HomeMy WebLinkAbout02.a. 10-Year Financial Projections for Rate Setting (1-24-13)2-af
Central Contra Costa Sanitary District
Dlstri butrd aMir
January 11, 2013 St roc to eave f,
TO: BOARD OF DIRECTORS
VIA: ANN E. FARRELL, GENERAL MANAGER
THEA VASSALLO, FINANCE MANAGER
FROM: TODD SMITHEY, FINANCE ADMINISTRATOR
SUBJECT: BOARD FINANCIAL PLANNING AND POLICY WORKSHOP
10 —YEAR FINANCIAL PLANNING PROJECTIONS
Attached are the 10 -Year Financial Projections for Rate Setting. This document utilizes
the District's financial planning model to project rates over the next fiscal year and
following 9 years. The projections utilize expenditure and revenue projections
generated from a number of sources and documented in the report. This year, the
Financial Projections indicate the need for a 2 -year $34 per year increase for years
2013 -14 and 2014 -15 based on current assumptions. Staff will be reviewing the
projection assumptions and getting Board input at the Board Financial Planning and
Policy Workshop scheduled for January 24, 2013. If you have any questions that you
would like to discuss prior to the workshop or if you have particular items you would like
to have covered during the workshop, please contact Finance Manager Thea Vassallo
or General Manager Ann Farrell.
Central Contra Costa Sanitary District
Board Financial Planning & Policy Workshop
10 -Year Financial Projections
for Rate Setting
January 24, 2013
sta
SEWER SERVICE CHARGE COMPARISON
FINANCIAL REPORT
• Introduction
• Report Terms /Acronyms
• Staff Recommendation
• Methodology and Background
• Development of 2013 Scenarios
• 2013 Financial Planning Scenarios
• Conclusion
APPENDIX 1
White Papers- Backup Information
Capital Planning Memo
Capital Workshop Presentation
GLOSSARY
TABLE OF CONTENTS
Page 1
Page 2
Page
3
Page
4
Page
5
Pages
6 -9
Pages
10 -13
Pages
14 -31
Page
32
Pages 33 -49
Pages 1 -17
Pages 1 -23
Pages A - F
Note: Pages for Executive Summary through White Papers run from pages I to 49 consecutively. Appendix II has its own numbering and
the Glossary has its own lettering.
F XECUTIVE SUMMA
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 (2009 -10 and 2010 -11) in order to provide some financial relief to our customers. 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 in 2009-
10. In June of 2011, the Board adopted the staff recommended scenario of a 2 -year $30 per year SSC increase for 2011 -12 and 2012-
13. At that time of adoption, it was thought that increases of this magnitude going forward, ie. about $30 per year for the next ten years,
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 have increased substantially. This increase is putting more pressure on rates and resulting in projected increases greater
than what was previously projected. Other savings, including deferral of some capital projects to reduce capital spending for the next
several years have moderated the potential increases. This year staff is recommending a continuation of the annual rate increases
which are currently calculated at approximately $34 per year each year for the next several years.
Staff recommends a Proposition 218 notice be sent to our ratepayers in March 2013 stating the need for a 2 -year increase in
sewer service charge (SSC) of $34 per year for 2013 -14 and 2014 -15. This is a total 2 -year increase of $68 and would bring the
SSC from $371 to $439 over the 2 -year period. The District will remain in the bottom half of agencies surveyed even with the
proposed 2 -year increase.
SEWER SERVICE CHARGE COMPARISON
This year staff is recommending a 2 -year $34 per year rate increase. At the time of developing this document, most jurisdictions have
not released their rate increase information for 2013 -14. Therefore, the information provided in the table is CCCSD information for
2012 -13 but includes the proposed rate increases for 2013 -14 and 2014 -15 as well. After accounting for the two $34 rate increases
and with 2012 -13 data, the District's position remains in the bottom half of those surveyed. See table below.
Sewer Service Charge Rates for Bay Area Agencies
Revised January 2, 2013 (Rates in effect on January 1, 2013)
Agency
12-13
SSCi')
AVR"' per
connection, if
known
SSC plus
AVR
Rank from
lowest (with
AVR)
Comments
Santa Rosa
$1,132
N/A
$1,132
25
Effective 1/1/13.
Petaluma
$994
N/A
$994
24
Effective 1/1/13. Future CPI increases approved.
Rodeo Sanitary District
$695
$57
$752
22
Effective August 2012
Crockett Sanitary District
$632
$219
$851
23
No increase in FY 2012 -13
Ironhouse Sanitary District
$618
$10
$628
21
Sells cattle and hay to offset rates.
Richmond
$603
N/A
$603
20
Increasing to $633 in 13 -14
Brentwood
$565
N/A
$565
19
No increase in 2012 -13
Oakland (EBMUD for treatment)
$557
N/A
$557
18
Increasing to $614 on 1/1/14
Benicia
$551
N/A
$551
17
Effective 1/1/13. Four more annual increases (to $678) approved.
2012 -13 Mean Rate of Agencies Surveyed
$502
Berkeley (EBMUD for treatment)
$496
N/A
$496
14
Vallejo
$495
N/A
$495
13
Increasing to $507 on 7/1/13 and to $520 on 7/1/14
Novato
$495
$64
$559
16
Increasing to $514 in 13 -14; $533 in 14 -15; $552 in 15 -16.
Mountain View Sanitary District
$491
$27
$518
15
No increase in 2012 -13
Livermore
$489
N/A
$489
12
No increase in 2012 -13
Pittsburg (DDSD for treatment)
$454
$19
$473
10
Napa Sanitation District
$448
N/A
$448
9
Annual CPI increases approved for future years.
CCCSD 2014 -15 Proposed Rate
$439
$73
$512
Pleasanton
$427
N/A
$427
7
Automatic CPI increase every July 1
Bay Point (DDSD for treatment)
$412
$62
$474
11
Includes $34 collection system replacement/rehab fee collected on tax roll.
CCCSD 2013 -14 Proposed Rate
$405
$73
$478
Stege SD (EBMUD for treatment)
$396
$20
$416
6
Antioch (DDSD for treatment)
$385
$20
$405
5
CCCSD 2012 -13 Current Rate
$371
$73
$444
8
Effective 7/1/12
Fairfield (FSSD)
$360
N/A
$360
3
Dublin San Ramon Services District
$355
$13
$368
4
Annual CPI increases approved for future years.
Concord (CCCSD for treatment)
$324
N/A
$324
2
Pays for HHW Service from garbage franchise fees.
Union Sanitary District
$320
N/A
$320
1
West County Wastewater District
$304
$20
$324
2
Annual increases to $330, $353, $377 approved.
Oro Loma Sanitary District
$189
N/A
$188
lowest
Annual increases to $195, $200, $206 approved.
Rates in effect on January 1, 2013 unless noted. Data from prior years: current year data not available.
I'I Annual Sewer Service Charge per Single Family Residence, or SFR.
( �1AVR = ad valorem (property tax) revenue; data from CCC Auditor - Controller's Report on 2011 -12 Property Tax Administration Charges. Where AVR is not known, adjusted rate includes only SSC.
-2-
FINANCIAL REPORT
INTRODUCTION
This document contains the 2013 -14 financial projections for Board consideration. Based on these projections, staff is recommending a
2 -year $34 per rate (2013 -14 and 2014 -15) increase be noticed via a Proposition 218 notice satisfying the notice requirements for a
Public Hearing on rates on June 6, 2013.
The financial report is broken into the following sections which provide the background information for the 2013 Board Financial
Workshop:
• Report Terms /Acronyms
• Staff Recommendation (yellow text box)
• Methodology and Background
• Development of 2013 Scenarios
• 2013 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 January 24, 2013 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 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 301h to meet O &M and CIP expenses given that
District revenue is received from the County twice per year. The term Funds Available is used to define the amount of cash
and investments that is actually on hand on June 30th of that same year.
-4-
Staff Recommendation
Notice a 2 -year $34 per year sewer service charge rate increase through the Proposition 218 process
and adopt the increase at the Public Hearing scheduled for June 6, 2013.
In addition, staff recommends that we continue with a multi - pronged strategy to financial planning:
• Review and adjust our other fees, rates and charges 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. A pay down of pension UAAL is allocated at $75 million over the ten years of this plan.
/ Li /_1
-5-
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 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 301h 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. Further spending down the Funds Available such that short -term borrowing
is necessary is not recommended as it would provide for only a modest reduction in rates for the several years it would take to
spend down the funds on hand and would leave the District in a vulnerable position with no "cushion" for unforeseen events.
• 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 Funds Available meet Funds required in 2019 -20 (Year 7), but then ramp up
again to hit the targeted year approximately at 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. Additional payments over the ten
years of the plan of $75 million are also included to pay down our CCCERA UAAL.
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 Funds Available 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.
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
revenues 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 Funds Available. 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 2 -year
$30 per year increase for 2011 -12 and 2012 -13.
The table and chart that follow show the history of our SSC rate increases from 1990 -91 to projected 2014 -15:
Fiscal Year
Annual Sewer Service Charge
O &M Capital
Total
1990 -1991
$
136
$
-
$
136
1991 -1992
$
151
$
-
$
151
1992 -1993
$
160
$
5
$
165
1993 -1994
$
160
$
25
$
185
1994 -1995
$
160
$
28
$
188
1995 -1996
$
157
$
31
$
188
1996 -1997
$
157
$
31
$
188
1997 -1998
$
157
$
31
$
188
1998 -1999
$
157
$
31
$
188
1999 -2000
$
157
$
31
$
188
2000 -2001
$
185
$
15
$
200
2001 -2002
$
204
$
20
$
224
2002 -2003
$
207
$
41
$
248
2003 -2004
$
218
$
54
$
272
2004 -2005
$
204
$
76
$
280
2005 -2006
$
234
$
46
$
280
2006 -2007
$
213
$
76
$
289
2007 -2008
$
242
$
58
$
300
2008 -2009
$
260
$
51
$
311
2009 -2010
$
292
$
19
$
311
2010 -2011
$
300
$
11
$
311
2011 -2012
$
302
$
39
$
341
2012 -2013
$
344
$
27
$
371
2013 -2014
$
335
$
70
$
405
2014 -2015
$
372
$
67
$
439
The average rate increase from 1990 -91 through 2012 -13 is $12.63 per year or 5.10% per year.
- 8 -
Recommended
Recommended
$450 —
$400
$350 A
$300
$250
$200
$150
$100
$50
HISTORY OF CENTRAL SAN SEWER SERVICE CHARGE RATES
Proposed for 2013 -14 and 2014 -15
District loss of Property Tax
•0
vera a Rate Increase = 12.63/ ear 5.1 Wr
.• 110• f-1
District loss of Property Tax .
$0
l
l_ 1
L
i
90/9
919
92/9
93/9
94/9
95/9
96/9
97/9
98/9
99/0
00 /0
01/0
02/0
03/0
04/0
05!0
06/0
07/0
08/0
09/1
10/11
1112
12/13
13/14
14/15
1
2
3
4
5
6
7
8
9
0
1
2
3
4
5
6
7
8
9
0
® Capital /Debt
0
0
5
25
28
31
31
31
31
31
15
20
41
54
76
46
76
58
51
19
11
39
27
70
67
■ O &M
136
151
160
160
160
157
157
157
1 157
157
185
204
207
218
204
234
213
242
260
292
300
302
344
335
372
-9-
DEVELOPMENT OF 2013 SCENARIO
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 model. The
assumptions used are provided in detail with each of the workshop scenarios presented 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 2012. 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)
• Other Post Employment Benefits (OPEB)
• CCCERA Unfunded Accrued Actuarial Liability (UAAL)
• Outstanding Total Debt
Continued prudent management of these significant liabilities is necessary. While we have a funding plan in place, significant
fluctuations of the CCCERA and OPEB amounts are possible. Recent pension reform legislation may reduce the CCCERA
UAAL associated with terminal pay enhancements as well as the ongoing cost of pensions if the courts uphold this provision
of the law. These potential savings are not incorporated in the financial model at this time.
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 or the potential reductions resulting
from State pension reform legislation.
Central Contra Costa Sanitary District
Unfunded Liabilities and Cash & Investment Balances
Proiected fioures in italics
<1> Source - Audited Financials and projections based on internal workpapers
<2> Source - Audited Financials and 7/1/2010 Bartell Actuarial report for 2010 -11 and 2011 -12; projections in 2012.13 and 2013 -14 assume no change in benefit structure but assume that the interest earnings rate
will be lowered from 6.5% to 6.25% in the 7/1/12 actuarial work that is currently being prepared by Bartell and Associates. (Decreasing the anticipated rate of return by .25% will increase the liability in addition to the
large number of retirements in 2011 -12.)
<3> Source - CCCERA - note that there is a 18 month lag i,e. the $99.8 million in 2012 -13 is as of 12/31/10 and was used in setting rates for 2012 -13. The $109.2 million in 2013 -14 is as of 12/31/11 and was used
in setting rates for 2013 -14.
<4> Source - CAFR Debt Statistics and draft 10 -year plan model
<5> Source - Audited Financials and draft 10 -year plan model plus S/I cash balance (approximately $4.0 million) for projections.
-12-
Source
2005 -06
2006.07
2007 -08
2008 -09
2009 -10
2010 -11
2011.12
2012 -13
2013 -14
Accrued Compensated Absence
<1>
$ 5,199,818
5,312,645
6,102,851
6,123,647
5,724,684
5,132,067
3,710,580
3,700,000
3,800,000
GASB 45 OPEB Unfunded Liability
<2>
N/A
66,106,705
66,106,705
66,428,054
66,428,054
80,933,000
77,591,000
77,000,000
74,000,000
CCCERA Unfunded Liability
<3>
$ 30,379,000
36,393,000
40,477,000
43,021,000
36,483,000
39,779,000
71,018,235
99,841,380
109,168,803
Outstanding Debt
<4>
$ 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
$ 69,371,673
139,332,690
141,855,806
142,297,192
164,096,706
177,692,650
200,547,052
225,003,206
227,546,047
Cash & Investments
<5>
$ 68,185,730 1
35,057,668 1
40,207,157 1
54,979,971 1
60,800,173
63,074,343
58,924,132
50,500,000
48,350,000
Ratio - Liabilities to Cash & Investments
1.02 1
3.97
3.53 1
2.59 1
2.70 1
2.82 1
3.40 1
4.46 1
4.71
<1> Source - Audited Financials and projections based on internal workpapers
<2> Source - Audited Financials and 7/1/2010 Bartell Actuarial report for 2010 -11 and 2011 -12; projections in 2012.13 and 2013 -14 assume no change in benefit structure but assume that the interest earnings rate
will be lowered from 6.5% to 6.25% in the 7/1/12 actuarial work that is currently being prepared by Bartell and Associates. (Decreasing the anticipated rate of return by .25% will increase the liability in addition to the
large number of retirements in 2011 -12.)
<3> Source - CCCERA - note that there is a 18 month lag i,e. the $99.8 million in 2012 -13 is as of 12/31/10 and was used in setting rates for 2012 -13. The $109.2 million in 2013 -14 is as of 12/31/11 and was used
in setting rates for 2013 -14.
<4> Source - CAFR Debt Statistics and draft 10 -year plan model
<5> Source - Audited Financials and draft 10 -year plan model plus S/I cash balance (approximately $4.0 million) for projections.
-12-
Total Liabilities Compared to Cash and Investment Balance
$250,000,000
$200,000,000 -
$150,000,000
$100,000,000
$50,000,000
$-
2005-06 2006 -07 2007 -08 2008 -09 2009 -10 2010 -11 2011 -12
—Total Unfunded Liabilities —Cash & Investments
$250,000,000
$200,000,000
$150,000,000
$100,000,000
$50,000,000
Liabilities by Type and Fiscal Year
2012 -13 2013 -14
2005 -06 2006 -07 2007 -08 2008 -09 2009 -10 2010 -11 2011 -12 2012 -13
■ Accrued Compensated Absence ■ GASB 45 OPEB Unfunded Liability ❑ CCCERA Unfunded Liability ❑ Outstanding Debt
MWE
2013 -14
2013 FINANCIAL PLANNING SCENARIOS
The Plan this year includes only one scenario as currently drafted and utilizes assumptions very similar to those used last year. A
summary table of assumptions for the ten -year period of the 2013 Plan follows and is then followed by a table of assumptions year by
year. Using current assumptions, a 2 -year rate increase of $34 per year for 2013 -14 and 2014 -15 is calculated by the model. This
compares to the 2 -year $38 per year increase calculated last year. Though expenses increased in this model compared to last year's,
rates were reduces due to higher revenues and a higher ending fund balance projected for 2012 -13.
The table shown below compares this year's to last year's assumptions and 10 -year totals in the rate - setting period. The 10 -year rate -
setting period referred to in the 2012 Baseline Scenario is FY 2012 -13 to 2021 -22; the 10 -year rate - setting period referred to in the
2013 Baseline Scenario is FY 2013 -14 to 2022 -23. The comparison is to rolling 10 -year periods so in general, expenses are higher in
the 2013 Scenario due to the Year 1 in the 2012 Scenario being dropped and adding on a new 10th year in the 2013 Scenario with
higher inflated figures in Year 10.
- 14-
Assumption
2012 Baseline Scenario (2012 -13 — 21 -22)
2013 Baseline Scenario 2013 -14 — 22 -23)
Capital
Total capital expenditures of $408.9 million
Total capital expenditures of $422.1 million included
Project
included in the 1 O -Year Plan. Funds
in the 1 O -Year Plan. Funds Available are ramped
Spending
Available are ramped up in 2021 -22
up in 2022 -23 anticipating larger capital projects
anticipating larger capital projects shifted to
shifted to years 11 -15 that are not shown in the
years 11 -15 that are not shown in the model.
model. (Alternatively, the funds could be used to
pay down unfunded liabilities.
CCCERA
Total CCCERA cost over 10 years is $254.3
Total CCCERA cost over 10 years is $233.0 million,
million. The UAAL was estimated to increase
or $21.3 million less than in last year's model. The
to $122.5 million for the 2013 -14 rate - setting.
actual UAAL of $109.2 million was lower than
$75 million was included in the ten years of
estimated for the 2013 -14 rate - setting. There is still
the scenario to pay down our unfunded
$75 million included to pay down our unfunded
liability starting in 2015 -16.
liability starting in 2015 -16 and the associated rate
reductions are higher than estimated last year. We
are now phasing in employee payment of their own
contribution that was previously 100% paid by the
District.
GASB
$83.2 million in the 10 -year period to pay
$83.5 million in the 10 -year period to pay down our
45 /OPEB
down our unfunded liability for retiree health
unfunded liability for retiree health care.
care.
Total
2012 current rate increase assumptions used
2013 current rate increase assumptions used —total
Employee
— total employee benefits in the 10 -year
employee benefits in the 10 -year period = $427.1
Benefits
period = $412.7 million.
million or $14.4 million higher than 2012. This is
(Including
mainly due to higher medical premium costs offset
CCCERA and
by lower estimates for CCCERA payments.
GASB 45)
Salary and
Salaries were discounted at a 3% vacancy
The vacancy factors were reduced to 2% for
Benefits
factor and benefits were discounted at a 4%
salaries and 3% for benefits due to many vacant
Vacancy
vacancy factor due to anticipated retirements.
positions being filled.
Factors
Total O &M
Total O &M expenses in the 10 -year period
Total O &M expenses in the 10 -year period are
Expenses
are $909.1 million.
$946.8 million and are $37.6 million higher than in
(Including
2012. This is mainly due to increased salary and
CCCERA
benefits partially offset by savings in other line
and GASB 45)
items.
SSC RUE's
The total RUE ranges from 164,458 in 2012-
The total RUE ranges from 166,091 in 2013 -14 to
13 to 177,258 in 2021 -22.
175,541 in 2022 -23. This is 1,717 total connections
less than the 2012 scenario due to a reduction in
assumed new connections.
SSC Capital
Capital Component reduced from $39
The Capital Component was increased from $27 in
Component
planned to $27 in 2012 -13 to accommodate
2012 -13 to $70 in 2013 -14 to pay for capital projects
additional O &M expenses related to employee
and begin to build up the SCF.
benefits.
-15-
The following table shows assumptions by year:
Comparison of Scenario Assumptions
2013 Baseline Scenario
Fiscal Year
2012 -13
2013 -14
2014 -15
2015 -16
2016 -17
2017 -18
2018 -19
2019 -20
2020 -21
2021 -22
2022 -23
Interest %
0.40%
0.50%
0.75%
1.00%
1.25%
1.50%
2.00%
2.50%
3.00%
3.50%
N/A
4.00%
Capital Inflation %
0.0%
0.0%
1.5%
0.0%
2.0%
2.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
# of New Connections
3.0%
# of New Connections
800
800
850
900
950
1,000
1
1,050
1,100
1,150
N/A
1,200
1,250
Ad Valorem Tax Escalation*
0.0%
0.0%
0.0%
0.0%
1.0%
0.0%
1.0%
1.0%
2.0%
1.0%
3.0%
1.5%
3.0%
2.0%
3.0%
2.5%
3.0%
3.0%
Total Sewer Service Charge (SSC)
3.0%
371
3.0%
Total Sewer Service Charge (SSC)
$
371
$
405
$
439
$
473
$
507
$
541
$
576
$
611
$
645
$
645
$
645
SSC O &M Component
$
344
$
335
$
372
$
433
$
443
$
444
$
460
$
466
$
464
$
508
$
437
SSC Capital Component
$
27
$
70
$
67
$
40
$
64
$
97
$
116
$
145
$
181
$
137
$
208
Total SSC Annual Rate Increase
$
30
$
34
$
34
$
34
$
34
$
34
$
35
$
35
$
34
$
-
$
-
2012 Baseline (Prior Year Staff Recommended) Scennrin
Fiscal Year
2012 -13
2013 -14
2014 -15
2015 -16
2016 -17
2017 -18
2018 -19
2019 -20
2020 -21
2021 -22
2022 -23
Interest %
0.75%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
5.00%
5.00%
N/A
Capital Inflation %
0.0%
1.5%
2.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
N/A
# of New Connections
800
800
800
1,000
1,000
1,000
1,000
1
1,000
1,000
1,000
N/A
Ad Valorem Tax Escalation*
0.0%
0.0%
0.0%
1.0%
1.0%
2.0%
3.0%
3.0%
3.0%
3.0%
N/A
Total Sewer Service Charge (SSC)
$
371
$
409
$
447
$
485
$
521
$
557
$
593
$
629
$
665
$
701
N/A
SSC O &M Component
$
344
$
366
$
374
$
430
$
436
$
438
$
454
$
460
$
464 1
$
496
N/A
SSC Capital Component
$
27
$
43
$
73
$
55
$
85
$
119
$
139
$
169
$
201
$
205
N/A
Total SSC Annual Rate Increase
$
30
$
38
$
38 1
$
38
$
36
$
36
$
36
$
36
$
36
$
36
N/A
*Debt Service is funded first, any remaining property tax funds Capital.
Changes in Assumptions Include:
- Interest earnings on Sewer Construction Fund reduced.
- Capital inflation eliminated for 2013 -14.
- Number of new connections reduced in earlier years and increased in future years.
- Ad Valorem tax escalation adjusted in future years.
EM
JANUARY 2013 SCENARIO SUMMARY TABLE
The projected rates for 2013 -14 and beyond are summarized in the table below and compared to the projected rates from the 10 -Year
Financial Plan from 2012.
Summary of Scenarios Referred to in the Financial Report
Scenario
ID
Description
2013 -14
Rate
Increase
2014 -15
Rate
Increase
2015 -16
Rate
Increase
2016 -17
Rate
Increase
2017 -18
Rate
Increase
2018 -19
Rate
Increase
2019 -20
Rate
Increase
2020 -21
Rate
Increase
2021 -22
Rate
Increase
2021 -22
Rate
Increase
10 -Year
Ending
Total
Previous Baseline Scenario -
1
2012 Financial Plan
$ 38
$ 38
$ 38
$ 36
$ 36
$ 36
$ 36
$ 36
$ 36
N/A
$ 701
Current Baseline Scenario -
2
2013 Financial Plan
$ 34
$ 34
$ 34
$ 34
$ 34
$ 35
$ 35
$ 34
$ -
$ -
$ 645
OTHER CONSIDERATIONS:
Staff can prepare additional scenarios, if needed. Some Board suggestions include:
• Prioritize and reduce capital spending to live with actual revenue.
• Consider short -term borrowing and further spend down reserves.
If there is Board interest in these or other scenarios, staff can develop added scenarios for discussion.
- 17-
Summary of Scenarios Referred to in the Financial Report
Scenario
ID
Description
2013 -14
Rate
Increase
2014 -15
Rate
Increase
2015 -16
Rate
Increase
2016 -17
Rate
Increase
2017 -18
Rate
Increase
2018 -19
Rate
Increase
2019 -20
Rate
Increase
2020 -21
Rate
Increase
2021 -22
Rate
Increase
2021 -22
Rate
Increase
10 -Year
Ending
Total
Previous Scenario:
1
$ 38
$ 38
$ 38
$ 36
$ 36
$ 36
$ 36
$ 36
$ 36
N/A
$ 701
2012 Financial Plan
Current Scenario:
2
$ 34
$ 34
$ 34
$ 34
$ 34
$ 35
$ 35
$ 34
$ -
$ -
$ 645
2013 Financial Plan
SCENARIO ONE — PRIOR YEAR 2012 BASELINE
CENTRAL CONTRA COSTA SANITARY DISTRICT
FEBRUARY 16, 2012 BOARD (PRIOR YEAR) FINANCIAL PLANNING WORKSHOP
SCENARIO ASSUMPTIONS
UPDATED WITH BOARD COMMITTEE REQUESTED CHANGES IN BLUE (PRIOR YEAR)
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 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 /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.
�L'2
SCENARIO ONE — PRIOR YEAR 2012 BASELINE
CENTRAL CONTRA COSTA SANITARY DISTRICT
FEBRUARY 16, 2012 BOARD (PRIOR YEAR) FINANCIAL PLANNING WORKSHOP
SCENARIO ASSUMPTIONS
UPDATED WITH BOARD COMMITTEE REQUESTED CHANGES IN BLUE (PRIOR YEAR)
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 -
4-4 2015-16. Also, regular connections were reduced in 2012 -13 through 2014 -15.
The total RUE count ^hes Up +n the R amber used iR the 2011
r �- ,
2020 21 the GurreRt Fnedel -shews tee; RUE € at h + 1,0 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 $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 2014 -15, and then 1 % per
year increases are assumed starting in 2015 -16 through 2014 =15 2016 -17, 2% per year in
201546 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..
-20-
SCENARIO ONE — PRIOR YEAR 2012 BASELINE
CENTRAL CONTRA COSTA SANITARY DISTRICT
FEBRUARY 16, 2012 BOARD (PRIOR YEAR) FINANCIAL PLANNING WORKSHOP
SCENARIO ASSUMPTIONS
UPDATED WITH BOARD COMMITTEE REQUESTED CHANGES IN BLUE (PRIOR YEAR)
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 came as pFejeGted ;n the 2011 seen .„
whoeh were are 800 connections in 2011 -12, 900GGRReGtiRs- iR 2042-4-3-, 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.
GAS B -45/O P E B :
• 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.
-21-
SCENARIO ONE — PRIOR YEAR 2012 BASELINE
CENTRAL CONTRA COSTA SANITARY DISTRICT
FEBRUARY 16, 2012 BOARD (PRIOR YEAR) FINANCIAL PLANNING WORKSHOP
SCENARIO ASSUMPTIONS
UPDATED WITH BOARD COMMITTEE REQUESTED CHANGES IN BLUE (PRIOR YEAR)
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
-22-
S
H
$80,000,000 -
$70,000,000 -
$60,000,000 -
$50,000,000
$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 2012 Baseline Scenario
0000 0000
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 44,138,989 38,405,967 39,583,712 42,868,828 43,519,917 50,245,319 59,208,988 59,275,093 67,285,117 74,288,336
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
Fiscal Year
-23-
CENTRAL CONTRA COSTA SANITARY DISTRICT
10 -YEAR FINANCIAL PLANNING WORKSHEET
SCENARIO 1 - PRIOR YEAR 2012 BASELINE SCENARIO
Fiscal Years 2012 -13 through 2021 -2022
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G H J K
L
M
N O
1
Planning Year Projected »»
2 3 1 4 5 6
7
8
9 10
2
1
3
a
2011 -2012
2012 -2013
2013 -2014
2014 -2015
2015 -2016
2016 -2017
2017 -2018
1 2018 -2019
2019 -2020
2020 -2021
2021 -2022
5
Service Data Assumptions (End of F.Y.)
163,658
164,458
165,258
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
10
SEWER SERVICE CHARGE DATA AND CALCULATIONS
11
Sewer Service Charge Rate - Debt Service
-
-
-
-
374
-
-
-
-
-
- -
464 496
12
Sewer Service Charge Rate - O &M
$ 302
344
366
430
436
438
454
460
13
Sewer Service Charge Rate - Capital
Total SSC Rate
Increase to Rate - $
Increase to Rate - %
$ 39
27
43
73 55
85
119 139
1 169
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
9.65% 8.80% 10.24% 9.29% 8.50% 7.42% 6.91% 6.46% 6.07% 5.72% 5.41%
16
19
Total SSC Revenue
$ 55,628,000
0.40%
60,865,677
0.75%
67,427,097 74,049,317
1.00% 1.50%
1 81,071,837
2.00%
87,923,141
2.50%
94,889,644
3.00%
101,971,348 109,168,251 116,480,354 123,907,658
3.50% 4.00% 5.00% 5.00%
20
Interest Revenue Rate Assumption
Property Tax:
21
22
23
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
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
Percentage of Pumped Zone to Total Connections
?dam:
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
1 35.00%
8,300,000
1 10.00%
8,300,000
10.00%
8,300,000
10.00%
8,500;000
35
36
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
Salary Inflation (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
11
-
(1)
(4)
(6)
(6)
42
Total O &M Benefit Increase Per Year ( %)
15.97%
11.54%
11.07%
5.07%
32.40%
o
°
1.23%
1.32%
1.17%
12.01%
43
Be in additional 10
illion ear to CCCERA
UAAL 15 million
in 2021 -22
44
Total O &M Expense Change from prior year ( %)
11.45%
7.68%
6.34%
4.64%
15.155°
2.66%
1.99%
5.08%
2.23%
2.92%
7.02%
46
Capital Project Inflation %
0.00%
1.009/0
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
3.72
4.51
13.51
- 7.81
8.89
11.22
14.50
14.27
15.72
49
1 Debt as a Percent of Revenue
6%
691r.
5%
5%
2%
3%
3%
2%
2%
2%
2%
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CENTRAL CONTRA COSTA SANITARY DISTRICT
10 -YEAR FINANCIAL PLANNING WORKSHEET
SCENARIO 1 - PRIOR YEAR 2012 BASELINE SCENARIO
Fiscal Years 2012 -13 through 2021 -2022
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A
E
F
G
N
I
J
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50
51
DEBT SERVICE FUND
Projected
»»
2011 -2012
1
2012 -2013
2
2013 -2014
3
2014 -2015
4
2015 -2016
5
2016 -2017
6
2017 -2018
7
2018 -2019
8
2019 -2020
9
2020 -2021
10
2021 -2022
52
53
TOTAL REVENUE:
$
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 1
3,810,000
3,603,000
3,601,000
3,608,000
3,597,000
55
56
57
58
Ending Fund Balance
-
Projected»
2011 -2012
-
1
2012 -2013
-
2
2013 -2014
-
3
2014 -2015
-
4
2015 -2016
-
5 1
2016 -2017
-
6
2017 -2018
-
7
2018 -2019
-
8
2019 -2020
-
9
2020 -2021
-
10
2021 -2022
59
TOTAL REVENUE:
$
62,188,554
70,429,970
75,425,747
77,772,228
89,742,488
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
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)
682,594
1,258,302
164,189
378,310
293,003
153,429
392,895
721,471
112,640
649,712
62
63
Ending Fund Balance
$
7,335,450
8,018,044
9,276,346
9,440,535
9,818,845
10,111,848
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»
2011 -2012
9.89 %i
1
2012 -2013
10.33%
2
2013 -2014
10.38%
3
10.29%1
4
10.49%
5
10.29%
6
10.21%
7
10.30%
8
10.28 %,
9
10.08%
10
67
2014 -2015
2015 -2016
2016 -2017
2017 -2018
2018 -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
36,572,875
42,141,184
47,614,447
60,112,980
66,118,807
69,857,493
69
TOTAL CAPITAL EXPENDITURES:
$
27,649,000
32,343,000
29,719,200
1 26,474,692
27,057,793
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)
(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:
-
-
-
-
-
-
-
-
-
-
-
I'i
73
74
75
Ending Fund Balance
TOTAL BALANCES
$
46,676,933
Projected»
2011 -2012
36,120,945
1
2012 -2013
29,129,622
2
2013 -2014
30,143,177
3
33,049,983
4
33,408,069
5
39,980,042
6
li 48,550,816
7
47,895,449
8
55,792,834
9
62,146,341
10
76
2014 -2015 1 2015 -2016 2016 -2017 2017 -2018
2018 -2019 2019 -2020 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
501245,319
59,208,988
59,275,093
67,285,117
74,288,336
78
FUNDS REQUIRED
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
3,601,000
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
28,596,537
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
1
84
85
Funds Available Amount Above /(Below) Funds Required
$
16,423,322
5,937,647
82,988
791,837
(1,133,800)
(900,030)
3,468,505
5,216,005
5,101,371
9,215,307
201400,615
-25-
1/10/2013 4:36 PM N:\ACCOUNTING\GMTEMPI \10 -Year Plan Projections\2013 -2014 Projections \Workshop Docs- prelim \FY2013 -14 Scenario 1 Prior year Summary for Curr yr Report
SCENARIO TWO — 2013 BASELINE
CENTRAL CONTRA COSTA SANITARY DISTRICT
FEBRUARY 24, 2013 FINANCIAL PLANNING WORKSHOP
Scenario Premise:
• Staff Recommendation of a 2 -year, $34 SSC rate increase for 2013 -14 and 2014 -15
• Because of timing for mailing Proposition 218 notices to our rate - payers, the 6 -month
review numbers were not used this year in the base year. The projections come mainly
from the 2012 -13 budget with adjustments to labor and utilities.
• The bullets in this section highlight significant differences from this year to last year
comparing the two rolling10 -year rate setting time periods (Prior Year 2012 Baseline
Scenario: 2012 -13 — 2021 -22 and the 2013 Baseline Scenario: 2013 -14 — 2022 -23):
o Salaries have increased by $31.2 million due to lowering the salary vacancy factor
by 1% and increased annual inflation due to more merit increases for new
employees and COLA from recent MOU contract changes.
o Capital project spending assumptions presented at the December 20, 2012 CIB
Workshop are used in the model. The impact in the 10 -year period is a $13.2 million
increase in the current year scenario.
o Employee benefits are updated based on current information and include known rate
increases.
■ The largest increases are in Medical and Health Premiums due to the Kaiser
rate being 5% higher than predicted last year and the high volume of
retirements. ($28.9 million higher in the 2013 scenario).
CCCERA expenses decreased by $21.4 million in the current 2013 scenario
due to a data from CCCERA staff detailing amortization and the impact to our
rates as we pay -down our UAAL from 2015 -16 to 2021 -11. Our CCCERA
rate savings in those years are better than anticipated last year. Also, the
current UAAL was projected last year to be $122.5 million as of 12/31/11, and
it was actually $109.2 million which lowers annual amortization costs.
■ The GASB OPEB ARC remains at $8.3 million /year, except for years 2021 -22
and 2022 -23 that are increased by about $500,000. The adjustment is
needed in the model in these two fiscal years because retiree premiums
alone exceed the $8.3 million annual assumption.
o Total O &M expenses in the 10 -year period are $37.6 million higher in the current
model compared to last year's 10 -Year model comparing the rolling 10 -year rate
setting windows. Salaries and Wages are $31.2 million higher, total employee
benefits are $14.4 million higher. These increases are offset by savings in other
accounts.
-26-
SCENARIO TWO — 2013 BASELINE
CENTRAL CONTRA COSTA SANITARY DISTRICT
FEBRUARY 24, 2013 FINANCIAL PLANNING WORKSHOP
The section following provides more information on assumptions used in the 10 -Year Plan
scenarios.
Revenue:
• Interest Rates: Interest rates are lower this year than last year. Last year staff assumed
5% by 2021 -22, this year we assume 4% by 2022 -23.
• Current 2012 -13 Property Tax Revenue is estimated to be $12.6 million versus $13.6 in last
year's model. This is because the State repayment of the $1.0 million Prop 1A borrowed
property tax would be repaid to the District, with interest in 2012 -13. Also, the annual
growth in property tax was lowered in this year's model. Total 10 -year Property Tax
revenue is $7.1 million less in the 2013 Scenario.
• The total number of RUE is calculated by taking total SSC revenue in any given year
divided by the SSC rate for that year. The total RUE in the current scenario is 850
connections higher compared to last year. The RUE is decreased in earlier years and
increased in later years based on current staff information and projections.
• Connection fee rates are higher in the current model. Total Connection fee revenue
(Capacity and Pump Zone Fees) are $13.0 million higher in the 2013 scenario.
Expense /Expenditures /Debt:
• Capital Project expenditures, that are based on the figures presented at the December 20,
2012 Board Workshop, are not inflated in 2013 -14, are inflated by 2% in 2014 -15, 3.0% in
2015 -16, and then 3% per year thereafter. These inflation assumptions are the same in
both 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 inflation this year is 6.5% /year for 3 years, 4.0% for one year, and then 3.5% /year
thereafter. Last year all future years were increased by 3.5% per year. The increased
percentage is due to the 4% COLA and assumption of more new employees receiving 5%
merit increases as they progress up the salary range.
• Salary vacancy of 2 %, and benefit vacancy of 3% are used in the model. This means
projections are reduced by 2% per year for salaries and 3% per year for benefits to account
for unfilled positions. The salary vacancy factors were reduced by 1% each this year; in the
past, the salary vacancy has been 3% and the benefit vacancy has been 4 %. Fewer
vacancies are anticipated due to the large number of retirements that already occurred in
the past 2 years.
• Employee retiree and refilling assumptions were updated in 2012 -13 and remain the same
as last year for future years.
-27-
SCENARIO TWO — 2013 BASELINE
CENTRAL CONTRA COSTA SANITARY DISTRICT
FEBRUARY 24, 2013 FINANCIAL PLANNING WORKSHOP
• The large annual payments totaling $75 million from 2015 -16 to 2021 -22 to pay down our
CCCERA UAAL are the same in both scenarios.
• There is no new debt issued in either scenario.
GASB- 45 /OPEB:
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. The Self Insurance Fund Investments and Debt
Fund restricted reserve account investment are not included in the model.
$100,000,000
$90,000,000
$80,000,000
$70,000,000
$60,000,000
ca
o $50,000,000 -
$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 2 - 2013 Baseline Scenario
increasea tunas Avaiiauie Tor large projects in the next tive
years; new solids treatment (digesters or new furnaces).
Alternatively, -fund couCd -be used -to pay own unfunded
liabilities.
on-so 00000
00,00 e
WON
$0 1 2009 -2010 1 2010 -2011 1 2011 -2012 1 2012 -2013 1 2013 -2014 1 2014 -2015 1 2015 -2016 1 2016 -2017 1 2017 -2018 1 2018 -2019 1 2019 -2020 1 2020 -2021 1 2021 -2022 1 2022 -2023
-TOTAL FUNDS AVAILABLE
73,441,883
61,999,931
$54,999,999
47,420,532
44,945,738
47,522,566
48,794,120
46,522,636
50,343,083
56,458,149
54,093,279
58,755,072
56,869,260
74,1923852
'TOTAL FUNDS REQUIRED
32,660,271
33,560,131
$37,741,375
37,976,514
38,450,075
39,246,655
44,520,419
44,736,269
46,934,511
53,959,497
54,102,505
57,614,198
54,000,205
51,504,607
Fiscal Year
1/10/20134:25 PM N:\ACCOUNTING \GMTEMPI \10 -Year Plan Projections\2013 -2014 Projections \Workshop Docs- prelim \FY2013 -14 Scenario 2 Baseline Summary for Curr yr Report Chart 9
-29-
CENTRAL CONTRA COSTA SANITARY DISTRICT
10 -YEAR FINANCIAL PLANNING WORKSHEET
SCENARIO 2 - 2013 BASELINE SCENARIO
Fiscal Years 2013 -14 through 2022 -2023
-30-
1/10/2013 4:33 PM N:\A000UNTING \GMTEMPI \10 -Year Plan Projections \2013 -2014 Projections \Workshop Docs - prelim \FY2013 -14 Scenario 2 Baseline Summary for Curr yr Report
A
F
G
H
I J K L M N O
P
2
3
Planning Year
Projected »»
1
RATE
2
ASSUMPTIONS
3 4 5 6 7 8 1 9
10
a 1
2012 -2013
2013 -2014
2014 -2015
2015 -2016
2016 -2017 1 2017 -2018 1 2018 -2019
2019 -2020
2020 -2021
2021 -2022
2022 -2023
5
Service Data Assumptions (End of F.Y.)
165,291
166,091
166,941
167,841
-
168,791 169,791 170,841
171,941
-
173,091 174,291
- -
175,541
-
6
Adjustment to total RUE due to lower commercial accounts
-
-
-
-
-
-
7
New Connections (RUE) for the labeled F.Y..
800
800
850
900
950
1,000
1,050
1,100
1,150 1,200
1,250
8
Growth Per Year 0.49%
SEWER SERVICE CHARGE DATA AND CALCULATIONS
0.48%
0.51%
0.54% 0.57%
ha
0.59% 1 0.62% 0.64%
0.67%
0.69%
0.72%
9
10
11
Sewer Service Charge Rate - Debt Service
-
-
-
-
-
-
-
-
-
-
-
12
Sewer Service Charge Rate - 0 &M
344
335
372
433
443
444
460
466
464
508
437
13
14
Sewer Service Charge Rate - Capital 27 70 67 40 64 97 116 145 181 137 208
Total SSC Rate 371 405 439 473 507 541 576 611 645 645 645
Increase to Rate - $ 30 34 34 34 34 34 35 35 34 - -
Increase to Rate - % 8.80% 9.16% 8.40% 7.74% 7.19% 6.71% 6.47% 6.08% 5.56% 0.00% 0.00%
Total SSC Revenue 61,174,720 I 67,105,028 I 73,100,712 11 79,176,145 85,336,429 ' 91,586,662 98,102,262 104,720,162 111,273,096 112,030,971 112,821,096
Interest Revenue Rate Assumption 0.40% 0.50% 0.75% 1.00% 1.25% 1.50% 2.00% 2.50% 3.00% 3.50% 4.00%
_ d3 ..
Property Tax:
15
16
19
20
21
22
23
24
Growth %Assumption
0.00%
0.00%
0.00%
1.00%
1.00%
1.50%
2.00%
2.50%
3.00%
3.00%
3.00%
25
Growth $
510,831
1,070,000
(1,070,000)
125,580
126,836
192,156
260,051
331,566
407,826
420,060
432,662
26
Tax Take or Repayment
-
1,070,000
-
-
-
-
-
-
-
-
-
27
Property Tax -Total
12,558,000
13,628,000
12,558,000
12,683,580
12,810,416
13,002,572
13,262,623
13,594,189
14,002,015
14,422,075
14,854,737
28
29
Property Tax Impact on RUE
Connection Fee - Gravity Zone
75.97
82.05
75.22
75.57
75.89
76.58
77.63
79.06
pr
7,074
80.89
7,241
82.75
84.62
5,797
5,987
6,177
6,364
6,548
6,727
6,903
7,404
7,562
30
31
Percent Increase from PY
6.08%
3.28%
3.16%
3.04%
2.89%
2.74%
2.61%
2.48% 2.36%
2.25%
2.14%
32
Conn Fee - Pumped Zone
7,422
7,665
7,908
8,148
8,383
8,613
8,838
9,057 9,271
9,479
9,682
33
Percent Increase from PY 4.96%
Percentage of Pumped Zone to Total Connections 56.25%
=
Retiree OPEB Annual Contributions 8,300,000
3.28%
3.16%
3.04%
2.89%
2.74%
2.61%
2.48% 2.36%
2.25%
2.14%
34
35
56.25% 52.94%
i ;
8,300,000 8,300,000
51.11%
8,300,000
49.47%
8,300,000
48.00%
' 8,300,000
32.86%
8,300,000
9.09% 8.70%
1 8,300,000 8,300,000
8.33%
8,500,000
8.00%
8,618,966
36
37
Portion Allocated to PARS Trust
4,160,394
4,015,337
3,674,310
3,213,072
2,757,154
2,290,504
1,836,685
1,372,644
983,955
471,299
323,630
38
Estimated PARS Trust Balance (3% /year interest)
27,076,018
32,024,096
36,769,358
41,181,903
45,257,229
48,974,166
52,335,177
55,319,055
57,992,100
60,217,302
62,357,159
40
Salary Inflation (Impacted by Retirement Assumptions below)
5.6%
4.4%
6.1%
6.1%
3.7%
3.2%
_ 3.2%
2
3.4%
3.2%
3.4%
3.4%
41
No. of New Retirements (netofdeaths)
6
(5)
6
4
2
2
(2)
3
(4)
(3)
42
Total 0 &M Benefit Increase Per Year ( %)
17.63%
7.76%
6.75%
32.25%
0.33%
0.09%
1.17%
UAAL 15 million
1.01%
0.77%
11.08%
- 26.38%
43
a in additional 10
million ear to CCCERA
in 2021 -22
44
Total 0 &M Expense Change from prior year ( %)
9.12%
4.81%
6.37%
16.469.
2.47%
1.44%
4.98%
2.00%
2.68%
6.55%
- 10.63%
46
Capital Project Inflation %
1 1.00%
1.50%1
2.00%
3.00%
3.00%
3.00%
3.00%
3.00%
3.00%
3.00%
3.00%
48
Debt Coverage Ratio
3.98
4.13
4.53
11.49
6.97
7.97
10.01
13.20
12.58
12.19
14.27
49
Debt as a Percent of Revenue
6%
5%
5%
2%
3%
3% 2%
2%
2%
2%
2%
-30-
1/10/2013 4:33 PM N:\A000UNTING \GMTEMPI \10 -Year Plan Projections \2013 -2014 Projections \Workshop Docs - prelim \FY2013 -14 Scenario 2 Baseline Summary for Curr yr Report
CENTRAL CONTRA COSTA SANITARY DISTRICT
10 -YEAR FINANCIAL PLANNING WORKSHEET
SCENARIO 2 - 2013 BASELINE SCENARIO
Fiscal Years 2013 -14 through 2022 -2023
-31-
1/10/2013 4:33 PM N:\AC000NTING\GMTEMPI\10 -Year Plan Projections \2013 -2014 Projections \Workshop Docs - prelim \FY2013 -14 Scenario 2 Baseline Summary for Curr yr Report
A F G H I
J
K L
M
N
O
P
50
51
DEBT SERVICE FUND
'
2
`
5
6
7
8
9
,.
10
3
2015 -2016
4
s2
2012 -2013
2013 -2014 2014 -2015
2016 -2017
2017 -2018
2018 -2019
2019 -2020
2020 -2021
2021 -2022
2022 -2023
53
TOTAL REVENUE:
5,567,376
5,552,435 1 5,546,218
2,077,785
3,782,051
3,809,926
3,603,238
3,600,701
3,607,578
3,597,111
3,593,499
54
TOTAL EXPENSE:
5,567,376
5,552,435
5,546,218
2,077,785
3,782,051
3,809,926
3,603,238
3,600,701
3,607,578
3,597,111
3,593,499
55
56
s�
Ending Fund Balance
RUNNING EXPENSE FUND
-
Projected »»
2012 -2013
-
1
2013 -2014
-
2
-
3
2015 -2016
-
4
2016 -2017
-
5
2017 -2018
-
6
2018 -2019
- -
7 8
-
9
-
10
2022 -2023
58
2014 -2015
2019 -2020
2020 -2021
2021 -2022
59
TOTAL REVENUE:
73,108,217
71,137,461
78,458,359
91,247,191
93,875,407
95,001,088
99,759,493
102,015,015
102,939,245
112;548,823
99,456,282
so
TOTAL EXPENSE:
70,221,247
73,598,684
78,288,135
91,173,720
93,425,608
94,775,031
99,493,021
101,486,721
104,203,392
111,033,817
99,227,173
61
REVENUE MINUS EXPENSE:
2,886,970
(2,461,224)
170,224
73,471
449,799 226,057
266,471
528,294 (1,264,147)
1,515,007
229,110
621
1
63
Ending Fund Balance
11,586,970
9,125,746
9,295,970
9,369,441
9,819,240
10,045,297
10,311,768
10,840,063
9,575,915
11,090,922
11,320,032
sa
ss
MSEVVER
67
1 Prudent Reserve
CONSTRUCTION
11.82%
Projected »»
2012 -2013
14.80%
1
2013 -2014
10.01%1
2
2014 -2015
9.95%1
3
9.89%
4
9.87%
5
9.90%1
6
9.90%
7
9.76%
8
9.65%
9
9.70%
10
2015 -2016
2016 -2017
2017 -2018
2018 -2019
2019 -2020
2020 -2021
2021 -2022
2022 -2023
68
TOTAL REVENUE:
21,877,563
29,561,430
28,578,784
27,842,350
33,419,294
38,922,166
44,160,284
56,716,987
63,092,078
58,220,068
68,605,559
ss
TOTAL CAPITAL EXPENDITURES:
32,344,000
29,575,000
26,172,180
26,644,267
36,140,577
35,327,776
38,311,690
59,610,151
57,166,137
61,620,887
51,511,077
7o
REVENUE MINUS CAPITAL EXPENDITURES:
(10,466,437),
(13,570)
2,406,604
1,198,083 (2,721,283)
3,594,389
5,848,594
(2,893,164) 5,925,941
(3,400,819)
17,094,482
71
BOND PROCEEDS:
-
-
-
-
-
-
-
- -
-
-
7
73
74
Ending Fund Balance
35,833,562
35,819,992
38,226,596
39,424,680
36,703,396
40,297,786
46,146,380
43,253,216
49,179,157
45,778,338
62,872,820
MTOTAL
76
FUND BALANCES
Projected »»
2012 -2013
1
2
3
4
5
6
7
8
9
10
2013 -2014
2014 -2015
2015 -2016
2016 -2017
2017 -2018
2018 -2019 2019 -2020
2020 -2021 2021 -2022
2022 -2023
77
TOTAL FUNDS AVAILABLE
47,420,532
44,945,738
i 47,522,566
48,794,120
46,522,636
50,343,083
56,458,149 54,093,279
58,755,072 56,869,260
74,192,852
78
FUNDS REQUIRED
79
100% of Debt Service
5,552,435
5,546,218
2,077,785
3,782,051
3,809,926
3,603,238
3,600,701
3,607,578
3,597,111
3,593,500
-
8o
32% of Next Year's 0 &M Expense
23,551,579
25,052,203
29,175,590
29,896,195
30,328,010
31,837,767
32,475,751
33,345,085
35,530,821
36,596,746
37,694,648
81
30% of Next Year's Capital Expenditures
8,872,500
7,851,654
7,993,280
10,842,173
10,598,333
11,493,507
17,883,045
17,149,841
18,486,266
13,809,959
13,809,959
82
TOTAL FUNDS REQUIRED
37,976,514
1 38,450,075
1 39,246,655
1 44,520,419 44,736,269
1 46,934,511
1 53,959,497
54,102,505
57,614,198
54,000,205
51,504,607
83
84
85
lFunds Available Amount Above /(Below) Funds Required
9,444,018
6,495,663
8,275,911
4,273,701 1,786,367
3,408,572
2,498,651
(9,226)
1,140,874 2,869,055
22,688,244
-31-
1/10/2013 4:33 PM N:\AC000NTING\GMTEMPI\10 -Year Plan Projections \2013 -2014 Projections \Workshop Docs - prelim \FY2013 -14 Scenario 2 Baseline Summary for Curr yr Report
CONCLUSION
Staff recommends a Proposition 218 notice be sent to our ratepayers in March 2013 stating the
need for a 2 -year increase in sewer service charge (SSC) of $34 per year for 2013 -14 and 2014-
15. This is a total 2 -year increase of $68 and brings the SSC from $371 to $439 over the 2 -year
period. The District will remain in the bottom half of agencies surveyed even with the proposed 2-
year increase. This increase will allow the capital component of the sewer service charge to be
increased to approach sustainable funding of the capital program, which has been in a deficit
spending mode for the last several years.
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CENTRAL CONTRA COSTA SANITARY DISTRICT
2013 -14
APPENDIX I — WHITE PAPERS
INTRODUCTION
In this section of the report, staff discusses various topics in more detail that have
an impact on rate setting. These topics include:
• Current and Potential Issues and the Economy
• Fees & Charges
• Rental Property Income
• Self- Insurance Fund
• Significant Liabilities (GASB- 45 /OPEB- Retiree 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 five years of financial forecasting have been challenging due to the
turbulent economy. The following bulleted list highlights some of the 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.
Contra Costa County Employees' Retirement Association's (CCCERA) Pension
Costs:
• Amortization: The rolling amortization period used by CCCERA helped
smooth the exceptional 2008 market losses.
• Depooling: Our rates are now calculated solely on our number of
employees and retirees and their associated retirement benefit obligation.
Rates increased by 4.68% of salary in 2013 -14.
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• Not all of the depooling costs were recognized in the December 2009
actuarial valuation. Based on the 2009 valuation, our 2011 -12 rates
increased by 12.5 %. Then, in the December 2010 actuarial report, the
salary enhancement percent of pay was also depooled and changed from
12% to 24% based on District usage trends, driving our depooled rates up
by another 13.79% in 2012 -13.
• Public pressure to reduce final year salary was addressed by legislative
action this year: Public Employees' Pension Reform Act (PEPRA) of
2013. Currently the Contra Costa Superior Court issued an injunction on
some PEPRA provisions related to pensionable compensation, mainly
regarding the issue of vested rights and current active employees. The
financial impact to District CCCERA pension costs won't be known until
the conclusion of this court case and any potential appeals.
• Unfunded Actuarial Accrued Liability (UAAL): The bullets above all impact
the increase or decrease of our unfunded liability for pension obligation.
• Recently ratified District contracts phase -in cost - sharing of normal costs
by employees over the 5 year term of the contract.
Retire Health Care Costs (GASB- 45 1OPEB)
• The most recent actuarial study was performed as of July 1, 2010. The
actuarial report as of July 1, 2012 is in process and we should have the
results in time for 2013 -14 budgeting.
• The Annual Required Contribution (ARC) is currently $8.3 million per year.
• Several factors will impact the results of the July 1, 2012 Actuarial Report
Accrued Unfunded Liability and ARC:
• Implementation of our internal Tier 3 is anticipated to lower the
annual contribution to some degree in future years.
• Any recent new MOU changes to employee payment of medical
premiums will not be included in the July 1, 2012 actuarial
calculations because the data used is in the calculation is for
employees and retirees on -board as of June 30, 2012.
• The large number of retirements in 2011 and 2012 will add to the
Unfunded Liability.
• The actuaries are lowering the interest rate assumption for our
PARS earnings from 6.50% to 6.25% in the July 1, 2012 actuarial
report — this will also increase the Unfunded Liability.
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.
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We have contacted Contra Costa County and there has been no
correspondence from the State indicating that the Prop 1 A borrowing,
which is due for repayment to the District in 2012 -13, will happen this
fiscal year. We have a receivable on the books and are assuming we will
receive our payment in the 2013 -14 fiscal year.
Annual unemployment rates are projected to decrease slightly through
2018.
• California still appears to be lagging behind the National Recovery.
Housing Market
• The poor housing market has impacted the number of new connections,
and associated capacity fee and permit fee revenue. New housing start
statistics show that the State is anticipating growth in the next few years,
but we are using conservative annual new connection estimates of 800
per year.
• Lower housing values are lowering property tax to some degree -
homeowners are requesting Contra Costa County (CCC) to reassess their
property value — property tax revenue has remained almost flat at around
$12 million per year.
Commercial Sewer Service Charge
• Several commercial accounts have gone out of business, decreasing our
commercial sewer service charge revenue.
Interest Rates
• Currently, interest earnings continue at an all -time low of less than 1 %.
• Interest earnings on our Funds Available continue to be minimal.
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
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The focus of the January 24, 2013 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 staff's recommendation for updating these 6 categories of fees,
rates and charges for 2013 -14.
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 $424 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. Staff tracks annexation related costs and has
concluded that the current Annexation Charge of $424 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 2, 2012. The gravity capacity
fee is currently $5,797 per residential unit equivalent (RUE). Parcels in pumped
zones currently pay an additional $1,625 per RUE for a total of $7,422 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 2013 -14 and
recommends a 2.3% increase in the gravity capacity fee to $5,930 per residential
unit equivalent (RUE) and a 2.3% decrease in the additional fee for the pumped
zone to $1,587, which would result in a total capacity fee in pumped service
areas of $7,517 per RUE which is a net increase of 1.3 %. The slight decrease
-36-
in the pumped zone portion of the fee reflects that over the past year
depreciation of pumping assets was greater than the addition of new pumping
assets.
Staff is also exploring the possibility of a formal Leased Capacity Fee program.
Such a program would be similar to our current approach for capacity fees
charged under a Special Discharge permit. The leasing arrangement would
allow business with very high capacity charges to make smaller annual payments
while ensuring that the District receives proper compensation for capital assets.
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 July 2012.
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 2013.
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, if needed, for the
coming fiscal year in March 2013.
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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
January 24 Financial Planning Workshop.
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 Handling and Disposal Charges for Conditionally
Exempt Small Quantity Generators (CESQG1
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.
-38-
RENTAL PROPERTY INCOME
The District owns various properties adjacent to the treatment plant and the CSO
campus. Some of the lands adjacent to the treatment plant and CSO campus
were acquired by the District to serve as buffer land or as potential expansion
area. Acquiring adjoining land when it became available has been a successful
advance planning policy for the District. It has enabled the District to have
greater control on land development next to the treatment plant and ensure
development has been compatible with District operations. It has also provided
land for expansion as in the case with the CSO campus, and has been a source
of revenue.
In addition to vacant land, the District at times may lease out or license out
portions of the collection system right of way if said action does not impact
existing facilities or operations. A comprehensive list of District owned land was
submitted to the Board at the March 15, 2012, meeting.
Below is a condensed list of existing income generating leases for Calendar Year
2012:
Annual Revenue From Leases on CCCSD Land (2012)
Contra Costa Top Soil .......... ............................... $ 63,660
County Quarry .................... ...............................
$ 220,932
4737 Imhoff Place Bay 1B ...... ............................... $ 9,900
4737 Imhoff Place Bay 7 ....... ...............................
$16,800
4737 Imhoff Place Bay 8 ...... ...............................
$ 13,200
ATT cell site at CSO ............ ...............................
$ 17,250
Lagiss.................................... ...............................
$ 1,200
CCW D Alum Ponds ........... ...............................
$ 156,502
Kiewit Clean Fill (through October) ...................
$ 522,272
Annual Revenue From Leases on CCCSD Right of Way (2012)
Concord Commerce on 2 "d Ave. South ................. $ 4,230
ITCorp ...................................... ............................... $ 999
Willows Shopping Center ..... ............................... $ 13,976
Equilon................................... ............................... $ 2,916
Total Annual Revenue (2012) ........................... $ 1,043,837
-39-
As vacant land for industrial purposes along the Highway 4 corridor and central
Contra Costa County becomes scarce, the demand for available land such as
that owned by the District will continue to increase. To that end, Real Property
staff will be updating the District's master land use plan during the 2013 year.
Updating the land use plan will ensure that the District's real estate assets are
maximized, minimize liability risk, and preserve land for future District use.
SELF - INSURANCE FUND
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 since then.
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 which are discussed below and on the following page.
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 2012 -13 $850,000 was transferred
from the General Fund to the SIF.
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 2013 -14 in order to meet claims, claims expenses and claims
reserve expectations.
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 2012 actuarial report estimates an
expected unpaid liability of $618,000 for sub -fund A risks as of June 30, 2014.
However, since the District raised its self- insured retention in 2007, we have
increased the sub -fund A reserve to $1,000,000.
-40-
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 by sub -fund A. Additionally, loss valuations vary widely
from claim to claim but may result in extremely high claims expenses 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 subject to underlying policy deductibles.
SUB -FUND C: Non - GASB -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 - GASB -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.
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
The chart below shows the annual amounts of these four liabilities from 2005 -06
through projected 2013 -14. Please note that in 2005 -06, the GASB 45 (OPEB)
requirements did not exist so the liability was not calculated or shown. Also, the
CCCERA liability is shown in the year it impacts rate - setting, not as of the
calendar year of the actuarial report.
-41-
Liabilities by Type and Fiscal Year
$250,000,000
$200,000,000
$150,000,000
$100,000,000
$50,000,000
$-
2005.06 2006.07 2007.06 2008.09 2009.10 2010.11 2011.12 2012.13 2013.14
0 Accrued Compensated Absence I GASB 45 OPEB Unfunded Utility O CCCERA Unfunded Liability 0 Outstanding Debt
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 and vacation accruals, are almost all
retired.
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. A new
actuarial valuation is being prepared as of July 1, 2012. New unfunded liability
and annual contribution amounts are not known at this time.
-42-
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
• $109.2 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, 58.7% of
the 2012 -13 rate and 61.2% of the 2013 -14 rate goes to paying down the
unfunded liability.
The new PEPRA legislation will lower the UAAL for newly hired employees.
Vested rights for current active employees is currently under judicial review and
the impact is not known.
4. Outstandina 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 in the areas
of water quality, air quality, solids management, hazardous materials /waste
management, and safe working requirements. Historically, revision to these
requirements takes several years so they do not substantially change on a year -
to -year basis. However, recent legislative and regulatory actions create a more
dynamic regulatory environment for the District's operations involving air
emissions and the NPDES Permit for our discharge to Suisun Bay.
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Air Quality Standards
The primary issues associated with regulating the District's air emissions include:
Recent decreases in the National Ambient Air Quality Standards (NAAQS)
for particulate matter < 2.5 microns in diameter (PM2.5)-
Implementation of both state and federal regulations to limit emissions of
greenhouse gas (GHG).
Implementation of new air emission standards for Sewage Sludge
Incinerators (SSI) under section 129 of the Clean Air Act (129 Standards).
The PM2.5 ambient air limits are established to control the amount of fine
particulate matter, <2.5 microns in diameter, in the ambient air. Depending on the
actions taken by the Bay Area Air Quality Management District (BAAQMD) in
response to this new standard, the District may need to implement capital
improvements to the on -site biosolids incinerators within the next 3 to 10 years.
Possible early drivers in this process include the potential for the SF Bay Area to
be designated as a non - attainment area for PM2.5 standards and /or a finding that
the District's emissions of PM2.5 pose a risk to public health. The 30 year old
existing air pollution control devices (APCD) on the District's SSIs do not
effectively control PM2.5. If the District is required to upgrade the APCD on the
existing SSIs with state -of- the -art wet scrubbers and Wet Electrostatic
Precipitators (WESPs) to control PM2.5, there will also be increased removal of
cyanide, mercury, and other trace pollutants. The outlet water from a state- of -the-
art wet scrubber/WESP would need additional side - stream treatment capabilities
incorporated to address other pollutants captured (e.g. cyanide, mercury) before
reintroducing to the treatment plant processes. The upgraded wet
scrubbers/WESP is more energy efficient but the side - stream treatment could
increase energy demand and increase GHG emissions addressed below.
The regulation of GHG emissions continues to move forward at both the State
and Federal level. Currently, GHG emissions in- excess of 25,000 metric tons
carbon dioxide equivalents (CO2e) requires a compliance obligation under the
Cap and Trade section of California's GHG regulations. The current price for 1
metric ton of CO2e is approximately $15.00. The District actively manages our
CO2e emissions to stay under the 25,000 metric ton per year cap with historical
CO2e emissions at approximately 24,000 metric tons CO2e. The margin of
compliance between the current CO2e emissions and the regulatory threshold is
small and will influence the District's operational decision- making for years to
come in order to stay under the 25,000 metric ton per year threshold. Failure to
stay under the 25,000 metric tons of CO2e per year would result in an annual cost
of approximately $400,000 for CO2e allowances. Significant capital improvements
or upgrades could result in higher energy demands which could result in the
GHG regulatory threshold being exceeded, higher operating costs for alternative
biogenic energy sources, or creative capital projects that accomplish energy
reductions in other operational units (e.g. upgraded wet scrubbers would require
-44-
lower energy). Landfill gas continues to be an energy source that does not
contribute to the District's CO2e emissions and the projected supply is estimated
to be more than 15 years.
The SSI regulatory standards are being appealed by National Association of
Clean Water Agencies ( NACWA). Preliminary decisions on the SSI rule and
other solid waste combustor rules indicate the prospect for NACWA successfully
appealing the standards are limited. The District's source test results
demonstrated that Furnace 2 can comply with the SSI emission standards and
source testing for Furnace 1 is scheduled for March 2013. If Furnace 1 source
testing documents compliance with the new standards, no immediate capital
improvements to the incinerators will be necessary to meet the new standards.
When the SSI standards are implemented, the District will need to monitor the
capital expenditures on the incinerators (excluding APCD systems) to determine
if improvements exceed 50% of the current value of the original cost. If this
threshold in expenditures are exceeded the standards for a new incinerator
would apply.
Staff will continue to monitor the regulatory developments for the SSI Rule, GHG
regulations, and PM 2.5 to determine the potential effects these actions will have
on the District's operations.
Water Quality Standards
The District's NPDES Permit was reissued with an effective date of April 1, 2012.
This permit contains new effluent limits for ammonia as expected. The District is
able to comply with the new ammonia limits. The permit also requires significant
studies to be completed to:
■ Help advance the science of nutrient impact on Suisun Bay.
■ Assess the potential operational improvements to the existing facilities
that can reduce ammonia in the District's effluent.
■ Evaluate the potential treatment plant improvements available to the
District, both conventional and applicable innovative technologies, to
achieve ammonia reduction in the effluent should a lower ammonia limit
be established.
■ Complete a site characterization study of the area known as the
Surcharge Fill Area which is the likely location to install ammonia
treatment equipment should it be necessary.
The NPDES Permit is written so the RWQCB could reopen the permit on April 1,
2015 to require further actions to control ammonia in the District's effluent based
on the findings of the studies referenced above. Although the permit only
requires the studies to address ammonia, the District decided to approach the
studies with a broader scope to include nutrient removal.
-45-
Preliminary research findings indicate that use of conventional nitrification
methods to remove ammonia would be inhibited by elevated cyanide
concentrations. The cyanide in the District's scrubber water that is currently
discharged to the primary effluent is at levels that could cause inhibitory effects. If
this technology is pursued, then side - stream treatment of the scrubber water
could be needed to avoid this adverse effect. Side - stream treatment of the
scrubber water without improving the wet scrubber system could increase energy
demand levels that would exceed the GHG regulatory threshold referenced
above, or require the District to increase the import of high priced power from
PG &E.
Concurrent with the studies identified above, significant work is being performed
in the SF Bay region and upstream in the Sacramento River delta regarding
potential effects of ammonia and nutrients on the health of the bay /delta system.
The findings from the scientific efforts completed to date to characterize the role
of ammonia and nutrients on impacts to the health of the SF Bay region are
inconclusive within the scientific community. The District and other wastewater
dischargers will need to continue to contribute funding for ongoing and future
studies to ensure that sound science is available to inform the regulatory
decision - making associated with ammonia and nutrients.
If the District is required to design and construct expanded treatment facilities to
remove ammonia and /or nutrients from the effluent, the capital expenditures are
significant. The previous financial plan included $70 million for ammonia removal
project within the next 10 years which needs to be retained until the studies are
completed. The Plan also includes $20 million for remediation of contaminated
soils. This budgeted amount may need to be increased if nutrient removal
capabilities are included in the planned facility improvements, or if the site
characterization study results identify a significantly higher cost to properly
dispose of the soil removed from within the Surcharge Fill Area of the treatment
plant to complete the facility improvements. Staff will continue to monitor findings
from the District sponsored studies and progress on other programs related to
ammonia and nutrients to determine the effect on the District's operations and
planning.
Control of Pollutant Sources
In addition to ammonia and nutrients, contaminants of emerging concerns
(CECs; including pesticides, pharmaceuticals, health care products) can become
significant drivers of major revisions to the treatment plant over the next 10 to 15
years. The State Water Board is processing a Toxicity Policy that could
significantly change how Toxicity monitoring and compliance is conducted in
NPDES Permits. The District appears to be able to comply with the new
standards depending on how the SF Bay RWQCB implements this new policy. If
the District violates the proposed new toxicity limits, CECs are anticipated to be
the likely cause of such measured toxicity. Increased operating costs will be
-46-
required to investigate the potential cause of the measured toxicity and capital
improvements may be required if the District is not able to control the identified
source of the toxicity through other means.
Another possible area of concern includes the potential for increased liability from
discharges of pollutants to the environment from customers connected to the
District's collections system. The District is currently in litigation involving a
release of chlorinated solvents (perchloroethylene or "perc ") from a dry cleaning
facility in Pleasant Hill to the soil and groundwater. Depending on how the SF
Bay RWQCB responds to the attempts by attorneys for the land owner to include
the District as a Responsible Party in the investigation and clean -up of this case,
exposure to potential significant future liability from similar releases of pollutants
could be expanded.
Collection System
In the mid -1990s and early 2000s, federal and state agencies started to focus on
monitoring and preventing sanitary sewer overflows from Collection Systems.
While federal efforts have lagged, California has taken a leading role in curbing
Sanitary Sewer Overflows (SSOs). In 2006, the State Water Resources Control
Board (SWRCB) adopted Statewide General Waste Discharge Requirements for
Sanitary Sewer Systems. These general requirements are included as part of the
District's NPDES Permit. In addition to requirements for managing collection
systems, this order sets monitoring and reporting requirements for SSOs. SSO
data collected by the SWRCB will be the basis for future requirements aimed at
further preventing and reducing SSOs.
Of continuing concern are regulatory requirements related to maintenance of
private sewer laterals. Currently, the District is not responsible for maintenance of
sewer laterals. There have been previous efforts to have public agencies accept
responsibility for sewer laterals instead of homeowners and business owners. On
January 7, 2013, the SWRCB released new Draft SSO Monitoring and Reporting
Requirements, which include voluntary reporting by public agencies of private
lateral overflows. Possible future requirements to maintain sewer laterals would
have a significant impact on both the District's Capital Improvement Plan and the
Operations and Maintenance Budget.
Federal agencies have been evaluating infiltration /inflow (1 /1) reduction as a way
of reducing SSOs. The District experiences 1/1 into the Collection System during
the winter, which in turn increases the flows to the treatment plant. If the flow is
greater than the treatment capacity, a portion of the flow is bypassed to holding
basins, and then later treated when the treatment plant flows recede. Most
treatment plants do not have this storage capacity. The EPA may push
nationwide or statewide programs to reduce 1/1 from Collection Systems. A
mandated 1/1 reduction program could have a significant impact on the District's
Capital Improvement Plan.
-47-
UTILITIES & CHEMICALS
Utilities
The total utility budget for 2012 -13 is $3,581,000 or approximately 15% of the
operations and maintenance budget for the treatment plant.
The District continuously monitors treatment plant energy usage to ensure
efficient and cost - effective operations. In addition, several energy -use studies
have been completed to evaluate energy use in the plant and identified possible
energy saving opportunities. Also, energy usage is a major consideration in the
planning and design of treatment plant projects to expand or modify facilities in
the future.
The largest component of the utility budget is natural gas (76% of budget) which
is used primarily in the cogeneration system and to a lesser degree in the
multiple hearth furnaces and auxiliary boilers. Landfill Gas (14% of budget) is
used in the furnaces and auxiliary boilers. The price of landfill gas (LFG) is tied
to the price of natural gas, which under the current contract is priced at 75
percent the burner tip price of natural gas. In addition, the LFG price has a cap
of $4.60 per decatherm and a floor of $2.60 per decatherm. Lastly, electrical
costs represent less than 10% of the utility budget.
The District operates a high- efficiency cogeneration system that produces
approximately 90% of the treatment plant's electrical energy needs. At current
natural gas prices (approximately $4.50 per decatherm prepurchase costs, not
including delivery) the cogeneration system saves the District more than one
million dollars per year over the cost of purchasing energy from Pacific Gas and
Electric. Imported electricity costs from PG &E are approximately $0.32 per
kilowatt hour. The recent shutdown of the cogeneration system following the
explosion on March 29, 2012 through October 5, 2012 affected 2011 -12 utility
costs and will also affect 2012 -13 costs. The additional energy costs associated
with the cogeneration outage are estimated to be over $1.0 million spread over
two fiscal years.
Improvements are planned for the cogeneration system to upgrade the control
and fuel systems. Similarly, Acme Fill (Bulldog Gas and Power) the LFG
supplier, is planning improvements to install new gas wells and a new gas
compressor for more efficient and reliable landfill gas delivery.
Natural gas prices have dropped substantially in recent years, due to an
abundance of gas resulting from the development of hydraulic fracturing. The
District's natural gas consultant (Valtech Energy Management) predicts that
prices will remain flat or will increase slowly over the next several. District Staff
have prepurchased 85% of calendar year 2013 natural gas needs at an average
price of $4.40 per Decatherm. This price is significantly lower that the 10 year
-48-
average price of $6.60 per decatherm. Since LFG is indexed to the price of
natural gas, its price is similarly low.
Chemicals
Chemical costs for fiscal year 2012 -2013 are projected to be $1,431,000, or five
percent of the treatment plant operations and maintenance budget for the
treatment plant. The major chemical costs are as follows:
• Lime (sludge pH control)
$206,000
• Polymer (sludge conditioning for dewatering)
$485,000
• Sodium Hypochlorite (odor control /bulking sludge control)
$308,000
• Hydrogen Peroxide (odor control)
$54,000
Over the past 10 years, lime costs have increased at about 10% per year,
polymer 3.5% per year, hypochlorite 0.4% per year, and the Other Chemicals
account, which is mainly hydrogen peroxide, 3.3% per year.
Chemical production and delivery to the customer are energy intensive. As the
world economics continue to recover from an economic slowdown, upside
pressure on chemical prices will increase. As such, the overall chemical cost
escalation is projected to be approximately five percent per year.
The District has historically used carbide lime for sludge pH control. Carbide lime
is a waste product from the production of acetylene. With lower acetylene
production and shifting production locations, the quantity of carbide lime has
diminished resulting in the purchase of more costly slaked lime. If this trend
continues lime costs could escalate beyond the above projections.
-49-
Central Contra Costa Sanitary District
December 6, 2012
TO: BOARD OF DIRECTORS
VIA: ANN E. FARRELL, GENPkAL MANAGER
FROM: ANDREW ANTKOWI WAPITAL PROJECTS DIVISION MANAGER
SUBJECT: REVIEW PRELIMINARY 2013 TEN -YEAR CAPITAL PLAN
AND FISCAL YEAR 2013 -14 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 develop and refine financial planning scenarios based on
current information on operations and maintenance costs. The content of the Capital Budget
and Plan will be discussed at the Capital Planning Workshop on December 20, 2012. Due to
the substantial capital funding deficit we are currently experiencing, the calculated rate
increases for the next several years are on the order of 8% per year to allow for a capital
component of the sewer service charge that will bring capital revenue back in line with
planned capital expenditures.
Rates will be examined in more detail as part of the Financial Planning Workshop on January
24 which will incorporate all District expenses and revenues and make ten -year rate setting
projections for Board consideration. The goal of this two phase financial planning process is
to inform the Board of the District financial situation and reach Board consensus on the
language for a Proposition 218 notice regarding a rate increase, ideally by the first meeting in
March (March 7, 2013) in order to meet the noticing deadlines.
BACKGROUND
In preparation for the first fiscal year (FY) 2013 -14 Capital Planning Workshop on December
20, 2012, 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 11, 2012. 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 January 24, 2013). By fixing the level of capital
expenditures, which comprise approximately 30 - 35 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 January lead to some
concerns about capital revenue and expenditures, adjustments can be made at that time and
can be incorporated into the draft Capital Improvement Budget and Plan, which is brought to
the Board in a second FY 2013 -14 Capital Planning Workshop in April.
Page 1
't
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, 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 $31 million in
2013 dollars for FY 2013 -14.
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.
The annual investment rate for mechanical equipment /pressure piping systems /electrical
equipment at the treatment plan and pumping stations is more difficult to estimate. Staff
continues to better define this reinvestment rate. Work to date suggests a renovation budget
rate of 1 % of replacement value for the treatment plant and pumping stations is an
appropriate 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 rather than bond financing. 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 $31 million per year in 2013 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.
Page 2
Also included were Standby 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 Figure 1 shows historical District capital expenditures since 1990 -91. Annual
capital spending has ranged from a low of $17 million in FY 1996 -97 to a high of $40 million
in FY 2006 -07 (in actual dollars). 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 FYs
2001 -02 through 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 2, 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.
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 the two revenue receipts, 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 in the very favorable bidding climate.
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 reduce increases in 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. Unfortunately, the majority of the
two -year $30 per year rate increase was allocated to operations and maintenance costs to
avoid deficit spending in that budget and the capital program continued to be significantly
underfunded. A table showing the sewer service charge components for the last thirteen
years follows.
Page 3
Figure 1
CENTRAL CONTRA COSTA SANITARY DISTRICT
ANNUAL CAPITAL EXPENDITURES
FISCAL YEARS 1990 - 2012
(,000 omitted)
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 11.12
Treatment Plant
6,856 4,369 11,237 22,685
12,835
10,409
5,723
7,304
6,721
9,768
11.007
4,832
4,353
5,542
5,211
7,341
9,221
9,722
9.325
10,296
9,297
7,024
Collection System
13,729 8,834 9,931 16,011
16,342
14,795
8,555
12,944
18,023
6,603
14,387
24,556
19,568
12,385
19,536
18,581
24,281
23,128
20,967
12,832
8,801
12,348
General Improvements
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
4,640
Recycled Water
177
346
600
857
4,254
422
303
1,271
259
216
349
194
(338)
162
205
569
937
730
745
In Actual Dollars 21,691 18,234 22,622 37.378 32.371 31,882 16,927 24,434 25,666 20,575 28,169 31,379 25,439 19,781 26,493 27,671 39,640 33,363 36.708 29,109 27,962 24,757
Adjusted by 3 %/Year 40,352 32,933 39,668 63,634 53.504 51,161 26,372 36,959 37,691 29,335 38.992 42,171 33,192 25,058 32,583 33,041 45,954 37,550 40,112 30,882 28,801 24,757
$70,000
$60,000
$50,000
$40,000
$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 11 -12
-In Actual Dollars - Adjusted by 3 %/Year
Page 4
Figure 2
$14,000,000
$12,000,000
$10,000,000
$8,000,000
$6,000,000
$4,000,000
$2,000,000
Property Tax and Capacity Fee Trends
crsHr, lax annt measam rim i ransa village
connections
N M LO (0 r- 00 O O N M It u7 (0 r- 00 0) O N_
O O) O O O d) O O O O O O O O O O O r r
N M 't LO (O n 00 m O N M (!� CO r 00 m O r
m 0) 0) 0) 0) m O 0 O O O O O O O O O O O
m d) D) O D) 01 O O O O O O O O O O O O O O O
N N N N N N N N N N N N
---*---Property Tax —*—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
$344
$27
$371
PROJECTED FISCAL YEAR 2012 -13 EXPENDITURES /R EVEN UES /SCF BALANCE
For the current FY 2012 -13, expenditures were budgeted to significantly exceed revenue.
This was a conscious decision to deficit spend and utilize the $30 million in bond funds that
had been deposited in the Sewer Construction Fund to complete specific projects, such as
Standby Power Improvements, Sludge Hauling Improvements, Dry/Wet Weather Bypass
Improvements and the Collection System Operations Department Facility, when the bid
climate was favorable. The following tables show the budgeted expenditures and revenues
for FY 2012 -13 and the resultant cash flow and sewer construction fund balance.
2012 -13 CAPITAL PROGRAM
EXPENDITURES
BUDGETED
Treatment Plant Program
$7.4 million
Collection System Program
$13.7 million
General Improvements Program
$7.3 million
Recycled Water Program
$3.9 million
Total Expenditures
$32.3 million
2012 -13 CAPITAL PROGRAM
REVENUE
BUDGETED
Facilities Capacity Fees
$4.5 million
Pumped Zone Fees
$.6 million
Interest
$.4 million
Sewer Service Charges
$4.4 million
Property Taxes
$7.5 million
Reimbursements from Concord
$3.8 million
Reimbursements from others
$.6 million
Total Revenues
$21.8 million
Page 6
2012 -13 CAPITAL PROGRAM
CASH FLOW
BUDGETED
Total expenditures
$32.3 million
Total revenue
$21.8 million
Variance
-$10.5 million
SCF Balance 6/30/13
$35.8 million
As part of past debt financing, the District has pledged revenues to first pay 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. FY 2013 -14 will start with an estimated balance of $35.8 million, only slightly greater
than the minimum funds required to meet District cash flow needs. Thus, a significant sewer
service charge increase will be needed to continue to fund the capital program at the
historical and recommended level of 1 % of asset value or approximately $31 million per year.
DISCUSSION OF PROJECTED SEWER SERVICE CHARGE INCREASES NEEDED TO
FUND RECOMMENDED 2013 CAPITAL IMPROVEMENT PLAN
The sewer service charge was increased significantly over the last year two years.
Unfortunately, increases in the unfunded liability for pensions have resulted in higher
operating costs and the majority of the two year increase went to fund operating expenses.
Thus, limited funds were available to allocate to the capital component of the sewer service
charge and the capital funding deficit remains. The following two figures demonstrate 1) the
deficit spending that has occurred in the capital program and the resultant spending down of
the sewer construction fund - Figure 3, and 2) the increasing operations and maintenance
component of the sewer service charge while the capital component has remained flat -
Figure 4.
Page 7
Figure 3
N
C
0
c
Capital Program Has Been Deficit Spending Since FY 2004 -05
$70.0
$65.6
$30 M Net Bond Sale
(Nov /Dec 2009)
$60.0 -$56.9 $57.3
$55.2
Sewer Construction Fund $53.8
$51.8 $51.7 $52.1
Balance
$50.0 $47.8
$44.3 $46.3
$45.4 $45.0
$40.0 $35.8
Annual Expense $33.5
$32.3 $30.2
$30.0 29.
$24.8
Annual Reven AOF $26.2
$20.0
$10.0
$0.0
1999 -00
2000 -01
2001 -02
2002.03
2003 -04
2004 -05
2005 -06
2006 -07
2007 -08
2008 -09
2009 -10
2010 -11
2011 -12
2012 -13
Budget
2013 -14
2014.15
Recommended
--dr-Annual Revenue
$21.6
$18.9
$17.0
$23.5
$28.2
$30.0
$24.8
$36.3
$35.3
$28.4
$21.9
$15.8
$21.7
$21.9
$24.0
$29.5
tAnnual Expense
$20.6
$28.2
$31.4
$25.4
$19.8
$26.5
$27.7
$39.6
$33.4
$36.7
$29.1
$28.0
$24.8
$32.3
$29.6
$26.2
-qb-*SCF Balance'
$56.9
1 $47.8
1 $44.3
1 $45.4
1 $53.8
$57.3
1 $55.2
1 $51.8
$51.7
1 $45.0
$65.6
$52.1
$46.3
$35.8
$30.2
$33.5
'SFC Balance is not strictly governed by checkbook accounting and may not strictly represent the sum of prior year balance and current year variance.
Page 8
Figure 4
Sewer Service
Charge
Revenues Diverted from
Capital Program
to Balance
District
O &M Budget Need to be
Replenished
$500
$450
$433
$402
Total Charge per RUE
$400
$371
$341
$350
$311 $311 $311
$300
$344
$353
$354
$300
$280 $28 $289
$272 0
$248 $300 $302
$250
$224
$200 Operations Component
$200
$150
$100
$76
$79
$58 Capital Program Component
$49
$50
$51 $39
$27
$19 $11
$0
2000 -01 2001 -02 2002 -03 2003 -04 2004 -05 2005 -06 2006 -07 2007 -08 2008 -09 2009 -10 2010 -11 2011 -12
2012 -13
2013 -14
2014 -15
Preliminary
Preliminary
Page 9
Based on expenditures of approximately $31 million per year for renovation, renewal,
replacement and known capacity projects; approximately 166,000 residential unit equivalents
paying sewer service charge; and revenue from other sources of approximately $17 million;
the capital component would need to be $84 to fully fund the capital program as compared to
the current capital component of $27. Thus, an increase of approximately $57 is needed in
sewer service charges just to bring the capital program out of the deficit spending mode.
Assuming a two year increase, this is approximately $29 per year.
Preliminary calculations using the Districts rate - setting model inclusive of operating and
maintenance costs and with capital expenditures less than $31 million in the first two years of
the plan, indicate rate increases of approximately $31 per year for the next several years will
be needed. Based on this very preliminary information, rates would need to increase from
the current $371 per year to $402 per year in FY 2013 -14 and $433 in FY 2014 -15. The
District would remain substantially below the FY 2012 -13 median of agencies surveyed of
$492 even with these increases. A Proposition 218 notice for two consecutive rate increases
of approximately $31 each year would need to be sent out by mid April to notice such a
proposed increase. In order to prepare the mailer in time, a Board decision on a two year
rate increase will be needed at the March 7, 2013 Board meeting if possible or the March 21,
2013 Board meeting at the latest.
ANNUAL SERVICE CHARGE PER RUE
Fiscal Year
Operations
Component
Capital
Component
Total Sewer Service Charge
per RUE
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
$344
$27
$371
Prelim 2013 -14
$353
$49
$402 $31 increase
Prelim 2014 -15
$354
$79
$433 ($31 increase)
These sewer service charge increase figures are preliminary and will be refined for the
January 24, 2013 Financial Planning Workshop. The FY 2013 Capital Plan and FY 2013 -14
Capital Budget are described in the following pages and are based on the recommended
continued level of funding and assume a rate increase of the magnitude discussed above.
Page 10
RECOMMENDED 2013 CAPITAL IMPROVEMENT PLAN
FY 2013 -14 TO FY 2022 -23
The proposed 2013 Ten -Year Capital Improvement Plan is summarized in the following,
Table 5. It contains a moderate baseline plan of $253 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 $11.8 million to address needed seismic improvements and
$12.5 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 to 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,
in 10 to 20 years, a significant investment in seismic retrofit of the existing incinerator
building is not recommended.
In addition to the $253 million baseline, the total $365 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 $7 million for
removal of screenings from the wastewater stream to reduce downstream operational issues
and a $6 million allowance for alternative energy to either replace our existing cogeneration
system or convert to solar energy. Finally, in the tenth year of the plan, $4 million is
budgeted to begin permitting /pre- design of a new fluidized bed incinerator and $5 million to
begin planning /pre- design to replace our ultraviolet disinfection system with ozone, to better
treat for contaminants of emerging concern.
Funding for the $365 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, significant rate increases
are needed over the next several years to restore the capital component of the sewer service
charge to a sustainable level. 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 11 and with the full Board at the
December 20, 2012 Capital Budget Workshop.
Page 11
Table 5
Proposed Ten -Year Capital Improvement Plan
Page 12
2013 -14
2014 -15
2015 -16
2016 -17
2017 -18
2018 -19
2019 -20
2020 -21
2021 -22
2022 -23
Total
Treatment Plant
Reg. compliance/
Planning/Safety Planning/Safety
605,000
481,000
571,000
320,000
2,765,000
10,915,000
28,165,000
24,370,000
27,145,000
12,990,000
108,327,000
One -Time Renovation
7,627,0001
8,845,000
5,102,000
12,145,000
6,420,000
80,000
80,0001
80,000
80,000
280,000
40,739,000
Recurring Renovation
482,000
720,000
2,520,000
2,470,000
2,550,000
2,950,000
2,950,000
2,850,000
1,850,000
1,900,000
21,242,000
Expansion
0
0
0
0
0
0
0
0
100,000
840,000
940,000
Subtotal
8,714,000
10,046,000
8,193,000
14,935,000
11,735,000
13,945,000
31,195,000
27,300,000
29,175,000
16,010,000
171,248,000
Collection System
Renovation
10,601,000
10,151,000
10,601,000
12,501,000
12,114,000
13,451,000
11,031,000
13,151,000
13,080,000
3,451,000
110,132,000
Reg. Compliance/
Planning/Safety Planning/Safety
520,000
270,000
270,000
270,000
270,000
270,000
270,000
170,000
170,000
170,000
2,650,000
Expansion
2,792,000
2,701,000
4,151,000
3,401,000
3,536,000
3,066,000
4,251,0001
3,651,000
2,751,000
11,218,000
41,518,000
Pumping Stations
1,006,000
440,000
135,000
255,000
1,635,000
610,000
1,635,000
635,000
1,915,000
2,935,000
11,201,000
Subtotal
14,919,000
13,562,000
15,157,000
16,427,000
17,555,000
17,397,000
17,187,000
17,607,000
17,916,000
17,774,000
165,501,000
General Improvements
Vehicles & Equipment
501,000
501,000
501,000
501,000
501,000
500,000
500,0001
500,000
500,000
500,000
5,005,000
Management Information
Systems
1,100,000
550,000
500,000
500,000
500,000
500,000
500,000
500,000
500,000
500,000
5,650,000
Projects
2,490,000
460,000
470,000
485,000
855,000
480,000
480,000
480,000
480,000
355,000
7,035,000
Subtotal
4,091,000
1,511,000
1,471,000
1,486,000
1,856,000
1,480,000
1,480,000
1,480,000
1,480,000
1,355, 000
17,690,000
Recycled Water
Urban Landscaping
1,856,0001
550,000
550,000
550,000
550,000
550,000
550,000
550,000
550,000
2,827,000
9,083,000
Industrial
01
0
0
0
0
0
0
0
0
1,900,000
1,900,000
Subtotal
1,856,000
550,000,
5-5-0,00-0-
550,000
550,000
550,000
550,000
550,000
550,000
4,727,000
10 983,000
Total
29,580,000
25,669,000!
25,371,000
33,398,0001
31 696,000
33,372 000
50,412 000
46,937,000
49,121,000
39,866,000
365,422,000
Page 12
RECOMMENDED FISCAL YEAR 2013 -14 CAPITAL IMPROVEMENT BUDGET
The recommended FY 2013 -14 Capital Improvement Budget totals $29.6 million of which
$28.1 million is for renewal and replacement and routine capacity improvements. This
amount is close to the $31.0 million annual investment recommended to accomplish a once -
per -100 year replacement of all District assets. In addition, an expenditure of $1.5 million
($4.4 million total project cost) 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.
FY 2013 -14 CAPITAL IMPROVEMENT
BUDGET
TOTAL
Treatment Plant Baseline
$ 8.7 million
Collection System Baseline
$14.9 million
General Improvements Baseline*
$ 4.1 million
Recycled Water Baseline
$ 0.4 million
Concord Landscape Irrigation
$1.5 million
Total Baseline
$28.1 million
Total Baseline + Concord Recycled Water
$29.6 million
*Includes $1.8 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 2012 Capital and January 2013 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 few months in anticipation of the second
Board Capital Workshop in April 2013, when the detailed draft Capital Improvement Budget
is reviewed with the Board.
A review of the preliminary 2013 -14 Capital Improvement Budget for major projects and
areas of emphasis follows.
TREATMENT PLANT PROGRAM
Preliminary estimates of baseline expenditures for the FY 2013 -14 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 2013 -14 TREATMENT PLANT PROGRAM
CATEGORY
PROJECT
ANNUAL EXPENSE
One Time
Renovation
Primary Treatment Renovation
$ 5,000,000
Pump & Blower Building Seismic Imp.
$ 850,000
Cogeneration Renovation
$ 400,000
Recurring
Renovation
Piping Renovation Phase 8
$ 100,000
All Other
$ 2,364,000
Total Baseline
$ 8,714,000
Page 13
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 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.
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 PBB
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
withstand a major seismic event. Board approval will be sought prior to award of a
construction contract for the proposed improvements.
Piping Renovations Phase 8: 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 8 project
will evaluate and design the next round of piping replacement throughout the treatment plant.
COLLECTION SYSTEM PROGRAM
The major 2013 -14 projects planned for the proposed $14,919,000 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 2013 -14 COLLECTION SYSTEM PROGRAM
CATEGORY
PROJECT
ANNUAL EXPENSE
Renovation program
North Orinda Ph 5, Lafayette Ph 8,
$ 10,601,000
Diablo Renovation Ph 2, Walnut
Creek Ph 10, Concrete and
Corrugated Pipe Renovation, TV
inspection and others
Capacity /Renovations
Grayson Creek Trunk in Pleasant
$ 1,600,000
Hill
Pumping Stations
Moraga Pumping Station Grinder,
$ 600,000
Buchanan South Pumping Station
Removal
Developer services
Developer Services
$ 681,000
Contractual
Current CADs — Harper Lane,
Assessment Districts
Willow Drive
$ 500,000
All others
$ 2,137,000
Total
$14,919,000
Page 14
Renovation Program: The renovation program continues the District's efforts to
renovate /replace sewers identified by the TV Program as being in poor condition. This year's
renovation program focuses on North Orinda, Diablo, Walnut Creek, 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 (2013 CIPP Lining project) will install
approximately 6,300 feet of cured in place pipe in concrete and CM pipe ranging in size from
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 fiscal year 2011 -12. The design of the Pleasant Hill Grayson
Creek Trunk project started in fiscal year 2012 -13 and will continue in the 2013 -14 with
construction in fiscal year 2014 -15. The Pleasant Hill Grayson Creek Trunk project 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 focus of this program for FY 2013 -14 is implementing minor
improvements at District's pumping stations. The Moraga Pumping Station has consistent
problems with ragging. To improve the maintenance and operation of this station a project to
add grinders and /or other equipment needed to alleviate the ragging problem will be
designed and constructed during this fiscal year. 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 2013 -14.
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.
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. 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.
Page 15
GENERAL IMPROVEMENTS PROGRAM
General Improvements in FY 2013 -14 are proposed at $ 4,091,000 and will include the
traditional equipment budget, information technology budget and items associated with
miscellaneous District facilities. The largest proposed expenditure is the $1.8 million
budgeted for construction of seismic retrofit of the District Headquarters Office Building
(HOB). In order to facilitate construction staff will be relocated to other buildings at the
treatment plant site in Martinez, and a leased office building in Concord. Staff will use the
opportunity of an empty building to construct general improvements. These general
improvements include new carpet, painting, installing recycled water to the restrooms and
other minor upgrades.
The General Improvements Program also recommends significant investment in Information
Technology (IT) next year. $500,000 has been budgeted for general 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. Staff is also 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 databases within the District. As part of this project, staff is 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
workflow routing for collection system operations crews. A budget of $600,000 is
recommended for the GDI /maintenance scheduling modernization project.
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, $1.5 million ($4.4 million total project cost) 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.
Page 16
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 mid January and will be discussed at a
workshop on January 24, 2013. This year's financial planning process is particularly
important as there is no Proposition 218 notice in place and the Board will need to make a
decision regarding future rate increases by early to mid March to allow for proper Proposition
218 noticing to occur. The December Capital Budget Workshop discussion is the first step in
this process. Following the January Financial Planning Board Workshop and after a
determination on funding levels and future rate increases is made, the Capital Budget and
Plan expenditure figures can be finalized and the comprehensive Capital Budget and Plan
developed for Capital Projects Committee and full Board consideration in April.
Page 17
Item 10.a.)
2013 -14 Capital Improvement
Budget and Plan
December 20, 2012 Board Meeting
k Central Contra Costa Sanitary District
Kick -off FY 2013 -14 Financial Planning
• No Proposition 218 Notice in Place
• Significant increase in Capital Component of Sewer
Service Charge needed to fund Capital Program
• Today's meeting reviews proposed Capital Program
Expenditures for FY 2013 -14 and next nine years
• Reviewed similar presentation at the Capital Projects
Committee meeting on December 11, 2012
• Combined Operation & Maintenance and Capital
Planning Ten Year Plan Financial Workshop January 24,
2013
• Board agreement on language for Proposition 218 notice
needed by early to mid March to meet printing /mailing
timelines
4
Sewer
Service
Charge is
Critical
Funding
$637,000
Source
for Capital
Program
FY 2012 -13 CAPITAL REVENUES
BUDGETED
Facility Capacity Fees
$4,417,000
Pumped Zone Fees
$637,000
Interest Sewer Construction Fund
$350,000
Property Taxes (Net after debt paid)
$7,534,000
Sewer Service Charge ($27 capital component)
$4,430,000
Reimbursements from Others
City of Concord
$3,833,000
Recycled Water Sales (Net after O &M)
$61,000
Developer Fees /Other
$525,000
TOTAL
$21,787,000
Current Year Program Sets Beginning
SCF Balance for Ten Year Plan
FY 2012 -13 CAPITAL PROGRAM
BUDGETED
Total Expenditures
$32.3 million
Total Revenue
$21.8 million
Variance
-$10.5 million
Beginning SCF Balance 6/30/13
Funds Required for Cash Flow
$35.8 million
$30 — 35 million
1►
Increase in SSC Capital Component is
needed to fully fund Capital Program.
5500 - - -
6450 4333
Total Charge per RUE Sao2
5400 4371
5331
4350 5300 4311 5311 4311 S353 4354
5300 5289 - -/
5272 5280 4280 / - 5300 5302
5278
4250 5224
5200 6200 J�"'-"_�, /`� Opera:.ons Com pccrr'
$150
$100 S76 S74
559 SS4 phat Program Component
S50 539 $27✓
` 479 Stt _
40
2LOa04 201.02 203203 20LX44 VA,05 2X&M M15-07 200748 7006{5 270410 2010.11 2011 -12 201213 23'3:: 714'5
P � P e -. +Y
Capital Program has been deficit
spending for many years
S700
SIOm Mw M.a f...
Ww/0.e]OOS
S600 SS",5 u`'
f°3 —5%2
lase
$600 K' 3
Sw.) 134 i
$400
�........r.�., .. 07.3 ^'Z
530.0
52,.3
S200
510 0
Soo
'SFC Balance is not strictly governed by checkbook accounting and may not strictly represent the
sum of prior year balance and current year variance.
3
Preliminary Ten Year Plan Findings -
Two -Year -$31 per Year Sewer Service Charge
Increase Needed to Fund Capital + O &M
Fiscal
SSC Ops
SSC Cap
Total SSC
Total Est
Year
Compnt
Compnt
Cap
Revenue*
Current
$344
$27
$371
$21.8
2012 -13
million
Prelim
$353
$49
$402
$24.0
2013 -14
million
Prelim
$354
$79
$433
$29.5
2014 -15 1
million
•Ideal 1 % reinvestment spending rate - $31 million per year.
Should bonds be considered as an
alternative to raising rates?
• Guideline for bonding capacity maximum of 20% of
revenue going to debt service. FY 2011 -12 Revenue
$85 million therefore suggested debt service < $17
million.
• Current debt service $5.6 million per year vs. $17 million
per year guideline.
• Investigation of benefits of using bonds to pay down
CCCERA unfunded pension obligation ongoing.
• May be prudent to reserve bonding capacity for large
capital requirements for unbudgeted regulatory
mandates.
Ll
$365 Million Ten Year Plan Is a Responsible
One That Funds....
• Treatment Plant
- Primary Sedimentation Renovation
Proposed Ten-Year
Capital Improvement • •
11 M
- Cogeneration Replacement/Alternative Energy
$
6 M
- Nitrification
$
70 M
- Contaminated Soils Remediation
$
20 M
- Incinerator /Solids Handling Improvements
$
12.5 M
- Screenings Removal
$
7 M
• Collection System
- Identified Renovation Needs
$
110.1 M
- Identified Capacity Needs
$
28.6 M
- Pumping Station Renovation
$
11.2 M
- CAD's and Developer Sewers
$
�1' y�"%
���TN::
.XI�Q:•::iY:.�1•'.:YiH)'S(I.:.:
- Seismic Improvements
$
i'l:f f- CN ?:.:
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?N::.li(••:FNF:.]1
- Concord Landscape Irrigation
$
4.41VI
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S:'7s�sNOEM�,a^:�
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•-a
$365 Million Ten Year Plan Is a Responsible
One That Funds....
• Treatment Plant
- Primary Sedimentation Renovation
$
11 M
- Cogeneration Replacement/Alternative Energy
$
6 M
- Nitrification
$
70 M
- Contaminated Soils Remediation
$
20 M
- Incinerator /Solids Handling Improvements
$
12.5 M
- Screenings Removal
$
7 M
• Collection System
- Identified Renovation Needs
$
110.1 M
- Identified Capacity Needs
$
28.6 M
- Pumping Station Renovation
$
11.2 M
- CAD's and Developer Sewers
$
12.9 M
• General Improvements and Treatment Plant
- Seismic Improvements
$
7.1 M
• Recycled Water
- Concord Landscape Irrigation
$
4.41VI
5
Proposed FY 2013 -14 Capital Improvement Budget
FY 2013 -14 CIB
Program /Project
Total Cost
Treatment Plant Baseline
$ 8.7 million
Collection System Baseline
$14.9 million
General Improvements Baseline*
$ 4.1 million
Recycled Water Baseline
$ 0.4 million
Concord Landscape Irrigation
$1.5 million
Total Baseline
$28.1 million
Total Baseline + Concord REW
$29.6 million
Includes $1.8 million for one time seismic retrofits of HOB
FY 2013 -14 TREATMENT PLANT PROGRAM
CATEGORY
PROJECT
ANNUAL
EXPENSE
One Time
Renovation
Primary Treatment Renovation
$5,000,000
Pump & Blower Building Seismic
$ 850,000
Cogeneration Renovation
$ 400,000
Recurring
Renovation
Piping Renovation Phase 8
$ 100,000
All Other
$2,364,000
Total Baseline
$8,714,000
Treatment Plant Renovation Needs Continue to
be Identified with Condition Assessments
-Determine the likelihood of failure and /or the
remaining life of the asset.
-Completed Assessments:
-Concrete
*Asphalt Paving
*Protective Coatings
-Transformers
-Buildings re Seismic
*Presence of Hazardous Materials
-Critical Piping (Aeration)
-Elevators
*Electrical Switchgear
•TP replacement value -- $660M*
*Reinvestment rate @ 1.8%
-$12M
* Not incl. land value, GI, CS or RW
Aaaav NO.: 21127 A... LO.alion: I— Area
Gab ?Fletl WnrX: 0/122009 OMeneX Oelecu'. Mullipelm Flak Noes)
AeXOn: F.reo-eeN.eh�w•rePomm.m,ta�;el
Etllmem el WtluI LXn Fwnalninp: 16M Yrn
Pmw xow:
Ths IorOane ofNa Nrrve�kns wen rwbN r kllwv. tln w:um ur le nIW 6om PX Bay rtlaad
Bev counllrq 0Om 0x Bam PX Bw, meWnq aeuN are irle,eE k es Bev 1. Ber 2 ..... aM Bar 10.
Photo 13: Bay 1 - Detail of Exposed
Aggregate Above Water Line (Typical)
$11.0 M Primary Sedimentation Tank
Renovations Incorporates Condition
Assessment Findings and Improves Efficiency
• Proposed Renovations
— Replace Scum Collection System
— Replace Chain Drives
— Rehabilitate Concrete
— Replace water and air
supply piping
— Replace Scum Skimmers and Thickener
— Construct New Grit Handling Facilities
— Upgrade /Renovate Electrical Conduits /Equipment
FI
Scum Spray System Requires Renovation to
Improve Performance
Drive Shafts & Bearings need to be
replaced
_ IN
Grit Handling Facilities are Odorous and
Reaching End of Useful Life
- - - -- -
Cogeneration Upgrades
• Repaired existing cogeneration unit
• Evaluated options
for upgrading
• Concluded that the
existing cogeneration
unit should be maintained until plant
energy demands increase significantly
(i.e. nitrification)
We
Cogeneration Upgrades
• Negotiating five years maintenance
contract with Solar Turbines
• Required cogeneration unit upgrades
—upgrade to electronic fuel valves
—new controls
—new fuel manifold /injectors for natural
gas
— other
• Proceeding with recommended
improvements
Renewable Energy _
• CCCSD is participating in the regional
renewable energy procurement (R -REP), led by
Alameda County.
• Solar assessments have been performed on most
District properties:
— Solar power purchase agreement recommended for
HHW, CSO and CSO Vehicle Shop (no capital expense)
• Regional RFP will be issued in mid -2013 to procure
a bid on solar energy for more than 20 agencies.
• Position Paper in January for CCCSD Board to
authorize signing of R -REP MOU
iM
Piping Renovation
Ongoing program to identify and replace
deteriorated piping
and equipment
throughout the
treatment plant.
NPDES Permit Adopted April 1, 2012
• Requires participation in collaborative studies to evaluate
the role of ammonia and ammonium in inhibiting primary
productivity (phyto and zoo plankton) in Suisun Bay.
Final report due 11 -1 -2014.
• Requires development of facilities plan to evaluate
alternative treatment technologies to remove ammonia and
site characterization for contaminated soil site.
Final report due 2 -28 -2014.
• Requires total ammonia effluent load limit 5500 kg /day
monthly average.
Permit "relook "....April 1, 2015..... reassess the
appropriateness of the total ammonia load limit.
11
What could Ammonia Removal look like?
(Basis of $70 million capital cost estimate in CIP)
Il4L \
is �V��f�•��.��••��•'+
.�'
Conventional Nitrification
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)
• Characterization study underway
• Assume $20 Million for planning purposes in year 2019
12
Model Compares Integrated
Fuel /GHG /Solids Handling Methods
V. P *. ". Few D* Dee V- U* xs --
JJJ_; "44 ,
B61 °1
a c
C D _ F G H I
1
2 WknPLE MWTH FURNACE
3
A
5
6 a'
7 B.
10 xan•
R A
L3
u
K pe*n.
Vgx.z Use}e
13 �:an. neY
19 xie.
ri So.dcn+
Feed.rY.er I Fe+MY.r Tan4/
Dova,u�
N_ C6.
V k
H.Yng Value
STWEr, 6 S
Gn WY.g R.guem.rcs
WAMW6,-Q 21 %TS
G. WYng ReOU —,
WIBTW*y tm
G. HeY.p R.gonm.ns
MMVMJ T _
I dW G. T, 9. U..d
W4CFfdaT
Maa gxsm LFGfB p+. n gas swc7
$40,090,000
MeY T""""
MBi�uda.,
Su G.nuYgn (Parspnp)
My Y a0:on TSIGT
2008 Lan %e bas LYaer
-108 IM-Udy g.. wY
1llf n
Lw1SCF L&r
.f Sum
NMSCF LCVp
MFf Sum :F Gas
A8 NaNn� Gx LkaOe
Nbou r
.If 1.
WNGyr
MIf Q
Ed NCJ
Wf Sum
MMSCF NGyr
ref Sum NY C-
Nwww r
FeedalarLWdp
ltteYn per HOe px ppm makeup +'a
CongensaN Retw
d usapN ttexn
Candameu Blenddn
dusaMe seam
men Sge —Wln AM
$90,196,000 * **
.IF
Rr• < aytarrae- >. ❑:: A:; S a.>_•.9•s; .=, i I
Solids Handling Alternatives Analysis
Solids
Capital Cost
O &M Cost
Present Worth of
Handling
20 -yr Life Cycle
Alternative
($ /y ear)
Cost*
Anaerobic
$40,090,000
Mi
$5,708,000
$125,000,000
Digestion
Anaerobic
Digestion w/
$58,664,000
$3,418,000
$109,530,000
Food Wastes **
Fluidized Bed
$60,000,000
$2,620,000
$98,985,000
Incineration
Multiple Hearth
$16,702,000 * **
$4,940,000...
$90,196,000 * **
Furnace
($7,800,000) * * **
($4,940,000) * * **
($81,295,000) * * **
*Assumes discount rate of 3 %, $6 /MMBTU NG, $0.13 /kWh
** Includes costs for side - stream ammonia treatment
** *Includes solids building seismic improvements
* ** *Includes only scrubber replacement and burner improvements
13
Slide 26
M1 Capital Costs are consistant with model
Assuming Sludge disposal through land application or landfilling from BACWA report (these are
estimates based on current costs) the O &M costs are correct. Assumes Natural Gas Prices are
$6 /MMBTU
Michael, 12/3/2012
FY 2013 -14 COLLECTION SYSTEM PROGRAM
CATEGORY
PROJECT
ANNUAL EXPENSE
Renovation program
North Orinda 5, Lafayette 8,
$ 10,601,000
Diablo 2, Walnut Creek 10,
Concrete & CM Pipe, TV
inspection and others
Capacity /Renovations
Grayson Creek Trunk in
$ 1,600,000
Pleasant Hill
Pumping Stations
Moraga Pumping Station
$ 600,000
Grinder, Buchanan South
Removal
Developer services
Developer Services
$ 681,000
Contractual
Current CADs — Harper
$ 500,000
Assessment Districts
Lane, Willow Drive
All others
$ 2,137,000
Total
$14,919,000
14
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
2012/13
5.3 Miles
TOTAL
Completed Renovation
42.2 Miles
Renovation Program (6, 8 & 10 inch)
Achieves 100% Completion
of all known defects by FY 19/20
Total miles of pipe to be renovated - 82.8 miles*
Miles of pipe renovated to date - 42.2 miles
Remaining miles to renovate - 40.6 miles
10 Yr Budget
Miles of
Percent of
for
Pipe
Known
Renovation
Renov. in
Defects
(millions) **
Next 10
Renov. in
Yrs * **
10 Yrs
$110.1
74.4
100 %+
* Based on TV inspection of 99 percent of 6, 8 and 10 inch mains
** Provides $22.1 million in FY 18119 to 22123 for lines currently
not identified by TV program
* ** Estimated at $280/ft
15
SSO Downward Trend Has Been
Significant Since Start of Renovation
Program
Running 12 -Month Overflow Totals
1999 to present
200
150
129
100
+ +,+
50
0 .
m m m m m m m m m m m g m m
> > > > > > > > > > > > > >
12 -Month Total at Month -End
SSO Downward Trend Has Been
Significant Since Start of Renovation
Program
100
90
80
70
60
s0
40
30
20
10
0
Comparison of Cumulative Overflows
JAN FES MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
—0-2009 — -2010 t 2011 2012 1
16
WI -W bn `
n' I I
LEGEND.
1j CD�Wpwclrr rRRp� KSE
CREEKIilT.1
1114 0
t � i -, L✓. � �. •�f °rh-.'... .. ORAYEOX CHEEXALT.1
`- + -._��I --mil �� )' ,� PIFANNf XILL ROM CDXPo00rt
17
az..
Capacity Program
�
w
Pleasant Hill
Pleasant Hi1VGreyson Creak
°"'
10 year plan includes
ca
$18M for high
Pbass nt Hill Road
priority
"' °`°°`nFY20 " „2,
pz-w Ix a ®,.
- p4-0
capacity projects
u
-.. k - ”
• L.:} --` 't' .:...�
r-za
�,�f` -J °..°
-•YAK
w. Walnut Cre °k-
Ea.a
EaA .iw�i ;':
s- Walnut Siva
rr�
f
rsA
Moraga -
Moraga Way
1.
Legend
M -a -
---e ty Deficiency Group
O t
San Ramon -
Percent — l i, : Capaelty San R. Schedule C -
(2040 Development, E -yeer Eventl
2
No Slope " Invert E-
❑ \
L <
-00 %1 -130%
-- _0%
_
\
WI -W bn `
n' I I
LEGEND.
1j CD�Wpwclrr rRRp� KSE
CREEKIilT.1
1114 0
t � i -, L✓. � �. •�f °rh-.'... .. ORAYEOX CHEEXALT.1
`- + -._��I --mil �� )' ,� PIFANNf XILL ROM CDXPo00rt
17
FY 2013 -14 GENERAL IMPROVEMENTS PROGRAM
PROJECT
ANNUAL EXPENSE
Vehicles and Equipment
$500,000
Information Technology
$500,000
Seismic Improvements HOB
$1,800,000
GDI Treatment Plant and
SMMS Replacement
$600,000
All Other
$691,000
Total
$4,091,000
GDI & SMMS Replacement
SMMS WORKFLOW SEE
_ ADDITIONAL DIAGRAM
SOL Server 2005
IBM ASI400 Server SOL Saver 2DD5
1GIS WEB GIS QiSedes
P FYE .
(s WbM )
ESG Data ESG Des Q HTE A00W.
District and
Developer Jobs
Mapping
GeoMedia
Collection system
plan and profile
drawings
AutoCAD
SOL Server 2008
SQL -01
CCCSDLF8
(Laserflclre)
18
.................
ColdFusion (Reports)
MapGuide(Spatial)
No
GDI
G01 V1Y0 Sarvr
(YW Mows 2003 Sarvan45
Q01
18
Seismic Retrofit Program
Project
2013 10 -YR CIP
CONSTRUCTION
HOB
$ 1,800,000
FY 2013 -14
Pump & Blower
$ 2,850,000
FY 2013 -14
POB Office Area
$ 1,176,000
FY 2015 -16
TP Warehouse
$ 895,000
FY 2016 -17
Laboratory
$ 192,000
FY 2016 -17
SCB'
$ 200,000
FY 2022 -23
Total
$ 7,113,000
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.
19
Pump and Blower Building Houses Critical Plant
Equipment
14LI
63.37 - 2011 08:23
�: N�_N 5,
tv to
PBB Retrofit Can Be Accomplished
,. Keeping Plant in Service
West
•Buttress West Sided 4
-Shear Walls all Sides south
a.a--
20
FY 2013 -14 RECYCLED WATER PROGRAM
PROJECT
ANNUAL EXPENSE
Baseline - Pleasant Hill Zone 1,
Martinez Refineries and other
REW Planning
$ 356,000
Total Baseline
$ 356,000
Concord Landscape Irrigation
$1,500,000
Total
$1,856,000
Concord Landscape Irrigation Project
Approx. 190
y AFY
Chevm'' Over 34 New
0=
Customers
$4.4 million
total cost
$1 million
V�� -_ State Prop 84
6
Grant
Bid in
February 2013
21
Martinez Refinery Project
Construction Unbudgeted/ Conducting Title 16 Feasibility Study in cooperation
with CCW D
A.
-': _
- ' y• 1
- _ Two i MqN _ L,
Sh<0 P..1m
L
—_ _ S " CCCSD TI rNllwltt
��l�r. �7 S ;! �_ ,4 [;�'%L�y _f_fi..� . -)gyp?• I .� �.
Board Role in Capital Program is Ongoing
• Set Initial Capital Funding Levels in Nov /December
• Confirm Capital Funding Levels in Jan /February as
part of overall District Ten Year Financial Plan
• Agree upon wording for Prop 218 notice March
• Board Workshop Focused on CIB /CIP Projects April
• Authorize CIB /Program Budgets and O &M Budget and
set Rates in June
• Authorize Supplemental Program Funds when needed
• Award Construction Projects > $100,000
• Authorize Construction Change Orders >$100,000
• Authorize Consultant Contracts > $100,000
22
What do we need from the Board today?
• Concurrence that proposed preliminary expenditure
figures for FY 2013 -14 and the subsequent 9 years are
acceptable for inclusion in financial planning documents
to be reviewed by Board in January 2013
• Concurrence that relative emphasis and allocation of
expenditures between the four programs is acceptable
for development of the detailed FY 2013 -14 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 2013 Ten Year Capital Plan
23
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).
U
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.
L-11
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.
Liabili - 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.
OPE_B(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