Cedar Hills PI Water Analysis


BCA – 2016 Rates Study Update as of -29-2016

The pdf document above is a study performed by Bowen Collins & Associates on the city’s water resources and capabilities. The introduction states:

The City of Cedar Hills (City) has retained Bowen Collins & Associates (BC&A) to perform an update to the Utility Rate Study that was completed in 2012 for the City’s water, pressurized irrigation, sewer, and storm drain utilities. The objective of the rate study update is to update the City’s existing rate models that were developed in 2012 to reflect historic data gathered over the past four years. This will then allow recommended utility rates to be calculated in accordance with accepted industry standards. Prior to performing any detailed calculation of rates, the City requested a cursory review of the overall status of each utility fund. The purpose of this memorandum is to summarize the results of this review.

The document provides great insight into where we are as a city with regards to water, sewer, and storm drain. Of concern is the summary regarding water. From the study:

Several conclusions can be made from Figure 3 (water):

  • With the increases recommended in the 2012 Utility Rate Study, water revenues will closely follow the recommended level of long-term funding throughout the 10-year planning window.
  • Expected revenues in the water system will be both above and below projected expenditures. Over the length of the full planning window, however, revenue and expenditures are expected to be about equal. Based on these observations, it appears that the City can stick with the 2012 Utility Rate Study recommendations and meet its financial needs. Before making this decision, however, it is important to consider a few other issues regarding water system reliability. As has been identified in previous analyses, the City’s secondary water system is vulnerable to disruption during periods of peak demand. Despite the City’s best efforts to educate and encourage its residents regarding the prudent use of irrigation water, summertime water use is still significantly higher than required to meet the actual water needs of landscape in the City. The result of this high water use is a secondary system that is running at the very edge of its limits. While City staff have been able to successfully manage these demands for the past several years, running the system at the edge of capacity has several negative effects:
    • Decreased System Performance – For the most part, the City has been able to deliver secondary water over the last several years at adequate pressures to meet customer needs. However, many pipelines are already operating at velocities above recommended levels. Even though future growth in the City is modest, any growth in the system has the potential to result in low pressure problems in some parts of the City’s system.
    • Increased System Wear – Another negative effect of operating the system at the edge of its capacity is increased system wear. Wear on pump bearings is proportional to the square of pump speed. This means doubling the pump speed results in four times the wear on the pump bearings. Operating at higher velocities can also erode pipeline linings and weaken pipe walls. Use of this system in this manner is analogous to operating a vehicle at maximum speed. Although it may be able to withstand the higher speed for a period of time, operation at the edge of capacity will result in more frequent and costly system maintenance.
    • Potential Source Failure – The City has successfully met demands for the past several years through heavy use of its Cottonwood Well. This is a dual purpose well that can provide water to both the City’s culinary and secondary systems. If this well were to fail during the peak summer months (or if the City’s other major culinary source, the Harvey Well, were to fail), the City would be faced with a major supply shortage. While some well failure issues can be resolved in a short period of time, other major failures could take weeks or months to resolve. During this period, the City would be able to meet culinary demands, but would face severe secondary water restrictions. It is expected that widespread damage to existing landscapes could result from such an event.

Two alternative options to doing nothing (which BC&A refers to as Alt #1) are to install secondary water meters (Alt #2) or install an additional well and equipment (Alt #3).

BCA Analysis on PI Meters (Alt #2)

The most straight forward way to avoid operating the system at the edge of capacity is to decrease system demand. This was the topic of a previous memorandum prepared by BC&A dated May 8, 2015. In that memo, BC&A looked at a number of alternatives for funding construction of pressure irrigation meters and potential cost savings associated with construction of the meters. Major highlights from the memo are as follows:

  • The estimated cost of installing meters is $1.5 million.
  • The most cost effective method for funding installation of these meters would be to use available reserves on hand (approximately $900,000) and then bond for the remaining amount in a 5-year bond.
  • Installation of secondary water meters is expected to reduce system demands by at least 33%. This becomes saved water that can be made available and used for other purposes.
  • Reduced demand is expected to have significant cost savings for the City. Expected savings include $70,000/year in power costs and $45,000/year in pump and equipment replacement costs.

Funding of the water system under this alternative is shown in Figure 4 (in pdf report). Based on the figure, it appears that this alternative can be accomplished using the same rate increases identified for Alternative 1 (Current Status) for the next five years. After the bond on the meters is paid off, the City would be able to reduce its secondary rates by 8% in association with the costs savings associated with the reduced demand.

BCA Analysis on Installing an Additional Well (Alt #3)

The other obvious approach to avoid operating the system at the edge of capacity is to build additional redundancy and capacity into the existing system. Under this alternative, demands would not be decreased through the use of meters but new facilities would be constructed to meet the existing level of demand. The goal of these improvements would be to provide approximately the same level of system performance and reliability as would be obtained in Alternative 2. Required improvements associated with this alternative would include:

  • Installation of an additional redundant well at a cost of $1.5 million.
  • Replacement of undersized pipelines and pump stations in the system at a total cost of $2,000,000. This includes replacement of about 3 miles of pipeline at various locations throughout the City.

Funding of the water system under this alternative is shown in Figure 5 (in pdf report). Based on the figure, it is clear that some additional rate increases will be required to accomplish the desired improvements. Even with bonding and pulling from available cash reserves, this alternative would require an immediate increase in secondary rates of 8% and another increase of 5.8% the following year. These increases would need to remain in place moving forward.

PI funding


BCA’s Recommendation

  • Continue to gradually increase sewer and storm drain rates as identified in the 2012 Rate Study and as summarized in Table 1.
  • Independent of the City’s decision of pressure irrigation alternatives, it is recommended that the City continue to gradually increase culinary water rates as identified in the 2012 Rate Study and as summarized in Table 2.
  • Because of the consequences associated with a possible system failure during the summer months, BC&A would not recommend Alternative 1. It is strongly recommended that the City pursue one of the other two alternatives to increase system performance and reliability.
  • From a cost perspective, Alternative 2 – New Secondary Meters is the most cost effective approach. At the end of the 10-year planning window, it will cost the City approximately $230,000 less per year than Alternative 3. This equates to a savings of approximately $87/year for the average customer.
  • Another advantage of Alternative 2 is that it provides for the most efficient use of the City’s water resources. While the City has adequate water to meet projected needs, unforeseen issues could affect its supply in the future (groundwater contamination, increased drought, etc.). Reducing demand will allow for the most flexible use of the City’s water into the future.
  • Alternative 2 may also have an advantage in terms of potential future regulatory requirements. A recent report released by the State of Utah’s Auditor General regarding Utah’s water needs recommends that the State Legislature consider requiring metering of secondary water as a policy that will encourage efficient water use. Many states in the region already have this requirement. Although text of the bill is not yet available for review, there are reports that a bill regarding metering of water use will actually be discussed in this year’s legislative session.
  • Although it has the disadvantages highlighted above, Alternative 3 is a feasible alternative for meeting the future secondary water needs of the City’s customers and could be selected if the City does not wish to meter its secondary system (and assuming metering does not become a legal requirement).
  • Whichever alternative it decides to pursue, it is recommended that the City proceed with one of these alternatives as soon as possible to minimize its exposure to the consequences of potential system failure under current conditions.

I encourage residents to read the entire study as this is something the Council will be discussing over the next several months as we work on a budget for fiscal year 2017.

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