HomeMy WebLinkAboutOperating and Capital Budget FY 2015-2016
Otay Water District
Adopted Operating and Capital Budget
Fiscal Year 2015-2016
BOARD OF DIRECTORS
Jose Lopez, Division 4 President
Mitchell Thompson, Division 2 Vice President
Mark Robak, Division 5 Treasurer
Tim Smith, Division 1
Gary Croucher, Division 3
MANAGEMENT TEAM
Mark Watton General Manager
German Alvarez Assistant General Manager
Joseph R. Beachem Chief Financial Officer
Geoff Stevens Chief Information Officer
Adolfo Segura Assistant Chief, Administrative Services and IT
Pedro Porras Chief, Water Operations
Jose Martinez Assistant Chief, Water Operations
Rod Posada Chief, Engineering
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Organization Chart . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Budget Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Resolution No. 4290 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
History and Community Profile
Past and Present . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Current Economic Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
The Future . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Demographics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Water Rate Comparison . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Sewer Rate Comparison . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Service Area Assessed Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Ten Principal Taxpayers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Ten Largest Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
San Diego Rainfall . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Financial Summaries
Budget Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Operating Budget Summary – General Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Operating Budget Summary by System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
General Fund Revenues, Expenditures and Transfers . . . . . . . . . . . . . . . . . . . . . . . 45
Fund Balance Summary by Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Revenues and Expenditures by Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Revenues and Expenditures by Type . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Five-Year Forecast
Five-Year Forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
General Fund Forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Fund Balances Forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Debt Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Schedule of Outstanding Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Projected Principal Payments by Debt Issuance . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Projected Interest Payments by Debt Issuance . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
i
Table of Contents
Revenues and Expenditures
Potable Revenues and Expenditures
Potable Narrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Operating Budget Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Classification of Water Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Water Sales Summary by Service Class . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Unit Sales History and Meter Count by Customer Class . . . . . . . . . . . . . . . . . . . . 64
System Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
MWD and CWA Fixed Fees (pass-through) . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Meter Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Revenue History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Water Purchases and Related Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Power Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Administrative Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Materials and Maintenance Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Potable Water Service Area Maps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Recycled Revenues and Expenditures
Recycled Narrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Operating Budget Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Classification of Water Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Water Sales Summary by Meter Size. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Unit Sales History and Meter Count by Customer Class. . . . . . . . . . . . . . . . . . . . 80
System Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Meter Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Revenue History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Water Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Power Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Administrative Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Materials and Maintenance Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Recycled Water Service Area Maps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Sewer Revenues and Expenditures
Sewer Narrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Operating Budget Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Sewer Charges Summary by Service Class . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
Sewer System Summary by Meter Size. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Revenue History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Power Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Administrative Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Materials and Maintenance Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Formula for Sewer Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Sewer Service Area Map . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
ii
Table of Contents
General Revenues and Expenditures
General Revenues and Expenses Narrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
General Revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
General Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
Departmental Operating Budget
Departmental Operating Budget Narrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Labor and Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
Labor and Benefits by Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
Position Count by Department . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
Contract/Temporary Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
Administrative Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Materials and Maintenance Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
Operating Expenditures by Department . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
Operating Expenditures by Object . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
Departmental Budgets:
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
General Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
Administrative Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134
IT and Strategic Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147
Water Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155
Engineering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171
General Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181
Capital Budget
Capital Improvement Program Narrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183
Major CIP Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185
CIP Projects in Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186
CIP Reserve Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191
CIP Funding Source and Category . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 192
CIP Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193
CIP Justification and Impact on Operating Budget . . . . . . . . . . . . . . . . . . . . . . . . 197
Capital Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198
Policies
Summary of Financial Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199
Reserve Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201
Reserve Policy Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 229
Investment Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 231
Investment Policy Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 238
Debt Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 244
Debt Policy Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 257
Appendix
Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 262
List of Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 268
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 271
iii
September 24, 2015
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 2016. The budget supports the District’s updated FY 2015-2018 Strategic Plan as
well as the financing of all of the District’s services, programs, and capital needs during the
2016 fiscal year. With a balanced budget and the Strategic Plan in place, the District is well-
positioned for continued success in the ensuing years.
The coming years will continue to pose considerable challenges for those in California’s
water community. The state is facing its fourth straight year of a record drought and despite
extensive local efforts to develop more reliable water, Governor Jerry Brown and the State
Water Resources Control Board (SWRCB) have ordered mandatory cuts in potable water
use across California and set a statewide conservation goal of 25 percent.
To reduce potable water use by 25 percent statewide, the regulations adopted by the
SWRCB place each urban water supplier into one of eight tiers which are assigned a
conservation standard ranging from 4 percent to 36 percent. Under the SWRCB order,
customers of the Otay Water District must reduce water use by 20 percent over the next
nine months. This order came despite Otay customers having reduced water use 27
percent since 2007. Each month, the SWRCB will compare every urban water suppliers’
water use with their use for the same month in 2013 to determine if they are on track for
meeting their conservation standard. Agencies that consistently fail to meet the
conservation standard could be fined as much as $10,000 per day.
The order was also imposed without regard to San Diego County having 97 percent of the
water supply it needs to meet customer demand this year, despite four years of record
drought. San Diego County, including Otay Water District customers by virtue of being a
member of the San Diego County Water Authority (CWA), have expended more than $3.1
billion over the last decade to create a more reliable water supply network that has shielded
iv
customers from the most severe of the drought’s impacts. Water supplies in the San Diego
region will improve even more as the western hemisphere’s largest desalination plant
comes online in a matter of months.
As the conservation mandates went into effect, sales decreased 27 percent in May and 26
percent in June, 2015. The District expects sales to recover somewhat in FY 2016 with the
warmer summer months. As one would assume, such dramatic reductions in sales will
impact revenues. Staff anticipated moderate reductions in sales and will continue to closely
monitor these trends as they relate to overall District finances.
The District’s success as an organization through the economic recession, banking crisis,
slowdown in the housing industry, and now the severe drought is significantly enhanced by
the policies and practices put in place by the Board of Directors to ensure the strength and
stability of the District. The management team is fully confident that with these policies and
practices, supported by the FY 2015-2018 Strategic Plan, along with a dedicated and
talented staff, that we will achieve continued success as an organization and thus, assure
the well-being of the people we serve.
FY 2015-2018 Strategic Plan
The FY 2015-2018 Strategic Plan consisted of a two-phased approach. Phase 1 has been
completed with the primary focus on developing key enterprise-wide projects – SCADA,
Work Order/Asset Management, and Emergency Preparedness/NIMS. We are now
entering Phase 2 of the FY 2015-2018 Strategic Plan where the focus is to build upon the
system foundation, business process improvement, and facilities. Where rapid growth had
been a significant focus in the early years of the District and in its earlier strategic plans,
today we are primarily focused on managing long-term maintenance and replacement of
infrastructure.
The change is based on the recognition that as an organization matures, fewer resources
are needed to support growth; but greater effort is required to maintain and upgrade
infrastructure and assets. This is important because in this phase of its lifecycle, an
organization derives income more from customer rates and less from developer fees.
Therefore, the increased maintenance and replacement costs place increased 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;
the management team must place greater emphasis on internal efficiency and the
v
development of technology assisted best practices. In effect, the organization must use
investments in technology to do more with the same or fewer resources.
From a water supply perspective, this means determining the optimum mix of water supply,
treatment, and delivery solutions for customers. From a daily operating perspective,
efficiency improvements have become the primary source of competitive advantage and
cost optimization for utilities.
A goal included in the District’s past strategic plans is to capitalize on technology
investments and utilizing those technologies to continually improve efficiency and
productivity. The success of this approach is evidenced by the gains in productivity and by
the reduction in staffing the District has experienced. The following charts show that since
2007, the District has reduced staffing by 36.75 full-time equivalent positions, or 21%
percent, while the number of customer accounts increased by 2,034.
Employee Count and Number of Accounts
With increased efficiency and higher employee productivity, the District has been able to
continue absorbing some of the pass-through costs from its water suppliers, the City of San
Diego, San Diego County Water Authority (CWA), and Metropolitan Water District (MWD).
This helps to address customer concerns about rising water rates.
Based on an annual survey of water and sewer rates conducted by District staff, Otay
continues to be one of the lower cost providers in San Diego County. The District has the
10th lowest water rate out of the 23 member agencies in San Diego County and the 7th
17
4
.
7
5
17
2
.
7
5
16
8
.
7
5
16
6
15
9
15
6
14
8
14
3
14
0
13
8
52,615
54,649
51,500
52,000
52,500
53,000
53,500
54,000
54,500
55,000
0
20
40
60
80
100
120
140
160
180
200
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Em
p
l
o
y
e
e
Co
u
n
t
FISCAL YEAR
vi
lowest sewer rate out of the 28 sewer service providers in San Diego County. The results
of the water and sewer surveys are shown on pages 30 and 31, respectively.
The chart below shows that since 2007, the wholesale water supply costs have increased
96.2 percent while the District’s retail water rates have increased a lesser 88.2 percent.
Wholesale Water Supply Costs vs. District Retail Rate Increases
The District currently delivers water service to nearly 49,274 potable and 706 recycled water
customer accounts. All of the potable water sold to customers is purchased from CWA.
Forty-seven percent of this water is in turn purchased from the region’s primary water
importer, MWD. This number has decreased significantly compared to previous years and
beginning in FY 2016, 7% will come from seawater desalination.
The District has been proactive in reducing its dependence on MWD water treatment
facilities. For example, in 2009 the District entered into an agreement with CWA that allowed
our neighboring Helix Water District to treat imported water on behalf of the District at their
Levy Water Treatment Plant. This has brought regional water treatment closer to our
customers, which reduces dependence on water treatment facilities located outside of San
Diego County.
The District also collects and recycles wastewater from approximately 4,669 homes and
businesses. Wastewater is collected and delivered to the Ralph W. Chapman Water
Recycling Facility (RWCWRF), which is capable of reclaiming wastewater at a rate of 1.3
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
96.2%
88.2%
vii
million gallons per day. In addition to the Chapman facility, the District continues purchasing
up to 6 million gallons per day of recycled water from the City of San Diego’s South Bay
Water Reclamation Plant. The use of recycled water for landscape irrigation and industrial
processes reduces dependence on imported potable supplies, provides a local supply that
is drought proof, and diversifies District resources.
Fiscal Year 2016 Operating Budget Summary
Otay Water District’s operating expenditures consist of three major sectors: potable water,
recycled water, and sewer, budgeted at $89,236,000 for Fiscal Year 2016. Revenues from
potable and recycled water are projected to be $78,897,700, approximately $1,888,000 less
than the Fiscal Year 2015 budget. Water sales volumes are expected to decrease by 8%
compared to FY 2015 budgeted sales due to drought mandates. Sewer revenues are
projected to be $3,206,300, approximately $198,600 more than fiscal year 2015. This
increase in sewer revenue is due to the final phase-in of the residential sewer rate increases
from 2013. The remaining budgeted revenues of $7.1 million come from various special
fees, assessments, and miscellaneous income.
Significant aspects of the Operating Budget are:
A balanced budget supporting the goals of the Strategic Plan.
The use of an economist to project growth for the region.
An updated six-year Rate Model to ensure sound financial planning and reserve
levels.
Ongoing water supply rate increases of 5.8 percent from MWD and CWA due to the
high cost of supply programs, higher energy costs, and increasing operating costs.
Implemented rate increases in potable, recycled water, and sewer. This included
pass-through rate increases from the City of San Diego, CWA, and the County of San
Diego.
In efforts to minimize rate increases, the District has again reduced staffing levels
from 140 full-time equivalent positions last year to 138 this year.
Of San Diego County’s 23 water agencies, the Otay Water District’s water rates are
below the countywide average.
viii
Fiscal Year 2016 Capital Improvement Program
The Fiscal Year 2015-16 Capital Improvement Program (CIP) Budget consists of 80 projects
and a budget of $11.1 million. The budget emphasizes long-term planning for ongoing
programs to meet population growth while functioning within fiscal constraints. This year’s
CIP budget increased by $500,000 compared to last year’s projection primarily due to an
increase in capital purchases for vehicles and the APCD Engine Replacements and
Retrofits.
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,
for its annual budget for the fiscal year beginning July 1, 2014. In order to receive this
award, a governmental unit must publish a budget document that meets program
criteria as a policy document, as an operations guide, as a financial plan, and as a
communications device.
The Government Finance Officers Association of the United States and Canada
(GFOA) also presented a Special Capital Recognition for the Fiscal Year 2014-2015
Budget.
The California Society of Municipal Finance Officers (CSMFO) presented Otay Water
District the Certificate of Award for Excellence in Operating Budgeting for Fiscal Year
2014-2015.
The California Society of Municipal Finance Officers (CSMFO) presented Otay Water
District the Certificate of Award for Excellence in Capital Budgeting for Fiscal Year
2014-2015.
The Government Finance Officers Association Officers (GFOA) presented Otay Water
District the Certificate of Excellence in Financial Reporting for its Comprehensive
Annual Financial Report for the Fiscal Year ended June 30, 2014.
ix
Conclusion
The challenges presented this year were met by the Otay Water District’s Board of Directors’
resolve to keep the stability and financial strength of the District as one of its highest
priorities.
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 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 the financial management and operations of the
District.
Mark Watton, General Manager
x
At-A-Glance
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.
History
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. The District 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 May 2007 a new source of recycled water
from the City of San Diego was obtained, allowing
the Otay Water District to supply 11.4% of total water
demand with recycled water.
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, abutting
the cities of El Cajon and La Mesa and
encompassing most of the City of Chula Vista and a
small portion of the City of San Diego.
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 15.
1
General Information
For Fiscal Year 2016, the District will have a staff of 138 full-time equivalent employees under the
leadership of the General Manager. The District provides water service to approximately 52% of its
expected ultimate deliveries with a population of more than 217,000 people. This percentage
increases as the District's service area continues to grow to ultimate build-out. The District is
projected to deliver approximately 27,000 acre-feet of potable water to 49,500 potable customer
accounts. By 2035, deliveries are expected to reach 48,400 acre-feet of potable water to serve 285,000
people or 69,000 accounts. The growth rate, as projected by the San Diego Association of
Governments (SANDAG), for the City of Chula Vista, is approximately .96% per year over the next
decade. Using historical data and considering current economic conditions, staff has moderated
this projection to a growth rate of 0.33% for Fiscal Year 2016.
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 partnership with the City of San Diego to beneficially reuse an additional 2,906 acre-feet per
year of recycled water for fiscal year 2016, and ultimately up to 6,720 acre-feet per year. The District
continues to be the largest retail provider of recycled water in the County of San Diego.
The District also owns and operates a wastewater collection system providing public sewer service
to approximately 4,670 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.
1. Carlsbad Municipal Water District
2. City of Del Mar
3. City of Escondido
4. Fallbrook Public Utility District
5. Helix Water District
6. City of National City
7. City of Oceanside
8. Olivenhain Municipal Water District
9. Otay Water District
10. Padre Dam Municipal Water District
11. Camp Pendleton Marine Corps Base
12. City of Poway
13. Rainbow Municipal Water District
14. Ramona Municipal Water District
15. Rincon del Diablo Municipal Water District
16. City of San Diego
17. San Dieguito Water District
18. Santa Fe Irrigation District
19. South Bay Irrigation District
20. Vallecitos Water District
21. Valley Center Municipal Water District
22. Vista Irrigation District
23. Yuima Municipal Water District
24. Lakeside Water District
San Diego County Water Agencies
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 by sharing 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
Distinguished Budget Presentation Award
The Government Finance Officers Association (GFOA) presented a
Distinguished Budget Presentation Award to the District for its annual
budget for the fiscal year 2014-2015. 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.
This year the District also received a Special Capital Recognition from
GFOA for its Fiscal Year 2014-2015 Budget.
4
Financial Awards
The California Society of
Municipal Finance Officers
(CSMFO) presented Otay
Water District the Certificate
of Award for Excellence in
Operating Budgeting for
Fiscal Year 2014-2015.
The California Society
of Municipal Finance
Officers (CSMFO)
presented Otay Water
District the Certificate
of Award for
Excellence in Capital
Budgeting for Fiscal
Year 2014-2015.
5
Financial Awards
The Government Finance Officers Association Officers (GFOA)
presented Otay Water District the Certificate of Excellence in
Financial Reporting for its Comprehensive Annual Financial
Report for the Fiscal Year ended June 30, 2014.
6
Award
The Construction Management Association of America (CMAA)
presented the Otay Water District with the 2015 Distinguished
Owner Honoree Award.
7
Strategic Performance Management Plan
Introduction
The Strategic Plan is the core document which guides the District’s efforts to meet and positively
adapt to change. The overall plan is extensively reviewed and revised every three to four years. This
current edition (covering fiscal years 2015-2018) is the fifth in a series of updated plans.
In order to develop the FY 2015-2018 Strategic Plan, the Senior Management Team carefully
reviewed the previous strategic plans and, in an interactive environment, examined future
opportunities and risks. After careful analysis, an overall direction is set for the plan. In 2015 a solid
systems foundation was put in place completing a replacement work order and SCADA system, and
improving the core GIS system for managing the District’s infrastructure. The FY 2016 to 2018
objectives, which follow, build upon this foundation and focus on business process improvement
and facilities.
The General Manager presented the plan to the Board on May 19, 2015 as part of the overall District
Budget. With this plan, the Board is able to make more informed oversight decisions about the utility’s
direction, and assess performance.
8
Strategic Performance Management Plan
Mission
To provide high quality and reliable 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 challenge, as District staff, is to quantify and demonstrate our commitment and the ability
to optimize our resources, business processes, and technology to achieve the strategic plan goals.
We, as a team, commit to regularly assess and document how our decisions and work practices
accomplish our goals and objectives.
Balanced Scorecard Goals
9
Strategic Performance Management Plan
FY 2016 – 2018 Objectives
Optimize SCADA Program.
Optimize Asset Management Program.
Address Dependency on Imported Water through Proper Planning.
Improve District Emergency Response Program.
Enhance Communication with Customers.
Enhance Cost Benefit Analysis.
Utilize Power and Fuel Effectively.
Optimize Inventory Management.
Evaluate City of San Diego Pure Water Program Planning/Implementation.
Evaluate and Enhance the District's Water Conservation Programs and Services.
Manage an Effective Leak Detection and Repair Program.
Enhance District's Facilities Physical Security.
Improve and Streamline Meter Related Work Processes.
Evaluate Sewer System Business.
Evaluate Efficiencies for Delivering Capital Assets.
Guarantee Adequate Maintenance of all District’s Pressure Vessels.
In Conjunction with the City of San Diego, Manage the Infrastructure for a more Efficient
Transmission of Recycled Water.
Evaluate the Viability of Implementing an Indirect Potable Reuse Program.
Strengthen Internal Audit Program.
Evaluate Opportunities to Combine or Transfer Similar Work Functions.
Optimize GPS/GIS Technology.
10
Strategic Performance Management Plan
Evaluate Eden's Self-service Option with HR Module.
Streamline Procurement and Contractor On-boarding Process via Web-based
eProcurement Technology.
Evaluate Current and New CIS Systems.
Streamline Enterprise Confined Space Program.
Streamline Operations Work Processes.
Streamline Data Input in Reporting for Field Services.
Streamline Work Processes in Four Strategic Areas Including Departmental Synergies,
Technology, Procurements, and Alignment of Business Practices.
Evaluate Two-Way Emergency Radio Replacement.
Revise Business Practices by Modifying the Master Recycled Water Permit.
Implement a Habitat Conservation Plan that will Streamline O&M within District
Easements.
Negotiate a New Successor MOU for Represented Employees for FY 2017 and Related
Compensation and Benefits for Unrepresented Employees.
Succession Planning.
Strategic Plan Performance Measures FY 2015-2018
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.
Customer Satisfaction: Percent positive/Percent surveyed.
Gallons per Capita per Day: Total potable water purchased/Annual population/Number of
days through the end of the quarter.
Health & Safety Severity Rate: Number of lost days/Number of injuries resulting in lost
time.
11
Strategic Performance Management Plan
Employee Turnover Rate: Number of voluntary terminations/Average number of
employees.
Training Hours per Employee: Total qualified training hours for all employees/Average
number of FTE.
Safety Training Program: Number of safety training hours /Number of field employees.
CIP Project Expenditures vs. Budget: Actual quarterly expenditures/Annual budget.
Construction Change Order Incidence: Total cost of change orders/Total original
construction contract amount.
Mark-out Accuracy: Number of mark-outs performed without an at-fault hit.
Project Closeout Time: Number of days between Notice of Substantial Completion
(NOSC) and Notice of Completion (NOC) for all construction projects within the
quarter/Number of construction projects within the quarter.
Answer Rate: Number of all calls answered/Number of all calls received.
O&M Cost per Account: Total operations O&M costs/Number of accounts.
Billing Accuracy: Number of correct bills/Number of total bills.
Overtime Percentage: Actual overtime costs (including comp time)/Budgeted overtime
costs.
Sewer Rate Ranking: Otay percentage ranking for the average bill for sewer among
regional agencies.
Water Rate Ranking: Otay percentage ranking among regional agencies.
Debt Coverage Ratio: Qualified net operating revenues/Debt service requirements.
Reserve Level: Number of reserve funds that meet or exceed fund target levels/Total
number of reserve funds.
Accounts per Employees: Number of connections/Number of FTEs (excludes sewer, staff
handling sewer, recycled connections, staff handling recycled connections, and
engineering staff).
12
Strategic Performance Management Plan
Distribution System Loss: 100 [volume purchased – (volume sold + volume used) /Volume
purchased].
Customer Satisfaction with Website: Percentage of satisfied customers based on
Customer Opinion and Awareness Survey.
Network Availability: Percentage of time availability of core applications during business
hours/Total time.
Website Hits: Average total visitors per month.
Technical Quality Complaint: 1,000 X (number of technical quality–associated complaints).
Planned Potable Water Maintenance Ratio in $: Total planned maintenance cost/Total
maintenance cost.
Planned Recycled Water Maintenance Ratio in $: Total planned maintenance cost/Total
maintenance cost.
Planned Wastewater Maintenance Ratio in $: Total planned maintenance cost/Total
maintenance cost.
Direct Cost of Treatment per MGD: Total O&M costs directly attributable to sewer
treatment /Total volume (in MGD).
O&M Cost per MG – Wastewater: Total O&M cost (less depreciation)/Volume in MG
processed.
% PM’s Completed – Fleet Shop: Number of PM's completed/Number of PM's scheduled
to be completed.
% PM’s Completed – Reclamation Plant: Number of PM's completed/Number of PM's
scheduled to be completed.
% PM’s Completed – Pump/Electric Section: Number of PM's completed/Number of PM's
scheduled to be completed.
System Valve Exercise Program: Actual number of valves exercised per quarter/770
valves per quarter.
Water Distribution System Integrity: 100 (annual total number of leaks or breaks/total
miles of distribution pipes).
13
Strategic Performance Management Plan
Planned Water Service Disruption Rate: Number of customers experiencing disruption
per 1,000 accounts.
Potable Water Compliance Rate: All primary health regulations are met.
Collection System Integrity: Collection system failure/Total miles of collection system
piping.
Recycled Water System Integrity: Leaks or breaks/Number of miles of distribution system.
Sewer Overflow Rate: Total number of sewer overflows/Total miles of pipe in the sewage
collection system.
Critical Valve Exercising: Number of critical valves exercised annually.
Annual Recycled Water Site Inspections: Percentage of required recycled water use sites
inspected per year.
Recycled Water Shutdown Testing: Percentage of recycled water use sites per year vs.
the number required by the Department of Health (DOH).
Emergency Facility Testing: Number of facilities and generators tested on an annual
basis/ Total facilities.
Leak Detection Program: Percentage distribution system surveyed for leaks.
Reservoir Inspection and Cleaning: Number of water reservoirs cleaned annually.
Main Flushing and Hydrant Maintenance: Number of mains flushed and fire hydrants
maintained.
Percent of Bills Sent Electronically: Total of bills emailed/Total bills processed.
Percent of Bills Paid Electronically: Total number payments received electronically/Total
payments received.
14
Organization Chart
District Position Count - (138 Positions)
GENERAL MANAGER (5)
Assistant General Manager
Administrative
Services (13)
Finance
(32)
Water
Operations
(56)
Engineering
Services (19)
Human
Resources
Purchasing and
Facilities
Safety and
Security
Administration
Controller
and
Budgetary
Services
Treasury and
Accounting
Services
Customer
Service
IT Applications
IT Operations
GIS
Water System
Operations
Utility
Maintenance/
Construction
Engineering
Services and
Environmental
Services
Public Services
and
Field Services
Citizens and
Customers
Information Technology
and Strategic Planning (13)
BOARD OF DIRECTORS
Meter
Maintenance
15
Budget 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 set prior to the
start of each fiscal year. It is designed and presented for the general needs of the District, its staff,
and citizens. The budget is a comprehensive and balanced financial plan that features District
services, resources and their allocation, financial policies, and other useful information to allow the
users to gain a general understanding of the District’s financial status and future plans. To help
readers navigate this document, the following is a general description of each of the tabulated
sections of the budget.
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, San Diego
rainfall, future development and projects that will have an impact on the District in the coming years.
Financial Summaries
This section contains an overview of the District’s revenues and expenditures by fund for the current
budgeted fiscal year, the prior years’ actual amounts, and the future estimated amounts. The prior
year’s actual amounts are unaudited due to timing of the completion of the financial statement audit;
actual amounts may vary pending the completion of the audit. It includes a description of each of
the revenue and expense categories as well as charts depicting their relationships.
Five-Year Forecast
The District prepares a comprehensive Rate Model each year based on budget input, trends, new
programs, and requirements. Estimates are made for cost increases, rate increases, targeted fund
balances, capital needs, and debt requirements. Analysis for the current budget year plus five
subsequent years is conducted and a six-year forecast is prepared based on the Rate Model results.
16
Budget Overview
Revenues and Expenditures
The District budgets revenues and expenditures by Potable, Recycled, and Sewer Systems. General
revenues and expenditures that are not specific to one system or department are budgeted in the
General Revenues and Expenses section. An allocation of overhead costs is made to equitably
distribute the cost of running the District among the various business segments.
Departmental Operating Budget
This section provides a summary of each department’s operating expenditures and detailed budget
information including its mission, responsibilities, three-year staffing schedules, performance
indicators, accomplishments, and goals. Also provided are graphical presentations of departmental
budget percentages to District totals, as well as summary expenditure information by division for
three fiscal years.
Capital Budget
An overview of the District’s Capital Improvement Program (CIP), the Water Resources Master Plan
(WRMP), the Sewer Master Plan, major assumptions and criteria, a six-year listing of CIP project
expenditures justifications, and the impact on the Operating Budget and capital purchases budget
for the fiscal year are located in this section.
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.
17
Budget Overview
Budget Process
The District has integrated the Capital Improvement Program (CIP) Budget and the Operating
Budget. These budgets are developed based on the District’s Water Resources Master Plan, the
Sewer Master Plan and Strategic Business Plan. New initiatives and programs are categorized into
the Balanced Scorecard perspectives. Appropriate budget amounts are determined by using the
historical data of operations and new growth, developers’ input, SANDAG projections, and economic
outlook.
To assure reliable, 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 1.4%.
Pass-through rate increases for costs imposed on the District by the wholesale water
providers.
Accurate projections of capital budget needs (including replacement needs).
Reserve funding in accordance with the Reserve Policy to meet future growth demands and
maintain financial stability.
Funding of the Strategic Plan initiatives as categorized into the Balanced Scorecard
perspectives.
Avoid rate spikes by leveling rate increases over a six-year period.
The Finance Department prepares the budget for the Potable, Recycled, and Sewer Systems. This is
done using estimated cost increases from the District’s wholesale water providers as well as
estimated sewer charge increases provided by the County and 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.
Each year, the Finance Department provides departments with a Budget Workbook which gives
instructions on how to budget for personnel, administrative expenses, and materials and
maintenance expenses. Included in this workbook are historical trends, assumptions, and training
on how to enter the expense data into the District’s budget system.
18
Budget Overview
Budget Calendar
February March April May-June July – January
2/11/15
Chiefs submit request
for new personnel,
personnel
reclassification
changes,
advancements, and
long-term staffing to HR
2/20/15
Project Managers
submit CIP Budgets for
new projects and
changes to existing
projects in CIP Budget
application
2/25/15
HR to complete
preliminary review of
new personnel,
personnel
reclassification
changes, requests, and
advancements
2/25/15
Chiefs to submit
Operating and Admin
Budget; Capital
Purchases and
justifications; Labor
Budget Worksheet
3/02-3/2015
Finance to review
Operating Budget and
reconciliation with
departments
3/03/15
Engineering Department
reviews all CIP Budget
requests with AGM
3/09/15
HR to review new
personnel,
reclassifications and
change requests with
GM
3/11/15
Finance to review
preliminary CIP Budget
with Chief of Engineering
3/16/15
Finance to have second
review of CIP Budget with
AGM and Engineering
3/30/15
Finance to review
Department Operating
Budgets and personnel
cost with Chiefs, AGM
and GM
3/30/15
CIP budget presented to
the General Manager for
review and comments
4/01/15
Chiefs review Strategic
Plan objectives and
performance
measures to ensure
they are on target for
FY 2015
4/03/15
Chiefs submit Position
Analysis Questionnaire
to HR for GM approval
Personnel requests
and request for
reclassifications
4/08/15
Review CIP Budget
with GM
4/16/15
General Manager
performs preliminary
review of budget
4/28/15
Preliminary budget
review with General
Manager
5/04/15
Prepare Draft 218
30-Day Rate
Increase Notice
5/07/15
Review
assumptions and
rates with Chiefs,
Assistant General
Manager, and
General Manager
5/07/15
Practice run of
budget
presentation with
Finance, Chiefs,
AGM, and GM
5/19/15
Budget Workshop
for FY 2015-2016
Operating and
Capital Budgets
6/03/15
Board Meeting –
approval of the
FY 2015-2016
Operating and
Capital Budgets
9/02/15
Board approval of
water and sewer
rate increase
notices
10/07/15-10/26/15
Rate increase
message inserted
with water and
sewer billing
1/01/16
Water and sewer
rate increase
19
Budget Overview
Personnel Budget
The budgeting of salaries and benefits is performed in the position budgeting module of the
Enterprise Resource Planning (ERP) system. This tool allows the District to budget for each
authorized position and the associated benefits in an automated fashion. Departments submit
requests for new positions, reclassifications, or advancements to the 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.
Administrative and Materials and Maintenance Budget
Administrative and Materials and Maintenance expenses are entered into the budget model of the
ERP system by individual requests. These requests are compared to last year’s budget and expenses
to determine reasonableness by the Finance Department. All costs are justified and supported by
explanations. These budgets are then presented to the General Manager and the Board of Directors
prior to adopting the budget.
Capital Improvement Plan (CIP) Budget
The Engineering Department issues budget instructions for the CIP budget process. Each project
manager uses the CIP Budget module system to review year-to-date project expenses and then
estimates 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.
Rate Model
Once budgets have been calculated, the Finance Department inputs all of the operating revenues
and expenses, CIP expenses, reserve funding, and reserve levels into the District’s Rate Model.
Inflators for cost and volume are input into the Rate Model to project the next six 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 should be issued, and maintain all of the reserve levels in accordance with the Reserve
Policy.
20
Budget Overview
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 2016. All approved modifications to the budget will be documented in the form of
a staff report and noted in the board meeting minutes.
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
21
Budget 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 fund
basis, which is used to account for operations that are financed and operated in a manner similar to
a private business enterprise and conforms to the guidelines of Generally Accepted Accounting
Principles (GAAP). 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.
Fund Structure
The District budgets services in one of the three business segments: Potable, Sewer or Recycled.
Each business segment categorizes revenue and expenditure as a function of the Operating Budget,
Capital Improvement Plan Budget, or Developer Deposits. Please refer to the District’s Reserve
Policy, beginning on page 201, which provides the detailed flow of funds.
Recycle
Sewer
Sewer
Operating
Budget
Sewer
CIP Budget
Sewer
Developer
Deposits
Recycle
Operating
Budget
Recycle
Developer
Deposits
Recycle
CIP Budget
Potable
Potable
Operating
Budget
Potable
CIP Budget
Potable
Developer
Deposits
22
23
24
Past and Present
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 obtain water from the San Diego
County Water Authority (CWA). The CWA is the water
wholesale supplier of the member agencies in San Diego
County. In the fall of 1969, Otay Water District and La Presa
County Water District merged into the Otay Water District.
Since then, the District has grown from a handful of
customers and two employees to become an
organization operating a water network with more than
727 miles of potable and 104 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 District continues to face numerous challenges with the slow recovery from the largest
economic downturn since the Great Depression and now with the severe drought the State of
California is facing. Additionally, the region experienced large water supply cost increases totaling
more than 90% since 2007. Finally, the inaction in the State Capitol to address the crisis in the
Sacramento – San Joaquin Bay Delta, the source of 30 percent of Southern California’s water supply
adds further uncertainty to the future cost and availability of water. Fortunately, the District, as a
member of the CWA, is well-positioned for water coming from the Colorado River due to the
Quantification Settlement Agreements (QSA).
In June 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 of San Diego,
increasing to 6 mgd ultimately. In addition, 1 mgd is
produced at the District’s RWCWRF Plant. 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 replaced by recycled water in the years to come.
La Presa County Water District (ca. 1957)
25
Current Economic Conditions
The District services the needs of a growing population by purchasing water from the San Diego
County Water Authority (CWA). The CWA purchases its water from the Metropolitan Water District of
Southern California (MWD) and the Imperial Irrigation District (IID). The District 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 addition to the treated water deliveries from CWA, the District has several emergency
agreements with the City of San Diego, Helix Water District, and Sweetwater Authority that allows
agencies to have flexibility to deal with emergency shutdowns. Through innovative agreements like
these, 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 217,000 residents. The local and national recovery from the global
recession of 2009 has been slow; however, due to San Diego County’s diverse economy, it is
forecasted to do better than most of the nation.
Over the past 12 years, the District has added more than 7,291 new customer connections, with
2,189 occurring in Fiscal Year 2004. In Fiscal Year 2015, the District sold 139 meters which is an
average of 12 meters per month.
26
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.
Future Development
As in the previous fiscal year, the District employed an economist to provide an Economic Outlook
of the national economy, San Diego County’s economy, the future of south San Diego County, and
an overview of the Otay Water District. Projections of future development indicate that the ratio of
multi-family units will increase because the remaining land is zoned for multi-family development.
Projected Units for Sale and Rental
Otay Water District Service Area
FY 2016 through FY 2021
Project FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 Total
Total Single-Family Units 149 288 375 618 780 805 3,015
Total Condominium 297 202 482 715 780 688 3,164
Total Rental 150 475 885 692 757 714 3,673
Total Units 596 965 1,742 2,025 2,317 2,207 9,852
% Multi-Family 75% 70% 78% 69% 66% 64% 69%
Source: The London Group Realty Advisors, March 2015
Using the economist report, the District’s engineering staff projects that over the next six years the
District will sell another 3,207 meters which translates to 4,676 equivalent dwelling units (EDUs).
These projections have been incorporated in the Five-Year Forecast on page 50.
Projected Meter Sales in EDUs
0
200
400
600
800
1000
1200
1400
FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021
27
The Future
San Diego County Water Supply
San Diego County imports about 90 percent of its water from the Colorado River and Northern
California. Since these sources face legal and environmental constraints, the region has been
exploring other ways to ensure an adequate water supply, including increased water recycling, more
aggressive conservation programs, increased water storage, groundwater desalination, and
seawater desalination.
Carlsbad Desalination Project
The District’s water wholesaler, the San Diego
County Water Authority, voted on November 29,
2012, to approve a water purchase agreement
with Poseidon Resources Corporation
(Poseidon). Under the water purchase
agreement, the County Water Authority will
purchase 48,000 to 56,000 acre-feet of water
annually from the desalination plant located in
Carlsbad, California. The plant is expected to
produce up to 54 million gallons of water a day
beginning in the fall of 2015 and will generate enough water to serve about 112,000 families and
meet 7 to 10 percent of the region’s demand. The total price for the desalinated water, including
related upgrades to the County Water Authority’s pipelines and treatment plant, is projected to start
between $2,014 and $2,257 per acre-foot (in 2012 dollars). An acre-foot is approximately 325,900
gallons, or enough to supply two typical single-family households of four for a year.
Rosarito Desalination and the Otay Mesa Conveyance and Disinfection
System Projects
The Rosarito Desalination Project is comprised of a 100 million gallons per day seawater reverse
osmosis desalination plant, together with a pump station and pipeline, to convey water to Tijuana
and to the District. This would be the first cross-
border water supply project of its kind and requires
public messaging to inform key stakeholders and the
public of the significance of the Project. If successful,
this Project may start delivering water to District
customers by early 2020. The Project includes the
construction of facilities on the U.S. side to include a
large diameter pipeline 3.5 miles long, a pump
station, a disinfection facility and the use of the Roll
Reservoir in Otay Mesa. Rosarito Desalination Project rendering
28
Demographics
The District boundaries shown in the map 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 such as age, education, and
employment. The following demographic data
was provided by The London Group Realty
Advisors, which summarizes the sub regional
areas of Sweetwater, South Bay and Jamul.
Demographics of the Otay Water District
The population of the Otay Water District has grown from 114,937 in 1980 to 243,916 in 2010. This
represents a 149.1% increase over the past 30 years. The average persons per household was 3.32
in 2010. SANDAG reports the City of Chula Vista’s ethnic/racial makeup with 58% Hispanic, 20%
white, 14% Asian and the remaining population are of other ethnic/racial descent. In a recent
economic forecast conducted by The London Group Realty Advisors, the District’s median age is 35.7
and 34.0% of adults have a four-year degree or higher. The average household income is $94,136
and the median household income is $80,805.
The London Group Realty Advisors have projected that the housing units in the District’s service area
will consist of low density townhomes and multi-plexes. The average residential sales price in South
San Diego County was $629,632 in 2014.
Otay Water District Demographics
Population 243,916
Persons/Household 3.32
Ethnic/Racial makeup
Hispanic 58.0%
White 20.0%
Asian 14.0%
Other 8.0%
Median Age 35.7
Percentage with 4 year degree or higher 34.0%
Average Household Income $ 94,136
Median Household Income $ 80,805
Source: SANDAG, The London Group Realty Advisors, Claritas Demographics
29
Water Rate Comparison
The District strives to remain cost effective in its rate setting, by controlling operating cost, yet passing
through the full cost of supply. In June 2015, the District conducted a survey of the water rates of the
water providers within San Diego County. The following chart shows that the District has the 10th
lowest water rate in the region.
SURVEY OF MEMBER AGENCY WATER RATES
BASED ON 13 UNITS OF WATER USE AND ¾" METER SIZE
PROJECTED WATER BILL FOR FY 2016
*
*
110.62
108.41
106.99
102.84
101.57
99.52
95.99
91.79
88.16
86.78
84.01
82.63
81.90
81.87
79.23
79.01
76.33
75.73
74.06
72.49
72.01
71.30
63.02
$- $20 $40 $60 $80 $100 $120
Padre Dam E
Padre Dam W
Rainbow
Ramona
Valley Center
Del Mar
Fallbrook
Escondido
Vista
Rincon
San Diego
Yuima
Oceanside
Otay
Helix
Carlsbad
Santa Fe
Olivenhain
Sweetwater
Vallecitos
San Dieguito
Poway
Lakeside
* At the time of the survey in June 2015, the member agency's FY 2016 rate was
unavailable. The estimated increase is equal to the District's FY 2016 average rate increase.
30
Sewer Rate Comparison
Water consumption based sewer rate
Flat Sewer Rate
Otay Water District
*
The District conducted a survey of the rates of the sewer providers within San Diego County. Sewer rates
are billed at either a fixed or variable rate. The following chart shows the various sewer providers and the
type of rate that is charged to the consumers. The District is among the lowest sewer rates in the County
of San Diego.
SEWER RATE COMPARISON, SAN DIEGO COUNTY
BASED ON 11 UNITS OF WATER USE AND 3/4" RESIDENTIAL METER SIZE
PROJECTED SEWER BILL FOR FY 2016
105.54
86.29
83.50
81.74
77.21
75.03
67.77
66.67
60.97
59.25
54.91
54.25
51.57
51.26
51.20
50.56
50.50
49.53
46.80
46.14
45.32
40.19
38.99
38.48
32.08
28.00
26.55
26.04
$- $20 $40 $60 $80 $100 $120
Del Mar
Oceanside
Encinitas
Rainbow
Olivenhain
Fallbrook
Padre Dam
Rancho Santa Fe
Ramona
Buena
San Diego, City
Vista
Escondido
Solana Beach
Valley Center - MG
La Mesa
El Cajon
Chula Vista
Imperial Beach
Poway
Lemon Grove
Otay Water District
Vallecitos
Coronado,City
National City
San Diego, County
Carlsbad
Leucadia
* At the time of the survey in June 2015, the member agency's FY 2016 rate was unavailable. The
estimated increase is equal to the District's FY 2016 average rate increase.
*
*
31
Service Area Assessed Valuation
Source: County of San Diego Auditor and Controller
Otay Water District’s service area encompasses property with over $24.7 billion of assessed valuation.
Properties are assessed at 100% of their full value less exemption from taxation under the law and
homeowner’s exemptions. The District receives its portion of the 1% property tax, according to
Proposition 13 and AB8. With the very recent increases in the assessed valuation, the District will benefit
by receiving its proportionate share of this increase.
Five-Year Service Area Assessed Valuation, in millions ($)
$-
$4,000
$8,000
$12,000
$16,000
$20,000
$24,000
$28,000
2011 2012 2013 2014 2015
$23,519 $23,145 $22,836 $23,304 $24,682
32
Assessed Percent
Value to Total
1. GGP-OTAY RANCH LP 118,952,326$ 0.49%
2. BRISA ACQUISITIONS LLC 117,000,000 0.48%
3. AVALON II CALIFORNIA VALUE IV LP 115,380,000 0.47%
4. REGULO PLACE APARTMENTS INVESTORS LLC 100,348,224 0.41%
5. VISTA PACIFIC VILLAS LP 89,856,103 0.37%
6. CORRECTIONS CORP OF AMERICA 80,040,092 0.33%
7. SP LAVIDA REAL LLC 70,794,630 0.29%
8. CAMDEN USA INC. 65,770,597 0.27%
9. BRE-FM CA LLC 51,712,694 0.21%
10. SPE TERRA NOVA VILLAS APARTMENT OWNER LLC 40,900,875 0.17%
Total $ 850,755,541 3.45%
Total Service Area Assessed Valuation $ 24,682,307,510
Ten Principal Taxpayers 850,755,541$ 3.45%
Other Taxpayers 23,831,551,969 96.55%
24,682,307,510$ 100.00%
Source: County of San Diego Auditor and Controller
Organization
Ten Principal Taxpayers as of June 30, 2015
33
Customer Customer Annual % of Water
Name Type Revenues Sales
1. CITY OF CHULA VISTA Publicly Owned 3,508,939$ 4.4%
2. COUNTY OF SAN DIEGO Publicly Owned 950,461 1.2%
3. STATE OF CALIFORNIA Publicly Owned 833,907 1.1%
4. EASTLAKE III COMMUNITY Commercial 781,004 1.0%
5. STEELE CANYON GOLF CLUB LLC Commercial 735,908 0.9%
6. CHULA VISTA SCHOOL DISTRICT Publicly Owned 541,036 0.7%
7. SWEETWATER SCHOOL DISTRICT Publicly Owned 379,353 0.5%
8. SANDAG Commercial 376,714 0.5%
9. EASTLAKE 1 HOA Commercial 364,252 0.5%
10. ROLLING HILLS RANCH COMM ASSOC Commercial 303,611 0.4%
Total 8,775,186$ 11.1%
79,134,999$
Ten Largest Customers 8,775,186$ 11.1%
Others 70,359,813 88.9%
79,134,999$ 100.0%
Ten Largest Customers - Fiscal Year 2015
34
San Diego Rainfall
Although San Diego received less than normal rainfall in Fiscal Year 2015, the District is hopeful that
San Diego's rainfall will return to its average pattern and volume for Fiscal Year 2016. The 10-year
average of 7.75 inches for San Diego rainfall reflects the long-term drought conditions for our area. San
Diego's rainfall average over 20 years is 8.96 inches; the 30-year average is 9.74 inches; and the 40-year
average is 10.34 inches.
San Diego rainfall, while a contributing factor, is not the controlling factor for our potable water supply
shortage. The San Diego region imports 83% of its potable supply, so conditions elsewhere
significantly affect the actual amount of water available to the District. In the event the amount of water
supplied to the District is reduced, water sales revenues would decrease. Related water purchase
expenses would also be reduced, mitigating the impact of the decrease in revenues. The amount of
any supply reduction would dictate the magnitude of the District's response and type of reaction.
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.
On April 1, 2015, Governor Brown ordered cities and towns across California to cut water use by 25%.
This mandatory drought restriction was the first in state history. For the water year 2016 (defined as
October 1 - September 30), climatologists are anticipating El Nino conditions, with the greatest
chances of wet conditions in Southern California. Precipitation falling in the Sierra's region is important
because snowmelt feeds the major reserviors in Northern California.
Fiscal years 2006 - 2015
5.42
3.85
7.49 9.17 11.01 12.66
8.03 6.48 5.74 7.68
0
5
10
15
20
25
30
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
In
c
h
e
s
Annual Rainfall
35
Budget Summary
The FY 2016 Operating Budget is summarized and presented in the Operating Budget Summary- General
Fund on pages 42-43. This schedule presents the District’s overall revenues and expenditures by type.
Also included in this section is the Operating Budget Summary by System on page 44 which presents the
General Fund budget in the business segments of Potable, Recycled, and Sewer. Additional schedules
provided in this section are the General Fund Revenues, Expenditures and Transfers; Fund Balance
Summary by Fund; Revenues and Expenditures by Fund; and Revenues and Expenditures by Type - All
Funds; are presented on pages 45-49.
For Fiscal Year 2016, the District has approved an increase in water rates primarily to pass-through cost
increases from water suppliers. The District also approved an increase in sewer rates for the rehabilitation
of the aging sewer system. Neighboring agencies are experiencing similar cost increases and most are
encountering similar rate increases.
The Operating Budget for Fiscal Year 2016 is $91.6 million in comparison to the previous fiscal year budget
of $86.1 million. The $5.5 million increase is a result of water supply rate increases of 2.5% from MWD
and 3.6% from CWA. CWA’s increase is due to the high cost of supply programs, including the early
delivery of Carlsbad desalination water. CWA also needs to secure a prudent financial position by
achieving the rate stabilization fund targets and smoothing the water rates.
GENERAL FUND REVENUES
Potable Water Sales
Potable water sales revenue collected from the sale of water including: system charges, energy charges,
and penalties accounts for 78.2% of the District’s operating revenues. It is estimated that 26,868.7 acre-
feet of potable water will be sold during FY 2016, which is a decrease of 2,323.7 from FY 2015. Budgeted
revenues from water sales are projected to be $69.8 million, a decrease of 3% from FY 2015, which is
primarily due to mandatory drought restrictions imposed by the State Water Resources Control Board.
Additional schedules relating to potable water sales are included in the Potable Revenues and
Expenditures section of this budget.
Recycled Water Sales
Recycled Water is not subject to the State Water Resources Control Board’s drought mandates. Recycled
water sales revenue is generated from the sale of 3,955.7 acre-feet of recycled water. The recycled rate
is 15% less than the potable irrigation rate. The FY 2015 sales revenue budget is $9.1 million which is an
increase of $289,400 from FY 2015 and includes the incentive credits provided by MWD and CWA.
Sewer Revenues
Sewer charges are the monthly fees collected and represents 99% of the District’s sewer revenue. The
remaining 1% of revenue is derived from penalties. The monthly fees are determined by volume of flow
and the strength of solids discharged into the sewer system. The FY 2016 Sewer Revenues are projected
to be $3.2 million which is an increase from the prior year of $198,600.
36
Budget Summary
Meter Fees
Meter fees are charges collected for new water service connections. Fees vary depending upon meter
size and the type of service. The FY 2016 revenue from meter fees is $66,200, which is an increase of
$14,700 compared to the FY 2015 budget. The costs associated with meter installations are included in
the Operating Expenses section.
Capacity Fee Revenues
These fees are earned by the General Fund for the Engineering Department’s support for expansion
functions. The FY 2016 capacity fee revenue is $1.13 million which is a decrease of $15,800 compared to
FY 2015.
Betterment Fees for Maintenance
These fees are earned by the General Fund for the Water Operations Department’s maintenance of
certain District assets. In May 2015, the Board took action to discontinue the collection of these fees
beginning in FY 2016.
Tax Revenues
The District receives 1% property tax revenues and availability fees on properties within the District’s
boundaries. These revenues are collected by the County of San Diego via the Property Tax Roll and are
remitted to the District annually. Based on the historical collections from the County of San Diego, the
District’s projected tax revenues of $3.9 million which is an increase of $134,200 compared to FY 2015.
Spending limits for the District are governed by the 1979 passage of California Proposition 4, Limitations
of Government Appropriations (Article XIII B of the California Constitution, commonly known as the GANN
limit). Proposition 4 places an appropriations limit on most spending from tax proceeds. The following
table shows that the District is below the Gann Limit.
Otay Water District Appropriations Limit (in thousands)
Fiscal Year 2010 2011 2012 2013 2014 2015
Gann Limit $ 3,826 $ 3,787 $ 3,917 $ 4,120 $ 4,392 $ 4,454
Appropriations subject to the limit $ 3,008 $ 2,924 $ 2,890 $ 2,892 $ 2,968 $ 3,134
Non-Operating Revenues
Non-operating revenues are revenues that are not directly related to the operation of a water or sewer
utility and include such items as District property rentals and leases, and billing services for the City of
Chula Vista. The District projected $1.87 million in revenues for FY 2016 which is a slight decrease of
$74,200 compared to FY 2015.
37
Budget Summary
Interest
Interest is earned by each fund that has a positive balance and is paid by each fund with a negative
balance. Interest income on General Fund balances is considered general use revenue. Interest revenue
is projected to be $157,500 in FY 2016 which is $80,100 more than in FY 2015.
GENERAL FUND EXPENDITURES
Potable Water Purchases
Water purchases are the expenses of purchasing 28,052.0 acre-feet for the District's potable water supply.
A provision has been made to allow 1,183.3 acre-feet of water for District usage, leakage, and evaporation.
Total Potable Water Purchases are projected to be $32.3 million in FY 2016 which is a decrease of $2.2
million compared to FY 2015.
Recycled Water Purchases
Recycled water purchases are the expenses of purchasing 2,906.4 acre-feet for the District's recycled
water supply which remain unchanged from Fiscal Year 2015. In addition to the purchases there is a
contractual Take-or-Pay payment budgeted for 1,910.8 acre-feet which is 298 acre-feet more than FY
2015. Total Recycled Purchases are projected to be $1.7 million in FY 2016 which is an increase of
$104,300 compared to FY 2015.
Infrastructure Access Charge
This charge was established in FY 1999 by CWA to finance a portion of its fixed annual costs including
annual payments of principal and interest on debt as well as 80% of all operation and maintenance costs.
This fixed charge is based on the number of "household meter equivalents." Infrastructure access
charges are projected at $1.9 million in FY 2016.
Customer Service Charge
This charge was established in FY 2004 by CWA as a fixed charge. The Customer Service Charge is set
to recover costs necessary to support CWA’s development of policies and implementation of programs
that benefit the region as a whole. Customer service charges are projected to remain at $1.8 million in
FY 2016.
Reliability Charge
This charge was established in FY 2016 by CWA as a fixed charge and became effective January 2016.
The Reliability Charge is set to recover a portion of the fixed costs associated with the Carlsbad
Desalination Plant and IID water transfer costs. Allocation of this charge is based upon member agencies
share of the rolling five-year average M&I deliveries. The reliability charge is projected to be $950,400 for
FY 2016 (January through June 2016).
Emergency Storage Charge
The Emergency Storage Charge was established by CWA in calendar year 2003, to recover costs
associated with non-agricultural water deliveries and is allocated based on each member agency’s share
of deliveries. The emergency storage charge is projected to remain at $4.7 million in FY 2016.
38
Budget Summary
Capacity Reservation Charge
This charge was established in FY 2002 by the MWD, as a fixed charge on a member agency's requested
maximum daily capacity. The Capacity Reservation Charge is a charge per cubic-foot-second (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. Capacity reservation charges are projected to be $806,400 which is an
increase of $105,000 compared to FY 2015.
Readiness-to-Serve Charge
This charge was established in FY 1996 by MWD, to recover the principal and interest payments on non-
tax supported debt service used to fund the capital improvements necessary to meet the continuing
reliability and quality needs associated with current demands. These costs are offset by standby charges
collected by MWD on the tax bills of District customers. These charges are projected to remain at $1.8
million in FY 2015.
Power Costs
Power costs are expenses associated with the transmission and distribution of water to customers. The
pumping costs to distribute water vary with elevation and will increase as water sales increase. Power
costs are projected to be $3.1 million, which is an increase of $274,400 compared to FY 2015.
Labor and Benefits
Labor and benefits are the wages and fringe benefits for FY 2016 Full-time Equivalent (FTE) employees.
Labor costs are reduced by the number of hours that are charged to non-operating Capital Improvement
Program (CIP) and developer deposit projects. The detail of actual personnel and payroll related
expenses is included in the Departmental Operating Budget section. Labor and benefits increased by
$633,400 from $19.7 million to $20.4 million in FY 2016.
Administrative Expenses
Administrative expenses are costs incurred by various departments that are directly related to District
operations. Administrative expenses are projected to remain at $5.4 million in FY 2016. Additional details
are supplied in the Departmental Operating Budget section.
Materials and Maintenance Expenses
Materials and maintenance expenses are costs associated with the operation and maintenance of
District facilities. Materials and maintenance expenses are projected to remain at $3.6 million in FY 2016.
Additional details are supplied in the Departmental Operating Budget section.
39
Budget Summary
GENERAL FUND RESERVES
Expansion Reserves
These reserves are established to fund expansion needs including project costs, existing debt payments,
and new debt that will be issued in the future to fund expansion. For FY 2016, these reserves will be
funded with $2.7 million from Recycled Water.
Betterment Reserves
These reserves are established to fund the betterment needs of facilities including project costs, existing
debt payments, and new debt that will be issued in the future to fund betterment. For FY 2016, these
reserves will be funded from Potable and Recycled Water for a total of $2.4 million.
Replacement Reserves
These reserves are established to fund the replacement needs including project costs, existing debt
payments, and new debt that will be issued in the future to fund replacement. For FY 2016, these reserves
will be funded from Potable, Recycled Water, and Sewer Funds totaling $3.4 million.
New Water Supply Reserves
These reserves are established to fund new water supply needs including project costs, existing debt
payments, and new debt that will be issued in the future to fund expansion. For FY 2016, this reserve will
be funded with $35,000 from Potable Water.
FUND TRANSFERS
Fund transfers are necessary to ensure that each fund pays its fair share of costs, or to achieve required
fund balances per the District’s policy.
Transfer to OPEB Trust
For FY 2016, the Potable General Fund is budgeted to fund the OPEB Trust $1,006,000 for retiree health
liabilities.
Transfer to Sewer Replacement Reserve
For FY 2016, Potable Water will fund the Sewer Replacement Reserve with $1,199,300, a repayment of
borrowed funds.
40
Budget Summary
OTHER FINANCIAL SCHEDULES/PRESENTATIONS
Operating Budget Summary by System
The Budget Summary by System schedule reflects the separation of operating revenues and expenses
among potable water, recycled water, and sewer. This is provided as information but is necessary to
ensure sufficient revenue is collected from sewer customers versus water customers.
General Fund – Revenue, Expenditures, and Transfers
This schedule shows the General Fund’s total revenues, expenditures, and transfers showing the prior
year’s actuals, the prior year’s budget and unaudited actuals, the current year’s budget, along with the
variance from the prior year’s budget.
Fund Balance Summary by Fund
This schedule shows each fund’s balance at June 30, 2015, and the projected balance for June 30, 2016.
These balances are based on the results of the budget and rate model. This includes transfers between
funds made to meet target levels as outlined in the Reserve Policy.
Revenues and Expenditures by Fund
The Revenues and Expenditures by Fund schedule reflects each fund’s revenues and expenditures by
business line, where appropriate. This schedule is reconciled to the Fund Balance Summary and
excludes transfers between funds.
Revenues and Expenditures by Type – All Funds
This is a consolidated schedule of revenues and expenditures, including sources and uses of funds but
excluding fund transfers.
41
FY 2014 FY 2015 FY 2015 FY 2016
11-Actual Budget Actual * Budget $%
Revenues
#Potable Water Sales 71,272,396$ 71,959,100$ 70,281,989$ 69,783,700$ (2,175,400)$ (3.0%)
Recycled Water Sales 10,014,767 8,826,600 8,853,010 9,116,000 289,400 3.3%
#Sewer Revenues 2,757,867 3,007,700 3,009,634 3,206,300 198,600 6.6%
#Meter Fees 78,465 51,500 90,246 66,200 14,700 28.5%
#Capacity Fee Revenues 1,167,405 1,150,600 1,312,108 1,134,800 (15,800) (1.4%)
#Betterment Fees for Maintenance 485,738 301,800 188,123 - (301,800) (100.0%)
Tax Revenues 3,624,363 3,763,700 3,814,516 3,897,900 134,200 3.6%
#Non-operating Revenues 2,057,519 1,947,800 2,404,375 1,873,600 (74,200) (3.8%)
#Interest 124,197 77,400 128,599 157,500 80,100 103.5%
ExTransfer from Potable General Fund - 553,800 553,800 - (553,800) (100.0%)
General Fund Draw Down 214,400 - - - - 0.0%
Total Revenues 91,797,117$ 91,640,000$ 90,636,400$ 89,236,000$ (2,404,000)$ (2.6%)
Expenditures
#Potable Water Purchases 36,151,147$ 34,521,500$ 33,952,017$ 32,332,100$ (2,189,400) (6.3%)
Recycled Water Purchases 1,661,887 1,601,500 1,360,807 1,705,800 104,300 6.5%
#CWA - Infrastructure Access Charge 1,856,202 1,901,400 1,900,266 1,931,400 30,000 1.6%
#CWA - Customer Service Charge 1,753,840 1,792,200 1,796,853 1,777,800 (14,400) (0.8%)
CWA - Reliability Charge - - - 950,400 950,400 100.0%
#CWA - Emergency Storage Charge 4,515,596 4,741,200 4,720,701 4,681,800 (59,400) (1.3%)
#MWD - Capacity Reservation Charge 531,318 701,400 701,976 806,400 105,000 15.0%
#MWD - Net RTS and Standby Charge 1,740,511 1,800,000 1,817,339 1,798,800 (1,200) (0.1%)
Subtotal - Water Costs 48,210,501$ 47,059,200$ 46,249,959$ 45,984,500$ (1,074,700)$ (2.3%)
#Power 2,808,846$ 2,838,400$ 3,048,335$ 3,112,800$ 274,400$ 9.7%
#Labor and Benefits 19,044,022 19,747,600 19,406,815 20,381,000 633,400 3.2%
#Administrative Expenses 4,085,545 5,419,200 4,503,990 5,387,800 (31,400) (0.6%)
#Materials & Maintenance 3,157,876 3,619,800 3,339,777 3,612,800 (7,000) (0.2%)
Subtotal - Operations Costs 29,096,289$ 31,625,000$ 30,298,917$ 32,494,400$ 869,400$ 2.7%
#Expansion Reserve 3,428,000 2,538,900 2,538,900 2,695,800 156,900 6.2%
B Betterment Reserve 125,000 3,530,000 3,530,000 2,400,000 (1,130,000) (32.0%)
ReReplacement Reserve 4,230,000 3,270,200 3,270,200 3,421,000 150,800 4.6%
Transfer to Sewer General Fund 152,800 553,800 553,800 - (553,800) (100.0%)
TOOPEB Trust 1,242,900 647,100 647,100 1,006,000 358,900 55.5%
Potable General Fund 1,913,000 1,583,800 1,583,800 - (1,583,800) (100.0%)
Sewer Replacement - 127,000 127,000 1,199,300 1,072,300 844.3%
New Supply Reserve - 705,000 705,000 35,000 (670,000) (95.0%)
Subtotal - Reserve Funding 11,091,700$ 12,955,800$ 12,955,800$ 10,757,100$ (2,198,700)$ (17.0%)
Total Expenditures 88,398,490$ 91,640,000$ 89,504,676$ 89,236,000$ (2,404,000)$ (2.6%)
Excess Revenues (Expenditures)3,398,627$ -$ 1,131,724$ -$ -$
Operating Budget Summary - General Fund
Budget to Budget
* Actual unaudited
42
Operating Budget Summary - General Fund
Potable Water Sales 69,783,700$ 78.2%
Recycled Water Sales 9,116,000 10.2%
Sewer Revenues 3,206,300 3.6%
Meter Fees 66,200 0.1%
Capacity Fee Revenues 1,134,800 1.3%
Tax Revenues 3,897,900 4.4%
Non-operating Revenues 1,873,600 2.0%
Interest 157,500 0.2%
89,236,000$ 100.0%
Potable Water Purchases 44,278,700$ 49.7%
Recycled Water Purchases 1,705,800 1.8%
Power 3,112,800 3.5%
Labor and Benefits 20,381,000 22.8%
Administrative Expenses 5,387,800 6.1%
Materials & Maintenance 3,612,800 4.0%
Reserve Funding 10,757,100 12.1%
89,236,000$ 100.0%
FY 2016 Operating Revenues
FY 2016 Operating Expenditures
43
Potable Recycled Sewer Total
Revenues
Water Sales 69,783,700$ -$ -$ 69,783,700$
Recycled Water Sales - 9,116,000 - 9,116,000
Sewer Revenues - - 3,206,300 3,206,300
Meter Fees 65,800 400 - 66,200
Capacity Fee Revenues 1,134,800 - - 1,134,800
Tax Revenues 3,846,300 - 51,600 3,897,900
Non-operating Revenues 1,836,400 - 37,200 1,873,600
Interest 143,000 6,300 8,200 157,500
Total Revenues 76,810,000$ 9,122,700$ 3,303,300$ 89,236,000$
Expenditures
Water Purchases 32,332,100$ 1,705,800$ -$ 34,037,900$
CWA - Infrastructure Access Charge 1,931,400 - - 1,931,400
CWA - Customer Service Charge 1,777,800 - - 1,777,800
CWA - Reliability Charge 950,400 - - 950,400
CWA - Emergency Storage Charge 4,681,800 - - 4,681,800
MWD - Capacity Reservation Charge 806,400 - - 806,400
MWD - Net RTS and Standby Charges 1,798,800 - - 1,798,800
Subtotal - Water Costs 44,278,700$ 1,705,800$ -$ 45,984,500$
Power 2,372,400 563,600 176,800 3,112,800$
Labor and Benefits 18,518,100 1,181,600 681,300 20,381,000
Administrative Expenses 4,865,200 321,800 200,800 5,387,800
Materials & Maintenance 2,168,300 287,800 1,156,700 3,612,800
Subtotal - Operations Costs 27,924,000$ 2,354,800$ 2,215,600$ 32,494,400$
#Expansion Reserve - 2,695,800 - 2,695,800
B Betterment Reserve - 1,945,000 455,000 2,400,000
R Replacement Reserve 2,493,900 328,000 599,100 3,421,000
TOOPEB Trust 914,100 58,300 33,600 1,006,000
Sewer Replacement 1,199,300 - - 1,199,300
New Supply Reserve - 35,000 - 35,000
Subtotal - Reserve Funding 4,607,300$ 5,062,100$ 1,087,700$ 10,757,100$
Total Expenditures 76,810,000$ 9,122,700$ 3,303,300$ 89,236,000$
Excess Revenue (Expenditures)-$ -$ -$ -$
FY 2016 Operating Budget Summary by System
44
FY 2014 FY 2016
Actual Budget Actual* Budget $%
Revenues and Fund Sources
Water Sales 81,287,163$ 80,785,700$ 79,134,999$ 78,899,700$ (1,886,000)$ (2.3%)
Sewer Revenues 2,757,867 3,007,700 3,009,634 3,206,300 198,600 6.6%
Meter Fees 78,465 51,500 90,246 66,200 14,700 28.5%
Capacity Fee Revenues 1,167,405 1,150,600 1,312,108 1,134,800 (15,800) (1.4%)
Betterment Fee Revenues 485,738 301,800 188,123 - (301,800) (100.0%)
Tax Revenues 3,624,363 3,763,700 3,814,516 3,897,900 134,200 3.6%
Non-Operating Revenues 2,057,519 1,947,800 2,404,375 1,873,600 (74,200) (3.8%)
Interest 124,197 77,400 128,599 157,500 80,100 103.5%
Transfers 214,400 553,800 553,800 - (553,800) (100.0%)
Total Revenue and Fund Sources 91,797,119$ 91,640,000$ 90,636,400 89,236,000$ (2,404,000) (2.6%)
Expenditures and Fund Uses
Water Purchases 48,210,501 47,059,200 46,249,959 45,984,500 (1,074,700) (2.3%)
Power 2,808,846 2,838,400 3,048,335 3,112,800 274,400 9.7%
Administrative Expenses 4,085,545 5,419,200 4,503,990 5,387,800 (31,400) (0.6%)
Materials and Maintenance 3,157,876 3,619,800 3,339,777 3,612,800 (7,000) (0.2%)
Labor and Benefits 19,984,919 19,747,600 19,406,815 20,381,000 633,400 3.2%
Transfers 11,091,700 12,955,800 12,955,800 10,757,100 (2,198,700) (17.0%)
Total Expenditures and Fund Uses 89,339,387$ 91,640,000$ 89,504,676$ 89,236,000$ (2,404,000)$ (2.6%)
Excess Revenues/(Expenditures)2,457,732$ -$ 1,131,724 -$ -$ (100.0%)
General Fund Revenues, Expenditures and Transfers, in millions ($)
FY 2015
Budget to Budget
Variance
General Fund - Revenues, Expenditures and Transfers
$80,000
$82,000
$84,000
$86,000
$88,000
$90,000
$92,000
FY 2014 Actual FY 2015 Budget FY 2015 Actual FY 2016 Budget
91
,
7
9
7
91
,
6
4
0
90
,
6
3
6
89
,
2
3
6
89
,
3
3
9
91
,
6
4
0
89
,
5
0
5
89
,
2
3
6
Total Revenues Total Expenditures
*Actual unaudited
45
Actual*Projected
Balance Interfund Balance
June 30, 2015 Revenues Expenditures Transfers (1)June 30, 2016
General Fund
Potable 22,433,599$ 76,810,000$ 76,810,000$ (2,168,800) 20,264,799$
Recycled 4,175,386 9,122,700 9,122,700 (2,043,200) 2,132,186
Sewer 2,008,510 3,303,300 3,303,300 (1,586,500) 422,010
Total General Fund 28,617,495 89,236,000 89,236,000 (5,798,500) 22,818,995
Expansion Fund
Potable and Recycled (2)657,541 4,224,700 5,744,200 1,270,000 408,041
Sewer 18,346 100 - (15,000) 3,446
Total Expansion Fund 675,887 4,224,800 5,744,200 1,255,000 411,487 (3)
Betterment Fund
Potable 4,737,827 805,500 3,759,500 (1,575,000) 208,827
Recycled (185,680) 6,900 753,400 1,945,000 1,012,820
Sewer 519,916 34,000 251,000 470,000 772,916
Total Betterment Fund 5,072,063 846,400 4,763,900 840,000 1,994,563 (3)
Replacement Fund
Potable 30,094,484 3,304,300 7,175,800 10,435,000 36,657,984
Recycled 5,214,322 48,500 870,100 328,000 4,720,722
Sewer 10,621,521 89,800 1,520,000 3,384,900 12,576,221
Total Replacement Fund 45,930,328 3,442,600 9,565,900 14,147,900 53,954,928
New Supply Fund
Potable 1,062,201 259,900 177,500 (730,000) 414,601
Recycled (15,548) 1,400 4,800 35,000 16,052
Sewer - - - - -
Total New Supply Fund 1,046,653 261,300 182,300 (695,000) 430,653 (3)
OPEB Fund 31,445 100 1,006,000 1,006,000 31,545 (4)
Debt Service Fund 4,658,306 758,100 780,700 - 4,635,706
Total 86,032,176$ 98,769,300$ 111,279,000$ 10,755,400$ 84,277,877$
2,294,900$
(1)The total for interfund transfers does not net to $0 because some transfers are already reflected in the Operating
Revenues and Expenditures for General Fund as follows:
Expansion Reserve 2,695,800$
Betterment Reserve 2,400,000
Replacement Reserve 3,421,000
New Supply Reserve 35,000
OPEB Reserve 1,006,000
Total 9,557,800$ ##
(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 201-230.
(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.
Fiscal Year 2016 Budget
Fund Balance Summary by Fund
*Actual unaudited
46
FY 2014 FY 2016
Actual Budget Actual* Budget
General Fund
Potable 78,707,722$ 79,154,100$ 78,106,717$ 76,810,000$
Recycled 10,031,730 8,834,400 8,871,699 9,122,700
Sewer 2,996,065 3,651,500 3,657,984 3,303,300
Total General Fund (1)91,735,517 91,640,000 90,636,400 89,236,000
Expansion Fund
Potable 4,158,840$ 1,788,700 1,947,314 4,121,400
Recycled 1,698,412 115,200 245,449 103,300
Sewer 7,803 200 150 100
Total Expansion Fund 5,865,055 1,904,100 2,192,913 4,224,800
Betterment Fund
Potable 3,294,249$ 1,098,500 1,070,815 805,500
Recycled (456,923) 4,200 23,515 6,900
Sewer 37,336 42,100 36,137 34,000
Total Betterment Fund 2,874,662 1,144,800 1,130,467 846,400
Replacement Fund
Potable 9,296,348$ 1,022,900 2,206,897 3,304,300
Recycled 122,907 27,500 221,136 48,500
Sewer 48,764 37,700 75,480 89,800
Total Replacement Fund 9,468,019 1,088,100 2,503,513 3,442,600
New Supply Fund
Potable 385,981$ 191,500 396,763 259,900
Recycled (371,603) 1,600 50,898 1,400
Sewer - - - -
Total New Supply Fund 14,378 193,100 447,661 261,300
OPEB Fund 823,523$ 600 11,011 100
Debt Service Fund 663,497$ 655,000 755,609 758,100
Total Revenues 111,444,652$ 96,625,700$ 97,677,574 98,769,300$
17,607,897$ 620,300$
Revenues and Expenditures by Fund
FY 2015
*Actual unaudited
47
FY 2014 FY 2016
Actual Budget Actual* Budget
Revenues and Expenditures by Fund
FY 2015
General Fund
Potable 78,424,638$ 79,154,100$ 77,332,582$ 76,810,000$
Recycled 8,472,312 8,834,400 8,782,103 9,122,700
Sewer 2,442,437 3,651,500 3,389,991 3,303,300
Total General Fund 89,339,387 91,640,000 89,504,676 89,236,000
Expansion Fund
Potable 4,658,990$ 4,843,000 4,689,037 4,469,300
Recycled 1,557,915 1,284,200 1,283,173 1,274,900
Sewer - - 7,510 -
Total Expansion Fund 6,216,905 6,127,200 5,979,720 5,744,200
Betterment Fund
Potable 3,352,161$ 3,699,800 2,875,698 3,759,500
Recycled 59,228 175,400 541,156 753,400
Sewer 180,310 305,000 214,301 251,000
Total Betterment Fund 3,591,699 4,180,200 3,631,155 4,763,900
Replacement Fund
Potable 5,640,438$ 6,852,300 6,948,034 7,175,800
Recycled 1,181,130 831,400 515,482 870,100
Sewer 777,199 1,275,000 1,376,978 1,520,000
Total Replacement Fund 7,598,767 8,958,700 8,840,494 9,565,900
New Supply Fund
Potable 427,719$ 467,600 372,965 177,500
Recycled 128,420 4,800 104,255 4,800
Sewer - - - -
Total New Supply Fund 556,139 472,400 477,220 182,300
OPEB Fund 940,355$ 958,000 929,113 1,006,000
Debt Reserve Fund 13,650,886$ 750,100 749,263 780,700
Total Expenditures 121,894,137 113,086,600 110,111,640 111,279,000
Surplus/(Deficit)(10,449,486)$ (16,460,900)$ (12,434,066) (12,509,700)$
*Actual unaudited
48
FY 2014 FY 2016
Actual Budget Actual* Budget
Revenues and Fund Sources
Water Sales 81,287,163 80,785,700 79,135,000 78,899,700
Sewer Revenues 2,757,867 3,007,700 3,009,634 3,206,300
Meter Fees 78,465 51,500 90,246 66,200
Capacity Fee Revenues 2,703,862 2,293,500 3,943,190 3,126,200
Betterment Fee Revenues 709,986 340,500 309,510 28,600
New Supply Fee Revenue 225,038 180,300 402,987 244,700
Capacity Fees for Maintenance 1,167,405 1,150,600 1,312,108 1,134,800
Betterment Fees for Maintenance 485,738 301,800 188,123 -
Tax Revenues 3,624,363 3,763,700 3,814,516 3,897,900
Availability Fees 549,409 441,500 477,137 444,400
Non-Operating Revenues 2,057,519 1,947,800 2,404,375 1,873,600
GO Bond Debt Tax Revenues 641,798 651,700 726,878 722,800
Sewer Debt Tax Revenues 962 500 - 1,000
COPs Proceeds 13,566,703 770,400 750,485 799,200
Grants 209,873 111,100 3,867 3,714,200
Interest 407,007 273,600 555,718 609,700
Interfund Transfers 152,800 553,800 553,800 -
Total Revenue and Fund Sources 110,625,958$ 96,625,700$ 97,677,574 98,769,300$
Expenditures and Fund Uses
Water Purchases 48,210,501 47,059,200 46,249,959 45,984,500
Power 2,808,846 2,838,400 3,048,335 3,112,800
Administrative Expenses 4,085,545 5,419,200 4,503,990 5,387,800
Materials and Maintenance 3,157,876 3,619,800 3,339,777 3,612,800
Labor Expenses 19,984,919 19,747,600 19,406,815 20,381,000
CIP Expenses 8,497,568 10,575,900 9,726,136 11,341,200
Debt Service 8,563,486 8,460,300 8,451,485 8,532,000
Capacity Fees for Maintenance 1,170,985 1,150,600 1,312,107 1,134,800
Betterment Fees for Maintenance 485,738 301,800 188,123 -
OPEB Retiree Health Expenses 940,355 958,000 929,113 1,006,000
COPs Proceeds Distribution 12,900,198 - - 29,000
General Fund Transfers 2,065,800 2,137,600 2,137,600 2,493,900
Interfund Transfers 9,025,900 10,818,200 10,818,200 8,263,200
Total Expenditures and Fund Uses 121,897,717 113,086,600 110,111,640 111,279,000
Surplus/(Deficit)(11,271,759)$ (16,460,900)$ (12,434,066) (12,509,700)$
Revenues and Expenditures by Type - All Funds
FY 2015
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 2014 and 2015 shown above.
*Actual unaudited
49
Five-Year Forecast – FY 2017 through FY 2021
The District updates its Rate Model to build the budget for the upcoming fiscal year and to forecast
the five subsequent years. This financial forecast is designed to provide a general understanding
of how revenues and expenditures are expected to influence the District and is reviewed in relation
to its effect on funding capital projects and reserve levels. Estimates for growth, water costs, and
others such as rainfall, and average water consumption per customer, are used throughout the
Rate Model to calculate various revenue and expense amounts in each year. The Engineering
Department is primarily responsible for the growth estimates as described in the budget overview
on page 18. 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, estimates from the District’s health providers, as well as actuarial reports from the District’s
pension providers. Other general inflators are derived from statistical data from consumer price
indexes for the region.
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. The 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 a GIS-centric Asset Management System, CityWorks,
which is crucial to tracking and maintaining the history of 726 miles of potable pipelines, 102 miles
of recycled pipelines, 88 miles of sewer mains, 40 potable and 4 recycled reservoirs, 21 potable and
3 recycled pump stations, and a 1.3 million gallons per day reclamation plant. Utilizing an
integrated database from the Geographic Information System (GIS) provides real-time work order
planning, execution, and consolidation of all maintenance history. These systems are also
integrated with financial software to allow asset tracking and management information. As the
systems are further developed, the District will be able to better anticipate operating costs
associated with the capital projects. The impact of the CIPs on the Operating Budget is addressed
in the CIP section of this budget.
Projected Cost of Water
The projected water cost is based on CWA’s Rate Modeling Program. This program evaluates
many options of the Regional Water Facilities Master Plan, which determines the most feasible
projects for water resources
and incorporates
these decisions into CWA’s
Capital Improvement
Program. This cost is also
based on CWA’s estimated
water cost for purchases from
MWD and the Imperial
Irrigation District (IID).
50
FY 2017 FY 2018 FY 2019 FY 2020 FY 2021
Revenues
Water/Sewer Rates 87,380,400 94,151,100 99,471,400 104,544,800 109,952,900
Meter Fees 71,500 76,700 78,700 81,800 85,400
Capacity Fee Revenues 1,140,500 1,151,900 1,163,400 1,175,000 1,186,800
Non-operating Revenues 1,903,100 1,934,200 1,967,200 2,002,000 2,037,500
Tax Revenues 3,998,300 4,103,400 4,214,000 4,401,100 4,598,900
Interest Income 202,100 259,200 297,600 337,900 383,100
Total Revenues 94,695,900$ 101,676,500$ 107,192,300$ 112,542,600$ 118,244,600$
30,646,100$ 32,661,700$ 33,295,800$ 33,936,300$
FY 2017 FY 2018 FY 2019 FY 2020 FY 2021
Expenditures & Transfers
Water Cost 50,115,400$ 54,801,700$ 58,873,100$ 63,386,700$ 68,229,200$
Power 3,308,000 3,526,000 3,692,900 3,878,400 4,077,600
Labor and Benefits 21,338,600 22,104,400 22,325,000 22,820,900 23,325,700
Administrative Expenses 5,395,200 5,555,000 5,481,600 5,649,900 5,823,800
Materials & Maintenance 3,729,200 3,887,800 4,045,200 4,209,300 4,379,900
Net Transfers (Reserve Funding)10,809,500 11,801,600 12,774,500 12,597,400 12,408,400
Total Expenditures and Transfers 94,695,900$ 101,676,500$ 107,192,300$ 112,542,600$ 118,244,600$
Excess Revenues (Expenditures)-$ -$ -$ -$ -$
General Fund Forecast - FY 2017 through FY 2021
This forecast incorporates both cost increases for expenditures and rate increases for revenues, as well as
growth projections.
Revenues
Expenditures and Transfers
$0
$20
$40
$60
$80
$100
$120
FY 2017 FY 2018 FY 2019 FY 2020 FY 2021
$9
5
$1
0
2
$1
0
7
$1
1
3
$1
1
8
$9
5
$1
0
2
$1
0
7
$1
1
3
$1
1
8
Revenues and Expenditures Forecast, in millions ($)
Revenues Expenditures
51
FY 2017 FY 2018 FY 2019 FY 2020 FY 2021
General Fund 20,985,900$ 22,476,600$ 23,609,700$ 24,997,100$ 26,465,400$
Betterment Fund 2,527,600 2,210,800 2,480,500 2,713,300 2,707,500
Replacement Fund 41,936,100 32,000,200 30,314,700 33,448,500 37,431,100
Expansion Fund 445,100 587,700 184,500 106,900 106,900
New Supply Fund 812,600 1,207,800 1,608,900 1,802,800 1,805,900
Debt Reserve 4,574,500 4,643,300 4,722,800 4,829,800 4,951,000
Total Fund Balance 71,281,800$ 63,126,400$ 62,921,100$ 67,898,400$ 73,467,800$
(19,500) (19,754) (20,111) (20,411) (20,811)
Fund Balances by Fund
Fund Balances - FY 2017 through FY 2021
$0
$20
$40
$60
$80
FY 2017 FY 2018 FY 2019 FY 2020 FY 2021
Fund Balances Forecast, in millions ($)
General Fund Betterment Fund Replacement Fund
Expansion Fund Debt Reserve
52
Debt Management
The District has been successful in financing capital improvements through a combination of long-
term and short-term financing plans. Financial tools used include General Obligation Bonds,
Certificates of Participation (COPs), Build America Bonds (BABs), developer fees, and pay-as-you-go
funding.
The District’s primary debt management objective is to keep the level of indebtedness within
available resources and within limits that will allow the District to meet the debt service coverage
ratios required by the bond covenant. Bonds have been and will be used to improve existing facilities
and to build the projects in the Capital Improvement Program (CIP). The District’s debt service
obligations have a significant effect upon the District’s current and future water rates. All efforts that
minimize the cost of debt have a corresponding effect that reduces water rates.
In July 2014, Standard & Poor’s (S&P) affirmed the District’s AA rating. At the same time, S&P revised
its outlook on the District from negative to stable. The revised outlook was based on the District’s
improved financial performance during the previous two fiscal years, a strong liquidity position, and
strong income levels in the District’s service area. S&P cited the complete reliance on expensive
imported potable water as a partial offset to these credit strengths.
850-2 Pump Station discharge pipes feeding the distribution system
53
Debt Management
The District achieved a 199% actual debt coverage ratio, including growth revenues, for fiscal year
2015, which exceeded the debt covenant minimum ratio of 125%. To meet the bond indebtedness
obligation and maintain stable rates, the rate model is used to forecast revenues and operating
requirements. In the next six years, the District does not anticipate the need to issue new debt and
expects the District’s financial performance to yield strong levels prior to any debt issued. The chart
below show the District’s projected debt coverage ratio from FY 2016 through FY 2021. The debt
coverage ratios are growing as rates are set to ensure adequate funding of the reserves.
The District’s Board of Directors believes that a strong debt coverage ratio will benefit the ratepayers
as it reduces the cost of water infrastructure; and therefore have been willing to support this with
necessary rate increases. The District has projected a schedule of rate increases designed to
generate sufficient revenue to pay off existing and planned future debt issues. See the Policies
section of the budget for the District’s complete Debt Policy.
Projected Debt Coverage Ratio
1.43
1.88
2.28
2.80
3.12 3.24
-
0.50
1.00
1.50
2.00
2.50
3.00
3.50
FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021
Co
v
e
r
a
g
e
R
a
t
i
o
Projected Ratio Minimum Ratio = 1.25
54
Outstanding
Year Maturity Original Balance
# Incurred Description Date Amount 6/30/2016
1 1996 Certificates of Participation (COPs)September 1, 2026 15,400,000$ 9,400,000$
2 2007 Certificates of Participation (COPs)September 1, 2036 42,000,000 5,150,000
3 2009 General Obligation (GO) Bonds August 31, 2022 7,780,000 35,795,000
4 2010 Certificates of Participation Series A (COPs)September 1, 2024 13,840,000 10,590,000
5 2010 Build America Bonds Series B (BABs)September 1, 2040 36,355,000 36,355,000
6 2013 Water Revenue Refunding Bonds September 1, 2023 7,735,000 6,470,000
Total Outstanding Debt 123,110,000$ 103,760,000$
Total Assessed Valuation - FY 2015
Percentage of Original Debt to Assessed Valuation 0.50%0.07%
Debt Limit per District Debt Policy (% of Assessed Valuation)15.00%15.00%
24,682,307,510$ 11,157,255,925$
Note: The accounting for debt proceeds and payments is described in the District's Reserve Policy.
Total Outstanding Debt, in millions ($)
Schedule of Outstanding Debt
All Debts GO Bonds
$-
$10
$20
$30
$40
$50
$60
$70
$80
$90
1996 COPs 2009 GOBs 2007 COPs 2010A COPs 2010B BABs 2013 WRRBs
Principal Interest
55
1996 COPs 2009 GOBs 2007 COPs 2010A COPs 2010B BABs 2013 WRRBs Total
600,000 570,000 1,035,000 870,000 - 615,000 3,690,000
600,000 585,000 1,075,000 900,000 - 635,000 3,795,000
600,000 605,000 1,115,000 940,000 - 660,000 3,920,000
700,000 635,000 1,155,000 975,000 - 685,000 4,150,000
700,000 650,000 1,200,000 1,015,000 - 715,000 4,280,000
700,000 680,000 1,250,000 1,065,000 - 745,000 4,440,000
800,000 705,000 1,300,000 1,120,000 - 775,000 4,700,000
800,000 720,000 1,355,000 1,175,000 - 805,000 4,855,000
900,000 - 1,410,000 1,235,000 - 835,000 4,380,000
900,000 - 1,470,000 1,295,000 - - 3,665,000
1,000,000 - 1,530,000 - 1,365,000 - 3,895,000
1,100,000 - 1,595,000 - 1,450,000 - 4,145,000
- - 1,665,000 - 1,545,000 - 3,210,000
- - 1,735,000 - 1,640,000 - 3,375,000
- - 1,810,000 - 1,745,000 - 3,555,000
- - 1,890,000 - 1,855,000 - 3,745,000
- - 1,970,000 - 1,975,000 - 3,945,000
- - 2,055,000 - 2,105,000 - 4,160,000
- - 2,150,000 - 2,245,000 - 4,395,000
- - 2,245,000 - 2,390,000 - 4,635,000
- - 2,340,000 - 2,550,000 - 4,890,000
- - 2,445,000 - 2,715,000 - 5,160,000
- - - - 2,895,000 - 2,895,000
- - - - 3,085,000 - 3,085,000
- - - - 3,290,000 - 3,290,000
- - - - 3,505,000 - 3,505,000
9,400,000$ 5,150,000$ 35,795,000$ 10,590,000$ 36,355,000$ 6,470,000$ 103,760,000$
2038
2039
2040
2041
Total
Combined Debt Service through Maturity, in millions ($)
2032
2033
2034
2035
2036
2037
2026
2027
2028
2029
2030
2031
2020
2021
2022
2023
2024
2025
2016
2017
2018
2019
Projected Principal Payments by Debt Issuance
FY
$0
$1
$2
$3
$4
$5
$6
$7
$8
$9
20
1
6
20
1
7
20
1
8
20
1
9
20
2
0
20
2
1
20
2
2
20
2
3
20
2
4
20
2
5
20
2
6
20
2
7
20
2
8
20
2
9
20
3
0
20
3
1
20
3
2
20
3
3
20
3
4
20
3
5
20
3
6
20
3
7
20
3
8
20
3
9
20
4
0
20
4
1
Interest
Principal
56
1996 COPs (1)2009 GOBs 2007 COPs 2010A COPs 2010B BABs 2013 WRRBs(2)Total
1,780 181,663 1,466,301 466,888 2,371,868 237,275 4,725,775
1,660 162,969 1,425,791 431,088 2,371,868 213,033 4,606,409
1,540 139,633 1,383,674 393,754 2,371,868 186,800 4,477,270
1,403 114,433 1,339,316 354,988 2,371,868 159,567 4,341,575
1,263 88,533 1,292,856 306,196 2,371,868 131,167 4,191,884
1,123 61,533 1,243,390 253,363 2,371,868 101,567 4,032,844
967 33,500 1,191,723 197,821 2,371,868 70,767 3,866,645
807 4,800 1,136,760 139,529 2,371,868 38,767 3,692,531
630 - 1,079,326 78,279 2,371,868 5,567 3,535,670
450 - 1,019,160 11,331 2,371,868 - 3,402,810
253 - 955,504 - 2,299,330 - 3,255,087
37 - 888,304 - 2,207,767 - 3,096,108
- - 818,038 - 2,110,252 - 2,928,289
- - 744,796 - 2,006,679 - 2,751,475
- - 668,402 - 1,896,516 - 2,564,918
- - 588,644 - 1,779,392 - 2,368,036
- - 505,485 - 1,651,430 - 2,156,915
- - 416,609 - 1,514,409 - 1,931,018
- - 323,240 - 1,368,290 - 1,691,530
- - 225,714 - 1,212,689 - 1,438,403
- - 124,031 - 1,046,730 - 1,170,761
- - 17,828 - 869,973 - 887,801
- - - - 681,541 - 681,541
- - - - 480,724 - 480,724
- - - - 266,587 - 266,587
- - - - 38,421 - 38,421
11,913$ 787,064$ 18,854,892$ 2,633,235$ 45,149,410$ 1,144,510$ 73,425,425$
(1)Interest on the 1996 Certificates of Participation is variable and is projected using an interest rate of .02%.
(2)The 2013 Water Revenue Refunding Bonds were an advanced refunding of the 2004 COPs, which was a refunding
of the 1993 COPs.
2038
2039
2040
2041
Total
2032
2033
2034
2035
2036
2037
2026
2027
2028
2029
2030
2031
2020
2021
2022
2023
2024
2025
2016
2017
2018
2019
Projected Interest Payments by Debt Issuance
FY
57
Potable Revenues and Expenditures
Potable Revenues
The District will provide water service to
approximately 49,454 potable customers by
the end of Fiscal Year 2016. Ninety-one
percent of the potable customers are
residential and the remaining nine percent
are comprised of multi-residential, publicly-
owned, commercial, agricultural,
landscaping, and construction. With the
decline in residential developments in recent
years, the District expects only nominal
growth of 0.33% for Fiscal Year 2016. Unit
sales are anticipated to decrease 8.0%
compared to the previous year's budget.
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
units sold in the top tiers. These unit sales represent approximately 65% 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, the MWD and CWA fixed charge, and the District
system fee. These fixed charges are 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. Energy charges are set so as to recover the power costs associated
with pumping. This charge is adjusted based on an annual review of these costs to ensure that
sufficient revenue is collected to offset pumping costs.
Penalties are charged to the District customer accounts when payments are delinquent. These
penalty revenues are budgeted based on historical trends.
Surge Tank at the 803-2 Pump Station
58
Potable Revenues and Expenditures
Potable Expenditures
In Fiscal Year 2016, the District estimates to purchase 28,052 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 1,183.3 acre-feet.
Today, the District purchases 100% of its potable water from the San Diego County Water Authority
(CWA); however, in the past the District purchased only treated water through the CWA’s treated
water pipeline. Then in 2006, to diversify the water supply and to become less reliant on treated
water from outside the region, Otay entered an agreement to purchase 10,000 acre-feet of raw water
treated by neighboring Helix Water District at their Levy Water Treatment Plant. This raw water
comes into the region through a CWA raw water pipeline which gives the District redundancy in
water supply. The reliability is necessary to ensure water deliveries can continue in an emergency
situation such as earthquakes or other natural disasters. The District’s agreement also brings
regional water treatment closer to our customers, which reduces dependence on water treatment
facilities located outside of San Diego County. Flow Control Facility No. 14 connects the Helix Water
District to Otay Water District through approximately 5 miles of 36” pipeline.
Although the District does not own a direct water supply reservoir that captures surface water, there
are cooperative agreements between CWA and the other member agencies to manage water
demands and supply the region in times of need.
The member agencies and CWA reservoirs serves
multiple functions including: surface water capture,
seasonal shift water storage, carryover storage, local
sources of emergency water supplies, system capacity
buffers during peak demand periods and offers a level of
security for short and long‐term emergency situations.
The location of each reservoir, as shown on page 60,
effects the extent to which it can perform the various
functions, as does the individual agencies’ operational
plan implemented at each location.
Replacing pump at the 944 Pump Station
59
Potable Revenues and Expenditures
The San Diego County Water Authority (CWA) purchases water for the County of San Diego from
MWD and the Imperial Irrigation District (IID). Any cost increases by CWA, MWD, or IID impacts the
District's water purchases and directly affects the District's fees, rates, and service charges.
Beginning in late fall 2015, the Carlsbad Desalination Project, the largest and most technologically
advanced seawater desalination project in the Western Hemisphere, is expected begin operations
and anticipated to meet 7-10% of the region’s water demand.
60
FY 2014 FY 2015 FY 2015 FY 2016
11-Actual Budget Actual * Budget $ %
Revenues
##Water Sales 71,272,396$ 71,959,100$ 70,281,989$ 69,783,700$ (2,175,400)$ (3.0%)
##Meter Fees 77,503 51,100 86,165 65,800 14,700 28.8%
##Capacity Fee Revenues 1,167,405 1,150,600 1,304,598 1,134,800 (15,800) (1.4%)
##Betterment Fees for Maintenance 485,738 301,800 188,123 - (301,800) (100.0%)
Tax Revenues 3,580,042 3,712,100 3,769,963 3,846,300 134,200 3.6%
##Non-operating Revenues 2,024,615 1,914,000 2,370,615 1,836,400 (77,600) (4.1%)
##Interest 100,023 65,400 105,264 143,000 77,600 118.7%
Total Revenues 78,707,722$ 79,154,100$ 78,106,717$ 76,810,000$ (2,344,100)$ (3.0%)
Expenditures
Potable Water Purchases 36,151,147$ 34,521,500$ 33,952,017$ 32,332,100$ (2,189,400)$ (6.3%)
##CWA - Infrastructure Access Charge 1,856,202 1,901,400 1,900,266 1,931,400 30,000 1.6%
##CWA - Customer Service Charge 1,753,840 1,792,200 1,796,853 1,777,800 (14,400) (0.8%)
##CWA - Reliability Charge - - - 950,400 950,400 100.0%
##CWA - Emergency Storage Charge 4,515,596 4,741,200 4,720,701 4,681,800 (59,400) (1.3%)
##MWD - Capacity Reservation Charge 531,318 701,400 701,976 806,400 105,000 15.0%
##MWD-Net RTS and Standby Charges 1,740,511 1,800,000 1,817,339 1,798,800 (1,200) (0.1%)
Subtotal - Water Costs 46,548,614$ 45,457,700$ 44,889,152$ 44,278,700$ (1,179,000)$ (2.6%)
##Power 2,057,945 2,188,400 2,280,061 2,372,400 184,000 8.4%
##Labor and Benefits 17,007,323 17,663,500 17,383,737 18,518,100 854,600 4.8%
##Administrative Expenses 3,616,818 4,927,100 4,040,636 4,865,200 (61,900) (1.3%)
##Materials & Maintenance 1,654,641 1,921,800 1,743,396 2,168,300 246,500 12.8%
11-Subtotal - Operations Costs 24,336,727$ 26,700,800$ 25,447,830$ 27,924,000$ 1,223,200$ 4.6%
##Expansion Reserve 3,418,000 - - - - (100.0%)
Bet Betterment Reserve - 2,805,000 2,805,000 - (2,805,000) (100.0%)
RepReplacement Reserve - 675,000 675,000 2,493,900 1,818,900 269.5%
sw Transfer to Sewer General Fund 152,800 553,800 553,800 - (553,800) (100.0%)
TO Transfer to OPEB 1,114,600 546,000 546,000 914,100 368,100 67.4%
GF Transfer to General Fund Reserve 1,913,000 1,583,800 1,583,800 - (1,583,800) (100.0%)
Sw Transfer to Sewer Replacement - 127,000 127,000 1,199,300 1,072,300 844.3%
NSTransfer to New Supply Fund - 705,000 705,000 - (705,000) (100.0%)
Subtotal - Reserve Funding 6,598,400$ 6,995,600$ 6,995,600$ 4,607,300$ (2,388,300)$ (34.1%)
Total Expenditures 77,483,741$ 79,154,100$ 77,332,582$ 76,810,000$ (2,344,100)$ (3.0%)
Excess Revenues (Expenditures)1,223,981$ -$ 774,135$ -$ -$
Operating Budget Summary - Potable
Budget to Budget
Variance
* Actual unaudited61
FY 2015 FY 2015 FY 2016
Actual*Budget Budget $ %
Water Sales 44,025,774$ 45,669,500$ 41,344,900$ (4,324,600)$ -9.5%
System Fees 12,380,370 12,337,500 13,292,300 954,800 7.7%
Energy Fees 2,134,865 2,145,600 2,311,300 165,700 7.7%
MWD and CWA Fixed Fees 10,846,411 10,936,200 11,946,600 1,010,400 9.2%
Penalties 894,569 870,300 888,600 18,300 2.1%
Total Water Sales 70,281,989$ 71,959,100$ 69,783,700$ (2,175,400)$ -3.0%
Water Sales 41,344,900$ 59.0%
System Charges 13,292,300 19.0%
Energy Charges 2,311,300 3.0%
MWD and CWA Fixed Charges 11,946,600 17.0%
Penalties 888,600 2.0%
Total Water Sales 69,783,700$ 100.0%
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 $ .072 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 calculated to recover the MWD's and CWA's fixed annual
costs including the construction, operation and maintenance of aqueducts, and emergency storage projects.
These fixed charges are based on the size of the meter.
Penalties: Charges and penalties are imposed on customer accounts for late payments and returned checks.
Classification of Water Sales - Potable
Budget to Budget
Variance
FY 2016 Classification of Water Sales
*Actual unaudited 62
Number of
Current Approved*Accounts Units Amount
Residential 45,025 6,954,400 23,198,800$
Conservation Tier (< 5 hcf)1.95$ 1.99$
6 - 10 3.04 3.10
11 - 22 3.95 4.03
over 23 hcf 6.08 6.20
Master Meter 862 1,326,700 4,631,000
0 - 4 3.00 3.06
5 - 9 3.89 3.96
over 10 hcf 6.00 6.12
Public and Commercial 1,469 1,802,500 5,895,300
Tier I 3.21 3.27
Tier II 3.26 3.32
Tier III 3.31 3.37
Agriculture, Landscaping, and Construction 1,348 1,620,500 7,176,300
Tier I 4.37 4.45
Tier II 4.42 4.50
Tier III 4.47 4.56
Total 48,704 11,704,100 40,901,400$
Government Fee 0.32 0.37 - - 443,500
Total Water Sales 48,704 11,704,100 41,344,900$
Residential 6,954,400 60%
Master Meter 1,326,700 10%
Public and Commercial 1,802,500 20%
Agricultural and Landscaping 1,620,500 10%
Total Water Sales 11,704,100 100%
Water Sales Summary by Service Class - Potable
FY 2016 Sales BudgetWater Rates
FY 2016 Unit Sales by Service Class
*Approved rates for water billed beginning in January 2016.
63
FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016
Budget
Residential 7,486,069 7,507,214 7,836,873 8,050,828 7,248,930 6,954,400
Master Meters 1,389,616 1,409,515 1,495,057 1,536,902 1,482,502 1,326,700
Public and Commercial 1,771,396 1,859,571 2,031,253 2,056,075 2,049,294 1,802,500
Agricultural and Landscaping 1,537,304 1,581,243 1,723,839 1,931,856 1,795,230 1,529,900
Temporary and Fire Services 179,472 153,351 102,020 144,458 168,469 90,600
Total Unit Sales 12,363,857 12,510,894 13,189,042 13,720,119 12,744,425 11,704,100
FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016
Budget
Residential 43,903 44,396 44,670 44,826 44,941 45,025
Master Meters 797 799 800 798 806 862
Public and Commercial 1,434 1,433 1,493 1,449 1,453 1,470
Agricultural and Landscaping 1,223 1,227 1,227 1,229 1,227 1,228
Temporary and Fire Services 797 810 772 846 881 869
Total Meter Count 48,154 48,665 48,962 49,148 49,308 49,454
Unit Sales History and Meter Count by Customer Class - Potable
Unit Sales in thousands and Meter Count Trends
Meter Count
Actual
Actual
Unit Sales History (in hcf)
5,000
15,000
25,000
35,000
45,000
55,000
-
5,000
10,000
15,000
20,000
FY 2011
Actual
FY 2012
Actual
FY 2013
Actual
FY 2014
Actual
FY 2015
Actual
FY 2016
Budget
Potable Meters Potable Unit Sales
64
System Fees - Potable
Meter FY 2016 Current Approved*FY 2015 FY 2016
Size
Meter
Count Rates Rates Budget Budget $%
All Service Types
0.75 43,794 19.39$ 18.91$ 9,340,100$ 10,046,600$ 706,500$ 7.56%
1.00 2,433 27.39 26.71 725,600 789,800 64,200 8.85%
1.50 940 47.40 46.22 491,400 527,800 36,400 7.41%
2.00 1,082 71.39 69.61 850,500 915,400 64,900 7.63%
3.00 75 135.41 132.02 107,300 118,800 11,500 10.72%
4.00 184 207.43 202.24 405,600 450,000 44,400 10.95%
6.00 16 407.50 397.31 71,800 77,300 5,500 7.66%
8.00 3 647.56 631.37 21,400 23,000 1,600 7.48%
10.00 5 927.63 904.44 51,100 55,000 3,900 7.63%
Sub-total 48,532 12,064,800 13,003,700 938,900 7.78%
Fire Services
0.63 691 25.32 24.69 190,700 207,300 16,600 8.70%
0.75 9 25.32 24.69 2,500 2,700 200 8.00%
1.00 26 25.32 24.69 7,500 7,800 300 4.00%
2.00 16 25.32 24.69 6,000 4,800 (1,200) -20.00%
3.00 - 25.32 24.69 - - -
4.00 - 34.12 33.27 - - -
10.00 - 34.12 33.27 - - -
Sub-total 742 206,700 222,600 15,900 7.69%
Turn Over Fees 10.00 10.00 66,000 66,000 -
Total 49,274 12,337,500$ 13,292,300$ 954,800$ 7.74%
*Approved rates for water billed beginning in January 2016.
Historical System Fees, in millions ($)
Budget to Budget
Variance
$-
$2
$4
$6
$8
$10
$12
$14
FY 2011
Actual
FY 2012
Actual
FY 2013
Actual
FY 2014
Actual
FY 2015
Actual
FY 2016
Budget
$9.49 $9.58 $10.32 $12.38 $12.38 $13.29
65
Meter
FY 2016
Meter Count Current Approved* FY 2015 FY 2016
Size Budget Rates Rates Budget Budget $%
0.75 43,796 13.67$ 16.84$ 7,379,700$ 8,004,300$ 624,600$ 8.46%
1.00 2,572 25.35 31.24 749,900 873,300 123,400 16.46%
1.50 935 57.35 70.66 662,200 717,800 55,600 8.40%
2.00 1,083 97.53 120.17 1,300,000 1,414,600 114,600 8.82%
3.00 76 207.44 255.60 184,300 208,800 24,500 13.29%
4.00 98 332.20 409.32 387,600 432,200 44,600 11.51%
6.00 16 680.02 837.89 134,300 145,700 11,400 8.49%
8.00 3 1,098.15 1,353.09 40,700 44,100 3,400 8.35%
10.00 5 1,580.67 1,947.62 97,500 105,800 8,300 8.51%
Total 48,584 10,936,200$ 11,946,600$ 1,010,400$ 9.24%
*Approved rates for water billed beginning in January 2016.
Note: Construction Meters, Fire Services, and Recycled Meters are exempt from MWD and CWA Fixed Fees.
Historical MWD and CWA Fixed Fees, in millions ($)
Budget to Budget
Variance
MWD and CWA Fixed Fees (Pass-Through) - Potable
$-
$2
$4
$6
$8
$10
FY 2011
Actual
FY 2012
Actual
FY 2013
Actual
FY 2014
Actual
FY 2015
Actual
FY 2016
Budget
$7.42 $9.00 $9.75 $10.31 $10.94 $11.95
66
Meter Meter Installation Meter Total Budgeted
Size Sales Fee Fee Fees Amount
0.75 162 102.56$ 216.13$ 318.69$ 51,600$
1.00 - 102.56 278.89 381.45 -
1.50 1 102.56 453.31 555.87 600
2.00 - 102.56 649.55 752.11 -
3.00 2 617.51 2,024.25 2,641.76 5,300
4.00 2 617.51 3,515.80 4,133.31 8,300
6.00 - 975.40 6,072.73 7,048.13 -
8.00 - 1,495.69 7,587.43 9,083.12 -
10.00 - 1,495.69 10,912.14 12,407.83 -
Total 167 65,800$
Meter Fees - Potable
Meter Fees:Charges collected for new water service connections. Fees vary depending upon
meter size and type of service. The costs associated with meter installations are included in the
Operating Expenses section of the budget. These charges are funded by developers.
Historical Meter Count
-
15,000
30,000
45,000
60,000
FY 2011
Actual
FY 2012
Actual
FY 2013
Actual
FY 2014
Actual
FY 2015
Actual
FY 2016
Budget
48
,
1
5
4
49
,
3
6
1
48
,
8
6
0
49
,
1
5
0
49
,
4
5
3
49
,
6
2
0
67
FY 2011 FY 2012 FY 2013 FY 2014 FY 2015*FY 2016
Budget
Water Sales 32,236,451$ 35,615,558$ 40,845,630$ 46,856,253$ 44,025,774$ 41,344,900$
System Fees 9,490,904 9,583,563 10,315,199 11,152,291 12,380,370 13,292,300
Energy Fees 1,693,186 1,881,776 1,964,062 2,114,844 2,134,865 2,311,300
MWD and CWA Fixed Fees 7,421,386 9,000,267 9,747,977 10,309,983 10,846,411 11,946,600
Penalties 665,931 703,081 796,426 839,025 894,569 888,600
Total Potable Revenues 51,507,858$ 56,784,245$ 63,669,294$ 71,272,396$ 70,281,989$ 69,783,700$
Revenue History - Potable
Revenue History - Potable, in millions ($)
Actual
$-
$20
$40
$60
$80
FY 2011
Actual
FY 2012
Actual
FY 2013
Actual
FY 2014
Actual
FY 2015
Actual*
FY 2016
Budget
Water Sales System Fees Energy Fees MWD & CWA Fixed Fees Penalties
*Actual unaudited
68
FY 2015
Actual*
FY 2016
Budget
FY 2015
Actual*
FY 2016
Budget
$ %
Potable Water Purchases (CWA):
Rate Effective January 1,143.00$ 1,165.00$ 22$ 1.9%
Budgeted Sales 29,529.4 26,868.7 32,967,241$ 30,968,000$ (1,999,241)$ -6.1%
District & Unbilled Usage 126.3 61.2 141,004 70,800 (70,204) -49.8%
Water Loss 643.2 1,122.1 745,071 1,293,300 548,229 73.6%
Budgeted Sales Treatment (CSD)- - 98,700 - (98,700) -100.0%
Less: Potable Supplement (42.1) (46,436) - 46,436 -100.0%
Total Variable Charges 30,256.8 28,052.0 33,905,580$ 32,332,100$ (1,573,480) -4.6%
CWA and MWD Fixed Charges:
CWA - Infrastructure Access Charge 1,900,266$ 1,931,400$ 31,134$ 1.6%
CWA - Customer Service Charge 1,796,853 1,777,800 (19,053) -1.1%
CWA - Emergency Storage Charge 4,720,701 4,681,800 (38,901) -0.8%
CWA - Reliability Fixed Charge - 950,400 950,400 100.0%
MWD - Capacity Reservation Charge 701,976 806,400 104,424 14.9%
MWD - Readiness-to-Serve Charge 1,817,339 1,798,800 (18,539) -1.0%
Total Fixed Charges 10,937,135$ 11,946,600$ 1,009,465$ 9.2%
Total Variable and Fixed Charges 44,842,715$ 44,278,700$ (564,015)$ -1.3%
Average Cost Per Acre-Foot 1,482$ 1,578$
Budget to Budget
Variance
Acre Feet
Water Purchases and Related Costs - Potable
Purchase Costs
-
10,000.0
20,000.0
30,000.0
40,000.0
FY 2011
Actual
FY 2012
Actual
FY 2013
Actual
FY 2014
Actual
FY 2015
Actual
FY 2016
Budget
29
,
5
7
4
.
3
30
,
5
4
2
.
8
31
,
8
8
0
.
1
33
,
4
0
6
.
9
30
,
2
5
6
.
8
28
,
0
5
2
.
0
Historical Potable Water Purchases, in acre-feet
*Actual unaudited
69
Power Costs - Potable
FY 2013 FY 2014 FY 2015 FY 2016
Actual Actual Actual*Budget $ %
Administrative Buildings 164,785 179,919$ 216,744$ 225,700$ 8,956$ 4.1%
Potable Transmission 1,610,428 1,878,026 2,063,318 2,146,700 83,382 4.0%
Total Potable Power Costs 1,775,213$ 2,057,945$ 2,280,062$ 2,372,400$ 92,338$ 4.0%
Budget to Budget
Variance
Historical Power Costs, in thousands ($)
$0
$500
$1,000
$1,500
$2,000
$2,500
FY 2011
Actual
FY 2012
Actual
FY 2013
Actual
FY 2014
Actual
FY 2015
Actual
FY 2016
Budget
1,
4
6
8
1,
4
6
3
1,
6
1
0
1,
8
7
8
2,
0
6
3
2,1
4
7
15
9
16
5
16
5
18
0
21
7
22
6
Potable Transmission Administrative and Operations Buildings
*Actual unaudited
70
FY 2014 FY 2015 FY 2015 FY 2016
Actual Budget Actual* Budget $%
Administrative Expenditures
Directors' Fees 19,834$ 30,000$ 20,382$ 30,000$ -$ -
Travel and Meetings 147,068 207,700 158,205 214,400 6,700 3.2%
Conservation and Outreach 136,743 174,900 144,026 176,900 2,000 1.1%
General Office Expense 258,732 280,800 257,756 284,700 3,900 1.4%
Equipment 942,826 1,133,300 1,230,413 1,106,500 (26,800) (2.4%)
Fees 489,867 498,700 481,243 1,056,900 558,200 111.9%
Services 1,286,792 2,042,300 1,526,937 2,224,600 182,300 8.9%
Training 65,818 123,500 77,232 99,000 (24,500) (19.8%)
Utilities 12,929 14,000 14,184 14,900 900 6.4%
General Expenses 844,099 1,041,000 821,303 250,000 (791,000) (76.0%)
Bad Debt Expense 149,364 148,000 91,269 148,000 - 0.0%
Subtotal before Overhead 4,354,072$ 5,694,200$ 4,822,950$ 5,605,900$ (88,300)$ (1.6%)
Less: Overhead Allocation (737,254) (767,100) (782,314) (740,700) 26,400 (3.4%)
Total Expenditures 3,616,818$ 4,927,100$ 4,040,636$ 4,865,200$ (61,900)$ (1.3%)
4,403,925$ 5,400,900$ 5,644,253$ 5,855,900$
Directors' Fees 30,000$ 0.5%
Travel and Meetings 214,400 3.8%
Conservation and Outreach 176,900 3.2%
General Office Expense 284,700 5.1%
Equipment 1,106,500 19.7%
Fees 1,056,900 18.9%
Services 2,224,600 39.7%
Training 99,000 1.8%
Utilities 14,900 0.3%
General Expenses 250,000 4.5%
Bad Debt Expense 148,000 2.6%
Subtotal 5,605,900$ 100.0%
Less: Overhead Allocation (740,700)
Total Administrative Expenses 4,865,200$
Administrative Expenditures - Potable
Budget to Budget
Variance
FY 2016 Administrative Expenditures - Potable
* Actual unaudited
71
Materials and Maintenance Expenditures - Potable
FY 2014 FY 2015 FY 2015 FY 2016
Actual Budget Actual* Budget $ %
Materials and Maintenance
Fuel and Oil 187,861 289,300$ 184,027$ 235,600 (53,700)$ (18.6%)
Meters and Materials 63,345 113,100 110,956 113,100 - 0.0%
Fleet Parts and Equipment 111,271 128,400 118,367 127,400 (1,000) (0.8%)
Infrastructure Equipment & Supplies 358,877 367,900 358,197 433,500 65,600 17.8%
Chemicals 208,743 223,500 190,169 225,500 2,000 0.9%
Safety Equipment 31,888 41,300 39,343 126,300 85,000 205.8%
Laboratory Equipment and Supplies 35,057 35,000 34,655 31,000 (4,000) (11.4%)
Other Materials and Supplies 126,227 126,300 173,865 185,200 58,900 46.6%
Building and Grounds Materials 55,608 46,500 55,375 47,900 1,400 3.0%
Contracted Services 475,764 550,500 478,442 642,800 92,300 16.8%
Total Expenditures 1,654,641$ 1,921,800$ 1,743,396$ 2,168,300$ 246,500$ 12.8%
Fuel and Oil 235,600$ 10.9%
Meters and Materials 113,100 5.2%
Fleet Parts and Equipment 127,400 5.9%
Infrastructure Equipment and Supplies 433,500 20.0%
Chemicals 225,500 10.4%
Safety Equipment 126,300 5.8%
Laboratory Equipment and Supplies 31,000 1.4%
Other Materials and Supplies 185,200 8.5%
Building and Grounds Materials 47,900 2.2%
Contracted Services 642,800 29.7%
2,168,300$ 100.0%
Budget to Budget
Variance
FY 2016 Materials and Maintenance Expenditures - Potable
* Actual unaudited
72
Potable Water Service Area
73
Recycled Revenues and Expenditures
In 1980, the District began operation of the Ralph W. Chapman Water Recycling Facility (RWCWRF).
The RWCWRF plant is capable of recycling wastewater at the rate of 1.3 million gallons per day
(MGD) to augment water supplies for irrigation purposes only. The treatment process consists of
primary, secondary, and tertiary treatment. The facility’s conversion time to treat raw sewage to full
Title 22 recycled water is approximately 20 hours.
The steps of the water recycling process are as follows:
Primary Treatment
The raw sewage flows in at the rotary screen, also known as the “headworks” which removes a large
amount of coarse organic and inorganic material that is either floating or in suspension. This is
followed by a grit chamber, which removes the heavy settled material.
Secondary Treatment
This is where the biological treatment begins. The first step takes place in the aeration tanks, also
known as reactors or sedimentation basins, which contain bacteria that feed on the organic material
in sewage. These bacteria are aerobic, and therefore require a great quantity of pumped-in air to
help them thrive. The second step in the process is clarification where the sludge from the aeration
tanks is allowed to settle to the bottom and the clear liquid, or secondary effluent, flows out over
weirs at the surface. Some of the settled sludge is disposed of and some is returned to the aeration
74
Recycled Revenues and Expenditures
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, completing the process of
recycling wastewater into recycled water.
The District entered an agreement with the City of San Diego in October 2003, to purchase up to six
million gallons a day of recycled water from their South Bay Water Reclamation Plant (SBWRP). 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
into 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 11.6 percent of its total water demand will be met using
recycled water.
Both the RWCWRF plant, owned and operated by the District, and the SBWRP plant, owned and
operated by the City of San Diego, supply the District’s recycled distribution system, as shown in the
diagram below.
75
Recycled Revenues and Expenditures
The District operates the largest recycled water distribution system in San Diego County and will
supply approximately 2,906.4 acre-feet of recycled water to 706 landscaping and construction
customers by the end of Fiscal Year 2016. The recycled water customer base consists primarily of
irrigation at golf courses, schools, parks, and open space. The geographic area of this water use
includes Eastlake, Otay Ranch, Rancho Del Rey, and other areas of eastern Chula Vista.
Producing and distributing recycled water is costly. To help offset the costs of supplying alternative
water sources, both CWA and MWD offer incentive programs. In Fiscal Year 1991, the District signed
agreements with CWA and MWD to take advantage of the programs they offered. A second
agreement was signed in 2000. In 2005, the District agreed to terminate both agreements and
entered into a new agreement which allows 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.
927-1 Recycled Water Reservoir
76
FY 2014 FY 2015 FY 2015 FY 2016
31-Actual Budget Actual * Budget $ %
Revenues
#Recycled Water Sales 10,014,767$ 8,826,600$ 8,853,010$ 9,116,000$ 289,400$ 3.3%
#Meter Fees 962 400 4,081 400 - 0.0%
#Interest 16,001 7,400 14,608 6,300 (1,100) (14.9%)
General Fund Draw Down 61,600 - - - - 0.0%
Total Revenues 10,093,330$ 8,834,400$ 8,871,699$ 9,122,700$ 288,300$ 3.3%
Expenditures
Recycled Water Purchases 1,661,887 1,601,500 1,360,807 1,705,800 104,300 6.5%
#Power 591,883 469,400 600,799 563,600 94,200 20.1%
#Labor and Benefits 1,205,253 1,181,800 1,258,945 1,181,600 (200) (0.0%)
#Administrative Expenses 298,562 285,600 290,362 321,800 36,200 12.7%
#Materials & Maintenance 282,827 295,900 270,990 287,800 (8,100) (2.7%)
11 Subtotal - Operations Costs 4,040,412$ 3,834,200$ 3,781,903$ 4,060,600$ 226,400$ 5.9%
#Expansion Reserve 10,000 2,538,900 2,538,900 2,695,800 156,900 6.2%
B Betterment Reserve 125,000 725,000 725,000 1,945,000 1,220,000 168.3%
ReReplacement Reserve 4,230,000 1,679,000 1,679,000 328,000 (1,351,000) (80.5%)
TOTransfer to OPEB 66,900 57,300 57,300 58,300 1,000 1.7%
N Transfer to New Supply Fund - - - 35,000 35,000 100.0%
Subtotal - Reserve Funding 4,431,900$ 5,000,200$ 5,000,200$ 5,062,100$ 61,900$ 1.2%
Total Expenditures 8,472,312$ 8,834,400$ 8,782,103$ 9,122,700$ 288,300$ 3.3%
1,681,554$ -$ 89,596$ -$ -$ Excess Revenues/Expenditures
Operating Budget Summary - Recycled
Budget to Budget
Variance
* Actual unaudited77
FY 2015*FY 2015 FY 2016
Actual Budget Budget $%
Water Sales 6,412,122$ 6,506,000$ 6,694,500$ 188,500$ 2.9%
System Fees 431,121 438,600 464,300 25,700 5.9%
Energy Fees 369,302 322,300 399,200 76,900 23.9%
MWD and CWA Rebates 1,611,764 1,522,800 1,522,900 100 0.0%
Penalties 28,701 36,900 35,100 (1,800) -4.9%
Total Recycled Water Sales 8,853,010$ 8,826,600$ 9,116,000$ 289,400$ 3.3%
Water Sales 6,694,500$ 73%
System Charges 464,300 5%
Energy Charges 399,200 4%
MWD and CWA Rebates 1,522,900 17%
Penalties 35,100 1%
9,116,000$ 100%
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 $ .072 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 $185 from MWD for every acre-foot (AF) of recycled water sold.
Penalties: Charges and penalties are imposed on customer accounts for late payments and returned checks.
Classification of Water Sales - Recycled
Budget to Budget
Variance
FY 2016 Classification of Water Sales
*Actual unaudited
78
Fiscal Year 2016 Sales Budget
Current Approved*Accounts Units Amount
101 49,300 186,900$
0 - 32 units 3.73$ 3.80$
33 - 75 units 3.79 3.86
over 76 units 3.84 3.91
591 1,253,400 4,820,000
0 - 130 units 3.73 3.80
131 - 325 units 3.79 3.86
over 326 units 3.84 3.91
Recycled 3.0" and 4.0" Meter 11 87,100 329,800
0 - 440 units 3.73 3.80
441 - 1,050 units 3.79 3.86
over 1,051 units 3.84 3.91
1 214,700 819,800
0 - 4,000 units 3.73 3.80
4,001 - 10,000 units 3.79 3.86
over 10,000 units 3.84 3.91
1 67,000 185,500
0 - 440 units 2.72 2.77
441 - 1,050 units 2.77 2.82
over 1,051 units 2.81 2.86
1 51,600 142,700
0 - 4,000 units 2.72 2.77
4,001 - 10,000 units 2.77 2.82
over 10,000 units 2.81 2.86
706 1,723,100 6,484,700$
Government Fee 0.32 0.34 - - 209,800
Total Water Sales 706 1,723,100 6,694,500$
*Approved rates for water billed beginning in January 2016.
Water Sales Summary by Meter Size - Recycled
Recycled .75" and 1.0" Meter
Recycled 1.5" and 2.0" Meter
Recycled more than 6.0" Meter
Recycled Commercial <10" Meter
Recycled Commercial >10" Meter
Water Rates
Total
79
Unit Sales History and Meter Count by Customer Class - Recycled
FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016
Budget
Recycled .75" & 1.0" Meter 46,328 47,699 59,698 68,523 63,142 49,300
Recycled 1.5" & 2.0" Meter 1,220,953 1,201,012 1,366,238 1,474,879 1,365,116 1,253,400
Recycled 3.0" & 4.0" Meter 74,444 93,899 100,991 134,386 103,125 87,100
Recycled > 6.0" Meter 333,866 310,223 352,023 390,542 192,003 214,700
Recycled Commercial<10" Meter - - - - 67,010 67,000
Recycled Commercial>10" Meter - - - - 51,560 51,600
Total Unit Sales 1,675,591 1,652,833 1,878,950 2,068,330 1,841,956 1,723,100
FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016
Budget
Recycled .75" & 1.0" Meter 95 101 103 100 101 101
Recycled 1.5" & 2.0" Meter 576 581 587 588 590 591
Recycled 3.0" & 4.0" Meter 11 11 11 11 11 11
Recycled > 6.0" Meter 4 3 3 3 1 1
Recycled Commercial<10" Meter - - - - 1 1
Recycled Commercial>10" Meter - - - - 1 1
Total Meter Count 686 696 704 702 705 706
Unit Sales in thousands ($) and Meter Count Trends
Actual
Actual
Unit Sales History (in hcf)
Meter Count
675
700
725
100
500
900
1,300
1,700
2,100
2,500
FY 2011
Actual
FY 2012
Actual
FY 2013
Actual
FY 2014
Actual
FY 2015
Actual
FY 2016
Budget
Meter Count Recycled Unit Sales
80
System Fees - Recycled
Meter
Meter
Count Current Approved* FY 2015 FY 2016
Size Budget Rates Rates Actual Budget $%
0.75 2 19.39$ 18.91$ 400$ 500$ 100$ 25.0%
1.00 99 27.39 26.71 30,200 32,100 1,900 6.3%
1.50 396 47.40 46.22 206,700 222,400 15,700 7.6%
2.00 195 71.39 69.61 153,300 165,000 11,700 7.6%
3.00 4 135.41 132.02 6,000 6,400 400 6.7%
4.00 7 207.43 202.24 18,300 17,200 (1,100) -6.0%
6.00 2 407.50 397.31 13,500 9,700 (3,800) -28.1%
8.00 - 647.56 631.37 - - - 0.0%
10.00 1 927.63 904.44 10,200 11,000 800 7.8%
Total 706 438,600$ 464,300$ 25,700$ 5.9%
*Approved rates for water billed beginning in January 2016.
Budget to Budget
Variance
Historical System Fees, in thousands ($)
-
100
200
300
400
500
FY 2011
Actual
FY 2012
Actual
FY 2013
Actual
FY 2014
Actual
FY 2015
Actual
FY 2016
Budget
81
Meter Meter Installation Meter Total Total
Size Sales Fee Fee Fees Amount
0.75 - 102.56$ 216.13$ 318.69$ -$
1.00 1 102.56 278.89 381.45 400
1.50 - 102.56 453.31 555.87 -
2.00 - 102.56 649.55 752.11 -
3.00 - 617.51 2,024.25 2,641.76 -
4.00 - 617.51 3,515.80 4,133.31 -
6.00 - 975.40 6,072.73 7,048.13 -
8.00 - 1,495.69 7,587.43 9,083.12 -
10.00 - 1,495.69 10,912.14 12,407.83 -
Total 1 400$
Meter Fees - Recycled
Historical Meter Count
Meter Fees:Charges collected for new water service connections. Fees vary depending upon
meter size and type of service. The costs associated with meter installations are included in the
Operating Expenses section of the budget. These charges are funded by developers.
-
200
400
600
800
FY 2011
Actual
FY 2012
Actual
FY 2013
Actual
FY 2014
Actual
FY 2015
Actual
FY 2016
Budget
705 696 702 713 706 706
82
Budgeted
FY 2011 FY 2012 FY 2013 FY 2014 FY 2015*FY 2016
Water Sales 4,645,719$ 4,999,441$ 6,148,619$ 7,416,631$ 6,412,122$ 6,694,500$
System Fees 266,547 268,937 292,201 356,806 431,121 464,300
Energy Fees 274,608 303,867 346,064 383,513 369,302 399,200
MWD and CWA Rebates 1,482,019 1,413,335 1,660,736 1,828,134 1,611,764 1,522,900
Penalties 93,146 33,323 40,867 29,682 28,701 35,100
Total Recycled Revenue 6,762,039$ 7,018,903$ 8,488,487$ 10,014,766$ 8,853,010$ 9,116,000$
Revenue History - Recycled
Revenue History - Recycled, in millions ($)
Actual
$-
$2
$4
$6
$8
$10
FY 2011
Actual
FY 2012
Actual
FY 2013
Actual
FY 2014
Actual
FY 2015
Actual
FY 2016
Budget
Water Sales System Fees Energy Fees MWD and CWA Rebates Penalties
*Actual unaudited
83
FY 2015
Actual*
FY 2016
Budget
FY 2015
Actual*
FY 2016
Budget
$ %
Rate 350.00$ 350.00$ -$ 0.0%
Recycled Water Purchases 3,309.1 2,906.4 1,158,206$ 1,017,200$ (141,006) -12.2%
Meter Fee $1,646.50 monthly - - 19,758 19,800 42 0.2%
Take-or-pay contract (1)806.6 1,910.8 282,300 668,800 386,500 136.9%
Sub-Total 1,460,264$ 1,705,800$ 245,536 16.8%
Less: City of San Diego Credit (2)(99,457) - 99,457 -100.0%
Add: Potable Supplement 42.1 46,436 - (46,436) -100.0%
Total 4,157.8 4,817.2 1,407,243$ 1,705,800$ 298,557$ 21.2%
Average Cost Per Acre-Foot (Effective Rate)441.28$ 586.92$
(1) This is the anticipated take-or-pay amount to be paid to the City of San Diego. The contract requires
the purchase of a minimum volume of water. The District does not anticipate meeting the
minimum therefore, a payment would be due to the City of San Diego.
(2) This is a one time credit of $88,911 given by the City of San Diego for overcharged meter fees
and a credit of $10,546 due to a Plant Shutdown in January.
Water Purchases - Recycled
HISTORICAL RECYCLED WATER PURCHASES, IN ACRE-FEET
Purchase CostsAcre Feet
Budget to Budget
Variance
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
FY 2011
Actual
FY 2012
Actual
FY 2013
Actual
FY 2014
Actual
FY 2015
Actual
FY 2016
Budget
2,
9
6
9
.
0
3,
1
7
1
.
2
3,
2
4
9
.
8
3,
8
2
1
.
5
3,
3
0
9
.
1
2,
9
0
6
.
4
*Actual Unaudited
84
Power Costs - Recycled
FY 2013 FY 2014 FY 2015 FY 2016
Actual Actual Actual* Budget $ %
471,139$ 591,883$ 600,799$ 563,600$ (37,199)$ -6.2%
Budget to Budget
Variance
Historical Power Costs, in thousands ($)
Treatment and Recycled
Transmission
$0
$100
$200
$300
$400
$500
$600
$700
FY 2011
Actual
FY 2012
Actual
FY 2013
Actual
FY 2014
Actual
FY 2015
Actual
FY 2016
Budget
46
2
.
0
3
44
0
.
0
7
47
1
.
1
4
59
1
.
8
8
60
0
.
8
0
56
3
.
6
0
*Actual unaudited
85
FY 2014 FY 2015 FY 2015 FY 2016
Actual Budget Actual* Budget $ %
Administrative Expenditures
Travel and Meetings 42$ -$ -$ -$ -$ -
Equipment 327 1,300 - 1,300 - -
Fees 27,046 24,000 25,587 25,600 1,600 6.7%
Services 70,021 65,100 57,491 105,200 40,100 61.6%
Subtotal before Overhead 97,436$ 90,400$ 83,078$ 132,100$ 41,700$ 46.1%
Add: Overhead Allocation 201,126 195,200 207,284 189,700 (5,500) (2.8%)
Total Expenditures 298,562$ 285,600$ 290,362$ 321,800$ 36,200$ 12.7%
Equipment 1,300$ 0.4%
Fees 25,600 8.0%
Services 105,200 32.7%
Overhead Allocation 189,700 58.9%
321,800$ 100.0%
FY 2016 Administrative Expenditures - Recycled
Administrative Expenditures - Recycled
Budget to Budget
Variance
* Actual unaudited
86
FY 2014 FY 2015 FY 2015 FY 2016
Actual Budget Actual* Budget $ %
Materials and Maintenance
Fuel and Oil 11,336$ 15,000$ 12,370$ 15,000$ -$ 0.0%
Meters and Materials 2,793 700 865 700 - 0.0%
Infrastructure Equipment & Supplies 85,660 87,500 81,933 72,000 (15,500) (17.7%)
Chemicals 160,146 169,100 154,979 170,600 1,500 0.9%
Safety Equipment - 1,000 1,386 1,000 - -
Laboratory Equipment and Supplies 3,945 4,000 3,971 4,000 - -
Other Materials and Supplies 7,056 5,300 3,439 5,200 (100) (1.9%)
Contracted Services 11,891 13,300 12,047 19,300 6,000 45.1%
Total Expenditures 282,827$ 295,900$ 270,990$ 287,800$ (8,100)$ (2.7%)
Fuel and Oil 15,000$ 5.2%
Meters and Materials 700 0.2%
Infrastructure Equipment & Supplies 72,000 25.0%
Chemicals 170,600 59.4%
Safety Equipment 1,000 0.3%
Laboratory Equipment and Supplies 4,000 1.4%
Other Materials and Supplies 5,200 1.8%
Contracted Services 19,300 6.7%
287,800$ 100.0%
Materials and Maintenance Expenditures - Recycled
Budget to Budget
Variance
FY 2016 Materials and Maintenance Expenditures - Recycled
* Actual unaudited
87
Recycled Water Service Area
88
Sewer Revenues and Expenditures
The District provides sewer service to approximately 15,200 customers through 4,670 accounts
located in the northern section of the District. The District operates and maintains the sewage
collection system serving Rancho San Diego, Singing Hills, and portions of Mount Helix, all within
the Upper Sweetwater River Basin. This basin is also known as the Jamacha Basin. Residential
customers comprise 98.4% of the customer base. Modest growth of 0.33% is anticipated in Fiscal
Year 2016.
Wastewater collection within the Jamacha Basin is provided by two agencies: the Otay Water District
and the County of San Diego, (formerly the Spring Valley Sanitation District). Customers in the basin,
not served by either agency, dispose of their sewage through septic tanks. After the sewage has
been collected, it is sent to the District’s Ralph W. Chapman Water Recycling Facility (RWCWRF)
treatment plant where the District produces recycled water, see page 74 outlining the sewer process.
The by-product of the treatment process is called sludge and it is discharged through the City of San
Diego Metropolitan Wastewater (Metro) and the County of San Diego systems.
The District is a member of Metro Wastewater Joint Powers Authority and shares in the use of the
City of San Diego's regional wastewater facilities. A significant amount of the sewer operation costs
is for sewer service charges from the Metro Wastewater JPA which is budgeted at $815,000 for Fiscal
Year 2016. Additionally, the District will pay $181,400 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 2016.
To meet State of California requirements, customers must pay their fair share of sewer costs. The
District is required to determine sewer rates in accordance with the State’s Revenue Program
Guidelines. During Fiscal Year 2013, the District performed a Cost of Service Study and Rate Study
(i.e. reviewed rates, fees, charges, costs, and the usage structure) and determined that increases in
rates, fees, and charges are necessary in order to recover sufficient revenues to operate and maintain
the public sewer system.
Sewer bills are based on the rate of discharge and the strength for non-residential customers. Due
to their higher discharge and strength, non-residential customers (comprising 1.6% of the customer
base) comprise 12% of the total sewer charges. The formula for sewer rates is shown on pages 97
and 98.
89
FY 2014 FY 2015 FY 2015 FY 2016
21-Actual Budget Actual * Budget $ %
Revenues
#Sewer Revenues 2,757,867$ 3,007,700$ 3,009,634$ 3,206,300$ 198,600$ 6.6%
#Capacity Fee Revenues - - 7,510 - - (100.0%)
Tax Revenues 44,321 51,600 44,553 51,600 - 0.0%
#Non-operating Revenues 32,904 33,800 33,760 37,200 3,400 10.1%
#Interest 8,173 4,600 8,727 8,200 3,600 78.3%
TF Transfer from Potable General Fund - 553,800 553,800 - (553,800) (100.0%)
General Fund Draw Down 152,800 - - - - (100.0%)
Total Revenue 2,996,065$ 3,651,500$ 3,657,984$ 3,303,300$ (348,200)$ (9.5%)
Expenditures
#Power 159,018$ 180,600$ 167,475$ 176,800$ (3,800)$ (2.1%)
#Labor and Benefits 831,446 902,300 764,133 681,300 (221,000) (24.5%)
#Administrative Expenses 170,165 206,500 172,992 200,800 (5,700) (2.8%)
#Materials & Maintenance 1,220,408 1,402,100 1,325,391 1,156,700 (245,400) (17.5%)
11 Subtotal - Operations Costs 2,381,037$ 2,691,500$ 2,429,991$ 2,215,600$ (475,900)$ (17.7%)DS
B Betterment Reserve - - - 455,000 455,000 100.0%
ReReplacement Reserve - 916,200 916,200 599,100 (317,100) (34.6%)
TOTransfer to OPEB 61,400 43,800 43,800 33,600 (10,200) (23.3%)
Subtotal - Reserve Funding 61,400$ 960,000$ 960,000$ 1,087,700$ 127,700$ 13.3%
Total Expenditures 2,442,437$ 3,651,500$ 3,389,991$ 3,303,300$ (348,200)$ (9.5%)
553,628$ -$ 267,993$ -$ -$
Excess Revenue/(Expenditures)
Operating Budget Summary - Sewer
Budget to Budget
Variance
* Actual unaudited90
FY 2016 FY 2015 FY 2016
Accounts Current Approved(1)Budget Budget $%
Single-Family 4,545 2.46$ 2.46$ 1,572,800$ 1,672,800$ 100,000$ 6%
Multi-Family 50 2.46 2.46 187,700 190,100 2,400 1%
Commercial
Low Strength 45 2.46 2.46 53,300 54,900 1,600 3%
Medium Strength 13 3.53 3.53 33,600 34,000 400 1%
High Strength 7 5.63 5.63 17,500 39,200 21,700 55%
Schools 6 2.46 2.46 109,900 96,700 (13,200) -14%
Churches 4 2.46 2.46 8,500 9,900 1,400 14%
Total Sewer Charges 4,670 1,983,300$ 2,097,600$ 114,300$
(1)Approved rates for sewer service beginning in January 2016.
Single-Family 1,672,800$ 80.0%
Multi-Family 190,100 9.0%
Commercial 234,700 11.0%
2,097,600$ 100.0%
FY 2016 Sewer Charges by Service Class
Sewer Charges Summary by Service Class
Usage Fee
Budget to Budget
Variance
91
FY 2016 Current Approved*FY 2015 FY 2016
Accounts Rates Rates Budget Budget $%
Single-Family 4,545 15.89$ 17.19$ 824,900$ 901,800$ 76,900$ 8.5%
Non-Residential
0.75 22 27.07 27.07 6,700 6,800 100 1.5%
1.00 6 39.89 39.89 2,800 2,800 - 0.0%
1.50 20 71.82 71.82 16,800 17,200 400 2.3%
2.00 63 110.17 110.17 81,400 83,400 2,000 2.4%
3.00 6 199.66 199.66 14,000 14,400 400 2.8%
4.00 6 327.51 327.51 23,000 23,600 600 2.5%
6.00 1 647.12 647.12 7,600 7,800 200 2.6%
8.00 - 1,030.67 1,030.67 - - -
10.00 1 1,478.12 1,478.12 17,300 17,800 500 2.8%
Total Sewer System Fee 4,670 994,500$ 1,075,600$ 81,100$
*Approved rates for sewer service beginning in January 2016. Approved residential rate includes $1.30
re-capture rate.
Sewer System Fee Summary by Meter Size
Budget to Budget
Variance
92
FY 2011 FY 2012 FY 2013 FY 2014 FY 2015* FY 2016
Budget
Sewer Charges 2,363,313$ 2,368,192$ 2,588,991$ 2,736,867$ 2,986,734$ 3,173,000$
Penalties 23,287 27,173 29,300 21,000 33,760 33,300
Total 2,386,600$ 2,395,365$ 2,618,291$ 2,757,867$ 3,020,494$ 3,206,300$
Revenue History - Sewer
Revenue History - Sewer, in thousands ($)
Actual
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
FY 2011
Actual
FY 2012
Actual
FY 2013
Actual
FY 2014
Actual
FY 2015
Actual
FY 2016
Budget
Sewer Charges Penalties
93
Power Costs - Sewer
FY 2013 FY 2014 FY 2015 FY 2016
Actual Actual Actual* Budget $ %
Sewer Lift Station 184,108$ 159,018$ 167,475$ 176,800$ 9,325$ 5.6%
Historical Power Costs, in thousands ($)
Budget to Budget
Variance
$0
$40
$80
$120
$160
$200
FY 2011
Actual
FY 2012
Actual
FY 2013
Actual
FY 2014
Actual
FY 2015
Actual
FY 2016
Budget
81 70
184 159 167 177
*Actual unaudited
94
FY 2014 FY 2015 FY 2015 FY 2016
Actual Budget Actual* Budget $ %
Administrative Expenditures
Equipment -$ 5,000$ 3,575$ 4,500$ (500)$ (10.0%)
Fees 292 2,000 6,715 2,500 500 25.0%
Services 30,664 44,900 35,508 80,000 35,100 78.2%
Bad Debt Expense 5,380 7,000 2,222 7,000 - 0.0%
Total 36,336$ 58,900$ 48,020$ 94,000$ 35,100$ 59.6%
Add: Overhead Allocation 133,829 147,600 124,972 106,800 (40,800) (27.6%)
Total Expenditures 170,165$ 206,500$ 172,992$ 200,800$ (5,700)$ (2.8%)
Equipment 4,500$ 2.2%
Fees 2,500 1.2%
Services 80,000 39.9%
Bad Debt Expense 7,000 3.5%
Overhead Allocation 106,800 53.2%
200,800$ 100.0%
Administrative Expenditures - Sewer
Budget to Budget
Variance
FY 2016 Administrative Expenditures - Sewer
* Actual unaudited
95
FY 2014 FY 2015 FY 2015 FY 2016
Actual Budget Actual* Budget $ %
Materials and Maintenance
Fleet Parts and Equipment 1,006$ 1,500$ 4,689$ 1,500$ -$ -
Infrastructure Equipment & Supplies 51,627 69,600 72,609 115,800 46,200 66.4%
Chemicals 3,705 4,500 4,507 4,500 - -
Safety Equipment 77 1,900 44 - (1,900) (100.0%)
Laboratory Equipment and Supplies 4,936 5,000 5,221 5,000 - -
Other Materials and Supplies 198 200 2,884 100 (100) (50.0%)
Contracted Services 36,335 24,500 26,924 33,400 8,900 36.3%
Subtotal Materials and Maintenance 97,884$ 107,200$ 116,878$ 160,300$ 53,100$ 49.5%
Sewer Charges
Metro O&M Costs 1,021,724 1,020,300$ 1,020,276 815,000 (205,300)$ (20.1%)
Spring Valley Sewer Charge 100,800 274,600 188,237 181,400 (93,200) (33.9%)
Subtotal Sewer Charges 1,122,524 1,294,900 1,208,513 996,400 (298,500) (23.1%)
Total Expenditures 1,220,408$ 1,402,100$ 1,325,391$ 1,156,700$ (245,400)$ (17.5%)
Fleet Parts and Equipment 1,500$ 0.1%
Infrastructure Equipment & Supplies 115,800 10.0%
Chemicals 4,500 0.4%
Laboratory Equipment & Supplies 5,000 0.4%
Other Materials and Supplies 100 0.0%
Contracted Services 33,400 2.9%
Metro O&M Costs 815,000 70.5%
Spring Valley Sewer Charge 181,400 15.7%
1,156,700$ 100.0%
Materials and Maintenance Expenditures - Sewer
Budget to Budget
Variance
FY 2016 Materials and Maintenance Expenditures - Sewer
* Actual unaudited
96
Formula for Sewer Rates
To meet State of California requirements, customers must pay their fair share of sewer costs. The
District is required to determine sewer rates in accordance with the State’s Revenue Program
Guidelines.
Residential and Multi-Residential Sewer Service
To estimate sewer use, the District averages metered water use for the winter months of January
through April. A “winter average” is the basis of the sewer charges for the entire year. The winter
months are the best time to average water use because less water is used outdoors and most of the
water used flows to the sewer system. The District gives customers a 15% usage discount to
acknowledge that not all water purchased goes to the sewer system. The maximum consumption
charge is based on 30 units.
The following is the sewer bill formula for residential and multi-residential customers:
((Winter Average X .85) x Usage Fee) + System Fee
The current usage fee and system fee for single-family residential customers $2.46 and $15.89,
respectively. Effective January 1, 2016 the usage fee and system fee will be $2.46 and $17.19,
respectfully.
The current usage fee for multi-residential customers is $2.46 and will remain the same at $2.46 for
the calendar year 2016. The system fee for multi-residential is based on meter size and will remain
unchanged for the calendar year 2016 as shown on page 92.
Commercial and Industrial Sewer Service
To estimate sewer use, the District averages metered water use. An “average annual consumption”
is the basis of the sewer charges for the entire year. The average annual consumption is defined as
the units of water billed from January through December of the previous year. The District gives
customers a 15% usage discount to acknowledge that not all water purchased goes to the sewer
system.
The following is the sewer formula for commercial and industrial customers:
(Average Annual Consumption x .85 x Usage Fee x Strength Factor) + System Fee
The District calculates the monthly bill based on the customer’s water use, sewer strength and the
size of the customer’s water meter which is more equitable among customer classes. The rates and
charges by meter size are shown on page 92.
97
Formula for Sewer Rates
into various categories and has identified Strength Factors for each of these business categories.
The standard of measure for Strength Factors is the typical sewer strength of a single-family
residence (SFR). The Strength Factors established by the SWRCB are listed below and are used by
the District in the calculation of commercial sewer rates. These factors are in terms of the strength
relative to a SFR, with a SFR having a strength factor of 1.
The following are the Strength Factors:
Description
Strength
Factor
Fee
Low-Strength Commercial * 1.000 $ 2.46
Medium-Strength Commercial 2.000 $ 3.53
High-Strength Commercial 4.000 $ 5.63
*Schools and churches are categorized as Low-Strength Commercial customers.
98
Sewer Service Area
99
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
fees may cover costs including but not limited to planning, design, construction, and financing
associated with facilities. The District uses a portion of capacity fee revenues to provide general
expansion planning and developer support. These fees reimburse the General Fund for the cost of
providing these services. For FY 2016, capacity fees are projected to be $1,134,800 which is $15,800
less than FY 2015.
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 or recycled water
facilities. The fee ensures that future users fund the portion of the facilities that were sized and built
for their future use by prior customers. Prior to FY 2010, annexation fees were unrestricted and
therefore included in the General Fund revenues. With the 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. Tax Revenues are
projected to increase by $135,100 to $3,213,000.
The District levies availability charges each year in developed areas to be used for upgrades and
betterment and in undeveloped areas to provide funding for planning, mapping, and preliminary
design of facilities to meet future development. Current legislation provides that any availability
charge 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. Availability fees are projected to be $684,900.
Included in the General Revenues are a variety of Non-Operating Revenues. These revenues include
lease revenues, 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.
100
General Revenues and Expenses
In addition to the cell-site leases, the District leases land to the Highlands Links Golf Group., LLC. The
lease terms include a minimum annual rent guarantee plus a percentage of sales.
For most of the District’s water customers in the City of Chula Vista (CCV), the City of Chula Vista
provides the sewer services. The CCV sewer fees are based on water consumption. Because of the
shared customer base, the CCV contracts with the District for the billing of their sewer customers
who live within the District.
General Expenses
The expenses in this section are general operating costs not associated with an individual
department. These include legal costs, insurance premiums, changes in accrued employee leave
balances, and miscellaneous interest. These expenditures represent 7.5% of the total Departmental
Budget.
Legal expenditures are viewed as a District-wide general cost because they benefit all departments
and usually are not attributed to any one department. The District retains outside legal services
instead of in-house counsel.
Insurance premiums are also viewed as District-wide general cost because it benefits all
departments and cannot be attributed to any one department. The District participates in a program
where it can reduce its premium by implementing training sessions to reduce on-the-job accidents
and injuries.
Some employee benefits are charged to the General Expense Department because they are not
entirely attributable to a specific department or fiscal year in which they are incurred. For example,
when a pay rate increase occurs for an employee, his/her leave balances increase in value due to
this change. In this case, the cost is charged to the General Expense Department.
101
FY 2014 FY 2015 FY 2015 FY 2016
Actual Budget Actual * Budget $%
Fee Revenues
Capacity Fee Revenues 1,170,985$ 1,150,600$ 2,404,375$ 1,134,800$ (15,800)$ (1.4%)
Betterment Fees for Maintenance 485,738 301,800 485,738 - (301,800) (100.0%)
Subtotal Fee Revenues 1,656,723 1,452,400 2,890,113 1,134,800 (317,600) (21.9%)
Tax Revenues
1% General Tax 2,894,402 3,077,900 2,894,402 3,213,000 135,100 4.4%
Availability Fees 729,961 685,800 - 684,900 (900) (0.1%)
Subtotal Tax Revenues 3,624,363 3,763,700 2,894,402 3,897,900 134,200 3.6%
General Revenue 5,281,086$ 5,216,100$ 5,784,515$ 5,032,700$ (183,400)$ (3.5%)
FY 2014 FY 2015 FY 2015 FY 2016
Actual Budget Actual * Budget $%
Property Rental 1,317,736$ 1,302,500$ 1,232,920$ 1,269,800$ (32,700) (2.5%)
Sewer Billing Fees 372,473 372,400 375,741 375,500 3,100 0.8%
Set-up Fee for Lease Site 22,500 - 24,500 - - 0.0%
Grants 40,867 - 3,867 - - 0.0%
Revenue from Shared Facility 32,152 33,800 - 37,200 3,400 10.1%
Miscellaneous 271,791 239,100 733,587 191,100 (48,000) (20.1%)
Non-Operating Revenue 2,057,519$ 1,947,800$ 2,370,615$ 1,873,600$ (74,200)$ (3.8%)
Potable Recycled Sewer Total
Capacity Fee Revenues 1,134,800$ -$ -$ 1,134,800$
1% General Tax 3,213,000 - - 3,213,000
Availability Fees 633,300 - 51,600 684,900
Property Rental 1,269,800 - - 1,269,800
Sewer Billing Fees 375,500 - - 375,500
Revenue from Shared Facility - - 37,200 37,200
Miscellaneous 191,100 - - 191,100
Total General and Non-Operating Revenue 6,817,500$ -$ 88,800$ 6,906,300$
Note: For General and Non-Operating Revenues, the Potable Fund serves as the District's General Fund for accounting purposes.
FY 2016
Budget to Budget
Variance
General and Non-Operating Revenues by Business
General Revenues
Budget to Budget
Variance
Non-Operating Revenues
* Actual unaudited 102
FY 2014 FY 2015 FY 2015 FY 2016
Actual Budget Actual* Budget $ %
General Expense
Labor and Benefits (1)1,536,043$ 1,290,800$ 1,487,720$ 1,183,400$ (107,400)$ (8.3%)
Legal Fees 280,069 410,000 174,636 250,000 (160,000) (39.0%)
General Insurance 549,869 631,000 645,410 586,000 (45,000) (7.1%)
Services 14,161 - - - - 0.0%
Training 2,566 - - - - 0.0%
Total General Expense 2,382,708$ 2,331,800$ 2,307,766$ 2,019,400$ (312,400)$ (13.4%)
General Expense
Budget to Budget
Variance
(1) Benefits include District-wide labor and benefit costs not attributable to any one department, such as the
effect of cost of living raises on accrued leave liabilities or the Other Post Employment Benefit (OPEB) costs.
These costs are netted against the District's anticipated Vacancy Factor. The Vacancy Factor for FY 2015 and
FY 2016 is $185,600 and $338,300, respectively. Additionally, the labor and benefits shown on this schedule are
those related to operating costs and does not include CIP labor and benefit costs.
* Actual unaudited
103
Departmental Operating Budget
Labor and Benefits
Labor and Benefits represent 22.8% of the total Operating Budget. 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 2016 Budget includes funding for labor and
benefits for 138 full-time equivalent (FTE) employees.
The staffing level for Fiscal Year 2016 had a decrease of three (3) FTE employees from Fiscal Year
2015. The District has chosen to eliminate vacant positions in areas that have experienced a
reduction of workload requirements. Since 2007, the District has reduced FTEs by 21% due to slowed
growth and by focusing on efficiencies and automation. Efficiencies have been achieved by strategic
planning, goal setting, outsourcing, and leveraging advancements in technology.
A projected 7.6% 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 $1,748,600.
Administrative Expenses
Administrative Expenses decreased by $31,400 or (.06%) compared to FY 2016 and is shown on page
111. In Fiscal Year 2016, more funding has been provided for Water Conservation efforts and an
investment in the District’s leak detection program. This increase is offset by lower costs in legal
services, equipment, fees, training, and overhead allocation to work orders.
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.
Materials and Maintenance
Like all costs included by the District, the Materials and Maintenance Expenses allow the District to
provide reliable, high-quality products, services, and support to its customers. As the District
continues to grow and technology and regulations change, maintenance and services will be
adjusted, as needed.
For Fiscal Year 2016, there is a .02% decrease in Materials and Maintenance Expenses totaling
$7,000. The sewer charges decreased by 23%, or $298,000 and Fuel and Oil decreased by 17.3% by
$53,700. This decrease is offset by increases in Safety Equipment of $83,100 for the purchase of
104
Departmental Operating Budget
emergency equipment and emergency response supplies. Other materials, supplies, and
contracted services have also increased by $58,700 and $107,200 for the leak detection program.
Currently, the Water Operations Department uses an Infrastructure Management System (IMS) for the
maintenance of existing and new assets. The District plans on replacing the legacy system (IMS)
with a GIS Centric Work Order System that will further improve the tracking and management of the
Materials and Maintenance Expenses.
Strategic Plan Implementation
Strategic goals and objectives, as presented to the Board of Directors, are incorporated into
departmental operating budgets to ensure adequate funds are available to implement the Strategic
Plan. The District updates its performance measurement program each fiscal year to provide
measurable results of progress on both strategic and key operational goals and objectives. (See the
plan objectives and measures in the department sections that follow.) Performance measures have
been developed by comparing key District activities with functional and available operational data
that provide reliable feedback on progress. Developed cooperatively with staff and the help of
outside consultants, the measures are designed to be comparable to measures commonly found in
similar industries.
The performance measures focus on “best practice” as applied to the District. Measures are
collected and reviewed quarterly by the Senior Management Team and reviewed by the Board at
least twice a year. Results are used to set new targets for the following fiscal year and to hold staff
accountable for the current fiscal year.
105
Board of Directors 107,100$ 0.4%
General Manager 1,605,900 5.3%
General Expense 2,019,400 6.6%
Administrative Services 3,070,500 10.0%
Finance 6,128,400 20.0%
Information Technology and Strategic Planning 3,610,600 11.8%
Water Operations 11,663,400 38.1%
Engineering 2,381,600 7.8%
30,586,900$ 100.0%
Departmental Operating Budget
Total FY 2016 Departmental Operating Budget
$30,586,900
106
FY 2014 FY 2016
Actual Budget Actual* Budget
Labor Costs 11,029,405$ 11,337,400$ 11,177,926$ 11,487,900$
Benefits
Pension 3,096,070 3,596,600 3,575,595 3,885,300
Employee Assistance Program 3,827 4,000 3,755 4,000
Workers' Compensation 230,015 267,300 261,821 260,000
Health/Dental/Life Insurance/OPEB 3,542,644 3,825,600 3,611,579 4,012,200
Social Security/Medicare 909,150 945,200 927,579 948,200
Salary Continuation Insurance 64,304 65,000 56,144 67,800
State Unemployment Insurance 43,492 60,000 9,998 30,000
Vacation/Sick/Holiday/Other Leave 2,140,833 2,103,800 2,277,556 2,195,300
Total Benefits 10,030,335 10,867,500 10,724,027 11,402,800
Total Labor and Benefits 21,059,740 22,204,900 21,901,953 22,890,700
Less: Non-Operating Labor and Benefits
Labor Costs 949,323 1,001,100 1,062,022 1,048,100
Benefits Allocation 544,962 729,200 661,849 700,500
Total Non-Operating Labor and Benefits 1,494,285 1,730,300 1,723,871 1,748,600
Operating Labor & Benefits 19,565,455 20,474,600 20,178,082 21,142,100
Total Overhead Allocation 1,091,721 1,151,300 1,221,325 1,205,300
Less: Overhead Allocation Personnel Portion 689,422 727,000 771,267 761,100
Admin Portion of Overhead (36.85%)402,299$ 424,300 450,058 444,200
Net Operating Labor and Benefits 18,876,033$ 19,747,600$ 19,406,815$ 20,381,000$
Labor and Benefits
FY 2015
140
138
04080120160
Full - Time Equivalent (FTE)
FY 2016 FY 2015
*Actual unaudited
107
Potable Sewer Recycled
Developer
Reimbursed-
CIP Total
Operating Labor Costs 9,740,000$ 252,100$ 447,700$ -$ 10,439,800$
Benefits 10,047,500 246,100 408,700 - 10,702,300
Overhead Allocation-Personnel (1,269,300) 183,100 325,100 - (761,100)
Total Operating Labor and Benefits 18,518,200 681,300 1,181,500 - 20,381,000
CIP Labor Costs 561,000 152,200 138,000 196,900 1,048,100
Benefits 371,800 95,400 91,500 141,800 700,500
Overhead Allocation-Personnel 407,400 110,500 100,200 143,000 761,100
Total CIP Labor and Benefits 1,340,200 358,100 329,700 481,700 2,509,700
Total Labor and Benefits 19,858,400$ 1,039,400$ 1,511,200$ 481,700$ 22,890,700$
Potable-Operating 18,518,200$ 80.9%
Potable-CIP 1,340,200 5.8%
Sewer-Operating 681,300 3.0%
Sewer-CIP 358,100 1.6%
Recycle-Operating 1,181,500 5.2%
Recycle-CIP 329,700 1.4%
Develeper Reimbursed-CIP 481,700 2.1%
22,890,700$ 100.0%
Labor and Benefits by Fund - Fiscal Year 2016
108
FY 2014 FY 2015 FY 2016
General Manager 5 5 5
Total FTE - General Manager 55 5
Administrative Services
Administrative Services Management 3 3 3
Human Resources 4 3 3 (1)
Purchasing 7 7 6
Safety 1 1 1
Conservation 1 0 0 (2)
Total FTE - Administrative Services 16 14 13
Finance
Financial Management 3 3 3
Controller and Budgetary Services 5 5 5
Treasury and Accounting Services 6 6 6
Customer Service 15 11 10 (1), (2)
Conservation 0 1 1 (2)
Meter Maintenance 0 8 7 (1), (2)
Total FTE - Finance 29 34 32
IT and Strategic Planning
IT and Strategic Planning Applications 5 4 4 (2)
IT Operations 3 4 5 (2)
Geographic Information Systems 4 4 4
Total FTE - IT and Strategic Planning 12 12 13
Operations
Operations Management 2 2 3 (2)
Water System Operations 26 21 19 (2)
Utility Maintenance/Construction 26 26 27 (2)
Collection/Treatment/Reclamation Operations 7 7 7
Total FTE - Operations 6156 56
Engineering
Engineering Management 3 3 3
Engineering 17 16 16 (1)
Total FTE - Engineering 20 19 19
District Total FTE Position Count 143 140 138
Position Count by Department
(1) The District’s strategic planning efforts of streamlining business processes enabled the District to be more efficient and
provided an opportunity to reduce staffing.
(2) Positions were re-classified and/or transferred as part of streamlining the District's organizational structure.
109
FY 2014 FY 2015 FY 2016
Water Conservation Technician 1 0 0 (1)
Senior Civil Engineer 0 1 0 (1), (2)
Total Contract/Temporary Employees 1 1 0
General Manager 5 4%
Administrative Services 13 10%
Finance 32 21%
IT and Strategic Planning 13 10%
Operations 56 41%
Engineering 19 14%
138 100%
Contract / Temporary Employees
(1) The District’s strategic planning efforts of streamlining business processes enabled the District to be more efficient and
provided an opportunity to reduce staffing.
(2) Positions were re-classified and/or transferred as part of streamlining the District's organizational structure.
FY 2016 POSITION COUNT
110
FY 2014 FY 2015 FY 2015 FY 2016
Actual Budget Actual* Budget $%
Administrative Expenditures
Directors' Fees 19,834$ 30,000$ 20,382$ 30,000$ -$ -
Travel and Meetings 147,110 207,700 158,205 214,400 6,700 3.2%
Conservation and Outreach 136,743 174,900 144,026 176,900 2,000 1.1%
General Office Expense 258,732 280,800 257,756 284,700 3,900 1.4%
Equipment 943,153 1,139,600 1,233,988 1,112,300 (27,300) (2.4%)
Fees 517,205 524,700 513,545 1,085,000 560,300 106.8%
Services 1,387,477 2,152,300 1,619,936 2,409,800 257,500 12.0%
Training 65,818 123,500 77,232 99,000 (24,500) (19.8%)
Utilities 12,929 14,000 14,184 14,900 900 6.4%
General Expenses 844,099 1,041,000 821,303 250,000 (791,000) (76.0%)
Bad Debt Expense 154,744 155,000 93,491 155,000 - 0.0%
Subtotal before Overhead 4,487,844$ 5,843,500$ 4,954,048$ 5,832,000$ (11,500) (0.2%)
Less: Overhead Allocation (402,299) (424,300) (450,058) (444,200) (19,900) -
Total Expenditures 4,085,545$ 5,419,200$ 4,503,990$ 5,387,800$ (31,400)$ (0.6%)
4,702,612$ 5,605,400$ 5,775,351$ 6,082,000$
Directors' Fees 30,000$ 0.5%
Travel and Meetings 214,400 3.7%
Conservation & Outreach 176,900 3.0%
General Office Expense 284,700 4.9%
Equipment 1,112,300 19.1%
Fees 1,085,000 18.6%
Services 2,409,800 41.3%
Training 99,000 1.7%
Utilities 14,900 0.3%
General Expense 250,000 4.3%
Bad Debt Expense 155,000 2.6%
5,832,000$ 100.0%
Less: Overhead Allocation (444,200)
Total Administrative Expenses 5,387,800$
Administrative Expenditures - Total
Budget to Budget
Variance
FY 2016 Total Administrative Expenditures, in thousands ($)
* Actual unaudited
111
FY 2014 FY 2015 FY 2015 FY 2016
Actual Budget Actual* Budget $ %
Materials and Maintenance
Fuel and Oil 199,197$ 304,300$ 196,397$ 250,600$ (53,700)$ (17.6%)
Meters and Materials 66,138 113,800 111,821 113,800 - 0.0%
Fleet Parts and Equipment 112,277 129,900 123,056 128,900 (1,000) (0.8%)
Infrastructure Equipment & Supplies 496,164 525,000 512,739 621,300 96,300 18.3%
Chemicals 372,594 397,100 349,655 400,600 3,500 0.9%
Safety Equipment 31,965 44,200 40,773 127,300 83,100 188.0%
Laboratory Equipment and Supplies 43,938 44,000 43,847 40,000 (4,000) (9.1%)
Other Materials and Supplies 133,481 131,800 180,188 190,500 58,700 44.5%
Building and Grounds Materials 55,608 46,500 55,375 47,900 1,400 3.0%
Contracted Services 523,990 588,300 517,413 695,500 107,200 18.2%
Subtotal Materials and Maintenance 2,035,352$ 2,324,900$ 2,131,264$ 2,616,400$ 291,500$ 12.5%
Sewer Charges
Metro O&M Costs 1,021,724 1,020,300$ 1,020,276 815,000 (205,300)$ (20.1%)
Spring Valley Sewer Charge 100,800 274,600 188,237 181,400 (93,200) (33.9%)
Subtotal Sewer Charges 1,122,524$ 1,294,900$ 1,208,513$ 996,400$ (298,500)$ (23.1%)
Total Expenditures 3,157,876$ 3,619,800$ 3,339,777$ 3,612,800$ (7,000)$ (0.2%)
Fuel and Oil 250,600$ 6.9%
Meters and Materials 113,800 3.1%
Fleet Parts and Equipment 128,900 3.6%
Infrastructure Equipment and Supplies 621,300 17.2%
Chemicals 400,600 11.1%
Safety Equipment 127,300 3.5%
Laboratory Equipment and Supplies 40,000 1.1%
Other Materials and Supplies 190,500 5.3%
Building and Grounds Materials 47,900 1.3%
Contracted Services 695,500 19.3%
Sewer Charges 996,400 27.6%
3,612,800$ 100.0%
Materials and Maintenance Expenditures - Total
Budget to Budget
Variance
FY 2016 Materials and Maintenance Expenditures
* Actual unaudited
112
FY 2014 FY 2015 FY 2015 FY 2016
Budget to
Budget
Actual Budget Actual* Budget Variance
Departmental Expenditures
BBoard of Directors 100,367$ 115,100$ 95,949$ 107,100$ (8,000)$
GGeneral Manager 1,353,831 1,562,300 1,386,637 1,605,900 43,600
GGeneral Expense 2,382,708 2,331,800 2,309,023 2,019,400 (312,400)
AAdministrative Services 2,915,571 2,995,600 2,847,208 3,070,500 74,900
F Finance 5,463,210 5,816,700 5,496,511 6,128,400 311,700
IT IT and Strategic Planning 3,021,303 3,373,800 3,491,549 3,610,600 236,800
WWater Operations 10,314,465 11,384,100 10,712,348 11,663,400 279,300
EEngineering 1,827,709 2,358,500 2,132,682 2,381,600 23,100
T Total Departmental Expenditures 27,379,164$ 29,937,900$ 28,471,907$ 30,586,900$ 649,000$
Less: Overhead Allocation (1,091,721) (1,151,300) (1,221,325) (1,205,300) (54,000)
Net Departmental Expenditures 26,287,443$ 28,786,600$ 27,250,582$ 29,381,600$ 595,000$
Non-Departmental Expenditures
Water Purchases 48,210,501$ 47,059,200$ 46,249,959$ 45,984,500$ (1,074,700)$
Power 2,808,846 2,838,400 3,048,335 3,112,800 274,400
Expansion Reserve 3,428,000 2,538,900 2,538,900 2,695,800 156,900
Betterment Reserve 125,000 3,530,000 3,530,000 2,400,000 (1,130,000)
Replacement Reserve 4,230,000 3,270,200 3,270,200 3,421,000 150,800
Transfer to Sewer General Fund 152,800 553,800 553,800 - (553,800)
Transfer to General Fund Reserve 1,913,000 1,583,800 1,583,800 - (1,583,800)
Transfer to Sewer Replacement - 127,000 127,000 1,199,300 1,072,300
Transfer to OPEB 1,242,900 647,100 647,100 1,006,000 358,900
Transfer to New Supply Reserve - 705,000 705,000 35,000 (670,000)
Total Non-Departmental Expenditure 62,111,047$ 62,853,400$ 62,254,094$ 59,854,400$ (2,999,000)$
Total Operating Expenditures 88,398,490$ 91,640,000$ 89,504,676$ 89,236,000$ (2,404,000)$
Operating Expenditures by Department
FY 2016 Funding Source by Department, in Millions ($)
$0 $3,000 $6,000 $9,000 $12,000
Water Operations
Finance
IT and Strategic Planning
Administrative Services
Engineering
General Expense
General Manager
Board of Directors
Potable
Recycled
Sewer
* Actual unaudited
113
Operating Expenditures by Object
FY 2014 FY 2015 FY 2015 FY 2016
Actual Budget Actual* Budget Variance
Departmental Expenditures
Labor and Benefits 19,733,444$ 20,474,600$ 20,178,082$ 21,142,100$ 667,500$
Director's Fees 19,834 30,000 20,382 30,000 -
Travel and Meetings 147,110 207,700 158,205 214,400 6,700
Conservation and Outreach 136,743 174,900 144,026 176,900 2,000
General Office Expense 258,732 280,800 257,756 284,700 3,900
Equipment 943,153 1,139,600 1,233,988 1,112,300 (27,300)
Fees 1,361,304 1,565,700 1,334,848 1,335,000 (230,700)
Services 1,387,477 2,152,300 1,619,936 2,409,800 257,500
Training 65,818 123,500 77,232 99,000 (24,500)
Materials & Maintenance 2,035,352 2,324,900 2,131,264 2,616,400 291,500
Power and Utilities 12,929 14,000 14,184 14,900 900
Sewer Charges 1,122,524 1,294,900 1,208,513 996,400 (298,500)
Bad Debt Expense 154,744 155,000 93,491 155,000 -
Total Departmental Expenditures 27,379,164$ 29,937,900$ 28,471,907$ 30,586,900$ 649,000$
Less: Overhead Allocation (1,091,721) (1,151,300) (1,221,325) (1,205,300) (54,000)
Net Departmental Expenditures 26,287,443$ 28,786,600$ 27,250,582$ 29,381,600$ 595,000$
Non-Departmental Expenditures
Water Purchases 48,210,501$ 47,059,200$ 46,249,959$ 45,984,500$ (1,074,700)$
Power 2,808,846 2,838,400 3,048,335 3,112,800 274,400
Expansion Reserve 3,428,000 2,538,900 2,538,900 2,695,800 156,900
Betterment Reserve 125,000 3,530,000 3,530,000 2,400,000 (1,130,000)
Replacement Reserve 4,230,000 3,270,200 3,270,200 3,421,000 150,800
Transfer to Sewer General Fund 152,800 553,800 553,800 - (553,800)
Transfer to General Fund Reserve 1,913,000 1,583,800 1,583,800 - (1,583,800)
Transfer to Sewer Replacement - 127,000 127,000 1,199,300 1,072,300
Transfer to OPEB 1,242,900 647,100 647,100 1,006,000 358,900
Transfer to New Supply Fund - 705,000 705,000 35,000 (670,000)
Total Non-Departmental Expenditures 62,111,047$ 62,853,400$ 62,254,094$ 59,854,400$ (2,999,000)$
Total Operating Expenditures 88,398,490$ 91,640,000$ 89,504,676$ 89,236,000$ (2,404,000)$
Budget to
Budget
*Actual unaudited
114
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.
Mark Robak
Treasurer
Division 5
Tim Smith
Division 1
Mitchell Thompson
Vice President
Division 2
Jose Lopez
President
Division 4
Gary Croucher
Division 3
Board of Directors
The Otay Water District is a revenue-
neutral public agency established in
accordance with the California Water
Code. This not-for-profit status means
Otay has no private shareholders, pays no
dividends and therefore does not report
to, nor answer to the California Public
Utilities Commission. The District does,
however, answer to the public through a
five-member Board of Directors. Each
Director is elected by voters within their
respective division boundaries to
represent the public's interest with regard
to rates for service, taxes, policies,
ordinances, and other matters related to
the management and operation of the
Otay Water District. Directors serve four-
year, alternating terms on the Board.
115
Board of Directors 107,100$ 0.4%
General Manager 1,605,900 5.0%
General Expense 2,019,400 7.5%
Administrative Services 3,070,500 12.3%
Finance 6,128,400 16.7%
IT and Strategic Planning 3,610,600 10.9%
Water Operations 11,663,400 40.1%
Engineering 2,381,600 7.1%
30,586,900$ 100.0%
FY 2014 FY 2015 FY 2015 FY 2016
Actual Budget Actual* Budget
Board of Directors 100,367$ 115,100$ 95,949$ 107,100$
Board of Directors
Board of
Directors ,
$107,100
FY 2016 Total Departmental Budget
$30.6 Million
*Actual unaudited
116
FY 2014 FY 2015 FY 2015 FY 2016
Actual Budget Actual*Budget
Benefits 71,935 68,500$ 69,094 61,600$
Director's Fees 19,834 30,000 20,382 30,000
Travel and Meetings 7,798 16,600 6,473 15,500
Training 800 - - -
Total 100,367$ 115,100$ 95,949$ 107,100$
Board of Directors
Budget vs. Actual, in thousands ($)
$-
$30
$60
$90
$120
2012 2013 2014 2015 2016
10
7
11
2
10
9
11
5
10
7
75
87
10
0
96
Budget Actual
*Actual unaudited
117
Director’s Division Boundaries
118
General Manager
Mission
To provide high value water and wastewater services to the customers of the Otay Water District, in
a professional, effective, and efficient manner.
General Manager’s Vision
“A District that is at the forefront in innovations to provide water services at affordable rates, with a
reputation for outstanding customer service.”
C
Key Challenge
Our key challenge, as District staff, is to quantify and demonstrate our commitment and the ability to
optimize our resources, business processes, and technology to achieve the strategic plan goals. We,
as a team, commit to regularly assess and document how our decisions and work practices
accomplish our goals and objectives.
E
119
Position Title FY 2014 FY 2015 FY 2016
General Manager 111
Assistant General Manager 111
District Secretary 111
Sr. Confidential Executive Secretary 111
Communications Officer 1 1 1
Total 555
District Position Count - 138
General Manager Department - (5 Positions)
General Manager - Position Count
Board of Directors
1111
General Manager
1211
District
Secretary
1211
Sr. Confidential
Executive Secretary
1211
Communications
Officer
1211
Assistant
General Manager
2111
120
Board of Directors 107,100$ 0.4%
General Manager 1,605,900 5.3%
General Expense 2,019,400 6.6%
Administrative Services 3,070,500 10.0%
Finance 6,128,400 20.0%
IT and Strategic Planning 3,610,600 11.8%
Water Operations 11,663,400 38.1%
Engineering 2,381,600 7.8%
30,586,900$ 100.0%
FY 2014 FY 2015 FY 2015 FY 2016
Actual Budget Actual* Budget
General Manager 1,039,143$ 1,240,500$ 1,061,445$ 1,263,300$
Assistant General Manager 314,688 321,800 325,192 342,600
Total 1,353,831$ 1,562,300$ 1,386,637$ 1,605,900$
-$
General Manager
General
Manager,
$1,605,900
FY 2016 Total Departmental Budget
$30.6 Million
*Actual unaudited
121
FY 2014 FY 2015 FY 2015 FY 2016
Actual Budget Actual* Budget
Labor and Benefits 1,112,599$ 1,128,400$ 1,152,471$ 1,199,600$
Travel and Meetings 42,804 54,600 44,127 54,600
Conservation and Outreach 3,421 7,000 4,061 6,000
General Office Expense 3,164 5,300 2,449 1,700
Equipment 2,700 4,000 2,400 3,000
Fees 47,303 64,000 57,930 48,000
Services 141,689 199,000 123,049 193,000
Materials & Maintenance - 100,000 - 100,000
Miscellaneous 151 - 150 -
Total 1,353,831$ 1,562,300$ 1,386,637$ 1,605,900$
General Manager
Budget vs. Actual, in thousands ($)
$1,000
$1,300
$1,600
$1,900
2012 2013 2014 2015 2016
1,
7
2
1
1,
4
8
8
1,
4
4
5
1,
5
6
2
1,
6
0
6
1,
6
6
9
1,
4
1
9
1,
3
5
4
1,
3
8
7
Budget Actual
*Actual unaudited
122
General Manager
Measures the level of satisfaction
with the District’s website via
surveys.
Services We Provide
The General Manager’s office provides leadership and direction for all District services and
operations including potable, recycled, and the treatment plant. As head of the agency, the
General Manager interacts with the Board of Directors to set policies and strategic direction and en-
sures that all applicable laws and regulations are met. The General Manager oversees, co-
ordinates, and directs the development and execution of annual plans, and operating and capital
improvement projects; represents the District in establishing and maintaining relationships with
member agencies and external organizations, and is focused on executing the District’s mission,
Strategic Plan, and Board priorities.
Performance Measures – Strategic Plan FY 2015-2018
Measures 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.
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
FY 12-13 FY 13-14 FY 14-15 FY 15-16
Target Actual & Projected
CUSTOMER: Customer Satisfaction
CUSTOMER: Customer Satisfaction with Website
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
FY 12-13 FY 13-14 FY 14-15 FY 15-16
Target Actual & Projected
123
General Manager
Accomplishments – Fiscal Year 2014-2015
For FY 2015, Otay Water District continued to be one of the lower cost water service
providers of San Diego County’s 23 public water agencies.
The District updated and implemented the FY 2015-2018 Strategic Plan. This is the 12th
year the plan has been in place.
The District successfully responded to the state’s drought emergency and the Water
Resources Control Board’s order to immediately reduce potable water use by 20% over
2013 levels.
The District reached the conservation goal through the rapid development and
implementation of a Drought Community Outreach Plan that coordinated and deployed all
existing outreach tools to cost-effectively communicate with every customer through either
direct mail, bill messaging, email or auto-dial phone messaging. In the first weeks of
implementation, customers reduced potable water use by 25%. This was followed by
monthly reductions of 27% and 26%, respectively.
Through restructuring and without resorting to layoffs, the District’s labor costs were
reduced through the elimination of two full-time equivalent positions (FTE).
Since 2007, the District has experienced a reduction of 36.75 FTEs, or 21%. In the same
timeframe, the number of customers served per FTE has grown from 301 to 396, an
increase of 31.5%.
Staffing reductions from 2007 to present have resulted in a cumulative net savings of
$23,935,600. These savings have helped to lessen the impact of higher wholesale water
costs to the District’s ratepayers.
For the eleventh consecutive year, the District received the Distinguished Budget
Presentation Award from the Government Finance Officers Association (GFOA) of the
United States and Canada.
For the eleventh consecutive year, the District received the GFOA’s Certificate of
Achievement for Excellence in Financial Reporting.
The District completed the Notice of Preparation (NOP) and scoping meeting in
conjunction with the U.S. State Department for the Otay Mesa Conveyance and Disinfection
System project Environment Impact Report/Environmental Impact Statement. The goal is
to obtain a Presidential Permit to be able to receive desalinated water from the proposed
Desalination Plant in Rosarito, B.C., Mexico.
The District continues to work with the California Department of Public Health, Mexican
officials and NSC Agua as they continue working toward permitting, approval, and
construction of an ocean water desalination facility to serve potential customers in Mexico
and in Otay’s service area.
124
Administrative Services - General
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, safety and security, and emergency preparedness and response.
Department Responsibilities
The Administrative Services Department, under the general direction of the Assistant General
Manager and Assistant Chief of Administrative Services and Information Technology Services,
provides the following support services: Human Resources, Purchasing, Facilities Maintenance, and
Safety and Security Administration. The department also coordinates assigned activities with other
departments and outside agencies, and provides highly responsible and complex administrative
support to the District, General Manager, and Board of Directors.
125
Position Title FY 2014 FY 2015 FY 2016
Chief, Administrative Services (Assistant Chief,
Administrative Services and IT) 111
Confidential Executive Secretary 111
Confidential Secretary 111
Human Resources Manager 111
Senior Human Resources Analyst 111
Human Resources Analyst 111
Human Resources Technician 1 0 0
Purchasing & Facilities Manager 111
Senior Buyer 111
Assistant Buyer 111
Lead Warehouse Worker / Facilities Worker 110
Warehouse / Delivery Worker 111
Facilities Maintenance Technician 2 2 2
Safety & Security Specialist 1 1 1
Senior Water Conservation Specialist 100
Total 16 14 13
Administrative Services - Position Count
District Position Count - 138
Administrative Services Department - (13 Positions)
(a) Interim position oversees Administrative Services and Information Technology (IT).
Purchasing and
Facilities
2231 (6)
Safety and Security
Administration
2241 (1)
Human
Resources
2221 (3)
Assistant Chief,
Administrative Services and IT
2211 (3)
(a)
126
Board of Directors 107,100$ 0.4%
General Manager 1,605,900 5.3%
General Expense 2,019,400 6.6%
Administrative Services 3,070,500 10.0%
Finance 6,128,400 20.0%
IT and Strategic Planning 3,610,600 11.8%
Water Operations 11,663,400 38.1%
Engineering 2,381,600 7.8%
30,586,900$ 100.0%
FY 2014 FY 2015 FY 2015 FY 2016
Actual Budget Actual* Budget
Administrative Chief 481,371$ 463,800$ 569,260$ 511,700$
Human Resources 720,522 703,300 694,264 730,000
Purchasing and Facilities 1,452,526 1,455,800 1,221,295 1,415,900
Safety and Security 261,152 372,700 362,389 412,900
Total 2,915,571$ 2,995,600$ 2,847,208$ 3,070,500$
Administrative Services
Administrative
Services,
$3,070,500
FY 2016 Total Departmental Budget
$30.6 Million
*Actual unaudited
127
FY 2014 FY 2015 FY 2015 FY 2016
Actual Budget Actual* Budget
Labor and Benefits 2,027,956$ 2,044,500$ 1,952,312$ 2,065,700$
Travel and Meetings 5,052 16,700 11,075 17,300
General Office Expense 106,291 108,000 100,119 106,000
Equipment 64,074 75,500 62,972 81,000
Fees - - 750 -
Services 294,272 316,000 298,789 282,600
Training 41,446 92,600 56,002 70,000
Materials & Maintenance 363,551 328,300 351,005 433,000
Power and Utilities 12,929 14,000 14,184 14,900
Total 2,915,571$ 2,995,600$ 2,847,208$ 3,070,500$
Budget vs. Actual, in thousands ($)
Administrative Services
$-
$1,000
$2,000
$3,000
$4,000
2012 2013 2014 2015 2016
3,
7
2
7
3,
6
7
9
3,0
7
0
2,
9
9
6
3,
0
7
1
3,
3
4
5
2,8
6
4
2,
9
1
6
2,
8
4
7
Budget Actual
*Actual unaudited
128
Administrative Services – Strategic Plan Objectives
Administrative Services Objectives - Strategic Plan FY 2015-2018
Completed Objectives:
BUSINESS PROCESSES
Enhanced security processes and planning.
LEARNING AND GROWTH
Finalized negotiations of a successor Memorandum of Understanding for represented
employees, implemented related compensation and benefits for unrepresented
employees, and implemented updates to policies and MOU.
Objectives on schedule:
BUSINESS PROCESSES
Evaluate opportunities to combine or transfer similar work functions.
CUSTOMER
Regularly produce and 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.
129
Administrative Services – Human Resources
Human Resources
Services We Provide
Human Resources, under the direction of the Assistant Chief of Administrative and Information
Technology 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 staff
management to include employee training and development; recognition and incentives;
performance evaluation process and employee discipline; ensures legal compliance; and
implements work/life balance initiatives to include a wellness program.
Performance Measures – Strategic Plan FY 2015-2018
Annual percent of voluntary
terminations (excludes
retirement).
Measures the quantity of general
and management formal training
hours completed per employee.
0.0%
1.5%
3.0%
4.5%
6.0%
FY 12-13 FY 13-14 FY 14-15 FY 15-16
Target Actual & Projected
0
5
10
15
20
25
FY 12-13 FY 13-14 FY 14-15 FY 15-16
Target Actual & Projected
LEARNING AND GROWTH: Turnover Rate
LEARNING AND GROWTH: Training Hours per Employee
130
Administrative Services – Human Resources
Accomplishments – Fiscal Year 2014-2015
Decreased labor costs by participating with other departments to reduce two (2) full-time
positions by instituting efficiency programs, which minimized the impact of higher water
costs from wholesalers, resulting in District-wide annual cost-savings of approximately
$254,000.
Finalized negotiations and implementation of a three-year successor Memorandum of
Understanding (MOU) with the Employee Association that will be in effect from July 1, 2014-
June 30, 2017. Updates to contract language include streamlining grievance and discipline
procedures, updating leave provisions, eliminating double time and updating assignment of
premiums for standby and call back pay resulting in approximately $14,000 annual cost-
savings for these pay types, and making general updates to 26 sections to further streamline
MOU language.
Worked with benefit consultant to price ancillary benefits in the market and changed Short
and Long-Term Disability coverage, which resulted in a savings of approximately $9,000 per
year with a three-year rate guarantee, totaling approximately $27,000 over the three-year
period. The District also changed the dental third party administrator arrangement, which
was a seamless transfer for employees while providing for cost-savings to the District of
approximately $4,200, a 19.7% decrease after the first year of implementation.
Coordinated and received credit for the Special District Risk Management Authority’s
(SDRMA) Credit Incentive Program. The District received a combined credit of approximately
$97,700, which was applied towards the Property/Liability and Workers’ Compensation
premiums. This credit includes CIP, longevity distribution, and a 5% multi-program discount.
In addition to this credit, the District received a high-volume discount of approximately
$268,000.
Developed and/or updated various policies, procedures, and programs to include the Policy
Against Discrimination & Harassment and Complaint Procedure, Supervisor Performance
Evaluation Manual, Department of Transportation Procedure, and Paid Sick Leave Policy for
Temporary Employees.
Successfully completed the recruitment and selection process for 20 positions within the
District..
Quantifies the rate of
employee days lost from
work due to illness or injury.
(1) The unexpected spike in the severity
rate for FY 2015 was due to an unforeseen
long-term leave of absence of one employee.
CUSTOMER SERVICE: Health & Safety Severity Rate
0
15
30
45
60
75
FY 12-13 FY 13-14 FY 14-15 FY 15-16
Target Actual & Projected
(1)
131
Administrative Services – Purchasing
Purchasing
Services We Provide
The Purchasing Division, under general direction of the Assistant Chief of Administrative and
Information Technology 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. Also, as needed, provides complex purchasing related analysis and
consultation to the District and General Manager.
Accomplishments – Fiscal Year 2014-2015
Instituted a Help Desk Ticket email process to assist Operations field personnel to
immediately report conditions in need of attention using iPhones and Toughbooks.
Directed the conversion of the District’s CalCard online expense reporting program, a
cumbersome time-consuming paper-based expense reporting practice, to U.S. Bank’s online
portal, reducing expense report submissions from 6 weeks to nearly real-time. Streamlined
procedures to assist in capturing early payment rebates and saved hundreds of labor hours
with one-time data entry and automated processes.
Setup of Office Depot’s online ordering system with the District’s contracted pricing to give
departments direct access to purchase office supplies eliminating the requisitioning process,
purchasing, invoicing, and warehousing of low dollar items, resulting in savings of staff time.
With the aid of Safety and Security, upgraded the obsolete analog fire alarm panels at
Operations, Warehouse, and Administration buildings to all digital systems in order to meet
the latest codes and standards.
Eliminated vacant Lead Warehouse and Facilities Worker position by rearranging current
associated duties. All aspects of warehouse support, inventory, the fuel island, surplus, and
e-waste management duties were absorbed by the Purchasing Manager and staff, resulting
in savings of approximately $142,232 per year.
Facilities and Safety & Security staff has begun a District-wide program to standardize and
modernize the District’s physical security alarm, access control, and video verification
systems and to consolidate administrative functions under DMP’s Entré Access & Security
Management System Software. To date, two sites have been integrated into the new
program with the remaining scheduled throughout FY 2016-17.
132
Administrative Services – Safety and Security
Safety and Security
Services We Provide
Safety and Security, under the direction of the Assistant Chief of Administrative and Information
Technology Services, provides the following: assesses the occupational exposure to risk; evaluates
hazards and mitigation of safety hazards and risk to injury; directs and supervises accident
investigations relating to occupational injuries, fleet incidents and/or damage to, or theft of District
property; develops hazardous materials business plans, community right-to-know, Risk
Management Prevention and Process Safety Management plans; develops and implements
procedures to ensure compliance with safe work practices and determines training needs to
address issues; develops, implements and manages safety programs; manages the District’s
security program; implements, schedules and coordinates recurring safety training; coordinates the
Department of Transportation (DOT), the District’s Drug Free Workplace, and DMV Pull-Notice
Programs; and plans and coordinates the District’s emergency preparedness program.
Performance Measures – Strategic Plan FY 2015-2018
Accomplishments – Fiscal Year 2014-2015
District-wide completion of the Incident Command System (ICS) and National Incident
Management System (NIMS) training framework. The training further prepares the District with
response, management, and cooperation of incidents ranging from local to state-wide
emergency events.
Developed and/or updated various policies, procedures, and programs to include Cal/OSHA
regulatory updates to Heat Illness Prevention, Noise/Hearing Conservation, First Aid/AED/CPR,
Confined Space/Confined Space Rescue, Fall Protection, Forklift Operations, Reporting Injuries,
Spill Prevention Control and Countermeasure Plans (SPCC), inspections and revalidation of 25
qualified District facilities with chemical inventories.
Commenced the first phase of a District-wide program to standardize and modernize District
physical security, access control, monitoring and video system. This phase included a
successful proof of concept evaluation of the new enterprise security model at two District
facilities and Board approval for the migration of selected facilities.
Measures the number of safety
training programs/hours annually
provided to all field employees.
(1) All District field staff participated in
Emergency Preparedness Training
during FY 2015.
0
10
20
30
40
50
FY 12-13 FY 13-14 FY 14-15 FY 15-16
Target Actual & Projected
(1)
LEARNING AND GROWTH: Safety Training Program
133
Finance – General
Mission Statement
To provide timely, accurate, and clear information that optimizes service to the District’s staff and
ratepayers. Through continuous improvement, professional service, and effective fiscal policies the
Finance Department will ensure that financial resources are collected, recorded, protected, and
expended in a fiscally responsible manner.
Department Responsibilities
The Finance Department, under the general direction of the Chief Financial Officer, provides the
following support services: Controller and Budgetary Services, Treasury and Accounting Services,
Payroll and Accounts Payable, and Customer Service. The Department ensures the District’s
conformance with modern finance, accounting theory and practices, and compliance with
applicable state and federal laws. In addition, it provides customer support, meter reading and
maintenance, and water conservation outreach programs. The Finance staff provides highly
responsible and complex administrative and technical support to the District, General Manager, and
Board of Directors.
Meter Maintenance
Finance
Customer Service
134
Position Title FY 2014 FY 2015 FY 2016
Chief Financial Officer 1 1 1
Executive Secretary 111
Secretary 111
Finance Manager, Treasury and Accounting 111
Finance Manager, Controller and Budget 1 1 1
Customer Service Manager 2 2 2
Senior Accountant 4 4 4
Accountant 3 3 3
Accounting Technician (a)222
Lead Customer Service Representative 2 2 2
Customer Service Representative I, II and III 7 7 6
Lead Customer Service Field Representative 1 1 1
Customer Service Field Representative I and II 332
Lead Cross Connection/Meter Maintenance Worker (a)011
Meter Maintenance Worker I & II (a)033
Senior Conservation Specialist (b)011
Total 29 34 32
(a) Beginning in FY 2015, Meter Maintenance was moved to Finance.
(b) Beginning in FY 2015, Senior Conservation Specialist Position was moved to Finance.
Finance - Position Count
District Position Count - 138
Finance Department - (32 Positions)
Treasury and
Accounting
Services
2331 (6)
Customer
Service
2341/2343
(10)
Controller and
Budgetary
Services 2321 (5)
Chief Finance Officer - 2311 (3)
Meter
Maintenance
2342 (8)
135
Board of Directors 107,100$ 0.4%
General Manager 1,605,900 5.3%
General Expense 2,019,400 6.6%
Administrative Services 3,070,500 10.0%
Finance 6,128,400 20.0%
IT and Strategic Planning 3,610,600 11.8%
Water Operations 11,663,400 38.1%
Engineering 2,381,600 7.8%
30,586,900$ 100.0%
FY 2014 FY 2015 FY 2015 FY 2016
Actual Budget Actual* Budget
Finance Chief 503,297$ 517,100$ 524,447$ 544,600$
Controller and Budgetary Services 820,598 827,600 830,236 883,300
Treasury and Accounting Services 1,283,993 1,293,900 1,289,188 1,364,700
Customer Service 2,048,685 2,148,900 1,964,999 2,115,600
Meter Shop 542,089 606,300 601,735 626,100
Water Conservation 264,548 422,900 285,906 594,100
Total 5,463,210$ 5,816,700$ 5,496,511$ 6,128,400$
Finance
Finance,
$6,128,400
FY 2016 Total Departmental Budget
$30.6 Million
*Actual unaudited
136
FY 2014 FY 2015 FY 2015 FY 2016
Actual Budget Actual* Budget
Labor and Benefits 4,374,755$ 4,567,800$ 4,475,530 4,687,100$
Travel and Meetings 14,990 25,100 17,611 26,100
Conservation and Outreach 133,322 167,900 139,965 170,900
General Office Expense 147,820 164,700 153,875 167,800
Equipment - 200 - -
Fees 368,200 362,200 354,813 351,600
Services 171,379 237,900 123,313 432,500
Training - - - 500
Materials & Maintenance 98,151 135,900 138,063 136,900
Bad Debt Expense 154,593 155,000 93,341 155,000
Total 5,463,210$ 5,816,700$ 5,496,511$ 6,128,400$
Finance
Budget vs. Actual, in thousands ($)
$2,500
$4,000
$5,500
2012 2013 2014 2015 2016
4,
7
1
2
4,
8
8
7
5,
8
6
3
5,
8
1
7
6,
1
2
8
4,
5
4
0
5,
6
5
5
5,
4
6
3
5,
4
9
7
Budget Actual
*Actual unaudited
137
Finance – Strategic Plan Objectives
Finance Department Objectives – Strategic Plan FY 2015-2018
Objectives on Schedule:
BUSINESS PROCESSES
Evaluate and enhance the District’s water conservation programs and services.
Improve and streamline meter related processes.
Streamline Finance business processes.
FINANCIAL
Implement an internal audit program for the District with the purpose of ensuring
adequate controls are in place to safeguard the property of the District.
Improve financial planning and communication regarding the expenditure of District
funds.
Objectives behind Schedule:
CUSTOMER
Enhance communications with customers using our new phone system.
138
Finance – Controller and Budgetary Services
Controller and Budgetary Services
Services We Provide
The Controller and Budgetary Services Division is responsible for developing and publishing the
annual operating and capital budgets as well as preparing the six-year financial plan and proposing
rate changes. Staff prepares monthly and annual reports, monitors budget variances, and
coordinates interactions with outside agencies. This division is also responsible for the bi-weekly
payroll of 138 full-time and temporary employees using the District’s Integrated Financial Eden
System. Timesheets and pay stubs are collected and distributed electronically. Benefits and
deductions are processed bi-weekly. Federal and state tax returns are filed on a quarterly basis and
W2s are filed annually.
Performance Measures – Strategic Plan FY 2015-2018
Operations & Maintenance (O&M)
cost per account/per customer.
(QualServe)
Comparing actual to budgeted
overtime to monitor costs.
FINANCIAL: O & M Cost per Account
FINANCIAL: Overtime Percentage
$0
$100
$200
$300
$400
$500
$600
FY 12-13 FY 13-14 FY 14-15 FY 15-16
Target Actual & Projected
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
FY 12‐13 FY 13‐14 FY 14‐15 FY 15‐16
Target Actual & Projected
139
Finance – Controller and Budgetary Services
District's average customer bill
as compared to other agencies
in San Diego County. Otay is
ranked 7th of 28 agencies.
District's average customer bill
as compared to other agencies
in San Diego County. Otay is
ranked 10th of 23 agencies.
Percentage for unaccounted
Water. (QualServe)
FINANCIAL: Sewer Rate Ranking
FINANCIAL: Water Rate Ranking
BUSINESS PROCESSES: Distribution System Loss
5
8
11
14
17
20
23
FY 12-13 FY 13-14 FY 14-15 FY 15-16
Target Actual & Projected
5
8
11
14
17
20
23
FY 12-13 FY 13-14 FY 14-15 FY 15-16
Target Actual & Projected
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
FY 12-13 FY 13-14 FY 14-15 FY 15-16
Target Actual & Projected
140
Finance – Controller and Budgetary Services
Accomplishments – Fiscal Year 2014-2015
For the eleventh consecutive year, the District has met nationally recognized guidelines and
has been awarded the Distinguished Budget Presentation award for the Fiscal Year 2014-
2015 Budget by the Government Finance Officers Association (GFOA). In order to receive
this award, a governmental unit must publish a budget document that meets program criteria
as a policy document, a financial plan, as an operations guide and as a communications
device. This award is a significant achievement and is the highest form of recognition in
governmental budgeting. This year the District also received a Special Capital Recognition
from GFOA for its Fiscal Year 2014-2015 Budget.
For the ninth consecutive year, the District has been awarded the Operating Budget
Excellence Award for the Fiscal Year 2014-2015 Budget by the California Society of Municipal
Finance Officers (CSMFO) which recognizes agencies that have prepared a budget
document or a communication tool that meets certain standards.
For the tenth consecutive year, the District has been awarded the Capital Budget Excellence
Award for the Fiscal Year 2014-2015 Capital Improvement Program Budget by the CSMFO
which recognizes agencies that have prepared a Capital Improvement Budget document or
a communication tool that meets certain standards.
Consolidated eight water IDs and two sewer IDs into one ID each for water and sewer. The
consolidation process involved creating, sending and posting multiple Proposition 218
notices regarding the consolidation and public hearings. Finance staff effectively worked
with legal counsel and communicated with various public agencies within each ID to post
multiple public notices. As a result of the consolidation, greater efficiency has been achieved.
141
Finance – Treasury and Accounting Services
Treasury and Accounting Services
Services We Provide
The Treasury and Accounting Services Division coordinates and directs the activities of the general
ledger accounting; audit; banking and cash management; investments and treasury functions; debt
financing; job costing; cost accounting; fixed assets; and contract review. The division is responsible
for the accounts payable process which pays approximately 750 invoices on a monthly basis. It is
also responsible for completing the District’s annual financial audit and publishing of the
Comprehensive Annual Financial Report (CAFR). The division conducts an annual review of the
District’s Investment Policy, as required by law, with approval by the Board of Directors. It provides
financial analysis and review of staff projects and operational business proposals. It also assists in
the preparation of the District’s annual operating and capital budgets, along with updating the Rate
Model and the six-year financial plan.
Performance Measures – Strategic Plan FY 2015-2018
Measures level of debt coverage
ratio (ability to pay debt).
(QualServe) Includes growth
related revenue. The minimum
legal level is 125%.
Measures all of the District's
reserves against the Board
adopted Reserve Policy levels.
FINANCIAL: Debt Coverage Ratio
FINANCIAL: Reserve Level
100.0%
125.0%
150.0%
175.0%
200.0%
FY 12-13 FY 13-14 FY 14-15 FY 15-16
Target Actual & Projected
70.0%
80.0%
90.0%
100.0%
FY 12-13 FY 13-14 FY 14-15 FY 15-16
Target Actual & Projected
142
Finance – Treasury and Accounting Services
Accomplishments – Fiscal Year 2014-2015
For the eleventh consecutive year, the District has been awarded the Certificate of
Achievement for Excellence in Financial Reporting by the Government Finance Officers
Association (GFOA) for the Comprehensive Annual Financial Report (CAFR) for fiscal year
ending June 30, 2014. This is the highest form of recognition in the area of governmental
accounting and financial reporting, and clearly demonstrates how the District takes great
care in maintaining high financial standards.
143
Finance – Customer Service
Customer Service
Services We Provide
The Customer Service Division is responsible for providing billing, receipting, collections, and
customer care for water and sewer services in addition to assisting with water conservation. The
billing and customer care teams handle the coordination of billing and receipting of approximately
49,000 accounts per month. Customers have the choice of receiving either a paper bill or an
electronic bill. Various payment options include 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 give customers access to their account information 24/7. If they desire more personal
service, the customer care team handles an average of 5,000 customer calls per month. The water
conservation staff promotes and conducts residential and large landscape surveys, promotes the
Water Conservation Garden as a resource, participates in outreach events throughout the
community, helps fund and promote a variety of incentive and other programs available to its
customers, and manages the District’s Water Shortage Response Plan as well as its water waste
reporting program.
The Meter Shop is responsible for the installation and maintenance of all meters in the District.
They manage the District’s backflow/cross-connection prevention which includes annual testing of
devices and water meters to ensure the continued safety of the potable water system. Staff
responds to customer issues regarding meter accuracy, conducts site audits, and maintains
records as required by various regulatory agencies. The Meter Reading team reads approximately
49,000 potable, recycled, and District meters a month using automatic meter reading technology.
Performance Measures – Strategic Plan FY 2015-2018
Percentage of calls as a
measure of all calls received.
The targets are set by industry
standards.
CUSTOMER: Answer Rate
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
FY 12-13 FY 13-14 FY 14-15 FY 15-16
Target Actual & Projected
144
Finance – Customer Service
Accomplishments – Fiscal Year 2014-2015
In May 2015, the State Water Resources Control Board issued a drought mandate to reduce
consumption 20% over 2013 levels. The District successfully responded to the mandate
through outreach via phone calls and emails to the 50,000 District customers. In June 2015,
the District had a 25.9% reduction over 2013 water usage.
In FY 2015, the customer service division expanded its responsibility to also respond to non-
emergency operations customer calls. This function was previously handled by the
Operations Secretary. The change in responsibility has increased the efficiency and
effectiveness of customer service for the District.
Percentage of correct bills
issued. (QualServe)
The targets are set by industry
standards.
Meet or exceed Department of
Water Resources and California
Urban Water Council targets for
per capita use of potable water.
FINANCIAL: Billing Accuracy
CUSTOMER: Gallons per Capital per Day
95.0%
96.0%
97.0%
98.0%
99.0%
100.0%
FY 12-13 FY 13-14 FY 14-15 FY 15-16
Target Actual & Projected
100
120
140
160
180
200
FY 12-13 FY 13-14 FY 14-15 FY 15-16
Target Actual & Projected
145
Finance – Customer Service
Responded to over 400 reports of water waste via a letter, phone call or site visit that resulted
in more efficient and effective water conservation efforts.
Successfully moved the large meter testing program in-house with the purchase of the
equipment to accomplish the testing. This has yielded a significant cost savings and is also
less disruptive to customers because staff has more discretion in scheduling the testing.
Staff has tested 120 large meters in a nine-month period.
Implemented a mobile payment platform to allow customers 24 hour access to pay their
bills using a smart phone or tablet. This enhancement provides customers with greater
flexibility in viewing and paying their water bills.
146
IT and Strategic Planning - General
Mission Statement
To provide superior technology and strategic planning services to support District goals, staff and
customer service.
Department Responsibilities
The Information Technology and Strategic Planning Department, under the general direction of the
Chief Information Officer and the Assistant Chief of Administrative Services and Information
Technologies and Strategic Planning, 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; and provides highly responsible complex administrative and technical
support to the Directors.
147
Position Title FY 2014 FY 2015 FY 2016
Chief Information Officer 1 1 1
IT Manager 111
GIS Manager 111
GIS Programmer/Analyst 1 1 1
GIS Analyst 111
GIS Technician 1 1 1
Network Engineer 1 1 1
Database Administrator 111
Data Systems Technician 0 0 1
Lead Business System Analyst 111
Business System Analyst I and II 222
Network Analyst 111
Total 121213
(a) Interim position is budgeted in Administative Services and also oversees IT and Strategic Planning.
IT and Strategic Planning - Position Count
District Position Count - 138
Information Technology & Strategic Planning Department - (13 Positions)
IT Applications
2411 (5)
IT Operations
2421 (3)
GIS
2431 (4)
Chief Information Officer
2411 (1)
Assistant Chief,
Administrative Services and IT
2411
(a)
148
Board of Directors 107,100$ 0.4%
General Manager 1,605,900 5.3%
General Expense 2,019,400 6.6%
Administrative Services 3,070,500 10.0%
Finance 6,128,400 20.0%
IT and Strategic Planning 3,610,600 11.8%
Water Operations 11,663,400 38.1%
Engineering 2,381,600 7.8%
30,586,900$ 100.0%
FY 2014 FY 2015 FY 2015 FY 2016
Actual Budget Actual* Budget
IT Chief/Applications 899,920$ 957,000$ 827,936$ 304,600$
IT Operations 1,384,713 1,462,400 1,738,011 2,376,400
Geographic Information System 736,670 954,400 925,602 929,600
Total 3,021,303$ 3,373,800$ 3,491,549$ 3,610,600$
IT and Strategic Planning
IT and Strategic
Planning,
$3,610,600
FY 2016 Total Departmental Budget
$30.6 Million
*Actual unaudited
149
FY 2014 FY 2015 FY 2015 FY 2016
Actual Budget Actual* Budget
Labor and Benefits 2,056,743$ 2,042,200$ 2,090,887$ 2,326,900$
Travel and Meetings 20,276 26,700 31,946 32,700
General Office Expense 426 1,500 983 1,400
Equipment 844,062 1,017,700 1,136,520 983,600
Services 88,456 278,700 223,623 259,000
Training 11,340 7,000 7,590 7,000
Total 3,021,303$ 3,373,800$ 3,491,549$ 3,610,600$
IT and Strategic Planning
Budget vs. Actual, in thousands ($)
$1,000
$1,900
$2,800
2012 2013 2014 2015 2016
3,
0
8
0
2,
9
9
6
3,
1
3
6
3,
3
7
4
3,
6
1
1
2,
8
7
2
2,
9
3
3
3,
0
2
1
3,
4
9
2
Budget Actual
*Actual unaudited
150
IT and Strategic Planning – IT Operations
IT and Strategic Plan Objectives – Strategic Plan FY 2015-2018
Objectives Completed:
BUSINESS PROCESSES
Implement GIS-centric work order system.
Improve the operating cost and efficiency of data center and network services.
Replace SCADA software system.
Implement wireless radio and data network for SCADA and field operations.
Objectives on Schedule:
BUSINESS PROCESSES
Implement enterprise GIS centric data structures, tools, and mechanisms for asset
management.
Develop asset management criticality and condition assessments for District
facilities.
Completed jointly with Water Operations Department.
(1)
(1)
(1)
(1)
151
IT and Strategic Planning – IT Operations
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; and information systems support to the District. The
department also provides highly responsible and complex administrative and technical support to
the District, General Manager, and Board of Directors.
Accomplishments – Fiscal Year 2014-2015
Updated and implemented the FY 2015 – 2018 Strategic Plan. This is the 12th year the plan
has been in place. The effort involved an analysis of the past plan, assessment of industry
trends, workshops with management, line staff and the Board. Included in the plan was a
significant update to strategic Information System initiatives including a replacement work
order and SCADA system for operational improvements and further alignment of enterprise
systems.
IT executed a major redesign of the District’s public facing website. The redesign placed
emphasis on customer ease of use, improved functionality, and overall information
access. The site was designed from a “mobile-friendly” perspective to ensure access by the
growing number of mobile users. The new site also offers an ePayment option for customers
wanting to make online payments.
The District replaced its legacy enterprise work order system with Cityworks. Cityworks is a
SQL based GIS-centric system, which leverages the District’s GIS and Financial system
investments by integrating enterprise work order function, asset management, expenditures
and capital planning. The inter-relationship of these processes is core to the day-to-day
operation and maintenance of the District’s water infrastructure services and asset
management.
During the past year, the District continued the replacement of its legacy enterprise SCADA
system. The new SCADA system provides real-time information, monitoring and device
management of the District’s reservoir, Treatment Plant and water distribution assets.
152
IT and Strategic Planning – IT Operations
IT Operations
Services We Provide
IT Operations is responsible for day-to-day functions of the District’s enterprise data center; network
and desktop hardware/software; disaster recovery; telecommunications; mobile and wireless
networks; website; and help desk. IT Operations has shared responsibilities of enterprise physical
access security and video surveillance services.
Performance Measures – Strategic Plan FY 2015-2018
Accomplishments – Fiscal Year 2014-2015
IT staff replaced its aging enterprise data storage infrastructure utilized for the District’s
business critical applications. The new data storage solution offers improved administration,
increased capacity, performance, reliability, and security. This new solution also gives the
District many advantages including data encryption functionality, improved data protection,
hardware redundancy, and scalability.
Percentage of uptime for network
during normal business hours.
(1) Did not include customer online bill
payment services prior to 2015.
Tracks the number of visitors
to District website per month.
BUSINESS PROCESSES: Network Availability
LEARNING & GROWTH: Website Hits
99.0%
99.2%
99.4%
99.6%
99.8%
100.0%
FY 12-13 FY 13-14 FY 14-15 FY 15-16
Target Actual & Projected
(1)
1,000
16,000
31,000
46,000
61,000
76,000
91,000
106,000
FY 12-13 FY 13-14 FY 14-15 FY 15-16
Target Actual & Projected
153
IT and Strategic Planning – GIS System
Geographic Information System (GIS)
Services We Provide
The GIS division is responsible for enterprise development and maintenance of District spatial data,
applications, and related programs. It is also responsible for the data collection and data QA/QC of
the District’s facility data and land-based data. In addition, it provides technical support in designing,
developing, documenting and maintaining the District’s database systems and creates database
structures that consolidate the conceptual, logical and physical models of data.
Accomplishments – Fiscal Year 2014-2015
Upgraded the District’s Enterprise GIS Dashboard with enhanced functions focusing on
customer billing information. The Dashboard enhances staff effectiveness and productivity
by providing real-time data to Customer Service staff, Meter Readers, Meter Shop, and
Operations field staff.
Developed a new Engineering Construction Inspection template for the GIS mobile platform.
The new template will optimize the field data and reporting function, save time, and assist
Inspection staff with enhanced productivity.
Developed new GIS function templates for the Water Utility group. The new hydrant, potable
meter, and recycled meter templates will enhance activity, coordination, and status reporting
among field and supervisor staff. The templates will also allow supervisors to produce daily,
weekly, and monthly activity reports.
Served as the U.S. Geological Survey (USGS) image acquisition contract steward for
Mid/South San Diego County region. Under our stewardship, the District coordinated the
participation of nine San Diego County agencies. The District was responsible for the
negotiation and contract execution. Via this effort, the District also saved more than $30,000
on the yearly imaging service cost.
154
Water Operations - General
Mission Statement
To provide all operations and maintenance service in the most efficient, safe, and cost effective
manner to all internal and external customers, and to strive to continually improve the level of service.
Department Responsibilities
The Water Operations Department, under the general direction of the Chief of Water Operations,
provides the following support services: Potable and Recycled Water System Operations,
Construction Maintenance, Sewer Collection, and Wastewater Treatment. The department provides
highly responsible and complex technical and administrative support to the District, General
Manager, and Board of Directors.
155
Water Operations - Position Count
District Position Count - 138
Water Operations Department - (56 Positions)
Utility Services
Utility Maintenance/Construction 3231 (1)
Utility Maintenance 3232 (18)
Fleet Maintenance 3233 (4)
Pump & Electrical 3236 (5)
Water Operations
Water System Operations 3221 (1)
Water System 3225 (13)
Recycled System 3226 (5)
SCADA System 3227 (2)
Laboratory 3243 (1)
Reclamation Plant 3244 (4)
Chief, Water Operations 3211 (2)
156
Position Title FY 2014 FY 2015 FY 2016
Chief, Water Operations 1 1 1
Assistant Chief, Water Operations 0 0 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
Lead Water Systems Operator 2 2 2
Water Systems Operator I, II, and III 9 9 8
Valve Maintenance Worker 1 1 2
Senior Disinfection Technician 2 2 2
Senior SCADA Instrumentation Technician 1 1 2
SCADA Instrumentation Technician 1 1 0
Electrician I and II 2 2 2
Pump Mechanic I and II 2 2 2
Lead Cross Connection/ Meter Maintenance Worker (1)100
Meter Maintenance Worker I and II (1)400
Utility Services Manager 110
Utility Maintenance Supervisor 222
Utility Crew Leader 3 3 3
Utility Workers I and II 8 8 8
Senior Utility/Equipment. Operator 3 3 3
Fleet Maintenance Supervisor 1 1 1
Equipment Mechanic I and II 3 3 3
Reclamation Plant Supervisor 1 1 1
Lead Reclamation Plant Operator 1 1 1
Reclamation Plant Operator I, II, III 2 2 2
Recycled Water Distribution Operator 4 4 4
Laboratory Analysts 1 1 1
Total 615656
(1) Beginning in FY 2015, Meter Maintenance was moved to Finance.
Water Operations - Position Count
District Postion Count - 138
Water Operations Department - (56 Positions)
157
Board of Directors 107,100$ 0.4%
General Manager 1,605,900 5.3%
General Expense 2,019,400 6.6%
Administrative Services 3,070,500 10.0%
Finance 6,128,400 20.0%
IT and Strategic Planning 3,610,600 11.8%
Water Operations 11,663,400 38.1%
Engineering 2,381,600 7.8%
30,586,900$ 100.0%
FY 2014 FY 2015 FY 2015 FY 2016
Actual Budget Actual* Budget
Water Operations Chief 426,459$ 445,900$ 440,401$ 450,300$
Water Systems 5,723,947 6,329,200 5,916,109 6,115,700
Construction Maintenance 4,164,059 4,609,000 4,355,838 5,097,400
Total 10,314,465$ 11,384,100$ 10,712,348$ 11,663,400$
Water Operations
Water
Operations,
$11,663,400
FY 2016 Total Departmental Budget
$30.6 Million
*Actual unaudited
158
FY 2014 FY 2015 FY 2015 FY 2016
Actual Budget Actual* Budget
Labor and Benefits (1)7,160,946$ 7,744,600$ 7,466,321 8,008,200$
Travel and Meetings 38,385 49,300 29,911 48,800
General Office Expense 74 300 - 300
Equipment 32,317 42,200 32,096 44,700
Fees 75,652 65,500 79,477 69,400
Services 301,853 415,600 243,149 540,100
Training 9,096 11,000 10,680 9,000
Materials & Maintenance 1,573,618 1,760,700 1,642,201 1,946,500
Sewer Charges 1,122,524 1,294,900 1,208,513 996,400
Total 10,314,465$ 11,384,100$ 10,712,348$ 11,663,400$
(1) Excludes CIP labor and benefits.
Water Operations
Budget vs. Actual, in thousands ($)
$-
$4,000
$8,000
$12,000
2012 2013 2014 2015 2016
12
,
6
8
9
11
,
8
5
3
10
,
9
1
3
11
,
3
8
4
11
,
6
6
3
10
,
9
3
6
10
,
4
3
9
10
,
3
1
5
10
,
7
1
2
Budget Actual
*Actual unaudited
159
Water Operations – Strategic Plan Objectives
Water Operations Objectives - Strategic Plan FY 2015-2018
In Phase 1 of the 2015-2018 Strategic Plan, the Operations Department’s primary responsibilities was
to sponsor and implement two major software replacement projects. As a GIS based asset
management program is at the foundation of the District’s long-term plans, Water Operations
needed to implement a GIS based work order and SCADA system so that all future work would be
accurately reflected in future maintenance and replacement plans. The Senior Team designated
Water Operations as the initial department to effect this upgrade. As such, the 2015 Strategic
Objectives were met by the Operations Department’s sponsorship and implementation efforts; both
systems were installed on time and budget. In the 2016–2018 Strategic Plan the IT and Strategic
Planning Section will take the lead in the implementation and reducing the per unit costing of work
and streamline business processes.
Objectives Completed:
BUSINESS PROCESSES
Replace SCADA software system.
Implement wireless radio and data network for SCADA and field operation.
Objectives on Schedule:
BUSINESS PROCESSES
Develop asset management criticality and condition assessments for District
facilities.
(1) Completed jointly with IT and Strategic Planning Section.
(1)
(1)
(1)
160
Water System Operations
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.
Water System Operations
Services We Provide
The Water Systems Operations Division encompasses five sections which are responsible for
operations and monitoring of the potable and recycled water distribution systems as well as the
Ralph W. Chapman Water Recycling Facility. The water system operators monitor and operate the
water distribution system to ensure it provides safe, reliable drinking water to the District’s customers.
The SCADA staff performs installations, maintenance, updates, and modifications to the SCADA
control system and related communications equipment, both for existing facilities as well as CIP
projects. The treatment plant staff maintains and operates the District’s sewer treatment plant in
order to produce high-quality recycled water to the District’s recycled water customers. The recycled
system operators monitor and operate the recycled water distribution system to ensure it provides
adequate supply to the District’s recycled water customers and periodically conduct cross-
connection tests to ensure that the potable distribution system is completely isolated from the
recycled water system. Laboratory staff ensures all regulatory-required sampling, analyses, and
reporting is done to meet the requirements from the State Water Resources Control Board 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.
Performance Measures - Strategic Plan FY 2015-2018
BUSINESS PROCESSES: Technical Quality Complaint
0
2
4
6
8
10
FY 12-13 FY 13-14 FY 14-15 FY 15-16
Target Actual & Projected
161
Water System Operations
(1) In FY 2013-2014 the target was not met due to the repairs needed to the 927/944 pressure regulating valves
at the Use Area.
Measures the effectiveness in
planned maintenance.
Percentage of planned
maintenance costs compared
to combined planned and
corrective maintenance costs.
Tracks the percentage of
scheduled PMs completed
in the Reclamation Plant.
BUSINESS PROCESSES: Planned Recycled Water Maintenance Ratio
BUSINESS PROCESSES: Planned Wastewater Maintenance Ratio
LEARNING AND GROWTH: Percentage of Preventative Maintenance (PM) Completed in
the Reclamation Plant
50%
60%
70%
80%
90%
100%
FY 12-13 FY 13-14 FY 14-15 FY 15-16
Target Actual & Projected
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
FY 12-13 FY 13-14 FY 14-15 FY 15-16
Target Actual & Projected
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
FY 12-13 FY 13-14 FY 14-15 FY 15-16
Target Actual & Projected
(1)
162
Water System Operations
(1) FY 2012-2013 was below target due to low staffing levels.
Measures the direct cost to
treat one million gallons of
wastewater (includes employee
salaries but not overhead and
fringe benefits.)
(QualServe)
Number of valves exercised
per year for maintenance of
distribution systems' infrastructure
to ensure minimal interruption
of potable water delivery to
customers.
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)
BUSINESS PROCESSES: Direct Cost of Treatment per MGD
BUSINESS PROCESSES: Valve Exercising Program
BUSINESS PROCESSES: Water Distribution System Integrity
$700
$800
$900
$1,000
$1,100
FY 12-13 FY 13-14 FY 14-15 FY 15-16
Target Actual & Projected
0
1,000
2,000
3,000
4,000
5,000
6,000
FY 12-13 FY 13-14 FY 14-15 FY 15-16
Target Actual & Projected
(1)
0.0
5.0
10.0
15.0
20.0
FY 12-13 FY 13-14 FY 14-15 FY 15-16
Target Actual & Projected
163
Water System Operations
(1) Both actual/projected and target are at 100%.
(2) The long-term leak detection plan at the District was to complete 100% leak detection over 5 years (about 20% per
year). The board approved staff’s recommendation to complete the remaining 55% in FY 2016.
Quantifies the annual average of
planned water outages experienced
by the utility customer expressed
as number of accounts affected
per 1,000 accounts. (QualServe)
Quantifies the percentage of time
each year that the District meets
all of the health related drinking
water standards in U.S. National
Primary Drinking Water Regulations.
(QualServe)
Measures the percentage of
potable distribution system
surveyed for leaks.
FY 2014-2015 is the first year for this
performance measure.
BUSINESS PROCESSES: Planned Water Service Disruption Rate
BUSINESS PROCESSES: Potable Water Compliance Rate
BUSINESS PROCESSES: Leak Detection Program
0
2
4
6
8
10
FY 12-13 FY 13-14 FY 14-15 FY 15-16
Target Actual & Projected
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
FY 12-13 FY 13-14 FY 14-15 FY 15-16
Target Actual & Projected
(1)
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
FY 12-13 FY 13-14 FY 14-15 FY 15-16
Target Actual & Projected
(2)
164
Water System Operations
(1) Both actual/projected and target are at 100%
Measure for the full operation
and maintenance cost to treat
one million gallons of
wastewater. (QualServe)
Measures the percentage of
required recycled water use
sites inspected per year.
FY 2014-2015 is the first year for this
performance measure.
Measures the percentage of
recycled water use sites tested
per year vs. the number required
by the Department of Occupational
Health.
FY 2014-2015 is the first year for this
performance measure.
BUSINESS PROCESSES: Annual Recycled Water Site Inspection
BUSINESS PROCESSES: Recycled Water Shutdown Testing
BUSINESS PROCESSES: O&M Cost per MG
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
FY 12-13 FY 13-14 FY 14-15 FY 15-16
Target Actual & Projected
(1)
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
FY 12-13 FY 13-14 FY 14-15 FY 15-16
Target Actual & Projected
$1,000
$1,200
$1,400
$1,600
$1,800
$2,000
FY 12-13 FY 13-14 FY 14-15 FY 15-16
Target Actual & Projected
165
Water System Operations
Tracks number of leaks or breaks
per 100 miles of water distribution
system.
.
(1) FY 2014-2015 there was one break/leak on the recycled water system.
Accomplishments – Fiscal Year 2014-2015
Coordinated proactive leak detection services for approximately 20% of the potable system
and 18% of the recycled system. This project identified 93 potable leaks, which in turn were
repaired by the Utility Maintenance section and resulted in a payback of the cost of the leak
detection survey in about 4 months.
Effective July 1, 2015, transferred the Recycled Water Operator division to the Engineering
Department to streamline the business process.
Coordinated with Water Systems and Utility Maintenance sections and the Customer Service
division to transfer the valve crew business process from Water Systems to Utility
Maintenance. This resulted in a reduction of one full-time employee.
With the assistance of the District’s Environmental Specialist, staff centralized and
coordinated all Hazardous Management Business Plan inspections. This revised process
leverages synergy between departments and helps ensure compliance with regulating
agencies.
During FY 2015, the new SCADA system and Cityworks implementation began. This will
streamline processes. CityWorks will automatically generate routine maintenance work
orders from the motor and engine run-time hours provided by SCADA.
BUSINESS PROCESSES: Recycled Water System Integrity
0
2
4
6
8
10
FY 12-13 FY 13-14 FY 14-15 FY 15-16
Target Actual & Projected
(1)
166
Water Operations – Utility Services Maintenance
Tracks the percentage of
scheduled PM's that are
completed in the Fleet Shop.
Measures the effectiveness in
planned maintenance.
Utility Services Maintenance
Services We Provide
The Utility Maintenance and Construction Division has three sections which provide vital
maintenance functions to ensure continuity of the drinking water, recycled water, and wastewater
services to District customers while adhering to all applicable regulatory compliance requirements.
Utility Maintenance staff maintains all collection and potable distribution and recycled distribution
systems, including regular inspection and cleaning of the wastewater collection system. They also
exercise valves, install and/or repair main pipelines and service lines expediently, while following all
established safety rules and regulations. The Fleet Maintenance staff implements active preventative
maintenance practices and repairs on all District vehicles and equipment to ensure optimum
performance while establishing fuel efficient operational practices and emissions compliance. Pump
and Electrical staff performs preventative, predictive and corrective maintenance on all pumps,
motors, switchgear, and control valves in the District and assists with electrical maintenance and
installation throughout the District.
Performance Measures – Strategic Plan FY 2015-2018
BUSINESS PROCESSES: Planned Potable Water Maintenance Ratio
LEARNING AND GROWTH: Percentage of Preventative Maintenance Completed in the
Fleet Maintenance
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
FY 12-13 FY 13-14 FY 14-15 FY 15-16
Target Actual & Projected
75.0%
80.0%
85.0%
90.0%
95.0%
100.0%
FY 12-13 FY 13-14 FY 14-15 FY 15-16
Target Actual & Projected
167
Water Operations – Utility Services Maintenance
Number of wastewater collection
system failures per 100 miles of
collection system pipeline.
(QualServe)
Measures the wastewater
collection system pipeline
condition and the effectiveness
of planned maintenance.
(QualServe)
Tracks the percentage of
scheduled PM's completed
in the Pump/Electric
section.
(1) The actual and projected number of system failures for FY 2013-2016 is 0.
(2) Both actual/projected and targets are at 0.0%.
(3) The actual and projected maintenance is 100% complete.
BUSINESS PROCESSES: Collection System Integrity
BUSINESS PROCESSES: Sewer Overflow Rate
LEARNING AND GROWTH: Percentage of Preventative Maintenance (PM) Completed in
the Pump/Electric Section
0
1
2
3
4
FY 12-13 FY 13-14 FY 14-15 FY 15-16
Target Actual & Projected (1)
0.0%
0.5%
1.0%
1.5%
FY 12-13 FY 13-14 FY 14-15 FY 15-16
Target Actual & Projected
(2)
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
FY 12-13 FY 13-14 FY 14-15 FY 15-16
Target Actual & Projected (3)
168
Water Operations – Utility Services Maintenance
Measures the number of
facilities and generators tested
on an annual basis.
FY 2014-2015 is the first year for this
performance measure.
Measures the number of
mains flushed and fire
hydrants maintained.
FY 2014-2015 is the first year for this
performance measure.
Measures the number of critical
valves exercised annually.
FY 2014-2015 is the first year for this
performance measure.
Note: In FY 2014-2015, fire hydrant maintenance was the focus for the valve crew. For FY 2015-2016, main flushing will
only be completed on a reactive basis.
BUSINESS PROCESSES: Emergency Facility Testing
BUSINESS PROCESSES: Main Flushing and Fire Hydrant Maintenance
BUSINESS PROCESSES: Critical Valve Exercising
0
10
20
30
40
FY 12-13 FY 13-14 FY 14-15 FY 15-16
Target Actual & Projected
0
200
400
600
800
FY 12-13 FY 13-14 FY 14-15 FY 15-16
Target Actual & Projected
0
100
200
300
400
500
600
FY 12-13 FY 13-14 FY 14-15 FY 15-16
Target Actual & Projected
169
Water Operations – Utility Services Maintenance
Accomplishments – Fiscal Year 2014-2015
As a result of rotating all levels of Utility Workers through the CCTV and flushing tasks, Utility
Maintenance staff was able to rely more on Utility Worker I and Utility Worker II personnel to
reduce labor costs when performing collection system maintenance.
The overall size of the fleet was reduced by two units thereby reducing capital and operating
expenses.
As a result of the District’s proactive inspection efforts, staff shut down and repaired defects
in a 14-inch recycled force main that was located in an environmentally sensitive area.
Conducted the District’s first systematic and certified pressure vessel inspection. The
inspection was performed by a certified pressure vessel inspector (API 510) on the District’s
oldest hydro tank (Rancho Jamul) with no significant defects noted. These inspection efforts
will continue until all hydro tank inspections are complete. Based on the results of the
inspections, they will continue on a pro-active frequency.
170
Engineering - General
Mission Statement
To provide Engineering, Construction, and Environmental services for the District and for the
development community, quality control of future District assets, and expediting of the
permitting process, through the use of our dedicated employees and innovative technology
with the goal of attaining excellent customer satisfaction.
Departmental Responsibilities
The Engineering Department, under the general direction of the Chief of Engineering,
provides the following support services: Planning, Design, Construction Management,
Inspection Project Management, Surveying, and Public Services of all District facilities. The
department is responsible for strategic planning; the capital budget; water resources
planning; support facilities planning; environmental services; quality control; construction;
developer designed and constructed facilities; along with coordinating assigned activities
with other District departments and outside agencies. It provides highly responsible and
complex administrative and technical support to the District, General Manager, and the
Board of Directors.
171
Position Title FY 2014 FY 2015 FY 2016
Chief, Engineering 1 1 1
Executive Secretary 111
Secretary 111
Engineering Manager 222
Senior Civil Engineer 2 2 2
Associate Civil Engineer 0 0 1
Construction Management Specialist 1 0 0
Assistant Civil Engineer I and II 110
Environmental Compliance Specialist 1 1 1
Permit Technicians 2 2 2
Senior Engineering Technician 222
Inspection Supervisor 111
Construction Inspectors I and II 333
Supervising Land Surveyor 111
Assistant Survey Technician 1 1 1
Total 201919
Engineering - Position Count
District Position Count - 138
Engineering Department - (19 Positions)
Engineering Services 3321 (6)
Environmental Services 3451 (1)
Public Services 3421 (3)
Field Services 3431 (6)
Chief, Engineering
3311 (3)
172
Board of Directors 107,100$ 0.4%
General Manager 1,605,900 5.3%
General Expense 2,019,400 6.6%
Administrative Services 3,070,500 10.0%
Finance 6,128,400 20.0%
IT and Strategic Planning 3,610,600 11.8%
Water Operations 11,663,400 38.1%
Engineering 2,381,600 7.8%
30,586,900$ 100.0%
FY 2014 FY 2015 FY 2015 FY 2016
Actual Budget Actual* Budget
Engineering Chief 302,990$ 371,900$ 338,021$ 390,700$
Engineering Services (1)497,566 835,300 728,167 808,500
Public Services (2)849,590 948,800 931,380 1,016,500
Environmental Services 177,563 202,500 135,114 165,900
Total 1,827,709$ 2,358,500$ 2,132,682$ 2,381,600$
(1) Engineering Services includes Planning, Design, and Water Resources.
(2) Public Services includes Public, Construction, and Survey Services.
Engineering
Engineering,
$2,381,600
FY 2016 Total Departmental Budget
$30.6 Million
*Actual unaudited
173
FY 2014 FY 2015 FY 2015 FY 2016
Actual Budget Actual* Budget
Labor and Benefits (1)1,392,467$ 1,587,800$ 1,483,742$ 1,609,600$
Travel and Meetings 17,805 18,700 17,062 19,400
General Office Expense 957 1,000 330 7,500
Fees 26,050 33,000 21,832 30,000
Services 389,828 705,100 606,756 702,600
Training 570 12,900 2,960 12,500
Materials & Maintenance 32 - - -
Total 1,827,709$ 2,358,500$ 2,132,682$ 2,381,600$
(1) Excludes CIP labor and benefits.
Engineering
Budget vs. Actual, in thousands ($)
0
500
1,000
1,500
2,000
2,500
2012 2013 2014 2015 2016
1,
8
3
7
1,
8
6
2
2,
0
2
6
2,
3
5
9
2,
3
8
2
1,
8
1
7
1,
8
1
7
1,
8
2
8
2,
1
3
3
Budget Actual
*Actual unaudited
174
Engineering - Strategic Plan Objectives
Engineering Strategic Plan Objectives – Strategic Plan FY 2015-2018
Objectives on Schedule:
BUSINESS PROCESSES
To evaluate options to efficiently manage and operate a sewer system in the
Jamacha Basin with the San Diego County Sanitation Deparment.
Evaluate and provide recommendations to the City of San Diego Pure Water
Program.
175
Engineering – Planning, Design
Planning / Design / Environmental / Water Resources
Services We Provide
The Planning, Design, Environmental, and Water Resources Divisions provide a variety of
services directly related to potable water, recycled water, and sewer services. Water
resources staff identifies, negotiates, and develops additional potable and recycled water
supplies. Planning staff develops the preliminary design of a project in order to facilitate final
design and ultimately construction of the facility. Planning staff also coordinates the review
of planning documents related to potential new development. Design staff prepares the
design of facilities and advertises projects for bid. Environmental staff coordinates and tracks
the project through the construction stage and for a period after construction, if long-term
mitigation is required. In addition, staff assists the Operations Department on special design
projects related to maintenance of existing facilities including the Ralph W. Chapman Water
Reclamation Facility. Additionally, Water Resources staff coordinates with other agencies on
regional issues and is responsible for obtaining grants, loans, and cost-sharing opportunities.
Accomplishments – Fiscal Year 2014 -2015
Prepared cross-functional analysis to consolidate the Recycled Water Systems
Division with the Field Services Division to create efficiencies which will result in the
reduction of hiring Outside Services consultants that currently support the
Developer Recycled Water Program.
With the use of new technology, completed condition assessment and inspection of
4,000 feet of the existing Ralph W. Chapman Water Reclamation Facility (RWCWRF)
14-inch Force Main. Completed repairs to prevent potential damage to the
environmental preserve, Sweetwater watershed, and other District facilities.
Completed the condition assessment and inspection of approximately 2.2 miles of
pipe of the 36-inch La Presa Pipeline starting from the District headquarters off
Jamacha Boulevard to the Regulatory site. Completed repairs to preserve the
useful life of this pipeline for another 30-40 years.
Worked closely with staff and representatives from NSC Agua to coordinate on
approaches to ensure compliance with the California Water Resources Control
Board Drinking Water Program regulatory requirements. To meet these
requirements, NSC Agua started a two year source water testing program in
September 2014 at the power plant intake and outlet structures. The objective of
this source water quality testing is to determine the type of constituents in the
ocean water and then to ensure that the appropriate treatment will be performed
and that the desalinated water product will meet the California water quality
standards.
176
Engineering – Planning, Design
Participated in a monthly workgroup with several stakeholders from the private and
public sectors of the United States and Mexico developing Mexican federal
standards for inlets, outfalls, and brine disposal from desalination plants. This effort
resulted in a knowledge interchange, cooperation, and recognition of the Otay
Water District by the Border Affairs Commission of the Mexican Congress.
Completed the Notice of Preparation (NOP) and scoping meeting in conjunction
with the U.S. State Department for the Otay Mesa Conveyance and Disinfection
System project Environmental Impact Report/Environmental Impact Statement.
Coordinated three project site visits to the District by U.S. State Dept. personnel.
The goal is to obtain a Presidential Permit to be able to receive desalinated water
from the proposed Desalination Plant in Rosarito B.C., Mexico.
Completed installation of the corrosion inhibitor treatment system on the Water
Operations Building’s fire sprinkler system which will increase the useful life of the
protection system.
Received the “Distinguished Owner Honoree” award from Construction
Management Association of America – San Diego Chapter.
177
Engineering – Public Services
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.
Performance Measures – Strategic Plan FY 2015-2018
(1) Both actual/projected and targets are 100%.
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.
Compares quarterly CIP
expenditures with budget.
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
110.0%
FY 12-13 FY 13-14 FY 14-15 FY 15-16
Target Actual & Projected
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
110.0%
FY 12-13 FY 13-14 FY 14-15 FY 15-16
Target Actual & Projected
FINANCIAL: CIP Project Expenditures vs. Budget
BUSINESS PROCESSES: Mark-out Accuracy
(1)
178
Engineering – Public Services
Measures the rate of change
orders for CIP projects under
construction.
(1) The FY 2013-2014 results for the above performance measure was highly influenced by contractor
performance issues on the R2091 project which delayed contract closeout.
Accomplishments – Fiscal Year 2014-2015
Increased meter revenue by $3.73 million or 122% over FY 2015 budgeted amount.
Issued 66 permits in support of development within the District increasing the
District’s customer base.
Increased revenue by 4.8% from FY 2014 cell site leases in excess of $1.19 million
and maintained 33 cell site leases. The revenue generated through the cell site
lease program assists in reducing the costs paid by the District’s ratepayers.
Completed 3,724 USA Mark-out tickets with an accuracy rate of 100%, an increase
of 1.8% from Fiscal Year 2014. Also, completed 26 surveys related to various
projects included in the FY 2015 CIP.
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.
0
40
80
120
160
200
FY 12-13 FY 13-14 FY 14-15 FY 15-16
Target Actual & Projected
(1)
BUSINESS PROCESSES: Project Closeout Time
FINANCIAL: Construction Change Order
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
FY 12-13 FY 13-14 FY 14-15 FY 15-16
Target Actual & Projected
179
Engineering – Public Services
Performed QA/QC on 6,033 linear feet of pipeline. Also, performed 121 meter sets,
rehabbed 3 tanks, and reviewed 36 plan checks that consisted of fire services,
backflows, and developer pipeline projects as part of the delivery of the FY 2015 CIP
and active developer projects. As a result, the District’s service area was expanded
for future customers.
Completed construction of the 624-2 Reservoir Coating and Upgrades project. This
is a twenty-seven year old reservoir and by maintaining the reservoir we are
improving the water reliability and preserving the useful life for another 20 years.
The total construction cost of the project was $1,180,770.
Completed construction of the 870-1 Reservoir Access Road Paving Project which
provides enhanced access for maintenance.
180
Board of Directors 107,100$ 0.4%
General Manager 1,605,900 5.3%
General Expense 2,019,400 6.6%
Administrative Services 3,070,500 10.0%
Finance 6,128,400 20.0%
IT and Strategic Planning 3,610,600 11.8%
Water Operations 11,663,400 38.1%
Engineering 2,381,600 7.8%
30,586,900$ 100.0%
FY 2014 FY 2015 FY 2015 FY 2016
Actual Budget Actual* Budget
General Expense 2,382,708$ 2,331,800$ 2,309,023$ 2,019,400$
General Expense
The expenditures in this section are general operating costs not associated with an individual
department. The expenditures include: legal costs, insurance premiums, changes in accrued
employee leave balances and miscellaneous interest. These expenditures represent 6.6% of the total
Department Budget.
General Expense,
$2,019,400
FY 2016 Total Departmental Budget
$30.6 Million
*Actual unaudited
181
FY 2014 FY 2015 FY 2015 FY 2016
Actual Budget Actual* Budget
Labor and Benefits (1)1,536,043$ 1,290,800$ 1,487,720$ 1,183,400$
Fees 844,099 1,041,000 820,046 836,000
Services - - 1,257 -
Training 2,566 - - -
Total 2,382,708$ 2,331,800$ 2,309,023$ 2,019,400$
(1) Benefits include District-wide labor and benefit costs not attributable to any one department, such as the effect
of cost of living raises on accrued leave liabilities or the Other Post Employment Benefit (OPEB) costs. These
costs are netted against the District's anticipated Vacancy Factor. The Vacancy Factor for FY 2015 and FY 2016
is $185,600 and $338,300, respectively. Additionally, the labor and benefits shown on this schedule are those
related to operating costs and does not include CIP labor and benefit costs.
General Expense
Budget vs. Actual, in thousands ($)
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
2012 2013 2014 2015 2016
79
2
2,
1
7
6
2,
1
5
0
2,
3
3
2
2,
0
1
9
1,
6
1
2
2,
3
4
4
2,
2
1
4
2,
3
0
9
Budget Actual
*Actual unaudited
182
Capital Improvement Program
The District provides water service to a population of approximately 217,000 which is expected to
ultimately increase to 308,000 by the year 2050. This growth as well as the maintenance of existing
assets requires 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 growth requires that the District invest $283 million in capital assets through
ultimate build-out. The Fiscal Year 2016 Capital Budget is $11.1 million and the six-year Capital
Improvement Program (CIP) totals $193.9 million. A separate CIP Budget document 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.
183
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
Vehicles, Office Equipment, Furniture, and Field Equipment purchases. The details of these
purchases can be found on page 198. Capital Facility Projects are items that exceed $10,000 or
$20,000 for infrastructure related items (as defined under Capital Equipment on page 263 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.
184
Major CIP Projects
Capital Improvement Projects
The Fiscal Year 2016 CIP Budget contains 89 projects. The cost of the work planned for 80 of these
projects fall within Fiscal Year 2016 and total $11.1 million. Of the 80 projects planned for Fiscal Year
2016, one is designated as a reimbursable project with an estimated cost totaling $1,000. These
projects are built by developers and reimbursed by the District.
The following shows how the $11.1 million of projects are broken down into four categories:
1. Capital facilities $ 3.1 million
2. Replacement or renewal projects $ 6.9 million
3. Capital purchase projects $ 1.1 million
4. Developer reimbursement projects $ 1.0 thousand
The Six-Year CIP and Fiscal Year 2015 Capital Budget are consistent with the District's Water
Resources Master Plan, current capacity fees, and the District's strategic financial objectives.
185
CIP Projects in Construction
Calavo Basin Sewer
Rehabilitation – Phase I
(S2033)
Project part of the District’s comprehensive sewer
management program.
Project will replace deteriorated or sagging sections of
sewer pipe.
Overall Project Budget: $6.00M
Start: January 2015
Estimated Completion: July 2015
Payment Restoration
Trench Restoration
186
CIP Projects in Construction
850-3 Reservoir Interior
Coating & Upgrades
(P2542)
Remove and Replace Deteriorating Reservoir Coatings.
Structural Modifications to Increase Service Life.
$0.53M Budget
Start: May 2015
Estimated Completion: October 2015
Sandblasting Interior Roof
Interior Roof Prior to Sandblasting
187
CIP Projects in Construction
944-1, 944-2, & 458-2 Reservoir
Interior/Exterior Coating & Upgrades
(P2531, P2532, P2535)
Remove and Replace Deteriorating Reservoir Coatings.
Structural Modifications to Increase Service Life.
$1.83M Budget
Start: November 2014
Estimated Completion: October 2015
Scaffolding Removal on the 944-2 Reservoir
188
CIP Projects in Construction
450-1 Disinfection Facility
Rehabilitation
(R2112)
Remove and Replace Sodium Hypochlorite Tanks and Chemical Feed
Pumps.
Construct New Roll-Up Door.
$0.27M Budget
Start: January 2015
Estimated Completion: July 2015
Disinfection Facility – New Roll-Up Door
Disinfection Facility – New Chemical Pump Concrete Pad
189
CIP Projects in Construction
Relocate Existing Water Facilities to support SR-11 Construction.
$2.25M Budget
Start: February 2014
Estimated Completion: August 2015
SR-11 Utility Relocations Sequence
(P2453)
Heat Shrink a Cathodic Protection Sleeve on an Installation for the SR-11
190
FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 Total
Beginning Balance 54,032$ 57,795$ 45,100$ 35,643$ 34,298$ 37,881$ 264,749$
Capacity Fees 2,220 4,251 6,323 9,557 11,952 12,864 47,167
Grants 3,714 - - - - - 3,714
Interest 416 507 486 453 503 594 2,958
Temporary Meters 397 399 403 407 413 419 2,439
Availability (Betterment Portion)473 491 510 529 550 571 3,124
New Supply Fee 245 475 715 1,050 1,322 1,418 5,224
COPS 2010B Reimbursement 770 770 770 770 770 770 4,621
Transfer from General Fund 15,549 9,364 10,211 11,491 11,015 10,693 68,323
Interfund Transfers 30 40 47 50 54 58 279
Total Sources 23,814 16,297 19,465 24,307 26,579 27,387 137,849
CIP Projects 11,136 20,085 20,014 16,651 13,997 14,407 96,290
Debt Service 7,780 7,764 7,757 7,840 7,824 7,814 46,779
Developer Services 1,135 1,142 1,151 1,162 1,174 1,187 6,950
Total Uses 20,051 28,991 28,922 25,653 22,995 23,408 150,019
Net Sources (Uses)3,763$ (12,694)$ (9,457)$ (1,345)$ 3,584$ 3,979$ (12,171)$
Ending Balance 57,795$ 45,100$ 35,643$ 34,298$ 37,881$ 41,860$ 252,578$
CIP Reserve Funds, in Thousands ($)
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. The
District does not anticipate issuing new water or sewer debt.
CIP Reserve Funds
$0
$10
$20
$30
$40
$50
$60
FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021
Reserve Fund Balances, in thousands ($)
New Supply
Expansion
Replacement
Betterment
191
FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 Total
Expansion 479$ 556$ 889$ 1,171$ 367$ 213$ 3,676$
Betterment 2,558 5,271 4,785 4,335 4,852 5,402 27,202
Replacement 7,959 14,118 13,060 8,745 5,578 5,192 54,652
New Supply 140 140 1,280 2,400 3,200 3,600 10,760
Total 11,136$ 20,085$ 20,014$ 16,651$ 13,997$ 14,407$ 96,290$
FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 Total
Capital Facility Projects 3,111$ 9,283$ 12,546$ 10,991$ 10,863$ 10,055$ 56,849$
Replacement/Renewal Projects 6,883 9,948 5,933 3,437 1,832 1,150 29,183
Capital Purchase Projects 1,141 705 535 513 402 532 3,828
Developer Reimbursement Projects 1 29 100 100 20 - 250
Subtotal 11,136 19,965 19,114 15,041 13,117 11,737 90,110
FY 2017 Through FY 2021 Projects - 120 900 1,610 880 2,670 6,180
Total 11,136$ 20,085$ 20,014$ 16,651$ 13,997$ 14,407$ 96,290$
CIP Category
CIP Funding Source and Category
CIP Funding Source
$0
$5
$10
$15
$20
$25
FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021
Six-Year CIP by Funding Source, in thousands ($)
Betterment Replacement Expansion New Supply
$0
$5
$10
$15
$20
FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021
Six-Year CIP by Category, in thousands ($)
Capital Facility Projects Replacement/Renewal Projects
Capital Purchase Projects Developer Reimbursement Projects
192
CIP No Description FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 Total
P2040 Res - 1655-1 Reservoir 0.5 MG $ 25 $ 250 $ 900 $ 925 $ 100 $ - $ 2,200
P2083 PS - 870-2 Pump Station Replacement 350 5,000 5,000 3,350 - - 13700
P2267 36-Inch Main Pumpouts and Air/Vacuum Ventilation
Installations
50 200 55 - - - 305
P2325 PL-10" to 12" Oversize, 1296 Zone, PB Road-Rolling
Hills Hydro PS/PB Bndy
1 20 - - - - 21
P2451 Otay Mesa Desalination Conveyance and
Disinfection System
350 350 3,200 6,000 8,000 9,000 26900
P2466 Regional Training Facility 8 6 - - - - 14
P2469 Information Technology Network and Hardware 175 50 - - - - 225
P2470 Financial System Enhancements 100 - - - - - 100
P2486 Asset Management Plan Condition Assessment and
Data Acquisition
75 75 28 - - - 178
P2511 Otay Interconnect Pipeline 50 200 200 102 1 1 554
P2537 Operations Yard Property Acquisition Improvements 450 150 15 - - - 615
P2540 Work Order Management System Replacement 60 100 - - - - 160
P2541 624 Pressure Zone PRSs 525 5 - - - - 530
P2547 District Administration Vehicle Charging Stations 1 43 5 - - - 49
P2549 Fuel System Upgrade 30 - - - - - 30
P2551 Blossom Lane Helix WD and Otay WD
Interconnection
150 13 - - - - 163
P2552 South Barcelona Helix WD and Otay WD
Interconnection
150 20 - - - - 170
P2554 640/340 PRS at Energy Way and Nirvana Avenue 1 1 50 250 75 23 400
P2555 Administration and Operations Parking Lot
Improvements
10 50 100 100 100 140 500
P2561 Res - 711-3 Reservoir Cover/Liner Replacement 5 95 1,700 - - - 1800
P2562 Res - 571-1 Reservoir Cover/Liner Replacement 1 9 10 90 2,490 - 2600
P2563 Res - 870-1 Reservoir Cover/Liner Replacement 1 5 5 9 90 890 1000
P2568 Technology Business Processes Improvement 40 75 - - - - 115
P2569 Metro Ethernet Implementation/ District Facilities -
Pilot
100 - - - - - 100
P2570 SCADA Equipment & Infrastructure Enhancement - 100 100 100 - - 300
P2571 Datacenter Network Enhancement & Replacement
of Infrastructure Componets
- - - 100 100 - 200
P2572 Enterprise Resource Planning (ERP) Replacement - - - - - 250 250
R2077 RecPL - 24-Inch, 860 Zone, Alta Road - Alta
Gate/Airway
5 20 20 - - - 45
R2107 RWCWRF Screening Compactor and Chlorine
Injectors Enclosure
7 - - - - - 7
CIP Projects ($1,000s)
The 2016 Fiscal Year CIP Budget contains 89 projects. The costs for the work planned for Fiscal Year 2016 is
$11.1 million. Of the 80 projects planned for Fiscal Year 2016, one is designated as a reimbursable project with
an estimated cost of $1,000. This project is built by a developer and reimbursed by the District.
CAPITAL FACILITY PROJECTS
193
CIP No Description FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 Total
R2108 Res - 927-1 Reservoir Cover Replacement $ 10 $ - $ - $ - $ - $ - $ 10
R2110 RecPS - 944-1 Optimization and Pressure Zone
Modifications
25 5 92 - - - 122
R2114 Large Recycle Pump Replacement at the RWCWRF
927-1 Pump Station
40 - - - - - 40
R2117 RWCWRF Disinfection System Improvements 110 1,100 1,100 100 - - 2410
R2118 Steele Canyon Sewer PS Chopper Pump 40 - - - - - 40
R2119 Treatment Plant Automation & Security Upgrades 50 50 50 50 - - 200
R2121 Res - 944-1 Reservoir Cover/Liner Replacement 25 1,375 - - - - 1400
R2122 Emergency Recycled Water Fire Hydrant
Installations
75 - - - - - 75
S2043 RWCWRF Sludge Handling System 1 1 1 1 1 1 6
38 Total Capital Facility Projects $ 3,096 $ 9,368 $ 12,631 $ 11,177 $ 10,957 $ 10,305 $ 57,534
CIP No Description FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 Total
P2382 Safety and Security Improvements $ 300 $ 250 $ - $ - $ - $ - $ 550
P2453 SR-11 Utility Relocations 5 5 250 250 257 - 767
P2485 SCADA Communication System and Software
Replacement
75 35 150 150 150 160 720
P2493 624-2 Reservoir Interior/Exterior Coating 55 50 - - - - 105
P2494 Multiple Species Conservation Plan 87 - - - - - 87
P2495 San Miguel Habitat Management/Mitigation Area 120 120 160 160 180 190 930
P2496 Otay Lakes Road Utility Relocations 20 5 - - - - $25
P2504 Regulatory Site Access Road and Pipeline
Relocation
50 365 135 20 - - $570
P2507 East Palomar Street Utility Relocation 25 120 110 - - - $255
P2508 Pipeline Cathodic Protection Replacement Program 150 300 50 47 - - $547
P2515 870-1 Reservoir Paving 15 - - - - - $15
P2518 803-3 Reservoir Interior/Exterior Coating 20 45 - - - - $65
P2519 832-2 Reservoir Interior/Exterior Coating 20 45 25 - - - $90
P2520 Motorola Mobile Radio Upgrade 30 14 - - - - $44
P2529 711-2 Reservoir Interior & Exterior Coating 600 130 25 35 - - $790
P2530 711-1 Reservoir Interior & Exterior Coating 800 200 15 25 - - $1,040
P2531 944-1 Reservoir Interior & Exterior Coating 130 50 35 - - - $215
P2532 944-2 Reservoir Interior & Exterior Coating 50 50 50 - - - $150
P2533 1200-1 Reservoir Interior & Exterior Coating 5 490 35 35 - - $565
P2534 978-1 Reservoir Interior & Exterior Coating - 10 275 5 35 - $325
P2535 458-2 Reservoir Interior & Exterior Coating &
Upgrades
115 5 35 - - - $155
P2538 Administration and Operations Building Fire
Sprinkler Replacement Program
5 20 18 - - - $43
P2539 South Bay Bus Rapid Transit (BRT) Utility
Relocations
100 100 100 40 - - $340
CIP Projects ($1,000s)
REPLACEMENT/RENEWAL PROJECTS
CAPITAL FACILITY PROJECTS, CONTINUED
194
CIP No Description FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 Total
P2542 850-3 Reservoir Interior Coating $ 230 $ 15 $ 35 $ - $ - $ - $ 280
P2543 850-1 Reservoir Interior/Exterior Coating - 10 515 10 40 - $575
P2544 850-2 Reservoir Interior/Exterior Reservoir Coating 5 5 880 10 40 - $940
P2545 980-1 Reservoir Interior/Exterior Coating 950 445 50 50 - - $1,495
P2546 980-2 Reservoir Interior/Exterior Coating - - 10 1,390 10 40 $1,450
P2550 Fuel Island Upgrade 75 - - - - - $75
P2553 Heritage Road Bridge Replacement and Utility
Relocation
10 100 290 645 155 - $1,200
P2557 520 Res Recirculation Pipeline Chemical Supply and
Analyzer Feed Replacement Project
1 29 65 5 - - $100
P2558 Additional Pump Station Fuel Storage 25 - - - - - $25
P2559 Pressure Vessel Repair and Replacement Program 50 250 - - - - $300
P2564 Administration Carpet Replacement Program 65 75 75 - - - $215
P2565 803-2 Reservoir Interior/Exterior Coating & Upgrades - - - 5 675 45 $725
P2566 520-2 Reservoir Interior/Exterior Coating & Upgrades - - - - 10 1,780 $1,790
P2567 1004-2 Reservoir Interior/Exterior Coating &
Upgrades
- - - - 10 555 $565
R2109 Sweetwater River Wooden Trestle Improvement for
the Recycled Water Forcemain
400 10 - - - - $410
R2111 RWCWRF - RAS Pump Replacement 250 - - - - - $250
R2112 450-1 Disinfection Facility Rehabilitation 40 25 - - - - $65
R2116 RecPL - 14-Inch, 927 Zone, Forcemain Assessment
and Repair
225 1,000 150 50 - - $1,425
R2120 RWCWRF Filtered Water Storage Tank
Improvements
10 245 245 - - - $500
S2012 San Diego County Sanitation District Outfall and
RSD Outfall Replacement
50 150 150 200 250 300 $1,100
S2024 Campo Road Sewer Main Replacement 500 3,400 1,000 - - - $4,900
S2027 Rancho San Diego Pump Station Rehabilitation 320 1,000 1,000 915 - - $3,235
S2033 Sewer System Rehabilitation 900 800 800 800 800 500 $4,600
46 Total Replacements and Renewal Projects $ 6,883 $ 9,968 $ 6,733 $ 4,847 $ 2,612 $ 3,570 $ 34,613
CAPITAL PURCHASE PROJECTS
CIP No Description FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 Total
P2282 Vehicle Capital Purchases $ 556 $ 298 $ 295 $ 327 $ 308 $ 317 $ 2,101
P2285 Office Equipment and Furniture Capital Purchases 15 15 15 14 6 - 65
P2286 Field Equipment Capital Purchases 50 100 83 68 16 105 $422
P2366 APCD Engine Replacements and Retrofits 535 307 157 118 78 110 $1,305
4 Total Capital Purchase $1,156 $720 $550 $527 $408 $532 $3,893
REPLACEMENT/RENEWAL PROJECTS, CONTINUED
CIP Projects ($1,000s)
195
DEVELOPER REIMBURSEMENT PROJECTS .
CIP No Description FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 Total
P2556 HWY 94 Upsized Utility Relocations at Melody Lane $ 1 $ 29 $ 100 $ 100 $ 20 $ - $ 250
1 Total Reimbursement Projects $1 $29 $100 $100 $20 $0 $250
SUMMARY
CIP No Description FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 Total
80 Total - FY 2016 Projects $11,136 $19,965 $19,114 $15,041 $13,117 $11,737 $90,110
9 Total - FY 2017 through FY 2021 Projects $0 $120 $900 $1,610 $880 $2,670 $6,180
89 Grand Totals $11,136 $20,085 $20,014 $16,651 $13,997 $14,407 $96,290
CIP Projects ($1,000s)
196
CIP #Description Cost
Cat. (2)
Funding
Source (3)
FY
2016
FY
2017
FY
2018
FY
2019
FY
2020
FY
2021 TOTAL
P2040 Res - 1655-1 Reservoir 0.5 MG M E/B $0 $0 $0 $50 $51 $52 $153
P2451 Otay Mesa Desalination
Conveyance and Disinfection
System
M/E/C N/B - - - 40,000 75,000 115,000
P2466 Regional Training Facility M E/B 1,000 1,000 1,000 1,000 - - 4,000
P2537 .M/E B - 700 725 750 776 800 3,751
P2547 District Administration Vehicle
Charging Stations
M/E E/B - 700 700 700 700 700 3,500
S2043 RWCWRF Sludge Handling System M/E/C B - - - - 30,000 30,000
1,000 2,400 2,425 2,500 41,527 106,552 156,404
$2,000 $4,800 $4,850 $5,000 $83,054 $213,104 $312,808
FY
2016
FY
2017
FY
2018
FY
2019
FY
2020
FY
2021 TOTAL
$1,000 $1,200 $1,200 $1,250 $10,252 $20,252 $35,154
- 1,200 1,225 1,250 26,275 66,300 96,250
- - - - 5,000 20,000 25,000
$ 1,000 $ 2,400 $ 2,425 $ 2,500 $ 41,527 $ 106,552 $ 156,404
(1)
(2)
(3)
Note:See pages 193-196 for complete description of CIP projects.
Projected Incremental Operating Expenditures (1)
E - Expansion B - Betterment R - Replacement N - New Supply
The following schedule shows anticipated operating costs associated with each project in the CIP. Below is a summary of each
category of new costs that will be impacted. No additional revenues are associated with the individual projects, as revenues are
linked more directly to growth in water sales and capacity fee revenues.
Cost Category
Maintenance (M)
Energy (E)
Chemical (C)
Funding Source - Some projects have multiple funding sources as indicated by a slash (/):
CIP Justification and Impact on Operating Budget
O&M cost for a reservoir: Total annual operating cost divided by the number of million gallons (MG) of storage capacity in the system.
This rate per MG is then multiplied by the MG capacity of the new reservoir. Reservoirs require chemical treatment; therefore, the
chemical cost per MG is estimated and applied to the future operating cost. Both O&M and chemical costs are increased annually for
inflation.
Each of the capital purchases and other types of assets has its own unique O&M cost.
Cost Category - Indicates maintenance cost (M), energy cost (E), or chemical cost (C), based on the project type and Engineer's
estimates.
O&M cost for a pump station: Total annual operating cost divided by the number of million of gallons a day (MGD) capacity in the
system = O&M cost per MGD. This rate is then multiplied by the MGD capacity of the new pump station. Similarly, power cost per MGD
for transmission is calculated and applied to the MGD of the new pump station. Chemical expenses are incurred for pumping at the
well sites. All estimated costs are increased annually for inflation.
Projected Incremental Operating Expenditures (operating cost) or O&M includes labor, benefits, materials, and overhead.
O&M cost for pipes: Total annual operating cost divided by the number of feet of pipe in the system = O&M cost to maintain a foot of
pipe. This rate is then multiplied by the number of feet in new pipeline, and is increased annually for inflation.
Total Operating Budget Cost Impact
197
Item#Amount
Office Equipment/Furniture
11 15,000$
Office Equipment/Furniture 15,000$
15,000
35,000
50,000
11,000
405,000
140,000
556,000
APCD Engine Replacements and Retrofits
14,500
520,000
APCD Engine Replacements and Retrofits 535,000
Grand Total 1,156,000$
P2285 Office 15,000$
P2286 Field 50,000
P2282 Vehicle 556,000
P2366 APCD Engine Replacements and Retrofits 535,000
Grand Total 1,156,000$
Two portable engine driven pumps
19 Valve machine
Total of
Total of
3 Portable Meter Test Program/hardware
18 Replace truck bed for Unit No. 184
21 One-ton service truck with engine driven
Hydraulic air compressor and 20-foot crane.
Vehicles
Operations
Summary by Project
Total of Vehicles
9
17
Operations
22 Portable Emissions Analyzer
Total of Field Equipment
Potable Vactor truck with 15-yard debris body
Administrative Services
Workstation ergonomics
Operations
FY 2016 Capital Purchases
Capital purchases are non-recurring operating expense items for District-wide use that cost more
than $10,000 each and have an estimated useful life of two years or more. The Capital Purchase
Projects include Field Equipment, Office Equipment and Furniture, and Vehicle purchases.
Description
Field Equipment
Finance
198
Summary of Financial Policies
Introduction
This section includes a brief synopsis of the District’s Reserve Policy, Investment Policy, and Debt
Policy.
The Reserve Policy is a comprehensive policy which explains how the District is operated,
including the distinction of business segments to ensure the various users pay their fair share of
costs. It explains how fees are collected and what they are used for. It also explains the difference
between funds, as well as how transfers shall be made, and defines each reserve target funding
level. This policy was adopted by the Board in November 2010. The District periodically reviews
the policy to ensure it reflects current policies and financial practices. The Reserve Policy was
updated and adopted by the Board in November 2014.
The following chart depicts the detailed flow of funds that may be useful in understanding the
Reserve Policy.
Unrestricted and
Undesignated
(General Use) Funds
Restricted Funds
FUND CHART
Designated Funds
Designated
Expansion
Designated
New Supply
Designated
Replacement
Designated
Betterment
Potable
General Fund
Recycled General
Fund
Sewer
General Fund
Restricted
Expansion
Restricted
Betterment
Debt
Reserve
Restricted
New Supply
OPEB
Reserve
199
Summary of Financial Policies
The Investment Policy is a guideline for the prudent investment of cash. It outlines government
code as well as authority granted by the Board of Directors. The primary objectives, in order of
significance, are to invest safely, with adequate liquidity, and to achieve a return on investments. In
August 2007, the District received a Certification of Excellence Award from the Association of Public
Treasurers of the United States and Canada (APT US&C) for this policy. The Investment Policy was
updated and adopted by the Board in May 2015.
The Debt Policy establishes that debt financing will only be used for Capital Improvement Projects
(CIP), which have an extended useful life for ten years or longer, and that exceed the District’s
ability to be funded with current resources such as annual cash flow, fund balances, or reserves.
Additionally, the life of a project is expected to exceed the term of the financing. The District strives
to maintain the highest possible credit ratings for all categories of long-term debt that can be
achieved without compromising delivery of basic services and the achievement of district policy
objectives. In August 2007, the District received a Certification of Excellence award from the
Association of Public Treasurers of the United States and Canada (APT US&C) for this policy. The
Debt Policy was updated and adopted by the Board in September 2013.
200
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
201
Reserve Policy
construction, betterment, and replacement of infrastructure in all three business areas: potable, recycled,
and sewer.
The District establishes different funds to track revenues allocated to different activities. Once established,
each fund receives financial resources up to the levels defined in this policy. Every year, as a part of the
annual budget process, the District’s rate model is updated for each fund with the current fund balances and
the estimated revenues and expenditures for the next six years. The expenditure requirements and financial
resources are then evaluated to ensure that the existing fund balances and additional revenues are
sufficient within the current budget cycle and for the next five years to maintain target fund levels. If a deficit
is identified, then options for transfers, shifting CIP projects, debt, cost saving measures, and/or rate
increases are evaluated.
1.2 The District’s Capital Improvement Program (CIP)
The planning, design, and construction costs of all capital facilities within the three business segments are
allocated to four cost types and corresponding fund categories: New Water Supply, Expansion,
Replacement, and/or Betterment. The allocation to these four cost types is defined in the District’s Capital
Improvement Program (CIP) and is determined by an engineering analysis that identifies which type of
customer will benefit from each facility, planned or existing. The costs of the capital improvements are
borne by either existing users or by the developing areas, or by a combination of the two, as applicable.
This Reserve Policy protects both the existing users and the developing areas from incurring unwarranted
costs. Developing areas are not required to finance facilities that are replacement or betterment and
established areas are not required to replace facilities before they are worn out because of new
development. However, to ensure a fair allocation of costs, each facility has the potential to be classified into
any or all of the four cost types. In addition to these cost types there are occasional CIPs that may be
billable to a third party, if for example a third party requires a District facility be relocated. Paragraphs a
through d below, describe how the costs of capital facilities are financed through various fees.
a. New Water Supply
The portion of a new supply project that benefits new users is financed from the reserves in the New
Water Supply Fund category. These reserves are primarily derived from proceeds of the new water
supply fee. The New Water Supply Fund is restricted, meaning the amounts credited to this fund are
accounted for separately and are used solely for the planning, design, and construction of the new
water supply expansion facilities. Debt financing may also be a temporary financial resource to
finance new water supply projects. The District has a Debt Policy (Policy No. 45) that guides the
debt issuance process. Any debt proceeds used for this purpose would be restricted in nature and
tracked separately. General use reserves may also be placed in the Designated New Water Supply
Fund and used for water supply projects.
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
202
Reserve Policy
the capacity fees collected within developing areas. Capacity fees are accounted for separately and
used for the planning, design, and construction of expansion facilities. Additionally, expansion may
be financed by the “buy-in” portion of the capacity fee which is restricted for CIP purposes, but not
specifically for expansion. Debt financing may also be a temporary financial resource for expansion
projects. General use reserves may also be placed in the Designated Expansion Fund and used for
expansion projects.
c. Replacement
The portion of a CIP project that benefits existing users by replacing an existing facility is financed
from the reserves in the Replacement Fund category. Replacement of facilities may be financed
with proceeds of the “buy-in” portion of the capacity fees, general use reserves held in the
Designated Replacement Fund, and debt proceeds. The various funding sources available for
replacement projects is anticipated to provide the necessary flexibility to begin projects while any
necessary debt financing is being obtained.
d. Betterment
Facilities that improve reliability, meet new regulations, or create increased levels of service are
considered betterment facilities that benefit existing users. The reserves in the Betterment Fund
category are used to finance these projects or portions of projects. Proceeds of the “buy-in” portion
of the capacity fees may also be used to finance betterment projects. General use reserves may be
placed in the Designated Betterment Fund and used for betterment projects.
1.21 Relocations
Occasionally, relocation of a District facility is required by a third party. If the District has a superior
easement the relocation cost will be paid by the third party, but only to the extent that the District does not
benefit from the relocation. When relocation is required, a CIP project may be created which is wholly or
partially financed by a third party. On occasion, the District will require that its own facilities be relocated.
Depending on the nature of the facilities, the financial resources for these projects could be from new water
supply, expansion, replacement, betterment or third party financing. Each project is individually negotiated
with the third party based on the facts and circumstances of the relocation. Occasionally, the District will
improve the facilities that are being relocated. When determining how to allocate costs to various funds the
following guideline is suggested: if a project has more than five years of useful life remaining, an incremental
cost view should be considered; if the project has less than five years of useful life remaining, a pro-rata cost
approach should be considered. Also, the likelihood the District will benefit from an asset’s life extension
should be evaluated prior to allocating costs.
1.22 Oversizing
If deemed reasonable by the District, in connection with the construction of backbone facilities, a developer
may be required to oversize new facilities for future development. The developer is reimbursed for
incremental oversizing costs as per Policy No. 26. These reimbursements are not available for the
distribution system within a development which is an obligation of the developer.
203
Reserve Policy
1.23 Exclusion of Developed Areas from Expansion Costs
Developed areas are assumed to have sufficient supply and capacity to meet their current requirements as
provided by the developers. In addition, they are considered to have borne capital financial costs that are at
least proportionate to the benefits they have received from capital facilities. Accordingly, no regional capital
financing costs are allocated to these areas so that they will not incur any costs for newly developing areas,
except for capital projects that produce district-wide benefit or cost savings.
1.24 Improvement Districts (IDs)
Improvement Districts (IDs) are established to facilitate the financing of particular improvements by the
specific beneficiaries. The District has a number of improvement districts that were established for General
Obligation (GO) debt repayment. Most GO debt has been paid off and it is unlikely that the District will issue
additional GO debt. Improvement districts continue to be used for other purposes: 1) to distinguish sewer
customers from water customers on the county tax roll; or 2) to place parcels on the county tax roll for the
collection of availability fees.
Over the years, the District moved to a district-wide perspective of financing improvements. This philosophy
is evident by the district-wide capacity and annexation fees. The District also uses district-wide water rates.
As time goes on, it is expected that IDs will continue to outgrow their purpose and their use will diminish.
1.3 The Purpose of the Policy
Public entities accumulate and maintain reserves to ensure both financial stability and continuous
availability of services. Financial stability and the resulting improved credit quality allow the public entity to
weather times of uncertainty and the impact of negative events, both major and minor. Reserves allow for
the ongoing maintenance of property and timely payment of expenses even when such expenses exceed
money available from a single fiscal period. In the final analysis, the type and level of reserves are driven by
the type and magnitude of uncertainty faced by the public entity.
A “reserve” has a number of meanings, as follows:
Working capital is required to insure timely payment of obligations.
A buffer against volatility in revenues.
Liquidity is required to obtain other goods and services (e.g., bank services).
Designated money to protect creditors.
Money set aside to replace assets at the end of their useful lives.
Money set aside to repair or replace assets damaged or destroyed at unanticipated times.
204
Reserve Policy
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.
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).
205
Reserve Policy
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.
Specifically, the Constitution states that “each entity of the government can establish contingency,
emergency, unemployment, reserve, sinking fund…or similar funds as it shall deem reasonable and proper.” 2
Similarly, the State’s Water Code does not impose any requirements as to specific or recommended reserve
fund levels. As a result, the public finance community as a whole has yet to settle on any real objective
standards for the level of reserve funds appropriate for governmental enterprises. This lack of consensus as
to specific standards is indicative of the wide variance of the financial and operations context for different
districts and different contingencies justifying reserves.
The Government Finance Officers Association (GFOA) in its “Recommended Practice on Appropriate Level
of Unreserved Fund Balance in the General Fund” (2002) states that in establishing a policy governing the
level of unreserved fund balance in the general fund, a government should consider a variety of factors.
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.
1
206
Reserve Policy
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.
The District will hold its reserves at responsible and prudent levels. This policy sets minimum,
maximum, and target levels for each of the various funds. This has been done so that the District
can maintain reserves to meet the purpose for which the funds were established. The levels are set
207
Reserve Policy
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. Water Annexation Fees (General Use)
Annexation fees3 are collected as a condition of annexing into the District’s potable or recycled water
facilities. Since the existing facilities have been built and maintained by developers or customers
within the District, the annexation fee is calculated based on the present value of all property taxes
(1% property tax and availability fees) paid by existing and prior customers. The annexation fee
reimburses existing customers for past contributions so that all customers have contributed more
equally to water facilities. Proceeds of annexation fees are unrestricted and may be used for any
general fund purpose.
3 Code of Ordinances, Section 9.
208
Reserve Policy
d. Sewer Annexation Fees (General Use)
A sewer annexation fee is collected when property is annexed into an improvement district. Since
the existing facilities have been built and maintained by developers or customers within a sewer IDs,
the annexation fee is calculated based on the present value of all availability fees paid by existing
and prior customers. The annexation fee reimburses existing customers for past contributions so
that all customers have contributed more equally to sewer facilities. Proceeds of the annexation fees
are unrestricted and may be used for any general fund purpose.
e. New Water Supply Fee (Restricted)
New water supply fees4 are based on the cost of the expansion portion of new water supply projects
divided by the number of future equivalent dwelling units (EDU). The new water supply fee covers
the cost of planning, design, construction, and financing associated with facilities for the District’s
new supply needs. These fees are paid by developers. The proceeds of this fee may be used only
for new potable or recycled water supply projects. Although the fees collected are not restricted
separately, one portion for potable and the other for recycled, they are tracked separately.
f. Water Capacity Fees (Restricted)
Water capacity fees4 are based on the value of existing and future facilities divided by the number of
existing and future equivalent dwelling units. This method of calculating capacity fees is called the
combined method, where the “buy-in” portion of the capacity fee covers costs to repay existing
customers for the facilities that they have built, and where the “incremental” portion of the capacity
fee covers the cost of future expansion facilities. The “buy-in” portion of the capacity fee is restricted
to pay for planning, design, construction, and financing associated with expansion, replacement or
betterment facilities. The “buy-in” portion may be shifted back and forth between expansion,
betterment or replacement as the financing needs change. The “incremental” portion of the capacity
fee is limited to planning, design, construction, and financing exclusively for expansion facilities
(excluding new water supply expansion).
g. Sewer Capacity Fees (Restricted)
Sewer capacity fees are based on the value of existing and future facilities divided by the number of
existing and future equivalent dwelling units. This method of calculating capacity fees is called the
combined method, where the “buy-in” portion of the capacity fee covers cost to repay existing
customers for the facilities that they have built, and where the “incremental” portion of the capacity
fee covers the cost of future expansion facilities. The “buy-in” portion of the capacity fee is restricted
to pay for planning, design, construction, and financing associated with expansion, replacement or
betterment facilities. The “buy-in” portion may be shifted back and forth between expansion,
betterment or replacement as the financing needs change. The “incremental” portion of the capacity
fee is limited to planning, design, construction, and financing exclusively for expansion facilities. For
parcels within a sewer ID the calculation excludes the tax debt already paid by these customers
therefore, producing a lower fee than for parcels outside of a sewer ID. The capacity fees are
restricted to pay for planning, design, construction, and financing associated with the expansion,
replacement, or betterment of facilities.
4 Code of Ordinances, Section 28.
209
Reserve Policy
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.
The water capacity fee is calculated based on the combined recycled and potable water systems’ needs.
This methodology is used because the two water systems work hand-in-hand. All capacity fees can be
used for either potable or recycled but must be tracked to distinguish between the “buy-in” and “incremental”
portions as described above. So, while capacity fees are not restricted separately by potable and recycled,
they are tracked separately.
2.1 Customers/Users
a. Uniform Rates and Charges (General Use)
Charges to users for water, sewer, and recycled water are uniform throughout the District for similar
customer types.
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.
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
210
Reserve Policy
c. Energy Charges (General Use)
The energy pumping fee is a charge per Unit of water for each 100 feet of lift, or fraction thereof,
above the base elevation of 450 feet. This charge is placed on the monthly water bills of all water
customers.
d. Penalties (General Use)
Penalties are added to the monthly water and sewer bills for late charges, locks, etc.
e. Pass-through Fixed Charges (General Use)
A fixed monthly charge to the District’s customers intended to collect sufficient funds to pass-through
the increased fixed costs from the County Water Authority (CWA) and the Metropolitan Water District
(MWD).
f. Special Rates and Charges (General Use)
In addition to the uniform water and sewer charges, the District has a special sewer rate for the
Russell Square lift station. The Russell Square fee is for construction, installation, maintenance or
repair of the Russell Square lift station. This fee is collected in accordance with the Russell Square
sewer charge (see Code of Ordinances Section 53.03B).
g. Temporary Meter Fees (General Use/Restricted)
Water charges, in lieu of capacity fees, are charged on temporary meters. This is done because
temporary meters use system capacity but they are not charged a capacity fee. Temporary water
use is charged at two times the water rate with the added charge placed in the Restricted Expansion
Fund. The primary users of these temporary meters are developers; however, general customers
also use these for various purposes.
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
211
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. Spending limits for
the District are governed by the 1979 passage of California Proposition 4, Limitations of Government
Appropriations (GANN limit). Proposition 4 places an appropriation limit on most spending from tax
proceeds.
b. Availability Charges (General Use/Restricted)
The District levies availability charges each year in developed and undeveloped areas. Current
legislation provides that any amount up to $10 per parcel is general use and any amount over $10
per parcel is restricted to be expended in and for the improvement district (ID) within which it is
collected. Accordingly, the District may use availability charges in excess of $10 toward costs of
water and sewer facilities which are either, expansion, betterment, or replacement of facilities
consistent with the purpose of the ID in which they are collected. This portion of the proceeds of
availability charges is geographically restricted and restricted by purpose. As costs are incurred on
these projects the respective IDs are charged, reducing the reserves. To the extent that availability
charges are not used for the purpose for which they are collected, they must be returned to the
property owners that paid them. The District has historically used these reserves for betterment
capital facilities thus, the restricted reserves are accounted for in “sub-funds” of the Betterment Fund
(See 2.1 f.).
c. Improvement District General Obligation (GO) Bond Assessments (Restricted)
The District has historically issued general obligation (GO) debt and establishes an improvement
district for the repayment of that debt. When this financing method is used, the county tax roll can be
used to collect special taxes or assessments within the ID to pay the debt obligation. The proceeds
of the debt are restricted for the purpose as defined in the bond documents.
212
Reserve Policy
2.3 Miscellaneous Income
a. Miscellaneous Rents and Leases (General Use)
Revenues received from the rental and lease of District property are general use revenues. Not only
are they periodic revenues, but there is also a one-time fee charged with the setup of each new
lease. The District incurs expenses related to these rents and leases. The one-time fees are
calculated to recover the costs to setup the leases.
b. Sewer Billing Fees (General Use)
Sewer billing fees are general use revenues. The District provides processing and billing services to
the City of Chula Vista to bill and collect from their customers for sewer service. These fees are to
recover the cost the District incurs to provide this service.
c. Interest Income or Expense Allocation (General Use, Designated, and Restricted)
Interest income (expense) will be allocated every month based upon each fund's month-ending
balance. In this way, each fund receives credit for interest earned by that fund and each fund with a
negative balance is charged for the use of the other fund’s reserves.
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
213
Reserve Policy
2.4 Debt Issuance
a. Loans (General/Restricted Use)
As the District determines that additional financing is required for a particular purpose, the option of
borrowing is considered. The determination to borrow is made as a part of the annual rate model
update and is evaluated in accordance with the Debt Policy before it is recommended to the Board
for action. As an option to bond indebtedness, loans are available to satisfy short-term financing
needs. These loans may or may not be contractually restricted for a particular purpose.
b. General Obligation (GO) Bonds (Restricted)
As the District becomes more developed it becomes less likely that general obligation debt will be
used as it requires a vote of the public to be approved. Bond proceeds are restricted for the
construction of those facilities identified in the GO bond issuance. Occasionally, specific portions of
bond proceeds may be allocated for the repayment of the principal and interest, also called debt
service, on these bonds. As the District determines that additional financing is required for a
particular purpose, the option of debt issuance is considered. The determination to issue debt is
made as a part of the annual rate model update and is evaluated in accordance with the Debt Policy
before it is recommended to the Board for action.
c. Certificates of Participation (COPs) (Restricted)
General revenues of the District are pledged as security for Certificates of Participation (COPs)
indebtedness. If the District determines that additional financing is required for a particular purpose,
the option of debt issuance is considered. The determination to issue debt is made as a part of the
annual rate model update and is evaluated in accordance with the Debt Policy before it is
recommended to the Board for action. This form of financing has become the industry’s preferred
form of financing as it does not require a vote of the general public.
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
214
Reserve Policy
2.5 Inter-fund Transfers
Each year in the budgeting process, future fund levels are projected for the next six years. Based on
these projections transfers are recommended. Reserves may be transferred between Unrestricted
or Designated Funds and the General Fund (see 4.0 “Funding Levels” and 4.1 “Fund Transfers”).
Reserves may not be transferred to or from any of the restricted funds unless it is between two
restricted funds with a shared purpose.
Fund Types and Categories
3.0 General Funds
a. Purpose
The General Fund is neither restricted nor designated. The District maintains one General Fund for
each business segment (water, sewer, and recycled). This fund holds the working capital and
emergency operating reserves. While the General Fund has a short-term focus to finance the
District’s annual operations, it is supported by the six-year rate model. This 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.
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
215
Reserve Policy
The General Fund also plays a role in the debt planning of the District. This fund is viewed by the
debt markets as a commitment by the District to ensure financial stability of the rates and charges of
the District. The District is anticipated to need a number of debt issuances over the years and this
fund will help the District not only to stabilize rate fluctuations but also to access low cost financing
for future projects.
b. Sources
Meter installation charges, temporary meter fees, uniform rates and charges, monthly system fees,
energy charges, penalties, pass-through fixed charges, general levy property tax receipts, water
annexation fees, availability charges, miscellaneous rents and leases, sewer billing fees, interest
income or expense allocation, loans, and a portion of the temporary water sales.
The sewer general fund receives sewer charges, penalties, availability charges, sewer annexation
fees, and interest income or expense allocation.
c. Funding Levels
I. Minimum Level – The minimum reserve level for each business segment of the General
Fund is three months of operating budget expenses (evaluated separately for each
segment).
II. Maximum Level – The maximum reserve level for the General Fund is nine months of
operating budget expenses. In the event that this fund exceeds the seven month level, the
excess will be evaluated or transferred to one or more of the designated funds.
III. Target Level – The target level of reserves is three months of operating budget expenses. In
the event that the fund drops below the target level, rate increases or fund transfers would be
considered.
3.1 Designated Other Post Employment Benefits (OPEB) Fund
a. Purpose
Designated Other Post Employment Benefits (OPEB) reserves are “general use” reserves that have
been set apart by Board action to finance the medical benefits of qualified retirees as outlined in the
District’s benefits plan. This fund is available to hold any Board designated OPEB funds. The District
also has a trust at CalPERS and is restricted for the purpose of financing the OPEB liability. Money
held in the CalPERS trust restricts the funds from any use other than OPEB. The two funds are
considered jointly when looking at target reserve levels. Every two years, actuarial study is
performed to update the annual financing requirements. Changes in the actuarial valuation may
result from changes in benefit levels, employee population, health insurance costs, or general
market conditions.
b. Sources
The OPEB liability may be financed by general use reserves coming from user rates and charges,
either from an operating budget expenditure or from interfund transfers. Transfers of unrestricted
reserves may come from the various designated funds or from the General Fund. As a part of the
216
Reserve Policy
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.
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
217
Reserve Policy
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.
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
218
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, Capital Improvement Fund, and the Designated Expansion Fund. Potable and recycled
reserves are considered jointly while sewer is evaluated separately.
b. Sources
The Expansion Fund is financed by water charges in lieu of capacity fees (for temporary meters) and
the “incremental” portion of the capacity fee. The other funds in this category may also be financed
by debt proceeds, the “buy-in” portion of the capacity fee, and the general fund through a
designation of reserves.
c. Funding Levels
I. Minimum Level – As the District matures the CIP will move to purely replacement
and betterment projects. As the District moves through this lifecycle the need for
expansion reserves will decrease and may be reduced to zero.
II. Maximum Level – The maximum reserve level for the expansion category of funds is
limited to five years of unfinanced expansion facilities as described in the District’s
CIP Budget. To determine the unfinanced amount, the total financing needs must be
reduced by the projected expansion revenues, bond financing, and any restricted or
general fund revenues allocated to this fund category. If the combined expansion
reserves exceed target levels, the District should consider reducing capacity fees,
reallocating restricted or designated funds to meet other purposes, or shifting the
timing of expansion projects.
III. Target Level – The target level is six months of expansion expenditures. It is
important that the expansion reserves remain at a minimum of six months of
expansion expenditures. This reserve level allows the District the time necessary to
issue additional debt without depleting expansion reserves. If the combined
expansion reserves drop below six months of expenditures this would trigger a
transfer of general use reserves, a bond sale, an adjustment to the timing of
expansion projects, or a reallocation of restricted reserves. Bond proceeds would be
placed in the Restricted Bond Fund, transfers of general use reserves would be
placed in the Designated Expansion Fund, and transfers of restricted reserves would
be placed in the Expansion Capital Improvement Fund.
219
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 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.
Unrestricted and
Undesignated Funding
Sources
Funding Source 2x Water
Rates
Capacity
Fees (1)
Restricted Funds
Restricted Funds
Designated Funds
Expansion
Fund
Expansion
Debt Fund
General Fund – Rates and Charges
Restricted Funds Expansion Capital
Improvement
Fund
Debt
Proceeds
Restricted Funds
Capital
Improvement
Fund
Bond
Debt
Expansion
Fund
Designated
Expansion
Fund
Expansion
Fund
Category
32.4% 67.6%
Diagram 3.3: Expansion Fund Category
(1) For Water Capacity Fees 32.4% goes into the Expansion fund and 67.6% goes into the
Capital Improvement Fund. For Sewer Capacity Fees 100% goes to the Capital
Improvement Fund.
220
Reserve Policy
With the District’s development of its financial systems and the greater need and ability to
separate and track reserves, the replacement reserves have been separated into three funds:
water, recycled, and sewer.
Projects undertaken solely for the purpose of replacing major capital equipment or facilities,
i.e., where the cost exceeds $10,000 for capital purchases or $20,000 for infrastructure items,
generally these are not considered normal maintenance. When the cost is below $10,000,
the costs are financed annually as operational maintenance. As charges are incurred on
replacement projects the reserves are deducted from the respective Replacement Funds on
a monthly basis.
b. Sources
The various funds in this category are financed by debt proceeds, the “buy-in” portion of the
capacity fee, and general fund designations.
c. Funding Levels
I. Minimum Level – The minimum reserve level of this category of funds is 3% of the
historical value of existing assets as identified in the District’s current financial
statements. Potable, recycled, and sewer replacement are evaluated separately.
II. Maximum Level – The maximum reserve level of this category of funds is 6% of
existing assets. If the combined replacement reserves exceed target levels, the
District should consider transferring the “buy-in” portion of the capacity fee to meet
other purposes. Another consideration would be to shift the timing of replacement
projects.
III. Target Level – The target reserve level of this category of funds is 4% of existing
assets. In the event that the reserves fall below the recommended target level, the
District should consider transferring the “buy-in” portion of the capacity fee. The
District should also consider shifting the timing of replacement projects or issuing
debt to support the planned level of facility replacement. The District will act based
on the annual six-year rate model, to insure that at the end of that planning horizon
the reserves exceed the minimum level and is approaching the target level.
221
Reserve Policy
(1) For Water Capacity Fees 67.6% goes into the Capital Improvement Fund. For Sewer Capacity
Fees 100% goes into the Capital Improvement Fund.
3.5 Betterment Fund Category
a. Purpose
The Betterment Fund category is to finance the betterment portion of capital projects with a
portion going to maintenance of the potable, recycled, and sewer systems. The District
maintains separate Betterment Fund categories, one for each improvement district. An
improvement district is a legally defined geographic area usually established for the purpose
of bond financing of facilities. The betterment reserves within these funds are restricted by
law for use within the improvement district in which the fees were collected (Water Code
71631.6). However, the legal restriction of this reserve depends upon the particular revenue
source. (See Section 2.2 b. for a review of the availability fees).
Funding Source
Unrestricted and
Undesignated Funding
Sources
Capacity
Fees (1)
Diagram 3.4: Replacement Fund Category
Restricted Funds
Restricted Funds
Designated Funds
Capital
Improvement Fund
Replacement
Debt Fund
Designated
Replacement
Fund
General Fund – Rates and Charges
Debt
Proceeds
Debt Fund
Restricted Funds
Replacement
Capital
Improvement
Fund
Replacement
Fund
Category
4%
222
Reserve Policy
When considering the reserve levels of the betterment category of funds, the following funds
work in concert and must be considered jointly: the Betterment Fund, Debt Fund, Capital
Improvement Fund, and Designated Betterment Fund.
b. Sources
The Betterment Fund category receives restricted revenues by improvement district from
availability fees (the first $10 is unrestricted, while amounts over $10 are restricted) collected
through the county tax roll. Betterment may also be financed by debt proceeds, the “buy-in”
portion of the capacity fee, as well as the general fund through a designation of reserves.
c. Funding Levels
I. Minimum Level – As the District matures the CIP will move to purely replacement
projects. As the District moves through this lifecycle the need for betterment reserves
will decrease and may be reduced to zero.
II. Maximum Level – The maximum reserve level for the betterment category of funds is
limited to five years of unfinanced betterment facilities as described in the District’s
CIP Budget. To determine the unfinanced amount, the total financing need must be
reduced by the projected betterment revenues, bond financing, and general fund
designations. If this maximum is exceeded, then the District should evaluate
reductions in the special water rates and availability fees, transferring designated
reserves to meet other purposes, or shifting the timing of betterment projects.
III. Target Level – The target is six months of betterment expenditures. It is important
that the betterment reserves remain at a minimum of six months of betterment
expenditures. This reserve level allows the District the time necessary to issue
additional debt without depleting betterment reserves. If the combined betterment
reserves drop below six months of expenditures this would trigger a transfer of
general use reserves, a bond sale, or an adjustment to the timing of betterment
projects. Bond proceeds would be placed in the Betterment Bond Fund while
transfers would be placed in the Designated Betterment Fund.
223
Reserve Policy
Unrestricted and
Undesignated Funding
Sources
Diagram 3.5: Betterment Fund Category
Funding Source Capacity
Fees (2)
Restricted Funds
Restricted Funds
Designated Funds
Capital
Improvement
Fund
Betterment
Debt Fund
Betterment
Fund
General Fund – Rates and Charges
Availability
Charges (1)
Restricted Funds
Debt
Proceeds
Restricted Funds
Bond
Debt
Designated
Betterment
Fund
Betterment
Fund
Betterment
Capital
Improvement
Fund
Betterment
Fund
Category
(1) The portion of charges over $10 per parcel is restricted.
(2) For Water Capacity Fees 67.6% goes into the Capital Improvement Fund. For Sewer Capacity
Fees 100% goes into the Capital Improvement Fund.
224
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
designated or CIF Funds
Total of all funds in fund
category = six months
of capital expenditures
Nexus of cost to fee
Expansion Fund
Category
Capacity fee increase,
bond financing, or
transfer to designated
or CIF Funds
Total of all funds in fund
category = six months
of capital expenditures
Nexus of cost to fee
Replacement Fund
Category
Bond financing, or
transfer to designated
or CIF Funds
Total of all funds in fund
category = 4% of
infrastructure
Nexus of cost to fee
Betterment Fund
Category
Bond financing, or
transfer to designated
or CIF Funds
Total of all funds in fund
category = six months
of capital expenditures
5 years unfunded
needs
Debt Reserve Fund Increase tax collection
or rates
One semi-annual
payment
Two semi-annual
payments
OPEB Fund Fund transfers Full funding Full funding
General Fund Rate increase or fund
transfers
Three months of
operating budget
expenses
Nine months of
operating budget
expenses
Additional Restricted Funds
4.0 Capital Improvement Fund
a. Purpose
The “Capital Improvement Fund’s sole purpose is to track the “buy-in” portion of the capacity fee and
to ensure these fees are expended solely for the purpose for which they were collected. In this case
it is to pay for facilities that were in existence at the time this fee was established. These fees may be
used for expansion, replacement, or betterment projects or any debt related to these categories. The
water capacity fees may also be used for either the potable or the recycled systems. As capacity
fees are collected, the “buy-in” portion of the fee is allocated as needed to one of three capital
improvement funds, one in each of the Expansion, Replacement, and Betterment Fund categories.
These reserves are used to pay debt or offset any negative balance within these three categories of
funds. For sewer, these fees fund the Expansion, Replacement, or Betterment Fund categories.
225
Reserve Policy
These fees may not be used to finance the New Water Supply category, as there were no new water
supply facilities in existence at the time the new methodology for capacity fees was established.
b. Sources
The “buy-in” portion of the capacity fee collected after June 30, 2010 or after September 30, 2014 for
sewer.
c. Funding Levels
There are no minimums, maximums, or target levels for these reserves on an individual basis. The
allocation of this fee to the various capital improvement funds is dependent on the overall reserve
levels within each fund category.
4.1 Debt Reserve Fund
a. Purpose
The Debt Reserve Fund is established to hold the proceeds from the various debt issuances. There
are two types of debt, General Obligation bonds and Certificates of Participation bonds. The
proceeds are transferred to the New Water Supply, Expansion, Replacement, or Betterment Debt
Funds as they are expended for various facilities within those fund categories. As repayment of the
debt occurs, the balances within these individual funds are reduced so that the financial impact of
issuing debt is tracked within the category for which the debt was issued.
b. Sources
Debt proceeds.
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.
226
Reserve Policy
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 restricted reserves for a specific purpose,
and may not be transferred to another category as no other category has the same purpose. However, the
“buy-in” portion of the capacity fees are restricted for purposes that are shared by more than one category of
funds and may therefore be transferred to a restricted fund within another fund category as long as it shares
the same purpose.
In many situations reserve transfers are expected as some fund categories will exceed their maximums or
drop below their minimums. Only fund categories that are below the stated target are eligible to receive
transferred reserves. Fund categories that exceed their maximums are first to be considered for transfers
out, followed by funds that exceed their targets. Funds that exceed their minimums are also available for
reserve transfers out, but only when other options are not available.
The rationale for prioritizing reserve transfers is based on the immediacy of the need and the availability of
reserves from other funding sources. For example, the General Fund is first to receive reserves when it
drops below its target or minimum levels. This is because of the immediate and ongoing nature of the
expenditures that are served by this fund. The operation of the 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,
227
Reserve Policy
Restricted Debt Fund, or the General Fund. Because the Capital Improvement Fund may finance expansion,
replacement or betterment reserves may be transferred between these fund categories, but only back and
forth within its own type of restricted fund.
As an example, if during the rate model update process it was determined that the Expansion Funds
(designated and restricted) would drop and stay below the minimum during the six-year planning horizon,
this would trigger a bond sale, a transfer of general use reserves, and/or a transfer of restricted reserves. If
in the cash planning process, it was anticipated that the General Fund would remain above target during the
planning horizon and that the trend did not present a problematic underfunded status, then General Fund
reserves would be considered available for transfer prior to making proceeds available from a bond sale.
Also, if during this period the Betterment Fund category was anticipated to exceed its maximum, then
reserves from either the Designated Betterment Fund, or the Capital Improvement Fund would be
transferred to the corresponding Expansion Fund prior to a bond sale. All funds are evaluated to determine
which has the greatest need or availability of reserves before any reserve transfer recommendation is
presented to the Board.
228
Glossary
The Reserve Policy contains terminology that is unique to public finance and budgeting. The following
glossary provides assistance in understanding these terms.
Annexation Fees: When water service is requested for land outside the boundaries of the District, the land to
be serviced must first be annexed. For sewer service the land must be annexed into an improvement district
within the District.
Assets: Resources owned or held by Otay Water District that has monetary value.
Availability Fees: The District levies charges each year in developed areas to be used for upgrades,
betterment, or replacement and in undeveloped areas to provide a source of funding for planning, mapping,
and preliminary design of facilities to meet future development. Current legislation provides that any
availability charge in excess of $10.00 per acre shall be used only for the purpose of the improvement district
for which it was assessed.
Bond: A written promise to pay a sum of money on a specific date at a specified interest rate. The interest
payments and the repayment of the principal are authorized in a District bond resolution. The most
common types of bonds are General Obligation (GO) bonds and Certificates of Participation (COPs). These
are frequently used for construction of large capital projects such as buildings, reservoirs, pipelines and
pump stations.
Capital Equipment: Fixed assets such as vehicles, marine equipment, computers, furniture, technical
instruments, etc. which have a life expectancy of more than two years and a value over $10,000.
Capital Improvement Program: A long-range plan of the District for the construction, rehabilitation and
modernization of the District-owned and operated infrastructure.
CWA: The County Water Authority was organized in 1944 under the State County Water Authority Act for the
primary purpose of importing Colorado River water to augment the local water supplies of the Authority's
member agencies. The Authority purchases water from the Metropolitan Water District of Southern
California (MWD) which imports water from the Colorado River and the State Water Project.
Debt Service: The District's obligation to pay the principal and interest of bonds and other debt instruments
according to a predetermined payment schedule.
Expenditures/Expenses: These terms refer to the outflow of funds paid or to be paid for an asset, goods, or
services obtained regardless of when actually paid for. (Note: An encumbrance is not an expenditure). An
encumbrance reserves funds to be expended in a future period.
Fund: An account used to track the collection and use of monies for a specifically defined purpose.
229
Glossary
Fund Balance: The current funds on hand resulting from the historical collection and use of monies. The
difference between assets and liabilities reported in the District’s Operating Fund plus residual equities or
balances and changes therein, from the 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.
Operating Budget: The portion of the budget that pertains to daily operations that provide basic
governmental services. The operating budget contains appropriations for such expenditures as personnel,
supplies, utilities, materials, travel and fuel, and does not include purchases of major capital plant or
equipment which is budgeted for separately in the Capital Budget. The Operating Budget also identifies
planned non-operating revenues and expenses.
Revenue: Monies that the District receives as income. It includes such items as water sales and sewer fees.
Estimated revenues are those expected to be collected during the fiscal year.
Russell Square: A sewer lift station constructed in 1983 that serves four properties in the Russell Square
Development.
System Fees: Each water service customer pays a monthly system charge for water system replacement,
maintenance, and operation expenses. The charge is based on the size of the meter and class of service.
Tax Collection for Bond Debt: California Water Code Section 72091 authorizes the District, as a municipal
water district, to levy ad valorem property taxes which are equal to the amount required to make annual
payments for principal and interest on General Obligation bonds approved by the voters prior to July 1, 1978.
Unit: A Unit of water is 100 cubic feet or 748 gallons of water.
Water Rates: Rates vary among classes of service and are measured in Units. The water rates for
residential customers are based on an accelerated block structure. As more Units are consumed, a higher
Unit rate is charged. Effective in 2009, all non-residential customers are charged for water based on a tiered
rate structure in which water rates are based on meter size and amount of Units consumed.
230
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
2.2.6) Restricted New Water Supply Fund
2.3) Other Post Employment Fund (OPEB)
2.4) Debt Reserve Fund
Exceptions to the pooling of funds do exist for tax-exempt debt proceeds, debt reserves and deferred
compensation funds. Funds received from the sale of general obligation bonds, certificates of participation
or other tax-exempt financing vehicles are segregated from pooled investments and the investment of such
funds are guided by the legal documents that govern the terms of such debt issuances.
3.0 PRUDENCE
Investments should be made with judgment and care, under current prevailing circumstances, which
persons of prudence, discretion and intelligence, exercise in the management of their own affairs, not for
speculation, but for investment, considering the probable safety of their capital as well as the probable
income to be derived.
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.
231
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
232
Investment Policy
performance of the investment portfolio. Employees and officers shall refrain from undertaking personal
investment transactions with the same individual with whom business is conducted on behalf of the District.
7.0 AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS
The Chief Financial Officer shall maintain a list of 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 $50 million). The District
may also invest bond proceeds in LAIF with the same but independent maximum limitation.
233
Investment Policy
8.03) Bonds, debentures, notes and other evidence of indebtedness issued by any of the following
government agency issuers:
Federal Home Loan Bank (FHLB)
Federal Home Loan Mortgage Corporation (FHLMC or "Freddie Mac")
Federal National Mortgage Association (FNMA or "Fannie Mae")
Government National Mortgage Association (GNMA or “Ginnie Mae”)
Federal Farm Credit Bank (FFCB)
Federal Agricultural Mortgage Corporation ( FAMCA or “Farmer Mac”)
There is no percentage limitation of the portfolio which can be invested in this category, although a
five-year maturity limitation is applicable. Government agencies whose implied guarantee has been
reduced or eliminated shall require an “A” rating or higher by a nationally recognized statistical rating
organization.
8.04) Interest-bearing demand deposit accounts and Certificates of Deposit (CD) will be made only
in Federal Deposit Insurance Corporation (FDIC) insured accounts. For deposits in excess of the
applicable FDIC insured maximum, 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(h).
Purchases of commercial paper may not exceed 10 percent of the District’s portfolio and no more
than 10 percent of the outstanding commercial paper of any single issuer.
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(k). Investments in medium-term notes are limited to 10 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(l). Investments in money market mutual funds are
limited to 10 percent of the District's portfolio.
234
Investment Policy
8.08) The San Diego County Treasurer’s Pooled Money Fund, which is a County managed
investment pool, may be used by the Otay Water District to invest excess funds. There is no
percentage limitation of the portfolio which can be invested in this category.
8.09) Under the provisions of California Government Code 53601.6, the Otay Water District shall not
invest any funds covered by this Investment Policy in inverse floaters, range notes, interest-only strips
derived from mortgage pools, or any investment that may result in a zero interest accrual if held to
maturity. Also, the borrowing of funds for investment purposes, known as leveraging, is prohibited.
9.0 INVESTMENT POOLS/MUTUAL FUNDS
A thorough investigation of the pool/fund is required prior to investing, and on a continual basis. There shall
be a questionnaire developed which will answer the following general questions:
A description of eligible investment securities, and a written statement of investment policy
and objectives.
A description of interest calculations and how it is distributed, and how gains and losses are
treated.
A description of how the securities are safeguarded (including the settlement processes),
and how often the securities are priced and the program audited.
A description of who may invest in the program, how often, and what size deposits and
withdrawals are allowed.
A schedule for receiving statements and portfolio listings.
Are reserves, retained earnings, etc., utilized by the pool/fund?
A fee schedule, and when and how is it assessed.
Is the pool/fund eligible for bond proceeds and/or will it accept such proceeds?
10.0 COLLATERALIZATION
Collateralization will be required on certificates of deposit exceeding the applicable FDIC insured maximum.
In order to anticipate market changes and provide a level of security for all funds, the collateralization level
will be 102% of market value of principal and accrued interest. Collateral will always be held by an
independent third party with whom the entity has a current custodial agreement. A clearly marked evidence
of ownership (safekeeping receipt) must be supplied to the entity and retained. The right of collateral
substitution is granted.
11.0 SAFEKEEPING AND CUSTODY
All security transactions entered into by the Otay Water District shall be conducted on a delivery-versus-
payment (DVP) basis. Securities will be held by a third party custodian designated by the District and
evidenced by safekeeping receipts.
235
Investment Policy
12.0 DIVERSIFICATION
The Otay Water District will diversify its investments by security type and institution, with limitations on the
total amounts invested in each security type as detailed in Paragraph 8.0, above, so as to reduce overall
portfolio risks while attaining benchmark average rate of return. With the exception of U.S. Treasury
securities, government agencies, and authorized pools, no more than 50% of the District’s total investment
portfolio will be invested with a single financial institution.
13.0 MAXIMUM MATURITIES
To the extent possible, the Otay Water District will attempt to match its investments with anticipated cash
flow requirements. Unless matched to a specific cash flow, the District will not directly invest in securities
maturing more than five years from the date of purchase. However, for time deposits with banks or savings
and loan associations, investment maturities will not exceed two years. Investments in commercial paper
will be restricted to 270 days.
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.
236
Investment Policy
Coupon, discount or earnings rate.
Par value, amortized book value, and market value.
Percentage of the portfolio represented by each investment category.
17.0 INVESTMENT POLICY ADOPTION
The Otay Water District’s investment policy shall be adopted by resolution of the District’s Board of Directors.
The policy shall be reviewed annually by the Board and any modifications made thereto must be approved
by the Board.
18.0 GLOSSARY
See Appendix A.
237
Appendix A: Glossary
Active Investing: Active investors will purchase investments and continuously monitor their activity, often
looking at the price movements of their stocks many times a day, in order to exploit profitable conditions.
Typically, active investors are seeking short term profits.
Agencies: Federal agency securities and/or Government-sponsored enterprises.
Bankers’ Acceptance (BA): A draft or bill or exchange accepted by a bank or trust company. The accepting
institution guarantees payment of the bill, as well as the issuer.
Benchmark: A comparative base for measuring the performance or risk tolerance of the investment
portfolio. A benchmark should represent a close correlation to the level of risk and the average duration of
the portfolio’s investments.
Broker/Dealer: Any individual or firm in the business of buying and selling securities for itself and others.
Broker/dealers must register with the SEC. When acting as a broker, a broker/dealer executes orders on
behalf of his/her client. When acting as a dealer, a broker/dealer executes trades for his/her firm's own
account. Securities bought for the firm's own account may be sold to clients or other firms, or become a
part of the firm's holdings.
Certificate of Deposit (CD): A short or medium term, interest bearing, FDIC insured debt instrument offered
by banks and savings and loans. Money removed before maturity is subject to a penalty. CDs are a low
risk, low return investment, and are also known as “time deposits”, because the account holder has agreed
to keep the money in the account for a specified amount of time, anywhere from a few months to several
years.
Collateral: Securities, evidence of deposit or other property, which a borrower pledges to secure repayment
of a loan. Also refers to securities pledged by a bank to secure deposits of public monies.
Commercial Paper: An unsecured short-term promissory note, issued by corporations, with maturities
ranging from 2 to 270 days.
Comprehensive Annual Financial Report (CAFR): The official annual report for the Otay Water District. It
includes detailed financial information prepared in conformity with generally accepted accounting principles
(GAAP). It also includes supporting schedules necessary to demonstrate compliance with finance-related
legal and contractual provisions, extensive introductory material, and a detailed statistical section.
Coupon: (a) The annual rate of interest that a bond’s issuer promises to pay the bondholder on the bond’s
face value. (b) A certificate attached to a bond evidencing interest due on a set date.
238
Appendix A: Glossary
Dealer: A dealer, as opposed to a broker, acts as a principal in all transactions, buying and selling for his
own account.
Debenture: A bond secured only by the general credit of the issuer.
Delivery Versus Payment: There are two methods of delivery of securities: delivery versus payment and
delivery versus receipt. Delivery versus payment is delivery of securities with an exchange of money for the
securities. Delivery versus receipt is delivery of securities with an exchange of a signed receipt for the
securities.
Derivatives: (1) Financial instruments whose return profile is linked to, or derived from, the movement of one
or more underlying index or security, and may include a leveraging factor, or (2) financial contracts based
upon notional amounts whose value is derived from an underlying index or security (interest rates, foreign
exchange rates, equities or commodities).
Discount: The difference between the cost price of a security and its maturity when quoted at lower than
face value. A security selling below original offering price shortly after sale also is considered to be at a
discount.
Discount Securities: Non-interest bearing money market instruments that are issued at a discount and
redeemed at maturity for full face value, e.g., U.S. Treasury Bills.
Diversification: Dividing investment funds among a variety of securities offering independent returns.
Federal Credit Agencies: Agencies of the Federal government set up to supply credit to various classes of
institutions and individuals, e.g., S&L’s, small business firms, students, farmers, farm cooperatives, and
exporters.
Federal Deposit Insurance Corporation (FDIC): A federal agency that insures deposits in member banks
and thrifts, currently up to $100,000 per deposit.
Federal Farm Credit Bank (FFCB): The Federal Farm Credit Bank system supports agricultural loans and
issues securities and bonds in financial markets backed by these loans. It has consolidated the financing
programs of several related farm credit agencies and corporations.
Federal Funds Rate: The rate of interest at which Fed funds are traded. This rate is currently pegged by the
Federal Reserve through open-market operations.
239
Appendix A: Glossary
Federal Agricultural Mortgage Corporation (FAMC or Farmer Mac): A stockholder owned, publicly-traded
corporation that was established under the Agricultural Credit Act of 1987, which added a new Title VIII to
the Farm Credit Act of 1971. Farmer Mac is a government sponsored enterprise, whose mission is to
provide a secondary market for agricultural real estate mortgage loans, rural housing mortgage loans, and
rural utility cooperative loans. The corporation is authorized to purchase and guarantee securities. Farmer
Mac guarantees that all security holders will receive timely payments of principal and interest.
Federal Home Loan Bank (FHLB): Government sponsored wholesale banks (currently 12 regional banks),
which lend funds and provide correspondent banking services to member commercial banks, thrift
institutions, credit unions and insurance companies.
Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac): A stockholder owned, publicly
traded company chartered by the United States federal government in 1970 to purchase mortgages and
related securities, and then issue securities and bonds in financial markets backed by those mortgages in
secondary markets. Freddie Mac, like its competitor Fannie Mae, is regulated by the United States
Department of Housing and Urban Development (HUD).
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.
240
Appendix A: Glossary
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.
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
241
Appendix A: Glossary
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.
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
242
Appendix A: Glossary
compensate him for this. Dealers use RP extensively to finance their positions. Exception: When the Fed is
said to be doing RP, it is lending money that is increasing bank reserves.
Safekeeping: A service to customers rendered by banks for a fee whereby securities and valuables of all
types and descriptions are held in the bank’s vaults for protection.
Secondary Market: A market made for the purchase and sale of outstanding securities issues following
their initial distribution.
Securities & Exchange Commission: Agency created by Congress to protect investors in securities
transactions by administering securities legislation.
Sec Rule 15C3-1: See Uniform Net Capital Rule.
Structured Notes: Notes issued by Government Sponsored Enterprises (FHLB, FNMA, FAMCA, etc.), and
Corporations, which have imbedded options (e.g., call features, step-up coupons, floating rate coupons,
derivative-based returns) into their debt structure. Their market performance is impacted by the fluctuation
of interest rates, the volatility of the imbedded options and shifts in the shape of the yield curve.
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.
243
Debt Policy
1.0: POLICY
It is the policy of the Otay Water District to finance the acquisition of high value assets that have an extended
useful life through a combination of current revenues and debt financing. Regularly updated debt policies
and procedures are an important tool to insure the use of the District’s resources to meet its commitments,
to provide the highest quality of service to the District’s customers, and to maintain sound financial
management practices. These guidelines are for general use and allow for exceptions as circumstances
dictate.
2.0: SCOPE
This policy is enacted in an effort to standardize the issuance and management of debt by the Otay Water
District. The primary objective is to establish conditions for the use of debt, to minimize the District’s debt
service requirements and cost of issuance, to retain the highest practical credit rating, maintain full and
complete financial disclosure and reporting, and to maintain financial flexibility for the District. This policy
applies to all debt issued by the District including general obligation bonds, revenue bonds, capital leases
and special assessment debt.
3.0: LEGAL & REGULATORY REQUIREMENTS
The Chief Financial Officer (CFO) and the District’s Legal Counsel will coordinate their activities to ensure
that all securities are issued in full compliance with Federal and State law.
4.0: CAPITAL FACILITIES FUNDING
Financial Planning
The District maintains a six-year financial projection that identifies operating requirements and public facility
and equipment requirements, and has developed a Rate Model for funding the District’s 6-Year Capital
Improvement Program (CIP). The District’s CIP Budget places the capital requirements in order of priority
and schedules them for funding and implementation. It identifies a full range of capital needs, provides for
the ranking of the importance of such needs, and identifies all the funding sources that are available to
cover the costs of the projects. In cases where the program identifies project funding through the use of
debt financing, the budget should provide information needed to determine debt capacity. The Rate Model
and the CIP Budget give the Board part of the data needed to make informed judgments concerning the
possibility of issuing debt.
Funding Criteria
The Chief Financial Officer (CFO) will evaluate all capital project requests and develop a proposed funding
plan. Priority may be given to those projects that can be funded with current resources (annual cash flow,
fund balances or reserves). Those projects that cannot be funded with current resources may be deferred or
244
Debt Policy
the CFO may recommend that they be funded with debt financing. However, debt financing will not be
considered appropriate for any recurring purpose such as current operating and maintenance expenditures.
The issuance of short-term cash-flow instruments is excluded from this limitation.
The General Manager will recommend the funding plan to the Board. The General Manager may deem it
necessary or desirable in certain circumstances to convene a Finance Committee meeting to evaluate
funding options presented by the Chief Financial Officer.
Funding Sources
The District’s capital improvements can be classified in three categories: those related to an expansion of
the system (“expansion”), those related to upgrading the existing system (“betterment”) and those related to
repairing or replacing existing infrastructure (“replacement”). In general, capital improvements for
betterment or replacement are financed primarily through user charges, availability charges, and betterment
charges. Capital improvements for expansion are financed through capacity fees. Accordingly, these fees
are reviewed at least annually or more frequently as required and set at levels sufficient to ensure that new
development pays its fair share of the costs of constructing necessary infrastructure. Additionally, the District
will seek State and Federal grants and other forms of intergovernmental aid wherever possible.
Pay-As-You-Go Projects
The District’s capacity fees are the major funding source in financing additions to the water system and the
recycled water system. Over time, the fees collected and the cost to construct the capital projects should
balance. However, collection of these fees is subject to significant fluctuation based on the rate of new
development. Accordingly, the Chief Financial Officer, in developing the funding plan for the CIP, will
determine that current revenues and adequate 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.
245
Debt Policy
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 variable interest costs will be the higher of the 10 year average
rate or the current weekly variable rate.
2. The variable rate debt costs will include an estimate for annual costs such as letter of credit fees,
liquidity fees, remarketing fees, monthly draw fees and annual rating fees applicable to the letter of
credit.
3. Any potential reserve fund earnings will reduce the fixed rate debt service or variable rate debt
service as applicable.
246
Debt Policy
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.
247
Debt Policy
Negotiated Sale
Types of debt that would typically lend themselves to the negotiated sale format are variable rate debt and
unrated debt. Circumstances that might warrant a negotiated sale may occur when the issue is of a limited
size that would not attract wide-spread investor interest, during periods of high levels of issuance by other
entities in the State, or during periods of market volatility or with relatively new financing techniques. In the
event the District decides to use a negotiated sale, it will pay management fees only to those firms that
place orders for bonds.
If the size of the District’s proposed issue is not cost effective, the District may also consider issuing its debt
by private placement or through any qualified Joint Power Authority (JPA) in the State of California whose
principal business is issuing bonds.
8.0: REFUNDING DEBT
Purpose
Periodic reviews of all outstanding debt will be undertaken by the Chief Financial Officer to determine
refunding (refinancing) opportunities. The purpose of the refinancing may be to:
1. Lower annual debt service by taking advantage of lower current interest rates.
2. Update or revise covenants on outstanding debt issue if a Rate Covenant appears to be too high,
has precluded the District from implementing its financing plan, or has caused the District to
increase rates to customers.
3. Restructure debt service associated with an issue to facilitate the issuance of additional debt, usually
in order to smooth out peaks in total debt service which can occur frequently as one debt issue is
layered on top of existing debt issues.
4. Alter bond characteristics such as call provisions or payment dates.
5. Pay for conversion costs such as funding a reserve fund or paying for credit enhancement when
converting variable rate debt to fixed rate debt.
Restrictions on Refunding
Tax-exempt bonds typically have provisions that preclude early redemption of the bonds for a period of
years after issuance. The number of times a tax-exempt bond can be refinanced prior to its Optional
Redemption date (known as Advance Refunding) is limited by the IRS. For debt issued after 1986, issuers
may only provide for Advance Refunding of obligations in advance of the Optional Redemption date one
time. There is no limit by the IRS on the ability of issuers to redeem bonds early once the Optional
Redemption date has been reached (known as Current Refunding).
248
Debt Policy
Savings Criteria
In cases where an Advance Refunding or Current Refunding is intended to provide debt service savings, the
District may commence the refinancing process if a minimum five percent (5%) present value savings net of
issuance costs and any cash contributions can be demonstrated. Since interest rates may fluctuate
between the time when a refinancing is authorized and when the debt is issued, beginning the process with
at least a 5% savings should provide the District with some level of protection that it can achieve a minimum
of three percent (3%) net present value savings of the refunding bonds when and if the debt is issued.
These minimum standards are intended to protect the District staff from spending time on refinancings that
become marginally cost-effective after the entire issuance process is complete.
The savings target may be waived, however, if sufficient justification for lowering the savings target can be
provided by meeting one or more of the other refunding objectives described above.
9.0: SUBORDINATE LIEN DEBT
The District will issue subordinate lien debt only if it is financially beneficial to the District or consistent with
creditworthiness objectives. Subordinate lien debt is structured to be payable second in priority to the
District’s other outstanding debt. Typically, subordinate lien debt might be issued if the District desired a
more flexible Rate Covenant with respect to its new obligations and did not want to refinance all of its
existing debt to obtain that less restrictive Rate Covenant.
10.0: FINANCING PARTICIPANTS
The District’s purchasing guidelines provide the process for securing professional services related to
individual debt issues. The solicitation and selection process include encouraging participation from
qualified service providers, both local and national, and securing services at competitive prices.
Financial Advisor: The use of a Financial Advisor is necessary for the sale of debt by a competitive bid
process and is desirable when issuing debt through a negotiated sale. The Financial Advisor has a fiduciary
duty to the District and will seek to structure the District’s debt in the manner that is saleable, yet meets the
District’s objectives for the financing. The Financial Advisor will advise the District on alternative structures
for its debt, the cost of different debt structures and potential pricing mechanisms that can be expected from
underwriters (such as call features, term bonds and premium and discount bond pricing) and, at the
District’s direction, will write the offering document (preliminary official statement). With respect to
competitive sales, the Financial Advisor will arrange for distributing the preliminary official statement,
accepting bids via an internet bidding platform, verifying the lowest bid and provide detailed instructions for
the flow of funds at closing to the winning Underwriter, the Trustee and the District. In a negotiated sale, the
Financial Advisor will provide independent confirmation on the Underwriter’s proposed pricing to ensure that
interest rates and Underwriter’s compensation are appropriate for the credit quality of the issue and
competitive in the overall public finance market in California.
249
Debt Policy
Underwriter: The Underwriter markets the bonds for sale to investors. While the District’s preference is to
select the Underwriter for the debt via sale of the debt at competitive bid, there are circumstances when a
negotiated issue is in the best interests of the District. Negotiated sales are preferable if the security features
are particularly complex or market conditions are volatile. The Chief Financial Officer will recommend
whether the method of sale is competitive or negotiated based on the type of issue and other market
conditions. In the case of negotiated sales, the Underwriter will be required to demonstrate sufficient
capitalization and sufficient experience related to the specific type of debt issuance.
The Underwriter will work in connection with the District’s Financial Advisor on structuring the issue and
offering different pricing ideas.
Bond Counsel: The District’s Bond Counsel provides the primary legal documents that detail the security for
the bonds and the authority under which bonds are issued. The Bond Counsel also provides an opinion to
bond holders that the bonds are tax-exempt under both State and Federal law. All closing documents in
connection with an issue are also prepared by Bond Counsel.
Disclosure Counsel: The District’s Disclosure Counsel provides legal advice to the District regarding the
adequacy of the District’s disclosure of financial information or risks of investing in the District’s debt issue to
the investing public. The Disclosure Counsel can prepare the official statement or review the official
statement and gives the District an opinion that there is no information missing from the official statement of
a material nature that would be necessary for an investor to make an informed decision about investing in
the District’s bonds.
Trustee: The Trustee is a financial institution selected by the District to administer the collection of revenues
pledged to repay the bonds and to distribute those funds to bondholders.
Letter of Credit Bank: The Letter of Credit Bank is a U.S. or foreign bank that has issued a letter of credit
providing both credit enhancement (the Letter of Credit Bank will pay the debt in the event that the District
defaults on the payment) and liquidity for a variable rate bond issue. These banks have their own short-term
credit rating, which can be higher than the District’s short-term credit rating. Liquidity is needed because
variable rate bondholders are allowed to “put” their bonds back to the District if they do not like the interest
rate currently being offered. The District’s Remarketing Agent then finds a new buyer for those bonds, but in
the event that no buyer is found, a draw is made under the letter of credit to purchase the bonds that have
been “put.” As soon as the bonds are remarketed to another buyer, the letter of credit is repaid. The letter of
credit fees are paid annually or quarterly. Letter of credits are typically issued for not more than 3 years and
must be renewed during the life of the bonds. Credit enhancement is discussed further under the heading
“CREDIT ENHANCEMENT.”
Municipal Bond Insurer: The Municipal Bond Insurer can be one of several insurance companies that
provide municipal bond insurance policies securing payment of the District’s debt. These policies provide
that the Municipal Bond Insurer will pay the District’s debt in the event that the District defaults on its
payments. Debt which is insured carries the Municipal Bond Insurer’s credit rating. The insurance premium
for the bond insurance policy is paid one time at the issuance of the debt and is non-cancelable for the term
250
Debt Policy
of the debt. Unlike a letter of credit, bond insurance policies do not provide liquidity and are most typically
purchased for fixed rate debt.
Remarketing Agent: The Remarketing Agent is an investment bank that, each week, determines the interest
rate for the District’s variable rate obligations. The rate is set at the rate at which the obligations could be
sold on the open market at 100% of their face value. The Remarketing Agent also finds new buyers for any
of the obligations that are “put” back to the District.
Rating Agencies: Currently, there are three widely recognized rating agencies that rate municipal debt in
the United States: Standard & Poor’s, Moody’s Investors Service, and Fitch Investors Service. Rating
agencies establish objective criteria under which each type of financing undertaken by the District is to be
analyzed. Upon request, a rating agency will rate the underlying strength of the District’s financings, without
regard to the purchase of any credit enhancement. The rating is released to the general public and
thereafter, the rating agency will periodically update its analysis of a particular issue, and may raise or lower
the rating if circumstances warrant. Investment-grade ratings range from “AAA” to “BBB-.” A rating below
“BBB-” is not investment grade. Many mutual funds cannot buy bonds that do not carry an investment
grade.
Verification Agent: In a refunding, the District will deposit funds with an escrow agent (usually the trustee)
in an amount sufficient, together with earnings thereon, to pay the debt service and redemption price of the
debt being refunded through and including the call date. The Verification Agent verifies the mathematical
accuracy of calculation of the amount to be deposited in escrow and the bond counsel relies on this
verification in giving their opinion that the debt is defeased within the meaning of the indenture and that the
lien of the debt on the revenues pledged to the debt being refunded is released.
11.0: CONFLICT OF INTEREST AND STANDARDS OF CONDUCT
Members of the District, the Board of Directors and its consultants, service providers and underwriters shall
adhere to standards of conduct and conflict of interest rules as stipulated by the California Political Reform
Act or the Municipal Securities Rulemaking Board (MSRB), as applicable. All debt financing participants shall
maintain the highest standards of professional conduct at all times, in accordance with MSRB Rules,
including Rule G-37. There shall be no conflict of interest with the District with any debt financing
participant.
12.0: CONTINUING DISCLOSURE
The District acknowledges the responsibilities of the underwriting community and pledges to make all
reasonable efforts to assist underwriters in their efforts to comply with SEC Rule 15c2-12 and MSRB Rule G-
36. The District will file its official statements with the MSRB and the nationally recognized municipal
securities information repositories. The District will also post copies of its comprehensive financial reports
on the MSRB’s Electronic Municipal Market Access (EMMA) website, and will disseminate other information
that it deems pertinent to the market in a timely manner (For bonds issued after 2012, 10 days). While initial
bond disclosure requirements pertain to underwriters, the District will provide financial information and
251
Debt Policy
notices of material events on an ongoing basis throughout the life of the issue. Material events are defined
as those events which are considered to likely reflect on the credit supporting the securities.
(a) The events considered material according to the SEC are:
1. Principal and interest payment delinquencies;
2. Unscheduled draws on debt service reserves reflecting financial difficulties;
3. Unscheduled draws on credit enhancements reflecting financial difficulties;
4. Substitution of credit or liquidity providers, or their failure to perform;
5. Adverse tax opinions or the issuance by the Internal Revenue Service of proposed or final
determinations of taxability or of a Notice of Proposed Issue (IRS Form 5701-TEB);
6. Tender offers;
7. Defeasances;
8. Ratings changes; and
9. Bankruptcy, insolvency, receivership or similar proceedings.
Note: for the purposes of the event identified in subparagraph (9) above, the event is considered
to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar
officer for an obligated person in a proceeding under the U.S. Bankruptcy Code or in any other
proceeding under state or federal law in which a court or governmental authority has assumed
jurisdiction over substantially all of the assets or business of the obligated person, or if such
jurisdiction has been assumed by leaving the existing governmental body and officials or officers
in possession but subject to the supervision and orders of a court or governmental authority, or the
entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or
governmental authority having supervision or jurisdiction over substantially all of the assets or
business of the obligated person.
(b) Pursuant to the provisions of this section (b), the District shall give, or cause to be given, notice of the
occurrence of any of the following events with respect to the Bonds, if material:
1. Unless described in paragraph (a) above, notices or determinations by the Internal Revenue
Service with respect to the tax status of the Bonds or other material events affecting the tax
status of the Bonds;
2. The consummation of a merger, consolidation or acquisition involving an obligated person or
the sale of all or substantially all of the assets of the obligated person, other than in the ordinary
course of business, the entry into a definitive agreement to undertake such an action or the
termination of a definitive agreement relating to any such actions, other than pursuant to its
terms;
3. Appointment of a successor or additional trustee or the change of the name of a trustee;
4. Nonpayment related defaults;
5. Modifications to the rights of Owners of the Bonds;
6. Notices of redemption; and
252
Debt Policy
7. Release, substitution or sale of property securing repayment of the Bonds.
Whenever the District obtains knowledge of the occurrence of a Listed Event under (b) above, the District
shall as soon as possible determine if such event would be material under applicable federal securities
laws.
13:0 INVESTMENT & ARBITRAGE COMPLIANCE
Tax-exempt bonds are required to meet certain provisions of the federal tax code in order to maintain their
tax-exempt status. In order to prevent municipal issuers from borrowing money at tax-exempt rates solely for
the purpose of investing the proceeds in higher yielding investments and making a profit (“arbitrage”), the
federal tax code contains a provision that requires issuers to compare the interest earned on any bond
funds held (such as a reserve fund) with interest that would theoretically be earned if the funds were
invested at the yield of the bonds, and to “rebate” to the federal government any interest earned in excess of
the theoretical earnings limit.
The Chief Financial Officer shall invest the bond proceeds subject to the District’s Investment Policy in a
timely manner, to ensure the availability of funds to meet operational requirements. In doing so, the CFO will
maintain a system of record keeping and reporting to meet the arbitrage rebate compliance requirements of
the federal tax code.
14.0: 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
and again in 2009. The District also has approximately $29 million in general obligation bonds authorized
between 1960 and 1978 for various improvement districts throughout the District, but unissued. General
obligation bonds can only be issued under these existing authorizations to the extent necessary to fund the
improvements specified by each ballot measure.
253
Debt Policy
General obligation bonds generally are regarded as the broadest and soundest security among tax-secured
debt instruments. An unlimited-tax pledge would enable a trustee to invoke mandamus to force the District
to raise the tax rate as much as necessary to pay off the bonds. General obligation bonds have other credit
strengths as well: the property tax tends to be a steady and predictable revenue source, and when a vote is
required to issue them, bondholders have some indication of taxpayers’ willingness to pay. General
obligation bonds carry the highest credit rating that a public agency can achieve and therefore, the lowest
interest cost. General obligation bonds typically are issued to finance capital facilities and not for ongoing
operational or maintenance costs.
The District will use an objective analytical approach to determine whether it can afford to assume new
general obligation debt for the improvement districts, or in the case of projects not approved by the original
ID 27 vote, prior to any submission of a general obligation bond ballot measure to voters. This process will
compare generally accepted standards of affordability to the current values for the District. These standards
will include debt per capita, debt as a percent of taxable value, debt service payments as a percent of
current revenues and current expenditures, and the level of overlapping net debt of all local taxing
jurisdictions. The process will also examine the direct costs and benefits of the proposed expenditures. The
decision on whether or not to assume new debt will be based on these costs and benefits, the current
conditions of the municipal bond market, and the District’s ability to "afford" new debt as determined by the
aforementioned standards.
Revenue Bonds
Revenue bonds are limited-liability obligations that pledge net revenues of the District to debt service. The
net revenue pledge is after payment of all operating costs. Since revenue bonds are not generally secured
by the full faith and credit of the District, the financial markets require coverage ratios of the pledged revenue
stream and a covenant to levy rates and charges sufficient to produce net income at some level in excess of
debt service (a Rate Covenant).
Also there may be a test required to demonstrate that future revenues will be sufficient to maintain debt
service coverage levels after any proposed additional bonds are issued. The District will strive to meet
industry and financial market standards with such ratios without impacting the current rating. Annual
adjustments to the District’s rate structure may be necessary to maintain these coverage ratios.
The underlying credit of revenue bonds is judged on the ability of the District’s existing rates to provide
sufficient net income to pay debt service and the perceived willingness of the District to raise rates and
charges in accordance with its Rate Covenant. Actual past performance also plays a role in evaluating the
credit quality of revenue bonds, as well as the diversity of the customer base. Revenue bonds generally
carry a credit rating one or two investment grades below a general obligation bond rating.
The District may use a debt structure called “Certificates of Participation” to finance capital facilities.
However, if the certificates contain a pledge of net revenues and a Rate Covenant, they are treated as
essentially the same as a revenue bond.
254
Debt Policy
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.
255
Debt Policy
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.
15.0: RATING AGENCY APPLICATIONS
The District may seek one or more ratings on all new issues that are being sold in the public market. These
rating agencies include, but are not limited to, Fitch Investors Service, Moody’s Investors Service, and
Standard & Poor’s. When applying for a rating on an issue over $1 million or more, the District shall make a
formal presentation of the finances and positive developments within the District to the rating agencies. The
District will report all financial information to the rating agencies upon request. This information shall
include, but shall not be limited to, the District’s Comprehensive Annual Financial Report (CAFR), and the
Adopted Operating and Capital Budget.
16.0: 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-
256
Debt Policy
effective. Selection of credit enhancement providers will be subject to a competitive bid process using the
District’s purchasing guidelines, if applicable.
Fixed Rate Bonds
Credit enhancement for fixed rate bonds is obtained by the purchase of bond insurance. If a commitment
for bond insurance is obtained for a particular issue, the District will estimate the annual debt service for the
issue based on current interest rates applicable to the credit rating of the bond insurer. If the estimated debt
service on this basis is less than or equal to estimated debt service for the issue based on interest rates for
bonds with the District’s underlying or stand-alone credit rating, the District will purchase the bond
insurance. Any intention of the District to prepay the debt ahead of its scheduled maturity will be taken into
account in the analysis. Credit enhancement may be used to improve or establish a credit rating on a
District debt obligation even if such credit enhancement is not cost effective if, in the opinion of the Chief
Financial Officer, the use of such credit enhancement meets the District’s debt financing goals and
objectives, such as, funding of a reserve fund for the bonds.
Variable Rate Bonds
Credit enhancement for variable rate bonds is comprised of two components: credit support and liquidity.
The interest on variable rate bonds is based on a short-term investment rate (usually 7 days). Any investor
can tender their bonds back to the District to be repurchased on short notice (usually 7 days). Because of
the short-term nature of the investment, the securities that the District is “competing” with for investors are
AA-rated mutual funds. Therefore, variable debt needs to have credit enhancement to achieve a
comparable AA rating, as well as liquidity support to provide the District with a mechanism to purchase any
bonds that are tendered before they can be remarketed to new investors. A limited number of financial
institutions offer letters of credit that combine both credit support and liquidity for one fee. An alternative is
to purchase bond insurance to provide credit support and enter into a separate purchase agreement with a
financial institution to provide liquidity. The difference in cost between the two structures will be analyzed
before either alternative is selected for variable rate debt.
17.0: GLOSSARY
Ad Valorem Tax: A tax calculated “according to the value” of property. Such a tax is based on the assessed
valuation of tangible personal property. In most jurisdictions, the tax is a lien on the property enforceable by
seizure and sale of the property. General restrictions, such as overall restrictions on rates, or the percent of
charge allowed, sometimes apply. As a result, ad valorem taxes often function as the balancing element in
local budgets.
Advance Refunding: A procedure whereby outstanding bonds are refinanced by the proceeds of a new
bond issue prior to the date on which outstanding bonds become due or are callable. Typically an advance
refunding is performed to take advantage of interest rates that are significantly lower than those associated
257
Debt Policy
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.
Capital Lease: The acquisition of a capital asset over time rather than merely paying rent for temporary use.
A lease-purchase agreement, in which provision is made for transfer of ownership of the property for a
nominal price at the scheduled termination of the lease, is referred to as a capital lease.
Certificate of Participation: A financial instrument representing a proportionate interest in payments such
as lease payments by one party (such as the District acting as a lessee) to another party (often a trustee).
258
Debt Policy
CIP: Capital Improvement Program.
Competitive Sale: The sale of securities in which the securities are awarded to the bidder who offers to
purchase the issue at the best price or lowest cost.
Continuing Disclosure: The requirement by the Securities and Exchange Commission for most issuers of
municipal debt to provide current financial information to the informational repositories for access by the
general marketplace.
Debt Service: The amount necessary to pay principal and interest requirements on outstanding bonds for a
given year or series of years.
Defeasance: Providing for payment of principal of premium, if any, and interest on debt through the first call
date or scheduled principal maturity in accordance with the terms and requirements of the instrument
pursuant to which the debt was issued. A legal defeasance usually involves establishing an irrevocable
escrow funded with only cash and U.S. Government obligations.
Derivative: A financial product that is based upon another product. Generally, derivatives are risk mitigation
tools.
Discount: The difference between a bond’s par value and the price for which it is sold when the latter is less
than par.
Financial Advisor: A consultant who advises an issuer on matters pertinent to a debt issue, such as
structure, sizing, timing, marketing, pricing, terms and bond ratings.
General Obligation Bonds: Debt that is secured by a pledge of the ad valorem taxing power of the issuer.
Also known as a full faith and credit obligation.
Municipal Securities Rulemaking Board (MSRB): The MSRB, comprised of representatives from
investment banking firms, dealer bank representatives, and public representatives, is entrusted with the
responsibility of writing rules of conduct for the municipal securities market.
Negotiated Sale: A sale of securities in which the terms of sale are determined through negotiation
between the issuer and the purchaser, typically an underwriter, without competitive bidding.
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.
259
Debt Policy
Option: A derivative contract. There are two primary types of options (see Put Option and Call Option). An
option is considered a wasting asset because it has a stipulated life to expiration and may expire worthless.
Hence, the premium could be wasted.
Optional Redemption: The redemption of an obligation prior to its stated maturity, which can only occur on
dates specified in the bond indenture.
Overlapping Debt: The legal boundaries of local governments often overlap. In some cases, one unit of
government is located entirely within the boundaries of another. Overlapping debt represents the
proportionate share of debt that must be borne by one unit of government because another government
with overlapping or underlying taxing authority issued its own bonds.
Par Value: The face value or principal amount of a security.
Pay-as-you-go: To pay for capital improvements from current resources and fund balances rather than
from debt proceeds.
Put Option: A contract that grants to the purchaser the right but not the obligation to exercise.
Rate Covenant: A covenant between the District and bondholders, under which the District agrees to
maintain a certain level of net income compared to its debt payments, and covenants to increase rates if net
income is not sufficient to meet such level.
Refunding: A procedure whereby an issuer refinances an outstanding bond issue by issuing new bonds.
Revenue Bonds: A bond which is payable from a specific source of revenue and to which the full faith and
credit of an issuer with taxing power is not pledged. Revenue bonds are payable from identified sources of
revenue, and do not permit the bondholders to compel a jurisdiction to pay debt service from any other
source. Pledged revenues often are derived from the operation of an enterprise. Generally, no voter
approval is required prior to issuance.
Special Assessments: A charge imposed against property or parcel of land that receives a special benefit
by virtue of some public improvement that is not, or cannot be enjoyed by the public at large. Special
assessment debt issues are those that finance such improvements and are repaid by the assessments
charged to the benefiting property owners.
Swap: A customized financial transaction between two or more counterparties who agree to make periodic
payments to one another. Swaps cover interest rate, equity, commodity and currency products. They can
be simple floating for fixed exchanges or complex hybrid products with multiple option features.
260
Debt Policy
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.
261
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 the land 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) the land 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, 2014 are $1,622 and $5,986 for water and sewer, respectively.
APPROPRIATION: The annual budget adopted by the District’s Board appropriates funds for
monitoring and control purposes, and serves as a financial plan.
ASSETS: Resources owned or held by the District that have monetary value.
AVAILABILITY FEES: The District levies charges each year in developed areas to be used for general
purposes for construction of facilities. This fee is levied in undeveloped areas to provide a source of
funding for planning, mapping, and preliminary design of facilities to meet future development. Current
legislation provides that any availability charge in excess of $10.00 per acre shall be restricted only for
the purpose of constructing facilities in the improvement district in which it was assessed.
BALANCED BUDGET: A financial plan, for a specified period of time that matches all planned revenues
and expenditures with various services. This plan has sufficient sources of funds to support the
planned expenditures. The District uses a fiscal year beginning July 1 and ending June 30 for budgetary
and financial reporting purposes.
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.
262
Glossary
BETTERMENT FEES FOR MAINTENANCE: The Operating Budget earns betterment fees for
maintenance work performed on infrastructure within special betterment zones. Betterment 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 a contribution of capital to either reimburse existing customers for the available capacity in the
existing system, or to help finance planned future growth-related capacity improvements.
CAPACITY FEE REVENUES: These fees are earned by the Operating Budget as the Engineering
Department supports expansion functions.
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, computer systems,
and special tools. The capital budget also includes funds for infrastructure related items over $20,000
(as explained below) which are distinguished from operating items according to their value and
projected useful life.
CAPITAL EQUIPMENT: Fixed assets such as vehicles, equipment, furniture, technical instruments, etc.
which have a life expectancy of more than two years and a value over $10,000. This category may
include items over $20,000 that are 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, 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.
263
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.
ENTERPRISE RESOURCE PLANNING: Systems with a shared database that supports multiple
functions used by different business units.
EXPENDITURES/EXPENSES: These terms refer to the outflow of funds paid or to be paid for an asset,
goods or services obtained regardless of when actually paid for. (Note: An encumbrance is not an
expenditure). An encumbrance reserves funds to be expended in a future period.
264
Glossary
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.
FISCAL YEAR: Twelve-month term designating the beginning and ending period for recording financial
transactions. The District has specified July 1 to June 30 as its fiscal year.
FUND BALANCE: The current funds on hand resulting from the net historical collection and use of
monies. The difference between assets and liabilities reported in the District’s Operating Fund plus
residual equities or balances and changes therein, from the result of operations.
GENERAL FUND: The District’s general fund is an enterprise fund – one for each of the District’s three
business lines Potable, Recycled and Sewer services. Each is an accounting entity with a self-
balancing set of accounts established to record the financial position and results that pertain to a
specific activity. The activities of enterprise funds closely resemble those of ongoing businesses in
which the purpose is to conserve and add to basic resources while meeting operating expenses from
current revenues. Enterprise funds account for operations that provide services on a continuous basis
and are substantially financed by revenues derived from user charges.
GRANTS: Contributions or gifts of cash or other assets from another governmental agency to be used
or expended for a specified purpose, activity, or facility. Capital grants are restricted by the grantor for
the acquisition and/or construction of fixed assets. Operating grants are restricted by the grantor for
operating purposes or may be used for either capital or operating purposes at the discretion of the
grantee.
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.
265
Glossary
METROPOLITAN WATER DISTRICT (MWD) STANDBY CHARGES: Revenue generated from property
taxes by MWD to cover the Readiness-to-Serve (RTS) Charge. This charge pays for the debt service for
construction projects necessary to meet reliability and quality needs. The RTS Charge was adopted in
1996.
NET ASSETS: The difference between total assets and total liabilities. Increases or decreases in net
assets may serve as a useful indicator of whether the financial position of the District is strengthening or
weakening.
1% PROPERTY TAX: In 1978, Proposition 13 limited general levy property tax rates for all taxing
authorities to a total rate of 1% of full cash value. Subsequent legislation, AB 8, established that the
receipts from the 1% levy were to be distributed to taxing agencies according to approximately the
same proportions received prior to Proposition 13. Funds received are to be used for facilities
construction or debt service on bonds sold to build facilities.
OPERATING BUDGET: The portion of the budget that pertains to daily operations that provide basic
governmental services. The operating budget contains appropriations for such expenditures as
personnel, supplies, utilities, materials, travel and fuel, and does not include purchases of major capital
plant or equipment which are budgeted for separately in the Capital Budget.
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 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 use 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.
266
Glossary
REVENUE: Monies that the District receives as income. It includes such items as water sales and
sewer fees. Estimated revenues are those expected to be collected during the fiscal year.
READINESS-TO-SERVE CHARGE (RTS): 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 expansion facilities.
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. The water rates for residential customers use an
accelerated block structure. As more units are consumed, a higher unit rate is charged. Effective in
2009, all non-residential customers are charged for water based on a tiered rate structure in which
water rates are based on meter size and amount of units consumed.
WORKING CAPITAL: A financial measure which represents available operating liquidity. The
calculation is current assets minus current liabilities.
267
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
CUWCC California Urban Water Conservation Council
CWA County Water Authority (San Diego)
DOT Department of Transportation
DVP Delivery-versus-Payment
EBPP Electronic Bill Pay and Presentment
EDU Equivalent Dwelling Unit
ERP Enterprise Resource Planning
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
List of Acronyms
268
List of Acronyms
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
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
269
List of Acronyms
PL Pipeline
PRS Pressure Reducing Station
PRV Pressure Reducing Valve
PS Pump Station
QSA Quantitative Settlement Agreements
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
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
VOIP Voice Over Internet Protocol
WRMP Water Resources Master Plan
WTP Water Treatment Plant
270
Index
Administrative Expenditures 71,86,95,111
At-A-Glance 1
Awards 4-7
Budget Calendar 19
Budget Guide 16-17
Budget Process and Overview 18-22
Budget Summary 36-41
Capital Improvement Program Narrative 183-184
Capital Purchases Budget 198
CIP Projects in Construction 186-190
CIP Funding Source and Category 192
CIP Justification and Impact on Operating Budget 197
CIP Major Projects 185
CIP Projects 193-196
CIP Reserve Funds 191
Classification of Water Sales 62,78
Current Economic Conditions 26
Debt Management 53-54
Debt Policy 245-257
Debt Policy Glossary 257-261
Demographics 29
Department Budgets:
Administrative Services 125-133
Board of Directors 115-118
Engineering 171-180
Finance 134-146
General Expense 181-182
General Manager 119-124
IT and Strategic Planning 147-154
Water Operations 155-170
Departmental Operating Budget Narrative 104-106
Five-Year Forecast 50
Formula for Sewer Rates 97-98
Fund Balance Summary by Fund 46
Fund Balances 52
Future, The 27-28
General Fund Forecast 51
General Fund Revenues, Expenditures and Transfers 45
General Information 2
General Expense 103
271
Index
General Revenues 102
General Revenues and Expenses Narrative 100-101
Glossary 262-267
Investment Policy 231-237
Investment Policy Glossary 238-243
Labor and Benefits 107-108
Letter of Transmittal iv-x
List of Acronyms 268-270
Materials and Maintenance Expenditures 72,87,96,112
Meter Fees 67,82,92
MWD and CWA Fixed Fees (Pass-Through) 66
Operating Budget Summary 61,77,90
Operating Budget Summary by System 44
Operating Budget Summary – General Fund 42-43
Operating Expenditures by Department 113
Operating Expenditures by Object 114
Organization Chart 15
Past and Present 25
Position Count by Department 109-110
Potable Narrative 58-60
Power Costs 70,85,94
Projected Interest Payments by Debt Issuance 57
Projected Principal Payments by Debt Issuance 56
Recycled Narrative 74-76
Reserve Policy 201-228
Reserve Policy Glossary 229-230
Resolution 4290 23-24
Revenue History 68,83,93
Revenues and Expenditures by Fund 47-48
Revenues and Expenditures by Type 49
San Diego Rainfall 35
Schedule of Outstanding Debt 55
Service Area Assessed Valuation 32
Service Area Maps 73,88,99,118
Sewer Charges Summary by Service Class 91
Sewer Narrative 89
Sewer Rate Comparison 31
Statement of Values 3
Strategic Performance Management Plan 7-14
Summary of Financial Policies 199-200
272
Index
System Fees 65,81
Table of Contents i-iii
Ten Largest Customers 34
Ten Principal Taxpayers 33
Unit Sales History and Meter Count by Customer Class 64,80
Water Purchases - Recycled 84
Water Purchases and Related Costs - Potable 69
Water Rate Comparison 30
Water Sales Summary by Meter Size 79
Water Sales Summary by Service Class 63
273