Water Utility Strategic Planning From Concept To

Water Utility Strategic PlanningFrom Concept toImplementationMay 7, 2009HDR Engineering, Inc.

Presentation Overview Why Bother? Topics––––Administration, Customer Service, and IntradepartmentalMaster Planning, Modeling, and Regulatory ComplianceOperations, Maintenance, and Asset ManagementFinancial Policies, Procedures, Reporting, and Rate Making Mission Statement & Core Values

What will the future be foryour Water Utility?Utilities of the futurewill likely do threethings really well: Operationally efficient Engaged in the community Integrate water management,sustainability, and publicpolicy decisionsTo leverage regionalopportunities,relationships, andeconomies of scale.

The 10 Qualities from Effective UtilityManagement - A Primer for Water andWastewater Utilities, June 2008.1. Produces its product (potable water, treated effluent, etc.) in full2.3.4.5.compliance with any regulatory and reliability requirements.Provides “reliable, responsive, and affordable services.”Strives to recruit and retain competent, motivated, adaptive andsafe employees and leaders.Ensures all facets of utility operations are optimized.Should be financially viable.

The 10 Qualities from Effective UtilityManagement - A Primer for Water andWastewater Utilities, June 2008.6. Should have stable infrastructure and know the condition of allassets.7. Is operationally resilient with a collaborative and proactive workenvironment.8. Is conscious of the effects and impacts its decisions have on thecommunity.9. Ensures the water provided is consistent with current and futurecustomer needs.10.Should gain and maintain stakeholder understanding and support.

Strategic Business Plan &MAsset ManagementComprehensivePlansRegulatoryAgencies &RequirementsCIPRate DesignInstitutionalAgreementsRegulatoryCompliance

Strategic Planning HierarchyMissionCritical Success FactorsObjectivesManagement &OperationsStrategicInitiativesPerformanceMeasures

Strategic Business Plan ModelThe City of Today is committed toenhancing the quality of life inpartnership with the citizens,employees, visitors, and businesscommunity and creating anatmosphere that respects all.The Mission of Utility Servicesis to provide vital servicesto the community by deliveringa high-quality, uninterrupted supplyof water and efficiently managingwaste materials.Regulatory Agencies &RequirementsUtilityPoliciesThe mission of the WaterDivision is to protectpublic health by ensuringan uninterrupted supplythat meets or exceedsState Department ofHealth water qualitystandards.ComprehensivePlansCIPO&MAsset ManagementRate DesignInstitutionalAgreementsRegulatoryCompliance

Comparison of MissionStatementsStatementsCore ValuesCityWorkforceQuality of LifeEconomyUtilitiesEfficiencyWaterProvide Service

Strategic, Facility, andFinancial Plan ProcessPlanning & PoliciesMaster Planning & ModelingAsset ManagementFinancial Master PlanReviews and Updateszz PlanningPlanning CriteriaCriteriazz LandLand UseUse PlanPlanzz PoliciesPolicies andand CriticalCritical SuccessSuccess FactorsFactorszz RegulatoryRegulatory ComplianceCompliancezz SystemSystem AnalysisAnalysiszz CIPCIP andand O&MO&Mzz GASBGASB 3434zz InventoryInventory && DatabaseDatabasezz AnnualAnnual RenewalRenewal && ReplacementReplacementzz RatesRates (Rates,(Rates, Fees,Fees, CapacityCapacity Charges)Charges)zz FinancingFinancing StrategyStrategy andand PoliciesPolicieszz CustomerCustomer ServiceServiceScheduledScheduled ReviewsReviews for:for:zz StrategicStrategic PlanPlan andand PerformancePerformancezz FacilityFacility && FinancialFinancial MasterMaster PlansPlanszz UserUser RatesRates andand ChargesCharges

Planning & Policies: CriticalManagement ToolRoadmapFrameworkDocumentationMessageProvides management with clear directionProvides consistent & logical financial /rate decisionsProvides future Boards with basis forreasoning behind past decisionsProvides customers information tounderstand Board’s philosophyBoard’sProvides strong message to outsidefinancial community

Integrated Master PlanningPlanning Criteria& PoliciesExisting SystemAnalysisCapitalImprovementProgramModeling& MappingSystem StandardsMasterPlanAsset ManagementSource Analysis& Water RightsFinancial Strategy& RatesOperation andMaintenanceSource ProtectionConservation& ReuseWater Quality& Treatment

Asset ManagementFinancial Planning/BudgetingIdentify & Prioritize ProjectsIT to Support ProgramsInspection & Condition AssessmentDevelop & Implement Decision ProcessForecast Asset Replacement NeedsUpdate Asset Databases & Identify Gaps

Financial Master PlanningPlanning and Policies: Sets the foundationfor prudent fiscal management / rate settingRevenue Requirements: Utility revenuescompared to expenses, determines overall“level” of rate adjustmentCost of Service: Equitably allocates revenuerequirements to customer classesRates: Design rate structure to collecttargeted (required) revenues

Keys to Success Plan Early – Plan Often Integrated Process is the Most Effective Planning Policies & Master Plans Time to Full Implementation (1-2 Years) Scheduled Reviews & Updates

Administration, Customer Service, ional StructurePublic & Customer CommunicationCustomer Service Objectives – Critical Success FactorsInterdepartmental/Interutility Communication & ReportingIntegration with Land Use Policies & StandardsProject & Activity PrioritizationElected Officials & Public

Master Planning, Modeling, andRegulatory ComplianceEstablishing Policies& Planning CriteriaCollect &Evaluate DataDetermine RegulatoryComplianceAnalyze Resource& TreatmentDevelop OverallTreatment/Supply/DeliveryStrategyDevelop CIP &Financing StrategyPrepareMaster PlansModel ping/Pumping/StorageImprovements

Develop Asset ManagementDecision ProcessesAsset History(Maintenance,Failures, etc.)Inspection /Condition DataMaintenanceType &FrequencyDecisionProcessRepairRehabilitateCost /Consequences ofFailureReplace

Budget and Fiscal Policies FinancialReporting /Management Budget Revenue CapitalImprovement Debt Reserve Rate SettingCapacity &Connection Fee

Financial and Rate MakingKey Policy “Drivers”Enterprise FundAccountingzz SeparateSeparate UtilityUtility TypeType AccountsAccountszz SystemSystem SpecificSpecific CapacityCapacity ChargesChargesz-Accounts forz SubSub-Accountsfor Grants/LoansGrants/LoansCapitalImprovement Planzzzzzzzz20-year Forecast-year Updates20-yearForecast withwith 55-yearUpdates““GrowthGrowth Pays” PreferredPays forfor GrowthGrowth”PreferredFinancingFinancing StrategyStrategyDebtDebt ServiceService CoverageCoverage CovenantsCovenantsRenewal &ReplacementzzzzzzAnnualAnnual DepreciationDepreciation TargetTargetTiedTied toto AssetAsset ManagementManagementFundedFunded byby RatesRatesReserveszzzzzzzzOperatingOperating XX daysdays ofof O&MO&MEmergencyEmergency InterimInterim CashCash FlowFlowDebtDebt ServiceService BondBond CovenantsCovenantsRateRate StabilizationStabilizationCapacity &Connection FeeszzzzzzCIPCIP ProjectProject UseUse Only;Only; NotNot O&MO&MOffsettoCIP&DebtServiceOffset to CIP & Debt Service PaymentsPaymentsAnnualAnnual AdjustmentsAdjustments UsingUsing ENRENR IndexIndex

Financial Plan ProcessCapital Financing &Revenue RequirementsCost-of-Service Analysis &Rate Structure Design4) ALLOCATEREV REQUIREMENTTO FUNCTIONS1) DEFINEPOLICY DRIVERSCAPITALNEEDSCONNECTIONCHARGES2) DEVELOPCAPITALFINANCING PLANEXTRADEBT SERVICEECONOMIC& FINANCIALASSUMPTIONSDATA &CUSTOMER STATSDEBTPROCEEDSCUSTOMERCOMMODITYFIRE FLOWOTHERSOURCES5) ALLOCATEFUNCTIONAL COSTS TOCUSTOMER CLASSESRATE FUNDING3) DEVELOP RATEREVENUESRESIDENTIALCOMMERCIAL6) DESIGN RATESTRUCTUREOTHER

Project Outcomes 3 Key Observations– Does what you have work well?– Does what you have need some “tweaks”?– Is there something missing that you should have? Strategic Plan Report Strategic Initiatives

City of Today StrategicInitiativesINITIATIVE #X: TITLE OF INITIATIVETo create .PERFORMANCE MEASURESVITAL FACTOR X-X:Name of vital factor supporting initiativeOutcomeActual MeasurementBenchmarkPerformance GoalGoal Attainment PeriodDepartment OwnershipProject:OwnershipFY 2008/09 MilestonesJuly - October2008November 2008December 2008January 2009March 2009July mountKnownFundingSource

Mission Statements & CoreValuesUtility ServicesCityWater DivisionMission StatementsThe City of Today iscommitted to enhancing thequality of life in partnershipwith the citizens,employees, visitors, andbusiness community andcreating an atmosphere thatrespects all.The Mission of UtilityServices is to provide vitalservices to the communityby deliveringa high-quality,uninterrupted supplyof water and efficientlymanaging waste materials.Critical Success Factors / Core ValuesThe Mission of the WaterDivision is to protectpublic health by ensuringan uninterrupted supplythat meets or exceedsState Department ofHealth water qualitystandards.

Strategic Initiative # 1: Combine andCross-Train Water and WastewaterOperations Field CrewFY 2008FY 20XXIndependentWater andWastewaterUtilities withseparateoperationscrewsCross trained staffand supportbetween utilities willincrease reliabilityand economy ofscale for costsavings

Strategic Initiative # 2: Develop CIPPrioritization ProcedureFY 2008FY 20XXCIP dictatedby budgetand responseto emergencysituationsClear proceduresto prioritizeCIP projectswill efficientlyutilize limitedfunding resources

Example CIP Scoring ScenarioCategoryProtection of th/ExpansionWater Quality (nonregulatory)0 – Meets standards0 – Meets regulations0 – Meets current &future0 – Will not affect waterqualityMeet Customer ServiceExpectations0 – Expectations metCost control0 – No cost savingsPublic Health & Safety0 – No health & safetybenefit0 – No environmentalimpactEnvironmentalStewardship &Sustainability(Time Limited)0 – No partneringopportunitiesRankings2 – Doesn’t meet2 – Doesn’t meetanticipatedregulations2 – Doesn’t meet futureneeds1 – Will improve waterquality 20%customers1 – Service improved2 – Unable to meet1 – Cost reduced by 1time opportunity2 – Future cost savingsor 1-time3 – critical3 – Doesn’t meet currentregulations3 – Doesn’t meet currentcustomer needs3 – Will improve waterquality 20%customers3 – Unable to meet servicestandard @ criticalconnection3 – Payback 2 years orloan and grant financing3 – Increase health & safety1 – Limited enhancement2 – Moderateenhancement2 – increased cost or lostpartnering if wanted3 – Benefits mitigation orsustainability3 – Irrevocably lostopportunity if don’tproceed

Water Utility Strategic Planning From Concept to Implementation . Financial Planning/Budgeting Develop & Implement Decision Process Forecast Asset Replacement Needs . Financial Master Planning Planning and Policies: Sets th