DECEMBER 15, :00 PM TWSD RATE ADJUSTMENT HEARING

L. To fix and from time to time to increase or decrease water and sewer rates, tolls or charges for services or facilities furnished or made available by the district, including, without limiting the generality of the foregoing, standby charges for both water and sewers, and to pledge that revenue for the payment of any indebtedness of the district. NMSA GENERAL POWERS

New Mexico Statute establishes a three step procedure for allowing a Water and Sanitation District that has not elected to become subject to the Public Regulation Commission to adjust its rates, tolls, fees and charges. Note: This statute was changed by House Bill 337 which became law in The TWSD board has not elected to become subject to the Public Regulation Commission. STATUATORY AUTHORITY AND PROCEDURE

 (1)At least 30 days after publication of a notice of the board’s intention to adjust rates, tolls, fees or charges, the board shall conduct a public hearing on the proposed resolution, at which time, after hearing proponents and opponents, the board may reject, amend or adopt the resolution adjusting the rates, tolls, fees or charges; STEP 1 PUBLIC HEARING

 (2) within thirty days after publication of the resolution adjusting rates, tolls, fees or charges, the new rates, tolls, fees or charges may be appealed by a taxpaying elector to the district court of the county in which the district is located; and STEP 2 PUBLICATION & APPEAL

 (3) the district court shall consider the petition to overturn the adjustments, based on the record of the board hearing in which the resolution was adopted, under the court’s rules governing review by a district court of administrative decisions or orders. STEP 3 DISTRICT COURT

On October 22, 2009 The Timberon Water and Sanitation District board of directors adopted resolution 09/ adjusting water rates. The resolution lists the following changes. RESOLUTION 09/10-005

 1. The base water rate will be $27.40 per month, which includes the first 1000 gallons of water with a progressive rate curve for water usage after the first 1000 gallons.  2. Rates for non-potable water, hooking up meters, extending water lines, turning meters off and on, connecting and disconnecting meters will remain unchanged.  3. The water standby charge will be $56.70 per year, except that if an Infrastructure Maintenance Charge is adopted, the rate shall remain $36.00 per year. PROPOSED CHANGES

 4. After two (2) months, there will be a 6% interest charge on unpaid metered water and standby charges.  5. There will be a $10.00 late fee charged on all metered water bills after a two (2) week grace period. The grace period starts the day after the due date listed on the metered water bill.  6. To help the financially disadvantaged, there will be a voluntary donation program established. Proceeds from these donations would be distributed evenly amongst those who provide documentation that they are on the State “LiHeap” (subsidized utility bill) program. PROPOSED CHANGES

TWSD needs system wide upgrades and replacement of lines, tanks, collection systems, and treatment facilities. The district has experienced water system maintenance and repair costs, coupled with legal expenses, that exceed its revenues. The district, in the past, has used reserve funds to meet operating costs rather than raise rates making the the cost of water artificially low. There are no funds available to be set aside for water system infrastructure improvements and capital asset replacement. WHY DO WE NEED A RATE ADJUSTMENT?

The district seeks to balance operation and maintenance expenses with recurring revenues, build an operational reserve to ensure financial solvency, and dedicate funds to capital improvement of the water system. Grants and other revenue sources previously available for capital improvement projects have disappeared due to the economy. The district was recently informed that funding in the amount of $1,049,000 for urgently needed repairs to tank two, our primary water reservoir, and other critical water system projects was no longer available. WHY DO WE NEED A RATE ADJUSTMENT? Timberon Water System (Asset Management)

PRIMARY STORAGE TANK #2

In the cost of operating the water enterprise was $338,490. An additional $47,600 per year for the next three years is needed to rebuild the reserve accounts as required by the DFA. HOW MUCH DO WE NEED?

Department of Finance and Administration calls for an additional 3 months of operations and maintenance reserves and 1 month of emergency reserves for a total of $112,830. Capital reserves add another $30,000. The whole $142,830 in reserves can be built up over a period of 3 years or about $47,600 per year. Based on the actual expenditures of $338,490 and adding the reserve requirements means that the annual water enterprise budged should be approximately $386,090. DFA BUDGETING REQUIREMENTS

Budget Committee Working Document WATER ACCOUNTS COMBINED

WILL THE NEW RATES SOLVE THE PROBLEM? REVENUE GOAL TO BALANCE BUDGET ( /3 OF RESERVE REQUIREMENTS)$386,090 FIXED INCOME FROM 620 METERS 205,900 VARIABLE INCOME WATER USAGE (EST.) 85,236 1/3 OF STANDBY CHARGES 83,160 COLLECTIONS PAST DUE STANDBY CHARGES (EST.) 20,000 TOTAL$394,296

CURRENT RATES Base Rate17.40 per mo. Metered Water2.69 1st 1000 gal. 2nd 1000 gal.2.69 per 1000 gal. Third 1000 gal.2.69 per 1000 gal. Water use is at a Fixed Rate Standby Chg per year PROPOSED NEW RATES Base Rate27.40 per mo. Metered water0.00 1st gal. 2nd 1000 gal per 1000 gal. Third 1000 gal.4.00 per 1000 gal. Water use is a Progressive Rate Standby Chg per year The overall increase in the base rate and the standby charges is 57.5%. COMPARISON OF CURRENT RATES AND PROPOSED NEW RATES Note: A progressive water rate is now required by the NM Drinking Water Bureau

All non-water revenues and expenditures were removed from the budget then funds sufficient to meet DFA budgetary requirements over a period of three years were added in. The results were divided by the numbers. The increase of 57.5% should balance the budget and rebuild the reserve accounts in three years. WHERE DID THE 57.5% NUMBER COME FROM?

Increasing the $17.40 base rate and standby charge by three percent annually since it was established would have resulted in a 2010 base rate of $28.76 per month and an annual standby charge of $ Note: standby charges were calculated from the $36.00 annual rate not the original $42.00 rate. THREE PERCENT ANNUAL INCREASE The proposed rate adjustment is for a base rate of $27.40 and a standby charge of $56.70.

The maximum percentage of increase in water bills for 88.5% of the water users in Timberon (those using 5,000 gallons a month or less) will be less than 44% HOW MUCH WILL YOUR BILL GO UP ?

CURRENT CHARGES Base Rate Gallons2.69 Total Bill20.09 NEW CHARGES Base Rate Gallons0.00 Total Bill27.40 Effective rate of increase for 1000 gallon user is 36.4% Base Rate Gallons5.38 Total Bill22.78 Base Rate Gallons2.00 Total Bill29.40 Effective rate of increase for 2000 gallon user is 29.1% EFFECT OF RATE ADJUSTMENT ON TYPICAL WATER CUSTOMER

CURRENT CHARGES Base Rate Gallons8.07 Total Bill25.47 NEW CHARGES Base Rate Gallons6.00 Total Bill33.40 Effective rate of increase for 3000 gallon user is 31.1% Base Rate ,000 Gallons13.45 Total Bill30.85 Base Rate ,000 Gallons17.00 Total Bill44.40 Effective rate of increase for 5,000 gallon user is 43.9% EFFECT OF RATE ADJUSTMENT ON TYPICAL WATER CUSTOMER

Questions for the board regarding the rate adjustments Please remember to step up to the microphone and state your name. END OF PRESENTATION

Links to supporting documents Budget Chart #6 (Current rates) (New rates) 4&5.xls - Sheet1!A1 (Fixed and Variable Water) Timberon Water System (Asset Management)