Budget Message E
BUDGET MESSAGE
FY 1985-86
TIGARD WATER DISTRICT
April 9 , 1985
During the present fiscal year the water district has been
on the accrual versus cash basis in its accounting and budgetary
method. This method of accounting began on July 1, 1975 and
employs the generally accepted principles for an operating enter-
prise . The accrual method of accounting will again be utilized
for the new Fiscal Year 1985-86 , beginning July 1, 1985 .
The financial policies of the water district will remain
essentially the same as in past years . Fiscal restraint has been
the policy of the Board of Commissioners since formation of the
district in 1938 . The present excellent financial condition of
the district reflects this conservative approach.
Again this year, the water district received a clean, un-
qualified opinion from the auditor (Coopers & Lybrand) for both
the financial report and budgetary report for the period ended
June 30, 1984 .
GENERAL
The patrons of the water district have not experienced a
water shortage or restrictions on usage, of any kind, since the
summer of 1971. Supply of water is ample until beyond year 2000 .
The appearance of the water facilities, including reservoir
sites, pump stations, etc . , is first-class . All grounds are
landscaped, well-maintained and are an asset to the community.
The good news is that no increases are planned next year in
consumer rates . The last rate increase occurred in February 1983 .
This will be the longest time interval between rate increases in
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BUDGET MESSAGE (Continued)
the past 20 years . The tax rate will continue its annual decline
from 374 to 31G per $1, 000 assessed valuation. However, upon
realizing an inequity in meter connection fees, the Board of
Commissioners approved an increase in the cost of larger meters,
effective July 1, 1985 . Cost of the standard (household) meter
(5/8" x 3/4" ) will remain the same.
SIGNIFICANT EVENTS OF PAST YEAR
a. Major Capital Improvements .
TWD installed 4 , 800 feet of 24-inch ductile iron pipe
along S . W. Bonita Road, between I-5 freeway and Lake Oswego' s
Waluga reservoir, to parallel and reinforce an exising 16-inch
main. This main installation materially improves the district' s
capability to import more Clackamas River water from Lake Oswego.
A 75-KW diesel generator for auxiliary power at Hi Tor
reservoir has been purchased and should be operational within two
months .
b. Purchase of Land.
TWD purchased on contract 5 .16 acres of land, commonly
called "Air-King site" , located at the northwest corner of S . W.
Burnham and Hall Boulevard, for a future Operations Center (FY
1989-90) . Four annual payments of $100, 000 each, plus accrued
interest, will become due, commencing on July 1, 1985 . One-half
street improvements at the site will be completed by June 1985 .
C. Equipment.
A new Case backhoe was purchased, replacing a 1977 model.
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BUDGET MESSAGE (Continued)
d. Annexations.
Approximately 400 acres of land on the north and south
slopes of Bull Mountain were annexed to the district. These
annexations complete the district' s boundary on the west side and
is coincidental with the Metropolitan Urban Growth Boundary.
At this writing, it appears that the city of Durham will
be annexed and served by TWD, beginning on July 1, 1985 . Prior to
this time, Durham has been served by Lake Grove Water District on
an out-of-district basis.. There are about 200 meter connections
in the city of Durham.
Only one parcel of land of about 100 acres remains to be
annexed to the district prior to year 2000, unless the Urban Growth
Boundary is changed. This proposal, located at S . W. 135th and
Scholls Ferry Road, will be submitted to the boundary commission
soon, but the property owners must, first, agree to be annexed to
the city of Tigard. Upon approval, boundaries of the district will
be finalized as follows:
East: I-5 freeway
North: Beaverton and Metzger Water District
West: Metropolitan Urban Growth Boundary
South: Tualatin River
e. Projects not completed .
Sandblast and paint three (3) steel tanks . This project
was postponed until the State Highway Division completes improvements
to I-5 freeway at the Haines Street overpass .
Installation of 16-inch and 12-inch mains along S . W.
135th and Scholls Ferry Road, including another inter-tie with the
city of Beaverton, was only partially completed because of problems
obtaining an easement and approval for annexation.
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BUDGET MESSAGE (Continued)
f. Change in Political Structure.
In an effort to get municipalities more involved in
the decision-making process of the water system, it was suggested,
for study, the possibility of a reorganization of the governing
body so that more direct representation of cities could be achieved.
The district' s attorney presented a legal brief in which he stated,
in part:
"The first question seems to be what can the Board
of the Water District do, if anything, to alter the manner
in which the composition of its governing body is determined,
i .e. , is it possible that commissioners be chosen to represent
municipal entities within the boundaries of the District as
opposed to the electorate of the District as a whole? My
conclusion is that that cannot be done by the Board or by the
electorate of the District.
The District is a special district created pursuant to
enabling legislation of the State of Oregon. ORS Chapter 264 ,
' Domestic Water Supply Districts ' . As such, the District
Board can exercise only those powers and functions which are
delegated to them by the legislature . Even the voters of the
District on their own initiative cannot change the governmental
structure required of the District. That would require a state-
wide initiative or an action of the legislature to amend Chapter
264, ORS .
. . . . . . . . . . . . . .
The suggestion that the governing body of the district
should be comprised of commissioners designated by and to
represent municipalities within the district is not legally
possible under ORS Chapter 264 . "
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BUDGET MESSAGE (Continued)
GOALS OF THE WATER DISTRICT
A critical situation (on water supply) has not existed in
the district for many years . The district has solved its problems
for the present and short-range time period and is now actively
building for the intermediate and long-range time periods to meet
needs until year 2000 .
The district excels in all categories of a water system,
namely: storage, distribution, and supply. In addition to an
outstanding water system, the district has one of the lowest per
capita costs in Washington County for water service.
A primary goal of the district is to operate a "pay-as-you-
go" water system without future indebtedness . The present indebt-
edness is less than $2 million and that will be paid off within
10� years . To continue along this financial plan means monies
will have to be set aside each year for future major capital
improvements. Such a fund is called "Capital Projects Reserve
Fund" . Monies earmarked for these purposes must be kept in a fund,
separate and distinct from all other funds . These reserves may
be established only for the future financing of a specific project
or activity.
The district has plans for three (3) specific projects to be
constructed prior to year 2000 . These are:
1990 : Operations Center at Hall and Burnham Streets .
($800, 000) (Land is being purchased on contract) .
1995 : 1-MG reservoir at Hi Tor. ($300, 000) . (Land is
owned by district) .
2000 : 5-MG reservoir on 150th Avenue, between Bull Moun-
tain Road and Beef Bend Road . ($1, 000, 000) . (Land
must be purchased) .
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BUDGET MESSAGE (Continued)
FISCAL CONSIDERATIONS
All funds in the Bond Construction Fund were expended on
June 30, 1979 . Therefore, the district has only two active funds,
those being the General Fund and the Debt Service Fund (sometimes
called: Bond Sinking Fund) . The General Fund is used for the
everyday operations of the district while the Debt Service Fund
is a fund established to reserve monies to pay off bonded indebt-
edness . As noted on the previous page, the establishment of a
Capital Projects Reserve Fund will be recommended this year .
DEBT SERVICE FUND
The last .bond issue for the district was in 1976 and no new
bond issues are proposed in the new budget. This has been the
longest time interval between bond issues since 1959 .
On July 1, 1985, the water district' s indebtedness will be
$1, 675, 000 . Annual requirements in principal and interest to
liquidate this debt are shown below:
Annual Payment : Estimated
Fiscal Principal Tax Rate
Year + Interest per $1, 000
1985-86 $ 299 , 190 31G
1986-87 295, 037 28G
1987-88 231, 802 21�
1988-89 183 , 870 15G
1989-90 192, 322 15G
1990-91 165 , 653 12�
1991-92 164 , 172 llG
1992-93 162, 298 10t
1993-94 165 , 017 10G
1994-95 162, 178 9�
1995-96 163 , 912 9�
Annual payments peaked in 1982 so requirements will continue
to decrease substantially each year, particularly this year and
next year, at which time three of the five outstanding bond
issues will be liquidated. While the bonded debt payments
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BUDGET MESSAGE (Continued)
decrease annually, the assessed valuation of the district con-
tinues to increase. Thus, as the years pass, this has a com-
pounding effect on reducing the tax rate.
A history of advalorem taxes is shown on page 7a (on opposite
side of folder) . It is estimated that the tax rate will decrease
from 37� to 31G per $1, 000 assessed valuation which will provide
sufficient funds to make all bonded indebtedness payments for the
next fiscal year, plus one-half year.
GENERAL FUND
A summarized preliminary budget document for the General Fund
has been prepared for the new fiscal year and is shown on the
opposite side of this folder. Supporting documents with historical
data are, also, shown.
It is emphasized that the budget document is a financial
guide only, and when approved and adopted, legally authorizes the
Board of Commissioners to expend funds in specific categories .
It does not authorize the staff to spend any funds . Approval of
individual appropriations is accomplished at regular monthly
meetings of the board.
The budget committee is the final approving authority of the
proposed budget document. Subsequently, the Board of Commissioners
will adopt the approved budget. It is unnecessary to acquire voter
approval of the budget because revenues from taxation are not used
to fund the operation of the district. User fees constitute most
of the income necessary to operate and maintain the system. Taxes
are utilized for payments on bonded indebtedness only. These bond
measures were previously approved by the patrons at the polls . The
public has the right to appear before the committee and make their
views known on the current budget document.
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BUDGET MESSAGE (Continued)
Appropriate public notices have been published in THE TIGARD
TIMES on the time and date of the first meeting. Subsequent meet-
ings, if necessary, will be called by the chairman of the budget
committee.
The next few pages discuss income and expenditures proposed
in the General Fund budget. Most estimated figures are derived
from historical data of previous years. In other cases, knowledge
of pending developments assists in arriving at more accurate pro-
jections . It is noted that no one has a crystal ball so any and
all comments and suggestions are welcome.
It is recommended that the budget committee examine very care-
fully those line items which represent a large percentage of the
total budget. Correct forecasts on these line items can have a
marked effect on the preparation of a realistic budget.
GENERAL FUND
INCOME
% of
Account Amount Total
Beginning Balance. . . . . . $ 474, 000 19%
Water Sales . . . . . . . . . . . . 1, 600, 300 65%
Meter Sales. . . . . . . . . . . . 249, 100 10%
Other Income. . . . . . . . . . . 146 , 600 6%
Total: $ 2, 470., 000 100%
Beginning Balance .
Beginning balance is a very important figure and is derived
by adding the actual balance on March 31, 1985 to estimated income,
less expenditures, for the remaining three months (April, May and
June) of the fiscal year. An excellent beginning balance is fore-
casted as a result of higher than estimated revenues received from
water sales, meter sales, and developer ' s projects .
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BUDGET MESSAGE (Continued)
Being on the accrual method of accounting, the beginning
balance includes inventory on hand which is estimated to be about
$150, 000 on July 1, 1985 . Beginning balance also includes cash
on hand, accounts receivable, less accounts payable.
Water Sales.
Water Sales represent the single most important source of
income in the budget, accounting for 65 % of the total revenue.
Therefore, maximum attention should be given to this line item.
An error of just a few percentage points can make a significant
difference in the total amount of revenue estimated to be received.
Fortunately, water sales are reasonably predictable .
Water consumption for the past five calendar years is shown
as follows:
Consumption:
Calendar Million Gallons % increase
Year per Day or decrease
1980 2 . 60 +1. 6'
1981 2 .76 +6 . 20
1982 2 . 81 +1 . 8% 3 . 3% ay. inc .
1983 2. 79 -0 .7%
1984 3 .00 +7 . 5%
History of water sales is, also, shown on page la in the
attached folder . Those percentage increases reflect consumer rates
as well as increases in consumption so they should not be used as a
basis for projecting future revenue. No increases in consumer rates
are planned this year.
Wet summers and conservation tend to keep water consumption
low. It is believed that with the revived economy and improved con-
struction activity, along with the addition of 200 meter connections
in the city of Durham, consumption will increase to 3 .15 MGD (million
gallons per day) or 5% higher than last year . This percentage is
used in estimating revenue as well as increased costs to purchase
water from others .
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BUDGET MESSAGE (Continued)
Meter Sales .
Income from meter installations is very volatile and unpre-
dictable, being dependent upon building construction. Some
additional revenue will be generated due to an increase in fees
for the larger meters, 1-inch and above. A conservative 10%
increase in revenue from meter sales is predicted.
EXPENDITURES
To some on the budget committee it may be frustrating not
to be able to reduce expenditures more . Unfortunately, just like
the federal and state budgets, 80% of the expenditures are "built"
into the system. It costs a certain amount of money just to open
the doors each morning.
One will find that, for the most part, savings can be made
most easily by minimizing or delaying capital expenditures, such
as pipeline extensions, major maintenance and repair jobs, and by
not purchasing new vehicles and equipment. Indeed, this is often
the tactic used when funds become. short near the end of the fiscal
year. This can, however, be more costly in future years because of
more rapid deterioration of the system and higher maintenance costs
for trucks and equipment as well as a reduction in the quality of
service to patrons .
EXPENDITURES
% of
Account Amount Total
Personal services . . . . . . . . . . . $ 499 , 100 20%
Water Costs . . . . . . . . . . . . . . . . . 680, 000 28%
Repairs: (Lines, pumps, etc .) 45, 000 2%
Meter Installation Expense. . 62, 000 2%
Equipment. . . . . . . . . . . . . . . . . . . 75, 000 3%
Pipeline extensions . . . . . . . . . 223, 000 9%
Land & Improvements . . . . . . . . . 152, 000 6%
Other Expenditures. . . . . . . . . . 333, 900 14%
Trans to Cap. Proj . Res. . . . . 50, 000 2%
Ending Fund Balance. . . . . . . . . 350, 000 14%
Total: $2, 470, 000 100%
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BUDGET MESSAGE (Continued)
Personal Services.
Representatives of the Board of Commissioners and the
employees met a few months ago and a mutually agreeable settle-
ment on wages and fringe benefits was approved. (Note : water
district employees are non-union, but are afforded the opportunity
to negotiate an acceptable wage package) . After several lengthy
meetings of the board, it was agreed to grant the employees a 2-�%
increase in basic pay and a 3% increase (from 7% to 10%) in dis-
trict' s contribution to the retirement plan.
It should be noted that such changes in the basic salaries
also affect other elements in the personal services account,
namely: retirement, social security, SAIF, life and disability
insurance, and overtime pay.
Eleven of the twelve full-time employees are eligible for
the pension and deferred compensation plan.
Water Costs .
Costs to import water account for the highest single expendi-
ture. A 5% increase in water consumption is projected, both in
revenues and costs .
Repairs : Lines, pumps, reservoirs, etc .
In addition to normal repairs on pipelines and pumps, etc . ,
again, this year it is deemed necessary to sandblast and paint the
three steel tanks owned by the district. This work was postponed
from last year. These tanks have not been painted in over 11 years .
Rust is showing through on the sides . Two of these tanks are
located near the Haines Street overpass at I-5 freeway, while the
other one is a small tank located at S . W. 121st and Gaarde Street.
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BUDGET MESSAGE (Continued)
Meter Installation Expense.
A 10% increase in meter installation expense is predicted
to coincide with meter installation income.
Equipment.
The need for auxiliary power at No. 1 reservoir has existed
for too long. A 175-KW generator should be purchased to be in-
stalled in the shop area. This generator will provide power to
operate the pumps when normal electricity is curtailed for any
reason. These pumps increase the water pressure to an acceptable
level to about 500 homes in the Little Bull Mountain area .
As the district continues to grow, so does the need for
larger equipment to perform the necessary tasks . A supplementary
computer with more memory is required so that fixed assets and
inventory can be included in the accounting system. This was
recommended by the auditor. The district has limited office
space for such additional equipment. Fortunately, computers are
being built smaller and smaller each year .
Included in the budget are funds to purchase a new pick-up
truck to replace a 1976 model.
Pipeline Extensions (See attached map) .
a. Beaverton connection. 1, 400 feet of 12" pipe along
Scholls Ferry Road and 1, 000 feet of 16" pipe along
135th Avenue.
b. City of Durham loop. 2, 900 feet of 12" pipe along
Upper Boones Ferry Road to replace asbestos-cement pipe.
C. Ross and 81st Avenue. 2, 500 feet of 8" pipe for
circulation loop.
d. Naeve Street. 740 feet of 8" pipe for circulation
loop.
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BUDGET MESSAGE (Continued)
Land and Improvements .
Contract terms for purchase of the Air-King site call for
four annual payments of $100, 000 each, plus interest on the out-
standing balance at 6%, on July 1, 1985, 1986 , 1987 , and 1988 .
Funds to make the first payment on July lst, plus $24, 000 interest,
are included in the budget.
One of the primary objectives of the district, prior to year
2000, is to construct a 5-MG (million gallon) reservoir on S . W.
150th Avenue, as noted on Page 5 of this report . This reservoir
will require 3 acres of land. A site has been selected, at the
correct elevation, for purchase . The land is presently vacant and
should be available for purchase this year. This land purchase
will complete all required land acquisitions until year 2000 .
Air-King Site.
Although the district purchased this land last year, on con-
tract, actual possession of the property will not occur until
July 1, 1985 . On that date it is proposed to lease the property
for $36 , 000 annually for at least a 2-year period, with options
for additional years . This is shown as rental income in the
budget.
Likewise, there are rental expenses to consider . These include
$10, 500 in property taxes and about $1, 500 for fire insurance, etc .
The remainder of income, $24, 000, will take care of the annual
interest payment.
The district has the option of leaving the property vacant
and, thus, not paying property taxes (because of tax-exempt status) .
In view of the gain to be derived, as noted above, it is considered
prudent to lease the property and keep it on the tax rolls .
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BUDGET MESSAGE (Continued)
Ending Fund Balance.
An Ending Fund Balance of $350, 000 is deemed necessary to
ensure adequate funds to start the succeeding fiscal year . To
start the fiscal year, the $100 , 000 payment (in cash) must be
made for the Air-King site. The Ending Fund Balance also in-
cludes $150, 000 in inventory as well as Accounts Receivable,
less Accounts Payable. This balance is considered a minimum to
ensure that short-term borrowing to meet current expenses will
be unnecessary and, also, provides some interest to accrue from
short-term investments (savings) .
CAPITAL PROJECTS RESERVE FUND
This fund will be established for the first time this year
with a modest deposit of $50, 000 as a beginning. In future years,
it is believed that larger amounts can be placed into this account.
In compliance with budgetary law, these funds will be ear-
marked for the specific purpose of constructing an Operations
Center in the near future. (See attached drawings) .
SUMMARY
In the opinion of this budget officer who has reviewed the
district' s budgets for the past 15 years, this budget is probably
the best. It provides the funds necessary to accomplish important
tasks, correct the few remaining deficiencies in the system, and
at the same time, continue liquidating indebtedness and investing
in the future. The patrons are well-served with no consumer rate
increases and a reduction in the tax rate while being beneficiaries
of a more reliable water system and alternatives for future water
supply.
In passing, one cannot forget to mention the continued out-
standing performance and contribution made by all employees of
the district.
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BUDGET MESSAGE (Continued)
THE FINALE
This is as an appropriate time, .as any, ,to announce my
retirement as Administrator/Engineer in four years no later
than. June 30, 1989, God willing. This advance notice is made
so that the district will be aware and can start making plans
for an orderly transition.
Twenty years duration on a second career is long enough.
I have, essentially, accomplished all of my goals and am proud
and completely satisfied with the status of the water district.
The district progressed from one of the worst to one of the
best. It is unbelievable that it took so long to get to this
point. One thing is for sure -- water systems are .not built in
a day.
It is hoped that, in the future, a registered engineer will
not be required on the staff. With advance work and planning,
this can be accomplished. For example, prior to leaving, it is
my intention to have permits and plans prepared for the three
major projects programmed to be completed prior to year 2000 .
(see Page 5) .
Almost all major pipelines extensions for the district will
be completed within a few years . Only pipeline replacements will
be necessary in which an engineer is not required. Developers
can utilize consulting engineers for design work as is now
authorized by statute. The district may desire to retain a
registered engineer on a consulting basis, only.
It is sincerely hoped that the Board of Commissioners will
select a replacement from within the organization.
Res ectfully submitted,
Ober�tE antee
Budget Officer
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