HomeMy WebLinkAbout#10 2009 Budget Agenda Item # 10
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7-4M-
BUDGET
To: Board of Directors
From: Bob Mescher
Date: October 21, 2009
Subject: Budget Presentations:
a. Reserve Funds & Revenues
b. Operating/Capital Budget: Electric Operations
c. Operating/Capital Budget:Water Operations
1. WHY THIS MATTER IS BEFORE THE BOARD
This item continues the preparation process of the FY10 and FY11 budget.
2. HISTORY
In July 2008, the Board adopted a revision to Title 3 requiring the General Manager to submit
to the Board a two-year budget beginning 2010.
Since July 2009, staff has been preparing the FY10 and FY11 budget.
The FY10 and FY11 purchase power plan was presented in the September 2, 2009 Board
Meeting. It was estimated that purchase power costs would decrease over 2% in FY10 as
compared to the FY09 budget, but would increase over 5% in FY11 as compared to FY10.
At the September 16, 2009 Board Meeting, the District's Mission Statement, Objectives and
Goals were reviewed.
At the October 7, 2009 Board Meeting, the proposed operating and capital budgets of the
supporting departments were presented.
At those last two meetings, Staff presented the following budget assumptions:
• Labor rates are estimated to be flat in FY10 and increased an estimated 3% in FY11
(actual rates will depend on union contract negotiations)
• Staffing level changes include a reduction in four full-time positions through attrition
• Three reductions in Electric
• One reduction in Water
• 67 total FTEs in FY10 & FY11
• The District's fiber assets will provide an additional revenue source
• Most other operational expenses will remain flat or slightly increased, ranging from 0%
to 3% per year
• No new debt will be incurred
• The costs of employee benefits, particularly medical insurance and retirement benefits
are projected to increase in FY10 and FY11
• The District will focus on more water conservation programs in FY11. Water
conservation programs will be increased about 10% in FY11 from FY10, and an
additional employee in the Conservation Department is proposed for the last half of
FY11, to add capacity for new water programs
At the October 21, 2009 meeting, just prior to this agenda item, the revised Purchase Power
Plan for the next two years will be presented for adoption and a public hearing for the budget
will be set.
3. NEW INFORMATION
Update to Assumptions
The revised FY10 and FY11 Purchase Power Plan estimates that purchase power costs will
decrease about 3% in FY10 as compared to the FY09 budget, but increase about 4% in FY11
as compared to FY10. This is a reduction in cost of about 1% per year from the original
estimate.
Reserve Funds
The District continues to fund the reserves for the Electric Department, but those reserve fund
balances will not reach the District's goals in the next two years. However, once the Electric
Department's debt is extinguished in 2013, the operating reserve requirements will be
significantly reduced and the District will be able to quickly reach its operating and capital
reserve goals.
By the end of FY11, the District will reach and exceed its reserve fund goals for the Water
Department. These reserve balances will protect the District from the revenue uncertainties of
the new residential volumetric billing and provide the District with internal funding for the last
phase of the meter installation project.
These reserve goals and balances will be discussed with the Board again in the first quarter of
next year.
Revenue Requirements
To fund the budgeted expenditures, the following rate increases are proposed:
FY10 FY11
Electric 0.00% 3.00%
Water 1.75% 1.75%
For the FY11 electric rates and rate structure, Staff proposes that the District consider a rate
study early in FY10, similar to the study conducted by HDR this year for water rates.
Budaet Highlights for Electric &Water Departments
Electric Department
• Two less FTE's due to unfilled FY09 budgeted positions
• Medical & retirement costs increase in both years
• No other significant changes in year-to-year expenses
• Focus will increase on system maintenance, since new construction has slowed
Water Department
• One less FTE through attrition beginning in FY10
• Medical & retirement costs increase in both years
• Power supply costs are reduced as leaks are repaired
• The Placer County Water Agency's Lahonton Water System contract ends in FY09
• Focus will continue on installing new residential water meters
Next steps of the budget process
November 4, 2009
• Draft budget including a discussion of overheads
• Financial Master Plan
• Public hearing
November 18, 2009
• Adopt budget
• Adopt rates, fees, and charges
• Adopt overhead rates
4. FISCAL IMPACT
This budget workshop is part of the overall budget process that will affect the District's
spending for the next two fiscal years.
5. RECOMMENDATION
Receive this report and provide comments to staff.
Mary Chg an Michael D. Holley
Administrative Services Manager General Manager