HomeMy WebLinkAboutOperating and Capital Budget FY 2012-2013OTAY WATER DlSTRlCT
Adopted Operating and Capital Budget
Fiscal Year 2012-2013
Spring Valley, California
Adopted
Operating and Capital Budget
Fiscal Year 2012-2013
GENERAL MANAGER
Mark Watton
SENIOR MANAGEMENT TEAM
German Alvarez
Assistant General Manager
Joseph R. Beachem Pedro Porras
Chief Financial Officer Chief of Water Operations
Geoff Stevens Rod Posada
Chief Information Officer Chief of Engineering
Rom Sarno, Jr.
Chief of Administrative Services
BOARD OF DIRECTORS
President Jose Lopez
Division 4
Vice President David Gonzalez, Jr.
Division 1
Treasurer Gary Croucher.
Division 3
Mitchell Thompson
Division 2
Mark Robak
Division 5
Table of Contents
Page
Letter of Transmittal iv
BUDGET FOREWORD
Otay Water District At-A-Glance 1
General Information 2
Statement of Values 3
Awards 4
Strategic Performance Management Plan 7
Organization Chart 16
Budget Process Overview 17
Resolution No. 4195 22
HISTORY AND COMMUNITY PROFILE
Past and Present 24
Current Economic Conditions 25
The Future 26
Demographics 27
Ten Largest Customers 28
Water Rate Comparison 29
Sewer Rate Comparison 30
Service Area Assessed Valuation 31
Ten Principal Taxpayers 32
San Diego Rainfall 33
FINANCIAL SUMMARIES
Budget Summary 34
Operating Budget Summary – General Fund 38
Operating Budget Summary by System 39
Operating Revenues and Expenditures 40
Fund Balance Summary by Fund 41
Revenues and Expenditures by Fund 42
Revenues and Expenditures by Type 44
FIVE-YEAR FORECAST
Five-Year Forecast 45
General Fund Forecast 46
Fund Balances 47
Debt Management 48
Schedule of Outstanding Debt 50
Projected Principal Payments by Debt Issuance 51
Projected Interest Payments by Debt Issuance 52
i
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
ii
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 146
Engineering 160
General Expense 170
CAPITAL BUDGET
Capital Improvement Program Narrative 173
Major CIP Projects 175
CIP Projects in Construction 176
CIP Reserve Funds 180
CIP Funding Source and Category 181
CIP Projects 182
CIP Justification and Impact on Operating Budget 184
Capital Purchases Budget 185
POLICIES
Summary of Financial Policies 186
Reserve Policy 188
Reserve Policy Glossary 217
Investment Policy 219
Investment Policy Glossary 226
Debt Policy 232
Debt Policy Glossary 246
APPENDIX
Glossary 250
List of Acronyms 256
Index 259
iii
September 4, 2012
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 2013. This year’s budget supports the management plan to finance all of the
District’s services and programs during the 2013 fiscal year.
The mission of the District is to provide high value water and wastewater services to the
customers of the Otay Water District, in a professional, effective and efficient manner. As in the
past few years, we continue to deal with numerous challenges resulting from the slow recovery
from the largest economic downturn since the Great Depression. The District also faces large
rate increases from San Diego County’s wholesale water suppliers.
San Diego County has very limited natural supplies of water and therefore must rely on imported
water from Northern California and the Colorado River. The wholesale and retail water agencies
serving San Diego County recognized their dependence on imported water in the early 1990s and
since that time have been implementing programs to create a more reliable, robust water system,
one that will also increase water independence. Programs to secure more water, as well as a more
reliable water supply, are expensive and represent a contributing factor to increasing costs.
Given the continuing uncertain times, efforts to keep rate increases to a minimum, without
risking safety or reliability, the District must find the best solutions that balance many
imperatives. The tool the District will use to accomplish this is the 2012-2014 Strategic Business
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 second 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 the early years of
the District’s existence, today we have become equally focused on managing long-term
maintenance and replacement of 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, over time, an organization
derives income more from customer rates and less from developer fees. At this stage in its
development, increased maintenance and 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, it must place greater
iv
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 the District’s earlier strategic 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
suppliers by increased efficiency and improved productivity that help address customer concerns
about rising water rates.
17
4
.
7
5
17
2
.
7
5
16
8
.
7
5
16
6
15
9
15
6
14
8
120
130
140
150
160
170
180
Reduction of 15.3%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
2007 2008 2009 2010 2011 2012 2013
82.4
69.1%
CWA vs. Otay Water District Rate Increases
CWA Water Cost Increase Otay Water Rate Increase
Population
s
Population
Population
Employee Count
v
In the annual survey of water rates, for a typical District customer, Otay’s rates continue to be
among the lowest in San Diego County.
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.
Today, the District provides water service to nearly 48,540 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). Fifty eight percent 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.
The District also owns and operates a wastewater collection and recycling system to provide
public sewer service to approximately 4,652 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, budgeted at $82,318,200 for Fiscal Year 2013. Revenues from
potable and recycled water are projected to be $69,456,800, about $4,152,500 (6.4%) more than
the Fiscal Year 2012 budget. Water sales volumes are expected to increase slightly by 1% over
vi
FY 2012 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 $2,555,200, about $219,200 more than Fiscal Year
2012. This increase from higher rates is primarily to cover $4.4 million of additional capital
projects over the next six years. The remaining budgeted revenues of $10.3 million come from
various special fees, 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 project growth for the region.
An updated six-year Rate Model to ensure sound financial planning and reserve levels.
Ongoing water supply rate increases of 9.1% 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.
In response to the economic slowdown, the District has again reduced staffing levels
from 156 full-time equivalent positions to 148.
Of San Diego County’s 23 water agencies, Otay’s water rates are below the county-wide
average.
The Fiscal Year 2012-13 Capital Improvement Program (CIP) Budget consists of 70 projects and
a budget of $18.0 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 $4.6 million compared to last year’s projection, due to the completion of some
large projects as well as the deferral of projects to match the timing of land development.
THE FUTURE
The coming years will continue to pose challenges for those in California’s water community.
For instance, it is uncertain if the challenges facing the Sacramento-San Joaquin Bay Delta, the
source of 30 percent of Southern California’s water supply, will be addressed and at what cost to
end users. Serious challenges also jeopardize water coming from the Colorado River.
Furthermore, as the cost of water has increased to the retail customer, sales have decreased. As
one would expect, water sales reductions have impacted revenues and will continue to affect the
District’s finances. With this 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 Director’s resolve to keep the stability and financial strength of the District as one of its
highest priorities.
vii
AWARDS AND ACKNOWLEDGMENTS
The Government Finance Officers Association of the United States and Canada (GFOA)
presented a Distinguished Budget Presentation Award to Otay Water District, California
for its annual budget for the fiscal year beginning July 1, 2011. 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 communica-
tions device.
The California Society of Municipal Finance Officers (CSMFO) presented Otay Water
District the Certificate of Award for Excellence in Operating Budgeting for Fiscal Year
2011-2012.
The California Society of Municipal Finance Officers (CSMFO) presented Otay Water
District the Certificate of Award for Excellence in Capital Budgeting for Fiscal Year
2011-2012.
The Municipal Information Systems Association of California (MISAC) presented the
2010-2011 Award for Excellence Information Technology Practices to Otay Water
District. The award recognizes outstanding practices in Information Technology that have
met or surpassed local government standards.
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.
__
Mark Watton, General Manager
viii
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
To provide high value water and wastewater
services to the customers of the Otay Water District, 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 are set by five Directors elected by
voters in their respective geographic area.
Organizational Structure
The General Manager reports directly to the
Board of Directors. The Assistant General Manager along with District management oversees day-to-day operations. The
Assistant General Manager oversees the five
departments of Administrative Services;
Finance; Information Technology and Strategic Planning; Water Operations; and Engineering. These and other lines of
reporting are shown on the organization
chart on page 16.
1
General Information
For Fiscal Year 2013, the District will have a staff of 148 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 208,000 people. This percentage increases as the District's
service area continues to grow to ultimate
build-out. The District is projected to
deliver approximately 28,925 acre-feet of potable water to 48,860 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 0.6% for
Fiscal Year 2013.
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 2,900 acre-feet per year of recycled water for Fiscal Year 2013, 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 4,652 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.
2
Statement of Values
As Otay Water District employees we dedicate ourselves to:
Customers
We take pride that our commitment to customer-centered service is our highest priority.
Excellence
We strive to provide the highest quality and value in all that we do.
Integrity
We commit ourselves to doing the right thing. Ethical behavior, trustworthiness and accountability are the District’s foundation.
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
3
Financial Awards
The Government Finance Officers Association of the United States and Canada (GFOA) presented a Distinguished Budget Presentation Award to Otay Water
District, California for its annual budget for the fiscal year beginning July 1,
2011. In order to receive this award, a governmental unit must publish a budget document that meets program criteria as a policy document, as an operations guide, as a financial plan, and as a communications device.
This award is valid for a period of one year only. We believe our current
budget continues to conform to program requirements, and we are submitting it
to GFOA to determine its eligibility for another award.
4
Financial Awards
The California Society of Municipal Finance
Officers (CSMFO) presented Otay Water District the Certificate
of Award for Excellence
in Operating Budget for
Fiscal Year 2011-2012.
The California Society
of Municipal Finance
Officers (CSMFO) presented Otay Water
District the Certificate
of Award for Excellence
in Capital Budget for
Fiscal Year 2011-2012.
5
Awards
The Municipal Information Systems Association of California presented the 2010/2011 Award for Excellence Information
Technology Practices to Otay Water District. The award recognizes
outstanding practices in Information Technology that have met or
surpassed local government standards.
6
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 input. Through the Strategic Plan and budget approval processes, the Board is then
able to make well informed oversight decisions
about the utility’s direction.
7
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.
8
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.
9
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).
10
Strategic Performance Management Plan
11. Develop a management dashboard measuring cost, efficiency, and operational status.
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.
11
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. Perform-ance measures were revised on
July 1, 2011, to reflect the measure-
ment criteria for the fiscal years 2012-
2014 strategic plan.
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.
12
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.
13
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)
14
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)
15
Organization Chart
GENERAL MANAGER
Assistant General Manager
Administrative
Services Finance Water
Operations Engineering
Human
Resources
Purchasing and
Facilities
Safety and Risk
Administration
Water
Conservation
Controller
and Budgetary
Services
Treasury and
Accounting
Services
Customer
Service
Payroll and
Accounts
Payable
IT Applications
IT Operations
GIS
Water System
Operations
Utility
Maintenance/
Construction
Collection/
Treatment/
Recycle Operations
Planning
Design
Water
Resources
Public Services
Construction
Survey
Environmental
Citizens and
Customers
Information Technology
and Strategic Planning
BOARD OF DIRECTORS
16
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 projected
economic conditions. It also includes
statistics on the District’s customers, the
region’s tax base, and San Diego rainfall.
Financial Summaries
This section contains an overview of the
District’s revenues and expenditures by fund
for the current budgeted fiscal year, the prior
two years’ actual, the future 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 the
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.
17
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 justifications,
and the impact on the Operating Budget and
capital purchases budget for the fiscal year
are located in this section.
Policies
This section includes a summary of the
District’s financial policies and practices,
including the Reserve Policy, Investment
Policy, and Debt Policy.
Appendix
The last section consists of a Glossary of
budget and financial terms, List of
Acronyms, and an Index.
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
18
Budget Process Overview
Board of Directors prior to adopting the
budget.
The budgeting of salaries and benefits is
performed in the position budgeting module
of the budget system. This tool allows the
District to budget for each authorized
position and the associated benefits in an
automated fashion. Departments submit
requests for new positions, reclassifications,
or advancements to the Assistant General
Manager. These requests are reviewed by
the Assistant General Manager and then
presented to the General Manager for
approval. Upon their approval, the Finance
Department enters these changes, as well as
negotiated pay increases and benefit rate
changes, into the position budget system.
Position budgeting calculates the salaries
and benefits to be included in the District’s
budget.
The Finance Department prepares the
budget for the Potable, Recycled, and Sewer
Systems. This is done using estimated cost
increases from the District’s wholesale
water providers as well as estimated sewer
charge increases provided by the 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 Manager 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
19
Budget Process Overview
Budget Calendar
2/15/12 Chiefs submit request for new
Personnel/Personnel Reclassifications
changes, Advancements and Long-
Term Staffing to HR
2/22/12 HR to complete preliminary review of
new Personnel, Personnel Reclass,
change requests and Advancements
2/24/12 Project Managers submit CIP Budgets
for new projects and changes to
existing projects in CIP Budget
Application
2/27/12 Chiefs to submit Operating and Admin
Budget; Capital Purchases and
Justifications; Labor Budget Worksheet
3/5/12 HR to review new personnel, reclass
and changes requests with GM
3/5/12 Finance to review Operating Budget
and Reconciliation with Departments
3/5/12 Engineering Department reviews all
CIP budget requests with Assistant GM
3/12/12 Finance to review Department
Operating Budgets with GM and AGM
3/12/12 Finance to review preliminary CIP
Budget with Chief of Engineering
3/16/12 Finance to have second review of CIP
budget with AGM and Engineering
3/16/12 Finance to review personnel cost with
Chiefs, AGM and GM
3/23/12 Review CIP Budget with General
Manager
4/2/12 Finance to review assumptions and
rates with Chiefs, AGM and GM
4/5/12 Chiefs submit Position Analysis
Questionnaire to HR for GM approved
Personnel Requests and Request for
Reclass (advancements do not need
GM approval)
4/12/12 Preliminary Budget review with
General Manager
5/3/12 Practice run of budget presentation with
Finance, Chiefs, AGM and GM
5/7/12 Prepare Draft 218 30-Day Rate
Increase Notices
5/15/12 Budget Workshop for approval of the
FY 2012-2013 Operating and Capital
Budgets and Draft 218 30-Day Rate
Increase Notices
11/6/12 218 30-Day Notice of Water and Sewer
Rate Increase due for bill insertion
1/1/13 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 2013. All
approved modifications to the budget will be
documented in the form of a staff report and
noted in the board meeting minutes.
20
Budget Process Overview
Budget Basis
The District utilizes the accrual basis for
budgeting which is the same as the basis of
accounting used in the audited financial
statements, recognizing revenues and
expenses in the period in which they are
earned and incurred, respectively. The
District reports its activities on an enterprise
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.
CWA’s All-American Canal Lining Project will provide
67,700 acre-feet of water annually.
21
22
23
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 724 miles of
potable and 99 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,
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 the recycled
water system to the City of San Diego’s City
South Bay Water Reclamation Plant.
Today, the District purchases about 3
million gallons per day (mgd) of recycled water from the city, 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
P
r
e
s
a
C
o
u
n
t
y
W
a
t
e
r
D
i
s
t
r
i
c
t
(c
a
.
1
9
5
7
)
Pr
e
s
e
n
t
24
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 from 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
0.2% each year. Most of this growth is from
small development projects or homeowners
converting their septic system to sewer
because of environmental issues.
The District’s water service area was one of
the fastest growing regions in the nation.
During the past decade, the population of the
service area has nearly doubled. It is
estimated that the District is currently
serving approximately 208,500 residents. In
just the past nine years, the District has
added more than 6,484 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 40 permits per month, and sold 316
water meters in Fiscal Year 2011-2012.
2012 Landscape Contest Winner
25
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.
Meter Sales
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 3,980 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.
26
Demographics
The District boundaries shown in the chart below encompass an area of approximately 125.5 square miles in San Diego County, located immediately east of the City of San Diego metropolitan area and running from the City of El Cajon south to the international border.
SANDAG creates and maintains a tremendous quantity of demographic, economic, land use,
transportation and criminal justice information about the San Diego region. The demographic
data include population characteristics like age, education, and employment. Because of the
overlapping of the District’s service area with the cities of Chula Vista, La Mesa, El Cajon, and
the unincorporated areas of Spring Valley and Jamul, the following demographic data is from the City of Chula Vista as it most closely represents the District.
The population of Chula Vista has grown from 83,927 in 1980, to 135,136 in 1990, to 173,556 in
2000, and in 2010 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 $66,955 in
2009, and 92% of Chula Vista’s housing units were occupied.
27
% of
Annual Water
Customer Type Revenues Sales
1. City of Chula Vista Publicly Owned 2,534,914 4.0%
2. State of California Publicly Owned 983,882 1.5%
3. EastLake Summit Association Commercial (Irrigation)741,847 1.2%
4. County of San Diego Publicly Owned 703,141 1.1%
5. Sweetwater School District Publicly Owned 495,750 0.8%
6. Cuyamaca College Publicly Owned 459,615 0.7%
7. ERP Operating LP Commercial (Irrigation)431,952 0.7%
8. Windingwalk Master Association Commercial (Irrigation)429,534 0.7%
9. Belleme HOA Commercial (Irrigation)399,036 0.6%
10. EastLake Country Club Commercial (Irrigation)397,629 0.6%
Total 7,577,300$ 11.9%
Estimated FY12 Water Sales 63,803,148$
FY 2012 Customers
Customer Name
Ten Largest Customers - Fiscal Year 2012
Ten Largest
11.9%
Others
88.1%
28
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.
14 Unit Water Use and 3/4" Residential Meter
Projected Water Bill Effective January 2013
Survey of Member Agency Water Rates
29
Sewer Rate Comparison
Note: These amounts reflect the charges on the sewer bills of the various agencies and cities.
(1) Otay is water-consumption based.
14 Unit Water Use and 3/4" Residential Meter
Projected Rates Effective January 2013
Sewer Rate Comparison of Sewer Providers in San Diego County
Water-consumption based sewer rate Flat sewer rate
Otay Water District (1)
30
Service Area Assessed Valuation
Five-Year Service Area Assessed Valuation
Source: County of San Diego Auditor and Controller
Otay Water District’s service area encompasses property with over $23.1 billion of assessed valuation.
Properties are assessed at 100% of their full value less 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
1.6% from FY12 to FY13.
$20,000
$24,000
$28,000
2007 2008 2009 2010 2011 2012
$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
$2
3
,
1
4
5
Mi
l
l
i
o
n
D
o
l
l
a
r
s
31
Percent
Assessed Value to Total
1. San Diego Expressway Limited Partnership (SDELP) (1) $ 260,022,112 1.13%
2. GGP-Otay Ranch LP 176,655,960 0.77%
3. Regulo Place Apartments Investors LLC 100,505,618 0.43%
4. Corrections Corp of America 76,982,862 0.33%
5. S P Lavida Real LLC 71,000,814 0.31%
6. Camden USA Inc 62,974,684 0.27%
7. E Q R-Missions at Sunbow LLC 58,990,523 0.25%
8. Village II of Otay HB SUB 58,129,700 0.25%
9. Avalon II California Value IV LP 53,620,549 0.23%
10. BRE-FM CA LLC 49,479,995 0.21%
Total $ 968,362,817 4.18%
Total Service Area Assessed Valuation $ 23,145,467,535
(1)This property was acquired on December 12, 2011 by the State of California (CALTRANS).
Effective Fiscal Year 2013, this property will no longer be included in the assessed valuation.
FY 2012 Service Area Taxpayers
Source: County of San Diego Auditor and Controller
Organization
Ten Principal Taxpayers as of June 30, 2012
Ten Principal
Taxpayers
4.18% Other Taxpayers
95.82%
32
San Diego Rainfall
10.62
5.18
22.50
5.42
3.85
7.49
9.17 11.01 12.66
8.03
0
5
10
15
20
25
30
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
In
c
h
e
s
Fiscal Year
Fiscal Years 2003-2012
Annual Rainfall 10-Year Average Rainfall (9.59 inches)
Although San Diego received less than normal rainfall in Fiscal Year 2012, the District is expecting
that San Diego's rainfall will return to its average pattern and volume for Fiscal Year 2013. The 10-year average of 9.59 inches for San Diego rainfall reflects the long-term drought conditions for our area. San Diego's rainfall average over 20 years is 9.76 inches; the 30-year average is 10.13 inches;
and the 40-year average is 10.49 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 sales revenues would decrease. Related water purchase expenses
would also be reduced, mitigating the impact of the decrease in revenues. The amount of any
supply reduction would dictate the magnitude of the District's response and type of reaction.
The San Diego rainfall information shown in the chart above uses data from the San Diego Airport
at Lindbergh Field and is provided by the Western Regional Climate Center. More information can
be obtained from their website: http://www.wrcc.dri.edu. The Western Regional Climate Center’s
website data, in turn, is derived from data received from the National Climatic Data Center, the
National Weather Service, the National Resource Conservation Service, the Bureau of Land Management, the U.S. Forest Service, and other federal, state, and local agencies. Although the
data reflects actual rainfall at Lindbergh field, it is representative of rainfall for the area served by
the Otay Water District.
33
Budget Summary
The Operating Budget is summarized and
presented in the Operating Budget Summary
on page 38. Also included in this section is
the Operating Budget Summary by System
on page 39, the Fund Balance Summary by
Fund on page 41, and the Revenues and
Expenditures by Fund on pages 42 and 43.
The Revenues, Expenditures, and Sources
and Uses of Funds by Type for all funds are
presented on page 44. For Fiscal Year 2013,
the District has approved an increase in water
rates for its customers in order to pass-
through cost increases from water suppliers.
The sewer approved rate increase is for major
repair work on the aging sewer system.
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 2013
is $82,318,200 in comparison to the previous
fiscal year budget of $78,062,200. The
$4,256,000 increase is a result of water
supply rate increases of 7.5% from MWD
and 9.1% from CWA. CWA’s increase is
because of the high cost of supply programs,
higher energy rates, and increase in 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 18-20. 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 the District’s health providers. Other
general inflators are derived from statistical
data from consumer price indexes for the
region.
Revenues
Potable Water Sales
Potable water sales revenue collected from
the sale of water, including: system charges,
energy charges, and penalties. It is estimated
that 28,925 acre-feet of potable water will be
sold during Fiscal Year 2013. Budgeted
revenues from water sales are projected to be
$61,754,400, an increase of 6.6% due mainly
to the past several years of increases in pass-
through water cost. The volume of sales is
virtually the same as prior year volume.
Additional schedules relating to potable
water sales are included in the Potable
Revenues and Expenditures section of this
budget.
Recycled Water Sales
Recycled water sales revenue collected from
the sale of 3,910 acre-feet of recycled water
to customers at a discount of 15% off the
potable irrigation rate. The FY 2013 sales
revenue budget of $7,702,400, an increase of
$306,900 from FY 2012, 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
34
Budget Summary
strength of solids discharged into the sewer
system.
Meter Fees
Meter fees are charges collected for new
water service connections. Fees vary
depending upon meter size and type of
service. The costs associated with meter
installations are included in the Operating
Expenses section.
Capacity Fee Revenues
These fees are earned by the 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 are the expenses of
purchasing 30,513 acre-feet for the District's
potable water supply. A provision has been
made to allow 1,588 acre-feet of water for
District usage, leakage, and evaporation.
Recycled Water Purchases
Recycled water purchases are the expenses of
purchasing 2,911 acre-feet for the District's
recycled water supply. The District no
longer budgets for a potable supplement to
the recycled system due to the source of
recycled water from the City of San Diego.
35
Budget Summary
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 148 Full-time Equivalent (FTE)
employees. Labor costs are reduced by the
number of hours that are charged to non-
operating Capital Improvement Program
(CIP) and developer deposit projects. The
detail of actual personnel and payroll related
expenses is included in the Departmental
Operating Budget section.
Administrative Expenses
Administrative expenses are costs incurred
by various departments that are directly
related to District operations. Additional
details are supplied in the Departmental
Operating Budget section.
Materials and Maintenance
Materials and maintenance expense is the
cost associated with the operation and
maintenance of District facilities. Additional
details are supplied in the Departmental
Operating Budget section.
36
Budget Summary
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 is provided as
information but is necessary to ensure
sufficient revenue is collected from sewer
customers versus water customers.
Fund Balance Summary by Fund
This schedule shows each fund’s balance at
June 30, 2012, and the projected balance for
June 30, 2013, based on the results of the
budget and rate model. This includes
transfers between funds made to meet target
levels as outlined in the Reserve Policy.
Revenues and Expenditures by
Fund
The Revenues and Expenditures by Fund
schedule reflects each fund’s revenues and
expenditures by business line, where
appropriate. This schedule is reconciled to
the Fund Balance Summary and excludes
transfers between funds.
Revenues and Expenditures by
Type – All Funds
This is a consolidated schedule of revenues
and expenditures, including sources and uses
of funds but excluding fund transfers.
37
FY 2011 FY 2013 Budget
11-Actual Budget Estimated Budget Variance
REVENUES
##Potable Water Sales 51,507,858$ 57,908,800$ 56,784,245$ 61,754,400$ 3,845,600$
Recycled Water Sales 6,762,039 7,395,500 7,018,903 7,702,400 306,900
##Sewer Revenues 2,386,600 2,336,000 2,395,365 2,555,200 219,200
##Meter Fees 91,152 82,000 131,904 112,200 30,200
##Capacity Fee Revenues 1,063,234 1,044,000 1,160,066 1,180,600 136,600
##Betterment Fees for Maintenance 560,229 628,600 690,885 689,400 60,800
Tax Revenues 3,576,721 3,839,600 3,587,019 3,882,600 43,000
##Non-operating Revenues 2,098,198 2,021,600 2,063,472 1,914,300 (107,300)
##Interest 112,822 158,300 81,511 105,700 (52,600)
OPEBTransfer from OPEB 1,220,000 1,380,000 1,380,000 879,500 (500,500)
ExpTransfer from Betterment Reserve - 30,000 30,000 - (30,000)
Transfer from Replacement - 120,000 120,000 - (120,000)
General Fund Draw Down 1,657,400 522,800 522,800 946,900 424,100
Transfer from General Fund - 595,000 595,000 595,000 -
TOTAL REVENUES 71,036,253 78,062,200 76,561,170 82,318,200 4,256,000
EXPENDITURES
##Potable Water Purchases 25,323,291 27,793,100 27,957,531 30,552,200 2,759,100
Recycled Water Purchases 1,321,897 1,452,800 1,605,774 1,504,000 51,200
##CWA - Infrastructure Access Charge 1,550,466 1,756,900 1,756,656 1,818,000 61,100
##CWA - Customer Service Charge 1,315,224 1,562,600 1,553,756 1,687,800 125,200
##CWA - Emergency Storage Charge 2,884,050 3,585,800 3,505,590 4,086,000 500,200
##MWD - Capacity Reservation Charge 660,282 603,900 599,146 504,000 (99,900)
##MWD - Net RTS and Standby Charges 1,232,240 1,488,600 1,481,211 1,610,400 121,800
Subtotal - Water Costs 34,287,450 38,243,700 38,459,664 41,762,400 3,518,700
##Power 2,170,357 2,440,900 2,138,674 2,368,000 (72,900)
##Labor and Benefits 17,287,427 18,119,600 17,240,618 18,856,200 736,600
##Administrative Expenses 4,719,358 4,560,700 4,299,360 4,804,900 244,200
##Materials & Maintenance 3,801,792 4,300,000 3,763,097 3,747,900 (552,100)
##Expansion Reserve 2,775,000 555,000 555,000 3,936,000 3,381,000
Bett ResBetterment Reserve 315,000 - - 1,120,000 1,120,000
Repl ResReplacement Reserve 6,965,000 3,330,000 3,330,000 743,000 (2,587,000)
Transfer to Sewer General Fund - 786,800 786,800 595,000 (191,800)
Transfer to General Fund Reserve 390,500 2,420,500 2,420,500 2,285,800 (134,700)
Transfer to Sewer Replacement 1,750,000 1,720,000 1,720,000 2,099,000 379,000
Transfer to New Supply Reserve - 1,585,000 1,585,000 - (1,585,000)
TOTAL EXPENDITURES 74,461,884 78,062,200 76,298,713 82,318,200 4,256,000
EXCESS REVENUES (EXPENSE)(3,425,631)$ -$ 262,457$ -$ -$
FY 2012
Operating Budget Summary - General Fund
38
Potable Recycled Sewer Total
REVENUES
Water Sales 61,754,400$ -$ -$ 61,754,400$
Recycled Water Sales - 7,702,400 - 7,702,400
Sewer Revenues - - 2,555,200 2,555,200
Meter Fees 108,600 3,600 - 112,200
Capacity Fee Revenues 1,015,600 - 165,000 1,180,600
Bett Betterment Fees for Maintenance 689,400 - - 689,400
Tax Revenues 3,831,100 - 51,500 3,882,600
Non-operating Revenues 1,883,700 - 30,600 1,914,300
Interest 92,800 6,800 6,100 105,700
OPEBTransfer from OPEB 879,500 - - 879,500
General Fund Draw Down - 275,800 671,100 946,900
Transfer from General Fund - - 595,000 595,000
TOTAL REVENUES 70,255,100 7,988,600 4,074,500 82,318,200
EXPENDITURES
Water Purchases (CWA)30,552,200 - - 30,552,200
Water Purchases (CSD)- 1,038,700 - 1,038,700
Take-or-pay - 465,300 - 465,300
Subtotal - Water Purchases 30,552,200 1,504,000 - 32,056,200
CWA - Infrastructure Access Charge 1,818,000 - - 1,818,000
CWA - Customer Service Charge 1,687,800 - - 1,687,800
CWA - Emergency Storage Charge 4,086,000 - - 4,086,000
MWD - Capacity Reservation Charge 504,000 - - 504,000
MWD - Net RTS and Standby Charges 1,610,400 - - 1,610,400
Subtotal - Water Costs 40,258,400 1,504,000 - 41,762,400
Power 1,785,700 498,500 83,800 2,368,000
Labor and Benefits 16,690,300 1,312,700 853,200 18,856,200
Administrative Expenses 3,990,500 405,500 408,900 4,804,900
Materials & Maintenance 2,055,400 331,900 1,360,600 3,747,900
Retiree Medical Reserve - - - -
5716 Expansion Reserve - 3,936,000 - 3,936,000
Bett ResBetterment Reserve 495,000 - 625,000 1,120,000
Repl ResReplacement Reserve - - 743,000 743,000
Transfer to Sewer GF 595,000 - - 595,000
Transfer to GF Reserve 2,285,800 - - 2,285,800
Transfer to Sewer Replacement 2,099,000 - - 2,099,000
TOTAL EXPENDITURES 70,255,100 7,988,600 4,074,500 82,318,200
EXCESS REVENUES -$ -$ -$ -$
FY 2013 Operating Expenditures
FY 2013 Operating Budget Summary by System
Potable
85.4%
Recycled
9.7%
Sewer
4.9%
39
FY 2013 Operating Revenues
4612
TOTAL REVENUES
4621
sum
EXPENDITURES:
5511
5523
FY 2013 Operating Expenditures
EXCESS REVENUES
Operating Revenues and Expenditures
Potable Water
Sales
75.0%
Recycled Water
Sales
9.4%
Sewer Revenue
3.1% Other Fees
2.4%
Tax
Revenues
4.7%
Transfers
1.8% Non-Operating
Revenues
2.3%
Interest
0.1%
General Fund
Draw Down
1.2%
Potable Water Cost
48.9%
Recycled Water
Purchases
1.8%
Power
2.9%
Labor & Benefits
22.9%
Administrative
Expenses
5.8% Materials &
Maintenance
4.6%
Expansion
Reserve
4.8%
Transfers
6.0%
Betterment
Reserve
1.4%
Replacement
Reserve
0.9%
40
Estimated Projected
Balance Interfund Balance
June 30, 2012 Revenues Expenditures Transfers (1)June 30, 2013
GENERAL FUND
Potable 12,174,084$ 70,255,100$ 70,255,100$ -$ 12,174,084$
Recycled 5,024,857 7,988,600 7,988,600 - 5,024,857
Sewer 1,264,887 4,074,500 4,074,500 - 1,264,887
Total General Fund 18,463,828 82,318,200 82,318,200 - 18,463,828
EXPANSION FUND
Potable and Recycled (2)22,319,460 5,113,300 9,501,400 (16,894,000) 1,037,360
Sewer 607,118 1,900 165,000 (432,000) 12,018
Total Expansion Fund 22,926,578 5,115,200 9,666,400 (17,326,000) 1,049,378 (3)
BETTERMENT FUND
Potable (7,644,090) 3,615,400 5,534,400 12,395,000 2,831,910
Recycled 710,959 32,900 119,000 (688,000) (63,141)
Sewer 570,484 43,900 1,522,800 1,057,000 148,584
Total Betterment Fund (6,362,647) 3,692,200 7,176,200 12,764,000 2,917,353 (3)
REPLACEMENT FUND
Potable 17,985,893 2,120,700 7,942,800 12,579,000 24,742,793
Recycled 4,070,907 160,300 408,000 (1,391,000) 2,432,207
Sewer 6,385,729 42,200 1,773,300 2,842,000 7,496,629
Total Replacement Fund 28,442,529 2,323,200 10,124,100 14,030,000 34,671,629
NEW SUPPLY FUND
Potable 2,452,319 1,035,300 710,800 (1,500,000) 1,276,819
Recycled 585,419 23,800 77,800 (70,000) 461,419
Sewer - - - - -
Total New Supply Fund 3,037,738 1,059,100 788,600 (1,570,000) 1,738,238 (3)
OPEB FUND 1,660,369 20,331 801,200 (879,500) - (4)
DEBT RESERVE FUND 20,158,681 747,900 5,418,100 - 15,488,481
TOTAL 88,327,076$ 95,276,131$ 116,292,800$ 7,018,500$ 74,328,907$
(0)$
(1)The total for interfund transfers does not net to $0 because some transfers are already reflected in the OperatingRevenues and Expenditures for General Fund as follows:
Expansion Reserve (3,936,000)$
Betterment Reserve (1,120,000)
Replacement Reserve (2,842,000)
New Supply Reserve -
OPEB Reserve 879,500
Total (7,018,500) -
(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 2013
Fund Balance Summary by Fund
41
FY 2011 FY 2013
Actual Budget Estimated Projected
REVENUES
GENERAL FUND
GPrev Potable 60,691,248$ 66,756,200$ 65,590,783$ 70,255,100$
GRrev Recycled 6,774,568 7,933,000 7,559,139 7,988,600
GSrev Sewer 3,570,437 3,373,000 3,411,248 4,074,500
Total General Fund (1)71,036,253 78,062,200 76,561,170 82,318,200
EXPANSION FUND
EPrev Potable 4,669,160 3,947,600 1,873,048 3,569,600
ERrev Recycled 1,788,545 8,700 1,034,511 1,543,700
ESrev Sewer 3,527 4,100 3,896 1,900
Total Expansion Fund 6,461,232 3,960,400 2,911,455 5,115,200
BETTERMENT FUND
BPrev Potable 1,272,350 1,278,600 1,206,612 3,615,400
BRrev Recycled 3,773 3,200 2,501 32,900
BSrev Sewer 50,862 46,200 44,366 43,900
Total Betterment Fund 1,326,985 1,328,000 1,253,479 3,692,200
REPLACEMENT FUND
RPrev Potable 1,911,964 2,218,800 2,565,204 2,120,700
RRrev Recycled 250,883 127,900 334,671 160,300
RSrev Sewer 31,168 28,700 36,114 42,200
Total Replacement Fund 2,194,015 2,375,400 2,935,989 2,323,200
NEW SUPPLY FUND
NSPrev Potable (416,687) 394,260 409,513 1,035,300
NSRrev Recycled (56,642) 500 61,526 23,800
NSSrev Sewer - - - -
Total New Supply Fund (473,329) 394,760 471,039 1,059,100
OrevOPEB FUND 45,813 33,700 16,724 20,331
DrevDEBT RESERVE FUND 1,287,490 510,500 760,136 747,900
Total Revenues 81,878,459$ 86,664,960$ 84,909,992 95,276,131$
Revenues and Expenditures by Fund
FY 2012
42
FY 2011 FY 2013
Actual Budget Estimated Projected
Revenues and Expenditures by Fund
FY 2012
EXPENDITURES
GENERAL FUND
GPexp Potable 64,268,939$ 66,756,200$ 65,402,134$ 70,255,100$
GRexp Recycled 7,767,182 7,933,000 7,717,738 7,988,600
GSexp Sewer 2,425,763 3,373,000 3,178,841 4,074,500
Total General Fund 74,461,884 78,062,200 76,298,713 82,318,200
EXPANSION FUND
EPexp Potable 9,086,619 6,946,500 5,577,429 6,808,600
ERexp Recycled 2,966,465 3,245,400 2,841,020 2,692,800
ESexp Sewer 91,731 202,800 176,209 165,000
Total Expansion Fund 12,144,815 10,394,700 8,594,658 9,666,400
BETTERMENT FUND
BPexp Potable 5,058,463 8,140,700 6,440,493 5,534,400
BRexp Recycled 184,971 122,200 69,035 119,000
BSexp Sewer 198,350 1,498,900 1,038,885 1,522,800
Total Betterment Fund 5,441,784 9,761,800 7,548,413 7,176,200
REPLACEMENT FUND
RPexp Potable 6,476,257 6,620,500 6,235,807 7,942,800
RRexp Recycled 645,752 2,234,000 4,519,201 408,000
RSexp Sewer 388,778 1,535,200 257,897 1,773,300
Total Replacement Fund 7,510,787 10,389,700 11,012,905 10,124,100
NEW SUPPLY FUND
NSPexp Potable 779,614 1,440,000 391,094 710,800
NSRexp Recycled 118,232 80,000 44,536 77,800
NSSexp Sewer - - - -
Total New Supply Fund 897,846 1,520,000 435,630 788,600
OexpOPEB FUND 939,250 935,000 1,502,871 801,200
DexpDEBT RESERVE FUND 7,689,691 751,600 6,396,578 5,418,100
Total Expenditures 109,086,056 111,815,000 111,789,768 116,292,800$
EXCESS (DEFICIT) (1)(27,207,597)$ (25,150,040)$ (26,879,776) (21,016,669)$
43
FY 2011 FY 2013
Actual Budget Estimated Budget
REVENUES AND FUND SOURCES
Potable Water Sales 51,507,858$ 57,908,800$ 56,784,245$ 61,754,400$
Recycled Water Sales 6,762,039 7,395,500 7,018,903 7,702,400
Tax Revenues 3,576,721 3,839,600 3,587,019 3,882,600
Capacity Fee Revenues 4,199,941 4,358,800 3,890,246 4,406,700
Grants 3,590,000 574,000 935,227 400,000
Sewer Revenues 2,386,600 2,336,000 2,395,365 2,555,200
Non-Operating Revenues 2,098,198 2,021,600 2,063,472 1,914,300
General Fund Draw Down 1,657,400 522,800 522,800 946,900
Interest 981,667 825,800 568,655 517,531
Transfer from OPEB 1,220,000 1,380,000 1,380,000 879,500
Capacity Fees for Maintenance 1,063,232 1,044,000 1,160,066 1,180,600
Betterment Fee Revenues 676,680 713,700 713,570 705,400
Betterment Fees for Maintenance 560,229 628,600 690,885 689,400
GO Bond Debt Tax Revenues 606,966 501,200 597,799 618,300
Availability Fees 534,621 531,000 517,283 519,200
Sewer Debt Tax Revenues 365,155 - 14,201 7,000
New Supply Fee Revenue - 388,960 459,032 399,100
Meter Fees 91,152 82,000 131,904 112,200
COPs Proceeds - 867,600 734,320 5,490,400
Interfund Transfers - 745,000 745,000 595,000
Total Revenues and Fund Sources 81,878,459$ 86,664,960$ 84,909,992 95,276,131$
EXPENDITURES AND USES OF FUNDS
Potable Water Purchases 32,965,553$ 36,790,900$ 36,853,890$ 40,258,400$
CIP Expenses 18,320,176 22,632,000 18,717,660 17,994,100
Labor Expenses 17,287,427 18,119,600 17,240,618 18,856,200
Interfund Transfers 11,805,000 7,190,000 7,190,000 7,898,000
Debt Service 7,191,610 8,486,800 7,781,983 8,642,300
Administrative Expenses 4,719,358 4,560,700 4,299,360 4,804,900
Materials and Maintenance 3,801,792 4,300,000 3,763,098 3,747,900
Power 2,170,357 2,440,900 2,138,675 2,368,000
Recycled Water Purchases 1,321,897 1,452,800 1,605,774 1,504,000
Capacity Fees for Maintenance 1,063,234 1,044,000 1,160,066 1,180,600
Payment to PERS 285,000 192,000 753,000 -
Betterment Fees for Maintenance 560,229 655,000 690,885 689,400
General Fund Transfers 390,500 3,207,300 3,207,300 2,880,800
OPEB Health Expenses 654,250 743,000 749,871 801,200
COPs Proceeds Distribution 6,549,673 - 5,637,588 4,667,000
Total Expenditures and Uses of Funds 109,086,056 111,815,000 111,789,768 116,292,800
EXCESS (DEFICIT) (27,207,597)$ (25,150,040)$ (26,879,776) (21,016,669)$
Revenues and Expenditures by Type - All Funds
FY 2012
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.
44
Five-Year Forecast
Financial Forecast for Fiscal
Years 2014-2018
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
724 miles of potable pipelines, 99 miles of
recycled pipelines, 88 miles of sewer lines,
40 potable and 4 recycled reservoirs, 21
potable and 3 recycled pump stations, and a
1.3 million gallons per day reclamation
plant. Utilizing an integrated database from
the Geographic Information System (GIS)
provides real-time work order planning,
execution, and consolidation of all
maintenance history. These systems are also
integrated with financial software to allow
asset tracking and management information.
As 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).
45
REVENUES FY 2014 FY 2015 FY 2016 FY 2017 FY 2018
Water/Sewer Rates 76,340,300$ 82,891,000$ 88,538,700$ 92,634,700$ 96,841,700$
Meter Fees 137,100 141,500 180,000 189,100 203,600
Capacity Fee Revenues 1,020,700 1,030,900 1,041,200 1,051,600 1,062,100
Betterment Fees 692,800 699,700 706,700 713,800 720,900
Annexation Fees - 8,200 17,000 26,200 36,000
Non-operating Revenues 1,949,700 1,986,500 2,024,800 2,064,000 2,103,600
Tax Revenues 3,851,000 3,922,500 3,996,700 4,173,400 4,359,800
Interest Income 135,900 202,800 264,600 475,500 708,100
General Fund Draw Down (244,700) (379,900) (531,400) (711,300) -
TOTAL 83,882,800$ 90,503,200$ 96,238,300$ 100,617,000$ 106,035,800$
19,833,000$ 21,488,400$ 22,341,800$ 22,010,700$
EXPENDITURES AND TRANSFERS
Water Cost 45,318,100$ 48,736,700$ 52,561,000$ 56,605,700$ 60,964,000$
Power 2,474,400 2,431,800 2,553,300 2,683,700 2,821,200
Labor and Benefits 19,168,300 19,855,600 20,415,600 20,801,200 21,309,700
Administrative Expenses 4,656,400 4,801,300 4,946,500 5,102,600 5,259,600
Materials & Maintenance 3,900,200 4,058,700 4,223,700 4,395,600 4,574,200
Fund Transfers, Net 8,365,400 10,619,100 11,538,200 11,028,200 11,107,100
TOTAL 83,882,800$ 90,503,200$ 96,238,300$ 100,617,000$ 106,035,800$
EXCESS REVENUES -$ -$ -$ -$ -$
General Fund Forecast - FY 2014 Through FY 2018
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 2014 FY 2015 FY 2016 FY 2017 FY 2018
$8
4
$9
1
$9
6
$1
0
1
$1
0
6
$8
4
$9
1
$9
6
$1
0
1
$1
0
6
Mi
l
l
i
o
n
s
Revenues and Expenditures Forecast
Revenues Expenditures
46
FUND FY 2014 FY 2015 FY 2016 FY 2017 FY 2018
General Fund 20,974,700$ 22,365,500$ 23,922,800$ 25,567,900$ 27,399,900$
Betterment Fund 2,749,500 6,811,700 4,218,800 1,113,100 1,147,900
Replacement Fund 29,071,500 27,870,400 32,652,800 32,296,700 30,945,300
Expansion Fund 2,974,800 1,982,000 1,296,400 7,211,900 7,254,800
New Supply Fund 2,402,900 2,789,300 2,381,600 747,300 763,200
Debt Reserve 8,621,700 655,500 580,900 535,400 526,400
TOTAL 66,795,100$ 62,474,400$ 65,053,300$ 67,472,300$ 68,037,500$
(25) 5 (35) (35) (78)
Fund Balances - FY 2014 Through FY 2018
$0
$20
$40
$60
$80
FY 2014 FY 2015 FY 2016 FY 2017 FY 2018
Mi
l
l
i
o
n
s
Fund Balances Forecast
General Fund Betterment Fund Replacement Fund Expansion Fund Debt Reserve
47
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. As of the end of fiscal year 2012, the State
Sewer Loan has been paid off and there are six outstanding bond issues. Bonds have been and
will be used to improve existing facilities and to build the projects in the Capital Improvement
Program (CIP). The District’s debt service obligations have a significant effect upon the
District’s current and future water rates. All efforts that minimize the cost of debt have a
corresponding effect that reduces water rates.
In 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.
Since the ratings upgrade two years ago, the District has been faced with the challenge of
maintaining very strong financial ratios while water sales volumes have been decreasing. During
the past four years, sales volumes have been declining due to a number of factors. The factors
include significant rainfall, a struggling economy, price elasticity, and the promotion of water
conservation. These factors, along with the decline of developer fee revenues, have made it
difficult to maintain the highest of financial ratios. So, while the District’s financial ratios
remain strong, Fitch Ratings lowered the District’s credit rating from AA to AA-. This latest
Fitch rating along with the AA rating from Standard & Poor’s puts the District into a split rating
of AA/AA-.
The District’s goal of maintaining a very strong financial ratio has not changed. The rate
planning process has maintained a high level of financial discipline and as a result, the debt
coverage is expected to rebound in a short period of one to two years. The District’s Board of
Directors has always held that a strong debt coverage ratio will benefit the ratepayers as it
reduces the cost of water infrastructure; and have been willing to support this with necessary rate
increases. As a result of the District’s consistency in financial direction, this rating change is not
expected to be a permanent shift.
48
Debt Management
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.
Debt Coverage Ratio
The minimum debt coverage ratio is 1.25 in accordance with District bond covenants.
49
Outstanding
Year Original Balance
#Incurred Maturity Date Amount 06/30/12
1 1996 Certificates of Participation (COPs)September 1, 2026 15,400,000$ 10,900,000$
2 2009 General Obligation (GO) Bonds August 31, 2022 7,780,000 6,755,000
3 2004 Certificates of Participation (COPs)September 1, 2023 12,270,000 8,680,000
4 1994 State Loan November 30, 2011 5,000,000 -
5 2007 Certificates of Participation (COPs)September 1, 2036 42,000,000 38,665,000
6 2010 Certificates of Participation Series A (COPs)September 1, 2024 13,840,000 13,055,000
7 2010 Build America Bonds Series B (BABs)September 1, 2040 36,355,000 36,355,000
Total Outstanding Debt 132,645,000$ 114,410,000$
Total Assessed Valuation - FY 2012
Percentage of Original Debt to Assessed Valuation 0.57%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.
Description
GO Bonds
9,941,622,812$ 23,145,467,535$
All Debts
Schedule of Outstanding Debt
944-I R Recycled Water Pump Station
50
1996 COPs GOBs 2004 COPs 2007 COPs 2010A COPs 2010B BABs Total
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
10,900,000$ 6,755,000$ 8,680,000$ 38,665,000$ 13,055,000$ 36,355,000$ 114,410,000$
2013
2014
2015
Projected Principal Payments by Debt Issuance
FY
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
TOTAL
$0
$500
$1,000
$1,500
$2,000
$2,500
1996
COPs
GOBs 2004
COPs
2007
COPs
2010A
COPs
2010B
BABs
Th
o
u
s
a
n
d
s
FY 2013 Principal and Interest
Interest
Principal
51
1996 COPs (1)GOBs (2)2004 COPs 2007 COPs 2010A COPs 2010B BABs Total
621,600 231,063 343,000 1,577,500 553,838 2,371,868 5,698,868
602,900 215,088 321,700 1,541,900 533,538 2,371,868 5,586,993
572,700 198,663 298,600 1,504,900 508,563 2,371,868 5,455,293
537,500 181,663 273,500 1,466,300 478,488 2,371,868 5,309,318
501,200 162,969 246,800 1,425,800 443,088 2,371,868 5,151,725
465,000 139,633 219,000 1,383,700 406,288 2,371,868 4,985,489
465,000 114,433 188,900 1,339,300 367,988 2,371,868 4,847,489
423,700 88,533 157,100 1,292,900 323,113 2,371,868 4,657,214
339,200 61,533 123,000 1,243,400 271,113 2,371,868 4,410,114
291,900 33,500 86,300 1,191,700 216,488 2,371,868 4,191,756
243,600 4,800 47,800 1,136,800 159,113 2,371,868 3,963,981
190,200 - 6,900 1,079,300 98,863 2,371,868 3,747,131
135,900 - - 1,019,200 33,994 2,371,868 3,560,962
76,500 - - 955,500 - 2,328,345 3,360,345
11,100 - - 955,500 - 2,238,589 3,205,189
- - - 818,000 - 2,143,093 2,961,093
- - - 744,800 - 2,041,540 2,786,340
- - - 668,400 - 1,933,609 2,602,009
- - - 588,600 - 1,818,823 2,407,423
- - - 505,500 - 1,694,728 2,200,228
- - - 416,600 - 1,560,558 1,977,158
- - - 323,200 - 1,417,508 1,740,708
- - - 225,700 - 1,265,086 1,490,786
- - - 124,000 - 1,102,634 1,226,634
- - - 17,800 - 929,495 947,295
- - - - - 745,010 745,010
- - - - - 548,357 548,357
- - - - - 338,716 338,716
- - - - - 115,262 115,262
5,478,000$ 1,431,877$ 2,312,600$ 23,546,300$ 4,394,469$ 53,055,641$ 90,218,887$
(1)Interest on the 1996 Certificates of Participation is variable and is projected using an interest rate of 5.9%
(2)The GO Bonds were refinanced in April of 2009.
Projected Interest Payments by Debt Issuance
FY
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
Note: The total projected debt payment of $8,642,300 for FY 2013 as shown on the Debt Service Expenditure on the Revenues and Expenditures
by Type - All Funds Schedule on page 44 is less than the projected principal payment of $3,320,000 shown on page 51, plus the interest payment
of $5,698,868 shown above, by $376,568 due to the difference of the stated rate of 5.9% and the actual rate the district is currently paying. The
difference in rate results in a variance of $359,500 on the 1996 COPs. The remaining variance of $17,068 is miscellaneous administrative fees not
shown on the principal and interest schedules.
2037
2038
2039
2040
2041
TOTAL
52
Potable Revenues and Expenses
The District will provide water service to approximately 48,860 potable customers by the end of
Fiscal Year 2013. 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. With the extensive residential developments slowing down in
recent years, the District expects only nominal growth of 0.6% for Fiscal Year 2013. Unit sales
are anticipated to decrease 0.1% 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 30% of the potable water sales
revenue. Water rates, energy fees, and penalties recover the remaining 70% of revenues
necessary to fund operations. (Note: when potable and recycled revenues are combined the fixed
fees do not exceed 30% of the total revenues.)
Energy charges are based on the quantity of water used and the elevation to which the water has
been lifted to provide service. Revenue from energy charges is used to recover the power costs
associated with pumping. This charge is adjusted 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.
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 2013, the District is estimating the purchase of 30,512.5 acre-feet of potable
water, sufficient to meet the demands of its customers. Provisions have been made for District
usage, leakage, and evaporation in the amount of 1,587.8 acre-feet.
San Vicente Dam Raising is a part of CWA’s Emergency Storage Projects
54
FY 2011 FY 2013 Budget Variance
11-Actual Budget Estimated Budget Variance %
REVENUES
##Water Sales 51,507,858$ 57,908,800$ 56,784,245$ 61,754,400$ 3,845,600$ 6.6%
##Meter Fees 84,935 79,700 120,565 108,600 28,900 36.3%
##Capacity Fee Revenues 970,353 841,200 980,066 1,015,600 174,400 20.7%
##Betterment Fees for Maintenance 560,229 628,600 690,885 689,400 60,800 9.7%
Tax Revenues 3,524,451 3,788,100 3,536,434 3,831,100 43,000 1.1%
##Non-operating Revenues 2,065,126 1,991,000 2,031,351 1,883,700 (107,300) (5.4%)
##Interest 95,496 138,800 67,237 92,800 (46,000) (33.1%)
OPEBTransfer from OPEB 1,220,000 1,380,000 1,380,000 879,500 (500,500) (36.3%)
General Fund Draw Down 662,800 - - - - 0.0%
TOTAL REVENUES 60,691,248 66,756,200 65,590,783 70,255,100 3,498,900 5.2%70,255,100
EXPENDITURES
Water Purchases 25,323,291 27,793,100 27,957,531 30,552,200 2,759,100 9.9%
##CWA - Infrastructure Access Charge 1,550,466 1,756,900 1,756,656 1,818,000 61,100 3.5%
##CWA - Customer Service Charge 1,315,224 1,562,600 1,553,756 1,687,800 125,200 8.0%
##CWA - Emergency Storage Charge 2,884,050 3,585,800 3,505,590 4,086,000 500,200 13.9%
##MWD - Capacity Reservation Charge 660,282 603,900 599,146 504,000 (99,900) (16.5%)
##MWD - Net RTS and Standby Charges 1,232,240 1,488,600 1,481,211 1,610,400 121,800 8.2%
Subtotal - Water Costs 32,965,553 36,790,900 36,853,890 40,258,400 3,467,500 9.4%
##Power 1,626,979 1,848,300 1,628,174 1,785,700 (62,600) (3.4%)
##Labor and Benefits 15,429,186 15,946,400 15,315,251 16,690,300 743,900 4.7%
##Administrative Expenses 3,893,361 3,775,600 3,615,966 3,990,500 214,900 5.7%
##Materials & Maintenance 1,763,860 2,144,500 1,738,353 2,055,400 (89,100) (4.2%)
Transfers
Bett ResBetterment Reserve - - - 495,000 495,000
Repl ResReplacement Reserve 6,245,000 - - - -
GF Transfer to Potable General Fund - 2,420,500 2,420,500 2,285,800 (134,700)
swr gfTransfer to Sewer General Fund 595,000 595,000 595,000 595,000 -
Swr RepTransfer to Sewer Replacement 1,750,000 1,720,000 1,720,000 2,099,000 379,000
NSFTransfer to New Supply Reserve - 1,515,000 1,515,000 - (1,515,000)
Subtotal - Transfers 8,590,000 6,250,500 6,250,500 5,474,800 (775,700) (12.4%)
TOTAL EXPENDITURES 64,268,939 66,756,200 65,402,134 70,255,100 3,498,900 5.2%
EXCESS REVENUES (EXPENSES)(3,577,691)$ -$ 188,649$ -$ -$ 0.0%
EXCESS REVENUES, w/o restatement and transfers -$ FY 2013 Potable Operating Expenditures
FY 2012
Operating Budget Summary - Potable
Water Cost
62.1% Power
2.8%
Labor &
Benefits
25.8%
Administrative Expenses
6.2%
Material &
Maintenance
3.1%
55
FY 2012
Estimated
FY 2013
Budget Variance
Water Sales 35,615,558$ 39,110,200$ 3,494,642$
System Fees 9,583,563 10,328,400 744,837
Energy Fees 1,881,776 1,809,500 (72,276)
MWD and CWA Fixed Fees 9,000,267 9,705,800 705,533
Penalties 703,081 800,500 97,419
Total Water Sales 56,784,245$ 61,754,400$ 4,970,155$
Water Rates: Rates vary among classes of service and are charged per unit of water. A unit of water is equal
to 100 cubic feet of water. On January 1, 2009, the District implemented a tiered rate structure for all customer
types to encourage conservation and bring equity among the classes.
System Fees: Each water service customer pays a monthly system charge for water system replacement,
maintenance, and operation expenses. The charge is based on the size of the meter.
Energy Fees: The energy pumping fee is $ .042 per 100 cubic feet of water for each 100 feet of lift above the
elevation of 450 feet. All water customers are in one of 29 zones based on elevation.
MWD and CWA Fixed Fees: These pass-through charges are to pay for a portion of MWD's and CWA's
fixed annual costs including the construction, operation and maintenance of aqueducts and emergency storage
projects. These Fixed Charges are based on the size of the meter.
Penalties: Charges and penalties are imposed on customer accounts for late payments and returned checks.
Classification of Water Sales - Potable
Water Sales
63.3%
System Fees16.8%
Energy Charges
2.9%
Penalties
1.3%
MWD and CWA Fixed
Charges
15.7%
56
Current Approved*Accounts Units Amount
Residential
Conservation Tier (< 5 hcf)1.58$ 1.73$
6 - 10 2.45 2.69
11 - 22 3.19 3.50
over 23 hcf 4.92 5.39
Total Residential 44,576 7,608,600 22,845,400$
Master Meter
0 - 4 2.43 2.66 5 - 9 3.15 3.45
over 10 hcf 4.85 5.32
Total Master Meter 803 1,403,300 4,418,900
Public and Commercial Tier I 2.59 2.84 Tier II 2.66 2.92
Tier III 2.70 2.96 Total Public and Commercial 1,442 1,840,900 5,043,200
Agriculture, Landscaping, and ConstructionTier I 3.53 3.87
Tier II 3.60 3.95
Tier III 3.66 4.01
Total Agriculture, Landscaping, and Construction 1,335 1,746,800 6,426,300
Total 48,156 12,599,600 38,733,800$
Government Fee 0.29 0.29 - - 376,400
Total Water Sales 48,156 12,599,600 39,110,200$
*Approved rates for water billed in January 2013.-
FY 2013 Unit Sales by Service Class
Water Sales Summary by Service Class - Potable
Fiscal Year 2013 Sales BudgetWater Rates
Residential
60.4%
Master Meter
11.1%
Public and Commercial 14.6% Agricultural and Landscaping
12.6%
Temporary and Others 1.3%
57
Estimated Budget
FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013
Residential 9,379,544 8,881,191 7,679,494 7,486,069 7,507,214 7,608,600
Master Meters 1,445,634 1,430,235 1,371,244 1,389,616 1,409,515 1,403,300
Public and Commercial 1,869,841 1,938,215 1,798,277 1,771,396 1,859,571 1,840,900
Agricultural and Landscaping 2,306,624 2,183,823 1,644,130 1,537,304 1,581,243 1,583,400
Temporary and Others 574,026 490,297 254,016 179,472 153,351 163,400
Total Unit Sales 15,575,669 14,923,761 12,747,161 12,363,857 12,510,894 12,599,600
FY 2013 Unit Sales and Meter Count Trends
Unit Sales History by Customer Class - Potable
Actual
5,000
15,000
25,000
35,000
45,000
55,000
-
5
10
15
20
FY 2008 Actual FY 2009 Actual FY 2010 Actual FY 2011 Actual FY 2012 Estimated FY 2013 Budget
Me
t
e
r
s
Un
i
t
s
(
m
i
l
l
i
o
n
s
)
Unit Sales Meters
58
Meter Current Approved*
Size
Estimated
6/30/2012 FY13 Growth Rates Rates
Estimated
6/30/2012 FY13 Growth
FY 2013
Budget
0.75 43,664 311 14.58$ 16.74$ 8,205,300$ 32,700$ 8,238,000$
1.00 1,877 6 18.52 21.26 448,000 800 448,800
1.50 939 - 28.37 32.57 343,300 - 343,300
2.00 1,082 1 40.18 46.13 560,300 300 560,600
3.00 71 - 71.68 82.29 65,600 - 65,600
4.00 176 3 107.13 122.99 243,000 2,300 245,300
6.00 17 - 205.59 236.02 45,000 - 45,000
8.00 3 - 323.73 371.64 12,500 - 12,500
10.00 5 - 461.57 529.88 29,700 - 29,700
-
Fire Services 705 - 30.11 34.57 273,600 - 273,600
Turn Over Fees 10.00 10.00 66,000 - 66,000
Total 48,539 321 10,292,300$ 36,100$ 10,328,400$
*Approved rates for water billed in January 2013.
Historical System Fees
Budgeted System Fees
System Fees - Potable
Meter Count
$-
$2
$4
$6
$8
$10
$12
FY 2008
Actual
FY 2009
Actual
FY 2010
Actual
FY 2011
Actual
FY 2012
Estimated
FY 2013
Budget
Mi
l
l
i
o
n
s
59
Meter Current Approved*
Size
Estimated
6/30/2012 FY13 Growth Rates Rates
Estimated
6/30/2012 FY13 Growth
FY 2013
Budget
0.75 43,657 311 14.01$ 13.28$ 7,148,400$ 27,200$ 7,175,600$
1.00 1,867 6 23.33 22.12 509,100 900 510,000
1.50 933 - 46.74 44.31 509,700 - 509,700
2.00 1,080 1 74.74 70.85 943,400 500 943,900
3.00 71 - 149.48 141.71 124,000 - 124,000
4.00 94 3 233.58 221.43 256,600 4,400 261,000
6.00 17 - 467.09 442.80 92,800 - 92,800
8.00 3 - 747.39 708.53 26,200 - 26,200
10.00 5 - 1,070.74 1,015.06 62,600 - 62,600
Total 47,727 321 9,672,800$ 33,000$ 9,705,800$
*Approved rates for water billed in January 2013.
Historical MWD and CWA Fixed Fees
Publicly-Owned
Agriculture
Budgeted MWD & CWA - Fixed ChargesMeter Count
MWD and CWA Fixed Fees (Pass-Through)-Potable
$-
$2
$4
$6
$8
$10
FY 2008
Actual
FY 2009
Actual
FY 2010
Actual
FY 2011
Actual
FY 2012
Estimated
FY 2013
Budget
Mi
l
l
i
o
n
s
60
Meter Meter Installation Meter AMR Total Budgeted
Size Sales Fee Fee Fee Fees Amount
0.75 8 60.00$ 59.00$ 147.00$ 266.00$ 2,100$
1.00 309 60.00 117.00 147.00 324.00 100,100
1.50 - 103.00 250.00 147.00 500.00 -
2.00 1 240.00 475.00 147.00 862.00 900
3.00 - 300.00 653.00 147.00 1,100.00 -
4.00 3 300.00 1,370.00 147.00 1,817.00 5,500
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 321 108,600$
Historical Meter Count
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 2008 Actual FY 2009 Actual FY 2010 Actual FY 2011 Actual FY 2012 Estimated FY 2013 Budget
61
Estimated Budget
FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013
Water Sales 30,049,415$ 30,375,618$ 31,326,151$ 32,236,451$ 35,615,558$ 39,110,200$
System Fees 9,611,046 9,510,996 9,342,732 9,490,904 9,583,563 10,328,400
Energy Fees 1,834,102 1,866,237 1,662,233 1,693,186 1,881,776 1,809,500
MWD and CWA Fixed Fees 2,530,306 3,758,403 6,359,939 7,421,386 9,000,267 9,705,800
Penalties 779,985 649,683 853,279 665,931 703,081 800,500
Total Potable Revenues 44,804,854$ 46,160,937$ 49,544,334$ 51,507,858$ 56,784,245$ 61,754,400$
Revenue History - Potable
Revenue History - Potable
Actual
$-
$10
$20
$30
$40
$50
$60
$70
FY 2008 Actual FY 2009 Actual FY 2010 Actual FY 2011 Actual FY 2012 Estimated FY 2013 Budget
Mi
l
l
i
o
n
s
Water Sales System Fees Energy Fees MWD & CWA Fees Penalties
62
FY 2012
Estimated
FY 2013
Budget
FY 2012
Estimated
FY 2013
Budget
Acre Feet Acre Feet Rate (1)
Potable Water Purchases (CWA):
Budgeted Sales 28,720.9 28,924.7 $957/$1,063 26,345,279$ 28,961,300$
District & Unbilled Usage 188.1 62.2 $957/$1,063 173,434 63,300
Water Loss 1,633.8 1,525.6 $957/$1,063 1,553,471 1,527,600
Total Variable Charges 30,542.8 30,512.5 28,072,184$ 30,552,200$
MWD and CWA Fixed Charges:
Infrastructure Access Charge (IAC)1,756,656$ 1,818,000$
Customer Service Charge (CSC)1,553,756 1,687,800
Emergency Storage Charge (ESC)3,505,590 4,086,000
Capacity Reservation Charge (CRC)599,146 504,000
Readiness-to-Serve Charge (RTS)1,481,211 1,610,400
Total Fixed Charges 8,896,359$ 9,706,200$
Total Variable and Fixed Charges 36,968,543$ 40,258,400$
Average Cost Per Acre Foot 1,210$ 1,319$
(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
FY08
Actual
FY09
Actual
FY10
Actual
FY11
Actual
FY12
Estimated
FY13
Budget
Ac
r
e
F
e
e
t
Historical Potable Water Purchases
63
Power Costs - Potable
Administrative
and Operations
Buildings
Potable
Transmission
Total Potable
Power Costs
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 Actual 158,657 1,468,322 1,626,979
FY12 Estimated 165,099 1,463,075 1,628,174
FY13 Budget 169,400 1,616,300 1,785,700
$0
$500
$1,000
$1,500
$2,000
$2,500
FY08
Actual
FY09
Actual
FY10
Actual
FY11
Actual
FY12
Estimated
FY13
Budget
Th
o
u
s
a
n
d
s
Historical Power Costs
Potable Transmission Administrative and Operations Buildings
64
FY 2011 FY 2013 Budget
Actual Budget Estimated Budget Variance %
Directors' Fees 13,700$ 30,000$ 13,600$ 30,000$ -$ 0.0%
Travel and Meetings 159,708 196,200 127,457 172,400 (23,800) (12.1%)
Conservation and Outreach 257,007 300,800 214,556 231,500 (69,300) (23.0%)
General Office Expense 306,470 330,100 275,518 296,600 (33,500) (10.1%)
Equipment 1,086,052 955,500 914,749 918,500 (37,000) (3.9%)
Fees 445,418 400,000 449,611 450,700 50,700 12.7%
Services 1,420,423 1,389,100 1,364,543 1,662,000 272,900 19.6%
Training 125,385 140,200 79,439 113,700 (26,500) (18.9%)
Utilities 18,264 19,000 20,330 20,500 1,500 7.9%
Miscellaneous 130,663 140,000 126,263 155,000 15,000 10.7%
Total 3,963,090 3,900,900 3,586,066 4,050,900 150,000 3.8%
Less: Overhead Allocation (913,251) (997,300) (882,455) (969,400) 27,900 (2.8%)
Subtotal 3,049,839 2,903,600 2,703,611 3,081,500 177,900 6.1%
General Expenses 843,522 872,000 912,355 909,000 37,000 4.2%
Total Administrative Expenses 3,893,361$ 3,775,600$ 3,615,966$ 3,990,500$ 214,900$ 5.7%
4,806,612$ 4,772,900$ 4,498,421$ 4,959,900$
FY 2013 Administrative Expenses - Potable
Equipment
Fees
Services
Training
Utilities
SUM %
FY 2012
Administrative Expenses - Potable
Directors'
Fees 0.7%
Travel &
Meetings 4.3% Conservation &
Outreach
5.7%
General Office Expense
7.3%
Equipment 22.7%
Fees 11.1%
Services 41.1%
Training 2.8%
Utilities 0.5% Miscellaneous 3.8%
65
FY 2011 FY 2013 Budget
Actual Budget Estimated Budget Variance %
Fuel and Oil 205,559$ 339,900$ 229,086$ 354,500$ 14,600$ 4.3%
Meters and Materials 161,546 208,200 168,923 183,000 (25,200) (12.1%)
Fleet Parts and Equipment 138,073 165,400 124,122 148,000 (17,400) (10.5%)
Infrastructure Equipment and Supplies 405,264 441,300 368,050 444,000 2,700 0.6%
Chemicals 224,609 241,000 212,902 241,000 - 0.0%
Safety Equipment 41,269 27,500 27,006 29,400 1,900 6.9%
Laboratory Equipment and Supplies 34,520 35,000 33,517 35,000 - 0.0%
Other Materials and Supplies 150,111 158,200 147,991 158,200 - 0.0%
Building and Grounds Materials 74,032 80,500 68,628 55,500 (25,000) (31.1%)
Contracted Services 328,877 447,500 358,128 406,800 (40,700) (9.1%)
Materials and Maintenance 1,763,860 2,144,500 1,738,353 2,055,400 (89,100) (4.2%)
Total Materials and Maintenance 1,763,860$ 2,144,500$ 1,738,353$ 2,055,400$ (89,100)$ (4.2%)
FY 2013 Materials and Maintenance Expenses - Potable
Materials and Maintenance Expenses - Potable
FY 2012
Fuel & Oil 17.2%
Meters & Materials 9.0%
Fleet Parts & Equipment 7.2%
Infrastructure Equipment & Supplies
21.6%
Chemicals 11.7%
Safety Equipment
1.4%
Laboratory Equipment & Supplies
1.7%
Other Materials & Supplies
7.7%
Building & Grounds
Materials 2.7%
Contracted Services
19.8%
66
Potable Water Service Area
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 water supplies for irrigation purposes only. 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 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
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 3,910 acre-feet of recycled water to 702 landscaping and construction
customers by the end of Fiscal Year 2013. 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 eliminated the 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, reducing future capacity and storage requirements.
The $42 million investment in capital outlay results in a significant reduction of water purchase
costs and an increase in system reliability. The District expects that 12 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 183 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 further 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 $185 from MWD for every acre-foot (AF) of recycled water sold.
69
FY 2011 FY 2013 Budget Variance
31-Actual Budget Estimated (drft)Budget Variance %
REVENUES
##Recycled Water Sales 4,645,719$ 5,207,300$ 4,999,441$ 5,561,600$ 354,300 6.8%
##System Fees 266,547 239,000 268,937 292,200 53,200 22.3%
##Energy Fees 274,608 302,700 303,867 305,300 2,600 0.9%
##MWD/CWA Rebates 1,482,019 1,563,100 1,413,335 1,505,600 (57,500) (3.7%)
##Penalties 93,146 83,400 33,323 37,700 (45,700) (54.8%)
##Total Recycled Water Sales 6,762,039 7,395,500 7,018,903 7,702,400 306,900 4.1%
##Meter Fees 6,217 2,300 11,339 3,600 1,300 56.5%
##Capacity Fee Revenues 1,150 - 3,791 - - 0.0%
##Interest 5,162 12,400 2,306 6,800 (5,600) (45.2%)
GF DRGeneral Fund Draw Down - 522,800 522,800 275,800 (247,000) (47.2%)
TOTAL REVENUES 6,774,568 7,933,000 7,559,139 7,988,600 55,600 0.7%
EXPENDITURES
##Water Purchases (CSD) / Meter Fees 1,321,897 1,106,700 1,605,774 1,038,700 (68,000) (6.1%)
##Take-or-pay - 346,100 - 465,300 119,200 34.4%
Total Water Purchases 1,321,897 1,452,800 1,605,774 1,504,000 51,200 3.5%
##Power 462,031 510,800 440,069 498,500 (12,300) (2.4%)
##Labor and Benefits 1,121,159 1,263,800 1,132,573 1,312,700 48,900 3.9%
##Administrative Expenses 327,224 351,000 284,936 405,500 54,500 15.5%
##Materials & Maintenance 334,371 399,600 299,386 331,900 (67,700) (16.9%)
Transfers
GF Transfer to General Fund Reserve 390,500 - - - -
##Expansion Reserve 2,775,000 555,000 555,000 3,936,000 3,381,000
Bett ResBetterment Reserve 315,000 - - - -
Repl ResReplacement Reserve 720,000 3,330,000 3,330,000 - (3,330,000)
NSFNew Supply Reserve - 70,000 70,000 - (70,000)
Subtotal- Transfers 4,200,500 3,955,000 3,955,000 3,936,000 (19,000) (0.5%)
TOTAL EXPENDITURES 7,767,182 7,933,000 7,717,738 7,988,600 55,600 0.7%
EXCESS REVENUES (EXPENSES)(992,614)$ -$ (158,599)$ -$ -$ 0.0%
-$
FY 2013 Recycled Operating Expenditures
FY 2012
Operating Budget Summary - Recycled
Water Purchases 37.1%
Power
12.3%
Labor & Benefits 32.4%
Administrative Expenses 10.0%
Materials &
Maintenance
8.2%
70
FY 2012
Estimated
FY 2013
Budget Variance
Water Sales 4,999,441$ 5,561,600$ 562,159$
System Fees 268,937 292,200 23,263
Energy Fees 303,867 305,300 1,433
MWD and CWA Rebates 1,413,335 1,505,600 92,265
Penalties 33,323 37,700 4,377
Total Recycled Water Sales 7,018,903$ 7,702,400$ 683,497$
Water Rates: Rates vary among classes of service and are charged per unit of water. A unit of water is equal to 100
cubic feet of water. On January 1, 2009, the District implemented a tiered rate structure for all customer types to
encourage conservation and bring equity among the classes.
System Fees: Each water service customer pays a monthly system charge for water system replacement, maintenance,
and operation expenses. The charge is based on the size of the meter.
Energy Fees: The energy pumping fee is $ .042 per 100 cubic feet of water for each 100 feet of lift above the elevation
of 450 feet. All water customers are in one of 29 zones based on elevation.
MWD and CWA Rebates: Incentive from MWD and CWA for providing recycled water. The District receives $200
from CWA and $185 from MWD for every acre-foot (AF) of recycled water sold.
Penalties: Charges and penalties are imposed on customer accounts for late payments and returned checks.
Classification of Water Sales - Recycled
Water Sales
72.2%
System Charges
3.8% Energy Charges
4.0%
MWD and CWA
Rebates
19.5%
Penalties
0.5%
71
Fiscal Year 2013 Sales Budget
Current Approved*Accounts Units Amount
Tier I 3.02$ 3.31$
Tier II 3.06 3.35
Tier III 3.12 3.42
109 51,400 162,000$
Tier I 3.02 3.31
Tier II 3.06 3.35
Tier III 3.12 3.42
580 1,236,900 3,894,600
Recycled 3.0" and 4.0" Meter
Tier I 3.02 3.31
Tier II 3.06 3.35
Tier III 3.12 3.42
Total Recycled 3.0" and 4.0" Meter 11 95,800 303,300
Tier I 3.02 3.31
Tier II 3.06 3.35
Tier III 3.12 3.42
2 319,500 1,002,400
702 1,703,600 5,362,300$
Government Fee 0.29 0.29 - - 199,300
Total Water Sales 702 1,703,600 5,561,600$
*Approved rates for water billed in January 2013.
Unit Sales and Meter Count Trends
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
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
-
200
400
600
800
-
500
1,000
1,500
2,000
2,500
FY 2008
Actual
FY 2009
Actual
FY 2010
Actual
FY 2011
Actual
FY 2012
Estimated
FY 2013
Budget
Me
t
e
r
s
Un
i
t
s
(
t
h
o
u
s
a
n
d
s
)
Unit Sales Meters
72
Meter Current Approved*
Size
Estimated
6/30/2012 FY13 Growth Rates Rates
Estimated
6/30/2012 FY13 Growth
FY 2013
Budget
0.75 1 - 14.58$ 16.74$ 200$ -$ 200$
1.00 100 8 18.52 21.26 23,900 1,900 25,800
1.50 384 2 28.37 32.57 140,400 700 141,100
2.00 194 - 40.18 46.13 100,500 - 100,500
3.00 4 - 71.68 82.29 3,700 - 3,700
4.00 7 - 107.13 122.99 9,700 - 9,700
6.00 2 - 205.59 236.02 5,300 - 5,300
8.00 - - 323.73 371.64 - - -
10.00 1 - 461.57 529.88 5,900 - 5,900
Total 693 10 289,600$ 2,600$ 292,200$
Budgeted Recycled System Fees 292,200$
*Approved rates for water billed in January 2013.
Historical System Fees
Meter Count Budgeted System Fees
System Fees - Recycled
-
100
200
300
400
500
FY 2008
Actual
FY 2009
Actual
FY 2010
Actual
FY 2011
Actual
FY 2012
Estimated
FY 2013
Budget
Th
o
u
s
a
n
d
s
73
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 8 60.00 117.00 147.00 324.00 2,600$
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 10 3,600$
Historical Meter Count
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 2008
Actual
FY 2009
Actual
FY 2010
Actual
FY 2011
Actual
FY 2012
Estimated
FY 2013
Budget
74
Estimated Budgeted
FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013
Water Sales 3,347,964$ 3,787,845$ 4,417,995$ 4,645,719$ 4,999,441$ 5,561,600$
System Fees 425,061 366,529 261,946 266,547 268,937 292,200
Energy Fees 248,429 288,247 266,599 274,608 303,867 305,300
MWD and CWA Rebates 1,833,949 1,711,787 1,583,801 1,482,019 1,413,335 1,505,600
Penalties 92,855 83,950 92,545 93,146 33,323 37,700
Total Recycled Revenue 5,948,258$ 6,238,358$ 6,622,886$ 6,762,039$ 7,018,903$ 7,702,400$
Revenue History - Recycled
Revenue History - Recycled
Actual
$-
$2,000
$4,000
$6,000
$8,000
FY 2008
Actual
FY 2009
Actual
FY 2010
Actual
FY 2011
Actual
FY 2012
Estimated
FY 2013
Budget
Th
o
u
s
a
n
d
s
Penalties MWD & CWA Rebates Energy Fees System Fees Water Sales
75
FY13 Budget FY13 Budget
Acre Feet Rate Purchase Costs % of Total
SBWRP Recycled Water Purchases (CSD)
Recycled Water Purchases 2,911.0 350.00$ 1,018,900$ 67.8%
Meter Fee - 1,646.50 19,800 1.3%
Take-or-pay contract (1)- 465,300 30.9%
Total 2,911.0 1,504,000$ 100.00%
(1) This is the anticipated take-or-pay amount to be paid the City of SD. The contract requires
the purchase of a minimum volume of water. The District does not anticipate meeting the
minimum, therefore a payment would be due to the City of San Diego.
Water Purchases - Recycled
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
FY 2008
Actual
FY 2009
Actual
FY 2010
Actual
FY 2011
Actual
FY 2012
Estimated
FY 2013
Budget
Ac
r
e
F
e
e
t
Historical Recycled Water Purchases
76
Treatment and
Recycled
Transmission
FY08 Actual 306,480$
FY09 Actual 572,331
FY10 Actual 422,780
FY11 Actual 462,031
FY12 Estimated 440,069
FY13 Budget 498,500
Historical Power Costs
Power Costs - Recycled
$0
$100
$200
$300
$400
$500
$600
FY08
Actual
FY09
Actual
FY10
Actual
FY11
Actual
FY12
Estimated
FY13
Budget
Th
o
u
s
a
n
d
s
77
FY 2011 FY 2013 Budget
Actual Budget Estimated Budget Variance %
Travel and Meetings - 365$ - - 0.0%
Equipment 2,057$ 4,500$ 3,015 1,300$ (3,200)$ (71.1%)
Fees 50,663 57,000 46,557 57,600 600 1.1%
Services 77,165 66,800 40,059 124,700 57,900 86.7%
Miscellaneous 2,399 5,000 - 5,000 - 0.0%
Total 132,284 133,300 89,996 188,600 55,300 41.5%
Overhead Allocation 194,940 217,700 194,940 216,900 (800) (0.4%)
Total Administrative Expenses 327,224$ 351,000$ 284,936$ 405,500$ 54,500$ 15.5%
FY 2013 Administrative Expenses - Recycled
FY 2012
Administrative Expenses - Recycled
Equipment .3% Fees
14.2%
Services 30.8%
Miscellaneous 1.2%
Overhead Allocation
53.5%
78
FY 2011 FY 2013 Budget
Actual Budget Estimated Budget Variance %
Fuel and Oil 12,949$ 13,300$ 13,931$ 13,600$ 300$ 2.3%
Meters and Materials 5,137 4,900 5,626 5,000 100 2.0%
Infrastructure Equipment and Supplies 82,803 104,500 99,605 74,500 (30,000) (28.7%)
Chemicals 214,007 256,000 163,179 226,000 (30,000) (11.7%)
Safety Equipment 6,344 2,100 2,513 - (2,100) (100.0%)
Laboratory Equipment and Supplies 3,863 4,000 4,398 4,000 - 0.0%
Other Materials and Supplies 4,666 6,300 3,303 5,300 (1,000) (15.9%)
Contracted Services 4,602 8,500 6,831 3,500 (5,000) (58.8%)
Total Materials and Maintenance 334,371$ 399,600$ 299,386$ 331,900$ (67,700)$ (16.9%)
FY 2013 Materials and Maintenance Expenses - Recycled
Materials and Maintenance Expenses - Recycled
FY 2012
Fuel & Oil 4.1%
Meters & Materials 1.5%
Infrastructure
Equipment &
Supplies
22.4%
Chemicals 68.1%
Laboratory Equipment &
Supplies
1.2%
Other Materials & Supplies 1.6%
Contracted
Services 1.1%
79
Recycled Water Service Area
80
Sewer Revenues and Expenses
Metropolitan Wastewater System
The District provides sewer service to approximately 15,200 customers through 4,652 accounts (or approximately 6,674 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 0.2% is anticipated in Fiscal Year 2013. 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 sewer service charges from Metro budgeted at $1,009,700 for Fiscal Year 2013. Additionally, the District will pay $239,200 for its share of the operation and
maintenance cost of the Rancho San Diego Outfall and the Spring Valley Outfall to transport
sewage to Metro for Fiscal Year 2013.
The charge for sewer service is mandated by the State Revenue Program Guidelines which require the use of a "Service Unit Assignment Formula" that converts higher strength uses into a
service unit value comparable to the use impact of a single-family residential user or equivalent
dwelling unit (EDU). The rate of discharge and strength of sewage for non-residential customers
tend to be higher than a single-family residential user. Due to their higher discharge and strength, non-residential customers (comprising 1.5% of the customer base)
are assigned 12.3% of the total service
units. The formula for the sewer rates is
shown on page 88.
81
Operating Budget Summary - Sewer
FY 2011 FY 2013 Budget Variance
11-Actual Budget Estimated Budget Variance %
REVENUES
4200 Sewer Charges 2,386,600$ 2,336,000$ 2,395,365$ 2,555,200$ 219,200$ 9.4%
4136 Capacity Fee Revenues 91,731 202,800 176,209 165,000 (37,800) (18.6%)
4400 Non-operating Revenues 33,072 30,600 32,121 30,600 - 0.0%
Tax Revenues 52,270 51,500 50,585 51,500 - 0.0%
4510 Interest 12,164 7,100 11,968 6,100 (1,000) (14.1%)
Transfers
TF BettTransfer from Betterment - 30,000 30,000 - (30,000)
Repl Replacement Reserve - 120,000 120,000 - (120,000)
DD General Fund Draw Down 994,600 - - 671,100 671,100
FR GFTransfer from General Fund - 595,000 595,000 595,000 -
Subtotal -Transfers 994,600 745,000 745,000 1,266,100 521,100 69.9%
TOTAL REVENUES 3,570,437 3,373,000 3,411,248 4,074,500 701,500 20.8%
EXPENDITURES
5411 Power 81,347 81,800 70,431 83,800 2,000 2.4%
5110 Labor and Benefits 737,082 909,400 792,794 853,200 (56,200) (6.2%)
5200 Administrative Expenses 498,773 434,100 398,458 408,900 (25,200) (5.8%)
5300 Materials & Maintenance 1,703,561 1,755,900 1,725,358 1,360,600 (395,300) (22.5%)
Transfers
Bett ResBetterment Reserve - - - 625,000 625,000
Repl ResReplacement Reserve - - - 743,000 743,000
swr gfTransfer to Sewer General Fund (595,000) 191,800 191,800 - (191,800)
Subtotal -Transfers (595,000) 191,800 191,800 1,368,000 1,176,200 86.0%
TOTAL EXPENDITURES 2,425,763 3,373,000 3,178,841 4,074,500 701,500 20.8%
EXCESS REVENUES 1,144,674$ -$ 232,407$ -$ -$ 0.0%
FY 2013 Sewer Operating Expenditures
EXCESS REVENUES, w/o restatement and transfers -$
FY 2012
Power
3.1% Labor and Benefits 31.5%
Administrative
Expenses 15.1%
Materials &
Maintenance 50.3%
82
Units/FY 2013
Accounts ASU(1)Current Approved(3)Current Approved(3)Budget
Single Family 4,526 4,526 12.26$ 13.30$ 1.77$ 1.92$ 1,768,000$
Multi-Family 50 1,360 12.26 13.30 1.77 1.92 345,900
Schools 6 s 275 41.75 45.30 143,600
Churches 4 c 42 41.75 45.30 21,900
Commercial
Low Strength 40 1 232 41.75 45.30 121,200
Medium Strength 19 2 134 41.75 45.30 70,000
High Strength 7 3 107 41.75 45.30 55,900
Penalties 28,700
TOTAL SEWER CHARGES 4,652 6,674 2,555,200$
Sewer Charges by Service Class FY2013
(1)Assigned Service Units
(2)Current and Approved base fees for 1" meter are $17.88 and $19.40, respectively.
(3)Approved rates for sewer service beginning in January 2013.
Sewer Charges Summary by Service Class
Usage Fee / Sewer RateBase Fee for 3/4" Meter(2)
Single Family 70.0%
Multi-Family 13.6%
Schools 5.7% Churches 0.9% Commercial - Low
Strength 4.8%
Commercial - Medium
Strength 2.8%
Commercial - High
Strength 2.2%
83
Budget
FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013
Sewer Charges 2,359,173$ 2,154,628$ 2,271,879$ 2,363,313$ 2,368,192$ 2,526,500$
Penalties 55,713 29,896 39,707 23,287 27,173 28,700
Total 2,414,886$ 2,184,524$ 2,311,586$ 2,386,600$ 2,395,365$ 2,555,200$
Penalties
Revenue History - Sewer
Actual
$1,900
$2,000
$2,100
$2,200
$2,300
$2,400
$2,500
$2,600
FY08 Actual FY09 Actual FY10 Actual FY11 Actual FY12 Estimated FY13 Budget
Th
o
u
s
a
n
d
s
s
Sewer Revenue History
Sewer Charges Penalties
84
Power Costs - Sewer
Sewer Lift
Stations
FY08 Actual 82,023$
FY09 Actual 88,512
FY10 Actual 84,408
FY11 Actual 81,347
FY12 Estimated 70,431
FY13 Budget 83,800
$0
$20
$40
$60
$80
$100
FY08
Actual
FY09
Actual
FY10
Actual
FY11
Actual
FY12
Estimated
FY13
Budget
Th
o
u
s
a
n
d
s
Historical Power Costs
85
FY 2011 FY 2013 Budget
Actual Budget Estimated Budget Variance %
Equipment -$ 1,000$ 364$ 8,700$ 7,700$ 770.0%
Fees 306 4,000 1,940 4,000 - 0.0%
Services 358,387 265,500 254,397 239,500 (26,000) (9.8%)
Miscellaneous 9,205 5,000 10,882 10,000 5,000 100.0%
Total 367,898 275,500 267,583 262,200 (13,300) (4.8%)
Overhead Allocation 130,875 158,600 130,875 146,700 (11,900) (7.5%)
Total Administrative Expenses 498,773$ 434,100$ 398,458$ 408,900$ (25,200)$ (5.8%)
FY 2013 Administrative Expenses - Sewer
FY 2012
Administrative Expenses - Sewer
Equipment
2.1% Fees
1.0%
Services
58.6% Miscel1aneous
2.4%
Overhead Allocation 35.9%
86
FY 2011 FY 2013 Budget
Actual Budget Estimated Budget Variance %
Fleet Parts and Equipment 2,180$ 3,000$ 1,074$ 1,500$ (1,500)$ (50.0%)
Infrastructure Equipment and Supplies 67,343 53,800 44,117 68,000 14,200 26.4%
Chemicals 3,974 7,000 5,677 7,000 - 0.0%
Safety Equipment 5,990 3,300 2,736 - (3,300) (100.0%)
Laboratory Equipment and Supplies 6,017 5,000 4,697 5,000 - 0.0%
Other Materials and Supplies 902 200 65 200 - 0.0%
Contracted Services 13,996 47,000 41,047 30,000 (17,000) (36.2%)
Materials and Maintenance 100,402 119,300 99,413 111,700 (7,600) (6.4%)
Sewer Charges
Metro O&M Costs 1,329,921 1,397,400 1,397,400 1,009,700 (387,700) (27.7%)
Spring Valley Sewer Charge 273,238 239,200 228,545 239,200 - 0.0%
Total Sewer Charges 1,603,159 1,636,600 1,625,945 1,248,900 (387,700) (23.7%)
Total Materials and Maintenance 1,703,561$ 1,755,900$ 1,725,358$ 1,360,600$ (395,300)$ (22.5%)
FY 2013 Materials and Maintenance Expenses - Sewer
Materials and Maintenance Expenses - Sewer
FY 2012
Fleet Parts and
Equipment 0.1%
Infrastructure Equipment & Supplies
5.0% Chemicals 0.5%
Laboratory Equipment &
Supplies 0.4%
Contracted Services
2.2%
Metro O&M Costs 74.2%
Spring Valley
Sewer Charge 17.6%
87
Formula for Sewer Rates
Strength Factors
1.000 Schools
1.000 Churches
1.000 Low-Strength Commercial
1.238 Medium-Strength Commercial
2.203 High-Strength Commercial
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 $1.77 and $1.92, respectively. A base fee is also applied. Current and approved base fees are $12.26 and $13.30 for ¾ inch water meter, and $17.88 and $19.40 for 1 inch or greater. Approved fees are effective for all services billed after January 1, 2013.
To meet State of California requirements, customers must pay their fair share of sewer costs. The
Otay Water District is required to determine sewer rates in accordance with the State’s Revenue
Program Guidelines. The State Water Resources Control Board (SWRCB) has grouped
commercial customers into various categories and has identified strength factors for each of these
business categories. The standard of measure for strength factors is the typical sewer strength of a
single family residence (SFR). The typical SFR has
280 milligrams per liter of Biological Oxygen Demand
and 234 milligrams per liter of suspended solids. The
strength factors established by the SWRCB are listed
below and are used by the District in the calculation of
commercial sewer rates. These factors are in terms of
the strength relative to a SFR, SFR having a strength
factor of 1.000.
Monthly bills are calculated based on Assigned Service Units (ASUs). The formula to calculate
ASUs is as follows:
Number of ASUs = (((Flow in gallons per day X 0.85) / 250) X Strength Factor)
The typical SFR’s estimated daily flow is 250 gallons per day (gpd). This flow level, for the
typical SFR, is the baseline or standard of measure by which flows are measured. Flows for
commercial entities vary and are calculated using the reads from the business’ water meters. This
flow is converted to gpd then divided by 250 to put the flow in terms of a residential equivalence.
The reduced flow factor 15% is used to reflect that not all water used flows into the sewer system.
The number of ASU’s is multiplied by the following district-wide sewer rate to determine the
monthly sewer bill. The minimum charge for commercial shall be no lower than 1 ASU at low-
strength.
This charge is increasing by $3.55 per ASU from $41.75 to $45.30. The approved rate is effective
for all services billed beginning January 1, 2013.
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
Sewer Service Area
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 are restricted for the purpose of funding the District facilities when collected these
may cover costs including but not limited to planning, design, construction, and financing
associated with those facilities. The District uses a portion of capacity fee revenues to provide
general expansion planning and developer support. These fees reimburse the General Fund for
the cost of providing these services.
Betterment fees are earned by the General Fund for facilities maintenance performed by the
Water Operations Department.
Annexation fees are collected when developers buy into the District’s potable 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 2010, annexation fees were unrestricted
and therefore included in the General Fund revenues. With the new fee methodology, these fees
are now restricted for the purpose of capital improvements.
The 1% Property Tax is a result of Proposition 13 that was approved in 1978, which limited the
general levy property tax rate for all taxing authorities to a total rate of 1% of the assessed value.
Subsequent legislation, AB8, established that the receipts from the 1% levy were to be
distributed to taxing agencies according to approximately the same proportions received prior to
Proposition 13. These general use funds are currently being used as a source of operating
revenue.
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 miscellaneous revenues.
Lease revenues make up a large portion of general revenues and are mainly from the lease of
cell-sites on District property. When the District enters a new lease there is a one-time fee
charged with the set-up of each cell-site. The District incurs expenses related to these leases and
the purpose of the fee is to recover the cost to set up the lease.
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.
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 5.4% 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.
Calavo Gardens Sewer Rehabilitation
91
FY 2011 FY 2013 Budget Variance
Actual Budget Estimated Budget Variance %
Fee Revenues
Capacity Fee Revenues 1,063,234$ 1,044,000$ 1,160,066$ 1,180,600 136,600$ 13.1%
Betterment Fees for Maintenance 560,229 628,600 690,885 689,400 60,800 9.7%
Subtotal Fee Revenues 1,623,463 1,672,600 1,850,951 1,870,000 197,400 11.8%
Tax Revenues
1% General Tax 2,923,709 3,141,700 2,890,156 3,185,600 43,900 1.4%
Availability Fees 653,012 697,900 696,863 697,000 (900) (0.1%)
Subtotal Tax Revenues 3,576,721 3,839,600 3,587,019 3,882,600 43,000 1.1%
General Revenues 5,200,184$ 5,512,200$ 5,437,970$ 5,752,600$ 240,400$ 4.4%
FY 2011 FY 2013 Budget Variance
Actual Budget Estimated Budget Variance %
Property Rental 1,185,573$ 1,298,400$ 1,222,060$ 1,265,300$ (33,100) (2.5%)
Sewer Billing Fees 361,680 362,500 366,431 366,400 3,900 1.1%
Set-up Fee for Lease Site 5,581 8,000 3,000 1,500 (6,500) (81.3%)
Grants 70,265 20,000 34,593 - (20,000) (100.0%)
Revenue from Shared Facility 31,863 30,600 32,121 30,600 - 0.0%
Miscellaneous 443,236 302,100 405,267 250,500 (51,600) (17.1%)
Non-Operating Revenues 2,098,198$ 2,021,600$ 2,063,472$ 1,914,300$ (107,300)$ (5.3%)
Potable Recycled Sewer Total
Fee Revenues
Capacity Fee Revenues 1,015,600$ -$ 165,000$ 1,180,600$
Betterment Fees for Maintenance 689,400 - - 689,400
Total Fee Revenues 1,705,000 - 165,000 1,870,000
Tax Revenues
1% General Tax 3,185,600 - - 3,185,600
Availability Fees 645,500 - 51,500 697,000
Total Tax Revenues 3,831,100 - 51,500 3,882,600
Non-Operating Revenues
Property Rental 1,265,300 - - 1,265,300
Sewer Billing Fees 366,400 - - 366,400
Set-up Fee for Lease Site 1,500 - - 1,500
Revenue from Shared Facility - - 30,600 30,600
Miscellaneous 250,500 - - 250,500
Total Non-Operating Revenues 1,883,700 - 30,600 1,914,300
Total General and Non-Operating Revenues 7,419,800$ -$ 247,100$ 7,666,900$
Note: For General and Non-Operating Revenues, the Potable Fund serves as the District's General Fund for
accounting purposes.
FY 2013 Budget
Non-Operating Revenues
FY 2012
General and Non-Operating Revenues by Business
General Revenues
FY 2012
92
FY 2011 FY 2013 Budget Variance
Actual Budget Estimated Budget Variance %
Administrative Expenses
Legal Fees 350,946$ 380,000$ 364,519 380,000$ -$ 0.0%
General Insurance 492,576 492,000 547,836 529,000 37,000 7.5%
Total Administrative Expenses 843,522 872,000 912,355 909,000 37,000 4.2%
Benefits
Benefits (1)344,512 (79,600) 699,740 1,267,300 1,346,900 0.0%
Total General Expenses 1,188,034$ 792,400$ 1,612,095$ 2,176,300$ 1,383,900$ 174.6%
FY 2012
General Expenses
(1) Benefits for General Expenses include District-wide labor and benefit expenses not attributable to any one department, such as the
effect of cost of living raises on accrued leave liabilities or the Other Post Employment Benefit (OPEB) Costs. These expenses are netted
against the District's anticipated Vacancy Factor. The Vacancy Factor for FY 2012 and FY 2013 was $278,800 and $271,300
respectively.
During FY12 the Otay Water District adopted an enhanced retiree medical plan which increased the District's OPEB costs by
$792,000 for FY13. The increased costs of this OPEB plan change enhancement is offset by approximately $950,000 in savings for
pension costs after the District's employees agreed to increase their amount paid for pensions from 1% to 8% of pensionable wages.
Unrelated to the enhancement, the FY13 costs also includes a shift in funding of $350,000 of OPEB costs from reserves to the District's
operating budget.
93
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 2013 Budget includes
funding for labor and benefits for 148 Full-time Equivalent (FTE) employees and a 3.5% across-the-board salary increase on
July 1, 2012.
The staffing level for Fiscal Year 2013 had a decrease of eight FTE employees from
Fiscal Year 2012. The District has chosen
to eliminate eight vacant positions in areas
that have experienced a reduction of work due to slowing of growth. Since 2007, the District has reduced FTEs by 13% due to
slowed growth and by focusing on
efficiencies and automation. Efficiencies
have been achieved by strategic planning,
goal setting, and leveraging advancements in technology.
A projected 10.25% of the labor and
benefits costs will be charged to projects included in the Capital Improvement
Program (CIP) and Developer Deposits.
These labor and benefit costs are not
considered Operating costs and therefore
reduce the Operating Budget by $2,272,500.
Administrative Expenses
Administrative Expenses represent 5.8%
of the District's total operating costs. A
detailed listing of the Administrative
Expenses for Fiscal Year 2013 is shown on page 101. The increase of $244,200 is due to increased regulatory fees,
property insurance, and outside services
needed for consultants. This increase is
offset by decreased conservation incentives and telecommunications costs. 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 less
discretionary than others such as insurance
or regulatory fees which are mandatory.
The District is more able to control expenses such as training or business
meetings. The safety needs of the
District's customers and employees and
compliance with regulatory agencies are of
utmost importance, so related expenses are considered necessary.
94
Departmental Operating Budget
Materials and Maintenance
Like all cost included by the District, the
Materials and Maintenance Expenses
allow the District to provide reliable, high-
quality products, services, and support to
its customers.
As the District continues to grow and
technology and regulations change,
maintenance and services will be adjusted,
as needed. This year, there is a 6.2%
decrease in Materials and Maintenance
Expenses totaling $164,400. This
reduction is mainly due to decreases in
chemicals; fleet and meter materials,
contracted services, building grounds, and
materials.
The Water Operations Department has
implemented an Infrastructure
Management System (IMS) which allows
for better maintenance of existing assets
and enhanced monitoring of all assets
including new assets coming on-line. It
also facilitates planning for repair and
replacement as well as assessing the
condition of infrastructures. IMS helps the
District to better track and manage the
Materials and Maintenance Expenses.
Strategic Plan Implementation
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
updates its performance measurement
program each fiscal year to provide
measurable results of progress on both
strategic and key operational goals and
objectives. (See the plan objectives and
measures in the department sections that
follow.) Performance measures have been
developed by comparing key District
activities with functional and available
operational data that provide reliable
feedback on progress. Developed
cooperatively with staff and the help of
outside consultants, the measures are
designed to be comparable to measures
commonly found in similar industries.
The performance measures focus on “best
practice” as applied to the District.
Measures are collected and reviewed
quarterly by the Senior Management Team
and reviewed by the Board at least twice a
year. Results are used to set new targets
for the following fiscal year and to hold
staff accountable for the current fiscal
year.
850 Pump Station pump removal as part of the
La Presa System Improvements for CIP P2370
95
General Manager
General Expense
Administrative Services
Finance
Water Operations
Engineering
Departmental Operating Budget FY 2013
Total Departmental Operating Budget - $29,053,000
Board of Directors
0.4% General Manager
5.1%
General Expense 7.5%
Administrative
Services 12.7%
Finance 16.8%
Information
Technology and Strategic Planning
10.3%
Water Operations 40.8%
Engineering
6.4%
96
FY11 FY13
Actual Budget Estimated Budget
Labor Costs 11,410,095$ 11,958,200$ 11,035,318$ 11,905,100$
Benefits
Pension (1)3,417,185 3,883,500 3,293,694 3,083,000
Employee Assistance Program 4,391 6,000 3,784 5,000
Workers' Compensation (2)175,824 8,700 (4,597) 245,900
Health/Dental/Life Insurance/OPEB (1)2,155,369 2,394,900 2,743,477 3,556,400
Social Security/Medicare 939,909 967,200 905,547 975,800
Salary Continuation Insurance 76,781 79,100 68,536 65,900
State Unemployment Insurance 66,505 75,000 55,818 75,000
Vacation/Sick/Holiday/Other Leave 2,250,080 2,214,800 2,204,816 2,254,800
Total Fringe Benefits 9,086,044 9,629,200 9,271,075 10,261,800
Total Labor and Benefits 20,496,139 21,587,400 20,306,393 22,166,900
Less: Non-Operating Labor and Benefits
Labor Costs 1,386,197 1,465,400 1,313,527 1,429,600
Fringe Benefits Allocation 815,824 938,200 798,332 842,900
Total Work Order Allocation 2,202,021 2,403,600 2,111,859 2,272,500
Operating Labor & Benefits 18,294,118 19,183,800 18,194,534 19,894,400
Total Overhead Allocation 1,594,127 1,685,200 1,510,556 1,644,000
Less: Overhead Allocation Personnel Portion 1,006,691 1,064,200 953,916 1,038,200
Admin Portion of Overhead (36.85%)587,436$ 621,000 556,640 605,800
Net Operating Labor and Benefits 17,287,427$ 18,119,600$ 17,240,618$ 18,856,200$
(2) FY12 Workers' Compensation budget and expense reflects the planned write-off of a previously accrued $235,500 liability.
Labor and Benefits
(1) During FY12 the Otay Water District adopted an enhanced retiree medical plan which increased the District's Other Post
Employment Benefit (OPEB) costs by $792,000 for FY13. The increased costs of this OPEB plan enhancement is offset by
approximately $950,000 in savings for pension costs after the District's employees agreed to increase their amount paid for
pensions from 1% to 8% of pensionable wages. Unrelated to the enhancement, the FY13 costs also includes a shift in funding of
$350,000 of OPEB costs from reserves to the District's operating budget.
FY12
156
21
66
13
32
18
6
148
19
65
12
30
17
5
0 40 80 120 160
Total
Engineering
Water Operations
Information Technology and Strategic Planning
Finance
Administrative Services
General Manager
Full-Time Equivalent (FTE)
Comparison by Department
FY 12-13 FY 11-12
97
Potable Sewer Recycled
Developer
Reimbursed-
CIP Total
Operating Labor Costs 9,617,500$ 346,200$ 511,800$ -$ 10,475,500$
Benefits 8,734,100 255,600 429,200 - 9,418,900
Overhead Allocation-Personnel (1,661,300) 251,400 371,700 - (1,038,200)
Total Operating Labor and Benefits 16,690,300 853,200 1,312,700 - 18,856,200
CIP Labor Costs 897,700 63,700 282,800 185,400 1,429,600
Benefits 527,900 34,200 172,700 108,100 842,900
Overhead Allocation-Personnel 651,900 46,300 205,400 134,600 1,038,200
Total CIP Labor and Benefits 2,077,500 144,200 660,900 428,100 3,310,700
Total Labor and Benefits 18,767,800$ 997,400$ 1,973,600$ 428,100$ 22,166,900$
Labor and Benefits by Fund - Fiscal Year 2013
Potable-Operating
75%
Potable-CIP
10%
Sewer-Operating
4%
Sewer-CIP 1% Recycle-Operating 6% Recycle-CIP
4%
98
FY 2011 FY 2012 FY 2013
General Manager 6 6 5
Total FTE - General Manager Department 6 6 5
Administrative Services 3 3 3
Human Resources 4 4 4Purchasing877
Safety 1 1 1
Conservation 3 3 2
Total FTE - Administrative Services Department 19 18 17
Controller and Budgetary Services 7 7 7Treasury and Accounting Services 6 5 5Customer Service 19 17 15
Payroll and Accounts Payable 3 3 3
Total FTE - Finance Department 35 32 30
IT and Strategic Planning Applications 5 5 4IT Operations 3 4 4
Geographic Information Systems 4 4 4
Total FTE - IT and Strategic Planning Department 12 13 12
Operations Management 2 2 2
Water System Operations 28 28 28
Utility Maintenance/Construction 30 30 29Collection/Treatment/Reclamation Operations 6 6 6
Total FTE - Operations Department 66 66 65
Engineering Management 3 3 3
Engineering 18 18 16
Total FTE - Engineering Department 21 21 19
District Total FTE Position Count 159 156 148
Position Count by Department
99
FY 2011 FY 2012 FY 2013
Customer Service Field Representative I and II 1 0 0
Water Conservation Technician 0 1 0
Strategic Planning Assistant 1 1 0
Reclamation Plant Operator 0 1 0
Utility Construction Assistant 0 1 1
Sr. Civil Engineer 0 1 1
Sr. Engineering Technician 1 0 0
Total Contract/Temporary Employees 3 5 2
Position Count
Contract / Temporary Employees
General Manager 3% Administrative Services
11%
Finance 20%
Information
Technology and Strategic Planning
8%
Operations
45%
Engineering 13%
100
FY 2011 FY 2013 Budget
Actual Budget Estimated Budget Variance %
Directors' Fees 13,700$ 30,000$ 13,600$ 30,000$ -$ 0.0%
Travel and Meetings 159,708 196,200 127,822 172,400 (23,800) (12.1%)
Conservation and Outreach 257,007 300,800 214,556 231,500 (69,300) (23.0%)
General Office Expense 306,470 330,100 275,518 296,600 (33,500) (10.1%)
Equipment 1,088,109 961,000 918,128 928,500 (32,500) (3.4%)
Fees 496,387 461,000 498,108 512,300 51,300 11.1%
Services 1,855,975 1,721,400 1,658,999 2,026,200 304,800 17.7%
Training 125,385 140,200 79,439 113,700 (26,500) (18.9%)
Utilities 18,264 19,000 20,330 20,500 1,500 7.9%
Miscellaneous 142,267 150,000 137,145 170,000 20,000 13.3%
Total 4,463,272 4,309,700 3,943,645 4,501,700 192,000 4.5%
Less: Overhead Allocation (587,436) (621,000) (556,640) (605,800) 15,200 (2.4%)
Subtotal 3,875,836 3,688,700 3,387,005 3,895,900 207,200 5.6%
General Expenses 843,522 872,000 912,355 909,000 37,000 4.2%
Total Administrative Expenses 4,719,358$ 4,560,700$ 4,299,360$ 4,804,900$ 244,200$ 5.4%
5,306,794$ 5,181,700$ 4,856,000$ 5,410,700$
Total Administrative Expenses FY 2013
FY 2012
Administrative Expenses - Total
Directors' Fees 0.6%
Travel & Meetings 3.2%
Conservation &
Outreach
4.3%
General Office
Expense
5.5%
Equipment 17.1%
Fees 9.5% Services 37.4%
Training 2.1%
Utilities 0.4%
General Expense 16.8%
Miscellaneous
3.1%
101
FY 2011 FY 2013 Budget
Actual Budget Estimated Budget Variance %
Materials and Maintenance
Fuel and Oil 218,508$ 353,200$ 243,017$ 368,100$ 14,900$ 4.2%
Meters and Materials 166,683 213,100 174,549 188,000 (25,100) (11.8%)
Fleet Parts and Equipment 140,253 168,400 125,196 149,500 (18,900) (11.2%)
Infrastructure Equipment and Supplies 555,410 599,600 511,772 586,500 (13,100) (2.2%)
Chemicals 442,590 504,000 381,758 474,000 (30,000) (6.0%)
Safety Equipment 53,603 32,900 32,255 29,400 (3,500) (10.6%)
Laboratory Equipment and Supplies 44,399 44,000 42,612 44,000 - 0.0%
Other Materials and Supplies 155,680 164,700 151,359 163,700 (1,000) (0.6%)
Building and Grounds Materials 74,032 80,500 68,628 55,500 (25,000) (31.1%)
Contracted Services 347,475 503,000 406,006 440,300 (62,700) (12.5%)
Materials and Maintenance 2,198,633 2,663,400 2,137,152 2,499,000 (164,400) (6.2%)
Sewer Charges
Metro O&M Costs 1,329,921 1,397,400 1,397,400 1,009,700 (387,700) (27.7%)
Spring Valley Sewer Charge 273,238 239,200 228,545 239,200 - 0.0%
Total Sewer Charges 1,603,159 1,636,600 1,625,945 1,248,900 (387,700) (23.7%)
Total Materials and Maintenance 3,801,792$ 4,300,000$ 3,763,097$ 3,747,900$ (552,100)$ (12.8%)
FY 2013 Materials and Maintenance Expenses
Materials and Maintenance Expenses - Total
FY 2012
Fuel & Oil 9.8% Meters & Materials
5.0%
Fleet Parts & Equipment
4.0%
Infrastructure Equipment & Supplies 15.6%
Chemicals 12.6%
Safety Equipment
0.8% Laboratory Equipment &
Supplies
1.2%
Other Materials &
Supplies
4.4%
Building & Grounds
Materials
1.5%
Contracted
Services
11.8%
Sewer Charges 33.3%
102
FY 2011 FY 2013
Actual Budget Estimated Budget
Departmental Expenditures
Board of DirectorsBoard of Directors 75,413$ 106,600$ 74,997$ 111,900$
General ManagerGeneral Manager 1,688,703 1,721,400 1,669,025 1,488,400
General ExpenseGeneral Expense 1,188,034 792,400 1,612,095 2,176,300
Administrative ServicesAdministrative Services 3,415,204 3,727,400 3,345,258 3,678,800
FinanceFinance 4,559,086 4,712,000 4,413,730 4,886,800
Information Technology and Strategic PlanningInformation Technology and Strategic Planning 2,978,151 3,080,200 2,872,363 2,995,800
Water OperationsWater Operations 11,514,254 12,688,600 11,061,978 11,853,000
EngineeringEngineering 1,983,859 1,836,900 1,764,185 1,862,000
Total Departmental Expenditures 27,402,704 28,665,500 26,813,631 29,053,000
Less: Overhead Allocation (1,594,127) (1,685,200) (1,510,556) (1,644,000)
Net Departmental Expenditures 25,808,577 26,980,300 25,303,075 27,409,000
Non-Departmental Expenditures
Water Purchases 34,287,450 38,243,700 38,459,664 41,762,400
Power 2,170,357 2,440,900 2,138,674 2,368,000
Expansion Reserve 2,775,000 555,000 555,000 3,936,000
Betterment Reserve 315,000 - - 1,120,000
Replacement Reserve 6,965,000 3,330,000 3,330,000 743,000
Transfer to Sewer General Fund - 595,000 595,000 595,000
Transfer to General Fund Reserve 390,500 2,612,300 2,612,300 2,285,800
Transfer to Sewer Replacement 1,750,000 1,720,000 1,720,000 2,099,000
Transfer to New Supply Reserve - 1,585,000 1,585,000 -
Total Non-Departmental Expenditures 48,653,307 51,081,900 50,995,638 54,909,200
TOTAL OPERATING EXPENDITURES 74,461,884$ 78,062,200$ 76,298,713$ 82,318,200$
FY 2012
Operating Expenditures by Department
103
FY 2011 FY 2013
Actual Budget Estimated Budget
Departmental Expenditures
Labor and Benefits 18,294,117$ 19,183,800$ 18,194,534$ 19,894,400$
Director's Fees 13,700 30,000 13,600 30,000
Travel and Meetings 159,709 196,200 127,821 172,400
Conservation and Outreach 257,007 300,800 214,556 231,500
General Office Expense 306,470 330,100 275,518 296,600
Equipment 1,088,110 961,000 918,128 928,500
Fees 1,339,909 1,333,000 1,410,463 1,421,300
Services 1,855,975 1,721,400 1,658,999 2,026,200
Training 125,385 140,200 79,439 113,700
Materials & Maintenance 2,198,632 2,663,400 2,137,153 2,499,000
Power and Utilities 18,264 19,000 20,330 20,500
Sewer Charges 1,603,159 1,636,600 1,625,945 1,248,900
Miscellaneous 142,267 150,000 137,145 170,000
Total Departmental Expenditures 27,402,704 28,665,500 26,813,631 29,053,000
Less: Overhead Allocation (1,594,127) (1,685,200) (1,510,556) (1,644,000)
Net Departmental Expenditures 25,808,577 26,980,300 25,303,075 27,409,000
Non-Departmental Expenditures
Water Purchases 34,287,450 38,243,700 38,459,664 41,762,400
Power 2,170,357 2,440,900 2,138,674 2,368,000
Retiree Medical Reserve - - - -
Expansion Reserve 2,775,000 555,000 555,000 3,936,000
Betterment Reserve 315,000 - - 1,120,000
Replacement Reserve 6,965,000 3,330,000 3,330,000 743,000
Transfer to Sewer General Fund - 595,000 595,000 595,000
Transfer to General Fund Reserve 390,500 2,612,300 2,612,300 2,285,800
Transfer to Sewer Replacement 1,750,000 1,720,000 1,720,000 2,099,000
Transfer to New Supply Fund - 1,585,000 1,585,000 -
Total Non-Departmental Expenditures 48,653,307 51,081,900 50,995,638 54,909,200
TOTAL OPERATING EXPENDITURES 74,461,884$ 78,062,200$ 76,298,713$ 82,318,200$
FY 2012
Operating Expenditures by Object
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
Mitch Thompson
Gary Croucher
Treasurer
David Gonzalez, Jr.
Vice President
Division 3
Division 2
Division 1
Division 4
Division 5
Jose Lopez
President
Mark Robak
105
FY 2011 FY 2012 FY 2013
Actual Budget Estimated Budget
Board of Directors 75,413$ 106,600$ 74,997$ 111,900$
TOTAL 75,413$ 106,600$ 74,997$ 111,900$
Board of Directors
Board of Directors
0.4% General Manager
5.1%
General Expense 7.5%
Administrative Services 12.7%
Finance 16.8%
Information Technology and
Strategic Planning 10.3%
Water Operations
40.8%
Engineering
6.4%
FY 2013 Total Departmental Budget - $29.1 Million
Board of Directors - $111,900
106
Board of Directors
FY 2011 FY 2012 FY 2013
Board of Directors Actual Budget Estimated Budget
Benefits 53,932$ 60,000$ 58,088$ 65,300$
Director's Fees 13,700 30,000 13,600 30,000
Travel and Meetings 7,781 16,600 2,789 16,600
Total 75,413$ 106,600$ 74,997$ 111,900$
Budget vs. Actual
$-
$50
$100
$150
FY 2009 FY 2010 FY 2011 FY 2012 FY 2013
99 98
87
107 112
$88
$63
$75 $75 Th
o
u
s
a
n
d
s
Budget Actual
107
Director’s Division Boundaries
108
General Manager
Mission Statement
To provide high value water and wastewater services to the customers of the Otay Water
District, in a professional, effective, and efficient manner.
Key Challenge
Our key District challenge is to add increased value by improving our core business processes. From a water supply perspective, this means determining the optimum mix of
water supply, treatment, and delivery solutions for our customers. From a daily operating
perspective, efficiency improvements have become the primary source of competitive
advantage and cost optimization for utilities. Adding value from this perspective means the
entire team focusing on not only the highest priority goals but also examining the details of what we do every day and be willing to alter how we do it if it makes a positive difference. Our employees voice a high degree of personal and professional satisfaction with our
direction and the entire team is committed to meeting this key challenge with distinction.
General Manager’s Vision
“A District that is at the forefront in innovations to provide water services at affordable rates, with a reputation for outstanding customer service.” - Mark Watton
Division Title Division No.
General Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1111
Assistant General Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2111
109
Position Count FY 2011 FY 2012 FY 2013
General Manager 1 1 1
Assistant General Manager 2 2 1
District Secretary 1 1 1
Sr. Confidential Executive Secretary 1 1 1
Communications Officer 1 1 1
Total 6 6 5
District Position Count - 148
General Manager Department - 5
Position Count
Board of Directors
General Manager
District
Secretary
Sr. Confidential
Executive Secretary
Communications
Officer
Assistant General
Manager
110
FY 2011 FY 2012 FY 2013
Actual Budget Estimated Budget
General Manager 1,113,229$ 1,079,000$ 1,156,196$ 1,167,300$
Legal 209 9,800 - -
Assistant General Manager 575,265 632,600 512,829 321,100
TOTAL 1,688,703$ 1,721,400$ 1,669,025$ 1,488,400$
General Manager
Board of Directors 0.4%
General Manager
5.1%
General Expense 7.5%
Administrative
Services
12.7%
Finance 16.8%
Information
Technology and
Strategic Planning 10.3%
Water Operations 40.8%
Engineering 6.4%
FY 2013 Total Departmental Budget - $29.1 Million
General Manager - $1,488,400
111
General Manager
FY 2011 FY 2012 FY 2013
Actual Budget Estimated Budget
Labor and Benefits 1,334,420$ 1,429,400$ 1,289,474$ 1,106,800$
Travel and Meetings 46,186 63,500 42,384 53,900
Conservation and Outreach 2,998 5,000 7,378 6,000
General Office Expense 6,444 8,000 6,754 5,100
Equipment - 1,500 161 -
Fees 50,132 46,000 41,464 82,000
Services 248,433 168,000 281,305 234,600
Training 90 - 105 -
Miscellaneous - - - -
Total 1,688,703$ 1,721,400$ 1,669,025$ 1,488,400$
Budget vs. Actual
$-
$500
$1,000
$1,500
$2,000
FY 2009 FY 2010 FY 2011 FY 2012 FY 2013
$1
,
7
6
9
$1,66
7
$1
,
7
9
1
$1,72
1
$1
,
4
8
8
$1
,
6
8
7
$1
,
5
3
0
$1,68
9
$1,66
9
Th
o
u
s
a
n
d
s
Budget Actual
112
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 Manager. The office posts and
disseminates meeting notices, agendas, minutes, sets board meeting dates, and assists in
conducting board and committee meetings. It also manages public and media relations, bi-
national and legislative affairs, and provides liaison with local elected officials and community
groups. The General Manager’s office oversees the production and distribution of publications
and notices to inform the public of District functions, policies, and services. The office also
coordinates special events and provides staffing and support to local water associations.
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 2011-2012
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 14 units per month, as of
January 1, 2012, Otay’s water rates were the 7th lowest in San Diego County.
In a Labor Cost Comparison of San Diego County’s water districts, Otay’s Annual Salaries
and Benefits per Customers are the second lowest.
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.
113
General Manager
When comparing Customers per Employee, Otay is among the best with each employee serving 396 customers.
Customers continue to report high levels of satisfaction with the Otay Water District as their service provider. In the most recent customer survey, 91% of customers rated the District’s
service as good, very good, or excellent.
For the seventh year in a row, Otay received the Distinguished Budget Presentation Award from the Government Finance Officers Association of the United States and Canada. This
award reflects on Otay’s longstanding commitment to transparency and public
accountability.
Otay has a AA credit rating from Standard and Poor’s, and a AA- credit rating from Fitch.
These ratings are excellent given Otay’s size and reflect on the District’s high credit
worthiness. For the typical Otay customer, it means they will pay less interest on bonds
issued for capital improvement projects.
In our annual audit, the auditor did not identify any deficiencies in internal controls over
financial reporting that they considered to be material weaknesses.
The multi-year Automatic Meter Reading (AMR) program was completed in FY 2012. This
well-proven and cost-effective technology helps the District improve efficiency, increase
productivity, reduce costs, improve customer service and even promote water conservation.
With completion of the installation of the AMR meters, the meter reading team was reduced
in size from 9 FTEs in FY 2008 to 4 FTEs for 2013. Prior to AMR, the District projected it
would need 11 meter readers to serve its customers.
As a result of the 2010 U.S. Census, the District finalized and approved divisional boundary
changes and equalized the population within the five Board of Director’s divisions. The new
divisional boundaries have been publicized and published on the District’s external and
internal websites, and delivered to the County of San Diego’s Registrar of Voters.
Otay vigorously promoted paperless billing to customers and approximately 19,000 accounts
converted to paperless billing. At the end of FY 2012, this represents approximately 35 percent of customers using the paperless option; saving thousands of dollars each month in printing, postage, and check processing costs.
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 reduced the number of FTEs from 175 in FY 2007 to 148 in the new fiscal year, even as it delivers
more services to a larger customer base.
114
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
115
Position Count FY 2011 FY 2012 FY 2013
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
Senior Buyer 1 1 1
Assistant Buyer 1 1 1
Lead Warehouse Worker / Facilities Worker 1 1 1
Warehouse / Delivery Worker 1 1 1
Facilities Maintenance Technician 2 2 2
Records Assistant 1 0 0
Safety & Security Administrator 1 1 1
Water Conservation Manager 1 1 1
Water Conservation Specialist 2 2 1
Total 19 18 17
Position Count
District Position Count - 148
Administrative Services Department - 17
Purchasing and
Facilities
Safety and Risk
Administration
Water
Conservation
Human
Resources
Administrative
Services
116
Department Responsibilities
FY 2011 FY 2012 FY 2013
Actual Budget Estimated Budget
Administrative Chief 427,190$ 465,000$ 453,277$ 476,100$
Human Resources 723,139 787,100 774,102 885,300
Purchasing and Facilities 1,350,344 1,451,300 1,320,226 1,461,000
Safety and Security 323,625 312,200 272,763 313,600
Water Conservation 590,906 711,800 524,890 542,800
TOTAL 3,415,204$ 3,727,400$ 3,345,258$ 3,678,800$
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.
Board of Directors 0.4% General Manager
5.1%
General Expense
7.5%
Administrative
Services
12.7%
Finance
16.8%
Information
Technology and
Strategic Planning 10.3%
Water Operations 40.8%
Engineering 6.4%
FY 2013 Total Departmental Budget - $29.1 Million
Administrative Services - $3,678,800
117
Administrative Services
FY 2011 FY 2012 FY 2013
Actual Budget Estimated Budget
Labor and Benefits 2,324,156$ 2,503,100$ 2,331,863$ 2,407,800$
Travel and Meetings 16,375 22,300 11,880 21,400
Conservation and Outreach 254,010 295,800 207,178 225,500
General Office Expense 98,420 123,900 89,763 124,300
Equipment 56,991 45,100 35,866 92,500
Fees 7,602 6,000 3,209 4,000
Services 246,392 286,100 267,396 393,400
Training 97,386 104,200 73,544 77,700
Materials & Maintenance 295,608 321,900 304,229 311,700
Power and Utilities 18,264 19,000 20,330 20,500
Total 3,415,204$ 3,727,400$ 3,345,258$ 3,678,800$
Budget vs. Actual
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
FY 2009 FY 2010 FY 2011 FY 2012 FY 2013
$3,64
0
$3,91
3
$3
,
9
3
5
$3
,
7
2
7
$3,67
9
$3
,
3
3
8
$3,38
8
$3
,
4
1
5
$3
,
3
4
5
Th
o
u
s
a
n
d
s
Budget Actual
118
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
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.
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.
119
Administrative Services
Performance Measures
Accomplishments – Fiscal Year 2011-2012
Decreased labor costs by participating with other departments to reduce eight full-time positions by instituting efficiency programs such as automated meter reading and online
bill pay services, all of which minimize the impact of higher water costs from
wholesalers, resulting in District-wide annual cost-savings of $938,000.
Increased employees’ contribution to the employees’ portion of the CalPERS Pension
program from 1% to 8% of CalPERS reportable wages. This increase resulted in
significant annual cost-savings to the District, which allowed employees access to greater
post-employment benefits at no cost to the District. In Fiscal Year 2013, the District’s
savings are projected to be $158,000.
Implemented the Company Nurse Program to provide for an efficient and cost-savings
method for employees to seek treatment for work-related injuries. Over time, this nurse
triage program will save the District money in workers’ compensation claim fees.
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
Administrative Services
In order to streamline our processes, the District thoroughly analyzed our three 457
Deferred Compensation providers’ financial performance, service and products. As a
result, the District reduced providers from three to two Deferred Compensation providers
in order to remain competitive and provide the best service and product to our employees.
In an effort to continue with best practices and to validate that the District is receiving the best available benefit consulting services at a competitive price, the District went out to
bid for benefit brokers in February 2012 and successfully selected a broker, which will
have a cost-savings to the District of $13,600 per year.
Coordinated and received credit for the Special District Risk Management Authority’s
(SDRMA) Credit Incentive Program. The credit totaled $26,500 for Property and
Liability, and $25,100 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
Streamline inventory procedures.
Streamline requisition and purchasing procedures.
121
Administrative Services
Performance Measures
Accomplishments – Fiscal Year 2011-2012
Decentralized the data entry for receiving services to District secretaries, minimizing the back and forth communication between Accounts Payable, the Warehouse, and the
departments, thus simplifying the service receiving process.
Enhanced inventory control by initiating a department review and sign-off of materials issued to the various departments, providing an additional check and balance by having the department supervisors verify that materials pulled by the crews are appropriate and
properly used.
Worked with Accounts Payable to install the electronic infrastructure required to initiate the electronic payment of invoices.
Developed standard specifications related to irrigation and landscaping District facilities.
Worked with Water Conservation to create a list of water-wise plants to be specified by
Engineering for renovation and new construction projects emphasizing the District’s focus of using water-wise plants and irrigation, increased site security, and reducing
maintenance costs.
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
Blanket Order Activity
Percentage of material purchases acquired via blanket POs.
122
Administrative Services
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 District’s National Incident Management System (NIMS) Emergency
Management Plan.
Performance Measures
H&S Severity Rate
Quantifies the rate of employee days lost from
work due to illness or injury.
Safety Training Program
Safety & Risk Administration will provide a minimum of 8
safety training programs/hours
which 68 field employees attend.
123
Administrative Services
Accomplishments – Fiscal Year 2011-2012
In May, the District participated in the “2012 Golden Guardian County of San Diego Full
Scale Exercise.” The exercise assessed the District’s plans, policies, and procedures for
responding to and recovering from a catastrophic event occurring within Southern
California.
The District’s Hazardous Materials Business Plans (HMBP) and Spill Prevention Control
and Countermeasure Plans (SPCC) have been updated and have been inspected by the
County of San Diego. The County acknowledged the District’s efforts to reduce and
dispose of hazardous waste and the positive changes to the method of recordkeeping for
tracking hazardous material within the District.
Significant upgrades have been made to the District’s security system. Critical locations
within the District have been evaluated and changes recommended and implemented
where appropriate. These efforts have enhanced the District’s ability to provide a safe and secure work environment for employees and to protect District assets.
Water Conservation
Services We Provide
Water Conservation, under the direction of the Chief of Administrative Services, provides the
following: promotes and conducts residential and large landscape surveys; promotes the Water
Conservation Garden as a resource to its customers; participates in outreach events throughout
the community, including a WaterSmart Plant Fair, the Spring Garden Festival, Lemon Festival,
Bonita Festival, JamulFest, South Bay Green Scene and the Fall 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, the water themed high school photo contest and video contest; 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.
124
Administrative Services
Increase conservation related communication by expanding web-based information.
Closely monitor the District’s potable water demand to ensure the District will remain on
target to achieve its 2015 gpcd (gallons per capita 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.
Performance Measures
Total Water Saved
Estimate of water saved per
acre-feet through conservation
programs.
High levels of conservation during 09-10 was achieved
primarily by the completion of
one large project.
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.
125
Administrative Services
Accomplishments – Fiscal Year 2011-2012
The District, through many innovative programs, increased its annual active water conservation savings by an additional 67 acre-feet to 2,142 acre-feet (2075 + 67) of water saved this fiscal year.
The District’s fiscal year 2012 potable consumption of 137 gallons per capita per day (gpcd) stayed well below its 2015 target of 171 gpcd and remains below the 2010 figure of 142 gpcd.
126
Finance
Mission Statement
To provide effective tracking of all financial impacts of the District’s activities, and to provide
quality billing and customer service. Information is efficiently compiled and verified in
accordance with regulatory requirements and is provided to management, customers, 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2351
Finance Department Staff
127
Position Count FY 2011 FY 2012 FY 2013
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 2 2
Customer Service Supervisor 2 0 0
Senior Accountant 4 4 4
Accountant 4 3 3
Payroll Technician 0 0 0
Accounting Assistant 0 0 0
Accounting Technician 2 2 2
Senior Customer Service Representative 2 2 2
Customer Service Representative I, II and III 8 8 7
Lead Customer Service Field Representative 1 1 1
Customer Service Field Representative I and II 5 4 3
Total 35 32 30
Position Count
District Position Count - 148
Finance Department - 30
Treasury and
Accounting
Services
Customer
Service
Payroll and
Accounts
Payable
Controller and
Budgetary
Services
Finance
128
Department Responsibilities
FY 2011 FY 2012 FY 2013
Actual Budget Estimated Budget
Finance Chief 474,171$ 502,400$ 505,191$ 518,100$
Controller and Budgetary Services 618,096 644,300 623,942 711,900
Treasury and Accounting Services 1,085,178 1,086,300 1,091,451 1,080,900
Customer Service 2,016,934 2,068,000 1,809,156 2,166,500
Payroll and Accounts Payable 364,707 411,000 383,990 409,400
TOTAL 4,559,086$ 4,712,000$ 4,413,730$ 4,886,800$
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,
Payroll, and Accounts Payable. The Department ensures District’s conformance with modern finance and accounting
theory, practices, and compliance with applicable state and federal laws. The Deparment also implements financial
accounting, reporting programs, and practices to meet the District’s fiduciary responsibilities. The Finance staff provides
highly responsible and complex administrative support to the District, General Manager, and Board of Directors.
Board of Directors
0.4% General Manager 5.1%
General Expense 7.5%
Administrative
Services 12.7%
Finance
16.8% Information Technology &
Strategic Planning
10.3%
Water Operations 40.8%
Engineering
6.4%
FY 2013 Total Departmental Budget - $29.1 Million
Finance - $4,886,800
129
Finance
FY 2011 FY 2012 FY 2013
Actual Budget Estimated Budget
Labor and Benefits 3,865,686$ 4,040,400$ 3,755,813$ 3,960,100$
Travel and Meetings 11,139 14,600 10,266 12,700
General Office Expense 187,882 182,900 170,588 164,900
Equipment 208 200 - -
Fees 312,086 283,000 335,742 291,200
Services 181,895 190,600 141,321 287,600
Training 190 300 - 300
Total 4,559,086$ 4,712,000$ 4,413,730$ 4,886,800$
Budget vs. Actual
$4,000
$5,000
FY 2009 FY 2010 FY 2011 FY 2012 FY 2013
$4
,
4
7
2
$4,86
9
$4,73
0
$4
,
7
1
2
$4,88
7
$4
,
3
6
8
$4
,
6
1
7
$4,55
9
$4
,
4
1
4
Th
o
u
s
a
n
d
s
Budget Actual
130
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, preparation of the District’s overhead,
calculation of benefits rates, and other analysis.
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)
131
Finance
Sewer Rate Ranking
District's average customer bill
as compared to other agencies
in San Diego County. Otay is ranked 5th of 28 agencies.
Water Rate Ranking
District's average customer bill
as compared to other agencies
in San Diego County. Otay is ranked 7th of 23 agencies.
Distribution System Loss
Percentage for unaccounted
water (QualServe).
132
Finance
Accomplishments – Fiscal Year 2011-2012
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 eighth 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 the highest standards.
The Capital Improvement Program (CIP) budget received the “Excellence in Capital
Budgeting Award” from the CSMFO for the seventh year in a row.
Developed the CIP Budget application with Engineering and IT staff’s input. With this
application it allows project managers to update their budgets online, review and print the
CIP budget sheets, and create reports to be loaded into both the rate model and the final
budget presentation. Additionally, a suite of reports are being added so that manual preparation of reports is no longer necessary.
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. 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.
133
Finance
Performance Measures
Accomplishments Fiscal – Year 2011-2012
Awarded the Government Finance Officers Association (GFOA) Certificate of
Achievement for Excellence in Financial Reporting for the eighth 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.
Staff completed internal audits in the following areas: a) phone service; b) processing
scrap materials; c) credit card reconciliation; and d) meter purchase and install
procedures. The District actively promotes a program of strong internal controls to
protect against losses due to unauthorized activities or financial transactions.
Debt Coverage Ratio
Measures level of debt coverage ratio (ability to pay debt).
(QualServe) The minimum
legal level is 125%.
Reserve Level
Measures all of the District's
reserves against the Board
adopted Reserve Policy levels.
134
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 4-1/2
continuous years. It is the District’s policy to invest any available public funds in a
manner which will provide maximum security at a market interest return, and while
meeting the daily cash flow demands of the entity. Conforming with the District’s investment policy and following all state statutes governing the investment of public
funds, is a key focus.
Customer Service
Services We Provide
The Customer Service Division is responsible for providing meter reading, billing, receipting,
collections, and customer care for water and sewer services. The meter reading team reads
approximately 49,000 potable, recycled, and District meters a month using automatic meter reading technology. The District has completed the conversion to an automated meter reading
system to 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.
Streamline Customer Service business processes
135
Finance
Performance Measures
Accomplishments – Fiscal Year 2011-2012
Completed a software upgrade to the Customer Information System which included an
updated bill print format for all customers. The new bill print format now allows for
consolidated billing of multiple accounts and shows credit balances, both of which had been a common request from customers.
Successfully transitioned over 8,000 accounts from paper bills to paperless billing. The
anticipated annual savings is expected to be $50,000 with the potential to increase as more transitions take place.
The AMR change-out program that was scheduled to end in FY 2014 was successfully
completed this year. This allowed the meter reading team to be reduced by two full-time employees with an overall reduction of five full-time employees since FY 2008.
Answer Rate
Percentage of calls as a measure of all calls received.
Billing Accuracy
Percentage of correct bills issued. (QualServe)
136
Finance
Incorporated the second phase of streamlining the fire service read process. The fire service reads are now reported through the annual backflow testing process. This new
process will save approximately 40 hours of staff time per month.
Updated the cashiering station with the most recent software upgrade which provides better reporting functionality and ensures the latest compliance with financial regulations.
Automated several routine print jobs, such as letters to locked owner accounts and
welcome letters to new customers, saving staff time and improving efficiency.
Payroll and Accounts Payable
Services We Provide
The Payroll Division pays 148 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. This division also
responsible for the accounts payable process which pays and approximately 750 invoices on a monthly basis.
Strategic Plan Objective
Streamline accounts payable business processes
Accomplishments – Fiscal Year 2011-2012
Accounts payable processes are being reviewed and streamlined to further increase
efficiencies.
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 2011.
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
138
Position Count FY 2011 FY 2012 FY 2013
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 1 1 1
GIS Technician 1 1 1
Network Engineer 1 1 1
Database Administrator 1 1 1
Lead Business System Analyst 1 1 1
Business System Analyst I and II 2 2 2
Network Analyst 1 1 1
Records Assistant 0 1 0
Total 12 13 12
Position Count
District Position Count - 148
Information Technology & Strategic Planning Department - 12
IT Applications IT Operations GIS
Information Technology and
Strategic Planning
139
Department Responsibilities
FY 2011 FY 2012 FY 2013
Actual Budget Estimated Budget
IT Chief/Applications 942,747$ 1,026,900$ 984,576$ 971,100$
IT Operations 1,370,008 1,337,000 1,183,472 1,281,600
Geographic Information System 665,396 716,300 704,315 743,100
TOTAL 2,978,151$ 3,080,200$ 2,872,363$ 2,995,800$
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.
Board of Directors 0.4% General Manager 5.1%
General Expense 7.5%
Administrative Services 12.7%
Finance 16.8%
Information
Technology and
Strategic Planning
10.3%
Water Operations 40.8%
Engineering 6.4%
FY 2013 Total Departmental Budget - $29.1 Million
Information Technology and Strategic Planning - $2,995,800
140
Information Technology and Strategic Planning
FY 2011 FY 2012 FY 2013
Actual Budget Estimated Budget
Labor and Benefits 1,862,884$ 2,058,300$ 1,824,404$ 2,003,100$
Travel and Meetings 10,241 12,500 8,105 9,300
General Office Expense 2,801 4,300 2,069 400
Equipment 960,607 844,600 837,742 801,000
Services 125,554 143,500 200,043 163,500
Training 16,064 17,000 - 18,500
Total 2,978,151$ 3,080,200$ 2,872,363$ 2,995,800$
Budget vs. Actual
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
FY 2009 FY 2010 FY 2011 FY 2012 FY 2013
$2
,
8
2
0
$2,85
6
$2
,
9
6
4
$3,08
0
$2,99
6
$2
,
8
1
0
$2
,
8
6
4
$2
,
9
7
8
$2
,
8
7
2
Th
o
u
s
a
n
d
s
Budget Actual
141
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.
Develop District-wide Records Management program.
Implement GIS-centric work order system.
Streamline and improve data center processes.
Accomplishments – Fiscal Year 2011-2012
In FY 2012, 36 of 42 (85%) strategic objectives identified in the plan were either completed or on schedule to be completed. Also, 32 of 42 (76%) Performance Measures
identified as critical to District operations were either ahead of or on target.
Delivered a significantly upgraded records management solution and converted nearly 50
years of digital Board records and project files while eliminating documents that had met
the District’s records retention guidelines. This upgrade reduced costs for storage and
document processing, as well as much easier and faster access to records.
Implemented a new capital budgeting system and process that makes capital tracking
much easier and eliminated significant consultant expenses for related outside services.
Automated formerly paper-intensive and manual processed forms such as Direct Deposit,
Vehicle Inspection, Petty Cash, Staff Expense, Tuition Reimbursement and Check
Request, which saves labor and contributes to the goal of reducing manual labor.
Began implementation of a new “GIS Centric” work order system that will serve as the primary system to improve field work efficiency. In addition, there is continued
emphasis on asset management and collection of critical facilities data on all of our pump
stations, reservoirs, and other field facilities.
142
Information Technology and Strategic Planning
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.
Performance Measures
Customer Satisfaction
with Website
Tracks customer satisfaction
with website through survey.
Network Availability
Percentage of uptime for network
during normal business hours.
143
Information Technology and Strategic Planning
Accomplishments – Fiscal Year 2011-2012
Outsourced core email and network monitoring services to a “cloud provider” ensuring
lower costs, more functionality, and higher reliability. This eliminated a back-up data
facility and reduced District electrical and air conditioning services that were costing over
$30,000 a year to operate.
Reduced the cost of phone system maintenance by upgrading the District’s telephone
system, which went live at the beginning of FY2012. This upgrade has provided new
opportunities to improve customer service options and has eliminated a redundant wiring
system that will no longer need to be maintained.
Reduced hardware purchases by buying services where possible, and reduced capital
expenditures for the data center by nearly $200,000 while keeping operating expenses
flat.
Received the Municipal Information Systems Association of California (MISAC) “2010-
2011 Award for Excellence Information Technology Practices” -- the Department was
honored to be recognized by peer professionals for the second year in a row.
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.
Website Hits Tracks the number of visitors
to our website per month.
144
Information Technology and Strategic Planning
Accomplishments – Fiscal Year 2011-2012
Updated inaccurate parcels, revising naming conventions to make data simpler to use, and
reviewed District and Division boundaries to ensure that both election and tax records are
accurate.
Added new layers of information to our GIS including CCTV data for sewer pipes and revised boundaries for facilities to make tracking easier.
Modified GIS data to allow staff to identify and track work done to key pieces of
infrastructure such as pump stations and reservoirs. These “vertical assets” are now much more accessible for improved maintenance planning.
Delivered new tools, particularly a “flex viewer” which utilizes ESRI off the shelf software
to provide multi-dimensional access to data from either a map or data table perspective with appropriate drill down and hyper linking activity.
145
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
146
Position Count
District Position Count - 148
Water Operations Department - 65
Fleet/Equipment
Maintenance
Construction
Maintenance
Water Systems
Operations
Utility
Maintenance
Pump/Electrical
Water Systems
Meter
Maintenance
SCADA
Recycled
Maintenance
Treatment Plant
Laboratory
Water Operations
Collection System
147
Position Count FY 2011 FY 2012 FY 2013
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 2 2 2
Disinfection Technician 0 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 4
Utility Services Manager 1 1 1
Utility Maintenance Supervisor 2 2 2
Utility Crew Leader 4 4 4
Utility Workers I and II 8 9 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 0 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 0
Recycled Water Distribution Operator 3 3 4
Laboratory Analysts 1 1 1
Laboratory Technicians I and II 0 0 0
Total 66 66 65
Position Count
District Position Count - 148
Water Operations Department - 65
148
Department Responsibilities
FY 2011 FY 2012 FY 2013
Actual Budget Estimated Budget
Water Operations Chief 437,862$ 434,000$ 409,734$ 430,300$
Water Systems 7,184,563 7,621,100 6,819,756 6,950,800
Construction Maintenance 3,891,829 4,633,500 3,832,488 4,471,900
TOTAL 11,514,254$ 12,688,600$ 11,061,978$ 11,853,000$
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, Sewer Collection, and
Wastewater Treatment, that provides highly responsible and complex technical and administrative support to the District,
General Manager, and Board of Directors.
Board of Directors 0.4% General Manager 5.1%
General Expense
7.5%
Administrative Services 12.7%
Finance
16.8%
Information Technology and Strategic Planning 10.3%
Water Operations
40.8%
Engineering 6.4%
FY 2013 Total Departmental Budget - $29.1 Million
Water Operations - $11,853,000
149
Water Operations
FY 2011 FY 2012 FY 2013
Actual Budget Estimated Budget
Labor and Benefits 7,236,955$ 7,981,800$ 7,029,157$ 7,821,300$
Travel and Meetings 53,842 49,000 46,265 44,300
General Office Expense 4,222 4,800 3,746 300
Equipment 48,648 61,900 38,801 35,000
Fees 92,024 91,000 77,932 97,100
Services 420,402 360,000 265,663 408,300
Training 9,711 12,000 4,400 10,500
Materials & Maintenance 1,903,024 2,341,500 1,832,924 2,187,300
Sewer Charges 1,603,159 1,636,600 1,625,945 1,248,900
Miscellaneous 142,267 150,000 137,145 -
Total 11,514,254$ 12,688,600$ 11,061,978$ 11,853,000$
Budget vs. Actual
$-
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
FY 2009 FY 2010 FY 2011 FY 2012 FY 2013
$11
,67
9
$1
1
,
4
7
9
$1
1
,
4
2
1
$1
2
,
6
8
9
$11
,85
3
$1
0
,
7
1
6
$1
0
,
5
8
5
$11
,51
4
$11
,06
2
Th
o
u
s
a
n
d
s
Budget Actual
150
Water Operations
Water Systems Operations
Services We Provide
The Water Systems Operations Division encompasses six sections which are responsible for operations and maintenance of the potable and recycled water distribution systems and the Ralph W. Chapman Water Recycling Facility. The water system operators maintain the water
distribution system and ensure it is running properly in order to provide safe, reliable drinking
water to the District’s customers. 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. The
treatment plant staff maintains and operates the District’s sewer treatment plant in order to
produce high-quality recycled water to the District’s recycled water customers. The recycled
system operators maintain the recycled water distribution system and ensures it is operating
properly in order to provide recycled water to the District’s recycled water customers.
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
Implement a water loss management program.
Replace SCADA system and optimize functionality, business continuity, and bandwidth.
Evaluate opportunities to combine or transfer similar work functions.
Complete valve exercising program business processes.
Develop data collection and condition assessment for potable system facilities.
Implement the recommendation for improving response to extended power outages.
151
Water Operations
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)
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.
152
Water Operations
.
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)
Planned Wastewater Maintenance
Ratio in Dollars
Percentage of planned
maintenance costs compared to combined planned and
corrective maintenance costs.
O&M Cost per MG
Measure for the full operation
and maintenance cost to treat
one million gallons of wastewater. (QualServe)
153
Water Operations
Percentage of Preventative
Maintenance Completed in the
Reclamation Plant
Tracks the percentage of
scheduled PM's that are
completed in the
Reclamation Plant.
Percentage of Preventative
Maintenance Completed in the
Pump/Electric Section
Tracks the percentage of
scheduled PM's that are completed in the Pump/Electric
Section.
Percentage of Preventative
Maintenance Completed in the
Valve Maintenance Program Tracks the percentage of
scheduled PM's that are
completed in the Valve
Maintenance Program.
154
Water Operations
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.
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%.
155
Water Operations
Collection System Integrity
Number of wastewater collection
system failures per 100 miles of
collection system pipeline. (QualServe)
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)
Both Actual/Projected and Targets are at 0.0%.
156
Water Operations
Accomplishments – Fiscal Year 2011-2012
Installed nine Variable Frequency Drives at the 850-2 / 803-1 pump stations and removed/replaced the nine motors to allow the contractor to rewind them with inverted
rated wire. This will save the District approximately $85,000 per year in pumping costs.
Installed five new 125 HP pumps and motors at the 711-1 pump station which increases pump efficiency and extends the service life of the pumps.
Continued to collect pump station, reservoir, and pressure reducing station data for the
Asset Management program.
Assisted in the La Presa Systems Improvements, the 850-3 recoating, and the 944-1
recycled pump station upgrade CIP projects, as well as developer projects throughout the
year.
Assisted in the planning and design of the Otay Interconnect Pipeline and the Rancho Del
Rey Well projects.
Exercised 1,408 valves this year. This equates to approximately 75% of all potable valves
being exercised since the valve crew began in 2006.
Worked with regional recycled water agencies and the County of San Diego Department of Environmental Health to produce a draft agreement that would reduce the cost of
oversight by the County on recycled water cross-connection testing by 50%
(approximately $20,000 per year) when fully implemented.
Participated in upgrade to the Ralph W. Chapman Water Recycling Facility. The
improvements included automating the chlorination feed system and scales; increasing
the physical security, lighting, and video-camera capabilities of the site; and installing a
tertiary treatment bypass system to help in the recovery process.
Utility Maintenance / Construction
Services We Provide
The Utility Maintenance and Construction Division has four sections which provide vital
maintenance functions that ensure the best quality of water and wastewater service to customers
while adhering to all applicable regulatory compliance requirements. Utility Maintenance
maintains the wastewater collection system, 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-Connection
Control program, regulated by the Department of Public 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
157
Water Operations
performance while establishing fuel efficient operational practices and emissions compliance. The wastewater collection system crews are cleaning and televising the sewer system on a daily
basis to ensure smooth flow of the system and to look for any area of concern in the system.
Strategic Plan Objective
Develop and implement large meter vault retrofit programs.
Develop large and small meter test bench strategy.
Develop data collection and condition assessment for collection system facilities.
Develop gen-set load bank testing.
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
Tracks the percentage of
scheduled PM's that are completed in the Fleet Shop.
158
Water Operations
(1) The AMR Program was accelerated in Fiscal Year 2012 to accommodate the further reduction in meter reading staff to
improve efficiency. The AMR Program will be completed in early fiscal year 2013.
Accomplishments – Fiscal Year 2011-2012
Installed covers for new emergency stand-by generator and chlorine injection equipment
at the Treatment Plant to extend the lifespan of the equipment. The new generator will provide power rating to support equipment upgrade.
Retro fitted 284 air-vacs to reduce impact by cars.
By designing and constructing large meters above ground it eliminated confined space
entries. One 6-inch at the Boys and Girls Aid society on Steele Canyon Drive and two 3-
inch meters at Avocado Village in La Mesa.
Staff cleaned 333,666 feet of sewer lines. No spills were reported.
Increased the percentage of AMR meters District-wide from 73.99% to 97.99%. The total number of AMR meters went from 36,324 to 47,791. By accelerating the AMR change-out schedule (contractor’s changing-out 9,723 meters and the District staff changed-out
2,039 meters) we essentially completed the change-out two years ahead of schedule.
Worked with Customer Service and I.T. staff to import the fire service reads from the IMS backflow database which eliminated the need for the Meter Reading staff to
manually collect the reads.
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.
Replace Manual Read Meters
with Automated Meters
Reflects the total number of
AMR Meter Replacements per
year which will increase meter reading efficiency and
reduce water loss through
increased meter accuracy.
(1)
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
160
Position Count FY 2011 FY 2012 FY 2013
Chief, Engineering 1 1 1
Executive Secretary 1 1 1
Secretary 1 1 1
Engineering Manager 2 2 2
Public Services Manager 1 1 0
Senior Civil Engineer 1 1 2
Associate Civil Engineer 2 2 1
Assistant Civil Engineer I and II 1 1 1
Environmental Compliance Specialist 1 1 1
Permit Technicians 2 2 2
Senior Engineering Technician 2 2 2
Inspection Supervisor 1 1 1
Construction Inspectors I and II 2 2 2
Supervising Land Surveyor 1 1 1
Land Surveyor 1 1 0
Assistant Survey Technician 1 1 1
Total 21 21 19
Position Count
District Position Count - 148
Engineering Department - 65
Water Resources,
Planning / Design /
Environmental
Public Services /
Construction /
Inspection / Survey
Engineering
161
Department Responsibilities
FY 2011 FY 2012 FY 2013
Actual Budget Estimated Budget
Engineering Chief 192,154$ 167,100$ 193,132$ 284,700$
Planning 351,268 305,000 262,442 230,000
Design 252,384 259,700 254,284 300,400
Water Resources 183,141 162,000 144,364 152,400
Public Services 282,846 292,400 277,127 278,000
Construction Services 240,376 154,200 161,781 169,700
Survey Services 276,243 285,400 273,987 249,600
Environmental Services 205,447 211,100 197,068 197,200
TOTAL 1,983,859$ 1,836,900$ 1,764,185$ 1,862,000$
Engineering
The Engineering Department, under the general direction of the Assistant General Manager, provides the following
support services: Planning, Design, Construction, Project Management, Public Services, and surveying 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.
Board of Directors
0.4%
General Manager
5.1%
General Expense
7.5%
Administrative
Services
12.7%
Finance
16.8%
Information
Technology and
Strategic Planning
10.3%
Water Operations
40.8%
Engineering
6.4%
FY 2013 Total Departmental Budget $29.1 Million
Engineering - $1,862,000
162
Engineering
FY 2011 FY 2012 FY 2013
Actual Budget Estimated Budget
Labor and Benefits 1,271,573$ 1,190,400$ 1,205,995$ 1,262,700$
Travel and Meetings 14,145 17,700 6,130 14,200
General Office Expense 6,700 6,200 2,599 1,600
Equipment 21,655 7,700 5,558 -
Fees 34,543 35,000 39,760 38,000
Services 633,299 573,200 503,272 538,800
Training 1,944 6,700 871 6,700
Total 1,983,859$ 1,836,900$ 1,764,185$ 1,862,000$
Budget vs. Actual
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
FY 2009 FY 2010 FY 2011 FY 2012 FY 2013
$2
,
9
5
5
$2,07
1
$2
,
0
2
4
$1,83
7
$1,86
2
$2
,
2
9
6
$1
,
9
1
7
$1,98
4
$1,76
4
Th
o
u
s
a
n
d
s
Budget Actual
163
Engineering
Water Resources / Planning / Design / Construction /
Environmental
Services We Provide
The Water Resources, Planning, Design, and Environmental Divisions provide a variety of services directly related to potable water, recycled water, and sewer services. Water
Resources staff identifies, negotiates, and develops additional potable and recycled water
supplies. Additionally Water Resources coordinates with other agencies or regional
issues and is responsible for obtaining grants, loans, and cost sharing opportunities. Planning staff develops the preliminary design of a project in order to facilitate final design and ultimately construction of the facility. Planning staff also coordinates the
review of planning documents related to potential new development. Design staff
prepares the design of facilities and advertises projects for bid. Environmental staff
coordinates and tracks the project through the construction stage and for a period after construction if long-term mitigation is required. In addition, we assist the Operations
Department on special design projects related to maintenance of existing facilities
including the Ralph W. Chapman Water Reclamation Facility.
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 Bioreactor Plant (MBR) and for a potential agreement with the City for recycled water supplies from the MBR Plant.
Prepare and implement a Wastewater Management Plan.
Accomplishments – Fiscal Year 2011-2012
Received $935,227 in grant funds from the United States Bureau of Reclamation
for participation in the Title XVI Program in Fiscal Year 2012. Over $12 million
in Title XVI grant funds have been received to date.
164
Engineering
Received $100,000 in reimbursements from Otay River Constructors for the SR-125 Utility Relocations. The project consisted of relocating a number of District
pipelines to accommodate the new SR-125 toll road by South Bay Expressway.
Started work on the Wastewater Master Plan (WWMP). The purpose of the WWMP is to develop costs, identify risks, benefits, regulatory requirements, and
opportunities the District could pursue in providing wastewater services and new
recycled water supply resources.
For the Rosarito Desalination Facility Conveyance and Disinfection System project a White Paper was prepared for the California Department of Public
Health Permit Approval Road Map, as well as a Boron Study and a report on the
Water Quality Thresholds for Boron.
Completed design of the Sewer Replacement on Avocado, Hidden Mesa,
Challenge, Louisa, and Calavo project. The project includes replacing 5,000
linear feet of 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.
Completed the design of the East Palomar Bridge Utility Relocation project. This
project replaces the 10-inch pipeline in the East Palomar Bridge.
Completed design on the 30-Inch Potable Pipeline in Hunte Parkway. This
project will reduce the head losses during high demands in the 980 pressure zone.
Completed preliminary design of the Rancho del Rey Groundwater Well Development project. The project consists of a recently installed brackish
groundwater production well and a future reverse-osmosis treatment facility that
is anticipated to produce 600 acre-feet of potable water annually. This project
will directly offset the use of imported potable water and increase reliability of the
local water supply for Chula Vista residents.
Obtained a Habitat Loss Incidental Take Permit (HLIT) from the City of Chula
Vista for the biological impacts that will occur during the construction of the
Wueste Road Recycled Water Pipeline, a component of the Recycled Water Supply Link Project.
Expanded an alignment study for the Otay Interconnect Pipeline (formerly named
North/South District Interconnection System Project) and studied supplemental alignments based on input from the community and the SDCWA. This project includes the design and construction of a pipeline and pump station to transfer
165
Engineering
water from the North District to the South District and vice versa for better water reliability.
Coordinated the District’s involvement (design review and inspection) in the
successful construction of the Heartland Training Facility at the District’s Regulatory site. This facility is a joint use training facility for Fire District and
Otay Water District employees. Phase I of the project is 95% complete and
contains a District owned confined space training prop.
Public Services / Survey / Inspection / Construction
Services We Provide
The Public Services, Survey, Inspection, and Construction Divisions assist the public by responding to customer visits, phone calls, and inquiries regarding permits, plan-checking
fees, filing procedures, permit status, meter sales, meter costs, and lateral costs. Staff
administers all plan-checking submittals for potable water, recycled water, and sewer
applications for approval, cellular lease agreements, fire service, and backflow
inspections, project deposits, and invoicing. Staff also provides inspections to private developer funded projects and the District's Capital Improvement Projects, easement and
encroachment enforcements, and survey and utility mark-outs of District facilities and
GPS plots. Once bid, the Construction staff provides construction management for the
projects.
Strategic Plan Objectives
Work with the District’s largest potable water use customers to convert landscape
and interior water use to recycled water where fiscally feasible and safe.
Strengthen CIP planning, budgeting, and cost tracking processes.
166
Engineering
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%.
CIP Project Expenditures
vs. Budget
Compares quarterly CIP
expenditures with budget.
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.
167
Engineering
Accomplishments – Fiscal Year 2011-2012
Generated revenue in meter sales in excess of $3.9 million and sold 316 meters
equating to 436 EDU’s and 316 permits.
Generated revenue in cell sites in excess of $1.02 million and maintained 33 cell
site leases.
The Survey Division completed 2,783 USA Mark-out tickets with an accuracy
rate of 100%.
The Inspection Division performed QA/QC on 10,911 linear feet of pipeline. District inspectors also performed 269 meter sets and 45 plan checks that
consisted of fire services, backflows, and developer pipeline projects.
Completed the construction of the Del Rio Road & Gillispie Drive Emergency Interconnection Project. This project consisted of installing two metered
emergency interconnections with Helix Water District to provide or take supply in
the event of an emergency.
Completed the major construction components of the Ralph W. Chapman Water Recycling Facility Upgrade project. This project upgraded the plant to meet
required effluent nitrogen levels and included energy efficient aeration panels and
turbo aeration blowers that will result in significant energy savings.
Completed construction of the La Presa System Improvements Project. This
project demolished the pump station and reservoir facilities at the La Presa and
Dorchester sites, installed a new pressure reducing station, and installed multiple
interconnections throughout the 640 pressure zone.
Completed the construction of the Force Main Access Road Repairs Project. This
project consisted of repairing the recycled water force main access road from the
treatment plant to the Use Area due to the December 2010 rain storms. Federal
Emergency Management Agency (FEMA) provided funding for this work.
Completed the HVAC Improvements to Copps Lane and Hillsdale Pump Stations
at the Regulatory Site. These two pump stations received additional Variable
Frequency Drives (VFD) to provide better efficiency.
Completed the meter relocations along Jamacha Blvd. for the County’s road
widening project.
168
Engineering
Completed the installation of five (5) new pumps and motors for the 711-1 Pump Station Upgrades project. The new 980-2 Pump Station and conservation efforts
reduced the demands in the 711 pressure zone. This project replaced the larger
pumps and motors with smaller more efficient equipment to accommodate the
reduced demand.
Completed the construction of the 657-1 & 657-2 Reservoir Coating and
Upgrades project which included removing and replacing the interior and exterior
coatings of both steel tanks. Structural modifications were also added to replace
aging equipment and bring the tanks up to current safety standards.
169
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
657-1 Reservoir
170
Description
FY 2011 FY 2012 FY 2013
Actual Budget Estimated Budget
General Expense 1,188,034$ 792,400$ 1,612,095$ 2,176,300$
TOTAL 1,188,034$ 792,400$ 1,612,095$ 2,176,300$
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 7.5% of the total Departmental Budget.
Board of Directors
0.4% General Manager 5.1%
General Expense
7.5%
Administrative Services 12.7%
Finance 16.8%
Information
Technology and Strategic Planning
10.3%
Water Operations
40.8%
Engineering
6.4%
FY 2013 Total Departmental Budget - $29.1 Million
General Expense - $2,176,300
171
General Expense
FY 2011 FY 2012 FY 2013
Actual Budget Estimated Budget
Labor and Benefits (1)344,512$ (79,600)$ 699,740$ 1,267,300$
Fees 843,522 872,000 912,355 909,000
Total 1,188,034$ 792,400$ 1,612,095$ 2,176,300$
Budget vs. Actual
(1) Benefits for General Expenses include District-wide labor and benefit expenses not attributable to any one department,
such as the effect of cost of living raises on accrued leave liabilities or the Other Post Employment Benefit Costs (OPEB).
These expenses are netted against the District's anticipated Vacancy Factor. The Vacancy Factor for FY 2012 and FY 2013
was $278,800 and $271,300 respectively.
During FY12 the Otay Water District adopted an enhanced retiree medical plan which increased the District's OPEB costs
by $792,000 for FY13. The increased costs of this OPEB plan enhancement is offset by approximately $950,000 in savings for
pension costs after the District's employees agreed to increase their amount paid for pensions from 1% to 8% of pensionable
wages. Unrelated to the enhancement, the FY13 costs also includes a shift in funding of $350,000 of OPEB costs from reserves
to the District's operating budget.
$-
$500
$1,000
$1,500
$2,000
$2,500
FY 2009 FY 2010 FY 2011 FY 2012 FY 2013
$7
8
4
$8
6
6
$8
8
8
$7
9
2
$2
,
1
7
6
$1
,
8
7
7
$1,31
5
$1
,
1
8
8
$1
,
6
1
2
Th
o
u
s
a
n
d
s
Budget Actual
172
Capital Improvement Program
The District provides water service to a population of approximately 208,000 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.
As such, capital planning is part of the District’s overall strategic planning. The capital
planning process involves identifying current needs, future needs, and prioritizing them based
on certain operating assumptions. The primary objective of this planning effort is to support an
orderly and efficient program of expansion, new water supply, replacement, and betterment,
while maintaining a stable long-range financial plan.
To accommodate this growth requires that the District invest $475 million in capital assets
through ultimate build-out. The Fiscal Year 2013 Capital Budget is $18 million and the six-
year Capital Improvement Program (CIP) totals $116.4 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 built using several major assumptions and design
criteria as follows:
1. Utilizing historical water demands for each land use type in the District to calculate future
demands.
2. Using maximum day peaking factors that vary with demand level.
3. Utilizing land use as planned by the City of Chula Vista.
4. Providing ten days of emergency water supply through a maximum of five days in covered
reservoirs and a minimum of five days from interconnections with adjacent agencies.
5. Inclusion of emergency operational storage to meet the five-day covered storage
requirement into the ten-day outage supply requirement.
CIP Justification and Impact on Operating Budget
The justification for each project is determined by whether it is required due to growth
(Expansion), new water sources (New Supply), improvements or upgrades (Betterment), or to
replace an existing asset (Replacement). As these projects are completed and placed into
service, there may be an impact on the Operating Budget by increasing costs in the areas of
maintenance, energy, or chemicals as shown on the justification and impact pages in this
section.
173
Capital Improvement Program
Capital Purchases and Facilities
All capital expenditures are in the CIP. This includes capital facilities and capital purchases.
Capital purchases are non-recurring operating expenditures for assets that cost more than
$10,000 each and have an estimated useful life of two years or more. The Capital Purchase
Projects include Vehicle, Office Equipment, Furniture, and Field Equipment purchases. The
details of these purchases can be found on page185. Capital Facility Projects are items that
exceed $10,000 or $20,000 for infrastructure related items (as defined under Capital Equipment
on page 251 of the Glossary) and have a useful life of at least two years.
The CIP projects are identified and are prioritized based on the following criteria:
1. Safety, restoration of service, immediate obligation, Board directed, or critical system need.
2. System upgrades or requirements to maintain system reliability in the next few fiscal years.
3. Need to meet the future growth of the system.
4. Project requirement may be reduced in capacity or may have low probability of need in the
future.
The following are the four categories of CIP projects:
New Water Supply
Facilities required to support new sources of water are funded from new supply fees or user
rates.
Expansion
Facilities required to support new or future users are funded from capacity fees or user rates.
Betterment
Facilities required because of inadequate capacity or new requirements that benefit existing users
are funded from availability, betterment fees, or rates.
Replacement
Facilities required to renew or replace existing facilities that have deteriorated or have exceeded
their useful life are funded from user rates.
174
Major CIP Projects
Capital Improvement Projects
The 2013 Fiscal Year CIP Budget contains 70 projects. The cost of the work planned for Fiscal Year 2013 is $18 million. Of the 70 projects planned for Fiscal Year 2013, only three are
designated as reimbursable projects with estimated costs totaling $63,000. These projects are
built by developers and reimbursed by the District.
The following shows how the $18 million of projects are broken down into four categories:
1. Capital facilities $ 6.9 million
2. Replacement or renewal projects $ 9.9 million
3. Capital purchase projects $ 1.1 million
4. Developer reimbursement projects $ .1 million
The Six-Year CIP and Fiscal Year 2013 Capital Budgets are consistent with the District's Water Resources Master Plan, current capacity fees, and the District's strategic financial objectives.
175
CIP Projects in Construction
Phase I of 944-1R
Recycled Water Pump
Station Upgrades and
System Enhancements
(R2091)
Phase I of 944-1R Recycled Water Pump Station Improvements
Installation of New Pump
New Instrumentation
New Suction Header Piping
Three new Pressure Reducing Stations
$1.88M Budget
Start: June 2011
Estimated Completion: September 2012
New Suction Header and Grating
at 944-1R Pump Station
New Pressure Reducing Station on Eastlake Parkway
176
CIP Projects in Construction
RWCRWF Upgrades and
Modifications (R2096)
New Air Scour Facility for the Filters
Refurbished Aeration Basin under Operation
RWCRWF Upgrades
and Modifications
(R2096)
RWCRWF Upgrades
New Aeration System, Blower System, and Electrical Instrumentation
$4.95M Budget
Start: July 2011
Estimated Completion: August 2012
177
CIP Projects in Construction
La Presa System
Improvements
(P2370)
Completed PRV Station
at La Presa Site
Demolition of the Dorchester Reservoir and PRV
La Presa System Improvements
Demolition of 850-1 and 657-1 Pump Stations and Forebay Reservoir
Multiple Interconnections Throughout Spring Valley
Demolition of Dorchester Reservoir and Pressure Reducing Station
$1.24M Budget
Start: November 2011
Estimated Completion: August 2012
178
CIP Projects in Construction
Sewer Main
Replacement Projects
(S2019, S2020, S2022,
& S2026)
Calavo Garden Sewer Rehabilitation
Replacement of 4,500 Linear Feet of Sewer
Manhole Rehabilitation/Replacement
Capacity Upgrades
New Flow Control and Diversion Vault for Calavo Lift Station
$3.10M Budget
Start: February 2012
Estimated Completion: May 2013
Excavating for Sewer
Replacement on Calavo Drive
Installing New 15-Inch Sewer on Avocado Blvd.
179
(Thousand $000s)FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 Total
Beginning Balance 48,044$ 40,377$ 37,199$ 39,454$ 40,550$ 41,369$
Capacity Fees 3,861$ 6,087$ 8,577$ 10,114$ 11,711$ 12,624$ 52,976$
Debt financing - - - 4,700 800 - 5,500
Grants 400 350 100 100 100 500 1,550
Interest 269 259 359 457 787 1,089 3,220
Betterment Charges 705 721 735 750 762 774 4,448
Temporary Meters 545 545 546 549 552 553 3,291
Availability (Betterment Portion)519 530 540 550 560 569 3,268
New Supply Fee 399 644 912 1,052 1,214 1,305 5,527
COPS 2010B Reimbursement 5,380 7,587 8,703 830 830 830 24,160
Transfer from General Fund 7,899 8,907 11,182 12,113 11,720 10,925 62,746
Interfund Transfers 111 99 86 18 30 42 385
Total Sources 20,088 25,729 31,740 31,233 29,066 29,211 167,069
CIP Projects 17,994 19,228 19,807 20,224 18,455 20,699 116,407
Betterment Fees for Maintenance 689 695 704 714 725 737 4,264
Debt Service 7,891 7,962 7,944 8,159 8,016 7,971 47,942
Developer Services 1,181 1,022 1,030 1,040 1,051 1,062 6,385
Transfer to State Loan Reserve - - - - - - -
Interfund Transfers - - - - - - -
Total Uses 27,755 28,907 29,485 30,137 28,247 30,469 174,998
Net Sources (Uses)(7,667)$ (3,178)$ 2,255$ 1,096$ 819$ (1,258)$ (7,929)$
Ending Balance 40,377$ 37,199$ 39,454$ 40,550$ 41,369$ 40,111$
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 CIPs and their funding sources, including fund transfers in
accordance with the District’s Reserve Policy, and planned debt issuances. This data is captured in the
District’s Rate Model on an annual basis in order to make these projections.
$0
$10,000
$20,000
$30,000
$40,000
$50,000
FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018
Th
o
u
s
a
n
d
s
Reserve Fund Balances
New Supply
Expansion
Replacement
Betterment
$40,377 $37,199 $39,454 $40,550 $41,369 $40,111
180
CIP Funding Source
(Thousands $000s)FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 TOTAL
Expansion 3,988$ 2,794$ 4,205$ 1,805$ 400$ 12,171$ 25,363$
Betterment 4,129 4,706 7,418 9,000 6,010 652 31,915
Replacement 9,273 9,808 4,264 5,499 8,605 7,560 45,009
New Supply 604 1,920 3,920 3,920 3,440 316 14,120
TOTAL 17,994$ 19,228$ 19,807$ 20,224$ 18,455$ 20,699$ 116,407$
CIP Category
(Thousands $000s)FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 TOTAL
Capital Facility Projects 6,938$ 7,902$ 9,992$ 10,317$ 13,666$ 16,375$ 65,190$
Replacement/Renewal Projects 9,874 9,640 4,310 6,165 3,237 1,162 34,388
Capital Purchase Projects 1,119 1,062 844 774 575 551 4,925
Developer Reimbursement Projects 63 595 300 300 300 290 1,848
Subtotal 17,994 19,199 15,446 17,556 17,778 18,378 106,351
FY 2014 Through FY 2018 Projects - 29 4,361 2,668 677 2,321 10,056
TOTAL 17,994$ 19,228$ 19,807$ 20,224$ 18,455$ 20,699$ 116,407$
CIP Funding Source and Category
$0
$10,000
$20,000
$30,000
$40,000
FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018
Six-Year CIP by Funding Source
Betterment
Replacement
Expansion
New Supply
$0
$10,000
$20,000
FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018
Six-Year CIP by Category
Capital Facility Projects
Replacement/Renewal Projects
Capital Purchase Projects
Developer Reimbursement Projects
181
CIP No Description FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 Total
CAPITAL FACILITY PROJECTS
P2009 PL - 36-Inch, SDCWA Otay FCF No. 14 to Regulatory Site $900 $900
P2083 PS - 870-2 Pump Station Replacement (28,000 GPM) 50 1 1 750 5,250 5,948 12,000
P2267 36-Inch Main Pumpouts and Air/Vacuum Ventilation Installations 5 230 200 435
P2370 La Presa System Improvements 195 195
P2434 Rancho Del Rey Groundwater Well Development 500 3,100 1,500 5,100
P2451 Otay Mesa Desalination Conveyance and Disinfection System 1,000 1,500 8,000 9,500 8,300 500 28,800
P2466 Regional Training Facility 14 14 28
P2486 Asset Management Plan Condition Assessment and Data Acquisition 200 50 60 60 60 59 489
P2502 803-1 Pump Station Modifications 50 50
P2503 850-2 Pump Station Modifications 50 50
P2511 North District - South District Interconnection System 1,000 1,000 2,000
P2514 PL - 30-Inch, 980 Zone, Hunte Parkway - Proctor Valley/Use Area 1,150 1,150
P2527 1200-1 Pump Station Facility Cover 30 30
P2528 30-Inch Potable Water Pipeline Manifold at 624 Reservoirs 300 1,000 1,300
P2536 HMBP-Emergency Stand-By Generator Secondary Containment 60 60
P2537 Operations Yard Property Acquisition Improvements 250 50 300
R2048 RecPL - Otay Mesa Distribution Pipelines and Conversions 15 1 1 1 50 1,752 1,820
R2058 RecPL - 16-Inch, 860 Zone, Airway Road - Otay Mesa/Alta 5 1 1 1 1 2,141 2,150
R2077 RecPL - 24-Inch, 860 Zone, Alta Road - Alta Gate/Airway 950 950 224 2,124
R2087 RecPL - 24-Inch, 927 Zone, Wueste Road - Olympic/Otay WTP 5 5 5 5 5 5,975 6,000
R2091 RecPS - 927-1 Pump Station Upgrade (10,000 GPM) and System
Enhancements
65 65
R2107 RWCWRF Screening Compactor and Chlorine Injectors Enclosure 115 115
S2039 Hidden Mountain Lift Station Enclosure 29 29
23 Total Capital Facility Projects 6,938 7,902 9,992 10,317 13,666 16,375 65,190
REPLACEMENT/RENEWAL PROJECTS
P2366 APCD Engine Replacements and Retrofits 120 265 200 175 162 162 1,084
P2382 Safety and Security Improvements 300 300 300 300 300 1,500
P2440 I-905 Utility Relocations 5 5 10
P2453 SR-11 Utility Relocations 200 125 125 1,000 700 2,150
P2458 AMR Manual Meter Replacement 1,400 500 1,900
P2477 Res - 624-1 Reservoir Cover Replacement 690 690
P2484 Large Water Meter Testing and Replacement Program 150 100 250
P2485 SCADA Communication System and Software Replacement 629 491 1,120
P2491 850-3 Reservoir Exterior Coating 150 150
P2493 624-2 Reservoir Interior/Exterior Coating 8 1,450 390 1,848
P2494 Multiple Species Conservation Plan 93 30 123
P2495 San Miguel Habitat Management/Mitigation Area 120 200 200 200 200 200 1,120
P2496 Otay Lakes Road Utility Relocations 50 50
P2504 Regulatory Site Access Road and Pipeline Relocation 50 225 175 450
P2507 East Palomar Street Utility Relocation 150 330 235 715
P2508 Pipeline Cathodic Protection Replacement Program 80 50 130
P2513 East Orange Avenue Bridge Crossing 840 150 990
P2515 870-1 Reservoir Paving 100 425 525
P2518 803-3 Reservoir Interior/Exterior Coating 700 50 750
P2519 832-2 Reservoir Interior/Exterior Coating 725 50 775
P2520 Motorola Mobile Radio Upgrade 50 50
P2521 Large Meter Vault Upgrade Program 150 150 100 60 460
P2535 458-2 Reservoir Interior Coating 5 275 20 300
R2096 RWCWRF - Upgrades and Modifications 60 60
R2099 Recycled System Air and Vacuum Value Retrofit 233 233 466
S2012 San Diego County Sanitation District Outfall and RSD Outfall Replacement 100 450 450 450 450 800 2,700
S2019 Avocado Boulevard 8-Inch Sewer Main Improvement 1,375 1,375
S2020 Calavo Drive 8-Inch Sewer Main Replacement 210 210
S2022 Hidden Mesa Drive 8-Inch Sewer Main Rehabilitation 50 50
S2023 Calavo Drive Sewer Main Utility Relocation 60 60
S2024 Campo Road Sewer Main Replacement 50 275 1,250 3,120 800 5,495
S2026 Challenge Boulevard 8-Inch Sewer Main Replacement 155 155
S2027 Rancho San Diego Pump Station Rehabilitation 300 2,490 2,790
S2028 Explorer Way 8-Inch Sewer Main Replacement 1 1 30 60 25 117
CIP Projects ($1,000s)
The 2013 Fiscal Year CIP Budget contains 70 projects. The costs for the work planned for Fiscal Year 2013 is $18 million. Of the
70 projects planned for Fiscal Year 2013, three are designated as reimbursable projects with an estimated cost of $63 thousand.
These projects are built by a developer and reimbursed by the District.
182
CIP Projects ($1,000s)
CIP No Description FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 Total
REPLACEMENT/RENEWAL PROJECTS, continued
S2033 Sewer System Various Locations Rehabilitation 200 420 150 770
S2040 Calavo Sewer Basin Improvements 275 525 450 1,250
S2041 Rancho San Diego Sewer Basin Improvements 40 75 235 800 600 1,750
38 Total Renewal & Replacements 9,874 9,640 4,310 6,165 3,237 1,162 34,388
CAPITAL PURCHASE PROJECTS
P2282 Vehicle Capital Purchases 49 392 400 425 450 476 2,192
P2286 Field Equipment Capital Purchases 115 90 75 74 75 75 504
P2443 Wireless Communications System 200 130 330
P2461 Records Management System Upgrade 2 90 90
P2469 Information Technology Network and Hardware 120 250 169 75 614
P2470 Financial System Enhancements 220 200 200 200 50 870
S2042 Sewer Vehicle Capital Purchases 325 325
7 Total Capital Purchase 1,119 1,062 844 774 575 551 4,925
DEVELOPER REIMBURSEMENT PROJECTS
P2325 PL - 10-inch to 12-inch Oversize, 1296 Zone, PB Road - Rolling Hills Hydro
PS/PB Bndy
49 49
R2083 RecPL - 20-Inch, 680 Zone, Heritage Road - Village 2/Olympic 4 395 399
R2094 Potable Irrigation Meters to Recycled Water Conversions 10 200 300 300 300 290 1,400
3 Total Reimbursement Projects 63 595 300 300 300 290 1,848
71 Total- FY2013 Projects 17,994 19,199 15,446 17,556 17,778 18,378 106,351
17 Total- FY2014 Through FY 2018 Projects - 29 4,361 2,668 677 2,321 10,056
Grand Totals $ 17,994 $ 19,228 $ 19,807 $ 20,224 $ 18,455 $ 20,699 $ 116,407
183
CIP Justification and Impact on Operating Budget
CIP #Description
Cost
Cat.
(2)
Funding
Source
(3)
FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 TOTAL
(4)
P2009 PL - 36-Inch, SDCWA Otay FCF No. 14 to
Regulatory Site
M E/B $9,600 $9,900 $10,200 $10,500 $10,800 $11,100 $62,100
P2325 PL - 10-inch to 12-inch Oversize, 1296 Zone,
PB Road - Rolling Hills Hydro PS/PB Bndy
E E $0 $2,300 $2,400 $2,500 $2,600 $0 $9,800
P2370 La Presa System Improvements M B ($1,900)($2,000)($2,100)($2,200)($2,300)$0 ($10,500)
P2434 Rancho Del Rey Groundwater Well
Development
M/E/C N/B $0 $604,000 $604,000 $604,000 $604,000 $604,000 $3,020,000
P2443 Wireless Communications System M R/E $0 $0 $18,000 $18,500 $19,100 $0 $55,600
P2451 Otay Mesa Desalination Conveyance and
Disinfection System
E/C N/B $0 $0 $0 $10,000 $28,500 $38,500
P2458 AMR Manual Meter Replacement M R $0 $0 $0 ($226,400)($233,200)($240,000)($699,600)
P2502 803-1 Pump Station Modifications E B $0 ($40,950)($81,900)($84,400)($86,900)($89,500)($383,650)
P2503 850-2 Pump Station Modifications E B $0 ($25,200)($50,400)($51,900)($53,500)($55,100)($236,100)
P2514 PL - 30-Inch, 980 Zone, Hunte Parkway -
Proctor Valley/Use Area
M E $0 $700 $700 $700 $700 $0 $2,800
R2082 RecPL - 24-Inch, 680 Zone, Olympic
Parkway - Village 2/Heritage
M E $0 $0 $0 $1,200 $1,200 $0 $2,400
R2083 RecPL - 20-Inch, 680 Zone, Heritage Road -
Village 2/Olympic
M E $0 $0 $700 $700 $700 $0 $2,100
R2084 RecPL - 20-Inch, 680 Zone, Village 2 -
Heritage/La Media
M E $0 $0 $0 $1,900 $0 $1,900
R2085 RecPL - 20-Inch, 680 Zone, La Media -
State/Olympic
M E $0 $0 $0 $1,300 $1,300 $0 $2,600
$7,700 $548,750 $501,600 $274,500 $276,400 $259,000 $1,867,950
FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 TOTAL
$7,700 $338,600 $357,500 $134,300 $130,200 $101,100 $1,069,400
$0 $196,150 $130,100 $126,200 $131,200 $140,400 $724,050
$0 $14,000 $14,000 $14,000 $15,000 $17,500 $74,500
$7,700 $548,750 $501,600 $274,500 $276,400 $259,000 $1,867,950
(1)Projected Incremental Operating Expenditures (operating cost) or O&M includes labor, benefits, materials, and overhead.
(2)
(3)
(4)
Note:See pages 182-183 for complete description of CIP projects.
The following schedule shows anticipated operating costs associated with each project in the CIP. Below is a summary of
each category of new costs that will be impacted. No additional revenues are associated with the individual projects, as
revenues are linked more directly to growth in water sales and capacity fee revenues.
Cost Category
Maintenance (M)
Energy (E)
Chemical (C)
Total Operating Budget Cost Impact
Negative cost reflect savings gained from operational efficiencies or the retirement of a facility.
Total Operating Budget Cost Impact
Projected Incremental Operating Expenditures (1)
E - Expansion B - Betterment R - Replacement N - New Supply
Cost Category - Indicates maintenance cost, energy cost, or chemical cost, based on the project type and Engineer's
estimates.
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.
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.
Each of the capital purchases and other types of assets has its own unique O&M cost.
Funding Source - Some projects have multiple funding sources as indicated by a slash (/):
184
Item#Amount Type
Engineering Development Services
R
R
R
R
R
R
R
R
R
R
Grand Total :
P2366 APCD 120,000$
P2282 Vehicle 49,000$
P2286 Field 114,600$
S2042 Sewer Vehicle 325,000$
608,600$
FY 2013 Capital Purchases
Total of Vehicles 374,000.00
Total of Field Equipment 234,600.00
Vehicles
Operations
3 This vehicle (Unit 110) is a Class 8 sewer line cleaning vehicle
utilized to maintain the District's sewer collection system as
required by the San Diego Regional Water Quality Control
Board. The funding for this replacement will come from the
Vehicle Capital Replacement Purchases (S2042)
325,000.00
11 Replacement backhoe (P2366)105,000.00
608,600.00
Summary by Project
4 2012 Ford F150 (P2282)26,000.00
6 2012 Toyota Matrix (P2282)23,000.00
1 Mueller CL-12 Tapping Machine (P2286)22,600.00
9 Heavy equipment trailer. (P2286)23,000.00
10 Portable light tower. (P2366)15,000.00
Operations
7 Crane for Unit 174 (P2286)26,000.00
8 Heavy equipment trailer. (P2286)23,000.00
Capital purchases are non-recurring operating expense items for District-wide use that cost more than $10,000 each and have
an estimated useful life of two years or more. The Capital Purchase Projects include Field Equipment, Office Equipment and
Furniture, and Vehicle purchases.
Description
Field Equipment
2 GPS Base Station consisting of a NetR9 receiver and Zephyr
Geodetic II Antenna (P2286)
20,000.00
185
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
186
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).
187
Reserve Policy
1.0 The District
The Otay Water District is a California municipal water district, authorized in 1956 by the State Legislature under the provisions of the Municipal Water District Act of 1911. The District is a "revenue
neutral" public agency; meaning each end user pays their fair share of the District's costs of water
acquisition, construction of infrastructure, and the operation and maintenance of the public water
facilities. The District provides water service within its boundaries, and provides sewer and recycled water service
within certain portions of the District. As such, the District operates three distinct business segments:
Potable water
Recycled water
Sewer
Each of these business segments has an identifiable customer base. In addition, the developer
community, large and small, makes up a significant class of customer for each business segment. As a
result, the District has four distinct customer service types:
Developers
Potable water users
Recycled water users
Sewer users
The District has established practices and developed computer systems that have enabled the District to maintain a clear separation between the service costs relating to each of its four customer service types.
Regardless of customer class, financial principles regarding cost allocation and fund accounting are
fundamental to the District’s Reserve Policy. These principles are derived from the statements of the
Governmental Accounting Standards Board (GASB), and from oversight and advisory bodies such as
the California State Auditor, the Little Hoover Commission, and the Government Finance Officers Association (GFOA). These have significant impacts on how the finances of the District are organized
and how financial processes work within the organization.
1.1 The District’s Use of Financial Resources
All of the District’s expenditures fall into two broad categories: operating costs and capital expenditures.
The operating costs include costs relating to the purchase and delivery of potable and recycled water, and the transportation and treatment of sewage. The capital expenditures support the construction of
infrastructure necessary to deliver services. The District uses various funds to support the operating and
capital efforts. Operations and maintenance is financed only by rates and charges, also called pay-as-
you-go, while capital infrastructure is financed using two financing methods: pay-as-you-go and debt
issuance (requiring annual debt service). The Capital Improvement Program (CIP) and the two funding methods support the construction, betterment, and replacement of infrastructure in all three business
areas: potable, recycled, and sewer.
188
Reserve Policy
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.
189
Reserve Policy
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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Reserve Policy
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).
Designated money to protect creditors.
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Reserve Policy
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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Reserve Policy
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.
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
1 California State Auditor, Bureau of State Audits, “California’s Independent Water Districts: Reserve Amounts Are Not
Always Sufficiently Justified, and Some Expenses and Contract Decisions Are Questionable,” dated June 2004,
2003-137; p. 8. 2 California Constitution, Article XIII B, Section 5.
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Reserve Policy
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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Reserve Policy
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 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
3 Code of Ordinances, Section 9.
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Reserve Policy
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 strategy, the District has financed construction with bond financing as the existing expansion reserves are depleted.
4 Code of Ordinances, Section 28
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Reserve Policy
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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Reserve Policy
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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Reserve Policy
2.2 County-Collected Taxes and Fees
a. General Levy Property Tax Receipts (1% Property Tax) (General Use)
In 1978, Proposition 13 limited the levy of ad valorem property taxes on real property to one
percent of the assessed value of such property. Subsequent legislation, AB 8, established that the
receipts from the one percent levy were to be distributed to taxing agencies proportionate to each
agency’s general levy receipts prior to Proposition 13. Taxes received are for general use.
b. Availability Charges (General Use/Restricted)
The District levies availability charges each year in developed and undeveloped areas. Current legislation provides that any amount up to $10 per parcel is general use and any amount over $10 per parcel is restricted to be expended in and for the improvement district (ID) within which it is
collected. Accordingly, the District may use availability charges in excess of $10 toward costs
of water and sewer facilities which are either, expansion, betterment, or replacement of facilities
consistent with the purpose of the ID in which they are collected. This portion of the proceeds of availability charges is geographically restricted and restricted by purpose. As costs are incurred on these projects the respective IDs are charged, reducing the reserves. To the extent that
availability charges are not used for the purpose for which they are collected, they must be
returned to the property owners that paid 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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Reserve Policy
c. Improvement District General Obligation (GO) Bond Assessments (Restricted)
The District has historically issued general obligation (GO) debt and establishes an improvement
district for the repayment of that debt. When this financing method is used, the county tax roll can be used to collect special taxes or assessments within the ID to pay the debt obligation. The
proceeds of the debt are restricted for the purpose as defined in the bond documents.
2.3 Miscellaneous Income
a. Miscellaneous Rents and Leases (General Use)
Revenues received from the rental and lease of District property are general use revenues. Not
only are they periodic revenues, but there is also a one-time fee charged with the setup of each
new lease. The District incurs expenses related to these rents and leases. The one-time fees are
calculated to recover the costs to setup the leases.
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
General Obligation
Bond Assessments
Diagram 2.2: Flow of Funds – County Collection Sources
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Reserve Policy
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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Reserve Policy
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 5.0 “Funding Levels” and 5.1
“Fund Transfers”). Reserves may not be transferred to or from any of the restricted funds unless
it is between two restricted funds with a shared purpose.
Fund Types and Categories
3.0 General Funds
a. Purpose
The General Fund is neither restricted nor designated. The District maintains one General Fund
for each business segment (water, sewer, and recycled). This fund holds the working capital
and emergency operating reserves. While the General Fund has a short-term focus to finance the
DEBT PROCEEDS
Unrestricted and
Undesignated
(General Use) Funds
Loans General
Obligation Bonds
Restricted Funds
Certificates of
Participation
Diagram 2.4: Flow of Funds – Debt Issuance Sources
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Reserve Policy
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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Reserve Policy
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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Reserve Policy
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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Reserve Policy
3.3 Expansion Fund Category
a. Purpose
The Expansion Fund category is to finance the expansion portion of capital projects and therefore is to be paid for by developers. When considering the reserve levels of the expansion category, the following funds work in concert and must be considered jointly: the Expansion
Fund, Expansion Debt Fund, Annexation Fund (potable and recycled only), Capital Improvement
Fund, and the Designated Expansion Fund. Potable and recycled reserves are considered jointly
while sewer is evaluated separately.
Restricted Funds
Unrestricted and
Undesignated Funding
Sources
Funding Source New Water
Supply Fees
Debt
Proceeds
Restricted Funds
Restricted Funds
Designated Funds
New Water
Supply Fund
Expansion
New Water
Supply Fund
Designated
New Water
Supply Fund
Debt Fund
General Fund – Rates and Charges
New Water
Supply Fund
Category
New Water
Supply
Debt Fund
Diagram 3.2: New Water Supply Fund Category
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Reserve Policy
b. Sources
The Expansion Fund is financed by water charges in lieu of capacity fees (for temporary meters)
and the “incremental” portion of the capacity fee. The other funds in this category may also be
financed by debt proceeds, annexation fees, the “buy-in” portion of the capacity fee, and the
general fund through a designation of reserves.
c. Funding Levels
I. Minimum Level – As the District matures the CIP will move to purely
replacement and betterment projects. As the District moves through this lifecycle the need for expansion reserves will decrease and may be reduced to zero.
II. Maximum Level – The maximum reserve level for the expansion category of
funds is limited to five years of unfinanced expansion facilities as described in the
District’s CIP Budget. To determine the unfinanced amount, the total financing needs must be reduced by the projected expansion revenues, bond financing, and
any restricted or general fund revenues allocated to this fund category. If the
combined expansion reserves exceed target levels, the District should consider
reducing capacity fees, reallocating restricted or designated funds to meet other
purposes, or shifting the timing of expansion projects.
III. Target Level – The target level is six months of expansion expenditures. It is
important that the expansion reserves remain at a minimum of six months of
expansion expenditures. This reserve level allows the District the time necessary
to issue additional debt without depleting expansion reserves. If the combined expansion reserves drop below six months of expenditures this would trigger a
transfer of general use reserves, a bond sale, an adjustment to the timing of
expansion projects, or a reallocation of restricted reserves. Bond proceeds would
be placed in the Restricted Bond Fund, transfers of general use reserves would be
placed in the Designated Expansion Fund, and transfers of restricted reserves would be placed in either the Expansion Annexation Fund or the Expansion
Capital Improvement Fund.
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Reserve Policy
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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Reserve Policy
3.4 Replacement Fund Category
a. Purpose
The Replacement Fund category is to finance replacement projects. When considering
the reserve levels of the replacement category of funds, the following funds work in concert and must be considered jointly: the Annexation Fund, Debt Fund, Capital Improvement Fund, and the Designated Replacement Fund. The 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
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Reserve Policy
of that planning horizon the reserves exceed the minimum level and is
approaching the target level.
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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Reserve Policy
3.5 Betterment Fund Category
a. Purpose
The Betterment Fund category is to finance the betterment portion of capital projects with
a portion going to maintenance of the potable, recycled, and sewer systems. The District maintains separate 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 this would
trigger a transfer of general use reserves, a bond sale, or an adjustment to the
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Reserve Policy
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
Diagram 3.6: Fund Targets
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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Reserve Policy
Diagram 3.6: Fund Targets
Fund or Fund
Category
Actions to Consider if
below Target Target Maximum
New Supply Fund
Category
New supply fee increase,
bond financing, or
transfer to designation or
to CIF or Annexation Fund
Total of all funds in
fund category = six
months of capital
expenditures
Nexus of cost to fee
Expansion Fund
Category
Capacity fee increase,
bond financing, or
transfer to designation or
to CIF or Annexation Fund
Total of all funds in
fund category = six
months of capital
expenditures
Nexus of cost to fee
Replacement Fund
Category
Bond financing, or
transfer to designation or
to CIF or Annexation Fund
Total of all funds in
fund category = 4% of
infrastructure
Nexus of cost to fee
Betterment Fund
Category
Bond financing, or
transfer to designation or
to CIF or Annexation Fund
Total of all funds in
fund category = six
months of capital
expenditures
5 years unfunded needs
Debt Reserve Fund Increase tax collection or
rates
One semi-annual
payment
Two semi-annual
payments
OPEB Fund Fund transfers Full funding Full funding
General Fund Rate increase or fund
transfers
Three months of
operating budget
expenses
Nine months of operating
budget expenses
Note: The annexation fee for sewer is a general fund revenue.
Additional Restricted Funds
4.0 Capital Improvement Fund
a. Purpose
The “Capital Improvement Fund’s sole purpose is to track the “buy-in” portion of the capacity fee and to ensure these fees are expended solely for the purpose for which they were collected.
In this case it is to pay for facilities that were in existence at the time this fee was established.
These fees may be used for expansion, replacement, or betterment projects or any debt related to
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Reserve Policy
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 reduced so that the
financial impact of issuing debt is tracked within the category for which the debt was issued.
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Reserve Policy
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 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
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Reserve Policy
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.
216
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.
217
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 payments, and other infringements of the District’s Code of Ordinances. 1% Property Tax: In 1978, Proposition 13 limited general levy property tax rates for all taxing
authorities to a total rate of 1% of full cash value. Subsequent legislation, AB 8, established that
the receipts from the 1% levy were to be distributed to taxing agencies according to approximately
the same proportions received prior to Proposition 13. Funds received are to be used for facilities construction or debt service on bonds sold to build facilities.
Operating Budget: The portion of the budget that pertains to daily operations that provide basic
governmental services. The operating budget contains appropriations for such expenditures as
personnel, supplies, utilities, materials, travel and fuel, and does not include purchases of major capital plant or equipment which is budgeted for separately in the Capital Budget. The Operating Budget also identifies planned non-operating revenues and expenses.
Revenue: Monies that the District receives as income. It includes such items as water sales and
sewer fees. Estimated revenues are those expected to be collected during the fiscal year. System Fees: Each water service customer pays a monthly system charge for water system
replacement, maintenance, and operation expenses. The charge is based on the size of the meter
and class of service.
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. Effective in 2009, all non-residential customers are charged for water
based on a tiered rate structure in which water rates are based on meter size and amount of units
consumed. A unit of water is 100 cubic feet or 748 gallons of water.
218
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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Investment Policy
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)
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Investment Policy
Federal Home Loan Mortgage Corporation (FHLMC or "Freddie Mac")
Federal National Mortgage Association (FNMA or "Fannie Mae")
Government National Mortgage Association (GNMA or “Ginnie Mae”)
Student Loan Marketing Association (SLMA or "Sallie Mae")
Federal Farm Credit Bank (FFCB)
There is no percentage limitation of the portfolio which can be invested in this category, although a five-year maturity limitation is applicable.
8.04 Interest-bearing demand deposit accounts and Certificates of Deposit (CD) will be made only in Federal Deposit Insurance Corporation (FDIC) insured accounts. For
deposits in excess of the insured maximum of $100,000, approved collateral shall be
required in accordance with California Government Code, Section 53652. Investments in
CD’s are limited to 15 percent of the District’s portfolio.
8.05 Commercial paper, which is short-term, unsecured promissory notes of corporate
and public entities. Purchases of eligible commercial paper may not exceed 10 percent of
the outstanding paper of an issuing corporation, and maximum investment maturity will be restricted to 270 days. Investment is further limited as described in California Government Code, Section 53601(g). Purchases of commercial paper may not exceed 15
percent of the District’s portfolio.
8.06 Medium-term notes defined as all corporate debt securities with a maximum
remaining maturity of five years or less, and that meet the further requirements of
California Government Code, Section 53601(j). Investments in medium-term notes are
limited to 15 percent of the District’s portfolio.
8.07 Money market mutual funds that invest only in Treasury securities and repurchase
agreements collateralized with Treasury securities, and that meet the further requirements
of California Government Code, Section 53601(k). Investments in money market mutual funds are limited to 15 percent of the District's portfolio.
8.08 The San Diego County Treasurer’s Pooled Money Fund, which is a County
managed investment pool, may be used by the Otay Water District to invest excess funds. There is no percentage limitation of the portfolio which can be invested in this category.
8.09 Under the provisions of California Government Code 53601.6, the Otay Water District shall not invest any funds covered by this Investment Policy in inverse floaters, range notes, interest-only strips derived from mortgage pools, or any investment that may
result in a zero interest accrual if held to maturity. Also, the borrowing of funds for
investment purposes, known a leveraging, is prohibited.
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9.0 Investment Pools/Mutual Funds
A thorough investigation of the pool/fund is required prior to investing, and on a continual basis. There shall be a questionnaire developed which will answer the following general questions:
A description of eligible investment securities, and a written statement of investment
policy and objectives.
A description of interest calculations and how it is distributed, and how gains and
losses are treated.
A description of how the securities are safeguarded (including the settlement
processes), and how often the securities are priced and the program audited.
A description of who may invest in the program, how often, and what size deposits
and withdrawals are allowed.
A schedule for receiving statements and portfolio listings.
Are reserves, retained earnings, etc., utilized by the pool/fund?
A fee schedule, and when and how is it assessed.
Is the pool/fund eligible for bond proceeds and/or will it accept such proceeds?
10.0 Collateralization
Collateralization will be required on certificates of deposit. In order to anticipate market changes and provide a level of security for all funds, the collateralization level will be 102% of market
value of principal and accrued interest. Collateral will always be held by an independent third
party with whom the entity has a current custodial agreement. A clearly marked evidence of
ownership (safekeeping receipt) must be supplied to the entity and retained. The right of
collateral substitution is granted.
11.0 Safekeeping and Custody
All security transactions entered into by the Otay Water District shall be conducted on a
delivery-versus-payment (DVP) basis. Securities will be held by a third party custodian
designated by the District and evidenced by safekeeping receipts.
12.0 Diversification
The Otay Water District will diversify its investments by security type and institution, with
limitations on the total amounts invested in each security type as detailed in Paragraph 8.0,
above, so as to reduce overall portfolio risks while attaining benchmark average rate of return. With the exception of U.S. Treasury securities, government agencies, and authorized pools, no
more than 50% of the District’s total investment portfolio will be invested with a single financial
institution.
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13.0 Maximum Maturities
To the extent possible, the Otay Water District will attempt to match its investments with anticipated cash flow requirements. Unless matched to a specific cash flow, the District will not
directly invest in securities maturing more than five years from the date of purchase. However,
for time deposits with banks or savings and loan associations, investment maturities will not
exceed two years. Investments in commercial paper will be restricted to 270 days.
14.0 Internal Control
The Chief Financial Officer shall establish an annual process of independent review by an
external auditor. This review will provide internal control by assuring compliance with policies and procedures.
15.0 Performance Standards
The investment portfolio shall be designed with the objective of obtaining a rate of return throughout budgetary and economic cycles, commensurate with the investment risk constraints
and the cash flow needs.
The Otay Water District’s investment strategy is passive. Given this strategy, the basis used by the CFO to determine whether market yields are being achieved shall be the State of California
Local Agency Investment Fund (LAIF) as a comparable benchmark.
16.0 Reporting
The Chief Financial Officer shall provide the Board of Directors monthly investment reports which provide a clear picture of the status of the current investment portfolio. The management
report should include comments on the fixed income markets and economic conditions,
discussions regarding restrictions on percentage of investment by categories, possible changes in
the portfolio structure going forward and thoughts on investment strategies. Schedules in the quarterly report should include the following:
A listing of individual securities held at the end of the reporting period by authorized investment category.
Average life and final maturity of all investments listed.
Coupon, discount or earnings rate.
Par value, amortized book value, and market value.
Percentage of the portfolio represented by each investment category.
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17.0 Investment Policy Adoption
The Otay Water District’s investment policy shall be adopted by resolution of the District’s
Board of Directors. The policy shall be reviewed annually by the Board and any modifications made thereto must be approved by the Board.
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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.
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Glossary
Debenture: A bond secured only by the general credit of the issuer. Delivery Versus Payment: There are two methods of delivery of securities: delivery versus
payment and delivery versus receipt. Delivery versus payment is delivery of securities with an
exchange of money for the securities. Delivery versus receipt is delivery of securities with an
exchange of a signed receipt for the securities. Derivatives: (1) Financial instruments whose return profile is linked to, or derived from, the
movement of one or more underlying index or security, and may include a leveraging factor, or
(2) financial contracts based upon notional amounts whose value is derived from an underlying
index or security (interest rates, foreign exchange rates, equities or commodities). Discount: The difference between the cost price of a security and its maturity when quoted at
lower than face value. A security selling below original offering price shortly after sale also is
considered to be at a discount.
Discount Securities: Non-interest bearing money market instruments that are issued at a discount and redeemed at maturity for full face value, e.g., U.S. Treasury Bills.
Diversification: Dividing investment funds among a variety of securities offering independent
returns. Federal Credit Agencies: Agencies of the Federal government set up to supply credit to various
classes of institutions and individuals, e.g., S&L’s, small business firms, students, farmers, farm
cooperatives, and exporters.
Federal Deposit Insurance Corporation (FDIC): A federal agency that insures deposits in member banks and thrifts, currently up to $100,000 per deposit.
Federal Farm Credit Bank (FFCB): The Federal Farm Credit Bank system supports agricultural
loans and issues securities and bonds in financial markets backed by these loans. It has consolidated the financing programs of several related farm credit agencies and corporations.
Federal Funds Rate: The rate of interest at which Fed funds are traded. This rate is currently
pegged by the Federal Reserve through open-market operations.
Federal Home Loan Bank (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
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Glossary
by those mortgages in secondary markets. Freddie Mac, like its competitor Fannie Mae, is regulated by the United States Department of Housing and Urban Development (HUD).
Federal National Mortgage Association (FNMA Or Fannie Mae): FNMA, like GNMA was
chartered under the Federal National Mortgage Association Act in 1938. FNMA is a federal
corporation working under the auspices of the Department of Housing and Urban Development (HUD). It is the largest single provider of residential mortgage funds in the United States. Fannie Mae is a private stockholder-owned corporation. The corporation’s purchases include a
variety of adjustable mortgages and second loans, in addition to fixed-rate mortgages. FNMA’s
securities are also highly liquid and are widely accepted. FNMA assumes and guarantees that all
security holders will receive timely payment of principal and interest. Federal Reserve System: The central bank of the United States created by Congress and
consisting of a seven member Board of Governors in Washington, D.C., 12 regional banks and
about 5,700 commercial banks that are members of the system.
Government National Mortgage Association (GNMA or Ginnie Mae): A government owned agency which buys mortgages from lending institutions, securitizes them, and then sells them to
investors. Because the payments to investors are guaranteed by the full faith and credit of the
U.S. Government, they return slightly less interest than other mortgage-backed securities.
Interest-Only Strips: A mortgage backed instrument where the investor receives only the interest, no principal, from a pool of mortgages. Issues are highly interest rate sensitive, and cash flows
vary between interest periods. Also, the maturity date may occur earlier than that stated if all
loans within the pool are pre-paid. High prepayments on underlying mortgages can return less to
the holder than the dollar amount invested. Inverse Floater: A bond or note that does not earn a fixed rate of interest. Rather, the interest
rate is tied to a specific interest rate index identified in the bond/note structure. The interest rate
earned by the bond/note will move in the opposite direction of the index. An inverse floater
increases the market rate risk and modified duration of the investment. Leverage: Investing with borrowed money with the expectation that the interest earned on the
investment will exceed the interest paid on the borrowed money.
Liquidity: A liquid asset is one that can be converted easily and rapidly into cash without a
substantial loss of value. In the money market, a security is said to be liquid if the spread between bid and asked prices is narrow and reasonable size can be done at those quotes.
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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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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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.
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14.0 Investment and Arbitrage Compliance
Tax-exempt bonds are required to meet certain provisions of the federal tax code in order to
maintain their tax-exempt status. In order to prevent municipal issuers from borrowing money at
tax-exempt rates solely for the purpose of investing the proceeds in higher yielding investments
and making a profit (“arbitrage”), the federal tax code contains a provision that requires issuers
to compare the interest earned on any bond funds held (such as a reserve fund) with interest that
would theoretically be earned if the funds were invested at the yield of the bonds, and to “rebate”
to the federal government any interest earned in excess of the theoretical earnings limit.
The Chief Financial Officer shall invest the bond proceeds subject to the District’s Investment
Policy in a timely manner, to ensure the availability of funds to meet operational requirements.
In doing so, the CFO will maintain a system of record keeping and reporting to meet the arbitrage rebate compliance requirements of the federal tax code.
15.0 Types of Debt Financing
General Obligation Bonds
General obligation bonds are secured by a pledge of the ad-valorem taxing power of the issuer
and are also known as a full faith and credit obligations. Bonds of this nature must serve a public
purpose to be considered lawful taxation of the property owners within the District and require a
two third’s majority vote in a general election. The benefit of the improvements or assets constructed and acquired as a result of this type of bond must be generally available to all
property owners.
The District can issue general obligation bonds up to but not in excess of 15% of the assessed
valuation under Article XVI, Section 18 of the State constitution. An annual amount of the levy necessary to meet debt service requirements is calculated and placed on the tax roll through the County of San Diego. The District also has a policy that the ad-valorem tax to be used to pay
debt service on general obligation bonds will not exceed $.10 per $100 of assessed value.
Voters within Improvement District No. 27 of the District authorized $100 million general
obligation bonds in 1989. The District issued $11,500,000 general obligation bonds in 1992 and
refinanced the bonds in 1998. The District also has approximately $29 million in general obligation bonds authorized 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
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and predictable revenue source, and when a vote is required to issue them, bondholders have
some indication of taxpayers’ willingness to pay. General obligation bonds carry the highest
credit rating that a public agency can achieve and therefore, the lowest interest cost. General
obligation bonds typically are issued to finance capital facilities and not for ongoing operational
or maintenance costs.
The District will use an objective analytical approach to determine whether it can afford to assume new general obligation debt for the improvement districts, or in the case of projects not
approved by the original ID 27 vote, prior to any submission of a general obligation bond ballot
measure to voters. This process will compare generally accepted standards of affordability to the
current values for the District. These standards will include debt per capita, debt as a percent of taxable value, debt service payments as a percent of current revenues and current expenditures, and the level of overlapping net debt of all local taxing jurisdictions. The process will also
examine the direct costs and benefits of the proposed expenditures. The decision on whether or
not to assume new debt will be based on these costs and benefits, the current conditions of the
municipal bond market, and the District’s ability to "afford" new debt as determined by the aforementioned standards.
Revenue Bonds
Revenue bonds are limited-liability obligations that pledge net revenues of the District to debt
service. The net revenue pledge is after payment of all operating costs. Though revenue bonds
are not generally secured by the full faith and credit of the District, the financial markets require coverage ratios of the pledged revenue stream and a covenant to levy rates and charges sufficient
to produce net income at some level in excess of debt service (a Rate Covenant).
Also there may be a test required to demonstrate that future revenues will be sufficient to
maintain debt service coverage levels after any proposed additional bonds are issued. The
District will strive to meet industry and financial market standards with such ratios. Annual
adjustments to the District’s rate structure may be necessary to maintain these coverage ratios.
The underlying credit of revenue bonds is judged on the ability of the District’s existing rates to
provide sufficient net income to pay debt service and the perceived willingness of the District to
raise rates and charges in accordance with its Rate Covenant. Actual past performance also plays
a role in evaluating the credit quality of revenue bonds, as well as the diversity of the customer
base. Revenue bonds generally carry a credit rating one or two investment grades below a general obligation bond rating.
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.
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Lease/Purchase Agreements
Over the lifetime of a lease, the total cost to the District will generally be higher than purchasing
the asset outright. As a result, the use of lease/purchase agreements in the acquisition of
vehicles, equipment and other capital assets will generally be avoided, particularly if smaller
quantities of the capital asset(s) can be purchased on a "pay-as-you-go" basis.
The District may utilize lease-purchase agreements to acquire needed equipment and facilities. Criteria for such agreements should be that the asset life is three years or more, the minimum
value of the agreement is $50,000 and interest costs must not exceed the interest rate earned by
the District’s portfolio for the average of the past 6 months. Lease payments of this type are
considered operating expenses and would reduce net operating income available to pay any District revenue bonds. There are no coverage requirements or rate covenants associated with lease/purchase agreements.
State Water Loans
The State Water Resources Control Board makes certain funds available to water districts
throughout the State. These loans typically carry a below-market rate of interest and are short term in nature. While State loans should be incorporated into the District’s debt portfolio for the
financing of capital improvements, the payment of the loan should not compromise the District’s
ability to issue other planned debt or cause the District to violate its rate covenants or make it
necessary for the District to increase rates to maintain existing rate covenants.
Land Based Financing
The District may consider developer or property owner initiated applications requesting the
formation of community facilities or assessment districts and the issuance of bonds to finance
eligible District facilities necessary to serve newly developing commercial, industrial and/or
residential projects. Facilities will be financed in accordance with the provisions of the
Municipal Improvement Act of 1913 and the Improvement Bond Act of 1915, or the Mello-Roos Community Facilities Act of 1982.
Typically, the bonds issued would be used to prepay, in a lump-sum, the District’s capacity fees
with respect to a large tract of land under development, or to finance in-tract infrastructure that
will eventually be dedicated to the District. The bonds are secured by a special tax or assessment
to be levied on property within the boundaries established for the community facilities district (sometimes known as a “Mello-Roos” district) or the assessment district. If the District becomes the sponsoring public agency for such financing district and the issuance of debt, the District will
be required to enter into a Funding, Construction and Acquisition agreement for any of the
facilities to be dedicated to the District upon completion. This agreement governs the type of
facilities to be constructed with bond proceeds and how the facilities will be accepted by the District.
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In some cases, the District may not be asked to be the sponsoring agency for the formation of a financing district, rather, the developer or property owner may approach a school district or a
city to be the sponsoring agency. Nonetheless, the property owner may want to include lump-
sum payment of District fees in the financing or construction of certain facilities to be dedicated
to the District upon completion. In this case, if the District desired to participate, the District would enter into a Joint Financing Agreement with the sponsoring agency, again governing the type of facilities to be constructed with bond proceeds and how the facilities will be accepted by
the District.
On a case-by-case basis, the Board shall make the determination as to whether a proposed district
will proceed under the provisions of the Assessment Acts or the Mello-Roos Community Facilities Act. The Board may confer with other consultants and the applicant to learn of any unique district requirements, such as long-term development phasing, prior to making any final
determination.
All District and District consultant costs incurred in the evaluation of new development, district
applications and the establishment of districts will be paid by the applicant(s) by advance deposits in those instances where a party or parties other than the District have initiated a proposed district. Expenses not legally reimbursable by the financing district will be borne by
the applicant. The District may incur expenses for analyzing proposed assessment or community
facilities districts where the District is the principal proponent of the formation or financing of
the district.
Prior to the issuance of any land secured financing and in accordance with State law, the Board
will adopt policies and procedures with criteria to be met before any special tax bonds or
assessment district bonds may be issued. These criteria include the qualifications of the
appraiser, the minimum value to lien ratio to be achieved prior to issuing the land secured debt
and the maximum tax to be levied on different categories of property.
16.0 Rating Agency Applications
The District may seek a rating on all new issues that are being sold in the public market. To ensure a fair rating, more than one rating agency shall be considered to rate the District’s issues.
These rating agencies include, but are not limited to, Fitch Investors Service, Moody’s Investors
Service, and Standard and Poor’s. When applying for a rating on an issue over $1 million or
more, the District shall make a formal presentation of the finances and positive developments
within the District to the rating agencies. The District will report all financial information to the rating agencies as they are published and upon request. This information shall include, but shall
not be limited to, the District’s Comprehensive Annual Financial Report (CAFR), and the
Adopted Operating and Capital Budget.
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17.0 Use of Credit Enhancement
Credit enhancement is a generic term that means any third-party guarantee of debt service. Credit enhancement providers include municipal bond insurance companies or financial
institutions. The purchase of credit enhancement allows the District’s bond issue to carry the
same credit rating as the credit provider. The District will seek to use credit enhancement when
such credit enhancement proves cost-effective. Selection of credit enhancement providers will
be subject to a competitive bid process using the District’s purchasing guidelines.
Fixed Rate Bonds
Credit enhancement for fixed rate bonds is obtained by the purchase of bond insurance. With
few exceptions, bond insurance companies are rated AAA. If a commitment for bond insurance
is obtained for a particular issue, the District will estimate the annual debt service for the issue
based on current AAA-rated bond interest rates with the cost of issuance including the payment of the bond insurance premium. If the estimated debt service on this basis is less than or equal to estimated debt service for the issue based on interest rates for bonds with the District’s
underlying or stand-alone credit rating, the District will purchase the bond insurance. Any
intention of the District to prepay the debt ahead of its scheduled maturity will be taken into
account in the analysis. Credit enhancement may be used to improve or establish a credit rating on a District debt obligation even if such credit enhancement is not cost effective if, in the
opinion of the Chief Financial Officer, the use of such credit enhancement meets the District’s
debt financing goals and objectives.
Variable Rate Bonds
Credit enhancement for variable rate bonds is comprised of two components: credit support and liquidity. The interest on variable rate bonds is based on a 7-day investment rate. Any investor can tender their bonds back to the District to be repurchased on 7 days’ notice. Because of the
short-term nature of the investment, the securities that the District is “competing” with for
investors are AAA-rated or AA-rated mutual funds. Therefore, variable debt needs to have
credit enhancement to achieve a comparable AAA or AA rating, as well as liquidity support to provide the District with a mechanism to purchase any bonds that are tendered before they can be remarketed to new investors. A limited number of financial institutions offer letters of credit that
combine both credit support and liquidity for one fee. An alternative is to purchase bond
insurance to provide credit support and enter into a separate purchase agreement with a financial
institution to provide liquidity. The difference in cost between the two structures will be analyzed before either alternative is selected for variable rate debt.
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Glossary
Ad Valorem Tax: A tax calculated “according to the value” of property. Such a tax is based on the assessed valuation of tangible personal property. In most jurisdictions, the tax is a lien on the
property enforceable by seizure and sale of the property. General restrictions, such as overall
restrictions on rates, or the percent of charge allowed, sometimes apply. As a result, ad valorem
taxes often function as the balancing element in local budgets.
Advance Refunding: A procedure whereby outstanding bonds are refinanced by the proceeds of a new bond issue prior to the date on which outstanding bonds become due or are callable.
Typically an advance refunding is performed to take advantage of interest rates that are
significantly lower than those associated with the original bond issue. At times, however, an
advance refunding is performed to remove restrictive language or debt service reserve requirements required by the original issue.
Amortization: The planned reduction of a debt obligation according to a stated maturity or
redemption schedule.
Arbitrage: The gain that may be obtained by borrowing funds at a lower (often tax-exempt) rate
and investing the proceeds at higher (often taxable) rates. The ability to earn arbitrage by issuing tax-exempt securities has been severely curtailed by the Tax Reform Act of 1986, as amended.
Assessed Valuation: The appraised worth of property as set by a taxing authority through
assessments for purposes of ad valorem taxation.
Basis Point: One one-hundredth of one percent.
Bond: A security that represents an obligation to pay a specified amount of money on a specific date in the future, typically with periodic interest payments.
Bond Counsel: An attorney (or firm of attorneys) retained by the issuer to give a legal opinion
concerning the validity of the securities. The bond counsel’s opinion usually addresses the
subject of tax exemption. Bond counsel may prepare, or review and advise the issuer regarding
authorizing resolutions or ordinances, trust indentures, official statements, validation proceedings and litigation.
Bond Insurance: A type of credit enhancement whereby a monocline insurance company
indemnifies an investor against a default by the issuer. In the event of a failure by the issuer to
pay principal and interest in-full and on-time, investors may call upon the insurance company to
do so. Once assigned, the municipal bond insurance policy generally is irrevocable. The
insurance company receives an up-front fee, or premium, when the policy is issued.
Call Option: A contract through which the owner is given the right but is not obligated to
purchase the underlying security or commodity at a fixed price within a limited time frame.
Cap: A ceiling on the interest rate that would be paid.
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Glossary
Capital Lease: The acquisition of a capital asset over time rather than merely paying rent for temporary use. A lease-purchase agreement, in which provision is made for transfer of
ownership of the property for a nominal price at the scheduled termination of the lease, is
referred to as a capital lease.
Certificates of Participation: A financial instrument representing a proportionate interest in payments such as lease payments by one party (such as the District acting as a lessee) to another
party (often a trustee).
CIP: Capital Improvement Program.
Competitive Sale: The sale of securities in which the securities are awarded to the bidder who
offers to purchase the issue at the best price or lowest cost.
Continuing Disclosure: The requirement by the Securities and Exchange Commission for most issuers of municipal debt to provide current financial information to the informational
repositories for access by the general marketplace.
Debt Service: The amount necessary to pay principal and interest requirements on outstanding
bonds for a given year or series of years.
Defeasance: Providing for payment of principal of premium, if any, and interest on debt
through the first call date or scheduled principal maturity in accordance with the terms and
requirements of the instrument pursuant to which the debt was issued. A legal defeasance
usually involves establishing an irrevocable escrow funded with only cash and U.S. Government
obligations.
Derivative: A financial product that is based upon another product. Generally, derivatives are risk mitigation tools.
Discount: The difference between a bond’s par value and the price for which it is sold when the
latter is less than par.
Financial Advisor: A consultant who advises an issuer on matters pertinent to a debt issue, such as structure, sizing, timing, marketing, pricing, terms and bond ratings.
General Obligation Bonds: Debt that is secured by a pledge of the ad valorem taxing power of
the issuer. Also known as a full faith and credit obligation.
Municipal Securities Rulemaking Board (MSRB): The MSRB, comprised of representatives
from investment banking firms, dealer bank representatives, and public representatives, is
entrusted with the responsibility of writing rules of conduct for the municipal securities market.
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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, 2012 are $1,556 and $5,741
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.
251
Glossary
Class of Service: All customers are classified based on the type of service used. For example,
the water rate per unit is determined by a classification such as residential versus business.
CWA: The County Water Authority was organized in 1944 under the State County Water
Authority Act for the primary purpose of importing Colorado River water to augment the local
water supplies of the Authority's member agencies. The Authority purchases water from MWD
which imports water from the Colorado River and the State Water Project.
Deannexation Fees: Each request for detachment of land from an improvement district is
reviewed on a case-by-case basis. The fees are determined based on the present value of future
debt service requirements.
Debt Coverage Ratio: The ratio of net revenue to annual interest and principal payments on debt.
Debt Service: The District's obligation to pay the principal and interest of bonds and other debt
instruments according to a predetermined payment schedule.
Depreciation: An expense recorded to allocate a tangible asset’s cost over its useful life.
Desalination: The removal of dissolved minerals (including salts) from seawater or brackish
water. Engineered water desalination processes, which produce potable water from seawater or
brackish water, have become important because many regions throughout the world suffer from
water shortages.
Energy Fees: Water customers are charged an energy pumping charge based on the quantity of
water used and the elevation to which the water has been lifted to provide service. The energy
pumping charge rate is $.045 (decreases on January 1, 2013 to $.042) per 100 cubic feet of water
for each 100 feet of lift above the base elevation of 450 feet. All water customers are in one of
29 zones based on elevation.
Enterprise Fund: Fund that provides goods or services to the public for a fee that makes the
entity self-supporting.
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 $34.57 per month for each connection for fire protection service.
252
Glossary
Fiscal Year: Twelve-month term designating the beginning and ending period for recording
financial transactions. The District has specified July 1 to June 30 as its fiscal year.
Fund Balance: The current funds on hand resulting from the historical collection and use of
monies. The difference between assets and liabilities reported in the District’s Operating Fund
plus residual equities or balances and changes therein, from the result of operations.
General Fund: The District’s general fund is an enterprise fund – one for each of the District’s
three business lines Potable, Recycled and Sewer services. Each is an accounting entity with a
self-balancing set of accounts established to record the financial position and results that pertain
to a specific activity. The activities of enterprise funds closely resemble those of ongoing
businesses in which the purpose is to conserve and add to basic resources while meeting
operating expenses from current revenues. Enterprise funds account for operations that provide
services on a continuous basis and are substantially financed by revenues derived from user
charges.
Grants: Contributions or gifts of cash or other assets from another governmental agency to be
used or expended for a specified purpose, activity, or facility. Capital grants are restricted by the
grantor for the acquisition and/or construction of fixed assets. Operating grants are restricted by
the grantor for operating purposes or may be used for either capital or operating purposes at the
discretion of the grantee.
Infrastructure Access Charge (IAC): A pass-through charge from CWA to each member agency.
The charge is to finance a portion of CWA’s fixed annual costs including the construction,
operation and maintenance of aqueducts and emergency storage projects. The fee was adopted in
January of 1999.
Interest Income: Earnings from the investment portfolio. Per District Policy Number 25, interest
income will be allocated to improvement districts each month based upon each fund’s prior
month-ending balance.
Late Charges/Penalties: Charges and penalties are imposed on customer accounts for late
payments, returned payments, and other infringement of the District’s Code of Ordinances.
Meter and Lateral Fees: Charge includes the material costs for the meter, meter box, and the
labor cost for installation to connect a new service to the distribution system.
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.
253
Glossary
Net Assets: The difference between total assets and total liabilities. Increases or decreases in net
assets may serve as a useful indicator of whether the financial position of the District is
strengthening or weakening.
1% Property Tax: In 1978, Proposition 13 limited general levy property tax rates for all taxing
authorities to a total rate of 1% of full cash value. Subsequent legislation, AB 8, established that
the receipts from the 1% levy were to be distributed to taxing agencies according to approximate-
ly 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.
254
Glossary
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.
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.
Unit: A Unit of water is 100 cubic feet or 748 gallons of water.
Water Capacity Fees: Charges paid by customers to connect to a District water system for
potable or recycled water service. Fees are determined by multiplying the demand factor for the
meter size by the total of the District-wide capacity fee and applicable zone charge
Water Rates: Rates vary among classes of service and are measured in units. The water rates for
residential customers are based on an accelerated block structure. As more units are consumed, a
higher unit rate is charged. Effective in 2009, all non-residential customers are charged for water
based on a tiered rate structure in which water rates are based on meter size and amount of units
consumed.
Working Capital: A financial measure which represents available operating liquidity. It is
calculated as current assets minus current liabilities.
255
AF Acre-Foot/Feet
AMR Automated Meter Reader/Reading
APCD Air Pollution Control District
APWA American Public Works Association
ASCE American Society of Civil Engineers
ASU Assigned Service Unit
AWWA American Water Works Association
BABS Build America Bonds
BMP Best Management Practices
BOD Biological Oxygen Demand
CAD Computer Aided Design
CAFR Comprehensive Annual Financial Report
CCV City of Chula Vista
CDFG California Department of Fish and Game
CEQA California Environmental Quality Act
CIP Capital Improvement Program
COD Chemical Oxygen Demand
COPS Certificates of Participation
CRC Capacity Reservation Charge
CSC Customer Service Charge
CSD City of San Diego
CSDA California Special Districts Association
CSMFO California Society of Municipal Finance Officers
CMMS Computerized Maintenance Management System
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
256
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
257
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
258
Index
Administrative Expenses 65,78,86,101
At-A-Glance 1
Awards 4-6
Budget Calendar 20
Budget Guide 17-18
Budget Process and Overview 18-21
Budget Summary 34-37
Capital Improvement Program Narrative 173-174
Capital Purchases Budget 185
CIP Projects in Construction 176-179
CIP Funding Source and Category 181
CIP Justification and Impact on Operating Budget 184
CIP Major Projects 175
CIP Projects 182-183
CIP Reserve Funds 180
Classification of Water Sales 56,71
Current Economic Conditions 25
Debt Management 48-49
Debt Policy 232-245
Debt Policy Glossary 246-249
Demographics 27
Department Budgets:
Administrative Services 115-126
Board of Directors 105-108
Engineering 160-169
Finance 127-137
General Expense 170-172
General Manager 109-114
Information Technology and Strategic Planning 138-145
Water Operations 146-159
Departmental Operating Budget Narrative 94-96
Five-Year Forecast 45
Formula for Sewer Rates 88
Fund Balance Summary by Fund 41
Fund Balances 47
Future, The 26
259
Index
General Fund Forecast 46
General Information 2
General Expenses 93
General Revenues 92
General Revenues and Expenses Narrative 90-91
Glossary 250-255
Investment Policy 219-225
Investment Policy Glossary 226-231
Labor and Benefits 97-98
Letter of Transmittal iv-viii
List of Acronyms 256-258
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 39
Operating Budget Summary – General Fund 38
Operating Expenditures by Department 103
Operating Expenditures by Object 104
Operating Revenues and Expenditures 40
Organization Chart 16
Past and Present 24
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 188-216
Reserve Policy Glossary 217-218
Resolution 4195 22-23
Revenue History 62,75,84
260
Index
Revenues and Expenditures by Fund 42-43
Revenues and Expenditures by Type 44
San Diego Rainfall 33
Schedule of Outstanding Debt 50
Service Area Assessed Valuation 31
Service Area Maps 67,80,89,108
Sewer Charges Summary by Service Class 83
Sewer Narrative 81
Sewer Rate Comparison 30
Statement of Values 3
Strategic Performance Management Plan 7-15
Summary of Financial Policies 186-187
System Fees 59,73
Table of Contents i-iii
Ten Largest Customers 28
Ten Principal Taxpayers 32
Unit Sales History by Customer Class 58
Water Purchases - Recycled 76
Water Purchases and Related Costs - Potable 63
Water Rate Comparison 29
Water Sales Summary by Service Class 57,72
261