water talks - water rates: what do they pay for?
DESCRIPTION
Director of Finance Tracy McCraner provides an overview of the Water Authority's rates. She reviews what makes up rates, why they are increasing, what the rate drivers are and what the future may hold for the San Diego region. From the September Water Talks: Water Rates: Funding a Reliable FutureTRANSCRIPT
Finance Director/Treasurer, Tracy McCraner
September 18, 2012 1
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What do we spend our money on
How do we manage costs/fiscal responsibility
Key Rate and Charge Drivers
Summary
Water purchases & treatment
CIP Expenditures
Debt service
Operating departments
Hodges operations
Equipment replacement
Other expenditures
$700,474 49%
$321,129 23%
$280,394 20%
$87,715 6%
$6,052 <1%
$1,220 <1%
$20,449 1%
$1,417,434 100%
Water Purchases and Treatment
CIP Debt Service
23% 49% 20%
Three categories account for 92% of the total budget:
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Water Authority’s Two-Year Budget for Fiscal Years 2012 and 2013 reflects a number of cost reduction and rate mitigation strategies in light of the “new normal – decrease of 16% from previous two-year budget ◦ Significant staffing reductions
31.33 positions (FTEs) or 16.4% eliminated in the Budget
Shift from building to managing existing assets
◦ Two-year no net cost MOUs
◦ Increased PERS employee cost sharing
Strong Fiscal Policies: Debt/Reserves/Investment
Rate Relief approved by the Board by lowering debt coverage level for FY 2013
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Increasing cost of water from suppliers
Significant investment in capital improvements and planned debt service
Reduced water sales volumes
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Projected CY 2013 M&I Cost of Water
Purchases/QSA Exchange
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MWD represents 81% of the Water Authority’s cost of water purchased and/or transported
* Excludes the debt service for capital projects and recovery of settlement expenditures.
MWD Supply Costs 52%
Canal Water Purchases*
<1%
IID Water Purchases*
19%
QSA Transportation Costs with MWD
29%
Total Cost = $285M
CY 2013 Water Sales
61% 39%
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8 * Excludes CP program fees and trustee services
2012 2013 2014 2015 2016
2011 Projected Debt Service $114 $138 $144 $148 $153
2012 Projected Debt Service $114 $135 $141 $145 $151
$60
$80
$100
$120
$140
$160
$180
$200
Mill
ion
s ($
)
Fiscal Year
Senior Lien Debt Service Increase -
$21M
9
0
100
200
300
400
500
600
700
2006 2007 2008 2009 2010 2011 2012 prelim
1,0
00
acr
e f
eet
Fiscal Year
Water sales in FY 2011 were 36% lower than in FY 2006
Water sales are projected to be relatively flat
36% Reduction
Untreated Water $88/AF Increase
14%
Treated Water Rate $111/AF Increase
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MWD Costs
Increase in IID Water Rate
Primarily Debt Service and Other Factors
48% 48%
10%
26%
12%
31%
11%
Increase in IID Supplies
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Cost of water purchases is 63% of the wholesale cost of water
The remaining 37% or $19.22/month is for the Water Authority to:
◦ Deliver water and maintain the system
◦ Rapidly diversify the region’s water supplies
◦ Provide in-region emergency water storage
◦ Develop in-region water storage capacity
Water Authority Operating Costs
Estimated CY 2013 Wholesale Costs per
Household *
$14.70
$5.30
$4.52
$27.93
IID/QSA Costs
Water Authority Capital Costs
MWD Costs 63% is the
Cost of Water
37% is Water Authority
Costs
Wholesale Monthly Cost of Water to Households
TOTAL: $52.45/month
* Based upon 0.5 AF of consumption a year
Wholesale Charges
Proposed Rates Monthly Retail Cost
Percent Retail Impact
Untreated $3.03 4.2%
Treated $3.82 5.4%
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5 Retail Agency Average Composite Cost (CY 2012) o Fixed Charge: $19.83 monthly
o Commodity Charge: $51.40
o Composite Monthly Residential Bill: $71.23
Actual rate impact will vary by member agency Notes:
1. Analysis based on retail rates for the City of Carlsbad, Helix Water District, the City of San Diego, Sweetwater Authority, and Otay Water District.
2. Tier 1 and Tier 2 pricing blocks vary by member agency.
3. Historic total water demand used to calculate member agency specific weighting factors.
4. Individual member agency commodity charge calculated using its average single family residential water use (hcf).
5. Composite commodity charge is the sum of the individual member agency's commodity charge times its weighting factor.
Key rate and charge drivers for CY 2013
◦ 8.5% increase in MWD costs
◦ $21 million (18%) increase in senior lien debt service – significant planned capital investment in our facilities and infrastructure
◦ Increasing IID deliveries and scheduled IID cost increase
◦ Persistent low water sales environment
MWD rate and charge volatility mitigation
◦ Succeeded in limiting MWD’s average rate increase to 5%
◦ Coverage level reduced to 1.35x in FY 2013; target of 1.5X will be achieved in FY2014
Overall rate and charge increase will vary by member agency depending upon the fixed charge allocations
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Any Questions please contact:
Tracy McCraner
Finance Director/Treasurer
858-522-6671