APWA Public Works Institute Managing A Water Supply

APWA Public Works Institute Managing A Water Supply Utility Terry Leeds P. E. , Director Charlie Stevens, Water Utility Officer Water Services, KCMO April 8, 2015

CLEAN, SAFE, RELIABLE WATER IS FUNDAMENTAL TO QUALITY OF LIFE IT’S OUR MOST VALUBLE RESOURCE 2 4/8/2015

Goals of the Presentation Provide an over-view of a water utility • Identify the key functional areas • Describe internal relationships and complexity of operation • Identify the challenges for management 3 4/8/2015

General Utility Information • Water Services is part of KCMO City government • Water Services operates three utilities • Water • Wastewater • Stormwater • • Each utility is a separate enterprise fund Source of revenue is customer payments FY 15 Budget - $351 million FTE’s 1, 005; 843 filled 4 4/8/2015

Water Utility Approximately 168, 000 accounts 32 whole sale customers ~600, 000 consumers FTE’s - 546 FY 2015 Budget $158 million 5 4/8/2015

KCMO Water System 6 4/8/2015

Managing A Water Supply Utility Primary Functional Areas • • • Operations Engineering/Contracting Customer Service Communications Human Resources Finance/Performance Management 7 4/8/2015

Operations • Water Treatment • Distribution System Maintenance 8 4/8/2015

Water Treatment • 240 MGD Treatment Plant - Missouri River Intake & Wells - Enhance Lime Softening - Built in the 1920 s - Average Flow - 105 MGD (FY 14) - Staff of 102 FTEs; (FY 15 avg. filled 86) • Pumping System - 18 Pumping Stations - Water Storage – 143 mg - 5 Pressure Zones • Challenges - Maintaining Aged Facilities - Comply with Regulations - Reducing Unaccounted for Water 9 4/8/2015

Water Treated 6 000 5 000 1998 1999 2000 2001 4 000 2002 2004 2005 3 000 2006 2007 2008 2009 2 000 2011 2012 2013 2014 1 000 Average for last 17 Yrs c De v No t Oc Au 10 Se p g l Ju n Ju ay M r Ap ar M Fe b n 0 Ja Millions of Gallons 2003 4/8/2015

Water Distribution System Assets • Staff of 111 FTEs; (FY 15 avg. filled 93) • 2, 805 Miles of Main – Pipe Dating From 1874 • 35, 000 Line Valves • 24, 000 Hydrants • 1, 270 air release valves • 165, 000 curb boxes • 16, 500 Backflow Devices Challenges • Deferred Maintenance ü 44. 9 main breaks/100 miles (CY 2014) ü Valve Assessment & Exercise program ü Hydrants • 11. 5 percent of repair work orders (CY 2014) were done by contractors 11 4/8/2015

350 Main Break Graph 300 1998 1999 2000 250 2001 2002 Millions of Gallons 2003 2004 2005 2006 2007 150 2008 2009 2010 2011 100 2012 2013 2014 Average for last 17 Yrs 50 0 Jan March May July September 12 November 4/8/2015

Water FY 16 -FY 20: Maintenance Program Project Type FY 16 FY 17 FY 18 FY 19 FY 20 Valve Exercising $1, 100, 000 $850, 000 Pipeline Workforce $2, 500, 000 $2, 650, 000 $300, 000 $150, 000 $500, 000 $1, 000 $500, 000 Service Line Kill $400, 000 $500, 000 Hydrant Repair $1, 000, 000 $1, 000, 000 $2, 000 $2, 000 $8, 300, 000 $7, 500, 000 $7, 000, 000 $7, 000 Air Release Valves Curb Stops Valve Replacement TOTAL: 13 4/8/2015

Engineering/Contracting • Master Planning • Capital Improvements Program • Operations & Maintenance Support 14 4/8/2015

Water Services Capital Improvement Program Investing in the future of our team and our community so we may continue a legacy of providing quality services for generations to come. • $1. 2 billion investment over 5 years • Over 18, 000 direct and indirect jobs created • Projects designed to: • • • Improve water quality and protect public health Improve customer utility services Meet regulatory requirements Promote economic development Build and maintain utility infrastructure 15 4/8/2015

BRE Analysis & Results Predictive Monitoring Strategy Economic-Based Replacement Strategy isk R d se a e cr Replace / Redesign Strategy In Condition Monitoring Strategy Run to Failure 16 4/8/2015

FY 2016 BRE Results INTERACTIVE CAPITAL IMPROVEMENT PLANNING Lo. F vs. Co. F Heat Map Graphics and Action Strategy Groups 36. 7 miles in A, B and C Groups 17 4/8/2015

Water CIP: FY 16 -FY 20 Budget Amounts by Project Type FY 16 FY 17 FY 18 FY 19 FY 20 Treatment $10, 500, 000 $22, 000 $23, 500, 000 $15, 500, 000 $27, 000 Pump Station $11, 090, 000 $25, 915, 000 $5, 300, 000 $17, 000 Transmission $7, 850, 000 $0 $6, 000 $1, 820, 000 $0 $900, 000 Distribution $49, 255, 000 $56, 940, 000 $46, 000, 000 $51, 000 Total $78, 695, 000 $104, 855, 000 $80, 800, 000 $80, 320, 000 $78, 900, 000 Total Water 5 -Year CIP $423, 570, 000 18 4/8/2015

Engineering (Continued) Example Capital Improvements Cash Funded ØWater Main Replacement: $5 million ØFacility Improvements: $1 million ØTreatment & Pumping Equipment: $6 million ØValve Rehabilitation & Replacement: $2 million ØFire Hydrants: $1 million Bond Funded ØShoal Creek Pump station: $6. 6 million ØVivion Road Transmission Main: $7. 8 million ØWater Main Replacement Construction: $25. 7 million ØWater Main Replacement Design: $7 million 19 4/8/2015

Engineering (continued) System Support • Trouble Shooting - Plant Equipment problems - SCADA • Distribution System • Difficult/Complex System Repairs • Modelling * Low Flow * Low Pressure • Maintain GIS 20 4/8/2015

Customer Service • Meter Reading • Billing • Customer Service 21 4/8/2015

Meter Reading & Billing • Cash Register • Total Meters – ~169, 000 • 89% residential and 11 % commercial • Sizes vary from 5/8 -inch (91%) to 12 -inch • Automated Meter Reading – 95 percent • Delinquent Accounts • Monthly Billing 22 4/8/2015

Business Customer Care • Call Center, 7 a. m. – 7 p. m. , M-F • Lobby, 8 a. m. – 5 p. m. , M-F • 32 Customer Service Reps/Specialists • 20, 000 to 30, 000 Phone Calls per Month • Common Issues - Open-Close Accounts - Late Payment/Payment Plans - Delinquent accounts 23 4/8/2015

Call Abandonment Rates May 2014 to March 2015 30000 25% 25000 20000 15% 15000 10000 5% Target 5% 5000 0 -5% май-14 июн-14 июл-14 авг-14 Calls Received сен-14 Calls Handled окт-14 ноя-14 Target Abandon Rate 24 дек-14 янв-15 фев-15 мар-15 Abandonment Rate 4/8/2015

Average speed of answer 120 97 100 80 70 Seconds 66 60 52 64 60 50 45 41 40 33 29 20 0 май-14 июн-14 июл-14 авг-14 сен-14 окт-14 25 ноя-14 дек-14 янв-15 фев-15 мар-15 4/8/2015

Communications • • • Customer Communications is Key Higher Expectations Transparency More Sophisticated Consumer New Forms of Communication Hot Topics - Construction Disruption - Water Outages – Repairs - Post-Repair/Construction Restoration - Water Rates & High Bills 26 4/8/2015

Utility Reputation for reliability (WSD Customer survey) 90% Natural gas company 89% Electric company 84% Kansas City Water Services 73% Wireless or cellular company 69% Internet service provider 68% Local telephone company 62% Cable/satellite television provider 0% 10% 20% 30% Q 4 2014 Q 3 2014 40% Q 2 2014 50% 60% 70% 80% 90% 100% Q 1 2014 % of “Always” and “Usually” 4/8/2015 27

Human Resources People are What Make or Break the Utility Issues/Concerns - Finding/Hiring Good People - Keeping Good People - Succession Planning - Training Programs - Diversified Workforce - Safe Work Environment - Union Grievances 28 4/8/2015

Finance/Performance Mgmt. • Budget • Rates • 47 Key Performance Indicators 29 4/8/2015

Water Utility Example Budget FY 15 Operating Budget $101, 949, 131 Capital Investment Cap. Outlay - $ 5, 126, 330 Debt Services - $34, 553, 267 Capital Imp. - $16, 000 $55, 679, 597 $157, 628, 728 Anticipated Revenue: $153, 039, 596 Projected Cash Reserve: $48, 618, 864 (142 days) 30 4/8/2015

Rate Making Perspectives Utility’s Perspective Does the revenue meet cost of service requirements? Are expenses fairly allocated to customer base? Customer’s Perspective Cost of water is growing faster than the CPI Society’s Perspective Does the rate structure promote economic efficiency? Oversight and Regulatory Perspective Do rates balance system and customer interests? Overall Perspective Underpricing Overpricing 31 4/8/2015

Utility Revenue Requirements (simplified) Debt + equity costs Annualized capital costs & Operation and maintenance expenses + Depreciation + General Fund Fees Annual operating expenses Annualized capital costs + Annual operating expenses Annual revenue requirements 32 4/8/2015

CPI 33 13 20 11 09 20 20 07 20 05 20 03 20 01 99 20 19 97 95 93 19 19 19 89 91 19 19 87 19 85 83 19 19 79 81 19 19 77 19 75 73 19 19 71 19 69 19 67 19 Price Index (1982 -1984 = 100) Historical Water Rates 400 350 300 250 200 150 100 50 0 Year Water Rate 4/8/2015

Managing a Water Supply Utility Challenges • Maintain High Quality Water • Aging Infrastructure – Deferred Maintenance • Providing for Growth • Workforce - Retiring Baby Boomers - Hiring/Retaining Good People • Keeping Up With Technology • Data-driven management • Find/Utilize Sustainable Solutions • High Customer Expectations • Rate Fatigue • Meeting Regulations 34 4/8/2015

QUESTIONS 35 4/8/2015