Helix Water District

Helix WATER DISTRICT

FISCAL YEAR 2016-17 ANNUAL REPORT

Helix Water District’s Lake Cuyamaca, Spring 2017 1 Fiscal Year 2016-17 Annual Report Helix Water District

About Helix

Helix Water District is responsible for the safety, quality and reliability of the drinking water for over half a million people in ’s east county. Our water meets all health and safety standards set by the Environmental Protection Agency and the state of and regular preventive maintenance maximizes the operating efficiency and lifespan of each piece of equipment in our water treatment and water distribution systems.

WATER TREATMENT WATER DISTRIBUTION 500,000 273,142 We serve over 500,000 people in our We serve over 273,000 people in service area and Otay, Padre Dam and Lemon Grove, La Mesa, El Cajon, Lakeside water districts Spring Valley and the county

27,985 Acre Feet* 106 Million Water storage in Lake Cuyamaca, Treatment capacity of the R.M. Levy and the City of San Water Treatment Plant, measured in Diego’s El Capitan Reservoir gallons per day

56,498 728 Metered services Miles of pipe

16,903 6,442 Valves Fire hydrants

25 24 Pump stations Reservoir tanks

* An acre foot is the volume of a sheet of water one acre in area and one foot deep, about 326,000 gallons, which is enough water to meet the average annual needs of two single family homes.

Los Coches Pump Station

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Board of Directors

Helix Water District is a special district: a local government agency formed to perform a needed service, such as water, sewer or fire protection. Like most special districts, Helix Water District is governed by a board elected from their communities. Our service area is apportioned into five voting divisions. Each division elects a representative to the board for a four-year term to oversee district policies and resources and to represent the district on regional water boards and committees.

Joel A. Scalzitti Kathleen Coates Hedberg Division 5 Director Division 4 Director Board President Vice President

Daniel H. McMillan DeAna R. Verbeke Mark Gracyk Division 1 Director Division 2 Director Division 3 Director

Our History Our history began in 1885 when the San Diego Flume Company began construction on Cuyamaca Dam and a 33.5 mile long redwood flume to deliver water from Lake Cuyamaca to La Mesa. In 1912, the La Mesa, Lemon Grove and Spring Valley Irrigation District was formed, and in 1926, the district assumed ownership of the Cuyamaca Water Company and became an operating entity under the Irrigation District Law of California, Water Code Sections 20500 et seq. The district was renamed Helix Irrigation District in 1956 and Helix Water District in 1973.

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President’s Letter

Dear Helix Water District Customer, This is our annual report for fiscal year 2016-17, which began July 1, 2016 and ended June 30, 2017. The report documents last year’s activities and financial results, but this year, we also wanted to ask the question, “Where is Helix now and what lies ahead?”

Board Meetings The question stems from the effects of drought and record-setting temperatures in California in eight of the last 10 years, and how state, regional and local water Customers and the public are encouraged to attend Helix suppliers, like Helix, are adapting. board meetings on the first and third Wednesday of the Throughout this period of profound change, the board and employees at Helix month at 6 p.m. and on the have been steadfast in our dedication to the communities we serve. All the while, fourth Wednesday at 3 p.m. we have been successfully managing the financial risk that water use restrictions Meetings are held at Helix’s and new regulations bring, and we continue to invest in our infrastructure, which administration office at 7811 University Avenue in is critical to the safety and reliability of the water you depend on. La Mesa.

This organization’s accomplishments in fiscal year 2016-17 and over the last 10 years are due to the expertise and hard work of Helix employees. I am honored to work on the board of directors, with my fellow board members, and with this outstanding staff.

What they accomplished during these difficult years is exactly what you want from a water utility, whether you are a resident, business owner or an elementary school principal responsible for hundreds of children -- safe, high-quality drinking water when you want it and when you need it.

Joel A. Scalzitti Board President

Small Valve Replacement Program (ongoing) 6 7 Fiscal Year 2016-17 Annual Report Helix Water District

Where We Are Now General Manager’s Report

According to Scripps Institution of Oceanography, more than 30 atmospheric rivers made landfall over California last winter, an unprecedented amount in the 70 years on record. They produced the wettest year ever recorded in California and brought five consecutive years of drought to an end.

They also brought a series of winter storms to San Diego County and to Helix’s Lake Cuyamaca watershed. In one 24 hour period in February, the lake received 1,016 acre-feet of runoff from the surrounding hillsides, and

Carlos V. Lugo Stonewall Peak -- enough water to meet the annual needs of over 2,000 homes. General Manager By June, we had utilized 3,349 acre-feet of water from the lake and placed 9,658 acre-feet in the City of San Diego’s El Capitan Reservoir, where Helix has water storage rights, for use in 2018 and the years ahead.

Because buying imported water is Helix’s single largest expense -- accounting for 51 percent of our fiscal year 2016-17 budget -- Lake Cuyamaca can have a significant impact on the district’s finances. The water we collected in the lake last winter will save Helix $8 million and, I am pleased to report, played a major role in reducing our 2018 rate increase.

Lake Cuyamaca / 2017 Financial Impact

11,248 Acre Feet $8 Million Amount of water collected in Lake Cost savings on imported water Cuyamaca last winter

The narrow band of clouds stretching across the Pacific Ocean is an atmospheric river that has made landfall over California. This one soaked the state on February 25, 2017. (NASA)

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Weather and Water

If you are wondering what kind of weather will hit California in 2018, you’re not the only one. Meteorologists are hesitant to make a forecast as El Niño conditions did not produce expected precipitation levels in 2016, and 2017’s record-breaking precipitation came without warning.

Two new studies from Scripps Institution of Oceanography analyze the uncertainty of California’s weather. The first looked at the last 70 years of weather across the state and confirmed that precipitation levels, especially in Southern California, are already more variable from year to year than Predicted Effects of Rising Temperatures anywhere else in the United States. Longer dry periods in California, similar to 2011-2016 drought Scripps’ second study looked at how our changing climate will affect More intense wet periods, similar precipitation in California in the years ahead. They analyzed 30 global climate to precipitation levels in 2017 models and concluded that California’s record-breaking weather over the last More powerful atmospheric rivers five years was a preview of what we can expect. The study predicts that as due to rising surface temperatures temperatures continue to rise, California will experience even longer dry in the Pacific Ocean periods and more intense wet periods. Increased flooding Faster evaporation rate It’s also important to remember that the changes we see in California’s Increased water demand for climate don’t just affect our water supply. Warmer temperatures increase agriculture water demand -- in our forests, in agriculture and in our own landscapes. Increased water demand for urban landscapes Recent Climate Records Links to Studies 2014 2015 First Study Warmest year on record (planet) Warmest year on record (planet) onlinelibrary.wiley.com/doi/ 10.1002/2017GL074175/full Warmest year on record (California) Warmest winter on record (California) Warmest winter on record (California) Driest winter on record (California) Second Study https://www.nature.com/articles/ s41598-017-11285-y 2016 2017 Website Warmest year on record (planet) Wettest winter on record (California) scripps.ucsd.edu Warmest summer on record (California)

Source: National Oceanic and Atmospheric Administration

Helix’s R.M. Levy Water Treatment Plant operates 24/7. This is the control room and from here plant operators can manage both the plant and our water distribution system.

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Adapting to a Changing Climate

How ready are we at Helix for rising temperatures, longer dry periods and more intense wet periods? The answer is that throughout the last five years of drought, Helix had an adequate water supply to meet customer demand. Why, then, did we set water use limits on our customers? Because Governor Brown’s executive order mandating statewide conservation applied to all water utilities in California.

We attained this level of water supply reliability through collaboration and cost sharing. Helix and each of the 24 water agencies serving the San Diego region are member agencies of the San Diego County Water Authority, and the Water Authority’s wholesale water rate -- the rate Helix and other member agencies pay for imported water -- includes the cost of water resources development.

Droughts The planning for the water supply we have in San Diego County today began 2007-2017 after the 1987-1992 drought. Through inter-agency collaboration among staff Colorado River Basin and elected board members, and with funding from the Water Authority’s 1999-Present wholesale water rate, Helix and other member agencies have effectively California invested over $3 billion in a diversified portfolio of water resources to prepare 2007-2009 the county for the years ahead. California 2012-2017 The Water Authority’s wholesale water rate also includes it’s share of the cost of similar investments in water resources development at Metropolitan Water District of Southern California, one step up Helix’s supply chain. Clearly, drought and preparing for rising temperatures and longer dry periods are pushing the cost of water higher. Over the last 10 years the Water Authority’s wholesale water rate has increased by 149 percent.

San Diego County Water Authority’s Wholesale Water Rate Price Helix pays per acre foot of untreated water

Reverse osmosis canisters at the Carlsbad Desalination Plant, a drought- proof water resource that can produce up to 50 million gallons of water per day.

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As investment in the region’s water supply continues so, too, will increases in water rates, because the San Diego County Water Authority’s wholesale water rate -- buying water -- is Helix’s single largest expense, accounting for 51 percent of our fiscal year 2016-17 budget.

And, if we want to benefit from water resources that are available during dry periods, such as the Pacific Ocean and purified wastewater, we need to invest in the development of advanced water treatment facilities like the Carlsbad Pure Water Projects Desalination Plant and the City of San Diego’s Pure Water Project. Helix is aka Potable Reuse partnering with Padre Dam Municipal Water District, the city of El Cajon and Pure water projects purify the county of San Diego to evaluate the feasibility of the East County Advanced recycled water that is already Water Purification Project, which would recycle then purify East County clean enough to use for wastewater to meet up to 30 percent of East County’s water demand. irrigation -- to drinking water standards. This requires an advanced treatment process San Diego County’s Diversified Portfolio of Water Resources of microfiltration, reverse osmosis and ultraviolet light. The result is exceptionally clean Current Supply In Development drinking water -- and a drought- Imported water from the Colorado Pure Water Project proof water supply. River and Northern California through - City of San Diego Metropolitan Water District of Southern California East County Advanced Senior water rights on Colorado River Water Purification Project through water transfer agreement with - Padre Dam Municipal Water District Imperial Valley farmers - Helix Water District - City of El Cajon Carlsbad Desalination Plant - County of San Diego Local storage of a six month water supply

Recycled water

Water conservation

Local water

This level of water supply reliability is possible because of the economies of scale possible in San Diego County. We’re a large urban area with a population of 3.5 million, and that provides significant advantages:

Large populations provide funding for large projects

Low per capita cost per project

Small and midsize water agencies benefit from projects they could not do alone Demonstration plant for the East County Cities that manage land use and water can develop water resources Advanced Water Purification Project, a and conservation through building projects partnership between Padre Dam Municipal Water District, Helix Water District, the city of El Cajon and the county of San Diego.

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Even building density within urban areas reduces the cost of water. This is another advantage Helix customers enjoy, as most of our service area is fully developed. This means that there are more customers per city block to pay the cost of the pipeline, valves, meters and fire hydrants serving that block -- and more customers across our service area to fund the operations and maintenance of the R.M. Levy Water Treatment Plant and our pumps and reservoir tanks.

The cost of water is increasing, but in 2018, Helix customers will still pay less than a penny a gallon for the dams and reservoirs that capture our water supply, the aqueducts that transport water across California to San Diego County, water treatment, and 24/7 delivery of water to your home.

State vs. Local Control: How We Will Manage Water

According to the Public Policy Institute of California, 93 percent of Californians are served by large urban water suppliers, meaning they live in large urban areas -- Orange County, Los Angeles, the Inland Empire and the Bay Area -- and enjoy the same advantages in developing water resources that we enjoy in San Diego County.

The story for the remaining 7 percent of Californians living in the state’s rural communities and cities is very different. Without large populations to fund water supply projects, options are limited. Rural communities often rely on a single source of water, maybe a local river or creek, but in much of California it is groundwater.

At the beginning of 2014, the state of California reported 17 rural communities would completely deplete their water supply in 60 to 120 days. In July 2015, the state reported that more than 2,000 residential wells had run dry. Many of these wells remain dry today, even after the wettest winter in California’s history. Water quality is also an issue. The PPIC reports that 300 small water systems in California’s rural communities do not serve safe drinking water.

The disparity between rural communities and large urban areas was likely what prompted the state of California to step in and implement a statewide drought response in 2015 that superseded regional drought management plans, like the one already enacted and collaboratively managed by the 24 water agencies serving San Diego County.

Particularly difficult for San Diego County was the State Water Resources Control Board’s implementation of Executive Order B-29-15, Governor Brown’s April 1, 2015 mandate to reduce water use by 25 percent statewide. The state disregarded the last 25 years of water supply development in San Diego County, Completing mark-outs in and that the region had an adequate water supply to weather the drought, the street prior to excavating.

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when it calculated mandatory water use reduction targets of 20 to 36 percent for each water utility in the region. In doing so, the state also showed little regard for the tenuous relationship between water conservation and a water utility’s fixed costs -- costs that are constant at any level of customer water use.

A Water Utility’s Fixed Costs Example $1,000,000 in fixed costs If water sales = 100,000 units then fixed costs = $10 per unit of water sold If water sales = 50,000 units then fixed costs = $20 per unit of water sold

Fixed Costs Variable Costs Water treatment plant Imported water purchases operations and maintenance Pumping/energy costs Water distribution system operations and maintenance

Replacement of aging infrastructure

Administrative costs and customer billing

Staffing

There is no way around the fact that lower customer water use necessitates higher rates in order to cover a utility’s fixed costs. Now, consider that Helix customers have reduced their water use by 50 gallons per person per day in the last 10 years in response to three droughts and calls for conservation. Water sales is Helix’s primary source of revenue, and a drop of this magnitude is as serious for a public utility as it would be for a business.

Helix Customer Water Use In gallons per person per day

Helix’s R.M. Levy Water Treatment Plant disinfects water with ozone, producing higher quality, better tasting tap water.

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Complying with Executive Order B-29-15 cost Helix $10 million in fiscal year 2015-16. Helix also responded to the mandate by joining the San Diego County Water Authority, other member agencies, water utilities from throughout the state and the Association of California Water Agencies in lobbying the State Water Resources Control Board for a better approach to water use limits taking into account local climate differences, local investment in new water resources and long-term water conservation efforts. While Helix staff lobbied the State Water Resources Control Board in writing, our board members flew multiple times to Sacramento to testify in person.

The state’s actions were also the impetus of the five-year rate plan we adopted in October 2015. We set projected maximum rates based on our fixed costs, the projected water savings of our customers and the assumption that the drought continued for five more years. At the end of fiscal year 2016-17, our projections were within 1 percent of actual customer water savings.

Helix is now waiting for the state’s follow-up to the drought -- three pieces of legislation and a massive water supply project:

Senate Bill 623 This legislative bill would impose a tax on water bills -- Helix water bills, for example -- to fund water quality improvements in California’s rural and economically disadvantaged communities. The current proposal is to charge Californians $0.95 per water bill beginning July 1, 2020. This bill will be assigned to the appropriate committees for hearings in 2018.

Senate Bill 606 In May, 2016, Governor Brown issued Executive Order B-37-16, which directed five state agencies to establish a permanent framework for water conservation and improve planning for more frequent and severe droughts. SB 606 seeks the required legislative approval of the framework.

The framework, titled Making Conservation a California Way of Life, requires urban water utilities, including Helix, to meet new water use targets based on their local climate, the population they serve and mandatory water efficiency standards developed by the state for indoor, landscape and commercial water use. The State Water Resources Control Board is expected to introduce the new standards in 2018, pending the Legislature’s approval of SB 606.

Water efficient landscaping is reducing urban water demand throughout California. Five years of drought, however, prompted many Californians to simply turn off their irrigation.

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Assembly Bill 401 AB 401 proposes the development of a plan and funding mechanism for a water rate assistance program for low-income Californians. The current proposal is a tax on water bills on all utility customers with incomes exceeding 200 percent of the federal poverty limit. This could result in a $3 to $6 tax per water bill for about two-thirds of Helix customers. The bill is due to the Legislature by February 1, 2018.

California WaterFix The confluence of the Sacramento and San Joaquin rivers is actually the confluence of most of the major rivers in California that flow down the western slopes of the Sierra. They converge between Sacramento and San Francisco in what is called the Delta, which provides water for up to two-thirds of Californians.

The California WaterFix is a $17 billion project to restore the Delta ecosystem and its fisheries, including salmon, by building new diversion facilities and two tunnels to transport water to Central Valley farms and Southern California cities. The primary issue with the project is that, while utilities in large urban areas can allocate the cost across millions of customers, farmers cannot. How the project will be equitably funded is unclear, but Helix customers may already be on the hook, as Metropolitan Water District of Southern California has committed $4 billion in funding. $17 Billion $4 Billion Projected costs of the California Funding from Metropolitan Water WaterFix District of Southern California

How Helix is Managing Uncertainty

While Helix contended with drought and state policies over the last six years, we also focused inward -- on what we can control. We committed to six cost control strategies to mitigate the impact of water use limits, lower revenues and higher imported water costs on our water rates.

Low or No Increases to Operating Costs Over the past six years, we have held our budgeted operating cost increases at or below the San Diego consumer price index (rate of inflation), which has ranged from 1.1 to 2.3 percent during this time frame.

Operations staff use geographic information system (GIS) technology to locate infrastructure underground.

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Helix Operating Costs 2012-2017

Maintaining Low Staffing Levels Beginning in fiscal year 2009-10, we began reducing our staff by 18 full-time and nine part-time employees. This level of staffing means that there is one Helix employee for every 1,832 district customers. In March 2017, the district deferred recruitments to fill open positions until the fiscal year 2017-18 budget wasapproved, with the exception of some specific positions tied to regulatory compliance.

Employee Retirement Contributions Helix employees are paying the full share of the employee contribution portion to the district’s CalPERS pension plan. Accordingly, each district employee contributes 8 percent (classic members) or 5.5 percent (new members) of each paycheck toward their CalPERS pension.

Between July 2011 and July 2017, the district’s 149 employees have paid $4.2 million to fund the district’s CalPERS liability. Another $910,500 in deductions from employee paychecks is planned for fiscal year 2017-18, bringing the total to $5.1 million by the end of the 2017-18 fiscal year.

Plant operator cleaning an ozone generator at Helix’s R.M. Levy Water Treatment Plant.

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Coordinated Maintenance and Capital Improvement Programs Our ongoing maintenance programs and our annual capital improvement projects address the district’s aging infrastructure using a thoughtful, planned approach. Over time, this saves our ratepayers money by avoiding costly emergency pipe breaks and unplanned expenditures, and supports regulatory compliance and the delivery of safe, high-quality water.

It also gives us flexibility. For example, we deferred $1.5 million of capital projects in fiscal year 2016-17 and $2.6 million in fiscal year 2015-16 in response to lower customer water use.

Together, our valve maintenance and turning policies, cast-iron and steel pipe replacement programs, large and small valve replacement programs, pipe crawls and transmission line inspections, and treatment plant equipment and maintenance programs all minimize system outages -- enhancing the reliability of your water service and controlling our costs.

In-House Technology Development Our own Supervisory Control and Data Acquisition System (SCADA) instrumentation and electrical technicians are replacing the district’s SCADA and communications system and implementing several software and electrical upgrades themselves, saving the district millions of dollars. Our in-house electricians replaced the electrical system at the water treatment plant at a cost savings of $300,000. And, our public affairs team developed and maintains our website in-house with less than $1,000 in software, avoiding up to $40,000 in consultant fees.

Outsourcing We continue to look for opportunities to outsource activities that help reduce costs or district overhead. Some of the items that are currently outsourced include traffic control, paving and concrete work, asphalt sealing, painting fire hydrants, plumbing, electrical, environmental consulting services, landscaping and custodial services.

Large Valve Replacement Program (ongoing)

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Where We Are Now

The goal of this report is to share with our customers that, while the wettest year in California’s history brought five years of drought to an end, the fallout of the drought is a more acute awareness of the potential impacts of a changing climate and the expectation of rising costs and more regulation.

However, we hope you also glean from this report that your investment in San Diego’s water supply -- through your Helix water bills -- has put you in a good position to weather the changes ahead. If you have any questions about this report, or would like Helix to speak to your group about the key themes discussed in the report, please do not hesitate to contact me or our public affairs staff.

Carlos V. Lugo General Manager

Lake Jennings

Helix employee participating in quarterly safety training conducted by Helix’s confined space rescue team and Heartland Fire’s Rescue Engine 12.

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WATER“ IS LOCAL, AND LOCALLY FUNDED. PAYING STATE TAXES ON A WATER BILL MAY NOT REST WELL WITH SAN DIEGANS. WE’LL SEE WHAT THE STATE PROPOSES, AND HOW WE NEED TO PROCEED.

Elizabeth Hull Helix’s Legal Counsel

Lake Jennings

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Water Quality and System Operations

Cost Drivers Over the Last 10 Years

Regulatory Fees Chemicals Energy

$142,981 $3,883/dry ton $0.17 kW-h Fiscal Year 2016-17 Fiscal Year 2016-17 Fiscal Year 2016-17

$52,725 $3,065/dry ton $0.13 kW-h Brian Olney Fiscal Year 2007-08 Fiscal Year 2007-08 Fiscal Year 2007-08 Director of Water Quality and System Operations

Fiscal Year 2016-17 Activities and Accomplishments

Infrastructure Replacement and Upgrades Completed Regulatory Compliance Projects Recoated screw pumps Process hazard analysis Air saturation study on imported source water Compliance audit of process safety manual Painted sedimentation basin travelling bridge Lead in schools testing program Replaced filter effluent valve actuators Replaced load cells and data cards on chlorine scale Rehab and replacement of ozone contactor Installed new leak detection sensors equipment Second round of Long Term 2 Enhanced Surface Repaired surface wash pipe supports in filter basin Water Treatment Rule cryptosporidium sampling Security camera pilot project Diversion reporting in compliance with Senate Bill 88 Vista Pump Station Motor Control Center replacement Lake Jennings Fletcher Hills 2 Pump Station construction Installed five tipis in campground Lemon Grove Tank inspection and repair Kids Day and Spring Carnival Helix 3 power pole replacement Rebuilt three altitude valves Larry Lyford, Helix’s Water Treatment Plant Manager

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What’s Ahead in Fiscal Year 2017-18 and Beyond

Lake Jennings tracer study to validate the lake mixing and dilution model for the East County Advanced Water Purification Program (ECAWP) Continue working with ECAWP partners to identify the cost and terms of a potential project “ Installing lightning arrestors at hydropneumatic OUR STAFF, pump stations Continued improvement of data management Replacing flume valve actuator OUR SYSTEMS Evaluation of Lake Jennings boat dock Treatment plant security camera system upgrades AND OUR PROCEDURES Treatment plant handrail modifications Replacing fluoride tank Replacing roof at treatment plant ARE FOCUSED ON Developing infrastructure replacement schedules Evaluating treatment on changing source water HIGH QUALITY WATER Monitoring proposed regulations AND PUBLIC SAFETY. THERE IS NO HIGHER PRIORITY AT HELIX THAN THE SAFETY OF OUR WATER.

Brian Olney Director of Water Quality and System Operations

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Operations

Fiscal Year 2016-17 Activities and Accomplishments What’s Ahead in Fiscal Year 2017-18 and Beyond

Installation of 20 electrical vehicle charging stations 1,118 12 42 Continued migration of aging vehicle fleet to hybrid technology Customer service field City and county projects Private development Recoating the administration office parking deck dispatches supported projects supported Replacing the treatment plant roof and heating, ventilation and air conditioning system Installing pressure reducing valve at Fletcher Hills 1 7,482 62 23 Pump Station Valves exercised Distribution valves Specialty valves replaced maintained

102 2,556 147 Air Valves maintained 3/4” to 1” meters replaced 1.5” to 2” meters replaced Kevin Miller Director of Operations

427 3,075 70 Meter maintenance jobs Hydrants maintained Hydrants repaired

87 37 Plastic service laterals New service laterals replaced installed

Greenfield Tank slope stabilization project Completed evaluation of cellular, automated water meter infrastructure (AMI) pilot project Established large diameter pipe inventory Developed greenhouse gas inventory Upgraded operations center building management system Upgraded operations center facility security system

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WE“ HAVE OVER $1.5 BILLION IN INFRASTRUCTURE SPREAD OUT OVER 50 SQUARE MILES. PREVENTIVE MAINTENANCE IS THE KEY, AND SO IS EVALUATING NEW TECHNOLOGIES THAT CAN STREAMLINE OUR WORK.

Kevin Miller Director of Operations

Cutting pavement

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Engineering

Fiscal Year 2016-17 Activities and Accomplishments Completed $10.5 million of design and construction on capital improvement projects Completed construction of the new Fletcher Hills 2 Pump Station and start-up is scheduled for fall 2017 Removed the last large segment of cast-iron pipe in the city of Lemon Grove Completed condition assessment of Aqueduct 2 pipeline and are completing rehabilitation repairs with significant cost savings Completed sale of El Monte Valley property

What’s Ahead in Fiscal Year 2017-18 and Beyond Jim Tomasulo Director of Engineering Our capital improvement program will exceed $15 million in upgrade and replacement projects We began the new fiscal year with 18 projects in the planning and design phase and 27 projects in the construction phase Replacing about a mile of aged steel pipeline Complete rehabilitation of the one million gallon South Rim Tank, including a new roof system

Surveying

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LAST“ YEAR, WE UTILIZED REMOTE FIELD TESTING TECHNOLOGY THAT SHOWS THE ACTUAL REMAINING WALL THICKNESS OF METALLIC PIPES. BY USING THE LATEST TECHNOLOGIES, WE AVOIDED A PIPE REPLACEMENT PROJECT -- WITH SUBSTANTIAL COST SAVINGS FOR OUR CUSTOMERS.

Jim Tomasulo Pipeline inspection tool Director of Engineering that employs remote field testing technology to measure pipe wall thickness.

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Administration What’s Ahead in Fiscal Year 2017-18 and Beyond The implementation of new Enterprise Resource Planning software for finance, payroll and human resources (Phase 2) Fiscal Year 2016-17 Activities and Accomplishments Geographic Information System improvements

Successfully transitioned to new vendors for a The state of California’s implementation of new better online bill payment portal and an improved water conservation mandates for water suppliers customer experience New legislation could tax water bills Rolled out new electronic content management Customer survey system to engineering department and over 300,000 documents have been entered 2018 Water Talks series Completed audio/video upgrades in boardroom, including an electronic voting system Human resources conducted 33 recruitments throughout the year for full-time, part-time, Lisa Stoia temporary and intern positions Director of Administrative Services Finance garnered the Government Finance Officers Award of Excellence in Financial Reporting The district received California Special Districts Transparency Certification Employees volunteered for Helix Helps to assist the cities in our service area with neighborhood projects Upgraded district’s website, which over 142,000 people used Introduced Helix Water Talks to give customers the opportunity to see our water treatment process and learn about our operations and infrastructure Upgraded Helix Highlights for delivery to customers six times a year Engaged customers for first time on Next Door Received the American Water Works Association 2016 Public Communications Achievement Award, Honorable Mention

Helix Water Talks took customers on tours of the R.M. Levy Water Treatment Plant and the Nat L. Eggert Operations Center. 44 45 Fiscal Year 2016-17 Annual Report Helix Water District

WE HAVE“ DECADES OF CONTRACTS, BUILDING PLANS AND DOCUMENTS THAT WILL SOON BE DIGITAL AND EASY TO SEARCH AND RETRIEVE. TECHNOLOGY IS MAKING HELIX BETTER -- FOR LESS THAN A PENNY A GALLON. WE TAKE A LOT OF PRIDE IN THAT.

Lisa Stoia Director of Administrative Services

Helix’s vault contains thousands of documents.

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Financial Statements

Statement of Net Position

2017 2016 2017 2016

Assets Liabilities Current Assets Current Liabilities Cash and cash equivalents $ 32,895,195 $ 25,752,212 Accounts payable $ 7,888,808 $ 7,499,350 Water receivables Accrued expenses 4,158,787 3,403,702 Billed 3,319,037 2,751,102 Compensated absences 300,690 301,931 6,886,763 6,018,837 Unbilled Current portion of bonds payable 1,435,000 1,395,000 Other receivables 140,824 487,365 Total Current Liabilities 13,783,285 12,599,983 Water inventory 22,254,594 12,476,019 775,686 726,577 Supplies inventory and prepaid expenses Non-Current Liabilities 66,272,099 48,212,112 Total Current Assets Compensated absences 2,549,369 2,573,771 Bonds payable after one year 9,710,000 11,145,000 Non-Current Assets Net pension liability 38,367,527 32,354,187 Restricted - debt service Cash and cash equivalents 1,904,993 1,903,704 Total Non-Current Liabilities 50,896,896 46,072,958 Investments 6,140,210 5,698,535 Total Liabilities 64,680,181 58,672,941 Capital assets Land 5,067,807 5,067,807 Deferred Outflows of Resources Reservoirs and pipelines 339,615,788 329,949,707 Deferred amount on refunding of debt 257,518 294,308 Automobiles and trucks 3,093,945 3,027,176 Deferred amount related to pensions 1,107,502 2,441,491 Buildings and equipment 49,112,961 45,812,485 Total Deferred Inflows of Resources 1,365,020 2,735,799 Less: accumulated depreciation (162,814,699) (154,148,155) Construction in progress 8,652,802 7,452,659 Net Position Total Non-Current Assets 250,773,807 244,763,918 Net investment in capital assets 231,326,086 224,327,371 Total Assets 317,045,906 292,976,030 Restricted debt service 1,904,993 1,903,704 Unrestricted 25,764,033 8,584,005 Deferred Outflows of Resources Total Net Position 258,995,112 234,815,080 Deferred amount related to pensions 7,994,407 3,247,790 Total Liabilities, Deferred Inflows of Resources and Net $ 325,040,313 $ 296,223,820 Position Total Assets and Deferred Outflows of Resources $ 325,040,313 $ 296,223,820 Continued...

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Statement of Revenues, Expenses and Changes in Net Position

2017 2016

Operating Revenues Water sales $ 75,332,588 $ 65,079,938 Local water runoff 16,828,525 2,868,403 Other charges 612,542 628,939 Total Operating Revenues 92,773,655 68,577,280

Operating Expenses Water purchases 25,293,132 33,274,446 Local water runoff 16,828,525 2,868,403 Administrative and general 20,273,722 18,499,846 Depreciation 9,093,269 8,539,576 Transmission and distribution 2,914,809 3,026,865 Water treatment 3,304,543 2,858,235 Pumping 2,113,134 1,926,249 Operations center 2,209,212 1,998,679 Customer services 1,133,143 1,200,519 Total Operating Expenses 83,163,489 74,192,818 Operating Income (Loss) 9,610,166 (5,615,538)

Non-Operating Revenues (Expenses) Interest income 322,092 310,213 Other income 11,569,143 3,411,700 Interest expense (477,369) (517,869) Other expense (685,950) (658,351) Total Non-Operating Revenues (Expenses) 10,727,916 2,545,693 Income (Loss) Before Contributions 20,338,082 (3,069,845)

Contributions by Customers, Developers and Agencies 3,841,950 3,758,230 Increase in net position 24,180,032 688,385 Net position, beginning of year 234,815,080 234,126,695 Net position, end of year 258,995,112 234,815,080

Helix is responsible for the maintenance of the fire hydrants in our service area.

50 51 Fiscal Year 2016-17 Annual Report Helix Water District

Statement of Cash Flows

2017 2016 2017 2016

Cash Flow From Operating Activities Reconciliation of Operating Loss to Receipts from customers $ 74,855,810 $ 66,313,420 Net Cash Provided by Operating Activities Payments to suppliers and vendors (53,275,491) (48,949,676) Operating income (loss) $ 9,610,166 $ (5,615,538) Payments to employees (11,722,254) (12,995,206) Adjustments Payments to reduce unfunded pension liability (750,000) (750,000) Depreciation 9,093,269 8,539,576 Other income 11,569,143 3,411,700 Other income and expense 10,883,193 2,753,349 Other expenses (685,950) (658,351) Change in operating assets and liabilities Net Cash Provided by Operating Activities 19,991,258 6,371,887 (Increase) decrease in water receivables (1,435,861) 884,912 (Increase) decrease in other receivables 346,541 (280,369)

Cash Flows From Capital and (Increase) decrease in water inventory (9,778,575) 377,486 Related Financing Activities (Increase) decrease in supplies inventory and prepaid (49,109) (40,248) Purchase and construction of capital assets (12,312,916) (9,441,608) expenses Principal payments on bonds (1,395,000) (1,350,000) (Increase) decrease in deferred outflows (4,746,617) (285,109) Interest paid (514,158) (554,658) Increase (decrease) in accounts payable 389,458 93,495 Cash contributions by customers and developers 1,274,877 1,380,139 Increase (decrease) in accrued expenses 755,085 768,095 Cash contributions by public agencies 219,794 36,216 Increase (decrease) in compensated absences (25,643) (129) Net Cash (Used) for Capital and Related Financing Increase (decrease) in deferred inflows related Activities (12,727,403) (9,929,911) to pensions (1,333,989) (3,406,604) Increase (decrease) in net pension liability 6,283,340 2,582,971 Cash Flows From Investing Activities Net Cash Provided by Operating Activities $ 19,991,258 $ 6,371,887 Purchase of investments (2,293,343) (3,471,786) Sales/maturities of investments 1,851,668 4,390,860 Supplemental Disclosures of Noncash Investing and Financing Activities Interest on investments 322,092 310,213 Contribution of water system assets by customers and Net Cash Provided by (Used for) developers $ 2,347,279 $ 2,341,875 Investing Activities (119,583) 1,229,287 Amortization of deferred amount on refunding debt $ 36,790 $ 36,790

Net Increase (Decrease) in Cash and Cash Equivalents 7,144,272 (2,328,737) Cash and Cash Equivalents at Beginning of Year 27,655,916 29,984,653 Cash and Cash Equivalents at End of Year $ 34,800,188 $ 27,655,916 Reconciliation to the Statements Net Position Cash and cash equivalents -- current $ 32, 895,195 $ 25,752,212 Cash and cash equivalents -- non-current 1,904,993 1,903,704

Total Cash and Cash Equivalents $ 34,800,188 $ 27,655,916

Continued...

52 53 Fiscal Year 2016-17 Annual Report Helix Water District

Our Employees Service Awards Awarded in Fiscal Year 2016-17

LUIS G ANDRADE JESUS A GONZALEZ JASON B.W. MOORE MILICA K SCHIPPER 30 YEARS 10 YEARS SONYA M ANDREWS TIMOTHY W GRAY DAVID R MOORE MICHAEL SCHUFF LORRI S ANNETT SCOTT L GROGG MIGUEL MORENO CAMERON L SCOTT MICHAEL SLOAN JESUS GONZALEZ ANELD A ANUB KOLTON E GUSTAFSON SHAUN D NAFFZIGER ALBERT F SEBASTIAN ROBERT JACQUOT SEAN TRACY MARQUETTA AYTES SANDRA C GUTKOWSKI IVAN NAPUTI DAMON N SILVA CHRISTOPHER BEAUCHAMP NADIR A BAIG KIRA M HALEY JOHN T NERIO MICHAEL R SLOAN 25 YEARS ROBERT MASTERSON DANIEL BAKER CLIFFORD E HALL JAIME P OKEWOLE RYAN S SMITH KATHLEEN HEDBERG MANUEL J BARRON COURTNEY R HERNANDEZ BRIAN M OLNEY ANNE D SOLANO BRIAN LAWLER MIGUEL PILAR JR JESSE A BARTLETT-MAY MICHAEL A HERRERA JAMES A PACE CRISTINA M SOTO ALBERT SEBASTIAN RITA MOONEY CHRISTOPHER M BEAUCHAMP TAIDGH D HORAN CARLTON H PALECHEK PETER J SPANGLER SHAUN NAFFZIGER MICHELLE P BERENS ERIC D HUGHES THOMAS J PEARCE LISA L STOIA 20 YEARS MANUEL BARRON MORGAN K BLAKE GARRETT T HURST MICHAEL T PEPIN DARRIN T TEISHER DONNA M BONNIN ROBERT P JACQUOT CARLOS R PERDOMO RICHARD E THOMPSON TRISTAN HAYMAN 5 YEARS JEREMY D BOONE KYLE B JAMES ISRAEL I PEREZ JAMES A TOMASULO ANELD ANUB EDWARD O BRISENDINE SANDRA L JANZEN ALICIA N PETERSON SEAN TRACY CINDY ZIERNICKI MICHAEL PEPIN JENNIFER C BRYANT GREGORY A JONES JEFFREY W PHILLIPS MICHAEL J UHRHAMMER KYLE JAMES CHEREE R BURTON JESSICA N KADING MIGUEL PILAR JR REBECCA VANEGAS 15 YEARS JOSEPH E CAMPBELL KARAH N KINGSBURY TRAVIS D POWELL TONY L VIELGUTH ROBYN M CHAMBERS STANLEY J KRUTE TRACY L POWELL EARL C VOOGD SILVIANO HUERTA JOHN A CID PAUL J LAFALCE JEFFRY W RAUH CHRISTOPHER L WALTER CHRISTOPHER MCRAE JAMES E CONDER MARY L LAMM DAVID D REAGAN CHRISTOPHER WATKINS MARK UMPHRES DEBORAH A COPHER BRIAN D LAWLER GARY P RICHARDSON MELISSA A WATT PATRICIA RUTAN CYNTHIA A COVARRUBIAS DONALD D LEMASTERS II BYRON L RICHARDSON BRYAN K WATTE PETER SPANGLER MICHELLE M CURTIS SLADE L LIVERMORE CHRISTINA K RINK JOHN D WILSON JOHN WILSON VINCENT R DAMBROSE III CARLOS V LUGO DAVIS L ROBBINS MARLENE YOUNG ANGELA DEEGAN QUINCE S LUNDE MARCUS A ROBERTI STEPHEN A YOUNG LONNY B DILL DEBRA S LUNDY JOHN M ROMERO CINDY A ZIERNICKI SAM L DILLMAN LARRY W LYFORD VICTOR A ROMERO SUSEN DOUBRAVA ALICIA D MACIAS CHRISTOPHER D ROSENBOOM DOUG L EMERY JEFFREY J MACMASTER TIMOTHY J ROSS ALFRED A ENDOZO DANA C MAGANA GAVIN P RUNYON ERIC L FOCKLER CHARLES G MARSHBURN JAMES G RUSSELL SUSAN S FOX GARY D MARTINEZ MICHAEL J RUSSELL JOSEPH J GARUBA ROBERT A MASTERSON PATRICIA A RUTAN WILLIAM O GASTON MICHAEL L MAYNARD JOSE L SALAS RICHARD J GILROY CHRIS MCRAE THEODORE J SALOIS DONALD C GINGRICH JR GEOFFREY M MENTA PHILLIP M SAMPLE EDUARDO C GONZALEZ KEVIN D MILLER SARAH M SAMPLE ROBERTO A MINEO RITA A MOONEY

54 55 Fiscal Year 2016-17 Annual Report

Our Mission Statement Helix Water District is a progressive industry leader, providing high- quality water, through an efficient and reliable system. Our innovative and dedicated employees and board members maximize human and technological resources, while providing superior service to our customers and supporting the environment for a sustainable future.

Administration Office 7811 University Avenue La Mesa, CA 91942 619-466-0585

Nat L. Eggert Operations Center 1233 Vernon Way El Cajon, CA 92020 619-596-3860

R.M. Levy Water Treatment Plant 9550 Lake Jennings Park Road Lakeside, CA 92040 619-443-1031

hwd.com

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