TUALATIN VALLEY WATER DISTRICT
BOARD OF COMMISSIONERS
1850 SW 170TH AVENUE
BEAVERTON, OR 97006
FEBRUARY 5, 2008
WORK SESSION 6:00 P.M.
Present:Commissioners: Jim Duggan, Marie Haynes and Dick Schmidt
(President Burke and Commissioner Doane were absent)
Management
Staff:Greg DiLoreto, Todd Heidgerken
Others: Tod Burton, Bob Shields, Judi Tonks, Cheryl Welch,David Barenberg and Peg Wills
Vice President Duggan called the Work Session to order at 6:00 PM.
General Manager DiLoreto advised the Board that TVWDreceived a preliminary water rate from the City of Portland for next year. The increase would be 16.2%, contingent on Portland’s final budget approval.
General Manager DiLoreto noted four of the TVWD Board Members would attend the Special Districts Associationof Oregon Conference in Bend February 8-10, 2008.
SOLAR OPTIONS FOR DISTRICT HEADQUARTERS (PowerPoint slides are attached for further detail)
General Manager DiLoretoindicatedCheryl Welch, Sustainability Coordinator, would provide thepresentation on the topic. General Manager DiLoretonoted Dave Barenberg of Energy Trust of Oregon was in the audience.
Ms. Welch provided a PowerPoint presentation and explained information received from PGE regarding the total District’s electricity use. Ms. Welch indicated that TVWD decreased total electrical usage by 3.7% last year. Themain office building rose 5.6%, which Ms. Welch explained makes investigating solar installation more important. Ms. Welch spoke ofmitigating carbon emissions through hydroelectric power and noted TVWD received approval from Energy Trust of Oregon to fund half of a feasibility study(up to $30,000)to fine tune the hydroelectric at the generation station at Center Street and to investigate new generation opportunities at theCorneliusPass site. A Request for Proposal (RFP) is scheduled to be advertised next week to find a consultant.
Ms. Welch indicated the initial thought was to generate 100,000 kWh per year from roof space; however, this is no longer a viableoption as the small shed is not structurally sound to hold solar panels. She explainedstaff reviewed opportunities and programs associated with the installation of solar panels that would generate either 90,000 kWh per yearor 60,000 kWh of electricity per year. The 90,000 kWH scenario using the Fleet Area roofis notan option due to significant costly reinforcements (roughly $150,000) andwould be difficult to meet the deadline for Federal incentives ofDecember 31, 2008.
Ms. Welch explained TVWD staffsuggestsutilizing the current warehouse roof and the roof of the new decanting area to generate 60,000 kWh per year. These areas can be up and running in time to install solar panels on both spaces prior to the end of 2008.
Ms. Welch explained financing options staff is evaluating. She referred to the chart in her presentation for details.
Vice President Duggan asked if Ms. Welch thought the Solar Hosting Agreement (SHA) was the best solution. Ms. Welch indicated she had re-calculated the numbers from those previouslypresented to the Board. She thought a better price per kWh could be achievedutilizing the Power Purchasing Agreement (PPA) or the Solar Hosting Agreement(SHA); however,she found that was not necessarily true. She noted the PPA and SHA optionsare roughly the same. She noted there may be a bit more savings with SHA, but it is similar to the PPA, just a shorter agreement.
Ms. Welch stated the Flip Model is not an option as it has too many complexities.
General Manager DiLoreto reiterated staff’s proposal is to go forward working to place panels on the warehouse building and the decant station then select one of the models Ms. Welch presented to pay for it. TVWD would not invest in the project. Ms. Welch pointed out an RFP could be issued that gives proposers an option to bid on both services.
SYSTEM DEVELOPMENT CHARGE (SDC) BRIEFING (PowerPoint slides are attached for further detail)
General Manager DiLoreto indicated he and Tod Burton, Financial Planning and Debt Project Manager, would co-present the PowerPoint presentation explaining TVWD’s System Development Charges (SDCs).
General Manager DiLoretoexplained SDCs are a one-time charge imposed on new development to equitably recover the cost of capacity needed to serve new customers. It is a “growth pays for growth” philosophy.
General Manager DiLoreto explained some of the key characteristics of SDCs:
One-time charge
SDCs are used for capital improvements only
SDCs are for the growth portion of capital only (cannot be used to replace a facility)
General Manager DiLoreto indicated TVWD uses SDCs for water source, reservoirs, and water pipeline systems. They include future and existing components. SDCs include a reimbursement and improvement component.
General Manager DiLoreto explained ORS 223.304 mandates that a Capital Improvement Plan (CIP) be prepared from which SDCs are then calculated. The SDC Act allows changing the amount of the SDCs by updated project and cost information, i.e. a new CIP or an annual inflationary increase tied to a specific cost index. The last major update was in 2002 after the Water Master Plan (WMP) was completed in December, 2000. General Manager DiLoreto noted with thecompletion of the 2007 WMP, it’s time to recalculateSDCs to reflect the capital projects recommended in that plan. The CIP in the 2007 WMPjumps up to about $250MM and a portion of that was for growth. As discussed, this projectindicated ownership of the water supply was beneficial because SDCs can help pay for it. General Manager DiLoreto further advised the new proposed SDC fee accommodates that growth.
Mr. Burton explained that an SDC update study was included as a part of the 2007 WMP. Staff held off finalizing the results untilthe Board made its decision regarding future water supplyat the December 19th Board meeting. This study updates the Equivalent Residential Units (ERU), physical facilities, and CIP figures used as inputs.
Mr. Burton stated the District’s SDC consists of two components: a reimbursement portion and an improvement portion. The update resulted in little change to the reimbursement portion of the SDC, but with a majority of future supply expansion scheduled to occur within the current six-year CIP, the improvement portion of the SDC increased significantly.
Commissioner Schmidt asked if the projection of 7,914 additional ERUs through 2013 is equal to the number of people who will be moving in over the next five years. General Manager DiLoreto indicated that is not based on populationhowever,it is based on the building ofhouses or commercial buildings.
General Manager DiLoretopointed out that the District has budgeted $205MM out of $270MM project in this first six years, $70MM will be in the next six-year CIP. That will mean TVWD will have to change the SDC to reflect that additional $70MM.
Mr. Burton explained in detail (referring to his presentation) the calculationsused to determine how staff arrived at the increase of an SDC from $2,377.00 per meter to $5,466.00 per meter.
Mr. Burton discussed TVWD’s implementation options noting TVWD did meet with Ernie Platt, Intergovernmental Relations Representative of the Home Builders Association for Metropolitan Portland. Mr. Platt provided TVWD two recommendations on the projected increase to SDC charges:
- Consider phasing the increase in over time.
- Give a longer than normal advance notice for the effective date of the SDC increase, allowing builders time to apply for an SDC before the new rate is implemented.
Mr. Burton indicated staff would like the Board to consider the following options:
- Charge full SDC up front, but allow an implementation date of June 1, 2008. If the Board takes action at their February meeting, TVWD can begin a notification process. He estimated the first year revenue, assuming the ERUs are attained, to be around $3.95MM, subject to the economic times. This scenario provides three months of notification.
- TVWD would phase in 2/3 of the improvement fee in June, 2008, and phase in the full amount a year later in June 2009, with possibly an adjustment to the cost index to annually adjust the SDCs. This option lessens the impact of the SDC increase and would recover most of TVWD’s projected revenuea year later. The first year revenue would be about $3.44MM as opposed to $3.59MM, and the estimated foregone revenue of $500M. This option provides the same three-month advance notification
General Manager DiLoreto added one of the considerations staff took into account is the fact that development is slowing down. The projected foregone revenue of $500Mwas madeprior to a downward turn in home building.
Mr. Burton notedTVWD will need to budget for the remaining portion of the future Supply Project through 2016. That amount will represent another increase in SDCs and staff will request the Board’s approval on an additional updated SDC. Staff will be using a 2.5% inflation adjustment for five years and will add approximately another $440.00 to the SDC charge for the Water Supply project. Staff will continue to track and update the Board.
Mr. Burton referred to the Ranking Comparative Charges for Water chart in his presentation. This charts SDC charges for several jurisdictions. TVWD’sranking using its current SDC charge of $3,341.00 is at mid point on the chart. Wilsonville, Hillsboro, West Linn, and Sherwood are all making major investments to the water systems and it is expected other communitiesplanning for this growth are also going to be making changes to the SDCs charged.
Vice President Duggan asked ifHillsboro has recently adjusted theirSDCs. General Manager DiLoretoresponded that the chart does reflect adjustments. Beaverton and Tigard have not yet adjusted SDCs. Forest Grove has adjustedto the $4,000.00 rate depicted;should go into effectFebruary or March.
Several other scenarios were discussed by the Board and staff:
Implementing 2/3 increase for residential construction and full amount increase for commercial and all other classes
Increases based on meter class
Change the effective date of a full increase to July 1 or August 1
General Manager DiLoretoindicated in his discussions, theHome Builders have to look at the total SDC cost increase, which includes not only water, but waste water and storm water, the traffic impact fee, and fees for parks, which just went up $3,000.00. The transportation fee is looking to double as well.
Commissioner Haynes asked if proportionately, the fees are not really going up for someone building a new home in a new development valued at $400-500M, the rate is as it’s always been? General Manager DiLoreto responded that yes and no, it is going up significantly for TVWD because TVWD is building a water supply. Otherwise, no, it would not be proportionately different. That is one reason it has been indexed to inflation each year in the past because TVWD couldn’t charge SDCs on the Portland system.
General Manager DiLoreto indicated June 1 was suggested because an SDC is issued once the builder has his permit. TVWD thought builders would reach the permit stage by June 1 if they were building a house this year.
General Manager DiLoreto noted projects to be built have been identified. The issue is should growth pay for its share of those projects. If the answer is yes, staff has presented a solution to recover the growth portion. TVWD staff believes the information presented is correct; the issueis how to implement it.
Vice President Duggan thanked Tod Burton, Todd Heidgerken and Cheryl Welch for their presentations.
Without objection, Vice President Duggan adjourned the Work Session at 7:00 P.M.
BOARD OF COMMISSIONERS
TUALATIN VALLEY WATER DISTRICT
BY: BY:
James Duggan, Vice PresidentMarie Haynes, Secretary
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