Review the Current Fiscal Year 2021 Adopted Budget
Review the Fiscal Year Adopted 2022 Budget
Review the most recent Audited Financial Statements
Budget Development – A priority driven process was utilized to create the budget. Each team manager works with staff and submits their recommendations for new programs, equipment, and any significantly increased line items over of the previous year. All requests are prioritized by each team, and then the priorities are compiled into an overall integrated priority list to serve the District’s mission of delivering safe, reliable water to our customers. The requested budget is reviewed and discussed with the Finance Oversight Committee who makes a recommendation to the Board of Directors on how they would like the requested budget to move forward. The Board reviewed the requested budget with staff during a study session. The requested budget was officially presented to the Board of Directors for a final review and adoption at the May Board meeting. A rate hearing was held prior to the May board meeting approving the requested fee changes that included the creation of the infrastructure rehabilitation fee along with an increase to the new customers deposit amounts. The infrastructure rehabilitation fee planned revenue has been included within the adopted budget.
Budget – Metro Water District has a $32.2 million Adopted Budget for Fiscal Year 2021, with $3.5 million budgeted for depreciation and amortization. The budget includes the following plan:
Operating Budget – $18,199,720
- Major operating expense include salaries and benefits for employees (54.58 full-time equivalent positions) totaling $5,300,142.
- CAP water purchases per the District’s CAP allocation / AVRP O&M, and regulatory fees accounting for another large portion of the budget at $3,455,191.
- Other operating expenses include consultant/contract services $1.23 million, general operating expenses $1.28 million, purchased power $1.13 million, and supplies at $0.81 million.
- Principal and interest on outstanding debt service is $4,400,438.
- Other budget disbursements include a contingency for sick and vacation payout liabilities of $89,763, and a $500,000 contingency in case of an emergency.
Other Budget Disbursements – $9,099,491
Capital investments to support the District’s mission such as equipment, trucks, software and hardware are funded at $346,478.
- Capital projects funded with cash total $4,017,426.
- In addition to the cash funded capital projects, an additional $1,337,255 is planned as outside funding, and $4,736,190 of capital project costs related to the Northwest Recharge Recovery and Delivery System will be paid for by the collaborative partnership with the Town of Marana and the Town of Oro Valley in accordance with the intergovernmental agreement.
- Depreciation and Amortization are non-cash funded expenses totaling $3,503,103.
Revenue – Metered Water Sales (Water Availability Rate and Water Consumption Charges) make up 78.9% of the District’s revenue. The other 21.1% consists of various fees, interest earnings, water storage, compensated conservation, and penalties/service charges. The Regional Transportation Authority (RTA) Waterline Relocation Fee will conclude with the associated defeased debt satisfied on January 1, 2021. The implementation of the Infrastructure Rehabilitation fee begins on January 1, 2021.
The Finance Oversight Committee – In 2010, the Board of Directors decided to add additional responsibilities to the Bond Oversight Committee and reconstitute that committee as the Finance Oversight Committee. The Finance Oversight Committee was asked to review and advise the Board of Directors regarding the District’s long-range financial planning including the annual operating budgets, capital budgets, rate structures, continued review of the capital improvement program, and bonds and other capital financing agreements. The Committee is comprised of seven members who are all residents of the District.
Bond Issuance – The District issued revenue bonds in 1999 and 2002 totaled $52,840,000. This debt included $23,000,000 authorized by voters in 1997 for the District’s first Capital improvement Program. Other components of the debt include refinancing the original bonds used to purchase the District, settle the City of Tucson litigation, along with refinancing funds used to construct the Herb Johnson Reservoir, District offices, and the District warehouse. In June 2018, the District was legally relieved the debt associated with the Subordinate Obligation Revenue Refunding Bonds, Series 2002, with a bond defeasance process.
In 2005, District voters authorized another $28,000,000 of debt for a second Capital Improvement Program. The first phase for the improvement projects were funded with a $15,375,000 loan from the Water Infrastructure Financing Authority of Arizona (WIFA), while the second phase started in 2007 with a WIFA loan for the remaining $12,625,000.
Debt Refinance and Restructuring – In 2009 the District refinanced the 1999 bonds which were paid in full on January 1, 2019. In 2009, a new WIFA loan was established to refinance the 2005 WIFA loan. In 2011, Senior Water Revenue Obligations were issued for $6,630,000. This obligation was defeased two years early on January 1, 2019. In January 2013, another restructuring of debt was Board approved with the refinancing of the 2002 Senior Water Revenue Bonds, which were paid in full on June 21, 2019, three and a half years early, saving the District over $150,000 in interest payments. In 2013, the 2002 Subordinate Obligation Revenue Refunding Bonds were restructured with principal deferred until 2020. In July 2016, the WIFA loan for the Riverside well was paid in full 16 years early saving customers over $110,000 in interest payments. The note payable for the Hub Water Purchase was paid in full on June 1, 2019. The outstanding debt balance as of July 1, 2020 is $21.1 million.
Bond Rating – On April 2, 2020, Moody’s Investment Service affirmed the Aa3 rating on senior lien revenue bonds stating that the financial position of Metro Water District is very healthy and is strong when compared to its Aa3 rating. At the time of the rating review, the District had 610 days of cash on hand which was noted as excellent and greatly exceeds the U.S. median. The District’s liquidity has improved significantly from 2014 to 2019 with annual debt service coverage increasing from 1.58 in 2014, to 1.7 in 2015, and up to 2.08 in 2019. The debt to operating revenue is now at 1.0 which has improved from a 2.6 in 2015, and the amount of outstanding debt is lower than the U.S. median level.
The Moody’s Investment Services press release, stated that the District has seen significant improvements over the last five years with the financial strength of the District “extremely strong and a notable strength in comparison to the Aa3 rating”.