To: Members of the Castle Rock Water Commission
From: Mark Marlowe, P.E., Director of Castle Rock Water
Anne Glassman, Business Solutions Manager
Title
2020 Rates & Fees Study Deliverables - June 2020
Body
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As part of the annual rates and fees study, Castle Rock Water staff gathers several pieces of information to input into the four enterprise models for calculating rates, system development fees and cost of service. Throughout the study, staff will bring to Commission some of those inputs and deliverables used for this process.
5 Year Financial Plan
Castle Rock Water (CRW) each year completes a five-year financial plan for the forecasted revenues and expenses. Attachment A shows the draft five-year financial plan for 2021-2025. Attachment A shows the total of all enterprise funds combined along with a breakdown of each enterprise fund for the last three year’s historical actuals, the 2020 approved budget, the 2020 year-end estimates and the proposed five year projections. This summary shows revenues and expenses broken down into the main budget categories. The five-year plan feeds off of the 2020 year-end estimates. On the revenue side, year-end estimates are driven largely by estimated changes to the system development fees from budget. CRW is updating estimates on system development fees monthly based on actual permit activity during COVID. These numbers will be updated as additional data becomes available. On expenses, year-end estimates for capital expenditures in Water and Wastewater are reduced due to the hold placed on a number of projects in response to projected economic conditions related to COVID, including the Administrative Building. For Water Resources, capital year-end estimates also reflect the hold placed on some projects, but further take into account projects that rolled forward and weren’t completed in 2019. In Stormwater, the 2019 Stormwater bank loan has a big impact on Stormwater revenues in 2019 and 2020. Note that the bank loan was not included in the 2019 budget. Corresponding capital expenditures in Stormwater are higher than normal in 2020 and 2021 as we spend these loan proceeds on legacy stormwater projects.
Overall, the revenues are projected to increase fairly consistently for the five year planning period based on growth projections and the continued increase in residential and commercial accounts receiving CRW services. Investment earnings fluctuate from year-to-year based on the market conditions and amount of investments. The intergovernmental revenues and other revenues are showing a decrease throughout the planning period due to agreements that are being fulfilled and coming to end of term, mostly in the water resources fund. Lastly, the transfers in and transfers out show large variances when comparing the 2020 approved budget to the 2020 YE estimates due to an inter-fund loan from wastewater to water for Liberty Tank Village that was pushed out to 2021 and not needed in 2020.
Overall, the operational expenses are projected to increase slowly and fairly consistently over the five year planning period in response to providing service to an increasing customer base. The changes in expenses can be found mostly in the Capital Improvement Program (CIP) projects and overall capital needs year-over-year based on the master planning process. The debt is showing a yearly decrease due to the 2012 revenue bonds maturing in 2023, thus no payments needed in 2024 and 2025. The personnel costs are in draft form as staff is in the process of working with the Finance Department to update the personnel costs for the 2021-2025 planning period including any possible FTE additions, merit increases and changes to overall employee benefit costs.
Flowcharts for Rates and Fees Models
Castle Rock Water staff put together a series of three flowcharts to help demonstrate the inputs and outputs used to calculate System Development Fees (SDFs), Development Impact Fees (DIFs) for Stormwater and customer rates as part of the annual rates and fees study. In Attachment B, the first flowchart shows the inputs that go into the calculation of system development fees (SDFs) for Water, Water Resources and Wastewater. The inputs are the remaining outstanding debt principal payments, fixed assets replacement costs, CIP plans through 2060 and system capacities created from both new CIP projects as well as the current system capacities from existing infrastructure.
The second flowchart shows inputs that go into the calculation for the Stormwater development impact fee (DIFs) model. The major inputs are CIP, the amount of acreage to be developed and the amount of impervious area.
The final flowchart shows the inputs for customer rate making for all four enterprise funds. The inputs include growth and inflation assumptions, projected reserve balances, debt service payments, projected SDF revenues, projected revenues and expenses, and CIP plans through 2060. All these inputs create outputs such as revenue requirements to cover expenses including CIP and what if any rate increases will be needed in the future.
Attachments:
Attachment A: 5 Year Financial Plan
Attachment B: Flowcharts for Rates and Fees Models