HomeMy WebLinkAboutOperating and Capital Budget FY 2007-2008
ADOPTED
OPERATING AND CAPITAL BUDGET
FISCAL YEAR 2007-2008
Board of Directors
Gary Croucher – President, Division 3
Jose Lopez - Vice President, Division 4
Jaime Bonilla - Treasurer, Division 2
Larry Breitfelder - Division 1
Mark Robak - Division 5
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 2007-2008
TABLE OF CONTENTS
Page
Letter of Transmittal iv
BUDGET FOREWORD
Otay Water District At-A-Glance 1
General Information 2
Statement of Values 3
Awards 4
Balanced Scorecard 8
Organization Chart 13
Budget Guide 14
Budget Calendar 16
Budget Process & Basis 17
Resolution No. 4097 20
POLICIES
Summary of Financial Policies 21
Reserve Policy 22
Reserve Policy Glossary 48
Investment Policy 50
Investment Policy Glossary 56
Debt Policy 62
Debt Policy Glossary 75
HISTORY AND COMMUNITY PROFILE
Past and Present 79
Current Economic Conditions 80
The Future 81
Demographics 82
Ten Largest Customers 83
Service Area Assessed Valuation 84
Ten Principal Taxpayers 85
San Diego County Rainfall 86
FINANCIAL SUMMARIES
Budget Summary 87
Operating Budget Summary – General Fund 91
Operating Budget Summary by Business 92
Operating Revenues & Expenditures 93
Fund Balance Summary by Fund 94
Revenues & Expenditures by Fund 95
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FIVE-YEAR FORECAST
Five-Year Forecast 97
General Fund Forecast 98
Fund Balances 99
Debt Management 100
Schedule of Outstanding Debt 101
Projected Principal & Interest Payments by Debt 102
REVENUES AND EXPENDITURES
Potable Revenues and Expenditures
Potable Narrative 103
Operating Budget Summary 105
Classification of Water Sales 106
Water Sales Summary by Service Class 107
Unit Sales History by Customer Class 108
System Fees 109
MWD & CWA Fixed Fees (Pass-Through) 110
Meter Fees 111
Revenue History 112
Water Purchases and Related Costs 113
Power Costs 114
Administrative Expenses 115
Materials and Maintenance Expenses 116
Potable Water Service Area Maps 117
Recycled Revenues and Expenditures
Recycled Narrative 118
Operating Budget Summary 121
Classification of Water Sales 122
Water Sales Summary by Service Class 123
System Fees 124
Meter Fees 125
Revenue History 126
Water Purchases 127
Power Costs 128
Administrative Expenses 129
Materials and Maintenance Expenses 130
Recycled Water Service Area Maps 131
Sewer Revenues and Expenditures
Sewer Narrative 132
Operating Budget Summary 134
Customers and Assigned Service Units 135
Revenue History 136
Power Costs 137
Administrative Expenses 138
Materials and Maintenance Expenses 139
Formula for Sewer Rates 140
Sewer Service Area Map 141
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General Revenues and Expenditures
General Revenues and Expenses Narrative 142
General Revenues 144
General Expenses 145
DEPARTMENTAL OPERATING BUDGET
Departmental Operating Budget Narrative 146
Labor & Benefits 149
Position Count by Department 151
Administrative Expenses 153
Materials and Maintenance Expenses 154
Operating Expenditures by Department 155
Operating Expenditures by Object 156
Departmental Budgets:
Board of Directors 157
General Manager 161
Administrative Services 166
Finance 177
Information Technology and Strategic Planning 188
Water Operations 197
Engineering 210
General Expense 223
CAPITAL BUDGET
Capital Improvement Program Narrative 226
Major CIP Projects 228
Flagship CIP Projects Completed 229
Flagship CIP Projects in Construction 231
Flagship CIP Project in Design 233
Progress on Major Project 234
CIP Reserve Funds 235
CIP Funding Source and Category 236
CIP Schedule 237
CIP Justification and Impact on Operating Budget 239
Capital Purchases Budget 241
APPENDIX
Glossary 242
List of Acronyms 248
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September 1, 2007
Honorable Board of Directors
Otay Water District
I am pleased to present the Otay Water District Adopted Operating and Capital Budget for Fiscal
Year 2007-08. With the District’s mission to provide safe and reliable potable and recycled
water and sewer services, there is an emphasis on water resources, 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 2008 Fiscal Year.
The District was formed in 1956 to serve as a public water and sewer agency, authorized as a
California special district 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.
Since the District was formed in1956, it has grown from a handful of customers and two employees to become an
organization operating a network with more than 763 miles
of pipelines, 42 reservoirs, a sewer treatment plant, and now
owns and operates 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.
Today, the District provides water service to nearly 47,030 potable and 585 recycled customers within approximately
125 square miles of southeastern San Diego County. In the
past, all of the potable water purchased by the District was
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. Last year, the District began
purchasing raw water from CWA. The Otay Water District contracted with the City of San
Diego to treat this raw water giving the District a new source of potable water. There are ongoing
negotiations with the City of San Diego to expand water treatment services in the future through
a new connection. By taking raw water through CWA’s system there is increased reliability of water supplied to the District.
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The District also owns and operates a wastewater collection
and recycling system to provide
public sewer service to
approximately 4,630 homes and businesses (or 6,620 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. On June 1, 2007, the District dedicated its new Supply Link Project connecting its recycled water
system to San Diego’s South Bay Water Reclamation Plant taking about six million gallons a
day of recycled water for irrigation purposes; this allows more potable water to be available for
human consumption. The purchase of this water allows the District to receive recycled financial incentives from both MWD and CWA which help to offset the investment in capital necessary to make this new source of water a reality.
BUDGET SUMMARY
For the first time in the District’s history, the fiscal year budget exceeds $100 million, with 2008
operating expenditures of $66.2 million and capital expenditures of $34.5 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 District’s operating expenditures are from its three major sectors: water, reclamation, and
sewer. Revenues from potable and recycled water for Fiscal Year 2008 are projected to be
$63,361,100 about $7.3 million (12.9%) greater than Fiscal Year 2007. Water sales are expected
to increase as a result of the slowing but continuing growth occurring within the District’s
service area. This growth should add over 1,030 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.
• An updated a six-year Rate Model to ensure sound financial planning and reserve levels.
• 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.
• Of San Diego County’s 23 water agencies, Otay’s water rate is the eighth-lowest and
below the county-wide average.
Current Sources of Water
77%
12%
3%
8%
Imported Potable
Imported Raw Locally
Treated
Recycled Produced
Recycled Purchased
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• Issued $42 million in debt in Fiscal Year 2007 to fund the construction of new facilities,
and replacement or enhancement of existing facilities.
• Funding for the six million gallons per day recycled water purchase agreement with the
City of San Diego.
• Increased credits from MWD and CWA for recycled water purchases from the City of
San Diego.
• Expanded residential, landscape, and commercial water conservation programs.
• Funding the fifth year of a Five-Year Labor Agreement ending in Fiscal Year 2008.
The projected operating cost for salaries and benefits is $15.6 million, which is an increase of
$988,100 (6.8%) compared to Fiscal Year 2007. The increase in labor is predominately the
result of negotiated pay and benefit increases.
Estimated growth totaling 1,030 potable and recycled water accounts will bring the new
customer count to 48,030 potable and 615 recycled accounts by the end of Fiscal Year 2008, this
number of accounts equates to approximately 75,300 equivalent dwelling units (EDUs). The
ultimate population projection of 277,000 will total to 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 $500 million in capital
assets before ultimate build-out is realized. The Fiscal Year 2007-08 Capital Budget consists of
82 projects and a budget of $34.5 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.
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
relatively new but aging infrastructure.
Time
STRATEGIC PLAN
To guide operations and planning efforts during this time of sustained growth, in 2001, the
District began developing a Strategic 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 that quality customer service and competitive rates are maintained.
The first multi-year Strategic 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
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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 8-12.)
One key to addressing the challenges is to capitalize on the significant investment that has been
made to implement an integrated information system. With the Otay Information System in
place, the District has focused on business process improvement utilizing best-in-class
technology. Other Strategic Plan objectives include: securing additional water sources,
continuing expansion of potable and recycled water networks, expanding use of recycled water,
and continuing efforts to promote conservation.
The current Strategic Plan identifies how the District needs to change in order to meet future
challenges and responsibilities. The plan is focused on all areas of the agency and describes
through cascading strategies, goals, and objectives, how it will achieve the desired changes.
Major themes in the updated plan are: 1) the movement toward improvement of maintenance
business practices so that the life of assets can be extended, 2) the development of improved and
more precise financial information to assist in management decisions, 3) the improvement of
customer service through enhanced customer knowledge and contact, and 4) the building of
critical assets on time and budget. As noted, the plan calls for the rapid adoption of
technological systems and the review of business practices that will yield increased productivity.
Part of the plan is a set of detailed performance measures which monitor the quarterly
productivity of the agency. This mix of long-term objectives and short-term measures of
productivity focuses the District on change while maintaining a high quality of customer service.
Putting the Strategic Plan to Work
Using the Strategic Plan as a guide and with the Board of Directors support, the District has been
able to put into place many substantial improvements. Some of the most significant
accomplishments are the integrated information system, the GIS system, and numerous policy
and procedure improvements. These accomplishments, along with the forward thinking
perspective of the District, paved the way for a thorough and persuasive presentation to two
rating agencies resulting in the positive outcome of a bond rating upgrade for Otay Water
District from an A+ to an AA-. Putting the Strategic Plan to work has resulted in operational
savings and in the case of the bond rating it has resulted in approximately $1.5 million of interest
expense savings.
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.
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Last year the District completed an
Integrated Water Resources Plan
(IRP). 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 identifies and
evaluates 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. In the coming year, the District will begin facilities rehabilitation and replacement
assessment which will define expected capital outlays for future system replacements. This
approach is clearly focused on asset management as a core discipline.
Recycled Water
Included in the UWMP is the agreement with the City of San Diego which allows the District to
purchase recycled water from the City’s South Bay Reclamation Facility. This contract delivers
on average, more than six million gallons per day of recycled water to the District’s growing
population. Recycled water purchased from this facility is used to irrigate golf courses, parks,
open space, road medians, and other commercial processes. Using this resource to address
specific demands has resulted in the District reducing its potable water use by approximately
15%, maximizing the beneficial use of an alternative resource, which makes millions of gallons
per day of potable water available for higher quality and better purposes. On June 1, 2007, the
District dedicated the Supply Link Project connecting the recycled water system to the City of
San Diego’s South Bay Water Reclamation Plant. The District received $3.3 of a $4 million
grant from Proposition 50 and another $2.4 million from the State Water Resources Control
Board (SWRCB) for partial funding of this project.
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
viii
Plan, the plan 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
Because of the vision and years of hard work that went into the Supply Link Project connecting
our recycled water system to the City of San Diego’s South Bay Water Reclamation Plant, the
San Diego County Taxpayer’s Association awarded the District with the Golden Watchdog of the
Year Award for 2007, the American Society of Civil Engineers presented the District the Award
of Merit, and the WateReuse Association of California named Otay its Utility of the Year.
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, 2006. 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. In addition, the CAFR
received the Outstanding Financial Reporting Award from the California Society of Municipal
Finance Officers (CSMFO).
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, 2006, as well as three
awards from the CSMFO for Excellence in Budgeting, Excellence in Public Communications,
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. 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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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. In 1980, the
District started operation of the Ralph W. Chapman Water Recycling Facility (RWCWRF), and
in June, 2007, a new source of recycled water from the City of San Diego was obtained, allowing
Otay Water District to supply 15 to 20 percent of total water demand with recycled water.
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 was formed in 1956 to serve as a public water and sewer agency,
authorized as a California special district under the provisions of the Municipal Water District
Act of 1911. The District’s ordinances, policies, taxes, and rates for service are set by five
Directors, elected by voters in their respective geographic 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 only their fair share of the District’s costs of water acquisitions and the
operation and maintenance of the public facilities.
ORGANIZATIONAL STRUCTURE
The General Manager reports directly to the Board of Directors, and through two Assistant
General Managers and the District management, oversees day-to-day operations. One Assistant
General Manager oversees the departments of Administrative Services, Finance, Information
Technology and Strategic Planning while the other oversees the Water Operations and
Engineering departments. These and other lines of reporting are shown on the organization chart
on page 13.
OTAY WATER DISTRICT AT-A-GLANCE
1
For Fiscal Year 2008, the District will have a staff of 172.75 full-time equivalent employees
under the leadership of the General Manager. The District provides water service to
approximately 39% of its land area with a population of more than 190,000 people. This
percentage increases as the District's service area continues to grow to ultimate build-out. The
District is projected to deliver approximately 38,500 acre-feet of potable water to about 48,030
potable customer accounts and to ultimately deliver 62,700 acre-feet of potable water to serve
277,000 people or 50,300 accounts. The rate of growth, as projected by the San Diego
Association of Governments (SANDAG) for the Chula Vista area of San Diego County, is
approximately 4.3% per year over the next decade. Using historical data and considering current
economic conditions, staff has moderated this projection to a growth rate of 2.1% for Fiscal Year
2008.
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 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 retail provider of recycled water in the
county.
The District also owns and operates a wastewater collection system providing public sewer
service to approximately 4,630 customer accounts within the Jamacha drainage basin. The sewer
service area covers approximately 8,797 acres, which is about 11% of the District’s total service
area. Residential customers comprise 98% of the sewer customer base.
The District was formed in 1956 to serve as a public 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 to an arid region of the southeastern San
Diego County. In 1971, the District constructed a small collection and treatment plant for sewer
in the northern section of the District, and in 1980 the District opened the Ralph W. Chapman
Water Recycling Facility. Finally in 1986, the District found a use for recycled water in the
construction industry for soil compression. For over 50 years, the available supply of water has
helped transform the District service area from a mostly scrub and cactus-covered backcountry
into a wonderful balance of diverse environments.
Photo Credits: Aerial photos, courtesy of Manny Ramirez, see pages 21 and 119
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
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, 2006. 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.
The California Society
of Municipal Finance
Officers (CSMFO)
presented Otay Water
District the Certificate
of Award Excellence
in Operating
Budgeting for Fiscal
Year 2006 - 07.
4
FINANCIAL AWARDS
The California Society of
Municipal Finance
Officers (CSMFO)
presented Otay Water
District the Certificate of
Award Excellence in
Capital Budgeting for
Fiscal Year 2006 - 07.
The California Society
of Municipal Finance
Officers (CSMFO)
presented Otay Water
District the Certificate of
Award Excellence in
Public Communications
Budgeting for Fiscal
Year 2006 - 07.
5
AWARDS
The San Diego Taxpayers Association announced that the Otay Water
District’s Supply Link project is the recipient of its 2007 Golden Watchdog
Award.
The Supply Link project redirects millions of gallons of recycled water that
was released each day into the ocean, and instead uses it to irrigate golf
courses, freeway landscapes, and parks in eastern Chula Vista.
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AWARDS
The Otay Water District has been named the Recycled
Water Agency of the Year for 2006 by the WateReuse
Association of California. This prestigious award
recognizes the District’s commitment to recycled water
use, its extensive recycled water network, and its new
Supply Link Project to connect with the City of San
Diego’s South Bay Water Reclamation Plant.
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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
Object Legend:
Scorecard
Strategy
Goal
Customer
Customers are the most important aspect of the District’s business. The District provides its
customers with a variety of public potable and recycled water service and sanitary sewer service.
The customers and the surrounding community trust that the District will provide 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 to accounting infomation. 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
Enhance the District’s customer satisfaction focus by evaluating customer
feedback.
Enhance customer communications for increased accessibility and ease of use.
Improve customer service by expanding employee access to Otay Information
System (OIS) information.
Enhance communication with developers.
BALANCED SCORECARD
8
Community Outreach
Expand water conservation in new commercial and residential construction.
Maximize recycled water use.
Expand the Public Education Program.
Define a program for increased relations with Mexico.
Update and implement the District’s Government and Public Relations Programs.
Industry Involvement
Learn industry trends and promote District achievements.
Finance
The District is a steward of public funds to provide water, recycled and sewer 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
Establish the District’s long-term financial plans.
Aggressively pursue all relevant grants.
Evaluate potential real property trades, leases, or sales to increase revenues.
Controls
Update the District’s financial policies.
Improve the District’s budget controls.
BALANCED SCORECARD
9
Full Cost of Services
Provide full and accurate cost accounting of District services.
Reporting
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
Meet current and future potable water demands.
Develop an Integrated Resources Plan (IRP) for evaluating alternative sources of
water.
Implement planned security initiatives.
Recycled Water Leader
Develop the District’s Sewer Master Plan.
Obtain more recycled water supplies.
Seek additional recycled water customers.
Operate the recycled water system efficiently.
Stewards of Public Infrastructure
Conduct best practice preventative maintenance activities.
Successfully transfer completed project into Operations.
Develop cost effective environmental program.
Business Efficiency
Fully integrate the Otay Information System (OIS).
BALANCED SCORECARD
10
Complete business process reengineering effort.
Develop a comprehensive Knowledge Management Plan.
Implement field technology solutions.
Implement the Legal Plan.
Streamline service installation process.
Policies and Guidelines.
Financial and Managerial Reporting.
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
Develop Long-Term Staffing Plan.
Generate a Long-Term Facility and Space Plan.
Highly Qualified Staff
Continue to recruit and retain a highly qualified workforce.
Train and Develop at All Organizational Levels
Evaluate and implement an Executive Training Program targeted at future
strategic goals.
Continue a Management Development Program.
Promote and recognize District staff participation in industry research projects
and publications.
Enhance employee training with new programs.
Continue Incentive Program.
BALANCED SCORECARD
11
Staff Inclusion
Formalize Collaborative Improvement Teams (CIT).
Monitor and Celebrate Success
Finalize and implement the District’s Recognition and Reward Program.
Establish a repeatable Employee Survey Program and benchmark against others.
BALANCED SCORECARD
12
ORGANIZATION CHART
BOARD OF DIRECTORS
GENERAL MANAGER
FINANCEADMINISTRATIVE
SERVICES INFORMATION
TECHNOLOGY
AND STRATEGIC
PLANNING
ENGINEERING 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/
Recycle
Operations
GIS
ASSISTANT GENERAL MANAGER ASSISTANT GENERAL MANAGER
IT
Operations Water Resources
Design
Planning
13
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. To help you navigate this document, the following is a general description of each of the
tabulated sections of the budget.
Budget Foreword
This introductory section contains descriptions and general information about the District,
Strategic Focus Areas highlighting major initiatives and accomplishments, and the Budget
Calendar and Process.
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
14
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. An allocation of overhead type cost is
made to equitably spread the cost to run the District between budget segments.
Departmental Operating Budget
This section provides a summary of each department’s operating expenditures and detailed
budget information including its mission, responsibilities, three-year staffing, 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
and 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
15
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 17 and 18.
February 3, 2007 Budget workbooks and instructions for Operating and Capital Budget
are distributed to departments.
February 20, 2007 Departments submit requests for new personnel and/or personnel
reclassifications to Human Resources.
February 28, 2007 Human Resources Department performs a preliminary review of
submitted requests.
March 9, 2007
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 12, 2007
General Manager approves new personnel and personnel
reclassification requests.
March 14, 2007
1. Finance Department reviews Operating Budget and reconciles with
departments.
2. Engineering Department reviews and prepares CIP budget and
submits to Finance for review and incorporation into the Rate
Model to calculate proposed rates.
April 18, 2007 General Manager performs preliminary review of the budget.
May 15, 2007 Final review of the proposed budget and rates is done by the General
Manager.
May 29, 2007 Present for approval to the Board of Directors the Fiscal Year 2008
Operating and Capital Budget.
BUDGET CALENDAR
16
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. New initiatives and programs are 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 2%
• pass-through rate increases for cost imposed on the District by the wholesale
water providers
• accurate projections of capital budget needs (including replacement needs)
• reserve funding in accordance with the Reserve Policy to meet future growth
demands and financial stability
• funding of the Strategic Plan initiatives as categorized into the Balanced
Scorecard perspectives
• avoid rate spikes by leveling rate increases over a six-year period
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 adopting
the budget.
The budgeting of salaries and benefits is performed in the position budgeting module of the
budget system. This tool allows the District to budget for each authorized position and the
associated benefits. 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
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The Finance Department prepares the budget for the potable, recycled, and sewer systems based
on estimated cost increases from the District’s wholesale water providers as well as estimated
sewer charge increases provided by the City of San Diego. Other significant factors in the
budget development include projected growth in customer accounts and weather. Additionally,
all general revenue and expense budgets are calculated using trend analysis and any external
factors that may affect these items.
The Engineering 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. They also project future costs to complete the project. Costs are adjusted
for scope changes as well as construction cost increases. Engineering then compiles the CIP
Budget and submits it to the Assistant General 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 are input into the Rate Model to project the
next five years of revenue and expenses. Rates are then set for the current fiscal year, plus five
subsequent years, such that all financial targets are met. Using this comprehensive modeling
tool, the District is able to smooth future rate increases, determine when debt should be issued,
and 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 a coordinated presentation of the budget by all departments, to the Board of
Directors for their approval at a special budget workshop in May. The 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 within the CIP Budget.
The Budget Report is intended as a financial guide and may be modified by the Board of
Directors during Fiscal Year 2008.
BUDGET PROCESS
18
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. The intent of the District is that the
costs (including replacement cost of existing assets) of providing goods or services to the general
public on a continuing basis, be financed or recovered primarily through user charges.
BUDGET BASIS
19
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Introduction
This section includes a brief synopsis of the District’s Reserve Policy, Investment Policy, and
Debt Policy.
The Reserve Policy is a comprehensive policy which explains how the District is operated,
including the distinction between business segments to ensure users pay their fair share of costs.
It explains how fees are collected and what they are used for. It also explains the difference
between funds, as well as how transfers shall be made, and defines each reserve target funding
level. The District adopted this new policy in March 2006.
The Investment Policy is a guideline for the prudent investment of cash. It follows government
code as well as authority granted by the Board of Directors. The primary objectives, in order of
significance, are to invest safely, with adequate liquidity, and to achieve sufficient return on
investments. This policy was revised and adopted by the Board in September 2006 and received
a Certification of Excellence Award from the Association of Public Treasurers of the United
States and Canada (APT US&C).
The Debt Policy establishes that debt financing will only be used for Capital Improvement
Projects (CIP), which have an extended useful life of ten years or longer, and that exceed the
District’s ability to be funded with current resources such as annual cash flow, fund balances, or
reserves. Additionally, the life of a project is expected to exceed the term of the financing. The
District strives to maintain the highest possible credit ratings for all categories of long-term debt
that can be achieved without compromising delivery of basic services and the achievement of
District policy objectives. This policy was revised and adopted by the Board in January 2007
and received a Certification of Excellence Award from the Association of Public Treasurers of
the United States and Canada (APT US&C).
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
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
25
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,
“California’s Independent Water Districts: Reserve Amounts Are Not Always Sufficiently
Justified, and Some Expenses and Contract Decisions Are Questionable,” dated June 2004,
26
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.
27
• 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
29
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
30
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
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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
33
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.
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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
39
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
40
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
41
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
42
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.
43
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
44
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
45
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
46
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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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.
Debt Service: The District's obligation to pay the principal and interest of bonds and other debt
instruments according to a predetermined payment schedule.
RESERVE POLICY GLOSSARY
48
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
50
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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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.
INVESTMENT POLICY GLOSSARY
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COUPON: (a) The annual rate of interest that a bond’s issuer promises to pay the
bondholder on the bond’s face value. (b) A certificate attached to a bond evidencing interest
due on a set date.
DEALER: A dealer, as opposed to a broker, acts as a principal in all transactions, buying
and selling for his own account.
DEBENTURE: A bond secured only by the general credit of the issuer.
DELIVERY VERSUS PAYMENT: There are two methods of delivery of securities:
delivery versus payment and delivery versus receipt. Delivery versus payment is delivery of
securities with an exchange of money for the securities. Delivery versus receipt is delivery
of securities with an exchange of a signed receipt for the securities.
DERIVATIVES: (1) Financial instruments whose return profile is linked to, or derived
from, the movement of one or more underlying index or security, and may include a
leveraging factor, or (2) financial contracts based upon notional amounts whose value is
derived from an underlying index or security (interest rates, foreign exchange rates, equities
or commodities).
DISCOUNT: The difference between the cost price of a security and its maturity when
quoted at lower than face value. A security selling below original offering price shortly after
sale also is considered to be at a discount.
DISCOUNT SECURITIES: Non-interest bearing money market instruments that are issued
at a discount and redeemed at maturity for full face value, e.g., U.S. Treasury Bills.
DIVERSIFICATION: Dividing investment funds among a variety of securities offering
independent returns.
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.
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FEDERAL HOME LOAN BANK (FHLB): Government sponsored wholesale banks
(currently 12 regional banks), which lend funds and provide correspondent banking services
to member commercial banks, thrift institutions, credit unions and insurance companies.
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC or Freddie Mac):
A stockholder owned, publicly traded company chartered by the United States federal
government in 1970 to purchase mortgages and related securities, and then issue securities
and bonds in financial markets backed by those mortgages in secondary markets. Freddie
Mac, like its competitor Fannie Mae, is regulated by the United States Department of
Housing and Urban Development (HUD).
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA or Fannie Mae):
FNMA, like GNMA was chartered under the Federal National Mortgage Association Act in
1938. FNMA is a federal corporation working under the auspices of the Department of
Housing and Urban Development (HUD). It is the largest single provider of residential
mortgage funds in the United States. Fannie Mae is a private stockholder-owned
corporation. The corporation’s purchases include a variety of adjustable mortgages and
second loans, in addition to fixed-rate mortgages. FNMA’s securities are also highly liquid
and are widely accepted. FNMA assumes and guarantees that all security holders will
receive timely payment of principal and interest.
FEDERAL RESERVE SYSTEM: The central bank of the United States created by
Congress and consisting of a seven member Board of Governors in Washington, D.C., 12
regional banks and about 5,700 commercial banks that are members of the system.
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA or Ginnie Mae):
A government owned agency which buys mortgages from lending institutions, securitizes
them, and then sells them to investors. Because the payments to investors are guaranteed by
the full faith and credit of the U.S. Government, they return slightly less interest than other
mortgage-backed securities.
INTEREST-ONLY STRIPS: A mortgage backed instrument where the investor receives
only the interest, no principal, from a pool of mortgages. Issues are highly interest rate
sensitive, and cash flows vary between interest periods. Also, the maturity date may occur
earlier than that stated if all loans within the pool are pre-paid. High prepayments on
underlying mortgages can return less to the holder than the dollar amount invested.
INVERSE FLOATER: A bond or note that does not earn a fixed rate of interest. Rather,
the interest rate is tied to a specific interest rate index identified in the bond/note structure.
The interest rate earned by the bond/note will move in the opposite direction of the index.
An inverse floater increases the market rate risk and modified duration of the investment.
LEVERAGE: Investing with borrowed money with the expectation that the interest earned
on the investment will exceed the interest paid on the borrowed money.
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LIQUIDITY: A liquid asset is one that can be converted easily and rapidly into cash without
a substantial loss of value. In the money market, a security is said to be liquid if the spread
between bid and asked prices is narrow and reasonable size can be done at those quotes.
LOCAL AGENCY INVESTMENT FUND (LAIF): The aggregate of all funds from
political subdivisions that are placed in the custody of the State Treasurer for investment and
reinvestment.
MARKET VALUE: The price at which a security is trading and could presumably be
purchased or sold.
MASTER REPURCHASE AGREEMENT: A written contract covering all future
transactions between the parties to repurchase/reverse repurchase agreements that establish
each party’s rights in the transactions. A master agreement will often specify, among other
things, the right of the buyer-lender to liquidate the underlying securities in the event of
default by the seller borrower.
MATURITY: The date upon which the principal or stated value of an investment becomes
due and payable.
MONEY MARKET: The market in which short-term debt instruments (bills, commercial
paper, bankers’ acceptances, etc.) are issued and traded.
MUTUAL FUNDS: An open-ended fund operated by an investment company which raises
money from shareholders and invests in a group of assets, in accordance with a stated set of
objectives. Mutual funds raise money by selling shares of the fund to the public. Mutual
funds then take the money they receive from the sale of their shares (along with any money
made from previous investments) and use it to purchase various investment vehicles, such as
stocks, bonds, and money market instruments.
MONEY MARKET MUTUAL FUNDS: An open-end mutual fund which invests only in
money markets. These funds invest in short term (one day to one year) debt obligations such
as Treasury bills, certificates of deposit, and commercial paper.
NATIONAL ASSOCIATION OF SECURITIES DEALERS (NASD): A self-regulatory
organization of the securities industry responsible for the operation and regulation of the
NASDAQ stock market and over-the-counter markets. Its regulatory mandate includes
authority over firms that distribute mutual fund shares as well as other securities.
PASSIVE INVESTING: An investment strategy involving limited ongoing buying and
selling actions. Passive investors will purchase investments with the intention of long term
appreciation and limited maintenance, and typically don’t actively attempt to profit from
short term price fluctuations. Also known as a buy-and-hold strategy.
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PRIMARY DEALER: A designation given by the Federal Reserve System to commercial
banks or broker/dealers who meet specific criteria, including capital requirements and
participation in Treasury auctions. These dealers submit daily reports of market activity and
positions and monthly financial statements to the Federal Reserve Bank of New York and are
subject to its informal oversight. Primary dealers include Securities and Exchange
Commission registered securities broker/dealers, banks, and a few unregulated firms.
PRUDENT PERSON RULE: An investment standard. In some states the law requires that a
fiduciary, such as a trustee, may invest money only in a list of securities selected by the
custody state—the so-called legal list. In other states the trustee may invest in a security if it
is one which would be bought by a prudent person of discretion and intelligence who is
seeking a reasonable income and preservation of capital.
PUBLIC SECURITIES ASSOCIATION (PSA): A trade organization of dealers, brokers,
and bankers who underwrite and trade securities offerings.
QUALIFIED PUBLIC DEPOSITORIES: A financial institution which does not claim
exemption from the payment of any sales or compensating use or ad valorem taxes under the
laws of this state, which has segregated for the benefit of the commission eligible collateral
having a value of not less than its maximum liability and which has been approved by the
Public Deposit Protection Commission to hold public deposits.
RANGE NOTE: An investment whose coupon payment varies and is dependent on whether
the current benchmark falls within a pre-determined range.
RATE OF RETURN: The yield obtainable on a security based on its purchase price or its
current market price. This may be the amortized yield to maturity on a bond the current
income return.
REGIONAL DEALER: A securities broker/dealer, registered with the Securities &
Exchange Commission (SEC), who meets all of the licensing requirements for buying and
selling securities.
REPURCHASE AGREEMENT (RP OR REPO): A holder of securities sells these
securities to an investor with an agreement to repurchase them at a fixed price on a fixed
date. The security “buyer” in effect lends the “seller” money for the period of the agreement,
and the terms of the agreement are structured to compensate him for this. Dealers use RP
extensively to finance their positions. Exception: When the Fed is said to be doing RP, it is
lending money that is increasing bank reserves.
SAFEKEEPING: A service to customers rendered by banks for a fee whereby securities and
valuables of all types and descriptions are held in the bank’s vaults for protection.
SECONDARY MARKET: A market made for the purchase and sale of outstanding
securities issues following their initial distribution.
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SECURITIES & EXCHANGE COMMISSION: Agency created by Congress to protect
investors in securities transactions by administering securities legislation.
SEC RULE 15C3-1: See Uniform Net Capital Rule.
STRUCTURED NOTES: Notes issued by Government Sponsored Enterprises (FHLB,
FNMA, 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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1.0: POLICY
It is the policy of the Otay Water District to finance the acquisition of high value assets that have
an extended useful life through a combination of current revenues and debt financing. Regularly
updated debt policies and procedures are an important tool to insure the use of the District’s
resources to meet its commitments, to provide the highest quality of service to the District’s
customers, and to maintain sound financial management practices. These guidelines are for
general use and allow for exceptions as circumstances dictate.
2.0: SCOPE
This policy is enacted in an effort to standardize the issuance and management of debt by the
Otay Water District. The primary objective is to establish conditions for the use of debt, to
minimize the District’s debt service requirements and cost of issuance, to retain the highest
practical credit rating, maintain full and complete financial disclosure and reporting, and to
maintain financial flexibility for the District. This policy applies to all debt issued by the District
including general obligation bonds, revenue bonds, capital leases and special assessment debt.
3.0: LEGAL & REGULATORY REQUIREMENTS
The Chief Financial Officer (CFO) and the District’s Legal Counsel will coordinate their
activities to ensure that all securities are issued in full compliance with Federal and State law.
4.0: CAPITAL FACILITIES FUNDING
Financial Planning
The District maintains a six-year financial projection that identifies operating requirements and
public facility and equipment requirements, and has developed a Rate Model for funding the
District’s 6-Year Capital Improvement Program (CIP). The District’s CIP Budget places the
capital requirements in order of priority and schedules them for funding and implementation. It
identifies a full range of capital needs, provides for the ranking of the importance of such needs,
and identifies all the funding sources that are available to cover the costs of the projects. In cases
where the program identifies project funding through the use of debt financing, the budget
should provide information needed to determine debt capacity. The Rate Model and the CIP
Budget give the Board part of the data needed to make informed judgments concerning the
possibility of issuing debt.
Funding Criteria
The Chief Financial Officer (CFO) will evaluate all capital project requests and develop a
proposed funding plan. Priority may be given to those projects that can be funded with current
resources (annual cash flow, fund balances or reserves). Those projects that cannot be funded
with current resources may be deferred or the CFO may recommend that they be funded with
DEBT POLICY
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debt financing. However, debt financing will not be considered appropriate for any recurring
purpose such as current operating and maintenance expenditures. The issuance of short-term
cash-flow instruments is excluded from this limitation.
The General Manager will recommend the funding plan to the Board. The General Manager
may deem it necessary or desirable in certain circumstances to convene a Finance Committee
meeting to evaluate funding options presented by the Chief Financial Officer.
Funding Sources
The District’s capital improvements can be classified in three categories: those related to an
expansion of the system (“expansion”), those related to upgrading the existing system
(“betterment”) and those related to repairing or replacing existing infrastructure (“replacement”).
In general, capital improvements for betterment or replacement are financed primarily through
user charges, availability charges, and betterment charges. Capital improvements for expansion
are financed through capacity fees. Accordingly, these fees are reviewed at least annually or
more frequently as required and set at levels sufficient to ensure that new development pays its
fair share of the costs of constructing necessary infrastructure. Additionally, the District will seek
State and Federal grants and other forms of intergovernmental aid wherever possible.
Pay-As-You-Go Projects
The District’s capacity fees are the major funding source in financing additions to the water
system and the recycled water system. Over time, the fees collected and the cost to construct the
capital projects should balance. However, collection of these fees is subject to significant
fluctuation based on the rate of new development. Accordingly, the Chief Financial Officer, in
developing the funding plan for the CIP, will determine that current revenues and adequate fund
balances are available so project phasing can be accomplished. If this is not the case, the Chief
Financial Officer may recommend that:
1. The project be deferred until funds are available, or
2. Based on the priority of the project, long-term debt is issued to finance the project.
Debt Financed Projects
If a project or projects are to be financed with long-term debt, the District should use the
following criteria to evaluate the suitability of the financing for the particular project or projects:
1. The life of the project or asset to be financed is 10 years or longer and its useful life is
expected to exceed the term of the financing.
2. Revenues available for debt service are deemed to be sufficient and reliable so that long-
term financing can be marketed without jeopardizing the credit rating of the District.
3. Market conditions present favorable interest rates and demand for District financing.
4. The project is mandated by State and/or Federal requirements and current resources are
insufficient or unavailable.
5. The project is immediately required to meet or relieve capacity needs and current
resources are insufficient or unavailable.
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5.0: DEBT STRUCTURE
General
The District will normally issue debt with a maturity of not more than 30 years. The structure
should approximate level debt service for the term where it is practical or desirable. There will
be no debt structures that include increasing debt service levels in subsequent years, with the first
and second year of a debt payoff schedule the exception and related to projected additional
income to be generated by the project to be funded. There will be no "balloon" debt repayment
schedules that consist of low annual payments and one large payment of the balance due at the
end of the term. There will always be at least interest paid in the first fiscal year after debt
issuance and principal starting no later than the first fiscal year after the date the facility or
equipment is expected to be placed in service. Capitalized interest will not be for a period of
more than necessary to provide adequate security for the financing.
Limitations on the Issuance of Variable Rate Debt
The District will normally issue debt with a fixed rate of interest. The District may issue variable
rate for the purpose of managing its interest costs. At the same time, the District should protect
itself from too much exposure to interest rate fluctuations. In determining that it is in the
District’s best interest to issue certain debt at variable rates instead of fixed rates, at the time of
issuing any variable rate debt, there should be at least a 10% estimated reduction in annual debt
costs by issuing variable rate debt when compared to a similar issuance of fixed rate debt. If the
estimated overall cost savings from issuing variable rate debt is not at least 10% at the time of
issuance, relatively small fluctuations in rates could actually increase the District’s financing
costs over the life of the bonds compared to a similar fixed rate financing. By using this 10%
factor at the time of issuance, the District can be relatively assured that its variable rate financing
will be cost-effective over the term of the bonds.
The comparison will be based on the following criteria:
1. The interest rate used to estimate interest costs will be the 10 year average for weekly
variable rates.
2. The variable rate debt costs will include an estimate for annual costs such as letter of
credit fees, liquidity fees, remarketing fees, monthly draw fees and annual rating fees
applicable to the letter of credit.
3. Any potential reserve fund earnings will reduce the fixed rate debt service or variable rate
debt service as applicable.
Periodically, using the criteria described above, the Chief Financial Officer will compare the
estimated annual debt service costs to maturity of any variable rate debt with estimated debt
service if the debt was converted to fixed rates. If this analysis produces a break even in total
payments over the life of the issue, the Chief Financial Officer will recommend converting such
variable rate debt to fixed rate.
Variable rate debt should not represent more than 25% of the District’s total debt portfolio. This
level of exposure to interest rate fluctuations is considered to be manageable in an environment
of increasing interest rates. At a higher ratio than this, the District might be faced with an
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unplanned water rate increase to meet its Rate Covenants. Rating agencies use this ratio in their
analysis of the District’s overall credit rating.
Further, Rate Covenants applicable to variable rate debt shall not compromise the issuance of
additional debt planned by the District and variable rate debt should always contain a provision
to allow conversion to a fixed rate at the District’s option.
6.0: CREDIT OBJECTIVES
The Otay Water District seeks to maintain the highest possible credit ratings for all categories of
long-term debt that can be achieved without compromising delivery of basic services and
achievement of District policy objectives.
Factors taken into account in determining the credit rating for a financing include:
1. Diversity of the District’s customer base.
2. Proven track record of completing capital projects on time and within budget.
3. Strong, professional management.
4. Adequate levels of staffing for services provided.
5. Reserves.
6. Ability to consistently meet or exceed Rate Covenants.
The District recognizes that external economic, natural, or other events may from time to time
affect the creditworthiness of its debt. Nevertheless, the District is committed to ensuring that
actions within its control are prudent and well planned.
7.0: COMPETITIVE AND NEGOTIATED SALE CRITERIA
Competitive Sale
The District will use a competitive bidding process in the sale of debt unless the nature of the
issue or specific circumstances warrants a negotiated sale. The CFO will determine the best bid
in a competitive sale by calculating the true interest cost (TIC) of each bid.
Negotiated Sale
Types of debt that would typically lend themselves to the negotiated sale format are variable rate
debt and unrated debt. Circumstances that might warrant a negotiated sale may occur when the
issue is of a limited size that would not attract wide-spread investor interest, during periods of
high levels of issuance by other entities in the State, or during periods of market volatility. In the
event the District decides to use a negotiated sale, it will pay management fees only to those
firms that place orders for bonds.
If the size of the District’s proposed issue is not cost effective, the District may also consider
issuing its debt though the California Statewide Communities Development Authority, which
provides a mechanism for pooling financings with similar issuers to obtain economies of scale.
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8.0: REFUNDING DEBT
Purpose
Periodic reviews of all outstanding debt will be undertaken by the Chief Financial Officer to
determine refunding (refinancing) opportunities. The purpose of the refinancing may be to:
1. Lower annual debt service by taking advantage of lower current interest rates.
2. Update or revise covenants on outstanding debt issue if a Rate Covenant appears to be
too high, has precluded the District from implementing its financing plan, or has caused
the District to increase rates to customers.
3. Restructure debt service associated with an issue to facilitate the issuance of additional
debt, usually in order to smooth out peaks in total debt service which can occur
frequently as one debt issue is layered on top of existing debt issues.
4. Alter bond characteristics such as call provisions or payment dates.
5. Pay for conversion costs such as funding a reserve fund or paying for credit enhancement
when converting variable rate debt to fixed rate debt.
Restrictions on Refunding
Tax-exempt bonds typically have provisions that preclude early redemption of the bonds for a
period of years after issuance. The number of times a tax-exempt bond can be refinanced prior
to its Optional Redemption date (known as Advance Refunding) is limited by the IRS. For debt
issued after 1986, issuers may only provide for Advance Refunding of obligations in advance of
the Optional Redemption date one time. There is no limit by the IRS on the ability of issuers to
redeem bonds early once the Optional Redemption date has been reached.
Savings Criteria
In cases where an Advance Refunding is intended to provide debt service savings, the District
may commence the refinancing process if a minimum five percent (5%) present value savings
net of issuance costs and any cash contributions can be demonstrated. Since interest rates may
fluctuate between the time when a refinancing is authorized and when the debt is issued,
beginning the process with at least a 5% savings should provide the District with some level of
protection that it can achieve a minimum of three percent (3%) net present value savings of the
refunding bonds when and if the debt is issued. These minimum standards are intended to
protect the District staff from spending time on refinancings that become marginally cost-
effective after the entire issuance process is complete.
The savings target may be waived, however, if sufficient justification for lowering the savings
target can be provided by meeting one or more of the other refunding objectives described above.
9.0: SUBORDINATE LIEN DEBT
The District will issue subordinate lien debt only if it is financially beneficial to the District or
consistent with creditworthiness objectives. Subordinate lien debt is structured to be payable
second in priority to the District’s other outstanding debt. Typically, subordinate lien debt might
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be issued if the District desired a more flexible Rate Covenant with respect to its new obligations
and did not want to refinance all of its existing debt to obtain that less restrictive Rate Covenant.
10.0: DERIVATIVES
The District may consider the use of derivative products on a case-by-case basis, consistent with
State statute and financial prudence. The most common derivatives include transactions known
as “swaps,” in which the District, by contract with an investment bank (known as a “provider”),
swaps its fixed rate debt payments for variable rate debt payments or vice versa, and “forwards,”
in which the District enters into a purchase contract with an underwriter to purchase refunding
bonds at a future date at interest rates locked in today (not at today’s rates, but at rates locked in
today). Derivative products introduce an additional risk factor into a financing, called “third-
party risk.” Once a derivative product is entered into, the District must rely upon the financial
stability of the provider to perform under the contract. Because the nature of derivatives is
speculative, that is, the District is assuming that rates will either go up or down over the period of
the contract and therefore expects to lock in a financial benefit today based on that assumption,
the financial benefits actually obtained from any derivative contract need to be monitored
periodically to determine if it is in the District’s interest to terminate the contract and what the
penalty might be for early termination. This requires a certain level of vigilance, and impartial
advice in this area is actually difficult to obtain since the derivative market is not particularly
liquid or price-transparent and is currently made up of a small handful of reputable providers.
There must be an overwhelming demonstrable financial benefit to the District based on
reasonable assumptions concerning future interest rates in order for the District to use
derivative products.
11.0: FINANCING PARTICIPANTS
The District’s purchasing guidelines provide the process for securing professional services
related to individual debt issues. The solicitation and selection process include encouraging
participation from qualified service providers, both local and national, and securing services at
competitive prices.
Financial Advisor: The use of a Financial Advisor is necessary for the sale of debt by a
competitive bid process and is desirable when issuing debt through a negotiated sale. The
Financial Advisor has a fiduciary duty to the District and will seek to structure the District’s debt
in the manner that is saleable, yet meets the District’s objectives for the financing. The Financial
Advisor will advise the District on alternative structures for its debt, the cost of different debt
structures and potential pricing mechanisms that can be expected from underwriters (such as call
features, term bonds and premium and discount bond pricing) and, at the District’s direction, will
write the offering document (preliminary official statement). With respect to competitive sales,
the Financial Advisor will arrange for distributing the preliminary official statement, accepting
bids via the internet, verifying the lowest bid and provide detailed instructions for the flow of
funds at closing to the winning Underwriter, the Trustee and the District. In a negotiated sale,
the Financial Advisor will provide independent confirmation on the Underwriter’s proposed
pricing to ensure that interest rates and Underwriter’s compensation are appropriate for the credit
quality of the issue and competitive in the overall public finance market in California.
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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.
Letter of Credit Bank: The Letter of Credit Bank is a U.S. or foreign bank that has issued a
letter of credit providing both credit enhancement (the Letter of Credit Bank will pay the debt in
the event that the District defaults on the payment) and liquidity for a variable rate bond issue.
These banks have their own short-term credit rating, which is generally higher than the District’s
short-term credit rating. Liquidity is needed because variable rate bondholders are allowed to
“put” their bonds back to the District if they do not like the interest rate currently being offered.
The District’s Remarketing Agent then finds a new buyer for those bonds, but in the event that
no buyer is found, a draw is made under the letter of credit to purchase the bonds that have been
“put.” As soon as the bonds are remarketed to another buyer, the letter of credit is repaid. The
letter of credit fees are paid annually. Letter of credits are typically issued for 5-7 years and
must be renewed during the life of the bonds. Credit enhancement is discussed further under the
heading “CREDIT ENHANCEMENT.”
Municipal Bond Insurer: The Municipal Bond Insurer can be one of several insurance
companies that provide municipal bond insurance policies securing payment of the District’s
debt. These policies provide that the Municipal Bond Insurer will pay the District’s debt in the
event that the District defaults on its payments. Debt which is insured carries the Municipal
Bond Insurer’s credit rating, in most cases, AAA. The insurance premium for the bond
insurance policy is paid one time at the issuance of the debt and is non-cancelable for the term of
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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.
12.0: CONFLICT OF INTEREST AND STANDARDS OF CONDUCT
Members of the District, the Board of Directors and its consultants, service providers and
underwriters shall adhere to standards of conduct and conflict of interest rules as stipulated by
the California Political Reform Act or the Municipal Securities Rulemaking Board (MSRB), as
applicable. All debt financing participants shall maintain the highest standards of professional
conduct at all times, in accordance with MSRB Rules, including Rule G-37. There shall be no
conflict of interest with the District with any debt financing participant.
13.0: CONTINUING DISCLOSURE
The District acknowledges the responsibilities of the underwriting community and pledges to
make all reasonable efforts to assist underwriters in their efforts to comply with SEC Rule 15c2-
12 and MSRB Rule G-36. The District will file its official statements with the MSRB and the
nationally recognized municipal securities information repositories. The District will also post
copies of its comprehensive financial reports on the Internet and provide hard copies of these
documents to interested parties upon request, and will disseminate other information that it
deems pertinent to the market in a timely manner. While initial bond disclosure requirements
pertain to underwriters, the District will provide financial information and notices of material
events on an ongoing basis throughout the life of the issue. Material events are defined as those
events which are considered to likely reflect on the credit supporting the securities. The events
considered material according to the SEC are:
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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.
14:0 INVESTMENT & ARBITRAGE COMPLIANCE
Tax-exempt bonds are required to meet certain provisions of the federal tax code in order to
maintain their tax-exempt status. In order to prevent municipal issuers from borrowing money at
tax-exempt rates solely for the purpose of investing the proceeds in higher yielding investments
and making a profit (“arbitrage”), the federal tax code contains a provision that requires issuers
to compare the interest earned on any bond funds held (such as a reserve fund) with interest that
would theoretically be earned if the funds were invested at the yield of the bonds, and to “rebate”
to the federal government any interest earned in excess of the theoretical earnings limit.
The Chief Financial Officer shall invest the bond proceeds subject to the District’s Investment
Policy in a timely manner, to ensure the availability of funds to meet operational requirements.
In doing so, the CFO will maintain a system of record keeping and reporting to meet the
arbitrage rebate compliance requirements of the federal tax code.
15.0: TYPES OF DEBT FINANCING
General Obligation Bonds
General obligation bonds are secured by a pledge of the ad-valorem taxing power of the issuer
and are also known as a full faith and credit obligations. Bonds of this nature must serve a public
purpose to be considered lawful taxation of the property owners within the District and require a
two third’s majority vote in a general election. The benefit of the improvements or assets
constructed and acquired as a result of this type of bond must be generally available to all
property owners.
The District can issue general obligation bonds up to but not in excess of 15% of the assessed
valuation under Article XVI, Section 18 of the State constitution. An annual amount of the levy
necessary to meet debt service requirements is calculated and placed on the tax roll through the
County of San Diego. The District also has a policy that the ad-valorem tax to be used to pay
debt service on general obligation bonds will not exceed $.10 per $100 of assessed value.
Voters within Improvement District No. 27 of the District authorized $100 million general
obligation bonds in 1989. The District issued $11,500,000 general obligation bonds in 1992 and
refinanced the bonds in 1998. The District also has approximately $29 million in general
obligation bonds authorized between 1960 and 1978 for various Improvement Districts
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throughout the District, but unissued. General obligation bonds can only be issued under these
existing authorizations to the extent necessary to fund the improvements specified by each ballot
measure.
General obligation bonds generally are regarded as the broadest and soundest security among
tax-secured debt instruments. An unlimited-tax pledge would enable a trustee to invoke
mandamus to force the District to raise the tax rate as much as necessary to pay off the bonds.
General obligation bonds have other credit strengths as well: the property tax tends to be a steady
and predictable revenue source, and when a vote is required to issue them, bondholders have
some indication of taxpayers’ willingness to pay. General obligation bonds carry the highest
credit rating that a public agency can achieve and therefore, the lowest interest cost. General
obligation bonds typically are issued to finance capital facilities and not for ongoing operational
or maintenance costs.
The District will use an objective analytical approach to determine whether it can afford to
assume new general obligation debt for the improvement districts, or in the case of projects not
approved by the original ID 27 vote, prior to any submission of a general obligation bond ballot
measure to voters. This process will compare generally accepted standards of affordability to the
current values for the District. These standards will include debt per capita, debt as a percent of
taxable value, debt service payments as a percent of current revenues and current expenditures,
and the level of overlapping net debt of all local taxing jurisdictions. The process will also
examine the direct costs and benefits of the proposed expenditures. The decision on whether or
not to assume new debt will be based on these costs and benefits, the current conditions of the
municipal bond market, and the District’s ability to "afford" new debt as determined by the
aforementioned standards.
Revenue Bonds
Revenue bonds are limited-liability obligations that pledge net revenues of the District to debt
service. The net revenue pledge is after payment of all operating costs. Though revenue bonds
are not generally secured by the full faith and credit of the District, the financial markets require
coverage ratios of the pledged revenue stream and a covenant to levy rates and charges sufficient
to produce net income at some level in excess of debt service (a Rate Covenant).
Also there may be a test required to demonstrate that future revenues will be sufficient to
maintain debt service coverage levels after any proposed additional bonds are issued. The
District will strive to meet industry and financial market standards with such ratios. Annual
adjustments to the District’s rate structure may be necessary to maintain these coverage ratios.
The underlying credit of revenue bonds is judged on the ability of the District’s existing rates to
provide sufficient net income to pay debt service and the perceived willingness of the District to
raise rates and charges in accordance with its Rate Covenant. Actual past performance also plays
a role in evaluating the credit quality of revenue bonds, as well as the diversity of the customer
base. Revenue bonds generally carry a credit rating one or two investment grades below a
general obligation bond rating.
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The District may use a debt structure called “Certificates of Participation” to finance capital
facilities. However, if the certificates contain a pledge of net revenues and a Rate Covenant,
they are treated as essentially the same as a revenue bond.
Lease/Purchase Agreements
Over the lifetime of a lease, the total cost to the District will generally be higher than purchasing
the asset outright. As a result, the use of lease/purchase agreements in the acquisition of
vehicles, equipment and other capital assets will generally be avoided, particularly if smaller
quantities of the capital asset(s) can be purchased on a "pay-as-you-go" basis.
The District may utilize lease-purchase agreements to acquire needed equipment and facilities.
Criteria for such agreements should be that the asset life is three years or more, the minimum
value of the agreement is $50,000 and interest costs must not exceed the interest rate earned by
the District’s portfolio for the average of the past 6 months. Lease payments of this type are
considered operating expenses and would reduce net operating income available to pay any
District revenue bonds. There are no coverage requirements or rate covenants associated with
lease/purchase agreements.
State Water Loans
The State Water Resources Control Board makes certain funds available to water districts
throughout the State. These loans typically carry a below-market rate of interest and are short
term in nature. While State loans should be incorporated into the District’s debt portfolio for the
financing of capital improvements, the payment of the loan should not compromise the District’s
ability to issue other planned debt or cause the District to violate its rate covenants or make it
necessary for the District to increase rates to maintain existing rate covenants.
Land Based Financing
The District may consider developer or property owner initiated applications requesting the
formation of community facilities or assessment districts and the issuance of bonds to finance
eligible District facilities necessary to serve newly developing commercial, industrial and/or
residential projects. Facilities will be financed in accordance with the provisions of the
Municipal Improvement Act of 1913 and the Improvement Bond Act of 1915, or the Mello-Roos
Community Facilities Act of 1982.
Typically, the bonds issued would be used to prepay, in a lump-sum, the District’s capacity fees
with respect to a large tract of land under development, or to finance in-tract infrastructure that
will eventually be dedicated to the District. The bonds are secured by a special tax or assessment
to be 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.
72
In some cases, the District may not be asked to be the sponsoring agency for the formation of a
financing district, rather, the developer or property owner may approach a school district or a
city to be the sponsoring agency. Nonetheless, the property owner may want to include lump-
sum payment of District fees in the financing or construction of certain facilities to be dedicated
to the District upon completion. In this case, if the District desired to participate, the District
would enter into a Joint Financing Agreement with the sponsoring agency, again governing the
type of facilities to be constructed with bond proceeds and how the facilities will be accepted by
the District.
On a case-by-case basis, the Board shall make the determination as to whether a proposed district
will proceed under the provisions of the Assessment Acts or the Mello-Roos Community
Facilities Act. The Board may confer with other consultants and the applicant to learn of any
unique district requirements, such as long-term development phasing, prior to making any final
determination.
All District and District consultant costs incurred in the evaluation of new development, district
applications and the establishment of districts will be paid by the applicant(s) by advance
deposits in those instances where a party or parties other than the District have initiated a
proposed district. Expenses not legally reimbursable by the financing district will be borne by
the applicant. The District may incur expenses for analyzing proposed assessment or community
facilities districts where the District is the principal proponent of the formation or financing of
the district.
Prior to the issuance of any land secured financing and in accordance with State law, the Board
will adopt policies and procedures with criteria to be met before any special tax bonds or
assessment district bonds may be issued. These criteria include the qualifications of the
appraiser, the minimum value to lien ratio to be achieved prior to issuing the land secured debt
and the maximum tax to be levied on different categories of property.
16.0: RATING AGENCY APPLICATIONS
The District may seek a rating on all new issues that are being sold in the public market. To
ensure a fair rating, more than one rating agency shall be considered to rate the District’s issues.
These rating agencies include, but are not limited to, Fitch Investors Service, Moody’s Investors
Service, and Standard and Poor’s. When applying for a rating on an issue over $1 million or
more, the District shall make a formal presentation of the finances and positive developments
within the District to the rating agencies. The District will report all financial information to the
rating agencies as they are published and upon request. This information shall include, but shall
not be limited to, the District’s Comprehensive Annual Financial Report (CAFR), and the
Adopted Operating and Capital Budget.
17.0: USE OF CREDIT ENHANCEMENT
Credit enhancement is a generic term that means any third-party guarantee of debt service.
Credit enhancement providers include municipal bond insurance companies or financial
institutions. The purchase of credit enhancement allows the District’s bond issue to carry the
same credit rating as the credit provider. The District will seek to use credit enhancement when
73
such credit enhancement proves cost-effective. Selection of credit enhancement providers will
be subject to a competitive bid process using the District’s purchasing guidelines.
Fixed Rate Bonds
Credit enhancement for fixed rate bonds is obtained by the purchase of bond insurance. With
few exceptions, bond insurance companies are rated AAA. If a commitment for bond insurance
is obtained for a particular issue, the District will estimate the annual debt service for the issue
based on current AAA-rated bond interest rates with the cost of issuance including the payment
of the bond insurance premium. If the estimated debt service on this basis is less than or equal to
estimated debt service for the issue based on interest rates for bonds with the District’s
underlying or stand-alone credit rating, the District will purchase the bond insurance. Any
intention of the District to prepay the debt ahead of its scheduled maturity will be taken into
account in the analysis. Credit enhancement may be used to improve or establish a credit rating
on a District debt obligation even if such credit enhancement is not cost effective if, in the
opinion of the Chief Financial Officer, the use of such credit enhancement meets the District’s
debt financing goals and objectives.
Variable Rate Bonds
Credit enhancement for variable rate bonds is comprised of two components: credit support and
liquidity. The interest on variable rate bonds is based on a 7-day investment rate. Any investor
can tender their bonds back to the District to be repurchased on 7 days’ notice. Because of the
short-term nature of the investment, the securities that the District is “competing” with for
investors are AAA-rated or AA-rated mutual funds. Therefore, variable debt needs to have
credit enhancement to achieve a comparable AAA or AA rating, as well as liquidity support to
provide the District with a mechanism to purchase any bonds that are tendered before they can be
remarketed to new investors. A limited number of financial institutions offer letters of credit that
combine both credit support and liquidity for one fee. An alternative is to purchase bond
insurance to provide credit support and enter into a separate purchase agreement with a financial
institution to provide liquidity. The difference in cost between the two structures will be
analyzed before either alternative is selected for variable rate debt.
74
Ad Valorem Tax: A tax calculated “according to the value” of property. Such a tax is based on
the assessed valuation of tangible personal property. In most jurisdictions, the tax is a lien on the
property enforceable by seizure and sale of the property. General restrictions, such as overall
restrictions on rates, or the percent of charge allowed, sometimes apply. As a result, ad valorem
taxes often function as the balancing element in local budgets.
Advance Refunding: A procedure whereby outstanding bonds are refinanced by the proceeds
of a new bond issue prior to the date on which outstanding bonds become due or are callable.
Typically an advance refunding is performed to take advantage of interest rates that are
significantly lower than those associated with the original bond issue. At times, however, an
advance refunding is performed to remove restrictive language or debt service reserve
requirements required by the original issue.
Amortization: The planned reduction of a debt obligation according to a stated maturity or
redemption schedule.
Arbitrage: The gain that may be obtained by borrowing funds at a lower (often tax-exempt) rate
and investing the proceeds at higher (often taxable) rates. The ability to earn arbitrage by issuing
tax-exempt securities has been severely curtailed by the Tax Reform Act of 1986, as amended.
Assessed Valuation: The appraised worth of property as set by a taxing authority through
assessments for purposes of ad valorem taxation.
Basis Point: One one-hundredth of one percent.
Bond: A security that represents an obligation to pay a specified amount of money on a specific
date in the future, typically with periodic interest payments.
Bond Counsel: An attorney (or firm of attorneys) retained by the issuer to give a legal opinion
concerning the validity of the securities. The bond counsel’s opinion usually addresses the
subject of tax exemption. Bond counsel may prepare, or review and advise the issuer regarding
authorizing resolutions or ordinances, trust indentures, official statements, validation proceedings
and litigation.
Bond Insurance: A type of credit enhancement whereby a monocline insurance company
indemnifies an investor against a default by the issuer. In the event of a failure by the issuer to
pay principal and interest in-full and on-time, investors may call upon the insurance company to
do so. Once assigned, the municipal bond insurance policy generally is irrevocable. The
insurance company receives an up-front fee, or premium, when the policy is issued.
Call Option: A contract through which the owner is given the right but is not obligated to
purchase the underlying security or commodity at a fixed price within a limited time frame.
DEBT POLICY GLOSSARY
75
Cap: A ceiling on the interest rate that would be paid.
Capital Lease: The acquisition of a capital asset over time rather than merely paying rent for
temporary use. A lease-purchase agreement, in which provision is made for transfer of
ownership of the property for a nominal price at the scheduled termination of the lease, is
referred to as a capital lease.
Certificate of Participation: A financial instrument representing a proportionate interest in
payments such as lease payments by one party (such as the District acting as a lessee) to another
party (often a trustee).
CIP: Capital Improvement Program.
Competitive Sale: The sale of securities in which the securities are awarded to the bidder who
offers to purchase the issue at the best price or lowest cost.
Continuing Disclosure: The requirement by the Securities and Exchange Commission for most
issuers of municipal debt to provide current financial information to the informational
repositories for access by the general marketplace.
Debt Service: The amount necessary to pay principal and interest requirements on outstanding
bonds for a given year or series of years.
Defeasance: Providing for payment of principal of premium, if any, and interest on debt
through the first call date or scheduled principal maturity in accordance with the terms and
requirements of the instrument pursuant to which the debt was issued. A legal defeasance
usually involves establishing an irrevocable escrow funded with only cash and U.S. Government
obligations.
Derivative: A financial product that is based upon another product. Generally, derivatives are
risk mitigation tools.
Discount: The difference between a bond’s par value and the price for which it is sold when the
latter is less than par.
Financial Advisor: A consultant who advises an issuer on matters pertinent to a debt issue,
such as structure, sizing, timing, marketing, pricing, terms and bond ratings.
General Obligation Bonds: Debt that is secured by a pledge of the ad valorem taxing power of
the issuer. Also known as a full faith and credit obligation.
Municipal Securities Rulemaking Board (MSRB): The MSRB, comprised of representatives
from investment banking firms, dealer bank representatives, and public representatives, is
entrusted with the responsibility of writing rules of conduct for the municipal securities market.
Negotiated Sale: A sale of securities in which the terms of sale are determined through
negotiation between the issuer and the purchaser, typically an underwriter, without competitive
bidding.
76
Official Statement: A document published by the issuer that discloses material information on
a new issue of municipal securities including the purposes of the issue, how the securities will be
repaid, and the financial, economic and social characteristics of the issuing government.
Investors may use this information to evaluate the credit quality of the securities.
Option: A derivative contract. There are two primary types of options (see Put Option and Call
Option). An option is considered a wasting asset because it has a stipulated life to expiration and
may expire worthless. Hence, the premium could be wasted.
Optional Redemption: The redemption of an obligation prior to its stated maturity, which can
only occur on dates specified in the bond indenture.
Overlapping Debt: The legal boundaries of local governments often overlap. In some cases,
one unit of government is located entirely within the boundaries of another. Overlapping debt
represents the proportionate share of debt that must be borne by one unit of government because
another government with overlapping or underlying taxing authority issued its own bonds.
Par Value: The face value or principal amount of a security.
Pay-as-you-go: To pay for capital improvements from current resources and fund balances
rather than from debt proceeds.
Put Option: A contract that grants to the purchaser the right but not the obligation to exercise.
Rate Covenant: A covenant between the District and bondholders, under which the District
agrees to maintain a certain level of net income compared to its debt payments, and covenants to
increase rates if net income is not sufficient to meet such level.
Refunding: A procedure whereby an issuer refinances an outstanding bond issue by issuing new
bonds.
Revenue Bonds: A bond which is payable from a specific source of revenue and to which the
full faith and credit of an issuer with taxing power is not pledged. Revenue bonds are payable
from identified sources of revenue, and do not permit the bondholders to compel a jurisdiction to
pay debt service from any other source. Pledged revenues often are derived from the operation
of an enterprise. Generally, no voter approval is required prior to issuance.
Special Assessments: A charge imposed against property or parcel of land that receives a
special benefit by virtue of some public improvement that is not, or cannot be enjoyed by the
public at large. Special assessment debt issues are those that finance such improvements and are
repaid by the assessments charged to the benefiting property owners.
Swap: A customized financial transaction between two or more counterparties who agree to
make periodic payments to one another. Swaps cover interest rate, equity, commodity and
currency products. They can be simple floating for fixed exchanges or complex hybrid products
with multiple option features.
77
True Interest Cost (TIC): A method of calculating the overall cost of a financing that takes
into account the time value of money. The TIC is the rate of interest that will discount all future
payments so that the sum of their present value equals the issue proceeds.
Underwriter: The term used broadly in the municipal market, to refer to the firm that purchases
a securities offering from a governmental issuer.
Yield Curve: Refers to the graphical or tabular representation of interest rates across different
maturities. The presentation often starts with the shortest-term rates and extends towards longer
maturities. It reflects the market’s views about implied inflation/deflation, liquidity, economic
and financial activity, and other market forces.
78
On January 27, 2006, the Otay Water District (OWD) celebrated its golden anniversary. Over
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 water network with more than 680 miles of potable and 83 miles of
recycled pipelines, 42 reservoirs, a sewer treatment plant, and one of the largest recycled water
distribution systems 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 water district’s boundaries currently stretch from Otay
Mesa and eastern Chula Vista to Spring Valley, southern El Cajon, and Jamul.
The District is facing a very dry year with the Colorado River in the midst of a prolonged multi-
year drought and the Sierra Nevada snow pack at its lowest level in many years. To add to this
situation, water deliveries are being curtailed to the State Water Project to protect endangered
Delta Smelt. All of this is likely to mean less water for Southern California in the years ahead.
The problems we are hearing about make the work we are doing all the more critical. On June 1,
2007 we dedicated our Supply Link Project connecting our recycled water system to the City of
San Diego’s South Bay Water Reclamation Plant. Today, we are taking about six million
gallons (mgd) per day of recycled water from the city and adding it to the one mgd we are
producing at our own treatment plant. With recycled water meeting a large portion of the
landscape irrigation needs, this means approximately seven mgd of potable water does not have
to be pumped hundreds of miles from northern California or the Colorado River. Instead,
enough drinking water to serve more than 15,000 homes is being conserved and can be used to
address shortages in the years to come.
Because of the vision and years
of hard work that went into the
successful completion of the
District’s new supply of
recycled water, the District was
awarded the Golden Watchdog
of the year award for 2007 by
the San Diego Taxpayer’s
Association, and the Utility of
the Year by the WateReuse
Association of California
PAST AND PRESENT
79
Currently, the District services the needs of a growing population by purchasing water from the
San Diego 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 CWA and
having the City of San Diego treat the water at the Lower Otay Pump Station. The District is in
negotiations with the City of San Diego to increase its raw water purchases and treatment in a
new connection called SD17. These new water sources will help take pressure off the potable
system and increase 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.
However, the demand for recycled water out-paced the supply, requiring the District to
supplement the limited supply of recycled water with potable water. Through the new agreement
with the City of San Diego, the District has discontinued supplementing its recycled demand
with potable water. Once again, this decreases the demand on 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 1.2%
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 few years, and is continuing at a slower pace. It is estimated that the
District is currently serving approximately 190,000 residents. In just the past five years, the
District has added more than 7,600 new customer connections. This is reflected internally as the
District’s Development Services Department approved on average 35 permits per month, and
sold 800 water meters in Fiscal Year 2006-2007.
CURRENT ECONOMIC CONDITIONS
80
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 not
only poised to continue successfully providing an affordable, safe, and reliable water supply for
the people of its service area, but is set to reap the rewards of greater efficiencies and economies
of scale.
2326
1397
835 869
1030
1227
1392 1529
1795 1995
-
500
1,000
1,500
2,000
2,500
FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13
METER SALES
Actual Projected
The Engineering Department projects that over the next six years the District will sell another
8,960 meters. The San Diego Association of Governments (SANDAG), the regional planning
agency, shows a slowing of growth for the City of Chula Vista after 2010, and an increase in
growth in the unincorporated areas of the region through 2020.
THE FUTURE
81
The Otay Water District boundaries shown in the chart below encompass an area of
approximately 125 square miles in San Diego County, located immediately east of the City of
San Diego metropolitan area and running from the City of El Cajon south to the international
boarder.
The San Diego Association of Governments (SANDAG), the regional planning agency, creates
and maintains a tremendous quantity of demographic, economic, land use, transportation and
criminal justice information about the San Diego region. The demographic data includes
population characteristics like age, education, and employment. Because of the overlapping of
Otay’s service area with the cities of Chula Vista, La Mesa, El Cajon, and the unincorporated
areas of Spring Valley and Jamul, the following demographic data is from the City of Chula
Vista as it most closely represents the District.
The population of Chula Vista has grown from 83,927 in 1980, to 135,136 in 1990, to 173,556 in
2000, and in 2006 the population reached 223,423. This represents an increase of 139,496 in the
past 26 years or a 166.2% increase, which correlates to the Districts rapid growth for the same
period.
The racial make up of Chula Vista is 50% Hispanic, 29% White, 13% Asian, 4% Black, and the
remaining 4% is all other groups. The median household income for Chula Vista was $68,497 in
2006, and 97% of Chula Vista’s housing units were occupied.
DEMOGRAPHICS
82
TEN LARGEST CUSTOMERS - FISCAL YEAR 2007
% of
Annual Water
Customer Name Customer Type Revenues Sales
1. City Of Chula Vista Publicly Owned 2,555,440$ 5.3%
2. State Of California Publicly Owned 993,602 2.0%
3. County Of San Diego Publicly Owned 801,420 1.6%
4. Eastlake III Community Assoc Construction (Potable, Temporary)576,165 1.2%
5. Mcmillin Construction, Irrigation (Reclaimed)571,469 1.2%
6. Eastlake Country Club Irrigation (Reclaimed, Permanent)547,092 1.1%
7. Country Hills Apartments Residential, Irrigation (Potable)491,231 1.0%
8. Otay River Constructors Construction (Potable, Temporary)386,212 0.8%
9. Salt Creek Partners LLC Irrigation (Reclaimed, Permanent)383,076 0.8%
10. Otay Project LP Construction (Potable, Temporary)365,690 0.8%
Total 7,671,397$ 15.8%
Estimated FY07 Water Sales 48,605,607$
CUSTOMERS
FISCAL YEAR 2007
Others
84.2%
Ten Largest
15.8%
83
SERVICE AREA ASSESSED VALUATION
Otay Water District’s service area encompasses property with over $22 billion of assessed valuation.
Properties are assessed at 100% of their full value less any exemptions such as, exemption from
taxation under the law and homeowner’s exemptions. As shown in the chart below, there has been a
significant increase in the assessed value of properties in the District service area. This increase is due
to both growth in the number of new homes, as well as increases in home prices. The growth in new
homes is expected to continue at a long-term rate of 3% until ultimate build-out. The assessed
valuation is the basis for the property tax change. The District receives its portion of the 1% property
tax, according to Proposition 13 and AB8, and with the increases in the assessed valuation the District
will benefit by receiving its proportionate share of this increase. Even with the down turn in the
property values the District is anticipating a modest increase of 5%.
Source: County of San Diego Auditor and Controller
$12,130
$14,131
$16,423
$19,566
$22,685
$-
$4,000
$8,000
$12,000
$16,000
$20,000
$24,000
Mi
l
l
i
o
n
D
o
l
l
a
r
s
2003 2004 2005 2006 2007
Fiscal Year
FIVE-YEAR SERVICE AREA ASSESSED VALUATION
84
TEN PRINCIPAL TAXPAYERS AS OF JUNE 30, 2007
Percent
Organization Assessed Value to Total
1. Corrections Corp of America $ 72,132,074 0.32%
2. SP La Vida Real LLC 72,000,000 0.32%
3. SSR Realty Advisors/Calstrs 71,828,419 0.32%
4. BRE Properties Inc 66,388,974 0.29%
5. S V Portfolio L P 64,296,720 0.28%
6. Camden USA Inc 58,777,852 0.26%
7. CON AM Partners 50,176,051 0.22%
8. EQR - Missions At Sunbow LLC 48,274,560 0.21%
9. FW CA Rancho San Diego Village LLC 41,848,000 0.19%
10. PPF Industrial 39,250,000 0.17%
Total $ 584,972,650 2.58%
Total Service Area Assessed Valuation $ 22,684,693,592
Source: County of San Diego Auditor and Controller
SERVICE AREA TAXPAYERS
FISCAL YEAR 2007
Other Taxpayers
97.4%
Ten Principal
Taxpayers
2.6%
85
SAN DIEGO COUNTY RAINFALL
FISCAL YEARS 1998-2007
3.85
5.42
22.50
5.18
10.62
2.99
8.58
6.71
17.78
5.76
0
5
10
15
20
25
30
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Fiscal Year
In
c
h
e
s
Annual Rainfall
10-Year Average Rainfall (8.94 inches)
San Diego rainfall levels continued to drop in FY2007, with under four inches of rain. The District
budgeted expecting FY2008 rainfall to remain within its normal average of about 9 inches a year. If
there is another low rainfall year, the District can expect water sales to outpace the budgeted number.
Under drought conditions there is the real potential for mandatory cutbacks. In the event of
cutbacks, District revenues would decrease as sales fall short of budget. Expenses however, would
also be reduced dampening the negative impact of revenue shortfalls on the budget. The severity of
cutbacks would dictate the magnitude of the District's response and type of reaction.
The San Diego rainfall information shown in the chart above uses data from the San Diego Airport at
Lindbergh Field and is provided by the Western Regional Climate Center. More information can be
obtained from their website: http://www.wrcc.dri.edu. The Western Regional Climate Center’s Web
site 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.
86
The Operating Budget is summarized and presented in the Operating Budget Summary on page
91. Also included in this section is the Operating Budget Summary by Business on page 92, the
Fund Balance Summary by Fund on page 94, and the Revenues and Expenditures by Fund
schedule on pages 95 and 96. For Fiscal Year 2008, the District increased both water and sewer
rates for its customers in order to pass-through cost increases from water and sewer agencies.
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 2008 is $66,180,500 in comparison to the previous
adjusted fiscal year budget of $59,070,600. The $7,109,900 increase is primarily due to higher
water cost due to price and growth increases, increases in salary and benefit costs, increases in
funding of new programs, and finally increases in funding of reserves.
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 38,500 acre-feet of potable water will
be sold during Fiscal Year 2008. Budgeted water sales are projected to be $47,506,500, an
increase of 10.1% 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 4,900 acre-feet of recycled
water to customers at a discount of 15% of the potable rate. The FY 2008 sales revenue budget
of $6,001,400, an increase of $1,555,000 from FY 2007, 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 Department supports
expansion functions.
BUDGET SUMMARY
87
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 41,300 acre-feet for the District's potable
water supplies. A provision has been made to allow 2,780 acre-feet of water for District usage,
leakage, and evaporation.
Recycled Water Purchases
Water purchases indicate the expense of purchasing 3,800 acre-feet for the District's recycled
water supplies. The District no longer budgets for a potable supplement to the recycled system
due to the new source of recycled water from the City of San Diego.
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."
88
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 172.75 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.
89
Debt Service
Debt Service is the principal and interest expense associated with the existing debt. Debt
payments are shown in the reserve funded by the debt. 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, 2007, and the projected balance for June 30,
2008, 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.
90
FY 2006 FY 2008 Budget Variance
11-Actual Budget Estimated Budget Variance %
REVENUES
##Potable Water Sales 40,192,169$ 43,130,800$ 44,112,749$ 47,506,500$ 4,375,700$ 10.1%
Recycled Water Sales 3,563,441 4,485,400 4,492,858 6,001,400 1,516,000 33.8%
##Sewer Revenues 2,296,856 2,568,100 2,577,993 2,679,100 111,000 4.3%
##Meter Fees 270,167 278,500 246,539 318,500 40,000 14.4%
##Capacity Fee Revenues 1,356,611 1,000,200 1,536,911 1,414,500 414,300 41.4%
Bet Betterment Fees for Maintenance - - - 73,300 73,300 100.0%
Annexation Fees - 1,216,900 2,119,886 1,464,500 247,600 20.3%
Tax Revenues 3,388,734 3,427,400 3,646,158 4,003,800 576,400 16.8%
##Non-operating Revenues 1,985,828 1,674,100 2,068,134 1,680,200 6,100 0.4%
##Interest - 1,005,600 1,173,649 1,038,700 33,100 3.3%
General Fund Draw Down 1,210,400 283,600 - - (283,600) (100.0%)
TOTAL REVENUES 54,264,206 59,070,600 61,974,876 66,180,500 7,109,900 12.0%
EXPENDITURES
##Potable Water Purchases 20,350,772 21,218,200 21,562,502 23,984,100 2,765,900 13.0%
Recycled Water Purchases 1,232,198 1,736,700 1,829,476 1,423,000 (313,700) (18.1%)
##CWA - Infrastructure Access Charge 844,855 1,003,900 1,003,927 1,090,200 86,300 8.6%
##CWA - Customer Service Charge 771,760 846,800 846,505 950,400 103,600 12.2%
##CWA - Emergency Storage Charge 1,047,601 1,230,600 1,230,830 1,507,800 277,200 22.5%
##MWD - Capacity Reservation Charge 508,756 514,800 530,708 569,400 54,600 10.6%
##MWD - Net RTS and Standby Charge 460,717 512,200 512,206 552,600 40,400 7.9%
Subtotal - Water Costs 25,216,659 27,063,200 27,516,154 30,077,500 3,014,300 11.1%
##Power 2,113,787 2,677,800 2,489,978 2,804,800 127,000 4.7%
##Labor and Benefits 14,431,295 14,606,300 15,232,922 15,604,500 998,200 6.8%
##Administrative Expenses 3,971,885 5,559,600 5,467,656 6,982,300 1,422,700 25.6%
##Materials & Maintenance 3,885,976 4,623,700 3,701,221 4,452,900 (170,800) (3.7%)
DS Debt Service (1)2,820,714 - - - - 0.0%
##Expansion Reserve 1,001,300 - - 2,590,200 2,590,200 100.0%
Bet Betterment Reserve - - - 3,432,900 3,432,900 100.0%
RepReplacement Reserve - 4,540,000 6,657,369 235,400 (4,304,600) (94.8%)
TOTAL EXPENDITURES 53,441,616 59,070,600 61,065,300 66,180,500 7,109,900 12.0%
EXCESS REVENUES (EXPENSE) 822,590$ -$ 909,576$ -$ -$ 0.0%
EXCESS REVENUES, w/o restatement and transfers -
(1)
FY 2007
OPERATING BUDGET SUMMARY - GENERAL FUND
Effective in FY07, debt service ($357,000 for Sewer State loan and $840,000 for ID 27 GO Bond) and corresponding tax
revenues are accounted for separately under restricted reserves.
91
Potable Recycled Sewer Total
REVENUES
Water Sales 47,506,500$ -$ -$ 47,506,500$
Recycled Water Sales - 6,001,400 - 6,001,400
Sewer Revenues - - 2,679,100 2,679,100
Meter Fees 294,400 24,100 - 318,500
Capacity Fee Revenues 1,414,500 - - 1,414,500
Bett Betterment Fees for Maintenance 73,300 - - 73,300
Annexation Fees 1,464,500 - - 1,464,500
Tax Revenues 3,952,500 - 51,300 4,003,800
Non-operating Revenues 1,679,200 - 1,000 1,680,200
Interest 851,700 99,000 88,000 1,038,700
TOTAL REVENUES 57,236,600 6,124,500 2,819,400 66,180,500
EXPENDITURES
Water Purchases (CWA) 21,123,300 - - 21,123,300
Water Purchases (CSD) 2,860,800 1,423,000 - 4,283,800
CWA - Infrastructure Access Charge 1,090,200 - - 1,090,200
CWA - Customer Service Charge 950,400 - - 950,400
CWA - Emergency Storage Charge 1,507,800 - - 1,507,800
MWD - Capacity Reservation Charge 569,400 - - 569,400
MWD - Net RTS and Standby Charges 552,600 - - 552,600
Subtotal - Water Costs 28,654,500 1,423,000 - 30,077,500
Power 2,208,100 493,600 103,100 2,804,800
Labor and Benefits 13,876,500 895,400 832,600 15,604,500
Administrative Expenses 6,521,500 271,300 189,500 6,982,300
Materials & Maintenance 2,768,100 226,000 1,458,800 4,452,900
5716 Expansion Reserve - 2,590,200 - 2,590,200
Bett RBetterment Reserve 3,207,900 225,000 - 3,432,900
Repl RReplacement Reserve - - 235,400 235,400
TOTAL EXPENDITURES 57,236,600 6,124,500 2,819,400 66,180,500
EXCESS REVENUES -$ -$ -$ -$
FY 2008 OPERATING BUDGET SUMMARY BY BUSINESS
FY 2008 OPERATING EXPENDITURES
Potable
87%
Recycled
9%
Sewer
4%
92
OPERATING REVENUES & EXPENDITURES
FY 2008 OPERATING REVENUES
Potable Water
Sales
71.8%Recycled Water
Sales
9.1%
Sewer Revenues
4.1%
Interest
1.6%
Non-Operating
Revenues
2.5%Tax Revenues
6.0%
Annexation Fees
2.2%
Betterment Fees for
Maintenance
0.1%
Capacity Fee
Revenues
2.1%
Meter Fees
0.5%
FY 2008 OPERATING EXPENDITURES
Betterment
Reserve
5.2%
Recycled Water
Purchases
2.2%
Power
4.2%
Administrative
Expenses
10.5%
Labor and
Benefits
23.6%
Materials &
Maintenance
6.7%
Expansion
Reserve
3.9%
Replacement
Reserve
0.4%
Potable Water
Costs
43.3%
93
Estimated Projected
Balance Interfund Balance
June 30, 2007 Revenues Expenditures Transfers (1)June 30, 2008
GENERAL FUND
Potable 26,925,082$ 57,236,600$ 57,236,600$ (6,137,100)$ 20,787,982$
Recycled 1,031,364 6,124,500 6,124,500 (2,239,800) (1,208,436)
Sewer 2,854,704 2,819,400 2,819,400 465,400 3,320,104
Total General Fund 30,811,150 66,180,500 66,180,500 (7,911,500) 22,899,650
EXPANSION FUND
Potable and Recycled (2)3,446,253 11,961,900 20,504,500 1,655,000 (3,441,347)
Sewer 426,692 22,000 10,000 - 438,692
Total Expansion Fund 3,872,945 11,983,900 20,514,500 1,655,000 (3,002,655)
BETTERMENT FUND
Potable (3,348,020) 1,739,400 9,278,600 7,282,500 (3,604,720)
Recycled 264,251 13,000 769,700 1,100,000 607,551
Sewer 270,836 42,200 18,800 (272,000) 22,236
Total Betterment Fund (2,812,933) 1,794,600 10,067,100 8,110,500 (2,974,933)
REPLACEMENT FUND
Potable 18,898,359 946,100 6,746,100 2,982,500 16,080,859
Recycled 2,887,678 143,400 670,000 1,380,000 3,741,078
Sewer 9,993,923 468,600 1,284,400 17,000 9,195,123
Total Replacement Fund 31,779,960 1,558,100 8,700,500 4,379,500 29,017,060
OPEB FUND 16,893,128 885,800 580,000 - 17,198,928
DEBT RESERVE FUND 27,584,163 1,177,400 1,194,200 25,000 27,592,363
TOTAL 108,128,413$ 83,580,300$ 107,236,800$ 6,258,500$ 90,730,413$
(1)The total for interfund transfers does not net to $0 because some transfers are already reflected in the Operating
Revenues and Expenditures for General Fund as follows:
Expansion Reserve (2,590,200)$
Betterment Reserve (3,432,900)
Replacement Reserve (235,400)
Total (6,258,500)
(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 2008
94
FY 2006 FY 2008
Actual Budget Estimated (1) Projected
REVENUES
GENERAL FUND
Potable 47,967,356$ 51,539,800$ 54,474,400 57,236,600$
Recycled 3,586,870 4,569,500 4,795,706 6,124,500
Sewer 2,709,980 2,961,300 2,704,771 2,819,400
Total General Fund 54,264,206 59,070,600 61,974,876 66,180,500
EXPANSION FUND
Potable 8,823,888 26,416,100 45,201,490 12,840,700
Recycled 66,058 7,462,400 (35,670,784) (878,800)
Sewer - 13,400 426,692 22,000
Total Expansion Fund 8,889,946 33,891,900 9,957,398 11,983,900
BETTERMENT FUND
Potable 1,488,640 7,760,200 4,434,749 1,739,400
Recycled - - 262,845 13,000
Sewer - 45,000 304,905 42,200
Total Betterment Fund 1,488,640 7,805,200 5,002,499 1,794,600
REPLACEMENT FUND
Potable 796,699 543,000 (9,506,944) 946,100
Recycled - 57,900 809,243 143,400
Sewer - 359,100 10,210,973 468,600
Total Replacement Fund 796,699 960,000 1,513,272 1,558,100
OPEB FUND 538,372 671,600 1,094,164 885,800
DEBT RESERVE FUND (2)- 1,065,400 42,797,802 1,177,400
Total Revenues 65,977,863$ 103,464,700$ 122,340,012 83,580,300$
(1)FY 2007 Estimated Revenues include distribution of reserve by fund:
Expansion Betterment Replacement
Potable 35,234,459$ (129,035)$ (10,406,080)
Recycled (35,640,330) (34,650) 682,818
Sewer 405,871 163,684 9,723,262
Total -$ -$ -
(2)Debt Reserve Fund budgeted separately from General Fund effective Fiscal Year 2007
REVENUES AND EXPENDITURES BY FUND
FY 2007
95
FY 2006 FY 2008
Actual Budget Estimated (1) Projected
REVENUES AND EXPENDITURES BY FUND
FY 2007
EXPENDITURES
GENERAL FUND
Potable 48,502,163$ 51,539,800$ 54,474,400 57,236,600$
Recycled 2,241,740 4,569,500 4,795,706 6,124,500
Sewer 2,697,714 2,961,300 1,795,195 2,819,400
Total General Fund 53,441,616 59,070,600 61,065,300 66,180,500
EXPANSION FUND
Potable 33,217,943 7,076,600 9,791,020 18,458,700
Recycled - 14,431,800 11,053,572 2,045,800
Sewer - - - 10,000
Total Expansion Fund 33,217,943 21,508,400 20,844,591 20,514,500
BETTERMENT FUND
Potable 2,446,912 2,428,000 5,015,139 9,278,600
Recycled - 233,400 (1,406) 769,700
Sewer - 99,000 34,069 18,800
Total Betterment Fund 2,446,912 2,760,400 5,047,802 10,067,100
REPLACEMENT FUND
Potable 5,128,374 4,814,600 3,795,446 6,746,100
Recycled - 634,400 84,459 670,000
Sewer - 937,400 269,432 1,284,400
Total Replacement Fund 5,128,374 6,386,400 4,149,337 8,700,500
OPEB FUND 641,464 580,000 629,982 580,000
DEBT RESERVE FUND (2)- 1,193,100 16,666,316 1,194,200
Total Expenditures 94,876,309 91,498,900 108,403,329 107,236,800
EXCESS (DEFICIT) (28,898,446)$ 11,965,800$ 13,936,683 (23,656,500)$
96
FIVE-YEAR FORECAST
Financial Forecast for Fiscal Years 2009-2013
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 Department. As new capital
assets are brought into service, they are managed by an Infrastructure Management System
(IMS) which is crucial to tracking and maintaining the history of 680 miles of potable pipelines,
83 miles of recycled pipelines, 86 miles of sewer lines, 38 potable and 4 recycled reservoirs, 24
potable and 2 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).
$655 $691 $732 $769 $793
$200
$400
$600
$800
$1,000
Per
Acre
F
oo
t
.
2009 2010 2011 2012 2013
Fiscal Year
PROJECTED COST OF WATER
97
Revenues FY 2009 FY 2010 FY 2011 FY 2012 FY 2013
Water/Sewer Rates 58,883,300$ 63,573,300$ 68,649,500$ 74,462,000$ 81,016,300$
Meter Fees 322,600 329,700 339,600 358,700 374,900
Capacity Fee Revenues 1,420,200 1,424,500 1,427,300 1,433,000 1,437,300
Betterment Fees 75,500 77,700 80,100 82,500 85,000
Annexation Fees 1,570,100 1,686,700 1,815,400 1,961,600 2,125,700
Non-operating Revenues 1,732,000 1,788,600 1,844,600 1,900,700 1,961,500
Tax Revenues 4,073,900 4,146,200 4,220,900 4,299,700 4,382,200
Interest Income 865,100 930,900 1,004,300 1,117,400 1,212,400
TOTAL 68,942,700$ 73,957,600$ 79,381,700$ 85,615,600$ 92,595,300$
4,892,900$ 4,942,800$ 5,485,200$ 7,009,300$
Expenditures and Transfers
Water Cost 32,583,700$ 35,059,600$ 37,908,100$ 40,843,400$ 43,601,400$
Power 2,959,400 3,126,200 3,306,800 3,516,200 3,750,400
Labor and Benefits 16,481,000 17,409,100 18,380,700 19,397,700 20,460,300
Administrative Expenses 6,362,800 6,131,100 6,303,900 6,481,300 6,663,500
Materials & Maintenance 4,671,000 4,842,700 5,071,700 5,312,400 5,565,200
Fund Transfers, Net 5,884,800 7,388,900 8,410,500 10,064,600 12,554,500
TOTAL 68,942,700$ 73,957,600$ 79,381,700$ 85,615,600$ 92,595,300$
Excess Revenues -$ -$ -$ -$ -$
GENERAL FUND FORECAST - FY 2009 THROUGH FY 2013
This forecast incorporates both cost increases for expenditures and rate increases for revenues, as well
as growth projections.
$69 $69 $74 $74 $79 $79 $86 $86
$93 $93
$0
$20
$40
$60
$80
$100
Mi
l
l
i
o
n
s
FY09 FY10 FY11 FY12 FY13
Fiscal Year
REVENUES AND EXPENDITURES FORECAST
Revenues Expenses
98
Fund FY 2009 *FY 2010 FY 2011 *FY 2012 FY 2013
General Fund 17,206,000$ 18,200,100$ 19,325,300$ 20,325,500$ 21,299,300$
Betterment Fund 1,290,800 1,535,300 1,749,600 1,549,200 2,028,600
Replacement Fund 30,889,900 32,368,500 34,764,100 35,039,000 35,956,800
Expansion Fund 27,791,300 11,660,400 24,302,100 14,853,100 10,838,500
Medical Fund 17,912,000 18,166,600 18,392,900 18,625,700 18,849,200
Debt Reserve 1,252,400 1,088,100 815,000 439,500 52,500
TOTAL 96,342,400$ 83,019,000$ 99,349,000$ 90,832,000$ 89,024,900$
Year-End Forecast Balances
FUND BALANCES - FY 2009 THROUGH FY 2013
$0
$20
$40
$60
$80
$100
Mi
l
l
i
o
n
s
FY09 FY10 FY11 FY12 FY13
Fiscal Year
FUND BALANCES FORECAST
General Fund Betterment Fund Replacement Fund
Expansion Fund Medical Fund Debt Reserve
* Increase due to bond issuance in FY09 and FY11
99
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
(COPs), 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 four 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. In a continuing effort
to reduce debt expenses, the District was successful in raising its overall credit rating from A+ to
AA-, which is projected to save in excess of $1.5 million over the life of the most recently issued
bonds. To meet the bond indebtedness obligation and maintain stable rates, a Long-Term
Financing Plan has been developed to forecast revenues and operating requirements. The
District has instituted a schedule of gradual rate increases designed to generate sufficient revenue
to pay off existing and planned future debt issues without large and/or rapid rate increases. See
the Policies Section of the budget for the District’s complete Debt Policy.
DEBT COVERAGE RATIO FORECAST
FISCAL YEARS 2009 - 2013
3.50 3.323.022.942.95
0.00
2.00
4.00
6.00
8.00
10.00
2009 2010 2011 2012 2013
Fiscal Year
Cov
e
ra
ge
R
atio .
.
Actual Ratio Min imum Ra t io = 1.25
The Actual Ratio includes growth-related revenues, such as Capacity and Annexation Fees. The
Minimum Ratio excludes these revenues in accordance with existing District Bond Covenants.
100
Outstanding
Year Original Balance
# Incurred Maturity Date Amount 06/30/07
1 1996 Certificates of Participation (COPs) 15,400,000$ 12,500,000$
2 1998 General Obligation (GO) Bonds 11,835,000 8,810,000
3 2004 Certificates of Participation (COPs) 12,270,000 10,835,000
4 1994 State Loan 5,000,000 1,350,778
5 2007 Certificates of Participation (COPs) 42,000,000 42,000,000
Total Outstanding Debt 86,505,000$ 75,495,778$
Total Assessed Valuation - FY 2007
Percentage of Original Debt to Assessed Valuation 0.38% 0.11%
Debt Limit per District Debt Policy (% of Assessed Valuation) 15.00% 15.00%
22,684,693,592$
All Debts
10,348,663,242$
GO Bonds
November 30, 2010
September 1, 2036
SCHEDULE OF OUTSTANDING DEBT
Description
September 1, 2026
August 31, 2022
September 1, 2023
101
1996 COPs (1)GOBs 2004 COPs State Loan 2007 COPs Total
613,750 834,385 928,534 359,811 1,720,919 4,457,399
704,167 830,822 928,159 359,583 2,491,328 5,314,059
694,167 831,035 927,334 359,347 2,491,358 5,303,241
684,167 830,258 925,604 358,981 2,494,770 5,293,780
674,167 828,166 927,487 6,010 2,496,801 4,932,631
762,083 824,645 922,993 - 2,497,520 5,007,241
749,583 824,452 921,706 - 2,496,926 4,992,667
737,083 822,951 923,575 - 2,499,864 4,983,473
822,500 824,542 923,544 - 2,501,301 5,071,887
807,500 819,750 921,819 - 2,500,791 5,049,860
792,500 818,500 918,985 - 2,498,674 5,028,659
875,417 820,542 913,944 - 2,494,316 5,104,219
857,917 816,042 912,129 - 2,492,856 5,078,944
840,417 814,833 912,979 - 2,493,390 5,061,619
920,833 816,667 911,281 - 2,491,723 5,140,504
900,833 811,708 907,844 - 2,491,760 5,112,145
978,750 - 901,899 - 2,489,326 4,369,975
956,250 - - - 2,489,160 3,445,410
1,031,667 - - - 2,485,504 3,517,171
1,104,583 - - - 2,483,304 3,587,887
- - - - 2,483,038 2,483,038
- - - - 2,479,796 2,479,796
- - - - 2,478,402 2,478,402
- - - - 2,478,644 2,478,644
- - - - 2,475,485 2,475,485
- - - - 2,471,609 2,471,609
- - - - 2,473,240 2,473,240
- - - - 2,470,714 2,470,714
- - - - 2,464,031 2,464,031
- - - - 2,462,828 2,462,828
16,508,334$ 13,169,298$ 15,629,816$ 1,443,732$ 73,839,378$ 120,590,558$
(1)Interest on the 1996 Certificates of Participation is variable and is projected using an interest rate of 2.5%
2009
PROJECTED PRINCIPAL AND INTEREST PAYMENTS BY DEBT
FY
2020
2021
2026
2027
2014
2015
2016
2017
2037
2031
2032
2033
2034
TOTAL
2022
2023
2024
2025
2028
2029
2030
2035
2036
2018
2019
2010
2011
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2008
102
POTABLE REVENUES AND EXPENSES
New water-rate hike in pipeline
Proposal would cover higher costs for 2008
By: Mike Lee – San Diego Union-Tribune
“Water agencies countywide are increasing their rates
to offset rapidly rising wholesale water prices.
The water authority’s board voted June 28 to increase
the agency’s 2008 rates by about 8 percent, though
each retail water provider’s final cost is different
because of several variables. The author-ity is trying
to pay for more expensive water from the
Metropolitan Water District in Los Angeles and for
construction projects to make the region drought-
proof.
Some of the countywide agency’s 24 member districts
anticipated the increase and incorporated it into their
latest rates. Others, including the city of San Diego,
will likely finalize a new rate increase this fall. San
Diego approved four years of annual rate boosts in
February – before water authority officials knew what
they would charge in 2008. “It puts pressure on all
(the) member agencies,” said Mark Watton, general
manager for the Otay Water District. “If you are not
current on those pass-throughs, they compound in the
future and you have created a huge problem.” Otay is
looking to raise its rates by more than 5 percent next
year in response to the increased cost of water.
In previous years, the public barely noticed rate
increases from wholesale water suppliers because
those price boosts often were nominal and were
passed along discreetly to ratepayers. Because of a
state Supreme Court ruling last summer, retail water
providers now must notify residents about these
increases and hold public hearings to discuss them.
The proposed rate changes will be outlined in notices
set to go out to property owners in the coming
months.”
The District will provide water service to approximately 48,030 potable customers by the end of
Fiscal Year 2008. Ninety-four percent of the potable customers are residential and the remaining
six percent 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 2.1% for Fiscal Year 2008. 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 2007 was less than four inches which is six
inches less than 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 107.
Unit sales represent approximately 68% 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).
All customers are required to pay a fixed monthly
system fee based on meter size. The fee recovers
34% of the fixed costs associated with delivering
water. Water rates, energy fees, and penalties
recover the remaining 66% of fixed costs and all
variable costs. The District will adjust the system
fee, as needed, to balance fixed costs with fixed
revenues following industry best practice.
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
103
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 is in negotiations with the City of San Diego for additional
treatment through the SD17 connection which will further diversify our water resources.
In Fiscal Year 2008, the District is estimating the purchase of 41,300 acre-feet of potable water
to meet the demands of its customers. Provisions have been made for District usage, leakage,
and evaporation in the amount of 2,780 acre-feet.
104
FY 2006 FY 2008 Budget Variance
11-Actual Budget Estimated Budget Variance %
REVENUES
##Water Sales 40,192,169$ 43,130,800$ 44,112,749$ 47,506,500$ 4,375,700$ 10.1%
##Meter Fees 249,288 253,500 196,259 294,400 40,900 16.1%
##Capacity Fee Revenues 1,356,611 1,000,200 1,430,092 1,414,500 414,300 41.4%
BettBetterment Fees for Maintenance - - - 73,300 73,300 100.0%
##Annexation Fees - 1,216,900 2,119,886 1,464,500 247,600 20.3%
Tax Revenues 2,978,122 3,377,500 3,593,168 3,952,500 575,000 17.0%
##Non-operating Revenues 1,980,766 1,668,100 2,066,796 1,679,200 11,100 0.7%
##Interest - 892,800 955,451 851,700 (41,100) (4.6%)
General Fund Draw Down 1,210,400 - - - - 0.0%
TOTAL REVENUES 47,967,356 51,539,800 54,474,400 57,236,600 5,696,800 11.1%
57,236,600
EXPENDITURES
##Water Purchases (CWA) 20,212,012 16,653,700 19,970,363 21,123,300 4,469,600 26.8%
##Water Purchases (CSD) 138,760 4,564,500 1,595,019 2,860,800 (1,703,700) (37.3%)
##Tier II Purchases - - (2,880) - - 0.0%
##CWA - Infrastructure Access Charge 844,855 1,003,900 1,003,927 1,090,200 86,300 8.6%
##CWA - Customer Service Charge 771,760 846,800 846,505 950,400 103,600 12.2%
##CWA - Emergency Storage Charge 1,047,601 1,230,600 1,230,830 1,507,800 277,200 22.5%
##MWD - Capacity Reservation Charge 508,756 514,800 530,708 569,400 54,600 10.6%
##MWD - Net RTS and Standby Charges 460,717 512,200 512,206 552,600 40,400 7.9%
Subtotal - Water Costs 23,984,461 25,326,500 25,686,678 28,654,500 3,328,000 13.1%
##Power 1,702,448 2,310,900 1,987,186 2,208,100 (102,800) (4.4%)
##Labor and Benefits 13,192,558 12,774,300 14,109,003 13,876,500 1,102,200 8.6%
##Administrative Expenses 3,739,631 5,057,000 5,154,135 6,521,500 1,464,500 29.0%
##Material & Maintenance 2,421,295 2,795,600 2,543,968 2,768,100 (27,500) (1.0%)
DS Debt Service 2,460,470 - - - - 0.0%
##Expansion Reserve 1,001,300 - - - - 0.0%
BettBetterment Reserve - - - 3,207,900 3,207,900 100.0%
RepReplacement Reserve - 3,275,500 4,993,429 - (3,275,500) (100.0%)
TOTAL EXPENDITURES 48,502,162 51,539,800 54,474,400 57,236,600 5,696,800 11.1%
EXCESS REVENUES (EXPENSES) (534,807)$ -$ -$ -$ -$ 0.0%
EXCESS REVENUES, w/o restatement and transfers -$
FY 2007
OPERATING BUDGET SUMMARY - POTABLE
POTABLE OPERATING EXPENDITURES
FY 2008
Material &
Maintenance
5.1%
Administrative
Expenses
12.1%
Power
4.1%
Water Costs
53.0%Labor and
Benefits
25.7%
105
FY 2007
Estimated
FY 2008
Budget Variance
Water Sales:
Water Sales 30,696,071$ 32,331,300$ 1,635,229$
System Fees 8,658,339 9,596,300 937,961
Energy Fees 1,801,455 2,018,000 216,545
MWD and CWA Fixed Fees 2,159,269 2,708,800 549,531
Penalties 797,615 852,100 54,485
Total 44,112,749$ 47,506,500$ 3,393,751$
Water Sales : Unit Sales x Rate
System Charges : Fixed monthly fee based on meter size
Energy Charges : Energy pumping fee of $0.034 per unit of water for each 100 feet of lift
or fraction thereof above the base elevation of 450 feet
Penalties : Late charges, locks , etc.
WATER SALES SUMMARY
FY 2008
System Charges
20%
MWD & CWA
Fixed Charges
6%
Penalties
2%Energy Charges
4%
Water Sales
68%
CLASSIFICATION OF WATER SALES - POTABLE
106
Current Approved*
Accounts Units Amount Rate Rate
Residential 45,073 11,388,400 21,782,300$ 1.88$ 1.91$ **
Publicly-Owned 263 1,005,000 2,031,900 1.99 2.06
Commercial 1,207 1,065,000 2,068,100 1.91 1.98
Landscaping 1,205 2,603,800 5,097,100 1.93 1.96 **
Agricultural 32 66,400 128,800 1.91 1.98
Temporary and Others 249 630,300 1,223,100 1.91 1.98
Total Potable Water Sales 48,029 16,758,900 32,331,300$ 1.90 1.93
*Approved rate effective January 1, 2008.
**Based on average rate.
Fiscal Year 2008 Sales Budget
UNIT SALES BY SERVICE CLASS
FY 2008
Residential
68%
Commercial
6%
Others
4%
Publicly Owned
6%Landscaping
16%
WATER SALES SUMMARY BY SERVICE CLASS - POTABLE
107
Estimated Budget
FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008
Residential 7,965,460 8,275,224 8,083,816 9,668,100 9,713,112 10,027,800
Master Meters 1,018,044 1,055,922 1,181,402 1,198,200 1,434,040 1,360,600
Publicly-Owned 929,850 933,517 901,639 919,200 984,391 1,005,000
Commercial 740,622 904,788 895,098 983,300 901,615 1,065,000
Landscaping 2,136,847 2,219,274 1,931,104 2,122,500 2,276,003 2,603,800
Agricultural 81,513 82,343 48,628 51,836 53,787 66,400
Temporary 735,185 750,530 723,712 689,000 696,516 630,300
Others 6,364 6,429 - - - -
Total 13,613,885 14,228,027 13,765,399 15,632,136 16,059,464 16,758,900
Actual
UNIT SALES AND METER TRENDS
6,000
8,000
10,000
12,000
14,000
16,000
18,000
FY03 Actual FY04 Actual FY05 Actual FY06 Actual FY07 Estimated FY08 Budget
Un
i
t
s
(
t
h
o
u
s
a
n
d
s
)
25,000
30,000
35,000
40,000
45,000
50,000
Me
t
e
r
s
Unit Sales Meters
UNIT SALES HISTORY BY CUSTOMER CLASS - POTABLE
108
Meter Current Approved* Existing Additional Total
Service Class Size Rates Rates Meters Meters Meters
Residential 0.75 11.30$ 12.30$ 6,032,300$ 73,000$ 6,105,300$
1.00 18.15 19.80 160,500 - 160,500
1.50 35.75 38.95 6,700 - 6,700
2.00 59.60 64.95 4,500 - 4,500
3.00 95.90 104.55 - - -
4.00 109.80 119.70 - - -
6.00 219.45 239.20 2,800 - 2,800
10.00 418.90 456.60 - - -
Non-Residential 0.75 22.00 24.00 141,000 1,800 142,800
1.00 33.90 36.95 343,100 1,900 345,000
1.50 47.65 51.95 549,200 1,700 550,900
2.00 59.60 64.95 813,800 18,200 832,000
3.00 95.90 104.55 84,200 - 84,200
4.00 109.80 119.70 381,400 - 381,400
6.00 219.45 239.20 55,000 - 55,000
10.00 418.90 456.60 31,500 - 31,500
- - -
Fire Services Various 23.30 25.40 172,400 - 172,400
Special System Fees - - 721,300
Budgeted Potable System Fees 8,778,400$ 96,600$ 9,596,300$
*Approved rates effective January 1, 2008.
Budgeted System Fees
-
10,000
20,000
30,000
40,000
50,000
FY03 Actual FY04 Actual FY05 Actual FY06 Actual FY07 Estimated FY08 Budget
METER COUNT HISTORY
SYSTEM FEES - POTABLE
109
Meter Current Approved*
Classification Size Rates Rates Existing Growth Total
Residential 0.75 3.55$ 3.85$ 1,891,500$ 23,100$ 1,914,600$
1.00 5.65 6.15 49,900 - 49,900
1.50 10.65 11.60 2,000 - 2,000
2.00 18.45 20.05 1,400 - 1,400
4.00 58.20 63.15 - - -
6.00 106.45 115.50 1,300 - 1,300
Non-Residential 0.75 3.55 3.85 22,700 300 23,000
1.00 5.65 6.15 57,100 300 57,400
1.50 10.65 11.60 122,700 400 123,100
2.00 18.45 20.05 251,600 5,600 257,200
3.00 34.05 36.95 29,800 - 29,800
4.00 58.20 63.15 201,700 - 201,700
6.00 106.45 115.50 26,600 - 26,600
10.00 276.75 300.30 20,800 - 20,800
Total 2,679,100$ 29,700$ 2,708,800$
*Approved rates effective January 1, 2008.
Budgeted MWD & CWA - Fixed Charges
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
Th
o
u
s
a
n
d
s
FY03
Actual
FY04
Actual
FY05
Actual
FY06
Actual
FY07
Estimated
FY08
Budget
MWD AND CWA FIXED CHARGES (PASS-THROUGH)
MWD AND CWA FIXED FEES (PASS -THROUGH) POTABLE
110
Meter Installation Meter AMR
Size Fee Fee Fee
Meter Fees:0.75 60.00$ 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 2008 Growth by Meter Size
Service Class 0.75 1.00 1.50 2.00 3.00 Total
Residential 933 - - - - 933
Non-Residential 12 8 5 44 - 69
Total Number of Meters 945 8 5 44 - 1,002
Total Meter Fees 251,400$ 2,600$ 2,500$ 37,900$ 294,400$
-
10,000
20,000
30,000
40,000
50,000
FY03 Actual FY04 Actual FY05 Actual FY06 Actual FY07 Estimated FY08 Budget
METER COUNT
METER FEES - POTABLE
111
Estimated Budget
FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008
Water Sales 22,732,862$ 25,204,669$ 24,760,101$ 27,975,777$ 30,696,071$ 32,331,300$
System Fees 7,191,403 7,576,328 7,933,913 8,056,340 8,658,339 9,596,300
Energy Fees 1,433,269 1,618,000 1,573,999 1,696,492 1,801,455 2,018,000
MWD and CWA Fixed Fees 591,667 1,088,156 1,620,548 1,775,186 2,159,269 2,708,800
Penalties 312,774 374,283 494,915 688,374 797,615 852,100
Total 32,261,975$ 35,861,436$ 36,383,476$ 40,192,169$ 44,112,749$ 47,506,500$
Note:
Fiscal Year 2005 Water Sales and Energy Fees drop due to 22.51 inches of rainfall.
Actual
System FeesWater Sales PenaltiesEnergy FeesMWD & CWA Fixed Fees
$-
$10,000
$20,000
$30,000
$40,000
Thousands
FY03 Actual FY04 Actual FY05 Actual FY06 Actual FY07 Estimated FY08 Budget
REVENUE HISTORY
REVENUE HISTORY - POTABLE
112
FY08 Budget FY08 Budget
Acre Feet Rate (1)Purchase Costs % to Total
Potable Water Purchases
Budgeted Sales (CWA) 33,005.1 $572/$614 19,482,200$ 80.0%
District & Unbilled Usage 717.4 $572/$614 423,600 1.7%
Water Loss 2,062.7 $572/$614 1,217,500 5.0%
Budgeted Sales (CSD) 5,468.0 $512/$537 2,860,800 13.3%
TOTAL VARIABLE CHARGES 41,253.2 23,984,100$ 100.0%
MWD & CWA FIXED CHARGES:FY07 Estimated FY08 Budget
Infrastructure Access Charge (IAC) 1,003,927$ 1,090,200$
Customer Service Charge (CSC) 846,505 950,400
Emergency Storage Charge (ESC)1,230,830 1,507,800
Capacity Reservation Charge (CRC) 530,708 569,400
Readiness-to-Serve Charge (RTS) 512,206 552,600
TOTAL FIXED CHARGES 4,124,176$ 4,670,400$
(1)The first rate applies to purchases from July to December of the budget fiscal year; the second from
January to June.
-
10,000
20,000
30,000
40,000
Ac
r
e
F
e
e
t
FY03
Actual
FY04
Actual
FY05
Actual
FY06
Actual
FY07
Estimated
FY08
Budget
POTABLE WATER PURCHASES
WATER PURCHASES AND RELATED COSTS - POTABLE
113
POWER COSTS - POTABLE
Admin and
Operations
Buildings
Potable
Transmission
Total Potable
Power Costs
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 Actual 154,567 1,628,153 1,782,721
FY07 Estimated 182,501 1,804,686 1,987,187
FY08 Budget 190,100 2,018,000 2,208,100
$0
$500
$1,000
$1,500
$2,000
$2,500
Thousands
FY03
Actual
FY04
Actual
FY05
Actual
FY06
Actual
FY07
Estimated
FY08
Budget
HISTORICAL POWER COSTS AND PROJECTIONS
Admin and Operations Buildings
Potable Transmission
114
FY 2006 FY 2008 Budget
Actual Budget Estimated Budget Variance %
Director's Fees 19,800$ 48,000$ 18,700$ 48,000$ - 0.0%
Travel and Meetings 175,432 236,200 158,506 270,900 34,700 14.7%
Conservation and Outreach 148,439 229,500 168,831 481,800 252,300 109.9%
General Office Expense 375,730 364,700 344,782 359,400 (5,300) (1.5%)
Equipment 711,679 973,600 901,151 1,014,300 40,700 4.2%
Fees 179,180 371,700 421,420 367,700 (4,000) (1.1%)
Services 1,858,732 2,639,300 2,023,530 2,923,300 284,000 10.8%
Training 113,700 153,700 97,772 173,100 19,400 12.6%
Utilities 11,530 11,700 12,870 14,000 2,300 19.7%
Miscellaneous - - 212 - - 0.0%
Total 3,594,223 5,028,400 4,147,775 5,652,500 624,100 12.4%
Less: Overhead Allocation (796,190) (978,600) (600,940) (807,300) 171,300 (17.5%)
Subtotal 2,798,033 4,049,800 3,546,835 4,845,200 795,400 19.6%
General Expenses 941,598 1,007,200 1,607,300 1,676,300 669,100 66.4%
Net Administrative Expenses 3,739,631$ 5,057,000$ 5,154,135$ 6,521,500$ 1,464,500$ 29.0%
4,535,821$ 6,035,600$ 5,755,075$ 7,328,800$
FY 2007
ADMINISTRATIVE EXPENSES - POTABLE
ADMINISTRATIVE EXPENSES - POTABLE
FY 2008
Fees
6.5%
Services
51.7%
Director's Fees
0.9%
Conservation and
Outreach
8.5%
Equipment
17.9%
General Office
Expense
6.4%
Training
3.1%
Utilities
0.2%
Travel and
Meetings
4.8%
115
FY 2006 FY 2008 Budget
Actual Budget Estimated Budget Variance %
Materials and Maintenance
Fuel and Oil 280,051$ 766,000$ 406,417$ 570,000$ (196,000) (25.6%)
Meters and Materials 499,051 265,100 312,406 304,400 39,300 14.8%
Fleet Parts and Equipment 151,407 155,000 159,601 161,100 6,100 3.9%
Landscaping Materials (1)6,300 - - - - 0.0%
Infrastructure Equipment and Supplies 633,035 685,200 531,277 523,500 (161,700) (23.6%)
Chemicals 174,799 195,000 197,565 225,000 30,000 15.4%
Safety Equipment 28,026 14,000 17,761 14,700 700 5.0%
Laboratory Equipment and Supplies 26,511 30,000 30,473 30,000 - 0.0%
Other Materials and Supplies 206,769 150,500 280,772 231,500 81,000 53.8%
Building and Grounds Materials 87,827 154,400 109,016 122,000 (32,400) (21.0%)
Contracted Services 327,520 380,400 498,680 585,900 205,500 54.0%
Materials and Maintenance 2,421,295 2,795,600 2,543,968 2,768,100 (27,500) (1.0%)
Total Materials and Maintenance 2,421,295$ 2,795,600$ 2,543,968$ 2,768,100$ (27,500)$ (1.0%)
(1)Landscaping outsourced in FY 2006
MATERIALS AND MAINTENANCE EXPENSES - POTABLE
FY 2007
MATERIALS AND MAINTENANCE EXPENSES - POTABLE
FY 2008
Contracted Services
21.2% Building and
Grounds Materials
4.4%
Laboratory
Equipment and
Supplies
1.1%Chemicals
8.1%
Meters and
Materials
11.0%
Fleet Parts and
Equipment
5.8%
Other Materials and
Supplies
8.4%
Safety Equipment
0.5%
Fuel and Oil
20.6%
Infrastructure
Equipment and
Supplies
18.9%
116
LOWER OTAYRESERVOIR
UPPER OTAYRESERVOIR
SWEETWATERRESERVOIR
LAKEMURRAY LOVELANDRESERVOIR
M EX IC O
Reservoir Pump Station
San Diego County Water Authority Pipes
Otay Water District Pipes
Otay Headquarters
EXISTING FACILITIES
San Diego County Water
Authority Connections
EXISTING
POTABLE WATER SERVICE AREA
117
RECYCLED REVENUES AND EXPENSES
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
bottom and the clear liquid, or secondary effluent, flows out over weirs at the surface. Some of
118
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 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.
119
Uriel Acosta, a construction worker, walked past a tank
containing reclaimed water. The Otay Water District is to buy
a large amount of water from the city of San Diego
Nelvin C. Cepeda / Union-Tribune
City to announce largest sale of reclaimed water
San Diego Union-Tribune – June 1, 2007 by Mike Lee, Staff Writer
San Diego city officials will announce the largest sale of recycled water in county history today.
The buyer is the Otay Water District, which has agreed to purchase about 6 million gallons of reclaimed – or
partially purified – water each day for irrigating golf courses, parks and other areas in eastern Chula Vista. The
water will come from San Diego's two reclamation plants.
But even with this major deal, the reclamation facilities will operate at only about one-third of their combined
capacity. The city will continue to pump tens of millions of gallons of partially treated wastewater into the ocean
daily instead of recycling them for sale.
Few businesses are willing to buy reclaimed water, partly because they don't want to pay for the installation of
specialized plastic piping. It's expensive to put in the purple pipes in developed areas – so expensive that San Diego
has stopped doing such work for the time being.
Meanwhile, Mayor Jerry Sanders has rejected the politically volatile idea of super-purifying the wastewater so it can
be used as drinking water. The concept, known as reservoir augmentation, has been espoused by several City
Council members, a city-sponsored citizens' panel, a coalition of water districts throughout the county, many
environmentalists and the county grand jury.
San Diego is seeking more buyers of reclaimed water but doesn't have much money to expand the program, said
Marsi Steirer, a top official for the city's water department.
Last year, San Diego completed a roughly $1 million
study of water-reuse options. Reservoir augmentation was
a central recommendation in that analysis. The concept
involves putting super-purified water into the city's San
Vicente Reservoir near Lakeside. There, it would mix
with river water and be treated again before being piped
throughout the city.
Sanders doesn't dispute the science behind reservoir
augmentation, but he insists that such projects are
divisive, expensive and unnecessary. He points to
desalination and importation of water as better options.
While debate continues over reservoir augmentation, the
Otay Water District's new purchase of reclaimed water is
being touted as a win-win situation.
San Diego will receive an estimated $2 million a year from Otay, while the district will be able to significantly lower
its reliance on imported water.
“Every (gallon) that we recycle is a (gallon) of potable imported water that we won't put in the landscape,” said Otay
manager, Mark Watton.
The district began planning its $43 million piping and storage network for reclaimed water in the early 1990s,
Watton said. The project started well before Otay officials were sure where their reclaimed water would come from.
“We knew that we were a little ahead putting in the purple pipe . . . but we also knew that you could never go in and
retrofit a neighborhood. You had to have the pipes in” while the communities were being developed, Watton said.
Nowadays, drought conditions affecting the Colorado River and minimal snowpacks in Northern California make
Otay's investment look smart. San Diego County gets most of its water from these two sources.
Using reclaimed water makes parks and other open spaces “essentially drought-proof,” Watton said.
120
FY 2006 FY 2008 Budget Variance
31-Actual Budget Estimated Budget Variance %
REVENUES
###Recycled Water Sales 2,694,517$ 3,216,000$ 3,294,171$ 3,583,800$ 367,800 11.4%
###System Fees 298,153 340,000 335,063 432,800 92,800 27.3%
###Energy Fees 198,599 215,400 190,570 264,800 49,400 22.9%
###MWD/CWA Rebates 372,172 633,000 592,056 1,614,900 981,900 155.1%
###Penalties - 81,000 80,998 105,100 24,100 29.8%
###Total Reclaimed Water Sales 3,563,441 4,485,400 4,492,858 6,001,400 1,516,000 33.8%
###Meter Fees 20,879 25,000 50,280 24,100 (900) (3.6%)
###Non-operating Revenues 2,550 3,000 - - (3,000) (100.0%)
###Interest - 56,100 145,748 99,000 42,900 76.5%
TOTAL REVENUES 3,586,870 4,569,500 4,795,706 6,124,500 1,555,000 34.0%
EXPENDITURES
###Water Purchases (CWA) 1,232,198 1,421,300 1,597,592 - (1,421,300) (100.0%)
###Water Purchases (CSD) - 315,400 231,884 1,423,000 1,107,600 351.2%
Total Water Purchases 1,232,198 1,736,700 1,829,476 1,423,000 (313,700) (18.1%)
###Power 185,103 202,600 431,562 493,600 291,000 143.6%
###Labor and Benefits 591,299 822,700 567,385 895,400 72,700 8.8%
###Administrative Expenses 106,445 314,200 205,245 271,300 (42,900) (13.7%)
###Materials & Maintenance 126,695 228,800 198,098 226,000 (2,800) (1.2%)
###Expansion Reserve - - - 2,590,200 2,590,200 100.0%
Bett Betterment Reserve - - - 225,000 225,000 100.0%
ReplReplacement Reserve - 1,264,500 1,563,940 - (1,264,500) (100.0%)
TOTAL EXPENDITURES 2,241,740 4,569,500 4,795,706 6,124,500 1,555,000 34.0%
EXCESS REVENUES (EXPENSES) 1,345,130$ -$ -$ -$ -$ 0.0%
-$
FY 2007
OPERATING BUDGET SUMMARY - RECYCLED
RECYCLED OPERATING EXPENDITURES
FY 2008
Betterment
Reserve
3.7%
Expansion
Reserve
42.3%
Labor and
Benefits
14.6%
Power
8.1%
Total Water
Purchases
23.2%
Materials &
Maintenance
3.7%
Administrative
Expenses
4.4%
121
FY 2007
Estimated
FY 2008
Budget Variance
Recycled Water Sales:
Water Sales 3,294,170$ 3,583,800$ 289,630$
System Fees 335,063 432,800 97,737
Energy Fees 190,570 264,800 74,230
MWD & CWA Rebates 592,056 1,614,900 1,022,844
Penalties 80,998 105,100 24,102
Total 4,492,858$ 6,001,400$ 1,508,542$
Water Sales : Unit Sales x Rate
System Charges : Fixed monthly fee based on meter size
Energy Charges : Energy pumping fee of $0.032 per unit of water for each 100 feet of lift
or fraction thereof above the base elevation of 450 feet
Penalties : Late charges, locks , etc.
WATER SALES SUMMARY
FY 2008
Water Sales
60%
Energy Charges
4%
Penalties
2%
MWD & CWA
Fixed Charges
27%
System Charges
7%
CLASSIFICATION OF WATER SALES - RECYCLED
122
Current Approved*
Accounts Units Amount Rate Rate
Water Sales:
Recycled 614 2,118,800 3,583,800$ 1.68$ 1.69$ **
*Approved rate effective January 1, 2008.
**Based on average rate.
Estimated Budget
FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008
Recycled 1,106,302 1,388,621 1,368,462 1,729,000 1,920,287 2,118,800
Fiscal Year 2008 Sales Budget
ACTUAL
UNIT SALES HISTORY - RECYCLED
UNIT SALES & METER TRENDS
-
500
1,000
1,500
2,000
2,500
FY03 Actual FY04 Actual FY05 Actual FY06 Actual FY07 Estimated FY08 Budget
Un
i
t
s
(
t
h
o
u
s
a
n
d
s
)
-
200
400
600
800
Me
t
e
r
s
Unit Sales Meters
WATER SALES SUMMARY BY SERVICE CLASS - RECYCLED
123
Meter Current Approved* Existing Additional Total
Service Class Size 6/30/07 FY08 Rates Rates Meters Meters Meters
Recycled 0.75 3 - 22.00$ 27.85$ 900$ -$ 900$
1.00 66 - 33.90 42.90 30,400 - 30,400
1.50 339 14 47.65 60.30 219,600 9,100 228,700
2.00 166 12 59.60 75.40 134,500 9,700 144,200
3.00 4 1 95.90 121.30 5,200 1,300 6,500
4.00 4 2 109.80 138.90 6,000 1,500 7,500
6.00 3 219.45 277.60 8,900 - 8,900
10.00 1 - 418.90 529.90 5,700 - 5,700
Total 586 29 411,200$ 21,600$ 432,800$
Budgeted Recycled System Fees 432,800$
*Approved rates effective January 1, 2008.
Meter Count
Budgeted System Fees
-
200
400
600
800
FY03 Actual FY04 Actual FY05 Actual FY06 Actual FY07
Estimated
FY08 Budget
METER COUNT
SYSTEM FEES - RECYCLED
124
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
0.75 1.00 1.50 2.00 3.00 Total
Residential - - 28 - 28
Total Meter Fees -$ -$ -$ 24,100$ -$ 24,100$
Fiscal Year 2008 Growth by Meter Size
-
200
400
600
FY03 Actual FY04 Actual FY05 Actual FY06 Actual FY07
Estimated
FY08 Budget
METER COUNT
METER FEES - RECYCLED
125
REVENUE HISTORY - RECYCLED
Estimated Budgeted
FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008
Water Sales 1,749,369$ 2,285,666$ 2,392,952$ 2,694,517$ $3,294,170 3,583,800$
System Fees 153,859 210,208 256,659 298,153 335,063 432,800
Energy Fees - - 52,119 198,599 190,570 264,800
MWD & CWA Rebates 298,445 447,020 262,850 372,172 592,056 1,614,900
Penalties - - - - 80,998 105,100
Total 2,201,673$ 2,942,894$ 2,964,580$ 3,563,441$ 4,492,858$ 6,001,400$
Note:
Fiscal Year 2005 Water Sales and Rebates drop due to 22.51 inches of rainfall.
ACTUAL
System FeesWater Sales PenaltiesEnergy Fees
MWD & CWA
Rebates
$-
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
Thousands
FY03 Actual FY04 Actual FY05 Actual FY06 Actual FY07
Estimated
FY08 Budget
REVENUE HISTORY
126
WATER PURCHASES - RECYCLED
FY08 Budget FY08 Budget
Acre Feet Rate Purchase Costs % to Total
SBWRP Recycled Water Purchases (CSD)
Recycled Water Purchases 3,799.7 $375 1,423,000$ 100.0%
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
Ac
r
e
F
e
e
t
FY03
Actual
FY04
Actual
FY05
Actual
FY06
Actual
FY07
Estimated
FY08
Budget
RECYCLED WATER PURCHASES
127
POWER COSTS - RECYCLED
Treatment and
Recycled
Transmission
FY03 Actual 227,800$
FY04 Actual 219,500
FY05 Actual 241,000
FY06 Actual 224,200
FY07 Estimated 431,562
FY08 Budget 493,600
$-
$100
$200
$300
$400
$500
Thousands
FY03
Actual
FY04
Actual
FY05
Actual
FY06
Actual
FY07
Estimated
FY08
Budget
HISTORICAL POWER COSTS AND PROJECTIONS
128
FY 2006 FY 2008 Budget
Actual Budget Estimated Budget Variance %
Equipment 168$ 1,000$ 540$ 3,000$ 2,000$ 200.0%
Fees - - - 7,000 7,000 100.0%
Services 3,522 166,000 104,633 105,000 (61,000) (36.7%)
Total 3,690 167,000 105,173 115,000 (52,000) (31.1%)
Overhead Allocation 102,756 147,200 100,071 156,300 9,100 6.2%
Administrative Expenses 106,446$ 314,200$ 205,245$ 271,300$ (42,900)$ (13.7%)
FY 2007
ADMINISTRATIVE EXPENSES - RECYCLED
ADMINISTRATIVE EXPENSES - RECYCLED
FY 2008
Equipment
1.1%
Fees
2.6%
Services
38.7%
Overhead
Allocation
57.6%
129
FY 2006 FY 2008 Budget
Actual Budget Estimated Budget Variance %
Materials and Maintenance
Fuel and Oil 22,213$ 35,000$ 12,348$ 27,000$ (8,000) (22.9%)
Meters and Materials 525 10,000 9,632 10,000 - 0.0%
Fleet Parts and Equipment 96 - 199 - - 0.0%
Infrastructure Equipment and Supplies 38,440 119,000 96,997 110,000 (9,000) (7.6%)
Chemicals 56,746 56,000 64,508 66,000 10,000 17.9%
Safety Equipment - 1,800 2,379 1,500 (300) (16.7%)
Laboratory Equipment and Supplies 76 2,000 2,060 4,000 2,000 100.0%
Other Materials and Supplies 8,440 - 5,765 5,000 5,000 100.0%
Building and Grounds Materials 159 - - - - 0.0%
Contracted Services - 5,000 4,210 2,500 (2,500) (50.0%)
Materials and Maintenance 126,695 228,800 198,098 226,000 (2,800) (1.2%)
Total Materials and Maintenance 126,695$ 228,800$ 198,098$ 226,000$ (2,800)$ (1.2%)
MATERIALS AND MAINTENANCE EXPENSES - RECYCLED
FY 2007
MATERIALS AND MAINTENANCE EXPENSES - RECYCLED
FY 2008
Fuel and Oil
11.9%
Contracted Services
1.1%
Other Materials and
Supplies
2.2%
Laboratory
Equipment and
Supplies
1.8%
Safety Equipment
0.7%
Chemicals
29.2%
Meters and
Materials
4.4%
Infrastructure
Equipment and
Supplies
48.7%
130
LOWER OTAYRESERVOIR
UPPER OTAYRESERVOIR
SWEETWATERRESERVOIR
LAKEMURRAY LOVELANDRESERVOIR
RALPH CHAPMANWATER RECYCLINGFACILITY
SOUTH BAY WATER RECLAMATION PLANT M EX I C O
Reservoir Pump Station
Otay Water District Pipes
Otay
Headquarters
EXISTING FACILITIES
Treatment Plants
RECYCLED WATER SERVICE AREA
EXISTING
131
The District provides sewer service to approximately 15,200 customers through 4,630 accounts
(or 6,620 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 98.5% of the customer
base. Modest growth of 1.2% is anticipated
in Fiscal Year 2008.
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 Water Recycling
Facility (RWCWRF) treatment plant where
the District produces recycled water, see
page 118 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 $988,800 for Fiscal Year 2008.
Additionally, the District will pay $235,000
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
2008.
The charge for sewer service is mandated by
the State Revenue Program Guidelines
SEWER REVENUES AND EXPENSES
Converting Landfill Gas Into Electricity
Jamacha Landfill
Pedro J. Porras, June 2007
The Jamacha Landfill, located near the intersection of Campo
Road and Singer Lane in Rancho San Diego, is one of ten
inactive landfill sites throughout the County of San Diego with
gas control systems that is own and operated by the County of
San Diego. This landfill is also adjacent to the Otay Water
District’s reclamation plant known as the Ralph W. Chapman
Water Recycling Facility.
Decomposing trash creates methane gas that is collected and
pumped through a web of pipes to a central processing facility
where electricity is created. Now, turning the landfill gas into
electric energy, gas that would otherwise be wasted, and use that
electric energy to operate a facility that treats wastewater into
high quality treated water useful for irrigation is an extraordinary
collaborative endeavor between two public agencies; the County
of San Diego and the Otay Water District. This project
exemplifies the conscientious endeavor made by public servants
to provide effective and efficient services to their customers
while enhancing the environment.
The Department of Public Works Solid Waste Management staff
identified Jamacha Landfill as having a potential for a successful
project. Among several features that the county found attractive,
these micro turbines can operate on waste gases with methane
content as low as 30 percent. In July of 2006, the County of San
Diego entered into an agreement with the Otay Water District for
a project to continue to process the landfill gas through the
existing skid and piped it down to 3 new 70 kW micro turbines at
the Ralph W. Chapman Water Recycling Facility.
The 3 micro turbines will be able to supply power for all of the
treatment plant operations during winter and approximately 65
percent during summer. During summer, we can receive power
from the micro turbines and SDG&E at the same time. In winter,
however, when the micro turbines produce more power than what
we need, the excess power will go to SDG&E's grid.
This is a great collaborative effort between two public agencies
with extraordinary results, from cleaning the air, to reducing
power demands from the grid, to treating wastewater for reuse in
landscaping while reducing the imported water demand.
132
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 unit (EDU). 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: 11% of the total
service units, while only comprising 1.5% of the customer base. The formula for the sewer rates
is shown on page 140.
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 $357,500 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 $1,350,780 with an interest rate of 3.5%. The debt service
payment for Fiscal Year 2008 is $359,800.
Micro turbines at the RWCWRF that convert landfill gas into electricity.
133
FY 2006 FY 2008 Budget Variance
11-Actual Budget Estimated Budget Variance %
REVENUES
4200 Sewer Charges 2,296,856 2,568,100 2,577,993 2,679,100 111,000 4.3%
4400 Non-operating Revenues 2,512 3,000 1,338 1,000 (2,000) (66.7%)
Tax Revenues 410,612 49,900 52,990 51,300 1,400 2.8%
4510 Interest - 56,700 72,450 88,000 31,300 55.2%
General Fund Draw Down - 283,600 - - (283,600) (100.0%)
TOTAL REVENUES 2,709,980 2,961,300 2,704,771 2,819,400 (141,900) (4.8%)
EXPENDITURES
5411 Power 226,237 164,300 71,230 103,100 (61,200) (37.2%)
5110 Labor and Benefits 647,438 1,009,300 556,534 832,600 (176,700) (17.5%)
5200 Administrative Expenses 125,809 188,400 108,276 189,500 1,100 0.6%
5300 Material & Maintenance 1,337,986 1,599,300 959,155 1,458,800 (140,500) (8.8%)
DS Debt Service 360,244 - - - - 0.0%
Repl RReplacement Reserve - - 100,000 235,400 235,400 100.0%
TOTAL EXPENDITURES 2,697,714 2,961,300 1,795,195 2,819,400 (141,900) (4.8%)
EXCESS REVENUES 12,266$ -$ 909,576$ -$ -$ 0.0%
EXCESS REVENUES, w/o restatement and transfers ##########
FY 2007
OPERATING BUDGET SUMMARY - SEWER
SEWER OPERATING EXPENDITURES
FY 2008
Administrative
Expenses
6.7%
Material &
Maintenance
51.7%
Labor and Benefits
29.5%
Power
3.7%
Replacement
Reserve
8.4%
134
Residential:
Single-Family 4,509 4,509.00
Multi-Family 50 1,360.00
Institutional:
Schools 6 269.70
Churches 4 87.03
Commercial:
Low Strength 34 181.27
Medium Strength 18 141.71
High Strength 6 72.45
Total 4,627 6,621.16
CUSTOMERS AND ASSIGNED SERVICE UNITS - SEWER
Service Units
AssignedTotal
AccountsUser Category
FY 2008
ASSIGNED SERVICE UNITS
Residential
89%
Others
11%
SEWER CUSTOMERS
Residential
99%
Others
1%
135
Estimated Budget
FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008
Sewer Charges 1,640,943$ 1,767,118$ 1,995,548$ 2,296,856$ 2,531,513$ 2,612,100$
Penalties (1)- - - - 46,480 67,000
Total 1,640,943$ 1,767,118$ 1,995,548$ 2,296,856$ 2,577,993$ 2,679,100$
(1)Prior to Fiscal Year 2007, penalties were Potable revenues only.
Actual
REVENUE HISTORY - SEWER
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
Th
o
u
s
a
n
d
s
s
FY03 Actual FY04 Actual FY05 Actual FY06 Actual FY07 Estimated FY08 Budget
SEWER REVENUE HISTORY
Sewer Charges Penalties
136
POWER COSTS - SEWER
Sewer Lift
Station
FY02 Actual 77,200$
FY03 Actual 88,398
FY04 Actual 88,915
FY05 Actual 82,447
FY06 Actual 85,894
FY07 Estimated 71,230
FY08 Budget 103,100
$-
$25
$50
$75
$100
Thousands
FY02
Actual
FY03
Actual
FY04
Actual
FY05
Actual
FY06
Actual
FY07
Estimated
FY08
Budget
HISTORICAL POWER COSTS AND PROJECTIONS
137
FY 2006 FY 2008 Budget
Actual Budget Estimated Budget Variance %
Equipment 8,898$ 1,000$ 494$ 1,000$ - 0.0%
Fees 232 500 - 7,700 7,200 1440.0%
Services 3,206 10,000 6,858 35,000 25,000 250.0%
Total 12,477 11,500 7,351 43,700 32,200 280.0%
Overhead Allocation 113,332 176,900 100,925 145,800 (31,100) (17.6%)
Administrative Expenses 125,809$ 188,400$ 108,276$ 189,500$ 1,100$ 0.6%
FY 2007
ADMINISTRATIVE EXPENSES - SEWER
ADMINISTRATIVE EXPENSES - SEWER
FY 2008
Overhead
Allocation
76.9%
Fees
4.1%
Services
18.5%
Equipment
0.5%
138
FY 2006 FY 2008 Budget
Actual Budget Estimated Budget Variance %
Materials and Maintenance
Meters and Materials 5$ -$ -$ -$ -$ 0.0%
Fleet Parts and Equipment 289 - - 2,000 2,000 100.0%
Infrastructure Equipment and Supplies 150,904 122,000 98,183 99,000 (23,000) (18.9%)
Chemicals 4,699 3,000 3,837 3,000 - 0.0%
Safety Equipment 1,687 2,800 1,439 1,000 (1,800) (64.3%)
Laboratory Equipment and Supplies 34,263 10,000 13,213 3,000 (7,000) (70.0%)
Other Materials and Supplies 167 - 692 - - 0.0%
Contracted Services 5,006 100,000 - 127,000 27,000 27.0%
Materials and Maintenance 197,019 237,800 117,364 235,000 (2,800) (1.2%)
Sewer Charges
Metro O&M Costs 916,774 1,130,000 617,686 988,800 (141,200) (12.5%)
Spring Valley Sewer Charge 224,193 231,500 224,105 235,000 3,500 1.5%
Total Sewer Charges 1,140,967 1,361,500 841,791 1,223,800 (137,700) (10.1%)
Total Materials and Maintenance 1,337,986$ 1,599,300$ 959,155$ 1,458,800$ (140,500)$ (8.8%)
MATERIALS AND MAINTENANCE EXPENSES - SEWER
FY 2007
MATERIALS AND MAINTENANCE EXPENSES - SEWER
FY 2008
Metro O&M Costs
67.8%
Spring Valley
Sewer Charge
16.1%
Fleet Parts and
Equipment
0.1%Infrastructure
Equipment and
Supplies
6.8%
Contracted Services
8.7%
Laboratory
Equipment and
Supplies
0.2%
Safety Equipment
0.1%
Chemicals
0.2%
139
FORMULA FOR SEWER RATES
Each year the District is required to revise its formula for determining sewer rates in accordance
with the State Revenue Program Guidelines.
For residential sewer customers, effective January 1, 2008, a “Winter Average” fee structure will
be used for calculating the monthly sewer charge. A usage fee will be charged based on the prior
year’s “Winter Average” water consumption, reduced by a 15% usage discount, times a rate of
$1.41. A base fee of $9.75 for a ¾ inch water meter and $14.25 for a 1 inch or greater water
meter shall be applied.
The commercial 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 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. The sewer rates per ASU effective on January 1st of Calendar Years 2007 and 2008 are
$32.70 and $33.26, respectively.
The minimum charge for commercial shall be no lower than one ASU at low strength. 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. For colleges, flow is based on the number of Certificated and
Classified Staff, and students enrolled in each school session.
140
LOWER OTAYRESERVOIR
UPPER OTAYRESERVOIR
SWEETWATERRESERVOIR
LAKEMURRAY LOVELANDRESERVOIR
RALPH CHAPMANWATER RECYCLINGFACILITY
M EX I C O
Holding Tanks Lift Stations
OWD Pipes
Otay
Headquarters
EXISTING FACILITIES
Treatment Plants
SEWER SERVICE AREA
141
GENERAL REVENUES AND EXPENSES
The District’s revenues and expenses in this section are not directly related to the services
delivered to potable, recycled, or sewer customers, yet they are operating expenses or revenues.
General Revenues
Capacity fees 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 which 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 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. In
Fiscal Year 2007, the District received
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.
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-
142
site. The District incurs expenses related to these leases and the purpose of the fee is to recover
the cost to set up the lease.
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 five 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 6% 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.
143
FY 2006 FY 2008 Budget Variance
Actual Budget Estimated Budget Variance %
Capacity Fee Revenues 1,356,611$ 1,000,200$ 1,536,911$ 1,414,500 414,300$ 41.4%
Betterment Fees for Maintenance - - - 73,300 73,300 100.0%
Annexation Fees - 1,216,900 2,119,886 1,464,500 247,600 20.3%
Tax Revenues
1% General Tax 1,338,279 2,802,700 2,930,494 3,328,700 526,000 18.8%
Availability Fees 609,099 624,700 715,664 675,100 50,400 8.1%
Total Tax Revenues 3,388,734 3,427,400 3,646,158 4,003,800 576,400 16.8%
General Revenues 4,745,345$ 5,644,500$ 7,302,955$ 6,956,100$ 1,311,600$ 23.2%
FY 2006 FY 2008 Budget Variance
Actual Budget Estimated Budget Variance %
Property Rental 806,014$ 1,124,200$ 914,403$ 894,200$ (230,000) (20.5%)
Sewer Billing Fees 347,205 350,900 354,815 355,500 4,600 1.3%
Set-up Fee for Lease Site 33,000 52,000 10,000 18,000 (34,000) (65.4%)
Grants 2,890 25,000 14,246 197,000 172,000 688.0%
Miscellaneous 796,720 122,000 774,671 215,500 93,500 76.6%
Non-Operating Revenues 1,985,828$ 1,674,100$ 2,068,134$ 1,680,200$ 6,100$ 0.4%
Potable Recycled Sewer Total
Capacity Fee Revenues 1,414,500$ -$ -$ 1,414,500$
Betterment Fees for Maintenance 73,300 - - 73,300
Annexation Fees 1,464,500 - - 1,464,500
Tax Revenues
1% Property Tax 3,328,700 - - 3,328,700
Availability Fees 623,800 - 51,300 675,100
Total Tax Revenues 3,952,500 - 51,300 4,003,800
Non-Operating Revenues
Property Rental 894,200 - - 894,200
Sewer Billing Fees 355,500 - - 355,500
Set-up Fee for Lease Site 18,000 - - 18,000
Grants 197,000 - - 197,000
Miscellaneous 214,500 - 1,000 215,500
Total Non-Operating Revenues 1,679,200 - 1,000 1,680,200
Total General and Non-Operating Revenues 8,584,000$ -$ 52,300$ 8,636,300$
GENERAL REVENUES
FY 2007
FY 2008 Budget
NON-OPERATING REVENUES
FY 2007
GENERAL AND NON-OPERATING REVENUES BY BUSINESS
144
FY 2006 FY 2008 Budget Variance
Actual Budget Estimated Budget Variance %
Administrative Expenses
Legal Fees 578,116$ 671,000$ 1,224,441 1,209,000 538,000$ 80.2%
General Insurance 363,483 335,500 382,192 467,300 131,800 39.3%
Interest - 700 667 - (700) (100.0%)
Total Administrative Expenses 941,598 1,007,200 1,607,300 1,676,300 669,100 66.4%
Benefits
Benefits - 47,000 214,202 10,000 (37,000) (78.7%)
Total General Expenses 941,598$ 1,054,200$ 1,821,502$ 1,686,300$ 632,100$ 60.0%
FY 2007
GENERAL EXPENSES
145
DEPARTMENTAL OPERATING BUDGET
Labor and Benefits
Labor and Benefits represent 23.5% 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 six departments: General Manager, Administrative
Services, Finance, Information Technology & Strategic Planning, Water Operations, and
Engineering. The departments are further categorized by functions into divisions. The Fiscal
Year 2008 Budget includes funding for labor and benefits for 172.75 Full-time Equivalent
(FTE) employees and a 3% across-the-board salary increase on July 1, 2007.
The staffing level for Fiscal Year 2008 has a decrease of two FTE employees from Fiscal Year
2007. The District has chosen to eliminate two vacant positions in areas that have experienced a
reduction of work due to slowing of growth.
A projected 11.5% 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 $1,927,700. The Water
Operations Department, with its staff of 71 employees, is responsible for maintaining and
operating the District's facilities.
Administrative Expenses
Administrative Expenses represent 25.6% of the District's total operating costs. A detailed
listing of the Administrative Expenses for Fiscal Year 2008 is shown on page 153. Several
significant long-term planning projects and some one-time anticipated legal expenses caused
nearly $1 million of this budget increase.
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.
146
DEPARTMENTAL OPERATING BUDGET
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.
As the District continues to grow and new facilities are added, additional maintenance and
services will be required. This year, there was a 3.7% decrease due to two significant
reductions in cost; a $196,000 reduction in fuel costs at the Lower Otay Pump station because
of reduced operating time and a decrease of $141,200 in the Metro O&M costs because of an
adjustment by the City of San Diego.
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.
147
DEPARTMENTAL OPERATING BUDGET
TOTAL DEPARTMENTAL OPERATING BUDGET
Fiscal Year 2008
$28,410,500
Information
Technology and
Strategic Planning
9.5%
Water Operations
39.6%
Finance
14.1%
General Expense
6.0%
Administrative
Services
13.6%
Board of Directors
0.4%General Manager
5.2%
Engineering
11.6%
148
FY06 FY08
Actual Budget Estimated Budget
Total Labor Costs 9,353,829$ 10,427,200$ 9,571,332$ 10,402,700$
Benefits
Pension 2,831,808 2,996,000 2,646,045 3,129,500
Employee Assistance Program 7,444 7,500 7,575 7,500
Worker's Compensation 593,756 295,700 314,130 287,800
Health/Dental/Life Insurance 1,567,034 1,577,900 2,244,685 1,669,800
Social Security / Medicare 780,852 871,700 798,752 904,600
Salary Continuation Insurance 73,636 79,300 71,355 74,900
Employee Awards 3,115 - 18,168 -
State Unemployment Insurance 17,691 20,000 1,304 10,000
Vacation / Sick / Holiday / Other Leave 1,738,682 1,922,200 1,745,843 1,911,000
Total Fringe Benefits 7,614,018 7,770,300 7,847,857 7,995,100
Total Labor & Benefits 16,967,847 18,197,500 17,419,189 18,397,800
Less: Non-Operating Labor & Benefits
Labor Costs 1,368,893 1,544,500 943,765 1,192,100
Fringe Benefits Allocation 814,999 925,000 557,116 735,600
Total WO Allocation 2,183,892 2,469,500 1,500,881 1,927,700
Operating Labor & Benefits 14,783,955 15,728,000 15,918,308 16,470,100
Less: Overhead Allocation Personnel Portion 994,124 1,121,700 685,386 865,700
Operating Labor & Benefits 13,789,831$ 14,606,300$ 15,232,922$ 15,604,400$
FY07
LABOR & BENEFITS
0
20
40
60
80
100
120
140
160
180
FULL TIME EQUIVALENT (FTE)
COMPARISON BY DEPARTMENT
FY 06-07 6 19 34.75 13 71 31 174.75
FY 07-08 6 20 35.75 13 71 27 172.75
GM ADM FIN IT OPS ENG Total
GM……General Manager
ADM.…Administrative Services
FIN…....Finance
IT…...…Information Technology
& Strategic Planning
OPS…...Water Operations
ENG…..Engineering & Planning
DEV…..Development Services
149
Potable Sewer Recycle
Developer
Reimbursed-
CIP Total
Total Operating Labor Costs 8,497,800$ 344,000$ 368,800$ -$ 9,210,600$
Benefits 6,762,100 238,800 258,600 - 7,259,500
Overhead Allocation-Personnel Portion (1,383,300) 249,800 267,800 - (865,700)
Total Operating Labor & Benefits 13,876,600 832,600 895,200 - 15,604,400
Total CIP Labor Costs 645,800$ 56,500$ 167,800$ 322,000$ 1,192,100$
Benefits 397,900 33,300 99,300 205,100 735,600
Overhead Allocation-Personnel Portion 469,000 41,000 121,800 233,900 865,700
Total CIP Labor & Benefits 1,512,700 130,800 388,900 761,000 2,793,400
Total Labor & Benefits 15,389,300 963,400 1,284,100 761,000 18,397,800
LABOR & BENEFITS BY FUND - FISCAL YEAR 2008
LABOR & BENEFITS BY FUND
Potable-Operating Potable-CIP Sewer-Operating
Sewer-CIP Recycle-Operating Recycle-CIP
150
FY 2006 FY 2007 FY 2008
General Manager 6 6 6
Total - General Manager Department 6 6 6
FTE 6.00 6.00 6.00
Administrative Services 3 3 3
Human Resources 4 4 5
Purchasing 9 9 9
Safety 111Conservation222
Total Administrative Services Department 19 19 20
FTE 18.50 19.00 20.00
Controller and Budgetary Services 7 7 7
Treasury and Accounting Services 6 6 6
Customer Service 17 18 19
Payroll and Accounts Payable 4 4 4
Total Finance Department 34 35 36
FTE 33.75 34.75 35.75
Information Technology and Strategic Planning Application 455
Information Technology Operations 5 5 4Geographic Information Systems 334
Total IT and Strategic Planning Department 12 13 13
FTE 12.00 13.00 13.00
Operations Management 322
Water System Operations 25 27 27
Utility Maintenance/Construction 36 35 35
Collection/Treatment/Reclamation Operations 8 7 7
Total Operations Department 72 71 71
FTE 72.00 71.00 71.00
Engineering Management 443
Engineering 28 27 24
Total Engineering Department 32 31 27
FTE 32.00 31.00 27.00
District Total Position Count 175 175 173
FTE 174.25 174.75 172.75
POSITION COUNT BY DEPARTMENT
151
FY 2006 FY 2007 FY 2008
Database Analyst 1 0 0
Customer Service Field Representative I and II 0 2 2
Customer Service Representative I and II 0 1 0
Total Contract/Temporary Employees 132
CONTRACT / TEMPORARY EMPLOYEES
POSITION COUNT BY DEPARTMENT
Administrative
Services
12%
Information
Technology and
Strategic Planning
8%
Finance
21%
Operations
41%
Engineering
15%
General Manager
3%
152
FY 2006 FY 2008 Budget
Actual Budget Estimated Budget Variance %
Director's Fees 19,800$ 48,000$ 18,700$ 48,000$ - 0.0%
Travel and Meetings 175,432 236,200 158,506 270,900 34,700 14.7%
Conservation and Outreach 148,439 229,500 168,831 481,800 252,300 109.9%
General Office Expense 375,872 364,700 344,782 359,400 (5,300) (1.5%)
Equipment 720,744 975,600 902,185 1,018,300 42,700 4.4%
Fees 179,413 372,200 421,420 382,400 10,200 2.7%
Services 1,865,460 2,815,300 2,135,021 3,063,300 248,000 8.8%
Training 113,700 153,700 97,772 173,100 19,400 12.6%
Utilities 11,530 11,700 12,870 14,000 2,300 19.7%
Miscellaneous - - 212 - - 0.0%
Total 3,610,390 5,206,900 4,260,300 5,811,200 604,300 11.6%
Less: Overhead Allocation (580,103) (654,500) (399,944) (505,200) 149,300 (22.8%)
Subtotal 3,030,287 4,552,400 3,860,356 5,306,000 753,600 16.6%
General Expenses 941,598 1,007,200 1,607,300 1,676,300 669,100 66.4%
Administrative Expenses - Total 3,971,885$ 5,559,600$ 5,467,656$ 6,982,300$ 1,422,700$ 25.6%
4,551,988$ 6,214,100$ 5,867,600$ 7,487,500$
FY 2007
ADMINISTRATIVE EXPENSES - TOTAL
ADMINISTRATIVE EXPENSES - TOTAL
FY 2008
Services
52.7%
Director's Fees
0.8%
Training
3.0%
Utilities
0.2%
Travel and
Meetings
4.7%Conservation and
Outreach
8.3%
General Office
Expense
6.2%
Equipment
17.5%
Fees
6.6%
153
FY 2006 FY 2008 Budget
Actual Budget Estimated Budget Variance %
Materials and Maintenance
Fuel and Oil 302,264$ 801,000$ 418,765$ 597,000$ (204,000) (25.5%)
Meters and Materials 499,581 275,100 322,038 314,400 39,300 14.3%
Fleet Parts and Equipment 151,791 155,000 159,801 163,100 8,100 5.2%
Landscaping Materials (1)6,300 - - - - 0.0%
Infrastructure Equipment and Supplies 822,379 926,200 726,457 732,500 (193,700) (20.9%)
Chemicals 236,243 254,000 265,909 294,000 40,000 15.7%
Safety Equipment 29,713 18,600 21,579 17,200 (1,400) (7.5%)
Laboratory Equipment and Supplies 60,849 42,000 45,747 37,000 (5,000) (11.9%)
Other Materials and Supplies 215,376 150,500 287,229 236,500 86,000 57.1%
Building and Grounds Materials 87,987 154,400 109,016 122,000 (32,400) (21.0%)
Contracted Services 332,526 485,400 502,890 715,400 230,000 47.4%
Materials and Maintenance 2,745,009 3,262,200 2,859,430 3,229,100 (33,100) (1.0%)
Sewer Charges
Metro O&M Costs 916,774 1,130,000 617,686 988,800 (141,200) (12.5%)
Spring Valley Sewer Charge 224,193 231,500 224,105 235,000 3,500 1.5%
Total Sewer Charges 1,140,967 1,361,500 841,791 1,223,800 (137,700) (10.1%)
Total Materials and Maintenance 3,885,976$ 4,623,700$ 3,701,221$ 4,452,900$ (170,800)$ (3.7%)
(1)Landscaping outsourced in FY 2006
MATERIALS AND MAINTENANCE EXPENSES - TOTAL
FY 2007
MATERIALS AND MAINTENANCE EXPENSES - TOTAL
FY 2008
Chemicals
6.6%
Fuel and Oil
13.4%
Laboratory
Equipment and
Supplies
0.8%
Building and
Grounds Materials
2.7%
Fleet Parts and
Equipment
3.7%
Meters and Materials
7.1%
Infrastructure
Equipment and
Supplies
16.4%
Safety Equipment
0.4%
Other Materials and
Supplies
5.3%
Contracted Services
16.1%
Sewer Charges
27.5%
154
FY 2006 FY 2008
Actual Budget Estimated Budget
Departmental Expenditures
Board of Directors 33,206$ 91,700$ 27,805$ 111,700$
General Manager 1,365,468 1,403,500 1,387,654 1,485,500
General Expense 941,598 1,054,200 1,821,502 1,686,300
Administrative Services 2,849,587 3,316,300 3,287,262 3,868,200
Finance 3,566,714 3,813,000 3,911,212 3,994,100
Information Technology and Strategic Planning 2,297,117 2,655,400 2,421,856 2,705,900
Water Operations 10,008,312 10,803,800 9,903,566 11,253,200
Engineering (1)2,801,382 3,427,900 2,726,271 3,305,600
Total Departmental Expenditures 23,863,384 26,565,800 25,487,129 28,410,500
Less: Overhead Allocation (1,574,227) (1,776,200) (1,085,330) (1,370,900)
Net Departmental Expenditures 22,289,157 24,789,600 24,401,799 27,039,600
Non-Departmental Expenditures
Water Purchases 25,216,659 27,063,200 27,516,154 30,077,500
Power 2,113,787 2,677,800 2,489,978 2,804,800
Debt Service 2,820,714 - - -
Expansion Reserve 1,001,300 - - 2,590,200
Betterment Reserve - - - 3,432,900
Replacement Reserve - 4,540,000 6,657,369 235,400
Total Non-Departmental Expenditures 31,152,460 34,281,000 36,663,501 39,140,800
TOTAL OPERATING EXPENDITURES 53,441,617$ 59,070,600$ 61,065,300$ 66,180,400$
(1)Engineering, and Planning and Development Services sections combined in FY2008
FY 2007
OPERATING EXPENDITURES BY DEPARTMENT
155
FY 2006 FY 2008
Actual Budget Estimated Budget
Departmental Expenditures
Labor and Benefits 15,425,420$ 15,728,000$ 15,918,308$ 16,470,100$
Director's Fees 19,800 48,000 18,700 48,000
Travel and Meetings 175,432 236,200 158,506 270,900
Conservation and Outreach 148,439 229,500 168,831 481,800
General Office Expense 375,871 364,700 344,782 359,400
Equipment 720,745 975,600 902,185 1,018,300
Fees 1,121,011 1,378,700 2,028,053 2,058,700
Services 1,865,460 2,815,300 2,135,021 3,063,300
Training 113,700 153,700 97,772 173,100
Materials & Maintenance 2,745,009 3,262,200 2,859,430 3,229,100
Power and Utilities 11,530 11,700 12,870 14,000
Sewer Charges 1,140,967 1,361,500 841,791 1,223,800
Miscellaneous - - 212 -
Interest - 700 667 -
Total Departmental Expenditures 23,863,384 26,565,800 25,487,129 28,410,500
Less: Overhead Allocation (1,574,227) (1,776,200) (1,085,330) (1,370,900)
Net Departmental Expenditures 22,289,157 24,789,600 24,401,799 27,039,600
Non-Departmental Expenditures
Water Purchases 25,216,659 27,063,200 27,516,154 30,077,500
Power 2,113,787 2,677,800 2,489,978 2,804,800
Debt Service 2,820,714 - - -
Expansion Reserve 1,001,300 - - 2,590,200
Betterment Reserve - - - 3,432,900
Replacement Reserve - 4,540,000 6,657,369 235,400
Total Non-Departmental Expenditures 31,152,460 34,281,000 36,663,501 39,140,800
TOTAL OPERATING EXPENDITURES 53,441,617$ 59,070,600$ 61,065,300$ 66,180,400$
FY 2007
OPERATING EXPENDITURES BY OBJECT
156
BOARD OF DIRECTORS
Division 4 Division 3 Division 2
Jose Lopez Gary Croucher Jaime Bonilla
Vice President President Treasurer
Division 1 Division 5
Larry Breitfelder Mark Robak
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.
157
DISTRICT BOUNDRY
158
FY 2006 FY 2008
Actual Budget Estimated Budget
Board of Directors 33,206$ 91,700$ 27,805$ 111,700$
TOTAL 33,206$ 91,700$ 27,805$ 111,700$
FY 2007
BOARD OF DIRECTORS
FY 2008 Total Departmental Budget - $28.4 Million
Board of Directors - $111,700
Water Operations
39.6%
Finance
14.1%
Board of Directors
0.4%
Administrative
Services
13.6%
General Manager
5.2%
General Expense
6.0%
Engineering
11.6%
Information
Technology and
Strategic Planning
9.5%
159
BOARD OF DIRECTORS
FY 2006 FY 2008
Board of Directors Actual Budget Estimated Budget
Benefits 1,890$ 20,000$ 1,740$ 40,000$
Director's Fees 19,800 48,000 18,700 48,000
Travel and Meetings 11,516 23,700 7,366 23,700
Total 33,206$ 91,700$ 27,805$ 111,700$
FY 2007
$148
$90
$156
$58
$88
$33
$92
$28
$112
$-
$50
$100
$150
$200
(i
n
T
h
o
u
s
a
n
d
D
o
l
l
a
r
s
)
FY04 FY05 FY06 FY07 FY08
Fiscal Year
Budget vs. Actual
Budget Actual
Estimated Adopted
160
ADMINISTRATIVE SERVICES
Division Title Division No.
Administrative Services Chief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2211
Human Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2221
Purchasing and Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2231
Safety and Risk Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2241
Water Conservation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2251
Mission Statement
To provide support to the Board of Directors, the General Manager, and
District staff to meet objectives in satisfying the needs of our customers by
providing, through best management practices, the full range of employer
and employee services, administrative services, risk management, and water
conservation.
166
Personnel Count FY 2006 FY 2007 FY 2008
Chief, Administrative Services 1 1 1
Executive Secretary 1 0 0
Confidential Secretary 0 1 2
Office Assistant 1 1 0
Human Resources Manager 1 1 1
Senior Human Resources Analyst 1 1 1
Human Resources Analyst 1 1 2
Human Resources Technician 1 1 1
Purchasing & Facilities Manager 1 1 1
Buyer I and II 1 1 2
Assistant Buyer 1 1 0
Lead Warehouse Worker 1 1 0
Lead Warehouse Worker / Facilities Worker 0 0 1
Warehouse / Delivery Worker 1 2 2
Warehouse Assistant (PT) 1 0 0
Facilities Maintenance Technician 2 2 2
Facilities Maintenance Assistant 1 1 1
Safety & Security Administrator 1 1 1
Water Conservation Manager 1 1 1
Water Conservation Specialist 1 1 1
Total 19 19 20
DISTRICT POSITION COUNT - 173
ADMINISTRATIVE SERVICES DEPARTMENT - 20
167
Department Responsibilities
FY 2006 FY 2008
Actual Budget Estimated Budget
Administrative Chief 328,550$ 318,000$ 315,298$ 370,700$
Human Resources 622,375 752,000 881,487 941,000
Purchasing and Facilities 1,245,250 1,498,900 1,428,982 1,586,600
Safety and Security 245,127 254,000 244,571 226,600
Water Conservation 408,285 493,400 416,924 743,300
TOTAL 2,849,588$ 3,316,300$ 3,287,262$ 3,868,200$
FY 2007
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 - $28.4 Million
Administrative Services - $3,868,200
Information
Technology and
Strategic Planning
9.5%
Engineering
11.6%
General Expense
6.0%
General Manager
5.2%
Administrative
Services
13.6%
Board of Directors
0.4%
Finance
14.1%Water Operations
39.6%
168
ADMINISTRATIVE SERVICES
FY 2006 FY 2008
Actual Budget Estimated Budget
Labor and Benefits 1,835,213$ 1,858,600$ 1,890,549$ 2,052,800$
Travel and Meetings 15,755 22,700 12,525 23,800
Conservation and Outreach 138,430 221,900 166,721 476,800
General Office Expense 117,592 115,000 113,525 115,400
Equipment 105,622 149,600 113,626 111,000
Fees 9,111 12,700 5,451 7,500
Services 305,231 398,600 520,185 446,400
Training 66,094 104,700 72,629 126,600
Materials & Maintenance 245,010 420,800 379,181 493,900
Power and Utilities 11,530 11,700 12,870 14,000
Total 2,849,588$ 3,316,300$ 3,287,262$ 3,868,200$
FY 2007
$2,629 $2,526
$2,971
$2,627 $2,789 $2,850
$3,316 $3,287
$3,868
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
(i
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FY04 FY05 FY06 FY07 FY08
Fiscal Year
Budget vs. Actual
Budget Actual
Estimated Adopted
169
Target Actual
Garden Awareness - measures the customer awareness
of the garden N/A 50.0% 47.0% 50.0%
Customer Satisfaction - measures the level of overall
customer satisfaction with the District N/A 90.0% 90.0% 90.0%
Industry Papers and Publications - measures the number
of industry papers and presentations to industry N/A 5 per year
(cumulative)
5 per year
(cumulative)
5 per year
(cumulative)
Public Relation Plan Execution - measures
implemetation of public outreaches, 50th anniversary,
and recycled water outreach plans
N/A 90.0% above 1.0 90.0% above
Training Hours per Employee (QualServe) - measures
the quantity of formal training utility employees are
actually completing
N/A 9.3 per
quarter
11.0 per
quarter
9.3 per
quarter
Safety Training Program - a minimum of 8 safety
training programs of which 90% of field employees
attend
N/A
19 per
quarter
(cumulative)
100%
19 per
quarter
(cumulative)
Time to Fill - number of recruitments on time/total
number of recruitments 100.0% 90.0% 95.7% 90.0%
Service Connections per FTE - ratio of number of
customers to Full Time Equilavent 274 Greater than
217 276.3%Greater than
217
Fiscal Year
2005-2006
Actual
Activity/Criterion
ADMINISTRATIVE SERVICES
PERFORMANCE MEASURES
Fiscal Year 2006-2007 Fiscal Year
2007-2008
Target
Legend
Completed
Ahead of Target
On Target
Not on Target
On Hold
No Reports
Not Scheduled to
Start Yet
Fiscal Year 2006-2007
170
Turnover Rate - number of voluntary
terminations/average number of employees during
measurement period
9.9% 10% per year 13.6% 10% per year
Blanket Order Activity - percentage of material
purchases purchased via blanket purchase order 16.9%15% or
Greater 16.1%15% or
Greater
Inventory Accuracy - actual/recorded inventory 99.8% 97.0% 99.8% 97.0%
Employee H&S Severity Rate (QualServe) - number of
lost work days per 100 employees 6 4 or less per
year 105 4 or less per
year
Total Water Saved - estimate of water saved per year
through conservation programs (voucher programs and
landscape surveys)
94.0% 90.0% 88.0% 90.0%
171
Accomplishments – Fiscal Year 2006-2007
Human Resources
• Communicated current workplace policies and employment standards by
assessing and updating the Employee Handbooks and New Employee Orientation
Program.
• Implemented District-wide employee training to communicate all new policies,
procedures, and programs.
• Developed and distributed the Benefits Statement to all employees to demonstrate
the value of their compensation package beyond their paycheck.
• In preparation for labor negotiations, developed a comprehensive Leave of
Absence Policy and developed and updated 14 other policies and Memorandum
of Understanding (MOU) language.
• Achieved recruitment goals by hiring 46 employees.
Water Conservation
• Prepared and completed the FY05-06 Best Management Practices (BMP) Report.
• Distributed over 90 residential Smart Controllers.
• Promoted the Artificial Turf Program at three high schools within the District.
• Participated in the design, coordination, and
implementation of the first Water
Conservation Summit.
• Promoted the end of the single-family toilet
voucher program, replacing 1,363 older toilets
with Ultra-low flush or High Efficiency toilets
this fiscal year and approximately 22,000
toilets since the program started in 1991.
Safety and Risk
• Developed a new Safety Recognition
Program.
• Recognized by California Highway Patrol
(CHP) for six years of satisfactory ratings of
the District's Bi-annual Inspection Terminals
(BIT) and Pull Notice programs.
Otay Water District Pipeline:
January 2007
By: David Burpeau, Safety and Risk
Administration
The District recently was awarded a special
recognition by the California Highway Patrol -
California Biennial Motor Safety Vehicle
Compliance Inspection Award - This award
was presented to Otay for our efforts in the
California Biennial Motor Safety Vehicle
Compliance Inspection Award for meritorious
achievement and commitment to highway
safety. The Biennial Inspection of Terminals
(BIT) program inspects all motor carriers
operating trucks in California to rate their
compliance with motor vehicle laws. Otay has
achieved consecutive satisfactory safety
compliance ratings since December, 1991.
ADMINISTRATIVE SERVICES
172
• Provided National Incident Management System (NIMS) training 100, 200, 700
and 800 for all affected staff.
• Received over $85,000 credit towards annual premiums for Property and Liability
and Workers' Compensation from Special District's Risk Management Authority
(SDRMA) for the District's excellent loss control and safety programs.
Purchasing and Facilities Maintenance
• Transitioned the administration of the District-wide landscape maintenance
contract from Operations to Facilities Maintenance, freeing responsibility from
core function positions.
• Implemented the Contracts Module of EDEN software, enhancing and
centralizing the collection, management, and reporting of contract related data and
providing critical information to project/contract managers on an as-needed basis
through an enterprise application.
• Evaluated and implemented Radio Frequency Identification (RFID) for minor
asset tracking, simplifying the inventory process and improving the accounting of
these items through the application of a technology based system.
• Evaluated, with the Operations Department, the acquisition and operation of the
District’s light duty fleet, identifying cost reduction and efficiency initiatives
including alternative gas efficient vehicles and modified vehicle retention criteria
designed to maximize the return on surplus vehicles and reduce fleet operating
costs.
173
Goal: Enhance the District’s customer satisfaction focus by evaluating customer
feedback
Objectives: Implement a standardized Potable and Recycled Water
Customer Survey
Goal: Expand water conservation in new commercial and residential construction
Objectives: Expand partnerships with city of Chula Vista officials,
developers, and community leaders
Goal: Maximize recycled water use
Objectives: Expand outreach to elected local officials and community
leaders to discuss the benefits of recycled water.
Goal: Expand the Public Education Program
Objectives: Develop quarterly articles for Star news and Union Tribune
feature
Goal: Define a program for increased relations with Mexico
Objectives: Identify ad promote opportunities for by-national
cooperation and understanding
Objective Legend
Completed
Ahead of
Schedule
On Schedule
Behind Schedule
On Hold
No Reports
Not Scheduled to
Start Yet
Goal
Objective
Customer
Goals and Objectives – Fiscal Year 2007-2008
ADMINISTRATIVE SERVICES – BALANCED SCORECARD
General Manager
174
Goal: Learn industry trends and promote District achievements
Objectives: Promote the District’s success in relevant areas by
publishing white papers, applying for awards, and speaking
at State and national conferences.
Human Resources
Learning and Growth
Goal: Develop Long-Term Staffing Plan
Objectives: Create a Long-Term Staffing Plan
Goal: Continue to recruit and retain a highly qualified workforce
Objectives: Promote the value of the District’s compensation and
benefits plan
Perform a comprehensive Compensation Study
Negotiate successor Memorandum of Understanding in
FY 2008
Goal: Enhance employee training with new programs
Objectives: Develop and implement a training needs assessment and
implement appropriate recommendations.
Goal: Establish a repeatable Employee Survey Program and baseline measures
Objectives: Establish a repeatable Employee Survey Program and
baseline measures.
Purchasing and Facilities
Goal: Improve the District’s budget controls
Objectives: Implement a Contract Management Tool
Goal: Generate a Long-Term Facility and Space Plan
Objectives: Develop a Long-Term Facility and Space Plan
Finance
175
Water Conservation
Goal: Maximize recycled water use
Objectives: Develop additional educational materials on beneficial uses
of recycled water and best proactive case studies
financial controls
Goal: Provide full and accurate cost accounting of District services
Objectives: Develop standard and flat fee methodology for key district
services
Assess and develop guidelines for life-cycle and activity-
based cost in conjunction with IMS
Goal: Policies and Guidelines
Objectives: Update the District’s Investment Policy
Goal: Enhance the District’s customer satisfaction focus by evaluating customer
feedback
Objectives: Implement a Customer Comment Tracking Program
Expand a Quality Control/Audit program to ensure quality
customer service
Implement an independent Customer Follow-up Program
Goal: Enhance customer communications for increased accessibility and ease of use
Objectives: Improve customer access to their account information via
the Web
Evaluate expanded use of multilingual communication
Program
Customer
176
GENERAL MANAGER
Division Title Division No.
General Manager 1111
Assistant General Manager, Finance and Administrative Services 2111
Assistant General Manager, Engineering and Operations 3111
Mission Statement
To provide the best quality of water and wastewater service to the customers of the Otay
Water District, in a professional, effective, efficient, and sensitive manner, in all aspects of
operation, so that public health, environment and quality of life are enhanced.
Key Challenges
"The Otay Water District faces unprecedented growth necessitating the acquisition and
development of water treatment and supply opportunities, infrastructure expansion and
improvements, and enhanced customer services. The District faces an environment of
escalating costs, increasing regulatory compliance and uncertainty, customer demands for
continuously improving services, and competition for resources. The key challenge for the
District is to find the best solutions that balance Otay's requirements with these significant
constraints."
General Manager's Vision
"A District that is at the forefront in innovations to provide water services at affordable rates,
with a reputation for outstanding customer service."
- Mark Watton
161
Personnel Count FY 2006 FY 2007 FY 2008
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 - 173
GENERAL MANAGER DEPARTMENT - 6
General Manager
BOARD OF
DIRECTORS
District Secretary
Communications
Officer
Legal
(Contracted)
Assistant General Manager,
Finance and Administration
Assistant General Manager,
Engineering and Operations
162
FY 2006 FY 2008
Actual Budget Estimated Budget
General Manager 883,407$ 932,200$ 905,333$ 1,017,400$
Legal 5,046 3,500 6,059 -
Assistant General Manager, Finance and Administration 241,478 237,100 251,193 237,200
Assistant General Manager, Engineering and Operations 235,537 230,700 225,069 230,900
TOTAL 1,365,468$ 1,403,500$ 1,387,654$ 1,485,500$
FY 2007
GENERAL MANAGER
FY 2008 Total Departmental Budget - $28.4 Million
General Manager - $1,485,500
Water Operations
39.6%
Finance
14.1%
Board of Directors
0.4%
Administrative
Services
13.6%
General Manager
5.2%
General Expense
6.0%
Engineering
11.6%
Information
Technology and
Strategic Planning
9.5%
163
GENERAL MANAGER
FY 2006 FY 2008
Actual Budget Estimated Budget
Labor and Benefits 1,104,648$ 1,060,500$ 1,103,014$ 1,098,600$
Travel and Meetings 80,644 91,600 75,924 95,600
Conservation and Outreach 9,803 7,600 2,110 5,000
General Office Expense 12,275 18,800 19,133 8,300
Equipment 3,259 1,500 134 3,000
Fees 27,387 30,500 31,086 32,000
Services 127,436 188,000 156,040 240,500
Training 15 5,000 - 2,500
Miscellaneous - - 212 -
Total 1,365,468$ 1,403,500$ 1,387,654$ 1,485,500$
FY 2007
$797 $772 $748
$1,550
$1,327 $1,365 $1,404 $1,388 $1,486
$-
$500
$1,000
$1,500
$2,000
(i
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FY04 FY05 FY06 FY07 FY08
Fiscal Year
Budget vs. Actual Budget Actual
Estimated Adopted
164
Accomplishments – Fiscal Year 2006-2007
• Led efforts which resulted in an upgrade of the Otay Water District’s bond rating from
A+ to AA-. Savings to district customers as a result of the upgrade could total as much
as $1.5 million.
• Dedicated the Recycled Water Supply Link project. This $43 million project is
conserving approximately six million gallons of potable water each day, which is enough
drinking water to serve more than 14,000 homes and businesses.
• Broke ground on the East County Treated Water project along with the San Diego
County Water Authority, Helix, Lakeside, and Padre Dam Water Districts. Not only will
this project substantially reduce anticipated capital improvement expenditures, it will also
greatly increase regional supply diversity and treated water reliability.
• Completed a feasibility study to build a joint training facility with the San Miguel
Consolidated Fire Protection District.
• Initiated negotiations for a new Memorandum of Understanding (MOU) with the Otay
Employee Association.
• Provided employees with expanded health care options.
• Established and maintained excellent working relationships with key government,
business, and community organizations to foster better understanding and build support
for water projects.
• Expanded working relationships with our Mexican counterparts in an effort to pursue
water related opportunities with Mexico.
• Maintained and provided potable water, sewer and recycled water infrastructure that are
appropriate to meet current and future needs.
GENERAL MANAGER
165
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.
177
Personnel Count FY 2006 FY 2007 FY 2008
Chief Financial Officer 1 1 1
Executive Secretary 1 1 1
Secretary (Part-Time) 0 0 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
Senior Customer Service Representative 0 0 2
Customer Service Representative I, II and III 7 9 8
Lead Customer Service Field Representative 1 1 1
Customer Service Field Representative I and II 6 6 6
Office Assistant 1 0 0
Office Assistant (Part-Time) 1 1 0
Total 34 35 36
DISTRICT POSITION COUNT - 173
FINANCE DEPARTMENT - 36
178
Department Responsibilities
FY 2006 FY 2008
Actual Budget Estimated Budget
Finance Chief 358,872$ 350,800$ 385,227$ 405,800$
Controller and Budgetary Services 478,638 458,100 481,090 479,000
Treasury and Accounting Services 711,084 787,100 841,593 891,500
Customer Service 1,648,384 1,871,600 1,860,303 1,869,400
Payroll and Accounts Payable 369,736 345,400 342,999 348,400
TOTAL 3,566,714$ 3,813,000$ 3,911,212$ 3,994,100$
FY 2007
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 - $28.4 Million
Finance - $3,994,100
Water Operations
39.6%Finance
14.1%
Board of Directors
0.4%
Administrative
Services
13.6%
General Manager
5.2%
General Expense
6.0%
Engineering
11.6%
Information
Technology and
Strategic Planning
9.5%
179
FINANCE
FY 2006 FY 2008
Actual Budget Estimated Budget
Labor and Benefits 2,947,633$ 3,163,500$ 3,215,282$ 3,320,300$
Travel and Meetings 19,807 22,600 17,381 26,900
General Office Expense 220,966 191,400 190,826 198,600
Equipment 5,031 200 1,422 1,600
Fees 64,577 233,500 325,440 244,000
Services 308,701 201,800 160,861 202,700
Total 3,566,714$ 3,813,000$ 3,911,212$ 3,994,100$
FY 2007
$2,783 $2,764
$3,129
$3,453 $3,475 $3,567 $3,813 $3,911 $3,994
$-
$1,000
$2,000
$3,000
$4,000
(i
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FY04 FY05 FY06 FY07 FY08
Fiscal Year
Budget vs. Actual
Budget Actual
Estimated Adopted
180
Target Actual
Water Rate Ranking - average water bill/other agencies'
water bill 30.5%Lower than
50.0%39.0% Lower than 50.0%
Sewer Rate Ranking - average sewer bill/other agencies'
sewer bill 63.0%Lower than
50.0%50.0% Lower than 50.0%
Meter Reading Accuracy - number of misreads/total
number of meter reads 100.0% 100.0% 100.0% 100.0%
Answer Rate - percentage of calls answered as a measure
of all calls received 94.3%97.0% or
Greater 96.0% 97.0% or Greater
Alternative Payments - number of non-cash
payments/total payments 17.8%
20.0% of
total number
of payments
21.0%
20.0% of total
number of
payments
Write-Offs - write-offs over water sales per month 0.03%Less than
0.5%0.01% Less than 0.5%
Return on Investments - average rate of return on
investments 83.0%
Meet or
exceed 100%
of LAIF
100.1%Meet or exceed
100% of LAIF
Overtime Percentage - actual over budgeted overtime
costs 70.7%Less than
100.0%153.0% Less than 100.0%
O&M Cost per Account - operations cost for O&M per
account
$408 per
customer
$387 per
customer
$433 per
customer $387 per customer
Unaccounted for Water Loss - percentage of
unaccounted water 6.0% 5.0% or Less 3.6% 5.0% or Less
Customer Service Cost per Account (QualServe) -
measures the amount of resources a utility applies to its
customer service program
N/A $55 $50 $55
FINANCE
PERFORMANCE MEASURES
Fiscal Year 2006-2007 Fiscal Year
2007-2008
Target
Fiscal Year
2005-2006
Actual
Activity/Criterion
Fiscal Year 2006-2007 Legend
Completed
Ahead of Target
On Target
Not on Target
On Hold
No Reports
Not Scheduled to
Start Yet
181
Debt Coverage Ratio (QualServe) - measures level of
debt service N/A .20% or less 0.1% .20% or less
Reserve Level - measures the District's reserve levels
against the plan N/A 100.0% 100.0% 100.0%
Billing Accuracy (QualServe) - number of corrected bills
reissued or adjusted as a result of a customer initiated
contact
N/A 9.3% 9.7% 9.3%
Automatic Meter Reading Program (AMR) - percentage
of AMR with radio reads used for billing N/A
75.0% of
meters in
ground
89.0% of
meters in
ground
75.0% of meters in
ground
System Renewal/Replacement Rate (QualServe) -
indicator quantifies the rate at which the utility is
meeting its individual need for infrastructure renewal
and replacement
N/A 4.5% 30.7% 4.5%
182
Accomplishments – Fiscal Year 2006-2007
Controller and Budgetary Services
• Prepared a balanced budget that met
the Strategic Plan and received the
Government Finance Officers
Association (GFOA) “Distinguished
Budget Presentation Award” for the
third year in a row and in addition,
received two awards from the
California Society of Municipal
Finance Officers (CSMFO) for:
“Excellence in Operating Budgeting”
and “Excellence in Public
Communications.”
• The Capital Improvement Program
(CIP) Budget received the
“Excellence in Capital Budgeting
Award” from the CSMFO for the
second year in a row.
• Re-negotiated a new 25 year
agreement for recycled water credits
with the San Diego County Water
Authority.
• Automated monthly financial
reporting to streamline processes and
improve timeliness of reporting.
• Completed the review and
reorganization of financial records
and destruction in accordance with
the records management policy.
FINANCE
Otay Water District lands double-A credit rating
The Business of Water
San Diego Daily Transcript: February 6, 2007
By: Jeran Wittenstein
Fitch Ratings, the credit rating house, announced last week it
has upgraded the Otay Water District from an “A+ to an “AA-“
rating, a move that could save the district as much as $1.5
million over the next 30 years, according to Otay Water
District CFO Joe Beachem.
“It’s a pretty good accomplishment that will provide a
substantial benefit to ratepayers,” he said.
Otay Water District aims to generate $42 million from a
competitive sale of bonds on Feb. 20. They are structured as
30-year bonds with level debt service and a 10-year par call.
Beachem said the district plans to have three debt issuances
in the next three to five years to fund significant facilities
projects in order to serve the robust growth occurring in areas
like Chula Vista that fall within its district.
Proceeds of the February sale will finance an expansion of
Otay’s water distribution system, including construction of a
pipeline to a water treatment plant located in Helix Water
District and two 10-million-gallon reservoirs. The projects will
improve supply diversity and reliability of Otay’s water supply,
Beachem said.
The Otay Water District serves a population of 189,000 in
south-eastern San Diego County, including rapidly growing
areas of the city of Chula Vista. Otay provides water to
approximately 52,000 connections. Water connections have
grown 4 percent annually over the past five years and are
projected to grow around 3 percent annually.
Otay has an extensive reclaimed water distribution system,
and current demand for reclaimed water – approximately 3.5
million gallons per day – exceeds the
1 mgd Otay can currently provide from its wastewater
treatment facility.
In March 2007, Otay will complete construction of a
6-mile pipeline to connect with a city of San Diego wastewater
treatment facility that is expected to provide a sufficient supply
of reclaimed water to meet Otay’s needs. As a result, the
district will be able to reduce its purchases of more expensive
treated water from SDCWA, resulting in a direct reduction to
purchased water costs.
183
Treasury and Accounting Services
• Received a credit rating upgrade from A+ to AA-.
• Received the GFOA award for Outstanding Financial Reporting 2005-06, for our
Comprehensive Annual Financial Report (CAFR), for the third consecutive year.
• Successfully issued $42 million in new debt securities (COPS-2007).
• Obtained an unqualified opinion on the Audited Financial Statements for the fiscal year
ending June 30, 2006.
• Improved the investment portfolio to consistently achieve a monthly return that exceeds
that of LAIF (benchmark).
• Updated the District's Investment Policy and the Debt Policy. Both received Certification
Awards by the Association of Public Treasurers of the United States and Canada (APT
US&C).
• Drafted a policy for reporting illegal or improper activity, and presented training to Otay
management & staff.
Customer Service
• Completed Phase I & II of the Interactive Voice Response (IVR) implementation which
allows customers 24/7 access to their account information.
• Successfully implemented the Special Assessments module in the Eden System.
• Completed Parcel Manager clean up and developed on-going systematic process for
parcel updates.
• Completed testing and timeline for implementation of auto-dialing capabilities.
• Automated tag service orders which resulted in saving 40 hours per month. Automated
the auto-write-off process and streamlined the collection process which resulted in saving
20 hours per month.
• Automated handling of on-line home bill payers through the bank. This resulted in faster
posting of customer payments.
• Implemented use of GPS technology for routing.
• Successfully completed credit card outsourcing.
• Implemented new meter reading software and hardware.
• Installed 13,642 AMR meters; this is 28% of the total meters to be replaced that has
resulted in saving many hours of meter reading time every month.
• Continued to work on new specifications and pricing for modifications and enhancements
to the CIS billing system which when implemented will result in time savings and
process improvements.
184
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.
• 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 2006.
185
Goal: Establish the District’s long-term financial plans
Objectives: 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
Controller and Budgetary Services
Goal: Improve the District’s budget controls
Objectives: Evaluate program budgeting
Refine the overhead and direct charging policies
Goal: Policies and Guidelines
Objectives: Develop comprehensive budget policies and guidelines
Objective Legend
Completed
Ahead of
Schedule
On Schedule
Behind Schedule
On Hold
No Reports
Not Scheduled to
Start Yet
Goal
Objective
Finance
Finance
Business Processes
FINANCE – BALANCED SCORECARD
Goals and Objectives – Fiscal Year 2007-2008
Chief Financial Officer
186
Goal: Financial and Managerial Reporting
Objectives: Improve the District’s financial reporting
Develop comprehensive management reporting
Treasury and Accounting Services
Goal: Improve the District’s budget controls
Objectives: Evaluate key business processes to ensure adequate
financial controls
Perform routine financial audit
Goal: Provide full and accurate cost accounting of District services
Objectives: Develop standard and flat fee methodology for key district
services
Assess and develop guidelines for life-cycle and activity-
based cost in conjunction with IMS
Goal: Policies and Guidelines
Objectives Update the District’s Investment Policy
Customer Service
Goal: Enhance the District’s customer satisfaction focus by evaluating customer
feedback
Objectives: Implement a Customer Comment Tracking Program
Expand a Quality Control/Audit program to ensure quality
customer service
Implement an independent Customer Follow-up Program
Goal: Enhance customer communications for increased accessibility and ease of use
Objectives: Improve customer access to their account information via
the Web
Evaluate expanded use of multilingual communication
Program
Finance
Customer
187
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.
188
Personnel Count FY 2006 FY 2007 FY 2008
Chief Information Officer 1 1 1
GIS Manager 0 0 1
GIS Supervisor 1 1 0
GIS Programmer/Analyst 0 0 1
GIS Technician 2 2 2
Computer Systems Administrator 1 1 0
IT Operations Manager 0 0 1
IT Operations Supervisor 1 1 0
Database Administrator 0 1 1
Business System Analyst I and II 3 3 3
Network Engineer 0 0 1
Network Support Technician 1 1 1
Records Assistant 1 1 1
Program and Systems Support Analyst 1 1 0
Total 12 13 13
STRATEGIC PLANNING DEPARTMENT - 13
DISTRICT POSITION COUNT - 173
INFORMATION TECHNOLOGY &
189
Department Responsibilities
FY 2006 FY 2008
Actual Budget Estimated Budget
IT Chief/Applications 649,297$ 648,500$ 689,727$ 800,800$
IT Operations 1,277,868 1,613,000 1,419,938 1,370,600
Geographic Information System 369,952 393,900 312,190 534,500
TOTAL 2,297,117$ 2,655,400$ 2,421,856$ 2,705,900$
FY 2007
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 - $28.4 Million
Information Technology and Strategic Planning - $2,705,900
Water Operations
39.6%
Finance
14.1%
Board of Directors
0.4%
Administrative
Services
13.6%
General Manager
5.2%General Expense
6.0%
Engineering
11.6%
Information
Technology and
Strategic Planning
9.5%
190
INFORMATION TECHNOLOGY AND STRATEGIC PLANNING
FY 2006 FY 2008
Actual Budget Estimated Budget
Labor and Benefits 1,528,314$ 1,583,100$ 1,284,347$ 1,572,400$
Travel and Meetings 8,070 20,100 10,716 19,400
General Office Expense 4,804 13,900 6,613 10,000
Equipment 560,806 731,900 718,690 825,900
Services 160,411 275,400 382,713 249,700
Training 34,587 31,000 18,776 28,500
Total 2,297,117$ 2,655,400$ 2,421,856$ 2,705,900$
FY 2007
$1,564 $1,427
$1,862 $1,797
$2,328 $2,297
$2,655
$2,422
$2,706
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
(i
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D
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)
FY04 FY05 FY06 FY07 FY08
Fiscal Year
Budget vs. Actual
Budget Actual
Estimated Adopted
191
Target Actual
Organizational Best Practices Index (QualServe) -
summarizes the implementation of management
programs or practices
N/A 24 or above 27 24 or above
Web Site Hits - tracks the number of web site hits N/A 20,000 per
month
24,616 per
month
20,000 per
month
Strategic Plan Goals - percentage of Strategic Plan Goals
on track 97.0% 90.0% 96.0% 90.0%
IT Help Request - percentage of help requests resolved
by due date 87.7% 90.0% 90.9% 90.0%
Network - total operational network time per year 99.4% 99.0% 99.0% 99.0%
GIS Accuracy - number of drawings
computerized/number of drawings filed 95.0% 90.0% 91.0% 90.0%
INFORMATION TECHNOLOGY AND STRATEGIC PLANNING
PERFORMANCE MEASURES
Fiscal Year
2005-2006
Actual
Fiscal Year
2007-2008
Target
Activity/Criterion Fiscal Year 2006-2007
Fiscal Year 2006-2007
Legend
Completed
Ahead of Target
On Target
Not on Target
On Hold
No Reports
Not Scheduled to
Start Yet
192
Accomplishments – Fiscal Year 2006-2007
Applications and Strategic Planning
• Implemented a “Balanced Scorecard”
methodology as part of an ongoing
Strategic Plan and Performance
Measurement Program. Seventy one
strategic objectives and 78 performance
measures are tracked to ensure the
District is moving forward to a distinct
plan and day-to-day performance is
measured and managed to achieve
improvements.
• Significant enhancements made to the
applications environment include:
o added new functionality for
contract management to its
financial modules
o specialized taxation software
o 7/24 support for payment plans
over the web
o Interactive Voice Response (IVR)
for the customer information and
billing modules
• Added powerful report generation tools
that produce reliable and advanced
management reports which are easily
available to all staff.
• Recognized the need for systems support
for “in field” task management and
reporting systems and enhanced support
for the work management system.
• New tasks and business processes have
been added for preventive maintenance
and tracking business processes
associated with support of field
operations.
Otay Water District Pipeline: January 2007
By: Bill Jenkins, IT Operations Manager
Otay Water’s IT Department is placing the
finishing touches on the build out and migration
to the new Data Center. The project required
keeping the current network operational while
building the new Data Center.
The new Data Center features:
“Blade servers” which require less space,
electricity, and cooling
Separate identical test and production
environments
Two inline UPS units to support the Data
Center in power outages
SQL 2005 Cluster to consolidate databases
now housed on 17 different servers
An inline air-conditioning unit backed up
by two roof mounted air conditioners
to keep the Data Center cool in the
event of A/C failure
A new Cisco switch to provide redundancy
in the event of a switch failure
A network “backbone” that runs at 1
Gigabit speed, compared to 100
Megabit speed in the old Data Center
A network that enhances mobile access
through tablet PCs
A much more mature IT disaster recovery
and business continuity platform
Enhanced security for access to the data
center
For Otay staff, many of the improvements will be
transparent, except for anticipated better
network performance and fewer help desk
requests.
The IT Department is now in the process of
updating and migrating major applications such
as EDEN Inforum Gold (IG), GIS, IMS,
Exchange Outlook, INET and Otay website to
their new servers.
Overall many of the changes in the data center
design will reduce future costs. For example by
consolidating databases we reduced future
software costs. We used a vendor as the general
contractor on the project, and Otay’s
Pump/Electric, Warehouse and Facilities staff
made major contributions to the project’s
success. The project was on time and in budget.
“It was a team effort all the way” said Bill
Jenkins – IT Operations Manager.
INFORMATION TECHNOLOGY AND STRATEGIC PLANNING
193
Geographic Information Systems (GIS)
• Redesigned and created a process whereby new parcels created are added
quickly and accurately to the database improving the accuracy and timeliness of
updating land and parcel based information to the GIS. This parcel data is now
available to staff and customers to issue permits or inspections.
• Developed a process to synchronize data from the GIS system and to populate a
specific work order when a specific asset was specified, thus allowing
information to always be current and accurate.
IT Operations
• Transformed the data center by making the following enhancements:
o replaced obsolete hardware and software
o consolidated space and improved organization with a new rack design
o installed new air conditioning equipment
o electrical work and replacement of backup power supplies were added
o expanded the Citrix environment and increased capacity
o enhanced server capacity and speeds
o established a new design that allowed isolation of testing and production
systems
o equipment that was removed from the existing data center will be utilized
in creating a back-up data center during the next fiscal year
• Conducted the following major enhancements to the NEC telecom system:
o upgraded the PBX
o installed IVR to permit bill paying by phone
o added redundant dial tone for disaster recovery
o rolled out an Out Dialing feature for customer notifications
• Deployed 50 field laptop computers with wireless air card connections for use
by field staff.
• Assisted with deployment of GPS into over 90 District vehicles in conjunction
with GIS and Fleet Maintenance.
• Upgraded conference rooms with a wide screen monitor connected to the
network and the Internet which allows for more productive meetings.
194
Goal: Enhance customer communications for increased accessibility and ease of use.
Objectives: Implement automated notification procedure for planned or
emergency maintenance, outages or boil-water notices.
Goal: Fully integrate the Otay Information systems (OIS)
Objectives: Fully integrate the Otay Information systems (OIS)
Goal: Complete business process reengineering effort
Objectives: Continuous management Development and Growth
Effort through process Innovation
Goal: Develop a comprehensive knowledge Management Plan
Objectives: Explore and develop two process improvement
objectives per year
Goal: Implement field technology solutions
Objectives: Maximize the district use of mobile, GIS and GPS
technologies including route planning for maintenance
crews and meter readers and locations based services
Objective Legend
Completed
Ahead of
Schedule
On Schedule
Behind Schedule
On Hold
No Reports
Not Scheduled to
Start Yet
Goal
Objective
Customer
Business Processes
INFORMATION TECHNOLOGY AND STRATEGIC PLANNING
Goals and Objectives – Fiscal Year 2007-2008
IT Chief/Applications
195
Goal: Implement the Legal Plan
Objectives: Ensure that significant contracts receive legal review
Goal: Enhance customer communications for increased accessibility and ease of use
Objectives: Evaluate and Implement the Interactive Voice Response
(IRV) System
Implement summary billing
IT Operations
Goal: Enhance customer communications for increased accessibility and ease of use
Objectives: Enhance the District’s Web Page and its links
Goal: Improve customer service by expanding employee access to OIS information
Objectives: Provide secure and protected use of OIS information to
employees on a 24 hour and mobile basis
Goal: Implement planned security initiatives
Objectives: Perform cyber-security tests
Implement a Business Resumption Plan (BRP)
Goal: Develop a comprehensive Knowledge Management Plan
Objectives: Update the District’s records management program
Customer
Business Processes
196
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.
197
DISTRICT POSITION COUNT - 173
OPERATIONS DEPARTMENT - 71
198
Personnel Count FY 2006 FY 2007 FY 2008
Chief, Water Operations 1 1 1
Planner Scheduler 1 0 0
Executive Secretary 1 1 1
Systems Operations Manager 1 1 1
Water Systems Supervisor 1 2 1
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 1 1
Senior Disinfection Technician 1 1 2
Disinfection Technician 1 1 0
Senior SCADA Instrumentation Technician 1 2 2
Electrician/Instrumentation Technician 1 0 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 0
Fleet Maintenance Supervisor 0 0 1
Equipment Shop Mechanic I and II 4 4 4
Welder II 1 1 1
Custodian/Automotive Attendant 1 0 0
Reclamation Plant Supervisor 1 1 1
Reclamation Plant Crew Leader 0 0 1
Reclamation Plant Operator 3 3 3
Recycled Lab Supervisor 1 0 0
Water System Technician 1 1 0
Lead Recycled Water Distribution Operator 0 0 1
Recycled Water Distribution Operator 3 3 3
Laboratory Analysts I and II 2 2 2
Total 72 71 71
DISTRICT POSITION COUNT - 173
OPERATIONS DEPARTMENT - 71
199
Department Responsibilities
FY 2006 FY 2008
Actual Budget Estimated Budget
Water Operations Chief 566,450$ 368,800$ 361,146$ 456,400$
Water Systems 4,976,728 5,697,800 5,070,223 5,924,700
Construction Maintenance 4,465,134 4,737,200 4,472,197 4,872,100
TOTAL 10,008,312$ 10,803,800$ 9,903,566$ 11,253,200$
FY 2007
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 - $28.4 Million
Water Operations - $11,253,200
Water Operations
39.6%
Finance
14.1%
Board of Directors
0.4%
Administrative
Services
13.6%
General Manager
5.2%
General Expense
6.0%
Engineering
11.6%
Information
Technology and
Strategic Planning
9.5%
200
WATER OPERATIONS
FY 2006 FY 2008
Actual Budget Estimated Budget
Labor and Benefits 6,203,555$ 6,130,200$ 6,357,239$ 6,663,800$
Travel and Meetings 22,651 22,300 21,104 48,300
General Office Expense 6,520 5,500 5,903 7,000
Equipment 44,589 90,900 67,227 73,100
Fees 47,553 45,500 33,352 43,900
Services 68,062 295,500 103,732 442,600
Training 11,681 11,000 6,152 15,500
Materials & Maintenance 2,462,528 2,841,400 2,467,066 2,735,200
Sewer Charges 1,140,967 1,361,500 841,791 1,223,800
Total 10,008,312$ 10,803,800$ 9,903,566$ 11,253,200$
FY 2007
$8,235 $7,746
$8,655 $8,150
$10,261 $10,008 $10,804
$9,904
$11,253
$-
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
(i
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FY04 FY05 FY06 FY07 FY08
Fiscal Year
Budget vs. Actual
Budget Actual
Estimated Adopted
201
Target Actual
AMR Program - AMR Meters Installed
(total of 1,100 retrofits per years; 275 per qtr)61% 100% 100% completed
Valve Exercising Program - maintenance of distribution
systems' infrastructure to ensure minimal interruption of
Potable Water delivery to the customer
89.0%381 per
quarter
685 per
quarter
381 per
quarter
Main Flushing Program - actual over-planned pipelines
(520) to be flushed per quarter 0.0% 90.0% 209% 90.0%
Technical Quality Complaint Rate (QualServe) - as
complaints per 1,000 customer accounts. The median
benchmark performance indicator for technical quality
complaints is expressed as follows: Region for the west
is 7.6; by size, between 100,001-500,000 is 8.6; and by
type, combining water and wastewater is 7.6
N/A 8 3.9 8
Potable Water Supplement - measures the amount of
potable water needed to supplement recycled water
demand
N/A
not to exceed
5% of system
demand
2%
not to exceed
5% of system
demand
O&M Cost per MG (QualServe) - measures the
operation and maintenance costs to treat one million
gallons of wastewater
N/A $3,096/MG $2,211/MG $3,096/MG
WATER OPERATIONS
PERFORMANCE MEASURES
Fiscal Year 2006-2007Fiscal Year
2005-2006
Actual
Activity/Criterion
Fiscal Year
2007-2008
Target
Fiscal Year 2006-2007 Legend
Completed
Ahead of Target
On Target
Not on Target
On Hold
No Reports
Not Scheduled to
Start Yet
202
Direct Cost of Treatment per MG (QualServe) -
measures the direct cost of wastewater treatment and
does not include staff overhead or fringe benefits
N/A $2,450/MG $1,113/MG $2,450/MG
AMR Program - replacement of 4,556 existing Ramar
transponders N/A 100% 100% completed
Unplanned Disruptions (QualServe) - quantifies the
number of unplanned water outages experienced by the
utility customer expressed as number of accounts
affected per 1,000 accounts
N/A 0.7% 0.7% 0.7%
Drinking Water Compliance Rate (QualServe) -
quantifies the percentage of time each year that the
District meets all of the health related drinking water
standards in U.S. National Primary Drinking Water
Regulations
N/A 100% 100% 100%
Recycled Water Production - produce greater than 1.20
MGD for 90% of the days with demand of 1.3 MGD N/A 69% 27% 69%
Planned Drinking Water Maintenance Ratio Cost
(QualServe) - compares how effectively the District is
investing in planned maintenance
N/A 63.5% 68% 63.5%
Collection System Integrity (QualServe) - number of
wastewater collection system failures per 100 miles of
collection system pipeline
N/A 3.8 0 3.8
Planned Wastewater Maintenance Ratio Cost
(QualServe) - percentage of planned maintenance cost
per total combined planned and corrective maintenance
hours
N/A 75% 83% 75%
Sewer Overflow Rate (QualServe) - measures the
wastewater collection system pipeline condition and the
effectiveness of routine maintenance
N/A 2.5% 0 2.5%
Pump Efficiency Testing - pump efficiency testing on
50% of the potable water pumps each year N/A 100% 100% 100%
Automatic Control Valve Testing - test operation and do
preventative maintenance on all automatic valves semi-
annually
N/A 90% 90% 90%
Water Distribution System Integrity (QualServe) -
measures the condition of the water distribution system
expressed as the total annual number of leaks and breaks
per 100 miles of distribution piping
N/A 16.9 16.3 16.9
Recycled Water System Integrity - tracks number of
leaks or breaks per 100 miles of water distribution
system
N/A 16.9 1.4 16.9
203
Air Vac Update Program - measures the number of
potable air vacs updated to DHS standards N/A 90% 100% 90%
Fire Hydrant Maintenance - measures the number of fire
hydrants serviced N/A 149 187 149
Planned Water Service Disruption Rate (QualServe) -
quantifies the number of planned water outages
experienced by the utility customer expressed as number
of accounts affected per 1,000 accounts
N/A 0.9 7.8 0.9
204
Team of Excellence Award
By Manny Magaña
June 23, 2007
The “Team of Excellence Award”
recognizes and rewards accomplishments
and contributions by employees working in
teams on a special project or assignment of
significance to the District.
This year’s award goes to the project
coordination team of Ron Ripperger, Jerry
Munoz, Jake Vaclavek, and Richard
Shackley. They took the lead role on a
seven day Inspection and Shutdown of the
District’s 36-inch transmission water main
from #5 connection to La Presa Pump
Station. This was the District’s largest,
most complex water shutdown ever
undertaken, as it involved months of
preparation, planning, and detailed
coordination between Operations,
Engineering, and the inspection
contractor. In addition, two major tie-ins
were undertaken on the same critical
supply pipeline at the same time with an
adjacent developer, the Point. A detailed
Shutdown Action Plan was created to assist
everyone involved and ensure that all work
would be successfully completed during
the seven day shutdown between 2-5-07
and 2-11-07. This project was completed
ahead of schedule and resulted in a number
of future improvements for similar type
inspection projects.
This critical project was a win/win for
everyone involved, Otay, the Point, the
inspection contractor, and our customers,
as no disruption in water service occurred
and the project was completed ahead of
schedule. The project was successful only
because of everyone’s cooperative effort,
their pre-planning commitment, and close
communication between both the
Engineering and Operations Departments.
Accomplishments – Fiscal Year 2006-2007
Water Operations Chief
• Worked closely with the Engineering Department
to successfully start-up the recycled water pipeline
from the South Bay Water Reclamation Plant
(SBWRP).
• The department Performed 24 planned shutdowns
which was six more than the previous year. Most
of these shutdowns were for developer projects or
valve replacements. This is notable considering the
amount of planning and work involved for each
shutdown.
• After receiving the “Flex Your Power Award” Otay
received a congratulatory letter from Senator
Barbara Boxer stating “The dedication and strong
leadership you have displayed represents a valuable
contribution to the community and sets a shining
example for us all to follow as we strive to reduce
our energy consumption.”
• Received a Certificate of Achievement from the
California Highway Patrol for six consecutive
satisfactory ratings and one administrative review
since December 1991 for our Biennial Inspections
of Terminals (BIT) program.
• Otay received a Certificate of Recognition from
SDG&E for excellence in energy savings and our
commitment to the community by saving energy
during temporary critical times last summer through
our participation in SDG&E’s Demand Response
Program.
• Significant improvements regarding the most recent
inspection of the District’s facilities were
acknowledged by Dr. Tuba Ertas, Department of
Health Services.
• The Department tracked and reported on 24
Performance Measures.
WATER OPERATIONS
205
• Successfully managed and tracked the Operations Budget.
• Worked closely with IT to successfully implement our automatic phone system.
• Continued communications with employees to ensure that they understand management
directives, such as the District’s Strategic Plan, Best Management Practices, the budget,
and organizational changes.
Water Systems
• Successfully coordinated the shutdown and inspection of the 36-inch main from the old
No. 11 connection in Spring Valley to the La Presa Pump Station which is the primary
feed of drinking water to the North District. This was completed without customer
disruptions or water supply concerns.
• Successfully coordinated the shutdown of the 42-inch inlet and outlet for the 624-3
Reservoir (30 MG) relocation project for the SR-125 toll road. These pipelines are the
main arteries that supply the South District and were shutdown for the tie-in of the
relocated lines which was completed without customer disruptions or water supply
concerns.
• Coordinated with the County of San Diego and their contractors on the installation of
microturbines and gas lines at the Ralph W. Chapman Water Recycling Facility
(RWCWRF) to produce power from gases produced at the landfill.
• Revised the District’s Code of Ordinance Policy 26 to formalize and update our recycled
water functions.
• Received approval from the Department of Health Services (DHS) for the Stage 2
Disinfectant By-Products (DBP) Sampling Plan for trihalomethane and haloacetic acid
sampling plan.
• Assisted in the new Master Reclamation Permit application.
• Coordinated with the City of San Diego on taking up to 10 MGD of potable water at
Lower Otay Pump Station and up to 6 MGD recycled water from the SBWRP.
• Assisted in the development of a new vehicle purchase program.
Construction Maintenance
• Expanded the comprehensive valve actuation program to include main flushing and fire
hydrant maintenance. The valve crew exercised 1,531 valves, flushed 416 mains, and
maintained 941 fire hydrants, in coordination with both the Utility Maintenance and
Water Operations Sections.
• Saved the District more than $100,000 annually by changing the way District vehicles are
serviced in-house, increasing efficiency and enabling the District to reduce manpower by
one person.
• Worked closely with IT to successfully implement the Global Positioning System project.
206
• Ensured the District engines met or exceeded the Air Pollution Control District’s (APCD)
requirements for permitted use to avoid costly fines.
• The impending California Air Resources Board (CARB) pending “Off-Road Diesel”
regulations will have a great financial impact in the District’s construction equipment.
Staff attended a preliminary CARB workshop and has applied for engine retrofit grant
money.
• Upgraded air-vacs and blow-offs during the 36-inch Jamacha Blvd. pipeline shutdown
and inspection.
• The remaining Ramar Automated Meter Reading (AMR) units have been successfully
replaced with the Master Meter 3G units.
207
Goal: Enhance the District’s customer satisfaction focus by evaluating customer feedback
Objectives: Communicate with customers prior to facility improvements
Goal: Improve customer service by expanding employee access to OIS information
Objectives: Evaluate OIS information as meeting customer service
Goal: Enhance the District’s customer satisfaction focus by evaluating customer feedback
Objectives: Utilize the District’s management reporting
Learning and Growth
Goal: Continue the Certification Incentive Program
Objectives: Elevate awareness of opportunities for Operations
employees to achieve higher certification
Attend industry courses and seminars
Goal: Fully integrate the Otay Information systems (OIS)
Objectives: Fully integrate the Otay Information systems (OIS)
Goal: Fully integrate the Otay Information systems (OIS)
Objectives: Fully integrate the Otay Information systems (OIS)
Objective Legend
Completed
Ahead of Schedule
On Schedule
Behind Schedule
On Hold
No Reports
Not Scheduled to Start Yet
Goal
Objective
Customer
Business Processes
Goals and Objectives – Fiscal Year 2007-2008
Water Operations Chief
WATER OPERATIONS – BALANCED SCORECARD
208
Goal: Develop a comprehensive Knowledge management Plan
Objectives: Review, improve and document Operations practice for
staff training
Water Systems Operations
Goal: meet current and future potable water demands
Objectives: Operate the system to meet demands 24/7
Meet all of the health-related water standards in the US
National Primary Drinking Water Regulations
Goal: Operate the Recycled Water System Efficiently
Objectives: Reduce the amount of potable water augmentation and
increase the recycled water productivity
Goal: Conduct best practice preventative maintenance activities
Objectives: Quantify the condition of the District’s collection and
distribution system
Construction Maintenance
Goal: Enhance the District’s customer satisfaction focus by evaluating customer
feedback
Objectives: Evaluate and respond to customer concerns affected by
facility improvements
Goal: Conduct best practice preventative maintenance activities
Objectives: Document and report planned maintenance ratios and activities
Goal: Implement field technology solutions
Objectives: Conversion of District’s meters to AMR
Goal: meet current and future potable water demands
Objectives: Operate the system to meet demands 24/7
Meet all of the health-related water standards in the US
National Primary Drinking Water Regulations
Business Processes
Customer
Business Processes
209
ENGINEERING
Division Title Division No.
Engineering Chief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3311
Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3321
Design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3331
Water Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3341
Public Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3421
Construction Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3431
Survey Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3441
Environmental Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3451
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.
210
Personnel Count FY 2006 FY 2007 FY 2008
Chief, Engineering 0 0 1
Chief, Engineering & Planning 1 1 0
Chief, Development Services 1 1 0
Executive Secretary 1 1 1
Secretary 1 1 1
Engineering Manager 2 2 2
Public Services Manager 1 1 1
Senior Civil Engineer 3 3 2
Associate Civil Engineer 2 2 3
Assistant Civil Engineer 3 3 1
Environmental Compliance Specialist 0 0 1
Permit Technicians I and II 0 0 2
Engineering Technicians I, II and III 8 7 4
Inspection Supervisor 1 1 1
Construction Inspectors I and II 4 4 4
Surveying Supervisor 1 1 1
Survey Technician 1 1 1
Assistant Survey Technician 1 1 1
Office Assistant 1 1 0
Total 32 31 27
DISTRICT POSITION COUNT - 173
ENGINEERING DEPARTMENT - 27
211
Department Responsibilities
FY 2006 FY 2008
Actual Budget Estimated Budget
Engineering Chief (1)828,909$ 574,600$ 472,573$ 490,400$
Planning 749,768 448,400 231,940 661,900
Design 417,749 776,200 525,044 466,500
Water Resources 62,250 403,500 312,960 143,300
Public Services 254,576 130,800 210,692 205,300
Construction Services 244,636 205,200 216,953 430,500
Survey Services 243,495 245,500 234,042 264,200
Environmental Services - 643,700 522,067 643,500
TOTAL 2,801,382$ 3,427,900$ 2,726,271$ 3,305,600$
FY 2007
ENGINEERING
The Engineering Department, under the general direction of the Assistant General Manager, provides the following support
services: Planning, Design, Construction, Project Management and surverying of all District facilities; 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.
(1) Effective FY 2008, Engineering and Development Services Departments are combined; Development Services Chief
Section is deactivated.
FY 2007 Total Departmental Budget 28.4 Million
Engineering - $3,305,600
Water Operations
39.6%
Finance
14.1%
Board of Directors
0.4%
Administrative
Services
13.6%
General Manager
5.2%
General Expense
6.0%
Engineering
11.6%
Information
Technology and
Strategic Planning
9.5%
212
ENGINEERING
FY 2006 FY 2008
Actual Budget Estimated Budget
Labor and Benefits 1,804,167$ 1,865,100$ 1,851,933$ 1,712,200$
Travel and Meetings 16,991 33,200 13,490 33,200
General Office Expense 13,714 20,100 8,784 20,100
Equipment 1,438 1,500 1,086 3,700
Fees 30,659 50,000 26,090 55,000
Services 895,619 1,456,000 811,490 1,481,400
Training 1,322 2,000 215 -
Materials & Maintenance 37,471 - 13,183 -
Total 2,801,382$ 3,427,900$ 2,726,271$ 3,305,600$
FY 2007
$606 $436 $592 $457
$2,858
$1,499
$3,428
$1,276
$3,306
$-
$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
213
Target Actual
Recycled Water Supply versus Demand -
determine the percentage of recycled water
demand met with potable water
N/A 0.0% 68.9% 0.0%
Grant Funds - measures the percentage of grants
awarded compared to relevant grant proposals
submitted
N/A 50.0% 57.9% 50.0%
Plan Check - measures the time to complete plan
check N/A 80% or above 100%
80% or
above
CIP Projects Expenditures vs Budget - compares
quarterly CIP expenditures with budget 92.0% 75% or greater 87.0%
75.0% or
greater
Project Constructability Review - measures
projects that receive a review with those projects
scheduled to receive a review
N/A 100.0% 100.0% 100.0%
Project Construction Budget - measures the
number of projects in contruction within plus or
minus 5%-10% of the budget
N/A 90.0% 100.0% 90.0%
Actual Recycled Water Demand vs Projected
Demand - measures the actual recycled water
demand against the projected recycled water
demand
N/A 90.0% 103.8% 90.0%
ENGINEERING
PERFORMANCE MEASURES
Fiscal Year 2006-2007Activity/Criterion
Fiscal Year
2005-2006
Actual
Fiscal Year
2007-2008
Target
Legend
Completed
Ahead of Target
On Target
Not on Target
On Hold
No Reports
Not Scheduled to Start Yet
Fiscal Year 2006-2007
214
North District Alternative Water Supply -
measures alternative water supply capabilities to
meet a 10 day continous supply outage in the
summer
40% 100.0% or Greater 40.0%
100.0% or
Greater
South District Alternative Water Supply -
measures alternative water supply capabilities to
meet a 10 day continuous supply outage in the
summer
110.0% 100.0% or Greater 110.0%
100.0% or
Greater
Sewer Collection Disposal Capacity - measures
sewer disposal capacity versus the total sewer
collection rate
N/A 100.0% 154.8% 100.0%
Facility Maps - measures the timeliness of
inserting maps to CADD N/A Less than 1.0 0.84
Less than
1.0
Facility Surveying - measures the timeliness of
surveying facilities after project acceptance N/A Less than 1.0 1.01
Less than
1.0
Mark out Accuracy - measures the percentage of
at-fault hits over time N/A Greater than
99.75%100.0%
Greater
than
99.75%
Cathodic Protection Program - inspect and test
Cathodic Test Stations for pipelines, and anodes
in steel reservoirs
N/A 90.0% 100.0% 90.0%
Project Closeout Time - measures the average
time between the issuance of a NOSC and NOC
for CIP projects in construction
N/A 90.0% 100.0% 90.0%
Construction Change Order Rate - measures the
rate of change orders for CIP projects under
construction
-1.50% Less than 4% 0.0%
Less than
4%
APCD Compliance - measures the compliance of
all engines and generators permitted under APCD N/A 95% or above 100.0%
95% or
above
Construction Inspection Productivity Index -
measures productivity of construction inspectors N/A 90% or better 130.0%
90.0% or
better
Construction Claims - reduce construction claims -0.19% Less than 5% 0.0%
Less than
5.0%
215
Otay Water District to Receive Grant for
Recycled Water Pipeline
November 7, 2005
By: Armando Buelna
On November 7, 2005, the Otay Water District (OWD)
was all but assured to receive a $4 million grant from the
State Water Resources Control Board (SWRCB). In a
ceremony held at the district’s headquarters, Gerald D.
Secundy, a board member with the SWRCB, formally
presented OWD’s board of directors with a Facilities
Plan Approval letter for the Proposition 50 grant, for
which final sign-off is expected in about two weeks. The
grant will be used for the district’s recycled water supply
link, a six-mile pipeline, reservoir and pump station
project that connects OWD’s recycled water network to
the city of San Diego’s South Bay Water Reclamation
Plant.
Proposition 50, the Water Quality, Supply and Safe
Drinking Water Projects, Coastal Wetlands Purchase and
Protection Bond Initiative was passed by California
voters on November 5, 2002. This $3.44 billion bond
measure includes funding for safe drinking water
programs, water supply and reliability programs,
wetland restoration, and water recycling. The $4 million
grant, the maximum amount being awarded by the
SWRCB, will be applied to the $40 million cost of the
project.
The OWD broke ground on the recycled water supply
link project on October 24, 2005. It includes a six-mile
long, 30”-inch in diameter transmission pipeline, a 12-
million gallon reservoir and 16-million gallons per day
pump station. In 2003, OWD signed a landmark 20-year
purchase agreement with the city of San Diego for up to
ten million gallons per day of high quality recycled
water.
“This recycled water pipeline project combined with
our purchase agreement with the city of San Diego is
setting a historic precedent for Otay and the region,”
according to Jose Lopez, president of the OWD’s board
of directors. “When we activate this new pipeline in
2007, up to 20 percent of our district’s total annual
demand will be met with recycled water.”
Note: The pipeline was dedicated and put into service on
June 1, 2007. As of June 30th, OWD has received $3.3
million of the $4 million grant with the remaining $0.7
million expected in the next fiscal year
Accomplishments – Fiscal Year 2006-2007
Planning
• Prepared scope of work and Request
for Proposal (RFP) for the Water
Resources Master Plan and Program
Environmental Impact Report and
interviewed firms.
• Continued a program to identify and
prioritize agency inter-connections.
• Initiated a Feasibility Study for the
construction of a Membrane
Bioreactor (MBR) in conjunction
with the City of Chula Vista and
Sweetwater Authority.
• Continued utilization of the Sewer
System Management Plan (SSMP)
to fulfill annual agency reporting
requirements.
• Completed documentation for
SCADA instrumentation and
drawings for Remote Terminal
Units.
Design
• Completed the final draft of the
Preliminary Design Report (PDR)
for the 36-inch pipeline from Flow
Control Facility (FCF) #14 to the
Regulatory Site.
• Completed comprehensive cathodic
protection survey for the District’s
pipelines, reservoirs, and
miscellaneous facilities.
• Completed design of the Olive Vista
Utility Relocation Project and
advertised for construction.
ENGINEERING
216
• Completed the design and awarded construction for the following projects:
o Telegraph Canyon Paving
o SR 905 Utility Relocation
o Meter Shop Remodel
• Completed 73 plan checks for potable and recycled water for new developer
projects, 30 fire service plan checks, and three sewer plan checks.
• Completed the access road paving for the Lower Otay Pump Station project.
• Awarded five professional service contracts for as-needed design services ranging
in value from $45,000 to $175,000.
Construction
• Completed the following projects this fiscal year:
o 30" Recycled Water Pipeline
o 450 Recycled Water Reservoir/680 Recycled Water Pump Station
o Meter Shop Remodel
o Lower Otay Pump Station Access Road
o 944 Reservoir Paving
o Sweetwater Springs Agency Interconnection
• Managed Change Order incidence to less than 1% of a project's construction cost.
• Quality assurance and control was exercised for over 75,000 linear feet of pipe on
approximately 270 projects constructed by developers. All projects were
accomplished with no loss of time due to injuries or accidents.
• Conducted overall quality control management for facilities installed by
developers.
• A total of eight CIP projects were constructed or are in progress with a value of
$56 million. This is up $11 million from last year.
• Conducted constructability review for CIP projects and plan checks for all
developer projects.
• Managed project closeout to less than 100 days between Notice of Substantial
Completion (NOSC) and Notice of Completion (NOC).
Water Resources
• WateReuse awarded Otay Water District the "Large Water Agency of the Year
Award" for its efforts in recycled water development.
• Received approximately $3,200,000 thus far, of the $4,000,000 Proposition 50
Grant from the State Water Resources Control Board for the recycled water
supply link between the City of San Diego South Bay Water Reclamation Plant
and the Otay Water District existing recycled water system.
217
• Finalized the Cooperative Agreement between the City of San Diego and the US
Bureau of Reclamation (USBR). The Cooperative Sub Agreement between the
City and Otay Water District was approved for the USBR Title XVI funding of
over $90,000,000 for recycled water projects. This includes $10,000,000 for
recycled water projects that have already been constructed as negotiated, which is
atypical of the Title XVI process.
• Completed agreement negotiations and obtained the Board of Directors approval
for the Otay Flow Control Facility No. 14 improvements to 16 million gallons per
day of capacity to be completed by the San Diego County Water Authority as part
of the East County Regional Treated Water Improvement Program Agreement.
• Completed the Integrated Water Resources Plan (IRP). • Participated in joint funding and development of two feasibility studies under
Proposition 50 Chapter 6a grant applications for the Otay River Demineralization
Groundwater Well development concept and the South County Regional Brine
Discharge Conveyance Facility. Both of these $500,000 projects were awarded a
$250,000 grant.
• Assisted in the preparation of the joint Sweetwater Authority/Otay Water District
SDCWA LISA (Local Investigations and Studies Assistance) grant application for
the San Diego Formation Conjunctive Use Study effort. Grant award notice is
pending.
• Completed the development of the Fiscal Year 2008 Capital Improvement
Program (CIP) and integrated the CIP project sheets onto the Inet.
Environmental
• Completed the amendment of the RWCWRF Waste Discharge requirements and
acquired a Recycled Water Master Reclamation Permit which was adopted by the
Regional Water Quality Control Board.
• Obtained all applicable permits for the 640 Reservoirs Project and the 36-inch La
Presa Pipeline Inspection and Repair Project.
• Completed the RFP process for the as-needed environmental services contract and
interviewed the three most qualified consultant firms.
• Began a RFP to select an environmental consultant to prepare a sub area plan that
will be amended into the Joint Agencies National Community Conservation Plan
(NCCP).
• Worked closely with County of San Diego Air Pollution Control District (APCD)
to achieve zero violations of the 37 permitted engines in the District.
• Obtained California Environmental Quality Act (CEQA) exemptions for the Olive
Vista Utility Relocation and the Telegraph Canyon Road Paving Projects.
• Continued management of the San Miguel Habitat Management Area and the
1004-2 Reservoir Access Road Five-Year Re-vegetation Project.
218
• Provided on-going environmental support to design, planning, and operations.
Public Service
• Processed 893 permits.
• Generated revenue in excess of $10 million.
• Managed 30 cell site leases that brought in nearly $800,000 in revenue.
• Processed more than $520,000 in reimbursement agreements.
• Closed 24 projects and refunded developers their deposits totaling $76,300.
• Sent 236 letters to developers delinquent in their accounts and collected over
$220,000.
• Established a web page for Public Contractors and Developers to access various
Public Service forms, meter fees, and design guidelines.
Survey
• Eighteen parcel maps and 13 subdivision maps with a total of 711 lots were added
to the cadastral base map this year. In addition, 200 assessor's parcel map pages
were researched and all new parcels updated.
• Backlog of assigned facility data collection on accepted projects has been
eliminated.
• Completed 2,547 mark-outs with an accuracy rate of 99.961%.
• Worked on ten 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.
• Drafted 47 easements and exported them to the GIS.
219
Goal: Develop a comprehensive Knowledge Management Plan
Objectives: Integrate engineering Document Management with Records
Management
Planning
Goal: Meet current and future potable water demands
Objectives: Improve existing and obtain additional inter-agency
connections
Design
Goal: Expand the Public Education Program
Objectives: Promote the District’s innovative water supply strategies
Objective Legend
Completed
Ahead of
Schedule
On Schedule
Behind Schedule
On Hold
No Reports
Not Scheduled to
Start Yet
Goal
Objective
Business Processes
Business Processes
Customer
ENGINEERING – BALANCED SCORECARD
Goals and Objectives – Fiscal Year 2007-2008
Engineering Chief
220
Water Resources
Goal: Maximize recycled water use
Objectives: Promote acceptance of recycled water use in other
geographic areas within the District’s sphere of influence:
North District, Rancho San Diego, and Resort Parcel-
Village 13 by Otay lakes
Goal: Establish the District’s long-term financial plans
Objective: Implement a long term planning process that results in a
sound financial plan
Public Services
Goal: Enhance customer communications for increased accessibility and ease of use
Objectives Automating access to Public Services information through
the District’s website
Goal: Improve District’s customer satisfaction focus by evaluating customer feedback
Objectives Streamline business process by implementing a flat rate for
service installation
Goal: Streamline service installation process
Objectives: Develop contractors list to prepare “Service Installation
Request” to help Otay OPS forces
Construction Services
Goal: Successfully transfer completed project into Operations
Objectives Implement construction feedback loop
Customer
Finance
Customer
Business Processes
Business Processes
221
Survey Services
Goal: Enhance the District’s customer satisfaction focus by evaluating customer
feedback
Objectives Facility location-WSA Markouts, facility verification, GPS
an acquisition of facilities that are not in the system
Goal: Implement field technology solutions
Objectives Implement IMS in Survey Division
Environmental Services
Goal: Develop cost effective environmental program
Objectives Obtain Official Approval for Otay’s Natural Community
Conservation Plan
Customer
Business Processes
Business Processes
222
GENERAL EXPENSE
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.
223
Description
FY 2006 FY 2008
Actual Budget Estimated Budget
General Expense 941,598$ 1,054,200$ 1,821,502$ 1,686,300$
TOTAL 941,598$ 1,054,200$ 1,821,502$ 1,686,300$
FY 2007
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 - $28.4 Million
General Expense - $1,686,300
Water Operations
39.6%
Finance
14.1%
Board of Directors
0.4%
Administrative
Services
13.6%
General Manager
5.2%
General Expense
6.0%
Engineering
11.6%
Information
Technology and
Strategic Planning
9.5%
224
GENERAL EXPENSE
FY 2006 FY 2008
Actual Budget Estimated Budget
Labor and Benefits -$ 47,000$ 214,202$ 10,000$
Fees 941,598 1,006,500 1,606,633 1,676,300
Interest - 700 667 -
Total 941,598$ 1,054,200$ 1,821,502$ 1,686,300$
FY 2007
$677
$2,537
$777
$1,170
$863 $942 $1,054
$1,822 $1,686
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
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Fiscal Year
Budget vs. Actual
Budget Actual
Estimated Adopted
225
The District provides water service to a population of approximately 190,000 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 2.7% per annum for the next 10-15 years. However, based on current economic
conditions, staff is projecting a 2.1% growth rate in population and equivalent dwelling units
(EDUs) for Fiscal Year 2008. 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
48,650 customer accounts equate to a projected 75,301 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 $500 million in capital assets
through ultimate build-out. The Fiscal Year 2008 Capital Budget is $34.5 million and the five-
year Capital Improvement Program (CIP) totals $157 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
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
226
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 2008 Fiscal Year CIP Budget contains 82 projects. The cost of the work planned for
Fiscal Year 2008 is $34.5 million. Of the 82 projects planned for Fiscal Year 2008, 27 are
designated as reimbursable projects, totaling $1.5 million. These projects are built by
developers and reimbursed by the District.
CAPITAL IMPROVEMENT PROGRAM
227
The following shows how the $34.5 million of projects are broken down into four categories:
1. Capital facilities $ 24.9 million
2. Replacement or renewal projects $ 6.7 million
3. Capital purchase projects $ 1.4 million
4. Developer reimbursement projects $ 1.5 million
The Five-Year CIP and Fiscal Year 2008 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
228
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. Original contract
completion date was April 1, 2007.
Cost: The construction project budget was $18.3 million and the amount spent
to complete this project was $17.7 million.
Significant
Issues:
Construction was accepted in June 2007 and the pump station is in use.
FLAGSHIP CIP PROJECTS COMPLETED
450-1 Reservoir /
680-1 Pump Station
Reservoir and the Pump
Station were completed in
April 2007.
229
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 was December 23, 2006.
Cost:
The construction project budget was $23.6 million and the amount spent
to complete this project was $22.9 million.
Significant
Issues:
Construction was accepted in May 2007 and the pipeline is in use.
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.
230
SR-905 Utility Relocations
Project started on
September 7, 2006 and is
expected to be completed in
the winter of 2007. This
project includes the
relocation of three pipelines
crossing under SR-905 and
the reconditioning of two
seismic valve vaults.
Telegraph Canyon Road
Paving Project
Project started on June 6,
2007 and is expected to be
completed in early August
2007. The project includes
numerous trench line
pavement rehabilitations
along Telegraph Canyon
Road and repaving
excavations at the 980-2
Pump Station site.
FLAGSHIP CIP PROJECTS CONSTRUCTION
231
Key Component:
Construction for two (2) 10-MG prestressed circular reservoirs and
associated piping.
Schedule:
Notice to Proceed was issued in January 2007. Project completion date
is expected to be in November 2008.
Cost: The construction project budget is 29% spent - $7.3 million out of a
total budget of $24.9 million. The total project budget is $29.5 million,
of which $9.4 million or 32%, has been spent.
Significant
Issues:
640-1; Installed 42” outlet piping and poured concrete encasement
under first reservoir. 640-2; Placed 10’ surcharge over the engineering
fill of the second reservoir. Began laying the inlet and outlet piping.
640-1 and 640-2
Reservoirs Project
(20.0 MG)
This project was
awarded to Pacific
Hydrotech and was
started in January
2007. Expected
completion is late
2008. Project consists
of two 10 million
gallon circular
concrete reservoirs,
11,000 feet of large
diameter pipe, several
valve and control
vaults and demolition
of the 520-1 Concrete
Reservoir.
Site Grading
Inlet/Outlet Valve Vault
232
36-Inch Pipeline From FCF No. 14 to Regulatory Site Project
Key
Component:
Approximately 5 miles of 36-Inch pipeline for potable water from Otay’s FCF
No. 14 to the Regulatory Site.
Schedule:
Preparing preliminary design report and reviewing alternative alignments.
The construction project budget is $18.5 million.
Cost:
Significant
Issues:
District received final draft of the preliminary design report and design is on
schedule.
FLAGSHIP CIP PROJECT IN DESIGN
233
City of San Diego’s Water Treatment Plant, Capacity
Key
Component:
Acquire at least 30 MGD and up to 50 MGD of local treatment capacity from
City of San Diego (City).
Schedule:
Otay Board approved the SD17 POU with the City, SDCWA and Otay. Draft
SD17 Agreement under negotiation.
Cost:
Only staff time has been budgeted; project cost is dependent upon negotiations
outcome.
Significant
Issues:
The City will supply “Surplus Water” from Otay WTP to Otay per the current
1999 Agreement.
The City has an opportunity to obtain a $6,500,000 Matching Proposition 50
Grant for SD17 consisting of a pump station at the Alvarado WTP to pump up
to 60 MGD into SDCWA Pipeline No. 4.SD17 is estimated to cost
$20,000,000. The District desires to acquire 50 MGD capacity. This project
will provide an opportunity to the City to generate revenue from surplus
capacity. For the District, this is an opportunity to save cost on water treatment
while providing an additional source of water supply.
PROGRESS ON MAJOR PROJECT
234
(Thousand $000s) FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 Total
Capacity Fees 7,448$ 8,652$ 9,560$ 9,804$ 13,009$ 13,472$ 61,945$
Debt financing - 29,970 - 26,570 - - 56,540
Grants 2,300 4,550 4,750 1,450 250 250 13,550
Interest 2,771 2,833 2,774 2,847 3,164 2,920 17,310
Betterment Charges 1,056 1,078 1,100 1,123 1,146 1,170 6,673
Temporary Meters 1,204 1,209 1,212 1,215 1,220 1,223 7,283
Availability (Betterment Portion) 558 569 581 593 605 618 3,524
Transfer from General Fund 14,145 6,930 8,335 9,245 11,030 13,555 63,240
Interfund Transfers 1,140 435 144 419 195 181 2,514
Total Sources 30,621 56,227 28,457 53,266 30,619 33,389 232,578
CIP Projects 34,463 38,442 34,769 28,334 29,787 25,723 191,518
Betterment Fees for Maintenance 73 76 78 80 83 85 474
Debt Service 3,331 5,658 6,450 7,754 8,496 8,580 40,268
Developer Services 1,415 1,420 1,425 1,427 1,433 1,437 8,557
Interfund Transfers 1,140 435 144 419 195 181 2,514
Total Uses 40,422 46,031 42,865 38,014 39,993 36,006 243,331
Net Sources (Uses)(9,800)$ 10,196$ (14,408)$ 15,252$ (9,375)$ (2,617)$ (10,753)$
CIP RESERVE FUNDS
The CIP Reserve Funds presentation, shown on the following pages, is designed to provide an understanding of how the
funding of CIPs is expected to financially influence the District over the next six years. The financial impacts are based on
the CIP program and its funding sources, including fund transfers in accordance with the District’s Reserve Policy, and
planned debt issuances. This data is captured in the District’s Rate Model on an annual basis in order to make these
projections.
$3,483
$29,361
$16,931
$1,291
$30,890
$27,791
$1,535
$32,369
$11,660
$1,750
$34,764
$24,302
$1,549
$35,039
$14,853
$2,029
$35,957
$10,838
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
Th
o
u
s
a
n
d
s
FY09 FY10 FY11 FY12 FY13
Fiscal Year
RESERVE FUND BALANCES
Betterment Replacement Expansion
235
CIP FUNDING SOURCE AND CATEGORY
(Thousands $000s)FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 TOTAL
Expansion 16,600$ 27,040$ 29,764$ 23,273$ 24,507$ 21,683$ 142,866$
Betterment 9,599 6,371 1,259 1,066 1,276 166 19,737
Replacement 8,265 5,032 3,746 3,995 4,004 3,874 28,916
TOTAL 34,463$ 38,442$ 34,769$ 28,334$ 29,787$ 25,723$ 191,518$
(Thousands $000s)FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 TOTAL
Capital Facility Projects 24,901$ 32,441$ 28,777$ 15,180$ 15,350$ 5,800$ 122,449$
Maintenance Projects 6,645 3,581 3,045 3,849 3,845 3,720 24,685
Capital Purchase Projects 1,406 870 320 320 320 320 3,556
Developer Reimbursement Projects 1,511 1,150 1,215 800 800 1,825 7,301
Subtotal 34,463 38,042 33,357 20,149 20,315 11,665 157,991
FY 2009 Through FY 2013 Projects - 400 1,412 8,185 9,472 14,058 33,527
TOTAL 34,463$ 38,442$ 34,769$ 28,334$ 29,787$ 25,723$ 191,518$
$0
$10,000
$20,000
$30,000
$40,000
FY09 FY10 FY11 FY12 FY13
SIX-YEAR CIP BY FUNDING SOURCE
Expansion
Replacement
Betterment
$0
$10,000
$20,000
$30,000
$40,000
FY09 FY10 FY11 FY12 FY13
SIX-YEAR CIP BY CATEGORY
Capital Facility Projects Maintenance Projects
Capital Purchase Projects Developer Reimbursement Projects
236
CIP No. Description FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 Total
CAPITAL FACILITY PROJECTS
P2009 PL - 36-Inch, SDCWA Otay FCF No. 14 to Regulatory Site 1,150$ 9,770$ 6,865$ 45$ -$ -$ 17,830$
P2033 PL - 16-Inch, 1296 Zone, Melody Road - Campo/Presilla 5 185 1,160 470 - - 1,820
P2037 Res - 980-3 Reservoir 15 MG 200 200 800 4,500 7,825 50 13,575
P2038 PL - 12-Inch, 978 Zone, Jamacha, Hidden Mesa, and Chase Upsize and Replacements 980 505 - - - - 1,485
P2040 Res - 1655-1 Reservoir 0.5 MG 1 1 85 700 795 - 1,582
P2129 Groundwater Exploration Program 10 10 15 25 630 1,280 1,970
P2143 Res - 1296-3 Reservoir 2 MG 1,200 1,800 50 - - - 3,050
P2172 PS - 1485-1 Pump Station Replacement 200 1,200 500 - - - 1,900
P2185 Res - 640-1 Reservoir 20.0 MG 15,000 6,000 500 - - - 21,500
P2190 PL - 10-Inch, 1485 Zone, Jamul Highlands Road to Presilla Drive 5 5 120 95 - - 225
P2191 Res - 850-4 Reservoir 2.2 MG 750 1,800 100 - - - 2,650
P2258 PS - Lower Otay Pump Station Phase 1 (9,000 GPM) 50 - - - 2,000 3,670 5,720
P2267 36-Inch Main Pumpouts and Air/Vacuum Ventilation Installations 150 - - - - - 150
P2295 624-1 Reservoir Disinfection Facility, Inlet/Outlet/Bypass and 613-1 Reservoir Demoli 550 - - - - - 550
P2318 PL - 20-Inch, 657 Zone, Summit Cross-Tie and 36-Inch Main Connections - 200 345 - - - 545
P2370 Res - Dorchester Reservoir and Pump Station Demolition - - - 65 70 - 135
P2387 PL - 12-Inch, 832 Zone, Steele Canyon Road - Via Caliente/Campo 270 185 - - - - 455
P2450 Otay River Groundwater Well Demineralization/Development 115 85 800 3,600 400 - 5,000
P2451 Rosarito Desalination Facility Conveyance System 5 5 15 80 95 800 1,000
P2457 Otay Mountain Groundwater Well Development 10 290 6,000 200 - - 6,500
P2460 I.D. 7 Trestle and Pipeline Demolition 20 55 300 - - - 375
P2462 Otay River Demineralization Feasibility Study 200 - - - - - 200
P2463 South Bay Regional Concentrate Conveyance Feasibility Study 25 100 - - - - 125
P2464 San Diego 17 Pump Station and Flow Control Facility 750 7,500 8,000 - - - 16,250
P2465 Regulatory Site Material Storage Bins 30 220 - - - - 250
P2466 Regional Training Facility 100 100 - - - - 200
P2467 San Diego Formation Groundwater Feasibility Study 800 800 - - - - 1,600
R2001 RecRes - 450-1 Reservoir 12 MG 50 - - - - - 50
R2004 RecPS - 680-1 Pump Station (11,500 GPM) 50 - - - - - 50
R2034 RecRes - 860-1 Reservoir 4 MG - 100 395 1,800 1,500 - 3,795
R2053 RWCWRF - R.O. Building Remodel and Office Furniture 305 50 - - - - 355
R2077 RecPL - 24-Inch, 860 Zone, Alta Road - Alta Gate/Airway 50 50 378 1,000 1,500 - 2,978
R2081 RecPL - 20-Inch, 944 Zone, Lane Avenue - Proctor Valley/Pond No. 1 900 300 - - - - 1,200
R2087 RecPL - 20-Inch, 944 Zone, Wueste Road - Olympic/Otay WTP 50 50 2,000 1,400 85 - 3,585
R2088 RecPL - 20-Inch, 860 Zone, County Jail - Roll Reservoir/860-1 Reservoir 50 50 149 1,000 250 - 1,499
R2089 North District Recycled Water Regulatory Compliance 195 - - - - - 195
R2090 MBR Water Recycling Facility Feasibility Study 40 - - - - - 40
R2091 RecPS - 944-1 Pump Station Upgrade 325 - - - - - 325
R2092 Dis - 450-1 Reservoir Disinfection Facility 300 800 - - - - 1,100
S2016 Solar Panel Installation Phase I 10 25 200 200 200 - 635
40 Total Capital Facility Projects 24,901 32,441 28,777 15,180 15,350 5,800 122,449
REPLACEMENT/RENEWAL PROJECTS
P2356 PL - 12-Inch, 803 Zone, Jamul Drive Permastran Pipeline Replacement 420 266 - - - - 686
P2366 APCD Engine Replacements and Retrofits 160 170 180 190 220 - 920
P2382 Safety and Security Improvements 90 90 90 89 - - 359
P2416 SR-125 Utility Relocations 190 - - - - - 190
P2422 Agency Interconnections 300 300 300 300 300 300 1,800
P2440 I-905 Utility Relocations 360 300 - - - - 660
P2441 NG/RAMAR Meter Replacements 100 - - - - - 100
CAPITAL IMPROVEMENT PROGRAM ($1,000s)
The 2008 Fiscal Year CIP Budget contains 82 projects. The costs for the work planned for Fiscal Year
2008 is $34.5 million. Of the 82 projects planned for Fiscal Year 2008, 18 are designated as reimbursable
projects with estimated costs of $1.5 million. These projects are built by developers and reimbursed by the
District.
237
CAPITAL IMPROVEMENT PROGRAM ($1,000s)
CIP No. Description FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 Total
REPLACEMENT/RENEWAL PROJECTS
P2447 Information Technology Meter Routing 80 - - - - - 80
P2453 SR-11 Utility Relocations 5 165 125 680 655 670 2,300
P2455 Data Cleansing Project 160 - - - - - 160
P2456 Air and Vacuum Valve Upgrades 520 550 580 600 620 640 3,510
P2458 AMR Manual Meter Replacement 1,250 1,375 1,500 1,650 1,700 1,750 9,225
P2459 Olive Vista Drive Utility Relocations 1,100 - - - - - 1,100
P2468 Finance Department Office Remodel 50 - - - - - 50
R2086 RWCWRF Force Main AirVac Replacements and Road Improvements 670 - - - - - 670
S2012 SVSD Outfall and RSD Replacement and OM Reimbursement 605 365 270 340 350 360 2,290
S2015 Calavo Lift Station Replacement 585 - - - - - 585
17 Total Replacement/Renewal Projects 6,645 3,581 3,045 3,849 3,845 3,720 24,685
CAPITAL PURCHASE PROJECTS
P2282 Vehicle Capital Purchases 210 220 220 220 220 220 1,310
P2286 Field Equipment Capital Purchases 91 100 100 100 100 100 591
P2353 Information Technology System Enhancements and Replacements 365 350 - - - - 715
P2361 Information Technology GIS Enhancements 150 100 - - - - 250
P2363 Information Technology Utility Billing, Data Management, and Financial System 200 100 - - - - 300
P2443 Information Technology Mobile Services 240 - - - - - 240
P2461 Records Management System Upgrade 150 - - - - - 150
7 Total Capital Purchase Projects 1,406 870 320 320 320 320 3,556
DEVELOPER REIMBURSEMENT PROJECTS
P2070 PL - 16-Inch, 980 Zone, Pacific Bay Homes Road- Proctor Valley/Rolling Hills Hydro 550 - - - - - 550
P2121 PL - 16-Inch, 711 Zone, Hunte Parkway - Olympic/EastLake 1 - - - - - 1
P2133 PL - 16-Inch, 711 Zone, EastLake Parkway - Olympic/Birch 1 - - - - - 1
P2164 PL - 20-Inch, 980 Zone, EastLake Parkway - Olympic/Birch 1 - - - - - 1
P2169 PL - 20-Inch, 980 Zone, EastLake Parkway - Birch/Rock Mountain 325 - - - - - 325
P2325 PL - 10" to 12" Oversize, 1296 Zone, PB Road - Rolling Hills Hydro PS/PB Bndy 130 - - - - - 130
P2367 PL - 16-Inch, 980 Zone, Olympic Parkway - East Palomar/EastLake - 850 415 - - - 1,265
P2397 PL - 12-Inch, 711 Zone, EastLake Parkway - Birch/Rock Mountain 175 - - - - - 175
P2414 PL - 12" to 16" Oversize, 803 Zone, Dehesa Road - Dehesa Meadow/OWD Bndy 10 - - - - - 10
P2435 PL - 16-Inch, 711 Zone, Birch Road - La Media/SR-125 30 - - - - - 30
R2031 RecPL - 12-Inch, 944 Zone, EastLake Parkway - Olympic/Birch 1 - - - - - 1
R2033 RecPL - 12-Inch, 944 Zone, Birch Road - La Media/EastLake 50 - - - - - 50
R2040 RecPL - 12-Inch, 680 Zone, Hunte Parkway - Olympic/EastLake 1 - - - - - 1
R2041 RecPL - 8-Inch, 944 Zone, EastLake Parkway - Birch/Rock Mountain 1 - - - - - 1
R2043 RecPL - 8-Inch, 944 Zone, Rock Mountain Road - La Media/SR-125 235 - - - - - 235
R2058 RecPL - 16-Inch, 860 Zone, Airway Road - Otay Mesa/Alta - 300 300 300 300 480 1,680
R2082 RecPL - 24-Inch, 680 Zone, Olympic Parkway - Village 2/Heritage - - 500 500 500 246 1,746
R2084 RecPL - 20-Inch, 680 Zone, Village 2 - Heritage/La Media - - - - - 1,099 1,099
18 Total Developer Reimbursement Projects 1,511 1,150 1,215 800 800 1,825 7,301
82 Total - FY 2008 Projects 34,463 38,042 33,357 20,149 20,315 11,665 157,991
12 FY 2009 Through FY 2013 Projects - 400 1,412 8,185 9,472 14,058 33,527
Grand Totals 34,463$ 38,442$ 34,769$ 28,334$ 29,787$ 25,723$ 191,518
238
CIP No. Description J/FS (2)Total FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 Total
P2009 PL - 36-Inch, SDCWA Otay E 8,700$ -$ -$ 4,400$ 8,700$ 9,000$ 9,300$ 31,400$
P2033 PL - 16-Inch, 1296 Zone E 2,200 - - - - 2,200 2,300 4,500
P2037 Res - 980-3 Reservoir E 28,200 - - - - - 28,200 28,200
P2038 PL - 12-Inch, 978 Zone B/R 1,500 - - 1,500 1,500 1,500 1,500 6,000
P2040 Res - 1655-1 Reservoir B 900 - - - - 500 900 1,400
P2143 Res - 1296-3 Reservoir E 3,800 - - 1,900 3,800 3,900 4,000 13,600
P2172 PS - 1485-1 Pump Station B/R 7,400 - - 7,400 7,600 7,800 8,000 30,800
P2185 Res - 640-1 Reservoir E/B 37,600 - - 18,800 37,600 38,700 39,900 135,000
P2190 PL - 10-Inch, 1485 Zone B 400 - - - - 400 400 800
P2191 Res - 850-4 Reservoir E/B 4,200 - - 4,200 4,300 4,400 4,500 17,400
P2295 624-1 Reservoir Disinfect E/B/R 8,400 8,400 8,700 9,000 9,300 9,600 9,900 54,900
P2318 PL - 20-Inch, 657 Zone B 100 - - - 100 100 100 300
P2357 PS - 657-1/850-1 Pump Station B (44,400) - - - - - (44,400) (44,400)
P2370 Res - Dorchester Reservoir B (4,800) - - - - - (4,800) (4,800)
P2387 PL - 12-Inch, 832 Zone B 600 - - 600 600 600 600 2,400
P2447 IT Meter Routing E/R 3,600 - 3,600 3,700 3,800 3,900 4,000 19,000
P2450 Otay River Groundwater Well E 27,900 - - - - - 27,900 27,900
P2457 East Otay Mesa Groundwater E 11,200 - - - - 11,200 11,500 22,700
P2458 AMR Retrofit B/R (226,400) (36,500) (34,500) (34,700) (39,300) (40,400) (41,000) (226,400)
P2464 San Diego 17 PS and Flow Control Facility E 308,200 - - - 308,200 317,400 326,900 952,500
R2001 RecRes - 450-1 Reservoir E 11,800 11,800 12,200 12,600 13,000 13,400 13,800 76,800
R2004 RecPS - 680-1 Pump Station E 170,100 170,100 175,200 180,500 185,900 191,500 197,200 1,100,400
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 2,800 2,900 3,000 3,100 14,500
R2087 RecPL - 16-Inch, 944 Zone E 1,500 - - - - 1,500 1,500 3,000
R2088 RecPL - 24-Inch, 860 Zone E 2,400 - - - - 2,400 2,500 4,900
R2091 RecPS - 944-1 Pump Station Upgrade E/B 107,900 - 107,900 111,100 114,400 117,800 121,300 572,500
R2092 Dis - 450-1 Res Disinfection Facility B 10,700 - - 10,700 11,000 11,300 11,600 44,600
Total Capital Facility Projects 704,800$ 153,800$ 275,800$ 334,500$ 673,400$ 711,700$ 750,900$ 2,900,100$
(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 237-238 for complete description of CIP projects.
CAPITAL FACILITY PROJECTS
CIP JUSTIFICATION AND IMPACT ON OPERATING BUDGET
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
239
CIP JUSTIFICATION AND IMPACT ON OPERATING BUDGET
CIP No. Description J/FS
(2)Total FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 Total
P2286 Field Equipment Capital Purch R 1,500$ 800$ 2,000$ 4,100$ 8,400$ 17,300$ 35,600$ 68,200$
P2443 IT Mobile Services E/R 18,000 - 18,000 18,500 19,100 19,700 20,300 95,600
Total Capital Purchase Projects 19,500 800 20,000 22,600 27,500 37,000 55,900 163,800
P2070 PL - 16-Inch, 980 Zone E 1,000 - 1,000 1,000 1,000 1,000 1,000 5,000
P2107 PL - 12-Inch, 711 Zone E 1,700 - - - - - 1,700 1,700
P2121 PL - 16-Inch, 711 Zone E 2,900 2,900 3,000 3,100 3,200 3,300 3,400 18,900
P2133 PL - 16-Inch, 711 Zone E 1,900 1,900 2,000 2,100 2,200 2,300 2,400 12,900
P2134 PL - 16-Inch, 711 Zone E 1,000 - - - 1,000 1,000 1,000 3,000
P2164 PL - 20-Inch, 980 Zone E 900 900 900 900 900 900 900 5,400
P2169 PL - 20-Inch, 980 Zone 900 - 900 900 900 900 900 4,500
P2325 PL - 10" to 12" Oversize E 2,300 - 2,300 2,400 2,500 2,600 2,700 12,500
P2367 PL - 16-Inch, 980 Zone E 3,300 - - 1,700 3,300 3,400 3,500 11,900
P2397 PL - 12-Inch, 711 Zone 300 - 300 300 300 300 300 1,500
P2402 PL - 12-Inch, 624 Zone E 1,000 - - - - 1,000 1,000 2,000
P2414 PL - 12" to 16" Oversize E 2,400 2,400 2,500 2,600 2,700 2,800 2,900 15,900
P2435 PL - 16-Inch, 711 Zone E 1,400 - 1,400 1,400 1,400 1,400 1,400 7,000
R2028 RecPL - 8-Inch, 680 Zone 2,400 - - - - 2,400 2,500 4,900
R2031 RecPL - 12-Inch, 944 Zone E 900 900 900 900 900 900 900 5,400
R2033 RecPL - 12-Inch, 944 Zone E 2,100 - 2,100 2,200 2,300 2,400 2,500 11,500
R2040 RecPL - 12-Inch, 680 Zone E 2,900 2,900 3,000 3,100 3,200 3,300 3,400 18,900
R2041 RecPL - 8-Inch, 944 Zone E 1,400 1,400 1,400 1,400 1,400 1,400 1,400 8,400
R2042 RecPL - 8-Inch, 944 Zone E 900 - - - 500 900 900 2,300
R2043 RecPL - 8-Inch, 944 Zone E 1,200 - 1,200 1,200 1,200 1,200 1,200 6,000
R2047 RecPL - 12-Inch, 680 Zone E 1,400 - - - 700 1,400 1,400 3,500
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 - 700 700 700 700 700 3,500
R2085 RecPL - 20-Inch, 680 Zone E 900 - - - - - 900 900
Total Developer Reimbursement Projects 51,400 13,300 23,600 25,900 30,300 35,500 47,400 176,000
Total Operating Budget Cost Impact 775,700$ 167,900$ 319,400$ 383,000$ 731,200$ 784,200$ 854,200$ 3,239,900$
FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 Total
13,700$ 68,700$ 95,900$ 163,700$ 189,700$ 241,900$ 773,600$
144,800 241,000 254,500 524,500 549,100 547,100 2,261,000
9,400 9,700 32,600 43,000 45,400 65,200 205,300
167,900$ 319,400$ 383,000$ 731,200$ 784,200$ 854,200$ 3,239,900$
Operations and Maintenance
Energy
Chemical
Total Operating Budget Cost Impact
Cost Category
CAPITAL PURCHASE PROJECTS
DEVELOPER REIMBURSEMENT PROJECTS
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.
Projected Incremental Operating Expenditures
240
Item# Description Amount Type
Field Equipment
Engineering Development
1 GPS Survey Equipment based on an estimate from Trimble $ 54,000 N
Total Field Equipment - Engineering Development 54,000
Operations
9 Valve exercise machine for the valve program $ 15,000 N
11 John Deere Backhoe Hydraulic Hammer with installation and attachments 21,500 N
Total Field Equipment - Operations 36,500
Total Field Equipment 90,500
Vehicles
Operations
10 2008 Mid-size Super Cab 4 door pickup truckor equivalent. 25,000 R
2 2008 Full-size Superduty 4 door Supercab diesel or equivalent. 30,000 R
3 2008 Full-size Superduty 4 door Supercab diesel or equivalent. 30,000 R
4 2008 Mid-size Super Cab 4 door or equivalent. 25,000 R
5 2008 Mid-size Super Cab 4 door or equivalent. 25,000 R
6 2008 Mid-size Super Cab 4 door or equivalent. 25,000 R
7 2008 Mid-size Super Cab 4 door or equivalent. 25,000 R
8 2008 Mid-size Super Cab 4 door or equivalent. 25,000 R
Total Vehicles 210,000
Total Field Equipment and Vehicles Budget 300,500$
N -New
R -Replacement
FY 2008 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.
241
GLOSSARY
The Fiscal Budget contains terminology that is unique to public finance and budgeting. The
following budget glossary provides assistance in understanding these terms.
Accrual Basis of Accounting: The basis of accounting under which transactions are
recognized when they occur, regardless of the timing of cash receipts and disbursements.
Acre-Foot: The volume of water that will cover one acre to a depth of one foot. One acre-
foot equals 435.6 units or 325,850 gallons.
Additional Systems Fees: Effective May 1, 1986, each customer receiving water service in
the Improvement District 9 water service zone pays an additional monthly meter system
charge of $2.00 for each meter in service.
Annexation Fees: Whenever 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.
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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
GLOSSARY
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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
244
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
245
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.
GLOSSARY
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Taxes: California Water Code Section 72091 authorizes the District, as a municipal water
district, to levy ad valorem property taxes which are equal to the amount required to make
annual payments for principal and interest on general obligation bonds approved by the
voters prior to July 1, 1978.
Temporary Water Charge: The rate for temporary water service is two times the rate for
permanent service. The additional charge is to offset the cost of construction of 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
247
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
BIT Bi-annual Inspection Terminals
BMP Best Management Practices
BOD Biological Oxygen Demand
BRP Business Resumption Plan
CADD Computer Aided Design & Drafting
CARB California Air Resources Board
CAFR Comprehensive Annual Financial Report
CCV City of Chula Vista
CEQA California Environmental Quality Act
CFS Cubic Foot per Second
CHP California Highway Patrol
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
DBP Disinfectant By-Products
DEH Department of Environmental Health
DHS Department of Health Services
DVP Delivery-versus-Payment
EDU Equivalent Dwelling Unit
EIR Environmental Impact Review
EOC Equal Opportunity Commission
ESC Emergency Storage Charge
FCF Flow Control Facility
LIST OF ACRONYMS
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LIST OF ACRONYMS
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
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
MBR Membrane Bioreactor
MG Million Gallons
MGD Million Gallons per Day
MGP Million Gallons per
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
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LIST OF ACRONYMS
NIMS National Incident Management System
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
PERS Public Employees' Retirement System
PL Pipeline
POU Principles of Understanding
PRS Pressure Reducing Station
PS Pump Station
PT Part-time
RFID Radio Frequency Identification
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
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LIST OF ACRONYMS
WER Work Environment Review
WRMP Water Resources Master Plan
WTP Water Treatment Plant
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