HomeMy WebLinkAbout09.a. Receive FY 2011-12 Operations & Maintenance Budget and Debt Service Fund BudgetCentral Contra Costa Sanitary District
9a.
BOARD OF DIRECTORS
POSITION PAPER
Board Meeting Date: May 19, 2011
subject: RECEIVE THE FISCAL YEAR 2011 -2012 OPERATIONS & MAINTENANCE
BUDGET; RECEIVE THE FISCAL YEAR 2011 -2012 DEBT SERVICE FUND
BUDGET
Submitted By: Inidadng Dept./Div.:
Debbie Ratcliff, Controller Administrative /Finance & Accounting
REVIEWED AND RECOMMENDED FOR BOARD ACTION.
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D. Ratcl' raves ✓ K. Im ames M. ifeiii,
General Maliager
ISSUE: The fiscal year (FY) 2011 -2012 Operations & Maintenance (O &M) Budget and
Debt Service Fund Budget are being submitted for review at the May 19, 2011 Board
Meeting, and are scheduled for approval and adoption at the June 2, 2011 Board
Meeting.
RECOMMENDATION: Review the FY 2011 -2012 O &M Budget and Debt Service Fund
Budget and provide District staff with comments and guidance leading to the public
hearing, approval, and adoption of the Budgets at the June 2, 2011 Board Meeting.
FINANCIAL IMPACTS: The FY 2011 -2012 O &M Budget was prepared using an
assumption that a $30 Sewer Service Charge (SSC) rate increase will be approved by
the Board. The SSC in FY 2011 -2012 is allocated as follows: O &M $302; Capital $39
per Residential Unit Equivalent (RUE). The FY 2011 -2012 SSC O &M allocation is
$2 /RUE higher than in FY 2010 -11 which produces $328,000 in additional O &M SSC
revenue; most of the assumed rate increase will fund capital projects.
The FY 2011 -2012 O &M Budget results in a decrease of $4.3 million to O &M reserves,
and total O &M reserves are projected to be $4.5 million at*the end of FY 2011 -2012.
This is approximately $2.2 million below the prudent reserve level; however, the capital
fund balance is adequate to meet cash flow needs in FY 2011 -2012 and the internal
SSC allocation will be adjusted in the FY 2012 -2013 budget process. The allocation of
the additional $28 to Capital will result in additional annual revenue of $4.6 million;
however, the FY 2011 -2012 Capital Budget still projects a drawdown of capital reserves
of $3.7 million.
Property tax is currently used for Debt Service and Capital. If the District were not to
receive any property tax, a SSC rate increase of $73 /RUE (21 %) would be needed.
ALTERNATIVES /CONSIDERATIONS: At the Board Workshop in March, different SSC
rate scenarios were considered that impact District revenues as well as the fiscal year-
end reserve balances. At that time, a rate increase of $30 /RUE was recommended by
N: IACCOUNTINGIGMTEMPIIBUDGET12011 -2012 BUDGE nBudget Review 08M 2011 -12 PP.DOC
Page 1 of 6
POSITION PAPER
Board Meeting Date: May 19, 2011
subject. RECEIVE THE FISCAL YEAR 2011 -2012 OPERATIONS & MAINTENANCE
BUDGET; RECEIVE THE FISCAL YEAR 2011 -2012 DEBT SERVICE FUND
BUDGET
staff. The Board may choose to not implement a FY 2011 -2012 rate increase, and will
need to direct staff where to make budget reductions. Finally, the Board may choose
an alternative that was not presented. The O &M and Capital draft budgets will be
revised, as necessary, to reflect Board action.
BACKGROUND: Staff has developed a 10 -year financial model for forecasting
revenues, expenses and fund balance. The model assists the District in setting and
projecting SSC rates. The model funds in the following order: Debt Service, O &M /Self-
Insurance and lastly, the Sewer Construction Fund. Staff made a presentation at the
March 3, 2011 Board Workshop recommending a $30 increase for FY 2011 -2012. In
April, 2011, the District ratepayers received a Proposition 218 Notice of Proposed
Increase in Annual SSC of up to $30 for FY 2011 -2012 for a total up to $341 per year
effective July 1, 2011, and up to an additional $30 increase for FY 2012 -2013, effective
July 1, 2012, for a total of up to $371 per year.
The FY 2011 -2012 proposed budget includes the allocation of $8.3 million from the
O &M Fund towards the unfunded liability associated with GASB 45 post - employment
benefits and current year retiree premiums. This amount is based on the recently
completed actuarial study by Bartell Associates. The $8.3 million includes an
approximate payment of $3.8 million for retiree medical, dental and life insurance
premiums annually and $4.5 million to be deposited in a GASB 45 PARS investment
trust to fund future retiree benefit costs. The amount increased by $1.3 million
compared to FY 2010 -2011. Two reasons account for the increase: the assumed
earnings rate was decreased from 8% in the previous study as of June 30, 2009, to
6.5% in the current evaluation as of July 1, 2010, and retiree medical premium
projected rate increases are higher in the near -term in the Bartell analysis.
The O &M portion of this position paper focuses on variances between projected FY
2010 -2011 expenses and the proposed FY 2011 -2012 Budget. The position paper also
notes any significant variances between the FY 2010 -2011 and FY 2011 -2012 Budgets.
Attachment I summarizes the Debt Service Fund Budget. Attachment II summarizes
the O &M revenues, expenses, and reserve balances for seven years - FY 2005 -2006
through FY 2011 -2012 (five years of actual expenses plus FY 2010 -2011 projected and
FY 2011 -2012 proposed budget numbers).
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POSITION PAPER
Board Meeting Date: May 19, 2011
Subject RECEIVE THE FISCAL YEAR 2011 -2012 OPERATIONS & MAINTENANCE
BUDGET; RECEIVE THE FISCAL YEAR 2011 -2012 DEBT SERVICE FUND
BUDGET
O &M Revenue: The following table compares Projected FY 2010 -2011 to Budget FY
2011 -2012 O &M Revenue:
Total District O &M Revenue for FY 2010 -2011 is projected to be $60.5 million
compared to the FY 2011 -2012 Budget amount of $62.2 million, resulting in an increase
of $1.7 million, or 2.8 %. This is due to:
• The O &M SSC allocation increases from $300 to $302; the SSC allocation to the
Sewer Construction Fund increases from $11 to $39 to help fund deferred and
needed capital improvements. The increased O &M allocation of $328,000 and
minimal anticipated new connections results in a small increase to O &M SSC
revenue of $343,600 compared to Projected FY 2010 -2011.
• Concord primarily shares a flow portion of Treatment Plant and Source Control
expenses and is charged administrative overhead and a finance charge. City of
Concord revenue is expected to be $1.3 million, or 15.1 %, more than Projected
FY 2010 -2011, mainly due to higher overall expenses in FY 2011 -2012
compared to expense savings in FY 2010 -2011.
O &M Expense: The following table below compares Projected FY 2010 -2011 to Budget -
FY 2011 -2012 O &M Expense:
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Projected
Budget
Increase /Decrease ( -)
FY 2010 -2011 '
FY 2011 -2012
Variance I
Variance %
Sewer Service Charge
$ 49,141,000
$ 49,484,600
343,600
0.7%
City of Concord
8,560,000
9,852,000
1,292,000
15.1%
All Other
2,823,007
2,862,105
39,098
1.4%
Total
$ 60,524,007
$ 62,198,705
1,674,698
2.8%
Total District O &M Revenue for FY 2010 -2011 is projected to be $60.5 million
compared to the FY 2011 -2012 Budget amount of $62.2 million, resulting in an increase
of $1.7 million, or 2.8 %. This is due to:
• The O &M SSC allocation increases from $300 to $302; the SSC allocation to the
Sewer Construction Fund increases from $11 to $39 to help fund deferred and
needed capital improvements. The increased O &M allocation of $328,000 and
minimal anticipated new connections results in a small increase to O &M SSC
revenue of $343,600 compared to Projected FY 2010 -2011.
• Concord primarily shares a flow portion of Treatment Plant and Source Control
expenses and is charged administrative overhead and a finance charge. City of
Concord revenue is expected to be $1.3 million, or 15.1 %, more than Projected
FY 2010 -2011, mainly due to higher overall expenses in FY 2011 -2012
compared to expense savings in FY 2010 -2011.
O &M Expense: The following table below compares Projected FY 2010 -2011 to Budget -
FY 2011 -2012 O &M Expense:
N: \ACCOUNTING \GMTEMPI \BUDGET\2011 -2012 BUDGET\Budget Review O&M 2011 -12 PP.DOC Page 3 of 6
POSITION PAPER
Board Meeting Date: May 19, 2011
subject. RECEIVE THE FISCAL YEAR 2011 -2012 OPERATIONS & MAINTENANCE
BUDGET; RECEIVE THE FISCAL YEAR 2011 -2012 DEBT SERVICE FUND
BUDGET
Total District O &M Expenses are projected to be $59.6 million in FY 2010 -2011
compared to a FY 2011 -2012 O &M budget of $66.5 million. This reflects a $7.0 million,
or 11.7 %, increase in expenses. Variances are discussed in detail below:
O &M Savings for FY 2010 -2011: Total FY 2010 -2011 expenses are projected to be
under - budget by $3.4 million due to staff vacancies and associated benefit cost savings
along with our ongoing commitment to achieve expense savings. This increases the
variance explanations when comparing Projected FY 2010 -2011 to Budget 2011 -2012.
O &M Salaries: District O &M salaries are projected to be $23.5 million in FY 2010 -2011
compared to a budget of $24.8 million in FY 2011 -2012 resulting in an increase of $1.3
million, or 5.4 %. This increase is mainly due to filling vacant positions, assumed 3%
cost -of living adjustments (COLA) and merit increases for newer or promoted
employees within their salary ranges, offset by a 4% salary vacancy factor reducing
expense by - $946,000 and one less position in the FY 2011 -2012 Staffing Plan.
N :\ACCOUNTING \GMTEMPI \BUDGET\2011 -2012 BUDGE RBudget Review O &M 2011 -12 PP.DOC Page 4 of 6
Projected
Budget
Increase /Decrease ( -)
FY 2010 -2011
FY 2011 -2012
Variance
Variance %
Salaries
$ 23,491,682
24,765,649
1,273,967
5.4%
Benefits & Cap O/H Credit
18,776,085
22,505,960
3,729,875
19.9%
Chemicals
1,597,000
1,771,000
174,000
10.9%
Utilities
4,429,039
4,542,600
113,561
2.6%
Repairs & Maintenance
3,099,372
3,528,761
429,389
13.9%
Hauling & Disposal
983,714
1,088,250
104,536
10.6%
Professional & Legal
469,660
540,660
71,000
15.1%
Outside Services
2,229,575
2,917,700
688,125
30.9%
Self- insurance
850,000
850,000
-
0.0%
Materials & Supplies
1;826,705
1,925,745
99,040
5.4%
All Other
1,816,505
2,104,335
287,830
15.8%
Total
$ 59,569,337
66,540,660
6,971,323
11.7%
Total District O &M Expenses are projected to be $59.6 million in FY 2010 -2011
compared to a FY 2011 -2012 O &M budget of $66.5 million. This reflects a $7.0 million,
or 11.7 %, increase in expenses. Variances are discussed in detail below:
O &M Savings for FY 2010 -2011: Total FY 2010 -2011 expenses are projected to be
under - budget by $3.4 million due to staff vacancies and associated benefit cost savings
along with our ongoing commitment to achieve expense savings. This increases the
variance explanations when comparing Projected FY 2010 -2011 to Budget 2011 -2012.
O &M Salaries: District O &M salaries are projected to be $23.5 million in FY 2010 -2011
compared to a budget of $24.8 million in FY 2011 -2012 resulting in an increase of $1.3
million, or 5.4 %. This increase is mainly due to filling vacant positions, assumed 3%
cost -of living adjustments (COLA) and merit increases for newer or promoted
employees within their salary ranges, offset by a 4% salary vacancy factor reducing
expense by - $946,000 and one less position in the FY 2011 -2012 Staffing Plan.
N :\ACCOUNTING \GMTEMPI \BUDGET\2011 -2012 BUDGE RBudget Review O &M 2011 -12 PP.DOC Page 4 of 6
POSITION PAPER
Board Meeting Date: May 19, 2011
subject. RECEIVE THE FISCAL YEAR 2011 -2012 OPERATIONS & MAINTENANCE
BUDGET; RECEIVE THE FISCAL YEAR 2011 -2012 DEBT SERVICE FUND
BUDGET
Benefits Including_ Capitalized Administrative Overhead Credit: District O &M benefits
including the capitalized administrative overhead credit for FY 2010 -2011, are projected
to be $18.8 million compared to a budget of $22.5 million in FY 2011 -2012 resulting in
an increase of $3.7 million, or 19.9 %. This is mainly due to the CCCERA rate increase
of 9.17% applied to salaries, resulting in a $3.1 million increase comparing Projected
FY 2010 -2011 to Budget FY 2011 -2012.
The March, 2011 Ten -Year Financial Plan used an estimate of $6.0 million for GASB 45
OPEB contributions in FY 2011 -2012, consisting of retiree healthcare premiums and
future contribution to the PARS trust. The FY 2010 -2011 required contribution is $7.0
million. The current amount in FY 2011 -2012 is $8.3 million based primarily on a lower
assumed interest earnings component 6.5% compared to the prior assumption of 8 %.
Please note that the OPEB contribution presented in the Total Salary, Benefits and
Capitalized Administrative Overhead Expense variance table in the O &M Budget
document just reflects the amount designated for future costs; the retiree premiums
currently being paid are included in the medical, dental and life Insurance benefit
accounts.
Benefit rate assumptions are provided in the following bulleted list:
• Kaiser — 16% assumed rate increase for active employees; 6.08% weighted
average retiree rate increase (Senior Advantage rates decreased by 1.13 %)
Rates are not yet final
• HealthNet — 7.99% rate increase for actives employees; 7.83% weighted
average retiree rate increase
• CCCERA — 9.17% rate increase (6.12% for CCCERA de- pooling and 3.05% for
normal costs and 5 -year smoothing of 2008 market losses)
• Delta Dental — No rate increase (10.7% rate increase from FY 2010 -2011 is still
in effect)
• Long -Term Disability (LTD) — 27% rate decrease due to new insurance provider
• Employee Assistance Program (EAP) — 0% rate increase
• Workers' Compensation — estimated 8% rate increase offset by confirmed
savings due to the experience modification factor moving from .90 to .73
• Life Insurance — 7.52% rate decrease due to new insurance provider
All Other O &M Expenses: The remaining O &M non -labor and benefit expenses total
$17.3 million in FY 2010 -2011 compared to $19.3 million in FY 2011 -2012 resulting in
an increase of $2.0 million or 11.4 %. Expense category variance explanations are
provided in the budget document at a District and Department level. The two largest
N :\ACCOUNTING \GMTEMPI \BUDGET\2011 -2012 BUDGEnBudget Review O &M 2011 -12 PP.DOC Page 5 of 6
POSITION PAPER
Board Meeting Date: May 19, 2011'
subject. RECEIVE THE FISCAL YEAR 2011 -2012 OPERATIONS & MAINTENANCE
BUDGET; RECEIVE THE FISCAL YEAR 2011 -2012 DEBT SERVICE FUND
BUDGET
expense category variances between Projected FY 2010 -2011 and Budgeted FY 2011-
2012 are noted below:
• Outside Services are $688,125 higher in FY 2011 -2012 than Projected FY 2010-
2011, mainly due to POD succession planning activities, including the update of
standard operating procedures, training program video, process control system
standardization, Suisun Bay Monitoring Program Support, operator shift
schedules review and annual source testing for compliance with new Section
129 Clean Air Act regulations.
Repairs and Maintenance expenses are $429,389 higher in Budgeted FY 2011-
2012 compared to Projected FY 2010 -2011. This is mainly due to an additional
centrifuge rotating assembly repair costing $125,000 and under spending in FY
2010 -2011 in this expense category ($395,000 less maintenance and expense
savings comparing FY 2010 -2011 Budget to FY 2010 -2011 Projected actual)
Any revisions to the FY 2011 -2012 O &M Budget determined at the May 19, 2011 Board
Meeting will be incorporated in the Budget submitted for approval at the June 2, 2011
Board Meeting, at which the following actions are scheduled for Board consideration:
• Conduct a public hearing to receive comments on the FY 2011 -2012 O &M
Budget, Self- Insurance Fund Budget, and Debt Service Fund Budget.
• Conduct a public hearing to receive comments on the SSC rates for FY 2011-
2012 and for the collection of the FY 2011 -2012 SSC on the County tax rolls.
• Approve and adopt the FY 2011 -2012 O &M Budget, Self- Insurance Fund
Budget, and Debt Service Fund Budget, and approve an ordinance which
establishes a SSC increase of $30 /RUE for a total SSC of $341 /RUE for FY
2011 -2012 and a $30 /RUE increase for FY 2012 -2013 for a total SSC of
$371 /RUE for FY 2012 -13.
RECOMMENDED BOARD ACTION: Review the FY 2011 -2012 O &M Budget and Debt
Service Fund Budget and provide District staff with comments and guidance leading to
the approval and adoption of the Budgets at the June 2, 2011 Board Meeting.
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CENTRAL CONTRA COSTA SANITARY DISTRICT
DEBT SERVICE FUND
FY 2011 -2012
Debt Service Revenue:
Attachment I
Sewer Service Charge $
Reserve Account Bond Interest Income (Including Premium) 217,630
Ad Valorem Tax (portion alllocated to Debt Service) 5,323,090
Total Debt Service Revenue $ 5,540,720
Debt Service Expense:
2009 Bond Interest Payment and Amortized Costs, less Tax Subsidy on BAB $ 1,888,601
Recycled Water Loan Interest Payment 30,773
Total Interest Payment and Amortization Costs $ 1,919,374
2009 Bond Principal Payment
Recycled Water Loan Principal Payment
Total Principal Payments
Total Debt Service Interest, Amortized Costs and Principal Payments
Fund Balance - Beginning of Year
Revenue over Expense
Transfer from /(to) O &M or Capital
Fund Balance - End of Year
$ 3,465,000
156,346
$ 3,621,346
$ 5,540,720
4/29/2011 8:39 AM N :\ACCOUNTING \GMTEMPI \BUDGET\2011 -2012 BUDGEnDebt Service Fund - Attachment 1.As
Attachment 11
CENTRAL CONTRA COSTA SANITARY DISTRICT
0 & M REVENUES, EXPENSES AND RESERVES
FISCAL YEARS 2005-2006 THROUGH 2011-2012
Notes: (1) Net Expenses include Operating and Maintenance expenses only and do not include any capital salaries or benefits.
(2) Actual Revenue through FY 2009-2010. Equivalent units multiplied by the capital component of the SSC rate in FY 2010-2011.
gmtemp 2011-12 Affachmentli.xis
FY 2005-2006
FY 2006-2007
FY 2007-2008
FY 2008-2009
FY 2009-2010
FY 2010-2011
FY2010-2011
FY 2011-2012
Actual
Actual
— Actual
Actual
Actual
Projected
Budget
Budget
Sewer Service Charge
37,781,774
35,057,668
40,207,157
43,087,454
48,692,520
49,141,000
50,143,000
49,484,600
City of Concord
7,383,011
9,043,215
8,206,860
8,755,857
8,664,668
8,560,000
9,100,000
9,852,000
Other
3,262,162
3,862,690
3,722,807
3,414,478
2,899,485
2,823,007
3,083,300
Total Revenues
48,426,947
47,963,573
52,136,824
55,257,789
60,256,673
60,524,007
62,326,300
_.2,862,105
62,198,705
Administrative
10,124,556
14,742,224
15,828,966
16,304,462
16,468,495
18,635,406
19,603,260
20,931,190
Engineering
6,405,545
5,472-1707
6,332,834
6,834,323
6,898,357
6,765,061
7,350,189
7,792,366
Collection System Operations
6,981,253
8,033,498
8,219,751
9,064,672
8,949,125
8,051,535
9,786,544
9,926,740
Plant Operations
19,858,259
21,438,368
22,054,206
22,927,971
21,467,827
22,1 i 83,706
23,169,314
24,752,505
Pumping Stations
2,160,534
2,299,234
2,685,703
2,752,950
2,773,800
3,033,629
3,056,414
3,137,859
Total Net Expenses (1)
45,530,147
51,986,031
55,121,466
57,884,378
56,557,604
59,569,337
62,965,721
66,540,660
Revenues Over (Under) Expenses
2,896,800
(4,022,458)
(2,984,642)
(2,626,589)
3,699,069
954,670
(639,421)
(4,341,955)
Fund Balance - Beginning of Year
10,893,405
13,790,205
9,767,747
6,783,105
4,156,516
7,855,585
8,810,255
Revenues Over (Under) Expenses
2,896,800
(4,022,458)
(2,984,642)
(2,626,589)
3,699,069
954,670
(4,34 955)
Fund Balance - End of Year
13,790,205
9,767,747
_6,783,105
4,156,516
7,855,585
8,810,255
4,468,300
Sewer Service Charge Rate - O&M
234
213
242
260
292
300
302
Sewer Service Charge Rate - Capital/Debt
46
76
58
51
19
11
39
Sewer Service Equivalent Units
161,461
164,590
166,145
165,721
166,755
163,803
163,856
(2) Informational - Sewer Construction Fund SSC
7,427,941
12,510,403
9,634,364
8,452,563
3,164,091
1,801,837
6,534,000
Notes: (1) Net Expenses include Operating and Maintenance expenses only and do not include any capital salaries or benefits.
(2) Actual Revenue through FY 2009-2010. Equivalent units multiplied by the capital component of the SSC rate in FY 2010-2011.
gmtemp 2011-12 Affachmentli.xis