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HomeMy WebLinkAbout08.b. 10-Year Financial ProjectionsCentral Contra Costa Sanitary District Board Financial Planning and Policy Workshop F-I �' �' February 16, 2012 Central Con#ra Cost Sanitary District EXECUTIVE SUMMARY SEWER SERVICE CHARGE COMPARISON FINANCIAL REPORT • Introduction • Report Terms /Acronyms • Staff Recommendation • Methodology and Background • Development of 2012 Scenarios • 2012 Financial Planning Scenarios • Conclusion APPENDIX I White Papers- Backup Information APPENDIX II Capital Planning Memo Capital Workshop Presentation GLOSSARY Page 1 Page 2 Page 3 Page 4 Page 5 Pages 6 - 7 Pages 8 - 9 Pages 10 - 46 Page 47 Pages 48 - 61 Pages 1 14 Pages 1 - 30 Pages A - F Note: Pages for Executive Summary through White Papers run from pages 1 to 61 consecutively. Appendix II and the Glossary have their own page numbering/lettering. EXECUTIVE SUMMARY The District has always prided itself on providing a high level of service for reasonable rates. When the severity of the economic downturn became apparent, the District Board of Directors, after thoughtful debate, elected not to raise sewer service charge rates for 2 years in order to provide some financial relief to our customers. Staff responded to the Board's actions by implementing cost - saving measures which resulted in a savings in operating and maintenance costs of over $2 million in 2009 -10 and $2.5 million projected for 2010 -11. Because the economic downturn resulted in significant bid savings on capital projects, staff recommended, and the Board agreed, that the Capital Program should continue and needed projects should be built. In order to fund these projects without raising rates for 2 years, $30 million in bonds were sold. Last year at this time the Board was considering a range of funding scenarios. It became evident that a two year Sewer Service Charge (SSC) increase of significance was needed after two years of not raising rates. The Board adopted the staff recommended scenario of a two year $30 per year SSC increase. At that time of adoption, in June of 2011, it was thought that increases of this magnitude going forward, ie. about $30 per year, would be adequate to meet the District's obligations for both operating and maintenance costs and capital expenditures over the 10 year duration of the financial plan. Since that time, the unfunded liabilities related to funding employee and retiree future healthcare and pensions has increased substantially. This increase is putting more pressure on rates and resulting in projected increases greater than what was projected last year. Because the SSC increase for 2012 -13 is already in place, there is no need for Board action this budget cycle. However, staff thought it important to provide the Board with data indicating the impact to future rate projections of these increased costs. A Proposition 218 notice was sent to our ratepayers in March 2011 stating the need for a 2 -year increase in sewer service charge (SSC) of $30 per year. This increase was adopted in June of 2011. Therefore, a rate increase of $30 will automatically go into effect on July 1, 2012. There is no need for additional Board action regarding 2012 -13 SSC rates. SEWER SERVICE CHARGE COMPARISON On June 2, 2011, after hearing public comments, the Board voted to adopt a 2 -year $30 per year rate increase. When the second year of the increase goes into effect on July 1, 2012, the District will be 6t" from the bottom of 27 San Francisco Bay Area agencies surveyed without property tax included and 9th from the bottom with property tax included. This ranking is based on the data available to date. Most jurisdictions have not released their rate increase information for 2012 -13, so this ranking will improve when all 2012 -13 rate increases for surveyed agencies are known. After accounting for the two $30 rate increases and with limited 2012 -13 data, the District's position remains in the bottom third of those surveyed, even when property tax revenues are included. See table below. Sewer Service Charge Rates for Bay Area Agencies Revised February 7, 2012 AVRI'' per Rank from Agency 12/13 SSd,) Rank from lowest connection, if known SSC plus AVR lowest (with AVR) Comments Santa Rosa $1,099 23 WA $1099 23 Effective 1/1/12; increasing to $1132 on 1/1113 Petaluma $953 22 WA $953 22 Effective 1/1/12. Rodeo Sanitary District Crockett Sanitary District $685 $632 21 20 $57 $227 $742 $859 20 21 Effective Aug 2011 • no increase planned Effective 7/1/11. Ironhouse Sanitary District $592 19 $11 $603 19 Sells cattle and hay to offset rates Oakland (EBMUD for treatment) $572 18 WA $572 18 Richmond $547 17 WA $547 17 Planning 2 annual increases of 2.5% each starting 7/1/13 Considering rate increase for 2012/13. Annual CPI increases approved for future years. nrentwoola $547 17 WA $547 17 Berkeley (EBMUD for treatment) $496 16 WA $496 14 Benicia 5496 16 WA $496 14 Rate increase (amount not known) to be effective 711112. Mountain View Sanitary District $491 15 $27 $518 16 Considering CPI increase for 7/1/12 Livermore $489 14 WA $489 12 2011 -12 Mean Rate of Agencies Surveyed $484 Vallejo Novato Napa Sanitation District $495 $464 $435 13 12 11 WA $44 WA $495 $508 $435 13 15 8 Planning 2 annual increases of 2.5% each starting 7/1/13 Considering rate increase for 2012/13. Annual CPI increases approved for future years. Pittsburg (DDSD) $431 10 $27 $458 10 Pleasanton $412 9 WA $412 6 Stage SD (EBMUD for treatment) _ _ Bay Point DDSD 5395 S389 8 7 $21 $80 $416 $469 7 11 Includes S34 colrn system replacemt/rehab fee collected on tax rolls. CCCSD 2012.13 Rate - effective 7/1/12 $371 6 $73 $444 9 Approved by Board on 6 /2/11. Antioch (DDSD) Dublin San Ramon Services D- Istria $353 $345 5 4 $27 $12 $380 $357 5 4 Annual CPI increases approved for future years Fairfield (FSSD) S343 3 WA $343 3 (CCCSD 2011 -12 Rate - effective 711/11 5341 $73 $414 Approved by Board on 6/2/11 Concord (CCCSD for treatment) $324 2 WA $324 2 Pays for HHW Service from garbage franchise fees Union Sanitary District $304 1 WA $304 1 West County Wastewater Disttdct $304 1 $20 $324 2 Annual increases to $330 $353,$377 approved Oro Loma Sanitary District $188 lowest WA Rates in effect on July 1, 2012 unless noted. OIAnnual SSC per Residential Unit Equivalent, or RUE. RtAVR =ad valorem (property tax) revenue: data from CCC Auditor- Controller's Report on 2010.11 Property $188 lowest Five year (30/0) increase adopted. Subsidized by solid waste charges. Data from prior years: current year data not available. Tax Administration Charges. Where AVR is not known, adjusted rate includes only SSC. Feb 22,2011: CCCSD AVR is residential portion only. 573 was calculated by Colette for CCCSD. Other agencies' AVR was adjusted by the same ratio as CCCSD residential AVR to total AVR, or 73190. FINANCIAL REPORT INTRODUCTION This document contains the 2012 -13 financial projections for Board information only. The 2012 -13 rate increase of $30 is self implementing on July 1, 2012. The financial report is broken into the following sections which provide the background information for the 2012 Board Financial Workshop: Report Terms /Acronyms • Staff Recommendation • Methodology and Background Development of 2012 Scenarios • 2012 Financial Planning Scenarios • Conclusion A Note About Financial Model Projections The 10 -year plan model is a forecasting tool. Many numbers in this report are projections based on the best, most current information available when the projections were made. Staff refines the numbers as new information becomes available; information presented at the February 16th Board Workshop may contain more current information. 3- REPORT TERMS /ACRONYMS The following terms are used throughout the report. They are listed below with their related acronyms so that you can refer to this table for definition purposes. The acronyms are initially spelled out and then thereafter, utilized throughout the report. AB 32 (Assembly Bill 32— California's Greenhouse Gas Law) ARC (Annual Required Contribution) AVR (Ad Valorem- Property Tax — Revenue) CCC (Contra Costa County) CCCERA (Contra Costa County Employees' Retirement Association) CIB (Capital Improvement Budget) CIP (Capital Improvement Program) CPI (Consumer Price Index) DEBT (consists of Bond Debt and the State Recycled Water Loan) GASB (Governmental Accounting Standards Board) GASB- 45 /OPEB (Governmental Accounting Standards -45 /Other Post - Employment Benefits) HHWCF (Household Hazardous Waste Collection Facility) LAIF (Local Agency Investment Fund) NPDES (National Pollutant Discharge Elimination System) O &M (Operations & Maintenance) OPEB (Other Post - Employment Benefits) RUE (Residential Unit Equivalent) RWQCB (San Francisco Bay Regional Water Quality Control Board) SIR (Self- Insured Retention) SSC (Sewer Service Charge) SWRCB (State Water Resources Control Board) UAAL (Unfunded Actuarial Accrued Liability) Important Note on District Terms Used in Report: The term Funds Required is used by the District to define the minimum amount of cash and investments the District must have on hand on June 30 "' to meet cash flow needs for operating and capital expenses, and the term Funds Available is used to define the amount of cash and investments that is actually on hand on June 30't' 4- Staff Recommendation Make no change to the self implementing $30 rate increase to take effect July 1, 2012 In addition, staff recommends that we continue with a multi - pronged strategy to financial planning: • Review and adjust our other fees annually to maintain full cost recovery. • Continue to optimize expenses by improving processes and efficiency, implementing new ideas, making expense reductions, scrutinizing the need to fill vacated positions and implementing a succession plan. • Use the continued favorable bid climate to implement needed capital projects at a reduced cost; continue Board workshops to manage and plan capital expenditures. • Use a pay -as- you -go approach for renewal and replacement projects. Accumulate funds for a potential $70 million addition of nitrification facilities to remove ammonia and a $20 million effort to remediate soils in the area where these new facilities would be located. • Draw down reserves when appropriate, but also consider the impact of unfunded liabilities, District cash flow needs, and future regulatory requirements. • Make payments on unfunded accrued liabilities, as revenues permit, to reduce interest and total costs. METHODOLOGY AND BACKGROUND The rate analysis uses a 10 -year cash flow model to develop rate guidance. The model calculates future rates needed to maintain adequate Funds Available based on projections from current information. As such, the model assumes the minimum amount of funds needed to meet cash flow needs. Current year budget figures are analyzed and updated to project future years for all revenue and expense categories. Bond and total debt, the O &M budget (including the District's Self- Insurance Fund or SIR), and the CIB are then estimated for future years based on department expense projections and the long -term CIP. Projections are also developed for revenue categories including capacity fees, SSC, property tax, interest income, City of Concord reimbursements, etc. The model also assumes: • The District will not short -term borrow to meet cash flow needs. To not borrow, the District must meet its Funds Required by having the Funds Available on hand. In the 10 -year planning and rate - setting process, this is the amount held in cash and investments that is needed at June 30th of any fiscal year to meet cash flow needs through mid - December, when the first SSC and CCC property tax payments are received. These funds are needed to pay bills from mid -April through mid - December while we wait for SSC and property tax to be deposited. • Funds Required changes from year to year based on annual expenditure projections. In years where large capital projects are under construction, Funds Required are higher to enable making payments to the contractor for these projects without short term borrowing. Based on experience and bond requirements, Funds Required is determined by calculating 30 % -32% of the next year's O &M and CIB, plus 100% of Annual Debt Service. SIR reserves and accumulated GASB- 45 /OPEB funds are excluded from Funds Available. • The financial model is run such that Funds Available are approximately equal to Funds Required at a targeted year in the future. Usually that year is year ten of the plan. This year the targeted year is approximately year 15, outside the 10 -year window, to allow for funding some anticipated capital projects that will be needed in the 11 -15 year range of the plan. • The Model assumes the District fully funds its annual obligation of its four major liabilities. In all scenarios, additional payments to pay down our CCCERA UAAL are incorporated. While the District has historically maintained a philosophy of pay -as- you -go and modest annual SSC increases, the rate increases have varied significantly from year to year. In fact, for a 6 -year period from 1994 -95 to 1999 -2000, District rates were maintained at a level of $188 per year. During this time, there was an emphasis on reducing operating and maintenance expenses. Additionally, and more significant to our current discussion, the Capital Program was reduced dramatically in order to reduce overall District expenditures and the Sewer Construction Fund Balance was depleted. A change in District management occurred in 1999 and an increased focus on enforcement by regulatory agencies at about the same time made it apparent that significant increases in the SSC were necessary in order to maintain service levels and rebuild the capital improvement program. 6- Over the 4 -year period from 2000 -01 to 2003 -04, the rates were increased from $188 to $272, a 45% increase, to make up for the lost ground from the years when rates were not increased. Then followed a period of time of moderate increases from 2004 -05 to 2008 -09 when rates rose from $272 to $311, a 14% increase. Finally, a 2 -year period in 2009 -10 and 2010 -11 where the Board felt that, in recognition of the economy and the impact to our rate payers, rates should not be increased. The rate increases were avoided by implementing O &M savings goals, and depleting the Sewer Construction Fund Balance. In addition, $30 million in bonds were sold to allow needed capital projects to move forward and take advantage of the aggressive bidding climate which significantly reduced project construction costs from engineering estimates. In June of 2011, the Board voted to implement a two year $30 per year increase. The table and chart that fnilnw Shnw tha hictnry of nl Ir CC(' rata in�roocnc fe— 1 nnn ni IG avcl ayc I oB5 I I IW Caaa I I U 1 1 1 I UzJ I -UZ if IFUU(J. n ZU I I - 1 Z IS Z�l U.bb per year or 4. 77% per year. SSC Rates Components $400 $350 $300 $250 - -- - - — $200 $150 $100 $50 O&M Capital Total -7- Annual Sewer Service Charge Fiscal Year O &M Capital Total 1990 -1991 $ 136 $ S 136 1991 -1992 $ 151 S S 151- 1992 -1993 S 160 S 5 $ 165 1993 -1994 $ 160 $ 25 S 185 1994 -1995 S 160 S 28 $ 188 1995 -1996 S 157 S 31 S 188 1996 -1997 $ 157 $ 31 S 188 1997 -1998 $ 157 $ 31 S 188 1998 -1999 $ 157 S 31 S 18T- 1999-2000 $ 157 S 31 S 188 2000 -2001 S 185 $ 15 $ 200 2001 -2002 S 204 S 20 $ 224 2002 -2003 S 207 $ 41 S 248 2003 -2004 $ 218 S 54 $ 272 2004 -2005 $ 204 S 76 S 280 2005 -2006 $ 234 $ 46 S 280 2006 -2007 $ 213 $ 76 $ 289 2007 -2008 $ 242 $ 58 $ 300 2008 -2009 S 260 S 51 $ 311 2009 -2010 $ 292 $ 19 $ 311 2010 -2011 $ 300 S 11 $ 311 2011-2012 $ 302 S 39 S 341 2012 -2013 S 344 $ 27 1 $ 371 IG avcl ayc I oB5 I I IW Caaa I I U 1 1 1 I UzJ I -UZ if IFUU(J. n ZU I I - 1 Z IS Z�l U.bb per year or 4. 77% per year. SSC Rates Components $400 $350 $300 $250 - -- - - — $200 $150 $100 $50 O&M Capital Total -7- DEVELOPMENT OF 2012 SCENARIOS Main Drivers Staff performs research prior to the 10 -year plan process to determine the assumptions that will be used in the planning scenarios. Based on the drivers discussed below, a table of assumptions is developed that forms the basis of the financial models. The assumptions used are provided in detail with each of the final workshop scenarios presented later in this report. A detailed description of the Capital Program expenditure needs was contained in information provided to the Board in memo and presentation format in December 2011. These materials are attached in Appendix II for your review. The main financial drivers are: • Capital investment in infrastructure for renewal and replacement as well as the capital and O &M cost of meeting new regulatory requirements, • Real estate downturn and revenue reductions in SSC, Interest Income, Property Tax, Developer Permit and Connection Fees, • CCCERA pension cost increases due to depooling and 5 -year smoothing of stock market losses from prior years, • Health care cost increases, which are higher this year mainly due to national healthcare reform and compliance, and • Significant unfunded accrued liabilities for which payment should be incorporated in the 10- year plan. Significant Unfunded Liabilities The District has 4 significant accumulated unfunded liabilities that are discussed in this section and also in a White Paper in Appendix I. They are: • Accrued Compensated Absence — Terminal Pay (vacation and sick leave accrued by employees) • OPEB • CCCERA UAAL • Outstanding Total Debt Continued prudent management of these significant liabilities is necessary. While we have a funding plan in place, we expect significant fluctuations of the CCCERA and OPEB amounts. The scenarios presented examine several different approaches to paying down these unfunded liabilities. The model assumes the District fully funds the prospective annual obligation of each of these liabilities. The table and graph that follows shows the amount of each of our significant liabilities for the past 5 years and then projects these liabilities into the future. The CCCERA liabilities do not reflect the reduced benefits for employees hired after January 1, 2011. r- Central Contra Costa Sanitary District Total Unfunded Liabilities Gi dnm "Al, nrninnfinnn in ilnlinn 6 Source - Audited Financials and projections based on internal workpapers <2> Source - Audited Financials and 71112010 Bartell Actuarial report; projections assume no change in benefit structure 6 Source - CCCERA trough 2012.13; note that there is a2-year lag i.e. the $99.8 million in 2012.13 is as of 12131110 and was used in setting rates for 2012.13. The $122.5 million in the 2013.14 column is an estimate from John Bartell and is as of 1231111 forte 2013.14 rate - seating process. Market retums and the 5 -year smoothing can impact this amount. <4> Source -CAFR Debt Stalistics and draft 10-year plan model <5> Source - Audited Financials and draft 14year plan model plus &I cash balance for projections. $300,00000 - $250,000,000 $200.000000 $150,000,000 $100.000,000 $50,000,000 20054 2006V 20074 2008-09 200910 2010.11 2011.12 2012.13 2013.14 Total Unf urded tiatiiies Cash 6 h -9- Source 2005.06 2006.07 2007.08 2008.09 2009.10 2010.11 . -.-'- - -. x-,. 2011.12 ..... ._.111.,..1.,, 2012.13 2013.14 Accrued Compensated Absence <•> S 5,199,818 5,312,645 6,102.851 6.123,647 5.124,684 5.132,067 4,500,000 4,000,000 4.000,000 GASB 45 OPEB liability <, NIA 68,447,956 68,447,956 68,769,305 68,769,305 80,933.000 11,591,000 75,000,000 73,000,000 CCCERA Unfunded Liability <3> S 30,379,000 36,393,000 40,477,000 43,021,000 36,483,000 39,779,000 11,018,235 1 99,841,380 122,500,000 Outstanding Debt <:> $ 33,792,855 31,520,340 29,169.250 26,724,491 55,460,968 51,848,583 48.227,237 44,461,826 40,577.244 Total Unfunded Liabilities S 69,371,673 141,673,941 144,197,057 144.638,443 166,437,957 177,692,650 201,336,472 223,303,206 240,077,244 Cash & Investments S 68,185,730 35.057,668 40207,157 54,979.971 60,800,173 63,074,343 58,500,000 42,700,000 1 4210.000 Ratio • Liabilities to Cash & Investments 1.02 4.04 3.59 2.63 2.74 2.82 3.44 5. 5,61 6 Source - Audited Financials and projections based on internal workpapers <2> Source - Audited Financials and 71112010 Bartell Actuarial report; projections assume no change in benefit structure 6 Source - CCCERA trough 2012.13; note that there is a2-year lag i.e. the $99.8 million in 2012.13 is as of 12131110 and was used in setting rates for 2012.13. The $122.5 million in the 2013.14 column is an estimate from John Bartell and is as of 1231111 forte 2013.14 rate - seating process. Market retums and the 5 -year smoothing can impact this amount. <4> Source -CAFR Debt Stalistics and draft 10-year plan model <5> Source - Audited Financials and draft 14year plan model plus &I cash balance for projections. $300,00000 - $250,000,000 $200.000000 $150,000,000 $100.000,000 $50,000,000 20054 2006V 20074 2008-09 200910 2010.11 2011.12 2012.13 2013.14 Total Unf urded tiatiiies Cash 6 h -9- 2012 FINANCIAL PLANNING SCENARIOS Staff has developed five scenarios for the Boards information. Scenarios 1 and 2 are those presented at the January 30, 2012 Board Budget and Finance Committee meeting. The following changes were made in subsequent Scenarios 3, 4 and 5 based on input received at the Board Budget and Finance Committee meeting on January 30, 2012: • Staff assumed 600 new connections annually beginning in 2013 -14 to anticipate that commercial business would begin to grow. The Board Budget & Finance Committee suggested to hold flat for 2 more years and the 600 additional connections per year now start in 2015 -16. This reduced the number of connections in the current model by 1,200 connections. • Staff assumed 900 new connections annually in 2012 -13 and 1,000 new connections beginning in 2013 -14 forward. The Board Budget & Finance Committee suggested reducing the number of connections to 800 connections in 2012 -13 through 2014 -15, and then returning to 1,000 new connections beginning in 2015 -16 forward. • Staff assumed property tax growth will stay flat through 2011 -12 and then will slowly escalate upwards from 1% - 3% beginning in 2013 -14. The Board Budget & Finance Committee suggested to hold property tax flat for 2 more years and the property tax assumptions now start escalating in-2015-16 ramping up from 1% to 3% /year. All three of these assumptions are based on a continued slower economic recovery for the next 2- 3 years which lowers our revenue calculations. Scenario 1 is the staff recommended scenario from 2011 which was the basis of the two year $30 per year rate increase. It is presented for comparison purposes to the current year scenarios. Scenario 2 is the preliminary scenario presented to the Budget and Finance Committee in late January. Scenario 3 incorporates the B &F Committee recommendation to slow down the rate of growth in housing and property tax. Both Scenarios 2 and 3 assumed consistent rate increases across the ten year plan and a $75 million pay down in CCCERA unfunded liabilities. Scenario 4 demonstrates the benefits of having higher rate increases in the first two years of the plan and includes the $75 million pay down in CCCERA unfunded liabilities. Scenario 5 demonstrates the rates needed to completely pay the $122.5 million total CCCERA unfunded liability. The following table summarizes changes in the 5 scenarios: Assumption Scenario 1- Prior Scenario 2 - 2012 Scenario 3 & 4 - 2012 Scenario 5 - 2012 Baseline Year 2011 Model Preliminary Draft for Baseline Models + Pay -off CCCERA UAAL 1/30/12 Corn Mtg. Model Capital Project Total capital Total capital expenditures Same as Scenario 2. Same as Scenario 2. Funds Spending expenditures of of $373.1 million Funds Available are Available are ramped up in $386.8 million in the included in the 10 -Year ramped up in 2021 -22 2021 -22 anticipating larger 10 -year period. Plan. This is $13.7 anticipating larger capital capital projects shifted to million less than prior projects shifted to years years 11 -15 that are not year due to costs for new 11 -15 that are not shown shown in the model. solids treatment were in the model. shifted to future years outside of the 10 -year window. CCCERA UAAL was $71 UAAL estimated increase Same as Scenario 2 Same as Scenario 2 except million for 2011 -12 to $122.5 million for the that the model assumes the rate setting and grew 2013 -14 rate - setting - total UAAL of $122.5 to $100 million for annual additional amount million is paid off (plus 2012 -13 rate setting. paid over 18 future years interest on the unpaid $75 million allocated is approximately $1.9 balance) by 2021 -22. Total to pay down UAAL. million per year. Total CCCERA cost over 10 years Total cost in the 10- CCCERA cost over 10 is $306.7 million, $61.0 year period was years is $245.7 million, or million more than Baseline $220.9 million. $24.8 million more than and $85.8 million more than in last ear's model. in last ear's model. GASB $57.3 million in the $83.0 million in the 10- Same as Scenario 2. Same as Scenario 2. 45 /OPEB 10 -year period. year period, and $25.7 million more than in 2011. Total Employee 2011 current rate 2012 current rate increase 2012 current rate Current rate increase Benefits increase assumptions assumptions used - total increase assumptions assumptions used - total (Including used - total employee benefits in the used - total employee employee benefits in the 10- CCCERA and employee benefits in 10 -year period = $386.2 benefits in the 10 -year year period = $460.2 million GASB 45) the 10 -year period = million or $16.4 million period = $401.2 million or $59.0 million higher than $369.8 million. higher than last year. or $31.4 million higher Baseline or $90.4 million than last year. higher than the 2011 Model. Total O &M Total O &M Total O &M expenses in Total O &M expenses in Total O &M expenses in the Expenses expenses were the 10 -year period are the 10 -year period are 10 -year period are $915.6 (Including projected to be $863.6 million and are $878.6 million and are million and are $37.0 million CCCERA $846.7 million in the $16.9 million higher than $31.9 million higher than higher than Baseline or and GASB 45) 10 -year period. in 2011. Increases in in 2011. Increases in $68.9 million higher CCCERA and GASB 45 CCCERA and GASB 45 compared to last year's costs are offset by lower costs are offset by lower model. Increases in projections in other line projections in other line CCCERA and GASB 45 items. items. costs are offset by lower projections in other line items. SSC RUE's Total RUE was Total RUE significantly Based on Board Same as Baseline. 169,537 in 2011 -12 less due to lower number Committee input, the to 178,437 in 2020- of connections, lower total RUE ranges from 21. Commercial water usage and number 163,658 in 2011 -12 to SSC revenue was of commercial accounts. 177,258 in 2021 -22. anticipated to Total RUE ranges from This is 1,700 total recover in 2 years 163,658 in 2011 -12 to connections less than which was overly 178,958 in 2021 - 22. Scenario 2, the optimistic. preliminary draft. SSC Capital Assumed Capital Capital Component Same as Scenario 2. Capital Component reduced Component Component increase reduced from $39 to $27 from $39 to $21 in 2012 -13 from $39 to $49 in in 2012 -13 to to accommodate additional 2012 -13. accommodate additional O&M expenses CCCERA O &M expenses. costs. -11- FEBRUARY 2012 SCENARIO SUMMARY TABLE The rate impacts of the various scenarios are summarized in the table below. The detailed scenarios are included in the following pages of this document. Scenario 2012.13 2013.14 2014.15 2015.16 2016.17 2017.18 2018.19 2019.20 2020.21 2021.22 10 -Year ID Description Comments Rate Rate Rate Rate Rate Rate Rate Rate Rate Rate Ending Increase Increase Increase Increase Increase Increase Increase Increase Increase Increase Total Prior -Year March 2011 Recommended Scenario • 2 year 1 rate ordinance of up to $30 per NA $ 30 $ 30 $ 31 S 31 $ 31 $ 31 S 31 S 31 $ 5 $ 5 $ 597 year 2012 Preliminary Draft Presented Unfunded liabilities related to funding 2 at 1/30112 Board Finance employee and retiree future healthcare S 30 $ 34 $ 34 S 34 $ 34 S 34 $ 34 S 34 S 34 S 34 $ 677 Committee and pensions has increased substantially Same as Scenario 2 except revisions Baseline Scenario - Uniform made to connection and property tax 3 Rate Increases assumptions holding growth flat S 30 S 38 $ 38 S 38 $ 36 S 36 $ 36 S 36 $ 36 $ 36 $ 701 through 2014.15 based on Board Budget & Finance Committee Input. Baseline Scenario - Two $50 per year SSC rate increases and Same as Scenario 3 except for front - 4 then rates as needed in future loaded rates that allow ending rate to S 30 S 50 S 50 $ 27 $ 27 $ 27 $ 27 $ 27 $ 27 S 27 $ 660 be less that Scenario 3. years. CCCERA additional payments start at $13.0 million in 2013.14 and increase Baseline Scenario plus pay off to $21.6 million by 2021 -22. Funds 5 CCCERA UAAL b end of 10- y Available fall below Funds Required in $ 30 $ 60 S 60 S 60 $ 22 S 22 S 22 $ 22 $ 22 S 22 $ 633 year period. 2013.14 and 2015.16 - may need short term financing. Frontdoading three S60 rate increases allow ending rate to be lower in spite of higher CCCERA costs. 12- Summary of Scenarios Referred to in the Financial Report Scenario 2012 -13 2013 -14 2014 -15 2015 -16 2016 -17 2017 -18 2018 -19 2019 -20 2020 -21 2021 -22 10 -Year ID Description Comments Rate Rate Rate Rate Rate Rate Rate Rate Rate Rate Ending Increase Increase Increase Increase Increase Increase Increase Increase Increase Increase Total Prior -Year March 2011 Recommended Scenario - 2 year 1 rate ordinance of up to $30 per N/A $ 30 $ 30 $ 31 $ 31 $ 31 $ 31 $ 31 $ 31 $ 5 $ 5 $ 597 year Unfunded liabilities related to funding 2012 Preliminary Draft Presented 2 at 1/30/12 Board Finance employee and retiree future healthcare $ 30 $ 34 $ 34 $ 34 $ 34 $ 34 $ 34 $ 34 $ 34 $ 34 $ 677 Committee and pensions has increased substantially Same as Scenario 2 except revisions made to connection and property tax Baseline Scenario - Uniform 3 assumptions holding growth flat $ 30 $ 38 $ 38 $ 38 $ 36 $ 36 $ 36 $ 36 $ 36 $ 36 $ 701 Rate Increases through 2014 -15 based on Board Budget & Finance Committee Input. Baseline Scenario - Two $50 per Same as Scenario 3 except for front - year SSC rate increases and 4 loaded rates that allow ending rate to be $ 30 $ 50 $ 50 $ 27 $ 27 $ 27 $ 27 $ 27 $ 27 $ 27 $ 660 then rates as needed in future less that Scenario 3. years. CCCERA additional payments start at $13.0 million in 2013 -14 and increase to $21.6 million by 2021 -22. Funds Baseline Scenario plus pay off Available fall below Funds Required in 5 CCCERA UAAL by end of 10- $ 30 $ 60 $ 60 $ 60 $ 22 $ 22 $ 22 $ 22 $ 22 $ 22 $ 683 2013 -14 and 2015 -16 - may need short year period. term financing. Front - loading three $60 rate increases allow ending rate to be lower in spite of higher CCCERA costs. 6K11 SCENARIO ONE — PRIOR YEAR RECOMMENDED SCENARIO CENTRAL CONTRA COSTA SANITARY DISTRICT MARCH 3, 2011 BOARD FINANCIAL PLANNING WORKSHOP PRIOR YEAR SCENARIO ASSUMPTIONS Revenue: • Assumptions for interest rates were lowered based on current information. Interest rates range from 0.5% in 2010 -11 and 2011 -12 and caps at 5.0% in 2020 -21. The 2010 scenario used a range from 1.3% to 5.5 %. • 2010 -11 Capital Revenue projections are estimated to be around $3 million less than budget. • O &M estimated revenue is based on the 6 -month review process, and is anticipated to be lower than budget. Our largest revenue source, the 2010 -11 SSC Revenue is anticipated to be $750,000 -$1.0 million below budget due to drought impact on commercial customers and the poor economy in general. • Current 2010 -11 Property Tax Revenue is estimated to be $12.2 million versus a total budget of $12.5 million. • The State repayment of borrowed property tax of $1.1 million is included in 2012 -13. • No property tax revenue growth is predicted through 2012 -13, and then 1 %o per year increases are assumed through 2014 -15, 2% per year in 2015 -16, and then 3% per year going forward. Expense /Expenditures /Debt: Capital Project spending assumptions presented at the December 16, 2010 CIB Workshop and updated after adoption of CAA 129 regulations for incinerator are used in the model. Specifically, the model includes a new nitrification project ($70 million in current dollars) but does not include the Concord Recycled Water project which would be partially funded by grants. • Capital Project inflation was reduced from 3% per year to 1 % in 2012 -13, 1.5% in 2013 -14, 2.0% in 2014 -15, and then 3% per year thereafter. • O &M annual inflation varies in the 10 years projected, but in general, salaries are inflated by 3.5% per year and all other accounts by 3% per year, except for chemicals and utilities that fluctuate according to current market conditions. • Includes employee retiree and refilling assumptions, and expense account assumption changes from Department Directors' review (such as utility cost fluctuations). !! FILENAME \p NA M\10 -Year Financial Plan \10 -Year Financial Plan\2012 -13 \10 yr Plan Scenario One Bullet List 2012- 13.docL -14- SCENARIO ONE — PRIOR YEAR RECOMMENDED SCENARIO CENTRAL CONTRA COSTA SANITARY DISTRICT MARCH 3, 2011 BOARD FINANCIAL PLANNING WORKSHOP PRIOR YEAR SCENARIO ASSUMPTIONS • Salary vacancy of 3 %, and benefit vacancy of 4% are used in the model. This means projections are reduced by 3% per year for salaries and 4% per year for benefits to account for unplanned unfilled positions. Significant increases to retirement rates are included in the model. In 2011 -12, a 9% rate increase is confirmed, and includes de- pooling costs. 2012 -13 and 2013- 14 include 5% per year rate increases to cover market losses that will be carried forward on a rolling 5 -year smoothing basis. 2015 -16 forward assumes 1 % rate increases per year —this year's model retirement costs over a 10 -year period are $12 million higher than what was assumed in the January 2010 Workshop scenarios. • Additional $75 million in payments beginning in 2015 -16 to pay down the CCCERA UAAL. Medical Premiums are projected to increase by almost 16% in 2011 -12 (based on HealthNet projection to HR 12/2010). The increase is due in part to the Health Care Reform Act. 6.5 % -7.5% rate increases are used in future years based on the GASB -45 actuarial assumptions for consistence. Medical expenses are $10 million higher in total in the 2011 scenario compared to 2010, mainly due to the large increase in 2011 -12, and the compounding effect in future years. 2012 -13 based on current actuarial assumptions. GASB- 45 /OPEB: • The OPEB /GASB -45 annual required contribution (ARC) is $6,676,364 ($39 of the SSC rate) based on the actuarial estimate and then ranges from $5.5 -$6.0 million in future years. Updated information will be provided after the actuarial analysis is done. Funds Required /Available: • The Funds Required calculation remains the same: 32% of next year's O &M + 30% of next year's Capital costs + 100% of Debt Service. The Funds Required formula is reviewed each year compared to actual spending. • Funds Available are made up of Running Expense and Sewer Construction Fund cash and investment accounts. Keeping Funds Available above Funds Required eliminates the need for short-term borrowing for cash flow. !! FILENAME \p NA M\10 -Year Financial Plan\10 -Year Financial Plan\2012 -13 \10 yr Plan Scenario One Bullet List 2012- 13.doc1 -15- 100,000,000 90,000,000 80,000,000 70,000,000 60,000,000 N L 50,000,000 0 40,000,000 30,000,000 20,000,000 10,000,000 -- Central Contra Costa Sanitary District Funds Available Compared to Funds Required by Year Scenario 1 - Prior Year Recommended Scenario - March 2011 2010 -2011 2011 -2012 2012 -2013 2013 -2014 2014 -2015 TOTAL FUNDS AVAILABLE 62,300,000 57,500,000 53,200,000 52,300,000 57,900,000 'TOTAL FUNDS REQUIRED 33,895,000 36,499,000 1 37,399,000 37,404,000 39,190,000 2015 -2016 2016 -2017 59,700,000 60,800,000 43,160,000 46,678,000 Fiscal Year 2017 -2018 60,500,000 51,761,000 2018 -2019 54,200,000 53,097,000 2019 -2020 50,900,000 50,782,000 2/2/2012 1:40 PM N:\A000UNTING \GMTEMPI \10 -Year Plan Projections\2012 -2013 Projections \Workshop - Draft Scenarios \Worhsop drafts post 2 1 12 mtg\2012 1 &2 - 10 -year plan model - prior year and 1 30 12 BFC version.xls Summ PY Recommend Chart 1 -16- WE 2020 -2021 53,400,000 52,186,220 CENTRAL CONTRA COSTA SANITARY DISTRICT 10 -YEAR FINANCIAL PLANNING WORKSHEET SCENARIO 1 - PRIOR YEAR 2011 RECOMMENDED PRIOR YEAR SCENARIO Fiscal Years 2011 -12 through 2020 -21 -17- 2/2/2012 1:45 PM NAACCOUNTING\GMTEMPI \10 -Year Plan Projections\2012 -2013 Projections\Workshop - Draft Scenarios \Worhsop drafts post 2 1 12 mtg\2012 1 &2 - 10 -year plan model - prior year and 1 30 12 BFC version.xls Summ PY Recommend A D E F G H I J K I. M N 1 ' ` ' • 3 4 5 6 7 8 _ 9 10 2013 -2014 2014 -2015 2015 -2016 2016 -2017 2017 -2018 2018 -2019 2019 -2020 2020 -2021 2 Planning Year Projected Actual 2010 -2011 Budget 1 2 _ 2012 -2013 3 4 2011 -2012 5 Service Data Assumptions (End of F.Y.) 166,741 169,537 170,437 171,437 172,437 173,437 174,437 175,437 176,437 177,437 178,437 6 Adjustment to total RUE due to lower commercial accounts 2,000 1,996 - - - - - - - - - 7 New Connections (RUE) for the labeled F.Y.. 700 800 900 1,000 1 1,000 1,000 1,000 1 1,000 1,000 1,000 1,000 8 Growth Per Year 0.42% 0.47% 0.53% 0.58% 0.58% 0.58% 0.57% 0.57% 0.57% 0.56% 0.56% s 1 o SEWER SERVICE CHARGE DATA AND CALCULATIONS 11 Sewer Service Charge Rate - Debt Service - - - - - - - - - - - 12 Sewer Service Charge Rate - O &M 300 302 322 335 349 403 4111 418 433 450 525 13 14 15 Sewer Service Charge Rate - Capital Total SSC Rate Increase to Rate - $ Increase to Rate - % 11 39 49 66 83 60 83 107 123 137 67 311 341 371 401 432 463 494 525 556 587 592 - 30 30 30 31 31 31 31 31 31 S 0.00% 9.65% 8.80% I 8.09% 7.73% 7.18% 6.70% 6.28% 5.90% 5.58% 0.85% 16 19 Total SSC Revenue 50,995,000 57,131,000 63,232,000 68,746,000 74,493,000 0.75% 1.00% 1.50% 80,301,000 86,172,000 92,104,000 98,099,000 104,156,000 105,635,000 20 21 Interest Revenue Rate Assumption 0.50% 0.50% 2.00% 2.50% 3.00% 3.50% 4.00% 5.00% 22 Property Tax: 23 24 Growth %Assumption -1.00% 0.00% 0.00% 1.00% 1.00% 2.00% 3.00% 3.00% 3.00% 3.00% 3.00% 25 Growth $ 939,417 (13,624) - 1,061,000 (939,000) 123,000 - 249,000 381,000 392,000 - 404,000 - 416,000 429,000 - 26 Tax Take or Repayment 1,061,000 - - - - 27 Property Tax - Total 12,213,624 12,200,000 13,261,000 12,322,000 12,445,000 12,694,000 13,075,000 13,467,000 13,871,000 14,287,000 1, 14,716,000 28 30 Property Tax Impact on RUE 73.25 Connection Fee - Gravity Zone 5,451 71.96 5,465 77.81 71.87 5,521 5,579 1.02% 1.05% 72.17 5,756 73.19 74.96 76.76 78.62 80.52 1 82.47 5,949 3.35% 6,069 6,177 6,320 6,508 6,748 31 Percent Increase from PY 2.89% 0.26% 3.17% 2.02% 1.78% 2.32% 2.97% 3.69% 32 Conn Fee - Pumped Zone 7,092 7,071 7,114 7,151 7,323 7,503 1 7,593 7,719 7,835 7,985 8,194 33 Percent Increase from PY 2.06% -0.30% 0.61% 0.52% 2.41% 2.46% 1.20% 1.66% 1.50% 1.91% 2.62% 34 35 Percentage of Pumped Zone to Total Connections Retiree OPEB Annual Contributions 43.00% 7,000,000 44.00% OTHER SCENARIO 6,000,000 50.00% ASSUMPTIONS 6,000,000 45.00% AND 6,000,000 45.00% FINANCIAL RATIOS/I 5,500,000 46.00% N FORMATION 5,500,000 47.00% 5,500,000 48.00% 5,500,000 35.00% 5,600,000 10.00% 5,700,000 10.00% 5,800,000 36 37 Portion Allocated to PARS Trust 3,801,364 2,169,877 1,776,376 1,410,919 556,609 304,317 (146,324) (318,320) (365,998) (356,202) (316,051) 38 Estimated PARS Trust Balance (0% /year interest) 13,173,000 15,419,000 17,325,000 18,923,000 19,772,000 20,478,000 20,840,000 21,137,000 21,498,000 21,987,000 22,755,000 40 Salary Inflation (Impacted by Retirement Assumptions below) 4% 3% 1% 3% 4% 4% 3% 4% 4% 4% 4% 41 No. of New Retirements (net of deaths) 14 10 9 10 8 41 11 - (1) 1 (4) (6) 42 Total 0 &M Benefit Increase Per Year ( %) 12.40% 9.57% 6.55% 7.66% 2.84% 37.90% 0.98% 1.25% l.S7%1 1.62%1 35.97 43 110 million add on addition to CCCERA UAAL 44 Total O &M Expense Change from prior year ( %) 6.85% 6.93% 458% 5.43% 2.89% 16. 8 0 2.72% 2.22% 5.65% 2.50% 17.85% 46 Capital Project Inflation % 0.0% 0.0% 1.0%1 1.5% 2.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 48 Debt Coverage Ratio 2.87 3.49 4.35 1 4.70 5.51 6.93 8.23 9.601 10.97 12.22 8.64 49 Debt as a Percent of Revenue 7.0%1 6.0%1 6.0%1 5.0%1 5.0%1 2.0% 3.0% 3.0%1 2.0% 2.0% 2.0% -17- 2/2/2012 1:45 PM NAACCOUNTING\GMTEMPI \10 -Year Plan Projections\2012 -2013 Projections\Workshop - Draft Scenarios \Worhsop drafts post 2 1 12 mtg\2012 1 &2 - 10 -year plan model - prior year and 1 30 12 BFC version.xls Summ PY Recommend CENTRAL CONTRA COSTA SANITARY DISTRICT 10 -YEAR FINANCIAL PLANNING WORKSHEET SCENARIO 1 - PRIOR YEAR 2011 RECOMMENDED PRIOR YEAR SCENARIO Fiscal Years 2011 -12 through 2020 -21 50 A D E F G H I J K L 7 8 2017 -2018 2018 -2019 M N 9 10 2019 -2020 2020 -2021 51 Projected Actual 2010 -2011 Budget 1 2011 -2012 2 3 4 5 6 52 2012 -2013 2013 -2014 2014 -2015 2015 -2016 2016 -2017 53 TOTAL REVENUE: 5,674,000 5,541,000 5,567,000 5,553,000 5,546,000 2,078,000 3,782,000 3,810,000 3,603,000 3,601,000 3,608,000 54 TOTAL EXPENSE: Ending Fund Balance RUNNING EXPENSE 5,674,000 5,541,000 5,567,000 5,553,000 5,546,000 2,078,000 3,782,000 3,810,000 3,603,000 3,601,000 3,608,000 ss ss 57 - Projected Actual 2010 -2011 Budget 1 2 2012 -2013 3 2013 -2014 4 2014 -2015 5 2015 -2016 6 2016 -2017 7 2017 -2018 8 2018 -2019 9 2019 -2020 10 2020 -2021 58 2011 -2012 59 TOTAL REVENUE: 61,000,000 63,200,000 68,000,000 71,400,000 74,500,000 85,800,000 88,200,000 90,500,000 95,000,000 99,100,000 115,200,000 so TOTAL EXPENSE: 60,500,000 64,700,000 67,600,000 71,300,000 73,400,000 85,600,000 87,900,000 89,900,000 94,900,000 97,300,000 114,700,000 61 REVENUE MINUS EXPENSE: 500,000 (1,500,000) 400,000 100,000 1,100,000 200,000 300,000 600,000 100,000 1,800,000 500,000 62 63 Ending Fund Balance 8,400,0001 6,900,0001 7,300,000 7,400,000 8,600,000 8,900,000 9,100,000 9,700,000 9,800,000 11,600,000 12,200,000 64 ss ss Prudent Reserve SEWER CONSTRUCTION 13.00%1 Projected Actual 2010 -2011 12.97%1 Budget 1 2011 -2012 10.17% 2 10.20% 3 10.08% 4 10.03% 5 10.03% 6 10.10% 7 10.19% 8 10.04% 9 10.12% 10 s� 1 2012 -2013 2013 -2014 2014 -2015 2015 -2016 2016 -2017 2017 -2018 2018 -2019 1 2019 -2020 2020 -2021 68 TOTAL REVENUE: 17,000,000 22,200,000 26,300,000 1 31,000,000 29,200,000 32,200,000 33,900,000 38,400,000 37,500,000 46,100,000 47,000,000 52,800,000 59,300,000 j 1 56,200,000 36,800,000 69 TOTAL CAPITAL EXPENDITURES: 28,700,000 25,500,000 30,100,000 27,900,000 32,400,000 61,200,000 34,900,000 7o REVENUE MINUS CAPITAL EXPENDITURES: (11,700,000) (3,300,000)1 (4,700,000) (900,000) 4,300,000 1,500,000 900,000 (900,000) (6,500,000) (5,000,000) 1,900,000 71 BOND PROCEEDS: - - - - - 45,900,000 44,900,000 2 3 - - - - - - 121 Ending Fund Balance 53,900,000 OTAL FUND BALANCES Projected Actual 2010 -2011 51,700,000 50,800,000 6 7 73 M 75 50,600,000 Budget 1 49,300,000 4 50,800,000 5 44,400,000 8 39, 00,0001 9 41,200,000 10 76 2011 -2012 2012 -2013 2013 -2014 2014 -2015 2015 -2016 2016 -2017 2017 -2018 2018 -2019 2019 -2020 2020 -2021 77 TOTAL FUNDS AVAILABLE 62,300,000 57,500,000 53,200,000 52,300,000 57,900,000 59,700,000 60,800,000 60,500,000 54,200,000 50,900,000 53,400,000 78 FUNDS REQUIRED 5,553,000 5,546,000 2,078,000 3,782,000 3,810,000 3,603,000 3,601,000 3,608,000 3,597,000 79 100% of Debt Service 5,541,000 5,567,000 ao 32% of Next Year's O &M Expense 20,704,000 21,632,000 22,816,000 2.3,488,000 27,392,000 9,720,000 28,128,000 11,250,000 28,768,000 30,368,000 14,100,000 17,790,000 31,136,000 36,704,000 10,470,000 37,805,120 10,784,100 81 30% of Next Year's Capital Expenditures 7,650,000 9,300,000 9,030,000 8,370,000 18,360,000 82 TOTAL FUNDS REQUIRED 33,895,000 36,499,000 37,399,000 37,404,000 39,190,000 43,160,000 46,678,000 51,761,000 53,097,000 50,782,000 52,186,220 L Funds Available Amount Above /(Below) Funds Required 28,405,000 21,001,000 15,801,000 14,896,000 18,710,000 16,540,000 14,122,000 8,739,000 1,103,000 118,000 1,213,780 83 84 85 -Is- 2/2/2012 1:45 PM N:IAC000NTING \GMTEMPI \70 -Year Plan Projections\2012 -2013 Projections\Workshop - Draft Scenarios \Worhsop drafts post 2 1 12 mtg\2012 1 &2 - 10 -year plan model - prior year and 1 30 12 BFC version.xts Summ PY Recommend SCENARIO TWO CENTRAL CONTRA COSTA SANITARY DISTRICT FEBRUARY 16, 2012 BOARD FINANCIAL PLANNING WORKSHOP PRELIMINARY DRAFT SCENARIO ASSUMPTIONS For January 30, 2012 Board Budget & Finance Committee Scenario Premise: • The 2 -year, up to $30 SSC rate increase approved by the Board for 2011 -12 and 2012 -13, is displayed in the preliminary draft of the baseline scenario. • The 2011 -12 O &M projection is based on the 6 -month budget review and is the basis of future year projections. • The goal of this year's preliminary scenario is to change only significant assumptions used in the model for ease of comparison to the 2011 recommended scenario. The bullets in this section highlight significant differences from this year to last year. o Capital project spending assumptions presented at the December 15, 2011 CIB Workshop are used in the model. The impact in the 10 -year period is a $13.7 million reduction in the current year preliminary scenario because project costs for new solids treatment (digesters or new furnaces) were shifted to future years outside of the 10 -year window. o Employee benefits are updated based on current information and include known rate increases. The largest impacts are in the CCCERA rate increases and the GASB -45 Annual Required Contribution (ARC) discussed below. The CCCERA unfunded liability will increase by another $22 million for the 2012 -13 rate - setting process. $1.9 million per year, which is the approximate annual amount that is amortized over 18 years, is included beginning in 2012- 13 in the 10 -Year Plan model. This is in addition to the assumed regular annual increase for normal costs. CCCERA rate increases that are multiplied times salary are: 9.17% rate increase in 2011 -12, 13.79% rate increase in 2012 -13 and 10.34% rate increase in 2013 -14. Retirement costs in this year's model over the 10 -year period are $24.7 million higher than what was assumed in the 2011 model, mainly due to the large unanticipated UAAL increases in recent years due to de- pooling. The GASB OPEB ARC increased to $8.3 million per year. The ARC used in the 2011 scenario ranged from $5.5 million to $6.0 million per year. The impact in the 10 -year period is $25.7 million more in the current 10 -Year Preliminary Scenario. o Positive O &M expense account variances in other line items, including salaries because of assumed savings due to retirements and hiring lags help offset the additional CCCERA and OPEB costs. Total O &M expenses in the 10 -year period are $16.9 million higher in the current model compared to last year's 10 -Year model. II FILENAME \p N: \GM\10 -Year Financial Plan \10 -Year Financial Plan\2012 -13 \10 yr Plan Scenario Two Assumptions 2012- 13.docl -19- SCENARIO TWO CENTRAL CONTRA COSTA SANITARY DISTRICT FEBRUARY 16, 2012 BOARD FINANCIAL PLANNING WORKSHOP PRELIMINARY DRAFT SCENARIO ASSUMPTIONS For January 30, 2012 Board Budget & Finance Committee o The total number of RUE's is calculated by taking total SSC revenue in any given year divided by the SSC rate for that year. The total RUE count was significantly reduced in 2009 -10 ( -3,996 RUE) due to lower number of connection equivalents and lower water usage of commercial accounts that are billed based on water usage. In last year's model, staff assumed the total RUE count would return to previous levels in 2 years and added back 2,000 additional RUE in each of the 2 years. This was too optimistic. In this year's model, the 2011 -12 projected RUE is even lower and is calculated to be almost 6,000 RUE lower than the assumption used in 2011. To phase back RUE over time, 600 RUE per year are added back in the current model beginning in 2013- 14. The total RUE count almost catches up to the numbers used in the 2011 scenario; in 2020 -21 the current model shows total RUE at about 1,000 less than the prior year 2011 scenario. If last year's SSC rate increases were applied to the lower RUE assumptions, revenue would have calculated $14.6 million lower in the current model in the 10 -year period. Higher revenue amounts in other line items, such as Concord revenue from treatment plant capital improvements, helped soften projected SSC rate increases in the current 2012 scenario. The section below provides more information on assumptions used in the 10 -Year Plan scenarios. Revenue: • Interest Rates: 2010 -11 was updated to actual average interest rate of 0.40 %. Future years remained the same as the 2011 assumptions and gradually increase from 0.75% in 2012 -13 to a cap of 5.0 %. • Current 2011 -12 Property Tax Revenue is estimated to be $12.0 million versus a total budget of $12.2 million. In the 2011 model, property tax revenue was estimated to be $12.2 million for 2011 -12. • No property tax revenue growth is predicted through 2012 -13, and then 1 % per year increases are assumed through 2014 -15, 2% per year in 2015 -16, and then 3% per year going forward. • The State repayment of borrowed property tax in the amount of $1.1 million is the same assumption in this year's and last year's scenario.. • Connection fee rates are the same as in the 2011 model; in 2011 -12 the facility capacity fee is $5,465 and increases to $6,900 by 2021 -22. The pump zone fee is $7,071 in 2011 -12 and increases to $8,300 by 2020 -21. II FILENAME \p N: \GM\10 -Year Financial Plan\10 -Year Financial Plan\2012 -13 \10 yr Plan Scenario Two Assumptions 2012- 13.doc1 -20- SCENARIO TWO CENTRAL CONTRA COSTA SANITARY DISTRICT FEBRUARY 16, 2012 BOARD FINANCIAL PLANNING WORKSHOP PRELIMINARY DRAFT SCENARIO ASSUMPTIONS For January 30, 2012 Board Budget & Finance Committee • The number of new connections per year is the same as projected in the 2011 scenario which were 800 connections in 2011 -12, 900 connections in 2012 -13, and then increase to 1,000 connections per year in 2013 -14 going forward. Expense /Expenditures /Debt: • Capital Project expenditures, that are based on the figures presented at the December 15, 2011 Board Workshop, are inflated by 1% in 2013 -14, 1.5% in 2014 -15, 2.0 % in 2015 -16 and then 3% per year thereafter. These inflation assumptions are used in last year's and this year's scenarios. • O &M annual inflation varies in the 10 years projected, but in general, salaries are inflated by 3.5% per year and all other accounts by 3% per year, except for chemicals and utilities that fluctuate according to current market conditions. • Salary vacancy of 3 %, and benefit vacancy of 4% are used in the model. This means projections are reduced by 3% per year for salaries and 4% per year for benefits to account for unfilled positions. • Employee retiree and refilling assumptions are updated in 2011 -12 and remain the same as last year for future years. • For consistency when comparing scenarios, the large annual payments beginning in 2015- 16 to pay down our CCCERA UAAL presented in last year's Recommended Scenario are also included in the 2012 Recommended Scenario. In both scenarios, the payments total $75 million. • There is no new debt issued in either scenario. GASB- 45 /OPEB: • The OPEB /GASB -45 ARC is $8.3 million per year ($50 of the SSC rate) based on the actuarial estimate by John Bartell. The $8.3 million per year is assumed in all 10 years. Funds Required/Available: The Funds Required calculation remains the same: 32% of next year's O &M + 30% of next year's Capital costs + 100% of Debt Service. The Funds Required formula is reviewed each year compared to actual spending. Funds required are defined as the amount of money held in cash and investments (liquid assets) that is needed on June 30th of any fiscal year to meet our cash flow needs through mid - December, when we receive our first sewer service charge and property tax payment from Contra Costa County. !! FILENAME \p NAGM\10 -Year Financial Plan \10 -Year Financial Plan\2012 -13 \10 yr Plan Scenario Two Assumptions 2012- 13.docl -21- SCENARIO TWO ' CENTRAL CONTRA COSTA SANITARY DISTRICT FEBRUARY 16, 2012 BOARD FINANCIAL PLANNING WORKSHOP PRELIMINARY DRAFT SCENARIO ASSUMPTIONS For January 30, 2012 Board Budget & Finance Committee • Funds Available are made up of Running Expense, Sewer Construction Fund cash, and investment accounts. Keeping Funds Available above Funds Required eliminates the need for short -term borrowing for cash flow II FILENAME \p N: \GM\10 -Year Financial Plan\10 -Year Financial Plan\2012 -13 \10 yr Plan Scenario Two Assumptions 2012- 13.doc1 -22- $100,000,000 $90,000,000 � S / 111 111 $70,000,000 $60,000,000 Cn L ca $50,000,000 0 $40,000,000 $30,000,000 $20,000,000 $10,000,000 th Central Contra Costa Sanitary District Funds Available Compared to Funds Required by Year Scenario 2 - 2012 PRELIMINARY DRAFT Scenario for 1/30/12 Board Finance Committee Increased Funds Available for large projects in the next five years; new solids treatment (digesters or new furnaces). / r ftftft • os�w 000 ON-OM `➢ 2011 -2012 2012 -2013 2013 -2014 2014 -2015 2015 -2016 2016 -2017 2017 -2018 2018 -2019 2019 -2020 2020 -2021 2021 -2022 -TOTAL FUNDS AVAILABLE $54,012,383 44,789,289 40,054,467 42,117,393 44,567,297 44,379,426 50,027,863 57,592,266 55,912,104 61,772,068 66,159,111 •TOTAL FUNDS REQUIRED $37,589,060 38,217,391 38,339,014 38,807,910 44,002,662 44,438,224 46,795,091 54,009,762 54,190,501 58,103,428 53,922,348 Fiscal Year 2/2/2012 1:41 PM N:\NCCOUNTING \GMTEMPI \10 -Year Plan Projections\2012 -2013 Projections \Workshop - Draft Scenarios \Worhsop drafts post 2 1 12 mtg\2012 1 &2 - 10 -year plan model - prior year and 1 30 12 BFC version.xls Summary for Curr yr Report Chart 9] -23- CENTRAL CONTRA COSTA SANITARY DISTRICT 10 -YEAR FINANCIAL PLANNING WORKSHEET SCENARIO 2 - PRELIMINARY DRART SCENARIO SHOWN AT 1/30/12 BOARD FINANCE COMMITTEE Fiscal Years 2012 -13 through 2021 -2022 -24- 2/2/2012 1:41 PM N:\ACCOUNTING \GMTEMPI\10 -Year Plan Projections\2012 -2013 Projections \Workshop - Draft Scenarios \Worhsop drafts post 2 1 12 mtg\2012 182 - 10 -year plan model - prior year and 1 30 12 BFC version.xls Summary for Curr yr Report A E F G H I J K L M N O 1 Planning_ Year Service Data Assumptions (End of F.Y.) Projected »» RATE 1 2 2012 -2013 2013 -2014 SETTING ASSUMPTIONS 3 4 5 6 7 8 9 10 2021 -2022 2 3 4 2011 -2012 2014 -2015 2015 -2016 2016 -2017 2017 -2018 2018 -2019 2019 -2020 2020 -2021 s 163,658 164,558 166,158 167,758 600 1,000 169,358 600 170,958 600 172,558 174,158 175,758 177,358 178,958 s Adjustment to total RUE due to lower commercial accounts (800) - 600 900 1,000 0.55% 0.61% - 600 600 600 600 600 7 New Connections (RUE) for the labeled F.Y.. 800 1,000 1,000 1,000 1,000 1,000 1,000 1,000 a Growth Per Year 0749% 0.60% 0.60% 0.59% 0.58% 0.58% 0.57% 0.57% 0.56% s SEWER SERVICE CHARGE DATA AND CALCULATIONS 10 11 Sewer Service Charge Rate - Debt Service - $ 302 $ 39 - - 344 364 370 27 41 69 - - - - - - - 12 Sewer Service Charge Rate - O &M 426 47 434 434 450 456 460 490 13 14 Sewer Service Charge Rate - Capital Total SSC Rate Increase to Rate - $ Increase to Rate - % Total SSC Revenue 3 7-3T- 107 1 125 1 153 183 1 187 $ 341 371 405 439 473 507 541 575 609 643 677 15 $ 30 30 34 34 34 34 34 34 34 34 34 9.65% 8.80% 9.16% 1 8.40% 7.74% 7.19% 6.71% 6.28% 5.91% 5.58% 5.29% 16 19 $ 55,628,000 60,884,227 67,091,663 73,426,450 79,870,036 86,422,423 93,083,609 99,853,596 106,732,382 113,719,969 120,816,356 20 21 Interest Revenue Rate Assumption 0.40% 0.75% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% 4.00% 5.00% 5.00% 22 23 Property Tax: 24 Growth %Assumption 0.00% 0.00% 1.00% 1.00% 2.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 25 Growth $ $ (213,624) 1,061,000 (941,000) 121,200 244,824 374,581 385,818 397,393 409,314 421,594 434,242 26 Tax Take or Repayment $ - 1,061,000 - - - - - - - - - 27 Property Tax - Total $ 12,000,000 13,061,000 12,120,000 12,241,200 12,486,024 12,860,605 13,246,423 13,643,816 14,053,130 14,474,724 14,908,966 2e 2s 30 Property Tax Impact on RUE Connection Fee - Gravity Zone $ 73.32 $ 5,465 79.37 5,521 72.94 5,579 72.97 5,756 73.73 5,949 75.23 6,069 76.76 6,177 78.34 6,320 79.96 6,508 81.61 6,748 83.31 6,900 31 Percent Increase from PY 0.26% 1.02% 1.05% 3.17% 3.35% 2.02% 1.78% 2.32% 2.97% 3.69% 2.25% 32 Conn Fee - Pumped Zone $ 7,071 7,114 7,151 7,323 7,503 7,593 7,719 7,835 7,985 8,194 8,300 33 Percent Increase from PY -0.30% 0.61% 0.52% 2.41% 2.46% 1.20% 1.66% 1.50% 1.91% 2.62% 1.29% 34 35 36 Percentage of Pumped Zone to Total Connections Retiree OPEB Annual Contributions 44.00% $ 8,300,000 50.00% 8,300,000 45.00% OTHER 8,300,000 45.00% SCENARIO 8,300,000 46.00% ASSUMPTIONS 8,300,000 1 47.00% 8,300,000 48.00% 8,300,000 35.00% 8,300,000 10.00% 8,300,000 10.00% 8,300,000 10.00% 8,500,000 37 Portion Allocated to PARS Trust $ 3,405,223 4,207,300 3,730,225 3,266,242 2,816,990 2,419,353 1,911,653 1,553,156 1,214,116 958,438 690,573 38 Estimated PARS Trust Balance (3% /year interest) $ 22,127,002 27,124,331 31,780,192 36,097,828 40,082,262 43,776,663 47,058,966 50,070,486 52,823,140 55,395,026 57,768,167 3% 40 Salary Inflation (Impacted by Retirement Assumptions below) 2% 4% 3% 3% 3% 3% 3% 3% 3% 3% 41 INo. of New Retirements (netofdeaths) 20 9 10 8 4 11 - (1) (4) 5.07%1 32.40% 1. 1.27 %1 1.23% 1.32% Begin additional $10 million /year to CCCERA UAAL ($15 million in 2021 -22) 4.64% 15.14Y6 0 0 2.22% (6) (6) 42 Total O &M Benefit Increase Per Year ( %) 15.97% 11.54% 11.07% 1.17% 12.01% 43 44 Total O &M Expense Change from prior year ( %) 11.45% 7.68% 6.41% 2.91% 7.06% 46 Capital Project Inflation % 0.00% 1.00% 1.50% 2.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00%1 3.00% 4s Debt Coverage Ratio 1 3.38 1 3.68 3.79 4.45 12.49 7.59 8.61 10.83 14.01 13.68 14.99 49 1 Debt as a Percent of Revenue 1 6% 6% S% 5% 2% 3% 3% 2% 2% 2% 2% -24- 2/2/2012 1:41 PM N:\ACCOUNTING \GMTEMPI\10 -Year Plan Projections\2012 -2013 Projections \Workshop - Draft Scenarios \Worhsop drafts post 2 1 12 mtg\2012 182 - 10 -year plan model - prior year and 1 30 12 BFC version.xls Summary for Curr yr Report CENTRAL CONTRA COSTA SANITARY DISTRICT 10 -YEAR FINANCIAL PLANNING WORKSHEET SCENARIO 2 - PRELIMINARY DRART SCENARIO SHOWN AT 1/30/12 BOARD FINANCE COMMITTEE Fiscal Years 2012 -13 through 2021 -2022 50 s1 A E DEBT SERVICE FUND Projected »» 2011 -2012 TOTAL REVENUE: $ 5,541,000 i TOTAL EXPENSE: $ 5,541,000 F G REVENUE, 1 2 2012 -2013 2013 -2014 H I J EXPENSE 3 4 5 2014 -2015 2015 -2016 2016 -2017 K 6 2017 -2018 L 7 2018 -2019 I M 8 2019 -2020 I N I 9 1 2020 -2021 O 10 2021 -2022 52 53 5,567,000 5,552,000 5,546,000 2,078,000 3,782,000 3,810,000 3,603,000 3,601,000 3,608,000 3,597,000 54 5,567,000 5,552,000 5,546,000 2,078,000 3,782,000 3,810,000 3,603,000 3,601,000 3,608,000 3,597,000 55 56 s� Ending Fund Balance RUNNING EXPENSE FUND - Projected» 2011 -2012 - - »»»»> » » »»> - » » »»> 2014 -2015 - » »» »> - » »» »> - »» »»> - »»» »> 2018 -2019 - » » »»> - L » »»»> - »» »»> 58 2012 -2013 2013 -2014 2015 -2016 2016 -2017 2017 -2018 2019 -2020 2020 -2021 2021 -2022 59 TOTAL REVENUE: $ 62,188,554 701447,170 75,387,403 77,700,525 89,794,192 92,426,595 91,738,204 93,775,861 98,792,112 101,316,525 103,643,033 111,130,570 6o TOTAL EXPENSE: $ 64,773,102 69,747,376 74,217,596 77,658,147 89,414,287 93,617,064 98,371,843 100,557,057 103,487,731 110,797,601 61 REVENUE MINUS EXPENSE: $ (2,584,548) 699,794 1,169,807 42,378 379,905 688,390 158,797 420,270 759,467 155,302 332,969 62 8,035,244 9,205,051 9,247,429 9,627,334 10,315,725 N Ending Fund Balance $ 7,335,450 10,474,522 10,894,792 11,654,259 11,809,561 12,142,530 64 65 ss Prudent Reserve SEWER CONSTRUCTION 14.22% Projected» 2011 -2012 9.88%1 10.35% »» » »> » » » »> 10.29% » »»»> 10.08% »»»»> 10.28% »» »»> 10.49% »»» »> 2017 -2018 10.42% »»»»> 10.53% » » » »> 10.52% »»»»> 10.35% » » » »> 67 2012 -2013 2013 -2014 2014 -2015 2015 -2016 2016 -2017 2018 -2019 2019 -2020 2020 -2021 2021 -2022 68 TOTAL REVENUE: $ 22,246,000 22,420,112 23,814,571 28,495,240 26,474,692 29,127,791_ 27,057,793 35,338,528 41,058,851 46,187,805 58,328,718 63,926,084 67,558,060 69 TOTAL CAPITAL EXPENDITURES: $ 27,649,000 32,343,000 29,719,200 36,214,789 35,569,212 39,043,672 60,768,347 58,221,422 63,503,986 70 REVENUE MINUS CAPITAL EXPENDITURES: $ (5,403,000) (9,922,888) (5,904,629) 1 2,020,548 1 2,069,998 1 (876,261) 1 5,489,640 7,144,133 (2,439,628) 5,704,662 4,054,074 71 BOND PROCEEDS: - - 1- - 36,754,045 30,849,416 39,553,341 2017 -2018 46,697,474 2018 -2019 73 �a 75 76 Ending Fund Balance TOTAL FUND BALANCES 46,676,933 2011 -2012 32,869,964 34,939,962 34,063,701 44,257,845 2019 -2020 49,962,507 2020 -2021 54,016,581 1 2021 -2022 2012 -2013 2013 -2014 2014 -2015 2015 -2016 2016 -2017 n TOTAL FUNDS AVAILABLE $ 54,012,383 44,789,289 40,054,467 42,117,393 44,567,297 44,379,426 50,027,863 57,592,266 55,912,104 61,772,068 66,159,111 78 FUNDS REQUIRED 3,601,000 79 100% of Debt Service $ 5,567,000 5,552,000 5,546,000 2,078,000 3,782,000 3,810,000 3,603,000 3,608,000 3,597,000 3,593,500 so 32% of Next Year's O &M Expense $ 22,319,160 23,749,631 24,850,607 28,612,572 29,356,225 29,957,460 31,478,990 32,178,258 33,116,074 35,455,232 36,518,889_ 81 30% of Next Year's Capital Expenditures $ 9,702,900 8,915,760 7,942,407 8,117,338 10,864,437 10,670,763 11,713,102 18,230,504 17,466,427 19,051,196 13,809,959 82 TOTAL FUNDS REQUIRED $ 37,589,060 38,217,391 38,339,014 38,807,910 44,002,662 44,438,224 46,795,091 54,009,762 54,190,501 58,103,428 53,922,348 83 Funds Available Amount Above /(Below) Funds Required $ 16,423,322 6,571,899 j 1,715,452 3,309,483 564,635 (58,798)' 3,232,772 3,582,503 84 85 1,721,604 3,668,640 12,236,762 -25- 2/2/2012 1:41 PM N:\ACC0UNTING \GMTEMPW0 -Year Plan Projections\2012 -2013 Projections\Workshop - Draft Scenarios \Worhsop drafts post 2 1 12 mtg\2012 1 &2 - 10 -year plan model - prior year and 1 30 12 BFC version.xls Summary for Curr yr Report SCENARIO THREE CENTRAL CONTRA COSTA SANITARY DISTRICT FEBRUARY 16, 2012 BOARD FINANCIAL PLANNING WORKSHOP SCENARIO ASSUMPTIONS UPDATED WITH BOARD COMMITTEE REQUESTED CHANGES IN BLUE Scenario Premise: The 2 -year, up to $30 SSC rate increase approved by the Board for 2011 -12 and 2012 -13, is displayed in this scenario. The 2011 -12 O &M projection is based on the 6 -month budget review and is the basis of future year projections. • The goal of this year's scenario is to change only significant assumptions used in the model for ease of comparison to the 2011 recommended scenario. The bullets in this section highlight significant differences from this year to last year. o Capital project spending assumptions presented at the December 15, 2011 CIB Workshop are used in the model. The impact in the 10 -year period is a $13.7 million reduction in the current year scenario because project costs for new solids treatment (digesters or new furnaces) were shifted to future years outside of the 10 -year window. o Employee benefits are updated based on current information and include known rate increases. The largest impacts are in the CCCERA rate increases and the GASB -45 Annual Required Contribution (ARC) discussed below. The CCCERA unfunded liability will increase by another $22 million for the 2012 -13 rate - setting process. $1.9 million per year, which is the approximate annual amount that is amortized over 18 years, is included beginning in 2012- 13 in the 10 -Year Plan model. This is in addition to the assumed regular annual increase for normal costs. CCCERA rate increases that are multiplied times salary are: 9.17% rate increase in 2011 -12, 13.79% rate increase in 2012 -13 and 10.34% rate increase in 2013 -14. Retirement costs in this year's model over the 10 -year period are $24.8 million higher than what was assumed in the 2011 model, mainly due to the large unanticipated UAAL increases in recent years due to de- pooling. The GASB OPEB ARC increased to $8.3 million per year. The ARC used in the 2011 scenario ranged from $5.5 million to $6.0 million per year. The impact in the 10 -year period is $25.7 million more in the current 10 -Year Scenario. o Positive O &M expense account variances in other line items, including salaries because of assumed savings due to retirements and hiring lags, help offset the additional CCCERA and OPEB costs. Total O &M expenses in the 10 -year period are $31.9 million higher in the current model compared to last year's 10 -Year model. 11 FILENAME \p NAM I0 -Year Financial Plan \10 -Year Financial Plan\2012 -13 \10 yr Plan Scenario Three Bullet List 20 1 2-13.doe' -26- SCENARIO THREE CENTRAL CONTRA COSTA SANITARY DISTRICT FEBRUARY 16, 2012 BOARD FINANCIAL PLANNING WORKSHOP SCENARIO ASSUMPTIONS UPDATED WITH BOARD COMMITTEE REQUESTED CHANGES IN BLUE o The total number of RUE's is calculated by taking total SSC revenue in any given year divided by the SSC rate for that year. The total RUE count was significantly reduced in 2009 -10 ( -3,996 RUE) due to lower number of connection equivalents and lower water usage of commercial accounts that are billed based on water usage. In last year's model, staff assumed the total RUE count would return to previous levels in 2 years and added back 2,000 additional RUE in each of the 2 years. This was too optimistic. In this year's model, the 2011 -12 projected RUE is even lower and is calculated to be almost 6,000 RUE lower than the assumption used in 2011. To phase back RUE over time, 600 RUE per year are added back in the current model beginning in 2013- 1-4 2015-16. Also, regular connections were reduced in 2012 -13 through 2014 -15. The total RUE count 220 -21 the Gurre-rtmodel showy total RUE a ©ut— 9, is 2,779 less than the prior year 2011 scenario. If last year's SSC rate increases were applied to the lower RUE assumptions, revenue would have calculated $22.2 million lower in the current model in the 10 -year period. Higher revenue amounts in other line items, such as Concord revenue from treatment plant capital improvements, helped soften projected SSC rate increases in the current 2012 scenario. The section below provides more information on assumptions used in the 10 -Year Plan scenarios. Revenue: • Interest Rates: 2010 -11 was updated to actual average interest rate of 0.40 %. Future years remained the same as the 2011 assumptions and gradually increase from 0.75% in 2012 -13 to a cap of 5.0 %. • Current 2011 -12 Property Tax Revenue is estimated to be $12.0 million versus a total budget of $12.2 million. In the 2011 model, property tax revenue was estimated to be $12.2 million for 2011-12. • No property tax revenue growth is predicted through 2012 -1`3 2014 -15, and then 1 % per year increases are assumed starting in 2015 -16 through 2014= 12016 -17, 2% per year in 2015 -1-6 2017 -18, and then 3% per year going forward. • The State repayment of borrowed property tax in the amount of $1.1 million is the same assumption in this year's and last year's scenario.. FILENAME \p NAGM \10 -Year Financial Plan \10 -Year Financial Plan\2012 -13110 yr Plan Scenario Three Burnet List 2012- 13.doc -27- SCENARIO THREE CENTRAL CONTRA COSTA SANITARY DISTRICT FEBRUARY 16, 2012 BOARD FINANCIAL PLANNING WORKSHOP SCENARIO ASSUMPTIONS UPDATED WITH BOARD COMMITTEE REQUESTED CHANGES IN BLUE Connection fee rates are the same as in the 2011 model; in 2011 -12 the facility capacity fee is $5,465 and increases to $6,900 by 2021 -22. The pump zone fee is $7,071 in 2011-12 and increases to $8,300 by 2020 -21. • The number of new connections per year is thews whist were is 800 connections in 2012 -13, 900 GORReGtiens in 2012 and then increase to 1,000 connections per year in 2013 -14 going forward through 2014 -15. Expense /Expenditures /Debt: • Capital Project expenditures, that are based on the figures presented at the December 15, 2011 Board Workshop, are inflated by 1% in 2013 -14, 1.5% in 2014 -15, 2.0% in 2015 -16 and then 3% per year thereafter. These inflation assumptions are used in last year's and this year's scenarios. • O &M annual inflation varies in the 10 years projected, but in general, salaries are inflated by 3.5% per year and all other accounts by 3% per year, except for chemicals and utilities that fluctuate according to current market conditions. • Salary vacancy of 3 %, and benefit vacancy of 4% are used in the model. This means projections are reduced by 3% per year for salaries and 4% per year for benefits to account for unfilled positions. • Employee retiree and refilling assumptions are updated in 2011 -12 and remain the same as last year for future years. • For consistency when comparing scenarios, the large annual payments beginning in 2015- 16 to pay down our CCCERA UAAL presented in last year's Recommended Scenario are also included in the 2012 Recommended Scenario. In both scenarios, the payments total $75 million, but the annual distribution is different; in the 2012 current year model, $15 million was shifted from 2020 -21 into 2021 -22. • There is no new debt issued in either scenario. GASB- 45 /OPEB: The OPEB /GASB -45 ARC is $8.3 million per year ($50 of the SSC rate) based on the actuarial estimate by John Bartell. The $8.3 million per year is assumed in all 10 years. II FILENAME \p NAGM \10 -Ycar Financial Plan \10 -Year Financial Plan \2012 -13 \10 yr Plan Scenario Three Bullet List 2012- 11doc~ -28- SCENARIO THREE CENTRAL CONTRA COSTA SANITARY DISTRICT FEBRUARY 16, 2012 BOARD FINANCIAL PLANNING WORKSHOP SCENARIO ASSUMPTIONS UPDATED WITH BOARD COMMITTEE REQUESTED CHANGES IN BLUE Funds Required /Available: The Funds Required calculation remains the same: 32% of next year's O &M + 30% of next year's Capital costs + 100% of Debt Service. The Funds Required formula is reviewed each year compared to actual spending. Funds required are defined as the amount of money held in cash and investments (liquid assets) that is needed on June 30'h of any fiscal year to meet our cash flow needs through mid - December, when we receive our first sewer service charge and property tax payment from Contra Costa County. Funds Available are made up of Running Expense, Sewer Construction Fund cash, and investment accounts. Keeping Funds Available above Funds Required eliminates the need for short -term borrowing for cash flow !! FILENAME \p NAGM \l0 -Year Financial Plan \10 -Year Financial Plan\2012 -13 \10 yr Plan Scenario Three Bullet List 2012- 13.doc= -29- $100,000,000 $90,000,000 $80,000,000 $70,000,000 $60,000,000 Cn L M $50,000,000 0 0 $40,000,000 $30,000,000 Central Contra Costa Sanitary District Funds Available Compared to Funds Required by Year Scenario 3 - 2012 Baseline Scenario $20,000,000 -- $10,000,000 $0 1 2011 -2012 2012 -2013 2013 -2014 2014 -2015 2015 -2016 TOTAL FUNDS AVAILABLE $54,012,383 44,138,989 38,405,967 39,583,712 42,868,828 •TOTAL FUNDS REQUIRED j $37,589,060 38,201,343 38,322,980 38,791,875 44,002,627 Increased Funds Available for large projects in the next five years; new solids treatment (digesters or new furnaces). 000� .0-00 0.01 2016 -2017 2017 -2018 2018 -2019 43,519,917 50,245,319 59,208,988 44,419,947 46,776,815 53,992,983 Fiscal Year 2019 -2020 59,275,093 54,173,721 2020 -2021 67,285,117 58,069,810 2/2/2012 1:47 PM N:\ACCOUNTING \GMTEMPI \10 -Year Plan Projections\2012 -2013 Projections \Workshop - Draft Scenarios \Worhsop drafts post 2 1 12 mtg\2012 3 - 10 -year plan model -New baseline.xls Summary for Curr yr Report Chart 9 -30- 2021 -2022 74,288,336 53,887,722 CENTRAL CONTRA COSTA SANITARY DISTRICT 10 -YEAR FINANCIAL PLANNING WORKSHEET SCENARIO 3 - BASELINE SCENARIO Fiscal Years 2012 -13 through 2021 -2022 -31- 2/2/2012 1:47 PM N:\A000UNTING\GMTEMPI\10 -Year Plan Projections\2012 -2013 Projections \Workshop - Draft Scenarios \Worhsop drafts post 2 1 12 mtg\2012 3 - 10 -year plan model -New baseline.xis Summary for Curr yr Report A E F G H I J K L M N O 1 Planning Year I RATE SETTING ASSUMPTIONS Projected »» 1 2 3 4 2011 -2012 2012 -2013 2013 -2014 2014 -2015 2015 -2016 5 6 7 8 9 10 2 3 4 2016 -2017 2017 -2018 2018 -2019 2019 -2020 2020 -2021 2021 -2022 s Service Data Assumptions (End of F.Y.) 163,658 164,458 - 800 165,258 166,058 167,658 - - 600 800 8_0_0_ 1100.0 0.49% 0.48% 0.60% -- 169,258 170,858 172,458 600 174,058 600 175,658 600 177,258 600 s JAdjustment to total RUE due to lower commercial accounts (800) 600 600 7 New Connections (RUE) for the labeled F.Y.. 800 1,000 1,000 1,000 1,000 1,000 1,000 8 Growth Per Year 0.49% 0.49% 0.60% 0.59% 0.59% 0.58% 0.57% 0.57% 9 10 SEWER SERVICE CHARGE DATA AND CALCULATIONS 11 lSewer Service Charge Rate - Debt Service - - - - - - - - - - - 12 Sewer Service Charge Rate - O &M $ 302 344 1 366 374 430 436 438 454 460 464 496 13 Sewer Service Charge Rate - Capital Total SSC Rate Increase to Rate - $ Increase to Rate - % $ 39 27 43 73 55 85 119 139 169 201 205 14 $ 341 371 409 447 485 521 557 593 629 665 701 15 $ 30 30 38 38 38 36 36 36 36 36 36 I 9.65% 8.80% 10.24% 9.29% 8.50% 7.42% 6.91% 6.46% 6.07% 5.72% 5.41% 16 19 zo 21 Total SSC Revenue Interest Revenue Rate Assumption $ 55,628,000 0.40% 60,865,677 0.75% 67,427,097 1.00% 74,049,317 1.50% 81,071,837 2.00% 87,923,141 2.50% 94,889,644 3.00% 101,971,348 3.50% 109,168,251 4.00% 116,480,354 5.00% 123,907,658 5.00% 22 23 Property Tax: 24 Growth %Assumption 0.00% 0.00% 0.00% 0.00% 1.00% 1.00% 2.00% 3.00% 3.00% 3.00% 3.00% 2s Growth $ $ (213,624) 1,061,000 (1,061,000) - 120,000 121,200 244,824 374,581 385,818 397,393 409,314 26 Tax Take or Repayment $ - 1,061,000 - - - - - - - - - 27 Property Tax - Total $ 12,000,000 13,061,000 12,000,000 12,000,000 12,120,000 12,241,200 12,486,024 12,860,605 13,246,423 13,643,816 14,053,130 28 29 Property Tax Impact on RUE $ 73.32 79.42 72.61 72.26 72.29 72.32 73.08 74.57 76.10 77.67 79.28 30 Connection Fee - Gravity tone $ 5,465 5,521 5,579 5,756 5,949 6,069 6,177 6,320 6,508 6,748 6,900 31 Percent Increase from PY 0.26% 1.02% 1.05% 3.17% 3.35% 2.02% 1.78% 2.32% 2.97% 3.69% 2.25% 32 lConn Fee - Pumped Zone $ 7,071 7,1141 7,151 1 7,323 7,503 7,593 7,719 7,835 7,985 8,194 8,300 33 Percent Increase from PY -0.30% 0.61% J 0.52% 1 2.41% 2.46% 1.20% 1.66% 1.50% 1.91% 2.62% 1.29% 34 3s 36 Percentage of Pumped Zone to Total Connections Retiree OPEB Annual Contributions 44.00% $ 8,300,000 50.00% 8,300,000 45.00% OTHER 8,300,000 1 45.00% SCENARIO 8,300,000 46.00% ASSUMPTIONS 8,300,000 47.00% 8,300,000 48.00% 8,300,000 35.00% 8,300,000 10.00% 8,300,000 10.00% 8,300,000 1 10.00% 8,500,000 37 Portion Allocated to PARS Trust $ 3,405,223 4,207,300 3,730,225 3,266,242 2,816,990 2,419,353 1,911,653 1,553,156 1,214,116 958,438 690,573 38 Estimated PARS Trust Balance (3% /year interest) $ 22,127,002 27,124,331 31,780,192 36,097,828 40,082,262 43,776,663 47,058,966 50,070,486 52,823,140 55,395,026 57,768,167 40 Salarylnflation (Impacted by Retirement Assumptions below) 2% 4% 3% 3% 3% 3% 3% 3% 3% 3% 3% 41 No. of New Retirements (net of deaths) 20 9 10 8 4 32.40% 11 - (1) 1.23%1 (4) (6) (6) 42 JTotal O &M Benefit Increase Per Year ( %) 15.97% 11.54% 11.07% 5.07% 1.27° 1.32% 1.17% 12.01% 43 Be in additional s 10 million ear to CCCERA UAAL 15 million in 2021 -22 44 Total 0 &M Expense Change from prior year ( %) 11.45% 7.68% 6.34% 4.64% 5.15% 15.15%7- 2.66% 1.99% 5.08% 2.23% 2.92% 7.02% 46 Capital Project Inflation % 0.00% 1.00% 1.50% 2.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 48 Debt Coverage Ratio Debt as a Percent of Revenue 3.38 3.56 3.72 4.51 13.51 7.81 8.89 3% 11.22 2% 14.50 2% 14.27 2% 15.72 2% 49 6% 6% 5% 5% 2% 3% -31- 2/2/2012 1:47 PM N:\A000UNTING\GMTEMPI\10 -Year Plan Projections\2012 -2013 Projections \Workshop - Draft Scenarios \Worhsop drafts post 2 1 12 mtg\2012 3 - 10 -year plan model -New baseline.xis Summary for Curr yr Report CENTRAL CONTRA COSTA SANITARY DISTRICT 10 -YEAR FINANCIAL PLANNING WORKSHEET SCENARIO 3 - BASELINE SCENARIO Fiscal Years 2012 -13 through 2021 -2022 50 51 A DEBT SERVICE FUND E ojected »» 2011 -2012 F 1 2012 -2013 G 2 2013 -2014 H 3 2014 -2015 I 4 2015-2016 J 5 2016 -2017 K 6 2017 -2018 L 7 2018 -2019 M N 8 9 2019 -2020 2020 -2021 O 10 2021 -2022 s2 TOTAL REVENUE: TOTAL EXPENSE: 53 $ 5,541,000 5,567,000 5,552,000 5,546,000 2,078,000 3,782,000 3,810,000 3,603,000 3,601,000 j 3,608,000 3,597,000 54 $ 5,541,000 - Projected» 2011 -2012 5,567,000 - 1 5,552,000 - 2 5,546,000 - 3 2,078,000 - 4 3,782,000 - 5 3,810,000 3,603,000 - - 6 l 7 2017 -2018 2018 -2019 3,601,000 3,608,000 - - 8 9 3,597,000 - 10 55 56 s7 Ending Fund Balance RUNNING EXPENSE FUND 58 2012 -2013 2013 -2014 2014 -2015 2015 -2016 2016 -2017 _ 2019 -2020 2020 -2021 2021 -2022 59 TOTAL REVENUE: $ 62,188,554 70,429,970 75,425,747 77,772,228 89,742,488 89,364,178 92,031,099 93,713,379 98,707,623 101,226,093 103,547,936 111,342,256 6o TOTAL EXPENSE: $ 64,773,102 69,747,376 74,167,446 77,608,038 91,738,096 93,559,949 98,314,728 100,504,622 103,435,296 110,692,544 61 REVENUE MINUS EXPENSE: $ (2,584,548) 682,594 1,258,302 164,189 378,310 293,003 153,429 392,895 721,471 112,640 649,712 s2 63 Ending Fund Balance $ 7,335,450 8,018,0_44 9,276,346 9,440,535 9,818,845 10,111,84-8—F 10,265,278 10,658,173 11,379,644 11,492,283 12,141,996 64 65 ss Prudent Reserve SEWER CONSTRUCTION 14.22% Projected» 2 011 -2012 9.89% 1 10.33% 2 2013 -2014 10.38% 3 2014 -2015 10.29% 4 2015 -2016 10.49% 5 2016 -2012018 10.29% �2017-2018 10.21% 10.30% 10.28% 10.08% 67 2012 -2013 -2019 2019 -2020 2020 -2021 2021 -2022 68 TOTAL REVENUE: $ 22,246,000 21,787,012 22,727,876 27,488,247 29,964,599 27,057,793 36,572,875 42,141,184 47,614,447 60,112,980 j 66,118,807 69,857,493 69 TOTAL CAPITAL EXPENDITURES: $ 27,649,000 32,343,000 29,719,200 26,474,692 36,214,789 35,569,212 39,043,672 60,768,347 j 58,221,422 63,503,986 70 REVENUE MINUS CAPITAL EXPENDITURES: $ (5,403,000) (10,555,988); (6,991,324) 1,013,555 2,906,806 358,086 6,571,973 8,570,774 (655,367) 7,897,385 6,353,506 71 BOND PROCEEDS: - - - - - - - - - - - 73 74 7s 76 Ending Fund Balance TOTAL $ 46,676,933 Projected» 2011 -2012 36,120,945 1 2012 -2013 29,129,622 2 30,143,177 3 33,049,983 4 33,408,069 5 2016 -2017 39,980,042 6 48,550,816 7 47,895,449 55,792,834 8 9 62,146,341 10 2013 -2014 2014 -2015 2015 -2016 2017 -2018 2018 -2019 2019 -2020 1 2020 -2021 2021 -2022 77 TOTAL FUNDS AVAILABLE $ 54,012,383 44,138,989 38,405,967 39,583,712 42,868,828 43,519,917 50,245,319 59,208,988 59,275,093 j 67,285,117 74,288,336 78 FUNDS REQUIRED 3,603,000 79 100% of Debt Service $ 5,567,000 5,552,000 5,546,000 2,078,000 3,782,000 3,810,000 3,601,000 3,608,000 3,597,000 3,593,500 8o 32% of Next Year's O &M Expense $ 22,319,160 23,733,583 24,834,572 28,596,53_7 29,356,191 29,939,184 31,460,713 32,161,479 33,099,295 35,421,614 36,484,263 81 30% of Next Year's Capital Expenditures $ 9,702,900 8,915,760 7,942,407 8,117,338 10,864,437 10,670,763 11,713,102 18,230,504 17,466,427 19,051,196 13,809,959 82 TOTAL FUNDS REQUIRED $ 37,589,060 38,201,343 38,322,980 38,791,875 44,002,627 44,419,947 46,776,815 53,992,983 54,173,721 58,069,810 53,887,722 83 - - -- - -- Funds Available Amount Above /(Below) Funds Required �- 791,837 (1,133,800) (900,030) 3,468,505 84 85 $ 16,423,322 5,937,647 82,988 5,216,005 5,101,371 9,215,307 20,400,615 -32- 2/2/2012 1:47 PM N:\AC000NTING\GMTEMPI \10 -Year Plan Projections\2012 -2013 Projections\Workshop - Draft Scenarios \Worksop drafts post 2 1 12 mtg\2012 3 - 10 -year plan model -New baseline.xis Summary for Curr yr Report SCENARIO FOUR CENTRAL CONTRA COSTA SANITARY DISTRICT FEBRUARY 16, 2012 BOARD FINANCIAL PLANNING WORKSHOP SCENARIO ASSUMPTIONS UPDATED WITH BOARD COMMITTEE REQUESTED CHANGES IN BLUE Scenario 4 uses the same assumptions as Scenario 3. The only difference is in the annual Sewer Service Charge increases. In this scenario, two S50 rate increases are front - loaded to see the impact of the time value of money. Scenario Premise: • The 2 -year, up to $30 SSC rate increase approved by the Board for 2011 -12 and 2012 -13, is displayed in this scenario. • The 2011 -12 O &M projection is based on the 6 -month budget review and is the basis of future year projections. • The goal of this year's scenario is to change only significant assumptions used in the model for ease of comparison to the 2011 recommended scenario. The bullets in this section highlight significant differences from this year to last year. o Capital project spending assumptions presented at the December 15, 2011 CIB Workshop are used in the model. The impact in the 10 -year period is a $13.7 million reduction in the current year scenario because project costs for new solids treatment (digesters or new furnaces) were shifted to future years outside of the 10 -year window. o Employee benefits are updated based on current information and include known rate increases. The largest impacts are in the CCCERA rate increases and the GASB -45 Annual Required Contribution (ARC) discussed below. The CCCERA unfunded liability will increase by another $22 million for the 2012 -13 rate - setting process. $1.9 million per year, which is the approximate annual amount that is amortized over 18 years, is included beginning in 2012- 13 in the 10 -Year Plan model. This is in addition to the assumed regular annual increase for normal costs. CCCERA rate increases that are multiplied times salary are: 9.17% rate increase in 2011 -12, 13.79% rate increase in 2012 -13, and 10.34% rate increase in 2013 -14. Retirement costs in this year's model over the 10 -year period are $24.7 million higher than what was assumed in the 2011 model, mainly due to the large unanticipated UAAL increases in recent years due to de- pooling. The GASB OPEB ARC increased to $8.3 million per year. The ARC used in the 2011 scenario ranged from $5.5 million to $6.0 million per year. The impact in the 10 -year period is $25.7 million more in the current 10 -Year Scenario. !! FILENAME \p NAGM\10 -Year Financial Plan \10 -Year Financial Plan\2012 -13 \10 yr Plan Scenario Four Bullet List 2012- 13.doc -33- SCENARIO FOUR CENTRAL CONTRA COSTA SANITARY DISTRICT FEBRUARY 16, 2012 BOARD FINANCIAL PLANNING WORKSHOP SCENARIO ASSUMPTIONS UPDATED WITH BOARD COMMITTEE REQUESTED CHANGES IN BLUE • Positive O &M expense account variances in other line items, including salaries because of assumed savings due to retirements and hiring lags, help offset the additional CCCERA and OPEB costs. Total O &M expenses in the 10 -year period are $31.9 million higher in the current model compared to last year's 10 -Year model. • The total number of RUE's is calculated by taking total SSC revenue in any given year divided by the SSC rate for that year. The total RUE count was significantly reduced in 2009 -10 ( -3,996 RUE) due to lower number of connection equivalents and lower water usage of commercial accounts that are billed based on water usage. In last year's model, staff assumed the total RUE count would return to previous levels in 2 years and added back 2,000 additional RUE in each of the 2 years. This was too optimistic. In this year's model, the 2011 -12 projected RUE is even lower and is calculated to be almost 6,000 RUE lower than the assumption used in 2011. To phase back RUE over time, 600 RUE per year are added back in the current model beginning in 2013- 44 2015 -16. Also, regular connections were reduced in 2012 -13 through 2014 -15. The total RUE count 2020 -21 the GLArreRt model spews total RUE a eHt 4,000 is 2,779 less than the prior year 2011 scenario. If last year's SSC rate increases were applied to the lower RUE assumptions, revenue would have calculated $22.2 million lower in the current model in the 10 -year period. Higher revenue amounts in other line items, such as Concord revenue from treatment plant capital improvements, helped soften projected SSC rate increases in the current 2012 scenario. The section below provides more information on assumptions used in the 10 -Year Plan scenarios. Revenue: • Interest Rates: 2010 -11 was updated to actual average interest rate of 0.40 %. Future years remained the same as the 2011 assumptions and gradually increase from 0.75% in 2012 -13 to a cap of 5.0 %. Current 2011 -12 Property Tax Revenue is estimated to be $12.0 million versus a total budget of $12.2 million. In the 2011 model, property tax revenue was estimated to be $12.2 million for 2011 -12, • No property tax revenue growth is predicted through 2012 13 2014 -15, and then 1% per year increases are assumed starting in 2015 -16 through 2014 15 2016 -17, 2% per year in 6 2017 -18, and then 3% per year going forward. FILENAME \p NAGM \l0 -Year Financial Plan \10 -Year Financial Plan\2012 -13 \10 yr Plan Scenario Four Bullet List 2012- 13.doc -34- SCENARIO FOUR CENTRAL CONTRA COSTA SANITARY DISTRICT FEBRUARY 16, 2012 BOARD FINANCIAL PLANNING WORKSHOP SCENARIO ASSUMPTIONS UPDATED WITH BOARD COMMITTEE REQUESTED CHANGES IN BLUE • The State repayment of borrowed property tax in the amount of $1.1 million is the same assumption in this year's and last year's scenario.. • Connection fee rates are the same as in the 2011 model; in 2011 -12 the facility capacity fee is $5,465 and increases to $6,900 by 2021 -22. The pump zone fee is $7,071 in 2011 -12 and increases to $8,300 by 2020 -21. • The number of new connections per year WhiGh were is 800 connections in 2012 -13, , and then increase to 1,000 connections per year in 2013 -14 going forward through 2014 -15. Expense /Expenditures /Debt: • Capital Project expenditures, that are based on the figures presented at the December 15, 2011 Board Workshop, are inflated by 1 % in 2013 -14, 1.5% in 2014 -15, 2.0% in 2015 -16 and then 3% per year thereafter. These inflation assumptions are used in last year's and this year's scenarios. • O &M annual inflation varies in the 10 years projected, but in general, salaries are inflated by 3.5% per year and all other accounts by 3% per year, except for chemicals and utilities that fluctuate according to current market conditions. • Salary vacancy of 3 %, and benefit vacancy of 4% are used in the model. This means projections are reduced by 3% per year for salaries and 4% per year for benefits to account for unfilled positions. • Employee retiree and refilling assumptions are updated in 2011 -12 and remain the same as last year for future years. • For consistency when comparing scenarios, the large annual payments beginning in 2015- 16 to pay down our CCCERA UAAL presented in last year's Recommended Scenario are also included in the 2012 Recommended Scenario. In both scenarios, the payments total $75 million, but the annual distribution is different; in the 2012 current year model, $15 million was shifted from 2020 -21 into 2021 -22. • There is no new debt issued in either scenario. H FILENAME \p NAGM\10 -Year Financial Plan \10 -Year Financial Plan\2012 -13 \10 yr Plan Scenario Four Bullet List 2012- 13.doc1 -35- SCENARIO FOUR CENTRAL CONTRA COSTA SANITARY DISTRICT FEBRUARY 16, 2012 BOARD FINANCIAL PLANNING WORKSHOP SCENARIO ASSUMPTIONS UPDATED WITH BOARD COMMITTEE REQUESTED CHANGES IN BLUE GASB- 45 /OPEB: • The OPEB /GASB -45 ARC is $8.3 million per year ($50 of the SSC rate) based on the actuarial estimate by John Bartell. The $8.3 million per year is assumed in all 10 years. Funds Required /Available: The Funds Required calculation remains the same: 32% of next year's O &M + 30% of next year's Capital costs + 100% of Debt Service. The Funds Required formula is reviewed each year compared to actual spending. Funds required are defined as the amount of money held in cash and investments (liquid assets) that is needed on June 30'h of any fiscal year to meet our cash flow needs through mid - December, when we receive our first sewer service charge and property tax payment from Contra Costa County. Funds Available are made up of Running Expense, Sewer Construction Fund cash, and investment accounts. Keeping Funds Available above Funds Required eliminates the need for short -term borrowing for cash flow 9 FILENAME \p NAGM\10 -Year Financial Plan \10 -Year Financial Plan\2012 -13 \10 yr Plan Scenario Four Bullet List 2012- 13.Joc -36- c� 0 0 Central Contra Costa Sanitary District Funds Available Compared to Funds Required by Year Scenario 4 - 2012 Baseline Scenario - 2 years of $50 SSC rate increases (2013 -14 and 2014 -15) $100,000,000 $90,000,000 $80,000,000 $70,000,000 $60,000,000 $50,000,000 $40,000,000 $30,000,000 $20,000,000 $10,000,000 $ 1 2011 -2012 2012 -2013 2013 -2014 2014 -2015 2015 -2016 TOTAL FUNDS AVAILABLE $54,012,383 44,138,989 40,384,269 45,567,490 51,145,341 'TOTAL FUNDS REQUIRED $37,589,060 38,201,343 38,322,980 38,791,875 44,002,627 -37- Increased Funds Available for large projects in the next five years; new solids treatment (digesters or new furnaces). %waft ftft 0-00 0000 P— 0000, 0000 + 1 2016 -2017 2017 -2018 52,678,377 58,826,740 44,419,947 46,776,815 Fiscal Year 2018 -2019 65,683,341 53,992,983 2019 -2020 62,016,576 54,173,721 2020 -2021 64,558,605 58,069,810 2021 -2022 64,178,403 53,887,722 CENTRAL CONTRA COSTA SANITARY DISTRICT 10 -YEAR FINANCIAL PLANNING WORKSHEET SCENARIO 4 - BASELINE WITH 2 FRONT - LOADED S50 RATE INCREASES Fiscal Years 2012 -13 through 2021 -2022 -38- 2/3/2012 1:56 PM NAACCOUNTING \GMTEMPI \10 -Year Plan Projections\2012 -2013 Projections \Workshop - Draft Scenarios \Workshop drafts post 2 1 12 mtg\2012 4 - 10 -year plan model -New baseline 50.50.xis Summary for Curr yr Report A E F G H I J K L M N 0 1 2 3 Planning Year Projected »» RATE 1 2 SETTING ASSUMPTIONS 3 4 5 6 7 8 9 10 a 2011 -2012 2012 -2013 2013 -2014 2014 -2015 2015 -2016 2016 -2017 2017 -2018 2018 -2019 2019 -2020 2020 -2021 2021 -2022 5 Service Data Assumptions (End of F.Y.) 163,658 164,458 1651258 166,058 167,658 169,258 170,858 172,458 174,058 175,658 177,258 6 Adjustment to total RUE due to lower commercial accounts (800) - - - 600 600 600 600 600 600 600 7 New Connections (RUE) for the labeled F.Y.. 800 800 800 800 1,000 1,000 1,000 1,000 1,000 1,000 1,000 8 Growth Per Year 0.49% 0.49% 0.49% 0.48% 0.60% 0.60% 0.59% 0.59% 0.58% 0.57% 0.57% 9 to SEWER SERVICE CHARGE DATA AND CALCULATIONS 11 Sewer Service Charge Rate - Debt Service - - - - - - - - - - - 12 Sewer Service Charge Rate - O &M $ 302 344 366 374 430 438 438 452 460 464 496 Service Charge Rate - Capital Total SSC Rate Increase to Rate - $ Increase to Rate - % Total SSC Revenue $ 39 27 55 97 68 87 114 127 146 169 164 r $ 341 371 421 471 498 525 552 579 606 633 660 15Sewer $ 30 30 50 50 27 27 27 27 27 27 27 9.65% 8.80% 13.48% 11.88% 5.73% 5.42% 5.14% 4.89% 4.66% 4.46% 4.27% $ 55,628,000 60,865,677 69,405,398 78,025,119 83,244,897 88,598,175 94,037,852 99,563,930 105,176,407 110,875,285 116,660,562 19 20 21 Interest Revenue Rate Assumption 0.40% 0.75% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% 4.00% 5.00% 5.00% 22 23 Property Tax: 24 Growth %Assumption 0.00% 0.00% 0.00% 0.00% 1.00% 1.00% 2.00% 3.00% 3.00% 3.00% 3.00% 25 Growth $ $ (213,624) 1,061,000 (1,061,000) - 120,000 121,200 244,824 374,581 385,818 397,393 409,314 26 Tax Take or Repayment $ - 1,061,000 - - - - - - - - - 27 Property Tax - Total $ 12,000,000 13,061,000 12,000,000 12,000,000 12,120,000 12,241,200 12,486,024 12,860,605 13,246,423 13,643,816 14,053,130 28 29 3o Property Tax Impact on RUE Connection Fee - Gravity Zone $ 73.32 $ 5,465 79.42 5,521 72.61 5,579 72.26 5,756 72.29 5,949 72.32 6,069 73.08 6,177 74.57 6,320 76.10 6,508 77.67 6,748 79.28 6,900 31 Percent Increase from PY 0.26% 1.02% 1.05% 3.17% 3.35% 2.02% 1.78% 2.32% 2.97% 3.69% 2.25% 32 Conn Fee - Pumped Zone $ 7,071 7,114 7,151 7,323 7,503 7,593 7,719 7,835 7,985 8,194 8,300 33 Percent Increase from PY -0.30% 0.61% 0.52% 2.41% 2.46% 1.20% 1.66% 1.50% 1.91% 2.62% 1.29% 34 35 36 Percentage of Pumped Zone to Total Connections Retiree OPEB Annual Contributions 44.00% $ 8,300,000 50.00% 8,300,000 45.00% OTHER 8,300,000 45.00% SCENARIO 8,300,000 46.00% ASSUMPTIONS 8,300,000 47.00% 8,300,000 48.00% 8,300,000 35.00% 8,300,000 10.00% 8,300,000 10.00% 8,300,000 10.00% 8,500,000 37 Portion Allocated to PARS Trust $ 3,405,223 4,207,300 3,730,225 3,266,242 2,816,990 2,419,353 1,911,653 1,553,156 1,214,116 958,438 690,573 3e Estimated PARS Trust Balance (3% /year interest) $ 22,127,002 27,124,331 31,780,192 36,097,828 40,082,262 43,776,663 47,058,966 50,070,486 52,823,140 55,395,026 57,768,167 40 Salary Inflation (impacted by Retirement Assumptions below) 2% 4% 3% 3% 3% 3% 4 11 32.40 %� 1. 3% - -- 3:27 °10 3% 3% 3% 3% 41 No. of New Retirements (net of deaths) 20 9 10 8 _ (1) 1.23% (4) (6) (6) 42 Total O &M Benefit Increase Per Year ( %) 15.97% 11.54% 11.07% 5.07% 1.32% 1.17% 12.01% 43 Begin additional $10 million /year to CCCER:A UAAL ($15 million in 2021 -22) 44 Total O &M Expense Change from prior year ( %) 11.45% 7.68% 6.34% 4.64% 15.15% o 9°0 2.23% 2.92% 7.02% 46 Capital Project Inflation % 0.00% 1.00% 1.50% 2.00% 3.00% 3.00% 3.00 %� 3.00% 3.00% 3.00% 3.00% N49 Debt_Coverage Ratio 3.38 3.56 4.08 5.23 14.62 8.04 8.74 10.63 13.46 12.76 13.67 Debt as a Percent of Revenue 6% 6% 5% 5% 2% 3% 3% 2% 2% 2% 2% -38- 2/3/2012 1:56 PM NAACCOUNTING \GMTEMPI \10 -Year Plan Projections\2012 -2013 Projections \Workshop - Draft Scenarios \Workshop drafts post 2 1 12 mtg\2012 4 - 10 -year plan model -New baseline 50.50.xis Summary for Curr yr Report CENTRAL CONTRA COSTA SANITARY DISTRICT 10 -YEAR FINANCIAL PLANNING WORKSHEET SCENARIO 4 - BASELINE WITH 2 FRONT - LOADED $50 RATE INCREASES Fiscal Years 2012 -13 through 2021 -2022 50 s1 A E Projected »» 2011 -2012 F 1 2012 -2013 G I REVENUE, 2 2013 -2014 H I I I EXPENSE AND FUND BALANCE 3 4 2014 -2015 2015 -2016 J I 5 2016 -2017 K 6 2017 -2018 L M 7 8 2018 -2019 I 2019 -2020 N 9 2020 -2021 O 10 2021 -2022 52 TOTAL REVENUE: TOTAL EXPENSE: 53 $ 5,541,000 5,567,000 5,552,000 5,546,000 2,078,000 3,782,000 3,810,000 3,603,000 3,601,000 3,608,000 3,597,000 54 $ 5,541,000 5,567,000 5,552,000 5,546,000 2,078,000 3,782,000 3,810,000 3,603,000 3,601,000 3,608,000 3,597,000 ss 1 Ending Fund Balance 1 - - - - - - - - - - - 56 57 RUNNING EXPENSE FUND Projected» 1 2 3 4 5 6 7 8 9 10 58 2011 -2012 2012 -2013 2013 -2014 1 2014 -2015 2015 -2016 1 2016 -2017 2017 -2018 2018 -2019 2019 -2020 2020 -2021 2021 -2022 59 _ TOTAL REVENUE: $ 62,188,554 70,429,970 75,425,747 77,772,228 89,742,488 92,368,616 93,723,504 98,375,873 101,226,729 103,548,762 111,343,124 6o TOTAL EXPENSE: $ 64,773,102 69,747,376 74,167,446 77,608,038 89,364,178 91,738,096 93,559,949 98,314,728 100,504,622 103,435,296 110,692,544 61 REVENUE MINUS EXPENSE: $ (2,584,548)1 682,594 I 1,258,302 164,189 378,310 630,520 163,555 61,145 722,107 113,466 650,580 62 63 Ending Fund Balance $ 7,335,450 8,018,044 9,276,346 9,440,535 9,818,845 10,449,365 10,612,920 10,674,066 11,396,172 10.32% 11,509,638 12,160,219 64 Prudent Reserve 14.22% 9.89% 10.33 %� 10.38% 10.29% 10.49% 10.63% 10.56%j 10.30%1 10.09% 65 ss 67 SEWER CONSTRUCTION Projected» 2011 -2012 1 2012 -2013 2 3 2013 -2014 2014 -2015 4 2015 -2016 5 2016 -2017 6 2017 -2018 7 8 9 10 2018 -2019 2019 -2020 2020 -2021 2021 -2022 68 TOTAL REVENUE: $ 22,246,000 21,787,012 24,706,178 31,493,724 32,257,334 37,117,304 36,214,789 41,554,021 35,569,212 45,839,128 56,379,474 60,649,985 62,473,204 69 TOTAL CAPITAL EXPENDITURES: $ 27,649,000 32,343,000 29,719,200 26,474,692 27,057,793 39,043,672 60,768,347 58,221,422 63,503,986 7o REVENUE MINUS CAPITAL EXPENDITURES: $ (5,403,000) (10,555,988) (5,013,022) 5,019,032 5,199,541 902,516 5,984,809 6,795,455 (4,388,873) 2,428,563 (1,030,783) 71 BOND PROCEEDS: - - - - - - - - - - - 73 Ending Fund Balance $ 46,676,933 36,120,945 31,107,923 36,126,955 41,326,496 42,229,011 48,213,820 55,009,276 50,620,403 53,048,967 52,018,184 7a 7s TOTAL FUND • A Projected» 2011 -2012 1 2012 -2013 2 2013 -2014 3 2014 -2015 4 2015 -2016 5 2016 -2017 6 7 8 9 10 76 2017 -2018 2018 -2019 2019 -2020 2020 -2021 2021 -2022 77 TOTAL FUNDS AVAILABLE $ 54,012,383 44,138,989 40,384,269 ' 45,567,490 51,145,341 52,678,377 58,826,740 65,683,341 62,016,576 64,558,605 64,178,403 76 FUNDS REQUIRED 3,608,000 33,099,295 79 100% of Debt Service $ 5,567,00_0 5,552,0_00 5,546,000 2,078,000 24,834,572 28,596,537 3,782,000 29,356,191 3,810,000 29,939,184 10,670,763 3,603,000 31,460,713 3,601,000 32,161,479 3,597,000 35,421,614 3,593,500 80.32% of Next Year's O &M Expense $ 22,319,160 23,733,583 36,484,263 81 30% of Next Year's Capital Expenditures $ 9,702,900 8,915,760 7,942,407 8,117,338 10,864,437 11,713,102 18,230,504 17,466,427 19,051,196 13,809,959 82 TOTAL FUNDS REQUIRED $ 37,589,060 38,201,343 38,322,980 38,791,875 44,002,627 44,419,947 46,776,815 53,992,983 54,173,721 58,069,810 53,887,722 83 7,842,854 6,488,795 10,290,681 8a Funds Available Amount Above /(Below) Funds Required $ 16,423,322 5,937,647 2,061,289 6,775,615 7,142,713 8,258,429 12,049,926 11,690,358 85 -39- 2/3/2012 1:56 PM N:WC000NTINMGMTEMPI \10 -Year Plan Projections\2012 -2013 Projections\Workshop - Draft Scenarios \Workshop drafts post 2 1 12 mtg\2012 4 -10 -year plan model -New baseline 50- 50.xis Summary for Curr yr Report SCENARIO FIVE CENTRAL CONTRA COSTA SANITARY DISTRICT FEBRUARY 16, 2012 BOARD FINANCIAL PLANNING WORKSHOP SCENARIO ASSUMPTIONS UPDATED WITH BOARD COMMITTEE REQUESTED CHANGES IN BLUE Scenario 5 uses the same assumptions as Scenario 3 & 4. In addition to these assumptions, we assume that the $122.5 million CCCERA UAAL is paid -off by 2021 -22. Specific information is provided below using GREEN font. Scenario Premise: • The 2 -year, up to $30 SSC rate increase approved by the Board for 2011 -12 and 2012 -13, is displayed in this scenario. The 2011 -12 O &M projection is based on the 6 -month budget review and is the basis of future year projections. • The goal of this year's scenario is to change only significant assumptions used in the model for ease of comparison to the 2011 recommended scenario. The bullets in this section highlight significant differences from this year to last year. o Capital project spending assumptions presented at the December 15, 2011 CIB Workshop are used in the model. The impact in the 10 -year period is a $13.7 million reduction in the current year scenario because project costs for new solids treatment (digesters or new furnaces) were shifted to future years outside of the 10 -year window. o Employee benefits are updated based on current information and include known rate increases. The largest impacts are in the CCCERA rate increases and the GASB -45 Annual Required Contribution (ARC) discussed below. The CCCERA unfunded liability will increase by another $22 million for the 2012 -13 rate - setting process. $1.9 million per year, which is the approximate annual amount that is amortized over 18 years, is included beginning in 2012- 13 in the 10 -Year Plan model. This is in addition to the assumed regular annual increase for normal costs. CCCERA rate increases that are multiplied times salary are: 9.17% rate increase in 2011 -12, 13.79% rate increase in 2012 -13 and 10.34% rate increase in 2013 -14. RP_tirer^e ^t ^^qty ;n th*o Payment of the $122.5 million, plus interest assessed each year on the unpaid balance and assumed savings in annual rates due to reducing UAAL amounts each year with accelerated payments, are included in this scenario. Total CCCERA cost over 10 years is $306.7 million, $61.0 million more than Baseline and $85.8 million more than in last year's model. " FILENAME \p NAGM \10 -Year Financial Plan \10 -Year Financial Plan\2012 -13 \10 yr Plan Scenario Five Bullet List 2012- 13.doe -40- SCENARIO FIVE CENTRAL CONTRA COSTA SANITARY DISTRICT FEBRUARY 16, 2012 BOARD FINANCIAL PLANNING WORKSHOP SCENARIO ASSUMPTIONS UPDATED WITH BOARD COMMITTEE REQUESTED CHANGES IN BLUE The GASB OPEB ARC increased to $8.3 million per year. The ARC used in the 2011 scenario ranged from $5.5 million to $6.0 million per year. The impact in the 10 -year period is $25.7 million more in the current 10 -Year Scenario. o Positive O &M expense account variances in other line items, including salaries because of assumed savings due to retirements and hiring lags, help offset the additional CCCERA and OPEB costs. Total O &M expenses in the 10 -year period are $31.9 millie 10-Year medel $37 million higher than Baseline or $68.9 million higher than the 2011 model. o The total number of RUE's is calculated by taking total SSC revenue in any given year divided by the SSC rate for that year. The total RUE count was significantly reduced in 2009 -10 ( -3,996 RUE) due to lower number of connection equivalents and lower water usage of commercial accounts that are billed based on water usage. In last year's model, staff assumed the total RUE count would return to previous levels in 2 years and added back 2,000 additional RUE in each of the 2 years. This was too optimistic. In this year's model, the 2011 -12 projected RUE is even lower and is calculated to be almost 6,000 RUE lower than the assumption used in 2011. To phase back RUE over time, 600 RUE per year are added back in the current model beginning in 2013- 44 2015 -16. Also, regular connections were reduced in 2012 -13 through 2014 -15. The total RUE count 2020 21 the GWrreRt medel shows tetal RUE at abeut 1,000 is 2.779 less than the prior year 2011 scenario. If last year's SSC rate increases were applied to the lower RUE assumptions, revenue would have calculated $22.2 million lower in the current model in the 10 -year period. Higher revenue amounts in other line items, such as Concord revenue from treatment plant capital improvements, helped soften projected SSC rate increases in the current 2012 scenario. The section below provides more information on assumptions used in the 10 -Year Plan scenarios. Revenue: Interest Rates: 2010 -11 was updated to actual average interest rate of 0.40 %. Future years remained the same as the 2011 assumptions and gradually increase from 0.75% in 2012 -13 to a cap of 5.0 %. 11 FILENAME \p N: \GM \l0 -Year Financial Plan \10 -Year Financial Plan\2012 -13110 yr Plan Scenario Five Bullet List 2012- 13.doc -41- SCENARIO FIVE CENTRAL CONTRA COSTA SANITARY DISTRICT FEBRUARY 16, 2012 BOARD FINANCIAL PLANNING WORKSHOP SCENARIO ASSUMPTIONS UPDATED WITH BOARD COMMITTEE REQUESTED CHANGES IN BLUE • Current 2011 -12 Property Tax Revenue is estimated to be $12.0 million versus a total budget of $12.2 million. In the 2011 model, property tax revenue was estimated to be $12.2 million for 2011 -12. • No property tax revenue growth is predicted through 2012 2014 -15, and then 1 % per year increases are assumed starting in 2015 -16 through 2014- X2016 -17, 2% per year in 2015 -16 2017 -18, and then 3% per year going forward. • The State repayment of borrowed property tax in the amount of $1.1 million is the same assumption in this year's and last year's scenario.. • Connection fee rates are the same as in the 2011 model; in 2011 -12 the facility capacity fee is $5,465 and increases to $6,900 by 2021 -22. The pump zone fee is $7,071 in 2011 -12 and increases to $8,300 by 2020 -21. • The number of new connections per year is the same as pFejeGted 'R the 2011 w#+se is 800 connections in 2012 -13, , and then increase to 1,000 connections per year in 2013 -14 going forward through 2014 -15. Expense /Expenditures /Debt: • Capital Project expenditures, that are based on the figures presented at the December 15, 2011 Board Workshop, are inflated by 1 % in 2013 -14, 1.5% in 2014 -15, 2.0% in 2015 -16 and then 3% per year thereafter. These inflation assumptions are used in last year's and this year's scenarios. • O &M annual inflation varies in the 10 years projected, but in general, salaries are inflated by 3.5% per year and all other accounts by 3% per year, except for chemicals and utilities that fluctuate according to current market conditions. • Salary vacancy of 3 %, and benefit vacancy of 4% are used in the model. This means projections are reduced by 3% per year for salaries and 4% per year for benefits to account for unfilled positions. • Employee retiree and refilling assumptions are updated in 2011 -12 and remain the same as last year for future years. '! FILENAME \p N: \GM\10 -Year Financial Plan \10 -Year Financial Plan\2012 -13 \10 yr Plan Scenario Five Bullet List 2012 -1 Adoc -42- SCENARIO FIVE CENTRAL CONTRA COSTA SANITARY DISTRICT FEBRUARY 16, 2012 BOARD FINANCIAL PLANNING WORKSHOP SCENARIO ASSUMPTIONS UPDATED WITH BOARD COMMITTEE REQUESTED CHANGES IN BLUE - -- _ • _ annual $75 millien, but the d'strOutien is e 9eFent; iR the 204 2 .. m*114o was shifted from • • e • • • 1 • •' • 1 million more than Baseline and $85.8 million more than in last year's model. • There is no new debt issued in either scenario. GASB- 45 /OPEB: • The OPEB /GASB -45 ARC is $8.3 million per year ($50 of the SSC rate) based on the actuarial estimate by John Bartell. The $8.3 million per year is assumed in all 10 years. Funds Required /Available: The Funds Required calculation remains the same: 32% of next year's O &M + 30% of next year's Capital costs + 100% of Debt Service. The Funds Required formula is reviewed each year compared to actual spending. Funds required are defined as the amount of money held in cash and investments (liquid assets) that is needed on June 30th of any fiscal year to meet our cash flow needs through mid - December, when we receive our first sewer service charge and property tax payment from Contra Costa County. Funds Available are made up of Running Expense, Sewer Construction Fund cash, and investment accounts. Keeping Funds Available above Funds Required eliminates the need for short -term borrowing for cash flow P FILENAME \p N: \GM \l0 -Year Financial Plan \10 -Year Financial Plan \2012 -13 \10 yr Plan Scenario Five Bullet List 2012- 13.docl -43- Central Contra Costa Sanitary District Funds Available Compared to Funds Required by Year Scenario 5 - 2012 Baseline Scenario but added CCCERA full UAAL repayment by the end of 10 -years $100,000,000 $90,000,000 $80,000,000 $70,000,000 $60,000,000 Would potentially require short -term financing or change in U) payments, $50,000,000 such as not nrefundina the CCCERA oavment to aid with cash flow. O DNEW= $40,000,000 i / $30,000,000 $20,000,000 $10,000,000 TOTAL FUNDS AVAILABLE 'TOTAL FUNDS REQUIRED 2011 -2012 2012 -2013 2013 -2014 2014 -2015 $54,012,383 441138,989 31,357,840 30,040,885 $37,589,060 42,194,943 41,945,094 39,764,682 Increased Funds Available for large projects in the next five years; new solids treatment (digesters or new furnaces). � — _ � � 0000 .00P so-ON 2015 -2016 2016 -2017 2017 -2018 41,569,447 48,4511714 57,141,460 44,943,488 46,165,187 48,927,849 Fiscal Year 2018 -2019 64,735,809 55,833,882 2019 -2020 61,850,212 55,683,375 2020 -2021 65,266,587 58,073,517 2021 -2022 68,977,352 53,891,540 2/2/2012 1:51 PM N:\AC000NTING \GMTEMPI \10 -Year Plan Projections\2012 -2013 Projections \Workshop - Draft Scenarios \Worhsoo drafts post 2 1 12 mtg\2012 5 baseline plus full payment of UAAL cash payments - payments ramp up.xls Summary for Curr yr Report Cha -44- CENTRAL CONTRA COSTA SANITARY DISTRICT 10 -YEAR FINANCIAL PLANNING WORKSHEET SCENARIO 5 - BASELINE PLUS FULL PAY -OFF OF UAAL IN THE 10 -YEAR WINDOW Fiscal Years 2012 -13 through 2021 -2022 -45- 2/2/2012 1:51 PM N:\AC000NTING \GMTEMP1 \10 -Year Plan Projection s\2012-201 3 Projections \Workshop - Draft Scenarios \Worhsop drafts post 2 1 12 mtg\2012 5 baseline plus full payment of UAAL cash payments - payments ramp up.xis Summary for Curr yr Report A E F G H I J K L M N O 1 Planning Year Projected »» 1 RATE SETTING 2 3 ASSUMPTIONS 4 5 6 7 i 8 9 10 2 3 4 2011 -2012 2012 -2013 2013 -2014 2014 -2015 2015 -2016 2016 -2017 2017 -2018 2018 -2019 2019 -2020 2020 -2021 2021 -2022 5 Service Data Assumptions (End of F.Y.) 163,658 164,458 165,258 - - 800 800 166,058 - 800 0.48% 167,658 600 169,258 170,858 172,458 600 174,058 175,658 177,258 s Adjustment to total RUE due to lower commercial accounts (800) 600 600 600 600 600 7 New Connections (RUE) for the labeled F.Y.. 800 1,00.0 1,000 1,000 1,000 1,000 1,000 0.57% 1,000 0.57% 8 Growth Per Year 0.49% 0.49% 0.49% 0.60% 0.60% 0.59% 0.59% 0.58% SEWER SERVICE CHARGE DATA AND CALCULATIONS 190 11 Sewer Service Charge Rate - Debt Service - - - - - - - - - - - 12 Sewer Service Charge Rate - O &M $ 302 350 426 434 444 452 466 486 488 488 492 13 Sewer Service Charge Rate - Capital Total SSC Rate Increase to Rate - $ Increase to Rate - % Total SSC Revenue $ 39 21 5 57 107 121 129 131 151 173 191 14 $ 341 371 431 491 551 573 595 617 639 661 683 15 $ 30 30 60 60 60 22 22 22 22 21 22 9.65% 8.80% 16.17% 13.92% 12.22% 3.99% 3.84% 3.70% 3.57% 3.44% 3.33% 16 19 $ 55,628,000 60,865,677 71,053,982 81,338,288 92,104,294 96,698,579 101,363,264 106,098,350 110,903,835 115,779,721 120,726,006 20 21 Interest Revenue Rate Assumption 0.40% 0.75% 1.00% 1.50% 2.00% 2.50% 3.50% 4.00% 5.00% 5.00% 22 23 Property Tax: t2.00% 24 Growth %Assumption 0.00% 0.00% 0.00% 0.00% 1.00% 1.00% 3.00% 3.00% 3.00% 3.00% 25 Growth $ $ (213,624) 1,061,000 (1,061,000) - 120,000 121,200 244,824 374,581 385,818 397,393 409,314 26 Tax Take or Repayment $ - 1,061,000 - - - - - - - - - 27 Property Tax - Total $ 12,000,000 13,061,000 12,000,000 12,000,000 12,120,000 12,241,200 12,486,024 12,860,605 13,246,423 13,643,816 14,053,130 28 29 Property Tax Impact on RUE $ 73.32 79.42 72.61 72.26 72.29 72.32 73.08 74.57 76.10 77.67 79.28 30 Connection Fee - Gravity Zone $ 5,465 5,521 5,579 5,756 5,949 6,069 6,177 6,320 6,508 6,748 6,900 31 Percent Increase from PY 0.26% 1.02% 1.05% 3.17% 3.35% 2.02% 1.78% 2.32% 2.97% 3.69% 2.25% 32 Conn Fee - Pumped Zone $ 7,071 7,114 7,151 7,323 7,503 7,593 7,719 7,835 7,985 8,194 8,300 33 Percent Increase from PY - 0.30% 0.61% 0.52% 2.41% 2.46% 1.20% 1.66% 1.50% 1.91% 2.62% 1.29% 34 35 3s Percentage of Pumped Zone to Total Connections Retiree OPEB Annual Contributions 44.00% $ 8,300,000 50.00% 8,300,000 45.00% OTHER 8,300,000 45.00% SCENARIO 8,300,000 46.00% ASSUMPTIONS 8,300,000 47.00% 8,300,000 48.00% 8,300,000 35.00% 8,300,000 10.009% e.10.00% 8,300,000 8,300,000 10.00% 8,500,000 37 Portion Allocated to PARS Trust $ 3,405,223 4,207,300 3,730,225 3,266,242 2,816,990 2,419,353 1,911,653 1,553,156 1,214,116 958,438 690,573 38 Estimated PARS Trust Balance (3% /year interest) $ 22,127,002 27,124,331 31,780,192 36,097,828 40,082,262 43,776,663 47,058,966 50,070,486 52,823,140 55,395,026 57,768,167 3% 3% 8 4 0.97% 5.34% to CCCERA UAAL ($13M in 2013 -14 3% 3% 6.55% 2015 -16 & 2016 -17; 40 Salary Inflation (Impacted by Retirement Assumptions below) 2% 4% 3% 3% 3% 3% 3% (4) (6) (6) - a -0.97% 1.65% $20M in 2018 -19, 2019 -20 & 2020 -21; $21.6M in 2021 -2 41 No. of New Retirements (net or deaths) 20 9 101 11 l (1) 42 lTotal O &M Benefit Increase Per Year ( %) 15.97% 11.54% 0.78 & 2014 -15; $15M in 43 _55.42%1 Begin additional payments $18M in 2017 -18; 44 Total 0 &M Expense Change from prior year ( %) 11.45% 7.68% 24.23% 2.63% 3.91%1 2.46% 4.58%1 1.16 % 1.78% 2.36% 46 Capital Project Inflation % 0.00% 1.00% 1.50% 2.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 48 Debt Coverage Ratio 3.38 3.56 2.45 4.06 17.48 9.45 3% 9.41 3% 10.84 2% 13.68 2% 13.00 2% 14.81 2% a9 Debt as a Percent of Revenue 6% 6% 5% 5% 2% -45- 2/2/2012 1:51 PM N:\AC000NTING \GMTEMP1 \10 -Year Plan Projection s\2012-201 3 Projections \Workshop - Draft Scenarios \Worhsop drafts post 2 1 12 mtg\2012 5 baseline plus full payment of UAAL cash payments - payments ramp up.xis Summary for Curr yr Report CENTRAL CONTRA COSTA SANITARY DISTRICT 10 -YEAR FINANCIAL PLANNING WORKSHEET SCENARIO 5 - BASELINE PLUS FULL PAY -OFF OF UAAL IN THE 10 -YEAR WINDOW Fiscal Years 2012 -13 through 2021 -2022 50 s1 A E Projected »» 2011 -2012 F 1 2012 -2013 G REVENUE, 2 2013 -2014 H I EXPENSE AND FUND BALANCE 3 4 2014 -2015 2015 -2016 J 5 2016 -2017 K 6 2017 -2018 L M 7 8 2018 -2019 2019 -2020 N 9 2020 -2021 O 10 2021 -2022 52 TOTAL REVENUE: 53 $ 5,541,000 5,567,000 5,552,000 5,546,000 2,078,000 3,782,000 3,810,000 3,603,000 3,601,000 3,608,000 3,597,000 54 TOTAL EXPENSE: $ 5,541,000 5,567,000 5,552,000 5,546,000 2,078,000 3,782,000 3,810,000 3,603,000 3,601,000 3,608,000 3,597,000 ss Ending Fund Balance - - - - - - - - - - - 5s 57 RUNNING EXPENSE FUND Projected» 1 2011 -2012 2012 -2013 2 3 2014 -2015 4 2015 -2016 5 6 7 8 9 10 58 2013 -2014 2016 -2017 2017 -2018 2018 -2019 2019 -2020 2020 -2021 2021 -2022 59 TOTAL REVENUE: $ 62,188,554 87,132,084 89,356,053 j 92,534,081 95,165,323 99,292,690 99,013,825 105,213,713 105,036,709 10_6,943,401 106,257,430 108,462,387 1 108,152,965 110,661,523 so TOTAL EXPENSE: $ 64,773,102 _71,414,321 69,747,376 86,647,446 88,927,146 92,404,199 94,678,286 110,704,128 61 REVENUE MINUS EXPENSE: $ (2,584,548) 1,666,945 484,638 428,907 129,882 487,037 278,865 177,003 685,971 309,423 (42,605) 62 63 Ending Fund Balance $ 7,335,450 9,002,395 9,487,033 9,915,940 10,045,822 10,532,859 1 10,811,724 10,988,727 11,674,698 11,984,120 11,941,515 64 Prudent Reserve 14.22%1 8.47% 10.12% 10.27% 10.47% 10.15%1 10.03%1 10.18% 10.16%1 10.55%1 10.51% M ss SEWER CONSTRUCTION Projected» 2011 -2012 1 2012 -2013 2 3 4 2015 -2016 5 2016 -2017 6 2017 -2018 7 2018 -2019 8 2019 -2020 9 2020 -2021 10 2021 -2022 67 2013 -2014 2014 -2015 68 TOTAL REVENUE: $ 22,246,000 $ 27,649,000 20,802,662 32,343,000 16,453,413 24,728,830 38,456,473 42,610,019 43,980,092 35,569,212 46,461,018 39,043,672 57,196,778 60,768,347 61,328,3_7_4 58,221,422 67,257,356 ss TOTAL CAPITAL EXPENDITURES: 29,719,200 26,474,692 27,057,793 36,214,789 63,503,986 7o REVENUE MINUS CAPITAL EXPENDITURES: $ (5,403,000) (11,540,338) (13,265,787) (1,745,862) 11,398,679 6,395,231 8,410,881 7,417,346 (3,571,568) 3,106,953 3,753,370 71 BOND PROCEEDS: - - - - - - - - - - - 73 74 75 76 Ending Fund Balance TOTAL ` $ 46,676,933 Projected» 2011 -2012 35,136,595 1 2012 -2013 21,870,807 2 20,124,945 3 31,523,625 4 37,918,855 5 46,329,736 6 53,747,082 7 50,175,514 8 53,282,467 9 57,035,837 10 2013 -2014 2014 -2015 2015 -2016 2016 -2017 2017 -2018 2018 -2019 2019 -2020 2020 -2021 2021 -2022 77 TOTAL FUNDS AVAILABLE $ 54,012,383 44,138,989 31,357,840 30,040,885 41,569,447 48,451,714 57,141,460 64,735,809 61,850,212 65,266,587 68,977,352 78 FUNDS REQUIRED 79 100% of Debt Service $ 5,567,000 $ 22,319,160 5,552,000 27,727,183 5,546,000 2,078,000 3,782,000 3,810,000 31,684,424 10,670,763 3,603,000 33,611,747 11,713,102 3,601,000 i 34,002,378 18,230,504 3,608,000 34,608,949 17,466,427 3,597,000 35,425,321 3,593,500 36,488,081 8o 32% of Next Year's O &M Expense 28,456,687 7,942,407 29,569,344 8,117,338 301297,051 10,864,437 81 30% of Next Year's Capital Expenditures $ 9,702,900 8,915,760 19,051,196 13,809,959 82 TOTAL FUNDS REQUIRED $ 37,589,060 42,194,943 Funds Available Amount Above /(Below) Funds Required $ 16,423,322 1,944,047 41,945,094 39,764,682 44,943,488 46,165,187 48,927,849 55,833,882 55,683,375 58,073,517 53,891,540 83 (10,587,254) , (9,723,797) (3,374,041) 84 ss 2,286,527 8,213,611 8,901,928 6,166,837 7,193,070 15,085,813 -46- 2/2/2012 1:51 PM N:\ACCOUNTING\GMTEMPI \10 -Year Plan Projections\2012 -2013 Projections\Workshop - Draft Scenarios \Worksop drafts post 2 1 12 mtg\2012 5 baseline plus full payment of UAAL cash payments - payments ramp up.xls Summary for Curr yr Report CONCLUSION The 2012 -13 rate increase of $30 is in place and will take effect on July 1, 2012. The scenarios developed for this year's ten year plan are meant merely to inform the Board regarding our increasing liabilities and the continued pressure on rates. The scenarios demonstrate the benefit of raising rates higher in earlier years to take advantage of the time value of money. In fact, the pay down of the total $122.5 million CCCERA unfunded liability does not result in significantly higher rates than the partial payment of $75 million, due to raising rates early in the ten year period and the benefit of these higher rates through the ten year period. No action is required of the Board this year regarding rates. Staff hopes the Board finds this information useful in considering what increases may be needed in future years. -47- CENTRAL CONTRA COSTA SANITARY DISTRICT 2012 -13 APPENDIX I — WHITE PAPERS INTRODUCTION In this section of the report, staff discusses various topics that have an impact on rate setting. The following topics are discussed individually and are arranged in alphabetical order. • Current and Potential Issues and the Economy • Fees & Charges • Self- Insurance Fund • Significant Liabilities (GAS B-45/OP EB-Reti ree Medical and Dental premiums, CCCERA UAAL- Retirement Unfunded Actuarial Accrued Liability, Debt Outstanding, and Accrued Compensation Absence — Terminal Pay) • Regulatory Impacts • Utilities & Chemicals CURRENT AND POTENTIAL ISSUES AND THE ECONOMY The last four ears of financial forecasting have been challenging due to the turbulent economy. The following bulleted list highlights issues that impact financial planning and rate - setting. Predictions were made and used in the model; the list is meant to draw attention to possible outcomes and District operations impact. Staff uses several sources to gather economic indicators such as the State of California Department of Finance and Legislative Analyst's Office publications, Wall Street Journal, UCLA Anderson Forecasts, and Highmark Capital (PARS Trust) literature. Some of the items listed below are discussed in more detail in subsequent sections. Review of Contra Costa County Employees' Retirement Association's ( CCCERA) policies: • Amortization: A rolling amortization period was implemented to help smooth unprecedented 2008 market losses • Depooling: Our rates will now be calculated solely on our number of employees and retirees and their associated retirement benefit obligation, and rates increased by 6.12% of salary -48- • Not all of the depooling costs were recognized in the December 2009 actuarial valuation. The salary enhancement percent of pay was changed from 12% to 24% in the December 2010 actuarial report, driving our depooled rates up by 13.79% in 2012 -13 Enhanced Retirement • Public pressure to reduce final year salary enhancements that are in addition to those specified in the Ventura and Paulson decisions may reduce retirement obligation • Unfunded Actuarial Accrued Liability (UAAL): The bullets above all impact the size of, and increase or decrease our unfunded liability for pension obligation GASB- 451OPEB • The most recent actuarial study was performed as of July 1, 2010. • The Annual Required Contribution increased from $7.0 million to $8.3 million per year • Implementation of our internal Tier 3 is anticipated to lower the annual contribution to some degree in future years State Government • California now has one of the lowest credit ratings in the nation • One more borrowing (suspension) is allowed under Prop 1A in a 10 -year period, and only after the prior suspension has been repaid with interest in 2012 -13 • High unemployment for California is projected through 2014 • California lags behind the National Recovery Housing Market • The poor housing market impacts the number of new connections, and associated capacity fee and permit fee revenue • Lower housing values is lowering property tax to some degree - homeowners are requesting Contra Costa County (CCC) to reassess their property value Commercial Sewer Service Charge • Water conservation has reduced SSC for commercial accounts • Some commercial accounts have gone out of business Interest Rates • Currently, interest earnings continue at an all -time low -below 1 %' • Interest earnings on our Funds Available will suffer if rates remain low Inflation /Deflation • Models assume 3% inflation per year for most O &M expenses, but also include a discount factor to mirror our annual actual expenses being less .than budget in most years -49- • Capital projects may continue to cost considerably less than what was expected in the projections due to the weak economy and annual inflation assumptions were reduced in 2011 -12 through 2015 -16 Employee Benefits • CCCERA increases and the GASB -45 required contributions are significant this year • Negotiations are in process -no assumptions for any potential benefit changes are included in the model Attrition • We have an aging workforce and anticipate a large number of retirements in the near future • Succession planning is in process • New employees cost less initially as they start lower in the salary range and don't receive longevity pay (lower GASB- 45 /OPEB cost also) Regulatory Exposure • See "Regulatory Impacts" section of this White Paper FEES AND CHARGES District Code Title 6, Fees and Charges, contains 12 Chapters that define our fees, rates and charges. Of these, the 6 that follow may require periodic updating: Chapter 6.08 — Annexation Charges Chapter 6.12 — Capacity Fee Program Chapter 6.30 — Schedule of Environmental and Development - Related Rates and Charges Chapter 6.34 — Sewer Service Charges Chapter 6.38 — Recycled Water Charges- Landscape Irrigation Chapter 6.40 — Hazardous Waste Handling and Disposal Charges for Conditionally Exempt Small Quantity Generators The focus of the February 16, 2012 Financial Planning Workshop for which this document is being prepared will be on the Sewer Service Charge (SSC), our largest source of revenue. However, our other fees, rates and charges should also be updated periodically to ensure adequate cost recovery. The following is a discussion of staffs recommendation for updating these 6 categories of fees, rates and charges for 2012 -13. -50- Chapter 6.08- Annexation Charges Annexation Charges are intended to recover the administrative and related costs associated with adding new territory to the District. These costs include fees paid to the Contra Costa County Local Agency Formation Commission (LAFCO), the County Surveyor, Elections Department and the State Board of Equalization (SBE), as well as staff time to receive annexation petitions, prepare annexation packages (including maps and parcel descriptions), and administer the process. Based on the staff level of effort and these other costs, Annexation Charges are currently $400 per parcel. These charges generally apply to infill parcels being annexed. Annexations of new subdivisions are billed at cost, by setting up an account and tracking and billing the costs separately. A deposit fee of $2,400 is charged up front for these large annexations. Work on processing the backlog of annexations is essentially complete and staff is now working on metering the remaining annexations to LAFCO one at a time so LAFCO has adequate time to review and process them. It is expected that the backlog will be eliminated by the end of 2012. Staff tracks annexation related costs and has concluded that the current Annexation Charge of $400 per parcel is appropriate. Chapter 6.12- Capacity Fee Program Capacity fees, rates and charges are applied to all new connections and for added burdens at existing connections. These fees are called "capital capacity fees" throughout much of this document to reflect the fact that they are dedicated to financing the capital program. The District last updated the Schedule of Capacity Fees, Rates and Charges effective July 1, 2011. The gravity capacity fee is currently $5,465 per residential unit equivalent (RUE). Parcels in pumped zones currently pay an additional $1,606 per RUE for a total of $7, 071 per RUE. The capacity fees are based on the total asset value of District facilities, property, and fund balances. The value of appropriate contributed facilities, and assets constructed through our Capital Improvement Program are added to the total asset value each year. Based on this new asset value (net of depreciation and escalation) new capacity fees are calculated. In years when the Capital Program expenditures are reduced, the subsequent increase in capacity fees will be less than in years following large expenditures in the Capital Program. It has been Board policy to annually adjust the capacity fees to ensure that new connections are paying their fair share to buy into District assets. Staff has calculated capacity fee adjustments for 2012 -13 and recommends a 6.1 % increase in the gravity capacity fee to $5,797 per residential unit equivalent (RUE) and a 1.2% increase in the additional fee for the pumped zone to $1,625, which would result in a total capacity fee in pumped service areas of $7,422 per RUE (an increase of 5.0 %). -51- Chapter 6.30- Schedule of Environmental and Development- Related Rates and Charges The Schedule of Environmental and Development Related Rates and Charges was last updated in 2011. Environmental Rates and Charges -The Environmental Rates and Charges are those that apply to our Source Control Program. In early 2006, it became apparent that one of the necessary steps to allow us to meet our ever tightening permit requirements would be permitting of a large number of small businesses. For example, the District recently implemented a mandatory amalgam separator program for all dentists who use or remove amalgam. As part of our strategy for local limits, we are working to reduce the copper in our effluent by regulating the discharge of vehicle maintenance facilities. In recognition of the benefit to all District rate - payers from the increased cost of compliance for these businesses, the Industrial User Permit Application Fees and Permit Fees for Class III Industrial Dischargers were set to zero by the Board effective July 1, 2006. Fees for Class II Industries, Special Discharge Permits and Trucked Waste Haulers have not been adjusted for many years. This year, Source Control staff is reviewing these fees and may recommend adjustments affecting the small number of customers in these categories for Board consideration in March 2012. Development - Related Rates and Charges -Each year, Development - Related Rates and Charges are reassessed based on the tracking of labor, overhead and other costs required for plan review, construction inspection, and CSO- provided, right -of -way and miscellaneous services. For the past several years, a review of the level of effort for these tasks was conducted and adjustments to the fee structure were implemented. Typically, these adjustments include increases, decreases, establishment of new categories and elimination of particular rates and charges. This year, staff is again evaluating the rates and charges based on current levels of effort and overhead and will recommend adjustments for the coming fiscal year in March 2012. Chapter 6.34 -Sewer Service Charge The Sewer Service Charge (SSC) rate is the principal discretionary category of District revenue since every connected property pays an annual SSC and the Board can set reasonable rates to meet short- and long -term financial planning objectives subject to the provisions of Proposition 218. The 10 -year strategy for future adjustments to SSC rates will be discussed with the Board at the February 16 Financial Planning Workshop. -52- Chapter 6.38- Recycled Water Charges- Landscape Irrigation On July 1, 2002, a revised recycled water rate structure was put in place to increase the cost recovery for the Recycled Water Program while maintaining rates competitive with users' alternative water supply sources, whether canal or potable water. Further, a 3% escalation clause was incorporated such that rates are automatically increased by 3% on July 1 of each year to attempt to cover the increasing costs of the program. This rate of increase matches that of the Contra Costa Water District and has kept our recycled water rates positioned at approximately 80% of those for canal and potable water, depending on what alternate source of water is available to the recycled water customer. This rate structure will remain in place, with no need for annual updates, until staff or the Board determines that changes would be beneficial to the District. Chapter 6.40- Hazardous Waste Handlinq and Disposal Charges for Conditionally Exempt Small Quantity Generators (CESQG) The CESQG charges were updated in March of 2004 to more fairly recover costs from small business participants by adding a $20 dollar drop -off fee per visit to cover administrative costs. In December 2011, the Philips Services Corporation contract for providing hauling, disposal and contract labor expired. However, after a rigorous selection process, they were again selected to continue their services to the District. The terms and conditions of the new contract include a modest increase in cost over the old contract. Staff has evaluated the cost of the CESQG program in light of the new contract as well as other factors to determine if any fee increases are appropriate. Based on current costs, the fees recover nearly 50% of the cost of the CESQG program. However, in order to encourage the use of the CESQG program by small businesses, which have been in many cases severely impacted by the current economic climate, staff recommends that the fees be left as is. This will continue the support of the program by the general rate payer base. This is justifiable since the CESQG program is important in preventing illegal dumping to the sewer which can increase costs for treatment to all rate payers. SELF - INSURANCE FUND 2012 -13 The District has self - insured most of its liability and some of its property risks since July 1, 1986, when the Board approved the establishment of the Self - Insurance Fund (SIF). The SIF has effectively funded District losses for over twenty -six years. -53- In 1994, Government Accounting Standards Board Statement No. 10 (GASB -10) set forth requirements on how public agencies must fund their self- insured risks. To assure compliance with GASB -10, the District restructured the SIF into three sub - funds. Each of the three sub -funds were established for funding specific risks and are defined under "Sub -Fund Discussion" below. Financial Impact The General Fund has been supporting the SIF by transferring funds into sub - fund C which then redistributes funds to sub -funds A and B to meet regulatory and financial requirements. In fiscal year 2011 -12, $850,000 was transferred from the General Fund to the SIF. According to the District's October 2010 actuarial report, the District must reserve a minimum of $538,000 in sub -fund A to fund unpaid losses through June 30, 2012 in order to comply with GASB -10. However, additional funds have been allocated to Sub -fund A to address changes in the District's risk profile. As of July 1, 2007, the Board increased the District's self- insured retention (SIR) for liability losses from $500,000 to $1,000,000 per occurrence. The sub -fund B reserve is maintained at $2,400,000 and is for employment - related and pollution - related risks. Typically, claims related to pollution or employment practices are costly. The District is required to maintain an adequate reserve for employment - related and pollution - related claims as mandated by GASB -10. However, there is no specific funding level required. There are currently two legal matters regarding allegations of pollution liability. The attached 10 -Year Plan includes increased legal expenses for the next two years as we address these matters. Funds drawn on sub -funds A and B are replenished from sub -fund C. The Board has adopted a strategy to increase the sub -fund C reserve in order to mitigate periodic fluctuations in sub -fund A claims and expenses and sub -fund B claims, expenses and reserve requirements. Because of favorable loss experience over the last few years, the balance of sub - fund C is unusually high. This 10 -Year Financial Plan stabilizes annual O &M contributions while drawing down the balance of sub -fund C over the ten years. In keeping with the Board's strategy, and as shown in current and prior financial plans, staff recommends transferring $850,000 from the General Fund to the SIF in fiscal year 2011 -12 in order to meet claims, claims expenses and claims reserve expectations. -54- Sub -Fund Discussion SUB -FUND A: GASB -10 Actuarially -based risks. These include general liability and automobile liability risks and claims. Sub -Fund A insures these risks based on the District having a $15,000,000 excess liability policy with a $1,000,000 self insured retention (SIR). The District obtains an actuarial review of these self - insured risks every two years to project losses and funding requirements as mandated by GASB -10. The October 2010 actuarial report estimates an expected unpaid liability of $538,000 for Sub -fund A risks as of June 30, 2012. However, changes to the District's risk profile warranted an increase in this reserve to $1,000,000. SUB -FUND B: GASB -10 Non - actuarially -based risks. These include employment and pollution risks. GASB -10 requires that all potential risks, including employment and pollution risks, be adequately funded even though these risks are not actuarially reviewed. These types of losses occur less often than those addressed in sub -fund A. Additionally, loss valuations vary widely from claim to claim but may result in extremely high costs and losses. Since these two factors make accurate loss forecasting difficult, an actuarial study is not required for these risks. However, with guidance from risk management and insurance specialists, the District has maintained sub -Fund B at $2,400,000 to fund employment - related and pollution - related risks based on the purchase of the above mentioned excess liability insurance policy and supplemental gap coverages where financially advantageous. These liability policies provide improved coverage for specific pollution and employment related risks but are still subject to underlying policy deductibles. SUB -FUND C: Non - GAS13-10 risks. This sub -Fund covers risk management program insurance premiums, retained property risks, potential losses from uninsurable risks, and the costs of initiating claims and lawsuits against others who have damaged the District. The District established this sub -Fund to finance non - GAS13-10 risks under our risk management program. Specific costs include: insurance premiums for excess liability policies and insurance premiums for property damage (i.e. fire, explosion, water damage, etc.) for losses above the District's self- insured retention of $250,000. This sub - Fund's reserves are used to offset increases in premiums or claims costs and maintain sub -Fund A's GASB 10 required minimum reserve level. -55- SIGNIFICANT LIABILITIES The District has 4 significant liabilities that must be planned for: 1. Accrued Compensated Absence (Terminal Pay) 2. GASB- 45 /OPEB (Retiree Medical, Dental and Life Insurance premiums, present and future) 3. Contra Costa County Employees' Retirement Association (CCCERA) Unfunded Actuarial Accrued Liability (UAAL) 4. Outstanding Debt A chart is provided at the end of this section showing our unfunded liabilities from 2005 -06 through 2013 -14, along with a comparison to our anticipated Cash and Investment balances for each year. 1. Accrued Compensated Absence Accrued Compensated Absence is the value of employee accruals that will be paid to employees upon termination. These accruals include vacation, sick leave, compensatory time earned and holiday compensatory time earned. Each year, the total liability is adjusted up or down depending on the activity for the year. This balance goes up as employees continue to accrue unused hours and is reduced by employees that either use their hours, or retire and receive payment. Staff predicts that the liability will decrease in future years as Tier 1 employees, generally with larger sick leave accruals paid at 85% of pay, will retire. Employees can accrue up to two times their annual vacation allowance based on their years of service and can accrue an unlimited number of unused sick leave hours. At termination or retirement, by law, all unused vacation must be paid to the employee. Sick leave is paid to Tier 1 employees at an 85% level. Tier 2 & 3 employees are paid on a sliding scale based on years of service with a maximum payout of 40 %. 2. GASB- 451OPEB (Retiree Medical, Dental and Life Insurance premiums) GASB -45 was implemented requiring public sector employers to make transparent in financial statements any unfunded future liabilities for medical, dental and life insurance premiums, present and future. The current unfunded liability is $80.9 million for 2010 -11 and $77.6 million in 2011 -12. The annual required contribution is $8.3 million per year. This includes retiree healthcare premiums and contributions to the PARS trust. -56- 3. CCCERA UAAL (Retirement Unfunded Actuarial Accrued Liability) The District's portion of the UAAL increased significantly in recent years. • $ 39.8 million as of 12/31/08 for 2010 -11 rate - setting • $ 71.0 million as of 12/31/09 for 2011 -12 rate - setting • $ 99.8 million as of 12/31/10 for 2012 -13 rate - setting • $122.5 million as of 12/31/11 for 2013 -14 rate - setting This is primarily due to de- pooling agencies into separate cost groups. The District's high number of retirees and enhanced benefits increase our pension costs. Additionally, market losses from 2008 were carried forward using CCCERA's five -year smoothing methodology, which also impacts our rates. Approximately 39.8% of the 2010 -11 rate, 52.3% of the 2011 -12 rate and 58.72% of the 2012 -13 rate goes to paying down the unfunded liability 4. Outstanding Debt The District sold a total of $54 million in both taxable and non- taxable bonds in 2009. The purpose of the sale was to refund the 1998 and 2002 outstanding bonds due to very favorable interest rates and to issue new debt to help fund several large projects included in the Capital Budget. Debt Service payments will be $5.4 million each year for the first 5 years dropping to $3.6 million for the next 9 years and $2.4 million for the remaining 6 years. Outstanding Debt is $48.2 million as of 2011 -12. REGULATORY IMPACTS Treatment Plant The treatment plant must comply with many regulatory requirements, some of which include water quality standards, air quality standards, solid quality standards, and safe working requirements. Historically, these requirements have not substantially changed on a year -to -year basis. Since the last financial plan, however, the implementation of State of California legislation to reduce greenhouse gas emissions, changes in how the Clean Air Act regulates Sewage Sludge Incinerator emissions, and a new focus on ammonia and nutrient removal in the Suisun Bay will drive substantial increases in our capital and operating costs over the next 10 years. -57- The greenhouse gas emission legislation is being implemented through cap and trade regulations that were adopted in December of 2011. Starting with calendar year 2013, any facility emitting over 25,000 metric tons per calendar year of carbon dioxide equivalents (CO2e) will need to take corrective actions. CO2e is the combined greenhouse gas effect of carbon dioxide, methane, and nitrous oxide from the combustion of non - biogenic fuels. At a minimum, every facility in the cap and trade program will have to purchase allowances on an annual basis to offset their entire emissions of CO2e for the applicable year. The allowances can be purchased at auction from the California Air Resources Board (CARB) or directly from other third party sellers. CARB has set a price range of $10 up to $40 per metric ton of carbon dioxide equivalents per year. Along with the annual purchase of allowances, many facilities will elect to reduce their annual CO2e emissions to below 25,000 metric tons per year through permanent process changes. This cost will ultimately be passed onto the consumer in the form of higher prices for electricity and natural gas. CCCSD's CO2e emissions were 24,802 metric tons in 2010 and approximately 23,900 metric tons in 2011. The primary source is natural gas combustion in the cogeneration system, auxiliary boilers, and the multiple hearth furnaces. The combustion of landfill gas does not add to our emissions of CO2ei so it is to CCCSD's benefit to continue the use of landfill gas for as long as possible. In 2011, landfill gas supplied approximately 25% of our fuel gas needs and allowed staff to manage natural gas usage on a weekly basis to meet a 2011 CO2e emission target of 24,000 metric tons. In March of 2011, United States Environmental Protection Agency (USEPA) adopted regulations to control the air emissions from sewage sludge incinerators (SSI) under the Section 129 of the 1990 Clean Air Act Amendments. The new regulation sets new emission limits on the following nine pollutants: mercury, lead, cadmium, hydrogen chloride, particulate matter, carbon monoxide, dioxins /furans, oxides of nitrogen, and sulfur dioxide. The Section 129 SSI emissions limits are effective 3 years after adoption in a State Implementation Plan or March 21, 2016, which ever comes first. Limited SSI source test data indicate that CCCSD's existing system can comply with the 129 emission limits when co- firing natural gas and sludge, but CCCSD may not be able to meet the dioxins /furans, HCI, and mercury limits when co- firing landfill gas and sludge. Additional SSI source tests are scheduled for February and September of 2012 to determine if the emissions when co- firing landfill gas and sludge continues to be a 129 compliance issue. If it does, CCCSD could meet the 129 emissions limits by stopping the use of landfill gas in the SSIs or by upgrading air pollution control equipment. -58- The current Capital Improvement Plan includes new wet scrubbers scheduled to be designed by July 1, 2013 and to be constructed by June 30, 2015. New wet scrubbers alone would control HCI, but not necessarily dioxin /furan and mercury. Dioxin /furan and mercury control would require new scrubbers, upgraded afterburners, and either powdered activated carbon injection system or a packed carbon bed. Staff will continue to closely follow evolving air regulations. The call for ammonia and /or nutrient removal from wastewater treatment effluent is escalating with a number of different groups and interests encouraging increased regulation of wastewater discharges. Recently, the Central Valley agriculture interests mounted a campaign to reduce the discharge of ammonia in wastewater to the Delta. The NPDES permit for Sacramento Regional Sanitation District was adopted by the Central Valley Regional Quality Control Board in 2011 with new requirements to remove ammonia and nitrogen to very low levels. The reason for this requirement was that detrimental impact of their effluent on Suisun Bay, where our District also discharges. The District is in the process of renewing our 5 -year NPDES permit. As part of this process the San Francisco Bay Area Regional Water Quality Control Board (RWQCB) published a draft tentative order for public comment. The primary comments came from San Luis & Delta- Mendota Water Authority and State Water Contractors and San Francisco Baykeeper. Both organizations were requesting ammonia removal from our final effluent. The RWQCB responded by proposing a mass -based effluent limit that reflects existing ammonium treatment performance , but is also requiring further study of the Delta to determine if there are site specific factors that would warrant more restrictive ammonia limit in the future. Plant Operations expects the new 5 -year NPDES permit, anticipated in March 2012, will contain achievable ammonia limits. Staff is still very concerned that the studies required over the next five years or the final RWQCB decision on nutrient removal will require ammonia removal as a minimum within the ten year planning horizon. Therefore, we have included an expense of $70 million in the out years of the financial plan to finance an ammonia removal project and have added dollars to the budget for the plant to finance its operation. In additions to nutrients, contaminants of emerging concerns (such as pharmaceuticals, health care products, and pesticides) as well as new rules on incineration will likely drive major revisions to the treatment plant over the next 10 to 15 years. -59- UTILITIES & CHEMICALS Utilities Energy costs represent approximately 15% of the treatment plant's operating budget. District staff continuously monitors treatment plant energy usage to ensure efficient and cost - effective operations. The ongoing search for energy cost savings has resulted in several energy -use studies. These studies have identified energy- saving opportunities, evaluated alternative energy sources, and have considered new regulations for greenhouse gas emissions. The District operates a high- efficiency cogeneration system that produces approximately 90% of the treatment plant's electrical energy needs. By incorporating energy- efficient technologies into capital improvement projects, the amount of imported electrical power has been reduced over the years. The FY 2011 -12 anticipated cost of natural gas is $2,700,000, which is slightly below budget. The largest component of the budget is for natural gas used in the auxiliary boilers, furnaces, and in the cogeneration system. Near -term natural gas prices have dropped considerably, due to a new method of natural gas extraction called fracking. If environmental impact or health and safety concerns related to fracking become further regulated, natural gas prices could increase. Over the last year, the District's price for natural gas (prepurchased) averaged $5.59 per decatherm. The average prepurchase price over the last 10 years was $6.52 per decatherm. The average price for 2011 over the last 12 months compared to the average prices over the last 10 years serve as an indicator that the long term rate trend in natural gas pricing is downward. Source testing on Furnace No. 1 during the summer of 2011 indicates that when burning landfill gas, the furnaces might not meet the new Section 129 standards for mercury and dioxin which become effective in 2016. Therefore, the District will likely need to either discontinue the use of landfill gas or add equipment to the furnaces to comply, resulting in increases in capital or operating costs. Further complicating matters, the District may decrease cogeneration output to reduce natural gas usage in order to stay below the greenhouse gas (GHG) capped sector limit and avoid having to buy GHG allowances. In the coming year, the District will be conducting another source test and determining the right combination of cogeneration versus import power to optimize costs. -60- Historically, the price of landfill gas is directly related to the price of natural gas through negotiations with the local closed landfill (Acme). The cost of landfill gas is approximately 60% the cost of natural gas. The anticipated expenditure for landfill gas for FY 2011 -2012 is $464,000. Over the next 10 -year period, the price of landfill gas is expected to follow the price of natural gas and remain low. Furthermore, landfill gas availability is expected to decrease within this time frame as the landfill ages. As the amount of landfill gas decreases, additional natural gas will be needed to make up the difference, thus increasing overall energy costs. The anticipated cost for electricity for FY 2011 -12 is $317,000, which is the budgeted amount. Electricity prices over the next 10 years are expected to rise as power producers are affected by greenhouse gas compliance costs and the anticipated higher natural gas costs. As noted above, if cogeneration is curtailed to reduce GHG's, more electricity would be imported, causing electricity expenditures to rise. Chemicals Chemical costs represent approximately 5% of the operations and maintenance budget for the treatment plant. Plant Operations uses chemicals to condition sludge, control odors, reduce bulking sludge, and produce recycled water. The major chemical costs are for lime ($212,000), polymer ($447,000), sodium hypochlorite ($296,000), and hydrogen peroxide ($53,000). Over the past 10 years, lime costs have increased at about 9.5% per year, hypochlorite about 0.8% per year, polymer 3.1 % per year, and the Other Chemicals account, which is mainly hydrogen peroxide, 4.3% per year. Chemical production and delivery to the customer are energy intensive. As the world economies continue to recover from the economic slowdown, it is expected that the increased energy costs, along with limited supplies and increased delivery costs due to large anticipated fuel cost increases, will again create up- side pressure on chemical prices. As such, the overall chemical cost escalation is projected to be approximately 5 %. -61- 3 Central Contra Costa Sanitary District December 2, 2011 TO: BOARD OF DIRECTORS VIA: JAMES M. KELLY, GENERAL MANAGER FROM: ANN E. FARRELL, DEPUTY GM /DIRECTOR OF ENGINEERING TAD J. PILECKI, CAPITAL PROJECTS DIVISION MANAGER SUBJECT: REVIEW PRELIMINARY 2012 TEN YEAR CAPITAL PLAN AND FISCAL YEAR 2012 -13 CAPITAL BUDGET RECOMMENDATION Staff recommends that the Board support the preliminary expenditures for the Capital Budget and Plan as proposed in this memo. Setting a conceptual budget for capital expenditures resolves one variable and simplifies the financial planning process. These figures are then used as District staff more fully develops and refines financial planning scenarios based on current information on operations and maintenance costs. Scenarios to be evaluated this year as part of the overall financial planning process include those associated with paying down the unfunded liability for pensions and retiree health care as well as any scenarios that emerge from the ongoing discussions regarding negotiating new contracts with the District's bargaining groups. Although the rate increase for the upcoming year has already been noticed and confirmed by the Board, future rate increases are still of concern and will be considered during the financial planning process. BACKGROUND In preparation for the first fiscal year (FY) 2012 -13 Capital Planning Workshop on December 15, 2011, staff has summarized the material we will be covering in this memo. Much of this information, with additional detail, will be reviewed with the Board Capital Projects Committee on December 6, 2011. We routinely hold a Capital Planning Workshop in the fall to set an estimated dollar amount for our capital program for the following ten years. We have found this approach to be very helpful in narrowing the scenarios and considerations for the winter Financial Planning Workshop (to be held February 16, 2012). By fixing the level of capital expenditures, which comprise approximately 30 - 40 percent of District overall spending, depending on the size of the Capital Budget that year, the possible budgeting scenarios become more refined and understandable. If the scenarios in February lead to some concerns about capital revenue and expenditures, adjustments can be made at that time and incorporated into the draft Capital Improvement Budget and Plan, which is brought to the Board in a second FY 2012 -13 Capital Planning Workshop in April. HISTORICAL PERSPECTIVE As our District assets age, renovation and replacement is necessary to keep them functioning properly. For budgeting purposes, the amount of annual investment in renovation and replacement must be estimated. In January 2000, without a formal condition assessment and asset management plan, staff developed and recommended a baseline for investment in our capital facilities which assumed replacement of all assets every one hundred years. This equates to a reinvestment rate of 1 % of the estimated replacement value. At that time, the total replacement value of our facilities was estimated at $2.1 billion and therefore the annual investment was set at $21 million. This target amount has been increased for inflation at 3% per year and has reached approximately $30 million in 2012 dollars for FY 2012 -13. Since January 2000, staff has invested significant resources in developing more sophisticated asset management programs for the collection system and treatment plant to provide the data for a more rigorous assessment of the appropriate baseline budgetary figure for asset renovation and replacement. These investigations support an annual investment of approximately 1 % of replacement value as a reasonable amount for the collection system. In fact, due to the relatively good condition of our system and limited number of line segments needing capacity upgrades, we have been able to include the known renovation and capacity needs for the collection system in the 1 % target budget amount as well as selected collection system capacity improvements. A higher annual investment rate may be necessary for mechanical equipment/pressure piping systems /electrical equipment at the treatment plan and pumping stations. Staff expects to continue to better define this reinvestment rate. Until that effort is complete, a renovation budget rate of 1 % of replacement value for the treatment plant and pumping stations will continue to be used to set recommended minimum funding levels for the Ten Year Capital Improvement Plan. The historical District philosophy for funding ongoing renewal and replacement has been to do so out of ongoing capital revenues sources and not to bond finance. Bond financing has been limited and has been reserved for large one time projects which benefit all rate payers, existing and future, and can logically be funded by spreading the payments over current and future rate payers. Using this philosophy, the ongoing renewal and replacement targeted expenditures of $30 million per year in 2012 dollars should be funded from annual revenue receipts and this should be the minimum level of funding for the capital program. As introduced above, expenditures for significant projects to increase capacity or address changing regulations or construct recycled water projects should be viewed as in addition to the budget for renovation, renewal and replacement. For several years in the recent past, budgeted expenditures for needed capacity and regulatory projects were increased to take advantage of increased revenues from a number of sources, principal among them being capacity fees for new connections. However, more recently, revenues have significantly decreased and the size of the capital program has been reduced. A number of the projects that had been initiated when revenues were higher were ready for construction. These projects targeted needed reliability, capacity and building improvements that had been contemplated for many years. They included the Solids Handling Improvements to allow hauling of sludge in the event of incinerators being out of service, and Dry/Wet Weather Improvements to allow bypass to Walnut Creek when the outfall is being inspected and when outfall capacity is exceeded and the wet storage ponds are full. Also included were Standby Page 2 Power Improvements to replace the old engine generators that were unreliable and finally a new Collection System Operations Department Administration, Crew and Warehouse facility. In early 2009, staff recommended and the Board concurred that bonds netting $30 million should be sold to enable completion of these needed projects. Staff is happy to report that these needed projects have been essentially completed at this time and very cost effectively, given the extremely competitive bid climate over the last several years. The following capital expenditure figure shows historical District capital expenditures since 1990 -91. Annual capital spending has ranged from a low of $17 million to a high of $40 million. This wide variation has been due to the conscious effort to defer needed projects in the late 1990's during a period of no rate increases and in FY 2001 -02 through FY 2003 -04, when the permanent loss of ad valorem tax was feared, and then escalate projects when the revenue picture improved with rapid build out of the Dougherty Valley and associated capacity fees. In 2002, bonds were issued for approximately $16.5 million to supplement capital revenue and fund construction of some capacity improvements needed to serve the Dougherty Valley area of San Ramon in advance of receiving the capacity fees generated upon connection of the completed homes and businesses. Those fees peaked in FY 2004- 05 when there were almost 2000 new connections in the Dougherty Valley alone. The Ten Year Capital Plan was developed based partially on anticipated revenues from the Dougherty Valley. The following property tax and capacity fee trend figure shows the extreme variability of these two sources of capital revenue over the years. As development slowed and the economy deteriorated, anticipated revenues did not materialize. As noted above, because a number of needed projects were under design and ready to be constructed and the bidding climate was very competitive, staff recommended in October 2009 that bonds netting $30 million be sold to supplement capital revenues. Capital revenues are collected and held in the Sewer Construction Fund (SCF). The SCF balance is an important tool in funding daily District operations. In addition to funding the capital program, the SCF balance is used to meet the cash flow needs of the District. The District receives its sewer service charge and property tax revenue from the County two times per year. In between revenue receipt, the District must pay its bills from the funds on hand. Based on the current District operating and maintenance and capital budgets, a SCF balance of approximately $30 to $35 million is necessary to pay the bills between revenue receipts. The SCF balance was projected to fall below the needed level in early 2009 if we continued the capital program at its budgeted level. Therefore, as noted above, a net $30 million in bonds were sold to allow continuing with construction of needed projects. The only capital revenue source completely within the control of the District is the capital component of the sewer service charge. The capital component of the sewer service charge had been sharply reduced in recent years to avoid raising the overall sewer service charge amount and still fund needed operation and maintenance activities. Last year the Board approved a two year rate increase of $30 each year, a portion of which was designated to renew the funding of the capital program. A table showing the sewer service charge components for the last twelve years and that proposed for FY 2012 -13 follows. Page 3 Adjusted by 3%Near 39,176 31,973 38,612 61.780 51,946 49,671 26,604 36,662 36,694 28,481 37,867 40,942 32,226 24,328 31,634 32 078 44 616 38,467 38,944 29,982 27,962 $70,000 $60,000 $50.000 $,0.000 $30.000 $20,000 $10,000 Annual Capital Expenditures 90.91 91.92 92.93 93 -94 94 -95 95-96 96 -97 97.98 98-99 99.00 00-01 01.02 02.03 03 -04 04.05 05 -06 06-07 07 -08 08-09 09.10 10-11 - InAdual Dollars — Adjusted by 3 %/Year Page 4 CENTRAL CONTRA COSTA SANITARY DISTRICT ANNUAL CAPITAL EXPENDITURES FISCAL YEARS 1990 - 2011 (,000 omitted) 90.91 91.92 92 -93 93.94 94.95 95.96 96-97 97.98 9899 99-00 00 -01 01 -02 02.03 03-04 04-05 05-06 06-07 07.08 08-09 09.10 10.11 Treatment Ptant 6.856 4.369 11,237 22.685 12.835 10.409 5.723 7,304 6721 9.768 11.007 4,832 4,353 5.542 5,211 7.341 9,221 9,722 9,325 10296 9,297 Colecton System 13.729 8.834 9.931 16.011 16.342 14.795 8.555 12.944 18023 6.603 14.387 24,556 19,568 12385 19536 18,581 24.281 23,128 20.967 12.832 8.801 General Improvemerks 1.106 5 031 1.454 (1.495) 2.848 6.078 1 792 (68) 500 3 901 1.504 1.732 1.302 1.505 1 552 2.087 5.976 308 5.847 5,044 9.134 Recycled Water 177 346 600 857 4.254 422 303 1.271 259 216 349 194 (338) 162 205 569 937 730 InAchADo:iars 21.691 18.234 22622 37.378 32371 31.882 16927 24.434 25.666 20,575 28.169 31,379 25,439 19.781 26.493 27,671 39,640 33.363 38.708 29.109 27,962 Adjusted by 3%Near 39,176 31,973 38,612 61.780 51,946 49,671 26,604 36,662 36,694 28,481 37,867 40,942 32,226 24,328 31,634 32 078 44 616 38,467 38,944 29,982 27,962 $70,000 $60,000 $50.000 $,0.000 $30.000 $20,000 $10,000 Annual Capital Expenditures 90.91 91.92 92.93 93 -94 94 -95 95-96 96 -97 97.98 98-99 99.00 00-01 01.02 02.03 03 -04 04.05 05 -06 06-07 07 -08 08-09 09.10 10-11 - InAdual Dollars — Adjusted by 3 %/Year Page 4 $14,000,000 $12,000,000 $10,000,000 $6,000.000 $4,000,000 $2,000,000 Property Tax and Capacity Fee Trends State borrowing l,Ul II IC%,LIVI IJ 1991- 1992- 1993- 1994- 1995- 1996- 1997- 1998- 1999- 2000- 2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008- 2009-2010- 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 —� Property Tax —a— Connection Fees Page 5 ANNUAL SERVICE CHARGE PER RUE Fiscal Year Operations Component Capital Component Total Sewer Service Charge per RUE 2000 -01 $185 $15 $200 2001 -02 $204 $20 $224 2002 -03 $207 $41 $248 2003 -04 $218 $54 $272 2004 -05 $204 $76 $280 2005 -06 $234 $46 $280 2006 -07 $213 $76 $289 2007 -08 $242 $58 $300 2008 -09 $260 $51 $311 2009 -10 $292 $19 $311 2010 -11 $300 $11 $311 2011 -12 $302 $39 $341 2012 -13 (2011 Ten Year Plan $322 $49 $371 2012 -13 (Prelim 2012 Ten Year Plan) $332 $39 $371 (Additional funding needed for pensions so capital component will be reduced) 2012 -13 (Sustainable Capital Component) $322 $84 $406 (Needed to fully fund the Capital Program with no draw -down of Sewer Construction Fund Balance PROJECTED SEWER SERVICE CHARGE CAPITAL COMPONENT The capital component was increased significantly last year and was recommended to be further increased this next fiscal year. Unfortunately, increases in the unfunded liability for pensions have resulted in higher operating costs and it is anticipated there will be no funds available to increase the capital component this next fiscal year. In any case, the funding level is still far from adequate. Based on expenditures of $30 million per year for renovation, renewal, replacement and known capacity projects and approximately 166,000 residential unit equivalents paying sewer service charge and revenue from other sources of approximately $16 million, the capital component would need to be $84 to fully fund the capital program. This $84 dollar capital component represents a continued increase from the $39 that will be achievable with the two year $30 rate increase noticed for FY 2011 -12 and FY 2012 -13. Of course this calculation could overstate or understate the needed increase because of the impact of an improving or declining economy on property tax, interest and capacity fee revenues. Because we are carrying a balance somewhat higher than the funds required of $30 -$35 million, rate increases to fully fund the capital program can continue to be phased in over several more years, but still represent a significant commitment. Page 6 PROJECTED FISCAL YEAR 2011 -12 EXPENDITURES /REVENUES /SCF BALANCE For the current FY 2011 -12, expenditures were budgeted to exceed revenue. While the deficit spending was significantly reduced from the previous fiscal year, due to the $30 sewer service charge increase, there was still a conscious decision to deficit spend and utilize the $30 million in bond funds that had been deposited in the Sewer Construction Fund for specific projects, such as Standby Power Improvements, Sludge Hauling Improvements, Dry/Wet Weather Bypass Improvements and the Collection System Operations Department Facility. These projects will all have been completed by the end of the fiscal year. In addition to the budgeted deficit spending, two additional expenditures were recommended by staff and approved by the Board which are expected to increase the deficit. One, with the extraordinary bidding climate being experienced on District projects, staff recommended and the Board concurred that the demolition of the old primary tanks and lime silos, budgeted in FY 2015 -16, should be moved up in time. This resulted in an unbudgeted expenditure of approximately $1.2 million. Second, the District received a commitment of grant funds from State Proposition 84 for the construction of the unbudgeted Concord Landscape Irrigation Project. The Districts portion of the design and construction cost is expected to be approximately $3 million with $600,000 in unbudgeted expenditures expected in FY 2011 -12. Potentially offsetting the increased expenditures is an increase in capital revenue year to date. Capital revenue is currently approximately $2 million more than budgeted due to some large apartment complexes that have paid capacity fees in recent months. It is difficult to predict if this trend will continue. For the purposes of this discussion, a range of revenues has been shown in the projected figures. The following table shows the budgeted and projected expenditures for FY 2011 -12. FY 2011 -12 CAPITAL PROGRAM BUDGETED PROJECTED Total expenditures $25.9 million $27.7 million Total revenue $22.2 million $22.2 - 24.2 million Variance -$3.7 million — $3.5 - $5.5 million SCF Balance 6/30/12 (Beginning balance 6/30/11 $52.1 million $48.4 million $ 46.6 - $48.6 million As part of the past debt financing, the District has pledged revenues to first pay its debt obligations. Second, revenue is assigned to Operations and Maintenance costs, including the Self Insurance Fund. Lastly, revenues are available for the Capital Improvement Program. As discussed above, the District draws on the SCF balance to fund its operation and maintenance functions as well as the capital program. The cash flow needs for this self - funding dictate that the Sewer Construction Fund balance be maintained between $30 -$35 million. Thus, FY 2012 -13, for which we are preparing this budget, will start with an estimated balance of $46.6 — 48.6 million, which is only approximately $10 — 15 million greater than the minimum funds required to meet District cash flow needs. Page 7 RECOMMENDED 2012 CAPITAL IMPROVEMENT PLAN FY 2012 -13 TO FY 2021 -22 The proposed 2012 Ten Year Capital Improvement Plan is summarized in the following table. It contains a moderate baseline plan of $258 million in improvements over the next ten years. The baseline program addresses needed reliability, capacity and building improvement projects, including renovating 100% of the high priority defective sewers identified to date, and provides $10.2 million to address needed seismic improvements and $12.2 million for improvements to the sludge dewatering equipment and multiple hearth incinerators. Recent studies of our solids handling technology have concluded that it is a good investment to improve our current facilities and extend their life by 10 -20 years before deciding upon a new solids handling technology. However, no money has been budgeted for seismic retrofit of the existing solids conditioning building. Because it is likely that we will convert to another solids handling technology, such as fluidized bed incinerators or anaerobic digesters in 10 -20 years, a significant investment in seismic retrofit of the existing incinerator building is not recommended. In addition to the $258 million baseline, the total $358 million Ten Year Capital Plan includes $20 million to remediate contaminated soils in the area where new nitrification facilities would be located and $70 million to construct nitrification facilities. It also includes a $7 million allowance for alternative energy to either replace our existing cogeneration system, which is inefficient compared to current technology, or convert to solar energy. Finally, in the tenth year of the plan, $3.5 million is budgeted to begin permitting /pre- design of a new fluidized bed incinerator or pre- design of anaerobic digestion and to begin planning /pre- design to replace our ultraviolet disinfection system with ozone, to better treat for contaminants of emerging concern. Funding for the $358 million Ten Year Capital Plan is from traditional sources of capital revenue, including property taxes, capacity fees and contributions from the City of Concord. Any funding deficit must be made up by increasing the sewer service charge capital component or by selling bonds. As noted previously in the memo, the two significant rate increases the Board approved last year were a good first step, but do not restore the capital component of the sewer service charge to a sustainable level. It is estimated that another $45 per RUE is needed beyond that planned for FY 2012 -13 to bring the capital component to a level sufficient to fund a $30 million per year Capital Program. Projections of the needed increases in the sewer service charge capital component to fund the recommended Ten Year Capital Plan will be further discussed with the Capital Projects Committee on December 6 and with the full Board at the December 15, 2011 Capital Budget Workshop. RECOMMENDED FISCAL YEAR 2012 -13 CAPITAL IMPROVEMENT BUDGET The recommended FY 2012 -13 Capital Improvement Budget totals $32.3 million of which $28.9 million is for renewal and replacement and routine capacity improvements. This amount is close to the $30.0 million annual investment recommended to accomplish a once per 100 year's replacement of all District assets. In addition an expenditure of $3.4 million is budgeted for the Concord Recycled Water Landscape Irrigation Project. Approximately $1 million of this will be reimbursed through a State Proposition 84 grant. The following table breaks down the expenditures by program. Page 8 Proposed Ten -Year Capital Improvement Plan Program/Subprogram 2012 -13 2013 -14 2014 -15 2015 -16 2016 -17 2017 -18 2018 -19 2019 -20 2020 -21 2021 -22 Totals Treatment Plant Reg. Compliance /Planning/Salety 590,000 960,000 271,000 421,000 4.720,000 5,165,000 10,915,000 27,165,000 23,780,000 27,180.000 101,167,000 One-Time Renovation 5,338,000 7,727,000 5,600,000 4,542,000 7,745,000 4,020,000 80,000 80,000 80.000 80.000 35.292,000 Recurring Renovation 1,508,000 402,000 1,460,000 2,460,000 2,470,000 2,600,000 3.050.000 3,050,000 3,800,000 28,000,000 22,60.000 Expansion 0 0 0 0 0 0 0 0 0 100,000 100,000 Subtotal 7,436,000 91089,000 7,331,000 7,423,000 14,935,000 11,785,000 14,045,000 30,295,000 26,660,000 30,160,000 159,159,000 Collection System Renovation 10,310,000 11,702.000 10,501,000 12,551,000 12,150,000 14,044,000 14,451,000 12,151,000 13,851,000 12,830,000 124,541,000 Reg. Compliance/Planning/Safety Expansion Pumping Stations 384,000 1,694,000 1,335.000 270,000 4,467,000 1,360,000 270,000 5,343,000 136,000 270,000 2,974,000 135,000 270,000 3.401,000 180,000 270,000 1,301,000 1.635.000 270.000 2,101,000 610,000 270,000 4,251,000 1,635,000 270,000 3,651,000 635,000 270,000 2,669,000 1,915,000 2,814,000 31,852,000 9,576,000 Subtotal 13,723,000 17,799,000 16,25.000 15,930,000 16,001,000 17, 250,000 17,432,000 18,307,000 18,407,000 17,684,000 168,783,000 General Improvements Vehicles & Equipment Management Information Systems 501,000 1,400,000 501,000 900.000 501,000 500,000 501,000 50.000 501,000 500,000 501,000 500.000 500,000 500,000 500.000 500.000 500,000 500.000 500,000 500.000 5,006,000 6,300,000 Projects 5,353,000 440,000 440,000 470,000 485,000 855,000 480,000 480,000 480,000 480.000 9,963,000 Subtotal 7,254,000 1,841,000 1,441,000 1,471,000 1,486,000 1,856,000 1,480,000 1,480,000 1,480,000 1,480,000 21,269,000 Recycled Water Urban Landscaping 3,930,000 551,000 550,000 550,000 550,000 550,000 550,000 550.000 550,000 550,000 8,881,000 Subtotal 3,930,000 551,000 550,000 550,000 550,000 550,000 550,000 550,000 550,000 550,000 8,881,000 Total 32,343,000 29,280,000 25,572,000 25,374,000 1 32,972,000 1 31,441,000 33,507,000 50,632,000 47,097,000 49,874,000 358,092,000 Page 9 FY 2012 -13 CAPITAL IMPROVEMENT BUDGET TOTAL Treatment Plant Baseline $ 7.4 million Collection System Baseline $13.7 million General Improvements Baseline* $ 7.3 million Recycled Water Baseline $ 0.5 million Concord Landscape Irrigation $3.4 million Total Baseline $28.9 million Total Baseline + Concord REW $32.3 million `Includes $4.75 million for one time seismic retrofit projects which are considered renovation and so have been considered baseline but will not be recurring. Staff will be working to develop the detailed budget document using the above preliminary figures as modified by the December 2011 Capital and February 2012 Financial Board Workshops. Many of the projects have already been defined. Others will evolve and emerge as we prepare the budget document over the next six months in anticipation of the second Board Capital Workshop in April 2011, when the detailed draft Capital Improvement Budget is reviewed with the Board. A review of the preliminary FY 2012 -13 Capital Improvement Budget for major projects and areas of emphasis follows. TREATMENT PLANT PROGRAM Preliminary estimates of baseline expenditures for the FY 2012 -13 Treatment Plant Program can be grouped into two major categories: one time renovation and recurring renovation. Each of the major projects is described briefly after the table. FY 2012 -13 TREATMENT PLANT PROGRAM CATEGORY PROJECT ANNUAL EXPENSE One Time Renovation Pump & Blower Building Seismic Imp. $3,000,000 Primary Treatment Renovation $1,000,000 Outfall Inspection and Renovation $ 815,000 Recurring Renovation j Piping Renovation Phase 6 $ 526,000 Piping Renovation Phase 7 $ 700,000 All Other $1,395,000 Total Baseline $7,436,000 Pump and Blower Seismic Improvements: The recently completed seismic analysis of treatment plant structures indicated that the Pump and Blower Building (PBB) would sustain significant damage /potential collapse during a major quake on the Concord fault. The PPB houses critical equipment such as the primary and final effluent pumps, aeration air blowers and service air compressors. Treatment plant operations would cease with the loss of any of this equipment. This project will develop a final design /cost to upgrade the building to Page 10 withstand a major seismic event. Board approval will be sought prior to award of a construction contract for the proposed improvements. Primary Treatment Renovations: Most of the piping and equipment in the Primary Treatment area was installed in the early to mid 1970's and is more than 30 years old. Much of the piping has shown signs of corrosion and some of the process equipment is reaching the end of its service life. This project will evaluate /replace water and air supply piping, grit handling equipment, scum and grease removal and thickening systems, the electrical system and the sludge collectors /piping /pumping. Outfall Inspection and Renovations: The Outfall was last inspected in 2003 and it is time to re- inspect both the land and submarine portions of the outfall as allowed by the current NPDES permit. The current plan is to retest the land portion of the outfall in a similar fashion to the work in 2003, and install new seals as necessary. The submarine portion will have rock added to provide additional ballast and protection from boat anchors in Suisun Bay. During inspection the treatment flow will be diverted to Walnut Creek through the Dry/Wet Weather Bypass Structure, which was just recently completed. Piping Renovations Phase 6 & Phase 7: A significant portion of the piping systems on the plant site are over 30 years old and some have already begun to fail. The Piping Renovations Program is systematically evaluating the piping systems and addressing problem areas before pipe failures adversely affect the treatment processes. The Piping Phase 6 project will replace scrubber water piping, some centrate piping, leaking connections at the cake feed pumps, sludge blending tank piping, leaking hypochlorite piping in several areas and air headers, air diffusers and valves in the pre- aeration tanks. It will also install baffles in the primary sedimentation tanks to improve solids capture. The Piping Phase 7 project will evaluate and renovate or replace hypochlorite and RAS piping in the RAS pump stations. It will also replace the ash hopper dust collector and other piping throughout the treatment plant. This project also includes improvements to the sludge truck loading building to improve indoor air quality for the operators. COLLECTION SYSTEM PROGRAM The major FY 2012 -13 projects planned for the proposed $13,723,000 Collection System Program can be grouped into five categories: renovations to existing sewers, pumping stations, developer services, capacity /renovation driven projects, and Contractual Assessment Districts (CAD's). A description of the major programs /projects follows the table of estimated expenditures. FY 2012 -13 COLLECTION SYSTEM PROGRAM CATEGORY PROJECT ANNUAL EXPENSE Renovation program Walnut Creek Ph 9, North Orinda $ 10,310,000 Ph 4, Lafayette Ph 8, Concrete and Corrugated Pipe Renovation, TV ins ection and others Capacity /Renovations Grayson Creek Trunk in Pleasant $ 500,000 Hill Page 11 Pumping Stations San Ramon Pump Station $ 1,335,000 Upgrades /Bypass pump, Buchanan South Removal Developer services Develo er Services $ 681,000 Contractual Current CADs — Vista Del Orinda, Assessment Districts St. Mary's Road, Harper Lane, $ 500,000 Smith Road- All others S 397,000 Total $13,723,000 Renovation Program: The renovation program continues the District's efforts to renovate /replace sewers indentified by the TV Program as being in poor condition. This year's renovation program focuses on Walnut Creek, North Orinda, and Lafayette where approximately 35,000 feet of sewer mains will be renovated /replaced. In addition, design and right -of -way acquisition efforts for next year's program will commence. The Concrete and Corrugated Metal (CM) Pipe Renovation Project will install approximately 12,100 feet of cured in place pipe in concrete and CM pipe ranging in size form 18 to 42 inches. The majority of the concrete pipe to be renovated is downstream of force mains that comprise the Martinez Pump system. The CM pipe was installed in the 1950's in Walnut Creek and recent CCTV work has shown extensive corrosion. Capacity /Renovations: In May 2010, the update of the Collection System Master Plan was completed and a list of priority capacity replacement projects was developed. The first of the identified projects, the new trunk sewer in Pleasant Hill Road near Acalanes High School in Lafayette, was completed in FY 2011 -12. This next fiscal year design will begin on the Pleasant Hill Grayson Creek Trunk, which will install approximately 5600 feet of 18 to 24 inch line in Pleasant Hill between the intersection of Pleasant Hill Road and Mercury Way to the Pleasant Hill Relief Interceptor in Ardith Drive. Pumping Stations: The primary focus of this program for FY 2012 -13 is the installation of larger dry weather pumps in the San Ramon Pump Station and the procurement/installation of an emergency bypass pump dedicated to this station. When the San Ramon Pump Station was upgraded in 2003, the District decided to reduce the cost of the project by replacing only two of the 4 pumps with new 250 HP pumps. The two remaining 100 HP pumps would be replaced once the flows to the station increased. Over the past year, the flows at the station have increased to the point where one of the small dry weather pumps cannot handle peak dry weather flow. The decommissioning of the Buchanan South pumping station is also planned. With some rerouting of sewers, this small pumping station can be eliminated. Developer Services: This project provides for appropriate capitalization of District force account labor and other expenses for planning, design, and construction of developer installed and contributed main sewer facilities in FY 2012 -13. Contractual Assessment Districts (CAD): The CAD program provides a financing mechanism for property owners to extend public sewers into areas which are currently served by septic systems. The program requires participating property owners to fund the cost for the non - participating property owners. The participating property owners can elect to have the District finance their costs and pay them back over a ten year period with interest. Page 12 The District has funded 24 CAD's using this approach over the years and has already been paid back the majority of the funds, with interest. The District also utilized a different approach in Alhambra Valley where the public good was served by the District funding the non - participants share to accelerate connections and reimbursement of District funds used to construct a trunk sewer. Recently the District has been approached by a group of property owners in the El Toyanol area of Orinda to utilize a similar approach to the Alhambra Valley and fund the non - participants share due to the extremely high cost of installing sewers and the environmental threat posed by failing septic tanks in the East Bay Municipal Utility District reservoir watershed. From a financial perspective, agreeing to fund the non - participants share would essentially mean that the District would be reimbursed over a potentially much longer time frame than the ten years provided by the CAD approach. Based on staff's knowledge of potential CAD's in the service area, a budget of $500,000 per year or $5 million over the ten year plan has been suggested. Regardless of whether or not the Board agrees to fund the non - participants costs, staff recommends this budget. If the Board were to agree to fund the non - participants share of some of these CAD's, the time elapsed before the funds were completely reimbursed would be longer. There is further discussion of this matter in a separate memo tc the Board. GENERAL IMPROVEMENTS PROGRAM General Improvements in FY 2012 -13 are proposed at $ 7,254,000 and will include the traditional equipment budget, information technology budget and items associated with miscellaneous District facilities. The largest proposed expenditure is the $4.5 million budgeted for seismic retrofit of the District Headquarters Office Building (HOB). This budget includes approximately $500,000 for carpet, paint and other minor upgrades in addition to the retrofit work. Final design /construction of any seismic improvements to HOB will be brought to the Board for consideration once the preliminary design /cost estimates are completed. In order to facilitate the seismic retrofit, staff is proposing that the building be vacated during construction. The logistics of this will be further discussed with the Board at upcoming meetings. Staff is also planning to move forward with seismic improvements on the 4737 warehouse based on recent discussions with the Board Real Estate Committee. These improvements, budgeted at $250,000, are currently under design and will come back to the Board for award once the project has been bid. The General Improvements Program also recommends significant investment in Information Technology (IT) next year. A place holder of $500,000 has been budgeted for IT development. Staff will be seeking Board input on the types of improvements they would like to see as we assess the state of the industry and where the District needs to go to be a leader in the use of technology, as suggested by the Board in their recent strategic planning session. In particular staff is planning to upgrade and modernize the existing geographic data integration (GDI) system which is used to display our collection system maps and link them to a variety of data bases within the District. Staff is also researching a replacement for our collection system maintenance scheduling software. The goal is to have a real time scheduling system which will support wireless field applications and real time work flow routing for collection system operations crews. A budget of $500,000 is recommended for the GDI /maintenance scheduling modernization project. Page 13 RECYCLED WATER PROGRAM Recycled Water Program spending includes the baseline budget needed for recycled water planning and continued implementation of cost effective Pleasant Hill Zone 1 connections. This planning includes funds for staff time and consultant and lobbying efforts to continue to pursue Title 16 funding for the Concord Landscape Irrigation project construction as well as pursue partners and support for a large -scale recycled water project to serve the Martinez refineries. The baseline also includes $100,000 for the District share of the Feasibility Study for the Martinez Refinery Project, for which we recently received Title 16 funding. In addition to the baseline, $3.4 million is budgeted for construction of the Concord Landscape Irrigation project. The District will receive a reimbursement of approximately $1 million from State Proposition 84 funds to construct this project. RECOMMENDATION Staff recommends that the Board support the preliminary expenditures for the Capital Budget and Plan as proposed in this memo. Setting a conceptual budget for capital expenditures resolves one variable of the financial planning process. These figures are then used as District staff more fully develops and refines financial planning scenarios as they gather current information on operations and benefits costs. Finally, a comprehensive rate planning document is prepared for distribution to the Board in late January and will be discussed at a workshop on February 16, 2012. During this same time period, staff will be providing the Board with various financial planning scenarios related to ongoing negotiations of new contracts for the different bargaining units. As benefit costs are a significant part of the District budget, it is expected that the Board will want to evaluate different benefit funding scenarios. In order to simplify this process, it is important to agree upon the Ten Year Capital Plan budgetary figures that can be included in the budgeting scenarios. Following the February Financial Planning Board Workshop, the Capital Budget and Plan expenditure figures are finalized and the comprehensive Capital Budget and Plan developed for Capital Projects Committee and full Board consideration in April. Page 14 Item 8a. 2012 -13 Capital Improvement Budget and Plan December 15, 2011 Board Presentation Proposed Ten -Year Capital Improvement Program Pr ram/S tam 2012 -13 1013.14 2014.15 2015-181 101 617 2OW48 2MO-19 2M920 202021 1 2021.22 Totals Treawwnt PI/tlt nCW4ftOWftftVWS1kk, 590000 980000 V1,MO 421,000 1710000 s105000 10215.00D 27105000 77180000 10110700D On -Tw. Rlroww 5338.000 7777000 5000000 512000 7715000 010000 80,000 00000 00.000 35.2D2.000 ReMdion 1500000 000 t 450000 465 2470000 500000 7050000 3050,OOD 20000.000 72000000 n 0 0 0 0 0 0 0 0 100000 1WODD Lr0101r/ 7 NO / NO 7,331,6M 7 111 11 JUAN N M 165 tU Cdlsc0011 Wn R4nonOOn 10310000 11707.000 10501000 1 561000 1 1W 000 1 000 11451110D 1 151 00D 12 000 121511000 384.000 270000 270000 270000 770.000 ZM.OW1 2MJOW 27OLODO 270.000 7ro000 7811000 1894000 1187000 6 000 Z674.000 3.401.000 1 t000 1 Z101.000 4251.00D 3.651.000 ZW.Ow 31 000 SOIOae 1,335,000 1 000 135,000 135000 180000 / 000 010000 t 000 MM 1 5.000 9578000 /e0latal 13 1 17MM W.Ul Ile IUMM ANIAN 17 17Anm IWAN WMAN ITPAM IMMM Gemral Impfow anenb Vow" aE SOt000 901000 501XO SD1,WO SMM 500000 500000 5WM 500000 5000000 Ftkrr W mt 1.400000 9W.WO 500 5000D0 500000 WOW 500.000 SOOOW WOOD SOOOW 8300000 5353000 440,000 110000 170000 485000 SMOOD 40DOOD 400 .000 480.000 480,000 9 4000 SuMaW 7 1M IA41AN 1AT1.W 1AAM IAKAO 1AMM 1ACM 1,410 IAIOM 21 ON RwjcW WOW Lkbw Lvftmft 3 000 11t 000 SSOODO 950000 560000 110000 550000 560000 110 550000 8101000 O&AW 3 0101 N1.N0 1{0.65/ NOON 650,000 111000 NO 101 11/ NON/ {_65,000 t 1010 ToW 32 343,ON U .000 7 f7 ;00/ 7 ON 3 {7 ON 21 1065 33 657 N U2 47 657 ON 49 t7/ 065 365 N NO $358 Million Ten Year Plan Is a Responsible One That Funds.... • Treatment Plant — Incinerator /Solids Handling Impvmts $12.2 M — Primary Sedimentation Renovation $9.7 M — Cogeneration Replacement/Alternative Energy $7M — Nitrification $70 M — Contaminated Soils Remediation $20 M • Collection System $6,534,000 — Identified Renovation Needs Plus $125 M — Identified Capacity Needs $20 M — Pumping Station Renovation $10 M — CAD's and Developer Sewers $13 M • General Improvements and Treatment Plant $481,000 — Seismic Improvements $10.2 M Sewer Service Charge is Critical Funding Source for Capital Program FY 2011 -12 CAPITAL REVENUES BUDGETED Facility Capacity Fees $4,372,000 Pumped Zone Fees $562,000 Interest Sewer Construction Fund $265,000 Property Taxes (Net after debt paid) $6,882,000 Sewer Service Charge ($39 capital component) $6,534,000 Reimbursements from Others City of Concord $2,549,000 Recycled Water Sales (Net after O &M) $110,000 Developer Fees /Other $491,000 Alhambra Valley /CAD's $481,000 TOTAL $22,246,000 2 Current Year Program Sets Beginning SCF Balance for Ten Year Plan FY 2011 -12 CAPITAL PROGRAM BUDGETED PROJECTED Total Expenditures $25.9 million $27.7 million Total Revenue $22.2 million $22.2 -24.2 million Variance -$3.7 million - ($3.5 -$5.5 million) SCF Balance 6/30/12 (Beginning balance 6/30/11 $52.1 million) $48.4 million $46.6 -$48.6 million Sewer Service Charge Revenues Diverted from Capital Program to Balance District O &M Budget $400 Total charge per RUE $350 $3�t s3ao s311 5311 $at $300 5289 5280 $280 $371 $272 5300 5302 $248 _ O rd:lOI15 CORI OflBtll $250 3224 3200 $200 i $ISO $100 Capital program component $50 �"9$3�9 511 3 Assuming Similar FY 2012 -13 Revenue... (plus Prop 84 $1 M Reimbursement and Payback of $1 M Property Tax) Planned Program Brings SCF Balance Down Close to Funds Required FY 2012 -13 CAPITAL PROGRAM PROPOSED BUDGET Total Expenditures $32.3 million Total Revenue $24.3 million Variance -$8 million SCF Balance 6/30/13 (Beginning balance 6/30/11 S46.6 — 48.6 million) $38.6 - $40.6 million Capital Program Has Been Deficit Spending for Seven Years f73 $70M S30M Nit S66 IbnE Sa'e $60M 557.3 INO•/Da f 53.E US .2 :0091 SSE. Sew�rj On Ss12 $51.7 $50M 47.E Fu 52 us 5 t .a $4011111 0A $30 -35M - Approximate Sewer Construction Fu oquirod et Distri Cash Flow Noods 32 3 $30M $279 5259 ,. $20M Annual Revenue 2 $158 $IOM $OM � 9 ti d iittq u o.ac�14� M Upcoming Developments Name 9!Y RUEs RUE's Year to Date are Promising and Exceed Walnut Creek Budget by $1.8 Million 24 Hour Fitness w/ Chick -Fil -A 2.500 - - - - - - - - - - - - - - 45 2.000 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Walnut Creek ,.500 -- -- - - - - - - ------ - - - - -- North Main Apartments 9C 98 NO Walnut Creek 500 Wilder 0 244 91, ' ^A9199d90s999A�ryry�1QLry�ry 0 �p b coo� oryo 1 OryON, N Nryo,, NIP Danville ,99,�019 v Fiscal Year ■ Total RUEs per Year ■ 2011 -12 Budgeted RUES Upcoming Developments Name 9!Y RUEs Sprouts Market Walnut Creek 2 24 Hour Fitness w/ Chick -Fil -A Walnut Creek 45 Paragon Apartments Walnut Creek 300 North Main Apartments Walnut Creek 98 The Village Mixed Use at Newell Ave Walnut Creek 39 Wilder Orinda 244 Alamo Creek Senior Apartments Danville 120 What increase in Capital Component will be needed in FY 2013 -14 & FY 2014 -15 and beyond? • Proposed 10 -year plan calls for $29.4 million in spending in FY 2013 -14 and $25.6 million in FY 2014- 15 ..... modest as compared to $30 M benchmark • Assuming similar revenue stream for next two years and about 166,000 connections • Increase in capital component of $20 in 2013 -14 and $20 in 2014 -15 will be needed to bring capital component to sustainable level • In subsequent years modest cost of living increments suffice until 2018 -19 when spending increases to fund soil remediation /nitrification projects What are our total unfunded liabilities as of most recent information? Accrued Compensated Absence $5.1 M GASB 45 OPEB Liability $77.6 M CCCERA Unfunded Liability $122.5 M Outstanding Debt $51.8 M TOTAL UNFUNDED LIABILITY -$257 M* *SEWER CONSTRUCTION FUND BALANCE 6 -30 -12 $-- 47 MILLION (Funds Required - $35 Million) L What is our bonding capacity and how should it be used? • Guideline 10% of revenue going to debt service. Current revenue $85 million therefore debt service $8.5 million. • Current debt service $5.6 million per year vs. $8.5 million per year guideline. • Investigating benefits of using remaining bonding capacity to fund capital and free up funds to pay down CCCERA unfunded pension obligation. • Discussion should risk of using bonding capacity which has historically been reserved for large capital requirements for unbudgeted regulatory mandates. Conclusion of Rate Setting Discussion • Two year $30 rate increase (FY 2010 -11 & FY 2011 -12) did not close the funding gap for the Capital Program • Additional - $40 rate increase over two years will be needed ($20 FY 2013 -14 & $20 FY 2014 -15) to close the Capital Program funding gap .... O&M needs will add to that increase • Raising rates to pay for capital improvements is essential to maintain existing assets and meet new regulatory mandates • Bonding capacity is limited and prudent management would preserve some capacity for future unidentified Capital Program necessities 7 Proposed FY 2012 -13 Capital Improvement Budget FY 2012 -13 CIB Program /Project Total Cost Treatment Plant Baseline $ 7.4 million Collection System Baseline $13.7 million General Improvements Baseline' $ 7.3 million Recycled Water Baseline $ 0.5 million Concord Landscape Irrigation $3.4 million Total Baseline $28.9 million Total Baseline + Concord REW $32.3 million 'Includes $4.75 million for one time seismic retrofits of HOB and 4737 Imhoff FY 2012 -13 TREATMENT PLANT PROGRAM CATEGORY PROJECT ANNUAL EXPENSE One Time Renovation Pump & Blower Building Seismic` $3,000,000 Primary Treatment Renovation' $1,000,000 Outfall Inspection and Renovation $ 815,000 Recurring Renovation Piping Renovation Phase 6 $526,000 Piping Renovation Phase 7 $ 700,000 All Other $1,395,000 Total Baseline $7,436,000 Current CCCSD Treatment Approach State of the Art When Constructed Recovers Energy and Phosphorus... What is our Treatment Plant of the Future? Ash Reuse = phosphorus recovery incineration Wasla n-, recovery 8 sleam production = Energy Recovery CCCSD Plant of the Future Planning Exercise • Comprehensive look at how to sustainably treat wastewater for next 50+ years. • Consider how CCCSD can transition to the plant of the future. • Incorporate findings of Greenhouse gas study of Incineration vs. Digestion. • Invited two consultants to develop & submit concepts for CCCSD treatment plant of the future and phased approach to get us there. • CCCSD staff & technical advisors attended presentation and reviewed documents. • Technical advisors submitted recommendations... X, Plant of Future Findings • Industry is "morphing" from doing things as they have for 100 years to looking at sustainability • Research ongoing on biological nutrient removal utilizing "short -cut NDN (nitrification /denitrification) processes" to reduce energy consumption • Research ongoing on biosolids to energy conversion as an alternative to incineration • Future biological nutrient facilities concepts entirely driven by effluent limits Recommendation: Maintain current facility /monitor research by others /identify research needs for CCCSD over the five years of the next NPDES permit 10 S -Curve for adoption of innovation Lo R I S K Mao�n E.rty AE ODt,rs E,ry I ,ro.,brc rt,iory. Hi Euy Late Time of Adoption -------------------------------- --- Where do we want to be on the innovation curve? CCCSD has built a comprehensive integrated energy /GHG model to analyze different scenarios for planning purposes. • Base model simulates GHG production and energy usage /cost for current operating conditions • Model scenarios include: — Switching to fluidized bed incinerators — Making modifications to cogeneration system — Going to higher level of treatment (nitrification /nutrient removal) — Switching to anaerobic digesters (in development) • Cost of electrical power, natural gas, landfill gas and CO2 allowances can be input to test sensitivity of different scenarios to energy prices Comparing Solids Handling Methods - - Ipx d ta 1'oe• Fyne I.ea p= yam. the n[s 4.a' it ijg:m% figm, Gz s C -0 r E _ F __G _i _M_ I _ J j L M M -0F t I IRXWU NUM RWAA,--f G BcukEs Mtsai W 4.0 qsn Gr. rh.,. 91es tltaNe ;�.,m m► war• neat W. Feb B'andavm ti10/q F..6 we. F.adaYx Ts.kl O.xrea Pe.cus O..awlia 0.t ... tWe VA. BRWy 415 Gas Heetep RW +x 1 WARY NO6i1 %TS as G Hemp R.I. WAPUW110n Ga Hee.p R.aa•. i WAP Ae} L.19 G. T. S. Vw WASCF;ta. W. *Kbm LFGe". n In vipoy $11,510,000 t4et Tra• %1d I.e6-0y Stw G..*- 1P —) G^. e b Im TSG, X0 Am GxI .k Ice 6%er.:'A-. pn Wf R LaCCF LGy Wf 12 kaw LGhr Wf Saa ML6f,`F LG¢r wf Sw if Gn LaMar ;me Nridrt c« usaee Wf R kd NGt r L f4 kd NGyr Wf Sum L�SCF mcfy Wf S MC Gas .. ** Includes $6 million for Solids Bldg Seismic Upgrade F..". P. W ­_0 caw. Resin d,4.bw st.m CenAle w &.%*- d cede earn lean Sawn mas nyrce flue Preliminary Findings of Solids Handling Alternatives Analysis Solids Handling Capital Cost O &M Cost Annualized Alternative ($ /year) Cost ($ /year)* Anaerobic $54,400,000 $7,450,000 $11,510,000 Digestion Fluidized Bed $60,000,000 $2,620,000 $7,850,000 Incineration Multiple Hearth $18,600,000'`* $4,910,000 $6,530,000 Furnace Upgrade *Assumes discount rate of 6% and 20 year analysis period. ** Includes $6 million for Solids Bldg Seismic Upgrade 12 Treatment Plant Renovation Needs Continue to be Identified with Condition Assessments -Determine the likelihood of failure and /or the remaining life of the asset. I __ I . „ -Completed Assessments: -Concrete *Asphalt Paving -Protective Coatings -Transformers *Buildings re Seismic *Presence of Hazardous Materials -Critical Piping (Aeration) *Elevators -Electrical Switchgear M MfW fI.... V2:B% Oew..10.1.eu NwP.rr rr, wcw M<wravf�ner L..n WB +cro.H�.rNNron N��Bwi ve Nr E photo 13: Bay 7 • Datall of ExpOW Apgregato Above Wator Line (Typical) $6.5 M Primary Sedimentation Tank Renovations Incorporates Condition Assessment Findings and Improves Efficiency • Proposed Renovations — Replace Scum Collection System — Install Baffles_ = == — Replace Chain Drives — Rehabilitate Concrete — Replace Scum Skimmers and Thickener — Construct New Grit Handling Facilities — Upgrade /Renovate Electrical Conduits /Equipment 13 Scum Spray System Improve Requires Renovation to Performance Tank Baffles Will Improve Solids Capture /Reduce Load on Secondary 14 Grit Handling Facilities are Odorous and Reaching End of Useful Life Ammonia removal looking more likely within ten year window of the CIP (Status Dec 2010) • December 2010 — CVRWQCB adopts Sacramento Regional Permit with Stringent Ammonia and Nitrate Removal • December 2010 - San Francisco RWQCB initiates nutrient study plan for Suisun Bay to evaluate impact of ammonia on phytoplankton • September 2010 Sacramento Regional tentative NPDES renewal calls for ammonia and nitrogen removal • August 2009 — An Urgent Call to Action report of the State -EPA Nutrient Innovations Task Group • May 1, 2009 — Ammonia included as "other stressor" in Bay Delta Conservation Plan and all treatment plants discharging to the Delta, including CCCSD, listed as contributors • June 2, 2008 —Dr. Dugdale finds that ammonia from wastewater treatment plants may pose a threat to Delta species • November 27, 2007 - Petition for Rulemaking on Secondary Treatment Standards for Nutrient Removal to EPA by NRDC 15 Ammonia removal looking more likely within ten year window of the CIP (Status Dec 2012) • Report of Waste Discharge for Reissuance of NPDES Permit submitted to RWQCB May 31, 2011. • Ongoing discussions with RWQCB and participation in Suisun Bay studies and Numeric Nutrient Endpoints studies to support work to identify stressors in Suisun Bay and the part played by ammonia and nutrients. • Administrative Draft of NPDES Permit received September 16 and comments returned September 22, 2011. RWQCB strategy to study arnmonia issue for five years of permit but not require ammonia removal at this time. • Draft Tentative Order received September 29, 2011 containing achievable ammonia limits. • CCCSD minor comments submitted November 1, 2011. State Water Contractors take an interest in CCCSD Tentative Order • SWC comments submitted November 1, 2011 suggest immediate requirements for CCCSD to remove ammonia and nitrogen. • RWQCB initial response to issue 13267 letter requiring CCCSD /DDSD to take the lead in studying nutrients in the Delta and identify short term plant improvements to reduce ammonia discharges • Approach conflicts with regional approach that CCCSD /RWQCB /BACWA have been promoting • BACWA submitted detailed Comments rebutting State Water Contractors letter December 8, 2011 • Discussions with RWQCB ongoing • Permit Adoption Hearing moved from January 18, 2012 to February 8, 2012. 16 What could Ammonia Removal look like? (Basis of $70 million capital cost estimate in CIP) f-rt Conventional Nitrification What could nutrient removal look like? (Additional $70 M without removal of contaminated soils.) A� 7 .,L Nutrient Removal level III 17 i Contaminated Soil 1 e 6 En ecove MBR Rte' watering D t Some Nitrification /Nutrient Removal Approaches Take Less Space Cost of Contaminated Soil Remediation is a Consideration in Choosing Future Treatment • Cost depends on Waste Class (estimated 150,000 cy) - Non Hazardous — landfill - $18.9 Million (Haul to Keller Canyon Landfill) - Non- RCRA — Hazardous - $18.5 - 27.6 Million (Rail transport to Utah) - RCRA Hazardous - $42.7 - $145.8 Million (Rail transport to Idaho) - On -site treatment - $27 — 39.5 Million (Stabilization /Solidification) • Assume $20 Million for planning purposes in year 2019 All sewers in District • as of • 2010 Ongoi On.. . Program �aE Bud . mary Focus is Walnut reek, � • I , ayette "��' s ` ,•may ,;a , � -. `,, . iii • . . ". r "a :.: .� 19 FY 2012 -13 COLLECTION SYSTEM PROGRAM CATEGORY PROJECT ANNUAL EXPENSE Renovation program' Walnut Creek 9, North Orinda 4, Lafayette 8, Concrete Pipe, TV inspection and others $ 10,310,000 Capacity /Renovations Grayson Creek Trunk in Pleasant Hill $ 500,000 Pumping Stations San Ramon Pump Station Upgrades, Buchanan South Removal $ 1,335,000 Developer services Developer Services $ 681,000 Contractual Assessment Districts Current CADs — Vista Del Orinda, St. Mary's Road, Harper Lane, Smith Road $ 500,000 All others $ 397,000 Total $13,723,000 All sewers in District • as of • 2010 Ongoi On.. . Program �aE Bud . mary Focus is Walnut reek, � • I , ayette "��' s ` ,•may ,;a , � -. `,, . iii • . . ". r "a :.: .� 19 Pipe Renovated to Date The following table reflects the miles of pipe (6, 8 &10 Inch) renovated to date. FISCAL YEAR PIPE RENOVATED 2005/07 8.1 Miles 2007/08 5.6 Miles 2008/09 6.3 Miles 2009/10 7.5 Miles 2010/11 2.6 Miles 2011/12 6.8 Miles TOTAL Completed Renovation 36.9 Miles Renovation Program (6, 8 & 10 inch) Achieves 100% Completion of all known defects by FY 18/19 Total miles of pipe to be renovated - 82.8 miles* Miles of pipe renovated to date - 36.9 miles Remaining miles to renovate - 45.9 miles 10 Yr Budget Miles of Percent of for Pipe Known Renovation Renov. in Defects (millions) ** Next 10 Renov. in Yrs * ** 10 Yrs $110.5 74.7 100 %+ * Based on TV inspection of 99 percent of 6, 8 and 10 inch mains ** Provides $31.1 million in FY 17118 to 21122 for lines currently not identified by TV program * ** Estimated at $280/ft 20 SSO Downward Trend Has Been Significant Since Start of Renovation Program Running 12 -Month Overflow Totals 1999 to present xoo — — ISO ,ze ,00 - w ss 0 — c c c c e c c e c c c 12 -Month Total at Month -End SSO Downward Trend Has Been Significant Since Start of Renovation Program Comoarison of Cumulative Overflows 100 90 80 70 so so 40 30 20 10 . 0 JAN FES MAR APR YAV JUN JUL AUG SEP OCT NOV DEC —4-2008-0-2009:*— ,0 —201 1 21 Capacity Program • a PMasant Hltl - \� fit• Pleasant H11UG ayton Creak t ✓ - v i 10 year plan includes Laayaaa- $20M for high priority Pleasant "M Road capacity projects oa.w D1� wa �1 rLJ _•I• ��"�..ti � ♦• ssw Walr%nCrsak- Oi ai.0 a,� ..� ,•. 3 - WNnut SNd raw ,a lair Morapa Moraga Way \ © �� Io—s.w oar •�1 -�._ Lapand - - - -_ San Ramon- New - GpaC11y Ia.nctaroY Otoup ►areanl — alpa Gpaclty yn Ramon Stnadula C � = t P Davatop —nl. a-yaar Svsntl Q , No Stoll or trtwn Etov . NSA >130% 1 22 �a�id -•, -i•_�j ^.� L. � r31�„. lit' � 7 y � �� \ \` -� t__ y�•ji'i1'or -•.��- r- s'ri.��� � c� -�•T:•_.• -alr� is �:... — \. � is j 7 ki4 t:�' -. 'l`ii r�• Inds 22 Budget funds abandonment of Buchanan South P.S. Con,rd Vehicles and Equipment Tower Information Technology Rcm Seismic Improvements HOB and 4737 Imhoff Place' North All Other Fvnpng ct •non Total A, F,1! Recp+neq argon ti Reconnec, &uinmeee Aupor, `0 S—. 0C Club swha CC Sarah ]p Pump Spore Authany , icn Recon n Ta Reconnect Nld u e � Crr>.vns Plus Heel AbWWW.d Pip. }} e. FY 2012 -13 GENERAL IMPROVEMENTS PROGRAM PROJECT ANNUAL EXPENSE Vehicles and Equipment $501,000 Information Technology $1,400,000 Seismic Improvements HOB and 4737 Imhoff Place' $4,750,000 All Other $603,000 Total $7,254,000 23 SWS nORKFLOW SEE AeoRgKAL DIAGRAM SOL Sonar ends IBM ASra00 Sane SOL Sarver 1005 SOL Sonar 2005 ESC-SOL I ESGS NYEB_GL S OSene CSO-02 $OL -01 �4erltr) ESG Dab - ESG Data MTE Acceq CCCSOLFe _ (LasaM1 I Dslnd an0 - ColdFustoe pt"-") Develops/ Jobs Mapping MapGulde (SpaftQ GeoMedia is Co0ea"n system GDi lan p end profile drawings 01C ABteCAD G= 24 Seismic Retrofit Program Project 2012 10 -YR CIP CONSTRUCTION HOB $ 4,500,000 FY 2012 -13 Pump & Blower $ 3,005,000 FY 2012 -13 4737 Warehouse $ 250,000 FY 2012 -13 POB Office Area $ 1,177,000 FY 2015 -16 TP Warehouse $ 895,000 FY 2016 -17 Laboratory $ 192,000 FY 2016 -17 SCB' $ 201,000 FY 2022 -23 Total 1$10,220,000 Seismic Retrofit of SCB is estimated at $7 -8 Million for construction; does not include bracing furnaces. Budgeted outside 10 year plan in anticipation of potential change in solids handling method. i Exterior Retrofit • • 34 11 /- - "' 25 HOB Interior Retrofit Option lulA= P 71 24 HOB Interior Retrofit Option JUP 26 Preliminary Ideas for Relocating Staff during HOB Seismic Upgrade — Keep as much staff as possible on or near Martinez campus — Utilize existing facilities (4737 Warehouse, Annex, space in POB) — Use any excess space at new CSO facility — Rent office trailers and place on Martinez campus — Consider lease of unoccupied office space — Review relocation plan with Board in the future Pump and Blower Building Houses Critical Plant Equipment - k 08:23 v oa s• 27 PBB Retrofit Can Be Accomplished Keeping Plant in Service -_' _ C West -Buttress West Side -Shear Walls all Side outh FY 2012 -13 RECYCLED WATER PROGRAM PROJECT ANNUAL EXPENSE Baseline - Pleasant Hill Zone 1, Martinez Refineries and other REW Planning $530,000 Total Baseline $530,000 Concord Landscape Irrigation' $3,400,000 Total $3,930,000 r: Concord Landscape Irrigation Project Approx. 190 A FY Over 34 New Customers $4.2 million total cost $1.2 million Prop 84 Grant c Board Role in Capital Program is Ongoing • Set Initial Capital Funding Levels in Nov /December • Confirm Capital Funding Levels in Jan /February • Board Workshop Focused on CIB /CIP Projects Apri • Authorize CIB /Program Budgets in June • Authorize Supplemental Program Funds if needed • Award Construction Projects > $100,000 • Authorize Construction Change Orders >$100,000 • Authorize Consultant Contracts > $100,000 What do we need from the Board today? • Concurrence that proposed preliminary expenditure figures for FY 2012 -13 and the subsequent 9 years are acceptable for inclusion in financial planning documents to be reviewed by Board in February 2012 • Concurrence that relative emphasis and allocation of expenditures between the four programs is acceptable for development of the detailed FY 2012 -13 Capital Improvement Budget and Ten -Year Capital Plan • Acknowledgement that a significant increase in the capital component of the Sewer Service Charge will be needed in FY 2013 -14 and FY 2014 -15 to fund the recommended 2012 Ten Year Capital Plan 30 GLOSSARY OF FINANCIAL TERMS For use with the 10 -year planning documents Accrual Basis of Accounting - The basis of accounting under which transactions are recognized when they occur, regardless of the timing of related cash flows. An example of accrual basis is when an invoice is sent out for services, a receivable is booked and revenue is recorded even though no cash has been received at the time the invoice is mailed to the customer. Ad Valorem Tax (Property Tax) - A tax based on the assessed value of taxable property (also referred to as Property Tax). Arbitrage - Borrowing in one market (such as bonds) at one interest rate and investing in another market (such as certificates of deposit) at a higher interest rate. Such activities are highly restricted by the federal government and any excess interest earned in this manner is not tax exempt. Asset - An economic resource owned by the entity that is expected to benefit future operations. Examples of assets are: cash, investments, receivables, and capital or fixed assets. Balance Sheet - See Statement of Net Assets, the current term. Bonds - A written promise to pay a sum of money (principal or face value) at a future date (maturity date) along with periodic interest amount paid at a specified percentage of the principal (interest rate). Bonds are typically used to finance long -term capital improvements. Budget - A plan of financial operation, embodying an estimate of proposed expenditures for a given period (typically a fiscal year) and the proposed means of financing those expenditures (revenue estimates). CAFR (Comprehensive Annual Financial Report) - A report prepared at the close of each fiscal year to show the actual audited condition of the Agency's funds and serves as the official public record of the Agency's financial status and activities. Capital - The term refers to the Sewer Construction (S /C) Fund. Capital Assets - Assets such as land, improvements to land, easements, buildings, building improvements, vehicles, machinery, equipment, works of art and historical treasures, infrastructure, and all other tangible or intangible assets that are used in operations and that have initial useful lives extending beyond a single reporting period. Capital Budget - A plan of proposed capital expenditures and the means of financing those expenditures. The capital budget is usually enacted as a part of the complete annual budget, which includes both operating and capital outlays. The capital budget should be based on a capital improvement program (CIP). A GLOSSARY OF FINANCIAL TERMS For use with the 10 -year planning documents Capital Improvement Program (CIP) - A plan for capital expenditures to be incurred each year over a fixed period of several future years setting forth each capital project, identifying the expected beginning and ending date for each project, the amount to be expended in each year, and the method of financing those expenditures. Cash Basis of Accounting - A basis of accounting under which transactions are recognized only when cash changes hands. Revenue is recognized when cash is received and expenses are recognized when paid. Cash Reserves (Funds Required /Funds Available) - The amount of cash and investments that is easily liquidated and available to meet the District's operating, capital, self- insurance, and debt service obligations. Reserves may be restricted or unrestricted. The Operations and Maintenance (O &M) and Capital Funds Available are unrestricted cash reserves, made up of cash and investments of the District (See definitions of Funds Available and Funds Required). Connection Fees (Capacity Fees, Facility Capacity Fees) - A fee charged when new or additional Residential Unit Equivalents (RUE) connect to the sewer to contribute their fair share of service and facility costs. (Also see Pumping Capacity Fees). Debt Service - The amount of principal and interest that a local government must pay each year on its long -term debt. Defeasement - The act of relieving an Agency of a particular liability (such as a specific bond series) by refunding the liability through an escrow or trust fund. Legally defeased liabilities do not need to be appropriated each year as the trust fund is removed from the control of the Agency. (The District defeased its 1994 debt using 1998 Revenue Refunding Bonds.) Deficit - (1) The excess of an entity's liabilities over its assets; (2) The excess of expenditures or expenses over revenues during a single accounting period. District Code - A system of rules, which are complied and arranged by a municipal corporation, and are adopted and used to regulate the conduct of its inhabitants and government. Facility Capacity Fees - see Connection Fees above. FASB (Financial Accounting Standards Board) - An independent body responsible for establishing and interpreting the GAAP mainly for use in the North America. The District follows FASB's standards in areas not specifically covered by GASB. r GLOSSARY OF FINANCIAL TERMS For use with the 10 -year planning documents Fund - An independent fiscal and accounting entity with a self - balancing set of accounts, recording cash and /or resources together with all related liabilities, obligations, reserves, and equities which are segregated for the purpose of carrying on specific activities or attaining certain objectives. One type of government fund is an enterprise fund and is the only type of government fund used by the District. Enterprise Funds - Accounts for District, self- sustaining activities that derive the major portion of their revenue from user fees. Enterprise Fund Accounting is used for self- sufficient government operations financed and operated in a manner similar to business enterprises, and for which preparation of an income statement is desirable. The District uses "sub- funds" to better manage internal finances. The funds are as follows: Running Expense (also referred to as Operations and Maintenance, O &M, or R/E) - A sub -fund that accounts for the general operations of the District. Operating revenues and expenses are accounted for in this sub -fund. Sewer Construction (also referred to as Capital or S /C) - A sub -fund that accounts for non - operating revenues that are to be used for acquisition or construction of plant, property, and equipment. Self - Insurance (S /1) - A sub -fund that accounts for interest earnings on cash balances and cash allocations from other funds, temporary investments, and costs of insurance premiums and claims not covered by the District's insurance policies. Debt Service - A sub -find that accounts for activity associated with the payment of the District's long -term bonds and loans. Funds Available (CCCSD term for Cash Reserves on hand) - The amount of cash and investments available in the O &M and S/C funds on June 30th of any fiscal year using the Funds Required definition above. Fund Balance (Net Assets) - The net worth of a fund, measured by total assets minus total liabilities. Funds Required (CCCSD term for Cash Reserves Guideline) - Used in the 10 -year planning process, this is the amount of money held in cash and investments (liquid assets) that is needed on June 30th of any fiscal year to meet our cash flow needs through mid - December, when we receive our first sewer service charge and property tax payment from Contra Costa County. This includes O &M and S/C Fund cash and temporary investments; it does not include OPEB payments /accruals, Debt Service cash or reserve investments and Self- Insurance Fund cash and investments. C GLOSSARY OF FINANCIAL TERMS For use with the 10 -year planning documents GAAP (Generally Accepted Accounting Principles) - A widely accepted set of rules, conventions, standards, and procedures for reporting financial information, as established by the Financial Accounting Standards Board (FASB). GASB (Governmental Accounting Standards Board) - Established in 1984, it is the ultimate authoritative accounting and financial reporting standard - setting body for state and local governments. The Board issues GASB statements that can require significant changes to an agency's financial reporting. Goal - The long -term continuing mission of a department, division, or program. Goals define the strategic results to be achieved and therefore indicate the relevance, importance, scope, and effectiveness of that outcome. Internal Control - The plan of organization and all other coordinated methods and procedures adopted to safeguard assets; to check the operations data; to promote operational efficiency, economy, and effectiveness, and to encourage adherence to prescribed managerial policies that will accomplish the objectives of the organization. Liability - A debt of the business; an amount owed to creditors, employees, government bodies, others; a claim against assets. Modified Accrual Basis of Accounting - The accrual basis of accounting adapted to the government fund type under which revenues are recognized when they become both "measurable" and "available to finance expenditures of the current period." Expenditures are generally recognized when the related fund liability is incurred. Net Assets - See Fund Balance O &M (Operations and Maintenance) - The Running Expense Fund. One -Time Revenue - Revenue that cannot reasonably be expected to continue, such as a single - purpose federal grants, an inter -fund transfer, or use of a reserve. Continual use of one -time revenues to balance the annual budget can indicate that the revenue base is not strong enough to support current service levels. OPEB (Other Post - Employment Benefits) - Benefits received by an employee when they retire, including medical, dental, and life insurance — but it does not include pension benefits. Operating Deficit - The amount by which current expenditures exceed current revenues. GLOSSARY OF FINANCIAL TERMS For use with the 10 -year planning documents Overhead (Administrative Overhead and Non -Work Hours) - Administrative Overhead and Non -Work Hours include indirect costs and the value of time off (holidays, sick leave, vacation, etc.) These costs are expressed as a percent of salary. For District accounting, salaries and benefits are separate from overhead (whereas consulting firms typically view employee benefits in "overhead "). Indirect costs are costs that are incurred for a common or joint purpose benefiting more than one cost objective or task and that are not readily assignable. Pay -As- You -Go - A term used to describe paying expenses as they are incurred, as opposed to prepaying, pre- funding, or setting money aside for future expenses. Performance Measures - The specific, quantitative measures of work performed within an activity or program (e.g., total miles of pipes cleaned). Also, a specific, quantitative measure of results obtained through a program or activity (e.g., reduced incidence of overflows due to a new maintenance program). Pumping Capacity Fees - A component of connection fees for units that are located in areas tributary to one or more of the District's Sewer Pumping Stations. (See Connection Fees.) Reserves - See Funds Required or Funds Available. Reserve Policy (CCCSD uses Cash Reserve Guidelines) - A document outlining minimum reserve thresholds, identifying current and potential reserves, and explaining what the reserves are, or how the reserves will be used. Residential Unit Equivalent (RUE) - A measure of sewage volume and strength equivalent to a typical residential household. Restricted Revenue - Revenue that is legally earmarked for a specific use, as may be required by state law, bond covenants, or grant requirements. For instance, capacity fees must be used within the S/C Fund; the revenue cannot be transferred to O &M. Sinking Fund A method by which a government may set aside money over time to pay for a project or obligation. Statement of Net Assets (Balance Sheet prior to GASB 34) - A statement reporting the present financial position of an entity by disclosing the value of its assets, liabilities, and equities as of a specified date. Assets minus liabilities equal fund balance (also called Net Assets) Strategic Plan - A comprehensive plan, normally covering a 5 -10 year period, developed to guide delivery of specific services, identify future needs and challenges, and identify future infrastructure needs. E GLOSSARY OF FINANCIAL TERMS For use with the 10 -year planning documents UAAL (Unfunded Actuarial Accrued Liability) - A term used in connection with pension plans, it is the amount of excess of the actuarial accrued liability over the actuarial value of assets. The value may also be negative; a negative unfunded actuarial accrued liability is the excess of the actuarial value of assets over the actuarial accrued liability, or the funding excess. Unfunded Liability - A liability that has been incurred during the current or a prior year, that does not have to be paid until a future year, and for which reserves have not been set aside to meet this obligation. It is similar to a long -term debt in that it represents a legal commitment to pay at some time in the future. F