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Water Rate Analysis

Will NorrisAdministrative Intern

City of The Dalles

Note to reader: Extra text has been added to the following slides that didn’t exist in the original PowerPoint, as it had a verbal presentation.

For further information please refer to the 7/25/11 Council Agenda Packet at: http://www/newsite/sites/default/files/imported/agendas/city_council/PDFs/Agenda072511.pdf

Agenda1. Water Utility Background

– Water Consumption– Previous Forecasts and Actuals– Expenditures and Revenues

2. Capital Requirements– Operations– Capital Improvements

3. Revenue Predictions4. Future Options

City of the Dalles - Water Rate Analysis

Consumption History


Background Capital Requirements Revenue Predictions Options

FY01/0

2

FY02/0

3

FY03/0

4

FY04/0

5

FY05/0

6

FY06/0

7

FY07/0

8

FY08/0

9

FY09/1

0

FY10/1

1 -

200,000

400,000

600,000

800,000

1,000,000

1,200,000

Metered water data from Utility Billing shows that system-wide water use has changed little in the past ten years

Possible reasons could include conservation, reaction to higher water prices and more water efficient appliances

Previous revenue predictions assumed increasing water use and more development.

Lower than expected water sales has meant that revenue expectations have not been met

Background Capital Requirements Revenue Predictions

Previous Revenue Predictions

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

Revenue Predicted vs. Actual2006 staff report Actual

($)

Mill

ions


Difference

$1.3 Million

Options

FY 97/98

FY 98/99

FY 99/00

FY 00/01

FY 01/02

FY 02/03

FY 03/04

FY 04/05

FY 05/06

FY 06/07

FY 07/08

FY 08/09

FY 09/10

$-

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

$3,000,000

$3,500,000

$4,000,000

Total Revenue Operating Costs and Debt Payments Fund Balance

Water Utility History



Flat Rates/Lowered Reserves

Rate Increases/Capital Investments

Options

Water Utility Personnel and Materials(2011 Dollars)



FY 01/02

FY 02/03

FY 03/04

FY 04/05

FY 05/06

FY 06/07

FY 07/08

FY 08/09

FY 09/10

$-

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

$3,000,000

Adjusting for inflation, the operating costs within the Water Utility have ,on average, increased 1.6% per year.

This is as healthcare, energy and metals prices have experienced large increases.

FY 2011/12 Debt Service


Revenue Predictions

2007 Water Revenue Bond $561,405(Wicks Clear Well, Dam permitting, Lone Pine well)

FFC 2008 $59,971(Public Works Shop Relocation)

FFC 2009 $32,421(West 1st Local Improvement District)

ARRA Loan $200,892(Vista Reservoir)

Total $854,689

OptionsBackground Capital Requirements

While operating costs have remained stable, implementing the Water Master Plan as well as meeting unexpected regulatory costs has substantially increased the debt of the utility.

Required Revenue to meet Expenses

Meeting current debt service and continuing forward historic price trends will require significant increases in Revenue in order to maintain fund balances.



Options

$-

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

Previous Actual Future Projected

Capital Projects



Thompson / 19 St. $650,000DEQ Temp Mitigation $1,200,000Paint Sorosis Reservoir

$670,000

Clean Garrison Reservoir

$15,000

Dog River Line Replacement

$6,800,000

Lone Pine Well Enhancement

$1,000,000

Paint Columbia View Reservoir

$300,000

3rd St. Streetscape $600,000Finished Water Pipeline

$10,000,000

TOTAL $22,000,000

Port Pipeline $950,000

There are still many projects that need to be completed in the next decade. Only one of which is primarily capacity enhancement.

The rest are meeting federal regulations or securing the quality and quantity of water the city already uses


Revenue PredictionsCity of the Dalles - Water Rate Analysis

Options

Previous revenue predictions created hypothetical scenarios and then calculated what billing would result.

This analysis instead used a regression equation to model the relationship between rate increases and additional revenue.Note: Background graph is not necessarily actual model statistics



FY 01/02

FY 02/03

FY 03/04

FY 04/05

FY 05/06

FY 06/07

FY 07/08

FY 08/09

FY 09/10

FY 10/11

FY 11/12

$1,250,000

$1,750,000

$2,250,000

$2,750,000

$3,250,000

$3,750,000

$4,250,000

+ 0% rate+ $3k revenue

+ 10% rate+ $311k

Options

Years with flat rate increases saw flat revenue growth. After instituting successive 10% rate increases, each year saw about a $311,000 increase in revenue.


0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%

-$200,000

-$100,000

$0

$100,000

$200,000

$300,000

$400,000

$500,000X Variable 1 Line Fit Plot

$0

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

$7,000,000

$8,000,000

Actual Predicted Revenue

0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%

-$200,000

-$100,000

$0

$100,000

$200,000

$300,000

$400,000

$500,000X Variable 1 Line Fit Plot

$-

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

$7,000,000

$8,000,000

Actual Predicted Revenue


Using this relationship to model a regression equation, any increment of rate increases can be used to estimate revenue growth.



Options1. On-time

– This is a safe scenario– Each capital investment completed as planned

2. Delayed– Each project is delayed several years to allow the supporting

rate base to grow

3. Critically Delayed– Increases risk of infrastructure failure and emergency

maintenance

A. Minimum Rate IncreasesB. Stable Rate Increases



Option #1 On Time



• Least risk and highest upfront cost option

FY 11/12 10%FY 12/13 16%FY 13/14 16%FY 14/15 14%FY 15/16 10%FY 16/17 10%FY 17/18 10%FY 18/19 8%FY 19/20 8%FY 20/21 6%

Eight of the ten projects are bonded in FY 11/12. The last two projects, port pipeline extension and replacing the finished water pipeline are bonded in FY 16/17

Option #2 A Delayed



• Each project delayed several years• Three bond issues requiredFY 11/12 10%FY 12/13 10%FY 13/14 6%FY 14/15 6%FY 15/16 8%FY 16/17 12%FY 17/18 14%FY 18/19 12%FY 19/20 12%FY 20/21 14%

Thompson/19th street project is paid with cash in FY 11/12. The first bonding begins in FY 14/15.

This plan requires three rounds of bonding.

Option #2 B Delayed



• Rates are spread more evenly• Fund Balances grow before projects


Exact same Capital Project timeline at Option #2 A.

Version B prioritizes stable rate increases, rather than just-in-time rate increases.

Option #3 A Critically Delayed



• Projects pushed to their furthest extreme• Dog River Permitting will require renewal


Thompson/19th st. is still paid cash this year. The largest project, Dog River Pipeline and the Finished Water Pipeline are delayed until FY 19/20.

Option #3 B Critically Delayed



• More evenly spacing rate increases leads to a large growth in fund balances


Version B prioritizes more stable rates. However, with the two larges projects, Dog River pipeline and Finished water pipeline replacements both delayed, major rate increases at the end of the decade are unavoidable.


Discussion

Economy & Finance

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