© 2019 Econics Innovations Inc. DBA Waterworth
Customer since 2016 | Population: 18,000
Virgin Valley Water District (VVWD) needed to eliminate unpredictable, steep water rate increases. They chose Waterworth to help them get off the “rates roller coaster”.
RESULTSSince starting with Waterworth, rate increases have become smaller and steadier. The District is now planning out rates four years in advance and the public is onboard with a more predictable and sustainable revenue model.
• Multi-year, 4 tier inclining block rate structure
• Long-term forecasting: both residents and the District are able to plan ahead
• Less expensive than consultants
• Improved confidence in ability to communicate with the Board of Directors
• Identify and proactively address upcoming financial challenges
Virgin Valley Water District (VVWD) in Nevada provides water services to residents in the City of Mesquite and the Town of Bunkerville, a population of approximately 22,000 people. The District’s board of directors value affordable services, and because of a short-term appearance of financial solvency and increasing revenues, they hesitated to raise rates. Although this was popular among residents, a detailed financial analysis revealed the reality of the situation: The District was quickly losing financial ground. Compounded with the need to remain compliant with bond covenants, the District was about to begin the upward climb of the “rates roller coaster”.
In 2010, after six and a half years with no change in rates and the largest infrastructure boom the region had seen, the District was forced to implement an across-the-board 36% rate increase. This was necessary to maintain an adequate debt service coverage ratio as per their bond agreement.
Price shock was understandably felt by residents and conservation efforts immediately ramped up in response. As a result, the net effective revenue increase of 25-28% was insufficient, and the District knew they needed a better plan. Outsourcing to consultants was cost prohibitive for the small water district, with typical quotes coming in between $60,000 and $90,000, and Excel wasn’t robust enough for their modeling needs.
VVWD wanted a solution that would keep rates analysis in-house and allow staff to explore different rate structures and their impact on their long-term financial forecast. They also wanted a communication tool for presenting to elected officials that would help them clearly and easily convey the District’s financial position and needs. Most of all, they needed a way to realistically forecast both costs and revenue over a longer-term horizon, in order to avoid playing catch up, and repeating periods of rate stagnation followed by massive increases.
HOW WATERWORTH HELPED
VVWD was one of Waterworth’s intrepid first users and staff saw the Waterworth vision right away. They found the onboarding process to be easy, and data uploading streamlined. From there, staff worked at their own pace, exploring the software’s different tools and gaining confidence with its functionality. VVWD Chief Financial Officer, Wes Smith, said that at one point everything clicked. He was able to model about 10 different robust scenarios in just a couple of days. His reaction: “Oh man, that is cool!” Staff then presented Waterworth to their board. Waterworth co-founder, JP Joly, was on the phone to explain the software, while Smith connected the dots of how Waterworth would help the District and be utilized in the rate setting process.
The Waterworth vision quickly came into focus for Board members as well, as they saw the effects of rate changes instantaneously. “Waterworth allows us to show what we need to do to be a sustainable system”, says Smith. Dynamic graphics helped Board members appreciate the District’s long-term financial forecast, their revenue requirements, and what needed to happen to meet them. “It’s amazing how quickly our Board members are beginning to understand the issues related to this process,” adds Smith. Ultimately the entire Board, and even some community members, became excited about Waterworth and threw their support behind it.
VVWD’s first rate change using Waterworth was still significant. The increase was necessary to help catch up financially, but thanks to good communication tools and a collective commitment to financial sustainability, it was approved with little opposition. A year later, the Board agreed to a series of small-but-steady increases and set a goal of maintaining a four-year rate schedule. They plan to continue to use Waterworth annually to perform integrity checks and make small course corrections. The District has vowed to never impose such a large rate spike at one time again, and their goal is to keep increases under 2% in any given year, with a target of 1% or less.
SUPPORT MADE THE DIFFERENCE
Extensive support from Waterworth has provided immense value to VVWD. Waterworth is acutely aware of their objectives, and meets annually with staff to set goals and create a work plan to achieve them. Waterworth experts have also been on the phone for support during board meetings, and District staff stays in regular contact, using tools such as live-chat, sometimes even after hours.
Staff have also appreciated Waterworth’s receptiveness to feedback on the software. They provided several suggestions for improved functionality, as well as requests for customization, and Waterworth was able to accommodate those quickly.
VVWD staff knew they needed a better way to forecast revenue needs and ensure they are financially sustainable for the long-term. For them, expensive consultants proved cost-prohibitive, while laborious (and easy-to-break) Excel spreadsheets simply were not up to the task. Fortunately, Waterworth checked all the right boxes and VVWD is in a much better position because of it.
Developing a multi-year rate schedule has allowed residents to prepare, since future rates are no longer a surprise. This has led to less-contentious public meetings, with only two people showing up at one recent rate hearing. As Smith says, “Waterworth has just taken the heat out of it.” The platform has allowed the District to have non-emotional conversations about rate increases and take positive steps towards sustainable service delivery.