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HomeMy WebLinkAbout21. Receive FY 2018-19 Pre-Audit Year-End Financial Summary Report; and consider alternatives for allocating (1) favorable budget variance, and (2) amount budgeted this year toward unfunded liabilities Page 1 of 19 Item 21. CENTRAL SAN BOARD OF DIRECTORS POSITION PAPER MEETING DATE: OCTOBER 3, 2019 SUBJECT: RECEIVE FISCAL YEAR 2018-19 PRE-AUDITYEAR-END FINANCIAL STATEMENT SUMMARY REPORT; AND CONSIDER ALTERNATIVES FOR ALLOCATING (A) $9.78 MILLION FY 2018-19 FAVORABLE BUDGET VARIANCE, AND (B) $1.25 MILLION BUDGETED IN FY 2019-20 TOWARD EMPLOYEE-RELATED UNFUNDED LIABILITIES SUBMITTED BY: INITIATING DEPARTMENT: KEVIN MIZUNO, FINANCE MANAGER ADMINISTRATION-FINANCE PHILIP LEIBER, DIRECTOR OF FINANCE AND ADMINISTRATION REVIEWED BY: ANN SASAKI, DEPUTY GENERAL MANAGER Roger S. Bailey General Manager ISSUE The Board of Directors approves the Operations and Maintenance (O&M), Capital Improvement (CIB), Self-I nsurance, and Debt Service budgets on an annual basis. At fiscal year (FY) end, staff reviews and compares the final revenues and expenditures, based on the pre-audit financial reports and provides an update to the Board on the budget-versus-actual activity. If there is a favorable budget variance, staff typically provides alternatives for the Board's consideration for allocating the unspent funds. Finally, the FY 2019-20 budget provides for the payment of $1.25 million to be used toward employee-related unfunded liabilities. The Board also will be asked to consider staff's recommendation for allocation of these funds. BACKGROUND A public hearing was held on J une 7, 2018, after which the Board adopted the FY 2018-19 budget. The proposed revenue and estimated expenditures within the adopted FY 2018-19 budget, actuals, variances, and year-end adjustments are summarized in Attachments 1 and 2. Attachment 1 summarizes the revenue and expense variances by sub-fund. It should be noted that the Sewer Construction Fund expenditures October 3, 2019 Regular Board Meeting Agenda Packet- Page 128 of 263 Page 2 of 19 variance of $1.524 million is merely a timing issue; this amount has been added to the FY 2019-20 spending plan as a carry-forward. Additionally, the variance in the Self-I nsurance Fund is reconciled as part of the budgeting process and will be resolved in the FY 2020-21 budget proposal. With those adjustments, the amount of funds to be considered for allocation to various potential uses is therefore $9.78 million, as detailed in Attachment 1. Relevant Principles I n terms of proposing an optimal recommendation, the following four principles are relevant for consideration. 1. Maintain adequate funding availability to ensure reliable operations; 2. Keep long-term Sewer Service Charge (SSC) rates as low as possible; 3. Provide SSC rate stability by minimizing significant unplanned fluctuations year to year; and 4. Minimize reliance on borrowing. FY2018-19 Favorable Budget Variance Keeping the above principles in mind, staff has identified the following alternatives for use of the $9.78 million favorable budget variance for FY 2018-19: • A. Keep Funds in the Sewer Construction Fund: (Principle 4 above) Maintaining funds in the Sewer Construction Fund would reduce borrowing needs currently anticipated for FY 2022-23. • B. Deposit to Pension Prefunding Trust: (Principles 2 and 3 above) The pay-down of unfunded actuarial accrued liabilities (UAAL)for pension and other post-employment benefit (OPEB) obligations was recommended in 2016 by Central San's financial consultant, PFM. Applying funds toward these liabilities can save Central San the assumed actuarial cost of these programs; for pension, this is 7.0%. Actual savings would depend on actual market returns of the invested funds but are targeted at the assumed actuarial return. Directing $1.25 million of the FY 2018-19 favorable budget variance toward the Pension Prefunding Trust would provide for a total contribution of $2.5 million toward employee related liabilities ($1.25 million of which is in the FY 2019-20 budget for OPEB, and $1.25 million from the FY 2018-19 variance to the Pension Prefunding Trust), which is at the level budgeted in the past several years. • C. Establish a Rate Stabilization Fund ("RSF"): (Principle 3 above) The 2018 Bond documents allow for the establishment of a RSF. The RSF would operate as follows: available funds could be deposited into the RSF. The RSF could be drawn down when needed to meet specified Debt Service Coverage (DSC) levels (either 1.00x, 1.25x per bond covenants, or the Board Debt Management policy specified level of 2.0x). When funds are withdrawn from the RSF, they are allowed to be counted as revenues in the DSC calculation. The 2018 Bond documents also allow for withdrawals from a RSF for other purposes. "The District has the right at any time to withdraw any or all amounts on deposit in the Rate Stabilization Fund and apply such amounts for any lawful purposes of the District relating to the Wastewater System." Accordingly, the RSF could be drawn down on a planned basis to otherwise avoid the need for higher than desired rate increases. In colloquial terms, the RSF could act as a "shock absorber"to smooth out (stabilize) rate increases. • D. Restore CIB Contingency: (Principle 1 above) This option would restore the FY 2019-20 CIB contingency to the original level of$2 million and provide funding for other newly identified projects through the following additions: • $1.11 million -- In June 2019, $1.11 million of CIB contingency funding was directed to District Project 8250 (Enterprise Resource Planning system). Restoring the CI B with this amount would allow for funding other unforeseen projects or overages as needed in FY 2019-20. October 3, 2019 Regular Board Meeting Agenda Packet- Page 129 of 263 Page 3 of 19 • $500,000 -- Increasing the Cl B contingency fund by an additional $500,000 would allow funding, if needed, for power resiliency projects to ensure continuity of power for critical operations in the event of a PG&E fire/weather related outage in conjunction with its Public Safety Power Shutoff (PSPS) program. • E. Increase in Self-Insurance Reserve: (Principles 1 and 3 above) Last year the Finance Committee requested that staff consider increasing this reserve. A portion of the FY 2018-19 variance could be directed toward the Self-I nsurance/Emergency reserve, with the aim of bolstering the balance in the fund from $5 million to $10 million over the next several years, as variance funding of this type becomes available. (Board Policy No. BP 017 — Fiscal Reserves is scheduled for its biennial review this fall.) Having adequate funding available to restore operations in the event of a natural disaster affecting the physical infrastructure is important to ensuring ongoing reliable operations, would help avoid the need for unplanned and significant rate adjustments. FY 2019-20 Funds Allocated Toward URAL Staff is also seeking the Board's direction regarding the $1.25 million budgeted in FY 2019-20 for paying down unfunded OPEB or pension-related liabilities. Staff recommends that this year's budgeted amount be dedicated toward the GASB 45/OPEB Trust. ALTERNATIVES/CONSIDERATIONS The Board may elect to allocate the $9.78 million FY 2018-19 favorable budget variance toward the above identified alternatives, and at various levels as selected. Proposals as identified below have been considered: Staff Revised Staff Recommendation as Recommendation Presented to Based on Committee Option Description Finance Committee Feedback (in millions) (in millions) A Keep funds in Sewer $5.92 $5.92 Construction Fund B Deposit to Pension $1.25 $1.25 Prefunding Trust C Establish Rate Stabilization 0 $2.61 Fund D Restore C I B Contingency $1.61 0 E Increase Self-Insurance $1.00 0 Reserve Total $9.78 $9.78 Staff presented the recommendation in the middle column to the Finance Committee on September 24, 2019. The Committee discussed alternatives, including the establishment of a Rate Stabilization Fund in lieu of items D and E above. Staff supports this revised recommendation, and if adopted, would plan to bring language related to the establishment of a Rate Stabilization Fund forward this fall as part of the biennial review of the Fiscal Reserve Policy (BP 017). Absent specific Board action, the entire favorable budget variance would, through operation of the fiscal reserve policies and mechanics of the financial plan, ultimately be applied to the Sewer Construction Fund. October 3, 2019 Regular Board Meeting Agenda Packet- Page 130 of 263 Page 4 of 19 FINANCIAL IMPACTS Due to the FY 2018-19 favorable variances in the O&M and CI B Budgets, the District's beginning cash balances for FY 2019-20 are higher than projected when rates were established in April 2019 and contemplated during the FY 2019-20 budget process. The variance of$9.78 million can be directed toward multiple beneficial uses as described above. The financial impact is favorable to District ratepayers regardless of which option is chosen, as there will be decreased future upward pressure on the Sewer Service Charge. Which principals are prioritized (as specified in the Background section) is the key policy decision for the Board. COMMITTEE RECOMMENDATION The Finance Committee reviewed this subject at its September 24, 2019 meeting and recommended receipt of the Pre-Audit Year-End Financial Statement Summary Report and supported the variance allocations as identified above including $5.92 million to remain in or be transferred to the Sewer Construction Fund, applying $1.25 million toward the Pension Prefunding Trust, and applying $2.61 million towards a Rate Stabilization Fund. The Finance Committee also supported the allocation of the FY 2019- 20 budgeted amount of$1.25 million to the OPEB Trust. RECOMMENDED BOARD ACTION Receive the FY 2018-19 Pre-Audit Year-End Financial Statement Summary Report and direct staff to: 1. Make the following allocations for utilization of the $9.78 FY 2018-19 favorable budget variance: $5.92 million to the Sewer Construction Fund $1.25 million to the Pension Prefunding Trust $2.61 million to fund a Rate Stabilization Fund (RS F) after revising BP 017 - Fiscal Reserves specifying operation of the RSF $9.78 million 2. Allocate the $1.25 million additional UAAL contribution included in the FY 2019-20 budget to Central San's OPEB Trust. Strategic Plan Tie-In GOAL THREE:Be a Fiscally Sound and Effective Water Sector Utility Strategy 1 - Conduct long-range financial planning, Strategy 2- Manage costs ATTACHMENTS: 1. Variance Summary 2. Variance Detail and Charts 3. Presentation October 3, 2019 Regular Board Meeting Agenda Packet- Page 131 of 263 Page 5 of 19 ATTACHMENT 1 Pre-Audit-June 2019 Financial Statement Summary and Variance Overview Budget Actual FY 2018-19 FY 2018-19 Variance Favorable/Unfavorable Operations&Maintenance Revenues $ 86,925,732 $ 90,377,103 $ 3,451,371 F See Attachment 2 Expenses 89,720,456 85,342,786 4,377,670 F See Attachment 2 Total (2,794,724) 5,034,317 7,829,041 Sewer Construction Higher than budgeted ad Valorem Property Taxes as well as$1.31M Capacity Fee from Revenues 55,889,268 60,899,723 5,010,455 F Viamonte Senior Living project Expenses 45,319,000 43,794,306 1,524,694 F Total 10,570,268 17,105,417 6,535,149 Self Insurance Revenues 960,250 1,036,330 76,080 F Expenses 924,500 1,125,404 (200,904) U Total 35,750 (89,074) (124,824) Debt Revenues 3,611,038 3,505,005 (106,033) U Expenses 1,135,780 1,025,005 110,775 F Principal PMT 2,480,000 2,480,000 - Total (4,742) - 4,742 District Totals(4 Funds) Revenues 147,386,288 155,818,161 8,431,873 F Favorable Expenses/Debt Principal 139,579,736 133,767,501 5,812,235 F Favorable Total $ 7,806,552 $ 22,050,660 14,244,108 Exclude: 1.Sewer Construction Spending Variance due to Timing (1,524,694) (Included in Sewer Construction expenses) (Carried Forward to FY 2019-20 Budget) 2.Pension Contribution to 115 Trust in FY 2018-19 (2,500,000) (Included in O&M expenses) (Payment to trust not reflected as expenditure per GASB 68,accordingly C&M expense savings are overstated) 3.FY 2018-19 Interest earnings in Pension 115 Trust (561,816) (Included in O&M revenues) (Restricted to addressing pension obligations) 4.Self Insurance variance that is addressed in FY 2020-21 124,824 (Included in Self Insurance) Budget Process through O&M allocation to Self-Insurance 5.Debt Service variance that is addressed in FY 2020-21 (4,742) (Included in Debt Service) Budget Process Net variance to be considered $ 9,777,680 October 3, 2019 Regular Board Meeting Agenda Packet- Page 132 of 263 Page 6 of 19 ATTACHMENT 2 Pre-Audit-June 2019 Financial Statement Summary Operations and Maintenance Variance Analysis ($in thousands) +Favorable Budget Actual Variance % Explanation Implications for future budgeting Revenues SSC-County $ 65,874 $ 67,349 1,475 2.2% Higher than anticipated development Conservative assumptions for growth used SSC-Direct 1,200 1,308 108 9.0% Higher than anticipated flow levels following post-drought Spike to be considered non-recurring and conditions. conservative assumptions for growth used City of Concord 14,800 15,205 405 2.7% Greater than anticipated treatment plant operating and Budget based on expected flow and estimated maintenance costs shared by Concord treatment plant expenditures Permit/Application Fees 480 679 199 41.5% Greater than anticipated development Conservative assumptions for growth are used;3 year average will pick up higher than budgeted experiences Side Sewer Inspection 1,080 1,385 305 28.2% More private lateral inspections than anticipated in budget Conservative assumptions for growth are used;3 year average will pick up higher than budgeted experiences Recycled Water 420 430 10 2.4% Higher than anticipated usage;Recycled Water 0&M expenses RW revenue was flat lined in FY 2019-20 budget and continued to exceed revenue,so no excess revenue was all revenue is assumed to stay in RE subfund transferred to SC subfund Annexation Charges 120 164 44 36.7% Higher than anticipated development Conservative assumptions for growth are used;3 year average will pick up higher than budgeted experiences All Other 2,952 3,857 905 30.7% Large share of variance(62%)attributable to unbudgeted and restricted Section 115 Pension Trust fund investment earnings. Also includes variances for septic/overtime inspections, industrial permits,lease revenue,pre-treatment,household hazardous waste,storm water and interest income. Total Revenues $ 86,926 $ 90,377 $ 3,451 4.0% Favorable variance Expenditures Salaries&Benefits $ 52,585 $ 52,283 $ 302 0.6% N/A-Variance is below 1% Chemicals 1,459 1,353 106 7.3% Lower than budgeted in Maintenance Division due to on Increase in budget as savings realized in from continuous improvement efforts and optimizing usage based process improvement expected to be offset by on operational demand. polymer price increases in FY 2019-20. Utilities 4,143 4,370 (227) -5.5% Higher than budgeted for Maintenance Division due to Cogen Increased budget in FY 2019-20 to reflect higher outages and price structure of new LFG contract;Increase in projected utility rates although Cogen outages not PG&E consumption and utility rates higher than budgeted for expected to recur. buffer properties in the District's right-of-way. Repairs&Maintenance 5,415 4,725 690 12.7% Continuous improvement practices by maintenance staff to Due to maintenance improvements and efficiencies responsibly extend time between repair,overhaul and noted in FY 2018-19,District incorporated slight replacement of assets resulting in savings in pump station and reduction(3.2%)in total O&M Fund Repairs& collection system operations. Maintenance budget in FY 2019-20. Outside Services 3,511 2,512 999 28.5% Savings realized on various budgeted technical services costs At times,items are not needed due to changed including:(1)purchase of interoperable radios being delayed circumstances or delays. FY 2019-20 reflects modest until early FY 2019-20;(2)budgeted purchase of a drone being increase in this line item(3.7%)based on latest pushed into FY 2019-20 due to FAA clearance delays;(3) divisional needs and circumstances. printing services savings realized by CIR Division through discounts and credits;(4)deferment of hiring a training consultant by HR and taking certain training programs in- house during FY 2018-19;(5)unanticipated savings by CSO in construction and field operations for trench paving,concrete work,rock hauling and CCN contracted services. Other 22,607 20,100 2,508 11.1% Variance attributable to FY 2018-19$2.5M contribution to Section 115 Pension Trust fund reported as balance sheet only transaction due to GASB 68 and not reported as expenditure. Staff exploring option of establishing new internal fund in FY 2019-20 to track Section 115 Trust contributions as expenditures. Total Expenses $ 89,720 $ 85,343 $ 4,378 4.9% Favorable variance Net Increase(Decrease) $ (2,795) $ 5,034 $ 7,829 Unadjusted favorable 0&M subfund variance October 3, 2019 Regular Board Meeting Agenda Packet- Page 133 of 263 N:\Accounting\GMTEMP1\Financials and Closing\2019 Financials\FY 2019 pre-audit variances funds and graph.xlsx 09/06/19 Page 7 of 19 ATTACHMENT 2 Pre-Audit-June 2019 Financial Statement Summary Operations and Maintenance Variance Analysis ($000) FY 2018-19 O&M Revenue Variances $80,000 $65,874 $70,000 $67,349 $60,000 $50,000 $40,000 $30,000 14,800 $20,000 15,205 3 857 $10,000 1,200 480 1,080 q20 164 i I 2,952 1$_ _L=08 L 679 L 1,385 _ 430 12L _ SSC-County SSC-Direct City of Concord Permit/Application Fees Side Sewer Inspection Recycled Water Annexation Charges All Other ■Budget ■Actual FY 2018-19 C&M Expense Variances $60,000 $52,585 $52,283 $50,000 $40,000 $30,000 22,607 20,100 $20,000 5,415 $10,000 4,143 3,511 4,370 4,725 2,512 � 2_ 1,459 1,353 Salaries&Benefits Chemicals Utilities Repairs&Maintenance Outside Services Other ■Budget ■Actual October 3, 2019 Regular Board Meeting Agenda Packet- Page 134 of 263 N:\Accounting\GMTEMP1\Financials and Closing\2019 Financials\FY 2019 pre-audit variances funds and graph.xlsx 09/06/19 [Attachment 3 UTILIZATION OF FY 2018 =lu VARIANCE FUNDS r AND USE OF BUDGETED $ 1 .25 MILLION FOR EmPLOYEE =RELATED LIABILITIES 7 i_ PHILIP R. LUBER DIRECTOR OF FINANCE & ADMINISTRATION -- SEPTEMBER 24, 2019 7 October 3, 20 ;:hoard Meet - _ NOVEMBER 10, 2016 WORKSHOP FINANCIAL ALTERNATIVES FOR EXCESS RESERVES PFM's Review of Excess PFM's Recommendation and Fund Alternatives: Direction Given by the Board: Pay down CCCERA unfunded Allocate all currently available dollars pension liabilities (URAL) to reduce pension UAAL and OPEB Pay down other post- liability. employment benefits (OPEB) unfunded liabilities and shorten $2.5M budgeted in FY 2016-17 amortization period from 22 to toward OPEB Trust (done Feb. 2017 by unanimous vote) 18 years ,done. 3. Set up and fund IRS Sec 115 $3.359M initial funding of Pension Pension Prefunding Trust (aone) Prefunding Trust using FY 2015-16 Allocate to CIB program budget variances (done Aug. 2017 Use to cover 0% rate increase by majority vote) FY 2017-18 a L i.. 3gul - _= BUDGET VARIANCES ANr FISCAL RESERVE ALTERNATIVES Good news : $9 .78 million in favorable variances in FY 2018- 19 $4.77 million from Operations & Maintenance (O&M) fund : Lower spending ($ 1 .88 million) and higher revenues ($2.89 million) $5.01 million for Sewer Construction (SC)/Capital Improvement Budget (CIB) higher revenues Recommendation : Direct Funds toward Multiple Purposes (see next page) * Additional variance from self-insurance will be addressed in FY 2020-21 budget process, and $8.5 million underspending variance for Capital Improvement Program will be carried forward to FY 2019-20 :'. gul - •- IROTB SIAL U � r � Keep in Sewer Construction to reduce future debt or rate increases Pay down employee related liabilities (OPEB or Pension) C. Contribute to Rate Stabilization Fund to: Maintain necessary debt service coverage Enhance rate stability through drawdowns to mitigate otherwise necessary rate increases Replenish CIB contingency in FY2019-20 / Fund Specific projects Increase Emergency Reserve of Self-Insurance Fund ►\1 RECOMMENDED ALLOCATIONS ($ MILLIONS A. D. E. C. B. Pension Recommended O&M SC-CIB SC- Self- Rate OPEB Prefunding CCCERA Reserve Reserve Contingency Insurance Stabilization Trust Trust(1) Trust(2) Allocation of Funds: Total Reserve Year-End 2018-19 Variances - O&M $4.77 - $2.52 - $1 - $1 .25 2018-19 Variances - SC 5.01 - 3.40 - - $1 .61 - - - Total $9.78 - $5.92 - $2.61 - $1 .25 - Budgeted 2019-20 UAAL Liabilities $1 .25 - - $1 .25 - Fully More than Below $2 More than No Target o 0 0 Funding Status Funded Fully Funded million Fully Established 84.3% 2.5/0 81.1 /o Budgeted Funded 83.5% Pro-Forma (1) Funding status per staff calculation using PARS Pension Trust June 30, 2019 statement and CCCERA December 31, 2017 valuation ($8.42M+ $1.25M proposed)/$391,297,351). (2) Funding status per CCCERA December 31, 2017 valuation. 2018 valuation expected on 10/2/2019. 4 ,_: _ gul - RESERVESTATUS ($ MILLIONS) O&M SC-CIB Rate Pension Assets in Total Reserve Reserve Self Stabilization OPEB Prefunding CCCERA Variance 5/12 50% CIB Insurance Fund Trust (1) Trust (2) Trust (3) Policy Target Reserves at Year End $36.5 $33.1 $6.5 Prior Year Additions and 18.5 0.72 2018-19 CIB Carryforward (5) E9 O&M & SC YE Variances $9.78 5.92 $2.61 $1.25 prior page) All Other (4) $0.13 Pre-Audit Reserves with Proposed Adjustments: Pro Forma 6-30-19 $36.5* $57.52* $7.09* 1 $2.61 $65.76 $9.64 $317.2 FY2019-20 Budgeted Contribution (Recommended) $1.25 Total Estimated Pro-Forma Balance After Reallocations 36.5* 57.52* 7.09* 2.61 67.01 $9.64 $317.2 (1) Balance and amounts are at market value. (2) Pension Prefunding Trust had a balance of$8.39M as of 6/30/19 (3) Assets per December 31, 2017 CCCERA valuation. 2018 Valuation available 10/2/2019. (4) Consisting of($0.125) FY 2018-19 self insurance variance that will be addressed in upcoming budget process. (5) Prior-year CIB additions were from FY 2016-17 and FY 2017-18 variances, and $8.5 million remains to cover FY 2018- 19 carryforward. (6) Pre-audit/ reconciliation with balance sheet accounts pending. gul - FORY OF PEB ($ MILLIONS Actuarial Value of Assets % Per Bartel 2-year Valuation Assets Funded 7/1/2012 $22.5 22.4% 7/1/2014 33.7 32.4% 7/1/2016 43.8 44.0% 7/1/2018 59.4 56.3% CalPERS Medical Transition 7/1/2019 65.80) 82.7% (2) 7/1/2019 estimate if add? $1.25M went to OPEB 67.0 84.3% (1 ) PARS OPEB Trust assets as of June 30, 2019 (2) Calculated using PARS OPEB Trust June 30, 2019 assets over accrued liabilities calculated by Bartel Associates in letter dated February 8, 2019 3 gul - r ' •- HISTORY oi= ADDITIONAL UAAL PAYMENTS ($ MILLIONS Pension Fiscal Date of CCCERA Prefunding OPEB Year Payment Trust Trust Trust Total Source of Funds 2013-14 Dec 2013 $5.0 Budgeted 2014-15 Dec 2014 5.0 Budgeted 2015-16 Dec 2015 2.5 Budgeted-Board Decision 2016-17 Feb 2017 $2.5 Funded by FY 2015-16 variances 2017-18 Aug 2017 $3.4 Budgeted-Board Decision 2017-18 Various 2.5 Funded by FY 2016-17 variances 2017-18 Various 2.0 2018-19 Various 2.5 Budgeted-Board Decision Subtotal12.5 7.9 5.0 25.4 2018-19 Pending 1.25 1.25 2.5 Recommendation: Budgeted $1.25M goes to OPEB Trust, and $1.25M variance goes to Pension a� Prefunding Trust . Total $12.5 $9.1 $6.3 $27.9 Totals 7 � gul - _ •_ ADDITIONAL UAAL PAYMENTS HAVE HELPED REDUCE THE UAAL COMPONENTS OF THE CCCERA PENSION UAAL $74 MILLION AS OF 2017 a,o Assumption Change U J Q Q Actuarial Gains(2014 forward) L O } Additional UAAL Prepayment J Q Subsequent Actuarial Losses Q s Restart of Amortization t= ro Discount Rate from 7.75%to 7.25% N L U Depooling Implementation O U Actuarial Losses from 2008 LL (30,000,000) (20,000,000) (10,000,000) 10,000,000 20,000,000 30,000,000 40,000,000 50,000,000 60,000,000 Notes: Pension Pre-Funding Trust assets of $8.4 million are available to further reduce UAAL indicated above . urWu l - RECOMMENDAT10N ON VARIANCE IZUNDS Direct staff to effectuate the following changes (with contribution to Rate Stabilization fund pending establishment of such fund by the Board ) Funding Source and Use�V 116A A. Sewer Construction: Maintain $3.4 million from Sewer Construction $5.92 million Variance and transfer from O&M reserve ($2.52 million) to mitigate the need for future debt issuances or rate increases B. Contribute to Pension Prefunding Trust $1.25 million from O&M $1.25 million Reserve C. Contribute to Rate Stabilization Fund ($1 million from O&M Reserve $2.61 million and $1.61 million from Sewer Construction) Total $9.78 million . 4 a 4. 8 3"'2 Regul - - `i RECOMMENDATION ON BUDGETED $ 1 .25 MILLION FOR EMPLOYEE RELATED LIABILITIES Direct $ 1 .25 million budgeted in FY 2019-20 to OPEB Trust Would result in 84.3% funded ratio (pro-forma) as of 6/30/2019 Rationale: balanced additional contributions to OPEB and Pension Prefunding Trust as both are comparable in overall funding status 8 QUESTIONS ?