Water and Sewer System Update

Goal 8: Sound Governance

Goal 9: Enhance and Sustain Infrastructure
City Council Work Session
July 7, 2010
 Bottom Line
Additional Revenue is Needed:
1. To Maintain Lowest Interest Rates (Bonds) – Pay
Less for Capital
2. For Increased Cost – State Mandated/Treatment
3. For the Lake Chapman Booster Pump Station
4. For Ongoing Pipe Replacements

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 Overview

• What’s Needed?
• Why Invest in Infrastructure?
• Capital Improvement Plan
• Financial Update
• Recommendation

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 Team

• Ramiro Lopez, IGS and Public Works Team Dir

• Max Duplant, Chief Financial Officer
• Todd Reck, Water Utilities Director
• Bret Starr, Asst Chief Financial Officer
• Aimee Kaslik, Business Manager
• David Cardenas, Water Business Manager

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 What’s Needed?
NEED ANNUAL CIP INVESTMENT OF $24-$40M
• Replace Failing Infrastructure
– Goal: 40 to 60 yr life
• Master Plan for Growth
• Water Supplies and Pipeline Capacity
• Water Reuse
• Operations and Maintenance

CURRENT CIP FUNDING OF $12M NOT ADEQUATE

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Importance of Water and Sewer
Infrastructure

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 Why Invest in Infrastructure?
Aging and Becoming Less Reliable
• Almost 1500 miles total
• Unlined Cast Iron
– 35 to 60 yrs old
– 140 miles
– Breaks easily
– Water quality issues
• Cement Pipe
– 28 to 40 yrs old
– 130 miles
– Breaks easily
• Concrete Sewers
– Corrosion failures 7
Water Infrastructure Grades

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News Video

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Water Infrastructure Problem
• “..out-of-sight, out-of-mind predicament”

• “..is in dire need of repair or replacement”

• “..more that any single bond election

could ever cover”

• Failure examples:
• Dallas County Records Bldg
• Stemmons Freeway
• Los Angeles – 43 breaks in a month

• “So, the alarm has been sounded – again

and again.”

• Major Irving failure - Riverside Sewer

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 Dallas/Irving Comparison
City of Dallas City of Irving
Water System Size 5,000 miles 700 miles
Pipe over 50 yrs old > 10% > 10%
Pipe Replacement Budget $127 M $9 M
Pipe Replacement Rate $25,400/mile $12,900/mile
Water Main Repairs 1,849 360
Water Main Repair Rate 37/100 miles 51/100 miles

• Irving has more repairs, but replaces pipes at half the

rate
• Lean Six Sigma projects increasing repair capabilities
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 Neighborhood Line Replacement
History and Projection
Water and Sewer Replacements
Millions

$30

$20
$15.0 $15.1 $15.3
$14.0
$11.0 $11.0
$10 $8.0 $7.6
$6.7
$5.3 $5.6
$4.5 $4.4 $4.0
$3.4
$1.2
$0

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 Failing Pipe Impacts
• Pipe Breaks
– Cartwright St (55 yrs old), 12 repairs in 2 yrs
– Pennington St (46 yrs old), 9 repairs in 2 yrs
• Red Water
– Fowler St (54 yrs old)
– Marie Ln (55 yrs old)
• Sewer Overflows
• Impacts:
– Loss of service (frustration)
– Cost (overtime and repair)
– Regulatory
– Flushing
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“Band Aid” Repairs-Britain 5/2/10
Three pipe failures

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Water Supply Investment Needed
Princeton Pump Station
- Future Improvements

Intake Pump Station

- $2M Total Upgrade
- $1M Irving’s Cost
Proposed Booster Pump Station
- $40M Total
- $20M Irving’s cost

Participate: Maximize and maintain control of $150M+ pipeline

Don’t participate: Lose some drought protection and may have
to buy Dallas water sooner
 Capital Improvement Plan
• $1M - 54” Customer Way Sewer
• $6.5M - Delaware Creek Sewer
• $1M Facility Security
• $0.5M Hackberry Pump Station Improvement
• Required TXDOT utility relocations
• $1.2 M Residential water pipe replacements
• Total: About $12M
• No funding for Water Supply Booster Pump Station

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 Finances
• System Fund needs to stand on its own
– Rates have to supply adequate revenue
– Avoid General Fund bailout as in 2007 ($4M)
• Water revenues down almost 9.8%
• Cash reserve projection down $3.6M
• Will not meet debt service coverage goals
• Bond ratings are at risk – higher rates

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 Costs Trending Up
• TCEQ Fees and Requirements up $500,000
• Water Treatment (Dallas)
– Last 4 years up $1.045M (18% Increase)
• Wastewater Treatment (TRA)
– Last 4 yrs up $3.975M (39% Increase)
• Development Costs (TXDOT, DART)
• Maintenance Costs

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 Public Communications
• Audit and Finance Committee
– 10/2009, 12/2009 and 5/2010
• Public Works Committee
– 10/2009
• City Council Work Session
– 10/21/2009, 12/2/2009, 1/13/2010
• City Council Meeting
– 1/14/2010
• City Spectrum
– 11/2009, 1/2010, 2/2010, 6/2010
• Website – Video and 5-yr Plans for Pipe Replacements
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 Voice of the Customer
• Customer complaints for the last 2 years
– Leaks concerns 1,418
– Water Quality (dirty, discolored) 420
– Low pressure concerns 255
– Sewer backups, slow drainage 2,609
– TOTAL 4,702

Average of 6 complaints per day

Each complaint can impact a few or up to hundreds of people

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 Recommendation
• Adopt a 5% Rate Increase
– Helps meet legal debt service coverage commitments
– Helps cover FY 2009-10 operations
– Doesn’t fund the water supply booster pump station
– Doesn’t fund new CIP (highest priorities only)
• Impact to Residential Customer
– $2.66/month increase ($53.37 total) typical
– Rates still lowest among 20 plus member cities (Dallas)
– “Lowest rate among the cities in (North Texas in) the
study” (The Celina Record Star - McLain Decision Support
System rate study)
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 No Rate Increase Option
• Would not sell water and sewer bonds
• Limited, if any, CIP for FY 2010-11
• High risk of bond rating downgrade
• Evaluate going from 20 to 30 year debt
• Would not participate in Lake Chapman
Booster Pump Station
– 32% future capacity loss (75 MGD vs. 110 MGD)
– Loss of pipeline operational control and drought
flexibility
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Questions

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