Title: Comparison With Other Wholesale Water Suppliers
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Permanent Link: http://ufdc.ufl.edu/WL00004724/00001
 Material Information
Title: Comparison With Other Wholesale Water Suppliers
Physical Description: Book
Language: English
Publisher: West Coast Regional Water Supply Authority
 Subjects
Spatial Coverage: North America -- United States of America -- Florida
 Notes
Abstract: Jake Varn Collection - Comparison With Other Wholesale Water Suppliers
General Note: Box 28, Folder 14 ( Governance Study for the Florida Legislature - September 10, 1996 ), Item 4
Funding: Digitized by the Legal Technology Institute in the Levin College of Law at the University of Florida.
 Record Information
Bibliographic ID: WL00004724
Volume ID: VID00001
Source Institution: Levin College of Law, University of Florida
Holding Location: Levin College of Law, University of Florida
Rights Management: All rights reserved by the source institution and holding location.

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3. COMPARISON WITH OTHER WHOLESALE WATER SUPPLIERS

This section summarizes the results of our survey of selected wholesale water suppliers.
Included is a description of relevant features of the four following suppliers:

* Peace River Water Authority
* Massachusetts Water Resources Authority
* Brazos River Water Authority
* Metropolitan Water District of Southern California

The survey of peer suppliers focuses on governance, rates, allocation methods, and financing
new facilities. Detailed descriptions of the peer review can be found later on this section.

Summary

The governance structures of the wholesale water suppliers we surveyed vary in the size of the
board, who appoints them, and the proportional representation given to each of the members.

Board Size
The boards range in size from 5 members of the Peace River Water Authority to 51 on the
Metropolitan Water District. At 6 members (only five voting), the West Coast Regional
Water Supply Authority (the Authority) has a relatively small board compared with those
above. The size of the board itself should have little if any impact on the quality of the
decisions made as long as all of the relevant parties are represented among the members.
Smaller groups tend to take less time to make decisions (fewer opinions need to be
considered) and require less staff support. A larger board may allow for consideration of a
greater variety of opinions and have a greater appreciation for subtle impacts of its decisions
on specific groups in the community. Exhibit 3-1 compares the board membership and voting
rules for each of the peers with the Authority.

Membership and Voting
Although each of the governing boards operate on the principle of one member one vote, the
Metropolitan Water District provides for enhanced voting for those jurisdictions with greater
assessed property valuation. This gives a greater voice to the more populous jurisdictions
while ensuring that all members' interests are represented. The composition of the District's
governing board gives at least one vote to each member, but enhances the voting strength of
the larger jurisdictions. This structure roughly parallels our Federal governing structure which
consists of a House of Representatives based on population and a Senate giving equal
representation to each state.


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Exhibit 3.1
Comparison of Governing Structures
Appointments Voting

Brazos River Water 21 members: 1 vote per member
Authority All appointed by
Governor

Massachusetts Water 11 members: 1 vote per member
Resources Authority 1 Secretary of
Environmental Affairs
4 appointed by Governor
3 appointed by Mayor of
Boston
3 appointed by Advisory
Board*

Metropolitan Water District 51 members: 1 vote per member
Drawn from 14 cities and
13 municipal authorities
(Jurisdiction membership
is augmented based on
property valuation)
Peace River Water District 5 members: 1 vote per member
Appointed by the
governing bodies of the
members
4 county
1 city (non-voting)

West Coast Regional Water 6 members: 1 vote per member
Supply Authority Appointed by governing
bodies of the members
3 county
2 city
1 city (non-voting)

* Advisory Board comprises representatives from several entities including the user cities and towns.

Governance Structure and Decision Making
Governing is a process of balancing the interests of competing groups. For a water authority
that often means balancing the need for water with the potential environmental impact of
withdrawal. For a governance structure to be effective, it must receive input from all the
relevant constituents, make informed decisions, and be able to ensure that they are carried out.


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Generally speaking, governing boards have two methods for enforcing decisions -- the carrot
(market mechanisms or incentives) or the stick (state law). Certain decisions made by a
wholesale water authority are likely to generate significant disagreement and therefore require
a mechanism for enforcement. Such decision matters include: expanding the aggregate water
supply, allocating the new supply, and allocating the cost of the new supply among members.

Exhibit 3-2 summarizes the method used by our peer group for making these decisions and
whether or not it is based on a carrot approach, a stick approach, or relies upon consensus.


Brazos River
Water Authority


Massachusetts
Water Resources
Authority


Metropolitan
Water District


Peace River
Water District


West Coast
Regional Water
Supply Authority


Exhibit 3-2
Methods for Enforcing Collective Decisions


Developing, allocating and financing
new water supply


I I


Board decision




Board decision



Board decision




Subscription


Subscription*


Enforcement Method


Contractual
Agreement


Board can intercept State
aid to member
governments


Market -- Voting
corresponds to financial
interest


Consensus


Consensus


* Recent attempts to agree upon developing new water supply have failed to achieve a consensus.

The source of the appointments and the representation of members on the governing board
affects the ability of the board to carry out its decisions. These two factors affect whether or
not the wholesale water supplier acts as a cooperative (with limited power) or as utility (with
relatively more power and independence within broad guidelines).

The governing boards of the peer wholesale water suppliers differ in who makes the
appointments. Two of the authorities have significant input from the state level. The
Governor of Texas makes all of the appointments to the Brazos River Water Authority while


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the Governor of Massachusetts influences directly or indirectly 8 of the 11 appointments to
the board (including the 3 appointed by the Advisory Board which includes several
gubernatorial appointments itself).

The participation of the Governor in making appointments to the board is accompanied by the
state's financial backing of the decisions the governing board makes. In the case of
Massachusetts, for example, the Massachusetts Authority may intercept state aid to member
jurisdictions to ensure that the financial obligations of the Authority are met. None of the
members of the Massachusetts Authority, therefore, can exercise veto power over decisions
of the Massachusetts Authority.

The Metropolitan Water District takes a different approach. By augmenting the membership
of the larger jurisdictions, the decisions of the District's governing board are more likely to be
in sync with the majority of the users. This does not eliminate the veto power of member
jurisdictions, but reduces the probability that members with the financial clout to veto the
District's decisions will do so.

For Peace River and the Authority to make decisions on aggregate water supply, allocation,
and financing requires a consensus among the voting members. These two Authorities are
structured in such a way that each of its participants can exercise a veto over the decisions of
their respective governing boards. Consequently, these Authorities tend to focus on providing
additional or new water supplies for a specific member which is financed by that same
member -- the subscription method of financing new construction. Attempts to perform like a
regional authority that develops new water resources for the entire region and spreads costs
evenly can be thwarted easily by one member claiming that it cannot or will not contribute the
revenue necessary to finance the new resources. With neither the authority to coerce payment
from members (such as intercepting state funds as in the case of Massachusetts Water
Resources Authority) nor a voting system that corresponds to financial clout, the two Florida
authorities will have difficulty enforcing aggregate water supply decisions.

Peer Review

Peace River/Manasota Regional Water Supply Authority

Governance
The Peace River/Manasota Regional Water Supply Authority is governed by a board
representing the member jurisdictions. The Boards of County Commissioners of Charlotte,
Manatee, Sarasota and Desoto Counties each appoint one member of their Commission to the
Authority Board. The city of Northport purchases water from the Authority, but does not
appoint a representative to the Board. Each Authority Board member is appointed for one
year by the Chairman of their respective county commission and serves for a one-year term.
Authority members may be reappointed.


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Each of the Board members has one vote with the majority ruling (3 of 4 directors). Although
it has never been used, the interlocal agreement between members allows for a weighted vote
method whereby board members would have one vote for each full 100,000 gallons produced
from the Water Treatment Plant and delivered to consumers.

The Peace River Authority was created in 1983 through an interlocal agreement. The
Authority has all powers granted to it by Florida Statutes Section 373.1962.

Financing and Ownership of Facilities
The Peace River Authority owns one facility -- the Peace River Regional Water Treatment
Facility located in DeSoto County. Charlotte County purchased the facility in 1991 from
General Development Utilities, Inc. and transferred it to the Authority. The facility is
currently a 12 million gallons (mgd) per day plant but is scheduled to be expanded to 18 mgd
in the year 2000. The estimated cost of expansion is $47,463,000. Funding sources will be
SWFWMD, U.S. EPA and an Authority bond issue.

Rates
Each customer of the Authority pays the same wholesale rate for water. Customers pay a
water charge to cover the fixed and variable costs of operating the facility. Included in the
charge is a capital cost component to repay Charlotte for acquisition of the facility. Also
included in the water rate is a facility use cost that is equal to the ad valorem taxes that would
have been collected by all taxing authorities located within DeSoto County for the Peace
River Regional Water Treatment. The facility use fee is agreed to by its members through a
contractual provision in the agreement. The cost of water per 1000 gallons of allocation for all
customers for fiscal year 95-96 is $1.278.

Allocations. Entitlements, and Credits
Each customer agrees to take a certain annual allocation which it pays for it even if the total
allocation is not used. The facility charge is arrived at by multiplying the base facility charge
rate per 1000 gallons allocated to that party each month without regard to actual water used.

When a customer receives water in excess of the peak month quantity for any month it pays
an additional charge derived by multiplying the monthly billing by 2.0 times the percent of
water delivered in excess of the amount provided in the delivery schedule unless an
emergency arises in which case the additional charge is waived. The same charge applies for
exceeding total annual quantity. If a customer determines that the quantity of water scheduled
for delivery in a given year exceeds their demand they can sell credits to other customers for
their surplus water by entering into an annual sales contract with another customer.

In addition, the Peace River Facility Fund is also a general fund that reflects the budget for
Administrative costs. Each member's share of these costs are calculated on base contribution
and a pro rated share of total administrative costs.


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Allocation of Costs for New Facilities
The Authority uses a subscription method for allocating the cost of new facilities to member
jurisdictions. If the Authority needs to develop new facilities to increase its pumping capacity
or expand its current facility, it can issue a revenue bond to raise construction funding. To
secure the bond, the Authority would seek a commitment from members that wanted access to
the additional water to be pumped. Only those members that want access to the additional
water would be obligated to pay more per 1,000 gallons of water to assist in financing the
bond. The Authority cannot issue a bond without first obtaining a commitment from at least
one of its members to finance it.

Brazos River Authority
The Brazos River Authority is governed by a Board of Directors of 21 members. These
individuals are appointed by the Governor of Texas subject to approval by the Texas Senate.
Board members represent regions within the 65 Texas Counties covered by the Brazos River
Basin. These board members do not have to be elected officials. No more than two directors
shall be appointed who reside in the same County at the time of their appointment. Each
member services a six year term with seven directors appointed or reappointed every 2 years.

Each board member receives one vote. Meetings are moderated by the chairman who is
elected by the Board. An extensive committee structure operates within the Board structure to
assess assigned issues and make recommendations to the Board.

The Brazos River Authority was created in 1929 by State legislation, pursuant to the
provisions of Article XVI, Section 59 of the Texas Constitution.

Financing and Ownership of Facilities

The Brazos River Authority operates a basin wide reservoir system of eleven reservoirs for
which it supplies untreated water to municipal (cities and towns), industrial and agricultural
users. The Authority also operates three regional sewerage treatment systems, one delivery
system, one potable water treatment system, and a hydroelectric generating facility. The
Authority operates the systems under contracts with various governmental agencies. Capital
construction is financed through member contributions or revenue bonds.

Rates
The Authority determines an annual revenue requirement based on operating and maintenance
expense and debt service payments for raw water service. A system rate is then adopted by the
Board. Rates are based on acre-feet of water requested by customers in long term contracts.
The Authority recently transitioned from project cost recovery to system wide cost recovery.
All other services fo the Board (e.g. wastewater treatment) are charged on a project cost
basis..


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Allocations. Entitlements. and Credits

Each raw water customer agrees to take a certain annual allocation which it pays for even if
the total allocation is not used. The contracting party may not cancel the agreement or reduce
the amounts of water it is obligated to pay for. However, should the contracting party ever
determine that it has water surplus to its anticipated needs from water to be supplied by the
Authority, the Authority will try to find another party who is able and willing to purchase the
surplus water. The terms of this separate agreement should be at a price not less favorable to
the Authority than the price and terms of the agreement between the Authority and the party
selling the water. If the Authority fails to find such a party at such price and on such terms,
the contracting party may make a written request to the Authority that the Authority reduce
the amounts of water for which the contracting party is obligated to pay.

Allocation of Costs for New Facilities
Contracts between the Authority and its raw water customers generally provide that each
contracting party pay to the Authority its pro rata share of operating and maintenance
expenses and debt service requirements of the revenue bonds based on a system wide cost
recovery process. The Authority has considered, but not yet implemented, an up front capital
recovery fee for new facilities. That decision is anticipated when the next reservoir is
constructed/acquired.

Massachusetts Water Resources Authority

Governance
The Massachusetts Water Resources Authority is governed by an eleven member executive
board. The board is chaired by the Massachusetts Secretary of Environmental Affairs. In
addition to the Secretary, 2 members are directly appointed by the Governor and serve
conterminous with the Governor, 1 member appointed by the Governor upon recommendation
of the Mayor of Quincy for a term of 4 years, 1 appointed by Governor upon recommendation
of selectmen of Winthrop for a term of 4 years, 3 members are appointed by the Mayor of
Boston and serve conterminous with the Mayor, and 3 by the Authority's Advisory Board for
a term of six years. An affirmative vote of six members is necessary for the Board to act.

The law establishing the Authority also established an Advisory Board consisting of a voting
representative from each of the user cities and towns; 1 representative from the Metropolitan
Area Planning Council; 6 persons appointed by the Governor (1 of these is to be an expert in
environmental protection); 1 representative from the Connecticut River Basin area; 1
representative from the Wachusett watershed area; representatives from the Quabbin and
Ware watershed areas; and two persons qualified by membership or affiliation in
organizations directly concerned with the recreational or commercial uses of Boston Harbor.
The Advisory Board was established to serve as a liaison between the Authority and the Local
Bodies.


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The Massachusetts Water Resource Authority was established in 1984 by an Act under
Massachusetts Chapter 372.

Financing and Ownership of Facilities
The Authority owns the waterworks system, pipes, conduits and other infrastructure. All
watersheds, reservoirs and other water rights are retained by the Commonwealth.
There are six water distributions systems within the Authority's service area. These six
systems are supplied through tunnels and aqueducts from two active and two stand-by
reservoirs and water is distributed through pumping and major transmission and storage
facilities, all of which are owned and maintained by the Authority.

Rates
Water charge for most members are based on water consumption in the preceding fiscal year.
Nineteen local body's water charges are based on the current fiscal year. These 19 receive
water pursuant to contractual arrangement. The Authority sets its rates and charges at levels
sufficient to pay, among other things, its current expenses and its debt service. The obligation
to pay the Authority's rates and charges is a general obligation of each local body, supported
by its full faith and credit and payable from all revenue sources.

In setting water rates, the Authority first identifies through the budgeting process the total
amount of revenue which must be raised through water rates, net of other anticipated sources
of revenue. The charge per million gallons of water, or unit charge, is derived by dividing the
total amount of required rate revenue by the aggregate number of gallons consumed in the
immediately preceding calendar year. The charges to each local body for a given fiscal year
are determined by multiplying the unit charge by the number of gallons consumed by each
local body during the immediately preceding calendar year

Allocations. Entitlements. and Credits
Assigning entitlement and allocating water supplies is not an issue for the Authority because
of existing excess water capacity.

Allocation of Costs for New Facilities
Capital expenditures are financed principally from the proceeds of revenue bonds issued under
general resolution. Debt service costs become part of the water rate charge.

Metropolitan Water District of Southern Califoria

Governance
The District consists of 27 member agencies that include 14 cities; one county water
authority; and 12 municipal water districts. The Board of Directors is comprised of at least
one representative per district. The other director seats are allocated based upon the assessed
value of real property, specifically, a member agency may name one additional director for
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boundaries. Voting procedures are based upon relative assessed valuation of real property
within the District of each member agency.

Financing and Ownership of Facilities
The District owns five water treatment facilities; fifteen hydroelectric power facilities; 775
miles of distribution system pipelines; the 242 mile Colorado River Aqueduct; and numerous
other plant and equipment.

Capital construction of new facilities are financed mostly by proceeds from the sale of water
revenue bonds, general obligation bonds, and commercial paper offerings. In addition,
approximately 20% of the capital program is financed through the District's pay-as-you go
program (from operating revenues).

Allocation of Costs and Voters Rights
The water rate is set to recover operations and maintenance expenses; revenue bond interest
and principal payments; revenue bond reserve requirements; a portion of the charges under the
State Water Contract; and all other obligations payable by net operating revenues. Member
agencies are not contractually obligated to purchase water from the District.

Allocation of Costs for New Facilities
If the Authority needs to develop new facilities to increase its pumping capacity, it can issue a
revenue bond to raise construction funding. The Board approves the resolution for the capital
construction and all members are legally bound by the resolution. Bonds are secured solely
by a lien on net operating revenues of the facility and do not constitute a general obligation of
indebtedness of the Authority. Member agencies are not contractually obligated to purchase
water from the new facility.


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