Providing water for a desert town is expensive business. While SNWA ponders approval of a long term $3billion package of water improvements for Las Vegas Valley, Virgin Valley Water District is in the process of planning its budget for the upcoming fiscal year (FY2021). VVWD faces a $25million budget in the coming year, as it also peers into the not-so-distant future projected by an updated master plan.
At its February 18 meeting, the VVWD board heard from district engineer Tyler Young as he outlined the district master plan update prepared by Bowen, Collins, and Associates (BCA), the district’s engineering consulting firm. While presenting figures that stretched to year 2080, the plan concentrates on the next ten years to 2030 in outlining immediate steps that are seen critical to efficient VVWD operations. The VVWD board accepted BCA’s updated master plan updates during its budget hearing meeting on March 4.
According to the revised master plan that uses a population growth rate projection of 3.35 per cent per year for the valley, the ten-year capital improvement plan (CIP) will cost over $64million. That figure breaks down into $30million cost for four new wells, $25million to renew and update the current water system inventory, and $10million for transmission lines, system pressure and other expenses. Forecasts show that valley population growth will drive the need for surface water resources to meet culinary purposes by roughly 2035, when VVWD reaches its 1,200 acre foot/year limit of State-regulated ground water use.
BCA concludes that all revenue sources and financial alternatives must be considered to cover the ten year price tag. District cash reserves must also be maintained to be ready for the eventual building of a water purification plant needed for surface (river) water. The cost of such a plant is projected to be $60million. All these factors point to the need for increases in district revenues, which translate into rate and fee increases.
VVWD expects to spend a total of $25million in the coming year, according to its tentative budget, up from total expenditures of $18.6million in the current year. That total includes $16million in capital outlay and $7.39million in operating costs.
District chief financial officer Wes Smith, responding to the master plan projections, modeled several alternative plans for generating revenue needed to operate and maintain district cash reserves during the 10-year period. These included user rate increases, increase of system development charges (SDC) on new construction, and possible restricting growth or mandatory water use restrictions.
VVWD’s user rate policy follows a principle of raising rates gradually, seeking to stay within cost of living increases, so users are not hit with massive rate increases and avoiding special service fees, as occurred about 7 years ago.
In 2017 during the last master plan review, the VVWD board set its SDC at $2600 per equivalent development unit (EDU), with a cap of 3 percent increase per fiscal year, despite a BCA master plan recommendation that the SDC be raised to $3500 at that time. That was done to lessen the impact on developers planning new construction in the valley.
According to new master plan figures, the current SDC now falls far short of keeping pace with the accelerated costs associated with capital projects, and BCA now recommends a SDC rate of $6000 to help bridge the financial gap of capital outlay which cannot be filled using only SDC revenues. While VVWD accepted BCA’s master plan document, it did not vote on any SDC change during its March 4 meeting; any proposed rate increase must be publicly noticed and discussed before enactment.
Smith’s financial model introduced the option of VVWD taking out a $10million bond to maintain the district’s cash reserves during the forecast period. This move would stabilize district reserves while adding debt during a time when interest rates are now at a low. The five-member VVWD board voted unanimously to place consideration of a bond on its next meeting agenda for March 17.
Local residential water user Gary Elgort, frequent advocate of area growth paying its own way Commented, “It doesn’t do anybody a favor delivering water below cost, and we must recognize that.”[ ] “Monitor what we do have available and accurately represent the situation as it is.”
The March 4 meeting focused on specific expenses and revenues for FY2021. The tentative budget, prepared by VVWD staff, was reviewed and some figures adjusted. A final version of the tentative budget must be sent to the State for approval before it can be put into action for the fiscal year starting July 1, 2020 and ending June 30, 2021.
The major expense for VVWD each year is expansion and maintenance of its deep water well system, storage, and transmission lines. Projected capital spending for FY2021 totals $16million. Major factors of that figure are the completion of the new Northwest water tank and lines ($5million) and drilling and outfitting of Well #35 ($4.6million).
VVWD employment costs are its second-highest expense. VVWD employs 28 people, with plans to hire an additional person. The FY2021 budget shows a total cost of $2,782million in salaries and benefits, breaking down to nearly $100,000 average cost per employee.
District Manager Kevin Brown led a discussion of employee wages, suggesting a move to a 10-step wage scale that would address issues created in the addition of employees while rewarding current staff and discouraging employee loss due to competitive disadvantage. The district currently covers the cost of P.E.R.S. retirement and self-insured health insurance for all employees.
After extended discussion that included public acknowledgement of the board’s appreciation of the high caliber of work by VVWD employees, the board voted to table the proposal to provide for more information before a wage change would be considered.
A high-ticket line item that was increased during the March 4 meeting is its budget for legal services. The budget was increased to $505,000, based on extraordinary cost in defending the district in an upcoming court trial brought by Wolf Creek Golf Course. That suit, disputing the district’s authority to set water rates, cost the district over $500,000 in the current fiscal year.
The next VVWD board meeting will be held at Bunkerville Town Hall on March 17 due to remodeling work that continues at the district headquarters building in Mesquite.