Roy Vega | 3/31/11
At a special meeting Tuesday night March 28th, the Board of Directors unanimously passed Resolution 2011-4, A Resolution of Amendment to and Clarification of the Application of the District’s Capital Investment Fees, Water Resource Fee, and Availability Fee Assessments. This was a watershed event in the recent history of the PAWS District.
You will recall that a previous Board had adopted a schedule of fees and charges on 02/09/2010 that established a Water System Capital Investment Fee (CIF) of $3,579 per equivalent unit (EU), a Wastewater Capital Investment Fee (CIF) of $4,252/EU, and a Water Resource (Dry Gulch Reservoir Project) Fee (WRF) of $5,617/EU. This WRF was the fourth and smallest fee assessed since 2006. Accordingly, the Board voted to refund to the WRF payers money which had been paid in excess of this amount. This has already taken place. The two CIFs and the WRF, totaling $13,448, were assessed whenever there was an application for a system connection or upon application for increased use to an existing connection. This was quite onerous, discouraging to potential builders and may have compounded the economic difficulty our community was and is suffering.
Shortly after the district election last spring placed Allan Bunch and myself on the board of directors, a moratorium was declared by the Board on assessing the WRF. That moratorium was successively extended to April 1 of this year pending the findings and recommendations of the Water Supply Study Group (WSSG) composed of concerned citizen volunteers formed at the same time.
In the interim, it became very apparent that the methodology for the calculation of the two capital investment fees was seriously flawed and also needed to be re-studied. Director Bunch correctly identified that the primary cause for the miscalculation of these fees was the absence of a "plan to build-out" philosophy rather than planning for possible water needs based upon unlimited growth of the District’s service boundaries. The latter policy was highly speculative and driven by population increases to the year 2055 using no longer realistic projections. The Bunch principle was that the existing District boundaries are finite and, therefore, the remaining needs for infrastructure can be quantified with a higher degree of certainty. This means that all future petitions for inclusion into the District will have to pay for their impact over and above the "full build-out" planning horizon or inclusion will be denied. As a consequence of this determination, each CIF was set at $3,000 pending resolution of the correct amounts, with the provision that property owners who paid these fees would be refunded the difference should the District’s research result in lower amounts, and no penalty if the research resulted in higher amounts (not deemed likely).
During this time, Jan Clinkenbeard, formerly a member of the WSSG, was selected from a list of qualified candidates to fill the vacancy on the Board created by the resignation of Bob Huff. She has been an admirable and hardworking addition.
Using the mid-range population increase projections for just the existing boundaries of the District developed by the WSSG’s sub-committee on population, and converting that back into EUs, produced a "current" planning horizon of the year 2033 after the District’s water system engineer reported their estimation that 6,042 EU’s remained for "full build-out." Additionally, the engineer was instructed to develop costs for system expansion constrained only by the duty of the District to deliver the standard 30 lbs of line pressure to a service connection. This reduced dramatically the costs the District’s rate payers would have been facing to meet fire flow requirements throughout the system. Developments requiring additional fire flow will utilize other compensatory measures at the expense of the party proposing the development, rather than as a burden on all the rate payers.
Similar work was done by the District’s wastewater system engineering firm. The costs for meeting the needs of future demand (the Capital Improvement Plan or CIP) were then allocated between benefit to existing rate payers and expansion costs caused strictly by new demand (= $16,063,533 for water CIF and $2,995,420 for wastewater CIF), and costs for acquisition of raw water supply that projections anticipate arising toward the end of the current planning horizon (= $11,838,333). This cost, henceforth to be identified as a Raw Water Acquisition Fund, as it turns out, is extremely modest when compared to the $204,519,000 planned to be funded by the former WRF for the Dry Gulch Reservoir Project. Further, as the result of Resolution 2011-4, there will no longer be a separate and distinct Water Resource Fee. Once again, as it formerly was, the funding for future raw water supply (be it storage or diversion rights) is logically a component of the Water Capital Investment Fee.
The conclusion of a year’s work by citizen volunteers, District staff and the Board are new CIFs effective April 1st as follows:
Water CIF = $4,617.00 per EU (but now including a restricted RWA component dedicated to future raw water supply of $1,959.00)
Wastewater CIF = $762.00 per EU
WRF for a Dry Gulch Reservoir Project = $0.00. Abandoned. Money which has been collected from this former assessment in excess of the $1,959 will be refunded to the people who paid it.
Anybody who made application for connections since October 12, 2010 will be refunded the amount paid in excess of $2,658 per EU for water CIF and the amount paid in excess of $762 per EU for wastewater CIF.
The calculation of the two CIFs then made it possible for a consulting firm called Redoak to project operating revenue requirements for the ten year planning period 2011 to 2020. Of four options presented, the one selected by the Board (Option II in their report) anticipates a modest 8.5% rate increase in the years 2014 and 2015 (but flexible), early retirement of 1998 revenue bonding ($665,000), and a debt issue of $9,700,000 in the year 2020. All of this, including refunding of excess fee collections, it has been determined can be accomplished without risk to the District’s creditworthiness.
This also includes servicing the $9,000,000 debt laid on the District to acquire the Dry Gulch Reservoir real estate. The San Juan Water Conservancy District, which last fall was invited by the PAWS Board to separate its operations from that of PAWS, has been called upon to undertake disposition of this real estate in cooperation with PAWS through a joint committee. Director Bunch represents PAWS on that committee which will seek ways of relieving the District’s rate payers of this burden through sale or partnering.
In summation, much remains to be done as a new general manager takes the reigns of administration and management and the Board ponders new reforms to make your water utility more customer friendly and cost effective.
As always, please be sure to contact me or Allan if you need additional information or have comments or suggestions as we promised during the election to communicate and remain available.
