Water Consolidation AWWA, CA-NV Fall Conference

Transcription

1 Water Consolidation AWWA, CA-NV Fall Conference Presented by: Jeff Tissier, Chief Financial Officer/Treasurer Truckee Meadows Water Authority October 22,

2 Water Consolidation Not for Whimpees 2

3 Water Consolidation History and Purpose Nevada Legislature passed the Western Regional Water Commission (WRWC) Act in Established the Western Regional Water Commission The Act required public water purveyors in the planning area to evaluate consolidation as a potential way to improve management of water resources, improve efficiency, and achieve economies of scale. Laid the groundwork for consolidation which had been previously attempted over the past 25 years. 3

4 Initial Evaluation Conclusion Consolidation of water utilities could result in many benefits: Improved management and use of surface groundwater water resources conjunctive use More efficient infrastructure utilization and development Better service to customers due to uniform rules of service and conservation practices Long-term efficiencies and economies of scale Project Requirement Consolidation can have no adverse impact on any customer group or existing water rates after positioning the organizations for consolidation. 4

5 Water Systems in the Truckee Meadows 5

6 Public Water Systems & Supply Facilities in the Consolidation Area Truckee Meadows Water Authority (TMWA) (94,000 connections) 31 groundwater wells producing approximately 63 MGD. Five of the wells have PCE treatment Two surface water treatment plants with a combined capacity of 127 MGD Washoe County Department of Water Resources (19,000 connections) 41 groundwater wells currently operating in 14 different systems (Spanish Springs, South Truckee Meadows, Hidden Valley, Upper Mt. Rose, North Valleys and other stand-alone satellite systems) Longley Lane Water Treatment Plant (LLWTP) 4 MGD Four wells have arsenic treatment (three feeding LLWTP, one in Truckee Canyon) Three wells have uranium treatment at Lightning W South Truckee Meadows GID (STMGID) (3,800 connections) Eight groundwater wells with one well treated for antimony and arsenic. Sun Valley GID (6,000 connections) All water supplied by TMWA under a wholesale contract. 6

7 Consolidation Project History Preliminary due diligence work began in late 2008 with positive results beginning a six year effort and initiation of detailed analysis December, 2009 TMWA Board and Board of County Commissioners (BCC) approved the Interlocal Agreement governing the consolidation hiatus due to STMGID January, 2010 to 2013 Continuing Due Diligence during severe recession; Washoe County/TMWA water rate actions December, 2013 Interlocal Agreement to merge STMGID into TMWA was completed and approved March, TMWA Board and BCC approved Implementation of the water system consolidation and effecting the Transition Plan with over 250 merger related tasks to complete critical, and non-critical tasks Target Date to complete consolidation is December 31, 2014-on track 7

8 Consolidation Due Diligence-Major Activities Infrastructure Assessment all water systems plus Vidler Importation Project Water Resource Assessment groundwater and creek rights Human Resource requirements and incorporating WCEA represented employees into I.B.E.W Local 1245 Union. Customer Service customer transfer to existing billing system-v3 Upgrade Excluded Obligations Address Developer Agreements tied to SWTMWTP System Controls porting of polling signals to TMWA s Glendale Water Treatment Plant Financial Modeling with Five Year Projection supporting rating agency decisions, assumption and defeasance of debt, other debt management activities 8

9 Consolidation of STMGID To Be or Not to Be Between 2011 and 2013 STMGID had to make a decision which delayed overall merger progress 3,800 service connections, primarily residential, interdependencies with Washoe County utility infrastructure and water resources Contract operation by TMWA not feasible-blur governance, differing philosophy of board oversight To physically separate would require $15.0+ million in infrastructure investments and a wholesale water contract with TMWA resulting in severe water rate impacts December 5, 2013, final decision to merge with TMWA which set in motion the entire consolidation process and dissolution activities for STMGID-NRS 318 requirements 9

10 Truckee Meadows Water Authority (TMWA) Formed in 2000 as the result of a collaboration between Reno, Sparks and Washoe County to bid on the water assets of Sierra Pacific Power Co. Purpose: Retain local control over Water Resources Financing: Issued $452.4MM in Revenue Bonds - Credit Rating AA/AA- Source of Revenue: Water User Fees and Charges Only Enterprise Fund Governance: A Joint Powers Authority (NRS 277) Current Members of the Board of Directors: Mike Carrigan, Chairman, Sparks City Council Kitty Jung, Washoe County Commission Vaughn Hartung, Washoe County Commission Mike Cate, Vice Chairman, City of Reno Appointee Geno Martini, Mayor of Sparks Sharon Zadra, Reno City Council Neoma Jardon, Reno City Council 10

11 TMWA s Resources Today and in the Future Surface Water 40 CFS (28,959 AF) Hunter Creek (9,847 AF) Conversion of Irrigation Rights (69,700 AF) Washoe County Creek Rights Groundwater 15,950 AF or less in non-drought years Additional 6,150 AF in drought years Recharged water Washoe County rights Storage Independence Lake (17,500 AF) Donner Lake (4,750 AF) Interim Storage Contract (ISA) 25 year contract for 14,000 AF of storage Truckee River Operating Agreement-X2 upstream drought reserves CFS cubic feet per second AF acre feet 11

12 The Truckee and Carson River Systems CALIFORNIA NEVADA Pyramid Lake Derby Dam Independence Donner Lake Stampede Boca Prosser Truckee River RENO/SPARKS Lake Tahoe Carson River Lahontan Reservoir NORTH FALLON A B C D E ,769,000 af AVG - 558,700 af ,200 af ,017,000 af AVG - 603,800 af ,400 af ,888,800 af AVG - 425,100 af ,400 af ,400 af AVG - 161,400 af ,000 af ,300 af AVG - 276,000 af ,300 af 12

13 Typical Diversions of the Truckee River AVERAGE YEAR DIVERSIONS PYRAMID LAKE 80% TCID 10% OTHER IRRIGATION 7% TMWA 3% * 734 KAF Avg. ( , 1993, , , 2011) at Farad DRY YEAR DIVERSIONS TCID 46% PYRAMID LAKE 32% OTHER IRRIGATION 14% TMWA 8% * 322 KAF Avg. ( , 1994, , , 2012) at Farad

14 Consolidation Accounting Financial Reporting Requirements Prior to June 30, 2013, TMWA would have to look back to APB 16 Business Combinations-allowed pooling of interests FASB 141 and 141R superseded APB 16 Business Combinations eliminating pooling of interests allowing only purchase accounting- square peg through round hole GASB 69 Government Combinations and Disposals of Government Operations (effective date for implementation for reporting periods after December 31, 2013) came to the rescue STMGID, Washoe County and TMWA are all June 30 year end reporting entities-consolidation is December 31, 2014 mid-year STMGID is a dissolution of government entity so all first six months revenues, expenses are incorporated into TMWA financial reporting 14

15 Consolidation Accounting Financial Reporting Requirements (continued) Washoe County water utility consolidation is a discontinuance of an operation so accounting for revenues and expenses are prospective from December 31, For STMGID June 30, 2014 audited financial information will be the opening balances for Statement of Net Position purposes For the Washoe County water utility, December 31, 2014 limited scope audit will provide the opening balances for Statement of Net Position purposes Consolidation/Merger provide unique opportunities to evaluate contingent liabilities and operational impairments and if quantifiable adjust up into the opening beginning balances-materiality plays a role Major contingent liability for TMWA was identified- Domestic Wells- Mt Rose Fan-process of quantifying 15

16 Mt. Rose/Galena Fan Domestic Well Mitigation Program and Contingent Liability Discuss the transition of the Mt. Rose/Galena Fan Domestic Well Mitigation Program from the County to TMWA. TMWA s new Rule 10 will continue the benefits to the residents under the current Washoe County Program. TMWA s new rule will become effective upon completion of the pending consolidation of the Washoe County water utility into TMWA. 16

17 Mt. Rose/Galena Fan Domestic Well Mitigation Program and Contingent Liability Disclosure was not deemed material to the Washoe county financial statements but potentially is material to TMWA s financial statements Quantification process is obtaining the groundwater model report, well logs and marrying this information to identify potentially additional impacted wellsquantify and record. 17

18 Water Systems in the Truckee Meadows 18

19 Well-Mitigation Program Boundary 19

20 Impairment of Assets During due diligence activities TMWA identified a number of existing facilities that will not be used going forward: STMGID Well No. 9 low producer, arsenic treatment, high cost well. Old Washoe #2 well to be impaired One last review as a result of infrastructure due diligence. 20

21 Debt Management TMWA will assume a $9.1 million Drinking Water State Revolving Loan from Washoe County- first transfer of its kind in the State of Nevada requiring approval for transfer Washoe county has $26.1 million in publically issued debt which requires defeasance- fixed rate or variable rate defeasance? Fixed rate defeasance was problematic advanced refunding with only twelve months to call, scheduling of sale an issue as well as shifting savings due to market conditions TMWA has a tax-exempt commercial paper program with $160 million in authorization 21

22 Debt Management (continued) TMWA s liquidity facilities with Wells Fargo and JP Morgan Chase was to expire June 5, 2014 so RFP for replacement facilities was presented to interested banks Bank of Tokyo Mitsubishi UFJ was the successful bid with excellent terms and expanded liquidity support to allow additional tax-exempt commercial paper issuance for purposes of defeasing the $26.1 million in Washoe County water utility debt All in interest cost with liquidity support at 0.5% versus 5% coupons on Washoe County debt-more flexible with respect to issuance timing-need Additional Bonds Test calculation Economics are outstanding allows for future fixed rate takeout and preserves future ability for current refunding of fixed rate take-out 22

23 Water Consolidation-Not for the Faint of Heart 23

24 Thank you! Questions? Jeff Tissier, Chief Financial Officer/Treasurer O: (775) , M: (775)