HomeMy WebLinkAbout12 District Code 3.01 Revision
AGENDA ITEM #12
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MEETING DATE: November 3, 2021
To: Board of Directors
FROM: Michael R. Salmon, Chief Financial Officer
SUBJECT: Update District Code Title 3, Chapter 3.01
APPROVED BY_____________________________
Brian C. Wright, General Manager
RECOMMENDATION:
Adopt Resolution 2021-20, Updating District Code Title 3, Chapter 3.01, Financial Goals
DISCUSSION:
Beginning in August 2021, the financial planning for Budget 2022 and 2023 and updating the
10-Year Financial Master Plan, included review and potential update(s) to District Code.
Staff recommends one revision to District Code, specifically to General Fund Operating Reserve
[District Code 3.01.01.04].
Current District code wording for Electric is as follows:
Electric general fund should have a cash reserve equal to one half of the annual
budgeted operating expenses, excluding depreciation
Recommended revision to the following:
Electric general fund should have a cash reserve equal to one half of the annual
budgeted operating expenses, excluding depreciation and purchased power
Staff recommends this modification to the reserve policy due the existence of an Electric Rate
Reserve. As the reserve policy is currently defined, including purchased power costs, Electric’s
operating reserve is relatively high, as 53% of the operating expenses are purchased power.
This is deemed as duplicative or too conservative, as there is a separate Electric Rate Reserve.
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For example purposes, utilizing 2021 Budget:
operating expenses (as currently defined) x 50% = $12.1 million goal
operating expenses (as recommended defined) x 50% = $5.6 million goal
Electric’s operating general fund balance was $10.9 million as of December 31, 2020. With the
change in policy definition, the amount in excess of operating goal would be transferred to the
Electric Capital Reserve, with capital expenditures the planned utilization of funds. The General
Fund Operating Reserve, Rate Reserve, Capital Reserve, and Vehicle Reserve are rate
generated and the reserve fund ‘bucket’ is a Board designation. Further, the buildup of general
fund monies in recent years is attributed in part to actual capital expenditures under budget
capital expenditures ($3.0 in 2020 and $2.7m in 2021).
Electric Utility: ($ thousands) Operating Reserve (general fund)
$11,394 Operating general fund balance as of December 31, 2020
(490) Board approved (March 2021) transfer to Rate Reserve related to 2020 balance
$10,904 Operating general fund balance as of December 31, 2020, post-Rate Reserve transfer
(7,431) Transfer to Capital Reserve, recommended with this Policy change
2021 Activity: operating revenue less expenses net favorable to budget $324, capital
expenditures net less than budget $2,714, and investment income unfavorable ($307)
2,731 = Forecast, favorable cash flow net 2021 activity
$ 6,204 Forecast, Operating general fund balance as of December 31, 2021
Electric Utility: ($ thousands) Capital Reserve
$ 3,637 Capital reserve balance as of December 31, 2020
257 Transfer In (funding) as budgeted for 2021
0 Transfer Out (use) – none used, budget for 2021 was use of $1,772,658
12 Investment Income, capital reserve
7,431 Transfer to Capital Reserve, recommended with this Policy change
$11,337 Forecast, Operating general fund balance as of December 31, 2021
Above transfer to capital reserve of $7,431,000 is included in the Financial Master Plan as part
of beginning balance for 2022 and utilized in early years thereafter, as a funding source for
capital expenditure plan.
GOAL(S) RELEVANCE:
District Code Section 1.05.030 Goals:
1. Manage for Financial Stability and Resiliency
FISCAL IMPACT:
Eliminates duplicity of purchased power in calculations of both operating reserve and rate
reserve for Electric. Shifts $7,431,000 of Electric funds from general funding operating reserve
to capital reserve designation.
ATTACHMENTS:
Resolution 2021-20
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