11 commitments (a) Fairfax Water The Authority has several agreements with Fairfax Water, which collectively reserve treated water capacity of 62.4 MGD, representing 92% of the Authority’s total water capacity. These agreements allow for the purchase of additional capacity, if available, based on actual construction and administrative costs negotiated at the time of sale. In May 2017, the Authority purchased an additional 5 MGD of water capacity for approximately $26.6 million. Capacity payments are included in property, plant and equipment on the accompanying Statements of Net Position, and are amortized over the estimated useful life from the inception of the agreement, ranging between 40-50 years. Fairfax Water provides water to the Service Authority from two water treatment plants, the Corbalis Water Treatment Plant in Herndon, Virginia, which withdraws water from the Potomac River and the Griffith Water Treatment Plant in Lorton, Virginia, which withdraws water from the Occoquan Reservoir. The Authority participates in construction and expansion costs of the two water treatment plants based on the Authority’s purchased capacity. Amounts expended for construction, expansion and capacity in fiscal years 2020 and 2019, were $1.9 million and $3.7 million, respectively, with total payments to date as of June 30, 2020 of $130.0 million. The Authority also has agreements with Fairfax Water for the reservation of transmission main capacity. Under these agreements, the Authority is required to make equal monthly payments for varying terms that range up to 420 months (35 years) from the date of the initial payment. Payments made in fiscal years 2020 and 2019 were approximately $700,000. Future payments due to Fairfax Water for these agreements are as follows: Years Ending June 30, 2021 2022 2023 2024 2025 2026-2030 Total $ 668,006 668,006 668,006 668,006 668,006 3,340,030 $ 6,680,060 In addition, Fairfax Water charges the Authority a rate per thousand gallons of water delivered. The rate is based on Fairfax Water’s operation, maintenance, and general and administrative costs divided by total consumption billed. Purchased water expenditures related to Fairfax Water for fiscal years 2020 and 2019 were approximately $12.3 million and $11.1 million, respectively. (b) City of Manassas The Authority has a water capacity and service agreement with the City of Manassas which effectively reserves 5 MGD of treated water capacity for the Authority at the City’s water treatment facility at Lake Manassas, which represents approximately 7% of the Authority’s total available purchased water capacity. The agreement also allows for the use of an additional 2 MGD by either party, if needed. The Authority is obligated to pay the City's wholesale rate for purchases at the water treatment facility and is obligated to pay the City’s wholesale rate plus a wheeling charge for water taken at other delivery points. The City's wholesale rate consists of fixed and variable costs per the agreement. The initial amount paid by the Authority to the City for the 5 MGD of capacity was $8,131,846. This amount is included in property, plant and equipment as advance capacity payments on the accompanying Statements of Net Position, and is being amortized through the year 2039 on a straight-line basis. The Authority also shares in the cost of certain capital improvements based on the Authority's reserved capacity as a percentage of the total permitted capacity at the City’s water treatment facility. The Authority has made payments for capital costs during the fiscal years ended June 30, 2020 and 2019 in the amount of $204,000 and $187,000, respectively. These payments are included in property, plant and equipment as advance capacity payments on the accompanying Statements of Net Position, and are being amortized over 40 years on a straight-line basis. The cost of water purchased by the Authority from the City during fiscal years 2020 and 2019 was approximately $1.9 million and $1.6 million, respectively 74 FINANCIAL SECTION NOTES TO FINANCIAL STATEMENTS
Prince William County Service Authority | 4 County Complex Court Woodbridge, VA 22192
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