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Newport News Waterworks Report to the Community - Fiscal Year 2010

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It is up to us

to live up to the legacy

that was left for us,

and to leave a legacy

that is worthy of our children

and of future generations.

Christine Gregoire, Governor of Washington

The most essential function of any water utility is to provide a safe and dependable supply of high quality drinking water. At Newport News Water-works, an integral part of that mission is the prin-ciple of sustainability; that is, the ability to provide fi rst-rate service to our current customers without compromising our ability to meet the needs of fu-ture generations. As municipal employees, we un-derstand that the equipment we use, the facilities we operate, the infrastructure we maintain, belong to the public trust. We are merely their custodians.

Since its founding in 1889, Newport News Water-works has maintained a proud tradition of careful, responsible management of the land, water, infra-structure, and fi nancial resources in our custody. Just as past generations did for us, it is our obliga-tion to be intelligent caretakers of the assets in our custody in order to pass them on as a continuing legacy to our children and their children, in turn. This is possible only through thoughtful leader-ship, vigilant oversight, and sound management, with a long-term view toward protecting and pre-serving all our resources. This concept of sustain-ability is a long-standing principle of the way we do business. In fi scal year 2010, Waterworks contin-ued that tradition in every aspect of our operations, from routine maintenance to capital improvement planning.

It is an ethic of total stewardship.

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Infrastructure Stewardship

The durability of our infrastructure plays an important role in Waterworks’ stewardship eff orts. Conscientious stewardship demands that we replace, repair, or refurbish aging infrastruc-ture in a timely manner. At the same time, we must optimize the performance of our capital assets in order to maximize their lifespan and reduce replacement costs. In this way, neither existing nor future customers are encumbered with undue fi nancial or service burdens.

For this reason, Waterworks care-fully scrutinizes our infrastructure each year to identify and prioritize replacement needs. Waterworks accomplishes this through our Capital Improvement Plan (CIP). Waterworks’ CIP is developed through a consensus-driven pro-cess, with input from employees representing a wide cross-section of the organization, so that treat-ment, distribution, customer ser-vice, technology, fi nancial, and op-erational issues are all addressed. This process allows us to effi ciently and eff ectively manage our assets in a proactive manner by:

anticipating when aging infra-• structure needs to be added, refurbished, or upgraded;

understanding the risks of • allowing needed work to be postponed; and

properly estimating the fi nan-• cial capital required to perform the necessary work.

During FY 2010 Waterworks’ in-vested approximately $15 million in new or on-going CIP projects. Over the next fi ve years, we an-ticipate investing another $83.2 million in capital improvements, with $24 million funded through general obligation bonds, $34.9 million funded through water revenue bonds, and the remainder paid for with cash from the operat-ing budget.

The eff ectiveness of such infra-structure stewardship has been demonstrated in our distribution system by the downward trend we’ve experienced in main breaks over the last 15 years. We’ve made especially substantial decreases in the number of breaks in those

sections of our service area where the highest volume of leaks was previously occurring. Concurrent with the reduction in main breaks, Waterworks has seen a signifi cant reduction in the number of discol-ored water complaints received due in part to a systematic eff ort to eliminate a substantial number of dead end lines through the addi-tion of interconnections.

Via an automated call distribu-tion system, our customer service phone center records the types of complaints we receive (e.g., discolored water, low pressure, taste, and odor). Using our geo-graphic information system (GIS), we use this data to identify areas of high complaints. This informa-tion is then used to determine the areas most in need of additional distribution system improvements. We also conduct a targeted fl ush-ing program in remaining areas of high discolored water complaints. In this way, we more eff ectively manage our system renewal eff orts in a way that will reduce costs while improving overall customer satisfaction.

When scheduling water main replacements, Waterworks coor-dinates as much as possible with local government and the Virginia Department of Transportation in

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an eff ort to minimize costs and reduce disruptions for citizens and commuters. Each year the list of Waterworks’ proposed pipeline replacement projects is shared with the public works departments of jurisdictions in our service area in order to coordinate our projects with their pavement resurfacing projects.

We also work with the Virginia Department of Transportation (VDOT) to install and/or move

mains and service lines during their road construction projects.

As a prime example, VDOT be-gan site work last spring on the widening of a major thoroughfare between Newport News and York County. Waterworks is coordinat-ing with VDOT on the installa-tion of approximately two miles of transmission main during this project. When the installation is complete, we will have added an important interconnection between

previously isolated sections of our distribution system, providing in-creased redundancy and reliability at a substantially lower cost than if we had undertaken the project independently.

CIP projects underway during FY 2010 included the rehabilitation of two dams, the replacement of the air scour blowers at the Harwood’s Mill treatment plant, and the re-furbishment of the Copeland Park storage tank.

These images illustrate how conscientious stewardship has signifi cantly reduced the number of main breaks and discolored water complaints in our distribution system over time. Each set of maps is a geographical depiction of the density of all reported main breaks (top) or discolored water complaints (bott om) within the given fi ve-year period.

Main Breaks 1997-2002 Main Breaks 2005-2010

Discolored Water Complaints 1997-2002 Discolored Water Complaints 2005-2010

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Waterworks’ ten storage tanks constitute an important part of our infrastruc-ture, and periodic refurbishment of these resources is necessary to prolong their useful life and ensure their ability to perform the dual functions of providing consistent system pressure and meeting daily peak demands. Major rehabilitation requires that the tanks be drained and taken out of service.

In FY 10, as part of our approved Capital Improvements Plan, Waterworks embarked on a multi-year tank refurbishment project to be funded through cash capital. The project commenced with the ground-up rehabilitation of our Copeland Park Tank, which was last refurbished during the 1990s. In the course of the three-month job, the fi ve-million-gallon tank was sandblasted down to bare metal, structural repairs were completed, and the tank’s interior and exterior were repainted with industrial coatings.

Waterworks was able to complete the project for just under $1 million, in-cluding engineering and repair costs – much lower than budgeted projec-tions, thanks to favorable construction conditions. We hope to receive equally favorable bids on the three tanks scheduled for rehab in the coming year, for signifi cant cost savings on the overall project.

Refurbishing Our Storage Tanks

The interior of the Copeland Park ground storage tank at the start of the refurbishment project (top) and after structural repairs, sandblasting and repainting were complete.

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Upgrading Our Treatment Plants

In anticipation of stricter federal regulations governing water quality, between 2002 and 2007, Waterworks converted from chlorine to ozone disinfection at both our water treat-ment plants. Subsequent to the modifi cation at the Harwood’s Mill treatment plant in 2006, Waterworks commenced a multi-phased project to reduce manganese levels in the fi nished water, the cause of an increased number of discolored water complaints since the conversion to ozone. A key part of that ongoing eff ort was the completion in FY 2010 of a manganese fi ltration plant for recycled waste streams from the treatment plant.

Further improvements at our Harwood’s Mill Treatment Plant include replacing the fi lter media as we prepare to change from conven-tional mixed media fi ltration to biofi ltration. Before that can be done, however, we need to replace two air scour blowers and associated equipment at the plant.

Air scour blowers are used during the back-wash process that cleans the fi lter media.

Because the new fi lter beds will be approximately 33 per-cent deeper than the current beds, it will take more pressure to clean them. The existing air scour blowers, which were installed during the original plant construction in 1989, have limited capacity and won’t support the planned improve-ments. The new blowers are more robust and will be able to handle the deeper media beds.

Preliminary design work for this phase was completed in late spring 2010. We estimate the actual construction will be com-plete by the end of April 2011, sett ing the stage for the fi lter media replacement project, currently scheduled for FY2012.

Organic material and other impurities become trapped in the media as water passes through the fi ltration tanks at the Har-wood’s Mill Water Treatment Plant (left). During the backwashing process, (right) air scour blowers are used to agitate the fi lter media and loosen the trapped particles.

Ozone generators began operation at the Harwood’s Mill Water Treatment Plant in 2002.Ozone generators began operation at the Harwood’s Mill Water

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Rehabilitating Our Dams

During FY 2010, Waterworks made signifi cant progress on two major dam rehabilitation projects already underway and initiated work on a third.

Three years after a breach occurred at Walkers Dam and two years after completion of a $3.6 million stabilization project, fi nal design work for the renovation project was fi nished in April 2010. With the invitation to bid published in late May and responses due in early July, Waterworks ended the fi scal year anticipating the start of the construction phase before sum-mer’s end.

Walkers Dam is located outside the boundaries of the Waterworks service area, on the Chickahominy River in New Kent County. The river and the dam have long been popular destinations for recre-ational boaters and sport fi shing enthusiasts. Due to this popular-ity, Waterworks has maintained communication with local citizens, government agencies, and proper-ty owners throughout the project. We sought their input through public meetings and kept them informed of our activities through email updates.

Meanwhile, to comply with recent changes in Virginia’s dam safety regulations, Waterworks is plan-ning improvements to our Lee Hall Dam, including an increase

in spillway capacity. In June 2010, Waterworks awarded a contract for preliminary analysis and en-gineering studies to a consulting engineering fi rm. They have been tasked with developing a solu-tion that balances impacts to the existing infrastructure, the water supply, and the environment, while also satisfying dam safety requirements.

Using data gathered through surveys, geotechnical fi eld work, and computerized modeling of the reservoir system under a variety of storm events, they will conduct feasibility assessments before pre-senting their recommendations for bringing the 117-year-old structure into compliance with the new regulations.

As part of the Lee Hall Dam rehabilitation project, the spillway capacity will be increased to meet the state’s stricter dam safety regulations

The Chickahominy River is a popular destination for fi shing enthusiasts, including the heron seen here on Walkers Dam.

As part of the Lee Hall Dam rehabilitation project the spillway capacity will be

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Improving the Distribution System

Vital to the success of Waterworks’ infrastructure stewardship eff orts is an indepth knowledge of our assets and their condition. Waterworks is fortu-nate to have had a low employee turnover rate for nearly four decades, allowing institutional knowl-edge to accrue for several generations. Expanding on that knowledge, staff from Waterworks’ IT and Distribution divisions have developed a highly-advanced computer program to identify specifi c locations where the placement of additional valves would signifi cantly improve work crew effi ciency during main repairs.

As a result of this program, it’s been estimated that our institutional knowledge has been increased by an order of magnitude. At the same time, we have increased overall system reliability, reduced system vulnerability, ensured service to critical customers, and enhanced worker safety.

The oldest parts of Waterworks’ distribution system date to the late 19th and early 20th centuries. As our service area grew, parts of the system were expanded without the installation of additional valves. Over time, it has become necessary for repair crews to close multiple valves in order to discontinue

water fl ow and allow work to proceed in certain sections of the system. Waterworks’ Valve Place-ment Program was designed to identify the optimal location for the installation of new valves in these areas.

Combining sophisticated hydraulic modeling with detailed GIS and customer information system (CIS) data, Waterworks staff completed a computerized analysis of our 1,700-mile network of pipes to pinpoint the most advantageous locations for the new valves. In ad-dition, the program identifi es the location of every critical customer (i.e., hospital, medical or dental

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offi ce, school, military base, etc.) on the system, relative to existing valves. Based on their locations and other data, we are able to prioritize the placement of the needed valves.

As a result of this project, Waterworks has realized a number of unforeseen benefi ts. For example, line crews and customer service personnel can now receive signifi cantly more information about main breaks and repairs, including the number and location of valves that need to be closed for water to be cut off at the section of pipe needing repair, the number and types of accounts aff ected (e.g., residen-tial, commercial, industrial, etc.), the specifi c street addresses of accounts out of service, and whether critical customers are involved.

The same data is also being used to help us plan future system improvements. In particu-lar, we have used it to determine where new lines are needed to provide system redun-dancy for critical customers currently on dead end lines, and to predict the remaining life expectancy of pipes upstream of critical customers.

Another in-house analysis, conducted several years ago, was performed using data from

our GIS, CIS, and work order systems. From it we learned that our actual service reliabil-ity rate to customers averages 99.997%. This means a typical residential or business cus-tomer is likely to experience a single two- to three-hour outage every ten years.

We continue to use information from that study to assess over time whether we are expending the appropriate level of resources on system maintenance and improvement as well as whether we are able to reduce mainte-nance expenditures while still maintaining an acceptable level of service.

Additionally, because this analysis revealed that our service delivery reliability is so much higher than other utilities, such as electricity, gas, and telephone, it helped us to identify the need to make service reliability a more visible point in our educational outreach campaigns. In other words, our customers aren’t aware of the highly reliable service we provide com-pared to the other utilities they use.

For this reason, we incorporated the need for expanded outreach to stakeholders into our department-wide performance goals.

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Thanks to our Valve Placement Program, Waterworks has been able to identify and prioritize the optimal placement of additional valves in our system and pinpoint the locations of critical customers.

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StakeholderStewardship

The broad-ranging elements of this program include media relations, educational programs, special events, and in-house development of a variety of print materials, including a quarterly custom-er newslett er, a bi-monthly employee newslett er, the annual water quality report (also called the Consumer Confi dence Report or CCR), and an assortment of infor-mational brochures and fact sheets.

During FY 2010, Water-

As caretakers of the public’s resources, Waterworks believes an important aspect of our stewardship responsibility is keeping our customers informed and engaged. Con-sequently, we support a comprehensive com-munications program.

works staff coordinated or participated in more than 50 outreach events, includ-ing classroom presentations, treatment plant tours, com-munity festivals, environ-mental fairs, and speaking engagements, reaching an estimated 10,000 people.

With the use of social me-dia growing worldwide, Waterworks recognized a low-cost means of extending our reach in the community and connecting with more of our customers, especially the

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growing number who no longer rely on traditional media outlets for news and information. Taking advantage of this trend, in FY 2010 our public information offi ce added social media to our communications toolkit with the introduction of a Waterworks page on Facebook.

Waterworks has long been fortunate to have had the strong support of the Newport News City Council, our policy makers and rate sett ers. As a result, for the past two decades, Council has generally approved regular, incremental rate increases. This practice is not only considered to be a key to the long-term sustainability of an eff ectively managed water utility, but is also highly fa-vored by bond rating agencies. Moreover, regular, incremental rate increases are more manageable for our customers than larger, less frequent ones.

As our service area’s growth rate has slowed, Waterworks’ system expansion has also slowed, allowing us to turn additional resources toward system main-tenance. With the passage of time, our capital resources—water mains, dams, and treatment facilities—have experienced wear and tear. Regular repair, refur-bishment, and/or replacement is necessary to protect this investment. Water-works believes it is important for our customers to recognize that such main-tenance is part of our normal operations and should be funded through our regular rate structure. It is equally important for them to understand that the cost of such maintenance is likely to rise as the infrastructure continues to age.

Students from a local elementary school participate in the “water dance,” during a presentation by Waterworks staff .St d t f l l l t h l ti i t i th “ t

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Then-City Councilwoman Madeline McMillan (now Vice Mayor) spent a day in the fi eld with Waterworks employees during Drinking Water Week. Here she observes a crew as they replace a water main.

While the level of service Waterworks pro-vide is extremely high, this fact seems to go unrecognized by most of our customers. Consequently, our water and the system that delivers it are often undervalued by the pub-lic. For this reason, and because of the greater scrutiny water rates have been receiving, Waterworks regularly communicates with the city council in an eff ort to ensure they are aware of industry issues and trends, are familiar with the historical intent behind ex-isting rates, and are fully informed about the condition of our assets and the operational challenges we face.

As part of this eff ort, during Drinking Water Week 2010, Waterworks invited city council members to spend part of a workday with Waterworks employees, either individually or in small groups, to get a fi rst-hand look at how our employees perform their jobs. The

experience provided a unique opportunity for them to understand the challenges our em-ployees face in their day-to-day activities and observe the complexity of our operations.

It is hoped that this expanded dialogue will encourage an even more participative and collaborative partnership during the rate-sett ing process. As long as our customers and stakeholders share our dedication to preserv-ing and maintaining our water system as the invaluable public resource it is, we are confi -dent we will retain their continued support.

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Environmental Stewardship

team members review Water-works’ signifi cant aspects (activi-ties that have potential environ-mental impacts), set objectives and targets to work toward throughout the year, track progress on existing targets, and discuss timely issues.

Since its inception, Waterworks’ EMS Team has achieved success in a variety of environmental areas such as the reduction of genera-tor exhaust, improved disposal of waste oil, and increased re-cycling of waste materials. For example, between 2009 to 2010 alone, Waterworks recycled nearly 2,000 pounds of aerosol cans; 2,000

Waterworks is proud to have earned the designa-tion of Exceptional Environmental Enterprise (E4) from the Virginia Department of Environmental Quality. This is the state’s highest obtainable rating, and Waterworks has the only drinking water treat-ment/supply facilities thus recognized.

The E4 level is conferred only on facilities that have a fully-imple-mented, independently-verifi ed Environmental Management System (EMS), have committ ed to measures for continuous and sus-tainable environmental progress and community involvement, and have a record of sustained compli-ance.

Waterworks began implementing its EMS in 2005, when a cross-divisional team was established to help us improve our environmen-tal performance through a frame-work of continuous improvement. At regularly scheduled meetings,

Employees on the Waterworks Adopt-a-Spot team volunteer to pick up litt er along a one-mile section of the roadway that passes in front of our Maintenance and Operations Center.

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pounds of auto batt eries; 24,000 pounds of used tires, rubber hoses, and belts; 74,000 pounds of paper; and 74,940 pounds of scrap metal.

During the past fi scal year, Waterworks EMS Team led several new sustainability initiatives. One of them earned the Environmental Protec-tion Agency’s National Partnership for Environmental Priorities (NPEP) award for reducing the amount of lead used to balance vehicle tires by 34.6 percent.

Other activities included the installation of motion sensors to controllighting in offi ce spaces left empty for more than 30 minutes. The team is currently researching alternatives to further reduce the department’s use of electricity, through the use of LED lighting, daylight harvesting, and solar lighting.

Major eff orts such as these produce impressive results quickly. However, Waterworks recognizes that more modest eff orts can have an equally sizeable impact over time. Therefore, last year Waterworks ended the purchase and use of polystyrene (Styrofoam®) cups. Our Maintenance and Operations Center (MOC) led the department in this eff ort, and through this single action, eliminated 38,000 polystyrene cups annually from city waste streams. As a result, the polystyrene cups were removed from other Waterworks facilities. Employees department-wide now use coff ee cups and mugs brought from home, and Waterworks purchases only a small quantity of environmentally-friendly paper cups for visitors.

Waterworks’ environmental eff orts, however, are not limited to the work-place. As a responsible municipal citizen and neighbor, we strive to pro-

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mote environmental stewardship within the broader community. Illustrating this point is Waterworks’ all-new all-volunteer Adopt-A-Spot team, which accepted responsibility for a one-mile stretch of roadway that passes in front of the MOC in northern Newport News. Not only does this team conduct quarterly litt er collections, but they do it on their own time. Our employees truly “walk the talk” with respect to pollution prevention.

Another example of our environmental out-reach is the series of rain barrel workshops Waterworks sponsored in conjunction with the Newport News Department of Public Works, the Newport News Master Gardeners, and Habitat for Humanity.

Seven of these workshops were held between January and June 2010. The primary goal of the workshops was to promote principles and practices of sustainability including:

Following instructions provided by our Master Gardener partners, participants in the workshops constructed rain barrels using former food-shipping barrels. Once home, some customers, like the one who shared the photo above, painted their barrels to personalize them and make them more att ractive.

Water conservation – with local rainfall • measuring an average of 44 inches per year, customers can reduce or eliminate using tap water outside to irrigate gardens and plants;

Recycling – used food shipping barrels • (olives, pickles, and other food items) are purchased, cleaned, and re-purposed; and

Storm water management – • using a rain barrel helps control runoff and reduces the amount of water going into local storm water drains.

A second goal was to promote citizen involve-ment. During the workshops, citizens worked side-by-side with city staff to outfi t their bar-rels for home use. This aff orded city staff and citizens the opportunity to interact directly on a meaningful level while promoting environ-mental sustainability.

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Workforce Stewardship

The principles of good stewardship oblige us to be good caretakers of all our resources, including our human resources. This means helping our employees to maximize their tal-ents and realize their full potential. Moreover, good workforce stewardship means creating a positive and healthy work environment that fosters creativity, productivity, collaboration, and teamwork among members of our staff .

In addition to responding to the needs of our current employ-ees, Waterworks must focus on the signifi cant challenge of succession planning. We must carefully analyze and address our ability to retain institutional knowledge, as well as to recruit and retain high quality employees to replace the large number of baby-boomers retiring from our workforce. Finally, we must recognize and prepare for the diff ering needs and demands of tomorrow’s workforce.

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enhancing their specifi c skill sets. An example of this is Waterworks’ new supervisor train-ing program, introduced during the past fi scal year and created to address the specifi c needs of Waterworks personnel. Topics in this course include hiring practices, person-nel law, dealing with employees, 360-degree feedback, and many other areas that increase leadership, teamwork, and management capabilities. While the program was designed with the new supervisor in mind, experienced supervisors are also encouraged to att end this series to refresh their knowledge and learn new management techniques.

With succession planning in mind, Waterworks is rolling out an internal career development program aimed specifi cally at workforce re-tention and development. This program will allow us to focus on specifi c positions of con-cern and to direct employees in developing their skills sets toward known future oppor-tunities. This program will include a mentor-ing component wherein employees will be teamed with experts to facilitate knowledge transfer, encourage cross-division network-ing, and develop employees’ knowledge, skills, and abilities for improved performance and greater retention.

Career and Leadership Development

As a department of the City of Newport News, Waterworks participates in the training programs of-fered by the city’s Department of Human Resources. One such program is the “Pathways to Learning” series that teaches employees about our local gov-ernment structure, our leadership philosophy, the process we use for change, the values under which we operate, and other important leadership topics. Department employees may also participate in a series of courses designed to provide training in specialized areas such as computer software, records manage-ment, or Spanish. Included in this series are e-learn-ing or Internet-based programs.

In addition to these generalized courses, the city off ers a two-track Leadership Development Academy (LDA) specially-designed to cultivate future leaders. Track I con-centrates on giving employees a strong foundation of knowl-edge in the principles of eff ective leadership. Track II focuses on training opportunities for employees who already have considerable leadership experience or who have completed Leadership Track I.

Six Waterworks employees participated in the inaugural Track I course, presented in FY 2010. All six planned to continue with the second track after graduating in July. Meanwhile eight additional Waterworks employees were accepted into the FY 2011 Track I course.

Complementing and expanding upon the city-off ered courses, Waterworks has developed several in-house training pro-grams that focus directly on the needs of our employees dur-ing the varying phases of their careers. For example,Waterworks believes it is critical to make new employees feel welcome and to provide a structure in which to understand the organizational culture. Therefore, all newly hired person-nel are given a department-wide orientation, during which they tour our facilities and meet with the Director and each of our six division managers for discussions about our op-erations and our organizational culture. Through this type of training, we hope to help new employees make a quicker transition into the organization and ultimately achieve higher retention rates.

For established employees, we off er training geared toward

The City accepted eight Waterworks employees into the FY-11 Leadership Development Academy Track I course.Th Ci d i h W k l i h FY

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Training Tomorrow’s Workforce Today

Real-World GIS

Having successfully partnered with students from the Heritage High School Technology Depart-ment on a project in FY 2009, Waterworks again teamed up with the students in FY 2010, off ering them another opportunity to gain hands-on, real-world experience in GIS.

While performing regular water-shed maintenance following rainstorms, staff from Waterworks’ Forest Resources Branch had observed erosion on many of the fi re trails, leading them to the as-sumption that many of the culverts in our watersheds may be under-sized.

Waterworks’ commitment to att racting and retaining skilled employees has led to several partnerships with local school divisions in which students have been off ered unique career development opportunities.

One of these programs is the Hampton Roads Public Works Academy, off ered through the New Horizons Career and Technical Education Center. This two-year hands-on program trains high school students for future careers as public works and public utilities employees. The program consists of basic courses in 32 major disciplines associated with occupations with munici-palities and agencies throughout the region. Each class is taught by a subject matt er expert in that particular discipline. Prior to graduation, students are required to complete a paid summer internship with a member organization of the Public Works Academy. Students who successfully complete the program receive priority hiring status for positions at local public works and public utilities departments.

Beginning in fall 2009, Waterworks staff worked with school faculty and administrators to develop a semester-long project to calculate the drainage areas of our fi re trail culverts. The following February, 15 students visited the watershed to view the eroding culvert areas and collect spatial data using GPS equipment.

Using the data they collected, the students then calculated and mapped the areas in the GIS pro-grams on their classroom comput-ers. The resulting information is being used to guide “right-sizing” of culvert replacements, thus reducing future erosion and improving raw water quality.

Programs such as these are excel-lent examples of Waterworks’ eff orts to ensure a highly skilled and reliable future workforce by preparing tomorrow’s employees today.

Waterworks’ staff trained Heritage High School students to use GPS units to collect spacial data for mapping culverts in the watershed.Waterworks’ staff trained Heritage High School students to use GPS units to

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Financial StewardshipThe story of Waterworks’ fi nancial stewardship cannot be revealed by describing a single year’s fi scal management. Rather, it must be understood within the context of our long-term commitment to maintaining aff ordable rates without compromising water quality or the level of service provided.

Evidence of that commitment lies in the fact that in FY 2010, our average residential customer paid less than $23 per month for water service, an increase of 73 percent since 1990. Over the same twenty-year period, the Consumer Price Index—from which the rate of infl ation is calculated—increased by 75 percent, and the median household income in our service area increased by more than 80 percent.

During that time, Waterworks completed over $400 million in capital improvements, replacing

and upgrading two treatment com-plexes, adding 209 miles of pipe, completing major improvements to several dams and spillways, and signifi cantly improving security after 9/11. We replaced an obsolete, computerized billing system with a state-of-the-art Customer Informa-tion System and improved service to our customers by adding online and credit card payment options, budget billing, and a computerized telephone response system.

We reduced the environmental im-pacts of our operations by institut-ing a residuals recovery and land

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application program for our post-treatment waste discharges and implementing an Environmental Management System for continu-ous environmental improvement.

We also constructed the fi rst groundwater desalination plant in our region and consolidated our operations in a 110,000 square-foot maintenance and operations center that replaced a number of aging facilities located across the city.

Thanks to the enhancements we’ve made in our water treatment process, we’ve improved water quality, substantially reducing the number of taste, odor, and discol-ored water complaints received. With our conversion to ozone dis-infection, we decreased the level of trihalomethanes (THMs) – a by-product of chlorine disinfection

– in our fi nished water. And through our Distribution System Improve-ment program, we’ve cut the average number of leaks in our distribution pipelines nearly in half, from more than 40 per 100 miles of pipe per year to only 22 per hundred miles per year.

All this was accomplished while adding 31,000 new customer accounts and with budget increases averaging only 3.72 percent per year. In FY 2010, Waterworks served 58,000 more customers than we did in 1990, with only fi ve more employees.

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Total StewardshipBecause of our commitment to total stewardship, Waterworks has carefully invested in capital improvement projects to extend the life of our system and bolster its integrity. We have developed creative partnerships to expand our training programs and develop a pool of candidates to continue our legacy into the next generation.

We have implemented improvements in our operations allowing us to run more effi ciently, and we have adopted best practices to reduce our impact on the en-vironment. We have integrated new technology to bett er respond to customer demands and ever more stringent water quality regulations.

At Waterworks, we have never lost sight of the trust placed in us by every per-son who drinks our water. Thanks to careful and thoughtful stewardship, Wa-terworks is positioned to meet future challenges, confi dent of honoring our obligations to our predecessors by passing on to our successors a utility capable of providing a safe and dependable supply of high quality drinking water for generations to come.

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Comparative Financial HighlightsFiscal Year Ended June 30, 2010

What We Received

Receipts from customers $ 68,061,772 90.13%

Capital assets contributions 6,532,422 8.65%

Proceeds from sale of capital assets 374,409 0.5%

Interest received 549,738 0.73%

TOTAL SOURCES $ 75,518,341 100.00%

Sources and Uses of Funds (Cash Flows)

How It Was Used

Payments to suppliers $ 19,871,169 18.91%

Payments to employees 21,348,763 20.31%

Other payments 3,742,192 3.56%

Acquisition of capital assets 10,095,239 9.61%

Repayment and retirement of long-term debt 31,390,000 29.87%

Interest paid 8,649,977 8.23%

Transfer to other funds 10,000,000 9.51%

TOTAL USES $ 105,097340 100.00%

FUNDS AT THE BEGINNING OF THE YEAR $ 119,919,520

FUNDS AT THE END OF THE YEAR $ 90,340,521

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Balance SheetFY 2010 Financials

ASSETS JUNE 30, 2010 JUNE 30, 2009CURRENT ASSETS:

Cash & Cash EquivalentsUnrestricted $ 46,825,466 $ 55,015,115Restricted 43,515,055 64,904,406Receivables (Net Of Allowance) 15,152,833 11,409,897Inventories 3,415,746 3,585,396

Total Current Assets $ 108,909,100 $ 134,914,814

NON CURRENT ASSETS:Capital Assets (Net of Depreciation) $ 399,958,760 $ 456,773,872Other Assets 2,405,557 3,513,691

Total Non Current Assets $ 402,364,317 $ 460,287,563

TOTAL ASSETS $ 511,273,417 $ 595,202,377

LIABILITIES AND NET ASSETSCURRENT LIABILITIES:

Accounts Payable and Accrued Expenses $ 1,278,279 $ 1,626,356Construction Payable From Restricted Cash 549,419 1,805,324Accrued Liabilities 2,616,985 3,041,695Bonds Payable - Current Portion 13,635,000 31,390,000Deferred Revenue 36,259,461 37,174,095

Total Current Liabilities $ 54,339,144 $ 75,037,470

NON CURRENT LIABILITIES:Accumulated Leave $ 1,907,498 $ 2,059,900Total Customer Deposits 4,248,924 4,502,786Bonds Payable (Net of Current Portion) 180,508,382 195,292,527

Total Non Current Liabilities $ 186,664,804 $ 201,855,213

TOTAL LIABILITIES $ 241,003,948 $ 276,892,683

NET ASSETS:Invested In Capital Assets, Net Of Related Debt $ 238,441,047 $ 276,666,222Unrestricted 31,828,422 41,643,472

Total Net Assets $ 270,269,469 $ 318,309,694

TOTAL LIABILITIES AND NET ASSETS $ 511,273,417 $ 595,202,377

23

OPERATING REVENUES: JUNE 30, 2010 JUNE 30, 2009Water Sales $ 58,472,328 $ 59,813,335Water Standby Fee 914,634 325,905Charges for Services 10,702,508 11,618,995Miscellaneous 2,629,873 2,058,940Total Operating Revenues $ 72,719,343 $ 73,817,175

OPERATING EXPENSES:Personnel Services $ 20,787,551 $ 21,045,420Contractual Services (Sch #1) 11,208,879 11,228,035Internal Services (Sch #1) 1,517,751 1,377,139Total Material & Supplies 5,440,446 4,933,980Depreciation (Sch #1) 14,161,675 14,168,645Other (Sch #1) 3,742,192 3,278,678

Total Operating Expenses $ 56,858,493 $ 56,031,897

Operating Income (Loss) $ 15,860,850 $ 17,785,278

NON OPERATING REVENUES (EXPENSES):Fees and Charges $ 6,532,422 $ 8,132,413Interest Revenue 549,738 1,940,465Interest Expense (7,220,079) (6,653,001)Amortization, Cost Of Issuing Bonds (Sch#1) (173,382) (156,597)Gain (Loss) On Disposal Of Capital Assets 157,381 2,254,567Loss from King William Reservoir Project Termination (52,612,401) -Loss On Long Term Debt (Sch #1) (1,134,752) (1,898,162)Transfers Out (Sch #1) (10,000,000) (10,000,000)

Total Non Operating Revenues (net) $ (63,901,075) $ (6,380,315)

Increase in Net Assets $ (48,040,225) $ 11,404,963

NET ASSETS, BEGINNING OF YEAR $ 318,309,694 $ 306,904,731

NET ASSETS, END OF YEAR $ 270,269,469 $ 318,309,694

Income StatementFY 2010 Financials

24

Newport News City Council

McKinley L. Price, D.D.S.Mayor

Madeline McMillan

Vice Mayor

Sharon P. Scott

Councilwoman

Herbert H. Bateman, Jr.

Councilman

Joseph C. Whitaker

Councilman

Dr. Patricia P. Woodbury

Councilwoman

Tina L. Vick

Coucilwoman

City Manager

Neil A. Morgan

City Manager

Ki ley L P i e D D S

Newport News WaterworksCustomer Service Center (City Center at Oyster Point) 700 Town Center DriveNewport News, Virginia 23606

Monday -Friday8 a.m. - 5 p.m.

Newport News Treasurer’s Offi ce (Payments Only)2400 Washington AvenueNewport News, Virginia 23607

Monday - Friday8 a.m. - 4 p.m.

Customer Service Call Center757-926-1000757-926-1100 TDD

Emergency Service Dispatcher(After Hours, Weekends & Holidays)757-234-4800757-234-4933 TDD

Onlinewww.nngov.com/waterworks

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