Woodmoor Water and Sanitation District, Oct. 9 – Draft 2024 budget presented; tap fee discussion continues

Budget presented; workshop and hearing scheduled
Water and sewer tap fees debate continues
Hospital reimbursement option dropped
“Forever chemical” class action lawsuits
Cybersecurity strategy recommendations
Highlights of the operational reports

By James Howald

District Manager Jessie Shaffer presented a draft of the 2024 budget to the Woodmoor Water and Sanitation District (WWSD) board at its October meeting. The board continued its effort to set water and tap fees and voted on a change to its employee benefits policy. Two class action lawsuits related to Per- and Polyfluorinated Substances (PFAS) were discussed, and Shaffer updated the board on the district’s cybersecurity strategy. The board also heard operational reports.

Budget presented; workshop and hearing scheduled

Shaffer distributed copies of a proposed 2024 budget to the board and asked it to schedule a workshop for further discussion. The board scheduled the workshop for Oct. 24.

Shaffer pointed out that a change to rates or fees required an announcement to the public 30 days in advance of a vote on that change and said that if changes were decided on at the November meeting there would not be adequate time to announce the change before the December meeting. He suggested that the December board meeting be changed from Dec. 11 to Dec. 18 to provide adequate notice. The board approved his suggestion to reschedule the December meeting.

Attorney Erin Smith suggested opening the Nov. 13 board meeting with a public hearing on the budget and continuing the hearing until the Dec. 18 board meeting. Votes on any rate changes and on budget approval could be held at the December meeting, she said.

The board decided to follow Smith’s schedule.

Water and sewer tap fees debate continues

Following up on his presentations at the two previous board meetings, Andrew Rheem of Raftelis, the company that advises WWSD on rates and fees, presented another round of analysis intended to help the board decide how to set water and tap fees to balance the interests of current residents with those of future residents and developers. Rheem addressed the questions raised by the board following his previous presentations. He said he had corrected an error in his calculations and had reconsidered the role of the district’s Renewable Water Infrastructure Fee (RWIF), the monthly charge that covers debt service on the district’s purchase of Woodmoor Ranch and its water rights, in his analysis.

Rheem explained the guiding principles and the case law regarding the setting of tap fees. He said first there must be a link between the impact new development has on the system and the fees that fund that development. Secondly, there must be a rough proportionality between the fees and the impact of new development. Finally, the fees can’t discriminate between types of new development.

Funding the El Paso County Regional Loop Water Authority (EPCRLWA) water re-use project, in which WWSD is a participant, is an important factor in how WWSD should set its tap fees, Rheem said. He discussed three methods to fund the project:

Revenue bonds, backed up by rate increases, for $85 million in debt, with a 20-year loan term and 4.5% interest rate. This scenario assumes the other three participating districts will also assume their share of the costs.
General Obligation bonds, which would need to be approved by voters.
A “Go it alone” scenario where WWSD pays for the entire project, expected to cost $181 million with revenue bonds.

Rheem said he had re-calculated the replacement cost of WWSD’s entire system in light of the board’s comments at the previous meeting and the Replacement Cost New (RCN) of the system stood at $137 million, about $3 million more than he previously calculated.

Rheem said he had changed his approach to distributing the outstanding debt from the purchase of the Woodmoor Ranch based on last month’s discussion. WWSD has $12.5 million of unretired debt for that purchase. Dividing that debt by the number of residences when Woodmoor reaches complete buildout means each resident would be responsible for just under $2,400 of that debt, Rheem said.

Board President Brian Bush questioned this approach, asking Rheem why the unretired debt should not be divided by the current number of residents rather than by the future number of residents at buildout. Rheem argued using future residents was necessary to abide by the principle of proportional impact of development. Bush also questioned whether the Woodmoor Ranch and its water rights should be considered as outstanding debt or as an asset.

Rheem said the current water tap fee was $29,788 and proposed three potential water tap fees, each assuming a different approach to funding the EPCRLWA project:

A water tap fee of $44,791 if the project is funded with revenue bonds.
A water tap fee of $27,195 if the project is funded with general obligation bonds. In this scenario the project cost would be paid via property taxes, not tap fees. This fee would be $2,553 less than the current fee.
A water tap fee of $64,370, if the cost of the project is paid entirely by WWSD. This is the “Go it alone” scenario.

Director Tom Roddam asked Rheem to estimate the maximum tap fee WWSD could charge without being challenged in court. Shaffer said he thought a case could be made for a water tap fee around $54,000 if the EPCRLWA project were funded with revenue bonds and the costs were shared among the four participating districts.

Directors Dan Beley and Bill Clewe supported setting the water tap fee at $44,791, arguing that Woodmoor was a desirable community and new residents should be prepared to pay the price to live here.

Bush reiterated his concerns about how the RCN was being calculated, about whether Woodmoor Ranch should be thought of as an asset or an outstanding debt and about inconsistencies in how the EPCRLWA costs were factored in.

The board asked Rheem to update his analysis in time for its budget workshop on Oct. 24.

Hospital reimbursement option dropped

Shaffer asked the board to authorize removing the Hospital Reimbursement Plan (HRP) from the district’s employee benefit package. The option doesn’t pay for a lot, he said, and the Colorado Employer Benefit Trust (CEBT), which provides WWSD’s health plans, wants to remove it from its offerings. CEBT included the HRP in its portfolio to provide a low-cost, low-benefit choice so that districts could reach 100% participation. CEBT has dropped the requirement for 100% participation, Shaffer said.

The board authorized Shaffer to draft a resolution removing the option if CEBT accepts the possibility WWSD may not reach 100% participation by employees.

“Forever chemical” class action lawsuits

Shaffer told the board that class action lawsuits have been filed against 3M and DuPont regarding their production of PFAS chemicals, sometimes called “forever chemicals” because of their persistence in the environment. They have been linked to many health issues, including cancer. Shaffer said the lawsuits had been filed on behalf of every public utility in the country.

Shaffer said WWSD had tested for these chemicals in the past and they were not present in WWSD’s groundwater in detectable levels. Bush said the district could join the lawsuits if it had spent money on PFAS removal or testing. The lawsuits are asking for $11 billion in settlements. He asked Smith to file a claim on the WWSD’s behalf.

Cybersecurity strategy recommendations

At the previous board meeting, Shaffer was asked to review WWSD’s approach to cybersecurity. The district will add a technology called “endpoint detection and response,” which involves continuous monitoring of the WWSD’s IT assets. Shaffer said the staff would be trained on cybersecurity threats.

Highlights of the operational reports

In his financial report, board Treasurer Roy Martinez said that revenue from water sales was at 67% of the budgeted amount. Given the time of year, he would expect water sales to be closer to 75%, he said. Martinez attributed the lower sales to the year’s rainier weather.
Operations Superintendent Dan LaFontaine reported two main breaks, which together led to 2 million gallons of lost water.
District Engineer Ariel Hacker reported that the county’s project to expand Highway 105 between Jackson Creek Parkway and Knollwood Drive was uncovering unknown utility lines.
Hacker said WWSD had sold 58 water and sewer taps to Classic Homes for residences in the Monument Junction East development and 30 taps to the Cloverleaf development east of Lewis-Palmer High School.

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The next meeting is scheduled for Nov. 13 at 1 p.m. Meetings are usually held on the second Monday of each month at 1 p.m. at the district office at 1845 Woodmoor Drive; please see www.woodmoorwater.com or call 719-488-2525 to verify meeting times and locations.

James Howald can be reached at jameshowald@ocn.me.