HomeMy WebLinkAbout11 Budget Workshop on Financial Plan, Revenues and ReservesAqenda Item #
BUDGET
11
To: Board of Directors
From: Regina Wise
Date. October 18, 2017
Subject: FY18 and FY19 Budget, Financial Plan Review, Projected Revenue,
and Projected Reserve Balances
1. WHY THIS MATTER IS BEFORE THE BOARD
This item continues the process for the FY18 and FY19 budget.
2. HISTORY
The Financial Master Plan is a tool to help the Board and staff understand how the
proposed budget impacts long-term goals It includes a projection of the revenue and
expenses for FY18 through FY27 using the actual revenue and expenses for the most
recent twelve months, the proposed FY18 and FY19 budget, and a set of
assumptions. The Financial Master Plan is reviewed during the budget cycle to
ensure that the proposed budget is consistent with long-term goals.
3. NEW INFORMATION
The following assumptions were used for projecting the revenue and expenses for
FY18 through FY27:
• 1 % annual increase in customer growth;
• 3%annual inflation;
• No new debt;
• In FY22, the rate funded debt for the Water Utility will be cut in half because the
refunding portion of the 2006 COP and the Prop 55 debt will be paid off;
• In FY22, the Pension Sidefund debt shared by the Electric and Water Utility will
also be paid off;
• Interest earned is an average of just under 2%;
• Starting in FY21 the cap and trade revenue could disappear;
• CalPERS changes for the discount rate for pension have been included in the
Financial Master Plan;
• No change in cash and reserve goal for Electric (6 months expenses and $4
million in reserves); and
• No change to the cash and reserve goal for Water (twice the highest month
budgeted expenditures including debt and a revolving capital reserve fund in
the amount of $4 million for a total of approximately $7 million).
Attachment 1 is a summary of the Electric Utility's Financial Master Plan. It includes
the scheduled 3% rate increases in FY18 and FY19, and less than inflationary
increases in the out years to maintain operations and capital improvements while not
compromising reserves. The Electric Utility currently has a debt service coverage
requirement of 1.10 and the current projections do not raise concern with the District
meeting that requirement through the remaining years of the outstanding debt.
Attachment 2 depicts the reserve balances. The cash reserves are projected to
remain just above or at the District's current reserve goal level until FY26 where staff
has conservatively put a place holder in for electric meter replacements, as the life
expectancy on the meters is between 7-10 years.
Attachment 3 is a list of proposed Electric Utility capital projects that were included in
the Financial Master Plan assumptions.
Attachment 4 is a summary of the Water Utility's Financial Master Plan. It includes the
maximum rate increases of 3% for FY18 and FY19 and less than inflationary
increases for a five year period to maintain operations and capital improvements while
also building reserves to meet District goals . The debt service coverage ratio for the
Water Utility's current outstanding debt is a minimum of 1.25 until 2036 and the
current projections are not raising any concerns with meeting that requirement through
the remaining years of the outstanding debt.
Attachment 5 depicts the reserve balances. The cash reserves for the Water Utility
are projected to increase significantly starting in FY22 as debt obligations are paid off.
Attachment 6 is a list of the proposed Water Utility capital projects that were included
in the Financial Master Plan assumptions.
At the workshop, staff will have aspreadsheet-based model to demonstrate the
sensitivity of revenue and cash as rates change.
4. FISCAL IMPACT
The proposed FY18 and FY19 Budget is consistent with the District's long-term goals;
and staff is proposing a balanced budget for FY18 and FY19.
5. RECOMMENDATION
Receive this report and provide comments to staff.
Regina Wise
Interim Administrative Services Manager
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Michael D. Holley
General Manager
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