May 22, 2008At the May Utilities Board meeting, we presented an economic outlook in relation to water services. Development slowdown
The decrease in building permits for new homes is less than we forecasted. - 2007: 300 homes per month
- 2008: 175 homes per month
Homebuilders pay nearly $10,000 per new home in water development fees. The simple fact is that fewer requests for permits translates to less revenue collected. This is the primary contributor to our revenue shortfall. Fewer customers
There are fewer customers using our water system than we predicted. In past years, our community's growth rate was about 2.6 percent; now it is 1.1 percent. Decrease in water use
Because customers realize the importance of prudent use of our water resources, more of us are conserving. This decrease in water use is also contributing to our revenue shortage. Revenue shortfall | Development slowdown | $23.5 million | | Fewer customers and less usage | $9.5 million | | Total | $33 million |
What are we doing?
Our staff is scrutinizing every part of our operations to identify and implement efficiencies. - Labor: selective hiring freeze, vacancy management process, contract labor reduction
- Deferral selective capital expenditures: vehicles and equipment, system maintenance
- Continue our long-term optimization initiatives
- 18.6 percent, or $91.3 million, capital expenditure reduction in 2007 and 2008
- 82 positions reduced in 2007 and 2008 (goal: 200 position total by 2010)
- Selective travel freeze
- 20 percent reduction in corporate memberships and sponsorships
- Deferral of consulting services
Possible impact to bills
Over the upcoming weeks, we will evaluate the need for rate adjustments and continue to identify budget reductions. Our bond rating may be affected if budget and revenue adjustments are not made. To understand bond ratings, consider your credit or FICO score; the higher the score, the better interest rate you receive on loans and credit cards. Currently, our bond rating is one of the strongest in the country. The lower the interest rate on borrowed, the less impact to the customer. If we were downgraded from our current AA rating to an A rating, it could cost the organization and our customers about $50 million over the next 10 years. More resources | 
