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Home My WebLink About08.a. _Receive proposed Fiscal Year 2014-15 Operations & Maintenance and Debt Service Fund BudgetsBoard Meeting Date: May 15, 2014 Subject. RECEIVE THE PROPOSED FISCAL YEAR 2014 -15 OPERATIONS & MAINTENANCE BUDGET; RECEIVE THE PROPOSED FISCAL YEAR 2014 -15 DEBT SERVICE FUND BUDGET Submitted By., Initiating Dept /Div.: Thea Vassallo CPA, Finance Manager Administration /Finance & Accounting REVIEWED AND RECOMMENDED FOR BOARD ACTION: -" K er S. Bail Counsel or the District General Mana er ISSUE: The proposed Fiscal Year (FY) 2014 -15 Operations & Maintenance (O &M) Budget and Debt Service Fund Budget are being submitted for review at the May 15, 2014 Board Meeting, and are scheduled for approval and adoption at the June 5, 2014 Board Meeting. The budget document was provided to the Board under separate cover dated May 1, 2014. RECOMMENDATION: Review the proposed FY 2014 -15 O &M Budget and Debt Service Fund Budget and provide District staff with comments and guidance leading to the public hearing, approval, and adoption of the Budgets at the June 5, 2014 Board Meeting. FINANCIAL IMPACTS: The FY 2014 -15 O &M Budget was prepared using the $34 Sewer Service Charge (SSC) rate increase previously approved by the Board on June 20, 2013. The $439 SSC in FY 2014 -15 is allocated as follows: O &M $416; Capital $23 per Residential Unit Equivalent (RUE). The FY 2014 -15 SSC O &M allocation is $51 /RUE higher than in FY 2013 -14 which produces $8.4 million in additional O &M SSG revenue. The FY 2014 -15 O &M Budget results in a decrease of $2.0 million to O &M reserves, and total O &M reserves ('10% of FY 2014 -15 expenses) are projected to be $8.8 million at the end of FY 2014 -15. ALTERNATIVES /CONSIDERATIONS: At a Board Meeting in February, staff presented several different scenarios with various SSC rate with rate increases between $0 -$37 that considered the impact on District revenues as well as the fiscal year -end reserve balance. At a public hearing on April 17, 2014, the Board took no action to change the SSC rate increase of $34 for FY 2014 -15. BACKGROUND: Staff has developed a 10 -year financial model for forecasting revenues, expenses and fund balance. The model assists the District in setting and projecting SSC rates. The model funds in the following order: Debt Service, O &M /Self- Insurance, and then Sewer Construction Fund. In May, 2013, the District ratepayers received a NOTICE OF A PUBLIC HEARING /COMPLIANCE WITH PROPOSITION 298 N:WC000NTING \GMTEMPI \BUDGET\2014 -2015 BUDGET\Budget Review OM and DS 14 -15 PP 5- 15- 14.docx Page 1 of 6 POSITION PAPER Board Meeting Date: May 15, 2014 subjects RECEIVE THE FISCAL YEAR 2014 -15 OPERATIONS & MAINTENANCE BUDGET; RECEIVE THE FISCAL YEAR 2014 -15 DEBT SERVICE FUND BUDGET stating a rate increase of up to $34 for FY 2013 -14 for a total up to $405 per year effective July 1, 2013, and up to an additional $34 increase for FY 2014 -15, effective July 1, 2014, for a total of up to $439 per year. The proposed FY 2014 -15 budget includes the allocation of $8.1 million from the O &M Fund towards the unfunded liability associated with GASB 45 post - employment healthcare benefits and current year retiree premiums. This amount is based on the draft of the most recently completed two -year actuarial study by Bartel Associates. The $8.1 million includes an approximate payment of $5.3 million for retiree medical, dental and life insurance premiums annually and $2.8 million to be deposited in a GASB 45 PARS investment trust to fund future retiree benefit costs. This position paper focuses on variances between projected FY 2013 -14 expenses and the proposed FY 2014 -15 Budget. The position paper also notes any significant variances between the FY 2013 -14 and FY 2014 -15 Budgets. Attachment summarizes the Debt Service Fund Budget. Attachment II summarizes the O &M revenues, expenses, and reserve balances for seven years - FY 2008 -09 through FY 2014 -15 (five years of actual expenses plus FY 2013 -14 projected and FY 2014 -15 proposed budget numbers). N: (ACCOUNTING \GMTEMPI \BUDGET\2014 -2015 BUDGE RBudget Review OM and DS 14 -15 PP 5- 15- 14.docx POSITION PAPER Board Meeting Dater May 15, 2014 Subject: RECEIVE THE FISCAL YEAR 2014 -15 OPERATIONS & MAINTENANCE BUDGET; RECEIVE THE FISCAL YEAR 2014 -15 DEBT SERVICE FUND BUDGET O &M Revenue: The following table compares Projected FY 2013 -14 to Budget FY 2014 -15 O &M Revenue: Total District O &M Revenue for FY 2013 -14 is projected to be $77.2 million compared to the FY 2014 -15 Budget amount of $86.2 million, resulting in an increase of $9.0 million, or 11.7 %. This is due to: • The O &M SSC allocation increases from $365 to $416; the SSC allocation to the Sewer Construction Fund decreases from $40 to $23. The increased O &M allocation of $8.4 million results in an increase to O &M SSC revenue of $8.2 million compared to Projected FY 2013 -14. • Concord primarily shares a flow portion of Treatment Plant and Source Control expenses and is charged administrative overhead and a finance charge. City of Concord revenue is expected to be $0.9 million, or 7.1 %, more than Projected FY 2013 -14, mainly due to higher treatment plant operating expenses in FY 2014- 15. N :\ACCOUNTING \GMTEMPI\BUDGET12014 -2015 BUDGET\Budget Review OM and DS 14 -15 PP 5- 15- 14.docx Projected Budget Increase /Decrease ( -) FY 2013 -14 FY 2014 -15 variance $ variance % Sewer Service Charge $ 61,253,000 $ 69,447,000 $ 8,194,000 13.40/6 City of Concord 12,600,000 13,500,000 900,000 7.1% All Other 3,335,200 3,284,600 (50,600) -1.5% Total $ 77,188,200 $ 86,231,600 9,043,400 11.70 Total District O &M Revenue for FY 2013 -14 is projected to be $77.2 million compared to the FY 2014 -15 Budget amount of $86.2 million, resulting in an increase of $9.0 million, or 11.7 %. This is due to: • The O &M SSC allocation increases from $365 to $416; the SSC allocation to the Sewer Construction Fund decreases from $40 to $23. The increased O &M allocation of $8.4 million results in an increase to O &M SSC revenue of $8.2 million compared to Projected FY 2013 -14. • Concord primarily shares a flow portion of Treatment Plant and Source Control expenses and is charged administrative overhead and a finance charge. City of Concord revenue is expected to be $0.9 million, or 7.1 %, more than Projected FY 2013 -14, mainly due to higher treatment plant operating expenses in FY 2014- 15. N :\ACCOUNTING \GMTEMPI\BUDGET12014 -2015 BUDGET\Budget Review OM and DS 14 -15 PP 5- 15- 14.docx POSITION PAPER Board Meeting Date: May 15, 2014 subject: RECEIVE THE FISCAL YEAR 2014 -15 OPERATIONS & MAINTENANCE BUDGET; RECEIVE THE FISCAL YEAR 2014 -15 DEBT SERVICE FUND BUDGET O &M Expense: The following table compares Projected FY 2013 -14 to Budget FY 2014 -15 O &M Expense: Total District O &M Expenses are projected to be $76.5 million in FY 2013 -14 compared to a FY 2014 -15 O &M budget of $88.2 million. This reflects an $11.7 million, or 15.2 %, increase in expenses. Variances are discussed in detail below:. O &M Salaries: District O &M salaries are projected to be $25.6 million in FY 2013 -14 compared to a budget of $28.6 million in FY 2014 -15 resulting in an increase of $3.0 million, or 11.7 %. This increase is due to many factors: there is a 4% assumed cost-of- living increase (inclusive of the additional 1 % per contracts), there are a large number of merit increases and personnel advancements for recently- hired, current employees; and several positions that are currently open and budgeted in FY 2014 -15. Benefits Including Capitalized Administrative Overhead Credit: District O &M benefits including the capitalized administrative overhead credit for FY 2013 -14, are projected to be $32.8 million compared to a budget of $38.0 million in FY 2014 -15 resulting in an increase of $5.2 million, or 15.9 %. This is mainly due to an increase in retirement expenses of 5.6 million in FY 2014 -15 and, to a lesser extent, an increase in medical expenses. Benefit rate assumptions are provided in the following bulleted list: • Kaiser -- 7.52% rate increase for active ; 6.28 % weighted average retiree rate Increase • HealthNet — 9.5% rate increase in HMO for actives employees; 6.51% weighted average retiree rate increase N; \ACCOUNTING \GMTEMP1 \BUDGET\2014 -2015 BUDGET\Budget Review OM and DS 14 -15 PP 5- 15- 14.docx Projected Budget IncreaseiDecrease ( -) FY 2013 -14 FY 2014 -15 Variance Variance % Salaries $ 25,624,572 $ 28,618,169 $ 2,993,597 11.7% Benefits & Cap O/H Credit 32,807,653 38,026,430 5,218,777 15.9% Chemicals 1,582,000 1,605,000 23,000 1.5% Utilities 4,716,950 4,861,350 144,400 3.1% Repairs & Maintenance 3,455,127 4,911,762 1,456,635 42.2% Hauling & Disposal 1,063,600 1,040,200 (23,400) -2.2% Professional & Legal 462,200 539,400 77,200 16.7% Outside Services 2,415,148 3,303,021 887,873 36.8% Self- insurance 600,000 650,000 50,000 8.3% Materials & Supplies 1,859,754 2,024,315 164,561 8.8% All Other 1,959,954 2,619,248 659,294 33.6% Total $ 76,546,958 88,198,895 11,651,937 15.2 % Total District O &M Expenses are projected to be $76.5 million in FY 2013 -14 compared to a FY 2014 -15 O &M budget of $88.2 million. This reflects an $11.7 million, or 15.2 %, increase in expenses. Variances are discussed in detail below:. O &M Salaries: District O &M salaries are projected to be $25.6 million in FY 2013 -14 compared to a budget of $28.6 million in FY 2014 -15 resulting in an increase of $3.0 million, or 11.7 %. This increase is due to many factors: there is a 4% assumed cost-of- living increase (inclusive of the additional 1 % per contracts), there are a large number of merit increases and personnel advancements for recently- hired, current employees; and several positions that are currently open and budgeted in FY 2014 -15. Benefits Including Capitalized Administrative Overhead Credit: District O &M benefits including the capitalized administrative overhead credit for FY 2013 -14, are projected to be $32.8 million compared to a budget of $38.0 million in FY 2014 -15 resulting in an increase of $5.2 million, or 15.9 %. This is mainly due to an increase in retirement expenses of 5.6 million in FY 2014 -15 and, to a lesser extent, an increase in medical expenses. Benefit rate assumptions are provided in the following bulleted list: • Kaiser -- 7.52% rate increase for active ; 6.28 % weighted average retiree rate Increase • HealthNet — 9.5% rate increase in HMO for actives employees; 6.51% weighted average retiree rate increase N; \ACCOUNTING \GMTEMP1 \BUDGET\2014 -2015 BUDGET\Budget Review OM and DS 14 -15 PP 5- 15- 14.docx POSITION PAPER Board Meeting Date; May 15, 2014 Subject: RECEIVE THE FISCAL YEAR 2014 -15 OPERATIONS & MAINTENANCE BUDGET; RECEIVE THE FISCAL YEAR 2014 -15 DEBT SERVICE FUND BUDGET • CCCERA — Additional $5 million payment towards the unfunded retirement liability; 21 % average rate increase (change from prior year's rate, not percentage of payroll) due to five -year smoothing of 2008 market losses (this is the last year recognizing those losses) • Delta Dental — Estimated 4% rate increases • Long -Term Disability (LTD) — Estimated 2 % rate increases • Employee Assistance Program (EAP) — 2.1 % rate increase • Workers' Compensation — Estimated 10 % rate increase • Life Insurance — Estimated 3 % rate increase All Other O &M Expenses: The remaining O &M non -labor and benefit expenses total a projected $18.1 million in FY 2013 -14 compared to a budgeted $21.6 million in FY 2014 -15 resulting in an increase of $3.4 million, or 19.0 %. Expense category variance explanations are provided in the budget document at a District and Department level. The two largest expense category increase between Projected FY 2013 -14 and Budgeted FY 2014 -15 are noted below: • Repairs and Maintenance are $1.5 million higher in Budgeted FY 2014 -15 than Projected FY 2013 -14. This is largely due to the Roto - Rooter TV Inspection Program contract switching to the O &M budget from the Capital budget, and due to some drought preparation expenses. • Outside Services are $0.9 million higher in Budgeted FY 2014 -15 than Projected FY 2013 -14 due to several new training programs in the Administration Department. N :\ACCOUNTING \GMTEMP1\BUDGET\2014 -2015 BUDGET\Budget Review OM and DS 14 -15 PP 5- 15- 14.docx POSITION PAPER Board Meeting Date: May 15, 2014 subject: RECEIVE THE FISCAL YEAR 2014 -15 OPERATIONS & MAINTENANCE BUDGET; RECEIVE THE FISCAL YEAR 2014 -15 DEBT SERVICE FUND BUDGET Any revisions to the proposed FY 2014 -15 O &M Budget determined at the May 15, 2014 Board Meeting will be incorporated in the Budget submitted for approval at the June 5, 2014 Board Meeting, at which the following actions are scheduled for Board consideration: • Conduct a public hearing to receive comments on the FY 2014 -15 O &M Budget, Self- Insurance Fund Budget, and Debt Service Fund Budget. • Approve and adopt the FY 2014 -15 O &M Budget, Self- Insurance Fund Budget, and Debt Service Fund Budget. COMMITTEE RECOMMENDATION: The Finance Committee will review the FY 2014- 15 O &M Budget and Debt Service Fund Budget on May 5, 2014. RECOMMENDED BOARD ACTION: Review the FY 2014 -15 O &M Budget and Debt Service Fund Budget and provide District staff with comments and guidance leading to the approval and adoption of the Budgets at the June 5, 2014 Board Meeting. Attached Supporting Documents: 1. Debt Service Fund FY 2014 -15 2. O &M Revenues, Expenses and Reserves FY 2008 -09 Through 2014 -15 C:\ Users \dandersonWppData \Local \Microsoft \Windows \Temporary Internet Files \Content.Outlook \DVCG8C5G \Budget Review OM and DS 14 -15 PP 5- 15- 14.docx CENTRAL_ CONTRA COSTA SANITARY DISTRICT DEBT SERVICE FUND FY 2014 -15 Debt Service Revenue: Sewer Service Charge Reserve Account Bond Interest Income Ad Valorem Tax (portion allocated to Debt Service) Total Debt Service Revenue Debt Service Expense: 2009 Bond Interest Payment and Amortized Costs, less Tax Subsidy on BAB 8.7% reduction of tax subsidy due to congressional sequestration (8/13) 7.2% reduction of tax subsidy due to congressional sequestration (2/14) Recycled Water Loan Interest Payment Total Interest Payment and Amortization Costs 2009 Bond Principal Payment Recycled Water Loan Principal Payment Total Principal Payments Total Debt Service Interest, Amortized Costs and Principal Payments Fund Balance - Beginning of Year Revenue over Expense Transfer from /(to) O &M or Capital Fund Balance - End of Year Attachment I 40,700 5,535,647 $ 5,576,347 $ 1,494,218 30,009 18,259 $ 1,542,486 $ 3,865,000 168,861 $ 4,033,861 $ 5,576,347 N: \ACCOUNTING \GMTEMP1 \BUDGET\2014 -2015 BUDGET\Debt Service Fund - Attachment 1 O &M Revenues: Sewer Service Charge (O &M Only) City of Concord Other Total Revenues O &M Expenses: Administration Engineering Collection System Operations Plant Operations Pumping Stations Total Net Expenses (1) Revenues Over (Under) Expenses O &M Fund Balance - Beginning of Year Revenues Over (Under) Expenses O &M Fund Balance - End of Year (2) FY 2008 -09 Actual 43,087,454 8,755,857 3,414,478 55,257,789 16,304,462 6,834,323 9,064,672 22,927,971 2,752,950 57,884,378 (2,626,589) 6,783,105 (2,626,589) 4,156,516 CENTRAL CONTRA COSTA SANITARY DISTRICT O & M REVENUES, EXPENSES AND RESERVES FISCAL YEARS 2008 -09 THROUGH 2014 -15 FY 2009 -10 Actual 48,692,520 8,664,668 2,899,485 60,256,673 16,468,495 6,898,357 8,949,125 21,467,827 2,773,800 56,557,604 3,699,069 4,156,516 3,699,069 7,855,585 FY 2010 -11 Actual 49,095,869 9,224,952 1,858,977 60,179,798 18,432,632 6,855,747 8,529,492 21,360,057 2,938,697 58,116,625 2,063,173 7,855,585 2,063,173 9,918,758 FY 2011 -12 Actual 49,123,847 10,647,389 3,367,309 63,138,545 20,631,971 8,023,225 9,281,886 23,708,322 2,705,489 64,350,893 (1,212,348) 9,918,758 (1,212,348) 8,706,410 FY 2012 -13 Actual 49,123,847 10,647,389 3,367,309 63,138,545 20,631,971 8,023,225 9,281,886 23,708,322 2,705,489 64,350,893 (1,212,348) 8,706,410 (1,212,348) 7,494,062 FY 2013 -14 Projected 61,253,000 12,600,000 3,335,200 77,188,200 21,234,375 10,707,730 12,964,680 28,337,209 3,302,964 76,546,958 641,242 7,494,062 641,242 8,135,304 FY 2013 -14 Budget 59,531,700 12,800,000 2,820,300 75,152,000 22,048,046 10,582,751 13,088,979 28,619,007 3,486,169 77,824,952 (2,672,952) Attachment II FY 2014 -15 Budget 69,447,000 13,500,000 3,284,600 86,231,600 24,476,326 12,229,549 15,617,120 32,523,037 3,352,863 88,198,895 (1,967,295) 8,135,304 (1,967,295) 6,168,009 Sewer Service Charge Rate - O &M 260 292 300 302 302 365 416 Sewer Service Charge Rate - Capital /Debt 51 19 11 39 39 40 23 Sewer Service Equivalent Units 165,721 166,755 163,653 162,662 162,662 164,839 164,994 Notes: (1) Net Expenses include Operating and Maintenance expenses only and do not include any capital salaries or benefits. (2) Prudent fund balance assumed to be approximately 10% of annual expense. N: \ACCOUNTING \GMTEMPI \BUDGET\2014 -2015 BUDGE-R2013-14 Attachmentll