MVWD Board Preparing For More Rate Increases

By VERNON ROBISON

Moapa Valley Progress

The capital improvement needs of the Moapa Valley Water District (MVWD) are quickly overtaking the district’s ability to pay for them. And MVWD board members have been struggling in recent months to come up with a strategy to address that problem.

In a meeting held Tuesday, May 22, the board viewed projections showing that, given the current course, the district’s cash reserves could be completely spent by the year 2023. This is because of major upcoming infrastructure costs.

“We know that we have some pretty big projects coming down the pike that we have to do, pure and simple,” said MVWD General Manager Joe Davis. “The hard part is figuring out how we are going to cover those costs and then determining which things absolutely have to be done and which ones we can delay for a while.”

Earlier this year, the board approved the purchase of software that analyzes the district’s rate structure, along with its overall needs. It then predicts the financial sustainability of the current track into the future.

MVWD staff spent several months entering detailed data into the software. Theycan now pull up various scenarios showing effects of board actions on the overall finances of the district.
“We have put a lot of effort into making sure that our starting point is good,” Davis told board members. “Now its just a matter of deciding what is our next step.”

Davis said that the initial projection had started with a worst case scenario. It factored in some modest annual rate increases In addition, the projection assumed virtually no growth in the community. That is because the district has seen an extended period of no growth, Davis said.
“The last 10 years of so has been basically stagnant,” Davis said. “We have been averaging maybe 4-5 meter installs per year. That is pretty close to zero growth.”

In addition, the projection included all items identified in the district’s ten year capital plan by a recently contracted engineering study.

The top item on the list was a replacement for the crucial Arrow Canyon #1 (AC1) well, the district’s primary source for water. Producing 4500 gallons per minute, AC1 supplies the bulk of the needs of the district, especially during the summer months. All other MVWD sources together don’t add up to this one well’s production.

But AC1, in operation since 1992, is reaching the end of its life. District officials have determined that a new well is needed. Plans are in place to drill another production well in the nearby area by fiscal year 2022. But the project is very expensive. With BLM permits, environmental requirements as well as engineering, equipment and labor costs, the new well is estimated at $3.2 million.
And that is just the beginning of the capital needs list.

It also includes two new water storage tanks. The first, near Arrow Canyon, would cost about $911,000 to construct. The second, just above the Muddy River Narrows, would total nearly $2 million including the engineering.

The district has also identified that the Logandale Tank needs a recoating treatment on its inner lining to remain functional. This was scheduled for 2021 and is expected to cost about $420,000.

A major transmission line from Warm Springs to the Moapa Tank was also planned. This would replace the 20 inch pipeline that was installed in 1994. The pipe materials used in that line have proven to be faulty and prone to breaks. The estimated cost to replace that line is $1 million.

With all of this information entered into the computer model, the district is projected to spend through its roughly $5 million cash reserves by 2023, according to the model. The projection then showed cash continuing to drop well below zero in the years after that.
“We obviously can’t sustain that,” Davis said. “So there are some hard choices that have to be made.”
Of course, there are a number of variables that could improve that outlook.

The district has long been on the lookout for a major industrial user to replace the loss of the Reid Gardner Power Station which closed early in 2017. The power plant alone represented nearly $300,000 per year in revenue for the district.
“If we had been able to keep that one customer online, it would have staved off rate increases for a long time,” Davis said. “But since 90 percent of our other customers are residential, those households alone will have to pick up the cost.”

On the other hand, if residential growth were to pick up in the Moapa Valley, it would also have a significant effect on the district’s bottom line, Davis said.

Davis spoke specifically about the Mesas in Logandale project, a residential development proposal being considered for the area south of Gubler and east of Yamashita in Logandale. With only 250 homes proposed, this one project would represent a total of 7 percent growth to the district, Davis said.
“Even that one little infusion of growth, plugged into this equation, would help our cash reserve situation immensely well into the future,” Davis said. “Just that project alone could definitely reduce increases in rates.”

Board members recognized that, given the capital needs before them, measures would have to be taken to keep the district on track. One of these measures may be bonding to cover at least the Arrow Canyon well project. But even with that, the district would still need a series of annual rate increases to stay fiscally sound, they said.

Board member Randy Tobler, who had carefully analyzed the district’s finances by running scenarios through the software, told the board that there were two things that he had discovered that were eye-opening to him.

“First, if we could assume a consistent growth rate of only one percent annually, it would change our cash balance directly in a big way,” Tobler said. “And second, under the current scenario, if we hold off and delay a rate increase it has the same major effect only in an adverse way.”

This had led Tobler to the position that the district must chart a consistent course of annual rate increases. He said that he would not have a problem with an 8 percent increase to start as soon as possible.
“All of this does show, though, how growth; even like the (Mesas in Logandale) project that is being proposed; is so important for the community,” Tobler said.

The board also talked about the need to narrow down the list of capital projects to items that are most urgently necessary.

Board member Ryan Wheeler pointed to the storage tank planned for the Muddy River Narrows. “That is being planned because of a flood risk that might happen once in 100 years or more,” Wheeler said. “We might hold off on it.”

Wheeler also said that the Warm Springs tank on the list could also be delayed by the district. This was planned to stabilize system water pressure in the upper Muddy area. But that problem is currently being managed through various pressure regulating devices in the system.
“That may not be the permanent solution,” Wheeler said. “But it can continue to work that way for the time being.”

With all of this in mind, Wheeler said it may be best to delay both new tank projects indefinitely.
Wheeler spoke similarly about the proposed 20 inch transmission line from Warm Springs to the Moapa tank. “We could continue on as is with that, making repairs to the breaks as needed,” he said. “That could be done until the financial aspect gets better and we can afford to do something.”

In regards to the Logandale Tank recoat, Davis said that it also might be able to be delayed. Last year, the district had experts do repairs on the interior surface of the tank using a new experimental technique. That will be inspected again in the coming months. If the repair proves effective, then the district may be able to delay the full tank repairs for a few more years, Davis said.

With all of the proposed changes; including a shortened list of capital projects, bonding for Arrow Canyon and a series of annual rate increases; the projections fell in line with a sustainable level of cash reserves for the district.

Board members suggested that a possible rate increase be presented to them at their next board meeting on June 14 to possibly go into effect the following month.