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Home My WebLink AboutPresentation_Regular_5/11/2023 (4)Utilities Department May 11, 2023Regular Council Meeting Charge, & Maintaining 3.5% Rate Indexing to Preserve Water Utility Financial Sustainabilityper ERU Capital Recovery moConsideration of a 5% Water Utility Baseline Rate Recalibration, a $10/Increase ConsiderationWater Utility Rate - Summary of February 2023 Workshop Village of Tequesta 2 Modify prior capital plan to new 20 year capital plan•in model)Maintain approved 3.6% rate indexing (approved through 2026; projected 20 years •per equivalent residential unit (ERU) moIntroduce a capital recovery charge of $10/•Base rate recalibration of 5% •recommended implementing effective October 2023:RaftelisTo preserve the financial sustainability of the water utility/ water fund, •Labor issues and wage adjustments•Supply chain issues/ long lead time for goods and services•and global pandemic issuesCovid•and is not keeping up with operational increasesprice increases and the current rate structure will not fund the capital program Inflation has caused significant operational and capital project/ construction •Updated Utility Financial Forecast Overview of Our Water Utility System Village of Tequesta 3 pledgednotof Village Credit” and “Faith Full ▪ad valorem/ property tax money used to fund utilityNo▪water utility revenuesAll costs funded from ▪for as an Enterprise Fundaccounted Utility ▪UtilitiesInterconnects with Town of Jupiter and South Martin Regional ▪some areas over 70 years old–is approaching useful life Pipe ▪AC pipe-nonAC & both –water distribution pipe 75 miles of ▪MGD sand filter water plant2.7 ▪MGD reverse osmosis water plant3.6 ▪95M= $cost eplacementestimated r–cost Original ▪Over $35 million in gross depreciable assets▪square milesVillage is 2 square miles; water utility service area is 4 ▪Countiesunincorporated Palm Beach and Martin Tequesta, Jupiter Inlet Colony, and portions of / 8,000 ERCs in Village of accounts 5,100 serve Currently ▪ Overview 3.50%3.50%3.50%3.50%3.50%Rate Adj.2030-20272026202520242023ProjectedAdopted Rates Village of Tequesta 4 with operational costshelp fund the capital needs while keeping up adjustments to Plan was to continue the rate ▪projectsyear to help fund repair & replacement of 1.5% per fixed rate increase Additional ▪Service Commission Utility Indexin Florida Public istorical trends hon Based ▪)average of 2.0%–at that timeinflation rates (based on inflationary price indexing Includes ▪2026 at 3.5% per yearfiscal year Through ▪phasing planyear rate -5a adopted Council In FY22, •Prior Financial Forecast– 2023 Financial Plan 11.6%12.0%13.0%Commission IndexFL Public Service IndexENR Construction CPI Index+17.9%Truck Transportation of Freight+30.1%Asphalt Products+200.9%Diesel Fuel+40.9%Ductile Iron Pipe+51.7%Stainless Steel Pipe+41.4%Prefabricated Metal Buildings+56.9%Fabricated Rebar+47.9%Fabricate Structure Metal+23.3%Aluminum Mill Shapes+12.0%Copper Wire+95.4%PVC Conduit+105.8%PVC Pipe+51.7%Steel Pipe+64.6%Steel Products+20.5%Mix Concrete-Ready2022)-(NOVEMBER 2020BLS DATA Village of Tequesta 5 of 5.0%additional increase -to 2024 rate “correction” suggest a To recover effects of inflation on O&M expenses (70% of revenue requirements), •ratesurrentcHas been absorbed by •2020 to 2022inflation indices Increases in •wage adjustmentsand issues Labor •servicesand goods for imes tlong lead / chain issues Supply •global issuesCovid and •:constructionand operations of cost on inflation Effects of •:to financial forecast Updated •capital expenditure needsand reflect current operating to financial forecast and updated info year -year financial forecast into a 20-Expanded existing 10• Capital Improvement Plan$83,336,370$17,930,463 $27,575,868 $18,671,908 $19,158,132 Totals 3,147,671 165,429 673,791 634,426 1,674,025 Machinery, Vehicles, Equipment3,355,641 1,798,141 --1,557,500 Other Water Distribution60,039,975 12,090,448 22,697,976 15,902,348 9,343,804 Water Main Replacement13,470,480 3,116,903 3,767,627 170,184 6,415,617 Water Treatment$3,328,153 $759,541 $436,473 $1,964,951 $167,187 Water ProductionTotals2042-20382037-20332032-20282027-2023 Year Capital Expenditure Plan-20 Village of Tequesta 6(29%) (at current $)estimates from 2021 increased $10.1m –main replacement program Water •adjusted 3.5% / yr. beyond 2024inflation / current conditions for adjusted Costs •)discretionary(water main pipe replacement –Priority Second•discretionary)-(nontreatment and water supply –Priority First•type Functionalized by •expenditure requirementsand funding Identify •financial forecast year -Prepared 20• 7 VillagePlanned Pipe Replacement Projects Throughout the Village of Tequesta Capital Funding Plan Approach Village of Tequesta 8 programProvides up to $13.5m in Project Funding = 22 % of replacement •links to initial loan repayment period) –years (minimum -Maintain for 20•(component of base charge) = $10 per ERC recovery charge Capital •loans SRF interest -lowAssumes use of •new debtin phase to provide revenues –immediate charge Recommend •replacement program for funding source dedicatedinitial Develop •program to flexibility Provides •ratesfrom and “PAYGO” funding future borrowing Funding includes blend of •plan that fully funds the Capital Programdevelop –Objective • •(cont’d.)Capital Funding Plan Approach Village of Tequesta 9 Ongoing PAYGO Funding of Capital (net revenues after debt payments)•years)-Additional SRF Loans Assumed (will extend beyond 20•jected to Provide Funding for Remainder of Program (78% of Program)Pro•Ongoing Rate Adjustments Includes Price Index assumed to be 2.0% annually•Assumes Rates Increased thereafter by 3.0% annually•with 2022 presentation)Assumes Rates Increased by 3.5% annually from 2025 to 2031 (consistent •5.0% Increase above Adopted FY 2024–Adjust for Current Market Conditions •Provides Flexibility –Capital Funding Allow Existing Rates to be Gradually Adjusted to Provide Additional 2023 Funding Plan $83,3336,370 $17,930,463 $27,575,868 $18,671,908 $19,158,132 Totals 8,065,963 8,065,963 ---SRF Loan 4Proposed 10,020,917 -10,020,917 --SRF Loan 3Proposed 5,834,638 --3,245,967 2,588,670 SRF Loan 2Proposed 7,881,743 ---7,876,593 Proposed SRF Loan 12,631,932 ---2,631,932SRF Loan DW50270043,181,944 8,939,529 16,250,853 14,131,337 3,860,225 Capital Investment–Reserves 2,424,951 759,541 573,553 565,170 526,687 Expenses (operations)Capital Reclassified to Operating $3,299,432 $165,429 $730,545 $729,433 $1,674,025 Operating Reserves Totals2042-20382037-20332032-20282027-2023 Year Capital Expenditure Plan-20 Village of Tequesta 10 Capital Improvement Program– Financial Position Village of Tequesta 11(limit financial risk / ability to secure financing)strong fiscal position Maintain a •(flexibility in timing and amount of CIP)program the manage Effectively •(cash reserves) to:maintain liquidity Objective to • Fiscal Year 2023 Rate Comparison Village of Tequesta 12 inflation/ capital replacement with issues –utilities have planned rate adjustments Many •capital implementation plan with increase Rates will • Observations and Conclusions Village of Tequesta 13)capital needsof priority / conditions change (expenses as analyses / ongoing updates will need projections Costs and •Allows rates to be phased in over time to generate additional cash flow for capital expenditures •loans interest -Pledged to SRF low•front financing for programrecovery charge provides up ) dedicated fixed cost (capitalImplement •5% increase–, adjust 2024 Rates operating marginsDue to inflation and reduction in •Plan can be adjusted based on costs, funding, and need•priority of failure / criticality highest with assets Replace •Program needs to be phased to allow implementation with minimal disruption•water distribution replacement programto fund the plan more formal develop Need to •are reaching their useful service life main assets Water •upgrade projectsand water main replacement and treatment / water supply Includes both •and is a major issue facing utilities todaysignificant is capital plan Village’s • Summary Village of Tequesta 14 recommendationsModeled financial outcomes based on adjusting rates to determine •Determined current rate structure will not fund the original capital plan •Identified rate phasing plan and needs•programDeveloped capital funding plan, including infrastructure replacement •evaluated capital projects and prioritization and developed revised list-Re•loan (SRF) repaymentIdentified funding and expenditure requirements including state revolving •Updated previous 10 year financial model & increased it to 20 year model •Reviewed operating and capital plans•Updated Utility Financial Forecast 2023- Consideration of Rate Recommendations Village of Tequesta 15 Maintain approved 3.5% rate indexing•unit (ERU)per equivalent residential moIntroduce water capital recovery charge of $10/•5% increase–Recalibrate water utility base rate •Recommendations effective October 2023• Questions?17