C O NSUMPT IO N-BASED FIXED REVENUE A no ve l, e q uita b le a p - PowerPoint PPT Presentation

C O NSUMPT IO N-BASED FIXED REVENUE A no ve l, e q uita b le a p p ro a c h to fina nc ia l susta ina b ility Ma tt Willia ms, MBA Da vis re side nt F ra nk L o g e , PhD Civil & E nviro nme nta l E ng ine e ring , Pro fe sso r UC Da vis Ce nte r fo r Wa te r-E ne rg y E ffic ie nc y, Dire c to r

PRO BLEM STATEMENT  The e ffic ie nc y o f urb a n w a te r use ha s b e e n inc re a sing b e tw e e n 1995 a nd 2005.  Urb a n w a te r use in C a lifo rnia fe ll b y ne a rly 25 p e rc e nt fro m 247 to 201 g a llo ns p e r p e rso n p e r d a y.

PRO BLEM STATEMENT

PRO BLEM STATEMENT  The e ffic ie nc y o f urb a n w a te r use ha s b e e n inc re a sing b e tw e e n 1995 a nd 2005.  Urb a n w a te r use in C a lifo rnia fe ll b y ne a rly 25 p e rc e nt fro m 247 to 201 g a llo ns p e r p e rso n p e r d a y  Whe n c usto m e rs re d uc e w a te r use , utilitie s lo se m o ne y b e c a use the y c a nno t c o ve r the ir fixe d c o sts, w hic h fo r m o st utilitie s a re the m a jo rity o f to ta l c o sts.

ISCAL PAI N F CAL PAI N POL IT I

SO LUTIO N STATEMENT  The so lutio n w e p ro p o se is sim p ly a n e xte nsio n o f w a te r b ud g e ts, in tha t it is a llo c a ting the fixe d c o sts o n a b ud g e t, a s w e ll a s the va ria b le c o sts.  To truly a c hie ve Pro p 218 p ro p o rtio na lity, w e think the m a jo r c o nsid e ra tio n in a ny a na lysis o f re sid e ntia l c o nne c tio ns is the id e a o f a c tua l w a te r use re la tive to p o te ntia l w a te r use o f e a c h g ive n a c c o unt.

WHEN WATER AG ENC IES C REATE WATER RATE STRUC TURES, THEY ARE FO RC ED TO DEAL WITH THREE C O MPETING FO RC ES  C a lifo rnia C o nstitutio n A rtic le XIII (Pro p 2 1 8 ) - - The re q uire m e nts o f Pro p o sitio n 218 p a sse d in 1996 b y C a lifo rnia vo te rs, w hic h c re a te d the C a lifo rnia C o nstitutio n a rtic le XIII D, se c tio n 6 … sp e c ific a lly tha t p ro p e rty-re la te d fe e s, suc h a s w a te r se rvic e fe e s, sha ll no t e xc e e d the p ro p o rtio na l c o st o f p ro vid ing the se rvic e a ttrib uta b le to a p a rc e l  C a lifo rnia C o nstitutio n A rtic le X Wa te r Se c tio n 2 - - The p ro visio ns o f C a lifo rnia C o nstitutio n a rtic le X, se c tio n 2, w hic h c re a te the fra m e w o rk w ithin w hic h p ub lic a g e nc ie s m ust e sta b lish a nd e nfo rc e w a te r c o nse rva tio n m e a sure s a nd a re c ha rg e d w ith the re sp o nsib ility o f m a na g ing w a te r re so urc e s, a nd  Fisc a l Re sp o nsib ility – w ith the tw o ke y c o m p o ne nts b e ing F ISC AL S TABILITY a nd F ISC AL S USTAINABILITY

FIXED VS. VARIABLE … C O ST VS. REVENUES  Fo r e ve ry $2.00 o f re ve nue lo st to c o nse rva tio n… CURRE NT RAT E DE SIGN C OST R NUE E VE P ROPORT IONS P ROPORT IONS Va ria b l 33% Va ria b le 33% e Co sts Re ve nue F ixe d 67% 67% F ixe d Co sts Re ve nue  O nly $1.00 o f C o st is sa ve d …

FIXED VS. VARIABLE … C O ST VS. REVENUES  Fo r Ag e nc ie s this d isc o nne c t m e a ns a ST URA L DEFIC IT … RUC T CURRE NT RAT E DE SIGN C OST R NUE E VE P ROPORT IONS P ROPORT IONS Va ria b l 33% Va ria b le 33% e Co sts Re ve nue F ixe d 67% 67% F ixe d Co sts Re ve nue  And the m o re w e c o nse rve , the m o re DEFIC IT w e c re a te

DEALING WITH A STRUC TURAL DEFIC IT  Build a c ushio n (“ g o ug e ” c usto m e rs in e a rly ye a rs? )  Run w ith the d e fic it a nd / o r d ra w d o w n re se rve s  G o b a c k to the c o nsum e rs fre q ue ntly w ith a ne w ra te struc ture w ith hig he r ra te s NONE OF T SE OPT IONS ME T HE ST ANDARD OF PROVIDING HE E T E AND ST E WAT R RAT S F OR T HE CONSUME R AND … RE ASONABL ABL E E ARE POL DYNAMIT E AL L IT ICAL

C REAT ING A ste p b y C O NSUMPT IO N-BASED ste p p ro c e ss FIXED REVENUE

(1) C HO O SE REPRESENTATIVE PERIO D

(1) C HO O SE REPRESENTATIVE PERIO D

(2) C ALC ULATE ALLO C ATIO N PRO PO RTIO NS

(3) IDENTIFY & BUDG ET FIXED &VARIABLE C O STS 2011/12 Estimated Estimated Estimated Estimated Budgeted Expense Budget Fixed % Variable % Fixed $ Variable $ FUND 511 - Water Operations 1110-7252 Miscellaneous $351,260 60% 40% $211,000 $141,000 7520 Utility Resources Management $370,745 80% 20% $297,000 $74,000 7522 Water Production $2,869,635 50% 50% $1,435,000 $1,435,000 7523 Water Distribution $2,053,439 50% 50% $1,027,000 $1,027,000 7526 Cross-Connection Control $121,296 100% 0% $121,000 $0 7527 Fire Hydrant Maintenance $702,217 100% 0% $702,000 $0 7528 Water Conservation $0 50% 50% $0 $0 7529 New Services/Meter Install $16,906 100% 0% $17,000 $0 7531 North Davis Meadows $86,732 100% 0% $87,000 $0 7536 Water Support - City Facilities $45,395 100% 0% $45,000 $0 7565 Water Inter-Department Charges $234,119 100% 0% $234,000 $0 7602 - 8543 Miscellaneous $329,924 60% 40% $198,000 $132,000 8835 Debt Service $163,789 100% 0% $164,000 $0 9895 Transfer to Capital Replacement Fund 512 $2,767,268 80% 20% $2,214,000 $553,000 Total 10,112,725 $6,752,000 $3,362,000 Percentage Split 67% 33% FUND 512 - Water Capital Replacement 7520 Utility Resources Management $70,000 80% 20% $56,000 $14,000 8110-8217 Capital Replacement Misc. $2,981,603 80% 20% $2,385,000 $596,000 8543 JPA Contribution $4,275,000 90% 10% $3,848,000 $428,000 8836 - 8840 Debt Service $1,042,154 100% 0% $1,042,000 $0 9895 Transfer from Fund 511 ($2,767,268) 80% 20% ($2,214,000) ($553,000) Total $5,601,489 $5,117,000 $485,000 Percentage Split 91% 9% FUND 513 - Water Capital Expansion 8110-8185 Capital Expansion $349,533 100% 0% $350,000 $0 8543-8552 JPA Contribution $0 100% 0% $0 $0 8836 Debt Service $302,416 100% 0% $302,000 $0 9895 Contribution transfer From ????? ($150,000) 100% 0% ($150,000) $0 8223-8225 Capital Expansion $1,015,000 100% 0% $1,015,000 $0 Total $1,516,949 $1,517,000 $0 Percentage Split 100% 0% Total All Water Funds $17,231,163 $13,386,000 $3,847,000 15 Percentage Split 78% 22%

(3) ALLO C ATE FIXED C O STS

REC O VERING FIXED C O STS Pie re pre se nts to ta l fixe d c ha rg e s Pie re pre se nts to ta l fixe d c ha rg e s   Mo st wide ly use d me tho d Suppo rts F isc a l Sta b ility a nd  Simple to unde rsta nd Susta ina b ility   E a c h me te r size furthe r sub divide d E xpa nds c o nse rva tio n me ssa g e to “ste wa rdship o f c o lle c tive a sse t” 17

(4) VARIABLE C O STS PRO PO RTIO NALITY