HomeMy WebLinkAbout03.c. (Handout) Development of Reserve Policy and Target, CIP Scenarios, Development of Policy on Debt Financing, Revenue NeedsI
RESERVES POLICY/ ' 1
FINANCIAL PLAN
CENTRAL CONTRA COSTA SANITARY DISTRICT
BOARD WORKSHOP
i
NOVEMBER 17, 2014
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Types of Reserves - Typical
► Operating Reserve
► Provide working capital
► Cover unexpected increases to operating expenditures
► For CCCSD that recovers revenues twice a year
recommend minimum 6 months of operating expenses
► Capital Reserve
► Cover unexpected capital projects and /or build up funding
for RftR projects
P. Typically set at between 100'; to 300'• of the five year
average CIP
► Rate Stabilization Reserve
► Smooth out rate spikes
► Typically set at 10'; of operating revenue
11/17/2014
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Reserves Policy
SPECIAL RESERVES
► General Liability Self Insured Retention Reserves (one
event covered)
► $1 million
► Catastrophic/ Emergency Reserves
► Quickly repair critical assets in the event of a natural
disaster or facility failure
P $5 million recommended
► Currently have $3.4 million
► 52.4 million in pollution control
► $1 million extra
CCCSD Board Workshop
Reserves Survey
Operating 3 months 5 months
0 &M O &M
Rate 5%
Stabilization projected
0 &M
Capital
Self 1.25x annual $100K
Insurance expenses
CCCSD Cord Workahap
rtftrrtCi•r r
4 months 6 months
0 &M
0 &M
4 months
$5M
0 &M
1%
Next year's
replacement
plant
value
expansion
6 months
O &M
Min 1.25x
coverage
2 years CIP
Insured $1.5M SIR $2.5M SIR
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03
Fitch's Financial Profile Criteria
Stronger • Total debt service coverage of around 2.0 times (x) or greater.
• Days cash and days of working capital equal to one year or more.
• Free cash relative to depreciation equal to 100% or greater.
• Residential charges for individual or combined water /sewer utilities less than or equal
to 0.6% or 1.2% of median household income (MHI), respectively.
• A significant percentage of revenues recovered through base charges as opposed to
volumetric charges.
Midrange • Total debt service coverage of around 1.5x. TTM
• Days cash and days of working capital of around six months.
• Free cash relative to depreciation equal to around 85 %.
• Residential charges for individual or combined water /sewer utilities around 0.8%
1.5% of MHI, respectively.
• Approximately 10% of revenues recovered through base charges.
Weaker • Total debt service coverage of around 1.25x or less.
• Days cash and days of working capital ofthree months or less
• Free cash relative to depreciation of 60% or less.
• Residential charges for individual or combined water /sewer utilities in excess of 1.0%
or 2.0% of MHI, respectively.
• Little or no revenues recovered through base charges.
CCCSD P—rd W.,13mp
11/17/2014
Debt Policy
► Debt funding
► Advantages
► Smooth out rate
increases
► Intergenerational
equity
► Disadvantages
► Higher interest costs
► Requires coverage
ratios, which may
require rate increases
► Debt issuance costs
► Cash funding
► Advantages
► Lower interest costs
► No debt coverage
ratio
► No debt issuance
costs
► Disadvantages
► Rate spikes
► No intergenerational
equity
Policy: Dynamic funding - routine capital, replacement projects should be
on PAYGO
Use of debt allows District to mitigate increases and spread costs to
benefitting users
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Financial Plan
Mutti-yr Financial Plan
CCCSD board Worl¢hop 'v( >i: pia .r
Financial Plan Assumptions
► 0 &M Expenses
► Based on FY 2015 Budget and inflation factors are
consistent with District's projections
► General: 3`. h
P. Utilities/ Chemicals: 51i
► Directors' Fees Expenses and Workers' Comp: 4`r,
► Salaries: average 3.4 %,
h
► Capital Expenses
► Based on FY 2015 Budget for FY 2015 and Carollo's
estimates for FY 2016 through 2034
► UAALAdditional Contributions
P. $5M in FY 2015 and 2016 and $10M from FY 2017 to FY
2021
CCCSD boud wodahop
11/17/2014
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Total Funds
$500
$450 j JJ
i 5400 ^ 1,
$350
$300
$250
i $200
$150
$0
FY 2015 FY 2017 FY 2019 FY 2021 FY 2023 FY 2025 FY 2027 FY 2029 FY 2031 FY 2033
Ending Balance - -" Current Target — Proposed Target
11/17/2014
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