Where does San Juan’s revenue come from and how is it spent?
The San Juan Water District receives revenues from several sources, but the largest source is from rate revenues, as illustrated in this pie chart:
For fiscal year 2020-21, 87% of revenues are expected to come from your rate revenue. Some of the revenues, such as property taxes are dedicated to the capital program, leaving your rate revenues as the primary source of funding for operating the system. This pie chart shows “Where Your Rate Money Goes”:
How have San Juan’s retail operating revenues and expenses changed in recent years what has the District done to control costs?
Between fiscal years 2013-14 and 2016-17, the retail operations of the District generated cumulative losses of approximately $4 million, in spite of rate increases over that same period. Rate increases were being applied to both the daily base rate and the volumetric rate so when consumption fell in response to the drought, revenues fell as well. That is one of the reasons the Board approved the current 5-Year Rate Plan, with the increases being applied to the daily base rate, not the volumetric portion. It isn’t fair to the rate payers to be asked to conserve water, then be faced with a rate increase because revenues fell. The rate plan included increases to the daily base rate through January 2021 and, as shown in the graph above, has resulted in increased revenues sufficient to generate surpluses which the District sets aside in reserve for future capital projects.
The San Juan Water District understands that almost everything it does is paid for with your hard earned dollars and not all financial woes can be solved by raising water rates. The District has taken many actions to control costs including:
- Salary Schedule reduction: The District historically maintained a compensation package that was 10% above market average. In FY 2019-20 the Board of Directors reduced this target down to market median.
- Controlling pension costs by transferring the responsibility to employees to fund 100 percent of the employee’s share of pension contributions.
- Created a second tier of reduced pension benefits.
- Paid down the Unfunded Pension Liability: The District was paying 7.5% interest on this liability, but was only earning approximately 1.5% on its reserves. Between May of 2017 and April 2018 the District remitted just under $7 million to CalPERS, achieving a 95% funded ratio, saving rate payers approximately $8.8 million through FY 2036-37, with annual savings of approximately $350,000.
- Created a second tier of reduced benefits for retiree health benefits.
- Held staffing relatively constant.
- Refinanced existing debt: In May 2017 the District refinanced one its debt issuances, saving the ratepayers approximately $11.2 million through FY 2038-39.
- Renegotiated water contract with Placer County Water Agency: The District negotiated an amendment to its contract with PCWA wherein the take or pay amount was reduced from 25,000 acre-feet to 12,500 acre-feet. The District still has the option to take up to 25,000 acre-feet, but is only required to pay for 12,500 acre-feet regardless of whether it takes the water or not. This cut the PCWA water supply costs in half, providing savings of approximately $275,000 per year, starting in FY 2018-19.
- Renegotiated contracts with City of Roseville (City): Under two separate contracts, the District is obligated to provide up to 4,000 acre-feet annually to the City from the District’s PCWA take or pay contract. The amendments require the City to compensate the District for maintaining the availability of 4,000 acre-feet per year water supply for the City. This will generate annual revenues of approximately $90,000 beginning in FY 2018-19.
- Completion of a fee study and subsequent adjustment of fees to achieve full cost recovery. In addition to water rates, the District charges fees for various customer, or developer specific actions, such as hydrant meter rentals, development inspections, etc. These activities do not benefit the ratepayers as a whole. As such, the full cost of these activities should be borne by the individuals or businesses who are benefiting. The Board approved a new fee schedule that sets these fees at full cost recovery levels. This will put downward pressure on your future water rates.
These efforts, combined with a constant mindfulness to operate efficiently and frugally has resulted in operating expenses being relative stable over time. Recent increases in operating expenses stem from an increase in the maintenance of the distribution system. The rate increases have allowed staff the resources to fully complete all system maintenance tasks for the first time in well over ten years. In addition to reaching the proper maintenance levels the District has been able to increase reserves, which provided cash for infrastructure replacement and reduced the need for costly debt.
What are SJWD retail reserve levels and are they adequate?
Retail reserves were $10.5 million as of June 30, 2020, comprised of $2.5 million in the operating reserve and $8 million in the capital reserve. After factoring in the operations and capital budget for FY 2020-21, the reserve balance will be approximately $8.8 million.
The District is currently working on the Retail Master Plan. This plan assesses the condition of the distribution system and identifies capital replacement and investment needs over the next 10 years. The information from the master plan, and the current reserve level will be important factors in the next Retail Financial Plan which will inform the Board on recommended retail water rates over the next five years.