HomeMy WebLinkAboutOperating and Capital Budget FY 2006-2007
ADOPTED
OPERATING AND CAPITAL BUDGET
FISCAL YEAR 2006-2007
Board of Directors
Jaime Bonilla - President, Division 2
Jose Lopez - Vice President, Division 4
Mark Robak - Treasurer, Division 5
Gary Croucher - Division 3
Larry Breitfelder - Division 1
Management
Mark Watton - General Manager
German Alvarez - Assistant General Manager, Finance and Administration
Manny Magaña - Assistant General Manager, Engineering and Operations
Joseph R. Beachem - Chief Financial Officer
ADOPTED OPERATING AND CAPITAL BUDGET
FISCAL YEAR 2006-2007
TABLE OF CONTENTS
Page
Letter of Transmittal iv
Awards xi
BUDGET FOREWORD
Otay Water District At-A-Glance 1
General Information 2
Statement of Values 3
Balanced Scorecard 4
Organization Chart 8
Budget Guide 9
Budget Calendar 11
Budget Process & Basis 12
Resolution No. 4079 15
POLICIES
Summary of Financial Policies 16
Reserve Policy 17
Investment Policy 45
Debt Policy 57
HISTORY AND COMMUNITY PROFILE
Past, Present, and Future 70
Historic Timeline 71
Current Economic Conditions and Outlook 73
The Future 74
Ten Largest Customers 75
Service Area Assessed Valuation 76
Ten Principal Taxpayers 77
San Diego County Rainfall 78
FINANCIAL SUMMARIES
Budget Summary 79
Operating Budget Summary – General Fund 83
Operating Budget Summary by Business 84
Operating Revenues & Expenditures 85
Fund Balance Summary by Fund 86
Revenues & Expenditures by Fund 87
FIVE-YEAR FORECAST
Five-Year Forecast 89
General Fund Forecast 90
Fund Balances 91
Debt Management 92
Schedule of Outstanding Debt 93
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REVENUES AND EXPENDITURES
Potable Revenues and Expenditures
Potable Narrative 94
Operating Budget Summary 96
Classification of Water Sales 97
Water Sales Summary by Service Class 98
Unit Sales History by Customer Class 99
System Fees 100
MWD & CWA Fixed Fees (Pass-Through) 101
Meter Fees 102
Revenue History 103
Water Purchases and Related Costs 104
Power Costs 105
Administrative Expenses 106
Materials and Maintenance Expenses 107
Potable Water Service Area Maps 108
Recycled Revenues and Expenditures
Recycled Narrative 109
Operating Budget Summary 112
Classification of Water Sales 113
Water Sales Summary by Service Class 114
System Fees 115
Meter Fees 116
Revenue History 117
Water Purchases 118
Power Costs 119
Administrative Expenses 120
Materials and Maintenance Expenses 121
Recycled Water Service Area Maps 122
Sewer Revenues and Expenditures
Sewer Narrative 123
Operating Budget Summary 125
Customers and Assigned Service Units 126
Revenue History 127
Power Costs 128
Administrative Expenses 129
Materials and Maintenance Expenses 130
Formula for Sewer Rates 131
Sewer Service Area Map 132
General Revenues and Expenditures
General Revenues and Expenses Narrative 133
General Revenues 135
General Expenses 136
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DEPARTMENTAL OPERATING BUDGET
Departmental Operating Budget Narrative 138
Labor & Benefits 141
Position Count by Department 143
Administrative Expenses 148
Materials and Maintenance Expenses 149
Operating Expenditures by Department 150
Operating Expenditures by Object 151
Departmental Budgets:
Board of Directors 152
General Manager 156
Administrative Services 161
Finance 170
Information Technology and Strategic Planning 179
Water Operations 186
Engineering and Planning 194
Development Services 203
General Expense 211
CAPITAL BUDGET
Capital Improvement Program Narrative 214
Major CIP Projects 216
Flagship CIP Projects Completed 217
CIP Projects in Construction and Ahead of Schedule 220
CIP Reserve Funds 223
CIP Funding Source and Category 224
CIP Schedule 225
CIP Justification and Impact on Operating Budget 227
Capital Purchases Budget 229
APPENDIX
Glossary 230
List of Acronyms 236
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September 1, 2006
Honorable Board of Directors
Otay Water District
I am pleased to present the Otay Water District Adopted Operating and Capital Budget for Fiscal
Year 2006-07. The District’s 50th year of providing quality potable and recycled water, and
sewer, there is an emphasis on new water sources, system reliability, and new maintenance
requirements. This year’s budget establishes the management plan to finance all of the District’s
services and programs during the 2007 Fiscal Year.
The District is a publicly-owned water and sewer agency, authorized as a California special
district in 1956 by the State Legislature under the provisions of the Municipal Water District Act
of 1911. Its ordinances, policies, taxes, and rates for service are set by five Directors, elected by
voters in their respective divisions, to serve staggered four-year terms on its Governing Board.
The District is a “revenue neutral” public agency, meaning that each end-user pays his or her fair
share of the District’s costs of water acquisition and the operation and maintenance of the public
water and sewer facilities.
In 2006, the District celebrates its 50th anniversary. It began on an overcast summer day in 1955
when a plumber, a civil engineer, an attorney, a newspaper publisher, and two owners of large
tracts of land gathered for lunch at Christie’s Restaurant in Chula Vista. They met to discuss how
together they could bring life-giving water to an arid region of southeastern San Diego County.
By the end of the day, the group had a common vision, a few thousand dollars in capital, and the
framework for what would later become the Otay Water District. Their vision was realized on
January 27, 1956, when the District was authorized by the California Legislature to an
entitlement to import water.
Over the next 50 years, the District has grown from a
handful of customers and two employees to become an
organization operating a network with more than 663
miles of pipelines, 37 reservoirs, a sewer treatment
plant, and one of the largest recycled water distribution
networks in San Diego County. The character of the
service area has also changed from predominantly dry-
land farming and cattle ranching, to businesses, high-
tech industries, and large master-planned communities.
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Today, the District provides water service to nearly 46,830
potable and 540 recycled customers within approximately
125 square miles of southeastern San Diego County. All of
the potable water delivered by the District is purchased from
the San Diego County Water Authority (CWA) who in turn
purchases water from the region’s water importer, the
Metropolitan Water District of Southern California. In Fiscal
Year 2007, the District began purchasing raw water from
CWA and made an agreement with the City of San Diego to
treat the water. By taking raw water through CWA’s system
there is increased reliability of water supplied to the District.
This water is delivered through the Lower Otay Pump
Station.
The District also owns and operates a wastewater collection
and recycling system to provide public sewer service to approximately 4,570 homes and
businesses (or 6,600 Assigned Service Units) within portions of the communities of La Mesa,
Rancho San Diego, El Cajon, Jamul, and Spring Valley. Recycled water from the Ralph W.
Chapman Water Recycling Facility (RWCWRF) is used to irrigate golf courses, schools, public
parks, roadway landscapes, and various other approved uses in eastern Chula Vista. The
RWCWRF project is capable of reclaiming wastewater at a rate of 1.3 million gallons per day.
The District is also in a partnership with the City of San Diego to beneficially reuse an additional
six million gallons per day of recycled water from the City’s South Bay Water Reclamation Plant
(SBWRP).
BUDGET SUMMARY
For Fiscal Year 2007, the budget totals $94 million, with operating expenditures of $59 million
and capital expenditures of $35 million. The District’s goal is to provide the most effective and
efficient service possible while maintaining affordability of the water supply for the community.
The operating expenditures are derived from three major sectors: water, reclamation, and sewer.
Revenues for the water utility in Fiscal Year 2007 are projected to be $47,616,200 about $4.2
million (9.7%) greater than Fiscal Year 2006. Water sales are expected to increase as a result of a
slowing but continuing growth trend occurring within the District’s service area. This growth
should add over 870 new customer accounts and increase the District’s assets by approximately
$35 million for the year.
Significant aspects of the Operating Budget are:
• A balanced budget meeting the goals of the Strategic Plan.
• The District has updated a six-year Rate Model to ensure sound financial planning and
reserve levels.
• The District implemented rate increases in potable and reclaimed water, and sewer. This
included pass-through rate increases from CWA, City of San Diego, and County of San
Diego who raised costs to the water and sewer customers.
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• Of San Diego County’s 23 water agencies, Otay’s water rate is the seventh-lowest and
below the county-wide average.
• The District is planning on issuing debt in Fiscal Year 2007 to fund the construction of
new facilities, and replacement or enhancement of facilities.
• Includes funding for the six million gallons per day recycled water purchase agreement
with the City of San Diego.
• Includes funding for new regulations for air vac, valve maintenance, and the automated
meter reading change-out program.
• Expands residential, landscape, and commercial water conservation programs.
• Enhances Storm Water Control Best Management Practices.
• Funds the fourth year of a Five-Year Labor Agreement ending in Fiscal Year 2008.
The projected operating cost for salaries and benefits is $14.6 million, which is an increase of
$1,149,000 (8.5%) compared to Fiscal Year 2006. The increase in labor is predominately the
result of negotiated pay and benefit increases.
Estimated growth of 870 potable and recycled water accounts will bring the new customer count
to 47,670 potable and 570 recycled accounts by the end of Fiscal Year 2007 that equates to
approximately 74,600 equivalent dwelling units (EDUs). The ultimate population projection of
277,000 will result in an estimated 114,000 EDUs and an average annual water demand of
approximately 56 million gallons per day (MGD). To accommodate this growth, the District will
need to invest an estimated $530 million in capital assets through ultimate build-out. The Fiscal
Year 2006-07 Capital Budget consists of 90 projects and a budget of $35 million. The budget
emphasizes long-term planning for on-going programs while functioning within fiscal constraints
and population growth.
The District has begun to address the transformation from a growth-centric to a maintenance-
based organization. Capital and developer fees support growth but replacement and maintenance
is supported by rates and operating expenses. Otay has been very successful in managing growth
and now needs to focus on managing long-term maintenance and replacement of its aging
infrastructure.
Time
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STRATEGIC BUSINESS PLAN
To guide operations and planning efforts during this time of sustained growth, in 2001 the
District began developing a Strategic Business Plan. This plan was designed to address the
unique challenges and opportunities resulting from growth. It would also guide the District as it
strives to develop the necessary infrastructure and operational practices to perform its primary
business while ensuring quality customer service and competitive rates are maintained.
The first multi-year Strategic Business Plan was adopted by the Board of Directors in 2002.
Each year the Board of Directors reviews and updates the plan. While the first plan guided the
District through a period of record growth, the updated plan using a balanced scorecard method,
looks forward to a time when the majority of the requisite physical infrastructure is in place and
the District begins to transform from a growth-centric entity to a maintenance-based
organization. The District has been very successful managing growth and recognizes that
continued success is predicated on developing reliable, long-term, water supplies as well as
managing long-term maintenance and replacement of its infrastructure. (A summary of the
Balanced Scorecard is provided on pages 4-7.)
One key to addressing the challenges is to capitalize on the significant investment that has been
made in implementing integrated information systems. With the Otay Information System in
place, the District has focused on business process improvement utilizing best-in-class
technology. Other Strategic Business Plan objectives include securing additional water sources,
continuing expansion of its potable and recycled water networks, expanding use of recycled
water, and continuing efforts to promote conservation.
The vision incorporated in the Strategic Plan calls for: continuing to enhance the District’s
financial document capabilities; developing an Integrated Water Resources Plan (IRP) including
potable, recycled water, and wastewater services; identifying and supporting the development of
new water sources such as desalination, agricultural to urban water transfers, groundwater
development, and the use of recycled water; and utilizing new technologies to continue
streamlining operations to minimize rate increases and to ensure the District’s viability through
the entire build-out of its customer base.
Putting the Strategic Business Plan to Work
With the Strategic Business Plan serving as its primary guide, the Board of Directors adopted a
balanced $59 million Operating Budget and $35 million Capital Improvement Program (CIP) for
Fiscal Year 2006-2007. The budget is also aligned with the District’s long-range financing plan,
Rate Model, and financial statements. In conjunction with a Bond refinancing, the credit rating
firm Standard and Poor’s awarded the Otay Water District an A+ credit rating. Standard and
Poor’s presented the A+ rating after reviewing the District’s financing plan, Rate Model,
Strategic Plan, budget, and financial statements.
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Water Resources
The Strategic Plan drives advances in every aspect
of District operations. For instance, the Strategic
Plan called for updating of the Urban Water
Management Plan (UWMP), which was
completed in December 2005. The UWMP serves
as a long-range planning document for water
supply and demand, and provides an overview of
the District’s water supply and usage, recycled
water, and conservation programs. The UWMP
works to ensure the District always has the water
resources it needs to meet the demands of a
growing community.
The need to develop an Integrated Water Resources Plan (IRP) is identified within the Strategic
Plan. The mission of the IRP is to find the optimal mix of imported water, local supplies, and
conservation efforts to meet projected ultimate supply requirements in a cost-effective manner
while also incorporating environmental impacts, implementation risks, and other factors. The
planning objectives are to maintain affordability, meet water quality standards, achieve supply
reliability, increase system flexibility, increase supply diversity, and address environmental and
institutional constraints. The IRP planning effort will identify and evaluate all potential water
resource supply opportunities to arrive at a recommended diverse water supply portfolio.
The water supply portfolio will provide a strategic approach and focused direction to be
incorporated into the water resources master plan and the Capital Improvement Program for the
development of sufficient water supply to meet the planning objectives for long-term
sustainability. The water supply alternatives include all potential opportunities such as
desalination, groundwater, water transfers, recycled water supply development, and interagency
agreements.
Recycled Water
Included in the UWMP is an agreement with the City of San Diego allowing the District to
purchase recycled water from the City’s South Bay Reclamation Facility. This contract will
deliver, on average, more than six million gallons per day of recycled water to the District’s
growing population. Recycled water purchased from this facility will be used to irrigate golf
courses, parks, open space, road medians, and other commercial processes. Using this mostly
untapped resource to address specific demands will result in the District reducing its potable
water use by approximately 15%, maximizing the beneficial use of an alternative resource,
which also makes millions of gallons per day of potable water available for higher quality and
better purposes. In May 2005, the District awarded a contract for approximately six miles of
pipeline connecting the City’s reclamation facility to the District’s pumping station and reservoir
facilities, with construction scheduled to be completed in spring 2007. The District will be
receiving $4 million from Proposition 50 from the State Water Resources Control Board
(SWRCB) for partial funding of this project.
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The Future
The Otay Water District continues to use the challenges
presented by growth to create new opportunities and new
organizational efficiencies. By utilizing and continuing to
refine its Strategic Plan, it has captured the Board of
Director’s vision and united its staff in a common
mission. The organization has achieved a number of
significant accomplishments based on its successful
adherence to the plan. As a result, the District is poised
to successfully continue providing an affordable, safe,
and reliable water supply for the people of its service
area.
AWARDS AND ACKNOWLEDGMENTS
This year, the District received the State of California's "Flex Your Power” award for its Demand
Response Program. Since 2003, the OWD has upgraded pumps, motors, lights, as well as
heating and air conditioning equipment to improve efficiency and save energy. Energy savings
from these actions save 1.7 million kilowatt-hours of energy each year.
The District also reduced electricity use by cutting demand during peak hours when energy
supplies are tight. Through participation in the Flex Your Power Demand Response Program, the
District was able to cut its peak demand by 56% through time-of-use metering and off-peak
pumping. While participating in the Flex Your Power campaign, the District has cut energy use
and produced approximately $93,000 in annual energy savings. Reducing energy use during
peak periods also reduced demand on the state-wide power grid. Across California, the Flex
Your Power campaign has reduced electricity demand by more than two million kilowatts, the
equivalent capacity of two nuclear power plants.
The Government Finance Officers Association (GFOA) awarded a Certificate of Achievement
for Excellence in Financial Reporting to the Otay Water District for its Comprehensive Annual
Financial Report (CAFR) for the fiscal year ended June 30, 2005. In order to be awarded a
Certificate of Achievement, a government agency must publish an easily readable and efficiently
organized Comprehensive Annual Financial Report. This report must satisfy both generally
accepted accounting principles and applicable legal requirements. A Certificate of Achievement
is valid for a period of one year only. In addition, the CAFR received the Outstanding Financial
Reporting Award from the California Society of Municipal Finance Officers (CSMFO). We
believe that our current Comprehensive Annual Financial Report continues to meet both of the
program’s requirements and are submitting it to the GFOA and CSMFO to determine its
eligibility for future awards.
The District also received a Distinguished Budget Presentation Award from the GFOA for the
District’s Operating and Capital Budget for Fiscal Year beginning July 1, 2005, as well as three
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awards from the CSMFO for Excellence in Public Communications, Meritorious in Innovation in
Budgeting, and Excellence in Capital Budgeting. These prestigious awards recognize
conformance with the highest standards for preparation of state and local government financial
reports.
This budget reflects the Board of Directors’ vision for the District, management, and its
employees. The budget prioritizes its strategic goals and provides staff with a road map for
prioritizing programs and achieving the District’s mission. We will continue to strive to make
improvements in our budget process, including an extensive review and analysis of projections
for revenues, expenditures, capital projects, and reserves. I would like to thank all of the staff
involved in this process for the efforts put forth in the preparation of this budget, to ensure a
successful outcome.
To the Board of Directors, we acknowledge and appreciate their continued support and direction
in achieving excellence in financial management.
__
Mark Watton, General Manager
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FINANCIAL AWARDS
The Government Finance Officers
Association of the United States and
Canada (GFOA) presented a
Distinguished Budget Presentation
Award to Otay Water District for its
annual budget for the fiscal year
beginning July 1, 2005. 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.
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FINANCIAL AWARDS
xii
AWARD
xiii
HISTORY
The Otay Water District was formed in January 1956 and joined the San Diego County Water
Authority (CWA) in September 1956 to acquire the right to purchase and distribute imported
water throughout its service area. The District is also responsible for the collection, treatment,
and disposal of wastewater from a portion of the northern region of the District.
MISSION STATEMENT
The District’s mission is to provide safe and reliable water and wastewater services to its
community with innovation, in a cost efficient, water-wise, and environmentally responsible
manner.
SERVICE AREA
The District's boundaries encompass an area of approximately 125 square miles in San Diego
County, lying immediately east of the City of San Diego metropolitan area and running from the
City of El Cajon south to the international border.
GOVERNMENT
The Otay Water District is a publicly-owned water and sewer agency, authorized as a California
special district under the provisions of the Municipal Water District Act of 1911. The District’s
ordinances, policies, taxes, and rates for service are set by five Directors, elected by voters in
their respective division, to serve staggered four-year terms on its Governing Board. The
District is a “revenue neutral” public agency, meaning that each end-user pays a fair share of the
District’s costs of water acquisitions and the operation and maintenance of the public facilities.
ORGANIZATIONAL STRUCTURE
The General Manager manages the day-to-day District operations and reports directly to the
Board of Directors. Two Assistant General Managers report to the General Manager. One
Assistant General Manager oversees the departments of Administrative Services, Finance,
Information Technology and Strategic Planning while the other oversees the departments of
Water Operations, and Engineering and Development Services. These and other lines of
reporting are shown on the organization chart on page 8.
Otay Water District
2554 Sweetwater Springs Blvd
Spring Valley, CA 91978
(619) 670-2222
www.otaywater.gov
OTAY WATER DISTRICT AT-A-GLANCE
1
For Fiscal Year 2007, the District will have a staff of 174.75 full-time equivalent employees
under the leadership of the General Manager.
The District provides water service to approximately 39% of its service area with a population of
more than 189,000 people. This percentage increases as the District's service area continues to
develop. The District is projected to deliver approximately 36,900 acre-feet of potable water to
about 47,670 potable customer accounts and to ultimately serve 277,000 people, creating an
average demand of 56 million gallons per day (MGD). The rate of growth, as projected by the
San Diego Association of Governments (SANDAG) for San Diego County, is approximately
5.8% per year over the next decade. Using historical data and considering current economic
conditions, staff has moderated this projection to a growth rate of 1.8% for Fiscal Year 2007.
Recycled water from the Ralph W. Chapman Water Recycling Facility (RWCWRF) is used to
irrigate golf courses, schools, public parks, roadway landscapes, and various other approved uses
in eastern Chula Vista. The RWCWRF project is capable of reclaiming wastewater at a rate of
1.3 million gallons per day. The District is also in a partnership with the City of San Diego to
beneficially reuse an additional 6,720 acre-feet per year of recycled water beginning in Fiscal
Year 2007. This makes Otay Water District the largest provider of recycled water in the County.
The District also owns and operates a wastewater collection system providing public sewer
service to approximately 4,570 customer accounts (or 6,600 Assigned Service Units) within the
Jamacha drainage basin. The sewer service area covers approximately 8,797 acres, which is
about 11% of the District’s total service area. Residential customers comprise 98% of the sewer
customer base.
The District is a publicly-owned water and sewer agency authorized as a California special
district in 1956 by the state legislature under the provisions of the Municipal Water District Act
of 1911. Its ordinances, policies, taxes, and rates for service are set by its Board of Directors.
Since 1956, the District has provided high quality water and utility services to an arid region of
the southeastern San Diego County. For 50 years, the available supply of water has helped
transform the District service area from a mostly scrub and cactus-covered backcountry into a
wonderful balance of diverse environments.
Photo Credits: Aerial photos, including the cover and pages intentionally left blank, courtesy of
Manny Ramirez, also see pages 14, 16, 70 and 73; Soak City, courtesy of City of Chula Vista,
page 14; Aqueduct, courtesy of Bureau of Reclamation, page 95.
GENERAL INFORMATION
2
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.
TEAMWORK
We promote mutual trust.
We share information, knowledge and ideas to reach our common goals.
EMPLOYEES
We see each individual as unique and important.
We value diversity and open communication to promote fairness, dignity and respect.
Otay Water District Employees
Dedicated to Community Service
STATEMENT OF VALUES
3
The District’s strategies have been categorized into the following four Balanced Scorecard
perspectives:
Customer
Objectives
Measures
Finance
Objectives
Measures
Learning and Growth
Objectives
Measures
Business Processes
Objectives
Measures
Customer
Customers are the most important aspect of its business. The District provides its customers with
a variety of public water utility services. The surrounding community and customers trust that
the District will provide for a safe, secure, and reliable water supply far into the future at an
affordable price. These customers also expect prompt and courteous service from all District
staff, with a continually increasing demand for additional convenience and access. The
customers seek accurate information in the areas of water quality, cost savings, water
conservation, and the regulatory limitations and beneficial uses of recycled water. In order to
continually increase the District’s level of customer services, the District will implement the
following customer perspective strategies, goals, and objectives.
♦ Customer Satisfaction
¾ Enhance the customer satisfaction focus by evaluating customer feedback.
¾ Enhance customer communications for increased accessibility and ease of use.
¾ Improve customer service by expanding employee access to Otay Information
System (OIS) information.
¾ Enhance communication with developers.
BALANCED SCORECARD
4
♦ Community Outreach
¾ Expand water conservation in new commercial and residential construction.
¾ Maximize recycled water use.
¾ Expand the Public Education Program.
¾ Define a program for increased relations with Mexico.
¾ Update and implement the District’s Government and Public Relations Programs.
♦ Industry Involvement
¾ Learn industry trends and promote District achievements.
Finance
The District is a steward of public funds to provide a range of public utility services to a rapidly
growing customer base. Strengthening and acquiring water supply for reliability and growth
places upward pressure on water rates. These are in addition to the normal inflationary pressures
on the cost to operate and maintain the existing treatment and distribution systems. During this
growth period, the District is able to fund new capital with developer fees and bond financings in
congruence with the strategy that growth pays for growth.
Over time, the District will require significant funding to rehabilitate and replace the District’s
infrastructure including pipelines, treatment plant, and associated processing equipment. The
District ensures its continued financial health through long-term financial planning, formalized
financial policies, enhanced budget controls, fair pricing, debt planning, and improved financial
reporting. In alignment with this, the District has developed the following financial perspective
strategies, goals, and objectives.
♦ Financial Planning
¾ Establish the District’s long-term financial plans.
¾ Aggressively pursue all relevant grants.
¾ Evaluate potential real property trades, leases, or sales to increase revenues.
♦ Controls
¾ Update the District’s financial policies.
¾ Improve the District’s budget controls.
BALANCED SCORECARD
5
♦ Full Cost of Services
¾ Provide full and accurate cost accounting of District services.
♦ Reporting
¾ Improve the District’s financial reporting.
Business Processes
The District is committed to improving its business processes to better achieve the desired
strategies, goals, and objectives. The District recognizes that efficient and effective business
processes are essential to achieving the desired return on investment and improving operational
excellence. As the growth in the District’s sphere of influence continues, implementing
infrastructure management, integrated information solutions, and business process reengineering
to achieve the most efficient and effective business practices possible are critical to its success.
♦ Planning for Infrastructure and Supply
¾ Meet current and future potable water demands.
¾ Develop an Integrated Resources Plan (IRP) for evaluating alternative sources of
water.
¾ Implement planned security initiatives.
♦ Recycled Water Leader
¾ Develop the District’s Sewer Master Plan.
¾ Obtain more recycled water supplies.
¾ Seek additional recycled water customers.
♦ Stewards of Public Infrastructure
¾ Conduct best practice preventative maintenance activities.
♦ Business Efficiency
¾ Fully integrate the Otay Information System (OIS).
¾ Complete business process reengineering effort.
¾ Develop a comprehensive Knowledge Management Plan.
¾ Implement field technology solutions.
¾ Implement the Legal Plan.
BALANCED SCORECARD
6
Learning and Growth
The District is in a period of significant growth and change that will require a highly flexible and
skilled workforce. Continually increasing cost pressures and foreseeable changes as the
District’s business cycle matures will require doing more with fewer resources. In order to meet
these upcoming challenges, the District wishes to train and motivate its workforce by providing
all employees with a professional workplace culture, effective employee relations, enhanced
employee development, and a recognition program. The goal is to increase the capacity of the
overall organization to achieve the strategies, goals, and objectives of the District.
♦ Plan for the Future
¾ Generate a Long-Term Staffing Plan.
¾ Develop a Long-Term Facility and Space Plan.
♦ Highly Qualified Staff
¾ Continue to recruit and retain a highly qualified workforce.
♦ Train and Develop at All Organizational Levels
¾ Evaluate and implement an Executive Training Program targeted at future
strategic goals.
¾ Continue a Management Development Program.
¾ Promote and recognize District staff participation in industry research projects
and publications.
¾ Enhance employee training with new programs.
¾ Continue Incentive Program.
♦ Staff Inclusion
¾ Formalize Collaborative Improvement Teams (CIT).
♦ Monitor and Celebrate Success
¾ Finalize and implement the District’s Recognition and Reward Program.
¾ Establish a repeatable Employee Survey Program and benchmark against others.
BALANCED SCORECARD
7
ORGANIZATION CHART
BOARD OF DIRECTORS
GENERAL MANAGER
FINANCEADMINISTRATIVE
SERVICES
INFORMATION
TECHNOLOGY
AND STRATEGIC
PLANNING
DEVELOPMENT
SERVICES
ENGINEERING
AND PLANNING
WATER
OPERATIONS
Controller
and
Budgetary
Services
Treasury and
Accounting
Services
Customer
Service
Payroll and
Accounts
Payable
Human
Resources
Purchasing and
Facilities
Safety and
Risk
Administration
Water
Conservation
IT
Application Public Services
Construction
Survey
Environmental
Water System
Operations
Utility
Maintenance/
Construction
Collection/
Treatment/
Recycled
Operations
IT
Operations
ASSISTANT GENERAL MANAGER ASSISTANT GENERAL MANAGER
GIS
Water
Resources
Design
Planning
8
The District views the budget as an essential tool for proper financial management. This budget
is developed with input from the various department levels of the organization and is adopted
prior to the start of each fiscal year. It is designed and presented for the general needs of the
District, its staff, and citizens. It 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.
Budget Foreword
This introductory section contains description and general information about the District,
Strategic Focus Areas highlighting major initiatives and accomplishments, and the Budget
Calendar and Process.
Policies
This section includes a summary of the District’s financial policies and practices, including the
Reserve Policy, Investment Policy, and Debt Policy.
History and Community Profile
Included in this section is the history of the District, along with the current and future prospects.
It also includes statistics on the District’s customers, the region’s tax base, and rainfall.
Financial Summaries
This section contains an overview of the District’s revenues and expenditures by fund for the
current budgeted fiscal year and prior two years’ actual and 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 of cost increases, rate increases, targeted fund balances,
capital needs, and debt requirements are made. Analysis for the current budget year plus five
additional years is conducted and a five-year forecast is prepared based on the Rate Model
results.
BUDGET GUIDE
9
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 a general revenues and expenditures section.
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, performance
indicators, accomplishments, and goals. Also provided are graphical presentations of
departmental budget percentages to District total, as well as summary expenditure information
by division, for three fiscal years.
Capital Budget
An overview of the District’s Capital Improvement Program (CIP), the Water Resources Master
Plan (WRMP), major assumptions and criteria, a five-year listing of CIP project expenditures,
the justification and impact on the Operating Budget and capital purchases budget for the fiscal
year are located in this section.
Appendix
This last section consists of a Glossary of budget and financial terms, and a List of Acronyms
used in this budget book.
BUDGET GUIDE
10
Each year the Finance Department prepares a Budget Workbook for distribution to the
departments. This workbook gives instructions and deadlines for each phase of the budget.
The budget process is explained on pages 12 and 13.
February 1, 2006 Budget workbooks and instructions for Operating and Capital Budget
are distributed to departments.
February 24, 2006 Departments submit requests for new personnel and/or personnel
reclassifications to Human Resources.
March 6, 2006 Human Resources Department performs a preliminary review of
submitted requests.
March 17, 2006
General Manager approves new personnel and personnel
reclassification requests.
March 10, 2006
Each department submits the following items:
• Position analysis questionnaires
• Operating and administrative budget
• Capital purchases and justification
• Personnel budget and work order percentage allocation
• CIP budget sheets submitted to Engineering for review
March 15, 2006 to
March 22, 2006
1. Finance Department reviews Operating Budget and reconciles with
departments.
2. Engineering and Planning Department reviews and prepares CIP
budget and submits to Finance for review and incorporation into
the Rate Model to calculate proposed rates.
April 26, 2006 General Manager performs preliminary review of the budget.
May 15, 2006 Final review of the proposed budget and rates is done by the General
Manager.
May 30, 2006 Board of Directors adopts Fiscal Year 2007 Operating and Capital
Budgets.
BUDGET CALENDAR
11
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 and
Strategic Business Plan, then categorized into the Balanced Scorecard perspectives. Appropriate
budget amounts are determined by using the historical data of operations, growth, developers’
input, SANDAG projections, and economic outlook. The District is accounted for and budgeted
on an enterprise basis and conforms to the guidelines of Generally Accepted Accounting
Principles (GAAP).
To assure reliable, high-quality service to the growing customer base, the District has committed
to a number of long-range strategies that drive the budgeting process. The strategies and
assumptions used to develop the District’s integrated budget are:
• an average projected long-term growth rate of 3%
• pass-through rate increases for cost imposed on the District by the wholesale
water providers
• accurate projections of capital budget needs
• reserve funding in accordance with the Reserve Policy to meet future growth
demands
• funding of the Strategic Plan initiatives as categorized into the Balanced
Scorecard perspectives
Each year, the Finance Department prepares a Budget Workbook for distribution to the
departments. This workbook gives instructions to departments on how to budget for positions,
administrative, and materials expenses. Included in this workbook are historical trends,
assumptions, and training on how to enter the expense data into the District budget system.
Administrative and materials expenses are entered into the budget system by individual requests.
These requests are compared to last year’s budget and expenditures to determine reasonableness
by the Finance Department. New or large increases in costs are supported by explanations for
these costs and presented to the General Manager and the Board of Directors prior to budget
adoption.
Position budgeting is used for the salaries and benefits portion of the budget. Departments
submit requests for new positions, reclassifications, or advancements to the Assistant General
Managers. These requests are reviewed by the Assistant General Managers and then presented
to the General Manager for approval. Upon their approval, the Finance Department enters these
changes, as well as negotiated pay increases and benefit rate changes, into the position budget
system. Position budgeting calculates the salaries and benefits to be included in the District’s
budget.
BUDGET PROCESS
12
The Finance Department prepares the budget for the potable, recycled, and sewer systems based
on estimated cost increases by the District’s wholesale water providers, and sewer system
charges, growth in customer accounts, and other factors such as weather. Additionally, all
general revenue and expense budgets are calculated using trend analysis and any external factors
that may affect these items.
The Engineering and Planning Department issues budget instructions for the CIP budget process.
Each project manager receives a report of year-to-date project expenses and then estimates cost
to the end of the fiscal year, plus future costs to complete the project. Costs are adjusted for
scope changes as well as construction cost increases. Engineering and Planning then compiles
the CIP Budget and submits it to the Assistant General Managers and the General Manager for
review prior to presentation to the Board of Directors.
Once all of these budgets have been calculated, the Finance Department inputs all of the
operating revenues and expenses, CIP expenses, reserve funding, and reserve levels into the
District’s Rate Model. Inflators for cost and volume changes are input into the Rate Model and
cost and rates are calculated for the current fiscal year plus five subsequent years. Using this
comprehensive modeling tool, the District is able to smooth future rate increases, determine
when debt should be issued, and monitor all of the reserve levels in accordance with the Reserve
Policy.
In the spring, the Strategic Plan is presented to the Board of Directors for adoption. This is
followed by the Finance, Engineering and Planning Departments presenting to the Board of
Directors their recommendations at a special budget meeting in May of each year. The adoption
of the Strategic Plan and budget on an annual basis gives the District its direction for the
following fiscal year.
During the year, each department receives monthly budget and cost reports that are essential to
monitor and control costs. As events occur or conditions change, modifications to or deviations
from the original budget may be necessary. In the event the General Manager determines that an
emergency exists which requires immediate action, he may transfer appropriation within the
budget allocations, or request that the Board of Directors increase the current budgeted funds.
Due to the size of the District’s CIP, a separate budget book has been prepared outlining in detail
the projects and expenditures required to ultimate build-out. A synopsis of the CIP may be
found under the Capital Budget section of this report. As part of the integrated budget, Capital
Purchases have been included with the CIP Budget.
The Budget Report is intended as a financial guide and may be modified by the Board of
Directors during Fiscal Year 2007.
BUDGET PROCESS
13
The District utilizes the accrual basis for budget and accounting, recognizing revenues and
expenses in the period in which they are earned and incurred, respectively. The District reports
its activities on an enterprise basis, which is used to account for operations that are financed and
operated in a manner similar to a private business enterprise, where the intent of the District is
that the costs (including depreciation) of providing goods or services to the general public on a
continuing basis, be financed or recovered primarily through user charges.
BUDGET BASIS
14
15
Introduction
This section includes the District’s Reserve Policy, Investment Policy, and Debt Policy.
The Reserve Policy is a comprehensive policy which explains how the District is operated,
including the distinction of business segments to ensure users pay their fair share of costs. It
explains how fees are collected and what they are used for, including restricted and designated
funds, appropriate targets, and fund transfers. The District adopted this new policy in March
2006, replacing the District Financial Policies.
The Investment Policy is a guideline for the prudent investment of cash. It follows government
code as well as authority granted by the Board of Directors. The primary objectives are to
invest safely, with adequate liquidity, and to achieve sufficient return on investments. This
policy was revised in September 2006.
The Debt Policy addresses which conditions are appropriate for the use of debt, to minimize
the District’s debt service requirements and cost to issue debt. Additionally, the District strives
to retain the highest practical credit rating, with full disclosure and financial flexibility for the
District. The District adopted this new policy in April 2004.
SUMMARY OF FINANCIAL POLICIES
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INTRODUCTION
1.0 The District
The Otay Water District is a publicly-owned water and sewer service agency, more
specifically, a California special 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 its 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 operates three distinct business segments:
• Potable water
• Recycled water
• Sewer
Each of these business segments has a distinct 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 these service costs. Regardless of customer
class, financial principles regarding cost allocation and fund accounting are fundamental to the
District’s Reserve Policy. These principles are derived from the statements of the
Governmental Accounting Standards Board (GASB), and from oversight and advisory bodies
such as the California State Auditor, the Little Hoover Commission, and the Government
Finance Officers Association (GFOA). These have significant impacts on how the finances of
the District are organized and how financial processes work within the organization.
1.1 The District’s Use of Funds
All of the District’s expenditures fall into two broad categories: operating costs and capital
expenditures. The Operating and Maintenance (O&M) expenditures generally support the
purchase and delivery of potable and recycled water, and the transportation and treatment of
RESERVE POLICY
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sewage. The capital expenditures support the construction of infrastructure necessary to
deliver service. The District uses various reserves to support the operating and capital efforts.
Capital infrastructure is funded using two methods: pay-as-you-go or debt issuance (requiring
annual debt service). The Capital Improvement Program (CIP) and the two funding methods
support the construction of infrastructure in all three business areas: potable, recycled, and
sewer. Both the capital and operating efforts within the District are different for each of the
four distinct customer types.
The District uses a set of funds to accumulate and account for revenues allocated to different
activities. Those funds receive funding up to the levels defined in this policy. Each 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 or funding requirements are then evaluated to ensure that the existing fund levels
and additional revenues are sufficient within the current budget cycle and the next five years.
If a deficit is identified, then options for transfers, debt, and/or rate increases are evaluated.
1.2 The District’s Capital Improvement Program (CIP)
The planning, design, and construction costs of all facilities within the three business segments
are allocated to three cost areas: Expansion, Betterment, and/or Replacement. The funding
allocation for these three cost areas is defined in the District’s Capital Improvement Program
(CIP) and is determined by an engineering analysis which identifies which type of customers
will benefit from the facility. Expansion is for new customers, betterment is for existing
customers where the facility is improved, and replacement is for existing customers where the
facility is replaced. If an expansion capital project also results in betterment or replacement, the
costs are allocated to new users (Expansion) and existing users (Betterment and Replacement)
so that the developers will only pay the expansion portions. This policy protects both the
developing and established areas from incurring inappropriate costs. Developing areas are not
required to finance facilities that are due for replacement or betterment; conversely, established
areas are not required to replace facilities before they are worn out simply because of new
development. Each facility has the potential to be classified into all three categories to various
degrees. In addition to these standard categories there are occasional CIPs that may be billable
to a third party such as relocations.
a. Expansion Fund
The portion of a project that benefits new users is
funded by the developing areas through capacity fees.
Future expansion costs are divided by all future
connections to calculate the capacity fee. This capacity
fee is the primary funding source for expansion projects
and is accounted for separately and used solely for the
planning, design, and construction of expansion
facilities. The majority of the funding sources are
restricted in nature with the exception of the general
use funds placed into the Designated Expansion Fund.
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b. Betterment Fund
The District may construct a project that results in a significant benefit to existing users.
Facilities that improve reliability or meet new or increased standards of service are
considered betterment facilities. In such a case, user rate charges and betterment fees
could be used as a funding source for that portion of the project that results in a lowering
of overall operation and maintenance costs or an improvement to the existing users.
Betterment may also be a result of increased standards or regulations on water or sewer
systems. If the existing system must be improved in order to meet the new standards this
cost is a betterment cost. The majority of the funding sources are restricted in nature of
their use and the geographic area of use, with the exception of the general use funds
placed in the Designated Betterment Fund.
c. Replacement Fund
Replacement of facilities is funded primarily by
general user rates. The portion of a project that
benefits existing users is funded by the Replacement
Fund. It is expected that the District will debt finance
a significant portion of the future replacement
facilities. The District has a Debt Policy (Policy No.
45) that guides the debt issuance process. The
replacement reserve will serve as an immediate
funding source for replacement projects and will
provide the necessary flexibility to begin projects
while the appropriate debt financing is being
obtained.
1.21 Relocations
Occasionally, relocation of facilities is required when the District has easements for the pipe
location. When a project is relocated, the cost of the new facility shall be funded by the party
without an easement or if no parties have easements then it is funded by the party causing the
relocation. When this occurs, a CIP project may be created which is wholly or partially funded
by a third party who must reimburse the District for the cost of the relocation. Depending on
the nature of the facilities, the funding source for these projects could be from replacement,
expansion, betterment or third party funding of projects at the District. Each project is
individually negotiated. When determining how much this fund will pay for construction, the
following guideline is suggested: If a project has more than five years of useful life remaining
then funding is incremental, if there is less than five years remaining funds are contributed
from the Replacement Fund on a pro-rata basis.
1.22 Oversizing
In some cases, where reasonable, the developer may be required by the District to oversize new
facilities for future development in order to obtain economies of scale. The developer will be
reimbursed for incremental over-sizing costs as per Policy No. 27. These reimbursements are
only for backbone facilities funded by capacity fees - not for the distribution system within a
development which is an obligation of the developer separate from the capacity fees. These
smaller distribution pipes serving the individual homes within a development are often referred
to as “in-tract” pipelines.
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1.23 Exclusion of Developed Areas from Expansion Costs
Developed areas are considered 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 financial costs are allocated to these areas so
that they will not incur any costs for newly developing areas. In the case of a capital project that
produces District-wide cost savings, however; the District may provide financial support to new
facilities.
1.24 Improvement Districts (IDs)
Improvement Districts are established in order to facilitate the funding of a particular
improvement by the specific beneficiaries. The District has a number of Improvement Districts
that were established for General Obligation (GO) debt repayment. Many of these GO issuances
have been paid off and, as outlined in the Debt Policy, it is unlikely that the District will issue
additional GO debt. IDs continue to be used for other funding purposes. First, to distinguish
sewer customers from water customers on the county tax roll; second, to place parcels on the
county tax roll for the collection of availability fees; third, for the charging of special water rates;
and fourth, to track which properties have paid annexation fees.
Over the years, the District has taken a district-wide perspective to funding improvements. This
philosophy is evident by the district-wide capacity fee and annexation fee. The District also uses
district-wide water rates. As time continues, it is expected that IDs will continue to outgrow
their purpose. So, while many IDs remain their use will diminish over time.
1.3 The Purpose of the Policy
Public entities accumulate and maintain reserves to ensure both financial stability and the
continuation of the ability to provide services. Financial stability and the increase in credit
quality that result from stability allow the public entity to weather times of uncertainty and the
impacts of negative events, both major and minor. Funded reserves allow for the continued
maintenance of property and payment of expenses beyond the
magnitude of the funds available in 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 District.
A “reserve” has a number of meanings:
• Working capital required to insure timely payment of obligations
• A buffer against volatility in revenues
• Liquidity required to obtain other goods and services (e.g., bank
services)
• Designated funds to protect creditors
• Funds set aside to replace assets at the end of their useful lives
• Funds set aside to repair or replace assets damaged or destroyed
at unanticipated times
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It is important to note that reserve, 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. It is important to note that the term, fund balance was
recently 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 fund contingent future activities, whether known or unanticipated, operating or capital in
nature. The District’s Reserve Policy governs the management and use of these funds. 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
• 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 ERAF contributions or
changes in calculation methodology
• Operating Costs—Increases in operating and maintenance costs because of inflation,
labor agreement or other modification
• Force Majeure—Unanticipated expenditures resulting from natural disasters or
intentional acts
• Emergency Maintenance—Unanticipated expenditures resulting from unexpected failure
of assets (e.g. rupture in the primary transmission system)
• Unexpected Variation in Cash Flow—the incidence of additional costs or decreased
revenues that requires short-term borrowing in the absence of sufficient funds
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,
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“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. Each of these recommendations has 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, such as minimums and maximums, for the accumulation of reserves
• Identify the events or conditions that prompt the use of reserves
• Conform with plans to acquire or build capital assets
• Receive Board approval and be 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 reserve. Specifically,
the Constitution states that “each entity of the government can establish contingency, emergency,
reserve, or similar funds as it deems reasonable and proper.1” 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 contexts for
different districts and different contingencies justifying reserve of funds.
The Government Finance Officers Association (GFOA) in its Recommended Practice on
Appropriate Level of Unreserved Fund Balance in the General Fund (2002) states:
In establishing a policy governing the level of unreserved fund balance in the
general fund, a government should consider a variety of factors, including:
• The predictability of its revenues and the volatility of its expenditures
(i.e., higher levels of unreserved fund balance 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
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).
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.
22
• Designations (i.e., governments may wish to maintain higher levels of
unreserved fund balance to compensate for any portion of unreserved
fund balance already designated for a specific purpose).
In the preparation of this policy, each of the CSDA guidelines and the GFOA recommendations
has been considered. In addition, all seven objectives provided by the State Auditor are
specifically addressed for each reserve. The District wholly supports the State Auditor’s efforts
to bring a high-level of quality to reserve governance and establishing a standard of performance.
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 general guidelines as provided above. In
addition, the District has adopted the following principles in the management of its funds:
• Funds are held and used only for the purpose for which they are collected. This is done
to maintain equity between 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 O&M from capital expenditures occurs within each of the service types.
This is done because the funding of these expenditures is often on different timelines or
use different funding sources.
• The District will hold its reserve 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 funds 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 the long-term financing by spreading
the cost of facilities over the life of the facilities. The burden to pay for facilities is then
paid by those who use them. Optionally, the District could amass significant reserves by
pre-collecting funds in a Replacement Reserve Fund allowing the District to cash fund all
replacements. In order to obtain those funds, significant rate increases would be required,
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 study model on at least 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 prices charged. This review also insures that funds will be available to continue to serve
the District’s customers.
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SOURCES OF FUNDS
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 funded by
developers.
b. Annexation Fees (General Use)
Annexation Fees are outlined in Section 9 of the Code of Ordinances. This is the buy-in
to the District’s potable and recycled water facilities paid by the developer and based on
the excess capacity built by existing users. This fee insures that future users fund a
portion of the facilities that were sized and built for their future use by prior customers.
The annexation fees are general use funds and help to offset current customer costs. The
calculation of the fee uses a system-wide evaluation that combines the potable and
reclamation systems. This methodology is used because the two water systems work
hand-in-hand, the recycled system brings a new supply of water to the District reducing
the need for potable systems and the higher cost of obtaining new potable supplies.
c. 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.
d. Capacity Fees (Restricted)
The capacity fee is outlined in Section 28 of the Code of Ordinances. Capacity fees are
based on the estimated construction cost of expansion divided by the number of future
Equivalent Dwelling Units (EDUs). The capacity fee covers costs including, but not
limited to, planning, design, construction, and financing associated with facilities for the
District’s expansion needs. Ultimate facility needs are based on projected land use
planning. These needs and the projected costs change over time as regulatory agencies
determining land use make changes. Significant variations in future land use occur and
can alter projected facility requirements. As these changes occur, the District will review
the capacity fee calculation. These fees are paid by developers.
The District’s construction of infrastructure occurs prior to the addition of EDUs. This
serves two purposes: one it ensures that the District can serve the pending construction as
it is completed; 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 funds are depleted.
The capacity fee is calculated based on the expansion costs of the combined recycled and
potable water systems needs. This methodology, just like the annexation fee
methodology, is used because the two water systems work hand-in-hand. All capacity
fees can be used for either potable or recycled but only for expansion needs. So, while
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capacity fees are not restricted separately, one portion for potable and the other portion
for 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. This policy reduces possible misunderstanding that might
occur among customers if rates varied between geographical areas. It also provides for
an administratively straightforward billing process.
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 $0.032 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 cost from CWA and MWD.
DEVELOPERS
Annexation Fees Developer DepositsMeter Installation
Charges
Unrestricted and Undesignated (General Use) Fund
Designated Funds Restricted Funds
Capacity Fees
DIAGRAM 2.0: Flow of Funds – Developer Sources
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f. Special Rates and Charges (Restricted)
In addition to the uniform water charges, the District currently has five special water rates
and one sewer rate. The five water rates are all for construction, installation, and
maintenance of water storage reservoirs, pump stations, and water lines in the respective
areas. Each of these is listed as follows:
• North District water charge (code section 25.03H)
• ID 9 water charge (code section 25.03I)
• ID 3 water charge (code section 25.03J)
• ID 10 water charge (code section 25.03J)
• La Presa water charge (code section 25.03J)
• Russell Square sewer charge (code section 53.04C)
When these rates were established they were for
the specific purpose of constructing, installing,
and maintaining the water and sewer systems in
the areas that they were collected. Therefore,
these are Restricted Funds by geographic area as
well as by purpose. These fees however, can be
used for maintenance, unlike the availability fees.
These six special fees along with availability fees
are tracked separately, by geographic area, so they
can be evaluated for the target funding levels
separately. To meet this need, each special rate
and charge is accounted for in a “sub-fund” of the
betterment fund.
g. Temporary Meter Fees (General Use/Restricted)
Water charges, in lieu of capacity fees, are charged on temporary meters. This is done
because while temporary meters use system capacity 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 general levy property tax rates for all taxing authorities to
a total rate of one percent of the assessed value. 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.
Funds received are for general use.
b. Availability Charges (General Use/Restricted)
The District levies availability charges each year in developed and undeveloped areas.
Current legislation provides that any amount up to $10 per parcel is general use and any
amount over $10 per parcel is restricted to be expended in and for that Improvement
District (ID). IDs were formed to provide the lowest cost funding possible for the
development of water and sewer systems. Accordingly, the District may use any amount
over $10 to develop water and sewer systems which are either, expansion, betterment, or
replacement. This portion is geographically restricted and restricted by purpose. The
Restricted Funds are accounted for in “sub-funds” of the Betterment Fund (see 2.1 f.).
Availability fees can be used for the development of facilities consistent with the purpose
of the ID which they are collected in, while special rates and fees can also cover the
maintenance of those facilities. As charges are incurred on these projects the respective
IDs are charged reducing the betterment fund. In the event that funds are not used, the
Restricted Funds must be returned to the property owners that paid them. Therefore, the
CUSTOMERS / USERS
Energy ChargesMonthly System
Fees
Uniform Rates
and Charges
Unrestricted and
Undesignated
(General Use) Fund
Designated Funds Restricted Funds
Penalties
Pass - through
Fixed Charges
Temporary
Meter Fees Special Rates
and Charges
DIAGRAM 2.1: Flow of Funds – Customer Sources
27
monies in this fund may only be used to finance the construction, installation, and
maintenance of the systems within the geographic area of the specific IDs. The District
has historically used these funds for betterment capital facilities however, they are
available for any facility construction purpose benefiting the ID whether replacement,
betterment, or expansion.
Each year the District sends notices to all new customers informing them of the
availability fees and their purpose. This notice also informs the customers of the date and
time of the public hearing to receive public comment on this fee. The availability fees
are split between the Betterment Fund and the General Fund.
c. State Loan Assessment (Restricted)
The District assesses a $54 charge per unit of sewer service each year on the sewer
customers. This is collected via the County Tax Roll and is specifically collected for the
repayment of the State Loan.
d. General Obligation (GO) Bond Assessments (Restricted)
The District occasionally issues 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 funds and pay debt obligation.
COUNTY-COLLECTED TAXES AND FEES
State Loan
Assessment
Availability
Charges
General Levy
Property Tax
Receipts
Unrestricted and
Undesignated
(General Use)
Fund
Designated Funds 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. There is also a one-time
fee charged with the set-up of each new lease. The District incurs expenses related to
these rents and leases and this fee’s purpose is to recover the cost to set up the lease.
b. Sewer Billing Fees (General Use)
Fees received from the City of Chula Vista for processing and billing of their sewer
customers within our District.
c. Interest Income or Expense Allocation (General Use, Designated, and Restricted)
Interest income (expense) will be allocated each month based upon each fund's month-
ending balance.
2.4 Debt Issuance
a. Loans (General/Restricted Use)
As the District determines that additional funding 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
MISCELLANEOUS INCOME
Interest Income
or Expense
Allocation
Sewer Billing FeesMiscellaneous
Rents and Leases
Unrestricted and
Undesignated
(General Use)
Fund
Designated Funds Restricted Funds
DIAGRAM 2.3: Flow of Funds – Miscellaneous Income Sources
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DEBT PROCEEDS
Certificates of
Participation
General Obligation
BondsLoans
Unrestricted and
Undesignated
(General Use)
Fund
Designated Funds Restricted Funds
recommended to the Board for action. As an option to bond indebtedness, loans are
available especially to satisfy short tern 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 GO 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 funding 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 (Restricted)
General revenues of the District are pledged as security for COPs indebtedness. Before
issuing COPs, the District will determine that additional funding 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 study 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.
DIAGRAM 2.4: Flow of Funds – Debt Issuance Sources
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2.5 Inter-fund Transfers
Each year in the budgeting process future reserve levels are projected over the next six
years. Based on these projections, fund transfers are recommended. Monies may be
transferred between Unrestricted and General Fund (see 4.0 “Funding Levels” and 4.1
“Fund Transfers”). Funds may not be transferred to or from any of the restricted funds.
FUND TYPES
3.0 General Funds
a. Purpose
The General Fund is neither restricted nor designated. The District maintains only one
General Fund for each business segment (water, sewer, and recycled). This fund holds
the working capital and emergency operating reserves. 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 and avoid spikes in the rates or significant and abrupt
increases. This would only occur if there was a temporary need for funds that would
smooth out a rate spike or to ramp up what would otherwise be a dramatic rate increase.
This fund also plays a role in the debt planning of the District. It is an industry practice
to have a fund that can be used to stabilize rates. 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 issue a number of debt issuances over the years
and this fund will help the District not only to stabilize rate fluctuations but also access
low cost financing for future projects.
While the General Fund has a short-term focus to fund the District’s annual operations, it
is supported by the six year rate model. This fund is primarily used to fund the
operations of the District however; it can be used for any District purpose.
b. Sources
Meter installation charges, annexation fees, temporary meter fees, uniform rates and
charges, monthly system fees, energy charges, penalties, pass-through fixed charges,
general levy property tax receipts, availability charges, miscellaneous rents and leases,
sewer billing fees, interest incomes or expense allocation, loans, and a portion of the
temporary meter fees.
c. Levels
i. Minimum Level – The minimum funding level for the General Fund is
three months of operating budget expenses.
ii. Maximum Level – The maximum funding 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.
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iii. Target Level – The target level of funding 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 Funds
a. Purpose
Designated cash funds are “general use” funds that have been set apart by Board action
for a specific purpose. These funds can only be used for those purposes. However, these
funds are at the discretion of the Board and can be used for any other District purpose by
an action of the Board. The District maintains designated cash funds as follows:
• Other Post Employment Benefits Fund (OPEB)
• Designated Expansion Fund
• Designated Betterment Fund
• Replacement Fund
Detailed descriptions of the funds are as follows:
i. Other Post Employment Benefits Fund (OPEB)
The OPEB Fund is used to fund the medical benefits of qualified retirees as
outlined in the District’s benefits plan. It is fully funded by user rates. Every two
years the fund is evaluated for additional funding requirements. Changes in the
actuarial valuation may result from changes in benefit levels, employee
population, costs of health insurance, or general market conditions.
These funds are currently designated but may be placed into a trust effectively
removing the District’s day-to-day access to the funds. This would allow the
funds to offset the actuarial liability of the District to fund OPEB. However, these
funds are currently designated and therefore, may be used at Board direction for
any purpose.
ii. Designated Expansion Fund
The purpose of this fund is to supplement the financing of expansion projects. In
the event the restricted expansion funds are not sufficient to fund the expansion
projects these funds may be used. This fund must be evaluated in conjunction
with the Restricted Expansion Fund as they work in concert.
There is significant interdependency between the District’s potable and recycled
water systems. For this reason, the two systems are supported by one combined
capacity fee. The same capacity fee is charge on all water connection regardless
of whether they are potable or recycled. For this reason the Restricted and
Designated Expansion Funds for these two business segments must be considered
jointly when using the rate model and setting fees.
The District currently has not sewer expansion and therefore has no sewer
capacity fees and no active sewer expansion funds.
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This fund contains general use funds and at the direction of the Board may be
used for any District purpose.
iii. Designated Betterment Fund
The purpose of this fund is to supplement the
Restricted Betterment Fund for sewer, water, or
recycled. The District maintains three separate
designated betterment funds, one for each business
segment. In the event a Restricted Betterment Fund
is not sufficient to fund betterment projects this
fund will be used. This fund must be evaluated in
conjunction with the Restricted Betterment Fund as
they work in concert. When considering the
funding levels for betterment funds there are
multiple sub-funds within betterment that must be
individually considered (see 2.1 f.). This is a
general use fund and at the direction of the Board
may be used for any District purpose.
iv. Replacement Fund
The purpose of this fund is to pay for the
replacement of capital infrastructure and capital
purchases. This is a Designated Fund and was
created to meet a portion of the District’s
replacement needs. This fund is not to be used for
the replacement of non-capital items. Debt
financing of replacement will be the primary source
of funds for replacement however; this reserve is
established to fund a portion of replacement and
ensure that necessary replacements will occur
regardless of the immediate availability of the debt
markets. With the District’s development of its
financial systems and the greater need and ability to
separate funds, the Replacement Fund has 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 are not considered normal maintenance.
Where the cost is below $10,000 the costs are
financed annually as operational maintenance. As
charges are incurred on a replacement project the
funds are deducted from the Replacement Fund on a
monthly basis.
33
This is a Designated Fund and may be redirected for any purpose at Board
direction.
b. Sources
The sources of funding for designated funds are limited to interfund transfers from
available unrestricted funds (see 3.0 b.) and interest earnings on fund balances within
designated funds. Unrestricted funds may come from other designated funds or from the
General Fund. The operating budget is another source of designated general revenues.
As a part of the normal budget process the general revenues are sufficient to fund a
significant portion of the ongoing needs of the designated funds.
c. Levels Other Post Employment Benefits Fund
A. Minimum Level – Fully funded
as identified under the actuarial study of
the District’s OPEB liability.
B. Maximum Level – Fully funded
as identified by an actuarial study. In
the event that the fund is over funded,
the District will target for the full
funding within five (5) years reducing
the annual funding levels.
C. Target Level – Fully funded to meet the actuarially defined
valuation. In the event that the fund is not fully funded, the District will
target for full funding within five (5) years by increasing funding levels.
This increased funding would be in the form of either annual budget
funding or fund transfers.
i. Designated Expansion Fund
A. Minimum Level – As the District matures the CIP will move to
purely replacement projects. As the District moves through its lifecycle
the need for expansion funds will decrease and eventually be reduced to
zero. When considering the funding of expansion the Restricted
Expansion Fund and the Designated Expansion Fund work in concert and
must be considered jointly.
B. Maximum Level – The maximum level of this fund is limited to
five years of unfunded expansion needs as described in the District’s CIP
Budget. To determine the unfunded amount the total expansion costs must
be reduced by the projected restricted expansion revenues. Bond
financing is expected to fund a large portion of expansion.
C. Target Level – In order to facilitate debt financing of expansion,
it is important that the expansion funds retain a reserve of six months prior
to any attempt to obtain bond financing. This reserve allows the District
the time necessary to issue additional debt without running out of
expansion funds. If the combined expansion funds drop below six months
34
of expenditures this would trigger either a transfer of general use funds or
a borrowing of funds with a bond sale. Bond funds would be placed in the
Restricted Expansion Fund while transfers would be placed in the
Designated Expansion Fund. If the combined expansion funds exceeded
target the District should considered the need to reduce capacity fees or
transferring designated funds to meet another purpose.
ii. Designated Betterment Fund
A. Minimum Level – As the District matures the CIP will move to
purely replacement projects. As the District moves through its lifecycle
the need for betterment funds will decrease and eventually be reduced to
zero. When considering the funding of expansion the Restricted
Betterment Fund and the Designated Betterment fund work in concert and
must be considered jointly.
B. Maximum Level – The maximum level of this fund is limited to
five years of unfunded betterment needs as described in the District’s CIP
Budget. To determine the unfunded amount the total betterment costs must
be reduced by the projected restricted betterment revenues. Bond
financing is expected to fund a large portion of betterment.
C. Target Level – In order to facilitate debt financing of betterment,
it is important that the betterment funds retain a reserve of six months
prior to any attempt to obtain bond financing. This reserve allows the
District the time necessary to issue additional debt without running out of
betterment funds. When considering the funding levels for betterment
funds there are multiple sub-funds within betterment that must be
individually considered (see 2.1 f.). If the combined betterment funds
drop below six months of expenditures this would trigger either a transfer
of general use funds or a borrowing of funds with a bond sale. Bond funds
would be placed in the Restricted Betterment Fund while transfers would
be placed in the Designated Betterment Fund. If this target is exceeded,
then the District should evaluate reductions in the special water rates and
availability fees and also consider transfers to other funds.
iii. Replacement Fund
A. Minimum Level – The minimum level of funding is 3% of the
historical value of existing assets as identified in the District’s current
financial statement.
B. Maximum Level – The maximum level of funding is 6% of
existing assets. In the event the maximum level is exceeded in any year,
then the excess will be transferred as per the general transfer guidelines
found in Section IV.
C. Target Level – The target level of funding is 4% of existing
assets. In the event that the fund falls below the recommended target
level, transfers or operating revenues would be shifted to support the
35
Replacement Funds. The District will act based on the annual five (5)
year rate study to insure that at the end of that planning horizon the fund
exceeds the minimum level and is approaching the target level.
3.2 Restricted Funds
a. Purpose
Restricted cash funds are those that are legally set aside for a particular purpose
and cannot be used for any other purpose. The District maintains three Restricted
Funds:
• Restricted Expansion Fund
• Restricted Betterment Fund
• Debt Reserve Fund
The definition and purpose of each of these funds is described below:
i. Restricted Expansion Fund
The Restricted Expansion Fund works hand-in-hand with the Designated
Expansion Fund. When evaluating the need for additional funding, both
the restricted and designated funds must be considered as one fund. The
sole purpose of this fund is to construct potable, recycled, and sewer
facilities to the extent they serve the expansion needs of the District.
Recycled and potable are jointly accounted for as these water systems
work in concert. The sewer expansion is accounted for separately but is
currently inactive as there is no sewer expansion.
This fund is restricted by law and therefore is a Restricted Fund that can
be used for no other purpose. Government Code section 66001 requires
that these funds be accounted for separately and upon request that an
accounting be provided. In addition, five years after the first deposit into
the account or fund, the Code requires the District make specific findings
regarding any unexpended funds,
whether those funds are committed to
expenditure or not (Government Code
section 66001). The same findings
must continue to be made once every
five years thereafter. If the findings are
not made, the statute requires the
District refund the fees to the current
owner of the affected property. The
manner of the refund is at the District’s
discretion.
As charges are incurred on a project, and the project has been identified as
an expansion project, the costs are deducted from the Expansion Fund.
This allocation of funds is done on a monthly basis. In the event that
funds are not used for the expansion of District facilities the funds must be
36
returned to the developers who paid them. In the case where a policy
change requires a betterment project that would have been an expansion
project at the time the capacity fee was collected, reserves may be used for
that betterment project. The expansion reserves may also be used for bond
repayment, to the extent the debt was incurred to fund expansion.
ii. Restricted Betterment Fund
The Betterment Reserve covers the cost to construct, install, and in some
cases to maintain the potable, recycled, and sewer systems. The District
maintains three separate designated betterment funds, one for each
business segment. These funds are restricted by law for use within the
area in which the fees are collected (Water Code 71631.6). However, the
legal restriction of this fund depends upon the particular revenue source.
(see Section 2.1 f. for a review of the special rates and availability fees).
iii. Debt Reserve Fund
The purpose of the Debt Reserve Fund is to pay periodic principal and
interest debt payments on the outstanding debt. As these payments are
made the funds are reduced. As additional debt is incurred, new property
tax assessments may be authorized funded from assessments on the
Property Tax Roll. Annually, the District sets the tax rate at a level
necessary to fund that year’s debt payments. These rates are applied to the
assessed valuation of the property. Changes in property values in
assessment areas result in inverse fluctuations in the tax rate necessary to
generate the required debt payments.
In other cases, such as assessment districts, the debt service is funded
through an assessment being levied on each parcel within the district. In
assessment districts, the amount of the levy will vary by parcel and is
based on the amount of benefit that parcel received from the improvement.
In addition, debt service may be funded through water rates. In the case of
funding from water rates, there would not be a restriction on those debt
reserve funds. They may remain in the General Fund or be placed in a
Designated Fund if the Board were to take specific action to designate rate
funds for the purpose of debt payments.
These funds are legally restricted for the specific debt issuance for which
they are collected. These funds are not available for any other purpose
and may not be designated for any other purpose. If these funds are not
used for the payment of the specific debt for which they are collected they
must be returned to the customers who made the tax roll payments. The
District must evaluate the exact need of funds to avoid the costly
reimbursement process.
b. Sources
Temporary meter fees and capacity fees fund expansion while special rates
and charges and availability charges fund the betterment fund. The debt
37
reserves are funded by the State Loan Assessment, and GO bond
assessments. Each debt fund can also be funded with the proceeds of the
debt. Lastly, each fund is allotted its share of the interest income or
expense.
c. Levels
i. Restricted Expansion Fund
A. Minimum Level –While there is no minimum balance, an
action is required when the balance of the combined Restricted
Expansion Fund and the Designated Expansion Fund drops below
six months of expenditures. This would trigger either a transfer of
funds from a non-Restricted Fund or a borrowing of funds with a
bond sale. Bond funds would be placed in the Restricted
Expansion Fund while transfers would be placed in the Designated
Expansion Fund.
B. Maximum Level – The maximum of this fund is limited
not by a particular dollar amount but by the limited ability to
collect funds for this purpose. This limitation is mandated by
Government Code section 66001. Under the Code, the District
must identify the purpose of the fee and the use to which it will be
put, effectively establishing a nexus between the development
project or class of project and the improvement being financed.
The District must further establish that the amount of the funds
being collected will not exceed that needed to pay for the
improvement (Government Code section 66005). Under this
mandate, also referred to as AB 1600, the Mitigation Fee Act and
Government Code sections 66000 et seq., the District can only
collect capacity fees for expansion projects. To insure compliance
with this, the District performs periodic rate studies, a part of
which is the calculation of the legally defensible capacity fee.
Therefore, the District is limited in this fund by the nexus between
the need for expansion expenditures and the fee that is approved
for its collection.
With the lack of a dollar limitation for the maximum, it is
incumbent on the District to maintain the planned construction of
capital infrastructure. While building ahead of the need makes it
unlikely that the capacity fees will accumulate to any great degree,
significant delays in construction may result in high levels of the
Restricted Expansion Fund. This is one reason why the District
reports to the Board on a periodic basis the progress of the CIP
spending. Further, the annual update of the rate model brings the
Restricted and Designated Expansion Fund balances to the Board’s
attention. Also, the District provides annual Developer meetings
where the existing and projected reserve levels are reviewed.
38
C. Target Level – In order
to facilitate debt financing of
expansion, it is important that
the expansion funds retain a
reserve of six months prior to
any attempt to obtain bond
financing. This reserve allows
the District the time necessary
to issue additional debt without
running out of expansion
funds.
ii. Restricted Betterment Fund
A. Minimum Level – While there is no minimum, less than
six months of available funds in the combined Restricted
Betterment and Designated Betterment Funds would trigger either
a transfer of funds from a non-Restricted Fund or a borrowing of
funds with a bond sale. Bond funds would be placed in the
Restricted Betterment Fund while transfers would be placed in the
Designated Betterment Fund.
B. Maximum Level – The maximum to be retained in this
fund is five years of unfunded CIP betterment expenditures as
defined in the CIP budget forecast. To determine the unfunded
amount the total betterment costs must be reduced by the projected
restricted betterment revenues. If this maximum is exceeded, then
the District should evaluate reductions in the special water rates
and availability fees and also consider transfers to other funds.
C. Target Level – In order to facilitate debt financing of
betterment, it is important that the betterment funds retain a reserve
of six months prior to any attempt to obtain bond financing. This
reserve allows the District the time necessary to issue additional
debt without running out of betterment funds. When considering
the funding levels for betterment funds there are multiple sub-
funds within betterment that must be individually considered (see
2.1 f.).
iii. Debt Reserve Fund
A. Minimum Level – As debt service payments are made the
funds may be completely depleted if no other payments are
required.
B. Maximum Level – Sufficient to pay the periodic annual
debt service payments. As levels approach this maximum, the
District must evaluate the rate at which funds are being collected
so as to not over collect. Reductions in the tax rates have been
39
common as property values have risen. Even if the maximum is
exceeded, no refunds would occur if future debt payments are
necessary. The action required if funds exceed the maximum is a
reduction of the rate of collection which will bring the balance
down over time.
C. Target Level – The target level of funds for the various
debt issuances is six months of debt service. This target level will
be reduced as the term of the debt comes to a close.
FUND
ACTIONS TO
CONSIDER IF
BELOW TARGET
TARGET MAXIMUM
Restricted Expansion
Fund *
Capacity fee increase
Bond financing
Six months of
capital
expenditures
Nexus of cost to
fee
Restricted Betterment
Funds **
Rate increase
Bond financing
Six months of
capital
expenditures
5 yr unfunded
needs
Debt Reserve Fund
Increase tax collection
One semi-annual
payment
Two semi-annual
payments
Designated Expansion
Fund *
Fund transfers
Six months of
capital
expenditures
5 yr unfunded
needs
Designated
Betterment Fund **
Fund transfers
Six months of
capital
expenditures
5 yr unfunded
needs
OPEB Fund
Fund transfers Full funding Full funding
Replacement Fund
Fund transfers 4% of
infrastructure
6% of
infrastructure
General Fund
Rate increase
Fund transfers
Three months of
operating budget
expenses
Nine months
* Expansion needs must consider the Restricted and Designated Expansion Funds as well as any available bond financing.
** Betterment needs must consider the Restricted and Designated Betterment Funds as well as any available bond financing
DIAGRAM 3.0: Fund Targets
40
FUND TRANSFERS
4.0 Funding Levels
As described in the preceding sections, the District maintains funds for its operating and capital
activities. These funds fall into three accounting categories; 1) unrestricted and undesignated, or
general use funds, 2) designated, and 3) restricted. The source of the money for each fund was
discussed along with the purpose, source of funds, and levels. Key determinants 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 must always be viewed in light
of a 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
the target amount or under the target amount. This is not only acceptable but expected. The rate
model provides an empirical estimate of the conformance between the District’s financial
activities and the guidelines of this policy.
4.1 Fund Transfers
A significant portion of the funding for the District’s designated funds comes from interfund
transfers from the Unrestricted or General Funds. It is important to note that the District has the
ability to use General Funds for any business purpose. General Funds may be transferred to any
other unrestricted fund for any business need. Designated funds are General Funds which have
been set aside for a specific purpose by Board action. These funds can only be used for the
purpose they were designated, or with Board action, they may be used for any business purpose.
General Funds may also be used for any restricted purpose but are not transferred to Restricted
Funds due to the sensitivity of the tracking of Restricted Funds. If funds are needed for a
restricted purpose they are transferred to a Designated Fund identified with the restricted
purpose. Restricted Funds may only be used for the purpose that they were collected therefore
no transfers are made to or from these funds.
In many situations, fund transfers are expected as some funds will exceed their maximum or drop
below their minimums. Only funds that are below the stated target are eligible to receive
transferred funds. Funds 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 fund transfer out but only when other options are not available.
The rationale for prioritizing fund transfers is based on the immediacy of the need and the
availability of funds from other funding sources. For example, the General Fund is first to
receive funds when it drops below its target or minimum levels. This is because of the
immediate and ongoing nature of the expenditures that are served by this fund. The operation of
the District is first and foremost of the objectives of the District. On the other end of the
spectrum, the Replacement Fund has a long-term perspective and will be used to partially fund
replacement assets for many years to come. Debt financing is available to respond to this long
41
term, foreseeable, and planned cash flow. This fund is less likely to have immediate needs and
has other funding options.
When making the determination of when transfers are necessary, all funds work as independent
funds. The exceptions to this rule are the two expansion funds (one restricted and one
designated) and the two betterment funds (one restricted and one designated). Each of these two
sets of funds work as one but are kept separate due to the significant difference in the fund types,
one being restricted and one originating from General Funds. It is unlikely to have high
immediacy of need in these funds as they, like the Replacement Fund, are long term in nature
and have debt financing as an alternative funding source.
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 planning
horizon, this would trigger a bond sale or a transfer of unrestricted funds. If in the cash planning
process, it was anticipated that the General Fund would remain above target during the planning
horizon of six (6) years and that the trend did not present a problematic underfunded status, then
those funds would be considered available for transfer prior to making funds available from the
sale of bonds. Also, if during this period another Designated Fund was anticipated to exceed its
maximum then the excess would be transferred to the Designated Expansion Fund prior to any
other transfers. Funds are evaluated to determine which has the greatest need or availability of
funds before any fund 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: Whenever utility service is requested for land outside the boundaries of an
improvement district, the land to be serviced must first be annexed. The annexation fee for
water was set on March 3, 1997 at $1,000 per EDU. The fee for sewer annexation was set at
$3,819 on December 16, 1998. These base rates are adjusted quarterly according to a cost of
living index.
Assets: Resources owned or held by Otay Water District that have monetary value.
Availability Fees: The District levies charges each year in developed areas to be used for
upgrades, betterment, or replacement and in undeveloped areas to provide a source of funding
for planning, mapping, and preliminary design of facilities to meet future development. Current
legislation provides that any availability charge in excess of $10.00 per acre shall be used only
for the purpose of the improvement district for which it was assessed.
Betterment Fees: In addition to other applicable water rates and charges, water customers pay a
fee based on water service zone or Improvement District. These fees are restricted for use in the
area where they are collected and may be used for the construction and maintenance of facilities.
Bond: A written promise to pay a sum of money on a specific date at a specified interest rate.
The interest payments and the repayment of the principal are authorized in a District bond
resolution. The most common types of bonds are General Obligation (GO) bonds and
Certificates of Participation (COPs). These are frequently used for construction of large capital
projects such as buildings, reservoirs, pipelines and pump stations.
Capital Equipment: Fixed assets such as vehicles, marine equipment, computers, furniture,
technical instruments, etc. which have a life expectancy of more than two years and a value over
$10,000.
Capital Improvement Program: A long-range plan of the District for the construction,
rehabilitation and modernization of the District-owned and operated infrastructure.
CWA: The County Water Authority was organized in 1944 under the State County Water
Authority Act for the primary purpose of importing Colorado River water to augment the local
water supplies of the Authority's member agencies. The Authority purchases water from the
Metropolitan Water District of Southern California (MWD) which imports water from the
Colorado River and the State Water Project.
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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 checks, and related telephone contacts.
Operating Budget: The portion of the budget that pertains to daily operations that provide basic
governmental services. The operating budget contains appropriations for such expenditures as
personnel, supplies, utilities, materials, travel and fuel, and does not include purchases of major
capital plant or equipment which is budgeted for separately in the Capital Budget. The
Operating Budget also identifies planned non-operating revenues and expenses.
Revenue: Monies that the District receives as income. It includes such items as water sales and
sewer fees. Estimated revenues are those expected to be collected during the fiscal year.
System Fees: Each water service customer pays a monthly system charge for water system
replacement, maintenance, and operation expenses. The charge is based on the size of the meter
and class of service.
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.
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. All non-residential customers are charged a flat rate per unit. A
unit of water is 100 cubic feet or 748 gallons of water.
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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
2.3) Other Post Employment Fund (OPEB)
2.4) Debt Reserve Fund
Exceptions to the pooling of funds do exist for tax-exempt debt proceeds and deferred
compensation funds. Funds received from the sale of general obligation bonds, certificates
of participation or other tax-exempt financing vehicles are segregated from pooled
investments and the investment of such funds are guided by the legal documents that govern
the terms of such debt issuances.
3.0: PRUDENCE
Investments should be made with judgment and care, under current prevailing circumstances,
which persons of prudence, discretion and intelligence exercise in the management of their
own affairs, not for speculation, but for investment, considering the probable safety of their
capital as well as the probable income to be derived.
The standard of prudence to be used by investment officials shall be the “Prudent Person”
and/or "Prudent Investor" standard (California Government Code 53600.3) and shall be
applied in the context of managing an overall portfolio. Investment officers acting in
accordance with written procedures and the investment policy and exercising due diligence
shall be relieved of personal responsibility for an individual security's credit risk or market
INVESTMENT POLICY
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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 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
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undertaking personal investment transactions with the same individual with whom business
is conducted on behalf of the District.
7.0: AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS
The Chief Financial Officer shall maintain a list of financial institutions authorized to
provide investment services. In addition, a list will also be maintained of approved security
broker/dealers who are authorized to provide investment services in the State of California.
These may include “primary” dealers or regional dealers that qualify under Securities &
Exchange Commission Rule 15C3-1 (Uniform Net Capital Rule). No public deposit shall be
made except in a qualified public depository as established by state laws.
All financial institutions and broker/dealers who desire to become qualified bidders for
investment transactions must supply the District with the following, as appropriate:
• Audited Financial Statements.
• Proof of National Association of Security Dealers (NASD) certification.
• Proof of state registration.
• Completed broker/dealer questionnaire.
• Certification of having read the District’s Investment Policy.
• Evidence of adequate insurance coverage.
An annual review of the financial condition and registrations of qualified bidders will be
conducted by the CFO. A current audited financial statement is required to be on file for
each financial institution and broker/dealer in which the District invests.
8.0: AUTHORIZED AND SUITABLE INVESTMENTS
From the governing body perspective, special care must be taken to ensure that the list of
instruments includes only those allowed by law and those that local investment managers are
trained and competent to handle. The District is governed by the California Government
Code, Sections 53600 through 53692, to invest in the following types of securities, as further
limited herein:
8.01) United States Treasury Bills, Bonds, Notes or those instruments for which the full
faith and credit of the United States are pledged for payment of principal and interest.
There is no percentage limitation of the portfolio which can be invested in this
category, although a five-year maturity limitation is applicable.
8.02) Local Agency Investment Fund (LAIF), which is a State of California managed
investment pool, may be used up to the maximum permitted by State Law (currently
$40 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”)
• Student Loan Marketing Association (SLMA or "Sallie Mae")
• Federal Farm Credit Bank (FFCB)
There is no percentage limitation of the portfolio which can be invested in this category,
although a five-year maturity limitation is applicable.
8.04) Interest-bearing demand deposit accounts and Certificates of Deposit (CD) will be
made only in Federal Deposit Insurance Corporation (FDIC) insured accounts. For
deposits in excess of the insured maximum of $100,000, approved collateral shall be
required in accordance with California Government Code, Section 53652.
Investments in CD’s are limited to 15 percent of the District’s portfolio.
8.05) Commercial paper, which is short-term, unsecured promissory notes of corporate and
public entities. Purchases of eligible commercial paper may not exceed 10 percent of
the outstanding paper of an issuing corporation, and maximum investment maturity
will be restricted to 270 days. Investment is further limited as described in California
Government Code, Section 53601(g). Purchases of commercial paper may not exceed
15 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 or less, and that meet the further requirements of
California Government Code, Section 53601(j). Investments in medium-term notes
are limited to 15 percent of the District’s portfolio.
8.07) Money market mutual funds that invest only in Treasury securities and repurchase
agreements collateralized with Treasury securities, and that meet the further
requirements of California Government Code, Section 53601(k). Investments in
money market mutual funds are limited to 15 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 a leveraging, is prohibited.
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9.0: INVESTMENT POOLS/MUTUAL FUNDS
A thorough investigation of the pool/fund is required prior to investing, and on a continual
basis. There shall be a questionnaire developed which will answer the following general
questions:
• A description of eligible investment securities, and a written statement of investment
policy and objectives.
• A description of interest calculations and how it is distributed, and how gains and losses
are treated.
• A description of how the securities are safeguarded (including the settlement processes),
and how often the securities are priced and the program audited.
• A description of who may invest in the program, how often, and what size deposits and
withdrawals are allowed.
• A schedule for receiving statements and portfolio listings.
• Are reserves, retained earnings, etc., utilized by the pool/fund?
• A fee schedule, and when and how is it assessed.
• Is the pool/fund eligible for bond proceeds and/or will it accept such proceeds?
10.0: COLLATERALIZATION
Collateralization will be required on certificates of deposit. 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.
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13.0: MAXIMUM MATURITIES
To the extent possible, the Otay Water District will attempt to match its investments with
anticipated cash flow requirements. Unless matched to a specific cash flow, the District will
not directly invest in securities maturing more than five years from the date of purchase.
However, for time deposits with banks or savings and loan associations, investment
maturities will not exceed two years. Investments in commercial paper will be restricted to
270 days.
14.0: INTERNAL CONTROL
The Chief Financial Officer shall establish an annual process of independent review by an
external auditor. This review will provide internal control by assuring compliance with
policies and procedures.
15.0: PERFORMANCE STANDARDS
The investment portfolio shall be designed with the objective of obtaining a rate of return
throughout budgetary and economic cycles, commensurate with the investment risk
constraints and the cash flow needs.
The Otay Water District’s investment strategy is passive. Given this strategy, the basis used
by the CFO to determine whether market yields are being achieved shall be the State of
California Local Agency Investment Fund (LAIF) as a comparable benchmark.
16.0: REPORTING
The Chief Financial Officer shall provide the Board of Directors monthly investment reports
which provide a clear picture of the status of the current investment portfolio. The
management report should include comments on the fixed income markets and economic
conditions, discussions regarding restrictions on percentage of investment by categories,
possible changes in the portfolio structure going forward and thoughts on investment
strategies. Schedules in the quarterly report should include the following:
• A listing of individual securities held at the end of the reporting period by authorized
investment category.
• Average life and final maturity of all investments listed.
• Coupon, discount or earnings rate.
• Par value, amortized book value, and market value.
• Percentage of the portfolio represented by each investment category.
17.0: INVESTMENT POLICY ADOPTION
The Otay Water District’s investment policy shall be adopted by resolution of the District’s
Board of Directors. The policy shall be reviewed annually by the Board and any
modifications made thereto must be approved by the Board.
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APPENDIX A: GLOSSARY
ACTIVE INVESTING: Active investors will purchase investments and continuously
monitor their activity, often looking at the price movements of their stocks many times a day,
in order to exploit profitable conditions. Typically, active investors are seeking short term
profits.
AGENCIES: Federal agency securities and/or Government-sponsored enterprises.
BANKERS’ ACCEPTANCE (BA): A draft or bill or exchange accepted by a bank or trust
company. The accepting institution guarantees payment of the bill, as well as the issuer.
BENCHMARK: A comparative base for measuring the performance or risk tolerance of the
investment portfolio. A benchmark should represent a close correlation to the level of risk
and the average duration of the portfolio’s investments.
BROKER/DEALER: Any individual or firm in the business of buying and selling securities
for itself and others. Broker/dealers must register with the SEC. When acting as a broker, a
broker/dealer executes orders on behalf of his/her client. When acting as a dealer, a
broker/dealer executes trades for his/her firm's own account. Securities bought for the firm's
own account may be sold to clients or other firms, or become a part of the firm's holdings.
CERTIFICATE OF DEPOSIT (CD): A short or medium term, interest bearing, FDIC
insured debt instrument offered by banks and savings and loans. Money removed before
maturity is subject to a penalty. CDs are a low risk, low return investment, and are also
known as “time deposits”, because the account holder has agreed to keep the money in the
account for a specified amount of time, anywhere from a few months to several years.
COLLATERAL: Securities, evidence of deposit or other property, which a borrower
pledges to secure repayment of a loan. Also refers to securities pledged by a bank to secure
deposits of public monies.
COMMERCIAL PAPER: An unsecured short-term promissory note, issued by
corporations, with maturities ranging from 2 to 270 days.
COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR): The official annual
report for the Otay Water District. It includes detailed financial information prepared in
conformity with generally accepted accounting principles (GAAP). It also includes
supporting schedules necessary to demonstrate compliance with finance-related legal and
contractual provisions, extensive introductory material, and a detailed statistical section.
COUPON: (a) The annual rate of interest that a bond’s issuer promises to pay the
bondholder on the bond’s face value. (b) A certificate attached to a bond evidencing interest
due on a set date.
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DEALER: A dealer, as opposed to a broker, acts as a principal in all transactions, buying
and selling for his own account.
DEBENTURE: A bond secured only by the general credit of the issuer.
DELIVERY VERSUS PAYMENT: There are two methods of delivery of securities:
delivery versus payment and delivery versus receipt. Delivery versus payment is delivery of
securities with an exchange of money for the securities. Delivery versus receipt is delivery
of securities with an exchange of a signed receipt for the securities.
DERIVATIVES: (1) Financial instruments whose return profile is linked to, or derived
from, the movement of one or more underlying index or security, and may include a
leveraging factor, or (2) financial contracts based upon notional amounts whose value is
derived from an underlying index or security (interest rates, foreign exchange rates, equities
or commodities).
DISCOUNT: The difference between the cost price of a security and its maturity when
quoted at lower than face value. A security selling below original offering price shortly after
sale also is considered to be at a discount.
DISCOUNT SECURITIES: Non-interest bearing money market instruments that are issued
at a discount and redeemed at maturity for full face value, e.g., U.S. Treasury Bills.
DIVERSIFICATION: Dividing investment funds among a variety of securities offering
independent returns.
FEDERAL CREDIT AGENCIES: Agencies of the Federal government set up to supply
credit to various classes of institutions and individuals, e.g., S&L’s, small business firms,
students, farmers, farm cooperatives, and exporters.
FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC): A federal agency that
insures deposits in member banks and thrifts, currently up to $100,000 per deposit.
FEDERAL FARM CREDIT BANK (FFCB): The Federal Farm Credit Bank system
supports agricultural loans and issues securities and bonds in financial markets backed by
these loans. It has consolidated the financing programs of several related farm credit
agencies and corporations.
FEDERAL FUNDS RATE: The rate of interest at which Fed funds are traded. This rate is
currently pegged by the Federal Reserve through open-market operations.
FEDERAL 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.
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FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC or Freddie Mac):
A stockholder owned, publicly traded company chartered by the United States federal
government in 1970 to purchase mortgages and related securities, and then issue securities
and bonds in financial markets backed by those mortgages in secondary markets. Freddie
Mac, like its competitor Fannie Mae, is regulated by the United States Department of
Housing and Urban Development (HUD).
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA or Fannie Mae):
FNMA, like GNMA was chartered under the Federal National Mortgage Association Act in
1938. FNMA is a federal corporation working under the auspices of the Department of
Housing and Urban Development (HUD). It is the largest single provider of residential
mortgage funds in the United States. Fannie Mae is a private stockholder-owned
corporation. The corporation’s purchases include a variety of adjustable mortgages and
second loans, in addition to fixed-rate mortgages. FNMA’s securities are also highly liquid
and are widely accepted. FNMA assumes and guarantees that all security holders will
receive timely payment of principal and interest.
FEDERAL RESERVE SYSTEM: The central bank of the United States created by
Congress and consisting of a seven member Board of Governors in Washington, D.C., 12
regional banks and about 5,700 commercial banks that are members of the system.
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA or Ginnie Mae):
A government owned agency which buys mortgages from lending institutions, securitizes
them, and then sells them to investors. Because the payments to investors are guaranteed by
the full faith and credit of the U.S. Government, they return slightly less interest than other
mortgage-backed securities.
INTEREST-ONLY STRIPS: A mortgage backed instrument where the investor receives
only the interest, no principal, from a pool of mortgages. Issues are highly interest rate
sensitive, and cash flows vary between interest periods. Also, the maturity date may occur
earlier than that stated if all loans within the pool are pre-paid. High prepayments on
underlying mortgages can return less to the holder than the dollar amount invested.
INVERSE FLOATER: A bond or note that does not earn a fixed rate of interest. Rather,
the interest rate is tied to a specific interest rate index identified in the bond/note structure.
The interest rate earned by the bond/note will move in the opposite direction of the index.
An inverse floater increases the market rate risk and modified duration of the investment.
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.
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LOCAL AGENCY INVESTMENT FUND (LAIF): The aggregate of all funds from
political subdivisions that are placed in the custody of the State Treasurer for investment and
reinvestment.
MARKET VALUE: The price at which a security is trading and could presumably be
purchased or sold.
MASTER REPURCHASE AGREEMENT: A written contract covering all future
transactions between the parties to repurchase/reverse repurchase agreements that establish
each party’s rights in the transactions. A master agreement will often specify, among other
things, the right of the buyer-lender to liquidate the underlying securities in the event of
default by the seller borrower.
MATURITY: The date upon which the principal or stated value of an investment becomes
due and payable.
MONEY MARKET: The market in which short-term debt instruments (bills, commercial
paper, bankers’ acceptances, etc.) are issued and traded.
MUTUAL FUNDS: An open-ended fund operated by an investment company which raises
money from shareholders and invests in a group of assets, in accordance with a stated set of
objectives. Mutual funds raise money by selling shares of the fund to the public. Mutual
funds then take the money they receive from the sale of their shares (along with any money
made from previous investments) and use it to purchase various investment vehicles, such as
stocks, bonds, and money market instruments.
MONEY MARKET MUTUAL FUNDS: An open-end mutual fund which invests only in
money markets. These funds invest in short term (one day to one year) debt obligations such
as Treasury bills, certificates of deposit, and commercial paper.
NATIONAL ASSOCIATION OF SECURITIES DEALERS (NASD): A self-regulatory
organization of the securities industry responsible for the operation and regulation of the
NASDAQ stock market and over-the-counter markets. Its regulatory mandate includes
authority over firms that distribute mutual fund shares as well as other securities.
PASSIVE INVESTING: An investment strategy involving limited ongoing buying and
selling actions. Passive investors will purchase investments with the intention of long term
appreciation and limited maintenance, and typically don’t actively attempt to profit from
short term price fluctuations. Also known as a buy-and-hold strategy.
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.
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PRUDENT PERSON RULE: An investment standard. In some states the law requires that a
fiduciary, such as a trustee, may invest money only in a list of securities selected by the
custody state—the so-called legal list. In other states the trustee may invest in a security if it
is one which would be bought by a prudent person of discretion and intelligence who is
seeking a reasonable income and preservation of capital.
PUBLIC SECURITIES ASSOCIATION (PSA): A trade organization of dealers, brokers,
and bankers who underwrite and trade securities offerings.
QUALIFIED PUBLIC DEPOSITORIES: A financial institution which does not claim
exemption from the payment of any sales or compensating use or ad valorem taxes under the
laws of this state, which has segregated for the benefit of the commission eligible collateral
having a value of not less than its maximum liability and which has been approved by the
Public Deposit Protection Commission to hold public deposits.
RANGE NOTE: An investment whose coupon payment varies and is dependent on whether
the current benchmark falls within a pre-determined range.
RATE OF RETURN: The yield obtainable on a security based on its purchase price or its
current market price. This may be the amortized yield to maturity on a bond the current
income return.
REGIONAL DEALER: A securities broker/dealer, registered with the Securities &
Exchange Commission (SEC), who meets all of the licensing requirements for buying and
selling securities.
REPURCHASE AGREEMENT (RP OR REPO): A holder of securities sells these
securities to an investor with an agreement to repurchase them at a fixed price on a fixed
date. The security “buyer” in effect lends the “seller” money for the period of the agreement,
and the terms of the agreement are structured to compensate him for this. Dealers use RP
extensively to finance their positions. Exception: When the Fed is said to be doing RP, it is
lending money that is increasing bank reserves.
SAFEKEEPING: A service to customers rendered by banks for a fee whereby securities and
valuables of all types and descriptions are held in the bank’s vaults for protection.
SECONDARY MARKET: A market made for the purchase and sale of outstanding
securities issues following their initial distribution.
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.
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STRUCTURED NOTES: Notes issued by Government Sponsored Enterprises (FHLB,
FNMA, SLMA, 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.
STUDENT LOAN MARKETING ASSOCIATION (SLMA or Sallie Mae): A federally
established, publicly traded corporation which buys student loans from colleges and other
lenders, pools them, and sells them to investors.
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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Introduction
The following policies and procedures are 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. The policies apply to all debt
issued by the District including general obligation bonds, revenue bonds, capital leases and
special assessment debt.
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.
Definitions
The following terms are used in this document:
“Advance Refunding” means to provide for the refinancing of debt prior to its Optional
Redemption date by setting aside funds in trust to pay debt service on the debt until the Optional
Redemption date is reached and the debt can be paid in full.
“CIP” means Capital Improvement Program.
“Optional Redemption” means the redemption of an obligation prior to its stated maturity, which
can only occur on dates specified in the bond indenture.
“Pay-as-you-go” means to pay for capital improvements from current resources and fund
balances rather than from debt proceeds.
“Rate Covenant” means 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.
Capital Facilities Funding
Financial Plan
The District maintains a multi-year financial projection that identifies operating requirements
and public facility and equipment requirements and is developing a Financial Plan for funding
the District’s Five-Year Capital Improvement Program (the “Financial Plan”). The Financial
Plan 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
DEBT POLICY
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importance of such needs and identifies all the funding sources that are available to cover the
costs of the projects. In cases where the Financial Plan identifies project funding through the use
of debt financing, the Financial Plan should provide information needed to determine debt
capacity. The Financial Plan gives the Board part of the data needed to make informed
judgments concerning the possibility of issuing debt.
Funding Criteria
The Chief Financial Officer 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 Chief Financial Officer 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 Subcommittee of
the Board 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 and capacity surcharge fees. Accordingly, user charges and
capacity fees should be implemented at levels sufficient to ensure that new development pays its
fair share of the costs of constructing necessary infrastructure.
Pay-As-You-Go Projects
The District’s capacity fees are the major funding source in financing additions to the water
system and the recycled water system. Over time, the fees collected and the cost to construct the
capital projects should balance. However, collection of these fees is subject to significant
fluctuation based on the rate of new development. Accordingly, the Chief Financial Officer in
developing the funding plan for the CIP will determine that current revenues and adequate fund
balances are available so project phasing can be accomplished.
If this is not the case, the Chief Financial Officer may recommend that:
1. The project be deferred until funds are available, or
2. Based on the priority of the project, long-term debt is issued to finance the project.
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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 ten 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.
Debt Structure
General
The District will normally issue debt with a maturity of not more than 30 years. The structure
should approximate level debt service for the term where it is practical or desirable. There will
be no debt structures that include increasing debt service levels in subsequent years, with the first
and second year of a debt payoff schedule the exception and related to projected additional
income to be generated by the project to be funded. There will be no “balloon” debt repayment
schedules that consist of low annual payments and one large payment of the balance due at the
end of the term. There will always be at least interest paid in the first fiscal year after debt
issuance and principal starting no later than the first fiscal year after the date the facility or
equipment is expected to be placed in service. Capitalized interest will not be for a period of
more than necessary to provide adequate security for the financing.
Limitations on the Issuance of Variable Rate Debt
The District will normally issue debt with a fixed rate of interest. The District may issue variable
rate for the purpose of managing its interest costs. At the same time, the District should protect
itself from too much exposure to interest rate fluctuations. In determining that it is in the
District’s best interest to issue certain debt at variable rates instead of fixed rates, at the time of
issuing any variable rate debt, there should be at least a 10% estimated reduction in annual debt
costs by issuing variable rate debt when compared to a similar issuance of fixed rate debt. If the
estimated overall cost savings from issuing variable rate debt is not at least 10% at the time of
issuance, relatively small fluctuations in rates could actually increase the District’s financing
costs over the life of the bonds compared to a similar fixed rate financing. By using this 10%
factor at the time of issuance, the District can be relatively assured that its variable rate financing
will be cost-effective over the term of the bonds.
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The comparison will be based on the following criteria:
1. The interest rate used to estimate interest costs will be the ten (10) year average for
weekly variable rates.
2. The variable rate debt costs will include an estimate for annual costs such as letter of
credit fees, liquidity fees, remarketing fees, monthly draw fees and annual rating fees
applicable to the letter of credit.
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 a fixed rate.
Variable rate debt should not represent more than 25% of the District’s total debt portfolio. This
level of exposure to interest rate fluctuations is considered to be manageable in an environment
of increasing interest rates. At a higher ratio than this, the District might be faced with an
unplanned water rate increase to meet its Rate Covenants. Rating agencies use this ratio in their
analysis of the District’s overall credit rating. Further, Rate Covenants applicable to variable rate
debt shall not compromise the issuance of additional debt planned by the District and variable
rate debt should always contain a provision to allow conversion to a fixed rate at the District’s
option.
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; and
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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Competitive and Negotiated Sale Criteria
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. 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.
If the size of the District’s proposed issue is not cost effective, the District may also consider
issuing its debt though the California Statewide Communities Development Authority, which
provides a mechanism for pooling financings with similar issuers to obtain economies of scale.
Refunding Debt
Purpose
Periodic reviews of all outstanding debt will be undertaken by the Chief Financial Officer to
determine refunding and/or refinancing opportunities. The purpose of the refinancing may be to:
1. Lower annual debt service by taking advantage of lower current interest rates.
2. Update or revise covenants on outstanding debt issue if a Rate Covenant appears to be
too high, has precluded the District from implementing its financing plan or has caused
the District to increase rates to customers.
3. Restructure debt service associated with an issue to facilitate the issuance of additional
debt, usually in order to smooth out peaks in total debt service, which can occur
frequently, as one debt issue is layered on top of existing debt issues.
4. Alter bond characteristics such as call provisions or payment dates.
5. Pay for conversion costs such as funding a reserve fund or paying for credit enhancement
when converting variable rate debt to fixed rate debt.
Restrictions on Refunding
Tax-exempt bonds typically have provisions that preclude early redemption of the bonds for a
period of years after issuance. The number of times a tax-exempt bond can be refinanced prior
to its Optional Redemption date (known as Advance Refunding) is limited by the IRS. For debt
issued after 1986, issuers may only provide for Advance Refunding of obligations in advance of
the Optional Redemption date, one time. There is no limit by the IRS on the ability of issuers to
redeem bonds early once the Optional Redemption date has been reached.
Savings Criteria
In cases where an Advance Refunding is intended to provide debt service savings, the District
may commence the refinancing process if a minimum five percent (5%) present value savings
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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.
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.
Derivatives
The District may consider the use of derivative products on a case-by-case basis, consistent with
State statute and financial prudence. The most common derivatives include transactions known
as “swaps,” in which the District, by contract with an investment bank (known as a “provider”),
swaps its fixed rate debt payments for variable rate debt payments or vice versa, and “forwards,”
in which the District enters into a purchase contract with an underwriter to purchase refunding
bonds at a future date at interest rates locked in today (not at today’s rates, but at rates locked in
today).
Derivative products introduce an additional risk factor into a financing, called “third-party risk.”
Once a derivative product is entered into, the District must rely upon the financial stability of the
provider to perform under the contract. Because the nature of derivatives is speculative, that is,
the District is assuming that rates will either go up or down over the period of the contract and
therefore expects to lock in a financial benefit today based on that assumption, the financial
benefits actually obtained from any derivative contract need to be monitored periodically to
determine if it is in the District’s interest to terminate the contract and what the penalty might be
for early termination. This requires a certain level of vigilance and impartial advice in this area
is actually difficult to obtain, since the derivative market is not particularly liquid or price-
transparent and is currently made up of a small handful of reputable providers.
There must be an overwhelming demonstrable financial benefit to the District based on
reasonable assumptions concerning future interest rates in order for the District to use
derivative products.
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Financing Participants
The District’s purchasing guidelines provide the process for securing professional services
related to individual debt issues. The solicitation and selection process include encouraging
participation from qualified service providers, both local and national, and securing services at
competitive prices.
Financial Advisor. The use of a Financial Advisor is necessary for the sale of debt by a
competitive bid process and is desirable when issuing debt through a negotiated sale. The
Financial Advisor has a fiduciary duty to the District and will seek to structure the District’s debt
in the manner that is saleable, yet meets the District’s objectives for the financing. The Financial
Advisor will advise the District on alternative structures for its debt, the cost of different debt
structures and potential pricing mechanisms that can be expected from underwriters (such as call
features, term bonds and premium and discount bond pricing) and, at the District’s direction, will
write the offering document (Preliminary Official Statement). With respect to competitive sales,
the Financial Advisor will arrange for distributing the preliminary official statement, accepting
bids via the Internet, verifying the lowest bid and provide detailed instructions for the flow of
funds at closing to the winning Underwriter, the Trustee and the District. In a negotiated sale,
the Financial Advisor will provide independent confirmation on the Underwriter’s proposed
pricing to ensure that interest rates and Underwriter’s compensation are appropriate for the credit
quality of the issue and competitive in the overall public finance market in California.
Underwriter. The Underwriter markets the bonds for sale to investors. While the District’s
preference is to select the Underwriter for the debt via sale of the debt at competitive bid, there
are circumstances when a negotiated issue is in the best interests of the District. Negotiated sales
are preferable if the security features are particularly complex or market conditions are volatile.
The Chief Financial Officer will recommend whether the method of sale is competitive or
negotiated based on the type of issue and other market conditions. In the case of negotiated
sales, the Underwriter will be required to demonstrate sufficient capitalization and sufficient
experience related to the specific type of debt issuance. The Underwriter will work in
connection with the District’s Financial Advisor on structuring the issue and offering different
pricing ideas.
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.
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Letter of Credit Bank. The Letter of Credit Bank is a U.S. and foreign bank that has issued a
letter of credit providing both credit enhancement (the Letter of Credit Bank will pay the debt in
the event that the District defaults on the payment) and liquidity for a variable rate bond issue.
These banks have their own short-term credit rating, which is generally higher than the District’s
short-term credit rating. Liquidity is needed because variable rate bondholders are allowed to
“put” their bonds back to the District if they do not like the interest rate currently being offered.
The District’s Remarketing Agent then finds a new buyer for those bonds, but in the event that
no buyer is found, a draw is made under the letter of credit to purchase the bonds that have been
“put.” As soon as the bonds are remarketed to another buyer, the letter of credit is repaid. The
letter of credit fees are paid annually. Letters of credit are typically issued for 5-7 years and
must be renewed during the life of the bonds. Credit enhancement is discussed further under the
heading “CREDIT ENHANCEMENT.”
Municipal Bond Insurer. The Municipal Bond Insurer can be one of several insurance
companies that provide municipal bond insurance policies securing payment of the District’s
debt. These policies provide that the Municipal Bond Insurer will pay the District’s debt in the
event that the District defaults on its payments. Debt which is insured carries the Municipal
Bond Insurer’s credit rating, in most cases, “AAA.” The insurance premium for the bond
insurance policy is paid one time at the issuance of the debt and is non-cancelable for the term of
the debt. Unlike a letter of credit, bond insurance policies do not provide liquidity and are most
typically purchased for fixed rate debt.
Remarketing Agent. The Remarketing Agent is an investment bank that, each week, determines
the interest rate for the District’s variable rate obligations. The rate is set at the rate at which the
obligations could be sold on the open market at 100% of their face value. The Remarketing
Agent also finds new buyers for any of the obligations that are “put” back to the District.
Rating Agencies. Currently, there are three rating agencies that rate municipal debt in the United
States: Standard & Poor’s, Moody’s Investors Service and Fitch Investors Service. Rating
agencies establish objective criteria under which each type of financing undertaken by the
District is to be analyzed. Upon request, a rating agency will rate the underlying strength of the
District’s financings, without regard to the purchase of any credit enhancement. The rating is
released to the general public and thereafter, the rating agency will periodically update its
analysis of a particular issue, and may raise or lower the rating if circumstances warrant.
Investment-grade ratings range from “AAA” to “BBB.” A rating below “BBB” is not
investment grade. Many mutual funds cannot buy bonds that do not carry an investment grade.
Verification Agent. In a refunding, the District will deposit funds with an escrow agent (usually
the trustee) in an amount sufficient, together with earnings thereon, to pay the debt service and
redemption price of the debt being refunded through and including the call date.
The Verification Agent verifies the mathematical accuracy of calculation of the amount to be
deposited in escrow and the bond counsel relies on this verification in giving their opinion that
the debt is defeased within the meaning of the indenture and that the lien of the debt on the
revenues pledged to the debt being refunded is released.
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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.
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
provide a copy of its comprehensive financial reports upon request and will disseminate other
information that it deems pertinent to the market in a timely manner. While initial bond
disclosure requirements pertain to underwriters, the District will provide financial information
and notices of material events on an ongoing basis throughout the life of the issue. Material
events are defined as those events which are considered to likely reflect on the credit supporting
the securities.
The events considered material according to the Securities and Exchange Commission (SEC)
are:
1. Rating changes.
2. Non-payment related defaults.
3. Adverse tax opinions or events affecting the tax exempt status.
4. Unscheduled draws on debt service reserves or credit enhancements reflecting financial
difficulties.
5. Modifications to the rights of securities holders.
6. Defeasance.
7. Bond calls.
8. Release, substitution, or sale of property securing repayment of the securities.
9. Substitution of credit or liquidity providers, or their failure to perform.
10. Principal and interest payment delinquencies.
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 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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Types of Debt Financing
General Obligation Bonds
General obligation bonds are secured by a pledge of the ad-valorem taxing power of the issuer
and are also known as a full faith and credit obligations. Bonds of this nature must serve a public
purpose to be considered lawful taxation of the property owners within the District and require a
two third’s majority vote in a general election. The benefit of the improvements or assets
constructed and acquired as a result of this type of bond must be generally available to all
property owners.
The District can issue general obligation bonds up to but not in excess of 15% of the assessed
valuation under Article XVI, Section 18 of the State Constitution. An annual amount of the levy
necessary to meet debt service requirements is calculated and placed on the tax roll through the
County of San Diego. The District also has a policy that the ad-valorem tax to be used to pay
debt service on general obligation bonds will not exceed $.10 per $100 of assessed value.
Voters within Improvement District (ID) No. 27 of the District authorized $100 million general
obligation bonds in 1989. The District issued $11,500,000 general obligation bonds in 1992 and
refinanced the bonds in 1998. The District also has approximately $29 million in general
obligation bonds authorized 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. Though revenue bonds
are not generally secured by the full faith and credit of the District, the financial markets require
coverage ratios of the pledged revenue stream and a covenant to levy rates and charges sufficient
to produce net income at some level in excess of debt service.
Also, there may be a test required to demonstrate that future revenues will be sufficient to
maintain debt service coverage levels after any proposed additional bonds are issued. The
District will strive to meet industry and financial market standards with such ratios. Annual
adjustments to the District’s rate structure may be necessary to maintain these coverage ratios.
The underlying credit of revenue bonds is judged on the ability of the District’s existing rates to
provide sufficient net income to pay debt service and the perceived willingness of the District to
raise rates and charges in accordance with its Rate Covenant. Actual past performance also plays
a role in evaluating the credit quality of revenue bonds, as well as the diversity of the customer
base. 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 of Participation 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 six 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.
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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 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
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.
68
Use of Credit Enhancement
Credit enhancement is a generic term that means any third-party guarantee of debt service. Credit
enhancement providers include municipal bond insurance companies or financial institutions.
The purchase of credit enhancement allows the District’s bond issue to carry the same credit
rating as the credit provider. The District will seek to use credit enhancement when such credit
enhancement proves cost-effective. Selection of credit enhancement providers will be subject to
a competitive bid process using the District’s purchasing guidelines.
Fixed Rate Bonds
Credit enhancement for fixed rate bonds is obtained by the purchase of bond insurance. With
few exceptions, bond insurance companies are rated AAA. If a commitment for bond insurance
is obtained for a particular issue, the District will estimate the annual debt service for the issue
based on current AAA-rated bond interest rates with the cost of issuance including the payment
of the bond insurance premium. If the estimated debt service on this basis is less than or equal to
estimated debt service for the issue based on interest rates for bonds with the District’s
underlying or stand-alone credit rating, the District will purchase the bond insurance. Any
intention of the District to prepay the debt ahead of its scheduled maturity will be taken into
account in the analysis. Credit enhancement may be used to improve or establish a credit rating
on a District debt obligation even if such credit enhancement is not cost effective if, in the
opinion of the Chief Financial Officer, the use of such credit enhancement meets the District’s
debt financing goals and objectives.
Variable Rate Bonds
Credit enhancement for variable rate bonds is comprised of two components, credit support and
liquidity. The interest on variable rate bonds is based on a seven-day investment rate. Any
investor can tender their bonds back to the District to be repurchased on seven days’ notice.
Because of the short-term nature of the investment, the securities that the District is “competing”
with for investors are AAA-rated or AA-rated mutual funds. Therefore, variable debt needs to
have credit enhancement to achieve a comparable AAA or AA rating, as well as liquidity support
to provide the District with a mechanism to purchase any bonds that are tendered before they can
be remarketed to new investors. A limited number of financial institutions offer letters of credit
that combine both credit support and liquidity for one fee. An alternative is to purchase bond
insurance to provide credit support and enter into a separate purchase agreement with a financial
institution to provide liquidity. The difference in cost between the two structures will be
analyzed before either alternative is selected for variable rate debt.
69
On January 27, 2006, the Otay Water District (OWD) celebrated its golden anniversary. Fifty
years ago, the California State Legislature officially authorized the OWD to an entitlement to
imported water. The Otay Water District was formed in 1956 by a small group of ranchers,
farmers and other property owners concerned about the declining quality and quantity of well
water. In 1957, developers in south Spring Valley created the La Presa County Water District to
gain water from the San Diego County Water Authority (CWA). In the fall of 1969, these two
districts merged into the Otay Water District.
Since then, the District has grown from a handful of customers and two employees to become an
organization operating a network with more than 663 miles of pipelines, 37 reservoirs, a sewer
treatment plant, and one of the largest recycled water distribution networks in San Diego County.
The character of the service area has also changed from predominantly dry-land farming and
cattle ranching to businesses, high-tech industries, and large master-planned communities. The
new water district’s boundaries stretch from Otay Mesa and eastern Chula Vista to Spring
Valley, southern El Cajon, and Jamul.
“This is a historic year for us,” said Board President Jaime Bonilla. “We are pleased to celebrate
50 years of providing reliable, quality water to our customers in South Bay and East County.”
To commemorate the 50th anniversary the District held special events including a community
open house in the summer of this year.
“The founders of the District had an optimistic vision of the future of this part of San Diego
County,” said Bonilla. “They knew that a reliable supply of clean water would make it happen,
and the prosperity we see today is the result of that vision.”
PAST, PRESENT, AND FUTURE
The name of the District
is derived from Otai, a
group of Native
Americans that resided
in the area around Otay
Mountain and the Otay
River prior to the arrival
of Europeans.
70
71
72
Currently, the District services the needs of a growing population by purchasing water from the
County Water Authority (CWA). CWA purchases its water from the Metropolitan Water
District of Southern California (MWD) and the Imperial Irrigation District. Otay takes delivery
of the water through several connections of large diameter pipelines owned and operated by
CWA. In Fiscal Year 2007, the District began purchasing raw water from the CWA and having
the City of San Diego treat the water. This new water source is taken through the Lower Otay
Pump Station which takes pressure off the potable system and increases the reliability through
diversifying the District’s supply.
For almost as long as it has been delivering potable water, the Otay Water District has collected
and reclaimed wastewater generated within the Jamacha drainage basin and pumped the recycled
water south to the Salt Creek basin where it is used for irrigation and other non-potable uses.
Through a new agreement with the City of San Diego, the District will receive an average six
million gallons a day of recycled water. This allows the District to discontinue supplementing its
recycled demand with potable water. Once again, this decreases the demand on the potable
supply and increases the reliability of the District’s supply.
The District’s sewer service area is growing at a slow but steady rate of approximately 1.6%
each year. Most of this growth is from small development projects or homeowners converting
their septic system into sewer because of environmental issues.
The District’s service area is in one of the fastest growing regions in the nation. During the past
decade, the population of the service area has nearly doubled. The phenomenal growth has
slowed slightly in the past several years, and is continuing at a slower pace. It is estimated that
the District is currently serving approximately 189,000 residents. In just the past four years, the
District has added more than 5,000 new customer connections. This is reflected internally as the
District’s Development Services Department approved 70 permits per month, and sold 835 water
meters in Fiscal Year 2005-2006.
CURRENT ECONOMIC CONDITIONS AND OUTLOOK
73
The Otay Water District continues to use the challenges presented by growth to create new
opportunities and new organizational efficiencies. By utilizing and continuing to refine its
Strategic Business Plan, it has captured the Board of Director’s vision and united its staff in a
common mission. The organization has achieved a number of significant accomplishments
based on its successful adherence to its Strategic Business Plan. The Otay Water District is
poised to continue successfully providing an affordable, safe, and reliable water supply for the
people of its service area.
2,326
1,397
835 869
1,112
1,672
1,546
1,396
2,006
-
500
1,000
1,500
2,000
2,500
FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12
METER SALES
Actual Projected
The Engineering and Planning Department projects that over the next six years the District will
sell another 8,600 meters. The San Diego Association of Governments (SANDAG), the regional
planning agency, estimates the District’s rate of growth will continue for a decade or more.
THE FUTURE
74
TEN LARGEST CUSTOMERS - FISCAL YEAR 2006
% of
Annual Water
Customer Name Business Type Revenues Sales
1. City of Chula Vista Publicly Owned 1,320,142$ 3.0%
2. State of California Publicly Owned 948,696 2.2%
3. McMillin Construction (Potable)666,771 1.5%
4. County of San Diego Publicly Owned 665,694 1.5%
5. Eastlake III Business/Irrigation (Reclaimed)502,189 1.1%
6. Country Hills Apartments Residential (Master Meter)461,985 1.1%
7. Country Club Eastlake Irrigation (Reclaimed)417,029 1.0%
8. Steele Canyon Irrigation (Potable Permanent)319,216 0.7%
9. California Bank & Trust Irrigation (Reclaimed)284,783 0.7%
10. The EastLake Company Construction (Potable)214,593 0.5%
Total 5,801,098$ 13.3%
Estimated FY06 Water Sales 43,755,610$
CUSTOMERS
FISCAL YEAR 2006
Ten Largest
13%
Others
87%
75
SERVICE AREA ASSESSED VALUATION
Otay Water District’s service area encompasses approximately 125 square miles in San Diego
County. Properties are assessed at 100% of their full value less any exemptions such as, exemption
from taxation under the law and homeowner’s exemptions. The significant increase in the assessed
value of properties in the District service area is due to both growth in the number of new homes, as
well as increases in home prices. This growth in new homes is expected to continue at a long-term
rate of 3% until ultimate build-out. The District receives its portion of the 1% property tax
according to Proposition 13 and AB8.
Source: County of San Diego Auditor and Controller
$10,490
$12,130
$14,131
$16,423
$19,566
$-
$4,000
$8,000
$12,000
$16,000
$20,000
Mi
l
l
i
o
n
D
o
l
l
a
r
s
2002 2003 2004 2005 2006
Fiscal Year
FIVE-YEAR SERVICE AREA ASSESSED VALUATION
76
TEN PRINCIPAL TAXPAYERS AS OF JUNE 30, 2006
Percent
Organization Assessed Value to Total
1. Corrections Corp of America $ 80,282,150 0.41%
2. Proctor Valley West Partners LLC 76,499,998 0.39%
3. SP La Vida Real LLC 72,000,000 0.37%
4. SSR Realty Advisors/Calstrs 71,828,419 0.37%
5. BRE Properties Inc 66,388,974 0.34%
6. Camden USA Inc 58,777,852 0.30%
7. CON AM Partners 50,176,051 0.26%
8. EQR - Missions At Sunbow LLC 48,274,560 0.25%
9. Pacifica Sunbow LP 44,609,150 0.23%
10. FW CA Rancho San Diego Village LLC 41,848,000 0.21%
Total $ 610,685,154 3.12%
Total Service Area Assessed Valuation $ 19,565,665,464
Source: County of San Diego Auditor and Controller
SERVICE AREA TAXPAYERS
FISCAL YEAR 2006
Other Taxpayers
97%
Ten Principal
Taxpayers
3%
77
SAN DIEGO COUNTY RAINFALL
FISCAL YEARS 1997-2006
6.717.00
17.78
5.76
8.58
2.99
10.62
5.18
22.51
6.06
0
5
10
15
20
25
30
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Fiscal Year
In
c
h
e
s
Annual Rainfall
10-Year Average Rainfall (9.32 inches)
The San Diego rainfall level dropped sharply in FY2006, receiving just over six inches of rain. The
District expects Fiscal Year 2007 rainfall to remain within its normal average of 9-10 inches a year.
The San Diego rainfall information shown in the chart above uses data from the San Diego Airport at
Lindbergh Field and is provided by the Western Regional Climate Center. More information can be
obtained from their website: http://www.wrcc.dri.edu. The Western Regional Climate Center’s
website data, in turn, is derived from data received from the National Climatic Data Center, the
National Weather Service, the National Resource Conservation Service, the Bureau of Land
Management, the U.S. Forest Service, and other federal, state, and local agencies. Although the data
reflects actual rainfall at Lindbergh field, it is representative of rainfall for the area served by the
Otay Water District.
78
The Operating Budget is summarized and presented in the Operating Budget Summary on page
83. Also included in this section are the Operating Budget Summary by Business on page 84, the
Fund Balance Summary by Fund on page 86, and the Revenues and Expenditures by Fund
schedule on pages 87 and 88. For Fiscal Year 2007, the District increased both water and sewer
rates for its customers in order to pass-through cost increases from water and sewer agencies, as
well as pay for newly mandated maintenance programs. These cost increases are being
experienced by our neighboring water agencies and most are encountering similar, if not greater,
rate increases.
Operating Budget Summary
The Operating Budget for Fiscal Year 2007 is $59,070,600 in comparison to the previous
adjusted fiscal year budget of $52,285,300. The $6,785,300 increase is primarily due to
additional projected water sales, newly mandated programs, and increases in salary and benefit
costs.
Revenues
Potable Water Sales
Potable water sales represent revenue collected from the sale of water, including: system
charges, energy charges, and penalties. It is estimated that 36,900 acre-feet of potable water will
be sold during Fiscal Year 2007. Budgeted water sales are projected to be $43,130,800, an
increase of 8.3% over the previous year's budget. Additional schedules relating to potable water
sales are included in the Potable Revenues and Expenditures section of this Budget.
Recycled Water Sales
Recycled water sales represent revenue collected from the sale of 4,500 acre-feet of recycled
water to customers at a discount of 12% of the potable rate. The FY 2007 sales revenue budget
of $4,485,400, an increase of $1,325,400 from FY 2006, includes the incentive credits provided
by the Metropolitan Water District (MWD) and the County Water Authority (CWA).
Sewer Revenues
Sewer charges are the monthly fees collected from the sewer service connections. The fees are
determined by volume of flow and the strength of solids discharged into the sewer system.
Meter Fees
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.
Capacity Fee Revenues
These fees are earned by the Operating Budget as our Engineering and Planning Department
supports expansion functions.
BUDGET SUMMARY
79
Annexation Fees
The District collects Annexation Fees when new customers annex into the District. This fee is
based on the excess capacity built by existing users and insures that future users fund a portion of
the facilities that were sized and built for their future use.
Tax Revenues
The District receives 1% property tax revenues, debt-related assessments, and availability fees on
properties within the District’s boundaries. These revenues are collected by the County of San
Diego via the Property Tax Role and remitted to the District annually.
Non-Operating Revenues
Non-Operating Revenues are revenues that are not directly related to the operation of a
water/sewer utility, and include such items as District property rentals and leases, and billing
services for the City of Chula Vista.
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.
General Fund Draw Down
This draw down of the General Fund is made when the balance is sufficient (in accordance to the
Reserve Policy) to fund operating expenditures of the District. If the balance was not sufficient,
either rates would be increased or expenditures cut to balance the budget. The Rate Model does
not show this as an ongoing funding source as revenues are sufficient to cover expenditures.
This draw down is being used as a means to smooth out the rate increases necessary to fund new
programs.
Expenditures
Potable Water Purchases
Water purchases indicate the expense of purchasing 38,900 acre-feet for the District's potable
water supplies. A provision has been made to allow 1,962 acre-feet of water for District usage,
leakage, and evaporation.
Recycled Water Purchases
Water purchases indicate the expense of purchasing 3,429 acre-feet for the District's recycled
water supplies. The District supplements the recycled water sales with 2,587 acre-feet of potable
water purchased from CWA. Beginning in the spring of 2007, the District will purchase 842
acre-feet of recycled water from the City of San Diego. This amount will increase in Fiscal Year
2008 as the potable supplement will diminish.
Infrastructure Access Charge
This charge was established in Fiscal Year 1999 by CWA to finance a portion of its fixed annual
costs including construction, operation, and maintenance of its aqueducts. This fixed charge is
based on the number of "household meter equivalents."
80
Customer Service Charge
This charge was established in Fiscal Year 2004 by CWA as a fixed charge. The Customer
Service Charge is set to recover costs necessary to support CWA’s development of policies, and
implementation of programs that benefit the region as a whole.
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.
Capacity Reservation Charge
This charge was established in Fiscal Year 2002 by the MWD, as a fixed charge on a member
agency's requested maximum day capacity. The Capacity Reservation Charge is a charge per
cubic-foot-second (cfs) and is applied to the amount of capacity (daily flow) a member agency
expects to use during the peak period from May through September.
Readiness-to-Serve Charge
This charge was established in Fiscal Year 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 the MWD on the tax bills of District customers.
Power Costs
Power is the cost 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.
Labor and Benefits
Labor and benefits are the wages and fringe benefits for 174.75 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.
Administrative Expenses
Administrative expenses are costs incurred by various departments that are directly related to
District operations. Additional details are supplied in the Departmental Operating Budget
section.
Materials and Maintenance
Materials and maintenance expense is the cost associated with the operation and maintenance of
District facilities. Additional details are supplied in the Departmental Operating Budget section.
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.
81
Debt Service
Debt Service is the principal and interest expense associated with the existing debt. Debt
payments will be shown in the reserve funded by the debt beginning in Fiscal Year 2007.
Schedules showing outstanding debt and principal and interest payments are shown in the Five-
Year Forecast section of this budget.
Operating Budget Summary by Business
The Budget Summary by System schedule reflects the separation of operating revenues and
expenses among potable water, reclaimed water, and sewer. This information is provided, due to
the necessity to collect sufficient revenue from each type of operation to recover the full cost of
operating expenses and to ensure that the customers are charged for services received.
Fund Balance Summary by Fund
This schedule shows each fund’s balance at June 30, 2006, and the projected balance for June 30,
2007, 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 schedules reflect each fund’s revenues and
expenditures by business line, where appropriate. This schedule is reconciled to the Fund
Balance Summary and includes transfers between funds.
82
FY 2005 FY 2007 Budget Variance
11-Actual Budget Estimated Budget Variance %
REVENUES
##Potable Water Sales 36,383,476$ 39,821,600$ 40,192,169$ 43,130,800$ 3,309,200$ 8.3%
Recycled Water Sales 2,964,580 3,559,900 3,563,441 4,485,400 925,500 26.0%
##Sewer Revenues 1,995,548 2,296,400 2,296,856 2,568,100 271,700 11.8%
##Meter Fees 460,167 416,800 270,167 278,500 (138,300) (33.2%)
##Capacity Fee Revenues - 1,222,200 1,356,611 1,000,200 (222,000) (18.2%)
Annexation Fees - - - 1,216,900 1,216,900 100.0%
Tax Revenues (1)2,883,115 2,814,600 3,388,734 3,427,400 612,800 21.8%
##Non-operating Revenues 1,161,117 1,163,400 1,978,542 1,674,100 510,700 43.9%
##Interest - - - 1,005,600 1,005,600 100.0%
General Fund Draw Down 1,210,400 1,210,400 1,210,400 283,600 (926,800) (76.6%)
TOTAL REVENUES 47,058,403 52,505,300 54,256,920 59,070,600 6,565,300 12.5%
EXPENDITURES
##Potable Water Purchases 18,087,244 19,178,000 20,350,772 21,218,200 2,040,200 10.6%
Recycled Water Purchases 1,135,900 1,535,400 1,464,082 1,736,700 201,300 13.1%
##CWA - Infrastructure Access Charge 696,565 772,700 844,855 1,003,900 231,200 29.9%
##CWA - Customer Service Charge 718,816 745,400 771,760 846,800 101,400 13.6%
##CWA - Emergency Storage Charge 900,159 958,500 1,047,601 1,230,600 272,100 28.4%
##MWD - Capacity Reservation Charge 472,522 502,300 508,756 514,800 12,500 2.5%
##MWD - Net RTS and Standby Charges 414,360 414,400 460,717 512,200 97,800 23.6%
Subtotal - Water Costs 22,425,566 24,106,700 25,448,543 27,063,200 2,956,500 12.3%
##Power 2,010,748 2,327,100 2,113,787 2,677,800 350,700 15.1%
##Labor and Benefits 11,237,495 13,457,300 14,431,295 14,606,300 1,149,000 8.5%
##Administrative Expenses 2,786,516 4,444,300 3,971,886 5,559,600 1,115,300 25.1%
##Materials & Maintenance 3,160,435 4,239,300 3,885,976 4,623,700 384,400 9.1%
Replacement Reserve 2,462,600 1,001,300 1,001,300 4,540,000 3,538,700 353.4%
Debt Service (2)2,692,543 2,709,300 2,820,714 - (2,709,300) (100.0%)
TOTAL EXPENDITURES 46,775,903 52,285,300 53,673,501 59,070,600 6,785,300 13.0%
EXCESS REVENUES (EXPENSE) 282,500$ 220,000$ 583,419$ -$ (220,000)$ (100.0%)
(1)
(2)
It is assumed that $1.2 M of Education Revenue Augmentation Fund (ERAF) will return to the District.
FY 2006
OPERATING BUDGET SUMMARY - GENERAL FUND
Effective in FY07, debt service ($357,000 for Sewer State loan and $840,000 for ID 27 GO Bond) and corresponding tax
revenues are accounted for separately under restricted reserves.
83
Potable Recycled Sewer Total
REVENUES
Water Sales 43,130,800$ -$ -$ 43,130,800$
Recycled Water Sales - 4,485,400 - 4,485,400
Sewer Revenues - - 2,568,100 2,568,100
Meter Fees 253,500 25,000 - 278,500
Capacity Fee Revenues 1,000,200 - - 1,000,200
Annexation Fees 1,216,900 - - 1,216,900
Tax Revenues 3,377,500 - 49,900 3,427,400
Non-operating Revenues 1,668,100 3,000 3,000 1,674,100
Interest 892,800 56,100 56,700 1,005,600
General Fund Draw Down - - 283,600 283,600
TOTAL REVENUES 51,539,800 4,569,500 2,961,300 59,070,600
EXPENDITURES
Water Purchases (CWA) 16,653,700 1,421,300 - 18,075,000
Water Purchases (CSD) 4,564,500 315,400 - 4,879,900
CWA - Infrastructure Access Charge 1,003,900 - - 1,003,900
CWA - Customer Service Charge 846,800 - - 846,800
CWA - Emergency Storage Charge 1,230,600 - - 1,230,600
MWD - Capacity Reservation Charge 514,800 - - 514,800
MWD - Net RTS and Standby Charges 512,200 - - 512,200
Subtotal - Water Costs 25,326,500 1,736,700 - 27,063,200
Power 2,310,900 202,600 164,300 2,677,800
Labor and Benefits 12,774,300 822,700 1,009,300 14,606,300
Administrative Expenses 5,057,000 314,200 188,400 5,559,600
Materials & Maintenance 2,795,600 228,800 1,599,300 4,623,700
Replacement Reserve 3,275,500 1,264,500 - 4,540,000
TOTAL EXPENDITURES 51,539,800 4,569,500 2,961,300 59,070,600
EXCESS REVENUES -$ -$ -$ -$
FY 2007 OPERATING BUDGET SUMMARY BY BUSINESS
FY 2006-2007 OPERATING EXPENDITURES
Potable
87%
Recycled
8%
Sewer
5%
84
OPERATING REVENUES & EXPENDITURES
FY 2006-2007 OPERATING REVENUES
Potable Water Sales
73.4%
Meter Fees
0.5%
Capacity Fee
Revenues
1.7%Annexation Fees
2.1%
Non-operating
Revenues
2.8%
Tax Revenues
5.8%
Interest
1.7%
Sewer Revenues
4.4%
Recycled Water
Sales
7.6%
FY 2006-2007 OPERATING EXPENDITURES
Recycled Water
Purchases
2.9%
Power
4.5%
Administrative
Expenses
9.4%
Labor and Benefits
24.7%
Materials &
Maintenance
7.8%
Replacement Reserve
7.7%
Potable Water Costs
42.9%
85
Estimated Projected
Balance Interfund Balance
June 30, 2006 Revenues Expenditures Transfers (1)June 30, 2007
GENERAL FUND
Potable 32,284,767$ 51,539,800$ 51,539,800$ (6,651,500)$ 25,633,267$
Recycled 1,481,734 4,569,500 4,569,500 (1,170,500) 311,234
Sewer 1,881,608 2,961,300 2,961,300 (421,600) 1,460,008
Total General Fund 35,648,109 59,070,600 59,070,600 (8,243,600) 27,404,509
EXPANSION FUND
Potable and Recycled (2)2,317,333 33,878,500 21,508,400 (679,300) 14,008,133
Sewer 405,871 13,400 - (146,000) 273,271
Total Expansion Fund 2,723,204 33,891,900 21,508,400 (825,300) 14,281,404
BETTERMENT FUND
Potable (2,896,664) 7,760,200 2,428,000 1,770,700 4,206,236
Recycled (34,650) - 233,400 285,000 16,950
Sewer 163,684 45,000 99,000 238,000 347,684
Total Betterment Fund (2,767,630) 7,805,200 2,760,400 2,293,700 4,570,870
REPLACEMENT FUND
Potable 12,470,038 543,000 4,814,600 7,735,400 15,933,838
Recycled 682,818 57,900 634,400 2,150,000 2,256,318
Sewer 9,723,262 359,100 937,400 - 9,144,962
Total Replacement Fund 22,876,118 960,000 6,386,400 9,885,400 27,335,118
OPEB FUND 16,428,945 671,600 580,000 - 16,520,545
DEBT RESERVE FUND 1,443,839 1,065,400 1,193,100 146,000 1,462,139
TOTAL 76,352,585$ 103,464,700$ 91,498,900$ 3,256,200$ 91,574,585$
15,222,000$
(1)The total for interfund transfers does not net to $0 because some transfers are already reflected in the Operating
Revenues and Expenditures for General Fund as follows:
Capacity Fee Revenues 1,000,200$
General Fund Draw Down 283,600
Replacement Reserve (4,540,000)
Total (3,256,200)
(2)Potable and Recycled funds are combined for expansion purposes.
Note:Significant changes in fund balances are due to debt proceeds from proposed debt issuances in the budget year,
as well as interfund transfers effected by the implementation of the newly-adopted reserve policy.
FUND BALANCE SUMMARY BY FUND
Estimated, Fiscal Year 2007
86
FY 2005 FY 2007
Actual Budget Estimated Projected
REVENUES
GENERAL FUND
Potable 41,443,697$ 46,291,800$ 47,962,582$ 51,539,800$
Recycled 3,015,637 3,160,000 3,586,870 4,569,500
Sewer 2,599,070 3,053,500 2,707,468 2,961,300
Total General Fund 47,058,404 52,505,300 54,256,920 59,070,600
EXPANSION FUND
Potable (1)8,153,707 9,177,400 8,823,888 26,416,100
Recycled (1)1,398,920 - 66,058 7,462,400
Sewer 1,086 - - 13,400
Total Expansion Fund 9,553,713 9,177,400 8,889,946 33,891,900
BETTERMENT FUND
Potable (1)1,663,234 1,610,500 1,488,640 7,760,200
Recycled 17,368 - - -
Sewer (16,233) - - 45,000
Total Betterment Fund 1,664,369 1,610,500 1,488,640 7,805,200
REPLACEMENT FUND
Potable 507,469 532,700 796,699 543,000
Recycled 17,368 - - 57,900
Sewer 206,013 121,900 - 359,100
Total Replacement Fund 730,850 654,600 796,699 960,000
OPEB FUND 389,768 535,300 538,372 671,600
DEBT RESERVE FUND (2)- - - 1,065,400
Total Revenues 59,397,104$ 64,483,100$ 65,970,578$ 103,464,700$
(1)Projected revenues include proposed debt issuances as follows:
Expansion Fund - Potable 16,600,000$
Expansion Fund - Recycled 4,600,000
Betterment Fund - Potable 6,300,000
(2)Effective FY 2007, Debt Reserve Fund is budgeted separately from General Fund.
REVENUES AND EXPENDITURES BY FUND
FY 2006
87
FY 2005 FY 2007
Actual Budget Estimated Projected
REVENUES AND EXPENDITURES BY FUND
FY 2006
EXPENDITURES
GENERAL FUND
Potable 42,667,911$ 45,969,100$ 48,502,163$ 51,539,800$
Recycled 2,090,340 3,262,700 2,473,624 4,569,500
Sewer 2,017,653 3,053,500 2,697,714 2,961,300
Total General Fund 46,775,904 52,285,300 53,673,501 59,070,600
EXPANSION FUND
Potable 9,577,784 14,600,500 33,217,943 7,076,600
Recycled 3,314,411 17,122,000 - 14,431,800
Sewer - - - -
Total Expansion Fund 12,892,196 31,722,500 33,217,943 21,508,400
BETTERMENT FUND
Potable 1,823,469 4,006,800 2,446,912 2,428,000
Recycled 1,622 61,000 - 233,400
Sewer 316,320 51,000 - 99,000
Total Betterment Fund 2,141,411 4,118,800 2,446,912 2,760,400
REPLACEMENT FUND
Potable 3,698,938 4,438,900 5,128,374 4,814,600
Recycled 68,475 50,000 - 634,400
Sewer 213,392 478,400 - 937,400
Total Replacement Fund 3,980,805 4,967,300 5,128,374 6,386,400
OPEB FUND 551,062 317,400 641,464 580,000
DEBT RESERVE FUND (2)- - - 1,193,100
Total Expenditures 66,341,377 93,411,300 95,108,194 91,498,900
EXCESS (DEFICIT) (6,944,273)$ (28,928,200)$ (29,137,616)$ 11,965,800$
88
FIVE-YEAR FORECAST
Financial Forecast for Fiscal Years 2008-2012
This financial forecast is designed to provide a general understanding of how revenues and
expenditures are expected to influence the District over the next five years. Revenue and
expenditure projections are reviewed in relation to their effect on funding capital projects,
reserve levels, and Operating Fund balances. The District updates its Rate Model on an annual
basis in order to make these projections and determine recommended rates. The model looks at
debt ratios, projected rate increases, cost increases, and growth projections.
The District must look at building new infrastructure to service the needs of its customers. The
CIP Master Plan looks at the service needs of all customers over the next six years and at the
betterment and expansion needs from now until ultimate build-out. These capital projects and
the funding for them are reviewed annually by the Engineering and Planning Department. As
new capital assets are brought into service, they are managed by an Infrastructure Management
System which is crucial to tracking and maintaining the history of 663 miles of potable pipelines,
77 miles of recycled pipelines, 86 miles of sewer lines, 34 potable, and 3 recycled reservoirs, 27
potable and 1 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 asset management
information. As these systems are further developed, the District will be able to better anticipate
operating costs associated with these capital projects. The impact of the CIPs on the Operating
Budget is addressed in the CIP section of this budget.
Projected Cost of Water
The projected water cost is based on CWA’s Rate Modeling Program. This process 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).
$675 $710 $750 $788 $811
$0
$200
$400
$600
$800
$1,000
Per
A
cre
F
oo
t
.
2008 2009 2010 2011 2012
Fiscal Year
P RO J EC TED C O S T O F W ATER
89
GENERAL FUND FORECAST - FY 2008 THROUGH FY 2012
This forecast incorporates both cost increases for expenditures and rate increases for revenues, as well
as growth projections.
Revenues FY 2008 FY 2009 FY 2010 FY 2011 FY 2012
Water/Sewer Rates 55,352,000$ 60,161,800$ 64,709,000$ 69,043,600$ 74,370,300$
Meter Fees 286,200 293,300 293,500 306,400 328,000
Capacity Fee Revenues 1,005,200 1,015,300 1,025,500 1,035,800 1,046,200
Annexation Fees 1,305,900 1,416,500 1,530,400 1,650,400 1,795,300
Non-operating Revenues 1,727,700 1,786,100 1,843,900 1,901,900 1,964,400
Tax Revenues 3,494,800 3,571,000 3,644,800 3,717,800 3,799,000
Interest Income 878,000 770,800 849,400 950,400 1,049,300
TOTAL 64,049,800$ 69,014,800$ 73,896,500$ 78,606,300$ 84,352,500$
-$ -$ -$ -$ -$
Expenditures and Transfers
Water Cost 28,496,600$ 30,711,700$ 33,090,900$ 35,574,800$ 38,561,400$
Power 3,083,500 3,276,900 3,464,500 3,655,800 3,899,300
Labor and Benefits 15,448,300 16,357,000 17,333,900 18,386,400 19,521,600
Administrative Expenses 5,708,500 5,861,900 6,018,800 6,179,200 6,343,400
Material & Maintenance 4,808,700 5,001,000 5,201,100 5,409,200 5,625,500
Fund Transfers, Net 6,504,200 6,874,800 7,837,000 8,363,000 9,137,000
TOTAL 64,049,800$ 68,083,300$ 72,946,200$ 77,568,400$ 83,088,200$
Excess Revenues -$ 931,500$ 950,300$ 1,037,900$ 1,264,300$
$64 $64
$69 $68 $74 $73 $79 $78
$84 $83
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
Mi
l
l
i
o
n
s
FY 2008 FY 2009 FY 2010 FY 2011 FY 2012
Fiscal Year
REVENUES AND EXPENDITURES FORECAST
Revenues Expenditures and Transfers
90
FUND BALANCES - FY 2008 THROUGH FY 2012
Fiscal Year-End Forecast Balances
Fund 2008 2009 2010 2011 2012
General Fund 14,461,700$ 15,393,200$ 16,343,500$ 17,381,400$ 18,645,700$
Betterment Fund 4,468,500 4,105,300 2,447,800 3,324,500 2,896,200
Replacement Fund 26,196,200 25,759,300 25,853,300 29,638,800 26,309,600
Expansion Fund 10,752,600 20,516,900 16,679,400 7,573,400 10,491,900
Medical Fund 17,364,900 17,538,400 17,665,700 17,751,100 17,763,300
Debt Reserve 872,400 811,900 777,900 736,800 732,200
TOTAL 74,116,300$ 84,125,000$ 79,767,600$ 76,406,000$ 76,838,900$
$0
$20
$40
$60
$80
$100
Mi
l
l
i
o
n
s
2008 2009 2010 2011 2012
Fiscal Year
FUND BALANCES FORECAST
General Fund Betterment Fund Replacement Fund
Expansion Fund Medical Fund Debt Reserve
91
DEBT MANAGEMENT
Financing the capital improvements needed to keep up with the growing demand for water in the
District’s service area has been accomplished through a combination of long-term and short-term
financing sources. These include General Obligation Bonds, Certificates of Participation,
developer fees, and pay-as-you-go funding.
Debt Management
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. Currently, there are three outstanding bond
issues and a State Sewer Loan, which the District will gradually retire per scheduled principal
and interest payments. 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. The need
to increase water rates is partially required in order to pay for the District’s increased debt
obligations. The District has issued Certificates of Participation (COPs) with amortization terms
of 20 and 30 years. With the passage of Senate Bill 290 on January 1, 2000, the District now has
the ability to finance capital facilities at terms up to 40 years. This new flexibility may result in a
decrease in annual debt service expenditures and better match the payment for facilities to the
use of facilities. To meet the bond indebtedness obligation and maintain stable rates, a Long
Range Financing Plan has been developed to forecast revenues and operating requirements. The
District has instituted a schedule of gradual rate increases designed to generate sufficient revenue
to pay off existing and planned future debt issues without large and/or rapid rate increases. See
the Policies Section of the budget for the District’s complete Debt Policy.
DEBT COVERAGE RATIO FORECAST
FISCAL YEARS 2008 - 2012
4.07 4.06 3.44
5.00
4.42
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
2008 2009 2010 2011 2012
Fiscal Year
Cov
e
ra
ge
R
atio .
.
Actual Ratio Min imu m Ratio = 1.25
The Actual Ratio includes growth-related revenues, such as Capacity and Annexation Fees. The
Minimum Ratio excludes these revenues in accordance with existing District Bond Covenants.
92
Outstanding
Year Original Balance
# Incurred Maturity Date Amount 06/30/06
1 1996 Certificates of Participation (COPs) 15,400,000$ 13,100,000$
2 1998 General Obligation (GO) Bonds 11,835,000 9,590,000
3 2004 Certificates of Participation (COPs) 12,270,000 11,825,000
4 1994 State Loan 5,000,000 1,659,037
Total Outstanding Debt 44,505,000$ 36,174,037$
Total Assessed Valuation - FY 2006
Percentage of Original Debt to Assessed Valuation 0.23% 0.14%
Debt Limit per District Debt Policy (% of Assessed Valuation) 15.00% 15.00%
1996 COPs (1)GOBs 2004 COPs State Loan Total
621,250$ 832,235$ 933,484$ 360,031$ 2,747,000$
613,750 834,385 928,534 359,811 2,736,480
704,167 830,823 928,159 359,583 2,822,731
694,167 831,035 927,334 359,347 2,811,883
684,167 830,258 925,605 358,981 2,799,010
674,167 828,166 927,487 6,010 2,435,829
762,083 824,645 922,993 - 2,509,721
749,583 824,452 921,706 - 2,495,741
737,083 822,951 923,575 - 2,483,609
822,500 824,542 923,544 - 2,570,585
807,500 819,750 921,819 - 2,549,069
792,500 818,500 918,985 - 2,529,985
875,417 820,542 913,944 - 2,609,902
857,917 816,042 912,129 - 2,586,088
840,417 814,833 912,979 - 2,568,229
920,833 816,667 911,281 - 2,648,781
900,833 811,708 907,844 - 2,620,385
978,750 - 901,899 - 1,880,649
956,250 - - - 956,250
1,031,667 - - - 1,031,667
1,104,583 - - - 1,104,583
17,129,583$ 14,001,533$ 16,563,300$ 1,803,763$ 49,498,179$
(1)Interest on the 1996 Certificates of Participation is variable and is projected using an interest rate of 2.5%
2026
2027
TOTAL
2022
2023
2024
2025
2018
2019
2020
2021
2014
2015
2016
2017
2010
2011
2012
2013
2007
2008
2009
PROJECTED PRINCIPAL AND INTEREST PAYMENTS BY DEBT
FY
September 1, 2026
August 31, 2022
September 1, 2023
SCHEDULE OF OUTSTANDING DEBT
Description
November 30, 2010
19,565,665,464$
All Debts
8,579,576,581$
GO Bonds
93
The District will provide water service to
approximately 47,670 potable customers by the
end of Fiscal Year 2007. Ninety-three percent of
the potable customers are residential and the
remaining 7% are comprised of: publicly owned,
commercial, agricultural, landscaping, and
construction. Although the extensive residential
developments have slowed down in recent years,
the District still expects moderate growth of 1.8%
for Fiscal Year 2007. Unit sales are anticipated to
increase 2.4% from the previous year's budget due
to the expanded customer base and change in
weather. The rainfall in Fiscal Year 2006 was six
inches which is four inches less than a normal
rainfall year. The Fiscal Year 2007 Budget
anticipates a normal rainfall year.
Water rates vary among the customer
classifications. 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 January 1,
2005, an updated block rate structure
for residential customers was
implemented to encourage
conservation and to bring equity
among all customer classes. All
non-residential customers are
charged a flat rate per unit. The rates
for the various classes are shown on
page 98.
Unit sales represent approximately
69% of the water sales budget.
Other revenue sources include:
system charges, energy charges,
penalties, and other pass-through
charges from the County Water
Authority (CWA) and the
Metropolitan Water District (MWD).
POTABLE REVENUES AND EXPENSES
POTABLE WATER SYSTEM
HISTORY
By the mid 1950s, the region suffered from
overdrafts of the limited underground water
supply which resulted in the intrusion of
brackish water into existing wells threatening
their use. Efforts by interested citizens to
form a water district culminated with the
formation of the Otay Municipal Water
District in 1956. In 1957, developers in the
Spring Valley area planned to build 2,000
homes, this demand created the La Presa
County Water District to provide both water
and sewer services. These two districts
operated under a joint agreement until they
merged in the fall of 1969. When the Otay
Water District was formed, this area was
mostly rural and agricultural, and in 1960
the District had 700 water connections and
delivered 500 acre-feet of water annually.
94
All customers are required to pay a fixed monthly system fee based on meter size. The fee
recovers 31% of the fixed costs associated with delivering water. Water rates, energy fees, and
penalties recover the remaining 69% of fixed costs and all variable costs. Effective January 1,
2007, the District will raise the system fee for the first time in 14 years to recover more of its
fixed costs with a fixed revenue source.
Energy charges are based on the quantity of
water used and the elevation to which the
water has been lifted to provide service.
Revenue from energy charges is used to
recover the power costs and the maintenance
of the pump stations. This charge is reviewed
periodically to ensure that sufficient revenue
is collected to offset total pumping costs.
Penalties are charged to District customers
when late payments are made on accounts.
These penalty revenues are budgeted based
on historical trends.
The District receives 100% of its potable water from the County Water Authority. The CWA
purchases water from the MWD. Any increase in costs by CWA or MWD impacts the District's
water purchases, and directly affects the District's fees, rates, and service charges.
Prior to Fiscal Year 2007, all water purchases from CWA were treated water. The District has
entered an agreement with the City of San Diego to purchase raw water from CWA and have the
City of San Diego treat this water. This takes the pressure off the CWA treated demands as a
region, and gives the District an additional source of water which increases the reliability of
deliveries. This water is taken through the Lower Otay Pump Station (LOPS) which is a
temporary pump station. The District has included in its capital budget the building of a
permanent pump station once final negotiations with the City of San Diego are completed.
For Fiscal Year 2007, Tier II water is no longer budgeted by the District because of an agreement
to receive Colorado River water through the Imperial Irrigation District (IID) agreement. This
program calls for the ramping up of water deliveries commencing in 2004 until the maximum
deliveries are received in 2012. Because of this new source of water, CWA no longer anticipates
Tier II charges from MWD. Previously, if CWA, as a whole, exceeded its allotted water supplies
from MWD, Tier II charges in the amount of $81 per acre-foot were charged. These costs were
recovered from individual agencies in proportion to the participating agency’s contribution to
total Tier II water deliveries.
In Fiscal Year 2007, the District is estimating the purchase of 41,450 acre-feet of potable water
to meet the demands of its customers. Provisions have been made for District usage, leakage,
evaporation, and supplement to the reclamation system in the amount of 2,600 acre-feet.
95
FY 2005 FY 2007 Budget Variance
11-Actual Budget Estimated Budget Variance %
REVENUES
4100 Water Sales 36,383,476$ 39,821,600$ 40,192,169$ 43,130,800$ 3,309,200$ 8.3%
4130 Meter Fees 418,045 416,800 249,288 253,500 (163,300) (39.2%)
4136 Capacity Fee Revenues - 1,222,200 1,356,611 1,000,200 (222,000) (18.2%)
AnnexAnnexation Fees - - - 1,216,900 1,216,900 100.0%
4400 Non-operating Revenues 1,154,617 1,163,400 1,975,992 1,668,100 504,700 43.4%
Tax Revenues 2,277,159 2,457,400 2,978,122 3,377,500 920,100 37.4%
4510 Interest - - - 892,800 892,800 100.0%
General Fund Draw Down 1,210,400 1,210,400 1,210,400 - (1,210,400) (100.0%)
TOTAL REVENUES 41,443,697 46,291,800 47,962,582 51,539,800 5,248,000 11.3%
-
EXPENDITURES
5511 Water Purchases (CWA) 17,696,882 19,178,000 20,212,012 16,653,700 (2,524,300) (13.2%)
5515 Water Purchases (CSD) - - 138,760 4,564,500 4,564,500 100.0%
5512 Tier II Purchases 390,362 - - - - (100.0%)
5523 CWA - Infrastructure Access Charge 696,565 772,700 844,855 1,003,900 231,200 29.9%
5521 CWA - Customer Service Charge 718,816 745,400 771,760 846,800 101,400 13.6%
5522 CWA - Emergency Storage Charge 900,159 958,500 1,047,601 1,230,600 272,100 28.4%
5531 MWD - Capacity Reservation Charge 472,522 502,300 508,756 514,800 12,500 2.5%
5532 MWD - Net RTS and Standby Charges 414,360 414,400 460,717 512,200 97,800 23.6%
Subtotal - Water Costs 21,289,666 22,571,300 23,984,461 25,326,500 2,755,200 12.2%
5411 Power 1,693,659 2,032,100 1,702,448 2,310,900 278,800 13.7%
5110 Labor and Benefits 10,388,648 11,519,200 13,192,558 12,774,300 1,255,100 10.9%
5200 Administrative Expenses 2,554,379 3,797,900 3,739,631 5,057,000 1,259,100 33.2%
5300 Material & Maintenance 1,946,866 2,704,300 2,421,295 2,795,600 91,300 3.4%
5716 Replacement Reserve 2,462,600 1,001,300 1,001,300 3,275,500 2,274,200 227.1%
DS Debt Service 2,332,093 2,343,000 2,460,470 - (2,343,000) (100.0%)
TOTAL EXPENDITURES 42,667,911 45,969,100 48,502,163 51,539,800 5,570,700 12.1%
EXCESS REVENUES (EXPENSES) (1,224,214)$ 322,700$ (539,580)$ -$ (322,700)$ (100.0%)
FY 2006
OPERATING BUDGET SUMMARY - POTABLE
POTABLE OPERATING EXPENDITURES
FY 2007
Administrative
Expenses
10%
Material &
Maintenance
6%
Power
5%
Water Costs
53%Labor and Benefits
26%
96
FY 2006
Estimated
FY 2007
Budget Variance
Water Sales:
Water Sales 27,975,777$ 29,866,000$ 1,890,223$
System Fees 8,056,340 8,529,300 472,960
Energy Fees 1,696,492 1,853,000 156,508
MWD & CWA Fixed Fees 1,775,186 2,178,000 402,814
Penalties 688,374 704,500 16,126
Total 40,192,169$ 43,130,800$ 2,938,631$
Water Sales : Unit Sales x Rate
System Charges : Fixed monthly fee based on meter size
Energy Charges : Energy pumping fee of $0.032 per unit of water for each 100 feet of lift
or fraction thereof above the base elevation of 450 feet
Penalties : Late charges, locks , etc.
CLASSIFICATION OF WATER SALES - POTABLE
WATER SALES SUMMARY
System Charges
20%
MWD & CWA
Fixed Charges
5%
Penalties
2%Energy Charges
4%
Water Sales
69%
97
WATER SALES SUMMARY BY SERVICE CLASS - POTABLE
Current Approved*
Accounts Units Amount Rate Rate
Residential 44,245 11,094,300 20,471,700$ 1.83$ 1.85$ **
Publicly-Owned 230 975,700 1,903,100 1.93 1.95
Commercial 1,204 997,700 1,866,300 1.85 1.87
Landscaping 1,162 2,509,700 4,692,200 1.85 1.87
Agricultural 33 66,600 124,500 1.85 1.87
Temporary and Others 797 432,300 808,200 1.85 1.87
Total Potable Water Sales 47,671 16,076,300 29,866,000$ 1.84 1.86
*Approved rate effective January 1, 2007.
**Based on average rate.
Fiscal Year 2007 Sales Budget
UNIT SALES BY SERVICE CLASS
Residential
69%
Commercial
6%
Others
3%
Publicly Owned
6%Landscaping
16%
98
UNIT SALES HISTORY BY CUSTOMER CLASS - POTABLE
Estimated Budget
FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007
Residential 8,733,367 8,983,504 8,761,351 8,678,154 10,346,292 11,094,300
Publicly-Owned 896,024 929,850 933,517 928,371 878,934 975,700
Commercial 735,265 740,622 1,960,710 895,338 901,576 997,700
Landscaping 2,476,146 2,136,847 2,264,841 2,103,862 2,144,366 2,509,700
Agricultural 79,989 81,513 78,946 59,747 52,053 66,600
Temporary 799,146 735,185 697,664 1,042,526 400,715 432,300
Others 3,304 6,364 14,148 3 52 -
Total 13,723,241 13,613,885 14,711,176 13,708,001 14,723,988 16,076,300
Actual
UNIT SALES AND METER TRENDS
6,000
8,000
10,000
12,000
14,000
16,000
18,000
FY02 Actual FY03 Actual FY04 Actual FY05 Actual FY06 Estimated FY07 Budget
Un
i
t
s
(
t
h
o
u
s
a
n
d
s
)
25,000
30,000
35,000
40,000
45,000
50,000
Me
t
e
r
s
Unit Sales Meters
99
SYSTEM FEES - POTABLE
Meter Current Approved* Existing Additional Total
Service Class Size Rates Rates Meters Meters Meters
Residential 0.75 10.25$ 11.30$ 5,433,600$ 46,500$ 5,480,100$
1.00 16.50 18.15 131,800 2,500 134,300
1.50 32.50 35.75 7,800 2,000 9,800
2.00 54.20 59.60 4,800 - 4,800
4.00 99.80 109.80 6,300 - 6,300
6.00 199.50 219.45 5,000 - 5,000
Non-Residential 0.75 20.00 22.00 117,200 7,000 124,200
1.00 30.80 33.90 300,100 10,100 310,200
1.50 43.30 47.65 478,600 12,100 490,700
2.00 54.20 59.60 722,400 7,200 729,600
3.00 87.20 95.90 72,500 2,400 74,900
4.00 99.80 109.80 103,100 - 103,100
6.00 199.50 219.45 40,200 - 40,200
10.00 380.80 418.90 33,600 - 33,600
-
Temporary 0.75 20.00 22.00 2,500 - 2,500
1.00 30.80 33.90 2,300 - 2,300
1.50 43.30 47.65 2,700 - 2,700
2.00 54.20 59.60 9,600 - 9,600
4.00 99.80 109.80 225,100 - 225,100
6.00 199.50 219.45 15,100 - 15,100
- -
Fire Services Various 21.20 23.30 154,100 - 154,100
Special System Fees 571,100
Budgeted Potable System Fees 7,868,400$ 89,800$ 8,529,300$
*Approved rates effective January 1, 2007.
Budgeted System Fees
-10,00020,00030,00040,00050,000
FY02
Actual
FY03
Actual
FY04
Actual
FY05
Actual
FY06
Estimated
FY07
Budget
METER COUNT
100
MWD & CWA FIXED FEES (PASS-THROUGH) - POTABLE
Meter Current Approved*
Size Rates Rates
MWD & CWA FIXED FEES (PASS-THROUGH):0.75 2.85$ 3.55$
Each water service customer shall pay a monthly MWD & CWA fixed charge, 1.00 4.55 5.65
to pass-through fixed charges from these agencies to pay the following:1.50 8.55 10.65
MWD Readiness to Serve Charge and Capacity Reservation Charge; SDCWA 2.00 14.80 18.45
Infrastructure Access Charge; Customer Service Charge and Emergency 3.00 27.35 34.05
Storage Charge.4.00 46.75 58.20
6.00 85.50 106.45
10.00 222.30 276.75
Service Class 0.75 1.00 1.50 2.00 3.00 4.00 6.00 10.00 Total
Residential 1,613,700$ 38,800$ 2,200$ 1,300$ -$ 3,100$ 2,300$ -$ 1,661,400$
Master Meter 1,200 11,900 28,200 43,900 11,100 28,300 8,100 6,000 138,700
Commercial 11,300 17,600 27,500 57,100 7,400 10,100 1,200 - 132,200
Landscaping 3,900 13,900 41,100 92,800 1,800 2,500 2,300 - 158,300
Agriculture 300 200 600 2,400 400 2,500 - - 6,400
Publicly-Owned 1,000 3,700 3,600 15,000 3,700 8,200 6,900 15,000 57,100
Existing Fees 1,631,400 86,100 103,200 212,500 24,400 54,700 20,800 21,000 2,154,100
FY 07 Growth 15,100 2,500 3,300 2,200 800 - - - 23,900
Total 1,646,500$ 88,600$ 106,500$ 214,700$ 25,200$ 54,700$ 20,800$ 21,000$ 2,178,000$
*Approved rates effective January 1, 2007.
MWD & CWA Fixed Fees by Meter Size
$-
$500
$1,000
$1,500
$2,000
$2,500
Th
o
u
s
a
n
d
s
FY02
Actual
FY03
Actual
FY04
Actual
FY05
Actual
FY06
Budget
FY07
Budget
MWD AND CWA FIXED CHARGES (PASS-THROUGH)
101
METER FEES - POTABLE
Meter Installation Meter AMR
Size Fee Fee Fee
Meter Fees:0.75 60.00$ 59.00$ 147.00$
Meter Fees are charges collected for new water 1.00 60.00 117.00 147.00
service connections. Fees vary depending upon 1.50 103.00 250.00 147.00
meter size and type of service. The costs associated 2.00 240.00 475.00 147.00
with meter installations are included in the Operating 3.00 300.00 653.00 147.00
Expenses section of the budget. These charges are 4.00 300.00 1,370.00 147.00
funded by developers.6.00 300.00 2,500.00 147.00
10.00 300.00 3,737.00 147.00
Fiscal Year 2007 Growth by Meter Size
Service Class 0.75 1.00 1.50 2.00 3.00 Total
Residential 649 22 9 - - 680
Non-Residential 50 47 40 19 4 160
Total Number of Meters 699 69 49 19 4 840
Total Meter Fees 185,900$ 22,400$ 24,500$ 16,400$ 4,300$ 253,500$
-
10,000
20,000
30,000
40,000
50,000
FY02 Actual FY03 Actual FY04 Actual FY05 Actual FY06 Budget FY07 Budget
METER COUNT
102
REVENUE HISTORY - POTABLE
Estimated Budget
FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007
Water Sales 23,817,567$ 22,732,862$ 25,204,669$ 24,760,101$ 27,975,777$ 29,866,000$
System Fees 6,885,015 7,191,403 7,576,328 7,933,913 8,056,340 8,529,300
Energy Fees 1,423,634 1,433,269 1,618,000 1,573,999 1,696,492 1,853,000
MWD & CWA Fixed Fees 569,934 591,667 1,088,156 1,620,548 1,775,186 2,178,000
Penalties 277,363 312,774 374,283 494,915 688,374 704,500
Total 32,973,513$ 32,261,975$ 35,861,436$ 36,383,476$ 40,192,169$ 43,130,800$
Note:
Fiscal Year 2005 Water Sales and Energy Fees drop due to 22.51 inches of rainfall.
Actual
System FeesWater Sales PenaltiesEnergy Fees
MWD & CWA Fixed
Fees
$-
$10,000
$20,000
$30,000
$40,000
Thousands
FY02 Actual FY03 Actual FY04 Actual FY05 Actual FY06 Actual FY07 Budget
REVENUE HISTORY
103
WATER PURCHASES AND RELATED COSTS - POTABLE
FY07 Budget FY07 Budget
Acre Feet Rate (1)Purchase Costs % to Total
Potable Water Purchases
Budgeted Sales (CWA) 27,942.1 $545/$572 15,555,500$ 73.3%
District & Unbilled Usage 500.0 $545/$572 278,400 1.3%
Water Loss 1,462.1 $545/$572 819,800 3.9%
Budgeted Sales (CSD) 8,964.0 $507/$512 4,564,500 21.5%
TOTAL VARIABLE CHARGES 38,868.2 21,218,200$ 100.0%
MWD & CWA FIXED CHARGES:FY 06 Actual FY07 Budget
Infrastructure Access Charge (IAC) 844,855$ 1,003,900$
Customer Service Charge (CSC) 771,760 846,800
Emergency Storage Charge (ESC) 1,047,601 1,230,600
Capacity Reservation Charge (CRC) 508,756 514,800
Readiness-to-Serve Charge (RTS) 460,716 512,200
TOTAL FIXED CHARGES 3,633,688$ 4,108,300$
(1)The first rate applies to purchases from July to December of the budget fiscal year; the second from
January to June.
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
Ac
r
e
F
e
e
t
FY 02-03
Actual
FY 03-04
Actual
FY 04-05
Actual
FY 05-06
Estimated
FY 06-07
Budget
WATER PURCHASES
104
POWER COSTS - POTABLE
Admin and
Operations
Buildings
Potable
Transmission
Total Potable
Power Costs
FY02 Actual 118,783$ 1,279,992$ 1,398,775$
FY03 Actual 133,691 1,486,080 1,619,771
FY04 Actual 132,391 1,515,642 1,648,033
FY05 Actual 142,630 1,551,029 1,693,659
FY06 Estimated 136,196 1,566,252 1,702,448
FY07 Budget 146,800 2,164,100 2,310,900
$0
$500
$1,000
$1,500
$2,000
$2,500
Thousands
FY02
Actual
FY03
Actual
FY04
Actual
FY05
Actual
FY06
Estimated
FY07
Budget
HISTORICAL POWER COSTS AND PROJECTIONS
Admin and Operations Buildings
Potable Transmission
105
FY 2005 FY 2007 Budget
Actual Budget Estimated Budget Variance %
Director's Fees 26,499$ 48,000$ 19,800$ 48,000$ - 0.0%
Travel and Meetings 105,064 217,600 175,433 236,200 18,600 8.5%
Conservation and Outreach 130,510 211,900 148,439 229,500 17,600 8.3%
General Office Expense 304,985 352,400 375,730 364,700 12,300 3.5%
Equipment 485,753 930,500 711,679 973,600 43,100 4.6%
Fees 64,670 156,200 179,180 371,700 215,500 138.0%
Services 1,289,545 2,086,000 1,858,733 2,639,300 553,300 26.5%
Training 72,421 152,800 113,700 153,700 900 0.6%
Utilities 4,616 11,600 11,530 11,700 100 0.9%
Miscellaneous 10,088 - - - - (100.0%)
Total 2,494,151 4,167,000 3,594,224 5,028,400 861,400 20.7%
Less: Overhead Allocation (1,109,399) (1,231,600) (796,191) (978,600) 253,000 (20.5%)
Subtotal 1,384,752 2,935,400 2,798,033 4,049,800 1,114,400 38.0%
General Expenses 1,169,627 862,500 941,598 1,007,200 144,700 16.8%
Net Administrative Expenses 2,554,379$ 2,935,400$ 2,798,033$ 4,049,800$ 1,114,400$ 38.0%
FY2006
ADMINISTRATIVE EXPENSES - POTABLE
ADMINISTRATIVE EXPENSES - POTABLE
Services
52.5%Equipment
19.4%Fees
7.4%
Director's Fees
0.9%
Conservation and
Outreach
4.6%
General Office
Expense
7.2%
Utilities
0.2%
Training
3.1%
Travel and Meetings
4.7%
106
FY 2005 FY 2007 Budget
Actual Budget Estimated Budget Variance %
Materials and Maintenance
Fuel and Oil 235,063$ 205,000$ 280,051$ 766,000$ 561,000 273.7%
Meters and Materials 795,116 652,200 499,051 265,100 (387,100) (59.4%)
Fleet Parts and Equipment 132,892 155,000 151,407 155,000 - 0.0%
Landscaping Materials (1)93,544 15,000 6,300 - (15,000) (100.0%)
Infrastructure Equipment and Supplies 216,434 593,500 633,035 685,200 91,700 15.5%
Chemicals 145,706 210,000 174,798 195,000 (15,000) (7.1%)
Safety Equipment 15,684 46,600 28,026 14,000 (32,600) (70.0%)
Laboratory Equipment and Supplies 28,185 50,000 26,511 30,000 (20,000) (40.0%)
Other Materials and Supplies 83,969 65,000 206,769 150,500 85,500 131.5%
Building and Grounds Materials 63,137 90,000 87,827 154,400 64,400 71.6%
Contracted Services 137,136 622,000 327,520 380,400 (241,600) (38.8%)
Materials and Maintenance 1,946,866 2,704,300 2,421,295 2,795,600 91,300 3.4%
Total Materials and Maintenance 1,946,866$ 2,704,300$ 2,421,295$ 2,795,600$ 91,300$ 3.4%
(1)Landscaping outsourced in FY 2006
MATERIALS AND MAINTENANCE EXPENSES - POTABLE
FY 2006
MATERIALS AND MAINTENANCE EXPENSES - POTABLE
Contracted Services
13.6% Building and
Grounds Materials
5.5%
Laboratory
Equipment and
Supplies
1.1%
Chemicals
7.0%
Meters and
Materials
9.5%
Fleet Parts and
Equipment
5.5%
Other Materials and
Supplies
5.4%
Safety Equipment
0.5%
Fuel and Oil
27.4%
Infrastructure
Equipment and
Supplies
24.5%
107
POTABLE WATER SERVICE AREA
108
In 1980, the District started operation of the Ralph W. Chapman Water Recycling Facility
(RWCWRF). The RWCWRF project is capable of recycling wastewater at the rate of 1.3
million gallons per day (MGD) to augment potable water supplies for irrigation purposes. The
RWCWRF treatment process consists of primary, secondary, and tertiary treatment. The
RWCWRF’s conversion time from 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 drum 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 a
huge mass of 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
RECYCLED REVENUES AND EXPENSES
109
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.
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. Solids, screenings, and sludge are
discharged to the City of San Diego Metropolitan
Wastewater (Metro) system.
The District operates the largest recycled water
distribution system in San Diego County and will
supply approximately 4,480 acre-feet of recycled
water to 566 landscaping and construction
customers by the end of Fiscal Year 2007. The
recycled water customer base consists primarily
of irrigation at golf courses, schools, parks and
open space in the EastLake, Otay Ranch, and
Rancho Del Rey and other areas of eastern Chula
Vista. Due to the plant's limited treatment
capacity, 2,587 acre-feet of potable water will be
used to supplement the reclamation system to
meet customers' demands.
This District entered a landmark 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. To bring this plan to fruition,
the District is in the process of completing
construction of 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 are expected to
be completed in Spring 2007, which will greatly
reduce the potable supplement. The benefits of
this to the region as a whole are great as less
RECYCLED WATER HISTORY
The Otay Water District has a history in
water recycling that goes back nearly 40
years.
In the 1960s, Director Ralph W. Chapman
recognized the value of using this resource and
became a vocal advocate for water recycling.
Today, not only is it fitting that OWD’s water
recycling facility bear his name, the Ralph W.
Chapman Water Recycling Facility, but the
District has continued working to achieve his
dream of widespread recycled water use.
In the late 1960s, OWD began water
recycling with a small packaged treatment
plant affectionately named “Miss Stinky.” At
this time, however, there were few customers
for recycled water. It took until the early-
1980s for Chapman’s vision to take shape. As
the EastLake I community began construction
in 1986, millions of gallons of water were
needed for soil compaction and dust
suppression. An inexpensive source of this
water was the Chapman facility.
By the early 1990s, Chula Vista and OWD
began requiring dual piping in new
developments such as EastLake Greens. One
set of pipes would supply drinking water for
human consumption, while the other would
deliver recycled water to irrigate common
areas.
OWD has the largest recycled water network
in San Diego County today, and it continues to
expand. When the new supply link to the
South Bay Water Reclamation Plant comes
online in early 2007, recycled water used for
irrigation will equal approximately 15 to 20
percent of OWD’s total water usage.
Ralph Chapman knew that one day recycled
water would be a low-cost, long-term supply
of new water that would help the region offset
its demand for imported water. Today, his
dream is being realized. As OWD celebrates
its 50th Anniversary, it is fitting to
acknowledge the contribution of one of
OWD’s founding fathers and honor his place
in history.
110
demand on the potable system will
be made, which reduces future
capacity and storage requirements.
The estimated $42 million
investment in capital outlay is
anticipated to result in a significant
reduction of water purchase costs
and an increase in system
reliability. The District expects that
15 to 20 percent of its total water
demand will be met using recycled
water.
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 to enter into a new agreement
which will allow the District to maximize its ability to earn incentives and to simplify the grant
requirements. Currently, the District receives $147 from CWA and $185 from MWD for every
acre-foot (AF) of recycled water sold.
111
FY 2005 FY 2007 Budget Variance
31-Actual Budget Estimated Budget Variance %
REVENUES
##Recycled Water Sales 2,392,952$ 2,332,700$ 2,694,517$ 3,216,000$ 883,300 37.9%
##System Fees 256,659 274,800 298,153 340,000 65,200 23.7%
##Energy Fees 52,119 180,000 198,599 215,400 35,400 19.7%
MWD/CWA Rebates 262,850 372,500 372,172 633,000 260,500 69.9%
##Penalties - - - 81,000 81,000 100.0%
##Total Reclaimed Water Sales 2,964,580 3,160,000 3,563,441 4,485,400 1,325,400 41.9%
##Meter Fees 42,122 - 20,879 25,000 25,000 0.0%
Tax Revenues 2,435 - - - - 0.0%
##Non-operating Revenues 6,500 - 2,550 3,000 3,000 0.0%
##Interest - - - 56,100 56,100 0.0%
TOTAL REVENUES 3,015,637 3,160,000 3,586,870 4,569,500 1,409,500 44.6%
EXPENDITURES
##Water Purchases (CWA) 1,135,900 1,535,400 1,464,082 1,421,300 (114,100) (7.4%)
##Water Purchases (CSD) - - - 315,400 315,400 0.0%
Total Water Purchases 1,135,900 1,535,400 1,464,082 1,736,700 201,300 13.1%
##Power 142,690 132,800 185,103 202,600 69,800 52.6%
##Labor and Benefits 556,456 1,101,600 591,299 822,700 (278,900) (25.3%)
##Administrative Expenses 146,575 367,400 106,446 314,200 (53,200) (14.5%)
##Material & Maintenance 108,718 125,500 126,695 228,800 103,300 82.3%
##Replacement Reserve - - - 1,264,500 1,264,500 0.0%
TOTAL EXPENDITURES 2,090,340 3,262,700 2,473,624 4,569,500 1,306,800 40.1%
EXCESS REVENUES (EXPENSES) 925,297$ (102,700)$ 1,113,246$ -$ 102,700$ 0.0%
FY 2006
OPERATING BUDGET SUMMARY - RECYCLED
RECYCLED OPERATING EXPENDITURES
FY 2007
Power
6%
Labor and Benefits
25%
Administrative
Expenses
10%
Material &
Maintenance
7%
Water Purchases
56%
112
FY 2006
Estimated
FY 2007
Budget Variance
Recycled Water Sales:
Water Sales 2,694,517$ 3,216,000$ 521,483$
System Fees 298,153 340,000 41,847
Energy Fees 198,599 215,400 16,801
MWD & CWA Rebates 372,172 633,000 260,828
Penalties - 81,000 81,000
Total 3,563,441$ 4,485,400$ 840,959$
Water Sales : Unit Sales x Rate
System Charges : Fixed monthly fee based on meter size
Energy Charges: Energy pumping fee of $0.032 per unit of water for each 100 feet of lift
or fraction thereof above the base elevation of 450 feet
Penalties: Late charges, locks , etc.
CLASSIFICATION OF WATER SALES - RECYCLED
WATER SALES SUMMARY
Water Sales
71%
Energy Charges
5%
Penalties
2%
MWD & CWA
Fixed Charges
14%
System Charges
8%
113
WATER SALES SUMMARY BY SERVICE CLASS - RECYCLED
Current Approved*
Accounts Units Amount Rate Rate
Water Sales:
Recycled 566 1,957,600 3,216,000$ 1.61$ 1.64$ **
*Approved rate effective January 1, 2007.
**Based on average rate.
Estimated Budget
FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007
Recycled 999,958 1,106,302 1,492,131 1,445,634 1,755,644 1,957,600
Fiscal Year 2007 Sales Budget
UNIT SALES HISTORY - RECYCLED
ACTUAL
UNIT SALES & METER TRENDS
-
500
1,000
1,500
2,000
FY02 Actual FY03 Actual FY04 Actual FY05 Actual FY06 Estimated FY07 Budget
Un
i
t
s
(
t
h
o
u
s
a
n
d
s
)
-
200
400
600
Me
t
e
r
s
Unit Sales Meters
114
SYSTEM FEES - RECYCLED
Meter Current Approved* Existing Additional Total
Service Class Size Rates Rates Meters Meters Meters
Recycled 0.75 20.00$ 22.00$ 1,000$ -$ 1,000$
1.00 30.80 33.90 25,200 - 25,200
1.50 43.30 47.65 157,200 - 157,200
2.00 54.20 59.60 114,000 19,800 133,800
3.00 87.20 95.90 5,500 - 5,500
4.00 99.80 109.80 5,000 - 5,000
6.00 199.50 219.45 7,500 - 7,500
10.00 380.80 418.90 4,800 - 4,800
Total 320,200$ 19,800$ 340,000$
Budgeted Recycled System Fees 340,000$
*Approved rates effective January 1, 2007.
Budgeted System Fees
-
200
400
600
800
FY02 Actual FY03 Actual FY04 Actual FY05 Actual FY06 Estimated FY07 Budget
METER COUNT
115
METER FEES - RECYCLED
Meter Installation Meter AMR
Size Fee Fee Fee
Meter Fees:0.75 60.00$ 59.00$ 147.00$
Meter Fees are charges collected for new water 1.00 60.00 117.00 147.00
service connections. Fees vary depending upon 1.50 103.00 250.00 147.00
meter size and type of service. The costs associated 2.00 240.00 475.00 147.00
with meter installations are included in the Operating 3.00 300.00 653.00 147.00
Expenses section of the budget. These charges are 4.00 300.00 1,370.00 147.00
funded by developers.6.00 300.00 2,500.00 147.00
10.00 300.00 3,737.00 147.00
Service Class 0.75 1.00 1.50 2.00 3.00 Total
Residential - - 29 - 29
Total Number of Meters - - - 29 - 29
Total Meter Fees -$ -$ -$ 25,000$ -$ 25,000$
Fiscal Year 2007 Growth by Meter Size
-
200
400
600
FY02 Actual FY03 Actual FY04 Actual FY05 Actual FY06 Estimated FY07 Budget
METER COUNT
116
REVENUE HISTORY - RECYCLED
Estimated Budget
FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007
Water Sales 1,552,486$ 1,749,369$ 2,285,666$ 2,392,952$ 2,694,517$ 3,216,000$
System Fees 75,729 153,859 210,208 256,659 298,153 340,000
Energy Fees - - - 52,119 198,599 215,400
MWD & CWA Rebates 312,640 298,445 447,020 262,850 372,172 633,000
Penalties - - - - - 81,000
Total 1,940,855$ 2,201,673$ 2,942,894$ 2,964,580$ 3,563,441$ 4,485,400$
Note:
Fiscal Year 2005 Water Sales and Rebates drop due to 22.51 inches of rainfall.
ACTUAL
System FeesWater Sales PenaltiesEnergy FeesMWD & CWA Rebates
$-
$1,000
$2,000
$3,000
$4,000
Thousands
FY02 Actual FY03 Actual FY04 Actual FY05 Actual FY06 Estimated FY07 Budget
REVENUE HISTORY
117
WATER PURCHASES - RECYCLED
FY07 Budget FY07 Budget
Acre Feet Rate (1)Purchase Costs % to Total
Potable Water Purchases
Potable Supplement 2,587.0 $545/$572 1,421,300$ 81.8%
SBWRP Recycled Water Purchases (CSD)
Recycled Water Purchases 842.0 $375 315,400 18.2%
TOTAL VARIABLE CHARGES 3,429.0 1,736,700$ 100.0%
(1)The first rate applies to purchases from July to December of the budget fiscal year; the second from
January to June.
-
500.0
1,000.0
1,500.0
2,000.0
2,500.0
3,000.0
3,500.0
Ac
r
e
F
e
e
t
FY 02-03
Actual
FY 03-04
Actual
FY 04-05
Actual
FY 05-06
Estimated
FY 06-07
Budget
WATER PURCHASES
118
POWER COSTS - RECYCLED
Treatment and Recycled
Transmission
FY02 Actual 110,800$
FY03 Actual 134,900
FY04 Actual 130,000
FY05 Actual 142,700
FY06 Estimated 185,103
FY07 Budget 202,600
$-
$50
$100
$150
$200
$250
Thousands
FY02
Actual
FY03
Actual
FY04
Actual
FY05
Actual
FY06
Estimated
FY07
Budget
HISTORICAL POWER COSTS AND PROJECTIONS
119
FY 2005 FY 2007 Budget
Actual Budget Estimated Budget Variance %
General Office Expense 22$ -$ -$ -$ -$ (100.0%)
Equipment 783 8,000 168 1,000 (7,000) (87.5%)
Fees 2,420 500 - - (500) (100.0%)
Services (3,497) 25,000 3,522 166,000 141,000 564.0%
Total (272) 33,500 3,690 167,000 133,500 398.5%
Overhead Allocation 146,847 333,900 102,756 147,200 (186,700) (55.9%)
Administrative Expenses 146,575$ 367,400$ 106,446$ 314,200$ (53,200)$ (14.5%)
FY2006
ADMINISTRATIVE EXPENSES - RECYCLED
ADMINISTRATIVE EXPENSES - RECYCLED
Equipment
0.3%
Services
52.8%
Overhead
Allocation
46.9%
120
FY 2005 FY 2007 Budget
Actual Budget Estimated Budget Variance %
Materials and Maintenance
Fuel and Oil 18,122$ 27,000$ 22,213$ 35,000$ 8,000 29.6%
Meters and Materials 2,557 - 525 10,000 10,000 100.0%
Fleet Parts and Equipment - - 96 - - (100.0%)
Infrastructure Equipment and Supplies 25,826 36,500 38,440 119,000 82,500 226.0%
Chemicals 34,765 60,000 56,746 56,000 (4,000) (6.7%)
Safety Equipment - - - 1,800 1,800 100.0%
Laboratory Equipment and Supplies 18,240 2,000 76 2,000 - 0.0%
Other Materials and Supplies 9,208 - 8,440 - - 0.0%
Building and Grounds Materials - - 159 - - 0.0%
Contracted Services - - - 5,000 5,000 100.0%
Materials and Maintenance 108,718 125,500 126,695 228,800 103,300 82.3%
Total Materials and Maintenance 108,718$ 125,500$ 126,695$ 228,800$ 103,300$ 82.3%
MATERIALS AND MAINTENANCE EXPENSES - RECYCLED
FY 2006
MATERIALS AND MAINTENANCE EXPENSES - RECYCLED
Chemicals
24.5%
Fuel and Oil
15.3%
Laboratory
Equipment and
Supplies
0.9%
Meters and
Materials
4.3%
Infrastructure
Equipment and
Supplies
52.0%
Safety Equipment
0.8%
Contracted
Services
2.2%
121
RECYCLED WATER SERVICE AREA
122
The District provides sewer service to approximately 15,200 customers through 4,570 accounts
(or 6,600 Assigned Service Units) 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 within the Upper Sweetwater River Basin, also known as the
Jamacha Basin. Residential customers comprise 98% of the customer base. Modest growth of
1.6% is anticipated in Fiscal Year 2007.
Wastewater collection within the Jamacha
Basin is provided by two agencies: the Otay
Water District and the Spring Valley
Sanitation District. Customers in the basin,
not served by either agency, dispose of their
sewage through septic tanks. After the sewer
has been collected, it is sent to the District’s
Ralph W. Chapman Recycling Facility
(RWCRF) treatment plant where the District
produces recycled water, see page 109
outlining the sewer process. The byproduct of
the treatment process is called sludge and it is
discharged through the City of San Diego
Metropolitan Wastewater (Metro) and the
Spring Valley Sanitation District systems.
The Otay Water District is a member of Metro
Wastewater System and a significant amount
of the sewer operation costs is for estimated
sewer service charges from Metro totaling
$1,130,000 for Fiscal Year 2007.
Additionally, the District will pay $231,500
for its share of the operation and maintenance
cost of the Rancho San Diego Outfall and the
Spring Valley Outfall to dispose of sewage to
Metro for Fiscal Year 2007.
The charge for sewer service is mandated by
the State Revenue Program Guidelines which
requires the use of a "Service Unit
Assignment Formula" that converts higher
strength uses into a service unit value
comparable to the use impact of a single-
family residential user or equivalent dwelling
SEWER REVENUES AND EXPENSES
SEWER HISTORY
As the 1950s gave way to the 1960s, large parcels of
undeveloped land and avocado groves in the
unincorporated areas east of Spring Valley quickly gave
way to housing tracts and commercial development. At
the time, homes were built using septic systems. As more
homes were built, however, the land became increasingly
unable to absorb the increased sewage flow and septic
systems began to fail. As the situation became critical, the
District stepped in to address this community concern with
the development a public sewer system.
The District constructed a small collection and treatment
system, with a treatment plant capable of treating 60,000
gallons per day.
In December of 1980, a new larger treatment plant was
construction called Jamacha Basin Waste Water
Reclamation Facility. This facility was a major step
forward from the original treatment plant. The facility was
later renamed the Ralph W. Chapman Water Recycling
Facility in honor of the former board member.
Today, the District provides sewer service to
approximately 4,600 customer accounts. The sewer
service area is located in the northwesterly portion of the
District. It covers approximately 8,797 acres, which is
about 11 percent of the District’s total service area. This
sewage collection system serves Rancho San Diego,
Singing Hills and portions of Mount Helix within the
Upper Sweetwater River Basin, also known as the Jamacha
Basin.
The Otay Water District has entered into an agreement
with the City of Chula Vista to bill city residents residing
within the District’s service area for both sewer and water
through the District’s billing system.
123
unit. The rate of discharge and strength of sewage for non-residential customers tends to be
higher than a single-family residential user. Due to their higher discharge and strength, non-
residential customers are assigned more units: 12% of the total service units, while only
comprising 2% of the customer base. The formula for the sewer rates is shown on page 131.
In addition to the monthly sewer fee, sewer customers are annually assessed $54 per assigned
service unit on their property tax statements. This revenue of $354,900 is necessary for the
payment of principal and interest on the $5 million State loan to modify the RWCWRF. The
outstanding balance on the loan is $1,659,037 with an interest rate of 3.5%. The debt service
payment for Fiscal Year 2007 is $360,100.
124
FY 2005 FY 2007 Budget Variance
11-Actual Budget Estimated Budget Variance %
REVENUES
4110 Recycled Water Sales -$ 399,900$ -$ -$ (399,900)$ (100.0%)
4211 Sewer Charges 1,995,548 2,296,400 2,296,856 2,568,100 271,700 11.8%
4400 Non-operating Revenues - - - 3,000 3,000 100.0%
Tax Revenues 603,522 357,200 410,612 49,900 (307,300) (86.0%)
4510 Interest - - - 56,700 56,700 100.0%
General Fund Draw Down - - - 283,600 283,600 100.0%
TOTAL REVENUES 2,599,070 3,053,500 2,707,468 2,961,300 (92,200) (3.0%)
EXPENDITURES
5411 Power 174,399 162,200 226,237 164,300 2,100 1.3%
5110 Labor and Benefits 292,391 836,500 647,438 1,009,300 172,800 20.7%
5200 Administrative Expenses 85,562 279,000 125,809 188,400 (90,600) (32.5%)
5300 Material & Maintenance 1,104,851 1,409,500 1,337,986 1,599,300 189,800 13.5%
DS Debt Service 360,450 366,300 360,244 - (366,300) (100.0%)
TOTAL EXPENDITURES 2,017,653 3,053,500 2,697,714 2,961,300 (92,200) (3.0%)
EXCESS REVENUES 581,417$ -$ 9,754$ -$ -$ (100.0%)
FY 2006
OPERATING BUDGET SUMMARY - SEWER
SEWER OPERATING EXPENDITURES
FY 2007
Power
6%
Labor and Benefits
34%
Administrative
Expenses
6%
Material &
Maintenance
54%
125
CUSTOMERS AND ASSIGNED SERVICE UNITS - SEWER
FY 2007
Total Assigned
User Category Accounts Service Units
Residential:
Single-Family 4,449 4,449.00
Multi-Family 50 1,360.00
Institutional:
Schools 6 270.63
Churches 4 97.52
Commercial:
Low Strength 34 192.39
Medium Strength 18 137.90
High Strength 6 64.87
Total 4,567 6,572.31
ASSIGNED SERVICE UNITS
Residential
88%
Others
12%
SEWER CUSTOMERS
Others
1%
Residential
99%
126
REVENUE HISTORY - SEWER
Estimated Budget
FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007
Sewer Charges 1,588,901$ 1,640,943$ 1,767,118$ 1,995,548$ 2,296,856$ 2,509,900$
Penalties (1)- - - - - 58,200
Total 1,588,901$ 1,640,943$ 1,767,118$ 1,995,548$ 2,296,856$ 2,568,100$
(1)Prior to Fiscal Year 2007, penalties were Potable revenues only.
Actual
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
Th
o
u
s
a
n
d
s
s
FY02 Actual FY03 Actual FY04 Actual FY05 Actual FY06 Estimated FY07 Budget
SEWER REVENUE HISTORY
Sewer Charges Penalties
127
POWER COSTS - SEWER
Sewer Lift Station
FY02 Actual 135,416$
FY03 Actual 164,846
FY04 Actual 158,836
FY05 Actual 174,399
FY06 Estimated 226,237
FY07 Budget 164,300
$0
$50
$100
$150
$200
Thousands
FY02
Actual
FY03
Actual
FY04
Actual
FY05
Actual
FY06
Estimated
FY07
Budget
HISTORICAL POWER COSTS AND PROJECTIONS
128
FY 2005 FY 2007 Budget
Actual Budget Estimated Budget Variance %
General Office Expense 54$ -$ 141$ -$ - (100.0%)
Equipment - 37,000 8,898 1,000 (36,000) (97.3%)
Fees 308 500 232 500 - 0.0%
Services 503 25,000 3,206 10,000 (15,000) (60.0%)
Total 865 62,500 12,477 11,500 (51,000) (81.6%)
Overhead Allocation 84,697 216,500 113,332 176,900 (39,600) (18.3%)
Administrative Expenses 85,562$ 279,000$ 125,809$ 188,400$ (90,600)$ (32.5%)
FY2006
ADMINISTRATIVE EXPENSES - SEWER
ADMINISTRATIVE EXPENSES - SEWER
Overhead
Allocation
93.9%
Fees
0.3%
Services
5.3%
Equipment
0.5%
129
FY 2005 FY 2007 Budget
Actual Budget Estimated Budget Variance %
Materials and Maintenance
Fuel and Oil 541$ -$ -$ -$ - (100.0%)
Meters and Materials - - 5 - - (100.0%)
Fleet Parts and Equipment 50 - 288 - - (100.0%)
Infrastructure Equipment and Supplies 12,544 143,500 150,904 122,000 (21,500) (15.0%)
Chemicals 2,566 5,500 4,699 3,000 (2,500) (45.5%)
Safety Equipment 4,368 4,500 1,687 2,800 (1,700) (37.8%)
Laboratory Equipment and Supplies 1,878 30,000 34,263 10,000 (20,000) (66.7%)
Other Materials and Supplies 576 - 167 - - (100.0%)
Contracted Services - 50,000 5,006 100,000 50,000 100.0%
Materials and Maintenance 22,523 233,500 197,019 237,800 4,300 1.8%
Sewer Charges
Metro O&M Costs 870,504 955,000 916,774 1,130,000 175,000 18.3%
Spring Valley Sewer Charge 211,824 221,000 224,193 231,500 10,500 4.8%
Total Sewer Charges 1,082,328 1,176,000 1,140,967 1,361,500 185,500 15.8%
Total Materials and Maintenance 1,104,851$ 1,409,500$ 1,337,986$ 1,599,300$ 189,800$ 13.5%
MATERIALS AND MAINTENANCE EXPENSES - SEWER
FY 2006
MATERIALS AND MAINTENANCE EXPENSES - SEWER
Chemicals
0.2%Safety Equipment
0.2%
Laboratory
Equipment and
Supplies
0.6%
Contracted
Services
6.2%
Spring Valley
Sewer Charge
14.5%
Metro O&M Costs
70.7%
Infrastructure
Equipment and
Supplies
7.6%
130
Each year the District is required to revise its formula for determining sewer rates in accordance
with the State Revenue Program Guidelines. The formula takes into consideration the cost
associated with daily flow, chemical oxygen demand (COD) and the removal of suspended solids
(SS). The COD and SS determine the strength factor for the groups of high, medium and low,
and the State Water Resources Control Board (SWRCB) determines these factors. The factors
beginning January 1, 2004 are shown below:
1.000 Single Family Residential
1.000 Multi-Family Residential
1.000 Schools
1.000 Churches
1.000 Low Strength Commercial
1.238 Medium Strength Commercial
2.203 High Strength Commercial
The following formula is based on an estimated daily flow of 250 gallons per day plus 280
milligrams per liter of Biological Oxygen Demand (BOD) and 234 milligrams per liter of SS for
a residential equivalent dwelling unit or an assigned service unit (ASU). The new method of
calculating the sewer rate is to multiply the flow by the strength factor to determine the Assigned
Service Unit (ASU) as follows:
Daily Flow x Strength Factor = Assigned Service Unit
(gpd x .85)/250gpd x
as shown above = ASU
The ASU is then multiplied by the district-wide sewer rate to determine the monthly sewer
charge. As approved by the Board of Directors, the sewer rates per ASU effective on January 1st
of Calendar Years 2006 and 2007 are $30.90 and $32.70, respectively.
The minimum charge for commercial shall be no lower than one ASU at low strength. Churches
are considered the same as low-strength commercial.
For public schools, flow is based on average daily attendance for the prior school year, including
summer school, as reported by schools to meet state requirements. For elementary schools, 50
students equal one ASU; for junior high schools, 40 students equal one ASU; for high schools,
24 students equal one ASU. The formula for schools is the same as the single-family residence.
FORMULA FOR SEWER RATES
131
SEWER SERVICE AREA
132
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.
General Revenues
Capacity fees have a restricted purpose when collected to cover costs including, but not limited
to, planning, design, construction, and financing associated with facilities for the District’s
expansion needs. The District uses a portion of capacity fee revenues to provide general
planning and developer support. These fees reimburse the General Fund for cost of providing
these services.
Annexation fees are collected when developers buy into the District’s potable and recycled water
facilities. The fee insures that future users fund a portion of the facilities that were sized and
built for their future use by prior customers. Annexation fees are unrestricted and therefore
included in the General Fund revenues.
The 1% Property Tax is a result of Proposition 13 which occurred in 1978. This limited 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.
For Fiscal Years 2005 and 2006, the State of California has imposed an Educational Revenue
Augmentation Fund Shift of property tax revenue away from special districts such as the Otay
Water District. This shift equated to a $1,210,400 loss in 1% tax revenue. Beginning Fiscal
Year 2007, the District will again receive its full amount of this tax revenue.
The District levies availability charges each
year in developed areas to be used for
upgrades and betterment and in undeveloped
areas to provide a 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 benefit of the improvement
district in which it is assessed.
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 any
miscellaneous revenues.
GENERAL REVENUES AND EXPENSES
133
Revenues are received from the lease of District property, mainly for the purpose of cell-sites.
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 this purpose of the fee is to recover
the cost to set up the lease.
In addition to the cell-site leases, the District leases land to the Salt Creek Golf Club. The lease
terms include a minimum annual rent guarantee plus a percentage of sales over 3%. This lease is
a 40 year term with two additional 5 year options.
For most of the District’s water customers in the City of Chula Vista, the City of Chula Vista
(CCV) provides the sewer services. The CCV sewer fees are based on water consumption.
Because of the interrelated functions, the CCV contracts with the District for processing and
billing of their sewer customers within the District for a fee.
General Expenses
The expenses in this section are general operating expenses not associated with an individual
department. These include legal costs, insurance premiums, changes in accrued employee leave
balances, and miscellaneous interest. These expenses represent 4% of the total Departmental
Budget.
Legal expenses are viewed as a District-wide general expense because it benefits each
department and usually is not attributed to any one department. The District retains outside legal
services rather than having in-house counsel.
Insurance expense is viewed as District-wide general expense because it benefits each
department 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 the specific department or year in which they are earned. For example,
when a pay rate increase occurs for an employee and leave balances increase in value due to this
change. In this case, the expense is charged to the General Expense Department.
Miscellaneous interest expense is recorded in this section. This is related to a five-year lease of a
Vactor truck that the District acquired four years ago. The truck was capitalized, but the interest
expense for the lease purchase is considered an operating expense.
134
FY 2005 FY 2007 Budget Variance
Actual Budget Estimated Budget Variance %
Capacity Fee Revenues -$ 1,222,200$ 1,356,611$ 1,000,200 (222,000)$ (18.2%)
Annexation Fees - - - 1,216,900 1,216,900 100.0%
Tax Revenues
Sewer Fees Tax Revenue 354,490 357,200 359,364 - (357,200) (100.0%)
Debt Tax Revenue 994,484 839,700 1,081,991 - (839,700) (100.0%)
1% General Tax 977,552 1,006,500 1,338,279 2,802,700 1,796,200 178.5%
Availability Fees 556,590 611,200 609,099 624,700 13,500 2.2%
Total Tax Revenues 2,883,115 2,814,600 3,388,734 3,427,400 612,800 21.8%
General Revenues 2,883,115$ 4,036,800$ 4,745,345$ 5,644,500$ 1,607,700$ 39.8%
FY 2005 FY 2007 Budget Variance
Actual Budget Estimated Budget Variance %
Property Rental 766,733$ 803,200$ 806,014$ 1,124,200$ 321,000 40.0%
Sewer Billing Fees 247,961 342,200 347,205 350,900 8,700 2.5%
Set-up Fee for Lease Site - 18,000 33,000 52,000 34,000 188.9%
Grants - - - 25,000 25,000 100.0%
Miscellaneous 146,423 - 792,324 122,000 122,000 100.0%
Non-Operating Revenues 1,161,117$ 1,163,400$ 1,978,542$ 1,674,100$ 510,700$ 43.9%
Potable Recycled Sewer Total
Capacity Fee Revenues 1,000,200$ -$ -$ 1,000,200$
Annexation Fees 1,216,900 - - 1,216,900
Tax Revenues
1% Property Tax 2,802,700 - - 2,802,700
Availability Fees 574,800 - 49,900 624,700
Total Tax Revenues 3,377,500 - 49,900 3,427,400
Non-Operating Revenues
Property Rental 1,124,200 - - 1,124,200
Sewer Billing Fees 350,900 - - 350,900
Set-up Fee for Lease Site 52,000 - - 52,000
Grants 25,000 - - 25,000
Miscellaneous 116,000 3,000 3,000 122,000
Total Non-Operating Revenues 1,668,100 3,000 3,000 1,674,100
Total General and Non-Operating Revenues 7,262,700$ 3,000$ 52,900$ 7,318,600$
FY 2007 Budget
NON-OPERATING REVENUES
FY 2006
GENERAL AND NON-OPERATING REVENUES BY BUSINESS
GENERAL REVENUES
FY 2006
135
FY 2005 FY 2007 Budget Variance
Actual Budget Estimated Budget Variance %
General Administrative Expenses
Legal Fees 852,285$ 525,000$ 578,116$ 671,000$ 146,000$ 17.1%
Benefits - - - 47,000 47,000 100.0%
General Insurance 317,342 337,500 363,483 336,200 (1,300) (0.4%)
Interest - - - 700 700 100.0%
Total 1,169,627$ 862,500$ 941,598$ 1,054,900$ 192,400$ 16.4%
FY 2006
GENERAL EXPENSES
136
137
Labor and Benefits
Labor and Benefits represent 24.7% of the total Operating Budget. In Fiscal Year 2004, the
Employees’ Association signed a five-year Memorandum of Understanding (MOU) with the
District. The highlights of this agreement included: changes to the medical and dental plans
with employees paying a portion of their dependent’s premiums, enhancements of the
retirement package with the Public Employees’ Retirement System (PERS) to include a “2.7%
at 55” benefit, and the rewriting of the entire MOU to streamline the grievance procedure and
other District practices.
District personnel are assigned to work in seven departments: General Manager,
Administrative Services, Finance, Information Technology & Strategic Planning, Water
Operations, Engineering & Planning, and Development Services. The departments are further
categorized by functions into divisions. The Fiscal Year 2007 Budget includes funding for
labor and benefits for 174.75 Full-time Equivalent (FTE) employees and a 3% across-the-board
salary increase on July 1, 2006.
The staffing level for Fiscal Year 2007 has a net increase of one-half FTE employee from
Fiscal Year 2006. This is a result of increasing a part-time warehouse position to a full-time
position.
A projected 13.6% of the labor and benefits costs will be charged to projects included in the
Capital Improvement Program (CIP) and Developer Deposits. These are not considered
Operating Projects and therefore reduce the Operating Budget by $2,469,500. The Water
Operations Department, with its staff of 72 employees, is responsible for maintaining and
operating the District's facilities.
Administrative Expenses
Administrative Expenses represent 9.4% of the District's total operating costs. A detailed
listing of the Administrative Expenses for Fiscal Year 2007 is shown on page 148.
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 more discretionary than others such as insurance or
regulatory fees which are mandatory; whereas the District may be better able to control other
expenses such as training or business meetings to some extent. The safety needs of the
District's customers and employees and the compliance with regulatory agencies are of utmost
importance to the District and these costs are considered necessary expenses.
DEPARTMENTAL OPERATING BUDGET
138
Materials and Maintenance
The Materials and Maintenance budget allows the District to provide and improve reliable,
high-quality products, services, and support to its customers.
New mandates by the California Department of Health for both the flexible line and cover
reservoir and valve-exercising programs are responsible for increases of $148,000 and
$288,000, respectively.
As the District continues to grow and new facilities are added, additional maintenance and
services will be required. There is an 9.1% increase, due to growth and cost increases, which
mainly consist of the following: Metro O&M Costs $175,000, Fuel and Oil $569,000 ($42,000
due to price and $527,000 due to a new source of water at the Lower Otay Pump Station),
Pressure Reducing Stations $53,000, and Spring Valley Sewer Charge of $10,500.
The Water Operations Department implemented an Infrastructure Management System (IMS)
which allows for better maintenance of assets as well as tracking new assets coming on-line,
planning for repair or replacement of assets as well as assessing the condition of the
infrastructure. IMS is helping the District to better track and manage the Materials and
Maintenance costs.
Performance Measurement Program
The Board of Directors approves the strategic goals and objectives. Departments then
incorporate these into their budgets to ensure adequate funds are available to implement these
plans. The District updated its performance measurement program in Fiscal Year 2006 to
provide measurable results of progress on both strategic and key operational goals and
objectives. The measures have been developed by comparing key District activities with
functional and available operational data that provide reliable feedback on progress.
Developed cooperatively with staff and the help of measurement experts, the measures are
designed to be comparable to measures commonly found in similar industries.
The performance measures focus on “best practice” as applied to the District. Measures are
collected and reviewed quarterly by the Senior Management Team and also reviewed by the
Board at least twice a year. Results are used to set new targets for the following fiscal year and
to hold staff accountable for the current fiscal year.
DEPARTMENTAL OPERATING BUDGET
139
DEPARTMENTAL OPERATING BUDGET
TOTAL DEPARTMENTAL OPERATING BUDGET
Fiscal Year 2006-2007
$26,565,800
Information
Technology and
Strategic Planning
10.0%
Water Operations
40.7%
Finance
14.3%
General Expense
4.0%
Administrative
Services
12.5%
Board of Directors
0.3%General Manager
5.3%
Development
Services
5.7%
Engineering and
Planning
7.2%
140
FY05 FY07
Actual Budget Estimated Budget
Total Labor Costs 9,530,742$ 9,506,400$ 9,353,829$ 10,427,200$
Benefits
Pension 2,508,438 3,013,100 2,831,808 2,996,000
Employee Assistance Program 7,257 7,500 7,444 7,500
Worker's Compensation 505,697 482,800 593,756 295,700
Health/Dental/Life Insurance 1,642,924 1,875,900 2,208,498 1,577,900
Social Security / Medicare 771,181 830,700 780,852 871,700
Salary Continuation Insurance 71,237 73,000 73,636 79,300
Employee Awards 4,660 - 3,115 -
State Unemployment Insurance 14,370 20,000 17,691 20,000
Vacation / Sick 1,414,095 1,747,100 1,738,682 1,922,200
Total Fringe Benefits 6,939,859 8,050,100 8,255,482 7,770,300
Total Labor & Benefits 16,470,601 17,556,500 17,609,311 18,197,500
Less: Non-Operating Labor & Benefits
Labor Costs 2,071,512 1,607,400 1,368,893 1,544,500
Fringe Benefits Allocation 1,657,210 1,324,500 814,999 925,000
Total WO Allocation 3,728,722 2,931,900 2,183,892 2,469,500
Operating Labor & Benefits 12,741,879 14,624,600 15,425,419 15,728,000
Less: Overhead Allocation Personnel Portion 1,504,384 1,167,300 994,124 1,121,700
Operating Labor & Benefits 11,237,495$ 13,457,300$ 14,431,295$ 14,606,300$
FY06
LABOR & BENEFITS
0
20
40
60
80
FULL TIME EQUIVALENT (FTE)
COMPARISON BY DEPARTMENT
FY 05-06 4 19.5 33.75 12 73 15 17
FY 06-07 4 20 34.75 13 72 15 16
GM ADM FIN IT OPS ENG DEV
GM……General Manager
ADM.…Administrative Services
FIN…....Finance
IT…...…Information Technology
& Strategic Planning
OPS…...Water Operations
ENG…..Engineering & Planning
DEV…..Development Services
141
Potable Sewer Recycle
Developer
Reimbursed-
CIP Total
Total Operating Labor Costs 8,118,000$ 417,400$ 347,300$ -$ 8,882,700$
Benefits 6,333,300 288,800 223,200 - 6,845,300
Overhead Allocation-Personnel Portion (1,121,700) - - - (1,121,700)
Total Operating Labor & Benefits 13,329,600 706,200 570,500 - 14,606,300
Total CIP Labor Costs 1,021,500$ 65,500$ 157,300$ 300,200$ 1,544,500$
Benefits 610,400 37,000 90,400 187,200 925,000
Overhead Allocation-Personnel Portion 741,900 47,600 114,200 218,000 1,121,700
Total CIP Labor & Benefits 2,373,800 150,100 361,900 705,400 3,591,200
Total Labor & Benefits 15,703,400 856,300 932,400 705,400 18,197,500
LABOR & BENEFITS BY FUND - FISCAL YEAR 2007
LABOR & BENEFITS BY FUND
Potable-Operating Potable-CIP Sewer-Operating
Sewer-CIP Recycle-Operating Recycle-CIP
Developer Reimbursed-CIP
142
FY 2005 FY 2006 FY 2007
General Manager:
General Manager 1 1 1
Assistant General Manager, Finance and Admin 111
Assistant General Manager, Eng. and Ops. 1 1 1
District Secretary 1 1 1
Assistant District Secretary 111
Communications Officer 111
Total 6 6 6
Total - General Manager Department 6 6 6
FTE 6.00 6.00 6.00
Administrative Services:
Chief, Administrative Services 111
Executive Secretary 1 1 0
Confidential Secretary 0 0 1
Office Assistant 111
Total 3 3 3
Human Resources:
Human Resources Manager 111
Senior Human Resources Analyst 111
Human Resources Analyst 111
Human Resources Technician 211
Total 5 4 4
Purchasing:
Purchasing and Facilities Manager 1 1 1
Buyer 111
Purchasing Assistant 1 0 0
Assistant Buyer 0 1 1
Lead Warehouse Worker 1 1 1
Warehouse/Delivery Worker I and II 1 1 2
Warehouse Assistant (PT) 1 1 0
Facilities Maintenance Technician 2 2 2
Building Maintenance Assistant 111
Total 9 9 9
Safety:
Safety and Risk Administrator 111
Total 1 1 1
POSITION COUNT BY DEPARTMENT
143
FY 2005 FY 2006 FY 2007
Conservation:
Water Conservation Manager 1 1 1
Water Conservation Specialist 1 1 1
Total 2 2 2
Total Administrative Services Department 20 19 19
FTE 19.50 18.50 19.00
Controller and Budgetary Services:
Chief Financial Officer 111
Executive Secretary 1 1 1
Finance Manager, Controller and Budget 1 1 1
Senior Accountant 222
Accountant 111
Office Assistant (PT) 1 1 1
Total 7 7 7
Treasury and Accounting Services:
Finance Manager, Treasury and Accounting 1 1 1
Senior Accountant 222
Accountant 333
Total 6 6 6
Customer Service:
Customer Service Manager 111
Customer Service Supervisor 111
Customer Service Representative I, II and III 7 7 9
Lead Customer Service Field Representative 1 1 1
Customer Service Field Representative I and II 6 6 6
Office Assistant 110
Total 17 17 18
Payroll and Accounts Payable:
Finance Supervisor, Payroll and Accounts Payable 1 1 1
Payroll Technician 1 1 1
Accounting Assistant 222
Total 4 4 4
Total Finance Department 34 34 35
FTE 33.75 33.75 34.75
144
FY 2005 FY 2006 FY 2007
Information Technology and Strategic Planning:
Chief Information Officer 111
GIS Supervisor 1 1 1
IT Operations Supervisor 1 1 1
GIS Technician 2 2 2
Computer Systems Administrator 111
Database Administrator 001
Business System Analyst I and II 233
Network Support Analyst 111
Records Services Assistant 111
Program and Systems Support Analyst 111
Total 11 12 13
Total IT and Strategic Planning Department 11 12 13
FTE 11.00 12.00 13.00
Operations Management:
Chief, Water Operations 1 1 1
Executive Secretary 1 1 1
Planner/Scheduler 0 1 0
Total 2 3 2
Water System Operations:
Water Systems Manager 100
System Operations Manager 011
Water Systems Supervisor 112
Pump Electrical Supervisor 1 1 1
Water Systems Crew Leader 222
Water Systems Operator I, II, and III 9 9 9
Valve Maintenance Worker 0 0 1
Disinfection Technician 1 1 1
Assistant Disinfection Technician 111
Recycled Water Distribution Operator 3 3 3
Senior SCADA Instrumentation Technician 112
Electrician/Instrumentation Technician 1 1 0
Electrician I and II 2 2 2
Pump Mechanic I and II 2 2 2
Total 25 25 27
145
FY 2005 FY 2006 FY 2007
Utility Maintenance/Construction:
Construction Maintenance Manager 1 1 1
Utility Maintenance Supervisor 2 2 2
Utility Crew Leader 555
Utility Workers I and II 10 10 10
Senior Utility/Equipment. Operator 4 4 4
Equipment Shop Supervisor 1 1 1
Equipment Shop Mechanic I and II 4 4 4
Welder II 1 1 1
Meter Maintenance/Cross Connect Supervisor 1 1 1
Lead Meter Maintenance Worker 1 1 1
Meter Maintenance/Cross Connect Worker I and II 5 5 5
Custodian/Automotive Attendant 110
Total 36 36 35
Collection/Treatment/Reclamation Operations:
Collection/Reclamation Manager 100
Recycled/Lab Supervisor 010
Reclamation Plant Supervisor 1 1 1
Water Reclamation Plant Operator 3 3 3
Water System Technician 111
Laboratory Analysts I and II 2 2 2
Total 8 8 7
Total Operations Department 71 72 71
FTE 71.00 72.00 71.00
Engineering Management:
Chief, Engineering and Planning 111
Executive Secretary 1 1 1
Total 2 2 2
Engineering and Planning:
Engineering Manager 222
Senior Civil Engineer 222
Associate Civil Engineer 222
Assistant Civil Engineer 122
Engineering Technicians I, II and III 4 5 5
Total 11 13 13
Total Engineering and Planning Department 13 15 15
FTE 13.00 15.00 15.00
146
FY 2005 FY 2006 FY 2007
Development Services:
Chief, Development Services 1 1 1
Public Services Manager 1 1 1
Secretary 1 1 1
Senior Civil Engineer 111
Associate Civil Engineer 111
Engineering Technicians I, II and III 3 3 2
Inspection Supervisor 1 1 1
Construction Inspectors I and II 4 4 4
Surveying Supervisor 111
Survey Technician 111
Assistant Survey Technician 111
Office Assistant 111
Total 17 17 16
Total Development Services Department 17 17 16
FTE 17.00 17.00 16.00
District Total Position Count 172 175 175
FTE 171.25 174.25 174.75
Senior Systems Analyst 1 0 0
Database Analyst 0 1 0
Customer Service Field Representative I and II 0 0 2
Customer Service Representative I and II 0 0 1
Total Contract Employees 1 1 3
Contract Employees
POSITION COUNT
Administrative
Services
11%
Information
Technology and
Strategic Planning
7%
Finance
20%
Operations
41%
Engineering and
Planning
9%
Development
Services
9%
General Manager
3%
147
FY 2005 FY 2007 Budget
Actual Budget Estimated Budget Variance %
Director's Fees 26,499$ 48,000$ 19,800$ 48,000$ - 0.0%
Travel and Meetings 105,064 217,600 175,433 236,200 18,600 8.5%
Conservation and Outreach 130,510 211,900 148,439 229,500 17,600 8.3%
General Office Expense 305,061 352,400 375,871 364,700 12,300 3.5%
Equipment 486,536 975,500 720,745 975,600 100 0.0%
Fees 67,398 157,200 179,412 372,200 215,000 136.8%
Services 1,286,552 2,136,000 1,865,461 2,815,300 679,300 31.8%
Training 72,421 152,800 113,700 153,700 900 0.6%
Utilities 4,616 11,600 11,530 11,700 100 0.9%
Miscellaneous 10,088 - - - - 0.0%
Total 2,494,744 4,263,000 3,610,391 5,206,900 943,900 22.1%
Less: Overhead Allocation (877,855) (681,200) (580,103) (654,500) 26,700 (3.9%)
Subtotal 1,616,889 3,581,800 3,030,288 4,552,400 970,600 27.1%
General Expenses 1,169,627 862,500 941,598 1,007,200 144,700 16.8%
Administrative Expenses - Total 2,786,516$ 4,444,300$ 3,971,886$ 5,559,600$ 1,115,300$ 25.1%
FY2006
ADMINISTRATIVE EXPENSES - TOTAL
ADMINISTRATIVE EXPENSES - TOTAL
Services
54.1%
Equipment
18.7%
Fees
7.2%
Director's Fees
0.9%
Conservation and
Outreach
4.4%
General Office
Expense
7.0%
Utilities
0.2%
Training
3.0%
Travel and
Meetings
4.5%
148
FY 2005 FY 2007 Budget
Actual Budget Estimated Budget Variance %
Materials and Maintenance
Fuel and Oil 253,726$ 232,000$ 302,264$ 801,000$ 569,000 245.3%
Meters and Materials 797,673 652,200 499,581 275,100 (377,100) (57.8%)
Fleet Parts and Equipment 132,942 155,000 151,791 155,000 - 0.0%
Landscaping Materials (1)93,544 15,000 6,300 - (15,000) (100.0%)
Infrastructure Equipment and Supplies 254,804 773,500 822,379 926,200 152,700 19.7%
Chemicals 183,037 275,500 236,243 254,000 (21,500) (7.8%)
Safety Equipment 20,052 51,100 29,713 18,600 (32,500) (63.6%)
Laboratory Equipment and Supplies 48,303 82,000 60,850 42,000 (40,000) (48.8%)
Other Materials and Supplies 93,753 65,000 215,376 150,500 85,500 131.5%
Building and Grounds Materials 63,137 90,000 87,986 154,400 64,400 71.6%
Contracted Services 137,136 672,000 332,526 485,400 (186,600) (27.8%)
Materials and Maintenance 2,078,107 3,063,300 2,745,009 3,262,200 198,900 6.5%
Sewer Charges
Metro O&M Costs 870,504 955,000 916,774 1,130,000 175,000 18.3%
Spring Valley Sewer Charge 211,824 221,000 224,193 231,500 10,500 4.8%
Total Sewer Charges 1,082,328 1,176,000 1,140,967 1,361,500 185,500 15.8%
Total Materials and Maintenance 3,160,435$ 4,239,300$ 3,885,976$ 4,623,700$ 384,400$ 9.1%
(1)Landscaping outsourced in FY 2006
MATERIALS AND MAINTENANCE EXPENSES - TOTAL
FY 2006
MATERIALS AND MAINTENANCE EXPENSES - TOTAL
Chemicals
5.5%
Fuel and Oil
17.3%
Laboratory
Equipment and
Supplies
0.9%
Building and
Grounds Materials
3.3%
Fleet Parts and
Equipment
3.3%
Meters and
Materials
6.0%
Infrastructure
Equipment and
Supplies
20.0%
Safety Equipment
0.4%
Other Materials
and Supplies
3.3%
Contracted
Services
10.5%
Sewer Charges
29.4%
149
FY 2005 FY 2007
Actual Budget Estimated Budget
Departmental Expenditures
Board of Directors 58,008$ 88,000$ 33,206$ 91,700$
General Manager 1,549,641 1,327,300 1,365,468 1,403,500
General Expense 1,169,627 862,500 941,598 1,054,200
Administrative Services 2,627,195 2,789,400 2,849,587 3,316,300
Finance 3,453,094 3,474,900 3,566,714 3,813,000
Information Technology and Strategic Planning 1,796,952 2,328,100 2,297,117 2,655,400
Water Operations 8,149,653 10,260,800 10,008,312 10,803,800
Engineering and Planning 456,516 1,395,600 1,499,157 1,925,600
Development Services 305,999 1,462,800 1,302,225 1,502,300
Total Departmental Expenditures 19,566,685 23,989,400 23,863,384 26,565,800
Less: Overhead Allocation (2,382,239) (1,848,500) (1,574,227) (1,776,200)
Net Departmental Expenditures 17,184,446 22,140,900 22,289,157 24,789,600
Non-Departmental Expenditures
Water Purchases 22,425,566 24,106,700$ 25,448,543$ 27,063,200$
Power 2,010,748 2,327,100 2,113,787 2,677,800
Debt Service 2,692,543 2,709,300 2,820,714 -
Replacement Reserve 2,462,600 1,001,300 1,001,300 4,540,000
Total Non-Departmental Expenditures 29,591,457 30,144,400 31,384,344 34,281,000
TOTAL OPERATING EXPENDITURES 46,775,903$ 52,285,300$ 53,673,501$ 59,070,600$
FY2006
OPERATING EXPENDITURES BY DEPARTMENT
150
FY 2005 FY 2007
Actual Budget Estimated Budget
Departmental Expenditures
Benefits 12,741,879$ 14,624,600$ 15,425,420$ 15,728,000$
Director's Fees 26,499 48,000 19,800 48,000
Travel and Meetings 105,064 217,600 175,432 236,200
Conservation and Outreach 130,510 211,900 148,439 229,500
General Office Expense 305,061 352,400 375,871 364,700
Equipment 486,536 975,500 720,745 975,600
Fees 1,237,025 1,019,700 1,121,011 1,378,700
Services 1,286,552 2,136,000 1,865,460 2,815,300
Training 72,421 152,800 113,700 153,700
Materials & Maintenance 2,078,107 3,063,300 2,745,009 3,262,200
Power and Utilities 4,615 11,600 11,530 11,700
Sewer Charges 1,082,328 1,176,000 1,140,967 1,361,500
Miscellaneous 10,088 - - -
Interest - - - 700
Total Departmental Expenditures 19,566,685 23,989,400 23,863,384 26,565,800
Less: Overhead Allocation (2,382,239) (1,848,500) (1,574,227) (1,776,200)
Net Departmental Expenditures 17,184,446 22,140,900 22,289,157 24,789,600
Non-Departmental Expenditures
Water Purchases 22,425,566 24,106,700$ 25,448,543$ 27,063,200$
Power 2,010,748 2,327,100 2,113,787 2,677,800
Debt Service 2,692,543 2,709,300 2,820,714 -
Replacement Reserve 2,462,600 1,001,300 1,001,300 4,540,000
Total Non-Departmental Expenditures 29,591,457 30,144,400 31,384,344 34,281,000
TOTAL OPERATING EXPENDITURES 46,775,903$ 52,285,300$ 53,673,501$ 59,070,600$
FY2006
OPERATING EXPENDITURES BY OBJECT
151
BOARD OF DIRECTORS
Division 4 Division 2 Division 5
Jose Lopez Jaime Bonilla Mark Robak
Vice President President Treasurer
Division 3 Division 1
Gary Croucher Larry Breitfelder
Division Title Division No.
Board of Directors 1111
Mission Statement
To provide safe, reliable water, recycled water and wastewater services to our
community in an innovative, cost efficient, water-wise and environmentally
responsible manner.
152
DISTRICT BOUNDARY
153
FY 2005 FY 2007
Actual Budget Estimated Budget
Board of Directors 58,008$ 88,000$ 33,206$ 91,700$
TOTAL 58,008$ 88,000$ 33,206$ 91,700$
Board of Directors
FY 2006
BOARD OF DIRECTORS
FY 2007 Total Departmental Budget - $26.6 Million
Board of Directors - $91,700
Development
Services
5.7%
Information
Technology and
Strategic Planning
10.0%
Engineering and
Planning
7.2%
General Expense
4.0%
General Manager
5.3%
Administrative
Services
12.5%
Board of Directors
0.3%
Finance
14.3%
Water Operations
40.7%
154
BOARD OF DIRECTORS
FY 2005 FY 2007
Board of Directors Actual Budget Estimated Budget
Benefits 25,716$ 14,400$ 1,890$ 20,000$
Director's Fees 26,499 48,000 19,800 48,000
Travel and Meetings 5,414 25,600 11,516 23,700
Conservation and Outreach 124 - - -
General Office Expense 165 - - -
Equipment 90 - - -
Total 58,008$ 88,000$ 33,206$ 91,700$
FY 2006
$147
$95
$148
$90
$156
$58
$88
$33
$92
$-
$50
$100
$150
$200
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Fiscal Year
Budget vs. Actual
Budget Actual
Estimated Adopted
155
GENERAL MANAGER
Division Title Division No.
General Manager 1111
Assistant General Manager, Finance and Administrative Services 2111
Assistant General Manager, Engineering and Operations 3111
General Manager’s Vision
“A district that is a respected leader in the water industry, at the forefront of
innovation, prepared for the future, that engages the talents of its employees
and provides a workplace that promotes employee development and growth,
and that earns the trust of its customers through outstanding service.”
- Mark Watton
156
Personnel Count FY 2005 FY 2006 FY 2007
General Manager 1 1 1
Assistant General Manager, Finance and Administration 1 1 1
Assistant General Manager, Engineering and Operations 1 1 1
District Secretary 1 1 1
Assistant District Secretary 1 1 1
Communications Officer 1 1 1
Total 666
DISTRICT POSITION COUNT - 175
GENERAL MANAGER DEPARTMENT - 6
157
FY 2005 FY 2007
Actual Budget Estimated Budget
General Manager 1,544,685$ 895,100$ 883,407$ 932,200$
Legal - 1,500 5,046 3,500
Assistant General Manager, Finance and Administration 16 223,500 241,478 237,100
Assistant General Manager, Engineering and Operations 4,940 207,200 235,537 230,700
TOTAL 1,549,641$ 1,327,300$ 1,365,468$ 1,403,500$
FY 2006
GENERAL MANAGER
FY 2007 Total Departmental Budget - $26.6 Million
General Manager - $1,403,500
Water Operations
40.7%
Finance
14.3%
Board of Directors
0.3%
Administrative
Services
12.5%
General Manager
5.3%
General Expense
4.0%Engineering and
Planning
7.2%
Information
Technology and
Strategic Planning
10.0%
Development
Services
5.7%
158
GENERAL MANAGER
FY 2005 FY 2007
Actual Budget Estimated Budget
Labor and Benefits 1,331,011$ 995,300$ 1,104,648$ 1,060,500$
Travel and Meetings 43,717 81,800 80,644 91,600
Conservation and Outreach 7,123 6,000 9,803 7,600
General Office Expense 27,332 8,700 12,275 18,800
Equipment 7,563 3,000 3,259 1,500
Fees 670 25,000 27,387 30,500
Services 120,310 202,500 127,436 188,000
Training 3,125 5,000 15 5,000
Miscellaneous 8,790 - - -
Total 1,549,641$ 1,327,300$ 1,365,468$ 1,403,500$
FY 2006
$625
$790 $797 $772 $748
$1,550
$1,327 $1,365 $1,404
$-
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
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Fiscal Year
Budget vs. Actual
Budget Actual
Estimated Adopted
159
Accomplishments – Fiscal Year 2005-2006
• Secured $4.2 million through the East County Treated Water Agreement which
succeeded in substantially reducing anticipated capital improvement expenditures while
greatly increasing treated water reliability.
• Established and maintained excellent working relationships with key government,
business, and community organizations to promote water resource issues and projects.
• Secured $4 million in grant funding for recycled water projects, generating both capital
improvement project savings and reducing future anticipated potable water purchases.
• Initiated negotiations with regional partners on treated water service to enhance reliability
and yield substantial long-term cost savings.
• Established excellent working relationships with Mexican officials in an effort to develop
water related opportunities with Mexico.
• Updated District policies to enhance the delivery of employee benefits and to more
appropriately recognize and reward performance.
• Maintained and provided potable water, sewer and recycled water infrastructure that are
appropriate to meet current and future needs.
GENERAL MANAGER
160
ADMINISTRATIVE SERVICES
Division Title Division No.
Administrative Services Chief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2211
Human Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2221
Purchasing and Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2231
Safety and Risk Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2241
Water Conservation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2251
Mission Statement
To provide support to the Board of Directors, the General Manager, and District
staff to meet objectives in satisfying the needs of our customers by providing,
through best management practices, the full range of employer and employee
services, administrative services, risk management, and water conservation.
161
Personnel Count FY 2005 FY 2006 FY 2007
Chief, Administrative Services 1 1 1
Executive Secretary 1 1 0
Confidential Secretary 0 0 1
Office Assistant 1 1 1
Human Resources Manager 1 1 1
Senior Human Resources Analyst 1 1 1
Human Resources Analyst 1 1 1
Human Resources Technician 2 1 1
Purchasing & Facilities Manager 1 1 1
Buyer 1 1 1
Assistant Buyer 0 1 1
Purchasing Assistant 1 0 0
Lead Warehouse Worker 1 1 1
Warehouse/Delivery Worker I and II 1 1 2
Warehouse Assistant (PT) 1 1 0
Facilities Maintenance Technician 2 2 2
Facilities Maintenance Assistant 1 1 1
Safety & Risk Administrator 1 1 1
Water Conservation Manager 1 1 1
Water Conservation Specialist 1 1 1
Total 20 19 19
DISTRICT POSITION COUNT - 175
ADMINISTRATIVE SERVICES DEPARTMENT - 19
162
Department Responsibilities
FY 2005 FY 2007
Actual Budget Estimated Budget
Administrative Chief 346,471$ 367,500$ 328,550$ 318,000$
Human Resources 608,537 626,100 622,375 752,000
Purchasing and Facilities 1,077,935 1,120,200 1,245,250 1,498,900
Safety and Security 236,311 237,200 245,127 254,000
Water Conservation 357,941 438,400 408,285 493,400
TOTAL 2,627,195$ 2,789,400$ 2,849,588$ 3,316,300$
FY 2006
ADMINISTRATIVE SERVICES
The Administrative Services Department, under the general direction of the Assistant General Manager, provides the
following support services: Human Resources, Purchasing and Facilities, Safety and Risk Administration, and Water
Conservation. It also coordinates assigned activities with other District departments and outside agencies, and provides
highly responsible and complex administrative support for the District, General Manager and Board of Directors.
FY 2007 Total Departmental Budget - $26.6 Million
Administrative Services - $3,316,300
Development
Services
5.7%
Information
Technology and
Strategic Planning
10.0%
Engineering and
Planning
7.2%
General Expense
4.0%
General Manager
5.3%
Administrative
Services
12.5%
Board of Directors
0.3%
Finance
14.3%
Water Operations
40.7%
163
ADMINISTRATIVE SERVICES
FY 2005 FY 2007
Actual Budget Estimated Budget
Labor and Benefits 1,757,931$ 1,813,000$ 1,835,213$ 1,858,600$
Travel and Meetings 13,620 20,600 15,755 22,700
Conservation and Outreach 123,263 205,900 138,430 221,900
General Office Expense 75,502 104,300 117,592 115,000
Equipment 76,622 81,100 105,622 149,600
Fees 26,628 7,700 9,111 12,700
Services 277,446 223,300 305,231 398,600
Training 58,694 113,800 66,094 104,700
Materials & Maintenance 212,872 208,100 245,010 420,800
Power and Utilities 4,615 11,600 11,530 11,700
Total 2,627,195$ 2,789,400$ 2,849,588$ 3,316,300$
FY 2006
$3,209
$2,402
$2,629 $2,526
$2,971
$2,627 $2,789 $2,850
$3,316
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
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Fiscal Year
Budget vs. Actual
Budget Actual
Estimated Adopted
164
Target Actual
Time to Fill - number of recruitments on time/total
number of recruitments 90.80% 90.0% 100.0% 90.0%
Customer per FTE - number of customers/number of
FTE budgeted positions 270 Greater than
217 274 Greater than
217
Turnover Rate - number of voluntary
terminations/average number of employees during
measurement period
5.0%Less than
10%9.9%Less than
10%
Blanket Order Activity - percentage of material
purchases purchased via blanket PO 15.9%15% or
Greater 16.9%15% or
Greater
Inventory Accuracy - actual/recorded inventory 99.0% 97.0% 99.8% 97.0%
Fleet Incidents - Track number of Fleet incidents
annually 14 Less than 4 6 Less than 4
Lost Work Day Injuries - Actual lost time injuries 7
4 or less per
year 6 4 or less per
year
Total Water Saved Estimate of water saved per year
through conservation programs (voucher programs and
landscape surveys)
96.0% 90.0% 94.0% 90.0%
ADMINISTRATIVE SERVICES
PERFORMANCE INDICATORS
Activity/Criterion
Fiscal Year
2004-2005
Actual
Fiscal Year 2005-2006 Fiscal Year
2006-2007
Target
Fiscal Year 2005-2006
165
Accomplishments – Fiscal Year 2005-2006
Human Resources
• Applied for the Credit Incentive Program on the Workers' Compensation insurance
through San Diego Risk Management Association (SDRMA) which saved the District
over $90,000 in Property Liability and the Worker’s Compensation Program.
• Implemented the Blue Cross network of doctors that will save the District over $130,000
annually.
• Developed and conducted a comprehensive Advanced Management Training Program for
management staff.
• Reviewed, revised and updated 17 Human Resources policies, procedures, and programs.
• Developed and implemented a Pay-for-Performance Program.
Purchasing and Facilities
• Negotiated the AMR meter supply contract with Master Meter with a projected savings
of $338,094 over the next three years.
• T-Mobile was selected as the District’s new cell phone service provider. The District is
receiving more than double the air time at a reduced cost and projected savings of
$26,000 annually.
• The District’s service and maintenance contracts have been negotiated to begin and
terminate on the fiscal year providing better tracking and budgeting.
• Purchasing worked with the user departments to develop a card holder/approving official
matrix and Cal-Card has been implemented in all departments.
ADMINISTRATIVE SERVICES
166
Safety and Risk Management
• Instrumental in getting on-line training covered by SDRMA which resulted in annual
savings of $10K.
• Acquired E&O coverage via SDRMA with major savings and better coverage.
• Completed all Credit Incentive Program points for SDRMA which resulted in a $90,000
discount on our premium renewal.
• Recovered more than $5,000 in stolen District property.
• Highly successful Risk Management/Safety audit by SDRMA of the District’s programs
including Property and Liability Loss Prevention, Safety, and Worker’s Compensation.
• Several County Haz Mat audits were conducted with no corrections or citations.
• Developed both on-line disinfection chemical training and low and high voltage safety
programs.
• Developed procedures and training on both the new CAL/OSHA Heat Stress
requirements and Fall Prevention Program.
• Attained Homeland Security Certification CHS III.
• Held a successful joint emergency exercise with City of Chula Vista and participated in a
joint CWA and multi-district exercise in Escondido.
Water Conservation
• Identified a leak during the Commercial Water Use Survey conducted at the Bailey
Correctional Facility, the District’s second largest commercial customer. The leak was
repaired immediately, saving 2.6 million gallons or 8 acre-feet of water a year.
• Received a $50,000 grant from the Bureau of Reclamation to co-fund the installation of
water-wise landscapes within the District.
• Funded 18 Splash Labs this fiscal year, a dramatic increase from prior years when we
funded an average of three per year.
• Coordinated the participation of 12 water-wise vendors at the “Conservation Courtyard”
in the Water Conservation Garden during this year’s Spring Garden Festival. The Garden
set a new attendance record of 5,535 people thanks in part to our successful efforts to
promote this event.
167
Goals and Objectives – Fiscal Year 2006-2007
Legend
Completed
Ahead of
Schedule
On Schedule
Behind Schedule
On Hold
No Reports
Not Scheduled to
Start Yet
Human Resources
Develop and implement a training needs assessment and implement appropriate
recommendations
Review and revise the Certification Incentive Program
Develop Long-Term Staffing Plan
Promote the value of the District's compensation and benefits plan
Perform a comprehensive Compensation Study
Negotiate successor Memorandum of Understanding
Evaluate and improve recruiting programs and incentives for difficult to recruit positions
Develop and implement guidelines for collaborative improvement teams
Finalize and Implement the District's Recognition and Reward Program
Establish a repeatable Employee Survey Program and benchmark against others
Purchasing and Facilities
Develop a Long-Term Facility and Space Plan
Safety and Risk Administration
Complete 5-year physical security improvements
Identify additional funding sources for security enhancements
168
Water Conservation
Continue to promote the Water Conservation Garden for increased community impact
Increase the distribution of water conservation brochures in key public locations
Increase the use of educational materials on the District's Web site
Explore the positive and negative impact of "mandatory" conservation programs
Develop additional educational materials on beneficial uses of recycled water and
best proactive case studies
Evaluate effectiveness of the school education program
Evaluate expansion of Metropolitan Water District's Learning Unit Program
Promote CWA's Splash Lab use by schools in District
169
FINANCE
Division Title Division No.
Finance Chief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2311
Controller and Budgetary Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2321
Treasury and Accounting Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2331
Customer Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2341
Payroll and Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2351
Mission Statement
To provide effective tracking of all financial impacts of the District's activities.
Information is efficiently compiled and verified in accordance with regulatory
requirements and is provided to management, the public, the Board, and other
governing bodies in order to support quality decision making. The Department’s
mission is also to safeguard District funds, pay all District financial obligations,
and provide internal and external customers with prompt, reliable service and
information
170
Personnel Count FY 2005 FY 2006 FY 2007
Chief Financial Officer 1 1 1
Executive Secretary 1 1 1
Finance Manager, Treasury and Accounting 1 1 1
Finance Manager, Controller and Budget 1 1 1
Finance Supervisor, Payroll and A/P 1 1 1
Customer Service Manager 1 1 1
Customer Service Supervisor 1 1 1
Senior Accountant 4 4 4
Accountant 4 4 4
Payroll Technician 1 1 1
Accounting Assistant 2 2 2
Lead Customer Service Field Representative 1 1 1
Customer Service Representative I, II and III 7 7 9
Customer Service Field Representative I and II 6 6 6
Office Assistant 1 1 0
Office Assistant (Part-Time) 1 1 1
Total 34 34 35
DISTRICT POSITION COUNT - 175
FINANCE DEPARTMENT - 35
171
Department Responsibilities
FY 2005 FY 2007
Actual Budget Estimated Budget
Finance Chief 370,557$ 348,600$ 358,872$ 350,800$
Controller and Budgetary Services 478,019 449,200 478,638 458,100
Treasury and Accounting Services 734,376 699,500 711,084 787,100
Customer Service 1,497,168 1,625,400 1,648,384 1,871,600
Payroll and Accounts Payable 372,974 352,200 369,736 345,400
TOTAL 3,453,094$ 3,474,900$ 3,566,714$ 3,813,000$
FY 2006
FINANCE
The Finance and Accounting Department, under the general direction of the Assistant General Manager, provides the
following support services: Controller and Budgetary Services, Treasury and Accounting Services, Customer Service,
and Payroll and Accounts Payable; ensures District’s conformance with modern finance and accounting theory, practices,
and compliance with applicable state and federal laws; implements financial accounting and reporting programs and
practices to meet the District’s fiduciary responsibilities; and provides highly responsible and complex administrative
support to the District, General Manager, and Board of Directors.
FY 2007 Total Departmental Budget - $26.6 Million
Finance - $3,813,000
Water Operations
40.7%
Finance
14.3%
Board of Directors
0.3%
Administrative
Services
12.5%
General Manager
5.3%
General Expense
4.0%
Engineering and
Planning
7.2%
Information
Technology and
Strategic Planning
10.0%
Development
Services
5.7%
172
FINANCE
FY 2005 FY 2007
Actual Budget Estimated Budget
Labor and Benefits 2,736,098$ 2,910,000$ 2,947,633$ 3,163,500$
Travel and Meetings 10,456 19,500 19,807 22,600
General Office Expense 173,720 190,800 220,966 191,400
Equipment 961 700 5,031 200
Fees 28,832 32,000 64,577 233,500
Services 502,277 321,900 308,701 201,800
Training 214 - - -
Miscellaneous 536 - - -
Total 3,453,094$ 3,474,900$ 3,566,714$ 3,813,000$
FY 2006
$2,333 $2,467
$2,783 $2,764
$3,129
$3,453 $3,475 $3,567 $3,813
$-
$1,000
$2,000
$3,000
$4,000
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Fiscal Year
Budget vs. Actual
Budget Actual
Estimated Adopted
173
Target Actual
Water Rate Ranking - average water bill/other agencies'
bill 26.0%Lower than
50%30.5%Lower than
50%
Sewer Rate Ranking - average sewer bill/other agencies'
bill 63.0%Lower than
50%63.0%Lower than
50%
Meter Reading Accuracy - number of misreads/total
number of meter reads 99.90% 99.90% 99.99% 99.90%
Answer Rate - percentage of calls answered as a measure
of all calls received 7.20%97% or
Greater 94.34%97% or
Greater
Alternative Payments - number of non-cash
payments/total payments 14.50%
20% of total
number of
payments
17.8%
20% of total
number of
payments
Total Operating Budget & Variance - actual
expenditures/budget 100.6% 100% or Less 99.5% 100% or Less
Write Offs - write-offs over water sales per month 0.3%Less than
0.5%0.03%Less than
0.5%
Return on Investments - total interest/total investment 131.0%
Meet or
exceed 100%
of LAIF
83.0%
Meet or
exceed 100%
of LAIF
Overtime Percentage - actual over budgeted overtime
costs 85.0%Less than
100%70.7%Less than
100%
O & M Cost per Account - operations cost for O & M
per account N/A
$387 O&M
cost per
customer
$369.74 per
customer
$387 O&M
cost per
customer
Unaccounted for Water Lost - percentage of
unaccounted water N/A 5% or Less 6.0% 5% or Less
FINANCE
PERFORMANCE INDICATORS
Activity/Criterion
Fiscal Year
2004-2005
Actual
Fiscal Year 2005-2006 Fiscal Year
2006-2007
Target
Fiscal Year 2005-2006
174
Accomplishments – Fiscal Year 2005-2006
Controller and Budgetary Services
• Prepared a balanced budget that met the Strategic Business Plan and received the
Government Finance Officers Association (GFOA) “Distinguished Budget Presentation
Award” in addition to two awards from the California Society of Municipal Finance
Officers (CSMFO) for: “Excellence in Public Communications” and “Meritorious in
Innovation in Budgeting.”
• The Capital Improvement Program (CIP) Budget received the “Excellence in Capital
Budgeting Award” from the CSMFO.
• Improved the readability of the budget document including; description of line items and
terminology.
• Created a Six-Year Rate Model in the new financial format to ensure sound financial
planning, including; smooth rate modification, efficient debt issuance strategy, and
meeting reserve target levels.
• Developed financial information reporting for the management team.
• Improved the training program to ensure smooth transfer of institutional knowledge.
Treasury and Accounting Services
• Established a “best practice” policy for reserve fund governance that provides direction
and transparency to the sources and uses of funds including targets, minimums, and
maximums for each fund.
• Received awards from GFOA and CSMFO for our Comprehensive Annual Financial
Report (CAFR).
• Obtained an unqualified opinion on the District’s Audited Financial Statements for the
fiscal year ending June 30, 2005.
• Negotiated a new banking contract with Union Bank of California which is projected to
save approximately $30,000 annually in banking fees.
• Re-negotiated the Brinks Armored Car Service contract which resulted in an annual
savings of $4,000.
• Re-engineered the process for monthly closing of the General Ledger, reducing the
average close from eight weeks to four weeks.
• Completed a total review of the District’s capital project funds (expansion, betterment &
replacement), as a part of the new policy for reserve fund governance.
• Implemented new audit procedures for petty cash to improve internal controls.
FINANCE
175
Customer Service
• Planned, designed, and established a timeline for Interactive Voice Response (IVR)
system implementation. When complete, the project will allow customers 24/7 access to
their account information.
• Brought approximately 2,000 AMR meters onto the automated system which resulted in
a savings of many hours of meter reading time per month.
• Evaluated and selected new meter reading software and hardware. The purchase and
implementation of the new handheld devices will increase reliability and are smaller and
lighter to carry in the field.
• Completed specifications and pricing for modifications and enhancements to the CIS
billing system which, when implemented, will result in time savings and process
improvements.
• Enhanced business processes including work flow permits for new meters and automated
meter changes resulting in time savings, reduced errors, improved tracking, and reporting
functionality.
• Improved reporting capabilities resulting in the ability to identify potential account errors
prior to billing and data clean-up as well.
Payroll and Accounts Payable
• Cross-trained accounts payable and payroll personnel providing enhanced department
coverage. This is important because these duties have a defined schedule with very little
flexibility.
• Implemented the changeover to Union Bank with a seamless transition for the payroll and
accounts payable check processing and the direct deposit files.
• Completed bi-weekly payroll and weekly accounts payable check runs in a timely
manner. While these processes are routine, they are highly visible and sensitive to
employees and vendors.
• Completed quarterly tax returns for the District which culminated with the processing,
printing, and distributing of W2’s and 1099’s for 2005.
176
Goals and Objectives – Fiscal Year 2006-2007
Legend
Completed
Ahead of Schedule
On Schedule
Behind Schedule
On Hold
No Reports
Not Scheduled to
Start Yet
Finance
Implement a long-term financing plan to support the District's Master Plan
Explore adopting a Conservation-based Rate Plan gradually increasing the fixed rate
percentage
Document the District’s Reserve Fund Governance Policy
Controller and Budgetary Services
Develop comprehensive budget policies and guidelines
Improve the readability of the budget document including description of line items and
terminology
Implement program budgeting
Refine the overhead and direct charging policies
Develop comprehensive management reporting
Improve the District's financial reporting
Treasury and Accounting Services
Evaluate key business processes to ensure adequate financial controls
Perform routine financial audits
Update the District's Investment Policy
Develop standard and flat fee methodology for key district services
Assess and develop guidelines for life-cycle and activity-based costing in conjunction
with IMS
177
Customer Service
Implement a Customer Comment Tracking Program
Expand a Quality Control/Audit program to ensure quality customer service
Implement an independent Customer Follow-up Program
Improve customer access to their account information via the Web
Evaluate expanded use of multilingual communication program
178
INFORMATION TECHNOLOGY
AND STRATEGIC PLANNING
Division Title Division No.
IT Chief/Applications. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2411
IT Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2421
Geographic Information System (GIS) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2431
Mission Statement
To provide the best quality technology in achieving the goals of the District
in serving our customers and employees.
179
Personnel Count FY 2005 FY 2006 FY 2007
Chief Information Officer 1 1 1
GIS Supervisor 1 1 1
IT Operations Supervisor 1 1 1
GIS Technician 2 2 2
Computer Systems Administrator 1 1 1
Database Administrator 0 0 1
Business System Analyst I and II 2 3 3
Network Support Analyst 1 1 1
Records Services Assistant 1 1 1
Program and Systems Support Analyst 1 1 1
Total 11 12 13
STRATEGIC PLANNING DEPARTMENT - 13
DISTRICT POSITION COUNT - 175
INFORMATION TECHNOLOGY &
180
Department Responsibilities
FY 2005 FY 2007
Actual Budget Estimated Budget
IT Chief/Applications 138,565$ 688,300$ 649,297$ 648,500$
IT Operations 1,600,556 1,178,200 1,277,868 1,613,000
Geographic Information System 57,831 461,600 369,952 393,900
TOTAL 1,796,952$ 2,328,100$ 2,297,117$ 2,655,400$
FY 2006
INFORMATION TECHNOLOGY AND STRATEGIC PLANNING
The Information Technology and Strategic Planning Department, under the general direction of the Assistant
General Manager, provides the following support services: development and implementation of information
technology; District’s Strategic Planning Process, including the development of long-term strategic initiatives,
and defining performance measurement metrics; information system support to the District and provides
highly responsible and complex administrative support to the District, General Manager, and Board of
Directors.
FY 2007 Total Departmental Budget - $26.6 Million
Information Technology and Strategic Planning - $2,655,400
Water Operations
40.7%
Finance
14.3%
Board of Directors
0.3%
Administrative
Services
12.5%
General Manager
5.3%
General Expense
4.0%
Engineering and
Planning
7.2%
Information
Technology and
Strategic Planning
10.0%
Development
Services
5.7%
z
181
INFORMATION TECHNOLOGY AND STRATEGIC PLANNING
FY 2005 FY 2007
Actual Budget Estimated Budget
Labor and Benefits 1,340,587$ 1,293,500$ 1,528,314$ 1,583,100$
Travel and Meetings 7,098 17,600 8,070 20,100
General Office Expense 7,043 12,900 4,804 13,900
Equipment 351,886 812,800 560,806 731,900
Fees - - 125 -
Services 89,589 170,300 160,411 275,400
Training - 21,000 34,587 31,000
Miscellaneous 750 - - -
Total 1,796,952$ 2,328,100$ 2,297,117$ 2,655,400$
FY 2006
$1,007 $985
$1,564 $1,427
$1,862 $1,797
$2,328 $2,297
$2,655
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
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Fiscal Year
Budget vs. Actual
Budget Actual
Estimated Adopted
182
Target Actual
Strategic Plan Goals Completion - goals meeting
performance expectations/total number of strategic plan
goals
96.0%90% or
Greater 97.0%90% or
Greater
IT Help Request - percent of help requests resolved with
one week time frame 87.2%85% by due
date 87.7%85% by due
date
Network - total operational network time per year 99.6%
99% during
business
hours
99.4%
99% during
business
hours
GIS Accuracy - number of drawings
computerized/number of drawings filed 76.3%90% or
Greater 95.0%90% or
Greater
INFORMATION TECHNOLOGY AND STRATEGIC PLANNING
PERFORMANCE INDICATORS
Fiscal Year
2004-2005
Actual
Fiscal Year
2006-2007
Target
Activity/Criterion Fiscal Year 2005-2006
Fiscal Year 2005-2006
183
Accomplishments – Fiscal Year 2005-2006
IT Chief/Applications
• Implemented a new work order management system for the Operations Staff.
• Expanded the accessibility and timeliness of management reporting.
• Implemented broad-based performance measures for all areas of the District.
IT Operations
• Replaced the District's telecommunications infrastructure.
• Initiated the effort to upgrade and improve Data Center Infrastructure.
• Completed installation of a new Records Management System.
Geographic Information System (GIS)
• Improved accuracy and timeliness of facilities and land data for Engineering and
Operations.
INFORMATION TECHNOLOGY AND STRATEGIC PLANNING
184
Goals and Objectives – Fiscal Year 2006-2007
Legend
Completed
Ahead of
Schedule
On Schedule
Behind Schedule
On Hold
No Reports
Not Scheduled to
Start Yet
IT Chief/Applications
Evaluate and Implement the Interactive Voice Response (IVR) System
Implement summary billing
Complete definition of "to be" processes
Maximize the districts use of mobile, GIS and GPS technologies including route planning
for maintenance crews and meter readers and locations based services
Develop a user friendly process for requesting legal services that encourage proactive use
of services
Fully integrate the Otay Information Systems (OIS)
IT Operations
Enhance the District's Web Page and its links
Provide secure and protected use of OIS information to employees on a 24 hour and
mobile basis
Perform cyber-security tests
Implement a Business Resumption Plan (BRP)
Document and manage knowledge transfer for core business processes
Update the District's records management program
Update the telecommunications infrastructure
185
WATER OPERATIONS
Division Title Division No.
Water Operations Chief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3211
Water Systems Operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3220
Construction Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3230
Mission Statement
To provide all operations and maintenance services in the highest possible
professional, efficient, safe, and cost effective manner to all internal and external
customers, and to strive to continually improve the level of service this department
provides.
186
DISTRICT POSITION COUNT - 175
OPERATIONS DEPARTMENT - 71
WATER
OPERATIONS
Construction
Maintenance
Water Systems
Operations
Utility
Maintenance
Fleet/Equipment
Maintenance
Meter
Maintenance
Water Systems
Recycled
Operations
Pump/Electrical
187
Personnel Count FY 2005 FY 2006 FY 2007
Chief, Water Operations 1 1 1
Planner Scheduler 0 1 0
Executive Secretary 1 1 1
Systems Operations Manager 0 1 1
Water Systems Manager 1 0 0
Water Systems Supervisor 1 1 2
Pump Electrical Supervisor 1 1 1
Meter Maintenance/Cross Connect Supervisor 1 1 1
Water Systems Crew Leader 2 2 2
Water Systems Operator I, II, and III 9 9 9
Valve Maintenance Worker 0 0 1
Disinfection Technician 1 1 1
Assistant Disinfection Technician 1 1 1
Senior SCADA Instrumentation Technician 1 1 2
Electrician/Instrumentation Technician 1 1 0
Electrician I and II 2 2 2
Pump Mechanic I and II 2 2 2
Lead Meter Maintenance Worker 1 1 1
Meter Maintenance/Cross Connect Worker I and II 5 5 5
Construction Maintenance Manager 1 1 1
Utility Maintenance Supervisor 2 2 2
Utility Crew Leader 5 5 5
Utility Workers I and II 10 10 10
Senior Utility/Equipment. Operator 4 4 4
Equipment Shop Supervisor 1 1 1
Equipment Shop Mechanic I and II 4 4 4
Welder II 1 1 1
Custodian/Automotive Attendant 1 1 0
Collection/Reclamation Manager 1 0 0
Reclamation Plant Supervisor 1 1 1
Recycled Lab Supervisor 0 1 0
Water Reclamation Plant Operator 3 3 3
Water System Technician 1 1 1
Recycled Water Distribution Operator 3 3 3
Laboratory Analysts I and II 2 2 2
Total 71 72 71
DISTRICT POSITION COUNT - 175
OPERATIONS DEPARTMENT - 71
188
Department Responsibilities
FY 2005 FY 2007
Actual Budget Estimated Budget
Water Operations Chief 322,829$ 601,300$ 566,450$ 368,800$
Water Systems 4,407,259 5,387,300 4,976,728 5,697,800
Construction Maintenance 3,419,565 4,272,200 4,465,134 4,737,200
TOTAL 8,149,653$ 10,260,800$ 10,008,312$ 10,803,800$
FY 2006
WATER OPERATIONS
The Water Operations Department, under the general direction of the Assistant General Manager, provides the following
support services: Potable and Recycled Water System Operations, Construction Maintenance, and Sewer Collection and
Treatment Operations; and provides highly responsible and complex technical and administrative support to the District,
General Manager, and Board of Directors.
FY 2007 Total Departmental Budget - $26.6 Million
Water Operations - $10,803,800
Water Operations
40.7%
Finance
14.3%
Board of Directors
0.3%
Administrative
Services
12.5%
General Manager
5.3%General Expense
4.0%
Engineering and
Planning
7.2%
Information
Technology and
Strategic Planning
10.0%
Development
Services
5.7%
189
WATER OPERATIONS
FY 2005 FY 2007
Actual Budget Estimated Budget
Labor and Benefits 5,120,276$ 6,259,200$ 6,203,555$ 6,130,200$
Travel and Meetings 15,878 27,500 22,651 22,300
Conservation and Outreach - - 206 -
General Office Expense 8,074 7,500 6,520 5,500
Equipment 47,773 76,400 44,589 90,900
Fees 5,667 31,000 47,553 45,500
Services 10,206 142,000 68,062 295,500
Training 8,601 11,000 11,681 11,000
Materials & Maintenance 1,850,839 2,530,200 2,462,528 2,841,400
Sewer Charges 1,082,328 1,176,000 1,140,967 1,361,500
Miscellaneous 12 - - -
Total 8,149,653$ 10,260,800$ 10,008,312$ 10,803,800$
FY 2006
$6,580 $6,680
$8,235 $7,746
$8,655 $8,150
$10,261 $10,008 $10,804
$-
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
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Fiscal Year
Budget vs. Actual
Budget Actual
Estimated Adopted
190
Target Actual
Preventive Maintenance Cost - total operations
preventive maintenance cost 4% N/A 0.0% N/A
AMR Program - actual over planned number of meters
(1,200) changed out per year 100.0%100% of
1200 61%100% of
1200
Valve Exercising and Hydrant Maintenance Program -
actual over planned number of valves (1,692) exercised
per year
24.0% 90.0% 89.0% 90.0%
Dead-End Main Flushing Program - actual over planned
pipelines (520) to be flushed per quarter 27.0% 90.0% 0% 90.0%
Percent of Wastewater Collection System Cleaned per
Year - actual over planned sewer pipe miles (17.2) to be
cleaned
320.0%17.2 miles
per year 223%17.2 miles
per year
Disinfection Residuals - number of samples with
chlorine residual between 0.7 ppm to 3.4 ppm/910
samples per quarter
96.0%
Stay within
desired range
95% of the
time
100%
Stay within
desired range
95% of the
time
Treatment Plant - number of days meets or exceeds
950,000 gallons per day of production 71.0% 90.0% 93% 90.0%
WATER OPERATIONS
PERFORMANCE INDICATORS
Fiscal Year
2006-2007
Target
Activity/Criterion Fiscal Year 2005-2006Fiscal Year
2004-2005
Actual
Fiscal Year 2005-2006
191
Accomplishments – Fiscal Year 2005-2006
Water Operation Chief
• Responded effectively to several San Diego County Water Authority’s (CWA) planned
and unplanned shutdowns. Water was delivered without incident or interruption and
customers were not affected or notified.
• The District received an award from San Diego Gas & Electric for innovative and cost-
effective ways of reducing energy consumption.
• The District received the State of California 2005 “Flex Your Power – Demand Response
Award.” By participating in the State of California’s Flex Your Power campaign to
promote energy efficiency and conservation, the District has cut energy use and produced
approximately $93,000 in annual energy savings.
Water Systems
• Installed piping, electrical power, and a pump for back-up redundancy in the preliminary
treatment process area at the Ralph W. Chapman Water Recycling Facility (RWCWRF).
• Designed, built, installed, programmed, and commissioned the new 980-2 Pump Station
System Control and Data Acquisition (SCADA) system.
• Created over twenty-two safety, process control, and workflow procedures for use in
training and regulatory compliance.
Construction Maintenance
• Successfully transferred all of the District’s Cross-Connection Control Program data from
an antiquated computer program into the District’s IMS.
• Began full implementation of the Automated Meter Reading (AMR) change-out program.
• Implemented a comprehensive valve actuation program in coordination with the both the
Utility Maintenance and Water Operations Sections.
WATER OPERATIONS
192
Goals and Objectives – Fiscal Year 2006-2007
Legend
Completed
Ahead of Schedule
On Schedule
Behind Schedule
On Hold
No Reports
Not Scheduled to
Start Yet
Water Systems
Implement automated notification procedure for planned or emergency
maintenance, outages or boil-water notices
Implement a comprehensive valve actuation program
Implement a comprehensive hydrant flushing and unidirectional
flushing program
Construction Maintenance
Update the District’s radio system and base stations
193
ENGINEERING AND PLANNING
Division Title Division No.
Planning/Design Chief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3311
Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3321
Design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3331
Water Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3341
Mission Statement
To provide customer satisfaction by delivering quality engineering and planning
services to our customers. Quality design and planning services that meets or exceeds
the appropriate codes and regulations, while being creative and technically sound.
194
Personnel Count FY 2005 FY 2006 FY 2007
Chief, Engineering & Planning 1 1 1
Executive Secretary 1 1 1
Engineering Manager 2 2 2
Senior Civil Engineer 2 2 2
Associate Civil Engineer 2 2 2
Assistant Civil Engineer 1 2 2
Engineering Technicians I, II and III 4 5 5
Total 13 15 15
DISTRICT POSITION COUNT - 175
ENGINEERING & PLANNING DEPARTMENT - 15
195
Department Responsibilities
FY 2005 FY 2007
Actual Budget Estimated Budget
Planning/Design Chief 86,129$ 239,700$ 269,391$ 297,500$
Planning 230,918 574,500 749,768 448,400
Design 139,470 581,400 417,749 776,200
Water Resources - - 62,250 403,500
TOTAL 456,516$ 1,395,600$ 1,499,157$ 1,925,600$
FY 2006
ENGINEERING AND PLANNING
The Engineering and Planning Department, under the general direction of the Assistant General Manager, provides the
following support services: Engineering and Planning, Engineering Construction, Project Management and Design
planning; responsible for strategic planning, capital budget, water resources planning, support facilities planning,
environmental services, quality control, construction, developer designed and constructed facilities; coordinates assigned
activities with other district departments and outside agencies; provides highly responsible and complex administrative
and technical support to the District, General Manager, and Board of Directors.
FY 2007 Total Departmental Budget - $26.6 Million
Engineering and Planning - $1,925,600
Water Operations
40.7%
Finance
14.3%
Board of Directors
0.3%
Administrative
Services
12.5%
General Manager
5.3%
General Expense
4.0%
Engineering and
Planning
7.2%
Information
Technology and
Strategic Planning
10.0%
Development
Services
5.7%
196
ENGINEERING AND PLANNING
FY 2005 FY 2007
Actual Budget Estimated Budget
Labor and Benefits 409,237$ 598,700$ 876,782$ 993,100$
Travel and Meetings 5,127 13,400 7,980 19,300
General Office Expense 8,435 15,500 5,191 12,700
Equipment 1,378 1,500 - -
Fees - 1,500 680 -
Services 17,759 470,000 576,952 900,500
Training 184 - - -
Materials & Maintenance 14,397 295,000 31,572 -
Total 456,516$ 1,395,600$ 1,499,157$ 1,925,600$
FY 2006
$631
$403
$606
$436 $351 $457
$1,396 $1,499
$1,926
$-
$400
$800
$1,200
$1,600
$2,000
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Fiscal Year
Budget vs. Actual
Budget Actual
Estimated Adopted
197
Target Actual
CIP Project Completion - complete design within
their scheduled time N/A Within 120% of
planned duration 101.0%Within 120% of
planned duration
CIP Backbone Projects Expenditures - Compare
current year CIP backbone projects actual
expenditures with the quarterly projected
expenditures
74.0% 75% or Greater 92.0% 75% or Greater
Alternative or Emergency Water Supply - 10 days
or greater minimum target for total alternative or
emergency water supply available
N/A 100% or Greater 75.0% 100% or Greater
ENGINEERING AND PLANNING
PERFORMANCE INDICATORS
Fiscal Year
2006-2007
Target
Fiscal Year 2005-2006Activity/Criterion
Fiscal Year
2004-2005
Actual
Fiscal Year 2005-2006
198
Accomplishments – Fiscal Year 2005-2006
Planning
• Obtained an agreement with CWA for an additional 8 MGD supply from the Helix water
system.
• Improved existing and constructed additional inter-agency minor connections.
• Explored the opportunity to wheel CWA and transfer water through the proposed private
Mexican aqueduct.
• Evaluated potential joint ventures, groundwater sources, and RWCWRF alternatives.
• Completed the sewer flow calibration in anticipation of the Sewer System Management
Plan (SSMP) requirements (formerly known as CMOM).
• Oversaw consultant efforts for completion of 2-10 MG 640 Pre-stressed Concrete
Reservoirs.
• Completed the Otay Mesa Valve Engineering Study for Recycled Water.
• Managed and awarded a $15 million construction contract for 680/450 Recycle PS/RES.
• Completed SAMP (sub-area master plan) for Otay Village 2 and City of Chula Vista
General Plan Amendment.
• Designed procurement and managed the installation, start-up, and testing of the trailer-
mounted engine driven pump at the Lower Otay Pump Station site.
• Commenced feasibility study with Sweetwater Authority (SWA), City of Chula Vista,
and Otay Water District for a recycled water production facility, sewer capacity for the
City of Chula Vista, and seasonal conjunctive use concepts in the Sweetwater and Otay
Rivers.
Design
• Completed the preliminary design report (PDR) for Hidden Mountain Sewer Lift Station
(S2002) and Russell Square Sewer Lift Station (S2001). The reports recommended
keeping the stations in lieu of constructing two gravity sewer mains to the City of El
Cajon for a cost savings of approximately $850,000.
• Completed the design of the 15 MG 980-3 Reservoir (CIP P2037) and the SR-905 Utility
Relocation project (P2440).
• Completed the PDR for the 1485-1 Pump Station (CIP P2172). The pump station will
provide additional pumping capacity and flexibility for the 1485 pressure zone in the
North District.
ENGINEERING AND PLANNING
199
• Completed the PDR report and 60% design for the Ralph W. Chapman Water Recycling
Facility Force Main Air/Vac Replacement and Access Road Rehabilitation Project (CIP
R2086).
• Completed the PDR report for the Calavo Sewer Lift Station Replacement Project (CIP
S2015).
• Executed two utility agreements with Caltrans for SR-905 Utility Relocation.
• Leading the efforts for developing WADG (Water Agency Design Guideline) for all East
County sister agencies.
Water Resources
• Developed the concept to participate in the SD17 Alvarado Water Treatment Plant
(WTP) capacity idea of roving situational capacity and developed a draft Principles of
Understanding (POU) for cost sharing, etc.
• Completed the negotiations agreement for the East County Regional Treated Water
Implementation Plan (ECRTWIP) with CWA to receive $4,200,000 toward the
construction of the new 36” pipeline from FCF #14 to Regulatory Site.
• Developed the North District Recycled Water Concept plans and cost estimates to
promote the use of recycled water.
• Continued with compliance with the requirements of the State Water Resource Control
Board (SWRCB) $4,000,000 Proposition 50 grant award. Expect to receive lump sum
payment in FY 2007.
• Completed the agreements with the Bureau of Reclamation and the City of San Diego for
the Title XVI water reuse and recycling program. The District will receive up to 25%
grant funds for the recycled water system.
• Completed the North Tijuana River groundwater study.
• Developed the Integrated Resources Plan (IRP) scope of work, acquired a CDM
consultant contract, and proceeded with project development.
\ • Provided engineering support for the FY 2007 capacity fee rate model and water rate
financial model and completed the engineering analysis for the annexation fee excess
capacity and related asset values for the annexation fee analyses.
• Participated in the joint SWA and Otay grant development of the Otay River
Demineralization Feasibility Proposition 50 Chapter 6a grant application and grant
award.
• Prepared a Proposition 50 Chapter 6a grant application for the Rosarito Regional
Seawater Demineralization Water Acquisition feasibility study.
• Participated in the joint CWA, City of San Diego, SWA, and Otay grant development of
the Regional Concentrate Conveyance Feasibility Study for South San Diego County
Proposition 50 Chapter 6a grant application and grant award.
200
Goals and Objectives – Fiscal Year 2006-2007
Legend
Completed
Ahead of
Schedule
On Schedule
Behind Schedule
On Hold
No Reports
Not Scheduled to
Start Yet
Planning
Implement a long term facilities plan (Master Plan)
In coordination with operations prepare a long-term replacement and rehabilitation plan.
Improve existing and obtain additional inter-agency minor connections
Build a permanent connection with the City of San Diego
Evaluate additional sewer customers in or near our District
Evaluate alternatives for Chapman – close, expand, move
Obtain South Bay's excess capacity
Design
Promote the District's infrastructure planning activities and high profile projects
Evaluate potential real property trades, leases or sales to increase revenues
Evaluate CIP budget development, monitoring, and reporting process
Implement a comprehensive cathodic protection program
Water Resources
Evaluate expanding the use of recycled water for single family residential
in new developments
Promote acceptance of recycled water use in other geographic areas within the District's
sphere of influence
Replace the water that is currently pumped to Chula Vista with the new 6 MGD
recycled water from the city of San Diego
Aggressively pursue all relevant grants
201
Conduct value engineering studies during the CIP planning process to ensure Master plan
is optimized and identify local and regional solutions
Implement “constructability” review during the design process to minimize construction
change orders
Obtain the Lower Otay Treatment Water Supply Agreement from the City of San Diego
for a total of 26 million gallons per day (MGD)
Obtain an agreement with CWA/Helix for an additional 8 MGD
Explore opportunity to wheel CWA/Transfer water through proposed private Mexican
aqueduct
Evaluate potential groundwater sources
202
DEVELOPMENT SERVICES
Division Title Division No.
Development Services Chief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3411
Public Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3421
Construction Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3431
Survey Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3441
Environmental Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3451
Mission Statement
To provide the highest quality services to the development community and other
departments by; constructing District assets, expediting the permitting and
environmental processes, meeting or exceeding all regulations, and to attain excellent
customer satisfaction with dedicated employees and innovative technology.
203
Personnel Count FY 2005 FY 2006 FY 2007
Chief, Development Services 1 1 1
Public Services Manager 1 1 1
Secretary 1 1 1
Senior Civil Engineer 1 1 1
Associate Civil Engineer 1 1 1
Engineering Technicians I, II and III 3 3 2
Inspection Supervisor 1 1 1
Construction Inspectors 4 4 4
Surveying Supervisor 1 1 1
Survey Technician 1 1 1
Assistant Survey Technician 1 1 1
Office Assistant 1 1 1
Total 17 17 16
DISTRICT POSITION COUNT - 175
DEVELOPMENT SERVICES DEPARTMENT - 16
204
Department Responsibilities
FY 2005 FY 2007
Actual Budget Estimated Budget
Development Services Chief 174,345$ 900,100$ 559,518$ 277,100$
Public Services 16,880 155,700 254,576 130,800
Construction Services 106,117 168,000 244,636 205,200
Survey Services 8,656 239,000 243,495 245,500
Environmental Services - - - 643,700
TOTAL 305,999$ 1,462,800$ 1,302,225$ 1,502,300$
FY 2006
DEVELOPMENT SERVICES
The Development Services Department, under the general direction of the Assistant General Manager, provides the
following support services: Construction, Surveying, Public Services, Capital Improvement Programs; serves as liaison
with developers, and is responsible for the District’s environmental compliance program; provides highly responsible and
complex administrative and technical support to the District, General Manager, and Board of Directors.
FY 2007 Total Departmental Budget - $26.6 Million
Development Services - $1,502,300
Water Operations
40.7%
Finance
14.3%
Board of Directors
0.3%
Administrative
Services
12.5%
General Manager
5.3%
General Expense
4.0%Engineering and
Planning
7.2%
Information
Technology and
Strategic Planning
10.0%
Development
Services
5.7%
205
DEVELOPMENT SERVICES
FY 2005 FY 2007
Actual Budget Estimated Budget
Labor and Benefits 21,022$ 740,500$ 927,385$ 872,000$
Travel and Meetings 3,754 11,600 9,011 13,900
General Office Expense 4,791 12,700 8,524 7,400
Equipment 264 - 1,438 1,500
Fees 5,600 60,000 29,979 50,000
Services 268,965 606,000 318,667 555,500
Training 1,603 2,000 1,322 2,000
Materials & Maintenance - 30,000 5,900 -
Total 305,999$ 1,462,800$ 1,302,225$ 1,502,300$
FY 2006
$242 $306
$1,463
$1,302
$1,502
$-
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
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Fiscal Year
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Budget Actual
Estimated Adopted
206
Target Actual
Construction Change Orders - total cost of construction
change orders -0.19% Less than 5% -1.5% Less than 5%
Construction Claims - reduce construction claims -0.19%
Less than 5%
of contract
amount
0.0%
Less than 5%
of contract
amount
DEVELOPMENT SERVICES
PERFORMANCE INDICATORS
Activity/Criterion
Fiscal Year
2004-2005
Actual
Fiscal Year 2005-2006 Fiscal Year
2006-2007
Target
Fiscal Year 2005-2006
207
Accomplishments – Fiscal Year 2005-2006
Public Services
• Processed a total of 1,134 permits.
• Generated revenue totaling $8.7 million.
• Processed $2,907,087 in Reimbursement Agreements, saving the District $538,295. The
original request was for $3,445,382.
• Made changes to the District’s Policy 26 – Developer Reimbursement Sunset Clause and
the District’s Construction Agreements.
• Closed 100 projects and refunded developers their deposits in excess of $414,000.
• Completed ten division business processes.
Construction
• A total of 12 CIP projects were constructed or in progress, with a value of
$45 million. This is up from last year’s total of $15 million.
• A total of 37 Change Orders were issued valued at -$557,748; this represents -3.4% of
the total construction cost.
• Quality assurance and control was exercised for over 135,000 linear feet of pipe on
approximately 250 projects constructed by developers. All projects were accomplished
with no loss of time due to injuries or accidents.
• The Department managed 28 cell site leases that brought in over $723,000 in revenue for
the District.
• The following projects were completed this fiscal year: the Dehesa Road Pipeline, the
980-2 Pump Station, the 803-4 Reservoir, the 1485 Reservoir, the 980 30-Inch Pipeline,
the 458-1 and 458-2 Reservoirs Coating, the 485-1 Reservoir recoating, RWCWRF
Paving, and the Rolling Hills Ranch Hydropneumatic Pump Station.
• Conducted overall quality control management for facilities installed by developers.
• Conducted program/construction management for the following projects:
¾ 1485-2 Reservoir
¾ 980-2 Pump Station
¾ 803-4 Reservoir
¾ 980 Steel Pipeline
¾ 30'' Recycled Water Pipeline - 50% complete
¾ 450 Recycled Water Reservoir/680 Recycled Water Pump Station - 30% complete
DEVELOPMENT SERVICES
208
• Conducted constructability reviews for CIP projects.
• Managed Change Order incidence to less than 3% of a project's construction cost.
• Managed project closeout to less than 100 days between Notice of Substantial
Completion (NOSC) and Notice of Completion (NOC).
Survey
• 10 parcel maps and 28 subdivision maps with a total of 1,569 lots were added to the
cadastral base map this year. In addition, 270 assessor’s parcel map pages were
researched and all new parcels updated.
• In cooperation with the Engineering and Planning Department, the Survey Division
worked on 27 CIP projects this year. The work included boundary and topographical
surveys, construction staking and construction checks, facility location (pothole) surveys
and composition of easement legal descriptions.
• The Survey Division received weekly requests from the Valve Crew, Meter Shop, Sewer
Maintenance Crew, and Engineering front counter to find and/or verify locations of sewer
laterals, water meters, valves, manholes and blow offs.
• In January, the Blackberry was put into service for USA Mark outs. This enabled the
locater in the field to access the incoming tickets via e-mail.
• The Survey Division drafted 477 easements and exported them to the GIS.
• The Survey Division completed 2,476 mark outs by mid-June with an accuracy rate of
99.96%. Three hits would give a rate of 99.88%, so District facilities have been very
well protected.
• All assigned facility data collection on accepted projects was completed within four
weeks of receiving “as-built” records.
Environmental
• Brought the U.S. Bureau of Reclamation grant application to substantial completion in
March 2006, when the Board approved the signing of the sub-agreement with the City of
San Diego.
• Completed the 980-3 Reservoir Mitigated Negative Declaration which was adopted by
the Board of Directors on April 5, 2006.
• Provided construction phase support to the Recycled Water Projects, including
attendance of progress meetings, completion of the project’s Biological Opinion in
September 2005, and completion of the draft Mitigation and Monitoring Plan.
• Obtained authority to construct for retrofits on Engine #1, Engine #25, and the Lower
Otay Pump Station temporary engine to bring them into compliance with the Air Toxic
Control Measure.
209
• Completed the three-year re-vegetation project for the 803-2 Reservoir Pipeline and
access road easement.
• Assisted in the completion of the 640-1 Reservoir Mitigated Negative Declaration and its
adoption by the Board of Directors on February 1, 2006.
• Continued management of the San Miguel Habitat Management Area and the 1004-2
Reservoir access road five-year re-vegetation project.
• Managed the collection and removal of approximately 1,380 feet of asbestos cement
pipeline from the C.W. McGrath granite pit.
Goals and Objectives – Fiscal Year 2006-2007
Legend
Completed
Ahead of
Schedule
On Schedule
Behind Schedule
On Hold
No Reports
Not Scheduled to
Start Yet
Public Services
Develop enhanced outreach and communication programs to strengthen relationships
with developers
210
GENERAL EXPENSE
Insert picture
Division Title Division No.
General Expense 1311
Mission Statement
To record and track the general expenses of the District which are not
applicable to a specific department.
211
Description
FY 2005 FY 2007
Actual Budget Estimated Budget
General Expense 1,169,627$ 862,500$ 941,598$ 1,054,200$
TOTAL 1,169,627$ 862,500$ 941,598$ 1,054,200$
FY 2006
GENERAL EXPENSE
The expenses in this section are general operating expenses not associated with an individual department. The expenses
include: legal costs, insurance premiums, changes in accrued employee leave balances and miscellaneous interest. These
expenses represent 4% of the total Departmental Budget.
FY 2007 Total Departmental Budget - $26.6 Million
General Expense - $1,054,200
Water Operations
40.7%
Finance
14.3%
Board of Directors
0.3%
Administrative
Services
12.5%
General Manager
5.3%
General Expense
4.0%
Engineering and
Planning
7.2%
Information
Technology and
Strategic Planning
10.0%
Development
Services
5.7%
212
GENERAL EXPENSE
FY 2005 FY 2007
Actual Budget Estimated Budget
Labor and Benefits -$ -$ -$ 47,000$
Fees 1,169,627 862,500 941,598 1,006,500
Interest - - - 700
Total 1,169,627$ 862,500$ 941,598$ 1,054,200$
FY 2006
$465
$1,538
$677
$2,537
$777
$1,170
$863 $942 $1,054
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
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Fiscal Year
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Budget Actual
Estimated Adopted
213
The District provides water service to a population of approximately 189,000 which is
expected to ultimately increase to 277,000. The growth rate projected by the San Diego
Association of Governments (SANDAG) and incorporated in the Water Resources Master Plan
is nearly 6% per annum for the next 10-15 years. However, based on current economic
conditions, staff is projecting a 1.8% growth rate in population and equivalent dwelling units
(EDUs) for Fiscal Year 2007. The EDU is the demand created by a typical single-family
dwelling requiring a 3/4" water meter. A business creates a demand equivalent to several
single-family dwellings, thus the term equivalent dwelling unit. Presently, our projected
48,200 customer accounts equate to a projected 74,600 EDUs. The ultimate population of
277,000 will result in an estimated 114,000 EDUs and an average annual water demand of
approximately 56 million gallons per day (MGD).
To accommodate this growth requires that the District invest $530 million in capital assets
through ultimate build-out. The Fiscal Year 2007 Capital Budget is $34.5 million and the five-
year Capital Improvement Program (CIP) totals $137 million. A separate CIP Budget
Notebook contains the descriptions, justifications, expenditures, and funding for all the
identified projects to ultimate build-out.
Assumptions and Criteria
The Water Resources Master Plan was based on several major assumptions and design criteria
which are as follows:
1. Utilizing historical water demands for each land use type in the District to calculate future
demands;
2. Using maximum day peaking factors that vary with demand level;
3. Utilizing land use as planned by the City of Chula Vista;
4. Providing ten days of emergency water supply through a maximum of five days in covered
reservoirs and a minimum of five days from interconnections with adjacent agencies;
5. Inclusion of emergency operational storage to meet the five-day covered storage
requirement into the ten-day outage supply requirement.
In summary, the CIP is developed based on the District's Water Resources Master Plan,
incorporating historical data, growth, developers' input, SANDAG projections, and long-term
economic outlook.
Justification for Project and Impact on Operating Budget
The justification for each project is determined by whether it is required due to growth
(Expansion), 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 cost in the areas of maintenance, energy or
chemicals as shown on the justification and impact pages in this section.
CAPITAL IMPROVEMENT PROGRAM
214
Capital Purchases and Facilities
This year, all capital expenditures are in the CIP. This includes capital facilities and capital
purchases. 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 Vehicle, Office Equipment and Furniture, and Field
Equipment purchases, the details of which can be found on page 223. Capital facility projects
are items that exceed $10,000 or $20,000 for infrastructure related items and have a useful life
of at least two years.
The Capital Improvement Program (CIP) projects identified are prioritized based on the
following criteria:
1. Safety, restoration of service, immediate obligation, Board directed or critical system need.
2. System upgrades or requirements to maintain system reliability in the next few fiscal years.
3. Need to meet the future growth of the system.
4. Project requirement may be reduced in capacity or may have low probability of need in the
future.
The Capital Improvement Program includes the following three categories of improvement
projects:
Expansion
Facilities required to support new or future users which are funded from capacity fees.
Betterment
Facilities required because of inadequate capacity or new requirements that benefit existing
users and funded from availability and betterment fees.
Replacement
Facilities required to renew or replace existing facilities that have deteriorated or have
exceeded their useful life and are funded from user rates.
Capital Improvement Projects
The 2007 Fiscal Year CIP Budget contains 90 projects. The cost of the work planned for
Fiscal Year 2007 is $34.5 million. Of the 90 projects planned for Fiscal Year 2007, 27 are
designated as reimbursable projects, totaling $3.4 million. These projects are built by
developers and reimbursed by the District.
CAPITAL IMPROVEMENT PROGRAM
215
The following shows how the $34.5 million of projects are broken down into four categories:
1. Capital facilities $ 25.5 million
2. Developer reimbursement $ 3.4 million
3. Replacement or renewal $ 3.9 million
4. Capital purchases $ 1.7 million
The Five-Year CIP and Fiscal Year 2007 Capital Budgets are
consistent with the District's Water Resources Master Plan,
current capacity fees, and the District's strategic financial
objectives.
MAJOR CIP PROJECTS
216
Key
Component:
25,000 GPM (36 MGD) pump
station delivering water to the 980
potable water pressure zone.
Schedule:
Board approved award of
construction contract in September
2004. Construction began in
October 2004. Completed in June
2006.
Cost:
Budget was 100% spent.
Significant
Issues:
APWA Honor Award will be given
on September 14, 2006.
Warranty items being worked on at
no cost to the District.
- One pump has been pulled for
warranty repair.
- ATS in process of installation.
980-2 Pump
Station
This project is
complete and
was accepted
into the
District’s
system in
June 2006.
FLAGSHIP CIP PROJECTS COMPLETED
217
Key
Component:
7,900 linear feet of 30-inch CML&C steel pipeline, from
Hunte Parkway to the 980 Reservoirs and 5,000 feet of
access road.
Schedule:
Notice to proceed dated April 20, 2005. Completed May
2006.
Cost:
Budget was 100% spent.
Key
Component:
Remove an existing 1 MG reservoir and construct a new
6 MG above-ground steel reservoir.
Schedule:
Board approved the construction contract in October
2004. Completed June 2006.
Cost:
This project came in $390,000 under budget.
30-Inch Pipeline,
980 Pressure Zone
This is an important
project due to
increasing demand
in Eastern Chula
Vista, 980 Zone.
Project was
designed in-house
and accepted by the
District in May 2006.
803-4, 6 MG
Reservoir
This project is
complete and
was accepted
into the
District’s
system in
June 2006.
218
Key
Component:
Construction of a new 1.6 MG steel reservoir.
Rehabilitation of the existing 0.3 MG steel reservoir.
Schedule:
Board approved the construction contract in May 2004.
Construction began in June 2004. The new 1485-2 Reservoir was
completed in November 2005, and the rehabilitation of the
existing 1485-1 Reservoir was completed in May 2006.
Cost:
This project came in $80,000 under budget.
1485-2, 1.6 MG
Reservoir
This project is
complete and
was accepted
into the
District’s
system in May
2006.
219
Key
Component:
Approximately 6 miles of 30” pipeline for recycled water from City
of San Diego’s South Bay Water Reclamation Plant (SBWRP) to
Otay’s 450-1 Reservoir and 680-1 Pump Station.
Schedule:
Full notice to proceed given on September 28, 2005. Contract
completion date is November 21, 2006.
Cost:
The overall project budget is 69% spent - $15.53 million out of a
total budget of $22.6 million.
Significant
Issues:
Project is progressing well. Construction contract is on schedule and
75% complete as of June 30, 2006.
30” Recycled Water
Pipeline Project
Project was awarded
for construction in
May 2005. This
pipeline will deliver
recycled water from
South Bay to the 450 /
680 Reservoir and
Pump Station. Project
is expected to be
completed in the fall
of 2006.
CIP PROJECTS IN CONSTRUCTION AND AHEAD OF SCHEDULE
220
980-3 15 MG Reservoir
Key Component:
12,000 GPM (17.3 MGD) pump station delivering recycled water from
450-1 Reservoir to the 680 and 944 recycled water pressure zones.
Schedule:
Construction started in late November 2005. Contract completion date is
March 14, 2007.
Cost: The overall project budget is 51% spent - $9.36 million out of a total
budget of $18.2 million.
Significant
Issues:
Construction contract is on schedule and 57% complete as of June 30,
2006.
Key
Component:
Otay Engineering staff is designing a
15 million gallon
pre-stressed, circular, concrete
reservoir adjacent to our two existing
reservoirs in the use area.
Schedule: 90% design completed. Construction
to begin in FY10.
Cost:
The overall project budget is 7%
spent.
Significant
Issues:
Project has been rescheduled in order
to complete other higher priority
projects. Additionally, other system
improvements have allowed this
project completion date to be
extended. Remaining design work
will be completed toward the end of
FY09 with construction starting in
early FY10.
450-1 Reservoir /
680-1 Pump Station
Reservoir and the Pump
Station are under
construction. Project is
expected to be completed in
the spring of 2007.
221
East County Regional Treated Water Improvement Program (ECRTWIP):
Key
Component:
Acquire an additional 4 MGD of local treatment capacity for a total of 12 MGD
on-peak capacity and 16 MGD off-peak capacity from Helix Water District
through the San Diego County Water Authority (CWA).
Otay’s portion is the construction of a 36” pipeline.
Schedule:
ECRTWIP agreement fully executed on April 27, 2006.
FCF #14 to be completed by December 2007 (CWA).
The 36” pipeline is expected to be completed by January 2010 (OWD).
Cost:
FY06 budget was expended.
Significant
Issues:
Four water districts involved (Otay, Padre, Lakeside and Helix) with CWA.
Each agency to pay for infrastructure.
CWA to contribute $4.2 million toward construction the new 36” pipeline by
Otay from FCF #14 to regulatory site.
OWD in process of hiring design consultant for the pipeline.
Total budget: $12.68 million OWD’s share: $8.28 million
City of San Diego’s WTP Capacity:
Key
Component:
Acquire at least 30 MGD of local treatment capacity from City of San Diego
(City).
Schedule:
Staff continues discussions with City and SDCWA staffs.
Cost:
Only staff time has been budgeted; project cost is dependent upon negotiations
outcome.
The City will supply “Surplus Water” from Otay WTP to Otay per the current 1999
agreement.
Re-established negotiations with the City with the new staff appointed recently by the
Mayor.
The City has an opportunity of a $10,000,000 grant for a pump station at the Alvarado
WTP to pump into CWA Pipeline No. 4.
Draft Principles of Understanding (POU) with the City have been prepared related to
222
(Thousand $000s) FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 Total
Capacity Fees 7,331$ 8,174$ 11,922$ 10,695$ 10,874$ 20,084$ 69,079$
Debt financing 27,500 - 18,350 - 13,150 - 59,000
Grants 4,240 1,616 3,592 3,592 2,080 1,520 16,640
Interest 1,291 2,098 2,370 2,552 2,410 2,337 13,058
Betterment Charges 949 1,017 1,054 1,093 1,133 1,174 6,420
Temporary Meters 800 804 812 820 828 836 4,900
Availability (Betterment Portion) 546 561 584 605 625 653 3,575
Transfer from General Fund 12,500 13,579 6,875 7,837 8,363 9,137 58,291
Interfund Transfers 356 705 537 674 423 334 3,030
Total Sources 55,513 28,554 46,096 27,868 39,886 36,075 233,992
Total CIP Projects 34,542 32,720 37,422 32,657 45,596 36,201 219,138
Less: 20% Experienced Adjustment (6,908) (6,544) (7,484) (6,531) (9,119) (7,240) (43,828)
CIP Projects, adjusted (1)27,634 26,176 29,938 26,126 36,477 28,961 175,311
Debt Service 3,167 3,840 5,642 5,444 6,394 6,573 31,060
Developer Services 1,000 1,005 1,015 1,026 1,036 1,046 6,128
Interfund Transfers 356 705 537 674 423 334 3,030
Total Uses 32,158 31,726 37,132 33,269 44,330 36,914 215,528
Net Sources (Uses)23,356$ (3,172)$ 8,964$ (5,401)$ (4,444)$ (839)$ 18,464$
(1) The District expects that 80% of the projected CIP costs will be expended in the fiscal year budgeted.
CIP RESERVE FUNDS
$3,924
$26,709
$13,956
$4,469
$26,196
$10,753
$4,105
$25,759
$20,517
$2,448
$25,853
$16,679
$3,325
$29,639
$7,573
$2,896
$26,310
$10,492
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
Th
o
u
s
a
n
d
s
FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012
Fiscal Year
RESERVE FUND BALANCES
Betterment Replacement Expansion
223
CIP FUNDING SOURCE AND CATEGORY
(Thousands $000)FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 TOTAL
Expansion 24,083$ 19,301$ 26,668$ 24,857$ 41,679$ 26,087$ 162,674$
Betterment 2,882 8,037 7,212 4,697 1,186 2,592 26,605
Replacement 7,577 5,382 3,542 3,104 2,732 7,523 29,859
TOTAL 34,542$ 32,720$ 37,422$ 32,657$ 45,596$ 36,201$ 219,138$
(Thousands $000s)FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 TOTAL
Capital Facility Projects 25,478$ 22,810$ 29,220$ 25,604$ 22,753$ 11,187$ 137,052$
Replacement/Renewal Projects 3,930 2,531 1,708 1,664 1,399 1,600 12,832
Capital Purchase Projects 1,725 693 670 320 320 310 4,038
Developer Reimbursement Projects 3,409 6,681 3,739 1,481 681 - 15,991
Subtotal 34,542 32,715 35,337 29,069 25,153 13,097 169,913
FY 2008 Through FY 2012 Projects - 5 2,085 3,588 20,443 23,104 49,225
TOTAL 34,542$ 32,720$ 37,422$ 32,657$ 45,596$ 36,201$ 219,138$
$0
$10,000
$20,000
$30,000
$40,000
FY2007 FY2008 FY2009 FY2010 FY2011 FY2012
FIVE-YEAR CIP BY FUNDING SOURCE
Betterment Replacement Expansion
$0
$10,000
$20,000
$30,000
$40,000
FY2007 FY2008 FY2009 FY2010 FY2011 FY2012
FIVE-YEAR CIP BY CATEGORY
Capital Facility Projects Replacement/Renewal Projects
Capital Purchase Projects Developer Reimbursement Projects
224
CIP No. Description FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 Total
CAPITAL FACILITY PROJECTS
P2008 PS - 980-2 Pump Station (25,000 GPM) 5$ -$ -$ -$ -$ -$ 5$
P2009 PL - 36-Inch, SDCWA Otay FCF No. 14 to Regulatory Site 675 2,550 4,900$ 6,682$ 3,601 - 18,408
P2028 Res - 1485-2 Reservoir 1.6 MG 50 - - - - - 50
P2033 PL - 16-Inch, 1296 Zone, Melody Rd. - Campo/Presilla 6 186 1,157 472 - - 1,821
P2037 Res - 980-3 Reservoir 15.0 MG 50 - - 2,500 6,500 3,644 12,694
P2038 PL - 12-Inch, 978 Zone, Jamacha and Hidden Mesa Road Upsize and Replace. 80 480 690 285 - - 1,535
P2040 Res - 1655-1 Reservoir 0.5 MG 45 85 1,115 339 - - 1,584
P2129 Groundwater Exploration Program 25 10 10 25 630 1,280 1,980
P2143 Res - 1296-3 Reservoir 2.0 MG 345 1,175 1,776 - - - 3,296
P2168 Res - 803-4 Reservoir 6.0 MG 265 - - - - - 265
P2172 PS - 1485-1 Pump Station Replacement 237 1,356 289 - - - 1,882
P2185 Res - 640-1 Reservoir 20.0 MG 1,000 9,000 8,500 6,800 - - 25,300
P2190 PL - 10-Inch, 1485 Zone, Jamul Highlands Road to Presilla Drive 2 40 75 - - - 117
P2191 Res - 850-4 Reservoir 2.2 MG 1,258 1,279 - - - - 2,537
P2258 PS - Lower Otay Pump Station 105 - - - 2,950 2,900 5,955
P2295 624-1 Reservoir Disinfection Facility, Inlet/Outlet/Bypass and 613-1 Reservoir Demo. 500 - - - - - 500
P2318 PL - 20-Inch, 657 Zone, Summit Cross-Tie and 36-Inch Main Connections 75 500 - - - - 575
P2356 PL - 12-Inch, 803 Zone, Jamul Drive Permastran Pipeline Replacement 55 315 240 - - - 610
P2357 PS - 657-1/850-1 Pump Station Demolition 5 49 246 - - - 300
P2370 Res - Dorchester Reservoir and Pump Station Demolition 23 67 - - - - 90
P2387 PL - 12-Inch, 832 Zone, Steele Canyon Road - Via Caliente/Campo 25 185 160 - - - 370
P2399 PL - 30-Inch, 980 Zone, 980 Reservoirs to Hunte Parkway 1 - - - - - 1
P2422 Agency Interconnections 160 54 - - - - 214
P2425 Otay WTP Capacity Purchase Agreement Negotiations 20 20 20 - - - 60
P2441 NG/RAMAR Replacements 1,250 - - - - - 1,250
P2447 Information Technology Meter Routing 80 - - - - - 80
P2449 Information Technology Business Continuity 225 - - - - - 225
P2450 Otay River Groundwater Well Demineralization/Development 5 10 100 885 3,600 400 5,000
P2451 Rosarito Desalination Facility Conveyance System 2 3 10 100 85 800 1,000
P2453 SR-11 Utility Relocations 5 170 120 680 655 670 2,300
P2454 Vaults and Meter, Alta Road and Use Area 253 212 - - - - 465
P2457 East Otay Mesa Groundwater Well Development 50 250 6,000 200 - - 6,500
P2458 AMR Retrofit 361 1,477 1,362 1,338 1,482 1,493 7,513
R2001 RecRes - 450-1 Reservoir 12.0 MG 4,300 667 - - - - 4,967
R2003 RecRes - 680-1 Reservoir 3.4 MG 250 - - - - - 250
R2004 RecPS - 680-1 Pump Station (11,500 GPM) 4,300 433 100 - - - 4,833
R2022 RecPL - 30-Inch, 450 Zone, Otay Valley - Dairy Mart/450-1 Reservoir 7,500 100 - - - - 7,600
R2034 RecRes - 860-1 Reservoir 4.0 MG 120 180 200 1,800 1,500 - 3,800
R2053 RWCWRF - R.O. Building Remodel and Office Furniture 289 65 - - - - 354
R2077 RecPL - 24-Inch, 860 Zone, Alta Road - Alta Gate/Airway 50 200 250 1,000 1,500 - 3,000
R2081 RecPL - 16-Inch, 944 Zone, Lane Avenue - Proctor Valley/Pond No. 1 150 200 - - - - 350
R2086 RWCWRF Force Main AirVac Replacements and Road Improvements 793 - - - - - 793
R2087 RecPL - 16-Inch, 944 Zone, Wueste Road - Olympic Parkway/Otay Treatment Plant 100 500 1,500 1,498 - - 3,598
R2088 RecPL - 24-Inch, 860 Zone, County Property - Roll Reservoir/860-1 Recycled Reservo 50 100 100 1,000 250 - 1,500
R2089 North District Recycled Water (Regulatory Compliance) 100 315 415
S2015 Calavo Lift Station Replacement 133 502 - - - - 635
S2016 Pilot Study / Solar Panel Installation 100 75 300 - - - 475
47 Total Capital Facility Projects 25,478 22,810 29,220 25,604 22,753 11,187 137,052
CAPITAL IMPROVEMENT PROGRAM ($1,000s)
225
CIP No. Description FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 Total
CAPITAL IMPROVEMENT PROGRAM ($1,000s)
REPLACEMENT/RENEWAL PROJECTS
P2267 36-Inch Main Pumpouts and Air/Vacuum Ventilation Installations 150 - - - - - 150
P2359 Operations EOC and Meter Shop Remodels and EOC Maps 71 47 - - - - 118
P2366 APCD Engine Replacements and Retrofits 150 150 150 150 150 300 1,050
P2382 Safety and Security Improvements 392 200 200 214 - - 1,006
P2416 SR-125 Utility Relocations 210 - - - - - 210
P2440 I-905 Utility Relocations 1,191 660 - - - - 1,851
P2456 District-Wide Air Vac Upgrades 500 580 580 600 600 650 3,510
P2459 Olive Vista Drive Utility Relocations 350 70 420
S2012 SVSD Outfall and RSD Replacement and OM Reimbursement 916 824 778 700 649 650 4,517
9 Total Replacement/Renewal Projects 3,930 2,531 1,708 1,664 1,399 1,600 12,832
CAPITAL PURCHASE PROJECTS
P2282 Vehicle Capital Purchases 266 127 220 220 220 210 1,263
P2286 Field Equipment Capital Purchases 59 100 100 100 100 100 559
P2353 Information Technology System Enhancements and Replacements 385 366 350 - - - 1,101
P2361 Information Technology GIS Enhancements 315 100 - - - - 415
P2363 Information Technology Utility Billing, Data Management, and Financial System 300 - - - - - 300
P2443 Information Technology Mobile Services 100 - - - - - 100
P2455 Data Cleansing Project 300 - - - - - 300
7 Total Capital Purchase Projects 1,725 693 670 320 320 310 4,038
DEVELOPER REIMBURSEMENT PROJECTS
P2026 PL - 20-Inch, 850 Zone, Jamacha Boulevard - Regulatory Site/Trace Road 50 - - - - - 50
P2070 PL - 16-Inch, 980 Zone, Pacific Bay Homes Road- Proctor Valley/1296 Hydro PS 500 - - - - - 500
P2081 PL - 36-Inch, 980 Zone, Proctor Valley Road - PB Road/PB Bndy 1 - - - - - 1
P2104 PL - 12-Inch, 711 Zone, La Media Road - Birch/Rock Mountain 110 608 115 - - - 833
P2107 PL - 12-Inch, 711 Zone, Rock Mountain Road - La Media/SR 125 195 422 105 - - - 722
P2121 PL - 16-Inch, 711 Zone, Hunte Parkway - Olympic/EastLake 600 287 287 - - - 1,174
P2133 PL - 16-Inch, 711 Zone, EastLake Parkway - Olympic/Birch 190 460 100 - - - 750
P2134 PL - 16-Inch, 711 Zone, Birch Road - SR 125/EastLake 65 297 50 - - - 412
P2164 PL - 20-Inch, 980 Zone, EastLake Parkway - Olympic/Birch 200 250 50 - - - 500
P2205 PS - Rolling Hills Hydro Pump Station (1,400 GPM) 300 - - - 300
P2325 PL - 10" to 12" Oversize, 1296 Zone, PB Road - Rolling Hills Hydro PS/PB Bndy 45 1 - - - 46
P2367 PL - 16-Inch, 980 Zone, Olympic Parkway - East Palomar/EastLake 1 464 800 - - - 1,265
P2402 PL - 12-Inch, 624 Zone, La Media Road - Village 7/Otay Valley 50 350 44 - - - 444
P2414 PL - 12" to 16" Oversize, 803 Zone, Dehesa Road - Dehesa Meadow/OWD Bndy 25 110 - - - 135
P2435 PL - 16-Inch, 711 Zone, Birch Road - La Media/SR 125 250 280 1 - - - 531
R2031 RecPL - 12-Inch, 944 Zone, EastLake Parkway - Olympic/Birch 160 69 - - - 229
R2033 RecPL - 12-Inch, 944 Zone, Birch Road - La Media/EastLake 230 558 - - - 788
R2040 RecPL - 12-Inch, 680 Zone, Hunte Parkway - Olympic/EastLake 200 459 400 - - - 1,059
R2041 RecPL - 8-Inch, 944 Zone, EastLake Parkway - Birch/Rock Mountain 130 152 - - - 282
R2042 RecPL - 8-Inch, 944 Zone, Rock Mountain Road - SR 125/EastLake 1 139 1 - - - 141
R2043 RecPL - 8-Inch, 944 Zone, Rock Mountain Road - La Media/SR 125 1 230 4 - - - 235
R2047 RecPL - 12-Inch, 680 Zone, La Media Road - Birch/Rock Mountain 100 334 1 - - - 435
R2058 RecPL - 16-Inch, 860 Zone, Airway Road - Otay Mesa/Alta 1 400 499 400 380 - 1,680
R2082 RecPL - 24-Inch, 680 Zone, Olympic Parkway - Village 2/Heritage 1 239 421 936 150 - 1,747
R2083 RecPL - 20-Inch, 680 Zone, Heritage Road - Village 2/Olympic 1 103 175 30 31 - 340
R2084 RecPL - 20-Inch, 680 Zone, Village 2 - Heritage/La Media 1 234 571 80 84 - 970
R2085 RecPL - 20-Inch, 680 Zone, Village 2 - High School/Olympic 1 235 115 35 36 - 422
27 Total Developer Reimbursement Projects 3,409 6,681 3,739 1,481 681 - 15,991
90 Total - FY 2007 Projects 34,542 32,715 35,337 29,069 25,153 13,097 169,913
FY 2008 Through FY 2012 Projects - 5 2,085 3,588 20,443 23,104 49,225
Grand Totals 34,542$ 32,720$ 37,422$ 32,657$ 45,596$ 36,201$ 219,138
226
CIP JUSTIFICATION AND IMPACT ON OPERATING BUDGET
CIP No. Description J/FS (2)Total FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 Total
P2008 PS - 980-2 Pump Station E 369,800$ 369,800$ 380,900$ 392,300$ 404,100$ 416,200$ 1,963,300$
P2009 PL - 36-Inch, SDCWA Otay E 8,700 8,700 8,700
P2028 Res - 1485-2 Reservoir E/B 3,000 3,000 3,100 3,200 3,300 3,400 16,000
P2033 PL - 16-Inch, 1296 Zone E 2,200 2,200 2,300 4,500
P2038 PL - 12-Inch, 978 Zone B/R 1,500 1,500 1,500 3,000
P2040 Res - 1655-1 Reservoir B 900 900 900 1,800
P2143 Res - 1296-3 Reservoir E 3,800 3,800 3,900 4,000 11,700
P2168 Res - 803-4 Reservoir E/B/R 9,500 9,500 9,800 10,100 10,400 10,700 50,500
P2172 PS - 1485-1 Pump Station B/R 7,000 7,000 7,200 7,400 21,600
P2185 Res - 640-1 Reservoir E/B 37,600 37,600 38,700 76,300
P2190 PL - 10-Inch, 1485 Zone B 400 400 400 400 1,200
P2191 Res - 850-4 Reservoir E/B 4,200 4,200 4,300 4,400 4,500 17,400
P2318 PL - 20-Inch, 657 Zone B 100 100 100 100 100 400
P2387 PL - 12-Inch, 832 Zone B 600 600 600 600 1,800
P2399 PL - 30-Inch, 980 Zone E 1,000 1,000 1,000 1,000 1,000 1,000 5,000
P2447 IT Meter Routing E/R 200 200 200 200 200 200 200 1,200
P2457 East Otay Mesa Groundwater E 700 700 700 1,400
P2458 AMR Retrofit B/R (194,100) (8,700) (36,500) (34,500) (34,700) (39,300) (40,400) (194,100)
R2001 RecRes - 450-1 Reservoir E 22,500 22,500 23,200 23,900 24,600 94,200
R2003 RecRes - 680-1 Reservoir E 6,300 6,300 6,500 6,700 6,900 7,100 33,500
R2004 RecPS - 680-1 Pump Station E 170,100 170,100 175,200 180,500 525,800
R2022 RecPL - 30-Inch, 450 Zone E 9,500 9,500 9,800 10,100 10,400 39,800
R2034 RecRes - 860-1 Reservoir E 7,500 7,500 7,500
R2077 RecPL - 24-Inch, 860 Zone E 2,700 2,700 2,700
R2081 RecPL - 16-Inch, 944 Zone E 2,700 2,700 2,700 2,700 2,700 10,800
R2087 RecPL - 16-Inch, 944 Zone E 1,500 1,500 1,500
R2088 RecPL - 24-Inch, 860 Zone E 2,400 2,400 2,400
Total Capital Facility Projects 811,700 (8,500) 353,300 406,000 600,800 659,500 698,800 2,709,900
(1)O&M costs include labor and benefits, materials, and overhead.
(2)J/FS - Justification and Funding Source - Some projects have multiple funding sources as indicated by a slash (/):
E - Expansion
B - Betterment
R - Replacement
Note:See pages 225-226 for complete description of CIP projects.
CAPITAL FACILITY PROJECTS
As the District grows and constructs new capital assets, the cost to maintain these new assets will be
added to the operating budget as they are brought into service. To determine the cost to maintain these
new assets, the District looks at the cost of maintaining similar assets through the Infrastructure
Management System and financial system. Costs are tracked by three main infrastructure asset groups
of pipes, pump stations and reservoirs, as well as capital purchases and other types. Pipes typically
have only operation and maintenance (O&M) costs associated with them, pump stations have O&M as
well as power cost, and reservoirs have O&M and chemical cost. Each of the capital purchases and
other types has its own unique O&M cost (1).
When the new assets are built or acquired for expansion or betterment, it is assumed that there will be
new operating costs associated with them. Some projects such as the Automated Meter Reading
program actually reduce operating costs through the automation process.
Projected Incremental Operating Expenditures
227
CIP JUSTIFICATION AND IMPACT ON OPERATING BUDGET
CIP No. Description J/FS
(2)Total FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 Total
P2282 Vehicle Capital Purchases R 29,500 14,800 22,500 63,300 130,400 268,600 553,300 1,052,900
P2286 Field Equipment Capital Purch R 1,000 500 1,400 2,800 5,800 11,900 24,500 46,900
P2443 IT Mobile Services E/R 18,000 18,000 18,500 19,100 19,700 20,300 95,600
Total Capital Purchase Projects 48,500 15,300 41,900 84,600 155,300 300,200 598,100 1,195,400
P2026 PL - 20-Inch, 850 Zone E/B 1,200 1,200 1,200 1,200 1,200 1,200 6,000
P2070 PL - 16-Inch, 980 Zone E 1,000 1,000 1,000 1,000 1,000 1,000 5,000
P2081 PL - 36-Inch, 980 Zone E 500 500 500 500 500 500 2,500
P2104 PL - 12-Inch, 711 Zone E 2,000 2,000 2,100 2,200 6,300
P2107 PL - 12-Inch, 711 Zone E 1,700 1,700 1,800 1,900 5,400
P2121 PL - 16-Inch, 711 Zone E 2,900 2,900 3,000 3,100 9,000
P2133 PL - 16-Inch, 711 Zone E 1,900 1,900 2,000 2,100 6,000
P2134 PL - 16-Inch, 711 Zone E 1,000 1,000 1,000 1,000 3,000
P2164 PL - 20-Inch, 980 Zone E 900 900 900 900 2,700
P2205 PS - Rolling Hills Hydro E 20,700 20,700 21,300 21,900 22,600 23,300 109,800
P2325 PL - 10" to 12" Oversize E 2,300 2,300 2,400 2,500 2,600 9,800
P2367 PL - 16-Inch, 980 Zone E 3,300 3,300 3,400 3,500 10,200
P2402 PL - 12-Inch, 624 Zone E 1,000 1,000 1,000 1,000 3,000
P2414 PL - 12" to 16" Oversize E 2,400 2,400 2,500 2,600 2,700 10,200
P2435 PL - 16-Inch, 711 Zone E 1,400 1,400 1,400 1,400 4,200
R2031 RecPL - 12-Inch, 944 Zone E 900 900 900 900 900 3,600
R2033 RecPL - 12-Inch, 944 Zone E 2,100 2,100 2,200 2,300 2,400 9,000
R2040 RecPL - 12-Inch, 680 Zone E 2,900 2,900 3,000 3,100 9,000
R2041 RecPL - 8-Inch, 944 Zone E 1,400 1,400 1,400 1,400 1,400 5,600
R2042 RecPL - 8-Inch, 944 Zone E 900 900 900 900 2,700
R2043 RecPL - 8-Inch, 944 Zone E 1,200 1,200 1,200 1,200 3,600
R2047 RecPL - 12-Inch, 680 Zone E 1,400 1,400 1,400 1,400 4,200
R2058 RecPL - 16-Inch, 860 Zone E 5,400 5,400 5,400
R2082 RecPL - 24-Inch, 680 Zone E 3,100 3,100 3,100
R2083 RecPL - 20-Inch, 680 Zone E 700 700 700
R2084 RecPL - 20-Inch, 680 Zone E 2,000 2,000 2,000
R2085 RecPL - 20-Inch, 680 Zone E 900 900 900
Total Developer Reimbursement Projects 67,100 - 23,400 33,100 56,500 58,100 71,800 242,900
Total Operating Budget Cost Impact 927,300$ 6,800$ 418,600$ 523,700$ 812,600$ 1,017,800$ 1,368,700$ 4,148,200$
FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 Total
6,800$ 77,200$ 159,300$ 284,900$ 456,200$ 786,900$ 1,771,300$
- 332,500 342,400 503,400 518,500 534,100 2,230,900
- 8,900 21,800 24,200 43,100 48,000 146,000
6,800$ 418,600$ 523,500$ 812,500$ 1,017,800$ 1,369,000$ 4,148,200$
Operations and Maintenance
Energy
Chemical
Total Operating Budget Cost Impact
The preceding schedule shows anticipated operating costs associated with each project in the CIP, and
below is a summary of each category of new costs that will be impacted. No additional revenues are
associated with the individual projects, as revenues are linked more directly to growth in water sales
and capacity fee revenues.
Cost Category
CAPITAL PURCHASE PROJECTS
DEVELOPER REIMBURSEMENT PROJECTS
Projected Incremental Operating Expenditures
228
FY 2007 CAPITAL PURCHASES BUDGET
Item#Description Amount Type
Field Equipment
Operations
116 Miller Dynasty 700 Tigrunner w/400A Water Cooled Torch Kit.
P.N. MIL 907310011
$ 11,050 R
118 Concrete Trailer Double Axel Drum Mixer 17,600 N
120 2000-gallon stainless steel water tank to be mounted on a truck chassis (not included) and
equipped with a pump and dispenser.30,000 N
Total Field Equipment 58,650
Vehicles
Finance
107 Hybrid 22,000 N
108 Hybrid 22,000 N
109 Hybrid 22,000 N
114 2007 Ford Ranger Super Cab 4 Door, w/4.0 V6 and automatic transmission. 18,500 R
115 2006 or 2007 For Ranger Supercab 4 door w/4.0 engine and automatic transmission. 18,500 R
Total Vehicles - Operations 103,000
Operations
111 2006 Ford F-150 Super Cab, Short Bed w/4.6 V8 engine and automatic transmission. 22,500 N
121 2006 Ford F-250 Super Cab Shorbed w/5.4 V8 engine and automatic Transmission. 25,500 R
122 2007 Sterling L8500 Cab & Chassis as specified for use in the Utility Maintenance Section.52,500 N
124 Ford Escape 20,000 R
125 Ford Escape 20,000 R
126 2006 Ford F-150 Super Cab Shortbed w/4.6 V8 Engine and Automatic Transmission. 22,500 R
Total Vehicles - Operations 163,000
Total of Vehicles 266,000
Total Capital Purchases Budget 324,650$
N -New
R -Replacement
229
The Fiscal Budget contains terminology that is unique to public finance and budgeting. The
following budget glossary provides assistance in understanding these terms.
Accrual Basis of Accounting: The basis of accounting under which transactions are
recognized when they occur, regardless of the timing of cash receipts and disbursements.
Acre-Foot: The volume of water that will cover one acre to a depth of one foot. One acre-
foot equals 435.6 units or 325,850 gallons.
Additional Systems Fees: Effective May 1, 1986, each customer receiving water service in
the Improvement District 9 water service zone pays an additional monthly meter system
charge of $2.00 for each meter in service.
Annexation Fees: Whenever utility service is requested for land outside the boundaries of an
improvement district, the land to be serviced must first be annexed. The annexation fee for
water was set on May 30, 2006 at $1,411 per EDU. The fee for sewer annexation was set at
$3,819 on December 16, 1998. These base rates are adjusted quarterly according to a cost of
living index. Assets: Resources owned or held by Otay Water 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, 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 restricted only for the purpose of constructing facilities in the improvement
district for which it was assessed.
Balanced Budget: A balanced financial plan, for a specified period of time that matches all
planned revenues and expenditures with various services. The District uses a fiscal year
beginning each July 1 and ending each June 30 for budgetary and financial reporting
purposes.
Betterment Fees: In addition to other applicable water rates and charges, certain water
customers pay a fee based on water service zone or improvement district. These are restricted
for the use in the area where they are collected and may be used for the construction and
maintenance of facilities.
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.
GLOSSARY
230
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 Reservation Charge: A Metropolitan Water District charge passed on by the San
Diego County Water Authority to individual agencies. This fee is paid based on the
District’s peak water demand.
Capital Budget: The portion of the annual budget that appropriates funds for the purchase of
capital equipment items and capital improvements. These expenditures are separated from
regular operating items, such as salaries, utilities and office supplies. The Capital Budget
includes funds for capital equipment purchases over $10,000, such as vehicles, furniture,
machinery, microcomputers and special tools or $20,000 for infrastructure related items,
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 or $20,000 for infrastructure related items.
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 the Metropolitan Water District of Southern California (MWD) which imports water
from the Colorado River and the State Water Project.
Deannexation Fees: Each request for detachment of land from an improvement district is
reviewed on a case-by-case basis. The fees are determined based on the present value of
future debt service requirements.
Debt Service: The District's obligation to pay the principal and interest of bonds and other
debt instruments according to a predetermined payment schedule.
GLOSSARY
231
Energy Fees: Water customers are charged an energy pumping charge based on the
quantity of water used and the elevation to which the water has been lifted to provide
service. The energy pumping charge is the rate of $.032 per 100 cubic feet of water for each
100 feet of lift above the base elevation of 450 feet. All water customers are in one of 29
zones based on elevation.
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. The
monthly system charge is $23.30 per month for each connection for fire protection service.
Fiscal Year: Twelve-month term designating the beginning and ending period for recording
financial transactions. The District has specified July 1 to June 30 as its fiscal year.
Fund Balance: The current funds on hand resulting from the 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 comprised of the District’s
three business lines Potable, Recycled and Sewer services. Each is an accounting entity
with a self-balancing set of accounts established to record the financial position and results
that pertain to a specific activity. The activities of enterprise funds closely resemble those
of ongoing businesses in which the purpose is to conserve and add to basic resources while
meeting operating expenses from current revenues. Enterprise funds account for operations
that provide services on a continuous basis and are substantially financed by revenues
derived from user charges.
Grants: Contributions or gifts of cash or other assets from another governmental agency to
be used or expended for a specified purpose, activity, or facility. Capital grants are
restricted by the grantor for the acquisition and/or construction of fixed assets. Operating
grants are restricted by the grantor for operating purposes or may be used for either capital
or operating purposes at the discretion of the grantee.
Infrastructure Access Charge (IAC): A pass-through charge from CWA to each member
agency. The charge is to finance a portion of CWA’s fixed annual costs including the
construction, operation and maintenance of aqueducts and emergency storage projects. The
fee was adopted in January of 1999.
GLOSSARY
232
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.
Irrigation Penalties: Potable water service provided solely for irrigation of landscaping will
receive a seasonably-adjusted allotment of water equal to 48” per year for the actual area to
be irrigated. Use of water in excess of the allotment shall be subject to penalty pricing. The
first violation is no surcharge. The second violation is 100% surcharge on excess water
used. The third violation is 400% surcharge. The fourth and subsequent violations are
800% surcharge.
Late Charges/Penalties: Charges and penalties are imposed on delinquent accounts. A late
payment charge of 5% of the total delinquent amount is added to the account. Other
miscellaneous late fees and penalties are detailed in 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 (RTS) Charge for the new debt service for
construction projects necessary to meet reliability and quality needs. The RTS Charge was
adopted in 1996.
Multiple Unit Charges: In addition to the system fee, a monthly charge is made for service
provided through one meter to more than one occupant in a building. The rate is $3.21
($3.53 effective 1/1/07) per month for each unit in a multiple unit residential, commercial or
industrial building.
1% General 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, 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. Funds
received are to be used for facilities construction or debt service on bonds sold to build
facilities.
Operating Budget: The portion of the budget that pertains to daily operations that provide
basic governmental services. The operating budget contains appropriations for such
expenditures as personnel, supplies, utilities, materials, travel and fuel, and does not include
purchases of major capital plant or equipment which is budgeted for separately in the
Capital Budget.
GLOSSARY
233
Other Income: Revenues that are not directly related to the business of providing water and
sewer services. For example, contract billing service for the City of Chula Vista and the
City of San Diego to bill their sewer customers based on water consumption.
Property Rental Income: Rent or lease agreements for the use of District property.
Reclaimed Water Rates: Non-potable water service provided from water produced by the
District’s reclamation plant and other non-potable sources. Reclaimed water is not used for
domestic purposes and all other uses must comply with federal, state and local laws and
regulations regarding the use of reclaimed 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 purposed and cannot be used for any other purpose.
Residential Conservation: The water rates for residential customers are based on an
accelerated block structure; as more units are consumed, a higher unit rate is charged. The
District has established a water conservation program to promote water conservation and
planning.
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.
RTS: Readiness-to-Serve Charge was adopted by the Metropolitan Water District (MWD)
in Fiscal 1996. The charge will serve as a foundation of fixed revenue for MWD. It will
cover the new debt service for construction projects necessary to meet reliability and quality
needs of current water-users as opposed to new customers.
Sale of Fixed Assets: District equipment, which has been determined by the Board to be of
no use, obsolete and/or beyond the useful life and therefore, may be sold.
Set-up Fees for Accounts: A charge of $10 is added for each account transferred to another
customer.
System Fees: Each water service customer pays a monthly system charge for water system
replacement, maintenance and operation expenses. The charge is based on the size of the
meter and class of service.
Taxes: California Water Code Section 72091 authorizes the District, as a municipal water
district, to levy ad valorem property taxes which are equal to the amount required to make
annual payments for principal and interest on general obligation bonds approved by the
voters prior to July 1, 1978.
GLOSSARY
234
Temporary Water Charge: The rate for temporary water service is two times the rate for
permanent service. The additional charge is to offset the cost of construction of facilities for
larger capacity.
Tier 2 Charge: A Metropolitan Water District charge passed on by the San Diego County
Water Authority to individual agencies. This is an added charge on all water sales by CWA in
excess of the District’s 90% baseline water usage.
Usage Surcharge: In addition to the water rates, a surcharge is paid by each customer when
the number of units of water furnished in any month exceeds the monthly usage allowance
for the size of meter being used.
Water Capacity Fees: Charges paid by customers to connect to a District water system for
potable or reclaimed water service. Fees are determined by multiplying the demand factor
for the meter size by the total of the District-wide capacity fee and applicable zone charge.
Water Rates: Rates vary among classes of service 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. All non-residential customers are charged a flat
rate per unit. A unit of water is 100 cubic feet or 748 gallons of water.
GLOSSARY
235
AF Acre-Foot/Feet
AMR Automated Meter Reader/Reading
APCD Air Pollution Control District
ASCE American Society of Civil Engineers
ASU Assigned Service Unit
AWWA American Water Works Association
BOD Biological Oxygen Demand
BRP Business Resumption Plan
CAFR Comprehensive Annual Financial Report
CCV City of Chula Vista
CEQA California Environmental Quality Act
CFS Cubic Foot per Second
CIP Capital Improvement Program
CIS Customer Information System
CIT Collaborative Improvement Teams
CMOM Capacity, Management, Operations & Maintenance
CMTA California Municipal Treasurers Association
COD Chemical Oxygen Demand
COPs Certificates of Participation
CRC Capacity Reservation Charge
CSC Customer Service Charge
CSD City of San Diego
CSMFO California Society of Municipal Finance Officers
CWA County Water Authority (San Diego)
DBMS Database Management System
DEH Department of Environmental Health
DVP Delivery-versus-Payment
EDU Equivalent Dwelling Unit
EIR Environmental Impact Review
EOC Equal Opportunity Commission
ESC Emergency Storage Charge
FCF Flow Control Facility
FHLMC Freddie Mac or Federal Home Loan Mortgage Corporation
FNMA Fannie Mae or Federal National Mortgage Association
FTE Full-time Equivalent
FY Fiscal Year
GASB Government Accounting Standards Board
GFOA Government Financial Officers Association
GIS Geographic Information System
LIST OF ACRONYMS
236
LIST OF ACRONYMS
GO General Obligation (bonds)
GPM Gallons per Minute
GPS Global Positioning System
HCF Hundred Cubic Foot
HMA Habitat Management Area
HR Human Resources
HRIS Human Resources Information System
IAC Infrastructure Access Charge
ID Improvement District
IID Imperial Irrigation District
IIPP Injury and Illness Prevention Program
IMS Infrastructure Management System
IRP Integrated Water Resources Plan
IRS Internal Revenue Service
IT Information Technology
IVR Interactive Voice Response
LAFCO Local Area Formation Commission
LAIF Local Agency Investment Fund
LMSE La Mesa Sweetwater Extension
LOPS Lower Otay Pump Station
MG Million Gallons
MGD Million Gallons per Day
MH Man-hours
MOU Memorandum of Understanding
MSCP Multiple Species Conservation Program
MSRB Municipal Securities Rulemaking Board
MWD Metropolitan Water District
MWWD Metropolitan Waste Water Department (City of San Diego)
NCCP Natural Community Conservation Plan
NEPA National Environmental Protection Act
NOC Notice of Completion
NOSC Notice of Substantial Completion
NPDES National Pollution Discharge Elimination System
O&M or O/M Operations and Maintenance
OIS Otay Information System
OWD Otay Water District
PB Pacific Bay
PDR Preliminary Design Report
PEIR Program Environmental Impact Report
237
LIST OF ACRONYMS
PERS Public Employees' Retirement System
PL Pipeline
POU Principles of Understanding
PRS Pressure Reducing Station
PS Pump Station
PT Part-time
RFP Request for Proposal
RSD Rancho San Diego
RTS Readiness-to-Serve
R/W Right-of-Way
RWCWRF Ralph W. Chapman Water Recycling Facility
SAMP Sub-Area Master Plan
SANDAG San Diego Association of Governments
SCADA Supervisory Control and Data Acquisition
SBWRP South Bay Water Reclamation Plant
SDRMA San Diego Risk Management Association
SEC Securities and Exchange Commission
SHRM Society of Human Resources Management
SLMA Sallie Mae or Student Loan Marketing Association
SPSD Spring Valley Sanitation District
SS Suspended Solids
SSMP Sewer System Management Plan
SWA Sweetwater Authority
SWRCB State Water Resource Control Board
USBR U.S. Bureau of Reclamation
UWMP Urban Water Management Plan
WADG Water Agency Design Guideline
WD Water District
WER Work Environment Review
WRMP Water Resources Master Plan
WTP Water Treatment Plant
238