existing water
facilities to clear the right of way for SR-11. Construction began in February 2014.
Completed the design of the 458-2 Reservoir Interior Coating and Upgrade project.
Structural modifications are being added to replace aging equipment and bring the
tank up to current AWWA and Cal-OSHA standards. The total CIP budget for this
project is $425,000.
Completed the design for the first phase of the Sewer Rehabilitation project for spot
repairs and sewer main replacement in the Calavo basin.
Completed the final design and acquired a permanent and temporary construction
easement for the 624 Pressure Zone Pressure Reducing Stations project. This
project will provide two PRSs feeding the 485 Pressure Zone and 458 Pressure Zone
from the 624 Pressure Zone to improve fire flow and enhance system reliability.
Completed the CEQA documents for the 870-1 Access Road Paving Project
Mitigated Negative Declaration.
Completed the first year of work on the enhancement of Cactus Wren Habitat under
a SANDAG TransNet Environmental Mitigation Program Grant for $88,840 at the
District’s San Miguel Habitat Management area. To date the District has received
$38,223 of the grant funds. This is a three year grant.
Prepared and approved two Mitigated Negative declarations for the Regulatory Site
Access Road Improvement project.
Completed the assessment and repairs of the Administration Building’s Fire
Sprinkler System, which resulted in a 5 year certification. Also completed the
installation of a treatment system which will reduce future corrosion of the fire
protection system.
Coordinated with SDG&E to verify energy savings at the Hillsdale Pump Station
allowing the station to draw from the 640 Reservoirs rather than the 520 Reservoirs.
SDG&E issued an incentive payment in the amount of $33,373.80.
178
Engineering – Public Services
Public Services / Survey / Inspection / Construction
Services We Provide
The Public Services, Survey, Inspection, and Construction Divisions assist the public by
responding to customer visits, phone calls, and inquiries regarding permits, plan-checking
fees, filing procedures, permit status, meter sales, meter costs, and lateral costs. Staff
administers all plan-checking submittals for potable water, recycled water, and sewer
applications for approval, cellular lease agreements, fire service, and backflow inspections,
project deposits, and invoicing. Staff also provides inspections to private developer funded
projects and the District's Capital Improvement Projects, easement and encroachment
enforcements, and survey and utility mark-outs of District facilities and GPS plots. Once bid,
the Construction staff provides construction management for the projects.
Performance Measures – Strategic Plan FY 2012-2014
(1) Both actual/projected and targets are at 100%.
BUSINESS PROCESSES
Mark-out Accuracy
Measures the percentage of
mark-outs performed without
an at-fault hit, which is damage to
a District facility that results from
a missing or erroneous mark-out. 50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
110.0%
FY 11-12 FY 12-13 FY 13-14 FY 14-15
Target Actual & Projected
FINANCIAL
CIP Project Expenditures
vs. Budget
Compares quarterly CIP
expenditures with budget.
(1)
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
110.0%
FY 11-12 FY 12-13 FY 13-14 FY 14-15
Target Actual & Projected
179
Engineering – Public Services
Construction Change Order
Measures the rate of change
orders for CIP projects under
construction.
FINANCIAL
Accomplishments – Fiscal Year 2013-2014
Generated revenue in meter sales in excess of $2.26 million and sold 184 meters
equating to 245.5 EDU’s and 50 permits.
Generated revenue in cell sites in excess of $1.13 million and maintained 33 cell site
leases.
The Survey Division completed 3,714 USA Mark-out tickets with an accuracy rate of
100%. District surveyors also completed 25 surveys related to various CIP’s.
The Inspection Division performed QA/QC on 13,401 linear feet of pipeline. District
inspectors also performed 172 meter sets and 22 plan checks that consisted of fire
services, backflows, and developer pipeline projects.
Completed construction of the 944-1R Recycled Pump Station Upgrade & System
Enhancements project. The project consisted of the installation Phase 1 upgrades
to the 944-1 Pump Station which included the installation of a third pump and motor
system which required a variety of electrical and instrumentation upgrades to the
Pump Station. The project also included the construction of three Pressure
BUSINESS PROCESSES
Project Closeout Time
Measures the average number
of days between the issuance
of a Notice of Substantial
Completion (NOSC) and a
Notice of Completion (NOC)
for CIP projects in construction.
0
20
40
60
80
100
120
FY 11-12 FY 12-13 FY 13-14 FY 14-15
Target Actual & Projected
-10.0%
-6.0%
-2.0%
2.0%
6.0%
FY 11-12 FY 12-13 FY 13-14 FY 14-15
Target Actual & Projected
180
Engineering – Public Services
Reducing Stations (PRS) which were constructed in Olympic Parkway, Eastlake
Parkway, and Otay Lakes Road. The total cost of the project was $1,252,928.
Completed the design and construction of the 927-1 Recycled Water Reservoir
Cover and Liner Replacement project. This project replaced a deteriorating
reservoir cover and liner for this 16.3 MG reservoir to increase the service life of the
reservoir. The total cost of the project was $878,958.
Completed construction of the 12-Inch Potable Pipeline in Orange Avenue Bridge,
Crossing I-805 project. This project installed 2,000 linear feet of new pipeline over
the I-805 freeway, and serves as a replacement while the pipeline in the East
Palomar Bridge is out of service. The total cost of the project was $891,290.
Completed construction of the 803-3 & 832-2 Reservoir Coating and Upgrades
project which included removing and replacing the interior and exterior coatings of
both steel tanks. Structural modifications were also added to replace aging
equipment and bring the tank up to current safety standards. The total cost of the
project was $873,561.
181
Board of Directors 115,100$ 0.4%
General Manager 1,562,300 5.2%
General Expense 2,331,800 7.8%
Administrative Services 2,995,600 10.0%
Finance 5,816,700 19.4%
IT and Strategic Planning 3,373,800 11.3%
Water Operations 11,384,100 38.0%
Engineering 2,358,500 7.9%
29,937,900$ 100.0%
FY 2013 FY 2014 FY 2014 FY 2015
Actual Budget Actual* Budget
TOTAL 2,343,613$ 2,149,600$ 2,214,164$ 2,331,800$
General Expense
The expenditures in this section are general operating costs not associated with an
individual department. The expenditures include: legal costs, insurance premiums,
changes in accrued employee leave balances and miscellaneous interest. These
expenditures represent 7.8% of the total Department Budget.
General
Expense,
$2,331,800
FY 2015 Total Departmental Budget
$29.9 Million
* Actuals unaudited
182
FY 2013 FY 2014 FY 2014 FY 2015
Actual Budget Actual* Budget
Labor and Benefits (1)1,490,161$ 1,205,400$ 1,367,499$ 1,290,800$
Fees 853,452 944,200 844,099 1,041,000
Training - - 2,566 -
Total 2,343,613$ 2,149,600$ 2,214,164$ 2,331,800$
(1) Benefits include District-wide labor and benefit costs not attributable to any one department, such
as the effect of cost of living raises on accrued leave liabilities or the Other Post Employment Benefit
Costs (OPEB). These costs are netted against the District's anticipated Vacancy Factor. The Vacancy
Factor for FY 2014 and FY 2015 is $266,900 and $185,600 respectively. Additionally, the labor and
benefits shown on this schedule are those related to operating costs and does not include CIP labor
Budget vs. Actual, in thousands ($)
General Expense
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
2010 2011 2012 2013 2014 2015
86
6
88
8
79
2
2,1
7
6
2,
1
5
0
2,
3
3
2
1,
3
1
5
1,
1
8
8
1,
6
1
2
2,
3
4
4
2,
2
1
4
Budget Actual
* Actuals unaudited
183
Capital Improvement Program
The District provides water service to a population of approximately 213,000 which is expected to
ultimately increase to 298,000 by the year 2040. This growth as well as the maintenance of existing
assets requires long-term capital planning. The process is dynamic, due to the evolving needs of
the community, the water supply issues, and changing regulations. As such, capital planning is part
of the District’s overall strategic planning. The capital planning process involves identifying current
needs, future needs, and prioritizing them based on certain operating assumptions. The primary
objective of this planning effort is to support an orderly and efficient program of expansion, new water
supply, replacement, and betterment, while maintaining a stable long-range financial plan.
To accommodate growth requires that the District invest $283 million in capital assets through
ultimate build-out. The Fiscal Year 2015 Capital Budget is $10.6 million and the six-year Capital
Improvement Program (CIP) totals $103.5 million. A separate CIP Budget document contains the
descriptions, justifications, expenditures, and funding for all the identified projects to ultimate build-
out.
Assumptions and Criteria
The CIP is developed based on the District's Water Resources Master Plan, incorporating historical
data, growth, developers' input, SANDAG projections, and long-term economic outlook.
The Water Resources Master Plan was built using several major assumptions and design criteria as
follows:
1. Utilizing historical water demands for each land use type in the District to calculate future
demands.
2. Using maximum day peaking factors that vary with demand level.
3. Utilizing land use as planned by the City of Chula Vista.
4. Providing ten days of emergency water supply through a maximum of five days in covered
reservoirs and a minimum of five days from interconnections with adjacent agencies.
5. Inclusion of emergency operational storage to meet the five-day covered storage
requirement into the ten-day outage supply requirement.
CIP Justification and Impact on Operating Budget
The justification for each project is determined by whether it is required due to growth (Expansion),
new water sources (New Supply), improvements or upgrades (Betterment), or to replace an existing
asset (Replacement). As these projects are completed and placed into service, there may be an
impact on the Operating Budget by increasing costs in the areas of maintenance, energy, or
chemicals as shown on the justification and impact pages in this section.
184
Capital Improvement Program
Capital Purchases and Facilities
All capital expenditures are in the CIP. This includes capital facilities and capital purchases. Capital
purchases are non-recurring operating expenditures for assets that cost more than $10,000 each
and have an estimated useful life of two years or more. The Capital Purchase Projects include
Vehicles, Office Equipment, Furniture, and Field Equipment purchases. The details of these
purchases can be found on page 195. Capital Facility Projects are items that exceed $10,000 or
$20,000 for infrastructure related items (as defined under Capital Equipment on page 264 of the
Glossary) and have a useful life of at least two years.
The CIP projects are identified and are prioritized based on the following criteria:
1. Safety, restoration of service, immediate obligation, Board directed, or critical system need.
2. System upgrades or requirements to maintain system reliability in the next few fiscal years.
3. Need to meet the future growth of the system.
4. Project requirement may be reduced in capacity or may have low probability of need in the future.
The following are the four categories of CIP projects:
New Water Supply
Facilities required to support new sources of water are funded from new supply fees or user rates.
Expansion
Facilities required to support new or future users are funded from capacity fees or user rates.
Betterment
Facilities required because of inadequate capacity or new requirements that benefit existing users
are funded from availability, betterment fees, or rates.
Replacement
Facilities required to renew or replace existing facilities that have deteriorated or have exceeded their
useful life are funded from user rates.
185
Major CIP Projects
Capital Improvement Projects
The Fiscal Year 2015 CIP Budget contains 79 projects. The cost of the work planned for 73 of these
projects fall within Fiscal Year 2015 and total $10.6 million. Of the 73 projects planned for Fiscal Year
2015, seven are designated as reimbursable projects with estimated costs totaling $7,000. These
projects are built by developers and reimbursed by the District.
The following shows how the $10.6 million of projects are broken down into four categories:
1. Capital facilities $ 3.1 million
2. Replacement or renewal projects $ 6.7 million
3. Capital purchase projects $ .7 million
4. Developer reimbursement projects $ .1 million
The Six-Year CIP and Fiscal Year 2015 Capital Budget are consistent with the District's Water
Resources Master Plan, current capacity fees, and the District's strategic financial objectives.
186
CIP Projects in Construction
624-2 Reservoir Interior/Exterior
Coating and Upgrades
(P2493)
Remove and Replace Deteriorating Reservoir Coating
Structural Modifications Including Level
Indicator Replacement and Anode Replacement
$1.95M Budget
Start: January 2014
Estimated Completion: July 2014
187
CIP Projects in Construction
927-1 Recycled Water Reservoir
Cover and Liner Replacement
(R2108)
Removal and Replacement of the reservoir liner and cover
$1.40M Budget
Start: November 2013
Completed: June 2014
188
CIP Projects in Construction
SR-II Utility Relocations
Sequence I
(P2453)
Relocate Existing Water Facilities to support SR-11 Construction
$2.25M Budget
Start: February 2014
Completed: July 2016
189
(Thousand $000s)FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 Total
Beginning Balance 50,713$ 48,522$ 40,121$ 25,565$ 22,794$ 24,823$
Capacity Fees 1,577$ 3,998$ 5,662$ 8,692$ 9,795$ 11,521$ 41,245$
Debt financing - 1,960 1,735 - - 1,425 5,120
Grants 111 2,663 254 - - - 3,028
Interest 188 191 228 220 259 376 1,462
Betterment Charges 302 - - - - - 302
Temporary Meters 716 716 718 721 725 727 4,323
Availability (Betterment Portion) 480 490 499 508 516 524 3,017
New Supply Fee 180 473 675 1,001 1,124 1,317 4,770
COPS 2010B Reimbursement 770 770 770 770 770 770 4,620
Transfer from General Fund 13,223 12,725 11,355 11,618 12,591 13,468 74,980
Interfund Transfers 1 1 1 - - - 3
Total Sources 17,548 23,987 21,897 23,530 25,780 30,128 142,870
Total CIP Projects 10,576 23,400 27,436 17,188 14,477 10,455 103,532
Betterment Fees for Maintenance 302 - - - - - 302
Debt Service 7,710 7,831 7,850 7,934 8,083 8,066 47,474
Developer Services 1,151 1,157 1,167 1,179 1,191 1,203 7,048
Total Uses 19,739 32,388 36,453 26,301 23,751 19,724 158,356
Net Sources (Uses)(2,191)$ (8,401)$ (14,556)$ (2,771)$ 2,029$ 10,404$ (15,486)$
Ending Balance 48,522$ 40,121$ 25,565$ 22,794$ 24,823$ 35,227$
The CIP Reserve Funds presentation, shown on the following pages, is designed to provide an understanding
of how the funding of CIPs is expected to financially influence the District over the next six years. The financial
impacts are based on CIPs and their funding sources, including fund transfers in accordance with the District’s
Reserve Policy, and planned debt issuances. This data is captured in the District’s Rate Model on an annual
basis in order to make these projections.
CIP Reserve Funds
$0
$10,000
$20,000
$30,000
$40,000
$50,000
FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020
Reserve Fund Balances, in thousands ($)
Betterment Replacement Expansion New Supply
48,522
40,121
25,565 22,794 24,823
35,227
190
CIP Funding Source
(Thousands $000s)FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 TOTAL
Expansion 892$ 803$ 1,568$ 3,371$ 3,488$ 6,510$ 16,633$
Betterment 1,881 3,655 8,661 6,462 3,546 1,426 25,630
Replacement 7,373 17,543 13,807 3,955 5,083 2,519 50,279
New Supply 430 1,400 3,400 3,400 2,360 - 10,990
TOTAL 10,576$ 23,400$ 27,436$ 17,188$ 14,477$ 10,455$ 103,532$
CIP Category
(Thousands $000s)FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 TOTAL
Capital Facility Projects 3,122$ 11,774$ 18,078$ 9,831$ 6,338$ 7,451$ 56,594$
Replacement/Renewal Projects 6,687 10,595 7,669 3,202 2,658 2,019 32,830
Capital Purchase Projects 760 955 715 773 639 825 4,667
Developer Reimbursement Projects 7 56 419 2,072 2,352 - 4,906
Subtotal 10,576 23,380 26,881 15,878 11,987 10,295 98,997
FY 2016 Through FY 2020 Projects - 20 555 1,310 2,490 160 4,535
TOTAL 10,576$ 23,400$ 27,436$ 17,188$ 14,477$ 10,455$ 103,532$
CIP Funding Source and Category
$0
$10,000
$20,000
$30,000
$40,000
FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020
Six-Year CIP by Funding Source, in thousands ($)
Betterment Replacement Expansion New Supply
$0
$10,000
$20,000
$30,000
FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020
Six-Year CIP by Category, in thousands ($)
Capital Facility Projects Replacement/Renewal Projects
Capital Purchase Projects Developer Reimbursement Projects
191
CIP No Description FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 Total
P2083 PS - 870-2 Pump Station Replacement $650 $7,500 $7,500 $15,650
P2267 36-Inch Main Pumpouts and Air/Vacuum Ventilation Installations $195 $5 $200
P2434 Rancho Del Rey Groundwater Well Development $75 $75
P2451 Otay Mesa Desalination Conveyance and Disinfection System $1,000 $3,500 $8,500 $8,500 $5,900 $27,400
P2466 Regional Training Facility $3 $6 $5 $14
P2486 Asset Management Plan Condition Assessment and Data
Acquisition
$75 $75 $75 $28 $253
P2511 Otay Interconnect Pipeline $100 $1 $1 $1 $1 $1 $105
P2537 Operations Yard Property Acquisition Improvements $100 $170 $50 $320
P2541 624 Pressure Zone PRSs $425 $425
P2547 District Administration Vehicle Charging Stations $45 $5 $50
P2548 Sump Pump Installation at the 980-1 & 2 Reservoirs $35 $35
P2549 Fuel System Upgrade $30 $30
P2551 Blossom Lane Helix WD and Otay WD Interconnection $5 $145 $250 $400
P2552 South Barcelona Helix WD and Otay WD Interconnection $5 $145 $250 $400
R2048 RecPL - Otay Mesa Distribution Pipelines and Conversions $1 $1 $1 $1 $1 $50 $55
R2058 RecPL - 16-Inch, 860 Zone, Airway Road - Otay Mesa/Alta $1 $1 $1 $1 $1 $50 $55
R2077 RecPL - 24-Inch, 860 Zone, Alta Road - Alta Gate/Airway $25 $5 $600 $600 $425 $1,655
R2087 RecPL - 24-Inch, 927 Zone, Wueste Road - Olympic/Otay WTP $5 $5 $5 $5 $5 $5,925 $5,950
R2107 RWCWRF Screening Compactor and Chlorine Injectors
Enclosure
$85 $85
R2108 Res - 927-1 Reservoir Cover Replacement $50 $5 $145 $200
R2110 RecPS - 944-1 Optimization and Pressure Zone modifications $50 $100 $150
R2113 Chlorine 1-ton Cyliner Emergency Close Valve $37 $37
R2114 Large Recycle Pump Replacement at the RWCWRF 927-1 Pump
Station
$100 $100
R2117 RWCWRF Contact Basin Expansion Project $20 $100 $690 $690 $1,500
S2043 RWCWRF Sludge Handling System $5 $5 $5 $5 $5 $1,425 $1,450
25 Total Capital Facility Projects $3,122 $11,774 $18,078 $9,831 $6,338 $7,451 $56,594
CIP No Description FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 Total
P2366 APCD Engine Replacements and Retrofits $5 $300 $300 $157 $118 $78 $958
P2382 Safety and Security Improvements $192 $200 $200 $200 $230 $200 $1,222
P2440 I-905 Utility Relocations $5 $12 $17
P2453 SR-11 Utility Relocations $600 $600 $200 $200 $200 $191 $1,991
P2477 Res - 624-1 Reservoir Cover Replacement $5 $45 $50
P2485 SCADA Communication System and Software Replacement $655 $125 $125 $905
P2493 624-2 Reservoir Interior/Exterior Coating $50 $5 $35 $90
P2494 Multiple Species Conservation Plan $90 $18 $108
P2495 San Miguel Habitat Management/Mitigation Area $180 $190 $200 $200 $200 $200 $1,170
P2496 Otay Lakes Road Utility Relocations $5 $20 $25
P2504 Regulatory Site Access Road and Pipeline Relocation $20 $5 $545 $570
P2507 East Palomar Street Utility Relocation $175 $135 $310
P2508 Pipeline Cathodic Protection Replacement Program $125 $125 $39 $289
P2515 870-1 Reservoir Paving $415 $45 $460
P2518 803-3 Reservoir Interior/Exterior Coating $30 $35 $65
P2519 832-2 Reservoir Interior/Exterior Coating $30 $35 $65
P2520 Motorola Mobile Radio Upgrade $50 $50
P2529 711-2 Reservoir Interior & Exterior Coating $5 $670 $45 $5 $35 $760
P2530 711-1 Reservoir Interior & Exterior Coating $10 $825 $65 $5 $35 $940
CIP Projects ($1,000s)
The 2015 Fiscal Year CIP Budget contains 79 projects. 73 of the projects fall within Fiscal Year 2015 with a cost of
$10.6 million. Of the 73 projects planned for Fiscal Year 2015, seven are designated as reimbursable projects with
an estimated cost of $7 thousand. These projects are built by a developer and reimbursed by the District.
CAPITAL FACILITY PROJECTS
REPLACEMENT/RENEWAL PROJECTS
192
CIP Projects ($1,000s)
CIP No Description FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 Total
P2531 944-1 Reservoir Interior & Exterior Coating $190 $5 $35 $230
P2532 944-2 Reservoir Interior & Exterior Coating $900 $5 $35 $940
P2535 458-2 Reservoir Interior & Exterior Coating & Upgrades $585 $5 $35 $625
P2538 Administration and Operations Building Fire Sprinkler
Replacement Program
$65 $65
P2539 South Bay Bus Rapid Transit (BRT) Utility Relocations $30 $150 $175 $355
P2542 850-3 Reservoir Interior Coating $5 $435 $5 $35 $480
P2550 Fuel Island Upgrade 75 $75
P2553 Heritage Road Bridge Replacement and Utility Relocation $5 $5 $100 $500 $590 $1,200
R2109 Sweetwater River Wooden Trestle Improvement for the Recycled
Water Forcemain
$50 $200 $340 $590
R2111 RWCWRF - RAS Pump Replacement $310 $310 $620
R2112 450-1 Disinfection Facility Rehabilitation $150 $40 $190
R2116 RecPL - 14-Inch, 927 Zone, Forcemain Assessment and Repair $100 $100 $650 $650 $1,500
S2012 San Diego County Sanitation District Outfall and RSD Outfall
Replacement
$150 $150 $250 $450 $450 $450 $1,900
S2024 Campo Road Sewer Main Replacement $600 $2,000 $2,790 $5,390
S2027 Rancho San Diego Pump Station Rehabilitation $150 $2,500 $500 $3,150
S2033 Sewer System Rehabilitation $675 $1,300 $1,000 $800 $800 $900 $5,475
35 Total Renewal & Replacements $6,687 $10,595 $7,669 $3,202 $2,658 $2,019 $32,830
CIP No Description FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 Total
P2282 Vehicle Capital Purchases $105 $600 $300 $275 $217 $434 $1,931
P2285 Office Equipment and Furniture Capital Purchases $15 $15 $15 $15 $14 $74
P2286 Field Equipment Capital Purchases $65 $40 $100 $83 $68 $16 $372
P2469 Information Technology Network and Hardware $175 $100 $100 $200 $200 $275 $1,050
P2470 Financial System Enhancements $100 $100 $100 $100 $100 $100 $600
P2540 Work Order Management System Replacement $300 $100 $100 $100 $40 $640
6 Total Capital Purchase $760 $955 $715 $773 $639 $825 $4,667
CIP No Description FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 Total
R2028 RecPL - 8-Inch, 680 Zone, Heritage Road - Santa Victoria/Otay
Valley
$1 $1 $1 $597 $600
R2042 RecPL - 8-Inch, 927 Zone, Rock Mountain Road - SR-
125/EastLake
$1 $1 $15 $123 $140
R2047 RecPL - 12-Inch, 680 Zone, La Media Road - Birch/Rock Mountain $1 $50 $399 $450
R2082 RecPL - 24-Inch, 680 Zone, Olympic Parkway - Village 2/Heritage $1 $1 $1 $1,000 $743 $1,746
R2083 RecPL - 20-Inch, 680 Zone, Heritage Road - Village 2/Olympic $1 $1 $1 $1 $396 $400
R2084 RecPL - 20-Inch, 680 Zone, Village 2 - Heritage/La Media $1 $1 $1 $350 $617 $970
R2085 RecPL - 20-Inch, 680 Zone, La Media - State/Olympic $1 $1 $1 $1 $596 $600
7 Total Reimbursement Projects $7 $56 $419 $2,072 $2,352 $0 $4,906
CIP No Description FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 Total
73 Total- FY2015 Projects $10,576 23,380 26,881 15,878 11,987 10,295 $98,997
6 Total- FY2016 Through FY 2020 Projects - 20 555 1,310 2,490 160 $4,535
79 Grand Totals $ 10,576 $ 23,400 $ 27,436 $ 17,188 $ 14,477 $ 10,455 $103,532
CAPITAL PURCHASE PROJECTS
DEVELOPER REIMBURSEMENT PROJECTS
SUMMARY
REPLACEMENT/RENEWAL PROJECTS, continued
193
CIP #Description Cost
Cat. (2)
Funding
Source (3)
FY
2015
FY
2016
FY
2017
FY
2018
FY
2019
FY
2020 TOTAL
P2451 Otay Mesa Desalination Conveyance
and Disinfection System
M/E/C N/B $ - $ - $ - $ 31,000 $ 52,000 $ 125,000 $ 208,000
P2466 Regional Training Facility M E/B - 1,000 1,000 1,000 1,000 - 4,000
P2537 Operations Yard Property Acquisition
Improvements
M/E E - - - 700 800 851 2,351
P2547 District Administration Vehicle
Charging Stations
M/E E/B - 700 700 700 700 700 3,500
R2082 RecPL - 24-Inch, 680 Zone, Olympic
Parkway - Village 2/Heritage
M E - - - - 1,200 - 1,200
R2083 RecPL - 20-Inch, 680 Zone, Heritage
Road - Village 2/Olympic
M E - - - - 700 - 700
R2084 RecPL - 20-Inch, 680 Zone, Village 2 -
Heritage/La Media
M E - - - - 1,900 - 1,900
R2085 RecPL - 20-Inch, 680 Zone, La Media -
State/Olympic
M E - - - - - 1,300 1,300
R2109 Sweetwater River Wooden Trestle
Improvement for the Recycled Water
Forcemain
M R 3,000 3,100 3,200 3,300 3,400 3,500 19,500
S2043 RWCWRF Sludge Handling System M/E/C B - - - - - 30,000 30,000
$3,000 $4,800 $4,900 $36,700 $61,700 $161,351 $272,451
FY
2015
FY
2016
FY
2017
FY
2018
FY
2019
FY
2020 TOTAL
$ 3,000 $ 4,300 $ 4,400 $ 9,500 $ 18,400 $ 75,001 $ 114,601
- 500 500 26,200 36,300 66,350 129,850
- - - 1,000 7,000 20,000 28,000
$ 3,000 $ 4,800 $ 4,900 $ 36,700 $ 61,700 $ 161,351 $ 272,451
(1)
(2)
(3)
Note:See pages 192-193 for complete description of CIP projects.
Projected Incremental Operating Expenditures (1)
E - Expansion B - Betterment R - Replacement N - New Supply
The following schedule shows anticipated operating costs associated with each project in the CIP. Below is a summary of each
category of new costs that will be impacted. No additional revenues are associated with the individual projects, as revenues are
linked more directly to growth in water sales and capacity fee revenues.
Cost Category
Maintenance (M)
Energy (E)
Chemical (C)
Funding Source - Some projects have multiple funding sources as indicated by a slash (/):
CIP Justification and Impact on Operating Budget
O&M cost for a reservoir: Total annual operating cost divided by the number of million gallons (MG) of storage capacity in the system.
This rate per MG is then multiplied by the MG capacity of the new reservoir. Reservoirs require chemical treatment; therefore, the
chemical cost per MG is estimated and applied to the future operating cost. Both O&M and chemical costs are increased annually for
inflation.
Each of the capital purchases and other types of assets has its own unique O&M cost.
Cost Category - Indicates maintenance cost (M), energy cost (E), or chemical cost (C), based on the project type and Engineer's
estimates.
O&M cost for a pump station: Total annual operating cost divided by the number of million of gallons a day (MGD) capacity in the system
= O&M cost per MGD. This rate is then multiplied by the MGD capacity of the new pump station. Similarly, power cost per MGD for
transmission is calculated and applied to the MGD of the new pump station. Chemical expenses are incurred for pumping at the well
sites. All estimated costs are increased annually for inflation.
Projected Incremental Operating Expenditures (operating cost) or O&M includes labor, benefits, materials, and overhead.
O&M cost for pipes: Total annual operating cost divided by the number of feet of pipe in the system = O&M cost to maintain a foot of pipe.
This rate is then multiplied by the number of feet in new pipeline, and is increased annually for inflation.
Total Operating Budget Cost Impact
194
Item#Amount
Grand Total :
P2286 Field 36,000$
P2262 Vehicl 69,000
105,000$
105,000$
1 Replacement of F150 pick-up truck, to be
purchased out of P2262 - Vehicle Capital
Purchases.
34,500
Total of Vehicles 69,000
Vehicles
Engineering Planning
2 New F150 pick-up truck for Inspection to be
purchased out of P2262 - Vehicle Capital
Purchases
34,500
Operations
4 Truck Mounted Crane (Pump/Electric)21,000
Total of Field Equipment 36,000
FY 2015 Capital Purchases
Summary by Project
Capital purchases are non-recurring operating expense items for District-wide use that cost more
than $10,000 each and have an estimated useful life of two years or more. The Capital Purchase
Projects include Field Equipment, Office Equipment and Furniture, and Vehicle purchases.
Description
Field Equipment
Finance
3 Portable Meter Test Program/hardware 15,000$
Operations
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Summary of Financial Policies
Introduction
This section includes a brief synopsis of the District’s Reserve Policy, Investment Policy, and Debt
Policy.
The Reserve Policy is a comprehensive policy which explains how the District is operated,
including the distinction of business segments to ensure users pay their fair share of costs. It
explains how fees are collected and what they are used for. It also explains the difference between
funds, as well as how transfers shall be made, and defines each reserve target funding level. This
policy was adopted by the Board in November 2010. The District periodically reviews the policy to
ensure it reflects current policies and financial practices. The Reserve Policy was updated and
adopted by the Board in August 2012.
The following chart depicts the detailed flow of funds that may be useful in understanding the
Reserve Policy.
Unrestricted and
Undesignated
(General Use) Funds
Restricted Funds
FUND CHART
Designated Funds
Designated
Expansion
Designated
New Supply
Designated
Replacement
Designated
Betterment
Potable
General Fund
Recycled General
Fund
Sewer
General Fund
Restricted
Expansion
Restricted
Betterment
Debt
Reserve
Restricted
New Supply
OPEB
Reserve
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Summary of Financial Policies
The Investment Policy is a guideline for the prudent investment of cash. It follows government code
as well as authority granted by the Board of Directors. The primary objectives, in order of
significance, are to invest safely, with adequate liquidity, and to achieve sufficient return on
investments. In August 2007, the District received a Certification of Excellence Award from the
Association of Public Treasurers of the United States and Canada (APT US&C) for this policy. The
investment policy was updated and adopted by the Board in May 2014.
The Debt Policy establishes that debt financing will only be used for Capital Improvement Projects
(CIP), which have an extended useful life for ten years or longer, and that exceed the District’s
ability to be funded with current resources such as annual cash flow, fund balances, or reserves.
Additionally, the life of a project is expected to exceed the term of the financing. The District strives
to maintain the highest possible credit ratings for all categories of long-term debt that can be
achieved without compromising delivery of basic services and the achievement of district policy
objectives. In August 2007, the District received a Certification of Excellence award from the
Association of Public Treasurers of the United States and Canada (APT US&C) for this policy. The
Debt Policy was updated and adopted by the Board in September 2013.
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Reserve Policy
1.0 The District
The Otay Water District is a California municipal water district, authorized in 1956 by the State
Legislature under the provisions of the Municipal Water District Act of 1911. The District is a "revenue
neutral" public agency; meaning each end user pays their fair share of the District's costs of water
acquisition, construction of infrastructure, and the operation and maintenance of the public water
facilities.
The District provides water service within its boundaries, and provides sewer and recycled water
service within certain portions of the District. As such, the District operates three distinct business
segments:
Potable water
Recycled water
Sewer
Each of these business segments has an identifiable customer base. In addition, the developer
community, large and small, makes up a significant class of customer for each business segment.
As a result, the District has four distinct customer service types:
Developers
Potable water users
Recycled water users
Sewer users
The District has established practices and developed computer systems that have enabled the
District to maintain a clear separation between the service costs relating to each of its four customer
service types. Regardless of customer class, financial principles regarding cost allocation and fund
accounting are fundamental to the District’s Reserve Policy. These principles are derived from the
statements of the Governmental Accounting Standards Board (GASB), and from oversight and
advisory bodies such as the California State Auditor, the Little Hoover Commission, and the
Government Finance Officers Association (GFOA). These have significant impacts on how the
finances of the District are organized and how financial processes work within the organization.
1.1 The District’s Use of Financial Resources
All of the District’s expenditures fall into two broad categories: operating costs and capital
expenditures. The operating costs include costs relating to the purchase and delivery of potable and
recycled water, and the transportation and treatment of sewage. The capital expenditures support
the construction of infrastructure necessary to deliver services. The District uses various funds to
support the operating and capital efforts. Operations and maintenance is financed only by rates and
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Reserve Policy
charges, also called pay-as-you-go, while capital infrastructure is financed using two financing
methods: pay-as-you-go and debt issuance (requiring annual debt service). The Capital
Improvement Program (CIP) and the two funding methods support the construction, betterment, and
replacement of infrastructure in all three business areas: potable, recycled, and sewer.
The District establishes different funds to track revenues allocated to different activities. Once
established, each fund receives financial resources up to the levels defined in this policy. Every year,
as a part of the annual budget process, the District’s rate model is updated for each fund with the
current fund balances and the estimated revenues and expenditures for the next six years. The
expenditure requirements and financial resources are then evaluated to ensure that the existing fund
balances and additional revenues are sufficient within the current budget cycle and for the next five
years to maintain target fund levels. If a deficit is identified, then options for transfers, shifting CIP
projects, debt, cost saving measures, and/or rate increases are evaluated.
1.2 The District’s Capital Improvement Program (CIP)
The planning, design, and construction costs of all capital facilities within the three business
segments are allocated to four cost types and corresponding fund categories: New Water Supply,
Expansion, Replacement, and/or Betterment. The allocation to these four cost types is defined in the
District’s Capital Improvement Program (CIP) and is determined by an engineering analysis that
identifies which type of customer will benefit from each facility, planned or existing. The costs of the
capital improvements are borne by either existing users or by the developing areas, or by a
combination of the two, as applicable.
This Reserve Policy protects both the existing users and the developing areas from incurring
unwarranted costs. Developing areas are not required to finance facilities that are replacement or
betterment and established areas are not required to replace facilities before they are worn out
because of new development. However, to ensure a fair allocation of costs, each facility has the
potential to be classified into any or all of the four cost types. In addition to these cost types there
are occasional CIPs that may be billable to a third party, if for example a third party requires a District
facility be relocated. Paragraphs a through d below, describe how the costs of capital facilities are
financed through various fees.
a. New Water Supply
The portion of a new supply project that benefits new users is financed from the reserves in
the New Water Supply Fund category. These reserves are primarily derived from proceeds
of the new water supply fee. The New Water Supply Fund is restricted, meaning the amounts
credited to this fund are accounted for separately and are used solely for the planning,
design, and construction of the new water supply expansion facilities. Debt financing may
also be a temporary financial resource to finance new water supply projects. The District has
a Debt Policy (Policy No. 45) that guides the debt issuance process. Any debt proceeds used
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Reserve Policy
for this purpose would be restricted in nature and tracked separately. General use reserves
may also be placed in the Designated New Water Supply Fund and used for water supply
projects.
b. Expansion
The portion of a CIP project that benefits new users is financed from the reserves in the
Expansion Fund category. These reserves are primarily derived from proceeds of the
“incremental” portion of the capacity fees collected within developing areas. Capacity fees
are accounted for separately and used for the planning, design, and construction of
expansion facilities. Additionally, expansion may be financed by annexation fees or the “buy-
in” portion of the capacity fee. Both of these fees are restricted for CIP purposes, but not
specifically for expansion. Debt financing may also be a temporary financial resource for
expansion projects. General use reserves may also be placed in the Designated Expansion
Fund and used for expansion projects.
c. Replacement
The portion of a CIP project that benefits existing users by replacing an existing facility is
financed from the reserves in the Replacement Fund category. Replacement of facilities may
be financed with proceeds of annexation fees, the “buy-in” portion of the capacity fees,
general use reserves held in the Designated Replacement Fund and debt proceeds. The
various funding sources available for replacement projects is anticipated to provide the
necessary flexibility to begin projects while any necessary debt financing is being obtained.
d. Betterment
Facilities that improve reliability, meet new regulations, or create increased levels of service
are considered betterment facilities that benefit existing users. The reserves in the Better
Fund category are used to finance these projects or portions of projects. Certain user rates,
charges, and betterment fees are restricted geographically for betterment of facilities, but
may also be used for general maintenance of facilities in that area. Proceeds of the
annexation fee and the “buy-in” portion of the capacity fees may also be used to finance
betterment projects. General use reserves may be placed in the Designated Betterment
Fund and used for betterment projects.
1.21 Relocations
Occasionally, relocation of a District facility is required by a third party. If the District has a superior
easement the relocation cost will be paid by the third party, but only to the extent that the District
does not benefit from the relocation. When relocation is required, a CIP project may be created
which is wholly or partially financed by a third party. On occasion, the District will require that its own
facilities be relocated. Depending on the nature of the facilities, the financial resources for these
projects could be from new water supply, expansion, replacement, betterment or third party
financing. Each project is individually negotiated with the third party based on the facts and
circumstances of the relocation. Occasionally, the District will improve the facilities that are being
200
Reserve Policy
relocated. When determining how to allocate costs to various funds the following guideline is
suggested: if a project has more than five years of useful life remaining, an incremental cost view
should be considered; if the project has less than five years of useful life remaining, a pro-rata cost
approach should be considered. Also, the likelihood the District will benefit from an asset’s life
extension should be evaluated prior to allocating costs.
1.22 Oversizing
If deemed reasonable by the District, in connection with the construction of backbone facilities, a
developer may be required to oversize new facilities for future development. The developer is
reimbursed for incremental oversizing costs as per Policy No. 26. These reimbursements are not
available for the distribution system within a development which is an obligation
of the developer.
1.23 Exclusion of Developed Areas from Expansion Costs
Developed areas are assumed to have sufficient supply and capacity to meet their current
requirements as provided by the developers. In addition, they are considered to have borne capital
financial costs that are at least proportionate to the benefits they have received from capital facilities.
Accordingly, no regional capital financing costs are allocated to these areas so that they will not incur
any costs for newly developing areas, except for capital projects that produce district-wide benefit or
cost savings.
1.24 Improvement Districts (IDs)
Improvement Districts (IDs) are established to facilitate the financing of particular improvements by
the specific beneficiaries. The District has a number of improvement districts that were established
for General Obligation (GO) debt repayment. Most GO debt has been paid off and it is unlikely that
the District will issue additional GO debt. Improvement districts continue to be used for other
purposes: 1) to distinguish sewer customers from water customers on the county tax roll; 2) to place
parcels on the county tax roll for the collection of availability fees; or 3) for charging special water
rates.
Over the years, the District moved to a district-wide perspective of financing improvements. This
philosophy is evident by the district-wide capacity and annexation fees. The District also uses district-
wide water rates. As time goes on, it is expected that IDs will continue to outgrow their purpose and
their use will diminish.
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Reserve Policy
1.3 The Purpose of the Policy
Public entities accumulate and maintain reserves to ensure both financial stability and continuous
availability of services. Financial stability and the resulting improved credit quality allow the public
entity to weather times of uncertainty and the impact of negative events, both major and minor.
Reserves allow for the ongoing maintenance of property and timely payment of expenses even when
such expenses exceed money available from a single fiscal period. In the final analysis, the type and
level of reserves are driven by the type and magnitude of uncertainty faced by the public entity.
A “reserve” has a number of meanings, as follows:
Working capital is required to insure timely payment of obligations.
A buffer against volatility in revenues.
Liquidity is required to obtain other goods and services (e.g., bank services).
Designated money to protect creditors.
Money set aside to replace assets at the end of their useful lives.
Money set aside to repair or replace assets damaged or destroyed at unanticipated times.
It is important to note that reserves, fund balance, and net assets are not the same. Fund balance
and net assets are accounting terms and may not always be in the form of cash or liquid investments.
Fund balances and net assets may not always be reserves unless a designation of all or a portion of
fund balance is made. In addition, the term fund balance was replaced by net assets as codified by
the Governmental Accounting Standards Board (GASB).
In short, reserves are the liquid assets of the District, accumulated and maintained for application to
finance contingent future activities, whether known or unanticipated, operating or capital in nature.
The District’s Reserve Policy governs the management and use of these financial resources. Few
policies have a more significant impact on the financial health and stability of the District. This policy
explains several key financial concepts used by the District and provides some background
information to the overall strategies and practices utilized. The District has a fiduciary obligation to
its customers, to manage and direct the use of public funds for the purpose of providing water and
sewer services in an efficient and financially sound manner.
1.4 Policy Guidelines
In 2000, the Little Hoover Commission reviewed the levels of reserve funds for special districts in
California and prepared a report reflecting that special districts were accumulating unreasonable
levels of funds. As a proactive response, the California Special Districts Association (CSDA) prepared
Reserve Guidelines for its members. The Reserve Guidelines were significant in noting that reserve
levels need to be in context of the organization’s overall business model and capital improvement
plan.
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Reserve Policy
There are a number of potential events which the District should consider in the development of
reserves:
Economic Uncertainty - performance of the regional economy and the impact of that
performance on demand for water.
Weather - the amount of rainfall and the impact of weather on the availability and the cost of
water as well as the demand for water.
Government Mandates - the impact of federal and state regulation, particularly
environmental regulation.
Tax Changes - limitations on the District’s taxing and spending powers through the passage
of a voter referendum, the impound of District property taxes or the removal of the District’s
power to levy property taxes, further increases to Educational Revenue Augmentation Fund
(ERAF) contributions or changes in calculation methodology.
Operating Costs - increases in operating and maintenance costs because of inflation, labor
agreement or other modification.
Force Majeure - unanticipated expenditures resulting from natural disasters or intentional
acts.
Emergency Maintenance - unanticipated expenditures resulting from unexpected failure of
assets (e.g., rupture in the primary transmission system).
Unexpected Variation in Cash Flow - the incidence of additional costs or decreased revenues
that require short-term borrowing in the absence of sufficient financial resources.
The California State Auditor has, in its oversight role, offered a number of quality recommendations
for the development of reserve policies as outlined in its report entitled, “California’s Independent
Water Districts: Reserve Amounts Are Not Always Sufficiently Justified, and Some Expenses and
Contract Decisions Are Questionable,” dated June 2004, Report No. 2003-137. All of these
recommendations have been incorporated into this policy in an effort to address key issues
surrounding the management and use of District reserves. The detailed objectives as identified by
the State Auditor are as follows:
Distinguish between restricted and unrestricted reserves.
Establish distinct purposes for all reserves.
Set target levels, including minimums and maximums, for the accumulation of reserves.
Identify the events or conditions that prompt the use of reserves.
Conform to plans to acquire or build capital assets.
Receive Board approval and that it is in writing.
Require periodic review of reserve balances and rationale for maintaining them.
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Reserve Policy
Yet, the State Auditor’s report acknowledges that the California Constitution (Article XIII B, Section 5)
is vague in its provisions governing the accumulation and use of reserves.1 Specifically, the
Constitution states that “each entity of the government can establish contingency, emergency,
unemployment, reserve, sinking fund or similar funds as it shall deem reasonable and proper.”2
Similarly, the State’s Water Code does not impose any requirements as to specific or recommended
reserve fund levels. As a result, the public finance community as a whole has yet to settle on any
real objective standards for the level of reserve funds appropriate for governmental enterprises. This
lack of consensus as to specific standards is indicative of the wide variance of the financial and
operations context for different districts and different contingencies justifying reserves.
The Government Finance Officers Association (GFOA) in its “Recommended Practice on
Appropriate Level of Unreserved Fund Balance in the General Fund” (2002) states that in
establishing a policy governing the level of unreserved fund balance in the general fund, a
government should consider a variety of factors. These include:
The predictability of its revenues and the volatility of its expenditures (i.e., higher levels
of the unreserved fund balances may be needed if significant revenue sources are
subject to unpredictable fluctuations or if operating expenditures are highly volatile).
The availability of resources in other funds as well as the potential drain upon general
fund resources from other funds (i.e., the availability of resources in other funds may
reduce the amount of the unreserved fund balance needed in the general fund, just
as deficits in other funds may require that a higher level of unreserved fund balance
be maintained in the general fund).
Liquidity (i.e., a disparity between when financial resources actually become
available to make payments and the average maturity of related liabilities may require
that a higher level of resources be maintained).
Designations (i.e., governments may wish to maintain higher levels of the unreserved
fund balance to compensate for any portion of unreserved fund balance already
designated for a specific purpose).
In the preparation of this policy, each of the CSDA guidelines and the GFOA recommendations has
been considered. In addition, all seven objectives provided by the State Auditor are specifically
addressed for each reserve. The District wholly supports the State Auditor’s efforts to bring a high-
level of quality to reserve governance and establishing a standard of performance.
1 California State Auditor, Bureau of State Audits, “California’s Independent Water Districts: Reserve Amounts Are Not Always Sufficiently Justified, and Some Expenses and Contract Decisions Are Questionable,” dated June 2004, 2003-137; p. 8.
2 California Constitution, Article XIII B, Section 5.
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Reserve Policy
The District recognizes that the customer pays for services provided. Quality management requires
that periodic valuations be performed so that fees and charges can be set at appropriate levels to
recover the cost of service. The District’s Reserve Policy has been drafted with consideration of the
GFOA, CSDA, and State Auditor’s general guidelines as provided above. In addition, the District has
adopted the following principles in the management of its financial resources:
Reserves are held and used only for the purpose for which they are collected. This is done
to maintain equity among customers.
Each of the service types is tracked separately so that expenditures and revenues can be
monitored and evaluated for each customer type. This provides the District with the
necessary information to appropriately charge for each of the services.
Separation of operations and maintenance from capital expenditures occurs within each of
the service types. This is done because the financing of these expenditures is often on
different timelines or use different reserves.
The District will hold its reserves at responsible and prudent levels. This policy sets minimum,
maximum, and target levels for each of the various funds. This has been done so that the
District can maintain reserves to meet the purpose for which the funds were established. The
levels are set by reference to line items in the District’s financial statements and approved
budgets. This allows reserve levels to adjust to the District’s changing financial
circumstances.
Debt financing of facilities provides intergenerational equity and maintains rates at
reasonable levels. This equity is accomplished with long-term financing which spreads the
cost of facilities over the life of the facilities. The burden to pay for facilities is then paid by
those who use them. The District could amass significant reserves by pre-collecting financial
resources in a Replacement Reserve Fund allowing the District to cash finance all
replacements. However, this would require significant rate increases burdening the current
customers and creating reserve levels difficult to defend to the ratepayers or other oversight
entities.
These concepts are fundamental to the way the District manages its funds and have a direct impact
on the way rates and charges are set. The District performs annual budget evaluations and updates
its rate model on an annual basis to monitor and adjust the various funds and revenue sources. The
separation, tracking, and projecting of the various funds and expenditures create the essential
information necessary for the equitable rate structure maintained by the District. The annual review
preserves the balance between services provided and the fees charged. This review also insures
that reserves will be available to continue to serve the District’s customers.
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Reserve Policy
Financial Sources
2.0 Developers
a. Meter Installation Charges (General Use)
Meter fees are charges collected for new water service connections. Fees vary depending
upon meter size and type of service. The costs associated with meter installations are
included in the Operating Expenses section of the budget. These charges are financed by
developers.
b. Developer Deposits (General Use)
These deposits are for the engineering and operations services provided to developers. They
are tracked separately for each developer and any excess amount is returned to the
developer.
c. Annexation Fees (Restricted)
Annexation fees3 are collected as a condition of annexing into the District’s potable and
recycled water facilities. Since the existing facilities have been built and maintained by
developers or customers within the District, the annexation fee is calculated based on the
present value of all property taxes (1% property tax and availability fees) paid by existing and
prior customers. The annexation fee insures that future users finance a portion of facilities
that were sized, built, and maintained for both existing and future users. Proceeds of
annexation fees are restricted and can be used for expansion, replacement, or betterment
projects. These reserves may be shifted back and forth as financing needs change.
d. Annexation Fees (Unrestricted)
A sewer annexation fee is collected when property is annexed into an improvement district.
This fee is calculated using the “buy-in” basis and therefore is unrestricted.
e. New Water Supply Fee (Restricted)
New water supply fees4 are based on the cost of the expansion portion of new water supply
projects divided by the number of future equivalent dwelling units (EDU). The new water
supply fee covers the cost of planning, design, construction, and financing associated with
facilities for the District’s new supply needs. These fees are paid by developers. The
proceeds of this fee may be used only for new potable or recycled water supply projects.
Although the fees collected are not restricted separately, one portion for potable and the other
for recycled, they are tracked separately.
f. Capacity Fees (Restricted)
Capacity fees4 are based on the value of existing and future facilities divided by the number
of existing and future equivalent dwelling units. This method of calculating capacity fees is
3 Code of Ordinances, Section 9. 4 Code of Ordinances, Section 28
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Reserve Policy
called the combined method, where the “buy-in” portion of the capacity fee covers costs to
repay existing customers for the facilities that they have built, and where the “incremental”
portion of the capacity fee covers the cost of future expansion facilities. The “buy-in” portion
of the capacity fee is restricted to pay for planning, design, construction, and financing
associated with expansion, replacement or betterment facilities. The “buy-in” portion may be
shifted back and forth between expansion, betterment or replacement as the financing needs
change. The “incremental” portion of the capacity fee is limited to planning, design,
construction, and financing exclusively for expansion facilities (excluding new water supply
expansion).
Facility needs are based on projected land use planning. Changes in anticipated future land use
occur and can alter projected facility requirements. Thus, both the anticipated facilities needs and
their projected costs change over time as regulatory agencies make changes to land use. The
District periodically reviews the capacity fee calculation to accommodate such variations. These
fees are paid by developers.
The District’s construction of infrastructure occurs prior to the addition of EDUs. This sequence
serves two purposes: one it ensures that the District can serve the pending construction as it is
completed; and two, it is more efficient to oversize many facilities at the outset rather than build for
the current need and then reconstruct when the future need is realized. As a result of this strategy,
the District has financed construction with bond financing as the existing expansion reserves are
depleted.
The capacity fee is calculated based on the combined recycled and potable water systems needs.
This methodology is used because the two water systems work hand-in-hand. All capacity fees can
be used for either potable or recycled but must be tracked to distinguish between the “buy-in” and
“incremental” portions as described above. So, while capacity fees are not restricted separately by
potable and recycled, they are tracked separately.
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Reserve Policy
2.1 Customers/Users
a. Uniform Rates and Charges (General Use)
Charges to users for water, sewer, and recycled water are uniform throughout the District for
similar customer types.
b. Monthly System Fees (General Use)
This is a fixed revenue source that is charged monthly. The amount of the charge is based
on the meter size.
c. Energy Charges (General Use)
The energy pumping fee is a charge per Unit of water for each 100 feet of lift, or fraction
thereof, above the base elevation of 450 feet. This charge is placed on the monthly water
bills of all water customers.
d. Penalties (General Use)
Penalties are added to the monthly water and sewer bills for late charges, locks, etc.
e. Pass-through Fixed Charges (General Use)
A fixed monthly charge to the District’s customers intended to collect sufficient funds to pass-
through the increased fixed costs from the County Water Authority (CWA) and the
Metropolitan Water District (MWD).
DEVELOPERS
Meter
Installation
Charges
Developer
Deposits
Restricted Funds
Annexation
Fees
Capacity
Fees
New Water
Supply Fees
Diagram 2.0: Flow of Funds - Developer Sources
Unrestricted and
Undesignated
(General Use) Funds
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Reserve Policy
f. Special Rates and Charges (Restricted)
In addition to the uniform water charges, the District currently has five special water rates
and one sewer rate. The five water rates are for construction, installation, and maintenance
of water storage reservoirs, pump stations, and water lines. Each of these rates and charges
must be used within the respective geographic areas from which they are collected. These
special charges are listed below:
North District water charge (Code section 25.03G)
ID 9 water charge (Code section 25.03H)
ID 3 water charge (Code section 25.03I)
ID 10 water charge (Code section 25.03I)
La Presa water charge (Code section 25.03I)
Russell Square sewer charge (Code section 53.04C)
When these rates were established they were for the specific purpose of constructing,
installing, and maintaining the water and sewer systems in the areas in which the fees were
collected. Therefore, these are restricted reserves by geographic area as well as by purpose.
These rates and charges can also be used for maintenance; unlike the availability fees
(discussed in 2.2 B.). These six special rates and charges along with availability fees are
tracked separately, by geographic area, so they can be individually evaluated to maintain the
targeted reserve levels. To meet this need, each special rate and charge is accounted for in
a “sub-fund” of the Betterment Fund.
g. Temporary Meter Fees (General Use/Restricted)
Water charges, in lieu of capacity fees, are charged on temporary meters. This is done
because temporary meters use system capacity but they are not charged a capacity fee.
Temporary water use is charged at two times the water rate with the added charge placed
in the Restricted Expansion Fund. The primary users of these temporary meters are
developers; however, general customers also use these for various purposes.
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Reserve Policy
2.2 County-Collected Taxes and Fees
a. General Levy Property Tax Receipts (1% Property Tax) (General Use)
In 1978, Proposition 13 limited the levy of ad valorem property taxes on real property to one
percent of the assessed value of such property. Subsequent legislation, AB 8, established
that the receipts from the one percent levy were to be distributed to taxing agencies
proportionate to each agency’s general levy receipts prior to Proposition 13. Taxes received
are for general use.
b. Availability Charges (General Use/Restricted)
The District levies availability charges each year in developed and undeveloped areas.
Current legislation provides that any amount up to $10 per parcel is general use and any
amount over $10 per parcel is restricted to be expended in and for the improvement district
(ID) within which it is collected. Accordingly, the District may use availability charges in
excess of $10 toward costs of water and sewer facilities which are either, expansion,
betterment, or replacement of facilities consistent with the purpose of the ID in which they
are collected. This portion of the proceeds of availability charges is geographically restricted
and restricted by purpose. As costs are incurred on these projects the respective IDs are
charged, reducing the reserves. To the extent that availability charges are not used for the
purpose for which they are collected, they must be returned to the property owners that paid
CUSTOMERS / USERS
Diagram 2.1: Flow of Funds - Customer Sources
Unrestricted and
Undesignated
(General Use) Funds
Monthly
System Fees
Restricted Funds
Energy
Charges
Penalties
Pass –Through
Fixed Charges 2x Water
Rate
Special Rates
and Charges
Uniform Rates
and Charges
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Reserve Policy
them. The District has historically used these reserves for betterment capital facilities thus,
the restricted reserves are accounted for in “sub-funds” of the Betterment Fund (see 2.1 f.).
c. Improvement District General Obligation (GO) Bond Assessments (Restricted)
The District has historically issued general obligation (GO) debt and establishes an
improvement district for the repayment of that debt. When this financing method is used, the
county tax roll can be used to collect special taxes or assessments within the ID to pay the
debt obligation. The proceeds of the debt are restricted for the purpose as defined in the
bond documents.
2.3 Miscellaneous Income
a. Miscellaneous Rents and Leases (General Use)
Revenues received from the rental and lease of District property are general use revenues.
Not only are they periodic revenues, but there is also a one-time fee charged with the setup
of each new lease. The District incurs expenses related to these rents and leases. The one-
time fees are calculated to recover the costs to setup the leases.
COUNTY COLLECTED TAXES AND FEES
Unrestricted and
Undesignated
(General Use)
Funds
General Levy
Property Tax
Receipts
Availability
Charges
Restricted Funds
General Obligation
Bond Assessments
Diagram 2.2: Flow of Funds – County Collection Sources
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Reserve Policy
b. Sewer Billing Fees (General Use)
Sewer billing fees are general use revenues. The District provides processing and billing
services to the City of Chula Vista to bill and collect from their customers for sewer service.
These fees are to recover the cost the District incurs to provide this service.
c. Interest Income or Expense Allocation (General Use, Designated, and Restricted)
Interest income (expense) will be allocated every month based upon each fund's month-
ending balance. In this way, each fund receives credit for interest earned by that fund and
each fund with a negative balance is charged for the use of the other fund’s reserves.
2.4 Debt Issuance
a. Loans (General/Restricted Use)
As the District determines that additional financing is required for a particular purpose, the
option of borrowing is considered. The determination to borrow is made as a part of the
annual rate model update and is evaluated in accordance with the Debt Policy before it is
recommended to the Board for action. As an option to bond indebtedness, loans are
available to satisfy short-term financing needs. These loans may or may not be contractually
restricted for a particular purpose.
b. General Obligation (GO) Bonds (Restricted)
As the District becomes more developed it becomes less likely that general obligation debt
will be used as it requires a vote of the public to be approved. Bond proceeds are restricted
for the construction of those facilities identified in the GO bond issuance. Occasionally,
MISCELLANEOUS INCOME
Unrestricted and
Undesignated
(General Use) Funds
Miscellaneous
Rents and Leases
Sewer Billing
Fees
Restricted Funds
Interest Income or
Expense Allocation
Diagram 2.3: Flow of Funds – Miscellaneous Income Sources
Designated Funds
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Reserve Policy
specific portions of bond proceeds may be allocated for the repayment of the principal and
interest, also called debt service, on these bonds. As the District determines that additional
financing is required for a particular purpose, the option of debt issuance is considered. The
determination to issue debt is made as a part of the annual rate model update and is
evaluated in accordance with the Debt Policy before it is recommended to the Board for
action.
c. Certificates of Participation (COPs) (Restricted)
General revenues of the District are pledged as security for Certificates of Participation
(COPs) indebtedness. If the District determines that additional financing is required for a
particular purpose, the option of debt issuance is considered. The determination to issue
debt is made as a part of the annual rate model update and is evaluated in accordance with
the Debt Policy before it is recommended to the Board for action. This form of financing has
become the industry’s preferred form of financing as it does not require a vote of the general
public.
2.5 Inter-fund Transfers
Each year in the budgeting process, future fund levels are projected for the next six years.
Based on these projections transfers are recommended. Reserves may be transferred
between Unrestricted or Designated Funds and the General Fund (see 4.0 “Funding Levels”
and 4.1 “Fund Transfers”). Reserves may not be transferred to or from any of the restricted
funds unless it is between two restricted funds with a shared purpose.
DEBT PROCEEDS
Unrestricted and
Undesignated
(General Use) Funds
Loans General
Obligation Bonds
Restricted Funds
Certificates of
Participation
Diagram 2.4: Flow of Funds – Debt Issuance Sources
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Reserve Policy
Fund Types and Categories
3.0 General Funds
a. Purpose
The General Fund is neither restricted nor designated. The District maintains one General
Fund for each business segment (water, sewer, and recycled). This fund holds the working
capital and emergency operating reserves. While the General Fund has a short-term focus
to finance the District’s annual operations, it is supported by the six-year rate model. This
fund is primarily used to finance the operations of the District; however, it can be used for any
District purpose.
This fund can be used to supplement the District’s rates and charges and be a temporary
source of revenue to balance the Operating Budget. This fund can also be used to avoid
spikes in the rates or significant and abrupt increases. It is an industry practice to have a fund
that can be used to stabilize rates. This would only occur if there was a temporary need for
reserves that would smooth out a rate spike or to ramp up what would otherwise be a
dramatic rate increase.
The General Fund also plays a role in the debt planning of the District. This fund is viewed
by the debt markets as a commitment by the District to ensure financial stability of the rates
and charges of the District. The District is anticipated to need a number of debt issuances
over the years and this fund will help the District not only to stabilize rate fluctuations but also
to access low cost financing for future projects.
b. Sources
Meter installation charges, temporary meter fees, uniform rates and charges, monthly system
fees, energy charges, penalties, pass-through fixed charges, general levy property tax
receipts, availability charges, miscellaneous rents and leases, sewer billing fees, interest
income or expense allocation, loans, and a portion of the temporary water sales.
The sewer general fund receives sewer charges, penalties, availability charges, sewer
annexation fees (calculated on the “buy-in” basis), and interest income or expense allocation.
Funding Levels
I. Minimum Level – The minimum reserve level for each business segment of
the General Fund is three months of operating budget expenses (evaluated
separately for each segment).
II. Maximum Level – The maximum reserve level for the General Fund is nine
months of operating budget expenses. In the event that this fund exceeds
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Reserve Policy
the seven month level, the excess will be evaluated or transferred to one or
more of the designated funds.
III. Target Level – The target level of reserves is three months of operating
budget expenses. In the event that the fund drops below the target level, rate
increases or fund transfers would be considered.
3.1 Designated Other Post Employment Benefits (OPEB) Fund
a. Purpose
Designated Other Post Employment Benefits (OPEB) reserves are “general use” reserves that
have been set apart by Board action to finance the medical benefits of qualified retirees as
outlined in the District’s benefits plan. This District fund holds only a portion of the total OPEB
reserves. The other portion is held in a trust at CalPERS and is restricted for the purpose of
financing the OPEB liability. The two portions are considered jointly when looking at target
reserve levels. Every two years, the fund is evaluated by an actuary to update the annual
financing requirements. Changes in the actuarial valuation may result from changes in
benefit levels, employee population, health insurance costs, or general market conditions.
The reserves held by the District are currently designated and may be placed into the
CalPERS trust to legally restrict the funds, removing the District’s legal access to these
reserves.
b. Sources
The OPEB liability may be financed by general use reserves coming from user rates and
charges, either from an operating budget expenditure or from interfund transfers. Transfers
of unrestricted reserves may come from the various designated funds or from the General
Fund. As a part of the normal budget process, annual operating revenues have been
sufficient to finance the ongoing needs of this designated fund. While debt financing is also
an option, the District has only used user rates and charges to finance this fund.
c. Funding Levels
I. Minimum Level – The minimum reserve level for this fund is equal to the
District’s OPEB liability as determined by the actuarial study. When
considering the reserve level of this fund, both the District held OPEB reserves
and CalPERS held OPEB reserves must be considered jointly.
II. Maximum Level – The maximum reserve level for this fund is equal to the
District’s OPEB liability as determined by the actuarial study. In the event that
the two funds, as described above, exceed the OPEB liability, the District will
reduce the annual funding levels as defined by the actuarial study.
III. Target Level – The target reserve level for this fund is equal to the District’s
OPEB liability as determined by the actuarial study. In the event that the two
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Reserve Policy
funds, as described above, fall below the OPEB liability, the District will
increase the annual funding levels as defined by the actuarial study.
3.2 New Water Supply Fund Category
a. Purpose
The New Water Supply Fund category is to finance the expansion portion of new water
supply projects and is therefore to be paid by developers. When considering the reserve
level of the New Water Supply category; the New Water Supply Fund, the New Water Supply
Debt Fund, and the Designated New Water Supply Fund all work in concert and must be
considered jointly.
b. Sources
The New Water Supply Fund receives reserves only from the new water supply fee. Other
funds within the new water supply category of funds receive debt proceeds and general use
reserves through a designation to this category.
c. Funding Levels
I. Minimum Level – As the District matures the CIP will move to purely
replacement projects. As the District moves through its lifecycle the need for
new water supply reserves will decrease and may be reduced to zero.
II. Maximum Level – The maximum reserve level for the new water supply
category of funds is limited to five years of the unfinanced new water supply
facilities as described in the District’s CIP Budget. To determine the
unfinanced amount, the total new water supply financing needs must be
reduced by the projected new water supply revenues, general fund
designations, and bond financing. If the combined new water supply
reserves exceed the target level, the District should consider transferring
designated reserves to meet other purposes, reduce the new water supply
fee, or change the timing of the new water supply projects.
III. Target Level – In order to facilitate debt financing of the new water supply, it
is important that the various new water supply funds retain an overall reserve
level of six months, prior to any attempt to obtain debt financing. This reserve
level allows the District the time necessary to issue additional debt without
depleting new water supply reserves. If the combined new water supply
reserve levels drop below six months of expenditures, this would trigger a
transfer of general use reserves, a bond sale, or a change in the timing of new
water supply projects. Bond proceeds would be placed in the Restricted New
Water Supply Debt Fund while transfers would be placed in the Designated
New Water Supply Fund.
216
Reserve Policy
3.3 Expansion Fund Category
a. Purpose
The Expansion Fund category is to finance the expansion portion of capital projects and
therefore is to be paid for by developers. When considering the reserve levels of the
expansion category, the following funds work in concert and must be considered jointly: the
Expansion Fund, Expansion Debt Fund, Annexation Fund (potable and recycled only), Capital
Improvement Fund, and the Designated Expansion Fund. Potable and recycled reserves are
considered jointly while sewer is evaluated separately.
Restricted Funds
Unrestricted and
Undesignated Funding
Sources
Funding Source
New Water
Supply Fees
Debt
Proceeds
Restricted Funds
Restricted Funds
Designated Funds
New Water
Supply Fund
Expansion
New Water
Supply Fund
Designated
New Water
Supply Fund
Debt Fund
General Fund –Rates and Charges
New Water
Supply Fund
Category
New Water
Supply
Debt Fund
Diagram 3.2: New Water Supply Fund Category
217
Reserve Policy
b. Sources
The Expansion Fund is financed by water charges in lieu of capacity fees (for temporary
meters) and the “incremental” portion of the capacity fee. The other funds in this category
may also be financed by debt proceeds, annexation fees, the “buy-in” portion of the capacity
fee, and the general fund through a designation of reserves.
c. Funding Levels
I. Minimum Level – As the District matures the CIP will move to purely
replacement and betterment projects. As the District moves through this
lifecycle the need for expansion reserves will decrease and may be reduced
to zero.
II. Maximum Level – The maximum reserve level for the expansion category of
funds is limited to five years of unfinanced expansion facilities as described
in the District’s CIP Budget. To determine the unfinanced amount, the total
financing needs must be reduced by the projected expansion revenues, bond
financing, and any restricted or general fund revenues allocated to this fund
category. If the combined expansion reserves exceed target levels, the
District should consider reducing capacity fees, reallocating restricted or
designated funds to meet other purposes, or shifting the timing of expansion
projects.
III. Target Level – The target level is six months of expansion expenditures. It is
important that the expansion reserves remain at a minimum of six months of
expansion expenditures. This reserve level allows the District the time
necessary to issue additional debt without depleting expansion reserves. If
the combined expansion reserves drop below six months of expenditures this
would trigger a transfer of general use reserves, a bond sale, an adjustment
to the timing of expansion projects, or a reallocation of restricted reserves.
Bond proceeds would be placed in the Restricted Bond Fund, transfers of
general use reserves would be placed in the Designated Expansion Fund,
and transfers of restricted reserves would be placed in either the Expansion
Annexation Fund or the Expansion Capital Improvement Fund.
218
Reserve Policy
3.4 Replacement Fund Category
a. Purpose
The Replacement Fund category is to finance replacement projects. When
considering the reserve levels of the replacement category of funds, the following
funds work in concert and must be considered jointly: the Annexation Fund, Debt
Fund, Capital Improvement Fund, and the Designated Replacement Fund. The
Unrestricted and
Undesignated Funding
Sources
Diagram 3.3: Expansion Fund Category
Funding Source 2x
Water
Capacity
Fees
Restricted Funds
Restricted Funds
Designated Funds
Expansion
Fund
Expansion
Debt Fund
Annexation
Fund
General Fund –Rates and Charges
Annexation
Fees
Restricted Funds
Expansion
Capital
Improvement
Debt
Proceeds
Restricted Funds
Capital
Improvement
Fund
Bond
Debt
Expansion
Fund
Designated
Expansion
Fund
59.4%
Expansion
Fund
Category
Restricted Funds
Expansion
Annexation
Fund
40.6%
219
Reserve Policy
purpose of these reserves is to pay for the replacement of capital infrastructure and
capital purchases. These reserves are not to be used for the replacement of non-
capital items.
With the District’s development of its financial systems and the greater need and
ability to separate and track reserves, the replacement reserves have been separated
into three funds: water, recycled, and sewer.
Projects undertaken solely for the purpose of replacing major capital equipment or
facilities, i.e., where the cost exceeds $10,000 for capital purchases or $20,000 for
infrastructure items, generally these are not considered normal maintenance. When
the cost is below $10,000, the costs are financed annually as operational
maintenance. As charges are incurred on replacement projects the reserves are
deducted from the respective Replacement Funds on a monthly basis.
b. Sources
The various funds in this category are financed by debt proceeds, annexation fees,
the “buy-in” portion of the capacity fee, and general fund designations.
c. Funding Levels
I. Minimum Level – The minimum reserve level of this category of funds is 3%
of the historical value of existing assets as identified in the District’s current
financial statements. Potable, recycled, and sewer replacement are
evaluated separately.
II. Maximum Level – The maximum reserve level of this category of funds is 6%
of existing assets. If the combined replacement reserves exceed target levels,
the District should consider transferring annexation fees or the “buy-in”
portion of the capacity fee to meet other purposes. Another consideration
would be to shift the timing of replacement projects.
III. Target Level – The target reserve level of this category of funds is 4% of
existing assets. In the event that the reserves fall below the recommended
target level, the District should consider transferring annexation fees or the
“buy-in” portion of the capacity fee. The District should also consider shifting
the timing of replacement projects or issuing debt to support the planned
level of facility replacement. The District will act based on the annual six-year
rate model, to insure that at the end of that planning horizon the reserves
exceed the minimum level and is approaching the target level.
220
Reserve Policy
3.5 Betterment Fund Category
a. Purpose
The Betterment Fund category is to finance the betterment portion of capital projects
with a portion going to maintenance of the potable, recycled, and sewer systems.
The District maintains separate Betterment Fund categories, one for each
improvement district. An improvement district is a legally defined geographic area
usually established for the purpose of bond financing of facilities. The betterment
Funding Source
Unrestricted and
Undesignated Funding
Sources
Capacity
Fees
Diagram 3.4: Replacement Fund Category
Annexation
Fees
Restricted Funds
Restricted Funds
Designated Funds
Capital
Improvement Fund
Replacement
Debt Fund
Designated
Replacement
Fund
Annexation Fund
General Fund – Rates and Charges
Debt
Proceeds
Restricted Funds
Debt Fund
Replacement
Annexation
Fund
Restricted Funds
Replacement
Capital
Improvement
Fund
59.4%
Replacement
Fund
Category
Replacement
Annexation
Fund
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Reserve Policy
reserves within these funds are restricted by law for use within the improvement
district in which the fees were collected (Water Code 71631.6). However, the legal
restriction of this reserve depends upon the particular revenue source. (See Section
2.1 f. for a review of the special rates and availability fees).
When considering the reserve levels of the betterment category of funds, the
following funds work in concert and must be considered jointly: the Betterment Fund,
Annexation Fund, Debt Fund, Capital Improvement Fund, and Designated Betterment
Fund.
b. Sources
The Betterment Fund category receives restricted revenues by improvement district
via special water rates and from availability fees collected through the county tax roll.
Betterment may also be financed by debt proceeds, annexation fees, the “buy-in”
portion of the capacity fee, as well as the general fund through a designation of
reserves.
c. Funding Levels
I. Minimum Level – As the District matures the CIP will move to purely
replacement projects. As the District moves through this lifecycle the need
for betterment reserves will decrease and may be reduced to zero.
II. Maximum Level – The maximum reserve level for the betterment category of
funds is limited to five years of unfinanced betterment facilities as described
in the District’s CIP Budget. To determine the unfinanced amount, the total
financing need must be reduced by the projected betterment revenues, bond
financing, annexation, and general fund designations. If this maximum is
exceeded, then the District should evaluate reductions in the special water
rates and availability fees, transferring designated reserves to meet other
purposes, or shifting the timing of betterment projects.
III. Target Level – The target is six months of betterment expenditures. It is
important that the betterment reserves remain at a minimum of six months of
betterment expenditures. This reserve level allows the District the time
necessary to issue additional debt without depleting betterment reserves. If
the combined betterment reserves drop below six months of expenditures
this would trigger a transfer of general use reserves, a bond sale, or an
adjustment to the timing of betterment projects. Bond proceeds would be
placed in the Betterment Bond Fund while transfers would be placed in the
Designated Betterment Fund.
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Reserve Policy
Fund
Restricted Funds
Unrestricted and
Undesignated Funding
Sources
Diagram 3.5: Betterment Fund Category
Funding Source
Capacity
Fees
Annexation
Fees
Restricted Funds
Restricted Funds
Designated Funds
Capital
Improvement
Fund
Betterment
Debt Fund
Betterment
Fund
General Fund – Rates and Charges
Special Rates
and
Availability
Restricted Funds
Betterment
Annexation
Fund
Debt
Proceed
Restricted Funds
Annexation
Fund
Bond
Debt
Designated
Betterment
Fund
Betterment
Fund
Betterment
Capital
Improvement
Fund
59.4%
Betterment
Fund
Category
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Reserve Policy
Diagram 3.6: Fund Targets
Fund or Fund
Category
Actions to Consider if
below Target Target Maximum
New Supply Fund
Category
New supply fee
increase, bond
financing, or transfer
to designation or to
CIF or Annexation
Fund
Total of all funds in
fund category = six
months of capital
expenditures
Nexus of cost to fee
Expansion Fund
Category
Capacity fee increase,
bond financing, or
transfer to designation
or to CIF or
Annexation Fund
Total of all funds in
fund category = six
months of capital
expenditures
Nexus of cost to fee
Replacement Fund
Category
Bond financing, or
transfer to designation
or to CIF or
Annexation Fund
Total of all funds in
fund category = 4% of
infrastructure
Nexus of cost to fee
Betterment Fund
Category
Bond financing, or
transfer to designation
or to CIF or
Annexation Fund
Total of all funds in
fund category = six
months of capital
expenditures
5 years unfunded
needs
Debt Reserve Fund Increase tax collection
or rates
One semi-annual
payment
Two semi-annual
payments
OPEB Fund Fund transfers Full funding Full funding
General Fund Rate increase or fund
transfers
Three months of
operating budget
expenses
Nine months of
operating budget
expenses
Note: The annexation fee for sewer is a general fund revenue.
Additional Restricted Funds
4.0 Capital Improvement Fund
a. Purpose
The “Capital Improvement Fund’s sole purpose is to track the “buy-in” portion of the
capacity fee and to ensure these fees are expended solely for the purpose for which they
were collected. In this case it is to pay for facilities that were in existence at the time this fee
was established. These fees may be used for expansion, replacement, or betterment
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Reserve Policy
projects or any debt related to these categories. These fees may also be used for either the
potable or the recycled systems. As capacity fees are collected, the “buy-in” portion of the
fee is allocated as needed to one of three capital improvement funds, one in each of the
Expansion, Replacement, and Betterment Fund categories. These reserves are used to pay
debt or offset any negative balance within these three categories of funds. These fees may
not be used to finance the New Water Supply category, as there were no new water supply
facilities in existence at the time the new methodology for capacity fees was established.
b. Sources
The “buy-in” portion of the capacity fee collected after June 30, 2010.
c. Funding Levels
There are no minimums, maximums, or target levels for these reserves on an individual
basis. The allocation of this fee to the various capital improvement funds is dependent on
the overall reserve levels within each fund category.
4.1 Annexation Fund
a. Purpose
The Annexation Fund’s sole purpose is to track the potable and recycled annexation fees
collected and to ensure these fees are expended solely for the purpose for which they were
collected. The annexation fees may be used for expansion, replacement, or betterment
projects or any debt related to these categories. These fees may be used for either the
potable or recycled systems. These reserves may not be used to finance the New Water
Supply category, as it was not in existence at the time the fee was established. As these
fees are collected they are allocated as needed to one of three capital improvement funds,
one in each of the Expansion, Replacement, and Better Fund categories.
b. Sources
Potable and recycled annexation fees collected after June 30, 2010.
c. Uses
There are no minimums, maximums, or target levels for these reserves on an individual
basis. The allocation of this fee to the various Annexation Funds is dependent on the
overall reserve levels within each fund category.
4.2 Debt Reserve Fund
a. Purpose
The Debt Reserve Fund is established to hold the proceeds from the various debt
issuances. There are two types of debt, General Obligation bonds and Certificates of
Participation bonds. The proceeds are transferred to the New Water Supply, Expansion,
Replacement, or Betterment Debt Funds as they are expended for various facilities within
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Reserve Policy
those fund categories. As repayment of the debt occurs, the balances within these
individual funds are reduced so that the financial impact of issuing debt is tracked within
the category for which the debt was issued.
b. Sources
Debt proceeds.
c. Uses
There are no minimums, maximums, or target levels for this fund on an individual basis.
This fund is available on an as needed basis to fund CIP projects for new water supply,
expansion, replacement, or betterment. From a funding level perspective, these reserves
are evaluated in the context of all the various funds within each fund category.
Fund Transfers
5.0 Funding Levels
As described in the preceding sections, the District maintains reserves for its operating and capital
activities. These reserves can be of three types: 1) undesignated or general use reserves, 2)
designated, and 3) restricted for a specific purpose. The restricted reserves can be restricted
geographically and/or by purpose. The District maintains various funds to track the various
designations and restrictions. The source of the money for each fund was discussed along with
the purpose, source of funds, and levels. Key characteristics of these funds are the target levels,
minimums, and maximums. The funding levels must be viewed in the context of the economic
environment, political environment, and in light of the District’s rate model. The District’s six-year
rate model not only shows the current balance but also shows the trend of the fund balances.
Often the trend of the fund is a greater indicator of financial stability than is the current balance.
The rate model is updated each year with the budget process and evaluates each fund over the
next six years. The rate model will take into account the general economic environment, looking at
the development rate, supply rate increases, the possibility of raising rates, capital infrastructure
spending, and strategic plan initiatives. The fund balances may at times be over or under the
target amount. This is not only acceptable but expected. The rate model provides an empirical
estimate of the conformance between the projected District’s financial activities and the guidelines
of this policy.
5.1 Fund Transfers
Reserves within the District’s various designated funds come from interfund transfers of
unrestricted general use reserves. It is important to note that the District has the ability to use
general use reserves for any business purpose. General use reserves may be transferred to and
from any unrestricted fund for any business need. Designated reserves are general use reserves
226
Reserve Policy
which have been set aside for a specific purpose by Board action. These reserves can only be
used for the purpose they were designated, or with Board action they may be used for any other
business purpose. While general use reserves may be used for any restricted purpose they may
not be transferred to Restricted Funds due to the sensitivity of the tracking of restricted reserves. If
reserves are needed for a restricted purpose they are transferred to a Designated Fund within the
fund category with that particular purpose. Reserves restricted to a fund category may only be
used within that category and may not be transferred to another category. For example, the new
water supply fee and the “incremental” portion of the capacity fee are restricted reserves for a
specific purpose, and may not be transferred to another category as no other category has the
same purpose. However, the “buy-in” portion of the capacity fees and annexation fees are
restricted for purposes that are shared by more than one category of funds and may therefore be
transferred to a restricted fund within another fund category as long as it shares the same purpose.
In many situations reserve transfers are expected as some fund categories will exceed their
maximums or drop below their minimums. Only fund categories that are below the stated target
are eligible to receive transferred reserves. Fund categories that exceed their maximums are first
to be considered for transfers out, followed by funds that exceed their targets. Funds that exceed
their minimums are also available for reserve transfers out, but only when other options are not
available.
The rationale for prioritizing reserve transfers is based on the immediacy of the need and the
availability of reserves from other funding sources. For example, the General Fund is first to receive
reserves when it drops below its target or minimum levels. This is because of the immediate and
ongoing nature of the expenditures that are served by this fund. The operation of the District is first
and foremost of the objectives of the District. On the other end of the spectrum, the Replacement
Fund has a long-term perspective and will be used to partially finance replacement assets for
many years to come. Debt financing is available to respond to this long term, foreseeable, and
planned cash flow. This fund is less likely to have immediate needs and has other financing
options.
When making the determination of when transfers are necessary, all funds within a fund category
work as a group. The combined balance of the restricted and designated funds is looked at when
determining whether the fund category requires additional funding from the Restricted Capital
Improvement Fund, Restricted Annexation Fund, Restricted Debt Fund, or the General Fund.
Because the Capital Improvement Fund and Annexation Fund may finance expansion,
replacement or betterment reserves may be transferred between these fund categories, but only
back and forth within its own type of restricted fund.
As an example, if during the rate model update process it was determined that the Expansion
Funds (designated and restricted) would drop and stay below the minimum during the six-year
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Reserve Policy
planning horizon, this would trigger a bond sale, a transfer of general use reserves, and/or a
transfer of restricted reserves. If in the cash planning process, it was anticipated that the General
Fund would remain above target during the planning horizon and that the trend did not present a
problematic underfunded status, then General Fund reserves would be considered available for
transfer prior to making proceeds available from a bond sale. Also, if during this period the
Betterment Fund category was anticipated to exceed its maximum, then reserves from either the
Designated Betterment Fund, the Annexation Fund, or the Capital Improvement Fund would be
transferred to the corresponding Expansion Fund prior to a bond sale. All funds are evaluated to
determine which has the greatest need or availability of reserves before any reserve transfer
recommendation is presented to the Board.
228
Glossary
The Reserve Policy contains terminology that is unique to public finance and budgeting. The
following glossary provides assistance in understanding these terms.
ANNEXATION FEES: When water service is requested for land outside the boundaries of the
District, the land to be serviced must first be annexed. For sewer service the land must be annexed
into an improvement district within the District.
ASSETS: Resources owned or held by Otay Water District that has monetary value.
AVAILABILITY FEES: The District levies charges each year in developed areas to be used for
upgrades, betterment, or replacement and in undeveloped areas to provide a source of funding for
planning, mapping, and preliminary design of facilities to meet future development. Current
legislation provides that any availability charge in excess of $10.00 per acre shall be used only for
the purpose of the improvement district for which it was assessed.
BETTERMENT FEES: In addition to other applicable water rates and charges, water customers
pay a fee based on water service zone or Improvement District. These fees are restricted for use in
the area where they are collected and may be used for the construction and maintenance of
facilities.
BOND: A written promise to pay a sum of money on a specific date at a specified interest rate.
The interest payments and the repayment of the principal are authorized in a District bond
resolution. The most common types of bonds are General Obligation (GO) bonds and Certificates
of Participation (COPs). These are frequently used for construction of large capital projects such as
buildings, reservoirs, pipelines and pump stations.
CAPITAL EQUIPMENT: Fixed assets such as vehicles, marine equipment, computers, furniture,
technical instruments, etc. which have a life expectancy of more than two years and a value over
$10,000.
CAPITAL IMPROVEMENT PROGRAM: A long-range plan of the District for the construction,
rehabilitation and modernization of the District-owned and operated infrastructure.
CWA: The County Water Authority was organized in 1944 under the State County Water Authority
Act for the primary purpose of importing Colorado River water to augment the local water supplies
of the Authority's member agencies. The Authority purchases water from the Metropolitan Water
District of Southern California (MWD) which imports water from the Colorado River and the State
Water Project.
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Glossary
DEBT SERVICE: The District's obligation to pay the principal and interest of bonds and other debt
instruments according to a predetermined payment schedule.
EXPENDITURES/EXPENSES: These terms refer to the outflow of funds paid or to be paid for an
asset, goods, or services obtained regardless of when actually paid for. (Note: An encumbrance is
not an expenditure). An encumbrance reserves funds to be expended in a future period.
FUND: An account used to track the collection and use of monies for a specifically defined
purpose.
FUND BALANCE: The current funds on hand resulting from the historical collection and use of
monies. The difference between assets and liabilities reported in the District’s Operating Fund plus
residual equities or balances and changes therein, from the results of operations.
INTEREST INCOME: Earnings from the investment portfolio. Per District Policy Number 25,
interest income will be allocated to the various funds each month based upon each fund’s prior
month-ending balance.
LATE CHARGES/PENALTIES: Charges and penalties are imposed on customer accounts for late
payments, returned payments, and other infringements of the District’s Code of Ordinances.
1% PROPERTY TAX: In 1978, Proposition 13 limited general levy property tax rates for all taxing
authorities to a total rate of 1% of full cash value. Subsequent legislation, AB 8, established that the
receipts from the 1% levy were to be distributed to taxing agencies according to approximately the
same proportions received prior to Proposition 13. Funds received are to be used for facilities
construction or debt service on bonds sold to build facilities.
OPERATING BUDGET: The portion of the budget that pertains to daily operations that provide
basic governmental services. The operating budget contains appropriations for such expenditures
as personnel, supplies, utilities, materials, travel and fuel, and does not include purchases of major
capital plant or equipment which is budgeted for separately in the Capital Budget. The Operating
Budget also identifies planned non-operating revenues and expenses.
REVENUE: Monies that the District receives as income. It includes such items as water sales and
sewer fees. Estimated revenues are those expected to be collected during the fiscal year.
SYSTEM FEES: Each water service customer pays a monthly system charge for water system
replacement, maintenance, and operation expenses. The charge is based on the size of the meter
and class of service.
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Glossary
TAXES: California Water Code Section 72091 authorizes the District, as a municipal water district,
to levy ad valorem property taxes which are equal to the amount required to make annual
payments for principal and interest on General Obligation bonds approved by the voters prior to
July 1, 1978.
UNIT: A Unit of water is 100 cubic feet or 748 gallons of water.
WATER RATES: Rates vary among classes of service and are measured in Units. The water rates
for residential customers are based on an accelerated block structure. As more Units are
consumed, a higher Unit rate is charged. Effective in 2009, all non-residential customers are
charged for water based on a tiered rate structure in which water rates are based on meter size
and amount of Units consumed.
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Investment Policy
1.0 POLICY
It is the policy of the Otay Water District to invest public funds in a manner which will provide maximum
security with the best interest return, while meeting the daily cash flow demands of the entity and
conforming to all state statues governing the investment of public funds.
2.0 SCOPE
This investment policy applies to all financial assets of the Otay Water District. The District pools all cash for
investment purposes. These funds are accounted for in the District’s audited Comprehensive Annual
Financial Report (CAFR) and include:
2.1) General Fund
2.2) Capital Project Funds
2.2.1) Designated Expansion Fund
2.2.2) Restricted Expansion Fund
2.2.3) Designated Betterment Fund
2.2.4) Restricted Betterment Fund
2.2.5) Designated Replacement Fund
2.2.6) Restricted New Water Supply Fund
2.3) Other Post Employment Fund (OPEB)
2.4) Debt Reserve Fund
Exceptions to the pooling of funds do exist for tax-exempt debt proceeds, debt reserves and deferred
compensation funds. Funds received from the sale of general obligation bonds, certificates of participation
or other tax-exempt financing vehicles are segregated from pooled investments and the investment of such
funds are guided by the legal documents that govern the terms of such debt issuances.
3.0 PRUDENCE
Investments should be made with judgment and care, under current prevailing circumstances, which
persons of prudence, discretion and intelligence, exercise in the management of their own affairs, not for
speculation, but for investment, considering the probable safety of their capital as well as the probable
income to be derived.
The standard of prudence to be used by investment officials shall be the “Prudent Person” and/or "Prudent
Investor" standard (California Government Code 53600.3) and shall be applied in the context of managing
an overall portfolio. Investment officers acting in accordance with written procedures and the investment
policy and exercising due diligence shall be relieved of personal responsibility for an individual security's
credit risk or market price changes, provided deviations from expectations are reported in a timely fashion
and appropriate action is taken to control adverse developments.
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Investment Policy
4.0 OBJECTIVE
As specified in the California Government Code 53600.5, when investing, reinvesting, purchasing, acquiring,
exchanging, selling and managing public funds, the primary objectives, in priority order, of the investment
activities shall be:
4.1) Safety: Safety of principal is the foremost objective of the investment program. Investments
of the Otay Water District shall be undertaken in a manner that seeks to ensure the
preservation of capital in the overall portfolio. To attain this objective, the District will diversify
its investments by investing funds among a variety of securities offering independent returns
and financial institutions.
4.2) Liquidity: The Otay Water District’s investment portfolio will remain sufficiently liquid to
enable the District to meet all operating requirements which might be reasonably
anticipated.
4.3) Return on Investment: The Otay Water District’s investment portfolio shall be designed with
the objective of attaining a benchmark rate of return throughout budgetary and economic
cycles, commensurate with the District’s investment risk constraints and the cash flow
characteristics of the portfolio.
5.0 DELEGATION OF AUTHORITY
Authority to manage the Otay Water District’s investment program is derived from the California Government
Code, Sections 53600 through 53692. Management responsibility for the investment program is hereby
delegated to the Chief Financial Officer (CFO), who shall be responsible for all transactions undertaken and
shall establish a system of controls to regulate the activities of subordinate officials and their procedures in
the absence of the CFO.
The CFO shall establish written investment policy procedures for the operation of the investment program
consistent with this policy. Such procedures shall include explicit delegation of authority to persons
responsible for investment transactions. No person may engage in an investment transaction except as
provided under the terms of this policy and the procedures established by the CFO.
6.0 ETHICS AND CONFLICTS OF INTEREST
Officers and employees involved in the investment process shall refrain from personal business activity that
could conflict with the proper execution and management of the investment program, or that could impair
their ability to make impartial investment decisions. Employees and investment officials shall disclose to the
General Manager any material financial interests in financial institutions with which they conduct business.
They shall further disclose any personal financial/investment positions that could be related to the
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Investment Policy
performance of the investment portfolio. Employees and officers shall refrain from undertaking personal
investment transactions with the same individual with whom business is conducted on behalf of the District.
7.0 AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS
The Chief Financial Officer shall maintain a list of financial institutions authorized to provide investment
services. In addition, a list will also be maintained of approved security broker/dealers who are authorized
to provide investment services in the State of California. These may include “primary” dealers or regional
dealers that qualify under Securities & Exchange Commission Rule 15C3-1 (Uniform Net Capital Rule). No
public deposit shall be made except in a qualified public depository as established by state laws.
All financial institutions and broker/dealers who desire to become qualified bidders for investment
transactions must supply the District with the following, as appropriate:
Audited Financial Statements.
Proof of National Association of Security Dealers (NASD) certification.
Proof of state registration.
Completed broker/dealer questionnaire.
Certification of having read the District’s Investment Policy.
Evidence of adequate insurance coverage.
An annual review of the financial condition and registrations of qualified bidders will be conducted by the
CFO. A current audited financial statement is required to be on file for each financial institution and
broker/dealer in which the District invests.
8.0 AUTHORIZED AND SUITABLE INVESTMENTS
From the governing body perspective, special care must be taken to ensure that the list of instruments
includes only those allowed by law and those that local investment managers are trained and competent to
handle. The District is governed by the California Government Code, Sections 53600 through 53692, to invest
in the following types of securities, as further limited herein:
8.01) United States Treasury Bills, Bonds, Notes or those instruments for which the full faith and
credit of the United States are pledged for payment of principal and interest. There is no percentage
limitation of the portfolio which can be invested in this category, although a five-year maturity
limitation is applicable.
8.02) Local Agency Investment Fund (LAIF), which is a State of California managed investment
pool, may be used up to the maximum permitted by State Law (currently $50 million). The District
may also invest bond proceeds in LAIF with the same but independent maximum limitation.
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Investment Policy
8.03) Bonds, debentures, notes and other evidence of indebtedness issued by any of the following
government agency issuers:
Federal Home Loan Bank (FHLB)
Federal Home Loan Mortgage Corporation (FHLMC or "Freddie Mac")
Federal National Mortgage Association (FNMA or "Fannie Mae")
Government National Mortgage Association (GNMA or “Ginnie Mae”)
Federal Farm Credit Bank (FFCB)
Federal Agricultural Mortgage Corporation ( FAMCA or “Farmer Mac”)
There is no percentage limitation of the portfolio which can be invested in this category, although a
five-year maturity limitation is applicable. Government agencies whose implied guarantee has been
reduced or eliminated shall require an “A” rating or higher by a nationally recognized statistical rating
organization.
8.04) Interest-bearing demand deposit accounts and Certificates of Deposit (CD) will be made only
in Federal Deposit Insurance Corporation (FDIC) insured accounts. For deposits in excess of the
applicable FDIC insured maximum, approved collateral shall be required in accordance with
California Government Code, Section 53652. Investments in CD’s are limited to 15 percent of the
District’s portfolio.
8.05) Commercial paper, which is short-term, unsecured promissory notes of corporate and public
entities. Purchases of eligible commercial paper may not exceed 10 percent of the outstanding
paper of an issuing corporation, and maximum investment maturity will be restricted to 270 days.
Investment is further limited as described in California Government Code, Section 53601(h).
Purchases of commercial paper may not exceed 10 percent of the District’s portfolio and no more
than 10 percent of the outstanding commercial paper of any single issuer.
8.06) Medium-term notes defined as all corporate debt securities with a maximum remaining
maturity of five years or less, and that meet the further requirements of California Government Code,
Section 53601(k). Investments in medium-term notes are limited to 10 percent of the District’s
portfolio.
8.07) Money market mutual funds that invest only in Treasury securities and repurchase
agreements collateralized with Treasury securities, and that meet the further requirements of
California Government Code, Section 53601(l). Investments in money market mutual funds are
limited to 10 percent of the District's portfolio.
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Investment Policy
8.08) The San Diego County Treasurer’s Pooled Money Fund, which is a County managed
investment pool, may be used by the Otay Water District to invest excess funds. There is no
percentage limitation of the portfolio which can be invested in this category.
8.09) Under the provisions of California Government Code 53601.6, the Otay Water District shall not
invest any funds covered by this Investment Policy in inverse floaters, range notes, interest-only strips
derived from mortgage pools, or any investment that may result in a zero interest accrual if held to
maturity. Also, the borrowing of funds for investment purposes, known as leveraging, is prohibited.
9.0 INVESTMENT POOLS/MUTUAL FUNDS
A thorough investigation of the pool/fund is required prior to investing, and on a continual basis. There shall
be a questionnaire developed which will answer the following general questions:
A description of eligible investment securities, and a written statement of investment policy
and objectives.
A description of interest calculations and how it is distributed, and how gains and losses are
treated.
A description of how the securities are safeguarded (including the settlement processes),
and how often the securities are priced and the program audited.
A description of who may invest in the program, how often, and what size deposits and
withdrawals are allowed.
A schedule for receiving statements and portfolio listings.
Are reserves, retained earnings, etc., utilized by the pool/fund?
A fee schedule, and when and how is it assessed.
Is the pool/fund eligible for bond proceeds and/or will it accept such proceeds?
10.0 COLLATERALIZATION
Collateralization will be required on certificates of deposit exceeding the applicable FDIC insured maximum.
In order to anticipate market changes and provide a level of security for all funds, the collateralization level
will be 102% of market value of principal and accrued interest. Collateral will always be held by an
independent third party with whom the entity has a current custodial agreement. A clearly marked evidence
of ownership (safekeeping receipt) must be supplied to the entity and retained. The right of collateral
substitution is granted.
11.0 SAFEKEEPING AND CUSTODY
All security transactions entered into by the Otay Water District shall be conducted on a delivery-versus-
payment (DVP) basis. Securities will be held by a third party custodian designated by the District and
evidenced by safekeeping receipts.
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Investment Policy
12.0 DIVERSIFICATION
The Otay Water District will diversify its investments by security type and institution, with limitations on the
total amounts invested in each security type as detailed in Paragraph 8.0, above, so as to reduce overall
portfolio risks while attaining benchmark average rate of return. With the exception of U.S. Treasury
securities, government agencies, and authorized pools, no more than 50% of the District’s total investment
portfolio will be invested with a single financial institution.
13.0 MAXIMUM MATURITIES
To the extent possible, the Otay Water District will attempt to match its investments with anticipated cash
flow requirements. Unless matched to a specific cash flow, the District will not directly invest in securities
maturing more than five years from the date of purchase. However, for time deposits with banks or savings
and loan associations, investment maturities will not exceed two years. Investments in commercial paper
will be restricted to 270 days.
14.0 INTERNAL CONTROL
The Chief Financial Officer shall establish an annual process of independent review by an external auditor.
This review will provide internal control by assuring compliance with policies and procedures.
15.0 PERFORMANCE STANDARDS
The investment portfolio shall be designed with the objective of obtaining a rate of return throughout
budgetary and economic cycles, commensurate with the investment risk constraints and the cash flow
needs.
The Otay Water District’s investment strategy is passive. Given this strategy, the basis used by the CFO to
determine whether market yields are being achieved shall be the State of California Local Agency
Investment Fund (LAIF) as a comparable benchmark.
16.0 REPORTING
The Chief Financial Officer shall provide the Board of Directors monthly investment reports which provide a
clear picture of the status of the current investment portfolio. The management report should include
comments on the fixed income markets and economic conditions, discussions regarding restrictions on
percentage of investment by categories, possible changes in the portfolio structure going forward and
thoughts on investment strategies. Schedules in the quarterly report should include the following:
A listing of individual securities held at the end of the reporting period by authorized
investment category.
Average life and final maturity of all investments listed.
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Investment Policy
Coupon, discount or earnings rate.
Par value, amortized book value, and market value.
Percentage of the portfolio represented by each investment category.
17.0 INVESTMENT POLICY ADOPTION
The Otay Water District’s investment policy shall be adopted by resolution of the District’s Board of Directors.
The policy shall be reviewed annually by the Board and any modifications made thereto must be approved
by the Board.
18.0 GLOSSARY
See Appendix A.
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APPENDIX A: GLOSSARY
ACTIVE INVESTING: Active investors will purchase investments and continuously monitor their activity, often
looking at the price movements of their stocks many times a day, in order to exploit profitable conditions.
Typically, active investors are seeking short term profits.
AGENCIES: Federal agency securities and/or Government-sponsored enterprises.
BANKERS’ ACCEPTANCE (BA): A draft or bill or exchange accepted by a bank or trust company. The
accepting institution guarantees payment of the bill, as well as the issuer.
BENCHMARK: A comparative base for measuring the performance or risk tolerance of the investment
portfolio. A benchmark should represent a close correlation to the level of risk and the average duration of
the portfolio’s investments.
BROKER/DEALER: Any individual or firm in the business of buying and selling securities for itself and others.
Broker/dealers must register with the SEC. When acting as a broker, a broker/dealer executes orders on
behalf of his/her client. When acting as a dealer, a broker/dealer executes trades for his/her firm's own
account. Securities bought for the firm's own account may be sold to clients or other firms, or become a
part of the firm's holdings.
CERTIFICATE OF DEPOSIT (CD): A short or medium term, interest bearing, FDIC insured debt instrument
offered by banks and savings and loans. Money removed before maturity is subject to a penalty. CDs are a
low risk, low return investment, and are also known as “time deposits”, because the account holder has
agreed to keep the money in the account for a specified amount of time, anywhere from a few months to
several years.
COLLATERAL: Securities, evidence of deposit or other property, which a borrower pledges to secure
repayment of a loan. Also refers to securities pledged by a bank to secure deposits of public monies.
COMMERCIAL PAPER: An unsecured short-term promissory note, issued by corporations, with maturities
ranging from 2 to 270 days.
COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR): The official annual report for the Otay Water
District. It includes detailed financial information prepared in conformity with generally accepted accounting
principles (GAAP). It also includes supporting schedules necessary to demonstrate compliance with
finance-related legal and contractual provisions, extensive introductory material, and a detailed statistical
section.
COUPON: (a) The annual rate of interest that a bond’s issuer promises to pay the bondholder on the bond’s
face value. (b) A certificate attached to a bond evidencing interest due on a set date.
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DEALER: A dealer, as opposed to a broker, acts as a principal in all transactions, buying and selling for his
own account.
DEBENTURE: A bond secured only by the general credit of the issuer.
DELIVERY VERSUS PAYMENT: There are two methods of delivery of securities: delivery versus payment and
delivery versus receipt. Delivery versus payment is delivery of securities with an exchange of money for the
securities. Delivery versus receipt is delivery of securities with an exchange of a signed receipt for the
securities.
DERIVATIVES: (1) Financial instruments whose return profile is linked to, or derived from, the movement of
one or more underlying index or security, and may include a leveraging factor, or (2) financial contracts
based upon notional amounts whose value is derived from an underlying index or security (interest rates,
foreign exchange rates, equities or commodities).
DISCOUNT: The difference between the cost price of a security and its maturity when quoted at lower than
face value. A security selling below original offering price shortly after sale also is considered to be at a
discount.
DISCOUNT SECURITIES: Non-interest bearing money market instruments that are issued at a discount and
redeemed at maturity for full face value, e.g., U.S. Treasury Bills.
DIVERSIFICATION: Dividing investment funds among a variety of securities offering independent returns.
FEDERAL CREDIT AGENCIES: Agencies of the Federal government set up to supply credit to various
classes of institutions and individuals, e.g., S&L’s, small business firms, students, farmers, farm cooperatives,
and exporters.
FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC): A federal agency that insures deposits in member
banks and thrifts, currently up to $100,000 per deposit.
FEDERAL FARM CREDIT BANK (FFCB): The Federal Farm Credit Bank system supports agricultural loans
and issues securities and bonds in financial markets backed by these loans. It has consolidated the
financing programs of several related farm credit agencies and corporations.
FEDERAL FUNDS RATE: The rate of interest at which Fed funds are traded. This rate is currently pegged by
the Federal Reserve through open-market operations.
FEDERAL AGRICULTURAL MORTAGE CORPORATION (FAMC or Farmer Mac): A stockholder owned,
publicly-traded corporation that was established under the Agricultural Credit Act of 1987, which added a
new Title VIII to the Farm Credit Act of 1971. Farmer Mac is a government sponsored enterprise, whose
mission is to provide a secondary market for agricultural real estate mortgage loans, rural housing mortgage
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loans, and rural utility cooperative loans. The corporation is authorized to purchase and guarantee
securities. Farmer Mac guarantees that all security holders will receive timely payments of principal and
interest.
FEDERAL HOME LOAN BANK (FHLB): Government sponsored wholesale banks (currently 12 regional
banks), which lend funds and provide correspondent banking services to member commercial banks, thrift
institutions, credit unions and insurance companies.
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC or Freddie Mac): A stockholder owned,
publicly traded company chartered by the United States federal government in 1970 to purchase mortgages
and related securities, and then issue securities and bonds in financial markets backed by those mortgages
in secondary markets. Freddie Mac, like its competitor Fannie Mae, is regulated by the United States
Department of Housing and Urban Development (HUD).
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA or Fannie Mae): FNMA, like GNMA was chartered
under the Federal National Mortgage Association Act in 1938. FNMA is a federal corporation working under
the auspices of the Department of Housing and Urban Development (HUD). It is the largest single provider
of residential mortgage funds in the United States. Fannie Mae is a private stockholder-owned corporation.
The corporation’s purchases include a variety of adjustable mortgages and second loans, in addition to
fixed-rate mortgages. FNMA’s securities are also highly liquid and are widely accepted. FNMA assumes
and guarantees that all security holders will receive timely payment of principal and interest.
FEDERAL RESERVE SYSTEM: The central bank of the United States created by Congress and consisting of
a seven member Board of Governors in Washington, D.C., 12 regional banks and about 5,700 commercial
banks that are members of the system.
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA or Ginnie Mae): A government owned
agency which buys mortgages from lending institutions, securitizes them, and then sells them to investors.
Because the payments to investors are guaranteed by the full faith and credit of the U.S. Government, they
return slightly less interest than other mortgage-backed securities.
INTEREST-ONLY STRIPS: A mortgage backed instrument where the investor receives only the interest, no
principal, from a pool of mortgages. Issues are highly interest rate sensitive, and cash flows vary between
interest periods. Also, the maturity date may occur earlier than that stated if all loans within the pool are pre-
paid. High prepayments on underlying mortgages can return less to the holder than the dollar amount
invested.
INVERSE FLOATER: A bond or note that does not earn a fixed rate of interest. Rather, the interest rate is tied
to a specific interest rate index identified in the bond/note structure. The interest rate earned by the
bond/note will move in the opposite direction of the index. An inverse floater increases the market rate risk
and modified duration of the investment.
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LEVERAGE: Investing with borrowed money with the expectation that the interest earned on the investment
will exceed the interest paid on the borrowed money.
LIQUIDITY: A liquid asset is one that can be converted easily and rapidly into cash without a substantial loss
of value. In the money market, a security is said to be liquid if the spread between bid and asked prices is
narrow and reasonable size can be done at those quotes.
LOCAL AGENCY INVESTMENT FUND (LAIF): The aggregate of all funds from political subdivisions that are
placed in the custody of the State Treasurer for investment and reinvestment.
MARKET VALUE: The price at which a security is trading and could presumably be purchased or sold.
MASTER REPURCHASE AGREEMENT: A written contract covering all future transactions between the
parties to repurchase/reverse repurchase agreements that establish each party’s rights in the transactions.
A master agreement will often specify, among other things, the right of the buyer-lender to liquidate the
underlying securities in the event of default by the seller borrower.
MATURITY: The date upon which the principal or stated value of an investment becomes due and payable.
MONEY MARKET: The market in which short-term debt instruments (bills, commercial paper, bankers’
acceptances, etc.) are issued and traded.
MUTUAL FUNDS: An open-ended fund operated by an investment company which raises money from
shareholders and invests in a group of assets, in accordance with a stated set of objectives. Mutual funds
raise money by selling shares of the fund to the public. Mutual funds then take the money they receive from
the sale of their shares (along with any money made from previous investments) and use it to purchase
various investment vehicles, such as stocks, bonds, and money market instruments.
MONEY MARKET MUTUAL FUNDS: An open-end mutual fund which invests only in money markets. These
funds invest in short term (one day to one year) debt obligations such as Treasury bills, certificates of
deposit, and commercial paper.
NATIONAL ASSOCIATION OF SECURITIES DEALERS (NASD): A self-regulatory organization of the
securities industry responsible for the operation and regulation of the NASDAQ stock market and over-the-
counter markets. Its regulatory mandate includes authority over firms that distribute mutual fund shares as
well as other securities.
PASSIVE INVESTING: An investment strategy involving limited ongoing buying and selling actions. Passive
investors will purchase investments with the intention of long term appreciation and limited maintenance,
and typically don’t actively attempt to profit from short term price fluctuations. Also known as a buy-and-
hold strategy.
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PRIMARY DEALER: A designation given by the Federal Reserve System to commercial banks or
broker/dealers who meet specific criteria, including capital requirements and participation in Treasury
auctions. These dealers submit daily reports of market activity and positions and monthly financial
statements to the Federal Reserve Bank of New York and are subject to its informal oversight. Primary
dealers include Securities and Exchange Commission registered securities broker/dealers, banks, and a few
unregulated firms.
PRUDENT PERSON RULE: An investment standard. In some states the law requires that a fiduciary, such as
a trustee, may invest money only in a list of securities selected by the custody state—the so-called legal list.
In other states the trustee may invest in a security if it is one which would be bought by a prudent person of
discretion and intelligence who is seeking a reasonable income and preservation of capital.
PUBLIC SECURITIES ASSOCIATION (PSA): A trade organization of dealers, brokers, and bankers who
underwrite and trade securities offerings.
QUALIFIED PUBLIC DEPOSITORIES: A financial institution which does not claim exemption from the
payment of any sales or compensating use or ad valorem taxes under the laws of this state, which has
segregated for the benefit of the commission eligible collateral having a value of not less than its maximum
liability and which has been approved by the Public Deposit Protection Commission to hold public deposits.
RANGE NOTE: An investment whose coupon payment varies and is dependent on whether the current
benchmark falls within a pre-determined range.
RATE OF RETURN: The yield obtainable on a security based on its purchase price or its current market
price. This may be the amortized yield to maturity on a bond the current income return.
REGIONAL DEALER: A securities broker/dealer, registered with the Securities & Exchange Commission
(SEC), who meets all of the licensing requirements for buying and selling securities.
REPURCHASE AGREEMENT (RP OR REPO): A holder of securities sells these securities to an investor with
an agreement to repurchase them at a fixed price on a fixed date. The security “buyer” in effect lends the
“seller” money for the period of the agreement, and the terms of the agreement are structured to
compensate him for this. Dealers use RP extensively to finance their positions. Exception: When the Fed is
said to be doing RP, it is lending money that is increasing bank reserves.
SAFEKEEPING: A service to customers rendered by banks for a fee whereby securities and valuables of all
types and descriptions are held in the bank’s vaults for protection.
SECONDARY MARKET: A market made for the purchase and sale of outstanding securities issues following
their initial distribution.
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SECURITIES & EXCHANGE COMMISSION: Agency created by Congress to protect investors in securities
transactions by administering securities legislation.
SEC RULE 15C3-1: See Uniform Net Capital Rule.
STRUCTURED NOTES: Notes issued by Government Sponsored Enterprises (FHLB, FNMA, FAMCA, etc.),
and Corporations, which have imbedded options (e.g., call features, step-up coupons, floating rate coupons,
derivative-based returns) into their debt structure. Their market performance is impacted by the fluctuation
of interest rates, the volatility of the imbedded options and shifts in the shape of the yield curve.
TREASURY BILLS: A non-interest bearing discount security issued by the U.S. Treasury to finance the
national debt. Most bills are issued to mature in three months, six months, or one year.
TREASURY BONDS: Long-term coupon-bearing U.S. Treasury securities issued as direct obligations of the
U.S. Government and having initial maturities of more than 10 years.
TREASURY NOTES: Medium-term coupon-bearing U.S. Treasury securities issued as direct obligations of
the U.S. Government and having initial maturities from two to 10 years.
UNIFORM NET CAPITAL RULE: Securities and Exchange Commission requirement that member firms as
well as nonmember broker-dealers in securities maintain a maximum ratio of indebtedness to liquid capital
of 15 to 1; also called net capital rule and net capital ratio. Indebtedness covers all money owed to a firm,
including margin loans and commitments to purchase securities, one reason new public issues are spread
among members of underwriting syndicates. Liquid capital includes cash and assets easily converted into
cash.
YIELD: The rate of annual income return on an investment, expressed as a percentage. (a) INCOME YIELD is
obtained by dividing the current dollar income by the current market price for the security. (b) NET YIELD or
YIELD TO MATURITY is the current income yield minus any premium above par or plus any discount from
par in purchase price, with the adjustment spread over the period from the date of purchase to the date of
maturity of the bond.
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1.0 Policy
It is the policy of the Otay Water District to finance the acquisition of high value assets that have an
extended useful life through a combination of current revenues and debt financing. Regularly
updated debt policies and procedures are an important tool to insure the use of the District’s
resources to meet its commitments, to provide the highest quality of service to the District’s
customers, and to maintain sound financial management practices. These guidelines are for general
use and allow for exceptions as circumstances dictate.
2.0 Scope
This policy is enacted in an effort to standardize the issuance and management of debt by the Otay
Water District. The primary objective is to establish conditions for the use of debt, to minimize the
District’s debt service requirements and cost of issuance, to retain the highest practical credit rating,
maintain full and complete financial disclosure and reporting, and to maintain financial flexibility for
the District. This policy applies to all debt issued by the District including general obligation bonds,
revenue bonds, capital leases and special assessment debt.
3.0 Legal and Regulatory Requirements
The Chief Financial Officer (CFO) and the District’s Legal Counsel will coordinate their activities to
ensure that all securities are issued in full compliance with Federal and State law.
4.0 Capital Facilities Funding
Financial Planning
The District maintains a six-year financial projection that identifies operating requirements and public
facility and equipment requirements, and has developed a Rate Model for funding the District’s Six-
Year Capital Improvement Program (CIP). The District’s CIP Budget places the capital requirements
in order of priority and schedules them for funding and implementation. It identifies a full range of
capital needs, provides for the ranking of the importance of such needs, and identifies all the funding
sources that are available to cover the costs of the projects. In cases where the program identifies
project funding through the use of debt financing, the budget should provide information needed to
determine debt capacity. The Rate Model and the CIP Budget give the Board part of the data needed
to make informed judgments concerning the possibility of issuing debt.
Funding Criteria
The Chief Financial Officer (CFO) will evaluate all capital project requests and develop a proposed
funding plan. Priority may be given to those projects that can be funded with current resources
(annual cash flow, fund balances or reserves). Those projects that cannot be funded with current
resources may be deferred or the CFO may recommend that they be funded with debt financing.
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However, debt financing will not be considered appropriate for any recurring purpose such as
current operating and maintenance expenditures. The issuance of short-term cash-flow instruments
is excluded from this limitation.
The General Manager will recommend the funding plan to the Board. The General Manager may
deem it necessary or desirable in certain circumstances to convene a Finance Committee meeting
to evaluate funding options presented by the Chief Financial Officer.
Funding Sources
The District’s capital improvements can be classified in three categories: those related to an
expansion of the system (“expansion”), those related to upgrading the existing system (“betterment”)
and those related to repairing or replacing existing infrastructure (“replacement”). In general, capital
improvements for betterment or replacement are financed primarily through user charges,
availability charges, and betterment charges. Capital improvements for expansion are financed
through capacity fees. Accordingly, these fees are reviewed at least annually or more frequently as
required and set at levels sufficient to ensure that new development pays its fair share of the costs
of constructing necessary infrastructure. Additionally, the District will seek State and Federal grants
and other forms of intergovernmental aid wherever possible.
Pay-As-You-Go Projects
The District’s capacity fees are the major funding source in financing additions to the water system
and the recycled water system. Over time, the fees collected and the cost to construct the capital
projects should balance. However, collection of these fees is subject to significant fluctuation based
on the rate of new development. Accordingly, the Chief Financial Officer, in developing the funding
plan for the CIP, will determine that current revenues and adequate fund balances are available so
project phasing can be accomplished. If this is not the case, the Chief Financial Officer may
recommend that:
1. The project be deferred until funds are available, or
2. Based on the priority of the project, long-term debt is issued to finance the project.
Debt Financed Projects
If a project or projects are to be financed with long-term debt, the District should use the following
criteria to evaluate the suitability of the financing for the particular project or projects:
1. The life of the project or asset to be financed is 10 years or longer and its useful life is expected
to exceed the term of the financing.
2. Revenues available for debt service are deemed to be sufficient and reliable so that long-
term financing can be marketed without jeopardizing the credit rating of the District.
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3. Market conditions present favorable interest rates and demand for District financing.
4. The project is mandated by State and/or Federal requirements and current resources are
insufficient or unavailable.
5. The project is immediately required to meet or relieve capacity needs and current resources
are insufficient or unavailable.
5.0 Debt Structure
General
The District will normally issue debt with a maturity of not more than 30 years. The structure should
approximate level debt service for the term where it is practical or desirable. There will be no debt
structures that include increasing debt service levels in subsequent years, with the first and second
year of a debt payoff schedule the exception and related to projected additional income to be
generated by the project to be funded. There will be no "balloon" debt repayment schedules that
consist of low annual payments and one large payment of the balance due at the end of the term.
There will always be at least interest paid in the first fiscal year after debt issuance and principal
starting no later than the first fiscal year after the date the facility or equipment is expected to be
placed in service. Capitalized interest will not be for a period of more than necessary to provide
adequate security for the financing.
Limitations on the Issuance of Variable Rate Debt
The District will normally issue debt with a fixed rate of interest. The District may issue variable rate
for the purpose of managing its interest costs. At the same time, the District should protect itself from
too much exposure to interest rate fluctuations. In determining that it is in the District’s best interest
to issue certain debt at variable rates instead of fixed rates, at the time of issuing any variable rate
debt, there should be at least a 10% estimated reduction in annual debt costs by issuing variable
rate debt when compared to a similar issuance of fixed rate debt. If the estimated overall cost
savings from issuing variable rate debt is not at least 10% at the time of issuance, relatively small
fluctuations in rates could actually increase the District’s financing costs over the life of the bonds
compared to a similar fixed rate financing. By using this 10% factor at the time of issuance, the
District can be relatively assured that its variable rate financing will be cost-effective over the term of
the bonds.
The comparison will be based on the following criteria:
1. The interest rate used to estimate interest costs will be the 10 year average for weekly variable
rates.
2. The variable rate debt costs will include an estimate for annual costs such as letter of credit
fees, liquidity fees, remarketing fees, monthly draw fees and annual rating fees applicable to
the letter of credit.
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3. Any potential reserve fund earnings will reduce the fixed rate debt service or variable rate
debt service, as applicable.
Periodically, using the criteria described above, the Chief Financial Officer will compare the
estimated annual debt service costs to maturity of any variable rate debt with estimated debt service
if the debt was converted to fixed rates. If this analysis produces a break even in total payments over
the life of the issue, the Chief Financial Officer will recommend converting such variable rate debt to
fixed rate.
Variable rate debt should not represent more than 25% of the District’s total debt portfolio. This level
of exposure to interest rate fluctuations is considered to be manageable in an environment of
increasing interest rates. At a higher ratio than this, the District might be faced with an unplanned
water rate increase to meet its Rate Covenants. Rating agencies use this ratio in their analysis of the
District’s overall credit rating.
Further, Rate Covenants applicable to variable rate debt shall not compromise the issuance of
additional debt planned by the District and variable rate debt should always contain a provision to
allow conversion to a fixed rate at the District’s option.
6.0 Credit Objectives
The Otay Water District seeks to maintain the highest possible credit ratings for all categories of long-
term debt that can be achieved without compromising delivery of basic services and achievement
of District policy objectives.
Factors taken into account in determining the credit rating for a financing include:
1. Diversity of the District’s customer base.
2. Proven track record of completing capital projects on time and within budget.
3. Strong, professional management.
4. Adequate levels of staffing for services provided.
5. Reserves.
6. Ability to consistently meet or exceed Rate Covenants.
The District recognizes that external economic, natural, or other events may from time to time affect
the creditworthiness of its debt. Nevertheless, the District is committed to ensuring that actions
within its control are prudent and well planned.
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7.0 Competitive and Negotiated Sale Criteria
Competitive Sale
The District will use a competitive bidding process in the sale of debt unless the nature of the issue
or specific circumstances warrants a negotiated sale. The CFO will determine the best bid in a
competitive sale by calculating the true interest cost (TIC) of each bid.
Negotiated Sale
Types of debt that would typically lend themselves to the negotiated sale format are variable rate
debt and unrated debt. Circumstances that might warrant a negotiated sale may occur when the
issue is of a limited size that would not attract wide-spread investor interest, during periods of high
levels of issuance by other entities in the State, or during periods of market volatility or with relatively
new financing techniques. In the event the District decides to use a negotiated sale, it will pay
management fees only to those firms that place orders for bonds.
If the size of the District’s proposed issue is not cost effective, the District may also consider issuing
its debt by private placement or through any qualified Joint Power Authority (JPA) in the State of
California whose principal business is issuing bonds.
8.0 Refunding Debt
Purpose
Periodic reviews of all outstanding debt will be undertaken by the Chief Financial Officer to determine
refunding (refinancing) opportunities. The purpose of the refinancing may be to:
1. Lower annual debt service by taking advantage of lower current interest rates.
2. Update or revise covenants on outstanding debt issue if a Rate Covenant appears to be too
high, has precluded the District from implementing its financing plan, or has caused the
District to increase rates to customers.
3. Restructure debt service associated with an issue to facilitate the issuance of additional debt,
usually in order to smooth out peaks in total debt service which can occur frequently as one
debt issue is layered on top of existing debt issues.
4. Alter bond characteristics such as call provisions or payment dates.
5. Pay for conversion costs such as funding a reserve fund or paying for credit enhancement
when converting variable rate debt to fixed rate debt.
Restrictions on Refunding
Tax-exempt bonds typically have provisions that preclude early redemption of the bonds for a period
of years after issuance. The number of times a tax-exempt bond can be refinanced prior to its
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Optional Redemption date (known as Advance Refunding) is limited by the IRS. For debt issued after
1986, issuers may only provide for Advance Refunding of obligations in advance of the Optional
Redemption date one time. There is no limit by the IRS on the ability of issuers to redeem bonds
early once the Optional Redemption date has been reached.
Savings Criteria
In cases where an Advance Refunding is intended to provide debt service savings, the District may
commence the refinancing process if a minimum five percent (5%) present value savings net of
issuance costs and any cash contributions can be demonstrated. Since interest rates may fluctuate
between the time when a refinancing is authorized and when the debt is issued, beginning the
process with at least a 5% savings should provide the District with some level of protection that it
can achieve a minimum of three percent (3%) net present value savings of the refunding bonds
when and if the debt is issued. These minimum standards are intended to protect the District staff
from spending time on refinancings that become marginally cost-effective after the entire issuance
process is complete.
The savings target may be waived, however, if sufficient justification for lowering the savings target
can be provided by meeting one or more of the other refunding objectives described above.
9.0 Subordinate Lien Debt
The District will issue subordinate lien debt only if it is financially beneficial to the District or consistent
with creditworthiness objectives. Subordinate lien debt is structured to be payable second in priority
to the District’s other outstanding debt. Typically, subordinate lien debt might be issued if the District
desired a more flexible Rate Covenant with respect to its new obligations and did not want to
refinance all of its existing debt to obtain that less restrictive Rate Covenant.
10.0 Derivatives
The District may consider the use of derivative products on a case-by-case basis, consistent with
State statute and financial prudence. The most common derivatives include transactions known as
“swaps,” in which the District, by contract with an investment bank (known as a “provider”), swaps its
fixed rate debt payments for variable rate debt payments or vice versa, and “forwards,” in which the
District enters into a purchase contract with an underwriter to purchase refunding bonds at a future
date at interest rates locked in today (not at today’s rates, but at rates locked in today). Derivative
products introduce an additional risk factor into a financing, called “third-party risk.” Once a derivative
product is entered into, the District must rely upon the financial stability of the provider to perform
under the contract. Because the nature of derivatives is speculative, that is, the District is assuming
that rates will either go up or down over the period of the contract and therefore expects to lock in a
financial benefit today based on that assumption, the financial benefits actually obtained from any
derivative contract need to be monitored periodically to determine if it is in the District’s interest to
terminate the contract and what the penalty might be for early termination. This requires a certain
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level of vigilance, and impartial advice in this area is actually difficult to obtain since the derivative
market is not particularly liquid or price-transparent and is currently made up of a small handful of
reputable providers.
There must be an overwhelming demonstrable financial benefit to the District based on reasonable
assumptions concerning future interest rates in order for the District to use derivative products.
11.0 Financing Participants
The District’s purchasing guidelines provide the process for securing professional services related to
individual debt issues. The solicitation and selection process include encouraging participation from
qualified service providers, both local and national, and securing services at competitive prices.
Financial Advisor: The use of a Financial Advisor is necessary for the sale of debt by a competitive
bid process and is desirable when issuing debt through a negotiated sale. The Financial Advisor has
a fiduciary duty to the District and will seek to structure the District’s debt in the manner that is
saleable, yet meets the District’s objectives for the financing. The Financial Advisor will advise the
District on alternative structures for its debt, the cost of different debt structures and potential pricing
mechanisms that can be expected from underwriters (such as call features, term bonds and
premium and discount bond pricing) and, at the District’s direction, will write the offering document
(preliminary official statement). With respect to competitive sales, the Financial Advisor will arrange
for distributing the preliminary official statement, accepting bids via the internet, verifying the lowest
bid and provide detailed instructions for the flow of funds at closing to the winning Underwriter, the
Trustee and the District. In a negotiated sale, the Financial Advisor will provide independent
confirmation on the Underwriter’s proposed pricing to ensure that interest rates and Underwriter’s
compensation are appropriate for the credit quality of the issue and competitive in the overall public
finance market in California.
Underwriter: The Underwriter markets the bonds for sale to investors. While the District’s preference
is to select the Underwriter for the debt via sale of the debt at competitive bid, there are
circumstances when a negotiated issue is in the best interests of the District. Negotiated sales are
preferable if the security features are particularly complex or market conditions are volatile. The Chief
Financial Officer will recommend whether the method of sale is competitive or negotiated based on
the type of issue and other market conditions. In the case of negotiated sales, the Underwriter will
be required to demonstrate sufficient capitalization and sufficient experience related to the specific
type of debt issuance.
The Underwriter will work in connection with the District’s Financial Advisor on structuring the issue
and offering different pricing ideas.
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Bond Counsel: The District’s Bond Counsel provides the primary legal documents that detail the
security for the bonds and the authority under which bonds are issued. The Bond Counsel also
provides an opinion to bond holders that the bonds are tax-exempt under both State and Federal
law. All closing documents in connection with an issue are also prepared by Bond Counsel.
Disclosure Counsel: The District’s Disclosure Counsel provides legal advice to the District regarding
the adequacy of the District’s disclosure of financial information or risks of investing in the District’s
debt issue to the investing public. The Disclosure Counsel can prepare the official statement or
review the official statement and gives the District an opinion that there is no information missing
from the official statement of a material nature that would be necessary for an investor to make an
informed decision about investing in the District’s bonds.
Trustee: The Trustee is a financial institution selected by the District to administer the collection of
revenues pledged to repay the bonds and to distribute those funds to bondholders.
Letter of Credit Bank: The Letter of Credit Bank is a U.S. or foreign bank that has issued a letter of
credit providing both credit enhancement (the Letter of Credit Bank will pay the debt in the event that
the District defaults on the payment) and liquidity for a variable rate bond issue. These banks have
their own short-term credit rating, which is generally higher than the District’s short-term credit rating.
Liquidity is needed because variable rate bondholders are allowed to “put” their bonds back to the
District if they do not like the interest rate currently being offered. The District’s Remarketing Agent
then finds a new buyer for those bonds, but in the event that no buyer is found, a draw is made under
the letter of credit to purchase the bonds that have been “put.” As soon as the bonds are remarketed
to another buyer, the letter of credit is repaid. The letter of credit fees are paid annually. Letter of
credits are typically issued for 5-7 years and must be renewed during the life of the bonds. Credit
enhancement is discussed further under the heading “CREDIT ENHANCEMENT.”
Municipal Bond Insurer: The Municipal Bond Insurer can be one of several insurance companies
that provide municipal bond insurance policies securing payment of the District’s debt. These
policies provide that the Municipal Bond Insurer will pay the District’s debt in the event that the District
defaults on its payments. Debt which is insured carries the Municipal Bond Insurer’s credit rating, in
most cases, AAA. The insurance premium for the bond insurance policy is paid one time at the
issuance of the debt and is non-cancelable for the term of the debt. Unlike a letter of credit, bond
insurance policies do not provide liquidity and are most typically purchased for fixed rate debt.
Remarketing Agent: The Remarketing Agent is an investment bank that, each week, determines the
interest rate for the District’s variable rate obligations. The rate is set at the rate at which the
obligations could be sold on the open market at 100% of their face value. The Remarketing Agent
also finds new buyers for any of the obligations that are “put” back to the District.
Rating Agencies: Currently, there are three rating agencies that rate municipal debt in the United
States: Standard & Poor’s, Moody’s Investors Service, and Fitch Investors Service. Rating agencies
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establish objective criteria under which each type of financing undertaken by the District is to be
analyzed. Upon request, a rating agency will rate the underlying strength of the District’s financings,
without regard to the purchase of any credit enhancement. The rating is released to the general
public and thereafter, the rating agency will periodically update its analysis of a particular issue, and
may raise or lower the rating if circumstances warrant. Investment-grade ratings range from “AAA”
to “BBB.” A rating below “BBB” is not investment grade. Many mutual funds cannot buy bonds that
do not carry an investment grade.
Verification Agent: In a refunding, the District will deposit funds with an escrow agent (usually the
trustee) in an amount sufficient, together with earnings thereon, to pay the debt service and
redemption price of the debt being refunded through and including the call date. The Verification
Agent verifies the mathematical accuracy of calculation of the amount to be deposited in escrow
and the bond counsel relies on this verification in giving their opinion that the debt is defeased within
the meaning of the indenture and that the lien of the debt on the revenues pledged to the debt being
refunded is released.
12.0 Conflict of Interest and Standards of Conduct
Members of the District, the Board of Directors and its consultants, service providers and
underwriters shall adhere to standards of conduct and conflict of interest rules as stipulated by the
California Political Reform Act or the Municipal Securities Rulemaking Board (MSRB), as applicable.
All debt financing participants shall maintain the highest standards of professional conduct at all
times, in accordance with MSRB Rules, including Rule G-37. There shall be no conflict of interest
with the District with any debt financing participant.
13.0 Continuing Disclosure
The District acknowledges the responsibilities of the underwriting community and pledges to make
all reasonable efforts to assist underwriters in their efforts to comply with SEC Rule 15c2-12 and
MSRB Rule G-36. The District will file its official statements with the MSRB and the nationally
recognized municipal securities information repositories. The District will also post copies of its
comprehensive financial reports on the Internet and provide hard copies of these documents to
interested parties upon request, and will disseminate other information that it deems pertinent to the
market in a timely manner. While initial bond disclosure requirements pertain to underwriters, the
District will provide financial information and notices of material events on an ongoing basis
throughout the life of the issue. Material events are defined as those events which are considered
to likely reflect on the credit supporting the securities. The events considered material according to
the SEC are:
1. Rating changes.
2. Non-payment related defaults.
3. Adverse tax opinions or events affecting the tax exempt status.
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4. Unscheduled draws on debt service reserves or credit enhancements reflecting financial
difficulties.
5. Modifications to the rights of securities holders.
6. Defeasance.
7. Bond calls.
8. Release, substitution, or sale of property securing repayment of the securities.
9. Substitution of credit or liquidity providers, or their failure to perform.
10. Principal and interest payment delinquencies.
14.0 Investment and Arbitrage Compliance
Tax-exempt bonds are required to meet certain provisions of the federal tax code in order to maintain
their tax-exempt status. In order to prevent municipal issuers from borrowing money at tax-exempt
rates solely for the purpose of investing the proceeds in higher yielding investments and making a
profit (“arbitrage”), the federal tax code contains a provision that requires issuers to compare the
interest earned on any bond funds held (such as a reserve fund) with interest that would theoretically
be earned if the funds were invested at the yield of the bonds, and to “rebate” to the federal
government any interest earned in excess of the theoretical earnings limit.
The Chief Financial Officer shall invest the bond proceeds subject to the District’s Investment Policy
in a timely manner, to ensure the availability of funds to meet operational requirements. In doing so,
the CFO will maintain a system of record keeping and reporting to meet the arbitrage rebate
compliance requirements of the federal tax code.
15.0 Types of Debt Financing
General Obligation Bonds
General obligation bonds are secured by a pledge of the ad-valorem taxing power of the issuer and
are also known as a full faith and credit obligations. Bonds of this nature must serve a public purpose
to be considered lawful taxation of the property owners within the District and require a two third’s
majority vote in a general election. The benefit of the improvements or assets constructed and
acquired as a result of this type of bond must be generally available to all property owners.
The District can issue general obligation bonds up to but not in excess of 15% of the assessed
valuation under Article XVI, Section 18 of the State constitution. An annual amount of the levy
necessary to meet debt service requirements is calculated and placed on the tax roll through the
County of San Diego. The District also has a policy that the ad-valorem tax to be used to pay debt
service on general obligation bonds will not exceed $.10 per $100 of assessed value.
Voters within Improvement District No. 27 of the District authorized $100 million general obligation
bonds in 1989. The District issued $11,500,000 general obligation bonds in 1992 and refinanced the
bonds in 1998. The District also has approximately $29 million in general obligation bonds authorized
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between 1960 and 1978 for various Improvement Districts throughout the District, but unissued.
General obligation bonds can only be issued under these existing authorizations to the extent
necessary to fund the improvements specified by each ballot measure.
General obligation bonds generally are regarded as the broadest and soundest security among tax-
secured debt instruments. An unlimited-tax pledge would enable a trustee to invoke mandamus to
force the District to raise the tax rate as much as necessary to pay off the bonds. General obligation
bonds have other credit strengths as well: the property tax tends to be a steady and predictable
revenue source, and when a vote is required to issue them, bondholders have some indication of
taxpayers’ willingness to pay. General obligation bonds carry the highest credit rating that a public
agency can achieve and therefore, the lowest interest cost. General obligation bonds typically are
issued to finance capital facilities and not for ongoing operational or maintenance costs.
The District will use an objective analytical approach to determine whether it can afford to assume
new general obligation debt for the improvement districts, or in the case of projects not approved by
the original ID 27 vote, prior to any submission of a general obligation bond ballot measure to voters.
This process will compare generally accepted standards of affordability to the current values for the
District. These standards will include debt per capita, debt as a percent of taxable value, debt service
payments as a percent of current revenues and current expenditures, and the level of overlapping
net debt of all local taxing jurisdictions. The process will also examine the direct costs and benefits
of the proposed expenditures. The decision on whether or not to assume new debt will be based on
these costs and benefits, the current conditions of the municipal bond market, and the District’s ability
to "afford" new debt as determined by the aforementioned standards.
Revenue Bonds
Revenue bonds are limited-liability obligations that pledge net revenues of the District to debt service.
The net revenue pledge is after payment of all operating costs. Though revenue bonds are not
generally secured by the full faith and credit of the District, the financial markets require coverage
ratios of the pledged revenue stream and a covenant to levy rates and charges sufficient to produce
net income at some level in excess of debt service (a Rate Covenant).
Also there may be a test required to demonstrate that future revenues will be sufficient to maintain
debt service coverage levels after any proposed additional bonds are issued. The District will strive
to meet industry and financial market standards with such ratios. Annual adjustments to the District’s
rate structure may be necessary to maintain these coverage ratios.
The underlying credit of revenue bonds is judged on the ability of the District’s existing rates to
provide sufficient net income to pay debt service and the perceived willingness of the District to raise
rates and charges in accordance with its Rate Covenant. Actual past performance also plays a role
in evaluating the credit quality of revenue bonds, as well as the diversity of the customer base.
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Revenue bonds generally carry a credit rating one or two investment grades below a general
obligation bond rating.
The District may use a debt structure called “Certificates of Participation” to finance capital facilities.
However, if the certificates contain a pledge of net revenues and a Rate Covenant, they are treated
as essentially the same as a revenue bond.
Lease/Purchase Agreements
Over the lifetime of a lease, the total cost to the District will generally be higher than purchasing the
asset outright. As a result, the use of lease/purchase agreements in the acquisition of vehicles,
equipment and other capital assets will generally be avoided, particularly if smaller quantities of the
capital asset(s) can be purchased on a "pay-as-you-go" basis.
The District may utilize lease-purchase agreements to acquire needed equipment and facilities.
Criteria for such agreements should be that the asset life is three years or more, the minimum value
of the agreement is $50,000 and interest costs must not exceed the interest rate earned by the
District’s portfolio for the average of the past 6 months. Lease payments of this type are considered
operating expenses and would reduce net operating income available to pay any District revenue
bonds. There are no coverage requirements or rate covenants associated with lease/purchase
agreements.
State Water Loans
The State Water Resources Control Board makes certain funds available to water districts throughout
the State. These loans typically carry a below-market rate of interest and are short term in nature.
While State loans should be incorporated into the District’s debt portfolio for the financing of capital
improvements, the payment of the loan should not compromise the District’s ability to issue other
planned debt or cause the District to violate its rate covenants or make it necessary for the District to
increase rates to maintain existing rate covenants.
Land Based Financing
The District may consider developer or property owner initiated applications requesting the
formation of community facilities or assessment districts and the issuance of bonds to finance
eligible District facilities necessary to serve newly developing commercial, industrial and/or
residential projects. Facilities will be financed in accordance with the provisions of the Municipal
Improvement Act of 1913 and the Improvement Bond Act of 1915, or the Mello-Roos Community
Facilities Act of 1982.
Typically, the bonds issued would be used to prepay, in a lump-sum, the District’s capacity fees with
respect to a large tract of land under development, or to finance in-tract infrastructure that will
eventually be dedicated to the District. The bonds are secured by a special tax or assessment to be
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levied on property within the boundaries established for the community facilities district (sometimes
known as a “Mello-Roos” district) or the assessment district. If the District becomes the sponsoring
public agency for such financing district and the issuance of debt, the District will be required to enter
into a Funding, Construction and Acquisition agreement for any of the facilities to be dedicated to
the District upon completion. This agreement governs the type of facilities to be constructed with
bond proceeds and how the facilities will be accepted by the District.
In some cases, the District may not be asked to be the sponsoring agency for the formation of a
financing district, rather, the developer or property owner may approach a school district or a city to
be the sponsoring agency. Nonetheless, the property owner may want to include lump-sum
payment of District fees in the financing or construction of certain facilities to be dedicated to the
District upon completion. In this case, if the District desired to participate, the District would enter
into a Joint Financing Agreement with the sponsoring agency, again governing the type of facilities
to be constructed with bond proceeds and how the facilities will be accepted by the District.
On a case-by-case basis, the Board shall make the determination as to whether a proposed district
will proceed under the provisions of the Assessment Acts or the Mello-Roos Community Facilities
Act. The Board may confer with other consultants and the applicant to learn of any unique district
requirements, such as long-term development phasing, prior to making any final determination.
All District and District consultant costs incurred in the evaluation of new development, district
applications and the establishment of districts will be paid by the applicant(s) by advance deposits
in those instances where a party or parties other than the District have initiated a proposed district.
Expenses not legally reimbursable by the financing district will be borne by the applicant. The District
may incur expenses for analyzing proposed assessment or community facilities districts where the
District is the principal proponent of the formation or financing of the district.
Prior to the issuance of any land secured financing and in accordance with State law, the Board will
adopt policies and procedures with criteria to be met before any special tax bonds or assessment
district bonds may be issued. These criteria include the qualifications of the appraiser, the minimum
value to lien ratio to be achieved prior to issuing the land secured debt and the maximum tax to be
levied on different categories of property.
16.0 Rating Agency Applications
The District may seek a rating on all new issues that are being sold in the public market. To ensure
a fair rating, more than one rating agency shall be considered to rate the District’s issues. These
rating agencies include, but are not limited to, Fitch Investors Service, Moody’s Investors Service, and
Standard and Poor’s. When applying for a rating on an issue over $1 million or more, the District
shall make a formal presentation of the finances and positive developments within the District to the
rating agencies. The District will report all financial information to the rating agencies as they are
published and upon request. This information shall include, but shall not be limited to, the District’s
Comprehensive Annual Financial Report (CAFR), and the Adopted Operating and Capital Budget.
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Debt Policy
17.0 Use of Credit Enhancement
Credit enhancement is a generic term that means any third-party guarantee of debt service. Credit
enhancement providers include municipal bond insurance companies or financial institutions. The
purchase of credit enhancement allows the District’s bond issue to carry the same credit rating as
the credit provider. The District will seek to use credit enhancement when such credit enhancement
proves cost-effective. Selection of credit enhancement providers will be subject to a competitive bid
process using the District’s purchasing guidelines.
Fixed Rate Bonds
Credit enhancement for fixed rate bonds is obtained by the purchase of bond insurance. With few
exceptions, bond insurance companies are rated AAA. If a commitment for bond insurance is
obtained for a particular issue, the District will estimate the annual debt service for the issue based
on current AAA-rated bond interest rates with the cost of issuance including the payment of the bond
insurance premium. If the estimated debt service on this basis is less than or equal to estimated
debt service for the issue based on interest rates for bonds with the District’s underlying or stand-
alone credit rating, the District will purchase the bond insurance. Any intention of the District to
prepay the debt ahead of its scheduled maturity will be taken into account in the analysis. Credit
enhancement may be used to improve or establish a credit rating on a District debt obligation even
if such credit enhancement is not cost effective if, in the opinion of the Chief Financial Officer, the use
of such credit enhancement meets the District’s debt financing goals and objectives.
Variable Rate Bonds
Credit enhancement for variable rate bonds is comprised of two components: credit support and
liquidity. The interest on variable rate bonds is based on a 7-day investment rate. Any investor can
tender their bonds back to the District to be repurchased on 7 days’ notice. Because of the short-
term nature of the investment, the securities that the District is “competing” with for investors are
AAA-rated or AA-rated mutual funds. Therefore, variable debt needs to have credit enhancement to
achieve a comparable AAA or AA rating, as well as liquidity support to provide the District with a
mechanism to purchase any bonds that are tendered before they can be remarketed to new
investors. A limited number of financial institutions offer letters of credit that combine both credit
support and liquidity for one fee. An alternative is to purchase bond insurance to provide credit
support and enter into a separate purchase agreement with a financial institution to provide liquidity.
The difference in cost between the two structures will be analyzed before either alternative is
selected for variable rate debt.
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Glossary
AD VALOREM TAX: A tax calculated “according to the value” of property. Such a tax is based on the
assessed valuation of tangible personal property. In most jurisdictions, the tax is a lien on the
property enforceable by seizure and sale of the property. General restrictions, such as overall
restrictions on rates, or the percent of charge allowed, sometimes apply. As a result, ad valorem
taxes often function as the balancing element in local budgets.
ADVANCE REFUNDING: A procedure whereby outstanding bonds are refinanced by the proceeds
of a new bond issue prior to the date on which outstanding bonds become due or are callable.
Typically an advance refunding is performed to take advantage of interest rates that are significantly
lower than those associated with the original bond issue. At times, however, an advance refunding
is performed to remove restrictive language or debt service reserve requirements required by the
original issue.
AMORTIZATION: The planned reduction of a debt obligation according to a stated maturity or
redemption schedule.
ARBITRAGE: The gain that may be obtained by borrowing funds at a lower (often tax-exempt) rate
and investing the proceeds at higher (often taxable) rates. The ability to earn arbitrage by issuing
tax-exempt securities has been severely curtailed by the Tax Reform Act of 1986, as amended.
ASSESSED VALUATION: The appraised worth of property as set by a taxing authority through
assessments for purposes of ad valorem taxation.
BASIS POINT: One one-hundredth of one percent.
BOND: A security that represents an obligation to pay a specified amount of money on a specific
date in the future, typically with periodic interest payments.
BOND COUNSEL: An attorney (or firm of attorneys) retained by the issuer to give a legal opinion
concerning the validity of the securities. The bond counsel’s opinion usually addresses the subject
of tax exemption. Bond counsel may prepare, or review and advise the issuer regarding authorizing
resolutions or ordinances, trust indentures, official statements, validation proceedings and litigation.
BOND INSURANCE: A type of credit enhancement whereby a monocline insurance company
indemnifies an investor against a default by the issuer. In the event of a failure by the issuer to pay
principal and interest in-full and on-time, investors may call upon the insurance company to do so.
Once assigned, the municipal bond insurance policy generally is irrevocable. The insurance
company receives an up-front fee, or premium, when the policy is issued.
CALL OPTION: A contract through which the owner is given the right but is not obligated to purchase
the underlying security or commodity at a fixed price within a limited time frame.
CAP: A ceiling on the interest rate that would be paid.
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Glossary
CAPITAL LEASE: The acquisition of a capital asset over time rather than merely paying rent for
temporary use. A lease-purchase agreement, in which provision is made for transfer of ownership
of the property for a nominal price at the scheduled termination of the lease, is referred to as a capital
lease.
CERTIFICATES OF PARTICIPATION: A financial instrument representing a proportionate interest in
payments such as lease payments by one party (such as the District acting as a lessee) to another
party (often a trustee).
CIP: Capital Improvement Program.
COMPETITIVE SALE: The sale of securities in which the securities are awarded to the bidder who
offers to purchase the issue at the best price or lowest cost.
CONTINUING DISCLOSURE: The requirement by the Securities and Exchange Commission for
most issuers of municipal debt to provide current financial information to the informational
repositories for access by the general marketplace.
DEBT SERVICE: The amount necessary to pay principal and interest requirements on outstanding
bonds for a given year or series of years.
DEFEASANCE: Providing for payment of principal of premium, if any, and interest on debt through
the first call date or scheduled principal maturity in accordance with the terms and requirements of
the instrument pursuant to which the debt was issued. A legal defeasance usually involves
establishing an irrevocable escrow funded with only cash and U.S. Government obligations.
DERIVATIVE: A financial product that is based upon another product. Generally, derivatives are risk
mitigation tools.
DISCOUNT: The difference between a bond’s par value and the price for which it is sold when the
latter is less than par.
FINANCIAL ADVISOR: A consultant who advises an issuer on matters pertinent to a debt issue, such
as structure, sizing, timing, marketing, pricing, terms and bond ratings.
GENERAL OBLIGATION BONDS: Debt that is secured by a pledge of the ad valorem taxing power
of the issuer. Also known as a full faith and credit obligation.
MUNICIPAL SECURITIES RULEMAKING BOARD (MSRB): The MSRB, comprised of representatives
from investment banking firms, dealer bank representatives, and public representatives, is entrusted
with the responsibility of writing rules of conduct for the municipal securities market.
260
Glossary
NEGOTIATED SALE: A sale of securities in which the terms of sale are determined through
negotiation between the issuer and the purchaser, typically an underwriter, without competitive
bidding.
OFFICIAL STATEMENT: A document published by the issuer that discloses material information on
a new issue of municipal securities including the purposes of the issue, how the securities will be
repaid, and the financial, economic and social characteristics of the issuing government. Investors
may use this information to evaluate the credit quality of the securities.
OPTION: A derivative contract. There are two primary types of options (see Put Option and Call
Option). An option is considered a wasting asset because it has a stipulated life to expiration and
may expire worthless. Hence, the premium could be wasted.
OPTIONAL REDEMPTION: The redemption of an obligation prior to its stated maturity, which can
only occur on dates specified in the bond indenture.
OVERLAPPING DEBT: The legal boundaries of local governments often overlap. In some cases,
one unit of government is located entirely within the boundaries of another. Overlapping debt
represents the proportionate share of debt that must be borne by one unit of government because
another government with overlapping or underlying taxing authority issued its own bonds.
PAR VALUE: The face value or principal amount of a security.
PAY-AS-YOU-GO: To pay for capital improvements from current resources and fund balances rather
than from debt proceeds.
PUT OPTION: A contract that grants to the purchaser the right but not the obligation to exercise.
RATE COVENANT: A covenant between the District and bondholders, under which the District
agrees to maintain a certain level of net income compared to its debt payments, and covenants to
increase rates if net income is not sufficient to meet such level.
REFUNDING: A procedure whereby an issuer refinances an outstanding bond issue by issuing new
bonds.
REVENUE BONDS: A bond which is payable from a specific source of revenue and to which the full
faith and credit of an issuer with taxing power is not pledged. Revenue bonds are payable from
identified sources of revenue, and do not permit the bondholders to compel a jurisdiction to pay debt
service from any other source. Pledged revenues often are derived from the operation of an
enterprise. Generally, no voter approval is required prior to issuance.
SPECIAL ASSESSMENTS: A charge imposed against property or parcel of land that receives a
special benefit by virtue of some public improvement that is not, or cannot be enjoyed by the public
261
Glossary
at large. Special assessment debt issues are those that finance such improvements and are repaid
by the assessments charged to the benefiting property owners.
SWAP: A customized financial transaction between two or more counterparties who agree to make
periodic payments to one another. Swaps cover interest rate, equity, commodity and currency
products. They can be simple floating for fixed exchanges or complex hybrid products with multiple
option features.
TRUE INTEREST COST (TIC): A method of calculating the overall cost of a financing that takes into
account the time value of money. The TIC is the rate of interest that will discount all future payments
so that the sum of their present value equals the issue proceeds.
UNDERWRITER: The term used broadly in the municipal market, to refer to the firm that purchases
a securities offering from a governmental issuer.
YIELD CURVE: Refers to the graphical or tabular representation of interest rates across different
maturities. The presentation often starts with the shortest-term rates and extends towards longer
maturities. It reflects the market’s views about implied inflation/deflation, liquidity, economic and
financial activity, and other market forces.
262
Glossary
The Fiscal Budget contains terminology that is unique to public finance and budgeting. The
following budget glossary provides assistance in understanding these terms.
ACCRUAL BASIS OF ACCOUNTING: The basis of accounting under which transactions are recognized
when they occur, regardless of the timing of cash receipts and disbursements.
ACRE-FOOT: The volume of water that will cover one acre to a depth of one foot. One acre-foot equals
435.6 units or 325,850 gallons.
ADDITIONAL SYSTEMS FEES: Effective May 1, 1986, each customer receiving water service in the
Improvement District 9 water service zone pays an additional monthly meter system charge of $2.00 for
each meter in service.
ANNEXATION FEES: Whenever water service is requested for land outside the boundaries of the
District the land must first be annexed into the District. The annexation fee for water service was set at
$1,477 per EDU on July 1, 2009. Whenever sewer service is requested for land outside the boundaries
of an improvement district (ID) the land must first be annexed into the ID. The fee for sewer annexation
was set at $3,819 on December 16, 1998. These base rates are adjusted quarterly according to a cost
of living index. The rates as of July 1, 2014 are $1,622 and $5,986 for water and sewer, respectively.
APPROPRIATION: The annual budget adopted by the District’s Board appropriates funds for
monitoring and control purposes, and serves as a financial plan.
ASSETS: Resources owned or held by the District that have monetary value.
AVAILABILITY FEES: The District levies charges each year in developed areas to be used for general
purposes for construction of facilities. This fee is levied in undeveloped areas to provide a source of
funding for planning, mapping, and preliminary design of facilities to meet future development. Current
legislation provides that any availability charge in excess of $10.00 per acre shall be restricted only for
the purpose of constructing facilities in the improvement district in which it was assessed.
BALANCED BUDGET: A financial plan, for a specified period of time that matches all planned revenues
and expenditures with various services. This plan has sufficient sources of funds to support the
planned expenditures. The District uses a fiscal year beginning July 1 and ending June 30 for budgetary
and financial reporting purposes.
BETTERMENT FEES: In addition to other applicable water rates and charges, certain water customers
pay a fee based on water service zone or improvement district. These are restricted for the use in the
area where they are collected and may be used for the construction and maintenance of facilities.
263
Glossary
BETTERMENT FEES FOR MAINTENANCE: The Operating Budget earns betterment fees for
maintenance work performed on infrastructure within special betterment zones. Betterment fees are
collected for the construction and maintenance of these specific assets.
BOND: A written promise to pay a sum of money on a specific date at a specified interest rate. The
interest payments and the repayment of the principal are authorized in a District bond resolution. The
most common types of bonds are general obligation (GO) bonds and Certificates of Participation
(COPs). These are frequently used for construction of large capital projects such as buildings,
reservoirs, pipelines, and pump stations.
BUDGET BASIS: The budget and accounting basis for the District is recognized on an accrual basis.
Accrual basis means that revenues are recognized when earned and expenses are recognized when
incurred.
CAPACITY FEE: A connection fee is charged when a new water meter is placed into service. This fee
is a contribution of capital to either reimburse existing customers for the available capacity in the
existing system, or to help finance planned future growth-related capacity improvements.
CAPACITY FEE REVENUES: These fees are earned by the Operating Budget as the Engineering
Department supports expansion functions.
CAPACITY RESERVATION CHARGE: An MWD charge passed on by CWA to individual agencies. This
fee is paid based on the District’s peak water demand.
CAPITAL BUDGET: The portion of the annual budget that appropriates funds for the purchase of
capital equipment items and capital improvements. These expenditures are separated from regular
operating items, such as salaries, utilities, and office supplies. The Capital Budget includes funds for
capital equipment purchases over $10,000, such as vehicles, furniture, machinery, computer systems,
and special tools. The capital budget also includes funds for infrastructure related items over $20,000
(as explained below) which are distinguished from operating items according to their value and
projected useful life.
CAPITAL EQUIPMENT: Fixed assets such as vehicles, equipment, furniture, technical instruments, etc.
which have a life expectancy of more than two years and a value over $10,000. This category may
include items over $20,000 that are infrastructure related items (this cost may not extend useful life of
the water or sewer infrastructure, but without the purchase of the item, the whole asset is rendered
useless, as described in the District’s Capitalization Policy).
CAPITAL IMPROVEMENT PROGRAM: A long-range plan of the District for the construction,
rehabilitation and modernization of the District-owned and operated infrastructure.
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Glossary
CLASS OF SERVICE: All customers are classified based on the type of service used. For example, the
water rate per unit is determined by a classification such as residential versus business.
CWA: The County Water Authority was organized in 1944 under the State County Water Authority Act
for the primary purpose of importing Colorado River water to augment the local water supplies of the
Authority's member agencies. The Authority purchases water from MWD which imports water from the
Colorado River and the State Water Project.
DEANNEXATION FEES: Each request for detachment of land from an improvement district is reviewed
on a case-by-case basis. The fees are determined based on the present value of future debt service
requirements.
DEBT COVERAGE RATIO: The ratio of net revenue to annual interest and principal payments on debt.
DEBT SERVICE: The District's obligation to pay the principal and interest of bonds and other debt
instruments according to a predetermined payment schedule.
DEPRECIATION: An expense recorded to allocate a tangible asset’s cost over its useful life.
DESALINATION: The removal of dissolved minerals (including salts) from seawater or brackish water.
Engineered water desalination processes, which produce potable water from seawater or brackish
water, have become important because many regions throughout the world suffer from water
shortages.
ENERGY FEES: Water customers are charged an energy pumping charge based on the quantity of
water used and the elevation to which the water has been lifted to provide service. The energy
pumping charge rate is $.045 (decreases on January 1, 2013 to $.042) per 100 cubic feet of water for
each 100 feet of lift above the base elevation of 450 feet. All water customers are in one of 29 zones
based on elevation.
ENTERPRISE FUND: Fund that provides goods or services to the public for a fee that makes the entity
self-supporting.
ENTERPRISE RESOURCE PLANNING: Systems with a shared database that supports multiple
functions used by different business units.
EXPENDITURES/EXPENSES: These terms refer to the outflow of funds paid or to be paid for an asset,
goods or services obtained regardless of when actually paid for. (Note: An encumbrance is not an
expenditure). An encumbrance reserves funds to be expended in a future period.
265
Glossary
FIRE SERVICE: Water service is provided by the District solely for use in fire hydrants or fire sprinkler
systems from lines or laterals connected to the District’s water mains. The monthly system charge is
$34.57 per month for each connection for fire protection service.
FISCAL YEAR: Twelve-month term designating the beginning and ending period for recording financial
transactions. The District has specified July 1 to June 30 as its fiscal year.
FUND BALANCE: The current funds on hand resulting from the net historical collection and use of
monies. The difference between assets and liabilities reported in the District’s Operating Fund plus
residual equities or balances and changes therein, from the result of operations.
GENERAL FUND: The District’s general fund is an enterprise fund – one for each of the District’s three
business lines Potable, Recycled and Sewer services. Each is an accounting entity with a self-
balancing set of accounts established to record the financial position and results that pertain to a
specific activity. The activities of enterprise funds closely resemble those of ongoing businesses in
which the purpose is to conserve and add to basic resources while meeting operating expenses from
current revenues. Enterprise funds account for operations that provide services on a continuous basis
and are substantially financed by revenues derived from user charges.
GRANTS: Contributions or gifts of cash or other assets from another governmental agency to be used
or expended for a specified purpose, activity, or facility. Capital grants are restricted by the grantor for
the acquisition and/or construction of fixed assets. Operating grants are restricted by the grantor for
operating purposes or may be used for either capital or operating purposes at the discretion of the
grantee.
INFRASTRUCTURE ACCESS CHARGE (IAC): A pass-through charge from CWA to each member
agency. The charge is to finance a portion of CWA’s fixed annual costs including the construction,
operation and maintenance of aqueducts and emergency storage projects. The fee was adopted in
January of 1999.
INTEREST INCOME: Earnings from the investment portfolio. Per District Policy Number 25, interest
income will be allocated to improvement districts each month based upon each fund’s prior month-
ending balance.
LATE CHARGES/PENALTIES: Charges and penalties are imposed on customer accounts for late
payments, returned payments, and other infringement of the District’s Code of Ordinances.
METER AND LATERAL FEES: Charge includes the material costs for the meter, meter box, and the
labor cost for installation to connect a new service to the distribution system.
266
Glossary
METROPOLITAN WATER DISTRICT (MWD) STANDBY CHARGES: Revenue generated from property
taxes by MWD to cover the Readiness-to-Serve (RTS) Charge. This charge pays for the debt service for
construction projects necessary to meet reliability and quality needs. The RTS Charge was adopted in
1996.
NET ASSETS: The difference between total assets and total liabilities. Increases or decreases in net
assets may serve as a useful indicator of whether the financial position of the District is strengthening or
weakening.
1% PROPERTY TAX: In 1978, Proposition 13 limited general levy property tax rates for all taxing
authorities to a total rate of 1% of full cash value. Subsequent legislation, AB 8, established that the
receipts from the 1% levy were to be distributed to taxing agencies according to approximately the
same proportions received prior to Proposition 13. Funds received are to be used for facilities
construction or debt service on bonds sold to build facilities.
OPERATING BUDGET: The portion of the budget that pertains to daily operations that provide basic
governmental services. The operating budget contains appropriations for such expenditures as
personnel, supplies, utilities, materials, travel and fuel, and does not include purchases of major capital
plant or equipment which are budgeted for separately in the Capital Budget.
OTHER INCOME: Revenues that are not directly related to the business of providing water and sewer
services. For example, contract billing service for the City of Chula Vista and the City of San Diego to bill
their sewer customers based on water consumption.
PROPERTY RENTAL INCOME: Rent or lease agreements for the use of District property.
QUALSERVE: A voluntary quality improvement program designed exclusively for water and
wastewater utilities.
RECYCLED WATER RATES: Non-potable water service provided from water produced by the District’s
reclamation plant and other non-potable sources. Recycled water is not used for domestic purposes
and all uses must comply with federal, state and local laws and regulations regarding the use of
recycled water.
RESERVE FUND: The District maintains Reserve Funds per the District’s policy for both designated and
restricted balances. Designated Reserve Funds are “general use” funds designated by the Board.
Restricted reserves are those that are legally set aside for a particular purpose and cannot be used for
any other purpose.
RESIDENTIAL CONSERVATION: The water rates for residential customers use an accelerated block
structure; as more units are consumed, a higher unit rate is charged. The District has established a
water conservation program to promote water conservation and planning.
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Glossary
REVENUE: Monies that the District receives as income. It includes such items as water sales and
sewer fees. Estimated revenues are those expected to be collected during the fiscal year.
READINESS-TO-SERVE CHARGE (RTS): Adopted by MWD in Fiscal 1996. The charge serves as a
foundation of fixed revenue for MWD. It covers the new debt service for construction projects
necessary to meet reliability and quality needs of current water-users as opposed to new customers.
SALE OF FIXED ASSETS: District equipment, which has been determined by the Board to be of no use,
obsolete, and/or beyond the useful life and therefore, may be sold.
SET-UP FEES FOR ACCOUNTS: A charge of $10 is added for each account transferred to another
customer.
SYSTEM FEES: Each water service customer pays a monthly system charge for water system
replacement, maintenance and operation expenses. The charge is based on the size of the meter and
class of service.
TAXES: California Water Code Section 72091 authorizes the District, as a municipal water district, to
levy ad valorem property taxes which are equal to the amount required to make annual payments for
principal and interest on general obligation bonds approved by the voters prior to July 1, 1978.
TEMPORARY WATER CHARGE: The rate for temporary water service is two times the rate for
permanent service. The additional charge is to offset the cost of construction of expansion facilities.
TIER 2 CHARGE: An MWD charge passed on by CWA to individual agencies. This is an added charge
on all water sales by CWA in excess of the District’s 90% baseline water usage.
UNIT: A unit of water is 100 cubic feet or 748 gallons of water.
WATER CAPACITY FEES: Charges paid by customers to connect to a District water system for potable
or recycled water service. Fees are determined by multiplying the demand factor for the meter size by
the total of the District-wide capacity fee and applicable zone charge
WATER RATES: Rates vary among classes of service. The water rates for residential customers use an
accelerated block structure. As more units are consumed, a higher unit rate is charged. Effective in
2009, all non-residential customers are charged for water based on a tiered rate structure in which
water rates are based on meter size and amount of units consumed.
WORKING CAPITAL: A financial measure which represents available operating liquidity. The
calculation is current assets minus current liabilities.
268
AF Acre-Foot/Feet
AMR Automated Meter Reader/Reading
APCD Air Pollution Control District
APWA American Public Works Association
ASCE American Society of Civil Engineers
ASU Assigned Service Unit
AWWA American Water Works Association
BABS Build America Bonds
BMP Best Management Practices
BOD Biological Oxygen Demand
CAD Computer Aided Design
CAFR Comprehensive Annual Financial Report
CCV City of Chula Vista
CDFG California Department of Fish and Game
CEQA California Environmental Quality Act
CIP Capital Improvement Program
COD Chemical Oxygen Demand
COPS Certificates of Participation
CRC Capacity Reservation Charge
CSC Customer Service Charge
CSD City of San Diego
CSDA California Special Districts Association
CSMFO California Society of Municipal Finance Officers
CMMS Computerized Maintenance Management System
CUWCC California Urban Water Conservation Council
CWA County Water Authority (San Diego)
DOT Department of Transportation
DVP Delivery-versus-Payment
EBPP Electronic Bill Pay and Presentment
EDU Equivalent Dwelling Unit
ERP Enterprise Resource Planning
ESC Emergency Storage Charge
FCF Flow Control Facility
FEMA Federal Emergency Management Association
FTE Full-time Equivalent
FY Fiscal Year
GAAP Generally Accepted Accounting Principles
List of Acronyms
269
List of Acronyms
GASB Government Accounting Standards Board
GF General Funds
GFOA Government Finance Officers Association
GIS Geographic Information System
GO General Obligation (bonds)
GPCD Gallons per Capita per Day
GPM Gallons per Minute
GPS Global Positioning System
HCF Hundred Cubic Foot
HCP Habitat Conservation Plan
HR Human Resources
HVAC Heating Ventilation and Air Conditioning
HWD Helix Water District
IAC Infrastructure Access Charge
ID Improvement District
IID Imperial Irrigation District
IMS Infrastructure Management System
IRP Integrated Water Resources Plan
IRS Internal Revenue Service
IT Information Technology
IVR Interactive Voice Response
LAIF Local Agency Investment Fund
MBR Membrane Bioreactor
MG Million Gallons
MGD Million Gallons per Day
MND Mitigated Negative Declaration
MOU Memorandum of Understanding
MWD Metropolitan Water District
NCCP Natural Community Conservation Plan
NIMS National Incident Management System
NOC Notice of Completion
NOSC Notice of Substantial Completion
O&M or O/M Operations and Maintenance
OPEB Other Post Employee Benefits
OWD Otay Water District
PB Pacific Bay
PERS Public Employees' Retirement System
270
List of Acronyms
PL Pipeline
PRS Pressure Reducing Station
PRV Pressure Reducing Valve
PS Pump Station
QSA Quantitative Settlement Agreements
RFP Request for Proposal
RSD Rancho San Diego
RTS Readiness-to-Serve
RWCWRF Ralph W. Chapman Water Recycling Facility
SAMP Sub-Area Master Plan
SANDAG San Diego Association of Governments
SBWRP South Bay Water Reclamation Plant
SCADA Supervisory Control and Data Acquisition
SDG&E San Diego Gas & Electric
SS Suspended Solids
SVSD Spring Valley Sanitation District
SWRCB State Water Resources Control Board
UML Unified Modeling Language
USFWS United States Fish and Wildlife Service
UWMP Urban Water Management Plan
VFD Variable Frequency Drive
VOIP Voice Over Internet Protocol
WRMP Water Resources Master Plan
WTP Water Treatment Plant
271
Index
Administrative Expenses 69,84,92,108
At-A-Glance 1
Awards 4-6
Budget Calendar 17
Budget Guide 14-15
Budget Process and Overview 16-20
Budget Summary 34-39
Capital Improvement Program Narrative 184-185
Capital Purchases Budget 195
CIP Projects in Construction 187-189
CIP Funding Source and Category 191
CIP Justification and Impact on Operating Budget 194
CIP Major Projects 186
CIP Projects 192-193
CIP Reserve Funds 190
Classification of Water Sales 60,76
Current Economic Conditions 24
Debt Management 51-52
Debt Policy 245
Debt Policy Glossary 259-262
Demographics 27
Department Budgets:
Administrative Services 122-133
Board of Directors 112-115
Engineering 172-181
Finance 134-146
General Expense 182-183
General Manager 116-121
IT and Strategic Planning 147-155
Water Operations 156-171
Departmental Operating Budget Narrative 101-103
Five-Year Forecast 48
Formula for Sewer Rates 94-95
Fund Balance Summary by Fund 44
Fund Balances 50
Future, The 25-26
General Fund Forecast 49
General Fund Revenues, Expenditures and Transfers 43
General Information 2
General Expenses 100
272
Index
General Revenues 99
General Revenues and Expenses Narrative 97-98
Glossary 263-268
Investment Policy 232-238
Investment Policy Glossary 239-244
Labor and Benefits 104-105
Letter of Transmittal iv-x
List of Acronyms 269-271
Materials and Maintenance Expenses 70,85,93,109
Meter Fees 65,80
MWD and CWA Fixed Fees (Pass-Through) 64
Operating Budget Summary 59,75,88
Operating Budget Summary by System 42
Operating Budget Summary – General Fund 40-41
Operating Expenditures by Department 110
Operating Expenditures by Object 111
Organization Chart 13
Past and Present 23
Position Count by Department 106
Potable Narrative 56-58
Power Costs 68,83,91
Projected Interest Payments by Debt Issuance 55
Projected Principal Payments by Debt Issuance 54
Recycled Narrative 72-74
Reserve Policy 198-228
Reserve Policy Glossary 229-231
Resolution 4235 21-22
Revenue History 66,81,90
Revenues and Expenditures by Fund 45-46
Revenues and Expenditures by Type 47
San Diego Rainfall 33
Schedule of Outstanding Debt 53
Service Area Assessed Valuation 30
Service Area Maps 71,86,96,115
Sewer Charges Summary by Service Class 89
Sewer Narrative 87
Sewer Rate Comparison 29
Statement of Values 3
Strategic Performance Management Plan 7-12
Summary of Financial Policies 196-197
273
Index
System Fees 63,79
Table of Contents i-iii
Ten Largest Customers 32
Ten Principal Taxpayers 31
Unit Sales History and Meter Count by Customer Class 62,78
Water Purchases - Recycled 82
Water Purchases and Related Costs - Potable 67
Water Rate Comparison 28
Water Sales Summary by Meter Size 77
Water Sales Summary by Service Class 61
274