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HomeMy WebLinkAbout10-Financial Master Plan Review, Projected Revenue, and Projected Reserve BalancesMW TRUC EE DCON 1E Public Utility District BUDGET To: Board of Directors From: Robert Mescher Date: October 16, 2013 Subject: Financial Master Plan Review, Projected Revenue, and Projected Reserve Balances 1. WHY THIS MATTER IS BEFORE THE BOARD This item continues the preparation process of the FY14 and FY15 Budget. 2. HISTORY The Financial Master Plan is a tool to help the Board and Staff understand how the proposed budget impacts long-term goals. It includes a projection of the revenue and expenses for FY14 through FY23 using the actual revenue and expenses for the most recent twelve months, the proposed FY14 and FY15 Budget, and a set of assumptions. The Financial Master Plan is reviewed during the budget cycle to ensure that the proposed budget is consistent with long-term goals. K 1Z1:47VI1'1;101NiTiI_rIEelZ The following assumptions were used for projecting FY14 through FY21: • 1 % annual increase in customer growth • 3% annual inflation • One new IT employee in FY14 • One Work Order employee restored in FY15 • No new debt • Interest earned is about 1 % until FY17, then FY18, then 3% thereafter the revenue and expenses for increases to 2% for FY17 and Attachment 1 is a summary of the Electric Utility's Financial Master Plan. It shows that electric rates need to be raised only minimally to complete necessary capital projects and maintain its reserve goals. Attachment 2 graphs the reserve balances using the data in Attachment 1. The cash reserves are projected to be near the current goal by the end of FY13 and maintained at or near the goal for the remaining years with very little rate increases. Attachment 3 is a list of the proposed Electric Utility capital projects. Attachment 4 is a summary of the Water Utility's Financial Master Plan. It shows that the water rates need to be raised only modestly to complete high -priority capital projects and maintain the water utility reserve goals. Attachment 5 graphs the reserve balances using the data in Attachment 4. The water cash reserve goals were achieved in FY11, but the Board subsequently approved projects that utilized the reserve funds. Additionally, the Board elected to postpone recommended water rate increases due to economic difficulties experienced by the rate payers. That postponement impacted the the reserve balances as anticipated. However, the graph shows that with modest rate increases going forward, the reserve goals can be achieved. Attachment 6 is a list of the proposed Water Utility capital projects. At the workshop, Staff will have an Excel spreadsheet -based model to demonstrate the sensitivity of revenue and cash as rates change. 4. FISCAL IMPACT The Financial Master Plan verifies that the proposed FY14 and FY15 Budget is consistent with the District's long-term goals. 5. RECOMMENDATION Receive this report and provide comments to staff. 117k_ ,��- Robert Mescher Administrative Services Manager Michael D. Holley General Manager