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HomeMy WebLinkAbout1/31/2008 AGENDA BACKUPCentral Contra Costa Sanitary District
Board Workshop
Budget and Sewer Service Charge Review
For the Fiscal Year 2008 -2009 Budget Process
January 31, 2008
Overview of Today's Workshop
• Introduce budget policy issues
• State of the District
• Discuss rate setting approach
• Items that impact rates
• Proposed rates & alternatives
• Receive Board direction:
- 2008 -09 SSC rate Increase
• Operating Expenses
• Capital Improvement Program
• Other rates, fees, and charges
• Future actions on unfunded liabilities
1
Budget Policy Issues
Set 2008 -09 SSC Rate increase of $0 — $13 /year.
Have full cost recovery for all fees, charges, and
services?
How to address unfunded liabilities:
— Other post employment benefits (OPEB or
GASB 45)
— Retirement Unfunded Actuarial Accrued Liability
(UAAL)
Role of Bond funding for Capital Program
Develop Reserve Guidelines
Develop strategy to protect reserves
STATE OF THE DISTRICT
2
Financial Summary
• District is in a strong financial position:
- Consistent revenue
- No major unexpected expenses
• District expenses increase greater than the
CPI.
• District cash reserves ($62.6 million) 6/30/07
• District has some unfunded liabilities.
• Low Bond Debt ($30.3 million).
• Capital Program is generally pay -as- you -go.
• Expenses projected to be "On Budget ".
District Overview
• Meeting Mission and Goals:
- Excellent compliance record.
- Excellent customer service.
- Reasonable Rates.
• Excellent Capital Program:
- Infrastructure Renewal and Rehabilitation
- Capacity
• Workforce:
- Salary survey, negotiations in 2009
- Transition
• Positioned to meet future requirements and
liabilities.
3
RATE SETTING APPROACH
Rate Setting Approach Since 2000
• Use Financial Cash Flow Model to
analyze policy issues and predict future
rates:
-10 -Year Planning Horizon.
- Don't borrow to meet cash flow needs
(Funds Required).
- Assumes use of Reserves to allow modest
annual SSC increases.
- Reserves Drawn down to Funds Required.
4
Rate - Setting Approach
• Use Bonds for major capital projects
only.
• SSC, Fees & Charges, and services
should recover full cost.
• Model uses reserve draw down to allow
smooth, modest rate increases.
Model Assumptions
• CIB /CIP as shown on 11/29/07 workshop.
• Trust setup for GASB 45, funded each year.
• Property tax income escalated 4% per year.
• Six new positions over next 10 years (assumption).
• Medical, Dental, and Life Insurance increase match
GASB 45 actuary assumptions.
• Vacancy factor of 4% for benefits and 3% for salary.
• Connection fee income $5 million less than 2007 -08
Plan.
5
Funds
. . •
Unrestricted Cash and investments Adjusted for Receivables and Payables @ June 30th
Incrased ConnectonFee Income
..
..
OEM
.
.
.
®
®
®
®®
®00000
®
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Items that Impact Rates
• Revenue
- SSC (the one we can control)
- Tax & Capacity Fees (limited control)
- Concord (a reimbursement)
• Expenses
— O &M
— Capital
• Liabilities
• Regulatory Compliance
• Are we on budget?
• Past year's rates
• Reserves
District Revenue
2007 -2008 Total Revenue & Reserve Draw
Rom OAM and
Capksl
Interest/Other Reserve 8% s
8% Sewer
Debt Service Service
(Mainly tax Charges
revenue) 49%
4%
Tax Revenue
(aMr debt
covered)
8%
Concord Capital
Charges
8%
Capital Capacity
A PS Res
9% Concord 0&
Service
Charges
9%
SSC Rate Controlled by District
Revenue & Reserves
$60,WO,OW
$W,000,000-----------------------------------------------------
W,Ow,wo ----------------------------------------------
$30,000,000 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - --
$2o,WO,WO - -- - - - - - - - - - - - - - - - - - -
$10,000,000 1 - - - - - - -- - - - - - - - - - - - - - - - - -
i
$- mm
�o + off = '" „
v, - - - - -t - -- --
��9 '
V20,000,000j G ,
o s « 8
■ 2003 2004 Actual ■ 2004.2005 Actual 0 20052008 Actual 0 20*2007 Projected 1112007-2008 Projected
SSC, Property Tax and Capacity Fee Trends
SSC- Property Tax - Connection Fees
f85,IMMI.IMM1
Projected 1991 -92 to 2017 -18
S 75.IMNI,IXM1
S65,IMN13NX1
f40.O.OW
S55.IMq,INM1
sw.aN1.IM10
$45.(XX).(XX)
$35.00.01Y)
S 20.1X10.000
S 25.010.1X10
S 15.IMXI,IMN1
S5.IMM1.(MNI
S 15.0p
•p
s� 1�
so
�PropertyTax �SSC �Cnnwction R.
10 Year Expenses
1993 -94 to 2007 -08
560.OW.OW
$50.010.W0
f40.O.OW
sw.aN1.IM10
S 20.1X10.000
$ III.(XX).(x)D
so
93/94
W95 95196 9N97 97198 99/99 99/00 0901 01 /02 02103 nm 040S 05/06 IW07 MRS
�OWExpeme CapitalExpeme
Capital expenses more adjustable than O &M
History of Capital Expenditures
p0mmw
80.900
50.000
10.900
30A99
20A00
10.000
0
90.91 91 -92 92 -93 93.91 91.95 95-96 96.97 97 -98 9&99 99.00 00-01 01 -02 02-03 03.01 01-05 05-M 00-07
aew Year
—h Acllal No —A¢uled b/ 3%Nw
DISTRICT 0 &M EXPENSES COMPARISON BY TYPE AND YEAR
$25.000000
520.0001000
$15.000.000
$10.000.000
$5.000.000
9abrbe 9melee bee Op. 01H Qaeide 9emeee. IbUkV 8 UYbe ibpnke B %60.; C hWTMb;
Usposel; ME*" & AN COW
SUOPIee
■ 200.42006 Actual 0 200&2007 Actual 0 2007 -2009 Rojected O 200&2009 ROjected
10
COMPARISON OF DEFLATED OPERATING EXPENSES
16,000,000 1996 -97 to 2007 -08
14,000,000
12,000,000
10,000,000
8,000,000
6,000,000
4,000,000
2,000,000
SALARIES b WAGES BROYff BEhim ALL OTHER
LIABILITIES
11
Millions $
Liability
Last
Year
Current
GASB 45 — Other post
Employment Benefits
$65
$48 -68
Retirement Unfunded
Actuarial Accrued Liability
(UAAL)
$40.5
$43
Debt
$32.4
$30.3
Terminal Pay
$5.2
$5.3
Total
$143.1
$126.6 -146.6
11
Liability Status
Liabilities
Status
GASB 45
Underway, in Rate Model
UAAL
Analysis just started
Debt Service
Funds allocated, in Rate
Model
Terminal Pay
Liability Booked. Should it
be part of reserve?
18.00%
14.00x.
12.00%
10.00%
8.00%
8.00%
4.00%
2.00%
0.00% ,p
110 1
Retirement Trend Analysis
'-'9 "p 'e tie ry0
epee �Q
ReW ment ComPOUMeO AMXW Gmwth
CWYOWed to 95-87
S*WIes LoeOOtnAeO AMA GmWth
COmpWW to 9&97
12
Regulation Compliance
Current Capital Program:
—provide capacity /reliability
—infrastructure renewal and
replacement
— Address known Regulations
Future Requirements /Initiatives
Regulatory Compliance
13
2007 -08
2008 -09
10 Year CIP
$385 million
$380 million
Expenditures
Bonds
$24 million 2010 -11
$27.5 million
$39 million 2013 -14
in 2017 -18
Future
Unknown
Unknown
Regulatory
Compliance
13
Future Regulatory
Compliance /Initiatives
• Mercury Control
• Sanitary Sewer Overflows
• Greenhouse Gas Reduction
• Nutrient Removal
• Emerging Contaminants
• Water Recycling
Are We On Budget?
• 2000 -01 thru 2006 -07 average
—O &M $1.4 million under
— Capital $.1 million over
— Within 1 -2% of total budget
— Over /under budget becomes
part of next years rate analysis
14
Past Year's Rates
• No increase in prior year will
result in higher increases in
futu re years.
• For example:
Increase (2008 -09) SSC (2017 -18)
$11 /yr $419/yr
$ 0 /yr $435/yr
Cash Reserves
• No borrowing costs
• Has allowed rate stabilization for year -to -year
variation in Capital Program
• Has been drawn down to subsidize /smooth rates
• Recommend to have staff develop guidelines for
Board consideration.
• Develop Reserve Safe Haven?
- Fund UAAL for retirement
- Place in Trust to fund GASB 45 OPEB's
15
History of Reserves
History and Projection of Cash Reserves (Reds Available 0 A 30th
Detleted to 1993-94 Dotlers
$70,000,000
$60,000,000
$50,000,000
$40,000,000
$30,000,000
$20,000,000
$10,000,000
$0
0! O O O O O O N It m 0)
c %� n rn co n
a w a a o O O O O .-
■ 0 &M Funds Available 0 SIC (Capital) Funds Available
PROPOSED RATES &
ALTERNATIVES
16
Background
• Modest annual rate increases since 2004.
• Forecasts show needed projects can be funded
and current level of service maintained with
future moderate increases.
• Public Notice two -year rate increase of up to
$13 /year in 2007.
• Authorized $11 increase for 2007 -08 ($289 /year
to $300 /year).
• Can authorize up to $13 increase for 2008 -09.
Staff Recommendation
• Authorize $11 per year increase for 2008 -09
from $300 to $311 /year (3.7% vs CPI of 3.3 %)
• Adopt annual increase to fees, rates, charges,
and Administrative Overhead — Full Cost Pricing
• GASB 45 — Consider a Trust
• UAAL — Analyze options
• Reserves:
— Develop Guideline
— Develop protective strategy
17
Qs&- #%rrrnenr1g%A Cr,onarin
nual Sewer SeMCa Charpe/RUE 164,248 165,848 167,198 188,498.169,798 171,19E 172,396 173,648 flinuf ej 1)o.o)a tro,ua
Fund. R.eu11.4/Funa. Aw11.ele
1,748.
� 1,600
1.350
1,300 1,300 t 1,300 1,300
ro.000
1,125
900 .700
eo.aoo
-
213
i
258
274 288 295 ` 311
•�
60.000
353 373
.Capital Upgrade/Replacement
40.005
�. 56
–
_. 49, 47 _..351.'48
47
J..�43
20.000
Total
289
t 0.00D
311.
323'x. 335 347 359
371
2005- 100# 200)- 2006- 200P 1010- ZOtt. 2012 4013
2014 2016- 2016- .1)-
4006 4007 40M 2000 2010 1011 ZO1II 2013 Z01♦
Y.
2016 2016 201] 2016
Taw Frld1 Av4Y0Y IOw Nd MYltl4 OB01 •Ta1Y Fl4ri n141*W
lO.00D
nual Sewer SeMCa Charpe/RUE 164,248 165,848 167,198 188,498.169,798 171,19E 172,396 173,648 flinuf ej 1)o.o)a tro,ua
o. of New COnneeYOrro._
1,748.
� 1,600
1.350
1,300 1,300 t 1,300 1,300
....1,250
1,125
900 .700
-Debt Serleae
08M
-
213
-
242 ,
258
274 288 295 ` 311
324
340 '
353 373
.Capital Upgrade/Replacement
76
�. 56
+.�.53
_. 49, 47 _..351.'48
47
J..�43
42 _ 4
Total
289
300
311.
323'x. 335 347 359
371
383`
395 407
18
No Rate Increase
50.000 .._._... _.....
FunrN R.aF11r.WFUnM Awll.bl.
...... .. ............. .................
..
......... ._....I
70.00
So—
40.000
20.005
lO.00D
Yo05. 2p5g.
4006 2001
2007 2006. 200E 2510. 4011- 1014- 101x. 2014
2006 Woo 1010 2011 2014 1013 2014 2015
Y..r
^--- -- Twl F,wg4 Av.IYOM I Oa44 r'AN FM ®Sa1 � 41 F,iW4 fipuYM
2015.
2015
2016- 2017-
2017 2016
Actual projected »..
2006- 2007 2007 -2008 2008 - 2009200 &"'"'� - ___
» »- »
.2n14'NI1LNt1!0r1142D1E2Ot62D1'
»»..... » »a
Amos tlorn:
Sewer Senlu Cnarpe/RUE
164,2 163,848 ' 187,196 188,488 #*5555 171,098 172,396 173.648 174,873 175.573.178,273
.. . or New Connections
1.748, 1,800 1,350 1,300 1,300 -. 1.300 1,300'.
1,25 0
1,025 900 700
-Debt 5-Ace
-0a3#
- - -
213 242 256 274 288 296 312
324
340 354 373
- Capital Up9rade/R60800noffn.
_76 _So �.1 2 49 48
51
5 5.1 4.
Tort
n r
288 300 300 315 330 345 360
375
390 405 420
18
Summary of Rates for Various Scenarios
January 2008 Scenario Rate Comparison
2008. 2009
2013 -2014
2017-2018
2017 -18
-Odatoding-
Pate
Rate
Rate
Debt
January 2007 - Recommended <1>
$
311
$
371
WA
WA
January 2008 - Recommended
$
311
$
371
$
419
$34.1 Million
January 2008 - No Rate Increase in 2008 -09
$
300
$
375
$
435
$34.1 Minion
January 2008 - Sinking Fund
$
313
$
378
$
438
$6.6 Millon
January 2008 - State Borrows Tax
$
311
1 $
359
$
407
$34.1 Million
January 2008 - $13 Rate Increase in 2008 -09
$
313
$
370
$
418
$34.1 Million
Why Raise Sewer Service Charge
• Modest Increase Now ($11 per year)
— Lower SSC long -term
— Funds capital program
— More ability to fund unexpected needs
— Current ratepayers pay cost of service
— Could reduce future debt financing &
unfunded liability
— Reserves allow smoother rate increases in
future
19
No Increase Now
1O • •
—Lower reserves
—Higher SSC long -term
—Less flexibility
— Future ratepayers could bear more of
burden
—Could increase Debt Finance &
unfunded liability
Why raise the Sewer Service Charge?
• Board Policy Issue
—What is an appropriate `reserve' balance?
• Current `rate smoothing' spends down
reserves
— Modest annual vs. larger periodic rate
increases?
• Deferred rate increases have a cost
— Should future large projects be bond
funded?
• Pay -as- you -go is less expensive for
ratepayers
c
ziewer ,ervlCe unarge Rankings
Concord (CCCSD for treatment)
$294
7
AVR per
SSC plus
Rank from
Antioch (DDSD) _
08M9
! Rank from
connection,
AVR, If
lowest
Auencv
SSC
LowaM
if known
i known
with AVR
Crockett Sanitary . District
$533
! 23
$233
$788
22
Benicia
$5211.
22
WA
$521
20
Berkeley (EBMUD for treatment.
$496
21
WA
$496
19
Mountain View Sanitary District
$480
20
$53
$593
21
Dublin San Ramon SD
$470
19
$13
$483
18
Richmond
$469
18
WA
$469
17
U%, ermore
$465
17
WA
3 $465
16
Rodeo Sanitary District
$443
l6
WA
$443
15
Oakland (EBMUD for treatment)
$425
µ
15
WA
$425
14
No%eto
$422
14
WA
$422 _.
13
Vallejo
$417
13
WA
$417
12
Napa Sanitation District
$416
12
WA
$416
11
Pleasanton
WA
j $378.
8
St a SD (EBMU for treatment
PA D _ )
$345
10
$11
Concord (CCCSD for treatment)
$294
7
$294
4
Antioch (DDSD) _
$289
6
$49
##;
Bay_ Point (DDS D) -_ . .
_
$277
...
5
$110
$387
9
Fairfield
$271
_ _
4
WA
i $271
3
Union Sanitary District
i $243 i
3
T t v
-$243
2
Oro Lomo Sanitary District
$213
2
WA
$213
1
West County Wastewater District
$160
1
$33
$213
1 .
Future Actions by Staff
• Provide budget information for City of Concord
- Coordinate with their budgeting process.
• Complete District Budget
- Finalize 2008 -09 O &M & Cl Budgets.
• Proceed with District Rate Setting Process
- Set Sewer Service Charge.
- Establish new Rates and Charges.
- Adjust Capacity Fee.
- Present OPEB Trust information to Board of Directors
for consideration.
- Begin analysis of how to address UAAL.
- Present Reserve guidelines and protection measures for
consideration for Board of Director deliberation?
21
Recommendation of Staff
• Implement the $11 Sewer Service Charge
Increase
• Prepare and Adopt annual increase to Fees,
Rates & Charges
• Proceed with District Rate Setting Process
— Announce in Pipeline?
— Hold Public Hearing in June
• Approve District Budget for 2008 -09
- Adopt Budget and rates in June
• Consider Funding OPEB
— Separate presentation for Board
• Develop Options to fund UAAL
• Develop Reserve Guidelines
Central Contra Costa Sanitary District
Board Workshop
Comments and Questions
22