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Home My WebLink About14 District Financial Goals Agenda Item # 14 r7fi,, 4 TRUCKEE DONNE Public Utility District WORKSHOP To: Board of Directors From: Mary Chapman Date: February 18, 2009 Subject: Review of District Financial Goals 1. WHY THIS MATTER IS BEFORE THE BOARD This is a year end review with the Board of the status of its financial goals. 2. HISTORY In 2004, the Board Adopted a set of financial goals. The status of the financial goals was reviewed with the Board on April 2, 2008. Staff made several recommendations to update the goals. In the revision to Title 3 of the District Code, proposed revisions to the financial goals were reviewed with the Board and incorporated into the policy. 3. NEW INFORMATION In our previous discussion, the Board realized that it would take several years to achieve some of the reserve fund goals. Attached is a complete set of staffs response to the status of the goals. 4. FISCAL IMPACT There is no direct fiscal impact associated with this item. 5. RECOMMENDATION Review this report and provide comments. Staff will be making a recommendation relating to the reserve funds. Mary Chap ant Michael D. Holley Administrative Services Manager General Manager District Code Title 3.01. 001 Financial Goals (Prepared on Electric and Water only; does not include CFDs) Black goal Blue: goal achieved Red: goal not yet achieved Green: there's a proposal to modify the goal 3.01.01.1 The following goals are established to promote and maintain the financial strength of the District: Planning Goals 1) Review Water and Electric Master Plans at least every five years • The Electric Master Plan was last reviewed in FY02. A new Electric Master Plan is complete in draft form and is currently under review. A formal Board presentation on the Plan is scheduled for February 18, 2009. • The Water Master Plan was last updated in FY04; the Urban Water Management Plan is scheduled for FY10; this will be followed in FY11 by a review of the Water Master Plan. 2) Review ten year Finance Master Plan each year • The Finance Master Plan was reviewed was on November 5, 2008 during the FY08 Budget process. The Finance Master Plan will be updated after the Electric Master Plan is adopted and again when the FY10—FY11 Budgets are prepared. 3) Prepare two-year operating budget with semi-annual reviews • Staff will prepare the District's first two-year operating budget for the FY10 and FY11. Staff began presenting semi-annual budget reviews beginning in FY08. 4) Prepare ten year Capital Improvement Plan; update annually • A five-year Capital Improvement Plan was presented in the FY09 Budget; the District is working on its first ten-year Capital Improvement Plan (electric and water); the Plan should be ready by December, 2009. 5) Review rate structure and levels at least once every three years • Completed as part of the FY09 budget process. The District will be conducting a water rate study in FY09 which will be followed up with an electric rate study in FY10. 6) Review Financial Goals every year • The Financial Goals were last reviewed at the April 2, 2008 Board meeting. 1 District Financial Goals Revenue Goals 1) Set operating revenues to capture entire cost to provide service plus build and maintain reserves and satisfy debt coverage ratios • The last electric rate increase in the amount of 7% was adopted on November 19, 2007 to be effective January 1, 2008 to cover the FY08 electric operating expenses and budgeted transfers. This increase also included a 3% increase which was implemented on January 1 , 2009. • The last water rate increase was adopted on July 13, 2006 to be effective January 1, 2007 in the amount of 3% with another 3% to be effective January 1 , 2008 to cover the FY08 water operating expenses and budgeted transfers. In FY08, the Board adopted a $5.00 per month surcharge for 5 years to pay for a portion of the cost of implementing a District wide water metering program. • The Miscellaneous Fees Schedule was last reviewed and increased on February 20, 2008. This schedule will be reviewed again in preparation of the FY10-FY11 Budget. • FY07 electric debt service coverage calculation was equal to 2.01 times debt. The required debt service coverage ratio needs to be at least 1.20 times debt. The FY08 debt service calculation is not ready at this time; we expect to meet or exceed the required 1 .20 times debt. • FY07 water debt service coverage calculation was equal to 2.14 times debt. The required debt service coverage ratio needs to be at least 1.25 times debt. The FY08 debt service calculation is not ready at this time; we expect to meet or exceed the required 1.25 times debt. 2) Review connection charges each year and set them to recover all costs • The last electric and water connection fee increases were adopted on February 6, 2008. 3) Review facilities fees every year • The last electric facilities fees increase was adopted on February 6, 2008; a complete review will be done after the FY09 update of the Electric System Master Plan. • The last water facilities fees increase was adopted on April 6, 2005; the water facilities fees were reviewed in FY08 and no increase was proposed. The next review of the Water System Master Plan is scheduled to be completed in FY11. The facilities fees will be reviewed with each budget cycle and at the completion of the updated Water System Master Plan. 2 District Financial Goals Debt Goals 1) Separate debt that is serving development (facilities fees), debt serving current customers (rates), debt serving a special assessment district (assessments) and debt financed by billing surcharges. These categories of debt should be separately identified in the budget. • Debt payments presented in the annual budget are broken down into these four categories. 2) One-half the debt service for all long-term debt in the aggregate is due in the first ten years • Total Electric Debt (P & 1) $17,377,893 Electric Debt Due in First Ten Years $17,377,893 Percent of Debt due in the next 10 years 100% • Total Water Debt $63,836,290 Water Debt Due in First Ten Years $34,338,975 Percent of Debt due in the next 10 years 54% 3) No more than one half the projected annual facilities fee revenue committed to debt service • FY09 projected electric facilities fees revenue $ 225,000 FY09 electric debt payments from facilities fees $ 0 % of annual FF revenue committed to debt 0% • FY09 projected water facilities fees revenue $ 664,200 FY09 water debt payments from facilities fees $ 506,931 % of annual FF revenue committed to debt 77% Given the current reduction in construction in Truckee, we lowered the estimate of how much the District would collect in facilities fees. As a result, the amount of water facilities fees committed to debt is greater than the 50% goal. Once construction picks up, we should be able.to once again meet the 50% goal. 4) No more than twenty-five percent of general fund revenues committed to debt service (Revenue taken from the FY09 Operating Budget). • Electric budgeted general funds revenue $23,669,071 FY09 debt service (P & 1) paid by General Fund $ 3,540,455 % of General Fund revenue committed to debt 15% • Water budgeted general funds revenue $ 10,570,856 FY09 debt service (P & 1) paid by General Fund $ 1,928,987 % of General Fund revenue committed to debt 18% 3 District Financial Goals 5) No debt more than 25 year maturity • See attached debt schedules from FY09 budget — longest term is 2006 COPs — 30 year financing — 28 years remaining 6) No debt longer than useful life of the project • No debt has been financed for a period longer that its useful life 4 District Financial Goals Cash Reserve Goals - Operations 1) Electric general fund should have a cash reserve equal to twice the highest month budgeted expenditure (This will be the month in which the highest wholesale electric bill is due plus the highest debt service payment.) • Electric general fund reserve goal $7,049,000 • Current electric general fund balance @ 12/31/08 $4,650,046 Less developer credits ( 758,309) Net electric general fund balance $3,891,737 2) Water general fund should have a reserve equal twice the highest month budgeted expenditure (this will probably be the month in which principal and interest on debt is due) • Water general fund reserve goal $2,705,000 • Current water general fund balance @ 12/31/08 $ 855,291 Less developer credits (381,300) Net water general fund balance $ 473,991 DSC & Operating Reserve $ 790,515 Total general fund & reserve fund balance $1,264,506 3) Electric rate stabilization fund should maintain a balance of$3,000,000 • The December 31, 2008 balance in the rate stabilization fund was $1,575,472. The budgeted transfer for FY09 is $430,129 5 District Financial Goals Capital Reserve Goals 1) There should be a revolving water capital reserve fund in the amount of $4,000,000 to permit projects to be initiated and funded prior to arrangement of long-term debt or other financing. • The water capital reserve fund balances are as follows: Land Sales Fund $3,741,925 Capital Replacement Fund 459,485 Total water capital reserve fund $4,201,410 • There are still internal loans outstanding to the Land Sales Trust Fund in the amount of$997,251 plus accrued interest until repaid. The internal loans are: Glenshire water system improvements $142,909 Purchase Steele property —Water share 329,140 Water General Fund —overdraft at 12/31/02 525,202 Total internal loan $997,251 2) There should be an electric capital reserve fund in the amount of$1,000,000. • The electric capital reserve fund has not been funded yet. 6 District Financial Goals Debt Reserve Goals 1) There should be a reserve fund for each debt instrument in an amount required by each lender • The following loans have reserve funds set up as required by the loan documents: Electric: 2003 COPs Reserve Fund $1,802,249 Water: 2006 COPs Reserve Fund $2,055,149 Prop 55 Reserve Fund $ 311,871 DWR SRF Loan Reserve Fund $ 242,543 (Add $40,026 two times per year until total reserve fund equals $800,852) 2) A reserve fund should be established and maintained to pay for vehicle and equipment purchases as needed. Long term financing should be used when necessary and the life of the asset purchased is greater than 15 years. • A new vehicle replacement fund was established in the FY09 Budget. The budgeted amount for FY09 is: Electric $155,000 Water $140,000 • There are no vehicle purchases included in the FY09 budget. 7 District Financial Goals Recommendations to change goals or create new goals: • Evaluate existing Board designated funds and consider reclassifying them into new and existing categories to meet the operating and capital reserve goals defined in this policy. 8 District Financial Goals i i APPENDIX M ELECTRIC DEBT SCHEDULE Principal and Interest Payments Purchased Power Transformer MSG MSG Contract Buyout Loan #9 #11 YEAR Rates ' Rates Rates Rates TOTAL 2009 3,415,413 58,929 19,282 46,832 3,540,455 2010 3,408,381 58,929 33,360 3,500,670 2011 3,392,238 58,929 3,451,166 2012 3,388,300 58,929 3,447,229 2013 3,379,444 58,929 3,438,373 16,983,775 294,644 19,282 80,191 17,377,893 Loan Descriptions Purchased Power Contract Buyout- 2003 A/B Idacorp $26M purchased power settlement Everen Securities -Loan repayment schedule for the financing of the purchase of 5 substation transformers MSG#9 - Municipal Services Group Loan #909-9 - Lease purchase of equipment MSG#11 -Municipal Services Group Loan #909-11 -Purchase of vehicles, equipment, hardware & software Debt Payments: All Electric debt payments are funded by current customers through rates. 1. The final Purchased Power Buyout debt payment is due on 11112013. Half of the payment will be funded by the reserve fund and the remaining portion will be funded by monthly prepayments made July-December 201: 54 APPENDIX IX WATER DEBT SCHEDULE Principal and Interest Payments 2006 2W6 2006 DWR-SRF DWR MSG MSG MSG MSG INTERNAL INTERNAL INTERNAL COP COP COP DONNER LAKE PROP 55 #1551 #1552 #9 #11 LOAN#2 LOAN#3B LOAN#38-1 YEAR Rates FF Assort Assort Rates FF Assort Rates Rates Rates Rates Rates TOTAL 2009 1,440,183 356,773 99,333 800,852 306,481 150,168 166,786 9,949 28,533 44,970 43,766 55,105 3,502,889 2010 1,441,974 355,696 97,619 800,652 306,461 150,158 166,786 25,485 44,970 43,766 55,105 3,488,691 2011 1,435,285 356,361 96,443 800,862 306,481 150,158 166,786 44,970 43,766 55,105 3,456,206 2012 1,438,999 355,906 99,984 800,852 306,481 150,158 166,786 44,970 43,766 55,105 3,463,006 2013 1,437,351 358,092 99,145 8001852 306,48i 150,156 166,786 44,970 43,766 55,105 3,463,206 2014 1,441,798 359,075 98,016 800,852 306,481 150,158 166,786 44,970 43,766 55,105 3,467.006 2015 1,445,599 358,876 96,616 800,652 306,481 160,158 166,786 44,970 43,766 55,105 3,469,206 2016 1,440,403 356,594 99,692 800,852 306,481 150,158 166,786 44,970 43,766 55,105 3,464,806 2017 1,441,699 356,070 98,120 800,852 306,481 150,156 166,843 44,970 43,766 55,105 3,464,064 2018 1,440,404 356,284 96,801 800,852 306,481 43,766 55,105 3,099,692 2019 1,443,958 355,324 100,207 800,B52 306,481 35,499 3,042,320 2020 1,441,399 357,617 97,973 800,852 306,481 3,004,321 2021 1,430,369 356,179 96,216 800,862 153,241 2,836,856 366 2022 703,445 358,008 99,060 800,852 1,961,1.962.235 ,961,235 2023 704,873 358,672 97,837 800,852 1,961,615 2024 701,233 369,233 100,297 800,852 1,964,627 2025 704,966 360,884 97,925 800,652 1, 6 , 2 2026 701,784 359,005 99,736 1,160,525 77 2027 703,819 359,606 97,150 1,169,275 2028 701,660 358,474 99,142 1,161,025 2029 700,480 360,101 100,444 1,161,775 2030 704,268 359,147 97,360 1,150,775 1,15 , 5 2031 700,580 359,624 98,421 9,275 2032 701,858 357,313 100,104 1,162,42 2033 701,611 359,424 101,490 1,156,550 2034 702,034 359,309 97,207 1,162875 2035 705,426 368,213 99,236 1,159,950 2036 703 318 356,908 99,724 1, , 29261174 10022869 2761295 13614484 3831009 1351422 1,501,131 9,949 54,018 404,729 473,160 651,050 63,83636,290 Loan Descriptions: 2W6 C ter system improvements and Donner Lake financing DWR/SRF-Replacement of Donner Lake Water System DK1VProp 55-Water system improvement projects MSG#1551-Municipal Services Group#1551-Bridge Street Tank construction MSG#1552-Municipal Services Group#1552-Glenshfre Pipeffne Project MSG#9-Municipal Services Group Loan#909-9-Lease purchase of equipment MSG#11-Municipal Services Group Loan#909-11 Equipment,hardware&software Internal Loan#2-Water System Improvements;borrowed from Reserve for Future Meter Fund(Resolution t96-12) Internal Loan#39-Water department foan;borrowed from Reserve for Future Meter Fund at IV3112002 Internal Loan#38-1-Wafer department loan;borrowed from Land Sales Trust Fund at 12/31/2002 Debt Payments: 1116M or debt payments are funded by development(FF),current customers(rates)and special assessments(assml). The method of payment for the water debt is listed in the column headings. 56