Financial Services Dan Crowley Director - Financial Planning Rate Advisory Committee Our water. Our future.
SAWS is a nationally recognized leader in providing reliable and affordable water service We proudly serve our customers and help communities flourish with plentiful, quality, affordable water services Page 1
Mission & Vision Mission: Proudly serving our customers and helping communities flourish with plentiful, quality, affordable water services. Vision: Our VISION of success is achieved through people, best in class performance, and strong partnerships. Page 2
Commitment to Essential Services Providing Value Around the Clock Water Source Well/Pump Storage River Wastewater Treatment Plant Sewage Collection System Distribution Page 3
SAWS By the Numbers at 10/31/2008 Employees: 1,601 YTD Revenues: Assets: Liabilities: Equity: $319.7 Million $3.42 Billion $1.71 Billion $1.71 Billion Nearly 10,000 miles of mains Serving over 1.3 million people Located within 620 square miles Page 4
A Brief History Acting for the Future 1994 Residential Conservation funding established by Ordinance 2004 Aquifer Storage & Recovery grand opening 1990s Federal lawsuit and establishment of EAA, pumping limits, and drought restrictions 1998 Commercial Conservation funding established by Ordinance 1980 1990 2000 2010 1980s Conservation initiatives begin 1992 SAWS created 1998 Council endorses Water Supply Plan 2001 Recycled Water System comes online 2005 Council endorses Water Supply Plan Update 1984 Council approves first Drought Management Plan 2000 Water Supply Fee established by Ordinance Page 5
SAWS Organization BOARD of TRUSTEES Internal Audit President / CEO Robert R. Puente Board Support Senior Vice President / Chief Financial Officer Doug Evanson Senior Vice President / Chief Operations Officer Steve Clouse Senior Vice President Strategic Resources Kelley Neumann Financial Services Information Services Distribution & Collection Val Ruiz Vice President Operations Services Mike Brinkmann Vice President Production & Treatment Engineering and Construction Water Resources Public Affairs Greg Flores Vice President Human Resources Jerry Bailey Vice President Legal Frank Stenger-Castro Vice President Accounting Application Services Construction and Maintenance Corporate Real Estate Production Distribution & Collection Engineering Conservation Customer Svc. Stacey Isenberg Vice President Claims Contracting Finance Database Administration Eastern Service Centers Environmental Laboratory Services Treatment Operations Governmental Engineering Water Resources Communications Corporate Training Legal Financial Planning ERSS Western Service Centers Facilities Maintenance Treatment Maintenance Infrastructure Planning Human Resources Records Management Purchasing Print Shop Services Support Services Facilities Management Heating and Cooling Pipeline Inspection Safety and Environmental Health Small, Minority, Women Business Risk Management Program Management Fleet Environmental Services Production/ Recycle/ Treatment Eng. Supply Technical Services Resource Protection & Compliance Treasury Security Page 6
Structure Plan and report from a Core Business perspective Water Delivery Wastewater Water Supply (Recycle, Water Resources, Conservation, Stormwater) Chilled Water & Steam Allocation of revenues and costs by core businesses Page 7
Planning Plan using 20 year model Revenues Operations & Maintenance Costs Capital Improvement Program Capital Outlay Debt Service Portfolio Financial Ratios (exp. Debt Coverage Ratios) Ordinance Requirements (75686, 92752 est.) Operating Reserve Debt Coverage and Reserves City Payment and Matching City Payment Page 8
Budget Process Review Strategic Plan Update revenue forecast Update 20 year Financial Plan Develop budget goals & strategy Establish budget guidelines based on Executive Management directives Departments prepare budgets Executive review and decision Presentations to Board Subcommittees, Board Board Approval Page 9
Rates Cost of Service Based Structures Rates are based on Cost of Service By customers class Matches rates to cost to serve each group Each group pays its own way ; no subsidies The current general water and wholesale service rate structure are comprised of: A monthly meter charge - based on meter size An increasing volume charge - which includes five blocks SAWS rates are regulated by City Council City Public Utilities office monitors SAWS activity Page 10
Revenue Requirements (Cash-Needs Approach) SAWS uses the Cash-Needs Approach to determine revenue requirements User charges are structured to recover specific cash requirements for O&M and capital Provides greater flexibility for SAWS to establish rates to recover the cash requirements Easier to understand - matches revenue with cash needs Our bond covenants are predicated on cash needs Is consistent with governmental budget practices Is generally accepted by governmental utility industry Page 11
450,000 425,000 400,000 375,000 Current water supplies in average conditions would meet demand through the 2040s Without Edwards Restrictions 350,000 325,000 300,000 Demand* Acre-Feet 275,000 250,000 225,000 200,000 175,000 150,000 125,000 100,000 75,000 50,000 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043 2045 2047 2049 2051 2053 2055 2057 2059 Edwards Supplies (Avg) Non-Edwards Supplies ASR Project *Assumes aggressive conservation and customer growth Page 12
Edwards Supplies Cut 40% Under Stage IV Drought Restrictions 450,000 425,000 Acre-Feet 400,000 375,000 350,000 325,000 300,000 275,000 250,000 225,000 Demand* Edwards Aquifer Level Stage I <660 Stage II <650 vs Today 668.1 Stage III <640 Stage IV <630 200,000 175,000 50-yr Water Supply Plan 150,000 125,000 100,000 75,000 50,000 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043 2045 2047 2049 2051 2053 2055 2057 2059 Edwards Supplies Non-Edwards Supplies ASR Project *Assumes aggressive conservation and customer growth Page 13
300,000 275,000 250,000 Drought of Record Scenario Shortage as early as 2013 Demand* 225,000 Acre-Feet 200,000 175,000 150,000 125,000 100,000 75,000 50,000 2009 2010 2011 2012 2013 2014 2015 2016 2017 Edwards Supplies Non-Edwards Supplies ASR Project *Assumes aggressive conservation and customer growth Page 14
Conservation 50% More Customers, 0% More Water SAWS Edwards Aquifer Production (1987 vs. 2007) 1987 2007 1987 2007 Page 15
Conservation Gallons per Capita per Day (GPCD) 240 220 200 180 160 140 120 100 80 60 40 220 GPCD (1980) Gallons Per Capita Per Day (1979-2007) 157 GPCD (1996) SAWS 115 GPCD (2007) Actual GPCD Predicted GPCD The National Leader Dallas 217 Austin 187 El Paso 151 Houston 134 20 TX Water Dev Bd, 2006 0 1979 1989 1999 2009 2019 45% reduction in per capita consumption Page 16
Conservation Fiscal & Environmental Stewardship Surface Water $2.7 billion Groundwater Desalination $1.3 billion Additional Edwards $0.7 billion 1980s 121,000 ac-ft saved 2008 Deferred alternative supplies would have cost up to $2.7 billion Page 17
Wastewater Treatment Savings Conservation Related Savings $12 Per Gallon $1,071 million saved $7 Per Gallon $625 million saved $3.90 Per Gallon $348 million saved 1980s 89.3 MGD Treatment 2008 Capacity Savings Additional treatment capacity would have cost up to $1.1 billion Page 18
Water Supply Accommodating a growing community Optimize use of the Edwards Conservation Recycled Water System Aquifer Storage and Recovery Reduce Stress on the Edwards Canyon Lake - Desalination Trinity Aquifer Local Carrizo - Regional Carrizo - Lower Colorado River Authority -Recharge - Other Potential Supplies Page 19
Infrastructure Improving the System Expensive Repairs Pipes crumble and fail over time Public Health and Safety Page 20
Capital Improvements Program 5 Year (Forecast) $400 $388.0 $300 $268.3 $335.4 $293.7 $293.2 $ in Millions $200 $100 $0 2009 2010 2011 2012 2013 Water Supply $86.8 $132.7 $127.9 $98.7 $67.8 Water Delivery $58.1 $78.2 $69.0 $68.2 $53.1 Wastewater $123.3 $177.0 $138.4 $126.7 $172.2 Heating & Cooling $0.1 $0.1 $0.1 $0.1 $0.1 Page 21
Operating Cost Increases Line maintenance and unavoidable rising costs Wastewater Line Cleaning Preventative Maintenance Program Chemical Cost Increases Ferrous Sulfate, Sulfuric Acid, Dewatering Polymer Electricity Customer Growth, Rate Increase, Fuel Adjustment Clause Employee-Related Retirement, Post-Retirement Medical Maintenance Materials/Expense Asphalt Price Increases, General Inflation, System Expansion Other Significant Increases Credit Card Payments, Security, Postage, Fuel Water Related Leases Increased Edwards Leases to Support Customer Growth, Regional Carrizo Leases Plus, Increased Conservation Efforts Programs, Education and Awareness Page 22
Operations 17% More Efficient Since 2004 Customers / Employee 500 400 403 441 464 464 473 Employee 300 200 100 0 2004 2005 2006 2007 2008* *End of year projection Page 23
Operational Efficiencies Operating and Maintenance Cost Per Customer* $290 $280 $270 $260 $250 $240 $230 $220 2005 2006 2007 2008 O&M Cost Per Average Customer 2005 O&M Per Customer - Projected with CPI *Adjusted to reflect consistent accounting treatment across all periods. Page 24
Residential Bill & Rate Projection Residential Bill (7,788 gallons water / 6,178 wastewater, ICL, Standard) Actual Projected Monthly Residential Bill 2009 2010 2011 2012 2013 Water Supply 11.91 12.92 13.98 15.02 16.34 Water Delivery 13.94 14.52 15.31 16.01 16.49 Wastewater 17.39 19.08 20.64 21.46 23.04 Total $ 43.24 $ 46.52 $ 49.93 $ 52.49 $ 55.87 Increase $ 1.63 $ 3.28 $ 3.41 $ 2.56 $ 3.38 Increase % 3.9% 7.6% 7.3% 5.1% 6.4% EAA Fee 0.95 0.95 0.95 0.95 0.95 Total With EAA $ 44.19 $ 47.47 $ 50.88 $ 53.44 $ 56.82 Increase % with EAA 2.8% 7.4% 7.2% 5.0% 6.3% Average based on 7,788 gallons water and 6,178 gallons sewer usage. As of November 2008. Excludes COSA Stormwater. Page 25
How the 2009 rate increase will be used 3.9% Infrastructure 1.7% (Line Cleaning) 0.9% Operations & Maintenance Water Supply 1.0% (Other) 0.3% Average Residential Bill Increase of $1.63 / month Average based on 7,788 gallons water and 6,178 gallons sewer usage. As of November 2008. Excludes COSA Stormwater. Page 26
National Bill Comparison National Residential Water and Wastewater Top 10 U.S. Cities by Population $90.00 $80.00 $70.00 $60.00 $50.00 $40.00 $30.00 $20.00 $10.00 $0.00 Chicago Phoenix San Antonio Dallas New York Houston San Jose Los Angeles Philadelphia San Diego Monthly Bill $27.23 $32.28 $44.19 $49.88 $54.45 $55.21 $56.52 $57.94 $67.93 $78.48 Average based on 7,788 gallons water and 6,178 gallons sewer usage. Rates as of November 2008. Excludes COSA Stormwater. Page 27
Texas Bill Comparison Average Residential Water and Wastewater $80.00 $70.00 $60.00 $50.00 $40.00 $30.00 $20.00 $10.00 $0.00 El Paso San Antonio Dallas Ft. Worth Houston Austin Corpus Christi Monthly Bill $34.59 $44.19 $49.88 $52.75 $55.21 $67.94 $68.08 Average based on 7,788 gallons water and 6,178 gallons sewer usage. As of November 2008. Excludes COSA Stormwater. Page 28
Residential Rate Increases Major Texas Cities Since Last SAWS Rate Increase in 2006 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% El Paso San Antonio Ft. Worth Houston Corpus Christi Dallas Austin Monthly Bill 2.0% 3.9% 6.7% 8.1% 19.3% 21.1% 25.9% Average based on 7,788 gallons water and 6,178 gallons sewer usage. Excludes EAA Fee. As of November 2008. Page 29
Affordability Programs Income Based Programs - Affordability Discount - Project Agua Payment Assistance Includes - Senior & Disability Billing - Medical Consideration - Foster Care Transition Support - Payment Arrangements Participants - Project Agua 1,015 - Wastewater only 3,528 - Senior Citizens 6,234 - Avg Monthly Enrollment 20,829 Page 30
Final Comment Domestic Bottled Water: SAWS Tap Water: $1.00 per 0.5 liter $0.0003 per 0.5 liter For the price of a single 0.5 liter bottle of water, you can fill up the same container with SAWS water once a day for more than 8.1 years. Page 31
Financial Services Dan Crowley Director - Financial Planning Rate Advisory Committee Our water. Our future.