HomeMy WebLinkAboutOperating and Capital Budget FY 2016-2017
Otay Water District
Adopted Operating and Capital Budget
Fiscal Year 2016-2017
BOARD OF DIRECTORS
Mitchell Thompson, Division 2 President
Jose Lopez, Division 4 Vice President
Tim Smith, Division 1 Treasurer
Gary Croucher, Division 3
Mark Robak, Division 5
MANAGEMENT TEAM
Mark Watton General Manager
German Alvarez Assistant General Manager
Joseph R. Beachem Chief Financial Officer
Adolfo Segura Chief, Administrative Services
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
Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Organization Chart . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Budget Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Resolution No. 4302. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
History and Community Profile
Past and Present . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Current Economic Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
The Future . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Demographics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Water Rate Comparison . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Sewer Rate Comparison . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Service Area Assessed Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Ten Principal Taxpayers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Ten Largest Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
San Diego Rainfall . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Strategic Plan
Strategic Plan - Fiscal Years 2015-2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Statement of Values . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Balanced Scorecard Perspective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Administrative Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Water Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Engineering. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Financial Summaries
Budget Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Operating Budget Summary – General Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Operating Budget Summary by System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
General Fund Revenues, Expenditures and Transfers . . . . . . . . . . . . . . . . . . . . . . . 62
Fund Balance Summary by Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Revenues and Expenditures by Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Revenues and Expenditures by Type . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Five-Year Forecast
Five-Year Forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
General Fund Forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Fund Balances Forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Debt Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Schedule of Outstanding Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Projected Principal Payments by Debt Issuance . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Projected Interest Payments by Debt Issuance . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
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Table of Contents
Revenues and Expenditures
Potable Revenues and Expenditures
Potable Narrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Operating Budget Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Classification of Water Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Water Sales Summary by Service Class . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Unit Sales History and Meter Count by Customer Class . . . . . . . . . . . . . . . . . . . . 81
System Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
MWD and CWA Fixed Fees (pass-through) . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Meter Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Revenue History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Water Purchases and Related Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Power Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Administrative Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Materials and Maintenance Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Potable Water Service Area Maps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
Recycled Revenues and Expenditures
Recycled Narrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Operating Budget Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Classification of Water Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Water Sales Summary by Meter Size. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Unit Sales History and Meter Count by Customer Class. . . . . . . . . . . . . . . . . . . . 99
System Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
Meter Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
Revenue History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
Water Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
Power Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Administrative Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Materials and Maintenance Expenditures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
Recycled Water Service Area Maps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
Sewer Revenues and Expenditures
Sewer Narrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
Operating Budget Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
Charges Summary by Service Class . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
System Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
Revenue History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
Power Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
Administrative Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
Materials and Maintenance Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
Formula for Sewer Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
Sewer Service Area Map . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
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Table of Contents
General Revenues and Expenditures
General Revenues and Expenses Narrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
General Revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
General Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
Departmental Operating Budget
Departmental Operating Budget Narrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
Labor and Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
Labor and Benefits by Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
Position Count by Department . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
Contract/Temporary Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
Administrative Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
Materials and Maintenance Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
Operating Expenditures by Department . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134
Operating Expenditures by Object . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
Departmental Budgets:
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
General Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
Administrative Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147
Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157
Water Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163
Engineering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171
General Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179
Capital Budget
Capital Improvement Program Narrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181
Major CIP Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183
CIP Projects in Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184
CIP Reserve Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188
Six-Year CIP Funding by Source . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189
Six-Year CIP Funding by Category . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189
Six-Year CIP Projects by Category ($1,000s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190
CIP Justification and Impact on Operating Budget . . . . . . . . . . . . . . . . . . . . . . . . 193
Capital Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194
Policies
Summary of Financial Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195
Reserve Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197
Reserve Policy Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225
Investment Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227
Investment Policy Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 234
Debt Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240
Debt Policy Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 253
Appendix
Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 259
List of Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 265
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 268
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September 9, 2016
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 2017. 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
2017 fiscal year. With a balanced budget and the Strategic Plan in place, the District is well-
positioned for continued success in the subsequent years.
The previous year has posed to be one of uncertainties and challenges regarding the
drought and water supplies for those in California, specifically San Diego County’s retail
water agencies and their ratepayers. In May 2015, the District and its customers struggled
with mandatory cuts in potable water use ordered by Governor Jerry Brown and the State
Water Resources Control Board. Despite District customers having reduced water use
27% since 2007, they still needed to reduce water use by 20% compared to 2013 levels.
Through their conservation efforts, District customers exceeded the 20% target, averaging
23% from June through December 2015. In February 2016, the State Water Board adopted
revised emergency regulations, which included providing credits to agencies with new
local, drought-resilient supplies. In March 2016, with the certification of the Claude “Bud”
Lewis Carlsbad Desalination Plant as a drought-resilient supply, San Diego County Water
agencies were able to reduce their conservation target by the State Water Board’s
maximum of eight percent, which lowered the District’s target from 20% to 12%. The
Carlsbad plant, which started commercial production in December 2015, provides the San
Diego region with 56,000 acre-feet of drought-proof water each year, reducing reliance on
imported sources.
In May 2016, the State Water Board replaced its state-mandated conservation target
method with a supply-based approach, considering each agency’s specific circumstances
and available water supplies. Now individual urban water agencies may self-certify their
iv
levels of available water supplies based on three additional dry years and the level of
conservation necessary to ensure adequate supply assuming a third consecutive dry year.
At the same time the State Board modified its emergency regulations from a state-
mandated water use target approach to a supply-based approach, the Metropolitan Water
District of Southern California (MWD) also ended its supply allocations. On May 26, 2016,
the San Diego County Water Authority (CWA) rescinded its Drought Management Plan
Stage 2 and established a public awareness campaign to help maintain a regional
commitment to water-use efficiency.
In San Diego, CWA has been allowed to certify supply sufficiency for all member agencies
and in June 2016, CWA confirmed that its member agencies have sufficient water supplies
to meet demands even during three additional dry years and will not be subject to state
mandated water-use reductions through January 2017.
For more than a year the District, other water agencies in the San Diego region, and local
civic and business groups advocated for state policies that reflected local water supply
investments and conditions. Due to those steadfast efforts and the District’s current level of
water supply reliability, the District declared an end to Water Shortage Response Level 2
and is no longer under a Water Shortage Response Level.
As conservation mandates went into effect during FY 2016, potable sales volumes
decreased 17.8% from FY 2015 levels. As one would expect, reductions in sales will impact
revenues. Homeowners and businesses have also implemented conservation measures
that are expected to generate permanent reductions in water use. As a result, the District
expects sales volumes to recover only one percent from reduced conservation during
FY 2017. Remaining increases in sales volumes are expected to come from new customers.
Staff will continue to closely monitor these trends as they relate to overall District finances.
I am extremely proud of the District’s staff, especially during the drought and state water
conservation mandates, because we continued to serve our customers using the high
standard of service that we have always striven for. This serves as a great reminder as to
why Otay Water District exists. In 2016, we celebrated the District’s 60th anniversary of
service to East County and South Bay. Since its establishment, the District’s motto has been
“Dedicated to Community Service.” From modest beginnings in 1956 through today, the
District remains dedicated to providing outstanding service to the communities and the
people we have the honor to serve.
v
Finding ways to streamline operations and cut costs also is a significant element of the
District’s ongoing commitment to our customers. By reducing the District’s costs, we can
pass those savings on to our ratepayers. In FY 2016, the District successfully refinanced its
Certificates of Participation (COPs), saving customers more than $5.6 million. This is only
one example of cost savings and the District’s ongoing dedication in pursuing cost
efficiencies. Since 2007 through 2017, the District has reduced its headcount from 174.5 to
135 employees, a 23% decrease, resulting in a cumulative savings of $30,052,900. Other
cost savings include reducing the number of vehicles and equipment the District maintains,
reducing fuel consumption, and decreasing water loss through our successful leak
detection and repair program. The District’s staff will continue to seek out other operational
efficiencies, thus reducing costs and increasing savings for our customers.
In light of California and the West’s persisting water challenges, the District continues its
efforts to enhance the potable water supply for our service area. We have reached a key
milestone in decreasing reliance on other water sources with the certification of the Final
Environmental Impact Report/Final Environmental Impact Statement (EIR/EIS) for the
District’s Otay Mesa Conveyance and Disinfection System Project. Now that the Final
EIR/EIS is complete, the United States Department of State (DOS) will use the document’s
findings and other factors to determine if the project would serve in the national interest. If
the DOS determines the project is in the national interest, it will issue the Presidential Permit.
If the project obtains other required approvals, the District could start receiving 18 million
gallons of desalinated water per day from the Rosarito Desalination plant as early as 2024,
serving potable water demands of up to two thirds of our customers.
The District’s success as an organization is significantly enhanced by the policies and
practices put in place by its Board to ensure the strength, stability, and reliability 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, ensure the well-being
of the people we serve.
FY 2015-2018 Strategic Plan
The FY 2015-2018 Strategic Plan consists of a four-phased approach. Phase one and phase
two have been completed. The primary focus of phase one was to develop key enterprise-
wide projects – SCADA, Work Order/Asset Management, and Emergency
Preparedness/NIMS. Phase two focused on building upon the system foundation, business
process improvement, and facilities. As part of phase three in FY 2017, we will continue to
vi
collect and populate these and other systems with new data so we can analyze and
optimize these systems for efficiencies. Based on results from FY 2017, in phase four we will
enhance key existing programs such as asset management, the internal auditing process,
facilities maintenance and security, and work-resource planning. While 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 operational efficiencies to cost-effectively manage 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
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 39.75 full-time equivalent positions, or 23%, while
the number of customer accounts increased by 2,261.
vii
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, and Metropolitan Water District. 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
11th lowest water rate out of the 22 member agencies in San Diego County and the 5th
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 23 and 24, respectively.
The chart below shows that since 2007, the wholesale water supply costs have increased
106.7% while the District’s retail water rates have increased a lesser 93.2%.
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
13
5
52,615
54,876
51,000
51,500
52,000
52,500
53,000
53,500
54,000
54,500
55,000
55,500
0
20
40
60
80
100
120
140
160
180
200
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Em
p
l
o
y
e
e
Co
u
n
t
FISCAL YEAR
Employee Count and Number of Accounts
viii
Wholesale Water Supply Costs vs. District Retail Rate Increases
The District currently delivers water service to nearly 49,425 potable and 708 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
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.
0%
20%
40%
60%
80%
100%
120%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
106.7%
93.2%
ix
Fiscal Year 2017 Operating Budget Summary
Otay Water District’s operating expenditures consist of three major sectors: potable water,
recycled water, and sewer, budgeted at $91,741,500 for Fiscal Year 2017. Revenues from
potable and recycled water are projected to be $81,138,900, approximately $2,239,200 more
than the Fiscal Year 2016 budget. Water sales volumes are expected to decrease by 8%
compared to FY 2016 budgeted sales due to drought mandates. Sewer revenues are
projected to be $2,918,900, approximately $287,400 less than fiscal year 2016. This decrease
in sewer revenue is primarily due to the discontinuance of the system fee recapture, which
was part of a 2013 Cost of Service study. The remaining budgeted revenues of $7.7 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 4.0% from MWD and 5.9% from CWA due to
the reduced volumes as a result of the Governor’s conservation mandate, 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 135 this year.
Of San Diego County’s 22 water agencies, the Otay Water District’s water rates are
below the countywide average.
Fiscal Year 2017 Capital Improvement Program
The Fiscal Year 2016-17 Capital Improvement Program (CIP) Budget consists of 89 projects
and a budget of $10.7 million. The budget emphasizes maintenance of existing
infrastructure and long-term planning for ongoing programs to meet population growth
while functioning within fiscal constraints. This year’s CIP budget decreased by $1,000,000
compared to last year’s projection primarily due to $340,000 decrease in capital purchases
for vehicles and field equipment and $600,000 reduction in reservoir recoating and relining
of smaller reservoirs.
x
Awards and Acknowledgments
The California Society of Municipal Finance Officers (CSMFO) presented Otay Water
District the Certificate of Award for Operating Budget Excellence Award for Fiscal
Year 2015-2016.
The California Society of Municipal Finance Officers presented Otay Water District
the Certificate of Award for Capital Budgeting Excellence Award for Fiscal Year 2015-
2016.
The Government Finance Officers Association Officers (GFOA) presented Otay Water
District the Certificate of Achievement for Excellence in Financial Reporting for its
Comprehensive Annual Financial Report for the Fiscal Year ended June 30, 2015.
Conclusion
The Otay Water District’s Board of Directors met the challenges presented this year with
responsibility, commitment, and persistence in an unwavering effort to continue preserving
the stability and financial strength of the District as one of its highest priorities.
This budget reflects the vision of the District’s Board, its management, and its employees.
We will continue to strive to make enhancements 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 District’s 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 your continued support and
direction in achieving excellence in the financial management and operations of the
District.
Mark Watton, General Manager
xi
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 12% 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 four departments of Administrative Services; Finance; Water Operations; and
Engineering. These and other lines of reporting are shown on the organization chart on page 7.
11
General Information
For Fiscal Year 2017, the District will have a staff of 135 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 220,000 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 45,501 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 1.0% per year over the next
decade. Using historical data and considering current economic conditions, staff has moderated
this projection to a growth rate of 0.3% for Fiscal Year 2017.
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 2,460 acre-feet per
year of recycled water for fiscal year 2017, 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 4,677 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
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 2015-
2016. 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.
33
Financial Awards
The California Society of
Municipal Finance Officers
(CSMFO) presented Otay
Water District the Operating
Budget Excellence Award
for Fiscal Year 2015-2016.
The California Society
of Municipal Finance
Officers (CSMFO)
presented Otay Water
District the Capital
Budgeting Excellence
Award for Fiscal Year
2015-2016.
44
Financial Awards
The Government Finance Officers Association Officers (GFOA)
presented Otay Water District the Certificate of Achievement for
Excellence in Financial Reporting for its Comprehensive Annual
Financial Report for the Fiscal Year Ended June 30, 2015.
55
Award
The Construction Management Association of America
(CMAA) presented the Otay Water District with the
2016 Distinguished Owner Honoree Award.
66
Organization Chart
District Position Count— (135 Positions)
Citizens and Customers Board of Directors
Safety and
Security
Administration
Assistant General Manager
General Manager (6)
Purchasing
and Facilities
Controller and
Budgetary
Services
Treasury and
Accounting
Services
Customer
Service
Meter
Maintenance
Water System
Operations
Utility
Maintenance/
Construction
Water Resources,
Planning, Design and
Environmental
Services
Administrative
Services
(23)
Human
Resources
Information
Technology
and Strategic
Planning
Finance
(31)
Geographic
Information
System
Public Services
and
Field Services
Engineering
(24)
Water
Operations
(51)
77
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 year’s 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.
8
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, List of Acronyms, and an Index.
9
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 and 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 estimated conservation levels, 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.
10
Budget Overview
Budget Calendar
February March April May-June July – January
2/10/16
Chiefs submit request
for new personnel,
personnel
reclassification changes,
advancements, and
long-term staffing to HR
2/19/16
Project Managers
submit CIP Budgets for
new projects and
changes to existing
projects in CIP Budget
application
2/24/16
HR to complete
preliminary review of
new personnel,
personnel
reclassification changes,
requests, and
advancements
2/24/16
Chiefs to submit
Operating and Admin
Budget; Capital
Purchases and
justifications; Labor
Budget Worksheet
2/29/16
Engineering Department
reviews all CIP Budget
requests with AGM
3/01-02/2016
Finance to review
Operating Budget and
reconciliation with
departments
3/02/16
Finance to review
preliminary CIP Budget
with Chief of Engineering
including year over year
explanations
3/08/16
HR to review new
personnel,
reclassifications and
change requests with GM
3/09/16
Finance to have second
review of CIP Budget with
AGM and Engineering
3/17/16
Finance to review
Department Operating
Budgets and personnel
cost with Chiefs, AGM
and GM
3/17/16
CIP budget presented to
the General Manager for
review and comments
4/06/16
Chiefs submit Position
Analysis Questionnaire
to HR for GM approval
Personnel requests
and request for
reclassifications
4/28/16
Preliminary budget
review with General
Manager
5/07/16
Review
assumptions and
rates with Chiefs,
Assistant General
Manager, and
General Manager
5/11/16
Practice run of
budget presentation
with Finance,
Chiefs, AGM, and
GM
5/23/16
Board Meeting –
approval of the
FY 2016-2017
Operating and
Capital Budgets
5/23/16
Board gave
direction to staff to
mail rate notices to
customers
07/07/16-08/04/16
Rate increase
message inserted
with water and
sewer billing
1/01/17
Water and sewer
rate increase
11
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 budgeted and actual
projected expenses to determine reasonableness by the Finance Department. All costs are justified
and supported by explanations. Finance compiles the operating budget and submits it to the
Assistant General Manager and the General Manager for review prior to presentation to the Board of
Directors.
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 costs 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. The debt coverage ratio is also evaluated to ensure adequate levels. Projected 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.
12
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 appropriations 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 2017. 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
13
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, regardless of the timing of cash receipts and disbursements. 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 197, 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
14
RESOLUTION NO. 4302
A RESOLUTION OF THE BOARÐ OF DIRECTORS OF
OTAY WATER DISTRTCT ADOPTTNG THE
FISCAT, YEAR 2OL6-20T7
OPERÄTING AND CAPITAL BUDGET; AND THE JOB
CLASSTFICATTON AND SALARY SCHEDULE
II{HEREAS, the OÈay Water District Board of Directors have
been presented wit,h a budget (Exhibit L) for the operation of
the Ot.ay Water Dist.rict for Fiscal Year 20l-6-20L7; and
V'IHEREAS, the Fiscal Year 20L6-20L7 OperaLing and Capital
Budget, has been reviewed and considered by the Board;
VüHEREAS, it is in the interest of the District to adopt
budget for said year;
I,{HEREAS in connecti-on with the
a
Board is also being presented with a
adopt,ion of the budget, the
Iisting of job
(Exhibit 2) for itsscheduleclassifications and salary
consideration, i-n order to
Regulat.ions Section 570.5,
comply with California Code of
NOW, THEREFORE, BE TT RESOLVED, DETERMTNED AND ORDERED bY
Lhe Board of DirecÈors of the Otay Water Dístríct t.hat t,he
Operating and Capital Budget for the operation of the District,
incorporat.ed herein by reference, is hereby adopted as the
District's budget for Fiscal Year 20L6-20l-7.
BE ÏT FURTHER RESOLVED that, t,he Board hereby approves and
included with the budget and,adopt,s the
consist.ent
salary schedule
with his authority over employee compensation under
1515
bot.h Stat.e law and the District's Code of Ordinances, authorizes
the Genêra1 Manager to update the salary schedule whenever
necessary to reflect changes made within his authority.
PASSED, APPROVED AND ADOPTED by the Board of Directors of
Otay I¡trat.er District at a board. meeting held thj-s 23'd day of May
20L6, by the following vote:
Ayes:
Noes:
Abstain:
AbsenE:
DirecÈors Oloucher, Lopez and Smith
None
Director Robak
Director Thompson
ei4
Vice President
ATTEST:
stri c SecreÈa
1616
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 730 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 coming years will continue to pose considerable challenges for those in California’s water
community. The state is just beginning to recover from its fourth straight year of a record drought
and despite extensive efforts to develop more reliable water, Governor Jerry Brown and the State
Water Resources Control Board (SWCRB) ordered mandatory cuts in potable water use across
California. The District’s mandatory cut
of 20% in FY 2016 has been reduced to
8% for FY 2017. The District’s
customers have done an excellent job
in conserving water usage, which has
resulted in the District meeting the
mandatory reductions. Additionally, the
region experienced large potable water
supply cost increases totaling more
than 90% since 2007 and a 116%
increase in the recycled water supply,
which was effective January 1, 2016.
La Presa County Water District (ca. 1957)
17
Past and Present
Finally, the inaction in the State Capitol to address the crisis in the Sacramento – San Joaquin Bay
Delta, the source of 30.0% 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)
and desalinated water from the Carlsbad Desalination Plant.
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.
18
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. It is estimated
that the District is currently serving approximately 220,000 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 7,409 new customer connections, with
2,189 occurring in Fiscal Year 2004. In Fiscal Year 2016, the District sold 118 meters which is an
average of 10 meters per month.
19
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 2022
Project FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY 22 Total
Total Single-Family Units 16 91 399 544 619 725 747 3,141
Total Condominium 275 302 232 347 649 669 788 3,262
Total Rental 0 519 310 563 745 557 721 3,415
Total Units 291 912 941 1,454 2,013 1,951 2,256 9,818
% Multi-Family 95% 90% 58% 63% 69% 63% 67% 68%
Source: The London Group Realty Advisors, March 2016
Using the economist report, the District’s engineering staff projects that over the next six years the
District will sell another 3,416 meters which translates to 5,557 equivalent dwelling units (EDUs).
These projections have been incorporated in the Five-Year Forecast on page 67.
Projected Meter Sales in EDUs
34
2
63
3
91
7
1,
1
0
8
1,
2
2
5
1,
3
3
2
0
500
1,000
1,500
FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022
20
The Future
San Diego County Water Supply
San Diego County imports about 84.0% 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 Plant
The District’s water wholesaler, the San Diego County
Water Authority, entered into a formal Water Purchase
Agreement (WPA) in November 2012. The WPA outlines
the commercial and financial terms for the purchase and
delivery of desalinated ocean water produced at the
Carlsbad Desalination Plant. Under the WPA, the County
Water Authority will purchase 48,000 to 56,000 acre-feet of
water annually from the desalination plant. The plant is
expected to produce up to 50 million gallons of water a
day and will generate enough water to serve about
112,000 families and meet 7 to 10 percent of the region’s
demand. Commercial production began on December
23, 2015. The total price for the desalinated water for 2016
is estimated to be between $2,131 and $2,267 per acre-foot
depending on how much is purchased annually. 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 2024. 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
Carlsbad Desalination Plant, 2015
21
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 286,329 in 2010. This
represents a 149.1% increase over the past 30 years. The average persons per household was 3.46. For
2016, SANDAG reports the City of Chula Vista’s ethnic/racial makeup with 44.3% Hispanic, 9.0% non-
Hispanic white, 17.2% 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 35.8 and
33.14% of adults have a four-year degree or higher. The average household income is $102,299 and the
median household income is $85,663.
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 has increased from $398,174 in 2009 to $686,183 in 2015.
Otay Water District Demographics (2016)
Population 243,916
Persons/Household 3.46
Ethnic/Racial makeup
Hispanic 44.3%
Non-Hispanic White 9.0%
Asian 17.2%
Other 15.1%
Median Age 35.8
Percentage with 4 year degree or higher 33.14%
Average Household Income $ 102,299
Median Household Income $ 85,663
Source: SANDAG, The London Group Realty Advisors, Claritas Demographics
22
The District strives to remain cost effective in its rate setting by controlling operating costs, yet passing
through the full cost of supply. In May 2016, the District conducted a survey of the water rates of its
neighboring water providers within San Diego County. The following chart shows that the District has
the 11th lowest water rates in San Diego County.
Water Rate Comparison, Member Agency Water Rates
Projected water bill for FY 2017
Based on 11 Units of water Use and 3/4 meter size
109.09
106.38
106.14
96.95
96.94
92.08
83.59
81.41
80.89
78.70
77.37
77.18
75.32
74.08
74.02
73.76
71.85
70.71
69.11
66.01
62.88
58.10
$- $20 $40 $60 $80 $100 $120
Yuima
Padre Dam
Ramona
* Valley Center
Rainbow
Fallbrook
Vista
Escondido
Rincon
Del Mar
San Diego
Otay Water District
Helix
Sweetwater
* Carlsbad
Oceanside
* Poway
Olivenhain
Vallecitos
Santa Fe
San Dieguito
Lakeside*
*At the time of the survey in May 2016, the member agency's FY 2017 rate was unavailable. The estimated
increase is equal to the District's FY 2017 average rate increase.
23
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.
Based on 11 units of water Use and 3/4 residential meter size
Projected sewer bill for FY 2017
Sewer Rate Comparison, San Diego County
108.22
87.46
86.52
81.06
75.50
73.91
69.88
69.83
63.28
59.25
57.65
57.52
55.08
55.31
53.63
52.43
51.91
51.51
49.02
48.33
47.47
41.92
41.35
40.01
33.60
29.33
29.13
28.64
$- $20 $40 $60 $80 $100 $120
Del Mar
*Encinitas
Oceanside
Fallbrook
Rainbow
Olivenhain
Padre Dam
*Rancho Santa Fe
Ramona
Buena
*El Cajon
San Diego, City
Vista
*Solana Beach
*Valley Center - MG
La Mesa
Chula Vista
Escondido
*Imperial Beach
*Poway
*Lemon Grove
Coronado,City
Vallecitos
Otay Water District
*National City
*San Diego, County
*Carlsbad
Leucadia
* At the time of the survey in July 2016, the member agency's FY 2017 rate was unavailable. The
estimated increase is equal to the District's FY 2017 average rate increase.
24
Source: County of San Diego Auditor and Controller
Otay Water District’s service area encompasses property with over $26.1 billion of assessed valuation.
Properties are assessed at 100% of their full value less exemption from taxation under the law and
homeowner’s exemptions. The District receives its portion of the 1% property tax, according to
Proposition 13 and AB8. With the very recent increases in the assessed valuation, the District will benefit
by receiving its proportionate share of this increase.
Five-Year Service Area Assessed Valuation, in millions ($)
Service Area Assessed Valuation
$-
$4,000
$8,000
$12,000
$16,000
$20,000
$24,000
$28,000
2012 2013 2014 2015 2016
$23,145 $22,836 $23,304 $24,682 $26,058
25
Assessed Percent
Value to Total
1. GGP-OTAY RANCH LP 119,330,990$ 0.460%
2. BRISA ACQUISITIONS LLC 118,281,029 0.450%
3. AVALON II CALIFORNIA VALUE IV LP 115,380,000 0.440%
4. REGULO PLACE APARTMENTS INVESTORS LLC 100,283,129 0.380%
5. VISTA PACIFIC VILLAS LP 91,951,717 0.350%
6. JOHN HANCOCK LIFE INSURANCE CO USA 88,422,185 0.340%
7. BRE - FM CA LLC 76,216,169 0.290%
8. SP LAVIDA REAL LLC 70,475,975 0.270%
9. CAMDEN USA INC 67,081,961 0.260%
10. FRG CORONA POINTE LLC 52,987,961 0.200%
Total $ 900,411,116 3.460%
Total Service Area Assessed Valuation $ 26,057,698,553
88,327,076$
Ten Principal Taxpayers 900,411,116$
Other Taxpayers 25,157,287,437
26,057,698,553$
Source: County of San Diego Auditor and Controller
Organization
Ten Principal Taxpayers as of June 30, 2016
26
Customer Customer Annual % of Water
Name Type Revenues Sales
1. CITY OF CHULA VISTA Publicly Owned 3,247,032$ 4.4%
2. STATE OF CALIFORNIA Publicly Owned 1,017,064 1.4%
3. COUNTY OF SAN DIEGO Publicly Owned 750,769 1.0%
4. EASTLAKE III COMMUNITY Commercial 637,974 0.9%
5. STEELE CANYON GOLF CLUB LLC Commercial 598,046 0.8%
6. CHULA VISTA SCHOOL DISTRICT Publicly Owned 524,968 0.7%
7. EASTLAKE COUNTRY CLUB Commercial 442,514 0.6%
8. SWEETWATER SCHOOL DISTRICT Publicly Owned 353,981 0.5%
9. HIGHLANDS GOLF COMPANY LLC Commercial 335,488 0.5%
10. EASTLAKE 1 HOA Commercial 306,520 0.4%
Total 8,214,357$ 11.1%
73,874,227$
Ten Largest Customers 8,214,357$ 11.1%
Others 65,659,870 88.9%
73,874,227$ 100.0%
Ten Largest Customers - Fiscal Year 2016
27
San Diego Rainfall
Although San Diego received less than normal rainfall in Fiscal Year 2016, the District is hopeful that San
Diego's rainfall will return to its average pattern and volume for Fiscal Year 2017. The 10-year average of
8.16 inches for San Diego rainfall reflects the long-term drought conditions for our area. San Diego's
rainfall average over 20 years is 8.7 inches; the 30-year average is 9.52 inches; and the 40-year average
is 10.27 inches.
San Diego rainfall, while a contributing factor, is not the controlling factor for our potable water supply
shortage. The San Diego region imports 84.0% 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.
Fiscal years 2007 - 2016
3.85 7.49 9.17 11.01 12.66
8.03 6.48 5.74 7.68 9.51
0
5
10
15
20
25
30
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
In
c
h
e
s
Annual Rainfall
28
Strategic Plan – Fiscal Years 2015 - 2018
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.
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.
A District that is innovative in providing water services at competitive rates, with a reputation for
outstanding customer service.
Our key challenge, as District staff, is to quantify and demonstrate our commitment and 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.
KEY CHALLENGE
VISION
MISSION
29
Strategic Plan – Statement of Values
We strive to provide the highest quality and value in all that we do.
EXCELLENCE
We commit ourselves to doing the right thing. Ethical behavior, trustworthiness, and
accountability are the District’s foundation.
INTEGRITY
We see each individual as unique and important. We value diversity and open communication
to promote fairness, dignity, and respect.
EMPLOYEES
We promote mutual trust by sharing information, knowledge and ideas to reach our common goals.
TEAMWORK
We take pride that our commitment to customer-centered service is our highest priority.
CUSTOMERS
30
Strategic Plan – Balanced Scorecard Perspective
The Balanced Scorecard is used as a
core methodology for the District’s
Strategic Plan. This method aligns
business activities to the vision and
strategy of the organization and is
designed to ensure that a company is
performing consistently on a wide
range of measures necessary to
ensure both short-term and long-term
advancements.
The Balanced Scorecard emphasizes
an integrated strategy approach for the
development of goals and measures in
four perspectives: customer, financial,
business processes, and learning and
growth.
Major components of the Strategic
Plan are the District’s strategic
objectives which guide the agency’s efforts to meet and positively adapt to change. Each objective
is broken down by the balanced scorecard, strategy, and goal required to meet the specific
challenge.
Customer Deliver high quality services to meet and increase confidence of the
customer in the value the District provides
Financial Manage the financial issues that are critical to the District
Business Processes Maximize efficiency and effectiveness
Learning & Growth Provide leadership and management expertise
Performance measures 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 execute the
mission of the District. Performance measures are designed to ensure the day-to-day operations
and services of the utility are meeting agreed upon expectations.
31
Strategic Plan – Administrative Services
OBJECTIVES
Balanced Scorecard: Customer
Goal Improve and expand communications
Objective 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
Goal Provide effective water services
Objective Update of SCADA program(2)
Balanced Scorecard: Financial
Goal Improve financial information and systems
Objective Enterprise e-commerce (purchasing/contracting) solution – BidSync(2)
Balanced Scorecard: Business Processes
Goal Identify and evaluate improvements to enterprise and departmental business
processes.
Objectives
Optimize asset management program
Enhance District’s enterprise facilities physical security
Enhance District's enterprise confine space program
Automation and enhancement of District-wide operational forms and
workflows(2)
Evaluate implementation of an on-line performance management system(1)
Balanced Scorecard: Learning and Growth
Goal Reinforce a results-oriented and accountable culture
Objectives
Negotiate a successor Memorandum of Understanding for represented
employees for 2017 and beyond and related compensation and benefits for
unrepresented employees with emphasis on making necessary updates to
employee health benefits related to health care reform(1)
Enhance District's emergency response program
(1) New objective in fiscal year 2017
(2) Objectives completed in fiscal year 2016
32
Strategic Plan – Administrative Services
Goal Focus on achieving a lean, flexible workforce
Objectives
Evaluate opportunities to combine or transfer similar work functions
Evaluate training and development programs for new and existing
supervisors/managers(1)
Fiscal Year 2016 Year End Results
PERFORMANCE MEASURES
Customer Satisfaction
Level of overall customer satisfaction with the District
(1) New objective in fiscal year 2017
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
FY 13-14 FY 14-15 FY 15-16 FY 16-17
Target Actual & Projected
3
6
0
0
Completed
On Schedule
Behind
On Hold
0510
Completed
On Schedule
Behind
On Hold
Total 9 Objectives
Balanced Scorecard
Customer
Target
90% Customer Satisfaction
Measurement Method
Percent positive/Percent surveyed
33
Strategic Plan – Administrative Services
Enterprise System Availability
Percentage of network uptime and reliability
Employee Voluntary Turnover Rate
Annual percentage of voluntary terminations (excludes retirement)
Training Hours per Employee
General and management formal training hours completed per employee
Balanced Scorecard
Business Processes
Target
No less than 99.5% each quarter in a
year
Measurement Method
99.5% = 3.60 hours of downtime per
month/1.83 days of downtime in a year
99.0%
99.2%
99.4%
99.6%
99.8%
100.0%
FY 13-14 FY 14-15 FY 15-16 FY 16-17
Target Actual & Projected
Balanced Scorecard
Learning and Growth
Target
Less than 5% turnover in a year
Measurement Method
Number of voluntary resignations (not
including retirements) /Average number of
employees
0.0%
1.5%
3.0%
4.5%
6.0%
FY 13-14 FY 14-15 FY 15-16 FY 16-17
Target Actual & Projected
Balanced Scorecard
Learning and Growth
Target
12 hours or more per employee per year
Measurement Method
Total qualified training hours for all
employees/ Average number of full time
employee (FTE)
0
5
10
15
20
25
FY 13-14 FY 14-15 FY 15-16 FY 16-17
Target Actual & Projected
34
Strategic Plan – Administrative Services
Safety Training Program
Number of safety training programs/ hours annually provided to all field employees
(1) New performance measure for fiscal year 2017
Injury Incident Rate(1)
Injury incidents per 200,000 hours worked compared to the National Average for Utilities – Water, Sewage,
and other Systems
Balanced Scorecard
Learning and Growth
Target
24 hours or more per field employee per year
Measurement Method
Number of safety training hours/Number of
field employees (includes mandated
training)
0
10
20
30
40
50
FY 13-14 FY 14-15 FY 15-16 FY 16-17
Target Actual & Projected
Balanced Scorecard
Learning and Growth
Target
No more than 6.6 injury incidents per
200,000 hours worked in a year
Measurement Method
[200,000 (Number of injuries and
illnesses)]/Employee hours worked
0
2
4
6
8
10
FY 13-14 FY 14-15 FY 15-16 FY 16-17
Target Actual & Projected
35
Strategic Plan – Finance
Objectives
Balanced Scorecard: Customer
Goal Increase customer confidence in the District
Objectives Enhance communications with customers
Balanced Scorecard: Financial
Goal Maintain District financial strength
Objectives
Implement a cost benefit program
Strengthen internal audit program
Balanced Scorecard: Business Processes
Goal Identify and evaluate improvements to enterprise and departmental business
processes
Objectives Improve and streamline meter related processes
Fiscal Year 2016 Year End Results
0
4
0
0
Completed
On Schedule
Behind
On Hold
0246
Completed
On Schedule
Behind
On Hold
Total 4 Objectives
36
Strategic Plan – Finance
Performance Measures
Answer Rate
Percent of calls as a measure of all calls received
O&M Cost per Account
Operation and maintenance cost per account (per customer)
Billing Accuracy
Number of correct bills issued
Balanced Scorecard
Customer
Target
No less than 97% each quarter in a
single year
Measurement Method
Number of all calls answered/Number
of all calls received
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
FY 13-14 FY 14-15 FY 15-16 FY 16-17
Target Actual & Projected
Balance Scorecard
Financial
Target
Less than $544.88 per account in a year
Measurement Method
Total O&M costs/Number of accounts
Balanced Scorecard
Financial
Target
No less than 99.80% per quarter in a year
Measurement Method
Number of correct bills/Number of total bills
95.0%
96.0%
97.0%
98.0%
99.0%
100.0%
FY 13-14 FY 14-15 FY 15-16 FY 16-17
Target Actual & Projected
$0
$100
$200
$300
$400
$500
$600
FY 13-14 FY 14-15 FY 15-16 FY 16-17
Target Actual & Projected
37
Strategic Plan – Finance
Overtime Percentage
Comparison of actual overtime to budgeted overtime
Sewer Rate Ranking
District's average sewer bill as compared to other agencies in San Diego County
Water Rate Ranking
District's average customer bill as compared to other agencies in San Diego County
Balance Scorecard
Financial
Target
Less than 100% of the budgeted overtime in
a year
Measurement Method
Actual overtime costs (including comp time)
Balance Scorecard
Financial
Target
Bottom 50 percentile for the 28 sewer
service providers in San Diego
Measurement Method
Otay percentage ranking for the average bill
for sewer among regional agencies
Balance Scorecard
Financial
Target
Bottom 50 percentile for the 22 member
agencies in San Diego
Measurement Method
Otay percentage ranking among regional
agencies
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
FY 13-14 FY 14-15 FY 15-16 FY 16-17
Target Actual & Projected
0
4
8
12
16
20
24
28
FY 13-14 FY 14-15 FY 15-16 FY 16-17
Target Actual & Projected
5
8
11
14
17
20
23
FY 13-14 FY 14-15 FY 15-16 FY 16-17
Target Actual & Projected
38
Strategic Plan – Finance
Debt Coverage Ratio
Measures level of debt coverage ratio (ability to pay debt)
Reserve Level
Measures the District’s reserves against the Board adopted Reserve Policy levels
Distribution System Loss
Percentage for unaccounted water
Balance Scorecard
Financial
Target
150% excluding growth revenue
Measurement Method
Qualified net operating revenues/Debt
service requirements
100.0%
125.0%
150.0%
175.0%
200.0%
FY 13-14 FY 14-15 FY 15-16 FY 16-17
Target Actual & Projected
Balance Scorecard
Financial
Target
85%
Measurement Method
Number of reserve funds that meet or
exceed fund target levels/Total number of
reserve funds
70.0%
80.0%
90.0%
100.0%
FY 13-14 FY 14-15 FY 15-16 FY 16-17
Target Actual & Projected
Balance Scorecard
Financial
Target
Less than 5% in a year
Measurement Method
100 [Volume purchased – (volume sold +
volume used) /Volume purchased]
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
FY 13-14 FY 14-15 FY 15-16 FY 16-17
Target Actual & Projected
39
Strategic Plan – Finance
Accounts per Full-Time Employee (FTE)(1)
Percent of Customers Paying Bills Electronically(2)
Payments received via website, IVR over the phone, pay stations, and direct transfers from banks
Gallons Per Capita per Day
Department of Water Resources and California Urban Water Council targets for per capita use of potable water
(1) FY 2016-2017 is the first year for this performance measure
(2) FY 2015-2016 is the first year for this performance measure
Balance Scorecard
Financial
Target
406 accounts per FTE
Measurement Method
Potable + Recycled + Sewer Accounts/
Number of full time employees
Balanced Scorecard
Financial
Target
In development
Measurement Method
Number of customers paying bills
electronically/Total number of
customers
380
390
400
410
420
FY 13-14 FY 14-15 FY 15-16 FY 16-17
Target Actual & Projected
65.0%
75.0%
85.0%
95.0%
FY 13-14 FY 14-15 FY 15-16 FY 16-17
Target Actual & Projected
Balance Scorecard
Customer
Target
Below 172 gallons per day
Measurement Method
Total potable water purchased/ Population
(from San Diego Association of Governments
(SANDAG))/Number of days through the end
of the reporting period (fiscal year)
75
95
115
135
155
175
195
FY 13-14 FY 14-15 FY 15-16 FY 16-17
Target Actual & Projected
40
Strategic Plan – Water Operations
Objectives
Balanced Scorecard: Customer
Goal Improve and expand communications
Objectives Evaluate requirements for future emergency communication system
Balanced Scorecard: Financial
Goal Improve financial information and systems
Objectives
Electric power and fuel management practices
Enhance management control of non-inventory items
Balanced Scorecard: Business Processes
Goal Actively manage water supply as well as support for water and sewer services
Objectives
Leak detection and repair program
Pressure vessel maintenance program
Goal Identify and evaluate improvements to enterprise and departmental business
processes
Objectives
Operations workflow process evaluation
Streamline input of operations data
Fiscal Year 2016 Year End Results
0
4
2
1
Completed
On Schedule
Behind
On Hold
0246
Completed
On Schedule
Behind
On Hold
Total 7 Objectives
41
Strategic Plan – Water Operations
PERFORMANCE MEASURES
Technical Quality Complaint
Complaint rate related to core utility services
Planned Potable Water Maintenance Ratio in $
Planned maintenance costs compared to combined planned and corrective maintenance costs
Planned Recycled Maintenance Ratio in $
Planned maintenance costs compared to combined planned and corrective maintenance costs
Balance Scorecard
Customer
Target
No more than 9 complaints per 1000
customer accounts in a year
Measurement Method
1000 (Number of technical quality
complaints)]/Number of active customer
accounts per reporting period
Balanced Scorecard
Financial
Target
66% of labor dollars spent on preventive
maintenance per quarter in a year
Measurement Method
Total planned maintenance cost/Total
maintenance cost
0
2
4
6
8
10
FY 13-14 FY 14-15 FY 15-16 FY 16-17
Target Actual & Projected
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
FY 13-14 FY 14-15 FY 15-16 FY 16-17
Target Actual & Projected
Balanced Scorecard
Financial
Target
70% of labor dollars spent on preventive
maintenance per quarter in a year
Measurement Method
Total planned maintenance cost/Total
maintenance cost
50%
60%
70%
80%
90%
100%
FY 13-14 FY 14-15 FY 15-16 FY 16-17
Target Actual & Projected
(1)
(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
42
Strategic Plan – Water Operations
Planned Wastewater Maintenance Ratio in $
Planned maintenance costs compared to combined planned and corrective maintenance costs
Direct Cost of Treatment per MGD
Does not include staff overhead or fringe benefits, but it does include staff salaries
O&M Cost per MGP - Wastewater
Includes staff overhead or fringe benefits, but it does not include staff salaries
Balanced Scorecard
Financial
Target
77% of labor dollars spent on preventive
maintenance per quarter in a year
Measurement Method
Total planned maintenance cost/Total
maintenance cost
Balanced Scorecard
Financial
Target
No more than $1050 per MG spent on
wastewater treatment in a year
Measurement Method
Total O&M costs directly attributable to
sewer treatment /Total volume (in MGD)
Balanced Scorecard
Financial
Target
No more than $1925 per MG spent on
O&M for wastewater treatment in a year
Measurement Method
Total O&M cost (less
depreciation)/Volume in MG processed
$700
$800
$900
$1,000
$1,100
FY 13-14 FY 14-15 FY 15-16 FY 16-17
Target Actual & Projected
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
FY 13-14 FY 14-15 FY 15-16 FY 16-17
Target Actual & Projected
$1,000
$1,200
$1,400
$1,600
$1,800
$2,000
FY 13-14 FY 14-15 FY 15-16 FY 16-17
Target Actual & Projected
43
Strategic Plan – Water Operations
Leak Detection Program(2)
Percentage of Potable and Recycled Distribution systems surveyed for leaks
Percent of Preventative Maintenance Completed – Fleet Shop
Preventative Maintenance includes vehicle services, pump station emissions tests, etc.
Percent of Preventative Maintenance Completed – Reclamation Plant
Preventative maintenance includes exercising standby equipment, changing oil on equipment, etc.
(1) FY 2014-2015 is the first year for this performance measure
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
FY 13-14 FY 14-15 FY 15-16 FY 16-17
Target Actual & Projected
Balanced Scorecard
Financial
Target
20% by the end of the year
Measurement Method
Percentage distribution system surveyed
for leaks
Balanced Scorecard
Business Processes
Target
90% each quarter in a year
Measurement Method
Number of PM's completed/Number of
PM's scheduled to be completed
Balanced Scorecard
Business Processes
Target
90% each quarter in a year
Measurement Method
Number of PM's completed/Number of
PM's scheduled to be completed
75.0%
80.0%
85.0%
90.0%
95.0%
100.0%
FY 13-14 FY 14-15 FY 15-16 FY 16-17
Target Actual & Projected
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
FY 13-14 FY 14-15 FY 15-16 FY 16-17
Target Actual & Projected
44
Strategic Plan – Water Operations
Percent of Preventative Maintenance Completed – Pump/Electric
Preventative maintenance includes pump motor oil changes, vibration tests, etc.
System Valve Exercising Program
Valves exercised per year for maintenance to ensure minimal interruption of water delivery to customers
Potable Water Distribution System Integrity
Number of leaks and breaks per 100 miles of potable distribution system
Balanced Scorecard
Business Processes
Target
90% each quarter in a year
Measurement Method
Number of PM's completed/Number of
PM's scheduled to be completed
Balanced Scorecard
Business Processes
Target
770 valves per quarter/3080 valves in a
year
Measurement Method
Actual number of valves exercised
Balanced Scorecard
Business Processes
Target
16 leaks or breaks per 100 miles of
distribution piping in a year
Measurement Method
100 (Annual total number of leaks or
breaks)] / Total miles of distribution pipes
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
FY 13-14 FY 14-15 FY 15-16 FY 16-17
Target Actual & Projected
0
1,000
2,000
3,000
4,000
5,000
6,000
FY 13-14 FY 14-15 FY 15-16 FY 16-17
Target Actual & Projected
0.0
5.0
10.0
15.0
20.0
FY 13-14 FY 14-15 FY 15-16 FY 16-17
Target Actual & Projected
45
Strategic Plan – Water Operations
(1) The actual and projected number of system failures for FY 2014-2017 is zero
(2) FY 2014-2015 there was one break/leak on the recycled water system
Collection System Integrity
Number of wastewater collection system failures per 100 miles of collection system pipeline
Recycled Water System Integrity
Number of leaks or breaks per 100 miles of recycled distribution system
Balanced Scorecard
Business Processes
Target
No more than 3.6 system failures per 100
miles of collection system pipeline in a
year
Measurement Method
[100 (Collection system failure)] /Total
miles of collection system piping
0
1
2
3
4
FY 13-14 FY 14-15 FY 15-16 FY 16-17
Target Actual & Projected (1)
Balanced Scorecard
Business Processes
Target
No more than 6.6 leaks or breaks per 100
miles of recycled distribution system in a
year
Measurement Method
[100 (Number of leaks or breaks)]/Total miles
of distribution system
(2)
46
Strategic Plan – Water Operations
(1) Both actual/projected and target are at 100%
(2) Both actual/projected and target are at 0.0%
(3) FY 2014-2015 is the first year for this performance measure
Sewer Overflow Rate
The wastewater collection system pipeline condition and the effectiveness of planned maintenance
Potable Water Compliance Rate
Compliance rate primary health related drinking water standards are met
Emergency Facility Power Testing(3)
Test facilities equipped with emergency generators for a loss of power
Balanced Scorecard
Business Processes
Target
100% each quarter in a year
Measurement Method
All primary health regulations are met
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
FY 13-14 FY 14-15 FY 15-16 FY 16-17
Target Actual & Projected
(1)
Balanced Scorecard
Business Processes
Target
0 overflows per quarter in a year
Measurement Method
[100 (Total number of sewer
overflows)]/Total miles of pipe in the sewage
collection system
0.0%
0.5%
1.0%
1.5%
FY 13-14 FY 14-15 FY 15-16 FY 16-17
Target Actual & Projected
(2)
0
10
20
30
40
FY 13-14 FY 14-15 FY 15-16 FY 16-17
Target Actual & Projected
Balanced Scorecard
Business Processes
Target
100% of the District’s facilities tested per
year
Measurement Method
Number of facilities and generators
tested/Total facilities
47
Strategic Plan – Water Operations
Main Flushing and Hydrant Maintenance(1)
215 is comprised of 165 hydrants maintained and 50 mains flushed
Critical Valve Exercising
Valves exercised per year for maintenance to ensure minimal interruption of water delivery to hospitals,
convalescent facilities, schools, and major shopping centers, as well as valves on large transmission mains
(1) FY 2014-2015 is the first year for this performance measure
(2) In FY 2014-2015, fire hydrant maintenance was the focus for the valve crew. For FY 2015-2016, main flushing was
completed on a reactive basis
Balanced Scorecard
Business Processes
Target
215 or more mains flushed and fire
hydrants maintained in a single year
Measurement Method
Number of mains flushed and fire hydrants
maintained
0
200
400
600
800
FY 13-14 FY 14-15 FY 15-16 FY 16-17
Target Actual & Projected
Balanced Scorecard
Business Processes
Target
100% of identified critical valves exercised
in a year
Measurement Method
Cumulative number of mains flushed plus
hydrants maintained
50%
60%
70%
80%
90%
100%
FY 13-14 FY 14-15 FY 15-16 FY 16-17
Target Actual & Projected
(2)
48
Strategic Plan – Engineering
Objectives
Balanced Scorecard: Business Processes
Goal Actively manage water supply as well as support for water and sewer services
Objectives
Evaluate City of San Diego's pure water program planning/implementation
Address dependency of imported water
Sewer system business evaluation
Evaluate the viability of implementing an indirect potable reuse program
Goal Identify and evaluate improvements to enterprise and departmental business
processes.
Objectives
Evaluate efficiencies for delivering capital assets
Streamline work processes in four strategic areas including departmental
synergies, technology, procurements, and alignment of business practices
Revise business practices by modifying the master recycled water permit
Implement a habitat conservation plan that will streamline O&M within District
easements
Fiscal Year 2016 Year End Results
0
5
1
2
Completed
On Schedule
Behind
On Hold
0246
Completed
On Schedule
Behind
On Hold
Total 8 Objectives
49
Strategic Plan – Engineering
PERFORMANCE MEASURES
CIP Project Expenditures vs. Budget
Compares CIP expenditures with budget
Construction Change Order Incidence
Rate of Change Orders for CIP projects under construction
Balanced Scorecard
Financial
Target
95% of budget but not to
exceed 100%
Measurement Method
Actual quarterly
expenditures/Annual budget
Balanced Scorecard
Financial
Target
No more than 5% per quarter in a year
Measurement Method
Total cost of change orders (not
including allowances)/Total original
construction contract amount (not
including allowances)
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
FY 13-14 FY 14-15 FY 15-16 FY 16-17
Target Actual & Projected
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
110.0%
FY 13-14 FY 14-15 FY 15-16 FY 16-17
Target Actual & Projected
50
Strategic Plan – Engineering
Mark-out Accuracy
Percentage of mark-outs performed without an at fault hit, which is damage to a District facility that results
from a missing or erroneous mark-out
Project Closeout Time
Average time between the issuance of a Notice of Substantial Completion (NSOC) and a Notice of
Completion (NOC) for CIP projects in construction
(1) Both actual/projected and targets are 100%
(2) 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
Balanced Scorecard
Business Processes
Target
No less than 100% every quarter in a
single year
Measurement Method
Number of mark-outs performed without
an at-fault hit/Total number of mark-outs
performed
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
110.0%
FY 13-14 FY 14-15 FY 15-16 FY 16-17
Target Actual & Projected
Balanced Scorecard
Business Processes
Target
No more than a 45 day average per quarter
in a year
Measurement Method
Number of Days between NOSC and NOC
for all construction projects within the
quarter/Number of construction projects
0
40
80
120
160
200
FY 13-14 FY 14-15 FY 15-16 FY 16-17
Target Actual & Projected
(1)
(2)
51
Strategic Plan – Engineering
Recycled Water Shutdown Testing(1)
Quadrennial shutdown testing of recycled water sites
(1) FY 2014-2015 is the first year for this performance measure
Annual Recycled Water Site Inspections(1)
Annual inspection of recycled water sites as required by the Department of Environmental Health (DEH)
Balanced Scorecard
Business Processes
Target
90% of recycled site shut down tests in a
year
Measurement Method
Percentage of recycled water use sites per
year compared to those scheduled
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
FY 13-14 FY 14-15 FY 15-16 FY 16-17
Target Actual & Projected
Balanced Scorecard
Business Processes
Target
100% of recycled sites inspected in a year
Measurement Method
Percentage of recycled sites inspected
per year of those required by department
of environmental health (DEH)
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
FY 13-14 FY 14-15 FY 15-16 FY 16-17
Target Actual & Projected
52
Budget Summary
The FY 2017 Operating Budget is summarized and presented in the Operating Budget Summary- General
Fund on pages 59-60. 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 61 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 62-66.
For Fiscal Year 2017, the Board has approved an increase in water rates primarily to pass-through cost
increases from water suppliers. The Board 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 2017 is $91.7 million in comparison to the previous fiscal year budget
of $89.2 million. The $2.5 million increase is a result of water supply rate increases of 4.0% from MWD,
5.9% from CWA and 216.3% from the City of San Diego. CWA’s increase is due to the water sales
uncertainty due to long-term impacts of state water regulations.
General Fund Revenues
Potable Water Sales
Potable water sales revenue collected from the sale of water including: system charges, energy charges,
and penalties account for 78.2% of the District’s operating revenues. It is estimated that 24,809.2 acre-
feet of potable water will be sold during FY 2017, which is a decrease of 2,059.5 from FY 2016. Budgeted
revenues from water sales are projected to be $72.2 million, an increase of 3.5% compared to FY 2016.
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. However,
the District’s recycled sales were adversely impacted by the mandate. Recycled water sales revenue is
generated from the sale of 3,955.7 acre-feet of recycled water. The recycled rate is 15.0% less than the
potable irrigation rate. The FY 2017 sales revenue budget is $8.9 million which is a decrease of $215,700
from FY 2016 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 1.0% 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 2017 Sewer Revenues are projected
to be $2.9 million which is a decrease from the prior year of $287,400.
53
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 2017 revenue from meter fees remains unchanged at $66,200
compared to the FY 2016 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 2017 capacity fee revenue of $1.3 million is an increase of $113,400 compared to
FY 2016.
Betterment Fees for Maintenance
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 $4.0 million which is an increase of $135,200 compared to FY 2016.
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 2011 2012 2013 2014 2015 2016
Gann Limit $ 3,787 $ 3,917 $ 4,120 $ 4,392 $4,454 $4,673
Appropriations subject to the limit $ 2,924 $ 2,890 $ 2,892 $ 2,968 $3,134 $3,323
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 $2.2 million in revenues for FY 2017 which is a decrease of $305,700
compared to FY 2016.
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 $156,900 in FY 2016 which is $600 less than in FY 2016.
5454
Budget Summary
General Fund Expenditures
Potable Water Purchases
Water purchases are the expenses of purchasing 25,912.3 acre-feet for the District's potable water supply.
A provision has been made to allow 1,103.1 acre-feet of water for District usage, leakage, and evaporation.
Total Potable Water Purchases are projected to be $31.3 million in FY 2017 which is a decrease of $1.0
million compared to FY 2016.
Recycled Water Purchases
Recycled water purchases are the expenses of purchasing 2,459.6 acre-feet for the District's recycled
water supply which is a decrease of 446.8 compared to Fiscal Year 2017. In addition to the purchases
there is a contractual Take-or-Pay payment budgeted for 2,302.4 acre-feet which is 391.6 acre-feet more
than FY 2016. Total Recycled Purchases are projected to be $3.6 million in FY 2017 which is an increase
of $1,910,100 compared to FY 2016.
Infrastructure Access Charge
This charge was established in FY 1999 by CWA and is imposed on member agencies as a condition of
maintaining connections to the CWA facilities. It is apportioned based on water meters within each
member agency. Infrastructure access charges are projected at $2.0 million in FY 2017 which is a slight
increase of $45,000 compared to 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 that are necessary to support the functioning of the CWA. The customer service charge
is allocated among the member agencies on the basis of each agency’s three-year rolling average of
member agency supply purchases from the CWA. The District’s customer service charges are projected
to be $1.7 million in FY 2017 which is a slight decrease of $63,600 compared to FY 2016.
Supply Reliability Charge
This charge was established in FY 2016 by CWA as a fixed charge and became effective January 2016.
The Supply Reliability Charge is set to recover a portion of the fixed costs associated with the CWA’s
highly reliable water supplies, such as desalinated water (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 (agricultural deliveries are not included). The reliability charge is projected to be
$1.9 for FY 2017.
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 $4.6 million in FY 2017.
5555
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 $988,800 which is an
increase of $182,400 compared to FY 2016.
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 be $1.4 million
in FY 2017, which is a decrease of $370,800 compared to FY 2016.
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 $2.9 million, which is a decrease of $174,800 compared to FY 2016.
Labor and Benefits
Labor and benefits are the wages and fringe benefits for FY 2017 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 are projected to
be $20.9 million, which is an increase of $518,900 compared to FY 2016.
Administrative Expenses
Administrative expenses are costs incurred by various departments that are directly related to District
operations. Administrative expenses are projected to be $5.2 million in FY 2017, which is a decrease of
$237,200 compared to 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 be $3.5 million in FY 2016, which
is a decrease of $156,500 compared to FY 2016. Additional details are supplied in the Departmental
Operating Budget section.
5656
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 2017, these reserves will be
funded with $3.6 million from Potable Water and $455,600 Recycled Water for a total of $4.1 million.
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 2017, these
reserves will be funded with $2.3 million from Potable Water, $835,200 from Recycled Water and $351.200
from Sewer funds for a total of $3.5 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 2017, these reserves
will be funded with $464,500 from Potable Water.
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 2017, this reserve will
be funded with $35,000 from Recycled 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 2017, the General Fund is budgeted to fund the OPEB Trust $961,000 for retiree health liabilities.
Transfer to General Fund Reserve
For FY 2017, the General Fund Reserve will be funded with $1.3 million from Potable Water, $1.4 million
from Recycled Water and $196,100 from Sewer.
57
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, 2016, and the projected balance for June 30, 2017.
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.
5858
FY 2015 FY 2016 FY 2017
11-Actual Budget Actual * Budget $%
Revenues
#Potable Water Sales 70,281,989$ 69,783,700$ 65,413,157$ 72,238,600$ 2,454,900$ 3.5%
Recycled Water Sales 8,853,010 9,116,000 8,527,042 8,900,300 (215,700) (2.4%)
#Sewer Revenues 3,009,634 3,206,300 3,149,295 2,918,900 (287,400) (9.0%)
#Meter Fees 90,246 66,200 78,568 66,200 - -
#Capacity Fee Revenues 1,312,108 1,134,800 1,517,128 1,248,200 113,400 10.0%
#Betterment Fees for Maintenance 188,123 - - - - -
Tax Revenues 3,814,516 3,897,900 3,970,202 4,033,100 135,200 3.5%
#Non-operating Revenues 2,404,375 1,873,600 2,434,865 2,179,300 305,700 16.3%
#Interest 128,599 157,500 124,502 156,900 (600) (0.4%)
ExTransfer from Potable General Fund 553,800 - - - - -
Total Revenues 90,636,400 89,236,000 85,214,759 91,741,500 2,505,500 2.8%
Expenditures
#Potable Water Purchases 33,952,017 32,332,100 29,409,666 31,271,300 (1,060,800) (3.3%)
Recycled Water Purchases 1,360,807 1,705,800 2,642,437 3,615,900 1,910,100 112.0%
#CWA - Infrastructure Access Charge 1,900,266 1,931,400 1,930,848 1,976,400 45,000 2.3%
#CWA - Customer Service Charge 1,796,853 1,777,800 1,778,197 1,714,200 (63,600)(3.6%)
CWA - Reliability Charge - 950,400 950,052 1,848,000 897,600 94.4%
#CWA - Emergency Storage Charge 4,720,701 4,681,800 4,681,673 4,579,800 (102,000)(2.2%)
#MWD - Capacity Reservation Charge 701,976 806,400 883,203 988,800 182,400 22.6%
#MWD - Net RTS and Standby Charge 1,817,339 1,798,800 1,587,254 1,428,000 (370,800)(20.6%)
Subtotal - Water Costs 46,249,959 45,984,500 43,863,330 47,422,400 1,437,900 3.1%
#Power 3,048,335 3,112,800 2,697,915 2,938,000 (174,800) (5.6%)
#Labor and Benefits 19,406,815 20,381,000 20,337,890 20,899,900 518,900 2.5%
#Administrative Expenses 4,503,990 5,387,800 4,510,379 5,150,100 (237,700) (4.4%)
#Materials and Maintenance 3,339,777 3,612,800 3,103,175 3,456,300 (156,500) (4.3%)
Subtotal - Operations Costs 30,298,917 32,494,400 30,649,359 32,444,300 (50,100) (0.2%)
DTransfer to General Fund Reserve - - - 2,854,300 2,854,300 100.0%
#Expansion Reserve 2,538,900 2,695,800 2,695,800 4,093,600 1,397,800 51.9%
B Betterment Reserve 3,530,000 2,400,000 2,400,000 3,466,400 1,066,400 44.4%
ReReplacement Reserve 3,270,200 3,421,000 3,421,000 464,500 (2,956,500) (86.4%)
Transfer to Sewer General Fund 553,800 - - - - -
TOOPEB Trust 647,100 1,006,000 1,006,000 961,000 (45,000) (4.5%)
Potable General Fund 1,583,800 - - - - -
Sewer Replacement 127,000 1,199,300 1,199,300 - (1,199,300) (100.0%)
New Supply Reserve 705,000 35,000 35,000 35,000 - -
Subtotal - Reserve Funding 12,955,800 10,757,100 10,757,100 11,874,800 1,117,700 10.4%
Total Expenditures 89,504,676 89,236,000 85,269,789 91,741,500 2,505,500 2.8%
Excess Revenues (Expenditures)1,131,724$ -$ (55,030)$ -$ -$ -
Operating Budget Summary - General Fund
Budget to Budget
VarianceFY 2016
* Actual unaudited
59
Potable Water Sales 72,238,600$ 78.7%
Recycled Water Sales 8,900,300 9.7%
Sewer Revenues 2,918,900 3.2%
Meter Fees 66,200 0.1%
Capacity Fee Revenues 1,248,200 1.4%
Tax Revenues 4,033,100 4.4%
Non-operating Revenues 2,179,300 2.3%
Interest 156,900 0.2%
91,741,500$ 100.0%
Potable Water Purchases 43,806,500$ 47.8%
Recycled Water Purchases 3,615,900 3.9%
Power 2,938,000 3.2%
Labor and Benefits 20,899,900 22.8%
Administrative Expenses 5,150,100 5.6%
Materials & Maintenance 3,456,300 3.8%
Reserve Funding 11,874,800 12.9%
91,741,500$ 100.0%
FY 2017 Operating Revenues
FY 2017 Operating Expenditures
Operating Budget Summary - General Fund
6060
Potable Recycled Sewer Total
Revenues
Water Sales 72,238,600$ -$ -$ 72,238,600$
Recycled Water Sales - 8,900,300 2,918,900 11,819,200
Meter Fees 65,800 400 - 66,200
Capacity Fee Revenues 1,248,200 - - 1,248,200
Tax Revenues 3,981,500 - 51,600 4,033,100
Non-operating Revenues 2,143,800 - 35,500 2,179,300
Interest 144,300 8,300 4,300 156,900
Total Revenues 79,822,200 8,909,000 3,010,300 91,741,500
Expenditures
Water Purchases 31,271,300 3,615,900 - 34,887,200
CWA - Infrastructure Access Charge 1,976,400 - - 1,976,400
CWA - Customer Service Charge 1,714,200 - - 1,714,200
CWA - Reliability Charge 1,848,000 - - 1,848,000
CWA - Emergency Storage Charge 4,579,800 - - 4,579,800
MWD - Capacity Reservation Charge 988,800 - - 988,800
MWD - Net RTS and Standby Charges 1,428,000 - - 1,428,000
Subtotal - Water Costs 43,806,500 3,615,900 - 47,422,400
Power 2,194,700 568,900 174,400 2,938,000
Labor and Benefits 18,581,400 1,339,200 979,300 20,899,900
Administrative Expenses 4,589,800 331,200 229,100 5,150,100
Materials and Maintenance 2,108,600 305,000 1,042,700 3,456,300
Subtotal - Operations Costs 27,474,500 2,544,300 2,425,500 32,444,300
Reserve Funding
D Transfer to General Fund Reserve 1,286,400 1,371,800 196,100 2,854,300
#Expansion Reserve 3,638,000 455,600 - 4,093,600
B Betterment Reserve 2,280,000 835,200 351,200 3,466,400
R Replacement Reserve 464,500 - - 464,500
TOOPEB Trust 872,300 51,200 37,500 961,000
New Supply Reserve - 35,000 - 35,000
Subtotal - Reserve Funding 8,541,200 2,748,800 584,800 11,874,800
Total Expenditures 79,822,200 8,909,000 3,010,300 91,741,500
Excess Revenue (Expenditures)-$ -$ -$ -$
FY 2017 Operating Budget Summary by System
61
FY 2015 FY 2017
Actual Budget Actual* Budget $%
Revenues and Fund Sources
Potable Water Sales 70,281,989$ 69,783,700$ 65,413,157$ 72,238,600$ 2,454,900$ 3.5%
Recycled Water Sales 8,853,010 9,116,000 8,527,042 8,900,300 (215,700) (2.4%)
Sewer Revenues 3,009,634 3,206,300 3,149,295 2,918,900 (287,400) (9.0%)
Meter Fees 90,246 66,200 78,568 66,200 - -
Capacity Fee Revenues 1,312,108 1,134,800 1,517,128 1,248,200 113,400 10.0%
Betterment Fee Revenues 188,123 - - - - -
Tax Revenues 3,814,516 3,897,900 3,970,202 4,033,100 135,200 3.5%
Non-Operating Revenues 2,404,375 1,873,600 2,434,865 2,179,300 305,700 16.3%
Interest 128,599 157,500 124,502 156,900 (600) (0.4%)
Transfers 553,800 - - - - -
Total Revenues and 90,636,400 89,236,000 85,214,759 91,741,500 2,505,500 2.8%
Fund Sources
Expenditures and Fund Uses
Potable Water Purchases 33,952,017 32,332,100 29,409,666 31,271,300 (1,060,800) (3.3%)
Recycled Water Purchases 1,360,807 1,705,800 2,642,437 3,615,900 1,910,100 112.0%
Fixed Charges 10,937,135 11,946,600 11,811,227 12,535,200 588,600 4.9%
Power 3,048,335 3,112,800 2,697,915 2,938,000 (174,800) (5.6%)
Labor and Benefits 19,406,815 20,381,000 20,337,890 20,899,900 518,900 2.5%
Administrative Expenses 4,503,990 5,387,800 4,510,379 5,150,100 (237,700) (4.4%)
Materials and Maintenance 3,339,777 3,612,800 3,103,175 3,456,300 (156,500) (4.3%)
Transfers 12,955,800 10,757,100 10,757,100 11,874,800 1,117,700 10.4%
Total Expenditures and 89,504,676 89,236,000 85,269,789 91,741,500 2,505,500 2.8%
Fund Uses
Excess Revenues/(Expenditures)1,131,724$ -$ (55,030)$ -$ -$ -
General Fund Revenues, Expenditures and Transfers, in millions ($)
FY 2016
Budget to Budget
Variance
General Fund - Revenues, Expenditures and Transfers
$80
$82
$84
$86
$88
$90
$92
FY 2015-Actual FY 2016-Budget FY 2016-Actual FY 2017-Budget
91
89
85
92
90
89
85
92
Revenue Expenditures
*Actual unaudited
62
Actual*Projected
Balance Interfund Balance
June 30, 2016 Revenues Expenditures Transfers (1)June 30, 2017
General Fund
Potable 22,165,151$ 79,822,200$ 79,822,200$ -$ 22,165,151$
Recycled 1,380,004 8,909,000 8,909,000 - 1,380,004
Sewer 11,743 3,010,300 3,010,300 - 11,743
Total General Fund 23,556,898 91,741,500 91,741,500 - 23,556,898
Expansion Fund
Potable and Recycled (2)3,272,004 2,596,700 5,224,300 4,359,600 5,004,004
Sewer 1,376,532 - - - 1,376,532
Total Expansion Fund 4,648,536 2,596,700 5,224,300 4,359,600 6,380,536 (3)
Betterment Fund
Potable (78,388) 795,600 2,224,800 2,280,000 772,412
Recycled 783,442 14,000 1,526,400 835,200 106,242
Sewer - 36,900 26,000 384,000 394,900
Total Betterment Fund 705,054 846,500 3,777,200 3,499,200 1,273,554 (3)
Replacement Fund
Potable 37,606,194 2,271,900 8,440,700 464,500 31,901,894
Recycled 13,266,524 99,400 198,000 (232,900) 12,935,024
Sewer (5,046,196) 101,700 1,585,000 (32,800) (6,562,296)
Total Replacement Fund 45,826,522 2,473,000 10,223,700 198,800 38,274,622
New Supply Fund
Potable 617,463 361,800 57,500 - 921,763
Recycled - 8,900 4,800 35,000 39,100
Sewer 5,025,373 - - - 5,025,373
Total New Supply Fund 5,642,836 370,700 62,300 35,000 5,986,236 (3)
OPEB Fund - 962,100 961,000 - 1,100 (4)
Debt Service Fund - 680,600 784,800 - (104,200)
Total 80,379,846$ 99,671,100$ 112,774,800$ 8,092,600$ 75,368,746$ 7,947,230$
(1) The total for interfund transfers does not net to $0 because some transfers are already reflected in the Operating
Revenues and Expenditures for General Fund as follows:
Expansion Reserve (4,126,700)$
Betterment Reserve (3,466,400)
Replacement Reserve (464,500)
New Supply Reserve (35,000)
Total (8,092,600)$ #
(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 197-226.
(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 2017 Budget
Fund Balance Summary by Fund
*Actual unaudited
63
FY 2015 FY 2017
Actual Budget Actual* Budget
Revenues
General Fund
Potable 78,106,717$ 76,810,000$ 72,575,946$ 79,822,200$
Recycled 8,871,699 9,122,700 8,529,451 8,909,000
Sewer 3,657,984 3,303,300 4,109,364 3,010,300
Total General Fund (1)90,636,400 89,236,000 85,214,761 91,741,500
Expansion Fund
Potable 2,024,914 1,712,500 2,137,632 2,483,300
Recycled 186,149 103,300 145,516 113,400
Sewer 150 100 12,531 -
Total Expansion Fund 2,211,213 1,815,900 2,295,679 2,596,700
Betterment Fund
Potable 1,131,615 805,500 405,789 795,600
Recycled 5,615 6,900 69,189 14,000
Sewer 36,137 34,000 - 36,900
Total Betterment Fund 1,173,367 846,400 474,978 846,500
Replacement Fund
Potable 2,184,797 3,304,300 4,218,081 2,271,900
Recycled 229,351 48,500 157,197 99,400
Sewer 100,357 89,800 110,157 101,700
Total Replacement Fund 2,514,505 3,442,600 4,485,435 2,473,000
New Supply Fund
Potable 383,063 259,900 446,575 361,800
Recycled 37,198 1,400 1,500 8,900
Sewer - - 218,925 -
Total New Supply Fund 420,261 261,300 667,000 370,700
OPEB Fund 551,486 914,200 921,217 962,100
Debt Service Fund 730,154 757,100 741,226 680,600
Total Revenues 98,237,386$ 97,273,500$ 94,800,296 99,671,100$
4,400,631$ 3,436,745$
Revenues and Expenditures by Fund
FY 2016
*Actual unaudited
64
FY 2015 FY 2017
Actual Budget Actual* Budget
Revenues and Expenditures by Fund
FY 2016
Expenditures
General Fund
Potable 77,332,582$ 76,810,000$ 71,591,041$ 79,822,200$
Recycled 8,871,699 9,122,700 8,529,451 8,909,000
Sewer 3,657,984 3,303,300 4,109,364 3,010,300
Total General Fund 89,862,265 89,236,000 84,229,856 91,741,500
Expansion Fund
Potable 4,541,070 4,469,300 4,659,221 4,112,200
Recycled 1,078,373 1,274,900 4,528 1,112,100
Sewer 7,510 - 395,319 -
Total Expansion Fund 5,626,953 5,744,200 5,059,068 5,224,300
Betterment Fund
Potable 2,594,998 3,759,500 3,740,543 2,224,800
Recycled 518,356 753,400 255,762 1,526,400
Sewer 214,301 251,000 - 26,000
Total Betterment Fund 3,327,655 4,763,900 3,996,305 3,777,200
Replacement Fund
Potable 6,879,734 7,175,800 7,112,872 8,440,700
Recycled 523,696 870,100 912,094 198,000
Sewer 1,376,978 1,520,000 1,072,335 1,585,000
Total Replacement Fund 8,780,408 9,565,900 9,097,301 10,223,700
New Supply Fund
Potable 350,165 177,500 152,213 57,500
Recycled 89,055 4,800 - 4,800
Sewer - - 735,874 -
Total New Supply Fund 439,220 182,300 888,087 62,300
OPEB Fund 831,057 914,100 826,291 961,000
Debt Reserve Fund 13,650,886 750,100 749,263 784,800
Total Expenditures 122,518,444 111,156,500 104,846,171 112,774,800
Surplus/(Deficit)(24,281,058)$ (13,883,000)$ (10,045,875) (13,103,700)$
*Actual unaudited
65
FY 2015 FY 2017
Actual Budget Actual* Budget
Revenues and Fund Sources
Water Sales 79,134,999$ 78,899,700$ 73,940,199$ 81,138,900$
Sewer Revenues 3,009,634 3,206,300 3,149,295 2,918,900
Meter Fees 90,246 66,200 78,568 66,200
Capacity Fee Revenues 1,312,108 1,134,800 1,517,128 1,248,200
Betterment Fee Revenues 309,510 - - -
Capacity Fees for Maintenance 4,346,177 2,862,000 4,975,067 4,261,200
Betterment Fees for Maintenance 188,123 - - -
Tax Revenues 3,814,516 3,897,900 3,970,202 4,033,100
Availability Fees 477,137 473,000 114,940 484,200
Non-Operating Revenues 2,404,375 1,873,600 2,434,865 2,179,300
GO Bond Debt Tax Revenues 1,453,756 722,800 1,475,424 640,400
Sewer Debt Tax Revenues - 1,000 - 1,000
COPs Proceeds 770,400 770,200 770,200 828,100
CALTRANS Reimbursement - 1,845,100 1,510,976 255,000
Interest 131,875 162,800 128,015 654,500
Interfund Transfer 653,279 1,006,100 1,013,414 962,100
Total Revenue and Fund Sources 98,096,135 96,921,500 95,078,293 99,671,100
Expenditures and Fund Uses
Water Purchases 46,249,959 45,984,500 43,863,330 47,422,400
Power 3,048,335 3,112,800 2,697,915 2,938,000
Labor Expenses 19,406,815 20,381,000 20,337,890 20,899,900
Administrative Expenses 4,503,990 5,387,800 4,510,379 5,150,100
Materials and Maintenance 3,339,777 3,612,800 3,103,175 3,456,300
CIP Expenses 11,051,731 12,505,000 12,198,933 12,033,100
Debt Service 7,701,000 8,532,000 7,744,576 8,039,200
OPEB Retiree Health Expenses 929,113 1,006,000 909,415 961,000
Interfund Transfers 12,955,800 10,757,100 10,757,100 11,874,800
Total Expenditures and Fund Uses 109,186,520 111,279,000 106,122,713 112,774,800
Surplus/(Deficit)(11,090,385)$ (14,357,500)$ (11,044,420)$ (13,103,700)$
Revenues and Expenditures by Type - All Funds
FY 2016
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 2015 and 2016 shown above.
*Actual unaudited
66
Five-Year Forecast – FY 2018 through FY 2022
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 10. 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 cost of water is based on CWA’s Rate Modeling Program. This CWA 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).
$-
$500
$1,000
$1,500
$2,000
$2,500
FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022
$1,691 $1,841 $1,951 $2,068 $2,191 $2,322
Pe
r
A
c
r
e
F
o
o
t
Projected Cost of Water
67
FY 2018 FY 2019 FY 2020 FY 2021 FY 2022
Revenues
Water/Sewer Rates 88,571,900$ 93,172,600$ 97,691,700$ 102,641,300$ 107,891,800$
Meter Fees 70,200 73,400 75,400 78,500 82,000
Capacity Fee Revenues 1,254,400 1,266,900 1,279,600 1,292,400 1,305,300
Non-operating Revenues 2,203,100 2,023,200 2,045,100 2,073,500 2,102,400
Tax Revenues 4,104,200 4,178,300 4,256,300 4,337,500 4,420,500
Interest Income 204,500 258,500 294,300 333,800 377,100
Total Revenues 96,408,300 100,972,900 105,642,400 110,757,000 116,179,100
32,358,500$ 31,958,100$ 31,745,900$ 32,150,700$
FY 2018 FY 2019 FY 2020 FY 2021 FY 2022
Expenditures
Water Cost 51,707,100 55,094,200 58,881,400 63,211,400 67,866,400
Power 3,080,200 3,217,300 3,371,500 3,543,900 3,729,200
Labor and Benefits 21,260,300 21,627,700 21,974,600 22,306,600 22,645,300
Administrative Expenses 4,989,500 5,145,100 5,395,500 5,486,500 5,644,300
Materials & Maintenance 3,538,400 3,681,800 3,831,000 3,986,300 4,148,100
Net Reserve Funding 11,832,800 12,206,800 12,188,400 12,222,300 12,145,800
Total Expenditures and Transfers 96,408,300 100,972,900 105,642,400 110,757,000 116,179,100
Excess Revenues (Expenditures)-$ -$ -$ -$ -$
-$ -$ -$ -$ -$
General Fund Forecast - FY 2018 Through FY 2022
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 2018 FY 2019 FY 2020 FY 2021 FY 2022
96
10
1
10
6
11
1
11
6
$9
6
$1
0
1
$1
0
6
$1
1
1
$1
1
6
Revenues and Expenditures Forecast, in millions ($)
Revenues Expenditures
68
FY 2018 FY 2019 FY 2020 FY 2021 FY 2022
Fund Balance
General Fund 21,148,800$ 22,199,600$ 23,374,200$ 24,647,500$ 26,020,700$
Betterment Fund 1,541,300 701,800 464,800 1,552,500 1,552,700
Replacement Fund 42,732,300 33,255,300 37,543,900 43,057,200 49,715,000
Expansion Fund 388,500 526,400 494,900 502,300 504,100
New Supply Fund 1,574,800 2,546,100 3,774,900 5,190,400 6,805,400
Debt Reserve 4,477,600 4,410,900 4,320,900 4,256,400 4,162,400
Total Fund Balance 71,863,300$ 63,640,100$ 69,973,600$ 79,206,300$ 88,760,300$
(124,471) (125,111) (125,654) (126,539) (127,325)
Fund Balances - FY 2018 Through FY 2022
Fund Balances by Fund
$0
$20
$40
$60
$80
$100
FY 2018 FY 2019 FY 2020 FY 2021 FY 2022
Fund Balances Forecast, in millions ($)
General Fund Betterment Fund Replacement Fund Expansion Fund Debt Reserve New Supply Fund
69
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 April, 2016, Standard & Poor’s (S&P) affirmed the District’s AA rating and stable outlook. The rating
was based on the broad and diverse service area, strong financial risk profile, and good operational
management policies and practices.
711-1 Reservoir (3.1 MG) – Exterior Wrapping
70
Debt Management
The District achieved a 171% actual debt coverage ratio, including growth revenues, for fiscal year
2016, 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 shows the District’s projected debt coverage ratio from FY 2017 through FY 2022. 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
1.96
2.40
2.80
3.12 3.36 3.54
-
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022
Co
v
e
r
a
g
e
R
a
t
i
o
Projected Ratio Minimum Ratio = 1.25
71
Outstanding
Year Maturity Original Balance
# Incurred Description Date Amount 6/30/2017
1 1996 Certificates of Participation (COPs)September 1, 2026 15,400,000$ 8,200,000$
2 2009 General Obligation (GO) Bonds August 31, 2022 7,780,000 3,995,000
3 2010 Certificates of Participation Series A (COPs)September 1, 2024 13,840,000 8,820,000
4 2010 Build America Bonds Series B (BABs)September 1, 2040 36,355,000 36,355,000
5 2013 Water Revenue Refunding Bonds (1)September 1, 2023 7,735,000 5,220,000
6 2016 Water Revenue Refunding Bonds (2)September 1, 2036 33,385,000 32,185,000
Total Outstanding Debt 114,495,000$ 94,775,000$
Total Assessed Valuation - FY 2016
Percentage of Original Debt to Assessed Valuation 0.44%0.07%
Debt Limit per District Debt Policy (% of Assessed Valuation)15.00%15.00%
(1)The 2013 Water Revenue Refunding Bonds were an advanced refunding of the 2004 COPs, which was a
refunding of the 1993 COPs.
(2)The 2016 Water Revenue Refunding Bonds were an advanced refunding of the 2007 COPs.
26,057,698,553$ 11,904,159,221$
Schedule of Outstanding Debt
All Debts GO Bonds
Total Outstanding Debt, in millions ($)
Note: The accounting for debt proceeds and payments is described in the District's Reserve Policy found on
pages 197-224.
$0
$15
$30
$45
$60
$75
$90
1996 COPs 2009 GOBs 2010A COPs 2010B BABs 2013
WRRBs
2016
WRRBs
Principal Interest
72
1996 COPs 2009 GOBs 2010A COPs 2010B BABs 2013 WRRBs(1)2016 WRRBs(2)Total
600,000$ 605,000$ 940,000$ -$ 660,000$ 1,015,000$ 3,820,000$
700,000 635,000 975,000 - 685,000 1,045,000 4,040,000
700,000 650,000 1,015,000 - 715,000 1,100,000 4,180,000
700,000 680,000 1,065,000 - 745,000 1,155,000 4,345,000
800,000 705,000 1,120,000 - 775,000 1,215,000 4,615,000
800,000 720,000 1,175,000 - 805,000 1,285,000 4,785,000
900,000 - 1,235,000 - 835,000 1,350,000 4,320,000
900,000 - 1,295,000 - - 1,420,000 3,615,000
1,000,000 - - 1,365,000 - 1,495,000 3,860,000
1,100,000 - - 1,450,000 - 1,570,000 4,120,000
- - - 1,545,000 - 1,645,000 3,190,000
- - - 1,640,000 - 1,715,000 3,355,000
- - - 1,745,000 - 1,785,000 3,530,000
- - - 1,855,000 - 1,855,000 3,710,000
- - - 1,975,000 - 1,955,000 3,930,000
- - - 2,105,000 - 2,005,000 4,110,000
- - - 2,245,000 - 2,055,000 4,300,000
- - - 2,390,000 - 2,115,000 4,505,000
- - - 2,550,000 - 2,170,000 4,720,000
- - - 2,715,000 - 2,235,000 4,950,000
- - - 2,895,000 - - 2,895,000
- - - 3,085,000 - - 3,085,000
- - - 3,290,000 - - 3,290,000
- - - 3,505,000 - - 3,505,000
8,200,000$ 3,995,000$ 8,820,000$ 36,355,000$ 5,220,000$ 32,185,000$ 94,775,000$
(1)The 2013 Water Revenue Refunding Bonds were an advanced refunding of the 2004 COPs, which was a
refunding of the 1993 COPs.
(2)The 2016 Water Revenue Refunding Bonds were an advanced refunding of the 2007 COPs.
2041
Total
Combined Debt Service through Maturity, in millions ($)
2035
2036
2037
2038
2039
2040
2029
2030
2031
2032
2033
2034
2023
2024
2025
2026
2027
2028
2018
2019
2020
2021
2022
Projected Principal Payments by Debt Issuance
FY
$0
$1
$2
$3
$4
$5
$6
$7
$8
$9
20
1
8
20
1
9
20
2
0
20
2
1
20
2
2
20
2
3
20
2
4
20
2
5
20
2
6
20
2
7
20
2
8
20
2
9
20
3
0
20
3
1
20
3
2
20
3
3
20
3
4
20
3
5
20
3
6
20
3
7
20
3
8
20
3
9
20
4
0
20
4
1
Interest
Principal
73
1996 COPs (1)2009 GOBs 2010A COPs 2010B BABs 2013 WRRBs(2)2016 WRRBs(3)Total
38,500$ 139,633$ 393,754$ 2,371,868$ 186,800$ 1,204,656$ 4,335,211$
35,083 114,433 354,988 2,371,868 159,567 1,156,040 4,191,979
31,583 88,533 306,196 2,371,868 131,167 1,101,498 4,030,845
28,083 61,533 253,363 2,371,868 101,567 1,044,206 3,860,620
24,167 33,500 197,821 2,371,868 70,767 983,956 3,682,079
20,167 4,800 139,529 2,371,868 38,767 920,290 3,495,421
15,750 - 78,279 2,371,868 5,567 853,331 3,324,795
11,250 - 11,331 2,371,868 - 782,915 3,177,364
6,333 - - 2,299,330 - 708,790 3,014,453
917 - - 2,207,767 - 630,915 2,839,599
- - - 2,110,252 - 562,998 2,673,250
- - - 2,006,679 - 494,865 2,501,544
- - - 1,896,516 - 423,931 2,320,447
- - - 1,779,392 - 350,198 2,129,590
- - - 1,651,430 - 297,102 1,948,532
- - - 1,514,409 - 247,185 1,761,594
- - - 1,368,290 - 193,878 1,562,168
- - - 1,212,689 - 136,419 1,349,108
- - - 1,046,730 - 76,996 1,123,726
- - - 869,973 - 11,175 881,148
- - - 681,541 - - 681,541
- - - 480,724 - - 480,724
- - - 266,587 - - 266,587
- - - 38,421 - - 38,421
211,833$ 442,432$ 1,735,261$ 40,405,674$ 694,202$ 12,181,344$ 55,670,746$
(1)Interest on the 1996 Certificates of Participation is variable and is projected using an interest rate of .5%.
(2)The 2013 Water Revenue Refunding Bonds were an advanced refunding of the 2004 COPs, which was a
refunding of the 1993 COPs.
(3)The 2016 Water Revenue Refunding Bonds were an advanced refunding of the 2007 COPs.
2041
Total
2035
2036
2037
2038
2039
2040
2029
2030
2031
2032
2033
2034
2023
2024
2025
2026
2027
2028
2018
2019
2020
2021
2022
Projected Interest Payments by Debt Issuance
FY
74
Potable Revenues and Expenditures
Potable Revenues
The District will provide water service to approximately 49,496 potable customers by the end of Fiscal
Year 2017. 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 2017. Unit sales are anticipated to decrease 7.7%
compared to the previous year's budget, and increase by 3.8% versus the previous year’s actual unit
sales.
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 61.4% 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.
944-1 (0.3 MG) Reservoir - Jamul, California
75
Potable Revenues and Expenditures
Potable Expenditures
In Fiscal Year 2017, the District estimates to purchase 29,912.3 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 1,103.1 acre-feet.
Today, the District
purchases 100% of its
potable water from the San
Diego County Water
Authority; however, in the
past the District purchased
only treated water through
the CWA’s treated water
pipeline. 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 reservoirs of member agencies and CWA serve 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 adds 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.
711-1 Reservoir (3.1 MG) – Remove and replace deteriorating reservoir coating
76
Potable Revenues and Expenditures
The San Diego County Water Authority 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. The Carlsbad
Desalination Plant began commercial operations in December 2015 and is the largest seawater
desalination plant in the nation. It is anticipated to meet 7-10% of the region’s water demand.
2011-2015
Five-Year Average
Water Supply
77
FY 2015 FY 2016 FY 2017
11-Actual Budget Actual * Budget $%
Revenues
##Water Sales 70,281,989$ 69,783,700$ 65,413,157$ 72,238,600$ 2,454,900$ 3.5%
##Meter Fees 86,165 65,800 76,366 65,800 - -
##Capacity Fee Revenues 1,304,598 1,134,800 1,512,600 1,248,200 113,400 10.0%
##Betterment Fees for Maintenance 188,123 - - - - -
Tax Revenues 3,769,963 3,846,300 3,897,734 3,981,500 135,200 3.5%
##Non-operating Revenues 2,370,615 1,836,400 1,553,316 2,143,800 307,400 16.7%
##Interest 105,264 143,000 122,772 144,300 1,300 0.9%
Total Revenues 78,106,717 76,810,000 72,575,945 79,822,200 3,012,200 3.9%
Expenditures
Potable Water Purchases 33,952,017 32,332,100 29,409,666 31,271,300 (1,060,800) (3.3%)
##CWA - Infrastructure Access Charge 1,900,266 1,931,400 1,930,848 1,976,400 45,000 2.3%
##CWA - Customer Service Charge 1,796,853 1,777,800 1,778,197 1,714,200 (63,600) (3.6%)
##CWA - Reliability Charge - 950,400 950,052 1,848,000 897,600 94.4%
##CWA - Emergency Storage Charge 4,720,701 4,681,800 4,681,673 4,579,800 (102,000) (2.2%)
##MWD - Capacity Reservation Charge 701,976 806,400 883,203 988,800 182,400 22.6%
##MWD-Net RTS and Standby Charges 1,817,339 1,798,800 1,587,254 1,428,000 (370,800) (20.6%)
Subtotal - Water Costs 44,889,152 44,278,700 41,220,893 43,806,500 (472,200) (1.1%)
##Power 2,280,061 2,372,400 2,017,258 2,194,700 (177,700) (7.5%)
##Labor and Benefits 17,383,737 18,518,100 18,165,431 18,581,400 63,300 0.3%
##Administrative Expenses 4,040,636 4,865,200 3,903,470 4,589,800 (275,400) (5.7%)
##Materials and Maintenance 1,743,396 2,168,300 1,676,689 2,108,600 (59,700) (2.8%)
11-Subtotal - Operations Costs 25,447,830 27,924,000 25,762,848 27,474,500 (449,500) (1.6%)
DS Transfer to General Fund Reserve - - - 1,286,400 1,286,400 100.0%
##Expansion Reserve - - - 3,638,000 3,638,000 100.0%
Bet Betterment Reserve 2,805,000 - - 2,280,000 2,280,000 100.0%
RepReplacement Reserve 675,000 2,493,900 2,493,900 464,500 (2,029,400) (81.4%)
swr Transfer to Sewer General Fund 553,800 - - - - -
TO Transfer to OPEB 546,000 914,100 914,100 872,300 (41,800) (4.6%)
GF Transfer to Potable General Fund 1,583,800 - - - -
Sw Transfer to Sewer Replacement 127,000 1,199,300 1,199,300 - (1,199,300) (100.0%)
NS Transfer to New Supply Fund 705,000 - - - - -
Subtotal - Reserve Funding 6,995,600 4,607,300 4,607,300 8,541,200 3,933,900 85.4%
Total Expenditures 77,332,582 76,810,000 71,591,041 79,822,200 3,012,200 3.9%
Excess Revenues (Expenditures)774,135$ -$ 984,904$ -$ -$ -
Operating Budget Summary - Potable
Budget to Budget
VarianceFY 2016
* Actual unaudited78
FY 2015 FY 2017
Actual Budget Actual*Budget $ %
Water Sales 44,025,774$ 41,344,900$ 37,243,504$ 44,450,600$ 3,105,700$ 7.5%
System Fees 12,380,370 13,292,300 13,391,005 12,204,600 (1,087,700) -8.2%
Energy Fees 2,134,865 2,311,300 2,151,538 2,164,200 (147,100) -6.4%
MWD and CWA Fixed Fees 10,846,411 11,946,600 11,850,407 12,535,200 588,600 4.9%
Penalties 894,569 888,600 776,703 884,000 (4,600) -0.5%-$ #DIV/0!
Total Water Sales 70,281,989$ 69,783,700$ 65,413,157$ 72,238,600$ 2,454,900$ 3.5%
Water Sales 44,450,600$ 61.4%
System Fees 12,204,600 16.9%
Energy Fees 2,164,200 3.0%
MWD and CWA Fixed Fees 12,535,200 17.4%
Penalties 884,000 1.3%
Total Water Sales 72,238,600$ 100.0%
Water Sales: Water 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 $ .044 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 2017 Classification of Water Sales
FY 2016
*Actual unaudited 79
Current Approved Accounts Unit Sales Budget
Residential 45,102 6,064,600 23,445,900$
Conservation Tier (< 5 hcf)2.13$ 2.53$
6 - 10 3.32 3.95
11 - 22 4.32 5.13
over 23 hcf 6.65 7.90
Multi-Residential 822 1,449,400 6,016,400
0 - 43.28 3.90
5 - 94.25 5.05
over 10 hcf 6.56 7.80
Public and Commercial 1,459 1,860,400 7,152,100
Tier I3.51 4.17
Tier II 3.56 4.23
Tier III 3.62 4.30
Agriculture, Landscaping, and Construction 1,350 1,432,600 7,430,000
Tier I4.78 5.68
Tier II 4.83 5.74
Tier III 4.89 5.81
Total 48,733 10,807,000 44,044,400$
Government Fee 0.37 0.41 - - 406,200
Total Water Sales 48,733 10,807,000 44,450,600$
Units %
Residential 6,064,600 60.0%
Multi-Residential 1,449,400 10.0%
Public and Commercial 1,860,400 20.0%
Agricultural, Landscaping &
Construction 1,432,600 10.0%
Total Water Sales 10,807,000 100.0%
Water Sales Summary by Service Class - Potable
FY 2017
FY 2017 Unit Sales by Service Class
(1) Approved rates for water billed beginning in January 2017.
Water Rates
(1)
80
FY 2013 FY 2014 FY 2015 FY 2017
Budget Actual Budget
Residential 7,836,873 8,050,828 7,248,930 6,954,400 5,832,549 6,064,600
Multi-Residential 1,495,057 1,536,902 1,482,502 1,326,700 1,417,211 1,449,400
Public and Commercial 2,031,253 2,056,075 2,049,294 1,802,500 1,827,965 1,860,400
Agricultural and Landscaping 1,723,839 1,931,856 1,795,230 1,529,900 1,221,929 1,278,200
Temporary and Fire Services 102,020 144,458 168,469 90,600 175,636 154,400
Total Unit Sales 13,189,042 13,720,119 12,744,425 11,704,100 10,475,290 10,807,000
FY 2013 FY 2014 FY 2015 FY 2017
Budget Actual Budget
Residential 44,670 44,826 44,941 45,025 45,038 45,102
Multi-Residential 800 798 806 862 817 822
Public and Commercial 1,493 1,449 1,453 1,470 1,455 1,459
Agricultural and Landscaping 1,227 1,229 1,227 1,228 1,231 1,231
Temporary and Fire Services 772 846 881 869 884 882
Total Meter Count 48,962 49,148 49,308 49,454 49,425 49,496
Unit Sales History and Meter Count by Customer Class - Potable
Unit Sales in thousands and Meter Count Trends
FY 2016
FY 2016
Actual
Actual
5,000
15,000
25,000
35,000
45,000
55,000
-
5,000
10,000
15,000
20,000
FY 2012
Actual
FY 2013
Actual
FY 2014
Actual
FY 2015
Actual
FY 2016
Actual
FY 2017
Budget
Potable Meters Potable Unit Sales
Units Meters
81
FY 2017 FY 2016 FY 2017
Meter Size Count Current Approved Budget Budget $%
All Service Types
0.75 43,788 18.91$ 15.91$ 10,046,600$ 9,138,300$ (908,300)$ -9.0%
1.00 2,595 26.71 22.47 789,800 765,700 (24,100) -3.1%
1.50 948 46.22 38.88 527,800 483,800 (44,000) -8.3%
2.00 1,097 69.61 58.55 915,400 839,900 (75,500) -8.2%
3.00 80 132.02 111.04 118,800 115,300 (3,500) -2.9%
4.00 197 202.24 170.10 450,000 434,700 (15,300) -3.4%
6.00 20 397.31 334.18 77,300 87,800 10,500 13.6%
8.00 3 631.37 531.05 23,000 20,900 (2,100) -9.1%
10.00 5 904.44 760.72 55,000 50,000 (5,000) -9.1%
Sub-total 48,733 13,003,700 11,936,400 (1,067,300) -8.2%
Fire Services
0.63 709 24.69 20.77 207,300 193,400 (13,900) -6.7%
0.75 12 24.69 20.77 2,700 3,300 600 22.2%
1.00 26 24.69 20.77 7,800 7,100 (700) -9.0%
2.00 16 24.69 20.77 4,800 4,400 (400) -8.3%
3.00 - 24.69 20.77 - - -
4.00 - 33.27 27.98 - - -
10.00 - 33.27 27.98 - - -
Sub-total 763 222,600 208,200 (14,400) -6.5%
Turn Over Fees 10.00 10.00 66,000 60,000 (6,000)
Total 49,496 13,292,300$ 12,204,600$ (1,087,700)$ -8.2%
(1) Approved rates for water billed beginning in January 2017.
System Fees - Potable
Historical System Fees, in millions ($)
Budget to Budget
VarianceSystem Fees
$-
$5
$10
$15
FY 2012
Actual
FY 2013
Actual
FY 2014
Actual
FY 2015
Actual
FY 2016
Actual
FY 2017
Budget
(1)
82
FY 2017 FY 2016 FY 2017
Meter Size Count Current Approved Budget Budget $%
0.75 43,781 16.84$ 15.00$ 8,004,300$ 8,356,300$ 352,000$ 4.4%
1.00 2,587 31.24 27.84 873,300 917,000 43,700 5.0%
1.50 943 70.66 62.96 717,800 755,600 37,800 5.3%
2.00 1,095 120.17 107.08 1,414,600 1,486,600 72,000 5.1%
3.00 80 255.60 227.75 208,800 229,300 20,500 9.8%
4.00 102 409.32 364.72 432,200 462,700 30,500 7.1%
6.00 18 837.89 746.59 145,700 171,100 25,400 17.4%
8.00 3 1,353.09 1,205.65 44,100 46,100 2,000 4.5%
10.00 5 1,947.62 1,735.39 105,800 110,500 4,700 4.4%
Total 48,614 11,946,600$ 12,535,200$ 588,600$ 4.9%
(1) Construction Meters, Fire Services, and Recycled Meters are exempt from MWD and CWA Fixed Fees.
(2) Approved rates for water billed beginning in January 2017.
Historical MWD and CWA Fixed Fees, in millions ($)
Budget to Budget Variance
MWD and CWA Fixed Fees (Pass-Through) - Potable
MWD and CWA Fixed Fees
$-
$2
$4
$6
$8
$10
FY 2012
Actual
FY 2013
Actual
FY 2014
Actual
FY 2015
Actual
FY 2016
Actual
FY 2017
Budget
(1)(2)
83
Meter Size Meter Sales Installation Fee Meter Fee Total Fees Budget
0.75 97 103.90$ 218.94$ 322.84$ 31,300$
1.00 - 103.90 282.52 386.42 -
1.50 1 103.90 459.21 563.11 600
2.00 10 103.90 658.00 761.90 7,600
3.00 2 625.55 2,050.60 2,676.15 5,400
4.00 5 625.55 3,561.56 4,187.11 20,900
6.00 - 988.10 6,151.79 7,139.89 -
8.00 - 1,515.16 7,686.20 9,201.36 -
10.00 - 1,515.16 11,054.19 12,569.35 -
Total 115 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
FY 2017
-
15,000
30,000
45,000
60,000
FY 2012
Actual
FY 2013
Actual
FY 2014
Actual
FY 2015
Actual
FY 2016
Actual
FY 2017
Budget
84
FY 2012 FY 2013 FY 2014 FY 2015 FY 2016*FY 2017
Budget
Water Sales 35,615,558$ 40,845,630$ 46,856,253$ 44,025,774$ 37,243,504$ 44,450,600$
System Fees 9,583,563 10,315,199 11,152,291 12,380,370 13,391,005 12,204,600
Energy Fees 1,881,776 1,964,062 2,114,844 2,134,865 2,151,538 2,164,200
MWD and CWA Fixed Fees 9,000,267 9,747,977 10,309,983 10,846,411 11,850,407 12,535,200
Penalties 703,081 796,426 839,025 894,569 776,703 884,000
Total Potable Revenues 56,784,245$ 63,669,294$ 71,272,396$ 70,281,989$ 65,413,157$ 72,238,600$
Revenue History - Potable, in millions ($)
Revenue History - Potable
Actual
$-
$20
$40
$60
$80
FY 2012
Actual
FY 2013
Actual
FY 2014
Actual
FY 2015
Actual
FY 2016
Actual
FY 2017
Budget
Water Sales System Fees Energy Fees MWD & CWA Fixed Fees Penalties
*Actual unaudited
85
FY 2017 FY 2017
Budget Actual Budget Budget Actual* Budget $ %
Potable Water Purchases (CWA):
Rate Effective January 1,165.00$ 1,165.00$ 1,255.00$ 90$ 7.7%
Budgeted Sales 26,868.7 24,048.2 24,809.2 30,968,000$ 27,755,198 29,940,200$ (1,027,800)$ -3.3%
District & Unbilled Usage**61.2 75.6 66.6 70,800 87,254 80,200 9,400 13.3%
Water Loss 1,122.1 1,376.9 1,036.5 1,293,300 1,567,214 1,250,900 (42,400) -3.3%
Total Variable Charges 28,052.0 25,500.7 25,912.3 32,332,100$ 29,409,666$ 31,271,300$ (1,060,800) -3.3%
CWA and MWD Fixed Charges:
CWA - Infrastructure Access Charge 1,931,400$ 1,930,848$ 1,976,400$ 45,000$ 2.3%
CWA - Customer Service Charge 1,777,800 1,778,197 1,714,200 (63,600) -3.6%
CWA - Emergency Storage Charge 4,681,800 4,681,673 4,579,800 (102,000) -2.2%
CWA - Reliability Fixed Charge 950,400 950,052 1,848,000 897,600 94.4%
MWD - Capacity Reservation Charge 806,400 883,203 988,800 182,400 22.6%
MWD - Readiness-to-Serve Charge 1,798,800 1,587,254 1,428,000 (370,800) -20.6%
Total Fixed Charges 11,946,600$ 11,811,227$ 12,535,200$ 588,600$ 4.9%
Total Variable and Fixed Charges 44,278,700$ 41,220,893$ 43,806,500$ (472,200)$ -1.1%
Average Cost Per Acre-Foot 1,578$ 1,616$ 1,691$
*Actual unaudited
** Excludes potable supplement to recycled system.
Water Purchases and Related Costs - Potable
Budget to Budget
Acre Feet Variance
FY 2016 FY 2016
Purchase Costs
-
8,000.0
16,000.0
24,000.0
32,000.0
40,000.0
FY 2012
Actual
FY 2013
Actual
FY 2014
Actual
FY 2015
Actual
FY 2016
Actual
FY 2017
Budget
Historical Potable Water Purchases, in acre-feet
86
FY 2013 FY 2014 FY 2015 FY 2017
Budget Actual*Budget $ %
164,785$ 179,919$ 216,744$ 225,700$ 212,448$ 220,600$ (5,100)$ -2.3%
Potable Transmission 1,610,428 1,878,026 2,063,318 2,146,700 1,804,810 1,974,100 (172,600) -8.0%
Total Power Costs 1,775,213$ 2,057,945$ 2,280,062$ 2,372,400$ 2,017,258$ 2,194,700$ (177,700)$ -7.5%
Power Costs - Potable
Budget to Budget
Variance
Administrative Buildings
Historical Power Costs, in thousands ($)
Actual
FY 2016
$0
$500
$1,000
$1,500
$2,000
$2,500
FY 2012
Actual
FY 2013
Actual
FY 2014
Actual
FY 2015
Actual
FY 2016
Actual
FY 2017
Budget
Administrative Buildings Potable Transmission
*Actual unaudited
87
FY 2015 FY 2016 FY 2017
Actual Budget Actual* Budget $ %
Administrative Expenditures
Directors' Fees 20,382$ 30,000$ 22,100$ 33,000$ 3,000$ 10.0%
Travel and Meetings 158,205 214,400 164,590 208,600 (5,800) (2.7%)
Conservation and Outreach 144,026 176,900 150,060 177,400 500 0.3%
General Office Expense 257,756 284,700 236,868 265,500 (19,200) (6.7%)
Equipment 1,230,413 1,106,500 1,060,303 1,109,300 2,800 0.3%
Fees 481,243 470,900 480,869 600,600 129,700 27.5%
Services 1,526,937 2,224,600 1,526,302 1,952,500 (272,100) (12.2%)
Training 77,232 99,000 68,007 126,000 27,000 27.3%
Utilities 14,184 14,900 26,445 14,900 - -
General Expenses 821,303 836,000 827,274 825,000 (11,000) (1.3%)
Bad Debt Expense 91,269 148,000 107,112 99,800 (48,200) (32.6%)
Subtotal before Overhead 4,822,950 5,605,900 4,669,930 5,412,600 (193,300) (3.4%)
Less: Overhead Allocation (782,314) (740,700) (766,460) (822,800) (82,100) -
Total Expenditures 4,040,636$ 4,865,200$ 3,903,470$ 4,589,800$ (275,400)$ (5.7%)
4,403,925$ ######## 5,497,204$ 6,237,600$
Directors' Fees 33,000$ 0.6%
Travel and Meetings 208,600 3.9%
Conservation and Outreach 177,400 3.3%
General Office Expense 265,500 4.9%
Equipment 1,109,300 20.5%
Fees 600,600 11.1%
Services 1,952,500 36.1%
Training 126,000 2.3%
Utilities 14,900 0.3%
General Expenses 825,000 15.2%
Bad Debt Expense 99,800 1.8%
Subtotal 5,412,600 100.0%
Less: Overhead Allocation (822,800)
Total Administrative Expenses 4,589,800$
Budget to Budget
Variance
FY 2017 Administrative Expenditures - Potable
FY 2016
Administrative Expenditures - Potable
* Actual unaudited
88
FY 2015 FY 2016 FY 2017
Actual Budget Actual* Budget $ %
Materials and Maintenance
Fuel and Oil 184,027$ 235,600$ 129,898$ 207,500 (28,100)$ (11.9%)
Meters and Materials 110,956 113,100 172,175 156,700 43,600 38.5%
Fleet Parts and Equipment 118,367 127,400 115,288 124,800 (2,600) (2.0%)
Infrastructure Equipment & Supplies 358,197 433,500 339,849 445,700 12,200 2.8%
Chemicals 190,169 225,500 151,647 199,600 (25,900) (11.5%)
Safety Equipment 39,343 126,300 79,156 51,000 (75,300) (59.6%)
Laboratory Equipment and Supplies 34,655 31,000 31,458 36,300 5,300 17.1%
Other Materials and Supplies 173,865 185,200 158,587 177,200 (8,000) (4.3%)
Building and Grounds Materials 55,375 47,900 56,663 56,000 8,100 16.9%
Contracted Services 478,442 642,800 441,968 653,800 11,000 1.7%
Total Expenditures 1,743,396$ 2,168,300$ 1,676,689$ 2,108,600$ (59,700)$ (2.8%)
Fuel and Oil 207,500$ 9.9%
Meters and Materials 156,700 7.4%
Fleet Parts and Equipment 124,800 5.9%
Infrastructure Equipment and Supplies 445,700 21.1%
Chemicals 199,600 9.5%
Safety Equipment 51,000 2.4%
Laboratory Equipment and Supplies 36,300 1.7%
Other Materials and Supplies 177,200 8.4%
Building and Grounds Materials 56,000 2.7%
Contracted Services 653,800 31.0%
2,108,600$ 100.0%
Budget to Budget
Variance
FY 2017 Materials and Maintenance Expenditures - Potable
FY 2016
Materials and Maintenance Expenditures - Potable
* Actuals unaudited
89
90
Potable Water Service Area
91
92
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
93
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. Sludge is 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 12.0% 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.
94
Recycled Revenues and Expenditures
The District operates the largest recycled water distribution system in San Diego County and will
supply approximately 2,459.6 acre-feet of recycled water to 710 landscaping and construction
customers by the end of Fiscal Year 2017. 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.
On January 1, 2016 the City of San Diego increased the cost of recycled water the District purchases
under the 2003 agreement from $0.80 per hcf to $1.73 per hcf, which was a 116% increase and is the
main reason recycled water purchases have increased $1.9 million versus the prior year budget.
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.
RWCWRF – Replace 3 Return Activated Sludge (RAS) Pumps Replacement
95
FY 2015 FY 2016 FY 2017
31-Actual Budget Actual * Budget $ %
Revenues
#Recycled Water Sales 8,853,010$ 9,116,000$ 8,527,042$ 8,900,300$ (215,700)$ (2.4%)
#Meter Fees 4,081 400 2,202 400 - -
#Interest 14,608 6,300 207 8,300 2,000 31.7%
Total Revenues 8,871,699 9,122,700 8,529,451 8,909,000 (213,700) (2.3%)
Expenditures
Recycled Water Purchases 1,360,807 1,705,800 2,642,437 3,615,900 1,910,100 112.0%
#Power 600,799 563,600 526,842 568,900 5,300 0.9%
#Labor and Benefits 1,258,945 1,181,600 1,287,606 1,339,200 157,600 13.3%
#Administrative Expenses 290,362 321,800 382,368 331,200 9,400 2.9%
#Materials and Maintenance 270,990 287,800 219,952 305,000 17,200 6.0%
11 Subtotal - Operations Costs 3,781,903 4,060,600 5,059,205 6,160,200 2,099,600 51.7%
D Transfer to GF Reserve - - - 1,371,800 1,371,800 100.0%
#Expansion Reserve 2,538,900 2,695,800 2,695,800 455,600 (2,240,200) (83.1%)
B Betterment Reserve 725,000 1,945,000 1,945,000 835,200 (1,109,800) (57.1%)
ReReplacement Reserve 1,679,000 328,000 328,000 - (328,000) (100.0%)
TOTransfer to OPEB 57,300 58,300 58,300 51,200 (7,100) (12.2%)
NTransfer to New Supply Fund - 35,000 35,000 35,000 - -
Subtotal - Reserve Funding 5,000,200 5,062,100 5,062,100 2,748,800 (2,313,300) (45.7%)
Total Expenditures 8,782,103 9,122,700 10,121,305 8,909,000 (213,700) (2.3%)
89,596$ -$ (1,591,854)$ -$ -$ - Excess Revenues/Expenditures
Operating Budget Summary - Recycled
Budget to Budget
VarianceFY 2016
* Actual unaudited
96
FY 2015 FY 2017
Actual Budget Actual*Budget $%
Water Sales 6,412,122$ 6,694,500$ 6,240,661$ 6,702,300$ 7,800$ 0.1%
System Fees 431,121 464,300 471,962 432,800 (31,500) -6.8%
Energy Fees 369,302 399,200 379,026 379,100 (20,100) -5.0%
MWD and CWA Rebates 1,611,764 1,522,900 1,396,472 1,351,000 (171,900) -11.3%
Penalties 28,701 35,100 38,921 35,100 - 0.0%
Total Recycled Water Sales 8,853,010$ 9,116,000$ 8,527,042$ 8,900,300$ (215,700)$ -2.4%
Water Sales 6,702,300$ 75.4%
System Fees 432,800 4.9%
Energy Fees 379,100 4.3%
MWD and CWA Rebates 1,351,000 15.2%
Penalties 35,100 0.2%
8,900,300$ 100.0%
Water Sales: Water 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 $ .044 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 $185 from MWD for every acre-foot (AF) of recycled water sold.
Penalties: Charges and penalties are imposed on customer accounts for late payments and returned checks.
Budget to Budget
Variance
FY 2017 Classification of Water Sales
FY 2016
Classification of Water Sales - Recycled
*Actual unaudited
97
Current Approved Accounts Unit Sales Budget
Recycled .75" and 1.0" Meter 102 47,600 209,200$
0 - 32 units 4.08$ 4.85$
33 - 75 units 4.14 4.92
over 76 units 4.20 4.99
Recycled 1.5" and 2.0" Meter 590 1,044,700 4,607,500
0 - 130 units 4.08 4.85
131 - 325 units 4.14 4.92
over 326 units 4.20 4.99
Recycled 3.0" and 4.0" Meter 11 81,000 358,300
0 - 440 units 4.08 4.85
441 - 1,050 units 4.14 4.92
over 1,051 units 4.20 4.99
Recycled more than 6.0" Meter 1 53,700 236,500
0 - 4,000 units 4.08 4.85
4,001 - 10,000 units 4.14 4.92
over 10,000 units 4.20 4.99
Recycled Temporary 3.0" and 4.0" Meter 40,000 177,600
0 - 440 units 4.08 4.85 3
441 - 1,050 units 4.14 4.92
over 1,051 units 4.20 4.99
Recycled Temporary more than 6.0" Meter 1 19,300 85,700
0 - 4,000 units 4.08 4.85
4,001 - 10,000 units 4.14 4.92
over 10,000 units 4.20 4.99
Recycled Commercial <10" Meter 1 108,100 357,800
0 - 173 units 2.97 3.53
174 - 831 units 3.03 3.60
over 832 units 3.07 3.65
Recycled Commercial >10" Meter 1 134,100 432,200
0 - 7,426 units 2.97 3.53
7,427 - 14,616 units 3.03 3.60
over 14,617 units 3.07 3.65
Total 710 1,528,500 6,464,800$
Government Fee 0.37 0.41 - - 237,500
Total Water Sales 710 1,528,500 6,702,300$
(1) Approved rates for water billed beginning in January 2017.
FY 2017
Water Sales Summary by Meter Size - Recycled
Water Rates
(1)
98
FY 2013 FY 2014 FY 2015 FY 2017
Budget Actual Budget
Recycled .75" & 1.0" Meter 59,698 68,523 63,142 49,300 52,258 47,600
Recycled 1.5" & 2.0" Meter 1,366,238 1,474,879 1,365,116 1,253,400 1,067,391 1,044,700
Recycled 3.0" & 4.0" Meter 100,991 115,794 103,125 87,100 91,711 81,000
Recycled > 6.0" Meter 352,023 363,760 192,003 214,700 50,140 53,700
Recycled-Temp 3" & 4" Meter - 18,592 - - 56,376 40,000
Recycled-Temp > 6" Meter - 26,782 - - 39,471 19,300
Recycled Commercial <10" Meter - - 67,010 67,000 100,000 108,100
Recycled Commercial >10" Meter - - 51,560 51,600 134,330 134,100
Total Unit Sales 1,878,950 2,068,330 1,841,956 1,723,100 1,591,677 1,528,500
FY 2013 FY 2014 FY 2015 FY 2017
Budget Actual Budget
Recycled .75" & 1.0" Meter 103 100 101 101 102 102
Recycled 1.5" & 2.0" Meter 587 588 590 591 588 590
Recycled 3.0" & 4.0" Meter 11 11 11 11 11 11
Recycled > 6.0" Meter 3 1 1 1 1 1
Recycled-Temp 3" & 4" Meter - 1 - - 3 3
Recycled-Temp > 6" Meter - 1 - - 1 1
Recycled Commercial <10" Meter - - 1 1 1 1
Recycled Commercial >10" Meter - - 1 1 1 1
Total Meter Count 704 702 705 706 708 710
Unit Sales History and Meter Count by Customer Class - Recycled
Unit Sales in thousands ($) and Meter Count Trends
Actual
Actual
FY 2016
FY 2016
100
300
500
700
900
100
500
900
1,300
1,700
2,100
2,500
FY 2012
Actual
FY 2013
Actual
FY 2014
Actual
FY 2015
Actual
FY 2016
Actual
FY 2017
Budget
Meter Count Recycled Unit Sales
99
FY 2017 FY 2016 FY 2017
Meter Size Meter Count Current Approved Budget Budget $%
0.75 2 18.91$ 15.91$ 500$ 400$ (100)$ -20.0%
1.00 100 26.71 22.47 32,100 29,500 (2,600) -8.1%
1.50 395 46.22 38.88 222,400 201,700 (20,700) -9.3%
2.00 195 69.61 58.55 165,000 149,900 (15,100) -9.2%
3.00 4 132.02 111.04 6,400 5,800 (600) -9.4%
4.00 10 202.24 170.10 17,200 22,300 5,100 29.7%
6.00 3 397.31 334.18 9,700 13,200 3,500 36.1%
8.00 - 631.37 531.05 - - - 0.0%
10.00 1 904.44 760.72 11,000 10,000 (1,000) -9.1%
Total 710 464,300$ 432,800$ (31,500)$ -6.8%
(1) Approved rates for water billed beginning in January 2017.
System Fees - Recycled
Budget to Budget Variance
Historical System Fees, in thousands ($)
System Fees
100
200
300
400
500
FY 2012
Actual
FY 2013
Actual
FY 2014
Actual
FY 2015
Actual
FY 2016
Actual
FY 2017
Budget
(1)
100
Meter Size Meter Sales Installation Fee Meter Fee Total Fees Budget
0.75 - 103.90$ 218.94$ 322.84$ -$
1.00 1 103.90 282.52 386.42 400
1.50 - 103.90 459.21 563.11 -
2.00 - 103.90 658.00 761.90 -
3.00 - 625.55 2,050.60 2,676.15 -
4.00 - 625.55 3,561.56 4,187.11 -
6.00 - 988.10 6,151.79 7,139.89 -
8.00 - 1,515.16 7,686.20 9,201.36 -
10.00 - 1,515.16 11,054.19 12,569.35 -
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.
FY 2017
550
575
600
625
650
675
700
725
FY 2012
Actual
FY 2013
Actual
FY 2014
Actual
FY 2015
Actual
FY 2016
Actual
FY 2017
Budget
101
FY 2012 FY 2013 FY 2014 FY 2015 FY 2016*FY 2017
Budget
Water Sales 4,999,441$ 6,148,619$ 7,416,631$ 6,412,122$ 6,240,661$ 6,702,300$
System Fees 268,937 292,201 356,806 431,121 471,962 432,800
Energy Fees 303,867 346,064 383,513 369,302 379,026 379,100
MWD and CWA Rebates 1,413,335 1,660,736 1,828,134 1,611,764 1,396,472 1,351,000
Penalties 33,323 40,867 29,682 28,701 38,921 35,100
Total Recycled Revenues 7,018,903$ 8,488,487$ 10,014,766$ 8,853,010$ 8,527,042$ 8,900,300$
Revenue History - Recycled
Revenue History - Recycled, in millions ($)
Actual
$-
$2
$4
$6
$8
$10
FY 2012
Actual
FY 2013
Actual
FY 2014
Actual
FY 2015
Actual
FY 2016
Actual
FY 2017
Budget
Water Sales System Fees Energy Fees MWD and CWA Rebates Penalties
*Actual unaudited
102
FY 2017 FY 2017
Budget Actual Budget Budget Actual* Budget $ %
Rate Per Acre Feet 348.00$ 487.74$ 756.00$ 408.00$ 117.2%
Recycled Water Purchases 2,906.4 2,670.2 2,459.6 949,900$ 1,417,576$ 1,859,300$ 909,400$ 95.7%
Meter Fee $1,333.75 monthly 19,800 17,841 16,000 (3,800) -19.2%
Take-or-pay contract (1)1,910.8 1,804.0 2,302.4 736,100 1,176,358 1,740,600 1,004,500 136.5%
Potable Supplement - 26.8 - - 30,662 - - -
Total 4,817.2 4,501.0 4,762.0 1,705,800$ 2,642,437$ 3,615,900$ 1,910,100$ 112.0%
Average Cost Per Acre-Foot (Effective Rate)586.91$ 989.62$ 1,470.10$
(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
the City of San Diego.
Water Purchases - Recycled
HISTORICAL RECYCLED WATER PURCHASES, IN ACRE-FEET
Variance
Budget to BudgetFY 2016
Purchase CostsAcre Feet
FY 2016
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
FY 2012
Actual
FY 2013
Actual
FY 2014
Actual
FY 2015
Actual
FY 2016
Actual
FY 2017
Budget
*Actual unaudited
103
FY 2013 FY 2014 FY 2015 FY 2017
Actual Budget Actual*Budget $ %
Total Power
Cost 471,139$ 591,883$ 600,799$ 563,600$ 526,842$ 568,900$ 5,300$ 0.9%
Budget to Budget
Variance
Historical Power Costs, in thousands ($)
FY 2016
Power Costs - Recycled
$0
$100
$200
$300
$400
$500
$600
$700
FY 2012
Actual
FY 2013
Actual
FY 2014
Actual
FY 2015
Actual
FY 2016
Actual
FY 2017
Budget
*Actual unaudited
104
FY 2015 FY 2016 FY 2017
Actual Budget Actual* Budget $ %
Administrative Expenditures
Equipment -$ 1,300$ 2,286$ 3,300$ 2,000$ 153.8%
Fees 25,587 25,600 24,347 25,500 (100) (0.4%)
Services 57,491 105,200 144,308 87,200 (18,000) (17.1%)
Subtotal before Overhead 83,078 132,100 170,941 116,000 (16,100) (12.2%)
Add: Overhead Allocation 207,284 189,700 211,427 215,200 25,500 13.4%
Total Expenditures 290,362$ 321,800$ 382,368$ 331,200$ 9,400$ 2.9%
Equipment 3,300$ 1.0%
Fees 25,500 7.7%
Services 87,200 26.3%
Overhead Allocation 215,200 65.0%
331,200$ 100.0%
FY 2017 Administrative Expenditures - Recycled
Administrative Expenditures - Recycled
Budget to Budget
Variance FY 2016
* Actual unaudited
105
FY 2015 FY 2016 FY 2017
Actual Budget Actual* Budget $ %
Materials and Maintenance
Fuel and Oil 12,370$ 15,000$ 11,921$ 34,800$ 19,800$ 132.0%
Meters and Materials 865 700 3,927 2,500 1,800 257.1%
Infrastructure Equipment & Supplies 81,933 72,000 66,601 75,400 3,400 4.7%
Chemicals 154,979 170,600 112,514 160,200 (10,400) (6.1%)
Safety Equipment 1,386 1,000 1,999 1,500 500 50.0%
Laboratory Equipment and Supplies 3,971 4,000 3,667 4,000 - -
Other Materials and Supplies 3,439 5,200 2,519 5,000 (200) (3.8%)
Contracted Services 12,047 19,300 16,804 21,600 2,300 11.9%
Total Expenditures 270,990$ 287,800$ 219,952$ 305,000$ 17,200$ 6.0%
Fuel and Oil 34,800$ 11.4%
Meters and Materials 2,500 0.8%
Infrastructure Equipment & Supplies 75,400 24.7%
Chemicals 160,200 52.6%
Safety Equipment 1,500 0.5%
Laboratory Equipment and Supplies 4,000 1.3%
Other Materials and Supplies 5,000 1.6%
Contracted Services 21,600 7.1%
305,000$ 100.0%
Materials and Maintenance Expenditures - Recycled
Budget to Budget
Variance
FY 2017 Materials and Maintenance Expenditures - Recycled
FY 2016
* Actual unaudited
106
Recycled Water Service Area
107
108
Sewer Revenues and Expenditures
The District provides sewer service to approximately 15,200 customers through 4,677 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 2017.
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 93 outlining the sewer process.
The by-product of the treatment process is called sludge and it is discharged through County’s
transmission system into the City of San Diego Metropolitan Wastewater (Metro) 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 $655,000 for Fiscal
Year 2017. Additionally, the District Is budgeted to pay $180,200 for its share of the operation and
maintenance cost of the Rancho San Diego Outfall and the Spring Valley Outfall to transport sewage
to Metro for Fiscal Year 2017.
To meet State of California requirements, customers must pay their fair share of sewer costs. The
District is required to set 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 were 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. Due to their higher discharge and
strength, non-residential customers (comprising 1.6% of the customer base) comprise 12.0% of the
total sewer charges. The formula for sewer rates is shown on pages 117-118.
109
FY 2015 FY 2016 FY 2017
21-Actual Budget Actual * Budget $ %
Revenues
#Sewer Revenues 3,009,634$ 3,206,300$ 3,149,295$ 2,918,900$ (287,400)$ (9.0%)
#Capacity Fee Revenues 7,510 - 4,528 - - -
Tax Revenues 44,553 51,600 72,469 51,600 - -
#Non-operating Revenues 33,760 37,200 881,549 35,500 (1,700) (4.6%)
#Interest 8,727 8,200 1,523 4,300 (3,900) (47.6%)
TF Transfer from Potable General Fund 553,800 - - - - -
Total Revenue 3,657,984 3,303,300 4,109,364 3,010,300 (293,000) (8.9%)
Expenditures
#Power 167,475 176,800 153,815 174,400 (2,400) (1.4%)
#Labor and Benefits 764,133 681,300 884,853 979,300 298,000 43.7%
#Administrative Expenses 172,992 200,800 224,541 229,100 28,300 14.1%
#Materials and Maintenance 1,325,391 1,156,700 1,206,534 1,042,700 (114,000) (9.9%)
11 Subtotal - Operations Costs 2,429,991 2,215,600 2,469,743 2,425,500 209,900 9.5%
D Transfer to General Fund Reserve - - 196,100 196,100 100.0%
B Betterment Reserve - 455,000 455,000 351,200 (103,800) (22.8%)
ReReplacement Reserve 916,200 599,100 599,100 - (599,100) (100.0%)
TOTransfer to OPEB 43,800 33,600 33,600 37,500 3,900 11.6%
Subtotal - Reserve Funding 960,000 1,087,700 1,087,700 584,800 (502,900) (46.2%)
Total Expenditures 3,389,991 3,303,300 3,557,443 3,010,300 (293,000) (8.9%)
267,993$ -$ 551,921$ -$ -$ -
Excess Revenue/(Expenditures)
Operating Budget Summary - Sewer
Budget to Budget
VarianceFY 2016
* Actual unaudited110
FY 2017 FY 2017
Accounts Current Approved(1)Budget Actual*Budget $%
Residential 4,552 2.46$ 2.58$ 1,572,800$ 1,648,752$ 1,429,300$ (143,500)$ -9.1%
Multi-Residential 50 2.46 2.58 187,700 220,491 188,600 900 0.5%
Commercial
Low Strength 45 2.46 2.58 53,300 13,063 48,400 (4,900) -9.2%
Medium Strength 13 3.53 3.70 33,600 43,739 15,400 (18,200) -54.2%
High Strength 7 5.63 5.90 17,500 22,878 30,200 12,700 72.6%
Schools 6 2.46 2.58 109,900 167,240 84,600 (25,300) -23.0%
Churches 4 2.46 2.58 8,500 9,944 10,400 1,900 22.4%
Subtotal Commercial 75 222,800 256,864 189,000 (33,800) -15.2%
Total Sewer Charges 4,677 1,983,300$ 2,126,107$ 1,806,900$ (176,400)$ -8.9%
Single-Family 1,429,300$ 79.1%
Multi-Family 188,600 10.4%
Commercial 189,000 10.5%
1,806,900$ 100.0%
(1)Approved rates for sewer service beginning in January 2017.
* Actual unaudited
FY 2017 Charges Summary by Service Class
Charges Summary by Service Class - Sewer
Usage Fee
Budget to Budget
VarianceFY 2016
111
FY 2017 Current Approved (1)FY 2017
Meter Size Accounts Rates Rates Budget Actual*Budget $ %
Residential 4,552 17.19$ 15.89$ 824,900$ 829,120$ 903,400$ 78,500$ 9.5%
Multi-Residential/Commercial
0.75 22 27.07 28.37 6,700 6,497 7,300 600 9.0%
1.00 6 39.89 41.80 2,800 2,393 2,900 100 3.6%
1.50 20 71.82 75.27 16,800 16,375 17,600 800 4.8%
2.00 63 110.17 115.46 81,400 80,644 85,300 3,900 4.8%
3.00 6 199.66 209.24 14,000 14,376 14,800 800 5.7%
4.00 6 327.51 343.23 23,000 23,581 24,200 1,200 5.2%
6.00 1 647.12 678.18 7,600 7,765 8,000 400 5.3%
8.00 - 1,030.67 1,080.14 - - - -
10.00 1 1,478.12 1,549.07 17,300 17,737 18,200 900 5.2%
Total System Fee 4,677 994,500$ 998,488$ 1,081,700$ 87,200$
(1)Approved rates for system fees beginning in January 2017.
System Fees - Sewer
Budget to Budget
VarianceFY 2016
*Actual unaudited
112
FY 2012 FY 2013 FY 2014 FY 2015 FY 2016*FY 2017
Budget
Sewer Charges 2,368,192$ 2,588,991$ 2,736,867$ 2,986,734$ 3,124,595$ 2,888,600$
Penalties 27,173 29,300 21,000 22,900 24,700 30,300
Total 2,395,365$ 2,618,291$ 2,757,867$ 3,009,634$ 3,149,295$ 2,918,900$
Revenue History - Sewer, in thousands ($)
Revenue History - Sewer
Actual
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
FY 2012
Actual
FY 2013
Actual
FY 2014
Actual
FY 2015
Actual
FY 2016
Actual
FY 2017
Budget
Sewer Charges Penalties
*Actual unaudited
113
FY 2013 FY 2014 FY 2015 FY 2017
Budget Actual*Budget $ %
Total Power
Cost $ 184,108 159,018$ 167,475$ 176,800$ 153,815$ 174,400$ (2,400)$ -1.4%
Historical Power Costs, in thousands ($)
Budget to Budget
Variance
Actual
FY 2016
Power Costs - Sewer
$20
$60
$100
$140
$180
$220
FY 2012
Actual
FY 2013
Actual
FY 2014
Actual
FY 2015
Actual
FY 2016
Actual
FY 2017
Budget
*Actual unaudited
114
FY 2015 FY 2016 FY 2017
Actual Budget Actual* Budget $ %
Administrative Expenditures
Equipment 3,575$ 4,500$ 86$ 16,500$ 12,000$ 266.7%
Fees 6,715 2,500 4,067 6,700 4,200 168.0%
Services 35,508 80,000 65,142 42,700 (37,300) (46.6%)
Bad Debt Expense 2,222 7,000 7,108 5,200 (1,800) (25.7%)
Total 48,020 94,000 76,403 71,100 (22,900) (24.4%)
Add: Overhead Allocation 124,972 106,800 148,138 158,000 51,200 47.9%
Total Expenditures 172,992$ 200,800$ 224,541$ 229,100$ 28,300$ 14.1%
Equipment 16,500$ 7.2%
Fees 6,700 2.9%
Services 42,700 18.6%
Bad Debt Expense 5,200 2.3%
Overhead Allocation 158,000 69.0%
229,100$ 100.0%
Budget to Budget
Variance
FY 2017 Administrative Expenditures - Sewer
FY 2016
Administrative Expenditures - Sewer
* Actual unaudited
115
FY 2015 FY 2016 FY 2017
Actual Budget Actual* Budget $ %
Materials and Maintenance
Fleet Parts and Equipment 4,689$ 1,500$ 7,504$ 5,000$ 3,500$ 233.3%
Infrastructure Equipment & Supplies 72,609 115,800 99,019 105,600 (10,200) (8.8%)
Chemicals 4,507 4,500 4,519 4,500 - -
Safety Equipment 44 - - - - -
Laboratory Equipment and Supplies 5,221 5,000 4,852 5,000 - -
Other Materials and Supplies 2,884 100 123 100 - -
Contracted Services 26,924 33,400 59,350 87,300 53,900 161.4%
Subtotal Materials and Maintenance 116,878 160,300 175,367 207,500 47,200 29.4%
Sewer Charges
Metro O&M Costs 1,020,276 815,000 812,536 655,000 (160,000) (19.6%)
Spring Valley Sewer Charge 188,237 181,400 218,631 180,200 (1,200) (0.7%)
Subtotal Sewer Charges 1,208,513 996,400 1,031,167 835,200 (161,200) (16.2%)
Total Expenditures 1,325,391$ 1,156,700$ 1,206,534$ 1,042,700$ (114,000)$ (9.9%)
Fleet Parts and Equipment 5,000$ 0.5%
Infrastructure Equipment & Supplies 105,600 10.1%
Chemicals 4,500 0.4%
Laboratory Equipment & Supplies (1)5,100 0.5%
Contracted Services 87,300 8.4%
Metro O&M Costs 655,000 62.8%
Spring Valley Sewer Charge 180,200 17.3%
1,042,700$ 100.0%
Includes Other Materials & Supplies.
Materials and Maintenance Expenditures - Sewer
Budget to Budget
Variance
FY 2017 Materials and Maintenance Expenditures - Sewer
FY 2016
(1)
* Actual unaudited
116
Formula for Sewer Rates
To meet State of California requirements, customers must pay their fair share of sewer costs. The
District is required to set 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 15.0% 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 $17.19,
respectively. Effective January 1, 2017 the usage fee and system fee will be $2.58 and $15.89,
respectfully.
The current usage fee for multi-residential customers is $2.46 and will increase to $2.58 for the
calendar year 2017. The system fee for multi-residential is based on meter size and is shown on
page 112.
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 15.0% usage discount to acknowledge that not all water purchased goes to the sewer
system.
The following is the sewer bill 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 112.
The District is required to determine sewer rates in accordance with the State’s Revenue Program
Guidelines. The State Water Resources Control Board (SWRCB) has grouped commercial customers
117
Formula for Sewer Rates
The District is required to determine sewer rates in accordance with the State’s Revenue Program
Guidelines. The State Water Resources Control Board (SWRCB) has grouped commercial customers
into various categories and has identified Strength Factors for each of these business categories.
The standard of measure for Strength Factors is the typical sewer strength of a single-family
residence (SFR). The 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, Effective
1/1/2017
Low-Strength Commercial * 1.000 $ 2.58
Medium-Strength Commercial 2.000 $ 3.70
High-Strength Commercial 4.000 $ 5.90
*Schools and churches are categorized as Low-Strength Commercial customers.
118
Sewer Service Area
119
120
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 2017, capacity fees are projected to be $1,248,200 which is $113,400
more than the FY 2016 budget.
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. Property Tax Revenues
are projected to increase versus FY 2015 budget by $141,800 to $3,354,800.
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 $678,300.
Included in the General Revenues are a variety of Non-Operating Revenues. These revenues include
lease revenue, set-up fees, sewer billing fees, grants, and miscellaneous revenues. Lease revenues
make up a large portion of general revenues and are mainly from the lease of cell-sites on District
property. When the District enters a new lease there is a one-time fee charged with the set-up of
each cell-site. The District incurs expenses related to these leases and the purpose of the fee is to
recover the cost to set up the lease.
In addition to the cell-site leases, the District leases land to the Highlands Golf Co., LLC. The lease
terms include a minimum annual rent guarantee plus a percentage of sales. This lease has a 36-
year term.
121
General Revenues and Expenses
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 7.8% 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.
122
FY 2015 FY 2016 FY 2017
Actual Budget Actual * Budget $%
Fee Revenues
Capacity Fee Revenues 1,312,108$ 1,134,800$ 1,517,128$ 1,248,200$ 113,400$ 10.0%
Betterment Fees 188,123 - - - - 0.0%
Subtotal Fee Revenues 1,500,231 1,134,800 1,517,128 1,248,200 113,400 10.0%
Tax Revenues
1% General Tax 3,128,961 3,213,000 3,353,611 3,354,800 141,800 4.4%
Availability Fees 685,555 684,900 616,591 678,300 (6,600) (1.0%)
Subtotal Tax Revenues 3,814,516 3,897,900 3,970,202 4,033,100 135,200 3.5%
General Revenue 5,314,747$ 5,032,700$ 5,487,331$ 5,281,300$ 248,600$ 4.9%
FY 2015 FY 2016 FY 2017
Actual Budget Actual * Budget $%
Property Rental 1,232,920$ 1,269,800$ 1,281,150$ 1,310,300$ 40,500 3.2%
Sewer Billing Fees 375,741 375,500 381,550 383,100 7,600 2.0%
Set-up Fee for Lease Site 24,500 - 9,000 - - 0.0%
Revenue from Shared Facility 33,760 37,200 25,241 35,500 (1,700) (4.6%)
Miscellaneous 737,454 191,100 737,924 450,400 259,300 135.7%
Non-Operating Revenue 2,404,375$ 1,873,600$ 2,434,865$ 2,179,300$ 305,700$ 16.3%
Potable Recycled Sewer Total
Capacity Fee Revenues 1,248,200$ -$ -$ 1,248,200$
1% General Tax 3,354,800 - - 3,354,800
Availability Fees 626,700 - 51,600 678,300
Property Rental 1,310,300 - - 1,310,300
Sewer Billing Fees 383,100 - - 383,100
Revenue from Shared Facility - - 35,500 35,500
Miscellaneous 450,400 - - 450,400
Total General and Non-Operating Revenue 7,373,500$ -$ 87,100$ 7,460,600$
(1) For General and Non-Operating Revenues, the Potable Fund serves as the District's General Fund
for accounting purposes.
General Revenues
General and Non-Operating Revenues by Business(1)
FY 2017
Budget to Budget
Variance
General Revenues(1)
Budget to Budget
Variance
Non-Operating Revenues(1)
FY 2016
FY 2016
* Actuals unaudited 123
FY 2015 FY 2016 FY 2017
Actual Budget Actual* Budget $%
General Expense
Labor and Benefits (1)1,487,720$ 1,183,400$ 1,359,311$ 1,181,400$ (2,000)$ (0.2%)
Legal Fees 174,636 250,000$ 250,074 250,000 - 0.0%
General Insurance 645,410 586,000 577,200 575,000 (11,000) (1.9%)
Services 1,257 - - - - 0.0%
Total General Expense 2,309,023$ 2,019,400$ 2,186,585$ 2,006,400$ (13,000)$ (0.6%)
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 2016
and FY 2017 is $338,300 and $198,600, 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.
FY 2016
* Actuals unaudited
124
Departmental Operating Budget
Labor and Benefits
Labor and Benefits represent 22.8% of the total Operating Budget. District personnel are assigned to
work in five departments: General Manager, Administrative Services, Finance, Water Operations, and
Engineering. The departments are further categorized by functions into divisions. The Fiscal Year 2017
Budget includes funding for labor and benefits for 135 full-time equivalent (FTE) employees.
The staffing level for Fiscal Year 2017 had a decrease of three (3) FTE employees from Fiscal Year 2016.
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 22.7% 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 7.8% 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 totaling $ 1,824,100
are not considered operating costs and therefore are not included in the Operating Budget.
Administrative Expenses
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. The safety needs of the District's customers
and employees, and compliance with regulatory agencies are of utmost importance and are considered
necessary. The District is better able to control expenses such as training or business meetings.
Overall administrative expenses decreased by $237,700 or (4.4%) compared to FY 2016 and is shown on
page 132. Decreases are anticipated in services by 13.6% or $327,400, bad debt expense by 32.3% or
$50,000, general office expense by 6.7% or $19,200, general expenses by 1.3% or $11,000 and travel and
meetings by 2.7% or $5,800. The decrease in services is primarily due to the removal of drought related
outreach in FY 2016. Staff has reduced the District’s bad debt expense budget to be more in line with the
recent trends. General office expenses have decreased primarily due to electronic mailing of
correspondence and e-billing. General expenses consist primarily of District insurance, legal expenses
and District-wide labor and benefit costs. For FY 2017, the District’s general insurance premium
decreased by 1.9% or $11,000. Travel and meeting budgets has decreased due to less employee travel
and meetings.
These decreases are offset by increases in fees by 20.1% or $105,700, training by 27.3% or $27,000,
equipment by 1.5% or $16,800, director’s fees by 10.0% or $3,000, and conservation and outreach by 0.3%
or $500. Fees increased primarily to cover election expenses and increases in the recycled water fees.
For FY 2017, the District increased the training budget to provide mandated management training.
Equipment costs increased primarily due to the addition of water absorbent materials for landfill disposal.
125
Departmental Operating Budget
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 2017, overall materials and maintenance expenses decreased by 4.3%, or $156,500.
Decreases were recognized in sewer charges by 16.2% or $161,200, safety equipment by 58.8% or
$74,800, chemicals by 9.1% or $36,300, fuel and oil by 3.3% or $8,300, and other materials and supplies
by 4.3% or $8,200. Sewer charges decreased by 19.6% or $160,000 compared to FY 2016 because the
District’s share of costs based on total flow, suspended solids and chemical oxygen, decreased. Safety
equipment decreased due to the removal of one time funding for first responders kits in FY 2016. The
budget for chemicals was reduced because staff anticipates less chemical usage due to reduced water
usage as a result of the conservation efforts. Fuel and oil was decreased to reflect the lower cost per
gallon of fuel. Other materials and supplies has been decreased based on the needs of the leak detection
program.
These decreases are offset by increases in contracted services by 9.7% or $67,200, meters and materials
by 39.9% or $45,400, building and grounds materials by 16.9% or $8,100, infrastructure equipment and
supplies by .9%, or $5,400, laboratory equipment and supplies by 13.3% or $5,300 and fleet parts and
materials by .7% or $900. Contracted services and infrastructure equipment and supply costs increased
primarily to provide for the needs of landfill hauling. Meters and materials costs have increased based
on the increased residential construction in the Otay Ranch area. Building and grounds materials costs
increased to provide for facilities maintenance.
126
Board of Directors 120,300$ 0.4%
General Manager 1,737,600 5.7%
General Expense 2,006,400 6.5%
Administrative Services 6,324,900 20.6%
Finance 5,858,600 19.1%
Water Operations 11,316,700 36.8%
Engineering 3,361,700 10.9%
30,726,200$ 100.0%
Departmental Operating Budget
Total FY 2017 Departmental Operating Budget
$30,726,200
127
FY 2015 FY 2017
Actual Budget Actual* Budget $ %
Labor Costs 11,177,926$ 11,487,900$ 11,383,709$ 11,645,000$ 157,100$ 1.4%
Benefits
Pension 3,575,595 3,885,300 3,854,533 4,161,600 276,300 7.1%
Employee Assistance Program 3,755 4,000 3,744 4,200 200 5.0%
Workers' Compensation 261,821 260,000 251,014 265,900 5,900 2.3%
Health/Dental/Life Insurance/OPEB 3,611,579 4,012,200 3,800,813 4,072,500 60,300 1.5%
Social Security/Medicare 927,579 948,200 947,970 962,700 14,500 1.5%
Salary Continuation Insurance 56,144 67,800 60,272 89,500 21,700 32.0%
State Unemployment Insurance 9,998 30,000 11,375 30,000 - 0.0%
Vacation/Sick/Holiday/Other Leave 2,277,556 2,195,300 2,326,667 2,262,900 67,600 3.1%
Total Benefits 10,724,027 11,402,800 11,256,389 11,849,300 446,500 3.9%
Total Labor and Benefits 21,901,953 22,890,700 22,640,098 23,494,300 603,600 2.6%
Less: Non-Operating Labor and Benefits
Labor Costs 1,062,022 1,048,100 960,168 1,060,800 12,700 1.2%
Benefits Allocation 661,849 700,500 644,741 763,300 62,800 9.0%
Total Non-Operating Labor and Benefits 1,723,871 1,748,600 1,604,910 1,824,100 75,500 4.3%
Operating Labor & Benefits 20,178,082 21,142,100 21,035,189 21,670,200 528,100 2.5%
Overhead Allocation (115% of labor costs) 1,221,325 1,205,300 1,104,194 1,219,900 14,600 1.2%
Admin Overhead (36.85%)450,058 444,200 406,895 449,500 5,300 1.2%
Personnel Overhead (63.15%)771,267 761,100 697,299 770,400 9,300 1.2%
Net Operating Labor and Benefits 19,406,815$ 20,381,000$ 20,337,890$ 20,899,800$ 518,800$ 2.5%
Labor and Benefits
Budget to Budget
VarianceFY 2016
140
138
135
04080120
Full - Time Equivalent (FTE)
FY 2017
Budget
FY 2016
FY 2015
* Actual unaudited
128
Potable Recycled Sewer
Developer
Reimbursed-
CIP Total
Operating Labor Costs 9,703,500$ 507,700$ 373,000$ -$ 10,584,200$
Benefits 10,287,900 462,800 335,300 - 11,086,000
Overhead Allocation-Personnel (1,410,100) 368,700 271,000 - (770,400)
Total Operating Labor and Benefits 18,581,300 1,339,200 979,300 - 20,899,800
CIP Labor Costs 441,400 186,300 135,800 297,300 1,060,800
Benefits 315,100 132,800 86,300 229,100 763,300
Overhead Allocation-Personnel 320,600 135,300 98,600 215,900 770,400
Total CIP Labor and Benefits 1,077,100 454,400 320,700 742,300 2,594,500
Total Labor and Benefits 19,658,400$ 1,793,600$ 1,300,000$ 742,300$ 23,494,300$
Potable-Operating 18,581,300$ 79.1%
Potable-CIP 1,077,100 4.6%
Sewer-Operating 979,300 4.2%
Sewer-CIP 320,700 1.4%
Recycle-Operating 1,339,200 5.7%
Recycle-CIP 454,400 1.9%
Develeper Reimbursed-CIP 742,300 3.1%
23,494,300$ 100.0%
Labor and Benefits by Fund - Fiscal Year 2017
129
FY 2016
General Manager 5 5 6 (1)
Total FTE - General Manager 5 5 6
Administrative Services
Administrative Services Management 3 3 3
Human Resources 3 3 3
Purchasing 7 6 5 (2)
Safety 1 1 1
IT Services 8 9 7 (2)
Geographic Information System (GIS)4 4 4 (2)
Total FTE - Administrative Services 26 26 23
Finance
Financial Management 3 3 3
Controller and Budgetary Services 5 5 5
Treasury and Accounting Services 6 6 6
Customer Service 15 13 12 (1), (2)
Conservation 1 1 1
Meter Maintenance 4 4 4
Total FTE - Finance 34 32 31
Operations
Operations Management 2 3 3 (1)
Water System Operations 21 19 16 (1)
Utility Maintenance/Construction 26 27 27 (1)
Total FTE - Operations 56 56 51
Engineering
Engineering Management 3 3 3
Engineering 16 16 21
Total FTE - Engineering 19 19 24 (1)
District Total Position Count 140 138 135
Position Count by Department
FY 2015 FY 2017
(2) The District’s strategic planning efforts of streamlining business processes enabled the District to be more efficient and
provided an opportunity to reduce staffing.
(1) Positions were re-classified and/or transferred as part of streamlining the District's organizational structure.
130
FY 2016
Lab Intern 0 0 1
Senior Civil Engineer 1 0 0 (1), (2)
Total Contract/Temporary Employees 1 0 1
General Manager 6.00 4.4%
Administrative Services 23.00 17.0%
Finance 31.00 23.0%
Operations 51.00 37.8%
Engineering 24.00 17.8%
Total 135.00 100.0%
(1) Positions were re-classified and/or transferred as part of streamlining the District's organizational structure.
(2) The District’s strategic planning efforts of streamlining business processes enabled the District to be more efficient and
provided an opportunity to reduce staffing.
Contract / Temporary Employees
FY 2015 FY 2017
FY 2017 Position Count by Department
131
FY 2015 FY 2016 FY 2017
Actual Budget Actual* Budget $%
Administrative Expenditures
Directors' Fees 20,382$ 30,000$ 22,100$ 33,000$ 3,000$ 10.0%
Travel and Meetings 158,205 214,400 164,590 208,600 (5,800) (2.7%)
Conservation and Outreach 144,026 176,900 150,060 177,400 500 0.3%
General Office Expense 257,756 284,700 236,868 265,500 (19,200) (6.7%)
Equipment 1,233,988 1,112,300 1,062,675 1,129,100 16,800 1.5%
Fees 513,545 499,000 509,283 632,800 133,800 26.8%
Services 1,619,936 2,409,800 1,735,752 2,082,400 (327,400) (13.6%)
Training 77,232 99,000 68,007 126,000 27,000 27.3%
Utilities 14,184 14,900 26,445 14,900 - -
General Expenses 821,303 836,000 827,274 825,000 (11,000) (1.3%)
Bad Debt Expense 93,491 155,000 114,220 105,000 (50,000) (32.3%)
Subtotal before Overhead 4,954,048 5,832,000 4,917,274 5,599,700 (232,300) (4.0%)
Less: Overhead Allocation (450,058) (444,200) (406,895) (449,600) (5,400) -
Total Expenditures 4,503,990$ 5,387,800$ 4,510,379$ 5,150,100$ (237,700)$ (4.4%)
4,702,612$ 5,605,400$ 5,744,548$ 6,424,700$
Directors' Fees 33,000$ 0.6%
Travel and Meetings 208,600 3.7%
Conservation & Outreach 177,400 3.2%
General Office Expense 265,500 4.7%
Equipment 1,129,100 20.1%
Fees 632,800 11.3%
Services 2,082,400 37.2%
Training 126,000 2.3%
Utilities 14,900 0.3%
General Expense 825,000 14.7%
Bad Debt Expense 105,000 1.9%
5,599,700 100.0%
Less: Overhead Allocation (449,600)
Total Administrative Expenses 5,150,100$
Administrative Expenditures - Total
Budget to Budget
Variance
FY 2017 Total Administrative Expenditures, in thousands ($)
FY 2016
* Actual unaudited
132
FY 2015 FY 2016 FY 2017
Actual Budget Actual* Budget $ %
Materials and Maintenance
Fuel and Oil 196,397$ 250,600$ 141,819$ 242,300$ (8,300)$ (3.3%)
Meters and Materials 111,821 113,800 176,102 159,200 45,400 39.9%
Fleet Parts and Equipment 123,056 128,900 122,792 129,800 900 0.7%
Infrastructure Equipment & Supplies 512,739 621,300 505,469 626,700 5,400 0.9%
Chemicals 349,655 400,600 268,680 364,300 (36,300) (9.1%)
Safety Equipment 40,773 127,300 81,155 52,500 (74,800) (58.8%)
Laboratory Equipment and Supplies 43,847 40,000 39,977 45,300 5,300 13.3%
Other Materials and Supplies 180,188 190,500 161,229 182,300 (8,200) (4.3%)
Building and Grounds Materials 55,375 47,900 56,663 56,000 8,100 16.9%
Contracted Services 517,413 695,500 518,122 762,700 67,200 9.7%
Subtotal Materials and Maintenance 2,131,264 2,616,400 2,072,008 2,621,100 4,700 0.2%
Sewer Charges
Metro O&M Costs 1,020,276 815,000 812,536 655,000 (160,000) (19.6%)
Spring Valley Sewer Charge 188,237 181,400 218,631 180,200 (1,200) (0.7%)
Subtotal Sewer Charges 1,208,513 996,400 1,031,167 835,200 (161,200) (16.2%)
Total Expenditures 3,339,777$ 3,612,800$ 3,103,175$ 3,456,300$ (156,500)$ (4.3%)
Fuel and Oil 242,300$ 7.0%
Meters and Materials 159,200 4.6%
Fleet Parts and Equipment 129,800 3.8%
Infrastructure Equipment and Supplies 626,700 18.2%
Chemicals 364,300 10.5%
Safety Equipment 52,500 1.5%
Laboratory Equipment and Supplies 45,300 1.2%
Other Materials and Supplies 182,300 5.3%
Building and Grounds Materials 56,000 1.6%
Contracted Services 762,700 22.1%
Sewer Charges 835,200 24.2%
3,456,300$ 100.0%
Materials and Maintenance Expenditures - Total
Budget to Budget
Variance
FY 2017 Materials and Maintenance Expenditures
FY 2016
* Actual unaudited
133
FY 2015 FY 2016 FY 2017 Budget to Budget
Actual Budget Actual* Budget Variance
Departmental Expenditures
BBoard of Directors 95,949$ 107,100$ 94,910$ 120,300$ 13,200$
GGeneral Manager 1,386,637 1,605,900 1,613,499 1,737,600 131,700
GGeneral Expense 2,309,023 2,019,400 2,186,585 2,006,400 (13,000)
A Administrative Services 6,338,873 6,681,800 6,020,287 6,324,900 (356,900)
F Finance 5,496,511 6,128,400 5,603,691 5,858,600 (269,800)
WWater Operations 9,991,323 10,911,400 10,383,742 11,316,700 405,300
E Engineering 2,853,591 3,132,900 3,152,924 3,361,700 228,800
T Total Departmental Expenditures 28,471,907 30,586,900 29,055,638 30,726,200 139,300
Less: Overhead Allocation (1,221,325) (1,205,300) (1,104,194) (1,219,900) (14,600)
Net Departmental Expenditures 27,250,582 29,381,600 27,951,444 29,506,300 124,700
Non-Departmental Expenditures
Water Purchases 46,249,959 45,984,500 43,863,330 47,422,400 1,437,900
Power 3,048,335 3,112,800 2,697,915 2,938,000 (174,800)
Transfer to General Fund Reserve - - - 2,854,300 2,854,300
Expansion Reserve 2,538,900 2,695,800 2,695,800 4,093,600 1,397,800
Betterment Reserve 3,530,000 2,400,000 2,400,000 3,466,400 1,066,400
Replacement Reserve 3,270,200 3,421,000 3,421,000 464,500 (2,956,500)
Transfer to Sewer General Fund 553,800 - - - -
Transfer to Potable General Fund 1,583,800 - - - -
Transfer to Sewer Replacement 127,000 1,199,300 1,199,300 - (1,199,300)
Transfer to OPEB 647,100 1,006,000 1,006,000 961,000 (45,000)
Transfer to New Supply Reserve 705,000 35,000 35,000 35,000 -
Total Non-Departmental Expenditure 62,254,094 59,854,400 57,318,345 62,235,200 2,380,800
Total Operating Expenditures 89,504,676$ 89,236,000$ 85,269,789$ 91,741,500$ 2,505,500$
FY 2017 Funding Source by Department, in Millions ($)
FY 2016
Operating Expenditures by Department
$0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000
Board of Directors
General Manager
Administrative Services
Finance
Water Operations
Engineering
General Expense
Potable
Recycled
Sewer
* Actual unaudited
134
FY 2015 FY 2016 FY 2017
Budget to
Budget
Actual Budget Actual* Budget Variance
Departmental Expenditures
Labor and Benefits 20,178,082$ 21,142,100$ 21,035,189$ 21,670,200$ 528,100$
Director's Fees 20,382 30,000 22,100 33,000 3,000
Travel and Meetings 158,205 214,400 164,590 208,600 (5,800)
Conservation and Outreach 144,026 176,900 150,060 177,400 500
General Office Expense 257,756 284,700 236,868 265,500 (19,200)
Equipment 1,233,988 1,112,300 1,062,675 1,129,100 16,800
Fees 1,334,848 1,335,000 1,336,557 1,457,800 122,800
Services 1,619,936 2,409,800 1,735,752 2,082,400 (327,400)
Training 77,232 99,000 68,007 126,000 27,000
Materials & Maintenance 2,131,264 2,616,400 2,072,008 2,621,100 4,700
Power and Utilities 14,184 14,900 26,445 14,900 -
Sewer Charges 1,208,513 996,400 1,031,167 835,200 (161,200)
Bad Debt Expense 93,491 155,000 114,220 105,000 (50,000)
Total Departmental Expenditures 28,471,907 30,586,900 29,055,638 30,726,200 139,300
Less: Overhead Allocation (1,221,325) (1,205,300) (1,104,194) (1,219,900) (14,600)
Net Departmental Expenditures 27,250,582 29,381,600 27,951,444 29,506,300 124,700
Non-Departmental Expenditures
Water Purchases 46,249,959 45,984,500 43,863,330 47,422,400 1,437,900
Power 3,048,335 3,112,800 2,697,915 2,938,000 (174,800)
Transfer to General Fund Reserve - - - 2,854,300 2,854,300
Expansion Reserve 2,538,900 2,695,800 2,695,800 4,093,600 1,397,800
Betterment Reserve 3,530,000 2,400,000 2,400,000 3,466,400 1,066,400
Replacement Reserve 3,270,200 3,421,000 3,421,000 464,500 (2,956,500)
Transfer to Sewer General Fund 553,800 - - - -
Transfer to General Fund Reserve 1,583,800 - - - -
Transfer to Sewer Replacement 127,000 1,199,300 1,199,300 - (1,199,300)
Transfer to OPEB 647,100 1,006,000 1,006,000 961,000 (45,000)
Transfer to New Supply Fund 705,000 35,000 35,000 35,000 -
Total Non-Departmental Expenditures 62,254,094 59,854,400 57,318,345 62,235,200 2,380,800
Total Operating Expenditures 89,504,676$ 89,236,000$ 85,269,789$ 91,741,500$ 2,505,500$
FY 2016
Operating Expenditures by Object
* Actual unaudited
135
136
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.
137
FY 2015 FY 2016 FY 2016 FY 2017
Actual Budget Actual* Budget
Board of Directors 95,949$ 107,100$ 94,910$ 120,300$
Total Expenses 95,949 107,100 94,910 120,300
FY 2015 FY 2016 FY 2017
Actual Budget Actual*Budget
Benefits 69,094 61,600 67,338 71,800
Director's Fees 20,382 30,000 22,100 33,000
Travel and Meetings 6,473 15,500 5,472 15,500
Total Expenses 95,949$ 107,100$ 94,910$ 120,300$
Board of Directors - Expenses
Department
Budget vs. Actual, in thousands ($)
FY 2016
Object
$0
$30
$60
$90
$120
2013 2014 2015 2016 2017
11
2
10
9
11
5
10
7
12
0
87
10
0
96
95
Budget Actual
* Actual unaudited
138
Director’s Division Boundaries
139
140
General Manager
Mission
To provide high value water and wastewater services to the customers of the Otay Water District, in
a professional, effective, and efficient manner.
General Manager’s Vision
“A District that is at the forefront in innovations to provide water services at affordable rates, with a
reputation for outstanding customer service.”
C
Key Challenge
Our key challenge, as District staff, is to quantify and demonstrate our commitment and the ability to
optimize our resources, business processes, and technology to achieve the strategic plan goals. We,
as a team, commit to regularly assess and document how our decisions and work practices
accomplish our goals and objectives.
E
141
Position Title FY 2015 FY 2016 FY 2017
General Manager 111
Assistant General Manager 111
District Secretary 111
Sr. Confidential Executive Secretary 111
Communications Officer 1 1 1
Communications Assistant 0 0 1
Total 556
District Position Count - 135
General Manager Department - (6 Positions)
General Manager - Position Count
Board of Directors
1111
General Manager
1211
District
Secretary
1211
Sr. Confidential
Executive Secretary
1211
Communications
Officer
1211
Assistant
General Manager
2111
Communications
Assistant
1211
142
FY 2015 FY 2016 FY 2016 FY 2017
Actual Budget Actual* Budget
General Manager 1,061,445$ 1,263,300$ 1,277,007$ 1,384,800$
Assistant General Manager 325,192 342,600 336,492 352,800
Total Expenses 1,386,637 1,605,900 1,613,499 1,737,600
-$
FY 2015 FY 2016 FY 2017
Actual Budget Actual* Budget
Labor and Benefits 1,152,471 1,199,600 1,203,379 1,349,200
Travel and Meetings 44,127 54,600 48,983 54,700
Conservation and Outreach 4,061 6,000 7,914 6,000
General Office Expense 2,449 1,700 1,243 1,700
Equipment 2,400 3,000 4,896 3,000
Fees 57,930 48,000 49,181 81,000
Services 123,049 193,000 266,675 122,000
Materials & Maintenance - 100,000 31,123 120,000
Miscellaneous 150 - 105 -
Total Expenses 1,386,637$ 1,605,900$ 1,613,499$ 1,737,600$
General Manager - Expenses
Department
Budget vs. Actual, in thousands ($)
FY 2016
Object
$1,000
$1,300
$1,600
$1,900
2013 2014 2015 2016 2017
1,
4
8
8
1,
4
4
5
1,
5
6
2
1,
6
0
6
1,
7
3
8
1,
4
1
9
1,
3
5
4
1,
3
8
7
1,
6
1
3
Budget Actual
* Actual unaudited
143
General Manager
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 ensures that
all applicable laws and regulations are met. The General Manager oversees, coordinates, and
directs the development and execution of annual plans and the operating and capital improvement
projects. The General Manager represents the District in establishing and maintaining relationships
with member agencies and external organizations. The General Manager is also focused on
executing the District’s mission, Strategic Plan and Board priorities.
Accomplishments – Fiscal Year 2015-2016
Otay Water District continues to be one of the lower cost water service providers of San Diego
County’s 22 public water agencies.
The District completed the 2015 Urban Water Management Plan and updated the 2015
Integrated Water Resources Plan. The Urban Water Management Plan was filed with the State
Department of Water Resources. This plan addresses the requirements of the California Water
Code; provides useful information to the public about the District’s water supplies and water
management programs; and provides a framework for water planning to minimize the negative
effects of potential water shortages. The purpose of the Integrated Water Resources Plan is to
identify and conceptually develop a diverse range of water supply projects to meet long-range
water supply needs.
The District completed phase two of the FY 2015-2018 Strategic Plan, which focused on the
successful implementation and rapid adoption of new business systems and technology
solutions, allowing the District to improve efficiencies and streamline work processes. This
helps the District to sustain a growing customer base with a reduced work force.
In FY 2016, the District successfully refinanced its 2007 Certificates of Participation (COPs),
saving its customers more than $5.6 million.
The District completed the draft Environmental Impact Report/Environmental Impact Statement
(EIR/EIS), in conjunction with the U.S. State Department, for the Otay Mesa Conveyance and
Disinfection System Project. The EIR/EIS was submitted for its 45-day public review period. This
document looks at the environmental effects of a proposed pipeline to convey desalinated
water, produced at a desalination plant in Rosarito, Mexico, across the U.S./Mexico border to
the District’s Roll Reservoir. Completion of this document is a requirement for obtaining a
Presidential Permit for receiving water across the border.
The District responded to more than 500 reports of water waste that resulted in more efficient
and effective water conservation efforts.
The District successfully responded to the state’s drought emergency and reduced potable
usage by 19.0% over 2013 levels.
144
General Manager
The District maintained a 100 percent compliance with both the rate of water quality parameters
and the goal of zero sanitary sewer overflows.
In FY 2016, the District decreased labor costs by $254,000. It reduced two full-time equivalent
(FTE) positions by instituting efficiency programs, which helps minimize the impact of higher
water costs from wholesalers. Since FY 2007, the District has experienced a reduction of 36.75
FTEs, or 21.0%. In the same timeframe, the number of customers served per FTE has grown
from 301 to 396, an increase of 31.6%. From FY 2007 to FY 2016, staffing reductions have resulted
in a cumulative savings of $24,136,200. These savings have helped to lessen the impact of
higher wholesale water costs to the District’s ratepayers.
The District enhanced its otaywater.gov website. The enhancements included improved visual
appeal, navigation, and search functionality. Improvements also included embedding an
eProcurement BidSync System to enable the District to efficiently conduct business and
manage contracts.
As part of the District’s successful Leak Detection and Repair Program, staff surveyed 150 miles
of potable pipelines. The survey focused on pipelines that were installed in 1985 and earlier.
District staff found and repaired four leaks in its distribution system.
A $425,000 Water Conservation Plan Grant was secured from the Pio Pico Energy Center and
will support the District’s Leak Detection and Leak Repair Program for FY 2017 and
FY 2018.
The District certified the Final Environmental Impact Report as part of the Otay Interconnect
Pipeline. The project will increase the District’s potable water supply flexibility and reliability.
For the last four years, the District received the “Distinguished Owner Honoree” award from the
Construction Management Association of America – San Diego Chapter.
For the twelfth consecutive year, the District was awarded the Certificate of Achievement for
Excellence in Financial Reporting by the Government Finance Officers Association (GFOA), for
its Comprehensive Annual Financial Report (CAFR).
For the twelfth consecutive year, the District has met nationally recognized guidelines and was
awarded the Distinguished Budget Presentation award for the Fiscal Year 2015-2016 Budget by
the Government Finance Officers Association.
For the tenth consecutive year, the District was awarded the Operating Budget Excellence
Award for the Fiscal Year 2015-2016 Budget by the California Society of Municipal Finance
Officers (CSMFO).
For the eleventh consecutive year, the CSMFO awarded the District the Capital Budgeting
Excellence Award for the Fiscal Year 2015-2016 Capital Improvement Program Budget.
The District received the Target Solutions Milestone Award for using the online training system
to train and keep District employees safe since 2000.
145145
146
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, and strategic
planning.
Department Responsibilities
The Administrative Services Department, under the general direction of the Assistant General
Manager and Chief of Administrative Services, provides the following support services: Human
Resources, Purchasing, Facilities Maintenance, and Safety and Security Administration, Information
Technology, and Strategic Planning. The department also coordinates assigned activities with other
departments and outside agencies, and provides highly responsible and complex administrative
support to the District, Board of Directors, and General Manager.
147
Position Title FY 2015 FY 2016 FY 2017
Chief, Administrative Services 101
Assistant Chief, Administrative Services 010
Confidential Executive Secretary 111
Confidential Secretary 111
Human Resources Manager 111
Senior Human Resources Analyst 111
Human Resources Analyst 111
Purchasing & Facilities Manager 111
Senior Buyer 111
Assistant Buyer 110
Senior Warehouse Worker 001
Lead Warehouse/Facilities Worker 100
Warehouse/Delivery Worker 110
Facilities Maintenance Technician 2 2 2
Safety & Security Specialist 1 1 1
Chief Information Officer 1 1 0
IT Manager 111
GIS Manager 1 11
GIS Programmer/Analyst 111
GIS Analyst 111
GIS Technician 111
Network Engineer 111
Database Administrator 111
Data Systems Technician 011
Lead Business System Analyst 100
System Support Analyst 011
Business System Analyst I and II 222
Network Analyst 110
Total 26 26 23
Administrative Services - Position Count
District Position Count - 135
Administrative Services Department - (23 Positions)
Purchasing
and Facilities
2231 (5)
Human
Resources
2221 (3)
Chief,
Administrative Services
2211 (3)
IT
Services
2411 (11)
GIS
2431 (4)
Safety and Security
Administration
2241 (1)
148
FY 2015 FY 2016 FY 2016 FY 2017
Actual (1)Budget (1)Actual* Budget
Administrative Chief 1,397,196$ 816,300$ 850,853$ 555,800$
Human Resources 694,264 730,000 661,366 824,900
Purchasing and Facilities 1,221,411 1,416,600 1,311,242 1,321,600
Safety and Security 362,389 412,900 303,123 361,300
IT Services 1,738,011 2,376,400 1,999,749 2,276,000
Geographic Information System (GIS) 925,602 929,600 893,954 985,300
Total Expenses 6,338,873 6,681,800 6,020,287 6,324,900
FY 2015 FY 2016 FY 2017
Actual (1)Budget (1)Actual* Budget
Labor and Benefits 4,043,199 4,392,600 4,050,829 4,074,300
Travel and Meetings 43,021 50,000 41,086 52,100
General Office Expense 101,102 107,400 76,620 94,000
Equipment 1,199,608 1,065,300 1,024,550 1,064,800
Fees 750 - 977 -
Services 522,412 541,600 353,922 552,000
Training 63,592 77,000 53,299 103,000
Materials & Maintenance 351,005 433,000 392,559 369,800
Power and Utilities 14,184 14,900 26,445 14,900
Total Expenses 6,338,873$ 6,681,800$ 6,020,287$ 6,324,900$
-$ -$ -$ -$
(1) In FY 2017, IT and Strategic Planning was consolidated into Administrative Services. Prior year
budget and actuals have been adjusted for comparative purposes.
Budget vs. Actual, in thousands ($)
Administrative Services - Expenses
Department
FY 2016
Object
$5,200
$5,400
$5,600
$5,800
$6,000
$6,200
$6,400
$6,600
$6,800
2013 2014 2015 2016 2017
6,
6
7
5
6,
2
0
5
6,
3
6
9
6,
6
8
2
6,
3
2
5
5,
7
9
7
5,
9
3
7
6,
3
3
9
6,
0
2
0
Budget Actual
* Actual unaudited
149
Administrative Services – Human Resources
Services We Provide
Human Resources, under the direction of the Chief of Administrative Services, provides the following
support services: recruits, selects and ensures the retention of qualified employees; develops,
implements and administers policies, procedures, collective bargaining contracts and employee
programs; ensures up-to-date classification plans and a competitive compensation program;
manages benefits programs for employees and retirees; manages the Workers’ Compensation
program; oversees employee performance through 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.
Accomplishments – Fiscal Year 2015-2016
Decreased labor costs by participating with other departments to reduce three (3) full-time
positions by instituting efficiency programs, which minimize the impact of higher water costs
from wholesalers, resulting in District-wide annual cost-savings of approximately $479,000.
Collaborated with Third Party Administrator to implement and file required individual and IRS tax
reporting (1095-C and 1094-C) related to Health Care Reform.
Planned and developed Request for Proposal for benefit consulting services. Oversaw and
participated in the bidding interviews to select and negotiate a new three-year benefit consultant
contract.
Coordinated and received credit for the Special District Risk Management Authority’s (SDRMA)
Credit Incentive Program. The District received a combined credit of approximately $160,700,
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 in the amount of approximately $273,100.
Developed and/or updated various policies, procedures and programs to include Drug Free
Workplace; Department of Transportation Drug & Alcohol Testing; Smoking, Tobacco and
Nicotine Free Campus; and Use of Information Technology Resources and Telecommunications
Systems.
Implemented additional Emergency Preparedness practices with the Safety and Security
Specialist and members of the Emergency Operations Center to be further prepared for disasters
or emergencies.
150
Administrative Services – Purchasing and Facilities
Services We Provide
The Purchasing Division, under general direction of the Chief of Administrative, 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 2015-2016
Facilities staff made changes to the Operations and Administrative HVAC systems, thermostats
and Trane building management software to fine-tune schedules and to idle unoccupied rooms
in order to capture greater energy savings.
For transparent, standardized and efficient procurement processes, Purchasing implemented an
online eProcurement system, BidSync, to source suppliers, manage solicitations and award
agreements for goods, services and public works.
Purchasing staff was able to eliminate one position, the Assistant Buyer, by leveraging changes
in technology and procedures. This was also achieved without a layoff when the Assistant Buyer
transferred to an open Warehouse position.
Migrated the District’s legacy ground loop fuel authorization and management system to a
modern Orpak wireless system that provides greater reliability and enhanced reporting.
Facilities staff began a District-wide security gate upgrade program replacing double panel
gates, mechanical lift rods, chains and combination locks with single swing gates,
electromechanical locks and access by key FOB credentials. Access security is improved
through ID authorizations and the elimination of chains and combination locks. Personal injuries
are reduced by removing lift rods and eliminating pinch points.
151
Administrative Services – Safety and Security
Services We Provide
Safety and Security, under the direction of the Chief of Administrative, 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.
Accomplishments – Fiscal Year 2015-2016
Chaired the District completion of the emergency preparedness monthly WebEOC exercises
hosted/sponsored by the SDWA and County of San Diego OES. These exercises further prepare
the District with response, management, and cooperation of incidents ranging from local to state-
wide emergency events.
Completed the second phase of a District-wide program to standardize and modernize physical
security, access control, and monitoring and video systems. This project further prepares the
District for implementation of the DMP “ENTRE” access control and security management
enterprise platform.
The District received the Target Solutions Milestone Award for using its online training platform
to train and keep employees safe.
Evaluated regulatory fall protection requirements and improved existing personal protective
equipment (PPE) and District practices in use. Provided refresher training to affected staff.
Procured updated PPE, replaced the use of 6’ lanyards with self-retracting lifelines, and added
guardrail systems for protection of open vaults and manhole lids.
Developed and created an electronic online chemical safety data sheet program. This program
is available on the District’s intranet, is accessible on-line and is broken down by sections with a
District-wide main folder.
Developed the following in-house occupational health and safety regulatory training and
certification programs: crane operator, Bill Jax, and Genie aerial lifts and forklift.
Trained Facilities and Fleet Shop staff on regulatory requirements for Hazardous Waste
Operations.
Provided confined space refresher training for all affected District staff using the District’s revised
Confined Space (CS) Entry Procedures Program, which included practical hands-on
training/instruction on the setup and use of entry and retrieval equipment; CS fall protection
requirements; setting up of CS perimeter guardrail protection; harness inspections before use
152
Administrative Services – Safety and Security
and donning/doffing; and duties and responsibilities of CS entry crew, supervisor, attendant and
entrant; CS entry protocols; and practical exercises.
Supported Operations and Engineering staff with the following District environmental programs:
California Accidental Release Program (CalARP), Hazardous Materials Business Plans (HMBP’s),
Spill Prevention Control and Countermeasure (SPCC). Participated in related meetings,
inspections and related program review.
Reviewed OSHA logs and calculations on District loss time/incident rates and provided Human
Resources with tracking options for the Strategic Plan measure.
Worked with SDRMA’s safety consultant to ensure the District was in compliance with safety
regulations noted during the assessment of our facilities.
153
Administrative Services – Strategic Planning
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 system 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 2015-2016
Completed the implementation of the new enterprise workflow automation solution, Nintex. This
solution will provide enhancements to business processes and will continue to streamline the
essential workflow of business forms that are used throughout the District, which are tied to the
enterprise portal, SharePoint. In addition, the solution will also aid in the management of existing
District documentation, content lifecycle management, record keeping requirements, and future
online service requests. Lastly, Nintex will enable users to now approve and manage desktop
forms via their mobile device.
Completed the implementation of a new backflow prevention management solution, XC2. This
solution will manage and administer the District’s backflow prevention program by providing new
and enhanced analysis and reporting in support of contamination prevention of potable water
services throughout the District. This accomplishment is the first in a series of phased
deployments to leverage the Cityworks asset management platform coupled with the District’s
overall asset management initiatives.
154
Administrative Services – IT Services
Services We Provide
IT Operations is responsible for day-to-day support of the District’s data center; enterprise business
systems network and desktop hardware/software; disaster recovery; telecommunications; mobile
and wireless networks; website; and help desk. IT Operations has collateral responsibilities for
access control security systems.
Accomplishments – Fiscal Year 2015-2016
Completed the re-engineering of business critical systems backup and recovery services. The
new backup and recovery landscape entails the co-location of business critical backup systems
to an off-site redundant data center. In the event of a major service interruption at the District’s
Administrative facilities, the new landscape ensures the continuity of business critical systems
by redirecting access to the off-site data center. Other key benefits with this specific
accomplishment is reduction of on-site operating costs and technology produced carbon
footprint.
Completed the deployment of the District’s new enterprise Cisco Unified Computing System
(UCS). The new UCS is the platform for all District enterprise server and business applications.
The UCS platform provides new and enhanced management features, increased application
performance, reliability, redundancy, security, and scalability. Lastly, the new UCS platform will
enable IT staff to quickly respond to future system requests with on-demand virtual machine
creation of new server or application environments.
155
Administrative Services – Geographic Information System
Services We Provide
The GIS group is responsible for the technical and administrative support of the District’s GIS/AM/FM
and CAD systems. It is also responsible for the data collection and data QA/QC of the District’s facility
data and land-based data. In addition, it provides technical support in designing, developing,
documenting and maintaining the District’s database systems and creates database structures that
consolidate the conceptual, logical and physical models of data.
Accomplishments – Fiscal Year 2015-2016
Completed the redesign of the District’s enterprise GIS system architecture. Staff redesigned the
GIS architecture to leverage the many benefits of the new Unified Computing System and virtual
server technology. The new design provides enhanced availability, performance, security, and
scalability for future GIS service requirements.
Completed the development of the new Pipe Isolation Trace application. In the event of a
required water shutdown or service interruption to a specific area, the application provides data
about the affected customers, which Customer Service staff can use to prepare information or
respond to customers. The application has also automated multiple workflows for emergency
shutdown or preventive maintenance use. This application will significantly minimize the time
required to gather affected customer information and timely deployment of notifications.
Completed the deployment of a new mobile data collection solution, which complements the
District’s field valve exercising Wachs Machines. The Wachs mobile solution automates record
valve exercising functions such as turns and high torque information, and electronically collects
the associated data. This is a key tool in the valve exercising program and will also support the
District’s enterprise asset management goals.
At the annual Esri Water User Conference, the District’s GIS team was recognized by peers across
the nation for their presentation titled “Using GIS to Improve Water Distribution Integrity.” The
District’s GIS design and representation of pipeline assets is considered an industry best
practice.
156
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
157
Position Title FY 2015 FY 2016 FY 2017
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
Senior Accountant 4 4 4
Accountant 3 3 3
Accounting Technician 222
Customer Service Manager 2 2 1
Customer Service Supervisor 0 0 1
Lead Customer Service Representative 2 2 1
Customer Service Representative I, II and III 7 6 6
Lead Customer Service Field Representative 1 1 1
Customer Service Field Representative I and II 322
Lead Cross Connection/Meter Maintenance Worker 111
Meter Maintenance Worker I & II (1)333
Senior Conservation Specialist 111
Total 34 32 31
(1) Beginning in FY 2015, Meter Maintenance was moved from Water Operations.
Finance - Position Count
District Position Count - 135
Finance Department - (31 Positions)
Treasury and
Accounting
Services
2331 (6)
Customer
Service
2341/2343
(13)
Controller and
Budgetary
Services 2321 (5)
Chief Finance Officer - 2311 (3)
Meter
Maintenance
2342 (4)
158
FY 2015 FY 2016 FY 2016 FY 2017
Actual Budget Actual* Budget
Finance Chief 524,447$ 544,600$ 547,874$ 563,700$
Controller and Budgetary Services 830,236 883,300 832,787 911,800
Treasury and Accounting Services 1,289,188 1,364,700 1,372,201 1,410,500
Customer Service 1,964,999 2,115,600 1,868,278 1,938,900
Meter Shop 601,735 626,100 656,403 687,600
Water Conservation 285,906 594,100 326,148 346,100
Total Expenses 5,496,511 6,128,400 5,603,691 5,858,600
FY 2015 FY 2016 FY 2017
Actual Budget Actual* Budget
Labor and Benefits 4,475,530 4,687,100 4,450,470 4,654,200
Travel and Meetings 17,611 26,100 17,795 25,600
Conservation and Outreach 139,965 170,900 142,146 171,400
General Office Expense 153,875 167,800 151,896 167,800
Fees 354,813 351,600 355,925 363,900
Services 123,313 432,500 188,468 190,400
Training - 500 180 500
Materials & Maintenance 138,063 136,900 182,696 179,800
Bad Debt Expense 93,341 155,000 114,115 105,000
Total Expenses 5,496,511$ 6,128,400$ 5,603,691$ 5,858,600$
-$ -$ -$ -$
Finance - Expenses
Department
Budget vs. Actual, in thousands ($)
FY 2016
Object
$2,500
$4,000
$5,500
2013 2014 2015 2016 2017
4,
8
8
7
5,
8
6
3
5,
8
1
7
6,
1
2
8
5,
8
5
9
5,
6
5
5
5,
4
6
3
5,
4
9
7
5,
6
0
4
Budget Actual
* Actual unaudited
159
Finance – Controller and Budgetary Services
Services We Provide
The Controller and Budgetary Services Division is responsible for developing and publishing the
annual operating and capital budgets as well as preparing the six-year financial plan and 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 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.
Accomplishments – Fiscal Year 2015-2016
For the twelfth consecutive year the District has met nationally recognized guidelines and
has been awarded the Distinguished Budget Presentation award for the Fiscal Year 2015-
2016 Budget by the Government Finance Officers Association. To receive this award, a
governmental unit must publish a budget document that meets program criteria as a policy
document, a financial plan, an operations guide and a communications device. This is a
significant achievement and is the highest form of recognition in governmental budgeting.
The District has been awarded the Operating Budget Excellence Award for the Fiscal Year
2015-2016 Budget by the California Society of Municipal Finance Officers (CSMFO). This is
the tenth consecutive year the District has been recognized as having prepared a budget
document or a communication tool that meets certain standards.
The CSMFO has awarded the District the Capital Budgeting Excellence Award for the Fiscal
Year 2015-2016 Capital Improvement Program Budget. This award recognizes agencies that
have prepared a Capital Improvement Budget document or a communication tool that meets
certain standards. This is the eleventh consecutive year the District has received this award.
160
Finance – 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.
Accomplishments – Fiscal Year 2015-2016
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, 2015. This is the twelfth
consecutive year the District has received this award which is the highest form of recognition
in the area of governmental accounting and financial reporting. It clearly demonstrates how
the District takes great care in maintaining high financial standards.
161
Finance – Customer Services
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.
Accomplishments – Fiscal Year 2015-2016
With ongoing process improvements, the Customer Service department has gained greater
efficiency. After the retirement of a Customer Service Manager in August 2015, a
reorganization took place that reduced staff by one FTE.
Customer Service staff responded to more than 500 reports of water waste, resulting in more
efficient and effective water conservation efforts.
Replaced the collection agency used for secondary collection services on unpaid water bills.
The change in agencies will allow the District to keep an additional 15% on all collectables.
The District’s large meter testing program aims to test all meters 3” or larger at least once
every three years. This year staff tested over 120 large meters and repaired or replaced 25
failing meters. The testing and repair process ensures the District’s largest users are billed
for all water used.
Meter Shop staff has implemented a new backflow program tracking system. This new
system will allow greater administrative flexibility in entering backflow test reports.
162
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.
163
Water Operations - Position Count
District Position Count - 135
Water Operations Department - (51 Positions)
Utility Services
Utility Maintenance 3232 (18)
Fleet Maintenance 3233 (4)
Pump & Electrical 3236 (5)
Water Operations
Water System Operations 3221 (1)
Water System 3225 (13)
SCADA System 3227 (2)
Laboratory 3243 (1)
Reclamation Plant 3244 (4)
Chief, Water Operations 3211 (2)
Assistant Chief of Water Operations
3231 (1)
164
Position Title FY 2015 FY 2016 FY 2017
Chief, Water Operations 1 1 1
Assistant Chief, Water Operations 0 1 1
Executive Secretary 1 1 1
System Operations Manager 1 1 1
Water Systems Supervisor 1 1 1
Recycled Water Systems Supervisor 1 1 0
Lead Water Systems Operator 2 2 2
Water Systems Operator I, II, and III 9 8 8
Valve Maintenance Worker 1 0 0
Senior SCADA Instrumentation Technician 1 2 2
Sr. Disinfection Technician 2 2 2
SCADA Instrumentation Technician 1 0 0
Recycled Water Distribution Operator 4 4 0
Utility Services Manager 100
Utility Maintenance Supervisor 222
Utility Crew Leader 3 3 3
Utility Workers I and II 8 8 8
Senior Utility/Equiment Operator 3 3 3
Valve Maintenance Worker 0 2 2
Pump Electric Supervisor 1 1 1
Electrician I and II 2 2 2
Pump Mechanic I and II 2 2 2
Fleet Maintenance Supervisor 1 1 1
Meter Maintenance Worker I & II (1)000
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
Laboratory Analysts 1 1 1
Total 565651
(1) Beginning in FY 2015, Meter Maintenance was moved to Finance.
Water Operations - Position Count
District Postion Count - 138
Water Operations Department - (51 Positions)
165
FY 2015 FY 2016 FY 2016 FY 2017
Actual (2)Budget (2)Actual* Budget
Water Operations Chief 440,401$ 450,300$ 438,881$ 461,600$
Water Systems 5,194,910 5,363,700 5,182,548 5,512,300
Construction Maintenance 4,356,012 5,097,400 4,762,313 5,342,800
Total Expenses 9,991,323 10,911,400 10,383,742 11,316,700
FY 2015 FY 2016 FY 2017
Actual (2)Budget (2)Actual* Budget
Labor and Benefits (1)6,753,648 7,264,900 7,428,812 7,821,700
Travel and Meetings 29,911 48,800 35,709 42,400
General Office Expense - 300 666 300
Equipment 32,096 44,000 33,104 61,300
Fees 71,241 61,400 74,347 149,900
Services 243,149 540,100 309,794 445,400
Training 10,680 9,000 4,873 9,000
Materials & Maintenance 1,642,085 1,946,500 1,465,270 1,951,500
Sewer Charges 1,208,513 996,400 1,031,167 835,200
Total Expenses 9,991,323$ 10,911,400$ 10,383,742$ 11,316,700$
(1) Excludes CIP labor and benefits.-$ -$ -$ -$
Water Operations - Expenses
Department
(2) In FY 2017, the Recycled Division's responsibilities have been reorganized between the Operations
and Engineering Departments. Prior year budget and actuals have been adjusted for comparative
purposes.
Budget vs. Actual, in thousands ($)
FY 2016
Object
$-
$4,000
$8,000
$12,000
2013 2014 2015 2016 2017
11
,
8
5
3
10
,
9
1
3
10
,
9
2
0
10
,
9
1
1
11
,
3
1
7
10
,
4
3
9
10
,
3
1
5
9,
9
9
1
10
,
3
8
4
Budget Actual
* Actual unaudited
166
Water Operations – 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.
Accomplishments – Fiscal Year 2015-2016
Staff prepared for and completed a 10-day full treated water shutdown of San Diego County
Water Authority’s Pipeline No. 4 from March 20, 2016 to March 26, 2016. Flows from the City
of San Diego via the Lower Otay Pump Station and District water storage was used for the
South District’s water demands for the duration of this planned shutdown.
The State Water Resources Control Board (SWRCB) determined that special lead and copper
testing was required to be performed in areas of potable water distribution systems that
typically contain a blend of water produced at the Carlsbad Desalination Plant. Staff prepared
a monitoring plan for the areas that receive this water blend. The plan includes sampling
dates that meet the deadlines put forth by the State.
The District’s FY 2016 leak detection campaign occurred from February 3, 2016 to March 14,
2016. A total of 150 miles of potable pipelines were surveyed. The survey focused on pipelines
that were installed in 1985 and earlier. A total of four leaks were found in the District’s
distribution system and were repaired by staff.
Completed improvements to the Ralph W. Chapman Water Reclamation Facility to meet new
regulations on industrial discharges of storm water.
Maintained a 100% compliance rate of water quality parameters and a goal of zero sanitary
sewer overflows.
167
Water Operations – Water System Operations
The County of San Diego held inspections at all four District sites that are under the California
Accidental Release Prevention (CalARP) program with no significant issues reported by the
County.
With assistance from the District’s Environmental Compliance Specialist, successfully
updated the Spill Prevention Control and Countermeasures (SPCC) plans for the five District
sites that are required to have them.
Converted from the existing Supervisory Control and Data Acquisition (SCADA) system to the
new iFix SCADA system as the primary means for system control in the potable, recycled and
treatment plant.
Successfully transitioned the responsibilities of operating the recycled water distribution
system from Engineering to Water Systems staff.
168
Water Operations – 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.
Accomplishments – Fiscal Year 2015-2016
Repaired a 12-inch emergency water main break on Hillsdale Road in El Cajon on
October 7, 2015.
Repaired an 18-inch emergency water main break on Campo Road in Spring Valley on
June 8, 2016.
Leveraged the GIS based iWater program to streamline the documentation of maintenance
completed on potable, recycled, and collection appurtenances.
Coordinated with the Purchasing Manager to implement the electronic procurement
software (BidSync) for the quotes and bids, throughout the department, to streamline the
procurement process for goods and services.
Staff continues to effectively manage the As Needed Paving Contract resulting in a cost
savings of 64% over the previous 7 years.
Tested, procured, and deployed a replacement valve-exercise machine that automates data
entry into the GIS database increasing valve exercise production and efficiency.
A qualified inspector completed the external inspection of all the District’s pressure vessels
(surge and hydro pneumatic tanks), with no significant issues noted, as part of the District’s
newly established maintenance program.
As a result of gained efficiencies within the Division, Operations staff have assumed the task
of inspection of the recycled force main from Engineering. The cost to complete this task
without requiring additional staff has been reduced by approximately 20%.
A new emergency general contractor was used by the District for the first time in more than
15 years to complete an emergency repair, thereby, providing the District additional
redundancy and flexibility in restoring and maintaining water supply to District customers.
169
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 2015 FY 2016 FY 2017
Chief, Engineering 1 1 1
Executive Secretary 111
Secretary 111
Engineering Manager 222
Senior Civil Engineer 2 2 2
Associate Civil Engineer 0 1 1
Construction Management Specialist 0 0 0
Assistant Civil Engineer I and II 100
Environmental Compliance Specialist 1 1 1
Permit Technicians 2 2 2
Senior Engineering Technician 222
Inspection Supervisor 101
Lead Construction Inspector 010
Construction Inspectors I and II 323
Supervising Land Surveyor 111
Assistant Survey Technician 1 1 1
Field Services Manager 011
Recycled Water Systems Supervisor 001
Recycled Water Distreibution Operator 003
Total 191924
Engineering - Position Count
District Position Count - 135
Engineering Department - (24 Positions)
Water Resources, Planning,
and Design 3321 (6)
Environmental Services 3451 (1)
Public Services 3421 (3)
Field Services 3431 (11)
Chief, Engineering
3311 (3)
172
FY 2015 FY 2016 FY 2016 FY 2017
Actual (4)Budget (4)Actual* Budget
Engineering Chief 338,021$ 390,700$ 440,056$ 594,100$
Engineering Services (1)728,167 808,500 825,865 721,200
Public Services (2)1,652,289 1,767,800 1,708,742 1,753,300
Environmental Services 135,114 165,900 178,261 293,100
Total Expenses 2,853,591 3,132,900 3,152,924 3,361,700
FY 2015 FY 2016 FY 2017
Actual (4)Budget (4)Actual* Budget
Labor and Benefits (3)2,196,415 2,352,900 2,475,049 2,517,600
Travel and Meetings 17,062 19,400 15,545 18,300
General Office Expense 330 7,500 6,443 1,700
Equipment - - 486 -
Fees 30,068 38,000 28,853 38,000
Services 606,756 702,600 616,893 772,600
Training 2,960 12,500 9,655 13,500
Total Expenses 2,853,591$ 3,132,900$ 3,152,924$ 3,361,700$
-$ -$ -$ -$
(1) Engineering Services includes Planning, Design, and Water Resources.
(2) Public Services includes Public, Construction and Survey Services.
(3) Excludes CIP labor and benefits.
(4) In FY 2017, the Recycled Division's responsibilities have been reorganized between the
Operations and Engineering Departments. Prior year budget and actuals have been adjusted for
comparative purposes.
Engineering - Expenses
Department
Budget vs. Actual, in thousands ($)
FY 2016
Object
0
500
1,000
1,500
2,000
2,500
3,000
3,500
2013 2014 2015 2016 2017
1,
8
6
2
2,
0
2
6
3,
1
3
3
3,
1
3
3
3,
3
6
2
1,
8
1
7
1,8
2
8
2,
8
5
4
3,
1
5
3
Budget Actual
* Actual unaudited
173
Engineering – Water Resources, Planning, Design,
and Environmental Services
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 2015 -2016
Completed the design and construction of interior and exterior coating and upgrades
to the 944-1, 944-2, 458-2, 850-3, 711-1 reservoirs. By maintaining reservoirs, the
District is improving the water reliability and preserving the useful life of these
reservoirs for another 20 years.
Completed construction of State Route 11 (SR-11) Potable Water Utility Relocations –
Sequence 1 project. This project relocated three (3) separate District water mains of
various sizes and materials to clear the right-of-way for SR-11.
Completed construction of the State Routes 11/125/905 Connector Ramps Blow Off
Relocation project. This project relocated an existing 6-inch potable water blow off
to clear the right of way for a future bridge across Otay Lakes Road.
Completed design and construction of two (2) new potable water pressure reducing
stations in the 624 pressure zone and improvements to an existing recycled water
pressure reducing station located in the 944 recycled water pressure zone. The two
(2) new potable water pressure reducing stations have improved fire flow and
enhanced system reliability. Improvements to the recycled water pressure reducing
station have reduced the risk of filling the vault with rain water and associated
damage to equipment.
Completed the design and replacement of three (3) aging return activated sludge
pumps, motors, and variable frequency drives at the Ralph W. Chapman Water
Reclamation Facility, including related electrical and waste sludge piping work, to
increase reliability and serviceability to provide increased capacity for meeting waste
and treatment process requirements..
174
Engineering – Water Resources, Planning, Design,
and Environmental Services
Completed the design and construction of the expansion of the Operations Yard
parking lot, which added over 27,000 square feet of space. The lot will provide a
separate parking area for employee vehicles, equipment storage, and a staging area
for emergency events.
Completed the design and construction of fire shields and safety measures to
increase fire resistance capacity to beyond three (3) hours to the underside of the
existing Sweetwater River Trestle that conveys the 14-inch recycled water
transmission line over the Sweetwater River.
With Helix Water District taking the lead, both agencies finalized plans, agreements,
and constructed improvements to two (2) emergency interconnections at Blossom
Lane and Ivy Street. Both agencies have benefited by having interconnections
between the two (2) districts for emergencies. The interconnections provide
increased reliability and flexibility during power outages and other disruptions in
service.
Completed design and obtained permits from the County of San Diego and Caltrans
to approve traffic control plans for the air-vacuum replacement on the 36-inch La
Presa Pipeline starting from District headquarters on Jamacha Boulevard to the
Regulatory site. These repairs will preserve the useful life of this pipeline for another
30-40 years.
Completed chlorine storage improvements to the 450-1 Disinfection Facility.
Worked closely with staff and representatives from NSC Agua to ensure compliance
with the California Water Resources Control Board Drinking Water Program
regulatory requirements. To meet these requirements, NSC Agua continued source
water testing 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 produced desalinated water will meet the California water quality standards.
Completed the 2015 Urban Water Management Plan and filed the plan with the
State’s Department of Water Resources. This plan will address the requirements of
the California Water Code, provide useful information to the public about the District’s
water supplies and water management programs, and provides a framework for
water planning to minimize the negative effects of potential water shortages.
Completed the 2015 Integrated Water Resources Plan Update and held a workshop
with the Board to go over the elements of the plan update. The purpose of the plan
is to identify and conceptually develop a diverse range of water supply projects to
meet long-range water supply needs.
Completed the final design and bid phases for the 14-inch Recycled Water Force
Main Improvements project. The project will replace blow offs and rehabilitate the
cathodic protection system to maintain the life expectancy of the existing facility. The
project will also provide a new flow meter vault to improve system reliability and
175
Engineering – Water Resources, Planning, Design,
and Environmental Services
reduce the risk of a recycled water spill within the San Diego National Wildlife
Refuge/Sweetwater Authority watershed.
Acquired pump station sites for the Otay Interconnect Pipeline (also known as North
District – South District Interconnection) project. The two (2) parcels will provide a
site for a future booster pump station.
Certified Final Environmental Impact Report as part of the Otay Interconnect Pipeline
(also known as North District – South District Interconnection) project. The Project
includes a 5-mile long, 30-inch diameter pipeline and associated booster pump
station that would enable the District to convey potable water from the North District’s
640 pressure zone to the South District’s 624 pressure zone and vice versa. The
Project will increase the District’s potable water supply flexibility and reliability.
Completed the design and environmental report for the Campo Road Sewer
Replacement project. The Final Mitigated Negative Declaration/Initial Study and
Environmental Checklist was approved by the Board on November 4, 2015. The
sewer design received permit approval from Caltrans on May 5, 2016.
Completed the draft Environmental Impact Report/Environmental Impact Statement
(EIR/EIS) in conjunction with the U.S. State Department for the Otay Mesa
Conveyance and Disinfection System Project and submitted the document for its 45-
day public review period. This document looks at the environmental effects of a
proposed pipeline to convey desalinated water produced at a desalination plant in
Rosarito, Mexico, across the US/Mexico border to the District’s Roll Reservoir.
Completion of this document is a requirement for obtaining a Presidential Permit for
receiving water across the border.
Received the “2016 Distinguished Owner Honoree” award from the Construction
Management Association of America – San Diego Chapter.
176
Engineering – Public Services and Field Services
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.
Accomplishments – Fiscal Year 2015-2016
Secured a $425,000 Water Conservation Plan grant from the Pio Pico Energy Center,
which will support the District’s Leak Detection and Leak Repair efforts for FY 2017
and FY 2018.
Sales of 118 meters totaled $4.28 Million and equated to 423.5 Equivalent Dwelling
Units.
Completed disposal of three (3) properties owned by the District and declared
surplus by the Board with a net value of $147,592.20.
Increased revenue by 4.6% from FY 2015 cell site leases in excess of $1.24 Million and
maintained 33 cell site leases.
Accepted developer water main projects with fixed assets valued at $2.03 Million.
Completed 3,550 USA Mark-out tickets with an accuracy rate of 100%. Also,
completed 34 surveys related to various projects included in the FY 2016 CIP.
Performed QA/QC on 25,484 linear feet of pipeline. Also, performed 120 meter sets,
rehabbed 3 tanks, and reviewed 45 plan checks that consisted of fire services,
backflows, and developer pipeline projects as part of the delivery of the FY 2016 CIP
and active developer projects.
Successfully completed the transition of Recycled Operations over to Engineering
Field Services. Worked closely with Operations for the transition of recycled water
systems operation within FY 2016. This has resulted in the pulling back in-house of
District’s new irrigation inspection of projects and has reduced the District’s demand
for outside services.
177
178
FY 2015 FY 2016 FY 2016 FY 2017
Actual Budget Actual* Budget
General Expense 2,309,023$ 2,019,400$ 2,186,585$ 2,006,400$
Total Expenses 2,309,023 2,019,400 2,186,585 2,006,400
FY 2015 FY 2016 FY 2017
Actual Budget Actual* Budget
Labor and Benefits (1)1,487,720 1,183,400 1,359,311 1,181,400
Fees 820,046 836,000 827,274 825,000
Services 1,257 - - -
Total Expenses 2,309,023$ 2,019,400$ 2,186,585$ 2,006,400$
-$ -$ -$ -$
(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 2016 and FY 2017
is $338,300 and $198,600, respectively. Additionally, the labor and benefits shown on this schedule are those
related to operating costs and does not include CIP labor and benefit costs.
General Expense
The expenditures in this section are general operating costs not associated with an individual
department. The expenditures include: legal costs, insurance premiums, changes in accrued
employee leave balances and miscellaneous interest. These expenditures represent 6.5% of the total
Department Budget.
Department
Budget vs. Actual, in thousands ($)
FY 2016
Object
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
2013 2014 2015 2016 2017
2,
1
7
6
2,1
5
0
2,
3
3
2
2,
0
1
9
2,
0
0
6
2,
3
4
4
2,
2
1
4
2,
3
0
9
2,
1
8
7
Budget Actual
* Actual unaudited
179
180
Capital Improvement Program
The District provides water service to a population of approximately 220,000 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 2017 Capital Budget is $10.7 million and the six-year Capital
Improvement Program (CIP) totals $89.8 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.
181
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 194. Capital Facility Projects are items that exceed $10,000 or
$20,000 for infrastructure related items (as defined under Capital Equipment on page 260 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:
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.
New Water Supply
Facilities required to support new sources of water are funded from new supply fees or user rates.
182
Major CIP Projects
Capital Improvement Projects
The Fiscal Year 2017 CIP Budget contains 107 projects. The cost of the work planned for 89 of these
projects fall within Fiscal Year 2017 and total $10.7 million. Of the 89 projects planned for Fiscal Year
2017, three are designated as a reimbursable project with an estimated cost totaling $14,000. These
projects are built by developers and reimbursed by the District.
The following shows how the $10.7 million of projects are broken down into four categories:
1. Capital facility projects $ 3.8 million
2. Replacement or renewal projects $ 5.9 million
3. Capital purchase projects $ 1 million
4. Developer reimbursement projects $ 14 thousand
The Six-Year CIP and Fiscal Year 2017 Capital Budget are consistent with the District's Water
Resources Master Plan, current capacity fees, and the District's strategic financial objectives.
183
CIP Projects in Construction
Project: 980-1 Reservoir Interior/Exterior
Coating and Upgrades (P2545)
Location: North End of Salt Creek Golf Course,
Hunte Parkway, Chula Vista
Director Division: 5
Project Description:
Remove and Replace Deteriorating Reservoir
Coatings
Structural Modifications to Increase Service Life
$1.50M Budget
Start: February 2016
Estimated Completion: August 2016
980-1 Reservoir (5.0 MG) – Exterior Containment and Sandblasting
184
CIP Projects in Construction
Director Division: 1
711-2 Reservoir (2.3 MG) – Exterior Scaffold Installation
Project: 711-1 and 711-2 Reservoir
Interior/Exterior Coating and Upgrades
(P2545)
Location: Park Meadows Road, Chula Vista.
Adjacent to East Lake County Club
Golf Course
Project Description:
Remove and Replace Deteriorating Reservoir
Coatings
Structural modifications to increase service life
$1.88M Budget
Start: November 2015
Estimated Completion: September 2016
185
CIP Projects in Construction
Project: Operations Yard Property Acquisition
Improvements (P2537)
Location: Sweetwater Springs Boulevard,
Spring Valley. Adjacent to District
Operations Yard
Director Division: 3
Project Description:
Provide parking to separate employee vehicles
from District equipment
Will serve as emergency staging area
$0.78M Budget
Start: January 2016
Estimated Completion: June 2016
Operations Yard Property Acquisition Improvements – Asphalt Concrete Paving
186
CIP Projects in Construction
Project: Rancho San Diego Basin Sewer
Rehabilitation – Phase I
(S2033-003103)
Location: 14 locations including Hillsdale Road,
Donahue Drive, Juliana Street,
Vista Grande Road, and Sundale Road.
Director Division: 5
Project Description:
Sewer system repairs at 14 locations
3,250 LF of 8-inch sewer
4 new sewer manholes
$3.00M Budget
Start: March 2016
Estimated Completion: November 2016
Trench Restoration in Singing Hills Mobile Estates Easement
187
FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 Total
Beginning Balance 56,804$ 51,914$ 46,556$ 38,859$ 45,067$ 51,367$ 56,804$
Sources
Capacity Fees 3,176 6,004 8,881 11,292 12,781 14,361 56,495
Debt financing (1)- 3,000 - - - - 3,000
Grants 255 505 500 500 500 133 2,393
Interest 458 477 495 510 641 808 3,389
Temporary Meters 739 744 750 759 770 781 4,543
Availability (Betterment Portion)484 503 522 542 563 585 3,199
New Supply Fee 346 661 986 1,227 1,397 1,565 6,182
COPS 2010B Reimbursement 828 828 828 828 828 828 4,968
Transfer from General Fund 8,060 10,617 11,075 10,897 10,788 10,571 62,008
Interfund Transfers 33 39 47 51 55 58 283
Total Sources 14,379 23,378 24,084 26,606 28,323 29,690 146,460
Uses
CIP Projects 10,733 20,023 22,874 11,371 12,995 11,832 89,828
Debt Service 7,288 7,459 7,640 7,747 7,736 7,828 45,698
Developer Services 1,248 1,254 1,267 1,280 1,292 1,305 7,646
Total Uses 19,269 28,736 31,781 20,398 22,023 20,965 143,172
Net Sources (Uses)(4,890) (5,358) (7,697) 6,208 6,300 8,725 3,288
Ending Balance 51,914$ 46,556$ 38,859$ 45,067$ 51,367$ 60,092$ 60,092$
(1) Proposed State Revolving Loan Funds for Campo Road Sewer Main Replacement
CIP Reserve Funds, in Thousands ($)
CIP Reserve Funds
The CIP Reserve Funds presentation, shown on the following pages, is designed to provide an understanding of
how the funding of CIPs is expected to financially influence the District over the next six years. The financial
impacts are based on CIPs and their funding sources, including fund transfers in accordance with the District’s
Reserve Policy, and planned debt issuances. This data is captured in the District’s Rate Model on an annual
basis in order to make these projections.
$0
$10
$20
$30
$40
$50
$60
FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022
CIP Reserve Fund Balances, in thousands ($)
Betterment Replacement Expansion New Supply
188
FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 Total
Source
Expansion 157$ 186$ 775$ 1,035$ 985$ 1,000$ 4,138$
Betterment 1,899 4,002 1,569 441 2,651 2,651 13,213
Replacement 8,657 15,815 20,510 9,875 9,339 8,161 72,357
New Supply 20 20 20 20 20 20 120
Total 10,733$ 20,023$ 22,874$ 11,371$ 12,995$ 11,832$ 89,828$
FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 Total
Category
Capital Facility Projects 3,745$ 4,683$ 3,706$ 3,329$ 3,540$ 1,834$ 20,837$
Replacement/Renewal Projects 5,904 14,691 16,970 5,517 3,049 105 46,236
Capital Purchase Projects 1,070 410 305 250 236 253 2,524
Developer Reimbursement Projects 14 139 315 - - - 468
Total 10,733$ 20,023$ 22,874$ 11,371$ 12,995$ 11,832$ 89,828$
CIP Category
Six-Year CIP Funding by Source
CIP Funding Source
Six-Year CIP Funding by Category
$0
$5
$10
$15
$20
$25
FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022
Six-Year CIP Funding by Source, in thousands ($)
Betterment Replacement Expansion New Supply
$0
$10
$20
$30
FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022
Six-Year CIP by Category, in thousands ($)
Capital Facility Projects Replacement/Renewal Projects
Capital Purchase Projects Developer Reimbursement Projects
189
CIP No Description FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 Total
P2040 Res - 1655-1 Reservoir 0.5 MG $ 20 $ 80 $ 450 $ 1,025 $ 825 $ 500 $ 2,900
P2267 36-Inch Main Pumpouts and Air/Vacuum Ventilation 220 55 - - - - 275
P2382 Safety and Security Improvements 250 - - - - - 250
P2405 PL - 624/340 PRS, Paseo Ranchero and Otay Valley Road 5 5 5 5 50 500 570
P2451 Otay Mesa Desalination Conveyance and Disinfection 50 50 50 50 50 50 300
P2453 SR-11 Utility Relocations 250 500 500 500 500 133 2,383
P2460 I.D. 7 Trestle and Pipeline Demolition 50 5 5 5 530 - 595
P2466 Regional Training Facility 6 - - - - - 6
P2485 SCADA Communication System and Software Replacement 85 85 85 85 24 - 364
P2486 Asset Management - Info Master Water Implementation 25 20 - - - - 45
P2494 Multiple Species Conservation Plan 48 20 - - - - 68
P2496 Otay Lakes Road Utility Relocations 5 20 - - - - 25
P2504 Regulatory Site Access Road and Pipeline Relocation 20 330 120 100 - - 570
P2516 PL - 12-Inch, 640 Zone, Jamacha Road - Darby/Osage - - - 75 100 625 800
P2520 Motorola Mobile Radio Upgrade 30 - - - - - 30
P2521 Large Meter Vault Upgrade Program 100 100 100 100 - - 400
P2537 Operations Yard Property Acquisition Improvements 10 - - - - - 10
P2541 624 Pressure Zone PRSs 10 - - - - - 10
P2547 District Administration Vehicle Charging Stations 85 20 - - - - 105
P2550 Fuel Island Upgrade 112 - - - - - 112
P2551 Blossom Lane Helix WD and Otay WD Interconnection 20 - - - - - 20
P2552 South Barcelona Helix WD and Otay WD Interconnection 20 - - - - - 20
P2553 Heritage Road Bridge Replacement and Utility Relocation 100 380 685 260 - - 1,425
P2564 Administration Carpet Replacement Program 5 210 - - - - 215
P2568 Technology Business Processes Improvement 100 - - - - - 100
P2569 Metro Ethernet Implementation/ District Facilities - Pilot 45 - - - - - 45
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 - - - - 250 250 500
P2584 Res - 657-1 and 657-2 Reservoir Demolitions - - - - 70 650 720
R2077 RecPL - 24-Inch, 860 Zone, Alta Road - Alta Gate/Airway 20 20 - - - - 40
R2079 RecPL - 6-Inch, 450 Zone, Otay Valley Road - Otay
Valley/Entertainment
10 10 10 10 110 - 150
R2109 Sweetwater River Wooden Trestle Improvement for the
Recycled Water Forcemain
10 5 - - - - 15
R2110 RecPS - 944-1 Optimization and Pressure Zone 5 67 - - - - 72
R2116 RecPL - 14-Inch, 927 Zone, Force Main Improvements 1,000 900 10 - - - 1,910
R2117 RWCWRF Disinfection System Improvements 10 50 50 150 1,000 150 1,410
R2118 Steele Canyon Sewer PS Large Solids Handling 68 - - - - - 68
R2119 RWCWRF Automation & Security Upgrades 95 50 130 - - - 275
R2120 RWCWRF Filtered Water Storage Tank Improvements 250 245 - - - - 495
R2122 Emergency Recycled Water Fire Hydrant Installations 15 - - - - - 15
Six-year CIP Projects by Category ($1,000s)
The 2017 Fiscal Year CIP Budget contains 107 projects. The costs for the work planned for Fiscal Year 2017 are $10.7
million. Of the 89 projects planned for Fiscal Year 2017, four are designated as reimbursable projects with an
estimated cost of $14,000. These reimbursable projects are built by a developer and reimbursed by the District.
Capital Facility Projects
190
CIP No Description FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 Total
R2123 Repurpose Otay Mesa Recycled Water Lines 35 5 5 5 150 150 350
R2124 RecPS - 927-1 Pump 5 Replacement 55 - - - - - 55
S2012 San Diego County Sanitation District Outfall and RSD Outfall
Replacement
150 150 200 250 300 350 1,400
S2027 Rancho San Diego Pump Station Rehabilitation 50 1,200 1,200 783 - - 3,233
S2033 Sewer System Rehabilitation 200 - - - - - 200
S2043 RWCWRF Sludge Handling System 1 1 1 1 1 1 6
S2047 Asset Management - Info Master Sewer Implementation - 30 28 - - - 58
47 Total Capital Facility Projects $ 3,745 $ 4,713 $ 3,834 $ 3,504 $ 3,960 $ 3,359 $ 23,115
P2083 PS - 870-2 Pump Station Replacement $ 390 $ 3,500 $10,800 $ 500 $ 50 $ 50 $ 15,290
P2174 PS - 1090-1 Pump Station Replacement (400 gpm) 1 150 200 1,149 - - 1,500
P2400 PL - 20-Inch Pipeline Replacement, 711 Zone, Otay Lakes
Road - at Santa Paula
- - - 150 350 1,500 2,000
P2493 624-2 Reservoir Interior/Exterior Coating 60 60 - - - - 120
P2507 East Palomar Street Utility Relocation 120 100 - - - - 220
P2508 Pipeline Cathodic Protection Replacement Program 300 100 96 - - - 496
P2518 803-3 Reservoir Interior/Exterior Coating 40 20 - - - - 60
P2519 832-2 Reservoir Interior/Exterior Coating 65 20 - - - - 85
P2529 711-2 Reservoir Interior & Exterior Coating 360 25 50 - - - 435
P2530 711-1 Reservoir Interior & Exterior Coating 90 50 50 - - - 190
P2531 944-1 Reservoir Interior & Exterior Coating 50 50 - - - - 100
P2532 944-2 Reservoir Interior & Exterior Coating 50 50 - - - - 100
P2533 1200-1 Reservoir Interior & Exterior Coating 10 700 50 50 - - 810
P2534 978-1 Reservoir Interior & Exterior Coating 615 50 50 - - - 715
P2535 458-2 Reservoir Interior & Exterior Coating & Upgrades 50 50 - - - - 100
P2538 Administration and Operations Building Fire Sprinkler
Replacement Program
10 - - - - - 10
P2539 South Bay Bus Rapid Transit (BRT) Utility Relocations 100 100 40 - - - 240
P2542 850-3 Reservoir Interior Coating 50 50 - - - - 100
P2543 850-1 Reservoir Interior/Exterior Coating 10 645 120 50 50 - 875
P2544 850-2 Reservoir Interior/Exterior Coating 835 135 50 50 - - 1,070
P2545 980-1 Reservoir Interior Exterior Coating 330 50 50 - - - 430
P2546 980-2 Reservoir Interior/Exterior Coating - 20 1,330 50 50 - 1,450
P2555 Administration and Operations Parking Lot Improvements 275 185 - - - - 460
P2557 520 Res Recirculation Pipeline Chemical Supply and
Analyzer Feed Replacement Project
50 35 5 - - - 90
P2559 Pressure Vessel Repair and Replacement Program 65 125 125 125 125 55 620
P2561 Res - 711-3 Reservoir Cover/Liner Replacement 1 4 95 1,700 - - 1,800
P2562 Res - 571-1 Reservoir Cover/Liner Replacement 90 2,500 5 5 - - 2,600
P2563 Res - 870-1 Reservoir Cover/Liner Replacement 1 1 9 90 899 - 1,000
P2565 803-2 Reservoir Interior/Exterior Coating & Upgrades - - 20 820 50 50 940
P2566 520-2 Reservoir Interior/Exterior Coating & Upgrades - - - 20 1,380 100 1,500
P2567 1004-2 Reservoir Interior/Exterior Coating & Upgrades - - - - 20 885 905
P2573 PL - 12-Inch Pipeline Replacement, 803 Zone, Hillsdale Road 160 225 1,365 - - - 1,750
Replacement/Renewal Projects
Capital Facility Projects, continued
Six-year CIP Projects by Category ($1,000s)
191
CIP No Description FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 Total
P2574 PL - 12-Inch and 14-inch Pipeline Replacement, 803 and 978
Zone, Vista Grande, Pence Drive
50 100 275 400 1,925 - 2,750
P2578 PS - 711-2 (PS 711-1 Replacement and Expansion) - 14,000 - - - 350 3,200 3,050 6,600
P2579 Temporary Lower Otay Pump Station Improvements 140 - - - - - 140
P2592 East H Street Bike Lane Utility Coordination 50 - - - - - 50
P2593 458-1 Reservoir Interior/Exterior Coating & Upgrades - - - - 10 830 840
P2594 Large Meter Replacement 240 150 95 - - - 485
R2111 RWCWRF - RAS Pump Replacement 10 5 - - - - 15
R2112 450-1 Disinfection Facility Rehabilitation 25 25 - - - - 50
R2121 Res - 944-1 Reservoir Cover/Liner Replacement 1 1 30 1,348 - - 1380
S2024 Campo Road Sewer Main Replacement 50 4,750 2,500 - - - 7300
S2044 Trenchless Sewer Rehabilitation 600 50 - - - - 650
S2045 Fuerte Drive Sewer Relocation 190 10 - - - - 200
S2046 RWCWRF - Aeration Panels Replacement 250 100 100 - - - 450
S2048 Hillsdale Road Sewer Repairs 100 390 10 - - - 500
S2049 Calavo Basin Sewer Rehabilitation - Phase 2 20 130 800 50 - - 1000
S2050 Rancho San Diego Basin Sewer Rehabilitation - Phase 2 - - - - 50 250 300
S2051 RWCWRF - Headworks Improvements - 50 100 600 - - 750
S2052 RWCWRF - Access Roads Repaving - - - 50 400 300 750
S2053 RWCWRF - Sedimentation Basins Refurbishment - - - 60 140 400 600
S2054 Calavo Basin Sewer Rehabilitation - Phase 3 - - - - 50 250 300
52 Total Replacements and Renewal Projects $ 5,904 $ 14,761 $18,420 $ 7,617 $ 8,749 $ 7,720 $ 63,171
Capital Purchase Projects
P2282 Vehicle Capital Purchases $ 197 $ 290 $ 240 $ 187 $ 236 $ 253 $ 1,403
P2285 Office Equipment and Furniture Capital Purchases 15 15 15 8 - - 53
P2286 Field Equipment Capital Purchases 38 105 50 55 - - 248
P2366 APCD Engine Replacements and Retrofits 820 - - - - - 820
4 Total Capital Purchase $1,070 $410 $305 $250 $236 $253 $2,524
Developer Reimbursement Projects .
P2325 PL-10" to 12" Oversize, 1296 Zone, PB Road-Rolling Hills
Hydro PS/PB Bndy
$ 3 $ - $ - $ - $ - $ - $ 3
P2403 PL - 12-inch, 624 Zone, Heritage Road - Olympic/Otay Valley - - - - 50 500 550
P2556 HWY 94 Upsized Utility Relocations at Melody Lane 1 99 - - - - 100
R2084 RecPL - 20-Inch, 680 Zone, Village 2 - Heritage/La Media 10 40 315 - - - 365
4 Total Reimbursement Projects $14 $139 $315 $0 $50 $500 $1,018
Summary
CIP No Description FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 Total
89 Total - FY 2017 Projects $10,733 $ 19,923 $21,296 $ 9,096 $ 6,825 $ 2,192 $ 70,065
18 Total - FY 2018 through FY 2022 Projects - 100 1,578 2,275 6,170 9,640 19,763
107 Grand Totals $10,733 $ 20,023 $22,874 $11,371 $ 12,995 $ 11,832 $ 89,828
Replacement/Renewal Projects, continued
Six-year CIP Projects by Category ($1,000s)
192
CIP#Description Cost
Cat. (2)
Funding
Source (3)
FY
2017
FY
2018
FY
2019
FY
2020
FY
2021
FY
2022 Total
P2040 Res - 1655-1 Reservoir 0.5 MG M E $ - $ - $ 50 $ 51 $ 52 $ 52 $ 205
P2466 Regional Training Facility M B/E 1,000 1,000 1,000 - - - 3,000
P2537 Operations Yard Property Acquisition
Improvements
M/E B 700 725 750 776 800 800 4,551
P2547 District Administration Vehicle
Charging Stations
M/E B/E 700 700 700 700 700 700 4,200
R2084 RecPL - 20-Inch, 680 Zone, Village 2 -
Heritage/La Media
M E - - 1,900 1,900 1,900 1,900 7,600
S2043 RWCWRF Sludge Handling System M/E/C B - - - - 30,000 30,000 60,000
2,400 2,425 4,400 3,427 33,452 33,452 79,556
FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 Total
1,200 1,200 3,150 2,152 12,152 12,152 32,006
1,200 1,225 1,250 1,275 11,300 11,300 27,550
- - - - 10,000 10,000 20,000
$ 2,400 $ 2,425 $ 4,400 $ 3,427 $ 33,452 $ 33,452 $ 79,556
(1)
(2)
(3)
Note:See pages 190-192 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.
Funding Source - Some projects have multiple funding sources as indicated by a slash (/):
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.
Cost Category
Each of the capital purchases and other types of assets has its own unique O&M cost.
Maintenance (M)
Energy (E)
Chemical (C)
Total Operating Budget Cost Impact
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.
193
Quantity Amount
Vehicles
1 34,000$
1 30,000
1 44,000
1 34,000
1 55,000
Total Vehicles 197,000
Office Equipment and Furniture
various 15,000
Total Office equipment and furniture 15,000
Field Equipment
1 38,000
Total Field equipment 38,000
APCD Engine Replacements and Retrofits
2 300,000
2 520,000
Total APCD engine replacements and retrofits 820,000
Grand Total : 1,070,000$
P2282 Vehicles 197,000$
P2285 Office equipment and furniture 15,000
P2286 Field equipment 38,000
P2366 APCD Engine replacements and retrofits 820,000
Grand Total: 1,070,000$
FY 2017 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
vehicles, office equipment and furniture, field equipment and APCD engine replacements and retrofits.
Description
Class 5 Dump Truck with 2-3 Yard Dump Body.
3/4 Ton Pick-up with Utility Body for Disinfection Technician.
40kw Critically Silenced Genset.
1/2 Ton Pick-up for Water System Operations Section.
1/2 Ton Pick-up for the Inspection Services Section.
All Wheel Drive SUV Replacement for Inspection Services Field Manager.
Districtwide office equipment and furniture items.
Summary by Project
Two emergency stand-by portable pumps.
Two replacement portable gensets.
194
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
195
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.
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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
197
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
the capacity fees collected within developing areas. Capacity fees are accounted for separately and
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Reserve Policy
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.
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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.
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
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Reserve Policy
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).
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.
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Reserve Policy
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
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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
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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.
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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.
205
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
206
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
207
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.
208
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
209
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
210
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.
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
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
211
Reserve Policy
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, an 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
normal budget process, annual operating revenues have been sufficient to finance the ongoing
212
Reserve Policy
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
transferring designated reserves to meet other purposes, reduce the new water
supply fee, or change the timing of the new water supply projects.
213
Reserve Policy
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
214
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.
215
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.
216
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.
217
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).
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.
Funding Source 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 und –Rtes and Charges
Debt
Proceeds
Debt Fund
Restricted Funds
Replacement
Capital
Improvement
Fund
Replacement
Fund
Category
4%
218
Reserve Policy
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.
219
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.
220
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.
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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.
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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,
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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.
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Glossary
The Reserve Policy contains terminology that is unique to public finance and budgeting. The following
glossary provides assistance in understanding these terms.
Annexation Fees: When water service is requested for land outside the boundaries of the District, the land
to be serviced must first be annexed. For sewer service the land must be annexed into an improvement
district within the District.
Assets: Resources owned or held by Otay Water District that has monetary value.
Availability Fees: The District levies charges each year in developed areas to be used for upgrades,
betterment, or replacement and in undeveloped areas to provide a source of funding for planning, mapping,
and preliminary design of facilities to meet future development. Current legislation provides that any
availability charge in excess of $10.00 per acre shall be used only for the purpose of the improvement district
for which it was assessed.
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.
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Glossary
Fund Balance: The current funds on hand resulting from the historical collection and use of monies. The
difference between assets and liabilities reported in the District’s Operating Fund plus residual equities or
balances and changes therein, from the 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.
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Investment Policy
1.0 POLICY
It is the policy of the Otay Water District to invest public funds in a manner which will provide maximum
security with the best interest return, while meeting the daily cash flow demands of the entity and
conforming to all state statues governing the investment of public funds.
2.0 SCOPE
This investment policy applies to all financial assets of the Otay Water District. The District pools all cash for
investment purposes. These funds are accounted for in the District’s audited Comprehensive Annual
Financial Report (CAFR) and include:
2.1) General Fund
2.2) Capital Project Funds
2.2.1) Designated Expansion Fund
2.2.2) Restricted Expansion Fund
2.2.3) Designated Betterment Fund
2.2.4) Restricted Betterment Fund
2.2.5) Designated Replacement Fund
2.2.6) Restricted New Water Supply Fund
2.3) Other Post Employment Benefits 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.
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Investment Policy
4.0 OBJECTIVE
As specified in the California Government Code 53600.5, when investing, reinvesting, purchasing, acquiring,
exchanging, selling and managing public funds, the primary objectives, in priority order, of the investment
activities shall be:
4.1) Safety: Safety of principal is the foremost objective of the investment program. Investments
of the Otay Water District shall be undertaken in a manner that seeks to ensure the
preservation of capital in the overall portfolio. To attain this objective, the District will diversify
its investments by investing funds among a variety of securities offering independent returns
and financial institutions.
4.2) Liquidity: The Otay Water District’s investment portfolio will remain sufficiently liquid to
enable the District to meet all operating requirements which might be reasonably
anticipated.
4.3) Return on Investment: The Otay Water District’s investment portfolio shall be designed with
the objective of attaining a benchmark rate of return throughout budgetary and economic
cycles, commensurate with the District’s investment risk constraints and the cash flow
characteristics of the portfolio.
5.0 DELEGATION OF AUTHORITY
Authority to manage the Otay Water District’s investment program is derived from the California Government
Code, Sections 53600 through 53692. Management responsibility for the investment program is hereby
delegated to the Chief Financial Officer (CFO), who shall be responsible for all transactions undertaken and
shall establish a system of controls to regulate the activities of subordinate officials and their procedures in
the absence of the CFO.
The CFO shall establish written investment policy procedures for the operation of the investment program
consistent with this policy. Such procedures shall include explicit delegation of authority to persons
responsible for investment transactions. No person may engage in an investment transaction except as
provided under the terms of this policy and the procedures established by the CFO.
6.0 ETHICS AND CONFLICTS OF INTEREST
Officers and employees involved in the investment process shall refrain from personal business activity that
could conflict with the proper execution and management of the investment program, or that could impair
their ability to make impartial investment decisions. Employees and investment officials shall disclose to the
General Manager any material financial interests in financial institutions with which they conduct business.
They shall further disclose any personal financial/investment positions that could be related to the
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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 Financial Industry Regulatory Authority (FINRA) 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 $65 million). The District
may also invest bond proceeds in LAIF with the same but independent maximum limitation.
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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
insured maximum of $250,000, approved collateral shall be required in accordance with California
Government Code, Section 53652. Investments in CD’s are limited to 15 percent of the District’s
portfolio.
8.05) Commercial paper, which is short-term, unsecured promissory notes of corporate and public
entities. Purchases of eligible commercial paper may not exceed 10 percent of the outstanding
paper of an issuing corporation, and maximum investment maturity will be restricted to 270 days.
Investment is further limited as described in California Government Code, Section 53601(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.
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.
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Investment Policy
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 $250,000 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.
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
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Investment Policy
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.
Coupon, discount or earnings rate.
Par value, amortized book value, and market value.
Percentage of the portfolio represented by each investment category.
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Investment Policy
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.
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Appendix A: Glossary
Active Investing: Active investors will purchase investments and continuously monitor their activity, often
looking at the price movements of their stocks many times a day, in order to exploit profitable conditions.
Typically, active investors are seeking short term profits.
Agencies: Federal agency securities and/or Government-sponsored enterprises.
Bankers’ Acceptance (BA): A draft or bill or exchange accepted by a bank or trust company. The accepting
institution guarantees payment of the bill, as well as the issuer.
Benchmark: A comparative base for measuring the performance or risk tolerance of the investment
portfolio. A benchmark should represent a close correlation to the level of risk and the average duration of
the portfolio’s investments.
Broker/Dealer: Any individual or firm in the business of buying and selling securities for itself and others.
Broker/dealers must register with the SEC. When acting as a broker, a broker/dealer executes orders on
behalf of his/her client. When acting as a dealer, a broker/dealer executes trades for his/her firm's own
account. Securities bought for the firm's own account may be sold to clients or other firms, or become a
part of the firm's holdings.
Certificate of Deposit (CD): A short or medium term, interest bearing, FDIC insured debt instrument offered
by banks and savings and loans. Money removed before maturity is subject to a penalty. CDs are a low
risk, low return investment, and are also known as “time deposits”, because the account holder has agreed
to keep the money in the account for a specified amount of time, anywhere from a few months to several
years.
Collateral: Securities, evidence of deposit or other property, which a borrower pledges to secure repayment
of a loan. Also refers to securities pledged by a bank to secure deposits of public monies.
Commercial Paper: An unsecured short-term promissory note, issued by corporations, with maturities
ranging from 2 to 270 days.
Comprehensive Annual Financial Report (CAFR): The official annual report for the Otay Water District. It
includes detailed financial information prepared in conformity with generally accepted accounting principles
(GAAP). It also includes supporting schedules necessary to demonstrate compliance with finance-related
legal and contractual provisions, extensive introductory material, and a detailed statistical section.
Coupon: (a) The annual rate of interest that a bond’s issuer promises to pay the bondholder on the bond’s
face value. (b) A certificate attached to a bond evidencing interest due on a set date.
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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.
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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.
Financial Industry Reglatory Authority, Inc. (FINRA): An independent, not-for-profit organization authorized
by Congress to protect America’s investors by making sure the securities industry operates fairly and
honestly. It is dedicated to investor protection and market integrity through effective and efficient regulation
of the securities industry. FINRA is the successor to the National Association of Securities Dealers, Inc.
(NASD).
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.
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Appendix A: Glossary
Interest Only Strips: A mortgage backed instrument where the investor receives only the interest, no
principal, from a pool of mortgages. Issues are highly interest rate sensitive, and cash flows vary between
interest periods. Also, the maturity date may occur earlier than that stated if all loans within the pool are pre-
paid. High prepayments on underlying mortgages can return less to the holder than the dollar amount
invested.
Inverse Floater: A bond or note that does not earn a fixed rate of interest. Rather, the interest rate is tied to a
specific interest rate index identified in the bond/note structure. The interest rate earned by the bond/note
will move in the opposite direction of the index. An inverse floater increases the market rate risk and
modified duration of the investment.
Leverage: Investing with borrowed money with the expectation that the interest earned on the investment
will exceed the interest paid on the borrowed money.
Liquidity: A liquid asset is one that can be converted easily and rapidly into cash without a substantial loss
of value. In the money market, a security is said to be liquid if the spread between bid and asked prices is
narrow and reasonable size can be done at those quotes.
Local Agency Investment Fund (LAIF): The aggregate of all funds from political subdivisions that are
placed in the custody of the State Treasurer for investment and reinvestment.
Market Value: The price at which a security is trading and could presumably be purchased or sold.
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.
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Appendix A: Glossary
Money Market Mutual Funds: An open-end mutual fund which invests only in money markets. These funds
invest in short term (one day to one year) debt obligations such as Treasury bills, certificates of deposit, and
commercial paper.
National Association of Securities Dealers (NASD): A self-regulatory organization of the securities industry
responsible for the operation and regulation of the NASDAQ stock market and over-the-counter markets. Its
regulatory mandate includes authority over firms that distribute mutual fund shares as well as other
securities.
Passive Investing: An investment strategy involving limited ongoing buying and selling actions. Passive
investors will purchase investments with the intention of long term appreciation and limited maintenance,
and typically don’t actively attempt to profit from short term price fluctuations. Also known as a buy-and-
hold strategy.
Primary Dealer: A designation given by the Federal Reserve System to commercial banks or broker/dealers
who meet specific criteria, including capital requirements and participation in Treasury auctions. These
dealers submit daily reports of market activity and positions and monthly financial statements to the Federal
Reserve Bank of New York and are subject to its informal oversight. Primary dealers include Securities and
Exchange Commission registered securities broker/dealers, banks, and a few unregulated firms.
Prudent Person Rule: An investment standard. In some states the law requires that a fiduciary, such as a
trustee, may invest money only in a list of securities selected by the custody state—the so-called legal list. In
other states the trustee may invest in a security if it is one which would be bought by a prudent person of
discretion and intelligence who is seeking a reasonable income and preservation of capital.
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.
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Appendix A: Glossary
Repurchase Agreement (RP OR REPO): A holder of securities sells these securities to an investor with an
agreement to repurchase them at a fixed price on a fixed date. The security “buyer” in effect lends the
“seller” money for the period of the agreement, and the terms of the agreement are structured to
compensate him for this. Dealers use RP extensively to finance their positions. Exception: When the Fed is
said to be doing RP, it is lending money that is increasing bank reserves.
Safekeeping: A service to customers rendered by banks for a fee whereby securities and valuables of all
types and descriptions are held in the bank’s vaults for protection.
Secondary Market: A market made for the purchase and sale of outstanding securities issues following
their initial distribution.
Securities & Exchange Commission: Agency created by Congress to protect investors in securities
transactions by administering securities legislation.
Sec Rule 15C3-1: See Uniform Net Capital Rule.
Structured Notes: Notes issued by Government Sponsored Enterprises (FHLB, FNMA, 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.
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1.0: POLICY
It is the policy of the Otay Water District to finance the acquisition of high value assets that have an extended
useful life through a combination of current revenues and debt financing. Regularly updated debt policies
and procedures are an important tool to insure the use of the District’s resources to meet its commitments,
to provide the highest quality of service to the District’s customers, and to maintain sound financial
management practices. These guidelines are for general use and allow for exceptions as circumstances
dictate.
2.0: SCOPE
This policy is enacted in an effort to standardize the issuance and management of debt by the Otay Water
District. The primary objective is to establish conditions for the use of debt, to minimize the District’s debt
service requirements and cost of issuance, to retain the highest practical credit rating, maintain full and
complete financial disclosure and reporting, and to maintain financial flexibility for the District. This policy
applies to all debt issued by the District including general obligation bonds, revenue bonds, capital leases
and special assessment debt.
3.0: LEGAL & REGULATORY REQUIREMENTS
The Chief Financial Officer (CFO) and the District’s Legal Counsel will coordinate their activities to ensure
that all securities are issued in full compliance with Federal and State law.
4.0: CAPITAL FACILITIES FUNDING
Financial Planning
The District maintains a six-year financial projection that identifies operating requirements and public facility
and equipment requirements, and has developed a Rate Model for funding the District’s 6-Year Capital
Improvement Program (CIP). The District’s CIP Budget places the capital requirements in order of priority
and schedules them for funding and implementation. It identifies a full range of capital needs, provides for
the ranking of the importance of such needs, and identifies all the funding sources that are available to
cover the costs of the projects. In cases where the program identifies project funding through the use of
debt financing, the budget should provide information needed to determine debt capacity. The Rate Model
and the CIP Budget give the Board part of the data needed to make informed judgments concerning the
possibility of issuing debt.
Funding Criteria
The Chief Financial Officer (CFO) will evaluate all capital project requests and develop a proposed funding
plan. Priority may be given to those projects that can be funded with current resources (annual cash flow,
fund balances or reserves). Those projects that cannot be funded with current resources may be deferred or
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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.
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4. The project is mandated by State and/or Federal requirements and current resources are insufficient
or unavailable.
5. The project is immediately required to meet or relieve capacity needs and current resources are
insufficient or unavailable.
5.0: DEBT STRUCTURE
General
The District will normally issue debt with a maturity of not more than 30 years. The structure should
approximate level debt service for the term where it is practical or desirable. There will be no debt structures
that include increasing debt service levels in subsequent years, with the first and second year of a debt
payoff schedule the exception and related to projected additional income to be generated by the project to
be funded. There will be no "balloon" debt repayment schedules that consist of low annual payments and
one large payment of the balance due at the end of the term. There will always be at least interest paid in
the first fiscal year after debt issuance and principal starting no later than the first fiscal year after the date
the facility or equipment is expected to be placed in service. Capitalized interest will not be for a period of
more than necessary to provide adequate security for the financing.
Limitations on the Issuance of Variable Rate Debt
The District will normally issue debt with a fixed rate of interest. The District may issue variable rate for the
purpose of managing its interest costs. At the same time, the District should protect itself from too much
exposure to interest rate fluctuations. In determining that it is in the District’s best interest to issue certain
debt at variable rates instead of fixed rates, at the time of issuing any variable rate debt, there should be at
least a 10% estimated reduction in annual debt costs by issuing variable rate debt when compared to a
similar issuance of fixed rate debt. If the estimated overall cost savings from issuing variable rate debt is not
at least 10% at the time of issuance, relatively small fluctuations in rates could actually increase the District’s
financing costs over the life of the bonds compared to a similar fixed rate financing. By using this 10% factor
at the time of issuance, the District can be relatively assured that its variable rate financing will be cost-
effective over the term of the bonds.
The comparison will be based on the following criteria:
1. The interest rate used to estimate 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.
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Periodically, using the criteria described above, the Chief Financial Officer will compare the estimated
annual debt service costs to maturity of any variable rate debt with estimated debt service if the debt was
converted to fixed rates. If this analysis produces a break even in total payments over the life of the issue,
the Chief Financial Officer will recommend converting such variable rate debt to fixed rate.
Variable rate debt should not represent more than 25% of the District’s total debt portfolio. This level of
exposure to interest rate fluctuations is considered to be manageable in an environment of increasing
interest rates. At a higher ratio than this, the District might be faced with an unplanned water rate increase
to meet its Rate Covenants. Rating agencies use this ratio in their analysis of the District’s overall credit
rating.
Further, Rate Covenants applicable to variable rate debt shall not compromise the issuance of additional
debt planned by the District and variable rate debt should always contain a provision to allow conversion to
a fixed rate at the District’s option.
6.0: CREDIT OBJECTIVES
The Otay Water District seeks to maintain the highest possible credit ratings for all categories of long-term
debt that can be achieved without compromising delivery of basic services and achievement of District
policy objectives.
Factors taken into account in determining the credit rating for a financing include:
1. Diversity of the District’s customer base.
2. Proven track record of completing capital projects on time and within budget.
3. Strong, professional management.
4. Adequate levels of staffing for services provided.
5. Reserves.
6. Ability to consistently meet or exceed Rate Covenants.
The District recognizes that external economic, natural, or other events may from time to time affect the
creditworthiness of its debt. Nevertheless, the District is committed to ensuring that actions within its control
are prudent and well planned.
7.0: COMPETITIVE AND NEGOTIATED SALE CRITERIA
Competitive Sale
The District will use a competitive bidding process in the sale of debt unless the nature of the issue or
specific circumstances warrants a negotiated sale. The CFO will determine the best bid in a competitive sale
by calculating the true interest cost (TIC) of each bid.
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Negotiated Sale
Types of debt that would typically lend themselves to the negotiated sale format are variable rate debt and
unrated debt. Circumstances that might warrant a negotiated sale may occur when the issue is of a limited
size that would not attract wide-spread investor interest, during periods of high levels of issuance by other
entities in the State, or during periods of market volatility 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).
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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.
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Underwriter: The Underwriter markets the bonds for sale to investors. While the District’s preference is to
select the Underwriter for the debt via sale of the debt at competitive bid, there are circumstances when a
negotiated issue is in the best interests of the District. Negotiated sales are preferable if the security features
are particularly complex or market conditions are volatile. The Chief Financial Officer will recommend
whether the method of sale is competitive or negotiated based on the type of issue and other market
conditions. In the case of negotiated sales, the Underwriter will be required to demonstrate sufficient
capitalization and sufficient experience related to the specific type of debt issuance.
The Underwriter will work in connection with the District’s Financial Advisor on structuring the issue and
offering different pricing ideas.
Bond Counsel: The District’s Bond Counsel provides the primary legal documents that detail the security for
the bonds and the authority under which bonds are issued. The Bond Counsel also provides an opinion to
bond holders that the bonds are tax-exempt under both State and Federal law. All closing documents in
connection with an issue are also prepared by Bond Counsel.
Disclosure Counsel: The District’s Disclosure Counsel provides legal advice to the District regarding the
adequacy of the District’s disclosure of financial information or risks of investing in the District’s debt issue to
the investing public. The Disclosure Counsel can prepare the official statement or review the official
statement and gives the District an opinion that there is no information missing from the official statement of
a material nature that would be necessary for an investor to make an informed decision about investing in
the District’s bonds.
Trustee: The Trustee is a financial institution selected by the District to administer the collection of revenues
pledged to repay the bonds and to distribute those funds to bondholders.
Letter of Credit Bank: The Letter of Credit Bank is a U.S. or foreign bank that has issued a letter of credit
providing both credit enhancement (the Letter of Credit Bank will pay the debt in the event that the District
defaults on the payment) and liquidity for a variable rate bond issue. These banks have their own short-term
credit rating, which 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
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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
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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
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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.
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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.
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Lease/Purchase Agreements
Over the lifetime of a lease, the total cost to the District will generally be higher than purchasing the asset
outright. As a result, the use of lease/purchase agreements in the acquisition of vehicles, equipment and
other capital assets will generally be avoided, particularly if smaller quantities of the capital asset(s) can be
purchased on a "pay-as-you-go" basis.
The District may utilize lease-purchase agreements to acquire needed equipment and facilities. Criteria for
such agreements should be that the asset life is three years or more, the minimum value of the agreement is
$50,000 and interest costs must not exceed the interest rate earned by the District’s portfolio for the average
of the past 6 months. Lease payments of this type are considered operating expenses and would reduce
net operating income available to pay any District revenue bonds. There are no coverage requirements or
rate covenants associated with lease/purchase agreements.
State Water Loans
The State Water Resources Control Board makes certain funds available to water districts throughout the
State. These loans typically carry a below-market rate of interest and are short term in nature. While State
loans should be incorporated into the District’s debt portfolio for the financing of capital improvements, the
payment of the loan should not compromise the District’s ability to issue other planned debt or cause the
District to violate its rate covenants or make it necessary for the District to increase rates to maintain existing
rate covenants.
Land Based Financing
The District may consider developer or property owner initiated applications requesting the formation of
community facilities or assessment districts and the issuance of bonds to finance eligible District facilities
necessary to serve newly developing commercial, industrial and/or residential projects. Facilities will be
financed in accordance with the provisions of the Municipal Improvement Act of 1913 and the Improvement
Bond Act of 1915, or the Mello-Roos Community Facilities Act of 1982.
Typically, the bonds issued would be used to prepay, in a lump-sum, the District’s capacity fees with respect
to a large tract of land under development, or to finance in-tract infrastructure that will eventually be
dedicated to the District. The bonds are secured by a special tax or assessment to be levied on property
within the boundaries established for the community facilities district (sometimes known as a “Mello-Roos”
district) or the assessment district. If the District becomes the sponsoring public agency for such financing
district and the issuance of debt, the District will be required to enter into a Funding, Construction and
Acquisition agreement for any of the facilities to be dedicated to the District upon completion. This
agreement governs the type of facilities to be constructed with bond proceeds and how the facilities will be
accepted by the District.
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In some cases, the District may not be asked to be the sponsoring agency for the formation of a financing
district, rather, the developer or property owner may approach a school district or a city to be the sponsoring
agency. Nonetheless, the property owner may want to include lump-sum payment of District fees in the
financing or construction of certain facilities to be dedicated to the District upon completion. In this case, if
the District desired to participate, the District would enter into a Joint Financing Agreement with the
sponsoring agency, again governing the type of facilities to be constructed with bond proceeds and how the
facilities will be accepted by the District.
On a case-by-case basis, the Board shall make the determination as to whether a proposed district will
proceed under the provisions of the Assessment Acts or the Mello-Roos Community Facilities Act. The
Board may confer with other consultants and the applicant to learn of any unique district requirements, such
as long-term development phasing, prior to making any final determination.
All District and District consultant costs incurred in the evaluation of new development, district applications
and the establishment of districts will be paid by the applicant(s) by advance deposits in those instances
where a party or parties other than the District have initiated a proposed district. Expenses not legally
reimbursable by the financing district will be borne by the applicant. The District may incur expenses for
analyzing proposed assessment or community facilities districts where the District is the principal proponent
of the formation or financing of the district.
Prior to the issuance of any land secured financing and in accordance with State law, the Board will adopt
policies and procedures with criteria to be met before any special tax bonds or assessment district bonds
may be issued. These criteria include the qualifications of the appraiser, the minimum value to lien ratio to
be achieved prior to issuing the land secured debt and the maximum tax to be levied on different categories
of property.
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-
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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
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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).
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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.
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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.
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True Interest Cost (TIC): A method of calculating the overall cost of a financing that takes into account the
time value of money. The TIC is the rate of interest that will discount all future payments so that the sum of
their present value equals the issue proceeds.
Underwriter: The term used broadly in the municipal market, to refer to the firm that purchases a securities
offering from a governmental issuer.
Yield Curve: Refers to the graphical or tabular representation of interest rates across different maturities.
The presentation often starts with the shortest-term rates and extends towards longer maturities. It reflects
the market’s views about implied inflation/deflation, liquidity, economic and financial activity, and other
market forces.
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Glossary
The Fiscal Budget contains terminology that is unique to public finance and budgeting. The
following budget glossary provides assistance in understanding these terms.
ACCRUAL BASIS OF ACCOUNTING: The basis of accounting under which transactions are recognized
when they occur, regardless of the timing of cash receipts and disbursements.
ACRE-FOOT: The volume of water that will cover one acre to a depth of one foot. One acre-foot equals
435.6 units or 325,850 gallons.
ADDITIONAL SYSTEMS FEES: Effective May 1, 1986, each customer receiving water service in the
Improvement District 9 water service zone pays an additional monthly meter system charge of $2.00 for
each meter in service.
ANNEXATION FEES: Whenever water service is requested for land outside the boundaries of the
District 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.
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Glossary
BETTERMENT FEES FOR MAINTENANCE: The Operating Budget earns betterment fees for
maintenance work performed on infrastructure within special betterment zones. 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.
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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.
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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.
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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.
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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.
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AF Acre-Foot/Feet
AMR Automated Meter Reader/Reading
APCD Air Pollution Control District
APWA American Public Works Association
ASCE American Society of Civil Engineers
ASU Assigned Service Unit
AWWA American Water Works Association
BABS Build America Bonds
BMP Best Management Practices
BOD Biological Oxygen Demand
CAD Computer Aided Design
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
CFS Cubic Foot Second
CMMS Computerized Maintenance Management System
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
CUWCC California Urban Water Conservation Council
CWA County Water Authority (San Diego)
DOH Department of Health
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
List of Acronyms
265
List of Acronyms
FY Fiscal Year
GAAP Generally Accepted Accounting Principles
GASB Government Accounting Standards Board
GF General Funds
GFOA Government Finance Officers Association
GIS Geographic Information System
GO General Obligation (bonds)
GPCD Gallons per Capita per Day
GPD Gallons 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
LF Linear Feet
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
266
List of Acronyms
OWD Otay Water District
PB Pacific Bay
PERS Public Employees' Retirement System
PL Pipeline
PRS Pressure Reducing Station
PRV Pressure Reducing Valve
PS Pump Station
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
267
Index
Administrative Expenditures 88,105,115,132
At-A-Glance 1
Awards 3-6
Balanced Scorecard Perspective 31
Budget Calendar 11
Budget Guide 8-9
Budget Process and Overview 10-14
Budget Summary 53-58
Capital Improvement Program Narrative 181-182
Capital Purchases 194
CIP Projects in Construction 184-187
CIP Justification and Impact on Operating Budget 193
CIP Major Projects 183
CIP Reserve Funds 188
Classification of Water Sales 79,97
Current Economic Conditions 19
Debt Management 70-71
Debt Policy 240-253
Debt Policy Glossary 253-257
Demographics 22
Department Budgets:
Administrative Services 147-156
Board of Directors 137-138
Engineering 171-177
Finance 157-162
General Expense 179
General Manager 141-145
IT and Strategic Planning 147-154
Water Operations 163-169
Departmental Operating Budget Narrative 125-127
Director’s Division Boundaries 139
Five-Year Forecast 67
Formula for Sewer Rates 117-118
Fund Balance Summary by Fund 63
Fund Balances 69
Future, The 20-21
General Fund Forecast 68
General Fund Revenues, Expenditures and Transfers 62
General Information 2
General Expense 124
268
Index
General Revenues 123
General Revenues and Expenses Narrative 121-122
Glossary 259-264
Investment Policy 227-233
Investment Policy Glossary 234-239
Labor and Benefits 128-129
Letter of Transmittal iv-xi
List of Acronyms 265-267
Materials and Maintenance Expenditures 89,106,116,133
Meter Fees 84,101
MWD and CWA Fixed Fees (Pass-Through) 83
Operating Budget Summary 78,96,110
Operating Budget Summary by System 61
Operating Budget Summary – General Fund 59-60
Operating Expenditures by Department 134
Operating Expenditures by Object 135
Organization Chart 7
Past and Present 17-18
Position Count by Department 130-131
Potable Narrative 75-77
Power Costs 87,104,114
Projected Interest Payments by Debt Issuance 74
Projected Principal Payments by Debt Issuance 73
Recycled Narrative 93-95
Reserve Policy 197-224
Reserve Policy Glossary 225-226
Resolution 4302 15-16
Revenue History 85,102,113
Revenues and Expenditures by Fund 64-65
Revenues and Expenditures by Type 66
San Diego Rainfall 28
Schedule of Outstanding Debt 72
Service Area Assessed Valuation 25
Service Area Maps 91,107,119
Sewer Charges Summary by Service Class 111
Sewer Narrative 109
Sewer Rate Comparison 24
Six-Year CIP Funding by Category 189
Six-Year CIP Funding by Source 189
Six-Year CIP Projects by Category ($1,000)s 190-192
269
Index
Statement of Values 30
Strategic Plan 29-52
Summary of Financial Policies 195-196
System Fees 82,100,112
Table of Contents i-iii
Ten Largest Customers 27
Ten Principal Taxpayers 26
Unit Sales History and Meter Count by Customer Class 81,99
Water Purchases - Recycled 103
Water Purchases and Related Costs - Potable 86
Water Rate Comparison 23
Water Sales Summary by Meter Size 79,98
Water Sales Summary by Service Class 80
270