HomeMy WebLinkAboutOperating and Capital Budget FY 2011-2012Table of Contents
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Letter of Transmittal iv
BUDGET FOREWORD
Otay Water District At-A-Glance 1 General Information 2
Statement of Values 3 Awards 4 Strategic Performance Management Plan 8
Organization Chart 17 Budget Process Overview 18
Resolution No. 4173 23
HISTORY AND COMMUNITY PROFILE
Past and Present 25 Current Economic Conditions 26
The Future 27
Demographics 28 Ten Largest Customers 29
Water Rate Comparison 30 Sewer Rate Comparison 31 Service Area Assessed Valuation 32
Ten Principal Taxpayers 33 San Diego Rainfall 34
FINANCIAL SUMMARIES
Budget Summary 35
Operating Budget Summary – General Fund 39 Operating Budget Summary by System 40
Operating Revenues and Expenditures 41 Fund Balance Summary by Fund 42 Revenues and Expenditures by Fund 43
Revenues and Expenditures by Type 45
FIVE-YEAR FORECAST
Five-Year Forecast 46
General Fund Forecast 47
Fund Balances 48 Debt Management 49
Schedule of Outstanding Debt 50
Projected Principal Payments by Debt Issuance 51 Projected Interest Payments by Debt Issuance 52
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Table of Contents
REVENUES AND EXPENDITURES
Potable Revenues and Expenditures
Potable Narrative 53 Operating Budget Summary 55
Classification of Water Sales 56 Water Sales Summary by Service Class 57 Unit Sales History by Customer Class 58
System Fees 59 MWD and CWA Fixed Fees (Pass-Through) 60 Meter Fees 61
Revenue History 62 Water Purchases and Related Costs 63
Power Costs 64
Administrative Expenses 65 Materials and Maintenance Expenses 66
Potable Water Service Area Maps 67
Recycled Revenues and Expenditures
Recycled Narrative 68 Operating Budget Summary 70
Classification of Water Sales 71 Water Sales Summary by Service Class 72 System Fees 73
Meter Fees 74 Revenue History 75 Water Purchases 76
Power Costs 77 Administrative Expenses 78
Materials and Maintenance Expenses 79
Recycled Water Service Area Maps 80
Sewer Revenues and Expenditures
Sewer Narrative 81
Operating Budget Summary 82
Sewer Charges Summary by Service Class 83 Revenue History 84
Power Costs 85 Administrative Expenses 86 Materials and Maintenance Expenses 87
Formula for Sewer Rates 88 Sewer Service Area Map 89
General Revenues and Expenditures
General Revenues and Expenses Narrative 90
General Revenues 92 General Expenses 93
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Table of Contents
DEPARTMENTAL OPERATING BUDGET
Departmental Operating Budget Narrative 94 Labor and Benefits 97
Labor and Benefits by Fund 98 Position Count by Department 99
Contract/Temporary Employees 100
Administrative Expenses 101 Materials and Maintenance Expenses 102
Operating Expenditures by Department 103
Operating Expenditures by Object 104 Departmental Budgets:
Board of Directors 105
General Manager 109 Administrative Services 115
Finance 127
Information Technology and Strategic Planning 138 Water Operations 145
Engineering 160 General Expense 170
CAPITAL BUDGET
Capital Improvement Program Narrative 173
Major CIP Projects 175 CIP Projects in Construction 176
CIP Reserve Funds 179
CIP Funding Source and Category 180 CIP Projects 181
CIP Justification and Impact on Operating Budget 183
Capital Purchases Budget 184
POLICIES
Summary of Financial Policies 186
Reserve Policy 188 Reserve Policy Glossary 217
Investment Policy 219
Investment Policy Glossary 225 Debt Policy 231
Debt Policy Glossary 245
APPENDIX
Glossary 249 List of Acronyms 255
Index 258
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September 1, 2011
Honorable Board of Directors
Otay Water District
I am pleased to present the Otay Water District’s Adopted Operating and Capital Budget for
Fiscal Year 2012. This year’s budget supports the management plan to finance all of the
District’s services and programs during the 2012 fiscal year.
The mission of the District is to provide customers with the best quality water, wastewater, and recycled water service in a professional, effective, and efficient manner. As with the past few
years, we continue to face numerous challenges with the slow recovery from the largest
economic downturn since the Great Depression and ongoing home foreclosures. The District
also faces large water supply cost increases because of inaction in California’s State Capitol to address the crisis in the Sacramento – San Joaquin Bay Delta. This is further complicated by the uncertainty of the rights to the Colorado River water, both of which represent 100 percent of our
imported water supply.
Given the continuing uncertain times and the demand by customers to keep rate increases to a minimum, the District must find the best solutions that balance the many expectations placed on it by a slowly recovering economy and by its customers. The District is looking to do this while
also meeting the expectation for continuous improvement. The way we will continue to achieve
these goals in this challenging environment is to continually improve all aspects of our core
business processes. The tool we will use to accomplish this is the Strategic Plan.
The District’s first Strategic Plan was developed in 2003 and it has been updated every three
years since then. We are now entering the first year of the 2012-2014 Strategic Plan. As with
previous plans, the focus has been on the District’s transformation from a growth-centric to a
maintenance-based organization. Where growth had been a significant focus in prior years, today we have become equally focused on managing long-term maintenance and replacement of infrastructure.
The change is illustrated by the Business Maturity
Curve (see illustration). During high growth periods, efforts are focused on achieving the macro targets of building and installing new infrastructure. As an
organization matures, fewer resources are needed to
support growth, but the effort to maintain and
improve infrastructure and assets increases. In addition, as an organization matures it derives income more from customer rates and less from developer
fees. At this stage, increased maintenance and
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replacement costs place pressure on customer rates. To balance the customer’s interest in
minimizing rate increases while also maintaining an organization’s infrastructure investments
and a strong financial position, we must place greater emphasis on internal efficiency and the
development of technology assisted best practices. In effect, an organization must use investments in technology to do more with the same or even fewer resources.
A goal of earlier plans included capitalizing on the technology investments and utilizing those
technologies to continually improve efficiency and productivity. The success of this approach is
evidenced by the gains in efficiency and by the reduction in staffing, even while the customer base has grown in recent years.
Furthermore, the District has been able to absorb some of the pass-though costs from our water providers by increased efficiency and improved productivity, helping to address customer concerns about rising water rates.
In this and coming years, the District will continue its efforts to improve business processes to
further increase efficiency and productivity through adherence to the 2012-2014 Strategic Plan.
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Today, the District provides water service to nearly 48,101 potable and 695 recycled water
customers within approximately 125.5 square miles of southeastern San Diego County. All of
the potable water sold to customers is purchased from the San Diego County Water Authority
(CWA). Much of this water is in turn purchased from the region’s primary water importer, the Metropolitan Water District of Southern California (MWD). The District also has entered into an agreement with the CWA to have the neighboring Helix Water District treat imported water
on behalf of the Otay Water District at their Levy Water Treatment Plant. This action brought
regional water treatment closer to customers, which helps reduce dependence on water treatment
facilities located outside of San Diego County. To deliver this locally treated water to customers, the District has completed a 5.1 mile, 36-inch
diameter pipeline. Drinking water delivered by this new pipeline is being stored in two recently
constructed 10 million gallon reservoirs. In addition to bringing water treatment closer to
customers, this new source of water diversifies the District’s supply and improves reliability. The District also owns and operates a wastewater collection and recycling system to provide
public sewer service to approximately 4,646 homes and businesses. Wastewater collected is
delivered to the Ralph W. Chapman Water Recycling Facility (RWCWRF), which is capable of
reclaiming wastewater at a rate of 1.3 million gallons per day. In addition to the Chapman facility, the District purchases up to 6 million gallons per day of recycled water from the City of
San Diego’s South Bay Water Reclamation Plant. Recycled water from these two sources is
used to irrigate golf courses, schools, public parks, roadway landscapes, and other approved uses
in the City of Chula Vista, California. The use of recycled water reduces dependence on
imported supplies and provides a local supply that diversifies District resources. BUDGET SUMMARY
The Otay Water District’s operating expenditures consist of three major sectors: potable water,
recycled water, and sewer, totaling $78,062,200 for Fiscal Year 2012. Revenues from potable and recycled water are projected to be $65,304,300, about $1,349,800 (2.1%) more than the Fiscal Year 2011 budget. Water sales volumes are expected to increase by 2% over FY 2011
actual sales as the economy is slowly improving, while efforts to promote water conservation
continue. Rate increases are therefore essential to offset the higher wholesale cost of water.
Sewer revenues are projected to be $2,336,000, about $65,500 more than Fiscal Year 2011 because of necessary rate increases due to pass-through cost increases by outside sewer service providers. The remaining revenue of $10.4 million comes from special fees and assessments and
miscellaneous income.
Significant aspects of the Operating Budget are:
A balanced budget meeting the goals of the Strategic Plan.
The use of an economist to determine growth for the region.
An updated six-year Rate Model to ensure sound financial planning and reserve levels.
Ongoing water supply rate increases of 7.7% from MWD and CWA because of the high
cost of supply programs, higher energy costs, and operating costs.
Implemented rate increases in potable, recycled water, and sewer. This included pass-through rate increases from CWA and the County of San Diego.
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In response to the economic slowdown, the District has again reduced staffing levels
from 159 full-time equivalent positions to 156. It has also cut operating expenditures by
$490,400 due to program funding changes and other discretionary spending cuts.
Of San Diego County’s 23 water agencies, Otay’s water rates are below the county-wide average.
The 2011-12 Capital Improvement Program (CIP) Budget consists of 74 projects and a budget of
$22.6 million. The budget emphasizes long-term planning for ongoing programs while
functioning within fiscal constraints and population growth. This year’s CIP budget decreased
by $5.8 million compared to last year’s projection, which is due to the deferral of projects to
match the timing of the increased demand due to land development.
THE FUTURE
The coming years will continue to pose challenges for those in California’s water community
and customers. While the State of California received a greater than normal amount of rainfall
this year, federal court orders continue to curtail water deliveries from Northern California due to
environmental factors in the Sacramento-San Joaquin Bay Delta and the uncertainty of Colorado River water deliveries continue. In addition, the political situation in the State Capitol has made
it difficult to find the compromises necessary to address the environmental challenges in the
Delta. These factors contribute to the higher cost of water statewide.
Through foresight, investments in drought-proof recycled water, conservation, and a water rate structure that rewards conservation, the Otay Water District has thus far avoided having to
require mandatory water conservation. The District has instead achieved its water conservation
goals using voluntary measures.
As you would expect, the planned water sales reductions have impacted revenues and will continue to affect the District’s finances. With that in mind, our success as an organization is
vastly enhanced by the practices and policies put in place by the Board of Directors to ensure the
strength and stability of the District even as we move forward through uncertain times. We are
fully confident that with these policies and practices, supported by dedicated and talented staff,
we will achieve continued success as an organization and thus assure the well-being of the people we serve.
In adopting this budget, the challenges presented this year were met by the Otay Water District
Board of Directors resolve to keep the stability and financial strength of the District as one of its
highest priorities.
AWARDS AND ACKNOWLEDGMENTS
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, 2010.
In order to be awarded a Certificate of Achievement, a government agency must publish
an easy to understand and efficiently organized Comprehensive Annual Financial Report. This report must satisfy both generally accepted accounting principles and applicable
legal requirements.
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The District also received a Distinguished Budget Presentation Award from the GFOA
for the District’s Operating and Capital Budget for the Fiscal Year beginning July 1,
2010, as well as two awards from the California Society of Municipal Finance Officers (CSMFO) for Excellence in Operating Budget and Excellence in Capital Budget. These prestigious awards recognize conformance with the highest standards for preparation of
state and local government financial reports.
The Irrigation Association presented Otay Water District with the 2010 National Water &
Energy Award. This award is in recognition of significant achievement in the
conservation of water and energy relating to irrigation procedures, equipment, methods
and techniques.
The Otay Water District was presented the 2011 Project of the Year Award for the
Jamacha Road Pipeline Project from the Public Works Association (APWA) in addition
to the 2011 Honor Award for the 1296-3 Reservoir (2MG).
In conclusion, this budget reflects the vision of the Board of Directors of the Otay Water District, its management, and its employees. We will continue to strive to make improvements in our
budget processes, including an extensive review and analysis of projections for revenues,
expenditures, capital projects, and reserves.
I would like to thank all the staff involved in this process for the efforts put forth in the preparation of this budget to ensure a successful outcome.
To the Board of Directors, we acknowledge and appreciate their continued support and direction
in achieving excellence in financial management.
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Mark Watton, General Manager
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At-A-Glance
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 the
Otay Water District to supply 12 percent of
total water demand with recycled water.
Mission Statement
The mission of the District is to provide customers with the best quality water, wastewater, and recycled water service in a
professional, effective, and efficient 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 is set by five Directors elected by
voters in their respective geographic
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 17.
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Otay Water District
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General Information
For Fiscal Year 2012, the District will have a staff of 156 full-time equivalent employees
under the leadership of the General
Manager. The District provides water
service to approximately 53% of its expected ultimate deliveries with a
population of more than 206,500 people.
This percentage increases as the District's
service area continues to grow to ultimate
build-out. The District is projected to deliver approximately 28,950 acre-feet of
potable water to 48,370 potable customer
accounts and to ultimately deliver by 2035
56,600 acre-feet of potable water to serve
285,000 people or 69,000 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 1.7% per
year over the next decade. Using historical data and considering current economic
conditions, staff has moderated this
projection to a growth rate of 0.5% for
Fiscal Year 2012.
Since 1956, the District has provided high
quality water to a semi-arid region of the
southeastern San Diego County. In 1971,
the District constructed a small collection
and treatment plant for sewer in the northern section of the District, and in 1980 the
District opened the Ralph W. Chapman
Water Recycling Facility (RWCWRF). For over 50 years, the available supply of water
has helped transform the District service
area from a mostly scrub and cactus-covered
backcountry into a balance of diverse environments.
Recycled water from the RWCWRF is used
to irrigate golf courses, schools, public
parks, roadway landscapes, and various other approved uses in eastern Chula Vista.
The RWCWRF is capable of recycling
wastewater at a rate of 1.3 million gallons
per day (1,200 acre-feet per year). The
District is also in a partnership with the City of San Diego to beneficially reuse an
additional 3,105 acre-feet per year of
recycled water for Fiscal Year 2012, and
ultimately up to 6,720 acre-feet per year.
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 4,646
customer accounts within the Jamacha
drainage basin. The sewer service area
covers approximately 8,797 acres, which is
about 11% of the District’s total service area. Residential customers comprise 97%
of the sewer customer base.
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Fiscal Year 2012 Adopted Budget
Statement of Values
As Otay Water District employees we dedicate ourselves to:
Customers
We take pride that our commitment to customer-centered service is our highest priority.
Excellence
We strive to provide the highest quality and value in all that we do.
Integrity
We commit ourselves to doing the right thing. Ethical behavior, trustworthiness and accountability are the District’s foundation.
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
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Otay Water District
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Financial Awards
The Government Finance Officers Association of the United States and Canada (GFOA) presented a Distinguished Budget Presentation Award to Otay Water
District, California for its annual budget for the fiscal year beginning July 1,
2010. In order to receive this award, a governmental unit must publish a budget document that meets program criteria as a policy document, as an operations
guide, as a financial plan, and as a communications device. This award is valid for a period of one year only. We believe our current
budget continues to conform to program requirements, and we are submitting it
to GFOA to determine its eligibility for another award.
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Fiscal Year 2012 Adopted Budget
Financial Awards
The California Society of Municipal Finance Officers (CSMFO)
presented Otay Water District the Certificate
of Award for Excellence
in Operating Budget for
Fiscal Year 2010-2011.
The California Society
of Municipal Finance Officers (CSMFO)
presented Otay Water
District the Certificate of Award for Excellence
in Capital Budget for
Fiscal Year 2010-2011.
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Otay Water District
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Awards
The Public Works Association
(APWA) presented Otay Water
District the 2011Project of the
Year Award for the Jamacha
Road Pipeline Project.
The American Society of
Civil Engineers presented
Otay Water District the 2010
Award of Excellence - Water
Treatment for the 1296-3
Reservoir Project.
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Fiscal Year 2012 Adopted Budget
Awards
The Public Works Association
(APWA) presented Otay Water
District the 2011 Honor Award
for the 1296-3 Reservoir (2MG).
The American Society of Civil Engineers presented Lee & Ro and Otay Water
District the 2010 Award of Excellence -
Water Quality / Flood Control /
Drainage for the Jamacha Road Pipeline.
The Irrigation Association
presented Otay Water District
the 2010 National Water &
Energy Conservation Award.
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Otay Water District
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Strategic Performance Management Plan
SWOT ANALYSIS
Introduction
The Strategic Plan is the core document which guides the agency’s efforts to meet and
positively adapt to change.
Every three years the District
engages in a major revision of its Strategic Plan. This current plan (covering fiscal
years 2012-2014) is the
fourth in a series of three-
year plans that began in
2003.
In order to develop the FY12-14 Strategic Plan, each
Chief meets with their staff to get a collective list of
ideas. Once these ideas are reviewed and discussed,
they are filtered using a SWOT analysis, assessing
the District’s Strengths, Weaknesses, Opportunities,
and Threats. To further focus the suggested
objectives, another analysis examines the plan from
the Balanced Scorecard perspective (Customer,
Financial, Business Process, and Learning & Growth).
The Senior Management Team reviews every
strategy, goal, objective, project plan,
performance measure, and target contained in
the plan. Through this team discussion process the General Manager gains consensus with his
staff on the exact priorities for the District,
including detailed financial and resource
considerations required to execute the plan.
Thus, the plan serves as an informal contract between the agency staff and the Board of
Directors on the strategic work that will be
done and what the agency hopes to achieve
over the next three years. In turn, the
General Manager presents the plan to the Board for approval. Through the Strategic Plan and
budget approval processes, the Board is then
able to make well informed oversight decisions
about the utility’s direction.
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Fiscal Year 2012 Adopted Budget
Strategic Performance Management Plan
Strategic Plan
Performance metrics and targets are a critical element of the Strategic Plan but differ from
Strategic Plan objectives. Objectives identify the action items that are necessary to achieve the
strategic vision. Performance measures are designed to ensure the day-to-day operations of the
utility are meeting agreed-upon expectations. Performance measures were revised from the prior year and are updated quarterly, and reviewed by the Board on a semi-annual basis.
Mission
To provide high value water and wastewater services to the customers of the Otay Water
District, in a professional,
effective, and efficient manner.
Vision
A District that is innovative in providing water services at affordable rates, with a
reputation for outstanding
customer service.
Key Challenge
Our key District challenge is to add increased value by improving our core business
processes. From a water supply perspective, this means determining the optimum mix of
water supply, treatment, and delivery solutions for our customers. From a daily operating perspective, efficiency improvements have become the primary source of competitive advantage and cost optimization for utilities. Adding value from this perspective means
the entire team focusing on not only the highest priority goals but also examining the
details of what we do every day and be willing to alter how we do it if it makes a positive
difference. Our employees voice a high degree of personal and professional satisfaction with our direction and the entire team is committed to meeting this key challenge with distinction.
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Otay Water District
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Strategic Performance Management Plan
I. Customer Service - Deliver high quality services to meet
customer needs and increase confidence of the customer in the
value the District provides.
A. “Maximize our customer satisfaction by expanding and improving
communications.”
1. Enhance communications with customers using our new phone system.
2. Regularly evaluate communications tools and explore the effective use of new
media options including: electronic newsletters, auto-dialer services, video streaming, social networks, and web media to ensure the District’s outreach
efforts are cost-effectively reaching all stakeholders.
3. Continue promoting the Water Conservation Garden as a venue for new and
existing homeowners, developers, and businesses.
4. Increase customers employing on-line bill payment.
5. Increase conservation related communications, such as surveys and comparative
information, by expanding web-based information.
II. Financial - Provide enhanced value by directing and
managing the financial issues that are critical to the District.
A. “Improve financial information and systems.”
1. Strengthen the long-term financial plan.
2. Develop sewer capacity fees for expansion.
3. Renegotiate the South Bay Water Reclamation Plant (SBWRP) recycled water
supply agreement with the City of San Diego.
4. Evaluate the water loss management program and make recommendations.
5. Evaluate the feasibility of replacing the existing customer information system or migrating to the new version of the Eden software.
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Fiscal Year 2012 Adopted Budget
Strategic Performance Management Plan
III. Business Process - Improve business functionality by
constantly improving the efficiency and effectiveness of
important business processes.
A. “Actively manage water supply and demand.”
1. Prepare and implement a Waste Water Management Plan.
2. Implement the recommendations within the Integrated Water Resources Plan
(IRP) to acquire alternative and/or additional potable and recycled water supplies
and reliability.
3. Closely monitor the District’s potable water demand to ensure the District will
remain on target to achieve its 2015 gallons per capita per day (GPCD) target as
identified in the 2010 Urban Water Management Plan (UWMP).
4. Work with the District’s largest potable water customers to convert landscape and interior water use to recycled water where fiscally feasible and safe.
5. Ensure best practices are followed in meeting the 20 by 2020 conservation targets
including reclassification of industrial and commercial customers.
6. Educate and work with local agencies and others to influence developers and
builders to incorporate practical water efficient practices in new construction.
7. Continue working with the City of Chula Vista for the possible development of an MBR Plant and for a potential agreement with the City for recycled water
supplies from the MBR Plant.
B. “Identify and implement improvements to the following business processes.”
1. Streamline Accounts Payable business process.
2. Continue development of the Asset Management program.
3. Strengthen CIP planning, budgeting, and cost tracking processes.
4. Develop systems and networks that support the disaster recovery plan.
5. Enhance security processes and planning.
6. Update the disaster recovery plan.
7. Update District-wide Records Management program.
8. Improve and streamline meter related processes.
9. Explore opportunities for improving and streamlining survey and inspection
business processes.
10. Improve the District’s computerized maintenance management system (CMMS).
11. Develop a management dashboard measuring cost, efficiency, and operational
status.
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Otay Water District
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Strategic Performance Management Plan
12. Review and consider implementing online employee self services.
13. Conduct a process review to enhance efficiency and operations in the following areas:
Water Distribution System, Recycled Distribution System, Collection System, and the
Ralph W. Chapman Water Recycling Facility.
14. Develop and implement large meter vault retrofit programs.
IV. Learning & Growth - Provide the leadership, tools,
and management commitment to become a more results-
oriented culture.
A. “Results-oriented workforce.”
1. Identify management initiatives for represented/unrepresented employees in
preparation for negotiations that will provide more efficiencies and more
flexibility.
2. Evaluate policies and procedures as appropriate to streamline processes and ensure the District remains competitive.
3. Review classification plan with the goal of providing greater flexibility.
4. Negotiate a successor “Memorandum of Understanding” for represented
employees for 2014 and beyond, and related compensation and benefits for
unrepresented employees.
5. Senior Management Team to develop summary of expectations for management
team to manage change in the future.
6. Update performance evaluation categories/program to ensure a results-oriented
workforce and update and provide training, if needed.
7. Evaluate pay-for-performance program to ensure the District is rewarding employees for innovations and business processes.
8. Establish a forum for continuous discussion regarding sections/units identifying
business process review in support of the District’s mission.
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Fiscal Year 2012 Adopted Budget
Strategic Performance Management Plan
Performance Management
Performance metrics and targets are a critical element of the strategic plan but differ from strategic plan objectives.
Objectives identify the action items
that are necessary to achieve the
strategic vision. Performance measures are designed to ensure the day-to-day operations of the utility are meeting
agreed upon expectations.
Performance measures are in the
process of being revised and will be
finalized prior to plan initiation on July 1, 2011.
Performance Measures
Customer Satisfaction: Measure the level of overall customer satisfaction with the District. Survey is conducted on an annual basis. Formation of survey begins in the first
quarter. Actual survey measures calendar year (January-December). Currently reported
quarterly.
Blanket Order Activity: Percentage of material purchases acquired via blanket POs.
Total Customer Water Saved: Estimate of water saved per acre-feet through
conservation programs.
Health & Safety Severity Rate: Quantifies the rate of employee days lost from work due to illness or injury.
Employee Turnover Rate: Annual percent of voluntary terminations (excludes
retirement).
Training Hours per Employee: Measures the quantity of general and management formal training employees are completing.
Safety Training Program: Safety and Risk Administration will provide a minimum of 8
safety training programs/hours per quarter which all field employees shall attend.
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Otay Water District
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Strategic Performance Management Plan
CIP Project Expenditures vs. Budget: Compares quarterly CIP expenditures with
budget.
Construction Change Order Incidence: Measures the rate of change order for CIP projects under construction.
Mark-Out Accuracy: Measures the percentage of mark outs performed without an at-
fault hit, which is damage to a District facility that results from a missing or erroneous
mark out.
Project Closeout Time: Measures the average number of days between the issuance of a
Notice of Substantial Completion (NOSC) and a Notice of Completion (NOC) for all
construction projects in construction.
Answer Rate: Percentage of calls as a measure of all calls received.
O&M Cost per Account: Operations & Maintenance (O&M) cost per account/per
customer. (QualServe)
Billing Accuracy: Percentage of correct bills issued. (QualServe)
Overtime Percentage: Comparing actual to budgeted overtime (including comp time) to monitor costs.
Sewer Rate Ranking: Otay ranking for the average sewer bill compared to other
agencies in San Diego County.
Water Rate Ranking: Otay ranking for the average water bill compared to other
agencies in San Diego County.
Debt Coverage Ratio: Measures level of debt coverage ratio (ability to pay debt). (QualServe) The minimum level is 125%.
Reserve Level: Measures all of the District’s reserves against the Board adopted Reserve
Policy levels.
Distribution System Loss: Percentage for unaccounted water. (QualServe)
Customer Satisfaction with Website: Tracks customer satisfaction with website through surveys.
Network Availability: Percentage of uptime for network during normal business hours.
Website Hits: Tracks the number of visitors to our website per month.
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Fiscal Year 2012 Adopted Budget
Strategic Performance Management Plan
Unplanned Disruptions: Quantifies the number of unplanned water outages experienced
by the utility customer expressed as number of accounts affected per 1,000 accounts.
(QualServe)
Technical Quality Complaint: Measures technical quality complaints of those related to core utility services. It is expressed as complaints per 1,000 customer accounts.
Planned Potable Water Maintenance Ratio in Dollars: Compares how effectively the
District is investing in planned maintenance. (QualServe)
Planned Recycled Water Maintenance Ratio in Dollars: Compares how effectively the
District is investing in planned maintenance.
Planned Wastewater Maintenance Ratio in Dollars: Percentage of planned maintenance costs compared to combined planned and corrective maintenance costs.
Direct Cost of Treatment per MGD: Measures the direct cost to treat one million
gallons of wastewater and does not include staff overhead or fringe benefits, but it does
include their salaries (QualServe).
O&M Cost per MGP – Wastewater: Total O&M cost (less depreciation) /Volume in
MG processed during the reporting period.
Percentage of Preventative Maintenance Completed in the Fleet Shop: To track the
percentage of scheduled PM’s that are completed in the Fleet Shop.
Percentage of Preventative Maintenance Completed at the Reclamation Plant: To
track the percentage of scheduled PM’s that are completed at the Reclamation Plant.
Percentage of Preventative Maintenance Completed in the Pump/Electric Section: To track the percentage of scheduled PM’s that are completed in the Pump/Electric
Section.
Percentage of Preventative Maintenance Completed in the Valve Maintenance
Program: To track the percentage of scheduled PM’s that are completed in the Valve Maintenance Program.
Valve Exercising Program: Maintenance of distribution systems’ infrastructure to
ensure minimal interruption of potable water delivery to customers.
Potable Water Distribution System Integrity: Measures the condition of the water distribution system expressed as the total annual number of leaks and breaks per 100
miles of distribution piping. (QualServe)
___________________________________________________________
Otay Water District
15
Strategic Performance Management Plan
Planned Water Service Disruption Rate: Quantifies the number of planned water
outages experienced by the utility customer expressed as number of accounts affected per
1,000 accounts. (QualServe)
Potable Water Compliance Rate: Quantifies the percentage of time each year that the District meets all of the health related drinking water standards in U.S. National Primary
Drinking Water Regulations. (QualServe)
Collection System Integrity: Number of wastewater collection system failures per 100 miles of collection system pipeline. (QualServe)
Replace Manual Read Meters with Automated Meter Readers: The measure reflects
the total number of AMR meter replacements per year which will increase meter reading
efficiency and reduce water loss through increased meter accuracy.
Recycled Water System Integrity: Tracks number of leaks or breaks per 100 miles of
water distribution system.
Sewer Overflow Rate: Measures the wastewater collection system pipeline condition
and the effectiveness of planned maintenance. (QualServe)
16
__________________________________________________________
Fiscal Year 2012 Adopted Budget
GENERAL MANAGER
BOARD OF DIRECTORS
Assistant General Manager
Engineering
Planning
Design
Water
Resources
Public Services
Construction
Survey
Environmental
Water
Operations
Water System
Operations
Utility
Maintenance/
Construction
Collection/
Treatment/
Recycle
Operations
Assistant General Manager
Information
Technology and
Strategic Planning
IT Applications
IT Operations
GIS
Finance
Controller
and
Budgetary
Services
Treasury
and
Accounting
Services
Customer
Service
Payroll and
Accounts
Payable
Administrative
Services
Human Resources
Purchasing and
Facilities
Safety and Risk
Administration
Water
Conservation
Organization Chart
Citizens and
Customers
___________________________________________________________
Otay Water District
17
Budget Process Overview
Budget Guide
The District views the budget as an essential tool for proper financial management. This budget is developed with input from the
various department levels of the
organization and is 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. The budget is
a comprehensive and balanced financial plan
that features District services, resources and
their allocation, financial policies, and other
useful information to allow the users to gain a general understanding of the District’s
financial status and future plans. To help
readers navigate this document, the
following is a general description of each of
the tabulated sections of the budget.
Budget Foreword
This introductory section contains
descriptions and general information about
the District, strategic focus areas highlighting major initiatives and
accomplishments, and the Budget Calendar
and Process.
History and Community Profile
Included in this section is the history of the District, along with the current and future
economic conditions and projections. 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 are made of cost increases, rate increases, targeted fund balances, capital
needs, and debt requirements. Analysis for
the current budget year plus five subsequent
years is conducted and a five-year forecast is
prepared based on the Rate Model results.
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
General Revenues and Expenses section.
An allocation of overhead type costs is made
to equitably spread the cost of running the District among the various business
segments.
Departmental Operating Budget
This section provides a summary of each
department’s operating expenditures and
detailed budget information including its
mission, responsibilities, three-year staffing,
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.
18
__________________________________________________________
Fiscal Year 2012 Adopted Budget
Budget Process Overview
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.
Policies
This section includes a summary of the
District’s financial policies and practices,
including the Reserve Policy, Investment
Policy, and Debt Policy.
Appendix
The last section consists of a Glossary of
budget and financial terms, List of
Acronyms, and an Index.
Budget Process
The District has integrated the Capital
Improvement Program (CIP) Budget and the Operating Budget. These budgets are
developed based on the District’s Water
Resources Master Plan 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 1.7%
pass-through rate increases for costs imposed on the District by the wholesale water providers
accurate projections of capital budget
needs (including replacement needs)
reserve funding in accordance with the Reserve Policy to meet future
growth demands and maintain
financial stability
funding of the Strategic Plan initiatives as categorized into the
Balanced Scorecard perspectives
avoid rate spikes by leveling rate
increases over a six-year period
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 expenses to determine
reasonableness by the Finance Department.
All costs are justified and supported by explanations. These budgets are then presented to the General Manager and the
Board of Directors prior to adopting the
budget.
___________________________________________________________
Otay Water District
19
Budget Process Overview
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 in an automated fashion. 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.
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 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. (See
diagram below.) Inflators for cost and volume are input into the Rate Model to
project the next five years of revenue and
expenses. This debt coverage ratio is also
evaluated to ensure adequate levels. Rates
are then set for the current fiscal year, plus five subsequent years, such that all financial
targets are met. Using this comprehensive
modeling tool, the District is able to smooth
future rate increases, determine when debt
Water
and
Sewer
Rates
Strategic
Plan
MWD/CWA &
Sewer Rates
Year End
Balances
Operating
Budget Input
CIP Budget
Input
Assumptions
Interest Rates
Inflation
Growth
Sales
Targets
Debt Coverage
Reserve Levels
Rate
Model
Operating
Budget
CIP
Budget
20
__________________________________________________________
Fiscal Year 2012 Adopted Budget
Budget Process Overview
Budget Calendar
2/11/11 Chiefs submit CIP Budgets for New Projects and changes to existing
Projects 2/16/11 Chiefs submit request for new Personnel/Personnel Reclassifications changes, Advancements and Long-Term Staffing to HR 2/23/11 HR to complete preliminary review of
new Personnel, Personnel Reclass, change requests and Advancements 2/28/11 Chiefs to submit Operating and Admin
Budget; Capital Purchases and Justifications; Labor Budget Worksheet 3/7/11 HR to review new personnel, reclass
and changes requests with GM 3/7/11 Finance to review Operating Budget and Reconciliation with Departments
3/14/11 Finance to review Department Operating Budgets with GM and AGMs 3/14/11 Finance to review preliminary CIP Budget with Chief of Engineering 3/18/11 Finance to have second review of CIP
budget with AGMs and Engineering 3/18/11 Finance to review personnel cost with Chiefs, AGMs and GM
3/25/11 Review CIP Budget with General Manager 4/4/11 Finance to review assumptions and
rates with Chiefs, AGMs and GM 4/7/11 Chiefs submit Position Analysis Questionnaire to HR for GM approved
Personnel Requests and Request for
Reclass (Advancements Don’t need GM approval)
4/14/11 Preliminary Budget for General Manager 5/5/11 Practice run of budget presentation with
Finance, Chiefs, AGMs and GM 5/9/11 Economic Outlook Study presented to
the Board 5/16/11 FY 2012-2014 Strategic Plan presented to the Board 5/16/11 Budget Workshop for approval of the FY 2011-2012 Operating and Capital Budgets and 218 30-Day Rate Increase
Notices 11/1/11 218 30-Day Notice of Water and Sewer Rate Increase due for bill insertion
1/1/12 Water and Sewer Rate Increase
should be issued, and maintain all of the reserve levels in accordance with the
Reserve Policy.
The District has a three year Strategic Plan, and each year in the spring, the portion of
the plan that pertains to the upcoming fiscal
year is presented to the Board of Directors
for review and direction. This is followed
by a coordinated presentation of the budget by all departments, to the Board of Directors
for their approval at a special budget
workshop in May. The review of the
Strategic Plan and the adoption of the
budget on an annual basis give the District its direction for the following fiscal year.
During the year, each department receives
monthly budget and cost reports that are
essential to monitor and control costs. As events occur or conditions change,
modifications to or deviations from the
original budget may be necessary. In the
event the General Manager determines that
an emergency exists which requires immediate action; he may transfer
appropriation within the budget allocations,
or request that the Board of Directors
increase the current budgeted funds.
Due to the size of the District’s CIP, a
separate budget book has been prepared outlining in detail the projects and
expenditures required to ultimate build-out.
A synopsis of the CIP may be found under
the Capital Budget section of this report. As
part of the integrated budget, capital purchases have been included within the CIP Budget.
The Budget Report is intended as a financial
guide and may be modified by the Board of
Directors during Fiscal Year 2012. All
approved modifications to the budget will be documented in the form of a staff report and
noted in the board meeting minutes.
___________________________________________________________
Otay Water District
21
Budget Process Overview
Budget Basis
The District utilizes the accrual basis for
budget which is the same as the basis of
accounting used in the audited financial
statements, recognizing revenues and
expenses in the period in which they are earned and incurred, respectively. The
District reports its activities on an enterprise
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.
Bay-Delta
22
__________________________________________________________
Fiscal Year 2012 Adopted Budget
___________________________________________________________
Otay Water District
23
24
__________________________________________________________
Fiscal Year 2012 Adopted Budget
Past and Present
On January 27, 2006, the Otay Water
District celebrated its golden anniversary. Over 50 years ago, the California State
Legislature officially authorized the District
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 709 miles of
potable and 96 miles of recycled pipelines, 44 reservoirs, a water reclamation plant, and one of the largest recycled water distribution
systems in the State of California. The
character of the service area has also
changed from predominantly dry-land farming and cattle ranching to businesses, high-tech industries, and large master-
planned communities. The District’s
boundaries currently stretch from Otay Mesa
and eastern Chula Vista to Spring Valley, southern El Cajon, and Jamul.
The mission of the District is to provide
customers with the best quality water, wastewater, and recycled water service in a
professional, effective, and efficient manner.
As with the past few years, we continue to
face numerous challenges with the slow
recovery from the largest economic downturn since the Great Depression and
ongoing home foreclosures. The District
also faces large water supply cost increases
and inaction in the State Capitol to address the crisis in the Sacramento – San Joaquin Bay Delta, and the uncertainty of Colorado
River water, the source of 100% of our
imported water.
These current problems make the work the District is doing all the more critical. On
June 1, 2007, the District dedicated the
Supply Link Project connecting recycled
water system to the City of San Diego’s City South Bay Water Reclamation Plant. Today, the District purchases about 3
million gallons per day (mgd) of recycled
water from the city, increasing to 6 mgd
ultimately, and in addition 1 mgd is produced at RWCWRF. With recycled water meeting a large portion of the
landscape irrigation needs, this means in the
future approximately 7 mgd of potable water
does not have to be pumped hundreds of miles from northern California or the Colorado River. Instead, enough drinking
water to serve more than 15,000 homes is
being conserved and can be used to address
shortages in the years to come.
La Presa County Water District
(ca. 1957)
___________________________________________________________
Otay Water District
25
Current Economic Conditions
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 (IID). Otay takes delivery
of the water through several connections of
large diameter pipelines owned and operated
by CWA. The District currently receives treated water from CWA and the Helix
Water District (HWD) by contract with
CWA. In the Southern region, in addition to
the treated water deliveries from CWA, the
District has an emergency agreement with the City of San Diego in the case of a
shutdown of the main treated water source.
Through innovative agreements like this,
benefits can be achieved by both parties by
using excess capacity of another agency and diversifying local supply, thereby increasing
reliability.
For several decades, the District has
collected and recycled wastewater generated within the Jamacha drainage basin and
pumped the recycled water south to the Salt
Creek basin where it is used for irrigation
and other non-potable uses. However, the
demand for recycled water out-paced the supply, requiring the District to supplement
the limited supply of recycled water with
potable water. Through the agreement with
the City of San Diego, the District has
discontinued supplementing its recycled demand with potable water. Once again,
this decreases the demand on potable water
and increases reliability of the District’s
supply.
The District’s sewer service area is growing
at a slow but steady rate of approximately
0.6% each year. Most of this growth is from
small development projects or homeowners
converting their septic system to sewer because of environmental issues.
The District’s service area was one of the
fastest growing regions in the nation. During the past decade, the population of the
service area has nearly doubled. It is
estimated that the District is currently
serving approximately 206,500 residents. In
just the past eight years, the District has added more than 6,168 new customer
connections, with 2,326 occurring in Fiscal
Year 2004. The phenomenal growth has
slowed, as our local and national economy is
experiencing a downturn. This slowdown appears to have leveled off as the District’s
Public Services Division approved on
average 12 permits per month, and sold 292
water meters in Fiscal Year 2010-2011.
26
__________________________________________________________
Fiscal Year 2012 Adopted Budget
The Future
The District continues to use the challenges presented by growth to create new opportunities and new organizational efficiencies. By utilizing and continuing to refine its Strategic Business Plan,
it has captured the Board of Director’s vision and united its staff in a common mission. The
organization has achieved a number of significant accomplishments based on its successful
adherence to its Strategic Business Plan. The District is not only poised to continue successfully providing an affordable, safe, and reliable water supply for the people of its service area, but is
set to reap the rewards of greater efficiencies and economies of scale.
This year because of the economic uncertainty of the region, the District employed an Economist
to verify the growth in the region. Using the economist’s report, the Engineering Department
projected that over the next six years the District will sell another 3,160 meters. SANDAG, the
regional planning agency, shows a slowing of the historic annual growth rate of 6.3% since 1980,
to a projected future annual growth rate of 1.7% through 2030, for the City of Chula Vista. For the unincorporated areas of the region the historic annual growth rate has been only 1.3% since
1980, but is expected to increase to 1.7% through 2030.
___________________________________________________________
Otay Water District
27
Demographics
The 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 border.
SANDAG creates and maintains a tremendous quantity of demographic, economic, land use,
transportation and criminal justice information about the San Diego region. The demographic
data include population characteristics like age, education, and employment. Because of the
overlapping of the District’s service area with the cities of Chula Vista, La Mesa, El Cajon, and the unincorporated areas of Spring Valley and Jamul, the following demographic data is from the
City of Chula Vista as it most closely represents the District.
The population of Chula Vista has grown from 83,927 in 1980, to 135,136 in 1990, to 173,556 in 2000, and in 2009 the population reached 243,916. This represents an increase of 159,989 in the
past 30 years or a 190.6% increase, which correlates to the District’s rapid growth for the same
period.
The racial make up of Chula Vista is 58% Hispanic, 20% White, 14% Asian, 4% Black, and the
remaining 7% is all other groups. The median household income for Chula Vista was $66,955 in
2009, and 92% of Chula Vista’s housing units were occupied.
28
__________________________________________________________
Fiscal Year 2012 Adopted Budget
% of
Annual Water
Customer Type Revenues Sales
1. City of Chula Vista Publicly Owned $2,298,355.60 3.9%
2. State of California Publicly Owned 1,003,099.17 1.7%
3. Sweetwater School District Publicly Owned 668,587.80 1.1%
4. County of San Diego Publicly Owned 636,773.46 1.1%
5. EastLake Summit Assoc Commercial (Irrigation)628,860.08 1.1%
6. EastLake III Community Assoc Commercial (Irrigation)578,224.27 1.0%
7. EastLake Country Club Commercial (Irrigation)412,035.34 0.7%
8. Cuyamaca College Publicly Owned 399,883.90 0.7%
9. Chula Vista School District Publicly Owned 391,737.28 0.7%
10. Windingwalk Master Association Commercial (Irrigation)341,281.42 0.6%
Total 7,358,838$ 12.6%
Estimated FY11 Water Sales 58,194,221$
Customer Name
Ten Largest Customers - Fiscal Year 2011
Ten Largest
12.6%
Others87.4%
Customers
Fiscal Year 2011
___________________________________________________________
Otay Water District
29
Water Rate Comparison
The District strives to remain cost effective in its rate setting, by controlling operating cost, yet passing through the full cost of supply. The following two charts show how the District
compares in rates with its neighboring water and sewer providers.
Note: These amounts reflect the charges on the water bills of the various agencies and cities.
Survey of Member Agency Water Rates
15 Unit Water Use and 3/4" Residential Meter
Projected Rates Effective January 2012
30
__________________________________________________________
Fiscal Year 2012 Adopted Budget
Sewer Rate Comparison
(1) Otay Water District uses a water-consumption based rate setting method.
(1)
___________________________________________________________
Otay Water District
31
Service Area Assessed Valuation
Source: County of San Diego Auditor and Controller
Otay Water District’s service area encompasses property with over $23.5 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. The historic
increases were due to both growth in the number of new homes, as well as increases in home prices.
Despite the slow down in the current housing market, the long-term growth in new homes is expected
to continue at approximately 1.7% 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. With the down turn in the property values the District is
anticipating a moderate decrease of 2.8% from FY11 to FY12.
$-
$4,000
$8,000
$12,000
$16,000
$20,000
$24,000
$28,000
2006 2007 2008 2009 2010 2011
$1
9
,
5
6
6
$2
2
,
6
8
5
$2
5
,
9
0
3
$2
6
,
7
5
2
$2
4
,
1
9
9
$2
3
,
5
1
9
Mi
l
l
i
o
n
D
o
l
l
a
r
s
Fiscal Year
Five-Year Service Area Assessed Valuation
32
__________________________________________________________
Fiscal Year 2012 Adopted Budget
Percent
Assessed Value to Total
1. San Diego Expressway Limited Partnership (SDELP) $ 260,000,000 1.11%
2. GGP-Otay Ranch LP 175,335,688 0.75%
3. Village II of Otay HB SUB 124,887,319 0.53%
4. Regulo Place Apartments Investors LLC 115,836,938 0.49%
5. O V Three Two LLC 92,539,199 0.39%
6. E Q R-Missions at Sunbow LLC 90,540,118 0.38%
7. S P Lavida Real LLC 80,970,425 0.34%
8. S V Portfolio LP 79,915,028 0.34%
9. Corrections Corp of America 76,437,168 0.32%
10. Village II of Otay LP 63,472,239 0.27%
Total $ 1,159,934,122 4.93%
Total Service Area Assessed Valuation $ 23,519,177,848
Source: County of San Diego Auditor and Controller
Organization
Ten Principal Taxpayers as of June 30, 2011
Ten Principal
Taxpayers
4.93%
Other Taxpayers95.07%
Service Area Taxpayers
FY 2011
___________________________________________________________
Otay Water District
33
San Diego Rainfall
2.99
10.62
5.18
22.50
5.42 3.85
7.49 9.17 11.01 12.66
0
5
10
15
20
25
30
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
In
c
h
e
s
Fiscal Year
Fiscal Years 2002-2011
Annual Rainfall 10-Year Average Rainfall (9.09 inches)
Although San Diego's Fiscal Year 2011 rainfall was greater in volume and more broadly distributed
across the year than normal, the District is expecting that San Diego's rainfall will return to its average pattern and volume for Fiscal Year 2012. The 10-year average of 9.09 inches for San Diego rainfall reflects the long-term drought conditions for our area. San Diego's rainfall average over 20
years is 10.25 inches; the 30-year average is 10.10 inches.
San Diego rainfall, while a contributing factor, is not the controlling factor for our potable water
supply shortage. The San Diego region imports 90% of its potable supply, so conditions elsewhere affect the actual amount of water available to the District. In the event the amount of water supplied
to the District is reduced, water-sale revenues would decrease. Related water purchase expenses
would also be reduced mitigating the impact of the decrease in revenues. The amount of any supply
reduction would dictate the magnitude of the District's response and type of reaction.
The San Diego rainfall information shown in the chart above uses data from the San Diego Airport
at Lindbergh Field and is provided by the Western Regional Climate. More information can be
obtained from their website: http://www.wrcc.dri.edu. The Western Regional Climate Center’s
website data, in turn, is derived from data received from the National Climatic Data Center, the
National Weather Service, the National Resource Conservation Service, the Bureau of Land Management, the U.S. Forest Service, and other federal, state, and local agencies. Although the
data reflects actual rainfall at Lindbergh field, it is representative of rainfall for the area served by
the Otay Water District.
34
__________________________________________________________
Fiscal Year 2012 Adopted Budget
Budget Summary
The Operating Budget is summarized and presented in the Operating Budget Summary
on page 39. Also included in this section is
the Operating Budget Summary by System
on page 40, the Fund Balance Summary by Fund on page 42, and the Revenues and
Expenditures by Fund on pages 43 and 44.
The Revenues, Expenditures, and Sources
and Uses of Funds by Type for all funds are
presented on page 45. For Fiscal Year 2012, the District increased both water and sewer
rates for its customers in order to pass-
through cost increases from water suppliers
and sewer treatment agencies. These cost
increases are being experienced by our neighboring water agencies and most are
encountering similar rate increases.
Operating Budget Summary
The Operating Budget for Fiscal Year 2012
is $78,062,200 in comparison to the
previous fiscal year budget of $76,993,900.
The $1,068,300 increase is water supply rate increases of 7.5% from MWD and 7.7%
from CWA because of the high cost of
supply programs, higher energy and
operating costs.
The District uses a rate model to build the
budget for the current fiscal year and five
subsequent years. To do this, estimates for
growth, water costs, and others such as
rainfall, and average water consumption per customer, are used throughout the model to
calculate various revenue and expense
amounts in each year. The Engineering
Department is primarily responsible for the
growth estimates as described in the budget process on pages 19-21. Water cost
estimates are obtained from District water
suppliers, CWA and MWD, and power cost
inflators from San Diego Gas and Electric,
the District power supplier. Labor and benefit cost inflators are based on the
Memorandum of Understanding with the District’s labor union, as well as estimates
from District health providers. Other
general inflators are derived from statistical
data from consumer price indexes for the region.
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 28,952 acre-feet of potable water will be sold during Fiscal Year 2012. Budgeted revenues from
water sales are projected to be $57,908,800,
an increase of 2.8% from the previous year's
budget despite the decreased water sales, and the past several years of increases in pass-through water cost. 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 3,962 acre-feet of
recycled water to customers at a discount of
15% off the potable irrigation rate. The FY 2012 sales revenue budget of $7,395,500, a
decrease of $225,100 from FY 2011,
includes the incentive credits provided by
MWD and the 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.
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Otay Water District
35
Budget Summary
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 General Fund
for Engineering Department’s support for expansion functions.
Betterment Fees for Maintenance
These fees are earned by the General Fund
for Water Operations Department’s
maintenance of certain District assets.
Annexation Fees
The District collects annexation fees when
new customers annex into the District. The
fee is based on the prior property tax and availability fees paid by existing users and
ensures 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 Roll 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 or 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.
Transfer from OPEB
This money is available to fund operations from the OPEB trust fund. In Fiscal Year
2008, the District established a reserve
through PERS, lowering the amount
necessary to reserve for OPEB expenses
allowing the excess to be available to the general fund.
Expenditures
Potable Water Purchases
Water purchases indicate the expense of
purchasing 30,438 acre-feet for the District's
potable water supply. A provision has been
made to allow 1,486 acre-feet of water for District usage, leakage, and evaporation.
Recycled Water Purchases
Recycled water purchases indicate the
expense of purchasing 3,106 acre-feet for the District's recycled water supply. The
District no longer budgets for a potable
36
__________________________________________________________
Fiscal Year 2012 Adopted Budget
Budget Summary
supplement to the recycled system due to the 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."
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 156 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.
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Otay Water District
37
Budget Summary
Additional details are supplied in the Departmental Operating Budget section.
New Supply Reserves
These reserves are established to fund new water supply needs including project costs, existing debt payments, and new debt that
will be issued in the future to fund
expansion.
Expansion Reserves
These reserves are established to fund
expansion needs including project costs, existing debt payments, and new debt that
will be issued in the future to fund
expansion.
Betterment Reserves
These reserves are established to fund the
betterment needs of facilities including
project costs, existing debt payments, and
new debt that will be issued in the future to
fund betterment.
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.
Transfers
These transfers are necessary to ensure that
each fund pays its fair share of costs, or to achieve required fund balances per the
District’s policy. The Transfer Out for Prop
1A occurred in FY 2010 and was a loan to
the state of the District’s 1% property tax
revenue.
Operating Budget Summary by
Business
The Budget Summary by System schedule
reflects the separation of operating revenues
and expenses among potable water, recycled 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, 2011, and the projected balance for
June 30, 2012, based on the results of the
budget and rate model. This includes transfers between funds made to meet target levels as outlined in the Reserve Policy.
Revenues and Expenditures by
Fund
The Revenues and Expenditures by Fund schedule reflect each fund’s revenues and expenditures by business line, where
appropriate. This schedule is reconciled to
the Fund Balance Summary and excludes
transfers between funds.
Revenues and Expenditures by
Type – All Funds
This is a consolidated schedule of revenues
and expenditures, including sources and uses
of funds but excluding fund transfers.
38
__________________________________________________________
Fiscal Year 2012 Adopted Budget
FY 2010 FY 2012 Budget
11-Actual Budget Estimated (drft)Budget Variance
REVENUES
##Potable Water Sales 49,587,223$ 56,333,900$ 51,507,858$ 57,908,800$ 1,574,900$
Recycled Water Sales 6,622,886 7,620,600 6,762,039 7,395,500 (225,100)
##Sewer Revenues 2,311,586 2,270,500 2,386,600 2,336,000 65,500
##Meter Fees 92,246 50,300 91,152 82,000 31,700
##Capacity Fee Revenues 1,030,688 1,095,300 1,063,234 1,044,000 (51,300)
##Betterment Fees for Maintenance 575,721 657,400 560,229 628,600 (28,800)
Annexation Fees 555,751 - - - -
Tax Revenues 3,679,280 3,843,900 3,576,721 3,839,600 (4,300)
##Non-operating Revenues 2,544,875 1,948,300 2,095,498 2,021,600 73,300
##Interest 214,280 296,300 112,821 158,300 (138,000)
OPEBTransfer from OPEB 1,030,000 1,220,000 1,220,000 1,380,000 160,000
ExpTransfer from Betterment Reserve - - - 30,000 30,000
Transfer from Replacement - - - 120,000 120,000
General Fund Draw Down - 1,657,400 1,657,400 522,800 (1,134,600)
Transfer from General Fund - - - 595,000 595,000
TOTAL REVENUES 68,244,536 76,993,900 71,033,552 78,062,200 1,068,300
EXPENDITURES
##Potable Water Purchases 24,530,567 26,238,700 25,323,291 27,793,100 1,554,400
Recycled Water Purchases 1,024,162 1,179,900 1,264,573 1,452,800 272,900
##CWA - Infrastructure Access Charge 1,344,828 1,550,700 1,550,466 1,756,900 206,200
##CWA - Customer Service Charge 1,128,306 1,315,200 1,315,224 1,562,600 247,400
##CWA - Emergency Storage Charge 2,196,876 2,875,200 2,884,050 3,585,800 710,600
##MWD - Capacity Reservation Charge 637,884 665,100 660,282 603,900 (61,200)
##MWD - Net RTS and Standby Charges 952,226 1,232,400 1,232,240 1,488,600 256,200
Subtotal - Water Costs 31,814,849 35,057,200 34,230,126 38,243,700 3,186,500
##Power 2,307,611 2,520,700 2,170,357 2,440,900 (79,800)
##Labor and Benefits 16,659,222 16,749,400 17,287,426 18,119,600 1,370,200
##Administrative Expenses 4,646,029 5,581,600 4,764,968 4,560,700 (1,020,900)
##Materials & Maintenance 3,491,494 3,769,500 3,794,620 4,300,000 530,500
##Expansion Reserve 1,610,000 2,775,000 2,775,000 555,000 (2,220,000)
Bett ResBetterment Reserve 3,810,000 1,435,000 315,000 - (1,435,000)
Repl ResReplacement Reserve 3,660,000 6,965,000 6,965,000 3,330,000 (3,635,000)
Transfer to Sewer General Fund 200,000 - - 786,800 786,800
Transfer Out - Prop 1A 270,300 - - - -
Transfer to General Fund Reserve 1,330,000 390,500 390,500 2,420,500 2,030,000
Transfer to Sewer Replacement - 1,750,000 1,750,000 1,720,000 (30,000)
Transfer to New Supply Reserve - - - 1,585,000 1,585,000
TOTAL EXPENDITURES 69,799,505 76,993,900 74,442,999 78,062,200 1,068,300
EXCESS REVENUES (EXPENSE)(1,554,969)$ -$ (3,409,446)$ -$ -$
FY 2011
Operating Budget Summary - General Fund
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Otay Water District
39
Potable Recycled Sewer Total
REVENUES
Water Sales 57,908,800$ -$ -$ 57,908,800$
Recycled Water Sales - 7,395,500 - 7,395,500
Sewer Revenues - - 2,336,000 2,336,000
Meter Fees 79,700 2,300 - 82,000
Capacity Fee Revenues 841,200 - 202,800 1,044,000
Bett Betterment Fees for Maintenance 628,600 - - 628,600
Tax Revenues 3,788,100 - 51,500 3,839,600
Non-operating Revenues 1,991,000 - 30,600 2,021,600
Interest 138,800 12,400 7,100 158,300
OPEBTransfer from OPEB 1,380,000 - - 1,380,000
TF BettTransfer from Betterment - - 30,000 30,000
Transfer from Replacement - - 120,000 120,000
General Fund Draw Down - 522,800 - 522,800
Transfer from General Fund - - 595,000 595,000
TOTAL REVENUES 66,756,200 7,933,000 3,373,000 78,062,200
EXPENDITURES
Water Purchases (CWA)27,793,100 - - 27,793,100
Water Purchases (CSD)- 1,106,700 - 1,106,700
Take-or-pay - 346,100 - 346,100
Subtotal - Water Purchases 27,793,100 1,452,800 - 29,245,900
CWA - Infrastructure Access Charge 1,756,900 - - 1,756,900
CWA - Customer Service Charge 1,562,600 - - 1,562,600
CWA - Emergency Storage Charge 3,585,800 - - 3,585,800
MWD - Capacity Reservation Charge 603,900 - - 603,900
MWD - Net RTS and Standby Charges 1,488,600 - - 1,488,600
Subtotal - Water Costs 36,790,900 1,452,800 - 38,243,700
Power 1,848,300 510,800 81,800 2,440,900
Labor and Benefits 15,946,400 1,263,800 909,400 18,119,600
Administrative Expenses 3,775,600 351,000 434,100 4,560,700
Materials & Maintenance 2,144,500 399,600 1,755,900 4,300,000
5716 Expansion Reserve - 555,000 - 555,000
Repl ResReplacement Reserve - 3,330,000 - 3,330,000
Transfer to Sewer GF 595,000 - 191,800 786,800
Transfer to GF Reserve 2,420,500 - - 2,420,500
Transfer to Sewer Replacement 1,720,000 - - 1,720,000
Transfer to New Supply Reserve 1,515,000 70,000 - 1,585,000
TOTAL EXPENDITURES 66,756,200 7,933,000 3,373,000 78,062,200
EXCESS REVENUES -$ -$ -$ -$
FY 2012 Operating Budget Summary by System
86%
10%
4%
FY 2012 Operating Expenditures
Potable
Recycled
Sewer
40
__________________________________________________________
Fiscal Year 2012 Adopted Budget
4611
TOTAL REVENUES
4621
sum
EXPENDITURES:
5511
5523
5521
5522
5531
5532
5411
5110
5200
5300
TOTAL EXPENDITURES
EXCESS REVENUES
Operating Revenues and Expenditures
76.7%
9.8%
3.1%2.3%5.1%2.8%0.2%
Potable Water Sales
Recycled Water Sales
Sewer Revenues
Other Fees
Tax Revenues
Transfers
Interest
FY 2012 Operating Revenues
47%
2%3%
23%
6%
6%
1%4%8%
Potable Water Costs
Recycled Water Purchases
Power
Labor and Benefits
Administrative Expenses
Materials & Maintenance
Expansion Reserve
Transfers
FY 2012 Operating Expenditures
___________________________________________________________
Otay Water District
41
Estimated Projected
Balance Interfund Balance
June 30, 2011 Revenues Expenditures Transfers (1)June 30, 2012
GENERAL FUND
Potable 9,778,510$ 66,756,200$ 66,756,200$ -$ 9,778,510$
Recycled 5,494,146 7,933,000 7,933,000 - 5,494,146
Sewer 1,431,657 3,373,000 3,373,000 - 1,431,657
Total General Fund 16,704,313 78,062,200 78,062,200 - 16,704,313
EXPANSION FUND
Potable and Recycled (2)12,866,792 3,956,300 10,191,900 (870,000) 5,761,192
Sewer 349,431 4,100 202,800 430,000 580,731
Total Expansion Fund 13,216,223 3,960,400 10,394,700 (440,000) 6,341,923 (3)
BETTERMENT FUND
Potable 11,197,085 1,278,600 8,140,700 - 4,334,985
Recycled 429,507 3,200 122,200 (405,000) (94,493)
Sewer 1,595,002 46,200 1,498,900 (30,000) 112,302
Total Betterment Fund 13,221,595 1,328,000 9,761,800 (435,000) 4,352,795 (3)
REPLACEMENT FUND
Potable 21,623,289 2,218,800 6,620,500 - 17,221,589
Recycled 4,925,437 127,900 2,234,000 3,330,000 6,149,337
Sewer 3,607,511 28,700 1,535,200 3,000,000 5,101,011
Total Replacement Fund 30,156,238 2,375,400 10,389,700 6,330,000 28,471,938
NEW SUPPLY FUND
Potable (416,687) 394,260 1,440,000 1,515,000 52,573
Recycled (56,642) 500 80,000 70,000 (66,142)
Sewer - - - - -
Total New Supply Fund (473,329) 394,760 1,520,000 1,585,000 (13,569) (3)
OPEB FUND 4,526,516 33,700 935,000 (1,380,000) 2,245,216 (4)
DEBT RESERVE FUND 25,795,122 510,500 751,600 - 25,554,022
TOTAL 103,146,677$ 86,664,960$ 111,815,000$ 5,660,000$ 83,656,637$
(1)The total for interfund transfers does not net to $0 because some transfers are already reflected in the Operating
Revenues and Expenditures for General Fund as follows:
Expansion Reserve (555,000)$
Betterment Reserve 30,000
Expansion Reserve -
Betterment Reserve 30,000
Replacement Reserve (4,930,000)
New Supply Reserve (1,585,000)
OPEB Reserve 1,380,000
Total (5,630,000) #
(2)Potable and Recycled funds are combined for expansion purposes.
(3)The fund balance is anticipated to change more than 10% due to the Districts ongoing current year CIP expenditures fund by
current years revenues and prior years debt issuance proceeds, as well as transfers made in accordance with the Reserve
Policy found on pages 188-218.
(4)This is a planned reduction of this reserve to fund the PERs OPEB trust in accordance with the actuarial analysis, as well as
fund salary and benefit cost in accordance with the Memorandum of Understanding with the labor union.
Estimated, Fiscal Year 2012
Fund Balance Summary by Fund
42
__________________________________________________________
Fiscal Year 2012 Adopted Budget
FY 2010 FY 2012
Actual Budget Estimated Projected
REVENUES
GENERAL FUND
GPrev Potable 59,201,390$ 65,978,000$ 60,028,448$ 66,756,200$
GRrev Recycled 6,629,817 7,643,100 6,774,567 7,933,000
GSrev Sewer 2,413,329 3,372,800 2,573,137 3,373,000
Total General Fund (1)68,244,536 76,993,900 69,376,153 78,062,200
EXPANSION FUND
EPrev Potable 5,160,255 4,514,400 4,669,160 3,947,600
ERrev Recycled 2,825,962 570,300 1,788,545 8,700
ESrev Sewer 6,113 7,700 3,527 4,100
Total Expansion Fund 7,992,331 5,092,400 6,461,232 3,960,400
BETTERMENT FUND
BPrev Potable 1,262,227 1,428,200 1,272,350 1,278,600
BRrev Recycled 2,800 3,100 3,773 3,200
BSrev Sewer 44,897 47,100 50,862 46,200
Total Betterment Fund 1,309,924 1,478,400 1,326,985 1,328,000
REPLACEMENT FUND
RPrev Potable 278,880 1,317,900 1,911,964 2,218,800
RRrev Recycled 64,857 472,100 250,883 127,900
RSrev Sewer 33,323 12,600 31,168 28,700
Total Replacement Fund 377,060 1,802,600 2,194,016 2,375,400
NEW SUPPLY FUND
NSPrev Potable - - (416,686) 394,260
NSRrev Recycled - - (56,642) 500
NSSrev Sewer - - - -
Total New Supply Fund - - (473,329) 394,760
OrevOPEB FUND 104,862 96,300 45,813 33,700
DrevDEBT RESERVE FUND 51,775,186 962,200 1,287,490 510,500
Total Revenues 129,803,900$ 86,425,800$ 80,218,360 86,664,960$
Revenues and Expenditures by Fund
FY 2011
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Otay Water District
43
FY 2010 FY 2012
Actual Budget Estimated Projected
Revenues and Expenditures by Fund
FY 2011
EXPENDITURES
GENERAL FUND
GPexp Potable 60,343,525$ 65,978,000$ 64,251,135$ 66,756,200$
GRexp Recycled 6,939,833 7,643,100 7,766,101 7,933,000
GSexp Sewer 2,516,147 3,372,800 3,020,763 3,373,000
Total General Fund 69,799,505 76,993,900 75,037,999 78,062,200
EXPANSION FUND
EPexp Potable 6,861,420 8,469,700 9,086,619 6,946,500
ERexp Recycled 213,074 9,078,500 2,966,465 3,245,400
ESexp Sewer 698 - 91,731 202,800
Total Expansion Fund 7,075,192 17,548,200 12,144,815 10,394,700
BETTERMENT FUND
BPexp Potable 2,010,569 6,691,900 5,058,463 8,140,700
BRexp Recycled 2,762 374,200 184,971 122,200
BSexp Sewer 175,406 1,653,800 198,350 1,498,900
Total Betterment Fund 2,188,737 8,719,900 5,441,784 9,761,800
REPLACEMENT FUND
RPexp Potable 5,429,102 7,918,800 6,476,257 6,620,500
RRexp Recycled 244,747 1,200,000 645,752 2,234,000
RSexp Sewer 268,146 1,267,900 388,778 1,535,200
Total Replacement Fund 5,941,995 10,386,700 7,510,787 10,389,700
NEW SUPPLY FUND
NSPexp Potable - - 779,614 1,440,000
NSRexp Recycled - - 118,232 80,000
NSSexp Sewer - - - -
Total New Supply Fund - - 897,846 1,520,000
OexpOPEB FUND 871,631 905,000 939,250 935,000
DexpDEBT RESERVE FUND 21,285,578 1,195,200 7,689,691 751,600
Total Expenditures 107,162,638 115,748,900 109,662,172 111,815,000$
EXCESS (DEFICIT) (1)22,641,261$ (29,323,100)$ (29,443,812) (25,150,040)$
44
__________________________________________________________
Fiscal Year 2012 Adopted Budget
FY 2010 FY 2012
Actual Budget Estimated Budget
REVENUES AND FUND SOURCES
Potable Water Sales 49,587,223$ 56,333,900$ 51,507,858$ 57,908,800$
Recycled Water Sales 6,622,886 7,620,600 6,762,039 7,395,500
Tax Revenues 3,679,280 3,843,900 3,576,721 3,839,600
Capacity Fee Revenues 2,978,943 3,464,800 4,199,941 4,358,800
Grants 4,765,000 2,540,000 3,590,000 574,000
Sewer Revenues 2,311,586 2,270,500 2,386,600 2,336,000
Non-Operating Revenues 2,544,875 1,948,300 2,095,498 2,021,600
General Fund Draw Down - 1,657,400 - 522,800
Interest 1,057,832 1,522,600 981,667 825,800
Transfer from OPEB 1,030,000 1,220,000 1,220,000 1,380,000
Capacity Fees for Maintenance 1,030,688 1,095,300 1,063,234 1,044,000
Betterment Fee Revenues 705,655 739,300 676,680 713,700
Betterment Fees for Maintenance 575,721 657,400 560,229 628,600
GO Bond Debt Tax Revenues 605,405 578,400 606,966 501,200
Availability Fees 543,654 521,000 534,621 531,000
Sewer Debt Tax Revenues 385,997 362,100 365,155 -
New Supply Fee Revenue - - - 388,960
Meter Fees 92,246 50,300 91,152 82,000
COPs Proceeds 50,731,158 - - 867,600
Annexation Fees 555,751 - - -
Interfund Transfers - - - 745,000
Total Revenues and Fund Sources 129,803,900$ 86,425,800$ 80,218,360 86,664,960$
EXPENDITURES AND USES OF FUNDS
Potable Water Purchases 30,790,687$ 33,877,300$ 32,965,553$ 36,790,900$
CIP Expenses 9,134,348 28,383,100 18,320,176 22,632,000
Labor Expenses 16,659,222 16,749,400 17,287,427 18,119,600
Interfund Transfers 9,080,000 12,925,000 11,805,000 7,190,000
Debt Service 5,898,401 7,714,200 7,191,610 8,486,800
Administrative Expenses 4,646,029 5,581,600 4,764,969 4,560,700
Materials and Maintenance 3,491,494 3,769,500 3,794,621 4,300,000
Power 2,307,611 2,520,700 2,170,357 2,440,900
Recycled Water Purchases 1,024,162 1,179,900 1,264,574 1,452,800
Capacity Fees for Maintenance 1,030,688 1,095,300 1,063,234 1,044,000
Payment to PERS 274,000 905,000 285,000 192,000
Betterment Fees for Maintenance 575,721 657,400 560,229 655,000
General Fund Transfers 1,800,300 390,500 985,500 3,207,300
OPEB Health Expenses 597,631 - 654,250 743,000
COPs Proceeds Distribution 19,852,345 - 6,549,674 -
Total Expenditures and Uses of Funds 107,162,638 115,748,900 109,662,172 111,815,000
EXCESS (DEFICIT) 22,641,261$ (29,323,100)$ (29,443,812) (25,150,040)$
Revenues and Expenditures by Type - All Funds
FY 2011
Note: Consistent with the District's financing plan, the 2010 debt proceeds along with District reserves have been
used to fund capital projects, resulting in the expected deficits in Fiscal Years 2011 and 2012 shown above.
___________________________________________________________
Otay Water District
45
Five-Year Forecast
Financial Forecast for Fiscal
Years 2013-2017
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 709 miles of potable pipelines, 96 miles of
recycled pipelines, 88 miles of sewer lines,
40 potable and 4 recycled reservoirs, 24 potable and 3 recycled pump stations, and a
1.3 million gallons per day reclamation
plant. Utilizing an integrated database from
the Geographic Information System (GIS) provides real-time work order planning,
execution, and consolidation of all
maintenance history. These systems are also
integrated with financial software to allow
asset tracking and management information. As 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).
___________________________________________________________
Otay Water District
46
REVENUES FY 2013 FY 2014 FY 2015 FY 2016 FY 2017
Water/Sewer Rates 72,260,400$ 79,049,800$ 85,431,500$ 90,795,800$ 96,624,100$
Meter Fees 137,100 141,500 180,000 189,100 203,600
Capacity Fee Revenues 845,400 853,900 862,400 871,000 879,700
Betterment Fees 631,700 638,000 644,400 650,800 657,300
Annexation Fees - 20,800 104,000 195,600 206,700
Non-operating Revenues 2,061,300 2,102,000 2,144,600 2,188,600 2,233,800
Tax Revenues 3,846,500 3,916,500 3,990,400 4,165,300 4,351,100
Interest Income 260,100 368,400 487,900 617,400 866,600
General Fund Draw Down 220,900 23,200 (119,300) (280,000) -
TOTAL 80,263,400$ 87,114,100$ 93,725,900$ 99,393,600$ 106,022,900$
16,213,600$ 18,099,300$ 19,829,400$ 20,787,300$
EXPENDITURES AND TRANSFERS
Water Cost 41,760,900$ 45,740,900$ 49,402,300$ 53,231,600$ 57,545,000$
Power 2,573,500 2,551,900 2,670,800 2,798,200 2,936,700
Labor and Benefits 18,711,700 19,160,900 19,487,100 19,768,400 20,035,000
Administrative Expenses 4,795,400 4,723,900 4,875,300 5,033,400 5,196,800
Materials & Maintenance 4,164,200 4,340,400 4,516,800 4,700,300 4,891,100
Fund Transfers, Net 8,257,700 10,596,100 12,773,600 13,861,700 15,418,300
TOTAL 80,263,400$ 87,114,100$ 93,725,900$ 99,393,600$ 106,022,900$
EXCESS REVENUES -$ -$ -$ -$ -$
General Fund Forecast - FY 2013 Through FY 2017
This forecast incorporates both cost increases for expenditures and rate increases for revenues, as well as
growth projections.
$0
$20
$40
$60
$80
$100
$120
FY 2013 FY 2014 FY 2015 FY 2016 FY 2017
$8
0
$8
7
$9
4
$9
9
$1
0
6
$8
0
$8
7
$9
4
$9
9
$1
0
6
Mi
l
l
i
o
n
s
Fiscal Year
Revenues and Expenditures Forecast
Revenues Expenditures
47
__________________________________________________________
Fiscal Year 2012 Adopted Budget
FUND FY 2013 FY 2014 FY 2015 FY 2016*FY 2017
General Fund 18,009,400$ 19,198,800$ 20,316,700$ 21,461,700$ 22,734,500$
Betterment Fund 4,700,400 8,580,300 4,913,300 16,580,600 6,288,500
Replacement Fund 32,800,000 32,993,100 29,060,600 30,216,300 31,495,000
Expansion Fund 5,417,500 2,020,900 5,364,100 15,216,000 10,395,300
New Supply Fund 1,044,900 3,064,600 1,999,200 62,800 63,400
OPEB Fund 246,500 251,400 257,700 265,400 276,000
Debt Reserve 585,600 371,400 177,100 3,000 3,800
TOTAL 62,804,300$ 66,480,500$ 62,088,700$ 83,805,800$ 71,256,500$
Fund Balances - FY 2013 Through FY 2017
$0
$20
$40
$60
$80
$100
FY 2013 FY 2014 FY 2015 FY 2016 FY 2017
Mi
l
l
i
o
n
s
Fund Balances Forecast
Debt Reserve
OPEB Fund
Expansion Fund
Replacement Fund
Betterment Fund
General Fund
* Increase in fund total due to bond issuances in FY 2016
___________________________________________________________
Otay Water District
48
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), Build America Bonds (BABs), 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 six 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. All efforts that
minimize the cost of debt have a corresponding affect that reduces water rates.
In a continuing effort to reduce debt expenses, the District was successful in raising its overall
credit rating from AA- to AA, two years ago. In March 2010, the District issued $50.2 million in debt with a combination of both tax-exempt and taxable Build America Bonds (BABs). The
effective interest rate on the combined series of bonds is 4.176%, after taking the BABs interest
payment subsidy into account. This bond sale takes advantage of the 35% reimbursement by the
Federal Government of the interest cost of the BABs as part of the economic stimulus program.
As a result of this reimbursement, the District will save $275,000 a year in interest costs.
To meet the bond indebtedness obligation and maintain stable rates, the rate model is used to
forecast revenues and operating requirements. The District has projected a schedule of rate
increases designed to generate sufficient revenue to pay off existing and planned future debt
issues. See the Policies section of the budget for the District’s complete Debt Policy.
The minimum debt coverage ratio is 1.25 in accordance with District bond covenants.
49
__________________________________________________________
Fiscal Year 2012 Adopted Budget
Outstanding
Year Original Balance
#Incurred Maturity Date Amount 06/30/11
1 1996 Certificates of Participation (COPs)September 1, 2026 15,400,000$ 11,300,000$
2 2009 General Obligation (GO) Bonds August 31, 2022 7,780,000 7,260,000
3 2004 Certificates of Participation (COPs)September 1, 2023 12,270,000 9,245,000
4 1994 State Loan November 30, 2011 5,000,000 6,000
5 2007 Certificates of Participation (COPs)September 1, 2036 42,000,000 39,550,000
6 2010 Certificates of Participation Series A (COPs)September 1, 2024 13,840,000 13,840,000
7 2010 Build America Bonds Series B (BABs)September 1, 2040 36,355,000 36,355,000
Total Outstanding Debt 132,645,000$ 117,556,000$
Total Assessed Valuation - FY 2012
Percentage of Original Debt to Assessed Valuation 0.56%0.08%
Debt Limit per District Debt Policy (% of Assessed Valuation)15.00%15.00%
Note: The accounting for debt proceeds and payments is described in the District's Reserve Policy found on pages 188-218.
Schedule of Outstanding Debt
10,161,791,890$ 23,519,177,848$
All Debts
Description
GO Bonds
___________________________________________________________
Otay Water District
50
1996 COPs GOBs (2)2004 COPs State Loan 2007 COPs 2010A COPs 2010B BABs Total
400,000 505,000 565,000 6,000 885,000 785,000 - 3,146,000
500,000 520,000 580,000 - 920,000 800,000 - 3,320,000
500,000 535,000 600,000 - 955,000 820,000 - 3,410,000
500,000 550,000 625,000 - 995,000 845,000 - 3,515,000
600,000 570,000 650,000 - 1,035,000 870,000 - 3,725,000
600,000 585,000 675,000 - 1,075,000 900,000 - 3,835,000
600,000 605,000 700,000 - 1,115,000 940,000 - 3,960,000
700,000 635,000 725,000 - 1,155,000 975,000 - 4,190,000
700,000 650,000 755,000 - 1,200,000 1,015,000 - 4,320,000
700,000 680,000 790,000 - 1,250,000 1,065,000 - 4,485,000
800,000 705,000 825,000 - 1,300,000 1,120,000 - 4,750,000
800,000 720,000 860,000 - 1,355,000 1,175,000 - 4,910,000
900,000 - 895,000 - 1,410,000 1,235,000 - 4,440,000
900,000 - - - 1,470,000 1,295,000 - 3,665,000
1,000,000 - - - 1,530,000 - 1,365,000 3,895,000
1,100,000 - - - 1,595,000 - 1,450,000 4,145,000
- - - - 1,665,000 - 1,545,000 3,210,000
- - - - 1,735,000 - 1,640,000 3,375,000
- - - - 1,810,000 - 1,745,000 3,555,000
- - - - 1,890,000 - 1,855,000 3,745,000
- - - - 1,970,000 - 1,975,000 3,945,000
- - - - 2,055,000 - 2,105,000 4,160,000
- - - - 2,150,000 - 2,245,000 4,395,000
- - - - 2,245,000 - 2,390,000 4,635,000
- - - - 2,340,000 - 2,550,000 4,890,000
- - - - 2,445,000 - 2,715,000 5,160,000
- - - - - - 2,895,000 2,895,000
- - - - - - 3,085,000 3,085,000
- - - - - - 3,290,000 3,290,000
- - - - - - 3,505,000 3,505,000
11,300,000$ 7,260,000$ 9,245,000$ 6,000$ 39,550,000$ 13,840,000$ 36,355,000$ 117,556,000$
2040
2041
TOTAL
2034
2035
2036
2037
2038
2039
2028
2029
2030
2031
2032
2033
2022
2023
2024
2025
2026
2027
2016
2017
2018
2019
2020
2021
2012
2013
2014
2015
Projected Principal Payments by Debt Issuance
FY
$0
$500
$1,000
$1,500
$2,000
$2,500
1996
COPs
GOBs
(2)
2004
COPs
State
Loan
2007
COPs
2010A
COPs
2010B
BABs
Th
o
u
s
a
n
d
s
FY 2012 Principal and Interest
Interest
Principal
51
__________________________________________________________
Fiscal Year 2012 Adopted Budget
1996 COPs (1)GOBs (2)2004 COPs State Loan 2007 COPs 2010A COPs 2010B BABs Total
638,200 246,588 362,500 - 1,611,800 569,688 2,371,868 5,800,643
621,600 231,063 343,000 - 1,577,500 553,838 2,371,868 5,698,868
602,900 215,088 321,700 - 1,541,900 533,538 2,371,868 5,586,993
572,700 198,663 298,600 - 1,504,900 508,563 2,371,868 5,455,293
537,500 181,663 273,500 - 1,466,300 478,488 2,371,868 5,309,318
501,200 162,969 246,800 - 1,425,800 443,088 2,371,868 5,151,725
465,000 139,633 219,000 - 1,383,700 406,288 2,371,868 4,985,489
465,000 114,433 188,900 - 1,339,300 367,988 2,371,868 4,847,489
423,700 88,533 157,100 - 1,292,900 323,113 2,371,868 4,657,214
339,200 61,533 123,000 - 1,243,400 271,113 2,371,868 4,410,114
291,900 33,500 86,300 - 1,191,700 216,488 2,371,868 4,191,756
243,600 4,800 47,800 - 1,136,800 159,113 2,371,868 3,963,981
190,200 - 6,900 - 1,079,300 98,863 2,371,868 3,747,131
135,900 - - - 1,019,200 33,994 2,371,868 3,560,962
76,500 - - - 955,500 - 2,328,345 3,360,345
11,100 - - - 955,500 - 2,238,589 3,205,189
- - - - 818,000 - 2,143,093 2,961,093
- - - - 744,800 - 2,041,540 2,786,340
- - - - 668,400 - 1,933,609 2,602,009
- - - - 588,600 - 1,818,823 2,407,423
- - - - 505,500 - 1,694,728 2,200,228
- - - - 416,600 - 1,560,558 1,977,158
- - - - 323,200 - 1,417,508 1,740,708
- - - - 225,700 - 1,265,086 1,490,786
- - - - 124,000 - 1,102,634 1,226,634
- - - - 17,800 - 929,495 947,295
- - - - - - 745,010 745,010
- - - - - - 548,357 548,357
- - - - - - 338,716 338,716
- - - - - - 115,262 115,262
6,116,200$ 1,678,465$ 2,675,100$ -$ 25,158,100$ 4,964,156$ 55,427,510$ 96,019,531$
(1)Interest on the 1996 Certificates of Participation is variable and is projected using an interest rate of 5.8%
(2)The GO Bonds were refinanced in April of 2009.
Note: The total projected debt payment of $8,486,800 for FY 2012 as shown on the Debt Service Expenditure on the Revenues and
Expenditures by Type - All Funds Schedule on page 45 is less than the projected principal payment of $3,146,000 shown on page 51, plus
the interest payment of $5,800,643 shown above, by $459,843 due to the difference of the stated rate of 5.8% and the actual rate the district
is currently paying. The difference in rate results in a variance of $418,900 on the 1996 COPs. The remaining variance of $40,943 is
miscellaneous administrative fees not shown on the principal and interest schedules.
2037
2038
2039
2040
2041
TOTAL
2031
2032
2033
2034
2035
2036
2025
2026
2027
2028
2029
2030
2019
2020
2021
2022
2023
2024
2013
2014
2015
2016
2017
2018
2012
Projected Interest Payments by Debt Issuance
FY
___________________________________________________________
Otay Water District
52
Potable Revenues and Expenses
The District will provide water service to approximately 48,371 potable customers by the end of Fiscal Year 2012. Ninety-two percent of the potable customers are residential and the remaining
eight percent are comprised of: master-metered, publicly owned, commercial, agricultural,
landscaping, and construction. Although the extensive residential developments have slowed
down in recent years, the District still expects nominal growth of 0.5% for Fiscal Year 2012. Unit sales are anticipated to decrease 0.3% from the previous year's budget due to the mild
weather patterns and the overall economic slowdown.
Water rates vary among the customer classifications. The water rates for all customers are based
on an accelerated block structure; as more units are consumed, a higher unit rate is charged on the higher units.
Unit sales represent approximately 63% of the water sales budget. Other revenue sources
include: system charges, energy charges, penalties, and other pass-through charges from the San
Diego County Water Authority (CWA) and the Metropolitan Water District (MWD).
All customers are required to pay fixed monthly fees of the MWD and CWA fixed charge and
the District system fee, based on meter size. These fees recover 32% of the potable water sales
revenue. Water rates, energy fees, and penalties recover the remaining 68% of remaining
revenues necessary to fund operations. (Note: when potable and recycled revenues are combined the fixed fees do not exceed 30% of the total revenues.) The District adjusts 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 associated with pumping. This charge increases based on a review of these costs to ensure that
sufficient revenue is collected to offset pumping costs.
Penalties are charged to District customers when late payments are made on accounts. These
penalty revenues are budgeted based on historical trends.
The District receives 100% of its potable water from CWA which purchases water from MWD
and IID. Any increase in costs by CWA, MWD, or IID impacts the District's water purchases
and directly affects the District's fees, rates, and service charges.
___________________________________________________________
Otay Water District
53
Potable Revenues and Expenses
The District entered into an agreement with CWA to have the Helix Water District, at their Levy Water Treatment Plant, treat imported untreated water on behalf of the Otay Water District. This
action brought regional water treatment closer to customers and reduced dependence on water
treatment facilities located outside of San Diego County.
In Fiscal Year 2012, the District is estimating the purchase of 30,438 acre-feet of potable water,
well below the allocation set by CWA and sufficient to meet the demands of its customers.
Provisions have been made for District usage, leakage, and evaporation in the amount of 1,486
acre-feet.
Colorado River
54
__________________________________________________________
Fiscal Year 2012 Adopted Budget
FY 2010 FY 2012 Budget Variance
11-Actual Budget Estimated Budget Variance %
REVENUES
##Water Sales 49,587,223$ 56,333,900$ 51,507,858$ 57,908,800$ 1,574,900$ 2.8%
##Meter Fees 86,278 40,200 84,935 79,700 39,500 98.3%
##Capacity Fee Revenues 1,030,467 1,095,300 970,353 841,200 (254,100) (23.2%)
##Betterment Fees for Maintenance 575,721 657,400 560,229 628,600 (28,800) (4.4%)
##Annexation Fees 555,751 - - - - 0.0%
Tax Revenues 3,627,302 3,792,500 3,524,451 3,788,100 (4,400) (0.1%)
##Non-operating Revenues 2,517,169 1,919,200 2,065,126 1,991,000 71,800 3.7%
##Interest 191,479 256,700 95,496 138,800 (117,900) (45.9%)
OPEBTransfer from OPEB 1,030,000 1,220,000 1,220,000 1,380,000 160,000 13.1%
General Fund Draw Down - 662,800 662,800 - (662,800) (100.0%)
TOTAL REVENUES 59,201,390 65,978,000 60,691,248 66,756,200 778,200 1.2%66,756,200
EXPENDITURES
Water Purchases 24,530,567 26,238,700 25,323,291 27,793,100 1,554,400 5.9%
##CWA - Infrastructure Access Charge 1,344,828 1,550,700 1,550,466 1,756,900 206,200 13.3%
##CWA - Customer Service Charge 1,128,306 1,315,200 1,315,224 1,562,600 247,400 18.8%
##CWA - Emergency Storage Charge 2,196,876 2,875,200 2,884,050 3,585,800 710,600 24.7%
##MWD - Capacity Reservation Charge 637,884 665,100 660,282 603,900 (61,200) (9.2%)
##MWD - Net RTS and Standby Charges 952,226 1,232,400 1,232,240 1,488,600 256,200 20.8%
Subtotal - Water Costs 30,790,687 33,877,300 32,965,553 36,790,900 2,913,600 8.6%
##Power 1,800,424 1,915,900 1,626,979 1,848,300 (67,600) (3.5%)
##Labor and Benefits 14,967,014 14,951,000 15,429,185 15,946,400 995,400 6.7%
##Administrative Expenses 3,927,558 4,597,200 3,881,648 3,775,600 (821,600) (17.9%)
##Material & Maintenance 1,964,043 2,046,600 1,757,770 2,144,500 97,900 4.8%
Bett ResBetterment Reserve 3,700,000 - - - - 0.0%
Repl ResReplacement Reserve 2,710,000 6,245,000 6,245,000 - (6,245,000) (100.0%)
GF Transfer to Potable General Fund 13,500 - - 2,420,500 2,420,500 100.0%
swr gfTransfer to Sewer General Fund 200,000 595,000 595,000 595,000 - 0.0%
propTransfer Out/In Prop 1A 270,300 - - - - 0.0%
Swr RepTransfer to Sewer Replacement - 1,750,000 1,750,000 1,720,000 (30,000) (1.7%)
NSFTransfer to New Supply Reserve - - - 1,515,000 1,515,000 100.0%
TOTAL EXPENDITURES 60,343,526 65,978,000 64,251,135 66,756,200 778,200 1.2%
EXCESS REVENUES (EXPENSES)(1,142,136)$ -$ (3,559,887)$ -$ -$ 0.0%
EXCESS REVENUES, w/o restatement and transfers -$
FY 2011
Operating Budget Summary - Potable
60.8%
3.1%
26.4%
6.2%3.5%
Potable Operating Expenditures
FY 2012
Water Costs
Power
Labor and Benefits
Administrative Expenses
Material & Maintenance
___________________________________________________________
Otay Water District
55
FY 2011
Estimated
FY 2012
Budget Variance
Water Sales 32,236,451$ 36,598,100$ 4,361,649$
System Fees 9,415,229 9,542,100 126,871
Energy Fees 1,693,186 1,874,000 180,814
MWD and CWA Fixed Fees 7,421,386 8,981,500 1,560,114
Penalties 665,931 913,100 247,169
Total Water Sales 51,432,183$ 57,908,800$ 6,476,617$
Water Rates: Rates vary among classes of service and are measured in units. On January 1, 2009, the District
implemented a tiered rate structure for all customer types to encourage conservation and bring equity among
the classes.
System Fees: Each water service customer pays a monthly system charge for water system replacement,
maintenance, and operation expenses. The charge is based on the size of the meter.
Energy Fees: The energy pumping fee is $ .045 per 100 cubic feet of water for each 100 feet of lift above elevationof 450 feet. All water customers are in one of 29 zones based on elevation.
MWD and CWA Fixed Fees: These Fixed Charges are based on Meter size. A pass-through charge from CWA to each member agency. The charge is to finance a potion of MWD's and CWA's fixed annual costs including
the construction, operation and maintenance of aqueducts and emergency storage projects.
Penalties: Charges and penalties are imposed on customer accounts for late payment and returned checks.
Classification of Water Sales - Potable
63.2%
16.5%3.2%1.6%
15.5%
Water Sales
System Charges
Energy Charges
Penalties
MWD and CWA Fixed Charges
56
__________________________________________________________
Fiscal Year 2012 Adopted Budget
Current Approved*Accounts Units Amount
Residential
Lifeline (< 5 hcf)1.49$ 1.58$
6 - 10 2.31 2.45
11 - 22 3.00 3.19
over 23 hcf 4.63 4.92
Total Residential 44,101 7,684,500 21,757,000$
Master Meter
0 - 4 2.29 2.43
5 - 8 2.97 3.15 over 10 hcf 4.57 4.85
Total Master Meter 808 1,423,400 4,134,500
Public and Commercial
Tier I 2.44 2.59
Tier II 2.50 2.66 Tier III 2.54 2.70
Total Public and Commercial 1,441 1,777,400 4,490,800
Agriculture, Landscaping and Constructions
Tier I 3.32 3.53 Tier II 3.39 3.60
Tier III 3.45 3.66
Total Agriculture, Landscaping and Constructions 1,344 1,726,400 5,895,800
Total 47,694 12,611,700 36,278,100$
Government Fee 0.29 0.293 - - 320,000
Total Water Sales 47,694 12,611,700 36,598,100$
*Approved rates for water usage beginning in January 2012 -
Water Sales Summary by Service Class - Potable
Fiscal Year 2012 Sales BudgetWater Rates
60.9%
11.3%
14.1%
12.3%1.4%
Unit Sales By Service Class
FY 2012
Residential
Master Meter
Public and Commercial
Agricultrural and Landscaping
Temporary and Others
___________________________________________________________
Otay Water District
57
Estimated Budget
FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012
Residential 9,713,112 9,379,544 8,881,191 7,679,494 7,486,069 7,684,500
Master Meters 1,434,040 1,445,634 1,430,235 1,371,244 1,389,616 1,423,400
Public and Commercial 1,886,006 1,869,841 1,938,215 1,798,277 1,771,396 1,777,400
Agricultural and Landscaping 2,329,790 2,306,624 2,183,823 1,644,130 1,537,304 1,548,900
Temporary and Others 696,516 574,026 490,297 254,016 179,472 177,500
Total Unit Sales 16,059,464 15,575,669 14,923,761 12,747,161 12,363,857 12,611,700
Unit Sales History by Customer Class - Potable
Actual
5,000
15,000
25,000
35,000
45,000
55,000
-
5,000
10,000
15,000
20,000
FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 Estimated FY 2012 Budget
Me
t
e
r
s
Un
i
t
s
(
t
h
o
u
s
a
n
d
s
)
Unit Sales and Meter Count Trends
Unit Sales Meters
58
__________________________________________________________
Fiscal Year 2012 Adopted Budget
Meter Current Approved
Size 6/30/2011 FY12 Growth Rates Rates Existing Growth Total
0.75 43,345 250 14.58$ 14.58$ 7,583,600$ 23,700$ 7,607,300$
1.00 1,773 10 18.52 18.52 394,000 1,200 395,200
1.50 936 - 28.37 28.37 318,700 - 318,700
2.00 1,085 4 40.18 40.18 523,100 1,000 524,100
3.00 71 6 71.68 71.68 61,100 2,800 63,900
4.00 187 - 107.13 107.13 240,400 - 240,400
6.00 19 - 205.59 205.59 46,900 - 46,900
8.00 2 - 323.73 323.73 7,800 - 7,800
10.00 6 - 461.57 461.57 33,200 - 33,200
-
Fire Services 677 - 30.11 30.11 244,600 - 244,600
Turn Over Fees 10.00 10.00 60,000 - 60,000
Total 48,101 270 9,513,400$ 28,700$ 9,542,100$ 500
Budgeted System Fees
System Fees - Potable
Meter Count
$-
$2,000
$4,000
$6,000
$8,000
$10,000
FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 EstimatedFY 2012 Budget
Th
o
u
s
a
n
d
s
Historical System Fees
___________________________________________________________
Otay Water District
59
Meter Current Approved*
Size 6/30/2011
FY12
Growth Rates Rates Existing Growth Total
0.75 43,338 250 11.82$ 14.01$ 6,621,600$ 21,800 6,643,400$
1.00 1,764 10 19.69 23.33 448,900 1,500 450,400
1.50 930 - 39.44 46.74 474,100 - 474,100
2.00 1,083 4 63.07 74.74 882,900 1,900 884,800
3.00 71 6 126.14 149.48 115,800 5,600 121,400
4.00 92 - 197.11 233.58 234,400 - 234,400
6.00 17 - 394.17 467.09 86,600 - 86,600
8.00 2 - 630.71 747.39 16,300 - 16,300
10.00 6 - 903.58 1,070.74 70,100 - 70,100
Total 47,303 270 8,950,700$ 30,800$ 8,981,500$
*Approved rates for water usage beginning in January 2012
Budgeted MWD & CWA - Fixed ChargesMeter Count
MWD and CWA Fixed Fees (Pass-Through)-Potable
$-
$2,000
$4,000
$6,000
$8,000
$10,000
FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
Estimated
FY 2012
Budget
Th
o
u
s
a
n
d
s
Historical MWD and CWA Revenues
60
__________________________________________________________
Fiscal Year 2012 Adopted Budget
Meter Meter Installation Meter AMR Total Budgeted
Size Sales Fee Fee Fee Fees Amount
0.75 250 60.00$ 59.00$ 147.00$ 266.00$ 66,500$
1.00 10 60.00 117.00 147.00 324.00 3,200
1.50 - 103.00 250.00 147.00 500.00 -
2.00 4 240.00 475.00 147.00 862.00 3,400
3.00 6 300.00 653.00 147.00 1,100.00 6,600
4.00 - 300.00 1,370.00 147.00 1,817.00 -
6.00 - 300.00 2,500.00 147.00 2,947.00 -
10.00 - 300.00 3,737.00 147.00 4,184.00 -
Total 270 79,700$
Meter Fees:
Meter Fees - Potable
Meter Fees are charges collected for new water service connections. Fees vary depending upon meter size and
type of service. The costs associated with meter installations are included in the Operating Expenses section
of the budget. These charges are funded by developers.
-
15,000
30,000
45,000
60,000
FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
Estimated
FY 2012
Budget
Historical Meter Count
___________________________________________________________
Otay Water District
61
Estimated Budget
FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012
Water Sales 30,696,070$ 30,049,415$ 30,375,618$ 31,326,151$ 32,236,451$ 36,598,100$
System Fees 8,658,339 9,611,046 9,510,996 9,342,732 9,415,229 9,542,100
Energy Fees 1,801,455 1,834,102 1,866,237 1,662,233 1,693,186 1,874,000
MWD and CWA Fixed Fees 2,159,269 2,530,306 3,758,403 6,359,939 7,421,386 8,981,500
Penalties 797,615 779,985 649,683 853,279 665,931 913,100
Total Potable Revenues 44,112,748$ 44,804,854$ 46,160,938$ 49,544,333$ 51,432,183$ 57,908,800$
Revenue History - Potable
Actual
$-
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 Estimated FY 2012 Budget
Th
o
u
s
a
n
d
s
Revenue History -Potable
Water Sales System Fees Energy Fees MWD & CWA Fees Penalties
62
__________________________________________________________
Fiscal Year 2012 Adopted Budget
FY 2011
Estimated
FY 2012
Budget
FY 2011
Estimated
FY 2012
Budget
Acre Feet Acre Feet Rate (1)
Potable Water Purchases (CWA):
Budgeted Sales 28,408.0 28,952.2 $887/$957 23,784,133$ 26,435,700$
District & Unbilled Usage 121.5 116.2 $887/$957 101,832 106,700
Water Loss 1,331.3 1,369.7 $887/$957 1,183,158 1,250,700
Total Variable Charges 29,860.8 30,438.1 25,069,123$ 27,793,100$
MWD and CWA Fixed Charges:
Infrastructure Access Charge (IAC)1,550,466$ 1,756,900$
Customer Service Charge (CSC)1,315,224 1,562,600
Emergency Storage Charge (ESC)2,884,050 3,585,800
Capacity Reservation Charge (CRC)660,282 603,900
Readiness-to-Serve Charge (RTS)1,232,240 1,488,600
Total Fixed Charges 7,642,262$ 8,997,800$
Total Variable and Fixed Charges 32,711,385$ 36,790,900$
Average Cost Per Acre Foot 1,095$ 1,209$
(1)The first rate applies to purchases from July to December of the budget fiscal year; the second from
January to June
Water Purchases and Related Costs - Potable
Purchase Costs
-
10,000
20,000
30,000
40,000
50,000
FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
Estimated
FY 2012
Budget
Ac
r
e
F
e
e
t
Historical Potable Water Purchases
___________________________________________________________
Otay Water District
63
Power Costs - Potable
Administrative
and Operations
Buildings
Potable
Transmission
Total Potable
Power Costs
FY07 Actual 172,646$ 1,838,636$ 2,011,282$
FY08 Actual 170,564 2,090,701 2,261,265
FY09 Actual 179,631 1,724,366 1,903,997
FY10 Actual 177,651 1,622,773 1,800,424
FY11 Estimated 158,657 1,468,322 1,626,979
FY12 Budget 179,100 1,669,200 1,848,300
2,677,800.00
$0
$500
$1,000
$1,500
$2,000
$2,500
FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 Estimated FY 2012 Budget
Th
o
u
s
a
n
d
s
Historical Power Costs
Administrative and Operations Buildings Potable Transmission
64
__________________________________________________________
Fiscal Year 2012 Adopted Budget
FY 2010 FY 2012 Budget
Actual Budget Estimated Budget Variance %
Directors' Fees 15,100$ 30,000$ 13,700$ 30,000$ -$ 0.0%
Travel and Meetings 162,652 221,400 159,708 196,200 (25,200) (11.4%)
Conservation and Outreach 240,734 479,700 257,007 300,800 (178,900) (37.3%)
General Office Expense 343,859 368,700 306,469 330,100 (38,600) (10.5%)
Equipment 1,009,501 1,030,200 1,084,928 955,500 (74,700) (7.3%)
Fees 439,105 434,100 445,418 400,000 (34,100) (7.9%)
Services 1,343,641 1,738,300 1,409,581 1,389,100 (349,200) (20.1%)
Training 126,746 151,800 125,385 140,200 (11,600) (7.6%)
Utilities 16,514 15,300 18,264 19,000 3,700 24.2%
Miscellaneous 145,110 171,100 130,916 140,000 (31,100) (18.2%)
Total 3,842,962 4,640,600 3,951,376 3,900,900 (739,700) (15.9%)
Less: Overhead Allocation (845,113) (959,400) (913,250) (997,300) (37,900) 4.0%
Subtotal 2,997,849 3,681,200 3,038,126 2,903,600 (777,600) (21.1%)
General Expenses 929,708 916,000 843,522 872,000 (44,000) (4.8%)
Total Administrative Expenses 3,927,557$ 4,597,200$ 3,881,648$ 3,775,600$ (821,600)$ (17.9%)
4,772,670$ 5,556,600$ 4,794,898$ 4,772,900$
Equipment
Fees
Services
Training
Utilities
FY 2011
Administrative Expenses - Potable
0.7%
5.0%
7.7%
8.5%
24.5%
10.3%
35.6%
3.6%0.5%
3.6%
Administrative Expenses -Potable
FY 2012 Director's Fees
Travel and Meetings
Conservation and Outreach
General Office Expense
Equipment
Fees
Services
Training
Utilities
Miscellaneous
___________________________________________________________
Otay Water District
65
FY 2010 FY 2012 Budget
Actual Budget Estimated Budget Variance %
Fuel and Oil 196,421$ 231,400$ 205,558$ 339,900$ 108,500$ 46.9%
Meters and Materials 137,678 213,300 161,546 208,200 (5,100) (2.4%)
Fleet Parts and Equipment 157,161 165,400 138,074 165,400 - 0.0%
Landscaping Materials 45 - - - - 0.0%
Infrastructure Equipment and Supplies 461,417 452,900 405,264 441,300 (11,600) (2.6%)
Chemicals 227,708 219,000 224,609 241,000 22,000 10.0%
Safety Equipment 47,001 50,900 41,269 27,500 (23,400) (46.0%)
Laboratory Equipment and Supplies 35,137 35,000 34,520 35,000 - 0.0%
Other Materials and Supplies 132,885 163,800 150,111 158,200 (5,600) (3.4%)
Building and Grounds Materials 95,116 76,000 74,032 80,500 4,500 5.9%
Contracted Services 473,474 438,900 322,787 447,500 8,600 2.0%
Materials and Maintenance 1,964,043 2,046,600 1,757,770 2,144,500 97,900 4.8%
Total Materials and Maintenance 1,964,043$ 2,046,600$ 1,757,770$ 2,144,500$ 97,900$ 4.8%
Materials and Maintenance Expenses - Potable
FY 2011
15.8%
9.7%
7.7%
20.6%11.2%1.3%
1.6%
7.4%
3.8%
20.9%
Materials and Maintenance Expenses -Potable
FY 2012 Fuel and Oil
Meters and Materials
Fleet Parts and Equipment
Infrastructure Equipment and Supplies
Chemicals
Safety Equipment
Laboratory Equipment and Supplies
Other Materials and Supplies
Building and Grounds Materials
Contracted Services
66
__________________________________________________________
Fiscal Year 2012 Adopted Budget
Potable Water Service Area
___________________________________________________________
Otay Water District
67
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
treatment process consists of primary, secondary, and tertiary treatment. The facility’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
___________________________________________________________
Otay Water District
68
Recycled Revenues and Expenses
effluent, flows out over weirs at the surface. Some of the settled sludge is disposed of and some is returned to the aeration tanks to keep the process in balance. The secondary effluent flowing
over the weirs is now ready for the next step. Solids, screenings, and sludge are discharged to
the City of San Diego Metropolitan Wastewater (Metro) system.
Tertiary Treatment
Just before filtration, a small amount of coagulant is added as a filter aid which helps suspended
material in the secondary effluent “clump” on the surface of the filters. The filters consist of a
layer of sand with a layer of anthracite coal on top. As the fluid moves through the filters, the
flow goes through a chlorine contact chamber where disinfection takes place.
The District operates the largest recycled water distribution system in San Diego County and will
supply approximately 3,962 acre-feet of recycled water to 695 landscaping and construction
customers by the end of Fiscal Year 2012. The recycled water customer base consists primarily
of irrigation at golf courses, schools, parks and open space in the Eastlake, Otay Ranch, Rancho
Del Rey and other areas of eastern Chula Vista.
The District entered an agreement with the City of San Diego in October 2003, to purchase up to
six million gallons a day of recycled water from their South Bay Water Reclamation Plant. To
bring this plan to fruition, the District constructed a 30-inch, six mile pipeline, a 12 million
gallon reservoir and a pump station to bring this new source of recycled water into the District’s system. These projects were completed in spring 2007, which eliminates the immediate need for
a potable supplement of the recycled system. The benefits of this to the region as a whole are
great as less demand on the potable system will be made, which reduces future capacity and
storage requirements. The $42 million investment in capital outlay results in a significant
reduction of water purchase costs and an increase in system reliability. The District expects that 15 to 20 percent of its total water demand will be met using recycled water.
To increase demand of recycled water and reduce the demands of potable water, the District has
begun a capital project to offer incentives to suitable customers to convert potable to recycled
water. See page 181 of the Capital Budget to view project R2094. With this program the District hopes to convert 300 acre feet of potable water to recycled, helping the region reduce
demands on the potable water system.
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
$200 from CWA and $185 from MWD for every acre-foot (AF) of recycled water sold.
69
__________________________________________________________
Fiscal Year 2012 Adopted Budget
FY 2010 FY 2012 Budget Variance
31-Actual Budget Estimated (drft)Budget Variance %
REVENUES
##Recycled Water Sales 4,417,995$ 5,257,000$ 4,645,719$ 5,207,300$ (49,700) (0.9%)
##System Fees 261,946 264,500 266,547 239,000 (25,500) (9.6%)
##Energy Fees 266,599 372,900 274,608 302,700 (70,200) (18.8%)
##MWD/CWA Rebates 1,583,801 1,655,500 1,482,019 1,563,100 (92,400) (5.6%)
##Penalties 92,545 70,700 93,146 83,400 12,700 18.0%
##Total Recycled Water Sales 6,622,886 7,620,600 6,762,039 7,395,500 (225,100) (3.0%)
##Meter Fees 5,968 10,100 6,217 2,300 (7,800) (77.2%)
##Capacity Fee Revenues 221 - 1,149 - - 0.0%
##Interest 742 12,400 5,162 12,400 - 0.0%
GF DRGeneral Fund Draw Down - - - 522,800 522,800 100.0%
TOTAL REVENUES 6,629,817 7,643,100 6,774,567 7,933,000 289,900 3.8%
EXPENDITURES
##Water Purchases (CSD) / Meter Fees 1,024,162 1,179,900 1,264,574 1,106,700 (73,200) (6.2%)
##Take-or-pay - - - 346,100 346,100 100.0%
Total Water Purchases 1,024,162 1,179,900 1,264,574 1,452,800 272,900 23.1%
##Power 422,780 529,800 462,031 510,800 (19,000) (3.6%)
##Labor and Benefits 1,042,791 1,086,800 1,121,159 1,263,800 177,000 16.3%
##Administrative Expenses 282,800 343,100 384,547 351,000 7,900 2.3%
##Materials & Maintenance 180,800 303,000 333,289 399,600 96,600 31.9%
GF Transfer to General Fund Reserve 1,316,500 390,500 390,500 - (390,500) (100.0%)
##Expansion Reserve 1,610,000 2,775,000 2,775,000 555,000 (2,220,000) (80.0%)
Bett ResBetterment Reserve 110,000 315,000 315,000 - (315,000) (100.0%)
Repl ResReplacement Reserve 950,000 720,000 720,000 3,330,000 2,610,000 362.5%
NSFNew Supply Reserve - - - 70,000 70,000
TOTAL EXPENDITURES 6,939,833 7,643,100 7,766,100 7,933,000 289,900 3.8%
EXCESS REVENUES (EXPENSES)(310,016)$ -$ (991,533)$ -$ -$ 0.0%
-$
FY 2011
Operating Budget Summary - Recycled
36%
13.9%32.3%
8.7%
9.1%
Recycled Operating Expenditures
FY 2012
Water Purchases
Power
Labor and Benefits
Administrative Expenses
Materials & Maintenance
___________________________________________________________
Otay Water District
70
FY 2011
Estimated
FY 2012
Budget Variance
Water Sales 4,645,719$ 5,207,300$ 561,581$
System Fees 266,547 239,000 (27,547)
Energy Fees 274,608 302,700 28,092
MWD and CWA Rebates 1,482,019 1,563,100 81,081
Penalties 93,146 83,400 (9,746)
Total Recycled Water Sales 6,762,039$ 7,395,500$ 633,461$
Water Rates: Rates vary among classes of service and are measured in units. On January 1, 2009, the District
implemented a tiered rate structure for all customer types to encourage conservation and bring equity among the classes.
System Fees: Each water service customer pays a monthly system charge for water system replacement, maintenance,
and operation expenses. The charge is based on the size of the meter.
Energy Fees: The energy pumping fee is $ .045 per 100 cubic feet of water for each 100 feet of lift above elevation
of 450 feet. All water customers are in one of 29 zones based on elevation.
MWD and CWA Rebates: Incentive from MWD and CWA for providing recycled water. The District receives $200
from CWA and $185 from MWD for every acre-foot (AF) of recycled water sold.
Penalties: Charges and penalties are imposed on customer accounts for late payment and returned checks.
Classification of Water Sales - Recycled
71%
3%4%21%
1%
Water Sales
System Charges
Energy Charges
MWD and CWA Rebates
Penalties
71
__________________________________________________________
Fiscal Year 2012 Adopted Budget
Fiscal Year 2012 Sales Budget
Current Approved*Accounts Units Amount
Tier I 2.84$ 3.02$
Tier II 2.88 3.06
Tier III 2.94 3.12
99 47,100 137,200$
Tier I 2.84 3.02
Tier II 2.88 3.06
Tier III 2.94 3.12
583 1,253,900 3,666,100
Recycled 3.0" and 4.0" Meter
Tier I 2.84 3.02
Tier II 2.88 3.06
Tier III 2.94 3.12
Total Recycled 3.0" and 4.0" Meter 10 72,700 213,300
Tier I 2.84 3.02
Tier II 2.88 3.06
Tier III 2.94 3.12
3 352,700 1,028,900
695 1,726,400 5,045,500$
Government Fee 0.29 0.293 - - 161,800
Total Water Sales 695 1,726,400 5,207,300$
*Approved rates for water usage beginning in January 2012
Water Rates
Total Recycled .75" and 1.0" Meter
Total Recycled 1.5" and 2.0" Meter
Total Recycled more than 6.0" Meter
Total
Water Sales Summary by Service Class - Recycled
Recycled .75" and 1.0" Meter
Recycled 1.5" and 2.0" Meter
Recycled more than 6.0" Meter
-
200
400
600
800
-
500
1,000
1,500
2,000
2,500
FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 Estimated FY 2012 Budget
Me
t
e
r
s
Un
i
t
s
(
t
h
o
u
s
a
n
d
s
)
Unit Sales and Meter Count Trends
Unit Sales Meters
___________________________________________________________
Otay Water District
72
Meter Current Approved
Size 6/30/11 FY12 Growth Rates Rates Existing Growth Total
0.75 - - 14.58$ 14.58$ -$ -$ -$
1.00 95 4 18.52 18.52 21,100 900 22,000
1.50 581 2 28.37 28.37 197,800 700 198,500
2.00 - - 40.18 40.18 - - -
3.00 4 - 71.68 71.68 3,400 - 3,400
4.00 6 - 107.13 107.13 7,700 - 7,700
6.00 3 - 205.59 205.59 7,400 - 7,400
8.00 - - 323.73 323.73 - - -
10.00 - - 461.57 461.57 - - -
Total 689 6 237,400$ 1,600$ 239,000$
Budgeted Recycled System Fees 239,000$
Meter Count Budgeted System Fees
System Fees - Recycled
-
1,000
2,000
3,000
4,000
FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 Estimated FY 2012 Budget
Hu
n
d
r
e
d
s
Historical System Fees
73
__________________________________________________________
Fiscal Year 2012 Adopted Budget
Meter Meter Installation Meter AMR Total Budgeted
Size Sales Fee Fee Fee Fees Amount
0.75 - 60.00$ 59.00$ 147.00$ 266.00$ -
1.00 4 60.00 117.00 147.00 324.00 1,300$
1.50 2 103.00 250.00 147.00 500.00 1,000
2.00 - 240.00 475.00 147.00 862.00 -
3.00 - 300.00 653.00 147.00 1,100.00 -
4.00 - 300.00 1,370.00 147.00 1,817.00 -
6.00 - 300.00 2,500.00 147.00 2,947.00 -
10.00 - 300.00 3,737.00 147.00 4,184.00 -
Total 6 2,300$
Meter Fees:
Meter Fees - Recycled
Meter Fees are charges collected for new water service connections. Fees vary depending upon meter size and
type of service. The costs associated with meter installations are included in the Operating Expenses section of
the budget. These charges are funded by developers.
-
200
400
600
800
FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
Estimated
FY 2012
Budget
Historical Meter Count
___________________________________________________________
Otay Water District
74
Estimated Budgeted
FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012
Water Sales 3,294,170$ 3,347,964$ 3,787,845$ 4,417,995$ 4,645,719$ 5,207,300$
System Fees 335,063 425,061 366,529 261,946 266,547 239,000
Energy Fees 190,570 248,429 288,247 266,599 274,608 302,700
MWD and CWA Rebates 592,056 1,833,949 1,711,787 1,583,801 1,482,019 1,563,100
Penalties 80,998 92,855 83,950 92,545 93,146 83,400
Total Recycled Revenue 4,492,857$ 5,948,258$ 6,238,358$ 6,622,886$ 6,762,039$ 7,395,500$
Revenue History - Recycled
Actual
$-
$2,000
$4,000
$6,000
$8,000
$10,000
FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
Estimated
FY 2012
Budget
Th
o
u
s
a
n
d
s
Revenue History -Recycled
Penalties MWD & CWA Rebates Energy Fees System Fees Water Sales
75
__________________________________________________________
Fiscal Year 2012 Adopted Budget
FY12 Budget FY12 Budget
Acre Feet Rate Purchase Costs % of Total
SBWRP Recycled Water Purchases (CSD)
Recycled Water Purchases 3,105.5 350.00$ 1,086,900$ 74.8%
Meter Fee - 1,646.50 19,800 1.4%
Take-or-pay contract (1)- 346,100 23.8%
Total 3,105.5 1,452,800$ 100.0%
(1) This reflects the contractual requirement to purchase a minimum volume of water. The District
does not anticipate meeting the minimum, therefore a payment would be due to the City of
San Diego.
Water Purchases - Recycled
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 Estimated FY 2012 Budget
Ac
r
e
F
e
e
t
Historical Recycled Water Purchases
___________________________________________________________
Otay Water District
76
Treatment and
Recycled
Transmission
FY07 Actual 358,359$
FY08 Actual 306,480
FY09 Actual 572,331
FY10 Actual 422,780
FY11 Estimated 462,031
FY12 Budget 510,800
Power Costs - Recycled
$0
$100
$200
$300
$400
$500
$600
FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 Estimated FY 2012 Budget
Th
o
u
s
a
n
d
s
Historical Power Costs
77
__________________________________________________________
Fiscal Year 2012 Adopted Budget
FY 2010 FY 2012 Budget
Actual Budget Estimated Budget Variance %
Equipment 3,801$ 4,500$ 2,057$ 4,500$ -$ 0.0%
Fees 36,265 40,400 50,663 57,000 16,600 41.1%
Services 59,353 108,100 77,165 66,800 (41,300) (38.2%)
Miscellaneous 491 - 59,722 5,000 5,000 100.0%
Total 99,910 153,000 189,607 133,300 (19,700) (12.9%)
Overhead Allocation 182,890 190,100 194,940 217,700 27,600 14.5%
Total Administrative Expenses 282,800$ 343,100$ 384,547$ 351,000$ 7,900$ 2.3%
FY 2011
Administrative Expenses - Recycled
1.3%
16.3%
19%
1.4%
62%
Administrative Expenses -Recycled
FY 2012
Equipment
Fees
Services
Miscellaneous
Overhead Allocation
___________________________________________________________
Otay Water District
78
FY 2010 FY 2012 Budget
Actual Budget Estimated Budget Variance %
Fuel and Oil 10,788$ 13,300$ 12,948$ 13,300$ -$ 0.0%
Meters and Materials 10,708 8,800 5,137 4,900 (3,900) (44.3%)
Infrastructure Equipment and Supplies 72,469 86,500 82,803 104,500 18,000 20.8%
Chemicals 73,786 172,000 214,007 256,000 84,000 48.8%
Safety Equipment 1,358 3,900 6,344 2,100 (1,800) (46.2%)
Laboratory Equipment and Supplies 6,266 4,000 3,863 4,000 - 0.0%
Other Materials and Supplies 4,474 9,600 4,666 6,300 (3,300) (34.4%)
Contracted Services 951 4,900 3,522 8,500 3,600 73.5%
Total Materials and Maintenance 180,800$ 303,000$ 333,290$ 399,600$ 96,600$ 31.9%
Materials and Maintenance Expenses - Recycled
FY 2011
3%
1%
26%
64%
1%1%
2%2%
Materials and Maintenance Expenses -Recycled
FY 2012
Fuel and Oil
Meters and Materials
Safety Equipment
Laboratory Equipment and Supplies
Other Materials and Supplies
Contracted Services
79
__________________________________________________________
Fiscal Year 2012 Adopted Budget
Recycled Water Service Area
___________________________________________________________
Otay Water District
80
Sewer Revenues and Expenses
Metropolitan Wastewater System
The District provides sewer service to approximately 15,200 customers through 4,646 accounts (or approximately 6,713 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 0.6% is anticipated in Fiscal Year 2012.
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 68 outlining the sewer process. The
byproduct of the treatment process is called sludge and it is discharged through the City of San
Diego Metropolitan Wastewater (Metro) and the Spring Valley Sanitation District systems.
The Otay Water District is a member of Metro Wastewater System and a significant amount of
the sewer operation costs is for estimated sewer service charges from Metro totaling $1,397,400
for Fiscal Year 2012. Additionally, the District will pay $239,200 for its share of the operation
and maintenance cost of the Rancho San Diego Outfall and the Spring Valley Outfall to transport
sewage to Metro for Fiscal Year 2012.
The charge for sewer service is mandated by the State Revenue Program Guidelines which
requires the use of a "Service Unit Assignment Formula" that converts higher strength uses into a
service unit value comparable to the use impact of a single-family residential user or equivalent
dwelling 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: 12.3% of the total service
units, while only comprising 1.5% of the customer base. The formula for the sewer rates
is shown on page 88.
In addition to the monthly sewer fee, sewer
customers had been annually assessed $54 per assigned service unit on their property tax bill.
The revenue generated was 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 $6,000 and in Fiscal Year 2012, the debt service will be
fully satisfied. After Fiscal Year 2011 the tax
assessment will not be collected as the proceeds
are no longer necessary to extinguish the debt.
___________________________________________________________
Otay Water District
81
FY 2010 FY 2012 Budget Variance
11-Actual Budget Estimated Budget Variance %
REVENUES
##Sewer Charges 2,311,586$ 2,270,500$ 2,386,600$ 2,336,000$ 65,500$ 2.9%
##Capacity Fee Revenues - - 91,731 202,800 202,800 100.0%
##Non-operating Revenues 27,706 29,100 30,372 30,600 1,500 5.2%
Tax Revenues 51,978 51,400 52,270 51,500 100 0.2%
##Interest 22,059 27,200 12,164 7,100 (20,100) (73.9%)
TF BettTransfer from Betterment - - - 30,000 30,000 100.0%
ReplTransfer from Replacement Reserve - - - 120,000 120,000 100.0%
General Fund Draw Down - 994,600 994,600 - (994,600) (100.0%)
FR GFTransfer from General Fund - - - 595,000 595,000 100.0%
TOTAL REVENUES 2,413,329 3,372,800 3,567,737 3,373,000 200 0.0%
EXPENDITURES
##Power 84,408 75,000 81,347 81,800 6,800 9.1%
##Labor and Benefits 649,417 711,600 737,082 909,400 197,800 27.8%
##Administrative Expenses 435,670 641,300 498,773 434,100 (207,200) (32.3%)
##Materials & Maintenance 1,346,652 1,419,900 1,703,561 1,755,900 336,000 23.7%
Bett ResBetterment Reserve - 1,120,000 - - (1,120,000) (100.0%)
swr gfTransfer to Sewer General Fund - (595,000) (595,000) 191,800 786,800 0.0%
TOTAL EXPENDITURES 2,516,147 3,372,800 2,425,763 3,373,000 200 0.0%
EXCESS REVENUES (102,818)$ -$ 1,141,974$ -$ -$ 0.0%
EXCESS REVENUES, w/o restatement and transfers -$
FY 2011
Operating Budget Summary - Sewer
2%
29%
14%
55%
Sewer Operating Expenditures
FY 2012
Power
Labor and Benefits
Administrative Expenses
Materials & Maintenance
82
__________________________________________________________
Fiscal Year 2012 Adopted Budget
Units/FY 2012
Accounts ASU(1)Current Approved(3)Current Approved(3)Budget
Single Family 4,522 4,522 11.57$ 12.26$ 1.67$ 1.77$ 1,579,600$
Multi-Family 50 1,360 11.57 12.26 1.67 1.77 314,900
Schools 6 s 300 39.39 41.75 146,200
Churches 4 c 51 39.39 41.75 25,100
Commercial
Low Strength 38 1 226 39.39 41.75 110,100
Medium Strength 19 2 146 39.39 41.75 71,000
High Strength 7 3 108 39.39 41.75 52,300
Penalties 36,800
TOTAL SEWER CHARGES 4,646 6,713 2,336,000$
(1)Assigned Service Units
(2)Current and approved base fees for 1" meter are $16.87 and $17.88, respectively.
(3)Approved rates for sewer service beginning in January 2012.
Sewer Charges Summary by Service Class
Usage Fee / Sewer RateBase Fee for 3/4" Meter(2)
69%
14%
6%1%5%3%2%
Sewer Charges by Service Class
FY 2012 Single Family
Multi-Family
Schools
Churches
Commercial -Low Strength
Commercial -Medium Strength
Commercial -High Strength
___________________________________________________________
Otay Water District
83
Estimated Budget
FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012
Sewer Charges 2,531,513$ 2,359,173$ 2,154,628$ 2,271,879$ 2,363,313$ 2,299,200$
Penalties 46,480 55,713 29,896 39,707 23,287 36,800
Total 2,577,993$ 2,414,886$ 2,184,524$ 2,311,586$ 2,386,600$ 2,336,000$
Penalties
Actual
Revenue History - Sewer
$1,900
$2,000
$2,100
$2,200
$2,300
$2,400
$2,500
$2,600
FY07 FY08 FY09 FY10 FY11
Estimated
FY12
Budget
Th
o
u
s
a
n
d
s
s
Sewer Revenue History
Sewer Charges Penalties
84
__________________________________________________________
Fiscal Year 2012 Adopted Budget
Power Costs - Sewer
Sewer Lift
Stations
FY07 Actual 94,989$
FY08 Actual 82,023
FY09 Actual 88,512
FY10 Actual 84,408
FY11 Estimated 81,347
FY12 Budget 81,800
$0
$20
$40
$60
$80
$100
FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
Estimated
FY 2012
Budget
Th
o
u
s
a
n
d
s
Historical Power Costs
___________________________________________________________
Otay Water District
85
FY 2010 FY 2012 Budget
Actual Budget Estimated Budget Variance %
Equipment 1,099$ 1,000$ -$ 1,000$ -$ 0.0%
Fees 4,444 2,000 306 4,000 2,000 100.0%
Services 311,308 503,600 358,387 265,500 (238,100) (47.3%)
Miscellaneous 3,084 6,200 9,205 5,000 (1,200) (19.4%)
Total 319,935 512,800 367,898 275,500 (237,300) (46.3%)
Overhead Allocation 115,737 128,500 130,875 158,600 30,100 23.4%
Total Administrative Expenses 435,672$ 641,300$ 498,773$ 434,100$ (207,200)$ (32.3%)
FY 2011
Administrative Expenses - Sewer
0.2%0.9%
61.2%1.2%
36.5%
Administrative Expenses -Sewer
FY 2012
Equipment
Fees
Services
Miscellaneous
Overhead Allocation
86
__________________________________________________________
Fiscal Year 2012 Adopted Budget
FY 2010 FY 2012 Budget
Actual Budget Estimated Budget Variance %
Fleet Parts and Equipment 1,634$ 3,000$ 2,180$ 3,000$ -$ 0.0%
Infrastructure Equipment and Supplies 76,169 52,500 67,343 53,800 1,300 2.5%
Chemicals 4,831 7,000 3,974 7,000 - 0.0%
Safety Equipment 1,639 5,500 5,990 3,300 (2,200) (40.0%)
Laboratory Equipment and Supplies 5,904 6,000 6,017 5,000 (1,000) (16.7%)
Other Materials and Supplies 118 300 902 200 (100) (33.3%)
Contracted Services 24,140 43,000 13,996 47,000 4,000 9.3%
Materials and Maintenance 114,435 117,300 100,402 119,300 2,000 1.7%
Sewer Charges
Metro O&M Costs 986,027 1,038,600 1,329,921 1,397,400 358,800 34.5%
Spring Valley Sewer Charge 246,190 264,000 273,238 239,200 (24,800) (9.4%)
Total Sewer Charges 1,232,217 1,302,600 1,603,159 1,636,600 334,000 25.6%
Total Materials and Maintenance 1,346,652$ 1,419,900$ 1,703,561$ 1,755,900$ 336,000$ 23.7%
Materials and Maintenance Expenses - Sewer
FY 2011
0.1%
3.1%
0.4%0.2%
0.3%
2.7%
79.6%
13.6%
Materials and Maintenance Expenses -Sewer
FY 2012
Fleet Parts and Equipment
Infrastructure Equipment and Supplies
Chemicals
Safety Equipment
Laboratory Equipment and Supplies
Other Materials and Supplies
Contracted Services
Metro O&M Costs
Spring Valley Sewer Charge
___________________________________________________________
Otay Water District
87
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 was implemented for calculating the monthly sewer charge. A usage fee is charged based on the
customer’s prior year’s “Winter Average” water consumption, reduced by a 15% usage discount. The current and approved usage fees are $1.67 and $1.77, respectively. A base fee is also applied. Current and approved base fees are $11.57 and $12.26 for ¾ inch water meter, and $16.87 and $17.88 for 1 inch or greater. Approved fees are effective for all services billed after January 1, 2012. For commercial customers, the sewer charge 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 current and proposed sewer rates per ASU are $39.39 and $41.75, respectively. The
approved rate is effective for all services billed after January 1, 2012.
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.
88
__________________________________________________________
Fiscal Year 2012 Adopted Budget
Sewer Service Area
___________________________________________________________
Otay Water District
89
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 the cost of
providing these services.
Betterment fees for maintenance are earned by the General Fund for the Water Operations Department’s maintenance of certain District assets.
Annexation fees are collected when developers buy into the District’s potable and recycled water
facilities. The fee ensures that future users fund the portion of the facilities that were sized and
built for their future use by prior customers. Prior to FY 2012, annexation fees were unrestricted and therefore included in the General Fund revenues. With the new fee methodology, these fees
are now restricted for the purpose of capital improvements.
The 1% Property Tax is a result of Proposition 13 that was approved in 1978, which limited the
general levy property tax rate for all taxing authorities to a total rate of 1% of the assessed value. Subsequent legislation, AB8, established that the receipts from the 1% levy were to be
distributed to taxing agencies according to approximately the same proportions received prior to
Proposition 13. These general use funds are currently being used as a source of operating
revenue.
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 parcel or 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 from the lease of cell-sites.
When the District enters a new lease there is a one-time fee charged with the set-up of each cell-site. The District incurs expenses related to these leases and 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. This lease has a 40-year term with two additional five-year options.
___________________________________________________________
Otay Water District
90
General Revenues and Expenses
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 shared customer base, the CCV contracts with the District for the billing of their
sewer customers who live within the District.
General Expenses
The expenses in this section are general operating 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 2.8% of the total Departmental
Budget.
Legal expenses are viewed as a District-wide general expense because they benefit all
departments and usually are not attributed to any one department. The District retains outside
legal services instead of in-house counsel.
Insurance expense is also viewed as District-wide general expense because it benefits all
departments and cannot be attributed to any one department. The District participates in a
program where it can reduce its premium by implementing training sessions to reduce on-the-
job accidents and injuries.
Some employee benefits are charged to the General Expense Department because they are not
entirely attributable to a specific department or fiscal year in which they are incurred. For
example, when a pay rate increase occurs for an employee, his/her leave balances increase in
value due to this change. In this case, the expense is charged to the General Expense
Department.
91
__________________________________________________________
Fiscal Year 2012 Adopted Budget
FY 2010 FY 2012 Budget Variance
Actual Budget Estimated Budget Variance %
Fee Revenues
Capacity Fee Revenues 1,030,688$ 1,095,300$ 1,063,234$ 1,044,000 (51,300)$ (4.7%)
Betterment Fees for Maintenance 575,721 657,400 560,229 628,600 (28,800) (4.4%)
Annexation Fees 555,751 - - - - 0.0%
Subtotal Fee Revenues 2,162,160 1,752,700 1,623,463 1,672,600 (80,100) (4.6%)
Tax Revenues
1% General Tax 3,008,496 3,143,400 2,923,709 3,141,700 (1,700) (0.1%)
Availability Fees 670,784 700,500 653,012 697,900 (2,600) (0.4%)
Subtotal Tax Revenues 3,679,280 3,843,900 3,576,721 3,839,600 (4,300) (0.1%)
General Revenues 5,841,440$ 5,596,600$ 5,200,185$ 5,512,200$ (84,400)$ (1.5%)
FY 2010 FY 2012 Budget Variance
Actual Budget Estimated Budget Variance %
Property Rental 1,083,988$ 1,163,900$ 1,185,574$ 1,298,400$ 134,500 11.6%
Sewer Billing Fees 360,651 361,500 361,680 362,500 1,000 0.3%
Set-up Fee for Lease Site 26,500 8,000 5,581 8,000 - 0.0%
Grants - 120,000 70,265 20,000 (100,000) (83.3%)
Revenue from Shared Facility 27,706 29,100 29,163 30,600 1,500 5.2%
Miscellaneous(1)1,046,030 265,800 443,235 302,100 36,300 13.7%
Non-Operating Revenues 2,544,875$ 1,948,300$ 2,095,498$ 2,021,600$ 73,300$ 3.8%
Potable Recycled Sewer Total
Capacity Fee Revenues 841,200$ -$ 202,800$ 1,044,000$
Betterment Fees for Maintenance 628,600 - - 628,600
Tax Revenues -
1% General Tax 3,141,700 - - 3,141,700
Availability Fees 646,400 - 51,500 697,900
Total Tax Revenues 3,788,100 - 51,500 3,839,600
Non-Operating Revenues
Property Rental 1,298,400 - - 1,298,400
Sewer Billing Fees 362,500 - - 362,500
Set-up Fee for Lease Site 8,000 - - 8,000
Grants 20,000 - - 20,000
Revenue from Shared Facility - - 30,600 30,600
Miscellaneous 302,100 - - 302,100
Total Non-Operating Revenues 1,991,000 - 30,600 2,021,600
Total General and Non-Operating Revenues 7,248,900$ -$ 284,900$ 7,533,800$
Note: For General and Non-Operating Revenues, the Potable Fund serves as the District's General Fund for
accounting purposes.
FY 2012 Budget
Non-Operating Revenues
FY 2011
General and Non-Operating Revenues by Business
General Revenues
FY 2011
___________________________________________________________
Otay Water District
92
FY 2010 FY 2012 Budget Variance
Actual Budget Estimated Budget Variance %
Administrative Expenses
Legal Fees 472,924$ 451,200$ 350,946 380,000$ (71,200)$ (15.8%)
General Insurance 456,784 464,800 492,577 492,000 27,200 5.9%
Total Administrative Expenses 929,708 916,000 843,522 872,000 (44,000) (4.8%)
Benefits
Benefits (1)427,547 (28,000) 344,512 (79,600) (51,600) 0.0%
Total General Expenses 1,357,255$ 888,000$ 1,188,034$ 792,400$ (95,600)$ (10.8%)
(1) FY 2012 and FY 2011 Benefits budget amounts are negative because of Vacancy Factor (salary savings)
of $159,800 and $204,200 respectively. This is netted against other District-wide Labor and Benefit
Expenses. In prior years Vacancy Factor was budgeted in the individual departments.
FY 2011
General Expenses
93
__________________________________________________________
Fiscal Year 2012 Adopted Budget
Departmental Operating Budget
Labor and Benefits
Labor and Benefits represent 23.2% of the
total Operating Budget. In Fiscal Year
2008, the Employees’ Association signed a six-year Memorandum of Understanding
(MOU) with the District. The highlights
of this agreement included: changes to
salaries based on a salary survey, changes
to the medical and dental plans, enhancements of the retirement package to include post retirement health benefits for
active employees, and rewriting the MOU
to streamline the 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 2012 Budget includes
funding for labor and benefits for 156
Full-time Equivalent (FTE) employees and a 3.5% across-the-board salary increase on
July 1, 2011.
The staffing level for Fiscal Year 2012 had a decrease of three FTE employees from
Fiscal Year 2011. The District has chosen
to eliminate three vacant positions in areas
that have experienced a reduction of work
due to slowing of growth. Since 2007, the District has reduced FTEs by 11% by
focusing on efficiencies and automation.
This has been achieved by strategic
planning, goal setting, and leveraging
advancements in technology.
A projected 16.1% 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 $3,467,800. The Water Operations Department, with its
staff of 66 employees, is responsible for
maintaining and operating the District's
facilities.
Administrative Expenses
Administrative Expenses represent 5.8% of the District's total operating costs. A detailed listing of the Administrative
Expenses for Fiscal Year 2012 is shown
on page 101. The decrease of $1,020,900
is due several events including a shift in work between the Operating and CIP budgets, a decrease in temporary help and
outside services due to the completion of
major projects, along with a decrease in
conservation incentives. In addition, the District eliminated non-essential items such as travel, conferences, and services
that are not vital to perform this year.
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,
where the District may be better able to
control expenses such as training or business meetings to some extent. The safety needs of the District's customers
and employees and compliance with
regulatory agencies are of utmost
importance, so related expenses are considered necessary.
___________________________________________________________
Otay Water District
94
Departmental Operating Budget
Materials and Maintenance
The Materials and Maintenance Expenses
allow the District to provide reliable, high-quality products, services, and support to its customers.
As the District continues to grow and new
facilities are added, additional maintenance and services will be required. This year, there is a 14.1% increase in
Materials and Maintenance Expenses
totaling $530,500. These costs are due
mainly to higher Metro O&M costs of $358,800 as well as increased chemical and fuel costs.
The Water Operations Department has
implemented an Infrastructure Management System (IMS) which allows for better maintenance of existing assets
and enhanced monitoring of new assets
coming on-line. It also facilitates planning
for repair and replacement of assets as well as assessing the condition of infrastructures. IMS helps the District to
better track and manage the Materials and
Maintenance Expenses.
Performance Measurement
Program
Strategic goals and objectives approved by
the Board of Directors are incorporated
into departmental operating budgets to
ensure adequate funds are available to
implement the Strategic Plan. The District has updated its performance measurement program this fiscal year to provide
measurable results of progress on both
strategic and key operational goals and
objectives. (See the plan objectives and measures in the department sections that
follow.) Performance measures have been developed by comparing key District
activities with functional and available
operational data that provide reliable
feedback on progress. Developed
cooperatively with staff and the help of outside consultants, the measures are
designed to be comparable to measures
commonly found in similar industries.
The performance measures focus on “best
practice” as applied to the District.
Measures are collected and reviewed
quarterly by the Senior Management Team
and reviewed by the Board at least twice a year. Results are used to set new targets for the following fiscal year and to hold
staff accountable for the current fiscal
year.
95
__________________________________________________________
Fiscal Year 2012 Adopted Budget
General Manager
General Expense
Administrative Services
Finance
Water Operations
Engineering
Departmental Operating Budget
Board of Directors 0.4%
General Manager
6.0%
General Expense2.8%
Administrative
Services13.0%
Finance
16.4%
Information
Technology 10.7%
Water Operations
44.3%
Engineering
6.4%
Total Departmental Operating Budget
FY 2012
$28,665,500
___________________________________________________________
Otay Water District
96
FY10 FY12
Actual Budget Estimated Budget
Total Labor Costs 11,115,520$ 11,514,300$ 11,410,095$ 11,958,200$
Benefits
Pension 3,212,514 3,320,800 3,417,185 3,883,500
Employee Assistance Program 4,485 7,500 4,391 6,000
Worker's Compensation (1)264,927 267,800 175,824 8,700
Health/Dental/Life Insurance 1,940,034 2,014,900 2,155,369 2,394,900
Social Security/Medicare 909,265 936,400 939,909 967,200
Salary Continuation Insurance 82,544 75,600 76,781 79,100
State Unemployment Insurance 33,931 20,000 66,505 75,000
Vacation/Sick/Holiday/Other Leave 2,073,645 2,104,100 2,250,079 2,214,800
Total Fringe Benefits 8,521,345 8,747,100 9,086,043 9,629,200
Total Labor and Benefits 19,636,865 20,261,400 20,496,138 21,587,400
Less: Non-Operating Labor and Benefits
Labor Costs 1,289,566 1,512,100 1,386,197 1,465,400
Fringe Benefits Allocation 751,562 901,800 815,824 938,200
Total Work Order Allocation 2,041,128 2,413,900 2,202,021 2,403,600
Operating Labor & Benefits 17,595,737 17,847,500 18,294,117 19,183,800
Total Overhead Allocation 1,483,001 1,738,900 1,594,127 1,685,200
Less: Overhead Allocation Personnel Portion 936,515 1,098,100 1,006,691 1,064,200
Admin Portion of Overhead (36.85%)546,486$ 640,800 587,436 621,000
Operating Labor and Benefits 16,659,222$ 16,749,400$ 17,287,426$ 18,119,600$
(1) The FY12 budget for Worker's Compensation reflects the planned write-off of a previously accrued $235,500 liability.
Labor and Benefits
FY11
159
21
66
12
35
19
6
156
21
66
13
32
18
6
0 40 80 120 160
Total
Engineering
Water Operations
Information Technology and Strategic Planning
Finance
Administrative Services
General Manager
Full-Time Equivalent (FTE)
Comparison by Department
FY 11-12 FY 10-11
97
__________________________________________________________
Fiscal Year 2012 Adopted Budget
Potable Sewer Recycled
Developer
Reimbursed-
CIP Total
Total Operating Labor Costs 9,604,900$ 374,300$ 513,600$ -$ 10,492,800$
Benefits 8,050,500 263,300 377,200 - 8,691,000
Overhead Allocation-Personnel (1,709,000) 271,800 373,000 - (1,064,200)
Total Operating Labor and Benefits 15,946,400 909,400 1,263,800 - 18,119,600
Total CIP Labor Costs 815,000 103,500 386,000 160,900 1,465,400
Benefits 515,700 67,200 249,800 105,500 938,200
Overhead Allocation-Personnel 592,000 75,100 280,300 116,800 1,064,200
Total CIP Labor and Benefits 1,922,700 245,800 916,100 383,200 3,467,800
Total Labor and Benefits 17,869,100$ 1,155,200$ 2,179,900$ 383,200$ 21,587,400$
Labor and Benefits by Fund - Fiscal Year 2012
76%
8%
5%1%6%4%Potable-Operating
Potable-CIP
Sewer-Operating
Sewer-CIP
Recycle-Operating
Recycle-CIP
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Otay Water District
98
FY 2010 FY 2011 FY 2012
General Manager: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 4Purchasing987
Safety 1 1 1Conservation333
Total Administrative Services Department 20 19 18
FTE 20.00 19.00 18.00
Controller and Budgetary Services 7 7 7Treasury and Accounting Services 6 6 5
Customer Service 22 19 17Payroll and Accounts Payable 3 3 3
Total Finance Department 38 35 32
FTE 38.00 35.00 32.00
Information Technology and Strategic Planning:Information Technology and Strategic Planning Applications 5 5 5Information Technology Operations 4 3 4Geographic Information Systems 4 4 4
Total IT and Strategic Planning Department 13 12 13
FTE 13.00 12.00 13.00
Operations Management 2 2 2Water System Operations 28 28 28
Utility Maintenance/Construction 31 30 30Collection/Treatment/Reclamation Operations 7 6 6
Total Operations Department 68 66 66
FTE 68.00 66.00 66.00
Engineering Management 3 3 3Engineering181818
Total Engineering Department 21 21 21
FTE 21.00 21.00 21.00
District Total Position Count 166 159 156
FTE 166.00 159.00 156.00
Position Count by Department
99
__________________________________________________________
Fiscal Year 2012 Adopted Budget
FY 2010 FY 2011 FY 2012
Customer Service Field Representative I and II 1 1 0
Customer Service Representative I and II 1 0 0
Water Conservation Technician 0 0 1
Strategic Planning Assistant 1 1 1
Reclamation Plant Operator 0 0 1
Utility Construction Assistant 0 0 1
Sr. Civil Engineer 0 0 1
Sr. Engineering Technician 1 1 0
Total Contract/Temporary Employees 4 3 5
Contract / Temporary Employees
4%
12%
21%
8%
42%
13%
Position Count
General Manager
Administrative Services
Finance
Information Technology
and Strategic Planning
Operations
Engineering
___________________________________________________________
Otay Water District
100
FY 2010 FY 2012 Budget
Actual Budget Estimated Budget Variance %
Directors' Fees 15,100$ 30,000$ 13,700$ 30,000$ -$ 0.0%
Travel and Meetings 162,652 221,400 159,708 196,200 (25,200) (11.4%)
Conservation and Outreach 240,734 479,700 257,007 300,800 (178,900) (37.3%)
General Office Expense 343,859 368,700 306,469 330,100 (38,600) (10.5%)
Equipment 1,014,401 1,035,700 1,086,986 961,000 (74,700) (7.2%)
Fees 479,814 476,500 496,387 461,000 (15,500) (3.3%)
Services 1,714,302 2,350,000 1,845,133 1,721,400 (628,600) (26.7%)
Training 126,746 151,800 125,385 140,200 (11,600) (7.6%)
Utilities 16,514 15,300 18,264 19,000 3,700 24.2%
Miscellaneous 148,685 177,300 199,843 150,000 (27,300) (15.4%)
Total 4,262,807 5,306,400 4,508,881 4,309,700 (996,700) (18.8%)
Less: Overhead Allocation (546,486) (640,800) (587,436) (621,000) 19,800 (3.1%)
Subtotal 3,716,321 4,665,600 3,921,445 3,688,700 (976,900) (20.9%)
General Expenses 929,708 916,000 843,522 872,000 (44,000) (4.8%)
Total Administrative Expenses 4,646,029$ 5,581,600$ 4,764,967$ 4,560,700$ (1,020,900)$ (18.3%)
5,192,515$ 6,222,400$ 5,352,403$ 5,181,700$
FY 2011
Administrative Expenses - Total
.7%
4.5%7.0%
7.7%
22.3%
10.7%
39.9%
3.3%
0.4%
3.5%
Administrative Expenses -Total
FY 2012 Directors' Fees
Travel and Meetings
Conservation and Outreach
General Office Expense
Equipment
Fees
Services
Training
Utilities
Miscellaneous
101
__________________________________________________________
Fiscal Year 2012 Adopted Budget
FY 2010 FY 2012 Budget
Actual Budget Estimated Budget Variance %
Materials and Maintenance
Fuel and Oil 207,208$ 244,700$ 218,506$ 353,200$ 108,500$ 44.3%
Meters and Materials 148,386 222,100 166,683 213,100 (9,000) (4.1%)
Fleet Parts and Equipment 158,795 168,400 140,253 168,400 - 0.0%
Landscaping Materials 45 - - - - 0.0%
Infrastructure Equipment and Supplies 610,055 591,900 555,410 599,600 7,700 1.3%
Chemicals 306,325 398,000 442,590 504,000 106,000 26.6%
Safety Equipment 49,998 60,300 53,603 32,900 (27,400) (45.4%)
Laboratory Equipment and Supplies 47,306 45,000 44,399 44,000 (1,000) (2.2%)
Other Materials and Supplies 137,478 173,700 155,680 164,700 (9,000) (5.2%)
Building and Grounds Materials 95,116 76,000 74,032 80,500 4,500 5.9%
Contracted Services 498,565 486,800 340,305 503,000 16,200 3.3%
Materials and Maintenance 2,259,278 2,466,900 2,191,461 2,663,400 196,500 8.0%
Sewer Charges
Metro O&M Costs 986,027 1,038,600 1,329,921 1,397,400 358,800 34.5%
Spring Valley Sewer Charge 246,190 264,000 273,238 239,200 (24,800) (9.4%)
Total Sewer Charges 1,232,217 1,302,600 1,603,159 1,636,600 334,000 25.6%
Total Materials and Maintenance 3,491,495$ 3,769,500$ 3,794,620$ 4,300,000$ 530,500$ 14.1%
Materials and Maintenance Expenses - Total
FY 2011
8.2%
5.0%
3.9%
13.9%
11.7%
0.8%1.0%
3.8%
1.9%
11.7%
38.1%
Materials and Maintenance Expenses -Total
FY 2012 Fuel and Oil
Meters and Materials
Fleet Parts and Equipment
Infrastructure Equipment and Supplies
Chemicals
Safety Equipment
Laboratory Equipment and Supplies
Other Materials and Supplies
Building and Grounds Materials
Contracted Services
Sewer Charges
___________________________________________________________
Otay Water District
102
FY 2010 FY 2012
Actual Budget Estimated Budget
Departmental Expenditures
Board of DirectorsBoard of Directors 63,353$ 86,600$ 75,413$ 106,600$
General ManagerGeneral Manager 1,530,407 1,790,600 1,682,449 1,721,400
General ExpenseGeneral Expense 1,314,537 888,000 1,188,034 792,400
Administrative ServicesAdministrative Services 3,387,950 3,935,200 3,409,113 3,727,400
FinanceFinance 4,617,243 4,730,300 4,559,086 4,712,000
Information Technology and Strategic PlanningInformation Technology and Strategic Planning 2,864,200 2,964,100 2,977,027 3,080,200
Water OperationsWater Operations 10,585,316 11,420,500 11,566,162 12,688,600
EngineeringEngineering 1,916,741 2,024,100 1,983,859 1,836,900
Total Departmental Expenditures 26,279,746 27,839,400 27,441,143 28,665,500
Less: Overhead Allocation (1,483,001) (1,738,900) (1,594,127) (1,685,200)
Net Departmental Expenditures 24,796,745 26,100,500 25,847,016 26,980,300
Non-Departmental Expenditures
Water Purchases 31,814,849 35,057,200 34,230,126 38,243,700
Power 2,307,611 2,520,700 2,170,357 2,440,900
Expansion Reserve 1,610,000 2,775,000 2,775,000 555,000
Betterment Reserve 3,810,000 1,435,000 315,000 -
Replacement Reserve 3,660,000 6,965,000 6,965,000 3,330,000
Transfer to Sewer General Fund 200,000 - - 786,800
Transfer Out/In Prop 1A 270,300 - - -
Transfer to General Fund Reserve 1,330,000 390,500 390,500 2,420,500
Transfer to Sewer Replacement - 1,750,000 1,750,000 1,720,000
Transfer to New Supply Reserve - - - 1,585,000
Total Non-Departmental Expenditures 45,002,760 50,893,400 48,595,983 51,081,900
TOTAL OPERATING EXPENDITURES 69,799,505$ 76,993,900$ 74,442,999$ 78,062,200$
FY 2011
Operating Expenditures by Department
103
__________________________________________________________
Fiscal Year 2012 Adopted Budget
FY 2010 FY 2012
Actual Budget Estimated Budget
Departmental Expenditures
Labor and Benefits 17,595,737$ 17,847,500$ 18,294,117$ 19,183,800$
Director's Fees 15,100 30,000 13,700 30,000
Travel and Meetings 162,652 221,400 159,708 196,200
Conservation and Outreach 240,734 479,700 257,007 300,800
General Office Expense 343,859 368,700 306,470 330,100
Equipment 1,014,400 1,035,700 1,086,986 961,000
Fees 1,409,522 1,392,500 1,339,909 1,333,000
Services 1,714,302 2,350,000 1,845,133 1,721,400
Training 126,746 151,800 125,385 140,200
Materials & Maintenance 2,259,278 2,466,900 2,191,462 2,663,400
Power and Utilities 16,514 15,300 18,264 19,000
Sewer Charges 1,232,217 1,302,600 1,603,159 1,636,600
Miscellaneous 148,685 177,300 199,843 150,000
Total Departmental Expenditures 26,279,745 27,839,400 27,441,143 28,665,500
Less: Overhead Allocation (1,483,001) (1,738,900) (1,594,127) (1,685,200)
Net Departmental Expenditures 24,796,744 26,100,500 25,847,016 26,980,300
Non-Departmental Expenditures
Water Purchases 31,814,849 35,057,200 34,230,126 38,243,700
Power 2,307,611 2,520,700 2,170,357 2,440,900
Expansion Reserve 1,610,000 2,775,000 2,775,000 555,000
Betterment Reserve 3,810,000 1,435,000 315,000 -
Replacement Reserve 3,660,000 6,965,000 6,965,000 3,330,000
Transfer to Sewer General Fund 200,000 - - 786,800
Transfer Out/In Prop 1A 270,300 - - -
Transfer to General Fund Reserve 1,330,000 390,500 390,500 2,420,500
Transfer to Sewer Replacement - 1,750,000 1,750,000 1,720,000
Transfer to New Supply Fund - - - 1,585,000
Total Non-Departmental Expenditures 45,002,760 50,893,400 48,595,983 51,081,900
TOTAL OPERATING EXPENDITURES 69,799,505$ 76,993,900$ 74,442,999$ 78,062,200$
FY 2011
Operating Expenditures by Object
___________________________________________________________
Otay Water District
104
Board of Directors
Mission Statement
To provide safe, reliable water, recycled water and wastewater services to our community in
an innovative, cost efficient, water-wise and environmentally responsible manner.
Division Title Division No.
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1111
Jaime Bonilla President
Gary Croucher Vice President
David Gonzalez, Jr. Treasurer
Division 3
Division 2
Division 1
Division 4
Division 5
Jose Lopez
Mark Robak
___________________________________________________________
Otay Water District
105
FY 2010 FY 2011 FY 2012
Actual Budget Estimated Budget
Board of Directors 63,353$ 86,600$ 75,413$ 106,600$
TOTAL 63,353$ 86,600$ 75,413$ 106,600$
Board of Directors
0.4%
6.0%2.8%
13.0%
16.4%
10.7%
44.3%
6.4%
FY 2012 Total Departmental Budget -$28.7 Million
Board of Directors -$106,600
Board of Directors
General Manager
General Expense
Administrative Services
Finance
Information Technology and Strategic
Planning
Water Operations
Engineering
106
__________________________________________________________
Fiscal Year 2012 Adopted Budget
Board of Directors
FY 2010 FY 2011 FY 2012
Board of Directors Actual Budget Estimated Budget
Benefits 44,017$ 40,000$ 53,932$ 60,000$
Director's Fees 15,100 30,000 13,700 30,000
Travel and Meetings 4,236 16,600 7,781 16,600
Total 63,353$ 86,600$ 75,413$ 106,600$
$-
$50
$100
$150
FY08 FY09 FY10 FY11 FY12
$112
$99 $98
$87
$107
$79 $88
$63
$75 Th
o
u
s
a
n
d
s
Fiscal Year
Budget vs. Actual
Budget Actual
___________________________________________________________
Otay Water District
107
Director’s Division Boundaries
108
__________________________________________________________
Fiscal Year 2012 Adopted Budget
General Manager
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 manner.
Key Challenges
“The key challenge for Otay is to find the best solutions that balance our requirements with the
significant constraints we face. Some of these constraints are escalating cost, drought, increasing regulatory compliance and uncertainty, customer demands for improved services, and competition for supply and resources. Meeting these challenges required dedication and a commitment to continuous
improvement, and the innovative use of technologies and resources.”
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
Division Title Division No.
General Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1111
Assistant General Manager, Finance and Administrative Services . . . . . . . . . . . . . . . 2111
Assistant General Manager, Engineering and Operations . . . . . . . . . . . . . . . . . . . . . . 3111
___________________________________________________________
Otay Water District
109
Position Count FY 2010 FY 2011 FY 2012
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
Sr. Confidential Executive Secretary 1 1 1
Communications Officer 1 1 1
Total 6 6 6
District Position Count - 156
General Manager Department - 6
Position Count
Assistant General Manager,
Engineering and Operations
Board of Directors
District Secretary
Sr. Confidential
Executive Secretary
Communications
Officer
Assistant General Manager,
Finance and Administration
General Manager
110
__________________________________________________________
Fiscal Year 2012 Adopted Budget
FY 2010 FY 2011 FY 2012
Actual Budget Estimated Budget
General Manager 975,124$ 1,194,600$ 1,106,975$ 1,079,000$
Legal 3,777 - 209 9,800
Assistant General Manager, Finance and Administration 285,261 306,500 298,787 321,700
Assistant General Manager, Engineering and Operations 266,244 289,500 276,477 310,900
TOTAL 1,530,407$ 1,790,600$ 1,682,448$ 1,721,400$
General Manager
0.4%6.0%
2.8%
13.0%
16.4%
10.7%
44.3%
6.4%
FY 2012 Total Departmental Budget -$28.7 Million
General Manager -$1,721,400
Board of Directors
General Manager
General Expense
Administrative Services
Finance
Information Technology and Strategic Planning
Water Operations
Engineering
___________________________________________________________
Otay Water District
111
General Manager
FY 2010 FY 2011 FY 2012
Actual Budget Estimated Budget
Labor and Benefits 1,275,172$ 1,327,900$ 1,334,420$ 1,429,400$
Travel and Meetings 46,816 73,800 46,186 63,500
Conservation and Outreach 5,562 7,000 2,997 5,000
General Office Expense 14,505 24,000 6,444 8,000
Equipment - 1,500 - 1,500
Fees 39,159 46,000 50,132 46,000
Services 148,780 310,400 241,926 168,000
Training 99 - 90 -
Miscellaneous 313 - 253 -
Total 1,530,406$ 1,790,600$ 1,682,448$ 1,721,400$
$-
$500
$1,000
$1,500
$2,000
FY08 FY09 FY10 FY11 FY12
$1
,
4
8
6
$1
,
7
6
9
$1
,
6
6
7
$1
,
7
9
1
$1
,
7
2
1
$1
,
7
6
6
$1
,
6
8
8
$1
,
5
3
0
$1
,
6
8
2
Th
o
u
s
a
n
d
s
Fiscal Year
Budget vs. Actual
Budget Actual
112
__________________________________________________________
Fiscal Year 2012 Adopted Budget
General Manager
R DISTRICT AT-A-GLANCE
Services We Provide
The General Manager’s office provides staffing, scheduling, and other support to the Board of
Directors, General Manager, and Assistant General Managers. The office posts and
disseminates meeting notices, agendas, minutes, sets board meeting dates, and assists in
conducting board and committee meetings. It also manages public and media relations, bi-national and legislative affairs, and provides liaison with local elected officials and community
groups. The General Manager’s office oversees the production and distribution of publications
and notices to inform the public of District functions, policies, and services. The office also
coordinates special events and provides staffing and support to local water associations.
Strategic Plan Objectives
Regularly evaluate communications tools and explore the effective use of new media options
including: electronic newsletters, auto-dialer services, video streaming, social networks, or
web media to ensure the District’s outreach efforts are cost-effectively reaching all stakeholders.
Performance Measures
Accomplishments – Fiscal Year 2010-2011
The Otay Water District prides itself on having water rates that are among the lowest of San
Diego County’s 24 water agencies. For a typical customer using 15 units per month, Otay‘s
water rates are the 7th lowest in San Diego County.
Customers continually report high levels of satisfaction and trust in the Otay Water District
as their service provider. In the most recent customer survey, 93% of customers rated the
District as good, very good, or excellent. These numbers are higher than in 2009 and 2010.
Customer Satisfaction
Measures the level of overall
customer satisfaction with the
District. Survey is conducted
on an annual basis. Formation
of survey begins in Q1. Actual survey measures calendar year
(January-December). Currently
reported quarterly.
___________________________________________________________
Otay Water District
113
General Manager
Customers also report a substantial amount of trust in the ability of the District to provide
them with clean, safe water, and they view water service as one of the best values for their
dollar: above gas & electricity, telephone service, cable TV, and Internet access.
Employee morale is also very high. Nearly three-fourths (73%) of all employees rate their
satisfaction as a 6 or 7 on a scale of 1 to 7. Nine out of ten (87%) rate their level of
satisfaction as a 5, 6, or 7. While outstanding, an even higher percent (96%) state they would recommend Otay as a place of employment.
Otay is continually recognized by outside organizations as a leader in the water industry.
The recognition comes from prominent national and internationally known organizations. When evaluated against comparably-sized public agencies, Otay consistently ranks among
the very best. This year, Otay received the Distinguished Budget Presentation Award from
the Government Finance Officers Association of the United States and Canada for the
seventh year in a row. Getting the award just once is an accomplishment for any public
agency. Receiving it for the seventh consecutive year reflects on Otay’s longstanding commitment to transparency and public accountability.
Each year Otay retains an auditing firm to review its finances and accounting practices. As in
previous years, no material errors or weaknesses were identified and there were no findings to present in the management letter. Retaining an outside auditing company is also an
example of Otay’s commitment to accountability and transparency.
The Otay Water District has a AA (Double A) credit rating from the rating agencies Standard
and Poor’s, and Fitch. This is an excellent credit rating for a public agency of its size and
reflects on Otay’s high credit worthiness. For the average customer, it means they pay less
interest on bonds issued for future capital improvement projects, which helps to keep water
rates down.
Otay’s capital improvement projects are completed on schedule, on budget, and with a
minimum of change orders. For instance, the 5-mile Jamacha Road Pipeline Project was not
only the largest capital improvement project in the District’s 55-year history, but also one of
the most challenging. Despite the challenges, the project was completed on-time and more
than $1 million under budget.
The District has been committed to using technology to enhance customer service and utilize
staff more efficiently. Through the innovative and practical use of technology, Otay has
reduced the number of full-time employees even as it delivers more services to a larger customer base.
Otay maintains excellent relationships with local elected officials, neighboring water
agencies, community planning groups, chambers of commerce, civic organizations, and has even established close working partnerships south of the border with the cities of Tijuana and
Rosarito Beach, Mexico, with the Governor of Baja California Norte, and the public agencies
serving the region.
114
__________________________________________________________
Fiscal Year 2012 Adopted Budget
Administrative Services
Mission Statement
To provide support to the Board of Directors, the General Manager, and District staff by
identifying and meeting objectives to satisfy the needs of our customers by providing, through
best management practices, the full range of employer and employee services, administrative
services, risk management, water conservation, safety and security.
Division Title Division No.
Administrative Services Chief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2211
Human Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2221
Purchasing and Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2231
Safety and Risk Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2241
Water Conservation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2251
___________________________________________________________
Otay Water District
115
Position Count FY 2010 FY 2011 FY 2012
Chief, Administrative Services 1 1 1
Confidential Executive Secretary 1 1 1
Confidential Secretary 1 1 1
Human Resources Manager 1 1 1
Senior Human Resources Analyst 1 1 1
Human Resources Analyst 1 1 1
Human Resources Technician 1 1 1
Purchasing & Facilities Manager 1 1 1
Buyer I and II 2 0 0
Senior Buyer 0 1 1
Assistant Buyer 0 1 1
Lead Warehouse Worker / Facilities Worker 1 1 1
Warehouse / Delivery Worker 2 1 1
Facilities Maintenance Technician 2 2 2
Facilities Maintenance Assistant 1 0 0
Records Assistant 0 1 0
Safety & Security Administrator 1 1 1
Water Conservation Manager 1 1 1
Water Conservation Specialist 2 2 2
Total 20 19 18
Position Count
District Position Count - 156
Administrative Services Department - 18
Purchasing and
Facilities
Safety and Risk
Administration
Water
Conservation
Human
Resources
Administrative
Services
116
__________________________________________________________
Fiscal Year 2012 Adopted Budget
Department Responsibilities
FY 2010 FY 2011 FY 2012
Actual Budget Estimated Budget
Administrative Chief 392,147$ 430,500$ 427,190$ 465,000$
Human Resources 705,450 852,200 723,138 787,100
Purchasing and Facilities 1,448,780 1,458,900 1,344,254 1,451,300
Safety and Security 264,678 338,500 323,625 312,200
Water Conservation 576,895 855,100 590,906 711,800
TOTAL 3,387,950$ 3,935,200$ 3,409,113$ 3,727,400$
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.
0.4%
6.0%2.8%
13.0%
16.4%
10.7%
44.3%
6.4%
FY 2012 Total Departmental Budget -$28.7 Million
Administrative Services -$3,727,400
Board of Directors
General Manager
General Expense
Administrative Services
Finance
Information Technology and Strategic Planning
Water Operations
Engineering
___________________________________________________________
Otay Water District
117
Administrative Services
FY 2010 FY 2011 FY 2012
Actual Budget Estimated Budget
Labor and Benefits 2,250,322$ 2,382,200$ 2,324,156$ 2,503,100$
Travel and Meetings 11,179 25,200 16,375 22,300
Conservation and Outreach 235,173 472,700 254,009 295,800
General Office Expense 102,471 126,000 98,420 123,900
Equipment 79,548 76,200 56,991 45,100
Fees 7,220 8,000 7,602 6,000
Services 211,288 390,200 246,392 286,100
Training 90,744 112,500 97,386 104,200
Materials & Maintenance 383,491 326,900 289,518 321,900
Power and Utilities 16,514 15,300 18,264 19,000
Total 3,387,950$ 3,935,200$ 3,409,113$ 3,727,400$
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
FY08 FY09 FY10 FY11 FY12
$3
,
8
6
8
$3
,
6
4
0
$3
,
9
1
3
$3
,
9
3
5
$3
,
7
2
7
$3
,
2
2
5
$3
,
3
3
8
$3
,
3
8
8
$3
,
4
0
9
Th
o
u
s
a
n
d
s
Fiscal Year
Budget vs. Actual
Budget Actual
118
__________________________________________________________
Fiscal Year 2012 Adopted Budget
Administrative Services
Human Resources
Services We Provide
Human Resources, under the direction of the Chief of Administrative Services, provides the following support services: recruits, selects and ensures the retention of qualified employees; develops, implements and administers policies, procedures, collective bargaining contracts and
employee programs; ensures up-to-date classification plans and a competitive compensation
program; manages benefits programs for employees and retirees; manages the Workers’
Compensation program; oversees employee performance through management staff to include employee training and development, recognition and incentives, performance evaluation process and employee discipline; ensures legal compliance and implements work/life balance initiatives
to include a comprehensive wellness program.
Strategic Plan Objectives
Continue promoting the Water Conservation Garden as a venue for new homeowners, developers, businesses and existing homeowners.
Increase and best target conservation related communications, such as surveys and comparative information, by expanding the use of electronically based information.
Closely monitor the District’s potable water demand to ensure the District will remain on
target to achieve its 2015 good target as identified in the 2010 Urban Water Management Plan.
Ensure best practices are followed in meeting the 20 by 2020 conservation targets
including reclassification of industrial and commercial customers.
Educate and work with local agencies and others to influence developers, builders, and to
incorporate practical water efficient practices in new construction.
Review and consider implementing online employee self-services.
Enhance security processes and planning.
Update the disaster recovery plan.
Identify management initiatives for represented/unrepresented employees in preparation for negotiations that will provide greater efficiency and more flexibility.
Evaluate policies and procedures as appropriate to streamline processes and ensure the
District remains competitive.
Review classification plan with the goal of providing greater flexibility.
Negotiate a successor Memorandum of Understanding for represented employees for 2014 and beyond, and related compensation and benefits for unrepresented employees.
___________________________________________________________
Otay Water District
119
Administrative Services
Senior Management Team to develop summary of expectations for management team to
manage change in the future.
Update performance evaluation categories/program to ensure a results-oriented workforce and update and provide training, if needed.
Evaluate pay-for-performance program to ensure the District is rewarding employees for innovations and business processes.
Establish a forum for continuous discussion regarding sections/units identifying business
process review in support of the District’s mission.
Performance Measures
Accomplishments – Fiscal Year 2010-2011
Reviewed and revised the District’s Employee Recognition Program to ensure employees
are being rewarded for streamlining business processes and promoting cost-effective measures.
Turnover Rate
Annual percent of voluntary
terminations. (Excludes
retirement)
Training Hours per Employee
Measures the quantity of general
and management formal training
hours employees are completing.
120
__________________________________________________________
Fiscal Year 2012 Adopted Budget
Administrative Services
Successfully increased Unrepresented Employees contribution to the employees’ portion
of the CalPERS Pension program by 7% in exchange for the District allowing employees
access to self-funded, post-employment health care benefits.
Implemented loan provisions for the 457 Deferred Compensation plans to provide a
positive enhancement to the District’s overall benefits program. This program provides
employees with the opportunity to take out one loan at a time against their 457 deferred
compensation plan.
Enhanced the Wellness Program by implementing a Weight Management Program to
help employees learn skills and habits necessary to maintain a healthy weight.
Developed, along with IT and the Safety and Security Administrator, the Training
Tracking System to more efficiently track all required District training. This system has
provided the District with the ability to track training usage and results in order to
manage and provide the most efficient opportunities for employees.
Enhanced and streamlined the benefits open enrollment and workers’ compensation
program by providing online resources and processing. This provided employees with
instant access to necessary documents and also provided automated reports that
facilitated the administrative tasks related to processing changes.
Coordinated and received credit for the Special District Risk Management Authority
Credit Incentive Program. The credit totaled $44,975 for Property and Liability, and
$26,322 for Workers’ Compensation premiums.
Purchasing
Services We Provide
The Purchasing Division, under general direction of the Chief of Administrative Services, oversees the general purchasing standards used within the District; purchases and oversees the
procurement of supplies, equipment, and services; controls and administers the District’s
standard materials inventory; disposes of surplus materials, equipment, and supplies; assists in
the acquisition and disposal of non-infrastructure related real estate; performs non-structural
facility maintenance work; and administers and manages outsourced facility maintenance service contracts. It also provides, as needed, complex purchasing related analysis and consultation to
the District and General Manager.
Strategic Plan Objective
Enhance the inventory management system.
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Otay Water District
121
Administrative Services
Performance Measures
Accomplishments – Fiscal Year 2010-2011
To stabilize pricing and reduce bidding costs, Purchasing staff solicited bids and obtained authorization to award a long-term, five-year agreement for both janitorial and landscaping services.
Worked with Accounts Payable staff to evaluate and improve on the accounts payable process, streamlining the progression and input of receiving documents and invoices into the EDEN financial system. These changes distributed the workload and streamlined the
process.
Worked with the Accounting staff to initiate and conduct internal accounting and purchasing procedure reviews and audits resulting in modification to the fixed asset
disposal process, streamlining the process and reducing the length of time surplus goods
are held prior to disposal.
Upgraded to a new version of software and system used to track non-capitalized assets
and reviewed the type of assets and data maintained by the system, providing additional
reporting and the addition of new asset types.
Cut expenses by switching the District’s non-networked ecopy machines to networked
machines, providing fax, scanning, publishing, email, and color capability to all
departments.
Blanket Order Activity
Percentage of material
purchases acquired via
blanket POs.
122
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Fiscal Year 2012 Adopted Budget
Administrative Services
Safety and Security
Services We Provide
Safety and Security, under the direction of the Chief of Administrative Services, provides the following: assesses the occupational exposure to risk; evaluates hazards and mitigation of safety hazards and risk to injury; directs and supervises accident investigations relating to occupational
injuries, fleet incidents and/or damage to, or theft of District property; develops hazardous
materials business plans, community right-to-know, Risk Management Prevention and Process
Safety Management plans; develops and implements procedures to ensure compliance with safe work practices and determines training needs to address issues; develops, implements and
manages safety programs; manages the District’s security program; implements, schedules and
coordinates recurring safety training; coordinates the Department of Transportation (DOT), the
District’s Drug Free Workplace, and DMV Pull-Notice Programs; and plans and coordinates the
District’s emergency preparedness program.
Strategic Plan Objectives
Enhance security processes and planning.
Update the disaster recovery plan.
Performance Measures
H&S Severity Rate
Quantifies the rate of
employee days lost from
work due to illness or injury.
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Otay Water District
123
Administrative Services
Accomplishments – Fiscal Year 2010-2011
Worked closely with HR, IT and Otay staff on the new Training Tracking System. This system will assist the District in ensuring that the staff is provided with the proper OSHA
regulated required training for their section and allows HR and managers track each
employee’s training. This also helps if any safety regulators request our safety training
records as now these records are readily available.
Upgraded the District’s NIMS manual to follow new guidelines and procedures to
activate the EOC center in case of an emergency.
Submitted $60,000 in claims to FEMA for reimbursement for damages caused by the
recent storms.
Participated in the “2011 ARkStorm Tabletop Exercise – Water Utilities and
Stakeholders” meeting hosted by the San Diego County Water Authority, the Water
Agencies Emergency Collaborative, and the Office of Emergency Services, to prepare
regional water agencies for coping with catastrophic flooding and ensure the
uninterrupted supply of safe drinking water to residents.
Water Conservation
Services We Provide
Water Conservation, under the direction of the Chief of Administrative Services, provides the following services:
Promotes and conducts residential surveys and also promotes large landscape surveys as well
as the Water Conservation Garden.
Safety Training Program
Safety & Risk Administration
will provide a minimum of 8
safety training programs/hours
per quarter, which 68 field
employees attend.
124
__________________________________________________________
Fiscal Year 2012 Adopted Budget
Administrative Services
Participates in outreach events throughout the community, including the WaterSmart plant
sale, the Spring Garden Festival, Cinco de Mayo, Lemon Festival, Bonita Festival,
JamulFest, and the Fall WaterSmart Gardening Festival.
Funds and promotes a variety of incentive and other programs available to its customers
including rebates for high efficiency clothes washers, high efficiency toilets, turfgrass
replacement with WaterSmart plants, rotating sprinkler nozzles and weather based irrigation
controllers, and the WaterSmart Landscape contest.
Promotes the school education program, which includes funding tours at the Water
Conservation Garden, the “Water is Life” poster contest, and the water themed high school
photo contest.
Develops water efficiency requirements for new construction.
Submits regular reports on the District's status with regard to the Water Conservation Best Management Practices as developed by the California Urban Water Conservation Council.
Manages the District’s Water Shortage Response Plan as well as its water waste reporting
program.
Strategic Plan Objectives
Continue promoting the Water Conservation Garden as a venue for new homeowners,
developers, businesses, and existing homeowners.
Closely monitor the District’s potable water demand to ensure the District will remain on
target to achieve its 2015 gpcd (gallons per capital per day) target as identified in the 2010
Urban Water Management Plan.
Ensure best practices are followed in meeting the 20 by 2020 conservation targets including
reclassification of industrial and commercial customers.
Educate and work with local agencies and others to influence developers, builders, and to incorporate practical water efficient practices in new construction.
___________________________________________________________
Otay Water District
125
Administrative Services
Performance Measures
Accomplishments – Fiscal Year 2010-2011
Recipient of the “2010 National Water and Energy Conservation Award” from the
Irrigation Association for the District’s successful implementation of a number of conservation programs.
The District, through many innovative programs, increased its annual water conservation
savings from 92 acre-feet to 2,075 acre-feet (1,983 + 92) of water saved this fiscal year.
The District’s Water Conservation Manager was selected to serve as the Chair of the
Water Use Efficiency Practitioner Certification Committee for the CA/NV Section of
AWWA.
Total Water Saved
Estimate of water saved per
acre-feet through conservation
programs.
High levels of conservation
during FY 08-09 and 09-10 was
achieved via several large projects
and rebates. Some of the conservation
programs have been eliminated by MWD.
Otay Water Use
(District Meters)
Consumes 32 acre-feet or less of
potable water at District sites. The District has been able to maintain
a significant reduction of water use at
its sites since 2008. The 2012 targeted
water usage was reduced to 15AF.
126
__________________________________________________________
Fiscal Year 2012 Adopted Budget
Finance
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.
Meter Readers
Division Title Division No.
Finance Chief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2311
Controller and Budgetary Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2321
Treasury and Accounting Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2331
Customer Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2341
Payroll and Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2251
Finance Department Staff
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Otay Water District
127
Position Count FY 2010 FY 2011 FY 2012
Chief Financial Officer 1 1 1
Executive Secretary 1 1 1
Secretary 1 1 1
Finance Manager, Treasury and Accounting 1 1 1
Finance Manager, Controller and Budget 1 1 1
Finance Supervisor, Payroll and A/P 1 1 1
Customer Service Manager 1 1 2
Customer Service Supervisor 2 2 0
Senior Accountant 4 4 4
Accountant 4 4 3
Payroll Technician 1 0 0
Accounting Assistant 1 0 0
Accounting Technician 0 2 2
Senior Customer Service Representative 2 2 2
Customer Service Representative I, II and III 9 8 8
Lead Customer Service Field Representative 1 1 1
Customer Service Field Representative I and II 7 5 4
Total 38 35 32
Position Count
District Position Count - 156
Finance Department - 32
Treasury and
Accounting
Services
Customer
Service
Payroll and
Accounts
Payable
Controller and
Budgetary
Services
Finance
128
__________________________________________________________
Fiscal Year 2012 Adopted Budget
Department Responsibilities
FY 2010 FY 2011 FY 2012
Actual Budget Estimated Budget
Finance Chief 416,044$ 448,300$ 474,171$ 502,400$
Controller and Budgetary Services 607,304 619,500 618,096 644,300
Treasury and Accounting Services 1,094,767 1,148,000 1,085,178 1,086,300
Customer Service 2,160,885 2,142,200 2,016,934 2,068,000
Payroll and Accounts Payable 338,243 372,300 364,707 411,000
TOTAL 4,617,243$ 4,730,300$ 4,559,086$ 4,712,000$
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.
0.4%
6.0%2.8%
13.0%
16.4%
10.7%
44.3%
6.4%
FY 2012 Total Departmental Budget -$28.7 Million
Finance -$4,712,000
Board of Directors
General Manager
General Expense
Administrative Services
Finance
Information Technology and Strategic Planning
Water Operations
Engineering
___________________________________________________________
Otay Water District
129
Finance
FY 2010 FY 2011 FY 2012
Actual Budget Estimated Budget
Labor and Benefits 3,858,267$ 4,027,500$ 3,865,686$ 4,040,400$
Travel and Meetings 17,997 19,100 11,139 14,600
General Office Expense 213,045 197,400 187,882 182,900
Equipment 143 3,200 208 200
Fees 316,324 308,000 312,086 283,000
Services 211,167 174,500 181,895 190,600
Training 300 600 190 300
Total 4,617,243$ 4,730,300$ 4,559,086$ 4,712,000$
$-
$1,000
$2,000
$3,000
$4,000
$5,000
FY08 FY09 FY10 FY11 FY12
$3
,
9
9
4
$4
,
4
7
2
$4
,
8
6
9
$4
,
7
3
0
$4
,
7
1
2
$4
,
0
2
3
$4
,
3
6
8
$4
,
6
1
7
$4
,
5
5
9
Th
o
u
s
a
n
d
s
Fiscal Year
Budget vs. Actual
Budget Actual
130
__________________________________________________________
Fiscal Year 2012 Adopted Budget
Finance
Controller and Budgetary Services
Services We Provide
The Controller and Budgetary Services Division is responsible for developing and publishing the
annual operating and capital budgets as well as preparing the six-year financial plan and setting
rates. Prepares monthly and annual reports, monitors budget variances and coordinates
interactions with outside agencies. Assists other departments with special projects such as; the preparation of cost studies, validation of financial data, and preparation of the District’s overhead and benefits rates and calculations.
Strategic Plan Objectives
Strengthen the long-term financial plan.
Develop sewer capacity fees for expansion.
Performance Measures
Overtime Percentage
Comparing actual to budgeted
overtime to monitor costs.
O&M Cost per Account
Operations & Maintenance (O&M)
cost per account/per customer. (QualServe)
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Otay Water District
131
Finance
Sewer Rate Ranking
District's average customer bill
as compared to other agencies
in San Diego County. Otay is
ranked 6th of 27 agencies.
Water Rate Ranking District's average customer bill
as compared to other agencies
in San Diego County. Otay is
ranked 6th of 23 agencies.
Distribution System Loss
Percentage for unaccounted water (QualServe).
132
__________________________________________________________
Fiscal Year 2012 Adopted Budget
Finance
Accomplishments – Fiscal Year 2010-2011
Prepared a balanced budget that is coordinated with the Strategic Plan and received the
Government Finance Officers Association (GFOA) “Distinguished Budget Presentation
Award” for the seventh consecutive year by meeting nationally recognized guidelines.
This award is a significant achievement and is the highest form of recognition in
governmental budgeting.
The budget received the “Excellence in Operating Budgeting” award from the California Society of Municipal Finance Officers (CSMFO) which recognizes agencies that have
prepared a budget document that meets certain standards.
The Capital Improvement Program (CIP) budget received the “Excellence in Capital
Budgeting Award” from the CSMFO for the sixth year in a row.
Updated the Reserve Policy to reflect the new methodology based on the Capacity and Annexation Fee Study conducted in the prior year. Included in the policy is the New
Water Supply Fee and accounting for debt proceeds.
Treasury and Accounting Services
Services We Provide
The Treasury and Accounting Services Division coordinates and directs the activities of the
general ledger accounting; audit; banking and cash management; investments and treasury
functions; debt financing; job costing; cost accounting; accounts receivable and debt collections; fixed assets; and contract review. Also responsible for completing the District’s annual financial
audit and publishing of the Comprehensive Annual Financial Report (CAFR). Conducts an
annual review of the District’s Investment Policy, as required by law, with approval by the Board
of Directors. Provides financial analysis and review of staff projects and operational business
proposals. Assists in the preparation of the District’s annual operating and capital budgets, along with updating the Rate Model and the six-year financial plan.
Performance Measures
Debt Coverage Ratio
Measures level of debt coverage
ratio (ability to pay debt). (QualServe) The minimum legal level is 125%.
___________________________________________________________
Otay Water District
133
Finance
Accomplishments Fiscal – Year 2010-2011
Awarded the Government Finance Officers Association (GFOA) Certificate of
Achievement for Excellence in Financial Reporting for the 7th consecutive year.
GFOA is a professional association of approximately 17,500 state, provincial, and local government finance officers in the United States and Canada that sponsors award
programs designed to encourage good financial reporting, for financial documents
including the Comprehensive Annual Financial Report (CAFR) and the annual budget.
Updated the District’s GASB 45 Actuarial Valuation for 2011–2013. This included
changes to the District’s retirement benefits package and reconciliation of the District’s
accounting for OPEB reserve funds. Government Accounting Standards Board
Statement 45 (GASB 45) is an accounting and financial reporting provision requiring
government employers to measure and report the liabilities associated with Other Post-Employment Benefits (OPEB). Reported OPEBs may include post-retirement medical,
pharmacy, dental, vision, life, long-term disability and long-term care benefits that are
not associated with a pension plan.
Staff completed internal audits in the following areas: a) Check requests/payments without a purchase order; b) Obsolete inventory; c) Parcel deferral agreements; and d)
Vehicle fast passes. Additionally, the District’s independent outside auditors completed
reviews of internal controls in the following areas: a) Cash & Investments; b) Payroll;
and c) Purchasing & Accounts Payable. The auditors are in the process of finalizing their written reports. The District actively promotes a program of strong internal controls to
protect against losses due to unauthorized activities or financial transactions.
Reserve Level
Measures all of the District's reserves against the Board
adopted Reserve Policy levels.
134
__________________________________________________________
Fiscal Year 2012 Adopted Budget
Finance
Staff achieved an overall rate of return on the District’s portfolio in excess of the
California State Local Agency Investment Fund (LAIF) rate of return, despite the falling economy and available investment rates. This goal has now been met for more than 3-1/2
continuous years. It is the District’s policy to invest any available 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 statutes governing
the investment of public funds.
Customer Service
Services We Provide
The Customer Service Division is responsible for providing meter reading, billing, receipting, and customer care for water and sewer services. The meter reading team reads approximately
49,000 meters a month using manual and automatic meter reading technology. The District is
almost three quarters of the way through the conversion to an automated meter reading system
that will enhance the District’s efficiency, accuracy and customer service. The billing and
customer care teams handle the coordination of billing and receipting of approximately 50,000 accounts per month. Customers are offered various payment options including ACH, web, IVR
(telephone) and the convenience of multiple locations for walk-in payments. The District has an
automated phone system and web portal which gives customer’s access to their account
information 24/7. If they desire more personal service, the customer care team handles an
average of 6,500 customer calls per month.
Strategic Plan Objectives
Enhance communications with customers using our new phone system.
Increase customers employing on-line bill payment.
Evaluate the feasibility of replacing the existing customer information system or migrating to the new version of the Eden software.
Improve and streamline meter related processes.
___________________________________________________________
Otay Water District
135
Finance
Performance Measures
Accomplishments – Fiscal Year 2010-2011
Successfully transitioned 3,500 accounts from in-house automated payment processing to our new online bill pay vendor which resulted in a reduction of staff time by more than 10 hours per month. The new automated service allows customers increased payment
flexibility with the ability to pay using bank accounts and credit/debit cards.
The ongoing Automated Meter Reader (AMR) change-out program, which included 4,559 meters this year, has reduced time spent on manual meter reading allowing for the
reduction of one FTE position. Currently, 73.25% of the District’s 49,057 meters are
AMR.
Implemented a new phone system with additional IVR and auto-dialer capabilities.
Customers are now greeted with an automated attendant and have the ability to select
from a variety of options including a dial by name directory.
Answer Rate
Percentage of calls as a
measure of all calls received.
Billing Accuracy
Percentage of correct bills
issued. (QualServe)
136
__________________________________________________________
Fiscal Year 2012 Adopted Budget
Finance
Further refined the collection process by transferring delinquent accounts to outside
agencies bi-monthly rather than monthly. By increasing the frequency of the account transfers, Otay has reduced the number of days prior to the start of collection actions.
Changed the process for reading Fire Service meters to coincide with domestic and
irrigation service meter reads. This change has increased efficiency by decreasing field trips and is expected to save the District approximately 120 hours annually.
Modified existing payment processing contracts to take advantage of Utility Discounts
thus reducing the District’s cost for processing credit and debit card payments by approximately .8%.
The lock process for non-compliance of backflow meters was duplicated in two
departments resulting in more field trips. Combining this process under one department
has resulted in greater efficiency and a reduction in staff time.
Payroll and Accounts Payable
Services We Provide
The Payroll Division pays 159 full-time and temporary employees on a bi-weekly basis using the
District’s Integrated Financial Eden System. Timesheets and pay stubs are collected and
distributed electronically. Tax returns are filed on a quarterly basis and W2’s are filed annually.
Benefits and deductions are processed bi-weekly through Accounts Payable. Approximately 750
invoices are processed on a monthly basis.
Strategic Plan Objective
Streamline accounts payable business processes
Accomplishments – Fiscal Year 2010-2011
Accounts payable processes are being reviewed and streamlined to further increase
efficiencies after the reduction of 1 FTE.
Completed bi-weekly payroll and weekly account 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 W2s and 1099s for 2010.
___________________________________________________________
Otay Water District
137
Information Technology and Strategic Planning
Mission Statement
To provide the best quality technology in achieving the goals of the District in serving our
customers and employees.
Division Title Division No.
IT Chief/Applications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2411
IT Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2421
Geographic Information System (GIS) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2431
___________________________________________________________
Otay Water District
138
Position Count FY 2010 FY 2011 FY 2012
Chief Information Officer 1 1 1
GIS Manager 1 1 1
IT Operations Manager 1 1 1
GIS Programmer/Analyst 1 1 1
GIS Analyst 0 1 1
GIS Technician 2 1 1
Network Engineer 1 1 1
Database Administrator 1 1 1
Lead Business System Analyst 0 1 1
Business System Analyst I and II 3 2 2
Network Analyst 1 1 1
Records Assistant 1 0 1
Total 13 12 13
Position Count
District Position Count - 156
Information Technology & Strategic Planning Department - 13
IT Applications IT Operations GIS
Information Technology and
Strategic Planning
139
__________________________________________________________
Fiscal Year 2012 Adopted Budget
Department Responsibilities
FY 2010 FY 2011 FY 2012
Actual Budget Estimated Budget
IT Chief/Applications 899,603$ 965,600$ 942,746$ 1,026,900$
IT Operations 1,361,574 1,349,400 1,368,885 1,337,000
Geographic Information System 603,023 649,100 665,396 716,300
TOTAL 2,864,200$ 2,964,100$ 2,977,027$ 3,080,200$
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.
0.4%
6.0%2.8%
13.0%
16.4%
10.7%
44.3%
6.4%
FY 2012 Total Departmental Budget -$28.7 Million
Information Technology and Strategic Planning -$3,080,200
Board of Directors
General Manager
General Expense
Administrative Services
Finance
Information Technology and
Strategic Planning
Water Operations
Engineering
___________________________________________________________
Otay Water District
140
Information Technology and Strategic Planning
FY 2010 FY 2011 FY 2012
Actual Budget Estimated Budget
Labor and Benefits 1,769,028$ 1,863,800$ 1,862,884$ 2,058,300$
Travel and Meetings 11,669 13,000 10,241 12,500
General Office Expense 3,358 6,200 2,801 4,300
Equipment 880,561 870,800 959,483 844,600
Services 185,937 192,300 125,554 143,500
Training 13,647 18,000 16,064 17,000
Total 2,864,200$ 2,964,100$ 2,977,027$ 3,080,200$
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
FY08 FY09 FY10 FY11 FY12
$2
,
7
0
6
$2
,
8
2
0
$2
,
8
5
6
$2
,
9
6
4
$3
,
0
8
0
$2
,
6
6
7
$2
,
8
1
0
$2
,
8
6
4
$2
,
9
7
7
Th
o
u
s
a
n
d
s
Fiscal Year
Budget vs. Actual
Budget Actual
141
__________________________________________________________
Fiscal Year 2012 Adopted Budget
Information Technology and Strategic Planning
IT Applications
Services We Provide
The Information Technology and Strategic Planning Department provides the following support
services: development and implementation of information technology; the District’s Strategic
Planning process, including the development of long-term strategic initiatives and defining
performance measurement metrics; information system support to the District and also provides
highly responsible and complex administrative support to the District, General Manager, and Board of Directors.
Strategic Plan Objectives
Continue development of the Asset Management program.
Update the Records Management program.
Improve the District's computerized maintenance management system (CMMS).
Develop a management dashboard measuring cost, efficiency, and operational status.
Develop systems and networks that support the disaster recovery plan.
Accomplishments – Fiscal Year 2010-2011
Enhanced the Online Bill Pay feature. This feature allows customers to pay bills online which
significantly reduce the District’s costs while improving access to our customers.
Implemented online forms for personnel providing greater access to our employees while
reducing costs.
Completed requirements gathering and prototype for the new records system.
Developed the District’s FY12-14 Strategic Plan, which touches all departments and lays the foundation for the future.
IT Operations
Services We Provide
IT Operations is responsible for day-to-day functions of the District’s data center, network and
desktop hardware/software, disaster recovery center, telecommunications, mobile and wireless
networks, website, and help desk. IT Operations has collateral responsibilities for access
security control and video surveillance.
___________________________________________________________
Otay Water District
142
Information Technology and Strategic Planning
Performance Measures
Customer Satisfaction
with Website
Tracks customer satisfaction with website through survey.
Network Availability
Percentage of uptime for network
during normal business hours.
Website Hits
Tracks the number of visitors
to our website per month.
143
__________________________________________________________
Fiscal Year 2012 Adopted Budget
Information Technology and Strategic Planning
Accomplishments – Fiscal Year 2010-2011
Implemented the District’s new telephone system which replaced one that was obsolete. It not
only provides more efficient ways to reach customers, but makes it easier for staff to assist
customers when they call. The new system saves staff time and allows for handling a greater number of incoming calls more economically and efficiently. In addition, it enhances our
ability to contact customers quickly and efficiently in case of an emergency.
IT Operations underwent a huge effort in completing the wireless project in the North District, expanding into the South District as well. This project alone will allow staff to utilize mobile
technology when in the field, opening the door for more efficient work processes.
Upgraded the Otay website. As the face of Otay, the website allows the District to
communicate important information to customers as well as staff.
Geographic Information System (GIS)
Services We Provide
The GIS division is responsible for the technical and administrative support to the Engineering
and Operations Departments on GIS/AM/FM and CAD systems. It is also responsible for the
data collection and data QA/QC of the District’s facility data and land based data. In addition, it
provides technical support in designing, developing, documenting and maintaining the District’s
database systems and creates database structures that consolidate the conceptual, logical and physical models of data.
Accomplishments – Fiscal Year 2010-2011
Completed a comprehensive GIS related Strategic Plan, preparing for the years to come.
Developed an advanced data platform to support future asset management efforts.
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Otay Water District
144
Water Operations
Mission Statement
To provide all operations and maintenance service in the most efficient, safe, and cost
effective manner to all internal and external customers, and to strive to continually improve
the level of service.
Division Title Division No.
Water Operations Chief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3211
Water Systems Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3220
Construction Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3230
___________________________________________________________
Otay Water District
145
Position Count
District Position Count - 156
Water Operations Department - 66
Fleet/Equipment
Maintenance
Construction
Maintenance
Water Systems
Operations
Utility
Maintenance
Pump/Electrical
Water Systems
Meter
Maintenance
SCADA
Recycled
Maintenance
Treatment Plant
Laboratory
Water Operations
146
__________________________________________________________
Fiscal Year 2012 Adopted Budget
Position Count FY 2010 FY 2011 FY 2012
Chief, Water Operations 1 1 1
Executive Secretary 1 1 1
Systems Operations Manager 1 1 1
Water Systems Supervisor 1 1 1
Pump Electrical Supervisor 1 1 1
Recycled Water Systems Supervisor 1 1 1
Meter Maintenance/Cross Connect Supervisor 1 1 1
Lead Water Systems Operator 2 2 2
Water Systems Operator I, II, and III 9 9 9
Valve Maintenance Worker 1 1 1
Senior Disinfection Technician 1 2 2
Disinfection Technician 1 0 0
Senior SCADA Instrumentation Technician 1 1 1
SCADA Instrumentation Technician 1 1 1
Electrician I and II 2 2 2
Pump Mechanic I and II 2 2 2
Lead Cross Connection/ Meter Maintenance Worker 1 1 1
Meter Maintenance/Cross Connect Worker I and II 5 5 5
Utility Services Manager 1 1 1
Utility Maintenance Supervisor 2 2 2
Utility Crew Leader 5 4 4
Utility Workers I and II 8 8 9
Senior Utility/Equipment. Operator 3 3 3
Fleet Maintenance Supervisor 1 1 1
Equipment Shop Mechanic I and II 3 3 3
Welder 1 1 0
Reclamation Plant Supervisor 1 1 1
Lead Reclamation Plant Operator 1 1 1
Reclamation Plant Operator I, II, III 3 3 3
Lead Recycled Water Distribution Operator 1 1 1
Recycled Water Distribution Operator 3 3 3
Laboratory Analysts 0 1 1
Laboratory Technicians I and II 2 0 0
Total 68 66 66
Position Count
District Position Count - 156
Water Operations Department - 66
___________________________________________________________
Otay Water District
147
Department Responsibilities
FY 2010 FY 2011 FY 2012
Actual Budget Estimated Budget
Water Operations Chief 435,031$ 447,300$ 437,862$ 434,000$
Water Systems 6,502,135 6,900,200 7,240,806 7,621,100
Construction Maintenance 3,648,150 4,073,000 3,887,494 4,633,500
TOTAL 10,585,316$ 11,420,500$ 11,566,162$ 12,688,600$
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.
0.4%
6.0%2.8%
13.0%
16.4%
10.7%
44.3%
6.4%
FY 2012 Total Departmental Budget -$28.7 Million
Water Operations -$12,688,600
Board of Directors
General Manager
General Expense
Administrative Services
Finance
Information Technology and
Strategic Planning
Water Operations
Engineering
148
__________________________________________________________
Fiscal Year 2012 Adopted Budget
Water Operations
FY 2010 FY 2011 FY 2012
Actual Budget Estimated Budget
Labor and Benefits 6,776,267$ 7,144,300$ 7,236,955$ 7,981,800$
Travel and Meetings 52,591 51,000 53,841 49,000
General Office Expense 4,389 6,000 4,223 4,800
Equipment 50,197 68,900 48,648 61,900
Fees 78,913 74,500 92,024 91,000
Services 349,348 441,900 416,067 360,000
Training 17,237 14,000 9,711 12,000
Materials & Maintenance 1,875,786 2,140,000 1,901,944 2,341,500
Sewer Charges 1,232,217 1,302,600 1,603,159 1,636,600
Miscellaneous 148,371 177,300 199,591 150,000
Total 10,585,316$ 11,420,500$ 11,566,163$ 12,688,600$
$-
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
FY08 FY09 FY10 FY11 FY12
$1
1
,
2
5
3
$1
1
,
6
7
9
$1
1
,
4
7
9
$1
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,
4
2
1
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2
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6
8
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6
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Th
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Fiscal Year
Budget vs. Actual
Budget Actual
___________________________________________________________
Otay Water District
149
Water Operations
Water Systems Operations
Services We Provide
Water Operations staff is responsible for operations and maintenance of the wastewater
collection system, potable and recycled water distribution systems, and the Ralph W. Chapman
Water Recycling Facility. Pump and electrical staff perform preventative, predictive and
corrective maintenance on all pumps, motors, switchgear, and control valves in the District and
assists with electrical maintenance and installation throughout the District. The SCADA staff performs installations, maintenance, updates, and modifications to the SCADA control system
and related communications equipment, both for existing facilities as well as CIP projects.
Laboratory staff ensures all regulatory-required sampling, analyses, and reporting is done to meet
the requirements from the California Department of Public Health for potable water and the
Regional Water Quality Control Board for recycled water and the reclamation plant treatment process. Laboratory staff works closely with the water system operators and disinfection staff to
monitor and optimize the water quality in the distribution system. They also perform
bacteriological sampling and analyses for Utility Maintenance and Engineering to ensure proper
disinfection was performed after maintenance or new construction.
Strategic Plan Objectives
Evaluate water loss management program and make recommendations.
Conduct a process review to enhance efficiency and operations in the following areas: Water Distribution System, Recycled Distribution System, Collection System, and the
Ralph W. Chapman Water Recycling Facility.
Performance Measures
Unplanned Disruptions
Quantifies the number of
unplanned water outages
experienced by the utility
customer expressed as number
of accounts affected per 1,000 accounts. (QualServe)
150
__________________________________________________________
Fiscal Year 2012 Adopted Budget
Water Operations
Technical Quality Complaint
The number of complaints is a
good measure of customer service.
Technical quality complaints allow us to measure the complaint rates we are experiencing with
individual quantification of those
related to core utility services.
It is expressed as complaints per 1,000 customer accounts.
Planned Recycled Water
Maintenance Ratio in Dollars
Compares how effectively the
District is investing in planned maintenance.
Planned Wastewater Maintenance
Ratio in Dollars
Percentage of planned
maintenance costs compared
to combined planned and corrective maintenance costs.
___________________________________________________________
Otay Water District
151
Water Operations
(1) The District anticipates a higher billing for FY 2012 from Metropolitan Water District due to a planned
treatment plant shutdown for major maintenance.
Direct Cost of Treatment
per MGD
Measures the direct cost to
treat one million gallons of wastewater and does not include staff overhead or
fringe benefits, but it does
include their salaries.
(QualServe)
O&M Cost per MG
Measure for the full operation and maintenance cost to treat
one million gallons of
wastewater. (QualServe)
Percentage of Preventative
Maintenance Completed in the
Reclamation Plant
To track the percentage of
scheduled PM's that are
completed in the
Reclamation Plant.
(1)
152
__________________________________________________________
Fiscal Year 2012 Adopted Budget
Water Operations
Percentage of Preventative
Maintenance Completed in the
Pump/Electric Section
To track the percentage of
scheduled PM's that are
completed in the Pump/Electric
Section.
Percentage of Preventative
Maintenance Completed in the
Valve Maintenance Program
To track the percentage of
scheduled PM's that are completed in the Valve
Maintenance Program.
Valve Exercising Program
Actual number of valves exercised per year for maintenance of
distribution systems' infrastructure
to ensure minimal interruption
of potable water delivery to
customers.
___________________________________________________________
Otay Water District
153
Water Operations
Planned Water Service
Disruption Rate
Quantifies the annual average of
planned water outages experienced
by the utility customer expressed as number of accounts affected
per 1,000 accounts. (QualServe)
Drinking Water Compliance Rate
Quantifies the percentage of
time each year that the District meets all of the health related
drinking water standards in
U.S. National Primary Drinking
Water Regulations. (QualServe)
Both Actual/Projected and Targets
are at 100%.
Collection System Integrity
Number of wastewater collection
system failures per 100 miles of collection system pipeline.
(QualServe)
154
__________________________________________________________
Fiscal Year 2012 Adopted Budget
Water Operations
Accomplishments – Fiscal Year 2010-2011
Assisted in four CIP projects: the 12-inch Jamacha Road Pipeline, 1296-1&2 Recoating Project, 657-1&2 Recoating Project, Del Rio and Gillespie Interconnect Project. Assisted
in the planning and design of six major CIP projects: the 711-1 pump and motor
replacement, 803-1 and 850-2 VFD installation, 944-1R recycled pump upgrades,
demolition of the Dorchester and La Presa pump facilities including installation of a new PRV, the North-South Interconnect Project, and the Rancho Del Rey Well Project.
Assisted CWA with the detection and mitigation of the nitrification event of their
Pipeline 4. Nitrification is the reduction of the chloramine residual in a pipeline or
reservoir due to bacteria using the ammonia as a food source. Nitrification in CWA’s pipeline was causing nitrification in the District and in other agencies systems. Also
served on a regional workgroup to draft and implement San Diego County Water
Authority’s Regional Nitrification Control Plan.
Recycled Water Distribution
System Integrity
Tracks number of leaks or breaks per 100 miles of water distribution
system.
Sewer Overflow Rate
Measures the wastewater
collection system pipeline
condition and the effectiveness
of planned maintenance.
(QualServe)
___________________________________________________________
Otay Water District
155
Water Operations
Exercised 4,836 valves this year in the proactive Valve Exercising Program, primarily in
the area of ID 22. Since this program began in 2006, 13,788 valves (66%) of valves in
the District have been exercised. The valve exercising business process was streamlined this year to increase production while primarily using one 2-person crew instead of two
2-person crews.
Several improvements were made at the reclamation plant including automation of the chlorination system, replacement of the filter media, and increasing the physical security,
lighting, and video-camera capabilities of the site.
Continued replacing the SCADA radios to Ethernet radios in the north district to strengthen the communication backbone between the north and central facilities. The
Ethernet radios provide more reliable communications and increased capacity to allow
video surveillance at facilities.
Saved over $9,000 annually in labor costs by converting mechanical altitude valve controls to SCADA control at six reservoirs. This allows for remote valve adjustment
instead of manual adjustment and also reduces the need for confined-space entries into
these vaults.
Added vibration monitoring equipment to the final 16 large pumps and motors, and now
they can all be monitored with this valuable predictive maintenance tool. Vibration
monitoring detects mechanical problems in pumps and motors so repairs can be made
prior to failure, at a lower cost, and can be scheduled more efficiently.
Worked with other regional recycled water agencies to reduce the oversight and costs
from the County of San Diego Department of Environmental Health to oversee required
testing of recycled water sites. As a result, the District will save $6,000 annually in
regulatory agency fees. There should be increased savings in the future from this ongoing effort.
Developed and began implementation of a Proactive Leak Detection Plan to reduce water
loss. This process uses leak noise data loggers to detect and locate leaks that are not visible on the surface of the ground or pavement.
Utility Maintenance / Construction
Services We Provide
The Utility Maintenance and Construction staff provides vital maintenance functions that ensure
the best quality of water and wastewater service to customers while adhering to all applicable
regulatory compliance requirements. Tasks include valve exercising, large meter installation,
main line and service line repairs as well as proactive regulatory system upgrades, and constant evaluation of the system integrity to allow for system planning upgrades. The Meter
Maintenance staff provides meter maintenance and repairs and/or replacement of meters to
ensure accurate accounting of water usage. By proactively administering the Backflow/Cross-
156
__________________________________________________________
Fiscal Year 2012 Adopted Budget
Water Operations
Connection program regulated by the Department of Health, staff provides comprehensive
protection of water quality. The Fleet Maintenance staff implements active preventative
maintenance practices and repairs the District’s vehicles and equipment to ensure optimum
performance while establishing fuel efficient operational practices and emissions compliance.
Strategic Plan Objective
Develop and implement large meter vault retrofit programs.
Performance Measures
Planned Potable water
Maintenance Ratio in Dollars
Compares how effectively the
District is investing in planned
Maintenance. (QualServe)
Percentage of Preventative
Maintenance Completed in the
Fleet Shop
To track the percentage of scheduled PM's that are completed in the Fleet Shop.
___________________________________________________________
Otay Water District
157
Water Operations
Accomplishments – Fiscal Year 2010-2011
Utility Maintenance staff upgraded 124 air-vacs which completed the P2456 Air and
Vacuum Valve Upgrades CIP project. This multi-year CIP project entailed retrofitting
750 existing potable system air and vacuum valves from a below ground position to an
above ground position. This retrofit fulfilled the Department of Health regulations requiring these air-vacs to be located above ground to ensure water quality in the event of
a pressure loss within the water system.
Designed and constructed a new above ground 10-inch meter and by-pass at the Donovan State Prison site in Otay Mesa. This task eliminated costly and highly regulated confined
space entries into the meter vault as well as provided a by-pass of water for the prison
while maintenance or testing occurs on the 10-inch meter.
Construction staff installed a 24-inch butterfly isolation valve that eliminated potential failure of a 27-inch water line (adjacent to the George Bailey Detention Facility in Otay
Mesa). This will increase the reliability of two nearby existing 30-inch water lines
creating a mainline by-pass between them for any emergency maintenance and/or repairs.
Since November 23, 2010, wastewater collection crews cleaned 137,000 feet of sewer
pipe which is 29% of the collection system. Sewer cleaning activities are the primary
source of deterrent for sewer overflows.
Construction staff replaced 5 valves throughout the District. Replacement of these valves
ensures timely and leak-free water line shut-offs that improves system reliability during
maintenance and repair activities.
Meter maintenance crew and the contractor completed 6,450 retrofits to Automated
Meter Readers (AMR). Since the inception of this AMR retrofit CIP project, 35,933
meters out of the District’s total of 49,057 meters have been retrofitted to AMR which
equates to 73.25% AMR’s in the ground.
Replace Manual Read Meters
with Automated Meters
This measure reflects the total
number of AMR Meter Replace-
ments per year which will increase meter reading efficiency and reduce water loss through
increased meter accuracy.
158
__________________________________________________________
Fiscal Year 2012 Adopted Budget
Water Operations
The meter maintenance crew tested 132 District backflows for operability and backflow
protection. In addition, the Meter Maintenance crew tracked and recorded the testing of
4,591 private backflow prevention devices. This program protects the District’s potable water supply from outside source pollution.
Fleet Maintenance Section received a Certificate of Achievement from the California
Highway Patrol for 8 consecutive satisfactory ratings for the Biannual Motor Carrier Safety Compliance Inspection Program as conducted by the California Highway Patrol.
___________________________________________________________
Otay Water District
159
Engineering
Mission Statement
To provide effective services to the other departments and development community by
constructing District assets and expediting the permitting process to attain excellent customer
satisfaction with dedicated employees and innovative technology.
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
___________________________________________________________
Otay Water District
160
Position Count FY 2010 FY 2011 FY 2012
Chief, Engineering 1 1 1
Executive Secretary 1 1 1
Secretary 1 1 1
Engineering Manager 2 2 2
Public Services Manager 1 1 1
Senior Civil Engineer 1 1 1
Associate Civil Engineer 2 2 2
Assistant Civil Engineer I and II 0 1 1
Environmental Compliance Specialist 1 1 1
Permit Technicians 2 2 2
Senior Engineering Technician 3 2 2
Inspection Supervisor 1 1 1
Construction Inspectors I and II 2 2 2
Supervising Land Surveyor 1 1 1
Land Surveyor 1 1 1
Assistant Survey Technician 1 1 1
Total 21 21 21
Position Count
District Position Count - 156
Engineering Department - 66
Water Resources Design / Planning /
Construction /
Environmental
Public Services /
Survey / Inspection
Engineering
161
__________________________________________________________
Fiscal Year 2012 Adopted Budget
Department Responsibilities
FY 2010 FY 2011 FY 2012
Actual Budget Estimated Budget
Engineering Chief 238,363$ 228,300$ 192,154$ 167,100$
Planning 340,598 550,000 351,268 305,000
Design 194,459 317,700 252,384 259,700
Water Resources 146,762 154,400 183,141 162,000
Public Services 289,508 183,300 282,846 292,400
Construction Services 266,839 133,200 240,376 154,200
Survey Services 256,274 224,300 276,243 285,400
Environmental Services 183,938 232,900 205,447 211,100
TOTAL 1,916,741$ 2,024,100$ 1,983,859$ 1,836,900$
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.
0.4%
6.0%2.8%
13.0%
16.4%
10.7%
44.3%
6.4%
FY 2012 Total Departmental Budget $28.7 Million
Engineering -$1,836,900
Board of Directors
General Manager
General Expense
Administrative Services
Finance
Information Technology and Strategic Planning
Water Operations
Engineering
___________________________________________________________
Otay Water District
162
Engineering
FY 2010 FY 2011 FY 2012
Actual Budget Estimated Budget
Labor and Benefits 1,237,834$ 1,089,800$ 1,271,573$ 1,190,400$
Travel and Meetings 18,164 22,700 14,145 17,700
General Office Expense 6,091 9,100 6,700 6,200
Equipment 3,952 15,100 21,655 7,700
Fees 38,198 40,000 34,543 35,000
Services 607,782 840,700 633,299 573,200
Training 4,720 6,700 1,944 6,700
Total 1,916,741$ 2,024,100$ 1,983,859$ 1,836,900$
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
FY08 FY09 FY10 FY11 FY12
$3
,
3
0
6
$2
,
9
5
5
$2
,
0
7
1
$2
,
0
2
4
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,
8
3
7
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,
6
8
7
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,
2
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6
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,
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,
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Th
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s
Fiscal Year
Budget vs. Actual
Budget Actual
163
__________________________________________________________
Fiscal Year 2012 Adopted Budget
Engineering
Water Resources
Services We Provide
The Water Resources Division is responsible for a variety of water resources planning
functions directly related to potable, recycled water, and sewer services. This includes
identification, negotiation, acquisition, and development of additional potable and
recycled water supplies of various interagency cooperative agreements and coordination
of water resources functions with other entities such as the Metropolitan Water District of Southern California, San Diego County Water Authority, City of San Diego, County of
San Diego, and the City of Chula Vista. Staff prepares a capital improvement program
facility plan and budget, and land development projects to ensure adequate and reliable
water service to customers and compliance with local and state laws for land
development projects. Staff also provides guidance and technical assistance for the development of the water and sewer capacity and annexation fees methodology and rates.
Coordinates funding resources such as grants, loans, and cost sharing opportunities.
Strategic Plan Objectives
Re-negotiate the South Bay Water Reclamation Plant (SBWRP) recycled water supply agreement with the City of San Diego.
Implement the recommendations within the Integrated Water Resources Plan
(IRP) to acquire alternative and/or additional potable and recycled water supplies and enhanced resource reliability.
Continue working with the City of Chula Vista for the possible development of a
Membrane Bioreator Plant (MBR) and for a potential agreement with the City for recycled water supplies from the MBR Plant.
Accomplishments – Fiscal Year 2010-2011
Received $1,700,000 in grant funds from the United States Bureau of Reclamation for participation in their Title XIV Program in FY 2011. Total Title XIV grant funds received to date is $11,110,000.
Completed the District’s 2010 Urban Water Management Plan (UWMP), as
required by California’s Urban Water Management Planning Act. Agencies must update their UWMP at least every five years. A new component of this update is Senate Bill 7-7 passed in November 2009 with the goal of reducing California’s
urban per capita water use by 20% by December 31, 2020.
___________________________________________________________
Otay Water District
164
Engineering
Completed an update to the District’s Water Resources Master Plan. Updated the
Water Resources Master Plan to include the demands from the City of Chula
Vista and City of San Diego Community Plan Updates. The District coordinated this update with the planning departments from both agencies to get the latest
information on future demands into San Diego Association of Governments’
(SANDAG) growth forecast and the District’s planning documents in preparation
of the 2010 Urban Water Management Plan.
Planning / Design / Construction / Environmental
Services We Provide
The Planning, Design, Construction, and Environmental Divisions provide a variety of services directly related to potable water, recycled water, and sewer facilities. This includes taking a project literally from “cradle to grave.” Planning staff develops the
preliminary design of a project in order to facilitate final design and ultimately
construction of the facility. Planning staff also coordinates the review of planning
documents related to potential new development. Design staff prepares the design of facilities and advertises projects for bid. Once bid, the Construction staff provides construction management for the projects. Environmental staff coordinates and tracks the
project through the construction stage and for a period after construction if long-term
mitigation is required. In addition, we assist the Operations Department on special
projects related to maintenance of existing facilities including the Ralph W. Chapman Water Reclamation Facility.
Strategic Plan Objectives
Prepare and implement a Waste Water Management Plan.
Strengthen CIP planning, budgeting, and cost tracking processes.
Performance Measures
CIP Project Expenditures
vs. Budget
Compares quarterly CIP
expenditures with budget.
165
__________________________________________________________
Fiscal Year 2012 Adopted Budget
Engineering
Accomplishments – Fiscal Year 2010-2011 with Corresponding Project
Numbers in Parenthesis
The completion of the 36-Inch Jamacha Road Pipeline project was the last component of the project which provides 10,000 AF per year of locally treated
water from Helix Water District’s Levy Treatment Plant. A 5-mile, 36-inch
diameter pipeline from the District’s regulatory site in Rancho San Diego to the
San Diego County Water Authority’s Flow Control Facility No. 14 in El Cajon
was completed to improve the District’s diversification of its water supply. Received final $3.78 million ($4.2 million total) reimbursement from San Diego
County Water Authority (SDCWA). (P2009)
Completed the televising, inspection, and engineering assessment of the District’s sewer system in support of the Sewer System Management Plan (SSMP), approved
by the Board on July 1, 2009. The SSMP requires the District to prepare a
rehabilitation and replacement plan, to identify and prioritize system deficiencies,
Project Closeout Time
Measures the average number
of days between the issuance
of a Notice of Substantial
Completion (NOSC) and a
Notice of Completion (NOC) for CIP projects in construction.
Construction Change Order
Incidences
Measures the rate of change
orders for CIP projects under
construction.
___________________________________________________________
Otay Water District
166
Engineering
and implement short-term and long-term rehabilitation actions to address each
deficiency. (S1210)
Completed a siting study of the various pipeline and pump station alternatives for a North District and South District Interconnection System. This project includes
the design and construction of a pipeline and pump station to transfer water from
the North District to the South District and vice versa for better water reliability.
(P2511)
Awarded contract to design the Otay Mesa Conveyance and Disinfection project
(Rosarito Desalination). This project will provide a potable water transmission
pipeline and pump station to convey the desalinated water from the border of Mexico to Roll Reservoir in Otay Mesa. (P2451)
Completed 90% design of the Sewer Replacement on Avocado, Hidden Mesa,
Challenge, Louisa, and Calavo project. The project includes replacing 5,000 linear feet of over 40 year old sewer pipelines, acquiring six easements from four
different property owners, multiple outreach meetings with residents and the local
planning group, and coordination with the county’s paving program. The project
is currently in review with the County of San Diego. (S2020/S2022/S2023)
Completed the design of the Ralph W. Chapman Water Recycling Facility
Upgrade project. This project upgrades the plant to meet more stringent effluent
nitrogen levels and includes energy efficient aeration panels and turbo aeration
blowers that will result in significant energy savings. (R2096)
Completed hydraulic modeling and design for modifications and upgrades on the
944-1R Recycled Water Pump Station Upgrades project. This project consists of
installing a new pump due to increased demand in the 927 and 944 pressure zones as well as installing three new pressure reducing stations to improve localized
high pressures. This project is currently in construction. (R2091)
Completed Phase I of the Rancho del Rey Well project. The objective was to develop a groundwater well production and treatment system at the Rancho del
Rey site capable of producing a sustainable yield as a local potable water supply.
(P2434)
Received nearly $600,000 in reimbursements from Caltrans for the SR-905 Utility Relocations. This project consisted of relocating a number of District pipelines to
accommodate the new SR-905 alignment by Caltrans. (P2440)
Completed the Mitigated Negative Declaration for the San Miguel Regional Training Facility and the Major Use Permit was approved by the County on
October 22, 2010. The training facility will be a joint–use facility that the District
can use for hands-on staff training and for use as an alternate EOC during
disasters. (P2466)
167
__________________________________________________________
Fiscal Year 2012 Adopted Budget
Engineering
Completed the District’s Sub Area Plan for the Joint Water Agencies Natural
Community Conservation Plan-Habitat Conservation Plan which was submitted to
the United States Fish and Wildlife Service and California Department of Fish and Game for review and approval on March 4, 2011. Once approved, this plan
will allow the District to self permit for biological impacts of future CIPs, saving
time and money. (P2494)
Public Services / Survey / Inspection
Services We Provide
The Public Services, Survey, and Inspection Divisions assist the public by responding to
customer visits, phone calls, and inquiries regarding permits, plan-checking fees, filing
procedures, permit status, meter sales, meter costs, and lateral costs. Staff administers all plan-checking submittals for potable water, recycled water and sewer applications for approval, cellular lease agreements, fire service, and backflow inspections, project
deposits, and invoicing. Staff also provides inspections to private developer funded
projects and the District's Capital Improvement Projects, easement and encroachment
enforcements, and survey and utility mark-outs of District facilities and GPS plots.
Strategic Plan Objectives
Work with the District’s largest potable water customers to convert landscape and
interior water use to recycled water where fiscally feasible and safe.
Explore opportunities for improving and streamlining Public Services Division,
including front counter, survey, and inspection business processes.
Performance Measures
Mark-Out Accuracy
Measures the percentage of mark-outs performed without
an at-fault hit, which is damage
to a District facility that results
from a missing or erroneous
mark-out.
Both Actual/Projected and
Targets are at 100%.
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168
Engineering
Accomplishments – Fiscal Year 2010-2011
Public Services generated revenue in meter sales in excess of $3.8 million and
sold 292 meters equating to 592.5 EDU’s and 470 permits.
Public Services generated revenue in cell sites in excess of $1.02 million,
maintained 33 cell site leases, and added one cell site lease to the existing
portfolio.
The Survey Division completed 2,541 USA Mark-out tickets with an accuracy
rate of 100%. The District is required to provide this service as mandated by
California State Law. This service helps protect the public by safeguarding
facilities from damage. (P1438)
District inspectors performed five fire service plan checks and four potable water
plan checks during the course of the year. Additionally, District inspectors
inspected 166 easements within the north part of the District.
169
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Fiscal Year 2012 Adopted Budget
General Expense
Mission Statement
To record and track the general expenses of the District which are not applicable to a specific
department.
Division Title Division No.
General Chief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1311
___________________________________________________________
Otay Water District
170
Description
FY 2010 FY 2011 FY 2012
Actual Budget Estimated Budget
General Expense 1,314,537$ 888,000$ 1,188,034$ 792,400$
TOTAL 1,314,537$ 888,000$ 1,188,034$ 792,400$
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 2.8% of the total Departmental Budget.
0.4
6.0%2.8%
13.0%
16.4%
10.7%
44.3%
6.4%
FY 2012 Total Departmental Budget -$28.7 Million
General Expense -$792,400 Board of Directors
General Manager
General Expense
Administrative Services
Finance
Information Technology and
Strategic Planning
Water Operations
Engineering
171
__________________________________________________________
Fiscal Year 2012 Adopted Budget
General Expense
FY 2010 FY 2011 FY 2012
Actual Budget Estimated Budget
Labor and Benefits (1)384,829$ (28,000)$ 344,512$ (79,600)$
Fees 929,708 916,000 843,522 872,000
Total 1,314,537$ 888,000$ 1,188,034$ 792,400$
(1) FY 2012 and FY 2011 budget amounts are negative because of Vacancy Factor (salary savings) of $159,800
and $204,200, respectively. This is netted against other District-wide Labor and Benefit Expenses.
In prior years, Vacancy Factor was budgeted in the individual departments.
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
FY08 FY09 FY10 FY11 FY12
$1
,
6
8
6
$7
8
4
$8
6
6
$8
8
8
$7
9
2
$2
,
5
0
8
$1
,
8
7
7
$1
,
3
1
5
$1
,
1
8
8
Th
o
u
s
a
n
d
s
Fiscal Year
Budget vs. Actual
Budget Actual
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Otay Water District
172
Capital Improvement Program
The District provides water service to a population of approximately 206,500 which is
expected to ultimately increase to 285,000 by the year 2035. This growth as well as the
maintenance of existing assets requires long term capital planning. The process is dynamic,
due to the evolving needs of the community, the water supply issues, and changing regulations,
and therefore is part of the District’s overall strategic planning. The capital planning process
involves identifying current and future needs, and prioritizing them based on certain operating
assumptions. The primary objective of this planning effort is to support an orderly and
efficient program of expansion, new water supply, replacement and betterment, while
maintaining a stable long-range financial plan.
To accommodate this growth requires that the District invest $500 million in capital assets
through ultimate build-out. The Fiscal Year 2012 Capital Budget is $22.6 million and the six-
year Capital Improvement Program (CIP) totals $154.6 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 CIP is developed based on the District's Water Resources Master Plan, incorporating
historical data, growth, developers' input, SANDAG projections, and long-term economic
outlook. The Water Resources Master Plan was 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.
CIP Justification and Impact on Operating Budget
The justification for each project is determined by whether it is required due to growth
(Expansion), new water sources (New Supply), improvements or upgrades (Betterment), or to
replace an existing asset (Replacement). As these projects are completed and placed into service, there may be an impact on the Operating Budget by increasing costs in the areas of
maintenance, energy, or chemicals as shown on the justification and impact pages in this
section.
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Otay Water District
173
Capital Improvement Program
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 expenditures for assets that cost more
than $10,000 each and have an estimated useful life of two years or more. The Capital Purchase
Projects include Vehicle, Office Equipment and Furniture, and Field Equipment purchases, the details of which can be found on pages 184-185. Capital Facility Projects are items that exceed $10,000 or $20,000 for infrastructure related items (as defined under Capital Equipment on page
250 of the Glossary) and have a useful life of at least two years.
The CIP projects are identified and are prioritized based on the following criteria:
1. Safety, restoration of service, immediate obligation, Board directed, or critical system need.
2. System upgrades or requirements to maintain system reliability in the next few fiscal years.
3. Need to meet the future growth of the system.
4. Project requirement may be reduced in capacity or may have low probability of need in the
future.
The following are the four categories of CIP projects:
New Water Supply
Facilities required to support new sources of water which are funded from new supply fees, or user rates.
Expansion
Facilities required to support new or future users which are funded from capacity fees, or user
rates.
Betterment
Facilities required because of inadequate capacity or new requirements that benefit existing users
and are funded from availability, betterment fees or rates.
Replacement
Facilities required to renew or replace existing facilities that have deteriorated or have exceeded their useful life, funded from user rates.
174
__________________________________________________________
Fiscal Year 2012 Adopted Budget
Major CIP Projects
Capital Improvement Projects
The 2012 Fiscal Year CIP Budget contains 74 projects. The cost of the work planned for Fiscal
Year 2012 is $22.6 million. Of the 74 projects planned for Fiscal Year 2012, only
five are designated as reimbursable projects with estimated costs totaling $5,000. These projects
are built by developers and reimbursed by the District.
The following shows how the $22.6 million of projects are broken down into four categories:
1. Capital facilities $ 10.6 million
2. Replacement or renewal projects $ 10.1 million
3. Capital purchase projects $ 1.9 million
4. Developer reimbursement projects $ 5 thousand The Six-Year CIP and Fiscal Year 2012 Capital Budgets are consistent with the District's Water
Resources Master Plan, current capacity fees, and the District's strategic financial objectives.
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Otay Water District
175
CIP Projects in Construction
Key Component:
Interior and exterior coatings on the 1296-1 & 2 Reservoirs.
Schedule:
A construction contract was awarded to West Coast Industrial Coating,
Inc., on February 3, 2010. Project is approximately 98% complete. Project
completion is anticipated for June 2011.
Cost:
The combined FY 2011 project budgets for CIPs P2490 and P2492 are $805,000, of which $787,000 or 98% was spent. The life-to-date project
budgets are $1,025,000, of which $999,000, or 97%.
Significant
Issues:
The contractor has failed two violable organic compound (VOC) tests, and
as a result the completion of the project will not occur until July 2011. The contractor is recoating the interior with a 100% solids epoxy to ensure
the VOC test passes.
Highlights: None.
1296-1 & 2 Reservoirs
Coating (P2490 & P2492)
This project was awarded to
West Coast Industrial
Coating, Inc. in February
2010. This project includes
an assessment of the
facilities to assure
compliance to all applicable
codes and OSHA standards
as well as for the interior
and exterior coatings of the
1296-1 & 2 Reservoirs.
176
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Fiscal Year 2012 Adopted Budget
CIP Projects in Construction
Key Component:
Interior and exterior coatings on the 657-1 & 2 Reservoirs.
Schedule:
A construction contract was awarded to Blastco, Inc., on January 5, 2011.
Construction is approximately 75% complete. Project completion is
anticipated for September 2011.
Cost:
The combined FY 2011 project budgets for CIPs P2505 and P2506 are
$650,000, of which $650,000, of which $547,000 or 84% was spent. The life-
to-date project budgets are $750,000, of which $547,000, or 73%, has been spent.
Significant
Issues:
None.
Highlights: None.
657-1 & 657-2 Reservoir Coating &
Upgrades (P2505 & P2506)
This project was awarded to Blastco,
Inc. in January 2011. This project
includes an assessment of the
facilities to assure compliance to all
applicable codes and OSHA
standards as well as the for interior
and exterior coatings of the
657-1 & 2 Reservoirs.
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Otay Water District
177
CIP Projects in Construction
Key Component:
Installation of two 6-inch meters, vaults, SCADA, and telemetry equipment for an interconnection with Helix Water District.
Schedule:
A construction contract was awarded to LH Woods & Sons on February 2,
2011. Construction is approximately 9% complete. Project completion is anticipated for August 2011.
Cost:
The combined FY 2011 project budgets for CIPs P2488 and P2489 are
$600,000. Project to be completed in September 2011.
Significant
Issues: None.
Highlights: Otay and Helix Water District have an agreement in place to split 50% of the
cost for design, construction, and maintenance of the facilities. Otay will receive the reimbursement after construction is complete.
Del Rio Road & Gillespie Drive Emergency Interconnections
(P2488 & P2489)
This project was awarded to LH Woods & Sons in February 2011. This project
includes two emergency interconnection vaults with Helix Water District. The
work includes a 6-inch meter, vault, and SCADA equipment.
178
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Fiscal Year 2012 Adopted Budget
(Thousand $000s)FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 Total
Beginning Balance 71,250$ 54,282$ 43,963$ 46,659$ 41,337$ 62,076$
Capacity Fees 3,765$ 5,578$ 5,893$ 8,184$ 9,091$ 10,485$ 42,998$
Debt financing - - 17,985 - 28,365 - 46,350
Grants 574 618 700 500 500 500 3,392
Interest 625 731 897 1,087 1,528 2,163 7,031
Betterment Charges 714 735 757 780 803 827 4,616
Temporary Meters 594 594 595 597 601 602 3,582
Availability (Betterment Portion)531 547 563 579 597 615 3,431
New Supply Fee 389 591 634 852 943 1,083 4,492
COPS 2010B Reimbursement 830 830 830 830 830 830 4,981
Transfer from General Fund 7,040 9,669 10,666 12,997 14,162 15,260 69,794
Interfund Transfers 37 56 75 94 112 150 523
Total Sources 15,098 19,948 39,595 26,500 57,533 32,516 191,190
CIP Projects 22,632 21,346 27,630 22,138 26,049 34,764 154,559
Betterment Fees for Maintenance 655 65 66 67 68 70 991
Debt Service 7,735 7,891 8,349 8,754 9,806 10,636 53,171
Developer Services 1,044 966 854 862 871 880 5,477
Total Uses 32,066 30,268 36,899 31,822 36,794 46,349 214,198
Net Sources (Uses)(16,968)$ (10,319)$ 2,696$ (5,322)$ 20,739$ (13,834)$ (23,008)$
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 CIP 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.
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017
Th
o
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s
a
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s
Fiscal Year
Reserve Fund Balances
New Supply
Expansion
Replacement
Betterment
$54,282
$43,936 $46,659 $41,337
$62,076
$48,242
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Otay Water District
179
CIP Funding Source
(Thousands $000s)FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 TOTAL
Expansion 4,866$ 2,972$ 3,965$ 4,033$ 7,890$ 20,789$ 44,515$
Betterment 6,472 4,585 9,279 5,970 9,420 11,700 47,426
Replacement 9,774 11,869 8,266 8,155 8,619 2,155 48,838
New Supply 1,520 1,920 6,120 3,980 120 120 13,780
TOTAL 22,632$ 21,346$ 27,630$ 22,138$ 26,049$ 34,764$ 154,559$
CIP Category
(Thousands $000s)FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 TOTAL
Capital Facility Projects 10,595$ 7,760$ 15,350$ 10,010$ 16,510$ 32,239$ 92,464$
Replacement/Renewal Projects 10,059 10,499 6,365 3,720 2,355 1,080 34,078
Capital Purchase Projects 1,973 1,360 1,080 965 714 495 6,587
Developer Reimbursement Projects 5 132 1,845 1,314 470 - 3,766
Subtotal 22,632 19,751 24,640 16,009 20,049 33,814 136,895
FY 2013 Through FY 2017 Projects - 1,595 2,990 6,129 6,000 950 17,664
TOTAL 22,632$ 21,346$ 27,630$ 22,138$ 26,049$ 34,764$ 154,559$
CIP Funding Source and Category
$0
$10,000
$20,000
$30,000
$40,000
FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017
Six-Year CIP by Funding Source
New Supply
Expansion
Replacement
BettermentTh
o
u
s
a
n
d
s
$0
$10,000
$20,000
$30,000
$40,000
FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017
Six-Year CIP by Category
Developer Reimbursement Projects
Capital Purchase Projects
Replacement/Renewal Projects
Capital Facility Projects
Th
o
u
s
a
n
d
s
180
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Fiscal Year 2012 Adopted Budget
2012 2013 2014 2015 2016 2017
CIP No.Description FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 Total
CAPITAL FACILITY PROJECTS
P2009 PL - 36-Inch, SDCWA Otay FCF No. 14 to Regulatory Site 300$ -$ -$ -$ -$ -$ 300$
P2370 La Presa System Improvements 600 135 - - - - 735
P2434 Rancho Del Rey Groundwater Well Development 850 2,600 - - - - 3,450
P2451 Otay Mesa Desalination Facility Conveyance and Disinfection System 2,350 2,000 15,000 9,650 - - 29,000
P2466 Regional Training Facility 20 - - - - - 20
P2467 San Diego Formation Groundwater Feasibility Study 400 - - - - - 400
P2473 PS - 711-1 Pump Station Improvement 300 100 - - - - 400
P2488 Del Rio Road Helix and Otay Agency Interconnection 150 - - - - - 150
P2489 Gillespie Drive Helix and Otay Agency Interconnection 150 - - - - - 150
P2497 Solar Power Feasibility Study 25 75 50 60 - - 210
P2502 803-1 Pump Station Modifications 425 100 - - - - 525
P2503 850-2 Pump Station Modifications 325 100 - - - - 425
P2511 North District - South District Interconnection System 1,400 800 - - 15,400 19,200 36,800
P2514 PL - 30-Inch, 980 Zone, Hunte Parkway - Proctor Valley/Use Area 750 750 - - - - 1,500
P2517 Chase Avenue Helix and Otay Interconnection 100 300 - - - - 400
R2048 RecPL - Otay Mesa Distribution Pipelines and Conversions 100 - - - 810 1,040 1,950
R2058 RecPL - 16-Inch, 860 Zone, Airway Road - Otay Mesa/Alta 150 150 - - - 2,100 2,400
R2077 RecPL - 24-Inch, 860 Zone, Alta Road - Alta Gate/Airway 350 350 - - - 1,774 2,474
R2087 RecPL - 24-Inch, 927 Zone, Wueste Road - Olympic/Otay WTP 150 - - - - 5,975 6,125
R2091 RecPS - 927-1 Pump Station Upgrade (10,000 GPM) and Sys Enhancements 1,500 100 - - - 1,850 3,450
R2094 Potable Irrigation Meters to Recycled Water Conversions 200 200 300 300 300 300 1,600
21 Total Capital Facility Projects 10,595 7,760 15,350 10,010 16,510 32,239 92,464
REPLACEMENT/RENEWAL PROJECTS
P2366 APCD Engine Replacements and Retrofits 295 232 234 200 200 200 1,361
P2382 Safety and Security Improvements 480 300 300 300 300 300 1,980
P2416 SR-125 Utility Relocations 48 - - - - - 48
P2440 I-905 Utility Relocations 25 9 - - - - 34
P2453 SR-11 Utility Relocations 50 50 50 - - - 150
P2458 AMR Manual Meter Replacement 1,400 1,400 1,400 650 - - 4,850
P2477 Res - 624-1 Reservoir Cover Replacement 200 200 - - - - 400
P2484 Large Water Meter Replacement Program 220 150 100 - - - 470
P2485 SCADA Communication System and Software Replacement 350 475 155 - - - 980
P2486 Asset Management Plan Condition Assessment and Data Acquisition 400 100 - - - - 500
P2491 850-3 Reservoir Exterior Coating 200 80 - - - - 280
P2493 624-2 Reservoir Interior Coating 30 70 700 120 - - 920
P2494 Multiple Species Conservation Plan 90 20 - - - - 110
P2495 San Miguel Habitat Management/Mitigation Area 250 250 250 250 250 250 1,500
P2496 Otay Lakes Road Utility Relocations 25 75 - - - - 100
P2504 Regulatory Site Access Road and Pipeline Relocation 100 300 198 - - - 598
P2505 657-1 Reservoir Interior/Exterior Coating 25 - - - - - 25
P2506 657-2 Reservoir Interior/Exterior Coating 25 - - - - - 25
P2507 East Palomar Street Utility Relocation 350 285 150 - - - 785
P2508 Pipeline Cathodic Protection Replacement Program 50 80 - - - - 130
P2513 East Orange Avenue Bridge Crossing 5 40 300 400 5 - 750
P2515 870-1 Reservoir Paving 25 275 - - - - 300
P2520 Motorola Mobile Radio Upgrade 50 50 - - - - 100
P2521 Large Meter Vault Upgrade Program 200 200 200 - - - 600
R2096 RWCWRF - Upgrades and Modifications 2,000 1,750 - - - - 3,750
R2099 Recycled System Air and Vacuum Value Retrofit 234 233 233 - - - 700
S2012 SVSD Outfall and RSD Replacement and OM Reimbursement 642 350 300 300 300 300 2,192
S2019 Avocado Boulevard 8-Inch Sewer Main Improvement 1,400 200 - - - - 1,600
S2020 Calavo Drive 8-Inch Sewer Main Replacement 370 110 - - - - 480
S2022 Hidden Mesa Drive 8-Inch Sewer Main Rehabilitation 80 40 - - - - 120
S2023 Calavo Drive Sewer Main Utility Relocation 50 - - - - - 50
S2024 Campo Road Sewer Main Replacement 10 150 250 1,500 1,300 30 3,240
S2026 Challenge Boulevard 8-Inch Sewer Main Replacement 25 200 25 - - - 250
S2027 Rancho San Diego Pump Station Rehabilitation 100 1,300 1,400 - - - 2,800
S2028 Explorer Way 8-Inch Sewer Main Replacement 20 100 5 - - - 125
S2029 Chase Avenue 8-Inch Sewer Main Replacement 20 100 5 - - - 125
S2030 Avocado Boulevard 8-Inch Sewer Main Replacement 50 250 25 - - - 325
S2031 Julianna Street 8-Inch Sewer Main Replacement 20 125 5 - - - 150
S2032 Puebla Drive 8-Inch Sewer Main Replacement 20 100 5 - - - 125
S2033 Sewer System Various Locations Rehabilitation 100 650 50 - - - 800
S2034 Vista Grande and Paseo Grande 8-Inch Sewer Main Replacement 25 200 25 - - - 250
41 Total Replacement/Renewal Projects 10,059 10,499 6,365 3,720 2,355 1,080 34,078
CIP Projects ($1,000s)
The 2012 Fiscal Year CIP Budget contains 74 projects. The costs for the work planned for Fiscal Year 2012 is $22.6
million. Of the 74 projects planned for Fiscal Year 2012, five are designated as reimbursable projects with an
estimated cost of $5,000. This project is built by a developer and reimbursed by the District.
___________________________________________________________
Otay Water District
181
CIP Projects ($1,000s)
CIP No.Description FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 Total
CAPITAL PURCHASE PROJECTS -
P2282 Vehicle Capital Purchases 395 640 520 470 420 400 2,845
P2285 Office Equipment and Furniture Capital Purchases 60 20 20 20 20 20 160
P2286 Field Equipment Capital Purchases 278 100 90 75 74 75 692
P2443 Information Technology Mobile Services 250 100 - - - - 350
P2461 Records Management System Upgrade 100 - - - - - 100
P2469 Information Technology Network and Hardware 460 300 250 200 - - 1,210
P2470 Application Systems Development and Integration 430 200 200 200 200 - 1,230
7 Total Capital Purchase Projects 1,973 1,360 1,080 965 714 495 6,587
DEVELOPER REIMBURSEMENT PROJECTS
P2325 PL - 10" to 12" Oversize, 1296 Zone, PB Road-Rolling H Hydro PS/PB Bndy 1 49 - - - - 50
R2082 RecPL - 24-Inch, 680 Zone, Olympic Parkway - Village 2/Heritage 1 4 795 946 - - 1,746
R2083 RecPL - 20-Inch, 680 Zone, Heritage Road - Village 2/Olympic 1 4 395 - - - 400
R2084 RecPL - 20-Inch, 680 Zone, Village 2 - Heritage/La Media 1 74 75 350 470 - 970
R2085 RecPL - 20-Inch, 680 Zone, La Media - State/Olympic 1 1 580 18 - - 600
5 Total Developer Reimbursement Projects 5 132 1,845 1,314 470 - 3,766
74 Total - FY 2012 Projects 22,632 19,751 24,640 16,009 20,049 33,814 136,895
11 FY 2013 Through FY 2017 Projects - 1,595 2,990 6,129 6,000 950 17,664
85 Grand Totals 22,632$ 21,346$ 27,630$ 22,138$ 26,049$ 34,764$ 154,559$
182
__________________________________________________________
Fiscal Year 2012 Adopted Budget
CIP No.Description J/FS (2) FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 Total (3)
CAPITAL FACILITY PROJECTS FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017
P2009 PL - 36-Inch, SDCWA Otay FCF No. 14 to Regulatory Site E/B 9,300$ 9,600$ 9,900$ 10,200$ 10,500$ 10,800$ 60,300$
P2370 La Presa System Improvements B - (1,900) (2,000) (2,100) (2,200) (2,300) (10,500)
P2434 Rancho Del Rey Groundwater Well Development N/B - - - 8,900 9,200 9,500 27,600
P2451 Otay Mesa Desalination Facility Conveyance and Disinfection System N/B - - - - 3,400 3,500 6,900
P2502 803-1 Pump Station Modifications B - (40,950) (81,900) (84,400) (86,900) (89,500) (383,650)
P2503 850-2 Pump Station Modifications B - (25,200) (50,400) (51,900) (53,500) (55,100) (236,100)
P2514 PL - 30-Inch, 980 Zone, Hunte Parkway - Proctor Valley/Use Area E - - 700 700 700 700 2,800
Total Capital Facility Projects 9,300$ (58,450)$ (123,700)$ (118,600)$ (118,800)$ (122,400)$ (532,650)$
REPLACEMENT/RENEWAL PROJECTS
P2458 AMR Manual Meter Replacement R - - - - (226,400) (233,200) (459,600)
Total Replacement/Renewal Projects - - - - (226,400) (233,200) (459,600)
CAPITAL PURCHASE PROJECTS
P2443 Information Technology Mobile Services E/R - - - 18,000 18,500 19,100 55,600
Total Capital Purchase Projects - - - 18,000 18,500 19,100 55,600
DEVELOPER REIMBURSEMENT PROJECTS
P2104 PL - 12-Inch, 711 Zone, La Media Road - Birch/Rock Mountain E - - - - 2,000 2,100 4,100
P2107 PL - 12-Inch, 711 Zone, Rock Mountain Road - La Media/SR 125 E - - - - 1,700 1,800 3,500
P2325 PL - 10" to 12" Oversize, 1296 Zone, PB Road-Rolling H Hydro PS/PB Bndy E - - 2,300 2,400 2,500 2,600 9,800
P2402 PL - 12-Inch, 624 Zone, La Media Road - Village 7/Otay Valley E - - - - 1,000 1,000 2,000
P2403 PL - 12-Inch, 624 Zone, Heritage Road - Olympic/Otay Valley E - - - - 3,100 3,200 6,300
R2028 RecPL - 8-Inch, 680 Zone, Heritage Road - Santa Victoria/Otay Valley E - - - - 2,400 2,500 4,900
R2042 RecPL - 8-Inch, 927 Zone, Rock Mountain Road - SR-125/EastLake E - - - 900 900 900 2,700
R2047 RecPL - 12-Inch, 680 Zone, La Media Road - Birch/Rock Mountain E - - - 1,400 1,400 1,400 4,200
R2082 RecPL - 24-Inch, 680 Zone, Olympic Parkway - Village 2/Heritage E - - - - 1,200 1,200 2,400
R2083 RecPL - 20-Inch, 680 Zone, Heritage Road - Village 2/Olympic E - - - 700 700 700 2,100
R2084 RecPL - 20-Inch, 680 Zone, Village 2 - Heritage/La Media E - - - - - 1,900 1,900
R2085 RecPL - 20-Inch, 680 Zone, La Media - State/Olympic E - - - - 1,300 1,300 2,600
Total Developer Reimbursement Projects - - 2,300 5,400 18,200 20,600 46,500
Total Operating Budget Cost Impact 9,300$ (58,450)$ (121,400)$ (95,200)$ (308,500)$ (315,900)$ (890,150)$
FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 Total
9,300$ 8,600$ 11,800$ 34,500$ (175,000)$ (178,300)$ (289,100)$
- (66,150) (132,300) (128,700) (132,500) (136,500) (596,150)
- (900) (900) (1,000) (1,000) (1,100) (4,900)
9,300$ (58,450)$ (121,400)$ (95,200)$ (308,500)$ (315,900)$ (890,150)$
(1)Projected Incremental Operating Expenditures (operating cost) or O&M includes labor, benefits, materials and overhead.
Each of the capital purchases and other types of assets has its own unique O&M cost.
(2)J/FS - Justification and Funding Source - Some projects have multiple funding sources as indicated by a slash (/):
E - Expansion B - Betterment R - Replacement N - New Supply
(3)Negative cost reflect savings gained from operational efficiencies or the retirement of a facility.
Note:See pages 181-182 for complete description of CIP projects.
CIP Justification and Impact on Operating Budget
The following schedule shows anticipated operating costs associated with each project in the CIP. Below is a summary
of each category of new costs that will be impacted. No additional revenues are associated with the individual projects,
as revenues are linked more directly to growth in water sales and capacity fee revenues.
Projected Incremental Operating Expenditures (1)
Cost Category
O&M cost for a pump station: Total annual operating cost divided by the number of million of gallons a day (MGD) capacity in the system = O&M
cost per MGD. This rate is then multiplied by the MGD capacity of the new pump station. Similarly, power cost per MGD for transmission is
calculated and applied to the MGD of the new pump station. Chemical expenses are incurred for pumping at the well sites. All estimated costs are
increased annually for inflation.
O&M cost for a reservoir: Total annual operating cost divided by the number of million gallons (MG) of storage capacity in the system. This rate
per MG is then multiplied by the MG capacity of the new reservoir. Reservoirs require chemical treatment; therefore, the chemical cost per MG is
estimated and applied to the future operating cost. Both O&M and chemical costs are increased annually for inflation.
EnergyChemical
Total Operating Budget Cost Impact
Operations and Maintenance
O&M cost for pipes: Total annual operating cost divided by the number of feet of pipe in the system = O&M cost to maintain a foot of pipe. This
rate is then multiplied by the number of feet in new pipeline, and is increased annually for inflation.
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Item#Description Amount Type
Field Equipment
R
R
R
R
N
N
N
N
N
R
21 Vactor rescue-vac device allows for the safe and efficient
excavation of soil during emergencies. This unit works in N
conjunction with the District's current Vactor units.
Information Technology
N
N - New
R - Replacement
15,000.00
473,000.00
60,000.00
75,000.00
15
Total of Field Equipment
Total of Office Equipment
Office Equipment
35,000.00
4 Operations Yard Gen Set. To be purchased from APCD Engine
Replacement and Retrofits CIP P2366.
40,000.00
14
FY 2012 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 Field Equipment, Office
Equipment and Furniture, and Vehicles purchases.
944-1 Pump Station Gen Set. To be purchased from APCD Engine
Replacement and Retrofits CIP P2366.
13 50,000.00
Operations
2
60,000.00
19 Board Video Equipment
Pump engine 1 replacement at Treatment Plant. To be purchased from
APCD engine replacement and retrofits CIP P2366.
45,000.00
18
12 MARS Series 6-1200 Test Bench System. Includes gravimetric weight
scale system W/M3 meter management software, computer and
printer, 500 gallon calibrated stainless steel tank, and on-site
instllation assistance and training with MARS pesonnel. To be
purchased from Field Equipment CIP P2286
93,000.00
Sewage by-pass trash pump. To be purchased from Field Equipment
CIP P2286.
17,000.00
30,000.00
17 Variable frequency drives for two Reclamation Plant effluent pump
motors. 480V, 200 HP, 18 Pulse, $26500 each.
3
Traffic Control Arrow Board. To be purchased from Field Equipment
CIP P2286.
16 Gen Set Load Bank Tester. To be purchased from Field Equipment
CIP P2286.
53,000.00
1004-2 Pump Station Gen Set. To be purchased from APCD Engine
Replacement and Retrofits CIP P2366
Sanitary Sewer Spill Response Trailer. To be purchased from Field
Equipment CIP P2286.
20,000.00
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Item#Description Amount
R
R
R
R
R
N
R
Capital Purchases Grand Total :
P2366 APCD 295,000.00$
P2282 Vehicle 395,000.00$
P2285 Office 60,000.00$
P2286 Field 278,000.00$
1,028,000.00$
N - New
R - Replacement
Total of Vehicles
100,000.00
9
40,000.00
1,028,000.00
495,000.00
100,000.00
35,000.00
Class 3 vehicle with a 2-3 yard dump bed to replace Unit 103. To be
purchased from vehicle capital purchase CIP P2282.
FY 2012 Capital Purchases
10 Sewer televising vehicle to be utilized by the wastewater collection
crew to televise the sanitary sewer system. To be purchased from
vehicle capital purchase CIP P2282.
130,000.00
60,000.00
7 Class 3 utility truck to replace unit No. 126. To be purchased from
vehicle capital purchase CIP P2282.
30,000.00
6 Multi-passenger van to replace Unit 100. To be purchased from
vehicle capital purchase CIP P2282.
Summary by Project
Vehicles
Operations
5 Multi passenger SUV to replace Unit No. 102. To be purchased from
Vehicle Capital Purchase CIP P2282.
11
8 Class 4 Utility Truck to replace Unit No. 94. To be purchased from
vehicle capital purchase CIP P2282.
Class Seven, 5-7 yard dump body dump truck to replace Unit No. 92.
To be purchased from APCD engine replacements and retrofits CIP
P2366.
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Summary of Financial Policies
Introduction
This section includes a brief synopsis of the District’s Reserve Policy, Investment Policy, and Debt Policy.
The Reserve Policy is a comprehensive policy which explains how the District is operated,
including the distinction of business segments to ensure users pay their fair share of costs. It explains how fees are collected and what they are used for. It also explains the difference between funds, as well as how transfers shall be made, and defines each reserve target funding
level. The District adopted this new policy in November 2010.
The following chart depicts the detailed flow of funds that may be useful in understanding the
Reserve Policy.
Unrestricted and
Undesignated
(General Use) Funds
Restricted Funds
FUND CHART
Designated Funds
Designated
Expansion
Designated
New Supply
Designated
Replacement
Designated
Betterment
Potable
General Fund
Recycled
General Fund
Sewer
General Fund
Restricted
Expansion
Restricted
Betterment
Debt
Reserve
Restricted
New Supply
OPEB
Reserve
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Summary of Financial Policies
The Investment Policy is a guideline for the prudent investment of cash. It follows government
code as well as authority granted by the Board of Directors. The primary objectives, in order
of significance, are to invest safely, with adequate liquidity, and to achieve sufficient return on
investments. 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 on 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 receive a Certification of Excellence award from the Association of Public
Treasurers of the United States and Canada (APT US&C).
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1.0 The District
The Otay Water District is a California municipal water district, authorized in 1956 by the State Legislature under the provisions of the Municipal Water District Act of 1911. The District is a "revenue neutral" public agency; meaning each end user pays their fair share of the District's costs
of water acquisition, construction of infrastructure, and the operation and maintenance of the
public water facilities.
The District provides water service within its boundaries, and provides sewer and recycled water service within certain portions of the District. As such, the District operates three distinct business
segments:
Potable water
Recycled water
Sewer
Each of these business segments has an identifiable customer base. In addition, the developer community, large and small, makes up a significant class of customer for each business segment.
As a result, the District has four distinct customer service types:
Developers
Potable water users
Recycled water users
Sewer users
The District has established practices and developed computer systems that have enabled the
District to maintain a clear separation between the service costs relating to each of its four
customer service types. Regardless of customer class, financial principles regarding cost
allocation and fund accounting are fundamental to the District’s Reserve Policy. These principles are derived from the statements of the Governmental Accounting Standards Board (GASB), and
from oversight and advisory bodies such as the California State Auditor, the Little Hoover
Commission, and the Government Finance Officers Association (GFOA). These have significant
impacts on how the finances of the District are organized and how financial processes work within the organization.
1.1 The District’s Use of Financial Resources
All of the District’s expenditures fall into two broad categories: operating costs and capital
expenditures. The operating costs include costs relating to the purchase and delivery of potable
and recycled water, and the transportation and treatment of sewage. The capital expenditures support the construction of infrastructure necessary to deliver services. The District uses various
funds to support the operating and capital efforts. Operations and maintenance is financed only by
rates and charges, also called pay-as-you-go, while capital infrastructure is financed using two
financing methods: pay-as-you-go and debt issuance (requiring annual debt service). The Capital
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Improvement Program (CIP) and the two funding methods support the construction, betterment,
and replacement of infrastructure in all three business areas: potable, recycled, and sewer.
The District establishes different funds to track revenues allocated to different activities. Once
established, each fund receives financial resources up to the levels defined in this policy. Every
year, as a part of the annual budget process, the District’s rate model is updated for each fund with
the current fund balances and the estimated revenues and expenditures for the next six years. The expenditure requirements and financial resources are then evaluated to ensure that the existing
fund balances and additional revenues are sufficient within the current budget cycle and for the
next five years to maintain target fund levels. If a deficit is identified, then options for transfers,
shifting CIP projects, debt, cost saving measures, and/or rate increases are evaluated.
1.2 The District’s Capital Improvement Program (CIP)
The planning, design, and construction costs of all capital facilities within the three business
segments are allocated to four cost types and corresponding fund categories: New Water Supply,
Expansion, Replacement, and/or Betterment. The allocation to these four cost types is defined in
the District’s Capital Improvement Program (CIP) and is determined by an engineering analysis that identifies which type of customer will benefit from each facility, planned or existing. The costs of the capital improvements are borne by either existing users or by the developing areas, or
by a combination of the two, as applicable.
This Reserve Policy protects both the existing users and the developing areas from incurring unwarranted costs. Developing areas are not required to finance facilities that are replacement or betterment and established areas are not required to replace facilities before they are worn out
because of new development. However, to ensure a fair allocation of costs, each facility has the
potential to be classified into any or all of the four cost types. In addition to these cost types there
are occasional CIPs that may be billable to a third party, if for example a third party requires a District facility be relocated. Paragraphs a through d below, describe how the costs of capital facilities are financed through various fees.
a. New Water Supply
The portion of a new supply project that benefits new users is financed from the reserves in the New Water Supply Fund category. These reserves are primarily derived from proceeds of the new water supply fee. The New Water Supply Fund is restricted, meaning the
amounts credited to this fund are accounted for separately and are used solely for the
planning, design, and construction of the new water supply expansion facilities. Debt
financing may also be a temporary financial resource to finance new water supply projects.
The District has a Debt Policy (Policy No. 45) that guides the debt issuance process. Any debt proceeds used for this purpose would be restricted in nature and tracked separately.
General use reserves may also be placed in the Designated New Water Supply Fund and
used for water supply projects.
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b. Expansion
The portion of a CIP project that benefits new users is financed from the reserves in the Expansion Fund category. These reserves are primarily derived from proceeds of the
“incremental” portion of the capacity fees collected within developing areas. Capacity fees
are accounted for separately and used for the planning, design, and construction of
expansion facilities. Additionally, expansion may be financed by annexation fees or the
“buy-in” portion of the capacity fee. Both of these fees are restricted for CIP purposes, but not specifically for expansion. Debt financing may also be a temporary financial resource for expansion projects. General use reserves may also be placed in the Designated
Expansion Fund and used for expansion projects.
c. Replacement
The portion of a CIP project that benefits existing users by replacing an existing facility is financed from the reserves in the Replacement Fund category. Replacement of facilities
may be financed with proceeds of annexation fees, the “buy-in” portion of the capacity
fees, general use reserves held in the Designated Replacement Fund and debt proceeds.
The various funding sources available for replacement projects is anticipated to provide the
necessary flexibility to begin projects while any necessary debt financing is being obtained.
d. Betterment
Facilities that improve reliability, meet new regulations, or create increased levels of
service are considered betterment facilities that benefit existing users. The reserves in the
Better Fund category are used to finance these projects or portions of projects. Certain user rates, charges, and betterment fees are restricted geographically for betterment of facilities,
but may also be used for general maintenance of facilities in that area. Proceeds of the
annexation fee and the “buy-in” portion of the capacity fees may also be used to finance
betterment projects. General use reserves may be placed in the Designated Betterment
Fund and used for betterment projects.
1.21 Relocations
Occasionally, relocation of a District facility is required by a third party. If the District has a
superior easement the relocation cost will be paid by the third party, but only to the extent that the
District does not benefit from the relocation. When relocation is required, a CIP project may be
created which is wholly or partially financed by a third party. On occasion, the District will require that its own facilities be relocated. Depending on the nature of the facilities, the financial
resources for these projects could be from new water supply, expansion, replacement, betterment
or third party financing. Each project is individually negotiated with the third party based on the
facts and circumstances of the relocation. Occasionally, the District will improve the facilities that
are being relocated. When determining how to allocate costs to various funds the following guideline is suggested: if a project has more than five years of useful life remaining, an
incremental cost view should be considered; if the project has less than five years of useful life
remaining, a pro-rata cost approach should be considered. Also, the likelihood the District will
benefit from an asset’s life extension should be evaluated prior to allocating costs.
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1.22 Oversizing
If deemed reasonable by the District, in connection with the construction of backbone facilities, a developer may be required to oversize new facilities for future development. The developer is reimbursed for incremental oversizing costs as per Policy No. 26. These reimbursements are not
available for the distribution system within a development which is an obligation of the developer.
1.23 Exclusion of Developed Areas from Expansion Costs Developed areas are assumed to have sufficient supply and capacity to meet their current requirements as provided by the developers. In addition, they are considered to have borne capital
financial costs that are at least proportionate to the benefits they have received from capital
facilities. Accordingly, no regional capital financing costs are allocated to these areas so that they
will not incur any costs for newly developing areas, except for capital projects that produce
district-wide benefit or cost savings.
1.24 Improvement Districts (IDs)
Improvement Districts (IDs) are established to facilitate the financing of particular improvements
by the specific beneficiaries. The District has a number of improvement districts that were
established for General Obligation (GO) debt repayment. Most GO debt has been paid off and it is unlikely that the District will issue additional GO debt. Improvement districts continue to be used
for other purposes: 1) to distinguish sewer customers from water customers on the county tax roll;
2) to place parcels on the county tax roll for the collection of availability fees; or 3) for charging
special water rates.
Over the years, the District moved to a district-wide perspective of financing improvements. This
philosophy is evident by the district-wide capacity and annexation fees. The District also uses
district-wide water rates. As time goes on, it is expected that IDs will continue to outgrow their
purpose and their use will diminish.
1.3 The Purpose of the Policy
Public entities accumulate and maintain reserves to ensure both financial stability and continuous availability of services. Financial stability and the resulting improved credit quality allow the public entity to weather times of uncertainty and the impact of negative events, both major and
minor. Reserves allow for the ongoing maintenance of property and timely payment of expenses
even when such expenses exceed money available from a single fiscal period. In the final analysis,
the type and level of reserves are driven by the type and magnitude of uncertainty faced by the public entity.
A “reserve” has a number of meanings, as follows:
Working capital is required to insure timely payment of obligations.
A buffer against volatility in revenues.
Liquidity is required to obtain other goods and services (e.g., bank services).
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Designated money to protect creditors.
Money set aside to replace assets at the end of their useful lives.
Money set aside to repair or replace assets damaged or destroyed at unanticipated times.
It is important to note that reserves, fund balance, and net assets are not the same. Fund balance
and net assets are accounting terms and may not always be in the form of cash or liquid
investments. Fund balances and net assets may not always be reserves unless a designation of all or a portion of fund balance is made. In addition, the term fund balance was replaced by net assets as codified by the Governmental Accounting Standards Board (GASB).
In short, reserves are the liquid assets of the District, accumulated and maintained for application
to finance contingent future activities, whether known or unanticipated, operating or capital in nature. The District’s Reserve Policy governs the management and use of these financial resources. Few policies have a more significant impact on the financial health and stability of the
District. This policy explains several key financial concepts used by the District and provides
some background information to the overall strategies and practices utilized. The District has a
fiduciary obligation to its customers, to manage and direct the use of public funds for the purpose of providing water and sewer services in an efficient and financially sound manner.
1.4 Policy Guidelines
In 2000, the Little Hoover Commission reviewed the levels of reserve funds for special districts in
California and prepared a report reflecting that special districts were accumulating unreasonable
levels of funds. As a proactive response, the California Special Districts Association (CSDA) prepared Reserve Guidelines for its members. The Reserve Guidelines were significant in noting
that reserve levels need to be in context of the organization’s overall business model and capital
improvement plan.
There are a number of potential events which the District should consider in the development of reserves:
Economic Uncertainty - performance of the regional economy and the impact of that
performance on demand for water.
Weather - the amount of rainfall and the impact of weather on the availability and the cost
of water as well as the demand for water.
Government Mandates - the impact of federal and state regulation, particularly
environmental regulation.
Tax Changes - limitations on the District’s taxing and spending powers through the passage of a voter referendum, the impound of District property taxes or the removal of the
District’s power to levy property taxes, further increases to Educational Revenue
Augmentation Fund (ERAF) contributions or changes in calculation methodology.
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Operating Costs - increases in operating and maintenance costs because of inflation, labor agreement or other modification.
Force Majeure - unanticipated expenditures resulting from natural disasters or intentional
acts.
Emergency Maintenance - unanticipated expenditures resulting from unexpected failure of
assets (e.g., rupture in the primary transmission system).
Unexpected Variation in Cash Flow - the incidence of additional costs or decreased
revenues that require short-term borrowing in the absence of sufficient financial resources.
The California State Auditor has, in its oversight role, offered a number of quality recommendations for the development of reserve policies as outlined in its report entitled,
“California’s Independent Water Districts: Reserve Amounts Are Not Always Sufficiently
Justified, and Some Expenses and Contract Decisions Are Questionable,” dated June 2004, Report
No. 2003-137. All of these recommendations have been incorporated into this policy in an effort
to address key issues surrounding the management and use of District reserves. The detailed objectives as identified by the State Auditor are as follows:
Distinguish between restricted and unrestricted reserves.
Establish distinct purposes for all reserves.
Set target levels, including minimums and maximums, for the accumulation of reserves.
Identify the events or conditions that prompt the use of reserves.
Conform to plans to acquire or build capital assets.
Receive Board approval and that it is in writing.
Require periodic review of reserve balances and rationale for maintaining them.
Yet, the State Auditor’s report acknowledges that the California Constitution (Article XIII B,
Section 5) is vague in its provisions governing the accumulation and use of reserves.1
Specifically, the Constitution states that “each entity of the government can establish contingency, emergency, unemployment, reserve, sinking fund or similar funds as it shall deem reasonable and
proper.”2 Similarly, the State’s Water Code does not impose any requirements as to specific or
recommended reserve fund levels. As a result, the public finance community as a whole has yet to
settle on any real objective standards for the level of reserve funds appropriate for governmental enterprises. This lack of consensus as to specific standards is indicative of the wide variance of the financial and operations context for different districts and different contingencies justifying
reserves.
1 California State Auditor, Bureau of State Audits, “California’s Independent Water Districts: Reserve Amounts Are Not Always Sufficiently Justified, and Some Expenses and Contract Decisions Are Questionable,” dated June 2004,
2003-137; p. 8. 2 California Constitution, Article XIII B, Section 5.
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The Government Finance Officers Association (GFOA) in its “Recommended Practice on
Appropriate Level of Unreserved Fund Balance in the General Fund” (2002) states that in establishing a policy governing the level of unreserved fund balance in the general fund, a
government should consider a variety of factors. These include:
The predictability of its revenues and the volatility of its expenditures (i.e., higher levels of the unreserved fund balances may be needed if significant revenue sources are subject to unpredictable fluctuations or if operating expenditures are highly
volatile).
The availability of resources in other funds as well as the potential drain upon general fund resources from other funds (i.e., the availability of resources in other
funds may reduce the amount of the unreserved fund balance needed in the general
fund, just as deficits in other funds may require that a higher level of unreserved
fund balance be maintained in the general fund).
Liquidity (i.e., a disparity between when financial resources actually become
available to make payments and the average maturity of related liabilities may
require that a higher level of resources be maintained).
Designations (i.e., governments may wish to maintain higher levels of the
unreserved fund balance to compensate for any portion of unreserved fund balance
already designated for a specific purpose).
In the preparation of this policy, each of the CSDA guidelines and the GFOA recommendations
has been considered. In addition, all seven objectives provided by the State Auditor are
specifically addressed for each reserve. The District wholly supports the State Auditor’s efforts to
bring a high-level of quality to reserve governance and establishing a standard of performance.
The District recognizes that the customer pays for services provided. Quality management
requires that periodic valuations be performed so that fees and charges can be set at appropriate
levels to recover the cost of service. The District’s Reserve Policy has been drafted with
consideration of the GFOA, CSDA, and State Auditor’s general guidelines as provided above. In
addition, the District has adopted the following principles in the management of its financial resources:
Reserves are held and used only for the purpose for which they are collected. This is done to maintain equity among customers.
Each of the service types is tracked separately so that expenditures and revenues can be
monitored and evaluated for each customer type. This provides the District with the necessary information to appropriately charge for each of the services.
Separation of operations and maintenance from capital expenditures occurs within each of
the service types. This is done because the financing of these expenditures is often on different timelines or use different reserves.
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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 reserves to meet the purpose for which the funds were
established. The levels are set by reference to line items in the District’s financial
statements and approved budgets. This allows reserve levels to adjust to the District’s
changing financial circumstances.
Debt financing of facilities provides intergenerational equity and maintains rates at
reasonable levels. This equity is accomplished with long-term financing which spreads the
cost of facilities over the life of the facilities. The burden to pay for facilities is then paid by those who use them. The District could amass significant reserves by pre-collecting financial resources in a Replacement Reserve Fund allowing the District to cash finance all
replacements. However, this would require significant rate increases burdening the current
customers and creating reserve levels difficult to defend to the ratepayers or other oversight
entities. These concepts are fundamental to the way the District manages its funds and have a direct impact
on the way rates and charges are set. The District performs annual budget evaluations and updates
its rate model on an annual basis to monitor and adjust the various funds and revenue sources. The
separation, tracking, and projecting of the various funds and expenditures create the essential information necessary for the equitable rate structure maintained by the District. The annual review preserves the balance between services provided and the fees charged. This review also
insures that reserves will be available to continue to serve the District’s customers.
Financial Sources
2.0 Developers
a. Meter Installation Charges (General Use)
Meter fees are charges collected for new water service connections. Fees vary depending upon meter size and type of service. The costs associated with meter installations are
included in the Operating Expenses section of the budget. These charges are financed by
developers.
b. Developer Deposits (General Use) These deposits are for the engineering and operations services provided to developers.
They are tracked separately for each developer and any excess amount is returned to the
developer.
c. Annexation Fees (Restricted) Annexation fees3 are collected as a condition of annexing into the District’s potable and
recycled water facilities. Since the existing facilities have been built and maintained by
developers or customers within the District, the annexation fee is calculated based on the
3 Code of Ordinances, Section 9.
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present value of all property taxes (1% property tax and availability fees) paid by existing
and prior customers. The annexation fee insures that future users finance a portion of facilities that were sized, built, and maintained for both existing and future users. Proceeds
of annexation fees are restricted and can be used for expansion, replacement, or betterment
projects. These reserves may be shifted back and forth as financing needs change.
d. Annexation Fees (Unrestricted) A sewer annexation fee is collected when property is annexed into an improvement district.
This fee is calculated using the “buy-in” basis and therefore is unrestricted.
e. New Water Supply Fee (Restricted)
New water supply fees4 are based on the cost of the expansion portion of new water supply projects divided by the number of future equivalent dwelling units (EDU). The new water supply fee covers the cost of planning, design, construction, and financing associated with
facilities for the District’s new supply needs. These fees are paid by developers. The
proceeds of this fee may be used only for new potable or recycled water supply projects.
Although the fees collected are not restricted separately, one portion for potable and the other for recycled, they are tracked separately.
f. Capacity Fees (Restricted)
Capacity fees4 are based on the value of existing and future facilities divided by the number
of existing and future equivalent dwelling units. This method of calculating capacity fees
is called the combined method, where the “buy-in” portion of the capacity fee covers costs to repay existing customers for the facilities that they have built, and where the
“incremental” portion of the capacity fee covers the cost of future expansion facilities. The
“buy-in” portion of the capacity fee is restricted to pay for planning, design, construction,
and financing associated with expansion, replacement or betterment facilities. The “buy-
in” portion may be shifted back and forth between expansion, betterment or replacement as
the financing needs change. The “incremental” portion of the capacity fee is limited to
planning, design, construction, and financing exclusively for expansion facilities
(excluding new water supply expansion).
Facility needs are based on projected land use planning. Changes in anticipated future land use
occur and can alter projected facility requirements. Thus, both the anticipated facilities needs and
their projected costs change over time as regulatory agencies make changes to land use. The
District periodically reviews the capacity fee calculation to accommodate such variations. These fees are paid by developers.
The District’s construction of infrastructure occurs prior to the addition of EDUs. This sequence
serves two purposes: one it ensures that the District can serve the pending construction as it is
completed; and two, it is more efficient to oversize many facilities at the outset rather than build for the current need and then reconstruct when the future need is realized. As a result of this
4 Code of Ordinances, Section 28
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strategy, the District has financed construction with bond financing as the existing expansion
reserves are depleted. The capacity fee is calculated based on the combined recycled and potable water systems needs.
This methodology is used because the two water systems work hand-in-hand. All capacity fees
can be used for either potable or recycled but must be tracked to distinguish between the “buy-in”
and “incremental” portions as described above. So, while capacity fees are not restricted
separately by potable and recycled, they are tracked separately.
2.1 Customers/Users
a. Uniform Rates and Charges (General Use) Charges to users for water, sewer, and recycled water are uniform throughout the District
for similar customer types.
b. Monthly System Fees (General Use) This is a fixed revenue source that is charged monthly. The amount of the charge is based on the meter size.
c. Energy Charges (General Use)
The energy pumping fee is a charge per unit of water for each 100 feet of lift, or fraction thereof, above the base elevation of 450 feet. This charge is placed on the monthly water bills of all water customers.
d. Penalties (General Use)
Penalties are added to the monthly water and sewer bills for late charges, locks, etc.
DEVELOPERS
Diagram 2.0: Flow of Funds - Developer Sources
Unrestricted and
Undesignated
(General Use) Funds
Meter
Installation
Charges
Developer
Deposits
Restricted Funds
Annexation
Fees
Capacity
Fees
New Water
Supply Fees
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e. Pass-through Fixed Charges (General Use)
A fixed monthly charge to the District’s customers intended to collect sufficient funds to pass-through the increased fixed costs from the County Water Authority (CWA) and the
Metropolitan Water District (MWD).
f. Special Rates and Charges (Restricted) In addition to the uniform water charges, the District currently has five special water rates
and one sewer rate. The five water rates are for construction, installation, and maintenance
of water storage reservoirs, pump stations, and water lines. Each of these rates and charges
must be used within the respective geographic areas from which they are collected. These
special charges are listed below:
North District water charge (Code section 25.03G)
ID 9 water charge (Code section 25.03H)
ID 3 water charge (Code section 25.03I)
ID 10 water charge (Code section 25.03I)
La Presa water charge (Code section 25.03I)
Russell Square sewer charge (Code section 53.04C)
When these rates were established they were for the specific purpose of constructing,
installing, and maintaining the water and sewer systems in the areas in which the fees were
collected. Therefore, these are restricted reserves by geographic area as well as by purpose. These rates and charges can also be used for maintenance; unlike the availability fees
(discussed in 2.2 B.). These six special rates and charges along with availability fees are
tracked separately, by geographic area, so they can be individually evaluated to maintain
the targeted reserve levels. To meet this need, each special rate and charge is accounted for
in a “sub-fund” of the Betterment Fund.
g. Temporary Meter Fees (General Use/Restricted)
Water charges, in lieu of capacity fees, are charged on temporary meters. This is done
because temporary meters use system capacity but they are not charged a capacity fee.
Temporary water use is charged at two times the water rate with the added charge placed in the Restricted Expansion Fund. The primary users of these temporary meters are
developers; however, general customers also use these for various purposes.
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2.2 County-Collected Taxes and Fees
a. General Levy Property Tax Receipts (1% Property Tax) (General Use)
In 1978, Proposition 13 limited the levy of ad valorem property taxes on real property to one percent of the assessed value of such property. Subsequent legislation, AB 8, established that the receipts from the one percent levy were to be distributed to
taxing agencies proportionate to each agency’s general levy receipts prior to Proposition
13. Taxes received are for general use.
b. Availability Charges (General Use/Restricted)
The District levies availability charges each year in developed and undeveloped areas.
Current legislation provides that any amount up to $10 per parcel is general use and any
amount over $10 per parcel is restricted to be expended in and for the improvement district
(ID) within which it is collected. Accordingly, the District may use availability charges in excess of $10 toward costs of water and sewer facilities which are either, expansion,
betterment, or replacement of facilities consistent with the purpose of the ID in which they
are collected. This portion of the proceeds of availability charges is geographically
restricted and restricted by purpose. As costs are incurred on these projects the respective
IDs are charged, reducing the reserves. To the extent that availability charges are not used for the purpose for which they are collected, they must be returned to the property owners
that paid them. The District has historically used these reserves for betterment capital
facilities thus, the restricted reserves are accounted for in “sub-funds” of the Betterment
Fund (see 2.1 f.).
CUSTOMERS / USERS
Diagram 2.1: Flow of Funds - Customer Sources
Unrestricted and
Undesignated
(General Use) Funds
Monthly
System Fees
Restricted Funds
Energy
Charges
Penalties
Pass –Through
Fixed Charges 2x Water
Rate
Special Rates
and Charges
Uniform Rates
and Charges
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c. State Loan Assessment (Restricted)
The District assesses a 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. When this loan is paid off the charge will be removed.
d. Improvement District General Obligation (GO) Bond Assessments (Restricted) The District has historically issued general obligation (GO) debt and establishes an
improvement district for the repayment of that debt. When this financing method is used,
the county tax roll can be used to collect special taxes or assessments within the ID to pay
the debt obligation. The proceeds of the debt are restricted for the purpose as defined in the
bond documents.
2.3 Miscellaneous Income
a. Miscellaneous Rents and Leases (General Use)
Revenues received from the rental and lease of District property are general use revenues. Not only are they periodic revenues, but there is also a one-time fee charged with the setup
of each new lease. The District incurs expenses related to these rents and leases. The one-
time fees are calculated to recover the costs to setup the leases.
b. Sewer Billing Fees (General Use) Sewer billing fees are general use revenues. The District provides processing and billing
services to the City of Chula Vista to bill and collect from their customers for sewer
service. These fees are to recover the cost the District incurs to provide this service.
COUNTY COLLECTED TAXES AND FEES
Unrestricted and
Undesignated
(General Use)
Funds
General Levy
Property Tax
Receipts
Availability
Charges
Restricted Funds
State Loan
Assessments
General Obligation
Bond Assessments
Diagram 2.2: Flow of Funds – County Collection Sources
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c. Interest Income or Expense Allocation (General Use, Designated, and Restricted)
Interest income (expense) will be allocated every month based upon each fund's month-ending balance. In this way, each fund receives credit for interest earned by that fund and
each fund with a negative balance is charged for the use of the other fund’s reserves.
2.4 Debt Issuance
a. Loans (General/Restricted Use)
As the District determines that additional financing is required for a particular purpose, the
option of borrowing is considered. The determination to borrow is made as a part of the annual rate model update and is evaluated in accordance with the Debt Policy before it is
recommended to the Board for action. As an option to bond indebtedness, loans are
available to satisfy short-term financing needs. These loans may or may not be
contractually restricted for a particular purpose.
b. General Obligation (GO) Bonds (Restricted) As the District becomes more developed it becomes less likely that general obligation debt
will be used as it requires a vote of the public to be approved. Bond proceeds are restricted
for the construction of those facilities identified in the GO bond issuance. Occasionally,
specific portions of bond proceeds may be allocated for the repayment of the principal and interest, also called debt service, on these bonds. As the District determines that additional financing is required for a particular purpose, the option of debt issuance is considered.
The determination to issue debt is made as a part of the annual rate model update and is
evaluated in accordance with the Debt Policy before it is recommended to the Board for
action.
MISCELLANEOUS INCOME
Unrestricted and
Undesignated
(General Use) Funds
Miscellaneous
Rents and Leases
Sewer Billing
Fees
Restricted Funds
Interest Income or
Expense Allocation
Diagram 2.3: Flow of Funds – Miscellaneous Income Sources
Designated Funds
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c. Certificates of Participation (COPs) (Restricted)
General revenues of the District are pledged as security for Certificates of Participation (COPs) indebtedness. If the District determines that additional financing is required for a
particular purpose, the option of debt issuance is considered. The determination to issue
debt is made as a part of the annual rate model update and is evaluated in accordance with
the Debt Policy before it is recommended to the Board for action. This form of financing
has become the industry’s preferred form of financing as it does not require a vote of the general public.
2.5 Inter-fund Transfers
Each year in the budgeting process, future fund levels are projected for the next six years. Based on these projections transfers are recommended. Reserves may be transferred
between Unrestricted or Designated Funds and the General Fund (see 4.0 “Funding Levels”
and 4.1 “Fund Transfers”). Reserves may not be transferred to or from any of the restricted
funds unless it is between two restricted funds with a shared purpose.
Fund Types and Categories
3.0 General Funds
a. Purpose
The General Fund is neither restricted nor designated. The District maintains one General
Fund for each business segment (water, sewer, and recycled). This fund holds the
DEBT PROCEEDS
Unrestricted and
Undesignated
(General Use) Funds
Loans General
Obligation Bonds
Restricted Funds
Certificates of
Participation
Diagram 2.4: Flow of Funds – Debt Issuance Sources
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working capital and emergency operating reserves. While the General Fund has a short-
term focus to finance the District’s annual operations, it is supported by the six-year rate model. This fund is primarily used to finance the operations of the District; however, it can
be used for any District purpose.
This fund can be used to supplement the District’s rates and charges and be a temporary
source of revenue to balance the Operating Budget. This fund can also be used to avoid spikes in the rates or significant and abrupt increases. It is an industry practice to have a
fund that can be used to stabilize rates. This would only occur if there was a temporary
need for reserves that would smooth out a rate spike or to ramp up what would otherwise
be a dramatic rate increase.
The General Fund also plays a role in the debt planning of the District. This fund is viewed by the debt markets as a commitment by the District to ensure financial stability of the rates
and charges of the District. The District is anticipated to need a number of debt issuances
over the years and this fund will help the District not only to stabilize rate fluctuations but
also to access low cost financing for future projects. b. Sources
Meter installation charges, temporary meter fees, uniform rates and charges, monthly
system fees, energy charges, penalties, pass-through fixed charges, general levy property
tax receipts, availability charges, miscellaneous rents and leases, sewer billing fees, interest income or expense allocation, loans, and a portion of the temporary water sales.
The sewer general fund receives sewer charges, penalties, availability charges, sewer
annexation fees (calculated on the “buy-in” basis), and interest income or expense
allocation.
c. Funding Levels
I. Minimum Level – The minimum reserve level for each business segment of
the General Fund is three months of operating budget expenses (evaluated
separately for each segment).
II. Maximum Level – The maximum reserve level for the General Fund is nine
months of operating budget expenses. In the event that this fund exceeds
the seven month level, the excess will be evaluated or transferred to one or more of the designated funds. III. Target Level – The target level of reserves is three months of operating
budget expenses. In the event that the fund drops below the target level, rate
increases or fund transfers would be considered.
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3.1 Designated Other Post Employment Benefits (OPEB) Fund
a. Purpose
Designated Other Post Employment Benefits (OPEB) reserves are “general use” reserves
that have been set apart by Board action to finance the medical benefits of qualified retirees
as outlined in the District’s benefits plan. This District fund holds only a portion of the
total OPEB reserves. The other portion is held in a trust at CalPERS and is restricted for the purpose of financing the OPEB liability. The two portions are considered jointly when
looking at target reserve levels. Every two years, the fund is evaluated by an actuary to
update the annual financing requirements. Changes in the actuarial valuation may result
from changes in benefit levels, employee population, health insurance costs, or general
market conditions. The reserves held by the District are currently designated and may be
placed into the CalPERS trust to legally restrict the funds, removing the District’s legal access to these reserves.
b. Sources
The OPEB liability may be financed by general use reserves coming from user rates and charges, either from an operating budget expenditure or from interfund transfers. Transfers of unrestricted reserves may come from the various designated funds or from the General
Fund. As a part of the normal budget process, annual operating revenues have been
sufficient to finance the ongoing needs of this designated fund. While debt financing is
also an option, the District has only used user rates and charges to finance this fund. c. Funding Levels
I. Minimum Level – The minimum reserve level for this fund is equal to the
District’s OPEB liability as determined by the actuarial study. When
considering the reserve level of this fund, both the District held OPEB reserves and CalPERS held OPEB reserves must be considered jointly.
II. Maximum Level – The maximum reserve level for this fund is equal to the
District’s OPEB liability as determined by the actuarial study. In the event
that the two funds, as described above, exceed the OPEB liability, the District will reduce the annual funding levels as defined by the actuarial study.
III. Target Level – The target reserve level for this fund is equal to the
District’s OPEB liability as determined by the actuarial study. In the event that the two funds, as described above, fall below the OPEB liability, the
District will increase the annual funding levels as defined by the actuarial
study.
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3.2 New Water Supply Fund Category
a. Purpose The New Water Supply Fund category is to finance the expansion portion of new water supply projects and is therefore to be paid by developers. When considering the reserve
level of the New Water Supply category; the New Water Supply Fund, the New Water
Supply Debt Fund, and the Designated New Water Supply Fund all work in concert and
must be considered jointly. b. Sources
The New Water Supply Fund receives reserves only from the new water supply fee. Other
funds within the new water supply category of funds receive debt proceeds and general use
reserves through a designation to this category. c. Funding Levels
I. Minimum Level – As the District matures the CIP will move to purely
replacement projects. As the District moves through its lifecycle the need
for new water supply reserves will decrease and may be reduced to zero. II. Maximum Level – The maximum reserve level for the new water supply
category of funds is limited to five years of the unfinanced new water supply
facilities as described in the District’s CIP Budget. To determine the
unfinanced amount, the total new water supply financing needs must be reduced by the projected new water supply revenues, general fund designations, and bond financing. If the combined new water supply
reserves exceed the target level, the District should consider transferring
designated reserves to meet other purposes, reduce the new water supply
fee, or change the timing of the new water supply projects. III. Target Level – In order to facilitate debt financing of the new water supply,
it is important that the various new water supply funds retain an overall
reserve level of six months, prior to any attempt to obtain debt financing.
This reserve level allows the District the time necessary to issue additional debt without depleting new water supply reserves. If the combined new water supply reserve levels drop below six months of expenditures, this
would trigger a transfer of general use reserves, a bond sale, or a change in
the timing of new water supply projects. Bond proceeds would be placed in
the Restricted New Water Supply Debt Fund while transfers would be
placed in the Designated New Water Supply Fund.
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3.3 Expansion Fund Category
a. Purpose
The Expansion Fund category is to finance the expansion portion of capital projects and
therefore is to be paid for by developers. When considering the reserve levels of the expansion category, the following funds work in concert and must be considered jointly:
the Expansion Fund, Expansion Debt Fund, Annexation Fund (potable and recycled only),
Capital Improvement Fund, and the Designated Expansion Fund. Potable and recycled
reserves are considered jointly while sewer is evaluated separately.
Restricted Funds
Unrestricted and
Undesignated Funding
Sources
Funding Source New Water
Supply Fees
Debt
Proceeds
Restricted Funds
Restricted Funds
Designated Funds
New Water
Supply Fund
Expansion
New Water
Supply Fund
Designated
New Water
Supply Fund
Debt Fund
General Fund – Rates and Charges
New Water
Supply Fund
Category
New Water
Supply
Debt Fund
Diagram 3.2: New Water Supply Fund Category
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b. Sources
The Expansion Fund is financed by water charges in lieu of capacity fees (for temporary
meters) and the “incremental” portion of the capacity fee. The other funds in this category
may also be financed by debt proceeds, annexation fees, the “buy-in” portion of the
capacity fee, and the general fund through a designation of reserves.
c. Funding Levels
I. Minimum Level – As the District matures the CIP will move to purely replacement and betterment projects. As the District moves through this
lifecycle the need for expansion reserves will decrease and may be reduced
to zero.
II. Maximum Level – The maximum reserve level for the expansion category of funds is limited to five years of unfinanced expansion facilities as
described in the District’s CIP Budget. To determine the unfinanced
amount, the total financing needs must be reduced by the projected
expansion revenues, bond financing, and any restricted or general fund
revenues allocated to this fund category. If the combined expansion reserves exceed target levels, the District should consider reducing capacity
fees, reallocating restricted or designated funds to meet other purposes, or
shifting the timing of expansion projects.
III. Target Level – The target level is six months of expansion expenditures. It is important that the expansion reserves remain at a minimum of six months
of expansion expenditures. This reserve level allows the District the time
necessary to issue additional debt without depleting expansion reserves. If
the combined expansion reserves drop below six months of expenditures
this would trigger a transfer of general use reserves, a bond sale, an adjustment to the timing of expansion projects, or a reallocation of restricted
reserves. Bond proceeds would be placed in the Restricted Bond Fund,
transfers of general use reserves would be placed in the Designated
Expansion Fund, and transfers of restricted reserves would be placed in
either the Expansion Annexation Fund or the Expansion Capital Improvement Fund.
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Unrestricted and
Undesignated Funding
Sources
Diagram 3.3: Expansion Fund Category
Funding Source 2x Water
Rates
Capacity
Fees
Restricted Funds
Restricted Funds
Designated Funds
Expansion
Fund
Expansion
Debt Fund
Annexation
Fund
General Fund – Rates and Charges
Annexation
Fees
Restricted Funds Expansion Capital
Improvement
Fund
Debt
Proceeds
Restricted Funds
Capital
Improvement
Fund
Bond
Debt
Expansion
Fund
Designated
Expansion
Fund
59.4%
Expansion
Fund
Category
Restricted Funds Expansion
Annexation Fund
40.6%
%%%
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3.4 Replacement Fund Category
a. Purpose
The Replacement Fund category is to finance replacement projects. When
considering the reserve levels of the replacement category of funds, the following
funds work in concert and must be considered jointly: the Annexation Fund, Debt
Fund, Capital Improvement Fund, and the Designated Replacement Fund. The purpose of these reserves is to pay for the replacement of capital infrastructure and
capital purchases. These reserves are not to be used for the replacement of non-
capital items.
With the District’s development of its financial systems and the greater need and
ability to separate and track reserves, the replacement reserves have been separated
into three funds: water, recycled, and sewer.
Projects undertaken solely for the purpose of replacing major capital equipment or facilities, i.e., where the cost exceeds $10,000 for capital purchases or $20,000 for
infrastructure items, generally these are not considered normal maintenance. When
the cost is below $10,000, the costs are financed annually as operational
maintenance. As charges are incurred on replacement projects the reserves are
deducted from the respective Replacement Funds on a monthly basis.
b. Sources The various funds in this category are financed by debt proceeds, annexation fees,
the “buy-in” portion of the capacity fee, and general fund designations.
c. Funding Levels
I. Minimum Level – The minimum reserve level of this category of funds is
3% of the historical value of existing assets as identified in the District’s
current financial statements. Potable, recycled, and sewer replacement are evaluated separately.
II. Maximum Level – The maximum reserve level of this category of funds is 6% of existing assets. If the combined replacement reserves exceed target
levels, the District should consider transferring annexation fees or the “buy-
in” portion of the capacity fee to meet other purposes. Another
consideration would be to shift the timing of replacement projects.
III. Target Level – The target reserve level of this category of funds is 4% of
existing assets. In the event that the reserves fall below the recommended
target level, the District should consider transferring annexation fees or the
“buy-in” portion of the capacity fee. The District should also consider shifting the timing of replacement projects or issuing debt to support the
planned level of facility replacement. The District will act based on the
annual six-year rate model, to insure that at the end of that planning horizon
the reserves exceed the minimum level and is approaching the target level.
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Funding Source
Unrestricted and
Undesignated Funding
Sources
Capacity
Fees
Diagram 3.4: Replacement Fund Category
Annexation
Fees
Restricted Funds
Restricted Funds
Designated Funds
Capital
Improvement Fund
Replacement
Debt Fund
Designated
Replacement
Fund
Annexation Fund
General Fund – Rates and Charges
Debt
Proceeds
Restricted Funds
Debt Fund
Replacement
Annexation
Fund
Restricted Funds
Replacement
Capital
Improvement
Fund
59.4%
Replacement
Fund
Category
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3.5 Betterment Fund Category
a. Purpose
The Betterment Fund category is to finance the betterment portion of capital
projects with a portion going to maintenance of the potable, recycled, and sewer
systems. The District maintains separate Better Fund categories, one for each
improvement district. An improvement district is a legally defined geographic area usually established for the purpose of bond financing of facilities. The betterment
reserves within these funds are restricted by law for use within the improvement
district in which the fees were collected (Water Code 71631.6). However, the legal
restriction of this reserve depends upon the particular revenue source. (See Section
2.1 f. for a review of the special rates and availability fees).
When considering the reserve levels of the betterment category of funds, the
following funds work in concert and must be considered jointly: the Betterment
Fund, Annexation Fund, Debt Fund, Capital Improvement Fund, and Designated Betterment Fund.
b. Sources The Betterment Fund category receives restricted revenues by improvement district via special water rates and from availability fees collected through the county tax
roll. Betterment may also be financed by debt proceeds, annexation fees, the “buy-
in” portion of the capacity fee, as well as the general fund through a designation of
reserves.
c. Funding Levels
I. Minimum Level – As the District matures the CIP will move to purely replacement projects. As the District moves through this lifecycle the need for betterment reserves will decrease and may be reduced to zero.
II. Maximum Level – The maximum reserve level for the betterment category
of funds is limited to five years of unfinanced betterment facilities as
described in the District’s CIP Budget. To determine the unfinanced amount, the total financing need must be reduced by the projected
betterment revenues, bond financing, annexation, and general fund
designations. If this maximum is exceeded, then the District should evaluate
reductions in the special water rates and availability fees, transferring designated reserves to meet other purposes, or shifting the timing of betterment projects.
III. Target Level – The target is six months of betterment expenditures. It is
important that the betterment reserves remain at a minimum of six months of betterment expenditures. This reserve level allows the District the time necessary to issue additional debt without depleting betterment reserves. If
the combined betterment reserves drop below six months of expenditures
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this would trigger a transfer of general use reserves, a bond sale, or an
adjustment to the timing of betterment projects. Bond proceeds would be placed in the Betterment Bond Fund while transfers would be placed in the
Designated Betterment Fund.
Fund
Restricted Funds
Unrestricted and
Undesignated Funding
Sources
Diagram 3.5: Betterment Fund Category
Funding Source Capacity
Fees
Annexation
Fees
Restricted Funds
Restricted Funds
Designated Funds
Capital
Improvement
Fund
Betterment
Debt Fund
Betterment
Fund
General Fund – Rates and Charges
Special Rates
and Availability
Charges
Restricted Funds
Betterment
Annexation
Fund
Debt
Proceeds
Restricted Funds
Annexation
Fund
Bond
Debt
Designated
Betterment
Fund
Betterment
Fund
Betterment
Capital
Improvement
Fund
59.4%
Betterment
Fund
Category
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Diagram 3.6: Fund Targets
Fund or Fund
Category
Actions to Consider if
below Target Target Maximum
New Supply Fund
Category
New supply fee
increase, bond
financing, or transfer to
designation or to CIF or
Annexation Fund
Total of all funds in fund
category = six months
of capital expenditures
Nexus of cost to fee
Expansion Fund
Category
Capacity fee increase,
bond financing, or
transfer to designation
or to CIF or Annexation
Fund
Total of all funds in fund
category = six months
of capital expenditures
Nexus of cost to fee
Replacement Fund
Category
Bond financing, or
transfer to designation
or to CIF or Annexation
Fund
Total of all funds in fund
category = 4% of
infrastructure
Nexus of cost to fee
Betterment Fund
Category
Bond financing, or
transfer to designation
or to CIF or Annexation
Fund
Total of all funds in fund
category = six months
of capital expenditures
5 years unfunded needs
Debt Reserve Fund Increase tax collection
or rates
One semi-annual
payment
Two semi-annual
payments
OPEB Fund Fund transfers Full funding Full funding
General Fund Rate increase or fund
transfers
Three months of
operating budget
expenses
Nine months of
operating budget
expenses
Note: The annexation fee for sewer is a general fund revenue.
Additional Restricted Funds
4.0 Capital Improvement Fund
a. Purpose
The “Capital Improvement Fund’s sole purpose is to track the “buy-in” portion of the
capacity fee and to ensure these fees are expended solely for the purpose for which they
were collected. In this case it is to pay for facilities that were in existence at the time this
fee was established. These fees may be used for expansion, replacement, or betterment
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projects or any debt related to these categories. These fees may also be used for either the
potable or the recycled systems. As capacity fees are collected, the “buy-in” portion of the fee is allocated as needed to one of three capital improvement funds, one in each of the
Expansion, Replacement, and Betterment Fund categories. These reserves are used to pay
debt or offset any negative balance within these three categories of funds. These fees may
not be used to finance the New Water Supply category, as there were no new water supply
facilities in existence at the time the new methodology for capacity fees was established.
b. Sources
The “buy-in” portion of the capacity fee collected after June 30, 2010.
c. Funding Levels There are no minimums, maximums, or target levels for these reserves on an individual basis. The allocation of this fee to the various capital improvement funds is dependent on
the overall reserve levels within each fund category.
4.1 Annexation Fund
a. Purpose
The Annexation Fund’s sole purpose is to track the potable and recycled annexation fees
collected and to ensure these fees are expended solely for the purpose for which they were
collected. The annexation fees may be used for expansion, replacement, or betterment
projects or any debt related to these categories. These fees may be used for either the potable or recycled systems. These reserves may not be used to finance the New Water Supply category, as it was not in existence at the time the fee was established. As these
fees are collected they are allocated as needed to one of three capital improvement funds,
one in each of the Expansion, Replacement, and Better Fund categories.
b. Sources Potable and recycled annexation fees collected after June 30, 2010.
c. Uses
There are no minimums, maximums, or target levels for these reserves on an individual basis. The allocation of this fee to the various Annexation Funds is dependent on the overall reserve levels within each fund category.
4.2 Debt Reserve Fund
a. Purpose
The Debt Reserve Fund is established to hold the proceeds from the various debt issuances. There are two types of debt, General Obligation bonds and Certificates of Participation
bonds. The proceeds are transferred to the New Water Supply, Expansion, Replacement, or
Betterment Debt Funds as they are expended for various facilities within those fund
categories. As repayment of the debt occurs, the balances within these individual funds are
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Reserve Policy
reduced so that the financial impact of issuing debt is tracked within the category for which
the debt was issued.
b. Sources
Debt proceeds.
c. Uses
There are no minimums, maximums, or target levels for this fund on an individual basis.
This fund is available on an as needed basis to fund CIP projects for new water supply, expansion, replacement, or betterment. From a funding level perspective, these reserves
are evaluated in the context of all the various funds within each fund category.
Fund Transfers
5.0 Funding Levels
As described in the preceding sections, the District maintains reserves for its operating and capital activities. These reserves can be of three types: 1) undesignated or general use reserves, 2)
designated, and 3) restricted for a specific purpose. The restricted reserves can be restricted
geographically and/or by purpose. The District maintains various funds to track the various
designations and restrictions. The source of the money for each fund was discussed along with the purpose, source of funds, and levels. Key characteristics of these funds are the target levels,
minimums, and maximums. The funding levels must be viewed in the context of the economic
environment, political environment, and in light of the District’s rate model. The District’s six-
year rate model not only shows the current balance but also shows the trend of the fund balances.
Often the trend of the fund is a greater indicator of financial stability than is the current balance.
The rate model is updated each year with the budget process and evaluates each fund over the next
six years. The rate model will take into account the general economic environment, looking at the development rate, supply rate increases, the possibility of raising rates, capital infrastructure spending, and strategic plan initiatives. The fund balances may at times be over or under the target
amount. This is not only acceptable but expected. The rate model provides an empirical estimate
of the conformance between the projected District’s financial activities and the guidelines of this
policy.
5.1 Fund Transfers
Reserves within the District’s various designated funds come from interfund transfers of
unrestricted general use reserves. It is important to note that the District has the ability to use
general use reserves for any business purpose. General use reserves may be transferred to and from any unrestricted fund for any business need. Designated reserves are general use reserves which have been set aside for a specific purpose by Board action. These reserves can only be
used for the purpose they were designated, or with Board action they may be used for any other
business purpose. While general use reserves may be used for any restricted purpose they may not
be transferred to Restricted Funds due to the sensitivity of the tracking of restricted reserves. If
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reserves are needed for a restricted purpose they are transferred to a Designated Fund within the
fund category with that particular purpose. Reserves restricted to a fund category may only be used within that category and may not be transferred to another category. For example, the new
water supply fee and the “incremental” portion of the capacity fee are restricted reserves for a
specific purpose, and may not be transferred to another category as no other category has the same
purpose. However, the “buy-in” portion of the capacity fees and annexation fees are restricted for
purposes that are shared by more than one category of funds and may therefore be transferred to a restricted fund within another fund category as long as it shares the same purpose.
In many situations reserve transfers are expected as some fund categories will exceed their maximums or drop below their minimums. Only fund categories that are below the stated target
are eligible to receive transferred reserves. Fund categories that exceed their maximums are first
to be considered for transfers out, followed by funds that exceed their targets. Funds that exceed
their minimums are also available for reserve transfers out, but only when other options are not
available.
The rationale for prioritizing reserve transfers is based on the immediacy of the need and the availability of reserves from other funding sources. For example, the General Fund is first to receive reserves when it drops below its target or minimum levels. This is because of the
immediate and ongoing nature of the expenditures that are served by this fund. The operation of
the District is first and foremost of the objectives of the District. On the other end of the spectrum,
the Replacement Fund has a long-term perspective and will be used to partially finance replacement assets for many years to come. Debt financing is available to respond to this long term, foreseeable, and planned cash flow. This fund is less likely to have immediate needs and has
other financing options.
When making the determination of when transfers are necessary, all funds within a fund category
work as a group. The combined balance of the restricted and designated funds is looked at when
determining whether the fund category requires additional funding from the Restricted Capital
Improvement Fund, Restricted Annexation Fund, Restricted Debt Fund, or the General Fund.
Because the Capital Improvement Fund and Annexation Fund may finance expansion, replacement or betterment reserves may be transferred between these fund categories, but only back and forth
within its own type of restricted fund.
As an example, if during the rate model update process it was determined that the Expansion
Funds (designated and restricted) would drop and stay below the minimum during the six-year
planning horizon, this would trigger a bond sale, a transfer of general use reserves, and/or a
transfer of restricted reserves. If in the cash planning process, it was anticipated that the General
Fund would remain above target during the planning horizon and that the trend did not present a problematic underfunded status, then General Fund reserves would be considered available for
transfer prior to making proceeds available from a bond sale. Also, if during this period the
Betterment Fund category was anticipated to exceed its maximum, then reserves from either the
Designated Betterment Fund, the Annexation Fund, or the Capital Improvement Fund would be
transferred to the corresponding Expansion Fund prior to a bond sale. All funds are evaluated to determine which has the greatest need or availability of reserves before any reserve transfer
recommendation is presented to the Board.
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Glossary
The Reserve Policy contains terminology that is unique to public finance and budgeting. The
following glossary provides assistance in understanding these terms.
Annexation Fees: When water service is requested for land outside the boundaries of the District,
the land to be serviced must first be annexed. For sewer service the land must be annexed into an
improvement district within the District.
Assets: Resources owned or held by Otay Water District that has monetary value.
Availability Fees: The District levies charges each year in developed areas to be used for
upgrades, betterment, or replacement and in undeveloped areas to provide a source of funding for
planning, mapping, and preliminary design of facilities to meet future development. Current legislation provides that any availability charge in excess of $10.00 per acre shall be used only for the purpose of the improvement district for which it was assessed.
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.
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.
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Glossary
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.
1% Property Tax: In 1978, Proposition 13 limited general levy property tax rates for all taxing
authorities to a total rate of 1% of full cash value. Subsequent legislation, AB 8, established that
the receipts from the 1% levy were to be distributed to taxing agencies according to approximately the same proportions received prior to Proposition 13. Funds received are to be used for facilities construction or debt service on bonds sold to build facilities.
Operating Budget: The portion of the budget that pertains to daily operations that provide basic
governmental services. The operating budget contains appropriations for such expenditures as personnel, supplies, utilities, materials, travel and fuel, and does not include purchases of major capital plant or equipment which is budgeted for separately in the Capital Budget. The Operating
Budget also identifies planned non-operating revenues and expenses.
Revenue: Monies that the District receives as income. It includes such items as water sales and sewer fees. Estimated revenues are those expected to be collected during the fiscal year.
System Fees: Each water service customer pays a monthly system charge for water system
replacement, maintenance, and operation expenses. The charge is based on the size of the meter
and class of service.
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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Investment Policy
1.0 Policy
It is the policy of the Otay Water District to invest public funds in a manner which will provide
maximum security with the best interest return, while meeting the daily cash flow demands of
the entity and conforming to all state statues governing the investment of public funds.
2.0 Scope
This investment policy applies to all financial assets of the Otay Water District. The District
pools all cash for investment purposes. These funds are accounted for in the District’s audited
Comprehensive Annual Financial Report (CAFR) and include:
2.1 General Fund
2.2 Capital Project Funds
2.2.1 Designated Expansion Fund
2.2.2 Restricted Expansion Fund
2.2.3 Designated Betterment Fund 2.2.4 Restricted Betterment Fund 2.2.5 Designated Replacement Fund
2.3 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 price changes, provided deviations
from expectations are reported in a timely fashion and appropriate action is taken to control
adverse developments.
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Investment Policy
4.0 Objective
As specified in the California Government Code 53600.5, when investing, reinvesting,
purchasing, acquiring, exchanging, selling and managing public funds, the primary objectives, in
priority order, of the investment activities shall be:
4.1 Safety: Safety of principal is the foremost objective of the investment program.
Investments of the Otay Water District shall be undertaken in a manner that seeks to
ensure the preservation of capital in the overall portfolio. To attain this objective, the District will diversify its investments by investing funds among a variety of securities
offering independent returns and financial institutions.
4.2 Liquidity: The Otay Water District’s investment portfolio will remain sufficiently
liquid to enable the District to meet all operating requirements which might be reasonably
anticipated.
4.3 Return on Investment: The Otay Water District’s investment portfolio shall be
designed with the objective of attaining a benchmark rate of return throughout budgetary
and economic cycles, commensurate with the District’s investment risk constraints and
the cash flow characteristics of the portfolio.
5.0 Delegation of Authority
Authority to manage the Otay Water District’s investment program is derived from the California Government Code, Sections 53600 through 53692. Management responsibility for the
investment program is hereby delegated to the Chief Financial Officer (CFO), who shall be
responsible for all transactions undertaken and shall establish a system of controls to regulate the
activities of subordinate officials and their procedures in the absence of the CFO.
The CFO shall establish written investment policy procedures for the operation of the investment
program consistent with this policy. Such procedures shall include explicit delegation of
authority to persons responsible for investment transactions. No person may engage in an investment transaction except as provided under the terms of this policy and the procedures established by the CFO.
6.0 Ethics and Conflicts of Interest
Officers and employees involved in the investment process shall refrain from personal business
activity that could conflict with the proper execution and management of the investment
program, or that could impair their ability to make impartial investment decisions. Employees
and investment officials shall disclose to the General Manager any material financial interests in financial institutions with which they conduct business. They shall further disclose any personal
financial/investment positions that could be related to the performance of the investment
portfolio. Employees and officers shall refrain from undertaking personal investment
transactions with the same individual with whom business is conducted on behalf of the District.
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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:
Federal Home Loan Bank (FHLB)
Federal Home Loan Mortgage Corporation (FHLMC or "Freddie Mac")
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Investment Policy
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.
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:
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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.
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.
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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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Glossary
Active Investing: Active investors will purchase investments and continuously monitor their activity, often looking at the price movements of their stocks many times a day, in order to
exploit profitable conditions. Typically, active investors are seeking short term profits.
Agencies: Federal agency securities and/or Government-sponsored enterprises.
Bankers’ Acceptance (BA): A draft or bill or exchange accepted by a bank or trust company.
The accepting institution guarantees payment of the bill, as well as the issuer.
Benchmark: A comparative base for measuring the performance or risk tolerance of the investment portfolio. A benchmark should represent a close correlation to the level of risk and
the average duration of the portfolio’s investments.
Broker/Dealer: Any individual or firm in the business of buying and selling securities for itself
and others. Broker/dealers must register with the SEC. When acting as a broker, a broker/dealer executes orders on behalf of his/her client. When acting as a dealer, a broker/dealer executes
trades for his/her firm's own account. Securities bought for the firm's own account may be sold
to clients or other firms, or become a part of the firm's holdings.
Certificate of Deposit (CD): A short or medium term, interest bearing, FDIC insured debt instrument offered by banks and savings and loans. Money removed before maturity is subject
to a penalty. CDs are a low risk, low return investment, and are also known as “time deposits”,
because the account holder has agreed to keep the money in the account for a specified amount
of time, anywhere from a few months to several years.
Collateral: Securities, evidence of deposit or other property, which a borrower pledges to secure
repayment of a loan. Also refers to securities pledged by a bank to secure deposits of public
monies.
Commercial Paper: An unsecured short-term promissory note, issued by corporations, with maturities ranging from 2 to 270 days.
Comprehensive Annual Financial Report (CAFR): The official annual report for the Otay Water
District. It includes detailed financial information prepared in conformity with generally
accepted accounting principles (GAAP). It also includes supporting schedules necessary to demonstrate compliance with finance-related legal and contractual provisions, extensive
introductory material, and a detailed statistical section.
Coupon: (a) The annual rate of interest that a bond’s issuer promises to pay the bondholder on
the bond’s face value. (b) A certificate attached to a bond evidencing interest due on a set date.
Dealer: A dealer, as opposed to a broker, acts as a principal in all transactions, buying and selling
for his own account.
Depenture: A bond secured only by the general credit of the issuer.
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Glossary
Delivery Versus Payment: There are two methods of delivery of securities: delivery versus payment and delivery versus receipt. Delivery versus payment is delivery of securities with an
exchange of money for the securities. Delivery versus receipt is delivery of securities with an
exchange of a signed receipt for the securities.
Derivatives: (1) Financial instruments whose return profile is linked to, or derived from, the
movement of one or more underlying index or security, and may include a leveraging factor, or
(2) financial contracts based upon notional amounts whose value is derived from an underlying
index or security (interest rates, foreign exchange rates, equities or commodities).
Discount: The difference between the cost price of a security and its maturity when quoted at
lower than face value. A security selling below original offering price shortly after sale also is
considered to be at a discount.
Discount Securities: Non-interest bearing money market instruments that are issued at a discount and redeemed at maturity for full face value, e.g., U.S. Treasury Bills.
Diversification: Dividing investment funds among a variety of securities offering independent
returns.
Federal Credit Agencies: Agencies of the Federal government set up to supply credit to various
classes of institutions and individuals, e.g., S&L’s, small business firms, students, farmers, farm
cooperatives, and exporters.
Federal Deposit Insurance Corporation (FDIC): A federal agency that insures deposits in member banks and thrifts, currently up to $100,000 per deposit.
Federal Farm Credit Bank (FFCB): The Federal Farm Credit Bank system supports agricultural
loans and issues securities and bonds in financial markets backed by these loans. It has
consolidated the financing programs of several related farm credit agencies and corporations.
Federal Funds Rate: The rate of interest at which Fed funds are traded. This rate is currently
pegged by the Federal Reserve through open-market operations.
Federal Home Loan Bank (FHIB): Government sponsored wholesale banks (currently 12
regional banks), which lend funds and provide correspondent banking services to member
commercial banks, thrift institutions, credit unions and insurance companies.
Federal Home Loan Mortgage Corporation (FHLMC Or Freddie Mac): A stockholder owned, publicly traded company chartered by the United States federal government in 1970 to purchase
mortgages and related securities, and then issue securities and bonds in financial markets backed
by those mortgages in secondary markets. Freddie Mac, like its competitor Fannie Mae, is
regulated by the United States Department of Housing and Urban Development (HUD).
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Glossary
Federal National Mortgage Association (FNMA Or Fannie Mae): FNMA, like GNMA was chartered under the Federal National Mortgage Association Act in 1938. FNMA is a federal
corporation working under the auspices of the Department of Housing and Urban Development
(HUD). It is the largest single provider of residential mortgage funds in the United States.
Fannie Mae is a private stockholder-owned corporation. The corporation’s purchases include a variety of adjustable mortgages and second loans, in addition to fixed-rate mortgages. FNMA’s
securities are also highly liquid and are widely accepted. FNMA assumes and guarantees that all
security holders will receive timely payment of principal and interest.
Federal Reserve System: The central bank of the United States created by Congress and consisting of a seven member Board of Governors in Washington, D.C., 12 regional banks and
about 5,700 commercial banks that are members of the system.
Government National Mortgage Association (GNMA or Ginnie Mae): A government owned
agency which buys mortgages from lending institutions, securitizes them, and then sells them to investors. Because the payments to investors are guaranteed by the full faith and credit of the
U.S. Government, they return slightly less interest than other mortgage-backed securities.
Interest-Only Strips: A mortgage backed instrument where the investor receives only the interest,
no principal, from a pool of mortgages. Issues are highly interest rate sensitive, and cash flows vary between interest periods. Also, the maturity date may occur earlier than that stated if all
loans within the pool are pre-paid. High prepayments on underlying mortgages can return less to
the holder than the dollar amount invested.
Inverse Floater: A bond or note that does not earn a fixed rate of interest. Rather, the interest rate is tied to a specific interest rate index identified in the bond/note structure. The interest rate
earned by the bond/note will move in the opposite direction of the index. An inverse floater
increases the market rate risk and modified duration of the investment.
Leverage: Investing with borrowed money with the expectation that the interest earned on the investment will exceed the interest paid on the borrowed money.
Liquidity: A liquid asset is one that can be converted easily and rapidly into cash without a
substantial loss of value. In the money market, a security is said to be liquid if the spread
between bid and asked prices is narrow and reasonable size can be done at those quotes.
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.
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Glossary
Master Repurchase Agreement: A written contract covering all future transactions between the
parties to repurchase/reverse repurchase agreements that establish each party’s rights in the
transactions. A master agreement will often specify, among other things, the right of the buyer-
lender to liquidate the underlying securities in the event of default by the seller borrower.
Maturity: The date upon which the principal or stated value of an investment becomes due and
payable.
Money Market: The market in which short-term debt instruments (bills, commercial paper,
bankers’ acceptances, etc.) are issued and traded.
Mutual Funds: An open-ended fund operated by an investment company which raises money
from shareholders and invests in a group of assets, in accordance with a stated set of objectives.
Mutual funds raise money by selling shares of the fund to the public. Mutual funds then take the
money they receive from the sale of their shares (along with any money made from previous investments) and use it to purchase various investment vehicles, such as stocks, bonds, and
money market instruments.
Money Market Mutual Funds: An open-end mutual fund which invests only in money markets.
These funds invest in short term (one day to one year) debt obligations such as Treasury bills, certificates of deposit, and commercial paper.
National Association Of Securities Dealers (NASD): A self-regulatory organization of the
securities industry responsible for the operation and regulation of the NASDAQ stock market
and over-the-counter markets. Its regulatory mandate includes authority over firms that distribute mutual fund shares as well as other securities.
Passive Investing: An investment strategy involving limited ongoing buying and selling actions.
Passive investors will purchase investments with the intention of long term appreciation and
limited maintenance, and typically don’t actively attempt to profit from short term price fluctuations. Also known as a buy-and-hold strategy.
Primary Dealer: A designation given by the Federal Reserve System to commercial banks or
broker/dealers who meet specific criteria, including capital requirements and participation in
Treasury auctions. These dealers submit daily reports of market activity and positions and monthly financial statements to the Federal Reserve Bank of New York and are subject to its
informal oversight. Primary dealers include Securities and Exchange Commission registered
securities broker/dealers, banks, and a few unregulated firms.
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.
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Glossary
Public Securities Association (PSA): A trade organization of dealers, brokers, and bankers who underwrite and trade securities offerings.
Qualified Public Depositories: A financial institution which does not claim exemption from the
payment of any sales or compensating use or ad valorem taxes under the laws of this state, which has segregated for the benefit of the commission eligible collateral having a value of not less
than its maximum liability and which has been approved by the Public Deposit Protection
Commission to hold public deposits.
Range Note: An investment whose coupon payment varies and is dependent on whether the current benchmark falls within a pre-determined range.
Rate of Return: The yield obtainable on a security based on its purchase price or its current
market price. This may be the amortized yield to maturity on a bond the current income return.
Regional Dealer: A securities broker/dealer, registered with the Securities & Exchange
Commission (SEC), who meets all of the licensing requirements for buying and selling
securities.
Repurchase Agreement (RP OR REPO): A holder of securities sells these securities to an investor with an agreement to repurchase them at a fixed price on a fixed date. The security
“buyer” in effect lends the “seller” money for the period of the agreement, and the terms of the
agreement are structured to compensate him for this. Dealers use RP extensively to finance their
positions. Exception: When the Fed is said to be doing RP, it is lending money that is increasing
bank reserves.
Safekeeping: A service to customers rendered by banks for a fee whereby securities and
valuables of all types and descriptions are held in the bank’s vaults for protection.
Secondary Market: A market made for the purchase and sale of outstanding securities issues following their initial distribution.
Securities & Exchange Commission: Agency created by Congress to protect investors in
securities transactions by administering securities legislation.
Sec Rule 15C3-1: See Uniform Net Capital Rule.
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.
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Glossary
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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Debt Policy
1.0 Policy
It is the policy of the Otay Water District to finance the acquisition of high value assets that have
an extended useful life through a combination of current revenues and debt financing. Regularly
updated debt policies and procedures are an important tool to insure the use of the District’s
resources to meet its commitments, to provide the highest quality of service to the District’s customers, and to maintain sound financial management practices. These guidelines are for
general use and allow for exceptions as circumstances dictate.
2.0 Scope
This policy is enacted in an effort to standardize the issuance and management of debt by the Otay Water District. The primary objective is to establish conditions for the use of debt, to
minimize the District’s debt service requirements and cost of issuance, to retain the highest
practical credit rating, maintain full and complete financial disclosure and reporting, and to
maintain financial flexibility for the District. This policy applies to all debt issued by the District
including general obligation bonds, revenue bonds, capital leases and special assessment debt.
3.0 Legal and Regulatory Requirements
The Chief Financial Officer (CFO) and the District’s Legal Counsel will coordinate their
activities to ensure that all securities are issued in full compliance with Federal and State law.
4.0 Capital Facilities Funding
Financial Planning
The District maintains a six-year financial projection that identifies operating requirements and
public facility and equipment requirements, and has developed a Rate Model for funding the
District’s Six-Year Capital Improvement Program (CIP). The District’s CIP Budget places the capital requirements in order of priority and schedules them for funding and implementation. It
identifies a full range of capital needs, provides for the ranking of the importance of such needs,
and identifies all the funding sources that are available to cover the costs of the projects. In cases
where the program identifies project funding through the use of debt financing, the budget
should provide information needed to determine debt capacity. The Rate Model and the CIP Budget give the Board part of the data needed to make informed judgments concerning the
possibility of issuing debt.
Funding Criteria
The Chief Financial Officer (CFO) will evaluate all capital project requests and develop a
proposed funding plan. Priority may be given to those projects that can be funded with current
resources (annual cash flow, fund balances or reserves). Those projects that cannot be funded
with current resources may be deferred or the CFO may recommend that they be funded with
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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.
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4. The project is mandated by State and/or Federal requirements and current resources are
insufficient or unavailable.
5. The project is immediately required to meet or relieve capacity needs and current
resources are insufficient or unavailable.
5.0 Debt Structure
General
The District will normally issue debt with a maturity of not more than 30 years. The structure
should approximate level debt service for the term where it is practical or desirable. There will be no debt structures that include increasing debt service levels in subsequent years, with the first
and second year of a debt payoff schedule the exception and related to projected additional
income to be generated by the project to be funded. There will be no "balloon" debt repayment
schedules that consist of low annual payments and one large payment of the balance due at the end of the term. There will always be at least interest paid in the first fiscal year after debt issuance and principal starting no later than the first fiscal year after the date the facility or
equipment is expected to be placed in service. Capitalized interest will not be for a period of
more than necessary to provide adequate security for the financing.
Limitations on the Issuance of Variable Rate Debt
The District will normally issue debt with a fixed rate of interest. The District may issue variable
rate for the purpose of managing its interest costs. At the same time, the District should protect
itself from too much exposure to interest rate fluctuations. In determining that it is in the
District’s best interest to issue certain debt at variable rates instead of fixed rates, at the time of issuing any variable rate debt, there should be at least a 10% estimated reduction in annual debt
costs by issuing variable rate debt when compared to a similar issuance of fixed rate debt. If the
estimated overall cost savings from issuing variable rate debt is not at least 10% at the time of
issuance, relatively small fluctuations in rates could actually increase the District’s financing costs over the life of the bonds compared to a similar fixed rate financing. By using this 10% factor at the time of issuance, the District can be relatively assured that its variable rate financing
will be cost-effective over the term of the bonds.
The comparison will be based on the following criteria:
1. The interest rate used to estimate interest costs will be the 10 year average for weekly
variable rates. 2. The variable rate debt costs will include an estimate for annual costs such as letter of
credit fees, liquidity fees, remarketing fees, monthly draw fees and annual rating fees
applicable to the letter of credit.
3. Any potential reserve fund earnings will reduce the fixed rate debt service or variable rate
debt service, as applicable.
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Periodically, using the criteria described above, the Chief Financial Officer will compare the
estimated annual debt service costs to maturity of any variable rate debt with estimated debt
service if the debt was converted to fixed rates. If this analysis produces a break even in total
payments over the life of the issue, the Chief Financial Officer will recommend converting such variable rate debt to fixed rate.
Variable rate debt should not represent more than 25% of the District’s total debt portfolio. This
level of exposure to interest rate fluctuations is considered to be manageable in an environment
of increasing interest rates. At a higher ratio than this, the District might be faced with an
unplanned water rate increase to meet its Rate Covenants. Rating agencies use this ratio in their analysis of the District’s overall credit rating.
Further, Rate Covenants applicable to variable rate debt shall not compromise the issuance of
additional debt planned by the District and variable rate debt should always contain a provision
to allow conversion to a fixed rate at the District’s option.
6.0 Credit Objectives
The Otay Water District seeks to maintain the highest possible credit ratings for all categories of
long-term debt that can be achieved without compromising delivery of basic services and
achievement of District policy objectives.
Factors taken into account in determining the credit rating for a financing include:
1. Diversity of the District’s customer base. 2. Proven track record of completing capital projects on time and within budget.
3. Strong, professional management.
4. Adequate levels of staffing for services provided.
5. Reserves. 6. Ability to consistently meet or exceed Rate Covenants.
The District recognizes that external economic, natural, or other events may from time to time
affect the creditworthiness of its debt. Nevertheless, the District is committed to ensuring that
actions within its control are prudent and well planned.
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.
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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.
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
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net of issuance costs and any cash contributions can be demonstrated. Since interest rates may fluctuate between the time when a refinancing is authorized and when the debt is issued,
beginning the process with at least a 5% savings should provide the District with some level of
protection that it can achieve a minimum of three percent (3%) net present value savings of the
refunding bonds when and if the debt is issued. These minimum standards are intended to protect the District staff from spending time on refinancings that become marginally cost-effective after the entire issuance process is complete.
The savings target may be waived, however, if sufficient justification for lowering the savings
target can be provided by meeting one or more of the other refunding objectives described above.
9.0 Subordinate Lien Debt
The District will issue subordinate lien debt only if it is financially beneficial to the District or
consistent with creditworthiness objectives. Subordinate lien debt is structured to be payable
second in priority to the District’s other outstanding debt. Typically, subordinate lien debt might be issued if the District desired a more flexible Rate Covenant with respect to its new obligations
and did not want to refinance all of its existing debt to obtain that less restrictive Rate Covenant.
10.0 Derivatives
The District may consider the use of derivative products on a case-by-case basis, consistent with
State statute and financial prudence. The most common derivatives include transactions known
as “swaps,” in which the District, by contract with an investment bank (known as a “provider”), swaps its fixed rate debt payments for variable rate debt payments or vice versa, and “forwards,”
in which the District enters into a purchase contract with an underwriter to purchase refunding
bonds at a future date at interest rates locked in today (not at today’s rates, but at rates locked in
today). Derivative products introduce an additional risk factor into a financing, called “third-
party risk.” Once a derivative product is entered into, the District must rely upon the financial stability of the provider to perform under the contract. Because the nature of derivatives is
speculative, that is, the District is assuming that rates will either go up or down over the period of
the contract and therefore expects to lock in a financial benefit today based on that assumption,
the financial benefits actually obtained from any derivative contract need to be monitored
periodically to determine if it is in the District’s interest to terminate the contract and what the penalty might be for early termination. This requires a certain level of vigilance, and impartial
advice in this area is actually difficult to obtain since the derivative market is not particularly
liquid or price-transparent and is currently made up of a small handful of reputable providers.
There must be an overwhelming demonstrable financial benefit to the District based on
reasonable assumptions concerning future interest rates in order for the District to use
derivative products.
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11.0 Financing Participants
The District’s purchasing guidelines provide the process for securing professional services
related to individual debt issues. The solicitation and selection process include encouraging
participation from qualified service providers, both local and national, and securing services at
competitive prices.
Financial Advisor: The use of a Financial Advisor is necessary for the sale of debt by a competitive bid process and is desirable when issuing debt through a negotiated sale. The
Financial Advisor has a fiduciary duty to the District and will seek to structure the District’s debt
in the manner that is saleable, yet meets the District’s objectives for the financing. The Financial
Advisor will advise the District on alternative structures for its debt, the cost of different debt
structures and potential pricing mechanisms that can be expected from underwriters (such as call
features, term bonds and premium and discount bond pricing) and, at the District’s direction, will
write the offering document (preliminary official statement). With respect to competitive sales,
the Financial Advisor will arrange for distributing the preliminary official statement, accepting
bids via the internet, verifying the lowest bid and provide detailed instructions for the flow of
funds at closing to the winning Underwriter, the Trustee and the District. In a negotiated sale,
the Financial Advisor will provide independent confirmation on the Underwriter’s proposed
pricing to ensure that interest rates and Underwriter’s compensation are appropriate for the credit
quality of the issue and competitive in the overall public finance market in California.
Underwriter: The Underwriter markets the bonds for sale to investors. While the District’s preference is to select the Underwriter for the debt via sale of the debt at competitive bid, there are circumstances when a negotiated issue is in the best interests of the District. Negotiated sales
are preferable if the security features are particularly complex or market conditions are volatile.
The Chief Financial Officer will recommend whether the method of sale is competitive or
negotiated based on the type of issue and other market conditions. In the case of negotiated sales, the Underwriter will be required to demonstrate sufficient capitalization and sufficient experience related to the specific type of debt issuance.
The Underwriter will work in connection with the District’s Financial Advisor on structuring the
issue and offering different pricing ideas.
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
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no information missing from the official statement of a material nature that would be necessary for an investor to make an informed decision about investing in the District’s bonds.
Trustee: The Trustee is a financial institution selected by the District to administer the collection
of revenues pledged to repay the bonds and to distribute those funds to bondholders.
Letter of Credit Bank: The Letter of Credit Bank is a U.S. or foreign bank that has issued a
letter of credit providing both credit enhancement (the Letter of Credit Bank will pay the debt in the event that the District defaults on the payment) and liquidity for a variable rate bond issue.
These banks have their own short-term credit rating, which is generally higher than the District’s
short-term credit rating. Liquidity is needed because variable rate bondholders are allowed to
“put” their bonds back to the District if they do not like the interest rate currently being offered.
The District’s Remarketing Agent then finds a new buyer for those bonds, but in the event that no buyer is found, a draw is made under the letter of credit to purchase the bonds that have been
“put.” As soon as the bonds are remarketed to another buyer, the letter of credit is repaid. The
letter of credit fees are paid annually. Letter of credits are typically issued for 5-7 years and
must be renewed during the life of the bonds. Credit enhancement is discussed further under the
heading “CREDIT ENHANCEMENT.”
Municipal Bond Insurer: The Municipal Bond Insurer can be one of several insurance
companies that provide municipal bond insurance policies securing payment of the District’s
debt. These policies provide that the Municipal Bond Insurer will pay the District’s debt in the
event that the District defaults on its payments. Debt which is insured carries the Municipal
Bond Insurer’s credit rating, in most cases, AAA. The insurance premium for the bond insurance policy is paid one time at the issuance of the debt and is non-cancelable for the term of
the debt. Unlike a letter of credit, bond insurance policies do not provide liquidity and are most
typically purchased for fixed rate debt.
Remarketing Agent: The Remarketing Agent is an investment bank that, each week, determines
the interest rate for the District’s variable rate obligations. The rate is set at the rate at which the obligations could be sold on the open market at 100% of their face value. The Remarketing
Agent also finds new buyers for any of the obligations that are “put” back to the District.
Rating Agencies: Currently, there are three rating agencies that rate municipal debt in the
United States: Standard & Poor’s, Moody’s Investors Service, and Fitch Investors Service. Rating agencies 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
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redemption price of the debt being refunded through and including the call date. The Verification Agent verifies the mathematical accuracy of calculation of the amount to be
deposited in escrow and the bond counsel relies on this verification in giving their opinion that
the debt is defeased within the meaning of the indenture and that the lien of the debt on the
revenues pledged to the debt being refunded is released.
12.0 Conflict of Interest and Standards of Conduct
Members of the District, the Board of Directors and its consultants, service providers and underwriters shall adhere to standards of conduct and conflict of interest rules as stipulated by
the California Political Reform Act or the Municipal Securities Rulemaking Board (MSRB), as
applicable. All debt financing participants shall maintain the highest standards of professional
conduct at all times, in accordance with MSRB Rules, including Rule G-37. There shall be no
conflict of interest with the District with any debt financing participant.
13.0 Continuing Disclosure
The District acknowledges the responsibilities of the underwriting community and pledges to make all reasonable efforts to assist underwriters in their efforts to comply with SEC Rule 15c2-
12 and MSRB Rule G-36. The District will file its official statements with the MSRB and the
nationally recognized municipal securities information repositories. The District will also post
copies of its comprehensive financial reports on the Internet and provide hard copies of these
documents to interested parties upon request, and will disseminate other information that it deems pertinent to the market in a timely manner. While initial bond disclosure requirements
pertain to underwriters, the District will provide financial information and notices of material
events on an ongoing basis throughout the life of the issue. Material events are defined as those
events which are considered to likely reflect on the credit supporting the securities. The events
considered material according to the SEC are:
1. Rating changes.
2. Non-payment related defaults.
3. Adverse tax opinions or events affecting the tax exempt status.
4. Unscheduled draws on debt service reserves or credit enhancements reflecting financial difficulties. 5. Modifications to the rights of securities holders.
6. Defeasance.
7. Bond calls.
8. Release, substitution, or sale of property securing repayment of the securities.
9. Substitution of credit or liquidity providers, or their failure to perform. 10. Principal and interest payment delinquencies.
14.0 Investment and Arbitrage Compliance
Tax-exempt bonds are required to meet certain provisions of the federal tax code in order to
maintain their tax-exempt status. In order to prevent municipal issuers from borrowing money at
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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
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.
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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.
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.
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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.
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.
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Debt Policy
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
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
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Debt Policy
is obtained for a particular issue, the District will estimate the annual debt service for the issue based on current AAA-rated bond interest rates with the cost of issuance including the payment
of the bond insurance premium. If the estimated debt service on this basis is less than or equal to
estimated debt service for the issue based on interest rates for bonds with the District’s
underlying or stand-alone credit rating, the District will purchase the bond insurance. Any intention of the District to prepay the debt ahead of its scheduled maturity will be taken into account in the analysis. Credit enhancement may be used to improve or establish a credit rating
on a District debt obligation even if such credit enhancement is not cost effective if, in the
opinion of the Chief Financial Officer, the use of such credit enhancement meets the District’s
debt financing goals and objectives.
Variable Rate Bonds
Credit enhancement for variable rate bonds is comprised of two components: credit support and
liquidity. The interest on variable rate bonds is based on a 7-day investment rate. Any investor
can tender their bonds back to the District to be repurchased on 7 days’ notice. Because of the
short-term nature of the investment, the securities that the District is “competing” with for
investors are AAA-rated or AA-rated mutual funds. Therefore, variable debt needs to have credit enhancement to achieve a comparable AAA or AA rating, as well as liquidity support to
provide the District with a mechanism to purchase any bonds that are tendered before they can be
remarketed to new investors. A limited number of financial institutions offer letters of credit that
combine both credit support and liquidity for one fee. An alternative is to purchase bond
insurance to provide credit support and enter into a separate purchase agreement with a financial institution to provide liquidity. The difference in cost between the two structures will be
analyzed before either alternative is selected for variable rate debt.
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Glossary
Ad Valorem Tax: A tax calculated “according to the value” of property. Such a tax is based on
the assessed valuation of tangible personal property. In most jurisdictions, the tax is a lien on the
property enforceable by seizure and sale of the property. General restrictions, such as overall
restrictions on rates, or the percent of charge allowed, sometimes apply. As a result, ad valorem taxes often function as the balancing element in local budgets.
Advance Refunding: A procedure whereby outstanding bonds are refinanced by the proceeds
of a new bond issue prior to the date on which outstanding bonds become due or are callable.
Typically an advance refunding is performed to take advantage of interest rates that are
significantly lower than those associated with the original bond issue. At times, however, an advance refunding is performed to remove restrictive language or debt service reserve
requirements required by the original issue.
Amortization: The planned reduction of a debt obligation according to a stated maturity or
redemption schedule.
Arbitrage: The gain that may be obtained by borrowing funds at a lower (often tax-exempt) rate and investing the proceeds at higher (often taxable) rates. The ability to earn arbitrage by issuing
tax-exempt securities has been severely curtailed by the Tax Reform Act of 1986, as amended.
Assessed Valuation: The appraised worth of property as set by a taxing authority through
assessments for purposes of ad valorem taxation.
Basis Point: One one-hundredth of one percent.
Bond: A security that represents an obligation to pay a specified amount of money on a specific
date in the future, typically with periodic interest payments.
Bond Counsel: An attorney (or firm of attorneys) retained by the issuer to give a legal opinion
concerning the validity of the securities. The bond counsel’s opinion usually addresses the
subject of tax exemption. Bond counsel may prepare, or review and advise the issuer regarding authorizing resolutions or ordinances, trust indentures, official statements, validation proceedings and litigation.
Bond Insurance: A type of credit enhancement whereby a monocline insurance company
indemnifies an investor against a default by the issuer. In the event of a failure by the issuer to
pay principal and interest in-full and on-time, investors may call upon the insurance company to do so. Once assigned, the municipal bond insurance policy generally is irrevocable. The
insurance company receives an up-front fee, or premium, when the policy is issued.
Call Option: A contract through which the owner is given the right but is not obligated to
purchase the underlying security or commodity at a fixed price within a limited time frame.
Cap: A ceiling on the interest rate that would be paid.
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Glossary
Capital Lease: The acquisition of a capital asset over time rather than merely paying rent for
temporary use. A lease-purchase agreement, in which provision is made for transfer of
ownership of the property for a nominal price at the scheduled termination of the lease, is
referred to as a capital lease.
Certificates of Participation: A financial instrument representing a proportionate interest in
payments such as lease payments by one party (such as the District acting as a lessee) to another
party (often a trustee).
CIP: Capital Improvement Program.
Competitive Sale: The sale of securities in which the securities are awarded to the bidder who offers to purchase the issue at the best price or lowest cost.
Continuing Disclosure: The requirement by the Securities and Exchange Commission for most
issuers of municipal debt to provide current financial information to the informational
repositories for access by the general marketplace.
Debt Service: The amount necessary to pay principal and interest requirements on outstanding bonds for a given year or series of years.
Defeasance: Providing for payment of principal of premium, if any, and interest on debt
through the first call date or scheduled principal maturity in accordance with the terms and
requirements of the instrument pursuant to which the debt was issued. A legal defeasance
usually involves establishing an irrevocable escrow funded with only cash and U.S. Government obligations.
Derivative: A financial product that is based upon another product. Generally, derivatives are
risk mitigation tools.
Discount: The difference between a bond’s par value and the price for which it is sold when the
latter is less than par.
Financial Advisor: A consultant who advises an issuer on matters pertinent to a debt issue,
such as structure, sizing, timing, marketing, pricing, terms and bond ratings.
General Obligation Bonds: Debt that is secured by a pledge of the ad valorem taxing power of
the issuer. Also known as a full faith and credit obligation.
Municipal Securities Rulemaking Board (MSRB): The MSRB, comprised of representatives from investment banking firms, dealer bank representatives, and public representatives, is
entrusted with the responsibility of writing rules of conduct for the municipal securities market.
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Glossary
Negotiated Sale: A sale of securities in which the terms of sale are determined through
negotiation between the issuer and the purchaser, typically an underwriter, without competitive
bidding.
Official Statement: A document published by the issuer that discloses material information on a new issue of municipal securities including the purposes of the issue, how the securities will be
repaid, and the financial, economic and social characteristics of the issuing government.
Investors may use this information to evaluate the credit quality of the securities.
Option: A derivative contract. There are two primary types of options (see Put Option and Call
Option). An option is considered a wasting asset because it has a stipulated life to expiration and may expire worthless. Hence, the premium could be wasted.
Optional Redemption: The redemption of an obligation prior to its stated maturity, which can
only occur on dates specified in the bond indenture.
Overlapping Debt: The legal boundaries of local governments often overlap. In some cases,
one unit of government is located entirely within the boundaries of another. Overlapping debt represents the proportionate share of debt that must be borne by one unit of government because another government with overlapping or underlying taxing authority issued its own bonds.
Par Value: The face value or principal amount of a security.
Pay-as-you-go: To pay for capital improvements from current resources and fund balances
rather than from debt proceeds.
Put Option: A contract that grants to the purchaser the right but not the obligation to exercise.
Rate Covenant: A covenant between the District and bondholders, under which the District
agrees to maintain a certain level of net income compared to its debt payments, and covenants to
increase rates if net income is not sufficient to meet such level.
Refunding: A procedure whereby an issuer refinances an outstanding bond issue by issuing new bonds.
Revenue Bonds: A bond which is payable from a specific source of revenue and to which the
full faith and credit of an issuer with taxing power is not pledged. Revenue bonds are payable
from identified sources of revenue, and do not permit the bondholders to compel a jurisdiction to
pay debt service from any other source. Pledged revenues often are derived from the operation of an enterprise. Generally, no voter approval is required prior to issuance.
Special Assessments: A charge imposed against property or parcel of land that receives a
special benefit by virtue of some public improvement that is not, or cannot be enjoyed by the
public at large. Special assessment debt issues are those that finance such improvements and are
repaid by the assessments charged to the benefiting property owners.
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Glossary
Swap: A customized financial transaction between two or more counterparties who agree to make periodic payments to one another. Swaps cover interest rate, equity, commodity and
currency products. They can be simple floating for fixed exchanges or complex hybrid products
with multiple option features.
True Interest Cost (TIC): A method of calculating the overall cost of a financing that takes
into account the time value of money. The TIC is the rate of interest that will discount all future payments so that the sum of their present value equals the issue proceeds.
Underwriter: The term used broadly in the municipal market, to refer to the firm that purchases
a securities offering from a governmental issuer.
Yield Curve: Refers to the graphical or tabular representation of interest rates across different
maturities. The presentation often starts with the shortest-term rates and extends towards longer maturities. It reflects the market’s views about implied inflation/deflation, liquidity, economic
and financial activity, and other market forces.
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Glossary
The Fiscal Budget contains terminology that is unique to public finance and budgeting. The
following budget glossary provides assistance in understanding these terms.
Accrual Basis of Accounting: The basis of accounting under which transactions are recognized
when they occur, regardless of the timing of cash receipts and disbursements.
Acre-Foot: The volume of water that will cover one acre to a depth of one foot. One acre-foot
equals 435.6 units or 325,850 gallons.
Additional Systems Fees: Effective May 1, 1986, each customer receiving water service in the
Improvement District 9 water service zone pays an additional monthly meter system charge of
$2.00 for each meter in service.
Annexation Fees: Whenever water service is requested for land outside the boundaries of the
District it must first be annexed into the District. The annexation fee for water service was set at
$1,477 per EDU on July 1, 2009. Whenever sewer service is requested for land outside the
boundaries of an improvement district (ID) it must first be annexed into the ID. The fee for
sewer annexation was set at $3,819 on December 16, 1998. These base rates are adjusted
quarterly according to a cost of living index. The rates as of July 1, 2011 are $1,516 and $5,593
for water and sewer, respectively.
Appropriation: The annual budget adopted by the District’s Board for monitoring and control
purposes, serving as a financial plan.
Assets: Resources owned or held by the District that have monetary value.
Availability Fees: The District levies charges each year in developed areas to be used for general
purposes for construction of facilities, 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 July 1 and ending June 30 for budgetary and financial reporting purposes.
Betterment Fees: In addition to other applicable water rates and charges, certain water customers
pay a fee based on water service zone or improvement district. These are restricted for the use in
the area where they are collected and may be used for the construction and maintenance of
facilities.
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Glossary
Betterment Fees for Maintenance: The Operating Budget earns betterment fees for maintenance
work performed on infrastructure within special betterment zones, where fees are collected for
the construction and maintenance of these specific assets.
Bond: A written promise to pay a sum of money on a specific date at a specified interest rate.
The interest payments and the repayment of the principal are authorized in a District bond
resolution. The most common types of bonds are general obligation (GO) bonds and Certificates
of Participation (COPs). These are frequently used for construction of large capital projects such
as buildings, reservoirs, pipelines and pump stations.
Budget Basis: The budget and accounting basis for the District is recognized on an accrual basis.
Accrual basis means that revenues are recognized when earned and expenses are recognized
when incurred.
Capacity Fee: A connection fee is charged when a new water meter is placed into service. This
fee is based on the estimated construction cost of expansion of the system to meet the needs of all
future customers. This fee covers the cost including, but is not limited to, planning, design,
construction, and financing of expansion of the system.
Capacity Fee Revenues: These fees are earned by the Operating Budget as the Engineering
Department supports expansion functions.
Capacity Reservation Charge: An MWD charge passed on by CWA to individual agencies. This
fee is paid based on the District’s peak water demand.
Capital Budget: The portion of the annual budget that appropriates funds for the purchase of
capital equipment items and capital improvements. These expenditures are separated from
regular operating items, such as salaries, utilities and office supplies. The Capital Budget
includes funds for capital equipment purchases over $10,000, such as vehicles, furniture,
machinery, microcomputers and special tools or $20,000 for infrastructure related items (as
explained in the note below), which are distinguished from operating items according to their
value and projected useful life.
Capital Equipment: Fixed assets such as vehicles, marine equipment, computers, furniture,
technical instruments, etc. which have a life expectancy of more than two years and a value over
$10,000 or $20,000 for infrastructure related items (this cost may not extend useful life of the
water or sewer infrastructure, but without the purchase of the item, the whole asset is rendered
useless and the dollar value to replace the item is $20,000 or more, as described in the District’s
Capitalization Policy).
Capital Improvement Program: A long-range plan of the District for the construction,
rehabilitation and modernization of the District-owned and operated infrastructure.
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Glossary
Class of Service: All customers are classified based on the type of service used. For example,
the water rate per unit is determined by a classification such as residential versus business.
CWA: The County Water Authority was organized in 1944 under the State County Water
Authority Act for the primary purpose of importing Colorado River water to augment the local
water supplies of the Authority's member agencies. The Authority purchases water from MWD
which imports water from the Colorado River and the State Water Project.
Deannexation Fees: Each request for detachment of land from an improvement district is
reviewed on a case-by-case basis. The fees are determined based on the present value of future
debt service requirements.
Debt Coverage Ratio: The ratio of net revenue to annual interest and principal payments on debt.
Debt Service: The District's obligation to pay the principal and interest of bonds and other debt
instruments according to a predetermined payment schedule.
Depreciation: An expense recorded to allocate a tangible asset’s cost over its useful life.
Desalination: The removal of dissolved minerals (including salts) from seawater or brackish
water. Engineered water desalination processes, which produce potable water from seawater or
brackish water, have become important because many regions throughout the world suffer from
water shortages.
Energy Fees: Water customers are charged an energy pumping charge based on the quantity of
water used and the elevation to which the water has been lifted to provide service. The energy
pumping charge is the rate of $.044 (to increase January 1, 2012 to $.045) per 100 cubic feet of
water for each 100 feet of lift above the base elevation of 450 feet. All water customers are in
one of 29 zones based on elevation.
Enterprise Fund: Fund that provides goods or services to the public for a fee that makes the
entity self-supporting.
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
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 $30.11 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.
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Glossary
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 – one for each of the District’s
three business lines Potable, Recycled and Sewer services. Each is an accounting entity with a
self-balancing set of accounts established to record the financial position and results that pertain
to a specific activity. The activities of enterprise funds closely resemble those of ongoing
businesses in which the purpose is to conserve and add to basic resources while meeting
operating expenses from current revenues. Enterprise funds account for operations that provide
services on a continuous basis and are substantially financed by revenues derived from user
charges.
Grants: Contributions or gifts of cash or other assets from another governmental agency to be
used or expended for a specified purpose, activity, or facility. Capital grants are restricted by the
grantor for the acquisition and/or construction of fixed assets. Operating grants are restricted by
the grantor for operating purposes or may be used for either capital or operating purposes at the
discretion of the grantee.
Infrastructure Access Charge (IAC): A pass-through charge from CWA to each member agency.
The charge is to finance a portion of CWA’s fixed annual costs including the construction,
operation and maintenance of aqueducts and emergency storage projects. The fee was adopted in
January of 1999.
Interest Income: Earnings from the investment portfolio. Per District Policy Number 25, interest
income will be allocated to improvement districts each month based upon each fund’s prior
month-ending balance.
Late Charges/Penalties: Charges and penalties are imposed on delinquent accounts. A late
payment charge of 5% of the most recent 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.
Net Assets: The difference between total assets and total liabilities. Increases or decreases in net
assets may serve as a useful indicator of whether the financial position of the District is
strengthening or weakening.
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Glossary
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.
Other Income: Revenues that are not directly related to the business of providing water and
sewer services. For example, contract billing service for the City of Chula Vista and the City of
San Diego to bill their sewer customers based on water consumption.
Property Rental Income: Rent or lease agreements for the use of District property.
QualServe: a voluntary quality improvement program designed exclusively for water and
wastewater utilities.
Recycled Water Rates: Non-potable water service provided from water produced by the
District’s reclamation plant and other non-potable sources. Recycled water is not used for
domestic purposes and all other uses must comply with federal, state and local laws and
regulations regarding the use of recycled water.
Reserve Fund: The District maintains Reserve Funds per the District’s policy for both
designated and restricted balances. Designated Reserve Funds are “general use” funds
designated by the Board. Restricted reserves are those that are legally set aside for a particular
purpose and cannot be used for any other purpose.
Residential Conservation: The water rates for residential customers 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.
Readiness-to-Serve Charge (RTS): was adopted by MWD in Fiscal 1996. The charge serves as a
foundation of fixed revenue for MWD. It covers the new debt service for construction projects
necessary to meet reliability and quality needs of current water-users as opposed to new
customers.
Sale of Fixed Assets: District equipment, which has been determined by the Board to be of no
use, obsolete and/or beyond the useful life and therefore, may be sold.
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Glossary
Set-up Fees for Accounts: A charge of $10 is added for each account transferred to another
customer.
System Fees: Each water service customer pays a monthly system charge for water system
replacement, maintenance and operation expenses. The charge is based on the size of the meter
and class of service.
Taxes: California Water Code Section 72091 authorizes the District, as a municipal water
district, to levy ad valorem property taxes which are equal to the amount required to make annual
payments for principal and interest on general obligation bonds approved by the voters prior to
July 1, 1978.
Temporary Water Charge: The rate for temporary water service is two times the rate for
permanent service. The additional charge is to offset the cost of construction of facilities for
larger capacity.
Tier 2 Charge: An MWD charge passed on by CWA to individual agencies. This is an added
charge on all water sales by CWA in excess of the District’s 90% baseline water usage.
Water Capacity Fees: Charges paid by customers to connect to a District water system for
potable or recycled water service. Fees are determined by multiplying the demand factor for the
meter size by the total of the District-wide capacity fee and applicable zone charge
Water Rates: Rates vary among classes of service 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. On January 1, 2009, the District implemented a tiered rate structure
for all customer types to encourage conservation and bring equity among the classes.
Working Capital: A financial measure which represents available operating liquidity. It is
calculated as current assets minus current liabilities.
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AF Acre-Foot/Feet
AMR Automated Meter Reader/Reading
APCD Air Pollution Control District
APWA American Public Works Association
ASCE American Society of Civil Engineers
ASU Assigned Service Unit
AWWA American Water Works Association
BABS Build America Bonds
BMP Best Management Practices
BOD Biological Oxygen Demand
CAD Computer Aided Design & Drafting
CAFR Comprehensive Annual Financial Report
CCV City of Chula Vista
CDFG California Department of Fish and Game
CEQA California Environmental Quality Act
CIP Capital Improvement Program
COD Chemical Oxygen Demand
COPS Certificates of Participation
CRC Capacity Reservation Charge
CSC Customer Service Charge
CSD City of San Diego
CSDA California Special Districts Association
CSMFO California Society of Municipal Finance Officers
CMMS Computerized Maintenance Management System
CWA County Water Authority (San Diego)
DOT Department of Transportation
DVP Delivery-versus-Payment
EBPP Electronic Bill Pay and Presentment
EDU Equivalent Dwelling Unit
ESC Emergency Storage Charge
FCF Flow Control Facility
FEMA Federal Emergency Management Association
FTE Full-time Equivalent
FY Fiscal Year
GAAP Generally Accepted Accounting Principles
GASB Government Accounting Standards Board
GF General Funds
GFOA Government Finance Officers Association
GIS Geographic Information System
GO General Obligation (bonds)
GPCD Gallons per Capita per Day
GPM Gallons per Minute
List of Acronyms
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List of Acronyms
GPS Global Positioning System
HCF Hundred Cubic Foot
HCP Habitat Conservation Plan
HR Human Resources
HVAC Heating Ventilation and Air Conditioning
HWD Helix Water District
IAC Infrastructure Access Charge
ID Improvement District
IID Imperial Irrigation District
IMS Infrastructure Management System
IRP Integrated Water Resources Plan
IRS Internal Revenue Service
IT Information Technology
IVR Interactive Voice Response
LAIF Local Agency Investment Fund
MBR Membrane Bioreactor
MG Million Gallons
MGD Million Gallons per Day
MND Mitigated Negative Declaration
MOU Memorandum of Understanding
MWD Metropolitan Water District
NCCP Natural Community Conservation Plan
NIMS National Incident Management System
NOC Notice of Completion
NOSC Notice of Substantial Completion
O&M or O/M Operations and Maintenance
OPEB Other Post Employee Benefits
OWD Otay Water District
PB Pacific Bay
PERS Public Employees' Retirement System
PL Pipeline
PRS Pressure Reducing Station
PRV Pressure Reducing Valve
PS Pump Station
RFP Request for Proposal
RSD Rancho San Diego
RTS Readiness-to-Serve
RWCWRF Ralph W. Chapman Water Recycling Facility
SAMP Sub-Area Master Plan
SANDAG San Diego Association of Governments
SBWRP South Bay Water Reclamation Plant
SCADA Supervisory Control and Data Acquisition
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List of Acronyms
SDG&E San Diego Gas & Electric
SS Suspended Solids
SVSD Spring Valley Sanitation District
SWRCB State Water Resources Control Board
UML Unified Modeling Language
USFWS United States Fish and Wildlife Service
UWMP Urban Water Management Plan
VFD Variable Frequency Drive
WRMP Water Resources Master Plan
WTP Water Treatment Plant
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Index
Administrative Expenses 65,78,86,101
Awards 4-7
Budget Calendar 21
Budget Guide 18-19
Budget Process and Overview 19-22
Budget Summary 35-38
Capital Improvement Program Narrative 173-175
Capital Purchases Budget 185-186
CIP Projects in Construction 176-178
CIP Funding Source and Category 180
CIP Justification and Impact on Operating Budget 183-184
CIP Major Projects 175
CIP Projects 181-182
CIP Reserve Funds 179
Classification of Water Sales 56,71
Current Economic Conditions 26
Debt Management 49
Debt Policy 232-245
Debt Policy Glossary 246-249
Demographics 28
Department Budgets:
Administrative Services 115-126
Board of Directors 105-107
Engineering 160-169
Finance 127-137
General Expense 170-172
General Manager 109-114
Information Technology and Strategic Planning 138-144
Water Operations 145-159
Departmental Operating Budget Narrative 94-96
Five-Year Forecast 46
Formula for Sewer Rates 88
Fund Balance Summary by Fund 42
Fund Balances 48
Future, The 27
258
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Fiscal Year 2012 Adopted Budget
Index
General Fund Forecast 47
General Information 2
General Expenses 93
General Revenues 92
General Revenues and Expenses Narrative 90-91
Glossary 240-245
Investment Policy 220-225
Investment Policy Glossary 226-231
Labor and Benefits 97-98
Letter of Transmittal iv-viii
List of Acronyms 246-249
Materials and Maintenance Expenses 66,79,87,102
Meter Fees 61,74
MWD and CWA Fixed Fees (Pass-Through) 60
Operating Budget Summary 55,70,82
Operating Budget Summary by System 40
Operating Budget Summary – General Fund 39
Operating Expenditures by Department 103
Operating Expenditures by Object 104
Operating Revenues and Expenditures 41
Organization Chart 17
Otay Water District At-A-Glance 1
Past and Present 25
Position Count by Department 99-100
Potable Narrative 53-54
Power Costs 64,77,85
Projected Interest Payments by Debt Issuance 52
Projected Principal Payments by Debt Issuance 51
Recycled Narrative 68-69
Reserve Policy 189-217
Reserve Policy Glossary 218-219
Resolution 4173 23-24
Revenue History 62,75,84
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Otay Water District
259
Index
Revenues and Expenditures by Fund 43-44
Revenues and Expenditures by Type 45
San Diego Rainfall 34
Schedule of Outstanding Debt 50
Service Area Assessed Valuation 32
Service Area Maps 67,80,89,108
Sewer Charges Summary by Service Class 83
Sewer Narrative 81
Sewer Rate Comparison 31
Statement of Values 3
Strategic Performance Management Plan 8-16
Summary of Financial Policies 187-188
System Fees 59,73
Ten Largest Customers 29
Ten Principal Taxpayers 33
Unit Sales History by Customer Class 58
Recycled Water Purchases 76
Potable Water Purchases and Related Costs 63
Water Rate Comparison 30
Water Sales Summary by Service Class 57,72
260
__________________________________________________________
Fiscal Year 2012 Adopted Budget