SUSTAINABLE UTILITIES “2007 and BEYOND”

1. SUSTAINABLE UTILITIES“2007 and BEYOND” SWORD MEETING November 15, 2006 City of Westminster Public Works and Utilities

2. WHY DID WE UNDERTAKE THIS IN 2006? • Older infrastructure…focus on providing services for growth required us to review needs for older system. Need to take hard look at aging infrastructure • System reliability, dependability and service criteria • Growth had supplied revenue that is diminishing and won’t be available in the future • User rates didn’t account for “use” of infrastructure or its cost • Approaching conclusion of water rights acquisition • Account for declining tap fee revenue • Review available revenue to meet infrastructure needs

3. THE BASICS….WHAT DID WE DO IN 2006? • Completed an INFRASTRUCTURE MASTER PLAN that assessed the condition of Water/Sewer Infrastructure - Water lines including transmission lines - Water Pump Stations, Pressure Reducing Stations - Water Treatment Plants (Semper, Northwest) - Pressure Zones, water tank storage - Wastewater collection systems - Wastewater pump stations • Completed a FINANCIAL REVIEW that assess how we pay for services (capital replacement and operations) - User rates and tap fees - Establish policies for reserves

4. INFRASTRUCTURE STUDY Water Infrastructure System • 480 miles pipe • Raw water supply system • Two water treatment plants, Thornton contract • Experience 80-100 breaks/year (decreasing) • Ten pressure zones within system • Nine storage reservoirs • Eight pump stations • Not included- Standley Lake Dam

5. Specifics of Deficiencies – Water Infrastructure Over 70% of pipe is greater than 20 years old • Highly aggressive soil prematurely attacks DIP • Water Treatment Facilities require on-going capital replacement, with greater attention to the older Semper Facility • Increase pipe replacement to ~ 8 miles/year • Adopt criteria that ”tightens up” acceptable pressures, including creation of three additional pressure zones and associated PRV’s and pipe to make changes • Add up to three additional storage tanks to meet domestic and fireflow requirements of new zones

6. Specifics of Deficiencies – Water Infrastructure (continued) • Replace/add new pumpstations to address old/outdated pump stations as well as add new stations to meet needs of new pressure zones • Improve condition of PRV’s • Upgrade telemetry of system

7. Wastewater Infrastructure System • 370 miles of collection/interceptor pipeline • Six lift stations • Big Dry Wastewater Treatment Facility • METRO Treatment Facility

8. Specifics of Deficiencies – Wastewater Infrastructure • Approximately 50 miles of pipeline is identified as having structural deficiency and are candidates for replacement or rehabilitation • Eliminate one lift station and upgrade remaining five stations with review of existing operating criteria due to normal aging and advancing to current standards. Upgrades to include electrical modifications and emergency overflow provisions

9. WHAT WERE THE RESULTS OF THE INFRASTRUCTURE STUDY? • Estimated value of $800,000,000 - $1,000,000,000 - Includes water and sewer infrastructure, and Standley Dam and BDCWWTF • Current estimated liability of $230,000,000 (W&S) • Water system improvement costs of $357m/20 years - $193m in pipe replacement - $89m pressure zone boundary changes • Wastewater system costs of $88m/20 years - $83m sewer line renewal - Lift station upgrades • Annual replacement costs of ~$20,000,000

10. NOW WHAT?? WHO PAYS? WHEN? FOR HOW LONG?

11. FINANCIAL REVIEW What Were We Trying to Accomplish? • Address long-term costs of utility infrastructure • Establish long-term rate strategy to keep up with depreciating infrastructure • Adopt fiscal policies that establish appropriate levels of reserves to balance available resources and variable long term capital needs

12. What Happens if We Don’t Adopt Long Term Rate Strategy That Addresses Costs of Infrastructure? • Excessive maintenance • Unreliable system • No clear strategy to sustain system • No way to catch up with “used” $230m of assets

13. What is the Long Term Strategy? • Increase tap fees to cover costs providing infrastructure and acknowledge declining taps remaining to build out (revenue source that will eventually “disappear”) • Increase rates “over time” to include a component that covers depreciation (hence, rate increases through 2015) • Develop fiscal policies that will dampen extreme volatility of rates caused by water shortages or excessive capital needs

14. What are the Long Term Rates and How Will it Affect Me? • In 2007, for an average residential user, water rates will rise 4.12% and sewer rates will increase 12.00%. The combined increase is 6.92%, or $3.59/month • In 2008, water rates will rise 2.74% and sewer rates will increase 6.50% for a combined increase of 4.06% • Rates in 2007, 2008 are adopted. Rates beyond that will be adopted by subsequent Councils. Rate increases would follow 2008 increases if long term policies are followed • Rate increases cover replacement, not operational costs

15. What might my water/sewer bill look like in 2007? $53.35 $3.59 $56.94

19. What are the Fiscal Policies the Council Adopted? • Creation of Rate Stabilization Reserve (RSR) to buffer low revenue years without requiring dramatic rate increases, but establishing strategy of how to make up revenues without using reserves dedicated to replacement capital funding • Creation of Capital Project Reserve (CPR) that accumulates necessary revenues to expend on replacement capital over time to ensure system sustainability

20. QUESTIONS THAT HAVE BEEN ASKED(Received from SWORD) • Westminster Utility Infrastructure. What is it, how old is it, when will it need replacement? • How much will it cost to replace each portion of the infrastructure? • How will it be paid for? • Why are our water and sewer rates going up? How much of the increase will go into the Capital Investment Fund to replace the infrastructure? • Why are you raising the stormwater fees? Where is the proof that street sweeping costs belong in the stormwater fund and actually cut costs in stormwater? Why are the costs for the hazardous waste pick-up being moved to the stormwater fund? • Why are you raising the concrete replacement fee? • Why are you adding a $2 per month fee for streetlights? • Is there any way to balance out the water pressure so that those of us living nearest the beginning of a line don’t have such high pressure that the life of our water heaters and plumbing is shortened? Can this be done and still maintain adequate pressure for those “at the end of the line?”