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Water Bond History and Water Bond History and Repayment Options Repayment Options Presented by: Presented by: City of Fernley Public Works City of Fernley Public Works and General Services Department and General Services Department Shari L. Whalen, P.E. Shari L. Whalen, P.E. April 28, 2012 April 28, 2012 ---PAGE BREAK--- Impact of New Standards Impact of New Standards Safe Drinking Water Act and Arsenic Rule Safe Drinking Water Act and Arsenic Rule Maximum Arsenic level of 10 ppb Maximum Arsenic level of 10 ppb City required to meet new rules by 2009 City required to meet new rules by 2009 Required construction of: Required construction of: – arsenic removal plant arsenic removal plant – pipelines from wells to plant (conveyance) pipelines from wells to plant (conveyance) – pipelines from plant to customers (delivery) pipelines from plant to customers (delivery) Today drinking water is under 5 ppb Today drinking water is under 5 ppb ---PAGE BREAK--- The Financial Summary The Financial Summary Bonds for Water Projects equaled $74.5 million Bonds for Water Projects equaled $74.5 million Annual water bond payment is $4.72 million Annual water bond payment is $4.72 million Annual water sale income equals Annual water sale income equals ~ ~ $5 million $5 million The bond debt is almost as much as our total The bond debt is almost as much as our total income income Not enough money left to run the water system Not enough money left to run the water system ---PAGE BREAK--- How do we pay to run the system? How do we pay to run the system? It costs about $3 million per year to run the water It costs about $3 million per year to run the water system system Savings account balance has dropped from $8 Savings account balance has dropped from $8 million to $2.5 million over the last three years million to $2.5 million over the last three years We have to find a solution before the savings We have to find a solution before the savings runs out runs out We might not have enough money to pay the We might not have enough money to pay the bond payment in February 2013 bond payment in February 2013 ---PAGE BREAK--- Bond Repayment Options Bond Repayment Options Four Options: Four Options: – Sell the utility to a private company Sell the utility to a private company – Charge a fee to repay the loan Charge a fee to repay the loan – Find new customers to share the cost Find new customers to share the cost – Refinance the loan to lower the yearly payment Refinance the loan to lower the yearly payment Presented to City Council on January 4, 2012 as Presented to City Council on January 4, 2012 as part of budget workshop part of budget workshop Discussion and Action taken on April 4, 2012 Discussion and Action taken on April 4, 2012 – Only consider three options (not selling) Only consider three options (not selling) ---PAGE BREAK--- Why Consider a Fee? Why Consider a Fee? Refinancing could cost up to $15 million and Refinancing could cost up to $15 million and customers will eventually have to pay that back, customers will eventually have to pay that back, too too Refinancing will only reduce the annual payment Refinancing will only reduce the annual payment for seven years for seven years – then the payment actually then the payment actually goes higher than it is today goes higher than it is today Finding new customers by expanding our Finding new customers by expanding our service area will take time and would be a longer service area will take time and would be a longer term solution term solution ---PAGE BREAK--- Why can Why can’t you just cut the budget? t you just cut the budget? Water Enterprise Fund money is separate Water Enterprise Fund money is separate from General Fund and Sewer Fund from General Fund and Sewer Fund money money Three separate businesses Three separate businesses Water Fund Budget has been cut and staff Water Fund Budget has been cut and staff is constantly trying to save money is constantly trying to save money Regulated by the Federal Government, Regulated by the Federal Government, State, NRS and NAC State, NRS and NAC ---PAGE BREAK--- Saving Money in the Water Fund Saving Money in the Water Fund 7% decrease in operating expenses between 7% decrease in operating expenses between FY10/11 and FY11/12 FY10/11 and FY11/12 3% decrease for combined operating and capital 3% decrease for combined operating and capital expenses between FY11/12 and proposed expenses between FY11/12 and proposed FY12/13 budgets (further reduced capital) FY12/13 budgets (further reduced capital) $341,000 in budgeted capital expenditure $341,000 in budgeted capital expenditure savings in FY10/11 by deferring purchases and savings in FY10/11 by deferring purchases and projects projects $200,000 in budgeted capital expenditure $200,000 in budgeted capital expenditure savings in FY11/12 through facility repair instead savings in FY11/12 through facility repair instead of replacement of replacement ---PAGE BREAK--- Saving Money in the Water Fund Saving Money in the Water Fund In 2011 and 2012, one position under filled and In 2011 and 2012, one position under filled and one position left vacant to save on salary one position left vacant to save on salary budgets budgets Only essential equipment purchases and repairs Only essential equipment purchases and repairs have been completed and no vehicles have have been completed and no vehicles have been purchased since 2009 been purchased since 2009 No merit raises or cost of living increases since No merit raises or cost of living increases since 2009 2009 Proposed capital budget for next year (FY12/13) Proposed capital budget for next year (FY12/13) is less than each of the budgets for the previous is less than each of the budgets for the previous five years five years ---PAGE BREAK--- Bond Fee Option Bond Fee Option Questions for City Council on April 4, 2012: Questions for City Council on April 4, 2012: – Do we collect the entire $4.7 million bond debt and Do we collect the entire $4.7 million bond debt and modify the existing water rates? modify the existing water rates? – Do we collect the bond fee from all existing water Do we collect the bond fee from all existing water customers, including inactive accounts, and anyone customers, including inactive accounts, and anyone who has a reserved hook who has a reserved hook-up? up? – Do we collect the bond fee in accordance with the Do we collect the bond fee in accordance with the meter multiplier, which is based on the available meter multiplier, which is based on the available capacity of the pipe? capacity of the pipe? – Do we collect the fee as an additional item on the Do we collect the fee as an additional item on the property tax statement? property tax statement? ---PAGE BREAK--- City Council Direction City Council Direction Work on developing a bond debt fee of up Work on developing a bond debt fee of up to $44.00 to $44.00 The base fee should be based on The base fee should be based on multipliers for meter size (more capacity multipliers for meter size (more capacity equals higher fee) equals higher fee) The fee would be collected from existing The fee would be collected from existing water customers and anyone with a water customers and anyone with a reserved hook reserved hook-up up Collect the fee on the property tax Collect the fee on the property tax statement statement ---PAGE BREAK--- City Council Direction City Council Direction Assess possible modifications to the Assess possible modifications to the existing water rates as a result of existing water rates as a result of collecting the entire bond payment through collecting the entire bond payment through the fee the fee Minimize the fees and rates as much as Minimize the fees and rates as much as possible possible Begin the Business Impact Statement Begin the Business Impact Statement process as required by NRS process as required by NRS ---PAGE BREAK--- Water Bond Water Bond Fee Structure Fee Structure Meter Size Capacity Meter Size Capacity Rate Rate Will Will-served lot served lot Base Rate Base Rate ¾ Base Rate Base Rate 1 Base Rate* 1.67% Base Rate* 1.67% 1 1 ½ Base Rate* 3.33% Base Rate* 3.33% 2 Base Rate* 5.33% Base Rate* 5.33% 3 Base Rate* 10.00% Base Rate* 10.00% 4 Base Rate* 16.67% Base Rate* 16.67% 6 Base Rate* 33.35% Base Rate* 33.35% *Based on American Water Works Association best practices ---PAGE BREAK--- $ 4,720,000.00 Annual Total Revenue $ 393,333.33 Total Revenue $ 37,694.23 $ 42.26 1 892 will-serve lots/ inactive accounts* $ 2,818.62 $ 1,409.31 33.35 2 6 $ 11,975.52 $ 704.44 16.67 17 4 $ 1,267.74 $ 422.58 10 3 3 $ 31,082.52 $ 225.24 5.33 138 2 $ 8,021.01 $ 140.72 3.33 57 1 1/2" $ 9,315.38 $ 70.57 1.67 132 1 $ 291,158.32 $ 42.26 1 6890 3/4" Revenue Rate Multiplier Accounts Meter Size ---PAGE BREAK--- What What’s next? s next? Business Impact Statement Business Impact Statement Public Meetings Public Meetings Public Hearings for Ordinance Public Hearings for Ordinance Fee Resolution Fee Resolution More discussions and more questions More discussions and more questions More research and analysis More research and analysis www.cityoffernley.org www.cityoffernley.org\waterbond waterbond