From The Pagosa Sun (Chris Mannara):
During a special meeting held on June 7, the Pagosa Area Water and Sanitation District (PAWSD) board was presented with the re- sults of a rate study conducted by Stantec…
Lay began the presentation by explaining the financial goals of the rate study. Some of the goals included:
• Maintaining a combined debt service coverage ratio of 1.25 per- cent.
• Maintaining adequate reserve requirements.
• Water and wastewater analysis performed as separate utilities and minimizing the rate impacts for both.
• Fund future utility operations and capital investments in the most financially prudent way possible.
Lay also explained that when it came to the water utility there were some assumptions factored into the rate study.
Those assumptions were:
• Utilizing annual cost escala- tion factors, 3 percent for both capital projects and operations and maintenance (O&M) fixed/variable expenses.
• Using a 2 percent growth rate for account growth based on PAWSD’s projections.
• Accounting for a consumption decrease in 2021 and 2025 to plan for a potential drought period.
• A decreased capital improve- ment fee in 2019 to $1,509 per equivalent residential unit (ERU) from $2,658 currently.
• Also decreasing the raw water acquisition fee to $1,726 per ERU from $1,959.
The presentation then moved to what PAWSD’s water rate revenue projections are, as well as projec- tions for funds with no rate adjust- ments for water utility.
Regarding water rate revenue projections, Lay explained that these projections are based on 2 percent account growth rates, but lso include a 5 percent reduction for consumption.
Lay also added that these water rate revenue projections do not include any rate increases from a revenue standpoint.
From the graph within the pre- sentation, PAWSD is projected to increase its water rate revenue each year aside from the fiscal years of 2021 and 2025 in which that 5 per- cent consumption decrease occurs.
Despite those decreases in those two years, in the fiscal year for 2028, PAWSD is projected to have about $4.2 million in water rate revenue.
Conversely, with no rate adjust- ments or debt in regard to water utility, PAWSD is projected to spend more funds than it currently has in the fiscal year for 2018.
This deficit is only projected to grow larger with each fiscal year, and, by 2022, PAWSD is projected to use about $10 million while only having about $4 million available.
For the years 2023-2028, PAWSD would be using about $6 million whilst having only about $4 mil- lion available with no debt or rate adjustments.
Water utility rate scenarios
Lay then presented the board with the three rate scenarios for water utility.
The first rate increase proposed would utilize a 12.5 percent rate adjustment, which was described by Lay as the “baseline scenario.”
This scenario would see rate increases from 2019 to 2021, three months of O&M reserve with no re- duction, 100 percent or $500,000 in annual waterline expenditures and the Snowball treatment plant project being debt funded by $3 million.
Waterline expenditures can also be described as waterline replace- ment, PAWSD District Manager Justin Ramsey added.
The proposed financial impact of this scenario on PAWSD custom- ers could raise their bill an addi- tional $19.35 from the current total of $68.16 to $87.51 in 2028.
All three proposed financial impacts also include the proposed rate increase for wastewater as well.
For all three scenarios, the Snowball treatment plant is debt funded, Lay added.
The second scenario presented by Lay was a 5 percent rate adjust- ment, which was described as the “alternative scenario.”
This scenario would have rate increases from 2019 to 2023, O&M reserves would be reduced below a three-month threshold in 2021- 2024, and waterline expenditures would also be reduced to 20 per- cent or $100,000.
Within the second scenario, PAWSD customers could see their bill increase from the current amount of $68.16 to $82.17 in 2018, an increase of $14.01.
The final alternative, which Lay noted as the “preferred” scenario, involves a 6.5 percent rate adjust- ment.
This scenario has the same rate increase and O&M reductions as described in the second scenario.
However, in this final scenario, only 50 percent or $250,000 would be allocated for annual waterline expenditures.
The financial impact within the preferred scenario would see PAWSD customers average bill in 2018 go from $68.16 to $85.56, an increase of $17.40.