HomeMy WebLinkAboutOperating and Capital Budget FY 2018-2019
Otay Water District
Adopted Operating and Capital Budget
Fiscal Year 2018-2019
BOARD OF DIRECTORS
Tim Smith, Division 1 President
Mitch Thompson, Division 2 Vice President
Mark Robak, Division 5 Treasurer
Gary Croucher, Division 3
Hector Gastelum, Division 4
MANAGEMENT TEAM
Mark Watton General Manager
Joseph R. Beachem Chief Financial Officer
Kevin Koeppen Assistant Chief, Finance
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. 4345. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xvii
OVERVIEW
Budget Guide. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Mission Statement, Vision, Statement of Values. . . . . . . . . . . . . . . . . . . . . . . 3
District Formation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Service Area. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Organizational Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Budget Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Budget Basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Fund Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Budget Calendar. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Economic Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
The Future. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
STRATEGIC PLAN
Administrative Services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Water Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Engineering. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
FINANCIAL SUMMARIES
Budget Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Operating Budget Summary – General Fund . . . . . . . . . . . . . . . . . . . . . . . . 44
Operating Budget Summary by System . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
General Fund Revenues, Expenditures and Transfers . . . . . . . . . . . . . . . . . . . 47
Fund Balance Summary by Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Revenues and Expenditures by Type. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Revenues and Expenditures by Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
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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 Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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 Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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 Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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 FY2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 262
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 264
iv
September 28, 2018
Honorable Board of Directors
Otay Water District
I am pleased to present the Otay Water District’s Adopted Operating and Capital Budget for
Fiscal Year 2019. The budget supports the District’s updated FY 2019-2022 Strategic Plan
titled, “Growth and Sustainability,” as well as the financing of all of the District’s services,
programs, and capital needs during FY 2019. The success as an organization is significantly
enhanced by the policies and practices implemented by its Board and management to
ensure the stability, reliability, strength, and sustainability of the District. The management
team is fully confident that through sound financial management and streamlining of the
District’s operations, supported by the Strategic Plan and a dedicated and talented staff, the
District will achieve continued success as an organization and thus, ensure the well-being
and quality of life of its more than 225,000 customers. Our goal is to sustain the services we
provide, while at the same time, minimize rate impacts for our ratepayers.
Water-Use Efficiency and California State Mandates
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 late April 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 to provide sufficient water supplies to meet customer demands, assuring there
would be no supply shortfall during three additional dry years.
v
Building on efforts to make water conservation a way of life and to prepare the state better
for droughts and climate change, on May 31, 2018, Governor Brown signed two bills into
law – Senate Bill 606 and Assembly Bill 1668 – that establish permanent water-use
restrictions throughout California. The laws outline an overall framework to guide the
District and other urban water suppliers in setting water-use targets. Through the District
and its customers’ successful water-use efficiency efforts, an average of 7 percent was
saved over 2013 levels since June 2017. The District will continue to work with the San
Diego County Water Authority (CWA), other water agencies, and state officials over the next
several years to define how the new laws will be implemented, ensuring the regulations are
both equitable and reflect local conditions.
In addition to meeting customer demands during a drought, the District consistently
advocates for state policies and legislation that include supply development and water-use
efficiency. Subsequent to the passing of the Governor’s new legislation, the District worked
diligently with the CWA, the Association of California Water Agencies, and other water
agencies in the region to ensure that the Governor’s new legislation supported a balanced
approach and reflected local water supply investments and conditions.
Legislative Items
An important topic, not to be disregarded, is access to safe and affordable drinking
water. Although it has not passed, the legislature is working towards a public goods
charge or water tax. CWA, other water agencies, and the business community
oppose the water tax that would place an additional charge on the District’s
customers. The District supports the intent of the bill; however, the current proposals
would require significant administrative costs and be counterproductive to the
effort. In addition, there are other funding options available for this important social
issue and not a new tax on residential water users.
A legislative bill that passed during the 2018 legislative session and has a financial
impact on the District and its ratepayers is Senate Bill 998 (Dodd), a measure which
places limitations on water agency shutoff policies and procedures. The measure
increases the District’s service shut-off days for delinquent accounts from 45 days
to no less than 60 days, creates a cap on reconnection fees, and grants authority to
both the State Water Resources Control Board and the Attorney General to enforce
provisions of the bill.
vi
The District has been part of a coalition of interests to advance amendments
addressing retail water service agency concerns. The District is in the business of
delivering safe and reliable water and does not disconnect delinquent customers
without prior substantial engagement.
FY 2019 - 2022 Strategic Plan
Since its establishment, the District’s motto has been “Dedicated to Community Service.”
From modest beginnings in 1956 through today, the District stands committed to providing
outstanding service to the residents and businesses the District has the honor to serve. This
serves as a great reminder to our staff and customers as to why the District exists.
During the District’s early years, a key focus of its preceding strategic plans was to meet the
demands of growth. Today, the District’s four-year Strategic Plan still has the word “growth”
in its theme of “Growth and Sustainability,” but “sustainability” is a critical element in
managing long-term maintenance and replacement of infrastructure. Staff works diligently
to ensure its planning documents support the District’s water supply and sewer facilities
that serve its customers now and in the future. The four-year (fiscal years 2019-2022)
Strategic Plan aims to support the goals in our planning documents, which include the
Water Facilities Master Plan Update, Wastewater Management Plan, Urban Water
Management Plan, and other critical plans.
The District’s Strategic Plan also serves as a roadmap to execute its objectives and track
day-to-day performance metrics, which ensure deliverables are being met, and essential
work processes are continuously being fine-tuned. Through the use of the Balanced
Scorecard framework, management and staff share a focused strategy to ensure the
District is moving along the right path, and maximizing its limited resources.
This change is based on the recognition that as an organization evolves, fewer resources
may be 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 efficiencies within the agency,
including innovation and technology development.
vii
In effect, the District leverages its investments in technology to do more with the same or
fewer resources. With sound planning, prudent fiscal management, community focus, and
a work culture prepared to adapt to new challenges, the District is well positioned to support
its growing customer base, while sustaining the quality of water service our customers
expect.
From a water supply perspective, this means determining the optimal blend of water supply,
treatment, and delivery solutions for customers. From a daily operating perspective,
efficiency enhancements have become the principal source of competitive advantage and
cost optimization for utilities.
Finding ways to utilize technology, streamline operations and reduce external costs are
critical elements of the District’s ongoing commitment and dedication to its customers.
Savings generated through streamlining and reducing costs can be passed to our
ratepayers. For example, from 2017 to 2023 the District is upgrading or replacing more than
49,600 automated meter reading (AMR) meters originally installed between 2004 and 2012.
To be as cost efficient as possible the District is replacing the meter register instead of the
entire meter and, when applicable, taking advantage of existing warranties, saving the
District and its ratepayers approximately $3.3 million 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 are many benefits to
utilizing AMR meters, including the reduction of full-time meter reader staff members,
increased safety of staff members, and allowing staff to store historical water use data.
These advanced meters can assist customers and the District identify unexplained usage
by providing leak, tamper, and backflow detection alarms. The efforts related to meter
technology is only one example of cost savings and the District’s ongoing commitment to
pursue cost efficiencies.
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 through 2019, the District has reduced
staffing by 37.75 full-time equivalent positions, or 22 percent, while the number of customer
accounts increased by 3,453.
viii
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.
In an effort to reduce the District’s costs of retirement obligations, the District made an
advanced payment of $31.8 million to its CalPERS pension plan on August 15, 2018. This
strategic step significantly reduced the high financing cost of the unfunded liability at
CalPERS and brought the funding level up to 88%. This will save the District
approximately $16 million over the next 24 years. The District’s Other Post Employee
Benefit plan (OPEB) is similarly well funded at 83% and is expected to be fully funded in
fiscal year 2021.
Other cost savings include reducing the number of vehicles and equipment, reducing fuel
consumption, reducing pavement costs, and decreasing water loss through the successful
leak detection and repair program. Staff continues to seek out other operational efficiencies,
thus decreasing costs and minimizing rate impacts on the District’s 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 fourth lowest
water rate out of the 22 member agencies in San Diego County (based on the District’s
average water user who uses 13 units of water and has a ¾” residential meter size) and the
sixth lowest sewer rate out of the 28 sewer service providers in the County (based on 12.6
17
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.
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13
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13
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13
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52,615
56,068
51,500
52,000
52,500
53,000
53,500
54,000
54,500
55,000
55,500
56,000
56,500
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20
40
60
80
100
120
140
160
180
200
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
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ix
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
x
The District also collects and recycles wastewater from approximately 4,712 homes and
businesses. The District collects wastewater and delivers it to its Ralph W. Chapman Water
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.
Sewer Cost of Service Study
In January 2018, the District performed a Sewer Cost of Service study, which reviewed
sewer rates, fees, charges, costs, and the sewer usage structure and determined that
changes in rates, fees, and charges are necessary in order to recover revenues based on
the cost of servicing each class of customer. On October 3, 2018, the District will hold a
public hearing (Proposition 218) and the Cost of Service study’s changes to be considered
by the District’s Board of Directors. The District will also consider authorizing, for a period
of five years, passing through to customers’ increases or decreases in costs imposed by the
District’s sewer service providers and increasing rates by up to 10 percent for internal cost
increases. As a result of the adoption, the customer’s sewer rates, fees, and charges will be
adjusted annually for costs and charges from the District’s sewer service providers and
other cost increases. The pass-through costs include rates, fees, and charges for power
and from the District’s treatment and disposal providers. The providers include but are not
limited to San Diego Gas and Electric, the County of San Diego, and the City of San Diego.
The rates, fees, and charges will provide revenue that recovers all costs reasonably borne
in providing sewer service; are equitable to all customer classes; and are proportionate to
the cost of providing the service to each customer class.
Fiscal Year 2019 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 $107,991,100 for FY 2019. Revenues from
potable and recycled water are projected to be $96,359,500, approximately $9,460,100 more
than the FY 2018 budget. District staff expects potable water sales volumes to increase by
14.8% compared to FY 2018 budgeted potable sales. The District projects sewer revenues
to be $2,922,600, approximately $53,200 more than FY 2018. The remaining budgeted
revenues of $8.7 million come from various special fees, assessments, and miscellaneous
income.
xi
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.
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.
3.2% water rate increase budgeted for January 1, 2019 and a 7.0% rate decrease for
sewer, effective January 1, 2019.
Metro sewer costs includes the minimal impact of the City of San Diego’s Pure Water
Program costs.
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 2019-2024 CIP Budget contains
103 projects and totals $92.8 million. During the FY 2018 budget preparation, the District
anticipated borrowing $5.5 million from the Clean Water State Revolving Fund for the
Campo Road Sewer Replacement Project (S2024). With the limited availability of these
funds, the District has reconsidered the borrowing and plans to issue debt in FY 2020 to
fund the project.
The FY 2019 budget contains 105 projects and totals $24.2 million. The District categorizes
projects into three business segments (Potable Water, Recycled Water, and Sewer).
Funding for the FY 2019 Potable, Recycled, and Sewer projects are $18.9 million, $.8 million
and $4.5 million, respectively. CIPs are also categorized into four categories: expansion,
betterment, replacement, or new water supply. The following is a breakdown of the CIPs
into the four categories:
Expansion projects $ 78 thousand
Betterment projects $ 2,852 thousand
Replacement projects $ 21,306 thousand
New Supply projects $ 3 thousand
Awards and Acknowledgments
The Government Finance Officers Association of the United States and Canada
presented Otay Water District the Distinguished Budget Presentation Award for its
xii
annual budget for the fiscal year beginning July 1, 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.
The California Society of Municipal Finance Officers presented Otay Water District
the Certificate of Award for Excellence in Operating Budgeting for Fiscal Year 2017-
2018.
The California Society of Municipal Finance Officers presented Otay Water District
the Certificate of Award for Excellence in Capital Budgeting for Fiscal Year 2017-2018.
The Government Finance Officers Association Officers presented Otay Water District
the Certificate of Excellence in Financial Reporting for its Comprehensive Annual
Financial Report for the Fiscal Year ended June 30, 2017.
Conclusion
The challenges presented this year are being 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.
Reserves will all be maintained above target levels as will the District’s Debt coverage level.
The Board of Directors, management team, and the employees are all committed to
efficiency in both the operations of the District as well as in its capital development. With
these efficiencies and the ongoing investment in new technologies the District has a
competitive edge in providing quality service.
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
xiii
Distinguished Budget Presentation Award
The Government Finance Officers Association presented a Distinguished Budget
Presentation Award to the District for its annual budget for the fiscal year 2017-2018. 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.
xiv
Financial Awards
The California Society of
Municipal Finance Officers
presented Otay Water
District the Operating
Budget Excellence Award
for Fiscal Year 2017-2018.
The California Society
of Municipal Finance
Officers presented
Otay Water District the
Capital Budgeting
Excellence Award for
Fiscal Year 2017-2018.
xv
Financial Awards
The Government Finance Officers Association Officers
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, 2017.
xvi
Award
The Municipal Information Systems Association of
California presented the Otay Water District with the
Quality Information Technology Practices Award for
2017.
xvii
RESOLUTION NO. 4345
A RESOLUTION OF THE BOARD OF DIRECTORS OF
OTAY WATER DISTRICT ADOPTING THE
FISCAL YEAR 2018-2019
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 2018-2019; and
WHEREAS, the Fiscal Year 2018-2019 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 2018-2019.
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
xviii
xix
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xx
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, 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 2019-2022) is a continuation of the 2015-2018 plan, and is the
5th multi-year plan. Included in this section are the District’s perspectives, goals, key performance
indicators, measurement methods, targets for each department, and the historical results of each
key performance indicator.
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,
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. The District also publishes a Six-Year Capital Improvement Program
Budget as a separate document that provides more detail of each project (budget amount,
description, justification, comments, fund details, expenditure schedule, operating budget impact,
and a map of the project location). The FY 2019-2024 Six-Year Capital Budget is available on our
website at the otaywater.gov/otay/cip.
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 exceptional water and wastewater service to its customers, and to manage District
resources in a transparent and fiscally responsible manner.
Vision
To be a model water agency by providing stellar service, achieving measurable results, and
continuously improving operational practices.
Statement of Values
As Otay Water District employees we dedicate ourselves to:
Customers:
We take pride that our commitment to customer-centered service is our highest priority.
Excellence:
We strive to provide the highest quality and value in all that we do.
Integrity:
We commit ourselves to doing the right thing. Ethical behavior, trustworthiness, and accountability
are the District’s foundation.
Employees:
We see each individual as unique and important. We value diversity and open communication to
promote fairness, dignity, and respect.
Teamwork:
We promote mutual trust by sharing information, knowledge, and ideas to reach our common goals.
Innovation:
We constantly seek better, more efficient, and cost effective ways to deliver our services.
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 percent of its treated
water. Of that, about 85 percent 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 (5)
Safety and
Security
Administration
Purchasing
and Facilities
Controller and
Budgetary
Services
Treasury and
Accounting
Services
Customer
Service
Meter
Services
Water System
Operations
Utility
Maintenance/
Construction
Water Resources,
Planning, Design
and
Environmental
Administrative
Services
(23)
Human
Resources
Information
Technology
and Strategic
Planning
Finance
(31)
Geographic
Information
System
Public Services
and
Field Services
Engineering
(26)
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 1.2%.
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 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 preliminary personnel changes. Departments
enter their budget requests in the budget module and provide their year-end projections to the
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
Budget Calendar (continued)
February (continued)
Senior Accountant. Explanations of variances from the current year’s budget versus the current year
projected expenditures and explanations of the 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 finalizes new personnel requests,
reclassifications, and change requests with the General Manager and provides it to Finance for
budgeting. 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 provides the Chiefs and General Manager preliminary budget schedules for the review 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 (continued)
July
Changes in water rates, fees, and charges, effective January 1, 2019, are included as inserts for the
following customers classes: residential, multi-residential, recycled, irrigation, and commercial
agricultural water, and business and publicly-owned.
For sewer customers, notices of the public hearing (Proposition 218 hearing) to be held on October
3, 2018 are included as inserts for the following customer classes: residential, and commercial. To
ensure that the public hearing noticing requirements are met, the District also provides the notices
to the record owner in a separate mailing.
October
On October 3, 2018, a public hearing (Proposition 218 Hearing) on sewer rates, fees, and charges
will be held in the Board of Directors Meeting Room, 2554 Sweetwater Springs Blvd., Spring Valley,
California, 91978. The purpose of the hearing is to consider all protests against the proposed rates,
fees, and charges that, if approved, will be imposed on properties serviced by the District.
January 2019
Water and sewer rates, fees, and charges are effective January 1, 2019.
11
Overview
Budget Calendar
December/January February March-April May-June July-January 2019
12/12/17
Budget instructions
for the Operating and
Capital Budget are
distributed to
departments
1/8/18
Budget workbooks
for the Operating and
Capital Budget are
distributed to
departments
1/19/18
Project managers
submit CIP Budgets
for New Projects and
changes to existing
Projects in CIP
Budget Application
2/5/18
Finance initial review of
CIP Budget with Chief of
Engineering including year
over year explanations
2/9/18
Chiefs submit request for
new personnel, personnel
reclassification changes,
advancements, and long-
term staffing to HR
2/20/18
Finance to have second
review and finalize the CIP
Budget with Engineering
including year over year
explanations
2/22/18
Chiefs to submit Operating
and Admin Budget; Capital
Purchases and
justifications; Labor Budget
Worksheet
2/23/18
HR to complete
preliminary review of new
personnel, personnel
reclassification changes,
requests, and
advancements
3/1-6/18
Finance to review
Operating Budget and
reconciliation with
departments
3/7/18
HR to review new
personnel,
reclassifications and
change requests with
General Manager
3/21/18
Finance to review
Department Operating
Budgets and personnel
cost with Chiefs and
General Manager
4/5/18
Chiefs submit Position
Analysis Questionnaire to
HR for GM approval
Personnel requests and
request for
reclassifications
5/7/18
Review assumptions
and rates with Chiefs
and General
Manager
5/10/18
Hard copy of
preliminary Budget to
Assistant Chiefs,
Chiefs, and General
Manager for review
5/14/18
FY 2019 Budget
Practice Run-through
5/21/18
Board
Meeting/Board
Workshop – approval
of the FY 2018-2019
Operating and
Capital Budget and
FY 2019-2024 Capital
Improvement
Program Budget
07/17/18-08/15/18
Water rate increase
notice inserted with
water billing.
Proposition 218
Hearing notice
inserted with sewer
billing and mailed
separately to record
owners.
10/03/18
Proposition 218
Hearing on sewer
rates, fees and
charges.
1/01/19
The 2019 water and
sewer rates, fees, and
charges are applied
to customer’s
monthly billing.
12
Community Profile
Demographics
The City of Chula Vista is the second largest city in the San Diego metropolitan area and most of the
City east of the I-805 freeway is within the District’s service area. The following reflects the
demographics of the City of Chula Vista:
Demographics
Population – City of Chula Vista 267,503
Otay Water District population served 225,000
Persons/Household 3.3
Ethnic/Racial makeup (City of Chula Vista)
Hispanic 56%
Non-Hispanic White 22%
Asian 13%
Other 9%
Median Age 34.2
Percentage with 4 year degree or higher 29.8%
Source: San Diego Association of Governments, Current Estimates and
United States Census Bureau
Service Area Assessed Valuation
The District’s service area encompasses property with over $29.4 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.
23 23 25 26 28 29
$0
$5
$10
$15
$20
$25
$30
$35
FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018
Bi
l
l
i
o
n
s
13
Community Profile
Ten Principal taxpayers as of June 30, 2018
Organization Assessed Percent
Value to Total
1. Villa Marina Del LLC/Heatherwood Del LLC/Rancho Investors LP $ 60,344,000 0.55%
2. John Hancock Life Insurance Co USA 146,864,856 0.50%
3. GGP-Otay Ranch LP 125,287,700 0.43%
4. Corrections Corporation of America 123,162,238 0.402%
5. Regulo Place Apartments Investors LLC 113,174,995 0.39%
6. Homefed Otay Land II LLC 106,210,960 0.36%
7. Brisa Acquisitions LLC 102,06,221 0.35%
8. N M Pulse LLC 95,114,480 0.32%
9. Vista Pacific Villas LP/Sunbow Partners LP 94,910,091 0.32%
10. BRE-FM CA LLC 78,926,030 0.27%
Total Top 10 Principal Taxpayers $1,145,201,571 3.9%
Total Service Area Assessed Valuation $29,387,363,297
Ten Largest Customers – Fiscal Year 2018
Customer Customer Annual % of Water
Name Type Revenues Sales
1. City of Chula Vista Publicly Owned 4,220,009 4.6%
2. Eastlake III Community Commercial 1,230,790 1.3%
3. State of California Publicly Owned 1,127,462 1.2%
4. County of San Diego Publicly Owned 981,647 1.1%
5. Sweetwater Union High School District Publicly Owned 853,335 0.9%
6. Chula Vista Elementary School District Publicly Owned 817,826 0.9%
7. Homefed Otay Land II, LLC Construction 684,441 0.7%
8. Eastlake Country Club Commercial 569,602 0.6%
9. Windingwalk Master Association Commercial 438,215 0.5%
10. Eastlake I HOA Commercial 426,266 0.5%
Total 10 Largest Customers $ 11,352,593 12.3%
Total District Customers $ 92,595,195
Source: County of San Diego, Property Tax Services
14
Community Profile
Water Rate Comparison, Member Agency Water Rates
The District strives to remain cost effective in its rate setting by controlling operating costs, yet
passing through the full cost of supply. In September 2018, the District conducted a survey of the
water rates of the water providers within San Diego County. The following chart shows that the
District has the 4th lowest water rate in the region.
Projected Water Bill for FY 2019
Based on 12 Units of water used and ¾" meter size
* At the time of the survey September 2018, the member agency's FY 2019 rate was unavailable. The
estimated increase is equal to the District's FY 2019 average rate increase.
131.32
119.56
117.00
115.24
113.06
111.85
111.16
108.08
98.60
97.87
96.79
92.92
92.30
89.88
89.88
88.88
86.83
85.54
84.25
78.83
76.30
67.41
$0 $20 $40 $60 $80 $100 $120 $140
*Padre Dam
Ramona
Fallbrook
*Rainbow
Yuima
Valley Center
Rincon
Escondido
Vista
Del Mar
San Diego
Olivenhain
Helix
Vallecitos
Sweetwater
*Poway
Carlsbad
Oceanside
Otay Water District
*Santa Fe
*San Dieguito
Lakeside*
15
Community Profile
Sewer Rate Comparison
The District conducted a survey of the rates of the sewer providers within San Diego County. Sewer
rates are billed at either a fixed or variable rate. The following chart shows the various sewer
providers and the type of rate that is charged to the consumers. The District is the 6th lowest sewer
rates in the County of San Diego.
120.35
91.09
90.55
82.84
81.75
79.17
78.55
68.53
66.56
65.81
65.47
64.53
63.54
62.91
62.82
61.95
56.45
56.17
54.12
53.90
50.15
48.75
43.51
38.99
35.23
34.21
28.84
28.64
$- $20 $40 $60 $80 $100 $120 $140
Del Mar
Fallbrook
Encinitas
Oceanside
Padre Dam
Rancho Santa Fe
Olivenhain
*Rainbow
Escondido
Ramona
Imperial Beach
*El Cajon
Chula Vista
*San Diego, City
La Mesa
Buena
Valley Center - MG
Vista
Solana Beach
*Poway
Lemon Grove
Coronado, City
Otay Water District
Vallecitos
National City
San Diego, County
*Carlsbad
Leucadia
Projected Sewer Bill for FY 2019
Based on 12.6 Units of water used and ¾" residential meter size
* At the time of the survey September 2018, the member agency's FY 2019 rate was unavailable. The
estimated increase is equal to the District's FY 2019 average rate increase.
16
Community Profile
San Diego Rainfall
San Diego received below average rainfall in FY 2018. The 10-year average of 8.72 inches for San
Diego rainfall reflects the long-term drought conditions for our area. San Diego's rainfall average
over 20 years is 8.32 inches; the 30-year average is 9.33 inches; and the 40-year average is 10.03
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.
Current Economic Conditions
San Diego County Water Supply
A safe, reliable water supply is crucial for the vitality of the San Diego region’s $220 billion economy
and quality of life for 3.3 million residents, including the Otay Water District’s more than 225,000
customers it serves. San Diego County imports approximately 80 percent 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.
9.17 11.01 12.66
8.03 6.48 5.74 7.68 10.38
12.97
3.08
0
5
10
15
20
25
30
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
In
c
h
e
s
San Diego Rainfall
Fiscal Years 2009 - 2018
Annual Rainfall 10 year average
Source: Western Regional Climate Center
17
Community Profile
Desalinated Water Supply
In December 2015, the Claude “Bud” Lewis Carlsbad Desalination Plant began producing
approximately 50 million gallons of water per day to the CWA, enough to serve approximately
400,000 people, meeting 7 to 10 percent of the region’s demand. Since the production of
desalinated water from the Carlsbad plant, the District’s customers have received a portion of this
highly reliable, drought-proof water supply. The amount of desalinated water that the District’s
customers receive fluctuates daily based on a variety of factors including the CWA’s potable water
demands.
Economic Outlook
At the start of each budget cycle, the District enters into a contract with an economist to complete
an economic and demographic analysis of the national and local economy. The study also provides
information on the changes in population, residential and commercial development within the
District service area. The following highlights the report:
The U.S. population growth is approximately 2.0-2.5 million annually and is projected to
continue at the same pace.
The U.S. unemployment rate, as of March 2018, was 4.0 percent nationally and is projected
to remain in the 4.0-4.5 percent range.
Since 2012, the residential recovery has experienced higher demand for both single-family
and multi-family production. It is projected that the calendar year 2018 will outpace calendar
year 2017.
The average single-family home price in California was $549,800, an increase of 25.3 percent
since 2013.
San Diego’s population is projected to reach 3.8 million by the year 2035.
The median age in San Diego County is 38.5.
San Diego County has averaged 33,720 new civilian jobs annually. As a result, the civilian
unemployment rate is below 4.0 percent. If the statistics include the military, the
unemployment rate would be lower.
San Diego County’s housing market will have a substantial increase in single-family and
multi-family production.
The median price of a detached home in San Diego County is $612,750
Chula Vista is the largest city in the south county and the District Area encompasses most of
the City east of the I-805. In the 2010-2017 period, the annual population increase was 3,619.
In eastern Chula Vista, the single-family homes range in price from $549,373-$628,899 and
the multi-family homes range in price from $389,810-$453,591.
Future Development
Using the economist’s report, the District’s engineering staff projects that over the next six years the
District will sell another 3,630 meters which translates to 4,544 equivalent dwelling units (EDUs).
These projections have been incorporated in the Five-Year Forecast on page 53.
18
Community Profile
Residential Construction
The following table summarizes the projected units for sale and units for rent from fiscal year 2019
through fiscal year 2024. It is anticipated that most of the development in the District will be in East
Chula Vista (Otay Ranch). There is a large development in apartments and townhomes to appeal to
the young families.
Projected Units for Sale and Rental
Otay Water District Service Area
FY 2019 through FY 2024
Project 2019 2020 2021 2022 2023 2024 Total
Total Single-Family Units 700 600 600 600 500 500 3,500
Total Multi-Family Units 1,300 1,200 1,000 800 600 600 5,500
For Sale 520 480 400 320 240 240 2,200
Rental 780 720 600 480 360 360 3,300
% Sale 40% 40% 40% 40% 40% 40% 40%
% Rental 60% 60% 60% 60% 60% 60% 60%
Total Units 2,000 1,800 1,600 1,400 1,300 1,300 9,400
% Multi-Family 65% 67% 63% 57% 46% 46% 59%
Source: The Expera Group, March 2018
Commercial Construction
Commercial construction in the District is projected to be modest during the next six years with
1,796,000 square feet of commercial development in the planning stages and under construction.
Industrial space has the most leasable space with an estimated 1,200,000 square feet, of which
200,000 square feet is currently under construction. There are also 600 total hotel rooms in five
planned hotel projects with 100 rooms that are currently under construction.
Projected Meter Sales in Equivalent Dwelling Unit (EDUs)
92
5
93
2
78
2
75
2
57
8
57
8
0
200
400
600
800
1,000
FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024
19
Community Profile
Under Construction and Planned Commercial Development
Expected
Delivery Year
Industrial
(S.F.)
Office
(S.F.)
Retail
(S.F.)
Total
(S.F.)
Hotels
(Rooms)
2019 200,000 10,000 131,000 341,000 100
2020 200,000 10,000 25,000 235,000 100
2021 200,000 10,000 25,000 235,000 100
2022 200,000 10,000 25,000 235,000 100
2023 200,000 150,000 25,000 375,000 100
2024 200,000 150,000 25,000 375,000 100
TOTAL 1,200,00 340,000 256,000 1,796,000 600
Source: The Expera Group March 2018
Miscellaneous Development
The City of Chula Vista has two major upcoming projects that are located in the District’s service
area: University Village and Sunroad East Otay Mesa Business Park (Sunroad Project). The Sunroad
project is currently planned for a combination of 3,100 multi-family units and 850,000 square feet of
commercial space. University Village is proposed campus of St. Katherine University which is
currently based in San Marcos. The land is also planned for a total of 1,597 residential units and 29.3
acres of industrial space.
Proposed Miscellaneous Development Activity
Chula Vista/Otay Mesa
Property Location Type Acres Est Date of
Completion
Sunroad East Otay
Mesa Business
Park
125 & Otay
Mesa Road
Mixed use, including 3100
housing units, 850 sf
commercial space
253 N/A
University Village N/A University, 1,597 Residential
Units
1,281 N/A
Source: The Expera Group March 2018
20
Community Profile
The Future
Capital Improvement Program
The District provides water and sewer service to a population of more than 225,000 customers,
including residential, business, government, industrial, and agricultural water users across urban,
suburban, and rural areas. The District’s service area population is projected to grow by 37 percent
to 308,000 residents by 2050. To ensure a reliable water supply and sewer system for the future
including sustaining the current infrastructure, the District has developed a number of future planning
documents, which provide a guide to defining the District’s proposed projects. These planning
documents include: the District’s 2015 Water Facilities Master Plan Update, Wastewater
Management Plan, 2015 Urban Water Management Plan, 2015 Integrated Water Resources Plan,
and 2018-2022 Strategic Plan.
The major projects planned for delivery over the next six fiscal years include:
• 870-2 Pump Station Replacement
• Campo Road Sewer Replacement
• 711-2 Pump Station Replacement
• Reservoir Improvements (including interior and exterior coatings to maximize the life of
facilities)
• Automated Meter Reading Infrastructure Replacement
• Sewer Basin Improvements
• Waterline Replacements
Rosarito Desalination and the Otay Mesa Conveyance and Disinfection System Projects
The Otay Water District continues its commitment to conserve and recycle water and to diversify the
water resources that serve its customers, thus reducing dependence on traditional water supplies
from the Colorado River and the Sacramento-San Joaquin Delta.
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. In May 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 authorized 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.”
Although purchasing and transporting water from Aguas de Rosarito’s desalination plant in Rosarito,
Baja California, Mexico, has been a component of the District’s water supply diversification efforts,
21
Community Profile
the project for the District has been halted. The District is interested in diversifying its water supplies
by purchasing potential excess desalinated ocean water from a future Rosarito desalination plant,
after the project has first satisfied and secured the water needs of its Mexican consumers in northern
Baja California.
The District has permitted a cross-border pipeline and has applied for water quality permits from
California regulators so that its customers will have the option of securing safe and cost-effective
water from a future Rosarito desalination plant after the plant has met the water needs of its Mexican
customers.
If the project does move forward, the District’s project has already 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
requires 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
The District fully understands and respects Baja California’s sovereign decision to either approve or
not approve the project. This interest has been discussed openly and transparently at the District’s
public Board meetings, as has its continued commitment to water conservation, recycling,
diversification, and reducing the District’s reliance on the Colorado River for the future benefit of our
water customers.
If the project advances, San Diego County and the District’s cross-border region would add
desalinated water to the long list of energy, aerospace, medical device, and electronics products that
cross the border every day.
22
Strategic Plan
Strategic Planning Process
The District’s strategic planning process is designed to provide clarity, direction, and focus for its
water service and to ensure the agency is working toward a common goal. The primary purpose
of the Strategic Plan is to ensure alignment of the District’s mission, vision, values, and plan
execution. Lastly, the Strategic Plan helps the District manage its day-to-day operations and services,
and reduce business risk.
The District’s Strategic Plan is developed using the Balanced Scorecard framework. Using this
framework, the District’s Strategic Plan is centered on four perspectives: customer, financial,
internal business process, and learning and growth. The key to this planning framework is that
these perspectives are not developed in isolation of each other, but as a unified set of strategies
and objectives. This unified approach is clearly understood throughout the District and by its
governing Board.
Each of the four perspectives is explained below:
Customer: Focuses on performance related to customer service levels, satisfaction, brand, and
confidence.
Financial: Focuses on the financial performance of the a gency.
Internal Business Process: Focuses on business processes designed to deliver and improve
customer objectives and services.
Learning and Growth: Focuses on the agency’s culture and development of staff to ensure there
is a productive and skilled workforce in place.
In addition, the District uses the American Water Works Association’s (AWWA) utility benchmarking
performance indicators to monitor, track, and improve day-to-day essential tasks and services,
which are collected on a quarterly schedule. Execution of strategic objectives and industry-
based performance indicators are presented bi-annually to the public and Board.
The District’s strategic planning process is a continuation of the 2015-2018 plan, and this plan is
the 5th multi-year plan. Led by the General Manager and management team, strategic sessions
were held to review risks, opportunities, and develop short and long-term goals. The team carefully
examined and prioritized operational and service goals ranging from enhancing customer
engagement to pension liability. In a special workshop held in December 2017, the District’s Board,
along with an outside consultant, reviewed and provided feedback on the proposed 2019-2022
Strategic Plan and set in motion via the General Manager, the direction to prepare, finalize,
and kick-off the District’s new four-year plan. The complete 2019-2022 Strategic Plan is
located on our website. The following pages reflect the District’s perspectives, goals, key
performance indicators, measurement methods, and targets for each department:
23
Key Performance Indicators: Administrative Services
Performance
Indicator Target
Enterprise
System
Availability
No less than 99.5%
availability per quarter
annually
FY 2017 FY 2018 FY 2019 (1)
Target 99.5% 99.5% 99.5%
Actual 99.5% 99.5% 99.5% (2)
Performance
Indicator Target
Employee
Voluntary
Turnover Rate
Less than 5%
turnover annually
FY 2017 FY 2018 FY 2019 (1)
Target 5.0% 5.0% 5.0%
Actual 0.7% 0.0% 0% (2)
Performance
Indicator Target
Training Hours
per Employee
12 hours or more per
employee annually
FY 2017 FY 2018 FY 2019 (1)
Target 12.0 12.0 12.0
Actual 22.9 12.0 12.0 (2)
(1) FY 2019 is the first year of the FY 2019-2022 Strategic Plan
(2) FY 2019 projected performance indicator
Le
a
r
n
i
n
g
a
n
d
G
r
o
w
t
h
Goal Measurement
Method
Provide hands-on leadership, support,
and empowerment of staff, in order to
maintain an accountable high-performing
workforce.
Number of voluntary
resignations (not
including retirements)
/Average number of
employees
Le
a
r
n
i
n
g
a
n
d
G
r
o
w
t
h
Goal Measurement
Method
Provide hands-on leadership, support,
and empowerment of staff, in order to
maintain an accountable high-performing
workforce.
Total qualified training
hours for all
employees/ Average
number of full time
employees (FTE)
Strategic Plan
In
t
e
r
n
a
l
Bu
s
i
n
e
s
s
Pr
o
c
e
s
s
e
s
Goal Measurement
Method
Improve business services by continually
improving essential processes, invest in
strategic technology, and achieve new
efficiencies.
99.5% = 3.60 hours of
downtime per
month/1.83 days of
downtime in a year
24
Key Performance Indicators: Administrative Services (continued)
Performance
Indicator Target
Safety
Training
Program
24 hours or more per
field employee
annually
FY 2017 FY 2018 FY 2019 (1)
Target 24.0 24.0 24.0
Actual 30.8 24.0 24.0 (2)
Performance
Indicator Target
Injury Incident
Rate
No more than 6.8
incidents per 200,000
hours worked
annually
FY 2017 FY 2018 FY 2019 (1)
Target 6.6 6.6 6.8
Actual 4.9 6.6 6.8 (2)
(1) FY 2019 is the first year of the FY 2019-2022 Strategic Plan
(2) FY 2019 projected performance indicator
Fi
n
a
n
c
i
a
l
Goal Measurement
Method
Plan and execute sound financial
activities that are essential to running and
sustaining District operations, with the
lowest possible impact to customers.
[200,000 (Number of
injuries and
illnesses)]/Employee
hours worked
Strategic Plan
Le
a
r
n
i
n
g
a
n
d
G
r
o
w
t
h
Goal Measurement
Method
Provide hands-on leadership, support,
and empowerment of staff, in order to
maintain an accountable high-performing
workforce.
Number of safety
training hours/
Number of field
employees (includes
mandated training)
25
Key Performance Indicators: Finance
Performance
Indicator Target
Answer Rate No less than 97% per
quarter annually
FY 2017 FY 2018 FY 2019 (1)
Target 97.0% 97.0% 97.0%
Actual 98.1% 97.0% 97.0% (2)
Performance
Indicator Target
Billing
Accuracy
No less than 99.8%
per quarter annually
FY 2017 FY 2018 FY 2019 (1)
Target 99.8% 99.8% 99.8%
Actual 99.9% 99.8% 99.8% (2)
Performance
Indicator Target
Percentage of
Customers
Paying Bills
Electronically
No less than 75% per
quarter annually
FY 2017 FY 2018 FY 2019 (1)
Target 0.0% 75.6% 75.0%
Actual 75.6% 75.6% 75.0% (2)
(1) FY 2019 is the first year of the FY 2019-2022 Strategic Plan
(2) FY 2019 projected performance indicator
Goal
Execute and deliver services that meet or
exceed customer expectatins, and
increase customer engagement in order
to improve District services.
Measurement
Method
Plan and execute sound financial
activities that are essential to running and
sustaining District operations, with the
lowest possible impact to customers.
Number of
customers paying
bills electronically/
Total number of
customers
Strategic Plan
Measurement
Method
Number of all calls
answered/Number
of all calls received
Goal Measurement
Method
Cu
s
t
o
m
e
r
Fi
n
a
n
c
i
a
l
Plan and execute sound financial
activities that are essential to running and
sustaining District operations, with the
lowest possible impact to customers.
Number of correct
bills/Number of total
bills
Fi
n
a
n
c
i
a
l
Goal
26
Key Performance Indicators: Finance (continued)
Performance
Indicator Target
Overtime
Percentage
Less than 100% of the
budgeted overtime
per quarter annually
FY 2017 FY 2018 FY 2019 (1)
Target 100.0% 100.0% 100.0%
Actual 118.0% 100.0% 100.0% (2)
Performance
Indicator Target
Sewer Rate
Ranking
Bottom 50th
percentile for the 28
sewer service
providers
in San Diego annually
FY 2017 FY 2018 FY 2019 (1)
Target 14 14 14
Actual 5 6 6 (2)
Performance
Indicator Target
Water Rate
Ranking
Bottom 50th
percentile for the 22
member agencies in
San Diego annually
FY 2017 FY 2018 FY 2019 (1)
Target 11 11 11
Actual 11 3 4 (2)
(1) FY 2019 is the first year of the FY 2019-2022 Strategic Plan
(2) FY 2019 projected performance indicator
Goal Measurement
Method
Plan and execute sound financial
activities that are essential to running and
sustaining District operations, with the
lowest possible impact to customers.
Otay percentage
ranking among
regional agencies
Goal Measurement
Method
Plan and execute sound financial
activities that are essential to running and
sustaining District operations, with the
lowest possible impact to customers.
Otay percentage
ranking or the
average bill for
sewer among
regional agencies
Goal Measurement
Method
Plan and execute sound financial
activities that are essential to running and
sustaining District operations, with the
lowest possible impact to customers.
Fi
n
a
n
c
i
a
l
Fi
n
a
n
c
i
a
l
Fi
n
a
n
c
i
a
l
Actual overtime
costs (including
comp time)
Strategic Plan
27
Key Performance Indicators: Finance (continued)
Performance
Indicator Target
Reserve Level No less than 85%
annually
FY 2017 FY 2018 FY 2019 (1)
Target 85.0% 85.0% 85.0%
Actual 85.0% 100.0% 85.0% (2)
Performance
Indicator Target
Distribution
System Loss
Less than 5% per
quarter annually
FY 2017 FY 2018 FY 2019 (1)
Target 5.0% 5.0% 5.0%
Actual 4.1% 5.0% 5.0% (2)
Performance
Indicator Target
Accounts per
Full-Time
Employee
(FTE)
409 accounts per
FTE annually
FY 2017 FY 2018 FY 2019 (1)
Target 406.0 412.0 409.0
Actual 406.0 415.0 409.0% (2)
(1) FY 2019 is the first year of the FY 2019-2022 Strategic Plan
(2) FY 2019 projected performance indicator
Fi
n
a
n
c
i
a
l
Goal
Strategic Plan
Fi
n
a
n
c
i
a
l
Goal Measurement
Method
Plan and execute sound financial
activities that are essential to running and
sustaining District operations, with the
lowest possible impact to customers.
100 [Volume
purchased–(volume
sold + volume
used)/Volume
purchased]
Fi
n
a
n
c
i
a
l
Goal Measurement
Method
Plan and execute sound financial
activities that are essential to running and
sustaining District operations, with the
lowest possible impact to customers.
Potable + Recycled
+ Sewer Accounts/
Number of full-time
employees
Measurement
Method
Plan and execute sound financial
activities that are essential to running and
sustaining District operations, with the
lowest possible impact to customers.
Number of reserve
funds that meet or
exceed fund target
levels/Total number
of reserve funds
28
Key Performance Indicators: Finance (continued)
Performance
Indicator Target
O&M Cost per
Account
No more than $571
per account annually
FY 2017 FY 2018 FY 2019 (1)
Target $544 $561 $571
Actual $517 $561 $571 (2)
Performance
Indicator Target
Water Debt
Coverage
Ratio
150% excluding
growth revenue
annually
FY 2017 FY 2018 FY 2019 (1)
Target 150% 168% 150%
Actual 200% 200% 150% (2)
Performance
Indicator Target
Sewer Debt
Coverage
Ratio (3)
150% excluding
growth revenue
annually
FY 2017 FY 2018 FY 2019 (1)
Target 125.0%
Actual 125.0% (2)
(1) FY 2019 is the first year of the FY 2019-2022 Strategic Plan
(2) FY 2019 projected performance indicator
(3) FY 2019 is the first year for this key performance indicator
Fi
n
a
n
c
i
a
l
Goal Measurement
Method
Plan and execute sound financial
activities that are essential to running and
sustaining District operations, with the
lowest possible impact to customers.
Qualified net
operating
revenue/Debt
Service
requirements
Fi
n
a
n
c
i
a
l
Goal Measurement
Method
Plan and execute sound financial
activities that are essential to running and
sustaining District operations, with the
lowest possible impact to customers.
Qualified net
operating
revenues/Debt
service
requirements
Plan and execute sound financial
activities that are essential to running and
sustaining District operations, with the
lowest possible impact to customers.
Total O&M costs/
Number of
Accounts
Fi
n
a
n
c
i
a
l
Goal Measurement
Method
Strategic Plan
29
Key Performance Indicators: Water Operations
Performance
Indicator Target
Technicial
Quality
Complaint
No more than 7.1
complaints per 1,000
customer accounts
annually/7.1(1)
FY 2017 FY 2018 FY 2019 (2)
Target 9.00 9.00 7.10
Actual 3.94 4.25 4.2 (3)
Performance
Indicator Target
Planned
Potable Water
Maintenance
Ratio in $
66% of labor dollars
spent on preventative
maintenance per
quarter annually
FY 2017 FY 2018 FY 2019 (2)
Target 66.0% 66.0% 66.0%
Actual 70.0% 66.0% 66.0% (3)
Performance
Indicator Target
Planned
Recycled
Maintenance
Ration in $
70% of labor dollars
spent on preventative
maintenance per
quarter annually
FY 2017 FY 2018 FY 2019 (2)
Target 70.0% 70.0% 70.0%
Actual 91.0% 70.0% 70.0% (3)
(1) Key performance indicator utilizes AWWA benchmark
(2) FY 2019 is the first year of the FY 2019-2022 Strategic Plan
(3) FY 2019 projected performance indicator
Strategic Plan
Cu
s
t
o
m
e
r
Goal Measurement
Method
Execute and deliver services that meet or
exceed customer expectatins, and
increase customer engagement in order
to improve District services.
1,000 (Number of
technical quality
complaints)]/
Number of active
customer accounts
per reporting period
Fi
n
a
n
c
i
a
l
Goal Measurement
Method
Plan and execute sound financial
activities that are essential to running and
sustaining District operations, with the
lowest possible impact to customers.
Total planned
maintenance
cost/Total
maintenance cost
Fi
n
a
n
c
i
a
l
Goal Measurement
Method
Plan and execute sound financial
activities that are essential to running and
sustaining District operations, with the
lowest possible impact to customers.
Total planned
maintenance
cost/Total
maintenance cost
30
Key Performance Indicators: Water Operations (continued)
Performance
Indicator Target
Planned
Wastewater
Maintenance
Ratiio in $
77% of labor dollars
spent on preventative
maintenance per
quarter annually
FY 2017 FY 2018 FY 2019 (1)
Target 77.0% 77.0% 77.0%
Actual 90.6% 77.0% 77.0% (2)
Performance
Indicator Target
Leak
Detection
Program
At least 20% of system
surveyed for leaks
annually
FY 2017 FY 2018 FY 2019 (1)
Target 20.0% 20.0% 20.0%
Actual 33.0% 20.0% 20.0% (2)
Performance
Indicator Target
Direct Cost of
Treatment per
MGD
No more than $1,050
per MG spent on
wastewater treatment
annually
FY 2017 FY 2018 FY 2019 (1)
Target $1,050 $1,050 $1,050
Actual $1,096 $1,050 $1,050 (2)
(1) FY 2019 is the first year of the FY 2019-2022 Strategic Plan
(2) FY 2019 projected performance indicator
Fi
n
a
n
c
i
a
l
Goal Measurement
Method
Plan and execute sound financial
activities that are essential to running and
sustaining District operations, with the
lowest possible impact to customers.
Percentage
distribution system
surveyed for leaks
Fi
n
a
n
c
i
a
l
Goal Measurement
Method
Plan and execute sound financial
activities that are essential to running and
sustaining District operations, with the
lowest possible impact to customers.
Total O&M costs
directly attributable to
sewer treatment/
Total volume
(in MGD)
Strategic Plan
Fi
n
a
n
c
i
a
l
Goal Measurement
Method
Plan and execute sound financial
activities that are essential to running and
sustaining District operations, with the
lowest possible impact to customers.
Total planned
maintenance
cost/Total
maintenance cost
31
Key Performance Indicators: Water Operations (continued)
Performance
Indicator Target
Percent of
Preventative
Maintenance
Completed -
Reclamation
Plant
No less than 90% per
quarter annually
FY 2017 FY 2018 FY 2019 (1)
Target 90.0% 90.0% 90.0%
Actual 99.0% 90.0% 90.0% (2)
Performance
Indicator Target
Percent of
Preventative
Maintenance
Completed -
Fleet
Maintenance
No less than 90% per
quarter annually
FY 2017 FY 2018 FY 2019 (1)
Target 90.0% 90.0% 90.0%
Actual 100.0% 90.0% 90.0% (2)
Performance
Indicator Target
Percent of
Preventative
Maintenance
Completed -
Pump/Electric
No less than 90% per
quarter annually
FY 2017 FY 2018 FY 2019 (1)
Target 90.0% 90.0% 90.0%
Actual 100.0% 90.0% 90.0% (2)
(1) FY 2019 is the first year of the FY 2019-2022 Strategic Plan
(2) FY 2019 projected performance indicator
In
t
e
r
n
a
l
Bu
s
i
n
e
s
s
Pr
o
c
e
s
s
e
s
Goal Measurement
Method
Improve business services by continually
improving essential processes, invest in
strategic technology, and achieve new
efficiencies.
Number of PM's
completed/Number
of PM's scheduled to
be completed
In
t
e
r
n
a
l
Bu
s
i
n
e
s
s
Pr
o
c
e
s
s
e
s
Goal Measurement
Method
Improve business services by continually
improving essential processes, invest in
strategic technology, and achieve new
efficiencies.
Number of PM's
completed/Number
of PM's scheduled to
be completed
Strategic Plan
In
t
e
r
n
a
l
Bu
s
i
n
e
s
s
Pr
o
c
e
s
s
e
s
Goal Measurement
Method
Improve business services by continually
improving essential processes, invest in
strategic technology, and achieve new
efficiencies.
Number of PM's
completed/Number
of PM's scheduled to
be completed
32
Key Performance Indicators: Water Operations (continued)
Performance
Indicator Target
System Valve
Exercising
Program
3,080 valves exercised
annually
FY 2017 FY 2018 FY 2019 (1)
Target 3,080 3,080 3,080
Actual 3,228 3,080 3,080 (2)
Performance
Indicator Target
Potable Water
Distribution
System
Integrity
No more than 16 leaks
or breaks per 100
miles of distribution
piping
annually/16.1(3)
FY 2017 FY 2018 FY 2019 (1)
Target 16.0 16.0 16.0
Actual 10.3 16.0 16.0 (2)
Performance
Indicator Target
Recycled
Water System
Integrity
No more than 6.6
leaks or breaks per
100 miles of recycled
distribution system
annually
FY 2017 FY 2018 FY 2019 (1)
Target 6.6 6.6 6.6
Actual 0.9 0.0 0.0 (2)
(1) FY 2019 is the first year of the FY 2019-2022 Strategic Plan
(2) FY 2019 projected performance indicator
(3) Key performance indicator utilizes AWWA benchmark
In
t
e
r
n
a
l
Bu
s
i
n
e
s
s
Pr
o
c
e
s
s
e
s
Goal Measurement
Method
Improve business services by continually
improving essential processes, invest in
strategic technology, and achieve new
efficiencies.
[100 (Collection
system failure)]/
Total miles of
collection system
piping
Strategic Plan
In
t
e
r
n
a
l
Bu
s
i
n
e
s
s
Pr
o
c
e
s
s
e
s
Goal Measurement
Method
Improve business services by continually
improving essential processes, invest in
strategic technology, and achieve new
efficiencies.
[100 (Annual total
number of leaks &
breaks)]/
Total miles of
distribution pipes
In
t
e
r
n
a
l
Bu
s
i
n
e
s
s
Pr
o
c
e
s
s
e
s
Goal Measurement
Method
Improve business services by continually
improving essential processes, invest in
strategic technology, and achieve new
efficiencies.
Actual number of
valves exercised
33
Key Performance Indicators: Water Operations (continued)
Performance
Indicator Target
Potable Water
Compliance
Rate
No less than 100% per
quarter
annually/100%(1)
FY 2017 FY 2018 FY 2019 (2)
Target 100.0% 100.0% 100.0%
Actual 100.0% 100.0% 100.0% (3)
Performance
Indicator Target
Sewer
Overflow
Rate
0 Overflows per
quarter annually/0 (3)
FY 2017 FY 2018 FY 2019 (1)
Target 0 0 0
Actual 1 0 0 (2)
Performance
Indicator Target
Emergency
Facility Power
Testing
Test 100% of all
facilities scheduled
per quarter to have all
emergency facilities
tested annually
FY 2017 FY 2018 FY 2019 (1)
Target 34 34 34
Actual 36 34 34 (2)
(1) Key performance indicator utilizess AWWA benchmark
(2) FY 2019 is the first year of the FY 2019-2022 Strategic Plan
(3) FY 2019 projected performance indicator
Strategic Plan
In
t
e
r
n
a
l
Bu
s
i
n
e
s
s
Pr
o
c
e
s
s
e
s
Goal Measurement
Method
Improve business services by continually
improving essential processes, invest in
strategic technology, and achieve new
efficiencies.
[100 (Total number of
sewer
overflows)]/Total
miles of pipe in the
sewage collection
system
In
t
e
r
n
a
l
Bu
s
i
n
e
s
s
Pr
o
c
e
s
s
e
s
Goal Measurement
Method
Improve business services by continually
improving essential processes, invest in
strategic technology, and achieve new
efficiencies.
Number of facilities
and generators
tested/Total facilities
In
t
e
r
n
a
l
Bu
s
i
n
e
s
s
Pr
o
c
e
s
s
e
s
Goal Measurement
Method
Improve business services by continually
improving essential processes, invest in
strategic technology, and achieve new
efficiencies.
All primary health
regulations are met
34
Key Performance Indicators: Water Operations (continued)
Performance
Indicator Target
Main Flushing
and Hydrant
Maintenance
215 or more mains
flushed and fire
hydrants maintained
annually
FY 2017 FY 2018 FY 2019 (1)
Target 215 215 215
Actual 355 215 215 (2)
Performance
Indicator Target
Critical Valve
Exercising
631 critical valves
exercised annually
FY 2017 FY 2018 FY 2019 (1)
Target 631 631 631
Actual 631 631 631 (2)
Performance
Indicator Target
Tank
Inspection and
Cleaning
No less than 8 potable
water storage tanks
and/or reservoirs
cleaned annually
FY 2017 FY 2018 FY 2019 (1)
Target 7 8 8
Actual 8 8 8 (2)
(1) FY 2019 is the first year of the FY 2019-2022 Strategic Plan
(2) FY 2019 projected performance indicator
In
t
e
r
n
a
l
Bu
s
i
n
e
s
s
Pr
o
c
e
s
s
e
s
Goal Measurement
Method
Improve business services by continually
improving essential processes, invest in
strategic technology, and achieve new
efficiencies.
Number of tanks
cleaned and
inspected annually
Strategic Plan
In
t
e
r
n
a
l
Bu
s
i
n
e
s
s
Pr
o
c
e
s
s
e
s
Goal Measurement
Method
Improve business services by continually
improving essential processes, invest in
strategic technology, and achieve new
efficiencies.
Number of mains
flushed and fire
hydrants maintained
In
t
e
r
n
a
l
Bu
s
i
n
e
s
s
Pr
o
c
e
s
s
e
s
Goal Measurement
Method
Improve business services by continually
improving essential processes, invest in
strategic technology, and achieve new
efficiencies.
Cumulative number
of mains flushed plus
hydrants maintained
35
Key Performance Indicators: Engineering
Performance
Indicator Target
CIP Project
Expenditures
vs. Budget
95%-100% of
budget, but not to
exceed 100%
annually
FY 2017 FY 2018 FY 2019 (1)
Target 95.0% 95.0% 95.0%
Actual 109.1% 95.0%
95.0% (2)
Performance
Indicator Target
Construction
Change Order
Incidence
No more than
5% annually
FY 2017 FY 2018 FY 2019 (1)
Target 5.0% 5.0% 5.0%
Actual 1.5% 5.0%
5.0% (2)
Performance
Indicator Target
Mark-out
Accuracy
No less than 100%
per quarter annually
FY 2017 FY 2018 FY 2019 (1)
Target 100.0% 100.0% 100.0%
Actual 100.0% 100.0%
100.0% (2)
(1) FY 2019 is the first year of the FY 2019-2022 Strategic Plan
(2) FY 2019 projected performance indicator
Fi
n
a
n
c
i
a
l
Goal Measurement
Method
Plan and execute sound financial
activities that are essential to running
and sustaining District operations, with
the lowest possible impact to
customers.
Total cost of change
orders (not including
allowances)/Total original
construction contract
amount (not including
allowances)'
In
t
e
r
n
a
l
Bu
s
i
n
e
s
s
Pr
o
c
e
s
s
e
s
Goal Measurement
Method
Improve business services by
continually improving essential
processes, invest in strategic
technology, and achieve new
efficiences
Number of mark-outs
performed without an at-
fault hit/Total number of
mark-outs performed
Strategic Plan
Fi
n
a
n
c
i
a
l
Goal Measurement
Method
Plan and execute sound financial
activities that are essential to running
and sustaining District operations, with
the lowest possible impact to
customers.
Actual quarterly
expenditures/
Annual budget
36
Key Performance Indicators: Engineering (continued)
Performance
Indicator Target
Project
Closeout Time
No more than a
45 day average per
quarter annually
FY 2017 FY 2018 FY 2019 (1)
Target 45.0 45.0 45.0
Actual 71.2 45.0 45.0 (2)
Performance
Indicator Target
Annual
Recycled
Water Site
Inspections
100% of recycled
water sites
inspected annually
FY 2017 FY 2018 FY 2019 (1)
Target 100.0% 100.0% 100.0%
Actual 100.0% 100.0% 100.0% (2)
Performance
Indicator Target
Recycled
Water
Shutdown
Testing
90% of recycled site
shutdown tests
performed annually
FY 2017 FY 2018 FY 2019 (1)
Target 90.0% 90.0% 90.0%
Actual 90.0% 90.0% 90.0% (2)
(1) FY 2019 is the first year of the FY 2019-2022 Strategic Plan
(2) FY 2019 projected performance indicator
In
t
e
r
n
a
l
Bu
s
i
n
e
s
s
Pr
o
c
e
s
s
e
s
Goal Measurement
Method
Improve business services by
continually improving essential
processes, invest in strategic
technology, and achieve new
efficiences
Percentage of recycled
sites inspected per year
of those required by the
Department of
Environmental Health
In
t
e
r
n
a
l
Bu
s
i
n
e
s
s
Pr
o
c
e
s
s
e
s
Goal Measurement
Method
Improve business services by
continually improving essential
processes, invest in strategic
technology, and achieve new
efficiences
Percentage of recycled
water use sites per year
compared to those
scheduled
Strategic Plan
In
t
e
r
n
a
l
B
u
s
i
n
e
s
s
P
r
o
c
e
s
s
e
s
Goal Measurement
Method
Improve business services by
continually improving essential
processes, invest in strategic
technology, and achieve new
efficiences
Number of days between
Notice of Substantial
Completion and Notice of
Completion for all
construction projects
within the
quarter/Number of
construction projects
37
Key Performance Indicators: Engineering (continued)
Performance
Indicator Target
Easement
Desktop
Evaluation
and Field
Inspection (1)
100% of easements
evaluated and
inspected annually
FY 2017 FY 2018 FY 2019 (2)
Target 100.0%
Actual 100.0% (3)
(1) FY 2019 is the first year for this key performance measure
(2) FY 2019 is the first year of the FY 2019-2022 Strategic Plan
(3) FY 2019 projected performance indicator
In
t
e
r
n
a
l
Bu
s
i
n
e
s
s
Pr
o
c
e
s
s
e
s
Goal Measurement
Method
Strategic Plan
Improve business services by
continually improving essential
processes, invest in strategic
technology, and achieve new
efficiences
Number of Actual
Easements Evaluated
and Inspected/Total
Number of Easements
38
Financial Summaries
Budget Summary
The FY 2019 Operating Budget is summarized and presented in the Operating Budget Summary- General
Fund on pages 44-45. 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 46 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 47-51.
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 82.1% of the District’s operating revenues. It is estimated that 29,377.2 acre-
feet of potable water will be sold during FY 2019, which is an increase of 3,788.2 acre-feet from FY 2018.
Budgeted revenues from water sales are projected to be $87 million, an increase of 12.9% compared to
FY 2018. 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 (SWRCB) 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 3,593.5 acre-feet of recycled water. The FY 2019 sales revenue budget is $9.4 million which is
a decrease of $460,000 from FY 2018 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 2019 Sewer Revenues are relatively flat and projected to be $2.9 million.
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 2019 revenue from meter fees are projected to be $275,400 which is
an increase of $172,300 from FY 2018. 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 2019 capacity fee revenue of $1.65 million is an increase of $140,000 compared to
FY 2018.
39
Financial Summaries
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 $4.5 million which is an increase of $81,000 compared to FY 2018.
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 2013 2014 2015 2016 2017 2018
Gann Limit $ 4,120 $ 4,392 $ 4,454 $ 4,673 $ 4,969 5,196
Appropriations subject to the limit $ 2,892 $ 2,968 $ 3,134 $ 3,323 $ 3,551 3,795
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 $2.1 million in revenues for FY 2019 which is a decrease of $109,000
compared to FY 2018.
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 $247,200 in FY 2019 which is a decrease of $55,300 from FY 2018.
General Fund Expenditures
Potable Water Purchases
Water purchases are the expenses of purchasing 30,835.8 acre-feet for the District's potable water supply.
A provision has been made to allow 1,458.6 acre-feet of water for District usage, leakage, and evaporation.
Total Potable Water Purchases are projected to be $40.3 million in FY 2019 which is an increase of $6.1
million compared to FY 2018.
Recycled Water Purchases
Recycled water purchases are the expenses of purchasing 2,544.1 acre-feet for the District's recycled
water supply which is a decrease of 116.6 compared to Fiscal Year 2018. In addition to the purchases
there is a contractual Take-or-Pay payment budgeted for 2,484.9 acre-feet which is 250.6 acre-feet more
than FY 2018. Total Recycled Purchases are projected to be $3.8 million in FY 2019 which is an increase
of $101,400 compared to FY 2018.
40
Financial Summaries
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 2019 which is an
increase of $43,800 compared to FY 2018.
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 2018 and will remain at $1.6 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 at $2.1 million in FY 2019 which is an increase of $208,800 compared to FY
2018.
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 relatively flat compared to FY 2018 and
will remain at $4.5 million.
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 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 $758,400 which is an
increase of $24,000 compared to FY 2018.
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 $1.0 million
in FY 2019, which is a decrease of $308,400 compared to FY 2018.
41
Financial Summaries
Power Costs
Power costs are expenses associated with the transmission and distribution of water to customers. The
pumping costs to distribute water vary with elevation and will increase as water sales increase. Power
costs are projected to be $3.2 million which is an increase of $137,600 compared to FY 2018.
Labor and Benefits
Labor and benefits are the wages and fringe benefits for FY 2019 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 $22.1 million, which is an increase of $589,800 compared to FY 2018.
Administrative Expenses
Administrative expenses are costs incurred by various departments that are directly related to District
operations. Administrative expenses are projected to be $6.2 million in FY 2019, which is an increase of
$667,500 compared to FY 2018. 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 $3.7 million in FY 2019, which
is an increase of $43,800 compared to FY 2018. Additional details are supplied in the Departmental
Operating Budget section.
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 2019, these reserves will be
funded with $2.7 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 2019, there is
no reserve funding budgeted.
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 2019, these reserves
will be funded with $12,489,600 from the Potable Water Fund and 289,000 from the Sewer Fund.
New Water Supply Reserves
These reserves are established to fund new water supply needs including project costs, existing debt
42
Financial Summaries
payments, and new debt that will be issued in the future to fund expansion. For FY 2019, this reserve will
be funded with $75,000 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 2019, the General Fund is budgeted to fund the OPEB Trust $980,800 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.
Fund Balance Summary by Fund
This schedule shows each fund’s balance at June 30, 2018, and the projected balance for June 30, 2019.
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.
43
FY 2017 FY 2018 FY 2019
11-Actual Budget Actual * Budget $%
Revenues
#Potable Water Sales 73,977,350$ 77,036,300$ 82,131,332$ 86,956,300$ 9,920,000$ 12.9%
Recycled Water Sales 9,742,800 9,863,100 10,463,864 9,403,200 (459,900) (4.7%)
#Sewer Revenues 2,955,430 2,869,400 2,838,212 2,922,600 53,200 1.9%
#Meter Fees 72,624 103,100 283,500 275,400 172,300 167.1%
#Capacity Fee Revenues 1,559,317 1,513,200 1,617,128 1,653,700 140,500 9.3%
Tax Revenues 4,203,668 4,396,100 4,500,789 4,477,500 81,400 1.9%
#Non-operating Revenues 3,056,243 2,164,500 2,790,479 2,055,200 (109,300) (5.0%)
#Interest 237,307 302,500 212,743 247,200 (55,300) (18.3%)
Total Revenues 95,804,738 98,248,200 104,838,046 107,991,100 9,742,900 9.9%
Expenditures
#Potable Water Purchases 32,547,634 34,225,800 37,924,950 40,307,700 6,081,900 17.8%
Recycled Water Purchases 3,643,521 3,716,700 3,793,387 3,818,100 101,400 2.7%
#CWA - Infrastructure Access Charge 1,976,310 2,080,200 2,071,740 2,124,000 43,800 2.1%
#CWA - Customer Service Charge 1,714,325 1,682,400 1,670,281 1,645,800 (36,600)(2.2%)
CWA - Reliability Charge 1,847,036 1,908,000 1,909,909 2,116,800 208,800 10.9%
#CWA - Emergency Storage Charge 4,579,670 4,486,800 4,510,642 4,522,200 35,400 0.8%
#MWD - Capacity Reservation Charge 836,280 734,400 735,501 758,400 24,000 3.3%
#MWD - Net RTS and Standby Charge 1,268,160 1,344,000 1,049,092 1,035,600 (308,400)(22.9%)
Subtotal - Water Costs 48,412,936 50,178,300 53,665,502 56,328,600 6,150,300 12.3%
#Labor and Benefits 20,797,353 21,522,100 21,223,946 22,111,900 589,800 2.7%
#Administrative Expenses 4,745,277 5,485,700 5,306,194 6,153,200 667,500 12.2%
#Materials and Maintenance 3,007,595 3,645,700 3,790,205 3,689,500 43,800 1.2%
#Power 2,890,123 3,023,800 3,138,776 3,161,400 137,600 4.6%
Subtotal - Operations Costs 31,440,348 33,677,300 33,459,121 35,116,000 1,438,700 4.3%
D Transfer to General Fund Reserve 2,854,300 - - - - -
#Expansion Reserve 4,093,600 3,274,600 3,274,600 2,712,100 (562,500) (17.2%)
B Betterment Reserve 3,466,400 111,100 111,100 - (111,100) (100.0%)
R Replacement Reserve 464,500 9,787,900 9,787,900 12,778,600 2,990,700 30.6%
TOOPEB Reserve 961,000 998,000 998,000 980,800 (17,200) (1.7%)
New Supply Reserve 35,000 221,000 221,000 75,000 (146,000) (66.1%)
Subtotal - Reserve Funding 11,874,800 14,392,600 14,392,600 16,546,500 2,153,900 15.0%
Total Expenditures 91,728,084 98,248,200 101,517,223 107,991,100 9,742,900 9.9%
Excess Revenues (Expenditures)4,076,654$ -$ 3,320,823$ -$ -$ -
Operating Budget Summary - General Fund
Budget to Budget
VarianceFY 2018
*Actual unaudited
44
Potable Water Sales 86,956,300$ 80.7%
Recycled Water Sales 9,403,200 8.7%
Sewer Revenues 2,922,600 2.7%
Meter Fees 275,400 0.3%
Capacity Fee Revenues 1,653,700 1.5%
Tax Revenues 4,477,500 4.1%
Non-operating Revenues 2,055,200 1.8%
Interest 247,200 0.2%
107,991,100 100.0%
Potable Water Purchases 52,510,500 48.6%
Recycled Water Purchases 3,818,100 3.5%
Power 3,161,400 2.9%
Labor and Benefits 22,111,900 20.5%
Administrative Expenses 6,153,200 5.8%
Materials & Maintenance 3,689,500 3.4%
Reserve Funding 16,546,500 15.3%
107,991,100$ 100.0%
Operating Budget Summary - General Fund
FY 2019 Operating Revenues
FY 2019 Operating Expenditures
45
Potable Recycled Sewer Total
Revenues
Water Sales 86,956,300$ -$ -$ 86,956,300$
Recycled Water Sales - 9,403,200 9,403,200
Sewer Revenues - - 2,922,600 2,922,600
Meter Fees 270,300 5,100 - 275,400
Capacity Fee Revenues 1,653,700 - - 1,653,700
Tax Revenues 4,378,300 - 99,200 4,477,500
Non-operating Revenues 2,019,700 - 35,500 2,055,200
Interest 207,700 26,000 13,500 247,200
Total Revenues 95,486,000 9,434,300 3,070,800 107,991,100
Expenditures
Water Purchases 40,307,700 3,818,100 - 44,125,800
CWA - Infrastructure Access Charge 2,124,000 - - 2,124,000
CWA - Customer Service Charge 1,645,800 - - 1,645,800
CWA - Reliability Charge 2,116,800 - - 2,116,800
CWA - Emergency Storage Charge 4,522,200 - - 4,522,200
MWD - Capacity Reservation Charge 758,400 - - 758,400
MWD - Net RTS and Standby Charges 1,035,600 - - 1,035,600
Subtotal - Water Costs 52,510,500 3,818,100 - 56,328,600
Labor and Benefits 19,755,200 1,159,600 1,197,100 22,111,900
Administrative Expenses 5,193,600 675,700 283,900 6,153,200
Materials and Maintenance 2,218,900 355,000 1,115,600 3,689,500
Power 2,411,900 603,900 145,600 3,161,400
Subtotal - Operations Costs 29,579,600 2,794,200 2,742,200 35,116,000
#Expansion Reserve - 2,712,100 - 2,712,100
R Replacement Reserve 12,489,600 - 289,000 12,778,600
TOOPEB Reserve 906,300 34,900 39,600 980,800
New Supply Reserve - 75,000 - 75,000
Subtotal - Reserve Funding 13,395,900 2,822,000 328,600 16,546,500
Total Expenditures 95,486,000 9,434,300 3,070,800 107,991,100
Excess Revenue (Expenditures)-$ -$ -$ -$
FY 2019 Operating Budget Summary by System
* Actual unaudited
46
FY 2017 FY 2019
Actual Budget Actual* Budget $ %
Revenues and Fund Sources
Water Sales 83,720,150$ 86,899,400$ 92,595,196$ 96,359,500$ 9,460,100$ 10.9%
Sewer Revenues 2,955,430 2,869,400 2,838,212 2,922,600 53,200 1.9%
Meter Fees 72,624 103,100 283,500 275,400 172,300 167.1%
Capacity Fee Revenues 1,559,317 1,513,200 1,617,128 1,653,700 140,500 9.3%
Tax Revenues 4,203,668 4,396,100 4,500,788 4,477,500 81,400 1.9%
Non-Operating Revenues 3,056,243 2,164,500 2,790,479 2,055,200 (109,300) (5.0%)
Interest 237,307 302,500 212,743 247,200 (55,300) (18.3%)
Total Revenues and 95,804,738 98,248,200 104,838,046 107,991,100 9,742,900 9.9%
Fund Sources
Expenditures and Fund Uses
Water Purchases 48,412,936 50,178,300 53,665,502 56,328,600 6,150,300 12.3%
Power 2,890,123 3,023,800 3,138,776 3,161,400 137,600 4.6%
Labor and Benefits 20,797,353 21,522,100 21,149,124 22,111,900 589,800 2.7%
Administrative Expenses 4,745,277 5,485,700 5,306,194 6,153,200 667,500 12.2%
Materials and Maintenance 3,007,595 3,645,700 3,790,205 3,689,500 43,800 1.2%
Transfers 11,874,800 14,392,600 14,392,600 16,546,500 2,153,900 15.0%
Total Expenditures and 91,728,084 98,248,200 101,442,401 107,991,100 9,742,900 9.9%
Fund Uses
Excess Revenues (Expenditures 4,076,654$ -$ 3,395,645$ -$ -$ -
General Fund Revenues, Expenditures and Transfers, in millions ($)
FY 2018
Budget to Budget
Variance
General Fund - Revenues, Expenditures and Transfers
$80
$82
$84
$86
$88
$90
$92
FY 2017-Actual FY 2018-Budget FY 2018-Actual FY 2019-Budget
96
98
10
5
10
8
92
98
10
1
10
8
Revenue Expenditures
*Actual unaudited
47
Actual*Projected
Balance Interfund Balance
June 30, 2018 Revenues Expenditures Transfers (1)June 30, 2019
General Fund
Potable 25,206,830$ 95,486,000$ 95,486,000$ 4,481,300$ 29,688,130$
Recycled 3,428,762 9,434,300 9,434,300 (1,440,300) 1,988,462
Sewer 1,248,515 3,070,800 3,070,800 (1,090,000) 158,515
Total General Fund 29,884,106 107,991,100 107,991,100 1,951,000 31,835,106
Expansion Fund
Water (2)1,474,171 4,446,700 5,768,000 844,700 997,571
Sewer (9,419) (100) - - (9,519)
Total Expansion Fund 1,464,752 4,446,600 5,768,000 844,700 988,052 (3)
Betterment Fund
Potable 317,675 780,900 2,396,500 2,196,000 898,075
Recycled 433,079 9,500 273,400 28,200 197,379
Sewer 1,542,686 11,000 2,063,000 438,000 (71,314)
Total Betterment Fund 2,293,440 801,400 4,732,900 2,662,200 1,024,140 (3)
Replacement Fund
Potable 37,872,314 34,983,200 20,474,000 (51,933,500) 448,014
Recycled 5,158,187 266,300 527,100 (123,000) 4,774,387
Sewer 6,018,610 48,100 2,420,000 (864,800) 2,781,910
Total Replacement Fund 49,049,111 35,297,600 23,421,100 (52,921,300) 8,004,311
New Supply Fund
Water (2)1,666,720 794,800 167,000 75,000 2,369,520
Sewer - - - - -
Total New Supply Fund 1,666,720 794,800 167,000 75,000 2,369,520 (3)
OPEB Fund 262,404 2,900 980,800 980,800 265,304
Debt Service Fund 4,520,286 680,600 751,700 30,000,000 34,449,186 (4)
Total 89,140,819$ 150,015,000$ 143,812,600$ (16,407,600)$ 78,935,619$ (813,743)$
(1) The total for interfund transfers does not net to $0 because some transfers are already reflected in the Operating
Revenues and Expenditures for General Fund as follows:
Expansion Reserve (2,712,100)$
Replacement Reserve (12,761,600)
New Supply Reserve (75,000)
OPEB Reserve (980,800)
Total (16,529,500)$ #
(2) Potable and Recycled funds are combined for expansion purposes.
(3) The fund balance is anticipated to change more than 10% due to the Districts ongoing current year CIP expenditures
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.
(4) The District plans to issue $30 million in Water Revenue Bonds to fund CIP projects.
Fiscal Year 2019 Budget
Fund Balance Summary by Fund
*Actual unaudited
48
FY 2017 FY 2019
Actual Budget Actual* Budget
Revenues and Fund Sources
Water Sales 83,720,150$ 86,899,400$ 92,595,196$ 96,359,500$
Sewer Revenues 2,955,430 2,869,400 2,838,212 2,922,600
Meter Fees 72,624 103,100 283,500 275,400
Capacity Fee Revenues 1,559,317 1,513,200 1,617,128 1,653,700
Capacity Fees for Maintenance 4,375,400 4,862,800 10,528,705 9,635,800
Tax Revenues 4,203,668 4,396,100 4,500,788 4,477,500
Availability Fees 560,800 460,500 491,545 460,500
Non-Operating Revenues 3,056,243 2,164,500 2,790,479 2,055,200
GO Bond Debt Tax Revenues 640,241 619,700 678,655 675,700
Debt Proceeds & BABs Subsidy (1)828,100 772,000 772,000 30,712,000
CALTRANS Reimbursement 67,093 255,000 - -
Interest 838,840 885,200 996,873 784,200
Interfund Transfer 967,968 1,000,300 1,011,813 983,700
Total Revenue and Fund Sources 103,845,873 106,801,200 119,104,893 150,995,800
Expenditures and Fund Uses
Water Purchases 48,412,936 50,178,300 53,665,502 56,328,600
Power 2,890,123 3,023,800 3,138,776 3,161,400
Labor Expenses 20,797,353 21,522,100 21,149,124 22,111,900
Administrative Expenses 4,745,279 5,485,700 5,306,194 6,153,200
Materials and Maintenance 3,007,595 3,645,700 3,790,205 3,689,500
CIP Expenses 14,507,469 21,675,200 21,626,112 25,853,800
Debt Service 7,717,791 8,279,100 7,531,188 8,986,900
OPEB Retiree Health Expenses 919,420 998,000 937,790 980,800
Interfund Transfers 11,874,800 14,392,600 14,392,600 16,546,500
Total Expenditures and Fund Uses 114,872,767 129,200,500 131,537,490 143,812,600
Surplus/(Deficit)(11,026,894)$ (22,399,300)$ (12,432,597)$ 7,183,200$
Revenues and Expenditures by Type - All Funds
FY 2018
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 2017 and 2018 shown above.
(1) Includes $30 million Water Revenue Bond Debt proceeds and $712,000 BABs subsidy.
*Actual unaudited
49
FY 2017 FY 2019
Actual Budget Actual* Budget
Revenues
General Fund
Potable 82,136,305$ 85,376,000$ 91,402,076$ 95,486,000$
Recycled 9,772,780 9,895,300 10,499,083 9,434,300
Sewer 3,895,653 2,976,900 2,936,887 3,070,800
Total General Fund (1)95,804,738 98,248,200 104,838,046 107,991,100
Expansion Fund
Potable 2,306,831 2,807,800 4,226,840 4,173,500
Recycled 173,922 189,900 271,302 273,200
Sewer (33) (100) (78) (100)
Total Expansion Fund 2,480,721 2,997,600 4,498,065 4,446,600
Betterment Fund
Potable 865,537 806,100 815,165 780,900
Recycled 21,121 11,500 12,037 9,500
Sewer 61,783 12,600 58,187 11,000
Total Betterment Fund 948,440 830,200 885,390 801,400
Replacement Fund
Potable 2,319,111 2,501,500 5,817,153 4,983,200
Recycled 177,740 192,500 367,980 266,300
Sewer 156,202 90,300 110,117 48,100
Total Replacement Fund 2,653,053 2,784,300 6,295,250 5,297,600
New Supply Fund
Potable 347,825 316,700 844,646 793,300
Recycled 22,693 700 50,168 1,500
Sewer - - - -
Total New Supply Fund 370,518 317,400 894,815 794,800
OPEB Fund 882,093 922,200 932,834 983,700
Debt Service Fund (1)706,309 701,300 760,494 30,680,600
Total Revenues 103,845,872$ 106,801,200$ 119,104,893 150,995,800$
(1) Includes proposed $30 million Water Revenue Bond Debt Issuance.
Revenues and Expenditures by Fund
FY 2018
*Actual unaudited
50
FY 2017 FY 2019
Actual Budget Actual* Budget
Revenues and Expenditures by Fund
FY 2018
Expenditures
General Fund
Potable 80,094,417$ 85,376,000$ 88,493,143$ 95,486,000$
Recycled 8,601,664 9,895,300 9,873,339 9,434,300
Sewer 3,032,005 2,976,900 3,075,919 3,070,800
Total General Fund 91,728,086 98,248,200 101,442,401 107,991,100
Expansion Fund
Potable 4,344,178 4,439,900 4,306,253 4,636,500
Recycled 1,128,766 1,192,000 975,700 1,131,500
Sewer 3,376 - 4,767 -
Total Expansion Fund 5,476,320 5,631,900 5,286,721 5,768,000
Betterment Fund
Potable 1,996,562 2,225,200 2,028,877 2,396,500
Recycled 1,393,943 368,400 306,069 273,400
Sewer 226,388 2,215,000 1,776,338 2,063,000
Total Betterment Fund 3,616,893 4,808,600 4,111,284 4,732,900
Replacement Fund
Potable 7,718,779 15,348,000 15,808,764 20,474,000
Recycled 111,518 389,100 70,089 527,100
Sewer 4,351,678 2,864,000 2,972,954 2,420,000
Total Replacement Fund 12,181,976 18,601,100 18,851,808 23,421,100
New Supply Fund
Potable 106,544 53,000 50,469 40,600
Recycled 109,070 108,000 111,500 126,400
Sewer - - - -
Total New Supply Fund 215,614 161,000 161,969 167,000
OPEB Fund 817,364 998,000 839,697 980,800
Debt Reserve Fund 836,513 751,700 843,611 751,700
Total Expenditures 114,872,766 129,200,500 131,537,490 143,812,600
Surplus/(Deficit)(11,026,894)$ (22,399,300)$ (12,432,597) 7,183,200$
*Actual unaudited
51
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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 2020 through FY 2024. 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 727 miles of potable
pipelines, 104 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 2020 FY 2021 FY 2022 FY 2023 FY 2024
Revenues
Water/Sewer Rates 102,848,700$ 107,167,000$ 111,865,300$ 117,086,200$ 122,612,200$
Meter Fees 276,300 281,600 286,100 292,200 298,800
Capacity Fee Revenues 1,662,000 1,678,600 1,695,400 1,712,400 1,729,500
Non-operating Revenues 2,341,300 2,367,900 2,395,700 2,165,100 2,195,000
Tax Revenues 4,509,800 4,593,100 4,679,300 4,768,900 4,860,500
Interest Income 300,400 361,400 430,800 506,400 558,900
Total Revenues 111,938,500 116,449,600 121,352,600 126,531,200 132,254,900
47,888,700$ 47,434,800$ 47,456,100$ 47,924,900$
FY 2020 FY 2021 FY 2022 FY 2023 FY 2024
Expenditures
Water Cost 60,239,100 64,537,000 69,073,200 73,655,000 78,587,300
Power 3,304,800 3,456,300 3,622,000 3,807,000 4,006,200
Labor and Benefits 20,670,100 20,888,200 21,120,200 21,480,400 21,016,200
Administrative Expenses 6,299,500 6,500,300 6,707,000 6,919,800 7,139,200
Materials & Maintenance 4,053,200 4,182,800 4,317,700 4,458,000 4,638,700
Net Reserve Funding 17,371,800 16,885,000 16,512,500 16,211,000 16,867,300
Total Expenditures and Transfers 111,938,500 116,449,600 121,352,600 126,531,200 132,254,900
Excess Revenues (Expenditures)-$ -$ -$ -$ -$
-$ -$ -$ -$ -$
General Fund Forecast
This forecast incorporates both cost increases for expenditures and rate increases for revenues, as well as growth
projections.
Expenditures and Transfers
Revenues
$100
$120
$140
FY 2020 FY 2021 FY 2022 FY 2023 FY 2024
11
2
11
6
12
1
12
7
13
2
$1
1
2
$1
1
6
$1
2
1
$1
2
7
$1
3
2
Revenues and Expenditures Forecast, in millions ($)
Revenues Expenditures
54
FY 2020 FY 2021 FY 2022 FY 2023 FY 2024
Fund Balance
General Fund 23,649,600$ 24,895,500$ 26,215,100$ 27,592,500$ 28,856,700$
Betterment Fund 295,700 620,400 884,100 1,072,900 1,080,200
Replacement Fund (1)42,258,400 42,302,000 44,812,600 44,696,500 44,260,300
Expansion Fund 101,000 635,700 1,226,900 828,800 831,800
New Supply Fund 2,783,200 3,484,300 4,193,800 4,779,300 5,374,100
Debt Reserve 4,330,200 4,231,800 4,138,200 4,065,500 3,999,800
Total Fund Balance 73,418,100$ 76,169,700$ 81,470,700$ 83,035,500$ 84,402,900$
(270,772) (274,787) (279,436) (284,736) (290,336)
(1) Includes proposed $30 million Water Revenue Bond Debt Issuance.
Fund Balances Forecast
Fund Balances by Fund
$0
$20
$40
$60
$80
$100
FY 2020 FY 2021 FY 2022 FY 2023 FY 2024
Fund Balances Forecast, in millions ($)
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), Water Revenue Bonds (WRBs),
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 2018,
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, in FY 2019 the District anticipates issuing $30 million in new debt
to fund CIP projects. The chart below shows the District’s projected debt coverage ratio, for the water
side of the District, from FY 2019 through FY 2024. 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
3.11 2.95 2.60 2.56 2.38 2.46
-
1.00
2.00
3.00
4.00
FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024
Co
v
e
r
a
g
e
R
a
t
i
o
Projected Ratio Minimum Covenant = 1.25
56
Debt Management
For sewer, the District plans to issue $5.0 million to fund the Campo Road Sewer Replacement project
(S2024). Currently, sewer has no other debt outstanding. The proposed increases in the sewer rates
are necessary to ensure the sewer debt coverage ratio meets the minimum covenant of 125%.
Projected Sewer Debt Coverage Ratio
--
1.94
1.68
2.08
2.30
-
0.50
1.00
1.50
2.00
2.50
FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024
Co
v
e
r
a
g
e
R
a
t
i
o
Projected Ratio Minimum Covenant = 1.25
57
Outstanding
Year Maturity Original Balance
# Incurred Description Date Amount 6/30/2019
1 1996 Certificates of Participation (COPs)September 1, 2026 15,400,000$ 6,900,000$
2 2009 General Obligation (GO) Bonds August 31, 2022 7,780,000 2,755,000
3 2010 Certificates of Participation Series A (COPs)September 1, 2024 13,840,000 6,905,000
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 3,875,000
6 2016 Water Revenue Refunding Bonds (2)September 1, 2036 33,385,000 30,125,000
Total Outstanding Debt 114,495,000$ 86,915,000$
Total Assessed Valuation - FY 2018
Percentage of Original Debt to Assessed Valuation 0.39%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.
29,387,363,297$ 12,738,454,702$
Schedule of Outstanding Debt
All Debts GO Bonds
Total Outstanding Debt, in millions ($)
Note: The accounting for debt proceeds and payments is described in the District's Reserve Policy found on
pages 173-214.
$0
$15
$30
$45
$60
$75
1996 COPs 2009 GOBs 2010A COPs 2010B BABs 2013
WRRBs
2016
WRRBs
Principal Interest
58
1996 COPs 2009 GOBs 2010A COPs 2010B BABs 2013 WRRBs(1)2016 WRRBs(2)Total
700,000 650,000 1,015,000 - 715,000 1,100,000 4,180,000
700,000 680,000 1,065,000 - 745,000 1,155,000 4,345,000
800,000 705,000 1,120,000 - 775,000 1,215,000 4,615,000
800,000 720,000 1,175,000 - 805,000 1,285,000 4,785,000
900,000 - 1,235,000 - 835,000 1,350,000 4,320,000
900,000 - 1,295,000 - - 1,420,000 3,615,000
1,000,000 - - 1,365,000 - 1,495,000 3,860,000
1,100,000 - - 1,450,000 - 1,570,000 4,120,000
- - - 1,545,000 - 1,645,000 3,190,000
- - - 1,640,000 - 1,715,000 3,355,000
- - - 1,745,000 - 1,785,000 3,530,000
- - - 1,855,000 - 1,855,000 3,710,000
- - - 1,975,000 - 1,955,000 3,930,000
- - - 2,105,000 - 2,005,000 4,110,000
- - - 2,245,000 - 2,055,000 4,300,000
- - - 2,390,000 - 2,115,000 4,505,000
- - - 2,550,000 - 2,170,000 4,720,000
- - - 2,715,000 - 2,235,000 4,950,000
- - - 2,895,000 - - 2,895,000
- - - 3,085,000 - - 3,085,000
- - - 3,290,000 - - 3,290,000
- - - 3,505,000 - - 3,505,000
6,900,000$ 2,755,000$ 6,905,000$ 36,355,000$ 3,875,000$ 30,125,000$ 86,915,000$
(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
2020
2021
2022
Projected Principal Payments by Debt Issuance
FY
$0
$1
$2
$3
$4
$5
$6
$7
$8
$9
20
2
0
20
2
1
20
2
2
20
2
3
20
2
4
20
2
5
20
2
6
20
2
7
20
2
8
20
2
9
20
3
0
20
3
1
20
3
2
20
3
3
20
3
4
20
3
5
20
3
6
20
3
7
20
3
8
20
3
9
20
4
0
20
4
1
Interest
Principal
59
1996 COPs (1)2009 GOBs 2010A COPs 2010B BABs 2013 WRRBs(2)2016 WRRBs(3)Total
94,750 88,533 306,196 2,371,868 131,167 1,101,498 4,094,012
84,250 61,533 253,363 2,371,868 101,567 1,044,206 3,916,787
72,500 33,500 197,821 2,371,868 70,767 983,956 3,730,412
60,500 4,800 139,529 2,371,868 38,767 920,290 3,535,755
47,250 - 78,279 2,371,868 5,567 853,331 3,356,295
33,750 - 11,331 2,371,868 - 782,915 3,199,864
19,000 - - 2,299,330 - 708,790 3,027,120
2,750 - - 2,207,767 - 630,915 2,841,432
- - - 2,110,252 - 562,998 2,673,250
- - - 2,006,679 - 494,865 2,501,544
- - - 1,896,516 - 423,931 2,320,447
- - - 1,779,392 - 350,198 2,129,590
- - - 1,651,430 - 297,102 1,948,532
- - - 1,514,409 - 247,185 1,761,594
- - - 1,368,290 - 193,878 1,562,168
- - - 1,212,689 - 136,419 1,349,108
- - - 1,046,730 - 76,996 1,123,726
- - - 869,973 - 11,175 881,148
- - - 681,541 - - 681,541
- - - 480,724 - - 480,724
- - - 266,587 - - 266,587
- - - 38,421 - - 38,421
414,750$ 188,367$ 986,519$ 35,661,939$ 347,833$ 9,820,647$ 47,420,059$
(1)Interest on the 1996 Certificates of Participation is variable and is projected using an interest rate of 1.5%.
(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
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 50,625 potable customers by the end of FY
2019. Ninety-one percent of the potable customers are residential and the remaining 9.0% are
comprised of multi-residential, business and publicly-owned, and irrigation and commercial
agricultural. The District expects nominal growth in the customer base of 1.7% for FY 2019. Unit
sales are anticipated to increase 14.8% compared to the previous year's budget, and increase by
4.7% 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 30.4% of the potable water sales revenue.
Water rates, energy fees, and penalties generate the remaining 69.6% 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 2019, the District estimates to purchase 30,835.8 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 1,458.6 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 No. 4. In 2010, to diversify the water
supply and to become less reliant on CWA’s Pipeline No. 4, the District entered an agreement with
CWA to purchase water treated by neighboring Helix Water District at their Levy Water Treatment
Plant. This treated water from Flow Control Facility No. 14 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, 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-inch pipeline.
61
Potable Revenues and Expenditures
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 water storage and carryover storage to provide a reliable water source in dry years.
The CWA’s emergency and carryover storage project interconnected reservoirs, pipelines and pump
stations make water available to the San Diego region if imported water deliveries are interrupted,.
The CWA purchases water for the 24 member agencies 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.
62
FY 2017 FY 2018 FY 2018 FY 2019
11-Actual Budget Actual * Budget $%
Revenues
Water Sales 73,977,350$ 77,036,300$ 82,131,332$ 86,956,300$ 9,920,000$ 12.9%
Meter Fees 67,340 100,500 275,748 270,300 169,800 169.0%
Capacity Fee Revenues 1,555,941 1,513,200 1,612,361 1,653,700 140,500 9.3%
Tax Revenues 4,096,383 4,344,500 4,448,598 4,378,300 33,800 0.8%
Non-operating Revenues 2,246,543 2,129,000 2,763,966 2,019,700 (109,300) (5.1%)
Interest 192,748 252,500 170,071 207,700 (44,800) (17.7%)
Total Revenues 82,136,305 85,376,000 91,402,076 95,486,000 10,110,000 11.8%
Expenditures
Potable Water Purchases 32,547,634 34,225,800 37,924,950 40,307,700 6,081,900 17.8%
CWA - Infrastructure Access Charge 1,976,310 2,080,200 2,071,740 2,124,000 43,800 2.1%
CWA - Customer Service Charge 1,714,325 1,682,400 1,670,281 1,645,800 (36,600) (2.2%)
CWA - Reliability Charge 1,847,036 1,908,000 1,909,909 2,116,800 208,800 10.9%
CWA - Emergency Storage Charge 4,579,670 4,486,800 4,510,642 4,522,200 35,400 0.8%
MWD - Capacity Reservation Charge 836,280 734,400 735,501 758,400 24,000 3.3%
MWD-Net RTS and Standby Charges 1,268,160 1,344,000 1,049,092 1,035,600 (308,400) (22.9%)
Subtotal - Water Costs 44,769,415 46,461,600 49,872,115 52,510,500 6,048,900 13.0%
Labor and Benefits 18,620,467 19,270,400 19,013,759 19,755,200 484,800 2.5%
Administrative Expenses 4,243,832 4,653,400 4,631,575 5,193,600 540,200 11.6%
Materials and Maintenance 1,742,037 1,977,000 2,043,346 2,218,900 241,900 12.2%
Power 2,177,466 2,305,700 2,299,270 2,411,900 106,200 4.6%
1 Subtotal - Operations Costs 26,783,802 28,206,500 27,987,950 29,579,600 1,373,100 4.9%
DTransfer to General Fund Reserve 1,286,400 - - - - -
Expansion Reserve 3,638,000 - - - - -
BBetterment Reserve 2,280,000 - - - - -
RReplacement Reserve 464,500 9,787,900 9,787,900 12,489,600 2,701,700 27.6%
TOPEB Reserve 872,300 920,000 920,000 906,300 (13,700) (1.5%)
Subtotal - Reserve Funding 8,541,200 10,707,900 10,707,900 13,395,900 2,688,000 25.1%
Total Expenditures 80,094,417 85,376,000 88,567,965 95,486,000 10,110,000 11.8%
Excess Revenues (Expenditures)2,041,888$ -$ 2,834,111$ -$ -$ -
Operating Budget Summary - Potable
Budget to Budget
Variance
*Actual unaudited
63
FY 2017 FY 2019
Actual Budget Actual * Budget $ %
Water Sales 46,265,872$ 49,251,200$ 54,262,051$ 56,119,900$ 6,868,700$ 13.9%
System Charges 12,243,766 12,917,600 13,078,386 15,340,700 2,423,100 18.8%
Energy Charges 2,334,565 1,925,500 2,040,410 2,335,300 409,800 21.3%
MWD and CWA Fixed Charges 12,398,886 12,030,400 11,920,268 12,268,400 238,000 2.0%
Penalties 734,261 911,600 830,217 892,000 (19,600) -2.2%
Total Water Sales 73,977,350$ 77,036,300$ 82,131,332$ 86,956,300$ 9,920,000$ 12.9%
Water Sales 56,119,900$ 64.6%
System Charges 15,340,700 17.6%
Energy Charges 2,335,300 2.7%
MWD and CWA Fixed Charges 12,268,400 14.1%
Penalties 892,000 1.0%
Total Water Sales 86,956,300$ 100.0%
Water Sales: Water rates vary among classes of service and are charged per unit of water. A unit of water is equal to 100
cubic feet of water.
System Charges: 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 Charges: The energy pumping charge is $ .056 per 100 cubic feet of water for each 100 feet of lift above the elevat
of 450 feet. All water customers are in one of 29 zones based on elevation.
MWD and CWA Fixed Charges: These pass-through charges are calculated to recover the MWD's and CWA's fixed annua
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 2019 Classification of Water Sales
Classification of Water Sales - Potable
FY 2018 Budget to Budget
Variance
*Actual unaudited
64
Tier Rate Structure Current Approved Accounts Unit Sales Budget
Residential
46,018 7,057,600 30,965,300$
1 - 10 3.05$ 3.17$
11 - 22 5.44 5.65
over 23 hcf 7.03 7.30
Multi-Residential
872 1,612,700 6,476,300
0 - 42.85 2.96
5 - 95.17 5.37
over 10 hcf 6.35 6.60
Business and Publicly-Owned
All units 3.61 3.75 1,490 2,005,600 7,368,800
Irrigation and Commercial Agricultural
All units 5.27 5.47 1,445 2,120,800 10,856,300
49,825 12,796,700 55,666,700$
Government Fee 0.41 0.42 - - 453,200
Total Water Sales 49,825 12,796,700 56,119,900$
Unit %
Residential 7,057,600 55.1%
Multi-Residential 1,612,700 12.6%
Business and Pubicly-Owned 2,005,600 15.7%
Irrigation and Commercial
Agricultural 2,120,800 16.6%
Total Water Sales 12,796,700 100.0%
Water Sales Summary by Service Class - Potable
Water Rates FY 2019
FY 2019 Unit Sales by Service Class
(1) Approved rates for water billed beginning in January 2019.
(1)
65
FY 2014 FY 2015 FY 2016 FY 2017 FY 2019
Budget Actual Budget
Residential 8,050,828 7,248,930 5,832,549 6,266,299 6,183,300 6,761,701 7,057,600
Multi-Residential 1,536,902 1,482,502 1,417,211 1,516,436 1,496,600 1,602,807 1,612,700
Business and Publicly-Owned 2,057,493 2,049,294 1,827,965 1,815,635 1,813,800 1,924,280 2,005,600
Irrigation and Commercial Agricultural 2,074,896 1,963,699 1,397,565 1,651,961 1,652,700 1,938,595 2,120,800
Total Unit Sales 13,720,119 12,744,425 10,475,290 11,250,331 11,146,400 12,227,383 12,796,700
FY 2014 FY 2015 FY 2016 FY 2017 FY 2019
Budget Actual Budget
Residential 44,826 44,941 45,038 45,086 45,345 45,518 46,018
Multi-Residential 798 806 817 802 809 820 872
Business and Publicly-Owned 2,185 2,208 2,216 2,227 2,231 2,271 2,290
Irrigation and Commercial Agricultural 1,339 1,353 1,354 1,387 1,376 1,436 1,445
Total Meter Count 49,148 49,308 49,425 49,502 49,761 50,045 50,625
Unit Sales in thousands and Meter Count Trends
Unit Sales History and Meter Count by Customer Class - Potable
FY 2018
Actual
FY 2018
Actual
5,000
15,000
25,000
35,000
45,000
55,000
-
5,000
10,000
15,000
20,000
FY 2014
Actual
FY 2015
Actual
FY 2016
Actual
FY 2017
Actual
FY 2018
Actual
FY 2019
Budget
Potable Meters Potable Unit Sales
Units Meters
66
FY 2018 FY 2019 FY 2018 FY 2019
Meter Size Count Count Current Approved Budget Budget $%
Residential
0.75 43,472 43,904 17.38$ 18.05$ 8,659,000$ 9,265,600$ 606,600$ 7.0%
1.00 1,851 2,092 24.56 25.51 522,300 628,500 106,200 20.3%
1.50 18 18 42.49 44.13 8,800 9,400 600 6.8%
2.00 4 4 64.00 66.47 2,900 3,100 200 6.9%
Sub-total 45,345 46,018 9,193,000 9,906,600 713,600 7.8%
Multi-Residential
0.75 39 47 38.21 39.69 12,700 22,000 9,300 73.2%
1.00 174 204 53.97 56.05 79,800 134,700 54,900 68.8%
1.50 244 245 93.37 96.98 193,600 279,800 86,200 44.5%
2.00 233 247 140.61 146.04 278,400 424,800 146,400 52.6%
3.00 45 54 266.66 276.96 100,300 165,800 65,500 65.3%
4.00 64 65 408.50 424.28 222,200 324,800 102,600 46.2%
6.00 7 7 802.55 833.54 47,700 68,700 21,000 44.0%
8.00 3 3 1,275.34 1,324.59 32,500 46,800 14,300 44.0%
10.00 - - 1,826.91 1,897.47 - - - 0.0%
Sub-total 809 872 967,200 1,467,400 500,200 51.7%
Business and Publicly-Owned
0.75 327 334 35.99 37.38 101,800 147,000 45,200 44.4%
1.00 357 372 50.83 52.79 156,900 231,000 74,100 47.2%
1.50 302 312 87.95 91.35 229,000 331,300 102,300 44.7%
2.00 390 395 132.45 137.57 445,700 637,800 192,100 43.1%
3.00 34 35 251.19 260.89 73,900 107,500 33,600 45.5%
4.00 29 28 384.79 399.65 96,600 131,800 35,200 36.4%
6.00 9 9 755.97 785.17 58,900 83,200 24,300 41.3%
8.00 - - 1,201.32 1,247.71 - - -
10.00 5 5 1,720.86 1,787.32 74,400 105,200 30,800 41.4%
Sub-total 1,453 1,490 1,237,200 1,774,800 537,600 43.5%
Irrigation and Commercial Agricultural
0.75 115 119 30.40 31.57 32,000 44,200 12,200 38.1%
1.00 283 288 42.93 44.59 111,000 151,200 40,200 36.2%
1.50 388 389 74.28 77.15 263,400 353,400 90,000 34.2%
2.00 464 464 111.85 116.17 474,400 634,800 160,400 33.8%
3.00 3 3 212.13 220.32 5,800 7,800 2,000 34.5%
4.00 118 176 324.98 337.53 350,500 699,600 349,100 99.6%
6.00 5 6 638.44 663.10 29,200 46,900 17,700 60.6%
8.00 - - 1,014.56 1,053.74 - - -
10.00 - - 1,453.33 1,509.46 - - -
Sub-total 1,376 1,445 1,266,300 1,937,900 671,600 53.0%
Fire Services
Less than 3"778 800 20.77 21.57 193,900 203,200 9,300 4.8%
More than 4"- - 27.98 29.06 - - -
Sub-total 778 800 193,900 203,200 9,300 4.8%
Set-up Fees 10.00 10.00 60,000 50,800 (9,200)
Total 49,761 50,625 12,917,600$ 15,340,700$ 2,423,100$ 18.8%
(1) Approved rates for water billed beginning in January 2019.
System Charges - Potable
System Charges Budget to Budget Variance
(1)
67
FY 2019 FY 2018 FY 2019
Meter Size Count Current Approved Budget Budget $%
0.75 44,397 15.45$ 15.10$ 8,007,600$ 8,078,800$ 71,200$ 0.9%
1.00 2,949 28.68 28.04 900,900 1,003,500 102,600 11.4%
1.50 959 64.85 63.40 725,200 734,700 9,500 1.3%
2.00 1,108 110.30 107.84 1,418,500 1,448,400 29,900 2.1%
3.00 92 234.60 229.36 224,900 247,100 22,200 9.9%
4.00 99 375.68 367.29 439,800 441,300 1,500 0.3%
6.00 18 769.02 751.85 163,700 164,300 600 0.4%
8.00 3 1,241.89 1,214.16 44,100 44,200 100 0.2%
10.00 5 1,787.55 1,747.63 105,700 106,100 400 0.4%
Total 49,630 12,030,400$ 12,268,400$ 238,000$ 2.0%
(1) Construction Meters, Fire Services, and Recycled Meters are exempt from MWD and CWA Fixed Charges.
(2) Approved rates for water billed beginning in January 2019.
Historical MWD and CWA Fixed Charges, in millions ($)
MWD and CWA Fixed Charges (Pass-Through) - Potable
MWD and CWA Fixed Charges Budget to Budget
Variance
$0
$2
$4
$6
$8
$10
$12
$14
FY 2014
Actual
FY 2015
Actual
FY 2016
Actual
FY 2017
Actual
FY 2018
Actual
FY 2019
Budget
(1)(2)
68
Meter Size Meter Sales Installation Fee Meter Fee Total Fees Budget
0.75 700 111.25$ 234.44$ 345.69$ 242,000$
1.00 1 111.25 302.52 413.77 400
1.50 9 111.25 491.72 602.97 5,400
2.00 3 111.25 704.58 815.83 2,400
3.00 7 669.83 2,195.75 2,865.58 20,100
4.00 - 669.83 3,813.67 4,483.50 -
6.00 - 1,058.05 6,587.25 7,645.30 -
8.00 - 1,622.42 8,230.28 9,852.70 -
10.00 - 1,622.42 11,836.68 13,459.10 -
Total 720 270,300$
Meter Fees - Potable
FY 2019
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.
69
FY 2014 FY 2015 FY 2016 FY 2017 FY 2019
Budget
Water Sales 46,856,253$ 44,025,774$ 37,243,504$ 46,265,872$ 54,262,051$ 56,119,900$
System Charges 11,152,291 12,380,370 13,391,005 12,243,766 13,078,386 15,340,700
Energy Charges 2,114,844 2,134,865 2,151,538 2,334,565 2,040,410 2,335,300
MWD and CWA Fixed Charges 10,309,983 10,846,411 11,850,406 12,398,886 11,920,268 12,268,400
Penalties 839,025 894,569 776,704 734,261 830,217 892,000
Total Potable Revenues 71,272,396$ 70,281,989$ 65,413,157$ 73,977,350$ 82,131,332$ 86,956,300$
Revenue History - Potable
FY 2018*
Revenue History - Potable, in millions ($)
Actual
$-
$20
$40
$60
$80
$100
FY 2014
Actual
FY 2015
Actual
FY 2016
Actual
FY 2017
Actual
FY 2018
Actual
FY 2019
Budget
Water Sales System Charges Energy Charges MWD & CWA Fixed Charges Penalties
*Actual unaudited
70
FY 2019 FY 2019
Budget Actual Budget Budget Actual* Budget $ %
Potable Water Purchases (CWA):
Rate Effective January 1,309.00$ 1,279.61$ 1,305.00$ (4.00)$ -0.3%
Budgeted Sales 25,588.9 28,070.2 29,377.2 32,730,500 35,910,910 38,401,000 5,670,500 17.3%
District & Unbilled Usage(1)99.3 323.3 225.2 126,200 415,595 294,400 168,200 133.3%
Water Loss 1,070.4 1,244.4 1,233.4 1,369,100 1,598,595 1,612,300 243,200 17.8%
Total Variable Charges 26,758.6 29,637.9 30,835.8 34,225,800$ 37,925,100$ 40,307,700$ 6,081,900 17.8%
CWA and MWD Fixed Charges:
CWA - Infrastructure Access Charge 2,080,200 2,071,740 2,124,000 43,800 2.1%
CWA - Customer Service Charge 1,682,400 1,670,281 1,645,800 (36,600) -2.2%
CWA - Emergency Storage Charge 4,486,800 4,510,642 4,522,200 35,400 0.8%
CWA - Reliability Fixed Charge 1,908,000 1,909,909 2,116,800 208,800 10.9%
MWD - Capacity Reservation Charge 734,400 735,501 758,400 24,000 3.3%
MWD - Readiness-to-Serve Charge 1,344,000 1,049,092 1,035,600 (308,400) -22.9%
Total Fixed Charges 12,235,800 11,947,165 12,202,800 (33,000) -0.3%
Total Variable and Fixed Charges 46,461,600 49,872,265 52,510,500 6,048,900 13.0%
Average Cost Per Acre-Foot 1,736$ 1,683$ 1,703$
(1) Excludes potable supplement to recycled system.
*Actual unaudited
Water Purchases and Related Costs - Potable
FY 2018 FY 2018
Acre Feet Purchase Costs
Budget to Budget
Variance
0
8000
16000
24000
32000
40000
FY 2014
Actual
FY 2015
Actual
FY 2016
Actual
FY 2017
Actual
FY 2018
Actual
FY 2019
Budget
Historical Potable Water Purchases, in acre-feet
71
FY 2014 FY 2015 FY 2016 FY 2017 FY 2019
Budget Actual* Budget $ %
Administrative Buildings 179,919$ 216,744$ 212,448$ 196,288$ 223,500$ 188,067$ 215,100$ (8,400)$ -3.8%
Potable Transmission 1,878,026 2,063,318 1,804,810 1,981,178 2,082,200 2,111,203 2,196,800 114,600 5.5%
Total Power Costs 2,057,945$ 2,280,062$ 2,017,258$ 2,177,466$ 2,305,700$ 2,299,270$ 2,411,900$ 106,200$ 4.6%
Power Costs - Potable
FY 2018 Budget to Budget
Variance
Actual
Historical Power Costs, in thousands ($)
$0
$500
$1,000
$1,500
$2,000
$2,500
FY 2014
Actual
FY 2015
Actual
FY 2016
Actual
FY 2017
Actual
FY 2018
Actual
FY 2019
Budget
Administrative Buildings Potable Transmission
*Actual unaudited
72
FY 2017 FY 2018 FY 2018 FY 2019
Actual Budget Actual* Budget $ %
Administrative Expenditures
Directors' Fees 20,493$ 40,000$ 35,252 70,000$ 30,000$ 75.0%
Travel and Memberships 157,379 245,400 184,597 246,900 1,500 0.6%
Conservation and Outreach 152,220 161,600 159,161 174,900 13,300 8.2%
General Office Expense 220,661 266,700 251,686 270,400 3,700 1.4%
Equipment 1,155,214 1,191,800 1,391,868 1,328,200 136,400 11.4%
Fees 620,148 601,000 591,312 619,900 18,900 3.1%
Services 1,499,855 1,814,800 1,546,136 1,764,400 (50,400) (2.8%)
Training 104,983 122,300 91,076 134,100 11,800 9.6%
Utilities 13,596 14,900 13,639 14,900 - 0.0%
Insurance and Legal 1,027,198 911,000 1,040,154 1,341,100 430,100 47.2%
Miscellaneous Expense 181 100 109 100 - 0.0%
Bad Debt Expense 69,548 99,800 128,836 99,800 - 0.0%
Subtotal before Overhead 5,041,476 5,469,400 5,433,826 6,064,700 595,300 10.9%
Less: Overhead Allocation (797,645) (816,000) (802,251) (871,100) (55,100) -
Total Expenditures 4,243,831$ 4,653,400$ 4,631,575$ 5,193,600$ 540,200$ 11.6%
4,403,925$
Directors' Fees 70,000$ 1.2%
Travel and Memberships 246,900 4.1%
Conservation and Outreach 174,900 2.9%
General Office Expense 270,400 4.5%
Equipment 1,328,200 21.9%
Fees 619,900 10.2%
Services 1,764,400 29.1%
Training 134,100 2.2%
Utilities 14,900 0.2%
Insurance and Legal 1,341,100 22.1%
Bad Debt Expense (1)99,900 1.6%
6,064,700 100.0%
Less: Overhead Allocation (871,100)
Total Administrative Expenses 5,193,600$
(1)Includes Miscellaneous Expense
Administrative Expenditures - Potable
Budget to Budget
Variance
FY 2019 Administrative Expenditures - Potable
*Actual unaudited
73
FY 2017 FY 2018 FY 2018 FY 2019
Actual Budget Actual* Budget $ %
Materials and Maintenance
Fuel and Oil 149,075$ 183,000$ 158,593$ 189,200$ 6,200$ 3.4%
Meters and Materials 148,492 117,200 273,009 286,000 168,800 144.0%
Fleet Parts and Equipment 115,733 124,800 118,113 139,700 14,900 11.9%
Infrastructure Equipment & Supplies 416,436 411,000 334,294 409,500 (1,500) (0.4%)
Chemicals 128,197 199,600 160,213 204,600 5,000 2.5%
Safety Equipment 54,157 51,800 50,782 56,800 5,000 9.7%
Laboratory Equipment and Supplies 37,758 58,500 57,210 38,700 (19,800) (33.8%)
Other Materials and Supplies 159,842 149,200 186,720 180,600 31,400 21.0%
Building and Grounds Materials 65,774 61,100 98,242 63,500 2,400 3.9%
Contracted Services 466,573 620,800 606,170 650,300 29,500 4.8%
Total Expenditures 1,742,037$ 1,977,000$ 2,043,346$ 2,218,900$ 241,900$ 12.2%
Fuel and Oil 189,200$ 8.5%
Meters and Materials 286,000 12.9%
Fleet Parts and Equipment 139,700 6.3%
Infrastructure Equipment and Supplies 409,500 18.5%
Chemicals 204,600 9.2%
Safety Equipment 56,800 2.6%
Laboratory Equipment and Supplies 38,700 1.7%
Other Materials and Supplies 180,600 8.1%
Building and Grounds Materials 63,500 2.9%
Contracted Services 650,300 29.3%
Total Expenditures 2,218,900$ 100.0%
Materials and Maintenance Expenditures - Potable
Budget to Budget
Variance
FY 2019 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. 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). The
District constructed a 30-inch six mile pipeline, a 12 million gallon reservoir, and a pump station to
bring this new source of recycled water into the District’s system. These projects were completed in
spring 2007 which eliminated the need for a potable supplement into the recycled system. The
benefits of this to the region as a whole are great, as less demand on the potable system will be
made, reducing future capacity and storage requirements. The $42 million investment in capital
outlay results in a significant reduction of water purchase costs and an increase in system reliability.
The District expects that 11.0% 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 3,593.5 acre-feet of recycled water to 729 landscaping and construction customers by
the end of Fiscal Year 2019. 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, 2024, 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 2017 FY 2018 FY 2018 FY 2019
31-Actual Budget Actual * Budget $ %
Revenues
Recycled Water Sales 9,742,800$ 9,863,100$ 10,463,864$ 9,403,200$ (459,900)$ (4.7%)
Meter Fees 5,284 2,600 7,752 5,100 2,500 96.2%
Interest 24,696 29,600 27,467 26,000 (3,600) (12.2%)
Total Revenues 9,772,780 9,895,300 10,499,083 9,434,300 (461,000) (4.7%)
Expenditures
Recycled Water Purchases 3,643,521 3,716,700 3,793,387 3,818,100 101,400 2.7%
Labor and Benefits 1,122,503 1,171,300 1,141,154 1,159,600 (11,700) (1.0%)
Administrative Expenses 288,482 557,100 414,857 675,700 118,600 21.3%
Materials and Maintenance 208,323 327,900 320,732 355,000 27,100 8.3%
Power 590,035 584,600 665,509 603,900 19,300 3.3%
1 Subtotal - Operations Costs 2,209,343 2,640,900 2,542,252 2,794,200 153,300 5.8%
DTransfer to GF Reserve 1,371,800 - - - - -
Expansion Reserve 455,600 3,274,600 3,274,600 2,712,100 (562,500) (17.2%)
BBetterment Reserve 835,200 - - - - -
TOPEB Reserve 51,200 42,100 42,100 34,900 (7,200) (17.1%)
NTransfer to New Supply Fund 35,000 221,000 221,000 75,000 (146,000) (66.1%)
Subtotal - Reserve Funding 2,748,800 3,537,700 3,537,700 2,822,000 (715,700) (20.2%)
Total Expenditures 8,601,664 9,895,300 9,873,339 9,434,300 (461,000) (4.7%)
1,171,116$ -$ 625,744$ -$ -$ - Excess Revenues/Expenditures
Operating Budget Summary - Recycled
Budget to Budget
Variance
*Actual unaudited
79
FY 2017 FY 2019
Actual Budget Actual* Budget $%
Water Sales 7,431,235$ 7,493,200$ 7,883,748$ 6,838,800$ (654,400)$ -8.7%
System Charges 434,775 589,100 594,049 804,300 215,200 36.5%
Energy Charges 417,595 313,700 347,841 343,800 30,100 9.6%
MWD and CWA Rebates 1,436,936 1,428,400 1,600,214 1,383,500 (44,900) -3.1%
Penalties 22,259 38,700 38,012 32,800 (5,900) -15.2%
Total Recycled Water Sales 9,742,800$ 9,863,100$ 10,463,864$ 9,403,200$ (459,900)$ -4.7%
Water Charges 6,838,800$
System Charges 804,300
Energy Charges 343,800
MWD and CWA Rebates 1,383,500
Penalties 32,800
9,403,200$
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 Charges: 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 Charges: The energy pumping charge is $ .056 per 100 cubic feet of water for each 100 feet of lift above the elevation
of 450 feet. All water customers are in one of 29 zones based on elevation.
MWD and CWA Rebates: Incentive from MWD and CWA for providing recycled water. The District receives $200
from CWA and $185 from MWD for every acre-foot (AF) of recycled water sold.
Penalties: Charges and penalties are imposed on customer accounts for late payments and returned checks.
Classification of Water Sales - Recycled
FY 2018 Budget to Budget
Variance
FY 2019 Classification of Water Sales
*Actual unaudited
80
Current Approved Accounts Unit Sales Budget
Recycled Irrigation
All units 4.26$ 4.41$ 727 1,429,800 6,171,300$
Recycled Commercial
All units 3.01 3.12 2 135,500 413,300
Total 729 1,565,300 6,584,600
Government Fee 0.41 0.42 - - 254,200
Total Water Sales 729 1,565,300 6,838,800$
Units %
Recycled Irrigation 1,429,800 91.3%
Recycled Commercial 135,500 8.7%
1,565,300 100.0%
(1) Approved rates for water billed beginning in January 2019.
Water Sales Summary by Meter Size - Recycled
Water Rates FY 2019
FY 2019 Unit Sales by Meter Size
(1)
81
FY 2014 FY 2015 FY 2016 FY 2017 FY 2019
Budget Actual Budget
Recycled Irrigation 2,068,330 1,723,386 1,357,347 1,393,468 1,377,800 1,588,141 1,429,800
Recycled Commercial - 118,570 234,330 232,300 238,300 222,361 135,500
Total Unit Sales 2,068,330 1,841,956 1,591,677 1,625,768 1,616,100 1,810,502 1,565,300
FY 2014 FY 2015 FY 2016 FY 2017 FY 2019
Budget Actual Budget
Recycled Irrigation 702 703 706 719 717 723 727
Recycled Commercial - 2 2 2 2 1 2
Total Meter Count 702 705 708 721 719 724 729
Unit Sales in thousands ($) and Meter Count Trends
Unit Sales History and Meter Count by Customer Class - Recycled
FY 2018
FY 2018
Actual
Actual
150
300
450
600
750
100
500
900
1,300
1,700
2,100
FY 2014
Actual
FY 2015
Actual
FY 2016
Actual
FY 2017
Actual
FY 2018
Actual
FY 2019
Budget
Units Meters
82
FY 2019 FY 2018 FY 2019
Meter Size Meter Count Current Approved Budget Budget $%
Irrigation
0.75 3 31.11$ 32.20$ 800$ 1,100$ 300$ 37.5%
1.00 110 43.94 45.48 41,000 59,000 18,000 43.9%
1.50 405 76.04 78.70 275,100 376,000 100,900 36.7%
2.00 193 114.50 118.51 203,500 269,800 66,300 32.6%
3.00 4 217.15 224.75 7,900 10,600 2,700 34.2%
4.00 10 332.67 344.31 33,200 40,600 7,400 22.3%
6.00 2 663.54 686.76 5,900 16,200 10,300 174.6%
8.00 - 1,038.56 1,074.91 - - - -
10.00 - 1,487.72 1,539.79 - - - -
Sub-total 727 567,400$ 773,300$ 205,900$ 36.3%
Commercial
0.75 - 36.85$ 38.14$ - - - -
1.00 - 52.04 53.86 - - - -
1.50 - 90.06 93.21 - - - -
2.00 - 135.63 140.38 - - - -
3.00 - 257.21 266.21 - - - -
4.00 - 394.01 407.80 - - - -
6.00 1 774.07 801.16 6,600 9,500 2,900 43.9%
8.00 - 1,230.08 1,273.13 - - - -
10.00 1 1,762.08 1,823.75 15,100 21,500 6,400 42.4%
Sub-total 2 21,700 31,000 9,300 42.9%
Total 729 589,100$ 804,300$ 215,200$ 36.5%
(1) Approved rates for water billed beginning in January 2019.
System Charges - Recycled
System Charges Budget to Budget Variance
(1)
83
Meter Size Meter Sales Installation Fee Meter Fee Total Fees Budget
0.75 - 111.25$ 234.44$ 345.69$ -$
1.00 4 111.25 302.52 413.77 1,700
1.50 3 111.25 491.72 602.97 1,800
2.00 2 111.25 704.58 815.83 1,600
3.00 - 669.83 2,195.75 2,865.58 -
4.00 - 669.83 3,813.67 4,483.50 -
6.00 - 1,058.05 6,587.25 7,645.30 -
8.00 - 1,622.42 8,230.28 9,852.70 -
10.00 - 1,622.42 11,836.68 13,459.10 -
Total 9 5,100$
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.
Meter Fees - Recycled
FY 2019
84
FY 2014 FY 2015 FY 2016 FY 2017 FY 2019
Budget
Water Sales 7,416,631$ 6,412,122$ 6,240,661$ 7,431,235$ 7,883,748$ 6,838,800$
System Charges 356,806 431,121 471,962 434,775 594,049 804,300
Energy Charges 383,513 369,302 379,026 417,595 347,841 343,800
MWD and CWA Rebates 1,828,134 1,611,764 1,396,472 1,436,936 1,600,214 1,383,500
Penalties 29,682 28,701 38,921 22,259 38,012 32,800
Total Recycled Revenues 10,014,766$ 8,853,010$ 8,527,042$ 9,742,800$ 10,463,864$ 9,403,200$
Revenue History - Recycled
FY 2018*
Revenue History - Recycled, in millions ($)
Actual
$-
$2
$4
$6
$8
$10
FY 2014
Actual
FY 2015
Actual
FY 2016
Actual
FY 2017
Actual
FY 2018
Actual
FY 2019
Budget
Water Sales System Charges Energy Charges MWD and CWA Rebates Penalties
*Actual unaudited
85
FY 2019 FY 2019
Budget Actual Budget Budget Actual* Budget $ %
Rate Per Acre-Feet 756.00$ 755.34$ 756.00$ -$ 0.0%
Recycled Water Purchases 2,660.7 3,352.3 2,544.1 2,011,600$ 2,532,110$ 1,923,500$ (88,100)$ -4.4%
Meter Fee $1,333.75 monthly 16,000 16,005 16,000 - 0.0%
Take-or-pay contract (1)2,234.3 1,648.5 2,484.9 1,689,100 1,245,122 1,878,600 189,500 11.2%
Total 4,895.0 5,000.8 5,029.0 3,716,700$ 3,793,237$ 3,818,100$ 101,400$ 2.7%
Average Cost Per Acre-Foot (Effective Rate)1,396.89$ 1,131.53$ 1,500.76$
(1) This is the anticipated take-or-pay amount to be paid to the City of San Diego. The contract requires the purchase of minimum
volume of water. The District does not anticipate meeting the minimum therefore, a payment would be due to the City of San Diego.
HISTORICAL RECYCLED WATER PURCHASES, IN ACRE-FEET
Water Purchases - Recycled
FY 2018 FY 2018 Budget to Budget
Acre Feet Purchase Costs Variance
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
FY 2014
Actual
FY 2015
Actual
FY 2016
Actual
FY 2017
Actual
FY 2018
Actual
FY 2019
Budget
*Actual unaudited
86
FY 2014 FY 2015 FY 2016 FY 2017 FY 2019
Budget Actual* Budget $ %
Total Power Cost 591,883$ 600,799$ 526,842$ 590,035$ 584,600$ 665,509$ 603,900$ 19,300$ 3.3%
Historical Power Costs, in thousands ($)
Actual
FY 2018 Budget to Budget
Variance
Power Costs - Recycled
$0
$100
$200
$300
$400
$500
$600
$700
FY 2014
Actual
FY 2015
Actual
FY 2016
Actual
FY 2017
Actual
FY 2018
Actual
FY 2019
Budget
*Actual unaudited
87
FY 2017 FY 2018 FY 2018 FY 2019
Actual Budget Actual* Budget $ %
Administrative Expenditures
General Office Expense 42$ -$ 86 -$ -$ 0.0%
Equipment 2,821 1,300 10,540 1,300 - 0.0%
Fees 25,199 26,300 25,630 23,600 (2,700) (10.3%)
Services 65,104 115,500 116,814 289,500 174,000 150.6%
Insurance and Legal (1)14,936 225,000 74,899 175,000 (50,000) (22.2%)
Subtotal before Overhead 108,102 368,100 227,969 489,400 121,300 33.0%
Add: Overhead Allocation 180,381 189,000 186,888 186,300 (2,700) (1.4%)
Total Expenditures 288,484$ 557,100$ 414,857$ 675,700$ 118,600$ 21.3%
Equipment 1,300$ 0.2%
Fees 23,600 3.5%
Services 289,500 42.8%
Insurance and Legal 175,000 25.9%
Overhead Allocation 186,300 27.6%
Total Expenditures 675,700$ 100.0%
(1) Legal expenses pertaining to the City of San Diego Recycled Water Rate Lawsuit.
FY 2019 Administrative Expenditures - Recycled
Administrative Expenditures - Recycled
Budget to Budget
Variance
*Actual unaudited
88
FY 2017 FY 2018 FY 2018 FY 2019
Actual Budget Actual* Budget $ %
Materials and Maintenance
Fuel and Oil 7,914$ 13,300$ 18,229$ 29,300$ 16,000$ 120.3%
Meters and Materials 3,384 7,500 3,061 7,500 - 0.0%
Infrastructure Equipment & Supplies 64,238 110,700 117,421 67,500 (43,200) (39.0%)
Chemicals 115,849 152,200 137,034 167,200 15,000 9.9%
Safety Equipment 1,012 1,500 1,384 4,500 3,000 200.0%
Laboratory Equipment and Supplies 4,024 4,000 4,100 4,200 200 5.0%
Other Materials and Supplies 2,694 6,500 6,059 6,500 - -
Contracted Services 9,208 32,200 33,444 68,300 36,100 112.1%
Total Expenditures 208,323$ 327,900$ 320,732$ 355,000$ 27,100$ 8.3%
Fuel and Oil 29,300$ 8.3%
Meters and Materials 7,500 2.1%
Infrastructure Equipment & Supplies 67,500 19.0%
Chemicals 167,200 47.1%
Safety Equipment 4,500 1.3%
Laboratory Equipment and Supplies 4,200 1.2%
Other Materials and Supplies 6,500 1.8%
Contracted Services 68,300 19.2%
Total Expenditures 355,000$ 100.0%
Materials and Maintenance Expenditures - Recycled
Budget to Budget
Variance
FY 2019 Materials and Maintenance Expenditures - Recycled
*Actual unaudited
89
Recycled Water Service Area
90
Sewer Revenues and Expenditures
The District provides sewer service to approximately 15,300 customers through 4,714 accounts
located in the northern section of the District. The District operates and maintains the sewage
collection system serving Rancho San Diego, Singing Hills, and portions of Mount Helix, all within
the Upper Sweetwater River Basin. This basin is also known as the Jamacha Basin. Residential
customers comprise 98.4% of the customer base.
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 $625,500 for FY
2019. Additionally, the District Is budgeted to pay $195,700 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 2019.
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 2018, 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 changes in rates, fees, and
charges were necessary in order to recover sufficient revenues to operate and maintain the public
sewer system.
Sewer bills are based on the rate of discharge and the strength. Due to their higher discharge and
strength, non-residential customers (comprising 1.6% of the customer base) comprise 10.8% of the
total sewer charges. The formula for sewer rates is shown on pages 99-100.
91
FY 2017 FY 2018 FY 2018 FY 2019
21-Actual Budget Actual * Budget $ %
Revenues
Sewer Revenues 2,955,430$ 2,869,400$ 2,838,212$ 2,922,600$ 53,200$ 1.9%
Capacity Fee Revenues 3,376 - 4,767 - - -
Tax Revenues 107,285 51,600 52,190 99,200 47,600 92.2%
Non-operating Revenues 809,700 35,500 26,513 35,500 - -
Interest 19,863 20,400 15,205 13,500 (6,900) (33.8%)
Total Revenue 3,895,653 2,976,900 2,936,887 3,070,800 93,900 3.2%
Expenditures
Labor and Benefits 1,054,383 1,080,400 1,069,033 1,197,100 116,700 10.8%
Administrative Expenses 212,965 275,200 259,762 283,900 8,700 3.2%
Materials and Maintenance 1,057,235 1,340,800 1,426,127 1,115,600 (225,200) (16.8%)
Power 122,622 133,500 173,997 145,600 12,100 9.1%
1 Subtotal - Operations Costs 2,447,205 2,829,900 2,928,919 2,742,200 (87,700) (3.1%)
DTransfer to General Fund Reserve 196,100 - - - - -
BBetterment Reserve 351,200 111,100 111,100 - (111,100) (100.0%)
RReplacement Reserve - - - 289,000 289,000 100.0%
TOPEB Reserve 37,500 35,900 35,900 39,600 3,700 10.3%
Subtotal - Reserve Funding 584,800 147,000 147,000 328,600 181,600 123.5%
Total Expenditures 3,032,005 2,976,900 3,075,919 3,070,800 93,900 3.2%
863,648$ -$ (139,032)$ -$ -$ -
Excess Revenue/(Expenditures)
Operating Budget Summary - Sewer
Budget to Budget
Variance
*Actual unaudited
92
FY 2019 FY 2019
Accounts Current Approved (1)Budget Actual* Budget $ %
Residential 4,588 2.77$ 2.67$ 1,310,700$ 1,296,800$ 1,412,300$ 101,600$ 7.8%
Multi-Residential 50 2.77 2.67 195,600 193,500 198,500 2,900 1.5%
Commercial
Low Strength 46 2.77 2.67 56,800 56,200 49,500 (7,300) -12.9%
Medium Strength 13 3.98 3.31 34,800 34,400 15,800 (19,000) -54.6%
High Strength 7 6.34 4.56 32,600 32,300 28,000 (4,600) -14.1%
Schools 6 2.77 2.67 89,600 88,600 91,800 2,200 2.5%
Churches 4 2.77 2.67 11,000 10,900 10,700 (300) -2.7%
Subtotal Commercial 76 224,800 222,400 195,800 (29,000) -12.9%
Total Sewer Charges 4,714 1,731,100$ 1,712,700$ 1,806,600$ 75,500$ 4.4%
Single-Family 1,412,300$ 78.2%
Multi-Family 198,500 11.0%
Commercial 195,800 10.8%
1,806,600$ 100.0%
(1)Approved rates for sewer service beginning in January 2019.
FY 2019 Charges Summary by Service Class
Charges Summary by Service Class - Sewer
Usage Rate Budget to Budget
VarianceFY 2018
*Actual unaudited
93
FY 2019 Current Approved (1)FY 2018 FY 2019
Meter Size Accounts Charges Charges Budget Budget $ %
Residential 4,588 17.08$ 14.91$ 900,900$ 880,600$ (20,300)$ -2.3%
Multi-Residential/Commercial
0.75 22 30.50 14.91 7,400 6,000 (1,400) -18.9%
1.00 6 44.94 37.27 2,600 2,900 300 11.5%
1.50 20 80.92 74.55 18,700 18,600 (100) -0.5%
2.00 63 124.12 119.27 90,500 92,000 1,500 1.7%
3.00 6 224.93 223.64 15,600 16,000 400 2.6%
4.00 6 368.97 372.73 25,700 26,700 1,000 3.9%
6.00 1 729.04 745.45 8,500 8,900 400 4.7%
8.00 - 1,161.15 1,192.73 - - -
10.00 2 1,665.25 1,714.54 38,600 40,600 2,000 5.2%
Total System Charges 4,714 1,108,500$ 1,092,300$ (16,200)$ -1.5%
System Charges - Sewer
Budget to Budget
Variance
(1) Approved rates for sewer service beginning in January 2019.
94
FY 2014 FY 2015 FY 2016 FY 2017 FY 2019
Budget Actual*Budget
Sewer Charges 2,736,867$ 2,986,734$ 3,124,595$ 2,929,899$ 2,839,600$ 2,809,415$ 2,898,900$
Penalties 21,000 22,900 24,700 25,531 29,800 28,797 23,700
Total 2,757,867$ 3,009,634$ 3,149,295$ 2,955,430$ 2,869,400$ 2,838,212$ 2,922,600$
Revenue History - Sewer
FY 2018
Revenue History - Sewer, in thousands ($)
Actual
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
FY 2014
Actual
FY 2015
Actual
FY 2016
Actual
FY 2017
Actual
FY 2018
Actual
FY 2019
Budget
Sewer Charges Penalties
*Actual unaudited
95
FY 2014 FY 2015 FY 2016 FY 2017 FY 2019
Budget Actual* Budget $ %
Total Power
Cost 159,018$ 167,475$ 153,815$ 122,622$ 133,500$ 173,997$ 145,600$ 12,100$ 9.1%
Power Costs - Sewer
FY 2018 Budget to Budget
Variance
Historical Power Costs, in thousands ($)
Actual
$20
$60
$100
$140
$180
FY 2014
Actual
FY 2015
Actual
FY 2016
Actual
FY 2017
Actual
FY 2018
Actual
FY 2019
Budget
*Actual unaudited
96
FY 2017 FY 2018 FY 2018 FY 2019
Actual Budget Actual*Budget $%
Administrative Expenditures
Travel and Memberships 11$ - -$ -$ -$ 0.0%
Equipment 16,793 10,900 4,784 10,900 - 0.0%
Fees 4,461 4,100 3,488 3,800 (300) (7.3%)
Services 15,486 82,500 71,540 74,800 (7,700) (9.3%)
Miscellaneous Expense - - 2,719 - - 0.0%
Bad Debt Expense 4,700 5,200 3,096 5,200 - 0.0%
Total 41,451 102,700 85,627 94,700 (8,000) (7.8%)
Add: Overhead Allocation 171,514 172,500 174,135 189,200 16,700 9.7%
Total Expenditures 212,965$ 275,200$ 259,762$ 283,900$ 8,700$ 3.2%
Equipment 10,900$ 3.8%
Fees 3,800 1.3%
Services 74,800 26.4%
Bad Debt Expense 5,200 1.8%
Overhead Allocation 189,200 66.7%
Total Expenditures 283,900$ 100.0%
Administrative Expenditures - Sewer
Budget to Budget
Variance
FY 2019 Administrative Expenditures - Sewer
*Actual unaudited
97
FY 2017 FY 2018 FY 2018 FY 2019
Actual Budget Actual* Budget $ %
Materials and Maintenance
Fleet Parts and Equipment 2,953$ 5,000$ 8,108 8,000$ 3,000$ 60.0%
Infrastructure Equipment & Supplies 95,789 142,800 174,724 128,200 (14,600) (10.2%)
Chemicals 3,943 5,900 7,167 15,400 9,500 161.0%
Laboratory Equipment and Supplies 5,010 8,700 11,011 7,600 (1,100) (12.6%)
Other Materials and Supplies - 100 1,990 100 - -
Contracted Services 77,623 167,600 88,805 135,100 (32,500) (19.4%)
Subtotal Materials and Maintenance 185,318 330,100 291,805 294,400 (35,700) (10.8%)
Sewer Charges
Metro O&M Costs 690,984 820,700 820,700 625,500 (195,200) (23.8%)
Spring Valley Sewer Charge 180,933 190,000 313,622 195,700 5,700 3.0%
Subtotal Sewer Charges 871,917 1,010,700 1,134,322 821,200 (189,500) (18.7%)
Total Expenditures 1,057,235$ 1,340,800$ 1,426,127$ 1,115,600$ (225,200)$ (16.8%)
Fleet Parts and Equipment 8,000$ 0.7%
Infrastructure Equipment & Supplies 128,200 11.5%
Chemicals 15,400 1.4%
Laboratory Equipment & Supplies (1)7,700 0.7%
Contracted Services 135,100 12.1%
Metro O&M Costs 625,500 56.1%
Spring Valley Sewer Charge 195,700 17.5%
Total Expenditures 1,115,600$ 100.0%
Includes Other Materials & Supplies.
Materials and Maintenance Expenditures - Sewer
Budget to Budget
Variance
FY 2019 Materials and Maintenance Expenditures - Sewer
(1)
*Actual unaudited
98
Formula for Sewer Rates
(1) Sewer rates are 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:
(Sewer Rate x Winter Average x 85%) + System Charges = Total Monthly Bill
The current sewer rates and system charges for single-family residential customers are $2.77 and
$17.08, respectively. Effective January 1, 2019 the sewer rate and system charges will be $2.67 and
$14.91, respectfully.
The current sewer rates for multi-residential customers is $2.77 and will decrease to $2.67 for the
calendar year 2019. The sewer rates and system charges for residential and multi-residential
customers is 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 Sewer Rate(1)) + System Charges = Total Monthly Bill
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 SWRCB has grouped commercial customers into various categories and has
99
Formula for Sewer Rates
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
1/1/2019
Low-Strength Commercial * 1.000 $ 2.67
Medium-Strength Commercial 2.000 $ 3.31
High-Strength Commercial 4.000 $ 4.56
*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 2019, capacity fees are projected to be $1.7 million which is $140,500
more than the FY 2019 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 $3.7 milliion which is $29,000 more than the FY 2019 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. Budgeted availability
fees are projected to increase from $680,400 to $732,800.
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 4.8% of the total Departmental
Budget.
Legal expenditures are viewed as a District-wide general cost because they benefit all departments
and usually are not attributed to any one department. The District retains outside legal services
instead of in-house counsel.
Insurance premiums are also viewed as District-wide general cost because it benefits all
departments and cannot be attributed to any one department. The District participates in a program
where it can reduce its premium by implementing training sessions to reduce on-the-job accidents
and injuries.
Some employee benefits are charged to the General Expense Department because they are not
entirely attributable to a specific department or fiscal year in which they are incurred. For example,
when a pay rate increase occurs for an employee, his/her leave balances increase in value due to
this change. In this case, the cost is charged to the General Expense Department.
104
FY 2017 FY 2018 FY 2019
Actual Budget Actual * Budget $%
Fee Revenues
Capacity Fee Revenues 1,559,317$ 1,513,200$ 1,617,128$ 1,653,700$ 140,500$ 9.3%
Subtotal Fee Revenues 1,559,317 1,513,200 1,617,128 1,653,700 140,500 9.3%
Tax Revenues
1% General Tax 3,474,343 3,715,700 3,803,064 3,744,700 29,000 0.8%
Availability Fees 729,325 680,400 697,724 732,800 52,400 7.7%
Subtotal Tax Revenues 4,203,668 4,396,100 4,500,788 4,477,500 81,400 1.9%
General Revenue 5,762,985$ 5,909,300$ 6,117,916$ 6,131,200$ 221,900$ 3.8%
FY 2017 FY 2018 FY 2018 FY 2019
Actual Budget Actual * Budget $%
Property Rental 1,375,305$ 1,282,300$ 1,439,247$ 1,351,100$ 68,800$ 5.4%
Sewer Billing Fees 385,482 394,600 393,412 404,600 10,000 2.5%
Set-up Fee for Lease Site 27,000 - 21,500 - - 0.0%
Revenue from Shared Facility 25,737 35,500 26,513 35,500 - 0.0%
Miscellaneous 1,242,718 452,100 909,807 264,000 (188,100) -41.6%
Non-Operating Revenue 3,056,242$ 2,164,500$ 2,790,479$ 2,055,200$ (109,300)$ -5.0%
Potable Recycled Sewer Total
Capacity Fee Revenues 1,653,700$ -$ -$ 1,653,700$
1% General Tax 3,744,700 - - 3,744,700
Availability Fees 633,600 - 99,200 732,800
Property Rental 1,351,100 - - 1,351,100
Sewer Billing Fees 404,600 - - 404,600
Revenue from Shared Facility - - 35,500 35,500
Miscellaneous 264,000 - - 264,000
Total General and Non-Operating Revenue 8,051,700$ -$ 134,700$ 8,186,400$
(1) For General and Non-Operating Revenues, the Potable Fund serves as the District's General Fund
for accounting purposes.
Non-Operating Revenues(1)
Budget to Budget
Variance
General and Non-Operating Revenues by Business(1)
FY 2019
General Revenues
General Revenues(1)
FY 2018 Budget to Budget
Variance
*Actual unaudited
105
FY 2017 FY 2018 FY 2018 FY 2019
Actual Budget Actual* Budget $%
General Expense
Total labor and benefits (1)1,397,852$ 1,106,200$ 1,461,441$ 1,069,600$ (36,600)$ (3.3%)
Administrative Expenditures
Insurance expenses 607,404 661,000 206,821 896,100 235,100 35.6%
Legal expenses (2)434,730$ 475,000$ 70,107$ 620,000 145,000 30.5%
Total General Expense 2,439,985$ 2,242,200$ 1,738,959$ 2,585,700$ 108,400$ 4.8%
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 2018 and FY 2019 is $205,300 and $212,500, 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 Legal Expenses for FY 2018 and FY 2019 is $225,000 and $175,000 respectively, for the
City of San Diego Recycled Water Rate Lawsuit.
*Actual unaudited
106
Departmental Operating Budget
Labor and Benefits
The District reviews and studies organizational/personnel changes and a five-year long-term staffing
review on an annual basis as part of the budgeting process. Labor and Employee Benefits expenditures
for FY 2019 were estimated based on proposed staffing level needs. The objective of the annual review
is to examine the implementation of department efficiencies and evolving business practices, impacts on
staffing levels, as well as prepare future leaders of the organization. The annual review is also used as a
reference tool for District succession planning purposes.
The District provides employees and Board members with a choice of four health providers (Blue Shield
HMO, EPO and PPO, and the District is adding Kaiser HMO effective 1/1/19) and a dental PPO plan. The
District pays 100% of employee coverage and 88% of spouse and dependent coverage. Other ancillary
benefits include basic life and accidental death and dismemberment insurance, short and long term
disability benefits, flexible spending accounts for health and dependent care, and an Employee
Assistance Program. In addition, the District offers the CalPERS Pension plan 2.7% @ 55 for classic
members and 2.0% @ 62 for PEPRA employees and Other Post-Employment Benefits after the employees
reach certain age and tenure requirements. Employees participate in the contribution for both plans.
Increases in employee benefits costs are mainly due to continued increases in group health insurance
premiums, additional payments to OPEB to reduce long-term retiree health liability, and an increase in
compensation due to a 2.8% increase in salary and wages, based on the Memorandum of Understanding
(MOU) between the District and its employee association.
Labor and Benefits represent 20.4% 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 2019 Budget
includes funding for labor and benefits for 137 full-time equivalent (FTE) employees.
The staffing level for FY 2019 has increased three (3) FTE employee from FY 2018. The District
continuously analyzes workload requirements, opportunities for automation and areas where resources
can be effectively shared or relocated. As a result, the District has eliminated the Assistant General
Manager position and added the following positions: meter maintenance worker, customer service field
representative, construction inspector and an assistant survey technician. The additional positions are
primarily in response to residential development in Eastern Chula Vista.
A projected 8.2% 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 $2,060,200
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.
107
Departmental Operating Budget
Administrative Expenses (Continued)
Overall administrative expenses increased by $667,500 or 12.2% compared to FY 2018 and are shown on
page 117. The Insurance and legal expenses budget increased by $380,100 or 33.5% due to higher
insurance deductibles, increased insurance premiums and increased anticipated expenses for legal
expenses. The equipment budget increased by $136,400 or 11.3% primarily due to a reallocation of
information technology expenses from outside services to equipment expense. This was done to
consolidate contractual services into one category. The services budget increased by $115,900 or 5.8%
for various needs within the District. The Director’s fees increased by $30,000 or 75% to meet potential
increases in the Board director fee amounts and anticipated increases in Director reimbursements. Fees
increased by $15,900 or 2.5% primarily for election fees. Training increased by $11,800 or 9.6% primarily
due to required hazardous materials training (HAZWOPER training).
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 2019, overall materials and maintenance expenses increased by 1.2%, or $43,800. The largest
decrease is in Metro O&M fees of ($195,200) or (23.8%) due to decrease in projected cash funding
requirements for the City of San Diego’s pure water program. The decrease in Metro fees from FY 2018
to FY 2019 is largely a result of the District exceeding budgeted flow to Metro in 2018 due to maintenance
at the treatment plant and a reduction in the level of cash funding for the cities pure water programs,
however, the District estimates metro fees will continue to increase for pure water program costs.. Other
decreases are reflected in infrastructure equipment and supplies of ($59,300) or (8.9%) and in laboratory
equipment and supplies of ($20,700) or (29.1%) primarily due to one-time equipment purchases in the FY
2018 budget.
These decreases are offset by increases in meters and materials of $168,800 or $135.4% due to increased
meter sales. This increase has a net $0 increase on the overall operating budget as it is offset by increases
in revenues from meter sales and installation fees. Contracted Services increased by $33,100 or 4.0%
due to increases for ongoing weed abatement at the 54 acre lot and golf course. Other materials and
supplies increased by $31,400 or 20.2% due to increases in meter sales. Fuel and oil increased by $22,200
or 11.3% in due to rising fuel costs. Chemical expenses increased by $29,500 or 8.2% for chemicals
needed in a pax mixer, and residual control system chemical usage. Fleet parts and equipment increased
by $17,900 or 13.8% due to increasing tire costs and a new truck bed. Safety Equipment increased by
$8,000 or 15.0% due to a transfer of safety equipment out of infrastructure equipment and supplies.
108
Board of Directors 175,800$ 0.5%
General Manager 1,732,700 5.2%
General Expense 2,585,700 7.8%
Administrative Services 6,849,100 20.6%
Finance 6,164,200 18.5%
Water Operations 12,166,200 36.5%
Engineering 3,625,900 10.9%
33,299,600$ 100.0%
Departmental Operating Budget
Total FY 2019 Departmental Operating Budget
$33,299,600
* Actual unaudited
109
FY 2017 FY 2018 FY 2018 FY 2019
Actual Budget Actual* Budget $ %
Labor Costs 11,668,426$ 11,979,700$ 11,580,545$ 12,291,000$ 311,300$ 2.6%
Benefits
Pension 4,130,482 4,378,200 3,559,566 4,822,200 444,000 10.1%
Employee Assistance Program 3,706 4,200 3,700 4,000 (200) -4.8%
Workers' Compensation 284,810 320,400 317,393 389,000 68,600 21.4%
Health/Dental/Life Insurance/OPEB 3,919,293 4,052,500 4,757,345 3,963,800 (88,700) -2.2%
Social Security/Medicare 953,090 997,800 978,716 1,040,300 42,500 4.3%
Salary Continuation Insurance 61,098 62,100 61,802 57,900 (4,200) -6.8%
State Unemployment Insurance - 20,000 - 20,000 - 0.0%
Vacation/Sick/Holiday/Other Leave 2,331,164 2,343,800 2,434,413 2,433,100 89,300 3.8%
Total Benefits 11,683,642 12,179,000 12,112,935 12,730,300 551,300 4.5%
Total Labor and Benefits 23,352,068 24,158,700 23,693,480 25,021,300 862,600 3.6%
Less: Non-Operating Labor and Benefits
Labor Costs 1,051,855 1,072,600 1,041,184 1,169,300 96,700 9.0%
Benefits Allocation 738,978 785,000 746,998 890,900 105,900 13.5%
Total Non-Operating Labor and Benefits 1,790,833 1,857,600 1,788,182 2,060,200 202,600 10.9%
Operating Labor & Benefits 21,561,235 22,301,100 21,905,298 22,961,100 660,000 3.0%
Overhead Allocation (115% of labor costs) 1,104,194 1,233,500 1,197,400 1,344,700 111,200 9.0%
Admin Overhead (36.85%)406,895 454,500 441,228 495,600 41,100 9.0%
Less: Non-operating labor overhead (763,883) (779,000) (756,134) (849,200) (70,200) 9.0%
Net Operating Labor and Benefits 20,797,352$ 21,522,100$ 21,149,164$ 22,111,900$ 589,800$ 2.7%
Labor and Benefits
Budget to Budget
Variance
04080120
Full - Time Equivalent (FTE)
FY 2019
Budget
FY 2018
FY 2017 135
134
137
* Actual unaudited
110
Potable Recycled Sewer
Developer
Reimbursed-
CIP Total
Operating Labor Costs 10,235,600$ 439,600$ 446,500$ -$ 11,121,700$
Benefits 11,012,300 400,800 426,300 - 11,839,400
Overhead Allocation-Personnel (1,492,700) 319,200 324,300 - (849,200)
Total Operating Labor and Benefits 19,755,200 1,159,600 1,197,100 - 22,111,900
CIP Labor Costs 534,900 49,000 107,600 477,800 1,169,300
Benefits 396,300 36,400 73,500 384,700 890,900
Overhead Allocation-Personnel 388,400 35,600 78,100 347,100 849,200
Total CIP Labor and Benefits 1,319,600 121,000 259,200 1,209,600 2,909,400
Total Labor and Benefits 21,074,800$ 1,280,600$ 1,456,300$ 1,209,600$ 25,021,300$
Potable-Operating 19,755,200$ 79.0%
Potable-CIP 1,319,600 5.3%
Sewer-Operating 1,197,100 4.8%
Sewer-CIP 259,200 1.0%
Recycle-Operating 1,159,600 4.6%
Recycle-CIP 121,000 0.5%
Developer Reimbursed-CIP 1,209,600 4.8%
25,021,300$ 100.0%
Labor and Benefits by Fund - Fiscal Year 2019
111
FY 2018
General Manager
General Manager 1 1 1
Assistant General Manager 1 1 0
District Secretary 1 1 1
Sr. Confidential Executive Secretary 1 1 1
Communications Officer 1 1 1
Communications Assistant 1 1 1
General Manager 6 6 5 (1)
Total FTE - General Manager Department 665
Administrative Services
Chief, Administrative Services 1 1 1
Assistant Chief, Administrative Services 0 0 0
Confidential Executive Secretary 1 1 1
Confidential Secretary 1 1 1
Administrative Services 333
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 1 1
Senior Buyer 1 0 0
Assistant Buyer 0 0 0
Senior Warehouse Worker 1 1 1
Warehouse/Delivery Worker 0 0 0
Facilities Maintenance Technician 2 2 2
Purchasing 5 5 5
Safety
Safety & Security Specialist 1 1 1
Safety 1 1 1
Information Technology Operations/Applications
Chief Information Officer 0 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 2017 FY 2019
(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
112
FY 2018
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 Systems Analyst I and II 2 2 2
Network Analyst 0 0 0
Information Technology 11 11 11
Total FTE - Administrative Services Department 23 23 23
Finance
Chief Financial Officer 1 1 1
Assistant Chief, Financ 0 01
Executive Secretary 1 1 1
Secretary 1 1 1
Finance 3 3 4
Controller and Budgetary Services
Finance Manager, Controller and Budget 1 1 0
Senior Accountant 2 2 2
Accountant 1 1 1
Accounting Technician 1 1 1
Controller and Budgetary Services 5 5 4
Treasury and Accounting Services
Finance Manager, Treasury and Accounting 1 1 1
Senior Accountant 222
Accountant 211
Accounting Technician 1 1 1
Treasury and Accounting Services 6 5 5 (1)
Customer Service:
Customer Service Manager 1 1 1
Customer Service Supervisor 1 1 1
Lead Customer Service Representative 1 1 1
Customer Service Representative I, II, III 6 6 6
Customer Service 9 9 9
Conservation
Sr. Water Conservation Specialist 1 0 0
Conservation 1 0 0 (1)
FY 2017 FY 2019
(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
Position Count by Department
113
FY 2018
Meter Maintenance
Meter Services Supervisor 0 1 1
Lead Cross Connection/Meter Maintenance Worker 1 0 0
Meter Maintenance Worker I & II 3 3 4
Lead Customer Service Field Representative 1 1 1
Customer Service Field Representative I and II 2 2 3
Meter Maintenance 7 7 9
Total FTE - Finance Department 31 29 31
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 0 0 0
Lead Water Systems Operator 2 2 2
Water Systems Operator I, II, and III 8 8 8
Senior SCADA Instrumentation Technician 2 2 2
Senior Disinfection Technician 2 2 2
Recycled Water Distribution Operator 0 0 0
Water System Operations 16 16 16
Utility Maintenance/Construction
Utility Maintenance Supervisor 222
Utility Crew Leader 3 3 3
Utility Workers I and II 8 8 8
Senior Utility/Equipment Operator 3 3 3
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 0 0 0
Laboratory Analyst 1 2 2
Collection/Treatment/Reclamation Operations 5 6 6
Total FTE - Operations Department 51 52 52
Position Count by Department
FY 2017 FY 2019
114
FY 2018
Engineering
Chief, Engineering 1 1 1
Executive Secretary 1 1 1
Secretary 1 1 1
Engineering 333
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 222
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 Program Supervisor 1 1 1
Recycled Water Specialist 3 3 3
Inspection Supervisor 1 1 1
Lead Construction Inspector 0 0 0
Construction Inspectors I and II 3 3 4
Supervising Land Surveyor 1 1 1
Assistant Survey Technician 1 1 2
Public Services, Survey, Inspection, & Recycled Water
Program 14 14 16
Total FTE - Engineering Department 24 24 26
District Total FTE Position Count 135 134 137
Position Count by Department
FY 2017 FY 2019
115
FY 2018
Lab Intern 1 0 0
Project Coordinator 0 1 0
Total Contract/Temporary Employees 110
General Manager 5.00 3.6%
Administrative Services 23.00 16.8%
Finance 31.00 22.6%
Operations 52.00 38.0%
Engineering 26.00 19.0%
Total 137.00 100.0%
Contract / Temporary Employees
FY 2017 FY 2019
FY 2019 Position Count by Department
116
FY 2017 FY 2018 FY 2018 FY 2019
Actual Budget Actual* Budget $ %
Administrative Expenditures
Directors' Fees 20,493$ 40,000$ 35,252$ 70,000$ 30,000$ 75.0%
Travel and Memberships 157,390 245,400 184,597 246,900 1,500 0.6%
Conservation and Outreach 152,220 161,600 159,161 174,900 13,300 8.2%
General Office Expense 220,703 266,700 251,772 270,400 3,700 1.4%
Equipment 1,174,828 1,204,000 1,407,192 1,340,400 136,400 11.3%
Fees 649,808 631,400 620,430 647,300 15,900 2.5%
Services 1,580,445 2,012,800 1,734,490 2,128,700 115,900 5.8%
Training 104,983 122,300 91,076 134,100 11,800 9.6%
Utilities 13,596 14,900 13,639 14,900 - -
Insurance and Legal 1,042,134 1,136,000 1,115,053 1,516,100 380,100 33.5%
Miscellaneous Expense 181 100 2,828 100 - -
Bad Debt Expense 74,248 105,000 131,932 105,000 - -
Subtotal before Overhead 5,191,029 5,940,200 5,747,422 6,648,800 708,600 11.9%
Less: Overhead Allocation (445,750) (454,500) (441,228) (495,600) (41,100) -
Total Expenditures 4,745,279$ 5,485,700$ 5,306,194$ 6,153,200$ 667,500$ 12.2%
######## 5,605,400$ 6,862,475$ 8,164,900$
Directors' Fees 70,000$ 1.1%
Travel and Memberships 246,900 3.7%
Conservation & Outreach 174,900 2.6%
General Office Expense 270,400 4.1%
Equipment 1,340,400 20.2%
Fees 647,300 9.7%
Services 2,128,700 32.0%
Training 134,100 2.0%
Utilities 14,900 0.2%
General Expense 1,516,100 22.8%
Bad Debt Expense (1)105,100 1.6%
6,648,800 100.0%
Less: Overhead Allocation (495,600)
Total Administrative Expenses 6,153,200$
(1)Includes Miscellaneous Expense
Administrative Expenditures - Total
Budget to Budget
Variance
FY 2019 Total Administrative Expenditures, in thousands ($)
*Actual unaudited
117
FY 2017 FY 2018 FY 2018 FY 2019
Actual Budget Actual* Budget $ %
Materials and Maintenance
Fuel and Oil 156,989$ 196,300$ 176,822$ 218,500$ 22,200$ 11.3%
Meters and Materials 151,876 124,700 276,070 293,500 168,800 135.4%
Fleet Parts and Equipment 118,686 129,800 126,221 147,700 17,900 13.8%
Infrastructure Equipment & Supplies 576,463 664,500 626,439 605,200 (59,300) (8.9%)
Chemicals 247,989 357,700 304,414 387,200 29,500 8.2%
Safety Equipment 55,169 53,300 52,166 61,300 8,000 15.0%
Laboratory Equipment and Supplies 46,792 71,200 72,321 50,500 (20,700) (29.1%)
Other Materials and Supplies 162,536 155,800 194,769 187,200 31,400 20.2%
Building and Grounds Materials 65,774 61,100 98,242 63,500 2,400 3.9%
Contracted Services 553,404 820,600 728,419 853,700 33,100 4.0%
Subtotal Materials and Maintenance 2,135,678 2,635,000 2,655,883 2,868,300 233,300 8.9%
Sewer Charges
Metro O&M Costs 690,984 820,700 820,700 625,500 (195,200) (23.8%)
Spring Valley Sewer Charge 180,933 190,000 313,622 195,700 5,700 3.0%
Subtotal Sewer Charges 871,917 1,010,700 1,134,322 821,200 (189,500) (18.7%)
Total Expenditures 3,007,595$ 3,645,700$ 3,790,205$ 3,689,500$ 43,800$ 1.2%
Fuel and Oil 218,500$ 5.9%
Meters and Materials 293,500 8.0%
Fleet Parts and Equipment 147,700 4.0%
Infrastructure Equipment and Supplies 605,200 16.4%
Chemicals 387,200 10.5%
Safety Equipment 61,300 1.7%
Laboratory Equipment and Supplies 50,500 1.4%
Other Materials and Supplies 187,200 5.1%
Building and Grounds Materials 63,500 1.7%
Contracted Services 853,700 23.0%
Sewer Charges 821,200 22.3%
Total Expenditures 3,689,500$ 100.0%
Materials and Maintenance Expenditures - Total
Budget to Budget
Variance
FY 2019 Materials and Maintenance Expenditures
* Actual unaudited
118
FY 2017 FY 2018 FY 2018 FY 2019
Budget to
Budget
Actual Budget Actual* Budget Variance
Departmental Expenditures
BBoard of Directors 97,922$ 144,100$ 134,799$ 175,800$ 31,700$
GGeneral Manager 1,879,060 1,994,400 1,444,214 1,732,700 (261,700)
GGeneral Expense 2,336,409 2,242,200 2,577,083 2,585,700 343,500
A Administrative Services 6,197,544 6,528,200 6,843,184 6,849,100 320,900
F Finance 5,286,364 5,668,800 5,909,269 6,164,200 495,400
WWater Operations 10,779,140 11,950,900 11,330,141 12,166,200 215,300
E Engineering 3,080,029 3,358,400 3,204,233 3,625,900 267,500
T Total Departmental Expenditures 29,656,468 31,887,000 31,442,923 33,299,600 1,412,600
Less: Overhead Allocation (1,106,243) (1,233,500) (1,197,400) (1,345,000) (111,500)
Net Departmental Expenditures 28,550,225 30,653,500 30,245,523 31,954,600 1,301,100
Non-Departmental Expenditures & Reserve Funding
Water Purchases 48,412,936 50,178,300 53,665,502 56,328,600 6,150,300
Power 2,890,123 3,023,800 3,138,776 3,161,400 137,600
Subtotal Non-Departmental Expenditures 51,303,059 53,202,100 56,804,278 59,490,000 6,287,900
Transfer to General Fund Reserve 2,854,300 - - - -
Expansion Reserve 4,093,600 3,274,600 3,274,600 2,712,100 (562,500)
Betterment Reserve 3,466,400 111,100 111,100 - (111,100)
Replacement Reserve 464,500 9,787,900 9,787,900 12,778,600 2,990,700
OPEB Reserve 961,000 998,000 998,000 980,800 (17,200)
Transfer to New Supply Reserve 35,000 221,000 221,000 75,000 (146,000)
Subtotal Reserve Funding 11,874,800 14,392,600 14,392,600 16,546,500 2,153,900
Total Operating Expenditures 91,728,084$ 98,248,200$ 101,442,401$ 107,991,100$ 9,742,900$
Operating Expenditures by Department
FY 2019 Funding Source by Department, in Millions ($)
$0 $5,000 $10,000 $15,000 $20,000 $25,000
Board of Directors
General Manager
Administrative Services
Finance
Water Operations
Engineering
General Expense
Potable
Recycled
Sewer
* Actual unaudited
119
FY 2017 FY 2018 FY 2018 FY 2019
Budget to
Budget
Actual Budget Actual* Budget Variance
Departmental Expenditures
Labor and Benefits 21,457,644$ 22,301,100$ 21,905,296$ 22,961,300$ 660,200$
Director's Fees 20,493 40,000 35,252 70,000 30,000
Travel and Memberships 157,390 245,400 184,597 246,900 1,500
Conservation and Outreach 152,220 161,600 159,161 174,900 13,300
General Office Expense 220,703 266,700 251,772 270,400 3,700
Equipment 1,174,828 1,204,000 1,407,192 1,340,400 136,400
Fees 1,691,942 1,767,400 1,735,483 2,163,400 396,000
Services 1,580,645 2,012,800 1,734,490 2,128,700 115,900
Training 104,983 122,300 91,076 134,100 11,800
Materials & Maintenance 2,135,678 2,635,000 2,655,883 2,868,300 233,300
Utilities 13,596 14,900 13,639 14,900 -
Sewer Charges 871,917 1,010,700 1,134,322 821,200 (189,500)
Miscellaneous Expense 181 100 2,828 100 -
Bad Debt Expense 74,248 105,000 131,932 105,000 -
Total Departmental Expenditures 29,656,468 31,887,000 31,442,923 33,299,600 1,412,600
Less: Overhead Allocation (1,106,243) (1,233,500) (1,197,400) (1,345,000) (111,500)
Net Departmental Expenditures 28,550,225 30,653,500 30,245,523 31,954,600 1,301,100
Non-Departmental Expenditures & Reserve Funding
Water Purchases 48,412,936 50,178,300 53,665,502 56,328,600 6,150,300
Power 2,890,123 3,023,800 3,138,776 3,161,400 137,600
Subtotal Non-Departmental Expenditures 51,303,059 53,202,100 56,804,278 59,490,000 6,287,900
Transfer to General Fund Reserve 2,854,300 - - - -
Expansion Reserve 4,093,600 3,274,600 3,274,600 2,712,100 (562,500)
Betterment Reserve 3,466,400 111,100 111,100 - (111,100)
Replacement Reserve 464,500 9,787,900 9,787,900 12,778,600 2,990,700
OPEB Reserve 961,000 998,000 998,000 980,800 (17,200)
Transfer to New Supply Fund 35,000 221,000 221,000 75,000 (146,000)
Subtotal Reserve Funding 11,874,800 14,392,600 14,392,600 16,546,500 2,153,900
Total Operating Expenditures 91,728,084$ 98,248,200$ 101,442,401$ 107,991,100$ 9,742,900$
Operating Expenditures by Object
* Actual unaudited
120
Departmental Operating Budget
Tim Smith
President
Division 1
Mitch Thompson
Vice President
Division 2
Mark Robak,
Treasurer
Division 5
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 2017 FY 2018 FY 2018 FY 2019
Actual Budget Actual*Budget
Board of Directors 97,922$ 144,100$ 134,799$ 175,800$
Total Expenses 97,922 144,100 134,799 175,800
FY 2017 FY 2018 FY 2018 FY 2019
Actual Budget Actual*Budget
Benefits 67,807 81,800 77,958 83,000
Director's Fees 20,493 40,000 35,252 70,000
Travel and Memberships 9,242 22,300 19,797 22,800
Conservation and Outreach 380 - 1,792 -
Total Expenses 97,922$ 144,100$ 134,799$ 175,800$
-$
Board of Directors
Department
Object
Budget vs. Actual, in thousands ($)
$0
$30
$60
$90
$120
2017 2018 2019
12
0
14
4
$1
7
6
98
13
5
Budget Actual
* Actual unaudited
122
Director’s Division Boundaries
123
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124
Departmental Operating Budget
(1) See Position count by Department on pages 112-116 for the list of positions per department. District Chiefs
report directly to the General Manager; however, they are budgeted within their respective department.
General Manager
Mission
To provide exceptional water and wastewater service to its customers, and to manage the Otay
Water District’s resources in a transparent and fiscally responsible manner.
General Manager’s Vision
“To be a model water agency by providing stellar community service, achieving measurable results,
and continuously improving our operational practices.”
C
Statement of values
As Otay Water District employees we dedicate ourselves to:
Customers: We take pride that our commitment to customer-centered service is our highest
priority.
Excellence: We strive to provide the highest quality and value in all that we do.
Integrity: We commit ourselves to doing the right thing. Ethical behavior, trustworthiness, and
accountability are the District’s foundation.
Employees: We see each individual as unique and important. We value diversity and open
communication to promote fairness, dignity, and respect.
Teamwork: We promote mutual trust by sharing information, knowledge, and ideas to reach our
common goals.
Innovation: We constantly seek better, more efficient, and cost effective ways to deliver our
services.
General Manager – 5 Positions (1)
District Secretary
1211
Communications Officer
1211
General Manager
1211
Sr. Confidential Executive
Secretary 1211
Chief Financial Officer
2311
Board of Directors
1111
Communications Assistant
1211
Chief, Administrative
Services 2211
Chief, Water
Operations 3211
Chief, Engineering
3311
125
FY 2017 FY 2018 FY 2018 FY 2019
Actual Budget Actual*Budget
General Manager 1,705,310$ 1,787,800$ 1,294,666$ 1,534,200$
Conservation 173,750 206,600 149,548 198,500
Total Expenses 1,879,060$ 1,994,400$ 1,444,214$ 1,732,700$
-$
FY 2017 FY 2018 FY 2018 FY 2019
Actual Budget Actual* Budget
Labor and Benefits 1,470,477 1,373,200 1,010,561 1,065,900
Travel and Memberships 50,121 101,600 70,545 100,600
Conservation and Outreach 151,840 161,600 156,951 174,900
General Office Expense 6,062 6,200 5,192 6,200
Equipment - 3,200 2,578 3,200
Fees 77,199 58,000 58,771 74,000
Services 95,702 189,000 138,320 206,300
Training 1,295 1,500 1,187 1,500
Materials & Maintenance 26,257 100,000 - 100,000
Miscellaneous 107 100 109 100
Total Expenses 1,879,060$ 1,994,400$ 1,444,214$ 1,732,700$
-$ -$ -$ -$
General Manager
Department
Object
Budget vs. Actual, in thousands ($)
$1,000
$1,300
$1,600
$1,900
2017 2018 2019
2,
0
8
4
1,
9
9
4
1,
7
3
3
1,
8
7
9
1,
4
4
4
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
communications, outreach, water conservation, and legislation. The office participates in outreach
events throughout the community and helps fund and promote a variety of incentive and other
programs available to its customers. Staff also promotes water-use efficiency through educating the
District’s customers about available rebates, water conservation programs, and the Water
Conservation Garden. The office also manages the District’s Water Shortage Response Plan as well
as its water waste reporting program.
Accomplishments – Fiscal Year 2017-2018
The Otay Water District continues to be one of the lower cost water service providers of San
Diego County’s 22 public water agencies and one of the County’s 28 lower cost sewer service
providers in the County.
Reflecting the District’s ongoing efforts to minimize rate increases, 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 2019 budget,
presenting a 7 percent decrease in sewer rates and an overall average water rate increase
of 3.2 percent.
The District distributed its annual consumer confidence report to customers, indicating that
it met or surpassed all the public health drinking water requirements and standards, and did
not exceed a health-related maximum contaminant level.
Coordinated and received credit for the Special District Risk Management Authority’s
(SDRMA) Credit Incentive Program (Incentive Program). The District received combined
credits of approximately $585,883.73, which were applied towards the Property/Liability and
Workers’ Compensation premiums. The credits include the Incentive Program, a renewal
questionnaire bonus, a 5 percent multi-program discount, and other discounts.
127
Departmental Operating Budget
General Manager (continued)
Accomplishments – Fiscal Year 2017-2018 (continued)
Completed an actuarial valuation of the District’s Other Post-Employment Benefit (OPEB)
plan, which is estimated to be fully-funded in Fiscal Year 2021.
Worked with benefits consultant to price ancillary benefits in the market and changed the
District’s Life and Accidental Death and Dismemberment coverage, which resulted in an
overall savings to the District of approximately $15,000 per year, or a 17 percent reduction in
rate.
In Fiscal Year 2018, the District saved approximately $6.26 million compared to 2007 due to
staffing efficiencies. In total, from 2007 to 2018, the Full Time Equivalent (FTE) reductions have
saved the District $36.3 million.
The District enrolled seven eligible facilities in SDG&E’s EcoChoice Program, which allows
the District to purchase 100 percent renewable energy at a lower rate than the District was
previously paying for electricity. Power purchased through this program is Green-e Energy
certified. The District’s participation not only supports the adoption and expansion of
renewable energy initiatives throughout the region, it also provides its customers with a more
environmentally responsible water-delivery system, along with a small reduction in energy
costs.
To maintain water quality and keep pumping costs to a minimum, the District adapted its
pump stations to the new SDG&E peak electricity usage hours.
Completed Cost of Service studies for the District’s sewer and water services, incorporating
the cost of service sewer rates – a 7 percent decrease – into the District’s Fiscal Year 2019
Budget. Also, completed a Proposition 218 hearing to implement the water rates developed
from the Fiscal Year 2018 Cost of Service study.
As part of the District’s Automated Meter Reading change out program, staff upgraded 4,000
of the District’s meters to a new register. By replacing the register only and not the register
and meter and taking advantage of existing warranties, District saved approximately
$400,000 in Fiscal Year 2018.
As part of the District’s successful Leak Detection and Repair Program, the District surveyed
approximately 150 miles of potable pipelines, finding and repairing seven District-side leaks,
saving approximately 9-million gallons of nonrevenue water per year.
128
Departmental Operating Budget
General Manager (continued)
Accomplishments – Fiscal Year 2017-2018 (continued)
Completed the requirements of the mandatory lead testing in schools program (Assembly
Bill 746) and continued work on the voluntary lead testing for all eligible schools that
requested sampling. All samples collected were below action levels.
After reviewing the findings of an agronomy study commissioned by the District, the Board
of Directors took action to protect its ratepayers from the immediate costs of maintaining the
former Salt Creek Golf Course. The study found that the costs of continuing to irrigate and
maintain the 239-acre former golf course are greater to ratepayers than the long range costs
of not irrigating and maintaining the former golf course and potentially repairing the turf at a
later date.
Through a partnership with 29 additional San Diego County agencies, the District leveraged
economies of scale and acquired multiple years of precise, high-quality aerial photography
images of the District’s service-area footprint. These images are critical to accurately
representing District parcels and designating its assets. This partnership, rather than
individual agency image acquisition, yielded the District an approximate cost savings of
$30,000.
The District sold 588 meters, which totaled $9.41 million and equated to 1,133 Equivalent
Dwelling Units.
The Board adopted a resolution, affirming the District’s effort to support the use of municipal
tap water by reducing the purchase and use of plastic water bottles.
The District participated in the Water Agency Customer Appreciation Day at the Water
Conservation Garden, promoting conservation and encouraging its customers to visit the
Garden as a resource.
The District hosted the San Diego Chapter WateReuse Association on a tour of the Ralph W.
Chapman Water Recycling Facility, which can produce up to 1.3 million gallons per day
of recycled water that is used to irrigate parts of Eastern Chula Vista.
In efforts to continue promoting water-use efficiency to the District’s customers, it recognized
the WaterSmart Landscape Contest “Best in District” winner, a Chula Vista resident.
129
Departmental Operating Budget
General Manager (continued)
Accomplishments – Fiscal Year 2017-2018 (continued)
Completed 4,300 USA Mark-out tickets with an accuracy rate of 100 percent and completed
24 surveys related to various projects included in the Fiscal Year 2018 CIP.
Developed the first smartphone app for the Cathodic Test Station (CTS) program, which was
designed to improve efficiency and accuracy of the cathodic test stations annual survey. The
tool, being used to validate facilities, edit survey information, and communicate work
progress, was fully deployed to Engineering staff and its consultants.
The District continues to enhance its website and social media sites by increasing the
frequency of posts and use of increased Spanish-language content. As a result, from July 1,
2017 to June 30, 2018, the District’s Facebook gained a 16 percent increase in followers from
208 to 241 followers and a 20 percent increase in Twitter followers from 1,427 to 1,713.
YouTube video views increased by 53 percent from 8,911 in Fiscal Year 2017 to 13,622 in
Fiscal Year 2018. The District’s website page views has increased by about 16 percent from
347,943 in Fiscal Year 2017 to 402,226 in Fiscal Year 2018 and its users has increased by
approximately 67 percent from 84,851 in Fiscal Year 2017 to 141,946 in Fiscal Year 2018.
The District implemented its text-message notification system for customers paying a late
bill, decreasing the mailing of disconnection notices by 20 percent. Additional text messages
are sent to customers approximately 10 days before service interruption, notifying customers
of their delinquent balance and providing a link to pay via the District’s mobile friendly online
payment site.
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 2018 negotiations of a new MOU with the OWDEA.
130
Departmental Operating Budget
Administrative Services
Mission Statement
To provide support to the Board of Directors, the General Manager, and District staff by executing
objectives that meet and serve the needs of our customers by providing, through best administrative
practices, the full range of employer and employee services, administrative services, risk
management, safety and security, emergency preparedness and response, enterprise computing,
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 112-113 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 2017 FY 2018 FY 2018 FY 2019
Actual Budget Actual* Budget
Administrative Chief 550,510$ 576,400$ 578,567$ 604,100$
Human Resources 686,522 815,700 749,500 810,900
Purchasing and Facilities 1,367,018 1,386,400 1,663,708 1,486,400
Safety and Security 350,233 364,800 362,420 382,000
IT Operations 2,341,125 2,391,700 2,527,008 2,559,400
Geographic Information System (GIS) 902,136 993,200 961,981 1,006,300
Total Expenses 6,197,544 6,528,200 6,843,184 6,849,100
FY 2017 FY 2018 FY 2018 FY 2019
Actual Budget Actual* Budget
Labor and Benefits 4,085,764 4,223,100 4,200,115 4,413,700
Travel and Memberships 33,870 45,500 27,925 50,100
General Office Expense 69,825 91,900 101,127 94,100
Equipment 1,110,156 1,142,200 1,354,878 1,281,300
Services 380,875 507,400 456,048 439,900
Training 87,307 104,500 76,724 114,500
Materials & Maintenance 416,151 398,700 612,728 440,600
Power and Utilities 13,596 14,900 13,639 14,900
Total Expenses 6,197,544$ 6,528,200$ 6,843,184$ 6,849,100$
Budget vs. Actual, in thousands ($)
Administrative Services
Department
Object
$5,800
$6,000
$6,200
$6,400
$6,600
$6,800
$7,000
2017 2018 2019
6,
3
2
5
6,
5
2
8
6,
8
4
9
6,1
9
8
6,
8
4
3
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 2017-2018
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 2018 negotiations of a new MOU with the OWDEA.
Enhanced the District’s Ergonomic Program by developing an approved list of ergonomic
products, piloting a program for standing workstations and ergonomic chairs, and implementing
a computer program to remind employees to stretch and take breaks throughout the day using
RSI Guard. Full implementation will occur in the next fiscal year.
Updated the performance evaluation form and process to streamline the employee feedback
and evaluation process, which included updating our reference guide and providing training for
supervisors and managers.
Researched management training and development and employee programs to enhance
employee skills and promote growth. Referred supervisors, managers, and employees to
appropriate level training. Coordinated training internally on key topics, to include “Five
Concurrent Themes of Success” for all District employees and other required supervisory
training.
Coordinated and received credit for the Special District Risk Management Authority’s (SDRMA)
Credit Incentive Program (Incentive Program). The District received combined credits of
approximately $585,883.73, which were applied towards the Property/Liability and Workers’
Compensation premiums. The credits include the Incentive Program, a renewal questionnaire
bonus, a 5 percent multi-program discount, and other discounts.
Worked with benefits consultant to price ancillary benefits in the market and changed the
District’s Life and Accidental Death and Dismemberment coverage, which resulted in an overall
savings to the District of approximately $15,000 per year, or a 17 percent reduction in rate.
133
Departmental Operating Budget
Human Resources (continued)
Accomplishments – Fiscal Year 2017-2018 (continued)
Introduced new technology to provide employees with additional resources related to their
health benefits, including a phone application (Ben-IQ) and an online flipbook that includes all
benefits’ plan information.
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
non-structural facility maintenance work; and administers and manages outsourced facility
maintenance service contracts.
Accomplishments – Fiscal Year 2017-2018
Upgraded the Legacy and obsolete analog HVAC building management system to an efficient
digital system with web-based tools and smart thermostats. The enhanced controls add energy
savings through customized room and department settings and schedules. Along with a web-
based interface, the system includes mobile apps for on-the-go facilities staff.
Upgraded the Administration and Operations water fountains with Rapid Water Bottle Filling
Stations to encourage the use of Otay Water District tap water with reusable water
containers. The bottle filling stations fill three times faster than standard drinking fountains,
provide one-handed operation with an electronic sensor for touchless, sanitary operation, and
minimize plastic waste in local landfills.
Deployed Entré, the District’s alarm and access management system, to the majority of the
District’s facilities in conjunction with the rollout of the Cox Metro Ethernet (Metro-E) initiative.
With Entré, staff can assign or grant access and alarm privileges to employees, vendors, and
contractors remotely and in real-time. Predefined profiles determine day, time and location
privileges for landscapers, janitorial staff, consultants, contractors, lab services, and community
groups, among many others.
The District enrolled seven eligible facilities, including the Administrative and Operations
buildings, in SDG&E’s EcoChoice Program. The program allows the District to purchase 100
percent renewable energy at a lower rate than the District was previously paying for electricity.
134
Departmental Operating Budget
Purchasing and Facilities (continued)
Accomplishments – Fiscal Year 2017-2018 (continued)
Power purchased through this program is Green-e Energy certified. The District’s participation
not only supports the adoption and expansion of renewable energy initiatives throughout the
region, it also provides its customers with a more environmentally responsible water-delivery
system, along with a small reduction in energy costs.
Safety and Security
Services We Provide
Safety and Security, under the direction of the Chief of Administrative Services, provides the following:
interprets safety regulations and standards, participates in the development and management of
new or revised safety standards, policies, plans, organizes, coordinates and implements the
occupational safety & health and security management programs for the District. Ensures the
workplace is in compliance with Cal/OSHA regulations. Coordinates programs which support a safe
workplace including: safety orientations, Injury and Illness Prevention Program, emergency
preparedness, HAZWOPER Team and confined space entry and rescue. Takes or recommends
action to ensure compliance with security and occupational safety & health regulations and
requirements. Advises staff on safe work methods and practices and the elimination of hazards.
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; coordinates the Department of Transportation (DOT), the District’s Drug-Free
Workplace, and DMV Pull-Notice Programs; and plans and coordinates the District’s emergency
preparedness program.
Accomplishments – Fiscal Year 2017-2018
Partnered with the Department of Homeland Security (DHS), Office of Infrastructure Protection,
Protective Security Coordination Division, and the Regional Resiliency Assessment Project
(RRAP) to assist in the gathering of security, emergency response, and resiliency programs. As a
result of District site visits, DHS will use the gathered data for resiliency enhancement activities
throughout the lifecycle of the RRAP. The District received various accolades for its progressive
security program.
135
Departmental Operating Budget
Safety and Security (continued)
Accomplishments – Fiscal Year 2017-2018 (continued)
Implemented an Emergency Mass Notification System designed to alert staff about 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 has mobile capability.
In partnership with Purchasing, updated District-wide facilities’ physical security system to
standardize and modernize access control and video monitoring of facilities. 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.
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; cybersecurity; physical access
controls; mobile, physical, and wireless networks; internal/external website; and end-user helpdesk
services.
Accomplishments – Fiscal Year 2017-2018
Deployed the District’s new GPS Fleet Management solution, ForeFleet. The new solution
provides seamless integration with the District’s existing fuel management system, improved
reporting features, and enhanced computer based diagnostics for predictive analysis and
preventive maintenance. It also manages all District fleet vehicle diagnostics information
including identification data, expenses, and routine inspections. Through the new fleet
management system, the District will manage fuel consumption, driver behavior, and real-time
tracking of vehicle locations.
Deployed the District’s new unified telecommunication system, 8X8. The new cloud-based
solution provides automatic and seamless call distribution, telephony integration with the
District’s current Financial Management System, and provides an out-dial campaign
136
Departmental Operating Budget
Information Technology Operations/Applications (continued)
Accomplishments – Fiscal Year 2017-2018 (continued)
management module necessary for customer engagement. The system also enables District
staff to communicate effectively through the use of instant messaging (IM), fluid chat options,
and presence features for improved call visibility and video conferencing. The new call-center
solution also provides a reduction in infrastructure and licensing costs and reduces the use of
physical space needed for an ’on premise” phone system.
Received the Municipal Information Systems Association of California’s (MISAC) achievement
award for “Quality Information Technology Practices” for 2017. The MISAC award program
recognizes public agency Information Technology groups throughout California for their
exemplary technology service and operational practices and standards such as enterprise
technology operations, project management, system deployment, disaster recovery, and
cybersecurity practices.
Azteca Systems, developer of the GIS-centric software application, CityWorks, recognized the
District in their bi-annual “InPrint” Magazine. The article spotlighted the agency’s work in the
deployment of the solution with focus on planning and monitoring of the District’s asset
maintenance, infrastructure management, cost of repair, and total labor cost of all
interdependencies required to meet the District’s operational and financial needs.
Staff hosted the inaugural User Group Symposium for Southern California neighboring agencies’
LaserFiche users, industry partners, and team members. The District successfully deployed the
Enterprise Content Management System several months ago as part of a strategic initiative and
was chosen to host and showcase the organization’s practices of the deployed solution. Staff
also wrote a customer spotlight transcription titled, “Meeting Compliance Requirements with
LaserFiche”, which was posted on the solution provider’s public website. The transcription
discussed the evaluation, roadblocks, and lessons learned from implementing the new content
management system.
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 computer aided design 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.
137
Departmental Operating Budget
Geographic Information Systems (GIS) (continued)
Accomplishments – Fiscal Year 2016-2017
Through a partnership with 29 additional San Diego County agencies, the District leveraged
economies of scale and acquired multiple years of precise, high-quality Oblique Images or aerial
photography of the District’s service-area footprint. These images are critical to accurately
representing District parcels and designating its assets. This partnership, rather than individual
agency image acquisition, yielded the District an approximate cost savings of $30,000.
Implemented Innovyze InfoMaster, the asset management software decision tool, which helps
Engineering and Operations staff to better predict and plan for future CIP and preventive
maintenance projects by using condition-based criteria.
Developed the first smartphone app for the Cathodic Test Station (CTS) program. The new
Geographic Information Systems (GIS) mobile app was developed to improve efficiency and
accuracy of the cathodic test stations annual survey. The tool was fully deployed to Engineering
staff and its consultants. The Engineering department has been using the tool to validate facilities,
edit survey information, and communicate work progress.
Developed a GIS spatial analysis solution to identify parcels that need to be verified for service
and billing activity. The spatial analysis tool helps to quickly identify suspect parcels and saves
investigative time and effort.
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,
Meter Services, 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 – 31positions (1)
(1) See Position Count by Department on pages 113-114 for the list of positions per department.
Treasury and
Accounting
Services
2331
Customer
Service
2341
Controller and
Budgetary
Services
2321
Assistant Chief of Finance - 2331231
Chief Finance Officer - 2311
Meter
Services
2342
139
FY 2017 FY 2018 FY 2018 FY 2019
Actual (1)Budget (1)Actual* Budget
Finance Chief 561,748$ 579,200$ 807,013$ 605,200$
Controller and Budgetary Services 892,375 950,700 716,301 938,100
Treasury and Accounting Services 1,329,062 1,336,800 1,423,139 1,312,100
Customer Service 1,851,993 1,983,200 2,066,147 2,207,400
Meter Shop 651,186 818,900 896,669 1,101,400
Total Expenses 5,286,364 5,668,800 5,909,269 6,164,200
FY 2017 FY 2018 FY 2018 FY 2019
Actual (1)Budget (1)Actual* Budget
Labor and Benefits 4,327,524 4,657,400 4,696,950 4,992,400
Travel and Memberships 9,661 17,300 9,367 17,700
General Office Expense 143,439 167,500 144,522 169,200
Equipment - - 404 -
Fees 401,675 387,300 390,717 388,100
Services 167,982 186,800 196,400 138,300
Training 455 700 248 1,500
Materials & Maintenance 161,306 146,800 336,010 352,000
Miscellaneous 74 - 2,719 -
Bad Debt Expense 74,248 105,000 131,932 105,000
Total Expenses 5,286,364$ 5,668,800$ 5,909,269$ 6,164,200$
-$ -$ -$ -$
Budget vs. Actual, in thousands ($)
Finance
Department
Object
$2,500
$4,000
$5,500
2017 2018 2019
5,
5
1
3
5,
6
6
9
6,
1
6
4
5,
2
8
6
5,
9
0
9
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 2017-2018
Completed a sewer Cost of Service study and incorporated the cost of service rates into the
District’s Fiscal Year 2019 Budget.
Completed a water Cost of Service study and completed a Proposition 218 hearing to
implement the rates developed in the Fiscal Year 2018 Cost of Service study.
With the purpose of evaluating alternatives for reducing the District’s pension obligation,
implemented GovInvest software, which helps agencies solve their unfunded pension, OPEB,
and debt issues
Implemented process improvements including: automation of the District’s monthly reserve-
reporting process, streamlining the District’s process for budgeting water revenue-related
items, developing an executive-reporting process for operating expense budgets, and
developing a Capital Improvement Program (CIP) budget approval process.
For the fourteenth consecutive year, the GFOA awarded the District with the Distinguished
Budget Presentation Award for the Fiscal Year 2017-2018 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 twelfth consecutive
year, recognized the District with the Operating Budget Excellence Award for the Fiscal Year
2017-2018 Budget. This award acknowledges the District for preparing a budget document
that meets high standards.
141
Departmental Operating Budget
Controller and Budgetary Services (continued)
Accomplishments – Fiscal Year 2017-2018 (continued)
The CSMFO awarded the District the Capital Budgeting Excellence Award for the Fiscal Year
2017-2018 CIP Budget. This award recognizes agencies that have prepared a CIP 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. The division conducts an annual review of the District’s
Investment Policy, as required by law, with approval by the Board of Directors. It provides financial
analysis and review of staff projects and operational business proposals. It also assists in the
preparation of the District’s annual operating and capital budgets, along with updating the rate model
and the six-year financial plan.
Accomplishments – Fiscal Year 2017-2018
Developed a financial model for evaluating the cost benefit of the Rosarito Desalination
pipeline project. The model was developed with the ability to modify assumptions related to
the cost and volumes of Rosarito desalinated water delivery and measure the impacts on
the District’s purchased water costs.
Completed the State Water Resources Control Board’s water loss audit certification
program and submitted a certified water loss audit to the Department of Water Resources.
Completed an actuarial valuation of the District’s Other Post-Employment Benefit (OPEB)
plan. The OPEB plan is estimated to be fully-funded in Fiscal Year 2021.
142
Departmental Operating Budget
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, interactive voice response
(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.
Accomplishments – Fiscal Year 2017-2018
As the District continues to see an increase in new home construction, meter maintenance
staff completed over 550 new meter installations.
Customer Service staff began using text messaging to notify customers who were late
paying their bill. Approximately 10 days before service interruption, additional text
messages are sent to customers who provided a cell phone number to the District. These
messages notify customers of their delinquent balance and provide a link to pay via the
District’s mobile friendly online payment site. Since text messaging was implemented, the
mailing of disconnection notices has decreased by 20 percent.
As part of the District’s Automated Meter Reading change out program, staff upgraded
4,000 of the District’s meters to a new register. This new register offers enhanced
technology that increases the distance these meters can be read remotely.
The District piloted a cellular reading technology for its temporary meters. Twenty cellular
reading units were installed on temporary meters throughout the District. The meter reads
for these meters can now be transmitted directly to the office, saving hours of manual
reading.
143
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144
Departmental Operating Budget
Water 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 page 114 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 2017 FY 2018 FY 2018 FY 2019
Actual Budget Actual*Budget
Water Operations Chief (1)459,537$ 472,800$ 479,925$ 502,800$
Water Systems (1)5,230,597 6,082,400 5,986,051 6,156,900
Construction Maintenance (1)5,089,006 5,395,700 4,864,165 5,506,500
Total Expenses 10,779,140 11,950,900 11,330,141 12,166,200
FY 2017 FY 2018 FY 2018 FY 2019
Actual Budget Actual*Budget
Labor and Benefits (1)7,718,915 8,260,600 7,895,488 8,633,500
Travel and Memberships 40,318 42,400 42,461 43,900
General Office Expense 18 300 337 300
Equipment 64,651 58,600 48,905 55,900
Fees 135,059 147,500 115,556 116,600
Services 409,375 432,300 378,878 511,100
Training 6,923 9,000 7,381 8,000
Materials & Maintenance 1,531,964 1,989,500 1,706,813 1,975,700
Sewer Charges 871,917 1,010,700 1,134,322 821,200
Total Expenses 10,779,140$ 11,950,900$ 11,330,141$ 12,166,200$
(1) Excludes CIP labor and benefits.-$ -$ -$ -$
Water Operations
Department
Object
Budget vs. Actual, in thousands ($)
$-
$4,000
$8,000
$12,000
2017 2018 2019
11
,
3
1
7
11
,
9
5
1
12
,
1
6
6
10
,
7
7
9
11
,
3
3
0
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 water
system operators monitor and operate the recycled water distribution system to ensure it provides
adequate supply to the District’s recycled water. Laboratory staff ensures all regulatory-required
sampling, analyses, and reporting is done to meet the requirements from the SWRCB 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 2017-2018
Prepared interconnections and provided flows four times, as requested by Sweetwater
Authority.
Provided operational support of Capital Improvement Projects, including the Hillsdale Road
Water Main Replacement Project and the 870-2 Pump Station Project.
Prepared for the requested deliveries of water to Mexico, which is expected to occur in Fiscal
Year 2019.
Completed the Fiscal Year 2018 Leak Detection Project, which included approximately 150
miles of surveyed mains. Staff found and repaired seven District-side leaks, saving
approximately 9-million gallons of non-revenue water per year.
Adapted to the new SDG&E peak electricity usage hours at District pump stations to maintain
water quality and keep pumping costs to a minimum. The changes made by SDG&E were
the most complex changes to time-of-use rates in approximately 20 years.
Discovered a car wash and oil change business in the Jamacha Basin that was not properly
maintaining their sewer clarifier. This business was reported to the County and City of San
Diego for inspections and resulted in citations.
147
Departmental Operating Budget
Water System Operations (continued)
Accomplishments – Fiscal Year 2017-2018 (continued)
Continued work on the voluntary lead testing in schools program that remains in effect until
November 1, 2019. All eligible schools that have requested sampling under this program have
been tested. Completed the requirements of the mandatory lead testing in schools program
(Assembly Bill 746). All samples collected were below action levels.
Completed the Triennial Lead and Copper Sampling Program. All samples collected were
below action levels.
Completed the requirements of Senate Bill 1398, Lead Service Line Inventory. The District
does not have any service lines made of lead.
Assisted the San Diego County Water Authority with their pilot testing for nitrification control
of Pipeline 4. The pilot testing was a success and they intend on installing permanent
nitrification control equipment during Fiscal Year 2019.
Completed the three-year audits and the five-year revalidations of the California Accidental
Release Prevention Program for the District’s chlorine and qualifying aqua ammonia sites.
Utility Services Maintenance
Services We Provide
The Utility Maintenance and Construction Division has three sections which provide vital
maintenance functions to ensure continuity of the drinking water, recycled water, and wastewater
services to District customers while adhering to all applicable regulatory compliance requirements.
Utility Maintenance staff maintains all collection and potable distribution and recycled distribution
systems, including regular inspection and cleaning of the wastewater collection system. They also
exercise valves, install and/or repair main pipelines and service lines expediently, while following all
established safety rules and regulations. The Fleet Maintenance staff implements active preventative
maintenance practices and repairs on all District vehicles and equipment to ensure optimum
performance while establishing fuel efficient operational practices and emissions compliance. Pump
and Electrical staff performs preventative, predictive and corrective maintenance on all pumps,
motors, switchgear, and control valves in the District and assists with electrical maintenance and
installation throughout the District.
Accomplishments – Fiscal Year 2017-2018
Reclassified a Valve Maintenance Technician to a Utility Worker, allowing the District to
complete required maintenance more cost effectively and efficiently.
148
Departmental Operating Budget
Utility Services Maintenance (continued)
Accomplishments – Fiscal Year 2017-2018 (continued)
As part of the District’s ongoing Emergency Preparedness efforts, it completed the
procurement and deployment of multiple forward deployed VHF radios that are strategically
located throughout the District. These radios have been built to be used in mobile and
stationary applications.
Staff converted one water vehicle and one fuel vehicle into trailer units, which eliminates two
commercial vehicles from the fleet inventory. This will save the District time and money
required for ongoing maintenance, inspections, and future replacement of more expensive
vehicles, while still providing the same level of service and emergency preparedness.
The District procured a Highline Response Trailer that can expedite the temporary restoration
of water during unplanned outages when alternative connection points are available.
As part of the District’s ongoing condition assessment and asset management efforts, staff
coordinated the first systematic inspection of the District’s Automatic Transfer Switches
(ATSs). This will be an ongoing effort and will mitigate failures of this critical asset and assist
in proactively budgeting and replacing them in a cost effective way.
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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 – 26 Positions (1)
(1) See Position Count by Department on page 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 2017 FY 2018 FY 2018 FY 2019
Actual Budget Actual*Budget
Engineering Chief (1)578,069$ 587,300$ 585,202$ 624,700$
Engineering Services (1)583,550 752,200 814,224 918,000
Public Services (1)1,644,690 1,722,700 1,502,075 1,738,300
Environmental Services (1)273,720 296,200 302,732 344,900
Total Expenses 3,080,029 3,358,400 3,204,233 3,625,900
FY 2017 FY 2018 FY 2018 FY 2019
Actual Budget Actual*Budget
Labor and Benefits (1)2,492,882 2,598,800 2,562,783 2,703,200
Travel and Memberships 14,178 16,300 14,502 11,800
General Office Expense 1,359 800 594 600
Equipment 21 - 427 -
Fees 35,875 38,600 55,386 68,600
Services 526,711 697,300 564,255 833,100
Training 9,003 6,600 5,536 8,600
Materials & Maintenance - - 332 -
Total Expenses 3,080,029$ 3,358,400$ 3,204,233$ 3,625,900$
(1) Excludes CIP labor and benefits.
Engineering
Department
Object
Budget vs. Actual, in thousands ($)
2,800
3,000
3,200
3,400
3,600
3,800
2017 2018 2019
3,
3
6
2
3,
3
5
8
3,6
2
6
3,
0
8
0
3,
2
0
4
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 2017 -2018
Completed the design and awarded a construction contract for the parking lot
pavement restoration project located in the Administration and Operations parking lots.
Completed the design of the Hillsdale Road 12-Inch Waterline Replacement project,
which included the replacement of 4,050 linear feet of existing potable main.
Completed design of the Hillsdale Road 8-Inch Sewer project, which included the
replacement of 760 liner feet of existing sewer.
Completed design of the Fuerte Drive Sewer Relocation project, which included the
relocation of 255 liner feet of 8-inch PVC sewer main to accommodate the County’s
realignment project.
Completed design of the 870-2 Pump Station project, which will replace the existing 870
high-head and low-head pump stations upon completion.
Prepared and presented two Water Supply Assessment and Verification reports to the
Board – one for the County of San Diego’s Otay Ranch Village 14 and Planning Area
16/19 and the second, for the County of San Diego’s Otay Ranch Resort Village project.
Completed the design for the interconnection pipeline air/vac replacement project.
Completed the design for the 980-2 reservoir coatings and upgrade project.
153
Departmental Operating Budget
Water Resources, Planning, Design, and Environmental Services
(continued)
Accomplishments – Fiscal Year 2017 -2018 (continued)
Prepared a Request for Proposals (RFP) and awarded As-Needed consultant services
contracts for:
1. Environmental Services
2. Engineering Design Services
3. Geotechnical Engineering Services
4. Asset Management Services
5. Coating Specialists and Inspection Services
Completed the negotiation and presented for Board approval of a replacement
agreement for the East County Regional Treated Water Improvement Program that
eliminated the take-or-pay provision and will terminate in 2028.
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 global positioning
system plots. Once bid, the Construction staff provides construction management for the
projects.
Accomplishments – Fiscal Year 2017-2018
Completed construction of Trenchless Sewer Rehabilitation project, which included the
trenchless repair of approximately 3,600 linear feet of 8-inch gravity sewer with cured-in-
place-pipe (CIPP) lining, 17 spot CIPP repairs, totaling about 150 linear feet,
reestablishment of 67 sewer laterals, and installation of 86 lateral liners (Brim and T-Style).
Completed construction of the Otay Water District’s Administration & Parking Lot
Improvements Phase 1 – Lighting and Vehicle Charging Station projects, which installed
new efficient LED lighting at the Administration and Operations parking lots, an electric
vehicle charging station, and four emergency panic buttons.
154
Departmental Operating Budget
Public Services and Field Services (continued)
Accomplishments – Fiscal Year 2017-2018 (continued)
Completed rehabilitation of the 978-1 (0.5 MG) and the 850-2 (3.1 MG) Reservoir Interior
Coating and Upgrades projects.
Completed construction of the 571-1 (36.7 MG) Reservoir Cover/Liner Replacement
project.
Completed construction of the 14-Inch Recycled Water Force Main Improvements
project and associated Cathodic Protection Improvements.
As of June 30, 2018, sold 588 meters, which totaled $9.41 million and equated to 1,133
EDUs.
Completed 4,300 USA Mark-out tickets with an accuracy rate of 100 percent and
completed 24 surveys related to various projects included in the Fiscal Year 2018 CIP.
Conducted Quality Assurance on 58,232 linear feet of new developer installed potable
water and recycled water distribution pipelines.
Audited the District’s sewer system, validating 21 new connections to the District’s
system.
Completed disposal of one District-owned property and declared surplus with a net
value of $691,475.
Amended leases to generate revenue in excess of $1.3 million from the District’s 30 cell-
site leases.
Approved the Otay Ranch Village 3 N Sub Area Master Plan Amendment No. 2.
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156
FY 2017 FY 2018 FY 2018 FY 2019
Actual Budget Actual*Budget
Total Expenses 2,336,409 2,242,200 2,577,083 2,585,700
FY 2017 FY 2018 FY 2018 FY 2019
Actual Budget Actual*Budget
Labor and Benefits (1)1,294,275 1,106,200 1,461,441 1,069,600
Insurance expenses 607,404 661,000 671,253 896,100
Legal expenses (2)434,730 475,000 443,800 620,000
Total Expenses 2,336,409$ 2,242,200$ 2,577,083$ 2,585,700$
(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 2018 and
FY 2019 is $205,300 and $212,500, 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 Legal Expenses for FY 2018 and FY 2019 is $225,000 and $175,000 respectively, for the City of
San Diego Recycled Water Rate Lawsuit.
General Expense
The expenditures in this section are general operating costs not associated with an individual
department. The expenditures include: legal costs, insurance premiums, changes in accrued
employee leave balances and miscellaneous interest. These expenditures represent 7.8% of the
total Department Budget.
Department
Object
Budget vs. Actual, in thousands ($)
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
2017 2018 2019
2,
0
0
6
2,
2
4
2
2,
5
8
6
2,
3
3
6
2,
5
7
7
Budget Actual
* Actual unaudited
157
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158
Capital Budget
The District’s population is expected to 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 2019 Capital Budget is $24.2 million and the six-year Capital
Improvement Program (CIP) totals $92.8 million. Over the next six-year CIP budget, the District plans
to issue $30 million and $5 million in new debt to fund water and sewer related CIP projects
respectively. 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. Capital facility projects are
items that exceed $10,000 or $20,000 for infrastructure related items (as defined under capital
equipment on page 258 of the Glossary) and have a useful life of at least two years.
The CIP projects are identified and are prioritized based on the following criteria:
Safety, restoration of service, immediate obligation, Board directed, or critical system need.
System upgrades or requirements to maintain system reliability in the next few fiscal years.
Need to meet the future growth of the system.
Project requirement may be reduced in capacity or may have low probability of need in the future.
160
Capital Budget
Major CIP Projects
161
FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 Total
Beginning Balance 52,887$ 40,739$ 45,396$ 47,000$ 51,076$ 51,338$ 52,887$
Sources
Capacity Fees 7,791 7,972 6,773 6,886 5,439 5,642 40,503
Debt financing 30,000 5,000 - - - - 35,000
Grants - 260 260 260 - - 780
Interest 510 553 686 825 962 1,016 4,552
Temporary Meters 1,082 1,093 1,104 1,117 1,133 1,150 6,679
Availability (Betterment Portion)461 479 498 518 539 560 3,055
New Supply Fee 763 792 684 678 536 552 4,005
COPS 2010B Reimbursement 712 712 712 712 712 712 4,272
Transfer from General Fund (19,383) 16,524 15,533 15,048 14,639 15,358 57,719
Interfund Transfers 44 52 60 68 76 80 380
Total Sources 21,980 33,437 26,310 26,112 24,036 25,070 156,945
Uses
CIP Projects 24,239 18,361 13,566 10,707 12,446 13,482 92,801
Debt Service 8,235 8,757 9,461 9,634 9,616 9,689 55,392
Developer Services 1,654 1,662 1,679 1,695 1,712 1,730 10,132
Total Uses 34,128 28,780 24,706 22,036 23,774 24,901 158,325
Net Sources (Uses)(12,148) 4,657 1,604 4,076 262 169 (1,380)
Ending Balance 40,739$ 45,396$ 47,000$ 51,076$ 51,338$ 51,507$ 51,507$
CIP Reserve Funds ($1,000)
The CIP Reserve Funds presentation, shown on the following pages, is designed to provide an understanding of
how the funding of CIPs is expected to financially influence the District over the next six years. The financial
impacts are based on CIPs and their funding sources, including fund transfers in accordance with the District’s
Reserve Policy,and planned debt issuances. This data is captured in the District’s Rate Model on an annual basis
in order to make these projections.
$0
$10
$20
$30
$40
$50
$60
FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024
CIP Reserve Fund Balances ($1,000)
Betterment Replacement Expansion New Supply
162
FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 Total
Source
Expansion 78$ 399$ 192$ 1,263$ 2,448$ 1,653$ 6,033$
Betterment 2,852 2,801 554 1,218 1,740 2,121 11,286
Replacement 21,306 15,158 12,817 8,223 8,255 9,676 75,435
New Supply 3 3 3 3 3 32 47
Total 24,239$ 18,361$ 13,566$ 10,707$ 12,446$ 13,482$ 92,801$
FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 Total
Fund
Potable 18,929$ 15,612$ 10,398$ 9,059$ 11,476$ 11,671$ 77,145$
Recycled 827 1,334 1,608 648 60 1 4,478
Sewer 4,483 1,415 1,560 1,000 910 1,810 11,178
Total 24,239$ 18,361$ 13,566$ 10,707$ 12,446$ 13,482$ 92,801$
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
$25
FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024
Six-Year CIP Projects by Funding Source, in Thousands ($)
Expansion Betterment Replacement New Supply
$-
$5
$10
$15
$20
$25
FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024
Six-Year CIP Projects by Fund, in Thousands ($)
Potable Recycled Sewer
163
Expansion
CIP No CIP Project Title FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 Total
P2040 (1)Res - 1655-1 Reservoir 0.5 MG 5$ 10$ 150$ 880$ 1,250$ 585$ 2,880$
P2494 Multiple Species Conservation Plan 50 30 - - - - 80
P2500 (1)Padre Dam - Otay Interconnection Dehesa Valley 2 2 19 2 2 18 43
P2547 District Administration Vehicle Charging Stations 2 2 12 - - - 16
P2595 PL - 16-inch, 624 Zone, Village 3N - Heritage Road, Main St/Energy Way 1 1 1 1 146 - 150
P2642 Rancho Jamul Pump Station Replacement 5 5 10 380 1,050 1,050 2,500
R2084 (1)RecPL - 20-Inch, 680 Zone, Village 2 - Heritage/La Media 14 350 - - - - 364
Total Expansion 78$ 399$ 192$ 1,263$ 2,448$ 1,653$ 6,033$
Potable 64$ 49$ 192$ 1,263$ 2,448$ 1,653$ 5,669$
Recycled 14 350 - - - - 364
Total Expansion 78$ 399$ 192$ 1,263$ 2,448$ 1,653$ 6,033$
Betterment
Funding Source FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 Total
P2382 Safety and Security Improvements 224 - - - - - 224
P2400 PL - 20-Inch Pipeline Replacement, 711 Zone, Otay Lakes Road -
at Santa Paula
- - 47 109 279 273 707
P2405 (1)PL - 624/340 PRS, Paseo Ranchero and Otay Valley Road 5 5 50 500 85 5 650
P2451 Otay Mesa Desalination Conveyance and Disinfection System 7 7 7 7 7 69 104
P2500 (1)Padre Dam - Otay Interconnection Dehesa Valley 4 4 41 4 4 41 97
P2504 Regulatory Site Access Road and Pipeline Relocation 3 3 1 1 1 5 12
P2521 Large Meter Vault Upgrade Program 25 100 100 50 - - 275
P2547 District Administration Vehicle Charging Stations 4 3 28 - - - 34
P2578 (1)PS - 711-2 (PS 711-1 Replacement and Expansion) - 14,000 gpm - - 16 93 1,302 1,690 3,100
P2608 (1)PL - 8-inch, 850 Zone, Coronado Ave, Chestnut/Apple 20 175 30 - - - 225
P2619 (1)PS - Temporary Lower Otay Pump Station Redundancy 200 1,490 10 - - - 1,700
P2630 624-3 Reservoir Automation of Chemical Feed System 5 20 50 300 10 - 385
R2110 RecPS - 944-1 Optimization and Pressure Zone Modifications 25 20 5 5 - - 55
R2116 (1)RecPL - 14-Inch, 927 Zone, Force Main Improvements 24 20 1 1 1 1 48
R2118 Steele Canyon Sewer PS Large Solids Handling Improvements 105 10 - - - - 115
R2120 (1)RWCWRF Filtered Water Storage Tank Improvements 50 390 10 - - - 450
R2123 Repurpose Otay Mesa Recycled Water Lines 5 10 150 150 35 - 350
R2125 RecPRS - 927/680 PRS Improvements, Otay Lakes Road 45 140 10 - - - 195
R2150 RWCWRF - Secondary Chlorine Analyzer and Feed System 40 5 - - - - 45
S2024 (2)Campo Road Sewer Main Replacement 2,000 400 - - - - 2,400
S2043 RWCWRF Sludge Handling System 5 - - - 5 - 10
S2047 Asset Management - Info Master Sewer Implementation 28 - - - - - 28
S2060 Steele Canyon Pump Station Replacement - - - - 13 38 50
S2065 RWCWRF - TOC Monitor 30 - - - - - 30
Total Betterment 2,852$ 2,801$ 554$ 1,218$ 1,740$ 2,121$ 11,288$
Potable 495$ 1,806$ 378$ 1,062$ 1,687$ 2,083$ 7,512$
Recycled 294 595 176 156 36 1 1,258
Sewer 2,063 400 - - 18 38 2,518
Total Betterment 2,852$ 2,801$ 554$ 1,218$ 1,740$ 2,121$ 11,288$
Six-Year CIP Projects by Source and Fund ($1,000s)
(1) Partially funded by 2018A Water Revenue Bonds.
(2) Project to be funded with FY 2020 Sewer Debt proceeds.
164
Replacement
CIP No CIP Project Title FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 Total
P2083 (1)PS - 870-2 Pump Station Replacement 7,900 4,700 46 2 2 - 12,650$
P2174 (1)PS - 1090-1 Pump Station Replacement (400 gpm)150 200 1,100 1,000 45 - 2,495
P2282 Vehicle Capital Purchases 520 254 300 296 250 250 1,870
P2286 Field Equipment Capital Purchases 363 155 60 60 63 60 761
P2400 PL - 20-Inch Pipeline Replacement, 711 Zone, Otay Lakes Road -
at Santa Paula
- - 104 242 621 607 1,573
P2453 (1)SR-11 Utility Relocations 25 50 375 800 800 100 2,150
P2460 I.D. 7 Trestle and Pipeline Demolition 20 80 485 10 - - 595
P2485 SCADA - Infrastructure and Communications Replacement 162 85 85 85 56 - 473
P2504 Regulatory Site Access Road and Pipeline Relocation 3 3 1 1 1 5 12
P2507 East Palomar Street Utility Relocation 5 5 - - - - 10
P2508 Pipeline Cathodic Protection Replacement Program 542 - - - - - 542
P2516 (1)PL - 12-Inch, 640 Zone, Jamacha Road - Darby/Osage - - - 75 400 425 900
P2529 711-2 Reservoir Interior & Exterior Coating 5 5 7 - - - 17
P2530 711-1 Reservoir Interior & Exterior Coating 5 5 15 - - - 25
P2531 944-1 Reservoir Interior & Exterior Coating 5 5 10 - - - 20
P2532 944-2 Reservoir Interior & Exterior Coating 5 5 5 - - - 15
P2533 1200-1 Reservoir Interior & Exterior Coating 5 25 755 5 12 - 802
P2534 978-1 Reservoir Interior & Exterior Coating 5 5 25 20 - - 55
P2535 458-2 Reservoir Interior & Exterior Coating & Upgrades 5 5 10 - - - 20
P2539 South Bay Bus Rapid Transit (BRT) Utility Relocations 45 60 60 - - - 165
P2543 850-1 Reservoir Interior/Exterior Coating 5 595 225 5 35 - 865
P2544 850-2 Reservoir Interior/Exterior Coating 5 5 25 152 - - 187
P2545 980-1 Reservoir Interior Exterior Coating 5 5 15 - - - 25
P2546 980-2 Reservoir Interior/Exterior Coating 695 5 30 50 - - 780
P2553 (1)Heritage Road Bridge Replacement and Utility Relocation 80 120 250 755 150 50 1,405
P2555 Administration and Operations Parking Lot Improvements 25 25 230 - - - 280
P2557 520 Res Recirculation Pipeline Chemical Supply and Analyzer
Feed Replacement Project
60 - - - - - 60
P2561 Res - 711-3 Reservoir Cover/Liner Replacement 2,045 75 10 - - - 2,130
P2562 Res - 571-1 Reservoir Cover/Liner Replacement 170 30 - - - - 200
P2563 Res - 870-1 Reservoir Cover/Liner Replacement 1 10 90 896 - - 997
P2565 803-2 Reservoir Interior/Exterior Coating & Upgrades 755 205 5 30 5 - 1,000
P2566 520-2 Reservoir Interior/Exterior Coating & Upgrades 10 10 1,030 350 35 65 1,500
P2567 1004-2 Reservoir Interior/Exterior Coating & Upgrades - - - 20 780 105 905
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 Road 20 - - - - - 20
P2574 (1)PL - 12-Inch Pipeline Replacement, 978 Zone, Vista Vereda 500 1,150 10 - - - 1,660
P2578 (1)PS - 711-2 (PS 711-1 Replacement and Expansion) - 14,000 gpm - - 35 207 2,898 3,761 6,900
P2584 Res - 657-1 and 657-2 Reservoir Demolitions - - - - - 1 1
P2593 458-1 Reservoir Interior/Exterior Coating & Upgrades - - 10 680 100 50 840
P2594 Large Meter Replacement 95 - - - - 140 235
P2604 AMR Change Out 1,800 1,300 - - - - 3,100
P2605 (1)458/340 PRS Replacement, 1571 Melrose Ave 75 247 - - - - 322
Six-Year CIP Projects by Source and Fund ($1,000s)
(1) Partially funded by 2018A Water Revenue Bonds.
165
Replacement, Continued
CIP No CIP Project Title FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 Total
P2607 Douglas Ave SWA and OWD Interconnection Upgrade 37 10 - - - - 47
P2608 (1)PL - 8-inch, 850 Zone, Coronado Ave, Chestnut/Apple 20 175 30 - - - 225
P2609 (1)PL - 8-inch, 1004 Zone, Eucalyptus St, Coronado/Date/La Mesa 10 65 405 60 - - 540
P2610 Valve Replacement Program - Phase 1 95 150 25 - - - 270
P2611 (1)Quarry Road Bridge Replacement and Utility Relocation 10 160 425 350 50 - 995
P2612 (1)PL - 12-inch, 711 Zone, Pas de Luz/Telegraph Canyon Rd 10 85 390 15 - - 500
P2614 485-1 Reservoir Interior/Exterior Coating - - - - 10 885 895
P2615 (1)PL - 12-Inch Pipeline Replacement, 803 PZ, Vista Grande 20 130 1,030 20 - - 1,200
P2616 (1)PL - 12-Inch Pipeline Replacement, 978 Zone, Pence Dr/Vista
Sierra Dr
180 2,280 20 - - - 2,480
P2617 Lobby Security Enhancements 145 - - - - - 145
P2623 Central Area to Otay Mesa Interconnection Pipelines
Combination Air/Vacuum Valve Replacements
130 25 5 - - - 160
P2625 (1)PL - 12-inch, 978 Zone, Hidden Mesa Road 1,000 400 10 - - - 1,410
P2627 (1)458/340 PRS Replacement, 1505 Oleander Ave 75 245 5 - - - 325
P2631 1485-2 Reservoir Interior/Exterior Coating & Upgrades - - - - 5 50 55
P2633 Otay Mesa Rd and Alta Rd Water Appurtenances Relocations 10 50 400 40 - - 500
P2634 Rolling Hills Hydropneumatic Pump Station Jockey Pump
Replacement
35 - - - - - 35
P2635 (1)Vista Diego Hydropneumatic Tank Replacement 10 50 330 10 - - 400
P2636 980-2 PS Surge Tank Interior/Exterior Coating 150 25 - - - - 175
P2637 Survey Division Field GPS Equipment Replacement 35 - - - - - 35
P2638 Buildings and Grounds Refurbishments 57 57 - - - - 114
P2639 Vista Diego Hydropneumatic Pump Station Replacement 5 5 5 5 5 150 175
P2640 Portable Trailer Mounted VFD Pumps 30 185 3 1 1 180 400
P2641 (1)Rancho Jamul Hydropneumatic Tank Replacement 1 9 280 10 - - 300
P2643 980-1 Pump Station Surge Tanks Replacement - - - 10 40 300 350
P2644 803-1 Pump Station Surge Tank Replacement - - - 10 40 300 350
P2645 Rolling Hills Hydropneumatic Tank Interior/Exterior Coating 5 20 190 10 - - 225
P2646 North District Area Cathodic Protection Improvements - - 190 50 140 420 800
P2647 Central Area Cathodic Protection Improvements - - 100 135 765 - 1,000
P2648 Otay Mesa Area Cathodic Protection Improvements 40 55 305 - - - 400
P2649 HVAC Equipment Purchase 21 44 20 15 30 - 130
P2651 Automatic Data Processing 20 - - - - - 20
R2121 Res - 944-1 Reservoir Cover/Liner Replacement 1 60 1,300 10 10 - 1,381
R2139 RWCWRF - Filter Troughs Replacement 5 - - - - - 5
R2143 AMR Change Out 165 130 - - - - 295
R2145 RWCWRF - Filter Media and Nozzles Replacement 130 - - - - - 130
R2146 Recycled Pipeline Cathodic Protection Improvements 20 20 100 460 - - 600
R2147 RWCWRF Fuel Lines Replacement 150 25 - - - - 175
R2148 Large Meter Replacement - Recycled 8 12 12 12 14 - 58
R2149 680-1R PS Surge Tank Interior/Exterior Coating 5 140 20 10 - - 175
R2151 RWCWRF - Bulk Chlorine Vapor Scrubber System
Refurbishment
35 2 - - - - 37
Six-Year CIP Projects by Source and Fund ($1,000s)
(1) Partially funded by 2018A Water Revenue Bonds.
166
Replacement, Continued
CIP No CIP Project Title FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 Total
S2012 San Diego County Sanitation District Outfall and RSD Outfall
Replacement
50 50 125 125 125 125 600
S2024 (1)Campo Road Sewer Main Replacement 2,000 400 - - - - 2,400
S2027 Rancho San Diego Pump Station Rehabilitation 5 5 220 220 - - 450
S2044 Trenchless Sewer Rehabilitation 5 5 30 30 - - 70
S2045 Fuerte Drive Sewer Relocation 10 10 - - - - 20
S2046 RWCWRF - Aeration Panels Replacement 100 200 25 25 - - 350
S2048 Hillsdale Road Sewer Repairs 10 5 5 5 5 190 220
S2049 Calavo Basin Sewer Rehabilitation - Phase 2 20 140 825 5 - - 990
S2050 Rancho San Diego Basin Sewer Rehabilitation - Phase 2 20 20 180 550 525 5 1,300
S2051 RWCWRF - Headworks Improvements 165 5 - - - - 170
S2053 RWCWRF - Sedimentation Basins Weirs Replacement 5 - - - - - 5
S2054 Calavo Basin Sewer Rehabilitation - Phase 3 - - - 20 180 1,090 1,290
S2060 Steele Canyon Pump Station Replacement - - - - 38 113 150
S2061 RWCWRF Aeration Controls Consolidation & Optimization
Upgrades (S)
10 30 150 - - - 190
S2066 Rancho San Diego Basin Sewer Rehabilitation - Phase 3 - - - 20 20 250 290
S2067 RWCWRF Roofing Replacement and Natural Light
Enhancement
20 145 - - - - 165
Total Replacement 21,306$ 15,158$ 12,817$ 8,223$ 8,255$ 9,676$ 75,434$
Potable 18,367$ 13,754$ 9,825$ 6,731$ 7,339$ 7,904$ 63,918$
Recycled 519 389 1,432 492 24 - 2,856
Sewer 2,420 1,015 1,560 1,000 893 1,773 8,660
Total Replacement 21,306$ 15,158$ 12,817$ 8,223$ 8,255$ 9,676$ 75,434$
New Supply
CIP No CIP Project Title FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 Total
P2451 Otay Mesa Desalination Conveyance and Disinfection System 3 3 3 3 3 32 47
Total New Supply 3$ 3$ 3$ 3$ 3$ 32$ 47$
Potable 3$ 3$ 3$ 3$ 3$ 32$ 47$
Total New Supply 3$ 3$ 3$ 3$ 3$ 32$ 47$
Summary by Source
Funding Source FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 Total
Expansion 78 399 192 1,263 2,448 1,653 6,033$
Betterment 2,852 2,801 554 1,218 1,740 2,121 11,286
Replacement 21,306 15,158 12,817 8,223 8,255 9,676 75,435
New Supply 3 3 3 3 3 32 47
Total CIP by Funding Source 24,239$ 18,361$ 13,566$ 10,707$ 12,446$ 13,482$ 92,801$
Summary by Fund
Fund FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 Total
Potable 18,929 15,612 10,398 9,059 11,476 11,671 77,145$
Recycled 827 1,334 1,608 648 60 1 4,478$
Sewer 4,483 1,415 1,560 1,000 910 1,810 11,178$
Total CIP by Fund 24,239$ 18,361$ 13,566$ 10,707$ 12,446$ 13,482$ 92,801$
Six-Year CIP Projects by Source and Fund ($1,000s)
(1) Project to be funded with FY 2020 Sewer Debt proceeds.
167
CIP#Description Cost
Cat. (2)
Funding
Source (3)
FY
2019
FY
2020
FY
2021
FY
2022
FY
2023
FY
2024 Total
P2083 PS - 870-2 Pump Station Replacement M R $ - $ - $ - $ 5,000 $ 5,000 $ - $10,000
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 - 5,700
$ 700 $ 700 $ 2,600 $ 7,600 $ 7,600 $ - $19,200
FY
2019
FY
2020
FY
2021
FY
2022
FY
2023
FY
2024 Total
$ 200 $ 200 $ 2,100 $ 7,100 $ 7,100 $ - $16,700
500 500 500 500 500 0 2,500
000000 0
$ 700 $ 700 $ 2,600 $ 7,600 $ 7,600 $ - $19,200
(1)
(2)
(3)
Note:See pages 164-167 for complete description of CIP projects.
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.
Projected Incremental Operating Expenditures (1)
E - Expansion B - Betterment R - Replacement N - New Supply
The following schedule shows anticipated operating costs associated with each project in the CIP. Below is a
summary of each category of new costs that will be impacted. No additional revenues are associated with the
individual projects, as revenues are linked more directly to growth in water sales and capacity fee revenues.
Funding Source - Some projects have multiple funding sources as indicated by a slash (/):
Cost Category - Indicates maintenance cost (M), energy cost (E), or chemical cost (C), based on the project
type and Engineer's estimates.
O&M cost for a pump station: Total annual operating cost divided by the number of million of gallons a day (MGD)
capacity in the system = O&M cost per MGD. This rate is then multiplied by the MGD capacity of the new pump station.
Similarly, power cost per MGD for transmission is calculated and applied to the MGD of the new pump station. Chemical
expenses are incurred for pumping at the well sites. All estimated costs are increased annually for inflation.
Projected Incremental Operating Expenditures (operating cost) or O&M includes labor, benefits, materials, and overhead
O&M cost for pipes: Total annual operating cost divided by the number of feet of pipe in the system = O&M cost to
maintain a foot of pipe. This rate is then multiplied by the number of feet in new pipeline, and is increased annually for
inflation.
Cost Category
168
Quantity Amount
Vehicles
1 One-half ton extra cab truck for the Survey Department.46,000$
1 1/2 ton extra cab truck for the Survey Department.46,000
1 1/2 ton extra cab truck for the Inspection Department.40,000
1 Compact truck for the Meter Reading Department.29,500
1 One-ton truck for the Meter Maintenance Department.56,000
1 One-ton truck for the Meter Maintenance Department.49,500
1 Compact truck for the Meter Maintenance Department.29,500
1 HAZWOP van for the Water Systems Department.65,000
1 One-ton extra cab dual rear wheel truck for the valve crew.56,000
1 Class 5 dump truck for the Utility Maintenance Department.63,000
1 1/2 ton truck for the Water Systems Department.40,000
Total vehicles - P2282 520,500
Field Equipment
1 Replacement force main inspection UTV for Utility Maintenance.15,000
1 Replacement rubber tire loader for Utility Maintenance Department.177,600
1 Mini excavator for Utility Maintenance Department.138,000
1 Replacement trailer, new loader and mini excavator.32,800
Total field equipment - P2286 363,400
Total 883,900$
Summary by Project
P2282 Vehicles 520,500
P2286 Field equipment 363,400
Total 883,900$
FY 2019 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 air pollution control district engine
replacements, and retrofits.
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170
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
171
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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Adopted
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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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Date
Adopted
Date
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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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Date
Adopted
Date
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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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Date
Adopted
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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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Adopted
Date
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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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Date
Adopted
Date
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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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Date
Adopted
Date
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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
254
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject
DEBT POLICY
Policy
Number
Date
Adopted
Date
Revised
45 4/13/04 2/1/17
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.
255
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject
DEBT POLICY
Policy
Number
Date
Adopted
Date
Revised
45 4/13/04 2/1/17
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.
256
Glossary
The Fiscal Budget contains terminology that is unique to public finance and budgeting. The following
budget glossary provides assistance in understanding these terms.
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.
APPROPRIATIONS: 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 meter is placed into service. This fee is a
contribution of capital to either reimburse existing customers for the available capacity in the existing
system, or to help finance planned future growth-related capacity improvements.
CAPACITY FEE REVENUES: These fees are earned by the Operating Budget as the Engineering
Department supports expansion functions.
257
Glossary
CAPACITY RESERVATION CHARGE: An MWD charge passed on by CWA to individual agencies. This
charge is 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 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.
DEBT COVERAGE RATIO: The ratio of net revenue to annual interest and principal payments on debt.
DEBT SERVICE: The District's obligation to pay the principal and interest of bonds and other debt
instruments according to a predetermined payment schedule.
DEPRECIATION: An expense recorded to allocate a tangible asset’s cost over its useful life.
DESALINATION: The removal of dissolved minerals (including salts) from seawater or brackish water.
Engineered water desalination processes, which produce potable water from seawater or brackish
water, have become important because many regions throughout the world suffer from water
shortages.
258
Glossary
ENERGY CHARGE: 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.
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.
259
Glossary
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 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 SYSTEM CHARGES: 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.
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.
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.
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.
260
Glossary
READINESS-TO-SERVE CHARGE: 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.
SYSTEM CHARGE: 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.
UNIT: A unit of water is 100 cubic feet or 748 gallons of water.
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.
261
AF Acre-Foot/Feet
AMR Automated Meter Reader/Reading
BABS Build America Bonds
CALPERS California Public Employees' Retirement System
CCV City of Chula Vista
CEQA California Environmental Quality Act
CIP Capital Improvement Program
COPS Certificates of Participation
CSD City of San Diego
CSDA California Special Districts Association
CSMFO California Society of Municipal Finance Officers
CWA County Water Authority (San Diego)
EDU Equivalent Dwelling Unit
ERP Enterprise Resource Planning
FTE Full-time Equivalent
FY Fiscal Year
GAAP Generally Accepted Accounting Principles
GASB Government Acounting Standards Board
GF General Funds
GFOA Government Finance Officers Association
GIS Geographic Information System
GO General Obligation (bonds)
GPM Gallons per Minute
HCF Hundred Cubic Foot
HR Human Resources
ID Improvement District
IID Imperial Irrigation District
IT Information Technology
LAIF Local Agency Investment Fund
MG Million Gallons
MGD Million Gallons per Day
MOU Memorandum of Understanding
MWD Metropolitan Water District
NIMS National Incident Management System
O&M or O/M Operations and Maintenance
OPEB Other Post Employee Benefits
OWD Otay Water District
PL Pipeline
PRS Pressure Reducing Station
List of Acronyms
262
List of Acronyms
PS Pump Station
RWCWRF Ralph W. Chapman Water Recycling Facility
SANDAG San Diego Association of Governments
SBWRP South Bay Water Reclamation Plant
SCADA Supervisory Control and Data Acquisition
SWRCB State Water Resources Control Board
263
Index
Administrative Expenditures 73,88,97,117
Awards xiv-xvii
Balanced Scorecard Perspective 23
Budget Basis 8
Budget Calendar 9-12
Budget Guide 1-2
Budget Process 6-8
Budget Summary 39
Capital Budget Narrative 159-161
Capital Purchases FY2019 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 17
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 151-155
Finance 139-143
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 48
Fund Balances Forecast 55
Fund Structure 9
Future, The 21
General Fund Forecast 54
General Fund Revenues, Expenditures and Transfers 39-43,47
General Expense 106,157
264
Index
General Revenues 105
General Revenues and Expenses Narrative 103-104
Glossary 257-261
Investment Policy 215-223
Investment Policy Glossary 224-231
Labor and Benefits 110
Labor and Benefits by Fund 111
Letter of Transmittal v-xiii
List of Acronyms 262-263
Materials and Maintenance Expenditures 74,89,98,118
Meter Fees 69,84
Mission Statement, Vision, Statement of Value 3
MWD and CWA Fixed Fees (pass-through) 68
Operating Budget Summary 63,79,92
Operating Budget Summary by System 46
Operating Budget Summary – General Fund 44-45
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 4345 xviii-xix
Revenue History 70,85,95
Revenues and Expenditures by Fund 50-51
Revenues and Expenditures by Type 49
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
265
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 Charges 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
266