HomeMy WebLinkAbout10.a. Receive Fiscal Year 2012-13 BudgetsCentral Contra Costa Sanitary District ' BOARD OF DIRECTORS POSITION PAPER Board Meeting Date: May 17, 2012 Subject: RECEIVE THE FISCAL YEAR 2012 -13 OPERATIONS & MAINTENANCE BUDGET; RECEIVE THE FISCAL YEAR 2012 -13 DEBT SERVICE FUND BUDGET Submitted By: Initiating Dept/Div.: Thea Vassallo, Provisional Finance Administrative /Finance & Accounting Manager REVIEWED AND COMMENDED FOR BOARD ACTION: Vassallo K. Alm Ann Farrell, General Manager ISSUE: The fiscal year (FY) 2012 -13 Operations & Maintenance (O &M) Budget and Debt Service Fund Budget are being submitted for review at the May 17, 2012 Board Meeting, and are scheduled for approval and adoption at the June 7, 2012 Board Meeting. The budget document was provided to the Board under separate cover dated May 3, 2012. RECOMMENDATION: Review the FY 2012 -13 O &M Budget and Debt Service Fund Budget and provide District staff with comments and guidance leading to the public hearing, approval, and adoption of the Budgets at the June 7, 2012 Board Meeting. FINANCIAL IMPACTS: The FY 2012 -13 O &M Budget was prepared using the $30 Sewer Service Charge (SSC) rate increase previously approved by the Board on June 2, 2011. The $371 SSC in FY 2012 -13 is allocated as follows: O &M $344; and Capital $27 per Residential Unit Equivalent (RUE). The FY 2012 -13 SSC O &M allocation is $42 /RUE higher than in FY 2011 -12 which produces $6.9 million in additional O &M SSC revenue. The FY 2012 -13 O &M Budget results in an increase of $1.9 million to O &M reserves, and total O &M reserves are projected to be $6.8 million at the end of FY 2011 -12. ALTERNATIVES /CONSIDERATIONS: At the Board Workshop in February, different SSC rate scenarios were considered that impact District revenues as well as the fiscal year -end reserve balances. All scenario premises used the $30 rate increase approved by the Board on June 2, 2011. BACKGROUND: Staff has developed a 10 -year financial model for forecasting revenues, expenses and fund balance. The model assists the District in setting and projecting SSC rates. The model funds in the following order: Debt Service, O &M /Self- Insurance and lastly, the Sewer Construction Fund. In April, 2011, the District ratepayers received a Proposition 218 Notice of Proposed Increase in Annual SSC of up to $30 for FY 2011 -12 for a total up to $341 per year effective July 1, 2011, and up to an additional $30 increase for FY 2012 -13, effective July 1, 2012, for a total of up to C:\ Users \dandersonWppData \Local \Microsoft \Windows \Temporary Internet Files \Content.Outlook \DVCG8C5G \Budget Review OM 2012 -13 PP. DOC Page 1 of 5 POSITION PAPER Board Meeting Date: May 17, 2012 subject. RECEIVE THE FISCAL YEAR 2012 -13 OPERATIONS & MAINTENANCE BUDGET; RECEIVE THE FISCAL YEAR 2012 -13 DEBT SERVICE FUND BUDGET $371 per year. On June 2, 2011 the Board approved both rate increases for $30 per year. The FY 2012 -13 O &M Budget was prepared using the $30 Sewer Service Charge (SSC) rate increase previously approved by the Board on June 2, 2011. The $371 SSC in FY 2012 -13 is allocated as follows: O &M $344; and Capital $27 per Residential Unit Equivalent (RUE). The FY 2012 -13 proposed budget includes the allocation of $8.3 million from the O &M Fund towards the unfunded liability associated with GASB 45 post - employment benefits and current year retiree premiums. This amount is based on the most recently completed two -year actuarial study by Bartel Associates. The $8.3 million includes an approximate payment of $4.5 million for retiree medical, dental and life insurance premiums annually and $3.8 million to be deposited in a GASB 45 PARS investment trust to fund future retiree benefit costs. This position paper focuses on variances between projected FY 2011 -12 expenses and the proposed FY 2012 -13 Budget. The position paper also notes any significant variances between the FY 2011 -12 and FY 2012 -13 Budgets. Attachment I summarizes the Debt Service Fund Budget. Attachment II summarizes the O &M revenues, expenses, and reserve balances for seven years - FY 2006 -07 through FY 2012 -13 (five years of actual expenses plus FY 2011 -12 projected and FY 2012 -13 proposed budget numbers). O &M Revenue: The following table compares Projected FY 2011 -12 to Budget FY 2012 -13 O &M Revenue: Total District O &M Revenue for FY 2011 -12 is projected to be $62.3 million compared to the FY 2012 -13 Budget amount of $70.2 million, resulting in an increase of $8.0 million, or 12.8 %. This is due to: • The O &M SSC allocation increases from $302 to $344; the SSC allocation to the Sewer Construction Fund decreases from $39 to $27. The increased O &M allocation of $6.9 million results in an increase to O &M SSC revenue of $7.1 million compared to Projected FY 2011 -12. C:\ Users \danderson\AppData \Local \Microsoft \Windows \Temporary Internet Files \Content.Outlook \DVCG8C5G \Budget Review OM 2012 -13 PP.DOC Page 2 of 5 Projected Budget Increase /Decrease ( -) FY 2011 -12 FY 2012 -13 Variance Variance % Sewer Service Charge $ 49,129,000 $ 56,205,500 7,076,500 14.4% City of Concord 10,000,000 10,800,000 800,000 8.0% 3,137,500 3,230,800 93,300 3.0% IIlOther Total $ 62,266,500 $ 70,236,300 7,969,800 12.8% Total District O &M Revenue for FY 2011 -12 is projected to be $62.3 million compared to the FY 2012 -13 Budget amount of $70.2 million, resulting in an increase of $8.0 million, or 12.8 %. This is due to: • The O &M SSC allocation increases from $302 to $344; the SSC allocation to the Sewer Construction Fund decreases from $39 to $27. The increased O &M allocation of $6.9 million results in an increase to O &M SSC revenue of $7.1 million compared to Projected FY 2011 -12. C:\ Users \danderson\AppData \Local \Microsoft \Windows \Temporary Internet Files \Content.Outlook \DVCG8C5G \Budget Review OM 2012 -13 PP.DOC Page 2 of 5 POSITION PAPER Board Meeting Date: May 17, 2012 subject RECEIVE THE FISCAL YEAR 2012 -13 OPERATIONS & MAINTENANCE BUDGET; RECEIVE THE FISCAL YEAR 2012 -13 DEBT SERVICE FUND BUDGET • Concord primarily shares a flow portion of Treatment Plant and Source Control expenses and is charged administrative overhead and a finance charge. City of Concord revenue is expected to be $800,000, or 8.0 %, more than Projected FY 2011 -12, mainly due to higher treatment plant operating expenses in FY 2012 -13 and an increase in the administrative overhead rate compared to FY 2011 -12. O &M Expense: The following table compares Projected FY 2011 -12 to Budget FY 2012 -13 O &M Expense: Salaries Benefits & Cap O/H Credit Chemicals Utilities Repairs & Maintenance Hauling & Disposal Professional & Legal Outside Services Self- Insurance Materials & Supplies I All Other � Ti otal Projected FY 2011 -12 $ 23,822,228 21,953,299 1,617,000 3,905,300 3,569,111 1,033,550 550,260 2,920,900 Budget FY 2012 -13 23,891,546 25,123,748 1,581,000 3,906,150 3,644,811 1,039,800 590,900 3,248,970 Increase /Decrease ( -) Variance Variance % 69,318 0.3% 3,170,449 14.4% (36,000) -2.2% 850 0.0% 75,700 2.1% 6,250 0.6% 40,640 328,070 850,000 850,000 - 1,873,255 1,970,805 97,550 1,866,824 2,458,734 591,910 $ 63,961,727 68,306,464 4,344,737 7.4% 11.2% 0.0% 5.2% 31.7% 6.8% Total District O &M Expenses are projected to be $64.0 million in FY 2011 -12 compared to a FY 2012 -13 O &M budget of $68.3 million. This reflects a $4.3 million, or 6.8 %, increase in expenses. Variances are discussed in detail below: O &M Savings for FY 2011 -12: Total FY 2011 -12 expenses are projected to be under - budget by $2.6 million largely due to staff vacancies and associated benefit cost savings along with our ongoing commitment to achieve expense savings. This increases the variance explanations when comparing the above Projected FY 2011 -12 to Budget 2012 -13. C:\ Users \danderson\AppData \Local \Microsoft \Windows \Temporary Internet Files \Content.Outlook \DVCGBC5G \Budget Review OM 2012 -13 PP.DOC Page 3 of 5 POSITION PAPER Board Meeting Date: May 17, 2012 subject. RECEIVE THE FISCAL YEAR 2012 -13 OPERATIONS & MAINTENANCE BUDGET; RECEIVE THE FISCAL YEAR 2012 -13 DEBT SERVICE FUND BUDGET O &M Salaries: District O &M salaries are projected to be $23.8 million in FY 2011 -12 compared to a budget of $23.9 million in FY 2012 -13 resulting in an increase of $69,000, or 0.3 %. This small increase is mainly due to normal merit increases and personnel advancements for current employees, offset by the large number of open positions being filled by new employees at a lower wage /step, and a 3% salary vacancy factor reducing expenses by $690,000. Benefits Including Capitalized Administrative Overhead Credit: District O &M benefits including the capitalized administrative overhead credit for FY 2011 -12, are projected to be $22.0 million compared to a budget of $25.1 million in FY 2012 -13 resulting in an increase of $3.1 million, or 14.4 %. This is mainly due to the CCCERA rate increase of 13.79% applied to salaries. The GASB 45 OPEB contributions for FY 2012 -13 remain the same as in FY 2011 -12, $8.3 million. The amount budgeted for contribution to the PARS trust is $3.8 million, a decrease of $740,000 from FY 2011 -12. The decrease is due to an increase in both the number of retirees receiving post - employment benefits and a rise in health care premiums. Benefit rate assumptions are provided in the following bulleted list: • Kaiser — 14.55% estimated rate increase for active and retired employees; rates are not yet final • HealthNet — 5.75% rate increase for actives employees; 6.62% weighted average retiree rate increase • CCCERA — 13.79% rate increase due to CCCERA de- pooling, five -year smoothing of 2008 market losses and for normal operating costs • Delta Dental — 5.9% rate decrease; this is the second year of a two -year contract • Long -Term Disability (LTD) — No rate increase • Employee Assistance Program (EAP) — 1.9% rate increase • Workers' Compensation — estimated 4% rate increase; rates are not yet final • Life Insurance — No rate increase All Other O &M Expenses: The remaining O &M non -labor and benefit expenses total $18.2 million in FY 2011 -12 compared to $19.3 million in FY 2012 -13 resulting in an increase of $1.1 million, or 6.1 %. Expense category variance explanations are provided in the budget document at a District and Department level. The two largest expense category variances between Projected FY 2011 -12 and Budgeted FY 2012 -13 are noted below: C:\ Users \dandersonWppData \Local \Microsoft \Windows \Temporary Internet Files \Content.Outlook \DVCG8C5G \Budget Review OM 2012 -13 PP.DOC Page 4 of 5 POSITION PAPER Board Meeting Date: May 17, 2012 subject RECEIVE THE FISCAL YEAR 2012 -13 OPERATIONS & MAINTENANCE BUDGET; RECEIVE THE FISCAL YEAR 2012 -13 DEBT SERVICE FUND BUDGET • Outside Services are $328,070 higher in FY 2012 -13 than Projected FY 2011 -12, largely due to additional studies associated with the new National Pollutant Discharge Elimination System permit and new air regulations for the multiple hearth furnace, and an increase in outside temporary staffing to cover vacancies. • All Other expenses are $591,910 higher in Budgeted FY 2012 -13 compared to Projected FY 2011 -12. This is largely due to election expenses of $350,000. Any revisions to the FY 2012 -13 O &M Budget determined at the May 17, 2012 Board Meeting will be incorporated in the Budget submitted for approval at the June 7, 2012 Board Meeting, at which the following actions are scheduled for Board consideration: • Conduct a public hearing to receive comments on the FY 2012 -13 O &M Budget, Self- Insurance Fund Budget, and Debt Service Fund Budget. • Approve and adopt the FY 2012 -13 O &M Budget, Self- Insurance Fund Budget, and Debt Service Fund Budget. RECOMMENDED BOARD ACTION: Review the FY 2012 -13 O &M Budget and Debt Service Fund Budget and provide District staff with comments and guidance leading to the approval and adoption of the Budgets at the June 7, 2012 Board Meeting. C: \Users \danderson\AppData \Local \Microsoft \Windows \Temporary Internet Files \Content.Outlook \DVCG8C5G \Budget Review OM 2012 -13 PP.DOC Page 5 of 5 CENTRAL CONTRA COSTA SANITARY DISTRICT DEBT SERVICE FUND FY 2012 -13 Debt Service Revenue: Sewer Service Charge Reserve Account Bond Interest Income (Including Premium) Ad Valorem Tax (portion alllocated to Debt Service) Total Debt Service Revenue Debt Service Expense: 2009 Bond Interest Payment and Amortized Costs, less Tax Subsidy on BAB Recycled Water Loan Interest Payment Total Interest Payment and Amortization Costs 2009 Bond Principal Payment Recycled Water Loan Principal Payment Total Principal Payments Total Debt Service Interest, Amortized Costs and Principal Payments Fund Balance - Beginning of Year Revenue over Expense Transfer from /(to) O &M or Capital Fund Balance - End of Year Attachment I 217,630 5,349,866 $ 5,567,496 $ 1,775,376 26,708 $ 1,802,085 $ 3,605,000 160,411 $ 3,765,411 $ 5,567,496 O &M Revenues: Sewer Service Charge (O &M Only) City of Concord Other Total Revenues O &M Expenses: Administrative Engineering Collection System Operations Plant Operations Pumping Stations Total Net Expenses (1) Revenues Over (Under) Expenses O &M Fund Balance - Beginning of Year Revenues Over (Under) Expenses O &M Fund Balance - End of Year (3) FY 2006 -07 Actual 35,057,668 9,043,215 3,862,690 47,963,573 14,742,224 5,472,707 8,033,498 21,438,368 2,299,234 51,986,031 (4,022,458) 13,790,205 (4,022,458) 9,767,747 CENTRAL CONTRA COSTA SANITARY DISTRICT O & M REVENUES, EXPENSES AND RESERVES FISCAL YEARS 2006 -07 THROUGH 2012 -13 FY 2007 -08 Actual 40,207,157 8,206,860 3,722,807 52,136,824 15,828,966 6,332,834 8,219,757 22,054,206 2,685,703 55,121,466 (2,984,642) 9,767,747 (2,984,642) 6,783,105 FY 2008 -09 Actual 43,087,454 8,755,857 3,414,478 55,257,789 16,304,462 6,834,323 9,064,672 22,927,971 2,752,950 57,884,378 (2,626,589) 6,783,105 (2,626,589) 4,156,516 FY 2009 -10 Actual 48,692,520 8,664,668 2,899,485 60,256,673 16,468,495 6,898,357 8,949,125 21,467,827 2,773,800 56,557,604 3,699,069 4,156,516 3,699,069 7,855,585 FY 2010 -11 Actual 49,141,000 8,560,000 2,823,007 60,524,007 18,635,406 6,765,061 8,951,535 22,183,706 3,033,629 59,569,337 954,670 7,855,585 954,670 8,810,255 FY 2011 -12 Projected 49,129,000 10,000,000 3,137,500 62,266,500 19,896,216 7,610,341 9,592,049 23,874,620 2,988,501 63,961,727 (1,695,227) 8,810,255 (1,695,227) 7,115,028 FY 2011 -12 Budget 49,484,600 9,852,000 2,862,105 62,198,705 Attachment II FY 2012 -13 Budget 56,205,500 10,800,000 3,230,800 70,236,300 20,931,190 21,123,745 7,792,366 8,186,764 9,926,740 10,905,445 24,752,505 25,272,977 3,137,859 2,817,533 66,540,660 (2) 68,306,464 (4,341,955) 1,929,836 7,115,028 1,929,836 9,044,864 Sewer Service Charge Rate - O &M 213 242 260 292 300 302 344 Sewer Service Charge Rate - Capital /Debt 76 58 51 19 11 39 27 Sewer Service Equivalent Units 164,590 166,145 165,721 166,755 163,803 162,679 163,388 Notes: (1) Net Expenses include Operating and Maintenance expenses only and do not include any capital salaries or benefits. (2) $2,617,788 of Budget to Budget increase due to increased benefit amounts. (3) Prudent fund balance assumed to be approximately 10% of annual expense. gmtemp 2012 -13 Attachmentll