Financial Impact of Drought

1
Financial Impactof Drought
March 5, 2008
Updated 3/17/08
2
Budget Review

• Drought Impacts
• Current Year Budget
• Future Years Budget
• Rate Adjustments

3
Budget Review

• Consumption

160
150
140
130
Average
120
2008
110
MGD
100
90
80
July
May
April
June
March
August
January
October
February
November
December
September
4
Budget Review

• Water Revenues

5
Budget Review

• Wastewater Revenues

6
Budget Review

• Water Rates

Tiers 2008
4.31
gt 22
2.18
12 - 22
1.89
1.33
0 - 11
Commercial - 1.73
Sewer - 3.22
7
Budget Review

• Tap Capacity

Shortfall
Actual
Budget
(7.1) M
20.3 M
27.4 M
8
Budget Review

• FY 2008 Projected

Actual
Budget
226.5 M
244.8 M
Revenues
10 M
10 M
Fund Balance
Total Revenues
236.5 M
254.8 M
Operating
94.5 M
96.2 M
Debt Service
129.0 M
129.7 M
28.9 M
28.9 M
Pay Go Contribution
252.4 M
Total Expenditures
254.8 M
(15.9) M
---
Decrease to Fund Balance
9
Budget Review

• Rate Issues
• FY 08 Bond Covenants
• Mandatory Restrictions
• 1 or 2 watering seasons
• Long Term Consumption Habits
• Effect Of Housing Starts

10
Budget Review
Bond Covenants
Actual
Budget
35 Fund Balance
35.4
40 .3
Test 1 (greater than 1 times debt service, can
use fund balance)
0.94 (13 M)
1.03
0.97 (6 M)
1.06
Test 2 (greater than 1 times debt service)
11
Budget Review

• Projected 09 Water Revenues

12
Budget Review

• Projected 09 Wastewater Revenues

Percentage of Total Annual Revenue
10.00
9.50
9.00
Average
8.50
2009
8.00

7.50
7.00
6.50
6.00
July
Aug
Sept
Oct
Nov
Dec
Jan
Feb
March
April
May
June

Full Year Shortfall of 12 Million

13
Budget Review

• Adjustments
• Revenue Requirement 23
• Delay Capital
• Operating Savings
• Reduce Pay Go

14
Budget Review

• Rate Increase
• Model Increase FY2009 - 6.05
• Drought Impact 9.87
• Implement May 1, 2008

15
Budget Review

• Why Additional Rates?
• Fixed vs. Variable Expenses
• Operations Impacts
• Rates Driven by Capital

16
Budget Review

• Fixed vs. Variable

255 Million Total Budget
17
Budget Review
Employees by Division
4
5
14
37
15
25
18
Budget Review

• Employees Per Thousand Accounts

2.15
2.08
2.10
2.02
2.05
2.00
1.95
1.91
1.88
1.90
1.83
1.85
1.80
1.77
1.75
1.70
1.65
1.60
2002
2003
2004
2005
2006
2007
19
Budget Review

• Cost of Enforcement to Date
• Total Cost - 358 k
• Out of Pocket - 156 k
• Fines - 237 k
• Employees Involved - 126

20
Budget Review

• Capital Spending
• Completed Projects
• McDowell Plant Expansion
• Southwest Water Main Phase 1
• McAlpine Lift Station
• Projects Under Way
• WW Treatment Plant Expansion
• Briar Creek Phase 1
• Southwest Water Main 2 3
• Five Year CIP Projects
• Long Creek WWTP
• Northeast Water Main
• Annexation

76 M 40 M 32 M
132 M 51 M 26 M
197 M 117 M 90 M
21
Budget Review

• Short Term Pain - Long Term Gain
• Reduced Consumption
• Reduced Water Capital
• Reduction in Size
• Delay Projects
• Extends Life of Current Interbasin Transfers
• Extends Life of Current Federal Energy Regulatory
  Commission Authorization

22
Budget Review

• Work Asset Management
• Reduce Capital
• Repair vs. Replace
• Life Cycle Cost
• Risk Assessment
• Pilot - 9M Reduction

23
Budget Review

• Tier Adjustment

Current
Projected
24
Budget Review

• Impact

1 ccf 748 gallons
25
Budget Review

• Conservation Impact

1 ccf 748 gallons
26
Budget Review

• Other Rate Adjustments

Water rate - 1.94 per ccf Sewer rate - 3.86
per ccf
27
Budget Review

• Model

2013
2012
2011
2010
2009
28
Budget Review

• NC SC Survey
• Summary of Combined Water and Sanitary Sewer
• (10 CCF Usage) 2008 Rates

125.75
106.84
140
91.69
91.73
120
85.45
83.75
82.48
80.93
81.26
79.83
79.94
78.86
100
75.78
62.37
80
58.09
57.16
53.45
49.10
60
40
20
0
Cary
Monroe
Hickory
Raleigh
Durham
Concord
Rock Hill
Asheville
Charlotte
Gastonia
Charleston
Chapel Hill
Mooresville
Kannapolis
Greensboro
Union County
Lincoln County
Winston-Salem
29
Budget Review
National Survey
Summary of Combined Water and Sanitary Sewer (10
CCF Usage) 2008 Rates
160
148.11
140
128.63
120
100
85.66
80.41
75.93
75.68
80
63.60
60.97
61.21
59.26
56.50
60
49.10
48.75
40
20
0
Austin
Seattle
Atlanta
Phoenix
Charlotte
Louisville
Cincinnati
Mobile, AL
Fort Worth
Indianapolis
Philadelphia
Orlando, FL
Richmond, VA
30
Budget Review
Survey of Drought Stricken Jurisdictions Summary
of Combined Water and Sanitary Sewer (10 CCF
Usage) 2008 Rates
160
148.11
140
125.36
120
100
89.32
85.45
79.83
79.94
75.95
74.12
80
63.55
59.88
57.16
58.09
60
49.10
44.17
40
20
0
Cary
Atlanta
Raleigh
Rock Hill
Charlotte
Greensboro
Marietta, GA
Augusta, GA
Gwinnett, GA
Chapel Hill
Columbus, GA
Winston Salem
Birmingham, AL
Cobb County, GA
31
Budget Review

• Next Steps
• Stakeholder Information - March 6th
• Council Agenda - March 24th
• Customer Information - April
• New Rate - May 1st

32
Budget Review

• Conclusion
• The Value of Water Is Changing
• Water is not an unlimited, cheap commodity that
  can be wasted.
• It is rather a valuable, limited resource that
  sustains life and provides for a growing economy.
• The demand for clean drinking water a clean,
  sustainable environment goes on even during a
  drought.