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HomeMy WebLinkAbout20- Water Department CITY OF SAN BERK _RDINO - REQUEST F.,.,R COUNCIL ACTION From: Bernard C. Kersey 1 opt eso u ion mending Kesolution Subject: 89-510. . .Establishing Sewer Connection De t: and Inspection Fees. . .and Repeal P Water and Resolution 94-391 ; and 2 Adopt a Date: Resolution Fixing and Revising Charges March 27, 1995 for Sewerage Collection. . . Resolution 93-384. and Repeal Synopsis of Previous Council action: On March 23- 1995, the Legislative Review Committee heard and recommended: 1) Amending Resolution 89-510, establishing sewer connection and inspection fees and ') establishing a credit for sewer stand-by charges for users within 200 feet of an { existing sewer line, effective March 1 , 1995, and repealing Resolution 94-391; and 2) A Resolution fixing and revising charges for services, and repealing Resolution 93-384. Adopt resolutions. C Si ature :ontact person: Bernard C. Kersey Phone: 384-5091 upporting data attached: Yes All Ward: UNDING REQUIREMENTS: Amount: None Source: Acct. No.) Acct. Description) Finance: )uncil Notes: 0262 CITY OF SAN BERN*-.4DINO - REQUEST F%-A COUNCIL ACTION STAFF REPORT BACKGROUND: On October 4, 1994 , the Board approved a Sewer Connection Charge freeze to $3 , 730 . 00, the rate in effect as of October 1, 1993 . Part of the rate freeze included the preparation of a Sewer Financing Plan Update which staff felt would result in some form of rate reduction. Permission was given to contract with Bartle Wells Associates to draft the report . This firm had previously drafted the 1990 Sewer Financing Plan which had resulted in the establishment of the updated connection fee process with annual 100 increases over the course of a five year period. Since the original report was last prepared and rates adopted, the cost of the anticipated capital projects turned out lower than expected. In 1990, the total cost for the projects was calculated at $196 million over a ten year period. These costs have been reduced to $108 million as a result of : ■ The cancellation of ammonia and nitrogen upgrade project; ■ The RIX tertiary treatment method was chosen over the conventional tertiary treatment method, a cost savings of nearly 500; ■ The construction bids for the RIX project and the PHR project were both lower than anticipated; ■ The Department received a State Revolving Fund loan for the full amount of the RIX Project, which reduced the amount of debt service obligation; ■ Finally, flows to the Water Reclamation Facility have decreased due to water conservation and the closing of Norton Air Force Base, postponing the need for the next Plant expansion. The Sewer Financing Plan Update was unanimously approved by the Board of Water Commissioners on February 21, 1995, after a work shop was held on February 7, 1995, to go over all the details within the report . The proposed effective date for these new rates is July 1, 1995, to coincide with the start of a new Fiscal Year. The following results, if the plan is adopted: ■ The sewer connection charge is being reduced to $2, 800 per single family dwelling, with incremental increases through to 1999, which results in a fee of $3, 500 . -0264 ■ The monthly Sewer Service Charge is being reduced from $13 . 55 per month to $13 . 25 per month for residential customers . ■ The monthly Sewer Service Charge for commercial, retail and industrial users is being reduced by $ . 05 per category. ■ A progressive credit (from 2% to 7511) for payment of standby charges for customers who were not initially connected to the sewer system (ie; on septic) . RECOMMENDATION The Board of Water Commissioners recommends approval of the Bartle Wells Associates Sewer Financing Plan Update and Connection Charge Review, including reduction of the Sewer Connection Charge to $2, 800 per EDU; the reduction of the monthly service charge for residential from $13 . 55 to $13 .25; the reduction of commercial, I retail and industrial users to various reduced rates; and the granting of a credit to customers paying the sewer service charge when they were not physically connected to the system. I I i i rcc: Paul Harmon 3-13-95 -- i '-Ji MAR 1 3 19 5 1[j LEGISLATIVE REVIEW COMMITTEE March 9, 1995 J ATTENDEES: Tip Councilwoman Valerie Pope-Ludlam - Chairwoman ''�`�� j Councilman Eddie Negrete Councilman David Oberhelman Dennis Barlow - Sr. Assistant City Attorney Peggy Ducey - Assistant to City Administrator Roger Hardgrave - Public Works Director/City Engineer Berney Kersey - Water Dept. General Manager Phil Arvizo - Council Executive Assistant Barbara Lindseth - EDA Admin. Services Mgr. Ralph Affaitati - Contractor Ruben Lopez -.Citizen Jeff Wright - Citizen 1. SEWER CONNECTION/CAPACITY FEES - Item continued to March 23 meeting after extensive discussion. This item will be combined with a new item: Reduction in Sewer Connection and Monthly Sewer Service Fees. 2. STIPEND FOR COMMISSIONERS - This item was brought on as an urgency item and after the agenda was posted. The Committee requested Ms. Ducey to research and report on what other cities do, which Commissioner might be recommended and a recommended stipend. Meeting adjourned. Councilwoman Valerie Pope-Ludlam Chairwoman VPL Jv CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTAWNT SEWER FINANCING PLAN UPDATE AND CONNECTION CHARGE REVIEW February 1995 BARTLE WELLS ASSOCIATES Independent Public Finance Advisors 1636 Bush Street San Francisco CA 94109 Tel. 415/775-3113 February 14, 1995 City of San Bernardino Municipal Water Department Board of Water Commissioners PO Box 710 San Bernardino CA 92402 Attn: Bernard C. Kersey General Manager Re: Sewer Financing Plan Update Bartle Wells Associates is pleased to present our Sewer Financing Plan Update for the City of San Bernardino Municipal Water Department. This report re- views the Department's capital improvement program and recommends changes to the connection charge for plant capacity and regional sewer service charge. Bartle Wells Associates prepared a prior financing plan in 1990. At that time, the Department anticipated capital projects with costs totalling $196 million over a ten-year period. Since 1990, several things have happened which have reduced the capital costs facing the Department: • The construction bids for several major projects were lower than antici- pated and another major project eliminated, lowering total capital costs from $196 million to $108 million. • The Department received a state revolving fund loan for the full amount of the RIX project, reducing the Department's debt service obligation. • Flows to the wastewater treatment plant have decreased due to both water conservation and the closing of Norton Air Force Base. For these reasons, the Department can reduce both its connection charge for sewer capacity and its regional sewer service charge, as follows. • Connection Charge: The City adopted connection charges for 1990 through 1995 based on the prior financing plan. The current charge is $3,730 per single-family dwelling. This rate was effective as of October 1, 1993. Due to the reduced cost of the capital improvement program, we recommend I that the City reduce the connection charge to $2,800 per single-family dwelling. As with the previous charge, we recommend that the City adopt connection charges for a 5-year period, increasing from the recommended $2,800 in 1995 to $3,500 in 1999. • Sewer Service Charges: The sewer utility has a comfortable fund balance and faces reduced capital expenses for the next several years. We believe that the City can safely reduce the monthly regional sewer service charge for treatment and disposal from the current level of $13.55 to $13.25 through the fiscal year 1995/96. We believe that this reduced rate can be Bartle Wells retained,through 1996/97. Beyond that time, rates will need to increase Associates gradually as driven by expenses. City of San Bernardino Municipal Water Department February 14, 1995 Page 2 Our report also makes recommendations in areas such as minimum fund balances which should be maintained in the sewer utility and reductions in the connection charge for properties which are already paying sewer service charges. It has been a pleasure to work with the Department on this project. We appre- date our long relationship with the Department and its staff. We also appred ate the cooperation we have received from the staff throughout our work. Very truly yours, BARTLE WELLS ASSOCIATES V •v ora J. tovall, CIPFA eed Schmidt, CIPFA Principal Vice President LJS/RVS:mt Enc. i i CONTENTS Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Capital Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Funding for Capital Projects . . . . . . . . . . . . . . . . . . . . . . . . . . 3 SRFLoans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Certificates of Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Outstanding Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Connection Charges for Plant Capacity . . . . . . . . . . . . . . . . . . 7 Recommended Connection Charge . . . . . . . . . 8 Credits for Payment of Standby Charges . . . . . . . . . . . . . . . . . . . . . . . . 9 Implementation of Connection Charges . . . . . . . . . . . . . . . . . . . . . . . . . 10 Sewer Service Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Financing Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Growth Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Historical Revenues and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Cash Flow Projection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Minimum Balance Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Debt Service Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 LIST OF TABLES TABLES FOLLOW PAGE 14 1. Costs of Wastewater Projects 2. Outstanding Debt - Wastewater Treatment 3. Proposed Sewer Connection Fee 4. Historical Growth in Sewer Revenue Units by Service Area S. Forecast of Growth in Sewer Revenue Units, Total Service Area 6. Sewer Revenues and Expenses 7. Sewer Utility - Revenues and Expenses - Cash Flow Projections 8. Sewer Funds Available - Beginning Balance 9. Net Revenue Coverage Requirement in 1992 Certificates of Participation APPENDICES A. Extracts from Installment Purchase Agreement Relating to $41.3 Million 1992 Sewer Certificates of Participation • Section 6.13, Amount of Rates and Charges • Definition of "Revenues" • Section 5.03, Additional Contracts and Bonds B. Escalation of Connection Fee, 1996-1999 INTRODUCTION The San Bernardino Municipal Water Department is a City department estab- lished by the City charter, and governed by a five-member Board of Water Commissioners, appointed by the Mayor of the City of San Bernardino. Under the City charter, the Department is responsible for water supply and distribu- tion, and since 1973 has also been charged by the Common Council with the responsibility for wastewater treatment and disposal. The Board of Water Commissioners establishes and collects water rates and charges. It recom- mends sewer rates to the Common Council for adoption. The City's Depart- ment of Public Services is responsible for the sewer collection system. In 1987 the Department approved a sewer master plan which identified facil- ities needed to increase wastewater treatment capacity to 60 million gallons per day (mgd) from the then-current capacity of 30 mgd. It also evaluated the adequacy of specific components of the treatment facilities. The master plan called for $153 million (in 1990 dollars) of new facilities over a 10-year period. In addition, the City was required by the Regional Water Quality Con- trol Board to upgrade its wastewater treatment to tertiary, at an additional cost of about $43 million, bringing the total new project costs to $196 million in 1990. Bartle Wells Associates prepared a financing plan, dated November 1990, which recommended connection charges for plant capacity, a capital com- ponent of the sewer service charges, and debt issuance and loans from the state revolving fund (SRF) to finance the necessary wastewater projects. Con- nection charges for a five-year period were recommended and subsequently adopted. The State Water Resources Control Board approved SRF loans for the rapid infiltration and extraction tertiary (RIX) demonstration and full-scale project. In February 1992 the Department issued $41.3 million of certificates of participation for the primary hydraulic reliability (PHR) and other waste- water projects. Since 1990, several things have happened which have reduced the Department's anticipated wastewater capital costs: • RIX was chosen over conventional tertiary treatment, which was estimated to have 50 percent higher costs. • The construction bids for the RIX and PHR projects were lower than anticipated. • The Department received an SRF loan for the full amount of eligible costs for the RIX project. • The ammonia and nitrogen upgrade project, with an estimated cost of over $50 million, can be indefinitely postponed or eliminated. • Flow to the wastewater treatment plant has decreased due to water conser- vation and the closing of Norton Air Force Base, postponing the need for the next plant expansion. This financing plan updates the prior sewer financing plans. It recommends revisions to the sewer connection charge and projects sewer service charges based on the revised cost estimates. 1 CAPITAL PROJECTS Table 1 summarizes the sewer capital projects. It includes projects which have been completed, projects which are under construction, and projects anticipated in the future. The projects in Table 1 have a total cost of $108 million in cur- rent dollars, compared to the $196 million that the Department anticipated in 1990. The status of the major projects is discussed below: • PHR: The project replaces and consolidates the headworks at the waste- water treatment plant, provides expansion capacity, and provides standby primary treatment for the Unit 1 primary clarifiers. It increases preliminary and primary treatment capacity from 33 mgd to 48 mgd. -This project was financed with the 1992 COPs; construction will be completed in 1995. • RM San Bernardino and Colton are constructing a tertiary treatment plant using rapid infiltration and extraction as the treatment method. A RIX dem- onstration project was successfully operated for a one-year period ending April 1992, and the Regional Board approved a full-scale 47-mgd RIX proj- ect. The project is under construction and is scheduled to begin operation in September 1995. Costs of the RIX project are shared between San Ber- nardino and Colton. The costs shown in Table 1 are San Bernardino's share of the costs. An SRF loan has been received for the RIX project. The remaining projects shown for completion by 1995 are smaller projects, which have been funded from cash reserves or the 1992 COPS. The Department estimates that it will need to complete the next expansion of the treatment plant by 2005, by addition of the Phase 3A secondary facilities and the Unit 3 solids handling improvements. The secondary facilities will add 7.5 mgd to the secondary treatment facilities, and the solids handling improve- ments will thicken, dewater, and stabilize sludge, for an additional 15 mgd of flow. i I i 2 FUNDING FOR CAPITAL PROJECTS The City has a variety of methods available for financing capital improvements. It can finance projects with cash from reserves which it has accumulated or ongoing revenues. It can borrow with a variety of methods. Borrowing ulti- mately costs more than does cash financing, because of the cost of interest on the borrowed money. Borrowing also spreads the cost of a project over a longer portion of the project's useful life, and spreads some of the costs to future customers as well as today's customers. Over the past five years, the Department has financed wastewater projects with cash from reserves, with SRF loans, and with the issuance of certificates of participation. These three methods will continue to be the major sources avail- able and appropriate for wastewater capital projects. This section briefly de- scribes the borrowing options. Subsequent sections of the report describe sources of cash for capital projects. SRF Loans The SRF loan program is the successor to the state and federal Clean Water Grant Program, which provided grants for wastewater projects. When the grant program was terminated at the end of federal fiscal year 1988, each state was required to institute a revolving loan program, with initial funding from the federal government. The SRF loan program is now funded by contri- butions from both the federal government and the State of California, and pro- vides low interest loans for wastewater projects. The basic structure of the loan program is as follows: • To qualify for an SRF loan, a wastewater project must be on the state's pri- ority list for project funding, and must be in a category which the state is funding. Projects are categorized from "A" to "E," depending on the seri- ousness of the wastewater problem. Categories are eligible for funding based on the amount of money which the state has available for loans. Projects which qualify for funding are treated on a first-come-first-served basis. • Interest on the loans is one-half of the interest rate on the latest issue of state general obligation bonds (currently about 3.00 to 3.25 percent). • Loans are made for an amount not to exceed the eligible amount of the low construction bid. The loan amount cannot be increased to fund any change orders. The local agency is responsible for all ineligible costs and change orders. Depending on available funds, the state may also limit the amount of funds that one agency can receive in one year. • The term of the loans is generally 20 years. Interest begins to accrue upon completion of construction, with the first payment due one year following completion of construction and the final payment 20 years later. ■ Loan applicants must follow established state procedures and comply with all state requirements. • Loan recipients must adopt a revenue program approved by the SWRCB. 3 0 San Bernardino has received two SRF loans for the RIX project, one for the demonstration project and one for the full scale project. The terms of these loans are discussed under OUTSTANDING DEBT in this report. Certificates of Participation Certificates of participation (COPs) are a form of lease financing commonly used by California local governments. They are called certificates of participa- tion because an investor buys a certificate indicating an undivided, propor- tional share of lease or installment purchase payments by a local agency. In a COP transaction, the City enters into a contract with a third-party seller or lessor to purchase specified facilities and to make a stream of payments which are sufficient to retire the debt. The seller is generally a nonprofit corporation or joint powers authority created by the City or a leasing company employed for this role only. The Public Safety Authority (PSA) filled this role for the City's 1992 sewer COPs. The seller assigns to the City the obligation to con- struct the project and assigns to the trustee the right to receive payments. The City, through a trustee bank, sells shares (i.e., participations) in its obligation, and makes installment payments to the trustee, which in turn pays interest and principal to the owners of the COPs. The installment payments have a prin- cipal portion and an interest portion, which is tax-exempt. Once the trans- action has been completed, it resembles a bond issue. There is no specific California statute that authorizes COPs or other types of lease financing; instead, they are based on the ability of local governments to enter into leases and contracts. COPs are authorized by governing boards, generally by resolution. Voter approval of the COP issue is not required, pay- ments do not constitute indebtedness as defined by the California Constitution, and no interest rate limit or issuance discount limitations exist. COPS can be used for most capital projects, including the types of improvements in the Department's capital improvement program. The fundamental security of COPS is the contract made by the City to make in- stallment payments that retire the CON principal and interest. In order to assure investors of COP payments, public agencies promise to annually appro- priate sufficient moneys to pay annual debt service. CON for utility projects are secured by revenues and structured like revenue bonds. They typically in- clude a debt service coverage requirement similar to that for revenue bonds. San Bernardino issued $41.3 million certificates of participation in February 1992, to finance the PHR and other smaller projects. The COPs are secured by sewer revenues, and have a coverage covenant which requires that net reve- nues be at least 1.10 times debt service. Future COPS, and other revenue- secured debt, must comply with the same coverage covenant, or be subordi- nated to the 1992 COPS. Outstanding Debt San Bernardino has several outstanding debt obligations related to wastewater treatment, as described below. Any future debt obligations will need to be coordinated with the commitments which have been made in connection with outstanding debt. Table 2 summarizes the outstanding sewer debt. 4 ■ PSA Lease: The PSA issued lease revenue bonds to finance acquisition and construction of sewage treatment facilities and real property. The sewer utility makes fixed annual lease payments of $536,000 to the PSA for these bonds. The final payment is due in 1998. Lease payments to the PSA are treated as operating expenses. ■ 1992 COPs: In 1992 the City issued $41.3 million of sewer certificates of participation, which financed the PHR and other facilities. The debt service on the certificates is about $3.3 million per year, and they mature annually through 2017. In issuing the COPs the City agreed to maintain net reve- nues of at least 110 percent of annual debt service. This "coverage cove- nant" is further discussed below. ■ SRF Loans: San Bernardino has received two SRF loans through SAWPA for the RIX project. The first loan was for the demonstration project. The total loan was in the amount of $5,353,621; San Bernardino's share was $4,015,216, and Colton was responsible for the balance. San Bernardino's annual debt service is $279,254; the first debt service payment was due in May 1992, and the final payment will be due in May 2011. A second SRF loan in the amount of $30.56 million was approved for the full-scale RIX project. San Bernardino's share of this loan is $26,008,444, and its share of annual debt service will be $1,739,181. Debt service payments on this loan will begin in 1996 and extend for 20 years. ■ SAWPA Brine Line Purchase: San Bernardino has purchased in SAWPA's brine line, for an annual payment of $456,000 for 20 years beginning 1993/94 and ending 2013/14. Coverage Pledge: The COPs are secured by an absolute and unconditional pledge of net sewer revenues. The City covenanted in connection with the issuance of the COPS to fix, prescribe, and collect rates, fees, and charges and connection charges for sewer service which will be at least sufficient to yield, during each fiscal year, an amount equal to 110 percent of debt service for such fiscal year. Net revenues must also equal 100 percent of all annual obli- gations. For purposes of the coverage covenant, "revenues" includes the amounts remaining in the Sewer Fund after all requirements have been met. The full definition of "revenues" is in the Installment Purchase Agreement se- curing the 1992 COPS, and is included in the Appendix of this report. The PSA lease payments are considered to be on a parity with COP payments; the SRF loan payments are subordinate to the COP payments. Additional Bonds Test: Additional parity debt in any form which is secured by sewer revenues must comply with the "Additional Contracts and Bonds" provi- sions of the Installment Purchase Agreement securing the 1992 COPS. The "additional bonds test" requires that the following conditions be met before any additional parity debt secured by sewer revenues can be issued. The spe- cific provisions are included in Section 5.03 of the Installment Purchase Agree- ment, which is included in the Appendix to this report. In simpler terms, the additional bonds provision require that: 5 ■ Actual net revenues for the year prior to the issuance of additional debt must be at least 1.10 times current debt service. ■ Actual net revenues plus estimated revenues from rate increases must be at least 1.10 times debt service on outstanding debt plus one year's debt ser- vice on the additional debt to be issued. ■ Estimated net revenues in each year through the first complete fiscal year after any uncompleted projects are in operation, including estimated reve- nues from any increase in rates and charges, must be at least 1.10 times debt service on all outstanding debt. i I 6 CONNECTION CHARGES FOR PLANT CAPACITY capacity rights on new The City collects a connection charge or payment for ca p ty connections to the sewer system, to pay the costs of treatment and disposal facilities necessary to serve new development. The connection charges are established and imposed on a regional basis, and the same charges are paid in San Bernardino, Loma Linda, and East Valley Water District. The City adopted the recommendations of the 1990 financing plan, and established the follow- ing connection charges for single-family dwellings. Connection charges for other types of connections are evaluated in terms of single-family unit equiva- lents or established by formula. Connection Effective Date Charge October 1, 1991 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,080 j October 1, 1992 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,390 1 October 1, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,730 October 1, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,100 October 1, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,510 On October 1, 1994, the connection charge was scheduled to increase to $4,100. This increase was deferred and the charge maintained at $3,730. California Government Code §66000 establishes the ground rules for fees for development projects imposed by California local governments. In order to establish, increase, or impose a fee "as a condition of approval of a develop- ment project" the City must: • Identify the purpose of the fee. • Identify the use to which the fee is to be put. If the use is financing public facilities, the facilities must be identified, which can be by reference to a capital improvement program. • Determine how there is a reasonable relationship between the fee's use and the type of development project on which the fee is imposed. • Determine how there is a reasonable relationship between the need for the public facilities and the type of development project on which the fee is imposed. • Determine, for a new fee being imposed, how there is a reasonable rela- tionship between the amount of the fee and the cost of the public facilities attributable to the development on which the fee is imposed. The law also requires that development fees be deposited in a separate capital facilities account, and be invested, accounted for and expended for the facilities to serve new development. The local agency is required to make findings once each fiscal year with respect to any portion of the fees which are unexpended or uncommitted for five years after deposit to identify the purpose to which the fee is to be put and to demonstrate a reasonable relationship between the 7 fee and the purpose for which it was charged. The local agency may be re- quired to refund funds which have not been committed or expended within five or more years after the deposit of the fee. Recommended Connection Charge San Bernardino's existing connection charge was established based on the cost of projects needed to expand the then-current facilities to accommodate growth and new development. The recommended connection charge is also based on a determination of the costs of facilities that have been constructed or remain to be constructed to provide capacity for new development. Because the costs of the capital improvement program have been substantially reduced, the Department can reduce the connection charge for future connec- tions. Table 3 allocates the capital improvement costs in Table 1 to expansion and existing customers, based on the rationale for the construction of each facility. Facilities that increase treatment plant capacity are allocated to expan- sion; facilities which replace or upgrade existing facilities are allocated to exist- ing customers. Most facilities provide some additional capacity as well as re- placement or upgrade. These facilities are allocated to each category based on the relative share of the project and related costs for each purpose. A portion of existing facilities other than those itemized in Table 3 is also allocated to expansion in the same manner. Costs of these facilities have been adjusted to 1995 levels based on ENR Construction Cost Indices. Based on the revised capital improvement program costs, the connection charge can be reduced from the current $3,730 to $2,800. The current connection charge increases at 10 percent per year, based on infla- tion and the cost of money. The revised connection charge should also esca- late annually, to reflect the increasing cost of future facilities and the interest on money borrowed for facilities constructed between 1990 and 1995. The average interest rate on the $41.2 million 1992 COPS is about 6.5 per- cent; the SRF loans are $5.3 million at 3.3 percent and $26 million at 2.8 percent. A rate of 5 percent would reflect the average interest cost on out- standing sewer debt. Based on recent trends, this financing plan assumes a construction cost infla- tion rate of 4 percent per year. This escalation is applied only to the Unit 3 and 3A facilities which will be constructed in about 2003 to 2005. The recommended connection charges for the next five years are shown below. Connection charges should be adjusted as the beginning of the fiscal year to simplify budgeting. Connection Effective Date Charge July1, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,800 July1, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,960 July1, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,130 July1, 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,310 July1, 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,500 8 The Department deposits connection charges in the Sewer Fund and segregates them into a special restricted account. They are applied to capital costs for the expansion of facilities, including the payment of debt service on the COPS, which financed facilities that provide capacity for new development. Use of connection charges is also subject to the joint powers agreement with Loma Linda and East Valley Water District, which requires that the charges be used for expansion of treatment and disposal facilities for use of the parties to the agreement. Credits for Payment of Standby Charges Under San Bernardino's City policies, all properties within City limits that are located within 200 feet of a sewer line or on real property adjoining an exist- ing sewer system are subject to sewer charges whether or not the property is connected to the sewer and receiving sewer service. These charges on uncon- nected properties are called "standby charges." These charges apply primarily to properties that were built and septic tanks installed prior to the availability of sewers. These properties must normally connect to the sanitary sewer in the event of a failure of their septic system. Such properties are required to pay the full sewer connection charge when they connect to the sewer. Adopting a stand- ard policy for a reduction in the connection charge for unsewered properties that have paid the monthly sewer standby charges will provide equitable treat- ment of property owners. The reduction in the connection charge should be based on the period of time for which the property has been subject to sewer standby charges. The De- partment can determine the applicable date from its records. Some properties may have been subject to standby charges since 1958; others may have been affected for one year or less. The following schedule reduces the connection charge by up to 75 percent for properties which have been paying standby charges for over 25 years at the time of their connection to the sewer system. This program would apply to all properties served by the water reclamation plant, not just the City. Reduction in Current Period For Which Property Connection Has Paid Standby Charges Charge Upto 1 year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2% 1-2 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2-3 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 3-4 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 4-5 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 5-10 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 10-15 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 15-20 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 20-25 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 Over25 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 9 Implementation of Connection Charges Section 66016 of the Government Code sets forth procedures for establishing new fees and increases. Under Section 66016, prior to levying a new fee or service charge or approving an increase to an existing fee or service charge, a local agency must hold at least one public meeting at which written or oral presentations can be made. The proposed changes to the sewer connection charge are reductions, which do not appear to be subject to the public meeting requirement. Under City policy, changes in the sewer connection and service charge are considered by the Board of Water Commissioners, which recommends actions to the Common Council. The Council considers these recommendations at its public meetings. The recommended reductions should be handled with the normal procedures. Y 10 SEWER SERVICE CHARGES Sewer service charges are the basic source of revenue for the sewer utility. Rates and charges for sewage treatment and collection are reviewed and changes recommended by the Board of Water Commissioners. Rates are adopted by the mayor and Common Council and are required by the City char- ter to be established in amounts sufficient to meet the obligations of the sewer utility. The Council, upon recommendations from the Board of Water Com- missioners, has the power and authority to establish charges for sewer service without the review or approval of any other governmental body, to refuse or terminate sewer service to delinquent customers, and to require full payment of delinquent amounts and reconnection fees to resume service. San Bernardino establishes a uniform regional treatment charge for all cus- tomers served by the regional treatment plant. The agencies served by con- tract pay the regional treatment costs by charging their customers the regional treatment charge and remitting the total regional charge attributable to their customers to San Bernardino. The City sewer service rate is composed of a regional treatment charge and a collection system charge. The collection system charge is established by the City's Department of Public Services. The Water Department bills and collects the total charge. Local collection system charges are then transferred to the City's Department of Public Services. The City has defined two categories of sewer customers—residential and com- mercial/industrial. Residential customers are single-family residences, du- plexes, or triplexes charged on a unit basis. All other customers—including apartments, trailer courts, and commercial/industrial customers—are charged on the basis of flow and strength. The flow portion of charges to nonresiden- tial customers is based on water consumption as reflected by water meter read- ings for the billing period, and may be reduced for the purpose of establishing charges subject to seasonal or consumptive use approved by the Board of Water Commissioners. The current sewer service charge for residential users is $13.55 per month and became effective January 1, 1994. The current collection system charge is $1.35 per month, bringing the total monthly charge to $14.90. As discussed in the following section of this report, the regional sewer service charge can be reduced to $13.25 in 1995/96 and 1996/97, due to the capital cost reductions. Sewer service charges are then expected to increase gradually, reflecting the trend of operating costs. 11 FINANCING PLAN This section of the report develops a financing plan and cash flow projection for the sewer utility. It is based on the project costs and connection charges discussed earlier in the report and on assumptions discussed in this section. Growth Rates The Department provides wastewater treatment for the City of San Bernardino, East Valley Water District, and the City of Loma Linda. Connection charges on new development have been an improvement element of the financing for wastewater capital projects, because many of the projects add capacity for new development. In developing the cash flow projection included in this report, it is important to determine a conservative estimate of future growth as a basis for financing planning. Table 4 summarizes new sewer revenue units (SRUs) for 1990 through 1994 for each jurisdiction served by the Department. As shown in the table, total new connections for all three entities were close to 1,500 in 1990 and 1991, then dropped sharply. Only 254 new SRUs were added in 1994. The purpose of projecting a growth rate in the financing plan is to estimate a dependable level of revenues from connection charges. The projection must be lower than actual experience, to provide a financial safeguard against low growth and low connection charge revenue. Due to economic conditions in California and the United States, growth in the past three years has been very low. Projections must assume that growth rates will stay low in the near future. Table 5 is the forecast of SRUs used as a basis for the financing plan. The financing plan assumes that 250 new SRUs pay connection charge for each of the next five years, then increase gradually for the next five years. Historical Revenues and Expenses Table 6 summarizes sewer revenue and expenses for the past two fiscal years, based on the Department's audited financial statements. Cash Flow Projection Table 7 presents a cash flow projection for a 12-year period beginning with the 1994/95 budget. The projection includes both capital and operating funds. It incorporates the capital improvement program discussed in this report, debt service, reserve accumulations, connection charge revenues, and projected oper- ation and maintenance expenses. The elements of the cash flow projection are discussed below: • Beginning Balance: The cash flow projection begins with a balance of sewer funds which is detailed in Table 8. • Regional Sewer Service Charges: Sewer service charges are the basic reve- nue source for the sewer utility. The projection is based on the 1994/95 budget and is adjusted thereafter as needed to meet financial requirements. Because of the accumulated balances in the sewer funds, as a result of care- ful management and reductions in capital costs, the sewer service charge can be reduced to $13.25 for 1995/96 and held at that level in 1996/97. 12 Gradual increases will be needed beginning in 1997/98. The sewer service charges in Table 7 are the regional charges only. Sewer customers also pay a collection system charge, which is currently $1.35 per month in the City of San Bernardino. • Connection Charges: Connection charge revenues are based on the growth rates and connection charges discussed earlier in this report. The connec- tion charge is increased 5.75 percent per year beyond 1998/99. • Interest Income: Interest income is calculated at 5.5 percent on the aver- age of the beginning and ending balances. • Miscellaneous and Other Income: Miscellaneous and other income is con- tinued at the 1994/95 budgeted amount of $50,000 per year. • SRF Loan for RIX: The SRF loan amounts for the RIX project are assumed to be received over 1994/95 and 1995/96, as construction expenses are incurred. • Proceeds of New COPS: No new sewer debt, other than the SRF loans already committed for the RIX project, appear to be required in the near future. Additional borrowing will be needed to finance the Unit 3 expan- sion, in 2002/03. • Salaries, Materials, Services: These expenses are estimated by Department staff based on anticipated increases in operating costs and the impact of the RIX project on treatment plant operating expenses. • RIX Facility Expenses: These expenses are estimated by Department staff based on staffing requirements and energy demands for the RIX project. • Existing Debt Service: Debt service on outstanding debt is from Table 2. • Capital Improvement Projects: Total projected costs for capital projects, as shown in Table 1. • Depreciation: The current depreciation expense is increased to $2.9 million per year, to include the PHR and RIX facilities. The depreciation expense provides a source of funds for ongoing capital outlay and replacement. • SRF Loan Reserve: The City is required by the SRF loan contracts to set aside a reserve of $130,000 per year for 10 years. Minimum Balance Recommendation The cash flow projection maintains a total closing balance for all funds of at least $5 million. This provides a combined reserve equal to about half of one year's operating expenses or one year's debt service. In the cash flow projec- tion, expenses for uses of funds exceed revenues or sources of funds by almost $10 million in the first four years, and reserves make up that difference. If actual application of reserves exceeds the levels estimated in the projection, sewer service charges may need to be adjusted to maintain a $5 million mini- mum balance. 13 Debt Service Coverage Table 9 calculates debt service coverage for each year shown in the cash flow projection. The coverage covenant securing the 1992 COPS requires the City to establish and maintain sewer service charges and other revenues and bal- ances which will produce net revenues, following payment of O&M expenses, of at least 1.10 times annual debt service. As shown in Table 9, debt service coverage on the COPs and PSA rent exceeds four times debt service in most years, and debt service coverage on all debt exceeds two times debt service. 14 TABLES TABLE 1 CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT COSTS OF WASTEWATER PROJECTS Project Cost Completed by 1995 Primary hydraulic reliability $31,909,241 RIX(tertiary treatment)* 29,054,572 Nitrogen removal pilot 6,660,000 Water reclamation project office 2,619,000 E St.pump station 3,610,000 Completed in 1995/96 Control system instrumentation 1,227,000 Maintenance building 250,000 To Be Completed by 2004/05 Phase 3A secondary 22,530,000 Unit 3 solids 10,583,000 Total projects $108,442,813 * San Bernardino's share of RIX project costs. Source: San Bernardino Municipal Water Department. i BARTLE WELLS ASSOCIATES 22—Feb-95 TABLE 2 SAN BERNARDINO MUNICIPAL WATER DEPARTMENT OUTSTANDING DEBT — WASTEWATER TREATMENT SRF Loans for RIX Total Year PSA Rent 1992 COPS Demo Plant Full Plant SAWPA Debt Service 1994/95 $536,000 $3,416,313 $279,293 $ --- $456,000 $4,687,606 1995/96 536,000 3,399,250 279,253 1,739,181 456,000 6,409,684 1996/97 536,000 3,387,563 279,253 1,739,181 456,000 6,397,997 1997/98 536,000 3,370,325 279,253 1,739,181 456,000 6,380,759 1998/99 ——— 3,352,538 279,253 1,739,181 456,000 5,826,972 1999/00 --- 3,333,738 279,253 1,739,181 456,000 5,808,172 2000/01 ——— 3,313,463 279,253 1,739,181 456,000 5,787,897 2001/02 ——— 3,291,250 279,253 1,739,181 456,000 5,765,684 2002/03 --- 3,302,188 279,253 1,739,181 456,000 5,776,622 2003/04 ——— 3,312,813 279,253 1,739,181 456,000 5,787,247 2004/05 ——— 3,327,813 279,253 1,739,181 456,000 5,802,247 2005/06 --- 3,341,563 279,253 1,739,181 456,000 5,815,997 Final maturity 1998 2017 2011 2016 2014 Source: San Bernardino Municipal Water Department A BARTLE WELLS ASSOCIATES 14—Feb-95 rn 1 LL- 1 �t T W� Q U O U) U) N co c 0 Q N E ►� "t to to O -t co O N O O O N N J C f� 00NNt") 0 r' (D ^ W O N N O tiC7N r N 0 O_ O W EA C' N (D t 7 O xU 1- otn000000o Q Cl) qt T U � (>S Z w U F- � (D O O N O O O O O (O (D Q C 0) 00000000 M CL O cOOOT- O "t gcQ0 O rn O w VJ .y. t7 O 0 O O T to 0 M 0 (D C to tDf7wto (D � OON t` o-() r to to n W to W t T N 0 O NNOO (6 r- .4 N w r� (V T T � CO O C O O O O cy Q W c 0 0 0 1- 0 0 0 0 0 r' C O O t77 O (D to t m l77 t tD ca Z ` x ZO Dw O � CL U = O 0 0 0 0 0 0 0 0 0 0 UJ ZZ y � 0 O (0 't to (o to (D 00 0 x QW Z � w rO0N00000 N) O M mw eoofl- 00000 r 0 r Z � (v_ootn00000 m O co 0omgto ior- O N r- < 0 +� O CO W to (D T r N to It 0 O mW N tTtntn0 (0co0 N � O U) LL m O r N 0 0 (C) N 07 r to (h N o U cr) NrN N a- 61) 64 Fn O _ cc: U a. m m C > U O .. «. m •' C Q •p CD !v N :3 a CL C C O ? N of O d Z N co O Rf O- C N N L _ U 'a +' (C O D C N U m C c6 ) w O N Irn CD U L L Q M m N N CoQ d; _ O a- O C m 4 + F; C O Cl :t! mo Q CL0- DFrz3: wU � H w 10— cUa 1— TAt3LE 4 SAN BERNARDINO MUNICIPAL WATER DEPARTMENT HISTORICAL GROWTH IN SEWER REVENUE UNITS BY SERVICE AREA, 1990-1994 San Bernardino Loma Linda Single Family Mulb—Famityl Single Family Multi—Family Year Residential I Residential Commercial Total Residential I Residential Commercial Total 1990 505 2 143 650 208 1 336 545 1991 641 60 410 1,111 2 105 1 108 1992 166 0 163 329 23 2 4 29 1993 118 2 68 188 22 1 2 25 1994 106 2 43 151 18 0 0 18 Average 307 13 165 486 55 22 69 145 MAX 641 60 410 1,111 208 105 336 545 MIN 106 0 43 151 2 0 0 18 East Valley otal Utility Single Family Multi—Famiy Single Family Multi—Famiy Year Residential Residential Commercial Total Residential Residential Commercial Total 1990 231 9 25 265 944 12 504 1,460 1991 194 40 31 265 837 205 442 1,484 1992 4 2 21 27 193 4 188 385 1993 79 0 39 118 219 3 109 331 1994 33 0 52 851 157 2 95 254 Average 108 - 10 34 152 470 45 268 783 MAX 231 40 52 265 944 205 504 1,484 MIN 4 0 21 27 157 2 95 254 Source: San Bernardino Municipal Water Department BARTLE WELLS ASSOCIATES 03—Mar-95 kwo� 0 TABLE 5 SAN BERNARDINO MUNICIPAL WATER DEPARTMENT FORECAST OF GROWTH IN SEWER REVENUE UNITS TOTAL SERVICE AREA, 1994/95 — 2003/04 Year Total Historical 1990 1,460 1991 1,484 1992 385 1993 331 1994 254 Forecast 1994/95 250 1995196 250 1996/97 250 1997/98 250 1998199 250 1999100 300 2000/01 350 2001/02 400 2002/03 450 2003/04 500 2004/05 550 1005/06 600 Sources: Historical — San Bernardino Water Municipal Department Forecast— Bartle Wells Associates BARTLE WELLS ASSOCIATES 03—Mar-95 a� TABLE 6 SAN BERNARDINO MUNICIPAL WATER DEPARTMENT SEWER REVENUES AND EXPENSES, 1992/93 AND 1993/94 1992/93 1993/94 Operating revenues [1] Sewer charges — within City of San Bernardino $9,243,730 $9,804,959 Sewer charges — within other areas 4,603,382 4,769,934 Industrial waste fees and miscellaneous sales 394,745 80,268 Total operarting revenues 14,241,857 14,655,161 Operating expenses [2] Operations and maintenance 6,013,543 6,314,605 General administrative 2,661,304 2,291,131 I Depreciation 2,176,538 2,238,249 Total operating expenses 10,851,385 10,843,985 Operating income 3,390,472 3,811,176 Nonoperating revenues (expenses) Interest income 1,803,590 1,125,159 Miscellaneous income 21,081 41,171 Grant revenue 9,464 -- Interest expense (1,404,338) (822,562) Bond service fees (101,724) (59,440) Amortization of not issuance costs (9,622) (9,623) Investment fees (1.972) -- RIX demonstration costs (226,199 -- Total nonoperating revenues(expenses) 90,280 274,705 Net income $3,480,752 $4,085,881 [t] Sale of sewer capacity rights(i.e.,connection fees) and similar fees are accounted as nonoperating credits and adjustments. [2] Does not include system service charge by City of San Bernardino. Prior years'audits included this charge as an expense. Source: Prepared by Bartle Wells Associates from financial statements and independent auditors' report for the years ended June 30, 1993 and 1994. BARTLE WELLS ASSOCIATES 14—Feb-95 o� Oo O 000000 O 0000000 0 0 0 rn LO 00 0 0000 0 000 00 0 0 0 rn 0to O 0000 o 000 OO 0 o O 1 rC7 co N000 T �! NCO 00 r O QO O 6A ER O T to CO mo to r� N O O co r t` r O co U) CD O (n O T CD O w to O r O to N N 0 co CA N N r p (n r O 000000 0 0 0 0 O T 0000000 O r O f� O � O O O O O O O O O O O CD Q Z O O O 0 p O 0 0 0 0 0 O.17 Iti C6 O O O O0O (T T (M � f- (DC) 0 A M CD C9 F N It co �f co co O N � ti c U O O r Q W to T j L6 ci 6% N N w CL O co to 0 O 0 0 0 0 0 0 O 0 0 0 0 0 0 0 O Z N M O O O O O O O O O O O O O O w O 000 00 O O 0 �J 2 m 1O J CD T C`) (D � C7 D O CD C (D r LL O CA CA N N (D N LO CD o D (D 0 c (D CD f- C7 (n O O (h n r c7 0 N =- (D 00 N r L V) (}W pU f` too 0 000000 0 0000000 0 0 0 w � N (D O O O O O O O O O O O O O O LCI Qw 0000 O 000 00 O O () CA rN C) ODO O � NQD OO f� Z ) 6%64 C� C7 � N o to (D N ) O C`7 r N w fl- to f,- t7 (D 00 C7 A r � (D Q (D O (D N O N (D X � w Z � = Q co to 0 0 000000 O 0000000 O O O 0 � � M0 0 00080 0 000 000 0 0 $ ZZ C) 6c)6 r a) 00 L6 V7 U) 0 UUO � OD � tUf OM � N 0 0 w O c{}cA N IT f` (D O CD N h 19t r- a) N � r- >w 0(D C7 O co r N 0 Z m a: 1 w (o n Loo O O O O O O O 0 0 0 0 0 O O O O O Z J o c 7 M f� O 00000 O O O 00 O O O Q1 C7 O Q) MIoO� r O (DO N— T f� U) O ffl Ef3 rf N M fl- tD O O (D 00 (D O N C`') T T CD O f- O LD N_ (D (A IT C'D r1 N_ (D C7 T O (D N (7 r- M T T T co w U � m a`s o U to U U m U E Q N (n r NL U = to m (L m m m — U m U N p N m 3 — N m C C m 3 UN 0 (Dm m O 'a N U (n x CZ0E .0 7@ " N 5 m m U m X m Q 3 m t: E CL.f N m (n Z E N X . (n O a 0 .0 m L O 0 m " O U D O ` O 00m E m C � E C X m cts t ~ L GU1 C C C m J m C m U C 'a m 2 m C w r C C m Q C (D m m y m 7 U U L 1 m C m N 0 0 m O O d C � U m aCa: U U) EL f- wcnc[ wZUma: F- Z w !"` (D oo O 000000 O oo00000 0 0 0 orn o 0000 O 0000 0 � oil 0 0000 0 0000 0 0 0 o I p *- st -1 CA o t- O C0 (D � 0 � N to 0 69 d9 (D M In CA In f� T tD O T O T N O qcr0) f� T 00 'T Q) r N N - N N ff3 CV) 69 (n to O Cr1 Q O O 0 0 0 0 0 0 0 O O N O O O Q O O 0 O O O 0 0 0 O O O Z I C6 (0 0 O 0 O 0 1 I (D CO _ To O ONNI0000 to to IRT O N 9(3 U) � CC � � CY) ON C) 4 Dv � O O U Q U) < M Nnj MT toto (DN T CO tT Q W N cr w a W � 00 O 000000 O 0 0 0 0 0 0 0 O o O Ot,- o 0000 O 0000000 0 0 O W o Q M O 0000 O 0000000 O O O W � O 6 o00 r T f` f` 'It CO O O fl- (fl (D LL 61)69 U LO 00 J N NCO CC) (DMOM N O I N T OTN f- Of- 'T CV) 0T It O T NN � TtotncDN r 0- N N M fY1 W U 69 I w � M 00 0 000000 0 0000000 0 0 0 O M O 0000 O O 000 O O O O O 0 QW Z O 0000 O O 000 000 O O o U) M T f� CO O O Cn N T CM C) EA 69 tA to CO to T (D M IT f- M O M N M LO JW N T OOCO (D O 113i Nofl- MCAT O T aX N NTT O to NT to (D N cD f- 60) Uw z z z � Q Q o 0 000000 0 0000000 0 0 0 � 0T o 0080 0 000 00 0 0 0 w T � rn O 0000 O 000 00 0 0 0 ZZ 0 r CO N 0 cr) 0 M Tto0 00 N �- O 61?69 N 0 0 f,- to to 0 O w O co iD C � w N fl- � to to f� O f` CA W N '� N T T to N N M N Z a` I W (p T 0 0 0 000000 0 0000000 o O O co O O O O O O 000 O o O O O Z -1 0000_ ^ t� O O coo 0 0 o O O QH o TM CD OtnNO t` C1i(D0 OO M Ni N U) O (4 64 T M O N to O O (D CO O M 00 o N N (D ` C\l IT .- C?O f- CY) LL T r- CO T O N N N co o w N N W U cn m c � o N V (t m as E Cn " c CD N 4) ti m N r V ~ N a t) m CL C _ m cC U CX .- O N W m C N CD .. m O v o -�v � a m� czC �mNo xw Emc c m m y a� cm m 0 E m ~ E0Z (5 X0 N p m p 0 N O C p C � V � � C E m m o = � cx ' 55a >CD x c m vm aC C C m C m J � m �u C m 0c m mm -- - a: ° o � XX0 00 o m C < � U m 2 a: � � co a r w co a: w Z 0 a a: F- Z w TABLE 8 SAN BERNARDINO MUNICIPAL WATER DEPARTMENT SEWER FUNDS AVAILABLE — BEGINNING BALANCE I i General operating fund $663,278 Capital improvement fund 1,035,341 Operations 3,200,000 COPs 1,620,584 P.S.A. Rent 223,334 Depreciation 2,681,643 Receivables from SAWPA* 2,317,450 Construction fund 5,702,269 Less: Contracts Payable (2,495,484 Beginning balance $14,948,413 Rounded to nearest 1,000 $14,948,000 *Reimbursement of preliminary costs regarding RIX project. Source: San Bernardino Municipal Water Department BARTLE WELLS ASSOCIATES 14—Feb-95 O 000000 000 O 00 'cr (D tO 0 0 0 0 0 0 000 O 00 (O (D �' 000000 O (D O O 00 4 c: a) OCT NOCA (5 0 4,a CO (D `ct00 CA O •- LO t- N0 LO 07 0 Z r I- T O C`') N oo 0 CCC) � CO 00 O LO O r tl_ O r t0 C7 L M1 CO N N r T r O Q U) d U O 000000 0 0 0 O 00 TO p 000000 O O O O 00 M O Q 000000 000 O 00 � nj 0 QOj V tlC000ON tONr` L COP. Q. 0 CA M N O LO T LO 0 q' co UO N (f) L1._ r N 00 CO 0) qT 00 C7 t0 C7 OD U) O LO O to O T V M tO Q Hq r N r r r J J ZO O 000000 000 O 00 (DO W W F- O 00000 000 O 0 0 0 Crjnj W O D(D � C7 O O qT O J (D r- F- � c O NNONmOT LO LO O 000 T (D CO t- CO CD O co O t\ Q?C7 Q Q U (D t- mO O O � CO (D m Q. Ef3 r N r r r W CV 0 0) O r W Z t- 0 0 0 0 0 0 000 O 00 m r 000000 O O O O 00 O mO Q 0 0 0 0 0 0 0 0 0 O 0 0 N 3 Z CF) CO (D O qT O C) I- N O �Y co JW O (n CO V' NtO qt (DNCO LO NO Q W T t- LO t� t1- LO (D a0 1- O CA CO Q. W 00 (D (D O O (D CO (D j T N T T U � Z DW (D 000000 000 0 00 or-- 000000 000 Q 00 M N mm z OW 000000 000 v 00 L66 rn � (D-o tO C C tri rn .0 .0 tO o Z (� O T O O O LO (D 0 00 00 00 M r Q r N qt tl_ (D O N t, 0 CA a) cr CO (D r- O O O C (D W T T M r N ZO wU ca (n 000000 000 0 00 J, a:) 000000 O O O 00 r r ZQZ000000 O O O 00 (6 Lo' qT ? CD 00 Cn CO mO O UO C CD � N OCT Co CA � N M ti LO C) (D (D (D LO CO W W r �O ()) r- LO N N N CA (D O m v cD M to 0 N CO W UZ ai N N m m a m EE m O Vt $ U) rn N N _ U 2 O L C m "- O U ` p tmn U) (D m m CD O 70 to N N N _ NN � Nc3 � m n. 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H F- APPENDIX A EXTRACTS FROM INSTALLMENT PURCHASE AGREEMENT RELATING TO $41 .3 MILLION 1992 SEWER CERTIFICATES OF PARTICIPATION • Section 6. 13 Amount of Rates and Charges • Definition of "Revenues" • Section 5.03 Additional Contracts and Bonds Section 6. 13 . Amount of Rates and Charges. The City shall fix, prescribe and collect rates, fees, charges and connection fees for sewer service which will be at least sufficient to yield during each Fiscal Year Net Revenues equal to one hundred ten percent ( 110%) of Debt Service for such Fiscal Year. The City may make adjustments from time to time in such rates, fees, charges and connection fees and may make such classification thereof as it deems necessary, but shall not reduce the rates and charges then in effect unless the Net Revenues from such reduced rates, fees, charges and connection fees will at all times be sufficient to meet the requirements of this section. I i i i i Revenues r The term "Revenues" means all income, rents, rates, fees, charges, and other moneys derived from the ownership or operation of the Enterprise, including, without limiting the generality of the foregoing, ( 1) all income, rents, rates, fees, charges, connection fees, business interruption insurance proceeds or other moneys derived by the City from the furnishing and supplying of the sewer or other services, facilities, and commodities furnished or supplied through the facilities of or in the conduct or operation of the business of the Enterprise, but excluding in all cases customer deposits or any other deposits or advances subject to refund until such deposits or advances have become the property of the City plus sewer availability charges and plus the earnings on and income derived from the investment of said amounts, and (2) amount remaining in the Sewer Fund a=ter full compliance with the terms cf zhis Agreement anc the Trust Agreement. i i Section 5 .03 . Additional Contracts and Bonds. The City may at any time execute any Contract or issue any Bonds, as the case may be, in accordance herewith; provided: ( 1) The Net Revenues for the most recent audited Fiscal Year or other 12 month period within the 18 months preceding the date of adoption by the City of the resolution authorizing the issuance of such 'Bonds or the date of the execution of such Contract, as the case may be, as evidenced by both a calculation prepared by the City_ and a special report prepared by an Independent Certified ub Aczounzan: or an 7 ndepend_r z _�_^.c:1��31 �OP_Sli:�c.^.t On such calculation on file with the City, shall have produced a sum equal to at least one hundred and ten percent ( 110%) OIL' the Debt Service for such Fiscal Year; and (2 ) The Net Re-,.Tenues _or e_ -nos t recent audited sca: year or „the: mont:~ per_od :z the iS months preceding the date of the execution of such Contract or the date of adoption by the City of the resolution authorizing the issuance of such Bonds, as he case :nay be, including Adjustments to give effect as of the first day of such Fiscal Year to increases or decreases in rates and charges for the sewer service approved and in effect as of the date Of:' calculation, as eidenced bl bot.h a calculation prepared by z1ne City and a special report prepared by an Independent Cerzif'ied Public Accountant or an Independent rinancial Consultant or such calculation or_ __.e w.= t-_.e City, shall have produced a sum equal tc at ' eaEt one hundred and ten percent, =1n°�) or the Debt. Ser,. i=e =o= such Fiscal Year t plus the Debt Service which would have accrued had such Contract been executed or Bonds been issued at the beginning of such Fiscal :ear; and (3 ) The estimated Net Revenues for the then current Fiscal Year or other 12 month period within the 18 months and for each Fiscal Year thereafter to and including the first complete Fiscal Year after the latest Date of Operation of any uncompleted Project to be financed from proceeds of such Contracts or Bonds, as evidenced by a certificate of the General Manager of the Department on file with the City, including (after giving effect to the completion of all such uncompleted Projects) an allowance for estimated Net Revenues for each of such Fiscal Years arising from any increase in the income, rents, fees, rates and charges estimated to be fixed, prescribed or received for the sewer service and which are economically feasible and reasonably considered necessary based on projected operations for such period, as evidenced by a certificate of the General Manager on file with the Department, shall produce a sum equal to at least one hundred and ten percent ( 110%) of the estimated Debt Service for each of such Fiscal Years, after giving effect to the execution of all Contracts and the issuance of all Bonds estimated to be required to be executed or issued to pay the costs of completing all uncompleted Projects within such Fiscal Years, assuming that all such Contracts and Bonds have maturities, interest rates and proportionate principal repayment provisions similar to the Contract last executed or then being executed or the Bonds last issued or then being issued for the purpose of acquiring and constructing any of such uncemple*_ed Projects; and ( a) The Project to be financed from the proceeds of such Contract or such Bonds is technically feasible and the estimated cost of the acquisition and construction thereof is reasonable, as evidenced by a certificate (prepared at time of the execution of Suc_. ,.,cntraCt or Bonds, as the case may be ) of t're Genera_ Kana e �.he .et.a: me:.� , which certificate shall be filed with the City. ( 5 ) The City shall deposit in the Reserve Fund or in a sJ;.,-ni.IAar fund or provide for ar, alternate security as provided in Section 5 .05 of the Trust Agreement an amount sufficient to equal the lesser of the reserve requirement (ca_c::_ated i.. the same manner as -the Series 199 . :reserve Fund Requirement was calculated) �cr the 3ond or Ccrtract or Line maximum reserve requirement permitted by law or government-al regulators . i _ „ �� ' ude t.e C_- from issuing any .;..t._�..7 herein shall p__.._ _ .y bonds or installment purchase contracts which are subordinate to any ponds or Contracts of the City. I O APPENDIX B ESCALATION OF CONNECTION FEE 1996 - 1999 § ` Cl) ICY! \ ± U)CD e ° § fg823 m 7 C/) Q\ $ S � = § 000 \ $ E \ CL \ \ ± - co on CO -i = rl E � � k 3 / \/Ci % F2 § $ E ƒ 2 § g2 / _CY $ e Q \ § k � \\ / § 2 / f ®® � \ \ / 2 \? $ R � � \ \ \//\ / \ \ ® ° & cr oo In 22 © ° $ 2 § 2 $ ƒ q - / # Cl) p w � / g / G u e ®¢ w I c .:0 Z0 W g ` Cl) ooCD -J S \ k k � � \ 77 § / § § k/ Ci ® = e f/ 3 �k �/ & R ° � �� / k � � \ 22 < a EE 7 M 7 \ t \ k\ ¢ J � � � / % \ CO LL _ ® a %° /w - 2 ƒ2d%/G ® 0 w Clt\7 0 7\C\J \ /\ � � � E U k 0E (D 3 c £ 0 � / E (D $2 c ` § g CD ca 2 ¢ § \ % / �\ � k ° 0k £ « _ C: k 2 m c � 2 = 2 § $ E k § 2 / ° ° $ � = $ 5 c 2 .. 2 • « _ c = a 93 c / E / � W § � § � a0 -6 �� k � k � (k2 � / z ( � k/ 1 wco %\ 72 x£ 22 E � a08 S, C: E © R m � @ �� � R $ S3 $ �w = u. - £n = n « 6cz CL < @ -9 d3 B a ,