Review the Fiscal Year Adopted 2024 Budget
Review the most recent Audited Financial Statements
Budget Development – A budget prioritization process was utilized to create the requested budget. Each team manager works with staff and submits their budget requests and recommendations for new programs, equipment, and significant cost increases on items when compared to the prior year adopted budget. All requests are prioritized by each team, and then the priorities are compiled into an overall integrated priority list to best serve the District’s mission of delivering safe, reliable water to our customers.
The requested budget was presented to the Board of Directors for review and recommendations. Rate and fee changes are part of the requested budget and the Board recommends scheduling a rate hearing after reviewing all proposed changes. After the Board of Directors reviews and discusses the requested budget and proposed rate and fee changes, a public information meeting is held to present the proposed changes to all customers. A rate hearing was held on May 15, 2023, to approve rates and fees for both Fiscal Year 2024 and Fiscal Year 2025 with no rate changes planned for Fiscal Year 2026. In accordance with budgeting best practices, after the revenue was secured/approved, the requested budget was officially presented to the Board of Directors for a final review and adoption at the May 15, 2023, Board meeting.
Budget – The Metro Water District Adopted Budget for Fiscal Year 2024, is $52.2 million with $3.96 million budgeted for depreciation and amortization. The budget includes the following plan:
Operating Budget – $19,491,367 higher by 6.33%
- Major operating expenses include salaries and benefits for employees including 59.01 full-time equivalent positions. Salaries and benefits are budgeted at $6,362,754, which is a 2.54% increase over the prior year’s Adopted Budget.
- Outside services are budgeted lower by 3.11% or $45,310 and general operating expenses are higher by 3.81% or $50,050.
- Electricity costs increased by 7.29%, supply costs are higher by 10.61%, and Central Arizona Project water costs have increased by 5.77% or $162,371.
- Principal and interest on outstanding debt service were budgeted at $5,006,965.
Investments to Support the District – $257,392
Capital investments to support the District’s mission includes two controllers for backup generation. Adding a dock pit leveler to the warehouse for safety and two inventory management handheld mobile computers. A mobile meter read collection system was included in the budget. Field staff requested a gas air compressor, a dirt and asphalt compactor, and a movable pressure recorder for checking the distribution system and well sites. A vacuum for operational potholing will also be used for potholing service line replacements and investigating galvanized and lead pipes. Adding a variable frequency drive to a booster station to replace a cycle stop valve used to modulate pressure. Additional shoring boxes were included to accommodate deeper trenches.
Capital Improvement Program – $19,619,215
The Northwest Recharge Recovery and Delivery System (NWRRDS) projects will start construction. The E&T well that was drilled in Fiscal Year 2023 will be equipped, site improvements, and final design completed. The Ironwood Blend Well was budgeted for design or well equipping and construction. Funding to acquire land for well replacements was included in the CIP plan. The New Linda Vista well was drilled in Fiscal Year 2023 and the equipping and site work will be completed in Fiscal Year 2024. The galvanized pipe replacement program was funded for design and start of construction. The automated metering infrastructure implementation and customer platform were included in the budget. This project has been selected by the Bureau of Reclamation for a $2 million dollar grant. A small mainline replacement project on Orange Grove Road was approved. Adding a perimeter wall around a well site to prevent erosion and control water flow will protect the environment and help the District to be a good neighbor within the community.
Non-Cash Expenses – $3,960,858
Depreciation and Amortization are non-cash funded expenses budgeted at $3,960,858 which is an increase of $25,066 with the implementation of GASB 87 and GASB 96 in prior fiscal years. With the GASB implementation, amortization, liabilities, and assets will be recorded for all leased vehicles, the solar panels, and all subscription-based information technology agreements.
Revenue – Metered Water Sales (Water Availability Rate, Water Consumption Charges, and Water Resource Utilization Fees) make up 79% of the District’s revenue. The other revenue sources account for 21% of the revenue from operations and consist of various fees, interest earnings, water storage, compensated conservation, penalties/service charges, and the infrastructure rehabilitation fee. Funding this year includes using $1 million dollars of the $2 million dollar grant and $2,434,743 of bipartisan infrastructure bill (BIL) federal funding obtained through the state revolving fund. In Fiscal Year 2023, an additional $610,777 of the federal BIL funding was received by the District. Additional applications have been submitted and are pending funding approval.
Bond Issuance
The District has five Water Infrastructure Finance Authority (WIFA) loans. One was issued in 2007 for $12,625,000 with an outstanding balance of $2,420,730.86 with a 1.531% interest rate. The 2009 loan was issued for $4,250,000 with a remaining outstanding balance of $2,179,867.08 with a 1.44% interest rate.
In Arizona, the BIL funding is distributed through the State Revolving Fund, which is managed by WIFA. The District submitted applications for three projects and obtained a total of $3,045,520 of principal forgiveness in the form of federal funding. The first project submitted was the E&T well. This loan is for $1,145,198 at a 2.04% interest rate and received $610,777 of principal forgiveness. The 10-year terms on this loan allow the District to pay it off in full upon completion with a 60-day notification.
The Ironwood Blending well project received $902,243 of principal forgiveness with a loan amount of $3,095,780 at a 2.04% interest rate for 10 years and can be paid in full after 5 years.
The District has been planning to obtain debt for the NWRRDS project. This project received $1,532,500 or principal forgiveness with a loan amount of $12,665,783 at an interest rate of 1.944% for 10 years. This loan is also payable in full after 5 years.
The only outstanding bond obligation occurred in October 2020, when the 2013 series subordinate obligation revenue bonds with a remaining par value of $7,937,000, and the Water Infrastructure Finance Authority Refinancing Series 2005/2009A loan with an outstanding balance of $5,785,881.28 were refunded. The outstanding balance at the time of the refunding was $13,722,881.28 and this was reduced to $9,265,000 of Series 2020 senior revenue obligations with a maturity date of January 1, 2026. The outstanding balance as of July 1, 2023, is $5,280,000.
The outstanding debt balance on all loan obligations as of July 1, 2023, is $25.2 million.
Bond Rating – On October 21, 2021, Moody’s Investment Service affirmed the District’s senior lien revenue bond credit rating at a strong Aa3 for a U.S. water system with a modest sized system, ample liquidity, a modest debt profile, and a strong debt service coverage.