HomeMy WebLinkAbout16 WorkShop Budget Performance Review FYE20 and TransfersAGENDA ITEM #16
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MEETING DATE:April 7, 2021
TO:Board of Directors
FROM:Michael Salmon,CFO
SUBJECT:2020 Year End Budget Performance, including Significant
Variances to Approved Budget, and Year End 2020 Transfers.
APPROVED BY______________________________
Brian C. Wright, Interim General Manager
RECOMMENDATION:
a)Accept this report of Budget Performance for 2020 end of year which includes
significant variances identified since the adoption of the budget for 2020 and 2021.
b)Approve fund transfers as follows:
1)Electric -$490,000 from General Fund to Rate Reserves
2)Water -$1,618,447 from Operating Reserves to General Fund
BACKGROUND:
This is a year-end review with the Board of the financial results as of December 31,2020.
District code requires a semiannual review of the budgeted revenues and expenditures
compared to actual revenues and expenditures.This is second of four reviews for the FY20
and FY21 Board approved Budget.
Staff reviewed the mid-year FY20 budget to actual financial performance in a workshop with
the Board on September 2,2020.The budget to actual report is a consolidated report of actual
activity for revenues,operational expenses,and capital improvement projects funded by rates
and reserves.The current reporting excludes accrual entries in revenues,depreciation,
amortization,and revenue and expenses associated with contributed capital projects.
Preliminary (audit in progress)FY20 year-end financial summary results are included in
Attachment 1 and Attachment 2.Both the Electric and Water utilities reported positive net
operating inflows.The Electric Utility had net operating inflow of $2.1M.The Water Utility had a
net operating inflow of $O.1M.Attachment 3 provides a report on Reserves and Attachment 4
is a report of Facility Fees.
Electric Utility
Attachment 1 is the preliminary Budget vs.Actual Revenue and Expenditures summary report
for the Electric Utility for FY20.Revenues exceeded budget expectations in FY20 by 4%.This
included a planned rate increase of 3%for FY20.With the pandemic, energy demand
dropped slightly in April and May, however, thereafter energy demands were up compared to
budget and last year.Joint Pole revenues of $597k were up notably to a budget of $180k.
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Expenses for the Electric Utility were $980,000 or 4%under budget expectations;the primary
driver being the cost of power which came in $1.5m or 12%under budget.Wildfire Mitigation
costs of $1.4m were over budget $392,000, however, under the Board approved increase to
spend $1.5m.
The Electric Utility for FY20 invested $2.8M in capital expenditures being funded from
operations,the capital reserve,and the vehicle reserve,compared to a budget of $5.8M.The
$3M in savings was due primarily to pandemic impact of delayed execution of planned projects.
The Electric Department‘s FY20 Capital Expenditures included:routine Distribution
Replacement and Improvement Projects;the SCADA Reliability Phase 5 Project,Northwoods-
Chamonix to Muhlebach Rebuild,and Pole Replacements.Vehicle purchases in FY20 were
deferred due to the pandemic.
Electric Total Net Operations Funded Cash inflow for FY20 is just over $2.1M.
In 2020, the Board approved two transfers from the Electric General Fund to Capital Reserves
Fund.
March 2020, $1.0M based on 2019 results and staff recommendation
September 2020, $522K based on YTD 2020 results and staff recommendation
Staff is recommending transferring $490,000 to the Rate Reserve Fund. This transfer
increases the Rate Reserve balance to District Code goal balance of $6.4M.Staff is
recommending review this summer of reserve policies, in particular the Operations cash
reserve, which as defined excludes depreciation and includes purchased power. The District
has a separate Rate Reserve, based on purchased power costs. Including purchased power
in the operating reserve generates a significantly high bar. Other reserve language to address
include how many years in an ‘average’ and defining which ‘year’ to measure and capital costs
components for capital reserve calculation.
Water Utility
Attachment 2 is the preliminary Budget vs.Actual Revenue and Expenditures summary report
for the Water Utility for FY20.Revenues exceeded budget expectations in FY20 by 2%.This
included a planned rate increase of 3%for FY20.Demand was strong despite the pandemic,
as well as, a warm and dry fall season.
Expenses for the Water Utility were in excess of budget by $93,000 or 1%,the primary driver
was water’s portion of general manager turnover costs,the cost of pumping water,
maintenance material costs and regulatory costs and fees.
The Water Utility for FY20 invested $2.3M in capital expenditures being funded from
operations, the operating reserve fund,and the vehicle reserve compared to a budget of
$2.4M.The major focus for the Water Utility for Capital Expenditures in FY20 included:the
Aclara Meter Transmitting Unit Replacement Project;upgrading the Data Collector Units;
facilities metering improvements;and the continuation of the SCADA Replacement Project.
Vehicle replacements for the Water Utility in FY20 were primarily deferred due to the pandemic.
Total Net Operations Funded Cash inflow for the Water Utility in FY20 was $O.1M.
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In 2020, no water transfers between General Fund and Reserves were made.
Staff recommends a transfer of $1,618,447 from a prior period established ‘Operating Reserve’
to the General Funds. The Operating Reserve is not a defined reserve in current District
Code. The General Fund serves as the operating reserve for each utility.Reserve balances
are presented as Attachment 3.
Facility Fees
The District establishes and collects facilities fees on new development for electric and water
system improvements attributable to new developments in accordance with the Electric and
Water Master Plans.Attachment 4 reports the status of the restricted Facilities Fees Fund for
each Utility respectively as of the end of FY20.The Electric Utility facilities fee collections
remained strong in FY20 with receipts of $253K compared to $317K in FY19.The Electric
Utility expended $436K in expenditures for facilities fees in FY20, related to the Truckee
substation rebuild project, as budgeted/planned use of funds in the approved FY20 and FY21
Budget.
The Water Utility facility fee collection in FY20 also remained strong with receipts of $746K
compared to $921K in FY19 due to continued development and new construction within the
District.The District utilizes facilities lees for qualifying debt service for the Water Utility on an
annual basis.In FY20 facilities fees of $358K were utilized for the Pipeline COP debt payment,
as budgeted.
The District is obligated to utilize facilities fees collected within a 5 year period,and is in
compliance with this requirement.
Accounts Receivable
The pandemic drove a pause in late fees and termination of service for non-payment of billings.
As of December 31, 2020, the past due 90 days or greater was electric $90,000 and water
$42,000, for a total of $132,000. This compares to a 2019 year end total of $14,000 past due
90+ days. The District has reserved $41,000 or 31%as an allowance for bad debt estimate in
the year-end 2020 financial statements. The pandemic has continued into 2021, and while
there is both Federal and California potential financial funds being discussed for publicly owned
utilities, there is no formal relief amount know at this time.
The $132,000 as of 12/31/2020 has increased to $159,000 as of February 28, 2021.
This matter is being monitored closely by staff and staff will continue to periodically update the
Board.
2021 Budget and Notable Financial Matters
All of the above addresses 2020 performance to Budget. Since the District approved the 2021
Budget in late fall of 2019, we have identified the following notable financial matters which
present variances to the 2021 Approved Budget:
a.Electric -Wildfire mitigation –Budget 1.0m Forecast Need of $1.5m
b.Electric –Purchased Power –Budget $12.9m Forecast* $12.5m
* Conservative, based on 2020 trend; subject to numerous variables and very early in year to forecast
annual cost
c.Rate of pay changes –Budget versus Actual 2020 & 2021, impact on 2021
Budget 2020 3.0% + Budget 2021 3.0% = 6.0%
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Actual 2020 ~6.0% + Actual 2021 2.0% =8.0%
2.0% variance, equates to approximately $165,000 in gross wages and $230,000
including Overheads.
d.Pension costs –Budget $2.3M Forecast $2.8M
e.Water –2021 Rate increase of 3% Budget, 9% Approved –approximate incremental
funding in 2021 of $770,000, primarily for capital expenditures funding of capital
improvement plan
f.Employee Housing JPA –$16,000
g.Investment Income –Budget $492,000 Forecast $402,000, shortfall of $90,000
(electric)
g.Town of Truckee Fueling Station -~$130,000 / 10 years = $13,000 per year expense
h.Pandemic –covid payment assistance, bad debt. $TBD
i.Utility Physical Security Plan $39,000, a new regulatory requirement in Electric
j.Strategic Plan –incremental efforts on Initiatives are not in 2021 Budget
k.Personnel Changes incremental to 2021 Budget that will be Board approved/acted on in
2021; a Board discussion item at a future Board meeting
Capital Expenditures –2021
Electric -Budget 2021 $6,505,000 Forecast $6,505,000
Water –Budget 2021 $2,009,000 Forecast $3,100,000
Above includes IT project split proportionately between E/W of $794,000 Budget and
Forecast.
Electric Forecast includes Building Projects, which is primarily comprised of Main
Building Remodel at estimated $2.0M and Upgrade Electrical Panel for Main Building (to
support Remodel)at estimated $150k.
Water Forecast of $3.1M compares to Rate Study total of $3.0M in fall 2020, and
includes District Pipeline Replacement 2021 Project for a total of $1.236M.
Staff is actively planning 2021 Capital Expenditures, and recommend a subject Board
Workshop in April or May.
1.05.020 Objectives:
1.Responsibly serve the public.
6. Manage the District in an effective, efficient, and fiscally responsible manner.
1.05.030 Goals:
1.1.Conduct the District’s business in a legal, ethical, open, and transparent manner.
6.6.Develop appropriate financial procedures to assure responsible financial management
FISCAL IMPACT:
Attachment 3 shows the beginning balances of the various reserve funds and the ending
balances for the Electric Utility and Water Utility.
There is not direct financial impact by means of accepting this report. The recommended
transfers further the Districts reserves balances to be in alignment with District Code
established targets for Designated acccounts, but are not required.
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ATTACHMENTS:
Attachment 1 –FY20 Budget versus Actual Results, Electric Utility
Attachment 2 –FY20 Budget versus Actual Results, Water Utility
Attachment 3 –FY20 Year End Reserve Balances Report
Attachment 4 –FY20 Year End Facility Fees Balances Report