LRPC November 2021

The LRPC primary focus over the past couple months has been (1) developing 2022 rate structure recommendations for the board; (2) finalizing asset management plan database and funding updates; (3) assisting staff in forecasting the reserves budget against liens (including capital asset replacement costs); and (4) providing staff with recommendations in planning the 2022 operating budget.

The recommendation from the LRPC and agreed to by the board is to maintain status quo with the 2022 rate structure, continuing with a consumption allocation included in the base rate at 700 CF for each bi‐monthly billing cycle and a flat (one tier) metered rate. The 2022 base rates and consumptive rates have been discussed but not yet fully approved. The LRPC is recommending a modest 2022 base rate increase consistent with inflation and providing income to meet total estimated expenses. As far as consumptive rates, ideally they should be at a level where the income generated from metered usage covers the BLSMWC cost of providing water as well as our estimated variable costs, which is $1.90 per 100 CF.  Since current consumptive rates are $1.60 per 100 CF, the LRPC is recommending an increase which gets us closer to our cost. The rates will continue to be reviewed with the board over the next month or so to reach full approval.

The Asset Management Plan (AMP) database was recently updated to account for capital asset replacements completed in the final couple months of the USDA Project, corrections to inconsistencies found in the database, and limiting the application of added soft costs (i.e., planning, engineering & contingency) only to those capital replacements where required. The updated escalated replacement cost estimate over 40 years is $6.7M. The most significant major replacement is the water distribution system in the Unit 13 Cypress Point area estimated in 2035 at ~$1.8M. This section of our water mainline upgrades was not included in the USDA Project. Funding the AMP replacement costs over 40 years will require allocating ~$167K annually to our reserves.

Total reserves at year‐end 2021 are estimated at +$2.2M. In the total reserves, an amount of ~$956K is earmarked and set aside for our “Reserve Fund Policy”, which includes a Capital Asset Reserve Fund target level of ~$502K covering the replacement costs of all assets with a remaining useful life of 5 years or less. Existing reserves, together with the history of BLSMWC year‐end “annual net income” financial records for the past 7+ years, indicates that we are in a strong position to cover our AMP 40‐year funding plan. With that said, the AMP database and funding plan will continue to be reviewed and updated as needed on an annual basis.

Lastly, the LRPC has been assisting the BLSMWC management & staff in formulating the 2022 operating budget. As mentioned above, income recommendations have been provided in both the base rate and metered rate accounts. A few expense accounts are still under discussion as we await needed information, and we plan to reach agreement and approval on those within the next month.