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The LCRA Board of Directors has affirmed staff's vision of
a financially well-managed water and wastewater utility system
that grows responsibly with the population of Central Texas
that LCRA plans to serve.
At a work session of the Board's Water Operations Committee
on Aug. 16, the staff presented the results of a detailed
staff analysis of each of LCRA's
39 existing water and wastewater systems. This analysis
reveals a utility system facing challenges and issues common
to a growing business.
But, General Manager Joe Beal told the commmittee, LCRA's
utility system is already a net financial contributor to
LCRA and to LCRA's mission to provide water and wastewater
services while protecting the environment and contributing
to the quality of life for citizens in its service area.
Improved systems
LCRA has improved the water and wastewater utility systems
of about 20 rural and suburban communities, solving problems
such as too little potable water, water with contaminants
and wastewater that does not meet regulatory standards.
"With our existing utility system, we are making life better
for thousands of people we serve," Beal said. "The public
needs these services and it's something LCRA needs to be
doing."
Board members commended LCRA staff for the depth and detail
of their analysis of existing systems and, as Board Chairman
Ray Wilkerson observed, "is in consensus with staff's long-term
planning" for the growth of the water and wastewater utility
system.
Lessons learned for growing business
The review of systems discussed lessons learned, such as
entering the business without an equity pool to invest
in systems acquired by LCRA. Some of those systems were
aging and needed extensive repair to bring them in regulatory
compliance.
Beal also said staff, himself included, had made the mistake
of being "too eager to please" communities who wanted LCRA
to manage or take over their systems. This led to acquisition
of some systems that needed more repair and maintenance than
ratepayers could easily afford. In this mode, staff also
produced financial estimates before doing enough of the necessary
work to determine their accuracy. This sometimes resulted
in project costs that exceeded those estimates.
"But dwelling on past missteps doesn't solve problems.
We need to find solutions but to do that we need guidance
from you," he told the committee.
Goal: improve performance
To move forward, Beal and Water Services Executive Manager
Suzanne Zarling asked the committee to consider alternatives
beyond LCRA's fiscal year 2006 business plan, which the
Board has previously approved. With the goal of improving
financial and operational performance in the utility system,
the business plan assumes steady and sometimes aggressive
rate increases designed to move each system toward financial
self sufficiency.
Financial assumptions in the business plan are based on
the long-standing Board expectation that each of LCRA's utility
systems will be responsible for paying its own upkeep and
costs. Sixteen of LCRA's 39 utility systems are not expected
to cover their costs, despite rate increases planned in the
foreseeable future.
However, more than half of LCRA's utility systems, representing
about 85 percent of LCRA's capital investment to date, can
be considered core businesses that already are able to pay
for themselves or will get there in a reasonable time. Among
those systems are:
Challenges with these systems involve managing the growth anticipated
over the next 30 years and the capital investments that will
be necessary to support that growth. (See water
utility plans).
Other ways to reshape the business
Board members said they supported staff recommendations that
would reshape LCRA's water and wastewater utility business,
such as the investment of equity into the utility system
to pay down debt and expansion of systems in high-growth
areas. The Board directed staff to bring solutions to these
challenges to them for consideration on a case-by-case
basis.
If we make equity investments into the utility system,
it will reduce the burden of debt payments and move the utility
toward fully covering its entire share of the costs, Zarling
said.
With appropriate strategic investment in high-growth areas,
expansion of the current service area and correction of problems
in other areas, LCRA's utility system could be in the black
in the 2016 to 2020 time frame, Zarling said. Staff projections
based on these policy assumptions indicate that LCRA's utility
system would be the fastest-growing business at LCRA in the
next 20 years.
"The long-term outlook for the system is very bright," she
said. |
