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Board of Directors
March 13, 2018
Board Item 4 Slide 2 March 13, 2018
Board Item 4 Slide 3 March 13, 2018
MWD Act authorizes property taxes to pay obligations of the district
Proposition 13 allows agencies to repay existing voter-approved indebtedness
Metropolitan’s share of SWC costs are within the exception for indebtedness
Metropolitan’s general obligation bonds are within the exception for indebtedness
Board Item 4 Slide 4 March 13, 2018
MWD Act Section 124.5, enacted in 1984, restricts ad valorem property taxes to recover:
Metropolitan’s general obligation bond debt service
A portion of its State Water Contract obligations, limited to the debt service on state general obligation bonds (Burns-Porter bonds) for facilities benefitting Metropolitan
Board may suspend restriction pursuant to providing notice to the Legislature, a public hearing, and a finding that doing so is “essential to the fiscal integrity of the district”
Board suspended the restriction for FYs 2013/14, 2014/15, 2015/16, 2016/17 and 2017/18
Board Item 4 Slide 5 March 13, 2018
February 2018: Noticed Legislature
March 2018: Public Hearing
April 2018: Board adopts resolution suspending Section 124.5 for FY 2018/19 and 2019/20
August 2018: Board establishes the tax rates for FY 2018/19
August 2019: Board establishes the tax rates for FY 2019/20
Board Item 4 Slide 6 March 13, 2018
.0035% of assessed valuations
A single-family residence in Metropolitan’s service area assessed at $400,000 currently pays about $14 per year in ad valorem taxes towards Metropolitan’s costs
Proposal to maintain the rate Proposed biennial budget and water rates and charges for FYs 2018/19 and 2019/20 are based on continuation of the existing tax rate
Board Item 4 Slide 7 March 13, 2018
0.0000
0.0050
0.0100
0.0150
0.0200
0.0250
0.0300
0.0350
0.0400
0.0450
19
60
19
64
19
68
19
72
19
76
19
80
19
84
19
88
19
92
19
96
20
00
20
04
20
08
20
12
20
16
Tax
Rat
e %
Fiscal Year
Board Item 4 Slide 8 March 13, 2018
$0
$200
$400
$600
$800
$1,000
$1,200
20
19
20
20
20
21
20
22
20
23
20
24
20
25
20
26
20
27
20
28
Millio
n D
olla
rs
Fiscal Year Ending
Rate FundedSWC Costs
Tax FundedSWC Costs
Tax FundedSWC GODebt ServiceCosts
Board Item 4 Slide 9 March 13, 2018
Fundamental to fiscal health are mechanisms for funding immediate and anticipated SWC obligations that are balanced
SWC obligations have steadily increased and are expected to continue to increase
~33 percent of budgeted expenditures; the single largest cost category
Ad valorem taxes help ensure a fair and appropriate balance between fixed costs and fixed revenues
~80 percent of Metropolitan’s costs are fixed, yet only 16 percent of revenues are fixed
~70 to 80 percent of SWC obligations are fixed, yet ad valorem taxes on Burns-Porter bonds are only 2 percent of the SWC costs
Board Item 4 Slide 10 March 13, 2018
Metropolitan provides a reliable supplemental water supply to a broad service area; the region and its substantial economy benefit from the availability of water
Ad valorem taxes ensure:
The cost of Metropolitan’s services are shared by all property-owning residences and businesses
The diversity of fixed revenues is maintained, which supports strong credit ratings
The diversity of fixed versus volumetric revenues preserves equity across member agencies
The balance of property taxes, rates, and charges are balanced and promote long-term fiscal health
A critical fixed source of revenue is maintained when alternatives are unavailable or impractical
Board Item 4 Slide 11 March 13, 2018
Board Item 4 Slide 12 March 13, 2018
Notice to Member Agencies, January 23, 2018
Information Board Letter February 1, 2018
Workshop #1, February 12, 2018
Workshop #2, February 27, 2018
Workshop #3, March 12, 2018
Receive input at Public Hearing on March 13, 2018
Workshop #4, March 27, 2018, if needed
April 9, 2018: Recommendation by F&I Committee, and Workshop #5, if needed
April 10, 2018: Board Action
Board Item 4 Slide 13 March 13, 2018
$0.0
$0.2
$0.4
$0.6
$0.8
$1.0
$1.2
$1.4
$1.6
$1.8
$2.0
2017/18Budget
2018/19Budget
2019/20Budget
Billio
n D
oll
ars
Other
CC
RTS
Taxes
Water Revenues*
* Includes water sales, exchanges and wheeling
Board Item 4 Slide 14 March 13, 2018
$0.0$0.2$0.4$0.6$0.8$1.0$1.2$1.4$1.6$1.8$2.0
2017/18Budget
2018/19Proposed
2019/20Proposed
Bil
lio
n D
oll
ars
Demand Management Supply Programs Colorado River Power O&M State Water Contract Capital Financing
Board Item 4 Slide 15 March 13, 2018
Maintain AAA/AA+/Aa1 ratings
Achieve/Maintain coverage ratios • Debt service coverage = 2.0
• Fixed charge coverage = 1.2
PAYGO funding • 60 percent per year
• Integral to maintaining coverage targets
• Provides financial flexibility
Board Item 4 Slide 16 March 13, 2018
0
100
200
300
400
500
600
700
2017 2018 2019 2020
Millio
n D
olla
rs
Fiscal Year Ending
Unrestricted Reserve* Target Reserve Minimum Reserve
Overall Rate Inc. 4.0% 4.0% 3.0% 3.0%
Water Transactions
(MAF)** 1.54 1.55 1.65 1.75
Rev. Bond Cvg 1.6 1.5 1.6 1.9
Fixed Chg Cvg 1.4 1.4 1.5 1.7
PAYGO, $M 132 108 120 120
* Revenue Remainder and Water Rate Stabilization Fund
** Includes water sales, exchanges and wheeling.
Board Item 4 Slide 17 March 13, 2018
Rate Type
2018
Approved
2019
Proposed
% Increase
(Decrease)
2020
Proposed
% Increase
(Decrease)
Full Service Untreated Volumetric Cost ($/AF)
Tier 1 $695 $731 5.2% $755 3.3%
Tier 2 $781 $817 4.6% $842 3.1%
Full Service Treated Volumetric Cost ($/AF)
Tier 1 $1,015 $1,050 3.4% $1,078 2.7%
Tier 2 $1,101 $1,136 3.2% $1,165 2.6%
RTS Charge ($M) $140 $133 (5.0%) $136 2.3%
Capacity Charge ($M) $37 $31 (15.7%) $32 2.3%
Rates and Charges Effective January 1st
Full Service Cost means the Full Service Rate, consisting of the following rate
components: the applicable Supply Rate, the System Access Rate, the System
Power Rate, the Water Stewardship Rate, and if applicable the Treatment Surcharge
for treated water service.
Board Item 4 Slide 18 March 13, 2018
Board Item 4 Slide 19 March 13, 2018
Treated Untreated
2.5% 4%
