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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 ® ® ©® 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