Parker-Stonegate Regionalization Compark Business Metro District, E-470 Potomac Metro District, Lincoln Park Metro District, Parker Water and Sanitation.

Parker-Stonegate RegionalizationCompark Business Metro District, E-470 Potomac Metro District, Lincoln Park Metro District, Parker Water and Sanitation Sanitation District, Stonegate Village Metro District

“financial solutions that make a difference”StepWise Utility Advisors, LLC. | 58 Inverness Drive East, Suite 260Englewood, CO 80112 | (866) 935-3101www.StepWiseAdvisors.com

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BACKGROUNDOverview of the Regionalization Study

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How Did This Process Begin?• Inclusion (or regionalization) has been discussed

a few times before– Each discussion ended for various reasons before a

recommendation could be presented at Board levels

– The last discussion (around 2006-07) ended when the issue was tabled by the Stonegate Board of Directors

• Stonegate renewed its interest in 2009– Signed MOU with PWSD in Feb. 2009

• Stonegate Engaged StepWise to conduct a 1st phase analysis of the cost/benefit of an inclusion (regionalization)

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Review the Timeline to Now

Feb-2010Stonegate retained

StepWise

Mar-2010Phase 1 Prelim.

Findings presented to

Stonegate Board

Feb-2011Stonegate task force receives

preliminary results

May-2010Phase 2 Findings

presented to Stonegate

Board

Jul 10 – Feb 11

PWSD and Stonegate

analysis

Mar-11Feb-11 May-11 Jun-11Mar-10Feb-10 May-10 Jun-10 Jul-11 Nov-11

Jun-2010Stonegate & PWSD begin discussions

for a regional utility

Mar-2011Joint Task Force &

Parker Board receives findings

May-2011PWSD Board

Workshop

Nov-11Stonegate Inclusion

Issue on Nov. Ballot

Jul-11PWSD

considers Resolution for

Inclusion

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Overall Approach – Find Scale

TOTAL GALLONS PRODUCED

AVER

AGE

COST

/ G

ALLO

N

Economies of Scale.The cost per unit

decreases with more units produced

How it Works

Total Fixed Cost= $1,000Variable Costs = $2.00 / gallon

If we produce 20 gallons:Total Cost = $1,040

Avg. Fixed Cost = $50 / gallon ($1,000/20)Variable Cost = $2.00 / gallon ($40/20)

Avg. Total Cost = $52 / gallon

If we produce 100 gallons:Total Cost = $1,200

Avg. Fixed Cost = $10 / gallon ($1,000/100)Variable Cost = $2.00 / gallon ($200/100)

Avg. Total Cost = $12 / gallon

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22

3344

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Regionalization Changes Cost Structure

TOTAL GALLONS PRODUCED

AVER

AGE

COST

/ G

ALLO

N

All Else Being Equal.Increased total costs

mean increased avg. cost for the SAME amount of

water produced

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3

22

New Economies.Benefits occur when we can

increase units of usage without undue increase to costs

22

3

= Fail

= Win

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Basic Regionalization Model

Stonegate Assessed

Value

The new district has a new balance sheet with increased assets and no increase in

debt. It can now operate at lower cost per unit than either of the 2 separate districts

Stonegate is transferring 100% of its assets, including 3,300 accounts generating instant cash

flow for the regionalized district.

PWSD AssetsPWSD

Debt

StonegateCASH FLOW

Stonegate ASSETS

Regionalized Utility

District

Stonegate Debt

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Searching for Economies of Scale

PWSDBaseline Projection

PWSDBaseline Projection

StonegateBaseline Projection

StonegateBaseline Projection

1 2

Regional ModelCombined Operations

Regional ModelCombined Operations

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Compare to BaselinesCompare to Baselines

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During this process we identify:

•Changes in cost structure•Increases in units produced•Change in avg. cost per unit•Whether economies of scale exist or not

During this process we identify:

•Changes in cost structure•Increases in units produced•Change in avg. cost per unit•Whether economies of scale exist or not

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PWSD Status Quo Projection 1

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Stonegate Status Quo Projection2

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Regional Model3

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Other Issues: Rueter-Hess

Stonegate Stonegate Mill LevyMill Levy

Parker Parker

Water Water

Mill LevyMill Levy

Credit is necessary to avoid double charging Stonegate residents for

Rueter-Hess

They will be paying 2 taxes for Rueter-Hess while everyone else pays just one

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Property Tax Impacts: Change in PWSD Assessed Valuation & Mill Levy

* Assumes a 1% average increase in property valuations from the 2010 recorded valuation levels.

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