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HomeMy WebLinkAbout08.a. Receive the 2010-2011 Operations and Maintenance Budget Review for the six months ended 12-31-10 and projections for the full fiscal yearCentral Contra Costa Sanitary District ' BOARD OF DIRECTORS POSITION PAPER Board Meeting Date: February 24, 2011 Subject: RECEIVE THE 2010 -2011 OPERATIONS AND MAINTENANCE BUDGET REVIEW FOR THE SIX MONTHS ENDED DECEMBER 31, 2010 Submitted By: Debbie Ratcliff, Controller Initiating Dept./Div.: Administrative Department REVIEWED AND RECOMMENDED FOR BOARD A CTION: D. Rath , M g raves Jam M. K ly, General ager ISSUE: A report of the results of a comparative review of actual and budgeted Operations and Maintenance (O &M) revenues and expenses for the first six months of the 201 0 -2011 fiscal year as well as full year projections are provided in this Position Paper. In addition, any significant variances from budget for the first six months and any significant full year projected variances are discussed. RECOMMENDATION: Receive the 2010 -2011 operations and Maintenance Budget review for the six months ended December 31, 2010 and full fiscal year projections. FINANCIAL IMPACTS: Six -Month Review: For the first six months ended December 31, 2010, total O &M revenues are $27,819,000 compared to a budget of $28,039,902 for a negative variance of $720,838 or -2.5 %. Total O &M expenses for the first six months are $30,720,955 compared to a budget of $33,324,077 for a positive variance of $2,603,122 or 7.8 %. The six -month status reflects the financial results at a certain point in time, as of December 31, 2010, and looks favorable. Annualized Projections: The projected O &M revenues for the full year are $61,091,500 compared to a budget of $62,326,300 for a negative variance of $1,234,800 or - 1.98 %. Total projected O &M expenses for the full year are $60,429,683 compared to a budget of $62,965,721 for a favorable variance of $2,536,038 or 4.03 %. This favorable variance is due to savings of $1,337,293 for labor and benefits, $148,000 for chemicals, $157,200 for utilities, $400,000 for repairs & 'maintenance, $200,000 for outside services, $132,308 for materials & supplies and $180,422 for other expenses. ALTERNATIVESICONSIDERATIONS: None 8.a. NAADM[NTINANCE16mopp 2011.D0C Page 1 of 3 POSITION PAPER Board Meeting Date: February 24, 2011 Subject. RECEIVE THE 2010 -2011 OPERATIONS AND MAINTENANCE BUDGET REVIEW FOR THE SIX MONTHS ENDED DECEMBER 31, 2010 BACKGROUND: Six -Month Review: The table on Attachment A compares actual O &M revenue and expense for the first six months of the fiscal year to the six -month budget. Significant variance explanations are included on the table. Annualized Proiections: Attachment B compares full year O &M projections to budget. Anticipated significant projected variances from the annual 201 0 -2011 O &M Revenue and Expense budget are listed below: Revenue Total O &M Revenue is projected to be $1,234,800 or 1.98% lower than budgeted largely due to lower commercial sewer service charge revenue than expected. Commercial SSC is lower due to the vacancies caused by the slow economy and the new drought rate system that encouraged water conservation. A negative variance is also projected from less O &M expenses in the Plant which reduces the City of Concord revenue, and lower interest income revenue as a result of a continued decline in interest rates. Expense Salaries and Benefits: Salaries and Wages expense is projected to be $000,000 under budget due to vacancies in all the departments. Some of the higher -paid open positions are under - filled, reducing expense. Employee benefits expense is expected to be under budget by $737 due to the benefit impact of vacant positions and a $523,000 savings on the annual OPEB payment based on the latest 2009 actuarial study. Chemicals: Chemicals expense is projected to be $148,000 under budget. A mild summer and early rains have reduced the use of chemicals for the pumping stations. Additional savings are from an anticipated price increase for hypochlorite which is now not expected to occur during this fiscal year, and from less than expected use of hydrogen peroxide. Utilities: Utilities expense is projected to be $157,200 under budget due to a lower than anticipated prices of natural and landfill gas. More electricity will be bought from PG &E in 2011 to reduce the District's green house gas emissions from the cogeneration facility. This will keep our green house gas emissions under 25,000 metric tons CO2eq, the threshold for having to purchase offsets. NAADMINTINANCE15mopp 2011.D0C page 2 of 3 POSITION PAPER Board Meeting Date: February 24, 2011 subject RECEIVE THE 2010 -2011 OPERATIONS AND MAINTENANCE BUDGET REVIEW FOR THE SIX MONTHS ENDED DECEMBER 31, 2010 Repairs & Maintenance: Repairs & Maintenance expense is projected to be $400,000 lower than budgeted due to the delay of installing three particulate matter filters on three diesel trucks, a postponement of a chemical treatment of sewer pipes, the removal of CSO phones and the associated maintenance cost, and less safety equipment repair expenses needed than was anticipated during the budgeting process. Outside Services: outside Services expense is projected to be $200,000 under budget as a result of a postponement of an expense for a warehouse consulting recruitment and less outside consulting services needed than was anticipated. Materials & Supplies: Materials & Supplies expense is projected to be $132,308 under budget due to fewer supplies ordered than was budgeted as a part of a cost - cutting effort. Other Expenses: other Expenses are projected to be $180,422 under budget. In a District -wide effort to save money, technical training, conference, and meetings expense is reduced by postponing some of the budgeted attendance or replacing them with more local and discounted group training alternatives. Less election expense than anticipated is expected to result in a $75,000 savings. The Revenue over Expense budgeted for the 2010 -2011 fiscal year yielded a decrease to the O &M Fund balance of $639,421. Although revenue is projected to be $'1,234,800 lower than budget, a reduction of $2,536,038 in expenses will result in a full year projection that the O &M Fund balance will actually increase by $661,817 for a positive variance of $1,301 ,238. RECOMMENDED BOARD ACTION: Receive the 2010 -2011 operations and Maintenance Budget Review for the six months ended December 31, 2010 and projections for the full fiscal year. 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