Minutes 08/20/2011 I'LL P14-ter
Productivity Committee's 3 i3 1 _" 2 Ft
Subcommittee
Public Utilities Capital Projects Review
August 30, 2011
9:30am
DRAFT Minutes
Subcommittee members:
Janet Vasey
Vlad Ryziw
Jim Gibson
Gina Downs
Doug Fee
Leslie Prizant
Collier County Public Utilities Division Staff:
Tom Wides, Director, Operations Support
Paul Mattausch, Director, Water
Dan Rodriguez, Director, Solid Waste
Tom Chmelik, Director, Planning & Project Management
Steve Messner, Interim Director, Wastewater
Bala Sridhar, Sr. Management and Budget Analyst
Joe Bellone, Manager, Utility Billing and Customer Service
Mike Sheffield, County Manager's Office
Sheree Mediavilla, Administrative Assistant
AGENDA
1. Call to Order
Meeting called to order by Janet Vasey at 9:33 am
2. Welcome and Introductions
Subcommittee members and County Staff introduced themselves.
3. Safety Comments
Paul Mattausch: Hazardous chemicals are stored and in use on site:
• Sulfuric acid
• Ammonia gas
• Chlorine gas
If there was a chlorine gas leak, an alarm will sound and we will follow a Hazardous
Chemicals Safety Plan, and a safety plan developed by the Risk Management
Department. An alarm will sound if we need to evacuate the building. Use the stairs
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and walk out the driveway to the front entry gate. Check the flag and wind sock and go
in the opposite direction of the wind.
Ms. Downs inquired if there is a requirement of the amount of land, or buffer that needs
to surround this site. Paul answered that no buffer is required and we notified neighbors
that we have chlorine on site. The Golden Gate Fire Department uses this facility for
training purposes.
4. Plant Presentation—Water 101
The Water Department provides an essential life-sustaining service—drinking water. We must
meet the demand of every customer for an unquestionably safe and sufficient supply of potable
water. We must stay in compliance with every Federal, State, and local regulation that controls
the source, treatment, and delivery of drinking water. We are a 24/7 service to the community.
The department is structured in four areas:
• Water Supply: Water from the well fields to the treatment plants.
• Water Production: Running the North and South treatment plants.
• Water Distribution: Water Distribution is responsible for getting the water from the plants to
the customers'faucets.
• Laboratory: To stay in compliance with every Federal, State, and local regulation related to the
delivery of water.
Our proposed FY12 budget calls for 126 FTE in six sections. The Water Distribution area is the
largest with 60 FTE.
The water supply system service area is approximately 240 miles and provides potable water to
56,000 service connections. We provide high quality water to 164,000 year-round residents,
and this increases to 200,000 residents during the season. We have four water storage and re-
pumping stations and 101 wells located in three well fields. In 1998, we had 27 wells in the
system. We have grown in capacity and reliability. The average daily demand is 21.8 MGD and
the maximum daily demand is 36.1 MG.
Jim Gibson asked what time period do you reach the maximum daily demand. Paul Mattausch
stated it is typically in the March/April time frame. It is dry time of year and peak population.
We track consumption use, and 28-30% on an annual basis goes to irrigation. Bala Sridhar has a
spreadsheet that tracks this and we know what is coming in on the water and wastewater side.
Gina Downs: What are the average gallons per day per capita?
Paul Mattausch: 140 gallons per person.
Gina Downs: Is that higher than the state average?
Paul Mattausch: Yes, but it is typical of Southwest Florida. The City of Naples and the City of
Marco Island are higher. We have done well on conservation as the average gallons per day in
1998 was 210. You will not see the number in the AUIR, but we have to plan for peak days.
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Rather than using 140 gallons per person, we use 185 for planning purposes. Approximately
30%of our drinking water is used for irrigation.
Gina Downs: During peak season, is 30% (potable water used for irrigation) average for other
counties?
Paul Mattausch. It is as high as 60%in Naples and Marco Island. The information is not widely
published by other counties. We are using half of that consumption. One third is coming from
reclaimed water and it is a benefit to the customer.
The South Plant was constructed in 1984 and had 4 MGD capacity using a lime softening water
treatment process. This was expanded by 8 MGD in 1998 to a total constructed capacity of 12
MGD.
The 2005 expansion added 8 MGD using a reverse osmosis water treatment process. The last
expansion in 2009 added an additional 12 MGD for a total capacity of 32 MGD (12 MGD utilizing
lime softening and 20 MGD utilizing reverse osmosis).
The Water Department raw water supply is provided by 34 wells in the fresh water Tamiami
Aquifer—the water is 60 to 110 feet below ground level and the capacity is 30 MGD.
The brackish water- Hawthorn Aquifer—has 76 wells and 300 to 950 feet below ground level.
The capacity is 70 MGD.
The potable ASR is the most expensive means of providing water for the system. We treat the
water first before putting it in the aquifer using ASR technology. As we go to more brackish
water to produce drinking water the efficiency goes down—to then put drinking water down in
the ASR, you lose some of the fresh water. It drives up the cost of operation for the entire
system.
Gina Downs: Is there a limit of the number of ASR wells?
Paul Mattausch: No, there is not a limit, but it is not economical because it depends on local
hydrogeology.
We have a good neighbor policy and do degasification and odor control so it does not go into
the air. Brackish water goes through pre-filtration and reverse osmosis. Pushing water under
pressure and separating the water from dissolved solids. There are two streams—the good
drinking water and the concentrate water is put into a deep well 3000 feet down —the state
permits us to deep inject our concentrate stream.
Doug Fee: How much water is injected down on a daily capacity?
Paul Mattausch: It varies on how much fresh and brackish and the demand from the customer.
The reverse osmosis process is about 75%effective.
Janet Vasey: How many deep injection wells do we have?
Paul Mattausch: We have two at the North Plant and two at the South Plant. We have one well
on this site that failed, and we are asking the Board of County Commissioners at the September
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13th meeting to approve a contract for the replacement of the liner in that well. In the FY12
budget, we are asking for$1.5 million for the replacement of the liner in the other deep
injection well. There is an 18 month downtime from the time of failure until the well can be
placed back into service.
Janet Vasey: What would you do if the second well failed before the other one is back on line?
Paul Mattausch: We are considering three deep injection wells at each of the two treatment
plants. I can't treat reverse osmosis; I can use lime softening for treatment. The North Plant
depends entirely on deep injection. If both fail at the North Plant, we are out of service until
we get them repaired. We would only have the 12 MGD that the South Plant can produce.
Gina Downs: Is the deep injection well that failed close to the age of the one that needs to be
relined?
Tom Chmelik: Yes.The two at the North Plant were replaced a year and a half apart.
Steve Messner: The cold steel liner was replaced with fiberglass.
Paul Mattausch: We lose a little capacity because of the thickness of the fiberglass.
Vlad Ryziw: Does staff do the inspection of the wells?
Paul Mattausch: Staff inspects the wells on a daily basis. There is an outer casing and an inner
lining. The space between the pipes is sealed and filled with fluid and the pressure is
monitored continuously. If we see the pressure drop and saw fluid loss, we would add fluid to
that inner space. We did a video inspection to inspect the inner lining and found the point of
failure.
Gina Downs: Are the ASR wells also steel and will they need to be replaced with fiberglass?
Paul Mattausch: We have used plastic ... PVC on those. Doug,we are ahead of the game. Deep
injection is standard in the industry.
Doug Fee: Do Tampa and Lee County use the same technology?
Paul Mattausch: Tampa is permitted to put their concentrate into the Bay. Bonita Springs has
deep injection wells.
The discussion changed to the topic of security.
Paul Mattausch: Security is an ongoing capital program. To make sure we have the appropriate
security in place, we do a vulnerability assessment, site assessment, and Collier County
Emergency Management provides assistance; we utilize consultants and professional
organizations, and regulatory agencies. We have lighting, fencing, locks, alarms, surveillance
cameras, and rotating site surveillance. Prior to this, we had things stolen, but it does not
happen now.
Gina Downs: Are there State or Federal programs that provide any funding for this?
Paul Mattausch: No
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Gina Downs: This is an unfunded mandate. Homeland security had minimum standards.
Vlad Ryziw: Is there any offsite security?
Paul Mattausch: All remote facilities have cameras and they are monitored by Facilities
Management 24/7.
Gina Downs: What about the EPA Numeric Nutrient Criteria?
Paul Mattausch: It appears that drinking water will not be included in the regulatory
enforcement; it would be on the Wastewater side. However, the water supply itself is used for
irrigation. We add ammonia which contains nitrogen and polyphosphate which contains
phosphorus and the current standard being proposed is lower than what is in the drinking
water. You can drink it, but you can't put it on the lawn.
Janet Vasey: Why would they make that regulation that makes no sense?
Tom Wides: We have legal experts to fight this battle.
Paul Mattausch: This facility was awarded the 2009 Award of Merit from the Water Reuse
Association. It is an international award for using reverse osmosis. In 2010, we received the
Plant Operations Excellence Award, having been nominated by the Florida Department of
Environmental Protection. We were also awarded the Water Distribution System Award
sponsored by the Florida Section of the American Water Works Association —awarded the
Large System Award. To win both in the same year is unheard of.This demonstrated to the
regulatory agencies and our peers that we are doing the right thing here.
Vlad Ryziw: Do you provide laboratory services to the homeowner?
Paul Mattausch: We don't offer service outside. We have liability concerns related to running
samples for a private individual. There is a liability for providing that information. The
laboratory does do a lot of the lighter analysis—methods that require a large capital investment
in lab equipment and certification of the employees are done contractually. Due to the
expense of analyzing metals, organic compounds, and insecticides, we utilize the services of a
contractor.
Paul Mattausch: Our drinking water treatment capacity is 54% reverse osmosis and 46%
constructed capacity is fresh water. 24MGD fresh water and 28MGD reverse osmosis capacity.
It is not 50/50. It takes more brackish to give the same amount of fresh water. In lime
softening, we only lose 2 to 3%. The membrane softening is 85%efficient and 15% has to go
into the deep injection wells. For reverse osmosis, for every 100 gallons of raw water used, we
get 75 gallons of drinking water.
It takes three years to get a fresh water permit and attorneys are involved. We are at the limit
because we have to compete with the Everglades. The Water Management District has to
conserve that. It takes 27.6MGD of fresh water a day to run both plants.
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Doug Fee: So that means more expense?
Paul Mattausch: Yes, it is more expensive to operate reverse osmosis plants.
Vlad Ryziw: Looking at the AUIR build out, what does that do to the facility?
Paul Mattausch: We are looking at 2027 for the next increment in capacity in the Northeast
and we already have land in Orangetree.
Gina Downs: This is user fee maintained.The developer is holding the costs.
Janet Vasey requested a copy of the PowerPoint presentation (subsequently provided by e-
mail).
5. CIP Discussion and Video Tour
Video Script
1 The Water Department has a Capital Improvement Program that supports the Public Utilitii
"Water Department Capital Division goal of accomplishing Level Two management of assets and risk of failure.Althoug
Improvement Plan Overview" some risk is assumed,the program still maintains compliance with all Federal,State,and
[CREATE TITLE PAGE] local regulations.Also maintained is the ability to meet the demand of its customers for
potable water with reliability and sustainability.
2 The Water Department operates and maintains 3 wellfields that provide the raw water
supply to two water treatment plants.The three wellfields include a total of 101 wells
Picture of well ranging in depth from approximately 80 feet deep to approximately 950 feet deep.The
wellfields provide both fresh water and brackish water to four separate treatment
processes.
3 Picture of SCRWTP LS The two hybrid water treatment plants have a total capacity to treat and distribute 52
million gallons per day of high quality drinking water.
4 Four million gallons of lime softening water treatment capacity was constructed at the
Picture of lime softening South County Regional Water Treatment Plant in 1984.The plant was expanded in 1988 to
reactor 12 million gallons per day.The lime softening treatment process uses fresh water from the
Lower Tamiami Aquifer.
5 Video of NCRWTP In 1993 the North County Regional Water Treatment Plant was constructed with a treatmei
capacity of 12 million gallons per day.
6 Picture of nano skid Nanofiltration,commonly known as membrane softening,uses fresh water from the Lower
Tamiami Aquifer in the production of drinking water.
7 The North County Regional Water Treatment Plant was expanded in 1999 with the addition
Picture of RO skid of 8 million gallons per day of reverse osmosis treatment,The reverse osmosis process use!
deeper brackish water from the Mid-and Lower Hawthorn Aquifers in the production of
drinking water.The total treatment capacity at this facility is 20 million gallons per day.
8 In this picture,the 12 million gallons per day of nanofiltration treatment process capacity is
Picture of process room on the left;the 8 million gallons of reverse osmosis treatment process capacity is on the
right.
9 Two additions followed,both at the South County Regional Water Treatment Plant.Both
Picture of SCRWTP RO additions use reverse osmosis to treat brackish water,again drawn from the Mid-and Lowi
Hawthorn Aquifers.
10 The first phase of reverse osmosis treatment capacity construction,8 million gallons per da
Picture of process room was completed in 2005.The second phase of construction added 12 million gallons per day
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of reverse osmosis treatment capacity in 2009.
11 Picture of plant site The completion of the two phases of reverse osmosis water treatment capacity brought th(
total water treatment capacity at this facility to 32 million gallons per day.
12 GIS Water Layer The water distribution system,a grid of underground transmission mains and water mains,
delivers drinking water to customers through approximately 900 miles of pipe—
13Map that's enough pipe that if laid end to end following 1-75 going north,would reach
Williamsburg,Kentucky!
14 Water is provided to 56,000 residences,businesses,schools,and medical facilities through
Picture of meter and
backflow device in front of a service connections from the underground water main in the street to the building.The
business water passes through a water meter,and in most cases,a backflow preventer before being
delivered to the customer's water service.
15 The Raw Water Booster Station,located on 7th Street SW in the Golden Gate Estates,pump
Video of RWBS raw water from the Tamiami Wellfield to the fresh water treatment processes at both the
North and South Treatment Plants.All of the water from this wellfield must pass through
this facility,which provides sufficient pressure to deliver the water to the treatment plants
16 Project 70085,a multi-year project,sets aside$500,000 in Fiscal Year 2012 for repairs and
modifications needed in this facility to meet pumping requirements to move the water to
Video of RWBS Pump Room the treatment plants and to stay in compliance with Florida Administrative Code 62-555.
This section of Florida Administrative Code requires water utilities to maintain facilities in
good repair and in operable condition at all times.
17 Included in the project will be replacement of the pipe that is buried beneath the slab of th
building with overhead piping that can be repaired when necessary without having to cut
Video if pipe insertion through the floor and excavate under the building.The project also includes the repair or
through floor replacement of the pumps and motors that pressurize the water in order to move it to the
treatment processes.Replacement of the metal frames that hold the pumps and motors in
correct alignment and the cement bases upon which the pumps and motors sit will also be
replaced.
18 Video of corroded metal The metal frames that hold the pump and motor sets are literally rusting away from the
pump frame exposure to the conditions of the facility...
19 Video of crumbling concrete and the concrete pump bases that were poured in the 1980s are beginning to crumble.
base
20 Additionally,money will be spent from this project to address ongoing restoration and
Picture of well rehabilitation of the 101 wells and the 41.87 miles of raw water transmission mains and
appurtenances.
21 The South Reverse Osmosis Wellfield provides brackish water to the South County Regiona
Video of broken pipe Water Treatment Plant.In February 2010 there was a catastrophic failure of the raw water
transmission main on the portion of the wellfield located south of the water treatment
facility.
22 Project 70030 in the Fiscal Year 2012 Budget commits$5,000,000 for the repair of the
Video of fittings and broken wellfield.The project will restore the wellfield to its original constructed capacity,necessar
pipe for providing raw water capacity and wellfield reliability for the reverse osmosis water
treatment process.
23 A significant milestone in the improvement to finished water quality was reached when the
Video of degas and odor degasification and odor control towers and related equipment replacement project was
control towers completed earlier this year at the North County Regional Water Treatment Plant.This Fisca
Year 2011 project addressed the treatment process and odor control function of the facility
but left work remaining to be funded and completed in Fiscal Year 2012.
24 The additional work,funded with$220,000 in Project 71066,includes the replacement of
Video of stairways concrete stairway access to buildings that are crumbling and separating from the structure!
these stairway accesses are becoming a safety concern,as they provide the only access to
the facilities.
25 Video of degas tower Also included is the repair and coating of the interior of the treated water clearwell which i
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showing located below the degasification towers in this video.This clearwell is an integral part of th
facility,holding water after it passes through the degasifiers,and acts as a suction chamber
for the transfer pumps that move the treated water to the ground storage tanks on the
plant site.
26 Project 71063 provides$1,000,000 for replacement of 10 of the Variable Frequency Drives
that provide electricity and control for pumps and motors located in the treatment facility.
Video of VFDs This is the third year of a four year project that replaces all of the VFDs in the plant.Many c
the VFDs currently in use were installed in 1991,and not only are they becoming more
unreliable,but replacement and repair parts are no longer available.
27 Interstage booster pump installation and pump redesign,combined with the replacement c
the reverse osmosis membrane filters in the reverse osmosis treatment units,will
Picture of RO skid significantly improve the efficiency of electrical consumption and the efficiency of treatmer
process in the production of potable water.Project 71057 establishes a budget of
$2,000,000 to accomplish these improvements in efficiency.
28 The lime softening reactors at the South County Regional Water Treatment Plant were
installed in the 1980s and have never undergone a major rehabilitation.During a complian(
Video of reactor leaks inspection by the Florida Department of Environmental Protection,the facility was cited fo
the degrading condition of the reactors and the need for corrective maintenance.Project
70034 establishes a budget of$500,000 to affect repair to two of the three reactors in Fisca
Year 2012.
29 In addition to the work on the reactors at the South County Regional Water Treatment
Plant,the Technical Support Program,Project 71065,provides funds to rehabilitate pumps,
Video of pipe gallery piping,and valves in the Filter Gallery located in the Lime Softening Plant.Also installed in
the 1980s,age and environment are taking a toll on the mechanical reliability of these
integral appurtenances to the lime softening water treatment process.
30 $1.5 M is budgeted in Project 70088 to replace the casing of Deep Injection Well Number 1.
The casing in Deep Injection Well Number 2 failed during this past year,and the
Video of DIW(NCRWTP) replacement is funded in the current fiscal year.The deep injection wells are the only
permitted method for disposal for the concentrate waste stream from the reverse osmosis
treatment process,and without the wells,no water can be treated.
31 The relocation of water distribution system underground infrastructure is often driven by
Florida Department of Transportation road projects.$4.5 M is budgeted in Project 70045 fa
pdf file of project relocation of water transmission mains related to the work that is scheduled during Fiscal
Year 2012.A large portion of these funds will be expended in the work that will be done in
and around the 1-75 and CR-951 intersection and the related work in and around the Davis
Boulevard and CR-951 intersection.
32 Project 71010 is a multi-year project for the replacement of water mains and water meters
GIS Water Layer—Old Lely in areas of the water distribution system that are either inadequately sized to meet peak
and fire flow requirements or that have escalating maintenance costs due to pipe failures.
33 Main replacement picture $1,500,000 has been budgeted for Fiscal Year 2012,and replacement efforts will focus on
the old Lely area.Projects in following years will target Berkshire and Naples Park.
34 Transite pipe,also known as asbestos/cement or AC pipe is problematic in portions of the
AC pipe removal picture(s) system that were installed in the mid-1900s where higher pipe failure rates are being
experienced.An excellent example is the water distribution system in the Isles of Capri,
where the second phase of a two phase replacement project is nearing completion.
35 Repairing a water main break that involves AC pipe requires specially trained and certified
AC pipe removal picture(s) personnel,special personal protection equipment,specialized air quality monitoring,specii
handling during repair or removal,and well-documented transport and disposal.
36 Picture of main replacement This multi-year project replaces approximately 3 miles per year of the 900 miles of water
distribution system.
37 Picture of residential meter A second significant multi-year project for the water distribution system is Project 70010,
the Meter Renewal and Replacement Program.This Fiscal Year 2012$1M project will
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replace failed meters and meters that have reached the end of their expected lifetime and
have decreasing accuracy.
38 There are 56,000 water meters in the system...water meters must accurately measure and
Picture of meter reading record the amount of water that passes through them in order to bill for water usage
accurately.
39 Picture of someone paying Both Water and Wastewater depend on accurate billing in order to provide the source of
utility bill revenue for the Utility...as meters age,they slow down ...in other words,and they measui
less water than is used.
40 As a result,although the utility must continue to pay for the full cost of water production,
pdf of FPL bill the utility loses revenue when meters lose accuracy.
41 Generally,a meter is expected to remain fairly accurate for about 15 years,but meter
Picture of meter on Gulfshore
Drive lifetime is dependent on many factors,including the rate at which water is used and the
environment in which the meter is located.
42 Picture of meter on Gulfshore An effective meter replacement program for the Collier County Water-Sewer District shout(
Drive replace approximately 4,000 meters per year.
43 This brief summary of some of the projects in the Fiscal Year 2012 Capital Improvement
Picture of a well and a meter Program started with the water source—the wellfields,and ended with the metered
delivery of water to the customer.
44 While this video is not intended to be a comprehensive list of all of the projects included in
Water flowing from faucet to the Fiscal Year 2012 Budget,it demonstrates the need for preserving the integrity of the
glass public water supply system,the need for projects to sustain compliance,projects that mee
demand with reliability,and projects that protect public health.
45 The Capital Improvement Program submitted in the Fiscal Year 2012 Budget is the right
Child drinking glass of water program at the right time,assuming Level Two Risk while avoiding costly breakdown and
repair...a public water supply system can't be run to failure...the regulatory agencies won
allow it...and the customer won't accept it.
Vlad Ryziw: How many capital projects are projected for FY12? Janet Vasey: 34 to 35 and nine
are $1 million or more. You only missed two in the video.
Doug Fee: Are you doing 4,000 meters per year? Paul Mattausch: We are not keeping up with
that currently and we will have to catch up. As meters age, they slow down and are less
accurate in recording use; this is to the customer's benefit. We are working with Utility Billing
and Customer Service as we phase the meter program in. Joe Bellone: We implemented
automatic meter reading in 2003. The driver of the truck is able to get a signal from the meter
without having to exit the vehicle.
Tom Wides: We have had cases where a part-time resident has challenged a spike in their
water bill when they were not living in the home. It is a tough challenge. We are now installing
Smart Meters that register every hour. We had one resident present their claim to the BCC and
we were able to show it was not a meter error, but an irrigation issue plus a leak.
Gina Downs: I assume there is a price difference and a Smart Meter is more expensive.
Paul Mattausch: There is not a significant difference, $12 to $15 per meter and a residential
meter should last 15 years. The meters all meet American Water standards.
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Vlad Ryziw: How would staff know when pipelines need to be replaced?
Paul Mattausch: We use the GIS and asset management systems to make the determinations.
We keep records of failures and map those areas. A good example of this is the Isle of Capri
project. They are located in a tidal area and the rate of water main breaks, or failures, was
increasing. In some locations on the Isle of Capri, the developer used 2" plastic electrical
conduit for the water system. Another area is old Lely where we do not have sufficient
pressure for fire flow. We must meet the current standards for fire hydrants. Homeowner's
insurance rates will go down when we meet the fire flow demands.
Paul Mattausch: Discussion of the South Wellfield restoration project.
The cost of restoration has been $6 Million in FY 11 and $5 Million in FY12. Collier County is
trying to get full recovery of these funds through litigation. [Discussion ended because of the
pending litigation].
Janet Vasey: In the meantime, we are getting enough water? Paul Mattausch: Yes; but we
would not have enough water today without that wellfield if the growth had continued as
projected.
Janet Vasey: The Vanderbilt project is $5 Million. It is in a tidal area and on the list of high
failures and had to be replaced.
Paul Mattausch: This is a Transportation project and we pay for the relocates. FPL is doing
their project at the same time when the road work is going on. We are moving our pipeline to
get out of the way of FPL.
Vlad Ryziw: The $4.5 million pipeline relocation project; is it not in an exclusive easement?
Paul Mattausch: We have utility easements for the pipe.
Tom Wides: The utility now pays for the relocates during transportation projects.
Janet Vasey: This cost is showing up in the FY11 and FY12 budgets and not showing up in the
rate study.
Tom Wides: The reserves will be used to pay this cost.
6. Reserves and Adequacy of Reserves (The Rational for Adequate Reserves White Paper
was distributed to the group).
• $74.1 million in reserves—categorized for discussion.
• $46.9 million—restricted reserves (Impact Fee Funds, Debt Service, Statutory).
• $11.0 million in reserves pertaining to the Impact Fee Funds are restricted from general
use.
• Debt Service Reserve is $17.3 million.
• Unrestricted Reserves amount to $27.3 million.
• $16.7 million is targeted for 50%of Depreciation Cost. This factor is a benchmark;
though not mandatory. It covers only the contingencies for capital, especially Repair&
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Rehabilitation (R&R) spending. Therefore, the reserve for R&R capital is not duplicated
or double counted.
• In the FY12 budget (based on the rate study), a 2.4% inflation factor was assumed for
calculations. Projections of utility operating expenses inflation are running 5-6%.
Therefore, a conservative estimate is that this inflationary cost will have at least a $1
million per year of negative impact on Reserves.
• There is $9.5 million of untargeted reserves for FY12. The spreadsheet for the Rational
for Adequate Reserves depicts how the reserves will be utilized over the next 5 fiscal
years; including the cover of potential shortfalls of Impact Fee Debt Service during that
period.
To recap, reserves totaling$27,260,500 related to Funds 412 and 414 are unrestricted and
can be used for general purposes. The current rate study forecasts a shortfall of$6 million
between impact fee collections and the amount of debt service. This shortfall has to be
offset by payments from the user rate reserves. A shortfall of$6 million each year for the
next five years, without any increase in impact fees or user rates will deplete the $27.3
million in two to three years. In addition, there is a need for the reserve of at least 50
percent of the depreciation expense to be maintained for repair and replacement projects,
which equals approximately$16.7 million. Recent uncertainties in commodity prices and
the underlying causes of increases are ongoing; a minimum of$1 million should be
maintained as a hedge against such spikes in commodity prices.
After providing for the shortfall in impact fees to pay debt service, depreciation as a cost
recovery and to maintain infrastructure, and a hedge against spikes in commodity prices,
any amount left has to be used for hurricane or any other unforeseen catastrophes. In the
above scenario, the amount available for unforeseen contingencies can be as low as$9.5
million, which may not be sufficient. In the absence of sufficient reserves in the general
fund to support any hurricane recovery-related efforts, we may have to revert to external
borrowing; the banks would require a reserve amount at least equal to 20 to 30 percent of
revenue as a required pledge. At the business levels, this will be approximately$20 to$30
million. Any pending hurricane will be funded under the Solid Waste, Water, and
Wastewater user fees.
We have no planned rate increases; however, will do another study for FY13. To reiterate,
there are no increases planned for FY11 and FY12.
Vlad Ryziw: In the unrestricted reserves section, please explain the 50%of depreciation
expense?
Bala Sridhar: The depreciation percent is not mandatory, but is a good business practice. It
covers only the contingencies for capital, especially repair and replacement projects. Five
years ago, we had $15 million in this category, but the aging infrastructure has caused this
to increase as well as the uncertainties in commodity price increases.
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Tom Wides: We have considered using the reserves, and retire some debt.
Bala Sridhar: If we reduced reserves by $80 million, and paid off a like amount in
outstanding debt, it would bring the county debt per capita to the Fitch median.
Unfortunately, it would hurt on cash position such that it would severely damage our debt
ratios. This would likely negatively impact our credit rating on our utility and outstanding
bonds.
Bala Sridhar: Fitch and Moody's are the firms that have rated our utility. We compare
ourselves to their medians for state, regional, and nation averages.
Tom Wides: Fitch has rated Collier County as a stable AA+with a strong financial profile.
Gina Downs: Collier County is 1.4%of median household income and is below Fitch's 2%.
This gives us some wiggle room.
Tom Wides: This is an affordability test for"average" person to absorb higher water user
rate. We are in a good place with our current level of user fees, both from the affordability
test and surrounding utilities.
Doug Fee: Referred to#6 on page one of the Rationale for Adequate Reserves—"Debt
service shortfall in impact fee fund will be paid by user rates reserves"
When do you see us being in this position?
Tom Wides: I can't determine when impact fees will be adequate to pay the annual impact
fee debt service, nor pay back the user fee advances.
Doug Fee: Will there be a payback?
Tom Wides: It is intended that when impact fees are adequate, they will pay back the
advances from user fees.
Doug Fee: Can we raise user fees?
Tom Wides: The Impact Fees have been set based on evaluation of the dual rational nexus
test. They are set at the highest legally defensible value.
Janet Vasey: We have nowhere to collect the impact fees, due to the decrease in building.
Tom Wides: We can't raise the rates since building going down. The fees are set based on
total Equivalent Residential Connections. The calculated (Formula) rate stays in place
whether 10 or 100 customers connect to the utility. We can't move the rate around; it is
based on total capacity.
Janet Vasey: Payback- user fees are loaning money to the funds 411 & 413 and will
payback when they have sufficient collections.
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Janet Vasey referred to the GovMax narrative for Funds 411 and 413 from SRF. Is money
borrowed? Funding sources included impact fees, revenue bond and some SRF loans. There
are many projects, and a few funding sources.The SRF and revenue bonds have to be paid
back. It was and is a revenue source.
Tom Wides: We had SRF loan approvals approximating $15 million in SRF program, and
only took a $5 million draw. We could have taken another draw; however, staff went to
Board and requested approval not to take any further draws.
Doug Fee: If they want to get rid of impact fees, can we possibly make user fees whole for
what they loaned to the impact fees?
Tom Wides: There is no other funding source. The utility operates with impact fees for
growth projects, and debt service, and user fees.
Janet Vasey: In the $74 million we have already accounted for the new relocates. Do you
need any additional for FY13, FY14, and FY15?
Tom Wides: Yes, there are additional relocate projects in those coming years.
Jim Gibson: On Page 3 of the Rationale for Adequate Reserves document, each one of the
reserves in a), b), and c) are discrete and there is a calculation. Question: Is there a
possible of redundancy? Could any one of the 3 serve as a sequential feel?
Tom Wides: Each of those reserves is defined under Florida Statute as to their intended
use. One could argue redundancy; however, as the table shows, the adequacy of the total
reserves becomes suspect in FY14. We monitor the use of reserves over a five year horizon.
We would like to believe that with no rate increases through FY16; however, our current
projections show evident shortfalls. We will continue to monitor, and develop rate cases.
Jim Gibson: Whatever you do here it will shorten or lengthen the debt service.
Tom Wides: We have been practicing cost containment cost containment since 2007. As
you note, the debt service won't change.
Jim Gibson: No new debt on the horizon?
Tom Wides: None is planned at this time.
Jim Gibson: Refunding issue as well? When do you make the first principal payment?
Tom Wides: SFR—immediately. On the revenue bond, we will start paying the principal in
2017, we have that schedule.
Doug Fee: Page 3—Is Cola trending lower?
Bala Sridhar: In 2009 - .4 COLA, and CPI was still at 6%. Similar trends in 2010 and 2011.
NACWA—CPI and utility costs. Look at 2009. CPI for utilities is rising much faster than
COLA.
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Dan Rodriguez: CPI for the Southeastern United States was at 4.21%.
Dan Rodriguez: We continue to drive down costs and renegotiate the contract with Waste
Management. We are on our 6th amendment to this contract.
Janet Vasey stated she will not be in town for the September 28th Subcommittee meeting at
the Landfill. Jim Gibson will be the chairman for that meeting. Gina Downs will go to the
landfill for the videotaping. Janet noted that this was an extremely productive meeting, and
we touched on all the big projects where we are looking at funding.
Vlad Ryziw: County staff and PUD provide excellent services internally and externally and I
commend staff for that. You are doing a great job to emphasize that. Management and
services begins with operations and maintenance. Quality of management drives the type
of projects.
Jim Gibson: Funding impact fees/ user fees are there any other general fund or non utility
capital projects that utility is bankrolling now?
Tom Wides: With the shortfall in surety coverage on the General Fund general obligation
bonds, the utility loaned $18.5 million to the general fund. So far$4 million has been paid
back. Working with the Finance Committee, we are looking to refund some of the general
obligation bonds. This could return an additional $7 to $9 million to the utility, if we can
justify refunding the bonds. Leaving$8 to $9 million outstanding.That is money outside the
Water/Sewer District's reserves. When we need it we need to get it back; that could be as
soon as 2014.
Public Comment— None
Adjourn -The meeting was adjourned at 12:20 p.m.
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