HomeMy WebLinkAbout14, Financial_Goals_Reserves_DebtWorkshop Item # 14
Review of District Financial
Goals, Reserves and Debt;
and Budget Process Ove►view
August 21, 2013
Background / History
• In 2004, the Board adopted a set of financial goals
- Planning
- Revenue
- Debt
- Reserves
• Financial goals were last reviewed on August 1, 2012
• The Board acknowledged that it would take time to achieve
some of the debt and reserve goals
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Background / History
• Electric Debt
- 2003 COP ended January 1, 2013; $3.4 million debt service
- $7.2 million Pension Obligation; $830,000 annual debt service
• Water Debt
- $22.3
million
2006 COP; $1.9 million annual debt service
- $
9.2
million
SRF; $0.8 million annual debt service
- $
2.3
million
DWR; $0.3 million annual debt service
- $
0.7
million
Glenshire; $0.2 million annual debt service
- $
0.5
million
Water Tank; $0.2 million annual debt service
- $35.0
million
total debt; $3.4 million annual debt service
3
New Information
Debt Goals
• No more than 50% of the annual water facilities fee revenue
committed to debt service
- 100% of the FY13 projected water facilities fees
revenue ($295,000) is allocated to the FY13 water debt
payments from facilities fees ($500,000)
• Water debt service ratio (DSR) must be more than 1.25
- DSR is a ratio of net operating revenue to annual debt service
- DSR for FY12 was 1.61
- DSR is projected to be less than 1.25 in next budget cycle at the
current revenue levels
e
New Information
Operating (Cash) Reserve Goals
Electric General Fund Cash Reserve should be equal to one
half of the annual operating expenses, excluding
depreciation; $10,000,000
- Current General Fund balance
Electric Rate Stabilization Fund should maintain a balance
of $3,000,000
- Rate Stabilization Fund balance $218921000
- Budgeted contributions in FY13 will achieve goal
by year end
ti�
New Information
Capital Reserve Goals
• There should be a Water Capital Reserve Fund in the
amount of $4,000,000
- Water Capital Replacement Fund balance $310001000
- Utilized fund for capital projects in FY12 and FY13
- Main replacements
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New Information
Budget Process
• September 4t"
- Mission, goals and objectives
- Budget assumptions
- Organization
- Staffing levels
- Debt
• September 18t"
- Purchased power plan
- Overview of the Prop 218 process
7
New Information
• October 2nd
- Updated water rate study
- Operating and capital budgets of supporting services
• October 16t"
- Operating and capital budgets of electric and water operations
- Reserve funds
- Revenue, rates, fees and charges
New Information
• November 6t"
- Draft budget
- Financial master plan
- Public hearing regarding draft budget
• November 20t"
- Consideration of adopting FY14 and FY15 budget
- Public hearing regarding water rates
Fiscal Impact
There is no direct fiscal impact associated with this item
iff
Recommendation
Provide comments and direction
11
12
FINANCIAL GOALS
Section:
3.01.01 Financial
Goals
3.01.01.1 The following goals are established to promote and
maintain the financial strength of the District:
3.01.01.01 Planning Goals
•Review Water and Electric Master Plans at least every five
years
•Review ten-year Finance Master Plan each year
•Prepare two-year operating budget with semi-annual reviews
•Prepare ten-year Capital Improvement Plan; update annually
•Review rate structure and levels every two years
•Review Financial Goals every year
3.01.01.02 Revenue Goals
•Set operating revenues to capture entire cost to provide service
plus build and maintain reserves and satisfy debt coverage ratios
•Review connection charges every two years and set them to
recover all costs
•Review facilities fees every budget cycle and after the
completion of a master plan
13
3.01.01.03 Debt Goals
• 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.
• One-half the debt service for all long-term debt in the
aggregate is due in the first ten years
• No more than one half the projected annual facilities fee
revenue committed to debt service
• No more than twenty-five percent of general fund revenues
committed to debt service
• No debt more than 25 year maturity
• No debt longer than useful life of the project
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3.01.01.04 Cash Reserve Goals - Operations
• Water general fund should have a cash reserve equal to
twice the highest month budgeted expenditure (this will
probably be the month in which principal and interest on
debt is due)
• Electric general fund should have a cash reserve equal to
one half of the annual budgeted operating expenses,
excluding depreciation
• Electric rate stabilization fund (aka Electric Rate Reserve)
should maintain a balance of $3,000,000
3.01.01.05 Capital Reserve Goals
• 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.
• There should be an electric capital reserve fund in the
amount of $1,000,000 minimum.
3.01.01.06 Debt Reserve Goals
• There should be a reserve fund for each debt instrument in
an amount required by each lender.
• 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.
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