Rainbow approves asset appraisal report

The Rainbow Municipal Water District (RMWD) approved an asset appraisal report of district-owned water and wastewater systems.

The Rainbow board’s 5-0 vote Feb. 28 approved the appraisal report provided by Willdan Financial Services and directed district staff to provide additional information for review at a future board meeting.

“This makes sure that the developers pay their accurate share of the use of the system that’s already there,” said Rainbow general manager Tom Kennedy. “We want to make sure that they buy into the right rate.”

The update of the asset data base will allow for the development of capacity fees which will be effective in cost recovery, equitable to both current and future customers, straightforward to administer, and legally justifiable.

“Part of the capacity is a buy-in to what the existing assets are,” said Kennedy.

In January 2015 the Rainbow board awarded a professional services contract to Atkins to update Rainbow’s water and wastewater master plans which will serve as the basis for infrastructure decisions and capital fees and will also allow for a current analysis of capacity fees paid by developers to support the infrastructure the development requires.

The plans will consider both existing conditions and expected conditions through the year 2030 and will assess potential local water sources, including recycled water and local groundwater supply. The assessment will determine whether the district should build its own reclamation plant or continue to convey wastewater through the Oceanside Outfall. The master plans identify capital improvement projects with cost estimates for new water and wastewater facilities.

In May 2015 the Rainbow board awarded a contract to the Tamayo Group to help facilitate the district’s strategic plan. The strategic plan will provide a long-range vision to guide Rainbow’s board and staff through decisions which will be made in the near future and will help determine the best options for infrastructure investment to serve the new development. In January 2016 the Rainbow board adopted the strategic plan, and the development of subsequent Rainbow budgets will be linked to objectives included in the strategic plan.

In March 2016 the Rainbow board authorized a $115,285 contract with Willdan Financial Services for the Temecula company to conduct a water and wastewater asset cost and capacity fee study.

“Last year we contracted with a specialty appraisal firm to look at all of our facilities,” said Kennedy. “They’re a firm that does this work for private water suppliers when they sell.”

Potential development projects currently within the Rainbow district boundaries could add approximately 2,700 equivalent dwelling units to Rainbow’s service demand, and proposed developments currently outside the district but which could potentially be annexed into Rainbow led to the scenario of approximately 4,300 new equivalent dwelling units.

The asset cost portion of the study reviewed the book value, which is defined as the cost minus the depreciated value, of the district’s water and wastewater assets. That process updated the fiscal value of additional facilities and added any facilities not previously included in the asset model.

The appraisal results will be incorporated into future annual reports, but approval of those reports are not required to set new capacity fees.

“The asset valuation can be used for capacity fees as is,” said Kennedy.

Rainbow’s estimate of the district’s assets had been approximately $80 million prior to the Willdan study. Willdan and subconsultant Hartman Consultants performed site visits to every RMWD facility and spent more than a week in the field inspecting facilities and documenting conditions of the infrastructure. Willdan also reviewed Rainbow’s current planning documents and valued the district’s property, equipment, and inventory.

Willdan appraised the value of Rainbow’s water system at $396 million and the district’s wastewater system at $43 million. The $439 million total is a 448 percent increase from the previous appraised value.

Kennedy expects the new capacity fee structure to be discussed at Rainbow’s April 25 board meeting. “We’re just finishing them up,” he
said.

Rainbow staff will also be working with the district’s Budget and Finance Committee to develop policies related to the increased depreciation expenses which are the result of the increased valuations. The policies focusing on the level of cash funding of depreciation required to maintain the district’s capital reserves are intended to fund asset replacement and rehabilitation projects with rate impacts as small as possible.

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