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m <br />WATER RATE STUDY I City of Santa Ana, CA <br />specific R &R activity to the expected year of R &R expenditure. Next, we then summed the total <br />estimated R &R costs for all assets and each modeled year to project future capital funding needs and to <br />develop reserve fund development strategies. <br />DEVELOPMENT OF VALUATION OF CAPITAL ASSETS <br />Black & Veatch also used the CAMPS tool to calculate a current depreciated value for each capital asset <br />within the asset inventory based on the Reproduction Cost New Less Depreciation (RCNLD) <br />methodology. This methodology values assets at their current reproduction costs (2012 Dollars) and <br />calculates depreciation based on this estimated cost, the original year in service, reasonable estimates <br />of useful lives, using a straight -line approach. Reasonable estimates of expected useful lives are <br />determined using the same approach described previously, including the use of class lives and <br />adjustments to class lives based on condition assessment data. Presented below are examples of <br />valuation calculations. <br />Case #1: Valuation based on Class Life <br />A 20 hp pump and motor (associated with a pump station) was placed in service in 2002, with a <br />class life of 15 years. At the time of the analysis, 2012, the pump is 10 years old, approximately <br />2/3 of its expected useful life. The asset is valued at $16,000 and has depreciated approximately <br />2/3 of its value, using a straight -line approach. The current 2012 value for this asset would then <br />be approximately $5,333. <br />Case #2: Valuation based on Condition Rating <br />A 20 hp pump and motor (associated with a pump station) was placed in service in 2002, with a <br />class life of 15 years. At the time of the analysis, 2012, the pump is 10 years old, but staff has <br />assessed the condition of the asset as poor (condition rating of 1). With the adjustment of the <br />expected useful life according to the algorithm described in the Adjustments to Useful Life <br />Based on Condition Monitoring discussion above, the asset has approximately 1/15 of its <br />original value, or approximately $1,067. <br />Financial, land and intangible assets were not included in the inventory or in this analysis. <br />CAPITAL ASSET INVENTORY, ASSET CLASS LIBRARY AND REPLACEMENT <br />SCHEDULE DATABASE DEVELOPMENT <br />Asset Inventory <br />The City provided several asset inventories that Black & Veatch then evaluated, summarized and then <br />compiled into a single database to facilitate the development of R &R schedules and costs, using the <br />methodology described previously. <br />Inventory Data Sources <br />Asset Inventory data records for the plant facilities were obtained from the City's Geographical <br />Information System (GIS). Additionally, asset inventory data records for the above ground infrastructure <br />assets for water above -grade assets use historical data captured by City staff from various different <br />M \l • <br />NOVEMBER 2014 <br />