MunicipalFinancialServices

Water Rates Update

December 18, 2008

MunicipalFinancialServices

Water Rate Setting Objectives

Pay operations and maintenance expenditures

Pay capital expenditures Pay debt principal and interest Meet debt coverage requirements Maintain prudent level of reserves Keep rates competitive

MunicipalFinancialServices

Water Rate Study Updates

Review revenue requirements – updated in this study

Allocate costs proportionally among customers – no change; used same allocation basis as for current rates (43% from Basic charges and 57% from Usage charges)

Develop rate structure – no change; used the current rate structure (meter sizes and tiers)

Customer Characteristics – added customers in Felton service area; steady decline in system-wide average water use

MunicipalFinancialServices

Water System Meters

Residential (6,492)90%

Other2%

Institutional (52)0.7%

Fire Service (29)0.4%

Landscape (11)0.2%

Private Mutual (5)0.1%

Vacant/Other (69)1%

Commercial (249)3%

Multi-Family (396)5%

Total Meters, October 2008 (7,303)

MunicipalFinancialServices

Water System Sales, Ccf

Tier 1: First 10 units (349,406)

38%

Tier 5: Over 200 units (97,074)

11%

Tier 4: 101 - 200 units (40,468)

4%

Tier 3: 41 - 100 units (108,019)

12%

Tier 2: 11 - 40 units (326,693)

35%

Total Water Use, 2009 (921,660 Ccf)

MunicipalFinancialServices

Long Term Water Use and Average Water Use

1819

2021

2223

22 2223 22 23 23

24

2221 22 21

21.2 21.2 21.1 21.1 21.0 21.0 20.9 20.9 20.8 20.7

500,000

550,000

600,000

650,000

700,000

750,000

800,000

850,000

900,000

950,000

1,000,000

1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

To

tal

Wat

er

Use

, C

cf

Total Water Use (Ccf), Actual All Customers (l. scale) Total Water Use (Ccf), Projected All Customers (l. scale)

Avg. Mo. Use, Actual All Customers (r. scale) Avg. Mo. Use, Projected All Customers (r. scale)

Water use in 2009 includes customers in the Felton area

MunicipalFinancialServices

Water System 2008 Replacement Value

Wells$2,350,000

2%

Tanks$5,827,500

6%

Water Pipeline$64,667,875

67%

Meters$10,950,000

11%

Hydrants$2,250,000

2%

Buildings$488,930

0.5%

Water Treatment$7,000,000

7%

Booster Stations$4,450,000

5%

2008 Water System Replacement Cost = $97,984,305

MunicipalFinancialServices

Rate Increase Alternatives Over 10 Years (2009-2018)

New Debt Status > No New Debt $6 Million New DebtAnnual Rate Increases, 2009-2011 > 15% / 10% / 5% 10% / 10% / 5%

Balance July 1, 2009 $13,525,000 $13,525,000

Expenditures

O&M $41,727,490 55% $41,727,490 53%Debt Service $10,833,741 14% $13,653,122 17%Capital Replacement $23,712,167 31% $23,712,167 30%Total Expenditures $76,273,397 100% $79,092,779 100%

Revenues

Water Rates $60,934,053 84% $57,479,762 75%Bond Disbursement $0 0% $6,000,000 8%Other Revenue $7,880,000 11% $7,880,000 10%Loan Repay from Wastewater $240,000 0.3% $240,000 0.3%Interest $3,581,581 5% $4,769,077 6%Total Revenue $72,635,634 100% $76,368,839 100%

Revenues - Expenditures -$3,637,763 -$2,723,940

Balance June 30, 2018 $9,887,237 $10,801,060

MunicipalFinancialServices

No New Debt, $24M Capital, Rates Increases of 15%/10%/5%

1.39% 1.85% 2.00% 2.14% 2.30% 2.51% 2.69% 2.89%3.71% 3.96%

15%

10%

5% 5% 5% 5% 5% 5% 5% 5%

-$20,000

-$15,000

-$10,000

-$5,000

$0

$5,000

$10,000

$15,000

$20,000

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

x$0

00Interest

Other OperatingRevenue

Water Fees

BondDisbursement

Debt Service

CapitalReplacement

Other OperatingCosts

Salaries andLabor Costs

Coverage

Ending Balance

Annual Increasein Rates

MunicipalFinancialServices

No New Debt, $24M Capital, Rates Increases of 15%/10%/5%

1%

11%

0%

15%

10%

5% 5% 5% 5% 5% 5% 5% 5%

$68 $68

$76

$87

$96

$100

$105

$111

$116

$122

$128

$135

$141

$76

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

$110

$120

$130

$140

$150

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Annual Increase in Rates

Avg Single Family 2-Mo Bill

Note: The 2006 rate increase applied only to the Basic Charge

MunicipalFinancialServices

$6M New Debt, $24M Capital, Rates Increases of 10%/10%/5%

1.32% 1.31% 1.42% 1.52% 1.63% 1.73% 1.82% 1.91% 2.31% 2.42%

10% 10%

5% 5% 5%4% 4% 4% 4% 4%

-$20,000

-$15,000

-$10,000

-$5,000

$0

$5,000

$10,000

$15,000

$20,000

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

x$0

00Interest

Other OperatingRevenue

Water Fees

BondDisbursement

Debt Service

CapitalReplacement

Other OperatingCosts

Salaries andLabor Costs

Coverage

Ending Balance

Annual Increasein Rates

MunicipalFinancialServices

$6M New Debt, $24M Capital, Rates Increases of 10%/10%/5%

1%

11%

0%

10% 10%

5% 5% 5%4% 4% 4% 4% 4%

$68 $68

$76

$83

$92$96

$101

$106$110

$115$119

$124

$129

$76

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

$110

$120

$130

$140

$150

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Annual Increase in Rates

Avg Single Family 2-Mo Bill

Note: The 2006 rate increase applied only to the Basic Charge

MunicipalFinancialServices

Comparison of Alternatives

New Debt Status > No New Debt $6 Million New Debt 2009-2018Rate Increases 2009-2011 > 15% / 10% / 5% 10% / 10% / 5% Difference

Debt Capacity > able to issue new date at later date temporary limit to debt issuanceNew Debt Payments > none 15 years at $313,000 per year

Debt Payments 2009-2018 > $10,833,741 $13,653,122 $2,819,382

Rates 2012-2018 > increase at 5% per year increase at about 4% per yearRevenue from Rates > $60,934,053 $57,479,762 -$3,454,291Revenue from Bonds > $0 $6,000,000 $6,000,000

Revenue from Interest > $3,581,581 $4,769,077 $1,187,496Revenue, Rates/Bonds/Int > $64,515,634 $68,248,839 $3,733,205

Change in Fund Balance > -$3,637,763 -$2,723,940 $913,823

MunicipalFinancialServices

Survey of Four Other Agencies

$35.75$41.10 $45.20 $47.45

$33.16 $31.00

$47.42

$31.00$42.28

$59.54

$39.90

$45.84

$50.36$52.84

$58.34$73.38

$59.07

$76.86

$74.50

$90.33

$0.00

$20.00

$40.00

$60.00

$80.00

$100.00

$120.00

$140.00

$160.00

SLVWD,Current

SLVWD,Proposed

2009

SLVWD,Proposed

2010

SLVWD,Proposed

2011

City ofSanta Cruz

(InsideLimits)

SoquelCreek Water

District -SFH

ScottsValley Water

District

SoquelCreek Water

District -Other

City ofSanta Cruz

(OutsideLimits)

Lompico

Quantity

Basic

MunicipalFinancialServices

END OFPRESENTATION

MunicipalFinancialServices

District Customers and Operations Customers

– 7,300 water meter connections as of October 2008– 55 sewer connections

Operations– Water

• Wells, Treatment, Storage, Distribution, Meter Reading, Fire Hydrants

– Sewer• Collection, Treatment, Effluent Disposal, Solids Disposal

– Administration• Billing, Financial Reporting, Operations Compliance

Reporting, Management