October 12, 2023

Irrigation Water Rate Study Update

GovRates

nt

Utility, Financial, Rate, and Manageme Consultants for Governments
www.govrates.com

Revenue Requirements

Projected Through Fiscal Year 2033
Should Update Financial and Rate Plan Regularly
Given Potential Substantial Changes

Currently Self-Sustainable
Historical Developer Deficit Funding That Must Eventually Be Repaid
Current Balance of About $4.1 Million (Still Being Validated)
Fiscal Year 2024 Budgeted Developer Subsidy for Capital /
Operating: $517,876
Per Deficit Funding Agreement with Developer, District Is Not
Charged Interest for Any Deficit Funding
Assumption (Requires Developer Consent): With Goal of Making System Financially Independent, Continue Developer Deficit Funding Over the Next Several Years to Enable More Gradual Irrigation Rate Increases
Projected Future Bond Issue(s) to Pay Off Deficit Funding Balance
The More Customers Connected to the System, the More Equivalent
Residential Units Over Which to Pay System Fixed Operating Costs
and Debt Payments, the Lower the Monthly Irrigation Rates Over the Long Term

With Developer Deficit Funding:

100% Pay-As-You-Go Funding – Including Assumed 20-Year Bond Issues in 2024 to Pay Off $4.1 Million Historical Developer Deficit Funding – Would Require Higher Upfront Rate Adjustments
$2.7M Tax-Exempt Bonds to Pay Off Capital Improvements Deficit Funding
and $1.5M Taxable Bonds to Pay Off Deficit Funding of Operating Costs

Issue: Capital Funding

About $13.7 Million of Capital Needs Identified Through Fiscal Year 2033
Based on Master Plan Cost Estimates and Renewal /
Replacement Cost Estimates Provided By District Staff
Considered Necessary to Meet Irrigation Demand and Keep
System Operationally Sustainable
Approximately $6.0 Million (44%) of Capital Needs Assumed to
Be Funded By Other Units and Future Unit Bonds
All Customers Benefit from Having More Units Over Which to
Pay for System Fixed Costs

Assumed

Capital Program Funding

Summary of Estimated Capital Improvements Through Fiscal Year 2033
Project	Project Type	Amount	Projected Funding Source	
12" PVC, C‐905 Irrigation Water Main with Fittings	Distribution Piping	$	4,153,500	Future Unit Bonds	
New Irrigation Wells ‐ 97, 98, 100, 101, 128, 129, 130,	Irrigation Wells	3,600,000	Rate Revenues / Developer Deficit Funding	
187, 188, 189				
6" PVC, C‐905 Irrigation Water Main with Fittings	Distribution Piping	1,287,000	Future Unit Bonds	
PIL 2A, 4, and 5 Pump Stations	PIL Expansion/Construction	990,000	Rate Revenues / Developer Deficit Funding	
16" PVC, C‐905 Reclaimed Water Line (Engl. WWTP)	Future Supply	928,800	Rate Revenues / Developer Deficit Funding	
Future Wells Supply Lines	Future Supply	900,000	Rate Revenues / Developer Deficit Funding	
Infrastructure Improvements and Maintenance	Renewals and Replacements	663,298	Rate Revenues / Developer Deficit Funding	
Islandwalk Stormwater Outfall	Future Supply	430,764	50% Other Units; 50% Rate Revenues /	
			Developer Deficit Funding	
16" PVC, C‐905 Irrigation Water Main with Fittings	Distribution Piping	378,000	Future Unit Bonds	
Well 77 Supply Line	Future Supply	151,200	Rate Revenues / Developer Deficit Funding	
West Villages Parkway Pond Irrigation Delivery	Future Supply	90,054	Rate Revenues / Developer Deficit Funding	
Construction Entrance	PIL Expansion/Construction	41,400	Rate Revenues / Developer Deficit Funding	
Silt Fence	Unit		37,212 	Rate Revenues / Developer Deficit Funding	
Total		 $	13,651,228 		

Operating Expense Increases
Operating Expenses Have Increased Substantially and Are Projected to Continue Increasing
Inflationary Effects Due to Various Factors
‒ Tampa-St. Petersburg-Clearwater Consumer Price Index (CPI)
Has Increased By About 28% Since September 2019, But
District's Irrigation Rates Have Increased By Only 11% During This Same Time Period
‒ Substantial Increases in Utility Supply Costs of Chemicals,
Steel, PVC Pipes, and Other Materials That Are Driven By
Global Market Forces
‒ Due to Regulatory Environment, Utility Costs Typically
Increase at a Higher Rate Than CPI

Well Payments
Will Be Settled in Court Years from Now or If Parties Reach a Settlement
Valuation of Water Rights Typically Determined Based on the
Cost of Replacement with Another Source
Per Easement Agreement Submitted with Water Use Permit
Application:
"Any rates for water charged by Grantee [Thomas Ranch Intangibles] will be competitive with prevailing rates charged by the City of North Port or other utility providers in the West Villages Improvement District."

After Englewood Water District Reclaimed Water Is No Longer Available After March 2024, Reclaimed Water Sources May Be Able to Handle Only About 21% of Current Irrigation Demand
Alternative to Well Water for Estimated 79% of Irrigation
Demand May Be Potable Water and Stormwater / Retained Water
Reclaimed Water Supply vs. Demand (2023)		

Description

Amount
(gpd)

City of North Port Wastewater Treatment Facilty Reclaimed Water	456,963	
Sarasota County Reclaimed Water	36,898	
Englewood Water District Reclaimed Water After March 2024		0 	
Total Reclaimed Water Sources	493,861	

Current Irrigation Water Demand ‐ Annual Average Demand	
2,303,615	
Percent of Irrigation Water Demand Provided By Reclaimed Water Sources		21%	

Current $4.17 per Equivalent Residential Unit (ERU) Well Availability Charge Is Neither the Best Deal Nor the Worst Deal for District Customers
Issues or Arguments Regarding "Apples-to-Apples" Comparisons,
Methodology for Determining Existing Well Availability Charges, and
Well Water Paid For Vs. Used
Future Well Payments Are Uncertain Pending Resolution of Current
Litigation
Bill Comparison With City of North Port Fiscal Year 2024 Rates [*]

Description	Amount

City of North Bulk Reclaimed Water Rate Per 1,000 Gallons	$0.31

Well Availability Charge Per 1,000 Gallons at Usage of 10,000 Gallons
Well Availability Charge Per 1,000 Gallons at Usage of 3,000 Gallons

$0.42
$1.39

City of North Port Bulk Potable Water Rate Per 1,000 Gallons	$6.83

City of North Port Effective Retail Potable Water Rate Per 1,000 Gallons at Usage of 10,000 Gallons	$10.13

21% City of North Port Bulk Reclaimed Water Rate, 30% Stormwater / Retained Water ($0), and
49% of North Port Bulk Potable Water Rate Per 1,000 Gallons	$3.41 [*] Reflects North Port water rates anticipated to become effective on December 1, 2023.

Water Rate Design
Target 40% Fixed Charge Recovery
Most System Costs Are Fixed and Must Be Paid Regardless of
Whether Water Is Used
Higher Fixed Charge Recovery Favored By Credit Rating
Agencies
Proposed Purchased Water Component of Volumetric Rates That Would Be Adjusted Annually Based on Percentage Increases in North Port Bulk Reclaimed Water Rate
Future Increases from North Port Are Unknown
Future Adjustments to Well Charges / Payments Based on Effective Agreement at the Time
Existing Agreement May Be Amended in Near Future

Water Rate Design (cont.)
In Absence of Formal Rate Study Recommendation, Recommend Automatic Rate Indexing for Rate Structure Components Other Than Purchased Water Volumetric Rates and Well Charges Based on Increases in Local Tampa-St. Petersburg- Clearwater Consumer Price Index
Indexing Is Common Among Utilities in Florida and Is a Best
Financial Management Practice
Smaller Rate Increases Over Time Help Prevent Large Future
Rate Increases and "Rate Shock"
Favored By Credit Rating Agencies Since Indexing Provides
More Assurance That Rates Will Keep Up With Inflation

Board Direction Needed
Continued Developer Deficit Funding (Presumption) Vs. Immediate 100% Pay-as-You- Go Funding
Developer Must Agree to This Arrangement
Possibly Charging the District for District's Use of Irrigation Water (e.g., for Common Areas)
Would Be Paid As Operating Costs from Other Units

Moving Forward…
Need to Secure Approval of Developer for Financial Plan
Financial and Rate Plan Is Anticipated to Remain Affordable and Competitive By Utility Industry Standards
Plan Should Be Updated Regularly to Reflect Changing
Conditions and to Preserve Ability to Gradually Phase-In
Irrigation Rate Adjustments
Will Have at Least One Customer Outreach Meeting Prior to Finalizing Rate Recommendations for Board Consideration

QUESTIONS AND DISCUSSION