HomeMy WebLinkAboutOperating and Capital Budget FY 2022-2023OTAYWATER DlSTRlCT
a Adopted Operafrng and Capital Budget
Ftsca[ Year 2022-2023
Sprtng VaUey, Ca[if omta
Otay Water District
Adopted Operating and Capital Budget
Fiscal Year 2022-2023
BOARD OF DIRECTORS
Tim Smith, Division 1 President
Mark Robak, Division 5 Vice President
Jose Lopez, Division 4 Treasurer
Ryan Keyes, Division 2
Gary Croucher, Division 3
MANAGEMENT TEAM
Jose Martinez General Manager
Joseph R. Beachem Chief Financial Officer
Kevin Koeppen Assistant Chief, Finance
Adolfo Segura Chief, Administrative Services
Andrew Jackson Chief, Water Operations
Michael Long Chief, Engineering
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Table of Contents
Page
Letter of Transmittal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v
Awards. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xv
Resolution No. 4410. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xix
OVERVIEW
Budget Guide. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Mission Statement, Vision, Statement of Values. . . . . . . . . . . . . . . . . . . . . . . 3
District Formation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Service Area. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Organizational Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Budget Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Budget Control and Jurisdiction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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7
Budget Basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Fund Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Budget Calendar. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
COMMUNITY PROFILE
Demographics. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Service Area Assessed Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
STRATEGIC PLAN
Strategic Plan Narrative. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
General Manager. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Administrative Services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Water Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Engineering. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
FINANCIAL SUMMARIES
Financial Summaries Narrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Operating Budget Summary – General Fund . . . . . . . . . . . . . . . . . . . . . . . . 40
Operating Budget Summary by System . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
General Fund Revenues, Expenditures and Transfers . . . . . . . . . . . . . . . . . . . 43
Fund Balance Summary by Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Revenues and Expenditures by Type. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Revenues and Expenditures by Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
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Table of Contents
FIVE-YEAR FORECAST
Five-Year Forecast Narrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
General Fund Forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Fund Balances Forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Debt Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Impact of Current Debt Levels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Schedule of Outstanding Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Projected Principal Payments by Debt Issuance . . . . . . . . . . . . . . . . . . . . . . 56
Projected Interest Payments by Debt Issuance . . . . . . . . . . . . . . . . . . . . . . . 57
REVENUES AND EXPENDITURES
Potable Revenues and Expenditures
Potable Narrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Operating Budget Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Classification of Water Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Water Sales Summary by Customer Class . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Unit Sales and Meter Count History by Customer Class . . . . . . . . . . . . . . . . . . 64
System Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
MWD and CWA Fixed Fees (pass-through) . . . . . . . . . . . . . . . . . . . . . . . . . 67
Meter Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Revenue History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Water Purchases and Related Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Power Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Administrative Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Materials and Maintenance Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Potable Water Service Area Map. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Recycled Revenues and Expenditures
Recycled Narrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Operating Budget Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Classification of Water Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Water Sales Summary by Customer Class . . . . . . . . . . . . . . . . . . . . . . . . . 79
System Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Unit Sales and Meter Count History by Customer Class . . . . . . . . . . . . . . . . . . 81
Meter Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Revenue History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Water Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Power Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Administrative Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Materials and Maintenance Expenditures. . . . . . . . . . . . . . . . . . . . . . . . . . 87
Recycled Water Service Area Map . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Sewer Revenues and Expenditures
Sewer Narrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Operating Budget Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Charges Summary by Customer Class. . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
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Table of Contents
Sewer Revenues and Expenditures (continued)
System Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Revenue History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Power Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Administrative Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Materials and Maintenance Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . 96
Formula for Sewer Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Sewer Service Area Map . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
General Revenues and Expenditures
General Revenues and Expenditures Narrative . . . . . . . . . . . . . . . . . . . . . . . 101
General Revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
General Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
DEPARTMENTAL OPERATING BUDGET
Departmental Operating Budget Narrative . . . . . . . . . . . . . . . . . . . . . . . . . 105
Labor and Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
Labor and Benefits by Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
Position Count by Department . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
Contract/Temporary Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
Administrative Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
Materials and Maintenance Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . 116
Operating Expenditures by Department . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
Operating Expenditures by Object . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
Departmental Budgets:
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
General Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
Administrative Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
Water Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140
Engineering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146
General Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151
CAPITAL BUDGET
Capital Budget Narrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153
CIP Reserve Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156
Six-Year CIP Projects Summary by Source ($1,000s). . . . . . . . . . . . . . . . . . . . 157
Six-Year CIP Projects Summary by Fund ($1,000s). . . . . . . . . . . . . . . . . . . . . 157
Six-Year CIP Projects by Source and Fund ($1,000s). . . . . . . . . . . . . . . . . . . . 158
CIP Justification and Impact on Operating Budget . . . . . . . . . . . . . . . . . . . . 162
Capital Purchases FY 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163
POLICIES
Summary of Financial Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165
Reserve Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167
Reserve Policy Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204
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Table of Contents
POLICIES (continued)
Investment Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207
Investment Policy Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216
Debt Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224
Debt Policy Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 244
APPENDIX
Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 249
List of Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 254
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 256
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September 12, 2022
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 2023. The budget supports the District’s Fiscal Year 2023-2026 Strategic Plan as
well as the financing of all District services, programs, and capital needs during Fiscal Year
2023. The success as an agency is significantly enhanced by the policies and practices
implemented by its Board and management to ensure stability, reliability, strength, and
sustainability. The management team is fully confident that through sound financial
management and streamlining of operations and services, supported by the Strategic Plan
and a dedicated and talented staff, the District will continue to achieve success and thus,
ensure the well-being and quality of life of its nearly 228,000 customers. Our goal is to
sustain the services we provide while minimizing rate impacts to our ratepayers.
Legislative and Regulatory Issues
The District continues to monitor legislative and regulatory activity and how it could impact
the District and its customers. August 31 was the final day of the legislative session and the
Governor has until September 30, 2022 to sign or veto legislation.
Senate Bill 222 would require the State Water Resources Control Board (SWRCB) to
implement a Water Rate Assistance Program that would provide financial assistance for
both drinking water and wastewater services to low-income residential ratepayers. Such a
program, if designed in a reasonable, efficient, and effective manner, is something the
District would like to see advanced. However, the District does have the following
fundamental concerns regarding how much funding will be available for actual low-income
household assistance as opposed to program administration: 1) inefficient use of low-
income water rate assistance funding with public water agencies having to perform
enrollment; 2) no cap proposed for the first year of administration costs; and 3) not all
program dollars would go into the program’s fund.
Other bills that the District is watching are AB 2142 (Gabriel) and SB 230 (Portantino). AB
2142, sponsored by the Association of California Water Agencies (ACWA), would provide a
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state tax exclusion from gross income for any amount received as a rebate, voucher, or
other financial incentive issued by a public water system, local government, or state agency
for participation in a turf replacement water conservation program. This bill passed and
awaits the Governor’s signature or veto. SB 230 would require the SWRCB to establish,
maintain, and direct a dedicated Constituents of Emerging Concern (CEC) Program to
assess the state of information and recommend areas for further study on the occurrence
of CECs in drinking water, and establishes the CEC Action Fund. The bill passed and is
awaiting the Governor’s signature or veto.
The District also has been actively engaged in the California Air Resources Board’s (CARB)
release of its updated draft regulatory language for the Advanced Clean Fleets Regulation
for State and Local Government Fleets. The District has followed this regulatory process
closely to make certain that the District’s first responders in the field who respond to water
and wastewater utility emergencies in specialized vehicles have the resources available to
them to ensure that response is not delayed. The District has submitted comments
regarding its concerns regarding the draft regulatory language and will continue to monitor
CARB’s activity on this matter. The District is also part of a coalition through the Association
of California Water Agencies on the issue.
The SWRCB and many water agencies, including the District, continue to focus on
conservation-related laws Senate Bill 606 and Assembly Bill 1668 that passed in 2018.
Building on efforts to make water conservation a way of life and to better prepare the state
for droughts and climate change, the District and other water agencies throughout the state
have worked with San Diego County Water Authority (CWA) and state officials to define how
the conservation laws will be implemented. These laws outline an overall framework to
guide the District and other urban water suppliers in setting water-use targets. The laws
require water agencies to establish a residential indoor gallon per capita per day (GPCD)
goal of 55, effective in 2023, decreasing to 52.5 in 2025, followed by a final decrease to 50
GPCD in 2030. The District projects that its current indoor GPCD levels meet the
requirement. The laws also required the SWRCB to adopt an outdoor water-use standard
by June 2022. The District has worked collectively with other water agencies and water
industry associations to discuss and provide comments to the SWRCB to ensure the
regulations are both equitable and reflect local conditions. The District will continue to work
on these efforts as the SWRCB releases more recommendations and reports.
Due to the drought, in May 2022, the SWRCB adopted an emergency drought regulation
and by June 10, the regulation went into effect for all water suppliers. The regulation requires
that water suppliers implement demand reduction actions identified in their Water Shortage
Contingency Plan (WSCP) for a shortage level of 10-20% (Level 2). The emergency
regulation remains in effect for one year, unless the SWRCB modifies it, readopts it, or ends
it before then. Because the regulation does not require a formal activation of level 2, the
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District remains at level 1 but is encouraging customers to implement level 2 actions. In the
District’s WSCP, the difference between being at level 1 and 2 is that level 2 requires
mandatory water restrictions and a shortage condition. Because restrictions are not
mandatory and the region or the state is not currently facing shortages, the District remains
at level 1.
Also related to water-use efficiency, as recommended to the legislature jointly by the
Department of Water Resources (DWR) and the State Board, SB 1157 (Hertzberg) would
lower the indoor residential water use standard. The bill passed and is awaiting the
Governor’s signature or veto. If enacted, the bill would establish the indoor residential water
use standards to be as follows: 55 GPCD until January 1, 2025; 47 GPCD until January 1,
2030; and 42 GPCD as of January 1, 2030. The District is currently projected to meet the
GPCD requirements. If signed, this bill would supersede SB 606 and AB 1668 which passed
in 2018.
In August, the Governor released a new California’s Water Supply Strategy, Adapting to a
Hotter, Drier Future, listing actions needed to address 10% loss of water supplies by 2040.
This includes seeking or expanding new sources of supplies like desalination, recycled
water and potable reuse, increased storage, reducing urban and agricultural water use, and
improved forecasting, data collection, and management of water. These are all related to
actions included in the 2020 Water Resilience Portfolio.
As directed by the Governor and building on work already conducted, on July 27, 2022, the
Department of Water Resources released its Draft Environmental Impact Report for the
Delta Conveyance Project, marking an important step in evaluating a key strategy to adapt
to a changing climate and provide clean, reliable water for future generations. This
environmental review process is also consistent with the Governor’s executive order
directing state agencies to develop the aforementioned portfolio of statewide water actions
and investments that improve water recycling, recharge depleted groundwater reserves,
strengthen existing levee protections, and improve Delta water quality.
Fiscal Year 2023 - 2026 Strategic Plan
The District's theme has been "Dedicated to Community Service" since its inception. From
its inception in 1956 to present day, the District has been dedicated to delivering exceptional
service to the residents and businesses it has the distinction of serving. This serves as a
great reminder to our staff about the significance of the District.
Over the years the District’s strategic plan has evolved from one focusing on significant
growth to one focusing on both consistent, albeit lower, growth levels and the long-term
operations and maintenance of the District. The District recently adopted a new strategic
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plan (FY 2023-2026), highlighting areas of focus, including a stronger emphasis on financial
and long-term demands, legislative matters, aging workforce and knowledge transfer,
organizational culture, customer service, cybersecurity, and asset management.
Performance metrics support short-term and long-term objectives linked to these strategies
to promote and track continuous improvement.
The new strategic plan, adopted by the Board in January 2022, is a four-year plan. The plan
reinforces the Board’s vision, mission, and value statements and the business perspectives
that serve as the foundation for the new strategies, goals, and objectives. Since the previous
plan, the District recognizes that the landscape has shifted in terms of the nature and scope
of local water supply initiatives in the region and financial revenue streams to support the
District's operational demands. The strategic plan goals and objectives are executed and
tracked as part of the annual budget process and serves as a guide for each year's planning
activities and budget development. It also establishes the general policy direction and
strategic priorities set forth by Board of Directors. Based on the Balanced Scorecard
methodology, the District develops the strategies, objectives, and programs required to
successfully implement the Board's direction.
There are several challenges facing the District today. They include fulfilling more stringent
water quality requirements, meeting the water demands of a developing community,
discovering methods to better use our current water resources through storage and water
conservation, retainment and recruitment of a skilled workforce, and maintaining an
adaptable organization to meet future challenges. The Board of Directors, senior
management, and staff introduced the new strategic plan to offer a foundation to meet
these challenges. The strategic plan allows us to also convey our plans to our customers,
other agencies, and water regulators. As with past plans, we are confident that this plan will
help us to maneuver and execute through these challenging times.
As the agency matures and its service area expands, fewer development resources and
fees will be available, but operating assets, infrastructure maintenance, rehabilitation, and
replacement expenses will continue to increase. Many of our infrastructure assets are
entering a pivotal age point in their operational lifecycle, and as a result, there will be
pressure to increase customer rates to offset these rising expenses. To balance the
customer's interest in reducing rate increases while preserving service reliability, well
maintained infrastructure, and a financially sound position, the management team
continues to prioritize efficiency inside the agency via investments in operational and
business technology to achieve continued efficiencies and maintaining an optimal head
count.
The strategic plan details our commitment to remain a model public agency that maintains
stakeholder trust through fiscal responsibility, environmental stewardship, and effective
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leadership. These high-level goals and strategic objectives are further articulated with
aligned implementation plans, District-wide accountability, and performance metrics to
measure and improve outcomes. Through community focus, sound planning, preparation,
and fiscal management, and a prepared and adaptable work culture, the District is well
positioned to support its growing customer base while sustaining the quality water service
that our community and our ratepayers expect.
The success of this approach is proven by the District’s gains in productivity, reduction in
staffing, and associated costs. The District has reduced staffing by 31.75 full-time equivalent
positions, or 18%, while the number of customer accounts increased by 4,388 from 2007
through 2023. The following chart shows that the District’s ratio of customer accounts per
full time employee has increased by 98 or 32% since 2007.
Customer Accounts per Full Time Employee
Because of increased efficiency and higher employee productivity, the District continues to
absorb some of the pass-through costs from its water suppliers, including the City of San
Diego, CWA, and Metropolitan Water District (MWD). This helps to address customer
concerns about rising water rates.
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
action significantly reduced the high financing cost of the unfunded liability at CalPERS and
brought the funding level up to 87%, which will save the District approximately $16
million. In Fiscal Year 2020, the District’s Other Post Employee Benefits (OPEB) plan became
30
1
30
6
31
4
32
1
33
6
34
4
36
6
38
0
38
9
39
6
40
6
41
2
40
9
40
9
40
7
40
6
39
9
-
50
100
150
200
250
300
350
400
450
Ac
c
o
u
n
t
s
p
e
r
F
u
l
l
T
i
m
e
E
m
p
l
o
y
e
e
Fiscal Year
ix
fully funded. In Fiscal Year 2021, with the OPEB plan being fully funded, the District began
redirecting $1.1 million of additional contributions to PERS. The District has budgeted to
continue an additional $2.1 million contribution in Fiscal Year 2023. When combined with
the $31.8 million 2018 advance funding, the District’s PERS funding strategy is projected to
save the District $6 million over a 12-year period.
Other cost savings include the reduction in number of vehicles and equipment, fuel
consumption, 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 District customers.
Based on an annual survey of water and sewer rates conducted by staff, the District
continues to be one of the lower cost providers in San Diego County. The District has the
eleventh lowest water rate out of the 24 member agencies in San Diego County (based on
the District’s average water user who uses 11 units of water and has a ¾” residential meter
size), and the fifth lowest sewer rate out of the 28 sewer service providers in the County
(based on 11.1 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 122.7% and the District’s retail water rates have increased 115.5%.
Wholesale Water Supply Costs vs. District Retail Rate Increases
0%
20%
40%
60%
80%
100%
120%
140%
2007 2009 2011 2013 2015 2017 2019 2021 2023
122.7%
115.5%
CWA Water Cost Increase
Otay Water Rate Increase
x
The District currently delivers water service to 51,494 potable and 771 recycled water
customer accounts. The District purchases all the potable water sold to customers from the
CWA. Seventy-six percent of this water, in turn, is purchased from the region’s primary water
importer, MWD, which derives its supply from the Colorado River and the California State
Water Project. The percentage of water purchased from MWD has decreased significantly
over the last several years due to conservation efforts, the water transfer agreement with
Imperial Irrigation District (IID), the All-American and Coachella lining project agreements,
and the water purchase agreement for water produced at the Carlsbad Desalination Plant.
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.
The District also collects and recycles wastewater from approximately 4,738 homes and
businesses. The District collects wastewater and delivers it to its Ralph W. Chapman Water
Recycling Facility (Chapman), 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 to
purchase up to 5.6 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.
Fiscal Year 2023 Operating Budget Summary
The Fiscal Year 2023 budget was prepared with the continuing challenges of inflation,
supply-chain challenges, water supply rate increases, added CIP projects, increasing power
costs, and current and pending legislative initiatives. Additional challenges are the City of
San Diego’s Pure Water program costs, the County of San Diego’s rehabilitation of shared
facilities, and the projected future debt issuances.
The District’s operating expenditures consist of three major sectors: potable water, recycled
water, and sewer, totaling $118.6 million of budget expenditures for Fiscal Year 2023.
Revenues from potable and recycled water sales are projected to be $104.5 million,
approximately $4.9 million more than the Fiscal Year 2022 budget. The District projects
sewer revenues to be $3.3 million, approximately $216 thousand more than Fiscal Year
2022. The remaining budgeted revenues of $10.8 million, approximately $1.3 million more
xi
than Fiscal Year 2022, come from various special fees, assessments, and miscellaneous
income.
Other significant aspects of the Operating Budget are:
A balanced budget supporting the goals of the Strategic Plan.
The use of an economist to project growth for the region.
An updated six-year Rate Model to ensure sound financial planning and reserve
levels.
Ongoing 6.2% melded increases from MWD and CWA are due to the high cost of
supply programs, higher energy costs, and increasing operating costs.
4.1% water rate increase to District customers budgeted for January 1, 2023, and a
4.5% rate increase for sewer, effective January 1, 2023.
Metro sewer costs include the anticipated impact of the City of San Diego’s Pure
Water Program costs.
The District maintains low water rates, below the countywide average of the County’s
24 water agencies.
Fiscal Year 2023-2028 Capital Improvement Program (CIP)
The CIP budget emphasizes long-term planning for ongoing programs to meet population
growth, facilities replacement, and betterment of infrastructure while functioning within
fiscal constraints. The Fiscal Year 2023 CIP budget contains 128 projects and totals $12.6
million. The District categorizes projects into three business segments: potable water,
recycled water, and sewer. Funding for the Fiscal Year 2023 potable, recycled, and sewer
projects are $9.7 million, $2.0 million, and $839 thousand, respectively. CIP projects are also
categorized into three categories: expansion, betterment, or replacement.
The following is a breakdown of the CIP projects into the three categories:
Replacement projects $ 9,995,000
Betterment projects 2,286,000
Expansion projects 298,000
Total $ 12,579,000
The Fiscal Year 2023-2028 CIP budget of $108.4 million has increased by $7.0 million versus
last year. The total water CIP budget for the six-year period is $98.5 million, which is a $5.8
xii
million increase compared to Fiscal Year 2022, while the sewer CIP of $9.8 million is
increasing $1.1 million compared to Fiscal Year 2022.
The District projects sewer debt issuances of $1.5 million and $1.1 million in Fiscal Year
2025 and Fiscal Year 2027, respectively. There are no water debt issuances projected for
Fiscal Years 2023-2028.
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
annual budget for the fiscal year beginning July 1, 2021. 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 2021-
2022.
The California Society of Municipal Finance Officers presented Otay Water District
the Certificate of Award for Excellence in Capital Budgeting for Fiscal Year 2021-2022.
The Government Finance Officers Association Officers presented Otay Water District
the Certificate of Excellence in Financial Reporting for its Annual Comprehensive
Financial Report for the Fiscal Year ended June 30, 2021.
Conclusion
The District’s Board of Directors met the challenges presented this year with responsibility,
commitment, and persistence to keep the stability and financial strength of the District as
one of its highest priorities. Reserves will be maintained above target levels as will the
District’s debt coverage level. The Board of Directors, management team, and staff are all
committed to efficiency in both District operations 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, management, and staff. The District
will continue to strive to make improvements in budget processes, including an extensive
review and analysis of projections for revenues, expenditures, capital projects, and reserves.
xiii
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.
Jose Martinez, General Manager
xiv
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 2021-2022. 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.
xv
Financial Awards
The California Society of Municipal Finance Officers presented Otay Water District the Operating
Budget Excellence Award for Fiscal Year 2021-2022.
xvi
Financial Awards
The California Society of Municipal Finance Officers presented Otay Water District the Capital
Budgeting Excellence Award for Fiscal Year 2021-2022.
xvii
Financial Awards
The Government Finance Officers Association Officers presented Otay Water District
the Certificate of Achievement for Excellence in Financial Reporting for its Annual
Comprehensive Financial Report for the Fiscal Year Ended June 30, 2021.
xviii
RESOLUTION NO. 4410
A RESOLUTION OF THE BOARD OF DIRECTORS OF
OTAY WATER DISTRICT ADOPTING THE
FISCAL YEAR 2022-2023
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 2022-2023; and
WHEREAS, the Fiscal Year 2022-2023 Operating and Capital
Budget, have 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 2022-2023.
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
xix
the General Manager to update the Salary Schedule, whenever
necessary, to reflect changes made within his authority.
PASSED, APPROVED AND ADOPTED by the Board of Directors of
Otay Water District at a board meeting held this 8th day of June
2022, by the following vote:
Ayes: Directors Keyes, Lopez, Robak and Smith
Noes: None
Abstain: None
Absent: Director Croucher
________________________
President
ATTEST:
____________________________
District Secretary
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 2023-2026) is a continuation of the 2019-2022 plan and is the
seventh multi-year plan dating back to 2002. 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. 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 separate six-year Capital Budget that
provides more detail of each project (budget amount, description, justification, comments, fund
details, expenditure schedule and a map of the project location). The FY 2023-2028 Six-Year Capital
Budget is available on our website at otaywater.gov/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
continually 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 2,686 acre-feet per year of recycled water for fiscal year 2023, and ultimately up
to 5,900 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 4,750 customer accounts within the Jamacha drainage basin. The sewer service
area covers approximately 8,800 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
125.3 square miles or 80,208 acres in San Diego County, lying
immediately east of the City of San Diego metropolitan area and
running from the City of El Cajon south to the international border,
abutting the cities of El Cajon and La Mesa and encompassing most
of the City of Chula Vista and a small portion of the City of San Diego.
The District purchases 100% of its treated water. Regionally, about
76% is imported, which is a blend from the Colorado River and the
California State Water Project. Twenty-four percent of the District’s
treated water comes from local supplies, including groundwater,
local water storage within the county and from the Pacific Ocean via
seawater desalination. The District purchases its treated water from
the San Diego County Water Authority and receives a blend of
treated water from the Metropolitan Water District of Southern
California’s R.A. 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.
4
Overview
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. Due to COVID-19, the District continues to
stream Board meetings online.
Collection,
Treatment, and
Reclamation
Operations
District Secretary
General Counsel
Public Information
Conservation
Citizens and
Customers Board of Directors
General Manager (4)
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
Geographic
Information
System
Finance
(31)
Strategic
Planning
Public Services
and
Field Services
Engineering
(29)
Water
Operations
(56)
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 Facilities Master Plan, the Sewer
System Management 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 six-year integrated budget are:
An average projected long-term growth rate of 0.36%.
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 water volumes, water cost projections, debt
6
Overview
coverage for current and future debt issuances, reserve 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.
Administrative and Materials and Maintenance Budget
Administrative and Materials and Maintenance expenses are entered into the budget model of the
ERP system by individual department 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 year, all
existing CIP projects are reviewed and capital project costs are adjusted and/or closed as
appropriate. This requires each project manager to review the year-to-date project expenses and
then estimate costs to the end of the fiscal year. They also project future costs to complete the project.
Adjustments to capital project expenses include scope changes and/or construction cost increases.
District Chiefs discuss the cost-benefit of projects, evaluate the reasonableness of the project budget,
current and alternate funding source(s) as well as the timing and/or priority of the project. All new
CIP project requests and significant changes to existing projects are reviewed and approved by all
District’s Chiefs and the General Manager. All CIP projects are entered into the CIP Budget
application. The Engineering Department works closely with the Finance Department to finalize the
six-year CIP Program Budget. Finance ensures that the District funding and reserve levels are
maintained in accordance with the District’s policy. Engineering then compiles the six-year CIP
Program Budget and submits it to the General Manager for review prior to presentation to the Board
of Directors.
Budget Control and Jurisdiction
The District has a four-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 the Board meeting in June. The review of the Strategic Plan and the
adoption of the budget on an annual basis give the District its direction for the following fiscal year.
During the year, each department receives monthly budget and actual cost reports that are essential
7
Overview
to monitor and control costs. As events occur or conditions change, modifications to or deviations
from the original budget may be necessary. The General Manager has the authority to transfer
appropriations within the budget allocations or request that the Board of Directors increase the
current budget.
Once adopted, District staff allocate the annual budget amounts to months based on historical
trends, the timing of anticipated activities, or a straight-lined approach. On a monthly basis, staff
prepares an operating financial statement comparing year to date results to budget, which is
included in the District’s monthly Board package. On a quarterly basis, staff prepares a comparison
of actual to budgeted CIP expenditures, which is also reported to the District’s Board of Directors.
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 are documented in the form of a staff
report and noted in the Board meeting minutes.
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.
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 in enterprise funds, 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). It is the intent of the District to
recover the costs (including replacement cost of existing assets) of providing goods or services to
the general public on a continuing basis, through financing or primarily through user charges.
Fund Structure
The District operates three distinct business segments: Potable water, Recycled water, and Sewer.
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 167, which provides the detailed flow of funds.
Recycled Sewer
Sewer
Operating
Budget
Sewer
CIP Budget
Sewer
Developer
Deposits
Recycled
Operating
Budget
Recycled
Developer
Deposits
Recycled
CIP Budget
Potable
Potable
Operating
Budget
Potable
CIP Budget
Potable
Developer
Deposits
8
Overview
Budget Calendar
December/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, 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 administrative and materials and maintenance budget requests in the
budget module and provide their current year-end projections to the Senior Accountant. Variance
explanations are provided to the Senior Accountant for: the current year’s budget versus the current
year projected expenditures, and the current year’s projected expenditures versus the next fiscal
year’s budget requests. The Senior Accountant reviews the year-end projections for reasonableness
and documents the explanations of the variances for review by the Assistant Chief of Finance. 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.
Once the General Manager has reviewed the preliminary CIP and operating expenses budgets, this
information is entered in the Rate Model to determine proposed water and sewer rates. Other data
incorporated into the Rate Model includes the six-year operating revenues and expenses, multi-year
CIP expenses, reserve funding, reserve levels, and debt issuances. Inflators for cost and volume are
applied 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 the reserve levels in accordance with the Reserve Policy.
9
Overview
April
Finance provides the Chiefs and General Manager preliminary budget schedules containing key
budget assumptions for their review and incorporates recommended changes.
During the regular Board meeting, the independent consultant presents the District’s economic
outlook report. This report is used by the Engineering Department to validate growth projections,
meter sales and construction climate.
In late April, staff conducts a budget workshop during a Special Board meeting to review Strategic
Plan initiatives, discuss the key budget assumptions, and provide preliminary information on the
Capital Improvement Program Budget. During the FY23 Special Board meeting, staff also presented
the results of a water cost of service study and obtained direction from the Board to prepare the FY
2023 budget based on the results of the study.
May
Based on the Board’s input from the April Special Board meeting, staff will modify the budget for final
presentation and approval in June.
June
At the regularly scheduled June Board meeting, staff presents the consolidated operating and CIP
budgets, along with recommended sewer rate change, to the Board for approval. Generally, no
modifications are made to the proposed budget once adopted. However, as events occur and/or
conditions change, a modification to a specific budget item may be necessary. In such an event, a
modification is documented in the form of a staff report and presented to the Board for approval. The
modification may occur any time of the year.
July
Rate increase notices containing changes in sewer rates, fees, and charges, effective January 1,
2023, are included as inserts for the following customers classes: residential, multi-residential, and
commercial industrial.
For water customers, notices of a public hearing (Proposition 218 hearing) to be held on October 5,
2022 were sent to customers in accordance with proposition 218 requirements.
October
On October 5, 2022, a public hearing (Proposition 218 Hearing) on water 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 2023
Water and sewer rates, fees, and charges become effective January 1, 2023.
10
Overview
Budget Calendar
December/January February March-April May-June July-January 2023
12/9/21
Budget instructions
and workbooks for
the Operating and
Capital Budget are
distributed to
departments
1/4/22
Labor Budget
Worksheets are
distributed to
departments
1/12/22
Project managers
submit CIP Budgets
for New Projects and
changes to existing
Projects in CIP
Budget Application
2/1/22
Finance initial review of
CIP Budget with Chief of
Engineering including year
over year explanations
2/3/22
Chiefs to submit Capital
Purchases and
justifications
2/7/22
Final review of CIP Budget
with Chiefs and General
Manager
2/8/22
Chiefs to submit Admin
and Materials Budget
requests
2/10/22
Chiefs to submit request
for new personnel,
personnel reclassification
changes, Position Analysis
Questionnaire,
advancements, and long-
term staffing to HR
2/11/22
Chiefs to submit Labor
Budget Worksheets
2/24/22
HR to complete
preliminary review of new
personnel, personnel
reclassification changes,
requests, and
advancements
3/3/22
HR to review new
personnel,
reclassifications and
change requests with
General Manager
3/7/22
CIP Budget finalized with
Chiefs and General
Manager
4/5/22
Finance to review
Department Operating
Budgets and personnel
cost with Chiefs and
General Manager
4/6/22
Economic Outlook
presented to Board by
external Economist
4/18/22
FY 2023 Key Budget
Assumption Practice Run-
through
4/27/22
Key Budget Assumption
Workshop to discuss
budget key figures and
assumptions. Cost of
service study presented.
5/9/22
Review assumptions,
and proposed rates
with General
Manager
5/16/22
FY 2023 Budget
Practice Run-through
5/17/22
Preliminary Budget
provided to Chiefs
and General
Manager for review
6/8/22
Budget Presentation
at the regular Board
Meeting – approval of
the FY 2022-2023
Operating and
Capital Budget and
FY 2023-2028 Capital
Improvement
Program Budget
7/25/22-8/16/22
Sewer rate increase
notice inserted with
sewer billing.
Proposition 218
Hearing notice
inserted with water
billing and mailed
separately to record
owners.
10/5/22
Proposition 218
Hearing on water
rates, fees, and
charges.
11
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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 277,220
Otay Water District population served (estimated) 227,957
Persons/Household 3.49
Ethnic/Racial makeup (City of Chula Vista)
Hispanic 60.3%
Non-Hispanic White 16.9%
Asian 15.3%
Black 5.1%
Other 2.4%
Median Age 36
Median Household Income $86,132
Percentage with 4-year degree or higher 29.2%
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 $36.2 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.
Six-Year Service Area Assessed Valuation
$ 28
$ 29
$ 31
$ 33
$ 35
$36
$0
$5
$10
$15
$20
$25
$30
$35
$40
FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022
Bi
l
l
i
o
n
s
13
Community Profile
Ten Principal Taxpayers – Fiscal Year 2023
Organization Assessed Percent
Value to Total
1. Amazon.com Services, LLC $ 333,631,825 0.86%
2. Rancho Investors, LP 175,359,593 0.45%
3. John Hancock Life Insurance Co USA 160,618,164 0.41%
4. Eastgroup Properties, LP 157,796,745 0.41%
5. Lipt Sanyo Avenue, LLC 156,600,000 0.40%
6. Corrections Corporation of America 155,410,305 0.40%
7. GGP-Otay Ranch, LP 141,264,436 0.36%
8. Chula Vista Apartments, LLC 134,093,743 0.35%
9. Regulo Place Apartments Investors, LLC 125,225,243 0.32%
10. Homefed Otay Land II, LLC 115,343,393 0.30%
Total Top Ten Principal Taxpayers $ 1,655,343,447 4.26%
Total Service Area Assessed Valuation $ 38,712,748,540
Source: County of San Diego Auditor and Controller
Ten Largest Customers – Fiscal Year 2022
Customer Name Customer Type Annual Revenues
% of
Water
Sales
1. City of Chula Vista Publicly Owned $ 4,332,713 4.2%
2. Richard J Donovan Correctional Facility Publicly Owned 1,424,920 1.4%
3. County of San Diego Publicly Owned 1,334,905 1.3%
4.Eastlake III Community Association Commercial 1,138,564 1.1%
5. Chula Vista School District Publicly Owned 818,403 0.8%
6. Homefed Village III Temporary 717,682 0.7%
7. Eastlake Country Club Commercial Recycled 695,455 0.7%
8. Baldwin & Sons, LLC Temporary 578,975 0.6%
9. Sweetwater School District Publicly Owned 572,757 0.6%
10. San Diego Family Housing Publicly Owned 529,098 0.5%
Total Top Ten Customers $ 12,143,471 11.8%
Total Water Sales $ 102,494,359 100.0%
14
Community Profile
Water Rate Comparison, Member Agency Water Rates (1)
The District strives to remain cost effective in its rate setting by controlling operating costs, yet
passing through the full cost of supply. In August 2022, 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 eleventh lowest water rate in the region.
Projected Water Bill for FY 2023
Based on 11 Units of water used and ¾” residential meter size
137.97
129.67
127.96
127.53
121.01
120.35
116.40
103.14
101.81
101.15
100.27
95.74
95.69
93.96
89.64
85.76
83.08
82.15
81.12
80.31
77.40
70.12
$0 $20 $40 $60 $80 $100 $120 $140
22*
21
20
19*
18
17
16*
15
14
13
12
11
10*
9
8
7
6
5
4*
3*
2*
1*
*At the time of the survey in August 2022, the member agency's FY 2023 rate was unavailable. An estimated
increase was applied equal to the other districts’ average FY 2023 known rate increases.
(1)Only 22 of the 24 member agencies are surveyed. Camp Pendleton is not included in this survey due to being a
Marine Corps Base. The City of National City is not included because their water is supplied by Sweetwater.
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 rate that is charged to the consumers. The District has the fifth lowest sewer rate
in the County of San Diego.
155.44
97.47
90.34
87.97
87.00
86.18
82.97
82.52
81.98
71.75
69.95
65.98
62.87
61.72
59.64
59.00
56.86
55.25
55.07
54.60
53.91
51.18
51.09
48.81
43.11
43.08
40.86
34.65
$- $20 $40 $60 $80 $100 $120 $140 $160 $180
28
27*
26*
25*
24
23
22*
21
20
19*
18
17
16
15
14
13
12
11
10
9
8*
7
6*
5
4
3
2*
1
Projected Sewer Bill for FY 2023
Based on 11.1 Units of water used and ¾” residential meter size
*At the time of the survey in August 2022, the member agency's FY 2023 rate was unavailable. An estimated
increase was applied equal to the other districts’ average FY 2023 known rate increases.
16
Community Profile
San Diego Rainfall
San Diego received below average rainfall of 6.83 inches in Fiscal Year 2022. The 10-year average of
8.9 inches for San Diego rainfall reflects the long-term drought conditions for our area. San Diego's
rainfall average over 20 years is 9.20 inches; the 30-year average is 9.44 inches; and the 40-year
average is 9.80 inches.
San Diego rainfall, while a contributing factor, is not the controlling factor for our potable water supply
shortage. The San Diego region imports 76% 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 economy and quality
of life of its residents. San Diego County imports approximately 76% of its water from the Colorado
River and Northern California. Since these sources face legal and environmental constraints, the
region has been making investments in the region’s water delivery and storage system and exploring
other avenues to ensure an adequate water supply. This includes water recycling, water-use
efficiency programs, water storage, groundwater desalination, and seawater desalination.
Desalinated Water Supply
In December 2015, the Claude “Bud” Lewis Carlsbad Desalination Plant began producing
approximately 50 million gallons of water per day to the CWA, enough to serve approximately 400,000
6.51
5.06
9.03
10.82
12.97
3.40
12.62
16.65
4.93
6.83
0
2
4
6
8
10
12
14
16
18
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
In
c
h
e
s
San Diego Rainfall
Fiscal Years 2013 - 2022
Annual Rainfall
10 year average
Source: Weather Underground
17
Community Profile
people, meeting approximately 10% 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.
Inflation
According to the Bureau of Labor Statistics, the CPI for urban consumers in the San Diego area rose
1.2% over the past two months ending July 2022. Over the last twelve months, area prices increased
7.3%. Food prices went up 5.9% and energy prices increased 29.6% largely as the result of an
increase in the price of gasoline. With gas prices remaining high, the inflationary trend is expected
to continue.
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 gross domestic product (GDP) will rise by 5.0-6.0%;
The population will continue to increase by more than 3.0 million annually (based on the 2020
Census);
Employment will reach 155.0 million, higher than pre-COVID levels;
The unemployment rate will be a steady 4.0%;
Initial unemployment claims will fall to new levels;
Job openings will continue to top 11.0 million;
30-year mortgage rates will rise to 4.00-4.50% range;
Oil prices per barrel will ebb to the $70-80 range unless the Ukrainian situation continues;
Construction will parallel 2020, with a total of 1.6-1.7 million new residential units;
The nationwide demand for new homes and condominiums will continue unabated;
The resale home market will continue its strong demand throughout 2022 with the inventory
of housing for sale gradually expanding in the second half of the year with taming of price
increases;
The non-residential construction market will continue to expand thanks to Federal spending
on infrastructure and military spending;
Inflation will continue to be in the 5-6% range;
Finally, the Federal government will open its purse strings even further than it did in 2020-
2021 and that will increase consumer goods demand.
The Future
Capital Improvement Program
The District provides water and sewer service to a population of nearly 228,000 customers, including
residential, business, government, industrial, and agricultural water users across urban, suburban,
18
Community Profile
Cottonwood Sewer Pump Station
and rural areas. The District’s service area population is projected
to grow by 19% to 272,350 residents by 2045. To ensure a reliable
water supply and sewer system for the future including sustaining
the current infrastructure, the District has developed several 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, 2020 Urban Water Management Plan, 2015
Integrated Water Resources Plan, and 2023-2026 Strategic Plan.
The major projects planned for delivery over the next six fiscal years include:
Pipeline Replacement Projects (27 Total)
Reservoir Construction or Rehabilitation Projects (17 Total)
Pump Station Replacement and Rehabilitation
Meter Replacement & AMI Pilot Project
Sewer Basin Improvements
Pipeline Misc. Appurtenances
Equipment & Vehicles
RWCWRF Projects (12 Total)
Residential Construction
The following table summarizes the projected new units for sale and new units for rent from Fiscal
Year 2023 through Fiscal Year 2028. 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.
Future Development
Using the economist’s report, the District’s engineering staff projects that over the next six years, the
District will sell another 1,384 meters which translates to 3,899.5 equivalent dwelling units (EDUs).
These projections have been incorporated in the Five-Year Forecast on page 49.
Projected Meter Sales in Equivalent Dwelling Unit (EDUs)
80
3
53
9
56
9
57
5
67
1
74
4
0
200
400
600
800
1,000
FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028
19
Community Profile
Projected Units for Sale and Rental
Otay Water District Service Area FY 2023 through FY 2028
Project 2023 2024 2025 2026 2027 2028 Total
Total Single-Family Detached 240 125 125 125 200 250 1,065
Total Single-Family Attached 778 818 815 790 790 678 4,669
Total For Sale 1,018 943 940 915 990 928 5,734
Apartments 1,337 830 1,230 1,148 930 680 6,155
Total 2,355 1,773 2,170 2,063 1,920 1,608 11,889
% Sale 43% 53% 43% 44% 52% 58% 48%
% Rental 57% 47% 57% 56% 48% 42% 52%
Source: Vertex Economic Report, March 2022
Commercial Construction
Commercial construction in the District is projected to be significant during the next six years with
5,744,000 square feet of commercial development in the planning stages and under construction,
including a 700,000 square foot Amazon facility. There are also approximately 760 total hotel rooms
in two planned hotel projects.
Under Construction and Planned Commercial Development
Expected Delivery FY 2023 through FY 2028
Fiscal Years:2023 2024 2025 2026 2027 2028 Total
Hotels (Sq. Ft.) 60,000 164,000 - - - 80,000 304,000
Industrial (Sq. Ft.) 1,700,000 500,000 500,000 500,000 500,000 500,000 4,200,000
Amazon (Sq. Ft.) 700,000 - - - - - 700,000
Office (Sq. Ft.)- 100,000 100,000 100,000 100,000 - 400,000
Retail (Sq. Ft.)- 20,000 90,000 15,000 15,000 - 140,000
Total (Sq. Ft.) 2,460,000 784,000 690,000 615,000 615,000 580,000 5,744,000
Source: Vertex Economic Report, March 2022
Miscellaneous Development
One future project occurring within the District’s service area is the redevelopment of the Salt Creek
Golf Course into a residential community. The project includes development of approximately 50
acres of residential property with 122 units and is estimated to be completed in 2028.
20
Strategic Plan
Strategic Planning Process
The Otay Water District’s Strategic Plan (Plan) provides the framework for operational objectives and
activities performed by District staff. The Plan facilitates the execution of programs, allocation of
resources, and collaboration and coordination with stakeholders. Through the use of the Balanced
Scorecard Performance Management System, the Board of Directors, Senior Management, and staff
share a focused strategy and ensure the agency is moving toward common goals and maximizing
its limited resources. In addition, the Plan details our commitment to remain a model public agency
that maintains stakeholder trust through fiscal responsibility, environmental stewardship, and
effective leadership.
The Plan’s strategies are balanced across four business perspectives that break down strategic
goals into smaller components, or objectives, and are executed by departments and cross-functional
groups. Based on the Balanced Scorecard methodology, each of the four business perspectives
provide the overall foundation for the District’s strategic planning direction:
Customer: Increase customer satisfaction and confidence.
Financial: Excel in stewardship and financial accountability.
Internal Business Process: Managing and enhancing internal process excellence and
organizational effectiveness.
Learning and Growth: Making people, safety, and the environment the building blocks of our
organization.
Additionally, the District actively participates in the American Water Works Association’s (AWWA)
utility benchmarking performance indicators to monitor, track, and improve day-to-day essential
tasks and services. The execution of strategic objectives and industry-based performance indicators
are presented bi-annually to the public and Board of Directors.
The District recently adopted a new Strategic Plan (FY 2023-FY 2026), highlighting areas of focus,
including a stronger emphasis on financial and long-term benefits, an aging workforce,
organizational culture, customer service, cybersecurity, and asset management. Key performance
indicators support short-term and long-term objectives linked to these strategies to promote and
track continuous improvement. In preparation of the new Plan, the General Manager and staff held
a number of strategic planning sessions to identify risks and opportunities and develop short and
long-term goals.
In a special workshop held in October 2021, for review and feedback, staff presented the
proposed FY 2023-FY 2026 Strategic Plan to the District’s Board of Directors and set in motion via
the General Manager, direction to finalize and complete the District’s new four-year plan.
The following pages reflect the District’s perspectives, goals, key performance indicators,
measurement methods, and targets for each department.
21
Key Performance Indicators: General Manager
Performance
Indicator Definition Measurement
Method Target
Customer Opinion
Survey
To provide
information to the
District about
customers’
perceptions, opinions,
and satisfaction as
they relate to the
District and its
services.
Multiple recruiting
methods (email and
telephone) and
multiple data
collection methods
(telephone and
online)
85% or greater
satisfaction
FY 2021 FY 2022 FY 2023 (1)
Target N/A N/A 85%
Actual N/A N/A 85% (2)
(1)FY 2023 is the first year for this key performance indicator
(2)FY 2023 projected performance indicator
Strategic Plan
Cu
s
t
o
m
e
r
Goal
Enhance customer and community engagement to increase
public awareness of the water industry and the District,
while continuing to provide superior customer service.
22
Key Performance Indicators: Administrative Services
Performance
Indicator Definition Measurement
Method Target
Business Recovery
Exercises
Exercises focused on
recovering data,
restoring essential
business applications,
and continuing
operations following
an unplanned
network outage.
Number of business
recovery exercises
completed annually
2 exercises
completed annually
FY 2021 FY 2022 FY 2023 (1)
Target N/A N/A 2
Actual N/A N/A 2 (2)
Performance
Indicator Definition Measurement
Method Target
Vulnerability
Assessment
Assessments
designed to identify
and classify security
vulnerabilities. Its
purpose is to reduce
the possibility of
unauthorized access
to sensitive systems
and data.
Number of
vulnerability
assessments
completed annually
2 assessments
completed annually
FY 2021 FY 2022 FY 2023 (1)
Target N/A N/A 2
Actual N/A N/A 2 (2)
Performance
Indicator Definition Measurement
Method Target
Injury Incident
Rate(3)(4)
Measures the rate of
work-related injuries
and illnesses.
(Number of
recordable
injuries/illnesses x
200,000 average
hours worked)/total
hours employees
worked
No more than 4.1
incidents per 200,000
hours worked
annually
FY 2021 FY 2022 FY 2023
Target 4.1 4.1 4.1
Actual 2.1 5.1 4.1 (2)
(1)FY 2023 is the first year for this key performance indicator
(2) FY 2023 projected performance indicator
(3)Key performance indicator based on calendar year and results would be available at 4th quarter of the following fiscal year
(4) Key performance indicator utilizes AWWA Benchmark
Strategic Plan
In
t
e
r
n
a
l
B
u
s
i
n
e
s
s
P
r
o
c
e
s
s
Goal
Practice ongoing infrastructure renewal and organizational
improvement through planning and increased operational
efficiency.
Goal
In
t
e
r
n
a
l
B
u
s
i
n
e
s
s
P
r
o
c
e
s
s
Practice ongoing infrastructure renewal and organizational
improvement through planning and increased operational
efficiency.
In
t
e
r
n
a
l
B
u
s
i
n
e
s
s
P
r
o
c
e
s
s
Goal
Practice ongoing infrastructure renewal and organizational
improvement through planning and increased operational
efficiency.
23
Key Performance Indicators: Administrative Services (continued)
Performance
Indicator Definition Measurement
Method Target
Employee Turnover
Rate
Measures the number
of voluntary
departures, excluding
retirements.
Number of voluntary
resignations (not
including retirements)
/Average number of
employees
Less than 5%
turnover annually
FY 2021 FY 2022 FY 2023
Target 5%5%5%
Actual 2%8% 0% (1)
Performance
Indicator Definition Measurement
Method Target
Training Hours per
Employee (2)
Measures the quantity
of general and
management formal
training employees
are completing
(excludes safety
training).
Total qualified training
hours for all
employees/ Average
number of full time
employees (FTE)
15.6 hours or more
per employee
annually
FY 2021 FY 2022 FY 2023
Target 12.0 12.0 15.6
Actual 16.5 24.5 15.6 (1)
Performance
Indicator Definition Measurement
Method Target
Safety Training
Program
Measures the quantity
of safety training for
field operational
employees.
Number of safety
training hours/
Number of field
employees (includes
mandated training)
24 hours or more per
field employee
annually
FY 2021 FY 2022 FY 2023
Target 24.0 24.0 24.0
Actual 28.4 55.8 24.0 (1)
(1)FY 2023 projected performance indicator
(2)Key performance indicator utilizes AWWA Benchmark
In
t
e
r
n
a
l
B
u
s
i
n
e
s
s
P
r
o
c
e
s
s
Goal
Foster a workforce culture of employee development and
innovation.
Le
a
r
n
i
n
g
a
n
d
G
r
o
w
t
h
Goal
Foster a workforce culture of employee development and
innovation.
Strategic Plan
Le
a
r
n
i
n
g
a
n
d
G
r
o
w
t
h
Goal
Foster a workforce culture of employee development and
innovation.
24
Key Performance Indicators: Finance
Performance
Indicator Definition Measurement
Method Target
Answer Rate
Measures the
percentage of calls
answered out of total
calls received.
Number of all calls
answered/Number of
all calls received
No less than 97%
answer rate annually
FY 2021 FY 2022 FY 2023
Target 97.0%97.0%97.0%
Actual 98.6%98.6% 97.0% (1)
Performance
Indicator Definition Measurement
Method Target
Billing Accuracy
Percentage of bills
issued without error
as a percentage of
total statements
issued.
Number of correct
bills/Number of total
bills
No less than 99.8%
accuracy rate
annually
FY 2021 FY 2022 FY 2023
Target 99.8%99.8%99.8%
Actual 99.99%99.99% 99.8% (1)
Performance
Indicator Definition Measurement
Method Target
Sewer Rate Ranking
District's average
customer sewer bill
compared to other
San Diego County
agencies.
Otay percentage
ranking or the
average bill for sewer
among regional
agencies
Bottom 50th
percentile for the 28
sewer service
providers
in San Diego annually
FY 2021 FY 2022 FY 2023
Target 14 14 14
Actual 5 5 5 (1)
(1)FY 2023 projected performance indicator
Strategic Plan
Goal
Cu
s
t
o
m
e
r
Fin
a
n
c
i
a
l
Operate the District in a financially sustainable and
transparent manner while maintaining a fair rate structure.
Fin
a
n
c
i
a
l
Goal
Goal
Enhance customer and community engagement to
increase public awareness of the water industry and the
District, while continuing to provide superior customer
service.
Operate the District in a financially sustainable and
transparent manner while maintaining a fair rate structure.
25
Key Performance Indicators: Finance (continued)
Performance
Indicator Definition Measurement
Method Target
Water Rate Ranking
District's average
customer water bill
compared to other
San Diego County
agencies.
Otay percentage
ranking among
regional agencies
Bottom 50th
percentile for the 22
member agencies in
San Diego annually
FY 2021 FY 2022 FY 2023
Target 11 11 11
Actual 5 5 11 (1)
Performance
Indicator Definition Measurement
Method Target
Water Debt Coverage
Ratio
Measures the level of
debt service to the net
revenues available to
pay debt service,
excluding growth
revenues and non-
cash transactions
(GASB 68
adjustment).
Qualified net
operating
revenues/Debt
service requirements
150% excluding
growth revenue
annually
FY 2021 FY 2022 FY 2023
Target 150%150%150%
Actual 272%262% 150% (1)
Performance
Indicator Definition Measurement
Method Target
Sewer Debt Coverage
Ratio
Measures level of
sewer debt service to
the net revenues
available to pay debt
service.
Qualified net
operating
revenue/Debt Service
requirements
150% excluding
growth revenue
annually
FY 2021 FY 2022 FY 2023
Target 150%150%150%
Actual 371%838% 150% (1)
(1)FY 2023 projected performance indicator
Goal
Operate the District in a financially sustainable and
transparent manner while maintaining a fair rate structure.
Goal
Operate the District in a financially sustainable and
transparent manner while maintaining a fair rate structure.
Goal
Operate the District in a financially sustainable and
transparent manner while maintaining a fair rate structure.
Fi
n
a
n
c
i
a
l
Fin
a
n
c
i
a
l
Fi
n
a
n
c
i
a
l
Strategic Plan
26
Key Performance Indicators: Finance (continued)
Performance
Indicator Definition Measurement
Method Target
Reserve Level
All reserve levels in
the District measured
to a predetermined
plan developed
during the initial
budget process
Number of reserve
funds that meet or
exceed fund target
levels/Total number
of reserve funds
No less than 83%
annually
FY 2021 FY 2022 FY 2023
Target 85%83%83%
Actual 85%83% 83% (1)
Performance
Indicator Definition Measurement
Method Target
Accounts per Full-
Time Employee (FTE)
Measures the number
of active accounts per
full-time employee.
The greater the
number of accounts
per employee, the
more efficient
technology and staff
are utilized.
Potable + Recycled +
Sewer Accounts/
Number of full-time
employees
399 accounts per FTE
annually
FY 2021 FY 2022 FY 2023
Target 408 406 399
Actual 408 406 399 (1)
Performance
Indicator Definition Measurement
Method Target
Distribution System
Loss
Percentage of
unaccounted potable
and recycled water
100 [Volume
purchased–(volume
sold + volume
used)/Volume
purchased]
Less than 5%
annually
FY 2021 FY 2022 FY 2023
Target 5.0%5.0%5.0%
Actual 3.9%4.0% 5.0% (1)
(1)FY 2023 projected performance indicator
Fi
n
a
n
c
i
a
l
Goal
Operate the District in a financially sustainable and
transparent manner while maintaining a fair rate structure.
Operate the District in a financially sustainable and
transparent manner while maintaining a fair rate structure.Fin
a
n
c
i
a
l
Goal
Strategic Plan
Fin
a
n
c
i
a
l
Goal
Operate the District in a financially sustainable and
transparent manner while maintaining a fair rate structure.
27
Key Performance Indicators: Water Operations
Performance
Indicator Definition Measurement
Method Target
Technical Quality
Complaint (1)
Measures the
complaint rate related
to core utility services.
It is expressed as
complaints per 1,000
customer accounts.
1,000 (Number of
technical quality
complaints)]/
Number of active
customer accounts
per reporting period
No more than 4.6
complaints per 1,000
customer accounts
annually
FY 2021 FY 2022 FY 2023
Target 7.1 7.1 4.6
Actual 4.5 3.9 4.0 (2)
Performance
Indicator Definition Measurement
Method Target
Potable Water
Compliance Rate (1)
Quantifies the
percentage of time
each year that the
District meets all
health related
drinking water
standards in U.S.
National Primary
Drinking Water
Regulations.
All primary health
regulations are met
100% of all health
regulations met
annually
FY 2021 FY 2022 FY 2023
Target 100%100%100%
Actual 100%100% 100% (2)
Performance
Indicator Definition Measurement
Method Target
Planned Potable
Water Maintenance
Ratio in $
Compares how
effectively the District
is investing in
planned maintenance
for Potable Water.
Total planned
maintenance
cost/Total
maintenance cost
70% of labor dollars
spent on preventative
maintenance
annually
FY 2021 FY 2022 FY 2023
Target 66%66%70%
Actual 66%73% 70% (2)
(1)Key performance indicator utilizes AWWA benchmark
(2)FY 2023 projected performance indicator
Cu
s
t
o
m
e
r
Goal
Enhance customer and community engagement to
increase public awareness of the water industry and the
District, while continuing to provide superior customer
service.
Fi
n
a
n
c
i
a
l
Goal
Operate the District in a financially sustainable and
transparent manner while maintaining a fair rate structure.
Strategic Plan
Cu
s
t
o
m
e
r
Goal
Enhance customer and community engagement to
increase public awareness of the water industry and the
District, while continuing to provide superior customer
service.
28
Key Performance Indicators: Water Operations (continued)
Performance
Indicator Definition Measurement
Method Target
Planned Recycled
Maintenance Ratio
in $
Compares how
effectively the District
is investing in
planned maintenance
for Recycled Water.
Total planned
maintenance
cost/Total
maintenance cost
70% of labor dollars
spent on preventative
maintenance
annually
FY 2021 FY 2022 FY 2023
Target 70%70%70%
Actual 55%74% 70% (1)
Performance
Indicator Definition Measurement
Method Target
Planned Wastewater
Maintenance Ratio
in $
Compares how
effectively the District
is investing in
planned maintenance
for Wastewater.
Total planned
maintenance
cost/Total
maintenance cost
80% of labor dollars
spent on preventative
maintenance
annually
FY 2021 FY 2022 FY 2023
Target 77%77%80%
Actual 93%90% 80% (1)
Performance
Indicator Definition Measurement
Method Target
Direct Cost of
Treatment per MGD
Measures the direct
cost of wastewater
treatment and
excludes staff
overhead and fringe
benefits but includes
salaries. The costs of
solid waste disposal
are not included.
Total O&M costs
directly attributable to
sewer treatment/
Total volume
(in MGD)
No more than $1,315
per MG spent on
wastewater treatment
annually
FY 2021 FY 2022 FY 2023
Target $1,050 $1,050 $1,315
Actual $1,374.69 $869.97 $1,315 (1)
(1)FY 2023 projected performance indicator
Fi
n
a
n
c
i
a
l
Goal
Operate the District in a financially sustainable and
transparent manner while maintaining a fair rate structure.
Strategic Plan
Operate the District in a financially sustainable and
transparent manner while maintaining a fair rate structure.
Goal
Fin
a
n
c
i
a
l
Fi
n
a
n
c
i
a
l
Goal
Operate the District in a financially sustainable and
transparent manner while maintaining a fair rate structure.
29
Key Performance Indicators: Water Operations (continued)
Performance
Indicator Definition Measurement
Method Target
System Valve
Exercising Program
Quantifies the
number of system
valves exercised in
the distribution
system.
Number of valves
exercised/ Total
number of District
valves
20% of District valves
exercised annually
(4092 valves) to
accomplish 100%
every 5 years
FY 2021(4)FY 2022(4)FY 2023
Target 3080 3080 20%
Actual 4723 3132 20% (2)
Performance
Indicator Definition Measurement
Method Target
Potable Water
Distribution System
Integrity (Leaks) (3)
Measures the
condition of the
potable water
distribution system
expressed as the total
annual number of
leaks per 100 miles of
distribution piping.
(Total number of
leaks x 100)/ Total
miles of distribution
system piping
No more than 2.5
leaks per 100 miles of
distribution piping
annually
FY 2021 FY 2022 FY 2023 (1)
Target N/A N/A 2.5
Actual N/A N/A 2.5 (2)
Performance
Indicator Definition Measurement
Method Target
Potable Water
Distribution System
Integrity (Breaks) (3)
Measures the
condition of the
potable water
distribution system
expressed as the total
annual number of
breaks per 100 miles
of distribution piping.
(Total number of
breaks x 100)/ Total
miles of distribution
system piping
No more than 3
breaks per 100 miles
of distribution piping
annually
FY 2021 FY 2022 FY 2023 (1)
Target N/A N/A 3
Actual N/A N/A 3 (2)
(1)FY 2023 is the first year for this key performance indicator
(2) FY 2023 projected performance indicator
(3)Key performance indicator utilizes AWWA Benchmark
(4)Key performance indicator measured as actual number of valves in FY 2021 and FY 2022
In
t
e
r
n
a
l
B
u
s
i
n
e
s
s
P
r
o
c
e
s
s
Goal
Practice ongoing infrastructure renewal and organizational
improvement through planning and increased operational
efficiency.
Strategic Plan
In
t
e
r
n
a
l
B
u
s
i
n
e
s
s
P
r
o
c
e
s
s
Goal
Practice ongoing infrastructure renewal and organizational
improvement through planning and increased operational
efficiency.
In
t
e
r
n
a
l
B
u
s
i
n
e
s
s
P
r
o
c
e
s
s
Goal
Practice ongoing infrastructure renewal and organizational
improvement through planning and increased operational
efficiency.
30
Key Performance Indicators: Water Operations (continued)
Performance
Indicator Definition Measurement
Method Target
Recycled Water
System Integrity
(Leaks)
Measures the
condition of the
recycled water
distribution system
expressed as the total
annual number of
leaks per 100 miles of
distribution piping.
(Total number of
leaks x 100)/ Total
miles of recycled
distribution system
piping
No more than 2.5
leaks per 100 miles of
recycled distribution
system
annually
FY 2021 FY 2022 FY 2023 (1)
Target N/A N/A 2.5
Actual N/A N/A 2.5 (2)
Performance
Indicator Definition Measurement
Method Target
Recycled Water
System Integrity
(Breaks)
Measures the
condition of the
recycled water
distribution system
expressed as the total
annual number of
breaks per 100 miles
of distribution piping.
(Total number of
breaks x 100)/ Total
miles of recycled
distribution system
piping
No more than 3
breaks per 100 miles
of recycled
distribution system
annually
FY 2021 FY 2022 FY 2023 (1)
Target N/A N/A 3
Actual N/A N/A 3 (2)
Performance
Indicator Definition Measurement
Method Target
Sewer Overflow
Rate (2)
Measures the
wastewater collection
system pipeline
condition and the
effectiveness of
planned
maintenance.
[100 (Collection
system failure)]/
Total miles of
collection system
piping
0 overflow rate
annually
FY 2021 FY 2022 FY 2023
Target 0 0 0
Actual 1.14 2.27 0 (1)
(1)FY 2023 projected performance indicator
(2)Key performance indicator utilizes AWWA benchmark
Strategic Plan
In
t
e
r
n
a
l
B
u
s
i
n
e
s
s
P
r
o
c
e
s
s
Goal
Practice ongoing infrastructure renewal and organizational
improvement through planning and increased operational
efficiency.
In
t
e
r
n
a
l
B
u
s
i
n
e
s
s
P
r
o
c
e
s
s
Goal
Practice ongoing infrastructure renewal and organizational
improvement through planning and increased operational
efficiency.
In
t
e
r
n
a
l
B
u
s
i
n
e
s
s
P
r
o
c
e
s
s
Goal
Practice ongoing infrastructure renewal and organizational
improvement through planning and increased operational
efficiency.
31
Key Performance Indicators: Water Operations (continued)
Performance
Indicator Definition Measurement
Method Target
Potable Tank
Inspection and
Cleaning
This provision
ensures that the
District adheres to the
American Water
Works Association
(AWWA)
recommendation and
guidelines of a tank
cleaning program
that cleans all tanks
and reservoirs every
five years.
Number of tanks
cleaned and
inspected annually
8 potable water
storage tanks and/or
reservoirs cleaned
annually
FY 2021 FY 2022 FY 2023
Target 8 8 8
Actual 8 8 8 (1)
Performance
Indicator Definition Measurement
Method Target
Hydrant Maintenance
Program
Evaluates the
condition and
maintenance of
hydrants to ensure
that they are readily
accessible,
completely functional,
and leak-free.
Number of hydrants
maintained/ Total
number of hydrants
20% of District
hydrants maintained
annually (1220
hydrants) to
accomplish 100%
every 5 years
FY 2021 FY 2022 FY 2023 (2)
Target N/A N/A 20%
Actual N/A N/A 20% (1)
(1)FY 2023 projected performance indicator
(2)FY 2023 is the first year for this key performance indicator
Strategic Plan
In
t
e
r
n
a
l
B
u
s
i
n
e
s
s
P
r
o
c
e
s
s
Goal
Practice ongoing infrastructure renewal and organizational
improvement through planning and increased operational
efficiency.
In
t
e
r
n
a
l
B
u
s
i
n
e
s
s
P
r
o
c
e
s
s
Goal
Practice ongoing infrastructure renewal and organizational
improvement through planning and increased operational
efficiency.
32
Key Performance Indicators: Engineering
Performance
Indicator Definition Measurement
Method Target
CIP Project
Expenditures vs.
Budget
Compares CIP
expenditures vs.
Budget
Actual quarterly
expenditures/
Annual budget
Greater than or equal
to 95% of budget
annually
FY 2021 FY 2022 FY 2023
Target 95%95%95%
Actual 111%103% 95% (1)
Performance
Indicator Definition Measurement
Method Target
Construction Change
Order Incidence
Measures rate of
Change Orders for
CIP projects under
Construction.
Total cost of change
orders (not including
allowances)/Total
original construction
contract amount (not
including allowances)
No more than
5% change order rate
annually
FY 2021 FY 2022 FY 2023
Target 5.0%5.0%5.0%
Actual 4.4%2.0% 5.0% (1)
Performance
Indicator Definition Measurement
Method Target
Mark-out Accuracy
The percentage of
mark-outs performed
without an at-fault hit;
defined as damage to
a District facility that
results from a missing
or erroneous mark-
out.
Number of mark-outs
performed without an
at-fault hit/Total
number of mark-outs
performed
100% of mark-outs
performed without an
at fault hit annually
FY 2021 FY 2022 FY 2023
Target 100%100%100%
Actual 100%100% 100% (1)
(1)FY 2023 projected performance indicator
Strategic Plan
Fin
a
n
c
i
a
l
Goal
Operate the District in a financially sustainable and
transparent manner while maintaining a fair rate structure.
Fi
n
a
n
c
i
a
l
Goal
Operate the District in a financially sustainable and
transparent manner while maintaining a fair rate structure.
In
t
e
r
n
a
l
B
u
s
i
n
e
s
s
P
r
o
c
e
s
s
Goal
Practice ongoing infrastructure renewal and organizational
improvement through planning and increased operational
efficiency.
33
Key Performance Indicators: Engineering (continued)
Performance
Indicator Definition Measurement
Method Target
Easement Desktop
Evaluation and Field
Inspection
Inspection of District
easements to ensure
that no unauthorized
encroachments exist.
Number of Actual
Easements Evaluated
and Inspected/Total
Number of
Easements
100% of easements
evaluated and
inspected annually
FY 2021 FY 2022 FY 2023
Target 100%100%100%
Actual 111%100% 100% (1)
(1)FY 2023 projected performance indicator
In
t
e
r
n
a
l
B
u
s
i
n
e
s
s
P
r
o
c
e
s
s
Goal
Strategic Plan
Practice ongoing infrastructure renewal and organizational
improvement through planning and increased operational
efficiency.
34
Financial Summaries
Budget Summary
The FY 2023 Operating Budget is summarized and presented in the Operating Budget Summary- General
Fund on pages 40-41. 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 42 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 Type - All Funds; and Revenues and Expenditures by
Fund ; and are presented on pages 43-47.
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 79.5% of the District’s operating revenues. It is estimated that 27,336.8 acre-feet
of potable water will be sold during FY 2023, which is an increase of 335 acre-feet from FY 2022. Budgeted
revenues from water sales are projected to be $94.3 million, an increase of 4.9% compared to FY 2022.
Schedules relating to potable water sales are included in the Potable Revenues and Expenditures section
of this budget.
Recycled Water Sales
The District’s recycled water sales continue to be adversely impacted by measures implemented as a
result of the permanent conservation efforts. Recycled water sales revenue is generated from the sale of
3,609.5 acre-feet of recycled water, which is below historic volumes which were as high as 4,748 acre-
feet sold in 2014. The FY 2023 sales revenue budget is $10.2 million which is an increase of $0.5 million
from FY 2022 and includes the incentive credit provided by MWD. As of FY 2021, the District was no longer
eligible for a credit incentive from CWA.
Sewer Revenues
Sewer charges, which represent 99% of sewer revenue, are the monthly fees collected from residential,
multi-residential, and commercial customers. The remaining 1% of revenue is derived from penalties. The
monthly fees are determined by volume of flow and the strength of solids discharged into the sewer
system. The FY 2023 sewer revenues are projected to be $3.3 million, an increase of $216,000 from FY
2022.
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 2023 revenue from meter fees is projected to be $170,000 which is an
increase of $96,000 from FY 2022. 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 2023 capacity fee revenue is projected to be $2.3 million, an increase of $335,000 from
FY 2022.
35
Financial Summaries
Tax Revenues
The District receives a portion of the 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. The District budgeted tax revenues of $5.3 million which is
an increase of $341,000 compared to FY 2022.
Spending limits for government entities 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 appropriations limit on most spending from tax proceeds. Otay
Water District is a special district and is not subject to the Gann Limit.
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 $2.5 million in revenues for FY 2023, which is an increase of $304,000
compared to FY 2022.
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 $495,000 in FY 2023, which is an increase of $259,000 from FY 2022.
General Fund Expenditures
Potable Water Purchases
Water purchases are the expenses of purchasing 28,633.2 acre-feet for the District's potable water supply.
A provision has been made to allow 1,296.4 acre-feet of water for District usage, leakage, and evaporation.
Total Potable Water Purchases are projected to be $44.3 million in FY 2023, which is an increase of $3.8
million compared to FY 2022.
Recycled Water Purchases
Recycled water purchases are the expenses of purchasing 2,685.7 acre-feet for the District's recycled
water supply which is an increase of 32 acre-feet compared to FY 2022. In addition to the purchases,
there is a contractual Take-or-Pay payment budgeted for 2,838.3 acre-feet which is 57.3 acre-feet more
than FY 2022. Total Recycled Purchases are projected to be $5.5 million in FY 2023, which is an increase
of $622,000 compared to FY 2022.
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 $3.0 million in FY 2023, which is a
decrease of $82,000 compared to FY 2022.
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
36
Financial Summaries
allocated among the member agencies based on each agency’s three-year rolling average of member
agency supply purchases from the CWA. Budgeted customer service charges are projected to be $1.9
million in FY 2023, an increase of $64,000 compared to FY 2022.
Supply Reliability Charge
This charge was established in FY 2016 by CWA as a fixed charge and became effective in 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 Municipal and Industrial (M&I) deliveries (agricultural deliveries are not
included). The reliability charge is projected at $3.0 million in FY 2023, which is an increase of $136,000
compared to FY 2022.
Emergency Storage Charge
The Emergency Storage Charge was established by CWA in calendar year 2003 to recover costs
associated with non-agricultural water deliveries and is allocated based on each member agency’s share
of deliveries. The emergency storage charge is projected to be $4.7 million in FY 2023, which is an
increase of $166,000 compared to FY 2022.
Capacity Reservation Charge
This charge was established in FY 2002 by 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 $762,000 in FY 2023,
which is relatively flat compared to FY 2022.
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 $685,000 in FY
2023, an increase of $32,000 compared to FY 2022.
Labor and Benefits
Labor and benefits are the wages and fringe benefits for FY 2023 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 $22.6 million, which is an increase of $600,600 compared to FY 2022.
Administrative Expenses
Administrative expenses are costs incurred by various departments that are directly related to District
operations. Administrative expenses are projected to be $8.1 million in FY 2023, which is an increase of
$509,900 compared to FY 2022. Additional details are supplied in the Departmental Operating Budget
section.
37
Financial Summaries
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 $4.1 million in FY 2023, which
is an increase of $145,000 compared to FY 2022. Additional details are supplied in the Departmental
Operating Budget section.
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. The
District’s power costs are projected to be $3.9 million in FY 2023, which is an increase of $408,000
compared to FY 2022.
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 2023, these reserves will be funded
with $542,800 from the Recycled Water Fund and $142,000 from the Sewer 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 2023, these
reserves will be funded with $4.1 million from the Potable Water Fund, $615,000 from the Recycled Water
Fund, and $210,000 from the Sewer Fund.
Replacement Reserves
These reserves are established to fund the replacement needs including project costs, existing debt
payments, and new debt that will be issued in the future to fund replacement. For FY 2023, these reserves
will be funded with $7.6 million from the Potable Water Fund, $545,000 from the Recycled Water Fund,
and $268,000 from the Sewer Fund.
Rate Stabilization Reserves
This sewer reserve is established for the purpose of minimizing rate increases in response to one-time
events and therefore stabilizing the rates and charges imposed by the District to meet covenanted debt
service coverage levels. For FY 2023, this reserve will be funded with $19,000 from the Sewer Fund.
New Water Supply Reserves
These reserves are established to fund new water supply needs including project costs, existing debt
payments, and new debt that will be issued in the future to fund expansion. For FY 2023, there is no
reserve funding budgeted.
Transfer to California Public Employees’ Retirement System (CalPERS)
For FY 2023, the General Fund is budgeted to make an additional annual contribution of $2.1 million to
CalPERS for pension liabilities.
38
Financial Summaries
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.
Other Financial Schedules/Presentations
Operating Budget Summary by System
The Budget Summary by System schedule reflects the breakdown of operating revenues and expenses
per fund. The schedule presents a balanced budget for each fund and shows that anticipated resources
are sufficient to cover current expenditures. This is provided as information but is necessary to ensure
sufficient revenue is collected from sewer customers versus water customers.
General Fund – Revenues, 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 audited 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, 2022, and the projected balance for June 30, 2023.
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.
39
FY 2021 FY 2022 FY 2022 FY 2023
11-Actual Budget Actual Budget $%
Revenues
#Potable Water Sales 91,054,950$ 89,934,000$ 92,452,011$ 94,308,000$ 4,374,000$ 4.9%
Recycled Water Sales 10,688,020 9,681,000 10,042,348 10,217,000 536,000 5.5%
#Sewer Revenues 2,865,634 3,068,000 3,085,044 3,284,000 216,000 7.0%
#Meter Fees 151,346 74,000 163,782 170,000 96,000 129.7%
#Capacity Fee Revenues 2,287,553 1,976,000 2,551,404 2,311,000 335,000 17.0%
Tax Revenues 5,191,021 4,969,000 5,502,252 5,310,000 341,000 6.9%
#Non-operating Revenues 5,960,015 2,219,500 6,469,704 2,523,100 303,600 13.7%
#Interest 231,823 236,000 187,354 495,000 259,000 109.7%
Total Revenues 118,430,362 112,157,500 120,453,899 118,618,100 6,460,600 5.8%
Expenditures
#Potable Water Purchases 40,797,557 40,446,000 42,572,534 44,250,000 3,804,000 9.4%
Recycled Water Purchases 2,902,170 4,865,000 4,585,689 5,487,000 622,000 12.8%
#CWA - Infrastructure Access Charge 2,851,758 3,080,000 3,080,352 2,998,000 (82,000) (2.7%)
#CWA - Customer Service Charge 1,734,673 1,817,000 1,816,764 1,881,000 64,000 3.5%
CWA - Reliability Charge 2,714,150 2,867,000 2,866,626 3,003,000 136,000 4.7%
#CWA - Emergency Storage Charge 4,588,473 4,595,000 4,595,462 4,711,000 116,000 2.5%
#MWD - Capacity Reservation Charge 636,498 765,000 764,843 762,000 (3,000) (0.4%)
#MWD - Readiness-To-Serve Charge 716,037 653,000 653,367 685,000 32,000 4.9%
Subtotal - Water Costs 56,941,316 59,088,000 60,935,637 63,777,000 4,689,000 7.9%
#Labor and Benefits 20,884,945 22,048,500 20,395,698 22,649,100 600,600 2.7%
#Administrative Expenses 6,265,249 7,547,800 6,919,294 8,057,700 509,900 6.8%
#Materials and Maintenance 3,802,207 3,987,900 3,884,421 4,132,600 144,700 3.6%
#Power 3,310,860 3,485,000 3,679,023 3,893,000 408,000 11.7%
Subtotal - Operations Costs 34,263,261 37,069,200 34,878,436 38,732,400 1,663,200 4.5%
DSGeneral Fund Reserve 259,000 90,500 90,500 40,400 (50,100) (55.4%)
#Expansion Reserve 150,000 2,066,900 2,066,900 684,800 (1,382,100) (66.9%)
Bett ResBetterment Reserve 985,000 735,000 735,000 4,890,000 4,155,000 565.3%
Repl ResReplacement Reserve 9,676,000 11,986,900 11,986,900 8,393,600 (3,593,300) (30.0%)
TOPEBTransfer to PERS 1,100,000 1,100,000 989,000 2,080,900 980,900 89.2%
Transfer to Rate Stabilization Fund - 21,000 21,000 19,000 (2,000) (9.5%)
Subtotal - Reserve Funding 12,170,000 16,000,300 15,889,300 16,108,700 108,400 0.7%
Total Expenditures 103,374,577 112,157,500 111,703,373 118,618,100 6,460,600 5.8%
Excess Revenues (Expenditures)15,055,785$ -$ 8,750,526$ -$-$ -
Operating Budget Summary - General Fund
Budget to Budget
Variance
40
Potable Water Sales 94,308,000$ 79.5%
Recycled Water Sales 10,217,000 8.6%
Sewer Revenues 3,284,000 2.8%
Meter Fees 170,000 0.1%
Capacity Fee Revenues 2,311,000 2.0%
Tax Revenues 5,310,000 4.5%
Non-operating Revenues 2,523,100 2.1%
Interest 495,000 0.4%
118,618,100 100.0%
Potable Water Purchases 58,290,000 49.1%
Recycled Water Purchases 5,487,000 4.6%
Power 3,893,000 3.3%
Labor and Benefits 22,649,100 19.1%
Administrative Expenses 8,057,700 6.8%
Materials and Maintenance 4,132,600 3.5%
Reserve Funding 16,108,700 13.6%
118,618,100$ 100.0%
Operating Budget Summary - General Fund
FY 2023 Operating Revenues
FY 2023 Operating Expenditures
41
Potable Recycled Sewer Total
Revenues
Water Sales 94,308,000$ -$ -$ 94,308,000$
Recycled Water Sales - 10,217,000 10,217,000 Sewer Revenues - -3,284,000 3,284,000
Meter Fees 157,000 13,000 - 170,000
Capacity Fee Revenues 2,311,000 - - 2,311,000 Tax Revenues 5,253,000 - 57,000 5,310,000
Non-operating Revenues 2,507,100 - 16,000 2,523,100 Interest 432,000 52,000 11,000 495,000
Total Revenues 104,968,100 10,282,000 3,368,000 118,618,100
Expenditures
Water Purchases 44,250,000 5,487,000 - 49,737,000 CWA - Infrastructure Access Charge 2,998,000 - - 2,998,000 CWA - Customer Service Charge 1,881,000 - - 1,881,000
CWA - Reliability Charge 3,003,000 - - 3,003,000 CWA - Emergency Storage Charge 4,711,000 - - 4,711,000
MWD - Capacity Reservation Charge 762,000 - - 762,000MWD - Readiness-To-Serve Charge 685,000 - - 685,000Subtotal - Water Costs 58,290,000 5,487,000 - 63,777,000
Labor and Benefits 20,092,200 1,459,900 1,097,000 22,649,100 Administrative Expenses 7,243,900 572,900 240,900 8,057,700 Materials and Maintenance 2,676,400 354,900 1,101,300 4,132,600
Power 3,136,000 590,000 167,000 3,893,000 Subtotal - Operations Costs 33,148,500 2,977,700 2,606,200 38,732,400 DSGeneral Fund Reserve - - 40,400 40,400
#Expansion Reserve - 542,800 142,000 684,800Bett ResBetterment Reserve 4,065,000 615,000 210,000 4,890,000
Repl ResReplacement Reserve 7,580,600 545,000 268,000 8,393,600
TOPEBTransfer to PERS 1,884,000 114,500 82,400 2,080,900 Transfer to Rate Stabilization Fund - - 19,000 19,000
Subtotal - Reserve Funding 13,529,600 1,817,300 761,800 16,108,700
Total Expenditures 104,968,100 10,282,000 3,368,000 118,618,100
Excess Revenue (Expenditures)-$ -$ -$ -$
FY 2023 Operating Budget Summary by System
42
FY 2021 FY 2023
Actual Budget Actual Budget $%
Revenues
Water Sales 101,742,970$ 99,615,000$ 102,494,359$ 104,525,000$ 4,910,000$ 4.9%
Sewer Revenues 2,865,634 3,068,000 3,085,044 3,284,000 216,000 7.0%
Meter Fees 151,346 74,000 163,782 170,000 96,000 129.7%
Capacity Fee Revenues 2,287,553 1,976,000 2,551,404 2,311,000 335,000 17.0%
Tax Revenues 5,191,021 4,969,000 5,502,252 5,310,000 341,000 6.9%
Non-Operating Revenues 5,960,015 2,219,500 6,469,704 2,523,100 303,600 13.7%
Interest 231,823 236,000 187,354 495,000 259,000 109.7%
Total Revenues and Sources 118,430,362 112,157,500 120,453,899 118,618,100 6,460,600 5.8%
Expenditures and Transfers
Water Purchases 56,941,316 59,088,000 60,935,637 63,777,000 4,689,000 7.9%
Power 3,310,860 3,485,000 3,679,023 3,893,000 408,000 11.7%
Labor and Benefits 20,884,945 22,048,500 20,395,698 22,649,100 600,600 2.7%
Administrative Expenses 6,265,249 7,547,800 6,919,294 8,057,700 509,900 6.8%
Materials and Maintenance 3,802,207 3,987,900 3,884,421 4,132,600 144,700 3.6%
Transfers 12,170,000 16,000,300 15,889,300 16,108,700 108,400 0.7%
- Total Expenditures and Transfers 103,374,577 112,157,500 111,703,373 118,618,100 6,460,600 5.8%
Excess Revenues (Expenditures)15,055,785$ -$ 8,750,526$ -$ -$ -
General Fund Revenues, Expenditures and Transfers, in millions ($)
FY 2022
Budget to Budget
Variance
General Fund - Revenues, Expenditures and Transfers
$80
$90
$100
$110
$120
$130
FY 2021
Actual
FY 2022
Budget
FY 2022
Actual
FY 2023
Budget
$1
1
8
$1
1
2
$1
2
0
$1
1
9
$1
0
3
$1
1
2
$1
1
2
$1
1
9
Revenue Expenditures
43
Actual Projected
Balance Interfund Balance
June 30, 2022 Revenues Expenditures Transfers (1)June 30, 2023
General Fund
Potable 34,233,000$ 104,968,100$ 104,968,100$ -$ 34,233,000$
Recycled 6,092,200 10,282,000 10,282,000 - 6,092,200
Sewer 1,031,700 3,368,000 3,368,000 - 1,031,700
Total General Fund 41,356,900 118,618,100 118,618,100 - 41,356,900 (1)
Expansion Fund
Water (2)432,900 4,503,700 6,162,200 1,056,000 (169,600)
Sewer 7,500 800 74,700 142,000 75,600
Total Expansion Fund 440,400 4,504,500 6,236,900 1,198,000 (94,000) (3)
Betterment Fund
Potable 35,500 1,020,900 3,372,300 4,065,000 1,749,100
Recycled 526,800 12,000 886,200 615,000 267,600
Sewer (14,000) 57,800 171,300 210,000 82,500
Total Betterment Fund 548,300 1,090,700 4,429,800 4,890,000 2,099,200 (3)
Replacement Fund
Potable 47,619,000 7,116,500 11,747,800 13,028,000 56,015,700
Recycled 4,360,100 858,000 1,197,700 545,000 4,565,400
Sewer 4,048,500 177,500 755,950 268,000 3,738,050
Total Replacement Fund 56,027,600 8,152,000 13,701,450 13,841,000 64,319,150 (3)
New Supply Fund
Water (2)3,027,700 63,100 87,800 - 3,003,000
Total New Supply Fund 3,027,700 63,100 87,800 - 3,003,000
Rate Stabilization Fund 196,000 - - 19,000 215,000
OPEB Fund (55,000) - 2,007,500 2,078,000 15,500
Debt Service Fund 4,410,800 435,800 797,800 - 4,048,800
Total (3)105,952,700$ 132,864,200$ 145,879,350$ 22,026,000$ 114,963,550$
(1)The total for interfund transfers does not net to $0 because some transfers are already reflected in the Operating Revenues and Expenditures for General Fund as follows:
General Fund Reserve (40,400)$
Expansion Reserve (684,800)
Betterment Reserve (4,890,000)
Replacement Reserve (8,393,600)
OPEB Reserve (2,080,900)
Rate Stabilization Reserve (19,000)
Total (16,108,700)$ #
Fund Balance Summary by Fund
Fiscal Year 2023 Budget
(2)Potable and Recycled funds are combined.
(3) The fund balance is anticipated to change more than 10% due to the District's ongoing current year CIP expenditures funded by current years revenues and
transfers made in accordance with the Reserve Policy found on pages 167-206.
44
FY 2021 FY 2023
Actual Budget Actual Budget
Revenues and Fund Sources
Water Sales 101,742,970$ 99,615,000$ 102,494,359$ 104,525,000$
Sewer Revenues 2,865,634 3,068,000 3,085,044 3,284,000
Meter Fees 151,346 74,000 163,782 170,000
Capacity Fee Revenues 2,287,553 1,976,000 2,551,404 2,311,000
Capacity Fees for Maintenance 10,245,373 5,041,000 11,195,389 11,191,283
Tax Revenues 5,191,021 4,969,000 5,502,252 5,310,000
Availability Fees 492,274 711,000 507,988 711,000
Non-Operating Revenues 5,960,015 2,219,500 6,469,704 2,523,100
GO Bond Debt Tax Revenues 747,215 532,000 483,260 362,800
Bond Proceeds and BABs Subsidy 783,415 783,300 782,835 783,000
Interest 611,408 624,800 634,221 1,693,000
Annexation Fees 84,810 - 48,686 -
Total Revenue and Fund Sources 131,163,035 119,613,600 133,918,924 132,864,183
-$ -$
Expenditures and Fund Uses
Water Purchases 56,941,316 59,088,000 60,935,637 63,777,000
Power 3,310,860 3,485,000 3,679,023 3,893,000
Labor Expenses 20,884,945 22,048,500 20,395,698 22,649,100
Administrative Expenses 6,265,249 7,547,800 6,919,294 8,057,700
Materials and Maintenance 3,802,207 3,987,900 3,884,421 4,132,600
CIP Expenses 9,484,860 10,718,400 8,996,429 14,890,100
Debt Service 9,447,321 10,318,100 9,501,873 10,290,650
Operating Projects 2,274,905 - 2,541,598 -
OPEB Retiree Expenses & PERS Funding 1,034,085 1,100,000 2,156,260 2,080,900
Total Expenditures and Fund Uses 113,445,748 118,293,700 119,010,233 129,771,050
Surplus/(Deficit)17,717,287$ 1,319,900$ 14,908,691$ 3,093,133$
(1)$ -$ -$ -$
Revenues and Expenditures by Type - All Funds
FY 2022
45
FY 2021 FY 2023
Actual Budget Actual Budget
Revenues
General Fund
Potable 105,521,579$ 99,288,500$ 107,991,040$ 104,968,100$
Recycled 10,728,713 9,706,000 10,079,969 10,282,000
Sewer 2,963,487 3,163,000 3,165,726 3,368,000
Total General Fund (1)119,213,779 112,157,500 121,236,734 118,618,100
Expansion Fund
Potable 3,740,240 2,713,700 3,914,799 3,904,700
Recycled 406,355 380,000 264,842 599,000
Sewer 358 300 188 800
Total Expansion Fund 4,146,953 3,094,000 4,179,828 4,504,500
Betterment Fund
Potable 477,720 1,013,200 479,840 1,020,900
Recycled 28,186 10,000 24,174 12,000
Sewer 31,383 56,600 32,636 57,800
Total Betterment Fund 537,289 1,079,800 536,650 1,090,700
Replacement Fund
Potable 5,344,631 2,179,800 6,963,734 7,116,500
Recycled 734,928 472,000 370,550 858,000
Sewer 117,392 31,300 76,439 177,483
Total Replacement Fund 6,196,951 2,683,100 7,410,723 8,151,983
New Supply Fund
Potable 228,981 26,600 34,771 56,100
Recycled 31,773 4,000 1,886 7,000
Total New Supply Fund 260,754 30,600 36,658 63,100
OPEB and PERS Fund 11,068 3,600 7,282 -
Debt Service Fund 796,241 565,000 511,049 435,800
Total Revenues 131,163,035$ 119,613,600$ 133,918,924 132,864,183$
Revenues and Expenditures by Fund
FY 2022
Note: This schedule excludes interfund transfers.
46
FY 2021 FY 2023
Actual Budget Actual Budget
Revenues and Expenditures by Fund
FY 2022
Expenditures
General Fund
Potable 83,147,654$ 85,903,600$ 86,566,162$ 91,438,500$
Recycled 5,434,309 7,621,100 7,236,830 8,464,700
Sewer 2,622,614 2,632,500 2,011,081 2,606,200
Total General Fund 91,204,577 96,157,200 95,814,073 102,509,400
Expansion Fund
Potable 4,062,061 4,604,500 4,990,604 5,017,600
Recycled 994,110 1,143,000 1,264,034 1,144,600
Sewer 34,158 23,300 46,662 74,700
Total Expansion Fund 5,090,329 5,770,800 6,301,300 6,236,900
Betterment Fund
Potable 1,316,912 3,129,800 2,664,243 3,372,300
Recycled 251,625 314,500 246,635 886,200
Sewer 104,964 121,800 149,091 171,300
Total Betterment Fund 1,673,501 3,566,100 3,059,970 4,429,800
Replacement Fund
Potable 8,399,411 10,040,900 10,022,085 11,747,800
Recycled 577,656 501,500 494,660 1,197,700
Sewer 256,267 337,000 276,970 755,950
Total Replacement Fund 9,233,334 10,879,400 10,793,714 13,701,450
New Supply Fund
Potable (236,792) 45,200 103,934 83,000
Recycled 3,444 5,000 3,431 4,800
Total New Supply Fund (233,348) 50,200 107,365 87,800
OPEB and PERS Fund 1,034,085 1,100,000 2,156,260 2,007,900
Debt Reserve Fund 5,443,270 770,000 777,551 797,800
Total Expenditures 113,445,748 118,293,700 119,010,233 129,771,050
Surplus/(Deficit)17,717,287$ 1,319,900$ 14,908,691 3,093,133$
Note: This schedule excludes interfund transfers.
47
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48
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 2024 through FY 2028. 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 related to the District’s pension and OPEB plans. Other general inflators are derived from
consumer price index statistical data 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, 101 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 CIP 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).
49
FY 2024 FY 2025 FY 2026 FY 2027 FY 2028
Revenues
Water/Sewer Rates 112,357,700$ 118,133,700$ 123,398,800$ 129,650,900$ 136,215,600$
Meter Fees 162,900 166,100 167,800 170,400 173,400
Capacity Fee Revenues 2,322,600 2,345,800 2,369,300 2,393,000 2,416,900
Non-operating Revenues 2,385,945 2,433,900 2,529,400 2,782,800 2,911,800
Tax Revenues 5,546,000 5,790,500 5,793,500 5,795,500 5,798,500
Interest Income 586,500 764,100 810,000 836,700 862,400
Total Revenues 123,361,645 129,634,100 135,068,800 141,629,300 148,378,600
59,311,845$ 60,619,300$ 61,172,300$ 63,023,000$
FY 2024 FY 2025 FY 2026 FY 2027 FY 2028
Expenditures
Water Cost 68,211,500 73,782,100 78,262,100 79,502,500 82,214,800
Power 4,124,600 4,366,200 4,596,200 4,838,300 5,093,300
Labor and Benefits 23,262,900 25,444,100 24,935,100 25,706,600 26,515,000
Administrative Expenses 8,340,100 8,812,800 9,235,000 9,703,700 10,194,200
Materials & Maintenance 4,272,300 4,505,400 4,732,900 4,972,000 5,223,400
Net Reserve Funding 15,131,245 12,723,500 13,307,500 16,906,200 19,137,900
Transfer to Rate Stabilization Fund 19,000 - - - -
Total Expenditures and Transfers 123,361,645 129,634,100 135,068,800 141,629,300 148,378,600
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
$0
$20
$40
$60
$80
$100
$120
$140
$160
FY 2024 FY 2025 FY 2026 FY 2027 FY 2028
$1
2
3
$1
3
0
$1
3
5
$1
4
2
$1
4
8
$1
2
3
$1
3
0
$1
3
5
$1
4
2
$1
4
8
Revenues and Expenditures Forecast, in millions ($)
Revenues Expenditures
50
FY 2024 FY 2025 FY 2026 FY 2027 FY 2028
Fund Balance
General Fund 27,069,200$ 29,245,900$ 30,450,200$ 31,197,800$ 32,329,100$
Betterment Fund 1,961,500 1,294,400 1,063,900 1,031,800 1,032,200
Replacement Fund 37,100,100 39,148,000 33,933,200 37,295,200 43,877,200
Expansion Fund 815,300 940,400 882,300 749,900 748,200
New Supply Fund 2,971,800 2,973,700 2,967,100 2,960,400 2,967,900
Debt Reserve 4,010,400 5,466,000 4,001,400 5,146,700 3,991,800
Rate Stabilization Fund 242,700 249,400 256,300 263,300 270,500
Total Fund Balance 74,171,000$ 79,317,800$ 73,554,400$ 78,645,100$ 85,216,900$
239,000 245,550 252,200 258,951 265,992
Fund Balances Forecast
Fund Balances by Fund
$0
$20
$40
$60
$80
$100
FY 2024 FY 2025 FY 2026 FY 2027 FY 2028
Fund Balances Forecast, in millions ($)
General Fund Betterment Fund Replacement Fund Expansion Fund
Debt Reserve New Supply Fund Rate Stabilization Fund
51
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),
Wastewater Revenue Bonds, 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 covenants. Bonds have been and will be used for the purpose of
improving the District’s 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 September 2018, Standard & Poor’s (S&P) affirmed the District’s water operation’s AA rating and
stable outlook. The rating was based on good historical coverage metrics, strong liquidity position,
moderate leverage, and strong financial management policies and practices. The District’s sewer
debt is not rated.
The District’s water side achieved a 354% actual debt coverage ratio, with growth revenues, for fiscal
year 2022, which exceeded the debt covenant minimum ratio of 125%. To meet the bond
indebtedness obligation and maintain stable rates, the rate model is used to forecast revenues and
operating requirements. On the water side, the District does not anticipate issuing any new debts for
budget years FY 2023 through FY 2028. The chart below shows the District’s projected debt coverage
ratio, for the water side of the District, from FY 2023 through FY 2028. The debt coverage ratios are
growing as rates are set to ensure adequate funding of the reserves.
The District’s Board of Directors believes that a strong debt coverage ratio will benefit the ratepayers
as it reduces the cost of water infrastructure; and therefore have been willing to support this with
necessary rate increases. The District has projected a schedule of rate increases designed to
generate sufficient revenue to pay off existing and planned future debt issues. See the
Policies section of the budget for the District’s complete Debt Policy.
Projected Water Debt Coverage Ratio
2.66
2.21 2.16 2.26
2.82
3.62
-
1.00
2.00
3.00
4.00
FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028
Co
v
e
r
a
g
e
R
a
t
i
o
Projected Ratio Minimum Covenant = 1.25
52
Debt Management
For sewer, the District originally issued $3.1 million of debt for sewer capital projects in 2019. This is
sewer’s only current outstanding debt obligation. The District is forecasting additional debt issuances
totaling $2.6 million between 2025 and 2027 will be needed to meet the projected capital project
expenditures and maintain reserves above target levels in all six years.
The financial needs of sewer for the FY 2023 six-year projection include funding anticipated Metro
JPA increases, increases in County shared facility costs for County rehabilitation projects, and
meeting the debt coverage requirements of future debt issuances. Sewer’s debt service coverage,
with growth revenues, for FY 2022 was 860%. The chart below shows the District’s projected debt
coverage ratio, for the sewer side of the District, from FY 2023 through FY 2028. The debt coverage
ratios are growing as rates are set to ensure adequate funding of the reserves.
Sewer Debt Coverage Ratio
5.45 5.87 6.07
4.43 4.27
3.60
-
1.00
2.00
3.00
4.00
5.00
6.00
7.00
FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028
Co
v
e
r
a
g
e
R
a
t
i
o
Projected Ratio Minimum Covenant = 1.25
53
The following schedule shows the District's debt service payments for FY 2023:
Year Incurred Debt Description Principal Interest Principal Interest Total
2009 General Obligations (GO) Bonds 720,000$ 14,400$ -$ -$ 734,400$
2010 Water Revenue Bonds Series A 1,175,000 159,113 - - 1,334,113
2010 Water Revenue Bonds Series B - 2,371,868 - - 2,371,868
2013 Water Revenue Refunding Bonds 805,000 33,400 - - 838,400
2016 Water Revenue Refunding Bonds 1,285,000 909,581 - - 2,194,581
2018 Water Revenue Refunding Bonds 1,455,000 1,187,038 - - 2,642,038
2019 Wastewater Revenue Bonds - - 70,000 88,041 158,041
Total 5,440,000$ 4,675,400$ 70,000$ 88,041$ 10,273,441$
Impact of Current Debt Levels
Water Sewer
The District's FY 2023 debt service is $10.3 million on total outstanding debts of $149 million as of June
30, 2022. The FY 2023 debt service payments represent 8.7% of the District's total budget. The District
considers this debt level low and does not impact the level of water or sewer utility service provided to
customers.
54
Outstanding
Year Maturity Original Principal Balance
#Incurred Description Date Amount 6/30/2023
1 2009 General Obligation (GO) Bonds August 31, 2022 7,780,000$ -$
2 2010 Water Revenue Bonds Series A September 1, 2024 13,840,000 2,530,000
3 2010 Water Revenue Bonds Series B (1)September 1, 2040 36,355,000 36,355,000
4 2013 Water Revenue Refunding Bonds (2)September 1, 2023 7,735,000 835,000
5 2016 Water Revenue Refunding Bonds (3)September 1, 2036 33,385,000 25,370,000
6 2018 Water Revenue Refunding Bonds (4)September 1, 2043 32,435,000 27,055,000
Subtotal Water Bonds 131,530,000 92,145,000
7 2019 Wastewater Revenue Bonds September 1, 2049 3,120,000 2,985,000
Subtotal Wastewater Bonds 3,120,000 2,985,000
Total Outstanding Debt 134,650,000$ 95,130,000$
Total Assessed Valuation - FY 2022
Percentage of Original Debt to Assessed Valuation 0.37%0.08%
Debt Limit per District Debt Policy (% of Assessed Valuation)15.00%15.00%
(1)The 2010B Water Revenue Bonds are Taxable Build America Bonds.
(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.
(4)The 2018 Water Revenue Refunding Bonds include a $6.9 million current refunding of the 1996 Variable
Rate COPs.
Total Outstanding Debt, in millions ($)
36,225,223,831$ 17,189,548,097$
Schedule of Outstanding Debt
All Debts GO Bonds
$0
$10
$20
$30
$40
$50
$60
$70
2009 GOBs 2010A WRBs 2010B
WRBs(1)
2013
WRRBs(2)
2016
WRRBs(3)
2018
WRRBs(4)
2019
WWRBs
Principal Interest
55
Note: The accounting for debt proceeds and payments is described in the District's Reserve Policy found on
pages 167-206.
2009 GOBs 2010A WRBs 2010B WRBs(1)2013 WRRBs(2)2016 WRRBs(3)2018 WRRBs(4)2019 WWRBs Total
720,000 1,175,000 - 805,000 1,285,000 1,455,000 70,000 5,510,000
- 1,235,000 - 835,000 1,350,000 1,650,000 75,000 5,145,000
- 1,295,000 - -1,420,000 1,730,000 75,000 4,520,000
- -1,365,000 - 1,495,000 1,820,000 80,000 4,760,000
- -1,450,000 - 1,570,000 1,915,000 80,000 5,015,000
- -1,545,000 - 1,645,000 1,030,000 85,000 4,305,000
- -1,640,000 - 1,715,000 1,080,000 85,000 4,520,000
- -1,745,000 - 1,785,000 1,135,000 90,000 4,755,000
- -1,855,000 - 1,855,000 1,195,000 90,000 4,995,000
- -1,975,000 - 1,955,000 1,245,000 95,000 5,270,000
- -2,105,000 - 2,005,000 1,295,000 95,000 5,500,000
- -2,245,000 - 2,055,000 1,350,000 100,000 5,750,000
- -2,390,000 - 2,115,000 1,400,000 100,000 6,005,000
- -2,550,000 - 2,170,000 1,460,000 105,000 6,285,000
- -2,715,000 - 2,235,000 1,270,000 105,000 6,325,000
- -2,895,000 - -1,235,000 110,000 4,240,000
- -3,085,000 - -1,185,000 115,000 4,385,000
- -3,290,000 - -1,210,000 115,000 4,615,000
- -3,505,000 - -1,290,000 120,000 4,915,000
- -- - - 985,000 125,000 1,110,000
- -- - - 775,000 125,000 900,000
- -- - - 800,000 130,000 930,000
- -- - - -135,000 135,000
- -- - - -140,000 140,000
- -- - - -145,000 145,000
- -- - - -150,000 150,000
- -- - - -155,000 155,000
- -- - - -160,000 160,000
720,000$ 3,705,000$ 36,355,000$ 1,640,000$ 26,655,000$ 28,510,000$ 3,055,000$ 100,640,000$
(1)The 2010B Water Revenue Bonds are Taxable Build America Bonds.
(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.
(4)The 2018 Water Revenue Refunding Bonds include a $6.9 million current refunding of the 1996 Variable Rate COPs.
2049
2050
Total
Combined Debt Service through Maturity, in millions ($)
2044
2040
2041
2042
2043
2045
2046
2047
2048
2034
2035
2036
2037
2038
2039
2028
2029
2030
2031
2032
2033
2023
2024
2025
2026
2027
Projected Principal Payments by Debt Issuance
FY
$0
$2
$4
$6
$8
$10
$12
20
2
3
20
2
4
20
2
5
20
2
6
20
2
7
20
2
8
20
2
9
20
3
0
20
3
1
20
3
2
20
3
3
20
3
4
20
3
5
20
3
6
20
3
7
20
3
8
20
3
9
20
4
0
20
4
1
20
4
2
20
4
3
20
4
4
20
4
5
20
4
6
20
4
7
20
4
8
20
4
9
20
5
0
Principal Interest
56
2009 GOBs 2010A WRBs 2010B WRBs(1)2013 WRRBs(2)2016 WRRBs(3)2018 WRRBs (4)2019 WWRBs Total
14,400 159,113 2,371,868 33,400 909,581 1,187,038 88,041 4,763,441
- 98,863 2,371,868 - 842,081 1,104,538 86,541 4,503,891
- 33,994 2,371,868 - 771,081 1,018,038 84,291 4,279,272
- -2,328,345 - 696,331 927,038 81,891 4,033,605
- -2,238,589 - 617,831 831,288 79,491 3,767,199
- -2,143,093 - 552,031 779,788 76,941 3,551,854
- -2,041,540 - 483,431 725,788 74,391 3,325,150
- -1,933,609 - 412,031 669,038 71,691 3,086,369
- -1,818,823 - 337,831 609,288 68,991 2,834,933
- -1,694,728 - 288,956 559,488 66,616 2,609,789
- -1,560,558 - 238,831 507,688 64,146 2,371,223
- -1,417,508 - 184,888 453,688 61,446 2,117,529
- -1,265,086 - 126,725 397,688 58,696 1,848,195
- -1,102,634 - 67,050 339,288 55,756 1,564,728
- -929,495 - -288,488 52,738 1,270,720
- -745,010 - -245,263 49,575 1,039,847
- -548,357 - -197,863 46,269 792,489
- -338,716 - -154,000 42,819 535,534
- -115,262 - -102,400 39,219 256,881
- -- - - 63,000 35,469 98,469
- -- - - 32,000 31,719 63,719
- -- - - -27,656 27,656
- -- - - -23,438 23,438
- -- - - -19,063 19,063
- -- - - -14,531 14,531
- -- - - -9,844 9,844
- -- - - -5,000 5,000
14,400$ 291,969$ 29,336,958$ 33,400$ 6,528,681$ 11,192,688$ 1,416,270$ 48,814,366$
(1)The 2010B Water Revenue Bonds are Taxable Build America Bonds.
(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.
(4)The 2018 Water Revenue Refunding Bonds include a $6.9 million current refunding of the 1996 Variable Rate COPs.
2045
2046
2047
2048
2030
2031
2032
Total
2035
2036
2037
2038
2042
2043
2039
2049
2033
2034
2044
2040
2041
2024
2025
2026
2027
2028
2029
2023
Projected Interest Payments by Debt Issuance
FY
57
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58
Potable Revenues and Expenditures
Potable Revenues
The District will provide water service to approximately 51,494 potable customers by the end of FY
2023. Ninety-one percent of the potable customers are residential and the remaining 9.0% are
comprised of multi-residential, business and commercial, publicly-owned, non-public irrigation and
commercial agriculture, public irrigation, and construction. The District expects nominal growth in
the customer base of 1.0% for FY 2023. Unit sales are anticipated to increase 1.2% compared to the
previous year's budget, and decrease by 3.3% 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 charge. 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 charges, 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 water to higher elevation. 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 2023, the District estimates to purchase 28,633.2 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 1,296.4 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.
59
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.
Historically, CWA purchases water for the 24 member agencies from MWD and the Imperial Irrigation
District. In December 2015, the Claude “Bud” Lewis Carlsbad Desalination Plant began its
commercial operations and has entered into an agreement with CWA as its sole water purchaser.
Any cost increases by CWA, MWD, IID, or Carlsbad Desalination Plant 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 produces approximately 56,000 acre-feet per year of drinking water
for the San Diego region. It currently meets about 10% of the county’s water demand.
60
FY 2021 FY 2022 FY 2022 FY 2023
11-Actual Budget Actual Budget $%
Revenues
##Water Sales 91,054,950$ 89,934,000$ 92,452,011$ 94,308,000$ 4,374,000$ 4.9%
##Meter Fees 134,973 68,000 154,443 157,000 89,000 130.9%
##Capacity Fee Revenues 2,279,774 1,976,000 2,536,629 2,311,000 335,000 17.0%
Tax Revenues 5,137,569 4,912,000 5,449,332 5,253,000 341,000 6.9%
##Non-operating Revenues 5,921,102 2,186,500 6,459,721 2,507,100 320,600 14.7%
##Interest 209,794 212,000 156,069 432,000 220,000 103.8%
Total Revenues 104,738,162 99,288,500 107,208,205 104,968,100 5,679,600 5.7%
Expenditures
Potable Water Purchases 40,797,557 40,446,000 42,572,534 44,250,000 3,804,000 9.4%
##CWA - Infrastructure Access Charge 2,851,758 3,080,000 3,080,352 2,998,000 (82,000) (2.7%)
##CWA - Customer Service Charge 1,734,673 1,817,000 1,816,764 1,881,000 64,000 3.5%
##CWA - Reliability Charge 2,714,150 2,867,000 2,866,626 3,003,000 136,000 4.7%
##CWA - Emergency Storage Charge 4,588,473 4,595,000 4,595,462 4,711,000 116,000 2.5%
##MWD - Capacity Reservation Charge 636,498 765,000 764,843 762,000 (3,000) (0.4%)
##MWD - Readiness-To-Serve Charge 716,037 653,000 653,367 685,000 32,000 4.9%
Subtotal - Water Costs 54,039,146 54,223,000 56,349,948 58,290,000 4,067,000 7.5%
##Labor and Benefits 18,693,313 19,714,100 18,410,312 20,092,200 378,100 1.9%
##Administrative Expenses 5,627,518 6,760,000 6,227,770 7,243,900 483,900 7.2%
##Materials and Maintenance 2,152,609 2,442,500 2,587,437 2,676,400 233,900 9.6%
##Power 2,635,068 2,764,000 2,990,695 3,136,000 372,000 13.5%
11-1311-5133Subtotal - Operations Costs 29,108,508 31,680,600 30,216,214 33,148,500 1,467,900 4.6%
##Expansion Reserve 150,000 - - - - -
Bett ResBetterment Reserve - 445,000 445,000 4,065,000 3,620,000 813.5%
Repl ResReplacement Reserve 8,892,000 11,918,900 11,918,900 7,580,600 (4,338,300) (36.4%)
TOPEBTransfer to PERS 1,018,000 1,021,000 918,400 1,884,000 863,000 84.5%
Subtotal - Reserve Funding 10,060,000 13,384,900 13,282,300 13,529,600 144,700 1.1%
Total Expenditures 93,207,654 99,288,500 99,848,462 104,968,100 5,679,600 5.7%
Excess Revenues (Expenditures)11,530,508$ -$ 7,359,743$ -$ -$ -
Operating Budget Summary - Potable
Budget to Budget
Variance
61
FY 2021 FY 2023
Actual Budget Actual Budget $ %
Water Sales 58,610,501$ 55,549,000$ 57,900,777$ 61,958,000$ 6,409,000$ 11.5%
System Charges 16,828,509 17,393,000 17,439,502 15,168,000 (2,225,000) (12.8%)
Energy Charges 2,695,390 2,575,000 2,692,451 2,721,000 146,000 5.7%
MWD and CWA Fixed Charges 12,889,974 13,505,000 13,548,475 13,547,000 42,000 0.3%
Penalties 30,576 912,000 870,806 914,000 2,000 0.2%
Total Water Sales 91,054,950$ 89,934,000$ 92,452,011$ 94,308,000$ 4,374,000$ 4.9%
Water Sales 61,958,000$ 65.7%
System Charges 15,168,000 16.1%
Energy Charges 2,721,000 2.9%
MWD and CWA Fixed Charges 13,547,000 14.4%
Penalties 914,000 0.9%
Total Water Sales 94,308,000$ 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 meter size.
Energy Charges: The energy pumping charge is $ .068 per 100 cubic feet of water for each 100 feet of lift above
the elevation of 450 feet. All water customers are in one of 29 zones based on elevation.
MWD and CWA Fixed Charges: These pass-through charges are calculated to recover MWD's and CWA's fixed annual
costs, excluding MWD's Capacity Reservation charge, for the construction, operation, and maintenance of aqueducts and
emergency storage projects. These fixed charges are based on meter size.
Penalties: Penalties are imposed on customer accounts for late payments and returned checks.
FY 2023 Classification of Water Sales
FY 2022
Classification of Water Sales - Potable
Budget to Budget
Variance
62
Customer Class Accounts Unit Sales Budget
Residential Units(1)Rate Units(1)Rate 46,722 6,491,400$ 32,947,000$
Tier 1 0 - 10 3.52$ 0 - 9 5.26$
Tier 2 11 - 22 6.30 10 - 12 5.71
Tier 3 23 or more 8.12 13 or more 6.35
Multi-Residential 919 1,857,800 9,166,000
Tier 1 0 - 4 3.29 0 - 9 5.22
Tier 2 5 - 9 5.97 10 - 12 5.65
Tier 3 10 or more 7.35 13 or more 5.85
Business and Commerical(3)
All units 4.17 5.52 2,113 1,132,700 5,430,000
Publicly Owned
All units 4.17 6.08 252 744,900 3,729,000
Non-Public Irrigation and Commercial Agriculture
All units 6.09 6.36 1,035 1,131,900 6,992,000
Public Irrigation
All units 6.09 6.94 264 262,700 1,669,000
Construction
All units 6.09 6.32 189 286,500 1,767,000
Total 51,494 11,907,900 61,700,000$
Government Fee 0.43 - - - 258,000
Total Water Sales 51,494 11,907,900$ 61,958,000$
Units %
Residential 6,491,400 54.5%
Multi-Residential 1,857,800 15.6%
Business and Commercial 1,132,700 9.5%
Publicly Owned 744,900 6.3%
Non-Public Irrigation and Commercial Agriculture 1,131,900 9.5%
Public Irrigation 262,700 2.2%
Construction 286,500 2.4%
Total Water Sales 11,907,900$ 100.0%
(3)Fire Services Meters are charged the Business and Commercial water rate.
Water Sales Summary by Customer Class - Potable
FY 2023 Unit Sales by Customer Class
(2)Rates are subject to a Proposition 218 Hearing. If approved, rates applied to water billed beginning January 1, 2023.
(1)This cost varies based on water usage and can be calculated using the consumption block tables. One unit of consumption equals
dwellings served.
748 gallons of water or one HCF (hundred cubic feet). Consumption for Multi-Residential is the water usage divided by the number of
FY 2023Water Rates
Current Approved (2)
63
FY 2018 FY 2019 FY 2020 FY 2021 FY 2023
Budget Actual Budget
Residential 6,761,701 6,187,132 6,311,655 6,926,913 6,521,600 6,499,686 6,491,400
Multi-Residential 1,602,807 1,598,041 1,658,205 1,798,024 1,623,700 1,806,626 1,857,800
Business and Commercial 1,159,315 1,147,997 1,100,358 1,132,851 1,165,313 1,326,708 1,132,700
Publicly Owned 764,965 726,315 710,052 689,237 708,987 743,983 744,900
Non-Public Irrigation and Commercial Agriculture 1,321,411 1,142,073 1,072,854 1,331,773 1,130,600 1,284,096 1,131,900
Public Irrigation 319,287 250,694 252,466 307,244 326,000 338,309 262,700
Construction 297,897 274,500 284,893 418,058 285,800 310,809 286,500
Total Unit Sales 12,227,383 11,326,752 11,390,483 12,604,100 11,762,000 12,310,217 11,907,900
FY 2018 FY 2019 FY 2020 FY 2021 FY 2023
Budget Actual Budget
Residential 45,086 45,972 46,298 46,482 46,607 46,574 46,722
Multi-Residential 802 821 874 884 887 896 919
Business and Commercial(1)1,978 2,056 2,099 2,113 2,093 2,180 2,113
Publicly Owned 249 246 250 252 252 253 252
Non-Public Irrigation and Commercial Agriculture 949 1,005 1,016 1,022 1,026 1,040 1,035
Public Irrigation 255 258 261 262 262 260 264
Construction 183 197 196 189 189 186 189
Total Meter Count 49,502 50,555 50,994 51,204 51,316 51,389 51,494
(1)Business and Commercial Customer Class includes Fire Services Meters.
Unit Sales and Meter Count History by Customer Class - Potable
Unit Sales in thousands and Meter Count Trends
Actual
Actual
FY 2022
Unit Sales by Customer Class
Meter Count by Customer Class
FY2022
5,000
15,000
25,000
35,000
45,000
55,000
-
5,000
10,000
15,000
20,000
FY 2018
Actual
FY 2019
Actual
FY 2020
Actual
FY 2021
Actual
FY 2022
Actual
FY 2023
Budget
Unit Sales in thousands and Meter Count Trends
Potable Meters Potable Unit Sales
Units Meters
64
FY 2022 FY 2023 FY 2022 FY 2023
Meter Size Count Count Current Approved Budget Budget $%
Residential
0.75 45,384 45,386 20.08$ 18.07$ 10,696,000$ 10,373,000$ (323,000)$ (3.0%)
1.00 1,200 1,313 28.39 22.47 401,000 383,000 (18,000) (4.5%)
1.50 19 19 49.11 33.73 11,000 9,000 (2,000) (18.2%)
2.00 4 4 73.98 47.04 3,000 3,000 - -
Sub-total 46,607 46,722 11,111,000 10,768,000 (343,000) (3.1%)
Multi-Residential
0.75 37 44 44.17 16.67 19,000 15,000 (4,000) (21.1%)
1.00 190 195 62.37 20.14 139,000 95,000 (44,000) (31.7%)
1.50 249 256 107.92 29.06 314,000 206,000 (108,000) (34.4%)
2.00 265 270 162.53 39.58 506,000 325,000 (181,000) (35.8%)
3.00 67 75 308.22 83.59 235,000 159,000 (76,000) (32.3%)
4.00 69 69 472.17 140.85 383,000 254,000 (129,000) (33.7%)
6.00 7 7 927.63 276.38 76,000 51,000 (25,000) (32.9%)
8.00 3 3 1,474.12 426.72 52,000 34,000 (18,000) (34.6%)
Sub-total 887 919 1,724,000 1,139,000 (585,000) (33.9%)-
Business and Commercial
0.75 301 311 41.61 18.22 147,000 112,000 (35,000) (23.8%)
1.00 307 308 58.75 22.72 211,000 151,000 (60,000) (28.4%)
1.50 276 277 101.66 34.22 329,000 226,000 (103,000) (31.3%)
2.00 304 304 153.11 47.82 544,000 367,000 (177,000) (32.5%)
3.00 29 30 290.34 101.62 99,000 71,000 (28,000) (28.3%)
4.00 11 13 444.76 173.30 56,000 48,000 (8,000) (14.3%)
6.00 3 3 873.81 348.50 29,000 22,000 (7,000) (24.1%)
Sub-total 1,231 1,246 1,415,000 997,000 (418,000) (29.5%)-
Publicly Owned
0.75 34 34 41.61 16.97 17,000 12,000 (5,000) (29.4%)
1.00 64 64 58.75 20.64 45,000 30,000 (15,000) (33.3%)
1.50 32 32 101.66 30.06 39,000 25,000 (14,000) (35.9%)
2.00 84 84 153.11 41.18 154,000 98,000 (56,000) (36.4%)
3.00 11 11 290.34 87.08 38,000 25,000 (13,000) (34.2%)
4.00 16 16 444.76 147.14 85,000 57,000 (28,000) (32.9%)
6.00 6 6 873.81 290.36 63,000 42,000 (21,000) (33.3%)
10.00 5 5 1,989.08 692.32 117,000 80,000 (37,000) (31.6%)
Sub-total 252 252 558,000 369,000 (189,000) (33.9%)
Non-Public Irrigation and Commercial Agriculture
0.75 111 115 35.13 16.13 45,000 35,000 (10,000) (22.2%)
1.00 267 273 49.62 19.24 156,000 112,000 (44,000) (28.2%)
1.50 325 330 85.86 27.26 327,000 222,000 (105,000) (32.1%)
2.00 314 313 129.28 36.69 429,000 311,000 (118,000) (27.5%)
4.00 7 2 375.63 129.48 15,000 6,000 (9,000) (60.0%)
6.00 2 2 737.94 251.10 43,000 12,000 (31,000) (72.1%)
Sub-total 1,026 1,035 1,015,000$ 698,000$ (317,000)$ (31.2%)
System Charges - Potable
(1)Board approved rates subject to a Proposition 218 hearing. If approved, water rates billed beginning in January 2023.
System Charges Budget to Budget Variance
(1)
65
FY 2022 FY 2023 FY 2022 FY 2023
Meter Size Count Count Current Approved Budget Budget $%
System Charges - Potable
System Charges Budget to Budget Variance
(1)
Public Irrigation
0.75 12 12 35.13 16.13 5,000$ 4,000$ (1,000)$ (20.0%)
1.00 31 32 49.62 19.24 18,000 13,000 (5,000) (27.8%)
1.50 67 68 85.86 27.26 69,000 45,000 (24,000) (34.8%)
2.00 145 145 129.28 36.69 225,000 144,000 (81,000) (36.0%)
3.00 3 3 245.19 77.26 9,000 6,000 (3,000) (33.3%)
4.00 4 4 375.63 129.48 18,000 12,000 (6,000) (33.3%)
Sub-total 262 264 344,000 224,000 (120,000) (34.9%)
Construction
0.75 6 6 35.13 16.58 3,000 2,000 (1,000) (33.3%)
1.00 4 4 49.62 19.98 2,000 1,800 (200) (10.0%)
1.50 3 3 85.86 28.75 3,000 2,200 (800) (26.7%)
2.00 1 1 129.28 39.09 2,000 1,100 (900) (45.0%)
4.00 172 172 375.63 138.91 775,000 531,000 (244,000) (31.5%)
8.00 3 3 1,172.69 419.37 42,000 29,000 (13,000) (31.0%)
Sub-total 189 189 827,000 567,100 (259,900) (31.4%)
Fire Services
All Meters 862 867 323,000 329,900 6,900 2.1%
Set-up Fees 15.00 15.00 76,000 76,000 - -
Total 51,316 51,494 17,393,000$ 15,168,000$ (1,656,100)$ (9.5%)
(1)Rates are subject to a Proposition 218 Hearing. If approved, rates applied to water billed beginning January 1, 2023.
66
FY 2023 FY 2022 FY 2023
Meter Size Count(1)Current Approved(2)Budget Budget $%
0.75 45,908 17.00$ 16.33$ 9,167,000$ 9,165,000$ (2,000)$ (0.1%)
1.00 2,189 31.57 27.22 765,000 750,000 (15,000) (2.0%)
1.50 985 71.36 54.42 812,000 736,000 (76,000) (9.4%)
2.00 1,121 121.39 87.06 1,594,000 1,399,000 (195,000) (12.2%)
3.00 119 258.17 190.45 328,000 304,000 (24,000) (7.3%)
4.00 276 413.41 342.81 496,000 826,000 330,000 66.5%
6.00 18 846.28 761.79 179,000 174,000 (5,000) (2.8%)
8.00 6 1,366.65 1,305.91 48,000 72,000 24,000 50.0%
10.00 5 1,967.12 2,067.69 116,000 121,000 5,000 4.3%
Total 50,627 13,505,000$ 13,547,000$ 42,000$ 0.3%
(1)Excludes fire service meters.
(2)Rates are subject to a Proposition 218 Hearing. If approved, rates applied to water billed beginning January 1, 2023.
Historical MWD and CWA Fixed Charges, in millions ($)
Budget to Budget VarianceMWD and CWA Fixed Charges
MWD and CWA Fixed Charges (Pass-Through) - Potable
$0
$2
$4
$6
$8
$10
$12
$14
FY 2018
Actual
FY 2019
Actual
FY 2020
Actual
FY 2021
Actual
FY 2022
Actual
FY 2023
Budget
67
Meter Size Meter Sales Installation Fee Meter Fee Total Fees Budget
0.75 146 122.91$ 259.01$ 381.92$ 56,000$
1.00 115 122.91 334.23 457.14 53,000
1.50 14 122.91 543.26 666.17 9,000
2.00 4 122.91 778.43 901.34 4,000
3.00 11 740.04 2,425.90 3,165.94 35,000
4.00 -740.04 4,213.39 4,953.43 -
6.00 -1,168.94 7,277.67 8,446.61 -
8.00 -1,792.46 9,092.91 10,885.37 -
10.00 -1,792.46 13,077.31 14,869.77 -
Total 290 157,000$
Meter Fees:Charges collected for new water service connections. Fees vary depending upon meter
size and type of service. The costs associated with meter installations are included in the Operating
Expenses section of the budget. These charges are funded by developers.
Historical Meter Count
FY 2023
Meter Fees - Potable
-
15,000
30,000
45,000
60,000
FY 2018
Actual
FY 2019
Actual
FY 2020
Actual
FY 2021
Actual
FY 2022
Actual
FY 2023
Budget
68
FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023
Budget
Water Sales 54,262,051$ 47,517,849$ 50,081,789$ 58,610,501$ 57,900,777$ 61,958,000$
System Charges 13,078,386 15,383,214 16,205,007 16,828,509 17,439,502 15,168,000
Energy Charges 2,040,410 2,123,039 2,276,779 2,695,390 2,692,451 2,721,000
MWD and CWA Fixed Charges 11,920,268 12,149,114 12,305,712 12,889,974 13,548,475 13,547,000
Penalties 830,217 801,527 612,381 30,576 870,806 914,000
Total Potable Revenues 82,131,332$ 77,974,743$ 81,481,668$ 91,054,950$ 92,452,011$ 94,308,000$
Revenue History - Potable, in millions ($)
Revenue History - Potable
Actual
$-
$20
$40
$60
$80
$100
FY 2018
Actual
FY 2019
Actual
FY 2020
Actual
FY 2021
Actual
FY 2022
Actual
FY 2023
Budget
Water Sales System Charges Energy Charges MWD & CWA Fixed Charges Penalties
69
FY 2023 FY 2023
Budget Actual Budget Budget Actual Budget $ %
Rate Per Acre-Foot:1,492.00$ 1,436.81$ 1,617.00$ 125.00$ 8.4%
Budgeted Sales 27,001.8 28,260.4 27,336.8 38,635,000 40,604,823 42,245,000 3,610,000 9.3%
District, Unbilled Usage (1)141.8 11.7 151.5 193,000 16,811 235,000 42,000 21.8%
Water Loss 1,130.6 1,381.2 1,144.9 1,618,000 1,984,522 1,770,000 152,000 9.4%
- Total Variable Charges 28,274.2 29,629.9 28,633.2 40,446,000$ 42,572,534$ 44,250,000$ 3,804,000$ 9.4%
CWA and MWD Fixed Charges:
CWA - Infrastructure Access Charge 3,080,000$ 3,080,352$ 2,998,000$ (82,000)$ (2.7%)
CWA - Customer Service Charge 1,817,000 1,816,764 1,881,000 64,000 3.5%
CWA - Emergency Storage Charge 4,595,000 4,595,462 4,711,000 116,000 2.5%
CWA - Reliability Fixed Charge 2,867,000 2,866,626 3,003,000 136,000 4.7%
MWD - Capacity Reservation Charge 765,000 653,367 762,000 (3,000) (0.4%)
MWD - Readiness-to-Serve Charge 653,000 764,843 685,000 32,000 4.9%
Total Fixed Charges 13,777,000$ 13,777,414$ 14,040,000$ 263,000$ 1.9%
Total Variable and Fixed Charges 54,223,000$ 56,349,948$ 58,290,000$ 4,067,000$ 7.5%
Average Cost Per Acre-Foot 1,918$ 1,902$ 2,036$
#DIV/0!
(1)Excludes potable supplement to recycled system.
Water Purchases and Related Costs - Potable
Budget to Budget
VariancePurchase Costs
FY 2022FY 2022
Acre-Feet
-
8,000
16,000
24,000
32,000
FY 2018
Actual
FY 2019
Actual
FY 2020
Actual
FY 2021
Actual
FY 2022
Actual
FY 2023
Budget
Historical Potable Water Purchases, in acre-feet
70
FY 2018 FY 2019 FY 2020 FY 2021 FY 2023
Budget Actual Budget $ %
Administrative Buildings 168,286$ 168,286$ 166,175$ 170,863$ 187,000$ 217,303$ 228,000$ 10,700$ 4.9%
Potable Transmission 2,028,976 2,028,976 2,260,865 2,464,206 2,577,000 2,773,392 2,908,000 266,494 10.1%
Total Power Costs 2,197,262$ 2,197,262$ 2,427,040$ 2,635,069$ 2,764,000$ 2,990,695$ 3,136,000$ 277,194$ 9.7%
Power Costs - Potable
Budget to Budget
Variance
Historical Power Costs, in thousands ($)
Actual
FY 2022
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
FY 2018
Actual
FY 2019
Actual
FY 2020
Actual
FY 2021
Actual
FY 2022
Actual
FY 2023
Budget
Administrative Buildings Potable Transmission
71
FY 2021 FY 2022 FY 2022 FY 2023
Actual Budget Actual Budget $%
Administrative Expenditures
Directors' Fees 55,335$ 80,000$ 55,632$ 84,000$ 4,000$ 5.0%
Travel and Conferences 45,642 165,800 96,910 181,600 15,800 9.5%
Memberships and Dues 76,475 90,300 79,843 92,000 1,700 1.9%
Conservation and Outreach 116,200 151,600 125,816 138,200 (13,400) (8.8%)
General Office Expense 232,639 259,900 250,436 268,000 8,100 3.1%
Equipment 1,428,634 1,418,100 1,419,332 1,552,200 134,100 9.5%
Fees 900,186 845,200 956,331 1,121,700 276,500 32.7%
Services 1,592,968 2,221,800 1,961,809 2,484,200 262,400 11.8%
Training 63,342 214,700 153,465 208,800 (5,900) (2.7%)
Utilities 15,999 17,600 17,747 18,100 500 2.8%
Insurance and Legal 1,770,620 2,021,900 1,703,411 1,959,500 (62,400) (3.1%)
Bad Debt Expense 242,500 240,000 247,276 120,000 (120,000) (50.0%)
Subtotal before Overhead 6,540,540 7,726,900 7,068,008 8,228,300 501,400 6.5%
Less: Overhead Allocation (913,022) (966,900) (840,238) (984,400) (17,500) 1.8%
Total Expenditures 5,627,518$ 6,760,000$ 6,227,770$ 7,243,900$ 483,900$ 7.2%
5,400,900$ 8,771,419$ 10,187,800$
Directors' Fees 84,000$ 1.0%
Travel and Conferences 181,600 2.2%
Memberships and Dues 92,000 1.1%
Conservation and Outreach 138,200 1.7%
General Office Expense 268,000 3.3%
Equipment 1,552,200 18.9%
Fees 1,121,700 13.6%
Services 2,484,200 30.2%
Training 208,800 2.5%
Utilities 18,100 0.2%
Insurance and Legal 1,959,500 23.8%
Bad Debt Expense 120,000 1.5%
Subtotal before Overhead 8,228,300 100.0%
Less: Overhead Allocation (984,400)
Total Expenditures 7,243,900$
Administrative Expenditures - Potable
Budget to Budget
Variance
FY 2023 Administrative Expenditures - Potable
72
FY 2021 FY 2022 FY 2022 FY 2023
Actual Budget Actual Budget $%
Materials and Maintenance
Fuel and Oil 174,769$ 205,700$ 311,212$ 306,200$ 100,500$ 48.9%
Meters and Materials 138,155 123,900 160,326 147,600 23,700 19.1%
Fleet Parts and Equipment 106,188 130,300 123,316 161,600 31,300 24.0%
Infrastructure Equipment and Supplies 437,564 382,400 399,772 428,900 46,500 12.2%
Chemicals 178,353 219,600 175,872 247,200 27,600 12.6%
Safety Equipment 65,107 80,900 100,249 63,000 (17,900) (22.1%)
Laboratory Equipment and Supplies 43,614 59,000 57,967 55,500 (3,500) (5.9%)
Other Materials and Supplies 207,594 281,100 281,841 296,100 15,000 5.3%
Building and Grounds Materials 62,597 87,600 87,879 82,500 (5,100) (5.8%)
Contracted Services 738,668 872,000 889,003 887,800 15,800 1.8%
Total Expenditures 2,152,609$ 2,442,500$ 2,587,437$ 2,676,400$ 233,900$ 9.6%
Fuel and Oil 306,200$ 11.4%
Meters and Materials 147,600 5.5%
Fleet Parts and Equipment 161,600 6.0%
Infrastructure Equipment and Supplies 428,900 16.0%
Chemicals 247,200 9.2%
Safety Equipment 63,000 2.4%
Laboratory Equipment and Supplies 55,500 2.1%
Other Materials and Supplies 296,100 11.1%
Building and Grounds Materials 82,500 3.1%
Contracted Services 887,800 33.2%
Total Expenditures 2,676,400$ 100.0%
Materials and Maintenance Expenditures - Potable
Budget to Budget
Variance
FY 2023 Materials and Maintenance Expenditures - Potable
73
Potable Water Service Area
74
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.
75
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 are great, as less demand on the potable system will be made, reducing
future capacity and storage requirements. The $42 million investment in capital outlay results in a
significant reduction of water purchase costs and an increase in system reliability. The District
expects that 12% 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 3,609.5 acre-feet of recycled water to 771 landscaping and construction customers by
the end of Fiscal Year 2023. The recycled water customer base consists primarily of irrigation at a
golf course, 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 $185
from MWD for every acre-foot (AF) of recycled water sold. As of FY 2021, the District was no longer
eligible for the rebate from CWA.
76
FY 2021 FY 2022 FY 2022 FY 2023
31-Actual Budget Actual Budget $%
Revenues
Recycled Water Sales 10,688,020$ 9,681,000$ 10,042,348$ 10,217,000$ 536,000$ 5.5%
Meter Fees 16,373 6,000 9,339 13,000 7,000 116.7%
Non-operating Revenues 5,367 - - - - -
Interest 18,953 19,000 28,282 52,000 33,000 173.7%
Total Revenues 10,728,713 9,706,000 10,079,969 10,282,000 576,000 5.9%
Expenditures
Recycled Water Purchases 2,902,170 4,865,000 4,585,689 5,487,000 622,000 12.8%
Labor and Benefits 1,248,432 1,306,700 1,266,278 1,459,900 153,200 11.7%
Administrative Expenses 411,219 538,600 459,270 572,900 34,300 6.4%
Materials and Maintenance 321,413 349,800 396,833 354,900 5,100 1.5%
Power 551,075 561,000 528,760 590,000 29,000 5.2%
11-1311-5133Subtotal - Operations Costs 5,434,309 7,621,100 2,651,141 8,464,700 843,600 11.1%
DSTransfer to General Fund Reserve - - - - - -
- -
Expansion Reserve - 2,041,900 2,041,900 542,800 (1,499,100) (73.4%)
Bett ResBetterment Reserve 985,000 - - 615,000 615,000 100.0%
Repl ResReplacement Reserve 615,000 - - 545,000 545,000 100.0%
TOPEBTransfer to PERS 45,000 43,000 32,100 114,500 71,500 166.3%
NSFNew Supply Reserve - - - - - -
Subtotal - Reserve Funding 1,645,000 2,084,900 2,074,000 1,817,300 (267,600) (12.8%)
Total Expenditures 7,079,309 9,706,000 9,310,830 10,282,000 576,000 5.9%
3,649,404$ -$ 769,139$ -$ -$ - Excess Revenues/Expenditures
Operating Budget Summary - Recycled
Budget to Budget
Variance
77
FY 2021 FY 2023
Actual Budget Actual Budget $%
Water Sales 8,604,255$ 7,282,000$ 8,247,269$ 8,113,000$ 831,000$ 11.4%
System Charges 876,898 914,000 929,628 911,000 (3,000) (0.3%)
Energy Charges 442,669 380,000 425,488 490,000 110,000 28.9%
MWD and CWA Rebates 764,198 634,000 408,030 668,000 34,000 5.4%
Penalties - 32,000 31,933 35,000 3,000 9.4%
Total Recycled Water Sales 10,688,020$ 9,242,000$ 10,042,348$ 10,217,000$ 975,000$ 10.5%
Water Sales 8,113,000$ 79.5%
System Charges 911,000 8.9%
Energy Charges 490,000 4.8%
MWD and CWA Rebates 668,000 6.5%
Penalties 35,000 0.3%
Total Recycled Water Sales 10,217,000$ 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 meter size.
Energy Charges: The energy pumping charge is $ 0.077 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: The District receives a $185 incentive from MWD for every acre-foot (AF) of recycled water sold.
As of FY 2021, the District was no longer eligible for the rebate from CWA.
Penalties: Penalties are imposed on customer accounts for late payments and returned checks.
Budget to Budget
Variance
FY 2023 Classification of Water Sales
Classification of Water Sales - Recycled
FY 2022
78
Current Approved(1)Accounts Unit Sales Budget
Recycled Non-Public Irrigation 5.05$ 5.36$ 411 1,217,342 6,235,000$
Recycled Commercial 3.58 4.92 1 155,900 624,000
Recycled Public Irrigation 5.05 5.47 359 199,058 1,089,000
Total 771 1,572,300 7,948,000$
Government Fee 0.43 - - - 165,000
Total Water Sales 771 1,572,300 8,113,000$
Units %
Recycled Non-Public Irrigation 1,217,342 77.4%
Recycled Commercial 155,900 9.9%
Recycled Public Irrigation 199,058 12.7%
1,572,300 100.0%
(1)Rates are subject to a Proposition 218 Hearing. If approved, rates applied to water billed beginning January 1, 2023.
FY 2023
Water Sales Summary by Customer Class - Recycled
Water Rates
FY 2023 Unit Sales by Customer Class
(1)
79
FY 2023 FY 2022 FY 2023
Meter Size Meter Count Current Approved(1)Budget Budget $%
0.75 10 36.93$ 36.06$ 2,000$ 4,000$ 2,000$ 100.0%
1.00 126 52.16 48.83 74,000 75,000 1,000 1.4%
1.50 415 90.25 81.22 429,000 423,000 (6,000) (1.4%)
2.00 205 135.90 119.74 322,000 313,000 (9,000) (2.8%)
3.00 5 257.73 262.42 12,000 14,000 2,000 16.7%
4.00 7 394.84 458.00 32,000 36,000 4,000 12.5%
6.00 2 787.55 953.41 18,000 21,000 3,000 16.7%
10.00 1 1,765.77 2,411.52 25,000 25,000 - -
Total 771 914,000$ 911,000$ (3,000)$ (0.3%)
(1)Rates are subject to a Proposition 218 Hearing. If approved, rates applied to water billed beginning January 1, 2023.
System Charges - Recycled
System Charges Budget to Budget
Variance
80
FY 2018 FY 2019 FY 2020 FY 2021 FY 2023
Budget Actual Budget
Recycled Non-Public Irrigation 981,679 738,029 796,764 965,690 843,900 872,845 834,700
Recycled Commercial 222,361 148,980 149,820 172,240 150,100 171,876 155,900
Recycled Public Irrigation 606,462 575,623 505,373 661,506 575,000 640,538 581,700
Total Unit Sales 1,810,502 1,462,632 1,451,957 1,799,436 1,569,000 1,685,259 1,572,300
FY 2018 FY 2019 FY 2020 FY 2021 FY 2023
Budget Actual Budget
Recycled Non-Public Irrigation 392 373 379 394 395 409 411
Recycled Commercial 1 1 1 1 1 1 1
Recycled Public Irrigation 331 352 355 358 358 358 359
Total Meter Count 724 726 735 753 754 768 771
Unit Sales and Meter Count History by Customer Class - Recycled
Unit Sales History in thousands and Meter Count Trends
FY 2022
Actual
Actual
FY 2022
Unit Sales by Customer Class
Meter Count by Customer Class
-
200
400
600
800
100
500
900
1,300
1,700
2,100
FY 2018
Actual
FY 2019
Actual
FY 2020
Actual
FY 2021
Actual
FY 2022
Actual
FY 2023
Budget
MetersUnits
Meter Count Unit Sales
81
Meter Size Meter Sales Installation Fee Meter Fee Total Fees Budget
0.75 2 122.91$ 259.01$ 381.92$ 1,000$
1.00 5 122.91 334.23 457.14 2,000
1.50 8 122.91 543.26 666.17 5,000
2.00 2 122.91 778.43 901.34 2,000
3.00 1 740.04 2,425.90 3,165.94 3,000
4.00 - 740.04 4,213.39 4,953.43 -
6.00 - 1,168.94 7,277.67 8,446.61 -
8.00 - 1,792.46 9,092.91 10,885.37 -
10.00 - 1,792.46 13,077.31 14,869.77 -
Total 18 13,000$
FY 2023
Meter Fees: Charges collected for new water service connections. Fees vary depending upon
meter size and type of service. The costs associated with meter installations are included in the
Operating Expenses section of the budget. These charges are funded by developers.
Historical Meter Count
Meter Fees - Recycled
550
575
600
625
650
675
700
725
750
775
FY 2018
Actual
FY 2019
Actual
FY 2020
Actual
FY 2021
Actual
FY 2022
Actual
FY 2023
Budget
82
FY 2018 FY 2019 FY2020 FY 2021 FY 2023
Budget
Water Sales 7,883,748$ 6,347,342$ 6,481,692$ 8,604,255$ 8,247,269$ 8,113,000$
System Charges 594,049 798,349 833,113 876,898 929,628 911,000
Energy Charges 347,841 315,385 331,188 442,669 425,488 490,000
MWD and CWA Rebates (1)1,600,214 1,292,330 1,283,359 764,198 408,030 668,000
Penalties 38,012 28,073 24,129 - 31,933 35,000
Total Recycled Revenues 10,463,864$ 8,781,479$ 8,953,481$ 10,688,020$ 10,042,348$ 10,217,000$
(1)As of FY 2021, the District was no longer eligible for the rebate from CWA.
Revenue History - Recycled
Revenue History - Recycled, in millions ($)
FY 2022
Actual
$-
$2
$4
$6
$8
$10
$12
FY 2018
Actual
FY 2019
Actual
FY 2020
Actual
FY 2021
Actual
FY 2022
Actual
FY 2023
Budget
Water Sales System Charges Energy Charges MWD and CWA Rebates Penalties
83
FY 2023 FY 2023
Budget Actual Budget Budget Actual Budget $ %
Rate Per Acre-Foot (2)962.00$ 755.33$ 974.00$ 12.00$ 1.2%
Recycled Water Purchases 2,653.6 2,934.2 2,685.7 2,163,000$ 2,488,254$ 2,616,000$ 453,000$ 20.9%
Potable Supplement - 2.0 - - 2,984 - - 0.0%
Meter Fee (2)21,000 21,138 27,000 6,000 28.6%
Take-or-pay contract (1)2,781.0 2,500.4 2,838.3 2,681,000 2,355,608 2,844,000 163,000 6.1%
Total 5,434.6 5,436.6 5,524.0 4,865,000$ 4,867,984$ 5,487,000$ 622,000$ 12.8%
Average Cost Per Acre-Foot (Effective Rate)1,833.37$ 1,659.05$ 2,043.07$
(1) This is the anticipated take-or-pay amount to be paid to the City of San Diego. The contract requires the purchase of a minimum volume of water.
The District does not anticipate meeting the minimum, therefore a payment would be due to the City of San Diego.
(2)Based on the City of San Diego's Cost of Service Study proposing a 4% increase in recycled water rate effective January 1, 2023.
HISTORICAL RECYCLED WATER PURCHASES, IN ACRE-FEET
Water Purchases - Recycled
FY 2022
Purchase Costs
Budget to Budget
Variance
FY 2022
Acre-Feet
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
FY 2018
Actual
FY 2019
Actual
FY 2020
Actual
FY 2021
Actual
FY 2022
Actual
FY 2023
Budget
84
FY 2018 FY 2019 FY 2020 FY 2021 FY 2023
Budget $ %
Total Power Costs 665,509$ 536,179$ 522,863$ 551,075$ 528,760$ 590,000$ 29,000$ 5.2%
Power Costs - Recycled
Budget to Budget
Variance
Historical Power Costs, in thousands ($)
FY 2022
Actual
$0
$100
$200
$300
$400
$500
$600
$700
FY 2018
Actual
FY 2019
Actual
FY 2020
Actual
FY 2021
Actual
FY 2022
Actual
FY 2023
Budget
85
FY 2021 FY 2022 FY 2022 FY 2023
Actual Budget Actual Budget $%
Administrative Expenditures
Equipment 5,415$ 10,000$ 15,531$ 12,400$ 2,400$ 24.0%
Fees 34,038 30,600 34,580 39,000 8,400 27.5%
Services 100,217 218,900 163,188 207,700 (11,200) (5.1%)
Insurance and Legal 50,062 50,000 14,847 50,000 - 0.0%
Subtotal before Overhead 189,732 309,500 228,146 309,100 (400) (0.1%)
Add: Overhead Allocation 221,487 229,100 231,124 263,800 34,700 15.1%
Total Expenditures 411,219$ 538,600$ 459,270$ 572,900$ 34,300$ 6.4%
Equipment 12,400$ 2.2%
Fees 39,000 6.8%
Services 207,700 36.3%
Insurance and Legal 50,000 8.7%
Overhead Allocation 263,800 46.0%
Total Expenditures 572,900$ 100.0%
FY 2023 Administrative Expenditures - Recycled
Budget to Budget
Variance
Administrative Expenditures - Recycled
86
FY 2021 FY 2022 FY 2022 FY 2023
Actual Budget Actual Budget $%
Materials and Maintenance
Fuel and Oil 11,292$ 20,000$ 19,900$ 20,000$ -$ 0.0%
Meters and Materials 6,295 8,600 8,827 8,600 - 0.0%
Infrastructure Equipment and Supplies 94,610 132,100 142,685 95,700 (36,400) (27.6%)
Chemicals 177,038 154,300 190,441 196,000 41,700 27.0%
Safety Equipment 359 3,800 280 4,100 300 7.9%
Laboratory Equipment and Supplies 4,318 4,900 2,665 5,100 200 4.1%
Other Materials and Supplies 5,458 4,500 15,254 9,500 5,000 111.1%
Contracted Services 22,043 21,600 16,781 15,900 (5,700) (26.4%)
Total Expenditures 321,413$ 349,800$ 396,833$ 354,900$ 5,100$ 1.5%
Fuel and Oil 20,000$ 5.6%
Meters and Materials 8,600 2.4%
Infrastructure Equipment and Supplies 95,700 27.0%
Chemicals 196,000 55.2%
Safety Equipment 4,100 1.2%
Laboratory Equipment & Supplies 5,100 1.4%
Other Materials and Supplies 9,500 2.7%
Contracted Services 15,900 4.5%
Total Expenditures 354,900$ 100.0%
Materials and Maintenance Expenditures - Recycled
Budget to Budget
Variance
FY 2023 Materials and Maintenance Expenditures - Recycled
87
Recycled Water Service Area
88
Sewer Revenues and Expenditures
The District provides sewer service to approximately 15,300 customers through 4,738 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 75 outlining the sewer process. The by-
product of the treatment process is called sludge and it is discharged through the 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 (JPA) 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 $704,000 for
FY 2023. Additionally, the District is budgeted to pay $210,000 for its share of the operation and
maintenance cost of the Rancho San Diego Outfall and the Spring Valley Outfall to transport sewage
to Metro for FY 2023.
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
January 2020, 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 11.0% of
the total sewer charges. The formula for sewer rates is shown on pages 97-98.
89
FY 2021 FY 2022 FY 2022 FY 2023
21-Actual Budget Actual Budget $%
Revenues
Sewer Revenues 2,865,634$ 3,068,000$ 3,085,044$ 3,284,000$ 216,000$ 7.0%
Capacity Fee Revenues 7,779 - 14,775 - - -
Tax Revenues 53,452 57,000 52,920 57,000 - -
Non-operating Revenues 33,546 33,000 9,983 16,000 (17,000) (51.5%)
Interest 3,076 5,000 3,004 11,000 6,000 120.0%
Total Revenue 2,963,487 3,163,000 3,165,726 3,368,000 205,000 6.5%
Expenditures
Labor and Benefits 943,200 1,027,700 719,108 1,097,000 69,300 6.7%
Administrative Expenses 226,512 249,200 232,254 240,900 (8,300) (3.3%)
Materials and Maintenance 1,328,185 1,195,600 900,151 1,101,300 (94,300) (7.9%)
Power 124,717 160,000 159,568 167,000 7,000 4.4%
11-1311-5133Subtotal - Operations Costs 2,622,614 2,632,500 2,011,081 2,606,200 (26,300) (1.0%)
DSTransfer to General Fund Reserve 259,000 90,500 90,500 40,400 (50,100) (55.4%)
Expansion Reserve - 25,000 25,000 142,000 117,000 468.0%
Bett ResBetterment Reserve - 290,000 290,000 210,000 (80,000) (27.6%)
Repl ResReplacement Reserve 169,000 68,000 68,000 268,000 200,000 294.1%
TOPEBTransfer to PERS 37,000 36,000 38,500 82,400 46,400 128.9%
Transfer to Rate Stabilization Fund - 21,000 21,000 19,000 (2,000) (9.5%)
Subtotal - Reserve Funding 465,000 530,500 533,000 761,800 231,300 43.6%
Total Expenditures 3,087,614 3,163,000 2,544,081 3,368,000 205,000 6.5%
(124,127)$ -$ 621,645$ -$ -$ - Excess Revenue/(Expenditures)
Operating Budget Summary - Sewer
Budget to Budget
Variance
90
FY 2023 FY 2023
Accounts Current Approved(1)Budget Actual Budget $%
Residential 4,612 3.11$ 3.25$ 1,469,000$ 1,382,500$ 1,604,000$ 135,000$ 9.2%
Multi-Residential 50 3.11 3.25 212,000 199,500 229,000 17,000 8.0%
Commercial
Low Strength 46 3.11 3.25 64,000 60,200 63,000 (1,000) (1.6%)
Medium Strength 13 3.54 3.69 37,000 34,800 41,000 4,000 10.8%
High Strength 7 4.98 5.20 25,000 23,500 26,000 1,000 4.0%
Schools 6 3.11 3.25 88,000 82,800 87,000 (1,000) (1.1%)
Churches 4 3.11 3.25 9,000 8,500 9,000 - -
Subtotal Commercial 76 223,000 209,800 226,000 3,000 1.3%
Total Sewer Charges 4,738 1,904,000$ 1,791,800$ 2,059,000$ 155,000$ 8.1%
Residential 1,604,000$ 77.9%
Multi-Residential 229,000 11.1%
Commercial 226,000 11.0%
Total Sewer Charges 2,059,000$ 100.0%
(1)Approved rates for sewer billed beginning in January 2023.
FY 2023 Charges Summary by Customer Class
Charges Summary by Customer Class - Sewer
Usage Rate Budget to Budget
VarianceFY 2022
91
FY 2023 Current Approved(1)FY 2022 FY 2023
Meter Size Accounts Charges Charges Budget Budget $ %
Residential 4,612 17.37$ 18.13$ 932,000$ 982,000$ 50,000$ 5.4%
Multi-Residential/Commercial
0.75 24 17.37 18.13 5,000 5,000 - -
1.00 5 43.41 45.30 3,000 3,000 - -
1.50 21 86.80 90.58 20,000 22,000 2,000 10.0%
2.00 62 138.88 144.92 101,000 105,000 4,000 4.0%
3.00 6 260.41 271.74 18,000 19,000 1,000 5.6%
4.00 6 434.02 452.90 31,000 32,000 1,000 3.2%
6.00 1 868.03 905.79 10,000 11,000 1,000 10.0%
8.00 - 1,388.87 1,449.29 - - - -
10.00 1 1,996.50 2,083.35 23,000 24,000 1,000 4.3%
Total System Charges 4,738 1,143,000$ 1,203,000$ 60,000$ 5.2%
(1)Approved rates for sewer billed beginning in January 2023.
System Charges - Sewer
Budget to Budget
Variance
92
FY 2018 FY 2019 FY 2020 FY 2021 FY 2023
Budget Actual Budget
Sewer Charges 2,913,787$ 2,913,787$ 2,876,592$ 2,863,846$ 3,047,000$ 3,057,053$ 3,262,000$
Penalties 19,870 19,870 16,291 1,788 21,000 27,991 22,000
Total 2,933,657$ 2,933,657$ 2,892,883$ 2,865,634$ 3,068,000$ 3,085,044$ 3,284,000$
Revenue History - Sewer, in thousands ($)
Revenue History - Sewer
FY 2022
Actual
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
FY 2018
Actual
FY 2019
Actual
FY 2020
Actual
FY 2021
Actual
FY 2022
Actual
FY 2023
Budget
Sewer Charges PenaltiesPenalties
93
FY 2018 FY 2019 FY 2020 FY 2021 FY 2023
Budget Acutal Budget $ %
Total Power Costs 173,997$ 143,575$ 152,461$ 124,717$ 160,000$ 159,568$ 167,000$ 7,000$ 4.4%
Power Costs - Sewer
Budget to Budget
Variance
Historical Power Costs, in thousands ($)
FY 2022
Actual
$20
$60
$100
$140
$180
FY 2018
Actual
FY 2019
Actual
FY 2020
Actual
FY 2021
Actual
FY 2022
Actual
FY 2023
Budget
94
FY 2021 FY 2022 FY 2022 FY 2023
Actual Budget Actual Budget $%
Administrative Expenditures
Memberships and Dues 2,415$ 7,000$ 2,886$ 3,500$ (3,500)$ (50.0%)
Equipment 16,170 2,700 2,046 2,400 (300) (11.1%)
Fees 4,322 4,500 5,064 5,300 800 17.8%
Services 27,349 57,200 72,992 31,200 (26,000) (45.5%)
Bad Debt Expense 7,494 3,200 16,117 2,000 (1,200) (37.5%)
Total 57,750 74,600 99,105 44,400 (30,200) (40.5%)
Add: Overhead Allocation 168,762 174,600 133,149 196,500 21,900 12.5%
Total Expenditures 226,512$ 249,200$ 232,254$ 240,900$ (8,300)$ (3.3%)
Memberships and Dues 3,500$ 1.4%
Equipment 2,400 1.0%
Fees 5,300 2.2%
Services 31,200 13.0%
Bad Debt Expense 2,000 0.8%
Overhead Allocation 196,500 81.6%
Total Expenditures 240,900$ 100.0%
Administrative Expenditures - Sewer
Budget to Budget
Variance
FY 2023 Administrative Expenditures - Sewer
95
FY 2021 FY 2022 FY 2022 FY 2023
Actual Budget Actual Budget $%
Materials and Maintenance
Fleet Parts and Equipment 7,535$ 8,000$ 3,054$ 8,000$ -$ -
Infrastructure Equipment and Supplies 110,369 124,300 112,327 103,000 (21,300) (17.1%)
Chemicals 21,005 16,200 13,525 24,000 7,800 48.1%
Safety Equipment - 500 - - (500) (100.0%)
Laboratory Equipment and Supplies 5,945 6,800 4,595 6,600 (200) (2.9%)
Other Materials and Supplies - 600 33 600 - -
Contracted Services 86,788 89,600 63,648 45,100 (44,500) (49.7%)
Subtotal Materials and Maintenance 231,642 246,000 197,182 187,300 (58,700) (23.9%)
Sewer Charges
Metro O&M Costs 849,962 651,900 531,868 704,000 52,100 8.0%
Spring Valley Sewer Charge 246,581 297,700 171,101 210,000 (87,700) (29.5%)
Subtotal Sewer Charges 1,096,543 949,600 702,969 914,000 (35,600) (3.7%)
Total Expenditures 1,328,185$ 1,195,600$ 900,151$ 1,101,300$ (94,300)$ (7.9%)
Fleet Parts and Equipment 8,000$ 0.7%
Infrastructure Equipment and Supplies 103,000 9.4%
Chemicals 24,000 2.2%
Laboratory Equipment and Supplies (1)7,200 0.7%
Contracted Services 45,100 4.1%
Metro O&M Costs 704,000 63.8%
Spring Valley Sewer Charge 210,000 19.1%
Total Expenditures 1,101,300$ 100.0%
Includes Other Materials & Supplies.
Materials and Maintenance Expenditures - Sewer
Budget to Budget
Variance
FY 2023 Materials and Maintenance Expenditures - Sewer
(1)
96
Formula for Sewer Rates
To meet State of California requirements, customers must pay their fair share of sewer costs. The
District is required to 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 of the previous three years. The “three-year winter average” is the basis of the sewer
charges for the entire year. The winter months are used to measure average water use because less
water is typically used outdoors during this time and therefore this average water use will more
accurately measure the typical water that flows into the sewer system. The District gives customers a
15.0 percent usage discount to acknowledge that not all water purchased goes to the sewer system.
The maximum consumption charge is based on 35.29 units.
The following is the sewer bill formula for residential and multi-residential customers:
(Sewer Rate x 3-Year Winter Average x 85%) + System Charges = Total Monthly Bill
The current sewer rates and system charges for single-family residential customers are $3.11 and
$17.37, respectively. Effective January 1, 2023, the sewer rate and system charges will be $3.25 and
$18.13, respectively.
The current sewer rates for multi-residential customers is $3.11 and will increase to $3.25 for the
calendar year 2023. The sewer rates and system charges for residential and multi-
residential customers is shown on pages 91 and 92.
Commercial and Industrial Sewer Service
To estimate sewer use, the District averages metered water use. An “average annual consumption” is
the basis of the sewer charges for the entire year. The average annual consumption is defined as the
units of water billed from January through December of the previous year. The District gives
customers a 15.0 percent 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 92.
(1) Sewer rates are based on the customer’s assigned strength factor
97
Formula for Sewer Rates
The District is required to determine sewer rates in accordance with the State’s Revenue Program
Guidelines. The SWRCB has grouped commercial and industrial customers into various categories
and has identified Strength Factors for each of these business categories. The standard of measure
for Strength Factors is the typical sewer strength of a single-family residence (SFR). The Strength
Factors established by the SWRCB are listed below and are used by the District in the calculation of
commercial sewer rates. These factors are in terms of the strength relative to an SFR, with an SFR
having a strength factor of 1.
The following are the Strength Factors:
Description
Fee, Effective
1/1/2023
Low-Strength Commercial(1) $ 3.25
Medium-Strength Commercial $ 3.69
High-Strength Commercial $ 5.20
(1)Schools and churches are categorized as Low-Strength Commercial customers
98
Sewer Service Area
99
This page intentionally left blank
100
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 2023, capacity fees are projected to be $2.3 million which is an
increase of $335,000 compared to FY 2022.
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 $5.3 million which is $341,000 more than the FY 2022 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 remain at $711,000.
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.
101
102
FY 2021 FY 2022 FY 2022 FY 2023
Actual Budget Actual Budget $%
Fee Revenues
Capacity Fee Revenues 2,287,553$ 1,976,000$ 2,557,592$ 2,311,000$ 335,000$ 17.0%
Subtotal Fee Revenues 2,287,553 1,976,000 2,557,592 2,311,000 335,000 17.0%
Tax Revenues
1% General Tax 4,504,324 4,258,000 4,761,324 4,599,000 341,000 8.0%
Availability Fees 686,697 711,000 740,928 711,000 - 0.0%
Subtotal Tax Revenues 5,191,021 4,969,000 5,502,252 5,310,000 341,000 6.9%
General Revenue 7,478,574$ 6,945,000$ 8,059,844$ 7,621,000$ 676,000$ 9.7%
FY 2021 FY 2022 FY 2022 FY 2023
Actual Budget Actual Budget $%
Property Rental 1,587,687$ 1,616,000$ 1,682,270$ 1,666,000$ 50,000$ 3.1%
Sewer Billing Fees 447,247 445,000 458,205 477,000 32,000 7.2%
Set-up Fee for Lease Site 9,000 - 9,000 - - 0.0%
Revenue from Shared Facility 33,546 33,000 (11,718) 16,000 (17,000) (51.5%)
Miscellaneous (2)3,763,351 125,500 4,331,947 364,100 238,600 190.1%
Non-Operating Revenue 5,840,831$ 2,219,500$ 6,469,704$ 2,523,100$ 303,600$ 13.7%
Potable Recycled Sewer Total
Capacity Fee Revenues 2,311,000$ -$ -$ 2,311,000$
1% General Tax 4,599,000 - - 4,599,000
Availability Fees 654,000 - 57,000 711,000
Property Rental 1,666,000 - - 1,666,000
Sewer Billing Fees 477,000 - - 477,000
Grants 203,000 - - 203,000
Revenue from Shared Facility - - 16,000 16,000
Miscellaneous 161,100 - - 161,100
Total General and Non-Operating Revenue 10,071,100$ -$ 73,000$ 10,144,100$
(1)For General and Non-Operating Revenues, the Potable Fund serves as the District's General Fund for accounting purposes.
(2)In FY 2021 and FY 2022, the District received settlement refunds of $3,162,940 and $3,270,450, respectively, from CWA after a favorable
judgement was awarded to CWA against MWD for overcharging prior years' water rates.
Non-Operating Revenues(1)
Budget to Budget
Variance
General and Non-Operating Revenues by Fund(1)
FY 2023
General Revenues
General Revenues(1)
Budget to Budget
Variance
103
FY 2021 FY 2022 FY 2022 FY 2023
Actual Budget Actual Budget $%General Expense
Labor and Benefits (1), (2)880,729$ 874,800$ 54,482$ (51,200)$ (926,000)$ (105.9%)
Administrative Expenditures
Insurance expenses 1,168,883 1,414,900 1,115,017 1,554,500 139,600 9.9%
Legal expenses 638,607 657,000 603,241 455,000 (202,000) (30.7%)
Total General Expense 2,688,219$ 2,946,700$ 1,772,740$ 1,958,300$ (988,400)$ (33.5%)
FY 2021 Actual FY 2022 Budget FY 2022 Actual FY 2023 Budget
OPEB $ 869,972 $ 901,400 $ - $ -
Cost of Living Adjustment & Benefits 220,457 188,000 269,082 177,600
Vacancy Adjustment (209,700) (214,600) (214,600) (228,800)
Total $ 880,729 $ 874,800 $ 54,482 $ (51,200)
(2)The District's OPEB plan is fully funded, therefore no additional contributions were made and budgeted by the District in FY 2022 and
FY 2023, respectively.
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 Factors for FY 2022 and FY 2023 are $214,600 and $228,800, 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.
104
Departmental Operating Budget
Labor and Benefits
The District reviews and studies organizational/personnel changes and performs a five-year long-term
staffing review on an annual basis as part of the budgeting process. Labor and Employee Benefits
expenditures for FY 2023 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 Kaiser HMO) plus a vision and 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 labor and
benefits costs are mainly due to continued increases in group health insurance premiums and an
increase in compensation due to a 3.0% increase in salary and wages, based on the Memorandum of
Understanding (MOU) between the District and its employee association. These increases are partially
offset by a decrease in OPEB funding costs due to the OPEB being approximately 107% funded as of
June 30, 2022.
Labor and Benefits represent 19.1% 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 2023 Budget
includes funding for labor and benefits for 143 full-time equivalent (FTE) employees.
The staffing level for FY 2023 has increased by three (3) FTE employees from FY 2022. The District
continuously analyzes workload requirements, opportunities for automation and areas where resources
can be effectively shared or relocated. For FY 2023, the staffing changes include an addition of two utility
workers to meet workload demands related to the valve replacement program, and one construction
permit technician due to additional workload brought about by the volume of new construction.
A projected 7.9% 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 $2,014,000
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 and equipment, 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.
105
Departmental Operating Budget
Administrative Expenses (Continued)
Overall administrative expenses increased by $509,900 or 6.8% compared to FY 2022 and are shown on
page 115. The District’s budget for fees increased by $285,700 or 32.5% primarily due to anticipated
increases in bank fees from increased customer credit card activities, and secondarily due to the addition
of Board members’ election fees incurred during election years. The services budget increased by
$225,200 or 9.0% due to anticipated expenditures related to various projects including preventive
maintenance at the District’s Ralph W. Chapman treatment plant, State required facilities master plan
update, State required lead and copper identification programs, cybersecurity assessment, climate action
plan, and personnel classification study. Equipment increased by $136,200 or 9.5% primarily due to
Toughbook replacements for the Operations staff and increases in software license fees. An increase in
overhead allocation of $39,100 or 6.9% is due to a decrease in administrative costs allocated to CIP
projects. Training and seminars increased by $15,800 or 9.5% due to training activities continuing the
return to pre-Covid levels of activity.
The increases were partially offset by decreases in bad debt expense by $121,200 or 49.8% due to
improvements in the collection process from reinstatement of locking and improvements to the lien
process for non-payment. The combined insurance and legal expenses budget decreased by $62,400 or
3.0% due to completion or substantial completion of litigation cases in FY 2022, offset by an estimated
increase in insurance premiums. Lastly, conservation and outreach expenses are anticipated to decline
by $13,400 or 8.8% due to decrease in the District’s FY 2023 share of the Water Conservation Garden’s
operating costs.
Materials and Maintenance
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 2023, overall materials and maintenance expenses increased by 3.6%, or $144,700 compared to
FY 2022. The District’s budget for fuel and oil increased by $100,500 or 44.5% due to a combination of
increases in fuel costs and restoring the driving volume to the pre-Covid level. Due primarily to increasing
chlorine costs, chemicals are similarly budgeted to increase by $77,100 or 19.8%. Metro operating and
maintenance costs increased by $52,100 or 8.0% due to an anticipated increase in wastewater flow to
the Metro sewer system. The Operations department anticipates purchasing several new pieces of
equipment in FY 2023 resulting in an increase in Fleet Parts and Equipment budget of $31,300 or 22.6%.
Meters and materials increased by $23,700 or 17.9% due to a projected increase in meter sales based on
growth projections and historical needs. Materials and supplies has an increase of $20,000 or 7.0% for
water system maintenance and repair.
The increases were partially offset by decreases in Spring Valley sewer charges due to a projected return
to normal operations in FY 2023. The FY 2022 budget included an increase in sewer charges due to a
planned shutdown at the District’s treatment plant. Contracted services decreased by $34,400 or 3.5%
due to the completion of various FY 2022 projects. Safety equipment and infrastructure and supply
decreased by $18,100 or 21.2% and $11,200 or 1.8%, respectively, due to several one-time equipment
purchases in FY 2022.
106
Board of Directors 239,000$ 0.7%
General Manager 1,638,300 4.5%
General Expense 1,958,300 5.4%
Administrative Services 7,849,000 21.6%
Finance 6,561,500 18.1%
Water Operations 12,973,100 35.8%
Engineering 5,042,300 13.9%
36,261,500$ 100.0%
Departmental Operating Budget
Total FY 2023 Departmental Operating Budget
$36,261,500
107
FY 2021 FY 2022 FY 2023
Actual Budget Actual Budget $%
Labor Costs 13,074,212$ 13,508,200$ 12,914,585$ 14,345,300$ 837,100$ 6.2%
Benefits
Pension 2,764,318 3,127,900 2,971,789 3,383,300 255,400 8.2%
Employee Assistance Program 4,772 4,000 3,192 4,000 - 0.0%
Workers' Compensation 380,296 427,600 319,929 311,100 (116,500) (27.2%)
Health/Dental/Life Insurance/OPEB 3,739,156 4,239,000 3,058,963 3,401,400 (837,600) (19.8%)
Social Security/Medicare 1,090,151 1,139,000 1,046,877 1,203,700 64,700 5.7%
Salary Continuation Insurance 61,440 60,500 62,297 62,300 1,800 3.0%
State Unemployment Insurance 19,167 20,000 12,041 20,000 - 0.0%
Vacation/Sick/Holiday/Other Leave 2,625,107 2,642,000 2,639,015 2,830,300 188,300 7.1%
Total Benefits 10,684,407 11,660,000 10,114,103 11,216,100 (443,900) (3.8%)
Total Labor and Benefits 23,758,619 25,168,200 23,028,688 25,561,400 393,200 1.6%
Less: Non-Operating Labor and Benefits
Labor Costs 1,233,609 1,329,200 1,123,156 1,236,300 (92,900) (7.0%)
Benefits Allocation 744,187 825,200 694,169 777,700 (47,500) (5.8%)
Total Non-Operating Labor and Benefits 1,977,796 2,154,400 1,817,325 2,014,000 (140,400) (6.5%)
Operating Labor & Benefits 21,780,823 23,013,800 21,211,363 23,547,400 533,600 2.3%
Overhead Allocation (115% of labor costs) 1,418,650 1,528,600 1,291,629 1,422,100 (106,500) (7.0%)
Admin Overhead (36.85%)522,773 563,300 475,965 523,800 (39,500) (7.0%)
Less: Non-operating labor overhead (895,878) (965,300) (815,664) (898,300) 67,000 (6.9%)
Net Operating Labor and Benefits 20,884,945$ 22,048,500$ 20,395,699$ 22,649,100$ 600,600$ 2.7%
Labor and Benefits
Budget to Budget
VarianceFY 2022
Budget vs. Actual, in thousands ($)
Budget
$19,000
$19,500
$20,000
$20,500
$21,000
$21,500
$22,000
$22,500
$23,000
2021 2022 2023
$2
1
,
8
6
0
$2
2
,
0
4
9
$2
2
,
6
4
9
$2
0
,
8
8
5
$2
0
,
3
9
6
Budget Actual
108
Potable Recycled Sewer
Developer
Reimbursed
CIP Total
Operating Labor Costs 12,022,400$ 622,600$ 463,700$ -$ 13,108,700$
Benefits 9,756,800 385,100 296,500 - 10,438,400
Overhead Allocation-Personnel (1,687,000) 452,200 336,800 - (898,000)
Total Operating Labor and Benefits 20,092,200 1,459,900 1,097,000 - 22,649,100
CIP Labor Costs 827,600 85,300 35,400 288,300 1,236,600
Benefits 520,100 53,400 21,600 182,500 777,600
Overhead Allocation-Personnel 601,000 62,000 25,700 209,400 898,100
Total CIP Labor and Benefits 1,948,700 200,700 82,700 680,200 2,912,300
Total Labor and Benefits 22,040,900$ 1,660,600$ 1,179,700$ 680,200$ 25,561,400$
Potable-Operating 20,092,200$ 78.6%
Potable-CIP 1,948,700 7.6%
Sewer-Operating 1,097,000 4.3%
Sewer-CIP 82,700 0.3%
Recycled-Operating 1,459,900 5.7%
Recycled-CIP 200,700 0.8%
Developer Reimbursed-CIP 680,200 2.7%
Total Labor and Benefits 25,561,400$ 100.0%
Labor and Benefits by Fund - Fiscal Year 2023
109
General Manager
General Manager 1 1 1
District Secretary 1 1 1
Sr. Confidential Executive Assistant 1 - -
Communications Officer 1 1 1
Communications Assistant 1 1 1
Total FTE - General Manager Department 5 4 4
Administrative Services
Chief, Administrative Services 1 1 1
Confidential Executive Assistant 1 1 1
Confidential Department Assistant 1 - -
Administrative Services 3 2 2
Human Resources
Human Resources Manager 1 1 1
Senior Human Resources Analyst 1 2 2
Human Resources Analyst 1 - -
HR Assistant I and II - 1 1
Human Resources 3 4 4
Purchasing
Purchasing and Facilities Manager 1 1 1
Senior Procurement & Contracting Analyst 1 1 1
Senior Warehouse Worker 1 - -
Warehouse Technician - 1 1
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
IT Manager 1 1 1
GIS Manager 1 1 1
GIS Programmer Analyst 1 1 1
GIS Analyst 1 1 1
GIS Technician 1 1 1
Network Engineer 1 1 1
Database Administrator 1 1 1
Business Systems Technician 1 1 1
System Support Analyst 1 1 1
Business Systems Analyst I and II 2 2 2
Information Technology 11 11 11
Total FTE - Administrative Services Department 23 23 23
FY 2023FY 2021
Position Count by Department
FY 2022
110
Finance
Chief Financial Officer 1 1 1
Assistant Chief, Finance 1 1 1
Executive Assistant 1 1 1
Department Assistant 1 1 1
Finance 4 4 4
Controller and Budgetary Services
Senior Accountant 2 2 2
Accountant 1 1 1
Accounting Technician 1 1 1
Controller and Budgetary Services 4 4 4
Treasury and Accounting Services
Finance Manager, Treasury and Accounting 1 1 1
Senior Accountant 2 2 2
Accountant 1 1 1
Accounting Technician 1 1 1
Treasury and Accounting Services 5 5 5
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 and II 6 6 6
Customer Service 9 9 9
Meter Services
Meter Services Supervisor 1 1 1
Lead Meter Maintenance/Cross Connection Worker 1 1 1
Meter Maintenance Worker I and II 3 3 3
Lead Customer Service Field Representative 1 1 1
Customer Service Field Representative I and II 3 3 3
Meter Services 9 9 9
Total FTE - Finance Department 31 31 31
Operations
Chief, Water Operations 1 1 1
Executive Assistant 1 1 1
Operations 2 2 2
Water System Operations
System Operations Manager 1 1 1
Water Systems Supervisor 1 1 1
Lead Water Systems Operator 2 2 2
FY 2023FY 2022FY 2021
Position Count by Department
111
Operations (continued)
Water System Operations (continued)
Water Systems Operator I, II, and III 8 8 8
Senior SCADA Instrumentation Technician 2 2 2
SCADA Instrumentation Technician 1 1 1
Senior Disinfection Technician 1 1 1
Disinfection Technician 1 1 1
Water System Operations 17 17 17
Utility Maintenance/Construction
Utility Services Manager 1 1 1
Utility Maintenance Supervisor 1 1 1
Utility Maintenance Assistant Supervisor 1 1 1
Utility Crew Leader 3 3 3
Utility Workers I and II 9 9 12
Senior Utility/Equipment Operator 4 4 4
Valve Maintenance Worker 1 1 -
Pump Electrical 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 29 29 31
Collection/Treatment/Reclamation Operations
Reclamation Plant Supervisor 1 1 1
Lead Reclamation Plant Operator 1 1 1
Reclamation Plant Operator I, II, and III 2 2 2
Laboratory Analyst 2 2 2
Collection/Treatment/Reclamation Operations 6 6 6
Total FTE - Operations Department 54 54 56
Engineering
Chief, Engineering 1 1 1
Executive Assistant 1 1 1
Department Assistant 1 1 1
Engineering 3 3 3
Water Resources, Planning, Design & Environmental
Engineering Manager 1 1 1
Senior Civil Engineer 3 3 3
Environmental Compliance Specialist 1 1 1
Senior Engineering Technician 1 1 1
Engineering Design Technician 1 1 1
Water Resources, Planning, Design & Environmental 7 7 7
FY 2023
Position Count by Department
FY 2022FY 2021
112
Engineering (continued)
Public Services, Survey, Inspection, & Recycled Water Program
Engineering Manager 1 1 1
Field Services Manager 1 1 1
Permit Technician 2 2 2
Recycled Water Program Supervisor 1 1 1
Lead Recycled Water Specialist - 1 -
Recycled Water Specialist 3 3 4
Inspection Supervisor 1 1 -
Lead Construction Inspector - 1 1
Construction Inspector I and II 4 3 4
Construction Permit Technician - - 1
Supervising Land Surveyor 1 1 1
Senior Utility Locator 1 1 -
Utility Locator 1 2 3
Public Services, Survey, Inspection, & Recycled Water
Program 16 18 19
Total FTE - Engineering Department 26 28 29
District Total FTE Position Count 139 140 143
FY 2023FY 2022FY 2021
Position Count by Department
139 140
143
135
137
139
141
143
145
FY 2021
Actual
FY 2022
Actual
FY 2023
Budget
Full-Time Equivalent (FTE)
113
GIS Intern - 0.5 -
Human Resources Analyst 0.5 0.5 -
Reclamation Plant Supervisor 0.5 - -
Senior SCADA Instrumentation Technician - - 0.5
Water Conservation Intern - - 0.5
Total Contract/Temporary Employees 1.0 1.0 1.0
General Manager 4 2.8%
Administrative Services 23 16.1%
Finance 31 21.7%
Operations 56 39.1%
Engineering 29 20.3%
Total 143 100.0%
FY 2022 FY 2023FY 2021
Contract / Temporary Employees
FY 2023 Position Count by Department
114
FY 2021 FY 2022 FY 2022 FY 2023
Actual Budget Actual Budget $%
Administrative Expenditures
Directors' Fees 55,335$ 80,000$ 55,632$ 84,000$ 4,000$ 5.0%
Travel and Conferences 45,642 165,800 96,910 181,600 15,800 9.5%
Memberships and Dues 78,890 97,300 82,729 95,500 (1,800) (1.8%)
Conservation and Outreach 116,200 151,600 125,816 138,200 (13,400) (8.8%)
General Office Expense 232,639 259,900 250,436 268,000 8,100 3.1%
Equipment 1,450,219 1,430,800 1,436,909 1,567,000 136,200 9.5%
Fees 938,546 880,300 995,975 1,166,000 285,700 32.5%
Services 1,720,534 2,497,900 2,197,989 2,723,100 225,200 9.0%
Training 63,342 214,700 153,465 208,800 (5,900) (2.7%)
Utilities 15,999 17,600 17,747 18,100 500 2.8%
Insurance and Legal 1,820,682 2,071,900 1,718,258 2,009,500 (62,400) (3.0%)
Bad Debt Expense 249,994 243,200 263,393 122,000 (121,200) (49.8%)
Subtotal before Overhead 6,788,022 8,111,000 7,395,259 8,581,800 470,800 5.8%
Less: Overhead Allocation (522,773) (563,200) (475,965) (524,100) 39,100 6.9%
Total Expenditures 6,265,249$ 7,547,800$ 6,919,294$ 8,057,700$ 509,900$ 6.8%
4,702,612$ 5,605,400$ 9,113,517$ 10,591,300$
Directors' Fees 84,000$ 1.0%
Travel and Conferences 181,600 2.1%
Memberships and Dues 95,500 1.1%
Conservation and Outreach 138,200 1.6%
General Office Expense 268,000 3.1%
Equipment 1,567,000 18.3%
Fees 1,166,000 13.6%
Services 2,723,100 31.8%
Training 208,800 2.4%
Utilities 18,100 0.2%
Insurance and Legal 2,009,500 23.4%
Bad Debt Expense 122,000 1.4%
8,581,800 100.0%
Less: Overhead Allocation (524,100)
Total Administrative Expenditures 8,057,700$
Administrative Expenditures - Total
Budget to Budget
Variance
FY 2023 Total Administrative Expenditures, in thousands ($)
115
FY 2021 FY 2022 FY 2022 FY 2023
Actual Budget Actual Budget $%
Materials and Maintenance
Fuel and Oil 186,061$ 225,700$ 331,112$ 326,200$ 100,500$ 44.5%
Meters and Materials 144,450 132,500 169,153 156,200 23,700 17.9%
Fleet Parts and Equipment 113,723 138,300 126,370 169,600 31,300 22.6%
Infrastructure Equipment and Supplies 642,543 638,800 654,784 627,600 (11,200) (1.8%)
Chemicals 376,396 390,100 379,838 467,200 77,100 19.8%
Safety Equipment 65,466 85,200 100,529 67,100 (18,100) (21.2%)
Laboratory Equipment and Supplies 53,877 70,700 65,227 67,200 (3,500) (5.0%)
Other Materials and Supplies 213,052 286,200 297,128 306,200 20,000 7.0%
Building and Grounds Materials 62,597 87,600 87,879 82,500 (5,100) (5.8%)
Contracted Services 847,499 983,200 969,432 948,800 (34,400) (3.5%)
Subtotal Materials and Maintenance 2,705,664 3,038,300 3,181,452 3,218,600 180,300 5.9%
Sewer Charges
Metro O&M Costs 849,962 651,900 531,868 704,000 52,100 8.0%
Spring Valley Sewer Charge 246,581 297,700 171,101 210,000 (87,700) (29.5%)
Subtotal Sewer Charges 1,096,543 949,600 702,969 914,000 (35,600) (3.7%)
Total Expenditures 3,802,207$ 3,987,900$ 3,884,421$ 4,132,600$ 144,700$ 3.6%
Fuel and Oil 326,200$ 7.9%
Meters and Materials 156,200 3.8%
Fleet Parts and Equipment 169,600 4.1%
Infrastructure Equipment & Supplies 627,600 15.2%
Chemicals 467,200 11.3%
Safety Equipment 67,100 1.6%
Laboratory Equipment & Supplies 67,200 1.6%
Other Materials & Supplies 306,200 7.4%
Building and Grounds Materials 82,500 2.0%
Contracted Services 948,800 23.0%
Sewer Charges 914,000 22.1%
Total Expenditures 4,132,600$ 100.0%
Materials and Maintenance Expenditures - Total
Budget to Budget
Variance
FY 2023 Materials and Maintenance Expenditures
116
FY 2021 FY 2022 FY 2022 FY 2023 Budget to
Budget
Actual Budget Actual Budget Variance
Departmental Expenditures
Board of DirectorsBoard of Directors 157,997$ 224,000$ 182,093$ 239,000$ 15,000$ General ManagerGeneral Manager 1,418,456 1,514,300 1,405,895 1,638,300 124,000 General ExpenseGeneral Expense 2,688,219 2,946,700 1,772,740 1,958,300 (988,400)
Administrative ServicesAdministrative Services 6,793,865 7,411,800 7,132,130 7,849,000 437,200 FinanceFinance 6,111,503 6,357,500 6,239,544 6,561,500 204,000
Water OperationsWater Operations 11,413,254 12,370,600 11,466,899 12,973,100 602,500 EngineeringEngineering 3,787,758 4,287,800 4,291,742 5,042,300 754,500 Total Departmental ExpendituresTotal Departmental Expenditures 32,371,052 35,112,700 32,491,043 36,261,500 1,148,800
Less: Overhead Allocation (1,418,650) (1,528,600) (1,291,629) (1,422,100) 106,500
Net Departmental Expenditures 30,952,402 33,584,100 31,199,413 34,839,400 1,255,300
Non-Departmental Expenditures & Reserve Funding
Water Purchases 56,941,316 59,088,000 60,935,637 63,777,000 4,689,000 Power 3,310,860 3,485,000 3,679,023 3,893,000 408,000
Subtotal Non-Departmental Expenditures 60,252,176 62,573,000 64,614,660 67,670,000 5,097,000
General Fund Reserve 259,000 90,500 90,500 40,400 (50,100)
Expansion Reserve 150,000 2,066,900 2,066,900 684,800 (1,382,100) Betterment Reserve 985,000 735,000 735,000 4,890,000 4,155,000 Replacement Reserve 9,676,000 11,986,900 11,986,900 8,393,600 (3,593,300) Transfer to PERS 1,100,000 1,100,000 989,000 2,080,900 980,900 Transfer to Rate Stabilization Fund - 21,000 21,000 19,000 (2,000) Subtotal Reserve Funding 12,170,000 16,000,300 15,889,300 16,108,700 108,400
Total Operating Expenditures 103,374,578$ 112,157,400$ 111,703,373$ 118,618,100$ 6,460,700$
Operating Expenditures by Department
FY 2023 Funding Source by Department, in Millions ($)
$0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000
Board of Directors
General Manager
Administrative Services
Finance
Water Operations
Engineering
General Expense
Potable
Recycled
Sewer
117
FY 2021 FY 2022 FY 2022 FY 2023
Budget to
Budget
Actual Budget Actual Budget Variance
Departmental Expenditures
Labor and Benefits 21,780,823$ 23,013,800$ 21,211,363$ 23,547,400$ 533,600$
Director's Fees 55,335 80,000 55,632 84,000$ 4,000 Travel and Conferences 45,642 165,800 96,910 181,600 15,800 Memberships and Dues 78,890 97,300 82,729 95,500 (1,800)
Conservation and Outreach 116,200 151,600 125,816 138,200 (13,400)
General Office Expense 232,639 259,900 250,436 267,700 7,800 Equipment 1,450,219 1,430,800 1,436,909 1,567,000 136,200 Fees 2,759,228 2,952,200 2,714,233 3,175,500 223,300
Services 1,720,534 2,497,900 2,197,989 2,723,100 225,200 Training 63,342 214,700 153,465 208,800 (5,900) Materials & Maintenance 2,705,664 3,038,300 3,181,452 3,218,600 180,300
Utilities 15,999 17,600 17,747 18,100 500
Sewer Charges 1,096,543 949,600 702,969 914,000 (35,600) Bad Debt Expense 249,994 243,200 263,393 122,000 (121,200) Total Departmental Expenditures 32,371,052 35,112,700 32,491,043 36,261,500 1,148,800
Less: Overhead Allocation (1,418,650) (1,528,600) (1,291,629) (1,422,100) 106,500 Net Departmental Expenditures 30,952,402 33,584,100 31,199,413 34,839,400 1,255,300
Non-Departmental Expenditures & Reserve Funding
Water Purchases 56,941,316 59,088,000 60,935,637 63,777,000 4,689,000 Power 3,310,860 3,485,000 3,679,023 3,893,000 408,000
Subtotal Non-Departmental Expenditures 60,252,176 62,573,000 64,614,660 67,670,000 5,097,000
General Fund Reserve 259,000 90,500 90,500 40,400 (50,100) Expansion Reserve 150,000 2,066,900 2,066,900 684,800 (1,382,100) Betterment Reserve 985,000 735,000 735,000 4,890,000 4,155,000
Replacement Reserve 9,676,000 11,986,900 11,986,900 8,393,600 (3,593,300) Transfer to PERS 1,100,000 1,100,000 989,000 2,080,900 980,900 Transfer to Rate Stabilization Fund - 21,000 21,000 19,000 (2,000)
Subtotal Reserve Funding 12,170,000 16,000,300 15,889,300 16,108,700 108,400
Total Operating Expenditures 103,374,578$ 112,157,400$ 111,703,373$ 118,618,100$ 6,460,700$
Operating Expenditures by Object
118
Departmental Operating Budget
Tim Smith
President
Division 1
Mark Robak
Vice President
Division 5
Jose Lopez
Treasurer
Division 4
Ryan Keyes
Division 2
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.
Gary Croucher
Division 3
119
FY 2021 FY 2022 FY 2022 FY 2023
Actual Budget Actual Budget $%
Board of Directors 157,997$ 224,000$ 182,093$ 239,000$ 15,000$ 6.7%
Total Expenses 157,997 224,000 182,093 239,000 15,000 6.7%
FY 2021 FY 2022 FY 2022 FY 2023
Actual Budget Actual Budget $%
Benefits 99,528 110,000 103,255 121,000 11,000 10.0%
Director's Fees 55,335 80,000 55,632 84,000 4,000 5.0%
Travel and Conferences 3,134 34,000 23,206 34,000 - 0.0%
Total Expenses 157,997$ 224,000$ 182,093$ 239,000$ 15,000$ 6.7%
-$
Board of Directors
Budget to Budget
Variance
Budget to Budget
Variance
Department
Object
Budget vs. Actual, in thousands ($)
$0
$50
$100
$150
$200
$250
2021 2022 2023
$1
8
6
$2
2
4
$2
3
9
$1
5
8
$1
8
2
Budget Actual
120
Director’s Division Boundaries
121
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122
Departmental Operating Budget
(1) See Position count by Department on page 110-114 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 – 4 Positions (1)
District Secretary
1211
Communications Officer
1211
General Manager
1211
Chief Financial Officer
2311
Board of Directors
1111
Communications Assistant
1211
Chief, Administrative
Services 2211
Chief, Water
Operations 3211
Chief, Engineering
3311
123
FY 2021 FY 2022 FY 2022 FY 2023
Actual Budget Actual Budget $%
General Manager 1,315,033$ 1,363,800$ 1,262,004$ 1,495,300$ 131,500$ 9.6%
Conservation 103,423 150,500 143,891 143,000 (7,500) (5.0%)
Total Expenses 1,418,456 1,514,300 1,405,895 1,638,300 124,000 8.2%
-$
FY 2021 FY 2022 FY 2022 FY 2023
Actual Budget Actual Budget $%
Labor and Benefits 961,656 880,500 858,969 938,700 58,200 6.6%
Travel and Conferences 5,559 36,200 18,998 35,200 (1,000) (2.8%)
Memberships and Dues 65,696 77,500 69,522 77,700 200 0.3%
Conservation and Outreach 116,200 151,600 125,816 138,200 (13,400) (8.8%)
General Office Expense 2,525 5,700 1,600 5,700 - 0.0%
Fees 90,974 64,000 58,340 116,000 52,000 81.3%
Services 74,577 194,800 123,083 222,300 27,500 14.1%
Training 1,269 4,000 1,710 4,500 500 12.5%
Materials & Maintenance 100,000 100,000 149,757 100,000 - 0.0%
Total Expenses 1,418,456$ 1,514,300$ 1,407,795$ 1,638,300$ 124,000$ 8.2%
-$ -$ (1,900)$ -$
General Manager
Budget to Budget
Variance
Budget to Budget
Variance
Department
Object
Budget vs. Actual, in thousands ($)
$1,000
$1,100
$1,200
$1,300
$1,400
$1,500
$1,600
$1,700
2021 2022 2023
$1
,
6
5
7
$1
,
5
1
4
$1
,
6
3
8
$1
,
4
1
8
$1
,
4
0
8
Budget Actual
124
Departmental Operating Budget
General Manager
Services We Provide
The General Manager’s office provides leadership and direction for all District operations and
services including potable, recycled, and wastewater. As leader of the agency, the General Manager
interacts with the Board of Directors to set policies and strategic direction and ensures that
applicable laws and regulations are met. The General Manager oversees, coordinates, and directs
the development and execution of planning and strategic documents 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 collaborates with all District departments to provide and support communications,
including but not limited to the website, social media, the newsletter, the mobile application, and
other materials and technologies. In addition, the office coordinates media relations, outreach,
education, water conservation, and legislation. The office supports and participates in outreach and
business events throughout the community and helps fund and promote a variety of conservation
rebates and other programs available to its customers. Staff promotes water-use efficiency through
educating the District’s customers about available rebates, water conservation programs, and the
Water Conservation Garden. The office also works with other departments to coordinate the District’s
Water Shortage Contingency Plan as well as its water waste reporting program.
Accomplishments – Fiscal Year 2021-2022
•The District’s rates were ranked the eleventh lowest among San Diego County’s 22 public
water agencies and the fifth lowest among the County’s 28 sewer service providers.
•Saved more than $60 million due to staffing efficiencies and the reduction of Full Time
Equivalent positions from 2007 to fiscal year 2022.
•As of June 30, 2021, the District funded 95.5% of its Defined Benefit Pension Plan, with a plan
to have it fully funded by 2034.
•Maintained full funding of the District’s Other Post Employment Benefit Plan unfunded liability
•On behalf of its customers, the District applied for over $500,000 in water and sewer bill
assistance funding through the State Water and Wastewater Arrearage Program, which
allowed water agencies to apply for funds for customers who had accrued delinquent
amounts from March 4, 2020 through June 15, 2021. These funds were issued to over 900
customers as credits on their accounts.
•The District applied for and was awarded the U.S. Bureau of Reclamation WaterSmart grant in
the amount of $234,645 for an upcoming Automated Meter Infrastructure implementation.
•Through the San Diego County Water Authority and Metropolitan Water District, the District
secured $15,000 for conservation-related programs and more than $38,000 for its Leak
Detection Program.
125
Departmental Operating Budget
General Manager (continued)
Accomplishments – Fiscal Year 2021-2022 (continued)
•The District had no impacts to its water supply and has maintained a continuity of operations
and services during the COVID-19 pandemic. Staff continued to monitor and provide updates
relating to responding to the pandemic, including but not limited to water and wastewater
services, supplies, operations, finances, and communication. Staff continued to monitor and
comply with all Federal, State, and Local orders and guidelines.
•Continued to lead executive management and staff in legislative and health order efforts to
address the COVID-19 pandemic, which included managing communications with employees
and customers and implementing policies and procedures related to telecommuting, safe
work practices, employee absences, staffing plans, testing, and more.
•Led and implemented a Pilot Telecommuting Policy/Program, which allows administrative
employees to work from home for up to two days per week to ensure the District remains
competitive in the industry, and support work/life balance initiatives.
•Received six offers, negotiated a purchase and sale agreement, and opened escrow for the
sale of the Salt Creek property for $33.4 million.
•Finalized the District’s first Hazard Mitigation Plan, which will be included in the County’s Multi
Joint Hazard Mitigation Plan.
•Updated board director division boundary maps through the redistricting process, which
included review of service-area growth, demographics, census data, and review of several
boundary maps for board evaluation and adoption.
•Presented the 2022 Otay Water District Legislative Program Policy Guidelines and 2022 Top 10
Legislative Priorities to the Board and remained engaged in legislative issues that could
impact the District.
•Remained engaged with Association of California Water Agencies (ACWA) and other public
agencies in response to California Air Resources Board’s (CARB) proposed regulation of the
transition to Zero Emissions Vehicles (ZEV) and Near Zero Emissions Vehicles (NZEV) for
public fleets per the Governor’s Executive Order of Advance Clean Fleet Regulation.
•Due to revenue loss because of unpaid water bills during COVID-19, staff continued to monitor
and tracked federal, state, and local funding programs available to water agencies and
customers.
•Declared a Level 1 of the District’s Water Shortage Contingency Plan, following Governor
Gavin Newsom’s declaration of a statewide drought and vote of the San Diego County Water
Authority Board of Directors to activate a Shortage Level 1 under its WSCP.
•Published the annual consumer confidence report, indicating to customers that the District
met or surpassed all public health drinking water requirements and standards.
126
Departmental Operating Budget
General Manager (continued)
Accomplishments – Fiscal Year 2021-2022 (continued)
•General Manager was nominated and selected as a board member representing Association
of California Water Agencies (ACWA) Region 10.
•Through funding from the San Diego County Water Authority and Metropolitan Water District
of Southern California, staff worked with a consultant to develop a readiness dashboard
related to Assembly Bill 1668 and Senate Bill 606.
•Developed a public survey for customers related to conservation behaviors.
•Celebrated 65 years of providing reliable water, recycled water, and sewer needs to its
customers. Staff published an article in the fall issue of the Pipeline Newsletter and promoted
the 65th anniversary through the website and social media.
•Continued to develop, leverage, and enhance District technologies, including smartphone
apps, drone technology, geographic information systems technology, GPS fleet-tracking
management systems, the Boardroom’s audio-visual equipment, asset management software,
cloud-based ticket management systems, and more.
•Coordinated public outreach for various Capital Improvement Projects, including the Melrose
and Oleander Ave 458/340 Pressure Reducing Station Project, 1200-1 site, 850-1 Reservoir
Recoating and Lining Project, 1090-1 Pump Station Renovation Project, and others.
•As part of the District’s Leak Detection and Repair Program, the District surveyed
approximately 173 miles of potable and recycled pipelines, finding, and repairing one District-
side leak. This survey is a good indication of the status of the District’s water distribution
system for the area surveyed.
•To continue promoting water-use efficiency to customers, the District recognized the
WaterSmart Landscape Contest “Best in District” winner, an El Cajon resident.
•Continued the educational partnership with Chula Vista Elementary School District and the
Sweetwater Authority for the Hydro Station, an interactive educational space that houses
learning exhibits, hands-on activities, and virtual opportunities, and teaches more than 4,000
fifth graders about the ecological cycle of water, water conservation, water quality, and
careers in the water industry.
•Partnered with Cuyamaca College’s Center for Water Studies program to serve on committees
to enhance outreach to veterans and women in the water industry.
•District staff participated on the committee for the Cuyamaca College Center for Water
Studies’ fifth annual Women in Water Symposium, held virtually on March 30 and April 6. The
District sponsored the event. The symposium hosted 15 speakers and 140 attendees. Eight
District staff attended the symposium. Topics included communication skills in a male-
dominated industry, a keynote panel with women general managers and executives, a panel
discussing a variety of water-related positions, juggling, and managing work-life balance,
127
Departmental Operating Budget
General Manager (continued)
Accomplishments – Fiscal Year 2021-2022 (continued)
diversity and inclusion, and personal branding. The District’s former Meter Services Supervisor
Shannon Coffin spoke on one of the panels. In addition, this year for the first time, District staff
recommended that the funds from the event go to the Mark Watton scholarship and the
committee concurred. Through the event the symposium raised more than $3,500 for the
scholarship.
•The District continued to support the “Mark Watton” scholarship fund through the Foundation
for Grossmont and Cuyamaca Colleges to increase the talent pool in the water industry by
supporting students attending the Center for Water Studies at Cuyamaca. Through the
scholarship, the Foundation for Grossmont & Cuyamaca College awarded scholarships to six
recipients for $500 each.
•The District continued to enhance its website and social media sites by increasing the
frequency of posts and use of Spanish-language content. As a result, the number of followers
on all District social media pages increased from July 1, 2021, to June 30, 2022. The District’s
Facebook gained a 45% increase in followers from 480 to 694. Its Twitter followers increased
by 3%, from 2,166 to 2,236. Instagram followers increased by 13%, from 927 to 1,045. Nextdoor
members in the District’s service area increased by 12%, from 50,172 to 56,295. LinkedIn
followers increased by 20%, from 696 to 833. YouTube subscribers increased by 96%, from 115
to 225. Also, its cumulative YouTube video views increased by 54%, from 117,075 to 180,615.
•The District launched a New Year’s-themed Instagram photo contest to help make the
community aware of water-saving efforts during the drought, encouraging participants to use
their creativity and share photographs of how they plan to save more water in 2022.
•Participated in the “Water is Life” Poster contest for grades kindergarten through twelfth and
awarded five students from three of 59 schools in the District’s service area. As part of
Metropolitan Water District of Southern California calendar contest, one District winner from last
year’s contest were published in MWD’s 2022 calendar.
128
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 technology,
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, Geographic Information Systems and 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 page 110 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
129
FY 2021 FY 2022 FY 2022 FY 2023
Actual Budget Actual Budget $%
Administrative Chief 499,071$ 478,800$ 486,399$ 500,000$ 21,200$ 4.4%
Human Resources 795,346 1,018,300 851,337 1,125,000 106,700 10.5%
Purchasing and Facilities 1,646,385 1,851,200 1,728,728 1,853,400 2,200 0.1%
Safety and Security 272,279 390,300 433,509 422,400 32,100 8.2%
IT Operations 2,531,377 2,534,200 2,543,658 2,775,700 241,500 9.5%
Geographic Information System (GIS) 1,049,407 1,139,000 1,088,499 1,172,500 33,500 2.9%
Total Expenses 6,793,865 7,411,800 7,132,130 7,849,000 437,200 5.9%
FY 2021 FY 2022 FY 2022 FY 2023
Actual Budget Actual Budget $%
Labor and Benefits 4,272,797 4,547,300 4,400,913 4,738,000 190,700 4.2%
Travel and Conferences 1,041 21,500 11,466 39,100 17,600 81.9%
Memberships and Dues 3,965 4,900 8,940 5,100 200 4.1%
General Office Expense 82,690 104,400 96,253 105,200 800 0.8%
Equipment 1,339,687 1,355,200 1,349,140 1,466,600 111,400 8.2%
Services 394,998 469,200 405,876 630,100 160,900 34.3%
Training 54,008 173,700 133,705 161,700 (12,000) (6.9%)
Materials & Maintenance 628,680 718,000 712,560 685,100 (32,900) (4.6%)
Power and Utilities 15,999 17,600 17,747 18,100 500 2.8%
Total Expenses 6,793,865$ 7,411,800$ 7,136,600$ 7,849,000$ 437,200$ 5.9%
Administrative Services
Budget to Budget
Variance
Budget to Budget
Variance
Department
Object
Budget vs. Actual, in thousands ($)
$6,000
$6,500
$7,000
$7,500
$8,000
2021 2022 2023
$6
,
9
2
7
$7
,
4
1
2
$7
,
8
4
9
$6
,
7
9
4
$7
,
1
3
7
Budget Actual
130
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 program
for employees and retirees; manages the workers’ compensation program; oversees employee
performance through staff management to include employee training and development;
development of recognition and incentive programs; manages performance evaluation process and
employee discipline; ensures legal compliance; and implements work/life balance initiatives.
Accomplishments – Fiscal Year 2021-2022
•Conducted 23 recruitments to fill 27 positions, which constitutes 19% of the District’s
workforce.
•Consistent with the advancement of the District’s development and training program,
coordinated various Franklin Covey programs to provide online leadership and business
execution training to District management staff and senior level employees..
•Continued to manage legislation and health orders related to Coronavirus Disease 2019
(COVID-19), which included updating District policies and procedures and managing
employee communication and related leaves of absence.
•Implemented a Pilot Telecommuting Policy/Program, which allows administrative
employees to work from home for up to two days per week to ensure the District remains
competitive in the industry, and support work/life balance initiatives.
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
facility maintenance work; and administers and manages outsourced facility maintenance service
contracts.
131
Departmental Operating Budget
Purchasing and Facilities (continued)
Accomplishments – Fiscal Year 2021-2022
•Adopted DocuSign eSignature (DocuSign) to electronically process District contracts,
purchase orders, invoices, vendor onboarding, and other documents that require routing,
review, data capture, acknowledgement, and signature. The savings in administrative and
other costs offsets the annual fee by more than twice the price of the service.
•Relocated a concrete shed contents from the warehouse to a new structure in the operation
equipment yard for the safety, security, and convenience of utility maintenance (UM)
staff. Facilities submitted a design for approval and then contracted for the installation of the
new storage facility.
•Auctioned off the Salt Creek Golf Course maintenance building in preparation for the sale of a
portion of the Salt Creek property. Through a public auction, the prefabricated steel and metal
structure was sold, dismantled, and repurposed by the new owner. In conjunction with its
removal, San Diego Gas & Electric (SDG&E) utility crews removed the electrical service and
equipment at the site and the equipment and utilities at a nearby underground golf cart
garage and the former club house site.
Safety and Security
Services We Provide
Safety and Security, under the direction of the Chief of Administrative Services, provides the following:
interprets and enforces safety regulations and standards, participates in the development and
management of new or revised safety standards, policies, and plans; organizes, coordinates,
implements the occupational safety and health and security management programs; ensures the
workplace follows Cal/OSHA regulations; coordinates programs that support a safe workplace,
including assessment and mitigation of hazards, and safety orientations, the Injury and Illness
Prevention Program (IIPP), emergency preparedness, directs and coordinates accident
investigations related to occupational injuries, fleet incidents and/or damage to, or theft of District
property; determines training needs to address issues; coordinates the Department of Transportation
(DOT), the District’s Drug-Free Workplace, and DMV Pull-Notice programs.
Accomplishments – Fiscal Year 2021-2022
•Continued membership with the San Diego Chapter InfraGard and staff appointment as the
Water and Wastewater Section Chief for the County.
•Resumed instructor-led and onsite critical training for essential staff. This included operations-
wide initial and refresher training in confined spaces, fall protection, Workzone traffic control,
heavy equipment, electrical safety, and defensive driving.
•Completed County Office of Emergency Services WebEOC monthly exercises to maintain the
District’s emergency readiness.
132
Departmental Operating Budget
Safety and Security (continued)
Accomplishments – Fiscal Year 2021-2022 (continued)
•Facilitated and finalized the District’s first Hazard Mitigation Plan , which will be included in the
County’s Multi Joint Hazard Mitigation Plan.
•Continued to update the District’s COVID-19 Prevention Program based on the under evolving
Cal/OSHA Emergency Temporary Standard and numerous California Department of Public
Health (CDPH) orders.
•Through proactive and preventive measures, the District prevented work-related COVID-19
cases during the pandemic and was able to maintain essential community water services,
while adhering to state health orders.
Information Technology Operations
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 enterprise
network, data center, productivity cloud services, and desktop and mobile hardware/software;
enterprise resource planning and work order management systems, disaster recovery;
telecommunications; cybersecurity; physical access controls; physical and wireless networks;
internal/external website support; project management, strategic planning, and end-user support
services.
Accomplishments – Fiscal Year 2021-2022
•Upgraded the District’s enterprise network infrastructure, allowing the District to meet current
and future growth needs. The new enterprise infrastructure provides the District with a robust,
secure, and highly available network computing environment leveraging state-of-the-art
technologies, redundancies, on-premises to cloud service interoperability, increased security,
management benefits, and overall lower cost of ownership.
•Deployed Microsoft’s enterprise cloud-based Mobile Device Management (MDM) solution,
Intune. The MDM solution enables IT staff to centrally administer, deliver rules and
applications, and secure District-issued mobile devices. The solution also allows IT to
remotely isolate and disable compromised devices, therefore, protecting District technology
services.
•Updated the District's Enterprise Content Management System (ECMS), Laserfiche, which
provides enhancements and necessary patches for advanced document version control,
workflow management, document security, and records retention improvements.
133
Departmental Operating Budget
Information Technology Operations (continued)
Accomplishments – Fiscal Year 2021-2022 (continued)
•The Department of Homeland Security (DHS) funded and conducted a cyber security risk
audit that evaluated the District’s technology security measures, data protection protocols,
network infrastructure, and SCADA environment safeguards. The assessment included testing
of firewall configurations, identification of potential vulnerabilities, a phishing attack campaign,
privileged account review, and other cyber-system and practice evaluations.
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; data
collection and data Quality Assurance/Quality Control (QA/QC) of the District’s facility data and land-
based data; technical support in designing, developing, documenting, and maintaining the District’s
GIS database systems; and creates data structures that consolidate logical and physical models of
data.
Accomplishments – Fiscal Year 2021-2022
•Integrated the District’s enterprise work order information into the GIS Operation Dashboard,
which provides staff with direct access to work order information of related assets to
improve efficiency. This enhancement is expected to save staff 15% of labor time in terms of
information searching and entering data.
•Created a time stamp feature for the Valve Exercise Program, which provides the overall
operating time for each exercised valve, minimizing field staff’s data entry time,
•Updated Director division boundary maps through the redistricting process requested by the
County of San Diego. Staff worked with a consultant to review service-area growth,
demographics, census data, and provide several boundary maps for Board evaluation and
adoption.
•Developed an Encroachment Inspector Application, which provides a platform for field staff
to input encroachment data real-time and transfer the information to a central database
seamlessly. The information is critical for the decision of prioritizing easement inspections and
the new application removes redundant steps for increased efficiency.
Participated in the joint effort of ortho-image acquisition among other agencies in San Diego
County. The newly acquired images were delivered and staff processed the data, which
includes creating mosaic datasets, setting up image services with two different projections,
creating scale levels, and more. The new images are available now in the GIS Dashboard and
other GIS related applications.
134
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 support to the Communications Division. Finance staff is also responsible for providing
complex administrative and technical support to the District, General Manager, and Board of
Directors.
Finance Department – 31 positions (1)
(1) See Position Count by Department on page 111 for the list of positions per department.
Treasury and Accounting Services 2331
Customer Service 2341
Controller and Budgetary Services 2321
Assistant Chief of Finance -2321231
Chief Finance Officer -2311
Meter Services 2342
135
FY 2021 FY 2022 FY 2022 FY 2023
Actual Budget Actual Budget $%
Finance Chief 583,852$ 598,400$ 596,475$ 621,400$ 23,000$ 3.8%
Controller and Budgetary Svs 872,180 979,600 980,694 975,100 (4,500) (0.5%)
Treasury and Accounting Svs 1,618,184 1,571,900 1,622,021 1,769,900 198,000 12.6%
Customer Service 2,216,860 2,313,000 2,196,098 2,228,700 (84,300) (3.6%)
Meter Shop 820,427 894,600 844,256 966,400 71,800 8.0%
Total Expenses 6,111,503 6,357,500 6,239,544 6,561,500 204,000 3.2%
FY 2021 FY 2022 FY 2022 FY 2023
Actual Budget Actual Budget $%
Labor and Benefits 4,731,526 4,911,100 4,689,660 5,062,600 151,500 3.1%
Travel and Conferences 1,788 12,900 2,245 13,100 200 1.6%
Memberships and Dues 3,938 6,200 6,494 6,200 - 0.0%
General Office Expense 146,972 149,100 152,272 156,400 7,300 4.9%
Equipment 2,825 1,500 815 1,500 - 0.0%
Fees 647,467 605,200 701,896 808,900 203,700 33.7%
Services 137,982 230,900 219,629 173,200 (57,700) (25.0%)
Training 400 1,400 435 1,200 (200) (14.3%)
Materials & Maintenance 188,611 196,000 205,952 216,400 20,400 10.4%
Bad Debt Expense 249,994 243,200 263,393 122,000 (121,200) (49.8%)
Total Expenses 6,111,503 6,357,500 6,242,791 6,561,500 204,000 3.2%
Less: Bad Debt Expense (249,994) (243,200) (263,393) (122,000) 121,200 (49.8%)
Expenses, Net of Bad Debt $ 5,861,509 $ 6,114,300 $ 5,979,398 $ 6,439,500 $ 325,200 5.3%
Finance
Department
Object
Budget to Budget
Variance
Budget to Budget
Variance
Budget vs. Actual, in thousands ($)
$5,800
$5,900
$6,000
$6,100
$6,200
$6,300
$6,400
$6,500
$6,600
2021 2022 2023
$6
,
2
5
6
$6
,
3
5
8
$6
,
5
6
2
$6
,
1
1
2
$6
,
2
4
3
Budget Actual
136
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 and capacity fee studies and preparing rate notices and property tax assessments. This
division is also responsible for the biweekly payroll of 143 full-time and temporary employees using
the District’s Eden System. Division staff collects and distributes timesheets and paystubs
electronically. Staff also processes benefits and deductions biweekly and files federal and state tax
returns on a quarterly basis, and W2s annually. This division also assists in the general ledger
accounting, audit, cost accounting, and contract review.
Accomplishments – Fiscal Year 2021-2022
•For the eighteenth consecutive year, the Government Finance Officers Association (GFOA)
awarded the District with the Distinguished Budget Presentation Award for the Fiscal Year
2021-2022 Budget.
•The California Society of Municipal Finance Officers (CSMFO) awarded the District for the
sixteenth consecutive year, the Operating Budget Excellence Award for the Fiscal Year
2021-2022 Budget.
•The CSMFO awarded the District for the seventeenth consecutive year with the Capital
Budgeting Excellence Award for the Fiscal Year 2021-2022 CIP Budget.
Treasury and Accounting Services
Services We Provide
The Treasury and Accounting Services Division coordinates and directs the activities of the general
ledger accounting and audit, banking and cash management, investments and treasury functions,
debt financing, job costing, cost accounting, fixed assets, property and liability insurance, and
contract review. The division is also responsible for the accounts payable process, which pays
approximately 700 invoices monthly. Additionally, the division is responsible for completing the
District’s annual financial audit and publishing the Annual Comprehensive Financial Report. The
division also conducts an annual review of the District’s Investment Policy, as required by law, with
approval of the Board of Directors. Moreover, it provides financial analysis and review of staff projects
and operational business proposals, assists in the preparation of the District’s annual operating and
capital budgets, and updates the rate model and the six-year financial plan.
137
Departmental Operating Budget
Treasury and Accounting Services (continued)
Accomplishments – Fiscal Year 2021-2022
•For the eighteenth consecutive year, the GFOA awarded a Certification of Achievement for
Excellence in Financial Reporting to the District for its Annual Comprehensive Financial
Report for the fiscal year ended June 30, 2021.
•Implemented various automations to reduce manual handling of invoices, requisitions, and
other financial documents, streamlining the invoice approval process while strengthening
internal controls over financial operations.
•Maintained full funding of the District’s Other Post Employment Benefit plan unfunded
liability.
•Completed the transition of the investment custody function and the debt trust
management to US Bank.
•Completed the 2021 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 the implementation of Governmental Accounting Standards Board Statement
No. 87 Leases Accounting, which included system and process changes to support the
recording and amortization of cell-site leases.
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 the Communications Division
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 or an electronic bill, and various payment options including 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 customers desire more personal service, the customer-
care team, which handles an average of 4,000 calls per month, will assist them.
The Meter Services Division is responsible for the installation and maintenance of all meters. Division
staff manages 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 also
responds to customer issues regarding meter accuracy, conducts site audits, and maintains records
as required by various regulatory agencies. Meter reading staff reads approximately 50,000 potable
and recycled meters a month using Automatic Meter Reading (AMR) technology.
138
Departmental Operating Budget
Customer Service (continued)
Accomplishments – Fiscal Year 2021-2022
•Completed more than 225 new meter and 85 construction meter installations.
•On behalf of its customers, the District applied for over $500,000 in water and sewer bill
assistance funding through the State Water and Wastewater Arrearage Program, which
allowed water agencies to apply for funds for customers who had accrued delinquent
amounts from March 4, 2020 through June 15, 2021. These funds were issued to over 900
customers as credits on their accounts.
•The moratorium on disconnections for non-payment was lifted at the end of 2021.
Customer service worked with communications staff to send notifications to delinquent
customers notifying them of disconnections resuming in February and encouraging them
to set up payment plans to avoid disconnection. Customer service staff set up
approximately 200 payment arrangements for delinquent customers.
•Applied for and was awarded the U.S. Bureau of Reclamation WaterSmart grant in the
amount of $234,645 for an upcoming Automated Meter Infrastructure implementation.
•Implemented new collection procedures for tenant accounts as the District’s policy has
changed to ultimately hold the property owners responsible for unpaid bill amounts after the
account is closed.
139
Departmental Operating Budget
Water Operations Department
Mission Statement
To provide operations and maintenance service in the most efficient, safe, and cost-effective manner
to 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 – 56 Positions (1)
(1) See Position Count by Department on pages 111-112 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
140
FY 2021 FY 2022 FY 2022 FY 2023
Actual Budget Actual Budget $%
Water Operations Chief (1)476,977$ 522,500$ 535,325$ 495,000$ (27,500)$ (5.3%)
Water Systems (1)6,091,711 6,463,200 5,870,358 6,600,600 137,400 2.1%
Construction Maintenance (1)4,844,566 5,384,900 5,061,216 5,877,500 492,600 9.1%
Total Expenses 11,413,254 12,370,600 11,466,899 12,973,100 602,500 4.9%
FY 2021 FY 2022 FY 2022 FY 2023
Actual Budget Actual Budget $%
Labor and Benefits (1)7,845,851 8,433,400 7,793,820 8,818,100 384,700 4.6%
Travel and Conferences 33,111 41,800 30,611 40,700 (1,100) (2.6%)
Memberships and Dues 2,914 5,000 5,080 3,500 (1,500) (30.0%)
General Office Expense - 200 - 200 - 0.0%
Equipment 79,966 58,000 47,458 68,300 10,300 17.8%
Fees 131,876 142,500 162,597 168,100 25,600 18.0%
Services 432,798 696,800 603,600 724,300 27,500 3.9%
Training 1,883 19,000 10,121 18,800 (200) (1.1%)
Materials & Maintenance 1,788,312 2,024,300 2,113,183 2,217,100 192,800 9.5%
Sewer Charges 1,096,543 949,600 702,969 914,000 (35,600) (3.7%)
Total Expenses 11,413,254$ 12,370,600$ 11,469,439$ 12,973,100$ 602,500$ 4.9%
(1)Excludes CIP labor & benefits.
Budget vs. Actual, in thousands ($)
Water Operations
Budget to Budget
Variance
Budget to Budget
Variance
Department
Object
$-
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
2021 2022 2023
$1
1
,
9
3
5
$1
2
,
3
7
1
$1
2
,
9
7
3
$1
1
,
4
1
3
$1
1
,
4
6
9
Budget Actual
141
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 five sections include: 1) Water System Operations
which oversees the Water Operations section; 2) Water Systems – Water system operators monitor
and operate the water distribution system to ensure it provides safe, reliable drinking water to the
District’s customers; 3) SCADA – Performs installations, maintenance, updates, and modifications to
the SCADA control system and related communications equipment, for existing facilities and the
Capital Improvement Project; 4) Treatment Plant – Maintains and operates the District’s sewer
treatment plant to produce high-quality recycled water to the District’s recycled water customers.
Water system operators monitor and operate the recycled water distribution system ensuring it
provides an adequate recycled water supply; and 5) Laboratory – Ensures regulatory-required
sampling, analyses, and reporting complies with the State Water Resources Control Board (SWRCB)
requirements for potable water, and the Regional Water Quality Control Board requirements for
recycled water and the reclamation plant treatment process. Laboratory staff works closely with
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 staff to ensure proper disinfection was performed after maintenance or new
construction.
Accomplishments – Fiscal Year 2021-2022
•Throughout the COVID-19 pandemic, staff continued to provide uninterrupted service to
customers while following the Center for Disease Control and Prevention and Cal/OSHA’s
requirements.
•Completed the Treatment Plant’s influent screenings manifest to satisfy disposal regulation
requirements.
•Completed State requested Per-and Polyfluoroalkyl Substances (PFAS) analysis on the
Treatment Plant’s influent and effluent flows.
•Assisted with the replacement of the influent sewer force main air vacs.
•Participated in the San Diego County Water Authority (SDCWA) Internship Program.
•Completed the Capital Improvement Program (CIP) for the optimization of the Blower and
Dissolved Oxygen controls at the Treatment Plant.
•Assisted with the biannual Sewer System Management Plan update.
•Coordinated preventative maintenance on the screenings washer presses at the
headworks of the Treatment Plant.
•Continued support for the Treatment Plant’s UV System Study project.
•Assisted with the coordination of the laboratory’s fume hood regulatory inspection.
142
Departmental Operating Budget
Water System Operations (continued)
Accomplishments – Fiscal Year 2021-2022 (continued)
•Continued to transition to the State’s Environmental Laboratory Accreditation Program
(ELAP) The NELAC Institute (TNI)laboratory requirements and completed a pre-assessment
on the Quality Assurance Manual.
•Prepared for and assisted with the County inspections for California Accidental Release
Prevention (CalARP), Spill Prevention Control and Countermeasure (SPCC), and Hazardous
Materials Business Plan (HMBP) at four District sites designated as CalARP sites with no
violations reported.
•Assisted with the completion of the 520 chemical feed mixer/injector CIP project.
•Assisted with the 980-1 and 980-2 Reservoir inlet/outlet vault rehab CIP project.
•Assisted with the 1200 VFD trailer CIP project including Programmable Logic Controller
(PLC) programming changes needed for different pumping modes.
•Assisted with the 1090 Pump Station rehabilitation CIP project.
•Completed research and began regulatory process for a pilot project to convert from aqua
ammonia to liquid ammonium sulfate at one of the potable disinfection facilities.
•Coordinated and completed two separate 10-day planned shutdowns for SDCWA’s Pipeline
4.
•Assisted with the completion of commissioning the Temporary Lower Otay Pump Station
(TLOPS) #2 CIP project.
•Assisted with the commissioning 870-2 Pump Station CIP project.
•Coordinated and executed shutdowns needed to support the valve replacement CIP
project.
•Assisted with the emergency portable pump testing at District sites.
•Coordinated biannual cleaning and dive inspections on the District’s floating cover
reservoirs.
•Coordinated the cleaning and inspection of eight potable reservoirs, per American Water
Works Association standards.
•Installed upgraded programmable logic controllers at 11 District Supervisory Control and
Data Acquisition (SCADA) sites.
•Began writing a new version of the SCADA Masterplan.
•Completed District-wide calibrations of all SCADA-related field instruments.
•Updated PLC input/output lists at 95% of SCADA sites.
•Assisted with the progression of the District’s Asset Management Plan.
•Began framework on the revised Lead and Copper Rule private water service line inventory.
143
Departmental Operating Budget
Water System Operations (continued)
Accomplishments – Fiscal Year 2021-2022 (continued)
•Completed the 2022 Public Heath Goal Report.
•Coordinated the leak detection campaign.
•Worked with SDCWA, Metropolitan Water District (MWD), International Boundary and
Water Commission (IBWC), and the Bureau of Reclamation on the renewal of the Mexico
Agreement for temporary emergency deliveries of Mexican Treaty Waters of the Colorado
River through January 2027.
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 potable, recycled, and wastewater services to
District customers while adhering to all applicable regulatory compliance requirements. The three
sections include: 1) Utility Maintenance – Maintains all collection and potable distribution and
recycled distribution systems, including regular inspection and cleaning of the wastewater collection
system. In addition, exercises valves and installs and repairs main pipelines and service lines
expediently while following all established safety rules and regulations; 2) Fleet Maintenance –
Implements active preventative maintenance practices and repairs on District vehicles and
equipment to ensure optimum performance while establishing fuel-efficient operational practices
and emissions compliance; and 3) Pump and Electrical – Performs preventative, predictive, and
corrective maintenance on pumps, motors, switchgear, and control valves, and assists with electrical
maintenance and installation throughout the District.
Accomplishments – Fiscal Year 2021-2022
•Initiated and finalized repairs on large, recycled water main breaks on Club House Drive in
Chula Vista and five large potable main breaks District-wide, including coordinating paving
work with contractors.
•As part of the General Manger’s emergency declaration, coordinated with a contractor to
initiate and finalize repairs on the 42-inch cement mortar lined and coated (CMLC) discharge
potable main at the 980-2 Pump Station, including working with other District departments
to ensure an efficient and cost-effective approach was taken to complete repairs.
•Supported several CIP projects, such as retrofitting the 1004-1 Pump Station for the Variable
Frequency Drive (VFD) trailer, including core drilling, piping, and welding to assist
engineering in the implementation of the rehabilitation of the 1004-1 Reservoir; replumbing
of the VFD trailer at the 1200-1 Pump Station to accommodate different pumping scenarios
and testing; installation of several isolation valves at the 1090-1 Pump Station; and supported
144
Departmental Operating Budget
Utility Services Maintenance (continued)
Accomplishments – Fiscal Year 2021-2022 (continued)
the 458-1 Reservoir recoating project and set up a temporary connection, as well as a spool
on the outlet of the reservoir to place back in service.
•Coordinated with engineering department to plan the rehabilitation of the 20-inch potable
main and six-inch sewer force main along the Steele Canyon Bridge to eliminate corrosion
issues on both pipes.
•Completed 40 valve replacements and replaced nearly 70 valves since the start of the
ongoing pilot valve replacement program in Fiscal Year 21.
•Exercised 712 critical valves and 3,132 isolation valves; maintained 7,355 hydrants; and
flushed 225 segments of mains.
•Completed more than 239,384 feet of routine sewer flushing and more than 50,569 feet of
Closed Circuit Television sewer inspections.
•Replaced/repaired 148 service laterals, 52 pro-active polyethylene lines, and 15 water mains.
•Continued to work with the County of San Diego and City of Chula Vista’s paving contractors,
Superior, Eagle, and ATP General Engineering to complete improvements throughout the
District, such as adjusting to grade manholes and valve caps as needed.
•Continued to update Standard Operating Procedures (SOP) as they relate to preventative
and corrective maintenance for each of the sections.
•Drafted a letter, in collaboration with Association of California Water Agencies (ACWA) and
other public agencies, in response to California Air Resources Board’s (CARB) proposed
regulation of the transition to Zero Emissions Vehicles (ZEV) and Near Zero Emissions
Vehicles (NZEV) for public fleets per the Governor’s Executive Order of Advance Clean Fleet
Regulation.
•Completed 36 emergency facility power testing and multiple Air Pollution Control District,
Hazardous Materials Business Plan, and HAZMAT inspections, with no violations noted.
•Completed pump vibration, pump efficiency, and thermo testing at District pump stations to
ensure system reliability.
145
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, and developer designed and constructed
facilities. The department also coordinates assigned activities with other District departments and
outside agencies and provides highly responsible and complex administrative and technical support
to the District, General Manager, and the Board of Directors.
Engineering Department – 29 Positions (1)
(1) See Position Count by Department on pages 112-113 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
146
FY 2021 FY 2022 FY 2022 FY 2023
Actual Budget Actual Budget $%
Engineering Chief (1)599,748$ 635,900$ 647,415$ 750,200$ 114,300$ 18.0%
Engineering Services (1), (2)929,086 1,136,500 1,088,656 1,309,100 172,600 15.2%
Public Services (1), (3)1,879,111 2,106,900 2,145,448 2,430,900 324,000 15.4%
Environmental Services (1)379,813 408,500 410,223 552,100 143,600 35.2%
Total Expenses 3,787,758 4,287,800 4,291,742 5,042,300 754,500 17.6%
FY 2021 FY 2022 FY 2022 FY 2023
Actual Budget Actual Budget $%
Labor and Benefits (1)2,988,736 3,256,700 3,310,264 3,919,900 663,200 20.4%
Travel and Conferences 1,009 19,400 12,284 19,500 100 0.5%
Memberships and Dues 2,377 3,700 5,900 3,000 (700) (18.9%)
General Office Expense 452 500 311 500 - 0.0%
Equipment 27,741 16,100 39,496 30,600 14,500 90.1%
Fees 81,421 68,600 73,142 73,000 4,400 6.4%
Services 680,179 906,200 845,801 973,200 67,000 7.4%
Training 5,782 16,600 7,494 22,600 6,000 36.1%
Materials & Maintenance 61 - - - - -
Total Expenses 3,787,758$ 4,287,800$ 4,294,692$ 5,042,300$ 754,500$ 17.6%
(1)Excludes CIP labor and benefits.
(2)Engineering Services includes Planning, Design, and Water Resources.
(3)Public Services includes Public, Construction and Survey Services.
Engineering
Budget to Budget
Variance
Budget to Budget
Variance
Department
Object
Budget vs. Actual, in thousands ($)
$-
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
2021 2022 2023
$3
,
8
2
7
$4
,
2
8
8
$5
,
0
4
2
$3
,
7
8
8
$4
,
2
9
5
Budget Actual
147
Departmental Operating Budget
Water Resources, Planning, Design, and Environmental Services
Services We Provide
The Water Resources, Planning, Design, and Environmental divisions provide a variety of services
directly related to potable water, recycled water, and sewer services. The Water Resources Division
identifies, negotiates, and develops additional potable and recycled water supplies. The Planning
Division develops the preliminary design of a project to facilitate final design and ultimately
construction of the facility. The Planning Division also coordinates the review of planning documents
related to potential new development. The Design Division prepares the design of facilities and
advertises projects for bid. The Environmental Division coordinates and tracks projects 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, the Water
Resources Division coordinates with other agencies on regional issues and is responsible for
obtaining grants, loans, and cost-sharing opportunities.
Accomplishments – Fiscal Year 2021-2022
•Achieved the objective by spending 102.7% of the Fiscal Year 2022 CIP budget with an eight-
year average of spending 98.8% of the fiscal year budgets from FY 2015 through FY 2022.
•Prepared the Annual Water Supply and Demand Assessment for the state.
•Applied for and received $78,594 in grant funds from SANDAG for threat reduction at the
Habitat Management Area.
•Approved a reimbursement agreement with the City of San Diego for the La Media/Airway
Road Pipeline Relocation project.
•Completed the designs for:
-Heritage Road Bridge Pipeline Project
-La Media/Airway Road Waterline Relocation
•Completed the designs and awarded construction contracts for:
-1200 Pressure Zone Improvements – Phase II Project
-458-1 Reservoir Interior/Exterior Coating and Upgrades Project
-Vista Grande/Vista Sierra Pipeline Replacement Project
-Paso de Luz/Telegraph Canyon Road Pipeline Replacement Project
-Recycled Water Pipeline Cathodic Protection Improvement Project
•Approved sub area master plans and amendments for:
-Village 7
-Sunbow II Phase 3
-Otay Crossings Commerce Park TM 5405
-Otay Business Park TM 5505R
-Hawano Industrial Development TM 5566R
-Otay Ranch Village 3 North
148
Departmental Operating Budget
Water Resources, Planning, Design, and Environmental Services (continued)
Accomplishments – Fiscal Year 2021-2022 (continued)
•Prepared reports and studies for:
-Asset Management Pipeline Prioritized Rehabilitation and Replacement
Methodology Assessment of all District potable water pipelines
-Asset Management Pump Station Prioritized Rehabilitation and Replacement
Methodology Assessment Pilot Project
-Feasibility of lowering the pressure for 323 customers by 20 pounds per square inch
(PSI) and operations implemented the change-out in the field
•Received six offers, negotiated a purchase and sale agreement, and opened escrow for the
sale of the Salt Creek property for $33.4 million.
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,
checking permit status, tracking meter sales, meter costs, and lateral costs. Staff administers all plan-
checking submittals for potable and recycled water, and sewer applications for approval, cellular
lease agreements, fire service, 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, construction staff provides construction
management for the projects.
Accomplishments – Fiscal Year 2021-2022
•Sold 218 meters, which totaled $9.44 million and equated to 781.5 Equivalent Dwelling Units.
•Completed 5,735 USA Mark-Out tickets with an accuracy rate of 100%.
•Supported $39 million of incoming assets from developer projects.
•Amended leases to generate Fiscal Year 2021 revenue in excess of $1.69 million from the
District’s 31 cell-site leases.
•Completed and closed out 27 developer recycled projects.
•Worked with GIS to implement the easement encroachment collection application.
•Completed the construction of:
-1200 Pressure Zone Improvements – Phase II (P2653) - Replacement of existing
pump station discharge header, pressure relief, suction manifold, and yard piping
improvements, and all other work and appurtenances.
149
Departmental Operating Budget
Public Services and Field Services (continued)
Accomplishments – Fiscal Year 2021-2022 (continued)
-1090-1 Pump Station Renovation (P2174) – Renovation of the existing potable
water pump station, including demolition work, installation of three centrifugal
pumps, piping, fittings, valves, controls, electrical, architectural improvements,
concrete work, pavement restoration, fencing, and all other work and
appurtenances.
-850-1 and 1200-1 Reservoirs Interior and Exterior Coatings and Upgrades – (P2533
& P2543) – Removal and replacement of the interior and exterior coatings on the
850-1 and 1200-1 potable water welded steel tanks in addition to structural
modifications, including, but not limited to, interior roof rafter replacement, liquid
level indicator replacement, cathodic anode replacement, new tank penetrations,
new fall protection devices, and roof vent replacement.
-Melrose Avenue and Oleander Ave 458/340 PRSs Replacement & 980 Reservoir
Altitude Valve Vaults Renovation (P2605, P2627 & P2671) – Replacement of two
existing potable water pressure reducing stations, including construction of
approximately 155 linear feet of 12-inch water line, connections and
abandonments of existing water lines, pavement and surface restoration, and the
renovation of two potable water altitude valve vaults, including replacement of
precast concrete vault tops, altitude valves, butterfly valves, steel water lines from
4-inch to 30-inch inside diameter, pavement and surface restoration, cathodic
protection, and all other associated work and appurtenances.
-458-1 Reservoir Interior and Exterior Coatings and Upgrades (P2693) – Removal
and replacement of the interior and exterior coatings on the 458-1 potable water
welded steel tank and structural modifications, including, but not limited to, interior
roof rafter replacement, liquid level indicator replacement, cathodic anode
replacement, new tank penetrations, new fall protection devices, and roof vent
replacement.
150
FY 2021 FY 2022 FY 2022 FY 2023
Actual Budget Actual Budget $%
General Expense (1), (2)2,049,612$ 2,289,700$ 1,169,499$ 1,503,300$ (786,400)$ (34.3%)
Legal 638,607 657,000 603,241 455,000 (202,000) (30.7%)
Total Expenses 2,688,219 2,946,700 1,772,740 1,958,300 (988,400) (33.5%)
FY 2021 FY 2022 FY 2022 FY 2023
Actual Budget Actual Budget $%
Labor and Benefits (1), (2)880,729 874,800 54,482 (51,200) (926,000) (105.9%)
Insurance expenses 1,168,883 1,414,900 1,115,017 1,554,500 139,600 9.9%
Legal expenses 638,607 657,000 603,241 455,000 (202,000) (30.7%)
Total Expenses 2,688,219$ 2,946,700$ 1,772,740$ 1,958,300$ (988,400)$ (33.5%)
FY 2021 Actual FY 2022 Budget FY 2022 Actual FY 2023 Budget
OPEB $ 869,972 $ 901,400 $ - $ -
Cost of Living Adjustment & Benefits 220,457 188,000 269,082 177,600
Vacancy Adjustment (209,700) (214,600) (214,600) (228,800)
Total $ 880,729 $ 874,800 $ 54,482 $ (51,200)
General Expense
Department
Object
Budget to Budget
Variance
Budget to Budget
Variance
The expenditures in this section are general operating costs not associated with an individual department. The expenditures
include: legal costs, insurance premiums and changes in accrued employee leave balances. These expenditures represent
5.4% of the total Department Budget.
(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 Factors for FY 2022 and FY 2023 are $214,600 and $228,800, 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)The District's OPEB plan is fully funded, therefore no additional contributions were made and budgeted by the District in FY 2022 and
FY 2023, respectively.
151
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152
CAPITAL BUDGET
The District provides water service to a population of nearly 228,000, which is expected to ultimately
increase to 272,350 by the year 2045. 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 approximately $269 million in capital assets
through ultimate build-out. The Fiscal Year 2023 Capital Budget is $12.6 million and the six-year
Capital Improvement Program (CIP) totals $108.4 million. The CIP is consistent with the District's
Water Facilities Master Plan, Sewer System Master Plan, current capacity tees, and the District's
strategic financial objectives. This CIP Budget document contains the descriptions, justifications,
expenditures, and funding tor 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 tour cost types and corresponding fund
categories: Expansion, Betterment, Replacement, and/or New Water Supply. The allocation to these
tour cost types is defined in the District's Capital Improvement Program (CIP) and is determined by
an engineering analysis that identities 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. Alternative funding sources are not
included as a funding source until they have been secured. Any secured alternative funding sources
will be noted in the project schedule. The following are general descriptions of the tour fund
categories:
EXPANSION
Facilities required to support new or future users are funded from capacity tees or user rates.
BETTERMENT
Facilities required because of inadequate capacity or new requirements that benefit existing users
are funded from availability, betterment tees, or rates.
REPLACEMENT
Facilities required to renew or replace existing facilities that have deteriorated or have exceeded their
useful lite are funded from user rates.
NEW WATER SUPPLY
Facilities required to support new sources of water are funded from new supply tees or user rates.
As of November 4, 2020, the collection of the new water supply tee was discontinued. The new water
supply fund will remain until the funds collected from the new water supply tees have been fully
depleted.
153
Capital Budget
Assumptions and Criteria
As a component of the annual budget development process, the Engineering staff update the CIP
budget using the following process:
•CIP projects are selected based on the Water Facilities Master Plan (WFMP), the Urban
Water Management Plan (UWMP), Sub Area Master Plans (SAMP), Integrated Water
Resources Plan (IRP), Wastewater Management Plan (WWMP), the Cathodic Protection
Plan, the District’s Strategic Plan, and other focused or specific planning documents and
reports to manage growth, maintenance, and the life extension of assets.
•The CIP goes through an iterative process to meet the criteria of growth, service levels,
supply targets, and system reliability.
•CIP target expenditures for the next six (6) years are refined and used in the rate model.
The following general criteria are used to determine the reasonableness of a project before it is
considered for inclusion within the CIP budget:
•Safety and existing facility conditions
•Operating system conditions and energy improvements
•Water and sewer system deficiencies
•Regulatory and permitting requirements
•Developer driven requirements
•Economic outlook
•Growth projections
•Water supply diversification goals
•Board and management directives
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.
New CIP projects and projects with material changes are subject to a formal approval process,
whereby the projects are reviewed and approved by each department and a senior management
panel. At each level of review, projects may be dropped or returned for more information. Once a
project has been approved by the department and senior management panel, the project is
forwarded to the General Manager (GM) for approval. Once approved by the GM, projects are added
to the CIP budget.
The Engineering Department evaluates the District’s recent construction and bidding data and
adjusts costs for individual CIP projects as appropriate. Projects are reprioritized based on the
District’s planning documents and to control spending to stabilize water and sewer rates.
154
Capital Budget
Other factors that influence the construction climate are:
•Shortage of skilled and unskilled labor
•Regional competition for contracting resources
•Materials cost escalation due to demand and material shortages
To mitigate the factors that influence the construction climate, Engineering staff utilize value
engineering, which involves reviewing new and existing projects during the design phase to reduce
costs and while maintaining the quality, value, and/or functionality of the capital project. Staff also
identifies projects that can be grouped together to attract bidders, utilizes pre-purchasing of
materials, and adds no-cost time extensions into specs as further mitigation strategies.
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 $20,000 for infrastructure related items (as defined under
capital equipment on page 250 of the Glossary) and have a useful life of at least two years and the
cost is based on current costs.
CIP Projects
155
FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 Total
Beginning Balance 60,226$ 69,509$ 42,847$ 44,356$ 38,849$ 42,042$ 60,226$
Sources
Capacity Fees 9,963 6,925 7,523 7,815 9,368 10,667 52,261
Debt financing - - 1,460 - 1,150 - 2,610
Interest 1,125 1,417 979 1,129 1,097 1,230 6,977
Temporary Meters 1,228 11 11 11 11 11 1,283
Availability (Betterment Portion)711 748 788 826 866 908 4,847
COPS 2010B Reimbursement 783 783 783 759 731 698 4,537
Transfer from (to) General Fund 19,856 (2,666) 25,298 13,072 17,130 18,981 91,671
Interfund Transfers 73 94 115 115 115 115 627
Total Sources 33,739 7,312 36,957 23,727 30,468 32,610 164,813
Uses
CIP Projects 12,579 21,974 24,268 17,981 15,978 15,583 108,363
Debt Service 9,566 9,677 8,834 8,884 8,904 8,017 53,882
Developer Services 2,311 2,323 2,346 2,369 2,393 2,417 14,159
Total Uses 24,456 33,974 35,448 29,234 27,275 26,017 176,404
Net Sources (Uses)9,283 (26,662) 1,509 (5,507) 3,193 6,593 (11,591)
Ending Balance 69,509$ 42,847$ 44,356$ 38,849$ 42,042$ 48,635$ 48,635$
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
$70
FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028
CIP Reserve Fund Balances ($1,000)
Betterment Replacement Expansion New Supply
156
FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 Total
Source
Expansion 298$ 674$ 1,582$ 1,836$ 1,715$ 1,451$ 7,556$
Betterment 2,286 4,720 3,877 2,544 2,091 2,029 17,547
Replacement 9,995 16,577 18,808 13,600 12,173 12,105 83,258
Total 12,579$ 21,971$ 24,267$ 17,980$ 15,979$ 15,585$ 108,361$
FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 Total
Fund
Potable 9,740$ 16,071$ 18,212$ 14,437$ 13,201$ 11,429$ 83,090$
Recycled 2,000 4,554 4,589 1,077 832 2,396 15,448
Sewer 839 1,346 1,466 2,466 1,946 1,760 9,823
Total 12,579$ 21,971$ 24,267$ 17,980$ 15,979$ 15,585$ 108,361$
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
$25
FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028
Six-Year CIP Projects by Funding Source, in Thousands ($)
Expansion Betterment Replacement
$-
$5
$10
$15
$20
$25
FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028
Six-Year CIP Projects by Fund, in Thousands ($)
Potable Recycled Sewer
157
Expansion
CIP No.CIP Project Title FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 Total
P2040 (1)Res - 1655-1 Reservoir 0.5 MG 85$ 248$ 481$ 295$ 248$ 116$ 1,473$
P2058 PL - 20-Inch, 1296 Zone, Proctor Valley Road from Melody Road to
Highway 94
33 59 330 330 59 10 822
P2171 PL - 20-Inch, 1296 Zone, Proctor Valley Road from Pioneer Way to
Melody Road
53 66 330 644 528 26 1,647
P2195 (3)PL - 24 - Inch, 640 Zone, Campo Road - Regulatory Site/Millar Ranch 15 15 15 75 375 563 1,058
P2196 (3)PL - 24 - Inch, 640 Zone, Millar Ranch Road to 832-1 Pump Station 15 15 15 75 188 413 720
P2451 (3)Otay Mesa Desalination Conveyance and Disinfection System 2 2 2 31 36
P2595 PL - 16-inch, 624 Zone, Village 3N - Heritage Road, Main St/Energy Way 1 1 145 1 1 1 150
P2619 (1)PS - Temporary Lower Otay Pump Station Redundancy 4 - - - - - 4
P2642 Rancho Jamul Pump Station Replacement 16 116 155 155 155 155 752
R2084 (1)RecPL - 20-Inch, 680 Zone, Village 2 - Heritage/La Media 1 1 1 1 1 90 95
S2069 Cottonwood Sewer Pump Station Renovation 63 125 75 225 125 12 625
S2071 (3)San Diego Metro Wastewater Capital Improvements 12 27 34 34 34 34 175
Total Expansion 298$ 674$ 1,582$ 1,836$ 1,715$ 1,451$ 7,556$
Note: Numbers may not total accurately due to rounding.
Potable 222$ 521$ 1,472$ 1,576$ 1,555$ 1,315$ 6,661$
Recycled 1 1 1 1 1 90 95
Sewer 75 152 109 259 159 46 799
Total Expansion 298$ 674$ 1,582$ 1,836$ 1,715$ 1,451$ 7,556$
Betterment
CIP No.CIP Project Title FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 Total
P2040 (1)Res - 1655-1 Reservoir 0.5 MG 190 552 1,070 656 552 258 3,278
P2058 PL - 20-Inch, 1296 Zone, Proctor Valley Road from Melody Road to
Highway 94
17 30 170 170 31 5 423
P2171 PL - 20-Inch, 1296 Zone, Proctor Valley Road from Pioneer Way to
Melody Road
27 34 170 331 272 14 848
P2451 (3)Otay Mesa Desalination Conveyance and Disinfection System - 1 4 4 3 69 81
P2521 Large Meter Vault Upgrade Program 25 30 30 30 30 20 165
P2563 Res - 870-1 Reservoir Cover/Liner Replacement and Supporting Projects 175 2,450 1,190 - - - 3,815
P2578 (1), (3)PS - 711-2 (PS 711-1 Replacement and Expansion) - 14,000 GPM 16 93 124 124 124 124 605
P2619 (1)PS - Temporary Lower Otay Pump Station Redundancy 10 - - - - - 10
P2626 803-4 Reservoir Water Quality Improvements – PAX System Purchase 10 10 - - - - 20
P2630 624-3 Reservoir Automation of Chemical Feed System 300 125 100 90 44 - 659
P2642 Rancho Jamul Pump Station Replacement 34 259 345 345 345 345 1,673
P2652 520 to 640 Pressure Zone Conversion 30 15 10 10 10 100 175
P2653 1200 Pressure Zone Improvements 100 50 25 - - - 175
P2654 Heritage Road Interconnection Improvements 10 30 30 30 30 30 160
P2656 Regulatory Site Desilting Basin Improvements 5 10 50 25 25 25 140
P2658 832-1 Pump Station Modifications 5 10 25 50 100 400 590
P2664 Otay Mesa Dual Piping Modification Program 50 50 50 50 60 50 310
P2669 Fuel Tank Safety and Integrity 45 35 - - - - 80
P2674 (1), (3)System Pressure Reducing Program 10 10 10 10 10 10 60
P2682 AMI Project 200 70 - - - - 270
P2683 Pump Station Safety, Monitoring, and Automation Improvements 50 50 100 100 100 100 500
P2684 Zero Emission Vehicles and Charging Infrastructure 75 88 162 162 163 350 1,000
R2117 RWCWRF Disinfection System Improvements 800 500 50 50 - - 1,400
R2157 RWCWRF Backwash Supply Pumps Upgrade 13 38 17 3 - - 71
S2024 (2)Campo Road Sewer Main Replacement 3 2 3 12 - - 20
S2043 (3)RWCWRF Sludge Handling System 1 1 1 1 1 50 55
S2069 Cottonwood Sewer Pump Station Renovation 62 125 75 225 125 13 625
S2071 (3)San Diego Metro Wastewater Capital Improvements 24 53 66 66 66 66 341
Total Betterment 2,286$ 4,720$ 3,877$ 2,544$ 2,091$ 2,029$ 17,547$
Note: Numbers may not total accurately due to rounding.
Potable 1,383$ 4,001$ 3,665$ 2,187$ 1,899$ 1,900$ 15,035$
Recycled 813 538 67 53 - - 1,471
Sewer 90 181 145 304 192 129 1,041
Total Betterment 2,286$ 4,720$ 3,877$ 2,544$ 2,091$ 2,029$ 17,547$
Six-Year CIP Projects by Source and Fund ($1,000s)
(1) Partially funded by 2018A Water Revenue Bonds.
(2) Project may be funded with Sewer Debt proceeds.
(3) Project expenditures go beyond FY 2028. See project detail sheet for more information.
158
- -
Replacement
CIP No.CIP Project Title FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 Total
P2083 (1)PS - 870-2 Pump Station Replacement 10$ -$ -$ -$ -$ -$ 10$
P2174 (1)PS - 1090-1 Pump Station Upgrade 10 - - - - - 10
P2195 (3)PL - 24 - Inch, 640 Zone, Campo Road - Regulatory Site/Millar Ranch 5 5 5 25 125 187 352
P2196 (3)PL - 24 - Inch, 640 Zone, Millar Ranch Road to 832-1 Pump Station 5 5 5 25 63 137 240
P2282 (3)Vehicle Capital Purchases 795 230 200 200 200 200 1,825
P2286 (3)Field Equipment Capital Purchases 168 125 125 125 125 125 793
P2405 (1)PL - 624/340 PRS, Paseo Ranchero and Otay Valley Road 125 500 350 140 180 195 1,490
P2453 (1)SR-11 Utility Relocations 5 5 150 150 150 200 660
P2460 I.D. 7 Trestle and Pipeline Demolition 100 350 105 20 - - 575
P2485 SCADA - Infrastructure and Communications Replacement 35 35 55 - - - 125
P2516 (1)PL - 12-Inch, 640 Zone, Jamacha Road - Darby/Osage 5 5 75 125 400 390 1,000
P2533 1200-1 Reservoir Interior & Exterior Coating 5 50 5 5 5 55 125
P2539 South Bay Bus Rapid Transit (BRT) Utility Relocations 15 35 - - - - 50
P2543 850-1 Reservoir Interior/Exterior Coating 5 45 5 5 5 40 105
P2546 980-2 Reservoir Interior/Exterior Coating 10 5 - - - - 15
P2553 (1)Heritage Road Bridge Replacement and Utility Relocation 50 425 1,350 1,500 1,225 200 4,750
P2562 Res - 571-1 Reservoir Cover/Liner Replacement 10 - - - - - 10
P2563 Res - 870-1 Reservoir Cover/Liner Replacement and Supporting Projects 75 1,050 510 - - - 1,635
P2565 803-2 Reservoir Interior/Exterior Coating & Upgrades 10 40 5 - - - 55
P2567 1004-2 Reservoir Interior/Exterior Coating & Upgrades 690 500 5 45 5 - 1,245
P2571 Data Center Network Data Storage and Infrastructure Enhancements 55 50 50 - - - 155
P2572 (3)Enterprise Resource Planning (ERP) Replacement 75 10 10 10 10 50 165
P2578 (1), (3)PS - 711-2 (PS 711-1 Replacement and Expansion) - 14,000 GPM 35 207 276 276 276 276 1,346
P2584 (3)Res - 657-1 and 657-2 Reservoir Demolitions - - - - 25 25 50
P2593 458-1 Reservoir Interior/Exterior Coating & Upgrades 50 50 45 5 - - 150
P2594 Large Meter Replacement 20 50 25 40 50 50 235
P2605 (1)458/340 PRS Replacement, 1571 Melrose Ave 80 20 - - - - 100
P2608 (1)PL - 8-inch, 850 Zone, Coronado Avenue, Chestnut/Apple 100 300 400 574 60 - 1,434
P2609 (1)PL - 8-inch, 1004 Zone, Eucalyptus Street, Coronado/Date/La Mesa 75 300 460 100 35 - 970
P2610 Valve Replacement Program - Phase 1 400 400 400 50 - - 1,250
P2611 (1), (3)Quarry Road Bridge Replacement and Utility Relocation 10 10 10 10 10 200 250
P2612 (1)PL - 12-inch, 711 Zone, Paso de Luz/Telegraph Canyon Road 500 325 90 10 - - 925
P2614 485-1 Reservoir Interior/Exterior Coating 650 675 5 40 5 - 1,375
P2615 (1), (3)PL - 12-Inch Pipeline Replacement, 803 PZ, Vista Grande 50 260 300 500 1,000 400 2,510
P2616 (1), (3)PL - 12-Inch Pipeline Replacement, 978 Zone, Pence Drive/Vista Sierra
Drive
1,000 400 200 150 150 600 2,500
P2617 Lobby Security Enhancements 1 1 3 20 20 - 45
Six-Year CIP Projects by Source and Fund ($1,000s)
(1) Partially funded by 2018A Water Revenue Bonds.
(2) Project may be funded with Sewer Debt proceeds.
(3) Project expenditures go beyond FY 2028. See project detail sheet for more information.
159
Replacement, Continued
CIP No.CIP Project Title FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 Total
P2623 Central Area to Otay Mesa Interconnection Pipelines Combination
Air/Vacuum Valve Replacements
10$ 150$ 150$ 70$ -$ -$ 380$
P2627 (1)458/340 PRS Replacement, 1505 Oleander Avenue 80 20 - - - - 100
P2631 1485-2 Reservoir Interior/Exterior Coating & Upgrades 5 40 750 400 5 50 1,250
P2638 Buildings and Grounds Refurbishments 173 50 50 50 25 - 348
P2639 Vista Diego Hydropneumatic Pump Station Replacement 175 1,500 1,500 225 - - 3,400
P2646 North District Area Cathodic Protection Improvements 50 300 450 400 - - 1,200
P2647 Central Area Cathodic Protection Improvements 3 30 165 600 600 600 1,998
P2649 HVAC Equipment Purchase 64 43 39 46 22 - 214
P2655 La Presa Pipeline Improvements 50 500 575 200 100 48 1,473
P2657 1485-1 Reservoir Interior/Exterior Coating & Upgrades - 5 25 650 270 - 950
P2659 District Boardroom Improvements 25 50 35 - - - 110
P2661 (3)Replacement of Backflow Prevention Devices on Pipeline
Interconnections on Otay Mesa
75 75 65 50 50 50 365
P2662 (3)Potable Water Meter Change Out 20 30 1,900 2,000 2,000 2,000 7,950
P2663 (3)Potable Water Pressure Vessel Program 30 400 400 400 400 400 2,030
P2665 (3)PL - 12-inch Pipeline Replacement, 870 Zone, Cactus Road - 25 25 25 25 25 125
P2666 (3)Low Head and High Head Pump Stations Demolition - 25 25 50 50 50 200
P2667 Small Meter Testing Bench 50 - - - - - 50
P2670 Administration and Operations Roof Repairs and Replacement 5 20 100 1 49 175 350
P2671 980 Reservoirs Altitude Valve Vaults Renovation 25 25 25 - - - 75
P2672 District Roof Repairs and Replacement Program 5 35 100 100 100 - 340
P2673 (3)803-4 Reservoir Interior/Exterior Coating - - 5 30 1,100 450 1,585
P2675 458-1 and 458-2 Reservoirs Site Pavement Refurbishment 250 150 40 10 - - 450
P2676 980-2 PS Miscellaneous Replacements 100 100 100 75 - - 375
P2677 PL - 16-Inch, 870 Zone, La Media Road and Airway Road Utility
Relocations
1,300 400 55 20 - - 1,775
P2678 Jamacha Boulevard Utility Relocation 25 100 100 25 - - 250
P2679 520-3 Reservoir Recirculation Static Mixer Replacement Project 30 20 10 - - - 60
P2680 PL - 12-inch Pipeline Replacement, 1530 Zone, Vista Diego Road 25 150 150 50 - - 375
P2681 PL-12-Inch, 1655 Zone, Presilla Drive Pipeline Replacement 110 550 490 370 55 - 1,575
P2684 Zero Emission Vehicles and Charging Infrastructure 75 88 162 162 163 350 1,000
P2685 (3)980/711 PRS Renovation - Proctor Valley Rd 10 20 50 70 100 400 650
P2686 (3)870 PZ Seismic Vault Renovation 5 10 30 35 100 150 330
P2687 Steele Canyon Rd Bridge 803 PZ 20-inch WL Renovation 100 100 90 150 150 10 600
P2688 (3)Standby Power Renovations - Potable Water 15 50 150 200 200 100 715
P2689 944-1-9 Pump Station Meter Vault Renovation 10 20 40 60 60 10 200
P2690 (3)850-4 Reservoir Interior/Exterior Coating - - - - - 15 15
R2120 (1)RWCWRF Filtered Water Storage Tank Improvements 15 50 10 - - - 75
R2121 Res - 944-1 Reservoir Cover/Liner Replacement 30 50 2,000 295 - - 2,375
R2144 RWCWRF Roofing Replacement and Natural Light Enhancement (R)5 - - - - - 5
R2146 Recycled Pipeline Cathodic Protection Improvements 500 500 10 - - - 1,010
R2148 Large Meter Replacement - Recycled 8 8 7 10 10 10 53
R2152 (3)Recycled Water Meter Change-Out 10 10 50 60 90 50 270
R2153 (3)Recycled Water Pressure Vessel Program 1 30 1 1 1 36 70
R2156 (3)RecPL - 14-inch RWCWRF Effluent Force Main Improvements 10 10 80 150 150 150 550
R2157 RWCWRF Backwash Supply Pumps Upgrade 37 112 53 8 - - 210
R2158 RWCWRF Stormwater Pond Improvements (R)5 25 40 40 55 10 175
R2159 RecPL - 16-Inch, 680 Zone, Olympic Parkway Recycled Pipeline
Replacement
400 3,000 2,000 200 50 50 5,700
R2160 (3)Recycled Water Field Equipment Capital Purchases 100 100 100 100 100 100 600
R2161 (3)450-1R Reservoir Interior/Exterior Coating & Upgrades - - - - 15 1,550 1,565
R2162 (3)Vehicle Capital Purchases - Recycled 25 10 20 20 50 50 175
R2163 450-1 RW Res Disinfection Injection Vault Renovation 20 80 100 90 10 - 300
R2164 (3)450-1 RW Res Stormwater Improvements 20 30 50 50 300 300 750
S2012 (3)San Diego County Sanitation District Outfall and RSD Outfall
Replacement
200 200 200 200 200 200 1,200
Six-Year CIP Projects by Source and Fund ($1,000s)
(1) Partially funded by 2018A Water Revenue Bonds.
(2) Project may be funded with Sewer Debt proceeds.
(3) Project expenditures go beyond FY 2028. See project detail sheet for more information.
160
Replacement, Continued
CIP No.CIP Project Title FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 Total
S2024 (2)Campo Road Sewer Main Replacement 3$ 3$ 2$ 12$ -$ -$ 20$
S2049 Calavo Basin Sewer Rehabilitation - Phase 2 50 100 250 450 200 30 1,080
S2050 (3)Rancho San Diego Basin Sewer Rehabilitation - Phase 2 10 20 40 80 100 400 650
S2054 (3)Calavo Basin Sewer Rehabilitation - Phase 3 - - 10 10 50 100 170
S2060 (3)Steele Canyon Pump Station Replacement - 10 40 50 200 500 800
S2061 RWCWRF Aeration Controls Consolidation & Optimization Upgrades (S)30 30 30 100 - - 190
S2066 (3)Rancho San Diego Basin Sewer Rehabilitation - Phase 3 - -5 5 5 50 65
S2067 RWCWRF Roofing Replacement and Natural Light Enhancement (S)5 - - - - - 5
S2069 Cottonwood Sewer Pump Station Renovation 125 250 150 450 250 25 1,250
S2072 (3)RWCWRF Rotary Screen Replacement 40 100 10 100 200 100 550
S2074 RWCWRF Stormwater Pond Improvements (S)5 25 40 40 55 10 175
S2075 (3)Field Equipment Capital Purchases 42 25 100 100 100 100 467
S2076 RWCWRF Grit Chamber Improvements 30 50 120 40 10 - 250
S2077 RWCWRF Blowers Renovation 30 120 120 120 10 - 400
S2078 (3)Vehicle Capital Purchases - Sewer - 20 20 20 50 50 160
S2079 Steele Canyon Rd Bridge 6-inch Sewer FM Renovation 100 50 50 50 90 10 350
S2080 Standby Power Renovations - Sewer 5 10 25 75 75 10 200
Total Replacement 9,995$ 16,577$ 18,808$ 13,600$ 12,173$ 12,105$ 83,258$
Note: Numbers may not total accurately due to rounding.
Potable 8,134$ 11,549$ 13,076$ 10,674$ 9,747$ 8,214$ 61,394$
Recycled 1,187 4,016 4,521 1,024 831 2,306 13,885
Sewer 674 1,012 1,211 1,902 1,595 1,585 7,979
Total Replacement 9,995$ 16,577$ 18,808$ 13,600$ 12,173$ 12,105$ 83,258$
Summary by Source
FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 Total
Expansion 298$ 674$ 1,582$ 1,836$ 1,715$ 1,451$ 7,556$
Betterment 2,286 4,720 3,877 2,544 2,091 2,029 17,547
Replacement 9,995 16,577 18,808 13,600 12,173 12,105 83,258
Total CIP by Funding Source 12,579$ 21,971$ 24,267$ 17,980$ 15,979$ 15,585$ 108,361$
Summary by Fund
FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 Total
Potable 9,740$ 16,071$ 18,212$ 14,437$ 13,201$ 11,429$ 83,090$
Recycled 2,000 4,554 4,589 1,077 832 2,396 15,448$
Sewer 839 1,346 1,466 2,466 1,946 1,760 9,823$
Total CIP by Fund 12,579$ 21,971$ 24,267$ 17,980$ 15,979$ 15,585$ 108,361$
Funding Source
Fund
Six-Year CIP Projects by Source and Fund ($1,000s)
(1) Partially funded by 2018A Water Revenue Bonds.
(2) Project may be funded with Sewer Debt proceeds.
(3) Project expenditures go beyond FY 2028. See project detail sheet for more information.
161
CIP#Description Cost
Category (2)
Funding
Source (3)
FY
2023
FY
2024
FY
2025
FY
2026
FY
2027
FY
2028 Total
P2083 PS - 870-2 Pump Station Replacement M R 5,000$ 5,000$ 5,000$ 5,000$ 5,000$ -$ 25,000$
P2626 803-4 Reservoir Water Quality Improvements – PAX System PurchaseM/E B 1,700 1,700 - - - - 3,400
P2654 Heritage Road Interconnection Improvements M B 1,500 1,500 - - - - 3,000
R2084 RecPL - 20-Inch, 680 Zone, Village 2 - Heritage/La Media M E 1,900 1,900 - - - - 3,800
$ 10,100 $ 10,100 $ 5,000 $ 5,000 $ 5,000 $ -$ 35,200
FY
2023
FY
2024
FY
2025
FY
2026
FY
2027
FY
2028 Total
$ 9,900 $ 9,900 $ 5,000 $ 5,000 $ 5,000 $ -$ 34,800
200 200 - - - - 400
- - - - -- -
$ 10,100 $ 10,100 $ 5,000 $ 5,000 $ 5,000 $ -$ 35,200
(1)
(2)
(3)
Note: See pages 158-161 for complete description of CIP projects.
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.
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
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
162
Quantity Potable Recycled Sewer Total
Vehicles
1 Class 5 valve exercising truck 200,000$ -$ -$ 200,000$
1 Class 8 5-7 yard dump truck 200,000 - - 200,000
1 Class 8, 10-12 yard dump truck 200,000 - - 200,000
2 Electric or hybrid van 120,000 - - 120,000
1 1/2 ton pick up 50,000 - - 50,000
2 Compact pick-up 25,000 25,000 - 50,000
Total Vehicles - P2282/R2162 795,000 25,000 - 820,000
Field Equipment
1 Compact excavator 112,500 - - 112,500
1 Pump and motor replacements - 100,000 - 100,000
1 Spill prevention sewer monitor system - - 22,000 22,000
1 Equipment trailer 20,000 - - 20,000
1 Jet scan rodder camera - - 20,000 20,000
1 Shoring trailer 20,000 - - 20,000
1 Emergency standby genset 15,500 - - 15,500
Total Field Equipment - P2286/R2160/S2075 168,000 100,000 42,000 310,000
Total 963,000$ 125,000$ 42,000$ 1,130,000$
Summary by Project
P2282 Vehicle Capital Purchases 795,000$
P2286 Field Equipment Capital Purchases 168,000
R2160 Field Equipment Capital Purchases 100,000
R2162 Vehicle Capital Purchases 25,000
S2075 Field Equipment Capital Purchases 42,000
Total 1,130,000$
FY 2023 Capital Purchases
Capital purchases are non-recurring operating expense items for District-wide use that cost more than $10,000 each
and have an estimated useful life of two years or more. The capital purchase projects include vehicles, office
equipment and furniture, field equipment and air pollution control district engine replacements, and retrofits.
Description
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Summary of Financial Policies
Introduction
This section includes a brief synopsis of the District’s Reserve Policy, Investment Policy, and Debt
Policy.
The Reserve Policy is a comprehensive policy which explains how the District is operated,
including the distinction of business segments to ensure the various users pay their fair share of
costs. It explains how fees are collected and what they are used for. It also explains the difference
between funds, as well as how transfers shall be made, and defines each reserve target funding
level. This policy was adopted by the Board in February 1993. The District periodically reviews the
policy to ensure it reflects current policies and financial practices. The Reserve Policy was updated
and adopted by the Board in November 2020.
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
165
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 2021.
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 March 2021.
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Number
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Date
Revised
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1.0 The District
The Otay Water District is a California municipal water district,
authorized in 1956 by the State Legislature under the provisions
of the Municipal Water District Act of 1911. The District is a
"revenue neutral" public agency; meaning each end user pays their
fair share of the District's costs of water acquisition,
construction of infrastructure, and the operation and maintenance
of the public water facilities.
The District provides water service within its boundaries, and
provides sewer and recycled water service within certain portions
of the District. As such, the District operates three distinct
business segments:
•Potable water
•Recycled water
•Sewer
Each of these business segments has an identifiable customer base.
In addition, the developer community, large and small, makes up a
significant class of customer for each business segment. As a
result, the District has four distinct customer service types:
•Developers
•Potable water users
•Recycled water users
•Sewer users
The District has established practices and developed computer
systems that have enabled the District to maintain a clear
separation between the service costs relating to each of its four
customer service types. Regardless of customer class, financial
principles regarding cost allocation and fund accounting are
fundamental to the District’s Reserve Policy. These principles
are derived from the statements of the Governmental Accounting
Standards Board (GASB), and from oversight and advisory bodies
such as the California State Auditor, the Little Hoover
Commission, and the Government Finance Officers Association
(GFOA). These have significant impacts on how the finances of
the District are organized and how financial processes work within
the organization.
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1.1 The District’s Use of Financial Resources
All of the District’s expenditures fall into two broad categories:
operating costs and capital expenditures. The operating costs
include costs relating to the purchase and delivery of potable and
recycled water, and the transportation and treatment of sewage.
The capital expenditures support the construction of
infrastructure necessary to deliver services. The District uses
various funds to support the operating and capital efforts.
Operations and maintenance is financed only by rates and charges,
also called pay-as-you-go, while capital infrastructure is
financed using two financing methods: pay-as-you-go and debt
issuance (requiring annual debt service). The Capital Improvement
Program (CIP) and the two funding methods support the
construction, betterment, and replacement of infrastructure in all
three business areas: potable, recycled, and sewer.
The District establishes different funds to track revenues
allocated to different activities. Once established, each fund
receives financial resources up to the levels defined in this
policy. Every year, as a part of the annual budget process, the
District’s rate model is updated for each fund with the current
fund balances and the estimated revenues and expenditures for the
next six years. The expenditure requirements and financial
resources are then evaluated to ensure that the existing fund
balances and additional revenues are sufficient within the current
budget cycle and for the next five years to maintain target fund
levels. If a deficit is identified, then options for transfers,
shifting CIP projects, debt, cost saving measures, and/or rate
increases are evaluated.
1.2 The District’s Capital Improvement Program (CIP)
The planning, design, and construction costs of all capital
facilities within the three business segments are allocated to
four cost types and corresponding fund categories: New Water
Supply, Expansion, Replacement, and/or Betterment. The allocation
to these four cost types is defined in the District’s Capital
Improvement Program (CIP) and is determined by an engineering
analysis that identifies which type of customer will benefit from
each facility, planned or existing. The costs of the capital
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improvements are borne by either existing users or by the
developing areas, or by a combination of the two, as applicable.
This Reserve Policy protects both the existing users and the
developing areas from incurring unwarranted costs. Developing
areas are not required to finance facilities that are replacement
or betterment and established areas are not required to replace
facilities before they are worn out because of new development.
However, to ensure a fair allocation of costs, each facility has
the potential to be classified into any or all of the four cost
types. In addition to these cost types there are occasional CIPs
that may be billable to a third party, if for example a third
party requires a District facility be relocated. Paragraphs a
through d below, describe how the costs of capital facilities are
financed through various fees.
a.New Water Supply
The portion of a new supply project that benefits new users
is financed from the reserves in the New Water Supply Fund
category. These reserves are primarily derived from proceeds
of the new water supply fee. The New Water Supply Fund is
restricted, meaning the amounts credited to this fund are
accounted for separately and are used solely for the
planning, design, and construction of the new water supply
expansion facilities. Debt financing may also be a temporary
financial resource to finance new water supply projects. The
District has a Debt Policy (Policy No. 45) that guides the
debt issuance process. Any debt proceeds used for this
purpose would be restricted in nature and tracked separately.
General use reserves may also be placed in the Designated New
Water Supply Fund and used for water supply projects.
Effective December 1, 2020, the new water supply fee
collection was discontinued. The New Water Supply Fund will
continue to be used to fund qualified projects and to pay the
proportionate share of debt service of new water supply
projects until the monies in the fund are fully depleted.
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
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expansion. Debt financing may also be a temporary financial
resource for expansion projects. General use reserves may
also be placed in the Designated Expansion Fund and used for
expansion projects.
c.Replacement
The portion of a CIP project that benefits existing users by
replacing an existing facility is financed from the reserves
in the Replacement Fund category. Replacement of facilities
may be financed with proceeds of the “buy-in” portion of the
capacity fees, general use reserves held in the Designated
Replacement Fund, and debt proceeds. The various funding
sources available for replacement projects is anticipated to
provide the necessary flexibility to begin projects while any
necessary debt financing is being obtained.
d.Betterment
Facilities that improve reliability, meet new regulations, or
create increased levels of service are considered betterment
facilities that benefit existing users. The reserves in the
Betterment Fund category are used to finance these projects
or portions of projects. Proceeds of the “buy-in” portion of
the capacity fees may also be used to finance betterment
projects. General use reserves may be placed in the
Designated Betterment Fund and used for betterment projects.
1.21 Relocations
Occasionally, relocation of a District facility is required by a
third party. If the District has a superior easement the
relocation cost will be paid by the third party, but only to the
extent that the District does not benefit from the relocation.
When relocation is required, a CIP project may be created which is
wholly or partially financed by a third party. On occasion, the
District will require that its own facilities be relocated.
Depending on the nature of the facilities, the financial resources
for these projects could be from new water supply, expansion,
replacement, betterment or third party financing. Each project is
individually negotiated with the third party based on the facts
and circumstances of the relocation. Occasionally, the District
will improve the facilities that are being relocated. When
determining how to allocate costs to various funds the following
guideline is suggested: if a project has more than five years of
useful life remaining, an incremental cost view should be
considered; if the project has less than five years of useful life
remaining, a pro-rata cost approach should be considered. Also,
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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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Number
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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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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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Date
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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.Water Capacity Fees (Restricted)
Water capacity fees4 are based on the value of existing and
future facilities divided by the number of existing and
future equivalent dwelling units. This method of calculating
capacity fees is called the combined method, where the “buy-
in” portion of the capacity fee covers costs to repay
existing customers for the facilities that they have built,
and where the “incremental” portion of the capacity fee
covers the cost of future expansion facilities. The “buy-in”
portion of the capacity fee is restricted to pay for
planning, design, construction, and financing associated with
expansion, replacement or betterment facilities. The “buy-
in” portion may be shifted back and forth between expansion,
betterment or replacement as the financing needs change. The
“incremental” portion of the capacity fee is limited to
planning, design, construction, and financing exclusively for
expansion facilities (excluding new water supply expansion).
f.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-
4 Code of Ordinances, Section 28
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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.
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.
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RESERVE POLICY
Policy
Number
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Date
Adopted
2/10/93
Date
Revised
11/4/20
Meter
Installation
Charges
Developer
Deposits
Annexation
Fees
Capacity
Fees
Restricted Funds Unrestricted and
Undesignated
(General Use) Funds
DEVELOPERS
Diagram 2.0: Flow of Funds - Developer Sources
2.1 Customers/Users
a.Uniform Rates and Charges (General Use)
Charges to users for water, sewer, and recycled water are
uniform throughout the District for similar customer types.
b.Monthly System Fees (General Use)
This is a fixed revenue source that is charged monthly.The
amount of the charge is based on the meter size.
c.Energy Charges (General Use)
The energy pumping fee is a charge per Unit of water for each
100 feet of lift, or fraction thereof, above the base
elevation of 450 feet. This charge is placed on the monthly
water bills of all water customers.
d.Penalties (General Use)
Penalties are added to the monthly water and sewer bills for
late charges, locks, etc.
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).
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BOARD OF DIRECTORS POLICY
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RESERVE POLICY
Policy
Number
25
Date
Adopted
2/10/93
Date
Revised
11/4/20
Uniform Rates
and Charges
Monthly
System Fees
Energy
Charges
2x Water
Rate
Pass –Through
Fixed Charges Penalties
Special Rates
and Charges
Restricted Funds
Unrestricted and
Undesignated
(General Use) Funds
CUSTOMERS / USERS
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.
Diagram 2.1: Flow of Funds - Customer Sources
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
181
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BOARD OF DIRECTORS POLICY
Subject
RESERVE POLICY
Policy
Number
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Date
Adopted
2/10/93
Date
Revised
11/4/20
were to be distributed to taxing agencies proportionate to
each agency’s general levy receipts prior to Proposition 13.
Taxes received are for general use. Spending limits for the
District are governed by the 1979 passage of California
Proposition 4, Limitations of Government Appropriations (GANN
limit). Proposition 4 places an appropriation limit on most
spending from tax proceeds.
b.Availability Charges (General Use/Restricted)
The District levies availability charges each year in
developed and undeveloped areas. Current legislation
provides that any amount up to $10 per parcel is general use
and any amount over $10 per parcel is restricted to be
expended in and for the improvement district (ID) within
which it is collected. Accordingly, the District may use
availability charges in excess of $10 toward costs of water
and sewer facilities which are either, expansion,
betterment, or replacement of facilities consistent with the
purpose of the ID in which they are collected. This portion
of the proceeds of availability charges is geographically
restricted and restricted by purpose. As costs are incurred
on these projects the respective IDs are charged, reducing
the reserves. To the extent that availability charges are
not used for the purpose for which they are collected, they
must be returned to the property owners that paid them. The
District has historically used these reserves for betterment
capital facilities thus, the restricted reserves are
accounted for in “sub-funds” of the Betterment Fund
(See 2.1 f.).
c.Improvement District General Obligation (GO) Bond
Assessments (Restricted)
The District has historically issued general obligation (GO)
debt and establishes an improvement district for the
repayment of that debt. When this financing method is used,
the county tax roll can be used to collect special taxes or
assessments within the ID to pay the debt obligation. The
proceeds of the debt are restricted for the purpose as
defined in the bond documents.
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OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject
RESERVE POLICY
Policy
Number
25
Date
Adopted
2/10/93
Date
Revised
11/4/20
General Levy
Property Tax
Receipts
Availability
Charges
General Obligation
Bond Assessments
Unrestricted and
Undesignated
(General Use)
Funds
Restricted Funds
COUNTY COLLECTED TAXES AND FEES
Diagram 2.2: Flow of Funds – County Collection Sources
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.
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OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject
RESERVE POLICY
Policy
Number
25
Date
Adopted
2/10/93
Date
Revised
11/4/20
Miscellaneous
Rents and Leases
Sewer Billing
Fees
Interest Income or
Expense Allocation
Restricted Funds Designated Funds
Unrestricted and
Undesignated
(General Use) Funds
MISCELLANEOUS INCOME
Diagram 2.3: Flow of Funds – Miscellaneous Income Sources
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.
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OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject
RESERVE POLICY
Policy
Number
25
Date
Adopted
2/10/93
Date
Revised
11/4/20
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.
Diagram 2.4: Flow of Funds – Debt Issuance Sources
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.
Loans General
Obligation Bonds
Certificates of
Participation
Restricted Funds
Unrestricted and
Undesignated
(General Use) Funds
DEBT PROCEEDS
185
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject
RESERVE POLICY
Policy
Number
25
Date
Adopted
2/10/93
Date
Revised
11/4/20
Fund Types and Categories
3.0 General Funds
a.Purpose
The General Fund is neither restricted nor designated. The
District maintains one General Fund for each business segment
(water, sewer, and recycled). This fund holds the working
capital and emergency operating reserves. While the General
Fund has a short-term focus to finance the District’s annual
operations, it is supported by the six-year rate model. This
fund is primarily used to finance the operations of the
District; however, it can be used for any District purpose.
This fund can be used to supplement the District’s rates and
charges and be a temporary source of revenue to balance the
Operating Budget. This fund can also be used to avoid spikes
in the rates or significant and abrupt increases. It is an
industry practice to have a fund that can be used to
stabilize rates. This would only occur if there was a
temporary need for reserves that would smooth out a rate
spike or to ramp up what would otherwise be a dramatic rate
increase.
The General Fund also plays a role in the debt planning of
the District. This fund is viewed by the debt markets as a
commitment by the District to ensure financial stability of
the rates and charges of 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.
186
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject
RESERVE POLICY
Policy
Number
25
Date
Adopted
2/10/93
Date
Revised
11/4/20
c.Funding Levels
I.Minimum Level – The minimum reserve level for each
business segment of the General Fund is three
months of operating budget expenses (evaluated
separately for each segment).
II.Maximum Level – The maximum reserve level for the
General Fund is nine months of operating budget
expenses. In the event that this fund exceeds the
seven month level, the excess will be evaluated or
transferred to one or more of the designated funds.
III.Target Level – The target level of reserves is
three months of operating budget expenses. In the
event that the fund drops below the target level,
rate increases or fund transfers would be
considered.
3.1 Designated Other Post Employment Benefits (OPEB) Fund
a.Purpose
Designated Other Post Employment Benefits (OPEB) reserves are
“general use” reserves that have been set apart by Board
action to finance the medical benefits of qualified retirees
as outlined in the District’s benefits plan. This fund is
available to hold any Board designated OPEB funds. The
District also has a trust at CalPERS and is restricted for
the purpose of financing the OPEB liability. Money held in
the CalPERS trust restricts the funds from any use other than
OPEB. The two funds are considered jointly when looking at
target reserve levels. Every two years, actuarial study is
performed to update the annual financing requirements.
Changes in the actuarial valuation may result from changes in
benefit levels, employee population, health insurance costs,
or general market conditions.
b.Sources
The OPEB liability may be financed by general use reserves
coming from user rates and charges, either from an operating
budget expenditure or from interfund transfers. Transfers of
unrestricted reserves may come from the various designated
funds or from the General Fund. As a part of the 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.
187
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject
RESERVE POLICY
Policy
Number
25
Date
Adopted
2/10/93
Date
Revised
11/4/20
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. Effective
December 1, 2020, the new water supply fee collection was
discontinued. The New Water Supply Fund will continue to be
used to fund qualified projects and to pay the proportionate
share of debt service of new water supply projects until the
monies in the fund are fully depleted.
188
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject
RESERVE POLICY
Policy
Number
25
Date
Adopted
2/10/93
Date
Revised
11/4/20
c.Funding Levels
Effective December 1, 2020, the new water supply fee
collection was discontinued. The New Water Supply Fund
will continue to be used to fund qualified projects and
to pay the proportionate share of debt service of new
water supply projects until the monies in the fund are
fully depleted.
Diagram 3.2: New Water Supply Fund Category
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
Funding Source Debt
Proceeds
Restricted Funds
Unrestricted and
Undesignated Funding
Sources
Designated
New Water
Supply Fund
Designated Funds
Expansion
New Water
Supply Fund
Restricted Funds
New Water
Supply
Debt Fund
Restricted Funds
New Water
Supply Fund
New Water
Supply Fund
Category
General Fund – Rates and Charges
Debt Fund
189
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject
RESERVE POLICY
Policy
Number
25
Date
Adopted
2/10/93
Date
Revised
11/4/20
must be considered jointly: the Expansion Fund, Expansion
Debt Fund, Capital Improvement Fund, and the Designated
Expansion Fund. Potable and recycled reserves are considered
jointly while sewer is evaluated separately.
b.Sources
The Expansion Fund is financed by water charges in lieu of
capacity fees (for temporary meters) and the “incremental”
portion of the capacity fee. The other funds in this
category may also be financed by debt proceeds, the “buy-in”
portion of the capacity fee, and the general fund through a
designation of reserves.
c.Funding Levels
I.Minimum Level – As the District matures the CIP
will move to purely replacement and betterment
projects. As the District moves through this
lifecycle the need for expansion reserves will
decrease and may be reduced to zero.
II.Maximum Level – The maximum reserve level for the
expansion category of funds is limited to five
years of unfinanced expansion facilities as
described in the District’s CIP Budget. To
determine the unfinanced amount, the total
financing needs must be reduced by the projected
expansion revenues, bond financing, and any
restricted or general fund revenues allocated to
this fund category. If the combined expansion
reserves exceed target levels, the District should
consider reducing capacity fees, reallocating
restricted or designated funds to meet other
purposes, or shifting the timing of expansion
projects.
III.Target Level – The target level is six months of
expansion expenditures. It is important that the
expansion reserves remain at a minimum of six
months of expansion expenditures. This reserve
level allows the District the time necessary to
issue additional debt without depleting expansion
reserves. If the combined expansion reserves drop
below six months of expenditures this would trigger
a transfer of general use reserves, a bond sale, an
adjustment to the timing of expansion projects, or
a reallocation of restricted reserves. Bond
190
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject
RESERVE POLICY
Policy
Number
25
Date
Adopted
2/10/93
Date
Revised
11/4/20
proceeds would be placed in the Restricted Bond
Fund, transfers of general use reserves would be placed
in the Designated Expansion Fund, and transfers of
restricted reserves would be placed in the Expansion
Capital Improvement Fund.
Diagram 3.3: Expansion Fund Category
(1)For Water Capacity Fees 32.4% goes into the Expansion fund and 67.6% goes into
the Capital Improvement Fund. For Sewer Capacity Fees 100% goes into the Capital
Improvement Fund.
Unrestricted and
Undesignated Funding
Sources
Designated
Expansion
Fund
Designated Funds
Expansion
Fund Restricted Funds
Expansion Capital
Improvement
Fund
Restricted Funds
Expansion
Debt Fund
Restricted Funds
Restricted Funds
Debt
Proceeds Capacity
Fees (1)
2x Water
Rates
Funding Source
General Fund – Rates and Charges
Expansion
Fund
Capital
Improvement
Fund
Bond
Debt
Expansion
Fund
Category
191
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject
RESERVE POLICY
Policy
Number
25
Date
Adopted
2/10/93
Date
Revised
11/4/20
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
combined replacement reserves exceed target levels, the
District should consider transferring the “buy- in”
portion of the capacity fee to meet other purposes.
192
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject
RESERVE POLICY
Policy
Number
25
Date
Adopted
2/10/93
Date
Revised
11/4/20
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.
193
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject
RESERVE POLICY
Policy
Number
25
Date
Adopted
2/10/93
Date
Revised
11/4/20
Diagram 3.4: Replacement Fund Category
(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
Unrestricted and
Undesignated Funding
Sources
Designated
Replacement
Fund
Designated Funds
Replacement
Capital
Improvement
Fund
Restricted Funds
Replacement
Debt Fund Restricted Funds
Restricted Funds
Replacement
Fund
Category
Debt
Proceeds
Capacity
Fees (1)
Funding Source
General Fund – Rates and Charges
Debt Fund Capital
Improvement Fund
194
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject
RESERVE POLICY
Policy
Number
25
Date
Adopted
2/10/93
Date
Revised
11/4/20
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.
195
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject
RESERVE POLICY
Policy
Number
25
Date
Adopted
2/10/93
Date
Revised
11/4/20
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.
196
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject
RESERVE POLICY
Policy
Number
25
Date
Adopted
2/10/93
Date
Revised
11/4/20
Fund
Diagram 3.5: Betterment Fund Category
Funding Source Availability
Charges (1) Capacity
Fees (2)
Debt
Proceeds
Restricted Funds
Capital
Improvement
Fund
Restricted Funds Betterment
Debt Fund
Restricted Funds
Betterment
Capital
Improvement
Fund
Restricted Funds Betterment
Fund
Designated Funds Designated
Betterment
Fund
Unrestricted and
Undesignated Funding
Sources
(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.
General Fund – Rates and Charges
Bond
Debt
Betterment
Fund
Betterment
Fund
Category
197
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject
RESERVE POLICY
Policy
Number
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Date
Adopted
2/10/93
Date
Revised
11/4/20
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
Rate Stabilization Fund Fund transfers from
legally available funds
The financial impact of
two consecutive years of
low winter water usage
The financial impact of
three consecutive years
of low winter water
usage
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
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collected. In this case it is to pay for facilities that
were in existence at the time this fee was established.
These fees may be used for expansion, replacement, or
betterment projects or any debt related to these categories.
The water capacity fees may also be used for either the
potable or the recycled systems. As capacity fees are
collected, the “buy-in” portion of the fee is allocated as
needed to one of three capital improvement funds, one in each
of the Expansion, Replacement, and Betterment Fund
categories. These reserves are used to pay debt or offset any
negative balance within these three categories of funds. For
sewer, these fees fund the Expansion, Replacement, or
Betterment Fund categories. 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.
4.2 Rate Stabilization Fund
a.Purpose
The Rate Stabilization Fund is established for the purpose of
minimizing rate increases in response to one-time events and therefore
stabilizing the rates and charges imposed by the District to meet
covenanted debt service coverage levels. The Rate Stabilization Fund
is not intended to be used to offset regular rate increases needed to
meet inflationary cost increases in operations.
b.Sources
The District may budget for Rate Stabilization Fund deposits from the
Sewer Fund, amounts in excess of the annual debt service coming due
and payable in the fiscal year, after payment of operating expenses.
The allowable amount that may be deposited shall not be transferred
prior to payment of the annual debt service obligation.
c.Uses
There is no minimum level for this fund. The maximum level shall be
equal to the financial impact of three (3) consecutive years of low
winter water usage. The target level for this fund shall be equal to
two (2) consecutive years of low winter water usage. For the purposes
of calculating debt service, amounts transferred from the Rate
Stabilization Fund to the Sewer Fund will constitute Gross Revenue in
the fiscal year the transfer occurs. All interest or other earnings
on deposits in the Rate Stabilization Fund will be withdrawn at least
annually and will be accounted for as operating revenue in the Sewer
Fund.
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
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restricted reserves can be restricted geographically and/or by
purpose. The District maintains various funds to track the
various designations and restrictions. The source of the money
for each fund was discussed along with the purpose, source of
funds, and levels. Key characteristics of these funds are the
target levels, minimums, and maximums. The funding levels must be
viewed in the context of the economic environment, political
environment, and in light of the District’s rate model. The
District’s six-year rate model not only shows the current balance
but also shows the trend of the fund balances. Often the trend of
the fund is a greater indicator of financial stability than is the
current balance.
The rate model is updated each year with the budget process and
evaluates each fund over the next six years. The rate model will
take into account the general economic environment, looking at the
development rate, supply rate increases, the possibility of
raising rates, capital infrastructure spending, and strategic plan
initiatives. The fund balances may at times be over or under the
target amount. This is not only acceptable but expected. The
rate model provides an empirical estimate of the conformance
between the projected District’s financial activities and the
guidelines of this policy.
5.1 Fund Transfers
Reserves within the District’s various designated funds come from
interfund transfers of unrestricted general use reserves. It is
important to note that the District has the ability to use general
use reserves for any business purpose. General use reserves may
be transferred to and from any unrestricted fund for any business
need. Designated reserves are general use reserves which have
been set aside for a specific purpose by Board action. These
reserves can only be used for the purpose they were designated, or
with Board action they may be used for any other business purpose.
While general use reserves may be used for any restricted purpose
they may not be transferred to Restricted Funds due to the
sensitivity of the tracking of restricted reserves. If reserves
are needed for a restricted purpose they are transferred to a
Designated Fund within the fund category with that particular
purpose. Reserves restricted to a fund category may only be used
within that category and may not be transferred to another
category. For example, the “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
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restricted for purposes that are shared by more than one category
of funds and may therefore be transferred to a restricted fund
within another fund category as long as it shares the same
purpose.
In many situations reserve transfers are expected as some fund
categories will exceed their maximums or drop below their
minimums. Only fund categories that are below the stated target
are eligible to receive transferred reserves. Fund categories
that exceed their maximums are first to be considered for
transfers out, followed by funds that exceed their targets. Funds
that exceed their minimums are also available for reserve
transfers out, but only when other options are not available.
The rationale for prioritizing reserve transfers is based on the
immediacy of the need and the availability of reserves from other
funding sources. For example, the General Fund is first to
receive reserves when it drops below its target or minimum levels.
This is because of the immediate and ongoing nature of the
expenditures that are served by this fund. The operation of the
District is first and foremost of the objectives of the District.
On the other end of the spectrum, the Replacement Fund has a long-
term perspective and will be used to partially finance replacement
assets for many years to come. Debt financing is
available to respond to this long term, foreseeable, and planned
cash flow. This fund is less likely to have immediate needs and
has other financing options.
When making the determination of when transfers are necessary, all
funds within a fund category work as a group. The combined
balance of the restricted and designated funds is looked at when
determining whether the fund category requires additional funding
from the Restricted Capital Improvement Fund, Restricted 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
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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 $75 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:
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•Federal Home Loan Bank (FHLB)
•Federal Home Loan Mortgage Corporation (FHLMC or "Freddie
Mac")
•Federal National Mortgage Association (FNMA or "Fannie Mae")
•Government National Mortgage Association (GNMA or “Ginnie
Mae”)
•Federal Farm Credit Bank (FFCB)
•Federal Agricultural Mortgage Corporation (FAMCA or “Farmer
Mac”)
There is no percentage limitation of the portfolio which can be
invested in this category, although a five-year maturity 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 must 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. Certificates of
Deposit (CD) will be made only to the FDIC-insured limit of
$250,000. 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 2 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.
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
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District’s portfolio and no more than 2 percent of the
outstanding medium-term notes of any single issuer.
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.
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•Are reserves, retained earnings, etc., utilized by the
pool/fund?
•A fee schedule, and when and how is it assessed.
•Is the pool/fund eligible for bond proceeds and/or will it
accept such proceeds?
10.0 COLLATERALIZATION
Collateralization will be required on certificates of deposit
exceeding the $250,000 FDIC insured maximum. In order to anticipate
market changes and provide a level of security for all funds, the
collateralization level will be 102% of market value of principal and
accrued interest. Collateral will always be held by an independent
third party with whom the entity has a current custodial agreement. A
clearly marked evidence of ownership (safekeeping receipt) must be
supplied to the entity and retained. The right of collateral
substitution is granted.
11.0: SAFEKEEPING AND CUSTODY
All security transactions entered into by the Otay Water District
shall be conducted on a delivery-versus-payment (DVP) basis.
Securities will be held by a third-party custodian designated by the
District and evidenced by safekeeping receipts.
12.0: DIVERSIFICATION
The Otay Water District will diversify its investments by security
type and institution, with limitations on the total amounts invested
in each security type as detailed in Paragraph 8.0, above, so as to
reduce overall 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
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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.
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.
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 ensure 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. It also establishes a
standard for internal lending/borrowing between water (potable and
recycled) and sewer funds, either direction. 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 and loans between water
and sewer funds.
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 and
lending/borrowing agreements 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
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costs of the projects. In cases where the program identifies project
funding through the use of debt financing, the budget should provide
information needed to determine debt capacity. The Rate Model and the
CIP Budget give the Board part of the data needed to make informed
judgments concerning the possibility of issuing debt.
Funding Criteria
The Chief Financial Officer (CFO) will evaluate all capital project
requests and develop a proposed funding plan. Priority may be given
to those projects that can be funded with current resources (annual
cash flow, fund balances or reserves). Those projects that cannot be
funded with current resources may be deferred or the CFO may recommend
that they be funded with 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
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to significant fluctuation based on the rate of new development.
Accordingly, the Chief Financial Officer, in developing the funding
plan for the CIP, will determine that current revenues and adequate
fund balances are available so project phasing can be accomplished.
If this is not the case, the Chief Financial Officer may recommend
that:
1.The project be deferred until funds are available, or
2.Based on the priority of the project, debt be 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
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repayment schedules that consist of low annual payments and one large
payment of the balance due at the end of the term. There will always
be at least interest paid in the first fiscal year after debt issuance
and principal starting no later than the first fiscal year after the
date the facility or equipment is expected to be placed in service.
Capitalized interest will not be for a period of more than necessary
to provide adequate security for the financing.
Limitations on the Issuance of Variable Rate Debt
The District will normally issue debt with a fixed rate of interest.
The District may issue variable rate for the purpose of managing its
interest costs. At the same time, the District should protect itself
from too much exposure to interest rate fluctuations. In determining
that it is in the District’s best interest to issue certain debt at
variable rates instead of fixed rates, at the time of issuing any
variable rate debt, there should be at least a 10% estimated reduction
in annual debt costs by issuing variable rate debt when compared to a
similar issuance of fixed rate debt. If the estimated overall cost
savings from issuing variable rate debt is not at least 10% at the
time of issuance, relatively small fluctuations in rates could
actually increase the District’s financing costs over the life of the
bonds compared to a similar fixed rate financing. By using this 10%
factor at the time of issuance, the District can be relatively assured
that its variable rate financing will be cost-effective over the term
of the bonds.
The comparison will be based on the following criteria:
1.The interest rate used to estimate variable interest costs will
be the higher of the 10-year average rate or the current weekly
variable rate.
2.The variable rate debt costs will include an estimate for annual
costs such as letter of credit fees, liquidity fees, remarketing
fees, monthly draw fees and annual rating fees applicable to the
letter of credit.
3.Any potential reserve fund earnings will reduce the fixed rate
debt service or variable rate debt service as applicable.
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
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even in total payments over the life of the issue, the Chief Financial
Officer will recommend converting such variable rate debt to fixed
rate.
Variable rate debt should not represent more than 25% of the
District’s total debt portfolio. This level of exposure to interest
rate fluctuations is considered to be manageable in an environment of
increasing interest rates. At a higher ratio than this, the District
might be faced with an unplanned water rate increase to meet its Rate
Covenants. Rating agencies use this ratio in their analysis of the
District’s overall credit rating.
Further, Rate Covenants applicable to variable rate debt shall not
compromise the issuance of additional debt planned by the District and
variable rate debt should always contain a provision to allow
conversion to a fixed rate at the District’s option.
6.0: CREDIT OBJECTIVES
The Otay Water District seeks to maintain the highest possible credit
ratings for all categories of long-term debt that can be achieved
without compromising delivery of basic services and achievement of
District policy objectives.
Factors taken into account in determining the credit rating for a
financing include:
1.Diversity of the District’s customer base.
2.Proven track record of completing capital projects on time and
within budget.
3.Strong, professional management.
4.Adequate levels of staffing for services provided.
5.Reserves.
6.Ability to consistently meet or exceed Rate Covenants.
The District recognizes that external economic, natural, or other
events may from time to time affect the creditworthiness of its debt.
Nevertheless, the District is committed to ensuring that actions
within its control are prudent and well planned.
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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
ability of issuers to refinance a tax-exempt bond prior to its
Optional Redemption date (known as Advance Refunding) is limited by
the Tax Code. There is no limit in the Tax Code on the ability of
issuers to redeem bonds prior to their maturity date 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.
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
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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.
Municipal Advisor: The use of a Municipal Advisor is necessary for
the sale of debt by a competitive bid process and is desirable when
issuing debt through a negotiated sale. The Municipal 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 Municipal 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 Municipal 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
Municipal Advisor will provide independent confirmation on the
Underwriter’s proposed pricing to ensure that interest rates and
Underwriter’s compensation are appropriate for the credit quality of
the issue and competitive in the overall public finance market in
California.
Underwriter: The Underwriter markets the bonds for sale to investors.
While the District’s preference is to select the Underwriter for the
debt via sale of the debt at competitive bid, there are circumstances
when a negotiated issue is in the best interests of the District.
Negotiated sales are preferable if the security features are
particularly complex or market conditions are volatile. The Chief
Financial Officer will recommend whether the method of sale is
competitive or negotiated based on the type of issue and other market
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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 Municipal
Advisor on structuring the issue and offering different pricing ideas.
Bond Counsel: The District’s Bond Counsel provides the primary legal
documents that detail the security for the bonds and the authority
under which bonds are issued. The Bond Counsel also provides an
opinion to bond holders that the bonds are tax-exempt under both State
and Federal law. All closing documents in connection with an issue
are also prepared by Bond Counsel.
Disclosure Counsel: The District’s Disclosure Counsel provides legal
advice to the District regarding the adequacy of the District’s
disclosure of financial information or risks of investing in the
District’s debt issue to the investing public. The Disclosure Counsel
can prepare the official statement or review the official statement
and gives the District an opinion that there is no information missing
from the official statement of a material nature that would be
necessary for an investor to make an informed decision about investing
in the District’s bonds.
Trustee: The Trustee is a financial institution selected by the
District to administer the collection of revenues pledged to repay the
bonds and to distribute those funds to bondholders.
Letter of Credit Bank: The Letter of Credit Bank is a U.S. or foreign
bank that has issued a letter of credit providing both credit
enhancement (the Letter of Credit Bank will pay the debt in the event
that the District defaults on the payment) and liquidity for a
variable rate bond issue. These banks have their own short-term
credit rating, which can be higher than the District’s short-term
credit rating. Liquidity is needed because variable rate bondholders
are allowed to “put” their bonds back to the District if they do not
like the interest rate currently being offered. The District’s
Remarketing Agent then finds a new buyer for those bonds, but in the
event that no buyer is found, a draw is made under the letter of
credit to purchase the bonds that have been “put.” As soon as the
bonds are remarketed to another buyer, the letter of credit is repaid.
The letter of credit fees are paid annually or quarterly. Letter of
credits are typically issued for not more than 3 years and must be
renewed during the life of the bonds. Credit enhancement is discussed
further under the heading “CREDIT ENHANCEMENT.”
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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
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.
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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. Municipal Advisors
shall also adhere to applicable SEC rules and MSRB Rule G-42. 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).
Reporting of Listed Events
While initial bond disclosure requirements pertain to underwriters,
the District will provide financial information and notices of listed
events on an ongoing basis throughout the life of the issue.
The list below (as of the most current SEC amendment effective
February 27, 2019) can change in the future, and any new requirements
added to SEC Rule 15(c)2-12 in the future are deemed to be added to
this section without the need to update the policy.
(a)The District shall give, or cause to be given, notice of the
occurrence of any of the following events with respect to any
bonds (in each case to the extent applicable) in a timely
manner not more than ten business days after the occurrence of
the event:
1.Principal or interest payment delinquencies;
2.Non-payment related defaults, if material;
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3.Modifications to the rights of the Holders, if material;
4.Optional, contingent or unscheduled calls, if material, and
tender offers;
5.Defeasances;
6.Rating changes;
7.Adverse tax opinions or the issuance by the Internal Revenue
Service of proposed or final determinations of taxability,
Notices of Proposed Issue (IRS Form 5701-TEB) or other
material notices or determinations with respect to the tax
status of the Bonds or other material events affecting the
tax status of the Bonds;
8.Unscheduled draws on the debt service reserves reflecting
financial difficulties;
9.Unscheduled draws on the credit enhancements reflecting
financial difficulties;
10.Substitution of the credit or liquidity providers or their
failure to perform;
11.Release, substitution or sale of property securing repayment
of the Bonds, if material;
12.Bankruptcy, insolvency, receivership or similar proceedings
of the District, which shall occur as described below;
13.Appointment of a successor or additional trustee or the
change of name of a trustee, if material;
14.The consummation of a merger, consolidation, or acquisition
involving the District or the sale of all or substantially
all of the assets of the District 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, if material;
15.Incurrence of a financial obligation of the District, if
material, or agreement to covenants, events of default,
remedies, priority rights, or other similar terms of a
financial obligation of the District, any of which affect
security holders, if material; or
16.Default, event of acceleration, termination event,
modification of terms, or other similar events under the
terms of a financial obligation of the District, any of
which reflect financial difficulties.
For these purposes, any event described in item 12 is considered to
occur when any of the following occur: the appointment of a receiver,
fiscal agent, or similar officer for the District in a proceeding
under the United States Bankruptcy Code or in any other proceeding
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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 District, or if such jurisdiction has been assumed by
leaving the existing governing 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 District.
Whenever the District obtains knowledge of the occurrence of a Listed
Event under item 12 above, the District shall or shall cause the
Dissemination Agent (if not the District) as soon as possible
determine if such event would be material under applicable federal
securities laws and if applicable file a notice of such occurrence
with the MSRB, in an electronic format as prescribed by the MSRB, in a
timely manner not in excess of 10 business days after the occurrence
of the Significant Event.
Notwithstanding the foregoing, notice of Significant Events described
in subparagraph (a)(8) above need not be given any earlier than the
notice (if any) of the underlying event is given to holders of
affected bonds under the applicable indenture securing such bonds.
The events described in subparagraphs (a)(2), (a)(7),(a)(8) (if the
event is a bond call), (a)(10), (a)(11), (a)(13), (a)(14) and (a)(15)
contain the qualifier “if material.” The District shall cause a notice
to be filed with respect to any such event only to the extent that the
District determines the event’s occurrence is material for purposes of
U.S. federal securities law.
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.
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The Chief Financial Officer shall invest the bond proceeds subject to
the District’s Investment Policy in a timely manner, to ensure the
availability of funds to meet operational requirements. In doing so,
the CFO will maintain a system of record keeping and reporting to meet
the arbitrage rebate compliance requirements of the federal tax code.
14.0: 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.
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The District can issue general obligation bonds up to but not in
excess of 15% of the assessed valuation under Article XVI, Section 18
of the State constitution. An annual amount of the levy necessary to
meet debt service requirements is calculated and placed on the tax
roll through the County of San Diego. The District also has a policy
that the ad-valorem tax to be used to pay debt service on general
obligation bonds will not exceed $.10 per $100 of assessed value.
Voters within Improvement District No. 27 of the District authorized
$100 million general obligation bonds in 1989. The District issued
$11,500,000 general obligation bonds in 1992 and refinanced the bonds
in 1998 and again in 2009. The District also has approximately $29
million in general obligation bonds authorized between 1960 and 1978
for various improvement districts throughout the District, but
unissued. General obligation bonds can only be issued under these
existing authorizations to the extent necessary to fund the
improvements specified by each ballot measure.
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
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municipal bond market, and the District’s ability to "afford" new debt
as determined by the aforementioned standards.
Revenue Bonds
Revenue bonds are limited-liability obligations that pledge net
revenues of the District to debt service. The net revenue pledge is
after payment of all operating costs. Since revenue bonds are not
generally secured by the full faith and credit of the District, the
financial markets require coverage ratios of the pledged revenue
stream and a covenant to levy rates and charges sufficient to produce
net income at some level in excess of debt service (a Rate Covenant).
Also there may be a test required to demonstrate that future revenues
will be sufficient to maintain debt service coverage levels after any
proposed additional bonds are issued. The District will strive to
meet industry and financial market standards with such ratios without
impacting the current rating. Annual adjustments to the District’s
rate structure may be necessary to maintain these coverage ratios.
The underlying credit of revenue bonds is judged on the ability of the
District’s existing rates to provide sufficient net income to pay debt
service and the perceived willingness of the District to raise rates
and charges in accordance with its Rate Covenant. Actual past
performance also plays a role in evaluating the credit quality of
revenue bonds, as well as the diversity of the customer base. Revenue
bonds generally carry a credit rating one or two investment grades
below a general obligation bond rating.
The District may use a debt structure called “Certificates of
Participation” to finance capital facilities. However, if the
certificates contain a pledge of net revenues and a Rate Covenant,
they are treated as essentially the same as a revenue bond.
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
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agreement is $50,000 and interest costs must not exceed the interest
rate earned by the District’s portfolio for the average of the past 6
months. Lease payments of this type are considered operating expenses
and would reduce net operating income available to pay any District
revenue bonds. There are no coverage requirements or rate covenants
associated with lease/purchase agreements.
State Water Loans
The State Water Resources Control Board makes certain funds available
to water districts throughout the State. These loans typically carry
a below-market rate of interest and are short term in nature. While
State loans should be incorporated into the District’s debt portfolio
for the financing of capital improvements, the payment of the loan
should not compromise the District’s ability to issue other planned
debt or cause the District to violate its rate covenants or make it
necessary for the District to increase rates to maintain existing rate
covenants.
Land Based Financing
The District may consider developer or property owner-initiated
applications requesting the formation of community facilities or
assessment districts and the issuance of bonds to finance eligible
District facilities necessary to serve newly developing commercial,
industrial and/or residential projects. Facilities will be financed
in accordance with the provisions of the Municipal Improvement Act of
1913 and the Improvement Bond Act of 1915, or the Mello-Roos Community
Facilities Act of 1982.
Typically, the bonds issued would be used to prepay, in a lump-sum,
the District’s capacity fees with respect to a large tract of land
under development, or to finance in-tract infrastructure that will
eventually be dedicated to the District. The bonds are secured by a
special tax or assessment to be levied on property within the
boundaries established for the community facilities district
(sometimes known as a “Mello-Roos” district) or the assessment
district. If the District becomes the sponsoring public agency for
such financing district and the issuance of debt, the District will be
required to enter into a Funding, Construction and Acquisition
agreement for any of the facilities to be dedicated to the District
upon completion. This agreement governs the type of facilities to be
constructed with bond proceeds and how the facilities will be accepted
by the District.
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In some cases, the District may not be asked to be the sponsoring
agency for the formation of a financing district, rather, the
developer or property owner may approach a school district or a city
to be the sponsoring agency. Nonetheless, the property owner may want
to include lump-sum payment of District fees in the financing or
construction of certain facilities to be dedicated to the District
upon completion. In this case, if the District desired to
participate, the District would enter into a Joint Financing Agreement
with the sponsoring agency, again governing the type of facilities to
be constructed with bond proceeds and how the facilities will be
accepted by the District.
On a case-by-case basis, the Board shall make the determination as to
whether a proposed district will proceed under the provisions of the
Assessment Acts or the Mello-Roos Community Facilities Act. The Board
may confer with other consultants and the applicant to learn of any
unique district requirements, such as long-term development phasing,
prior to making any final determination.
All District and District consultant costs incurred in the evaluation
of new development, district applications and the establishment of
districts will be paid by the applicant(s) by advance deposits in
those instances where a party or parties other than the District have
initiated a proposed district. Expenses not legally reimbursable by
the financing district will be borne by the applicant. The District
may incur expenses for analyzing proposed assessment or community
facilities districts where the District is the principal proponent of
the formation or financing of the district.
Prior to the issuance of any land secured financing and in accordance
with State law, the Board will adopt policies and procedures with
criteria to be met before any special tax bonds or assessment district
bonds may be issued. These criteria include the qualifications of the
appraiser, the minimum value to lien ratio to be achieved prior to
issuing the land secured debt and the maximum tax to be levied on
different categories of property.
Internal Lending/Borrowing
Internal Lending/Borrowing allows the lending and/or borrowing of
funds between the Water (Potable and Recycled) and the Sewer Funds,
either direction to meet financial needs in lieu of the borrowing fund
obtaining outside debt.
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Upon recommendation by the Chief Financial Officer, the Board may
adopt a resolution allowing lending/borrowing arrangements between
Water and Sewer funds. To the extent any inter-fund lending/borrowing
is undertaken in anticipation of long-term financing, the District
shall adopt a Resolution of its intention to repay such funds out of
tax-exempt debt proceeds so as to meet the requirement of federal tax
law for such borrowing.
If the funds being loaned are restricted, prevailing law requires that
the Resolution that the Board adopts must include a finding by the
Board that the lending fund has sufficient money to lend and that the
borrowing fund can repay the loan without adversely affecting the
District’s credit ratings.
Internal Lending/Borrowing arrangements will be recorded in accordance
with GASB reporting requirements. The arrangement will include the
purpose, a debt repayment schedule and a periodic interest charge that
is equal to the District’s investment rate of return for that same
period. This ensures that the lending fund is recapturing earnings
that would have been otherwise realized had these funds been invested
in the District’s investment portfolio.
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
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
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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
“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.
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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.
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.
244
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject
DEBT POLICY
Policy
Number
Date
Adopted
Date
Revised
45 4/13/04 03/03/2021
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
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.
245
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject
DEBT POLICY
Policy
Number
Date
Adopted
Date
Revised
45 4/13/04 03/03/2021
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.
Municipal Advisor: A person that provides advice to or on behalf of a
municipal entity or obligated person with respect to municipal
financial products or the issuance of municipal securities, including
advice with respect to the structure, timing, terms, and other similar
matters concerning such financial products or issues.
Financial Obligation: A debt obligation, lease, guarantee, derivative
instrument, or monetary obligation resulting from a judicial,
administrative, or arbitration proceeding, but not including municipal
securities as to which a final official statement has been provided to
the MSRB.
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.
Internal Lending/Borrowing: An Inter-fund lending arrangement between
Water and Sewer funds.
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
wasting asset because it has a stipulated life to expiration and may
expire worthless. Hence, the premium could be wasted.
246
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject
DEBT POLICY
Policy
Number
Date
Adopted
Date
Revised
45 4/13/04 03/03/2021
Optional Redemption: The redemption of an obligation prior to its
stated maturity, which can only occur on dates specified in the bond
indenture.
Overlapping Debt: The legal boundaries of local governments often
overlap. In some cases, one unit of government is located entirely
within the boundaries of another. Overlapping debt represents the
proportionate share of debt that must be borne by one unit of
government because another government with overlapping or underlying
taxing authority issued its own bonds.
Par Value: The face value or principal amount of a security.
Pay-as-you-go: To pay for capital improvements from current resources
and fund balances rather than from debt proceeds.
Put Option: A contract that grants to the purchaser the right but not
the obligation to exercise.
Rate Covenant: A covenant between the District and bondholders, under
which the District agrees to maintain a certain level of net income
compared to its debt payments, and covenants to increase rates if net
income is not sufficient to meet such level.
Refunding: A procedure whereby an issuer refinances an outstanding
bond issue by issuing new bonds.
Revenue Bonds: A bond which is payable from a specific source of
revenue and to which the full faith and credit of an issuer with
taxing power is not pledged. Revenue bonds are payable from
identified sources of revenue, and do not permit the bondholders to
compel a jurisdiction to pay debt service from any other source.
Pledged revenues often are derived from the operation of an
enterprise. Generally, no voter approval is required prior to
issuance.
Special Assessments: A charge imposed against property or parcel of
land that receives a special benefit by virtue of some public
improvement that is not, or cannot be enjoyed by the public at large.
Special assessment debt issues are those that finance such
improvements and are repaid by the assessments charged to the
benefiting property owners.
Swap: A customized financial transaction between two or more
counterparties who agree to make periodic payments to one another.
Swaps cover interest rate, equity, commodity and currency products.
247
OTAY WATER DISTRICT
BOARD OF DIRECTORS POLICY
Subject
DEBT POLICY
Policy
Number
Date
Adopted
Date
Revised
45 4/13/04 03/03/2021
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.
248
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.
ACCRUAL: A charge for work that has been done but not yet invoiced, for which provision is made at
the end of a financial period.
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.
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.
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.
249
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.
COVID-19: Illness caused by a novel coronavirus which was first identified amid an outbreak of
respiratory illness cases in Wuhan City, Hubei Province, China.
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.
250
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.
FINANCIAL AUDIT: Official financial examination of the District’s accounts.
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: 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 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.
GALLONS PER CAPITA PER DAY: The total number of gallons used by the city divided by the
population, divided by the number of days.
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.
251
Glossary
INTEREST INCOME: Earnings from the investment portfolio. Per District Policy Number 25, interest
income will be allocated to improvement districts each month based upon each fund’s prior month-
ending balance.
LATE CHARGES/PENALTIES: Charges and penalties are imposed on customer accounts for late
payments, returned payments, and other infringement of the District’s Code of Ordinances.
METER AND LATERAL FEES: Charge includes the material costs for the meter, meter box, and the
labor cost for installation to connect a new service to the distribution system.
METROPOLITAN WATER DISTRICT (MWD) STANDBY CHARGES: Revenue generated from property
taxes by MWD to cover the Readiness-to-Serve 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.
READINESS-TO-SERVE CHARGE: Adopted by MWD in Fiscal Year 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.
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.
252
Glossary
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.
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.
253
AB Assembly Bill
AF Acre-Foot/Feet
AMR Automated Meter Reader/Reading
AWWA American Water Works Association
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)
GPCD Gallons Per Capita Per Day
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
254
List of Acronyms
PS Pump Station
RWCWRF Ralph W. Chapman Water Recycling Facility
SANDAG San Diego Association of Governments
SB Senate Bill
SBWRP South Bay Water Reclamation Plant
SCADA Supervisory Control and Data Acquisition
SWRCB State Water Resources Control Board
255
Index
Administrative Expenditures 72,86,95,115
Awards xv-xviii
Budget Basis 8
Budget Calendar 9-11
Budget Control and Jurisdiction 7
Budget Guide 1-2
Budget Process 6-7
Budget Summary 35
Capital Budget Narrative 153-155
Capital Purchases FY 2023 163
CIP Justification and Impact on Operating Budget 162
CIP Reserve Funds 156
Classification of Water Sales 62,78
Contract/Temporary Employees 114
Current Economic Conditions 17-18
Debt Management 52-53
Debt Policy 224-248
Debt Policy Glossary 244-248
Demographics 13
Department Budgets:
Administrative Services 129-134
Board of Directors 119-121
Engineering 146-150
Finance 135-139
General Expense 151
General Manager 123-128
Water Operations 140-145
Departmental Operating Budget Narrative 105-106
Director’s Division Boundaries 121
District Formation 4
Economic Outlook 18
Five-Year Forecast 49
Formula for Sewer Rates 97-98
Fund Balance Summary by Fund 44
Fund Balances Forecast 51
Fund Structure 8
Future, The 18-20
General Fund Forecast 50
General Fund Revenues, Expenditures and Transfers 35-41, 43
General Expense 104,151
256
Index
General Revenues 103
General Revenues and Expenditures Narrative 101-102
Glossary 249-253
Impact of Current Debt Levels 54
Investment Policy 207-223
Investment Policy Glossary 216-223
Labor and Benefits 108
Labor and Benefits by Fund 109
Letter of Transmittal v-xiv
List of Acronyms 254-255
Materials and Maintenance Expenditures 73,87,96,116
Meter Fees 68,82
Mission Statement, Statement of Values 3
MWD and CWA Fixed Fees (pass-through) 67
Operating Budget Summary 61,77,90
Operating Budget Summary by System 42
Operating Budget Summary – General Fund 40-42
Operating Expenditures by Department 117
Operating Expenditures by Object 118
Organizational Structure 5
Position Count by Department 110-114
Potable Narrative 59-60
Power Costs 71,85,94
Projected Interest Payments by Debt Issuance 57
Projected Principal Payments by Debt Issuance 56
Recycled Narrative 75-76
Reserve Policy 167-206
Reserve Policy Glossary 204-206
Resolution 4410 xix-xx
Revenue History 69,83,93
Revenues and Expenditures by Fund 46-47
Revenues and Expenditures by Type 45
San Diego Rainfall 17
Schedule of Outstanding Debt 55
Service Area 4
Service Area Assessed Valuation Fees 13
Service Area Maps 74,88,99
Sewer Charges Summary by Customer Class 91
Sewer Narrative 89
Sewer Rate Comparison 16
257
Index
Six-Year CIP Projects Summary by Fund ($1,000s) 157
Six-Year CIP Projects Summary by Source ($1,000s) 157
Six-Year CIP Projects by Source and Fund ($1,000s) 158-161
Statement of Values 3
Strategic Plan 21-34
Summary of Financial Policies 165-166
System Charges 65-66,80,92
Table of Contents i-iv
Ten Largest Customers 14
Ten Principal Taxpayers 14
Unit Sales History and Meter Count by Customer Class 64,81
Water Purchases - Recycled 84
Water Purchases and Related Costs - Potable 70
Water Rate Comparison- Member Agency Water Rates 15
Water Sales Summary by Meter Size 79
Water Sales Summary by Customer Class 63
258
Otay Water District ႄႇႇႆ Sweetwater Springs Blvd.Spring Valley, CA ႋႃႋႉႊ-ႄႂႂႆ otaywater.gov