Elect Larey McLaren 2011

Rate Realities (extended)

FreeRangeAuthor — Mon, 24 Oct 2011 00:09:39 +0000

(extended article)

General Facilities Charges

General Facilities Charges (GFC’s) for both water and sewer are fees paid for connecting to the system. GFC’s are typically collected from builders or developers through Developer Extension Agreements (DEA’s) who then recoup the expense from the homebuyer at time of sale. They are separate from service rates. Neighborhoods can also form Utility Local Improvement Districts (U-LID’s) to petition the District to construct and connect sewer conveyance to the system, paying an assessment at time of connection. These are the primary ways we implement our “growth pays for growth” policy.

Water Rates

There are two components of water service rates. The base rate for single family residential ratepayers is the customers’ share of the cost to maintain and provide the facilities – pumps, pipes, reservoirs, etc. – required to deliver water to the meter. This rate is fixed and appears as a separate line item on the bi-monthly billing statement. It includes maintenance and operations expense, debt service on capital construction financing and administrative expenses. The consumption charge is for actual water usage computed in units of hundred cubic feet (HCF on your statement). A hundred cubic feet is equivalent to 748 gallons and the average bi-monthly residential consumption is approximately 8-10 HCF. Per unit rates are higher in summer months because consumption is significantly higher. You may see two consumption line items on your statement for the billing cycle during which seasonal rates transition. We hope to encourage conservation since the price we pay for water from our supplier – the city of Everett – is dependent upon a formula based on our peak usage (summer consumption is much higher) compared to average usage. It benefits us all to minimize summertime spikes.

Purchased water is a major expense component. We have recently concluded a lengthy contract negotiation with Everett for a 50 year water supply agreement. This new contract ensures stability for many years to come. The favorable result of the negotiations combined with lower than expected rates we obtained for construction financing enabled us to reduce planned water rate increases for 2011 and 2012 from 14% to 5%.

Sewer Rates

Our sewer rates are driven by flat fees established in contracts with King County METRO and the City of Everett. Our contract with King County expires in 2036 and the agreement with Everett expires early in 2020. Approximately 74% of the sewer charge appearing on your statement is a flat fee ‘passed through’ directly from the treatment processor. The balance covers overhead specific to Alderwood operations. Sewage treatment is our major expense component. It represents 30% of our total operating budget.

I have frequently lamented our participation in this arrangement, but the roots of our current wastewater treatment situation germinated nearly 50 years ago. For more on this subject, please see “Perspective”.

Some Historical Perspective

Alderwood Water District was established in 1931. We have grown over the years to be the largest special purpose water and sewer district in Washington State. We are responsible for over 1000 miles of pipe, dozens of pumps and lift stations, several reservoirs, a secondary sewer treatment facility and the attendant accoutrements for all of them. Our annual operating budget has reached $60M and the Capital Improvement Plan has identified projects valued at over $150M. Every asset has a finite life cycle and many of our assets are aging and near or past the end of their service lives. In this challenging economy sensitivity to rising costs is heightened. Many of us are struggling to make ends meet. Our Board does a comprehensive rate analysis every 3 years. In addition to the lousy economy a complicating factor in recent years has been our awareness of the neglect that has occurred in years past. Some agencies make a habit of deferring necessary capital replacement projects in order to keep rates artificially low. This practice creates a false sense of rate stability and increases probability of catastrophic service failure. Unfortunately deferral was Alderwood policy throughout the 1980’s and into the 1990’s. The reality is that continuing to delay necessary upgrades/replacements is an increasingly risky proposition. We have been playing “catch-up” and we are making headway but it is a large, complex challenge that will require time and resources, including all the attendant rate impacts, well into the future. The rate increases in recent years are largely attributable to the current costs of overcoming the neglect of the past.

One factor affecting Alderwood activities is the challenges posed by Mother Nature’s strongest force – gravity. In a topographically diverse area like ours, gravity is not always our friend. Moving water and sewage uphill requires pumps and pipes that are more expensive to construct and that are more expensive to keep operational. Pumps and lift stations have moving parts that fail or wear out and pressurized mains are more prone to failure. We attempt to take advantage of gravity but sometimes circumstances demand more costly solutions.

I think we need to maintain policy that encourages effective application of resources to sustaining critical water and sewer infrastructure. I believe responsible stewardship demands a balance between low rates and necessary infrastructure integrity. I have worked diligently to keep rates low while ensuring that critical infrastructure maintenance is performed effectively. Early in my tenure as Commissioner, we were evaluating the Sewer Comprehensive Plan (review and update required by statute every 5 years) preliminary report. Four options were outlined in the report for how to handle our wastewater services. I have philosophical concerns about hitching our metaphorical wagon to another agency’s horse – especially one based outside our county and without electoral accountability. At my request, the report was revised to include analysis and presentation of the possibility of Alderwood constructing and operating a facility capable of treating all of our own waste. It turned out to be cost-prohibitive, greatly outstripping our ability to finance it, but we now have documented evidence to support the conclusions that our Board ultimately – and reluctantly – arrived at.

Can you say,”Brightwater?” More on the sewer situation.

The genesis of Alderwood’s relationship with King County occurred decades ago.

The District was originally incorporated as only a water district. In the 1960’s as the area began to transition from a rural, farming community into the growing suburban and commercial region it is today, the Washington State Department of Health (DOH) encouraged the District to add wastewater services to its operation. The Commissioners during that era were reluctant (maybe even resistant) to expand into sanitary sewer processing, sparking elevating pressure from DOH. Eventually, the Picnic Point Wastewater Treatment Facility was constructed in the early 1970’s and enlarged a few years later. Picnic Point was never intended to treat all or even most of the wastewater generated in the District even though the District was not nearly as large as it is today. The original WWTF was a minimal effort to mollify DOH and it was constructed with virtually no consideration for future requirements. Today, we treat roughly 20% of the District’s daily wastewater flow at Picnic point. We are currently constructing a state-of-the-art secondary treatment facility that will treat 4 million gallons of sewage per day – a 33% increase in capacity over the facility replaced – when complete next year. And we kept our promise to future ratepayers by designing in capability for expansion to 6 MGD when needed.

About 10% of AWWD wastewater is conveyed to the city of Everett for treatment. The remaining 70% is treated by King County. Because of the prevailing attitude toward the sewer business in the 1960’s, Alderwood entered into a long-term arrangement with METRO, now King County Department of Natural Resources and Parks (KCDNR), for wastewater treatment by King County. As a result, we are paying the price today for shortsighted policy-making that occurred decades ago. And – like it or not – the new Brightwater plant will be treating our wastewater.

One option appearing attractive at first glance would be to renegotiate the existing agreements. There are ticklish political issues associated with renegotiation. Expensive legal counsel, the near absence of bargaining leverage and the potential for unintended adverse consequences it is difficult to devote valuable ratepayer resources to activities unlikely to yield significant benefit.

Reality Check

Now, let’s talk numbers. Rates have risen. However, a look at a chart comparing Alderwood rates to other agencies in the area reveals that Alderwood rates are very competitive. They are generally at or below the regional average. I/we have labored to minimize the effects of increased operational costs on rates. Our practice has been to balance adjustments over several years to eliminate large spikes in the hopes of mitigating impact on ratepayer wallets. A realistic expectation is that like everything else, rates ought to rise at about the same rate as inflation. Since 2001, the Consumer Price Index (CPI) for the Seattle area has gone up roughly 27% (Source: Bureau of Labor Statistics Consumer Price Index [CPI-U] updated June 15, 2011). The difference between the CPI and the rate of increase in Alderwood rates is directly attributable to the costs associated with playing catch-up, both here in Alderwood and at King County.

During periods of no rate growth, the costs of maintaining operations continue to accumulate. Failure to address ongoing requirements does not eliminate expense or rate increases. It only delays the inevitable and makes the fix more expensive and the decision to act much more painful.

Summary

I believe we are better off in control of our own destiny. In a perfect world, I believe we would be sourcing all of our own water and treating all of our own wastewater. And I am very confident in our organization. Sensitivity to and responding to customer concerns is a high priority. Recent improvements to our billing processes, website access and content, the GIS system (computerized records critical to construction activities), and many others are directly the result of input from customers. Customer input is a crucial aspect of our Strategic Planning process.

I think it is important to recognize that while rates are a critical aspect of District operation, rates are only part of the picture. AWWD is essentially a Maintenance and Operations (the ‘pumps & pipes’ guys you meet in the field) organization with Engineering, Admin and Finance providing vital support. Our object is to meet the highest service standards while keeping rates moderate and competitive. We must generate enough revenue to sustain the operation and rates are one source of revenue necessary to fund activities.

I am not a politician. I am not adept at spinning facts for political advantage. I have no political aspirations beyond my service to Alderwood ratepayers and I do not regard my service as a Commissioner as a stepping stone to higher office. I seek no contributions from special interests. I have tried to never lose sight of my commitment to excellent service and high standards of performance nor do I take our responsibilities to future ratepayers lightly. I prefer to focus on real issues and the whole picture. I believe the whole truth here is that Alderwood Water and Wastewater District is well run and I am proud of my contribution to our success. I very much appreciate the opportunity to serve granted to me. There is much work in progress that I wish to complete. I hope I have earned trust from ratepayers to accomplish that goal.

Larey McLaren
Alderwood Water Commissioner, 1999 to 2001; 2005 to present

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Clarity of Purpose

FreeRangeAuthor — Sun, 23 Oct 2011 00:46:11 +0000

Open Letter to Ratepayers:

I believe that one crucial (sadly, often neglected) responsibility of being a Commissioner is that of educator. Our role as liaison between ratepayers and the District applies in both directions. A typical ratepayer tends to be largely unaware of how much effort and expense is required to deliver water and sewer services to our homes and businesses. So it is important for each Commissioner to carry a truthful message to the public, even

if it is uncomfortable or politically unpleasant. Integrity and credibility based on honesty are critical.

One of the candidates for Alderwood Water Commissioner has asserted unequivocally that the District is horribly mismanaged because of two politically charged circumstances.

1. Seattle water rates are among the highest in the nation.

2. Alderwood rates have risen 43% in recent years.

Let’s examine these assertions.

There are major difficulties to overcome when comparing rates to those in other parts of the country. Disparities in demographics, geology, geography, climate, purveyor size & scope, type of agency and climate, among others make it extremely challenging to match “apples to apples” effectively. Having said that, the American Water Works Association published a comprehensive analysis in 2010. The Survey makes apparent the difficulties associated with reconciling numerous disparities, but it does suggest that water and sewer rates in Seattle are high. The correct question to ask is: How does this information impact Alderwood ratepayers? Answer: It doesn’t. Seattle’s rates are set by Seattle. Their source water lies in King County and is driven by contractual arrangements entirely unrelated to Alderwood. Our source water is a stable supply negotiated with the City of Everett through 2055. Alderwood residential rates are significantly lower than Seattle’s. Our sewer rates are driven by a contract with King County through 2036 and are also substantially lower than Seattle. In fact a recent study comparing water and sewer rates between several nearby regional agencies demonstrated that Alderwood rates are below regional averages. So if our rates are not among the highest in our region, is it responsible to allege that we are among the nations most expensive? Emphasizing this red herring either displays an appalling lack of understanding of our water & sewer operations or it is a cynical attempt to mislead voters by fabricating a “straw man”.

Despite being the largest, most complex special purpose water and wastewater district in Washington State, Alderwood residential rates remain moderate. This is a remarkable achievement. It is true that Alderwood rates have gone up faster in recent years than inflation as measured by the CPI, but that is only part of the story. The added increase can be attributed directly to the added expense of performing yesterday’s maintenance activities at the same time as we are performing today’s activities. We are paying now in the form of higher rate increases for artificially low or totally deferred increases in the past. AWWD policy in the 1980’s and 1990’s deferred moderate rate increases by neglecting infrastructure maintenance and kept rates artificially low. This is precisely why rates have risen faster recently – we are playing ‘catch up’. Remember that old oil filter ad, “Pay me now or pay me later?” Our situation is simply this: we can pay slightly higher rates today (about $2.50/month for typical consumption or 8% of a typical single family residential monthly bill) or pay much higher rates later. Do we really want to extend this policy? The expenses do not go away. Deferring them simply postpones them. They frequently come back later as bigger – sometimes much bigger – expenditures. Isn’t it better to pay now for today’s activities rather than borrowing from our future – and our kid’s futures? Can we really afford to continue amplifying our exposure to the unpleasant effects of catastrophic failure? Can we afford to sacrifice infrastructure integrity on the altar of marginal, short term rate increase reductions? A responsible, informed assessment recognizes that AWWD rates are moderate, that recent seemingly disproportionate increases are unpleasant but necessary, and that a thoughtful, comprehensive, planned approach which balances mitigation of the risk of infrastructure failure with reasonable rates is the most effective policy. We may disagree about where that balance lies but curtailing maintenance activities arbitrarily is simply not responsible. So the higher recent increases are indicative of Board mistakes – 20 years ago! And the recent efforts are actually a return to responsible stewardship!!!

Voters face a clear choice in this election.

On one hand is an inexperienced, uninformed, one-issue candidate who fabricates cynical, irrelevant concerns and who misrepresents the facts in order to achieve his goal, to get elected. Virtually every element of his ‘plan’ has either already been undertaken by the District or is in the works or ongoing.

Contrast that with my well-chronicled service to ratepayers. I have made demonstrable contributions to improving or enhancing District performance. I have frequently brought a sensible, effective perspective to bear on a wide range of topics. I spearheaded our District-wide Strategic Planning Initiative. The Plan has illuminated numerous opportunities for real cost savings through improved efficiency and enhanced

effectiveness, and will continue to do so for many years. Unlike the challenger’s ‘plan’, my Plan is well documented and being implemented. I insisted that all options were evaluated during a Sewer Comp Plan review. And the Citizens Alliance for Property Rights, a leading property rights advocacy organization recently awarded me an ‘Outstanding’ rating. For more information on AWWD and my contributions to our

success, please go to: www.electlarey.org.

It appears that the best choice is obvious. Vote for Laren W. “Larey” McLaren for Alderwood Water & Wastewater District, Commissioner Position 3.

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Weekly Herald statement

FreeRangeAuthor — Sun, 25 Sep 2011 04:54:17 +0000

We are always sensitive to rates and their impact on family finances. Striking a
balance between necessary expenses and low rates can be challenging. Here are
some ways we cut costs. I initiated or support them all.

o Restructure/refinance existing capital debt
o Regularly re-evaluate & re-prioritize new capital projects
o Extend depreciation schedules for operations equipment
o Negotiated favorable, long-term water supply contract with Everett
o Negotiated effective, long-term contracts with several cities who purchase wholesale water from AWWD

Our efforts pay off. A recent study showed AWWD rates – both water and sewer
– to be slightly lower than the average rates when compared to nine other utilities
in our region. This is quite an achievement considering Alderwood is the largest,
most complex district in Washington State.

I am not a politician but I am committed to responsible, effective stewardship of
ratepayer resources. For more please see: www.electlarey.org. Thank you.

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Ads on Pages

FreeRangeAuthor — Thu, 04 Aug 2011 05:03:03 +0000

WordPress.com will deliver commercial ads to pages and posts, near the bottom.

These ads are not endorsed or approved by the campaign.

Larey McLaren, or the campaign, DO NOT receive any funds from these ads.

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My District service

FreeRangeAuthor — Tue, 19 Jul 2011 03:28:30 +0000

Larey McLaren
Alderwood Water Commissioner, 1999 to 2001; 2005 to present

It’s truly an honor and a privilege to serve the ratepayers of Alderwood Water and Wastewater District. We are fortunate to enjoy excellent water and wastewater services professionally delivered at competitive rates. The District is sound financially and we continue to keep an eye to the future as we address current challenges.

I have been pleased to spearhead the District-wide strategic planning program which yields many benefits. Beginning with a vision of our future and after a comprehensive assessment of our current status, we evaluated every aspect of the organization and how each fit into the overall operation. We developed action plans for every department. We are implementing the plan and we are continually revising and elevating expectations.

We have recently finalized several 50-year agency agreements promoting long-term District stability. The bulk of our water expense is the purchase of water from the City of Everett. We now have a stable rate formula which has allowed us to enter into long term wholesale supply agreements with constituent cities. Mitigating peaks and valleys helps keep costs under control.

We have completely overhauled our IT department, reorganizing personnel and upgrading both hardware and software. The AWWD website has been revamped to allow easier, secure ratepayer access to account history and to enable on-line bill payment. We are also capable of providing timely notification via automated voice-mail during temporary service shutdowns or emergencies. Qualifying ratepayers can also take advantage of our discount program for low-income senior and disabled customers. We continue to identify new improvement opportunities.

AWWD encompasses approximately 60 square miles in SW Snohomish County. It is the largest special-purpose water and wastewater district in Washington State. We serve over 46,000 water connections and nearly 34,000 sewer connections. We utilize hundreds of miles of pipe and operate dozens of pumps and lift stations and we have several storage facilities including one that was the world’s largest steel water storage tank when built.

We have an extensive Capital Improvement Plan (CIP) due largely to the size and scope of the District.

Most of our wastewater is treated by King County, and Everett treats a small portion, but we operate our own treatment plant near Picnic Point serving the NW corner of the District. Our most complex current construction project is replacement of the aging wastewater treatment facility near Picnic Point. The existing plant was built in the early 1970’s. When complete and fully in service the new Picnic Point Waste Water Treatment Facility (WWTF) will be a truly state-of-the-art treatment plant doubling our treatment capacity and ensuring our capability for many years to come. We are implementing a comprehensive meter replacement program to upgrade technology, increase precision and reduce meter-reading expense while improving efficiency. A benefit that accompanies this upgrade is a greatly enhanced ability to identify potential leaks so timely repairs can be effected. This will not only save ratepayers money, it helps the District achieve goals set out in our Conservation Plan.

The District is early in the process of replacing existing water mains on SR99. Both sides of the highway will be affected from the Everett boundary south to approximately 150^th St SW. This is a large undertaking extending approximately 3.4 miles and we will phase and time the activity to mitigate disruption. Pump Station No.1 – one of two stations operated by the District to pump water from the City of Everett to our reservoirs – has recently undergone a major overhaul. Originally constructed in 1964, the station has received upgraded pumping and electrical equipment, expanded and enhanced power facilities, a new roof and a fresh coat of paint. Sewer Lift Station 11 located in the SW corner of McCollum Park will soon be replaced. Tentatively scheduled to begin in July 2011, this project includes demolition of the existing 40-year old station, construction of a new pump station near the current structure and a new pipeline at the southern edge of the Park.

A critical factor in our ability to stay on top of infrastructure maintenance challenges is our Computerized Maintenance Management System. CMMS facilitates effective application of resources to preserving and modernizing our “pumps and pipes”. The activities cited here are just a sampling of the projects the District has underway.

On a slightly more personal note, I have enjoyed the opportunity to represent AWWD at the Washington Association of Sewer and Water Districts and other regional venues. We have seven cities partly or wholly within our boundaries and we deal directly with Snohomish County and King County, as well as the State of Washington and various federal agencies. Collaboration and cooperation are crucial elements of our smooth operation. I am honored to be a part of a terrific organization and proud of my contribution to its success. I think it is especially important in today’s economy that we maintain our long term focus. Responsible stewardship demands a balance between keeping rates low and preserving infrastructure. We mustn’t sacrifice overall District health on the altar of short term cost cutting.

With your vote, I will continue to help ensure that Alderwood Water and Wastewater District remains a great place to be a customer and a great place to work. Thank you.

Member: American Water Works Association
Water Environment Federation
Washington Association of Sewer and Water Districts

Thanks for your support.

Learn more about Larey’s ideas at Management philosophy.

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What Drives Rates – Rate Realities

FreeRangeAuthor — Sun, 17 Jul 2011 04:34:47 +0000

This chart is an illustration for Rate Realities article (home page).

Source: Alderwood Water District, Proposed 2011 Rate Structure Revision, Finance Dept, Oct. 25, 2010.

25 Year Rate Increase Review – Rate Realities

FreeRangeAuthor — Sun, 17 Jul 2011 04:33:37 +0000

This chart is an illustration for Rate Realities article (home page).

“Our practice has been to balance adjustments over several years to eliminate large spikes in the hopes of mitigating impact on ratepayer wallets.”

Source: Alderwood Water District, Proposed Water & Wastewater Rate Changes for 2011 & 2012, Public Hearing, Finance Dept, Nov. 15, 2010.

Weekly Herald statement, June 27

FreeRangeAuthor — Thu, 30 Jun 2011 03:39:38 +0000

Larey McLaren

“In my ninth year as Commissioner, I have always kept an eye on the future, never losing sight of the balance between low rates and infrastructure integrity. I championed Districtwide strategic planning to enable us to identify and prioritize resources and activities to maximum benefit. This process will pay dividends far into the future.

“I belong to the Washington Association of Sewer & Water Districts, the American Water Works Association, and the Water Environment Federation, and I represent AWWD interests at local, state and national organizations. My basic management philosophy is:

• Hire good people

• Train them well

• Allow appropriate latitude & encourage high performance

“I am pleased that we are expanding our discount program to include disabled customers and that we provide an outstanding place to work.

“More information about me, my contributions to AWWD success and my perspectives can be found at my website: www.ElectLarey.org.”

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Management philosophy

FreeRangeAuthor — Mon, 27 Jun 2011 00:31:25 +0000

As your Commissioner I will serve ratepayer’s priorities …

District business ought to be transparent.
Rates ought to be reasonable and competitive.
“Growth pays for growth” ought to be strictly adhered to.
Capital projects ought to be planned with an eye on the future.
Where applicable, incentives ought to be consistent with objectives.
Budgets must be comprehensive.
Internal controls must be established and utilized.
Contracts must be sustainable for the long haul.
We must maximize long-term success.

My personal management philosophy is:

Set goals by establishing effective policy
Hire and train excellent employees
Get out of the way

Set goals

The Board’s job is to set the goals by establishing policy. Most of us don’t think about water services until the faucet dries up or the toilet doesn’t flush. It is human nature to take those things for granted that appear so effortless. We have 46,246 water connections and 33,765 sewer connections, hundreds of miles of pipe, pumps, generators, tanks and all of the equipment and personnel necessary to maintain effective operation. Great service starts with planning and the first step is to establish objectives.

Hire good people

In order to serve ratepayers properly, the Board must provide resources and training to the staff and remove impediments to their ability to perform. Effective staffing is a key element and the hiring process is the foundation. To be competitive in our ever-changing environment, we must raise the bar because being as good as we used to be isn’t enough. We must continually elevate performance standards. Training must be a high priority. Paul Harvey once said, “The problem with our society today is NOT that we aim too high and miss – it is that we aim too low and hit!” Alderwood employees are competent, professional and dedicated to providing high-quality, first rate water and sewer services. We must aim high to succeed.

Get out of the way

A key aspect, often difficult, is getting out of the way – allowing the “do-ers” to do their jobs. Micro-management is a pitfall to be avoided. The Board is responsible for establishing the policies that provide the framework necessary for employees to perform but hiring and training decisions must be validated through performance evaluation. The Alderwood staff has demonstrated what a well-qualified, highly trained workforce can accomplish.

As your Commissioner I will work to implement this philosophy.

Policy concerns: Effective policy includes administrative guidelines, strategic planning, inter-governmental relations, capital improvements and more but the scope of policy jurisdiction is limited by statute. Commissioners are often called upon to make hard choices between less-than-satisfactory alternatives. And the decisions confronting us today are largely driven by circumstances beyond the Board’s control. The Picnic Point Treatment Facility must include sustainable technology that will serve us for many years and it must be expandable. Water supply contracts must serve all District ratepayers – those served directly and those served indirectly through partner cities. The Brightwater situation places Alderwood customers right between two competing County governments. It will serve ratepayers well to be represented by advocates unafraid to “think outside the box.”

All too often, municipalities and government entities lose sight of who works for whom, and what the goals are. As your Commissioner I will ensure a bridge between ratepayer priorities and application of District resources.

If you agree that we have enough politicians and that ratepayers deserve a voice to balance that of industry insiders on the Alderwood Board please vote for me to have your voice heard.

Thanks for your support.

Larey McLaren
Alderwood Water Commissioner, 1999 to 2001; 2005 to present