20030801Report.pdf

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DATE:AUGUST 25, 1999
STONERIDGE WATER CERTIFICATE APPLICATION
CASE NO. GNR-98-
RE:
Attached for filing in the above referenced case is Staff s Report regarding its investigation of
this company s application. Please place the original of this report in the Commission s original case
file.
A draft of this report was provided to Mr. Keith Garner, the owner of the Stoneridge
Devleopment. Mr. Garner' comments and correspondence regarding this report are also attached.
STONERIDGE WATER
AND
SEWER COMPANY
APPLICATION
FOR
CERTIFICATE OF PUBLIC
CONVENIENCE AND NECESSITY
CASE NO. GNR-98-
COMMISSION STAFF REPORT
August 24, 1999
Prepared by:
Robert E. Smith
Senior Auditor
George E. Fink
Engineer
Stoneridge Water and Sewer Company
Case No. GNR-98-
Application for Certificate of Convenience and Necessity
Idaho Public Utilities Commission
BACKGROUND
Mr. Keith Garner filed an Application for a Certificate of Public Convenience and Necessity with,
the Idaho Public Utilities Commission (Commission) on July 22, 1998 for a water system
serving the Stoneridge Golf Course, Lake Sans Souci Subdivision and Stoneridge Recreational
Club Condominium Owners Association (SRCC). A sales office, pro-shop and maintenance
building are included in the development. Mr. Garner is the sole proprietor and developer ofthe
golf course, driving range, pro-shop, restaurant, recreation center, sale building, time-share
condominiums, rental condominiums, and infrastructure including both water and sewer systems.
The development is located off Blanchard Road in Sections 19 and 20, Township 54 North
Range 05 West, Boise Meridian, Bonner County, Idaho. The subdivision is located
approximately one mile west of the city of Blanchard, Idaho.
Note the time-share condominiums have all been sold and an owners' association has been
formed (i., Stoneridge Recreational Club Condominium Owners Association). The SRCC
consists of four condominium buildings with 146 units and a recreation center with swimming
pool and restaurant. This group filed a formal request on September 17, 1998 to intervene in the
case.
Approximately 200 residential lots, each approximately one third of an acre in size, are located
along the western side of the development. Only 29 residential customers were connected in the
test year. Rental condominiums and commercial buildings are located in the center of the
development. The Stoneridge Resort Golf Course is an 18-hole course located primarily along
the eastern side of the development.
WATER SUPPLY SYSTEM DESCRIPTION
Staff has performed a field inspection of the development. The system has two wells with a total
capacity of 1 400 gpm. These pumps discharge either directly into the distribution system or into
a 315 000-gallon concrete storage tank located on a hill to the northwest of the wells.
The distribution system is looped through the property using 6-inch and 8-inch mains. A
separate irrigation line is used to provide water to the golf course. The main lines appear to be
looped and are valved adequately to isolate any potential problem areas without interrupting
service to the entire system while repairs are being made. Meters are in place for the residential
and multi-residential customers. The Company reportedly is repairing and/or installing meters
COMMISSION STAFF REPORT AUGUST 24, 1999
on the golf course and commercial customers (i., pro-shop, sales office, etc.). The developer is
currently constructing additional rental condominiums and associated recreational center.
CUSTOMER WATER CONSUMPTION
A limited amount of recent consumption data was submitted by the Company in its Application.
Meter readings for January through August 1998 were submitted for residential customers and
the SRCC service. No current meter readings were provided for the sales building, golf course
pro-shop and maintenance shop. It is the Staff's understanding that either meters were not
installed or were in need of repair for these service connections. Additionally, it is the Staff s
understanding the well master meter was also in disrepair at the time the Application was
submitted. The Company did submit a report showing actual metered data for the total system
SRCC, and golf course for the years 1987, 1988 and 1989.
The total test year consumption for the system was estimated to be 48 674 870 gallons.
Residential customers consumed a total of approximately 8 069 770 gallons and SRCC
customers consumed a total of approximately 4 584 100 gallons. The other commercial
customers (pro-shop, etc.) were estimated to consume 214 000 gallons. The largest consumption
by far is attributable to the golf course, at an estimated 35 807 000 gallons (74% of total).
REVENUE REQUIREMENT ANALYSIS
Staff performed an audit of the Company s financial records. A copy of the Staff Audit Report is
attached to this report. A summary of the findings from this report are presented below.
Revenue was estimated by the Company to be a total of $18 572, of which $6 000 was estimated
to be paid by the golf course. Staff proposes a reduction in test year revenues of $120. The
estimated revenues are therefore $18 452. Staff notes that the Company has no rate base.
However, total expenses of$65 054 were submitted. Staff, in reviewing the Company s records
proposes a net reduction in expenses of$29 192. The revenue requirement for the Company was
thereby determined by the Staff to be $37 062. The projected revenue shortfall at current rates is
therefore, $18 610.
CUSTOMER RELATIONS
In reviewing records of customer contacts regarding the Company, Staff noted there have been
two specific incidents reported. In June 1997 a customer contacted the Commission regarding
low water pressure and concerns that the water supply wells would be insufficient to serve the
entire development. Additionally, the SRCC submitted several letters regarding an incident
where coliform bacteria had been found in the drinking water system. The SRCC complained
they had not been kept informed of the status of the incident and it had negatively impacted their
business. The SRCC has formally requested to intervene in this case.
COMMISSION STAFF REPORT AUGUST 24, 1999
RATE DESIGN
The Company is currently billing residential customers an $8 per month flat rate and the SRCC a
total of $883.50 per month. The golf course and other commercial customers have not been
billed. Staff developed several alternative rate designs using the aforementioned consumption
figures and a revenue requirement of $37 062. A summary of the results of the rate design
analysis is given in the following table.
Current Staff Rate Designs
Company
Option A Option B Option CRates
Residential Customers - Est. Revenue Reqmt. $7,850
Customer Charge ($/mth)$8.$5.$21.00 $14.
Commodity Charge ($/1000 gals/mth)$0.$0.
SRCC - Est. Revenue Reqmt. $3,750
Customer Charge ($/mth)$883.$53.$310.$200.
Commodity Charge ($/1000 gals/mth)$0.$0.
Commercial Customers - Est. Revenue Reqmt. $900
Customer Charge ($/mth)$6.$25.$20.
Commodity Charge ($/1000 gals/mth)$0.$0.30
Golf Course - Est. Revenue Reqmt. $25,615
Customer Charge ($/mth)$105.100.200.
Commodity Charge ($/1 000 gals/mth)$0.$0.30
Est. Revenue Surplus/ (Shortfall)($23 676)$467 $66 $61
Staff performed an abbreviated cost of service study. The rates suggested by this study are
reflected in Staff Rate Design Option A. In all rate designs performed by Staff, no base
consumption levels were set due to the minimal amount of current data available for all customer
groups. Staff Rate Design Option B shows the flat rates required to achieve the revenue
requirement for each customer class, whereas Option C represents a compromise position
between Options A and B.
Staff recommends that Rate Design Option C be set for the Company. It achieves the
apportionment of revenue requirement per the cost of service study, meets the revenue
COMMISSION STAFF REPORT AUGUST 24, 1999
requirement, represents a good balance between the customer and commodity charges for all
customers, and is expected to be a good introductory position for initiating metered rates to the
customers.
Staff prepared a rate proof using the rate designs listed in the table to determine the potential
impact on customers with maximum, minimum and average consumption patterns during the test
year. The results of the rate proof, showing the estimated increase or decrease in the total annual
bill, for each rate design, are summarized in the following table.
Current Increase in Total Annual Bill
Annual Bill
Option A Option B Option C
Residential Customers- Est. Revenue Reqmt. $7 850
Minimum Customer $96 ($17)$156 $80
500 gals/mth
Average Customer $96 $200 $156 $176
189 gals/mth
Maximum Customer $96 $937 $156 $501
119 088 gals/mth
SRCC - Est. Revenue Reqmt. $3,750
$10 602 ($6 849)($6 882)($6 827)
Commercial Customers - Est. Revenue Reqmt. $900
$899 $900 $913
Golf Course - Est. Revenue Reqmt. $25,615
$25 615 $25 200 $25 142
Note that in all cases the SRCC total annual bill will decrease. At current rates the SRCC
customer would contribute to 29% of the revenue requirement but only use 13% of the water.
The Staff proposed rates subsequently correct this inequity.
Under Staff recommended Rate Design Option C, the average residential customer will have
annual charges increase approximately $176 per year, or 183%. Furthermore, the customers with
minimum and maximum consumption patterns will incur increases in total annual charges of $80
to $501 per year (83% to 522%), respectively, assuming no changes in consumption patterns
occur.
COMMISSION STAFF REPORT AUGUST 24, 1999
Although this increase is significant, Staff notes that the original, arbitrarily set flat rate of $8 per
month was very low. Furthermore, the large increases in this case are primarily the result of the
large increase in the revenue requirement. Setting of a meter rate will allow all customers to
adjust consumption patterns if they desire to reduce the amount of their water bill, and Staff does
expect customer consumption to decrease due to the higher rates set in this case. The Company
will have the option to submit an application to modify rates in the event the reduced
consumption significantly impacts revenues.
STAFF RECOMMENDATIONS
1. Staff recommends that the Commission process this case under modified' procedure
without hearing.
2. Staff recommends that the Applicant be directed to establish a new company, separate
from the existing development company, for the sole purpose of providing water service to
the residents and businesses located within the Stoneridge subdivision. Evidence of the
formation of such a company shall be provided to the Commission.
3. Upon receiving evidence that a new company has been formed, Staff recommends that
the Commission issue a Certificate of Public Convenience and Necessity to the company to
provide water service to the Stoneridge development and adjacent reservoir property.
. 4. The Company should be directed to provide a detailed metes and bounds legal description
of the area to be served by the company.
5. Staff recommends that the Company be directed to establish a separate accounting system
for the water company. Furthermore, the Company should be directed to maintain receipts
and time records in a fashion that enables efficient and timely audit of the financial records.
6. The Company should be directed to eliminate any costs associated with maintenance of
the golf course irrigation system from the water company records. The owner should charge
such costs as a cost of operating and maintaining the golf course.
7. Staff recommends the Company be directed to provide a copy of the Commission
notice to each customer within five days of receipt by the Company.
8. The Commission s notice should include a copy ofthe Staff's calculations showing the
magnitude ofthe potential increase/decrease in annual bills for each customer group.
COMMISSION STAFF REPORT AUGUST 24, 1999
9. Staff recommends that the Commission accept the Staffs Rate Design Option C:
Residential customers $14 per month and a commodity charge of$.30 per 1000
gallons.
. SRCC Owner Association $200 per month and a commodity charge of $.30 per
1000 gallons.
Future multi-residential customers $40 per month and a commodity charge of
$.30 per 1000 gallons.
Commercial customers $20 per month and a commodity charge of $.30 per rooo
gallons. .
Golf course $1 200 per month and a commodity charge of $.30 per 1000 gallons.
10. The Company should be directed to install, read and maintain meters on all wells
residential, multi-residential, commercial and golf course customers.
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COMMISSION STAFF REPORT AUGUST 24, 1999
Case No. GNR-98-
Idaho Public Utilities Commission
Staff Audit Report
Stoneridge Water System
Prepared by
Robert E. Smith
Senior Auditor
AUGUST 24, 1999
CASE NO. GNR-98-
IDAHO PUBLIC UTILITIES COMMISSION
STAFF AUDIT REPORT
STONERIDGE WATER SYSTEM
PREPARED BY
ROBERT E. SMITH, SENIOR AUDITOR
BACKGROUND
Stoneridge is a golf resort development in Bonner County, Idaho near the community of
Blanchard. Mr. Keith Garner of Salt Lake City, Utah is the sole proprietor of the development
activities including the water system and a sewer system. The development consists of an
18-hole golf course, driving range, pro shop, restaurant, recreation center, swimming pool
maintenance building, timeshare condominium complex, rental condominiums and residential
home sites. The platted subdivision is identified as the Lake Sans Souci Subdivision. The
timeshare condominiums, a complex of 5 buildings, have all been sold and an owners
association for the complex has been formed. The timeshare complex includes a second
recreation center with a swimming pool and restaurant. As a part of the development activities
the developer constructed a central water system and sewer system to provide service throughout
the development including irrigation for the golf course. Development activities began in the
early 1970s.
Mr. Garner filed an Application with the Idaho Public Utilities Commission on July 22, 1998
requesting a Certificate of Convenience and Necessity to operate the water system as a public
utility in the State of Idaho. The Stoneridge Recreational Club Condominium Owners
Association, Inc. filed a formal intervention in this case.
1997 TEST YEAR
Data supporting the Application was based upon calendar year 1997. I visited the site near
Blanchard to begin an audit in September 1998 and learned that not all of the financial records
were maintained on site. Much of the detail support is maintained in Mr. Garner s office in Salt
Lake City, Utah. The fmancial support attached to the Application was for the entire operation
of the golf course, associated pro shop, restaurant, rental condominiums and development
activities including operation of the water system and sewer system. Very little detailed direct
cost of operating and maintaining the water system is identifiable from these records. Ms. Donna
Brown, the onsite manager, was very helpful but unable to provide all the detail necessary to
complete an audit of the water system operations.
AUDIT REPORT
GNR-98-AUGUST 24, 1999
By letter dated September 21 , 1998, I requested detail of the financial operation of the water
system in isolation of the other activities. A response to this request was not received until
January 19, 1999 in the form of an Idaho Public Utilities Annual Report for calendar year
1997 with supporting information. The report showed a net operating loss from water system
operations of $46 412. The supporting information was incomplete for determining the
derivation of each of the operating expenses reported.
I was unable to arrange an audit trip to Salt Lake City until March 1 , 1999 when the accountant
for Mr. Garner would return from Arizona. During that trip, I received clarification of
procedures used to allocate costs to the water company. The majority of the costs reflected in the
1997 PUC Annual Report form were not directly charged to the water system operation but
rather were allocated by the Applicant. Many of the allocations are somewhat arbitrary; not
supported by time records.
ATTACHMENT
Attachment" A" presents an income statement based upon the information provided in the
Idaho Public Utilities Commission Annual Report. The fIrst column presents the results of
operations as reported by the Applicant in that report. Column "B" presents several adjustments
to the reported expenses that I believe are appropriate for this system. The adjustments are
enumerated on Attachment "B" to this report. The third column on Attachment "A" presents the
income statement as adjusted by Staff.
I have not attempted to construct a balance sheet or determine a rate base at this time.
discussed above, the fmancial records for the water system are commingled with several other
activities. As a developer-installed system, the Commission s Rule No. 103 for Small Water
Companies assumes that the developer contributes the entire cost of the system and therefore the
company has no rate base. The Stoneridge Development was begun in the early 1970s and
undoubtedly there have been some repairs or equipment replacements that properly could have
been capitalized. However, at this time with the commingled records, it would be extremely
difficult to identify those improvements or replacements and determine appropriate accumulated
depreciation in order to develop a proper rate base for ratemaking purposes. In the future, any
major replacements of operating equipment should be well documented and capitalized for rate
base purposes.
The water system needs to be totally separated from the owner s other business activities.
Going forward, the Applicant needs to establish a totally separate checking account and a set of
accounting records for the water system in conformance with the Uniform System of Accounts
For Class C Water Utilities. Timesheets need to be maintained for employees working on the
water system and detailed records of operating expenses need to be maintained and paid directly
from the water system checking account. Maintenance of the golf course sprinkling system
AUDIT REPORT
GNR- W -98-AUGUST 24, 1999
should not be charged as operating expenses of the water system. Rather, such maintenance
should be charged to the operation of the golf course. If it is more convenient for Mr. Garner to
maintain one payroll for all of his employees, it would be appropriate for the development
company to bill the water system for labor; but such billing should be properly documented
showing exactly what service and time was provided. Billings for costs incurred by the Salt
Lake City office should be properly documented and paid by check from the water system
account. Any other transfers of funds from the water system checking account for the benefit of
the owners should be properly recorded as draws from the equity accounts.
The only records of revenues from customers are those for whom the water system has prepared
bills. The water system has neither provided any billing nor recorded any revenues for service to
facilities owned in common including irrigation of the golf course, service to the pro shop,
restaurant, rental condominiums, maintenance shop, offices or recreation center. Meter readings
for customers are non-existent until January of 1998. The master flow meter on the wells has
been broken and inoperable for several years. The water system has been charging residential
customers a flat rate of $8 per month and has been billing the Stoneridge Recreational Club
Condominium Homeowners Association a flat rate of $883 .50 per month. In response to my
request, the Applicant estimated revenues from all of the commonly-owned facilities including
the golf course would be $6 000 annually. I have used this estimate in the development of
Attachment "
As shown on Attachment ", after making the adjustments proposed on Attachment ", the
Net Income for the water system is a loss of $18,61 0.06 for the 1997 test year after paying all
expenses including compensation for administrative services of the Salt Lake City office staff.
Total Gross Revenue needs to cover all operating costs is indicated to be $37 062.06 or
approximately double the amount reported by the Applicant.
A TT ACHMENT B" Adjustments
Adjustment A" reduces the water system s reported electric pumping power expense by $224.
The electric costs, as detailed on Attachment ", show that checks were issued to pay electric
costs in the amount of $8 392.79 during the test year 1997. The detail also shows that of this
amount $1 503.10 was for power consumption in the previous year and that $908.33 was paid in
1998 for power consumed in the 1997 test year. Actual billings for power consumed in the test
year total $7 798.02. The Applicant used an amount of $8 224 that I am unable to duplicate from
the billing records. I have used an allowance of $8 000 as a liberal approximation of
pumping power costs. This allowance is $224 less than proposed by the Applicant. This
adjustment reduces operating expenses and increases both net income and owners equity by
$224.
AUDIT REPORT
GNR-98-AUGUST 24, 1999
Adjustment B" reduces the water system s reported water testing expenses by $119.78. This
adjustment levelizes the water testing expenses based upon the frequency of the required water
tests. As detailed on Attachment ", some of the tests are required monthly, some biannually
and others every I , 3, 4, or 9 years. This adjustment levelizes those testing expenses over the
frequency period. The Applicant used an amount of $1 187 for these water testing expenses.
Levelizing the expenses for the frequency period produces an annualized expense level of
$1306., indicating an adjustment of$119.78 is in order. This adjustment increases operating
expenses by $119.78 and reduces both net income and owners equity by a like amount.
Adjustment C" actually presents three separate adjustments all associated with labor costs.
The water system, as noted earlier, is owned by Mr. Garner who also maintains an office in Salt
Lake City, Utah. Labor costs allocated to operation of the water system include payroll from
both Blanchard and Salt Lake City. In my opinion, some of this payroll is duplicative for
functions performed in both locations that could easily be handled in Blanchard.
For administrative labor I have accepted the Applicant's allocation of cost for the onsite manager
in Blanchard in the amount of $2 080. This amount is based upon the onsite manager s own
estimation that only 10% of her time isrequired for water system administration. However, I
believe that the Applicant's allocation of labor cost for the Salt Lake office in the amount of
$12 000 is exorbitant. I have substituted an annual allowance of $1 ,000 for year-end preparation
of financial statements and annual reports plus a management fee of $5 200. This $100 per week
management fee is comparable with fees the Commission has allowed for other small water
companies. The fee recognizes the time and responsibilities required of the system owner to
oversee the overall operation of the company to insure compliance with applicable laws and
regulations. The adjustment of $5,800 to administrative and general labor expense then is the
difference between the Applicant's allocated cost of$12 000 and $6 200 developed above. The
800 adjustment reduces administrative and general expenses and increases both net income
and owners equity by a like amount.
O&M labor claimed by the Applicant is composed primarily of one employee who receives a flat
$360 biweekly to operate and maintain the water system. This employee also receives a flat
$390 biweekly to maintain arid operate the sewer system for the project. In addition, this
employee helps maintain the golf course and related equipment for which he receives an hourly
rate. No detailed timesheets are maintained showing the actual time devoted to the three
activities. Assuming that this employee devotes 35% of his time (14 hours per week) to the
water system, 35% to the sewer system and the remainder to the golf course, he would devote 28
hours per pay period to the water system at a rate of$12.86 per hour. This rate does not appear
to be unreasonable in comparison to other small water company labor rates.
A second employee of the golf course works part time on the water system during the winter
months. The Applicant estimated his time devoted to the water system to be 25% of the time
AUDIT REPORT
GNR-98-AUGUST 24, 1999
during three (3) winter months. This ratio produces an assignment of his annual salary to the
water system of6.25%. At a salary of$I 100 paid biweekly, the assignment of labor cost should
be $1,787.5 ($1 100 x 26 x 6.25%) rather than the $2 860 proposed by the Applicant. This
reduction of $1 ,072.50 would decrease O&M expense and increase both net income and owners
equity.
The third part of this adjustment is to restate payroll taxes in the amount of$I,554.20. This is a
calculated number using 8% for FICA taxes and unemployment insurance. The Applicant used a
rate of6%. The adjustment increases expenses by $19.20 and reduces net income and owners.
equity by a like amount.
Adjustment D" reclassifies a payment received for use of a backhoe from revenues to a contra
expense. The company had rented a backhoe that was used by an independent contractor. The
contractor was charged commensurately for the rental cost. The company recorded the fee
collected as revenue rather than as an offset to its own rental expense. This adjustment has no
effect on the company s operating results.
Adjustment E" calculates an allowance for travel expenses. The Applicant included an
allowance of $1 658.00. This amount includes an arbitrary 15% of all travel and entertainment
expenses by Salt Lake City based employees to the water system in the amount of $764. This
travel includes travel to Arizona for other unaffiliated business, travel cost of the developer s Salt
Lake City based construction manager as well as the owner and other Salt Lake City based
employees' travel expenses to visit the Stoneridge site. The Salt Lake City location is for the
convenience of the owner and cost to travel to Blanchard should not be charged to the water
company operation. The majority of the construction manager s travel was for building
construction purposes, not water company business and the travel to Arizona was totally
unaffiliated with the water company operation. Elimination of this $764 from the total travel
expense leaves a residual of $894.00. This residual is equivalent to 2 840 miles per year at $0.
per mile or 55 miles per week to deliver water samples, get supplies and travel around the service
area. The residual does not appear to be unreasonable. The $764 adjustment reduces operating
expense and increases both net income and owners equity.
Adjustment F" is simply an adjustment to recognize that the company would have incurred
regulatory fees due the Idaho Public Utilities Commission if it had been subject to the
Commission s jurisdiction and included in the annual regulatory assessment calculation. This
adjustment increases the company s operating expenses by $64.58 and decreases both net income
and owners equity by a like amount.
Adjustment G" provides an allowance for the use of office space, equipment and utilities
including heating, cooling and telephone. The water company shares office space in common
with other business activities of the owner. The allowance is arbitrary but in line with
AUDIT REPORT
GNR-98-AUGUST 24, 1999
allowances the Commission has provided other small water company operators for use of their
home offices. This adjustment increases operating expenses for the company in the amount of
200 and decreases both net income and owners equity by a like amount.
Adjustment H" is a proforma adjustment to recognize the incremental cost the company will
incur in the future. The company is installing chlorinating equipment on its wells. The
adjustment is based upon the company s estimate that the chlorinating costs will be $600 per
year. This amount does not appear to be an unreasonable estimate. The effect of this adjustment
is to increase operating expenses by $600 and decrease both net income and owners equity by alike amount.
RECOMMENDATIONS
I recommend that the Applicant be directed to establish a new company for the sole
purpose of providing water service to the residents and businesses located within the
development and provide evidence of such formation to the Commission.
Upon receiving evidence that such a new company has been formed, the Commission
should issue a certificate of Convenience and Necessity in that company s name for the
provision of water service within the development.
The new company should be directed to establish a separate accounting system for the
company consistent with the Uniform System of Accounts for Class C Water Companies
adopted by the Commission.
The company should be directed to read meters every month for service to each location
receiving water service from the company including the golf course irrigation system.
The company should be directed to eliminate any cost associated with maintenance of the
golf course irrigation system from the water company records. The owner should charge
such cost as a cost of operating and maintaining the golf course.
The company should be directed to repair and maintain the well flow meters in good
working order and read those meters each month.
The company should be directed to maintain receipts and time records in a fashion that
enables efficient and timely audit of the records.
The company should be directed to provide a detailed metes and bounds legal description
for the Stoneridge Subdivision plus the adjacent property upon which the reservoir is
constructed.
AUDIT REPORT
GNR-98-AUGUST 24, 1999
The company should be informed that it may petition the Commission for authority to
change its rates at any time but in not less than 12 months from the time the new
company is formed and receives a certificate from this Commission. Such petition for a
change in rates must be supported by a full 12 months of meter reading data as described
in Nos. 5 and 6 above.
RES : g dk: u: word/bsm ith/wpfi I est stoneri dJreport
AUDIT REPORT
GNR-98-AUGUST 24, 1999
Revenues
Unmetered (Golf Course Co. Est)
Rental Condo
Rec Center & Pool
Pro Shop & Restaurant
Residential
Commercial (Condo Assoc)
Other (Backhoe Rent)
Total Revenue
Operating Expenses
Labor 0 & M
Labor, Admin-Idaho
Labor A&G- SLC
Purchased Power
Chemical Expenses
Materials & supplies- O&M
Materials & Supplies - A&G
Water Testing Fees
Transportation Expense
Insurance
Deq Fees
PUC Fees
Bank Charges
Office Space Rent & Utilities
Total Operating Expenses
Depreciation Expense
Payroll Tax Expense (8%)
Auto Licenses
Total Expenses
Net Income
Total Gross Revenue Required
Stoneridge Water
Income Statement
Test Year 1997
Reported Adjustments
By Company
Staff
Proposed
Adjustment
Reference
$ 6,000.000.
850.850.
10,602.602.
120.(120.00)(D)
$ 18 572.(120.00) $18,452.
220.072.50)147.(C)
080.080.
12,000.(5,800.00)200.(C)
224.($224.00)$8,000.(A)
600.600.(H)
881.(120.00)761.(D)
152.152.
187.119.306.(B)
658.(764.00)894.(E)
734.734.
135.135.
64.64.(F)
224.224.
200.(G)
$ 41,495.196.14) $498.
015.(22 015.00) $
535.19.554.(C)
054.(29,191.94)062.
$ (46,482.00) $071.(18 610.06)
37,062.
ATTACHMENT A TO
STAFF AUDIT REPORT
Stoneridge Water
Staff Proposed Adjustments
Adjustment "Pumping Power
(late fee)
Billing Basic Net to Total Sub Totals
Date Charge Demand Cost KWH Cost Gross chg Bill
11/9/96 92.4 84.5080 390.480.3 .
12/9/96 92.85.5320 399.23.508.
1/9/97 92.84.5480 405.24.514.41 $1,503.
2/9/97 94.88:76 5980 424.513.
3/9/97 92.85.5300 398.25.510.
4/9/97 92.84.6580 446.24.555.
5/9/97 88.76.3580 334.410.
6/9/97 86.72.11040 614 686.
7/9/97 93.87.15780 791.34.914.
8/9/97 86.73.22900 1058.1131.
9/9/97 86.73.19040 914 56.1043.
10/9/97 88.76.11160 618.695.
11/9/97 88.76.3140 317.34.428.
total Paid 1997 1049.7114.228.8392.
12/9/97 90.80.4060 352.433.
1/9/98 89.79.4660 374.21.41 475.908.
2/9/98 92.85.5560 408.22.517.
3/9/98 91.82.3780 341.24.448.
4/10/98 89.79.3440 325.405.
5/11/98 93.86.10940 571.20.678.
6/10/98 87.74.8460 487.562.
7/9/98 200 86.73.15640 531.28.833.
Total Billed 1997 798.
Co used $8 224. Unable to duplicate
Use $8,000 Adjustment =$(224.00)
ATTACHMENT B TO
STAFF AUDIT REPORT
PAGE 1 OF 4
Adjustment B" Water Testing
Levelized Allowance
Non-monthly water testing allowance (Ievelized)
Lead & Copper ( 2 tests per Yr. ~ $20)
Radionuclides (1 test every 4 yrs ~ $50)
laCs (1 test every 3 yrs ~ $150)
sacs (1 test every 3 yrs ~ $900)
VOCs (1 test every 3 yrs ~ $250)
Nitrate ( 1 test Annually)
Nitrite (1 test every 9 yrs ~ $20)
Sodium (1 test every 3 yrs ~ $20)
Arsenic (1 test every 3 yrs ~ $20)
Monthly Coliform Bacteria tests 12 ~ $11
Number of Wells
Total Levelized cost
Company Used
Adjustment
Levelized
40.
12.
50.
300.
83.
, 20.
222
$ 521.
132.
$ 653.
$ 1 306.
187.
$ 119.
ATTACHMENT B TO
STAFF AUDIT REPORT
PAGE 2 OF 4
ADJUSTMENT "C" LABOR EXPENSES
PerCo. Annual
to Water
$800 $ 2 080.$360 9,360.
D. Brown 10% time on Water
K Rusho Flat Salary
T. Brown 25% winter months 100
Labor A&G- SLC
Staff Recommendation
D. Brown OK
K. Rusho
T Brown
Salt Lake A&G Financials & Reports
Management Supervision 4 Hrs Wk ~ $25
Total Staff Recommendation
O&M
Administration- SLC
Administration Blanchard
Payroll Tax ~ 8%
ADJUSTMENT "
860.
000.
$ 2 080.
360.
787.
000.
200.
$ 19,427.
$ 11 147.
200.
080,
$ 19,427.
Amount Charged to Water. Note $390
charged to sewer. Combined produce
annual ,salary of 19,500.. Noted that much
of time is spent performing golf course
maintenance. Also noted that golf course
irrigation piping is nearly equal to potable
water piping. Pd separately for golf course
maintenance activity.
10% of yearly pay
note: 25% of time for 3 Months = 6.25%
Company $10001 Mo. Estimate unsupported
Note: Staff believes this is redundant A&G
for benefit of owner. All could be adequately
performed in Blanchard. $1 000 allowance
for annual Prep of financial statements and
reports and 4 hrs per week management
supervision ~ $25.
14 Hrs/wk (35%) water $12.861
25% of annual pay for 3 winter months
per Co. Adjustment
$12 220.00 $ (1,072.50)
000.00 (5,800.00)
080.
$ 26 300.00 $ (6 872.50)
$ 1 554.20 $ 1 535.00 $19.
Remove Backhoe rent from Revenues and deduct from O&M Expense $ 120.
ATTACHMENT B TO
STAFF AUDIT REPORT
PAGE 3 OF 4
ADJUSTMENT
Transportation Expense
Per Company Report 1 ,658.
Includes Travel Exp for SLC Staff 15% of $5,096.54 is arbitrary estimate.Residual 2 840 miles ~ $0.315 per mile to deliver samples
and pickup materials and supplies.
No exception taken to residual
840 miles 52 weeks = 55 miles week
$ 764.
894.
$ 1 658.
ADJUSTMENT (Remove 15% SLC staff travel)$ 764.
ADJUSTMENT
PUC Fees
To recognize fees that would have been payable to the Idaho Public Utilities
Commission had the Company been subject to the Commission
regulatory ,fee assessment at .35% of revenues during the test year.$64.
ADJUSTMENT
Office Space Rent Allowance
Arbitrary $100 per month allowance for use of office space by the water company
including office equipment and utilities. Office space, equipment, heating
cooling and telephones are all in common with other business activites.$ 1 200.
ADJUSTMENT
Chemical Expenses Adjustment
The Company is installing chlorination equipment at the wells. No expenses were
incurred during the test period. This is a proforma adjustment is based
upon an estimate of the cost by the company that does not appear
unreasonable.$600.
ATTACHMENT B TO
STAFF AUDIT REPORT
PAGE 4 OF 4
~'\LlT/ESQ..
(;::;
FAX Correspondence
To:Donna Brown
Susan Stewart
Keith Garner
[phone]
[phone]
Date & Time: July ~1999 (11 :53 AM)
From: Bob Smith
George Fink
Draft Staff Report
This transmission is '
Fax:
Re:
page(s) including the cover sheet.Old/.(
MESSAGE: Attached is a Draft of our report and recommendations. Please review this
Draft and provide a written response with any comments, objections or concurrence
with our findings.
This report has not been filed officially with the Commission. Upon receipt of your
comments , we will finalize the report and file it with the Commission for their action.
We mayor may not make changes to the report based upon your comments. In any
event, your comments will also be filed with the Commission for its consideration.
P. O. Box 83720, Boise, Idaho 83720-0074
Telephone: [phone] Facsimile: [phone]
FROM G~RHER K I MB~LL 08.17.1999 09:24 P.
Stoneridqe
1204 Ea8t South Temple
Salt Lake City, Utah 84102
Auqust. lS, 1999
Robert E. Smith
Idaho Public utilities
P. O. Box 83720
Boise, Idaho 83720-0074
208.334.0300
208. 334 3762 fax
Commission
RE: Draft Staff ReportJuly 12, 1999
Gentlemen:
In reference to the above report, we offer the followinqcomments:
Backqround
Paqe 1 Mr. Garner did not develop the golf course. It wasin existence at the time of his purchase. Mr. Garner did notdevelopthe timeshare condominiums. A Mr. Nelson marketed those.When he went into bankruptcy Mr. Garner acquired this property in
. foreclosure from Zion Bank. Mr. Garner had previously owned all ofthe property.
Hater Consumption
Page 2 Your estimate of 48,674,870 gallons apparently has nofactual basis, so those f iqures are incorrect. Please note thatthe qol! course only uses water in the summer.
Revenue Reauireme~t
We .object to the reduction in total expenses, which apparentlyconsist of $22,015 depreciation and $7,177 of other expenses. believe the expenses submitted for 1997 were understated, anything. Since Mr. Garner did not market the timesharecondominiums, he should be entitled to recover his costs through
depreciation or some charge for capital recovery.
Customer Relations
Page 3 Please furnish data regarding complaints.
Rate Desian
The rate designs are apparently based on the estimated waterconsumption in qallons on Page 2. See also comment above regardingdepreciation.
r""n ..""".." """,",-,-"......'777 "7"'"r.
page 5 RGccmmen~~tiOI~12 P) 1'88. nota that the form~t1un ot a new company maymaterially increase the operBtin9 .xponsea. We feel the presentAccountin9 syetom is adequate and cost effective.14 We can furnish a 10981 dcClcription ot l..he property ownedby Mr. Garner.
#5 See 12 above.
water Gervice.We will keep time sheets separate tor the
Th4nk yo~ tor your consideration of these material concerns.
Sincerely,
f- !J'd4--1,c I!
Ke i th E. Carnor
..,...~/ . ./....., ,
/J /J
...
~d.-. qhJ~! .(/" / (~LV-l./.lll:_f:---C-
...
Eu~~e L. Kimrarr
""""'i:IID"""'"
IDAHO
PUBLIC UTiliTIEScommission
Dirk Kempthome, Governor
o. Box 83720, Boise, Idaho 83720-0074
August 17, 1999
Dennis S. Hansen, President
Marsha H. Smith, Commissioner
Paul Kjellander, Commissioner
Mr. Keith Garner
Mr. Eugene Kimball
Stoneridge
1204 East South Temple
Salt Lake City, Utah 84102
Dear Messrs. Garner and Kimball:
We received your facsimile response to the draft Commission Staff Report this
morning. We have a couple of questions regarding your response.
Regarding the "Background" section of the report, will you please clarify the
chronology regarding the development of the Stoneridge project. We understood through
discussions with Donna Brown, Susan Stewart, and yourselves that a Mr. Dolan was the
original developer of the properties in the mid to late 1970' s. You bought his interest in
the project early in the development process in 1979. You then continued with the
development of the project.
In 1980 you sold an interest in the project to Mr. Nelson and the two of you
continued with the development until 1982 when you sold the remainder of the project to
Mr. Nelson and held a note with a lien against the property. In 1992 Mr. Nelson filed
bankruptcy on the project and Zion National Bank foreclosed on the mortgage they held
against the property. To protect your interest in the project, you then stepped forward
and repUrchased the project from the bank and have been continuing the development
activities since that time.
Please correct any misunderstandings we may have regarding this chronology.
Specific dates and financial considerations regarding sale and transfer activities would be
very helpful.
Second, regarding the estimated water consumption, we utilized the best
information we had at our disposal including the James A. Sewell and Associates Report
attached to your application from which golf course consumption was extrapolated. You
indicated in your response that you believe this estimate is not correct but you did not
provide an alternative estimate of your own. If you have more current or accurate data
please provide same.
Located at 472 West Washington Street, Boise, Idaho 83702
Telephone: [phone] Facsimile: [phone]
Please provide your response as soon as possible. We will file our report with the
Commission no later than Friday of this week and will incorporate corrections and
clarifications based upon your response to these questions.
Both your original response received this morning and your response to this letter
will be filed with our report to the Commission.
Robert E. Smith
Senior Auditor
George Fink
Staff Engineer
~ ~un g"ft"~~ ~ 1 n~H~~~I::I. 11::1. I ~~~I ( : ~.;j t". I
stoner idge
1204 East South Temple
Salt Lake City, Utah 84102
August 18, 1999
Robert E. Smith
Idaho Public Utilities
P. O. 80x 83720
Boise, Idaho 83720-0074
208.334.0300208.334.3762 fax
Commission
RE: Draft Staff ReportJuly 12, 1999
Gentlemen:
In response to your letter dated August 17th, we offer thefollowing comments:
Backqround
Stoneridge was developed by Gordon Dolan and was foreclosed byChicago Title Company.
Mr. Garner purchased the project from Chicago Title Company inFebruary 1978, consisting of the golf course (in poor condition),
forested acreage on the north side of the road and some improvedlots.During 1979 three condo buildings were constructed and
recreation building and the water tank and sewer system.
On March 1, 1980 an agreement for "Sale and Purchase wasentered into between Garner and Nelson, with a 50% interest foreach party. Mr. Nelson was to invest $1,000,000 for add! tionaldevelopment costs and assume the $1,400,000 liability due ZionsBank, and be the managing general partner and market the developeduni ts as timeshare, not condos.
A disagreement arose shortly about the amount of development
costs and resulted in the transfer of the 50% Garner interest inthe project to Nelson on August 12, 1980 for the amount of$2,900,000 due in installments, interest at 10% per annum. Thenote was not secured by the property but carried the right to take
over the venture.
Whereupon Nelson marketed the existing units and constructedthirty-five additional, which were also sold. Nelson also madepayments on the $2,900,000 unsecured note for the years 1980, 1981,1982, and 1983. He then refused to make any more payments. Theprincipal balance then was $1,860,021, and interest accumulated atethe rate of $186 002 per year.
Garner proceeded with le9a1 action to collect the debt. TheZions Bank loan was also in default. Nelson declared bankruptcy in
F~ON ~R~N~~ ~IN8RLL ~e.le.I'"I"; ~:S 1'. Z
l!:'YU, case 90-01362 and fllE'd a plan ot r8organiza~ion in June1991.
Zions Bank tranaforred ~heir intorsst in the Bonner Company(Nel~on) BanKruptcy to Garner for $825,000. Garner agreed thatNelson would retain the 320 acre. north or t.be road (excluding thewater tank and acce~s thE'reto) and the bankrup~ay was over. adcUtion, Mr. Garner also asswnec1 an unrelated 11abiUty of Mr.Nelson's to 8ettle all the di8a9'reemen~8.
Water Consu~ptien
MeterR are baing in.talled fer all areas of usage and we willbe able to ~ccurately measure 1 t from .now on. There is no way tomea8ure it now. Tho golf course us.. water in the 9umme~ season,
none in the wlnter. The timeshare owners use it year round.
If ~ny oth.r informatien is needed, notify U8 by FAX.
. Sincerely,
&~
k.A/yY1PIrJ.f:!1~ (44.)
Eugene L. Kimball
ELK/ss
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