1. Imagine the result Impact Study on MSD Rate Payers of Proposed Consolidation/Merger Phase II – Towns of Biltmore Forest, Montreat and Weaverville Presentation to the MSD Planning Committee February 13, 2013

2. Agenda 1.Overview/Purpose of Study 2.Overview of Water Systems 3.Evaluation of Consolidation/Merger 4.Summary and Conclusions 5.Questions & Answers

3. Overview / Purpose of Study Assess impact of the proposed merger of Water Systems within Buncombe County with MSD Phase 1 – City of Asheville water system Phase 2 – Towns of Biltmore Forest, Montreat and Weaverville Potential legal, governance, valuation and asset compensation issues were beyond the scope of this study.

4. Town of Biltmore Forest – Water System Characterization Approximate population of 1,526 Customers: 762 residential, 9 commercial and 9 industrial Purchases water from the City of Asheville Water assets include : 20 miles of distribution pipelines

5. Town of Biltmore Forest – Water System Characterization No field visits conducted. Town’s water assets are below ground No future improvements anticipated by the Town: Majority (approx. 85%) of water lines replaced in 2002 FY13 budget includes about $7,500 for meters, meter boxes and hand tools Water Rates

6. Town of Montreat – Water System Characterization Town seasonal population of ~ 3,000 Montreat College located in Montreat (approximately 450 undergraduate students) Water System serves: 640 residential meter connections and 28 institutional connections Water system governed by Town Board

7. Town of Montreat – Water System Characterization Water system includes: 12 supply wells (only operate 11 wells currently; 4 new wells since 2002) 2 water storage tanks (total capacity 600,000 gallons) 2 booster pump stations (1 emergency) 18 miles of distribution lines Emergency connection with Black Mountain Water source: bedrock aquifer in Blue Ridge and Inner Piedmont Recharge Area

8. Town of Montreat – Water System Review Town reportedly replaced ~ 80% of water lines since mid-1980s Water system evaluated in 2006 (by McGill Associates) System in good condition. No improvements were identified Field visits of major assets conducted in December 2012 General condition good with only minor issues associated with corrosion and general housekeeping Existing programs for meter replacement, valve exercising, and leak detection Storage tanks inspected annually Funding provided for cleaning and minor repairs to tank Plans to paint tank FY2012-13

9. Town of Montreat - Organization Structure Staff consists of 14 employees 8 employees (part-time to water system)

10. Town of Montreat - Planned Water System CIP

11. Town of Montreat - Water Rates

12. Town of Weaverville – Water System Characterization Approximate population of 1,495 Serves all of the Town of Weaverville and northern Buncombe County In 2011, reported 2,119 residential, 148 commercial, 11 industrial and 9 institutional customers. Water assets include: Ivy River Water Treatment Plant (1.5 mgd) 62 miles of distribution pipelines (2 to 12-inches) 7 storage tanks (capacity 3.7 gallons) 4 pump stations Emergency water connections with City of Asheville and Town of Mars Hill

13. Town of Weaverville – Water System Review Field visits of major assets conducted in December 2012 General condition good with only minor issues associated with corrosion and general housekeeping Meter replacement program is underway (Automated Meter Reading (AMR) System) 700 + meters replace in 2011 and 2012 Valve exercising and leak detection programs About 10 distribution system leak repairs made monthly Fire hydrants and distribution lines flushed annually Water System is in compliance with Federal Drinking Water Rules (based on 2011 Annual Water Quality Report)

14. Town of Weaverville - Organization Structure Staff consists of 9 employees Other Town employees support the water system Town Manager (10%) Finance Officer (15%) Collections (40%) Administrative Assistant (50%)

15. Town of Weaverville - Planned Water System CIP

16. Town of Weaverville - Water Rates

17. Option: Provide Town of Weaverville with Water from the City of Asheville’s System Interconnection between Weaverville and Asheville Exists 8” line sized only for emergency use Preliminary Requirements for Supplying Water to the Town from the City’s system: Booster pump station (approximately 1 mgd) New 12-inch transmission line (avoids subjecting existing lines to excessive pressure) Further analysis and preliminary engineering report (PER) required

18. Evaluation of Consolidation / Merger – Assumptions 1.MSD would retain dedicated water system employees 9 full-time staff from Weaverville Water System (9 full-time) No staff from Biltmore Forest or Montreat as these Towns do not have full-time staff dedicated to the water systems; 2.MSD and Town of Weaverville will need to decide whether the Public Works Facility (15 Quarry Road) would be needed for the water system as part of the consolidated entity; 3.Biltmore Forest would continue to receive treated water from the Asheville system (no longer under the wholesale agreement)

19. Evaluation of Consolidation / Merger – Assumptions 4.Billing would be consolidated and performed by MSD; 5.MSD would assume Towns’ water system indebtedness or possibly compensate Town’s for remaining debt; 6.MSD would keep water and sewer accounting separate, with no immediate impact to sewer customers or MSD’s long-term business plan; 7.All Town water customers, including wholesale customers would remain unchanged after the merger; and 8.The evaluation of legal, governance, and asset compensation issues were beyond the study scope.

20. Potential Merger Impacts – Town of Biltmore Forest 1.Reduction in personnel expense. Current water system staff are part-time and would remain Town employees. 0.5 FTE added. 2.Elimination of indirect transfers to General Funds 3.Existing note (annual debt service $450,000) assumed to continue to be paid by the Town. 4.Water Rate Structure Converted to City’s Existing Structure – Residential bill ~17% lower 5.Cost savings of approximately $775,000 through FY2022; Net savings of $200,000 accounting for water revenue reduction (Asheville water rates lower)

21. Summary of Merger Impacts – Town of Biltmore Forest Savings = $200,000 through FY2022

22. Potential Merger Impacts – Town of Montreat 1.Reduction in personnel expense. Current water system staff are part-time and would remain Town employees providing other Town services and functions. 0.5 FTE added. 2.Elimination of contributions to the General Fund 3.Water Rate Structure Converted to City’s Existing Structure – Residential bill ~17% lower 4.Cost savings of approximately $422,000 through FY2022; Net savings are negligible accounting for water revenue reduction (Asheville water rates lower)

23. Summary of Merger – Town of Montreat Merger Impact = Negligible

24. Potential Merger Impacts – Town of Weaverville 1.Staffing Transfer of 9 full-time staff to MSD (Scenario 1). If water supplied by the Asheville system, assumed reduction in the number of staff by 4 positions by FY2017 (Scenario 2) Other Personnel expense reduction. Indirect personnel cost would be reduced. (Both Scenarios 1 &2) 2.Water Rate Structure Converted to City’s Existing Structure – Negligible Residential bill impact 3.Scenario 1 Net Savings of $209,000 (FY2014 - FY2022) Scenario 2 Net Savings of $ 675,000

25. Summary of Merger – Weaverville (Scenario 1) Savings = $209,000 through FY2022

26. Summary of Merger – Weaverville (Scenario 2) Savings = $675,000 through FY2022

27. Merger Impact Additional Considerations 1.Regional / uniform approach to water resources and supply 2.Future system capital needs shared by a regional customer base 3.Enhanced ability to coordinate/manage water and sewer pipe replacements 5.Coordinated and unified customer service and communications 6.Reduction in Town control over the water system

28. Question & Answer Thank you! Imagine the result ARCADIS G&M