FY 2016-17
Budget Workshop #2:
Review Budget and Rates
Charles Turner
April 6, 2016
1 | emwd.org
Agenda
• Strategic Plan Alignment:
Investing in Excellence
• Operating Budget
– Cost of Service
– Revenue Requirements
• Capital Budget
• Proposed Rate Adjustments
• Schedule/Proposition 218
Notice Process
2 | emwd.org
Budget and Rate Setting is Centered Around the
District’s Strategic Plan:
With a clearly defined mission and vision, as well
as guiding principles that define how we interact
with customers and employees, EMWD is driven
by standards to provide safe, reliable, economical
and environmentally friendly services:
•
Highly reliable water, recycled water and
wastewater service
•
Protection of public and environmental
health
•
Superior customer and community service
•
Sound planning and appropriate
investment
•
Efficiency and fiscal responsibility
•
Exemplary employer
•
Effective communication and
accountability
Strategic Plan Alignment:
Investing in Excellence
3 | emwd.org
Strategic Alignment: Standards of Excellence
Standards of Excellence
Highly reliable water, recycled water and
wastewater service
Protection of public and environmental
health
Vision: To provide essential services
to our community at a level that
exceeds the performance of any
other public or private entity.
Superior customer and community service
Sound planning and appropriate
investment
Efficiency and fiscal responsibility
Exemplary employer
Effective communication and accountability
4 | emwd.org
Strategic Alignment: Standards of Excellence
Standards of
Excellence
Highly reliable water,
recycled water and
wastewater service
Proposed FY 2016-17 Budget
Highlighted Investments
•
•
Investments to improve water and recycled water supply reliability:
• Well drilling/equipping ($6M) CIP
• Well rehab/engine replacements ($1M) OFA
• Water filtration plant filter replacements ($3M) CIP
• Water recharge ponds (Mt. Ave.) ($2M) CIP
• Water tank repairs/rehab ($1M) OFA
• Sewer treatment engine/pump replacements ($2M) OFA
Promote water use efficiency through conservation outreach ($1M)
• Drip Retrofit Irrigation Program (DRIP) ($0.4M)
Protection of public
and environmental
health
•
•
Investments in lab equipment ($0.1M)
Responsible regulation advocacy
Superior customer
and community
service
•
Investments in customer service technology
• Automated Metering System (AMI) ($4M) OFA
Improve customer service levels with temporary staffing support
5 | emwd.org
•
Strategic Alignment: Standards of Excellence
Standards of
Excellence
Proposed FY 2016-17 Budget
Investment Highlights
•
•
Investments in energy independence
• Reduced annual electric energy cost by $2M as result of
5MW solar investment completed in FY 2015-16
Investments in business process improvements
• IT Network/SCADA upgrade ($2M) OFA
• Inventory management system upgrade ($1M) OFA
Investment in groundwater sustainability plan ($0.5M) Special Proj.
Efficiency and fiscal
responsibility
•
•
•
•
Pursue refunding/refinancing opportunities to lower debt service
Pursue grants and external funding for CIP
Complete Cost of Service study and implement for FY 2017-18
Invest in OPEB Trust to reduce liability
Exemplary employer
•
Invest in business process improvements
• radio replacement for fleet ($0.5M) OFA
Effective
communication and
accountability
•
•
Partnering with Youth Ecology Corp and others
Promoting water conservation through water garden development
Sound planning and
appropriate
investment
6 | emwd.org
•
Operations
7 | emwd.org
Water Sales & Supply
•
For FY 2017, project 13% decrease in domestic water sales (AF) compared to
FY 2015 actual expense in response to emergency regulations and drought conditions.
Water Sales
Acre Feet (AF)
Domestic Retail
Domestic Wholesale
Agri Retail/Wholesale
Total
Recycled Water Sales (AF)
•
FY 2013-14
Actual
FY 2014-15
Actual
FY 2014-15
Budget
FY 2015-16
Budget
84,650
4,294
5,584
76,832
3,082
4,447
80,900
3,600
2,200
80,900
3,600
2,200
94,528
84,361
86,700
37,467
35,617
36,000
FY 2015-16
Forecast
FY 2016-17
Projection
86,700
62,690
2,200
5,390
70,280
65,900
2,200
4,000
72,100
36,000
36,000
36,000
FY 2015-16
Forecast
55,800
2,528
8,500
16,000
82,828
FY 2016-17
Projection
59,800
Lower demands than FY 2015 results in reduced water purchases.
Purchased/Produced
Acre Feet (AF)
Purchased
Purchased Replenishment
Desalter Production
Well Production
Total
8 | emwd.org
FY 2013-14
Actual
76,949
7,700
19,003
103,653
FY 2014-15
Actual
68,453
10,387
13,513
92,353
FY 2014-15
Budget
68,600
2,528
8,500
16,000
95,628
FY 2015-16
Budget
68,600
2,528
8,500
16,000
95,628
2,528
8,500
16,000
86,828
Water Supply Costs
•
Metropolitan Water District (MWD) rates are proposed to increase effective
January 1, 2017 by 4.0% overall.
– Full Service Untreated Tier 1 rate increase by 12.1%
•
EMWD’s purchased water costs are projected to increase by $0.8 million between
FY 2015-16 and FY 2016-17.
MWD Proposed Rate Increase*
Estimated Purchased Water Cost
MWD Charges
Untreated Water
Tier 1 Treated Water
Tier 2 Treated Water
Sub Totals
Estimated
AF
23,100
36,700
$
$
59,800
CC (Annual charge)
RTS (Annual charge)
Standby Credit (FY)
Tunnel @ 12.57 AF/day
Fixed Charges
Settlement Water
Total MWD Charges $
AF = Acre feet
CC = Capacity Charge
RTS = Readiness To Serve
Proposed FY 2016-17
Avg. Rate
Dollars
2,528
$
628
957
830
$
$
$
$
14,509,000
35,119,000
49,628,000
$
8,000
$
628
53
$
$
$
$
$
1,426,000
7,037,000
(2,379,000)
(2,891,000)
3,193,000
$
525
$
1,327,000
$
905
$
54,148,000
$
825,000
Projected Annual Increase:
*This does not include additional costs of approximately $1 million that would be incurred by EMWD should
Metropolitan adopt proposed changes to its fixed cost recovery for treatment.
9 | emwd.org
Cost of Water Service
• Net Operating Revenue to Fund Capital Commitments to decrease by $5.5
million in FY 2016-17 due to lower domestic water sales.
Water Services (000s)
Water Revenues:
Domestic Water
Domestic demand
Irrigation
Irrigation demand
Total Water Revenues
Operating Costs:
Purchased Water
Groundwater Replenishment
Operations & Maintenance
Energy
Allocated Support Costs
Admin allocation
Operating Costs
Operating Services
Net Operating Revenue to Fund Capital
Commitments
10 | emwd.org
FY 2014-15
Actual
$
90,609
23,250
3,365
71
$
117,295
FY 2015-16
Budget
$
100,999
26,271
1,424
85
$
128,779
Proposed
FY 2016-17
Variance to Budget
Budget
Over / (Under)
$
84,240 $
(16,759)
26,745
474
3,533
2,109
73
(12)
$
114,591 $
(14,188)
$
$
$
$
62,886
189
16,819
7,979
22,879
4,147
114,899
52,013
$
$
$
59,574
131
17,698
7,529
20,987
4,317
110,235
50,661
$
7,060
$
13,880
$
$
54,148 $
198
17,221
7,609
22,526
4,533
106,234 $
52,086
(8,738)
8
402
(370)
(354)
386
(8,666)
73
$
8,357 $
(5,523)
Water Sales Sensitivity Analysis - FY 2016-17 Budget Period
•
•
•
Staff prepared a model to analyze the impact to revenue sales based upon:
– Various stages of the Water Shortage Contingency Plan (WSCP)
– Associated impacts on acre-foot (AF) demand for each stage
Based on water supply conditions and anticipated regulations, staff recommends using
assumed AF and revenue sales under Alternative C - Stage 3C of the WSCP
throughout most of FY 2016-17.
Staff developed proposed rates and charges based upon projected sales under
Alternative C which are detailed in the proposed rates and charges section.
Alternatives Projections for FY 2016-17 Budget
Actual
FY 2014-15
Forecast
FY 2015-16
Alternative A
WSCP 2 (Full Budget)
Alternative B
WSCP 3b (50% of T3)
PROPOSED
Alternative C
WSCP 3C (100% of T3)
Alternative D
WSCP 4a (10% of T2)
Alternative E
WSCP 4b (30% of T2)
Domestic Tiered Retail Sales (AF)
% Variance to FY 2014-15 Actual
% Variance to FY 2015-16 Fore.
66,189
54,038
-18%
65,360
-1%
21%
59,442
-10%
10%
57,280
-13%
6%
56,200
-15%
4%
54,038
-18%
0%
Domestic Retail Sales (AF)
76,832
62,690
76,832
68,094
65,933
64,852
62,690
Total Water Revenue ($000)
$117,295
$111,516
$128,642
$114,417
$114,591
$114,571
$115,259
Total District Revenue ($000)
$200,808
$203,510
$224,719
$210,494
$210,668
$210,648
$211,336
Total Net Revenue ($000)
$82,625
$106,739
$102,721
$96,856
$99,099
$100,113
$102,869
Debt Service ($000)
$35,400
$42,459
$51,049
$51,049
$51,049
$51,049
$51,049
2.3
2.5
2.1
2.0
2.0
2.1
2.1
Debt Service Coverage Ratio (DSCR)
11 | emwd.org
Cost of Sewer Service
• Net Operating Revenue to Fund Capital Commitments to increase by $2.5
million as result of level operating costs and need to fund capital projects.
Sewer Services (000s)
Sewer Revenues:
Sewer Service
Outside Sewer Collections
Dump Stations
Total
Operating Costs:
Recycled Disposal
Collect/Lift
Treatment
Energy
Sludge Hauling
Allocated Support Costs
Admin allocation
Operating Costs
Net Operating Revenue to Fund Capital
Commitments
12 | emwd.org
FY 2014-15
FY 2015-16
Actual
Budget
$
51,647 $
55,291
24,971
27,111
503
538
$
77,120 $
82,940
$
Proposed
FY 2016-17
Variance to Budget
Budget
Over / (Under)
$
57,507 $
2,215
28,277
1,166
561
23
$
86,344 $
3,404
2,470 $
3,881
21,482
7,110
2,579
11,742
7,703
56,967 $
2,576
4,305
22,369
5,726
2,291
12,124
8,419
57,809
$
$
2,714 $
4,335
20,165
6,410
2,000
10,435
8,439
54,497 $
$
106
424
886
(1,385)
(288)
383
716
843
$
22,624
25,973 $
28,535
$
2,561
$
Cost of Recycled Water Service
• Net Operating Revenue to Fund Capital Commitments to increase by $0.4
million as result of need to fund capital projects.
Recycled Services (000s)
Recycled Water Revenues:
Recycled Sales
Recycled Demand
Recycled – Groundwater
Recovery Projects
From Sewer Customers
Total Revenues
Operating Costs:
Purchased Water
Transmission
Pumping
Energy
Storage
Allocated Support Costs
Operating Costs
Net Operating Revenue to Fund Capital
Commitments
13 | emwd.org
FY 2014-15
FY 2015-16
Actual
Budget
$
5,406 $
5,498
254
280
0
0
732
806
2,714
2,470
$
9,106 $
9,054
$
Proposed
FY 2016-17
Variance to Budget
Budget
Over / (Under)
$
5,963 $
464
308
28
0
0
886
81
2,576
106
$
9,733 $
679
$
$
997
575
973
688
2,989
6,221 $
$
1,111
586
1,193
760
3,055
6,704 $
1,121
580
977
832
3,503
7,013
$
`
10
(6)
(216)
72
448
309
$
2,885
2,350
2,720
$
370
$
$
Operating Services - Summary
• $40 million in Net Operating Revenue to Fund Capital Commitments in FY
2016-17, a $3 million decrease from FY 2015-16 Budget
Total Sales and Operating Costs (000s)
FY 2014-15
Actual
Sales:
Water
Sewer
Recycled
Total Sales
Operating Costs:
Water
Sewer
Recycled
Total Operating Costs
Net Operating Revenue to Fund Capital
Commitments
14 | emwd.org
$
$
$
Proposed
FY 2016-17
Budget
FY 2015-16
Budget
117,295 $
77,120
9,106
203,522 $
$
$
110,235
54,497
6,221
170,953
$
32,569
128,779 $
82,940
9,054
220,773 $
$
$
114,899
56,967
6,704
178,570
$
42,203
Variance to Budget
Over / (Under)
114,591 $
86,344
9,733
210,668 $
(14,188)
3,404
679
(10,105)
$
$
106,234
57,809
7,013
171,056
$
(8,666)
843
309
(7,514)
$
39,612
$
(2,591)
Capital:
Operating Fixed Assets (OFA)
Capital Improvement Program (CIP)
15 | emwd.org
Operating Fixed Assets (OFA) ($000)
EMWD OPERATING FIXED ASSETS (OFA)
FY 2016-17 PROPOSED BUDGET
Service
Carryover
From FY16 Budget
FY 2016-17
New Purchases
Proposed
FY 2016-17
Annual Budget
Vehicles
$2,175
$2,784
$4,959
IT Infrastructure
$3,157
$3,364
$6,521
Water Quality/Lab
O&M Maint. & RWRF Projects & Equip.
Total Maint. Projects & Equip.
$0
$3,250
$3,250
$123
$9,002
$9,125
$123
$12,252
$12,375
AMI Meter Replacement + Infrastructure Repl.
$0
$4,199
$4,199
Other
$0
$255
$255
$8,582
$19,727
$28,309
Total FY 2016-17
16 | emwd.org
Operating Fixed Assets (OFA) ($000)
Category
Maintenance
Projects
Description
•
•
•
Information
Technology
•
•
•
17 | emwd.org
Budget
FY 2015-16
Proposed
FY 2016-17
Sewer Treatment/Distribution Engines
& Pumps (21) - $3.8 million
Water Tank Repairs/Rehabs (5) - $1.2
million
Water Well Rehabs (7) / Engines &
Pumps, Boosters - $1.4 million
$6,980
$12,375
IT Network and SCADA Infrastructure $1.8 million
Software investment for Maximo
inventory management system - $1.2
million
Software investment for outdated HR
/ Payroll system - $2.2 million
$6,987
$6,521
Operating Fixed Assets (OFA) ($000)
Category
Description
Vehicles &
Equipment
• Includes (9) 375 KW Generators
- $1.9 million; (26)
Light/Medium Vehicles - $0.8
million; (5) Heavy Vehicles $1.5 million; (9) Trailers/Other $0.5 million
Other
•
AMI Meter Replacement &
Infrastructure Expansion
(Estimated actual FY 2015-16 $3.8 million)
Total
18 | emwd.org
Budget
FY 2015-16
Proposed
FY 2016-17
$6,425
$5,214
$0
$4,199
$20,392
$28,309
Capital Improvement Program (CIP) ($000)
• The proposed CIP for FY 2016-17 is $87.6 million, of which $27.8 million is
for replacement projects.
Fiscal Year
2016-17
Funding
Expansion
Water
Sewer
Recycled
General
Total
Fiscal Year
2017-18
Fiscal Year
2018-19
Fiscal Year
2019-20
Fiscal Year
2020-21
5 Year Total
$
$25,183
$23,807
$10,171
$592
59,753 $
$29,193
$42,841
$4,992
$1,406
78,431 $
$27,480
$17,701
$350
$0
45,530 $
$25,272
$9,190
$747
$0
35,210 $
$36,790
$5,434
$2,248
$0
44,473
$
$
$
$
$
143,917
98,973
18,508
1,998
263,396
Replacement
Water
Sewer
Recycled
General
Total
$
$16,329
$6,503
$5,010
$0
27,842 $
$13,851
$6,610
$2,459
$0
22,920 $
$20,002
$6,723
$172
$0
26,897 $
$19,234
$3,707
$368
$97
23,405 $
$19,964
$8,752
$1,107
$450
30,273
$
$
$
$
$
89,380
32,294
9,116
547
131,337
Total EMWD Funded
$
87,595 $
101,351 $
72,427 $
58,615 $
74,746 $
394,733
19 | emwd.org
Budget Summary – Expenditures
FY 2016-17 Budgeted Expenditures ($000s)
$375 million
• Increase to total expenditures
is proposed at $7 million from
FY 2015-16 to FY 2016-17, with
a significant portion attributed
to investments in reliability
projects (OFA and CIP).
$87,595
23%
$171,056
46%
$51,049
14%
$22,379
$28,310 6%
7%
$10,063 $4,488
3%
1%
Expenditures ($000)
Operating Expenses
Capital Improvements (CIP)
Debt Service
Operating Fixed Assets
G&A
OPEB Funding
Misc/Other
Total
20 | emwd.org
FY 2015-16
Budget
$178,570
$86,022
$50,858
$20,392
$19,860
$8,553
$3,736
$367,991
FY 2016-17
Proposed
$171,056
$87,595
$51,049
$28,310
$22,379
$10,063
$4,488
$374,941
Variance
-$7,514
$1,573
$191
$7,918
$2,520
$1,510
$752
$6,950
– OFA increase includes carryforward of $8 million from FY
2015-16
• Changes to rates and charges
are proposed to provide
funding for these additional
investments in reliability.
Proposed Consolidated Budget
•
Total Operating
Revenue declines by
4.6% in FY 2016-17
– Assumes modest rate
increase (see
Proposed Rates
section)
•
•
•
Total Operating
Expense declines by
4.2% in FY 2016-17
Total Funding Deficit of
$72 million in FY 201617, an $11.6 million
increase from FY 201516
Deficit to be funded by
bond proceeds and
reserves
21 | emwd.org
FY 2014-15
Actual
Category
Operating Revenue
Water Service
Sewer Service
Recycled Service
Total Operating Revenue
FY 2016-17
Proposed
% Change vs
Budget
$
117,295 $
77,120
9,106
203,522 $
128,779 $
82,940
9,054
220,773 $
114,591
86,344
9,733
210,668
-11.0%
4.1%
7.5%
-4.6%
Non-Operating Revenue
Property Tax & Standby
$
Connection & Development Fees
Interest Income
Other Income/Grants
Total Non-Operating Revenue $
36,579 $
29,051
2,670
12,144
80,444 $
34,068 $
45,540
2,261
4,642
86,511 $
37,190
45,225
3,040
6,500
91,956
9.2%
-0.7%
34.5%
40.0%
6.3%
$
283,966 $
307,284 $
302,624
-1.5%
$
59,574 $
50,661
54,497
6,221
170,953 $
111,379 $
62,886 $
52,013
56,967
6,704
178,570 $
115,684 $
54,148
52,086
57,809
7,013
171,056
116,908
-13.9%
0.1%
1.5%
4.6%
-4.2%
1.1%
$
16,637 $
765
3,036
35,516
55,954 $
19,860 $
2,155
1,581
50,858
74,454 $
22,379
2,100
2,388
51,049
77,917
12.7%
-2.5%
51.0%
0.4%
4.7%
Other Commitments
Other Post-Employment Benefits $
Total Other Commitments
$
8,843 $
8,843 $
8,553 $
8,553 $
10,063
10,063
17.7%
17.7%
$
$
235,749 $
48,217 $
261,577 $
45,707 $
259,036
43,588
-1.0%
-4.6%
Capital Commitments
Operating Fixed Assets
$
Capital Improvement Plan (CIP)
Total Capital Commitments
$
Gross Fund Contribution/(Deficit) * $
11,198 $
94,437
105,635 $
(57,418) $
20,392 $
86,022
106,414 $
(60,707) $
28,310
87,595
115,905
(72,317)
38.8%
1.8%
8.9%
19.1%
Total Revenues
Operating Expense
Water Purchases
Water Operations
Sewer Operations
Recycled Water Operations
Total Operating Expense
Operating Services
Non-Operating Expense
General & Administrative
Miscellaneous Expense
Special Projects & Studies
C.O.P./Bond Debt Expense
Total Non-Operating Expense
Total Expenses
Net Operating Margin
$
FY 2015-16
Budget
$
$
$
Proposed Rates, Fees & Charges:
Typical Residential Customer
22 | emwd.org
Proposed Rates, Fees and Charges
Proposed FY 2016-17 rate adjustments:
•
•
•
•
Water: Pass-through MWD increases and other increases; adjust wholesale rates
for full pass-through
– 2.0% Commodity and Daily Service Charge (DSC) rate increase effective
January 1, 2017
– Fixed charge per EMS per month of $1.00 effective January 1, 2017
– Ag Water: Continue implementation of multi-year phase-in to reach potable
rates
Sewer:
– 1.5% rate increase effective July 1, 2016
– Fixed charge per EDU per month of $0.75 effective July 1, 2016
Recycled Water: Rate increase equivalent to 10% per fiscal year, subject to Board
adoption in Fall 2016
Connection Fees: Existing Board resolution provides for pass-through increase,
effective January 1, 2017, based upon ENR construction cost index. Notice of
timeline and proposed increase to be sent to stakeholders in summer 2016.
23 | emwd.org
Rate Comparison: Residential Water & Sewer Bill
$250
Typical Customer's Monthly Bill
Water & Sewer Services - Inland Districts
(as of January, 2016)
Proposed monthly combined
water/sewer bill Increase from
$90.55 to $93.91,
or 3.7%
$200
$150
$93.91
$100
$50
$0
Water
24 | emwd.org
Wastewater
$90.55
Budget Schedule for FY 2016-17
Dates
Proposed Actions
March 2, 2016
Review Updated Schedule
March 16, 2016
Workshop: Review Key Budget Assumptions
April 6, 2016
Workshop: Review Budget and Rates;
Initial Review of Proposed Proposition 218 Notices
April 27, 2016*
Preliminary Adoption of Budget and Rates; Approve
Proposition 218 Notices
April 29, 2016
Last Day to Mail Proposition 218 Notices
June 15, 2016
Adopt FY 2016-17 Budget and Rates
July – August, 2016
Additional Board Workshops on Cost of Service Study
October, 2016
Adopt Cost of Service Study;
Develop Outreach Plans for 2017 and beyond
*Rescheduled from April 20, 2016.
25 | emwd.org
Contact Information
Charles Turner
Director of Finance
(951) 928-3777 Ext. 4363
Email: [email protected]
26 | emwd.org