HomeMy WebLinkAboutOperating and Capital Budget FY 2017-2018
Otay Water District
Adopted Operating and Capital Budget
Fiscal Year 2017-2018
BOARD OF DIRECTORS
Mark Robak, Division 5 President
Tim Smith, Division 1 Vice President
Mitch Thompson, Division 2 Treasurer
Gary Croucher, Division 3
Hector Gastelum, Division 4
MANAGEMENT TEAM
Mark Watton 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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v
Awards. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiii
Resolution No. 4336. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xvii
OVERVIEW
Budget Guide. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Mission Statement, Vision, Key Challenge, Statement of Values. . . . . . . . . . . . . 3
District Formation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Service Area. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Organizational Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Budget Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Budget Basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Fund Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Budget Calendar. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
COMMUNITY PROFILE
Demographics. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Service Area Assessed Valuation Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Ten Principal Taxpayers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Ten Largest Customers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Water Rate Comparison – Member Agency Water Rates. . . . . . . . . . . . . . . . . 15
Sewer Rate Comparison . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
San Diego Rainfall . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Current Economic Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Economic Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
The Future. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
STRATEGIC PLAN
Balanced Scorecard Perspective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Administrative Services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Water Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Engineering. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
FINANCIAL SUMMARIES
Budget Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Operating Budget Summary – General Fund . . . . . . . . . . . . . . . . . . . . . . . . 45
Operating Budget Summary by System . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
General Fund Revenues, Expenditures and Transfers . . . . . . . . . . . . . . . . . . . 48
Fund Balance Summary by Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Revenues and Expenditures by Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Revenues and Expenditures by Type. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
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Table of Contents
FIVE-YEAR FORECAST
Five-Year Forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
General Fund Forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Fund Balances Forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Debt Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Schedule of Outstanding Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Projected Principal Payments by Debt Issuance . . . . . . . . . . . . . . . . . . . . . . 59
Projected Interest Payments by Debt Issuance . . . . . . . . . . . . . . . . . . . . . . . 60
REVENUES AND EXPENDITURES
Potable Revenues and Expenditures
Potable Narrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Operating Budget Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Classification of Water Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Water Sales Summary by Service Class. . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Unit Sales History and Meter Count by Customer Class . . . . . . . . . . . . . . . . . . 66
System Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
MWD and CWA Fixed Fees (pass-through) . . . . . . . . . . . . . . . . . . . . . . . . . 68
Meter Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Revenue History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Water Purchases and Related Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Power Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Administrative Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Materials and Maintenance Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Potable Water Service Area Maps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Recycled Revenues and Expenditures
Recycled Narrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Operating Budget Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Classification of Water Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Water Sales Summary by Meter Size . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Unit Sales History and Meter Count by Customer Class . . . . . . . . . . . . . . . . . . 82
System Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Meter Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Revenue History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Water Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Power Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Administrative Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Materials and Maintenance Expenditures. . . . . . . . . . . . . . . . . . . . . . . . . . 89
Recycled Water Service Area Maps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
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Table of Contents
Sewer Revenues and Expenditures
Sewer Narrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
Operating Budget Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Charges Summary by Service Class . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
System Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Revenue History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Power Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Administrative Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Materials and Maintenance Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . 98
Formula for Sewer Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Sewer Service Area Map . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
General Revenues and Expenditures
General Revenues and Expenditures Narrative . . . . . . . . . . . . . . . . . . . . . . . 103
General Revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
General Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
DEPARTMENTAL OPERATING BUDGET
Departmental Operating Budget Narrative . . . . . . . . . . . . . . . . . . . . . . . . . 107
Labor and Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
Labor and Benefits by Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Position Count by Department . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
Contract/Temporary Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
Administrative Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
Materials and Maintenance Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . 118
Operating Expenditures by Department . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
Operating Expenditures by Object . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
Departmental Budgets:
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
General Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
Administrative Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
Water Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145
Engineering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151
General Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157
CAPITAL BUDGET
Capital Budget Narrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159
CIP Reserve Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162
Six-Year CIP Projects Summary by Source ($1,000s). . . . . . . . . . . . . . . . . . . . 163
Six-Year CIP Projects Summary by Fund ($1,000s). . . . . . . . . . . . . . . . . . . . . 163
Six-Year CIP Projects by Source and Fund ($1,000s). . . . . . . . . . . . . . . . . . . . 164
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Table of Contents
CAPITAL BUDGET (continued)
CIP Justification and Impact on Operating Budget . . . . . . . . . . . . . . . . . . . . 168
Capital Purchases FY2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169
POLICIES
Summary of Financial Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171
Reserve Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173
Reserve Policy Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212
Investment Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215
Investment Policy Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224
Debt Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 233
Debt Policy Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 252
APPENDIX
Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 257
List of Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 263
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 266
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September 30, 2017
Honorable Board of Directors
Otay Water District
I am pleased to present the Otay Water District’s Adopted Operating and Capital Budget for
FY 2018. 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 FY 2018.
The 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, practices, and sound financial
management, supported by the FY 2015-2018 Strategic Plan, along with a committed and
talented staff, the District will achieve continued success as an organization and thus,
ensure the well-being and quality of life its customers.
Drought Conditions and California State Mandates
According to the United States Geological Survey, the State of California has been in a
drought for more than five years. Fortunately, in 2017, California experienced above-average
precipitation and snowpack. The majority of reservoirs are above historic average levels
and most rivers, creeks, and lakes have been reported to be in good condition. On April 7,
2017, Governor Jerry Brown issued an executive order officially ending the drought state of
emergency in most of California. The Governor also released the state’s long-term plan to
better prepare the state for future droughts and make conservation a way of life in California.
On April 26, 2017, the State Water Resources Control Board (SWRCB) rescinded the
conservation mandates but continued the water-use reporting requirements and
prohibitions against wasteful practices. As part of the Governor’s mandate, the SWRCB
adopted Resolution No. 2016-0029, which allowed individual suppliers to self-certify that
there would be no supply shortfall assuming three additional dry years. With the certification
of the Claude “Bud” Lewis Carlsbad Desalination Plant, additional water storage capacity,
and upgraded conveyance systems, the San Diego region’s water agencies have the ability
v
to provide sufficient water supplies to meet customer demands, assuring there would be
no supply shortfall during three additional dry years.
In addition to meeting customer demands during a drought, the District has consistently
advocated for state policies and legislation that include supply development and water-use
efficiency. The District continues to work closely with the San Diego County Water Authority
(CWA), the Association of California Water Agencies, and other water agencies in the region
to ensure that the targets and measures in the Governor’s long-term framework support a
balanced approach and reflect local water supply investments and conditions.
The District continues its efforts to diversify water resources, reducing dependence on
traditional water supplies from the Colorado River and the Sacramento-San Joaquin Delta.
The District has reached a milestone by obtaining a Presidential Permit, allowing the District
to build a nearly four-mile long potable water pipeline that begins at the U.S. Mexico border.
The District could potentially begin receiving up to two thirds of its projected water needs
from the Rosarito Desalination plant as early as 2024. Although there are additional hurdles
to overcome, desalinated water from Rosarito would be a closer option and a drought
resistant source of water.
With the conservation mandates ending in FY 2017, potable sales volumes increased 7%
from FY 2016 levels. Regardless of the end of the drought emergency and the District
meeting the state’s mandated conservation targets, the District’s customers were still
seeing and hearing public campaigns promoting conservation and drought-related
messages throughout the county from the CWA, the state, and the Metropolitan Water
District (MWD). 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 3% due to continued conservation efforts in FY
2018, but remain 12% below 2015 levels. Additional remaining increases in sales volumes
are expected to come from new customers. Staff will continue to monitor these trends as
they influence overall District finances.
FY 2015 - 2018 Strategic Plan
The FY 2015-2018 Strategic Plan consisted of a two-phased approach. Phase 1 has been
completed with the primary focus on developing key enterprise-wide projects – SCADA,
Work Order/Asset Management, and Emergency Preparedness/NIMS. The District is now
entering Phase 2 of the FY 2015-2018 Strategic Plan, where the focus is to build upon the
system foundation, business process improvement, and facilities. Where rapid growth had
vi
been a significant focus in the early years of the District and in its earlier strategic plans,
today it is primarily focused on managing long-term maintenance and replacement of
infrastructure.
This 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 the 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.
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 residents and businesses the District has the honor to serve. This
serves as a great reminder as to why the District exists.
Finding ways to streamline operations and cut costs is a significant element of the District’s
ongoing commitment to its customers. By reducing costs those savings can be passed to
the ratepayers. For example, the District is currently upgrading more than 8,000 of its
approximately 49,000 automated meter reading (AMR) meters, from 3G to 4G technology,
allowing more meters to be read at a faster pace. In an effort to be as cost efficient as
possible, the District has decided, in most cases, to replace the meter register instead of the
entire meter, avoiding over $700,000 in meter replacement costs. Because of the life
expectancy and warranty of the meters, the District is able to delay the replacement of the
meters approximately 10 more years. There were many benefits to upgrading to AMR
meters, including the reduction of full-time meter reader staff members from nine to three,
increased safety of staff members, reduction of the District’s liability, and allowing staff to
store historical water use data. These advanced meters can assist customers with
unexplained usage by providing leak, tamper, and backflow detection alarms. The efforts
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related to meter technology is only one example of cost savings and the District’s ongoing
commitment to pursue cost efficiencies.
Investing in technology is another strategy the District uses to increase and enhance
efficiency and productivity. An ongoing goal included in the District’s past and current
strategic plans is to capitalize on these technology investments. The success of this
approach is proven by the District’s gains in productivity and reduction in staffing. The
following charts show that since 2007, the District has reduced staffing by 40.75 full-time
equivalent positions, or 23%, while the number of customer accounts increased by 2,542.
Employee Count and Number of Accounts
Because of increased efficiency and higher employee productivity, the District has been
able to continue absorbing some of the pass-through costs from its water suppliers,
including the City of San Diego, CWA, and MWD. This helps to address customer concerns
about rising water rates.
Other cost savings include reducing the number of vehicles and equipment, reducing fuel
consumption, and decreasing water loss through the successful leak detection and repair
program. Staff continues to seek out other operational efficiencies, thus reducing costs and
minimizing rate impacts on the customers.
Based on an annual survey of water and sewer rates conducted by staff, Otay continues to
be one of the lower cost providers in San Diego County. The District has the third lowest
water rate out of the 22 member agencies in San Diego County and the sixth lowest sewer
17
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.
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17
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.
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16
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.
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15
9
15
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14
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13
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52,615
55,157
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 2018
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Fiscal Year
viii
units of water and a ¾” residential meter size). The results of the water and sewer surveys
are shown on pages 15 and 16, respectively.
The following chart shows that since 2007, the wholesale water supply costs have
increased 103.2 percent while the District’s retail water rates have increased a lesser 96.4
percent.
Wholesale Water Supply Costs vs. District Retail Rate Increases
The District currently delivers water service to 50,625 potable and 729 recycled water
customer accounts. The District purchases all of the potable water sold to customers from
the CWA. Forty-seven percent of this water, in turn, is purchased from the region’s primary
water importer, MWD. This number has decreased significantly compared to previous
years due to conservation efforts, the water transfer with Imperial Irrigation District (IID), All
American canal lining, and seawater desalination.
The District continues its efforts to diversify water resources, reducing dependence on
traditional water supplies from the Colorado River and the Sacramento-San Joaquin Delta.
The District also has been proactive in reducing its dependence on MWD water treatment
facilities. For example, in 2009 the District entered into an agreement with the CWA that
allowed the neighboring Helix Water District to treat imported water on behalf of the District
at Helix’s Levy Water Treatment Plant. This has brought regional water treatment closer to
District customers, which lessens dependence on water treatment facilities located outside
of the County.
0%
20%
40%
60%
80%
100%
120%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
103.2%
96.4%
CWA Water Cost Increase
Otay Water Rate Increase
ix
Recycling Facility, which is capable of recycling 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 sources.
Water Cost of Service Study
During FY 2017, the District contracted with HDR Engineering, Inc., to perform a cost of
service study for potable and recycled water customers. The study recommended changes
to the District’s rate structure and the Board directed staff to implement the changes in the
FY 2018 budget. The FY 2018 rates include the following proposed changes to the rate
structure:
The FY 2017 conservation tier for residential customers has been eliminated,
reducing the number of residential tiers from four tiers to three tiers.
The FY 2017 system fee structure was based solely on meter size. The FY 2018
structure bases the fee on both customer type and meter size.
The Irrigation, Commercial, and Public customer’s variable rate structures have
been changed from a tiered rate structure to a unitary or flat rate structure.
Fiscal Year 2018 Operating Budget Summary
The District’s operating expenditures consist of three major sectors: potable water, recycled
water, and sewer, which include a total budget of $98,248,200 for FY 2018. Revenues from
potable and recycled water are projected to be $86,899,400, approximately $5,760,500 more
than the FY 2017 budget. District staff expects water sales volumes to increase by 3.1%
compared to FY 2017 budgeted sales. The District projects sewer revenues to be $2,869,400,
approximately $49,500 less than FY 2017. The remaining budgeted revenues of $8.4 million
come from various special fees, assessments, and miscellaneous income.
Other 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.
x
Ongoing water supply rate increases of 3.9% from MWD and CWA due to the high
cost of supply programs, higher energy costs, and increasing operating costs.
No water rate increase budgeted for January 1, 2018 and a 7.5% rate increase for
sewer, effective January 1, 2018.
Metro sewer costs includes the minimal impact of the City of San Diego’s Pure Water
Program costs.
Reduction in staffing levels from 135 full-time equivalent positions last year to 134
this year, minimizing impacts on rate increases.
District maintains lowest water rates, below the countywide average of the County’s
22 water agencies.
Six-Year Capital Improvement Program (CIP)
The CIP budget emphasizes long-term planning for ongoing programs to meet population
growth, while functioning within fiscal constraints. The FY 2018-2023 CIP Budget contains
103 projects and totals $102.3 million. The District anticipates borrowing $5.5 million from
the Clean Water State Revolving Fund for the Campo Road Sewer Replacement project
(S2024). The debt will include a 30-year maturity, with an estimated interest cost of 1.7%.
The FY 2018 budget contains 87 projects and totals $20.0 million. Of the 87 projects planned
for FY 2018, three are designated as reimbursable projects with an estimated cost totaling
$45,000 (P2430 and R2084). These projects are built by developers and reimbursed by the
District. This year’s CIP budget increased by $12.5 million compared to last year’s projection,
primarily due to the addition of the meter replacement project (P2604).
The following shows how the $20.0 million of projects are broken down into four categories:
Expansion projects $ .2 million
Betterment projects $ 2.7 million
Replacement projects $ 17.1 million
New Supply projects $ .01 million
Awards and Acknowledgments
The Government Finance Officers Association of the United States and Canada
(GFOA) presented Otay Water District the Distinguished Budget Presentation Award
for its annual budget for the fiscal year beginning July 1, 2016. In order to receive this
award, a governmental unit must publish a budget document that meets program
xi
criteria as a policy document, as an operations guide, as a financial plan, and as a
communications device.
Awards and Acknowledgments (continued)
The California Society of Municipal Finance Officers (CSMFO) presented Otay Water
District the Certificate of Award for Excellence in Operating Budgeting for Fiscal Year
2016-2017.
The California Society of Municipal Finance Officers (CSMFO) presented Otay Water
District the Certificate of Award for Excellence in Capital Budgeting for Fiscal Year
2016-2017.
The Government Finance Officers Association Officers (GFOA) presented Otay Water
District the Certificate of Excellence in Financial Reporting for its Comprehensive
Annual Financial Report for the Fiscal Year ended June 30, 2016.
Conclusion
The challenges presented this year were met by the District’s Board of Directors’ resolve to
keep the stability and financial strength of the District as one of its highest priorities.
This budget reflects the vision of the District’s Board, its management, and its employees.
The District will continue to strive to make improvements in the budget processes, including
an extensive review and analysis of projections for revenues, expenditures, capital projects,
and reserves.
I would like to thank the staff involved in this process for the efforts put forth in the
preparation of this budget to ensure a successful outcome.
To the Board, we acknowledge and appreciate their continued support and direction in
achieving excellence in the financial management and operations of the District.
Mark Watton, General Manager
xii
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 2016-
2017. 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.
xiii
Financial Awards
The California Society of
Municipal Finance Officers
(CSMFO) presented Otay
Water District the Operating
Budget Excellence Award
for Fiscal Year 2016-2017.
The California Society
of Municipal Finance
Officers (CSMFO)
presented Otay Water
District the Capital
Budgeting Excellence
Award for Fiscal Year
2016-2017.
xiv
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, 2016.
xv
Award
The Construction Management Association of America
(CMAA) presented the Otay Water District with the
2017 Distinguished Owner Honoree Award.
xvi
RESOLUTION NO. 4336
A RESOLUTION OF THE BOARD OF DIRECTORS OF
OTAY WATER DISTRICT ADOPTING THE
FISCAL YEAR 2017-2018
OPERATING AND CAPITAL BUDGET;
AND SALARY SCHEDULE
WHEREAS, the Otay Water District Board of Directors have
been presented with a budget (Exhibit A) for the operation of
the Otay Water District for Fiscal Year 2017-2018; and
WHEREAS, the Fiscal Year 2017-2018 Operating and Capital
Budget, has been reviewed and considered by the Board;
WHEREAS, it is in the interest of the District to adopt a
budget for said year;
WHEREAS, in connection with the adoption of the budget, the
Board is also being presented with the Salary Schedule
(Exhibit B) for its consideration, in order to comply with
California Code of Regulations Section 570.5,
NOW, THEREFORE, BE IT RESOLVED, DETERMINED AND ORDERED by
the Board of Directors of the Otay Water District that the
Operating and Capital Budget for the operation of the District,
incorporated herein by reference, is hereby adopted as the
District's budget for Fiscal Year 2017-2018.
BE IT FURTHER RESOLVED that the Board hereby approves and
adopts the Salary Schedule included with the budget and,
consistent with his authority over employee compensation under
both State law and the District's Code of Ordinances, authorizes
xvii
the General 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 Water District at a board meeting held this 24th day of May
2017, by the following vote:
ATTEST:
Ayes: Directors Gastelum, Robak and Smith
Noes: None
Abstain: Director Thompson
Absent: Director Croucher
President
xviii
Overview
Budget Guide
The District views the budget as an essential tool for proper financial management. This budget is
developed with input from each department 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.
Overview
This introductory section contains general information about the District such as: mission statement,
vision, key challenge, statement of values, District formation, organizational chart, and the budget
process and calendar.
Community Profile
This section contains the demographics of the District along with the current and projected
economic conditions and water and sewer rate comparison. It also includes statistics on the
District’s customers, the region’s tax base, rainfall, future development, and projects that will have an
impact on the District in the coming years.
Strategic Plan
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. Included in
this section are the District’s strategic objectives and the historical results of performance measures.
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.
1
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.
2
Overview
Mission Statement
To provide high quality and reliable water and wastewater services to the customers of the Otay
Water District, in a professional, effective, and efficient manner.
Vision
A District that is innovative in providing water services at competitive rates, with a reputation for
outstanding customer service.
Key Challenge
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.
Statement of Values
.
We take pride that our commitment to customer-centered
service is our highest priority.
We strive to provide the highest quality and value in all that we
do.
We commit ourselves to doing the right thing. Ethical behavior,
trustworthiness, and accountability are the District’s
foundation.
We see each individual as unique and important. We value
diversity and open communication to promote fairness,
dignity and respect.
We promote mutual trust by sharing information, knowledge
and ideas to reach our common goals.
3
Overview
District Formation
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. The District was
established 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. 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 provided high quality water to a semi-arid region of
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). 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 2,661 acre-feet per year of recycled water for fiscal year 2018, 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.
Service Area
The District's boundaries encompass an area of
approximately 125.5 square miles or 80,140 acres 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. The District purchases 100% of its treated water. Of
that, about 85% is imported, which is a blend from the
Colorado River and the California State Water Project.
Fifteen percent of the District’s treated water comes from
local supplies, including local water storage within the
county and from the Pacific Ocean via seawater
desalination. The District purchases its treated water from
the Metropolitan Water District of Southern California’s R.A.
4
Overview
Skinner Treatment Plant, the San Diego County Water Authority’s Twin Oaks Valley Water Treatment
Plant, the Carlsbad Desalination Plant, and the Helix Water District’s R.M. Levy Water Treatment Plant.
Organizational Structure
The District has a five-member Board of Directors that serve four-year, alternating terms on the
Board. 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 District. The Board generally meets in open public session
on the first Wednesday of each month at 3:30 p.m. at the District headquarters located at 2554
Sweetwater Springs Boulevard, Spring Valley, California.
Citizens and
Customers Board of Directors
General Manager (6)
Safety and
Security
Administration
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
Si
Administrative
Services
(23)
Human
Resources
Information
Technology
and Strategic
Planning
Finance
(29)
Geographic
Information
System
Public Services
and
Field Services
Engineering
(24)
Water
Operations
(52)
5
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 changes in costs from the District’s wholesale water providers as well as
estimated changes in sewer charges 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.
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 General Manager. 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.
6
Overview
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
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 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 General Manager for review prior to presentation to
the Board of Directors.
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.
Year‐end
Balances
Operating
Budget Input 6‐Year
Rate Model
Strategic
Plan
Operating
Budget Water
&
Sewer
Rates
Governor’s
Mandate
CIP
Budget 6‐Year CIP
Budget Input
MWD/CWA & City
Sewer Rates
Assumptions
Interest Rates
Inflation
Growth
Sales
Targets
Debt Coverage
Reserve Levels
7
Overview
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 the fiscal year. All approved modifications to the budget will be documented in the form of a
staff report and noted in the board meeting minutes.
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.
8
Overview
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 173, which provides the detailed flow of funds.
Budget Calendar
January
The Finance Department posts a budget workbook on the District’s intranet which provides
instructions on the upcoming operating budget deadlines, budget procedures for personnel,
administrative expenses, and materials and maintenance expenses. Included in this workbook are
historical trends, assumptions, and instructions on how to enter the expense data into the
District’s budget module. For the six-year Capital Budget process, the Engineering Department
provides Chiefs with the upcoming CIP deadlines and procedures.
February
Chiefs submit requests to Human Resources for personnel reclassifications changes,
advancements, long-term staffing and new personnel. Human Resources evaluates the requests
and provides recommendations to the General Manager. Human Resources notifies the Chiefs of
the status of the requests and Finance is provided with the approved personnel changes.
Departments enter their budget requests in the budget module and provides their year-end
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
9
Overview
February (continued)
projections to the Senior Accountant. Explanations of variances from the current year’s budget
versus the projected expenditures and explanations of the current year’s projected expenditures
versus the next fiscal year’s budget request are provided to Finance’s Senior Accountant. The Senior
Accountant reviews the year end projections for reasonableness and documents the explanations
of the variances for the Finance Manager to review. CIP project managers review and update their
existing CIP projects, identify projects to be deleted and submit new CIP projects to Engineering for
consideration. The CIP budget requests are reviewed with the General Manager.
March
The Finance Department meets with other departments to review their current year administrative,
materials and maintenance expenditures, year-end projections, and the preliminary budget requests
with Chiefs and Section Managers. Finance finalizes the explanations of the variances and
consolidates the year-end projections and the new fiscal year’s budget requests for Chiefs and the
General Manager’s review and discussion. Human Resources reviews new personnel requests,
reclassifications, and change requests with the General Manager. The Engineering Department
reviews the CIP budget with the Finance Department and provides year over year explanations of
the changes. The preliminary six-year CIP Budget is incorporated into the Rate Model to determine
proposed water and sewer rates.
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.
April
Finance prepares the following preliminary budget schedules for the review by the Chiefs and the
General Manager and incorporates recommended changes.
May
Finance reviews the budget assumptions and rates with the Chiefs and the General Manager.
Finance staff prepares the preliminary budget schedules, the budget staff report, and budget
workshop presentation. Approximately two weeks prior to the Budget Workshop, the Chiefs and
General Manager have a practice run of the presentation. The Budget Workshop is usually held
the last week of May and the Board adopts the budget and directs staff to mail the water and
sewer rate notices.
10
Overview
Budget Calendar
February March April May-June July – January
2/10/17
Chiefs submit request
for new personnel,
personnel
reclassification changes,
advancements, and
long-term staffing to HR
2/17/17
Project Managers
submit CIP Budgets for
new projects and
changes to existing
projects in CIP Budget
application
2/24/17
HR to complete
preliminary review of
new personnel,
personnel
reclassification changes,
requests, and
advancements
2/24/17
Chiefs to submit
Operating and Admin
Budget; Capital
Purchases and
justifications; Labor
Budget Worksheet
3/02-07/2017
Finance to review
Operating Budget and
reconciliation with
departments
3/06/17
Finance initial review of
CIP Budget with Chief of
Engineering including
year over year
explanations
3/08/17
HR to review new
personnel,
reclassifications and
change requests with
General Manager
3/09/17
Finance to review
Department Operating
Budgets and personnel
cost with Chiefs and GM
3/16/17
Finance to have second
review of CIP Budget with
Engineering
3/20/17
CIP budget presented to
the General Manager for
review and comments
4/06/17
Chiefs submit Position
Analysis Questionnaire
to HR for GM approval
Personnel requests
and request for
reclassifications
4/20/17
Preliminary budget
review with General
Manager
5/04/17
Review
assumptions and
rates with Chiefs
and General
Manager
5/15/17
FY 18 Budget
Practice Run-
through
5/24/17
Board
Meeting/Board
Workshop –
approval of the
FY 2017-2018
Operating and
Capital Budget and
FY 2018-2023
Capital
Improvement
Program Budget
5/24/17
Board gave
direction to staff to
mail rate notices to
customers
07/17/17-08/15/17
Rate increase
message inserted
with water and
sewer billing
10/04/17
Proposition 218
Hearing on water
rates
1/01/18
Water and sewer
rate increase
11
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12
Community Profile
Demographics
The population of the Otay Water District has grown from 114,937 in 1980 to 223,754 in 2016. At that
time the average persons per household was 3.46. For 2016, SANDAG reports the City of Chula
Vista’s ethnic/racial makeup with 44.6% Hispanic, 8.5% 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 36 and 34.6% of adults have a
four-year degree or higher. The average household income is $107,876 and the median household
income is $89,837.
Otay Water District Demographics
Population 223,754
Persons/Household 3.46
Ethnic/Racial makeup
Hispanic 44.6%
Non-Hispanic White 8.5%
Asian 17.2%
Other 15.2%
Median Age 36
Percentage with 4 year degree or higher 34.6%
Average Household Income $ 107,876
Median Household Income $ 89,837
Source: SANDAG, The London Group Realty Advisors, Claritas Demographics
Service Area Assessed Valuation
The District’s service area encompasses property with over $27.6 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.
$0
$5
$10
$15
$20
$25
$30
FY 2013 FY 2014 FY 2015 FY 2016 FY 2017
Bi
l
l
i
o
n
s
Source: County of San Diego, Property Tax Services
13
Community Profile
Ten Principal Taxpayers as of June 30, 2017
Organization Assessed Percent
Value to Total
1. JOHN HANCOCK LIFE INSURANCE CO U S A $ 143,985,157 0.6%
2. VILLA MARINA DEL LLC 115,380,000 0.4%
3. REGULO PLACE APARTMENTS INVESTORS LLC 105,233,043 0.4%
4. HOMEFED OTAY LAND II LLC 103,148,000 0.4%
5. BRISA ACQUISITIONS LLC 102,677,670 0.4%
6. VISTA PACIFIC VILLAS LP 93,349,400 0.4%
7. B R E-F M C A LLC 77,685,406 0.3%
8. OTAY-TIJUANA VENTURE LLC 71,865,268 0.3%
9. SP LAVIDA REAL LLC 69,142,541 0.3%
10. CAMDEN USA INC. 68,096,135 0.3%
Total Top 10 Principal Taxpayers $ 950,562,620 3.7%
Total Service Area Assessed Valuation $ 26,057,698,553
Ten Largest Customers – Fiscal Year 2017
Customer Customer Annual % of Water
Name Type Revenues Sales
1. CITY OF CHULA VISTA Publicly Owned $ 3,620,279 4.3%
2. STATE OF CALIFORNIA Publicly Owned 101,7064 1.2%
3. EASTLAKE III COMMUNITY Commercial 750,769 0.9%
4. COUNTY OF SAN DIEGO Publicly Owned 637,974 0.8%
5. HOMEFED OTAY LAND II, LLC Commercial 598,046 0.7%
6. CHULA VISTA SCHOOL DISTRICT Publicly Owned 524,968 0.6%
7. EASTLAKE COUNTRY CLUB Commercial 442,514 0.5%
8. STEELE CANYON GOLF CLUB LLC Commercial 353,981 0.4%
9. SWEETWATER SCHOOL DISTRICT Publicly Owned 335,488 0.4%
10. WINDINGWALK MASTER ASSOCIATION Commercial 306,520 0.4%
Total 10 Largest Customers $ 8,587,604 10.3%
Total District Customers $ 83,720,148
Source: County of San Diego, Property Tax Services
14
The District strives to remain cost effective in its rate setting by controlling operating costs, yet passing
through the full cost of supply. 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 3rd
lowest water rates in San Diego County.
Community Profile
Projected water bill for FY 2018
Based on 12 Units of water Use and 3/4 inch meter size
Water Rate Comparison, Member Agency Water Rates
123.09
122.47
118.43
108.02
104.26
101.28
91.46
90.92
89.19
87.84
86.98
84.54
84.00
82.09
81.46
80.61
80.71
77.08
76.71
76.49
71.92
65.66
$- $20 $40 $60 $80 $100 $120
Yuima
Padre Dam
*Ramona
Valley Center
Rainbow
Fallbrook
Escondido
Vista
Rincon
Del Mar
San Diego
Helix
Carlsbad
*Poway
Vallecitos
Oceanside
Olivenhain
Sweetwater
Santa Fe
Otay Water District
*San Dieguito
*Lakeside*
*At the time of the survey, August 2017, the member agency's FY 2018 rate was unavailable. The estimated
increase is equal to the District's FY 2018 average rate increase.
15
Water consumption based sewer rate Flat sewer rate Otay Water District
* At the time of the survey, August 2017, the agency's FY 2018 rate was unavailable. The estimated
increase is equal to the District's FY 2018 average rate increase
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 has among the lowest sewer rates in the County
of San Diego.
Community Profile
Sewer Rate Comparison, San Diego County
102.11
80.03
76.88
76.54
73.03
71.99
70.67
67.08
64.02
59.54
59.25
55.97
53.76
52.48
51.58
51.20
49.90
49.49
49.49
48.99
48.75
45.33
39.45
38.99
32.08
30.52
28.64
27.81
$- $20 $40 $60 $80 $100 $120
Del Mar
*Rainbow
Encinitas
*Fallbrook
Olivenhain
Padre Dam
*Rancho Santa Fe
*Ramona
Oceanside
Vista
Buena
*Solana Beach
Valley Center - MG
*San Diego, City
Imperial Beach
*El Cajon
Escondido
Chula Vista
La Mesa
*Poway
Lemon Grove
Coronado, City
Otay Water District
Vallecitos
National City
San Diego, County
Leucadia
Carlsbad
Projected sewer bill for FY 2018
Based on 9.5 units of water use and 3/4 inch residential meter size.
16
Community Profile
San Diego Rainfall
San Diego received more than normal rainfall in FY 2017, the District anticipated that San Diego's
rainfall will continue to maintain the average pattern and volume for FY 2018. The 10-year average
of 9.16 inches for San Diego rainfall reflects the long-term drought conditions for our area. San
Diego's rainfall average over 20 years is 9.05 inches; the 30-year average is 9.55 inches; and the 40-
year average is 10.42 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 below 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
District.
7.49 9.17
11.01
12.66
8.03
6.48 5.74
7.68
10.38
12.97
0
2
4
6
8
10
12
14
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
In
c
h
e
s
Annual Rainfall 10 year average
17
Community Profile
Current Economic Conditions
San Diego County Water Supply
A safe, reliable water supply is crucial for the vitality of the San Diego region’s $222 billion economy
and quality of life for 3.3 million residents, including Otay Water District’s more than 223,000
customers it serves. San Diego County imports approximately 85% of its water from the Colorado
River and Northern California. Since these sources face legal and environmental constraints, the
region has been making investments in the region’s water delivery and storage system and exploring
other avenues to ensure an adequate water supply. This includes water recycling, water-use
efficiency programs, water storage, groundwater desalination, and seawater desalination.
Desalinated Water Supply
In December 2015, the Claude “Bud” Lewis Carlsbad Desalination Plant began producing
approximately 50 million gallons of water per day to CWA, enough to serve approximately 400,000
people, meeting 7% to 10% of the region’s demand. Since the production desalinated water from
the Carlsbad plant, District’s customers have received an average of 10% of this highly reliable,
drought-proof water supply. An acre-foot is approximately 325,900 gallons or enough to supply two
typical single-family households of four for a year.
Economic Outlook
At the start of each budget cycle, the District enters into a contract with an economist to complete
an economic outlook study for both San Diego County and the area served by the District. The
following summarizes the conclusions and projections as to the growth of San Diego County and
the District’s service area:
San Diego County’s economy continues to experience solid growth. The unemployment rate
dropped to 4.2% in December and is lower than the national and state rates of 4.5% and
5.0%, respectively.
San Diego County added 28,900 jobs in 2016, a 2% increase for 2017. Another year of solid
job gains with an additional dip in the unemployment rate. The county is expected to add
another 25,000 to 30,000 jobs annually for the foreseeable future.
San Diego County’s population will continue to grow in the near future by more than 25,000
persons annually.
Housing construction is forecasted to average 10,000 to 11,000 units annually during each of
the next six years, with as much as 21% of that growth in the District’s service area.
As much as 70% of the new housing in the District’s service area will be attached, both for
sale and rental.
Commercial development in the District’s service area is expected to increase as office and
retail space ramps up in the millenia masterplan community. The millenia project includes
nearly 3,000 multi-family residential units, an office park, retail uses, parks and a hotel.
18
Community Profile
Future Development
Using the economist’s report, the District’s engineering staff projects that over the next six years the
District will sell another 3,438 meters which translates to 4,309 equivalent dwelling units (EDUs).
These projections have been incorporated in the Five-Year Forecast on page 53.
Residential Construction
The following table summarizes the projected units for sale and units for rent from fiscal year 2017
through fiscal year 2023.
Projected Units for Sale and Rental
Otay Water District Service Area
FY 2017 through FY 2023
Project 2017 2018 2019 2020 2021 2022 2023 Total
Total Single-Family Units 35 266 477 591 863 656 566 3,454
Total Condominium 129 479 494 500 597 586 442 3,227
Total Rental 0 175 252 723 834 838 300 3,122
Total Units 164 920 1,223 1,814 2,294 2,080 1,308 9,803
% Multi-Family 79% 71% 61% 67% 62% 68% 57% 65%
Source: The London Group Realty Advisors, March 2017
Projected Meter Sales in EDUs
34
4
62
8
77
8
1,
0
8
7
83
3
63
9
0
200
400
600
800
1,000
1,200
FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023
19
Community Profile
Commercial Construction
Commercial construction in the District is projected to be modest during the next six years with
3,939,190 square feet of commercial development in the planning stages and under construction.
Industrial space has the most leasable space with an estimated 1,774,032 square feet, of which
123,456 square feet is currently under construction. There are also 840 total hotel rooms in five
planned hotel projects with 283 rooms in two projects that are currently under construction. There
is 1,643,583 square feet of space and 205 hotel rooms with an unknown delivery date since delivery
expectations are typically contingent on the identification of a lessee prior to construction.
Under Construction and Planned Commercial Development
Expected
Delivery Year
Industrial
(S.F.)
Office
(S.F.)
Retail
(S.F.)
Total
(S.F.)
Hotels
(Rooms)
2017 123,456 0 13,144 136,600 283
2018 356,910 318,000 145,230 820,140
2019 0 712,100 20,000 732,100
2020 0 395,000 26,767 421,767 152
2018-2021 185,000 0 0 185,000 200
Unknown 1,108,666 309,000 225,917 1,643,583 205
TOTAL 1,774,032 1,734,100 431,058 3,939,190 840
Source: The London Group Realty Advisors, CoStar
20
Community Profile
The Future
Rosarito Desalination and the Otay Mesa Conveyance and Disinfection System Projects
In light of the growing need for new potable water supplies in Mexico and San Diego County, the
proposed Rosarito plant and the District’s Otay Mesa Conveyance and Disinfection System Project
would provide a new drought-proof water supply to its customers. On May 16, 2017, the U.S.
Department of State granted a presidential permit to allow the Otay Water District to build a nearly
four-mile long potable water pipeline that begins at the U.S.-Mexico border. This permit authorizes
the District to “construct, connect, operate, and maintain cross-border water pipeline facilities for the
importation of desalinated seawater at the International Boundary between the United States and
Mexico in San Diego County, California.” Purchasing and transporting water from Aguas de Rosarito’s
desalination plant in Rosarito, Baja California, Mexico, is a component of the District’s water supply
diversification efforts. The Rosarito plant could potentially produce water to meet up to two-thirds of
the District’s projected water use by 2024. The District currently provides water service to a population
of more than 223,000 people, which is expected to increase to more than 308,000 by 2050. The
Rosarito Desalination Project would produce 100 million gallons of water daily in two phases. The
first phase, expected to be operational by late 2019 or early 2020, would make 50 million gallons or
more of desalinated water available daily to the Tijuana/Rosarito region. The second phase,
expected to be completed by 2024, would deliver up to an additional 50 million gallons daily, with 10
to 30% of that water available to the District. In addition to the construction of a potable water
pipeline on the U.S. side of the border, the project also includes a pump station, and disinfection
facility. This would be the first cross-border water supply project of its kind to import water to the
U.S. from Mexico. The project has undergone environmental review as required by the California
Environmental Quality Act and National Environmental Policy Act and has obtained a U.S. Fish and
Wildlife biological permit. The District recognizes that such a project require rigorous safeguards and
review to ensure the protection of public health and has applied for a permit from the California
Water Resources Control Board’s Division of Drinking Water to ensure that water imported from
Mexico meets the same water quality drinking standards as water from regional lakes, from the
Claude “Bud” Lewis Carlsbad Desalination Plant, and from the City of San Diego’s Pure Water
Program.
21
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22
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 strategic 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 the 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.
23
Administrative Services Objectives
Goal Objective Status
Improve and expand
communications
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
On Schedule
Provide effective water services Optimize SCADA program Completed
Goal Objective Status
Actively manage water supply
as well as support for water
and sewer services
Evaluate and enhance the District's water conservation
programs and services On Schedule
Optimize asset management program On Schedule
Enhance District’s enterprise facilities physical security On Schedule
Enhance District's enterprise confined space program On Schedule
Advance business processes and operational efficiencies
through implementation of Information Technology Completed
Evaluate implementation of an on-line performance
management system On Schedule
Goal Objective Status
Reinforce a results-oriented and
accountable culture
Negotiate a successor Memorandum of Understanding for
represented employees for 2018 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
On Schedule
Enhance District's Emergency Response Program On Schedule
Evaluate opportunities to combine or transfer similar work
functions Completed
Evaluate training and development programs for new and
existing Supervisors/Managers Completed
Strategic Plan
Le
a
r
n
i
n
g
&
G
r
o
w
t
h
Cu
s
t
o
m
e
r
Identify and evaluate
improvements to enterprise
and departmental business
processesBu
s
i
n
e
s
s
P
r
o
c
e
s
s
e
s
Focus on achieving a lean,
flexible workforce
24
Administrative Services Objectives
Administrative Services Performance Measures
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
FY 14-15 FY 15-16 FY 16-17 FY 17-18
Target 99.5% 99.5% 99.5% 99.5%
Actual (1)99.9% 99.9% 99.5% 99.5%
Balanced Scorecard:Learning and Growth
Target:Less than 5% turnover in a year
Measurement Method:
FY 14-15 FY 15-16 FY 16-17 FY 17-18
Target 5.0% 5.0% 5.0% 5.0%
Actual (1)3.2% 0.0% 0.7% 0.0%
Balanced Scorecard:Learning and Growth
Target:12 hours or more per employee per year
Measurement Method:
FY 14-15 FY 15-16 FY 16-17 FY 17-18
Target 12.0 12.0 12.0 12.0
Actual (1)17.5 23.0 22.9 12.0
Strategic Plan
Number of voluntary resignations (not including retirements) /Average
number of employees
Total qualified training hours for all employees/ Average number of full time
employees (FTE)
Enterprise Technology Services Availability
Employee Voluntary Turnover Rate
Training Hours per Employee
(1) FY 17-18 Projected Measure
25
Balanced Scorecard:Learning and Growth
Target:24 hours or more per field employee per year
Measurement Method:
FY 14-15 FY 15-16 FY 16-17 FY 17-18
Target 24.0 24.0 24.0 24.0
Actual (1)43.1 36.8 30.8 24.0
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
FY 14-15 FY 15-16 FY 16-17 FY 17-18
Target 6.6 6.6
Actual (1)4.9 6.6
Safety Training Program
Administrative Services Performance Measures
(1) FY 17-18 Projected Measure
(2) FY 16-17 is the first year for this performance measure
Strategic Plan
Number of safety training hours/Number of field employees (includes
mandated training)
Injury Incident Rate(2)
26
Finance Objectives
Goal Objective Status
Increase customer confidence
in the District Enhance communications with customers On Schedule
Goal Objective Status
Implement a cost Benefit Program On Schedule
Strengthen Internal Audit Program On Schedule
Goal Objective Status
Identify and evaluate
improvements to enterprise
and departmental business
processes
Improve and streamline Meter Related Processes Completed
Cu
s
t
o
m
e
r
Fi
n
a
n
c
i
a
l
Bu
s
i
n
e
s
s
Pr
o
c
e
s
s
e
s
Maintain District financial
strength
Strategic Plan
27
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
FY 14-15 FY 15-16 FY 16-17 FY 17-18
Target 97.0% 97.0% 97.0% 97.0%
Actual (1)98.3% 97.8% 98.1% 97.0%
Balanced Scorecard:Financial
Target:No less than 99.80% per quarter in a year
Measurement Method:Number of correct bills/Number of total bills
FY 14-15 FY 15-16 FY 16-17 FY 17-18
Target 99.8% 99.8% 99.8% 99.8%
Actual (1)99.8% 99.9% 99.9% 99.8%
Balanced Scorecard:Financial
Target:In development
Measurement Method:Number of customers paying bills electronically/Total number of customers
FY 14-15 FY 15-16 FY 16-17 FY 17-18
Target 75.6% 75.6%
Actual (1) 75.6% 75.6%
Balanced Scorecard:Financial
Target:Less than 100% of the budgeted overtime in a year
Measurement Method:Actual overtime costs (including comp time)
FY 14-15 FY 15-16 FY 16-17 FY 17-18
Target 100.0% 100.0% 100.0% 100.0%
Actual (1)98.0% 129.0% 118.0% 100.0%
Balanced 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
FY 14-15 FY 15-16 FY 16-17 FY 17-18
Target 14 14 14 14
Actual (1)8755
(2) FY 15-16 is the first year for this performance measure
(1) FY 17-18 Projected Measure
Finance Performance Measures
Strategic Plan
Answer Rate
Billing Accuracy
Percentage of Customers Paying Bills Electronically (2)
Overtime Percentage
Sewer Rate Ranking
28
Balanced Scorecard:Financial
Target:Bottom 50 percentile for the 22 member agencies in San Diego
Measurement Method:Otay percentage ranking among regional agencies
FY 14-15 FY 15-16 FY 16-17 FY 17-18
Target 11 11 11 11
Actual (1)11 10 11 3
Balanced Scorecard:Financial
Target:150% excluding growth revenue
Measurement Method:Qualified net operating revenues/Debt service requirements
FY 14-15 FY 15-16 FY 16-17 FY 17-18
Target 150.0% 150.0% 150.0% 150.0%
Actual (1)168.0% 171.0% 200.0% 236.0%
Balanced Scorecard:Financial
Target:The annual average is 85.0%
Measurement Method:
FY 14-15 FY 15-16 FY 16-17 FY 17-18
Target 85.0% 85.0% 85.0% 85.0%
Actual (1)100.0% 78.0% 85.0% 85.0%
Balanced Scorecard:Financial
Target:Less than 5% in a year
Measurement Method:100 [Volume purchased – (volume sold + volume used) /Volume purchased]
FY 14-15 FY 15-16 FY 16-17 FY 17-18
Target 5.0% 5.0% 5.0% 5.0%
Actual (1)2.5% 4.0% 4.1% 5.0%
Strategic Plan
Number of reserve funds that meet or exceed fund target levels/Total number of
reserve funds
Finance Performance Measures
(1) FY 17-18 Projected Measure
Water Rate Ranking
Debt Coverage Ratio
Reserve Level
Distribution System Loss
29
Balanced Scorecard:Financial
Target:406 accounts per FTE
Measurement Method:Potable + Recycled + Sewer Accounts/ Number of full time employees
FY 14-15 FY 15-16 FY 16-17 FY 17-18
Target 406.0 412.0
Actual (1) 406.0 415.0
Balanced Scorecard:Financial
Target:Less than $544.88 per account in a year
Measurement Method:Total O&M costs/Number of Accounts
FY 14-15 FY 15-16 FY 16-17 FY 17-18
Target $531 $531 $544 $561
Actual (1)$511 $503 $517 $561
(2) FY 16-17 is the first year for this performance measure
(1) FY 17-18 Projected Measure
Strategic Plan
Finance Performance Measures
Accounts per Full-Time Employee (FTE) (2)
O & M Cost per Account
30
Operations Objectives
Goal Objective Status
Improve and expand
communications
Evaluate requirements for future Emergency
Communication system On Hold
Goal Objective Status
Electric power and fuel management practices On Schedule
Optimize Operations Non-Inventory Management On Schedule
Goal Objective Status
Leak Detection and Repair Program On Schedule
Pressure Vessel Maintenance Program On Schedule
Operations Workflow Process Evaluation On Schedule
Streamline input of operations data Behind
Schedule
Bu
s
i
n
e
s
s
P
r
o
c
e
s
s
e
s
Identify and evaluate
improvements to enterprise
and departmental business
processes
Actively manage water supply
as well as support for water
and sewer services
Strategic Plan
Cu
s
t
o
m
e
r
Fi
n
a
n
c
i
a
l
Improve financial information
and systems
31
Balanced Scorecard:Customer
Target:
Measurement Method:
FY 14-15 FY 15-16 FY 16-17 FY 17-18
Target 9.00 9.00 9.00 9.00
Actual (1)3.69 5.12 3.94 4.25
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
FY 14-15 FY 15-16 FY 16-17 FY 17-18
Target 66.0% 66.0% 66.0% 66.0%
Actual (1)66.0% 75.0% 70.0% 66.0%
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
FY 14-15 FY 15-16 FY 16-17 FY 17-18
Target 70.0% 70.0% 70.0% 70.0%
Actual (1)91.0% 86.0% 91.0% 70.0%
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
FY 14-15 FY 15-16 FY 16-17 FY 17-18
Target 77.0% 77.0% 77.0% 77.0%
Actual (1)91.6% 91.8% 90.6% 77.0%
Balanced Scorecard:Financial
Target:No more than $1,050 per MG spent on wastewater treatment in a year
Measurement Method:Total O&M costs directly attributable to sewer treatment /Total volume (in MGD)
FY 14-15 FY 15-16 FY 16-17 FY 17-18
Target $1,050 $1,050 $1,050 $1,050
Actual (1)$785 $913 $1,096 $1,050
Technical Quality Complaint
Planned Potable Water Maintenance Ratio in $
Planned Recycled Maintenance Ratio in $
Planned Wastewater Maintenance Ratio in $
Direct Cost of Treatment per MGD
Strategic Plan
Operations Performance Measures
No more than 9 complaints per 1,000 customer accounts in a year
1,000 (Number of technical quality complaints)]/Number of active customer
accounts per reporting period
(1) FY 17-18 Projected Measure
32
Balanced Scorecard:Financial
Target:No more than $1,925 per MG spent on O&M for wastewater treatment in a year
Measurement Method:Total O&M cost (less depreciation)/Volume in MG processed
FY 14-15 FY 15-16 FY 16-17 FY 17-18
Target $1,925 $1,925 $1,925 $1,925
Actual (1)$1,150 $1,458 $1,483 $1,925
Balanced Scorecard:Financial
Target:20% by the end of the year
Measurement Method:Percentage distribution system surveyed for leaks
FY 14-15 FY 15-16 FY 16-17 FY 17-18
Target 20.0% 20.0% 20.0% 20.0%
Actual (1)20.0% 20.0% 33.0% 20.0%
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
FY 14-15 FY 15-16 FY 16-17 FY 17-18
Target 90.0% 90.0% 90.0% 90.0%
Actual (1)98.9% 100.0% 100.0% 90.0%
Percent of Preventative Maintenance Completed – Reclamation Plant
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
FY 14-15 FY 15-16 FY 16-17 FY 17-18
Target 90.0% 90.0% 90.0% 90.0%
Actual (1)98.0% 100.0% 99.0% 90.0%
Percent of Preventative Maintenance Completed – Pump/Electric
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
FY 14-15 FY 15-16 FY 16-17 FY 17-18
Target 90.0% 90.0% 90.0% 90.0%
Actual (1)100.0% 100.0% 100.0% 90.0%
(1) FY 17-18 Projected Measure
O&M Cost per MGP - Wastewater
Leak Detection Program
Percent of Preventative Maintenance Completed – Fleet Sho
Strategic Plan
Operations Performance Measures
33
System Valve Exercising Program
Balanced Scorecard:Business Processes
Target:770 valves per quarter/3,080 valves in a year
Measurement Method:Actual number of valves exercised
FY 14-15 FY 15-16 FY 16-17 FY 17-18
Target 3,080 3,080 3,080 3,080
Actual (1) 3,425 4,549 3,228 3,080
Potable Water Distribution System Integrity
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 & breaks)] / Total miles of distribution pipes
FY 14-15 FY 15-16 FY 16-17 FY 17-18
Target 16.0 16.0 16.0 16.0
Actual (1)17.1 11.1 10.3 16.0
Collection System Integrity
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
FY 14-15 FY 15-16 FY 16-17 FY 17-18
Target 3.6 3.6 3.6 3.6
Actual (1)0.0 0.0 1.0 0.0
Recycled Water System Integrity
Balanced Scorecard:Business Processes
Target:
Measurement Method:[100 (Collection system failure)] /Total miles of collection system piping
FY 14-15 FY 15-16 FY 16-17 FY 17-18
Target 6.6 6.6 6.6 6.6
Actual (1)1.1 0.00 0.9 0.0
Potable Water Compliance Rate
Balanced Scorecard:Business Processes
Target:100% each quarter in a year
Measurement Method:All primary health regulations are met
FY 14-15 FY 15-16 FY 16-17 FY 17-18
Target 100.0% 100.0% 100.0% 100.0%
Actual (1)100.0% 100.0% 100.0% 100.0%
(1) FY 17-18 Projected Measure
No more than 6.6 system failures per 100 miles of recycled distribution system in a
year
Strategic Plan
Operations Performance Measures
34
Sewer Overflow Rate
Balanced Scorecard:Business Processes
Target:Overflows per quarter in a year is zero
Measurement Method:
FY 14-15 FY 15-16 FY 16-17 FY 17-18
Target 0000
Actual (1)0010
Emergency Facility Power Testing
Balanced Scorecard:Business Processes
Target:100% of the District’s facilities tested per year (34 facilities)
Measurement Method:Number of facilities and generators tested/Total facilities
FY 14-15 FY 15-16 FY 16-17 FY 17-18
Target 34 29 34 34
Actual (1)36 29 36 34
Main Flushing and Hydrant Maintenance (2)
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
FY 14-15 FY 15-16 FY 16-17 FY 17-18
Target 215 215 215 215
Actual (1)753 463 355 215
Critical Valve Exercising
Balanced Scorecard:Business Processes
Target:100% of identified critical valves exercised in a year
Measurement Method:Cumulative number of mains flushed plus hydrants maintained
FY 14-15 FY 15-16 FY 16-17 FY 17-18
Target 520 631 631 631
Actual (1)520 631 631 631
Tank Inspection and Cleaning
Balanced Scorecard:Business Processes
Target:8 potable water storage tanks/reservoirs are cleaned per fiscal year
Measurement Method:Number of tanks cleaned and inspected annually
FY 14-15 FY 15-16 FY 16-17 FY 17-18
Target 8878
Actual (1)5118 8
(1) FY 17-18 Projected Measure
(2) In FY 14-15, fire hydrant maintenance was the focus for the valve crew. For FY 15-16 and FY 16-17, main flushing was completed as needed
[100 (Total number of sewer overflows)]/Total miles of pipe in the sewage collection
system
Strategic Plan
Operations Performance Measures
35
Engineering Objectives
Goal Objective Status
Evaluate City of San Diego's Pure Water Program
Planning/Implementation On Schedule
Address dependency of imported water Completed
Sewer system business evaluation Completed
Evaluate the viability of implementing an Indirect Potable
Reuse Program Completed
Evaluate efficiencies for delivering capital assets Completed
Streamline work processes in four strategic areas
including departmental synergies, technology,
procurements, and alignment of business practices
Completed
Revise business practices by modifying the master
recycled water permit Completed
Implement a Habitat Conservation Plan that will streamline
O&M within District easements Completed
Strategic Plan
Identify and evaluate
improvements to enterprise
and departmental business
processes
Bu
s
i
n
e
s
s
P
r
o
c
e
s
s
e
s
Actively manage water supply
as well as support for water
and sewer services
36
CIP Project Expenditures vs. Budget
Balanced Scorecard:Financial
Target:95% of budget but not to exceed 100%
Measurement Method:Actual quarterly expenditures/Annual budget
FY 14-15 FY 15-16 FY 16-17 FY 17-18
Target 95.0% 95.0% 95.0% 95.0%
Actual (1)92.2% 89.8% 109.1% 95.0%
Construction Change Order Incidence
Balanced Scorecard:Financial
Target:No more than 5% per quarter in a year
Measurement Method:
FY 14-15 FY 15-16 FY 16-17 FY 17-18
Target 5.0% 5.0% 5.0% 5.0%
Actual (1)1.9% 1.8% 1.5% 5.0%
Mark-out Accuracy
Balanced Scorecard:Business Processes
Target:No less than 100% every quarter in a single year
Measurement Method:
FY 14-15 FY 15-16 FY 16-17 FY 17-18
Target 100.0% 100.0% 100.0% 100.0%
Actual (1)100.0% 100.0% 100.0% 100.0%
Project Closeout Time
Balanced Scorecard:Business Processes
Target:No more than a 45 day average per quarter in a year
Measurement Method:
FY 14-15 FY 15-16 FY 16-17 FY 17-18
Target 45.0 45.0 45.0 45.0
Actual (1)29.0 37.3 71.2 45.0
Strategic Plan
Total cost of change orders (not including allowances)/Total original construction
contract amount (not including allowances)
Number of mark-outs performed without an at-fault hit/Total number of mark-outs
performed
Number of days between NOSC and NOC for all construction projects within the
quarter/Number of construction projects
Engineering Performance Measures
(1) FY 17-18 Projected Measure
37
Annual Recycled Water Site Inspections
Balanced Scorecard:Business Processes
Target:100% of recycled sites inspected in a year
Measurement Method:
FY 14-15 FY 15-16 FY 16-17 FY 17-18
Target 100.0% 100.0% 100.0% 100.0%
Actual (1)100.0% 100.0% 100.0% 100.0%
Recycled Water Shutdown Testing
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
FY 14-15 FY 15-16 FY 16-17 FY 17-18
Target 90.0% 90.0% 90.0% 90.0%
Actual (1)100.0% 93.0% 90.0% 90.0%
(1) FY 17-18 Projected Measure
Percentage of recycled sites inspected per year of those required by the
Department of Environmental Health (DEH)
Strategic Plan
Engineering Performance Measures
38
Financial Summaries
Budget Summary
The FY 2018 Operating Budget is summarized and presented in the Operating Budget Summary- General
Fund on pages 45-46. 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 47 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 48-52.
For FY 2018, there is no proposed overall rate increase for water. However, based on a cost of service
study, the Board has approved changes to the rate structure, rates, fees and charges. These changes
have been communicated on page X of the Transmittal Letter. 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 2018 is $98.2 million in comparison to the previous fiscal year budget
of $91.7 million. The $6.5 million increase is a result of water supply rate increases from the District’s
wholesalers, increases in Metro sewer costs for the District’s share of the City of San Diego’s Pure Water
project, and increases in funding for reserves. Reserve funding has been increased primarily due to the
addition of the meter replacement project.
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 78.5% of the District’s operating revenues. It is estimated that 25,588.9 acre-
feet of potable water will be sold during FY 2018, which is an increase of 779.7 acre-feet from FY 2017.
Budgeted revenues from water sales are projected to be $77.0 million, an increase of 6.6% compared to
FY 2017. Schedules relating to potable water sales are included in the Potable Revenues and
Expenditures section of this budget.
Recycled Water Sales
Recycled water was not subject to the State Water Resources Control Board’s drought mandates.
However, the District’s recycled sales were adversely impacted by the mandate and sales volumes
remain below the 4,748 acre-feet sold in 2014. Recycled water sales revenue is generated from the sale
of 3,710.1 acre-feet of recycled water. The FY 2018 sales revenue budget is $9.9 million which is an
increase of $962,800 from FY 2017 and includes the incentive credits provided by MWD and CWA.
Sewer Revenues
Sewer charges, which represents 99% of sewer revenue, are the monthly fees collected from residential,
multi-residential, and commercial customers. 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 2018 Sewer Revenues are relatively flat and projected to be $2.9 million.
39
Financial Summaries
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 2018 revenue from meter fees are projected to be $103,100 which is
an increase of $36,900 from FY 2017. 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 2018 capacity fee revenue of $1.5 million is an increase of $265,000 compared to
FY 2017.
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 $4.4 million which is an increase of $363,000 compared to FY 2017.
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 2012 2013 2014 2015 2016 2017
Gann Limit $ 3,917 $ 4,120 $ 4,392 $ 4,454 $ 4,673 $ 4,969
Appropriations subject to the limit $ 2,890 $ 2,892 $ 2,968 $ 3,134 $ 3,323 $ 3,551
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 2018 which is a decrease of $14,800
compared to FY 2017.
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 $302,500 in FY 2018 which is an increase of $145,600 from FY 2017.
40
Financial Summaries
General Fund Expenditures
Potable Water Purchases
Water purchases are the expenses of purchasing 26,758.6 acre-feet for the District's potable water supply.
A provision has been made to allow 1,169.7 acre-feet of water for District usage, leakage, and evaporation.
Total Potable Water Purchases are projected to be $34.2 million in FY 2018 which is an increase of $3.0
million compared to FY 2017.
Recycled Water Purchases
Recycled water purchases are the expenses of purchasing 2,660.7 acre-feet for the District's recycled
water supply which is an increase of 201.1 compared to Fiscal Year 2017. In addition to the purchases
there is a contractual Take-or-Pay payment budgeted for 2,234.3 acre-feet which is 68.1 acre-feet less
than FY 2017. Total Recycled Purchases are projected to be $3.7 million in FY 2018 which is an increase
of $100,800 compared to FY 2017.
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 $2.1 million in FY 2018 which is an
increase of $103,800 compared to FY 2017.
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 relatively flat compared to FY 2017 and will remain at $1.7 million.
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 Imperial
Irrigation District (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 remain relatively flat compared to FY 2017 and will remain at be $1.9
million.
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 be $4.5 million in FY 2018 which a decrease
of $93,000 compared to FY 2017.
41
Financial Summaries
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 $734,400 which is a
decrease of $254,400 compared to FY 2017.
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 $1.3 million
in FY 2018, which is a decrease of $84,000 compared to FY 2017.
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 remain relatively flat compared to FY 2017 and will remain at $3.0 million.
Labor and Benefits
Labor and benefits are the wages and fringe benefits for FY 2018 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 $21.5 million, which is an increase of $622,000 compared to FY 2017.
Administrative Expenses
Administrative expenses are costs incurred by various departments that are directly related to District
operations. Administrative expenses are projected to be $5.5 million in FY 2018, which is a decrease of
$335,600 compared to FY 2017. 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 $3.6 million in FY 2018, which
is an increase of $189,400 compared to FY 2017. Additional details are supplied in the Departmental
Operating Budget section.
42
Financial Summaries
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 2018, these reserves will be
funded with $3.3 million from the Recycled Water Fund.
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 2018, these
reserves will be funded with $111,100 from Sewer Fund.
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 2018, these reserves
will be funded with $9,787,900 from the Potable Water Fund.
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 2018, this reserve will
be funded with $221,000 from the Recycled Water Fund.
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 2018, the General Fund is budgeted to fund the OPEB Trust $998,000 for retiree health liabilities.
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.
43
Financial Summaries
Fund Balance Summary by Fund
This schedule shows each fund’s balance at June 30, 2016, and the projected balance for June 30, 2018.
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.
44
FY 2016 FY 2017 FY 2017 FY 2018
11-Actual Budget Actual * Budget $ %
Revenues
#Potable Water Sales 65,413,157$ 72,238,600$ 73,977,348$ 77,036,300$ 4,797,700$ 6.6%
Recycled Water Sales 8,527,042 8,900,300 9,742,799 9,863,100 962,800 10.8%
#Sewer Revenues 3,149,295 2,918,900 2,955,430 2,869,400 (49,500) (1.7%)
#Meter Fees 78,568 66,200 72,624 103,100 36,900 55.7%
#Capacity Fee Revenues 1,517,128 1,248,200 1,559,317 1,513,200 265,000 21.2%
Tax Revenues 3,970,203 4,033,100 4,203,668 4,396,100 363,000 9.0%
#Non-operating Revenues 2,434,865 2,179,300 3,056,243 2,164,500 (14,800) (0.7%)
#Interest 124,502 156,900 237,307 302,500 145,600 92.8%
Total Revenues 85,214,760 91,741,500 95,804,736 98,248,200 6,506,700 7.1%
Expenditures
#Potable Water Purchases 29,409,666 31,271,300 32,547,634 34,225,800 2,954,500 9.4%
Recycled Water Purchases 2,642,437 3,615,900 3,643,521 3,716,700 100,800 2.8%
#CWA - Infrastructure Access Charge 1,930,848 1,976,400 1,976,310 2,080,200 103,800 5.3%
#CWA - Customer Service Charge 1,778,197 1,714,200 1,714,325 1,682,400 (31,800)(1.9%)
CWA - Reliability Charge 950,052 1,848,000 1,847,036 1,908,000 60,000 3.2%
#CWA - Emergency Storage Charge 4,681,673 4,579,800 4,579,670 4,486,800 (93,000)(2.0%)
#MWD - Capacity Reservation Charge 883,203 988,800 836,280 734,400 (254,400)(25.7%)
#MWD - Net RTS and Standby Charge 1,587,254 1,428,000 1,268,160 1,344,000 (84,000)(5.9%)
Subtotal - Water Costs 43,863,330 47,422,400 48,412,936 50,178,300 2,755,900 5.8%
#Power 2,697,915 2,938,000 2,890,123 3,023,800 85,800 2.9%
#Labor and Benefits 20,337,890 20,899,900 20,797,352 21,522,100 622,200 3.0%
#Administrative Expenses 4,510,379 5,150,100 4,745,279 5,485,700 335,600 6.5%
#Materials and Maintenance 3,103,175 3,456,300 3,007,595 3,645,700 189,400 5.5%
Subtotal - Operations Costs 30,649,359 32,444,300 31,440,349 33,677,300 1,233,000 3.8%
D Transfer to General Fund Reserve - 2,854,300 2,854,300 - (2,854,300) (100.0%)
#Expansion Reserve 2,695,800 4,093,600 4,093,600 3,274,600 (819,000) (20.0%)
B Betterment Reserve 2,400,000 3,466,400 3,466,400 111,100 (3,355,300) (96.8%)
R Replacement Reserve 3,421,000 464,500 464,500 9,787,900 9,323,400 2007.2%
TOOPEB Trust 1,006,000 961,000 961,000 998,000 37,000 3.9%
Sewer Replacement 1,199,300 - - - - -
New Supply Reserve 35,000 35,000 35,000 221,000 186,000 531.4%
Subtotal - Reserve Funding 10,757,100 11,874,800 11,874,800 14,392,600 2,517,800 21.2%
Total Expenditures 85,269,789 91,741,500 91,728,085 98,248,200 6,506,700 7.1%
Excess Revenues (Expenditures)(55,029)$ -$ 4,076,651$ -$ -$ -
Operating Budget Summary - General Fund
Budget to Budget
Variance
* Actual unaudited
45
Potable Water Sales 77,036,300$ 78.5%
Recycled Water Sales 9,863,100 10.0%
Sewer Revenues 2,869,400 2.9%
Meter Fees 103,100 0.1%
Capacity Fee Revenues 1,513,200 1.6%
Tax Revenues 4,396,100 4.5%
Non-operating Revenues 2,164,500 2.1%
Interest 302,500 0.3%
98,248,200 100.0%
Potable Water Purchases 46,461,600 47.3%
Recycled Water Purchases 3,716,700 3.8%
Power 3,023,800 3.0%
Labor and Benefits 21,522,100 21.9%
Administrative Expenses 5,485,700 5.6%
Materials & Maintenance 3,645,700 3.7%
Reserve Funding 14,392,600 14.7%
98,248,200$ 100.0%
FY 2018 Operating Revenues
FY 2018 Operating Expenditures
Operating Budget Summary - General Fund
46
Potable Recycled Sewer Total
Revenues
Water Sales 77,036,300$ -$ -$ 77,036,300$
Recycled Water Sales - 9,863,100 2,869,400 12,732,500
Meter Fees 100,500 2,600 - 103,100
Capacity Fee Revenues 1,513,200 - - 1,513,200
Tax Revenues 4,344,500 - 51,600 4,396,100
Non-operating Revenues 2,129,000 - 35,500 2,164,500
Interest 252,500 29,600 20,400 302,500
Total Revenues 85,376,000 9,895,300 2,976,900 98,248,200
Expenditures
Water Purchases 34,225,800 3,716,700 - 37,942,500
CWA - Infrastructure Access Charge 2,080,200 - - 2,080,200
CWA - Customer Service Charge 1,682,400 - - 1,682,400
CWA - Reliability Charge 1,908,000 - - 1,908,000
CWA - Emergency Storage Charge 4,486,800 - - 4,486,800
MWD - Capacity Reservation Charge 734,400 - - 734,400
MWD - Net RTS and Standby Charges 1,344,000 - - 1,344,000
Subtotal - Water Costs 46,461,600 3,716,700 - 50,178,300
Power 2,305,700 584,600 133,500 3,023,800
Labor and Benefits 19,270,400 1,171,300 1,080,400 21,522,100
Administrative Expenses 4,653,400 557,100 275,200 5,485,700
Materials and Maintenance 1,977,000 327,900 1,340,800 3,645,700
Subtotal - Operations Costs 28,206,500 2,640,900 2,829,900 33,677,300
#Expansion Reserve - 3,274,600 - 3,274,600
B Betterment Reserve - - 111,100 111,100
R Replacement Reserve 9,787,900 - - 9,787,900
TOOPEB Trust 920,000 42,100 35,900 998,000
New Supply Reserve - 221,000 - 221,000
Subtotal - Reserve Funding 10,707,900 3,537,700 147,000 14,392,600
Total Expenditures 85,376,000 9,895,300 2,976,900 98,248,200
Excess Revenue (Expenditures)-$ -$ -$ -$
FY 2018 Operating Budget Summary by System
47
FY 2016 FY 2018
Actual Budget Actual* Budget $ %
Revenues and Fund Sources
Potable Water Sales 65,413,157$ 72,238,600$ 73,977,348$ 77,036,300$ 4,797,700$ 6.6%
Recycled Water Sales 8,527,042 8,900,300 9,742,799 9,863,100 962,800 10.8%
Sewer Revenues 3,149,295 2,918,900 2,955,430 2,869,400 (49,500) (1.7%)
Meter Fees 78,568 66,200 72,624 103,100 36,900 55.7%
Capacity Fee Revenues 1,517,128 1,248,200 1,559,317 1,513,200 265,000 21.2%
Betterment Fee Revenues - - - - - -
Tax Revenues 3,970,203 4,033,100 4,203,667 4,396,100 363,000 9.0%
Availability Fees - - - - - -
Non-Operating Revenues 2,434,865 2,179,300 3,056,243 2,164,500 (14,800) (0.7%)
Interest 124,502 156,900 237,307 302,500 145,600 92.8%
Transfers - - - - - -
Total Revenues and 85,214,760 91,741,500 95,804,736 98,248,200 6,506,700 7.1%
Fund Sources
Expenditures and Fund Uses
Potable Water Purchases 29,409,666 31,271,300 32,547,634 34,225,800 2,954,500 9.4%
Recycled Water Purchases 2,642,437 3,615,900 3,643,521 3,716,700 100,800 2.8%
Fixed Charges 11,811,227 12,535,200 12,221,781 12,235,800 (299,400) (2.4%)
Power 2,697,915 2,938,000 2,890,123 3,023,800 85,800 2.9%
Labor and Benefits 20,337,890 20,899,900 20,797,352 21,522,100 622,200 3.0%
Administrative Expenses 4,510,379 5,150,100 4,745,279 5,485,700 335,600 6.5%
Materials and Maintenance 3,103,175 3,456,300 3,007,595 3,645,700 189,400 5.5%
Transfers 10,757,100 11,874,800 11,874,800 14,392,600 2,517,800 21.2%
Total Expenditures and 85,269,789 91,741,500 91,728,085 98,248,200 6,506,700 7.1%
Fund Uses
Excess Revenues/(Expenditures (55,029)$ -$ 4,076,651$ -$ -$ -
General Fund Revenues, Expenditures and Transfers, in millions ($)
FY 2017
Budget to Budget
Variance
General Fund - Revenues, Expenditures and Transfers
$80
$82
$84
$86
$88
$90
$92
FY 2016-Actual FY 2017-Budget FY 2017-Actual FY 2018-Budget
85
92
96
98
85
92
92
98
Revenue Expenditures
*Actual unaudited
48
Actual*Projected
Balance Interfund Balance
June 30, 2017 Revenues Expenditures Transfers
(1)June 30, 2018
General Fund
Potable 24,020,168$ 85,376,000$ 85,376,000$ (4,986,600)$ 19,033,568$
Recycled 4,272,936 9,895,300 9,895,300 (1,762,400) 2,510,536
Sewer 2,912,754 2,976,900 2,976,900 (1,990,100) 922,654
Total General Fund 31,205,857 98,248,200 98,248,200 (8,739,100) 22,466,757
Expansion Fund
Potable 4,651,023 2,807,800 4,439,900 (1,657,000) 1,361,923
Recycled (5,458,840) 189,900 1,192,000 5,090,800 (1,370,140)
Water (2)(807,818) 2,997,700 5,631,900 3,433,800 (8,218)
Sewer (4,574) (100) - - (4,674)
Total Expansion Fund (812,392) 2,997,600 5,631,900 3,433,800 (12,892) (3)
Betterment Fund
Potable 727,587 806,100 2,225,200 1,146,000 454,487
Recycled 833,910 11,500 368,400 (101,800) 375,210
Sewer 1,002,837 12,600 2,215,000 2,258,000 1,058,437
Total Betterment Fund 2,564,334 830,200 4,808,600 3,302,200 1,888,134 (3)
Replacement Fund
Potable 32,624,625 2,501,500 15,348,000 15,285,500 35,063,625
Recycled 4,812,296 192,500 389,100 48,000 4,663,696
Sewer 9,038,247 90,300 2,864,000 (156,800) 6,107,747
Total Replacement Fund 46,475,168 2,784,300 18,601,100 15,176,700 45,835,068
New Supply Fund
Potable 849,644 316,700 53,000 - 1,113,344
Recycled (126,169) 700 108,000 221,000 (12,469)
Sewer - - - - -
Total New Supply Fund 723,475 317,400 161,000 221,000 1,100,875 (3)
OPEB Fund 188,381 - 998,000 998,000 188,381
Debt Service Fund 4,534,828 625,500 751,700 - 4,408,628
Total 84,879,651$ 105,803,200$ 129,200,500$ 14,392,600$ 75,874,951$ 3,447,425$
(1) The total for interfund transfers does not net to $0 because some transfers are already reflected in the Operating
Revenues and Expenditures for General Fund as follows:
Expansion Reserve (3,274,600)$
Betterment Reserve (111,100)
Replacement Reserve (9,787,900)
New Supply Reserve (221,000)
OPEB Reserve (998,000)
Total (14,392,600)$ #
(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 funded
by current years revenues and prior years debt issuance proceeds, as well as transfers made in accordance with the Reserve
Policy found on pages 173-214
Fiscal Year 2018 Budget
Fund Balance Summary by Fund
*Actual unaudited
49
FY 2016 FY 2018
Actual Budget Actual* Budget
Revenues
General Fund
Potable 72,575,945$ 79,822,200$ 82,136,303$ 85,376,000$
Recycled 8,529,451 8,909,000 9,772,780 9,895,300
Sewer 4,109,364 3,010,300 3,895,653 2,976,900
Total General Fund (1)85,214,760 91,741,500 95,804,736 98,248,200
Expansion Fund
Potable 2,137,632 2,482,400 2,306,831 2,807,800
Recycled 255,657 113,200 173,922 189,900
Sewer 16 - (33) (100)
Total Expansion Fund 2,393,305 2,595,600 2,480,721 2,997,600
Betterment Fund
Potable 405,789 795,600 404,783 806,100
Recycled 17,431 14,000 21,121 11,500
Sewer 64,289 36,900 61,783 12,600
Total Betterment Fund 487,508 846,500 487,687 830,200
Replacement Fund
Potable 4,218,081 2,264,200 2,319,111 2,501,500
Recycled 218,925 99,800 177,740 192,500
Sewer 157,197 105,900 156,202 90,300
Total Replacement Fund 4,594,204 2,469,900 2,653,053 2,784,300
New Supply Fund
Potable 446,575 361,600 347,825 316,700
Recycled 19,323 8,700 22,693 700
Sewer - - - -
Total New Supply Fund 465,898 370,300 370,518 317,400
OPEB Fund 879,417 873,300 882,093 998,000
Debt Service Fund 741,226 678,600 643,177 625,500
Total Revenues 94,776,318$ 99,575,700$ 103,321,984 106,801,200$
939,563$ 5,738,945$
Revenues and Expenditures by Fund
FY 2017
*Actual unaudited
50
FY 2016 FY 2018
Actual Budget Actual* Budget
Revenues and Expenditures by Fund
FY 2017
Expenditures
General Fund
Potable 71,591,041$ 79,822,200$ 80,094,414$ 85,376,000$
Recycled 10,121,305 8,909,000 8,601,666 9,895,300
Sewer 3,557,443 3,010,300 3,032,005 2,976,900
Total General Fund 85,269,789 91,741,500 91,728,085 98,248,200
Expansion Fund
Potable 4,659,221 4,112,200 4,344,178 4,439,900
Recycled 1,072,335 1,112,100 1,128,766 1,192,000
Sewer 4,528 - 3,376 -
Total Expansion Fund 5,736,084 5,224,300 5,476,320 5,631,900
Betterment Fund
Potable 3,740,543 2,224,800 1,996,562 2,225,200
Recycled 395,319 1,526,400 1,393,943 368,400
Sewer 255,762 26,000 226,388 2,215,000
Total Betterment Fund 4,391,625 3,777,200 3,616,892 4,808,600
Replacement Fund
Potable 7,112,872 8,440,700 7,718,779 15,348,000
Recycled 735,874 198,000 111,518 389,100
Sewer 912,094 1,585,000 4,351,678 2,864,000
Total Replacement Fund 8,760,840 10,223,700 12,181,976 18,601,100
New Supply Fund
Potable 152,213 57,500 106,544 53,000
Recycled 102,968 4,800 109,070 108,000
Sewer - - - -
Total New Supply Fund 255,181 62,300 215,614 161,000
OPEB Fund 826,291 872,300 817,364 998,000
Debt Reserve Fund 877,280 751,700 748,854 751,700
Total Expenditures 106,117,091 112,653,000 114,785,105 129,200,500
Surplus/(Deficit)(11,340,773)$ (13,077,300)$ (11,463,121) (22,399,300)$
*Actual unaudited
51
FY 2016 FY 2018
Actual Budget Actual* Budget
Revenues and Fund Sources
Water Sales 73,940,199$ 81,138,900$ 83,720,147$ 86,899,400$
Sewer Revenues 3,149,295 2,918,900 2,955,430 2,869,400
Meter Fees 78,568 66,200 72,624 103,100
Capacity Fee Revenues 1,517,128 1,248,200 1,559,317 1,513,200
Capacity Fees for Maintenance 4,993,216 4,261,200 4,375,400 4,862,800
Tax Revenues 3,970,203 4,033,100 4,203,667 4,396,100
Availability Fees 114,940 484,200 100,375 460,500
Non-Operating Revenues 2,434,865 2,179,300 3,056,243 2,164,500
GO Bond Debt Tax Revenues 737,712 640,400 640,241 619,700
COPs Proceeds 770,200 828,100 828,100 772,000
CALTRANS Reimbursement 1,510,976 255,000 67,093 255,000
Interest 638,518 617,000 838,511 885,200
Interfund Transfer 972,261 962,200 967,968 1,000,300
Total Revenue and Fund Sources 94,828,080 99,633,700 103,385,115 106,801,200
Expenditures and Fund Uses
Water Purchases 43,863,330 47,422,400 48,412,936 50,178,300
Power 2,697,915 2,938,000 2,890,123 3,023,800
Labor Expenses 20,337,890 20,899,900 20,797,352 21,522,100
Administrative Expenses 4,510,379 5,150,100 4,745,279 5,485,700
Materials and Maintenance 3,103,175 3,456,300 3,007,595 3,645,700
CIP Expenses 12,173,466 12,000,000 14,507,469 21,675,200
Debt Service 7,834,229 8,039,200 7,731,206 8,279,100
OPEB Retiree Health Expenses 909,415 961,000 919,420 998,000
Interfund Transfers 10,757,100 11,874,800 11,874,800 14,392,600
Total Expenditures and Fund Uses 106,186,901 112,741,700 114,886,179 129,200,500
Surplus/(Deficit)(11,358,820)$ (13,108,000)$ (11,501,064)$ (22,399,300)$
Revenues and Expenditures by Type - All Funds
FY 2017
Note: Consistent with the District's financing plan, the District reserves have been used to fund capital projects,
resulting in the expected deficits in Fiscal Years 2016 and 2017 shown above.
*Actual unaudited
52
Five-Year Forecast
The District updates its Rate Model to build the budget for the upcoming fiscal year and to forecast
the five subsequent years, FY 2019 through FY 2023. This financial forecast is designed to provide a
general understanding of how revenues and expenditures are expected to influence the District.
This forecast also highlights the funding of 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 process on page 6. Water cost estimates are obtained from District’s water suppliers, CWA
and MWD. Power cost inflators are obtained from San Diego Gas and Electric, the District’s power
supplier. Labor and benefit cost inflators are based on the Memorandum of Understanding with
the District’s labor union as well as estimates from the District’s health providers, and the 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 replacing existing aging and future 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, replacement, and expansion needs from now until ultimate build-out.
Capital projects and their funding 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).
53
FY 2019 FY 2020 FY 2021 FY 2022 FY 2023
Revenues
Water/Sewer Rates 91,681,300$ 96,317,000$ 101,278,800$ 106,694,500$ 112,468,100$
Meter Fees 104,800 108,400 110,800 114,400 118,400
Capacity Fee Revenues 1,520,800 1,536,000 1,551,400 1,566,900 1,582,600
Non-operating Revenues 2,189,400 2,009,800 2,031,300 2,059,400 2,088,000
Tax Revenues 4,477,200 4,559,800 4,645,400 4,734,400 4,825,200
Interest Income 278,600 337,800 377,400 445,600 495,500
Total Revenues 100,252,100 104,868,800 109,995,100 115,615,200 121,577,800
36,202,300$ 35,854,000$ 36,098,600$ 37,008,900$
FY 2019 FY 2020 FY 2021 FY 2022 FY 2023
Expenditures
Water Cost 54,501,600 57,580,500 60,929,100 64,741,400 68,412,200
Power 3,160,900 3,305,900 3,464,400 3,641,500 3,832,000
Labor and Benefits 21,770,200 22,122,500 22,849,000 23,969,300 25,534,600
Administrative Expenses 5,372,700 5,544,400 5,811,200 5,919,000 6,094,000
Materials & Maintenance 3,799,700 4,268,500 4,258,200 4,065,300 4,230,300
Net Reserve Funding 11,647,000 12,047,000 12,683,200 13,278,700 13,474,700
Total Expenditures and Transfers 100,252,100 104,868,800 109,995,100 115,615,200 121,577,800
Excess Revenues (Expenditures)-$ -$ -$ -$ -$
-$ -$ -$ -$ -$
General Fund Forecast
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
$140
FY 2019 FY 2020 FY 2021 FY 2022 FY 2023
10
0
10
5
11
0
11
6
12
2
$1
0
0
$1
0
5
$1
1
0
$1
1
6
$1
2
2
Revenues and Expenditures Forecast, in millions ($)
Revenues Expenditures
54
FY 2019 FY 2020 FY 2021 FY 2022 FY 2023
Fund Balance
General Fund 22,162,300$ 23,216,000$ 24,347,400$ 25,603,100$ 27,048,200$
Betterment Fund 802,000 346,900 1,175,800 1,139,300 1,144,000
Replacement Fund 35,952,400 34,799,800 36,353,900 36,986,100 38,936,200
Expansion Fund 617,000 878,000 19,600 109,500 110,600
New Supply Fund 1,558,400 2,230,300 3,219,700 4,017,900 4,670,900
Debt Reserve 4,210,300 4,110,800 4,015,900 3,941,700 3,874,500
Total Fund Balance 65,302,400$ 65,581,800$ 69,132,300$ 71,797,600$ 75,784,400$
(185,164) (187,915) (190,987) (194,487) (198,187)
Fund Balances Forecast
Fund Balances by Fund
$0
$20
$40
$60
$80
FY 2019 FY 2020 FY 2021 FY 2022 FY 2023
Fund Balances Forecast, in millions ($)
General Fund Betterment Fund Replacement Fund Expansion Fund Debt Reserve New Supply Fund
55
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.
The District achieved a 200.0% actual debt coverage ratio, with growth revenues, for fiscal year 2017,
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. On the water side, the District does not anticipate the need to issue new debt and
expects the District’s financial performance to grow in strength prior to any future debt issuance. The
chart below shows the District’s projected debt coverage ratio, for the water side of the District, from
FY 2018 through FY 2023. 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 Water Debt Coverage Ratio
2.36 2.43 2.72
3.23 2.96 2.79
-
1.00
2.00
3.00
4.00
FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023
Co
v
e
r
a
g
e
R
a
t
i
o
Projected Ratio Minimum Ratio = 1.25
56
Debt Management
For sewer, the District is planning to borrow $5.5 million from the Clean Water State Revolving Fund
in 2018. The debt will have a 30-year maturity, with an estimated interest cost of 1.7%. Currently,
sewer has no other debt outstanding. The proposed increases in the sewer rates are necessary to
ensure the sewer operation’s debt coverage ratio meets the State Revolving Fund covenant, which
is expected to be 125%.
The District anticipates an increase in the debt coverage in FY 2022 primarily due to a reduction in
Metro costs as the cash funding for the first phase of pure water winds down.
Projected Sewer Debt Coverage Ratio
--
1.25 1.44
2.79
2.50
-
0.50
1.00
1.50
2.00
2.50
3.00
FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023
Co
v
e
r
a
g
e
R
a
t
i
o
Projected Ratio Minimum Ratio = 1.20
57
Outstanding
Year Maturity Original Balance
# Incurred Description Date Amount 6/30/2018
1 1996 Certificates of Participation (COPs)September 1, 2026 15,400,000$ 7,600,000$
2 2009 General Obligation (GO) Bonds August 31, 2022 7,780,000 3,390,000
3 2010 Certificates of Participation Series A (COPs)September 1, 2024 13,840,000 7,880,000
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 4,560,000
6 2016 Water Revenue Refunding Bonds (2)September 1, 2036 33,385,000 31,170,000
Total Outstanding Debt 114,495,000$ 90,955,000$
Total Assessed Valuation - FY 2017
Percentage of Original Debt to Assessed Valuation 0.41%0.06%
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
Total Outstanding Debt, in millions ($)
Note: The accounting for debt proceeds and payments is described in the District's Reserve Policy found on
pages 173-214.
27,598,986,676$ 12,738,454,702$
Schedule of Outstanding Debt
All Debts GO Bonds
$0
$15
$30
$45
$60
$75
1996 COPs 2009 GOBs 2010A COPs 2010B BABs 2013
WRRBs
2016
WRRBs
Principal Interest
58
1996 COPs 2009 GOBs 2010A COPs 2010B BABs 2013 WRRBs(1)2016 WRRBs(2)Total
700,000 635,000 975,000 - 685,000 1,045,000 4,040,000
700,000 650,000 1,015,000 - 715,000 1,100,000 4,180,000
700,000 680,000 1,065,000 - 745,000 1,155,000 4,345,000
800,000 705,000 1,120,000 - 775,000 1,215,000 4,615,000
800,000 720,000 1,175,000 - 805,000 1,285,000 4,785,000
900,000 - 1,235,000 - 835,000 1,350,000 4,320,000
900,000 - 1,295,000 - - 1,420,000 3,615,000
1,000,000 - - 1,365,000 - 1,495,000 3,860,000
1,100,000 - - 1,450,000 - 1,570,000 4,120,000
- - - 1,545,000 - 1,645,000 3,190,000
- - - 1,640,000 - 1,715,000 3,355,000
- - - 1,745,000 - 1,785,000 3,530,000
- - - 1,855,000 - 1,855,000 3,710,000
- - - 1,975,000 - 1,955,000 3,930,000
- - - 2,105,000 - 2,005,000 4,110,000
- - - 2,245,000 - 2,055,000 4,300,000
- - - 2,390,000 - 2,115,000 4,505,000
- - - 2,550,000 - 2,170,000 4,720,000
- - - 2,715,000 - 2,235,000 4,950,000
- - - 2,895,000 - - 2,895,000
- - - 3,085,000 - - 3,085,000
- - - 3,290,000 - - 3,290,000
- - - 3,505,000 - - 3,505,000
7,600,000$ 3,390,000$ 7,880,000$ 36,355,000$ 4,560,000$ 31,170,000$ 90,955,000$
(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
2019
2020
2021
2022
Projected Principal Payments by Debt Issuance
FY
$0
$1
$2
$3
$4
$5
$6
$7
$8
$9
20
1
9
20
2
0
20
2
1
20
2
2
20
2
3
20
2
4
20
2
5
20
2
6
20
2
7
20
2
8
20
2
9
20
3
0
20
3
1
20
3
2
20
3
3
20
3
4
20
3
5
20
3
6
20
3
7
20
3
8
20
3
9
20
4
0
20
4
1
Interest
Principal
59
1996 COPs (1)2009 GOBs 2010A COPs 2010B BABs 2013 WRRBs(2)2016 WRRBs(3)Total
35,083 114,433 354,988 2,371,868 159,567 1,156,040 4,191,979
31,583 88,533 306,196 2,371,868 131,167 1,101,498 4,030,845
28,083 61,533 253,363 2,371,868 101,567 1,044,206 3,860,620
24,167 33,500 197,821 2,371,868 70,767 983,956 3,682,079
20,167 4,800 139,529 2,371,868 38,767 920,290 3,495,421
15,750 - 78,279 2,371,868 5,567 853,331 3,324,795
11,250 - 11,331 2,371,868 - 782,915 3,177,364
6,333 - - 2,299,330 - 708,790 3,014,453
917 - - 2,207,767 - 630,915 2,839,599
- - - 2,110,252 - 562,998 2,673,250
- - - 2,006,679 - 494,865 2,501,544
- - - 1,896,516 - 423,931 2,320,447
- - - 1,779,392 - 350,198 2,129,590
- - - 1,651,430 - 297,102 1,948,532
- - - 1,514,409 - 247,185 1,761,594
- - - 1,368,290 - 193,878 1,562,168
- - - 1,212,689 - 136,419 1,349,108
- - - 1,046,730 - 76,996 1,123,726
- - - 869,973 - 11,175 881,148
- - - 681,541 - - 681,541
- - - 480,724 - - 480,724
- - - 266,587 - - 266,587
- - - 38,421 - - 38,421
173,333$ 302,800$ 1,341,506$ 38,033,808$ 507,400$ 10,976,687$ 51,335,535$
(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
2019
2020
2021
2022
Projected Interest Payments by Debt Issuance
FY
60
Potable Revenues and Expenditures
Potable Revenues
The District will provide water service to approximately 49,761 potable customers by the end of FY
2018. Ninety-one percent of the potable customers are residential and the remaining 9% are
comprised of multi-residential, business and publicly-owned, and irrigation and commercial
agricultural. With the decline in residential developments in recent years, the District expects only
nominal growth in the customer base of 0.33% for FY 2018. Unit sales are anticipated to increase
3.0% compared to the previous year's budget, and decrease by 1.0% versus the previous year’s
actual unit sales.
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/CWA fixed charge, and the District
system fee. The MWD/CWA fixed charges are based on meter size. The District system fee is based
on meter size and customer type. These fees generate 32% of the potable water sales revenue.
Water rates, energy fees, and penalties generate the remaining 68% of revenues necessary to fund
operations.
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.
Potable Expenditures
In FY 2018, the District estimates to purchase 26,758.6 acre-feet of potable water, sufficient to meet
the demands of its customers. Provisions have been made for District usage and loss in the amount
of 1,169.7 acre-feet.
Today, the District purchases 100% of its potable water from CWA. 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, the District 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. This is beneficial as it enhances
reliability of water deliveries in an emergency situation such as earthquakes or other natural
disasters. The District’s agreement also brings regional water treatment closer to our customers,
61
Potable Revenues and Expenditures
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 to capture 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 effects the extent to which it can perform
the various functions, as does the individual agencies’ operational plan implemented at each
location.
The CWA purchases water for the County of San Diego from MWD and the Imperial Irrigation District.
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 has
produced more than 1.1 billion gallons of drinking water for the San Diego region. It currently meets
about 10% of the county’s water demand. Additionally, the District is actively supporting the
development of a seawater desalination facility in Rosarito Beach, Mexico. If completed, the water
from this facility could replace up to two-thirds of the water the District receives from Northern
California and the Colorado River.
62
FY 2016 FY 2017 FY 2018
11-Actual Budget Actual * Budget $%
Revenues
##Water Sales 65,413,157$ 72,238,600$ 73,977,348$ 77,036,300$ 4,797,700$ 6.6%
##Meter Fees 76,366 65,800 67,340 100,500 34,700 52.7%
##Capacity Fee Revenues 1,512,600 1,248,200 1,555,941 1,513,200 265,000 21.2%
Tax Revenues 3,897,734 3,981,500 4,096,383 4,344,500 363,000 9.1%
##Non-operating Revenues 1,553,316 2,143,800 2,246,543 2,129,000 (14,800) (0.7%)
##Interest 122,772 144,300 192,748 252,500 108,200 75.0%
Total Revenues 72,575,945 79,822,200 82,136,303 85,376,000 5,553,800 7.0%
Expenditures
Potable Water Purchases 29,409,666 31,271,300 32,547,634 34,225,800 2,954,500 9.4%
##CWA - Infrastructure Access Charge 1,930,848 1,976,400 1,976,310 2,080,200 103,800 5.3%
##CWA - Customer Service Charge 1,778,197 1,714,200 1,714,325 1,682,400 (31,800) (1.9%)
##CWA - Reliability Charge 950,052 1,848,000 1,847,036 1,908,000 60,000 3.2%
##CWA - Emergency Storage Charge 4,681,673 4,579,800 4,579,670 4,486,800 (93,000) (2.0%)
##MWD - Capacity Reservation Charge 883,203 988,800 836,280 734,400 (254,400) (25.7%)
##MWD-Net RTS and Standby Charges 1,587,254 1,428,000 1,268,160 1,344,000 (84,000) (5.9%)
Subtotal - Water Costs 41,220,893 43,806,500 44,769,415 46,461,600 2,655,100 6.1%
##Power 2,017,258 2,194,700 2,177,466 2,305,700 111,000 5.1%
##Labor and Benefits 18,165,431 18,581,400 18,620,465 19,270,400 689,000 3.7%
##Administrative Expenses 3,903,470 4,589,800 4,243,831 4,653,400 63,600 1.4%
##Materials and Maintenance 1,676,689 2,108,600 1,742,037 1,977,000 (131,600) (6.2%)
11-Subtotal - Operations Costs 25,762,848 27,474,500 26,783,799 28,206,500 732,000 2.7%
DS Transfer to General Fund Reserve - 1,286,400 1,286,400 - (1,286,400) (100.0%)
##Expansion Reserve - 3,638,000 3,638,000 - (3,638,000) (100.0%)
Bet Betterment Reserve - 2,280,000 2,280,000 - (2,280,000) (100.0%)
RepReplacement Reserve 2,493,900 464,500 464,500 9,787,900 9,323,400 2007.2%
TO Transfer to OPEB 914,100 872,300 872,300 920,000 47,700 5.5%
Sw Transfer to Sewer Replacement 1,199,300 - - - - -
Subtotal - Reserve Funding 4,607,300 8,541,200 8,541,200 10,707,900 2,166,700 25.4%
Total Expenditures 71,591,041 79,822,200 80,094,414 85,376,000 5,553,800 7.0%
Excess Revenues (Expenditures)984,904$ -$ 2,041,888$ -$ -$ -
Operating Budget Summary - Potable
Budget to Budget
VarianceFY 2017
* Actual unaudited
63
FY 2016 FY 2018
Actual Budget Actual * Budget $ %
Water Sales 37,243,504$ 44,450,600$ 46,265,870$ 49,251,200$ 4,800,600$ 10.8%
System Fees 13,391,005 12,204,600 12,243,766 12,917,600 713,000 5.8%
Energy Fees 2,151,538 2,164,200 2,334,565 1,925,500 (238,700) -11.0%
MWD and CWA Fixed Fees 11,850,407 12,535,200 12,398,886 12,030,400 (504,800) -4.0%
Penalties 776,703 884,000 734,261 911,600 27,600 3.1%
Total Water Sales 65,413,157$ 72,238,600$ 73,977,348$ 77,036,300$ 4,797,700$ 6.6%
Water Sales 49,251,200$ 63.9%
System Fees 12,917,600 16.8%
Energy Fees 1,925,500 2.5%
MWD and CWA Fixed Fees 12,030,400 15.6%
Penalties 911,600 1.2%
Total Water Sales 77,036,300$ 100%
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.
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 $ .053 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.
FY 2017
Classification of Water Sales - Potable
Budget to Budget
Variance
FY 2018 Classification of Water Sales
*Actual unaudited64
Current Approved Current Approved Accounts Unit Sales Budget
Residential 45,345 6,183,300 26,171,600$
Conservation Tier (< 5 hcf)2.53$ -$
6 - 10 1 - 10 3.95 3.05
11 - 22 11 - 22 5.13 5.44
over 23 hcf over 23 hcf 7.90 7.03
Multi-Residential 809 1,496,600 6,348,200
0 - 40 - 43.90 2.85
5 - 95 - 95.05 5.17
over 10 hcf over 10 hcf 7.80 6.35
Business and Publicly-Owned
1 unit 3.61 1,453 1,813,800 7,134,000
Tier I- 4.17 -
Tier II - 4.23 -
Tier III - 4.30 -
Irrigation and Commercial Agricultural
1 unit 5.27 1,239 1,652,900 9,193,500
Tier I5.68 -
Tier II 5.74 -
Tier III 5.81 -
Total 48,846 11,146,600 48,847,300$
Government Fee 0.41 0.41 - - 403,900
Total Water Sales 48,846 11,146,600 49,251,200$
Units %
Residential 6,183,300 55.5%
Multi-Residential 1,496,600 13.4%
Business and Publicly-Owned 1,813,800 16.3%
1,652,900 14.8%
Total Water Sales 11,146,600 100.0%
Water Sales Summary by Service Class - Potable
FY 2018
FY 2018 Unit Sales by Service Class
(1) Approved rates for water billed beginning in January 2018.
Water RatesTier Rate Structure
Irrigation and Commercial Agricultrual
(1)(1)
65
FY 2013 FY 2014 FY 2015 FY 2016 FY 2018
Budget Actual Budget
Residential 7,836,873 8,050,828 7,248,930 5,832,549 6,064,600 6,266,299 6,183,300
Multi-Residential 1,495,057 1,536,902 1,482,502 1,417,211 1,449,400 1,516,436 1,496,600
Business and Publicly-Owned 2,031,253 2,056,075 2,049,294 1,827,965 1,860,400 1,815,635 1,813,800
Irrigation and Commercial Agricultural 1,723,839 1,931,856 1,795,230 1,221,929 1,278,200 1,423,637 1,394,600
Temporary and Fire Services 102,020 144,458 168,469 175,636 154,400 228,324 258,300
Total Unit Sales 13,189,042 13,720,119 12,744,425 10,475,290 10,807,000 11,250,331 11,146,600
FY 2013 FY 2014 FY 2015 FY 2016 FY 2018
Budget Actual Budget
Residential 44,670 44,826 44,941 45,038 45,102 45,086 45,345
Multi-Residential 800 798 806 817 822 802 809
Business and Publicly-Owned 1,493 1,449 1,453 1,455 1,459 1,445 1,453
Irrigation and Commercial Agricultural 1,227 1,229 1,227 1,231 1,231 1,241 1,239
Temporary and Fire Services 772 846 881 884 882 928 915
Total Meter Count 48,962 49,148 49,308 49,425 49,496 49,502 49,761
Unit Sales History and Meter Count by Customer Class - Potable
Unit Sales in thousands and Meter Count Trends
FY 2017
FY 2017
Actual
Actual
5,000
15,000
25,000
35,000
45,000
55,000
-
5,000
10,000
15,000
20,000
FY 2013
Actual
FY 2014
Actual
FY 2015
Actual
FY 2016
Actual
FY 2017
Actual
FY 2018
Budget
Potable Meters Potable Unit Sales
Units Meters
66
FY 2017 FY 2018 FY 2017 FY 2018
Meter Size Count Count Current Approved Budget Budget $%
Residential
0.75 43,304 43,472 15.91$ 17.38$ 9,037,200$ 8,659,000$ (378,200)$ -4.2%
1.00 1,777 1,851 22.47 24.56 524,400 522,300 (2,100) -0.4%
1.50 17 18 38.88 42.49 8,700 8,800 100 1.1%
2.00 4 4 58.55 64.00 3,100 2,900 (200) -6.5%
Sub-total 45,102 45,345 9,573,400 9,193,000 (380,400) -4.0%
Multi-Residential
0.75 41 39 15.91 38.21 8,600 12,700 4,100 47.7%
1.00 185 174 22.47 53.97 54,600 79,800 25,200 46.2%
1.50 244 244 38.88 93.37 124,600 193,600 69,000 55.4%
2.00 230 233 58.55 140.61 176,900 278,400 101,500 57.4%
3.00 44 45 111.04 266.66 62,800 100,300 37,500 59.7%
4.00 69 64 170.10 408.50 148,800 222,200 73,400 49.3%
6.00 6 7 334.18 802.55 26,300 47,700 21,400 81.4%
8.00 3 3 531.05 1,275.34 20,900 32,500 11,600 55.5%
10.00 - - 760.72 1,826.91 - - - 0.0%
Sub-total 822 809 623,500 967,200 343,700 452%
Business and Publicly-Owned
0.75 329 327 15.91 35.99 68,700 101,800 33,100 48.2%
1.00 356 357 22.47 50.83 105,000 156,900 51,900 49.4%
1.50 300 302 38.88 87.95 153,000 229,000 76,000 49.7%
2.00 398 390 58.55 132.45 302,400 445,700 143,300 47.4%
3.00 34 34 111.04 251.19 49,600 73,900 24,300 49.0%
4.00 27 29 170.10 384.79 60,300 96,600 36,300 60.2%
6.00 10 9 334.18 755.97 43,900 58,900 15,000 34.2%
8.00 - - 531.05 1,201.32 - - -
10.00 5 5 760.72 1,720.86 50,000 74,400 24,400 48.8%
Sub-total 1,459 1,453 832,900 1,237,200 404,300 48.5%
Irrigation and Commercial Agricultural
0.75 114 115 15.91 30.40 23,800 32,000 8,200 34.5%
1.00 277 283 22.47 42.93 81,700 111,000 29,300 35.9%
1.50 387 388 38.88 74.28 197,600 263,400 65,800 33.3%
2.00 465 464 58.55 111.85 357,600 474,400 116,800 32.7%
3.00 2 3 111.04 212.13 2,900 5,800 2,900 100.0%
4.00 101 118 170.10 324.98 225,600 350,500 124,900 55.4%
6.00 4 5 334.18 638.44 17,600 29,200 11,600 65.9%
8.00 - - 531.05 1,014.56 - - -
10.00 - - 760.72 1,453.33 - - -
Sub-total 1,350 1,376 906,800 1,266,300 359,500 39.6%
Fire Services
Less than 3"763 778 20.77 20.77 208,100 193,900 (14,200) -6.8%
More than 4"- - 27.98 27.98 - - -
Sub-total 763 778 208,100 193,900 (14,200) -6.8%
Turn Over Fees 10.00 10.00 60,000 60,000 -
Total 49,496 49,761 12,204,700$ 12,917,600$ (20,900)$ -0.2%
(1) Approved rates for water billed beginning in January 2018.
System Fees - Potable
System Fees Budget to Budget Variance
(1)
67
FY 2018 FY 2017 FY 2018
Meter Size Count Current Approved Budget Budget $%
0.75 43,946 15.00$ 15.45$ 8,356,300$ 8,007,600$ (348,700)$ -4.2%
1.00 2,657 27.84 28.68 917,000 900,900 (16,100) -1.8%
1.50 947 62.96 64.85 755,600 725,200 (30,400) -4.0%
2.00 1,089 107.08 110.30 1,486,600 1,418,500 (68,100) -4.6%
3.00 82 227.75 234.60 229,300 224,900 (4,400) -1.9%
4.00 99 364.72 375.68 462,700 439,800 (22,900) -4.9%
6.00 18 746.59 769.02 171,100 163,700 (7,400) -4.3%
8.00 3 1,205.65 1,241.89 46,100 44,100 (2,000) -4.3%
10.00 5 1,735.39 1,787.55 110,500 105,700 (4,800) -4.3%
Total 48,846 12,535,200$ 12,030,400$ (504,800)$ -4.0%
(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 2018.
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
$10
FY 2013
Actual
FY 2014
Actual
FY 2015
Actual
FY 2016
Actual
FY 2017
Actual
FY 2018
Budget
(1)(2)
68
Meter Size Meter Sales Installation Fee Meter Fee Total Fees Budget
0.75 270 107.70$ 226.96$ 334.66$ 90,400$
1.00 1 107.70 292.87 400.57 400
1.50 3 107.70 476.03 583.73 1,800
2.00 3 107.70 682.10 789.80 2,400
3.00 2 648.46 2,125.70 2,774.16 5,500
4.00 - 648.46 3,692.00 4,340.46 -
6.00 - 1,024.29 6,377.10 7,401.39 -
8.00 - 1,570.66 7,967.71 9,538.37 -
10.00 - 1,570.66 11,459.05 13,029.71 -
Total 279 100,500$
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 2018
-
15,000
30,000
45,000
60,000
FY 2013
Actual
FY 2014
Actual
FY 2015
Actual
FY 2016
Actual
FY 2017
Actual
FY 2018
Budget
69
FY 2013 FY 2014 FY 2015 FY 2016 FY 2018
Budget
Water Sales 40,845,630$ 46,856,253$ 44,025,774$ 37,243,504$ 46,265,870$ 49,251,200$
System Fees 10,315,199 11,152,291 12,380,370 13,391,005 12,243,766 12,917,600
Energy Fees 1,964,062 2,114,844 2,134,865 2,151,538 2,334,565 1,925,500
MWD and CWA Fixed Fees 9,747,977 10,309,983 10,846,411 11,850,407 12,398,886 12,030,400
Penalties 796,426 839,025 894,569 776,704 734,261 911,600
Total Potable Revenues 63,669,294$ 71,272,396$ 70,281,989$ 65,413,157$ 73,977,348$ 77,036,300$
Revenue History - Potable, in millions ($)
Revenue History - Potable
FY 2017
Actual
$-
$20
$40
$60
$80
FY 2013
Actual
FY 2014
Actual
FY 2015
Actual
FY 2016
Actual
FY 2017
Actual
FY 2018
Budget
Water Sales System Fees Energy Fees MWD & CWA Fixed Fees Penalties
70
FY 2018 FY 2018
Budget Actual* Budget Budget Actual* Budget $ %
Potable Water Purchases (CWA):
Rate Effective January 1,255.00$ 1,205.38$ 1,309.00$ 54$ 4.3%
Budgeted Sales 24,809.2 25,830.3 25,588.9 29,940,200$ 31,074,062$ 32,730,500$ 2,790,300$ 9.3%
District & Unbilled Usage**66.6 128.1 99.3 80,200 154,367 126,200 46,000 57.4%
Water Loss 1,036.5 1,043.5 1,070.4 1,250,900 1,319,205 1,369,100 118,200 9.4%
Total Variable Charges 25,912.3 27,002.0 26,758.6 31,271,300$ 32,547,634$ 34,225,800$ 2,954,500 9.4%
CWA and MWD Fixed Charges:
CWA - Infrastructure Access Charge 1,976,400$ 1,976,310$ 2,080,200$ 103,800$ 5.3%
CWA - Customer Service Charge 1,714,200 1,714,325 1,682,400 (31,800) -1.9%
CWA - Emergency Storage Charge 4,579,800 4,579,670 4,486,800 (93,000) -2.0%
CWA - Reliability Fixed Charge 1,848,000 1,847,036 1,908,000 60,000 3.2%
MWD - Capacity Reservation Charge 988,800 836,280 734,400 (254,400) -25.7%
MWD - Readiness-to-Serve Charge 1,428,000 1,268,160 1,344,000 (84,000) -5.9%
Total Fixed Charges 12,535,200$ 12,221,780$ 12,235,800$ (299,400)$ -2.4%
Total Variable and Fixed Charges 43,806,500$ 44,769,415$ 46,461,600$ 2,655,100$ 6.1%
Average Cost Per Acre-Foot 1,691$ 1,658$ 1,736$
*Actual unaudited
** Excludes potable supplement to recycled system.
Water Purchases and Related Costs - Potable
Budget to Budget
Acre Feet Variance
FY 2017 FY 2017
Purchase Costs
-
8,000.0
16,000.0
24,000.0
32,000.0
40,000.0
FY 2013
Actual
FY 2014
Actual
FY 2015
Actual
FY 2016
Actual
FY 2017
Actual
FY 2018
Budget
Historical Potable Water Purchases, in acre-feet
71
FY 2013 FY 2014 FY 2015 FY 2016 FY 2018
Budget Actual* Budget $ %
Administrative Buildings 164,785$ 179,919$ 216,744$ 212,448$ 220,600$ 196,288$ 223,500$ 2,900$ 1.3%
Potable Transmission 1,610,428 1,878,026 2,063,318 1,804,810 1,974,100 1,981,178 2,082,200 108,100 5.5%
Total Power Costs 1,775,213$ 2,057,945$ 2,280,062$ 2,017,258$ 2,194,700$ 2,177,466$ 2,305,700$ 111,000$ 5.1%
Power Costs - Potable
Budget to Budget
Variance
Historical Power Costs, in thousands ($)
Actual
FY 2017
$0
$500
$1,000
$1,500
$2,000
$2,500
FY 2013
Actual
FY 2014
Actual
FY 2015
Actual
FY 2016
Actual
FY 2017
Actual
FY 2018
Budget
Administrative Buildings Potable Transmission
*Actual Unaudited
72
FY 2016 FY 2017 FY 2017 FY 2018
Actual Budget Actual* Budget $%
Administrative Expenditures
Directors' Fees 22,100$ 33,000$ 20,493$ 40,000$ 7,000$ 21.2%
Travel and Memberships 164,590 208,600 157,379 245,400 36,800 17.6%
Conservation and Outreach 150,060 177,400 152,220 161,600 (15,800) (8.9%)
General Office Expense 236,868 265,500 220,661 266,700 1,200 0.5%
Equipment 1,060,303 1,109,300 1,155,214 1,191,800 82,500 7.4%
Fees 480,869 600,600 620,148 601,000 400 0.1%
Services 1,526,302 1,952,500 1,499,855 1,814,800 (137,700) (7.1%)
Training 68,007 126,000 104,983 122,300 (3,700) (2.9%)
Utilities 26,445 14,900 13,596 14,900 - 0.0%
Insurance and Legal 827,274 825,000 1,027,198 911,000 86,000 10.4%
Miscellaneous Expense - - 181 100 100 0.0%
Bad Debt Expense 107,112 99,800 69,548$ 99,800 - 0.0%
Subtotal before Overhead 4,669,930 5,412,600 5,041,476 5,469,400 56,800 1.0%
Less: Overhead Allocation (766,460) (822,800) (797,645) (816,000) 6,800 -
Total Expenditures 3,903,470$ 4,589,800$ 4,243,831$ 4,653,400$ 63,600$ 1.4%
4,403,925$ 5,400,900$ 6,068,674$ 6,380,400$
Directors' Fees 40,000$ 0.7%
Travel and Memberships 245,400 4.5%
Conservation and Outreach 161,600 3.0%
General Office Expense 266,700 4.8%
Equipment 1,191,800 21.8%
Fees 601,000 11.0%
Services 1,814,800 33.2%
Training 122,300 2.2%
Utilities 14,900 0.3%
Insurance and Legal 911,000 16.7%
Bad Debt Expense (1)99,900 1.8%
Subtotal 5,469,400 100.0%
Less: Overhead Allocation (816,000)
Total Administrative Expenses 4,653,400$
(1)Includes Miscellaneous Expense
Budget to Budget
Variance
FY 2018 Administrative Expenditures - Potable
Administrative Expenditures - Potable
* Actual unaudited
73
FY 2016 FY 2017 FY 2017 FY 2018
Actual Budget Actual* Budget $ %
Materials and Maintenance
Fuel and Oil 129,898$ 207,500$ 149,075$ 183,000$ (24,500)$ (11.8%)
Meters and Materials 172,175 156,700 148,492 117,200 (39,500) (25.2%)
Fleet Parts and Equipment 115,288 124,800 115,733 124,800 - 0.0%
Infrastructure Equipment & Supplies 339,849 445,700 416,436 411,000 (34,700) (7.8%)
Chemicals 151,647 199,600 128,197 199,600 - 0.0%
Safety Equipment 79,156 51,000 54,157 51,800 800 1.6%
Laboratory Equipment and Supplies 31,458 36,300 37,758 58,500 22,200 61.2%
Other Materials and Supplies 158,587 177,200 159,842 149,200 (28,000) (15.8%)
Building and Grounds Materials 56,663 56,000 65,774 61,100 5,100 9.1%
Contracted Services 441,968 653,800 466,573 620,800 (33,000) (5.0%)
Total Expenditures 1,676,689$ 2,108,600$ 1,742,037$ 1,977,000$ (131,600)$ (6.2%)
Fuel and Oil 183,000$ 9.3%
Meters and Materials 117,200 5.9%
Fleet Parts and Equipment 124,800 6.3%
Infrastructure Equipment and Supplies 411,000 20.8%
Chemicals 199,600 10.1%
Safety Equipment 51,800 2.6%
Laboratory Equipment and Supplies 58,500 3.0%
Other Materials and Supplies 149,200 7.5%
Building and Grounds Materials 61,100 3.1%
Contracted Services 620,800 31.4%
Total Expenditures 1,977,000$ 100.0%
Budget to Budget
Variance
FY 2018 Materials and Maintenance Expenditures - Potable
Materials and Maintenance Expenditures - Potable
* Actual unaudited
74
Potable Water Service Area
75
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76
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
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.
77
Recycled Revenues and Expenditures
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 13.0% 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. The District
operates the largest recycled water distribution system in San Diego County and will supply
approximately 2,660.7 acre-feet of recycled water to 719 landscaping and construction customers by
the end of Fiscal Year 2018. The recycled water customer base consists primarily of irrigation at golf
courses, schools, parks, and open space. The geographic area of this water use includes Eastlake,
Otay Ranch, Rancho Del Rey, and other areas of eastern Chula Vista.
Producing and distributing recycled water is costly. To help offset the costs of supplying alternative
water sources, both CWA and MWD offer incentive programs. In Fiscal Year 1991, the District signed
agreements with CWA and MWD to take advantage of the programs they offered. A second
agreement was signed in 2000. In 2005, the District agreed to terminate both agreements and
entered into a new agreement, which expires June 30, 2023, allowing 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.
78
FY 2016 FY 2017 FY 2018
31-Actual Budget Actual * Budget $ %
Revenues
Recycled Water Sales 8,527,042$ 8,900,300$ 9,742,799$ 9,863,100$ 962,800$ 10.8%
Meter Fees 2,202 400 5,284 2,600 2,200 550.0%
Interest 207 8,300 24,696 29,600 21,300 256.6%
Total Revenues 8,529,451 8,909,000 9,772,780 9,895,300 986,300 11.1%
Expenditures
Recycled Water Purchases 2,642,437 3,615,900 3,643,521 3,716,700 100,800 2.8%
Power 526,842 568,900 590,035 584,600 15,700 2.8%
Labor and Benefits 1,287,606 1,339,200 1,122,504 1,171,300 (167,900) (12.5%)
Administrative Expenses 382,368 331,200 288,483 557,100 225,900 68.2%
Materials and Maintenance 219,952 305,000 208,323 327,900 22,900 7.5%
1 Subtotal - Operations Costs 5,059,205 6,160,200 5,852,866 6,357,600 197,400 3.2%
DTransfer to GF Reserve - 1,371,800 1,371,800 - (1,371,800) (100.0%)
Expansion Reserve 2,695,800 455,600 455,600 3,274,600 2,819,000 618.7%
BBetterment Reserve 1,945,000 835,200 835,200 - (835,200) (100.0%)
RReplacement Reserve 328,000 - - - - -
TTransfer to OPEB 58,300 51,200 51,200 42,100 (9,100) (17.8%)
NTransfer to New Supply Fund 35,000 35,000 35,000 221,000 186,000 531.4%
Subtotal - Reserve Funding 5,062,100 2,748,800 2,748,800 3,537,700 788,900 28.7%
Total Expenditures 10,121,305 8,909,000 8,601,666 9,895,300 986,300 11.1%
(1,591,854)$ -$ 1,171,114$ -$ -$ - Excess Revenues/Expenditures
Operating Budget Summary - Recycled
Budget to Budget
VarianceFY 2017
* Actual unaudited
79
FY 2016 FY 2018
Actual Budget Actual* Budget $ %
Water Sales 6,240,661$ 6,702,300$ 7,431,235$ 7,493,200$ 790,900$ 11.8%
System Fees 471,962 432,800 434,775 589,100 156,300 36.1%
Energy Fees 379,026 379,100 417,595 313,700 (65,400) -17.3%
MWD and CWA Rebates 1,396,472 1,351,000 1,436,935 1,428,400 77,400 5.7%
Penalties 38,921 35,100 22,259 38,700 3,600 10.3%
Total Recycled Water Sales 8,527,042$ 8,900,300$ 9,742,799$ 9,863,100$ 962,800$ 10.8%
Water Sales 7,493,200$ 76.00%
System Fees 589,100 6.00%
Energy Fees 313,700 3.20%
MWD and CWA Rebates 1,428,400 14.50%
Penalties 38,700 0.30%
9,863,100$ 100.00%
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.
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 $ .053 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 $185 from MWD for every acre-foot (AF) of recycled water sold.
Penalties: Charges and penalties are imposed on customer accounts for late payments and returned checks.
Budget to Budget
Variance
FY 2018 Classification of Water Sales
Classification of Water Sales - Recycled
FY 2017
*Actual Unaudited
80
Current Approved Accounts Unit Sales Budget
Recycled .75" and 1.0" Meter
1 unit 4.26$ 106 55,400 258,700$
0 - 32 units 4.85$
33 - 75 units 4.92
over 76 units 4.99
Recycled 1.5" and 2.0" Meter
1 unit 4.26 595 1,146,600 5,357,200
0 - 130 units 4.85
131 - 325 units 4.92
over 326 units 4.99
Recycled 3.0" and 4.0" Meter
1 unit 4.26 11 94,300 440,900
0 - 440 units 4.85
441 - 1,050 units 4.92
over 1,051 units 4.99
Recycled more than 6.0" Meter
1 unit 4.26 1 53,600 248,100
0 - 4,000 units 4.85
4,001 - 10,000 units 4.92
over 10,000 units 4.99
Recycled Temporary 3.0" and 4.0" Meter
1 unit 4.26 4 27,900 129,200
0 - 440 units 4.85
441 - 1,050 units 4.92
over 1,051 units 4.99
Recycled Commercial <10" Meter
1 unit 3.01 1 99,500 340,500
0 - 173 units 3.53
174 - 831 units 3.60
over 832 units 3.65
Recycled Commercial >10" Meter
1 unit 3.01 1 138,800 465,600
0 - 7,426 units 3.53
7,427 - 14,616 units 3.60
over 14,617 units 3.65
Total 719 1,616,100 7,240,200$
Government Fee 0.41 0.41 - - 253,000
Total Water Sales 719 1,616,100 7,493,200$
(1) Approved rates for water billed beginning in January 2018.
FY 2018
Water Sales Summary by Meter Size - Recycled
Water Rates
(1)
81
FY 2014 FY 2015 FY 2016 FY 2018
Budget Actual Budget
Recycled .75" & 1.0" Meter 68,523 63,142 52,258 47,600 58,236 55,400
Recycled 1.5" & 2.0" Meter 1,474,879 1,365,116 1,067,391 1,044,700 1,159,103 1,146,600
Recycled 3.0" & 4.0" Meter 115,794 103,125 91,711 81,000 93,896 94,300
Recycled > 6.0" Meter 363,760 192,003 50,140 53,700 56,600 53,600
Recycled-Temp 3" & 4" Meter 18,592 - 56,376 40,000 12,350 27,900
Recycled-Temp > 6" Meter 26,782 - 39,471 19,300 13,283 -
Recycled Commercial <10" Meter - 67,010 100,000 108,100 95,680 99,500
Recycled Commercial >10" Meter - 51,560 134,330 134,100 136,620 138,800
Total Unit Sales 2,068,330 1,841,956 1,591,677 1,528,500 1,625,768 1,616,100
FY 2014 FY 2015 FY 2016 FY 2018
Budget Actual Budget
Recycled .75" & 1.0" Meter 100 101 102 102 109 106
Recycled 1.5" & 2.0" Meter 588 590 588 590 594 595
Recycled 3.0" & 4.0" Meter 11 11 11 11 11 11
Recycled > 6.0" Meter 1 1 1 1 1 1
Recycled-Temp 3" & 4" Meter 1 - 3 3 3 4
Recycled-Temp > 6" Meter 1 - 1 1 1 -
Recycled Commercial <10" Meter - 1 1 1 1 1
Recycled Commercial >10" Meter - 1 1 1 1 1
Total Meter Count 702 705 708 710 721 719
Units Meters
Unit Sales History and Meter Count by Customer Class - Recycled
Unit Sales in thousands ($) and Meter Count Trends
Actual
Actual
FY 2017
FY 2017
100
300
500
700
100
500
900
1,300
1,700
2,100
FY 2013
Actual
FY 2014
Actual
FY 2015
Actual
FY 2016
Actual
FY 2017
Actual
FY 2018
Budget
Meter Count Recycled Unit Sales
82
FY 2018 FY 2017 FY 2018
Meter Size Meter Count Current Approved Budget Budget $%
Irrigation
0.75 3 15.91$ 31.11$ 400$ 800$ 400$ 100.0%
1.00 103 22.47 43.94 29,500 41,000 11,500 39.0%
1.50 399 38.88 76.04 201,700 275,100 73,400 36.4%
2.00 196 58.55 114.50 149,900 203,500 53,600 35.8%
3.00 4 111.04 217.15 5,800 7,900 2,100 36.2%
4.00 11 170.10 332.67 22,300 33,200 10,900 48.9%
6.00 1 334.18 653.54 6,600 5,900 (700) -10.6%
8.00 - 531.05 1,038.56 - - - -
10.00 - 760.72 1,487.72 - - -
Total 717 416,200$ 567,400$ 151,200$ 36.3%
Commercial
0.75 - 15.91$ 36.85$ - - - -
1.00 - 22.47 52.04 - - - -
1.50 - 38.88 90.06 - - - -
2.00 - 58.55 135.63 - - - -
3.00 - 111.04 257.21 - - - -
4.00 - 170.10 394.01 - - - -
6.00 1 334.18 774.07 6,600 6,600 - 0.0%
8.00 - 531.05 1,230.08 - - - -
10.00 1 760.72 1,762.08 10,000 15,100 5,100 51.0%
Total 2 16,600 21,700 5,100 30.7%
Total 719 432,800$ 589,100$ 156,300$ 36.1%
(1) Approved rates for water billed beginning in January 2018.
System Fees - Recycled
System Fees Budget to Budget Variance
(1)
83
Meter Size Meter Sales Installation Fee Meter Fee Total Fees Budget
0.75 - 107.70$ 226.96$ 318.69$ -$
1.00 - 107.70 292.87 381.45 -
1.50 2 107.70 476.03 555.87 1,100
2.00 2 107.70 682.10 752.11 1,500
3.00 - 648.46 2,125.70 2,641.76 -
4.00 - 648.46 3,692.00 4,133.31 -
6.00 - 1,024.29 6,377.10 7,048.13 -
8.00 - 1,570.66 7,967.71 9,083.12 -
10.00 - 1,570.66 11,459.05 12,407.83 -
Total 4 2,600$
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 2018
550
575
600
625
650
675
700
725
FY 2013
Actual
FY 2014
Actual
FY 2015
Actual
FY 2016
Actual
FY 2017
Actual
FY 2018
Budget
84
FY 2013 FY 2014 FY 2015 FY 2016 FY 2018
Budget
Water Sales 6,148,619$ 7,416,631$ 6,412,122$ 6,240,661$ 7,431,235$ 7,493,200$
System Fees 292,201 356,806 431,121 471,962 434,775 589,100
Energy Fees 346,064 383,513 369,302 379,026 417,595 313,700
MWD and CWA Rebates 1,660,736 1,828,134 1,611,764 1,396,472 1,436,935 1,428,400
Penalties 40,867 29,682 28,701 38,921 22,259 38,700
Total Recycled Revenues 8,488,487$ 10,014,766$ 8,853,010$ 8,527,042$ 9,742,799$ 9,863,100$
Revenue History - Recycled
Revenue History - Recycled, in millions ($)
FY 2017*
Actual
$-
$2
$4
$6
$8
$10
FY 2013
Actual
FY 2014
Actual
FY 2015
Actual
FY 2016
Actual
FY 2017
Actual
FY 2018
Budget
Water Sales System Fees Energy Fees MWD and CWA Rebates Penalties
*Actual Unaudited
85
FY 2018 FY 2018
Budget Actual* Budget Budget Actual* Budget $ %
Rate Per Acre Feet 756.00$ 756.00$ 756.00$ -$ 0.0%
Recycled Water Purchases 2,459.6 3,183.2 2,660.7 1,859,300$ 2,393,280$ 2,011,600$ 152,300$ 8.2%
Meter Fee $1,333.75 monthly 16,000 16,005 16,000 - 0.0%
Take-or-pay contract (1)2,302.4 1,590.2 2,234.3 1,740,600 1,234,236 1,689,100 (51,500) -3.0%
Total 4,762.0 4,773.4 4,895.0 3,615,900$ 3,643,521$ 3,716,700$ 100,800$ 2.8%
Average Cost Per Acre-Foot (Effective Rate)1,470.12$ 1,144.62$ 1,396.87$
(1) This is the anticipated take-or-pay amount to be paid to the City of San Diego. The contract requires
the purchase of a minimum volume of water. The District does not anticipate meeting the
minimum therefore, a payment would be due to the City of San Diego.
Water Purchases - Recycled
HISTORICAL RECYCLED WATER PURCHASES, IN ACRE-FEET
Variance
Budget to Budget
Purchase Costs
FY 2017
Acre Feet
FY 2017
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
FY 2013
Actual
FY 2014
Actual
FY 2015
Actual
FY 2016
Actual
FY 2017
Actual
FY 2018
Budget
*Actual Unaudited
86
FY 2013 FY 2014 FY 2015 FY 2016 FY 2018
Budget Actual* Budget $ %
Total Power Cost $ 471,139 591,883$ 600,799$ 526,842$ 568,900$ 590,035$ 584,600$ 15,700$ 2.8%
Budget to Budget
Variance
Historical Power Costs, in thousands ($)
Power Costs - Recycled
FY 2017
Actual
$0
$100
$200
$300
$400
$500
$600
$700
FY 2013
Actual
FY 2014
Actual
FY 2015
Actual
FY 2016
Actual
FY 2017
Actual
FY 2018
Budget
*Actual Unaudited
87
FY 2016 FY 2017 FY 2017 FY 2018
Actual Budget Actual* Budget $ %
Administrative Expenditures
General Office Expense -$ -$ 42$ -$ -$ 0.0%
Equipment 2,286 3,300 2,821 1,300 (2,000) (60.6%)
Fees 24,347 25,500 25,199 26,300 800 3.1%
Services 144,308 87,200 65,104 115,500 28,300 32.5%
Insurance and Legal *- - 14,936 225,000 225,000 100.0%
Subtotal before Overhead 170,941 116,000 108,102 368,100 252,100 217.3%
Add: Overhead Allocation 211,427 215,200 180,381 189,000 (26,200) (12.2%)
Total Expenditures 382,368$ 331,200$ 288,483$ 557,100$ 225,900$ 68.2%
Equipment 1,300$ 0.2%
Fees 26,300 4.7%
Services 115,500 20.8%
Insurance and Legal 225,000 40.4%
Overhead Allocation 189,000 33.9%
Total Expenditures 557,100$ 100.0%
* Legal expenses pertaining to the City of San Diego Recycled Water Rate Lawsuit.
FY 2018 Administrative Expenditures - Recycled
Administrative Expenditures - Recycled
Budget to Budget
Variance
* Actual unaudited
88
FY 2016 FY 2017 FY 2017 FY 2018
Actual Budget Actual* Budget $ %
Materials and Maintenance
Fuel and Oil 11,921$ 34,800$ 7,914$ 13,300$ (21,500)$ (61.8%)
Meters and Materials 3,927 2,500 3,384 7,500 5,000 200.0%
Infrastructure Equipment & Supplies 66,601 75,400 64,238 110,700 35,300 46.8%
Chemicals 112,514 160,200 115,849 152,200 (8,000) (5.0%)
Safety Equipment 1,999 1,500 1,012 1,500 - -
Laboratory Equipment and Supplies 3,667 4,000 4,024 4,000 - -
Other Materials and Supplies 2,519 5,000 2,694 6,500 1,500 30.0%
Contracted Services 16,804 21,600 9,208 32,200 10,600 49.1%
Total Expenditures 219,952$ 305,000$ 208,323$ 327,900$ 22,900$ 7.5%
Fuel and Oil 13,300$ 4.1%
Meters and Materials 7,500 2.3%
Infrastructure Equipment & Supplies 110,700 33.8%
Chemicals 152,200 46.3%
Safety Equipment 1,500 0.5%
Laboratory Equipment and Supplies 4,000 1.2%
Other Materials and Supplies 6,500 2.0%
Contracted Services 32,200 9.8%
Total Expenditures 327,900$ 100.0%
Materials and Maintenance Expenditures - Recycled
Budget to Budget
Variance
FY 2018 Materials and Maintenance Expenditures - Recycled
* Actual unaudited
89
Recycled Water Service Area
90
Sewer Revenues and Expenditures
The District provides sewer service to approximately 15,200 customers through 4,700 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 97.3% of the customer base. Modest growth of 0.33% is anticipated in FY 2018.
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 treatment plant
where the District produces recycled water, see page 77 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 $820,700 for FY
2018. Additionally, the District Is budgeted to pay $190,000 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 FY 2018.
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. In
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. The District plans to conduct another Cost of Service Study and Rate Study during FY
2018.
Sewer bills are based on the rate of discharge and the strength. Due to their higher discharge and
strength, non-residential customers (comprising 2.7% of the customer base) comprise 18.7% of the
total sewer charges. The formula for sewer rates is shown on pages 99-100.
91
FY 2016 FY 2017 FY 2018
21-Actual Budget Actual * Budget $ %
Revenues
#Sewer Revenues 3,149,295$ 2,918,900$ 2,955,430$ 2,869,400$ (49,500)$ (1.7%)
#Capacity Fee Revenues 4,528 - 3,376 - - -
Tax Revenues 72,469 51,600 107,285 51,600 - -
#Non-operating Revenues 881,549 35,500 809,700 35,500 - -
#Interest 1,523 4,300 19,863 20,400 16,100 374.4%
Total Revenue 4,109,364 3,010,300 3,895,653 2,976,900 (33,400) (1.1%)
Expenditures
#Power 153,815 174,400 122,622 133,500 (40,900) (23.5%)
#Labor and Benefits 884,853 979,300 1,054,383 1,080,400 101,100 10.3%
#Administrative Expenses 224,541 229,100 212,965 275,200 46,100 20.1%
#Materials and Maintenance 1,206,534 1,042,700 1,057,235 1,340,800 298,100 28.6%
11 Subtotal - Operations Costs 2,469,743 2,425,500 2,447,205 2,829,900 404,400 16.7%
D Transfer to General Fund Reserve - 196,100 196,100 - (196,100) (100.0%)
B Betterment Reserve 455,000 351,200 351,200 111,100 (240,100) (68.4%)
R Replacement Reserve 599,100 - - - - -
TOTransfer to OPEB 33,600 37,500 37,500 35,900 (1,600) (4.3%)
Subtotal - Reserve Funding 1,087,700 584,800 584,800 147,000 (437,800) (74.9%)
Total Expenditures 3,557,443 3,010,300 3,032,005 2,976,900 (33,400) (1.1%)
551,921$ -$ 863,648$ -$ -$ -
Excess Revenue/(Expenditures)
Operating Budget Summary - Sewer
Budget to Budget
VarianceFY 2017
* Actual unaudited
92
FY 2018 FY 2018
Accounts Current Approved(1)Budget Actual* Budget $%
Residential 4,554 2.58$ 2.77$ 1,429,300$ 1,449,700$ 1,310,700$ (118,600)$ -8.3%
Multi-Residential 50 2.58 2.77 188,600 191,300 195,600 7,000 3.7%
Commercial
Low Strength 45 2.58 2.77 48,400 49,100 56,800 8,400 17.4%
Medium Strength 13 3.70 3.98 15,400 15,600 34,800 19,400 126.0%
High Strength 7 5.90 6.34 30,200 30,600 32,600 2,400 7.9%
Schools 6 2.58 2.77 84,600 85,800 89,600 5,000 5.9%
Churches 4 2.58 2.77 10,400 10,500 11,000 600 5.8%
Subtotal Commercial 75 189,000 191,600 224,800 35,800 18.9%
Total Sewer Charges 4,679 1,806,900$ 1,832,600$ 1,731,100$ (75,800)$ -4.2%
Single-Family 1,310,700$ 76.0%
Multi-Family 195,600 11.0%
Commercial 224,800 13.0%
1,731,100$ 100.0%
(1)Approved rates for sewer service beginning in January 2018.
FY 2018 Charges Summary by Service Class
Charges Summary by Service Class - Sewer
Usage Fee
Budget to Budget
VarianceFY 2017
*Actuals unaudited
93
FY 2018 Current Approved (1)FY 2017 FY 2018
Meter Size Accounts Rates Rates Budget Budget $ %
Residential 4,554 15.89$ 17.08$ 903,400$ 900,900$ (2,500)$ -0.3%
Multi-Residential/Commercial
0.75 22 28.37 30.50 7,300 7,400 100 1.4%
1.00 5 41.80 44.94 2,900 2,600 (300) -10.3%
1.50 20 75.27 80.92 17,600 18,700 1,100 6.3%
2.00 63 115.46 124.12 85,300 90,500 5,200 6.1%
3.00 6 209.24 224.93 14,800 15,600 800 5.4%
4.00 6 343.23 368.97 24,200 25,700 1,500 6.2%
6.00 1 678.18 729.04 8,000 8,500 500 6.3%
8.00 - 1,080.14 1,161.15 - - -
10.00 2 1,549.07 1,665.25 18,200 38,600 20,400 112.1%
Total System Fee 4,679 1,081,700$ 1,108,500$ 26,800$ 2.5%
System Fees - Sewer
Budget to Budget
Variance
(1) Approved rates for sewer service beginning in January 2018.
*Actuals Unaudited
94
FY 2013 FY 2014 FY 2015 FY 2016 FY 2018
Budget Actual* Budget
Sewer Charges 2,588,991$ 2,736,867$ 2,986,734$ 3,124,595$ 2,888,600$ 2,929,899$ 2,839,600$
Penalties 29,300 21,000 22,900 24,700 30,300 25,531 29,800
Total 2,618,291$ 2,757,867$ 3,009,634$ 3,149,295$ 2,918,900$ 2,955,430$ 2,869,400$
Revenue History - Sewer, in thousands ($)
Revenue History - Sewer
Actual
FY 2017
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
FY 2013
Actual
FY 2014
Actual
FY 2015
Actual
FY 2016
Actual
FY 2017
Actual
FY 2018
Budget
Sewer Charges Penalties
*Actuals unaudited
95
FY 2013 FY 2014 FY 2015 FY 2016 FY 2018
Budget Actual* Budget $ %
Total Power Cost $ 184,108 159,018$ 167,475$ 153,815$ 174,400$ 122,622$ 133,500$ (40,900)$ -30.6%
Historical Power Costs, in thousands ($)
Budget to Budget
Variance
Power Costs - Sewer
FY 2017
Actual
$20
$60
$100
$140
$180
$220
FY 2013
Actual
FY 2014
Actual
FY 2015
Actual
FY 2016
Actual
FY 2017
Actual
FY 2018
Budget
*Actual Unaudited
96
FY 2016 FY 2017 FY 2017 FY 2018
Actual Budget Actual* Budget $ %
Administrative Expenditures
Travel and Memberships -$ -$ 11$ -$ -$ 0.0%
Equipment 86 16,500 16,793 10,900 (5,600) (33.9%)
Fees 4,067 6,700 4,461 4,100 (2,600) (38.8%)
Services 65,142 42,700 15,486 82,500 39,800 93.2%
Bad Debt Expense 7,108 5,200 4,700 5,200 - 0.0%
Total 76,403 71,100 41,451 102,700 31,600 44.4%
Add: Overhead Allocation 148,138 158,000 171,514 172,500 14,500 9.2%
Total Expenditures 224,541$ 229,100$ 212,965$ 275,200$ 46,100$ 20.1%
Equipment 10,900$ 4.0%
Fees 4,100 1.5%
Services 82,500 30.0%
Bad Debt Expense 5,200 1.9%
Overhead Allocation 172,500 62.6%
Total Expenditures 275,200$ 100.0%
Budget to Budget
Variance
FY 2018 Administrative Expenditures - Sewer
Administrative Expenditures - Sewer
* Actual unaudited
97
FY 2016 FY 2017 FY 2017 FY 2018
Actual Budget Actual* Budget $ %
Materials and Maintenance
Fleet Parts and Equipment 7,504$ 5,000 2,953$ 5,000$ -$ -
Infrastructure Equipment & Supplies 99,019 105,600 95,789 142,800 37,200 35.2%
Chemicals 4,519 4,500 3,943 5,900 1,400 31.1%
Laboratory Equipment and Supplies 4,852 5,000 5,010 8,700 3,700 74.0%
Other Materials and Supplies 123 100 - 100 - -
Contracted Services 59,350 87,300 77,623 167,600 80,300 92.0%
Subtotal Materials and Maintenance 175,367 207,500 185,318 330,100 122,600 59.1%
Sewer Charges
Metro O&M Costs 812,536 655,000 690,984 820,700 165,700 25.3%
Spring Valley Sewer Charge 218,631 180,200 180,933 190,000 9,800 5.4%
Subtotal Sewer Charges 1,031,167 835,200 871,917 1,010,700 175,500 21.0%
Total Expenditures 1,206,534$ 1,042,700$ 1,057,235$ 1,340,800$ 298,100$ 28.6%
Fleet Parts and Equipment 5,000$ 0.4%
Infrastructure Equipment & Supplies 142,800 10.6%
Chemicals 5,900 0.4%
Laboratory Equipment & Supplies (1)8,800 0.6%
Contracted Services 167,600 12.5%
Metro O&M Costs 820,700 61.2%
Spring Valley Sewer Charge 190,000 14.3%
Total Expenditures 1,340,800$ 100.0%
Includes Other Materials & Supplies.
Materials and Maintenance Expenditures - Sewer
Budget to Budget
Variance
FY 2018 Materials and Maintenance Expenditures - Sewer
(1)
* Actual unaudited
98
Formula for Sewer Rates
(1) Usage fee charged is based on the customer’s assigned strength factor
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 $2.58 and $15.89,
respectively. Effective January 1, 2018, the usage fee and system fee will be $2.77 and $17.08,
respectfully.
The current usage fee for multi-residential customers is $2.58 and will increase to $2.77 for the
calendar year 2018. The usage fees and system fees for residential and multi-residential customers
are shown on pages 93 and 94.
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(1)) + 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 94.
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
99
Formula for Sewer Rates
into various categories and has identified Strength Factors for each of these business categories.
The standard of measure for Strength Factors is the typical sewer strength of a single-family
residence (SFR). The Strength Factors established by the SWRCB are listed below and are used by
the District in the calculation of commercial sewer rates. These factors are in terms of the strength
relative to a SFR, with a SFR having a strength factor of 1.
The following are the Strength Factors:
Description
Strength
Factor
Fee, Effective
1/1/2018
Low-Strength Commercial * 1.000 $ 2.77
Medium-Strength Commercial 2.000 $ 3.98
High-Strength Commercial 4.000 $ 6.34
*Schools and churches are categorized as Low-Strength Commercial customers
100
Sewer Service Area
101
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102
General Revenues and Expenditures
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 2018, capacity fees are projected to be $1,513,200 which is $265,000
more than the FY 2018 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 revised 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 be $3,715,700 which is $360,900 more than the FY 2018 budget.
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 up to $10.00 per parcel is general use and any amount over $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 increase slightly from $678,300 to $680,400.
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.
103
General Revenues and Expenditures
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 Expenditures
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 7.0% 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.
104
FY 2016 FY 2017 FY 2018
Actual Budget Actual * Budget $%
Fee Revenues
Capacity Fee Revenues 1,517,128$ 1,248,200$ 1,559,317$ 1,513,200$ 265,000$ 21.2%
Subtotal Fee Revenues 1,517,128 1,248,200 1,559,317 1,513,200 265,000 21.2%
Tax Revenues
1% General Tax 3,353,611 3,354,800 3,474,343 3,715,700 360,900 10.8%
Availability Fees 616,591 678,300 729,325 680,400 2,100 0.3%
Subtotal Tax Revenues 3,970,202 4,033,100 4,203,667 4,396,100 363,000 9.0%
General Revenue 5,487,330 5,281,300 5,762,984 5,909,300 628,000 11.9%
FY 2016 FY 2017 FY 2018
Actual Budget Actual * Budget $%
Property Rental 1,281,150 1,310,300 1,375,305 1,282,300 (28,000) -2.1%
Sewer Billing Fees 381,550 383,100 385,482 394,600 11,500 3.0%
Set-up Fee for Lease Site 9,000 - 27,000 - - 0.0%
Grants - - - 0.0%
Revenue from Shared Facility 25,241 35,500 25,737 35,500 - 0.0%
Miscellaneous 737,924 450,400 1,242,718 452,100 1,700 0.4%
Non-Operating Revenue 2,434,865 2,179,300 3,056,243 2,164,500 (14,800) -0.7%
Potable Recycled Sewer Total
Capacity Fee Revenues 1,513,200 - - 1,513,200
1% General Tax 3,715,700 - - 3,715,700
Availability Fees 628,800 - 51,600 680,400
Property Rental 1,282,300 - - 1,282,300
Sewer Billing Fees 394,600 - - 394,600
Revenue from Shared Facility - - 35,500 35,500
Miscellaneous 452,100 - - 452,100
Total General and Non-Operating Revenue 7,986,700$ -$ 87,100$ 8,073,800$
(1) For General and Non-Operating Revenues, the Potable Fund serves as the District's General Fund
for accounting purposes.
FY 2018
General Revenues
General and Non-Operating Revenues by Business(1)
Budget to Budget
Variance
General Revenues(1)
Budget to Budget
Variance
Non-Operating Revenues(1)
FY 2017
FY 2017
* Actual unaudited
105
FY 2016 FY 2017 FY 2017 FY 2018
Actual Budget Actual* Budget $%
General Expense
Total labor and benefits (1)1,359,311$ 1,181,400$ 1,397,866$ 1,106,200$ (75,200)$ (6.4%)
Administrative Expenditures
Insurance expenses 577,200 575,000 607,404 661,000 86,000 15.0%
Legal expenses (2)250,074$ 250,000$ 434,730$ 475,000$ 225,000 90.0%
Total General Expense 1,609,385$ 1,431,400$ 1,832,596$ 1,581,200$ 149,800$ 10.5%
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 2017
and FY 2018 is $198,600 and $205,300, respectively. Additionally, the labor and benefits shown on this
schedule are those related to operating costs and does not include CIP labor and benefit costs.
(2)Included in the FY 2018 Legal Expenses is $225,000 pertaining to the City of San Diego Recycled Water
Rate Lawsuit.
* Actual unaudited
106
Departmental Operating Budget
Labor and Benefits
Labor and Benefits represent 21.9% 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 FY 2018 Budget
includes funding for labor and benefits for 134 full-time equivalent (FTE) employees.
The staffing level for FY 2018 has decreased one (1) FTE employee from FY 2017. 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 23% 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 7.7% 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 $1,857,600
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.
Overall administrative expenses increased by $335,600 or 6.5% compared to FY 2017 and is shown on
page 117. Decreases are anticipated in services by $69,600 or 3.3%, conservation and outreach by
$15,800 or 8.9%, and training by $3,700 or 2.9% and fees by $1,400 or .2%. Services decreased due to a
shift in the funding for the leak detection program from the District to Pio Pico funding. The budget for
conservation and outreach decreased due to a reallocation of expenses from the commercial water
smart irrigation program to outside services. The training budget decreased primarily due to a reduction
in training needs.
These decreases are offset by increases in insurance and legal expenses by $311,000 or 37.7%,
equipment by $74,900 or 6.6%, travel and memberships by $36,800 or 17.6%, Directors’ fees by $7,000 or
21.2% and general office expense by $1,200 or .5%. The insurance and legal budget increased primarily
due to anticipated litigation related to the recycled water purchase price. In addition, insurance expenses
are anticipated to increase by $86,000 due to increases in deductibles and premiums compared to FY
2017. Travel and membership budgets increased primarily due to the membership fee for the Association
of California Water Agencies (ACWA) as well as increases in other memberships. The equipment budget
increased due to software/solutions transitioning from CIP to ongoing maintenance and existing contract
re-negotiations and renewals expected to occur in FY 2018.
107
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 FY 2018, overall materials and maintenance expenses decreased by 5.5%, or $189,400. Decreases
were recognized in meters and materials by 34,500 or 21.7%, fuel and oil by 19.0% or $46,000, other
materials and supplies by $26,500 or 14.5%, and chemicals by 1.8% or $6,600. The meters and materials
budget decreased primarily due to less meters replacements budgeted for FY 18. The fuel and oil budget
decreased because the unit price per gallon for fuel and oil was lowered. The budgets for other materials
and supplies and chemicals decreased to be closer to actual costs.
These decreases are offset by increases in Metro O& M costs by 25.3% or $165,700, contracted services
by 7.6% or $57,900, Infrastructure Equipment & Supplies by 6.0% or 37,800, Laboratory Equipment and
Supplies by 57.2% or $25,900, Spring Valley Sewer Charges by 5.4% or $9,800, Building and Grounds
Materials by 9.1% or $5,100 and Safety Equipment by 1.5% or $800. The Metro O & M costs increased
primarily due to the City of San Diego’s pure water program. The budgets for contracted services,
infrastructure equipment and supplies, laboratory equipment and supplies, building and grounds
materials and safety equipment increased compared to FY 2017 to provide for required maintenance.
108
Board of Directors 144,100$ 0.4%
General Manager 1,994,400 6.3%
General Expense 2,242,200 7.0%
Administrative Services 6,528,200 20.5%
Finance 5,668,800 17.8%
Water Operations 11,950,900 37.5%
Engineering 3,358,400 10.5%
31,887,000$ 100.0%
Departmental Operating Budget
Total FY 2018 Departmental Operating Budget
$31,887,000
109
FY 2016 FY 2017 FY 2017 FY 2018
Actual Budget Actual* Budget $ %
Labor Costs 11,383,709$ 11,645,000$ 11,668,426$ 11,979,700$ 334,700$ 2.9%
Benefits
Pension 3,854,533 4,161,600 4,130,482 4,378,200 216,600 5.2%
Employee Assistance Program 3,744 4,200 3,706 4,200 - 0.0%
Workers' Compensation 251,014 265,900 284,810 320,400 54,500 20.5%
Health/Dental/Life Insurance/OPEB 3,800,813 4,072,500 3,919,293 4,052,500 (20,000) -0.5%
Social Security/Medicare 947,970 962,700 953,090 997,800 35,100 3.6%
Salary Continuation Insurance 60,272 89,500 61,098 62,100 (27,400) -30.6%
State Unemployment Insurance 11,375 30,000 - 20,000 (10,000) -33.3%
Vacation/Sick/Holiday/Other Leave 2,326,667 2,262,900 2,331,164 2,343,800 80,900 3.6%
Total Benefits 11,256,389 11,849,300 11,683,642 12,179,000 329,700 2.8%
Total Labor and Benefits 22,640,098 23,494,300 23,352,068 24,158,700 664,400 2.8%
Less: Non-Operating Labor and Benefits
Labor Costs 960,168 1,060,800 1,051,855 1,072,600 11,800 1.1%
Benefits Allocation 644,741 763,300 738,978 785,000 21,700 2.8%
Total Non-Operating Labor and Benefits 1,604,910 1,824,100 1,790,833 1,857,600 33,500 1.8%
Operating Labor & Benefits 21,035,189 21,670,200 21,561,235 22,301,100 630,900 2.9%
Overhead Allocation (115% of labor costs) 1,104,194 1,219,900 1,209,633 1,233,500 13,600 1.1%
Admin Overhead (36.85%)406,895 449,500 445,750 454,500 5,000 1.1%
Personnel Overhead (63.15%)697,299 770,300 763,883 779,000 8,700 1.1%
Net Operating Labor and Benefits 20,337,890$ 20,899,900$ 20,797,352$ 21,522,100$ 622,200$ 3.0%
Labor and Benefits
Budget to Budget
Variance
04080120
Full - Time Equivalent (FTE)
FY 2018
Budget
FY 2017
FY 2016 138
135
134
110
Potable Recycled Sewer
Developer
Reimbursed-
CIP Total
Operating Labor Costs 10,054,100$ 446,000$ 407,000$ -$ 10,907,100$
Benefits 10,614,800 401,400 377,800 - 11,394,000
Overhead Allocation-Personnel (1,398,500) 323,900 295,600 - (779,000)
Total Operating Labor and Benefits 19,270,400 1,171,300 1,080,400 - 21,522,100
CIP Labor Costs 524,900 118,700 76,300 352,700 1,072,600
Benefits 372,300 83,300 49,400 280,000 785,000
Overhead Allocation-Personnel 381,300 86,200 55,400 256,100 779,000
Total CIP Labor and Benefits 1,278,500 288,200 181,100 888,800 2,636,600
Total Labor and Benefits 20,548,900$ 1,459,500$ 1,261,500$ 888,800$ 24,158,700$
Potable-Operating 19,270,400$ 79.8%
Potable-CIP 1,278,500 5.3%
Sewer-Operating 1,080,400 4.5%
Sewer-CIP 181,100 0.7%
Recycle-Operating 1,171,300 4.8%
Recycle-CIP 288,200 1.2%
Develeper Reimbursed-CIP 888,800 3.7%
24,158,700$ 100.0%
Labor and Benefits by Fund - Fiscal Year 2018
111
FY 2017
General Manager
General Manager 1 1 1
Assistant General Manager 1 1 1
District Secretary 1 1 1
Sr. Confidential Executive Secretary 1 1 1
Communications Officer 1 1 1
Communications Assistant 0 1 1
General Manager 5 6 6
Total FTE - General Manager Department 56 6
Administrative Services
Chief, Administrative Services 0 1 1
Assistant Chief, Administrative Services 1 0 0
Confidential Executive Secretary 1 1 1
Confidential Secretary 1 1 1
Administrative Services 33 3
Human Resources
Human Resources Manager 1 1 1
Senior Human Resources Analyst 1 1 1
Human Resources Analyst 1 1 1
Human Resources 3 3 3
Purchasing
Purchasing and Facilities Manager 1 1 1
Senior Procurement & Contracting Analyst 0 0 1
Senior Buyer 1 1 0
Assistant Buyer 1 0 0
Senior Warehouse Worker 0 1 1
Warehouse/Delivery Worker 1 0 0
Facilities Maintenance Technician 2 2 2
Purchasing 6 5 5 (1)
Safety
Safety & Security Specialist 1 1 1
Safety 1 1 1
Information Technology Operations/Applications
Chief Information Officer 1 0 0
IT Manager 1 1 1
GIS Manager 1 1 1
GIS Programmer/Analyst 1 1 1
GIS Analyst 1 1 1
Position Count by Department
FY 2016 FY 2018
(1) The District’s strategic planning efforts of streamlining business processes enabled the District to be more efficient and provided an
opportunity to reduce staffing
(2) Positions were re-classified and/or transferred as part of streamlining the District's organizational structure
112
FY 2017
Information Technology Operations/Applications (continued)
GIS Technician 1 1 1
Network Engineer 1 1 1
Database Administrator 1 1 1
Data Systems Technician 1 1 1
System Support Analyst 1 1 1
Business System Analyst I and II 2 2 2
Network Analyst 1 0 0
Information Technology 13 11 11 (1)
Total FTE - Administrative Services Department 26 23 23
Finance
Chief Financial Officer 1 1 1
Executive Secretary 1 1 1
Secretary 1 1 1
Finance 3 3 3
Controller and Budgetary Services
Finance Manager, Controller and Budget 1 1 1
Senior Accountant 2 2 2
Accountant 1 1 1
Accounting Technician 1 1 1
Controller and Budgetary Services 5 5 5
Treasury and Accounting Services
Finance Manager, Treasury and Accounting 1 1 1
Senior Accountant 2 2 2
Accountant 2 2 1
Accounting Technician 1 1 1
Treasury and Accounting Services 6 6 5 (1)
Customer Service:
Customer Service Manager 2 1 1
Customer Service Supervisor 0 1 1
Lead Customer Service Representative 2 1 1
Customer Service Representative I, II, III 6 6 6
Lead Customer Service Field Representative 1 1 1
Customer Service Field Representative I and II 2 2 2
Customer Service 13 12 12 (1)
Conservation
Sr. Water Conservation Specialist 1 1 0
Conservation 1 1 0 (1)
Position Count by Department
FY 2016 FY 2018
(1) The District’s strategic planning efforts of streamlining business processes enabled the District to be more efficient and provided
an opportunity to reduce staffing
(2) Positions were re-classified and/or transferred as part of streamlining the District's organizational structure
113
FY 2017
Meter Maintenance
Meter Services Supervisor 0 0 1
Lead Cross Connection/Meter Maintenance Worker 1 1 0
Meter Maintenance Worker I & II 3 3 3
Meter Maintenance 4 4 4
Total FTE - Finance Department 32 31 29
Operations
Chief, Water Operations 1 1 1
Assistant Chief, Water Operations 1 1 1
Executive Secretary 1 1 1
Operations 3 3 3
Water System Operations
System Operations Manager 1 1 1
Water Systems Supervisor 1 1 1
Recycled Water Systems Supervisor 1 0 0
Lead Water Systems Operator 2 2 2
Water Systems Operator I, II, and III 8 8 8
Senior SCADA Instrumentation Technician 0 2 2
Sr. Disinfection Technician 2 2 2
Recycled Water Distribution Operator 4 0 0
Water System Operations 19 16 16
Utility Maintenance/Construction
Utility Maintenance Supervisor 22 2
Utility Crew Leader 3 3 3
Utility Workers I and II 8 8 8
Senior Utility/Equipment Operator 3 3 3
Valve Maintenance Worker 2 2 2
Pump Electricial 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
Equipment Mechanic I and II 3 3 3
Utility Maintenance/Construction 27 27 27
Collection/Treatment/Reclamation Operations
Reclamation Plant Supervisor 1 1 1
Lead Reclamation Plant Operator 1 1 1
Reclamation Plant Operator I, II, III 2 2 2
Senior SCADA Instrumentation Technician 2 0 0
Laboratory Analyst 1 1 2
Collection/Treatment/Reclamation Operations 7 5 6 (2)
Total FTE - Operations Department 56 51 52
(1) The District’s strategic planning efforts of streamlining business processes enabled the District to be more efficient and provided
an opportunity to reduce staffing
(2) Positions were re-classified and/or transferred as part of streamlining the District's organizational structure
Position Count by Department
FY 2016 FY 2018
114
FY 2017
Engineering
Chief, Engineering 1 1 1
Executive Secretary 1 1 1
Secretary 1 1 1
Engineering 33 3
Water Resources, Planning, Design & Environmental
Engineering Manager 1 1 1
Senior Civil Engineer 2 2 2
Associate Civil Engineer 1 1 1
Environmental Compliance Specialist 1 1 1
Senior Engineering Technician 22 2
Water Resources, Planning, Design & Environmental 7 7 7
Public Services, Survey, Inspection, & Recycled Water Program
Engineering Manager 1 1 1
Field Services Manager 1 1 1
Permit Technicians 2 2 2
Recycled Water Systems Supervisor 0 1 1
Recycled Water Distribution Operator 0 3 3
Inspection Supervisor 0 1 1
Lead Construction Inspector 1 0 0
Construction Inspectors I and II 2 3 3
Supervising Land Surveyor 1 1 1
Assistant Survey Technician 1 1 1
Public Services, Survey, Inspection, & Recycled Water
Program 9 14 14 (2)
Total FTE - Engineering Department 19 24 24
District Total FTE Position Count 138 135 134
(2) Positions were re-classified and/or transferred as part of streamlining the District's organizational structure
Position Count by Department
FY 2016 FY 2018
(1) The District’s strategic planning efforts of streamlining business processes enabled the District to be more efficient and provided
an opportunity to reduce staffing
115
FY 2017
Lab Intern 0 1 0
Project Coordinator 0 0 1
Total Contract/Temporary Employees 01 1
General Manager 6.00 4.5%
Administrative Services 23.00 17.2%
Finance 29.00 21.6%
Operations 52.00 38.8%
Engineering 24.00 17.9%
Total 134.00 100.0%
Contract / Temporary Employees
FY 2016 FY 2018
FY 2018 Position Count by Department
116
FY 2016 FY 2017 FY 2017 FY 2018
Actual Budget Actual* Budget $%
Administrative Expenditures
Directors' Fees 22,100$ 33,000$ 20,493$ 40,000$ 7,000$ 21.2%
Travel and Memberships 164,590 208,600 157,390 245,400 36,800 17.6%
Conservation and Outreach 150,060 177,400 152,220 161,600 (15,800) (8.9%)
General Office Expense 236,868 265,500 220,703 266,700 1,200 0.5%
Equipment 1,062,675 1,129,100 1,174,828 1,204,000 74,900 6.6%
Fees 509,283 632,800 649,808 631,400 (1,400) (0.2%)
Services 1,735,752 2,082,400 1,580,445 2,012,800 (69,600) (3.3%)
Training 68,007 126,000 104,983 122,300 (3,700) (2.9%)
Utilities 26,445 14,900 13,596 14,900 - -
Insurance and Legal 827,274 825,000 1,042,134 1,136,000 311,000 37.7%
Miscellaneous Expense - - 181 100 100 100.0%
Bad Debt Expense 114,220 105,000 74,248 105,000 - -
Subtotal before Overhead 4,917,274 5,599,700 5,191,029 5,940,200 340,500 6.1%
Less: Overhead Allocation (406,895) (449,600) (445,750) (454,500) (4,900) -
Total Expenditures 4,510,379$ 5,150,100$ 4,745,279$ 5,485,700$ 335,600$ 6.5%
######## 5,605,400$ 6,233,163$ 7,076,200$
Directors' Fees 40,000$ 0.7%
Travel and Memberships 245,400 4.1%
Conservation & Outreach 161,600 2.7%
General Office Expense 266,700 4.5%
Equipment 1,204,000 20.3%
Fees 631,400 10.6%
Services 2,012,800 33.9%
Training 122,300 2.1%
Utilities 14,900 0.3%
General Expense 1,136,000 19.1%
Bad Debt Expense (1)105,100 1.7%
5,940,200 100.0%
Less: Overhead Allocation (454,500)
Total Administrative Expenses 5,485,700$
(1)Includes Miscellaneous Expense
Administrative Expenditures - Total
Budget to Budget
Variance
FY 2018 Total Administrative Expenditures, in thousands ($)
* Actual unaudited
117
FY 2016 FY 2017 FY 2017 FY 2018
Actual Budget Actual* Budget $ %
Materials and Maintenance
Fuel and Oil 141,819$ 242,300$ 156,989$ 196,300$ (46,000)$ (19.0%)
Meters and Materials 176,102 159,200 151,876 124,700 (34,500) (21.7%)
Fleet Parts and Equipment 122,792 129,800 118,686 129,800 - 0.0%
Infrastructure Equipment & Supplies 505,469 626,700 576,463 664,500 37,800 6.0%
Chemicals 268,680 364,300 247,989 357,700 (6,600) (1.8%)
Safety Equipment 81,155 52,500 55,169 53,300 800 1.5%
Laboratory Equipment and Supplies 39,977 45,300 46,792 71,200 25,900 57.2%
Other Materials and Supplies 161,229 182,300 162,536 155,800 (26,500) (14.5%)
Building and Grounds Materials 56,663 56,000 65,774 61,100 5,100 9.1%
Contracted Services 518,122 762,700 553,404 820,600 57,900 7.6%
Subtotal Materials and Maintenance 2,072,008 2,621,100 2,135,678 2,635,000 13,900 0.5%
Sewer Charges
Metro O&M Costs 812,536 655,000 690,984 820,700 165,700 25.3%
Spring Valley Sewer Charge 218,631 180,200 180,933 190,000 9,800 5.4%
Subtotal Sewer Charges 1,031,167 835,200 871,917 1,010,700 175,500 21.0%
Total Expenditures 3,103,175$ 3,456,300$ 3,007,595$ 3,645,700$ 189,400$ 5.5%
Fuel and Oil 196,300$ 5.4%
Meters and Materials 124,700 3.4%
Fleet Parts and Equipment 129,800 3.6%
Infrastructure Equipment and Supplies 664,500 18.2%
Chemicals 357,700 9.8%
Safety Equipment 53,300 1.4%
Laboratory Equipment and Supplies 71,200 2.0%
Other Materials and Supplies 155,800 4.3%
Building and Grounds Materials 61,100 1.7%
Contracted Services 820,600 22.5%
Sewer Charges 1,010,700 27.7%
Total Expenditures 3,645,700$ 100.0%
Materials and Maintenance Expenditures - Total
Budget to Budget
Variance
FY 2018 Materials and Maintenance Expenditures
* Actual unaudited
118
FY 2016 FY 2017 FY 2017 FY 2018 Budget to Budget
Actual Budget Actual* Budget Variance
Departmental Expenditures
BBoard of Directors 94,910$ 120,300$ 97,922$ 144,100$ 23,800$
GGeneral Manager 1,613,499 2,083,700 1,879,060 1,994,400 (89,300)
GGeneral Expense 2,186,585 2,006,400 2,323,333 2,242,200 235,800
A Administrative Services 6,020,287 6,324,900 6,197,444 6,528,200 203,300
F Finance 5,603,691 5,512,500 5,286,364 5,668,800 156,300
WWater Operations 10,383,742 11,316,700 10,779,040 11,950,900 634,200
E Engineering 3,152,924 3,361,700 3,080,029 3,358,400 (3,300)
T Total Departmental Expenditures 29,055,638 30,726,200 29,643,192 31,887,000 1,160,800
Less: Overhead Allocation (1,104,194) (1,219,900) (1,209,633) (1,233,500) (13,600)
Net Departmental Expenditures 27,951,444 29,506,300 28,433,559 30,653,500 1,147,200
Non-Departmental Expenditures
Water Purchases 43,863,330 47,422,400 48,412,936 50,178,300 2,755,900
Power 2,697,915 2,938,000 2,890,123 3,023,800 85,800
Transfer to General Fund Reserve - 2,854,300 2,854,300 - (2,854,300)
Expansion Reserve 2,695,800 4,093,600 4,093,600 3,274,600 (819,000)
Betterment Reserve 2,400,000 3,466,400 3,466,400 111,100 (3,355,300)
Replacement Reserve 3,421,000 464,500 464,500 9,787,900 9,323,400
Transfer to Sewer Replacement 1,199,300 - - - -
Transfer to OPEB 1,006,000 961,000 961,000 998,000 37,000
Transfer to New Supply Reserve 35,000 35,000 35,000 221,000 186,000
Total Non-Departmental Expenditures 57,318,345 62,235,200 63,177,859 67,594,700 5,359,500
Total Operating Expenditures 85,269,789$ 91,741,500$ 91,611,418$ 98,248,200$ 6,506,700$
FY 2018 Funding Source by Department, in Millions ($)
Operating Expenditures by Department
$0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000
Board of Directors
General Manager
Administrative Services
Finance
Water Operations
Engineering
General Expense
Potable
Recycled
Sewer
* Actual unaudited
119
FY 2016 FY 2017 FY 2017 FY 2018
Budget to
Budget
Actual Budget Actual* Budget Variance
Departmental Expenditures
Labor and Benefits 21,035,189$ 21,670,200$ 21,561,235$ 22,301,100$ 630,900$
Director's Fees 22,100 33,000 20,493 40,000 7,000
Travel and Memberships 164,590 208,600 157,390 245,400 36,800
Conservation and Outreach 150,060 177,400 152,220 161,600 (15,800)
General Office Expense 236,868 265,500 220,703 266,700 1,200
Equipment 1,062,675 1,129,100 1,174,828 1,204,000 74,900
Fees 1,336,557 1,457,800 1,691,942 1,767,400 309,600
Services 1,735,752 2,082,400 1,580,445 2,012,800 (69,600)
Training 68,007 126,000 104,983 122,300 (3,700)
Materials & Maintenance 2,072,008 2,621,100 2,135,678 2,635,000 13,900
Power and Utilities 26,445 14,900 13,596 14,900 -
Sewer Charges 1,031,167 835,200 871,917 1,010,700 175,500
Miscellaneous Expense -- 181 100 100
Bad Debt Expense 114,220 105,000 74,248 105,000 -
Total Departmental Expenditures 29,055,638 30,726,200 29,759,859 31,887,000 1,160,800
Less: Overhead Allocation (1,104,194) (1,219,900) (1,209,633) (1,233,500) (13,600)
Net Departmental Expenditures 27,951,444 29,506,300 28,550,226 30,653,500 1,147,200
Non-Departmental Expenditures
Water Purchases 43,863,330 47,422,400 48,412,936 50,178,300 2,755,900
Power 2,697,915 2,938,000 2,890,123 3,023,800 85,800
Transfer to General Fund Reserve - 2,854,300 2,854,300 - (2,854,300)
Expansion Reserve 2,695,800 4,093,600 4,093,600 3,274,600 (819,000)
Betterment Reserve 2,400,000 3,466,400 3,466,400 111,100 (3,355,300)
Replacement Reserve 3,421,000 464,500 464,500 9,787,900 9,323,400
Transfer to Sewer Replacement 1,199,300 - - - -
Transfer to OPEB 1,006,000 961,000 961,000 998,000 37,000
Transfer to New Supply Fund 35,000 35,000 35,000 221,000 186,000
Total Non-Departmental Expenditures 57,318,345 62,235,200 63,177,859 67,594,700 5,359,500
Total Operating Expenditures 85,269,789$ 91,741,500$ 91,728,085$ 98,248,200$ 6,506,700$
Operating Expenditures by Object
* Actual unaudited
120
Board of Directors
Mark Robak
President
Division 5
Tim Smith
Vice President
Division 1
Mitch Thompson
Treasurer
Division 2
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.
Hector Gastelum
Division 4
121
FY 2016 FY 2017 FY 2017 FY 2018
Actual Budget Actual* Budget
Board of Directors 94,910$ 120,300$ 97,922$ 144,100$
Total Expenses 94,910 120,300 97,922 144,100
FY 2016 FY 2017 FY 2017 FY 2018
Actual Budget Actual*Budget
Benefits 67,338 71,800 67,807 81,800
Director's Fees 22,100 33,000 20,493 40,000
Travel and Memberships 5,472 15,500 9,242 22,300
Conservation and Outreach - - 380 -
Total Expenses 94,910$ 120,300$ 97,922$ 144,100$
-$
Board of Directors
Department
Budget vs. Actual, in thousands ($)
Object
$0
$30
$60
$90
$120
2014 2015 2016 2017 2018
10
9
11
5
12
0
12
0
14
4
10
0
96
95
98
Budget Actual
* Actual unaudited
122
Director’s Division Boundaries
123
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124
Departmental Operating Budget
General Manager
Mission
To provide high value water and wastewater services to the customers of the Otay Water District, in
a professional, effective, and efficient manner.
General Manager’s Vision
“A District that is at the forefront in innovations to provide water services at affordable rates, with a
reputation for outstanding customer service.”
C
Key Challenge
Our key challenge, as District staff, is to quantify and demonstrate our commitment and the ability to
optimize our resources, business processes, and technology to achieve the strategic plan goals. We,
as a team, commit to regularly assess and document how our decisions and work practices
accomplish our goals and objectives.
E
General Manager – 6 Positions (1)
(1) See Position Count by Department on pages 112-115 for the list of positions per department.
Board of Directors
1111
General Manager
1211
District
Secretary
1211
Sr. Confidential
Executive Secretary
1211
Communications
Officer
1211
Assistant
General Manager
2111
Communications
Assistant
1211
125
FY 2016 FY 2017 FY 2017 FY 2018
Actual (1)Budget (1)Actual*Budget (1)
General Manager 1,613,499$ 1,737,600$ 1,705,310$ 1,787,800$
Conservation (1)326,148 346,100 173,750 206,600
Total Expenses 1,939,647$ 2,083,700$ 1,879,060$ 1,994,400$
-$
FY 2016 FY 2017 FY 2017 FY 2018
Actual (1)Budget (1)Actual*Budget (1)
Labor and Benefits 1,338,259 1,486,600 1,470,477 1,373,200
Travel and Memberships 52,096 60,600 50,121 101,600
Conservation and Outreach 150,060 177,400 151,840 161,600
General Office Expense 1,243 1,900 6,062 6,200
Equipment 4,896 3,000 - 3,200
Fees 49,181 81,000 77,199 58,000
Services 312,684 153,200 95,702 189,000
Materials & Maintenance 31,123 120,000 26,257 100,000
Miscellaneous 105 - 107 100
Total Expenses 1,939,647$ 2,083,700$ 1,879,060$ 1,994,400$
-$ -$ -$ -$
(1) In FY 2018, the Water Conservation Division was moved to the General Manager's department.
Prior year budget and actuals have been adjusted for comparative purposes.
General Manager
Department
Budget vs. Actual, in thousands ($)
Object
$1,000
$1,300
$1,600
$1,900
2014 2015 2016 2017 2018
1,
9
1
2
1,
9
8
5
2,
0
8
4
2,
0
8
4
1,
9
9
4
1,
5
7
5
1,
6
7
3
1,
9
4
0
1,
8
7
9
Budget Actual
* Actual unaudited
126
Departmental Operating Budget
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. The General Manager’s office
also supports the water conservation staff which 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.
Accomplishments – Fiscal Year 2016-2017
Otay Water District continues to be one of the lower cost water service providers of San Diego
County’s 23 public water agencies and one of the County’s 28 lower cost sewer service
providers in the County.
The Governor declared an end to the statewide-drought emergency. The District successfully
responded to the drought emergency – since the State’s emergency mandates began in 2015
– reducing potable usage by an average of 18% versus 2013 levels. The District’s residents
and businesses beat the State’s emergency water-use reduction mandates during 2015 and
2016, and continue to use less water than they did in 2013 even though drought conditions
have ended.
The District certified the 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 U.S. Department of State granted a presidential permit to the District, allowing it to build
a nearly four-mile potable water pipeline that begins at the U.S.-Mexico border. This will be
the first cross-border project of its kind to import water to the United States from Mexico. The
permit authorizes the District to “construct, connect, operate, and maintain cross-border
water pipeline facilities for the importation of desalinated seawater at the International
Boundary between the United States and Mexico in San Diego County, California.”
127
Departmental Operating Budget
General Manager
Accomplishments – Fiscal Year 2016-2017 (continued)
As an effort to proactively maintain the public water and sewer system, and provide timely
infrastructure improvements to the meet the needs of its service area, the District Board
approved its fiscal year 2018 budget, presenting no overall water rate increases and
minimizing impacts from supplier cost increases. However, the District did implement
changes to its rate structure based on a cost of service study, which was completed in April,
2017
To ensure the District’s ratepayers are paying rates based on the legally justifiable costs for
services they receive, the District filed a lawsuit against the City of San Diego in the San Diego
Superior Court challenging the amount the City charges Otay for reclaimed water. The
lawsuit contains a Petition for Writ of Mandate and Complaint for Breach of Contract, among
other claims. The lawsuit alleges that the City’s new reclaimed water rate violates the 2003
Agreement as well as the California Constitution (Propositions 13, 218, and 26), statute, and
common law. The City has also breached the agreement by unreasonably interfering with
and restricting Otay’s ability to increase sales of its reclaimed water and by violating the
agreement’s reclaimed water requirements.
The District began upgrading more than 8,000 of its approximately 49,000 automated meter
reading (AMR) meters, from 3G to 4G, allowing more meters to be read within a larger area
and at a faster speed. The District saved about $700,000 in fiscal year 2017 by replacing the
register only and not the register and meter.
The District distributed its annual consumer confidence report to customers, indicated that it
met or surpassed all the public health drinking water requirements and standards, and did
not exceed a health-related maximum contaminant level.
The District completed the Water Facilities Master Plan, a comprehensive review of the
District’s potable and recycled water systems. Staff identified capital improvements
necessary for each system to support future conditions including major planned land
development projects, while providing reliable and economical service to the District’s
customers.
The District completed the Integrated Water Resource Plan, which examined alternative
supply options and their potential to meet the needs of the District under a wide variety of
future conditions through 2040.
As part of the District’s successful Leak Detection and Repair Program, staff surveyed 242
miles of potable pipelines. District staff found and repaired 42 leaks in its distribution system
and notified customers of 162 potential customer-side leaks.
128
Departmental Operating Budget
General Manager
Accomplishments – Fiscal Year 2016-2017 (continued)
The District decreased labor costs by approximately $336,300 through the increase in
efficiency programs and reduction in three full-time positions.
The District coordinated and received credit for the Special District Risk Management
Authority’s (SDRMA) Credit Incentive Program (CIP). The District received combined credits
of approximately $109,665, which were applied towards the Property/Liability and Workers’
Compensation premiums. The credits include CIP, longevity distribution, and a 5% multi-
program discount. The District also received a high-volume discount of approximately
$273,127.
The District developed a text-message notification system for customers delinquent on their
water-bill payment. Beginning in fiscal year 2018, customers delinquent on their payments
will receive a text message that includes the past due balance and a link to the District’s bill
payment site.
The Department of Homeland Security and its vulnerability experts completed vulnerability
assessments of the District’s administration building, the treatment plant, and regulatory
facility. The assessments evaluated the facilities’ overall Protective Measure Indexes (PMI)
and the Resilience Measurement Indexes (RMI), which were higher than the average for
similar facilities/districts. These indexes include physical security, security management,
security force, information sharing, and security activity, preparedness, mitigation measures,
response capabilities, and recovery mechanisms. These assessments were conducted at no
cost, saving the District more than $100,000.
A consultant performed a required three-year compliance audit on the District’s Ralph W.
Chapman Water Recycling Facility and two regulatory sites. Operations staff completed
updates and revisions to the California Accidental Release Program – Risk Management
Plan/Process Safety Management manuals related to the overview of the Chlorine
Management System, thus saving the District more than $5,000 by not using a consultant to
complete the updates and revisions. The District passed the inspection.
The District enhanced its website and social media sites by increasing the frequency of posts
and the use of increased Spanish-language content. As a result, from July 1, 2016 to June 30,
2017, Otay’s Facebook gained a 35% increase in followers from 151 to 203 followers and a
30% increase in Twitter followers from 1,095 to 1,426.
For the more than five years, the District received the “Distinguished Owner Honoree” award
from the Construction Management Association of America – San Diego Chapter.
129
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130
Departmental Operating Budget
Administrative Services
Mission Statement
To provide support to the Board of Directors, the General Manager, and District staff by identifying
and meeting objectives to serve 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, emergency preparedness and response, and strategic planning.
Department Responsibilities
The Administrative Services Department, under the general direction of the Chief of Administrative
Services, provides the following support services: Human Resources, Purchasing, Facilities
Maintenance, Safety and Security, 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.
Administrative Services Department – 23 Positions (1)
(1) See Position Count by Department on pages 112-115 for the list of positions per department
Purchasing
and Facilities
2231
Human
Resources
2221
Chief,
Administrative Services
2211
Information
Technology
2421
Geographic
Information
Systems
2431
Safety and Security
2241
131
FY 2016 FY 2017 FY 2017 FY 2018
Actual Budget Actual* Budget
Administrative Chief 850,853$ 555,800$ 550,510$ 576,400$
Human Resources 661,366 824,900 686,522 815,700
Purchasing and Facilities 1,311,242 1,321,600 1,366,918 1,386,400
Safety and Security 303,123 361,300 350,233 364,800
IT Services 1,999,749 2,276,000 2,341,125 2,391,700
Geographic Information System (GIS) 893,954 985,300 902,136 993,200
Total Expenses 6,020,287 6,324,900 6,197,444 6,528,200
FY 2016 FY 2017 FY 2017 FY 2018
Actual Budget Actual* Budget
Labor and Benefits 4,050,829 4,074,300 4,085,764 4,223,100
Travel and Memberships 41,086 52,100 33,870 45,500
General Office Expense 76,620 94,000 69,825 91,900
Equipment 1,024,550 1,064,800 1,110,156 1,142,200
Fees 977 - - -
Services 353,922 552,000 380,775 507,400
Training 53,299 103,000 87,307 104,500
Materials & Maintenance 392,559 369,800 416,151 398,700
Power and Utilities 26,445 14,900 13,596 14,900
Total Expenses 6,020,287$ 6,324,900$ 6,197,444$ 6,528,200$
-$ -$ -$ -$
Budget vs. Actual, in thousands ($)
Administrative Services
Department
Object
$5,600
$5,800
$6,000
$6,200
$6,400
$6,600
2014 2015 2016 2017 2018
6,
2
0
5
6,
3
6
9
6,
3
2
5
6,
3
2
5
6,
5
2
8
5,
9
3
7
6,
3
3
9
6,
0
2
0
6,
1
9
7
Budget Actual
* Actual unaudited
132
Departmental Operating Budget
Human Resources
Services We Provide
Human Resources, under the direction of the Chief of Administrative Services, provides the following:
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.
Accomplishments – Fiscal Year 2016-2017
Staff facilitated the extension of the current Memorandum of Understanding (MOU) with the Otay
Water District Employees’ Association (OWDEA) for one year. Staff also completed significant
work to prepare for negotiations of a new MOU with the OWDEA in 2018.
Researched management training and development programs to enhance employee skills and
promote growth. Referred supervisors and managers to appropriate level training. Coordinated
semi-annual managerial training internally on key topics including risk and performance
management.
Due to complexities related to the Affordable Care Act, staff collaborated with the District’s third-
party administrator to implement and file required individual and IRS tax reporting forms (1095-
C and 1094-C) related to Health Care Reform.
Developed and/or updated various policies, procedures, and programs to maintain compliance
with federal and state regulations and/or to streamline internal processes. These include “Policy
Against Discrimination, Harassment, Retaliation and Complaint Procedure”, “Americans with
Disabilities Act/Fair Employment and Housing Act Policy”, “Paid Sick Leave Policy”, “Kin
Care/Family Medical Leave Act Policy”, “School and Child Care Provider Leave”, “Uniform Policy”,
“Drug-Free Workplace”, and “DOT Drug and Alcohol Testing Policy”.
Purchasing and Facilities
Services We Provide
Purchasing and Facilities, under the direction of the Chief of Administrative Services, provides the
following: oversees the general purchasing and contracting 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
133
Departmental Operating Budget
Purchasing and Facilities (continued)
Services We Provide (continued)
non-structural facility maintenance work; and administers and manages outsourced facility
maintenance service contracts.
Accomplishments – Fiscal Year 2016-2017
Modernized the District’s fuel island with all new double-walled underground piping, under-
dispenser containment, and gas and diesel dispensers. Staff also upgraded the wireless fuel
authorization system and installed equipment at the fuel pumps and on all District vehicles.
Upgraded the flooring throughout the administration building, replacing the original broadloom
carpet of nearly 20 years with commercial-grade carpet squares and vinyl tiles. Staff and a third-
party contractor completed this project after hours, utilizing a cubicle “lift-in-place” process with
minimal disruption of daily work schedules.
Redesigned cubicle layouts in the Administrative Services and Customer Service departments
to provide a more open floorplan, improve traffic flow, and enhance employee work
spaces. Similarly, staff redesigned the Public Service section during the flooring upgrade
program to provide enlarged work areas to public-facing employees and enhance customer
visibility.
Retrofitted electric gates throughout the District with digital receivers tied directly into the District’s
security and access system. Digital credentials in the form of clickers were issued to staff and
assigned to vehicles, providing controlled access and monitoring through the security and
access management system.
Safety and Security
Services We Provide
Safety and Security, under the direction of the Chief of Administrative Services, provides the following:
assesses the occupational exposure to risk; evaluates hazards and mitigation of safety hazards and
risk to injury; directs and supervises accident investigations relating to occupational injuries, fleet
incidents and/or damage to, or theft of District property; develops 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.
134
Departmental Operating Budget
Safety and Security (continued)
Accomplishments – Fiscal Year 2016-2017
Developed a professional relationship and partnership with the Department of Homeland
Security (DHS). The DHS Office of Infrastructure Protection, Protective Security Coordination
Division, and the Regional Resiliency Assessment Project (RRAP). Teams of scientists selected
the District to participate and assist in the gathering of security, emergency response and
resiliency programs. Throughout the process, the District highlighted its programs. DHS will use
the data gathered through the scientists’ site visits, which will be used for resiliency enhancement
activities throughout the lifecycle of the RRAP. The District received various accolades for its
progressive security program.
Implemented an Emergency Mass Notification System designed to alert District staff of
emergency events. The system includes coverage for up to 200 employees, 3,000 alert messages
sent by phone with interactive response capability or SMS text message, and 24/7 customer
support.
Worked with GIS and Engineering staff to create a facility enterprise security layer within the
District’s GIS platform. The layer includes an as-built component level, location information for all
District security facility enhancements, and is mobile friendly.
In partnership with Purchasing, updated District-wide facilities’ physical security system to
standardize and modernize access control and monitoring of video systems. This update
prepares the District for implementation of the digital monitoring panels for use with the District’s
access control and security management enterprise platform.
Streamlined the District’s Confined Space (CS) entry operations through training using the revised
CS procedures. Training 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; and harness inspections before use and donning/doffing. The training also included
duties and responsibilities of CS entry crew, supervisor, attendant and entrant; CS entry protocols;
hands-on practical exercises on the use of gas monitors, lowering and rescue, fall-protection
equipment, and administration and use of CS documentation.
Developed a benchmark for the District’s Strategic Plan measure titled ‘Injury Incident Rate’. Staff
reviewed OSHA logs, calculations of staff’s loss time, incident rates, and provided tracking options.
This supports Cal/OSHA, OSHA, and the U.S. Department of Labor Bureau of Labor Statistics
established practices.
Reduced the number of false alarms and the need for patrol services and/or District staff response.
As a result, the District significantly reduced costs and minimized the use of staff time.
Reviewed and updated key District safety programs, focusing on high-hazard areas such as confined
space, fall protection, heat illness prevention, hazard communications, safety data sheets, and illness
and injury prevention.
135
Departmental Operating Budget
Information Technology Operations/Applications
Services We Provide
IT Operations, under the direction of the Chief of Administrative Services, provides the following: day-
to-day support of the District’s enterprise business computing environment to include network and
desktop hardware/software; disaster recovery; telecommunications; mobile, physical, and wireless
networks; internal/external website; and help desk services. IT Operations also has collateral
responsibilities for access control security systems.
Accomplishments – Fiscal Year 2016-2017
Deployed the District’s new Enterprise Content Management System (ECMS), Laserfiche. The
new system for electronic document management features standardization, single file repository,
and content accessibility. The new system also allows for public portal accessibility, document
security, and integration with other District enterprise systems including SharePoint, GIS, and the
financial management system, Tyler Eden. Through the new ECMS, the District will manage
future electronic document activity, ranging from creation to preservation, and ultimately,
disposal.
Azteca Systems, the developer of the GIS-centric software application, Cityworks, recognized the
District’s technology team with the annual “Cityworks Exemplary User Award.” Through the
District’s use of the Cityworks system, it manages day-to-day work assignments, collects field
asset data, and manages preventive maintenance schedules, allowing the District to operate an
optimal platform for asset and work order management. Azteca recognized the District as a
leader in the use of technology and progressive water-use practices in sustainable services to
its customers.
Cox Business nominated the District’s Information Technology Manager for the 2017 San Diego
Top Tech Exec Awards. The judging panel selected the District’s IT Manager as one of the
finalists. The award nomination focused on the deployment of the Metro-E connectivity solution,
which replaced the District’s wireless network service infrastructure. Annually, the judging panel
selects private and public sector nominees based on practices of promoting and implementing
new technology services within their respective organization. Nominees included the San Diego
County Water Authority, Qualcomm, San Diego International Airport, UCSD San Diego
Supercomputer Center, and District Attorney’s Office. This is the second time the District is
recognized for its strategic alignment of enterprise technology and critical operational services.
Along with IT management leading the effort, technology and operations staff played a critical
role in the deployment of this new value-added enterprise service.
Completed the roadmap for enhancements to the District’s SCADA security system. The
comprehensive report provides a strategic outline of goals for the new system. The roadmap is
a multi-year plan designed to leverage additional automation capabilities, enhanced
remote/mobile visibility and control of system, smart energy monitoring and analytics, operator
process improvements, and system security enhancements.
136
Departmental Operating Budget
Information Technology Operations/Applications (continued)
Accomplishments – Fiscal Year 2016-2017 (continued)
Redesigned the SCADA telecommunications and wide-area network, enhancing the District’s
transmission services and hardening of security systems. Staff successfully converted 42 District
facilities from wireless connectivity/communications to physical connectivity. SCADA and IT staff
participated in the deployment, testing, optimization, and creation of transmission monitoring
and reporting points.
Geographic Information Systems (GIS)
Services We Provide
GIS, under the direction of the Chief of Administrative Services, provides the following: technical and
administrative support of the District’s enterprise GIS and CAD systems. GIS is also responsible for
the data collection and data QA/QC of the District’s facility data and land-based data. In addition,
GIS 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 2016-2017
Completed the migration to the new ArcGIS platform, Portal. The new web-based portal platform
will enable the District to create function based applications, share external web maps, improve
content management, enhance security, and an overall improved interactive experience of
existing enterprise GIS services.
Participated in the Regional Imagery Collection Project, which provides the latest high-resolution
imagery and contour data to District staff. Through a joint effort with 29 other agencies in San
Diego County, the District saved approximately $30,000.
Created a District GIS security information mobile app, which provides secured 24/7 access to
facility assets.
The GIS Manager presented a paper titled “GIS-centric Operation at Otay Water District” at the
2017 Esri International Conference. Over 200 GIS professionals specializing in the water and sewer
industry attended the presentation. This event further promoted the District’s image as a practice
leader in the GIS field.
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138
Departmental Operating Budget
Finance
Mission Statement
To provide timely, accurate, and clear information that optimizes service to the District’s staff and
ratepayers. Through continuous improvement, professional service, and effective fiscal policies the
Finance Department will ensure that financial resources are collected, recorded, protected, and
expended in a fiscally responsible manner.
Department Responsibilities
The Finance Department, under the general direction of the Chief Financial Officer, provides the
following support services: Controller and Budgetary Services, Treasury and Accounting Services,
Payroll, Accounts Payable, and Customer Service. The Department ensures the District’s
conformance with modern finance, accounting theory and practices, and compliance with
applicable state and federal laws. In addition, it provides customer support, meter reading and
maintenance, and water conservation outreach programs. The Finance staff provides highly
responsible and complex administrative and technical support to the District, General Manager, and
Board of Directors.
Finance Department – 29 positions (1)
(1) See Position Count by Department on pages 112-115 for the list of positions per department
Treasury and
Accounting
Services
2331
Customer
Service
2341
Controller and
Budgetary
Services
2321
Chief Finance Officer -2311
Meter
Maintenance
2342
139
FY 2016 FY 2017 FY 2017 FY 2018
Actual (1)Budget (1)Actual* Budget
Finance Chief 547,874$ 563,700$ 561,748$ 579,200$
Controller and Budgetary Services 832,787 911,800 892,375 950,700
Treasury and Accounting Services 1,372,201 1,410,500 1,329,062 1,336,800
Customer Service 1,868,278 1,938,900 1,851,993 1,983,200
Meter Shop 656,403 687,600 651,186 818,900
Total Expenses 5,277,543 5,512,500 5,286,364 5,668,800
FY 2016 FY 2017 FY 2017 FY 2018
Actual (1)Budget (1)Actual* Budget
Labor and Benefits 4,315,590 4,516,800 4,327,524 4,657,400
Travel and Memberships 14,682 19,700 9,661 17,300
General Office Expense 151,896 167,600 143,439 167,500
Fees 355,925 363,900 401,675 387,300
Services 142,459 159,200 167,982 186,800
Training 180 500 455 700
Materials & Maintenance 182,696 179,800 161,306 146,800
Miscellaneous - - 74 -
Bad Debt Expense 114,115 105,000 74,248 105,000
Total Expenses 5,277,543$ 5,512,500$ 5,286,364$ 5,668,800$
-$ -$ -$ -$
(1) In FY 2018, the Water Conservation Division was moved to the General Manager's department.
Prior year budget and actuals have been adjusted for comparative purposes.
Finance
Department
Budget vs. Actual, in thousands ($)
Object
$2,500
$4,000
$5,500
2014 2015 2016 2017 2018
5,
3
9
6
5,
3
9
4
5,
5
1
3
5,
5
1
3
5,
6
6
9
5,
4
6
3
5,
2
1
1
5,
2
7
8
5,
2
8
6
Budget Actual
* Actual unaudited
140
Departmental Operating Budget
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 responsible for performing cost of
service studies, capacity fee studies, preparing rate notices and property tax assessments. This
division is also responsible for the bi-weekly payroll of 134 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 and federal and state tax returns are filed on a
quarterly basis, W2s are filed annually. This division also assists in the general ledger accounting,
audit, cost accounting, and contract review.
Accomplishments – Fiscal Year 2016-2017
For the thirteenth consecutive year the GFOA awarded the District with the Distinguished
Budget Presentation Award for the Fiscal Year 2016-2017 Budget. 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 California Society of Municipal Finance Officers (CSMFO), for the eleventh consecutive
year, recognized the District with the Operating Budget Excellence Award for the Fiscal Year
2016-2017 Budget. This award acknowledges the District for preparing a budget document
that meets high standards.
The CSMFO awarded the District the Capital Budgeting Excellence Award for the Fiscal Year
2016-2017 Capital Improvement Program Budget. This award recognizes agencies that have
prepared a Capital Improvement Budget document that meets the established criteria. This
is the twelfth consecutive year the District has received this award.
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
141
Departmental Operating Budget
Treasury and Accounting Services (continued)
Services We Provide (continued)
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 2016-2017
For the thirteenth consecutive year, the Government Finance Officers Association (GFOA)
awarded the District with the Certificate of Achievement for Excellence in Financial Reporting,
for its Comprehensive Annual Financial Report (CAFR) for the fiscal year ending June 30,
2016. This award is the highest form of recognition in the area of governmental accounting
and financial reporting. Earning this award demonstrates District’s dedication and
commitment to upholding high financial standards.
Customer Service
Services We Provide
The Customer Service Division is responsible for providing billing, receipting, collections, and
customer care for water and sewer services in addition to assisting with water conservation. The
billing and customer care teams handle the coordination of billing and receipting of approximately
49,000 accounts per month. Customers have the choice of receiving either a paper bill or an
electronic bill. Various payment options include check, 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 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.
142
Departmental Operating Budget
Customer Service (continued)
Accomplishments – Fiscal Year 2016-2017
Meter Shop staff completed the annual large meter testing program by testing more than
120 meters and repairing and/or replacing more than 50 meters that were 3 inches or
larger.
Staff implemented a new cashiering system for in-house payments which included the
transition to Check21, whereby an electronic file of all payments made by check is
transmitted to the bank. This creates efficiencies through eliminating the need to process
checks in the daily bank deposit and speeding up the deposit process.
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144
Departmental Operating Budget
Operations Department
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.
Water Operations Department – 52 Positions (1)
(1) See Position Count by Department on pages 112-115 for the list of positions per department
Chief, Water Operations
3211
Utility Services
Utility Maintenance 3232
Fleet Maintenance 3233
Pump & Electrical 3236
Water Operations
Water System Operations 3221
Water System 3225
SCADA System 3227
Laboratory 3243
Reclamation Plant 3244
Assistant Chief of Water
Operations
3231
145
FY 2016 FY 2017 FY 2017 FY 2018
Actual (2)Budget (2)Actual* Budget
Water Operations Chief (1)438,881$ 461,600$ 459,537$ 472,800$
Water Systems (1)5,182,548 5,512,300 5,230,497 6,082,400
Construction Maintenance (1)4,762,313 5,342,800 5,089,006 5,395,700
Total Expenses 10,383,742 11,316,700 10,779,040 11,950,900
FY 2016 FY 2017 FY 2017 FY 2018
Actual (2)Budget (2)Actual* Budget
Labor and Benefits (1)7,428,812 7,821,700 7,718,915 8,260,600
Travel and Memberships 35,709 42,400 40,318 42,400
General Office Expense 666 300 18 300
Equipment 33,104 61,300 64,651 58,600
Fees 74,347 149,900 135,059 147,500
Services 309,794 445,400 409,275 432,300
Training 4,873 9,000 6,923 9,000
Materials & Maintenance 1,465,270 1,951,500 1,531,964 1,989,500
Sewer Charges 1,031,167 835,200 871,917 1,010,700
Total Expenses 10,383,742$ 11,316,700$ 10,779,040$ 11,950,900$
-$ -$ -$ -$
(1) Excludes CIP labor and benefits.-$ -$ -$ -$
Water Operations
Department
(2) In FY 2017, the Recycled Division's responsibilities were reorganized between the Operations and
Engineering Departments. Prior year budget and actuals have been adjusted for comparative
purposes.
Budget vs. Actual, in thousands ($)
Object
$-
$4,000
$8,000
$12,000
2014 2015 2016 2017 2018
10
,
9
1
3
10
,
9
2
0
11
,
3
1
7
11
,
3
1
7
11
,
9
5
1
10
,
3
1
5
9,
9
9
1
10
,
3
8
4
10
,
7
7
9
Budget Actual
* Actual unaudited
146
Departmental Operating Budget
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 2016-2017
The State Water Resources Control Board (SWRCB) required potable water distribution
systems that typically contain a blend of water produced at the Carlsbad Desalination Plant
conduct special lead and copper testing. In July, staff began the system wide second round
of special lead and copper sampling, which was completed in August and all test results
were compliant.
Staff completed the triennial Public Health Goal Report in August as required by the SWRCB.
In September, the SWRCB conducted a Sanitary Survey, inspecting all District reservoir sites
and pump stations and evaluated the cross-connection control program, emergency
response plans, various operations and maintenance programs, and the system operator
certification program. The SWRCB’s Sanitary Survey report indicated that the District’s water
system is well operated and maintained with no deficiencies noted.
In October, staff updated the District’s revised bacteriological sampling plan and submitted
it to the SWRCB Division of Drinking Water. This was required due an increase of potable
water customers from 208,000 in 2012 to 220,213 in 2016, which crossed a threshold in
population served. As a result, staff needs to take additional samples along the water
147
Departmental Operating Budget
Water System Operations
Accomplishments – Fiscal Year 2016-2017 (continued)
distribution system to comply with the State’s rules and regulations. In November, the State
approved the new sampling plan.
In December, staff began the process for the Kindergarten-through-12th grade School Lead
Sampling program as mandated by the SWRCB. Staff prepared action plans for lead-test
requests from schools within the District’s service area. As of June 30, 2017, 45 schools
requested the tests and 25 were tested. The District will continue to complete testing for all
schools that have requested lead testing.
The County of San Diego conducted the annual Hazardous Management Business Plan
(HMBP) inspections at the following sites: 450/680 Recycle Pump Station, 978-1 Pump
Station, 1200-1 Pump Station, and the Hidden Mountain Sewer Lift Station. The County found
no violations and did not require any follow-up actions. In addition, the County performed
another HMBP inspection of the 711-3 Reservoir site, again finding no significant issues.
The SWRCB approved the District’s 2017 Water Quality Emergency Notification Plan.
The Regional Water Quality Control Board (RWQCB) conducted a compliance inspection at
the District’s Water Recycling Facility. After completion, the RWQCB toured the facility and
found no issues with the facility process, technologies, or data maintenance. The RWQCB
issued a report noting no violations.
Staff assisted in implementing the new iFix SCADA system and Win911 notification system
as the sole source to receive information and alarm notifications thus allowing staff to phase
out all District pagers.
Staff phased out daily paper journals and implemented the use of an e-journal that is
accessible and retrievable to all staff. This resulted in a cost savings of $500 to the District.
In May, staff assisted the Inspection Department to perform a shutdown to disconnect the
old 16-inch line on Melody Road from the distribution system since the new 16-inch PVC that
supplies water to Rancho Jamul Estates is now in service. The shutdown affected 17 homes
on Las Palmas Road and Highway 94 in Jamul. Three water trailers were on site throughout
the duration of the shutdown from 8 a.m. to 4 p.m.
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
148
Departmental Operating Budget
Utility Services Maintenance (continued)
Services We Provide (continued)
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 2016-2017
As part of the District’s maintenance program, an inspector completed the internal and
external inspection, including non-destructive proactive testing of the District’s pressure
vessels (surge and hydro-pneumatic tanks), with no significant issues recorded.
As part of the District’s emergency planning efforts, in August, Fleet Maintenance, Pump
Electric, SCADA and Treatment Plant staff coordinated and installed a new emergency
generator at the Russell Square Sewer Lift Station.
The District experienced seven main breaks, notifying customers of the issues in a timely
manner. Staff worked meticulously to assess repairs and fix breaks to minimize water-service
impacts to customers.
The District performed seven planned shutdowns and eight emergency shutdowns. Staff
notified the affected customers and provided water trailers when necessary. Staff conducted
repairs as needed.
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150
Departmental Operating Budget
Engineering
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.
Engineering Department – 24 Positions (1)
(1) See Position Count by Department on pages 112-115 for the list of positions per department
Chief, Engineering
3311
Water Resources, Planning,
and Design 3321
Environmental Services 3451
Public Services 3421
Field Services 3431
151
FY 2016 FY 2017 FY 2017 FY 2018
Actual Budget Actual* Budget
Engineering Chief (1)440,056$ 594,100$ 578,069$ 587,300$
Engineering Services (1)825,865 721,200 583,550 752,200
Public Services (1)1,708,742 1,753,300 1,644,690 1,722,700
Environmental Services (1)178,261 293,100 273,720 296,200
Total Expenses 3,152,924 3,361,700 3,080,029 3,358,400
FY 2016 FY 2017 FY 2017 FY 2018
Actual Budget Actual* Budget
Labor and Benefits (1)2,475,049 2,517,600 2,492,882 2,598,800
Travel and Memberships 15,545 18,300 14,178 16,300
General Office Expense 6,443 1,700 1,359 800
Equipment 486 - 21 -
Fees 28,853 38,000 35,875 38,600
Services 616,893 772,600 526,711 697,300
Training 9,655 13,500 9,003 6,600
Total Expenses 3,152,924$ 3,361,700$ 3,080,029$ 3,358,400$
-$ -$ -$ -$
(1) Excludes CIP labor and benefits.
Engineering
Department
Budget vs. Actual, in thousands ($)
Object
0
500
1,000
1,500
2,000
2,500
3,000
3,500
2014 2015 2016 2017 2018
2,0
2
6
3,
1
3
3
3,
3
6
2
3,
3
6
2
3,
3
5
8
1,
8
2
8
2,
8
5
4
3,
1
5
3
3,
0
8
0
Budget Actual
* Actual unaudited
152
Departmental Operating Budget
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 2016 -2017
Completed the design and bidding phases of the 870-2 Pump Station Replacement
project. The project includes the main 870 pumps and replacement of the existing
reservoir inlet/outlet piping, construction of recirculation system pumps, and a
chloramine-disinfection booster system. Also included in the project are improvements
of the access road and the installation of utilities for electrical, gas, sewer, and
communication services.
Completed the design and bidding phases of 571-1 Reservoir Floating Cover/Liner
Replacement project.
Completed the design and construction to replace the Ralph W. Chapman Water
Recycling Facility 927/944 Pump Station Surge Tank project. The project included the
replacement tank, a new foundation, and 6-inch piping.
Updated the District’s InfoWater potable and recycled-system hydraulic models to
account for new development and to facilitate future updates with the District’s GIS
system.
Completed the Integrated Water Resource Plan (IRP). The IRP examined alternative
supply options and their potential to meet the needs of the District under a broad variety
of future conditions through 2040.Prepared and presented a Water Supply
Assessmentreport for the County of San Diego’s Otay 250 Sunroad East Otay Mesa
Business Park Specific Plan Amendment (SPA) project to the Board in July 2016.
Prepared and presented a Water Supply and Assessment Report for the City of Chula
Vista’s University Innovation District project to the Board in October 2016.
153
Departmental Operating Budget
Water Resources, Planning, Design, and Environmental Services
(continued)
Accomplishments – Fiscal Year 2016 -2017 (continued)
Completed condition assessment of the 14-inch Recycled Water Force Main with
Pipeline Inspection and Condition Analysis (PICA) Remote Field Eddy Current tool
(SeeSnake) to pinpoint leaks and spot repairs, validate the condition, and provide an
improved understanding of remaining life expectancy.
Completed design of the Hillsdale Road Waterline and Sewer Repairs project, which will
replace approximately 4,000 linear feet of a 12-inch water main and more than 700 linear
feet of an 8-inch sanitary-sewer line in Hillsdale Road east of Jamacha Road.
Completed design and began construction of the trenchless repair to sixty sections of the
sanitary-sewer system using cured-in-place-pipe (CIPP) lining and lateral liners to resolve
pipeline breaks and root intrusion issues.
Completed design of an 8-inch sanitary sewer relocation line in Fuerte Drive west of
Calavo Drive in coordination with the County of San Diego realigning the road.
Completed a review and compilation of potential improvements at the Ralph W.
Chapman Water Reclamation Facility to maintain the facility.
Studied the potential for converting the Potable Water 657 Pressure Zone to the 640
Pressure Zone and identified recommended improvements to resolve low-pressure
areas.
Provided monitoring and oversight on the County of San Diego Rancho San Diego Pump
Station Replacement project under construction.
Designed a wastewater screen to be installed at the Steele Canyon Sewer Lift Station to
restrict large solids that can clog and damage the sewage pumps.
Coordinated with the San Diego County Water Authority the abandonment of two flow-
control facilities (SD13FCF and OTAY5FCF) that are no longer in use.
Began preliminary design on the replacement of a 12-inch water line along Vista Vereda
between Vista Grande and Hidden Mesa Trail in the Hillsdale area.
Completed construction of the 711-1 (3.1 million-gallon) Reservoir, the 711-2 (2.3 million-
gallon) Reservoir Interior and Exterior Coating and Upgrades, the 980-1 (5.0 million-
gallon) Reservoir Interior Coating and Upgrades, and the 978-1 (0.5 million gallon)
Reservoir Interior Coating and Upgrade projects. By maintaining reservoirs, the District is
improving the water reliability and preserving the useful life of these reservoirs for another
20 years.
Completed the construction of the Rancho San Diego Basin Sewer Rehabilitation - Phase
1 project, which removed and replaced 3,178 linear feet of an 8-Inch sewer main line to
preserve and extend the life of the sewer system.
154
Departmental Operating Budget
Water Resources, Planning, Design, and Environmental Services
(continued)
Accomplishments – Fiscal Year 2016 -2017 (continued)
Completed the construction of the 36-Inch La Presa Air-Vac Valve Relocations project,
which will improve the operation and maintenance of these air-vacuum valves by
reducing staff’s exposure to traffic, and address concerns associated with the existing
air-vacuum valves located in potentially flooded vaults during a main break.
Completed the construction of new blow offs for the 14-inch Recycled Water Force Main
Improvements project. The construction of this project also provided a new flow-meter
vault to improve system reliability and reduce the risk of a recycled water spill within the
San Diego National Wildlife Refuge/Sweetwater Authority Watershed.
Awarded a construction contract to construct the Campo Road Sewer Replacement
project. Caltrans provided permit approval on the sewer design in May 2016.
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 2016-2017
The District approved the Otay Ranch Village 2 SPA Subarea Master Plan Amendment
Number One in September 2016.
The District approved the Otay Ranch Village 3 Subarea Master Plan Amendment
Number One in April 2017.
Sold 94 meters, totaling $2.88 million and equating to 305.5 Equivalent Dwelling Units.
Sold six sewer connections, totaling $33,600.
Completed disposal of one property owned by the District and declared surplus by the
Board with a net value of more than $145 million.
Amended leases to generate revenue in excess of $1.2 million from the District’s 30 cell-
site leases.
155
Departmental Operating Budget
Public Services and Field Services (continued)
Accomplishments – Fiscal Year 2016-2017 (continued)
Accepted six developer water-main projects with fixed assets valued at $4.25 million.
Completed 4,903 USA mark-out tickets with an accuracy rate of 100%.
Completed 38 surveys related to various projects included in the Fiscal Year 2017 Capital
Improvement Program.
Performed Quality Assurance on 48,312 linear feet of new developer-installed potable
and recycled water-distribution pipeline.
Implemented the District’s first use of a line stop on a developer project on State Route
94 to mitigate customer impacts and maintain service during a critical potable water
transmission main tie-in.
Increased efficiencies in the Recycled Water Site Program to reduce the level of outside
services used to perform design review and inspection of new recycled water-irrigation
projects.
156
FY 2016 FY 2017 FY 2017 FY 2018
Actual Budget Actual* Budget
General Expense (1)2,186,585$ 2,006,400$ 2,440,000$ 2,242,200$
Total Expenses 2,186,585 2,006,400 2,440,000 2,242,200
FY 2016 FY 2017 FY 2017 FY 2018
Actual Budget Actual* Budget
Labor and Benefits (1)1,359,311 1,181,400 1,397,866 1,106,200
Insurance expenses 577,200 575,000 607,404 661,000
Legal expenses (2)250,074 250,000 434,730 475,000
Total Expenses 2,186,585$ 2,006,400$ 2,440,000$ 2,242,200$
(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 2017 and FY 2018
is $198,600 and $205,300, respectively. Additionally, the labor and benefits shown on this schedule are those
related to operating costs and does not include CIP labor and benefit costs.
(2) Included in the FY 2018 Legal Expenses is $225,000 pertaining to the City of San Diego Recycled Water Rate
Lawsuit.
General Expense
The expenditures in this section are general operating costs not associated with an individual
department. The expenditures include: legal costs, insurance premiums, changes in accrued
employee leave balances and miscellaneous interest. These expenditures represent 7.0% of the total
Department Budget.
Department
Budget vs. Actual, in thousands ($)
Object
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
2014 2015 2016 2017 2018
2,
1
5
0
2,
3
3
2
2,
0
0
6
2,
0
0
6
2,2
4
2
2,
2
1
4
2,
3
0
9
2,
1
8
7
2,
4
4
0
Budget Actual
* Actual unaudited
157
This page intentionally left blank
158
Capital Budget
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 a long-term capital planning process. The process is dynamic, due to evolving
needs of the community, water supply issues, and changing regulations. As such, capital planning
is part of the District’s overall strategic planning process. The capital planning process involves
identifying current and future needs, and prioritizing them based on certain operating assumptions.
The primary objective of this planning effort is to support an orderly and efficient program of
expansion, new water supply, replacement, and betterment, while maintaining a stable long-range
financial plan.
To accommodate growth requires that the District invest $283 million in capital assets through
ultimate build-out. The Fiscal Year 2018 Capital Budget is $20.0 million and the six-year Capital
Improvement Program (CIP) totals $102.3 million. The CIP is consistent with the District's Water
Facilities Master Plan, Sewer System Master Plan, current capacity fees, and the District's strategic
financial objectives. This CIP Budget document contains the descriptions, justifications,
expenditures, and funding for all the identified projects to ultimate build-out.
The District’s Capital Improvement Program (CIP)
The planning, design, and construction costs of all capital facilities within three business segments
(Potable Water, Recycled Water and Sewer) are allocated to four cost types and corresponding fund
categories: Expansion, Betterment, Replacement and/or New Water Supply. 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.
The following are general descriptions of the four fund categories:
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.
159
Capital Budget
Assumptions and Criteria
The CIP is developed based on the District's Water Facilities Master Plan and Sewer Service Master
Plan, incorporating historical data, growth, developers' input, SANDAG projections, and long-term
economic outlook.
The Water Facilities 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 seasonal maximum day demand peaking factors.
3. Utilizing land use as planned by the City of Chula Vista, County of San Diego and City of San
Diego.
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 and 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.
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 169. Capital facility projects are items that exceed $10,000 or $20,000 for
infrastructure related items (as defined under capital equipment on page 258 of the Glossary) and
have a useful life of at least two years.
The CIP projects are identified and are prioritized based on the following criteria:
Safety, restoration of service, immediate obligation, Board directed, or critical system need.
System upgrades or requirements to maintain system reliability in the next few fiscal years.
Need to meet the future growth of the system.
Project requirement may be reduced in capacity or may have low probability of need in the future.
160
Capital Budget
Major CIP Projects
161
FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 Total
Beginning Balance 48,337$ 48,391$ 39,406$ 38,731$ 41,247$ 42,731$ 48,337$
Sources
Capacity Fees 3,138 5,714 7,229 10,623 8,386 6,670 41,760
Debt financing (1)- 5,500 - - - - 5,500
Grants 255 505 500 500 500 133 2,393
Interest 574 553 572 625 738 817 3,879
Temporary Meters 1,429 1,443 1,458 1,475 1,496 1,518 8,819
Availability (Betterment Portion)461 479 498 518 539 560 3,055
New Supply Fee 296 550 702 1,005 794 629 3,976
COPS 2010B Reimbursement 772 772 772 772 772 772 4,632
Transfer from General Fund 22,134 10,410 10,895 11,407 12,574 13,070 80,490
Interfund Transfers 47 51 59 63 71 75 366
Total Sources 29,106 25,977 22,685 26,988 25,870 24,244 154,870
Uses
CIP Projects 20,012 25,828 14,158 15,130 14,943 12,188 102,259
Debt Service 7,527 7,613 7,666 7,791 7,876 7,864 46,337
Developer Services 1,513 1,521 1,536 1,551 1,567 1,583 9,271
Total Uses 29,052 34,962 23,360 24,472 24,386 21,635 157,867
Net Sources (Uses)54 (8,985) (675) 2,516 1,484 2,609 (2,997)
Ending Balance 48,391$ 39,406$ 38,731$ 41,247$ 42,731$ 45,340$ 45,340$
(1) Proposed Funding from the Clean Water State Revolving Fund Campo Road Sewer Main Replacement
CIP Reserve Funds ($1,000s)
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
FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023
CIP Reserve Fund Balances ($1,000s)
Betterment Replacement Expansion New Supply
162
FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 Total
Source
Expansion 150$ 411$ 1,202$ 1,737$ 27$ 199$ 3,724$
Betterment (1)2,740 3,074 1,564 655 2,317 2,240 12,590
Replacement (1)17,107 22,312 11,362 12,708 12,569 9,719 85,775
New Supply 16 31 31 31 31 31 171
Total 20,012$ 25,828$ 14,158$ 15,130$ 14,943$ 12,188$ 102,259$
FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 Total
Fund
Potable 14,132$ 19,551$ 12,150$ 12,554$ 13,703$ 10,148$ 82,238$
Recycled 801 1,039 488 1,627 160 45 4,160
Sewer (1)5,079 5,238 1,520 949 1,080 1,995 15,861
Total 20,012$ 25,828$ 14,158$ 15,130$ 14,943$ 12,188$ 102,259$
CIP Funding Source
CIP by Fund
Six-Year CIP Projects Summary by Source ($1,000s)
Six-Year CIP Projects Summary by Fund ($1,000s)
$-
$5
$10
$15
$20
$25
$30
FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023
Six-Year CIP Projects by Funding Source, in Thousands ($)
Expansion Betterment Replacement New Supply
$-
$5
$10
$15
$20
$25
$30
FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023
Six-Year CIP Projects by Fund, in Thousands ($)
Potable Recycled Sewer
(1) Includes funds from the Clean Water State Revolving Fund 163
Expansion
CIP No CIP Project Title FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 Total
P2040 Res - 1655-1 Reservoir 0.5 MG 20$ 50$ 1,175$ 1,610$ 20$ 20$ 2,895$
P2430 PL - 20-inch, 980 Zone, Proctor Valley Road – Village 14 Phase 1 5 5 5 5 5 10 35
P2494 Multiple Species Conservation Plan 30 - - - - - 30
P2500 Padre Dam - Otay Interconnection Dehesa Valley 19 2 2 2 2 19 43
P2547 District Administration Vehicle Charging Stations 6 9 - - - - 16
P2595 PL - 16-inch, 624 Zone, Village 3N - Heritage Road, Main St/Energy
Way
- - - - - 150 150
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 10 120 - - 150
R2084 RecPL - 20-Inch, 680 Zone, Village 2 - Heritage/La Media 40 315 10 - - - 365
Total Expansion 150$ 411$ 1,202$ 1,737$ 27$ 199$ 3,724$
Potable 80$ 66$ 1,182$ 1,617$ 27$ 199$ 3,169$
Recylced 70 345 20 120 - - 555
Sewer - - - - - - -
Total Expansion 150$ 411$ 1,202$ 1,737$ 27$ 199$ 3,724$
Betterment
CIP No CIP Project Title FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 Total
P2267 36-Inch Main Pumpouts and Air/Vacuum Ventilation
Installations
10 10 - - - - 20
P2400 PL - 20-Inch Pipeline Replacement, 711 Zone, Otay Lakes
Road - at Santa Paula
- - 47 109 552 - 707
P2405 PL - 624/340 PRS, Paseo Ranchero and Otay Valley Road 5 5 5 50 500 85 650
P2451 Otay Mesa Desalination Conveyance and Disinfection
System
35 69 69 69 69 69 380
P2500 Padre Dam - Otay Interconnection Dehesa Valley 41 4 4 4 4 41 97
P2504 Regulatory Site Access Road and Pipeline Relocation 10 25 25 1 1 5 66
P2521 Large Meter Vault Upgrade Program 25 25 100 100 50 - 300
P2547 District Administration Vehicle Charging Stations 14 21 - - - - 35
P2578 PS - 711-2 (PS 711-1 Replacement and Expansion) - 14,000
gpm
- - - 109 992 2,000 3,100
P2608 PL - 8-inch, 850 Zone, Coronado Ave, Chestnut/Apple 5 20 145 5 - - 175
P2613 PL - 12-inch, 520 Zone, Rancho San Diego Towne Center
Loop
10 35 100 5 - - 150
P2619 PS - Temporary Lower Otay Pump Station Redundancy 20 80 485 50 - - 635
R2110 RecPS - 944-1 Optimization and Pressure Zone
Modifications
20 45 - - - - 65
R2116 RecPL - 14-Inch, 927 Zone, Force Main Improvements 200 400 - - - - 600
R2118 Steele Canyon Sewer PS Large Solids Handling
Improvements
50 3 - - - - 53
R2120 RWCWRF Filtered Water Storage Tank Improvements 25 20 400 5 - - 450
R2123 Repurpose Otay Mesa Recycled Water Lines 5 5 5 150 150 35 350
R2125 RecPRS - 927/680 PRS Improvements, Otay Lakes Road 50 145 5 - - - 200
S2024 (1)Campo Road Sewer Main Replacement 2,125 2,125 25 - - - 4,275
S2043 RWCWRF Sludge Handling System 30 - - - - 5 35
(1) Includes funds from the Clean Water State Revolving Fund
Six-Year CIP Projects by Source and Fund ($1,000s)
164
Betterment, Continued
CIP No CIP Project Title FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 Total
S2047 Asset Management - Info Master Sewer Implementation 30 28 - - - - 58
S2061 RWCWRF Aeration Controls Consolidation & Optimization
Upgrades (S)
30 10 150 - - - 190
Total Betterment 2,740$ 3,074$ 1,564$ 655$ 2,317$ 2,240$ 12,590$
Potable 175$ 293$ 979$ 500$ 2,167$ 2,200$ 6,314$
Recylced 350 618 410 155 150 35 1,718
Sewer 2,215 2,163 175 - - 5 4,558
Total Betterment 2,740$ 3,074$ 1,564$ 655$ 2,317$ 2,240$ 12,590$
Replacement
CIP No CIP Project Title FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 Total
P2083 PS - 870-2 Pump Station Replacement 4,000 10,550 1,850 50 50 - 16,500$
P2174 PS - 1090-1 Pump Station Replacement (400 gpm)1 150 200 1,100 1,000 45 2,496
P2282 Vehicle Capital Purchases 363 240 187 236 253 250 1,529
P2286 Field Equipment Capital Purchases 72 50 55 60 60 63 360
P2382 Safety and Security Improvements 150 325 - - - - 475
P2400 PL - 20-Inch Pipeline Replacement, 711 Zone, Otay Lakes
Road - at Santa Paula
- - 104 242 1,228 - 1,573
P2453 SR-11 Utility Relocations 50 50 700 1,000 452 100 2,352
P2460 I.D. 7 Trestle and Pipeline Demolition 5 40 530 20 - - 595
P2485 SCADA - Infrastructure and Communications Replacement 181 185 85 24 - - 475
P2493 624-2 Reservoir Interior/Exterior Coating 5 5 5 - - - 15
P2504 Regulatory Site Access Road and Pipeline Relocation 10 25 25 1 1 5 66
P2507 East Palomar Street Utility Relocation 5 5 - - - - 10
P2508 Pipeline Cathodic Protection Replacement Program 100 1 1 248 - - 350
P2516 PL - 12-Inch, 640 Zone, Jamacha Road - Darby/Osage - - 75 100 725 - 900
P2518 803-3 Reservoir Interior/Exterior Coating 5 5 - - - - 10
P2520 Motorola Mobile Radio Upgrade 30 - - - - - 30
P2529 711-2 Reservoir Interior & Exterior Coating 5 5 - - - - 10
P2530 711-1 Reservoir Interior & Exterior Coating 5 5 - - - -
P2531 944-1 Reservoir Interior & Exterior Coating 5 5 - - - - 10
P2532 944-2 Reservoir Interior & Exterior Coating 5 10 - - - - 15
P2533 1200-1 Reservoir Interior & Exterior Coating 10 745 5 45 - - 805
P2534 978-1 Reservoir Interior & Exterior Coating 10 5 5 5 - - 25
P2535 458-2 Reservoir Interior & Exterior Coating & Upgrades 5 5 - - - - 10
P2539 South Bay Bus Rapid Transit (BRT) Utility Relocations 5 40 100 50 - - 195
P2542 850-3 Reservoir Interior Coating 5 5 - - - - 10
P2543 850-1 Reservoir Interior/Exterior Coating 5 695 125 5 40 - 870
P2544 850-2 Reservoir Interior/Exterior Coating 700 5 5 20 - - 730
P2545 980-1 Reservoir Interior Exterior Coating 5 5 - - - - 10
P2546 980-2 Reservoir Interior/Exterior Coating 1,100 340 5 5 - - 1,450
P2553 Heritage Road Bridge Replacement and Utility Relocation 50 100 100 250 755 150 1,405
P2555 Administration and Operations Parking Lot Improvements 265 215 - - - - 480
Six-Year CIP Projects by Source and Fund ($1,000s)
165
Replacement, Continued
CIP No CIP Project Title FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 Total
P2557 520 Res Recirculation Pipeline Chemical Supply and
Analyzer Feed Replacement Project
35 5 - - - - 40
P2559 Pressure Vessel Repair and Replacement Program 30 45 100 100 100 100 475
P2561 Res - 711-3 Reservoir Cover/Liner Replacement 1 10 84 1,690 10 - 1,795
P2562 Res - 571-1 Reservoir Cover/Liner Replacement 2,700 145 5 - - - 2,850
P2563 Res - 870-1 Reservoir Cover/Liner Replacement 1 5 10 90 892 - 998
P2565 803-2 Reservoir Interior/Exterior Coating & Upgrades - 20 820 5 5 90 940
P2566 520-2 Reservoir Interior/Exterior Coating & Upgrades - - 10 1,240 150 100 1,500
P2567 1004-2 Reservoir Interior/Exterior Coating & Upgrades - - - 20 780 105 905
P2568 Technology Business Processes Improvement - Enterprise
Content Management System
36 - - - - - 36
P2571 Datacenter Network- Data, Storage, and Infrastructure
Enhancements
- 100 100 - - - 200$
P2572 Enterprise Resource Planning (ERP) Replacement - - - 250 250 - 500
P2573 PL - 12-Inch Pipeline Replacement, 803 Zone, Hillsdale 1,600 610 - - - - 2,210
P2574 PL - 12-Inch Pipeline Replacement, 978 Zone, Vista Vereda 450 2,000 30 - - - 2,480
P2578 PS - 711-2 (PS 711-1 Replacement and Expansion) - 14,000
gpm
- - - 242 2,208 4,451 6,900
P2584 Res - 657-1 and 657-2 Reservoir Demolitions - - - - - 35 35
P2593 458-1 Reservoir Interior/Exterior Coating & Upgrades - - - 10 730 100 840
P2594 Large Meter Replacement 150 95 - - - - 245
P2604 AMR Change Out 1,510 1,745 1,475 1,095 1,290 1,190 8,305
P2605 458/340 PRS Replacement, 1571 Melrose Ave 1 50 189 10 - - 250
P2606 803-2 Reservoir Repair/Replacement of Caulking and Tree
Removal
1 55 19 - - - 75
P2607 Douglas Ave SWA and OWD Interconnection Upgrade 10 30 10 - - - 50
P2608 PL - 8-inch, 850 Zone, Coronado Ave, Chestnut/Apple 5 20 145 5 - - 175
P2609 PL - 8-inch, 1004 Zone, Eucalyptus St, Coronado/Date/La
Mesa
- 10 65 315 10 - 400
P2610 Valve Replacement Program - Phase 1 30 60 60 - - - 150
P2611 Quarry Road Bridge Replacement and Utility Relocation 5 10 60 425 450 50 1,000
P2612 PL - 12-inch, 711 Zone, Pas de Luz/Telegraph Canyon Rd 5 10 85 390 10 - 500
P2614 485-1 Reservoir Interior/Exterior Coating - - - - 10 885 895
P2615 PL - 12-Inch Pipeline Replacement, 803 PZ, Vista Grande - 20 130 1,030 20 - 1,200
P2616 PL - 12-Inch Pipeline Replacement, 978 Zone, Pence
Dr/Vista Sierra Dr
20 180 2,280 20 - - 2,500
P2617 Lobby Security Enhancements 75 - - - - - 75
P2620 Radio and Emergency Communication System 20 - - - - - 20
P2623 Central Area to Otay Mesa Interconnection Pipelines
Combination Air/Vacuum Valve Replacements
20 120 120 10 - - 270
R2121 Res - 944-1 Reservoir Cover/Liner Replacement 1 1 33 1,347 - - 1,382
R2139 RWCWRF - Filter Troughs Replacement 30 - - - - - 30
R2143 AMR Change Out 350 75 25 5 10 10 475
S2012 San Diego County Sanitation District Outfall and RSD Outfall
Replacement
20 200 250 300 350 400 1,520
S2024 (1)Campo Road Sewer Main Replacement 2,125 2,125 25 - - - 4,275
(1) Includes funds from the Clean Water State Revolving Fund
Six-Year CIP Projects by Source and Fund ($1,000s)
166
Replacement, Continued
CIP No CIP Project Title FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 Total
S2027 Rancho San Diego Pump Station Rehabilitation 5 5 5 444 - - 459
S2033 Sewer System Rehabilitation 10 10 - - - - 20
S2044 Trenchless Sewer Rehabilitation 75 5 - - - - 80
S2045 Fuerte Drive Sewer Relocation 50 130 - - - - 180
S2046 RWCWRF - Aeration Panels Replacement 50 100 200 - - - 350
S2048 Hillsdale Road Sewer Repairs 400 270 - - - - 670
S2049 Calavo Basin Sewer Rehabilitation - Phase 2 19 130 845 5 - - 999
S2050 Rancho San Diego Basin Sewer Rehabilitation - Phase 2 - - 20 180 550 500 1,250
S2051 RWCWRF - Headworks Improvements 50 100 - - - - 150
S2053 RWCWRF - Sedimentation Basins Weirs Replacement 60 - - - - - 60
S2054 Calavo Basin Sewer Rehabilitation - Phase 3 - - - 20 180 1,090 1,290
Total Replacement 17,107$ 22,312$ 11,362$ 12,708$ 12,569$ 9,719$ 85,775$
Potable 13,862$ 19,161$ 9,959$ 10,407$ 11,479$ 7,719$ 72,585$
Recylced 381 76 58 1,352 10 10 1,887
Sewer 2,864 3,075 1,345 949 1,080 1,990 11,303
Total Replacement 17,107$ 22,312$ 11,362$ 12,708$ 12,569$ 9,719$ 85,775$
New Supply
CIP No CIP Project Title FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 Total
P2451 Otay Mesa Desalination Conveyance and Disinfection
System
16 31 31 31 31 31 171
Total New Supply 16$ 31$ 31$ 31$ 31$ 31$ 171$
Potable 16$ 31$ 31$ 31$ 31$ 31$ 171$
Recylced - - - - - - -
Sewer - - - - - - -
Total New Supply 16$ 31$ 31$ 31$ 31$ 31$ 171$
Summary by Source
Funding Source FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 Total
Expansion 150 411 1,202 1,737 27 199 3,724$
Betterment (1)2,740 3,074 1,564 655 2,317 2,240 12,590
Replacement (1)17,107 22,312 11,362 12,708 12,569 9,719 85,775
New Supply 16 31 31 31 31 31 171
Total CIP by Funding Source 20,012$ 25,828$ 14,158$ 15,130$ 14,943$ 12,188$ 102,089$
Summary by Fund
Fund FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 Total
Potable 14,132 19,551 12,150 12,554 13,703 10,148 82,238$
Recycled 801 1,039 488 1,627 160 45 4,160$
Sewer * 5,079 5,238 1,520 949 1,080 1,995 15,861$
Total CIP by Fund 20,012$ 25,828$ 14,158$ 15,130$ 14,943$ 12,188$ 102,259$
(1) Includes funds from the Clean Water State Revolving Fund
Six-Year CIP Projects by Source and Fund ($1,000s)
167
CIP#Description Cost
Cat. (2)
Funding
Source (3)
FY
2018
FY
2019
FY
2020
FY
2021
FY
2022
FY
2023 Total
P2040 Res - 1655-1 Reservoir 0.5 MG M E $ - $ - $ - $ - $ 52 $ 52 $ 104
P2083 PS - 870-2 Pump Station
Replacement
M R - - - - 5,000 5,000 10,000
P2466 Regional Training Facility M B/E - 1,000 1,000 1,000 1,000 1,000 5,000
P2537 Operations Yard Property Acquisition
Improvements
M/E B - 725 750 776 800 800 3,851
P2547 District Administration Vehicle
Charging Stations
M/E B/E - 700 700 700 700 700 3,500
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
- 2,425 4,350 4,376 39,452 39,452 90,055
FY
2018
FY
2019
FY
2020
FY
2021
FY
2022
FY
2023 Total
- 1,200 3,100 3,101 18,152 18,152 43,705
- 1,225 1,250 1,275 11,300 11,300 26,350
- - - - 10,000 10,000 20,000
$ - $ 2,425 $ 4,350 $ 4,376 $ 39,452 $ 39,452 $ 90,055
(1)
(2)
(3)
Note:See pages 164-167 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 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.
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Quantity Amount
Vehicles
1 1/2 Ton Pickup for inspection services 39,000$
1 1/2 Ton Pickup for inspection services 40,000
1 Compact Pickup for meter maintenance 29,800
1 One ton cab and chassis for meter maintenance 49,500
1 3/4 Ton Pickup Truck for meter maintenance 48,200
1 1/2 Ton Pickup for water systems operators 39,000
1 1/2 Ton Pickup for water systems operators 39,000
1 1/2 Ton Pickup for water systems operators 39,000
1 1/2 Ton Pickup for water systems operators 39,000
Total vehicles 362,500
Field Equipment
1 Purchase a trailer and convert it to a water tanker trailer 12,000
1 Purchase of highline trailer 30,000
1 Purchase a trailer and convert to a water tanker trailer 30,000
Total field equipment 72,000
Total 434,500$
Summary by Project
P2282 Vehicles 362,500
P2286 Field equipment 72,000
Total 434,500$
FY 2018 Capital Purchases
Description
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.
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Summary of Financial Policies
Introduction
This section includes a brief synopsis of the District’s Reserve Policy, Investment Policy, and Debt
Policy.
The Reserve Policy is a comprehensive policy which explains how the District is operated,
including the distinction of business segments to ensure 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 February 1993. 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
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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 2017.
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 February 2017.
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1.0 The District
The Otay Water District is a California municipal water district,
authorized in 1956 by the State Legislature under the provisions of the Municipal Water District Act of 1911. The District is a
"revenue neutral" public agency; meaning each end user pays their fair share of the District's costs of water acquisition, construction of infrastructure, and the operation and maintenance
of the public water facilities.
The District provides water service within its boundaries, and provides sewer and recycled water service within certain portions of the District. As such, the District operates three distinct
business segments:
Potable water
Recycled water
Sewer
Each of these business segments has an identifiable customer base. In addition, the developer community, large and small, makes up a
significant class of customer for each business segment. As a result, the District has four distinct customer service types:
Developers
Potable water users
Recycled water users
Sewer users
The District has established practices and developed computer systems that have enabled the District to maintain a clear
separation between the service costs relating to each of its four customer service types. Regardless of customer class, financial principles regarding cost allocation and fund accounting are
fundamental to the District’s Reserve Policy. These principles are derived from the statements of the Governmental Accounting
Standards Board (GASB), and from oversight and advisory bodies such as the California State Auditor, the Little Hoover Commission, and the Government Finance Officers Association
(GFOA). These have significant impacts on how the finances of the District are organized and how financial processes work within
the organization.
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1.1 The District’s Use of Financial Resources
All of the District’s expenditures fall into two broad categories: operating costs and capital expenditures. The operating costs
include costs relating to the purchase and delivery of potable and recycled water, and the transportation and treatment of sewage. The capital expenditures support the construction of
infrastructure necessary to deliver services. The District uses various funds to support the operating and capital efforts.
Operations and maintenance is financed only by rates and charges, also called pay-as-you-go, while capital infrastructure is financed using two financing methods: pay-as-you-go and debt
issuance (requiring annual debt service). The Capital Improvement Program (CIP) and the two funding methods support the
construction, betterment, and replacement of infrastructure in all three business areas: potable, recycled, and sewer.
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
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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 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
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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,
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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.
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.
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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 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
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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.
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Force Majeure - unanticipated expenditures resulting from natural disasters or intentional acts.
Emergency Maintenance - unanticipated expenditures resulting from unexpected failure of assets (e.g., rupture in the
primary transmission system).
Unexpected Variation in Cash Flow - the incidence of
additional costs or decreased revenues that require short-term borrowing in the absence of sufficient financial
resources. The California State Auditor has, in its oversight role, offered a
number of quality recommendations for the development of reserve policies as outlined in its report entitled, “California’s
Independent Water Districts: Reserve Amounts Are Not Always Sufficiently Justified, and Some Expenses and Contract Decisions Are Questionable,” dated June 2004, Report No. 2003-137. All of
these recommendations have been incorporated into this policy in an effort to address key issues surrounding the management and use
of District reserves. The detailed objectives as identified by the State Auditor are as follows:
Distinguish between restricted and unrestricted reserves.
Establish distinct purposes for all reserves.
Set target levels, including minimums and maximums, for the
accumulation of reserves.
Identify the events or conditions that prompt the use of
reserves.
Conform to plans to acquire or build capital assets.
Receive Board approval and that it is in writing.
Require periodic review of reserve balances and rationale for maintaining them. Yet, the State Auditor’s report acknowledges that the California Constitution (Article XIII B, Section 5) is vague in its provisions governing the accumulation and use of reserves.1
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.
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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. 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).
2 California Constitution, Article XIII B, Section 5.
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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 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
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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
3 Code of Ordinances, Section 9.
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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.
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”
4 Code of Ordinances, Section 28
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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. 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.
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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.
DEVELOPERS
Diagram 2.0: Flow of Funds ‐Developer Sources
Unrestricted and
Undesignated
(General Use) Funds
Meter
Installation
Charges
Developer
Deposits
Restricted Funds
Annexation
Fees
Capacity
Fees
New Water
Supply Fees
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b. Monthly System Fees (General Use) This is a fixed revenue source that is charged monthly. The
amount of the charge is based on the meter size.
c. Energy Charges (General Use) The energy pumping fee is a charge per Unit of water for each 100 feet of lift, or fraction thereof, above the base
elevation of 450 feet. This charge is placed on the monthly water bills of all water customers.
d. Penalties (General Use) Penalties are added to the monthly water and sewer bills for
late charges, locks, etc.
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.
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2.2 County-Collected Taxes and Fees
a. General Levy Property Tax Receipts (1% Property Tax)
(General Use) In 1978, Proposition 13 limited the levy of ad valorem
property taxes on real property to one percent of the assessed value of such property. Subsequent legislation, AB 8, established that the receipts from the one percent levy
were to be distributed to taxing agencies proportionate to each agency’s general levy receipts prior to Proposition 13.
Taxes received are for general use. 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
CUSTOMERS / USERS
Diagram 2.1: Flow of Funds ‐Customer Sources
Unrestricted and
Undesignated
(General Use) Funds
Monthly
System Fees
Restricted Funds
Energy
Charges
Penalties
Pass –Through
Fixed Charges
2x Water
Rate
Special Rates
and Charges
Uniform Rates
and Charges
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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.
COUNTY COLLECTED TAXES AND FEES
Unrestricted and
Undesignated
(General Use)
Funds
General Levy
Property Tax
Receipts
Availability
Charges
Restricted Funds
General Obligation
Bond Assessments
Diagram 2.2: Flow of Funds – County Collection Sources
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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.
MISCELLANEOUS INCOME
Unrestricted and
Undesignated
(General Use) Funds
Miscellaneous
Rents and Leases
Sewer Billing
Fees
Restricted Funds
Interest Income or
Expense Allocation
Diagram 2.3: Flow of Funds –Miscellaneous Income Sources
Designated Funds
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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.
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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
DEBT PROCEEDS
Unrestricted and
Undesignated
(General Use) Funds
Loans General
Obligation Bonds
Restricted Funds
Certificates of
Participation
Diagram 2.4: Flow of Funds – Debt Issuance Sources
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fund is primarily used to finance the operations of the District; however, it can be used for any District purpose.
This fund can be used to supplement the District’s rates and charges and be a temporary source of revenue to balance the
Operating Budget. This fund can also be used to avoid spikes in the rates or significant and abrupt increases. It is an industry practice to have a fund that can be used to
stabilize rates. This would only occur if there was a temporary need for reserves that would smooth out a rate
spike or to ramp up what would otherwise be a dramatic rate increase.
The General Fund also plays a role in the debt planning of the District. This fund is viewed by the debt markets as a
commitment by the District to ensure financial stability of the rates and charges of the District. The District is anticipated to need a number of debt issuances over the years
and this fund will help the District not only to stabilize rate fluctuations but also to access low cost financing for
future projects. b. Sources Meter installation charges, temporary meter fees, uniform rates and charges, monthly system fees, energy charges,
penalties, pass-through fixed charges, general levy property tax receipts, 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).
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II. Maximum Level – The maximum reserve level for the
General Fund is nine months of operating budget
expenses. In the event that this fund exceeds the seven month level, the excess will be evaluated or
transferred to one or more of the designated funds. III. Target Level – The target level of reserves is
three months of operating budget expenses. In the event that the fund drops below the target level,
rate increases or fund transfers would be considered. 3.1 Designated Other Post Employment Benefits (OPEB) Fund
a. Purpose Designated Other Post Employment Benefits (OPEB) reserves are “general use” reserves that have been set apart by Board
action to finance the medical benefits of qualified retirees as outlined in the District’s benefits plan. This fund is
available to hold any Board designated OPEB funds. The District also has a trust at CalPERS and is restricted for the purpose of financing the OPEB liability. Money held in the CalPERS trust restricts the funds from any use other than OPEB. The two funds are considered jointly when looking at
target reserve levels. Every two years, actuarial study is performed to update the annual financing requirements. Changes in the actuarial valuation may result from changes in benefit levels, employee population, health insurance costs, or general market conditions.
b. Sources The OPEB liability may be financed by general use reserves coming from user rates and charges, either from an operating budget expenditure or from interfund transfers. Transfers of
unrestricted reserves may come from the various designated funds or from the General Fund. As a part of the normal
budget process, annual operating revenues have been sufficient to finance the ongoing needs of this designated fund. While debt financing is also an option, the District
has only used user rates and charges to finance this fund.
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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.
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c. Funding Levels I. Minimum Level – As the District matures the CIP
will move to purely replacement projects. As the District moves through its lifecycle the need for new water supply reserves will decrease and may be reduced to zero. II. Maximum Level – The maximum reserve level for the new water supply category of funds is limited to
five years of the unfinanced new water supply facilities as described in the District’s CIP Budget. To determine the unfinanced amount, the
total new water supply financing needs must be reduced by the projected new water supply revenues,
general fund designations, and bond financing. If the combined new water supply reserves exceed the target level, the District should consider
transferring designated reserves to meet other purposes, reduce the new water supply fee, or
change the timing of the new water supply projects. III. Target Level – In order to facilitate debt financing of the new water supply, it is important that the various new water supply funds retain an
overall reserve level of six months, prior to any attempt to obtain debt financing. This reserve level allows the District the time necessary to issue additional debt without depleting new water supply reserves. If the combined new water supply
reserve levels drop below six months of expenditures, this would trigger a transfer of general use reserves, a bond sale, or a change in the timing of new water supply projects. Bond proceeds would be placed in the Restricted New
Water Supply Debt Fund while transfers would be placed in the Designated New Water Supply Fund.
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3.3 Expansion Fund Category
a. Purpose The Expansion Fund category is to finance the expansion
portion of capital projects and therefore is to be paid for by developers. When considering the reserve levels of the expansion category, the following funds work in concert and
must be considered jointly: the Expansion Fund, Expansion Debt Fund, Capital Improvement Fund, and the Designated
Expansion Fund. Potable and recycled reserves are considered jointly while sewer is evaluated separately.
Restricted Funds
Unrestricted and
Undesignated Funding
Sources
Funding Source New Water
Supply Fees
Debt
Proceeds
Restricted Funds
Restricted Funds
Designated Funds
New Water
Supply Fund
Expansion
New Water
Supply Fund
Designated
New Water
Supply Fund
Debt Fund
General Fund –Rates and Charges
New Water
Supply Fund
Category
New Water
Supply
Debt Fund
Diagram 3.2: New Water Supply Fund Category
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b. Sources The Expansion Fund is financed by water charges in lieu of
capacity fees (for temporary meters) and the “incremental” portion of the capacity fee. The other funds in this
category may also be financed by debt proceeds, 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
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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.
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Unrestricted and
Undesignated Funding
Sources
Diagram 3.3: Expansion Fund Category
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
(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 into the
Capital Improvement Fund.
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3.4 Replacement Fund Category
a. Purpose The Replacement Fund category is to finance replacement
projects. When considering the reserve levels of the replacement category of funds, the following funds work in concert and must be considered jointly: the Debt
Fund, Capital Improvement Fund, and the Designated Replacement Fund. The purpose of these reserves is to
pay for the replacement of capital infrastructure and capital purchases. These reserves are not to be used for the replacement of non-capital items.
With the District’s development of its financial systems
and the greater need and ability to separate and track reserves, the replacement reserves have been separated into three funds: water, recycled, and sewer.
Projects undertaken solely for the purpose of replacing
major capital equipment or facilities, i.e., where the cost exceeds $10,000 for capital purchases or $20,000 for infrastructure items, generally these are not considered normal maintenance. When the cost is below $10,000, the costs are financed annually as operational
maintenance. As charges are incurred on replacement projects the reserves are deducted from the respective Replacement Funds on a monthly basis. b. Sources
The various funds in this category are financed by debt proceeds, 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
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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.
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(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
Funding Source
Unrestricted and
Undesignated Funding
Sources
Capacity
Fees (1)
Diagram 3.4: Replacement Fund Category
Restricted Funds
Restricted Funds
Designated Funds
Capital
Improvement Fund
Replacement
Debt Fund
Designated
Replacement
Fund
General Fund – Rates and Charges
Debt
Proceeds
Debt Fund
Restricted Funds
Replacement
Capital
Improvement
Fund
Replacement
Fund
Category
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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.
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.
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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.
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Fund
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.
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Diagram 3.6: Fund Targets
Fund or Fund
Category
Actions to Consider if
below Target Target Maximum
New Supply Fund
Category
New supply fee
increase, bond
financing, or transfer to
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.
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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. 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.
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c. Uses There are no minimums, maximums, or target levels for this
fund on an individual basis. This fund is available on an as needed basis to fund CIP projects for new water supply,
expansion, replacement, or betterment. From a funding level perspective, these reserves are evaluated in the context of all the various funds within each fund category. Fund Transfers
5.0 Funding Levels
As described in the preceding sections, the District maintains reserves for its operating and capital activities. These reserves
can be of three types: 1) undesignated or general use reserves, 2) designated, and 3) restricted for a specific purpose. The restricted reserves can be restricted geographically and/or by
purpose. The District maintains various funds to track the various designations and restrictions. The source of the money
for each fund was discussed along with the purpose, source of funds, and levels. Key characteristics of these funds are the target levels, minimums, and maximums. The funding levels must be viewed in the context of the economic environment, political environment, and in light of the District’s rate model. The
District’s six-year rate model not only shows the current balance but also shows the trend of the fund balances. Often the trend of the fund is a greater indicator of financial stability than is the current balance.
The rate model is updated each year with the budget process and evaluates each fund over the next six years. The rate model will take into account the general economic environment, looking at the development rate, supply rate increases, the possibility of raising rates, capital infrastructure spending, and strategic plan
initiatives. The fund balances may at times be over or under the target amount. This is not only acceptable but expected. The
rate model provides an empirical estimate of the conformance between the projected District’s financial activities and the guidelines of this policy.
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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
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District is first and foremost of the objectives of the District. On the other end of the spectrum, the Replacement Fund has a long-term perspective and will be used to partially finance replacement
assets for many years to come. Debt financing is available to respond to this long term, foreseeable, and planned cash flow.
This fund is less likely to have immediate needs and has other financing options.
When making the determination of when transfers are necessary, all funds within a fund category work as a group. The combined
balance of the restricted and designated funds is looked at when determining whether the fund category requires additional funding from the Restricted Capital Improvement Fund, Restricted 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.
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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. 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.
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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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1.0: POLICY
It is the policy of the Otay Water District to invest public funds in a manner which will provide maximum security with the best interest
return, while meeting the daily cash flow demands of the entity and conforming to all state statues governing the investment of public funds. 2.0: SCOPE
This investment policy applies to all financial assets of the Otay Water District. The District pools all cash for investment purposes. These funds are accounted for in the District’s audited Comprehensive Annual Financial Report (CAFR) and include:
2.1) General Fund
2.2) Capital Project Funds 2.2.1) Designated Expansion Fund 2.2.2) Restricted Expansion Fund
2.2.3) Designated Betterment Fund 2.2.4) Restricted Betterment Fund
2.2.5) Designated Replacement Fund 2.2.6) Restricted New Water Supply Fund 2.3) Other Post Employment Fund (OPEB)
2.4) Debt Reserve Fund
Exceptions to the pooling of funds do exist for tax-exempt debt proceeds, debt reserves and deferred compensation funds. Funds received from the sale of general obligation bonds, certificates of
participation or other tax-exempt financing vehicles are segregated from pooled investments and the investment of such funds are guided by
the legal documents that govern the terms of such debt issuances. 3.0: PRUDENCE Investments should be made with judgment and care, under current
prevailing circumstances, which persons of prudence, discretion and intelligence, exercise in the management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived.
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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.
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
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delegated to the Chief Financial Officer (CFO), who shall be responsible for all transactions undertaken and shall establish a system of controls to regulate the activities of subordinate officials and their procedures in the absence of the CFO.
The CFO shall establish written investment policy procedures for the operation of the investment program consistent with this policy. Such procedures shall include explicit delegation of authority to persons responsible for investment transactions. No person may engage in an
investment transaction except as provided under the terms of this policy and the procedures established by the CFO. 6.0: ETHICS AND CONFLICTS OF INTEREST
Officers and employees involved in the investment process shall refrain from personal business activity that could conflict with the
proper execution and management of the investment program, or that could impair their ability to make impartial investment decisions. Employees and investment officials shall disclose to the General
Manager any material financial interests in financial institutions with which they conduct business. They shall further disclose any
personal financial/investment positions that could be related to the performance of the investment portfolio. Employees and officers shall refrain from undertaking personal investment transactions with the
same individual with whom business is conducted on behalf of the District.
7.0: AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS
The Chief Financial Officer shall maintain a list of District selected financial institutions and security broker/dealers authorized and
approved to provide investment services in the State of California. Investment services include the buying or selling of permissible investments such as treasuries, government agencies, etc. for delivery to the custodian bank. 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:
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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 through 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.
8.03) Bonds, debentures, notes and other evidence of
indebtedness issued by any of the following government agency issuers:
Federal Home Loan Bank (FHLB)
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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 from the settlement date 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 from the settlement date 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.
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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. 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.
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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 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 settlement date
of the purchase. However, for time deposits with banks or savings and loan associations, investment maturities will not exceed two years.
Investments in commercial paper will be restricted to 270 days.
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14.0: INTERNAL CONTROL The Chief Financial Officer shall establish an annual process of
independent review by an external auditor. This review will provide internal control by assuring compliance with policies and procedures. 15.0: PERFORMANCE STANDARDS
The investment portfolio shall be designed with the objective of obtaining a rate of return throughout budgetary and economic cycles, commensurate with the investment risk constraints and the cash flow needs.
The Otay Water District’s investment strategy is passive. Given this strategy, the basis used by the CFO to determine whether market yields
are being achieved shall be the State of California Local Agency Investment Fund (LAIF) as a comparable benchmark. 16.0: REPORTING
The Chief Financial Officer shall provide the Board of Directors monthly investment reports which provide a clear picture of the status of the current investment portfolio. The management report should
include comments on the fixed income markets and economic conditions, discussions regarding restrictions on percentage of investment by
categories, possible changes in the portfolio structure going forward and thoughts on investment strategies. Schedules in the quarterly report should include the following:
A listing of individual securities held at the end of the
reporting period by authorized investment category.
Average life and final maturity of all investments listed.
Coupon, discount or earnings rate.
Par value, amortized book value, and market value.
Percentage of the portfolio represented by each investment category.
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17.0: INVESTMENT POLICY ADOPTION
The Otay Water District’s investment policy shall be adopted by resolution of the District’s Board of Directors. The policy shall be
reviewed annually by the Board and any modifications made thereto must be approved by the Board. 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.
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COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR): The official annual
report for the Otay Water District. It includes detailed financial information prepared in conformity with generally accepted accounting principles (GAAP). It also includes supporting schedules necessary to
demonstrate compliance with finance-related legal and contractual provisions, extensive introductory material, and a detailed statistical section. COUPON: (a) The annual rate of interest that a bond’s issuer promises
to pay the bondholder on the bond’s face value. (b) A certificate attached to a bond evidencing interest due on a set date. DEALER: A dealer, as opposed to a broker, acts as a principal in all
transactions, buying and selling for his own account. 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.
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FEDERAL CREDIT AGENCIES: Agencies of the Federal government set up to
supply credit to various classes of institutions and individuals, e.g., S&L’s, small business firms, students, farmers, farm cooperatives, and exporters.
FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC): A federal agency that
insures deposits in member banks and thrifts, currently up to $100,000 per deposit. FEDERAL FARM CREDIT BANK (FFCB): The Federal Farm Credit Bank system supports agricultural loans and issues securities and bonds in financial markets backed by these loans. It has consolidated the financing programs of several related farm credit agencies and corporations.
FEDERAL FUNDS RATE: The rate of interest at which Fed funds are
traded. This rate is currently pegged by the Federal Reserve through open-market operations. FEDERAL 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).
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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 REGULATORY 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.
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
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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
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various investment vehicles, such as stocks, bonds, and money market instruments. MONEY MARKET MUTUAL FUNDS: An open-end mutual fund which invests only
in money markets. These funds invest in short term (one day to one year) debt obligations such as Treasury bills, certificates of deposit, and commercial paper. 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.
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RANGE NOTE: An investment whose coupon payment varies and is dependent
on whether the current benchmark falls within a pre-determined range. RATE OF RETURN: The yield obtainable on a security based on its
purchase price or its current market price. This may be the amortized yield to maturity on a bond the current income return. REGIONAL DEALER: A securities broker/dealer, registered with the
Securities & Exchange Commission (SEC), who meets all of the licensing
requirements for buying and selling securities. REPURCHASE AGREEMENT (RP OR REPO): A holder of securities sells these securities to an investor with an agreement to repurchase them at a fixed price on a fixed date. The security “buyer” in effect lends the
“seller” money for the period of the agreement, and the terms of the agreement are structured to compensate him for this. Dealers use RP
extensively to finance their positions. Exception: When the Fed is said to be doing RP, it is lending money that is increasing bank reserves.
SAFEKEEPING: A service to customers rendered by banks for a fee
whereby securities and valuables of all types and descriptions are held in the bank’s vaults for protection. SECONDARY MARKET: A market made for the purchase and sale of
outstanding securities issues following their initial distribution.
SECURITIES & EXCHANGE COMMISSION: Agency created by Congress to
protect investors in securities transactions by administering
securities legislation. SEC RULE 15C3-1: See Uniform Net Capital Rule. STRUCTURED NOTES: Notes issued by Government Sponsored Enterprises (FHLB, FNMA, 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.
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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
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CIP Budget give the Board part of the data needed to make informed judgments concerning the possibility of issuing debt.
Funding Criteria
The Chief Financial Officer (CFO) will evaluate all capital project requests and develop a proposed funding plan. Priority may be given
to those projects that can be funded with current resources (annual cash flow, fund balances or reserves). Those projects that cannot be funded with current resources may be deferred or the CFO may recommend that they be funded with debt 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
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fund balances are available so project phasing can be accomplished. If this is not the case, the Chief Financial Officer may recommend that:
1. The project be deferred until funds are available, or
2. Based on the priority of the project, long-term debt is issued to
finance the project.
Debt Financed Projects
If a project or projects are to be financed with long-term debt, the District should use the following criteria to evaluate the suitability of the financing for the particular project or projects:
1. The life of the project or asset to be financed is 10 years or longer and its useful life is expected to exceed the term of the
financing.
2. Revenues available for debt service are deemed to be sufficient and reliable so that long-term financing can be marketed without
jeopardizing the credit rating of the District.
3. Market conditions present favorable interest rates and demand for
District financing.
4. The project is mandated by State and/or Federal requirements and current resources are insufficient or unavailable.
5. The project is immediately required to meet or relieve capacity needs and current resources are insufficient or unavailable.
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
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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.
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.
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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.
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7.0: COMPETITIVE AND NEGOTIATED SALE CRITERIA
Competitive Sale
The District will use a competitive bidding process in the sale of debt unless the nature of the issue or specific circumstances warrants a negotiated sale. The CFO will determine the best bid in a
competitive sale by calculating the true interest cost (TIC) of each bid.
Negotiated Sale
Types of debt that would typically lend themselves to the negotiated sale format are variable rate debt and unrated debt. Circumstances
that might warrant a negotiated sale may occur when the issue is of a limited size that would not attract wide-spread investor interest, during periods of high levels of issuance by other entities in the State, or during periods of market volatility 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
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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).
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.
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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.
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
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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
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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 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
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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 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;
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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
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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
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.
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14.0: INTERNAL CONTROL
The District has implemented the following procedure to ensure that the proceeds of the proposed debt issuance will be directed to the intended use:
1. A separate Reserve Account shall be maintained for the
proceeds of each bond to ensure that there is no comingling of funds.
2. All related expenditures charged against the bond proceeds shall be properly approved by the authorized authority.
3. All related transactions shall be fully documented so that
an undisputable audit trail exists.
4. All related transactions shall be tracked in the District’s
Accounting System. A financial report reflecting all charges related to the bond shall be prepared and maintained.
5. The District shall establish a retention policy which states
that all supporting documents related to bond proceeds spending shall be kept indefinitely.
6. The Reserve Account shall be reconciled on a monthly basis.
15.0: TYPES OF DEBT FINANCING
General Obligation Bonds
General obligation bonds are secured by a pledge of the ad-valorem taxing power of the issuer and are also known as a full faith and credit obligations. Bonds of this nature must serve a public purpose to be considered lawful taxation of the property owners within the District and require a two third’s majority vote in a general
election. The benefit of the improvements or assets constructed and acquired as a result of this type of bond must be generally available to all property owners.
The District can issue general obligation bonds up to but not in excess of 15% of the assessed valuation under Article XVI, Section 18
of the State constitution. An annual amount of the levy necessary to meet debt service requirements is calculated and placed on the tax
roll through the County of San Diego. The District also has a policy
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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.
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.
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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.
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
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months. Lease payments of this type are considered operating expenses and would reduce net operating income available to pay any District revenue bonds. There are no coverage requirements or rate covenants associated with lease/purchase agreements.
State Water Loans
The State Water Resources Control Board makes certain funds available to water districts throughout the State. These loans typically carry
a below-market rate of interest and are short term in nature. While State loans should be incorporated into the District’s debt portfolio for the financing of capital improvements, the payment of the loan
should not compromise the District’s ability to issue other planned debt or cause the District to violate its rate covenants or make it
necessary for the District to increase rates to maintain existing rate covenants.
Land Based Financing
The District may consider developer or property owner initiated applications requesting the formation of community facilities or
assessment districts and the issuance of bonds to finance eligible District facilities necessary to serve newly developing commercial, industrial and/or residential projects. Facilities will be financed
in accordance with the provisions of the Municipal Improvement Act of 1913 and the Improvement Bond Act of 1915, or the Mello-Roos Community
Facilities Act of 1982.
Typically, the bonds issued would be used to prepay, in a lump-sum, the District’s capacity fees with respect to a large tract of land
under development, or to finance in-tract infrastructure that will eventually be dedicated to the District. The bonds are secured by a
special tax or assessment to be levied on property within the boundaries established for the community facilities district (sometimes known as a “Mello-Roos” district) or the assessment
district. If the District becomes the sponsoring public agency for such financing district and the issuance of debt, the District will be
required to enter into a Funding, Construction and Acquisition agreement for any of the facilities to be dedicated to the District upon completion. This agreement governs the type of facilities to be constructed with bond proceeds and how the facilities will be accepted by the District.
In some cases, the District may not be asked to be the sponsoring agency for the formation of a financing district, rather, the
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developer or property owner may approach a school district or a city to be the sponsoring agency. Nonetheless, the property owner may want to include lump-sum payment of District fees in the financing or construction of certain facilities to be dedicated to the District upon completion. In this case, if the District desired to
participate, the District would enter into a Joint Financing Agreement with the sponsoring agency, again governing the type of facilities to be constructed with bond proceeds and how the facilities will be accepted by the District.
On a case-by-case basis, the Board shall make the determination as to
whether a proposed district will proceed under the provisions of the Assessment Acts or the Mello-Roos Community Facilities Act. The Board
may confer with other consultants and the applicant to learn of any unique district requirements, such as long-term development phasing, prior to making any final determination.
All District and District consultant costs incurred in the evaluation of new development, district applications and the establishment of
districts will be paid by the applicant(s) by advance deposits in those instances where a party or parties other than the District have initiated a proposed district. Expenses not legally reimbursable by
the financing district will be borne by the applicant. The District may incur expenses for analyzing proposed assessment or community
facilities districts where the District is the principal proponent of the formation or financing of the district.
Prior to the issuance of any land secured financing and in accordance
with State law, the Board will adopt policies and procedures with criteria to be met before any special tax bonds or assessment district
bonds may be issued. These criteria include the qualifications of the appraiser, the minimum value to lien ratio to be achieved prior to issuing the land secured debt and the maximum tax to be levied on different categories of property.
16.0: RATING AGENCY APPLICATIONS
The District may seek 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
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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.
17.0: USE OF CREDIT ENHANCEMENT
Credit enhancement is a generic term that means any third-party guarantee of debt service. Credit enhancement providers include municipal bond insurance companies or financial institutions. The
purchase of credit enhancement allows the District’s bond issue to carry the same credit rating as the credit provider. The District will
seek to use credit enhancement when such credit enhancement proves cost-effective. Selection of credit enhancement providers will be subject to a competitive bid process using the District’s purchasing
guidelines, 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
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“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.
18.0: 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 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.
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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).
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
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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.
Option: A derivative contract. There are two primary types of options (see Put Option and Call Option). An option is considered a
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wasting asset because it has a stipulated life to expiration and may expire worthless. Hence, the premium could be wasted.
Optional Redemption: The redemption of an obligation prior to its stated maturity, which can only occur on dates specified in the bond indenture.
Overlapping Debt: The legal boundaries of local governments often overlap. In some cases, one unit of government is located entirely
within the boundaries of another. Overlapping debt represents the proportionate share of debt that must be borne by one unit of government because another government with overlapping or underlying
taxing authority issued its own bonds.
Par Value: The face value or principal amount of a security.
Pay-as-you-go: To pay for capital improvements from current resources and fund balances rather than from debt proceeds.
Put Option: A contract that grants to the purchaser the right but not
the obligation to exercise.
Rate Covenant: A covenant between the District and bondholders, under
which the District agrees to maintain a certain level of net income compared to its debt payments, and covenants to increase rates if net income is not sufficient to meet such level.
Refunding: A procedure whereby an issuer refinances an outstanding
bond issue by issuing new bonds.
Revenue Bonds: A bond which is payable from a specific source of revenue and to which the full faith and credit of an issuer with taxing power is not pledged. Revenue bonds are payable from
identified sources of revenue, and do not permit the bondholders to compel a jurisdiction to pay debt service from any other source.
Pledged revenues often are derived from the operation of an enterprise. Generally, no voter approval is required prior to issuance.
Special Assessments: A charge imposed against property or parcel of
land that receives a special benefit by virtue of some public
improvement that is not, or cannot be enjoyed by the public at large. Special assessment debt issues are those that finance such improvements and are repaid by the assessments charged to the benefiting property owners.
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Swap: A customized financial transaction between two or more counterparties who agree to make periodic payments to one another. Swaps cover interest rate, equity, commodity and currency products. They can be simple floating for fixed exchanges or complex hybrid products with multiple option features.
True Interest Cost (TIC): A method of calculating the overall cost of a financing that takes into account the time value of money. The TIC
is the rate of interest that will discount all future payments so that the sum of their present value equals the issue proceeds.
Underwriter: The term used broadly in the municipal market, to refer
to the firm that purchases a securities offering from a governmental issuer.
Yield Curve: Refers to the graphical or tabular representation of interest rates across different maturities. The presentation often starts with the shortest term rates and extends towards longer
maturities. It reflects the market’s views about implied inflation/deflation, liquidity, economic and financial activity, and
other market forces.
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Glossary
The Fiscal Budget contains terminology that is unique to public finance and budgeting. The following
budget glossary provides assistance in understanding these terms.
ACCRUAL BASIS OF ACCOUNTING: The basis of accounting under which transactions are recognized
when they occur, regardless of the timing of cash receipts and disbursements.
ACRE-FOOT: The volume of water that will cover one acre to a depth of one foot. One acre-foot equals
435.6 units or 325,850 gallons.
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.
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.
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.
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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, marine equipment, computers, furniture,
technical instruments, etc. which have a life expectancy of more than two years and a value over
$10,000.
CAPITAL EXPENDITURE: Capital expenditure or capital expense ("capex") is an expense where the
benefit continues over a long period, rather than being exhausted in a short period. Such expenditure is
of a non-recurring nature and results in acquisition of permanent assets.
CAPITAL IMPROVEMENT PROGRAM: A long-range plan of the District for the construction,
rehabilitation and modernization of the District-owned and operated infrastructure.
CLASS OF SERVICE: All customers are classified based on the type of service used. For example, the
water rate per unit is determined by a classification such as residential versus business.
CWA: The County Water Authority was organized in 1944 under the State County Water Authority Act
for the primary purpose of importing Colorado River water to augment the local water supplies of the
Authority's member agencies. The Authority purchases water from 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.
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Glossary
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. 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.
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.
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.
259
Glossary
INTEREST INCOME: Earnings from the investment portfolio. Per District Policy Number 25, interest
income will be allocated to improvement districts each month based upon each fund’s prior month-
ending balance.
LATE CHARGES/PENALTIES: Charges and penalties are imposed on customer accounts for late
payments, returned payments, and other infringement of the District’s Code of Ordinances.
METER AND LATERAL FEES: Charge includes the material costs for the meter, meter box, and the
labor cost for installation to connect a new service to the distribution system.
METROPOLITAN WATER DISTRICT (MWD) STANDBY CHARGES: Revenue generated from property
taxes by MWD to cover the Readiness-to-Serve (RTS) Charge. This charge pays for the debt service for
construction projects necessary to meet reliability and quality needs. The RTS Charge was adopted in
1996.
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 charge are based on the size of the meter.
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.
260
Glossary
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.
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.
261
Glossary
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.
262
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
FY Fiscal Year
List of Acronyms
263
List of Acronyms
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
OWD Otay Water District
264
List of Acronyms
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
SPA Specific Plan Amendment
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
265
Index
Administrative Expenditures 73,88,97,117
Awards xiii-xvi
Balanced Scorecard Perspective 23
Budget Basis 8
Budget Calendar 11
Budget Guide 1-2
Budget Process 6-8
Budget Summary 39
Capital Budget Narrative 159-161
Capital Purchases FY2018 169
CIP Justification and Impact on Operating Budget 168
CIP Reserve Funds 162
Classification of Water Sales 64,80
Contract/Temporary Employees 116
Current Economic Conditions 18
Debt Management 56-57
Debt Policy 233-252
Debt Policy Glossary 252-256
Demographics 13
Department Budgets:
Administrative Services 131-138
Board of Directors 121-122
Engineering 151-156
Finance 139-144
General Expense 157
General Manager 125-130
Water Operations 145-150
Departmental Operating Budget Narrative 107-109
Director’s Division Boundaries 123
District Formation 4
Economic Outlook 18-20
Five-Year Forecast 53
Formula for Sewer Rates 99-100
Fund Balance Summary by Fund 49
Fund Balances Forecast 55
Fund Structure 9
Future, The 21
General Fund Forecast 54
General Fund Revenues, Expenditures and Transfers 48
General Expense 106
266
Index
General Revenues 105
General Revenues and Expenses Narrative 103-104
Glossary 257-262
Investment Policy 215-223
Investment Policy Glossary 224-231
Labor and Benefits 110
Labor and Benefits by Fund 111
Letter of Transmittal v-xii
List of Acronyms 263-265
Materials and Maintenance Expenditures 74,89,98,118
Meter Fees 69,84
Mission Statement, Vision, Key Challenges, Statement of Values 3
MWD and CWA Fixed Fees (pass-through) 68
Operating Budget Summary 63,79,92
Operating Budget Summary by System 47
Operating Budget Summary – General Fund 45-46
Operating Expenditures by Department 119
Operating Expenditures by Object 120
Organizational Structure 5
Position Count by Department 112-115
Potable Narrative 61-62
Power Costs 72,87,96
Projected Interest Payments by Debt Issuance 60
Projected Principal Payments by Debt Issuance 59
Recycled Narrative 77-78
Reserve Policy 173-211
Reserve Policy Glossary 212-214
Resolution 4336 xvii-xviii
Revenue History 70,85,95
Revenues and Expenditures by Fund 50-51
Revenues and Expenditures by Type 52
San Diego Rainfall 17
Schedule of Outstanding Debt 58
Service Area 4
Service Area Assessed Valuation Fees 13
Service Area Maps 75,90,101
Sewer Charges Summary by Service Class 93
Sewer Narrative 91
Sewer Rate Comparison 16
Six-Year CIP Projects Summary by Fund ($1,000s) 163
267
Index
Six-Year CIP Projects Summary by Source ($1,000s) 163
Six-Year CIP Projects by Source and Fund ($1,000s) 164-167
Statement of Values 3
Strategic Plan 23-38
Summary of Financial Policies 171-172
System Fees 67,83,94
Table of Contents i-iv
Ten Largest Customers 14
Ten Principal Taxpayers 14
Unit Sales History and Meter Count by Customer Class 66,82
Water Purchases - Recycled 86
Water Purchases and Related Costs - Potable 71
Water Rate Comparison- Member Agency Water Rates 15
Water Sales Summary by Meter Size 81
Water Sales Summary by Service Class 65
268