HomeMy WebLinkAbout16 Extinguish Internal Loans Agenda Item # 16
Public Utility District
ACTION
To: Board of Directors
From: Bob Mescher
Date: March 18, 2009
Subject: Approve the Resolution to Consolidate Board Designed Reserve
Funds and Extinguish Internal Loans
1. WHY THIS MATTER IS BEFORE THE BOARD
Making changes to the structure of the District's reserve funds is solely within the
purview of the Board.
2. HISTORY
Cash and investment funds can be classified as "Restricted", "Board Designated", and
"Unrestricted".
Restricted Funds are funds that are mandated by an outside agency to be set aside
for a specific purpose. Examples of this type would be the District's debt reserve funds
for its 2006 COP and 2003 COP. The District is in compliance with all of its Restricted
Fund requirements and there are no proposed changes relating to Restricted Funds.
Board Designated Funds are funds voluntarily established by the Board to be used for
specific purposes. These funds could be also grouped as Operating Reserves or
Capital Reserves. There are currently ten board designated funds that have been
established over the years. Several of these funds have overlapping purposes and
could now be consolidated into fewer funds. Since Board Designated Funds are
established voluntarily, and situations change throughout time, the Board can modify
or reallocate these funds as needed.
Unrestricted Funds are all other funds and can be used for general operations or
capital improvements. Unrestricted Funds are synonymous with "General Fund - Cash
and Investments" and "Operating Cash," and can be considered as part of the
District's Operating Cash Reserves.
Title 3 of the District Code defines goals for Operating Cash Reserves and Capital
Reserves and were discussed last month. It is important for the District to maintain an
adequate level of reserves to cover unanticipated expenditures or disruptions in cash
flow.
As an example, the District presently has several internal loans that were created
because it had insufficient reserves available to pay for unanticipated expenditures at
the time.
3. NEW INFORMATION
Consolidating the board designated reserve funds and extinguishing the internal loans
will benefit the District by:
1. Simplifying the District's reserve reporting; making the reports more easily
understandable and transparent;
2. Reducing the complexity of the District's reserves; reducing staffs
accounting time; and
3. Bringing the overall reserve structure into better alignment with Board goals.
Attachment 1 lists the current balances of the District's internal loans.
Staff recommends that these internal loans be extinguished utilizing $168,000 of the
Electric Department's Operating Cash Reserves and $1,233,000 of the Water
Department's Land Sales Fund.
Attachment 2 illustrates proposed changes in the reserve funds including: the
extinguishment of internal loans; the merge of certain reserve funds; and the
establishment of a new Vehicle Reserve Fund for both Water and Electric as already
included in the approved FY09 Budget.
Attachment 3 projects the resulting balances, reflecting the proposed extinguishment
of internal loans and funding of the new Vehicle Reserve Funds, and how those
balances compare to the Title 3 Operating Cash Reserve and Capital Reserve goals.
It also shows staffs recommendations of consolidating certain reserve funds that have
overlapping purposes.
4. FISCAL IMPACT
Overall, the fiscal impact of the proposed changes would be revenue neutral for the
District, however, individual funds would be affected as follows:
• The Electric Department's Storm Damage Reserve Fund would increase by
$84,000 and the Operating Cash would reduce by $168,000, netting a
reduction to Operating Reserves of $84,000.
• The Water Department's Reserve for Future Water Meters would increase by
$824,000 and the Land Sales Fund would decrease by $740,000, netting an
increase to Capital Reserves of $84,000.
The FY09 budget provided for $144,000 to be transferred from the Water
Department's General Fund to certain reserve funds as payment towards principle and
interest of the internal loans. If the internal loans are extinguished, this transfer would
become unnecessary. Staff proposes that the $144,000 remain in the General Fund
until the Board approves the 2009 year-end adjustments.
5. RECOMMENDATION
Approve the attached Resolution Approving the Consolidation of Board Designated
Reserve Funds and Extinguishing Internal Loans.
Mary Chapman Michael D. Ho ey
Administrative Services Manager General Manager
ATTACHMENT 1
Truckee Donner Public Utility District
Internal Loans
As of 03/18/2009
Proposing
Internal Loans to be Repaid by
ELECTRIC DEPARTMENT
AGAINST THE STORM DAMAGE RESERVE
2006 Broadband Litigation Expenditures $ 84,005.37 Electric Operating Cash Reserves
Total Electric Internal Loans $ 84,005.37
WATER DEPARTMENT
AGAINST THE RESERVE FOR FUTURE WATER METERS
Water Department 2002 Deficit $ 410,147.34 Water Land Sales Fund
Water System Improvement Projects 329,690.93 Water Land Sales Fund
2006 Broadband Litigation Expenditures 84,005.37 Electric Operating Cash Reserves
E
Subtotal $ 823,843.64
AGAINST THE LAND SALES FUND
$
Steele Property Purchase 329,140.50 Water Land Sales Fund
Water Department 2002 Deficit 164,201.80 Water Land Sales Fund
$ 493,342.30
Subtotal
Total Water Internal Loans $1,317,185.94
ATTACHMENT 2
Truckee Donner Public Utility District
Proposed Changes to Reserves and Internal Loans
March 18, 2009
Proposed Structure
Existing Structure
ELECTRIC
Operating Cash Reserve Clpi at�t�g as a gat
Electric Rate Reserve
Electric Rate Reserve
ROOM_r.
Vehicle Replacement (New)
Building Capital Replacement
Capital Replacement
WATER
Operating Cash Reserve Operating Cash Reserve
Debt Service Coverage
EEEEEEI
Debt Service Coverage
Capital Replacement Capital Replacement
Future Water Meters
Future Water Meters a Vehicle Replacement (New)
e e
Other-Internal Loan Against the Future Water Meters
Land Sales
jInternal Loan Against the Land Sales Reserve
ATTACHMENT 3
Truckee Donner Public Utility District
2009 Reserve Status and Reserve Goals
As of March 18, 2009
(in thousands)
ELECTRIC
Balance FY09 Goal Variance
Operating
$ 4,670 $ 7,000 $ (2,330)
Operating Cash
1,630 3,000 (1,370)
Electric Rate Reserve
Total operating reserves
$ 6,300 $ 10,000 $ (3,700)
Capital 0 $ - $ 160
16
Vehicle Replacement ($160K in FY09 Budget) $ 160 1,000 (760)
Capital Replacement $ 400 $ 1,000 $ (600)
Total capital reserves
Total Reserves $ 6,700 $ 11,000 $ (4,300)
WATER
Balance FY09 Goal Variance
Operating $ 400 $ 2,700 $ (2,300)
Operating Cash 900 - 900
Debt Service Coverage (voluntary) $ 1,300 $ 2,700 $ (1,400)
Total operating reserves
Capital $ 4,010 $ 4,000 $ 10
Capital Replacement 1,550 - 1,550
Future Water Meters - 140
Vehicle Replacement ($140K in FY09 Budget)Total capital reserves $ 5,700 00 $ 4,000 $ 1,700
Total Reserves $ 7,000 $ 6,700 $ 300
11 I
TRUCKEE
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ublic Utility District
Resolution No. 2009 - XX
APPROVING THE CONSOLIDATION OF
BOARD DESIGNATED RESERVE FUNDS AND
EXTINGUISHING INTERNAL LOANS
WHEREAS, it is within the purview of the Board of Directors to make changes in the
structure of the District's reserve funds; and
WHEREAS, several of the Board designated funds now have overlapping purposes; and
WHEREAS, the District has previously utilized funds from these Board designated funds
for purposes other than the original designation, in the form of board-approved internal
loans; and
WHEREAS, the accounting and reporting of these funds and internal loans has become
more complex; and
WHEREAS, it is the intent of the Board to simplify the accounting and reporting of these
funds; and
NOW THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby approve
the following:
A. The $84,005.37 internal loan against the Storm Damage Reserve for 2006
broadband expenditures to be extinguished using the Electric Department's General
Fund.
B. The $410,147.34 internal loan against the Reserve for Future Water Meters Fund
for the 2002 deficit to be extinguished using the Land Sales Fund.
C. The $329,690.93 internal loan against the Reserve for Future Water Meters Fund
for water system improvement projects to be extinguished using the Land Sales
Fund.
D. The $84,005.37 internal loan against the Reserve for Future Water Meters Fund for
2006 broadband expenditures to be extinguished using the Electric Department's
General Fund.
E. The $329,140.50 internal loan against the Land Sales Fund for the Steele Property
purchase to be extinguished by the same fund.
1 Resolution 2009-XX
F. The $164,201.80 internal loan against the Land Sales Fund for the 2002 deficit to
be extinguished by the same fund.
G. $160,000.00 to be transferred from the Electric Department's General Fund to the
new Vehicle Reserve Fund. (This funding is included in the Department's approved
FY09 Budget.)
H. $140,000.00 to be transferred from the Water Department's General Fund to the
new Vehicle Reserve Fund. (This funding is included in the department's approved
FY09 Budget.)
I. To merge the Electric Department's Storm Damage Fund with the Electric
Operating Reserves.
J. To merge the Electric Department's Building Fund with the Electric Capital
Replacement Fund.
K. To merge the Water Department's Land Sales Fund with the Water Capital
Replacement Fund.
PASSED AND ADOPTED by the Board of Directors at a meeting duly called and held
within the District on March 18, 2009 by the following roll call vote:
AYES:
ABSTAIN:
NOES:
ABSENT:
TRUCKEE DONNER PUBLIC UTILITY DISTRICT
By
J. Ron Hemig, President
ATTEST:
Michael D. Holley, Clerk of the Board
2 Resolution 2009-XX