© 2019 Econics Innovations Inc. DBA Waterworth
Customer since 2016 | Population: 18,000
- Short-sighted planning given the community’s fast growth
- Steep rate hikes in 2010 caused community outcry
- Slow approval process for consultants and rate increases
- “Politics” kept people from being able to resolve the District’s water problems
RESULTS & BENEFITS
- Better conversations with elected officials
- Shorter board meetings because people can quickly grasp the financial situation
- More trust between District staff and the board earned through long-term planning, and setting and achieving realistic, impactful goals
- Less contention between staff, board and community
- District now has a clear financial plan for the next 20+ years
Our first case study (2018) of Virgin Valley Water District (VVWD) discussed how Waterworth helped VVWD to get off the “rates rollercoaster”. From 2001–2008, VVWD had experienced its largest infrastructure growth ever, with homes and businesses being built as the community expanded. But revenues were growing and the District had obtained several large bonds, so at the time it appeared there was no need to raise rates. In the absence of detailed analysis, however — and with the false sense of adequate revenues — the District didn’t realize the truth of its situation.
In 2010, the honeymoon ended. After six and a half years with no increase, VVWD was forced to raise rates by 36% in order to remain compliant with bond covenants. This sudden rate hike caused understandable shock to the community. Customers quickly reduced their usage in an attempt to manage their water bills. In turn, VVWD was surprised at how well its community could save water! As a result of everyone’s conservation efforts, VVWD’s 36% rate increase yielded only a net effective increase in revenue of 25-28% — so the District was still behind the 8-ball.
In 2015, under the direction of General Manager Kevin Brown, VVWD restructured its rates into a four-tier block system, with moderate increases in both tiered and base rates. It also added a debt-reduction fee (this is now being phased out as the District repays the bonds). With these changes, VVWD gradually stabilized its financial picture.
Because of the public outcry around the sudden rate increase back in 2010, VVWD determined to never impose such a large increase at one time again. The District needed a plan, though, to help it hold true to this commitment. In evaluating alternatives, the District agreed that hiring engineers was cost prohibitive. Staff also recognized that in-house spreadsheets didn’t give them the planning capabilities they knew they needed.
VVWD needed a plan to be financially sustainable for the long term, and it also wanted to be able to reach consensus more quickly with elected officials. After participating in a Waterworth demo, Brown decided VVWD would give the new software tool a try.
A CLEARER, LESS COSTLY TOOL
VVWD had just spent over $60,000 for a rate study by a consulting firm. When comparing that sum to the cost of using Waterworth, District staff recognized that not only did the software offer a massive cost savings over consultants, but it would also deliver ongoing fiscal value. Furthermore, VVWD staff saw that Waterworth would enable them to perform their own rates analysis, modeling and forecasting in-house, and on a more consistent basis.
Another challenge that Waterworth helped VVWD tackle was the public hearing process. Because of state requirements, red tape and the ever-tricky politics of raising rates, the process typically took 18–24 months — a situation that always left the District playing financial catch-up. With Waterworth, staff were instead able to walk the VVWD board of directors through its recommendations using the software as an explanatory tool.
During the first couple of meetings, a Waterworth expert was “in the room” via webinar. But over time, as VVWD staff became more familiar and confident with the tool, Waterworth’s experts weren’t even needed (although they continued to offer standby support via phone). VVWD staff found that Waterworth’s knowledgeable third-party input boosted the board’s confidence. And with the software’s capability to produce clear, easy-to-grasp visualizations, everyone was able to more effectively discuss the issues at hand.
THE EXACT SOLUTION THE DISTRICT HAD BEEN LOOKING FOR
Waterworth helped Virgin Valley Water District to not only perform a detailed financial analysis, but to shift the District’s view and decision-making from a six-year window to a twenty-year-plus horizon. The software’s powerful forecasting has ensured the District can remain financially solvent, keep rate increases smaller, and give its community members much more notice of rate changes. Waterworth is now the central planning software for VVWD. “For financial modeling, I can’t think of another tool that would be more helpful to any entity than Waterworth,” Brown says.
SAVE TIME AND COMMUNICATE BETTER
Waterworth has also proven to be especially useful in the public hearing process. Prior to Waterworth, District staff and board members regularly engaged in multiple meetings for hours at a time. It was a hard and long road to reach consensus, especially when large rate increases were on the table.
Now that the VVWD is using Waterworth, meetings have become considerably shorter. “The key is to have a system in place so it is not laborious and painful for [our elected officials],” says Chief Financial Officer Wes Smith. “Literally, at this last board meeting, I showed them, Here’s the projected line and here’s where the cash drops off, and in order to get the cash back up to where we want, it needs to be 1.3[%],” Smith recalls. “They said, It looks good to us, proceed.”
The conversation took about 10–15 minutes instead of hours. Because the board is now able to so clearly visualize the outcomes of various scenarios and District staff’s recommendations, Smith says the process has become much “cleaner”. Previously, President of the Board, Nephi Julien, says, “It just wasn’t as easy. It took a lot more spreadsheet and flow charts, a lot more slide shows and presentations, and a lot more talking to try to grasp [the District’s financial situation].”
Now Waterworth visually depicts the financial state and future of the District in a way that everyone can quickly and easily understand. “Being able to graphically show all that information on a single graph, not only did it help me as a manager, but it also helped our elected officials who aren’t as intimately knowledgeable about our budget to be able to visually see what we’re talking about,” Brown says. “That really helped them be able to pick it up and make decisions relatively quickly, whereas if we were just dealing with spreadsheets, it would have really slowed the process down.” Julien agrees and adds, “This has made [rate setting] easier. It’s accelerated our decision making, it’s accelerated our budget process. It has just been really useful for aggregating many data points into one place.”
Smith says the board’s confidence in District staff has improved, as well. “Because they know that we’re keeping an eye on stuff and we have a plan,” he says. “We’re not just throwing darts. We’re actually getting in the weeds and fine tuning it.”
Staff enjoy using Waterworth because it allows them to take control of — and responsibility for — their water systems. District employees are actively engaged with the tool and consult it regularly; Smith himself tweaks it on a monthly basis and investigates different scenarios. VVWD staff share progress and projections with the board of directors on an annual basis, to keep everyone apprised of what’s coming. “We’re doing all that so that we’re taking the responsibility in-house to make sure that we are sound and prudent in terms of how we’re managing our operations,” Smith says.
WATERWORTH’S ROLE IN SUCCESSION PLANNING
Waterworth, over consultant reports and siloed spreadsheets, is also proving that it will be an essential tool to succession planning in the District. When Brown first joined the District as general manager, he recalls that VVWD had a master plan in place, but it lacked a detailed financial plan. When the District engaged with Waterworth, staff were able to enter all their data into one management tool and gain a much clearer picture. This makes planning easier now, and for the coming decades.
Going forward, future management teams will benefit from using Waterworth in much the same way, plugging in their data to get easy-to-understand information that’s readily available and enjoyable to share. “It makes it really simple and easy for them to do,” Brown says. “It’s not something that somebody has to reinvent the wheel every time a change in management happens. We have already been there. They’ll just need to maybe replace a tire every now and again, or put air in it, and they’re good to go.”