TMWA plans come up short

The Truckee Meadows Water Authority has developed a 10-year plan and now it's searching for ways to fully fund it.

The water utility's financial plan, approved by its board of directors earlier this month, covers its operating budget and debt service, but comes up about $164 million short on a decade's worth of capital improvement projects.

TMWA is now considering various mechanisms - including rate changes and complex refinancing instruments - to make up for the shortfall.

For its rate structure, the utility is evaluating recommendations submitted this month by its ratemaking review committee while it has hired Public Financial Management to help develop a companion 10-year funding plan that will raise the additional money and boost the utility's poor credit standing.

The goal "is to develop a funding plan to close that gap and to make sure TMWA is fiscally sound over the next decade," said Jeff Tissier, manager, financial and administrative services, at the board meeting.

"To develop a financial roadmap for the future." Over the next 10 years, TMWA expects to receive $762 million in water sales, hydroelectric revenues and investment income.

That will fund $422.7 million in operating expenses and $14.9 million in reserves as required by its 2001 bond resolution as well as principal and interest payments of $72.3 million and $216.5 million, respectively, on those bonds.

What's remaining is just $35.6 million to cover $357.9 million in proposed capital improvements over the next 10 years.

TMWA said it expects to collect $97 million from developers, use $8 million already reserved for hydroelectric facilities and take another $45.1 million from cash reserves to help cover the projects.

"This leaves $164.2 million in capital improvements with no currently identified funding source," said the staff report for the board.

The 10-year financial plan was created assuming no rate increases, but that doesn't mean TMWA won't raise them.

"We'll need to continually look at rates," said Lori Williams, TMWA general manager, after the meeting.

First, rates would change if they are restructured, which is likely, said Williams.

For one, TMWA is in agreement with proposals made by the rate-making review committee, which call for growth to pay for itself.

The committee, created in December 2003 and comprising 17 residential and commercial TMWA customers, met 13 times earlier this year and delivered a final report this month.

In it, the group makes several recommendations, including what is says are more equitable ways to divvy up costs.

"After ...

evaluating the Business Service Fee schedule and the Water Facility Charge schedule, it is quite clear that growth and development is not paying their fair share of the cost associated with the impact they impose," said the committee's report.

To recover those costs, the report says the developer fees should include costs associated with the following: water reserves put aside due to growth, development of TMWA's recent water plan that goes out to 2025, basin facility planning, purchase and resale of water rights, inspection and development review work, equipment and facility replacement or upgrading, debt service related to growth, and a buy-in component for use of existing facilities.

Such changes would shift some of the costs from existing users to developers, and effectively changes rates.

Rates may also change once TMWA collects more data from the meters it is now installing, said Williams.

"Rates would change with different allocations."

Any rate changes would be subject to public notice and review, she said.

In the meantime, TMWA is working to investigate financing options that could also help make up for the shortfall.

John Bonow, with Public Financial Management in Philadelphia, made a presentation at the board meeting, reviewing what he called both traditional and synthetic refunding options.

TMWA's 2001A bonds cannot be prepaid for another seven years so he is looking into ways the water utility can finance the debt service on those bonds without losing money in the process.

Tissier said the funding report would be completed and presented to the TMWA board at its annual strategic planning meeting in October.