Riverside Public Utilities Water System Update Section 1 - - PowerPoint PPT Presentation

Riverside Public Utilities Water System Update

Credit Presentation

Section 1 Introduction Section 2 City of Riverside Update Section 3 Management and Key Strategic Initiatives Section 4 Water System Update System Update Financials Update Section 5 Conclusion

2011 Rating Presentation – April 19, 2011 Page 3

Presentation Participants

Riverside Public Utilities

• Brent Mason, Finance Director
• David Wright, Public Utilities General Manager
• Reiko Kerr, Assistant General Manager, Finance and Administration
• Kevin Milligan, Assistant General Manager, Water

Financial Advisor, Public Financial Management

• Daniel Hartman, Managing Director
• William Frymann, Senior Managing Consultant

Underwriter, De La Rosa

• Guillermo Garcia, Vice President

Introduction

2011 Rating Presentation – April 19, 2011 Page 4

RPU Key Credit Strengths

• RPU has exceeded its financial targets during the last five years and continues to improve

financial metrics which already compare favorably to the highest rated retail water credits in California

• Riverside‘s ‗AA‘ rated service territory continues to be strong, and the City of Riverside

remains the cornerstone of Riverside County

• Strong debt service coverage and high liquidity levels with substantial additional assets
• Revenue flexibility is created by the significant rate differential between RPU and other

California utilities, including other municipally owned utilities

• Riverside‘s City Council has shown a clear willingness to raise rates and protect and

build the financial strength of RPU‘s systems

• Water supply is secured for the life of the Bonds—RPU does not rely on the

Metropolitan Water District—and RPU is developing new water sources

• Diverse customer base with balanced customer concentration
• Experienced and successful management team with proven strategic vision and ability

to execute plans

• Proactive capital plans to maintain key infrastructure; RPU is well ahead of peer utilities

in the completion of capital plans

• Peer reviews and other utility ratings support best in class ratings for RPU

Introduction

Section 1 Introduction Section 2 City of Riverside Update Section 3 Management and Key Strategic Initiatives Section 4 Water System Update System Update Financials Update Section 5 Conclusion

2011 Rating Presentation – April 19, 2011 Page 6

The Riverside Service Territory is Strong

• The City of Riverside is the primary economic driver of

the region

• It is the 12th largest city in California and continues to

grow

• Encompasses 81.5 square miles
• Additional $1.8 billion of commercial/industrial/retail/

residential building permits over the past five years

• Net importer of jobs over the past five years
• 4,401 housing units added during the past five years
• Southern California‘s third largest suburban retail

center with $4.8 billion in annual sales

• Riverside is home to four internationally recognized

universities and colleges which support 50,000 students

• Top 10 employers in Riverside are primarily government

agencies, educational institutions, and hospitals

City of Riverside Update

City of Riverside Largest Employers As of June 30, 2010 Employer Number of Employees University of California, Riverside 6,470 County of Riverside 6,395 Riverside Unified School District 3,867 City of Riverside 2,619 Riverside Community College District 1,669 Alvord Unified School District 1,669 Riverside Community Hospital 1,600 The Press Enterprise 1,090 Parkview Hospital 900 Goodrich Corporation 500

Source: City of Riverside, Development Department

2011 Rating Presentation – April 19, 2011 Page 7

Riverside Demographics and Statistics

• Population continues to grow at manageable pace
• 6% increase in population over the past five

years and continued development

• Current population of 304,051
• 54% of the 94,000 housing units are owner occupied
• 67% are single unit structures
• 2% are foreclosed
• The City has a lower foreclosure rate than the County and Inland Empire overall
• Assessed Valuation for 2010 was $17 billion
• The average household income is $66,293
• Approximately 30,766 households have an average income greater than $75,000, and

approximately 16,653 households have an average income greater than $100,000

280,000 285,000 290,000 295,000 300,000 305,000 310,000 2006 2007 2008 2009 2010

Consistent Population Growth City of Riverside Update

2011 Rating Presentation – April 19, 2011 Page 8

The City General Fund Credit Remains Strong

• Riverside is highly rated, reflecting the strength of the regional economy, and the City‘s AA

category General Obligation ratings reflects Riverside‘s strong role as the hub of the County economy

• Riverside has a strong balance sheet and income statement that demonstrate

consistent efforts to live within the City‘s means

• The City of Riverside‘s General Fund has built up and maintained substantial reserves in

excess of $40 million despite the economic downturn

• Total reserves are more than 20% of budgeted FY 2010/2011 expenditures
• $30 million is set aside for economic contingencies
• Additional $10 million available for use by the General Fund
• FY 2009/2010 ended at $44 million (and projected at $44 million for FY 2010/2011)
• RPU‘s General Fund Transfer to the City is at the maximum level (11.5%) and is

anticipated in RPU‘s budget and rates

City of Riverside Update

2011 Rating Presentation – April 19, 2011 Page 9

Riverside is Fiscally Prudent

• Despite revenue challenges, the City‘s FY 2009/10 budget yielded a surplus of

approximately $4 million that has been directed to City Council priorities

• The City‘s FY 2010/2011 budget is balanced
• Achieved through prioritizing program delivery and holding positions vacant, while

maintaining all City services

• City management has consistently demonstrated a conservative budgetary approach

$0 MM $50 MM $100 MM $150 MM $200 MM $250 MM $300 MM Budgeted Expenditures Actual Expenditures

City of Riverside Update

2011 Rating Presentation – April 19, 2011 Page 10

Riverside is Committed to Future Development

• The five-year Riverside Renaissance has entered its final months and the $1.5 billion dollar plan is 80%

complete

• The City‘s commitment to the Renaissance program reflects a long-term approach to inspiring private

investment and increasing the quality of life for all citizens

• Riverside Renaissance is the most ambitious public investment program in Riverside‘s history
• Includes replacing infrastructure, and expanding and improving police, fire, parks, library, and other

community facilities

• Residents have demonstrated very strong support for the Renaissance Initiative

City of Riverside Update

2011 Rating Presentation – April 19, 2011 Page 11

Riverside New Business Development

• Riverside has very limited undeveloped industrial/commercial land and is able to be

very selective regarding how that space is developed, focusing on high-tech/high- wage prospects

• University Research Park

– The 39-acre park is a hub for emerging technology business and is already home to several technology companies – Newly constructed 35,000 s.f. Surado Corporate Center

• Turner Riverwalk

– 1 million s.f. mixed-use, commercial/retail project

• Downtown Projects

– 10 story, newly developed 250,000 s.f. office building purchased by Riverside County – Citrus Tower – 6 story 132,000 s.f. office building under construction – Hyatt Place Hotel – 5 story, 125 room hotel – Convention Center Expansion – 29,000 s.f. expansion, and remodel of existing facilities – Fox Entertainment Plaza – 12,000 s.f. restaurant/retail space, 10,000 s.f. exhibition space, 4,000 s.f. black box theater, 400 parking space garage

• Riverside is a high-technology community and offers free high-speed wireless

internet that covers 77% of the community

City of Riverside Update

Section 1 Introduction Section 2 City of Riverside Update Section 3 Management and Key Strategic Initiatives Section 4 Water System Update System Update Financials Update Section 5 Conclusion

2011 Rating Presentation – April 19, 2011 Page 13

RPU is a Community Asset for Riverside

• Riverside invests in the community through RPU which functions as a great partner for the

City

• Improve and protect the excellent financial base of the Utility
• Build a high quality, modernized infrastructure
• Safeguard Riverside‘s supply of quality water for the next 100 years
• Riverside‘s 55 local wells supply 100% of City‘s drinking water needs
• RPU provides reliable low cost service which is valuable to customers
• RPU rates are significantly below those of other local providers
• City Council has shown a willingness to maintain the financial health of RPU and to

preserve the strength of these important assets

Management Strategy and Key Initiatives

2011 Rating Presentation – April 19, 2011 Page 14

RPU Management Team is Experienced

• RPU management team is experienced and forward thinking
• RPU has conducted long-range strategic planning and financial planning
• Identified and implemented financing/rate mechanisms to address risks

(Water Master, Water Supply and Asset Management Plans)

• Planned for rate increases when necessary for system reliability and financial liquidity
• High priority placed on succession planning efforts
• Maintained local control
• RPU‘s staff has a broad and deep level of industry expertise
• RPU has solid political support from City Manager, Public Utilities Board,

City Council, the Chamber of Commerce, and customers

• RPU ―branded‖ as a community asset
• Rate increases have had strong political and community support

Management Strategy and Key Initiatives

2011 Rating Presentation – April 19, 2011 Page 15

Proactive Water Supply Management

• RPU has a low cost, sufficient and reliable source of groundwater and water storage and

is not reliant on Metropolitan

• RPU maintains connections to Metropolitan as a back-up supply of water
• Groundwater supply and RPU rights are adequate to meet 100% of customers needs for

next 100 years

• RPU and other entities have actively analyzed the region‘s groundwater supplies to

ensure that adequate storage levels are maintained

• RPU has aggressively funded capital projects to modernize systems
• Approved 5 year Safe W.A.T.E.R. Rate Plan implementation of Water Master, Water

Supply and Asset Management Plans

• RPU is pursuing ―new sources‖ of local water and water conservation measures
• RPU has identified a recycled water strategy pending a funding mechanism

Management Strategy and Key Initiatives

Section 1 Introduction Section 2 City of Riverside Update Section 3 Management and Key Strategic Initiatives Section 4 Water System Update System Update Financials Update Section 5 Conclusion

2011 Rating Presentation – April 19, 2011 Page 17

RPU Continues to Maintain its Credit Strengths

Water System Update – System Update

• RPU has a low cost, sufficient and reliable source of groundwater and water storage with high quality

back-up sources

• Riverside is completely water independent (FY 2009 – FY 2011)
• RPU Groundwater rights are adequate to meet customer needs for next 100 years
• System connection to MWD for back-up/emergency supplies
• Projections show no imported water (projections for imported water as high as $1,500/AF)
• RPU has excess water supply to sell to other providers
• Pursuing ―new sources‖ of local water supply to increase efficiency and reliability
• Aggressively pursuing grant/bond funding for infrastructure improvements
• Riverside has shown the willingness to raise rates when necessary
• Safe W.A.T.E.R. Rate Plan and implementation of Water Master, Water Supply and Asset Management

Plans

• Cost reimbursement to treat water from parties responsible for contamination
• Growing customer base with no significant customer concentration
• Significant peer recognition
• 2010 Design-Build Institute of America‘s Western Pacific Region Award
• 2011 CMUA Best Management Practices Award
• 2011 Finalist for ACWA Clair A. Hill Water Agency Award for Excellence
• E4 Program - 2011 Program Award of Merit from CA Association of Local Economic Development

2011 Rating Presentation – April 19, 2011 Page 18

RPU Water Resources are Stable/Sufficient

• RPU obtains 100% of its retail water needs from the Bunker Hill Basin (BHB) in San

Bernardino and Riverside/Colton groundwater basins

• 100% of FY 2010 water needs (22,704 million gallons) was from local groundwater
• BHB, approximately 8 miles northeast of the City, is the largest source of water
• 37 wells in the BHB convey water through two separate transmission pipelines
• 14 wells in the Riverside Colton Basin provide the second groundwater source
• 15 storage reservoirs with a capacity of 92.4 million gallons (three days emergency

supply)

• J.W. North Water Treatment Plant increased potable water supply
• RPU/other valley cities have increased conservation efforts
• FY 2010 completed Whitegates 1 & 2 reservoirs (9 MG capacity)
• December 2011 completion of Evans Reservoir (16 MG capacity)
• RPU has the ability to obtain water from MWD through Western Municipal Water District of

Riverside County

Water System Update – System Update

2011 Rating Presentation – April 19, 2011 Page 19

RPU Bunker Hill Basin

• RPU‘s rights to water in the Bunker Hill Basin and diverse system interconnection are an

enormous credit strength

Water System Update – System Update

2011 Rating Presentation – April 19, 2011 Page 20

• Capital investments in the RPU system are proactive and will create long-term benefits for

customers and the utility

• Aggressive 5 year Capital Improvement Plan

– Recycled water facilities, reservoir construction, facility rehabilitation, and main replacements

• Completion of on-site Chlorine Generation Plants

– Lower operating costs than sodium-hypochlorite – Safer than gaseous chlorine

• Water treatment is accomplished through granular activated carbon, ion-exchange,

micro-filtration, and meets or surpasses all State and Federal Standards – Agreements with parties responsible for groundwater contamination provided costs for construction, operation and maintenance of treatment plants – Agreements last up to 30-40 years. This saved $1.7 million in FY 2010 operating and maintenance costs, and helped keep rates low – Lockheed pays to treat TCE and perchlorate; and Shell, Dow Chemical, etc. to treat DBCP

• Expanded pipeline replacement program began in 1998; initiated systematic

transmission pipeline replacement program in 2008

Continuing to Modernize the Water System

Water System Update – System Update

2011 Rating Presentation – April 19, 2011 Page 21

Developing New Water Sources

• RPU is developing new water sources and finding ways to utilize recycled water
• RPU is developing a pipeline project

which will increase supply by 25%

• Utilizing a percolation process

(non-potable to potable water)

• 50% of the pipeline is in existing

infrastructure

• The project will not increase

distribution rates and has a minimal rate impact

• With this project, RPU will have local groundwater

supplies for the next 100+ years of demand

Waste Water Treatment Plant

Ground Water Percolation

Pellisier Ranch (170 Acres) Owned by the Water Department Existing distribution infrastructure Percolation basins Wells

Ground Water Pumping

Potable water

Water System Update – System Update

2011 Rating Presentation – April 19, 2011 Page 22

RPU Efforts to Preserve Water Quality

• Federal and State regulations mandate strict water quality
• RPU aggressively pursues parties responsible for groundwater contamination
• Lockheed Martin Corporation has constructed three regional GAC facilities (Tippecanoe,

Sunnyside, and Raub) to treat TCE at ten of the City‘s wells

• Lockheed Martin has also constructed two wellhead IX treatment facilities (Gage 46-1 and

Gage 66-1) and three regional facilities (Tippecanoe, Sunnyside, and Raub) for removal of perchlorate from ten of the City‘s wells

• Shell Oil funded the construction of two regional GAC plants (Palmyrita and Garner) to treat

DBCP at six of the City‘s wells

• Settlements require payment/reimbursement of RPU‘s treatment costs
• RPU protects its reputation and aggressively responds to erroneous reports on water quality

Collections since 2001 for Water Treatment Responsible Party Contributions in Aid O&M Reimbursed Lockheed Martin $ 26,394,616 $ 8,810,620 Shell Oil, et al 4,147,817 5,778,118 Grants 12,979,402 766,104 Total $ 43,521,835 $ 15,354,842

Water System Update – System Update

2011 Rating Presentation – April 19, 2011 Page 23

RPU Conservation Efforts

• RPU continues to implement conservation measures to improve reliability and preserve

water supply

• Implemented Water Conservation and Reclamation Surcharge (1.5% or retail sales) in 2004
• Expanded tiered rate structure in 2006 and development of a ―Recycled Water Facilities Plan‖
• Implement new programs to conserve an additional 10,000 AF of water and substitute 10,000 AF of

potable demand with recycled water, by 2020

• 2011 Best Management Practices Award (CMUA) 1 of 4 finalists at CMUA
• The City has Water Conservation & Reclamation programs
• Landscape water use efficiency ordinance, and plumbing codes to address retrofit of indoor plumbing

fixtures

• Variety of residential and commercial rebate programs

– Ongoing educational programs to promote conservation, and advertisements in media, newspaper, television, bill stuffers and radio – Employs various skilled auditors to assist customers with conservation efforts

• To promote conservation for development, RPU has implemented the following:
• ―Green Builder Program‖ designed to provide incentives for ultra-high efficiency homes that promote

energy efficiency, water and wood conservation, waste reduction, and indoor air quality

• Drafted a water conservation ordinance that addresses restrictions on water waste

Water System Update – System Update

2011 Rating Presentation – April 19, 2011 Page 24

Additional RPU Water Resources

• The JWNWTP, completed in 2008, brought new water supplies online (converted non-

potable to potable water) and eliminated reliance on imported State Project Water

• Secured additional water rights for Seven Oaks Dam for groundwater recharge and other

uses—long range average approximately 6,800 AFY

• Since 2001, Lockheed Martin & Shell Oil contributed $45.1M to treat groundwater

contamination

• Except the non-grant funded portion of JWNWTP ($12.8M), all treatment facilities costs

(capitalized value $50.6M) have been funded by others

• Riverside Recycled Water Project will replace recycled wastewater with potable water

supplies

• Divert up to 41,000 AFY of recycled water from the City‘s Regional Water Quality

Control Plant

• Supply 10,000 AFY of recycled water for landscape irrigation
• Recycling will free up potable water supply for potable demand
• Santa Ana River storm water capture and recharge project
• RPU can sell excess water for additional revenue, new sources of supply = new potential

source of revenue

Water System Update – System Update

Section 1 Introduction Section 2 City of Riverside Update Section 3 Management and Key Strategic Initiatives Section 4 Water System Update System Update Financials Update Section 5 Conclusion

2011 Rating Presentation – April 19, 2011 Page 26

Historic Figures and Results are Strong

• RPU has maintained strong financials over the past five years

Water System Update – Financials Update

(1)The amounts reflected as “Contributions in Aid” reflect cash collections from a combination of connection fees by developers and grant funded

• projects. Of the amounts listed, $80, $411, $10,357, $2,368, and $181 for the fiscal years 2005-06 through 2009-10, respectively, relates to grants

received from others to construct water facilities.

(2)Does not include contributions to City’s General Fund of $3,539,000, $3,928,000, $4,955,000 $5,276,000, and $5,657,000 for the fiscal years ended

June 30, 2006, 2007, 2008, 2009 and 2010, respectively.

Historical Operating Results ($ in Thousands) Fiscal Year Ended June 30, 2006 2007 2008 2009 2010 Operating Revenues: Residential, Net $ 22,214 $ 28,232 $ 29,794 $ 31,900 $ 33,096 Commercial, Industrial, and Other 12,087 15,171 16,370 17,691 18,051 Total Retail Sales, Net $ 34,301 $ 43,403 $ 46,164 $ 49,591 $ 51,147 Wholesale Sales 151 164 206 802 1,765 Other Operating Revenues 2,598 2,602 2,408 3,128 3,442 Total Water Revenues $ 37,050 $ 46,169 $ 48,778 $ 53,521 $ 56,354 Interest Income 1,773 2,931 3,357 3,169 1,815 Contributions in Aid(1) 10,878 5,611 13,410 3,749 1,308 Non-Operating Revenues 16,525 988 1,767 447 2,509 Total Revenues $ 66,226 $ 55,699 $ 67,312 $ 60,886 $ 61,986 Operating Expenses: Field Operations 7,171 7,569 8,753 10,190 10,505 Production and Operations 13,516 15,050 16,336 16,102 14,716 Engineering 6,341 6,842 8,738 9,347 9,424 Water Resources 1,309 Total Expenses(2) $ 27,028 $ 29,461 $ 33,827 $ 35,639 $ 35,954 Net Operating Revenues Available for Debt Service and Depreciation $ 39,198 $ 26,238 $ 33,485 $ 25,247 $ 26,032 Debt Service Requirements on Outstanding Bonds $ 7,665 $ 7,754 $ 8,630 $ 11,201 $ 12,540 Debt Service Coverage 5.11x 3.38x 3.88x 2.25x 2.08x

2011 Rating Presentation – April 19, 2011 Page 27

Long-term Assets/Liquidity Management

• Water Utility owns approximately 650 acres in City of San Bernardino
• Water Utility owns approximately 658 acres in Riverside County
• Electric Utility owns approximately 108 acres in Riverside County
• Water-Land Book value is approximately $11 million
• Most purchased 80-100 years ago and undervalued on financial statements
• 56 acre land sale to electric utility on December 31, 2010
• FMV sale = $11.6 million
• Acquired in 1930s with book value of $17,142
• 118 acre land sale to electric utility with loan to the Redevelopment Agency on

January 25, 2011

• FMV sale = $5.56 million
• Acquired in 1930s with book value of $26,706
• Better match of long-term assets and cash reserves for both utilities
• Water receives approximately $1 million annually (2% of retail revenues) from rental income
• Electric receives approximately $150K annually from rental income
• Electric has land with potential future revenue stream and value appreciation
• Water has increased reserves that reflects the sales

Water System Update – Financials Update

2011 Rating Presentation – April 19, 2011 Page 28

RPU Maintains Ample Cash and Liquidity

• RPU maintains ample liquidity and continues to meet goals to increase cash

Water System Update – Financials Update

Water Cash Balances Fiscal Year Ended June 30, 2002 2003 2004 2005 2006 2007 2008 2009 2010 12/31/10 Unrestricted Cash $ 28,539 $ 19,979 $ 17,367 $ 16,088 $ 33,765 $ 40,129 $ 29,577 $ 29,679 $ 29,370 $49,617 Council Restricted Cash

• 121

276 741 1,249 1,761 2,079 2,255 Total Cash $ 28,539 $ 19,979 $ 17,367 $ 16,209 $ 34,041 $ 40,868 $ 30,826 $ 31,440 $ 31,449 $51,872 Days Operating Cash on Hand 544 368 268 224 456 503 330 318 314 546 $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 2002 2003 2004 2005 2006 2007 2008 2009 2010 12./31/2010 Council Restricted Cash Unrestricted Cash

2011 Rating Presentation – April 19, 2011 Page 29

RPU Customers are a Diversified Stable Group

• RPU water revenue is diversified with a large proportion of stable retail sales and a group
• f stable large customers

# of Customers Revenues by Customer Class

Water System Update – Financials Update

Residential 90.98% Commercial 7.76% Industrial 0.67% Other 0.59% Residential 64.94% Commercial 16.53% Industrial 15.21% Other 3.32%

2011 Rating Presentation – April 19, 2011 Page 30

RPU Customer Base is Stable and Diverse

• RPU has a diverse customer base and no risk of customer concentration
• The Water Utility‘s top ten customers made up over 8% of revenues and more than

10% of total sales

FY 2010 Top 10 Water Customers

Customer Name % of Revenues % of Sales Local Government 2.18% 3.42% Local University 1.45% 1.56% Local School District 1.25% 1.40% Local School District 0.99% 1.06% Local Government 0.95% 1.07% State Agency 0.46% 0.50% Corporation 0.44% 0.50% Local University 0.27% 0.30% Local University 0.26% 0.28% Hospital 0.26% 0.30%

Water System Update – Financials Update

2011 Rating Presentation – April 19, 2011 Page 31

RPU Customer Growth Continues

• Metered customers continue to increase but successful conservation efforts and new

sources of supply eliminates purchases of imported water

• RPU has not purchased any imported water in the past two years
• Water sales fluctuate with weather, 2006-2010 average production was 25,573 and the

current year is 6.7% below average.

Water Production and Distribution Fiscal Year Ending June 30, 2006 2007 2008 2009 2010

• Est. 2011

Annual Production from System Wells

(1)

24,962 27,795 26,385 25,035 22,704 23,856 Purchased Imported Water 870 681 536 Total Annual Water Production 25,832 28,476 26,921 25,035 22,704 23,856 Peak Daily Distribution

(2)

118.8 109.2 111.3 105.8 98.0 90.6 Average Daily Production

(2) (3)

67.8 75.9 73.8 68.8 62.3 62.5

(1)In millions of gallons. One acre-foot is equal to approximately 325,900 gallons. (2)In millions of gallons per day. (3)Average Daily Production = Average Daily Distribution

62,000 62,500 63,000 63,500 64,000 64,500 2006 2007 2008 2009 2010

Water System Update – Financials Update

2011 Rating Presentation – April 19, 2011 Page 32

Capital Planning and Rate Actions

• RPU‘s board and Riverside‘s City Council have showed consistent willingness to raise

rates

• Rate increases have helped RPU modernize the water system and increase reliability
• Even with a history of increases RPU water rates are the lowest in the area/Southern

California

Water Rate Actions Effective Dates Overall System Residential Commercial / Industrial Irrigation August 25, 1997 8.50% 8.50% 8.50% 8.50% February 28, 2001 2.40% 2.40% 2.40% 2.40% March 01, 2002 4.00% 4.00% 4.00% 4.00% March 01, 2003 3.90% 3.90% 3.90% 3.90% June 01, 2004 8.50% 8.50% 8.50% 8.50% June 01, 2005 8.50% 8.50% 8.50% 8.50% June 01, 2006 8.50% 8.50% 8.50% 8.50% November 1, 2006 12.00% 12.00% 12.00% 12.00% November 1, 2007 10.00% 10.00% 10.00% 10.00% November 1, 2008 10.00% 10.00% 10.00% 10.00% November 1, 2009 10.00% 10.00% 10.00% 10.00% November 1, 2010 10.00% 10.00% 10.00% 10.00%

Water System Update – Financials Update

2011 Rating Presentation – April 19, 2011 Page 33

California Utility Rate Comparison

• RPU‘s rates are well below those of other utilities in the region
• In June 2004, the City began collecting a surcharge for Water Conservation and

Reclamation programs. This surcharge was approved by City Council and was phased in

• ver a three-year period with a 0.5% surcharge effective June 1, 2004, 1.0% effective

June 1, 2005 and 1.5% effective June 1, 2006 through May 31, 2014

• These funds are restricted and will be used to fund programs
• To promote conservation, education on water-use efficiency
• To encourage use of reclaimed water
• For research, development and demonstration programs to advance science and

technology with respect to water conservation and reclamation

Residential Water Rates Quantity Summer Winter First 15 ccf $ 1.14 $ 1.13 16 - 35 ccf $ 1.83 $ 1.64 36 - 60 ccf $ 2.85 $ 2.26 Over 60 ccf $ 4.10 $ 2.75

Water System Update – Financials Update

2011 Rating Presentation – April 19, 2011 Page 34

Rate Actions Result in Capital Improvements

• The past record of rate increases and capital improvement expenditures show that RPU

has been using rate actions over the past several years to modernize the water system in a manner which is ahead of the necessary system improvements other utilities will do.

All Capital Projects FY 2001 FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 Total System Expansion 3,857,742 4,457,718 3,853,839 7,651,369 8,707,959 3,848,970 8,907,405 8,913,748 7,647,249 8,539,333 66,385,332 Pipeline Replacements 4,553,295 5,026,243 4,224,487 5,601,001 4,561,101 11,248,327 11,719,125 7,056,721 7,620,704 6,168,229 67,779,234 Treatment Plants 706,200 2,394,292 11,736,523 2,408,243 773,457 42,788 894,316 20,462,835 4,128,556 312,590 43,859,802 Reservoir Construction 77,453 23,418 624,529 2,241,018 178,441 715,858 203,215 355,584 13,463,617 5,376,111 23,259,245 Meter Replacements 103,156 130,536 150,878 139,859 126,480 130,193 468,001 529,554 1,035,470 600,869 3,414,996 Property Acquisition

• 164,646

1,696,042 2,541,371 2,661,353 95,901 7,159,314 Caltrans

• 111,651

4,052,888 1,738,342 692,933 53,049 31,281 6,454 33,193 6,719,791 Recycled Water

• 65,890

509,336 3,610,947 4,186,173 Total Capital Projects 9,297,846 12,032,208 20,701,908 22,094,379 16,085,779 16,843,717 23,941,153 39,956,985 37,072,740 24,737,173 222,763,887 Grants/Developers 2,974,030 4,516,891 13,070,396 9,044,408 5,424,243 3,038,790 3,669,060 12,665,194 2,065,444 1,917,106 58,385,562 Fiscal Year FY 2001 FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 Total RPU Bonds/Rates Only 6,323,817 7,515,317 7,631,512 13,049,971 10,661,536 13,804,926 20,272,092 27,291,791 35,007,296 22,820,066 164,378,325 Average Rate Increase 2.4% 4.0% 3.9% 8.5% 8.5% 8.5% 12.0% 10.0% 10.0% 10.0%

Capital Improvement Projects and Related Rate Increases Water System Update – Financials Update

2011 Rating Presentation – April 19, 2011 Page 35

California Utility Rate Comparison

• RPU‘s rates are well below those of other utilities in the region including utilities which are

currently higher rated

• Limited exposure to ever increasing Metropolitan rates has also allowed RPU to

maintain rates well below Corona, Glendale, Pasadena, Eastern MWD, and Western MWD

*Rates as of July 1, 2010 for average residential customer using 26 ccf

Water System Update – Financials Update $87.37 $87.09 $82.17 $76.84 $74.74 $68.51 $62.54 $53.62

$45.90

$- $20 $40 $60 $80 $100

Eastern MWD Pasadena Glendale Corona Burbank Western MWD Irvine Ranch Anaheim Riverside

49.3% AA+/AA 90.4% Aa2/AA/AA 89.7% AA/AA+ 79.0% Aa2/AA 67.4% 62.8% AAA/AAA 36.3% Aa1/AAA/AAA 16.8% AAA/AAA

2011 Rating Presentation – April 19, 2011 Page 36

Projected Financials are Strong

• RPU expects to maintain strong financials results in the future
• Riverside‘s financial outlook is strong and RPU has a proven record of delivering on its

projections

Water System Update – Financials Update

Projected Operating Results

Fiscal Year Ended June 30, 2011 2012 2013 2014 2015 Operating Revenues: Residential $ 35,750 $ 37,343 $ 37,401 $ 38,143 $ 38,598 Commercial, Industrial, Other 20,165 21,542 22,181 23,050 23,117 Total Retail Sales, Net 55,915 58,885 59,582 61,193 61,715 Wholesale Sales 1,954 2,164 2,164 2,272 2,386 Other Operating Revenues 2,585 2,150 2,172 2,237 2,304 Total Water Revenues $ 60,454 $ 63,199 $ 63,918 $ 65,702 $ 66,405 Interest Income 3,981 3,908 2,707 2,469 3,360 Contributions in Aid 2,000 1,500 8,167 1,750 1,750 Non-Operating Revenues 16,007 1,007 1,007 1,507 1,507 Total Revenues $ 82,442 $ 69,614 $ 75,799 $ 71,428 $ 73,022 Operating Expenses: Purchased water/Pumping, & Supplies/Services $ 14,669 $ 14,970 $ 15,273 $ 15,580 $ 15,895 Field, Production & Operations, & Engineering 21,611 21,681 21,951 22,337 22,729 Total Expenses $ 36,280 $ 36,651 $ 37,224 $ 37,917 $ 38,624 Net Operating Revenues Available for Debt Service and Depreciation $ 46,162 $ 32,963 $ 38,575 $ 33,511 $ 34,398 Debt Service Requirements on Outstanding Bonds $ 15,014 $ 14,806 $ 14,796 $ 15,720 $ 16,594 Debt Service Coverage (Net of BABs Credit) 3.07 2.23 2.61 2.13 2.07 Debt Service Coverage 2.89 2.12 2.46 2.04 1.99

Section 1 Introduction Section 2 City of Riverside Update Section 3 Management and Key Strategic Initiatives Section 4 Water System Update System Update Financials Update Section 5 Conclusion

2011 Rating Presentation – April 19, 2011 Page 38

RPU Compares Favorably to Other Utilities

• As demonstrated by comparison to other municipal utilities, RPU‘s water enterprise is deserving
• f the highest ratings given to retail water systems in Southern California
• RPU fares well against the highest rated California retail water utilities over a number of key

metrics

• Water supply is stable and low cost for the life of the Bonds
• No reliance on water imports
• Strong debt service coverage ratios, high liquidity levels
• Strong, experienced management
• Demonstrated political support for necessary rate actions
• Strategic decision with community and city council support for rate increases to proactively

enhance system reliability

*Data obtained from individual Standard & Poor’s Moody’s Investor Service and Fitch Rating reports and individual utility annual reports.

Water Utility Key Metric Comparison Utility Current Ratings Number of Customers Total Operating Revenue (in millions) Total Operating Expenses (in millions) % Water Imported from Metropolitan Debt Service Coverage Days Cash

• n Hand

Anaheim Public Utilities Department* AAA/AAA 63,127 $ 58.52 $ 45.96 22.00% 2.60x 235 Burbank Water and Power AAA/AAA 26,400 $ 22.10 $ 16.71 47.00% 4.10x 153 Glendale Water and Power* Aa2/AA 33,509 $ 37.00 $ 29.12 70.00% 3.53x 84 Los Angeles Department of Water and Power* Aa2/AA/AA+ 659,000 $ 812.36 $ 584.38 48.00% 2.04x 76 Pasadena Water and Power Department* AA/AA+ 37,586 $ 43.48 $ 28.67 65.00% 4.00x 29 Riverside Public Utilities 64,231 $ 60.15 $ 36.35 0.00% 2.89x 546

Conclusion

2011 Rating Presentation – April 19, 2011 Page 39

RPU Key Credit Strengths

• RPU has exceeded its financial targets during the last five years and continues to improve

financial metrics which already compare favorably to the highest rated retail water credits in California

• Riverside‘s ‗AA‘ rated service territory continues to be strong, and the City of Riverside

remains the cornerstone of Riverside County

• Strong debt service coverage and high liquidity levels with substantial additional assets
• Revenue flexibility is created by the significant rate differential between RPU and other

California utilities, including other municipally owned utilities

• Riverside‘s City Council has shown a clear willingness to raise rates and protect and

build the financial strength of RPU‘s systems

• Water supply is secured for the life of the Bonds—RPU does not rely on the

Metropolitan Water District—and RPU is developing new water sources

• Diverse customer base with balanced customer concentration
• Experienced and successful management team with proven strategic vision and ability

to execute plans

• Proactive capital plans to maintain key infrastructure; RPU is well ahead of peer utilities

in the completion of capital plans

• Peer reviews and other utility ratings support best in class ratings for RPU

Conclusion

2011 Rating Presentation – April 19, 2011 Page 40

Tentative Financing Schedule

• April 18-19: Rating Agency Presentations
• April 19: Finalize Documents
• April 19: Prepare Document Packet for April 26th City Council Meeting
• April 26: City Council Meeting to Approve Water Series 2011A Refinancing
• Week of May 2: Receive Ratings for 2011 Water Series A
• May 13: Print and Mail Preliminary Official Statement for 2011 Water Series A
• May 18: Pricing of 2011 Water Series A
• May 25: Pre-closing for 2011 Water Series A
• May 26: Closing for 2011 Water Series A
• June 1: Optional Redemption of Water Series 2008A

Conclusion