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Home My WebLink About12 Cash Reserve GoalsWORKSHOPIAgendaItem#12TRUCKEEDONNERPublicUtilityDistrictBoardofDirectorsLisaHallJanuary16,2019Subject:ConsiderationofaDiscussionregardingCashReserveGoals1.WHYTHISMATTERISBEFORETHEBOARDThisinformationalitemisbeforetheBoardfordirectioninmodificationsinDistrictcashreservegoals.DistrictCodeTitle3.01,FinancialGoals,establishestheDistrict’splanning,revenue,debt,andreservegoals.ThisdiscussionfocusesoncashreservegoalswhichareestablishedbytheBoardinordertomitigateriskandensurecontinuityofoperations.ThesegoalsandfundingdeterminationsarereviewedandsetannuallybytheBoard.DistrictCodesections3.01.01.04through3.01.01.06setscashreservegoalsforboththeElectricandWaterUtilities.CashreservegoalsfortheWaterUtilitycurrentlyincludetwomonths’operatingexpendituresandarevolvingwatercapitalreservefundintheamountof$4,000,000forcapitalimprovementandmaintenanceprojects.CashreservegoalsfortheElectricUtilityincludesixmonths’operatingexpenditures,anelectricratereserveof$3,000,000,andaminimumcapitalreservefundof$1,000,000.TheBoardlastreviewedDistrictreservegoalsatitsMarch7,2018meetingaspartofthe2017year-endbudgetreviewandapprovedthefollowingreservegoals:WATERELECTRICGeneralFund$3,000,000$10,000,000OperatingIRateReserve3,000,000CapitalReserve4,000,0001,000,000VehicleReserve61,000603,000FacilityFees371,000DeferredLiability800,0001,200,000MeterReserve508,000AB32Cap&Trade1,138,000To:From:Date:2.HISTORYTotalReservesS8,740,000$16,941,0003.NEWINFORMATIONOnecomponenttoutilityratesettingiscashreserves.Extensiveanalysiswas per[ormedtodeterminecashreserveneedsandutilitybestpracticesforriskmitigation.Cashreserveneedshaveincreasedwithplannedcapitalprojects,inflation,andrisingregulatorycosts.UpdatingcashreservegoalsinDistrictcodeallowsreserveadjustmentsasneededtoreflectchangesinoperationalcosts.StaffrecommendsthefollowingchangestoDistrictCode:.Watergeneralfundshouldhaveacashreserveequaltosixmonthsoperatingbudget;.Electricratestabilizationfundshouldmaintainsixmonthscostofpurchasedpower;.AdeferredliabilityfundshouldmaintainadequatefundstocoverescalatingpensionscostsfortheElectricandWaterUtilities..Thereshouldbearevolvingwatercapitalreservefundtotalinganaverageofoneyearofcapitalexpenditures;.Thereshouldbeanelectriccapitalreservefundtotalinganaverageofoneyearofcapitalexpenditures.UpdatingcashreservegoalsinDistrictcodeallowsreserveadjustments,asneeded,toreflectchangesinoperationalcosts.Thefollowingisstaff’srecommendationforcashreservegoalsbasedonrecommendedDistrictCodeupdatesandinconsiderationofthecurrentoperatingbudget:_____________WATERELECTRICGeneralFund$4,000,00011,000,000OperatingIRateReserve______________6,000,000CapitalReserve4,000,0004,000,000VehicleReserveFacilityFeesDeferredLiability800,0002,000,000MeterReserveAB32Cap&TradeTotalReserves$8,800,000$23,000,000Acoderevisionwillberequiredinordertofacilitatethischange.4.FISCALIMPACTThereisnofiscalimpactassociatedwiththisworkshopitem.5.RECOMMENDATIONProvideinputanddirectiontostaff.6ZAZ:$itdJAZLisaHallMichaelD.HolleyAdministrativeServicesDirectorGeneralManager