March 21, 2024

Irrigation Water Rate Study Public Outreach Meeting

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

Purpose of This Meeting
Communicate Preliminary Results of Irrigation Rate Study
First Formal Rate Review Since September 2018
Most Issues Already Communicated During October 12, 2023
Board of Supervisors Meeting
Subject to Change - Several Unknowns
‒ Outcome of Litigation or Agreement Among Parties on Future
Well Availability Charges
‒ Willingness of Developer to Continue Deficit Funding
‒ Other Considerations Between Now and Presentation of Results
to Board
Provide Forum for Public / Customers to Provide Feedback Prior to Board Meeting to Adopt Adjustments

Revenue Requirements

Projected Through Fiscal Year 2033
Should Update Financial and Rate Plan Regularly
Given Potential Substantial Changes
Helps Preserve Ability to Gradually Phase-In Rate
Adjustments

Customer Growth
District Has Potential for Tremendous Growth
Number of Billable Equivalent Residential Units (ERU's) Has
Doubled Over Past Two Years  2,958 ERU's in Fiscal Year
2021 to 5,926 ERU's in Fiscal Year
Similar Growth Rate Projected to Continue Over Next Few
Years
Per Board Direction, Have Recognized Billing of Common Area Irrigation in Fiscal Year 2025
Estimated 114,920,000 Gallons Based on Recent History
Charging the District for District's Use of Irrigation Water
Would Be Paid As Operating Costs from Other Units

Issue: Irrigation System Not Currently Self-Sustainable
Historical Developer Deficit Funding That Must Eventually
Be Repaid
Balance of About $3.8 Million as of September 30, 2023  $1.7 Million
for Operating and $2.1 Million for Capital
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
Projected Future Bond Issue(s) to Pay Off Deficit Funding Balance
Timing Depends on Developer's Willingness to Continue Deficit
Funding
‒ District Representatives Have Discussed Continued Deficit Funding
With Developer, But Developer Has Not Yet Made Any Commitment
‒ Tax-Exempt Bonds to Pay Off Capital Improvements Deficit Funding
and Taxable Bonds to Pay Off Deficit Funding of Operating Costs

Issue: Capital Funding

About $13.5 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 $5.8 Million (43%) of Capital Needs Assumed to
Be Funded By 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,
187, 188, 189	Irrigation Wells	3,600,000	Rate Revenues / Developer Deficit Funding	
PIL 2A, 4, and 5 Pump Stations	PIL Expansion/Construction	1,308,000	Rate Revenues / Developer Deficit Funding	
6" PVC, C-905 Irrigation Water Main with Fittings	Distribution Piping	1,287,000	Future Unit Bonds	
Future Wells Supply Lines	Future Supply	1,080,000	Rate Revenues / Developer Deficit Funding	
16" PVC, C-905 Reclaimed Water Line (Engl. WWTP)	Future Supply	928,800	Rate Revenues / Developer Deficit Funding	
Infrastructure Improvements and Maintenance	Renewals and Replacements	663,298	Rate Revenues / Developer Deficit Funding	
16" PVC, C-905 Irrigation Water Main with Fittings	Distribution Piping	378,000	Future Unit Bonds	
West Villages Parkway Pond Irrigation Delivery	Future Supply		90,054 	Rate Revenues / Developer Deficit Funding	
Total		 $	13,488,652 		

Issue:

Operating Expense Increases
Operating Expenses Have Increased Substantially and Are Projected to Continue Increasing
Inflationary Effects Due to Various Factors
‒ Florida's Inflation Has Increased at a Higher Rate Than
National Consumer Price Index (CPI)
‒ Local Tampa-St. Petersburg-Clearwater CPI Has Increased By
About 31% Since September 2018 When Last Rate Study
Was Completed
‒ 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

Issue:

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."
Only Alternative to Well Water Currently Available Is Potable
Water from City of North Port

Issue:

Well Payments (cont.)
After Englewood Water District Reclaimed Water Is No Longer Available After March 2024 (This Month), 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%	

Issue:

Well Payments (cont.)
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 Port 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 Effective Retail Potable Water Rate Per 1,000 Gallons at Usage of 10,000 Gallons	$10.13

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

[*] Reflects North Port water rates that became effective on December 1, 2023.

Issue:

Differences in Per-Gallon Costs of Irrigation Water Among Customer Types
Based on Decisions on How Irrigation System Was Structured, There Are Three Basic Customer Types
Direct Connection to Master Distribution System
Irrigation Lakes with Private Irrigation Pumps
Irrigation Lakes with WVID Irrigation Pumps
Customers with Private Irrigation Pumps Pay Additional Operating and Maintenance Costs for Irrigation Water
District Staff Continues to Collect Data, But Current
Estimates Are at Least $0.20 Per 1,000 Gallons

Without Rate Adjustments, Irrigation Water System Is on Path to Bankruptcy

In Absence of Future Increases in Well Availability Charges and North Port Bulk Reclaimed Water Rates, Have Recognized Need for Revenue Increases Under Two Scenarios

		Scenario 1	
Developer Continues Deficit Funding Through		Scenario 2	
Developer Requires Repayment of Deficit	
	Fiscal Year 2033	Funding in Three Years	

Effective Date	Recognized Revenue Adjustment	Recognized Revenue Adjustment	
As Soon As Practical	30.0%	30.0%	
October 1, 2025	6.0%	16.0%	
October 1, 2026	6.0%	16.0%	
October 1, 2027	6.0%	16.0%	
October 1, 2028	6.0%	1.5%	
October 1, 2029	6.0%	1.5%	
October 1, 2030	6.0%	1.5%	
October 1, 2031	6.0%	1.5%	
October 1, 2032	6.0%	1.5%	

Summarized Revenues Vs. Revenue Requirements

Initial Rate Adjustment Projected to Eliminate Developer Deficit Funding for Operating Expenses
Continued Developer Deficit Funding for Capital Needs

Irrigation

Water Rate Design
Fixed Charge Recovery of 40%
Most System Costs Are Fixed and Must Be Paid Regardless
of Whether Water Is Used
Higher Fixed Charge Recovery Favored By Credit Rating
Agencies
Utility Industry: Greater Than 40% Fixed Charge Recovery
Does Not Promote Water Conservation
Future Adjustments to Well Charges / Payments Based on Effective Agreement at the Time
Existing Agreement May Be Amended in Future

Irrigation

Water Rate Design (cont.)
Proposed Purchased Water Component of Volumetric Rates That Would Be Adjusted Automatically Based on Percentage Increases in North Port Bulk Reclaimed Water Rate
Future Increases from North Port Are Unknown
Due to Extra Operating and Maintenance Costs for Irrigation Water, Lower Volumetric Rate for Customers with Private Irrigation Pumps
Extra Costs Not Choice Made By Customers

Irrigation

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

Existing and Preliminary Proposed Irrigation Water Rates

Description	Amount	
Well Availability Charge Per ERU	$4.17	
Capital Recovery Fee Per ERU	$1.39	
Volumetric Rate Per 1,000 Gallons Tier 1	
$0.73	
Tier 2	$1.39	

Existing Irrigation Water Rates Per Equivalent Residential Unit (ERU)

Existing and Preliminary Proposed Irrigation Water Rates (cont.)
Preliminary Proposed Irrigation Water Rates Per Equivalent Residential Unit (ERU)
Description	Amount	Notes	
			
Well Availability Charge Per ERU	$4.17	Adjustment unknown at this time; automatic future adjustments per agreement.	
Monthly Base Charge Per ERU	$2.35		
Purchased Reclaimed Water Rate Per 1,000 Gallons	$0.25	Automatic future adjustments based on changes in North Port reclaimed water rate charged to District; Round up to nearest cent; North Port bulk reclaimed water rate for Fiscal Year 2025 is unknown at this time.	
Volumetric Rate Per 1,000 Gallons			
Customers With Private Irrigation Pumps			
Tier 1	$0.68	These customers pay additional operating and	
Tier 2	$2.04	maintenance expenses for irrigation water.	
All Other Customers			
Tier 1	$0.88	To promote water conservation, Tier 2 volumetric rates	
Tier 2	$2.64	are priced at three (3) times Tier 1 volumetric rates.	

Bill Comparison Under Existing Well Availability Charge and North Port Bulk Reclaimed Water Rates

WVID Irrigation Water Bill Comparison
		
Monthly Bill for One ERU Using	
Increase in Customer	Total Cost Per
Gallon of Irrigation	
	Description	10,000 Gallons	Monthly Bill	Water Service	
Existing Rates		$12.86		0.13¢	
Preliminary Proposed Rates - Customers With Private Irrigation Pumps [*]	
15.82	
$2.96	
0.16¢	
Preliminary Proposed Rates - All Other
Customers	
17.82	
4.96	
0.18¢	
[*] These customers pay additional operating and maintenance expenses for irrigation water.

Reclaimed Water Bill Comparison at Usage of 10,000 Gallons

21

Different Utilities Have Different

Reclaimed Water Pricing Strategies	
If Reclaimed Water Rates Were Set at Cost of Service, They Might Be Higher Than Potable Water Rates and Would Discourage Reuse Consumption
Two Typical Reclaimed Water Pricing Strategies
Reclaimed Water Priced Lower Than Potable Water to
Encourage Customers to Hook Up to the System
‒ Need to Dispose of Treated Wastewater
‒ Without Reclaimed Water System, Utility Needs to Invest in
Expensive Deep Injection Wells or Other Disposal Alternative
‒ Alternative Water Supply – Utility Does Not Need to Invest in
Expensive New Water Treatment Capacity

Different Utilities Have Different

Reclaimed Water Pricing Strategies (cont.)	
Two Typical Reclaimed Water Pricing Strategies
(cont.)
Reclaimed Water Priced the Same as Potable Irrigation Water
‒ Provides Same Benefit / Use
‒ Not Everyone Has Access to Reclaimed Water – Unfair to Pay
Higher Potable Water Rate Just Because Reuse Is Unavailable
‒ JEA (Jacksonville), Florida's Largest Water and Wastewater Utility,
Has This Pricing Strategy

Potable Water Bill Comparison at Usage of 10,000 Gallons

24

Recommendations
Adopt First Year of Irrigation Water Rate Adjustments
Start Path Toward Self-Sustainability
In One Year, Validate Need for Rate Adjustments for Fiscal Year 2026 and Beyond
Possible Resolution of Some Current Issues
Update Customer Growth and Usage Projections
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

25

Irrigation Water Rate Adjustments

Q

A

QUESTIONS AND DISCUSSION