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Impact Study on MSD Rate Payers of Proposed Consolidation/Merger

Phase II – Towns of Biltmore Forest, Montreat and Weaverville

Presentation to the MSD Planning Committee

February 13, 2013

Agenda

1. Overview/Purpose of Study

2. Overview of Water Systems

3. Evaluation of Consolidation/Merger

4. Summary and Conclusions

5. Questions & Answers

Overview / Purpose of Study

• Assess impact of the proposed merger of Water Systems within Buncombe County with MSD

• Phase 1 – City of Asheville water system

• Phase 2 – Towns of Biltmore Forest, Montreat and Weaverville

• Potential legal, governance, valuation and asset compensation issues were beyond the scope of this study.

Town of Biltmore Forest – Water System Characterization

• Approximate population of 1,526

• Customers: 762 residential, 9 commercial and 9 industrial

• Purchases water from the City of Asheville

• Water assets include:• 20 miles of distribution pipelines

Town of Biltmore Forest – Water System Characterization

• No field visits conducted. Town’s water assets are below ground

• No future improvements anticipated by the Town: • Majority (approx. 85%) of water lines replaced in 2002• FY13 budget includes about $7,500 for meters, meter boxes and

hand tools

• Water Rates

Base Rate (Bi-Monthly) $37.99 (Includes 2,250 gallons)

From 2,250 to 60,000 gallons $4.51 per 1,000 gallonsFrom 60,000 gallons to 100,000 gallons $4.18 per 1,000 gallonsAbove 100,000 gallons $2.60 per 1,000 gallons

Town of Montreat – Water System Characterization

• Town seasonal population of ~ 3,000• Montreat College located in Montreat (approximately

450 undergraduate students)

• Water System serves: 640 residential meter connections and 28 institutional connections

• Water system governed by Town Board

Town of Montreat – Water System Characterization

• Water system includes:

• 12 supply wells (only operate 11 wells currently; 4 new wells since 2002)

• 2 water storage tanks (total capacity 600,000 gallons)

• 2 booster pump stations (1 emergency)

• 18 miles of distribution lines

• Emergency connection with Black Mountain

• Water source: bedrock aquifer in Blue Ridge and Inner Piedmont Recharge Area

Town of Montreat – Water System Review

• Town reportedly replaced ~ 80% of water lines since mid-1980s

• Water system evaluated in 2006 (by McGill Associates)

• System in good condition. No improvements were identified

• Field visits of major assets conducted in December 2012

• General condition good with only minor issues associated with corrosion and general housekeeping

• Existing programs for meter replacement, valve exercising, and leak detection

• Storage tanks inspected annually• Funding provided for cleaning and minor repairs to tank

• Plans to paint tank FY2012-13

Town of Montreat - Organization Structure

• Staff consists of 14 employees • 8 employees (part-time to water system)

Town of MontreatBoard of Commissioners

Boards and Commissions

Town Clerk

Town Attorney

Public Works Director

Utility Maintenance Techs/Operators

Utility Maintenance Workers (3)

Finance Officer

Police Chief

Police Officers

Auxiliary Police

Building Inspector/Code Admin.

Town Administrator

Town of Montreat - Planned Water System CIP

Description FY2012-13 FY2013-14 FY2014-15 FY2015-16 FY2016-17 Future Total

Water Line Replacement 39,500$ 50,000$ 50,000$ 40,000$ 50,000$ 39,500$ 269,000$ Well Exploration & Const. - - - 120,000 - - 120,000 Water Storage Facility 64,150 64,150 64,150 64,150 64,150 320,750 641,500 Water Tank Inspection/Maint 25,000 - - - - 23,000 48,000 Backhoe Replacement 19,095 19,095 19,095 19,095 19,095 95,475 Water Line Extension 119,000 - - - - - 119,000 Portable Generators 4,000 4,000 60,000 - - - 68,000

Total 270,745$ 137,245$ 193,245$ 243,245$ 133,245$ 383,250$ 1,360,975$

Town of Montreat - Water Rates

Monthly Residential Water Access Fee $14.00Monthly Institutional Water Access Fee (1" Line) $90.00Monthly Institutional Water Access Fee (2" Line) $220.00

Water Rate (per 1,000 gallons) $4.49

Town of Weaverville – Water System Characterization

• Approximate population of 1,495

• Serves all of the Town of Weaverville and northern Buncombe County

• In 2011, reported 2,119 residential, 148 commercial, 11 industrial and 9 institutional customers.

• Water assets include:• Ivy River Water Treatment Plant (1.5 mgd)• 62 miles of distribution pipelines (2 to 12-inches)• 7 storage tanks (capacity 3.7 gallons)• 4 pump stations• Emergency water connections with City of Asheville and Town of

Mars Hill

Town of Weaverville – Water System Review

• Field visits of major assets conducted in December 2012

• General condition good with only minor issues associated with corrosion and general housekeeping

• Meter replacement program is underway (Automated Meter Reading (AMR) System)

• 700 + meters replace in 2011 and 2012

• Valve exercising and leak detection programs

• About 10 distribution system leak repairs made monthly

• Fire hydrants and distribution lines flushed annually

• Water System is in compliance with Federal Drinking Water Rules (based on 2011 Annual Water Quality Report)

Town of Weaverville - Organization Structure

Staff consists of 9 employees

Other Town employees support the water system

• Town Manager (10%)

• Finance Officer (15%)

• Collections (40%)

• Administrative Assistant (50%)

Public Works Director

Public Works Supervisor

Water Prod.ORC

Water Maint.Crew Chief

Skilled Labor

Skilled Labor

Water Distr. Supervisor

Sanitation Crew Chief

Semi-Skilled Labor

Administrative Assistant

Sanitation Crew Chief

Semi-Skilled Labor

Recreation Crew Chief

Skilled Labor

Manpower #3June 30 - Sept 30

Street Crew Chief

Skilled Labor

Manpower #1 May 1 – Dec 15

Manpower #2 May 1 – Dec 15

Assistant Plant Supervisor

Plant Operator

Plant Operator

Plant Operator

Town of Weaverville - Planned Water System CIP

TotalProject Title Project Cost FY2012-13 FY2013-14 FY2014-15 FY2015-16 FY2016-17

Rebuild 2 High Service Water Pumps 19,000$ 9,500$ 9,500$ -$ -$ -$ Install Waste Effluent Monitoring System 25,000 25,000 Replace 1999 Explorer - Sampling & Testing 32,500 32,500 Replace Filter Bed Media 92,500 92,500 Chlorine Gas Delivery System Rebuild 26,400 26,400 Install Standby Diesel Generators 612,360 612,360 Replace Chlorine Gas Disinfection System 182,500 182,500 Replace Bulk Chemical Tank & Transfer System 67,000 67,000 Replace 2005 Explorer - Production Supervisor 32,500 32,500 Replace Water Lines - Yost Street 52,000 52,000 Replace 1999 Water Service Truck 42,000 42,000 Replace Water Lines - Coleman Street 60,200 60,200 Replace Water Lines in Boyds Union Chapel area 557,375 557,375 Replace 1986 Air Compressor 18,500 18,500 Replace 2007 Mini-Excavator 52,000 - 52,000 Replace Water Lines - Oakland St to Highland St 78,000 78,000 AMR System 570,000 20,000 100,000 150,000 150,000 150,000 GIS System-Shared with GF 50,000 50,000 - - - -

Total 2,569,835$ 112,000$ 847,475$ 1,036,860$ 260,500$ 313,000$

Town of Weaverville - Water Rates

Description Inside Town Outside Town

Water RatesFirst 3,000 gallons $6.77 $13.55Next 22,000 gallons $7.41 $14.81Next 175,000 gallons $8.07 $16.14Next 300,000 gallons $8.73 $17.46All over 500,000 gallons $9.40 $18.81

Minimum Monthly ChargeMeter Size

5/8" $13.55 $27.093/4" $27.72 $55.451" $42.53 $85.071-1/2" $81.04 $162.082" $132.88 $265.753" $273.59 $547.194" $437.39 $874.776" $885.17 $1,770.338" $1,433.80 $2,867.61

Charge Per Month

Rate ($ per 1,000 gallons)

Option: Provide Town of Weaverville with Water from the City of Asheville’s System

• Interconnection between Weaverville and Asheville Exists• 8” line sized only for emergency use

• Preliminary Requirements for Supplying Water to the Town from the City’s system:

• Booster pump station (approximately 1 mgd)

• New 12-inch transmission line (avoids subjecting existing lines to excessive pressure)

• Further analysis and preliminary engineering report (PER) required

Evaluation of Consolidation / Merger – Assumptions

1. MSD would retain dedicated water system employees

• 9 full-time staff from Weaverville Water System (9 full-time)

• No staff from Biltmore Forest or Montreat as these Towns do not have full-time staff dedicated to the water systems;

2. MSD and Town of Weaverville will need to decide whether the Public Works Facility (15 Quarry Road) would be needed for the water system as part of the consolidated entity;

3. Biltmore Forest would continue to receive treated water from the Asheville system (no longer under the wholesale agreement)

Evaluation of Consolidation / Merger – Assumptions

4. Billing would be consolidated and performed by MSD;

5. MSD would assume Towns’ water system indebtedness or possibly compensate Town’s for remaining debt;

6. MSD would keep water and sewer accounting separate, with no immediate impact to sewer customers or MSD’s long-term business plan;

7. All Town water customers, including wholesale customers would remain unchanged after the merger; and

8. The evaluation of legal, governance, and asset compensation issues were beyond the study scope.

Potential Merger Impacts – Town of Biltmore Forest

1. Reduction in personnel expense. Current water system staff are part-time and would remain Town employees. 0.5 FTE added.

2. Elimination of indirect transfers to General Funds

3. Existing note (annual debt service $450,000) assumed to continue to be paid by the Town.

4. Water Rate Structure Converted to City’s Existing Structure – Residential bill ~17% lower

5. Cost savings of approximately $775,000 through FY2022; Net savings of $200,000 accounting for water revenue reduction (Asheville water rates lower)

Summary of Merger Impacts – Town of Biltmore Forest

FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 $(500,000)

$(400,000)

$(300,000)

$(200,000)

$(100,000)

$-

$100,000

$200,000

$300,000

$400,000

Revenue Impact (Water Rates Changed to Asheville Rates)Elimination of Asheville Wholesale Water RevenueElimination of City of Asheville Water PurchasesAddition of 0.5 FTEReduction in Personnel ExpenseNet Total

Savings = $200,000 through FY2022

Potential Merger Impacts – Town of Montreat

1. Reduction in personnel expense. Current water system staff are part-time and would remain Town employees providing other Town services and functions. 0.5 FTE added.

2. Elimination of contributions to the General Fund

3. Water Rate Structure Converted to City’s Existing Structure – Residential bill ~17% lower

4. Cost savings of approximately $422,000 through FY2022; Net savings are negligible accounting for water revenue reduction (Asheville water rates lower)

Summary of Merger – Town of Montreat

Merger Impact = Negligible

FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 $(200,000)

$(100,000)

$-

$100,000

$200,000

$300,000

$400,000

Revenue Impact (Water Rates Changed to Asheville Rates)Reduction in Contributions to the General FundAddition of 0.5 FTEReduction in Personnel ExpenseNet Total

Potential Merger Impacts – Town of Weaverville

1. Staffing

• Transfer of 9 full-time staff to MSD (Scenario 1).

• If water supplied by the Asheville system, assumed reduction in the number of staff by 4 positions by FY2017 (Scenario 2)

• Other Personnel expense reduction. Indirect personnel cost would be reduced. (Both Scenarios 1 &2)

2. Water Rate Structure Converted to City’s Existing Structure – Negligible Residential bill impact

3. Scenario 1 Net Savings of $209,000 (FY2014 - FY2022)Scenario 2 Net Savings of $ 675,000

Summary of Merger – Weaverville (Scenario 1)

Savings = $209,000 through FY2022

FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 (200,000)

(100,000)

-

100,000

200,000

300,000

400,000

Reduction in Indirect Personnel ExpenseTown vs MSD Benefits Cost Dif-ferenceNet Total

Summary of Merger – Weaverville (Scenario 2)

FY2014FY2015FY2016FY2017FY2018FY2019FY2020FY2021FY2022 $(800,000)

$(600,000)

$(400,000)

$(200,000)

$-

$200,000

$400,000

$600,000

Capital Cost of Pump Station and Water Line (amortized)Addition of Asheville Water Produc-tion CostReduction in Weaverville WTP Operating CostTown vs MSD Benefits Cost Dif-ferenceReduction in Indirect Personnel ExpenseReduction in Direct Personnel ExpenseNet Total

Savings = $675,000 through FY2022

Merger Impact Additional Considerations

1. Regional / uniform approach to water resources and supply

2. Future system capital needs shared by a regional customer base

3. Enhanced ability to coordinate/manage water and sewer pipe replacements

5. Coordinated and unified customer service and communications

6. Reduction in Town control over the water system

Question & Answer

Thank you!

Imagine the result

ARCADIS G&M