HomeMy WebLinkAboutOperating and Capital Budget FY 2019-2020
Otay Water District
Adopted Operating and Capital Budget
Fiscal Year 2019-2020
BOARD OF DIRECTORS
Mitch Thompson, Division 2 President
Mark Robak, Division 5 Vice President
Hector Gastelum, Division 4 Treasurer
Tim Smith, Division 1
Gary Croucher, Division 3
MANAGEMENT TEAM
Mark Watton General Manager
Joseph R. Beachem Chief Financial Officer
Kevin Koeppen Assistant Chief, Finance
Adolfo Segura Chief, Administrative Services
Pedro Porras Chief, Water Operations
Jose Martinez Assistant Chief, Water Operations
Rod Posada Chief, Engineering
Dan Martin Assistant Chief, Engineering
Table of Contents
Page
Letter of Transmittal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v
Awards. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiv
Resolution No. 4367. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xviii
OVERVIEW
Budget Guide. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Mission Statement, Vision, Statement of Values. . . . . . . . . . . . . . . . . . . . . . . 3
District Formation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Service Area. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Organizational Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Budget Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Budget Basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Fund Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Budget Calendar. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
COMMUNITY PROFILE
Demographics. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Service Area Assessed Valuation Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Ten Principal Taxpayers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Ten Largest Customers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Water Rate Comparison – Member Agency Water Rates. . . . . . . . . . . . . . . . . 15
Sewer Rate Comparison . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
San Diego Rainfall . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Current Economic Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Economic Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
The Future. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
STRATEGIC PLAN
Strategic Plan Narrative. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Administrative Services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Water Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Engineering. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
FINANCIAL SUMMARIES
Financial Summaries Narrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Operating Budget Summary – General Fund . . . . . . . . . . . . . . . . . . . . . . . . 44
Operating Budget Summary by System . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
General Fund Revenues, Expenditures and Transfers . . . . . . . . . . . . . . . . . . . 47
Fund Balance Summary by Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Revenues and Expenditures by Type. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Revenues and Expenditures by Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
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Table of Contents
FIVE-YEAR FORECAST
Five-Year Forecast Narrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
General Fund Forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Fund Balances Forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Debt Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Schedule of Outstanding Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Projected Principal Payments by Debt Issuance . . . . . . . . . . . . . . . . . . . . . . 59
Projected Interest Payments by Debt Issuance . . . . . . . . . . . . . . . . . . . . . . . 60
REVENUES AND EXPENDITURES
Potable Revenues and Expenditures
Potable Narrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Operating Budget Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Classification of Water Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Water Sales Summary by Service Class. . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Unit Sales History and Meter Count by Customer Class . . . . . . . . . . . . . . . . . . 66
System Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
MWD and CWA Fixed Fees (pass-through) . . . . . . . . . . . . . . . . . . . . . . . . . 68
Meter Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Revenue History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Water Purchases and Related Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Power Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Administrative Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Materials and Maintenance Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Potable Water Service Area Maps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Recycled Revenues and Expenditures
Recycled Narrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Operating Budget Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Classification of Water Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Water Sales Summary by Meter Size . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
System Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Unit Sales History and Meter Count by Customer Class . . . . . . . . . . . . . . . . . . 83
Meter Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Revenue History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Water Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Power Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Administrative Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Materials and Maintenance Expenditures. . . . . . . . . . . . . . . . . . . . . . . . . . 89
Recycled Water Service Area Maps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Sewer Revenues and Expenditures
Sewer Narrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
Operating Budget Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Charges Summary by Service Class . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
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Table of Contents
Sewer Revenues and Expenditures (continued)
System Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Revenue History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Power Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Administrative Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Materials and Maintenance Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . 98
Formula for Sewer Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Sewer Service Area Map . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
General Revenues and Expenditures
General Revenues and Expenditures Narrative . . . . . . . . . . . . . . . . . . . . . . . 103
General Revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
General Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
DEPARTMENTAL OPERATING BUDGET
Departmental Operating Budget Narrative . . . . . . . . . . . . . . . . . . . . . . . . . 107
Labor and Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
Labor and Benefits by Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Position Count by Department . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
Contract/Temporary Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
Administrative Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
Materials and Maintenance Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . 118
Operating Expenditures by Department . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
Operating Expenditures by Object . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
Departmental Budgets:
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
General Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
Administrative Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
Water Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145
Engineering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151
General Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157
CAPITAL BUDGET
Capital Budget Narrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159
CIP Reserve Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162
Six-Year CIP Projects Summary by Source ($1,000s). . . . . . . . . . . . . . . . . . . . 163
Six-Year CIP Projects Summary by Fund ($1,000s). . . . . . . . . . . . . . . . . . . . . 163
Six-Year CIP Projects by Source and Fund ($1,000s). . . . . . . . . . . . . . . . . . . . 164
CIP Justification and Impact on Operating Budget . . . . . . . . . . . . . . . . . . . . 168
Capital Purchases FY2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169
POLICIES
Summary of Financial Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171
Reserve Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173
Reserve Policy Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212
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Table of Contents
POLICIES (continued)
Investment Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215
Investment Policy Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224
Debt Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 233
Debt Policy Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 252
APPENDIX
Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 257
List of Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 262
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 264
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September 27, 2019
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 2020. The budget supports the District’s updated Fiscal Year 2019-2022 Strategic
Plan titled, “Growth and Sustainability,” as well as the financing of all the District’s services,
programs, and capital needs during Fiscal Year 2020. The success as an agency is
significantly enhanced by the policies and practices implemented by its Board and
management to ensure the stability, reliability, strength, and sustainability of the District.
The management team is fully confident that through sound financial management and
streamlining of District operations, supported by the Strategic Plan and a dedicated and
talented staff, the District will achieve continued success as an agency and thus, ensure the
well-being and quality of life of its nearly 224,000 customers. Our goal is to sustain the
services we provide, while at the same time, minimize rate impacts for our ratepayers.
Water-Use Efficiency and California State Mandates
On April 7, 2017, Governor Jerry Brown issued an executive order officially ending the
drought state of emergency in most of California. The Governor also released the state’s
long-term plan to better prepare the state for future droughts and make conservation a way
of life. In late April 2017, the State Water Resources Control Board (SWRCB) rescinded the
conservation mandates but continued the water-use reporting requirements and
prohibitions against wasteful practices. As part of the Governor’s mandate, the SWRCB
adopted Resolution No. 2016-0029, which allowed individual suppliers to self-certify that
there would be no supply shortfall even with three additional dry years. With the certification
of the Claude “Bud” Lewis Carlsbad Desalination Plant, the additional water storage
capacity, and the upgraded conveyance systems, the San Diego region’s water agencies
have the ability to provide sufficient water supplies to meet customer demands, assuring
there would be no supply shortfall even if three additional dry years were to be realized.
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Building on efforts to make water conservation a way of life and to better prepare the state
for droughts and climate change, on May 31, 2018, Governor Brown signed two bills into
law – Senate Bill 606 and Assembly Bill 1668 – which established permanent water-use
restrictions throughout California. The laws outline an overall framework to guide the
District and other urban water suppliers in setting water-use targets. The District has been
working with the San Diego County Water Authority, other water agencies, and state
officials to define how the new laws will be implemented, ensuring the regulations are both
equitable and reflect local conditions.
As part of its efforts to keep stakeholders engaged in the conservation legislation (AB 1668
and SB 606), in May 2019, the SWRCB held its first quarterly Urban Overview Meeting. The
SWRCB’s goal is to keep the District, other water agencies, and stakeholders apprised of
the big picture through progress reports provided by each of the eight urban project
workgroups. The workgroups include the following: Model Water Efficient Landscape
Ordinance; Landscape Area Measurement; Wholesale Water Loss; Water Use Studies;
Standard, Methodologies and Performance Measures; Urban Water Management Plan
Guidebook; Annual Water Supply and Demand Assessment; and Data Streamlining.
To broaden the state’s approach on water, as California faces a range of existing
challenges, on April 29, 2019, Governor Newsom issued Executive Order N-10-19. The order
directs the secretaries of the California Natural Resources Agency, the California
Environmental Protection Agency, and the California Department of Food and Agriculture
to identify and assess a suite of complementary actions to ensure safe and resilient water
supplies, flood protection, and healthy waterways for the state’s communities, economy,
and environment.
Key Legislation
An ongoing and significant concern is access to safe and affordable drinking water in the
state. The District has played an active role in supporting the “no water tax” initiative to
creatively resolve funding drinking water quality conditions within many disadvantaged
communities throughout California, without the imposition of a drinking water tax on the
District and its customers. Several of the efforts to impose the water tax would have required
significant administrative costs to water agencies, which would be counterproductive to the
effort. In July, the Governor signed SB 200 (Monning), which establishes a stable ongoing
fund to help communities access safe drinking water, putting to rest the water tax
discussion for this year and optimistically for years to come.
A legislative bill that passed during the 2018 legislative session and has a financial impact
on the District and its ratepayers, is Senate Bill 998 (Dodd), a measure which places
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limitations on water agency shutoff policies and procedures. The new measure will
increase the District’s service shut-off days for delinquent accounts from 45 days to no less
than 60 days, create a cap on reconnection fees, and grant authority to both the SWRCB
and the Attorney General to enforce provisions of the bill. Because the new law impacts
existing practices, policies, and procedures, the District along with other urban and
community water systems that provide water to more than 200 service connections,
continue to evaluate the details of SB998 so the District is prepared for when the new
requirements go into effect on February 1, 2020.
To address an aging and retiring workforce in the water and wastewater operator fields and
to increase the pool of qualified individuals for these positions, the District also
cosponsored, with the San Diego County Water Authority, Assembly Bill (AB 1588). If passed,
this bill ensures military veterans transitioning into civilian water and wastewater operator
occupations receive appropriate credit for experience and education gained during military
service. AB 1588 unanimously passed the Senate Environmental Quality and Senate
Veterans Affairs committees. Because the bill has negligible state costs, it also passed out
of the Senate Appropriations Committee pursuant to Senate Rule 28.8, which basically
places it on consent, but without a vote. On August 26, it passed unanimously on the Senate
Floor, and on September 5, passed on concurrence in the Assembly. The District, along with
other water agencies, business, and military veterans’ organizations, continue to fervently
advocate for support of this bill and to gain Governor Gavin Newsom’s signature to pass it
as a law.
Fiscal Year 2019 - 2022 Strategic Plan
Since its establishment, the District’s motto has been “Dedicated to Community Service.”
From modest beginnings in 1956 through today, the District stands committed to providing
outstanding service to the residents and businesses it has the honor to serve. This serves
as a great reminder to our staff and customers as to why the District exists.
During the District’s early years, a key focus of its preceding strategic plans was to meet the
demands of growth. Today, the District’s four-year Strategic Plan still has the word “growth”
in its theme of “Growth and Sustainability,” but “sustainability” is a critical element in
managing long-term maintenance and replacement of infrastructure. Staff works diligently
to ensure its planning documents support the District’s water supply and sewer facilities
that serve its customers now and in the future. The four-year (Fiscal Years 2019-2022)
Strategic Plan aims to support the goals in our planning documents, which include the
Water Facilities Master Plan Update, Wastewater Management Plan, Urban Water
Management Plan, and other critical plans.
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The District’s Strategic Plan also serves as a roadmap to execute its objectives and track
day-to-day performance metrics, which ensure deliverables are being met, and essential
work processes are continuously being fine-tuned. Using the Balanced Scorecard
framework, management and staff share a focused strategy to ensure the District is moving
along the right path and maximizing its limited resources.
The District’s strategic philosophy recognizes that as the agency evolves and service
footprint matures, fewer development resources and fees will be available, while
operational assets and infrastructure maintenance, rehabilitation, and replacement costs
will increase. This is an important phase of the operational lifecycle and will therefore place
pressure to increase customer rates in order to counter growing service expenses. To
balance the customer’s interest in minimizing rate increases, while also maintaining the
agency’s infrastructure, investments, and financial position, the management team must
continue to place emphasis on efficiencies within the agency, including innovation and
continued use of technology.
In effect, the District leverages its investments in technology to do more with the same, or
fewer, resources. With sound planning, prudent fiscal management, community focus,
and a work culture prepared to adapt to new challenges, the District is well positioned to
support its growing customer base, while sustaining the quality of water service our
customers expect. From a water supply perspective, this means determining the optimal
blend of water supply, treatment, and delivery solutions for customers. From a daily
operating perspective, efficiency enhancements have become the principal source of
competitive advantage and cost optimization for utilities.
Finding ways to utilize technology, streamline operations, and reduce external costs are
critical elements of the District’s ongoing commitment and dedication to its customers.
Savings generated through streamlining and reducing costs are passed to our ratepayers.
For example, from 2017 to 2021 the District is upgrading or replacing more than 49,600
automated meter reading (AMR) meters, originally installed between 2004 and 2012. To be
as cost efficient as possible, the District is replacing meter registers instead of the entire
meter and, when applicable, taking advantage of existing warranties. This saves the District
and its ratepayers approximately $3.3 million in meter replacement costs. Because of the
meter’s life expectancy and warranty, the District can delay the replacement of the meters
by approximately 10 years. There are many benefits to utilizing AMR meters, including the
future potential reduction of full-time meter reading staff, increased safety of staff, and
allowing staff to store historical water use data. These advanced meters can assist
customers and the District, to identify unexplained usage by providing leak, tamper, and
backflow detection alarms. The efforts related to meter technology are an example of cost
savings and the District’s ongoing commitment to pursue cost efficiencies.
viii
The success of this approach is proven by the District’s gains in productivity, reduction in
staffing, and associated costs. The following charts show that since 2007 through 2020, the
District has reduced staffing by 36.75 full-time equivalent positions, or 21%, while the
number of customer accounts increased by 3,879.
Employee Count and Number of Accounts
Because of increased efficiency and higher employee productivity, the District has been
able to continue absorbing some of the pass-through costs from its water suppliers,
including the City of San Diego, CWA, and MWD. This helps to address customer concerns
about rising water rates.
In an effort to reduce the District’s costs of retirement obligations, the District made an
advanced payment of $31.8 million to its CalPERS pension plan on August 15, 2018. This
strategic step significantly reduced the high financing cost of the unfunded liability at
CalPERS and brought the funding level up to 88%. This will save the District approximately
$16 million over the next 24 years. The District’s Other Post Employee Benefit (OPEB) plan
is similarly well funded at 89% and is expected to be fully funded in Fiscal Year 2020.
Other cost savings include the reduction of the number of vehicles and equipment, fuel
consumption, pavement costs, and decreasing water loss through the successful leak
detection and repair program. Staff continues to seek out other operational efficiencies, thus
decreasing costs and minimizing rate impacts on the District’s customers.
Based on an annual survey of water and sewer rates conducted by staff, the District
continues to be one of the lowest cost providers in San Diego County. The District has the
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4
.
7
5
17
2
.
7
5
16
8
.
7
5
16
6
15
9
15
6
14
8
14
3
14
0
13
8
13
5
13
4
13
7
13
8
52,615
56,494
51,500
52,500
53,500
54,500
55,500
56,500
57,500
0
20
40
60
80
100
120
140
160
180
200
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Em
p
l
o
y
e
e
C
o
u
n
t
Fiscal Year
ix
third lowest water rate out of the 24 member agencies in San Diego County (based on the
District’s average water user who uses 11 units of water and has a ¾” residential meter size)
and the third lowest sewer rate out of the 28 sewer service providers in the County (based
on 8.6 units of water and a ¾” residential meter size). The results of the water and sewer
surveys are shown on pages 15 and 16, respectively.
The following chart shows that since 2007, the wholesale water supply costs have
increased 107.8%, while the District’s retail water rates have increased to a lower 104.2%.
Wholesale Water Supply Costs vs. District Retail Rate Increases
The District currently delivers water service to 51,034 potable and 731 recycled water
customer accounts. The District purchases all the potable water sold to customers from
the CWA. 32 percent of this water, in turn, is purchased from the region’s primary water
importer, MWD. This number has decreased significantly compared to previous years due
to conservation efforts, the water transfer with Imperial Irrigation District (IID), All American
canal lining, and seawater desalination.
The District continues its efforts to diversify water resources, reducing dependence on
traditional water supplies from the Colorado River and the Sacramento-San Joaquin Delta.
0%
20%
40%
60%
80%
100%
120%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
104.2%
107.8%CWA Water Cost Increase
Otay Water Rate Increase
x
The District also has been proactive in reducing its dependence on MWD water treatment
facilities. For example, in 2009 the District entered into an agreement with the CWA that
allowed the neighboring Helix Water District to treat imported water on behalf of the District
at Helix’s Levy Water Treatment Plant. This has brought regional water treatment closer to
District customers, which lessens dependence on water treatment facilities located outside
of the County.
The District also collects and recycles wastewater from approximately 4,729 homes and
businesses. The District collects wastewater and delivers it to its Ralph W. Chapman Water
Recycling Facility (Chapman), which is capable of recycling wastewater at a rate of 1.3
million gallons per day. In addition to the Chapman facility, the District continues to
purchase 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 sources.
Fiscal Year 2020 Operating Budget Summary
The District’s operating expenditures consist of three major sectors: potable water, recycled
water, and sewer, which include a total budget of $105.8 million for Fiscal Year 2020.
Revenues from potable and recycled water are projected to be $93.8 million, approximately
$2.6 million less than the Fiscal Year 2019 budget. District staff expects potable water sales
volumes to decrease by 8.3% compared to Fiscal Year 2019 budgeted potable sales. The
decline in budgeted potable water sales volumes is due to an expectation of more
temperate weather than what was budgeted for in Fiscal Year 2019. The District projects
sewer revenues to be $2.9 million, approximately $33 thousand less than Fiscal Year 2019.
The remaining budgeted revenues of $9.1 million come from various special fees,
assessments, and miscellaneous income.
Other 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 3.4% from MWD and CWA due to the high
cost of supply programs, higher energy costs, and increasing operating costs.
• 4.7% water rate increase budgeted for January 1, 2020, and an 8.9% rate increase
for sewer, effective January 1, 2020.
xi
• Metro sewer costs includes the anticipated impact of the City of San Diego’s Pure
Water Program costs.
• The District maintains low water rates, below the countywide average of the County’s
24 water agencies.
Fiscal Year 2020-2025 Capital Improvement Program (CIP)
The CIP budget emphasizes long-term planning for ongoing programs to meet population
growth, while functioning within fiscal constraints. The Fiscal Year 2020-2025 CIP budget
contains 122 projects and totals $88.3 million. The Sewer Budget reflects a $6.0 million debt
issuance through a public or private sale in Fiscal Year 2020 to fund the Campo Road Sewer
Replacement Project (S2024). In Fiscal Year 2019, the District’s water segment issued $34.9
million of debt, of which, $28 million will fund water projects, and $6.8 million was used to
refund the District’s 1996 Variable Rate Certificate of Participation. The water segment is
not anticipating borrowing any additional funds over the next six years.
The Fiscal Year 2020 CIP budget contains 97 projects and totals $17.2 million. The District
categorizes projects into three business segments (Potable Water, Recycled Water, and
Sewer). Funding for the Fiscal Year 2020 Potable, Recycled, and Sewer projects are $14.3
million, $0.7 million and $2.2 million, respectively. CIPs are also categorized into four
categories: expansion, betterment, replacement, or new water supply. The following is a
breakdown of the CIPs into the four categories:
Expansion projects $ 69,000
Betterment projects $ 3,581,000
Replacement projects $ 12,949,000
New Supply projects $ 623,000
Awards and Acknowledgments
• The Government Finance Officers Association of the United States and Canada
presented Otay Water District the Distinguished Budget Presentation Award for its
annual budget for the fiscal year beginning July 1, 2018. 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 presented Otay Water District
the Certificate of Award for Excellence in Operating Budgeting for Fiscal Year 2018-
2019.
xii
• The California Society of Municipal Finance Officers presented Otay Water District
the Certificate of Award for Excellence in Capital Budgeting for Fiscal Year 2018-2019.
• The Government Finance Officers Association Officers presented Otay Water District
the Certificate of Excellence in Financial Reporting for its Comprehensive Annual
Financial Report for the Fiscal Year ended June 30, 2018.
Conclusion
The challenges presented this year are being met by the District’s Board of Directors’ resolve
to keep the stability and financial strength of the District as one of its highest priorities.
Reserves will be maintained above target levels as will the District’s Debt coverage level.
The Board of Directors, management team, and staff are all committed to efficiency in both
District operations as well as in its capital development. With these efficiencies and the
ongoing investment in new technologies, the District has a competitive edge in providing
quality service.
This budget reflects the vision of the District’s Board, management, and staff. The District
will continue to strive to make improvements in budget processes, including an extensive
review and analysis of projections for revenues, expenditures, capital projects, and reserves.
I would like to thank 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, we acknowledge and appreciate their continued support and direction in
achieving excellence in the financial management and operations of the District.
Mark Watton, General Manager
xiii
Distinguished Budget Presentation Award
The Government Finance Officers Association presented a Distinguished Budget
Presentation Award to the District for its annual budget for the fiscal year 2018-2019. 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.
xiv
Financial Awards
The California Society of Municipal Finance Officers presented Otay Water District the Operating
Budget Excellence Award for Fiscal Year 2018-2019.
xv
Financial Awards
The California Society of Municipal Finance Officers presented Otay Water District the Capital
Budgeting Excellence Award for Fiscal Year 2018-2019.
xvi
Financial Awards
The Government Finance Officers Association Officers presented Otay Water
District the Certificate of Achievement for Excellence in Financial Reporting for its
Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2018.
xvii
RESOLUTION NO. 4367
A RESOLUTION OF THE BOARD OF DIRECTORS OF
OTAY WATER DISTRICT ADOPTING THE
FISCAL YEAR 2019-2020
OPERATING AND CAPITAL BUDGET;
AND SALARY SCHEDULE
WHEREAS, the Otay Water District Board of Directors have
been presented with a budget (Exhibit A) for the operation of
the Otay Water District for Fiscal Year 2019-2020; and
WHEREAS, the Fiscal Year 2019-2020 Operating and Capital
Budget, has been reviewed and considered by the Board;
WHEREAS, it is in the interest of the District to adopt a
budget for said year;
WHEREAS, in connection with the adoption of the budget, the
Board is also being presented with the Salary Schedule
(Exhibit B) for its consideration, in order to comply with
California Code of Regulations Section 570.5,
NOW, THEREFORE, BE IT RESOLVED, DETERMINED AND ORDERED by
the Board of Directors of the Otay Water District that the
Operating and Capital Budget for the operation of the District,
incorporated herein by reference, is hereby adopted as the
District's budget for Fiscal Year 2019-2020.
BE IT FURTHER RESOLVED that the Board hereby approves and
adopts the Salary Schedule included with the budget and,
consistent with his authority over employee compensation under
both State law and the District's Code of Ordinances, authorizes
Page 1 of 2
xviii
t he General Manager to update the Salary Schedule, whenever
necessary, to reflect changes made within his authorit y .
PASSED , APPROVED AND ADOPTED by the Board of Directors of
Otay Water District at a board meeting held this 5th day of June
2019 , by the following vote :
ATTEST :
Ayes: Directors Gastelum, Robak, Smith andThompson
Noes : Dir ector Croucher
Abstain : None
Absent : None
Di ~~
Page 2 of 2
xix
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xx
Overview
Budget Guide
The District views the budget as an essential tool for proper financial management. This budget is
developed with input from each department 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.
Overview
This introductory section contains general information about the District such as: mission statement,
vision, statement of values, District formation, organizational chart, and the budget process and
calendar.
Community Profile
This section contains the demographics of the District along with the current and projected
economic conditions and water and sewer rate comparison. It also includes statistics on the
District’s customers, the region’s tax base, rainfall, future development, and projects that will have an
impact on the District in the coming years.
Strategic Plan
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 2019-2022) is a continuation of the 2015-2018 plan and is the
5th multi-year plan. Included in this section are the District’s perspectives, goals, key performance
indicators, measurement methods, targets for each department, and the historical results of each
key performance indicator.
Financial Summaries
This section contains an overview of the District’s revenues and expenditures by fund for the current
budgeted fiscal year, the prior year’s actual amounts, and the future estimated amounts. 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.
1
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,
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. The District also publishes a separate Six-Year Capital Budget that
provides more detail of each project (budget amount, description, justification, comments, fund
details, expenditure schedule and a map of the project location). The FY 2020-2025 Six-Year Capital
Budget is available on our website at otaywater.gov/cip.
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, List of Acronyms, and an Index.
2
Overview
Mission Statement
To provide exceptional water and wastewater service to its customers, and to manage District
resources in a transparent and fiscally responsible manner.
Vision
To be a model water agency by providing stellar service, achieving measurable results, and
continually improving operational practices.
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.
Innovation:
We constantly seek better, more efficient, and cost effective ways to deliver our services.
3
Overview
District Formation
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. The District was
established 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. 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, Otay Water District and La Presa County Water District merged into the
Otay Water District. Since then, the District has provided high quality water to a semi-arid region of
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). 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 2,607 acre-feet per year of recycled water for fiscal year 2020, and ultimately up
to 5,900 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 4,700 customer accounts within the Jamacha drainage basin. The sewer service
area covers approximately 8,800 acres, which is about 11% of the District’s total service area.
Residential customers comprise 97% of the sewer customer base.
Service Area
The District's boundaries encompass an area of
approximately 125.3 square miles or 80,208 acres 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.
The District purchases 100% of its treated water. Regionally,
about 80% is imported, which is a blend from the Colorado
River and the California State Water Project. Twenty percent
of the District’s treated water comes from local supplies,
including groundwater, local water storage within the
county and from the Pacific Ocean via seawater
desalination. The District purchases its treated water from
the San Diego County Water Authority and receives a blend
of treated water from the Metropolitan Water District of
Southern California’s R.A. Skinner Treatment Plant, the San
4
Overview
Diego County Water Authority’s Twin Oaks Valley Water Treatment Plant, the Carlsbad Desalination
Plant, and the Helix Water District’s R.M. Levy Water Treatment Plant.
Organizational Structure
The District has a five-member Board of Directors that serve four-year, alternating terms on the
Board. 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 District. The Board generally meets in open public session
on the first Wednesday of each month at 3:30 p.m. at the District headquarters located at 2554
Sweetwater Springs Boulevard, Spring Valley, California.
Citizens and
Customers Board of Directors
General Manager (5)
Safety and
Security
Administration
Purchasing
and Facilities
Controller and
Budgetary
Services
Treasury and
Accounting
Services
Customer
Service
Meter
Services
Water System
Operations
Utility
Maintenance/
Construction
Water Resources,
Planning, Design
and
Environmental
Administrative
Services
(23)
Human
Resources
Information
Technology
and
Geographic
Information
System
Finance
(31)
Strategic
Planning
Public Services
and
Field Services
Engineering
(26)
Water
Operations
(53)
Collection,
Treatment, and
Reclamation
Operations
5
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 and 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 0.5%.
• 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 changes in costs from the District’s wholesale water providers as well as
estimated changes in sewer charges provided by the County and City of San Diego. Other significant
factors in the budget development include estimated conservation levels, projected growth in
Year-end
Balances
Operating
Budget Input 6-Year
Rate Model
Strategic
Plan
Operating
Budget Water
&
Sewer
Rates CIP
Budget 6-Year CIP
Budget Input
MWD/CWA & City
Sewer Rates
Assumptions
Interest Rates
Inflation
Growth
Sales
Targets
Debt Coverage
Reserve Levels
6
Overview
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.
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 General Manager. 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 budgeted and actual
expenses to determine reasonableness by the Finance Department. All costs are justified and
supported by explanations. Finance compiles the operating budget and submits it to the General
Manager for review prior to presentation to the Board of Directors.
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 costs 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 General Manager for review prior to presentation to
the Board of Directors.
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 June. 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 appropriations within the budget
allocations or request that the Board of Directors increase the current budgeted funds.
7
Overview
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 the fiscal year. All approved modifications to the budget will be documented in the form of a
staff report and noted in the board meeting minutes.
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, regardless of the timing of cash receipts and disbursements. 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). It is the intent of the District to
recover the costs (including replacement cost of existing assets) of providing goods or services to
the general public on a continuing basis, through financing or 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 173, 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
8
Overview
Budget Calendar
December/January
The Finance Department posts a budget workbook on the District’s intranet which provides
instructions on the upcoming operating budget deadlines, budget procedures for personnel,
administrative expenses, and materials and maintenance expenses. Included in this workbook are
historical trends, assumptions, and instructions on how to enter the expense data into the
District’s budget module. For the six-year Capital Budget process, the Engineering Department
provides Chiefs with the upcoming CIP deadlines and procedures.
February
Chiefs submit requests to Human Resources for personnel reclassifications changes,
advancements, long term staffing and new personnel. Human Resources evaluates the requests
and provides recommendations to the General Manager. Human Resources notifies the Chiefs of
the status of the requests and Finance is provided with preliminary personnel changes. Departments
enter their budget requests in the budget module and provide their year-end projections to the
Senior Accountant. Explanations of variances from the current year’s budget versus the current year
projected expenditures and explanations of the projected expenditures versus the next fiscal year’s
budget request are provided to Finance’s Senior Accountant. The Senior Accountant reviews the
year end projections for reasonableness and documents the explanations of the variances for the
Finance Manager to review. CIP project managers review and update their existing CIP projects,
identify projects to be deleted and submit new CIP projects to Engineering for consideration. The
CIP budget requests are reviewed with the General Manager.
March
The Finance Department meets with other departments to review their current year administrative,
materials and maintenance expenditures, year-end projections, and the preliminary budget requests
with Chiefs and Section Managers. Finance finalizes the explanations of the variances and
consolidates the year-end projections and the new fiscal year’s budget requests for Chiefs and the
General Manager’s review and discussion. Human Resources finalizes new personnel requests,
reclassifications, and change requests with the General Manager and provides it to Finance for
budgeting. The Engineering Department reviews the CIP budget with the Finance Department and
provides year over year explanations of the changes. The preliminary six-year CIP Budget is
incorporated into the Rate Model to determine proposed water and sewer rates.
Once budgets have been calculated, the Finance Department inputs all 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. The debt coverage ratio is also evaluated to ensure adequate levels. Projected 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.
9
Overview
Budget Calendar (continued)
April
Finance provides the Chiefs and General Manager preliminary budget schedules containing key
budget assumptions for their review and incorporates recommended changes. To accommodate
the District’s external consultant’s schedule, the economic outlook report was presented to the Board
as a separate item in April. This report is typically discussed at the June Budget Workshop.
May
In early May, staff schedules a budget workshop (workshop #1) to review the Strategic Plan
Initiatives, to discuss the key budget assumptions and to provide preliminary information on the
Capital Improvement Program Budget. Based on the Board’s input, staff will modify the budget for
final presentation and approval in June.
June
At the regularly scheduled June Board meeting, staff presents the consolidated operating and CIP
budgets (workshop #2), along with recommended rate changes, to the Board for approval.
July
Changes in water rates, fees, and charges, effective January 1, 2020, are included as inserts for the
following customers classes: residential, multi-residential, recycled, irrigation and commercial
agricultural water, and business and publicly-owned.
Changes in sewer rates, fees, and charges, effective January 1, 2020, are included as inserts for the
following customers classes: residential, multi-residential, and commercial and industrial.
January 2020
Water and sewer rates, fees, and charges become effective January 1, 2020.
10
Overview
Budget Calendar
December/January February March-April May-June July-January 2020
12/21/18
Budget instructions
for the Operating and
Capital Budget are
distributed to
departments
1/17/19
Budget workbooks
for the Operating and
Capital Budget are
distributed to
departments
1/18/19
Project managers
submit CIP Budgets
for New Projects and
changes to existing
Projects in CIP
Budget Application
2/5/19
Finance initial review of
CIP Budget with Chief of
Engineering including year
over year explanations
2/8/19
Chiefs submit request for
new personnel, personnel
reclassification changes,
advancements, and long-
term staffing to HR
2/15/19
Chiefs to submit Operating
and Admin Budget; Capital
Purchases and
justifications; Labor Budget
Worksheet
2/22/19
HR to complete
preliminary review of new
personnel, personnel
reclassification changes,
requests, and
advancements
3/4/19
CIP Budget finalized with
Chiefs and General
Manager
3/6/19
HR to review new
personnel,
reclassifications and
change requests with
General Manager
3/20/19
Finance to review
Department Operating
Budgets and personnel
cost with Chiefs and
General Manager
4/3/19
Economic Outlook
presented to Board by
external economist
4/4/19
Chiefs submit Position
Analysis Questionnaire to
HR for GM approval
Personnel requests and
request for
reclassifications
4/18/19
Review assumptions and
rates with Chiefs and
General Manager
4/23/19
FY 2020 key assumptions,
inputs, and open items for
Practice Run-through
5/2/19
Board Workshop #1
to review the
Strategic Plan
Initiatives, to discuss
the key budget
assumptions and to
provide preliminary
information on the
Capital Improvement
Program Budget
5/6/19
Hard copy of
preliminary Budget to
Assistant Chiefs,
Chiefs, and General
Manager for review
5/14/19
FY 2020 Budget
Practice Run-through
6/5/19
Board
Meeting/Board
Workshop #2 –
approval of the FY
2019-2020 Operating
and Capital Budget
and
FY 2020-2025 Capital
Improvement
Program Budget
07/17/19-08/15/19
Water and sewer
rate increase
notices inserted with
water billing.
1/01/20
The 2020 water and
sewer rates, fees,
and charges are
applied to customer’s
monthly billing.
11
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12
Community Profile
Demographics
The City of Chula Vista is the second largest city in the San Diego metropolitan area and most of the
City east of the I-805 freeway is within the District’s service area. The following reflects the
demographics of the City of Chula Vista:
Demographics
Population – City of Chula Vista 267,503
Otay Water District population served 223,698
Persons/Household 3.2
Ethnic/Racial makeup (City of Chula Vista)
Hispanic 60%
Non-Hispanic White 18%
Asian 15%
Other 7%
Median Age 34.6
Percentage with 4 year degree or higher 28.1%
Source: San Diego Association of Governments, Current Estimates and
United States Census Bureau
Service Area Assessed Valuation
The District’s service area encompasses property with over $30.8 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.
Six-Year Service Area Assessed Valuation
23 25 26 28 29 31
$0
$5
$10
$15
$20
$25
$30
$35
FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019
Bi
l
l
i
o
n
s
13
Ten Principal taxpayers as of June 30, 2019
Organization Assessed Percent
Value to Total
1. Rancho Investors LP $ 163,550,880 0.53%
2. John Hancock Life Insurance Co USA 149,802,150 0.49%
3. GGP-Otay Ranch LP 131,789,675 0.43%
4. Corrections Corporation of America 125,625,482 0.41%
5. Regulo Place Apartments Investors LLC 115,438,490 0.38%
6. Homefed Otay Land II LLC 107,315,177 0.34%
7. Brisa Acquisitions LLC 102,211,501 0.33%
8. N M Pulse LLC 97,016,769 0.32%
9. Vista Pacific Villas LP/Sunbow Partners LP 96,808,292 0.31%
10. EQR-Teresina LP 82,387,053 0.27%
Total Top 10 Principal Taxpayers $1,171,945,469 3.81%
Total Service Area Assessed Valuation $30,767,749,324
Ten Largest Customers – Fiscal Year 2019
Customer Customer Annual % of Water
Name Type Revenues Sales
1. City of Chula Vista Publicly Owned $ 3,499,674 4.0%
2. State of California Publicly Owned 1,044,665 1.2%
3. County of San Diego Publicly Owned 938,870 1.1%
4. Eastlake III Community Commercial 858,310 1.0%
5. Chula Vista Elementary School District Publicly Owned 677,674 0.8%
6. Sweetwater Union High School District Publicly Owned 676,255 0.8%
7. Eastlake Country Club Commercial Recycled 524,190 0.6%
8. Steele Canyon Golf Club Commercial 437,129 0.5%
9. Eastlake I HOA Commercial 347,582 0.4%
10. Windingwalk Master Association Commercial 338,136 0.4%
Total 10 Largest Customers $ 9,342,485 10.8%
Total District Customers $ 86,662,004
Source: County of San Diego Auditor and Controller
14
Community Profile
Community Profile
Water Rate Comparison, Member Agency Water Rates (1)
The District strives to remain cost effective in its rate setting by controlling operating costs, yet
passing through the full cost of supply. In September 2019, the District conducted a survey of the
water rates of the water providers within San Diego County. The following chart shows that the
District has the third lowest water rate in the region.
Projected Water Bill for FY 2020
Based on 11 Units of water used and ¾” meter size
117.39
115.94
113.23
110.71
105.92
105.54
104.16
100.78
98.75
91.49
88.55
86.42
85.45
83.82
83.38
81.20
80.60
78.77
77.94
75.75
71.22
63.25
$0 $20 $40 $60 $80 $100 $120 $140
Padre Dam
*Rainbow
Ramona
Fallbrook
*Valley Center
Rincon
Yuima
Escondido
Del Mar
Vista
San Diego
Olivenhain
Vallecitos
*Poway
Helix
*Carlsbad
*Sweetwater
Oceanside
Santa Fe
Otay Water District
San Dieguito
Lakeside
* At the time of the survey September 2019, the member agency's FY 2020 rate was unavailable. The estimated
increase is based on the other districts’ FY 2020 known rate increases.
(1) Only 22 of the 24 member agencies are surveyed. Camp Pendleton is not included in this survey due to being a
Marine Corps Base. The City of National City is not included because their water is supplied by Sweetwater.
15
Community Profile
Sewer Rate Comparison
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 the third lowest sewer
rates in the County of San Diego.
109.49
79.17
72.91
71.76
71.09
71.05
69.96
69.92
67.12
58.71
56.86
56.17
55.25
52.84
52.74
51.90
51.59
50.88
49.61
48.75
48.20
48.13
40.47
38.68
38.58
37.80
28.92
28.64
$- $20 $40 $60 $80 $100 $120
Del Mar
Rancho Santa Fe
Encinitas
Olivenhain
Fallbrook
Rainbow
Oceanside
Padre Dam
Ramona
*Valley Center - MG
Solana Beach
Vista
Buena
El Cajon
Imperial Beach
*Poway
Lemon Grove
La Mesa
Escondido
Coronado, City
Chula Vista
*San Diego, City
Vallecitos
National City
San Diego, County
Otay Water District
*Carlsbad
Leucadia
Projected Sewer Bill for FY 2020
Based on 8.6 Units of water used and ¾” residential meter size
* At the time of the survey September 2019, the member agency's FY 2020 rate was unavailable. The
estimated increase is based on the other agency’s average FY 2020 known rate increases.
16
Community Profile
San Diego Rainfall
San Diego received above average rainfall of 12.84 inches in FY 2019. The 10-year average of 9.18
inches for San Diego rainfall reflects the long-term drought conditions for our area. San Diego's
rainfall average over 20 years is 8.66 inches; the 30-year average is 9.59 inches; and the 40-year
average is 9.98 inches.
San Diego rainfall, while a contributing factor, is not the controlling factor for our potable water supply
shortage. The San Diego region imports 80.0% 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.
Current Economic Conditions
San Diego County Water Supply
A safe, reliable water supply is crucial for the vitality of the San Diego region’s $231 billion economy
and quality of life for 3.3 million residents, including the Otay Water District’s nearly 224,000
customers it serves. San Diego County imports approximately 80% of its water from the Colorado
River and Northern California. Since these sources face legal and environmental constraints, the
region has been making investments in the region’s water delivery and storage system and
exploring other avenues to ensure an adequate water supply. This includes water recycling, water-
use efficiency programs, water storage, groundwater desalination, and seawater desalination.
10.55 12.62
8.03 6.51 5.06
9.03 10.82 12.97
3.40
12.84
0
5
10
15
20
25
30
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
In
c
h
e
s
San Diego Rainfall
Fiscal Years 2009 -2018
Annual Rainfall
10 year average
Source: Western Regional Climate Center
17
Community Profile
Desalinated Water Supply
In December 2015, the Claude “Bud” Lewis Carlsbad Desalination Plant began producing
approximately 50 million gallons of water per day to the CWA, enough to serve approximately
400,000 people, meeting 7% – 10% of the region’s demand. Since the production of desalinated
water from the Carlsbad plant, the District’s customers have received a portion of this highly reliable,
drought-proof water supply. The amount of desalinated water that the District’s customers receive
fluctuates daily based on a variety of factors including the CWA’s potable water demands.
Economic Outlook
At the start of each budget cycle, the District enters into a contract with an economist to complete
an economic and demographic analysis of the national and local economy. The study also provides
information on the changes in population, residential and commercial development within the
District service area. The following highlights the report:
• The U.S. population growth is approximately 2.0-2.5 million annually and is projected to
continue at the same pace.
• The U.S. unemployment rate, as of April 2019, was 4% nationally and is projected to remain
in the 4.0% - 4.5% range.
• Since 2012, the residential recovery has experienced higher demand for both single-family
and multi-family production. It is projected that housing growth in the calendar year 2019
will slow down compared to 2018 levels.
• The average single-family home price in California was $557,600, an increase of 27.1% since
2013.
• San Diego’s population is projected to reach more than 3.8 million by the year 2035.
• The median age in San Diego County is 38.5.
• San Diego County has averaged 31,000 new civilian jobs annually. As a result, the civilian
unemployment rate is below 4%. If the statistics include the military, the unemployment rate
would be lower.
• San Diego County’s housing market will remain stable for single-family and multi-family
production.
• The median price of a detached home in San Diego County is $640,000
• Chula Vista is the largest city in the south county and the District Area encompasses most of
the City east of the I-805. In the 2010-2018 period, the annual population increase was 2,690.
• In eastern Chula Vista, the single-family homes range in price from $497,000-$1,084,000 and
the multi-family homes range in price from $367,000-$542,000.
Future Development
Using the economist’s report, the District’s engineering staff projects that over the next six years the
District will sell another 2,600 meters which translates to 3,230 equivalent dwelling units (EDUs).
These projections have been incorporated in the Five-Year Forecast on page 53.
18
Community Profile
Residential Construction
The following table summarizes the projected units for sale and units for rent from Fiscal Year 2020
through Fiscal Year 2025. It is anticipated that most of the development in the District will be in East
Chula Vista (Otay Ranch). There is a large development in apartments and townhomes to appeal to
the young families.
Projected Units for Sale and Rental
Otay Water District Service Area
FY 2020 through FY 2025
Project 2020 2021 2022 2023 2024 2025 Total
Total Single-Family Units 600 500 400 400 300 300 2,500
Total Multi-Family Units 1,600 1,300 1,100 900 800 700 6,400
Multi-Family Units For Sale 1,200 1,000 800 600 500 400 4,500
Multi-Family Units For Rent 400 300 300 300 300 300 1,900
% Sale 75% 77% 73% 67% 63% 57% 70%
% Rental 25% 23% 27% 33% 37% 43% 30%
Total Units 2,200 1,800 1,500 1,300 1,100 1,000 8,900
% Multi-Family 73% 72% 73% 69% 73% 70% 72%
Source: The Xpera Group, April 2019
Commercial Construction
Commercial construction in the District is projected to be modest during the next six years with
2,245,272 square feet of commercial development in the planning stages and under construction.
Industrial space has the most leasable space with an estimated 1,800,000 square feet, of which
300,000 square feet is currently under construction. There are also 350 total hotel rooms in five
planned hotel projects with 100 rooms that are currently under construction.
Projected Meter Sales in Equivalent Dwelling Unit (EDUs)
73
2
67
4
55
0
52
6
37
8
37
8
0
200
400
600
800
FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
19
Community Profile
Under Construction and Planned Commercial Development
Expected Delivery FY 2020 through FY 2025
Expected
Delivery
Year
2020 2021 2022 2023 2024 2025 TOTAL
Industrial
(Sq. Ft.)
300,000 300,000 300,000 300,000 300,000 300,000 1,800,000
Office
(Sq. Ft.)
_ 10,000 10,000 10,000 150,000 150,000 330,000
Retail (Sq.
Ft.)
20,272 15,000 20,000 20,000 20,000 20,000 115,272
Total (Sq.
Ft.)
320,272 325,000 330,000 330,000 470,000 470,000 2,245,272
Hotels
(Rooms)
_ 150 _ 100 _ 100 350
Source: The Xpera Group April 2019
Miscellaneous Development
The City of Chula Vista has two major upcoming projects that are located in the District’s service
area: University Village and Sunroad East Otay Mesa Business Park (Sunroad Project). The Sunroad
Project is currently planned for a combination of 3,100 multi-family units and 843,000 square feet of
commercial space. University Village is a proposed campus of St. Katherine University which is
currently based in San Marcos. The land is also planned for a total of 1,597 residential units and 29.3
acres of industrial space.
Proposed Miscellaneous Development Activity
Chula Vista/Otay Mesa
Property Location Type Acres Est Date of
Completion
Sunroad East Otay
Mesa Business
Park
125 & Otay
Mesa Road
Mixed use, including 3,100
housing units, 843,000 sf
commercial space
253 N/A
University Village Innovation
Center
University, 1,597 Residential
Units
1,281 N/A
Source: The Xpera Group April 2019
20
Community Profile
The Future
Capital Improvement Program
The District provides water and sewer service to a population of more than 225,000 customers,
including residential, business, government, industrial, and agricultural water users across urban,
suburban, and rural areas. The District’s service area population is projected to grow by 37% to
308,000 residents by 2050. To ensure a reliable water supply and sewer system for the future
including sustaining the current infrastructure, the District has developed several future planning
documents, which provide a guide to defining the District’s proposed projects. These planning
documents include: The District’s 2015 Water Facilities Master Plan Update, Wastewater
Management Plan, 2015 Urban Water Management Plan, 2015 Integrated Water Resources Plan,
and 2019-2022 Strategic Plan.
The major projects planned for delivery over the next six fiscal years include:
• 711-2 Pump Station Replacement (P2578)
• Various Waterline Replacements (11 Total)
• Reservoir Improvements (17 Total)
• Sewer Basin Improvements (S2049, S2050, and S2053)
• 870-2 Pump Station Replacement (P2083)
• Automated Meter Reading (P2604 and R2143) and Meter Replacement (P2594, P2662, R2148,
and R2152)
Otay Mesa Desalination Conveyance and Disinfection System Project (P2451)
The Otay Water District continues its commitment to conserve and recycle water and to diversify the
water resources that serve its customers, thus reducing dependence on traditional water supplies
from the Colorado River and the Sacramento-San Joaquin Delta.
In light of the growing need for new potable water supplies in Mexico and San Diego County, the
proposed Rosarito plant and the District’s Otay Mesa Conveyance and Disinfection System Project
would provide a new drought-proof water supply to its customers. In May 2017, the U.S. Department
of State granted a presidential permit to allow the Otay Water District to build a potable water pipeline
to cross the U.S.-Mexico border. This permit authorized the District to “construct, connect, operate,
and maintain cross-border water pipeline facilities for the importation of desalinated seawater at the
International Boundary between the United States and Mexico in San Diego County, California.”
Although purchasing and transporting water from Aguas de Rosarito’s desalination plant in Rosarito,
Baja California, Mexico, has been a component of the District’s water supply diversification efforts,
the project for the District has been halted. The District is interested in diversifying its water supplies
by purchasing potential excess desalinated ocean water from a future Rosarito desalination plant,
after the project has first satisfied and secured the water needs of its Mexican consumers in northern
Baja California.
21
Community Profile
If the project does move forward, the District’s project has already undergone environmental review
as required by the California Environmental Quality Act and National Environmental Policy Act and
has obtained a U.S. Fish and Wildlife biological permit. The District recognizes that such a project
requires rigorous safeguards and review to ensure the protection of public health and has applied
for a permit from the California Water Resources Control Board’s Division of Drinking Water to ensure
that water imported from Mexico meets the same water quality drinking standards as water from
regional lakes, from the Claude “Bud” Lewis Carlsbad Desalination Plant, and from the City of San
Diego’s Pure Water Program
The District fully understands and respects Baja California’s sovereign decision to either approve or
not approve the project. This interest has been discussed openly and transparently at the District’s
public Board meetings, as has its continued commitment to water conservation, recycling,
diversification, and reducing the District’s reliance on the Colorado River for the future benefit of our
water customers.
If the project advances, San Diego County and the District’s cross-border region would add
desalinated water to the long list of energy, aerospace, medical device, and electronics products that
cross the border every day.
22
Strategic Plan
Strategic Planning Process
The District’s strategic planning process is designed to provide clarity, direction, and focus for its
water service and to ensure the agency is working toward a common goal. The primary purpose
of the Strategic Plan is to ensure alignment of the District’s mission, vision, values, and plan
execution. Lastly, the Strategic Plan helps the District manage its day-to-day operations and services,
and reduce business risk.
The District’s Strategic Plan is developed using the Balanced Scorecard framework. Using this
framework, the District’s Strategic Plan is centered on four perspectives: customer, financial,
internal business process, and learning and growth. The key to this planning framework is that
these perspectives are not developed in isolation of each other, but as a unified set of strategies
and objectives. This unified approach is clearly understood throughout the District and by its
governing Board.
Each of the four perspectives is explained below:
Customer: Focuses on performance related to customer service levels, satisfaction, brand, and
confidence.
Financial: Focuses on the financial performance of the a gency.
Internal Business Process: Focuses on business processes designed to deliver and improve
customer objectives and services.
Learning and Growth: Focuses on the agency’s culture and development of staff to ensure there is
a productive and skilled workforce in place.
In addition, the District uses the American Water Works Association’s (AWWA) utility benchmarking
performance indicators to monitor, track, and improve day-to-day essential tasks and services,
which are collected on a quarterly schedule. Execution of strategic objectives and industry-
based performance indicators are presented bi-annually to the public and Board.
The District’s strategic planning process is a continuation of the 2019-2022 plan, and this plan is
the 6th multi-year plan. Led by the General Manager and management team, strategic sessions
were held to review risks, opportunities, and develop short and long-term goals. The team carefully
examined and prioritized operational and service goals ranging from enhancing customer
engagement to pension liability. In a special workshop held in December 2017, the District’s Board,
along with an outside consultant, reviewed and provided feedback on the 2019-2022 Strategic Plan
and set in motion via the General complete Manager, the direction to prepare, finalize, and
complete the District’s new four-year plan. The complete 2019-2022 Strategic Plan is located
on our website. The following pages reflect the District’s perspectives, goals, key
performance indicators, measurement methods, and targets for each department:
23
Key Performance Indicators: Administrative Services
Performance
Indicator Target
Enterprise
System
Availability
No less than 99.5%
availability per quarter
annually
FY 2018 FY 2019 (1)FY 2020
Target 99.5%99.5%99.5%
Actual 99.5%99.5% 99.5% (2)
Performance
Indicator Target
Employee
Voluntary
Turnover Rate
Less than 5%
turnover annually
FY 2018 FY 2019 (1)FY 2020
Target 5.0%5.0%5.0%
Actual 0.0%3.8% 0.0% (2)
Performance
Indicator Target
Training Hours
per Employee
12 hours or more per
employee annually
FY 2018 FY 2019 (1)FY 2020
Target 12.0 12.0 12.0
Actual 22.9 26.8 12.0 (2)
(1) The first year of the FY 2019-2022 Strategic Plan
(2) FY 2020 projected performance indicator
Le
a
r
n
i
n
g
a
n
d
G
r
o
w
t
h
Goal Measurement
Method
Provide hands-on leadership, support,
and empowerment of staff, in order to
maintain an accountable high-performing
workforce.
Number of voluntary
resignations (not
including retirements)
/Average number of
employees
Le
a
r
n
i
n
g
a
n
d
G
r
o
w
t
h
Goal Measurement
Method
Provide hands-on leadership, support,
and empowerment of staff, in order to
maintain an accountable high-performing
workforce.
Total qualified training
hours for all
employees/ Average
number of full time
employees (FTE)
Strategic Plan
In
t
e
r
n
a
l
B
u
s
i
n
e
s
s
Pr
o
c
e
s
s
e
s
Goal Measurement
Method
Improve business services by continually
improving essential processes, invest in
strategic technology, and achieve new
efficiencies.
99.5% = 3.60 hours of
downtime per
month/1.83 days of
downtime in a year
24
Key Performance Indicators: Administrative Services (continued)
Performance
Indicator Target
Safety
Training
Program
24 hours or more per
field employee
annually
FY 2018 FY 2019 (1)FY 2020
Target 24.0 24.0 24.0
Actual 30.8 35.4 24.0 (2)
Performance
Indicator Target
Injury Incident
Rate(3)
No more than 6.8
incidents per 200,000
hours worked
annually
FY 2018 FY 2019 (1)FY 2020
Target 6.8 6.8 6.8
Actual 4.4 4.4 6.8 (2)
(1) The first year of the FY 2019-2022 Strategic Plan
(2) FY 2020 projected performance indicator
(3) KPI based on calendar year and results would be available at 4th quarter of the following fiscal year
Fi
n
a
n
c
i
a
l
Goal Measurement
Method
Plan and execute sound financial
activities that are essential to running and
sustaining District operations, with the
lowest possible impact to customers.
[200,000 (Number of
injuries and
illnesses)]/Employee
hours worked
Strategic Plan
Le
a
r
n
i
n
g
a
n
d
G
r
o
w
t
h
Goal Measurement
Method
Provide hands-on leadership, support,
and empowerment of staff, in order to
maintain an accountable high-performing
workforce.
Number of safety
training hours/
Number of field
employees (includes
mandated training)
25
Key Performance Indicators: Finance
Performance
Indicator Target
Answer Rate No less than 97% per
quarter annually
FY 2018 FY 2019 (1)FY 2020
Target 97.0%97.0%97.0%
Actual 98.0%98.4% 97.0% (2)
Performance
Indicator Target
Billing
Accuracy
No less than 99.8%
per quarter annually
FY 2018 FY 2019 (1)FY 2020
Target 99.8%99.8%99.8%
Actual 99.98%99.9% 99.8% (2)
Performance
Indicator Target
Percentage of
Customers
Paying Bills
Electronically
No less than 75% per
quarter annually
FY 2018 FY 2019 (1)FY 2020
Target 75.0%75.0%75.0%
Actual 77.1%78.5% 75.0% (2)
(1) The first year of the FY 2019-2022 Strategic Plan
(2) FY 2020 projected performance indicator
Goal
Execute and deliver services that meet or
exceed customer expectations, and
increase customer engagement in order
to improve District services.
Measurement
Method
Plan and execute sound financial activities
that are essential to running and
sustaining District operations, with the
lowest possible impact to customers.
Number of
customers paying
bills electronically/
Total number of
customers
Strategic Plan
Measurement
Method
Number of all calls
answered/Number
of all calls received
Goal Measurement
Method
Cu
s
t
o
m
e
r
Fi
n
a
n
c
i
a
l
Plan and execute sound financial activities
that are essential to running and
sustaining District operations, with the
lowest possible impact to customers.
Number of correct
bills/Number of total
bills
Fi
n
a
n
c
i
a
l
Goal
26
Key Performance Indicators: Finance (continued)
Performance
Indicator Target
Overtime
Percentage
Less than 100% of the
budgeted overtime
per quarter annually
FY 2018 FY 2019 (1)FY 2020
Target 100.0%100.0%100.0%
Actual 100.0%129.0% 100.0% (2)
Performance
Indicator Target
Sewer Rate
Ranking
Bottom 50th percentile
for the 28 sewer
service providers
in San Diego annually
FY 2018 FY 2019 (1)FY 2020
Target 14 14 14
Actual 6 3 3 (2)
Performance
Indicator Target
Water Rate
Ranking
Bottom 50th percentile
for the 22 member
agencies in
San Diego annually
FY 2018 FY 2019 (1)FY 2020
Target 11 11 11
Actual 3 3 3 (2)
(1) The first year of the FY 2019-2022 Strategic Plan
(2) FY 2020 projected performance indicator
Goal Measurement
Method
Plan and execute sound financial activities
that are essential to running and
sustaining District operations, with the
lowest possible impact to customers.
Otay percentage
ranking among
regional agencies
Goal Measurement
Method
Plan and execute sound financial activities
that are essential to running and
sustaining District operations, with the
lowest possible impact to customers.
Otay percentage
ranking or the
average bill for
sewer among
regional agencies
Goal Measurement
Method
Plan and execute sound financial activities
that are essential to running and
sustaining District operations, with the
lowest possible impact to customers.
Fi
n
a
n
c
i
a
l
Fi
n
a
n
c
i
a
l
Fi
n
a
n
c
i
a
l
Actual overtime
costs (including
comp time)
Strategic Plan
27
Key Performance Indicators: Finance (continued)
Performance
Indicator Target
Reserve Level No less than 85%
annually
FY 2018 FY 2019 (1)FY 2020
Target 85.0%85.0%85.0%
Actual 100.0%100.0% 85.0% (2)
Performance
Indicator Target
Distribution
System Loss
Less than 5% per
quarter annually
FY 2018 FY 2019 (1)FY 2020
Target 5.0%5.0%5.0%
Actual 3.3%3.6% 5.0% (2)
Performance
Indicator Target
Accounts per
Full-Time
Employee
(FTE)
409 accounts per
FTE annually
FY 2018 FY 2019 (1)FY 2020
Target 412.0 409.0 409.0
Actual 412.0 410.0 409.0 (2)
(1) The first year of the FY 2019-2022 Strategic Plan
(2) FY 2020 projected performance indicator
Fi
n
a
n
c
i
a
l
Goal
Strategic Plan
Fi
n
a
n
c
i
a
l
Goal Measurement
Method
Plan and execute sound financial activities
that are essential to running and
sustaining District operations, with the
lowest possible impact to customers.
100 [Volume
purchased–(volume
sold + volume
used)/Volume
purchased]
Fi
n
a
n
c
i
a
l
Goal Measurement
Method
Plan and execute sound financial activities
that are essential to running and
sustaining District operations, with the
lowest possible impact to customers.
Potable + Recycled +
Sewer Accounts/
Number of full-time
employees
Measurement
Method
Plan and execute sound financial activities
that are essential to running and
sustaining District operations, with the
lowest possible impact to customers.
Number of reserve
funds that meet or
exceed fund target
levels/Total number
of reserve funds
28
Key Performance Indicators: Finance (continued)
Performance
Indicator Target
O&M Cost per
Account
No more than $570
per account annually
FY 2018 FY 2019 (1)FY 2020
Target $561 $571 $570
Actual $549 $548 $570 (2)
Performance
Indicator Target
Water Debt
Coverage
Ratio
150% excluding
growth revenue
annually
FY 2018 FY 2019 (1)FY 2020
Target 168%150%150%
Actual 200%150% 150% (2)
Performance
Indicator Target
Sewer Debt
Coverage
Ratio (3)
150% excluding
growth revenue
annually
FY 2018 FY 2019 FY 2020(2)
Target NA NA 150%
Actual NA NA 150%(3)
(1) The first year of the FY 2019-2022 Strategic Plan
(2) FY 2020 is the first year for this key performance indicator
(3) FY 2020 projected performance indicator
Fi
n
a
n
c
i
a
l
Goal Measurement
Method
Plan and execute sound financial activities
that are essential to running and
sustaining District operations, with the
lowest possible impact to customers.
Qualified net
operating
revenue/Debt
Service
requirements
Fi
n
a
n
c
i
a
l
Goal Measurement
Method
Plan and execute sound financial activities
that are essential to running and
sustaining District operations, with the
lowest possible impact to customers.
Qualified net
operating
revenues/Debt
service
requirements
Plan and execute sound financial activities
that are essential to running and
sustaining District operations, with the
lowest possible impact to customers.
Total O&M costs/
Number of Accounts Fi
n
a
n
c
i
a
l
Goal Measurement
Method
Strategic Plan
29
Key Performance Indicators: Water Operations
Performance
Indicator Target (1)
Technical
Quality
Complaint
No more than 7.1
complaints per 1,000
customer accounts
annually/7.1
FY 2018 FY 2019 (2)FY 2020
Target 9.00 7.10 7.10
Actual 4.20 3.55 4.0 (3)
Performance
Indicator Target
Planned
Potable Water
Maintenance
Ratio in $
66% of labor dollars
spent on preventative
maintenance per
quarter annually
FY 2018 FY 2019 (2)FY 2020
Target 66.0%66.0%66.0%
Actual 72.0%74.0% 66.0% (3)
Performance
Indicator Target
Planned
Recycled
Maintenance
Ration in $
70% of labor dollars
spent on preventative
maintenance per
quarter annually
FY 2018 FY 2019 (2)FY 2020
Target 70.0%70.0%70.0%
Actual 74.0%74.0% 70.0% (3)
(1) Target utilizes AWWA benchmark
(2) The first year of the FY 2019-2022 Strategic Plan
(3) FY 2020 projected performance indicator
Strategic Plan
Cu
s
t
o
m
e
r
Goal Measurement
Method
Execute and deliver services that meet or
exceed customer expectations, and
increase customer engagement in order
to improve District services.
1,000 (Number of
technical quality
complaints)]/
Number of active
customer accounts
per reporting period
Fi
n
a
n
c
i
a
l
Goal Measurement
Method
Plan and execute sound financial
activities that are essential to running and
sustaining District operations, with the
lowest possible impact to customers.
Total planned
maintenance
cost/Total
maintenance cost
Fi
n
a
n
c
i
a
l
Goal Measurement
Method
Plan and execute sound financial
activities that are essential to running and
sustaining District operations, with the
lowest possible impact to customers.
Total planned
maintenance
cost/Total
maintenance cost
30
Key Performance Indicators: Water Operations (continued)
Performance
Indicator Target
Planned
Wastewater
Maintenance
Ratio in $
77% of labor dollars
spent on preventative
maintenance per
quarter annually
FY 2018 FY 2019 (1)FY 2020
Target 77.0%77.0%77.0%
Actual 82.0%84.0% 77.0% (2)
Performance
Indicator Target
Leak
Detection
Program
At least 20% of system
surveyed for leaks
annually
FY 2018 FY 2019 (1)FY 2020
Target 20.0%20.0%20.0%
Actual 20.0%20.0% 20.0% (2)
Performance
Indicator Target
Direct Cost of
Treatment per
MGD
No more than $1,050
per MG spent on
wastewater treatment
annually
FY 2018 FY 2019(1)FY 2020
Target $1,050 $1,050 $1,050
Actual $1,166 $1,072 $1,050 (2)
(1) The first year of the FY 2019-2022 Strategic Plan
(2) FY 2020 projected performance indicator
Fi
n
a
n
c
i
a
l
Goal Measurement
Method
Plan and execute sound financial
activities that are essential to running and
sustaining District operations, with the
lowest possible impact to customers.
Percentage
distribution system
surveyed for leaks
Fi
n
a
n
c
i
a
l
Goal Measurement
Method
Plan and execute sound financial
activities that are essential to running and
sustaining District operations, with the
lowest possible impact to customers.
Total O&M costs
directly attributable to
sewer treatment/
Total volume
(in MGD)
Strategic Plan
Fi
n
a
n
c
i
a
l
Goal Measurement
Method
Plan and execute sound financial
activities that are essential to running and
sustaining District operations, with the
lowest possible impact to customers.
Total planned
maintenance
cost/Total
maintenance cost
31
Key Performance Indicators: Water Operations (continued)
Performance
Indicator Target
Percent of
Preventative
Maintenance
Completed -
Reclamation
Plant
No less than 90% per
quarter annually
FY 2018 FY 2019 (1)FY 2020
Target 90.0%90.0%90.0%
Actual 98.0%98.0% 90.0% (2)
Performance
Indicator Target
Percent of
Preventative
Maintenance
Completed -
Fleet
Maintenance
No less than 90% per
quarter annually
FY 2018 FY 2019 (1)FY 2020
Target 90.0%90.0%90.0%
Actual 100.0%98.5% 90.0% (2)
Performance
Indicator Target
Percent of
Preventative
Maintenance
Completed -
Pump/Electric
No less than 90% per
quarter annually
FY 2018 FY 2019 (1)FY 2020
Target 90.0%90.0%90.0%
Actual 100.0%100.0% 90.0% (2)
(1) The first year of the FY 2019-2022 Strategic Plan
(2) FY 2020 projected performance indicator
In
t
e
r
n
a
l
B
u
s
i
n
e
s
s
Pr
o
c
e
s
s
e
s
Goal Measurement
Method
Improve business services by continually
improving essential processes, invest in
strategic technology, and achieve new
efficiencies.
Number of PM's
completed/Number
of PM's scheduled to
be completed
In
t
e
r
n
a
l
B
u
s
i
n
e
s
s
Pr
o
c
e
s
s
e
s
Goal Measurement
Method
Improve business services by continually
improving essential processes, invest in
strategic technology, and achieve new
efficiencies.
Number of PM's
completed/Number
of PM's scheduled to
be completed
Strategic Plan
In
t
e
r
n
a
l
B
u
s
i
n
e
s
s
P
r
o
c
e
s
s
e
s
Goal Measurement
Method
Improve business services by continually
improving essential processes, invest in
strategic technology, and achieve new
efficiencies.
Number of PM's
completed/Number
of PM's scheduled to
be completed
32
Key Performance Indicators: Water Operations (continued)
Performance
Indicator Target
System Valve
Exercising
Program
3,080 valves exercised
annually
FY 2018 FY 2019 (1)FY 2020
Target 3,080 3,080 3,080
Actual 3,405 3,298 3,080 (2)
Performance
Indicator Target (3)
Potable Water
Distribution
System
Integrity
No more than 16
leaks or breaks per
100 miles of
distribution piping
annually/16.1
FY 2018 FY 2019 (1)FY 2020
Target 16.0 16.0 16.0
Actual 9.5 8.4 16.0 (2)
Performance
Indicator Target
Recycled
Water System
Integrity
No more than 6.6
leaks or breaks per
100 miles of recycled
distribution system
annually
FY 2018 FY 2019 (1)FY 2020
Target 6.6 6.6 6.6
Actual 2.7 4.5 0.0 (2)
(1) The first year of the FY 2019-2022 Strategic Plan
(2) FY 2020 projected performance indicator
(3) Target utilizes AWWA benchmark
In
t
e
r
n
a
l
B
u
s
i
n
e
s
s
Pr
o
c
e
s
s
e
s
Goal Measurement
Method
Improve business services by continually
improving essential processes, invest in
strategic technology, and achieve new
efficiencies.
[100 (Collection
system failure)]/
Total miles of
collection system
piping
Strategic Plan
In
t
e
r
n
a
l
B
u
s
i
n
e
s
s
Pr
o
c
e
s
s
e
s
Goal Measurement
Method
Improve business services by continually
improving essential processes, invest in
strategic technology, and achieve new
efficiencies.
[100 (Annual total
number of leaks &
breaks)]/
Total miles of
distribution pipes
In
t
e
r
n
a
l
B
u
s
i
n
e
s
s
Pr
o
c
e
s
s
e
s
Goal Measurement
Method
Improve business services by continually
improving essential processes, invest in
strategic technology, and achieve new
efficiencies.
Actual number of
valves exercised
33
Key Performance Indicators: Water Operations (continued)
Performance
Indicator Target (1)
Potable Water
Compliance
Rate
No less than 100%
per quarter
annually/100%
FY 2018 FY 2019 (2)FY 2020
Target 100.0%100.0%100.0%
Actual 100.0%100.0% 100.0% (3)
Performance
Indicator Target (1)
Sewer
Overflow
Rate
0 Overflows per
quarter annually/0
FY 2018 FY 2019 (2)FY 2020
Target 0 0 0
Actual 1 1 0 (3)
Performance
Indicator Target
Emergency
Facility Power
Testing
Test 100% of all
facilities scheduled
per quarter to have all
emergency facilities
tested annually
FY 2018 FY 2019 (2)FY 2020
Target 34 36 36
Actual 36 34 36 (3)
(1) Target utilizes AWWA benchmark
(2) FY 2019 is the first year of the FY 2019-2022 Strategic Plan
(3) FY 2020 projected performance indicator
Strategic Plan
In
t
e
r
n
a
l
B
u
s
i
n
e
s
s
P
r
o
c
e
s
s
e
s
Goal Measurement
Method
Improve business services by continually
improving essential processes, invest in
strategic technology, and achieve new
efficiencies.
[100 (Total number of
sewer
overflows)]/Total
miles of pipe in the
sewage collection
system
In
t
e
r
n
a
l
B
u
s
i
n
e
s
s
Pr
o
c
e
s
s
e
s
Goal Measurement
Method
Improve business services by continually
improving essential processes, invest in
strategic technology, and achieve new
efficiencies.
Number of facilities
and generators
tested/Total facilities
In
t
e
r
n
a
l
B
u
s
i
n
e
s
s
Pr
o
c
e
s
s
e
s
Goal Measurement
Method
Improve business services by continually
improving essential processes, invest in
strategic technology, and achieve new
efficiencies.
All primary health
regulations are met
34
Key Performance Indicators: Water Operations (continued)
Performance
Indicator Target
Main Flushing
and Hydrant
Maintenance
215 or more mains
flushed and fire
hydrants maintained
annually
FY 2018 FY 2019 (1)FY 2020
Target 215 215 215
Actual 443 216 215 (2)
Performance
Indicator Target
Critical Valve
Exercising
631 critical valves
exercised annually
FY 2018 FY 2019 (1)FY 2020
Target 631 631 631
Actual 633 631 631 (2)
Performance
Indicator Target
Tank
Inspection
and Cleaning
No less than 8 potable
water storage tanks
and/or reservoirs
cleaned annually
FY 2018 FY 2019 (1)FY 2020
Target 8 8 8
Actual 8 7 8 (2)
(1) The first year of the FY 2019-2022 Strategic Plan
(2) FY 2020 projected performance indicator
In
t
e
r
n
a
l
B
u
s
i
n
e
s
s
Pr
o
c
e
s
s
e
s
Goal Measurement
Method
Improve business services by continually
improving essential processes, invest in
strategic technology, and achieve new
efficiencies.
Number of tanks
cleaned and
inspected annually
Strategic Plan
In
t
e
r
n
a
l
B
u
s
i
n
e
s
s
Pr
o
c
e
s
s
e
s
Goal Measurement
Method
Improve business services by continually
improving essential processes, invest in
strategic technology, and achieve new
efficiencies.
Number of mains
flushed and fire
hydrants maintained
In
t
e
r
n
a
l
B
u
s
i
n
e
s
s
Pr
o
c
e
s
s
e
s
Goal Measurement
Method
Improve business services by continually
improving essential processes, invest in
strategic technology, and achieve new
efficiencies.
Cumulative number
of mains flushed plus
hydrants maintained
35
Key Performance Indicators: Engineering
Performance
Indicator Target
CIP Project
Expenditures
vs. Budget
95%-100% of
budget, but not to
exceed 100%
annually
FY 2018 FY 2019 (1)FY 2020
Target 95.0%95.0%95.0%
Actual 97.4%104.8% 95.0% (2)
Performance
Indicator Target
Construction
Change Order
Incidence
No more than
5% annually
FY 2018 FY 2019 (1)FY 2020
Target 5.0%5.0%5.0%
Actual 1.3%3.1% 5.0% (2)
Performance
Indicator Target
Mark-out
Accuracy
No less than 100%
per quarter annually
FY 2018 FY 2019 (1)FY 2020
Target 100.0%100.0%100.0%
Actual 100.0%99.96% 100.0% (2)
(1) The first year of the FY 2019-2022 Strategic Plan
(2) FY 2020 projected performance indicator
Fi
n
a
n
c
i
a
l
Goal Measurement
Method
Plan and execute sound financial
activities that are essential to running
and sustaining District operations, with
the lowest possible impact to
customers.
Total cost of change
orders (not including
allowances)/Total original
construction contract
amount (not including
allowances)'
In
t
e
r
n
a
l
B
u
s
i
n
e
s
s
Pr
o
c
e
s
s
e
s
Goal Measurement
Method
Improve business services by
continually improving essential
processes, invest in strategic
technology, and achieve new
efficiencies.
Number of mark-outs
performed without an at-
fault hit/Total number of
mark-outs performed
Strategic Plan
Fi
n
a
n
c
i
a
l
Goal Measurement
Method
Plan and execute sound financial
activities that are essential to running
and sustaining District operations, with
the lowest possible impact to
customers.
Actual quarterly
expenditures/
Annual budget
36
Key Performance Indicators: Engineering (continued)
Performance
Indicator Target
Project
Closeout Time
No more than a
45 day average per
quarter annually
FY 2018 FY 2019 (1)FY 2020
Target 45.0 45.0 45.0
Actual 70.3 37.0 45.0 (2)
Performance
Indicator Target
Annual
Recycled
Water Site
Inspections
100% of recycled
water sites
inspected annually
FY 2018 FY 2019 (1)FY 2020
Target 100.0%100.0%100.0%
Actual 100.0%100.0% 100.0%(2)
Performance
Indicator Target
Recycled
Water
Shutdown
Testing
90% of recycled site
shutdown tests
performed annually
FY 2018 FY 2019 (1)FY 2020
Target 90.0%90.0%90.0%
Actual 86.0%100.0% 90.0% (2)
(1) The first year of the FY 2019-2022 Strategic Plan
(2) FY 2020 projected performance indicator
In
t
e
r
n
a
l
B
u
s
i
n
e
s
s
Pr
o
c
e
s
s
e
s
Goal Measurement
Method
Improve business services by
continually improving essential
processes, invest in strategic
technology, and achieve new
efficiencies.
Percentage of recycled
sites inspected per year
of those required by the
Department of
Environmental Health
In
t
e
r
n
a
l
B
u
s
i
n
e
s
s
Pr
o
c
e
s
s
e
s
Goal Measurement
Method
Improve business services by
continually improving essential
processes, invest in strategic
technology, and achieve new
efficiencies.
Percentage of recycled
water use sites per year
compared to those
scheduled
Strategic Plan
In
t
e
r
n
a
l
B
u
s
i
n
e
s
s
P
r
o
c
e
s
s
e
s
Goal Measurement
Method
Improve business services by
continually improving essential
processes, invest in strategic
technology, and achieve new
efficiencies.
Number of days between
Notice of Substantial
Completion and Notice of
Completion for all
construction projects
within the
quarter/Number of
construction projects
37
Key Performance Indicators: Engineering (continued)
Performance
Indicator Target
Easement
Desktop
Evaluation
and Field
Inspection (1)
100% of easements
evaluated and
inspected annually
FY 2018 FY 2019 (1)(2)FY 2020
Target NA 100.0%100.0%
Actual NA 129.0% 100.0%(3)
(1) The first year of the FY 2019-2022 Strategic Plan
(2) The first year for this key performance measure
(3) FY 2020 projected performance indicator
In
t
e
r
n
a
l
B
u
s
i
n
e
s
s
Pr
o
c
e
s
s
e
s
Goal Measurement
Method
Strategic Plan
Improve business services by
continually improving essential
processes, invest in strategic
technology, and achieve new
efficiencies.
Number of Actual
Easements Evaluated
and Inspected/Total
Number of Easements
38
Financial Summaries
Budget Summary
The FY 2020 Operating Budget is summarized and presented in the Operating Budget Summary- General
Fund on pages 44-45. 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 46 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 Type - All Funds; and Revenues and Expenditures by
Fund; and are presented on pages 47-51.
General Fund Revenues
Potable Water Sales
Potable water sales revenue collected from the sale of water including: system charges, energy charges,
and penalties account for 81.3% of the District’s operating revenues. It is estimated that 26,949.2 acre-
feet of potable water will be sold during FY 2020, which is a decrease of 2,428 acre-feet from FY 2019.
Budgeted revenues from water sales are projected to be $84.0 million, a decrease of 3.5% compared to
FY 2019. The decrease is due to a reduction in budgeted volumes, which are partially offset by a rate
increase. Schedules relating to potable water sales are included in the Potable Revenues and
Expenditures section of this budget.
Recycled Water Sales
Recycled water was not subject to the State Water Resources Control Board’s (SWRCB) drought
mandates. However, the District’s recycled sales continue to be adversely impacted by measures
implemented as a result of the mandate. Recycled water sales revenue is generated from the sale of
3,656.6 acre-feet of recycled water, which is below the pre-mandate volume of 4,748 acre-feet sold in
2014. The FY 2020 sales revenue budget is $9.8 million which is an increase of $413,600 from FY 2019
and includes the incentive credits provided by MWD and CWA.
Sewer Revenues
Sewer charges, which represents 99% of sewer revenue, are the monthly fees collected from residential,
multi-residential, and commercial customers. The remaining 1.0% 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 2020 Sewer Revenues are relatively flat and projected to be $2.9 million.
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 2020 revenue from meter fees are projected to be $229,400 which is
a decrease of $46,000 from FY 2019. 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 2020 capacity fee revenue of $1.87 million is an increase of $215,200 compared to
FY 2019.
39
Financial Summaries
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 $4.6 million which is an increase of $138,400 compared to FY 2019.
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 2014 2015 2016 2017 2018 2019
Gann Limit $ 4,392 $ 4,454 $ 4,673 $ 4,969 $ 5,196 $ 5,430
Appropriations subject to the limit $ 2,968 $ 3,134 $ 3,323 $ 3,551 $ 3,795 $ 3,942
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 $2.1 million in revenues for FY 2020 which is a decrease of $10,700
compared to FY 2019.
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 $367,900 in FY 2020 which is an increase of $120,700 from FY 2019.
General Fund Expenditures
Potable Water Purchases
Water purchases are the expenses of purchasing 28,255.7 acre-feet for the District's potable water supply.
A provision has been made to allow 1,306.5 acre-feet of water for District usage, leakage, and evaporation.
Total Potable Water Purchases are projected to be $37.3 million in FY 2020 which is a decrease of $3.0
million compared to FY 2019.
Recycled Water Purchases
Recycled water purchases are the expenses of purchasing 2,607.2 acre-feet for the District's recycled
water supply which is an increase of 63.1 compared to Fiscal Year 2019. In addition to the purchases
there is a contractual Take-or-Pay payment budgeted for 2,739.8 acre-feet which is 254.9 acre-feet more
than FY 2019. Total Recycled Purchases are projected to be $4.1 million in FY 2020 which is an increase
of $240,300 compared to FY 2019.
40
Financial Summaries
Infrastructure Access Charge
This charge was established in FY 1999 by CWA and is imposed on member agencies as a condition of
maintaining connections to the CWA facilities. It is apportioned based on water meters within each
member agency. Infrastructure access charges are projected at $2.4 million in FY 2020 which is an
increase of $256,800 compared to FY 2019.
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 that are necessary to support the functioning of the CWA. The customer service charge is
allocated among the member agencies based on each agency’s three-year rolling average of member
agency supply purchases from the CWA. Budgeted customer service charges of $1.7 million are relatively
flat compared to FY 2019.
Supply Reliability Charge
This charge was established in FY 2016 by CWA as a fixed charge and became effective January 2016.
The Supply Reliability Charge is set to recover a portion of the fixed costs associated with the CWA’s
highly reliable water supplies, such as desalinated water (Carlsbad Desalination Plant) and Imperial
Irrigation District (IID) water transfer costs. Allocation of this charge is based upon member agencies
share of the rolling five-year average M&I deliveries (agricultural deliveries are not included). The
reliability charge is projected at $2.4 million in FY 2020 which is an increase of $260,400 compared to FY
2019.
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. The emergency storage charge is projected to be $4.6 million in FY 2020 which is an
increase of $57,600 compared to FY 2019.
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 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 $606,600 in FY 2020
which is a decrease of $151,800 compared to FY 2019.
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 $870,000 in
FY 2020, which is a decrease of $165,600 compared to FY 2019.
41
Financial Summaries
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. The
District’s power costs are projected to be relatively flat compared to FY 2019 and will remain at $3.2 million.
Labor and Benefits
Labor and benefits are the wages and fringe benefits for FY 2020 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 are projected to
be $21.2 million, which is a decrease of $954,200 compared to FY 2019.
Administrative Expenses
Administrative expenses are costs incurred by various departments that are directly related to District
operations. Administrative expenses are projected to be $6.3 million in FY 2020, which is an increase of
$180,600 compared to FY 2019. 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 $3.8 million in FY 2020, which
is an increase of $144,600 compared to FY 2019. Additional details are supplied in the Departmental
Operating Budget section.
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 2020, these reserves will be
funded with $2.6 million from the Potable Water Fund, $2.3 million from the Recycled Water Fund, and
$46,000 from the Sewer Fund.
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 2020, these
reserves will be funded with $3.0 million from the Potable Water Fund.
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 2020, these reserves
will be funded with $7.3 million from the Potable Water Fund, $81,100 from the Recycled Water Fund, and
110,300 from the Sewer Fund.
42
Financial Summaries
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 2020, there is no
reserve funding budgeted.
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 to OPEB Trust
For FY 2020, the General Fund is budgeted to fund the OPEB Trust $1.0 million for retiree health liabilities.
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 audited 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, 2019, and the projected balance for June 30, 2020.
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.
43
FY 2018 FY 2019 FY 2020
11-Actual Budget Actual Budget $%
Revenues
Potable Water Sales 82,131,332$ 86,956,300$ 77,974,743$ 83,951,500$ (3,004,800)$ (3.5%)
Recycled Water Sales 10,463,864 9,403,200 8,781,479 9,816,800 413,600 4.4%
Sewer Revenues 2,838,212 2,922,600 2,933,657 2,890,000 (32,600) (1.1%)
Meter Fees 283,500 275,400 220,439 229,400 (46,000) (16.7%)
Capacity Fee Revenues 1,617,128 1,653,700 1,898,333 1,868,900 215,200 13.0%
Tax Revenues 4,500,788 4,477,500 4,673,453 4,615,900 138,400 3.1%
Non-operating Revenues 2,790,479 2,055,200 2,639,856 2,065,900 10,700 0.5%
Interest 212,743 247,200 340,727 367,900 120,700 48.8%
Total Revenues 104,838,046 107,991,100 99,462,687 105,806,300 (2,184,800) (2.0%)
Expenditures
Potable Water Purchases 37,924,950 40,307,700 35,777,445 37,282,800 (3,024,900) (7.5%)
Recycled Water Purchases 3,793,387 3,818,100 3,843,264 4,058,400 240,300 6.3%
CWA - Infrastructure Access Charge 2,071,740 2,124,000 2,127,072 2,380,800 256,800 12.1%
CWA - Customer Service Charge 1,670,281 1,645,800 1,637,269 1,659,600 13,800 0.8%
CWA - Reliability Charge 1,909,909 2,116,800 2,069,007 2,377,200 260,400 12.3%
CWA - Emergency Storage Charge 4,510,642 4,522,200 4,464,397 4,579,800 57,600 1.3%
MWD - Capacity Reservation Charge 735,501 758,400 692,429 606,600 (151,800)(20.0%)
MWD - Net RTS and Standby Charge 1,049,092 1,035,600 925,194 870,000 (165,600)(16.0%)
Subtotal - Water Costs 53,665,502 56,328,600 51,536,077 53,815,200 (2,513,400) (4.5%)
Labor and Benefits 21,223,946 22,111,900 21,981,251 21,157,700 (954,200) (4.3%)
Administrative Expenses 5,306,192 6,153,200 5,733,412 6,333,800 180,600 2.9%
Materials and Maintenance 3,790,205 3,689,500 3,472,162 3,834,100 144,600 3.9%
Power 3,138,776 3,161,400 2,877,016 3,184,700 23,300 0.7%
Subtotal - Operations Costs 33,459,119 35,116,000 34,063,841 34,510,300 (605,700) (1.7%)
DSGeneral Fund Reserve - - - 954,400 954,400 100.0%
Expansion Reserve 3,274,600 2,712,100 2,712,100 4,927,300 2,215,200 81.7%
Bett ResBetterment Reserve 111,100 - - 3,048,000 3,048,000 100.0%
Repl ResReplacement Reserve 9,787,900 12,778,600 12,778,600 7,513,000 (5,265,600) (41.2%)
TOPEBOPEB Reserve 998,000 980,800 980,800 1,038,100 57,300 5.8%
New Supply Reserve 221,000 75,000 75,000 - (75,000) (100.0%)
Subtotal - Reserve Funding 14,392,600 16,546,500 16,546,500 17,480,800 934,300 5.6%
Total Expenditures 101,517,221 107,991,100 102,146,418 105,806,300 (2,184,800) (2.0%)
Excess Revenues (Expenditures)3,320,825$ -$ (2,683,731)$ -$ -$ -
Operating Budget Summary - General Fund
Budget to Budget
VarianceFY 2019
44
Potable Water Sales 83,951,500$ 79.4%
Recycled Water Sales 9,816,800 9.3%
Sewer Revenues 2,890,000 2.7%
Meter Fees 229,400 0.2%
Capacity Fee Revenues 1,868,900 1.8%
Tax Revenues 4,615,900 4.4%
Non-operating Revenues 2,065,900 1.9%
Interest 367,900 0.3%
105,806,300 100.0%
Potable Water Purchases 49,756,800 47.0%
Recycled Water Purchases 4,058,400 3.8%
Power 3,184,700 3.0%
Labor and Benefits 21,157,700 20.0%
Administrative Expenses 6,333,800 6.1%
Materials & Maintenance 3,834,100 3.6%
Reserve Funding 17,480,800 16.5%
105,806,300$ 100.0%
Operating Budget Summary - General Fund
FY 2020 Operating Revenues
FY 2020 Operating Expenditures
45
Potable Recycled Sewer Total
Revenues
Water Sales 83,951,500$ -$ -$ 83,951,500$
Recycled Water Sales - 9,816,800 9,816,800
Sewer Revenues - - 2,890,000 2,890,000
Meter Fees 225,200 4,200 - 229,400
Capacity Fee Revenues 1,868,900 - - 1,868,900
Tax Revenues 4,563,700 - 52,200 4,615,900
Non-operating Revenues 2,032,600 - 33,300 2,065,900
Interest 327,700 24,700 15,500 367,900
Total Revenues 92,969,600 9,845,700 2,991,000 105,806,300
Expenditures
Water Purchases 37,282,800 4,058,400 - 41,341,200
CWA - Infrastructure Access Charge 2,380,800 - - 2,380,800
CWA - Customer Service Charge 1,659,600 - - 1,659,600
CWA - Reliability Charge 2,377,200 - - 2,377,200
CWA - Emergency Storage Charge 4,579,800 - - 4,579,800
MWD - Capacity Reservation Charge 606,600 - - 606,600
MWD - Net RTS and Standby Charge 870,000 - - 870,000
Subtotal - Water Costs 49,756,800 4,058,400 - 53,815,200
Labor and Benefits 18,547,600 1,442,800 1,167,300 21,157,700
Administrative Expenses 5,460,600 591,300 281,900 6,333,800
Materials and Maintenance 2,311,200 331,100 1,191,800 3,834,100
Power 2,434,900 595,500 154,300 3,184,700
Subtotal - Operations Costs 28,754,300 2,960,700 2,795,300 34,510,300
DSGeneral Fund Reserve 556,100 398,300 - 954,400
Expansion Reserve 2,599,900 2,281,400 46,000 4,927,300
Bett ResBetterment Reserve 3,048,000 - - 3,048,000
Repl ResReplacement Reserve 7,321,600 81,100 110,300 7,513,000
TOPEBOPEB Reserve 932,900 65,800 39,400 1,038,100
Subtotal - Reserve Funding 14,458,500 2,826,600 195,700 17,480,800
Total Expenditures 92,969,600 9,845,700 2,991,000 105,806,300
Excess Revenue (Expenditures)-$ -$ -$ -$
FY 2020 Operating Budget Summary by System
46
FY 2018 FY 2020
Actual Budget Actual Budget $%
Revenues
Water Sales 92,595,196$ 96,359,500$ 86,756,222$ 93,768,300$ (2,591,200)$ (2.7%)
Sewer Revenues 2,838,212 2,922,600 2,933,657 2,890,000 (32,600) (1.1%)
Meter Fees 283,500 275,400 220,439 229,400 (46,000) (16.7%)
Capacity Fee Revenues 1,617,128 1,653,700 1,898,333 1,868,900 215,200 13.0%
Tax Revenues 4,500,788 4,477,500 4,673,453 4,615,900 138,400 3.1%
Non-Operating Revenues 2,790,479 2,055,200 2,639,856 2,065,900 10,700 0.5%
Interest 212,743 247,200 340,727 367,900 120,700 48.8%
Total Revenues and Sources 104,838,046 107,991,100 99,462,687 105,806,300 (2,184,800) (2.0%)
Expenditures and Transfers
Water Purchases 53,665,502 56,328,600 51,536,077 53,815,200 (2,513,400) (4.5%)
Power 3,138,776 3,161,400 2,877,016 3,184,700 23,300 0.7%
Labor and Benefits 21,223,946 22,111,900 21,981,251 21,157,700 (954,200) (4.3%)
Administrative Expenses 5,306,192 6,153,200 5,733,412 6,333,800 180,600 2.9%
Materials and Maintenance 3,790,205 3,689,500 3,472,162 3,834,100 144,600 3.9%
Transfers 14,392,600 16,546,500 16,546,500 17,480,800 934,300 5.6%
Total Expenditures and Transfers 101,517,221 107,991,100 102,146,418 105,806,300 (2,184,800) (2.0%)
Excess Revenues (Expenditures)3,320,825$ -$ (2,683,731)$ -$ -$ -
General Fund Revenues, Expenditures and Transfers, in millions ($)
FY 2019
Budget to Budget
Variance
General Fund - Revenues, Expenditures and Transfers
$80
$85
$90
$95
$100
$105
$110
FY 2018-Actual FY 2019-Budget FY 2019-Actual FY 2020-Budget
10
5
10
8
99
10
6
10
2
10
8
10
2
10
6
Revenue Expenditures
47
Actual Projected
Balance Interfund Balance
June 30, 2019 Revenues Expenditures Transfers (1)June 30, 2020
General Fund
Potable 29,420,348$ 92,969,600$ 92,969,600$ -$ 29,420,348$
Recycled 2,113,494 9,845,700 9,845,700 - 2,113,494
Sewer 516,357 2,991,000 2,991,000 - 516,357
Total General Fund 32,050,199 105,806,300 105,806,300 - 32,050,199
Expansion Fund
Water (2)29,173 3,564,200 5,566,100 5,332,300 3,359,573
Sewer (22,018) - 2,500 46,000 21,482
Total Expansion Fund 7,155 3,564,200 5,568,600 5,378,300 3,381,055
Betterment Fund
Potable 1,199,381 843,200 4,638,400 3,048,000 452,181
Recycled 213,758 9,200 152,700 (202,800) (132,542)
Sewer(3)791,173 6,700 1,022,000 413,000 188,873
Total Betterment Fund 2,204,312 859,100 5,813,100 3,258,200 508,512
Replacement Fund
Potable 13,196,508 3,043,200 15,238,100 20,221,600 21,223,208
Recycled 4,139,494 1,189,000 264,100 283,900 5,348,294
Sewer 1,314,149 61,800 1,155,000 6,252,200 6,473,149
Total Replacement Fund 18,650,151 4,294,000 16,657,200 26,757,700 33,044,651
New Supply Fund
Water (2)2,944,134 664,300 665,100 (170,000) 2,773,334
Total New Supply Fund 2,944,134 664,300 665,100 (170,000) 2,773,334
OPEB Fund 276,168 4,700 1,038,100 1,038,100 280,868
Debt Service Fund(4)18,955,825 7,933,800 2,000,600 (18,781,500) 6,107,525
Total(3)75,087,944$ 123,126,400$ 137,549,000$ 17,480,800$ 78,146,144$ 13,239,132$
(1) The total for interfund transfers does not net to $0 because some transfers are already reflected in the Operating
Revenues and Expenditures for General Fund as follows:
General Fund Reserve (954,400)$
Expansion Reserve (4,927,300)
Betterment Reserve (3,048,000)
Replacement Reserve (7,513,000)
OPEB Reserve (1,038,100)
Total (17,480,800)$
(2) Potable and Recycled funds are combined for expansion purposes.
Fund Balance Summary by Fund
Fiscal Year 2020 Budget
(4) The beginning balance includes $12.9 million of remaining debt proceeds from the 2018 Water Revenue Bond issuance and the revenue
includes a $6.0 million sewer debt issuance. The District has budgeted to expend these remaining 2018 issuance proceeds in FY 2020, which are
presented in this table as a transfer from the Debt Service fund to the Potable and Sewer Replacement Funds.
(3) The fund balance is anticipated to change more than 10% due to the District's ongoing currrent year CIP expenditures funded by current years
revenues, prior year debt issuances, current year debt issuance proceeds, as well as transfers made in accordance with the Reserve Policy
found on pages 173-214.
48
FY 2018 FY 2020
Actual Budget Actual Budget
Revenues and Fund Sources
Water Sales 92,595,196$ 96,359,500$ 86,756,222$ 93,768,300$
Sewer Revenues 2,838,212 2,922,600 2,933,657 2,890,000
Meter Fees 283,500 275,400 220,439 229,400
Capacity Fee Revenues 1,617,128 1,653,700 1,898,333 1,868,900
Capacity Fees for Maintenance 10,528,705 9,635,800 8,592,732 7,584,700
Tax Revenues 4,500,788 4,477,500 4,673,453 4,615,900
Availability Fees 491,545 460,500 541,553 486,400
Non-Operating Revenues 2,790,479 2,055,200 741,523 2,065,900
GO Bond Debt Tax Revenues 678,655 675,700 720,975 1,663,200
Bond Proceeds and BABs Subsidy (1)772,000 30,712,000 35,090,475 6,778,700
CALTRANS Reimbursement - - 416,780 -
Interest 983,369 784,200 1,263,967 1,175,000
Annexation Fees 13,502 - 23,774 -
Total Revenue and Fund Sources 118,093,079 150,012,100 143,873,883 123,126,400
Expenditures and Fund Uses
Water Purchases 53,665,502 56,328,600 51,536,077 53,815,200
Power 3,138,776 3,161,400 2,877,016 3,184,700
Labor Expenses 21,149,123 22,111,900 21,981,251 21,157,700
Administrative Expenses 5,306,194 6,153,200 5,733,412 6,333,800
Materials and Maintenance 3,790,205 3,689,500 3,472,162 3,834,100
CIP Expenses(2)20,689,189 24,900,600 13,700,240 20,475,500
Debt Service(3)7,531,188 8,986,900 15,353,837 10,229,100
OPEB Retiree Expenses & PERS Funding (4)937,790 980,800 32,784,019 1,038,100
Total Expenditures and Fund Uses 116,207,967 126,312,900 147,438,014 120,068,200
Surplus/(Deficit)1,885,112$ 23,699,200$ (3,564,131)$ 3,058,200$
Revenues and Expenditures by Type - All Funds
FY 2019
(1) FY 2019 Actual includes $34.9 million Water Revenue Bond Debt proceeds and $778,700 BABs subsidy.
(2) Includes $13.9 million of potable CIP expenditures, which were funded by bond proceeds.
(3) Includes $6.9 million current refunding of the 1996 Variable Rate Certificates of Participation.
(4) Includes $31.8 million advance funding to reduce the District's unfunded pension liability.
49
FY 2018 FY 2020
Actual Budget Actual Budget
Revenues
General Fund
Potable 91,402,076$ 95,486,000$ 87,207,461$ 92,969,600$
Recycled 10,499,083 9,434,300 8,823,257 9,845,700
Sewer 2,936,887 3,070,800 3,431,969 2,991,000
Total General Fund (1)104,838,046 107,991,100 99,462,687 105,806,300
Expansion Fund
Potable 4,226,840 4,173,500 7,277,777 3,280,600
Recycled 271,302 273,200 280,422 283,600
Sewer (78) (100) (206) -
Total Expansion Fund 4,498,064 4,446,600 7,557,993 3,564,200
Betterment Fund
Potable 815,165 780,900 756,413 843,200
Recycled 12,037 9,500 (124,162) 9,200
Sewer 58,187 11,000 56,923 6,700
Total Betterment Fund 885,389 801,400 689,174 859,100
Replacement Fund
Potable 4,805,340 34,030,000 30,573,100 3,043,200
Recycled 367,980 266,300 1,188,081 1,189,000
Sewer 110,117 48,100 1,870,965 61,800
Total Replacement Fund 5,283,437 34,344,400 33,632,146 4,294,000
New Supply Fund
Potable 844,646 793,300 700,092 623,700
Recycled 50,168 1,500 51,384 40,600
Total New Supply Fund 894,814 794,800 751,476 664,300
OPEB and PERS Fund 932,834 909,300 997,783 4,700
Debt Service Fund 760,495 724,500 782,624 7,933,800
Total Revenues 118,093,079$ 150,012,100$ 143,873,883 123,126,400$
Revenues and Expenditures by Fund
FY 2019
Note: This schedule excludes interfund transfers.
50
FY 2018 FY 2020
Actual Budget Actual Budget
Revenues and Expenditures by Fund
FY 2019
Expenditures
General Fund
Potable 77,785,243$ 82,090,100$ 76,465,387$ 78,511,100$
Recycled 6,335,639 6,612,300 6,422,232 7,019,100
Sewer 2,928,919 2,742,200 2,712,299 2,795,300
Total General Fund 87,049,801 91,444,600 85,599,918 88,325,500
Expansion Fund
Potable 4,306,253 4,636,500 8,524,513 4,421,500
Recycled 975,700 1,131,500 940,283 1,144,600
Sewer 4,767 - 12,393 2,500
Total Expansion Fund 5,286,720 5,768,000 9,477,189 5,568,600
Betterment Fund
Potable 2,028,877 2,396,500 1,755,307 4,638,400
Recycled 306,069 273,400 118,359 152,700
Sewer 1,776,338 2,063,000 2,330,636 1,022,000
Total Betterment Fund 4,111,284 4,732,900 4,204,302 5,813,100
Replacement Fund
Potable 14,871,843 19,520,800 3,272,806 15,238,100
Recycled 70,089 527,100 2,083,774 264,100
Sewer 2,972,954 2,420,000 2,826,426 1,155,000
Total Replacement Fund 17,914,886 22,467,900 8,183,006 16,657,200
New Supply Fund
Potable 50,469 40,600 29,461 660,500
Recycled 111,500 126,400 (490,199) 4,600
Total New Supply Fund 161,969 167,000 (460,738) 665,100
OPEB and PERS Fund 839,697 980,800 32,784,019 1,038,100
Debt Reserve Fund 843,610 751,700 7,650,318 2,000,600
Total Expenditures 116,207,967 126,312,900 147,438,014 120,068,200
Surplus/(Deficit)1,885,112$ 23,699,200$ (3,564,131) 3,058,200$
Note: This schedule excludes interfund transfers.
51
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52
Five-Year Forecast
$-
$500
$1,000
$1,500
$2,000
$2,500
FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
$1,761 $1,861 $1,967 $2,080 $2,198 $2,323
P
e
r
A
c
r
e
F
o
o
t
Projected Cost of Water
The District updates its Rate Model to build the budget for the upcoming fiscal year and to forecast
the five subsequent years, FY 2021 through FY 2025. This financial forecast is designed to provide a
general understanding of how revenues and expenditures are expected to influence the District.
This forecast also highlights the funding of 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 process on page 6. Water cost estimates are obtained from District’s water suppliers, CWA
and MWD. Power cost inflators are obtained from San Diego Gas and Electric, the District’s power
supplier. Labor and benefit cost inflators are based on the Memorandum of Understanding with
the District’s labor union as well as estimates from the District’s health providers, and the actuarial
reports related to the District’s pension and OPEB plans. Other general inflators are derived from
consumer price index statistical data for the region.
The District must look at replacing existing aging and future 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, replacement, and expansion needs from now until ultimate build-out.
Capital projects and their funding are reviewed annually by the Engineering Department. As new
capital assets are brought into service, they are managed by a GIS-centric Asset Management
System, CityWorks, which is crucial to tracking and maintaining the history of 723 miles of potable
pipelines, 104 miles of recycled pipelines, 84 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 cost of water is based
on CWA’s Rate Modeling Program.
This CWA 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).
53
FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
Revenues
Water/Sewer Rates 100,575,700$ 105,060,700$ 109,979,300$ 115,704,100$ 121,722,600$
Meter Fees 229,600 233,300 235,600 238,800 242,400
Capacity Fee Revenues 1,878,200 1,897,000 1,916,000 1,935,200 1,954,600
Non-operating Revenues 2,416,700 2,523,000 2,649,700 2,586,700 2,199,300
Tax Revenues 4,666,200 4,749,100 4,833,800 4,920,000 5,008,100
Interest Income 381,200 423,500 444,600 492,000 516,800
Total Revenues 110,147,600 114,886,600 120,059,000 125,876,800 131,643,800
46,097,800$ 45,871,800$ 46,162,500$ 47,270,500$
FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
Expenditures
Water Cost 57,025,800 60,386,700 63,998,900 67,981,400 72,212,600
Power 3,339,400 3,473,600 3,613,200 3,758,300 3,909,200
Labor and Benefits 21,728,100 22,638,700 23,204,500 23,807,500 24,448,200
Administrative Expenses 6,520,400 6,712,800 6,911,100 7,115,100 7,325,200
Materials & Maintenance 3,917,400 4,072,900 4,235,100 4,404,100 4,616,800
Net Reserve Funding 17,616,500 17,601,900 18,096,200 18,810,400 19,131,800
Total Expenditures and Transfers 110,147,600 114,886,600 120,059,000 125,876,800 131,643,800
Excess Revenues (Expenditures)-$ -$ -$ -$ -$
-$ -$ -$ -$ -$
General Fund Forecast
This forecast incorporates both cost increases for expenditures and rate increases for revenues,as well as growth
projections.
Expenditures and Transfers
Revenues
$80
$100
$120
$140
FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
11
0
11
5
12
0
12
6
13
2
$1
1
0
$1
1
5
$1
2
0
$1
2
6
$1
3
2
Revenues and Expenditures Forecast, in millions ($)
Revenues Expenditures
54
FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
Fund Balance
General Fund 23,145,100$ 24,336,200$ 25,502,200$ 26,775,400$ 28,137,000$
Betterment Fund 796,800 969,600 866,200 997,600 997,500
Replacement Fund 40,418,300 36,356,100 35,164,800 33,670,700 34,797,200
Expansion Fund 524,800 1,370,200 1,361,100 399,700 397,200
New Supply Fund 3,360,000 3,801,400 4,309,900 4,707,000 5,092,300
Debt Reserve 4,797,800 4,677,700 4,549,300 4,550,100 4,550,900
Total Fund Balance 73,042,800$ 71,511,200$ 71,753,500$ 71,100,500$ 73,972,100$
(293,418) (298,657) (304,141) (309,863) (315,687)
Fund Balances Forecast
Fund Balances by Fund
$0
$20
$40
$60
$80
FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
Fund Balances Forecast, in millions ($)
General Fund Betterment Fund Replacement Fund Expansion Fund Debt Reserve New Supply Fund
55
Debt Management
The District has been successful in financing capital improvements through a combination of long-
term and short-term financing plans. Financial tools used include General Obligation Bonds,
Certificates of Participation (COPs), Build America Bonds (BABs), Water Revenue Bonds (WRBs),
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.
In September, 2018, Standard & Poor’s (S&P) affirmed the District’s AA rating and stable outlook. The
rating was based on the broad and diverse service area, strong financial risk profile, and good
operational management policies and practices.
In November 2018, the District issued $34.9 million of Water Revenue Refunding Bonds.
Approximately $28 million will be used to fund the construction of water storage, treatment and
transmission facilities. The remaining $6.9 million was used to refinance the District’s 1996 Variable
Rate Certificate of Participation to a fixed rate.
The District achieved a 212% actual debt coverage ratio, with growth revenues, for fiscal year 2019,
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. On the water side, in FY 2020 the District does not anticipate issuing new debt. The
chart on the following page shows the District’s projected debt coverage ratio, for the water side of
the District, from FY 2020 through FY 2025. The debt coverage ratios are growing as rates are set to
ensure adequate funding of the reserves and the District’s 2013 COPs fully mature in FY 2024.
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.
56
Debt Management
Projected Water Debt Coverage Ratio
For sewer, the District plans to issue $6.0 million to fund the Campo Road Sewer Replacement project
(S2024). Currently, sewer has no other debt outstanding. The proposed increases in the sewer rates
are necessary to ensure the sewer debt coverage ratio meets the minimum covenant of 125%. The
chart below shows the District’s projected debt coverage ratio, for the sewer side of the District, from
FY 2020 through FY 2025. The debt coverage ratios are growing as rates are set to ensure adequate
fund of reserves.
Projected Sewer Debt Coverage Ratio
2.44 2.49 2.36 2.36 2.30
2.63
-
0.50
1.00
1.50
2.00
2.50
3.00
FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
Co
v
e
r
a
g
e
R
a
t
i
o
Projected Ratio Minimum Covenant = 1.25
2.90
1.26
1.56 1.78 1.96 2.01
-
0.50
1.00
1.50
2.00
2.50
3.00
3.50
FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
Co
v
e
r
a
g
e
R
a
t
i
o
Projected Ratio Minimum Covenant = 1.25
57
Outstanding
Year Maturity Original Balance
#Incurred Description Date Amount 6/30/2020
1 2009 General Obligation (GO) Bonds August 31, 2022 7,780,000$ 2,755,000$
2 2010 Water Revenue Bonds Series A September 1, 2024 13,840,000 6,905,000
3 2010 Water Revenue Bonds Series B (1)September 1, 2040 36,355,000 36,355,000
4 2013 Water Revenue Refunding Bonds (2)September 1, 2023 7,735,000 3,875,000
5 2016 Water Revenue Refunding Bonds (3)September 1, 2036 33,385,000 30,125,000
6 2018 Water Revenue Refunding Bonds (4)September 1, 2043 32,435,000 32,435,000
Total Outstanding Debt 131,530,000$ 112,450,000$
Total Assessed Valuation - FY 2019
Percentage of Original Debt to Assessed Valuation 0.43%0.10%
Debt Limit per District Debt Policy (% of Assessed Valuation)15.00%15.00%
(1)The 2010B Water Revenue Bonds are Taxable Build America Bonds.
(2)The 2013 Water Revenue Refunding Bonds were an advanced refunding of the 2004 COPs, which was a
refunding of the 1993 COPs.
(3)The 2016 Water Revenue Refunding Bonds were an advanced refunding of the 2007 COPs.
(4)The 2018 Water Revenue Refunding Bonds include a $6.9 million current refunding of the 1996 Variable
Rate COPs.
Total Outstanding Debt, in millions ($)
Note: The accounting for debt proceeds and payments is described in the District's Reserve Policy found on
pages 173 -214.
30,767,749,324$ 14,327,195,366$
Schedule of Outstanding Debt
All Debts GO Bonds
$0
$15
$30
$45
$60
$75
2009 GOBs 2010A
WRBs
2010B
WRBs(1)
2013
WRRBs
2016
WRRBs
2018
WRRBs
Principal Interest
58
2009 GOBs 2010A WRBs 2010B WRBs(1)2013 WRRBs(2)2016 WRRBs(3)2018 WRRBs(4)Total
650,000 1,015,000 - 715,000 1,100,000 1,245,000 4,725,000
680,000 1,065,000 - 745,000 1,155,000 1,310,000 4,955,000
705,000 1,120,000 - 775,000 1,215,000 1,370,000 5,185,000
720,000 1,175,000 - 805,000 1,285,000 1,455,000 5,440,000
- 1,235,000 - 835,000 1,350,000 1,650,000 5,070,000
- 1,295,000 - - 1,420,000 1,730,000 4,445,000
- - 1,365,000 - 1,495,000 1,820,000 4,680,000
- - 1,450,000 - 1,570,000 1,915,000 4,935,000
- - 1,545,000 - 1,645,000 1,030,000 4,220,000
- - 1,640,000 - 1,715,000 1,080,000 4,435,000
- - 1,745,000 - 1,785,000 1,135,000 4,665,000
- - 1,855,000 - 1,855,000 1,195,000 4,905,000
- - 1,975,000 - 1,955,000 1,245,000 5,175,000
- - 2,105,000 - 2,005,000 1,295,000 5,405,000
- - 2,245,000 - 2,055,000 1,350,000 5,650,000
- - 2,390,000 - 2,115,000 1,400,000 5,905,000
- - 2,550,000 - 2,170,000 1,460,000 6,180,000
- - 2,715,000 - 2,235,000 1,270,000 6,220,000
- - 2,895,000 - - 1,235,000 4,130,000
- - 3,085,000 - - 1,185,000 4,270,000
- 3,290,000 - 1,210,000 4,500,000
- 3,505,000 1,290,000 4,795,000
- 985,000 985,000
- 775,000 775,000
- - - - 800,000 800,000
2,755,000$ 6,905,000$ 36,355,000$ 3,875,000$ 30,125,000$ 32,435,000$ 112,450,000$
(1)The 2010B Water Revenue Bonds are Taxable Build America Bonds.
(2)The 2013 Water Revenue Refunding Bonds were an advanced refunding of the 2004 COPs, which was a
refunding of the 1993 COPs.
(3)The 2016 Water Revenue Refunding Bonds were an advanced refunding of the 2007 COPs.
(4)The 2018 Water Revenue Refunding Bonds include a $6.9 million current refunding of the 1996 Variable
Rate COPs.
Projected Principal Payments by Debt Issuance
FY
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2044
2040
2041
2042
2043
Total
Combined Debt Service through Maturity, in millions ($)
$0
$2
$4
$6
$8
$10
$12
20
2
0
20
2
1
20
2
2
20
2
3
20
2
4
20
2
5
20
2
6
20
2
7
20
2
8
20
2
9
20
3
0
20
3
1
20
3
2
20
3
3
20
3
4
20
3
5
20
3
6
20
3
7
20
3
8
20
3
9
20
4
0
20
4
1
20
4
2
20
4
3
20
4
4
Interest
Principal
59
2009 GOBs 2010A WRBs 2010B WRBs(1)2013 WRRBs(2)2016 WRRBs(3)2018 WRRBs (4)Total
97,200 323,113 2,371,868 140,700 1,119,831 1,424,913 5,477,624
70,600 271,113 2,371,868 111,500 1,063,456 1,361,038 5,249,574
42,900 216,488 2,371,868 81,100 1,004,206 1,294,038 5,010,600
14,400 159,113 2,371,868 49,500 941,706 1,223,413 4,760,001
- 98,863 2,371,868 16,700 875,831 1,145,788 4,509,050
- 33,994 2,371,868 - 806,581 1,061,288 4,273,731
- - 2,328,345 - 733,706 972,538 4,034,589
- - 2,238,589 - 657,081 879,163 3,774,834
- - 2,143,093 - 584,931 805,538 3,533,562
- - 2,041,540 - 517,731 752,788 3,312,060
- - 1,933,609 - 447,731 697,413 3,078,753
- - 1,818,823 - 374,931 639,163 2,832,917
- - 1,694,728 - 313,394 584,388 2,592,510
- - 1,560,558 - 263,894 533,588 2,358,039
- - 1,417,508 - 211,859 480,688 2,110,055
- - 1,265,086 - 155,806 425,688 1,846,580
- - 1,102,634 - 96,888 368,488 1,568,010
- - 929,495 - 33,525 313,888 1,276,907
- - 745,010 - - 266,875 1,011,885
- 548,357 - 221,563 769,920
- 338,716 - 175,931 514,647
- 115,262 - 128,200 243,462
- - - - - 82,700 82,700
- - - - - 47,500 47,500
- - - - - 16,000 16,000
225,100$ 1,102,681$ 36,452,563$ 399,500$ 10,203,090$ 15,902,569$ 64,285,507$
(1)The 2010B Water Revenue Bonds are Taxable Build America Bonds.
(2)The 2013 Water Revenue Refunding Bonds were an advanced refunding of the 2004 COPs, which was a
refunding of the 1993 COPs.
(3)The 2016 Water Revenue Refunding Bonds were an advanced refunding of the 2007 COPs.
(4)The 2018 Water Revenue Refunding Bonds include a $6.9 million current refunding of the 1996 Variable
Rate COPs.
2040
2041
Projected Interest Payments by Debt Issuance
FY
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2044
Total
2035
2036
2037
2038
2042
2043
2039
60
Potable Revenues and Expenditures
Potable Revenues
The District will provide water service to approximately 51,034 potable customers by the end of FY
2020. Ninety-one percent of the potable customers are residential and the remaining 9.0% are
comprised of multi-residential, business and publicly-owned, and irrigation and commercial
agricultural. The District expects nominal growth in the customer base of 1.0% for FY 2020. Unit
sales are anticipated to decrease 8.3% compared to the previous year's budget, and increase by
3.6% versus the previous year’s actual unit sales.
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/CWA fixed charge, and the District
system charge. The MWD/CWA fixed charges are based on meter size. The District system fee is
based on meter size and customer type. These fees generate 33.8% of the potable water sales
revenue. Water rates, energy charges, and penalties generate the remaining 66.2% of revenues
necessary to fund operations.
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 the District customer accounts when payments are delinquent. These
penalty revenues are budgeted based on historical trends.
Potable Expenditures
In FY 2020, the District estimates to purchase 28,255.7 acre-feet of potable water, sufficient to meet
the demands of its customers. Provisions have been made for District usage and loss in the amount
of 1,306.5 acre-feet.
Today, the District purchases 100% of its potable water from CWA. In the past the District purchased
only treated water through the CWA’s treated water Pipeline No. 4. In 2010, to diversify the water
supply and to become less reliant on CWA’s Pipeline No. 4, the District entered an agreement with
CWA to purchase water treated by neighboring Helix Water District at their Levy Water Treatment
Plant. This treated water from Flow Control Facility No. 14 gives the District redundancy in water
supply. This is beneficial as it enhances reliability of water deliveries 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-inch pipeline.
Although the District does not own a direct water supply reservoir to capture 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.
61
Potable Revenues and Expenditures
The reservoirs of member agencies and CWA serve multiple functions including: surface water
capture, seasonal water storage and carryover storage to provide a reliable water source in dry years.
The CWA’s emergency and carryover storage project interconnected reservoirs, pipelines and pump
stations make water available to the San Diego region if imported water deliveries are interrupted,.
The CWA purchases water for the 24 member agencies from MWD and the Imperial Irrigation
District. 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. The Carlsbad Desalination Plant began
commercial operations in December 2015 and is the largest seawater desalination plant in the
nation. It produces approximately 56,000 acre-feet per year of drinking water for the San Diego
region. It currently meets about 10% of the county’s water demand.
62
FY 2018 FY 2019 FY 2020
11-Actual Budget Actual Budget $%
Revenues
##Water Sales 82,131,332$ 86,956,300$ 77,974,743$ 83,951,500$ (3,004,800)$ (3.5%)
##Meter Fees 275,748 270,300 213,770 225,200 (45,100) (16.7%)
##Capacity Fee Revenues 1,612,361 1,653,700 1,885,940 1,868,900 215,200 13.0%
Tax Revenues 4,448,598 4,378,300 4,621,635 4,563,700 185,400 4.2%
##Non-operating Revenues 2,763,966 2,019,700 2,218,262 2,032,600 12,900 0.6%
##Interest 170,071 207,700 293,111 327,700 120,000 57.8%
Total Revenues 91,402,076 95,486,000 87,207,461 92,969,600 (2,516,400) (2.6%)
Expenditures
Potable Water Purchases 37,924,950 40,307,700 35,777,445 37,282,800 (3,024,900) (7.5%)
##CWA - Infrastructure Access Charge 2,071,740 2,124,000 2,127,072 2,380,800 256,800 12.1%
##CWA - Customer Service Charge 1,670,281 1,645,800 1,637,269 1,659,600 13,800 0.8%
##CWA - Reliability Charge 1,909,909 2,116,800 2,069,007 2,377,200 260,400 12.3%
##CWA - Emergency Storage Charge 4,510,642 4,522,200 4,464,397 4,579,800 57,600 1.3%
##MWD - Capacity Reservation Charge 735,501 758,400 692,429 606,600 (151,800) (20.0%)
##MWD-Net RTS and Standby Charge 1,049,092 1,035,600 925,194 870,000 (165,600) (16.0%)
Subtotal - Water Costs 49,872,115 52,510,500 47,692,813 49,756,800 (2,753,700) (5.2%)
##Labor and Benefits 19,013,759 19,755,200 19,555,682 18,547,600 (1,207,600) (6.1%)
##Administrative Expenses 4,631,573 5,193,600 5,032,115 5,460,600 267,000 5.1%
##Materials and Maintenance 2,043,346 2,218,900 1,987,515 2,311,200 92,300 4.2%
##Power 2,299,270 2,411,900 2,197,262 2,434,900 23,000 1.0%
11-1311-5133Subtotal - Operations Costs 27,987,948 29,579,600 28,772,574 28,754,300 (825,300) (2.8%)
DS General Fund Reserve - - - 556,100 556,100 100.0%
##Expansion Reserve - - - 2,599,900 2,599,900 100.0%
Bett ResBetterment Reserve - - - 3,048,000 3,048,000 100.0%
Repl ResReplacement Reserve 9,787,900 12,489,600 12,489,600 7,321,600 (5,168,000) (41.4%)
TOPEBOPEB Reserve 920,000 906,300 906,300 932,900 26,600 2.9%
Subtotal - Reserve Funding 10,707,900 13,395,900 13,395,900 14,458,500 1,062,600 7.9%
Total Expenditures 88,567,963 95,486,000 89,861,287 92,969,600 (2,516,400) (2.6%)-
Excess Revenues (Expenditures)2,834,113$ -$ (2,653,826)$ -$ -$ -
Operating Budget Summary - Potable
FY 2019 Budget to Budget
Variance
63
FY 2018 FY 2020
Actual Budget Actual Budget $ %
Water Sales 54,262,051$ 56,119,900$ 47,517,849$ 52,353,600$ (3,766,300)$ -6.7%
System Charges 13,078,386 15,340,700 15,383,214 16,078,600 737,900 4.8%
Energy Charges 2,040,410 2,335,300 2,123,039 2,366,100 30,800 1.3%
MWD and CWA Fixed Charges 11,920,268 12,268,400 12,149,114 12,258,800 (9,600) -0.1%
Penalties 830,217 892,000 801,527 894,400 2,400 0.3%
Total Water Sales 82,131,332$ 86,956,300$ 77,974,743$ 83,951,500$ (3,004,800)$ -3.5%
Water Sales 52,353,600$ 62.4%
System Charges 16,078,600 19.2%
Energy Charges 2,366,100 2.8%
MWD and CWA Fixed Charges 12,258,800 14.6%
Penalties 894,400 1.0%
Total Water Sales 83,951,500$ 100.0%
Water Sales: Water 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.
System Charges: 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 Charges: The energy pumping charge is $ .06 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 Fixed Charges: 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.
Penalties: Charges and penalties are imposed on customer accounts for late payments and returned checks.
FY 2020 Classification of Water Sales
FY 2019
Classification of Water Sales - Potable
Budget to Budget
Variance
64
Tier Rate Structure Current Approved Accounts (2)Unit Sales Budget
Residential 46,463 6,508,300 28,216,600$
1 - 10 3.17$ 3.31$
11 - 22 5.65 5.91
over 23 hcf 7.30 7.63
Multi-Residential 826 1,583,400 6,625,600
0 - 42.96 3.09
5 - 95.37 5.61
over 10 hcf 6.60 6.90
Business and Publicly-Owned
All units 3.75 3.92 1,459 1,866,200 7,147,600
Irrigation and Commercial Agricultural
All units 5.47 5.72 1,454 1,781,200 9,911,200
Total 50,202 11,739,100 51,901,000$
Government Fee 0.42 0.42 - - 452,600
Total Water Sales 50,202 11,739,100 52,353,600$
Units %
Residential 6,508,300 55.4%
Multi-Residential 1,583,400 13.5%
Business and Publicly-Owned 1,866,200 15.9%
Irrigation and Commercial 1,781,200 15.2%
Agricultural
Total Water Sales 11,739,100 100.0%
(2) Does not include fire service.
Water Sales Summary by Service Class - Potable
FY 2020
FY 2020 Unit Sales by Service Class
(1)Approved rates for water billed beginning in January 2020.
Water Rates
(1)
65
FY 2015 FY 2016 FY 2017 FY 2018 FY 2020
Budget Actual Budget
Residential 7,248,930 5,832,549 6,266,299 6,761,701 7,057,600 6,187,132 6,508,300
Multi-Residential 1,482,502 1,417,211 1,516,436 1,602,807 1,612,700 1,598,041 1,583,400
Business and Publicly-Owned 2,049,294 1,827,965 1,815,635 1,924,280 2,005,600 1,874,312 1,866,200
Irrigation and Commercial Agricultural 1,963,699 1,397,565 1,651,961 1,938,595 2,120,800 1,667,267 1,781,200
Total Unit Sales 12,744,425 10,475,290 11,250,331 12,227,383 12,796,700 11,326,752 11,739,100
FY 2015 FY 2016 FY 2017 FY 2018 FY 2020
Budget Actual Budget
Residential 44,941 45,038 45,086 45,518 46,018 45,972 46,463
Multi-Residential 806 817 802 820 816 821 826
Business and Publicly-Owned 2,208 2,216 2,227 2,271 2,265 2,302 2,291
Irrigation and Commercial Agricultural 1,353 1,354 1,387 1,436 1,445 1,460 1,454
Total Meter Count 49,308 49,425 49,502 50,045 50,544 50,555 51,034
Unit Sales History and Meter Count by Customer Class - Potable
Unit Sales in thousands and Meter Count Trends
Actual
Actual
FY 2019
FY 2019
5,000
15,000
25,000
35,000
45,000
55,000
-
5,000
10,000
15,000
20,000
FY 2015
Actual
FY 2016
Actual
FY 2017
Actual
FY 2018
Actual
FY 2019
Actual
FY 2020
Budget
Potable Meters Potable Unit Sales
Units Meters M
66
FY 2019 FY 2020 FY 2019 FY 2020
Meter Size Count Count Current Approved Budget Budget $%
Residential
0.75 45,004 45,369 18.05$ 18.87$ 9,265,600$ 9,984,400$ 718,800$ 7.8%
1.00 992 1,071 25.51 26.67 628,500 335,300 (293,200) -46.7%
1.50 18 19 44.13 46.13 9,400 10,300 900 9.6%
2.00 4 4 66.47 69.49 3,100 3,300 200 6.5%
Sub-total 46,018 46,463 9,906,600 10,333,300 426,700 4.3%
Multi-Residential
0.75 35 33 39.69 41.49 22,000 16,100 (5,900) -26.8%
1.00 160 152 56.05 58.59 134,700 104,600 (30,100) -22.3%
1.50 245 247 96.98 101.38 279,800 294,000 14,200 5.1%
2.00 247 257 146.04 152.67 424,800 459,700 34,900 8.2%
3.00 54 61 276.96 289.53 165,800 198,900 33,100 20.0%
4.00 65 66 424.28 443.54 324,800 343,700 18,900 5.8%
6.00 7 7 833.54 871.38 68,700 71,600 2,900 4.2%
8.00 3 3 1,324.59 1,384.73 46,800 48,800 2,000 4.3%
10.00 - - 1,897.47 1,983.62 - - - 0.0%
Sub-total 816 826 1,467,400 1,537,400 70,000 4.8%-
Business and Publicly-Owned
0.75 326 329 37.38 39.08 147,000 150,900 3,900 2.7%
1.00 359 355 52.79 55.19 231,000 230,000 (1,000) -0.4%
1.50 312 303 91.35 95.50 331,300 339,700 8,400 2.5%
2.00 391 392 137.57 143.82 637,800 661,800 24,000 3.8%
3.00 35 38 260.89 272.73 107,500 121,700 14,200 13.2%
4.00 28 28 399.65 417.79 131,800 137,300 5,500 4.2%
6.00 9 9 785.17 820.82 83,200 86,700 3,500 4.2%
8.00 - - 1,247.71 1,304.36 - - -
10.00 5 5 1,787.32 1,868.46 105,200 109,700 4,500 4.3%
Sub-total 1,465 1,459 1,774,800 1,837,800 63,000 3.5%-
Irrigation and Commercial Agricultural
0.75 119 124 31.57 33.00 44,200 48,000 3,800 8.6%
1.00 288 290 44.59 46.61 151,200 158,400 7,200 4.8%
1.50 389 392 77.15 80.65 353,400 370,700 17,300 4.9%
2.00 464 463 116.17 121.44 634,800 660,100 25,300 4.0%
3.00 3 3 220.32 230.32 7,800 8,100 300 3.8%
4.00 176 175 337.53 352.85 699,600 724,900 25,300 3.6%
6.00 6 7 663.10 693.20 46,900 57,000 10,100 21.5%
8.00 - - 1,053.74 1,101.58 - - -
10.00 - - 1,509.46 1,577.99 - - -
Sub-total 1,445 1,454 1,937,900 2,027,200 89,300 4.6%
Fire Services
Less than 3"50 50 21.57 22.55 - 13,200 13,200
More than 4"750 782 29.06 30.38 203,200 278,900 75,700
Sub-total 800 832 203,200 292,100 88,900 43.8%
Set-up Fees 10.00 10.00 50,800 50,800 -
Total 50,544 51,034 15,340,700$ 16,078,600$ 737,900$ 4.8%
(1) Approved rates for water billed beginning in January 2020.
System Charges - Potable
System Charges Budget to Budget Variance
(1)
67
FY 2020 FY 2019 FY 2020
Meter Size Count Current Approved Budget Budget $%
0.75 45,848 15.10$ 15.56$ 8,078,800$ 8,379,400$ 300,600$ 3.7%
1.00 1,861 28.04 28.89 1,003,500 635,500 (368,000) -36.7%
1.50 957 63.40 65.31 734,700 738,700 4,000 0.5%
2.00 1,115 107.84 111.10 1,448,400 1,464,100 15,700 1.1%
3.00 102 229.36 236.29 247,100 278,000 30,900 12.5%
4.00 100 367.29 378.38 441,300 447,400 6,100 1.4%
6.00 18 751.85 774.56 164,300 164,900 600 0.4%
8.00 3 1,214.16 1,250.83 44,200 44,400 200 0.5%
10.00 5 1,747.63 1,800.41 106,100 106,400 300 0.3%
Total 50,009 12,268,400$ 12,258,800$ (9,600)$ -0.1%
(1) Construction Meters, Fire Services, and Recycled Meters are exempt from MWD and CWA Fixed Charges.
(2) Approved rates for water billed beginning in January 2020.
Historical MWD and CWA Fixed Charges, in millions ($)
Budget to Budget
Variance
MWD and CWA Fixed Charges (Pass-Through) - Potable
MWD and CWA Fixed Charges
$0
$2
$4
$6
$8
$10
$12
$14
FY 2015
Actual
FY 2016
Actual
FY 2017
Actual
FY 2018
Actual
FY 2019
Actual
FY 2020
Budget
(1)(2)
68
Meter Size Meter Sales Installation Fee Meter Fee Total Fees Budget
0.75 600 112.11$ 236.25$ 348.36$ 209,000$
1.00 1 112.11 304.86 416.97 400
1.50 1 112.11 495.51 607.62 600
2.00 1 112.11 710.01 822.12 800
3.00 5 674.99 2,212.68 2,887.67 14,400
4.00 - 674.99 3,843.08 4,518.07 -
6.00 - 1,066.20 6,638.04 7,704.24 -
8.00 - 1,634.92 8,293.74 9,928.66 -
10.00 - 1,634.92 11,927.94 13,562.86 -
Total 608 225,200$
Meter Fees - Potable
Meter Fees: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.
FY 2020
69
FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020
Budget
Water Sales 44,025,774$ 37,243,504$ 46,265,872$ 54,262,051$ 47,517,849$ 52,353,600$
System Charges 12,380,370 13,391,005 12,243,766 13,078,386 15,383,214 16,078,600
Energy Charges 2,134,865 2,151,538 2,334,565 2,040,410 2,123,039 2,366,100
MWD and CWA Fixed Charges 10,846,411 11,850,406 12,398,886 11,920,268 12,149,114 12,258,800
Penalties 894,569 776,704 734,261 830,217 801,527 894,400
Total Potable Revenues 70,281,989$ 65,413,157$ 73,977,350$ 82,131,332$ 77,974,743$ 83,951,500$
Revenue History - Potable, in millions ($)
Revenue History - Potable
Actual
$-
$20
$40
$60
$80
$100
FY 2015
Actual
FY 2016
Actual
FY 2017
Actual
FY 2018
Actual
FY 2019
Actual
FY 2020
Budget
Water Sales System Charges Energy Charges MWD & CWA Fixed Charges Penalties
70
FY 2020 FY 2020
Budget Actual Budget Budget Actual Budget $ %
Potable Water Purchases (CWA):
Rate Effective January 1,305.00$ 1,306.47$ 1,337.00$ 32.00$ 2.5%
Budgeted Sales 29,377.2 26,002.8 26,949.2 38,401,000$ 33,973,956$ 35,558,600$ (2,842,400)$ -7.4%
District & Unbilled Usage (1)225.2 166.0 176.3 294,400 216,947 232,900 (61,500) -20.9%
Water Loss 1,233.4 1,216.0 1,130.2 1,612,300 1,586,542 1,491,300 (121,000) -7.5%
Total Variable Charges 30,835.8 27,384.8 28,255.7 40,307,700$ 35,777,445$ 37,282,800$ (3,024,900) -7.5%
CWA and MWD Fixed Charges:
CWA - Infrastructure Access Charge 2,124,000$ 2,127,072$ 2,380,800$ 256,800$ 12.1%
CWA - Customer Service Charge 1,645,800 1,637,269 1,659,600 13,800 0.8%
CWA - Emergency Storage Charge 4,522,200 4,464,397 4,579,800 57,600 1.3%
CWA - Reliability Fixed Charge 2,116,800 2,069,007 2,377,200 260,400 12.3%
MWD - Capacity Reservation Charge 758,400 692,429 606,600 (151,800) -20.0%
MWD - Readiness-to-Serve Charge 1,035,600 925,194 870,000 (165,600) -16.0%
Total Fixed Charges 12,202,800$ 11,915,368$ 12,474,000$ 271,200$ 2.2%
Total Variable and Fixed Charges 52,510,500$ 47,692,813$ 49,756,800$ (2,753,700)$ -5.2%
Average Cost Per Acre-Foot 1,703$ 1,742$ 1,761$
(1) Excludes potable supplement to recycled system.
Water Purchases and Related Costs - Potable
Budget to Budget
VarianceAcre Feet Purchase Costs
FY 2019 FY 2019
-
8,000
16,000
24,000
32,000
FY 2015
Actual
FY 2016
Actual
FY 2017
Actual
FY 2018
Actual
FY 2019
Actual
FY 2020
Budget
Historical Potable Water Purchases, in acre-feet
71
FY 2015 FY 2016 FY 2017 FY 2018 FY 2020
Budget Actual Budget $ %
Administrative Buildings 216,744$ 212,448$ 196,288$ 188,067$ 215,100$ 168,286$ 183,800$ (31,300)$ -14.6%
Potable Transmission 2,063,318 1,804,810 1,981,178 2,111,203 2,196,800 2,028,976 2,251,100 54,300 2.5%
Total Power Costs 2,280,062$ 2,017,258$ 2,177,466$ 2,299,270$ 2,411,900$ 2,197,262$ 2,434,900$ 23,000$ 1.0%
Power Costs - Potable
Budget to Budget
Variance
Historical Power Costs, in thousands ($)
Actual
FY 2019
$0
$500
$1,000
$1,500
$2,000
$2,500
FY 2015
Actual
FY 2016
Actual
FY 2017
Actual
FY 2018
Actual
FY 2019
Actual
FY 2020
Budget
Administrative Buildings Potable Transmission
72
FY 2018 FY 2019 FY 2020
Actual Budget Actual Budget $%
Administrative Expenditures
Directors' Fees 35,252$ 70,000$ 55,925 80,000$ 10,000$ 14.3%
Travel and Memberships 184,597 246,900 220,516 262,600 15,700 6.4%
Conservation and Outreach 159,161 174,900 157,644 171,400 (3,500) (2.0%)
General Office Expense 251,686 270,400 232,821 270,900 500 0.2%
Equipment 1,391,869 1,328,200 1,374,465 1,346,600 18,400 1.4%
Fees 591,312 619,900 666,276 674,200 54,300 8.8%
Services 1,546,133 1,764,400 1,687,171 1,844,300 79,900 4.5%
Training 91,076 134,100 109,005 173,100 39,000 29.1%
Utilities 13,639 14,900 13,894 15,800 900 6.0%
Insurance and Legal 1,040,154 1,341,100 1,218,137 1,420,700 79,600 5.9%
Miscellaneous Expense 109 100 - - (100) (100.0%)
Bad Debt Expense 128,836 99,800 111,678 104,700 4,900 4.9%
Subtotal before Overhead 5,433,824 6,064,700 5,847,532 6,364,300 299,600 4.9%
Less: Overhead Allocation (802,251) (871,100) (815,417) (903,700) (32,600) 3.7%
Total Expenditures 4,631,573$ 5,193,600$ 5,032,115$ 5,460,600$ 267,000$ 5.1%
4,403,925$ 5,400,900$ 7,065,669$ 7,785,000$
Directors' Fees 80,000$ 1.3%
Travel and Memberships 262,600 4.1%
Conservation and Outreach 171,400 2.7%
General Office Expense 270,900 4.1%
Equipment 1,346,600 21.2%
Fees 674,200 10.6%
Services 1,844,300 29.2%
Training 173,100 2.7%
Utilities 15,800 0.2%
Insurance and Legal 1,420,700 22.3%
Bad Debt Expense 104,700 1.6%
6,364,300 100.0%
Less: Overhead Allocation (903,700)
Total Administrative Expenses 5,460,600$
Administrative Expenditures - Potable
Budget to Budget
Variance
FY 2020 Administrative Expenditures - Potable
FY 2019
73
FY 2018 FY 2019 FY 2020
Actual Budget Actual Budget $%
Materials and Maintenance
Fuel and Oil 158,593$ 189,200$ 179,711$ 189,200$ -$ 0.0%
Meters and Materials 273,009 286,000 243,489 251,000 (35,000) (12.2%)
Fleet Parts and Equipment 118,113 139,700 123,525 135,300 (4,400) (3.1%)
Infrastructure Equipment & Supplies 334,294 409,500 402,932 394,800 (14,700) (3.6%)
Chemicals 160,213 204,600 117,883 194,400 (10,200) (5.0%)
Safety Equipment 50,782 56,800 51,876 76,500 19,700 34.7%
Laboratory Equipment and Supplies 57,210 38,700 40,087 45,700 7,000 18.1%
Other Materials and Supplies 186,720 180,600 245,919 200,600 20,000 11.1%
Building and Grounds Materials 98,242 63,500 66,428 68,000 4,500 7.1%
Contracted Services 606,170 650,300 515,665 755,700 105,400 16.2%
Total Expenditures 2,043,346$ 2,218,900$ 1,987,515$ 2,311,200$ 92,300$ 4.2%
Fuel and Oil 189,200$ 8.2%
Meters and Materials 251,000 10.9%
Fleet Parts and Equipment 135,300 5.9%
Infrastructure Equipment and Supplies 394,800 17.1%
Chemicals 194,400 8.4%
Safety Equipment 76,500 3.3%
Laboratory Equipment and Supplies 45,700 2.0%
Other Materials and Supplies 200,600 8.7%
Building and Grounds Materials 68,000 2.9%
Contracted Services 755,700 32.6%
Total Expenditures 2,311,200$ 100.0%
Materials and Maintenance Expenditures - Potable
Budget to Budget
Variance
FY 2020 Materials and Maintenance Expenditures - Potable
FY 2019
74
Potable Water Service Area
75
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76
Recycled Revenues and Expenditures
In 1980, the District began operation of the Ralph W. Chapman Water Recycling Facility. 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
tanks to keep the process in balance. The secondary effluent flowing over the weirs is now ready for
the next step. Sludge is discharged to the City of San Diego Metropolitan Wastewater (Metro)
system.
77
Recycled Revenues and Expenditures
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). 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 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 12.0% 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. The District
operates the largest recycled water distribution system in San Diego County and will supply
approximately 3,656.6 acre-feet of recycled water to 731 landscaping and construction customers by
the end of Fiscal Year 2020. 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 expires June 30, 2024, allowing 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.
78
FY 2018 FY 2019 FY 2020
31-Actual Budget Actual Budget $%
Revenues
Recycled Water Sales 10,463,864$ 9,403,200$ 8,781,479$ 9,816,800$ 413,600$ 4.4%
Meter Fees 7,752 5,100 6,669 4,200 (900) (17.6%)
Non-operating Revenues - - 1,470 - - -
Interest 27,467 26,000 33,639 24,700 (1,300) (5.0%)
Total Revenues 10,499,083 9,434,300 8,823,257 9,845,700 411,400 4.4%
Expenditures
Recycled Water Purchases 3,793,387 3,818,100 3,843,264 4,058,400 240,300 6.3%
Labor and Benefits 1,141,154 1,159,600 1,343,434 1,442,800 283,200 24.4%
Administrative Expenses 414,857 675,700 486,328 591,300 (84,400) (12.5%)
Materials and Maintenance 320,732 355,000 213,027 331,100 (23,900) (6.7%)
Power 665,509 603,900 536,179 595,500 (8,400) (1.4%)
11-1311-5133Subtotal - Operations Costs 2,542,252 2,794,200 2,578,968 2,960,700 166,500 6.0%
DSGeneral Fund Reserve - - - 398,300 398,300 100.0%
Expansion Reserve 3,274,600 2,712,100 2,712,100 2,281,400 (430,700) (15.9%)
Repl ResReplacement Reserve - - - 81,100 81,100 100.0%
TOPEBOPEB Reserve 42,100 34,900 34,900 65,800 30,900 88.5%
NSFNew Supply Reserve 221,000 75,000 75,000 - (75,000) (100.0%)
Subtotal - Reserve Funding 3,537,700 2,822,000 2,822,000 2,826,600 4,600 0.2%
Total Expenditures 9,873,339 9,434,300 9,244,232 9,845,700 411,400 4.4%
625,744$ -$ (420,975)$ -$ -$ - Excess Revenues/(Expenditures)
Operating Budget Summary - Recycled
FY 2019 Budget to Budget
Variance
79
FY 2018 FY 2020
Actual Budget Actual Budget $%
Water Sales 7,883,748$ 6,838,800$ 6,347,342$ 7,187,000$ 348,200$ 5.1%
System Charges 594,049 804,300 798,349 827,600 23,300 2.9%
Energy Charges 347,841 343,800 315,385 360,900 17,100 5.0%
MWD and CWA Rebates 1,600,214 1,383,500 1,292,330 1,407,800 24,300 1.8%
Penalties 38,012 32,800 28,073 33,500 700 2.1%
Total Recycled Water Sales 10,463,864$ 9,403,200$ 8,781,479$ 9,816,800$ 413,600$ 4.4%
Water Charges 7,187,000$ 73.3%
System Charges 827,600 8.4%
Energy Charges 360,900 3.7%
MWD and CWA Rebates 1,407,800 14.3%
Penalties 33,500 0.3%
9,816,800$ 100%
Water Sales: Water 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.
System Charges: 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 Charges: The energy pumping charge is $ .06 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 $185 from MWD for every acre-foot (AF) of recycled water sold.
Penalties: Charges and penalties are imposed on customer accounts for late payments and returned checks.
Budget to Budget
Variance
FY 2020 Classification of Water Sales
Classification of Water Sales - Recycled
FY 2019
80
Current Approved (1)Accounts Unit Sales Budget
Recycled Irrigation
All units 4.41$ 4.65$ 730 1,443,200 6,481,900$
Recycled Commercial
All units 3.12 3.29 1 149,600 475,100
Total 731 1,592,800 6,957,000$
Government Fee 0.42 0.42 - - 230,000
Total Water Sales 731 1,592,800 7,187,000
Units %
Recycled Irrigation 1,443,200 91%
Recycled Commercial 149,600 9%
1,592,800 100%
(1) Approved rates for water billed beginning in January 2020.
FY 2020
Water Sales Summary by Meter Size - Recycled
Water Rates
FY 2020 Unit Sales by Meter Size
(1)
81
FY 2015 FY 2016 FY 2017 FY 2018 FY 2020
Budget Actual Budget
Recycled Irrigation 1,723,386 1,357,347 1,393,468 1,588,141 1,429,800 1,313,652 1,443,200
Recycled Commercial 118,570 234,330 232,300 222,361 135,500 148,980 149,600
Total Unit Sales 1,841,956 1,591,677 1,625,768 1,810,502 1,565,300 1,462,632 1,592,800
FY 2015 FY 2016 FY 2017 FY 2018 FY 2020
Budget Actual Budget
Recycled Irrigation 703 706 719 723 727 725 730
Recycled Commercial 2 2 2 1 2 1 1
Total Meter Count 705 708 721 724 729 726 731
Unit Sales History and Meter Count by Customer Class - Recycled
Unit Sales in thousands and Meter Count Trends
FY 2019
FY 2019
Actual
Actual
-
150
300
450
600
750
100
500
900
1,300
1,700
2,100
FY 2015
Actual
FY 2016
Actual
FY 2017
Actual
FY 2018
Actual
FY 2019
Actual
FY 2020
Budget
MetersUnits
Meter Count Recycled Unit Sales
82
FY 2020 FY 2019 FY 2020
Meter Size Meter Count Current Approved Budget Budget $%
Irrigation
0.75 3 32.20$ 33.95$ 1,100$ 1,200$ 100$ 9.1%
1.00 108 45.48 47.95 59,000 59,950 950 1.6%
1.50 405 78.70 82.97 376,000 391,300 15,300 4.1%
2.00 200 118.51 124.94 269,800 290,650 20,850 7.7%
3.00 4 224.75 236.94 10,600 11,100 500 4.7%
4.00 8 344.31 362.99 40,600 34,000 (6,600) -16.3%
6.00 2 686.76 724.02 16,200 16,900 700 4.3%
8.00 - 1,074.91 1,133.22 - - - -
10.00 - 1,539.79 1,623.32 - - - -
Sub-total 730 773,300$ 805,100$ 31,800$ 4.1%
Commercial
0.75 - 38.14$ 40.21$ - - - -
1.00 - 53.86 56.78 - - - -
1.50 - 93.21 98.27 - - - -
2.00 - 140.38 148.00 - - - -
3.00 - 266.21 280.65 - - - -
4.00 - 407.80 429.92 - - - -
6.00 - 801.16 844.62 9,500 - (9,500) -100.0%
8.00 - 1,273.13 1,342.20 - - - -
10.00 1 1,823.75 1,922.69 21,500 22,500 1,000 4.7%
Sub-total 1 31,000 22,500 (8,500) -27.4%
Total 731 804,300$ 827,600$ 23,300$ 2.9%
(1) Approved rates for water billed beginning in January 2020.
System Charges - Recycled
System Charges Budget to Budget Variance
(1)
83
Meter Size Meter Sales Installation Fee Meter Fee Total Fees Budget
0.75 - 112.11$ 236.25$ 348.36$ -$
1.00 2 112.11 304.86 416.97 800
1.50 3 112.11 495.51 607.62 1,800
2.00 2 112.11 710.01 822.12 1,600
3.00 - 674.99 2,212.68 2,887.67 -
4.00 - 674.99 3,843.08 4,518.07 -
6.00 - 1,066.20 6,638.04 7,704.24 -
8.00 - 1,634.92 8,293.74 9,928.66 -
10.00 - 1,634.92 11,927.94 13,562.86 -
Total 7 4,200$
Meter Fees - Recycled
Meter Fees: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.
FY 2020
84
FY 2015 FY 2016 FY 2017 FY 2018 FY 2020
Budget
Water Sales 6,412,122$ 6,240,661$ 7,431,235$ 7,883,748$ 6,347,342$ 7,187,000$
System Charges 431,121 471,962 434,775 594,049 798,349 827,600
Energy Charges 369,302 379,026 417,595 347,841 315,385 360,900
MWD and CWA Rebates 1,611,764 1,396,472 1,436,936 1,600,214 1,292,330 1,407,800
Penalties 28,701 38,921 22,259 38,012 28,073 33,500
Total Recycled Revenues 8,853,010$ 8,527,042$ 9,742,800$ 10,463,864$ 8,781,479$ 9,816,800$
Revenue History - Recycled
Revenue History - Recycled, in millions ($)
FY 2019
Actual
$-
$2
$4
$6
$8
$10
FY 2015
Actual
FY 2016
Actual
FY 2017
Actual
FY 2018
Actual
FY 2019
Actual
FY 2020
Budget
Water Sales System Charges Energy Charges MWD and CWA Rebates Penalties
85
FY 2020 FY 2020
Budget Actual Budget Budget Actual Budget $ %
Rate Per Acre Feet 756.00$ 755.34$ 756.00$ -$ 0.0%
Recycled Water Purchases 2,544.1 2,683.2 2,607.2 1,923,500$ 2,026,665$ 1,971,100$ 47,600$ 2.5%
Meter Fee $1,333.75 monthly 16,000 16,005 16,000 - 0.0%
Take-or-pay contract (1)2,484.9 2,383.8 2,739.8 1,878,600 1,800,594 2,071,300 192,700 10.3%
Total 5,029.0 5,067.0 5,347.0 3,818,100$ 3,843,264$ 4,058,400$ 240,300$ 6.3%
Average Cost Per Acre-Foot (Effective Rate)1,500.76$ 1,432.37$ 1,556.59$
(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.
HISTORICAL RECYCLED WATER PURCHASES, IN ACRE-FEET
Water Purchases - Recycled
FY 2019 FY 2019 Budget to Budget
Acre Feet Purchase Costs Variance
-
500
1,000
1,500
2,000
2,500
3,000
3,500
FY 2015
Actual
FY 2016
Actual
FY 2017
Actual
FY 2018
Actual
FY 2019
Actual
FY 2020
Budget
86
FY 2015 FY 2016 FY 2017 FY 2018 FY 2020
Budget Actual Budget $ %
Total Power Cost 600,799$ 526,842$ 590,035$ 665,509$ 603,900$ 536,179$ 595,500$ (8,400)$ -1.4%
Power Costs - Recycled
FY 2019 Budget to Budget
Variance
Historical Power Costs, in thousands ($)
Actual
$0
$100
$200
$300
$400
$500
$600
$700
FY 2015
Actual
FY 2016
Actual
FY 2017
Actual
FY 2018
Actual
FY 2019
Actual
FY 2020
Budget
87
FY 2018 FY 2019 FY 2020
Actual Budget Actual Budget $%
Administrative Expenditures
General Office Expense 86$ -$ -$ -$ -$ 0.0%
Equipment 10,541 1,300 4,291 7,500 6,200 476.9%
Fees 25,630 23,600 24,340 20,500 (3,100) (13.1%)
Services 116,813 289,500 109,005 138,500 (151,000) (52.2%)
Insurance and Legal (1)74,899 175,000 129,404 175,000 - 0.0%
Subtotal before Overhead 227,969 489,400 267,040 341,500 (147,900) (30.2%)
Add: Overhead Allocation 186,888 186,300 219,288 249,800 63,500 34.1%
Total Expenditures 414,857$ 675,700$ 486,328$ 591,300$ (84,400)$ (12.5%)
Equipment 7,500$ 1.3%
Fees 20,500 3.5%
Services 138,500 23.4%
Insurance and Legal 175,000 29.6%
Overhead Allocation 249,800 42.2%
Total Expenditures 591,300$ 100.0%
(1) Legal expenses pertaining to the City of San Diego Recycled Water Rate Lawsuit.
FY 2020 Administrative Expenditures - Recycled
Administrative Expenditures - Recycled
Budget to Budget
Variance FY 2019
88
FY 2018 FY 2019 FY 2020
Actual Budget Actual Budget $%
Materials and Maintenance
Fuel and Oil 18,229$ 29,300$ 17,548$ 31,800$ 2,500$ 8.5%
Meters and Materials 3,061 7,500 2,285 7,500 - 0.0%
Infrastructure Equipment & Supplies 117,421 67,500 62,487 102,800 35,300 52.3%
Chemicals 137,034 167,200 85,225 146,000 (21,200) (12.7%)
Safety Equipment 1,384 4,500 3,040 7,000 2,500 55.6%
Laboratory Equipment and Supplies 4,100 4,200 4,559 4,400 200 4.8%
Other Materials and Supplies 6,059 6,500 4,781 4,500 (2,000) (30.8%)
Contracted Services 33,444 68,300 33,102 27,100 (41,200) (60.3%)
Total Expenditures 320,732$ 355,000$ 213,027$ 331,100$ (23,900)$ (6.7%)
Fuel and Oil 31,800$ 9.6%
Meters and Materials 7,500 2.3%
Infrastructure Equipment & Supplies 102,800 31.0%
Chemicals 146,000 44.1%
Safety Equipment 7,000 2.1%
Laboratory Equipment and Supplies 4,400 1.3%
Other Materials and Supplies 4,500 1.4%
Contracted Services 27,100 8.2%
Total Expenditures 331,100$ 100.0%
Materials and Maintenance Expenditures - Recycled
Budget to Budget
Variance
FY 2020 Materials and Maintenance Expenditures - Recycled
FY 2019
89
Recycled Water Service Area
90
Sewer Revenues and Expenditures
The District provides sewer service to approximately 15,300 customers through 4,729 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 97.3% of the customer base.
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 treatment plant
where the District produces recycled water, see page 77 outlining the sewer process. The by-product
of the treatment process is called sludge and it is discharged through County’s transmission system
into the City of San Diego Metropolitan Wastewater (Metro) 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 $600,900 for FY
2020. Additionally, the District Is budgeted to pay $251,100 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 FY 2020.
To meet State of California requirements, customers must pay their fair share of sewer costs. The
District is required to set sewer rates in accordance with the State’s Revenue Program Guidelines. In
Fiscal Year 2018, 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 changes in rates, fees, and
charges were 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. Due to their higher discharge and
strength, non-residential customers (comprising 1.6% of the customer base) comprise 12.9% of the
total sewer charges. The formula for sewer rates is shown on pages 99-100.
91
FY 2018 FY 2019 FY 2020
21-Actual Budget Actual Budget $%
Revenues
#Sewer Revenues 2,838,212$ 2,922,600$ 2,933,657$ 2,890,000$ (32,600)$ (1.1%)
#Capacity Fee Revenues 4,767 - 12,393 - - -
Tax Revenues 52,190 99,200 51,818 52,200 (47,000) (47.4%)
#Non-operating Revenues 26,513 35,500 420,124 33,300 (2,200) (6.2%)
#Interest 15,205 13,500 13,977 15,500 2,000 14.8%
Total Revenue 2,936,887 3,070,800 3,431,969 2,991,000 (79,800) (2.6%)
Expenditures
#Labor and Benefits 1,069,033 1,197,100 1,082,135 1,167,300 (29,800) (2.5%)
#Administrative Expenses 259,762 283,900 214,969 281,900 (2,000) (0.7%)
#Materials and Maintenance 1,426,127 1,115,600 1,271,620 1,191,800 76,200 6.8%
#Power 173,997 145,600 143,575 154,300 8,700 6.0%
11-1311-5133Subtotal - Operations Costs 2,928,919 2,742,200 2,712,299 2,795,300 53,100 1.9%
#Expansion Reserve - - - 46,000 46,000 100.0%
Bett ResBetterment Reserve 111,100 - - - - -
Repl ResReplacement Reserve - 289,000 289,000 110,300 (178,700) (61.8%)
TOPEBOPEB Reserve 35,900 39,600 39,600 39,400 (200) (0.5%)
Subtotal - Reserve Funding 147,000 328,600 328,600 195,700 (132,900) (40.4%)
Total Expenditures 3,075,919 3,070,800 3,040,899 2,991,000 (79,800) (2.6%)
(139,032)$ -$ 391,070$ -$ -$ -
Excess Revenue/(Expenditures)
Operating Budget Summary - Sewer
FY 2019 Budget to Budget
Variance
92
FY 2020 FY 2020
Accounts Current Approved(1)Budget Actual Budget $ %
Residential 4,605 2.67$ 2.93$ 1,412,300$ 1,419,600$ 1,382,000$ (30,300)$ -2.1%
Multi-Residential 50 2.67 2.93 198,500 199,500 193,100 (5,400) -2.7%
Commercial
Low Strength 45 2.67 2.93 49,500 49,800 67,100 17,600 35.6%
Medium Strength 12 3.31 3.64 15,800 15,900 34,700 18,900 119.6%
High Strength 7 4.56 5.01 28,000 28,100 24,300 (3,700) -13.2%
Schools 6 2.67 2.93 91,800 92,300 97,300 5,500 6.0%
Churches 4 2.67 2.93 10,700 10,800 10,400 (300) -2.8%
Subtotal Commercial 74 195,800 196,900 233,800 38,000 19.4%
Total Sewer Charges 4,729 1,806,600$ 1,816,000$ 1,808,900$ 2,300$ 0.1%
Single-Family 1,382,000$ 76.4%
Multi-Family 193,100 10.7%
Commercial 233,800 12.9%
1,808,900$ 100.0%
(1)Approved rates for sewer service beginning in January 2020.
FY 2020 Charges Summary by Service Class
Charges Summary by Service Class - Sewer
Usage Rate Budget to Budget
VarianceFY 2019
93
FY 2020 Current Approved (1)FY 2019 FY 2020
Meter Size Accounts Charges Charges Budget Budget $%
Residential 4,605 14.91$ 16.38$ 880,600$ 864,500$ (16,100)$ -1.8%
Multi-Residential/Commercial
0.75 23 14.91 16.38 6,000 4,300 (1,700) -28.3%
1.00 5 37.27 40.94 2,900 2,300 (600) -20.7%
1.50 20 74.55 81.88 18,600 18,800 200 1.1%
2.00 62 119.27 131.00 92,000 93,100 1,100 1.2%
3.00 6 223.64 245.64 16,000 16,900 900 5.6%
4.00 6 372.73 409.40 26,700 28,200 1,500 5.6%
6.00 1 745.45 818.79 8,900 9,400 500 5.6%
8.00 - 1,192.73 1,310.08 - - -
10.00 1 1,714.54 1,883.23 40,600 21,600 (19,000) -46.8%
Total System Charges 4,729 1,092,300$ 1,059,100$ (33,200)$ -3.0%
(1)Approved rates for sewer service beginning in January 2020.
System Charges - Sewer
Budget to Budget
Variance
94
FY 2015 FY 2016 FY 2017 FY 2018 FY 2020
Budget Actual Budget
Sewer Charges 2,986,734$ 3,124,595$ 2,929,899$ 2,809,415$ 2,898,900$ 2,913,787$ 2,868,000$
Penalties 22,900 24,700 25,531 28,797 23,700 19,870 22,000
Total 3,009,634$ 3,149,295$ 2,955,430$ 2,838,212$ 2,922,600$ 2,933,657$ 2,890,000$
Revenue History - Sewer, in thousands ($)
Revenue History - Sewer
FY 2019
Actual
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
FY 2015
Actual
FY 2016
Actual
FY 2017
Actual
FY 2018
Actual
FY 2019
Actual
FY 2020
Budget
Sewer Charges Penalties
95
FY 2015 FY 2016 FY 2017 FY 2018 FY 2020
Budget Actual Budget $ %
Total Power Cost 167,475$ 153,815$ 122,622$ 173,997$ 145,600$ 143,575$ 154,300$ 8,700$ 6.0%
Power Costs - Sewer
FY 2019 Budget to Budget
Variance
Actual
Historical Power Costs, in thousands ($)
$20
$60
$100
$140
$180
FY 2015
Actual
FY 2016
Actual
FY 2017
Actual
FY 2018
Actual
FY 2019
Actual
FY 2020
Budget
96
FY 2018 FY 2019 FY 2020
Actual Budget Actual Budget $%
Administrative Expenditures
Equipment 4,784$ 10,900$ 9,070 23,300$ 12,400$ 113.8%
Fees 3,488 3,800 3,686 3,800 - 0.0%
Services 71,540 74,800 25,538 50,300 (24,500) (32.8%)
Miscellaneous Expense 2,719 - - - - 0.0%
Bad Debt Expense 3,096 5,200 1,085 4,300 (900) (17.3%)
Total 85,627 94,700 39,379 81,700 (13,000) (13.7%)
Add: Overhead Allocation 174,135 189,200 175,590 200,200 11,000 5.8%
Total Expenditures 259,762$ 283,900$ 214,969$ 281,900$ (2,000)$ (0.7%)
Equipment 23,300$ 8.3%
Fees 3,800 1.3%
Services 50,300 17.9%
Bad Debt Expense 4,300 1.5%
Overhead Allocation 200,200 71.0%
Total Expenditures 281,900$ 100.0%
Administrative Expenditures - Sewer
Budget to Budget
Variance
FY 2020 Administrative Expenditures - Sewer
FY 2019
97
FY 2018 FY 2019 FY 2020
Actual Budget Actual Budget $%
Materials and Maintenance
Fleet Parts and Equipment 8,108$ 8,000$ 8,444$ 8,000$ -$ -
Infrastructure Equipment & Supplies 174,724 128,200 118,046 132,900 4,700 3.7%
Chemicals 7,167 15,400 4,059 27,400 12,000 77.9%
Safety Equipment - - - 7,000 7,000 100.0%
Laboratory Equipment and Supplies 11,011 7,600 6,640 5,600 (2,000) (26.3%)
Other Materials and Supplies 1,990 100 178 100 - -
Contracted Services 88,805 135,100 75,317 158,800 23,700 17.5%
Subtotal Materials and Maintenance 291,805 294,400 212,684 339,800 45,400 15.4%
Sewer Charges
Metro O&M Costs 820,700 625,500 782,379 600,900 (24,600) (3.9%)
Spring Valley Sewer Charge 313,622 195,700 276,557 251,100 55,400 28.3%
Subtotal Sewer Charges 1,134,322 821,200 1,058,936 852,000 30,800 3.8%
Total Expenditures 1,426,127$ 1,115,600$ 1,271,620$ 1,191,800$ 76,200$ 6.8%
Fleet Parts and Equipment 8,000$ 0.6%
Infrastructure Equipment & Supplies 132,900 11.2%
Chemicals 27,400 2.3%
Safety Equipment 7,000 0.6%
Laboratory Equipment & Supplies (1)5,700 0.5%
Contracted Services 158,800 13.3%
Metro O&M Costs 600,900 50.4%
Spring Valley Sewer Charge 251,100 21.1%
Total Expenditures 1,191,800$ 100.0%
Includes Other Materials & Supplies.
Materials and Maintenance Expenditures - Sewer
Budget to Budget
Variance
FY 2020 Materials and Maintenance Expenditures - Sewer
FY 2019
(1)
98
Formula for Sewer Rates
(1) Sewer rates are based on the customer’s assigned strength factor
To meet State of California requirements, customers must pay their fair share of sewer costs. The
District is required to set 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 15.0% 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:
(Sewer Rate x Winter Average x 85%) + System Charges = Total Monthly Bill
The current sewer rates and system charges for single-family residential customers are $2.67 and
$14.91, respectively. Effective January 1, 2020 the sewer rate and system charges will be $2.93 and
$16.38, respectfully.
The current sewer rates for multi-residential customers is $2.67 and will increase to $2.93 for the
calendar year 2020. The sewer rates and system charges for residential and multi-residential
customers is shown on pages 93 and 94.
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 15.0% usage discount to acknowledge that not all water purchased goes to the sewer
system.
The following is the sewer bill formula for commercial and industrial customers:
(Average Annual Consumption x 85% x Sewer Rate(1)) + System Charges = Total Monthly Bill
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 94.
The District is required to determine sewer rates in accordance with the State’s Revenue Program
Guidelines. The SWRCB has grouped commercial customers into various categories and has
identified Strength Factors for each of these business categories. The standard of measure for
Strength Factors is the typical sewer strength of a single-family residence (SFR). The Strength
99
Formula for Sewer Rates
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:
Description
Fee, Effective
1/1/2020
Low-Strength Commercial * $ 2.93
Medium-Strength Commercial $ 3.64
High-Strength Commercial $ 5.01
*Schools and churches are categorized as Low-Strength Commercial customers
100
Sewer Service Area
101
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102
General Revenues and Expenditures
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 2020, capacity fees are projected to be $1.9 million which is $215,200
more than the FY 2019 budget.
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 revised 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. Property Tax Revenues
are projected to be $3.9 milliion which is $156,600 more than the FY 2019 budget.
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 up to $10.00 per parcel is general use and any amount over $10.00 per parcel or acre shall
be used only for the benefit of the improvement district in which it is assessed. Budgeted availability
fees are projected to decrease from $732,800 to $714,600.
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.
103
General Revenues and Expenditures
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 Expenditures
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 8.1% 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.
104
FY 2018 FY 2019 FY 2020
Actual Budget Actual Budget $%
Fee Revenues
Capacity Fee Revenues 1,617,128$ 1,653,700$ 1,898,333$ 1,868,900$ 215,200$ 13.0%
Subtotal Fee Revenues 1,617,128 1,653,700 1,898,333 1,868,900 215,200 13.0%
Tax Revenues
1% General Tax 3,803,064 3,744,700 3,950,206 3,901,300 156,600 4.2%
Availability Fees 697,724 732,800 723,247 714,600 (18,200) -2.5%
Subtotal Tax Revenues 4,500,788 4,477,500 4,673,453 4,615,900 138,400 3.1%
General Revenue 6,117,916$ 6,131,200$ 6,571,786$ 6,484,800$ 353,600$ 5.8%
FY 2018 FY 2019 FY 2020
Actual Budget Actual Budget $%
Property Rental 1,439,247$ 1,351,100$ 1,384,211$ 1,487,900$ 136,800$ 10.1%
Sewer Billing Fees 393,412 404,600 409,765 422,900 18,300 4.5%
Set-up Fee for Lease Site 21,500 - 13,500 - - 0.0%
Grants - - - 5,000 5,000 100.0%
Revenue from Shared Facility 26,513 35,500 27,500 28,300 (7,200) -20.3%
Miscellaneous 909,807 264,000 804,880 121,800 (142,200) -53.9%
Non-Operating Revenue 2,790,479$ 2,055,200$ 2,639,856$ 2,065,900$ 10,700$ 0.5%
Potable Recycled Sewer Total
Capacity Fee Revenues 1,868,900$ -$ -$ 1,868,900$
1% General Tax 3,901,300 - - 3,901,300
Availability Fees 662,400 - 52,200 714,600
Property Rental 1,487,900 - - 1,487,900
Sewer Billing Fees 422,900 - - 422,900
Grants - - 5,000 5,000
Revenue from Shared Facility - - 28,300 28,300
Miscellaneous 121,800 - - 121,800
Total General and Non-Operating Revenue 8,465,200$ -$ 85,500$ 8,550,700$
(1) For General and Non-Operating Revenues, the Potable Fund serves as the District's General Fund
for accounting purposes.
General Revenues
General Revenues(1)
FY 2019 Budget to Budget
Variance
Non-Operating Revenues(1)
FY 2019 Budget to Budget
Variance
General and Non-Operating Revenues by Business(1)
FY 2020
105
FY 2018 FY 2019 FY 2020
Actual Budget Actual Budget $ %
General Expense
Total labor and benefits (1)1,536,224$ 1,069,600$ 1,160,104$ 1,046,300$ (23,300)$ (2.2%)
Administrative Expenditures
Insurance expenses 671,253 896,100 773,943 975,700 79,600 8.9%
Legal expenses (2)443,800 620,000 573,598 620,000 - 0.0%
Services 589 - - - - 0.0%
Total General Expense 2,651,866$ 2,585,700$ 2,507,645$ 2,642,000$ (23,300)$ (0.9%)
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 2019 and FY 2020 is $212,500 and
$202,600, 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.
(2)Included in the Legal Expenses for FY 2019 and FY 2020 is $175,000 and $175,000 respectively, for the City of San
Diego Recycled Water Rate Lawsuit.
FY 2019
106
Departmental Operating Budget
Labor and Benefits
The District reviews and studies organizational/personnel changes and a five-year long-term staffing
review on an annual basis as part of the budgeting process. Labor and Employee Benefits expenditures
for FY 2020 were estimated based on proposed staffing level needs. The objective of the annual review
is to examine the implementation of department efficiencies and evolving business practices, impacts on
staffing levels, as well as prepare future leaders of the organization. The annual review is also used as a
reference tool for District succession planning purposes.
The District provides employees and Board members with a choice of four health providers (Blue Shield
HMO, EPO and PPO, and the District is adding Kaiser HMO effective 1/1/19) and a dental PPO plan. The
District pays 100% of employee coverage and 88% of spouse and dependent coverage. Other ancillary
benefits include basic life and accidental death and dismemberment insurance, short and long term
disability benefits, flexible spending accounts for health and dependent care, and an Employee
Assistance Program. In addition, the District offers the CalPERS Pension plan 2.7% @ 55 for classic
members and 2.0% @ 62 for PEPRA employees and Other Post-Employment Benefits after the employees
reach certain age and tenure requirements. Employees participate in the contribution for both plans.
Increases in employee benefits costs are mainly due to continued increases in group health insurance
premiums, additional payments to OPEB to reduce long-term retiree health liability, and an increase in
compensation due to a 2.8% increase in salary and wages, based on the Memorandum of Understanding
(MOU) between the District and its employee association.
Labor and Benefits represent 20.0% of the total Operating Budget. District personnel are assigned to
work in five departments: General Manager, Administrative Services, Finance, Water Operations, and
Engineering. The departments are further categorized by functions into divisions. The FY 2020 Budget
includes funding for labor and benefits for 138 full-time equivalent (FTE) employees.
The staffing level for FY 2020 has increased by one (1) FTE employee from FY 2019. The District
continuously analyzes workload requirements, opportunities for automation and areas where resources
can be effectively shared or relocated. Since the District eliminated the Assistant General Manager
position in FY 2019, the following position was added: SCADA Instrumentation Technician. The need for
an additional SCADA technician is being driven by increasing calibration activities for the equipment in
order to meet regulatory and internal reporting requirements.
A projected 7.1% 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 totaling $1,679,800
are not considered operating costs and therefore are not included in the Operating Budget.
Administrative Expenses
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. The safety needs of the District's customers
and employees, and compliance with regulatory agencies are of utmost importance and are considered
necessary.
107
Departmental Operating Budget
Administrative Expenses (Continued)
Overall administrative expenses increased by $180,600 or 2.9% compared to FY 2019 and are shown on
page 117. The Insurance and legal expenses budget increased by $79,600 or 5.3% due to higher
insurance deductibles, increased insurance premiums, increased bank fees from greater credit card
volumes, increased software license fees, and increased training expenses. These increases were
partially offset by decreasing outside service fees due to leveraging internal labor instead. Fees increased
by $51,200 or 7.9% primarily due to an increase in credit card activity and secondarily due to election
costs. Training increased by $39,000 or 29.1% predominately for external leadership training, District-
wide training, specialized training in SCADA and NACE CIP Level 1 training. The equipment budget
increased by $37,000 or 2.8% primarily due to increases in GIS expenses including, mapping updates,
software maintenance and LiDAR increases.
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.
For FY 2020, overall materials and maintenance expenses increased by 3.9%, or $144,600 compared to
FY 2019. Contracted Services increased by $87,900 or 10.3% due to an increase in contracted services
for pump motor repairs and reservoir cover maintenance. The Spring Valley Sewer Charge increased
$55,400 or $28.3% based on the County maintenance plan for shared facility. Safety equipment increased
by $29,200 or 47.6% due to the replacement of worn fall protection equipment. Infrastructure equipment
and supplies increased by $25,300 or 4.2% as the result of contracting with an outside service for an HVAC
service agreement. Other materials and supplies increased by $18,000 or 9.6% due to the need to
purchase anodes and clamps, flow-meter repairs, and other as-needed replacements.
These increases were offset by decreases in Metro O&M costs of $24,600 or 3.9% due to capitalization of
pure water capital costs offset by Metro operating increases. Chemicals decreased $19,400 or 5.0% due
to the removal of funds for a pax mixer and reduced aqua ammonia and sodium hypochlorite purchases.
Meters and materials decreased by $35,000 or 11.9% due to a budget reduction in meter sales based on
growth projections.
108
Board of Directors 190,000$ 0.6%
General Manager 1,674,900 5.1%
General Expense 2,642,000 8.1%
Administrative Services 6,737,000 20.7%
Finance 5,754,200 17.7%
Water Operations 11,857,800 36.4%
Engineering 3,700,800 11.4%
32,556,700$ 100.0%
Departmental Operating Budget
Total FY 2020 Departmental Operating Budget
$32,556,700
109
FY 2018 FY 2019 FY 2020
Actual Budget Actual Budget $%
Labor Costs 11,580,539$ 12,290,800$ 12,041,669$ 12,866,000$ 575,200$ 4.7%
Benefits
Pension 4,551,158 4,822,300 4,865,042 2,499,100 (2,323,200) -48.2%
Employee Assistance Program 3,700 4,000 3,726 4,000 - 0.0%
Workers' Compensation 317,393 389,000 405,168 602,900 213,900 55.0%
Health/Dental/Life Insurance/OPEB 3,840,540 3,963,800 3,664,269 3,930,500 (33,300) -0.8%
Social Security/Medicare 978,716 1,040,300 1,003,750 1,090,900 50,600 4.9%
Salary Continuation Insurance 61,802 57,900 56,483 60,100 2,200 3.8%
State Unemployment Insurance - 20,000 - 20,000 - 0.0%
Vacation/Sick/Holiday/Other Leave 2,434,413 2,433,200 2,398,576 2,541,400 108,200 4.4%
Total Benefits 12,187,722 12,730,500 12,397,014 10,748,900 (1,981,600) -15.6%
Total Labor and Benefits 23,768,261 25,021,300 24,438,683 23,614,900 (1,406,400) -5.6%
Less: Non-Operating Labor and Benefits
Labor Costs 1,041,184 1,169,300 992,363$ 1,070,400 (98,900) -8.5%
Benefits Allocation 746,998 890,700 744,391 609,400 (281,300) -31.6%
Total Non-Operating Labor and Benefits 1,788,182 2,060,000 1,736,754 1,679,800 (380,200) -18.5%
Operating Labor & Benefits 21,980,079 22,961,300 22,701,929 21,935,100 (1,026,200) -4.5%
Overhead Allocation (115% of labor costs)1,197,362 1,344,700 1,141,217 1,231,100 (113,600) -8.4%
Admin Overhead (36.85%)441,228 495,600 420,539 453,700 (41,900) -8.5%
Less: Non-operating labor overhead (756,133) (849,400) (720,678) (777,400) 72,000 -8.5%
Net Operating Labor and Benefits 21,223,946$ 22,111,900$ 21,981,251$ 21,157,700$ (954,200)$ -4.3%
Budget vs. Actual, in thousands ($)
Labor and Benefits
Budget to Budget
VarianceFY 2019
$70
$100
$130
2018 2019 2020
21
,
5
2
2
22
,
1
1
2
21
,
1
5
8
21
,
2
2
4
21
,
9
8
1
Budget Actual
110
Potable Recycled Sewer
Developer
Reimbursed-
CIP Total
Operating Labor Costs 10,733,500$ 589,600$ 472,500$ -$ 11,795,600$
Benefits 9,362,900 425,000 351,600 - 10,139,500
Overhead Allocation-Personnel (1,548,800) 428,200 343,200 - (777,400)
Total Operating Labor and Benefits 18,547,600 1,442,800 1,167,300 - 21,157,700
CIP Labor Costs 619,000 29,800 84,100 337,500 1,070,400
Benefits 345,800 17,000 46,600 200,000 609,400
Overhead Allocation-Personnel 449,600 21,700 61,100 245,100 777,500
Total CIP Labor and Benefits 1,414,400 68,500 191,800 782,600 2,457,300
Total Labor and Benefits 19,962,000$ 1,511,300$ 1,359,100$ 782,600$ 23,615,000$
Potable-Operating 18,547,600$ 78.6%
Potable-CIP 1,414,400 6.0%
Sewer-Operating 1,167,300 4.9%
Sewer-CIP 191,800 0.8%
Recycled-Operating 1,442,800 6.1%
Recycled-CIP 68,500 0.3%
Developer Reimbursed-CIP 782,600 3.3%
23,615,000$ 100.0%
Labor and Benefits by Fund - Fiscal Year 2020
111
FY 2019
General Manager
General Manager 1 1 1
Assistant General Manager 1 0 0
District Secretary 1 1 1
Sr. Confidential Executive Assistant 1 1 1
Communications Officer 1 1 1
Communications Assistant 1 1 1
General Manager 6 5 5
Total FTE - General Manager Department 6 5 5
Administrative Services
Chief, Administrative Services 1 1 1
Confidential Executive Assistant 1 1 1
Confidential Department Assistant 1 1 1
Administrative Services 3 3 3
Human Resources
Human Resources Manager 1 1 1
Senior Human Resources Analyst 1 1 1
Human Resources Analyst 1 1 1
Human Resources 3 3 3
Purchasing
Purchasing and Facilities Manager 1 1 1
Senior Procurement & Contracting Analyst 1 1 1
Senior Warehouse Worker 1 1 1
Facilities Maintenance Technician 2 2 2
Purchasing 5 5 5
Safety
Safety & Security Specialist 1 1 1
Safety 1 1 1
Information Technology Operations/Applications
IT Manager 1 1 1
GIS Manager 1 1 1
GIS Programmer Analyst 1 1 1
GIS Analyst 1 1 1
GIS Technician 1 1 1
Network Engineer 1 1 1
Database Administrator 1 1 1
Business Systems Technician 1 1 1
System Support Analyst 1 1 1
Business Systems Analyst I and II 2 2 2
Information Technology 11 11 11
Total FTE - Administrative Services Department 23 23 23
Position Count by Department
FY 2018 FY 2020
112
FY 2019
Finance
Chief Financial Officer 1 1 1
Assistant Chief, Finance 0 1 1
Executive Assistant 1 1 1
Department Assistant 1 1 1
Finance 3 4 4
Controller and Budgetary Services
Finance Manager, Controller and Budget 1 0 0
Senior Accountant 2 2 2
Accountant 1 1 1
Accounting Technician 1 1 1
Controller and Budgetary Services 5 4 4
Treasury and Accounting Services
Finance Manager, Treasury and Accounting 1 1 1
Senior Accountant 2 2 2
Accountant 1 1 1
Accounting Technician 1 1 1
Treasury and Accounting Services 5 5 5
Customer Service
Customer Service Manager 1 1 1
Customer Service Supervisor 1 1 1
Lead Customer Service Representative 1 1 1
Customer Service Representative I, II, III 6 6 6
Customer Service 9 9 9
Meter Services
Lead Meter Maintenance / Cross Connection Worker 0 0 1
Meter Services Supervisor 1 1 1
Meter Maintenance Worker I & II 3 4 3
Lead Customer Service Field Representative 1 1 1
Customer Service Field Representative I and II 2 3 3
Meter Services 7 9 9
Total FTE - Finance Department 29 31 31
Operations
Chief, Water Operations 1 1 1
Assistant Chief, Water Operations 1 1 1
Executive Assistant 1 1 1
Operations 3 3 3
Water System Operations
System Operations Manager 1 1 1
Water Systems Supervisor 1 1 1
Lead Water Systems Operator 2 2 2
Position Count by Department
FY 2018 FY 2020
113
FY 2019
Operations (continued)
Water System Operations (continued)
Water Systems Operator I, II, and III 8 8 8
Senior SCADA Instrumentation Technician 2 2 2
SCADA Instrumentation Technician 0 0 1
Senior Disinfection Technician 2 2 1
Disinfection Technician 0 0 1
Water System Operations 16 16 17
Utility Maintenance/Construction
Utility Maintenance Supervisor 2 2 1
Utility Maintenance Assistant Supervisor 0 0 1
Utility Crew Leader 3 3 3
Utility Workers I and II 8 8 9
Senior Utility/Equipment Operator 3 3 3
Valve Maintenance Worker 2 2 1
Pump Electrical Supervisor 1 1 1
Electrician I and II 2 2 2
Pump Mechanic I and II 2 2 2
Fleet Maintenance Supervisor 1 1 1
Equipment Mechanic I and II 3 3 3
Utility Maintenance/Construction 27 27 27
Collection/Treatment/Reclamation Operations
Reclamation Plant Supervisor 1 1 1
Lead Reclamation Plant Operator 1 1 1
Reclamation Plant Operator I, II, III 2 2 2
Laboratory Analyst 2 2 2
Collection/Treatment/Reclamation Operations 6 6 6
Total FTE - Operations Department 52 52 53
Engineering
Chief, Engineering 1 1 1
Assistant Chief of Engineering 0 0 1
Executive Assistant 1 1 1
Department Assistant 1 1 1
Engineering 3 3 4
Water Resources, Planning, Design & Environmental
Engineering Manager 1 1 1
Senior Civil Engineer 2 2 3
Associate Civil Engineer 1 1 0
Environmental Compliance Specialist 1 1 1
Senior Engineering Technician 2 2 2
Water Resources, Planning, Design & Environmental 7 7 7
Position Count by Department
FY 2018 FY 2020
114
FY 2019
Engineering (continued)
Public Services, Survey, Inspection, & Recycled Water Program
Engineering Manager 1 1 0
Field Services Manager 1 1 1
Permit Technicians 2 2 2
Recycled Water Program Supervisor 1 1 1
Recycled Water Specialist 3 3 3
Inspection Supervisor 1 1 1
Construction Inspectors I and II 3 4 4
Supervising Land Surveyor 1 1 1
Assistant Survey Technician 1 2 0
Senior Utility Locator 0 0 1
Utility Locator 0 0 1
Public Services, Survey, Inspection, & Recycled Water
Program 14 16 15
Total FTE - Engineering Department 24 26 26
District Total FTE Position Count 134 137 138
Position Count by Department
FY 2018 FY 2020
134
137
138
132
134
136
138
140
FY 2018 - Actual FY 2019 - Actual FY 2020 - Budget
Full-Time Equivalent (FTE)
115
FY 2019
Project Coordinator 1 0 0
Lab Analyst 0 0 0.5
Total Contract/Temporary Employees 1 0 0.5
General Manager 5.00 3.6%
Administrative Services 23.00 16.7%
Finance 31.00 22.5%
Operations 53.00 38.4%
Engineering 26.00 18.8%
Total 138.00 100.0%
Contract / Temporary Employees
FY 2018 FY 2020
FY 2020 Position Count by Department
116
FY 2018 FY 2019 FY 2020
Actual Budget Actual Budget $%
Administrative Expenditures
Directors' Fees 35,252$ 70,000$ 55,925$ 80,000$ 10,000$ 14.3%
Travel and Memberships 184,597 246,900 220,516 262,600 15,700 6.4%
Conservation and Outreach 159,161 174,900 157,644 171,400 (3,500) (2.0%)
General Office Expense 251,772 270,400 232,821 270,900 500 0.2%
Equipment 1,407,194 1,340,400 1,387,826 1,377,400 37,000 2.8%
Fees 620,430 647,300 694,302 698,500 51,200 7.9%
Services 1,734,486 2,128,700 1,821,714 2,033,100 (95,600) (4.5%)
Training 91,076 134,100 109,005 173,100 39,000 29.1%
Utilities 13,639 14,900 13,894 15,800 900 6.0%
Insurance and Legal 1,115,053 1,516,100 1,347,541 1,595,700 79,600 5.3%
Miscellaneous Expense 2,828 100 - - (100) (100.0%)
Bad Debt Expense 131,932 105,000 112,763 109,000 4,000 3.8%
Subtotal before Overhead 5,747,420 6,648,800 6,153,951 6,787,500 138,700 2.1%
Less: Overhead Allocation (441,228) (495,600) (420,539) (453,700) 41,900 (8.5%)
Total Expenditures 5,306,192$ 6,153,200$ 5,733,412$ 6,333,800$ 180,600$ 2.9%
########5,605,400$ 7,501,492$ 8,383,200$
Directors' Fees 80,000$ 1.1%
Travel and Memberships 262,600 3.9%
Conservation & Outreach 171,400 2.5%
General Office Expense 270,900 4.0%
Equipment 1,377,400 20.3%
Fees 698,500 10.3%
Services 2,033,100 30.0%
Training 173,100 2.6%
Utilities 15,800 0.2%
General Expense 1,595,700 23.5%
Bad Debt Expense (1)109,000 1.6%
Subtotal before Overhead 6,787,500 100.0%
Overhead (453,700)
Total Expenditures 6,333,800$
(1)Includes Miscellaneous Expense
Administrative Expenditures - Total
Budget to Budget
Variance
FY 2020 Total Administrative Expenditures, in thousands ($)
FY 2019
117
FY 2018 FY 2019 FY 2019 FY 2020
Actual Budget Actual Budget $%
Materials and Maintenance
Fuel and Oil 176,822$ 218,500$ 197,259$ 221,000$ 2,500$ 1.1%
Meters and Materials 276,070 293,500 245,774 258,500 (35,000) (11.9%)
Fleet Parts and Equipment 126,221 147,700 131,969 143,300 (4,400) (3.0%)
Infrastructure Equipment & Supplies 626,439 605,200 583,465 630,500 25,300 4.2%
Chemicals 304,414 387,200 207,167 367,800 (19,400) (5.0%)
Safety Equipment 52,166 61,300 54,916 90,500 29,200 47.6%
Laboratory Equipment and Supplies 72,321 50,500 51,286 55,700 5,200 10.3%
Other Materials and Supplies 194,769 187,200 250,878 205,200 18,000 9.6%
Building and Grounds Materials 98,242 63,500 66,428 68,000 4,500 7.1%
Contracted Services 728,419 853,700 624,084 941,600 87,900 10.3%
Subtotal Materials and Maintenance 2,655,883 2,868,300 2,413,226 2,982,100 113,800 4.0%
Sewer Charges
Metro O&M Costs 820,700 625,500 782,379 600,900 (24,600) (3.9%)
Spring Valley Sewer Charge 313,622 195,700 276,557 251,100 55,400 28.3%
Subtotal Sewer Charges 1,134,322 821,200 1,058,936 852,000 30,800 3.8%
Total Expenditures 3,790,205$ 3,689,500$ 3,472,162$ 3,834,100$ 144,600$ 3.9%
Fuel and Oil 221,000$ 5.8%
Meters and Materials 258,500 6.7%
Fleet Parts and Equipment 143,300 3.7%
Infrastructure Equipment and Supplies 630,500 16.4%
Chemicals 367,800 9.6%
Safety Equipment 90,500 2.4%
Laboratory Equipment and Supplies 55,700 1.5%
Other Materials and Supplies 205,200 5.4%
Building and Grounds Materials 68,000 1.8%
Contracted Services 941,600 24.5%
Sewer Charges 852,000 22.2%
Total Expenditures 3,834,100$ 100.0%
Materials and Maintenance Expenditures - Total
Budget to Budget
Variance
FY 2020 Materials and Maintenance Expenditures
118
FY 2018 FY 2019 FY 2020 Budget to
Budget
Actual Budget Actual Budget Variance
Departmental Expenditures
Board of Directors Board of Directors 134,799$ 175,800$ 151,815$ 190,000$ 14,200$
General ManagerGeneral Manager 1,444,214 1,732,700 1,499,791 1,674,900 (57,800)
General ExpenseGeneral Expense 2,651,866 2,585,700 2,507,645 2,642,000 56,300
Administrative ServicesAdministrative Services 6,843,184 6,849,100 6,788,240 6,737,000 (112,100)
FinanceFinance 5,909,269 6,164,200 5,956,833 5,754,200 (410,000)
Water OperationsWater Operations 11,330,141 12,166,200 11,606,626 11,857,800 (308,400)
EngineeringEngineering 3,204,233 3,625,900 3,817,092 3,700,800 74,900
Total Departmental ExpendituresTotal Departmental Expenditures 31,517,706 33,299,600 32,328,042 32,556,700 (742,900)
Less: Overhead Allocation (1,197,363) (1,345,000) (1,141,217) (1,231,100) 113,900
Net Departmental Expenditures 30,320,343 31,954,600 31,186,825 31,325,600 (629,000)
Non-Departmental Expenditures & Reserve Funding
Water Purchases 53,665,502 56,328,600 51,536,077 53,815,200 (2,513,400)
Power 3,138,776 3,161,400 2,877,016 3,184,700 23,300
Subtotal Non-Departmental 56,804,278 59,490,000 54,413,093 56,999,900 (2,490,100)
General Fund Reserve - - - 954,400 954,400
Expansion Reserve 3,274,600 2,712,100 2,712,100 4,927,300 2,215,200
Betterment Reserve 111,100 - - 3,048,000 3,048,000
Replacement Reserve 9,787,900 12,778,600 12,778,600 7,513,000 (5,265,600)
OPEB Reserve 998,000 980,800 980,800 1,038,100 57,300
New Supply Reserve 221,000 75,000 75,000 - (75,000)
Subtotal Reserve Funding 14,392,600 16,546,500 16,546,500 17,480,800 934,300
Total Operating Expenditures 101,517,221$ 107,991,100$ 102,146,418$ 105,806,300$ (2,184,800)$
Operating Expenditures by Department
FY 2020 Funding Source by Department, in Millions ($)
FY 2019
$0 $2 $4 $6 $8 $10 $12
Board of Directors
General Manager
Administrative Services
Finance
Water Operations
Engineering
General Expense
Potable
Recycled
Sewer
119
FY 2018 FY 2019 FY 2020 Budget to
Budget
Actual Budget Actual Budget Variance
Departmental Expenditures
Labor and Benefits 21,980,079$ 22,961,300$ 22,701,929$ 21,935,100$ (1,026,200)$
Director's Fees 35,252 70,000 55,925 80,000 10,000
Travel and Memberships 184,597 246,900 220,516 262,600 15,700
Conservation and Outreach 159,161 174,900 157,644 171,400 (3,500)
General Office Expense 251,772 270,400 232,821 270,900 500
Equipment 1,407,192 1,340,400 1,387,826 1,377,400 37,000
Fees 1,735,483 2,163,400 2,041,843 2,294,200 130,800
Services 1,734,490 2,128,700 1,821,714 2,033,100 (95,600)
Training 91,076 134,100 109,005 173,100 39,000
Materials & Maintenance 2,655,883 2,868,300 2,413,226 2,982,100 113,800
Utilities 13,639 14,900 13,894 15,800 900
Sewer Charges 1,134,322 821,200 1,058,936 852,000 30,800
Miscellaneous Expense 2,828 100 - - (100)
Bad Debt Expense 131,932 105,000 112,763 109,000 4,000
Total Departmental Expenditures 31,517,706 33,299,600 32,328,042 32,556,700 (742,900)
Less: Overhead Allocation (1,197,363) (1,345,000) (1,141,217) (1,231,100) 113,900
Net Departmental Expenditures 30,320,343 31,954,600 31,186,825 31,325,600 (629,000)
Non-Departmental Expenditures & Reserve Funding
Water Purchases 53,665,502 56,328,600 51,536,077 53,815,200 (2,513,400)
Power 3,138,776 3,161,400 2,877,016 3,184,700 23,300
Subtotal Non-Departmental 56,804,278 59,490,000 54,413,093 56,999,900 (2,490,100)
General Fund Reserve - - - 954,400 954,400
Expansion Reserve 3,274,600 2,712,100 2,712,100 4,927,300 2,215,200
Betterment Reserve 111,100 - - 3,048,000 3,048,000
Replacement Reserve 9,787,900 12,778,600 12,778,600 7,513,000 (5,265,600)
OPEB Reserve 998,000 980,800 980,800 1,038,100 57,300
New Supply Reserve 221,000 75,000 75,000 - (75,000)
Subtotal Reserve Funding 14,392,600 16,546,500 16,546,500 17,480,800 934,300
Total Operating Expenditures 101,517,221$ 107,991,100$ 102,146,418$ 105,806,300$ (2,184,800)$
Operating Expenditures by Object
FY 2019
120
Departmental Operating Budget
Mitch Thompson
President
Division 2
Mark Robak
Vice President
Division 5
Hector Gastelum
Treasurer
Division 4
Gary Croucher
Division 3
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.
Tim Smith
Division 1
121
FY 2018 FY 2019 FY 2020
Actual Budget Actual Budget
Board of Directors 134,799$ 175,800$ 151,815$ 190,000$
Total Expenses 134,799 175,800 151,815 190,000
FY 2018 FY 2019 FY 2020
Actual Budget Actual Budget
Benefits 77,958 83,000 74,612 82,300
Director's Fees 35,252 70,000 55,925 80,000
Travel and Memberships 19,797 22,800 21,278 27,700
Conservation and Outreach 1,792 - - -
Total Expenses 134,799$ 175,800$ 151,815$ 190,000$
-$
Board of Directors
Department
Object
Budget vs. Actual, in thousands ($)
FY 2019
FY 2019
$70
$100
$130
2018 2019 2020
14
4
17
6
$1
9
0
13
5
15
2
Budget Actual
122
Director’s Division Boundaries
123
This page intentionally left blank
124
Departmental Operating Budget
(1) See Position count by Department on page 112-116 for the list of positions per department. District Chiefs
report directly to the General Manager; however, they are budgeted within their respective department.
General Manager
Mission
To provide exceptional water and wastewater service to its customers, and to manage the Otay
Water District’s resources in a transparent and fiscally responsible manner.
General Manager’s Vision
“To be a model water agency by providing stellar community service, achieving measurable results,
and continuously improving our operational practices.”
C
Statement of values
As Otay Water District employees we dedicate ourselves to:
Customers: We take pride that our commitment to customer-centered service is our highest
priority.
Excellence: We strive to provide the highest quality and value in all that we do.
Integrity: We commit ourselves to doing the right thing. Ethical behavior, trustworthiness, and
accountability are the District’s foundation.
Employees: We see each individual as unique and important. We value diversity and open
communication to promote fairness, dignity, and respect.
Teamwork: We promote mutual trust by sharing information, knowledge, and ideas to reach our
common goals.
Innovation: We constantly seek better, more efficient, and cost effective ways to deliver our
services.
General Manager – 5 Positions (1)
District Secretary
1211
Communications Officer
1211
General Manager
1211
Sr. Confidential
Executive Secretary
1211
Chief Financial Officer
2311
Board of Directors
1111
Communications Assistant
1211
Chief, Administrative
Services 2211
Chief, Water
Operations 3211
Chief, Engineering
3311
125
FY 2018 FY 2019 FY 2019 FY 2020
Actual Budget Actual Budget
General Manager 1,294,666$ 1,534,200$ 1,365,060$ 1,498,900$
Conservation 149,548 198,500 134,731 176,000
Total Expenses 1,444,214 1,732,700 1,499,791 1,674,900
-$
FY 2018 FY 2019 FY 2019 FY 2020
Actual Budget Actual Budget
Labor and Benefits 1,010,561 1,065,900 1,074,739 986,900
Travel and Memberships 70,545 100,600 79,289 97,000
Conservation and Outreach 156,951 174,900 157,644 171,400
General Office Expense 5,192 6,200 5,541 9,300
Equipment 2,578 3,200 1,530 3,200
Fees 58,771 74,000 59,577 82,000
Services 138,320 206,300 120,555 223,600
Training 1,187 1,500 916 1,500
Materials & Maintenance - 100,000 - 100,000
Miscellaneous 109 100 - -
Total Expenses 1,444,214$ 1,732,700$ 1,499,791$ 1,674,900$
-$ -$ -$ -$
General Manager
Department
Object
Budget vs. Actual, in thousands ($)
$-
$500
$1,000
$1,500
$2,000
2018 2019 2020
1,
9
9
4
1,
7
3
3
1,
6
7
5
1,
4
4
4
1,
5
0
0
Budget Actual
126
Departmental Operating Budget
General Manager
Services We Provide
The General Manager’s office provides leadership and direction for all District services and
operations including potable, recycled, and the treatment plant. As head of the agency, the General
Manager interacts with the Board of Directors to set policies and strategic direction and ensures that
all applicable laws and regulations are met. The General Manager oversees, coordinates, and directs
the development and execution of annual plans and the operating and capital improvement projects.
The General Manager represents the District in establishing and maintaining relationships with
member agencies and external organizations. The General Manager is also focused on executing
the District’s mission, Strategic Plan, and Board priorities. The General Manager’s office also supports
communications, outreach, water conservation, and legislation. The office participates in outreach
events throughout the community and helps fund and promote a variety of incentive and other
programs available to its customers. Staff also promotes water-use efficiency through educating the
District’s customers about available rebates, water conservation programs, and the Water
Conservation Garden. The office also manages the District’s Water Shortage Response Plan as well
as its water waste reporting program.
Accomplishments – Fiscal Year 2018-2019
• The District’s rates were ranked the third lowest among San Diego County’s 22 public water
agencies and the fourth lowest among the County’s 28 sewer service providers in the County.
• Saved approximately $6.6 million compared to 2007 due to staffing efficiencies. In total, from
2007 to fiscal year 2019, the Full Time Equivalent (FTE) reductions have saved the District $42.9
million.
• Concluded negotiations and implemented a five-year Memorandum of Understanding (MOU)
with the employee association effective July 1, 2019 through June 30, 2024.
• Increased the District’s funded percentage for its Defined Benefit Pension Plan from 62.9%, per
the July 2018 Annual Valuation Report, to an estimated 85.0%, with a plan to have it fully
funded by 2032.
• Increased the District’s funded percentage for its Other Post Employment Benefit (OPEB) Plan
from 83.0%, per the June 2017 OPEB Actuarial Valuation Study, to an estimated 97.0% with a
plan to have it fully funded in 2020.
• Published the annual consumer confidence report, indicating to customers that the District
met or surpassed all public health drinking water requirements and standards.
127
Departmental Operating Budget
General Manager (continued)
Accomplishments – Fiscal Year 2018-2019 (continued)
• Cosponsored Assembly Bill 1588 (Gloria/Gray), a bill to ensure military veterans transitioning
into civilian water and wastewater operator occupations receive appropriate crediting for
experience and education gained during military service.
• Continued to support the “no water tax” coalition by working with other agencies and
organizations to creatively resolve funding drinking water quality conditions within many
disadvantaged communities throughout California without the imposition of a drinking water
tax on the District and its customers.
• As part of the District’s efforts to support a streamlined and efficient program of expansion,
new water supply, replacement, and betterment, while maintaining a stable long-range
financial plan, the District completed construction of seven Capital Improvement Program
projects.
• Reduced the number of vehicles and other equipment the District maintained by 19% since
2006, saving the District approximately $106,000 in fiscal year 2018.
• Reduced overall fuel consumption for gas and diesel vehicles by 36%, saving the District
approximately $80,000 in fiscal year 2018.
• As part of the District’s Leak Detection and Repair Program, the District surveyed
approximately 145 miles of potable pipelines and 22 miles of recycled pipelines, finding and
repairing 60 District-side leaks, saving approximately 14-million gallons of nonrevenue water
per year.
• Reduced water loss by 43% since 2011, saving the District approximately $1.3 million in fiscal
year 2018.
• In efforts to promote water conservation and encourage its customers to visit the Water
Conservation Garden, the District participated in the Water Agency Customer Appreciation
Day held at the Garden.
• In efforts to continue promoting water-use efficiency to the District’s customers, it recognized
the WaterSmart Landscape Contest “Best in District” winner, an unincorporated La Mesa
resident.
128
Departmental Operating Budget
General Manager (continued)
Accomplishments – Fiscal Year 2018-2019 (continued)
• The District continues to enhance its website and social media sites by increasing the
frequency of posts and use of increased Spanish-language content. As a result, from July 1,
2018 to June 30, 2019, the District’s Facebook gained a 14% increase in followers from 241 to
274 followers and an 11% increase in Twitter followers from 1,713 to 1,897. YouTube video
views increased by 22 % from 13,622 in fiscal year 2018 to 16,633 in fiscal year 2019. The
District’s website page views have increased by about 12% from 402,226 in fiscal year 2018 to
449,179 in fiscal year 2019 and its users has increased by approximately 16% from 141,946 in
fiscal year 2018 to 163,942 in fiscal year 2019.
• Participated in the “Water is Life” Poster contest for grades kindergarten through sixth. The
District received approximately 245 submittals from 10 schools within the District’s service
area.
• Continued the use of drone technology to modernize how the District conducts preliminary
inspections of its 40 potable water reservoirs, four recycled water reservoirs, 20 pump stations,
and a recycled water treatment plant, saving employee time and improving the safety of
workers performing inspections.
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130
Departmental Operating Budget
Administrative Services
Mission Statement
To provide support to the Board of Directors, the General Manager, and District staff by executing
objectives that meet and serve the needs of our customers by providing, through best administrative
practices, the full range of employer and employee services, administrative services, risk
management, safety and security, emergency preparedness and response, enterprise computing,
and strategic planning.
Department Responsibilities
The Administrative Services Department, under the general direction of the Chief of Administrative
Services, provides the following support services: Human Resources, Purchasing, Facilities
Maintenance, Safety and Security, Information Technology, and Strategic Planning. The department
also coordinates assigned activities with other departments and outside agencies, and provides
highly responsible and complex administrative support to the District, Board of Directors, and
General Manager.
Administrative Services Department – 23 Positions (1)
(1) See Position Count by Department on page 112 for the list of positions per department.
Purchasing
and Facilities
2231
Human
Resources
2221
Chief,
Administrative Services
2211
Information
Technology
2421
Geographic
Information
Systems
2431
Safety and Security
2241
131
FY 2018 FY 2019 FY 2019 FY 2020
Actual Budget Actual Budget
Administrative Chief 578,567$ 604,100$ 602,160$ 556,700$
Human Resources 749,500 810,900 782,413 748,000
Purchasing and Facilities 1,663,708 1,486,400 1,482,508 1,562,100
Safety and Security 362,420 382,000 343,696 447,700
IT Operations 2,527,008 2,559,400 2,594,852 2,408,700
Geographic Information System (GIS)961,981 1,006,300 982,611 1,013,800
Total Expenses 6,843,184 6,849,100 6,788,240 6,737,000
FY 2018 FY 2019 FY 2019 FY 2020
Actual Budget Actual Budget
Labor and Benefits 4,200,115 4,413,700 4,397,135 4,123,000
Travel and Memberships 27,925 50,100 52,096 54,300
General Office Expense 101,127 94,100 81,061 92,500
Equipment 1,354,878 1,281,300 1,340,358 1,280,600
Services 456,048 439,900 371,578 458,100
Training 76,724 114,500 89,454 147,000
Materials & Maintenance 612,728 440,600 442,533 565,700
Power and Utilities 13,639 14,900 13,894 15,800
Total Expenses 6,843,184$ 6,849,100$ 6,788,240$ 6,737,000$
Budget vs. Actual, in thousands ($)
Administrative Services
Department
Object
$4,000
$4,500
$5,000
$5,500
$6,000
$6,500
$7,000
2018 2019 2020
6,
5
2
8
6,
8
4
9
6,
7
3
7
6,
8
4
3
6,
7
8
8
Budget Actual
132
Departmental Operating Budget
Human Resources
Services We Provide
Human Resources, under the direction of the Chief of Administrative Services, provides the following:
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 staff management to include employee training and development;
recognition and incentives; performance evaluation process and employee discipline; ensures legal
compliance; and implements work/life balance initiatives.
Accomplishments – Fiscal Year 2018-2019
• Finalized negotiations and implemented a five-year successor Memorandum of Understanding
(MOU) with the employee association that is effective July 1, 2019 through June 30, 2024.
• Conducted an employee engagement and satisfaction survey to measure employees’ opinions
about the District’s work environment. Data gathered from the survey will be used to drive strategic
initiatives to improve employee engagement, enhance teamwork, and further the District’s
mission commitment.
• Increased health benefit offerings by adding Kaiser Permanente HMO, which will provide an
additional benefit plan option to employees and retirees, while reducing District expenses.
• Conducted a review of the District’s deferred compensation providers and elected to consolidate
from two carriers to one. The single carrier program will go into effect January 1, 2020 and will
provide significant fee savings to employees.
• Established a District committee and hired a financial consultant to oversee the District’s deferred
compensation provider and monitor investment options.
• Coordinated and received credit for the Special District Risk Management Authority’s Credit
Incentive Program. The District received combined credits of approximately $678,139.73, which
were applied towards the Property/Liability and Workers’ Compensation premiums.
Purchasing and Facilities
Services We Provide
Purchasing and Facilities, under the direction of the Chief of Administrative Services, provides the
following: oversees the general purchasing and contracting 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
133
Departmental Operating Budget
Purchasing and Facilities (continued)
non-structural facility maintenance work; and administers and manages outsourced facility
maintenance service contracts.
Accomplishments – Fiscal Year 2018-2019
• Converted the Administration, Operations, and Warehouse building’s fluorescent lighting to non-
flicker, cool running, daylight spectrum, LED bulbs for improvements in task and ambient
conditions, reducing electricity and air conditioning demands. The return on the overall initial
investment is 100% within 24 months, plus ongoing annual savings of 30% to 40%.
• Designed, manufactured, and installed a new customer service reception area to enhance
customer interaction, improve staff ergonomics, complement Board Room design details, and
provide staff with level 3 ballistic protection. Also, retrofitted the lobby doors with level 2 ballistic
glass to provide an additional layer of security between the public areas and employee
areas. Installed a video system at the public service lobby entrance, allowing staff to verify the
identity and intent of individuals requesting access to the service desk prior to granting it.
• Reconfigured and expanded customer service section and the Engineering department cubicles
to provide expanded and more efficient workspaces for a reduced work force.
Safety and Security
Services We Provide
Safety and Security, under the direction of the Chief of Administrative Services, provides the following:
interprets safety regulations and standards, participates in the development and management of new
or revised safety standards, policies, plans, organizes, coordinates and implements the occupational
safety & health and security management programs for the District. Ensures the workplace is in
compliance with Cal/OSHA regulations. Coordinates programs which support a safe workplace
including: safety orientations, Injury and Illness Prevention Program, emergency preparedness,
HAZWOPER Team and confined space entry and rescue. Takes or recommends action to ensure
compliance with security and occupational safety & health regulations and requirements. Advises
staff on safe work methods and practices and the elimination of hazards. 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 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; 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.
134
Departmental Operating Budget
Safety and Security (continued)
Accomplishments – Fiscal Year 2018-2019
• Reduced employee injuries by 33%.
• Vehicle property claims remained at zero.
• As part of the District’s Injury and Illness Prevention Program, the District provided Bionomics
Injury Prevention training to all staff.
• Certified the District’s 12-member team at the State Industry Emergency Response level.
• Completed District-wide confined spaces inventory and worked with GIS staff to create a GIS
repository layer for tracking and identification purposes.
• Streamlined the District’s Occupational Health & Safety Programs in partnership with other
departments.
• Completed the District’s SDRMA triennial Occupational Health & Safety and Property and
Liability Loss Control Programs Review and Hazards Identification programs.
• Enhanced the District Occupational Health & Safety training by leveraging the Target Solutions
online platform and using water industry safety-specific training topics.
• Facilitated safety, security, emergency preparedness, and drone cross-functional committees,
which help to strengthen internal response on all levels, strengthening oversight and improving
reporting and relationships.
• Finalized the development of 17 District Emergency Incident Procedures as part of the District’s
Emergency Response Plan.
• Enhanced the Safety & Security Sharepoint employee website to include resources for
Occupational Health & Safety, Security, and Emergency Preparedness and Response.
• Developed and maintained the District’s FEMA and District-sanctioned emergency training
requirements for staff, which consisted of coordinating training resources and tracking
completions and certifications.
• Coordinated and led joint training exercises between the District’s HAZWOPER and Emergency
Response Team, Cal Fire, and the County of San Diego Fire department response teams.
• Updated the District’s Ergonomic Equipment Program.
• Worked with IT on the electronic conversion of safety forms to the Nintex platform, which
provides mobile easy-to-use workflow automation capabilities to allow for efficient data entry
submittal, management, automation, and optimization of paper-based business processes.
• Worked with Operations to enhance equipment and tools used in field operations, minimizing
risk and maximizing injury prevention.
135
Departmental Operating Budget
Safety and Security (continued)
Accomplishments – Fiscal Year 2018-2019 (continued)
• To avoid the recurrence of unsafe practices, staff instituted incident and accident investigation
ease-of-use forms and procedures that establish streamlined notification, response,
investigation, documentation, and follow-up protocols.
Information Technology Operations/Applications
Services We Provide
IT Operations, under the direction of the Chief of Administrative Services, provides the following: day-
to-day support of the District’s enterprise business computing environment to include network and
desktop hardware/software; disaster recovery; telecommunications; cybersecurity; physical access
controls; mobile, physical, and wireless networks; internal/external website; and end-user helpdesk
services.
Accomplishments – Fiscal Year 2018-2019
• Completed the deployment and migration of more than 300 of the District’s corporate email
addresses to Microsoft Office365. Features and benefits include email archiving, eDiscovery,
antimalware/antispam filtering capabilities, enhanced security, automatic up-to-date versions
of Office applications, and improved reliability.
• Completed the design and deployment of a new security firewall hardware solution and
additional safeguards delivering hardened authentication, access control, and authorization for
external users. The combination of these new devices provides the District with detailed
knowledge and awareness of possible intrusion/detection, greater access layer intelligence and
automation control into its corporate environment, while also increasing the District’s security
posture, and supporting its many technologies and business services.
• Via a sponsored Department of Homeland Security (DHS) cyber security audit, completed a
network risk and vulnerability assessment to determine the current state of the District’s
technology security measures, data protection methods, and SCADA environment
safeguards. DHS ran several cyber-breach exercises, including wired/wireless penetration
testing and social engineering and phishing campaigns. DHS complimented the District for its
cyber awareness and vigilance and concluded it currently maintains effective technology
security practices, controls, and safeguards.
• Completed the configuration and implementation of the District’s new document management
portal, Weblink, which serves as an external-facing portal enabling the public to actively search
for District documents, thus minimizing staff’s involvement for public records requests and other
related document searches.
136
Departmental Operating Budget
Geographic Information Systems (GIS)
Services We Provide
GIS, under the direction of the Chief of Administrative Services, provides the following: technical and
administrative support of the District’s enterprise GIS and computer aided design systems. GIS is also
responsible for the data collection and data QA/QC of the District’s facility data and land-based
data. In addition, GIS 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 2018-2019
• Completed a major upgrade to the enterprise GIS platform. The upgraded platform provides
additional capability and functions for business-critical GIS-related applications, ranging from
day-to-day work orders to enterprise asset management.
• Developed a Sewer Overflow Model and application for Engineering and Operations staff. Using
spatial analysis, the model simulates sewer manhole overflow paths and ranges, which will help
staff predict and plan for sewer pollution damages, and any County-required reporting within a
short period of time to meet State regulations.
• In support of the Asset Management program, developed a real-time dashboard application for
the District’s pipeline assets using Esri’s latest technology. The new dashboard is real-time
reflection of the District’s pipeline inventory, both in tabular and geographic representation.
• Implemented two new softwares for the District’s Drone Program, assisting staff to map out drone
flight paths with a high degree of accuracy and to collect field asset data and overlay it on to the
District’s GIS system.
• Designed and developed a smartphone app and web application for the easement and
encroachment project, which integrates the easement/encroachment data to the same platform
and streamlines the data collection and sharing process.
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138
Departmental Operating Budget
Finance
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,
Meter Services, 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.
Finance Department – 31positions (1)
(1) See Position Count by Department on page 113 for the list of positions per department.
Treasury and
Accounting
Services
2331
Customer
Service
2341
Controller and
Budgetary
Services
2321
Assistant Chief of Finance -2321231
Chief Finance Officer -2311
Meter
Services
2342
139
FY 2018 FY 2019 FY 2019 FY 2020
Actual Budget Actual Budget
Finance Chief 807,013$ 605,200$ 799,267$ 817,700$
Controller and Budgetary Services 716,301 938,100 698,904 767,000
Treasury and Accounting Services 1,423,139 1,312,100 1,405,083 1,150,000
Customer Service 2,066,147 2,207,400 2,105,495 2,028,000
Meter Shop 896,669 1,101,400 948,084 991,500
Total Expenses 5,909,269 6,164,200 5,956,833 5,754,200
FY 2018 FY 2019 FY 2019 FY 2020
Actual Budget Actual Budget
Labor and Benefits 4,696,950 4,992,400 4,820,089 4,539,800
Travel and Memberships 9,367 17,700 10,512 17,900
General Office Expense 144,522 169,200 145,393 168,000
Equipment 404 - 1,450 2,500
Fees 390,717 388,100 461,687 431,300
Services 196,400 138,300 109,901 167,400
Training 248 1,500 700 1,300
Materials & Maintenance 336,010 352,000 294,469 317,000
Miscellaneous 2,719 - - -
Bad Debt Expense 131,932 105,000 112,632 109,000
Total Expenses 5,909,269$ 6,164,200$ 5,956,833$ 5,754,200$
-$ -$ -$ -$
Budget vs. Actual, in thousands ($)
Finance
Department
Object
$2,000
$2,800
$3,600
$4,400
$5,200
$6,000
2018 2019 2020
5,
6
6
9
6,1
6
4
5,7
5
4
5,
9
0
9
5,
9
5
7
Budget Actual
140
Departmental Operating Budget
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 responsible for performing cost of
service studies, capacity fee studies, preparing rate notices and property tax assessments. This
division is also responsible for the bi-weekly payroll of 138 full-time and temporary employees using
the District’s Eden System. Timesheets and pay stubs are collected and distributed electronically.
Benefits and deductions are processed bi-weekly and federal and state tax returns are filed on a
quarterly basis, W2s are filed annually. This division also assists in the general ledger accounting,
audit, cost accounting, and contract review.
Accomplishments – Fiscal Year 2018-2019
• Completed a sewer Proposition 218 hearing to implement the rates developed in the Fiscal
Year 2018 Cost of Service study.
• Made a lump sum $31.8 million payment to CalPERS reducing the District’s unfunded
pension liability and increasing the District’s funded percentage from 62.9%, per the July 2018
Annual Valuation Report, to an estimated 85.0%, the District an estimated $16.4 million over
the next 25 years.
• For the fifteenth consecutive year, the Government Finance Officers Association (GFOA)
awarded the District with the Distinguished Budget Presentation Award for the Fiscal Year
2018-2019 Budget. This is a significant achievement and is the highest form of recognition in
governmental budgeting.
• The California Society of Municipal Finance Officers (CSMFO) for the thirteenth consecutive
year, recognized the District with the Operating Budget Excellence Award for the Fiscal Year
2018-2019 Budget.
• The CSMFO awarded the District for the fourteenth consecutive year, the Capital Budgeting
Excellence Award for the Fiscal Year 2018-2019 CIP Budget.
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
141
Departmental Operating Budget
Treasury and Accounting Services (continued)
Comprehensive Annual Financial Report. 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.
Accomplishments – Fiscal Year 2018-2019
• For the fifteenth consecutive year, the GFOA awarded a Certification of Achievement for
Excellence in Financial Reporting to the District for its Comprehensive Annual Financial
Report for the fiscal year ended June 30, 2018.
• Amended Investment Policy No. 27 to allow more flexibility with investment choices while
reducing overall investment risk in accordance with California Government Code Section
53601.
• Implemented internal control improvements including: implementing IT security changes to
ensure segregation of duties in the procurement-to-payment lifecycle; developed a vendor
creation process that sends automatic notifications, ensuring transparency; implemented a
monthly review of developer balances and controls to ensure balances are current and
collectible; completed a review of miscellaneous receivables; and implemented a collections
process.
• Completed the State Water Resources Control Board’s water loss audit certification program
and submitted a certified water loss audit to the Department of Water Resources.
• Executed the cash flow strategic plan, including the refinancing of 1996 COPS Debt and
issuing 2018 Water Revenue Bonds to support the continuing long-term Capital Improvement
Program improvements of the District.
• Completed a review of the District’s banking services to ensure fees and services are
competitive and beneficial to the District.
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 check, ACH, web, interactive voice response
(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
142
Departmental Operating Budget
Customer Service (continued)
24/7. If they desire more personal service, the customer care team handles an average of 5,000
customer calls per month.
Meter Services are responsible for the installation and maintenance of all meters in the District. They
manage the District’s backflow/cross-connection prevention which includes annual testing 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 2018-2019
• Meter maintenance staff completed more than 540 new meter installations.
• Outsourced the printing and mailing of backflow notices to save the District hundreds of
dollars in staff time.
• As part of the District’s Automated Meter Reading change-out program, staff upgraded
approximately 20,000 meters to a new register, which extends the automated reading life of
the meter for another 10 years.
• The District installed more than 100 cellular meter reading units on its temporary meters,
which allows the meter reads to be transmitted directly to the office, saving hours of manual
reading.
143
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144
Departmental Operating Budget
Water Operations Department
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.
Water Operations Department – 53 Positions (1)
(1) See Position Count by Department on pages 113-114 for the list of positions per department.
Chief, Water Operations
3211
Utility Services
Utility Maintenance 3232
Fleet Maintenance 3233
Pump & Electrical 3236
Water Operations
Water System Operations 3221
Water System 3225
SCADA System 3227
Laboratory 3243
Reclamation Plant 3244
Assistant Chief of Water
Operations
3231
145
FY 2018 FY 2019 FY 2019 FY 2020
Actual Budget Actual Budget
Water Operations Chief (1)479,925$ 502,800$ 498,326$ 472,100$
Water Systems (1)5,986,051 6,156,900 5,908,141 6,100,600
Construction Maintenance (1)4,864,165 5,506,500 5,200,159 5,285,100
Total Expenses 11,330,141 12,166,200 11,606,626 11,857,800
FY 2018 FY 2019 FY 2019 FY 2020
Actual Budget Actual Budget
Labor and Benefits (1)7,895,488 8,633,500 8,210,826 8,163,000
Travel and Memberships 42,461 43,900 43,154 46,600
General Office Expense 337 300 99 300
Equipment 48,905 55,900 44,488 76,600
Fees 115,556 116,600 115,824 123,200
Services 378,878 511,100 448,886 585,800
Training 7,381 8,000 8,189 10,900
Materials & Maintenance 1,706,813 1,975,700 1,676,224 1,999,400
Sewer Charges 1,134,322 821,200 1,058,936 852,000
Total Expenses 11,330,141$ 12,166,200$ 11,606,626$ 11,857,800$
(1) Excludes CIP labor and benefits.-$ -$ -$ -$
Budget vs. Actual, in thousands ($)
Water Operations
Department
Object
$- $4,000 $8,000 $12,0001 1 ,3 1 7 1 1 ,9 5 1 1 2 ,1 6 6 1 1 ,8 5 810,711,311,6BudgetActual
$7,000
$9,000
$11,000
$13,000
2018 2019 2020
11
,
9
5
1
12
,
1
6
6
11
,
8
5
8
11
,
3
3
0
11
,
6
0
7
Budget Actual
146
Departmental Operating Budget
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 water
system operators monitor and operate the recycled water distribution system to ensure it provides
adequate supply to the District’s recycled water. Laboratory staff ensures all regulatory-required
sampling, analyses, and reporting is done to meet the requirements from the SWRCB 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.
Accomplishments – Fiscal Year 2018-2019
• Provided operational and administrative support for the planning and installation of a pilot
rental Disinfection program PAX Mixer with Residual Control System for the 803-4 reservoir
site.
• Obtained bids and request for proposals for the fiscal year 2020 floating cover reservoir
maintenance and cleaning program as mandated by the State.
• Provided operational support on developer-related and Capital Improvement Projects (CIP)
including the 870-2 pump station, Hidden Mesa Pipeline replacement, 711-3 liner and cover
replacement, 803-2 tank recoating, air vac replacement along the 30-inch line from the 624-3
to Roll Reservoir and the Cathodic rehabilitation program.
• Planned and executed requested water deliveries of 292.7 acre-feet to Tijuana, Mexico during
September and October 2018.
• Provided administrative operational support for the 2019 leak detection program, which
included inspection of approximately 145 miles of potable and 22 miles of recycled pipelines,
verifying more than 300 potential leaks. Staff verified and repaired 60 District-side leaks, saving
approximately 14-million gallons of non-revenue water per year.
147
Departmental Operating Budget
Water System Operations (continued)
Accomplishments – Fiscal Year 2018-2019 (continued)
• Coordinated and provided operational support as needed for following CIP projects at the
Treatment Plant: Chlorine Scrubber Maintenance and Repairs, Steele Canyon Lift Station Bar
Screen Installation, Headworks Containment Repair, Effluent Force Main Repair, Diesel Fuel
Line Replacement, Clarifier and Filter Weir Troughs Replacement, Aeration Basin Trough
Replacement, Filter Inlet Valve Replacements, Filter and Chlorine Contact Basin Mud Valve
Replacements, Aeration Basin #2 Outlet Valve Replacements, Effluent Force Main Chlorine
Analyzer Installation, Filter Media and Nozzle Replacement, Sun Shields for Effluent Pressure
Reducing Station, and Aeration Basin Electrical Panels.
• Provided operational support and coordination for the City of San Diego’s emergency request
of water deliveries when the City experienced a main break on a transmission line and the Lower
Otay Treatment Plant was also offline due to a County Water Authority raw water shutdown. The
emergency delivery provided water to the South San Diego community and helped the City to
meet their daily demands.
• Requested proposals and planned and coordinated the inspection and cleaning of six potable
reservoirs to maintain a five-year inspection cycle of all reservoirs as recommended by the
American Water Works Association.
• Coordinated and provided support as needed for the aqua ammonia piping replacement CIP
at the Regulatory Site.
• Submitted to the State Water Resources Control Board the annual report for the water loss
discharges and BMP program.
• Gathered information as needed for the annual drinking water report submitted to the state.
• Provided support for regulatory inspections including the Air Pollution Control District and
HMBP.
• Provided Sweetwater Authority with potable flows as needed on three occasions via emergency
interconnects.
• Continued the voluntary Lead Testing in Schools Program and completed the requirements of
the mandatory Lead Testing in Schools Program (AB746). All samples collected were below
action levels.
• Completed the three-year audits and five-year revalidations of the California Accidental Release
Prevention Program for the District’s chlorine and qualifying aqua ammonia sites.
• Completed the Lab Chemical Hygiene Plan and updated laboratory standard operating
procedures to comply with upcoming Environmental Laboratory Accreditation Program/The
NELAC Institute (ELAP/TNI) regulations.
148
Departmental Operating Budget
Water System Operations (continued)
Accomplishments – Fiscal Year 2018-2019 (continued)
• Completed the annual Consumer Confidence Report.
• Initiated the Treatment Plant solids reduction and improved organic loading testing project.
• Completed the backup generator power at remote SCADA sites project.
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.
Accomplishments – Fiscal Year 2018-2019
• Reclassified a Utility Maintenance Supervisor to an Assistant Supervisor, allowing the District
to complete required maintenance more cost effectively and efficiently and without additional
staffing redundancy.
• Completed 65 proactive service lateral replacements in the Rancho San Diego area.
• Provided CIP support through the following: replaced large meters (Cuyamaca College,
Nirvana, Calle Verde), repaired the force main in a cultural sensitive area and replaced three
twelve inch sized tertiary filter influent valves at the Treatment Plant, modified the Steele
Canyon bar screen (Steele Canyon wet well), replaced ammonia lines at the Regulatory site,
assisted in the Hillsdale water and sewer improvements, and replaced valves for contractor
work at Hidden Mesa.
• Supported other agencies’ CIPs through the following: replaced and installed valves on
Sweetwater Springs Blvd (County of San Diego CIP), set up highline on San Carlos (County
CIP), added and removed stacking to adjust grade for manholes on Fuerte Drive (County of
San Diego CIP), and adjusted valves and manholes to grade for both (County of San Diego
and City of Chula Vista CIP’s).
149
Departmental Operating Budget
Utility Services Maintenance (continued)
Accomplishments – Fiscal Year 2018-2019 (continued)
• Commenced the start of the District’s formalized condition assessment program of the below
grade vaults, which will assist in increasing the lifespan of the assets and identify corrective
maintenance tasks to be completed at the lowest cost.
• Installed a new Jockey pump at the 1100-1 Hydro Pump Station which will increase operating
efficiency and lower lifetime maintenance costs.
• Completed the conversion and installation of two soft starts at the 450 and 680 Recycled
Pump Station, which is expected to reduce lifetime maintenance costs of the facility.
• Completed the mechanical and electrical controls on the new Surge tank located at the 927-
1R Recycled Pump Station, which will help to increase efficiency.
• Installed and automated clutch actuator to protect the LOPS engine by decoupling the engine
from the pump in the event of an unscheduled engine shut down.
• Installed fuel level monitors in the District’s generator to assist in emergency response
planning.
• Replaced and configured the District’s HAZWOPR van so the District is better prepared to
respond to emergency events.
• Reconfigured the District’s fleet of vehicles to be more efficient. As a result, although four new
field staff with assigned vehicles were added this past fiscal year, the fleet inventory only went
up by one.
• Reduced the District’s off-road equipment by a net of two assets despite the addition of a mini
excavator and front loader, which will add operational capability to perform emergency repairs
and reducing lifetime maintenance and operational costs.
• Working with the Engineering department, completed the District parking lot pavement
project, which included increasing security around the Operations yard, protecting high value
and emergency assets, and performing paving repairs that will extend the life of the
Operations parking lots.
150
Departmental Operating Budget
Engineering
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.
Engineering Department – 26 Positions (1)
(1) See Position Count by Department on pages 114-115 for the list of positions per department.
Chief, Engineering
3311
Water Resources, Planning,
and Design 3321
Environmental Services 3451
Public Services 3421
Field Services 3431
Assistant Chief of Engineering
3421
151
FY 2018 FY 2019 FY 2019 FY 2020
Actual Budget Actual Budget
Engineering Chief (1)585,202$ 624,700$ 740,820$ 593,800$
Engineering Services (1), (2)814,224 918,000 889,997 841,200
Public Services (1), (3)1,502,075 1,738,300 1,804,920 1,921,400
Environmental Services (1)302,732 344,900 381,355 344,400
Total Expenses 3,204,233 3,625,900 3,817,092 3,700,800
FY 2018 FY 2019 FY 2019 FY 2020
Actual Budget Actual Budget
Labor and Benefits (3)2,562,783 2,703,200 2,964,424 2,993,800
Travel and Memberships 14,502 11,800 14,187 19,100
General Office Expense 594 600 727 800
Equipment 427 - - 14,500
Fees 55,386 68,600 57,214 62,000
Services 564,255 833,100 770,794 598,200
Training 5,536 8,600 9,746 12,400
Materials & Maintenance 332 - - -
Total Expenses 3,204,233$ 3,625,900$ 3,817,092$ 3,700,800$
(1) Excludes CIP labor and benefits.
(2) Engineering Services includes Planning, Design, and Water Resources.
(3) Public Services includes Public, Construction and Survey Services.
Budget vs. Actual, in thousands ($)
Engineering
Department
Object
/P
$1,000
$2,000
$3,000
$4,000
2018 2019 2020
3,
3
5
8
3,6
2
6
3,
7
0
1
3,
2
0
4
3,
8
1
7
Budget Actual
152
Departmental Operating Budget
Water Resources, Planning, Design, and Environmental Services
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 2018-2019
• Adopted a Board resolution amending Policy No. 6 for the Annual Capital
Improvement Program development to align with the General Manager’s spending
authority.
• Completed three negotiations for:
- City of San Diego and other participating agencies for Board approval of the
Amended and Restated Regional Wastewater Agreement with a $1.8 billion cap
in spending for secondary equivalency and Pure Water
- Purchase of a trailer mounted engine and pump for the Temporary Lower Otay
Pump Station project
- Caltrans Utility Agreement for the SR-11 Utility Relocations on Enrico Fermi Drive
and Alta Road
• Completed the designs for:
- Portable trailer mounted variable frequency drive pump to aid the construction of
future CIP projects
- Temporary Lower Otay Pump Station Redundancy project
153
Departmental Operating Budget
Water Resources, Planning, Design, and Environmental Services
(continued)
Accomplishments – Fiscal Year 2018-2019 (continued)
• Awarded construction contracts for:
- 711-3 Reservoir Floating Cover and Liner Replacement project
- Pipeline Cathodic Protection Improvements – Phase II project
- Vista Vereda and Hidden Mesa Road Waterline Replacement project, which
included the replacement of 4,100 linear feet of existing potable main
- 803-2 Reservoir Interior/Exterior Coatings and Upgrades project
- Ralph W. Chapman Water Reclamation Facility Fuel System Improvements
project
- Ralph W. Chapman Water Reclamation Facility Filter Media and Nozzles
Replacement project
• Completed the repair of the 14-inch Recycled Water Force Main, which was
identified by a pipeline assessment completed in fiscal year 2018.
• Prepared Request for Proposals (RFP) and awarded consultant services contracts
for:
- Professional Engineering Design Services for Five Potable Water Pipelines
- As-Needed Appraisal Services
- As-Needed Engineering Design Services
- As-Needed Electrical Engineering Consulting Services
- Real Estate Broker Services
• Approved Sub Area Master Plans and Amendments for:
- Sweetwater Vistas development
- Village 8 West development
- Otay Crossings Commerce Park development
- Otay Ranch Village 2 development
• Presented an update to the Board on the status of the District’s efforts to expand the
use of recycled water.
• Identified five District properties, including the former Salt Creek Golf Course, for the
Board to declare surplus and notified 30 public agencies of the availability for
purchase, and presented an update to the Salt Creek Ad Hoc Committee.
Public Services and Field Services
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
154
Departmental Operating Budget
Public Services and Field Services (continued)
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 global positioning
system plots. Once bid, the Construction staff provides construction management for the
projects.
Accomplishments – Fiscal Year 2018-2019
• As of June 30, 2019, sold 507 meters, which totaled $7.88 million and equated to 876
Equivalent Dwelling Units.
• Completed 4,175 USA Mark-Out tickets with an accuracy rate of 99.91% and
completed 35 surveys related to various projects included in the Fiscal Year 2019 CIP.
• Supported $34.9 million of developer projects.
• Audited the District’s sewer system, validating 31 new connections to the District’s
system.
• Amended leases to generate fiscal year 2020 revenue in excess of $1.45 million from
the District’s 30 cell-site leases.
• Completed and closed out 10 developer recycled projects.
• Completed rehabilitation of the 980-2 (5.0 million-gallon capacity) Reservoir Interior
Coating and Upgrades project.
• Completed the construction of:
- Hillsdale Road 12-inch Waterline Replacement project, which included the
replacement of 4,050 linear feet of existing potable main
- Hillsdale Road 8-inch Sewer project, which included the replacement of 760
linear feet of existing sewer
- Fuerte Drive Sewer Relocation project, which included the relocation of 255
linear feet of 8-inch PVC sewer main to accommodate the County’s realignment
project
- Interconnection Pipeline Air/Vac Replacement project
- Ralph W. Chapman Water Reclamation Facility Headworks Improvements
project
- Steele Bridge Sewage Pump Station Wet Well Improvements
- District’s Administration & Parking Lot Improvements Phase II – Pavement
Rehabilitation Project
• Prepared RFP and awarded As-Needed Consultant Services contract for:
- Construction Management and Inspection Services
155
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156
FY 2018 FY 2019 FY 2019 FY 2020
Actual Budget Actual Budget
General Expense 2,651,866$ 2,585,700$ 2,507,645$ 2,642,000$
Total Expenses 2,651,866$ 2,585,700$ 2,507,645$ 2,642,000$
FY 2018 FY 2019 FY 2019 FY 2020
Actual Budget Actual Budget
Labor and Benefits (1)1,536,224 1,069,600 1,160,104 1,046,300
Insurance expenses 671,253 896,100 773,943 975,700
Legal expenses (2)443,800 620,000 573,598 620,000
Services 589 - - -
Total Expenses 2,651,866$ 2,585,700$ 2,507,645$ 2,642,000$
Object
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 8.1%of the
total Department Budget.
Department
Budget vs. Actual, in thousands ($)
(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 2019 and
FY 2020 is $212,500 and $202,600, 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.
(2) Included in the Legal Expenses for FY 2019 and FY 2020 is $175,000 and $175,000 respectively, for the City
of San Diego Recycled Water Rate Lawsuit.
$600
$1,200
$1,800
$2,400
$3,000
2018 2019 2020
2,
2
4
2
2,
5
8
6
2,
6
4
2
2,
6
5
2
2,
5
0
8
Budget Actual
157
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158
Capital Budget
The District provides water service to a population of nearly 224,000, which is expected to ultimately
increase to 308,000 by the year 2050. This growth, as well as the maintenance of existing assets,
requires a long-term capital planning process. The process is dynamic, due to evolving needs of the
community, water supply issues, and changing regulations. As such, capital planning is part of the
District’s overall strategic planning process. The capital planning process involves identifying current
and 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 approximately $280 million in capital assets
through ultimate build-out. The Fiscal Year 2020 Capital Budget is $17.2 million and the six-year
Capital Improvement Program (CIP) totals $88.3 million. The CIP is consistent with the District's
Water Facilities Master Plan, Sewer System Master Plan, current capacity fees, and the District's
strategic financial objectives. This CIP Budget document contains the descriptions, justifications,
expenditures, and funding for all the identified projects to ultimate build-out.
The District’s Capital Improvement Program (CIP)
The planning, design, and construction costs of all capital facilities within three business segments
(Potable Water, Recycled Water and Sewer) are allocated to four cost types and corresponding fund
categories: Expansion, Betterment, Replacement and/or New Water Supply. 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.
The following are general descriptions of the four fund categories:
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.
New Water Supply
Facilities required to support new sources of water are funded from new supply fees or user rates.
159
Capital Budget
Assumptions and Criteria
The CIP is developed based on the District's Water Facilities Master Plan and Sewer Service Master
Plan, incorporating historical data, growth, developers' input, SANDAG projections, and long-term
economic outlook.
The Water Facilities 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 seasonal maximum day demand peaking factors.
3. Utilizing land use as planned by the City of Chula Vista, County of San Diego and City of San
Diego.
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 and 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.
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 169. Capital facility projects are items that exceed $10,000 or $20,000 for
infrastructure related items (as defined under capital equipment on page 258 of the Glossary) and
have a useful life of at least two years.
The CIP projects are identified and are prioritized based on the following criteria:
• Safety, restoration of service, immediate obligation, Board directed, or critical system need.
• System upgrades or requirements to maintain system reliability in the next few fiscal years.
• Need to meet the future growth of the system.
• Project requirement may be reduced in capacity or may have low probability of need in the future.
160
Capital Budget
Major CIP Projects
161
FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 Total
Beginning Balance 27,615$ 43,679$ 44,880$ 41,966$ 41,053$ 38,922$ 27,615$
Sources
Capacity Fees 5,604 5,327 4,431 4,404 3,180 3,272 26,218
Debt financing 6,000 - - - - - 6,000
Grants - 260 260 260 - - 780
Interest 562 742 778 748 764 760 4,354
Temporary Meters 1,373 1,380 1,387 1,394 1,401 1,408 8,343
Availability (Betterment Portion)486 506 526 547 569 592 3,226
New Supply Fee 608 574 480 471 346 355 2,834
COPS 2010B Reimbursement 13,705 779 779 779 779 779 17,600
Transfer from General Fund 16,043 16,431 16,239 16,699 17,246 17,392 100,050
Interfund Transfers 265 77 82 82 86 86 678
Total Sources 44,646 26,076 24,962 25,384 24,371 24,644 170,083
Uses
CIP Projects 17,222 13,334 16,238 14,626 14,704 12,169 88,293
Debt Service 9,491 9,663 9,741 9,755 9,863 9,007 57,520
Developer Services 1,869 1,878 1,897 1,916 1,935 1,955 11,450
Total Uses 28,582 24,875 27,876 26,297 26,502 23,131 157,263
Net Sources (Uses)16,064 1,201 (2,914) (913) (2,131) 1,513 12,820
Ending Balance 43,679$ 44,880$ 41,966$ 41,053$ 38,922$ 40,435$ 40,435$
CIP Reserve Funds ($1,000)
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.
$0
$10
$20
$30
$40
$50
FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
CIP Reserve Fund Balances ($1,000)
Betterment Replacement Expansion New Supply
162
FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 Total
Source
Expansion 69$ 139$ 1,037$ 2,727$ 2,712$ 792$ 7,476$
Betterment 3,581 1,806 1,892 2,045 1,927 1,977 13,228
Replacement 12,949 11,277 13,238 9,851 10,062 9,369 66,746
New Supply 623 112 71 3 3 31 843
Total 17,222$ 13,334$ 16,238$ 14,626$ 14,704$ 12,169$ 88,293$
FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 Total
Fund
Potable 14,311$ 10,267$ 14,170$ 13,586$ 13,114$ 10,322$ 75,770$
Recycled 723 2,275 616 32 26 459 4,131
Sewer 2,188 792 1,452 1,008 1,564 1,388 8,392
Total 17,222$ 13,334$ 16,238$ 14,626$ 14,704$ 12,169$ 88,293$
CIP Funding Source
CIP by Fund
Six-Year CIP Projects Summary by Source ($1,000s)
Six-Year CIP Projects Summary by Fund ($1,000s)
$-
$5
$10
$15
$20
FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
Six-Year CIP Projects by Funding Source, in Thousands ($)
Expansion Betterment Replacement New Supply
$-
$5
$10
$15
$20
FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
Six-Year CIP Projects by Fund, in Thousands ($)
Potable Recycled Sewer
163
Expansion
CIP No CIP Project Title FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 Total
P2040 (1)Res - 1655-1 Reservoir 0.5 MG 30$ 50$ 580$ 1,550$ 1,450$ 280$ 3,940$
P2494 Multiple Species Conservation Plan 30 42 - - - - 72
P2595 PL - 16-inch, 624 Zone, Village 3N - Heritage Road, Main St/Energy Way 1 1 1 1 1 145 150
P2642 Rancho Jamul Pump Station Replacement 5 10 380 1,050 1,050 5 2,500
R2084 RecPL - 20-Inch, 680 Zone, Village 2 - Heritage/La Media 1 1 1 1 1 359 364
S2069 Cottonwood Sewer Pump Station Renovation 2 35 75 125 210 3 450
Total Expansion 69$ 139$ 1,037$ 2,727$ 2,712$ 792$ 7,476$
Potable 66$ 103$ 961$ 2,601$ 2,501$ 430$ 6,662$
Recycled 1 1 1 1 1 359 364
Sewer 2 35 75 125 210 3 450
Total Expansion 69$ 139$ 1,037$ 2,727$ 2,712$ 792$ 7,476$
Betterment
Funding Source FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 Total
P2451 Otay Mesa Desalination Conveyance and Disinfection System 7 7 7 7 7 69 104
P2521 Large Meter Vault Upgrade Program 100 100 75 - - - 275
P2578 (1)PS - 711-2 (PS 711-1 Replacement and Expansion) - 14,000 gpm - 15 140 1,395 1,240 1,240 4,030
P2619 (1)PS - Temporary Lower Otay Pump Station Redundancy 1,380 241 152 - - - 1,773
P2626 803-4 Reservoir Water Quality Improvements – PAX System Purchase 150 150 25 - - - 325
P2630 624-3 Reservoir Automation of Chemical Feed System 5 50 440 10 - - 505
P2652 520 to 640 Pressure Zone Conversion 20 60 100 50 20 - 250
P2653 1200 Pressure Zone Improvements 200 75 50 - - - 325
P2654 Heritage Road Interconnection Improvements 65 130 5 - - - 200
P2656 Regulatory Site Desilting Basin Improvements 40 100 10 - - - 150
P2658 832-1 Pump Station Modifications 15 300 250 35 - - 600
P2660 Camino Elevado Drive OWD and SWA Interconnection Upgrade 3 20 200 27 - - 250
P2664 Otay Mesa Dual Piping Modification Program 10 50 50 50 50 140 350
R2116 RecPL - 14-Inch, 927 Zone, Force Main Improvements 25 11 11 6 6 5 64
R2118 Steele Canyon Sewer PS Large Solids Handling Improvements 5 - - - - - 5
R2120 RWCWRF Filtered Water Storage Tank Improvements 390 75 60 - - - 525
R2125 RecPRS - 927/680 PRS Improvements, Otay Lakes Road 45 160 - - - - 205
R2150 RWCWRF - Secondary Chlorine Analyzer and Feed System 1 - - - - - 1
S2024 (2)Campo Road Sewer Main Replacement 750 15 - - - - 765
S2043 RWCWRF Sludge Handling System 100 5 5 50 50 100 310
S2047 Asset Management - Info Master Sewer Implementation 5 5 5 5 - - 20
S2060 Steele Canyon Pump Station Replacement - - - 2 10 38 50
S2069 Cottonwood Sewer Pump Station Renovation 3 35 75 125 210 2 450
S2070 Hidden Mountain Sewer Pump Station Wet Well Renovation 130 20 - - - - 150
S2071 San Diego Metro Wastewater Capital Improvements 132 182 232 283 334 383 1,546
Total Betterment 3,581$ 1,806$ 1,892$ 2,045$ 1,927$ 1,977$ 13,228$
Potable 1,995$ 1,298$ 1,504$ 1,574$ 1,317$ 1,449$ 9,137$
Recycled 466 246 71 6 6 5 800
Sewer 1,120 262 317 465 604 523 3,291
Total Betterment 3,581$ 1,806$ 1,892$ 2,045$ 1,927$ 1,977$ 13,228$
Six-Year CIP Projects by Source and Fund ($1,000s)
(1) Partially funded by 2018A Water Revenue Bonds.
(2) Project may by funded with Sewer Debt proceeds.
164
Replacement
CIP No CIP Project Title FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 Total
P2083 (1)PS - 870-2 Pump Station Replacement 4,700 46 2 2 - - 4,750
P2174 (1)PS - 1090-1 Pump Station Upgrade 350 1,450 150 - - - 1,950
P2282 Vehicle Capital Purchases 439 320 300 250 200 210 1,719
P2286 Field Equipment Capital Purchases 203 60 60 63 60 60 506
P2405 PL - 624/340 PRS, Paseo Ranchero and Otay Valley Road 5 50 250 700 475 20 1,500
P2453 (1)SR-11 Utility Relocations 270 270 60 60 200 200 1,060
P2460 I.D. 7 Trestle and Pipeline Demolition 80 50 450 10 - - 590
P2485 SCADA - Infrastructure and Communications Replacement 60 60 60 60 - - 240
P2507 East Palomar Street Utility Relocation 4 3 - - - - 7
P2508 Pipeline Cathodic Protection Replacement Program 50 - - - - - 50
P2516 (1)PL - 12-Inch, 640 Zone, Jamacha Road - Darby/Osage - - 75 125 400 400 1,000
P2533 1200-1 Reservoir Interior & Exterior Coating 25 825 5 29 - - 884
P2534 978-1 Reservoir Interior & Exterior Coating 5 25 20 5 - - 55
P2539 South Bay Bus Rapid Transit (BRT) Utility Relocations 20 60 70 - - - 150
P2543 850-1 Reservoir Interior/Exterior Coating 810 85 5 30 - - 930
P2544 850-2 Reservoir Interior/Exterior Coating 5 20 5 5 5 100 140
P2546 980-2 Reservoir Interior/Exterior Coating 5 15 - - - - 20
P2553 (1)Heritage Road Bridge Replacement and Utility Relocation 40 250 950 850 750 630 3,470
P2555 Administration and Operations Parking Lot Improvements 30 30 - - - - 60
P2561 Res - 711-3 Reservoir Cover/Liner Replacement 50 50 - - - - 100
P2562 Res - 571-1 Reservoir Cover/Liner Replacement 20 10 1 1 76 77 185
P2563 Res - 870-1 Reservoir Cover/Liner Replacement 5 50 1,150 42 - - 1,247
P2565 803-2 Reservoir Interior/Exterior Coating & Upgrades 125 65 5 30 5 120 350
P2567 1004-2 Reservoir Interior/Exterior Coating & Upgrades - - 20 850 90 5 965
P2571 Data Center Network Data Storage and Infrastructure Enhancements 100 - - - - - 100
P2572 Enterprise Resource Planning (ERP) Replacement - 80 50 - - - 130
P2573 PL - 12-Inch Pipeline Replacement, 803 Zone, Hillsdale Road 5 4 - - - - 9
P2574 (1)PL - 12-Inch Pipeline Replacement, 978 Zone, Vista Vereda 230 10 - - - - 240
P2578 (1)PS - 711-2 (PS 711-1 Replacement and Expansion) - 14,000 gpm - 35 310 3,105 2,760 2,760 8,970
P2584 Res - 657-1 and 657-2 Reservoir Demolitions - - - - 1 50 51
P2593 458-1 Reservoir Interior/Exterior Coating & Upgrades - 10 895 110 5 30 1,050
P2594 Large Meter Replacement 60 1 1 1 77 25 165
P2604 AMR Change-Out 1,300 260 260 - - - 1,820
P2605 (1)458/340 PRS Replacement, 1571 Melrose Ave 295 100 20 - - - 415
P2607 Douglas Ave SWA and OWD Interconnection Upgrade 20 25 - - - - 45
P2608 (1)PL - 8-inch, 850 Zone, Coronado Ave, Chestnut/Apple 50 75 475 200 - - 800
P2609 (1)PL - 8-inch, 1004 Zone, Eucalyptus St, Coronado/Date/La Mesa 225 450 60 - - - 735
P2610 Valve Replacement Program - Phase 1 50 75 75 50 4 - 254
P2611 (1)Quarry Road Bridge Replacement and Utility Relocation 75 275 550 325 50 - 1,275
P2612 (1)PL - 12-inch, 711 Zone, Paso de Luz/Telegraph Canyon Rd 50 75 335 25 - - 485
P2614 485-1 Reservoir Interior/Exterior Coating - - - 10 885 - 895
Six-Year CIP Projects by Source and Fund ($1,000s)
(1) Partially funded by 2018A Water Revenue Bonds.
(2) Project may by funded with Sewer Debt proceeds.
165
Replacement, Continued
CIP No CIP Project Title FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 Total
P2615 (1)PL - 12-Inch Pipeline Replacement, 803 PZ, Vista Grande 25 5 250 600 1,290 10 2,180
P2616 (1)PL - 12-Inch Pipeline Replacement, 978 Zone, Pence Dr/Vista Sierra Dr 170 1,700 1,390 10 - - 3,270
P2617 Lobby Security Enhancements 150 - - - - - 150
P2623 Central Area to Otay Mesa Interconnection Pipelines Combination Air/Vacuum Valve Replacements50 220 10 - - - 280
P2625 (1)PL - 12-inch, 978 Zone, Hidden Mesa Road 200 10 - - - - 210
P2627 (1)458/340 PRS Replacement, 1505 Oleander Ave 300 100 15 - - - 415
P2631 1485-2 Reservoir Interior/Exterior Coating & Upgrades - - - 5 50 1,000 1,055
P2638 Buildings and Grounds Refurbishments 89 - - - - - 89
P2639 Vista Diego Hydropneumatic Pump Station Replacement 25 425 2,300 50 - - 2,800
P2640 Portable Trailer Mounted VFD Pumps 458 50 - - - - 508
P2646 North District Area Cathodic Protection Improvements - 100 200 450 450 - 1,200
P2647 Central Area Cathodic Protection Improvements - 100 200 500 500 - 1,300
P2648 Otay Mesa Area Cathodic Protection Improvements 100 280 10 - - - 390
P2649 HVAC Equipment Purchase 44 20 15 30 - - 109
P2655 La Presa Pipeline Improvements 15 80 150 680 550 275 1,750
P2657 1485-1 Reservoir Interior/Exterior Coating & Upgrades - - - - 5 25 30
P2659 District Boardroom Improvements 180 20 - - - - 200
P2661 Replacement of Backflow Prevention Devices on Pipeline Interconnections on Otay Mesa10 75 75 75 75 65 375
P2662 Potable Water Meter Change Out - - - 20 30 1,900 1,950
P2663 Potable Water Pressure Vessel Program 50 300 350 50 300 450 1,500
R2121 Res - 944-1 Reservoir Cover/Liner Replacement 60 1,700 21 - - - 1,781
R2139 RWCWRF - Filter Troughs Replacement 1 - - - - - 1
R2143 AMR Change-Out 130 130 35 - - - 295
R2145 RWCWRF - Filter Media and Nozzles Replacement 1 - - - - - 1
R2146 Recycled Pipeline Cathodic Protection Improvements 40 185 475 - - - 700
R2147 RWCWRF Fuel Lines Replacement 10 - - - - - 10
R2148 Large Meter Replacement - Recycled 12 12 12 14 8 - 58
R2151 RWCWRF - Bulk Chlorine Vapor Scrubber System Refurbishment 1 - - - - - 1
R2152 Recycled Water Meter Change-Out - - - 10 10 50 70
R2153 Recycled Water Pressure Vessel Program 1 1 1 1 1 45 50
S2012 San Diego County Sanitation District Outfall and RSD Outfall
Replacement
50 50 125 125 125 125 600
S2024 (2)Campo Road Sewer Main Replacement 750 15 - - - - 765
S2027 Rancho San Diego Pump Station Rehabilitation 5 5 - - - - 10
S2045 Fuerte Drive Sewer Relocation 20 - - - - - 20
S2046 RWCWRF - Aeration Panels Replacement 5 - - - - - 5
S2048 Hillsdale Road Sewer Repairs 5 - - - - - 5
S2049 (2)Calavo Basin Sewer Rehabilitation - Phase 2 40 200 740 5 - - 985
S2050 Rancho San Diego Basin Sewer Rehabilitation - Phase 2 5 5 5 30 175 600 820
Six-Year CIP Projects by Source and Fund ($1,000s)
(1) Partially funded by 2018A Water Revenue Bonds.
(2) Project may by funded with Sewer Debt proceeds.
166
Replacement, Continued
CIP No CIP Project Title FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 Total
S2051 RWCWRF - Headworks Improvements 5 - - - - - 5
S2053 RWCWRF - Sedimentation Basins Weirs Replacement 1 - - - - - 1
S2054 Calavo Basin Sewer Rehabilitation - Phase 3 - - - - - 10 10
S2060 Steele Canyon Pump Station Replacement - - - 8 30 112 150
S2061 RWCWRF Aeration Controls Consolidation & Optimization Upgrades (S)30 150 40 - - - 220
S2066 Rancho San Diego Basin Sewer Rehabilitation - Phase 3 - - - - - 10 10
S2067 RWCWRF Roofing Replacement and Natural Light Enhancement 145 - - - - - 145
S2069 Cottonwood Sewer Pump Station Renovation 5 70 150 250 420 5 900
Total Replacement 12,949$ 11,277$ 13,238$ 9,851$ 10,062$ 9,369$ 66,746$
Potable 11,627$ 8,754$ 11,634$ 9,408$ 9,293$ 8,412$ 59,128$
Recycled 256 2,028 544 25 19 95 2,967
Sewer 1,066 495 1,060 418 750 862 4,651
Total Replacement 12,949$ 11,277$ 13,238$ 9,851$ 10,062$ 9,369$ 66,746$
New Supply
CIP No CIP Project Title FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 Total
P2451 Otay Mesa Desalination Conveyance and Disinfection System 3 3 3 3 3 31 46
P2619 (1)PS - Temporary Lower Otay Pump Station Redundancy 620 109 68 - - - 797
Total New Supply 623$ 112$ 71$ 3$ 3$ 31$ 843$
Potable 623$ 112$ 71$ 3$ 3$ 31$ 843$
Total New Supply 623$ 112$ 71$ 3$ 3$ 31$ 843$
Summary by Source
Funding Source FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 Total
Expansion 69 139 1,037 2,727 2,712 792 7,476$
Betterment 3,581 1,806 1,892 2,045 1,927 1,977 13,228
Replacement 12,949 11,277 13,238 9,851 10,062 9,369 66,746
New Supply 623 112 71 3 3 31 843
Total CIP by Funding Source 17,222$ 13,334$ 16,238$ 14,626$ 14,704$ 12,169$ 88,293$
Summary by Fund
Fund FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 Total
Potable 14,311 10,267 14,170 13,586 13,114 10,322 75,770$
Recycled 723 2,275 616 32 26 459 4,131$
Sewer 2,188 792 1,452 1,008 1,564 1,388 8,392$
Total CIP by Fund 17,222$ 13,334$ 16,238$ 14,626$ 14,704$ 12,169$ 88,293$
Six-Year CIP Projects by Source and Fund ($1,000s)
(1)Partially funded by 2018A Water Revenue Bonds.
167
CIP#Description Cost
Cat. (2)
Funding
Source (3)
FY
2020
FY
2021
FY
2022
FY
2023
FY
2024
FY
2025 Total
P2083 PS - 870-2 Pump Station Replacement M R $ - $ 5,000 $ 5,000 $ 5,000 $ 5,000 $ - $ 20,000
P2626 803-4 Reservoir Water Quality Improvements –
PAX System Purchase M/E B 100 200 1,700 1,700 1,700 - 5,400
P2654 Heritage Road Interconnection Improvements M B - - - 1,500 1,500 1,500 4,500
P2660 Camino Elevado Drive OWD and SWA
Interconnection Upgrade
E B - - - 420 420 420 1,260
R2084 RecPL - 20-Inch, 680 Zone, Village 2 -
Heritage/La Media
M E - 1,900 1,900 1,900 1,900 - 7,600
$ 100 $ 7,100 $ 8,600 $ 10,520 $ 10,520 $ 1,920 $ 38,760
FY
2020
FY
2021
FY
2022
FY
2023
FY
2024
FY
2025 Total
$ - $ 6,900 $ 8,400 $ 9,900 $ 9,900 $ 1,500 $ 36,600
100 200 200 620 620 420 2,160
0 0 0 0 0 0 0
$ 100 $ 7,100 $ 8,600 $ 10,520 $ 10,520 $ 1,920 $ 38,760
(1)
(2)
(3)
Note:See pages 164-167 for complete description of CIP projects.
Each of the capital purchases and other types of assets has its own unique O&M cost.
Maintenance (M)
Energy (E)
Chemical (C)
Total Operating Budget Cost Impact
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.
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.
Funding Source - Some projects have multiple funding sources as indicated by a slash (/):
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.
Cost Category
168
Quantity Amount
Vehicles
1 130,000$
1 Compact Truck for the Meter Reading Section.29,500
1 Compact Truck for the Meter Reading Section.29,500
1 1/2 Ton Truck for Water System Operator Section.37,000
1 Class 5 Dual Rear Wheel Flatbed Truck.65,000
1 Replacement Cab and Chassis for Unit 120.65,000
1 3/4 Ton Truck with Utility Body for the SCADA Section.46,000
1 1/2 Ton Truck for the Water Systems Section 37,000
Total vehicles - P2282 439,000
Field Equipment
1 11,000
1 12,000
1 Purchase two (2) 460 Gallon Diesel Fuel Trailer.35,000
1 300kVA Genset 145,000
Total field equipment - P2286 203,000
Total 642,000$
Summary by Project
P2282 Vehicles 439,000
P2286 Field equipment 203,000
Total 642,000$
Blue-White Industries Chemical Pump Skid for the 640 Disinfection
system to replace existing chlorine pump asset.
Flow meter replacement for the force main. The location of this meter
is at the spill box near the Use Area.
FY 2020 Capital Purchases
Description
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
vehicles, office equipment and furniture, field equipment and air pollution control district engine
replacements, and retrofits.
Class 5 Dual Rear Wheel Truck with Utility Body and 45-foot Bucket
Personal Lift.
169
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170
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 the various 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 February 1993. 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 November 2014.
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
171
Summary of Financial Policies
The Investment Policy is a guideline for the prudent investment of cash. It outlines 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 a 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 2019.
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 February 2017.
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BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
RESERVE POLICY 25 2/10/93 11/5/14
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.
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Subject Policy
Number
Date
Adopted
Date
Revised
RESERVE POLICY 25 2/10/93 11/5/14
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 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
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OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
RESERVE POLICY 25 2/10/93 11/5/14
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 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 the “buy-in” portion of the capacity fee which is
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
175
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
RESERVE POLICY 25 2/10/93 11/5/14
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 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
Betterment Fund category are used to finance these projects
or portions of projects. Proceeds of 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 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,
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OTAY WATER DISTRICT
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Subject Policy
Number
Date
Adopted
Date
Revised
RESERVE POLICY 25 2/10/93 11/5/14
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; or 2) to
place parcels on the county tax roll for the collection of
availability fees.
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.
177
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BOARD OF DIRECTORS POLICY
Subject Policy
Number
Date
Adopted
Date
Revised
RESERVE POLICY 25 2/10/93 11/5/14
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
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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.
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.
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• 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.
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
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.
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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).
2 California Constitution, Article XIII B, Section 5.
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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.
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
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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.
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. Water Annexation Fees (General Use)
Annexation fees3 are collected as a condition of annexing
into the District’s potable or recycled water facilities.
Since the existing facilities have been built and maintained
3 Code of Ordinances, Section 9.
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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
reimburses existing customers for past contributions so that
all customers have contributed more equally to water
facilities. Proceeds of annexation fees are unrestricted and
may be used for any general fund purpose.
d. Sewer Annexation Fees (General Use)
A sewer annexation fee is collected when property is annexed
into an improvement district. Since the existing facilities
have been built and maintained by developers or customers
within a sewer IDs, the annexation fee is calculated based on
the present value of all availability fees paid by existing
and prior customers. The annexation fee reimburses existing
customers for past contributions so that all customers have
contributed more equally to sewer facilities. Proceeds of the
annexation fees are unrestricted and may be used for any
general fund purpose.
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. Water Capacity Fees (Restricted)
Water 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 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
4 Code of Ordinances, Section 28
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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).
g. Sewer Capacity Fees (Restricted)
Sewer capacity fees 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 called the combined method, where the “buy-
in” portion of the capacity fee covers cost 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. For parcels within a sewer ID the
calculation excludes the tax debt already paid by these
customers therefore, producing a lower fee than for parcels
outside of a sewer ID. The capacity fees are restricted to
pay for planning, design, construction, and financing
associated with the expansion, replacement, or betterment of
facilities.
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.
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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 water 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.
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.
DEVELOPERS
Diagram 2.0: Flow of Funds - Developer Sources
Unrestricted and
Undesignated
(General Use) Funds
Meter
Installation
Charges
Developer
Deposits
Restricted Funds
Annexation
Fees
Capacity
Fees
New Water
Supply Fees
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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).
f. Special Rates and Charges (General Use)
In addition to the uniform water and sewer charges, the
District has a special sewer rate for the Russell Square lift
station. The Russell Square fee is for construction,
installation, maintenance or repair of the Russell Square
lift station. This fee is collected in accordance with the
Russell Square sewer charge (see Code of Ordinances Section
53.03B).
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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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. Spending limits for the
District are governed by the 1979 passage of California
Proposition 4, Limitations of Government Appropriations (GANN
limit). Proposition 4 places an appropriation limit on most
spending from tax proceeds.
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
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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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 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.
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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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.
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.
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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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, 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.
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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.
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
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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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, water annexation fees, 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, and interest
income or expense allocation.
c. 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).
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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 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 fund is
available to hold any Board designated OPEB funds. The
District also has a trust at CalPERS and is restricted for
the purpose of financing the OPEB liability. Money held in
the CalPERS trust restricts the funds from any use other than
OPEB. The two funds are considered jointly when looking at
target reserve levels. Every two years, actuarial study is
performed 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.
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.
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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 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.
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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.
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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, Capital Improvement Fund, and the Designated
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
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Expansion Fund. Potable and recycled reserves are considered
jointly while sewer is evaluated separately.
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, 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
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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
the Expansion Capital Improvement Fund.
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Unrestricted and
Undesignated Funding
Sources
Diagram 3.3: Expansion Fund Category
Funding Source 2x Water
Rates
Capacity
Fees (1)
Restricted Funds
Restricted Funds
Designated Funds
Expansion
Fund
Expansion
Debt Fund
General Fund – Rates and Charges
Restricted Funds Expansion Capital
Improvement
Fund
Debt
Proceeds
Restricted Funds
Capital
Improvement
Fund
Bond
Debt
Expansion
Fund
Designated
Expansion
Fund
Expansion
Fund
Category
(1) For Water Capacity Fees 32.4% goes into the Expansion fund and 67.6% goes into
the Capital Improvement Fund. For Sewer Capacity Fees 100% goes into the
Capital Improvement Fund.
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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 Debt
Fund, Capital Improvement Fund, and the Designated
Replacement Fund. The 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, 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
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combined replacement reserves exceed target levels,
the District should consider transferring 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 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.
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(1) For Water Capacity Fees 67.6% goes into the Capital Improvement Fund.
For Sewer Capacity Fees 100% goes into the Capital Improvement Fund.
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
Funding Source
Unrestricted and
Undesignated Funding
Sources
Capacity
Fees (1)
Diagram 3.4: Replacement Fund Category
Restricted Funds
Restricted Funds
Designated Funds
Capital
Improvement Fund
Replacement
Debt Fund
Designated
Replacement
Fund
General Fund – Rates and Charges
Debt
Proceeds
Debt Fund
Restricted Funds
Replacement
Capital
Improvement
Fund
Replacement
Fund
Category
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improvement district is a legally defined geographic
area usually established for the purpose of bond
financing of facilities. The betterment 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 2.2 b. for a review of the 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,
Debt Fund, Capital Improvement Fund, and Designated
Betterment Fund.
b. Sources
The Betterment Fund category receives restricted
revenues by improvement district from availability fees
(the first $10 is unrestricted, while amounts over $10
are restricted) collected through the county tax roll.
Betterment may also be financed by debt proceeds, 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, 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
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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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Fund
Unrestricted and
Undesignated Funding
Sources
Diagram 3.5: Betterment Fund Category
Funding Source Capacity
Fees (2)
Restricted Funds
Restricted Funds
Designated Funds
Capital
Improvement
Fund
Betterment
Debt Fund
Betterment
Fund
General Fund – Rates and Charges
Availability
Charges (1)
Restricted Funds
Debt
Proceeds
Restricted Funds
Bond
Debt
Designated
Betterment
Fund
Betterment
Fund
Betterment
Capital
Improvement
Fund
Betterment
Fund
Category
(1) The portion of charges over $10 per parcel is restricted.
(2) For Water Capacity Fees 67.6% goes into the Capital Improvement Fund. For Sewer
Capacity Fees 100% goes into the Capital Improvement Fund.
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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
designated or CIF Funds
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 designated
or CIF Funds
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 designated
or CIF Funds
Total of all funds in fund
category = 4% of
infrastructure
Nexus of cost to fee
Betterment Fund
Category
Bond financing, or
transfer to designated
or CIF Funds
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
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
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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 projects or any debt related to these categories.
The water capacity 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.
For sewer, these fees fund the Expansion, Replacement, or
Betterment Fund categories. 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 or after September 30, 2014 for sewer.
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 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
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.
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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.
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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 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 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
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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 Debt
Fund, or the General Fund. Because the Capital Improvement 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 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, 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.
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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.
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.
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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.
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.
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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.
Russell Square: A sewer lift station constructed in 1983 that
serves four properties in the Russell Square Development.
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.
Tax Collection for Bond Debt: 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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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.
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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.
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
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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
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 District selected
financial institutions and security broker/dealers authorized and
approved to provide investment services in the State of California.
Investment services include the buying or selling of permissible
investments such as treasuries, government agencies, etc. for delivery
to the custodian bank. 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:
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• Audited Financial Statements.
• Proof of Financial Industry Regulatory Authority (FINRA)
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 through 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 $65 million). The
District may also invest bond proceeds in LAIF with the same but
independent maximum limitation.
8.03) Bonds, debentures, notes and other evidence of
indebtedness issued by any of the following government agency
issuers:
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• 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 from the
settlement date 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 must be made
only in Federal Deposit Insurance Corporation (FDIC) insured
accounts. For deposits in excess of the insured maximum of
$250,000, approved collateral shall be required in accordance
with California Government Code, Section 53652. Certificates of
Deposit (CD) will be made only to the FDIC-insured limit of
$250,000. 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 2 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.
8.06) Medium-term notes defined as all corporate debt
securities with a maximum remaining maturity of five years from
the settlement date 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
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District’s portfolio and no more than 2 percent of the
outstanding medium-term notes of any single issuer.
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.
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.
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• 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 $250,000 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.
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 settlement date
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of the 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.
• Coupon, discount or earnings rate.
• Par value, amortized book value, and market value.
• Percentage of the portfolio represented by each investment
category.
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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.
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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.
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.
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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.
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 MORTGAGE 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
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).
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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.
FINANCIAL INDUSTRY REGULATORY AUTHORITY, INC. (FINRA): An independent,
not-for-profit organization authorized by Congress to protect
America’s investors by making sure the securities industry operates
fairly and honestly. It is dedicated to investor protection and
market integrity through effective and efficient regulation of the
securities industry. FINRA is the successor to the National
Association of Securities Dealers, Inc. (NASD).
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
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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.
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
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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.
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.
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.
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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.
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.
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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 & 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 6-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
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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. 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
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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.
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
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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 variable interest costs will
be the higher of the 10 year average rate or the current weekly
variable rate.
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.
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.
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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
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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
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 (known as Current Refunding).
Savings Criteria
In cases where an Advance Refunding or Current 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.
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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: 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 an internet bidding platform, 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
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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.
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 can be 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
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bonds are remarketed to another buyer, the letter of credit is repaid.
The letter of credit fees are paid annually or quarterly. Letter of
credits are typically issued for not more than 3 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. 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 widely recognized rating
agencies that rate municipal debt in the United States: Standard &
Poor’s, Moody’s Investors Service, and Fitch Investors Service.
Rating agencies 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
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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.
11.0: 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.
12.0: 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 MSRB’s Electronic Municipal Market Access
(EMMA) website, and will disseminate other information that it deems
pertinent to the market in a timely manner (For bonds issued after
2012, 10 days). 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.
(a) The events considered material according to the SEC are:
1. Principal and interest payment delinquencies;
2. Unscheduled draws on debt service reserves reflecting
financial difficulties;
3. Unscheduled draws on credit enhancements reflecting
financial difficulties;
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4. Substitution of credit or liquidity providers, or their
failure to perform;
5. Adverse tax opinions or the issuance by the Internal Revenue
Service of proposed or final determinations of taxability or
of a Notice of Proposed Issue (IRS Form 5701-TEB);
6. Tender offers;
7. Defeasances;
8. Ratings changes; and
9. Bankruptcy, insolvency, receivership or similar proceedings.
Note: For the purposes of the event identified in subparagraph
(9) above, the event is considered to occur when any of the
following occur: the appointment of a receiver, fiscal agent or
similar officer for an obligated person in a proceeding under
the U.S. Bankruptcy Code or in any other proceeding under state
or federal law in which a court or governmental authority has
assumed jurisdiction over substantially all of the assets or
business of the obligated person, or if such jurisdiction has
been assumed by leaving the existing governmental body and
officials or officers in possession but subject to the
supervision and orders of a court or governmental authority, or
the entry of an order confirming a plan of reorganization,
arrangement or liquidation by a court or governmental authority
having supervision or jurisdiction over substantially all of the
assets or business of the obligated person.
(b) Pursuant to the provisions of this section (b), the District
shall give, or cause to be given, notice of the occurrence of
any of the following events with respect to the Bonds, if
material:
1. Unless described in paragraph (a) above, notices or
determinations by the Internal Revenue Service with respect
to the tax status of the Bonds or other material events
affecting the tax status of the Bonds;
2. The consummation of a merger, consolidation or acquisition
involving an obligated person or the sale of all or
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substantially all of the assets of the obligated person,
other than in the ordinary course of business, the entry
into a definitive agreement to undertake such an action or
the termination of a definitive agreement relating to any
such actions, other than pursuant to its terms;
3. Appointment of a successor or additional trustee or the
change of the name of a trustee;
4. Nonpayment related defaults;
5. Modifications to the rights of Owners of the Bonds;
6. Notices of redemption; and
7. Release, substitution or sale of property securing repayment
of the Bonds.
Whenever the District obtains knowledge of the occurrence of a Listed
Event under (b) above, the District shall as soon as possible
determine if such event would be material under applicable federal
securities laws.
13:0 INVESTMENT & 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.
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14.0: INTERNAL CONTROL
The District has implemented the following procedure to ensure that
the proceeds of the proposed debt issuance will be directed to the
intended use:
1. A separate Reserve Account shall be maintained for the
proceeds of each bond to ensure that there is no comingling
of funds.
2. All related expenditures charged against the bond proceeds
shall be properly approved by the authorized authority.
3. All related transactions shall be fully documented so that
an undisputable audit trail exists.
4. All related transactions shall be tracked in the District’s
Accounting System. A financial report reflecting all charges
related to the bond shall be prepared and maintained.
5. The District shall establish a retention policy which states
that all supporting documents related to bond proceeds
spending shall be kept indefinitely.
6. The Reserve Account shall be reconciled on a monthly basis.
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
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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 and again in 2009. The District also has approximately $29
million in general obligation bonds authorized 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.
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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. Since 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 without
impacting the current rating. 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. 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
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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 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
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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 one or more ratings on all new issues that are
being sold in the public market. These rating agencies include, but
are not limited to, Fitch Investors Service, Moody’s Investors
Service, and Standard & 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
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financial information to the rating agencies 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.
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, if applicable.
Fixed Rate Bonds
Credit enhancement for fixed rate bonds is obtained by the purchase of
bond insurance. 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 interest rates applicable to the credit
rating of the bond insurer. 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, such as, funding of a reserve fund for the
bonds.
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 short-term investment rate (usually 7 days).
Any investor can tender their bonds back to the District to be
repurchased on short notice (usually 7 days). Because of the short-
term nature of the investment, the securities that the District is
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“competing” with for investors are AA-rated mutual funds. Therefore,
variable debt needs to have credit enhancement to achieve a comparable
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.
18.0: 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.
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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.
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.
Certificate 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
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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.
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
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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 at large.
Special assessment debt issues are those that finance such
improvements and are repaid by the assessments charged to the
benefiting property owners.
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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.
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Glossary
The Fiscal Budget contains terminology that is unique to public finance and budgeting. The following
budget glossary provides assistance in understanding these terms.
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.
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.
APPROPRIATIONS: 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.
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 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.
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CAPACITY RESERVATION CHARGE: An MWD charge passed on by CWA to individual agencies. This
charge is 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, marine equipment, computers, furniture,
technical instruments, etc. which have a life expectancy of more than two years and a value over
$10,000.
CAPITAL EXPENDITURE: Capital expenditure or capital expense is an expense where the benefit
continues over a long period, rather than being exhausted in a short period. Such expenditure is of a
non-recurring nature and results in acquisition of permanent assets.
CAPITAL IMPROVEMENT PROGRAM: A long-range plan of the District for the construction,
rehabilitation and modernization of the District-owned and operated infrastructure.
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.
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.
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ENERGY CHARGE: 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. 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.
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.
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.
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.
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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.
METROPOLITAN WATER DISTRICT (MWD) STANDBY CHARGES: Revenue generated from property
taxes by MWD to cover the Readiness-to-Serve 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.
MWD AND CWA FIXED SYSTEM CHARGES: 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.
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.
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.
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.
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Glossary
READINESS-TO-SERVE CHARGE: 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.
SYSTEM CHARGE: 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.
UNIT: A unit of water is 100 cubic feet or 748 gallons of water.
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.
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AF Acre-Foot/Feet
AMR Automated Meter Reader/Reading
BABS Build America Bonds
CALPERS California Public Employees' Retirement System
CCV City of Chula Vista
CEQA California Environmental Quality Act
CIP Capital Improvement Program
COPS Certificates of Participation
CSD City of San Diego
CSDA California Special Districts Association
CSMFO California Society of Municipal Finance Officers
CWA County Water Authority (San Diego)
EDU Equivalent Dwelling Unit
ERP Enterprise Resource Planning
FTE Full-time Equivalent
FY Fiscal Year
GAAP Generally Accepted Accounting Principles
GASB Government Acounting Standards Board
GF General Funds
GFOA Government Finance Officers Association
GIS Geographic Information System
GO General Obligation (bonds)
GPM Gallons per Minute
HCF Hundred Cubic Foot
HR Human Resources
ID Improvement District
IID Imperial Irrigation District
IT Information Technology
LAIF Local Agency Investment Fund
MG Million Gallons
MGD Million Gallons per Day
MOU Memorandum of Understanding
MWD Metropolitan Water District
NIMS National Incident Management System
O&M or O/M Operations and Maintenance
OPEB Other Post Employee Benefits
OWD Otay Water District
PL Pipeline
PRS Pressure Reducing Station
List of Acronyms
262
List of Acronyms
PS Pump Station
RWCWRF Ralph W. Chapman Water Recycling Facility
SANDAG San Diego Association of Governments
SBWRP South Bay Water Reclamation Plant
SCADA Supervisory Control and Data Acquisition
SWRCB State Water Resources Control Board
263
Index
Administrative Expenditures 73,88,97,117
Awards xiv-xvii
Budget Basis 8
Budget Calendar 9-11
Budget Guide 1-2
Budget Process 6-8
Budget Summary 39
Capital Budget Narrative 159-161
Capital Purchases FY2020 169
CIP Justification and Impact on Operating Budget 168
CIP Reserve Funds 162
Classification of Water Sales 64,80
Contract/Temporary Employees 116
Current Economic Conditions 17-18
Debt Management 56-57
Debt Policy 233-252
Debt Policy Glossary 252-256
Demographics 13
Department Budgets:
Administrative Services 131-137
Board of Directors 121-122
Engineering 151-155
Finance 139-143
General Expense 157
General Manager 125-129
Water Operations 145-150
Departmental Operating Budget Narrative 107-109
Director’s Division Boundaries 123
District Formation 4
Economic Outlook 18-20
Five-Year Forecast 53
Formula for Sewer Rates 99-100
Fund Balance Summary by Fund 48
Fund Balances Forecast 55
Fund Structure 8
Future, The 21-22
General Fund Forecast 54
General Fund Revenues, Expenditures and Transfers 39-45, 47
General Expense 106,157
General Revenues 105
264
Index
General Revenues and Expenditures Narrative 103-104
Glossary 257-261
Investment Policy 215-223
Investment Policy Glossary 224-231
Labor and Benefits 110
Labor and Benefits by Fund 111
Letter of Transmittal v-xiii
List of Acronyms 262-263
Materials and Maintenance Expenditures 74,89,98,118
Meter Fees 69,84
Mission Statement, Statement of Values 3
MWD and CWA Fixed Fees (pass-through) 68
Operating Budget Summary 63,79,92
Operating Budget Summary by System 46
Operating Budget Summary – General Fund 44-46
Operating Expenditures by Department 119
Operating Expenditures by Object 120
Organizational Structure 5
Position Count by Department 112-116
Potable Narrative 61-62
Power Costs 72,87,96
Projected Interest Payments by Debt Issuance 60
Projected Principal Payments by Debt Issuance 59
Recycled Narrative 77-78
Reserve Policy 173-211
Reserve Policy Glossary 212-214
Resolution 4367 xviii-xix
Revenue History 70,85,95
Revenues and Expenditures by Fund 50-51
Revenues and Expenditures by Type 49
San Diego Rainfall 17
Schedule of Outstanding Debt 58
Service Area 4
Service Area Assessed Valuation Fees 13
Service Area Maps 75,90,101
Sewer Charges Summary by Service Class 93
Sewer Narrative 91
Sewer Rate Comparison 16
Six-Year CIP Projects Summary by Fund ($1,000s) 163
Six-Year CIP Projects Summary by Source ($1,000s) 163
265
Index
Six-Year CIP Projects by Source and Fund ($1,000s) 164-167
Statement of Values 3
Strategic Plan 23-38
Summary of Financial Policies 171-172
System Charges 67,82,94
Table of Contents i-iv
Ten Largest Customers 14
Ten Principal Taxpayers 14
Unit Sales History and Meter Count by Customer Class 66,83
Water Purchases - Recycled 86
Water Purchases and Related Costs - Potable 71
Water Rate Comparison- Member Agency Water Rates 15
Water Sales Summary by Meter Size 81
Water Sales Summary by Service Class 65
266