Major Changes and Initiatives

FY 2003 has been marked by unprecedented capital spending, particularly on upgrading the Blue Plains Advanced Wastewater Treatment Plant. For the first time ever, WASA surpassed its capital spending target, spending 101 percent of the revised FY 2003 budget. This success is due in large part to the direction provided by the Board, particularly through the detailed reviews performed by the Operations and Finance and Budget Committees.

WASA's ten-year capital improvement program (CIP) totals $1.76 billion (cash disbursements basis), approximately $200 million more than last year's plan. As discussed in Section I, near term increases are due to accelerated project completion schedules and lead service line replacements. Increases in the later years of the plan are due to inclusion of the FY 2012 disbursements for the Long Term Control Plan in the amount of $86.5 million, and new projects in the Water Services Area in FY 2012.

This is the second year that we have included the early years of the LTCP in the 10-year plan. This plan was completed and presented to the U.S. Environmental Protection Agency in August 2002, and totals $1.265 billion in 2001 dollars, or $2.6 billion in inflated dollars, assuming a forty-year implementation schedule. In FY 2003, the Authority received a $49.7 million appropriation from the U.S. Congress for initial funding of the LTCP, and there are indications that an appropriation of $25 million to $35 million will be received in FY 2004. It is highly unlikely that this outside funding will continue without a commitment to the implementation of the proposed LTCP, so we have included it in our lifetime and disbursements budgets. It is important to note that the projected LTCP disbursements are based on a 40-year implementation schedule, so the majority of LTCP costs are not reflected in the current 10- year CIP and financial plan. WASA does not intend to begin any additional LTCP work beyond the $143 million (cash disbursements basis) of projects previously included in the CIP until a Board-approved financing plan is in place, as discussed in Section 1 of this document.

The following sections summarize major projects and changes in each service area, with additional details for each project included in each service area section. Additional details by project are included in the separate CIP document. Please note that all dollar amounts are presented on a project lifetime basis, except where noted otherwise.

Wastewater Treatment

The lifetime budget for the Wastewater Treatment Service Area is $1.2 billion dollars, reflecting no change from last year's plan. The 10-year disbursement budget is $699.7 million, an increase of $20.7 million over last year's plan, attributable to project budget increases for the filtration/disinfection facility ($12.9 million), plant access upgrades and other facility and security improvements ($7.7 million), and a new project for automated sampling ($1 million).

Major projects under construction in FY 2003 included Additional Chemical Systems, Alternate Disinfection Facilities, Additional Dewatering Facilities, Primary and Secondary Treatment Facilities, Process Control Computer System, Gravity Thickener Facilities, and Grit and Screen Facilities.

Construction is scheduled to start in FY 2004 for the Nitrification/Denitrification Facilities Upgrade and the Filtration/Disinfection Facility construction has been accelerated to the end of FY 2004. Plant access upgrades and other facility upgrades are also scheduled for the upcoming year.

Combined Sewer

The lifetime budget for the Combined Sewer Service Area is $2.6 billion, consistent with last year's lifetime budget. This includes the proposed CSO LTCP, assuming a 40-year implementation schedule. The proposed CSO LTCP was included in the lifetime budget due to the receipt of funding from the U.S. Congress; because receipt of this and future funding would have been unlikely without a commitment to eventually implement the LTCP, we have added the LTCP to the lifetime budget. On a disbursements basis, we have only included the early years of the LTCP, totaling $189.8 million; the majority of the LTCP costs on a disbursements basis are not reflected in the current CIP or rates projections. WASA does not intend to begin any additional LTCP work beyond previously planned and budgeted projects until an EPA and Board-approved plan is in place.

We have begun implementation of the $143 million (disbursements basis) of previously planned and budget CSO-related projects, including fabridam replacement and pumping station rehabilitation. It is important to note that these projects alone are projected to result in a forty percent reduction in combined sewer overflow when completed over the next six years.

Stormwater

The lifetime budget for the Stormwater Service Area is $94.7 million, an increase of $2.4 million over last year. Stormwater initiatives include projects for large diameter storm sewers and pumping station force sewer replacement and rehabilitation, totaling $21.1 million. These projects include replacing undersized, aged, or deteriorated sewers, as well as installation of new sewers to serve new development. Rehabilitation of 15 existing stormwater pumping stations, totaling $24.6 million, has been deferred, pending discussions with the District of Columbia regarding responsibility for this infrastructure. A portion of WASA's stormwater work is coordinated with the District's Department of Transportation (DDOT) when projects are made necessary by DDOT's work in the streets that often requires relocation of storm sewers, inlets, or other structures. The lifetime budget for these projects is $28.5 million, with DDOT paying the costs of repaving.

Sanitary Sewer

Lifetime budgets in the Sanitary Sewer Service Area total $193 million, compared to $177 million in last year's plan. This increase is due primarily to projected cost increases for pumping station upgrades based on more detailed designs that were completed in FY 2003 and increased costs of the Potomac Interceptor permanent odor control structures. The 10-year disbursements plan in this service area is $128.8 million, a $1.5 million increase over the FY 2002 – FY 2011 plan. A major area of activity is upgrading pumping stations, with lifetime budgets of $20.2 million. These upgrades are included in the EarthJustice Consent Decree.

Design for reconstructing portions of the Potomac Interceptor, which provides wastewater conveyance from areas of Virginia and Maryland, will be completed and construction is scheduled to begin on this project in FY 2004. Included in this project will be permanent odor control structures. The lifetime budget for this project is $25.1 million.

Construction will start in FY 2004 for the East Side Interceptor rehabilitation and the Citywide Inflow/Infiltration project. Also during FY2004, WASA will continue the evaluation of the sewer system to determine its condition, verify adequate capacity, and to develop new capital projects, as appropriate. The lifetime budget for Sanitary Sewer program management is $14.9 million.

Water

The lifetime budget for the Water Service Area is $566 million, an increase of $64 million over last year's $502 million lifetime budget. Disbursements for the 10-year plan have increased from $323.3 million to $352.4 million. These increases are attributable to lead service line replacements being included in the budget in FY 2004 and FY 2005 and large and small watermain repair projects in FY 2012.

A major rehabilitation of the Bryant Street pumping station, with a lifetime budget of $58.5 million will continue in FY 2004. The Automated Meter Reading project, which began in FY 2002, will continue in FY 2004 and FY 2005 with the replacement of the largest commercial meters. To date, over 106,000 residential and small commercial meters have been installed. The lifetime budget for this project is $46 million, which includes ongoing upgrades of $0.3 to $0.5 million annually after initial implementation.

Washington Aqueduct

The FY 2003 – FY 2012 disbursements budget for WASA's share of Washington Aqueduct projects total $119.1 million, or $7.6 million less than last year's plan. The decrease is due to the elimination of a previously planned project, backwash treatment.

Capital Equipment

The FY 2005 proposed lifetime budget for Capital Equipment is $97 million, compared to $85.6 million in last year's plan. With the exception of some systems projects, lifetime budgets for capital equipment begin with FY 2002 actual disbursements and end with projected FY 2013 disbursements due to the annual nature of the purchases that are made in this service area. The increase in the lifetime budget is attributable to the proposed asset management system and to the purchase of photocopying equipment.

CIP Development and Approval Process

WASA's capital budget review process begins each year in the spring, as part of both our capital and operating budget review process. This process includes a review of major accomplishments, priorities, status of major projects and emerging regulatory and related issues impacting the capital program. Projections of changes in project lifetime budgets are also included. The review process involves the WASA departments with responsibility for managing the capital projects as well as finance and budget staff and executive management. The CIP is integrated into WASA's ten-year financial plan; because of its size, it is the primary driver of WASA's projected rate increases over the next ten years.

This review process lasts over several months and culminates with the presentation of the updated CIP to WASA's Board of Directors' Operations and Finance & Budget Committees in October. The Committees complete their review from October through December. The operating budgets, capital improvement program, and ten-year financial plan are then forwarded to the full Board for its consideration in January.

After adoption by the Board of Directors, WASA is required to submit its annual operating and capital budgets to the Mayor and the District of Columbia Council for its review and comment; however, neither has power to change WASA's annual budgets. Final operating and capital budget numbers, along with the capital authority request will be forwarded to the District for inclusion in the District of Columbia's budget submission to Congress. WASA's request for capital authority is ultimately made to and approved by the U.S. Congress.

Facilities Master Plan and Other Facilities Planning Tools

The Water and Sewer Facilities Master Plan provides a twenty-year framework for developing, analyzing and evaluating changes to the CIP and includes projects currently in the ten-year CIP as well as proposed projects projected to begin after completion of the current ten-year planning period. It describes current conditions and presents a vision of the needs for the water and sewer systems and the actions planned to meet those needs. This plan is scheduled to be updated in FY 2004.

WASA has also developed more detailed facilities plans for specific areas including; a Biosolids Management Plan for dealing specifically with biosolids issues, and Water Systems and Liquid Processing Facilities Plans for use as project planning tools in those areas.

Disbursements and Project Lifetime Budgets

As in the past, we have presented the CIP on both a project lifetime basis and cash disbursement basis. During the CIP review process, we perform an extensive review of the total project, or “lifetime” budgets, which also reflect historical spending prior to the current ten-year period, projected spending beyond the current ten-year period and project contingencies. Project lifetime budgets are our primary area of focus in budget development and day-to-day monitoring. In addition to lifetime budgets, we also develop a cash disbursements forecast. Actual cash disbursements are critical to forecasting the anticipated level of rate increases and the amount and timing of capital financings. While cash disbursements are a function of project lifetime budgets, they reflect a more realistic projection of actual “cash out the door” excluding contingencies and taking into account historical and projected completion rates.

Changes have been made to some of the project lifetime budgets approved from last year due to a change in project scope, engineering cost estimates, site changes and other related issues. This year's budget document includes a summary of lifetime project budgets by program area for the Board's review, including a comparison with last year's plan. Also, this year's lifetime budget reflects the close-out of some older projects that had not been previously closed. These projects were completed and placed into service in earlier years, but due to invoicing or other contract close-out issues, had not been officially closed out in our project management and financial systems. Going forward, projects will be closed and dropped from the CIP in the fiscal year following the end of project activity.

Capital Authority

As part of WASA's enabling legislation, Congressional appropriations authority is required before any capital design or construction contract can be entered into. The FY 2005 request totals $274.3 million, and reflects the following:

• Remaining authority from prior years' appropriations
• Projected commitments in FY 2004 and FY 2005
• The first six months of planned FY 2006 commitments to ensure adequate authority exists, in the event that any projects are accelerated.

Due to the timing of the Congressional appropriations process, authority requests must be made well in advance of commitment execution. In addition, execution of any contract requires General Manager approval, with major projects and contracts requiring Board approval.

The combined sewer projects' authority request is zero, as existing and previously requested capital authority in this service area is in excess of projected commitments in FY 2004, FY 2005 and the first half of FY 2006. (These commitments cover only those projects historically included in WASA's CIP and do not reflect any new projects related to the CSO LTCP.) However, we may revise this request prior to Board approval in January based on the status of negotiations on the proposed LTCP with the EPA and Department of Justice, potential new funding from the federal government, or other related issues.

Major Assumptions

Inflation: All project costs are inflated at three percent annually to the mid-point of construction; personnel services are inflated at three percent per year throughout the 10-year plan

Contingency: WASA capital projects include project contingencies ranging from 5 – 15 percent, based on the size of the project.

Project Pages

This document contains individual sections for each of WASA's seven service areas. Each service area is made up of specific projects. Within each service area section in this document, there are individual project sheets for each current capital project in that section. The capital project sheets contain general information for each project. The following information is included:

Capitalization Policy

WASA's capitalization policy determines how expenditures will be recognized and accounted for. Because we also match the financing to the projected useful life of the item, it also determines how projects will be financed. The following guidelines are used to categorize items as capital, capital equipment or operating (maintenance):

• Maintenance related items – are routine, cost under $5,000, and do not extend the life of the item more than 3 years,
• Capital Equipment – has a life of at least 3 years, a cost exceeding $5,000 and is financed with short-term debt or cash,
• Capital Project – has a long life (average of 30 years), a minimum cost of $500,000, and is financed with 30 year bonds.

Historical and Projected Capital Spending

Disbursements Basis

Project Lifetime Budgets by Program Area

Fiscal Year 2005 Capital Authority Request

Sources of Funds

Dropped or Closed Project Listing

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