Borrego Water District Revenue Workshop

1. Borrego Water District Revenue Workshop

2. Potential Revenue Sources • Background • Service Area Relatively Small • Largely Undeveloped • Absentee Owners • Low Growth Rate • Community Sensitivity to Rate Increases • Most Costs Fixed and Not Directly Related to Amount of Water Sold • Benefits Flow to Current Users as Well as Future Users Glenn M Reiter & Associates

3. Current Situation • Basin in Overdraft • Recent Legislation SBX7-7 • Mandates a 20% reduction in urban per capita demand by 2020 • Loss of Major Customer • Funding Needs • Adequate funds for Operation and Maintenance • System replacement • Eventual augmentation of basin supply Glenn M Reiter & Associates

4. Revenue sources Glenn M Reiter & Associates

5. California Water Use By Percent Bul. No. 3 1957 Cal Water Plan 2005 Cal Water Plan 2009 Bul. No. 3 Bul. 160-98 Bul.160-93 Glenn M Reiter & Associates

6. California Water Use by Acre Feet Glenn M Reiter & Associates

7. Equitable Apportionment of Cost and Benefit • There Are Two Major Beneficiaries • Current Water Users • Residential • M & I • Recreational • Agricultural • Future Water Users • Residential • M & I • Recreational • Agricultural Glenn M Reiter & Associates

8. Identification of Amount of Benefit to All Users • Existing Users • Benefit of receiving a reliable water supply • Maintain property value • Maintain business and income • Vacant Property within Service Area • Maintain property value • Water available when needed Glenn M Reiter & Associates

9. Identification of Costs • There are two broad categories of costs • Operating Costs: (Day to Day Operations) • Energy • Labor • Insurance • Supplies • Equipment • Outside Services • Non-Operating Costs: (Long Term Sustaining) • Capital Replacement (Pipe, Pumps, Wells, Tanks) • Capital Outlay (Vehicles, Tools, Computers) • Capital Improvement (System Enlargement, New Water Supplies) • Debt Glenn M Reiter & Associates

10. Types of Cost • Two Broad Categories • Fixed (Expense not driven by water delivered) • Labor • Insurance • Communications • Maintenance • Equipment • Variable (Expense driven by water delivered) • Energy • Treatment Glenn M Reiter & Associates

11. Who Benefits From A Reliable Water Supply? • Current Users • Future Users Glenn M Reiter & Associates

12. How Can Non-Users Participate? • Parcel Charges • Special Taxes Glenn M Reiter & Associates

13. Parcel Charge Features • Ability to distribute cost and benefits to all property within service area • Stable revenue sources not dependent upon water sales • Nexus required • Requires weighted vote of property owners • May include exemptions for non-benefiting property Glenn M Reiter & Associates

14. Special Tax • Must be for specific purpose • 2/3 of registered voters must approve • District has approximately 1,440 registered voters • Does not require a Nexus since it is a tax Glenn M Reiter & Associates

15. Cost Allocation to Non-Users • The District experiences costs that are related to future water users • Preservation of facilities • Maintenance of capacity for future users • Planning studies to address overdraft situation • Planning studies to examine potential new water supplies • Labor costs associated with the above Glenn M Reiter & Associates

16. FY 10-11 Fixed versus Variable Variable Costs Fixed Costs

17. The General Plan for Borrego Valley Glenn M Reiter & Associates

18. Land Inventory Glenn M Reiter & Associates

19. Current Revenue Needs • Annual Operating & Non-Operating Budget • Funded by rates and charges that provide a stable revenue stream • Address the issue of reduced per capita consumption • Identify that portion of the Budget that is of benefit to future users (Vacant Property) • Determine how much of the Operating Budget should be collected from the Service Charge versus the Commodity Charge Glenn M Reiter & Associates

20. Future Cash Needs • Replacement of Capital Facilities • Expansion of delivery capability • Fund studies for the development of future water supplies • Examine what assets the District has that can be turned in cash or a revenue stream Glenn M Reiter & Associates

21. Financial Policies • Establish minimum operating coverage of 1.2 times Operating Expenses • Develop emergency reserve sufficient to replace critical system facilities after a disaster • Set rates and charges in each service area that reflects the cost to service that area • Develop rates or charges for properties that benefit from the availability of a water supply • Fund $_??__ per Year for facility replacement in accordance with GASBS State 34 Glenn M Reiter & Associates

22. Water Rates • In complying with SBX7-7, need to develop rates that will be equitable to all customers, taking into consideration lot size • Avoid rate shock by phasing increases over time • Adjust rates annually to avoid large sudden rate increases Glenn M Reiter & Associates

23. Financial Impacts of Conservation • Fixed Costs are not reduced • Cost could increase implementing conservation Programs • Only reduction is in variable portion of Operating Costs Glenn M Reiter & Associates

24. Cost Per AF Based on Sales of 3,000 af Glenn M Reiter & Associates

25. Recommended Approach • Determine revenue requirements for: • Short Term 5 Years • Possibly Long Term 20 Years? • Study and select appropriate revenue sources • Develop Long Range cash flow • Distribute Costs to appropriate benefitting properties • Develop rates • Public education • Proceed with Prop 218 requirements Glenn M Reiter & Associates