Borrego Water District Revenue

Workshop

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

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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

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REVENUE SOURCES

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California Water Use By Percent

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Bul. No. 3 1957Cal Water Plan 2005 Cal Water

Plan 2009Bul. No. 3

Bul.160-93

Bul. 160-98

California Water Use by Acre Feet

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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

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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

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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

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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

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Who Benefits From A Reliable Water Supply?

• Current Users

• Future Users

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How Can Non-Users Participate?

• Parcel Charges

• Special Taxes

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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

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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

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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 above04/21/23 Board Workshop Glenn M Reiter & Associates Slide 15

FY 10-11 Fixed versus Variable

04/21/23 Board Workshop Slide 16Fixed Costs Variable Costs

The General Plan for Borrego Valley

Number of Units

County Plan - Build Out 16,000 dwelling units (DUs)

Existing as of March 2009 2,500 DUs

Approved 3,725 DUs

In Review - 599 DUs

In Review - Condominiums 122

Potential 9,400 DUs

Existing DUs represent 15.6% of Build Out

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Land InventoryType Acres AV No. of Parcels Accounts

Improved 8,510 $400,836,460 2,157

Unimproved 23,675 $272,781,429 3,914

Water Service 2,141

Sewer Service

Totals 32,185 $673,617,889 6,071 2,141

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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

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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

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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 3404/21/23 Board Workshop Glenn M Reiter & Associates Slide 21

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

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Financial Impacts of Conservation

• Fixed Costs are not reduced

– Cost could increase implementing conservation

Programs

• Only reduction is in variable portion of Operating

Costs

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Cost Per AF Based on Sales of 3,000 af

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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 requirements04/21/23 Board Workshop Glenn M Reiter & Associates Slide 25