To: Members of the Castle Rock Water Commission
From:
Mark Marlowe, P.E., Director of Castle Rock Water
Anne Glassman, Business Solutions Manager
Title
2021 Rates & Fees Study Deliverables
Town Council Agenda Date: NA
Body
________________________________________________________________________________
Executive Summary
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.
2020 Year-End Financials
The 2020 year-end financials along with the 2021 approved budget serves as the starting point for developing the 5 year 2022-2026 financial plan. Three years of actual data from 2018-2020 serve as a historical trend comparison. Attachment A shows the comparison in summary by enterprise fund of the 2020 preliminary year-end actuals to the 2020 adopted budget. Revenue performance was outstanding despite the pandemic. The performance was driven by high water use as a result of dry, hot weather and people staying home due to the pandemic. Normally, much of the work force leaves Castle Rock for other communities during the day, but this was not happening with the pandemic. Strong growth in development also contributed to the higher than projected revenues with people wanting to move to the suburbs and particularly Castle Rock.
Overall, revenues were $4.3M higher than budget. Of this increase, $1.6M was in charges for service which includes metered water sales. Metered water sales were much higher than budgeted due to water consumption coming in higher than predicted as a result of a dry summer and more people being home during the pandemic. Approximately $1.8M was in system development fees for all funds due to permits coming in higher than predicted despite the pandemic. Investment earnings were $1.75M over budget as a result of great work by our Finance Department in investing our money. Another $3.1M was received for other revenues due to cash in lieu and sales of assets in the water fund and reimbursements in the water resources and wastewater funds that were not budgeted for. Finally, we received $0.6M in intergovernmental agreement (IGA) revenues due to capital grants in water resources and IGA revenues coming in higher than anticipated. Transfers in were $4.1M less than budgeted mainly due to not taking the planned Interfund loan from wastewater to water as it wasn’t needed. Also, fines and forfeitures and contributions and donations were approximately $0.4M less than expected.
Expenses were $56M lower than budget. The majority of this variance relates to capital projects not completed in 2020 of approximately $44.8M. Early in the pandemic many projects were put on hold by Castle Rock Water in order to evaluate the financial impact of the pandemic before proceeding with those capital expenditures. This was spread out over multiple projects. The largest capital items not spent in 2020 were $5.0M for water rights acquisition, $4.0M for Alternative Source of Supply, $4.1M for the push of the Administrative Building, $3.9M for Liberty Village Yellow Zone Tank, $3.5M for New water supply wells, $3.5M for East Plum Creek Stream Stabilization, $3.0M for Newlin Gulch Pipeline and Pump Station, $2.0M for both the Plum Creek Interceptor Upsize and the Plum Creek Diversion Structures, and many other projects. There will likely be a significant bump in capital spending in 2021 as late in 2020, decisions were made to proceed with capital projects that had been put on hold since revenues stayed strong.
Debt and financing and personnel came in pretty close to budget. Services and other came in $6.2M under budget due to $1.0M in wastewater for the Plum Creek Water Reclamation Authority (PCWRA) expansion, $1.2M for technical services in all funds, $0.8M in the assistance program in water, $0.5M in repair and maintenance of wells and the PCWRA capital buy-in, $0.4M in CIP operations and maintenance, $0.3M in utilities, $0.4M in other professional services and $0.4M in engineering services. Supplies were $0.6M under budget due to chemicals and fertilizers coming in under budget. Transfers out were $4.4M under budget primarily due to the $3.9M Interfund loan not being used between water and wastewater.
2022 Business Cases Summary
Every year, Castle Rock’s supervisors and managers review the staffing and equipment needs for their various divisions to determine if business cases should be prepared for additional personnel and / or equipment. If needs are identified, business cases are prepared to evaluate the financial, strategic, safety, level of service and other aspects of the need. The business cases are then submitted to the leadership team for review in light of the various priorities and budget constraints for the organization. As part of this review, leadership team reviews the long term staffing plan for possible changes. The long term staffing plan provides an estimate of staff needs out to the year 2060.
For 2022, a total of $270,011 in additional staff resources are being requested as well as equipment in an amount of $393,000. The staff resources will create an annual cost that will increase by approximately 5 percent going forward. The requested equipment costs will be single year expenditures with ongoing maintenance and future replacement costs. For the staff resources, three new full time equivalents (FTEs) are being requested for the 2022 budget. The three new FTEs include a Meter Technician, a Stormwater Operator and a Water Plant Operator.
Given the significant growth we have seen in customers and associated meters in the last five years, it is not surprising that an additional Meter Technician is being requested. We have four meter technicians currently. Customer meters have grown by more than 25% since 2016. Currently we have a service level that requires all meters within the Town to be read within three days. Those three days are the first three business days of the month regardless if they fall on a weekend or holiday. In addition to these needs, Meter Technicians are responsible for meter testing, meter and curb stop maintenance, inspections of new meter installations, the bulk hydrant program, disconnections and reconnections and final reads among other tasks. The current staffing levels for meter technicians has not allowed Castle Rock Water to undertake critical tasks including meter testing and curb stop maintenance. As an example our backlog of open maintenance related service orders has grown over the years due to being unable to complete the many new service orders we receive each month as well as having a backlog of older ones that staff is working to complete.
A new Stormwater Operator is needed to address increasing demands for maintenance of existing infrastructure as well as maintenance of new infrastructure being added to the system each year as a result of growth. The age of existing stormwater infrastructure is increasing with the average age going from 12 to 15 years and with that increasing age more assets are requiring more and more maintenance. Also with the increased growth in town there has been an increase in the amount of stormwater infrastructure around the town by approximately 20% since 2015. This includes an increase in inspection and maintenance needs for all Town owned stormwater ponds, catch basins, outfalls, man holes and pipes. Routine maintenance performed by the stormwater maintenance team includes removing debris from detention ponds, channels, outfalls and culverts. This work is required throughout the year with increased necessity after periods of high precipitation. New communities in the development phase, result in additional emergency maintenance, even with storms that produce a minimal amount of precipitation. Runoff and sediment from these neighborhoods have the potential to quickly fill up designated stormwater infrastructure and cause flooding, creating hazards to public safety. With the aging of the stormwater pipes, the stormwater maintenance team has been asked to begin running cameras through those pipes to identify maintenance needs and to manage contractors conducting repairs and maintenance on these pipes, beginning in 2022. This work will include CCTV of existing pipe and managing replacement projects for corrugated metal pipe (CMP) and reinforced concrete pipe (RCP). The additional FTE would create two crews, of two operators, safely and efficiently working on separate jobs. Currently with three operators, we are only able to have one crew and one project going at any one time. The fourth operator will allow for multiple maintenance projects to be performed at the same time.
With the recent startup of the newly constructed Advanced Treatment Plant at the Plum Creek Water Purification Facility, staff determined that additional personnel are needed to safely operate the advanced treatment processes and handle the other water treatment plants, 24 hours per day, seven days per week (24/7). Furthermore, increasing demands operating additional infrastructure, such as the new Plum Creek Pump Station, Castle Rock Reservoir 1, new deep groundwater wells, and additional WISE water import infrastructure create the need for more staff. Water quality monitoring requirements for the new advanced treatment processes, and the diversion and the reservoir in Sedalia are spreading staff too thin. An additional operations staff is needed in order to ensure water quality and expand water operations management capabilities for the new infrastructure. The workload facing plant operations is increasing for several reasons which include: the need to operate the new Plum Creek Diversion pump station and water intake structure on a full time basis, manage the reservoir in Sedalia, and optimize the importation of WISE water. Work load is expected to continue to increase each year as increasing summer water demands create a need for more staff and new chemicals and regulations require more staff on duty at a time. The diverse water supplies create the need for a greater focus on water quality driving more testing, and an increase in routine calibrations of monitoring equipment, data management and interpretation and balancing of the water supplies to maintain a consistent, high water quality.
A business case has also been submitted for a wheeled excavator for 2022. The wheeled excavator will be utilized by the Field Services (FS) team, to perform maintenance and repairs of Castle Rock Water owned infrastructure. Over the years Castle Rock Water has installed and/or purchased several miles of large diameter (>16’’) pipeline (WISE pipeline, Sedalia pump station line, the PCWPF alluvial well line, Mitchell Creek Force main are examples). These pipelines are mostly PVC, or in the case of the Ravenna pipeline Fiberglass (FRP) and have areas of deep bury depths. There have been multiple breaks on these lines over the years. These repairs have either been repaired in house or have been contracted out. The repairs that we were able to perform in-house must be located in very accessible and open areas allowing for 360-degree access around the break. This has allowed for the use of our smaller equipment to safely excavate the pipeline. In some cases, we have had to use both the back hoe and the mini excavator simultaneously, to complete the excavation. However, this is not always an option. CRW has had to contract out most of the repairs on these larger pipelines as well as for pipelines that are deep. Over the past 5 years, these contracted repairs have cost Castle Rock Water $300,699. In addition to these contracted repairs, Castle Rock Water has had to utilize rented excavators to complete several maintenance and repair tasks. The cost of this rental equipment has been $45,084 over the past 5 years. Overall by having our own excavator we could eliminate the need to hire out a contractor or renting a machine that we may not be able to get and increase our response time to these specific repairs and needs. An excavator will also allow for safer operation for repairs where there is not 360-degree access, lines are deep, or big lines need to be repaired.
Capital Implementation Plan (CIP) by Enterprise Fund
A large piece of the annual rates and fees study is updating capital project costs and timing to ensure the most current and up-to-date information gets input into the models. The capital plan forecasts costs through 2060 taking into consideration the timing of projects as well as inflation factors. Each capital project then receives a priority rating as follows:
Priority 1: Capital projects urgent in nature, timing is critical or dependent on another project.
Priority 2: Capital projects not as urgent in nature, timing of construction is more flexible.
Priority 3: Capital projects eliminated with little or no consequences to the future of Castle Rock Water.
Attachment B shows the individual capital projects requested as part of the 2021 Rates and Fees Study as compared to those requested in the 2020 Rates and Fees Study for the current five year planning periods.
For the Water Fund, the highest priority capital projects for 2022 include:
• Investments in Bell Mountain Ranch water system including re-drilling of a well, upgrades to the treatment plant, a raw water pipeline to better use existing wells CRW owns in the area, and the connection of the Bell Mountain system to CRW’s system.
• Targeted rehabilitation and replacement of aging water mains with Glover’s neighborhood being a particular focus
• Upgrades to our existing groundwater treatment plants to allow for better pH control to improve overall corrosion control in our system
• Continued implementation of the Supervisory Control and Data Acquisition (SCADA) system master plan with specific projects to ensure all systems are up to date and able to continue to manage our increased infrastructure and needs
If adequate revenues are available a lower priority project being recommended for 2022 is to build a connection from the new Tank 18 to our Blue Zone to provide for more redundancy and easier movement of supplies around the distribution system.
For the Water Resources Fund, the highest priority capital projects for 2022 include:
• Investments in additional storage including continuation of the Castle Rock Reservoir Number 2 project and additional Chatfield Reservoir storage purchases
• Construction of the Newlin Gulch pipeline which will allow reusable water to be moved from the Plum Creek basin into Rueter Hess Reservoir
• Continued implementation of the WISE project with primary efforts on construction of the Parker Mid-Section Pipeline
• Purchase of additional key water rights in the Plum Creek basin and for the Box Elder project
For the Stormwater Fund, the focus for capital investment in 2022 will be:
• Stabilization of Omni Tributary in the Plum Creek Basin
• Additional investment in the stabilization of McMurdo Gulch in the Cherry Creek basin
• Starting a program to rehabilitate and replace failing corrugated metal pipe (CMP)
• Updating drainage way master plans
For the Wastewater fund, the focus will shift from new treatment capacity which has been the primary capital project in 2020 and 2021 to rehabilitation and replacement of wastewater collection infrastructure and existing assets operated by Plum Creek Water Reclamation Authority.
Staff will use these CIP projections along with their priority ratings defined above to develop proposed changes to the 2021 Rates and Fees Study. Every few years we increase the planning period, and this year we have the forecast end year at 2060.
2020 Preliminary Fund Balances (Attachment C)
Throughout the year CRW staff reviews each enterprise fund to ensure that expenses do not exceed revenues. Attachment D is the historical fund balances, the 2020 preliminary fund balances, forecasted 2020 fund balances and the projected fund balances for 2021-2025.
Attachments:
Attachment A: 2019 Year End Financials
Attachment B: 2021 Business Cases
Attachment C: CIP Summary by Enterprise Fund
Attachment D: Fund Balances