VIRGIN VALLEY WATER DISTRICT BUSINESS IMPACT STATEMENT RE: POTENTIAL INCREASES TO WATER RATES AND SYSTEM DEVELOPMENT CHARGES
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1 VIRGIN VALLEY WATER DISTRICT BUSINESS IMPACT STATEMENT RE: POTENTIAL INCREASES TO WATER RATES AND SYSTEM DEVELOPMENT CHARGES Rule/Change Under Consideration: Increases to the District s culinary water rates and system development charges. 1 District Board Meeting to Evaluate Business Impact Statement: December 5, 2017 District Board Meeting to Consider Adoption of Proposed Increases: December 19, 2017 This Business Impact Statement was prepared by staff of the Virgin Valley Water District as designee of the District s board of directors in accordance with NRS It is based on information prepared and compiled by District staff and certain Virgin Valley businesses who responded to a notice of the potential increases that was mailed out and posted in public locations on October 24, The District s board of directors will evaluate and may adopt the findings of this Business Impact Statement at a public meeting on December 5, A copy of this Business Impact Statement is on file and available at the District s office located at 500 S. Riverside Road, Mesquite, Nevada The Increases Under Consideration The mission of the Virgin Valley Water District is to provide safe, reliable drinking water to the citizens and businesses of the Virgin Valley. The District is funded primarily by its customers water use, the associated payment of water bills and related charges. The District does not rely on property taxes or grants from governmental entities to augment its budget. Over the past several months, the District has examined its culinary water rates and system development charges. The District was formed in 1993 and rate increases, historically, have been relatively few and far between. Nevertheless, when water rates have changed, the increases have generally been substantial. In an effort to prevent imposing large increases all at once on rate payers, the District has more recently explored adjusting rates and charges in smaller increments on an annual basis 1 A system development charge, formerly known as an impact fee, is a charge imposed by the District to finance the costs of a capital improvement or facility expansion necessitated by or attributable to new development or new customers. 1
2 and these matters have been discussed in the District s public meetings over the past several months. The District has also engaged experts with experience in setting water rates who have assisted in developing rate options that would be financially sustainable for the District while also affordable and equitable for District rate payers. WaterWorth, one of the primary tools the District has used in this effort, has helped the District understand how water rates are performing now and how can they can be optimized to achieve the District s goals. In evaluating the District s culinary water rates, the District has considered, among other things, the expenses of providing water to customers including basic operating and maintenance costs. In examining system development charges, the District has considered its existing water rights, additional sources of water and their availability, the need for capital improvements, growth projections, and related factors. Specifics of the potential increases are set forth in the points below and additional details are provided in the Impact Analysis of Proposed Rate Changes on the Average User (per meter size) (Exhibit A) and Proposed Rate Schedule Changes (Exhibit B). The changes would entail setting the rates as shown with the annual increases occurring over the next four years, then re-evaluating and making adjustments every four years thereafter. 1. The Monthly Base Meter Rates and Block Rates would involve a 1% increase beginning in the District s 2018 fiscal year (FY2018), with an additional 1% increase at the start of FY2019, a 0.3% increase at the start of FY2020, and a 0.3% increase at the start of FY2021. For simplicity and ease of implementation the Monthly Base Meter Rates have been rounded to the nearest $ 0.05 (five cents) and the Block Rates rounded to the nearest $0.01 (one cent)/thousand gallons. 2. The System Development Charge would be increased to $2,500 per equivalent dwelling unit (EDU) in the first year with annual increases of 3% per year thereafter. For simplicity the System Development Charge has been rounded to the nearest $5.00 (five dollars). 3. The Impact Analysis of Proposed Rate Changes on the Average User (per meter size) shows the effect of the rate increases on the average user for each meter size. Impacts of changes to the Base Meter Rate and Usage Block Rates are shown separately. The analysis was prepared using actual water usage numbers from calendar year The low use number is based on low water usage during the winter; the high use number is based on high water use during the summer. 4. Each District customer currently pays a Debt Reduction Fee as part of the customer s monthly bill. This Debt Reduction Fee will be reduced by $0.70 / EDU per month starting with the April 2018 billing period. It will then be reduced again by $1.00 / EDU per month starting with the July 2019 billing period. On December 19, 2017, at the regular District board meeting, the District s board of directors will evaluate this Business Impact Statement and make a determination of whether the proposed 2
3 increases would impose a direct and significant economic burden upon a business or directly restrict the formation, operation, or expansion of a business within the District s service area. At a subsequent public meeting, the board of directors will hold a public hearing and consider whether to approve or disapprove the proposed increases, in whole or in part, or take other appropriate action related thereto. Notice to Local Businesses On October 24, 2017, the District mailed a formal written notice to local businesses entitled, Notice to Virgin Valley Businesses of Potential Increases in Water Rates and System Development Charges, which included a description of the increases under consideration. The businesses were invited to respond and submit data, documents, and other information to the District concerning whether the businesses believed the potential increases would impose a direct and significant economic burden upon a business or directly restrict the formation, operation or expansion of a business. The Notice stated that responses were to be submitted to the District by 4:30 PM, PDT on November 17, The Notice was also posted at the following locations: Virgin Valley Water District Offices America First Credit Union Bunkerville Post Office Mesquite Post Office Bank of Nevada Responses from Local Businesses The District received written responses from the following local businesses and copies of their responses are included as Exhibit 3 attached hereto: Colonial Property Management Terra West Management Services on behalf of Falcon Ridge Community Association The responses were reviewed and carefully considered. Colonial Property Management is a community manager for several homeowner associations (HOAs) in the valley. The HOAs are customers of the District s culinary water service and would be impacted by an increase in culinary water rates. On October 24, 2017, Colonial handwrote its response on the Notice it received from the District. Colonial s response states that it would have been nice if the HOAs had known about the potential water rate increases prior to preparing their budgets for 2018 and that Colonial had been told previously to expect a possible 1% rate increase. Colonial s response also included a copy of s exchanged on August 7, 2017 between Kevin Brown, the District s General Manager, and Colonial representative, Donna Villegas. Mr. Brown s 8/7/17 suggested that the HOAs plan on a 1% increase in water rates for the next year (2018), which is perfectly consistent with the increases under consideration. Colonial is not a property developer or builder 3
4 and Colonial s response did not address the potential increases to system development charges. Colonial s response also did not specifically address whether the potential increases would impose a direct and significant economic burden upon a business or directly restrict the formation, operation or expansion of a business. Similar to Colonial, Terra West Management Services is a community manager for some of the local associations and their response was submitted on behalf of Falcon Ridge Community Association (FRCA). This response, dated November 15, 2017, did not address whether the potential increases would impose a direct and significant economic burden or directly restrict the formation, operation or expansion of a business. Instead, the response stated that FRCA is opposed to any rate adjustments until the District assumes responsibility for the water distribution system located within FRCA s privately-owned commercial development. 2 FRCA s response does not address any details of the increases under consideration. Determination of Economic Burden After carefully evaluating all available information, including the responses from local businesses, the District s staff has reached the following conclusions: Will the proposed increases impose a direct and significant economic burden on businesses? NO Will the proposed increases directly restrict the formation, operation or expansion of businesses? NO Adverse Effects 2 Who bears responsibility for FRCA s water distribution system is a separate issue, unrelated to the increases under consideration. According to the District Rules, Regulations & Rates and related District policies, FRCA is responsible for the water system and pipes located on its private property and the District has addressed this matter in detail with FRCA on multiple occasions over the past couple of years. Section VI-3(1)) of the District s Rules, Regulations & Rates provide, The property owner is responsible for all water delivery lines, pipes, and appurtenances after the District s responsibility ends. The District s responsibility ends at the point closest to the distribution line servicing the property whether that point be at the property line, backflow device or meter. 4
5 The proposed culinary water rate increases are minor and the effects on businesses, if any, will be minimal. This is especially true since the Debt Reduction Fee on each customer s bill will be reduced by $0.70 / EDU per month starting with the April 2018 billing period. It will be reduced again by $1.00 / EDU per month starting with the July 2019 billing period. These reductions will more than offset the proposed rate increases over the next four years for the average customer. The increases in the system development charges apply primarily to property developers and builders. While most of the increases are minimal at 3%, the first increase scheduled for 2018 is 18%. However, this 18% increase only amounts to $380 for the most common size water meter (3/4 ), which is unlikely to impose a significant economic burden on a business. Nor does it seem likely that the increases would directly restrict the formation, operation or expansion of businesses for the same reasons. Significantly, no local developer, builder, or other business responded with any information suggesting that the proposed increases would constitute an economic burden or would have any impact whatsoever on their business. The District s system development charge (formerly known as an impact fee) has not been increased in several years and even with the proposed increases under consideration, the charges would still be competitive with other water purveyors in surrounding or similar communities. Further, developers and builders normally pass these costs on to consumers and it is unlikely that an increase of $380 for the typical size water meter (3/4 ) in 2018 (or even $610 in 2021) would cause a person looking for a home in the valley to look elsewhere. Beneficial Effects The increases under consideration would improve the District s overall financial condition and enable the District to continue providing quality water service to its customers. More specifically, the culinary rate increases would help the District ensure that it has sufficient funds to cover dayto-day operating expenses while the increases in system development charges will enable the District to fund capital improvement and facility expansion projects attributable to new developments and customers. Indirect Effects The indirect effects of the proposed changes include smaller, more manageable increases rather than one or more large increases all at once. Smaller increases are easier for customers to manage and setting them out a few years in advance enables customers to budget and plan accordingly. Methods Considered to Reduce Impacts As mentioned, the District has considered whether small but more frequent rate increases are preferable to larger but less frequent ones. It is believed that smaller increases projected out a few years at a time are easier for customers to manage and enable customers to plan and budget for. Therefore, the proposed changes were designed with these factors in mind and would be implemented in a manner to reduce and minimize the impacts on local businesses and customers. 5
6 Estimated Implementation Costs The District does not expect the proposed increases will materially increase the District s expenses or administration costs as the associated implementation tasks would be absorbed as part of current District staff responsibilities. Total Estimated Fees The total annual fees the District estimates to collect from the increases in culinary water rates are as follows and all references are to the District s fiscal year: 2018 $16,960 (with partial year implementation) 2019 $103, $131, $161,052 These amounts will depend on water usage. Funds collected will be used to pay the District s regular operating expenses. The total annual fees the District estimates to collect from the increases in system development charges are as follows and all references are to the District s fiscal year: 2018 $30,400 (with partial year implementation) 2019 $71, $85, $100,595 These amounts will depend on the rate of growth and development in the valley. Funds collected will be used to access and develop water resources and to install the infrastructure necessary to serve new developments and customers. Conclusion Overall, if the proposed increases are approved, the District s staff believes the impacts will be minimal and will not impose a direct and significant economic burden or directly restrict the formation, operation, or expansion of local businesses. CERTIFICATION OF BUSINESS IMPACT STATEMENT (NRS (2)) I, Kevin Brown, General Manager for the Virgin Valley Water District, hereby certify that to the best of my knowledge and belief the information contained in this Business Impact Statement was prepared properly and accurately. Dated this day of November,
7 Kevin Brown, General Manager Virgin Valley Water District 7
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