Water Resources Acquisition Fee Update...1.0 INTRODUCTION 1.1 Purpose In June 2005 the City of Phoenix (City) retained Red Oak Consulting, a division of Malcolm Pirnie, Inc. (Red Oak)

City of Phoenix, Arizona

Final Revised Report April 2008

Water Resources Acquisition Fee Update Phase 2: Fee Determination and Assessment

April 2008 Pathways to Lasting Solutions 0807693

City of Phoenix Water Resources Acquisition Fee Update – Phase 2

April 2008 Page i

City of Phoenix, Arizona

Water Resources Acquisition Fee Update – Phase 2 Report

TABLE OF CONTENTS

EXECUTIVE SUMMARY................................................................................................ iv

1.0 INTRODUCTION.................................................................................................. 1 1.1 Purpose................................................................................................................ 1 1.2 Background......................................................................................................... 1 1.3 Assumptions........................................................................................................ 2 1.4 Fee Requirements................................................................................................ 4 1.5 Methodologies..................................................................................................... 5 1.6 Selected Methodology ........................................................................................ 6 1.7 Definitions........................................................................................................... 7

2.0 EVALUATION OF WATER RESOURCES......................................................... 8 2.1 Study Time Frame............................................................................................... 8 2.2 Current and Future Water Resources.................................................................. 8 2.3 Water Service Areas ........................................................................................... 9 2.4 Population Projections ...................................................................................... 10 2.5 Water Supply and Demand Projections ............................................................ 12 2.6 Water Efficiency ............................................................................................... 13 2.7 Equivalent Dwelling Units................................................................................ 16

3.0 WATER RESOURCES ACQUISITION PROJECTS........................................ 20 3.1 Definition of Water Resources Acquisition Projects ........................................ 20 3.2 Description of Water Resources Acquisition Projects...................................... 21 3.3 Summary of Projects and Capital Costs............................................................ 22 3.4 Water Resources Acquisition Project Implementation ..................................... 23

4.0 WATER RESOURCES ACQUISITION FEE DEVELOPMENT .................... 24 4.1 Fee Determination............................................................................................. 24 4.2 Weighted Average Cost per Acre-Foot............................................................. 24 4.3 Cash Flow Projections ...................................................................................... 25 4.4 Water Resources Acquisition Project Financing .............................................. 27


April 2008 Page ii

5.0 FEE IMPLEMENTATION CONSIDERATIONS............................................. 29 5.1 Offsets and Credits............................................................................................ 29 5.2 Offset for Private Water Resources .................................................................. 29 5.3 Credit for ASLD Water..................................................................................... 29 5.4 Offsets for Water Efficiency............................................................................. 30

6.0 CONCLUSIONS AND RECOMMENDATIONS............................................... 31 6.1 Recommended Fee Schedule ............................................................................ 31 6.2 Future WRAF Adjustments Due to Inflation.................................................... 33 6.3 Large and Odd Sized Meter Connectors........................................................... 33

LIST OF FIGURES

Figure 2-1: Current and Future Water Supplies, General Plan (Moderate Shortage Conditions)

Figure 2-2: Population Projections

Figure 2-3: Estimated Water Savings Based on 1980 Per-Capita Use Rate

Figure 2-4: Average Monthly Single Family Residential Water Consumption

Figure 3-1: Basis of the Water Resources Acquisition Fee versus the Water Development Impact Fee.

LIST OF TABLES

Table ES-1: Comparison of Existing and Proposed Water Resources Acquisition Fees

Table 1-1: Existing Water Resources Acquisition Fees

Table 2-1: Population Projections, City of Phoenix

Table 2-2: Water Efficiency Program – Future Benefits and Costs

Table 2-3: Average Single Family Residential Water Consumption for New Accounts Established After 1998

Table 2-4: Multifamily EDU Analysis

Table 4-1: Water Resources Acquisition Cost per EDU

Table 4-2: Projected Average Annual Revenues

Table 4-3: Cash Flow Plan Assumptions

Table 6-1: Proposed Water Resources Acquisition Fee Schedule


April 2008 Page iii

LIST OF APPENDICES

Appendix A: Definitions

Appendix B: Proposed WRA Fee Areas

Appendix C: Water Supply and Demand Projections, General Plan (Moderate Shortage Conditions)

Appendix D: Future Water Demand Expressed as Equivalent Dwelling Units with Current Water Use Rate

Appendix E: Water Resources Acquisition Projects Weighted Average Cost per Acre-Foot and Average Cost per EDU

Appendix F: Water Resources Acquisition Projects Implementation and Financing Plan

Appendix G: Water Resources Acquisition Projects New Supply Capacity Projection

Appendix H: Water Resources Acquisition Projects Capital Cost Projection (2008 Dollars)

Appendix I: Water Resources Acquisition Fee Cash Flow Analysis, Excluding Financing (Inflated Dollars)

Appendix J: Water Resources Acquisition Fee Cash Flow Analysis, Including Financing (Inflated Dollars)


April 2008 Page iv

EXECUTIVE SUMMARY

The City of Phoenix, Arizona (City) retained Red Oak Consulting, a division of Malcolm Pirnie, Inc. (Red Oak) to update its Water Resources Acquisition Fee (WRAF). This report contains Red Oak’s WRAF recommendations based on our review and analysis of the City’s current and projected water resources projects and associated capital costs.

Development fees in Arizona must meet the requirements of the Arizona Revised Statutes (ARS §9-463.05) and development fee case law, namely the rational nexus criterion. The rational nexus criterion means that fees such as the WRAF must be administered in a nondiscriminatory manner and must bear a reasonably proportionate relationship to the burden imposed upon the municipality to provide additional necessary public facilities.

During the course of Red Oak’s study, the State of Arizona amended ARS §9-463.05. The revised statute requires that "before the assessment of a new or modified fee, the governing body of the municipality shall adopt or amend an infrastructure improvements plan.” Red Oak provided the required infrastructure improvements plan under separate cover.

The City’s existing WRAF varies by water service area (Areas 1, 2 and 3), meter size (⅝-inch through 6-inch), and customer category (single family residential, commercial and industrial; mobile home; and multifamily). The proposed WRAF maintains the existing structure, with the exception that the Off-Project Areas 2 and 3 (i.e., North and South of Jomax distinction) were combined into a single Off-Project area, and the mobile home customer category was combined with the multifamily category. Table ES-1 on the following page compares existing and proposed WRAFs.


April 2008 Page v

Table ES-1

Comparison of Existing and Proposed Water Resources Acquisition Fees Area 1 Area 2 Area 3

On-Project Areas Off-Project and Non-Member Areas South

of Jomax Road Off-Project Areas

North of Jomax Road

Single Family Residential, Commercial and Industrial (per meter size) Existing Proposed Existing Proposed Existing Proposed⅝-inch $ 52 $430 $ 426 $1,430 $ 633 $1,430 ¾-inch Not specified 430 Not specified 1,430 Not specified 1,430 1-inch 130 1,080 1,065 3,560 1,583 3,560 1½-inch 260 2,150 2,130 7,130 3,165 7,130 2-inch 416 3,440 3,400 11,400 5,064 11,400 3-inch, compound 780 6,460 6,390 21,380 9,495 21,380 3-inch, turbine 910 7,530 7,455 24,940 11,078 24,940 4-inch, compound or displacement 1,300 10,760 10,650 35,630 15,825 35,630

6-inch, compound 2,600 21,520 2,600 71,250 2,600 71,2506-inch, turbine 3,250 26,900 26,625 89,070 39,563 89,070

Mobile Home (per home) 36

See multifamily

below 298

See multifamily

below 443

See multifamily

below

Multifamily (per unit) $ 31 $210 $ 256 $700 $ 380 $700

Red Oak designed the WRAF to comply with ARS §9-463.05. The WRAF recovers costs for the acquisition of new water supplies to serve new customers. WRAF revenue is restricted to pay for new water rights acquisitions, water resources infrastructure, and/or water efficiency programs for new development, all of which contribute to meeting the City’s future water supply needs due to growth.


April 2008 Page 1 of 34

1.0 INTRODUCTION

1.1 Purpose

In June 2005 the City of Phoenix (City) retained Red Oak Consulting, a division of Malcolm Pirnie, Inc. (Red Oak) to update its Water Resources Acquisition Fee (WRAF). The study consisted of two phases of work: Phase 1 included a technical and cost assessment of proposed Water Resources Acquisition Projects (WRA Projects) and Phase 2 included the determination of a WRAF using the estimated capital costs developed in Phase 1. Phase 2 also included development of an appropriate WRAF assessment methodology that recovers the proportionate share of costs to obtain new water supplies for a new customer connecting to the system.

During the course of Red Oak’s study, the State of Arizona amended the State Statute relating to municipal development fees (ARS §9-463.05). The revised statute requires that "before the assessment of a new or modified fee, the governing body of the municipality shall adopt or amend an infrastructure improvements plan.” Red Oak provided the required infrastructure improvements plan under separate cover.

Red Oak submitted its final Phase 1 and Phase 2 reports to the City on August 18, 2006. Due a temporary delay in updating the WRAF, the City amended Red Oak’s professional services consulting agreement to allow for the inclusion of more recent information in the Phase 1 and Phase 2 reports. This report contains Red Oak’s WRAF recommendations based on our review and analysis of the City’s current and projected water resources projects and associated capital costs.

1.2 Background

In 1988 the City retained the firm Arthur Young for the development of a first-time WRAF. Arthur Young’s November 1988 report entitled “Development of a Water Resources Acquisition Fee” provided the basis for the City’s existing WRAF. The following year, in November 1989, the Phoenix City Council adopted a WRAF to be applied to all new service connections beginning in January 1990. The adopted ordinance established a 10-year phase-in plan. On January 1, 1996, the fee was capped at 70% of the full cost recovery amount indicated in the Arthur Young report. The City Council removed the 70% cap and set the WRAF at the full cost recovery value effective April 1, 2001. The existing WRAF has been in effect since April 1, 2001. Current fees vary by water service area (Areas 1, 2 and 3), meter size (⅝-inch through 6-inch), and customer category (single family residential, commercial and industrial; mobile homes;



and multifamily). As defined in the Phoenix City Code, Section 30-4, the City’s current WRAFs for a new connection are shown in Table 1-1.

Table 1-1 Existing Water Resources Acquisition Fees

Area 1 Area 2 Area 3 Single family Residential, Commercial and Industrial Meter Size (inches)

On-Project Areas

Off-Project and Non-

Member Areas South of

Jomax Road

Off-Project Areas North

of Jomax Road

⅝-inch $ 52 $ 426 $ 633 1-inch 130 1,065 1,583 1½-inch 260 2,130 3,165 2-inch, disc or turbine 416 3,400 5,064 3-inch, compound 780 6,390 9,495 3-inch, turbine 910 7,455 11,078 4-inch, compound 1,300 10,650 15,825 6-inch, compound 2,600 21,300 31,650 6-inch, turbine 3,250 26,625 39,563 Mobile Home (per home)

36 298 443

Multifamily (per unit)

$31 $256 $380

Red Oak designed the WRAF to comply with ARS §9-463.05. The WRAF recovers costs for the acquisition of new water supplies to serve new customers. WRAF revenue is restricted to pay for new water rights acquisitions, water resources infrastructure, and/or water efficiency programs for new development, all of which contribute to meeting the City’s future water supply needs due to growth.

Total WRAF revenue was $6,362,000, $7,890,000, and $8,034,000 for the fiscal years ended June 30, 2004, 2005 and 2006, respectively. Projected future WRAF revenues for the study period are provided in Section 6 of this report.

1.3 Assumptions

This report reflects the City’s comments and guidance as provided via regular project status conference calls and frequent meetings throughout year 2006. Findings presented in this report are based on City-provided technical information, cost and revenue data,



and discussions with City staff. Red Oak has relied on this data in the formulation of our findings. Red Oak also reviewed the following documents during the preparation of this study:

• The March 2008 Red Oak Report “Water Resources Acquisition Fee Update – Phase 1: Technical and Cost Data.”

• The City of Phoenix “Water Resources Plan Update 2005,” adopted by the Phoenix City Council, March 8, 2006.

• The June 2, 2005 Official Statement for $600,000,000 Junior Lien Water System Revenue Bonds, Series 2005.

• The November 1988 Arthur Young Draft Report “Development of a Water Resources Acquisition Fee.”

• Relevant legal documents including the Groundwater Management Act, Water Resources Acquisition Fee Phoenix City Code, Chapter 30.

It should be noted that the City is currently updating its Water System Master Plan and Wastewater Master Plan concurrently with this WRAF update project.

The WRAF analysis was based, in part, on the following key assumptions:

• The WRAF analysis was based on a 25-year forecast (fiscal year 2005-06 through fiscal year 2029-30) of water demands and water resources acquisition capital projects.

• The water resources project cost estimates defined in Red Oak’s report “Water Resources Acquisition Fee Update – Phase 1: Technical and Cost Data” dated March 2008.

• The City’s Water Resources Plan Update 2005 concluded “If Phoenix demand was to stabilize at current levels, no further capital expenditures would be necessary for water supply acquisition and for the development of related infrastructure…….[and] the needs for future supply capacity are thus dictated by new development.”

• The WRAF analysis reflects the City’s two primary water service areas: On-Project and Off-Project, as described in Section 4.



Red Oak endeavored to include the latest and best available information in this report. However, because plans and events may not occur as expected, it should be anticipated that there will be differences between forecasted and actual results and those differences could have a material positive or negative effect on the findings in this report.

To allow readers of this report to assess the financial impact of the proposed projects, future costs are presented in constant cost terms (2008 dollars) unless otherwise noted. Where appropriate, Red Oak incorporated inflation adjustments to reflect future costs (i.e., the cash-flow analysis uses inflated costs) using a 4.1% annual inflation rate, based on the 20-City Average Construction Cost Index (CCI) published by Engineering News Record (ENR), as follows:

Year Cost Index Percent Change

2002 6538 2003 6695 2.4% 2004 7115 6.3% 2005 7446 4.7% 2006 7751 4.1% 2007 7856 1.4% 2008(estimated) 8180 4.1%

Average Annual (3-year) 3.2% Average Annual (5-year) 4.1%

It should be noted that the Red Oak’s WRAF Phase 1 report presented capital costs in 2005 dollars. Red Oak adjusted the WRAF Phase 1 Report findings to reflect current cost terms (from 2005 to 2008 dollars) using a 3.2% annual inflation rate.

1.4 Fee Requirements

Development fees are one-time payments for public facilities based on the pro rata share of costs incurred for facilities needed to accommodate new development. Development fees relate only to capital facility expansions resulting from new development and are not to be utilized for rehabilitation efforts or operating expenses. Development fees in Arizona must meet the requirements of the Arizona Revised Statutes (ARS 9-463.05) and development fee case law, namely the “rational nexus” criterion.

The Arizona Revised Statutes outline a number of requirements for determination and assessment of development impact fees. In general, the following standards must be met.

• Fees must be used for projects that result in a beneficial use to new development.



• There must be accountability in the uses of fee revenue to ensure that funds are only used for allowable capital projects.

• Fees and schedules must be non-discriminatory.

• Cities and Towns must demonstrate a reasonably proportionate relationship between fee amounts and growth-related capital improvements funded with fee revenue.

• Developers must be given credit for required exactions or other dedications of lands and facilities that serve the purpose of the fee.

• Fees for residential uses must be paid at the time of issuance of construction permits for the residential units.

• Cities may automatically adjust a development fee on an annual basis without a public hearing if the adjustment is based on a nationally recognized index applicable to the cost of the necessary public service that is subject to the development fee.

The rational nexus criterion test consists of three requirements: 1) needed capital facilities are a consequence of new development; 2) fees are a reasonably proportionate share of the cost of the needed capital facilities; and 3) revenues are managed and expended in such a way that new development receives a benefit of the facilities.

Red Oak’s Phase 1 and II reports demonstrate that the required capital facilities are a consequence of new development, that the WRAF is proportionate and related to the additional demands of new development, that the WRAF will substantially benefit new development, and that the WRAF assessment schedule is uniform for the different types of development within different service areas. In addition, the WRAF allows for the evaluation of credits for dedications, as described in Section 7 of this report. This WRAF update also considers the City’s current WRAF and development impact fee assessment methodology, cost recovery analysis, and fee schedule for the existing WRAF.

1.5 Methodologies

For the purposes of the WRAF development, Red Oak evaluated industry-standard methods used to calculate development impact fees, as defined by the American Water Works Association (AWWA) M1 Manual “Principles of Water Rates, Fees, and Charges” These methods include:



• Equity Buy-In method

• Incremental Cost method

• Hybrid method

The goal of the equity buy-in method is to achieve an equity position between new and existing customers of the system. This approach is best suited for existing facilities that have been oversized and have excess capacity available. It utilizes the original cost of existing assets, escalated to current value using a standard cost index such as Engineering News-Record (ENR) Construction Cost Index (CCI). Adjustments are made to account for outstanding debt, developer contributions, and accumulated depreciation. The resulting estimate of current system equity is divided by the number of equivalent customers connected to the system to compute an equivalent unit charge.

The incremental cost method assigns to new development the incremental cost of system expansion needed to serve new development. This approach is best suited for communities that have limited existing capacity, and have prepared detailed growth-related capital project plans and acquisition plans. The cost of proposed projects for a specified time frame (e.g., 10, 20, or 30 years) is divided by the number of equivalent customers that will be served by the additional capital projects to compute an equivalent unit charge.

The hybrid method applies principles from both methods and is appropriate where some existing reserve capacity for growth is available and new capacity is planned.

1.6 Selected Methodology

The City’s 2005 Water Resources Plan Update concluded “If Phoenix demand was to stabilize at current levels, no further capital expenditures would be necessary for water supply acquisition and for the development of related infrastructure…….[and] the needs for future supply capacity are thus dictated by new development.” Furthermore, under moderate or severe shortage conditions, all existing water supplies would be required to serve current system customers. Therefore, because little if any excess capacity is available, Red Oak applied the incremental cost method to calculate the updated WRAF. The City engaged Red Oak to prepare a 25-year assessment of the growth-related water resources acquisition projects and cost estimates under Phase 1 of this project.



The steps to develop the WRAF using the incremental cost method are as follows:

• Determine the planning period

• Evaluate the expected growth rate and magnitude of expansion

• Evaluate excess capacity in the existing system, if any

• Determine the number of capacity units (e.g., equivalent residential units)

• Prepare a detailed capital project and water resources acquisition plan

• Calculate the WRAF per capacity unit

• Prepare a long range cash-flow projection

• Calculate interest and administrative costs for growth-related debt, if applicable

• Develop a uniform fee assessment structure applicable to all new customers.

The remainder of this report describes these sequential steps for the WRAF development.

1.7 Definitions

Defined terms used for purposes of this WRAF study are provided in Appendix A to this report. All capitalized words, abbreviations, acronyms, and terms used herein shall have the meanings set forth in Appendix A unless otherwise noted in this report.



2.0 EVALUATION OF WATER RESOURCES

2.1 Study Time Frame

The time frame for the analysis in this report is the 25-year period beginning with fiscal year (FY) 2005-06 (i.e., July 1, 2005 through June 30, 2006) and ending with FY 2029-30. This planning period was selected in order to evaluate the City’s long-range water resources requirements and the necessary projects and funding associated with satisfying both the conditions of the projected growth within the service area and the Groundwater Management Act. Such a long-range evaluation is required given the size and complexity of the projects and the proposed financing plan.

Due to the temporary delay in updating the WRAF, and to the revisions to ARS §9-463.05, Red Oak re-calculated the WRAF to reflect a 23-year period, beginning with fiscal year FY 2007-08 through FY 2029-30.

2.2 Current and Future Water Resources

Phoenix’s existing water needs are met through a diverse portfolio of water supplies, which are commonly grouped into four major categories:

• Water supplies delivered through the SRP

• Colorado River water delivered through the CAP

• Groundwater pumped from City wells

• Reclaimed water

The availability of each water supply is governed by unique hydrologic, legal and institutional factors. SRP supplies water from the Salt and Verde rivers to eligible lands within the Phoenix service area which are generally south of the Arizona Canal. The remainder of the service area is supplied primarily by Colorado River water delivered by the CAP. Groundwater wells and reclaimed water make up the remainder of the City’s current supplies as illustrated in Figure 2-1.



Figure 2-1Current and Future Water Supplies

General Plan (Moderate Shortage Conditions)

0

100,000

200,000

300,000

400,000

500,000

600,000

Acr

e F

eet

SRP (On-Pro ject only)

Groundwater

Additional CAP

CAP

ExistingReclaimed

System

McMullen Groundwater Future

Supplies

Additional SRP

Additional Reclaimed

Current

Supplies

Note:Figure adapted from the City’s 2005 Water Resources Plan Update



0

100,000

200,000

300,000

400,000

500,000

600,000

Acr

e F

eet



0

100,000

200,000

300,000

400,000

500,000

600,000

Acr

e F

eet

SRP (On-Pro ject only)

Groundwater

Additional CAP

CAP

ExistingReclaimed

System

McMullen Groundwater Future

Supplies

Additional SRP

Additional Reclaimed

Current

Supplies

Note:Figure adapted from the City’s 2005 Water Resources Plan Update

As shown above, the City will increasingly rely on reclaimed water to meet its needs as preferred surface-water and groundwater alternatives become fully utilized in the future. In addition, water efficiency will continue to play an important role in the City’s water supply plan. Current and future water supplies and related water resources acquisition projects are described in detail in the City’s Water Resources Plan 2005 Update.

2.3 Water Service Areas

Due to the City’s historic water rights commitments, certain water supplies are legally restricted for use in specific portions of the City’s service area. Thus, the water system is divided into On-Project, Off-Project, and non-member land. For the purposes of the WRAF, water acquisition costs were evaluated for the following service areas:

• Area 1: On-Project – the area located within the boundaries of SRP. Specific lands in this area are eligible to receive SRP water supplies by virtue of the lands



being enrolled by their owners in the original Salt River Reclamation Project, now known as SRP.

Future On-Project water supplies are already secured through the SRP, but may require capital improvements to raw water delivery infrastructure to alleviate existing capacity constraints and/or pre-treatment infrastructure, as needed to treat new, relatively low-quality source water supplies. Water efficiency programs will also play an important role in sustaining On-Project water supplies.

• Area 2: Off-Project – the area outside of the SRP boundaries or lands within the SRP boundaries that were not enrolled as part of the Salt River Reclamation Project and thus are not eligible to receive SRP water supplies. This area includes for example land north of the Arizona Canal such as the Union Hills area and the Deer Valley Development Areas, and portions of land south of the Western Canal, such as some but not all sections of the Ahwatukee Foothills Development Areas.

A majority of the current Off-Project water supply needs are met by Central Arizona Project (CAP) water. As detailed in this report, future Off-Project water supplies will be met from a combination of new water resources, including additional CAP, groundwater, reclaimed water, and water efficiency.

These areas are consistent with the City’s existing WRAF areas, with the exception of the current Off-Project Area 2 and 3 North and South of Jomax distinctions, which were combined into a single Off-Project area. The WRAF boundaries are provided in the Appendix B: Proposed WRA Fee Boundaries.

The North and South of Jomax distinction was originally applied in the 1988 report with the understanding that South of Jomax areas would primarily be served by CAP water. Since that time, the City has integrated its CAP, groundwater, and reclaimed water supplies in the northern areas, such that all available supply sources are utilized, as appropriate, both North and South of Jomax. As a result, the North and South of Jomax distinction no longer applies.

2.4 Population Projections

Population is a major consideration in assessing water consumption and water efficiency trends. Growth in the total service area population over the past 15 years was 43 percent, or about 2.3 percent per year. The water system currently serves a population of more



than 1.4 million residents. This includes the entire Phoenix incorporated area and a portion of the Town of Paradise Valley.

A similar growth rate is expected over the next 15 years. The most recent population-projections for the Phoenix service area were prepared by the Maricopa Association of Governments (MAG) and were based on the current Phoenix General Plan. The population projections Table 2-1 indicate that the population will be reach two million persons in 2020.

Table 2-1 Population Projections, City of Phoenix

2005 2010 2015 2020 2025 2030

On-Project 820,890 901,456 939,472 977,488 996,745 1,016,002Increase 80,567 80,567 38,016 38,016 19,257 19,257Increase (%) 11% 10% 4% 4% 2% 2%

Off-Project 708,788 798,645 920,404 1,042,162 1,101,987 1,161,812Increase 89,857 89,857 121,759 121,759 59,825 59,825Increase (%) 15% 13% 15% 13% 6% 5%

Total 1,530,000 1,700,000 1,860,000 2,020,000 2,099,000 2,178,000

Increase 171,000 170,000 160,000 160,000 79,000 79,000Increase (%) 13% 11% 9% 9% 4% 4%

* Population-Projections for the City’s General Plan Scenario. Data does not include Anthem but includes the portion of Paradise Valley that Phoenix serves.

As shown above, over the 25-year study period, the average population growth rate in the Off-Project area is nearly double that in the On-Project area.

Figure 2-2: City of Phoenix, Arizona Population Projections graphically depicts this population growth in the On-Project and Off-Project water service areas over the next 25 years.



Figure 2-2Population Projections

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

2005 2010 2015 2020 2025 2030

On-ProjectOff-ProjectTotal

As illustrated above, between 2015 and 2020 the Off-Project area population is expected to exceed the On-Project population. It should be noted that Phoenix’s actual population growth has typically exceeded projected levels. For example, the last set of MAG projections compiled in 1997 did not anticipate Phoenix reaching the 2.0 million threshold until after 2030. A wide variety of factors, mainly related to the economy and the City’s relative cost-of-living, will influence the City’s actual rate of growth.

2.5 Water Supply and Demand Projections

The City’s Water Resources Plan Update 2005 defines a range of projected demand scenarios. The City and Red Oak determined that the General Plan, Moderate Shortage Conditions Scenario would be utilized as the basis for establishing the City’s future water resources requirements and the WRAF. The City uses the General Plan and the associated planning documents to provide comprehensive direction for the growth, conservation and redevelopment of all physical aspects of the City. In addition, the City is currently experiencing a decade-long pattern of below normal precipitation both locally and in the watersheds serving Phoenix. Recent planning investigations indicate that this pattern could extend for another 10 or more years.

Given current projections, existing supply sources do not meet future supply needs under the General Plan Moderate Shortage Conditions Scenario. Future water supplies for new customers must be met through the acquisition of new water resources. These water



supply and demand projections are provided in Appendix C: Water Supply and Demand Projections, General Plan (Moderate Shortage Conditions).

Under the General Plan Moderate Shortage Conditions scenario, On-Project water demand is expected to increase from the current 179,080 acre-feet to 221,687 acre-feet by 2030 – an increase of 42,607 acre-feet. It is anticipated that this demand can be met via available SRP supplies. However, improvements to the SRP delivery system will be required to transfer SRP water to existing treatment plants and/or pretreatment of new, low-quality source water supplies. SRP supplies in this area are preferred over groundwater sources because a large number of wells have been removed from service due to groundwater contamination in the higher-density areas of central Phoenix.

Off-Project water demand is expected to increase from the current 173,372 acre-feet to 293,770 acre-feet by 2030 – an increase of 120,398 acre-feet. It is anticipated that this demand can be met using a wide range of future supplies, which are described in more detail in Section 4. It should be noted that Off-Project demand-growth exceeds On-Project demand growth by a factor of nearly 3 to 1.

The total 163,005 acre-feet in new water demand projections – consisting of 42,607 acre-feet (On-Project) and 120,398 acre-feet (Off-Project) – was used as the basis for selecting the water resources acquisition projects described in the following Section 4.

2.6 Water Efficiency

The City first implemented a formal water conservation program in 1982 that included a series of water efficiency enhancement measures to reduce per-capita water consumption. Water efficiency measures included retrofit of existing plumbing with water-saving devices, a mail order retrofit program, plumbing code enforcement, improved turf management, limitations on lawn size, xeriscaping promotions and outreach programs, improved turf irrigation management, and secondary school water efficiency education. The intent of these efforts was to extend current water supplies for the benefit of existing users. Figure 2-3 illustrates the City’s success in reducing water use from 267 GPCD in 1980, to 248 GPCD in 1990, to less than 209 GPCD in 2005.



Figure 2-3Estimated Water Savings based on 1980 Per-Capita Use Rate

-

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

1980 1985 1990 1995 2000 2005

Acr

e-Fe

et

Water SavingsWater Use

267GPCD

249GPCD

248GPCD

224GPCD

232GPCD

209GPCD

Note:Figure adapted from the City’s Water Resources Plan Update 2005, Figure 3-7.

Figure 2-3Estimated Water Savings based on 1980 Per-Capita Use Rate

-

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

1980 1985 1990 1995 2000 2005

Acr

e-Fe

et

Water SavingsWater Use

267GPCD

249GPCD

248GPCD

224GPCD

232GPCD

209GPCD

Note:Figure adapted from the City’s Water Resources Plan Update 2005, Figure 3-7.

While per-capita water consumption is expected to continue declining, the rate of decline will slow as more water-efficient new construction, employing improved irrigation systems and more efficient fixture units, represents an increasingly larger percentage of the total units. The overall GPCD rate (for residential and nonresidential per capita use combined) could rise if there is a substantial increase in nonresidential growth (proportional to residential).

In the future, the City will continue taking steps to reduce water consumption and encourage water efficiency. For existing uses, actions could include targeting high water using sectors and neighborhoods with educational materials, retrofit programs and a variety of other measures. For new development, actions could include further refinement of water conservation ordinances to incorporate water use efficiency into the design and construction of homes, businesses and other facilities. As ordinances are strengthened (for both existing and new uses) enforcement will play an important role in achieving water use reductions. The City's water efficiency programs will also include demand management measures aimed at reducing vulnerability to future drought-related surface water shortages.



Program Costs

To date, the City’s water efficiency program has saved water resources at a relatively small cost to the City. Total water efficiency program expenditures over the last 10 years were approximately $10,122,000 (1996 through 2006). During the same period, per-capita water reduction in the range of 15 GPCD (from 224 to 209) or 23,850 acre-feet per year was achieved. This amounts to an average cost of approximately $425 per acre-foot due to water efficiency programs.

As the City’s customers become more water efficient, the incremental cost of water efficiency per acre-foot of savings will likely increase. More than ever water providers must consider marginal cost tradeoffs between raw water quality, conveyance, advanced treatment, and increased water efficiency when seeking new supplies. Similarly, water providers employing demand management strategies to reduce excessive demand will experience increasing marginal costs as more efficient water consumers represent an increasingly larger percentage of total consumption. This fundamental principle – of increasing marginal opportunity costs – is reflected in the rising cost of the City’s water efficiency program.

In the future, $37,500,000 (2005 dollars) in water efficiency-related efforts is projected over the 25-year study period, resulting in an estimated supply savings of 26,966 acre-feet annually (in 2030) from new development. Of the projected $37,500,000 in water efficiency expenditures, $19,580,000 (approximately 52%) is attributable to water efficiency costs related to new development, as shown in Table 2-2.

Table 2-2 Water efficiency Program – Future Benefits and Costs

2030 Savings

(AF)

Percent Reduction

25-Year Program

Cost1

Cost per Acre Foot

Existing Customers 24,672 48% $17,917,000

New Development (post 2005) 26,966 52% $19,582,000

Total 51,638 100% $37,500,000

$726

Notes:

1. Water efficiency program cost of $1,500,000 per year, for 25 years (2005 dollars). Program

cost increases to $2,152,000 (2008 dollars) and cost per acre-foot of $798 (2008 dollars).



As shown above, the City’s future water efficiency program expenditures amount to an average “efficiency cost” of $726 per acre-foot (2005 dollars) or $798 (2008 dollars). Although this cost is more than 70 percent greater than the historical average of $425 per acre-foot, it remains well below the weighted-average cost to acquire new water resources, as detailed in Appendix E: Water Resources Acquisition Projects by Water Service Area.

2.7 Equivalent Dwelling Units

In order to present water demand and evaluate a proposed water resources fee using a common denominator, the projection of future water demand is expressed in Equivalent Dwelling Units (EDUs) for each water service area. A 25-year forecast of future demand in EDU terms is provided in Appendix D: Total Demand Expressed as Equivalent Development Units.

The November 1988 Arthur Young report “Development of a Water Resources Acquisition Fee” provided the basis for the City’s existing WRAF. In that report, a conversion factor of 0.485 acre-feet per EDU per year was determined based on an examination of historic billing statistics for single family residential customers. The 0.485 acre-feet per EDU conversion factor was applied as a City-wide weighted-average across all water service areas. Figure 2-4 illustrates the average monthly water consumption for all single family residential accounts.

Figure 2-4Average Monthly Single-Family Residential Water Consumption

y = -0.0033x + 18.127

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Year

CC

F pe

r M

onth

CCF per Account Linear (CCF per Account)



As shown in Figure 2-4, average monthly single family water consumption has cycled seasonally between approximately 10 and 25 hundred cubic feet (ccf), exhibiting a very gradual decline since the 1988 Arthur Young evaluation. The average monthly consumption over the last 15 years was 17.6 ccf per month or 211 ccf per year. This rate (211 ccf per year) is equivalent to 0.485 acre-feet annually, which supports the 0.485 acre-feet per EDU conversion factor developed in the 1988 Arthur Young report.

Upon further review of the City’s billing statistics, it was observed that the majority of homes constructed over the last decade tend to have lower average water consumption when compared to the older homes in more established areas of Phoenix. Therefore, the City and Red Oak Consulting conducted additional analysis of the City’s more recent billing system data (also known as the Water Customer Information System, or WCIS, data) for single family residences (WCIS Billing Category 01) connected to the system after 1998. Average annual water consumption for these new single family residential accounts for the period from 2002 through 2004 is shown in Table 2-3.

Table 2-3

Average Single Family Residential Water Consumption for New Accounts Established After 1998

Annual Average Consumption per Account Year

ccf gallons acre-feet

2002 158.7 118,684 0.364

2003 155.1 115,984 0.356

2004 147.2 110,086 0.338

AVERAGE 153.6 114,918 0.353

Significantly lower average single family water consumption in the range of 0.353 acre-feet per new single family home was observed for new single family housing developments, which typically have lower average consumption due to less water-intensive landscaping and less landscape in general due to smaller lot sizes. In addition, conservation requirements mandated by the Arizona Department of Water Resources (ADWR) and supporting statutes requiring the sale of high-efficiency plumbing fixtures have also led to a decline in water consumption for the typical new single family residence. Therefore, Red Oak and the City determined that it was appropriate to use the lower average from WCIS system data query (0.353 acre-feet per single family home).



Water Losses

Water loss is the difference between the water entering the supply system (from wells, surface intakes, and/or wholesale purchases) and water used (sold to customers or used for free). All systems experience some water loss as an ordinary part of operation. Determining a reasonable percentage for a given system depends on the type of storage and treatment, the condition of the system, and the extent and accuracy of metering. For the purposes of this WRAF analysis, percent water losses were estimated to be:

• Zero percent due to source losses and delivery inefficiency (e.g., silting, evaporation, seepage losses)1

• Five percent due to treatment losses (e.g., clarification, softening, and filtration losses)2

• Eight percent due to distribution losses (e.g., leaks, hydrant flushing, etc.)3

Therefore the total system water loss was determined to be approximately 13 percent. With the 13 percent adjustment for water losses, the conversion factor for all new connections, regardless of water service area, is 0.406 acre-feet per EDU (0.353 acre-

1 It is assumed that the water resources acquisition projects included source losses in the expected yield projections. It should be noted that due to the design, constant delivery, and efficient operation methods, the Central Arizona Project (CAP) estimates its average annual loss at seven percent. Central Arizona Project, P.O. Box 43020, Phoenix, Arizona 85080.

2 Recommended Standards For Water Works, 2003 Edition. Policies for the Review and Approval of Plans and Specifications for Public Water Supplies: A Report of the Water Supply Committee of the Great Lakes--Upper Mississippi River Board of State and Provincial Public Health and Environmental Managers.

3 Water distribution losses estimated to be approximately 8 percent. City average of 7.62 percent was reported in the June 2, 2005 Official Statement for $600,000,000 Junior Lien Water System Revenue Bonds, Series 2005. American Water Works Association recommends that water loss occurring after treatment be maintained at 10 percent or less.



feet divided by 0.87). This conversion factor was applied in the WRAF calculation described in Section 5 of this report.

Multifamily Analysis

The City and Red Oak conducted an analysis of the WCIS billing statistics for the multifamily category. Consumption data from approximately 14,500 multifamily units was evaluated to determine the average annual consumption per unit. The data was filtered to exclude outdoor water use, meaning, the multifamily sample included only multifamily accounts that measured outdoor water use separately with a separate landscaping water meter. Using the same analysis period (2003 through 2005), the City provided a profile of the monthly and average water consumption statistics for the multifamily accounts. Table 2-4 provides a summary of the results of the multifamily analysis.

Table 2-4

Multifamily EDU Analysis Average Daily Water Consumption

(gallons) Multifamily Residence (per unit) 154

Single Family Residence (per home) 315

Multifamily EDU Factor (as a percent of Single Family) 0.49

Based on this analysis, the multifamily customer uses approximately 49 percent of the water (per unit) used by a single family customer. This ratio reduces the WRAF proportionately for the new multifamily customer.

Mobile Homes

The City and Red Oak conducted an analysis of the WCIS billing statistics for the mobile home category. Consumption data was based on two mobile home parks created since 1988. The data indicated consumption patterns similar to the multifamily customers. The City does not anticipate that mobile home parks will be a significant growth sector in the future. For these reasons, the City and Red Oak determined that mobile homes should be assessed a WRAF (per unit) equivalent to the multifamily WRAF (per unit).



3.0 WATER RESOURCES ACQUISITION PROJECTS

3.1 Definition of Water Resources Acquisition Projects

In Phase 1, the City and Red Oak clearly defined the projects and related capital costs that comprise the updated WRAF. These projects are all forward-looking and required to serve new-growth in the City (i.e., only new customers). The major water system infrastructure components included in the City’s WRAF and Water Development Impact Fee are illustrated in Figure 3-1.

Figure 3-1Basis of the Water Resources Acquisition Fee

versus the Water Development Impact Fee

Water System

Infrastructure Components

Fee Basis

Raw WaterSupply

TreatedWater

Distribution

WaterTreatment

Water Development Impact Fee

Intakes, Wells, Pumps, Canals, Aqueducts and

Water Rights

Well-head Treatment, Preliminary Treatment, Clarification, Filtration,

and Advanced Treatment

Transmission Mains, Booster Stations, Pressure Reducing

Valves, and Associated Facilities

Water Resources Acquisition Fee

Based on raw water supply infrastructure capital costs

required for new development.

Based on potable water treatment and distribution infrastructure capital costs


Figure 3-1Basis of the Water Resources Acquisition Fee

versus the Water Development Impact Fee

Water System

Infrastructure Components

Fee Basis

Raw WaterSupply

TreatedWater

Distribution

WaterTreatment

Water Development Impact Fee

Intakes, Wells, Pumps, Canals, Aqueducts and

Water Rights

Well-head Treatment, Preliminary Treatment, Clarification, Filtration,

and Advanced Treatment

Transmission Mains, Booster Stations, Pressure Reducing

Valves, and Associated Facilities

Water Resources Acquisition Fee

Based on raw water supply infrastructure capital costs


Based on potable water treatment and distribution infrastructure capital costs


Red Oak derived the WRAF from the capital costs to obtain and transport raw water from the source (typically a reservoir or well) to the point of connection with the water treatment and distribution system (typically at the physical connection with an existing water treatment plant) and to pre-treat low-quality raw water (when needed to improve raw water quality to a level equivalent to the City’s existing raw water supplies).

In all cases Red Oak excluded capital costs associated with routine water treatment and distribution, including clarification and filtration facilities, transmission and distribution piping, pumping, and treated water storage. These costs are typically funded with water development impact fee revenue or other user fee revenue. Furthermore, Red Oak excluded costs associated with operations and maintenance (O&M) of existing and future systems. O&M costs are funded via revenues from water rates. In essence only the costs



of obtaining, transporting, and – in limited circumstances – treating new, raw water supplies are included in the calculation of the WRAF. This Section 4 describes the projected capital and financing costs associated with acquiring new water resources during the 25-year study period.

3.2 Description of Water Resources Acquisition Projects

Historically the City has provided water supply to meet increasing demand for municipal and industrial water use. The Salt River Project provides water to the City that is currently sufficient for the On-Project area, while Off-Project and non-member areas, the City’s most rapidly growing sector, currently obtain supplies from wells, gatewater, new conservation space water, and the Central Arizona Project (CAP). The City’s continuing efforts to acquire adequate supplies for future customers are outlined in the 2005 Phoenix Water Resources Plan Update. This plan describes new, separate projects that are being pursued as future water resources. Red Oak developed common names and descriptions as follows:

• CAP Reallocation - Reallocation of 8,206 acre-feet of previously unallocated CAP M&I water to the City.

• GRIC Lease - Lease of 15,000 acre-feet of CAP water from the GRIC.

• McMullen Valley Water Transfer - Transfer of groundwater from McMullen Valley to the CAP Canal for treatment at the Union Hills and/or Lake Pleasant Water Treatment Plant(s), or other City water treatment plant.

• Reclaimed Water - Reclaimed Water includes a number of supply alternatives for the direct delivery, recovery, or exchange of wastewater treatment plant effluent. As preferred surface-water and groundwater alternatives become fully utilized in the future, the City will increasingly rely on reclaimed water to meet its needs. These supplies include:

o Aqua Fria Reclaimed - a project to recharge effluent from the 91st Avenue WWTP to the aquifer underlying the Aqua Fria River Bed.



o Northern Reclamation Plants – the direct delivery or recharge of reclaimed water from the Cave Creek and/or North Gateway Water Reclamation Plants.

o 23rd Avenue Reclaimed – the direct delivery or recharge of reclaimed water from the 23rd Avenue WWTP.

• ASLD CAP Phoenix Allocation - Allocation of 12,000 acre-feet of CAP water from ASLD to the City of Phoenix for use on State Lands that develop within the City. Note that ASLD CAP reallocation was not included in future Off-Project water supplies and was not be included in the calculation of the weighted average cost of water resources acquisition. Where appropriate, the City will provide WRAF credits to compensate landowners for the value of ASLD water rights, which will be determined, in part, by the fees calculated in this report.

• Western Canal Pre-Treatment - Includes the additional treatment cost to improve western canal water to the average quality equal to the water quality in SRP system (i.e. less than 700mg/L).

The water resources alternatives described above are typically presented in this order throughout the following sections of this report.

3.3 Summary of Projects and Capital Costs

Red Oak evaluated the capital costs to acquire the additional future water supplies for the City. Project cost estimates are described in greater detail in the Red Oak report “Water Resources Acquisition Fee Update – Phase 1: Technical and Cost Data” The costs for each project are also summarized in Appendix E: Water Resources Acquisition Projects Weighted Average Cost per Acre-Foot by Water Service Area.

Capital costs provided in the Red Oak’s Phase 1 report consisted of facility construction, land acquisition (if applicable), engineering, administration, legal and contingencies. A construction contingency of 25 percent was used for all capital improvement projects (engineering and administration costs were assumed to be 10 percent of the estimated construction costs; legal and construction management contingencies were assumed to be 15 percent of the estimated construction costs). The Phase 1 reports documents that a total of approximately $334,474,000 (2005 dollars) will be necessary to provide an additional 168,971 acre-feet of water supply.



3.4 Water Resources Acquisition Project Implementation

The water resources projects implementation and financing plan are summarized in Appendices F through J. Due to the nature of civil engineering and construction, implementation and scheduling of such projects requires large one-time expenditures for the design and construction of new infrastructure. For the purpose of this report, it was assumed that water resources acquisition projects requiring significant investment in new infrastructure, such as McMullen Valley or Aqua Fria projects, would be implemented as a single design and construction contract, requiring a lump sump expenditure at the time of project commencement.

This implementation schedule is intended for the purpose of the WRAF calculation. It should be anticipated that there will be differences between this schedule and the actual schedule to be developed by the City’s Water Services Department, and those differences may have a material positive or negative effect on the City’s future financial plans.



4.0 WATER RESOURCES ACQUISITION FEE DEVELOPMENT

4.1 Fee Determination

Having detailed the City’s future investment in new water resources in Section 4, the next step is to set forth the methodology to be used in calculating the proposed WRAF. The City’s existing WRAF was calculated using a water resources weighted-average cost per acre-foot, as applied to each WRAF area.

Red Oak applied a methodology similar to the one previously used by the City to calculate the existing WRAF, but modified it as appropriate to recognize the changes in anticipated water resources proposed for each WRAF area, and to merge the existing Off-Project Areas 2 and 3 (i.e., North and South of Jomax distinction) into a single Off-Project area. The WRAF cost per acre-foot is the equivalent of the cost per acre-foot for all new water resources planned for On-Project and Off-Project areas. The methodology for determining the proposed WRAF is as follows:

1. Determine the Weighted Average Cost per Acre-Foot by WRAF Area – This step includes determining the cost per acre-foot for future water resources acquisition-Projects to serve each of the three WRAF areas. Appendix E provides the total cost per acre-foot for each WRAF area.

2. Convert the Cost Per Acre-Foot Into Cost Per Equivalent Dwelling Unit – This step includes the application of a conversion factor to the weighted average cost per acre-foot by WRAF area, as calculated above. This conversion factor was determined for each WRAF area based on an analysis of the City’s WCIS data, as previously described. The conversion factor expresses the water resources acquisition costs on an EDU basis.

4.2 Weighted Average Cost per Acre-Foot

Appendix E: Water Resources Acquisition Projects by Water Service Areas provides the weighted average cost per acre-foot for future water resources acquisition projects in each water service area. For On-Project areas, future demand requirements will be met with SRP water resources. Table 4-1 summarizes the weighted average water supply acquisition costs (i.e., total cost per acre-foot) and cost per EDU.



Table 4-1

Water Resources Acquisition Cost per EDU Area Cost per

Acre-Foot (2008 dollars)

ConversionFactor

Cost Per EDU

On-Project $ 1,060 0.406 $ 430 Off-Project $ 3,510 0.406 $ 1,430

As shown in Table 4-1, the On-Project cost per acre-foot and per EDU is significantly lower than the Off-Project cost. The reasons for this differential are that On-Project future demands are nearly satisfied by existing SRP resources and the costs of those resources are already fully capitalized (i.e., SRP investments have already been made and are fully paid for). This is in contrast to the Off-Project areas, where future demands are not currently satisfied and additional water resources must be obtained at a relatively high cost in order to serve future Off-Project customers.

The WRAF is intended to recover only costs associated with new customers requiring additional increments of capacity. Accordingly, the WRAF will not be used to offset the costs of SRP assets serving exiting customers or repairing or replacing SRP facilities. The replacement over time of the existing SRP system will be funded through water rates.

4.3 Cash Flow Projections

Revenue generated from WRAF fees is dedicated for the purchase of new water rights and related infrastructure pursuant to Chapter 30 of the Phoenix City Code, Section 30-10, entitled “Administration of the Water Resources Acquisition Fee.” The primary sources of revenue in this fund are WRAF revenue and interest income. Positive ending balances are retained in the fund for future water resources expenditures including financing and/or cash funding of water rights and raw water infrastructure (i.e., there are no transfers to or from the WRAF Fund). Based on the proposed fees, expected average annual revenues over the study period are summarized in Table 4-2.



Table 4-2 Projected Annual Revenues

Area Average Annual Incremental

Demand (acre-feet)

Average Annual

Incremental Demand (EDUs)

Proposed WRAF

per EDU

Projected Annual

Revenue

On-Project 1,705 4,200 $ 430 $ 1,806,000Off-Project 4,831 11,900 $ 1,430 $ 17,017,000

This annual revenue projection is based on a simple annual average of incremental demand divided equally over a 25-year period. The complete 25-year cash-flow projection is provided in Appendix I: Water Resources Acquisition Fee Cash Flow Analysis, Excluding Financing (Inflated Dollars). The purpose of the cash flow projection is to ensure proper liquidity levels are available to meet future liabilities.

In developing this cash flow analysis, Red Oak assumed that:

• All future residential and nonresidential development will pay 100% of the proposed WRAF fees, without offsets or credits.

• Future development will occur at the pace and magnitude assumed in the City’s General Plan Moderate Shortage Conditions Scenario developed for the City’s Water Resources Plan 2005 Update.

• Water resources project cost estimates will equal Red Oak’s WRA Project Cost Estimates, as per the “Water Resources Acquisition Fee Update – Phase 1: Technical and Cost Data.”

• The proposed WRAF will become effective in 2008. Thereafter, the WRAF will be adjusted in accordance with a national index (i.e., ENR CCI) as allowed by ARS §9-463.05, at an assumed annual inflation rate of 4.1 percent.



It should be anticipated that these assumptions will change, and that there will be differences between forecasted and actual results, and those changes and differences could have a material positive or negative effect on the cash flow projection. To maintain the reasonably proportionate relationship between the fee amounts and growth-related capital improvements funded with fee revenue, Red Oak recommends a comprehensive fee review at a minimum every five years or earlier if the City substantially changes its capital improvement plans.

Cash flow plan assumptions, including inflation and interest rates, beginning fund balances, and minimum target fund reserves are provided in Table 4-3.

Table 4-3 Cash Flow Plan Assumptions

Annual Inflation – All Items 4.1% Interest Rate on Cash Reserves 3.0% Interest Rate on 20-Year Revenue Bonds 6.0% Beginning Fund Balance (FY 2006-07) $35,684,000 Minimum Target Fund Reserve

(The greater of $20,000,000 or 1-year of WRAF Revenue) $20,000,000

As detailed in Appendix I: Water Resources Acquisition Fee Cash Flow Analysis, Excluding Financing (Inflated Dollars), WRAF revenue is insufficient to cash fund the water resources acquisition projects. Beginning in FY 2012-13, with the commencement of the McMullen Valley and SRP Western Canal projects, the WRAF net ending fund balance is in deficit by $45,636,000. Therefore, Red Oak assumed that the City will issue 20-year revenue bonds to finance these projects.

4.4 Water Resources Acquisition Project Financing

It is appropriate to include future financing costs in the determination of the WRAF. For the purposes of this analysis, Red Oak Consulting assumed that:

• The City will minimize debt related to the WRAF Fund 0050, issuing debt only when pay-as-you go funding is insufficient. Therefore, not some projects are cash-funded and others are debt-financed.



• The City will issue revenue bonds with a 6.0 percent interest rate, with four years of interest-only payments, and no debt issuance costs.

• The City will not make transfers (to or from) WRAF Fund 0050.

• Debt financing of the water resources acquisition projects will not impact the City’s existing debt service coverage ratios.

The City’s financing plan may change, and as a result, financing costs may increase or decrease depending on the combination of projects, the actual revenue received over the study period, and the financing approaches ultimately selected.



5.0 FEE IMPLEMENTATION CONSIDERATIONS

5.1 Offsets and Credits

The City currently recovers certain costs associated with water resources acquisition through its water rates and development impact fees (e.g., existing McMullen Valley debt service payments). For the purposes of this analysis, Red Oak assumed that only future water resources acquisition costs will be funded by the proposed WRAF. Any future changes to water rate and/or development impact fees that re-allocate those water acquisition costs to the WRAF will require a reassessment of the WRAF basis and assumptions.

5.2 Offset for Private Water Resources

On occasion, developers or other private parties may offer to provide or develop their own water resources that will either partially or wholly satisfy the water demand of the proposed commercial or residential development. In these instances, it is appropriate to offer an offset to the proposed WRAF. Such offset would depend upon the availability of a firm, long-term supply of sufficient water or suitable quality that is able to integrate with City’s water treatment and delivery system. This is consistent with the existing City Code, which provides offsets for eligible private water resources.

5.3 Credit for ASLD Water

ASLD administers water uses on State Trust land and secures water rights on those lands for the Trust. ASLD holds certain water rights in reserve, which may be provided or transferred with the land in the event of sale, transfer or development of such land by the City or within the City’s incorporated or proposed incorporated area. In this instance, it is appropriate for the City to offer a credit to the developer for the value of ASLD water included with the property and transferred to the City. This is consistent with the existing City Code, which provides offsets for eligible private water resources.

In the event of ASLD property sale or transfer for future development, ASLD’s Board of Appeals must approve the appraised value and the terms for every purchase or long term lease of State Trust land. The City has not reached an agreement with the ASLD regarding CAP water for use on State Lands within the City. As such, this WRAF analysis excludes ASLD CAP reallocation costs and supplies.



5.4 Offsets for Water Efficiency

Customers constructing residential or commercial units are required to follow the City’s plumbing, landscaping, and related codes outlining flow requirements for plumbing fixtures, water requirements for landscaping, etc. Certain builders may elect to install plumbing fixtures that will reduce the expected water demand below that required by the minimum code standards. Others may use xeriscaping with drought-resistant vegetation that would reduce expected water demands. In this situation, it may be appropriate that the City offer an offset to the water resources acquisition fee to reflect the expected reduction in water demand. Such an offset would offer a proportional reduction in the fee based upon lower than standard water demands.

Red Oak recommends that if offsets for conservation are adopted, a standard schedule of offsets should be developed for residential units which would allow a builder to determine in advance the financial impact of such expanded efficiency efforts. For commercial units, a standard schedule of offsets may not always address widely varying water demand situations. In such cases, the developer should have the burden of proof in demonstrating the proposed efficiency efforts will exceed the established standards. These specific fee offsets could be incorporated in an updated ordinance that follows the review of this report.



6.0 CONCLUSIONS AND RECOMMENDATIONS

6.1 Recommended Fee Schedule

As previously described in this report, development fees in Arizona must meet the requirements of the Arizona Revised Statutes (ARS §9-463.05) and development fee case law, namely the “rational nexus” criterion.

The WRAF is a one-time payment by new customers to recover costs for the acquisition of new water supplies to support growth. WRAF revenue is restricted to pay for new water rights acquisitions and related infrastructure and/or water efficiency programs; both of which contribute to meeting future water supply needs due to growth in the City’s service area. WRAF revenue is not to be utilized for treatment facility or distribution system construction, or for rehabilitation efforts or operating expenses. The fees developed in this report by Red Oak Consulting are intended to meet these standards.

The City’s existing WRAF varies by water service area (Areas 1, 2 and 3), meter size (⅝-inch through 6-inch), and customer category (single family residential, commercial and industrial; mobile homes; and multifamily). The proposed WRAF maintains the existing structure, with the exception that the Off-Project Area 2 and 3 (i.e., North and South of Jomax distinction) were combined into a single Off-Project area, and the mobile home customer category was combined with the multifamily category.

The proposed WRAF is applicable to new single family, commercial, or industrial connections with meters. The WRAF for connections with meter sizes larger than ⅝-inch are adjusted based on their relative meter capacities, as derived from capacity ratios published by the American Water Works Association (AWWA). The WRAF for multifamily connections is equal to 49 percent of the ⅝-inch single family WRAF. Table 6-1 provides the proposed WRAF schedule.



Table 6-1 Proposed Water Resources Acquisition Fee Schedule

Area 1 Area 2 Single Family Residence, Commercial, or Industrial Category (per meter size)

AWWA Meter

Capacity Ratio

On-Project Off-Project

⅝-inch 1.0 $ 430 $ 1,430

¾-inch NA 430 1,430

1-inch 2.5 1,080 3,560

1½ inch 5.0 2,150 7,130

2-inch 8.0 3,440 11,400

3-inch, compound 15.0 6,460 21,380

3-inch, displacement 16.0 6,890 22,800

3-inch, turbine 17.5 7,530 24,940

4-inch, compound or displacement

25.0 10,760 35,630

4-inch, turbine 30.0 12,910 42,750

6-inch, compound 50.0 21,520 71,250

6-inch, turbine 62.5 26,900 89,070

Multifamily and Mobile Home (per unit)

0.491 $ 210 $ 700

Notes: 1. As per the multifamily analysis described in Section 3.

This assessment methodology satisfies the requirements of ARS §9-463.05 by providing a non-discriminatory schedule of fees based on a reasonably proportionate relationship between the WRAF amount and the growth-related water resources capital improvements, as demonstrated in this report. In addition, the fee schedule mirrors the City’s water development impact fee structure.

The WRAF recovers costs for the acquisition of new water supplies to support growth. Revenues from this fee are restricted to pay for new water rights acquisitions or water efficiency programs that contribute to meeting future water supply needs due to growth in the City’s service area.



6.2 Future WRAF Adjustments Due to Inflation

As permitted by ARS §9-463.05, the City intends to automatically adjust the WRAF on an annual basis without a public hearing. The adjustment will be based on the 20-City Construction Cost Index (CCI) published by Engineering News Record (ENR). ENR CCI is a nationally recognized index applicable to the cost of the necessary public facilities that are the subject of the WRAF.

The water resources acquisition costs are primarily comprised of large scale construction projects to obtain, store, and transport raw water. Therefore, ENR CCI is the most appropriate nationally recognized index for the adjustment of the WRAF.

The ENR CCI index is a weighted aggregate index of the prices of constant quantities of structural steel, portland cement, lumber and common labor. The 20-city average index is generally more appropriate because it has more elements, and a smoother trend. Indexes for individual cities are more susceptible to price spikes.

The adjustment will be applied annually, following the release of the annual index, and following public notice of the adjustment at least thirty days in advance of its effective date.

To maintain the reasonably proportionate relationship between the fee amounts and growth-related capital improvements funded with fee revenue, Red Oak recommends a comprehensive fee review at a minimum every five years or earlier if the City substantially changes its capital improvement and/or financing plans.

6.3 Large and Odd Sized Meter Connectors

AWWA recommends determining meter capacities for large meters (greater than three inches) on a case-by-case basis, when appropriate. The City’s existing WRAF specifies fees for meters up to six inches. The City may allow for new connections with water meters greater than six inches or other sizes not included in the table provided. In these cases, fees will be proportional to the expected water use characteristics. This approach provides the flexibility to consider potentially varying capacity requirements that may be associated with larger meter sizes.

Red Oak recommends the fees for connections larger than six inches or other odd-sizes be based on the estimated capacity needs of the individual large-meter connector. In such cases, the developer should have the burden of proof in demonstrating that the proposed



large meter customer will have water demands less than those established using the AWWA meter capacity approach, otherwise the following fees would apply:

Single Family Residence, Commercial, or Industrial Category (per meter size)

AWWA Meter

Capacity Ratio

Area 1 On Project

Area 2 Off Project

6-inch, displacement 50.0 $ 21,520 $ 71,250

8-inch, compound 80.0 34,430 114,000

8-inch, turbine 90.0 38,730 128,260

10-inch, compound 115.0 49,490 163,880

10-inch, turbine 145.0 62,400 206,630

12-inch, turbine 215.0 92,530 306,390

City of Phoenix

Water Resources Acquisition Fee - Phase II ADefinitions

/ Pathways to Lasting Solutions

APPENDIX A

Definitions

The City of Phoenix, Arizona Water Resources Acquisition Fee Study

Word or Acronym Definition AFLR Agua Fria Linear Recharge ADWR Arizona Department of Water Resources ASLD Arizona State Land Department CAP Central Arizona Project CCI Construction Cost Index City City of Phoenix EDU Equivalent Dwelling Unit ENR Engineering News-Record FY Fiscal Year GPCD Gallons per Capita per Day GRIC Gila River Indian Community M&I Municipal and Industrial MAG Maricopa Association of Governments SRP Salt River Project WCIS Water Customer Information System WRA Water Resources Acquisition WRAF Water Resources Acquisition Fee WTP Water Treatment Plant WWTP Wastewater Treatment Plant


City of Phoenix

Water Resources Acquisition Fee - Phase II BProposed WRA Fee Areas

Pathways to Lasting Solutions

4443424140393837363534333231302928272625242322212019181716151413121110987654321010203

03 02 01 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44

012011010090807060504030201123456789

10111213141516171819202122232425262728293031323334353637383940414243444546474849505152535455565758596061626364656667686970717273747576

01301301201101009080706050403020112345678910111213141516171819202122232425262728293031323334353637383940414243444546474849505152535455565758596061626364656667686970717273747576

(17200S)PECOS RD

CHANDLER BLVD

RAY RD

WARNER RD

ELLIOT RD

GUADALUPE RD

(15600S)

(14000S)

(12400S)

(10800S)

(9200S)

BASELINE RD

SOUTHERN AVE

BROADWAY RD

UNIVERSITY DR

BUCKEYE RD

VAN BUREN ST

McDOWELL RD

THOMAS RD

INDIAN SCHOOL RD

CAMELBACK RD (5000N)

(4100N)

(2900N)

(1600N)

(300N)

(1200S)

(2800S)

(4400S)

(6000S)

(7600S)

BETHANY HOME RD

GLENDALE AVE

NORTHERN AVE

DUNLAP AVE

SHEA BLVD

CACTUS RD

THUNDERBIRD RD

GREENWAY RD

BELL RD

UNION HILLS DR (18600N)

(17000N)

(15400N)

(13800N)

(12200N)

(10600N)

(9000N)

(8000N)

(7000N)

(6000N)

LOOP 101 FRWY

DEER VALLEY RD

PINNACLE PEAK RD

HAPPY VALLEY RD

JOMAX RD

DYNAMITE BLVD

DIXILETA DR

LONE MOUNTAIN RD

DOVE VALLEY RD

CAREFREE HWY (34600N)

(33000N)

(31400N)

(29800N)

(28200N)

(26600N)

(25000N)

(23400N)

(21800N)

(20200N)

CLOUD RD

JOY RANCH RD

DESERT HILLS RD

ROCKAWAY HILLS RD

ANTHEM WAY

CIRCLE MTN RD

JENNY LIN RD

WANDER LN

MINGUS RD (49000N)

(47400N)

(45800N)

(44200N)

(42600N)

(41000N)

(39400N)

(37800N)

(36200N)

(4800

E)

(5600

E)

(6400

E)

(7200

E)

(4000

E)

(3200

E)

(2400

E)

(1600

E)16

TH S

T

24TH

ST

32ND

ST

40TH

ST

48TH

ST

56TH

ST

64TH

ST

SCOT

TSDA

LE R

D

7TH

ST

7TH

AVE

19TH

AVE

27TH

AVE

35TH

AVE

43RD

AVE

51ST

AVE

59TH

AVE

(700E

)

(700W

)

(1900

W)

(2700

W)

(17200S)

(15600S)

(14000S)

(12400S)

(10800S)

(9200S)

(5000N)

(4100N)

(2900N)

(3500

W)

(4300

W)

(5100

W)

(5900

W)

(6700

W)

(7500

W)

(8300

W)

(9100

W)

(9900

W)

(1070

0W)

(1150

0W)

(1230

0W)

67TH

AVE

75TH

AVE

83RD

AVE

91ST

AVE

99TH

AVE

107T

H AV

E

AVON

DALE

BLV

D

EL M

IRAG

E RD

(1600N)

(300N)

(1200S)

(2800S)

(4400S)

(6000S)

(7600S)

(18600N)

(17000N)

(15400N)

(13800N)

(12200N)

(10600N)

(9000N)

(8000N)

(7000N)

(6000N)

(34600N)

(33000N)

(31400N)

(29800N)

(28200N)

(26600N)

(25000N)

(23400N)

(21800N)

(20200N)

(49000N)

(47400N)

(45800N)

(44200N)

(42600N)

(41000N)

(39400N)

(37800N)

(36200N)

PECOS RD

CHANDLER BLVD

RAY RD

ESTRELLA RD

ELLIOT RD

DOBBINS RD

BASELINE RD

SOUTHERN AVE

BROADWAY RD

UNIVERSITY DR

BUCKEYE RD

VAN BUREN ST

McDOWELL RD

THOMAS RD

INDIAN SCHOOL RD

CAMELBACK RD

BETHANY HOME RD

GLENDALE AVE

NORTHERN AVE

DUNLAP AVE

PEORIA AVE

CACTUS RD

THUNDERBIRD RD

GREENWAY RD

BELL RD

UNION HILLS DR

LOOP 101 FRWY

DEER VALLEY RD

PINNACLE PEAK RD

HAPPY VALLEY RD

JOMAX RD

DYNAMITE BLVD

DIXILETA DR

LONE MOUNTAIN RD

DOVE VALLEY RD

CAREFREE HWY

CLOUD RD

JOY RANCH RD

DESERT HILLS RD

ROCKAWAY HILLS RD

ANTHEM WAY

CIRCLE MTN RD

JENNY LIN RD

WANDER LN

MINGUS RD

(4800

E)

(5600

E)

(6400

E)

(7200

E)

(4000

E)

(3200

E)

(2400

E)

(1600

E)

(700E

)

(700W

)

(1900

W)

(2700

W)

(3500

W)

(4300

W)

(5100

W)

(5900

W)

(6700

W)

(7500

W)

(8300

W)

(9100

W)

(9900

W)

(1070

0W)

(1150

0W)

(1230

0W)

16TH

ST

24TH

ST

32ND

ST

40TH

ST

48TH

ST

56TH

ST

64TH

ST

SCOT

TSDA

LE R

D

7TH

ST

7TH

AVE

19TH

AVE

27TH

AVE

35TH

AVE

43RD

AVE

51ST

AVE

59TH

AVE

67TH

AVE

75TH

AVE

83RD

AVE

91ST

AVE

99TH

AVE

107T

H AV

E

115T

H AV

E

EL M

IRAG

E RD

§̈¦17

§̈¦10

£¤60

vw101

vw202

vw51

vw101

vw101

Arizona Canal

Proposed WRA Fee Areas

±

I:\Data\ArcGISProjects\Jim\CustomWRA.mxd

FEE_AREA12

City of Phoenix

Water Resources Acquisition Fee - Phase II CWater Supply and Demand Projections, General Plan

(Moderate Shortage Conditions)


ON-PROJECT SUPPLY AND DEMAND 2005 2010 2015 2020 2025 2030(acre-feet) (acre-feet) (acre-feet) (acre-feet) (acre-feet) (acre-feet)

Current Water Supplies (to supply existing customers)Current SRP Supply 179,080 179,080 179,080 179,080 179,080 179,080

Future Water Supplies (to supply future customers)Future SRP Supply 0 17,791 25,065 32,344 35,868 39,337Water Efficience for New Development 0 1,479 2,084 2,689 2,982 3,270_________ _________ _________ _________ _________ _________

Total On-Project Water Supply 179,080 198,350 206,229 214,113 217,930 221,687

Current Water Demand 179,080 179,080 179,080 179,080 179,080 179,080Future Water Demand (at current water use rate) 0 19,270 27,149 35,033 38,850 42,607_________ _________ _________ _________ _________ _________Total On-Project Water Demand 179,080 198,350 206,229 214,113 217,930 221,687

Surplus/(Deficit) 0 0 0 0 0 0

OFF-PROJECT SUPPLY AND DEMAND 2005 2010 2015 2020 2025 2030(acre-feet) (acre-feet) (acre-feet) (acre-feet) (acre-feet) (acre-feet)

Current Water Supplies (to supply existing customers)CAP - Subcontract / M&I Priority Supplies 113,914 113,914 113,914 113,914 113,914 113,914CAP - Colorado River Exchange (Pre-1968) 4,751 4,751 4,751 4,751 4,751 4,751CAP - Indian Leases 7,323 7,323 7,323 7,323 7,323 7,323CAP - Agricultural-Priority 36,758 36,758 0 0 0 0SRP - Phoenix Supplies Available for Off-Project Use 68,000 68,000 0 0 0 0Reclaimed Water (direct delivery) 2,000 3,000 5,000 5,000 5,000 5,000Groundwater (based on current Capacity) 0 0 44,148 44,148 44,148 44,148_________ _________ _________ _________ _________ _________

Subtotal Current Off-Project Supplies 232,746 233,746 175,136 175,136 175,136 175,136

Future Water Supplies (to supply future customers)CAP Reallocation 0 8,206 8,206 8,206 8,206 8,206GRIC Lease 0 15,000 15,000 13,402 12,930 12,813McMullen Valley Water Transfer 0 0 17,604 38,000 38,000 38,000Reclaimed Water (direct delivery, recovery, or exchange) 0 0 0 3,827 19,525 35,920Underground Storage Credit Recovery 0 0 0 0 0 0Additional Safe Yield Groundwater 0 0 0 0 0 0ASLD CAP Reallocation 0 0 0 0 0 0NIA CAP Reallocation 0 0 0 0 0 0Water Efficiency for New Development 0 5,459 10,432 15,976 19,706 23,695_________ _________ _________ _________ _________ _________

Subtotal Future Off-Project Supplies 0 28,665 51,242 79,411 98,367 118,634_________ _________ _________ _________ _________ _________

Total Off-Project Water Supply 232,746 262,411 226,378 254,547 273,503 293,770

Current Off Project Water Demand 173,372 173,372 173,372 173,372 173,372 173,372Future Off-Project Water Demand (at current water use rate) 0 27,736 53,006 81,175 100,131 120,398_________ _________ _________ _________ _________ _________Total Off-Project Water Demand 173,372 201,108 226,378 254,547 273,503 293,770

Surplus/(Deficit) 59,374 61,303 0 0 0 0

COMBINED TOTAL SUPPLY AND DEMAND 2005 2010 2015 2020 2025 2030(acre-feet) (acre-feet) (acre-feet) (acre-feet) (acre-feet) (acre-feet)

Total Current Supplies 411,826 412,826 354,216 354,216 354,216 354,216Total Future Supplies and Water Efficiency for New Developmen 0 47,935 78,391 114,444 137,217 161,241_________ _________ _________ _________ _________ _________Total Water Supplies 411,826 460,761 432,607 468,660 491,433 515,457

Total Current Demand 352,452 352,452 352,452 352,452 352,452 352,452Total Future Demand (at current water use rate) 0 47,006 80,155 116,208 138,981 163,005_________ _________ _________ _________ _________ _________Total Water Demand 352,452 399,458 432,607 468,660 491,433 515,457

Surplus/(Deficit) 59,374 61,303 0 0 0 0

Notes:1. Adapted from the City's Water Resources Plan Update 2005, and Red Oak Consulting's WRAF Phase I Report, Tables 1 and 2b.

Moderate Shortage Conditions


APPENDIX C

Normal Conditions Moderate Shortage Conditions

Water Supply and Demand Projections1

The City of Phoenix, ArizonaWater Resources Acquisition Fee Study

Normal Conditions

Normal Conditions Moderate Shortage Conditions


City of Phoenix

Water Resources Acquisition Fee - Phase II DFuture Water Demand Expressed as Equivalent

Development Units with Current Water Use Rate


APPENDIX DFuture Water Demand Expressed as Equivalent Dwelling Units

with Current Water Use Rate

EDU Conversion Factor 0.406 acre-feet per EDU

Demand Incremental Cumulative Demand Incremental Cumulative(acre-feet) EDUs EDUs (acre-feet) EDUs EDUs

2005 - - - - 2006 3,854 9,493 9,493 5,547 13,663 13,663 2007 7,708 9,493 18,985 11,094 13,663 27,326 2008 11,562 9,493 28,478 16,642 13,663 40,989 2009 15,416 9,493 37,970 22,189 13,663 54,652 2010 19,270 9,493 47,463 27,736 13,663 68,315 2011 20,846 3,881 51,344 32,790 12,448 80,764 2012 22,422 3,881 55,226 37,844 12,448 93,212 2013 23,997 3,881 59,107 42,898 12,448 105,660 2014 25,573 3,881 62,988 47,952 12,448 118,108 2015 27,149 3,881 66,869 53,006 12,448 130,557 2016 28,726 3,884 70,753 58,640 13,876 144,433 2017 30,303 3,884 74,637 64,274 13,876 158,309 2018 31,879 3,884 78,521 69,907 13,876 172,186 2019 33,456 3,884 82,404 75,541 13,876 186,062 2020 35,033 3,884 86,288 81,175 13,876 199,938 2021 35,796 1,880 88,168 84,966 9,338 209,276 2022 36,560 1,880 90,049 88,757 9,338 218,614 2023 37,323 1,880 91,929 92,549 9,338 227,952 2024 38,087 1,880 93,809 96,340 9,338 237,290 2025 38,850 1,880 95,690 100,131 9,338 246,628 2026 39,601 1,851 97,540 104,184 9,984 256,612 2027 40,353 1,851 99,391 108,238 9,984 266,596 2028 41,104 1,851 101,242 112,291 9,984 276,579 2029 41,856 1,851 103,093 116,345 9,984 286,563 2030 42,607 1,851 104,943 120,398 9,984 296,547

Average 4,200 11,900

On-Project Off-Project


CalendarYear


City of Phoenix

Water Resources Acquisition Fee - Phase II EWater Resources Acquisition Projects Weighted Average

Cost per Acre-Foot Capital


Max. Annual Supply Capital Cost Capital Cost Total Cost per

Acre-Foot(acre-feet) (2005 dollars) (2008 dollars) (2008 dollars)

On-ProjectSRP Western Canal WTP 44,800 25,200,000 27,690,000 618 Water Efficiency for New Development 3,270 2,374,000 2,610,000 798 ____________ ____________ ____________Totals 48,070 27,574,000$ 30,300,000 Average Capital Cost Per Acre-Foot 630$

Off-ProjectCAP Reallocation 8,206 5,055,000 5,830,000 710 GRIC Lease 15,000 25,455,000 27,621,000 1,841 McMullen Valley Water Transfer 38,000 103,395,000 113,610,000 2,990 Reclaimed Water Projects

Agua Fria Linear Recharge 16,000 76,693,000 84,270,000 5,267 Northern Reclamation Plants 20,000 79,094,000 86,910,000 4,346 23rd Ave Reclaimed - - - -

ASLD CAP Reallocation 12,000 - - - Water Efficiency for New Development 23,695 17,208,000 18,910,000 798 ____________ ____________ ____________Totals 132,901 306,900,000$ 337,151,000$

Average Capital Cost Per Acre-Foot 1 120,901 337,150,000$ 2,789$

Notes:1. Off-Project average cost per acre-foot excludes ASLD supply.

Water ResourcesAcquisition Project

APPENDIX EWater Resources Acquisition Projects

Weighted Average Capital Cost per Acre-Foot



City of Phoenix

Water Resources Acquisition Fee - Phase II FWater Resources Acquisition Projects Implementation

and Financing Plan


APPENDIX FWater Resources Acquisition Projects

Implementation and Financing Plan


(acre-feet) (2008 Dollars) (2008 Dollars) (2008 Dollars)

On-ProjectSRP Western Canal WTP 2013 Revenue Bond 44,800 27,690,000 20,601,360 1,078$ Water Efficiency for New Development 2006 Conservation 3,270 2,610,000 - 798

Average Cost Per Acre-Foot 1,059

Off-ProjectCAP Reallocation 2010 Cash 8,206 5,830,000 - 710 GRIC Lease 2008 Cash 15,000 27,621,000 2,037,050 1,977 McMullen Valley Water Transfer 2013 Revenue Bond 38,000 113,610,000 84,525,840 5,214 Reclaimed Water Projects

Agua Fria Linear Recharge 2023 Cash 16,000 84,270,000 - 5,267 Northern Reclamation Plants 2017 Cash 20,000 86,910,000 - 4,346 23rd Ave Reclaimed NA - - -

ASLD CAP Reallocation 2030 NA 12,000 - - - Water Efficiency for New Development 2006 Conservation 23,695 18,910,000 - 798

Average Cost Per Acre-Foot 3,505 ____________ ____________ ____________

Total 180,971 367,451,000$ 107,164,250$

Cost per Acre-Foot

EDU Conversion Factor

Average Cost Per EDU

(2008 dollars) acre-feet per EDU (2008 dollars)

On-Project 1,060$ 0.406 430$ Off-Project 3,510$ 0.406 1,430$

Notes:1. Funding sources include "Cash", "Conservation", "Revenue Bond", "GO Bond", "Other", or "NA".2. Assumes full incremental capital cost is financed in the commencement year.3. Assumes water delivery begins 3 years after commencement, except for CAP Reallocation and GRIC Lease projects, which begin water delivery immediately.3. July 2005 costs are inflated into January 2008 dollars at the assumed inflation rate.4. NA means not applicable

Water Service Area

Cost perAcre-FootWater Resources

Acquisition Project

AnnualSupply

ConstructionYear

FundingSource 1

Capital Cost FinancingCost


City of Phoenix

Water Resources Acquisition Fee - Phase II GWater Resources Acquisition Projects New

Supply Capacity Projection


APPENDIX GWater Resources Acquisition Projects New Supply Capacity Projection


1 2 3 4 5 6 7 8 9 10Line 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15No. (acre-feet) (acre-feet) (acre-feet) (acre-feet) (acre-feet) (acre-feet) (acre-feet) (acre-feet) (acre-feet) (acre-feet)

On-Project1 SRP Western Canal WTP 0 0 0 0 0 0 0 0 0 02 Water Efficiency for New Development 296 592 887 1,183 1,479 1,600 1,721 1,842 1,963 2,084_____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________3 Total Available New Capacity 296 592 887 1,183 1,479 1,600 1,721 1,842 1,963 2,084

4 Total New Demand (at current water use rate) 3,854 7,708 11,562 15,416 19,270 20,846 22,422 23,997 25,573 27,149 _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________5 On-Project Surplus (Deficiency) (3,558) (7,116) (10,675) (14,233) (17,791) (19,246) (20,701) (22,155) (23,610) (25,065)

Off-Project6 CAP Reallocation 0 0 0 0 8,206 8,206 8,206 8,206 8,206 8,2067 GRIC Lease 0 0 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,0008 McMullen Valley Water Transfer 0 0 0 0 0 0 0 0 0 0

Reclaimed Water Projects9 Agua Fria Linear Recharge 0 0 0 0 0 0 0 0 0 010 Northern Reclamation Plants 0 0 0 0 0 0 0 0 0 011 23rd Ave Reclaimed 0 0 0 0 0 0 0 0 0 012 ASLD CAP Reallocation 0 0 0 0 0 0 0 0 0 013 Water Efficiency for New Development 1,092 2,184 3,275 4,367 5,459 6,454 7,448 8,443 9,437 10,432_____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________14 Total 1,092 2,184 18,275 19,367 28,665 29,660 30,654 31,649 32,643 33,638

15 Total New Demand (at current water use rate) 5,547 11,094 16,642 22,189 27,736 32,790 37,844 42,898 47,952 53,006 _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________16 Off-Project Surplus (Deficiency) (4,455) (8,911) 1,634 (2,822) 929 (3,130) (7,190) (11,249) (15,309) (19,368)

17 Surplus Carry-Over from Existing Supplies 59,374 59,374 59,374 59,374 59,374 61,303 61,303 61,303 61,303 61,303

18 Combined Net Surplus (Deficiency) 51,360 43,347 50,333 42,320 42,512 38,927 33,413 27,898 22,384 16,870


LineNo.

On-Project1 SRP Western Canal WTP2 Water Efficiency for New Development

3 Total Available New Capacity

4 Total New Demand (at current water use rate)

5 On-Project Surplus (Deficiency)

Off-Project6 CAP Reallocation7 GRIC Lease8 McMullen Valley Water Transfer

Reclaimed Water Projects9 Agua Fria Linear Recharge10 Northern Reclamation Plants11 23rd Ave Reclaimed12 ASLD CAP Reallocation13 Water Efficiency for New Development

14 Total


16 Off-Project Surplus (Deficiency)

17 Surplus Carry-Over from Existing Supplies

18 Combined Net Surplus (Deficiency)

APPENDIX G (cont.)Water Resources Acquisition Projects New Supply Capacity Projection


11 12 13 14 15 16 17 182015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23

(acre-feet) (acre-feet) (acre-feet) (acre-feet) (acre-feet) (acre-feet) (acre-feet) (acre-feet)

44,800 44,800 44,800 44,800 44,800 44,800 44,800 44,8002,205 2,326 2,447 2,568 2,689 2,748 2,806 2,865_____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________

47,005 47,126 47,247 47,368 47,489 47,548 47,606 47,665

28,726 30,303 31,879 33,456 35,033 35,796 36,560 37,323 _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________18,279 16,823 15,368 13,912 12,456 11,751 11,046 10,342

8,206 8,206 8,206 8,206 8,206 8,206 8,206 8,20615,000 15,000 15,000 15,000 15,000 15,000 15,000 15,00038,000 38,000 38,000 38,000 38,000 38,000 38,000 38,000

0 0 0 0 0 0 0 00 0 0 0 20,000 20,000 20,000 20,0000 0 0 0 0 0 0 00 0 0 0 0 0 0 0

11,541 12,650 13,758 14,867 15,976 16,722 17,468 18,214_____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________72,747 73,856 74,964 76,073 97,182 97,928 98,674 99,420

58,640 64,274 69,907 75,541 81,175 84,966 88,757 92,549 _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________14,107 9,582 5,057 532 16,007 12,962 9,917 6,871

0 0 0 0 0 0 0 0

14,107 9,582 5,057 532 16,007 12,962 9,917 6,871


LineNo.


3 Total Available New Capacity


5 On-Project Surplus (Deficiency)



14 Total


16 Off-Project Surplus (Deficiency)

17 Surplus Carry-Over from Existing Supplies

18 Combined Net Surplus (Deficiency)

APPENDIX G (cont.)Water Resources Acquisition Projects New Supply Capacity Projection


19 20 21 22 23 24 252023-24 2024-25 2025-26 2026-27 2027-28 2028-29 2029-30

(acre-feet) (acre-feet) (acre-feet) (acre-feet) (acre-feet) (acre-feet) (acre-feet)

44,800 44,800 44,800 44,800 44,800 44,800 44,8002,923 2,982 3,040 3,097 3,155 3,212 3,270_____________ _____________ _____________ _____________ _____________ _____________ _____________

47,723 47,782 47,840 47,897 47,955 48,012 48,070

38,087 38,850 39,601 40,353 41,104 41,856 42,607 _____________ _____________ _____________ _____________ _____________ _____________ _____________9,637 8,932 8,238 7,544 6,851 6,157 5,463

8,206 8,206 8,206 8,206 8,206 8,206 8,20615,000 15,000 15,000 15,000 15,000 15,000 15,00038,000 38,000 38,000 38,000 38,000 38,000 38,000

0 0 16,000 16,000 16,000 16,000 16,00020,000 20,000 20,000 20,000 20,000 20,000 20,000

0 0 0 0 0 0 00 0 0 0 0 0 0

18,960 19,706 20,504 21,302 22,099 22,897 23,695_____________ _____________ _____________ _____________ _____________ _____________ _____________100,166 100,912 117,710 118,508 119,305 120,103 120,901

96,340 100,131 104,184 108,238 112,291 116,345 120,398 _____________ _____________ _____________ _____________ _____________ _____________ _____________3,826 781 13,525 10,270 7,014 3,759 503

0 0 0 0 0 0 0

3,826 781 13,525 10,270 7,014 3,759 503


City of Phoenix

Water Resources Acquisition Fee - Phase II HWater Resources Acquisition Projects Capital Costs

(2008 Dollars)


APPENDIX HWater Resources Acquisition Projects Capital Costs (2008 Dollars)


Line 1 2 3 4 5 6 7 8 9No. 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

On-Project1 SRP Western Canal WTP -$ -$ -$ -$ -$ -$ -$ 27,690,000$ -$ 2 Water Efficiency for New Development 104,400 104,400 104,400 104,400 104,400 104,400 104,400 104,400 104,400

Off-Project3 CAP Reallocation - - 1,166,000 1,166,000 1,166,000 1,166,000 1,166,000 - - 4 GRIC Lease - - $13,810,510 3,452,627 3,452,627 3,452,627 3,452,627 - - 5 McMullen Valley Water Transfer - - - - - - - 113,610,000 -

Reclaimed Water Projects6 Agua Fria Linear Recharge - - - - - - - - - 7 Northern Reclamation Plants - - - - - - - - - 8 23rd Ave Reclaimed - - - - - - - - - 9 ASLD CAP Reallocation - - - - - - - - - 10 Water Efficiency for New Development 756,400 756,400 756,400 756,400 756,400 756,400 756,400 756,400 756,400 _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________11 Total 861,000$ 861,000$ 15,837,000$ 5,479,000$ 5,479,000$ 5,479,000$ 5,479,000$ 142,161,000$ 861,000$

Project

Note: Total costs represent the capital investment required in 2008 dollars, excluding financing costs, regardless of the constuction/ implementation year. Total costs shown on page 3 of 3 are the basis for further analysis, and are the same as those presented in the Infrastructure Improvements Plan.


LineNo.




11 Total

Project

APPENDIX H (cont.)Water Resources Acquisition Projects Capital Costs (2008 Dollars)


10 11 12 13 14 15 16 17 18 192014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24

-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ 104,400 104,400 104,400 104,400 104,400 104,400 104,400 104,400 104,400 104,400

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

- - - - - - - - 84,270,000 - - - 86,910,000 - - - - - - - - - - - - - - - - - - - - - - - - - - -

756,400 756,400 756,400 756,400 756,400 756,400 756,400 756,400 756,400 756,400 _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________861,000$ 861,000$ 87,771,000$ 861,000$ 861,000$ 861,000$ 861,000$ 861,000$ 85,131,000$ 861,000$


LineNo.




11 Total

Project

APPENDIX H (cont.)Water Resources Acquisition Projects Capital Costs (2008 Dollars)


20 21 22 23 24 25 Total2024-25 2025-26 2026-27 2027-28 2028-29 2029-30 (Rounded)

-$ -$ -$ -$ -$ -$ 27,690,000$ 104,400 104,400 104,400 104,400 104,400 104,400 2,610,000

- - - - - - 5,830,000 - - - - - - 27,621,020 - - - - - - 113,610,000

- - - - - - 84,270,000 - - - - - - 86,910,000 - - - - - - - - - - - - - -

756,400 756,400 756,400 756,400 756,400 756,400 18,910,000 _____________ _____________ _____________ _____________ _____________ _____________ _____________861,000$ 861,000$ 861,000$ 861,000$ 861,000$ 861,000$ 367,451,020$


City of Phoenix

Water Resources Acquisition Fee - Phase II IWater Resources Acquisition Fee Cash Flow Analysis,

Excluding Financing


APPENDIX IWater Resource Acquisition Fee Cash Flow Analysis, Excluding Financing (Inflated Dollars)


Line 1 2 3 4 5 6 7 8 9 10No. 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15

1 Beginning Fund Balance 35,684,000$ 42,924,000$ 51,237,000$ 48,711,000$ 67,752,000$ 88,525,000$ 106,555,000$ 126,179,000$ (23,204,000)$ (496,000)$

Revenues2 On-Project3 On-Project EDUs 9,493 9,493 9,493 9,493 9,493 3,881 3,881 3,881 3,881 3,881 4 WRAF per EDU 52 52 215 430 448 466 485 505 526 548 _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________5 On-Project WRAF Revenue 493,616$ 493,616$ 2,042,620$ 4,085,240$ 4,252,739$ 1,810,128$ 1,884,345$ 1,961,606$ 2,042,034$ 2,125,759$

6 Off-Project7 On-Project EDUs 13,663 13,663 13,663 13,663 13,663 12,448 12,448 12,448 12,448 12,448 8 WRAF per EDU 530 530 715 1,430 1,489 1,550 1,613 1,679 1,748 1,820 _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________9 Off-Project WRAF Revenue 7,234,587$ 7,234,587$ 9,769,084$ 19,538,167$ 20,339,253$ 19,290,683$ 20,081,622$ 20,904,990$ 21,762,117$ 22,654,388$

10 Other Revenue11 Interest Earnings 1,192,000 1,412,000 1,499,000 1,747,000 2,344,000 2,926,000 3,491,000 1,545,000 - 345,000 12 Transfers To (From) WRAF Fund 0050 - - - - - - - - - - _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________13 Total Revenue 8,034,000$ 9,140,000$ 13,311,000$ 25,370,000$ 26,936,000$ 24,027,000$ 25,457,000$ 24,412,000$ 23,804,000$ 25,125,000$

Expenditures14 On-Project15 SRP Western Canal WTP -$ -$ -$ -$ -$ -$ -$ 33,852,000$ -$ -$ 16 Water Efficiency for New Development 96,000$ 100,000$ 104,000$ 109,000$ 113,000$ 118,000$ 123,000$ 128,000$ 133,000$ 138,000$

17 Off-Project18 CAP Reallocation - - 1,166,000 1,166,000 1,166,000 1,166,000 1,166,000 - - - 19 GRIC Lease - - 13,810,510 4,267,448 4,063,743 3,860,037 3,656,332 - - - 20 McMullen Valley Water Transfer - - - - - - - 138,890,000 - -

Reclaimed Water Projects - - - - - - - - - - 21 Agua Fria Linear Recharge - - - - - - - - - - 22 Northern Reclamation Plants - - - - - - - - - - 23 23rd Ave Reclaimed - - - - - - - - - - 24 ASLD CAP Reallocation - - - - - - - - - - 25 Water Efficiency for New Development 698,000 727,000 756,000 787,000 820,000 853,000 888,000 925,000 963,000 1,002,000 _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________26 Total Expenditures 794,000$ 827,000$ 15,837,000$ 6,329,000$ 6,163,000$ 5,997,000$ 5,833,000$ 173,795,000$ 1,096,000$ 1,140,000$

27 Annual Surplus (Deficiency) 7,240,000 8,313,000 (2,526,000) 19,041,000 20,773,000 18,030,000 19,624,000 (149,383,000) 22,708,000 23,985,000

28 Ending Fund Balance 42,924,000 51,237,000 48,711,000 67,752,000 88,525,000 106,555,000 126,179,000 (23,204,000) (496,000) 23,489,000

29 Target Fund Reserve 20,000,000 20,000,000 20,000,000 23,623,000 24,592,000 21,101,000 21,966,000 22,867,000 23,804,000 24,780,000_____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________30 Net Ending Fund Balance 22,924,000 31,237,000 28,711,000 44,129,000 63,933,000 85,454,000 104,213,000 (46,071,000) (24,300,000) (1,291,000)

Notes:1. Assumes the proposed WRAF is effective January 1, 2008.

3. Project costs increase equal to the assumed inflation rate / national index (ENR CCI), with the exception of CAP reallocatin and GRIC lease, which reflect the known cost of future commitments.2. Assumes annual WRAF increases equal to the assumed inflation rate / national index (ENR CCI)


LineNo.

1 Beginning Fund Balance

Revenues2 On-Project3 On-Project EDUs4 WRAF per EDU

5 On-Project WRAF Revenue

6 Off-Project7 On-Project EDUs8 WRAF per EDU

9 Off-Project WRAF Revenue

10 Other Revenue11 Interest Earnings12 Transfers To (From) WRAF Fund 0050

13 Total Revenue

Expenditures14 On-Project15 SRP Western Canal WTP16 Water Efficiency for New Development

17 Off-Project18 CAP Reallocation19 GRIC Lease20 McMullen Valley Water Transfer


26 Total Expenditures

27 Annual Surplus (Deficiency)

28 Ending Fund Balance

29 Target Fund Reserve

30 Net Ending Fund Balance

APPENDIX I (cont.)Water Resource Acquisition Fee Cash Flow Analysis, Excluding Financing (Inflated Dollars)


11 12 13 14 15 16 17 18 19 202015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25

23,489,000$ 51,936,000$ (44,289,000)$ (14,687,000)$ 16,151,000$ 49,210,000$ 72,523,000$ 97,439,000$ (32,271,000)$ (8,032,000)$

3,884 3,884 3,884 3,884 3,884 1,880 1,880 1,880 1,880 1,880 570 594 618 643 670 697 726 755 786 819 _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________

2,214,322$ 2,305,111$ 2,399,623$ 2,498,011$ 2,600,432$ 1,310,606$ 1,364,342$ 1,420,282$ 1,478,515$ 1,539,136$

13,876 13,876 13,876 13,876 13,876 9,338 9,338 9,338 9,338 9,338 1,894 1,972 2,053 2,137 2,225 2,316 2,411 2,510 2,613 2,720 _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________

26,288,735$ 27,366,602$ 28,488,662$ 29,656,728$ 30,872,686$ 21,627,229$ 22,513,968$ 23,437,065$ 24,398,010$ 25,398,355$

1,131,000 115,000 - 22,000 980,000 1,826,000 2,549,000 978,000 - 140,000 - - - - - - - - - - _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________

29,634,000$ 29,787,000$ 30,888,000$ 32,177,000$ 34,453,000$ 24,764,000$ 26,427,000$ 25,835,000$ 25,877,000$ 27,077,000$

-$ -$ -$ -$ -$ -$ -$ -$ -$ -$ 144,000$ 150,000$ 156,000$ 162,000$ 169,000$ 176,000$ 183,000$ 191,000$ 199,000$ 207,000$

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 153,972,000 - - - 124,776,000 - - - - - - - - - - - - - - - - - - - - - - - - - - - -

1,043,000 1,086,000 1,130,000 1,177,000 1,225,000 1,275,000 1,328,000 1,382,000 1,439,000 1,498,000 _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________1,187,000$ 126,012,000$ 1,286,000$ 1,339,000$ 1,394,000$ 1,451,000$ 1,511,000$ 155,545,000$ 1,638,000$ 1,705,000$

28,447,000 (96,225,000) 29,602,000 30,838,000 33,059,000 23,313,000 24,916,000 (129,710,000) 24,239,000 25,372,000

51,936,000 (44,289,000) (14,687,000) 16,151,000 49,210,000 72,523,000 97,439,000 (32,271,000) (8,032,000) 17,340,000

28,503,000 29,672,000 30,888,000 32,155,000 33,473,000 22,938,000 23,878,000 24,857,000 25,877,000 26,937,000_____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________23,433,000 (73,961,000) (45,575,000) (16,004,000) 15,737,000 49,585,000 73,561,000 (57,128,000) (33,909,000) (9,597,000)


LineNo.


Revenues2 On-Project3 On-Project EDUs4 WRAF per EDU




10 Other Revenue11 Interest Earnings12 Transfers To (From) WRAF Fund 0050

13 Total Revenue

Expenditures14 On-Project15 SRP Western Canal WTP16 Water Efficiency for New Development

17 Off-Project18 CAP Reallocation19 GRIC Lease20 McMullen Valley Water Transfer







APPENDIX I (cont.)Water Resource Acquisition Fee Cash Flow Analysis, Excluding Financing (Inflated Dollars)


21 22 23 24 252025-26 2026-27 2027-28 2028-29 2029-30

17,340,000$ 46,367,000$ 77,446,000$ 110,688,000$ 146,208,000$

1,851 1,851 1,851 1,851 1,851 852 887 923 961 1,001 _____________ _____________ _____________ _____________ _____________

1,577,056$ 1,641,717$ 1,709,029$ 1,779,101$ 1,852,046$

9,984 9,984 9,984 9,984 9,984 2,831 2,948 3,068 3,194 3,325 _____________ _____________ _____________ _____________ _____________

28,268,290$ 29,427,321$ 30,633,873$ 31,889,895$ 33,197,415$

956,000 1,857,000 2,822,000 3,853,000 4,955,000 - - - - - _____________ _____________ _____________ _____________ _____________

30,801,000$ 32,926,000$ 35,165,000$ 37,522,000$ 40,004,000$

-$ -$ -$ -$ -$ 215,000$ 224,000$ 233,000$ 243,000$ 253,000$

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

1,559,000 1,623,000 1,690,000 1,759,000 1,831,000 _____________ _____________ _____________ _____________ _____________1,774,000$ 1,847,000$ 1,923,000$ 2,002,000$ 2,084,000$

29,027,000 31,079,000 33,242,000 35,520,000 37,920,000

46,367,000 77,446,000 110,688,000 146,208,000 184,128,000

29,845,000 31,069,000 32,343,000 33,669,000 35,049,000_____________ _____________ _____________ _____________ _____________16,522,000 46,377,000 78,345,000 112,539,000 149,079,000


City of Phoenix

Water Resources Acquisition Fee - Phase II JWater Resources Acquisition Fee Cash Flow Analysis,

Including Financing (Inflated Dollars)


APPENDIX JWater Resource Acquisition Fee Cash Flow Analysis, Including Financing (Inflated Dollars)


Line 1 2 3 4 5 6 7 8 9 10No. 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15

1 Beginning Fund Balance 35,684,000$ 42,924,000$ 51,237,000$ 48,711,000$ 67,752,000$ 88,525,000$ 106,555,000$ 126,179,000$ 136,879,000$ 157,581,000$

Fee Revenue2 On-Project3 On-Project EDUs 9,493 9,493 9,493 9,493 9,493 3,881 3,881 3,881 3,881 3,881 4 WRAF per EDU 52 52 215 430 448 466 485 505 526 548 _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________5 On-Project WRAF Revenue 457,088$ 493,616$ 2,042,620$ 4,085,240$ 4,252,739$ 1,810,128$ 1,884,345$ 1,961,606$ 2,042,034$ 2,125,759$

6 Off-Project7 On-Project EDUs 13,663 13,663 13,663 13,663 13,663 12,448 12,448 12,448 12,448 12,448 8 WRAF per EDU 530 530 715 1,430 1,489 1,550 1,613 1,679 1,748 1,820 _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________9 Off-Project WRAF Revenue 6,699,228$ 7,234,587$ 9,769,084$ 19,538,167$ 20,339,253$ 19,290,683$ 20,081,622$ 20,904,990$ 21,762,117$ 22,654,388$

Other Revenue10 Bond Proceeds - - - - - - - 172,742,000 - - 11 Interest Earnings 1,184,000 1,412,000 1,499,000 1,747,000 2,344,000 2,926,000 3,491,000 3,946,000 4,417,000 5,062,000 12 Transfers To (From) WRAF Fund 0050 - - - - - - - - - - _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________13 Total Revenue 8,034,000$ 9,140,203$ 13,310,704$ 25,370,407$ 26,935,993$ 24,026,811$ 25,456,967$ 199,554,596$ 28,221,151$ 29,842,147$

Expenditures Funding14 On-Project Source15 SRP Western Canal WTP Revenue Bond - - - - - - - 33,852,000 - - 16 Water Efficiency for New Development Conservation 96,000 100,000 104,000 109,000 113,000 118,000 123,000 128,000 133,000 138,000

17 Off-Project18 CAP Reallocation Cash - - 1,166,000 1,166,000 1,166,000 1,166,000 1,166,000 - - - 19 GRIC Lease Cash - - 13,810,510 4,267,448 4,063,743 3,860,037 3,656,332 - - - 20 McMullen Valley Water Transfer Revenue Bond - - - - - - - 138,890,000 - - 21 Reclaimed Water Projects22 Agua Fria Linear Recharge Cash - - - - - - - - - - 23 Northern Reclamation Plants Cash - - - - - - - - - - 24 23rd Ave Reclaimed NA - - - - - - - - - - 25 ASLD CAP Reallocation NA - - - - - - - - - - 26 Water Efficiency for New Development Conservation 698,000 727,000 756,000 787,000 820,000 853,000 888,000 925,000 963,000 1,002,000

27 Debt Service28 Existing - - - - - - - - - - 29 Proposed - - - - - - - 15,060,435 6,423,335 6,423,335 _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________30 Total Expenditures 794,000$ 827,000$ 15,837,000$ 6,329,000$ 6,163,000$ 5,997,000$ 5,833,000$ 188,855,000$ 7,519,000$ 7,563,000$ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________31 Annual Surplus (Deficiency) 7,240,000 8,313,000 (2,526,000) 19,041,000 20,773,000 18,030,000 19,624,000 10,700,000 20,702,000 22,279,000

32 Ending Fund Balance 42,924,000$ 51,237,000$ 48,711,000$ 67,752,000$ 88,525,000$ 106,555,000$ 126,179,000$ 136,879,000$ 157,581,000$ 179,860,000$

33 Target Fund Reserve 20,000,000 20,000,000 20,000,000 23,623,407 24,591,993 21,100,811 21,965,967 22,866,596 23,804,151 24,780,147_____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________34 Net Ending Fund Balance 22,924,000$ 31,237,000$ 28,711,000$ 44,128,593$ 63,933,007$ 85,454,189$ 104,213,033$ 114,012,404$ 133,776,849$ 155,079,853$

35 New Bonds - Principal Balance - - - - - 172,742,000 172,742,000 172,742,000

36 NET EQUITY (cash less bonded indebtedness) 28,711,000$ 44,128,593$ 63,933,007$ 85,454,189$ 104,213,033$ (58,729,596)$ (38,965,151)$ (17,662,147)$

Notes:1. Assumes annual WRAF increases equal to the assumed inflation rate / national index (ENR CCI)3. Project costs increase equal to the assumed inflation rate / national index (ENR CCI), with the exception of CAP reallocatin and GRIC lease, which reflect the known cost of future commitments.


LineNo.


Fee Revenue2 On-Project3 On-Project EDUs4 WRAF per EDU




Other Revenue10 Bond Proceeds11 Interest Earnings12 Transfers To (From) WRAF Fund 0050

13 Total Revenue

Expenditures Funding14 On-Project Source15 SRP Western Canal WTP Revenue Bond16 Water Efficiency for New Development Conservation

17 Off-Project18 CAP Reallocation Cash19 GRIC Lease Cash20 McMullen Valley Water Transfer Revenue Bond21 Reclaimed Water Projects22 Agua Fria Linear Recharge Cash23 Northern Reclamation Plants Cash24 23rd Ave Reclaimed NA25 ASLD CAP Reallocation NA26 Water Efficiency for New Development Conservation

27 Debt Service28 Existing29 Proposed






35 New Bonds - Principal Balance

36 NET EQUITY (cash less bonded indebtedness)

APPENDIX J (cont.)Water Resource Acquisition Fee Cash Flow Analysis, Including Financing (Inflated Dollars)


11 12 13 14 15 16 17 18 19 202015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25

179,860,000$ 206,549,000$ 99,743,000$ 117,544,000$ 137,120,000$ 158,574,000$ 169,929,000$ 182,523,000$ 40,115,000$ 50,656,000$

3,884 3,884 3,884 3,884 3,884 1,880 1,880 1,880 1,880 1,880 570 594 618 643 670 697 726 755 786 819 _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________

2,214,322$ 2,305,111$ 2,399,623$ 2,498,011$ 2,600,432$ 1,310,606$ 1,364,342$ 1,420,282$ 1,478,515$ 1,539,136$

13,876 13,876 13,876 13,876 13,876 9,338 9,338 9,338 9,338 9,338 1,894 1,972 2,053 2,137 2,225 2,316 2,411 2,510 2,613 2,720 _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________

26,288,735$ 27,366,602$ 28,488,662$ 29,656,728$ 30,872,686$ 21,627,229$ 22,513,968$ 23,437,065$ 24,398,010$ 25,398,355$

- - - - - - - - - - 5,796,000 4,594,000 3,259,000 3,820,000 4,435,000 4,928,000 5,287,000 3,340,000 1,362,000 1,698,000

- - - - - - - - - - _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________34,299,057$ 34,265,713$ 34,147,286$ 35,974,739$ 37,908,118$ 27,865,835$ 29,165,311$ 28,197,347$ 27,238,525$ 28,635,491$

- - - - - - - - - - 144,000 150,000 156,000 162,000 169,000 176,000 183,000 191,000 199,000 207,000

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

- - - - - - - 153,972,000 - - - 124,776,000 - - - - - - - - - - - - - - - - - - - - - - - - - - - -

1,043,000 1,086,000 1,130,000 1,177,000 1,225,000 1,275,000 1,328,000 1,382,000 1,439,000 1,498,000

- - - - - - - - - - 6,423,335 15,060,435 15,060,435 15,060,435 15,060,435 15,060,435 15,060,435 15,060,435 15,060,435 15,060,435 _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________7,610,000$ 141,072,000$ 16,346,000$ 16,399,000$ 16,454,000$ 16,511,000$ 16,571,000$ 170,605,000$ 16,698,000$ 16,765,000$ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________

26,689,000 (106,806,000) 17,801,000 19,576,000 21,454,000 11,355,000 12,594,000 (142,408,000) 10,541,000 11,870,000

206,549,000$ 99,743,000$ 117,544,000$ 137,120,000$ 158,574,000$ 169,929,000$ 182,523,000$ 40,115,000$ 50,656,000$ 62,526,000$

28,503,057 29,671,713 30,888,286 32,154,739 33,473,118 22,937,835 23,878,311 24,857,347 25,876,525 26,937,491_____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________ _____________178,045,943$ 70,071,287$ 86,655,714$ 104,965,261$ 125,100,882$ 146,991,165$ 158,644,689$ 15,257,653$ 24,779,475$ 35,588,509$

172,742,000 164,104,900 155,467,800 146,830,700 138,193,600 129,556,500 120,919,400 112,282,300 103,645,200 95,008,100

5,303,943$ (94,033,613)$ (68,812,086)$ (41,865,439)$ (13,092,718)$ 17,434,665$ 37,725,289$ (97,024,647)$ (78,865,725)$ (59,419,591)$


LineNo.


Fee Revenue2 On-Project3 On-Project EDUs4 WRAF per EDU




Other Revenue10 Bond Proceeds11 Interest Earnings12 Transfers To (From) WRAF Fund 0050

13 Total Revenue

Expenditures Funding14 On-Project Source15 SRP Western Canal WTP Revenue Bond16 Water Efficiency for New Development Conservation

17 Off-Project18 CAP Reallocation Cash19 GRIC Lease Cash20 McMullen Valley Water Transfer Revenue Bond21 Reclaimed Water Projects22 Agua Fria Linear Recharge Cash23 Northern Reclamation Plants Cash24 23rd Ave Reclaimed NA25 ASLD CAP Reallocation NA26 Water Efficiency for New Development Conservation

27 Debt Service28 Existing29 Proposed






35 New Bonds - Principal Balance

36 NET EQUITY (cash less bonded indebtedness)

APPENDIX J (cont.)Water Resource Acquisition Fee Cash Flow Analysis, Including Financing (Inflated Dollars)


21 22 23 24 252025-26 2026-27 2027-28 2028-29 2029-30

62,526,000$ 77,639,000$ 94,381,000$ 112,849,000$ 133,146,000$

1,851 1,851 1,851 1,851 1,851 852 887 923 961 1,001 _____________ _____________ _____________ _____________ _____________

1,577,056$ 1,641,717$ 1,709,029$ 1,779,101$ 1,852,046$

9,984 9,984 9,984 9,984 9,984 2,831 2,948 3,068 3,194 3,325 _____________ _____________ _____________ _____________ _____________

28,268,290$ 29,427,321$ 30,633,873$ 31,889,895$ 33,197,415$

- - - - - 2,102,000 2,580,000 3,108,000 3,690,000 4,328,000

- - - - - _____________ _____________ _____________ _____________ _____________31,947,346$ 33,649,038$ 35,450,902$ 37,358,996$ 39,377,461$

- - - - - 215,000 224,000 233,000 243,000 253,000

- - - - - - - - - - - - - - -

- - - - - - - - - - - - - - - - - - - -

1,559,000 1,623,000 1,690,000 1,759,000 1,831,000

- - - - - 15,060,435 15,060,435 15,060,435 15,060,435 15,060,435 _____________ _____________ _____________ _____________ _____________16,834,000$ 16,907,000$ 16,983,000$ 17,062,000$ 17,144,000$ _____________ _____________ _____________ _____________ _____________15,113,000 16,742,000 18,468,000 20,297,000 22,233,000

77,639,000$ 94,381,000$ 112,849,000$ 133,146,000$ 155,379,000$

29,845,346 31,069,038 32,342,902 33,668,996 35,049,461_____________ _____________ _____________ _____________ _____________47,793,654$ 63,311,962$ 80,506,098$ 99,477,004$ 120,329,539$

86,371,000 77,733,900 69,096,800 60,459,700 51,822,600

(38,577,346)$ (14,421,938)$ 11,409,298$ 39,017,304$ 68,506,939$


Documents

Water Resources Acquisition Fee Update...1.0 INTRODUCTION 1.1 Purpose In June 2005 the City of Phoenix (City) retained Red Oak Consulting, a division of Malcolm Pirnie, Inc. (Red Oak)