HomeMy WebLinkAbout01. Financial Planning Workshop Page 1 of 37
Item 1.
k�*k CENTRAL SAN
CENTRAL CONTRA COSTA SANITARY DISTRICT1
March 12, 2020
TO: HONORABLE BOARD OF DIRECTORS
FROM: DANEA GEMMELL, PLANNING AND DEVELOPMENT SERVICES DIVISION
MANAGER
EDGAR LOPEZ, CAPITAL PROJECTS DIVISION MANAGER / KEVIN
MIZUNO, FINANCE MANAGER
REVIEWED BY: PHILIP LEIBER, DIRECTOR OF FINANCE AND ADMINISTRATION
JEAN-MARC PETIT, DIRECTOR OF ENGINEERING AND TECHNICAL
SERVICES
ROGER S. BAILEY GENERAL MANAGER
SUBJECT: FINANCIAL PLANNING WORKSHOP IN WHICH THE FOLLOWING WILL
BE PRESENTED AND DISCUSSED:
• FINANCIAL CONDITION AND OTHER ISSUES
• PROPOSED FISCAL YEAR 2020-21 CAPITAL IMPROVEMENT
BUDGET (CIB)AND CORRESPONDING TEN-YEAR CAPITAL
IMPROVEMENT PLAN (CIP), TO INCLUDE:
• UPDATE ON RATE IMPACT SCENARIOS
• REVENUE ASSUMPTIONS
• SEWER SERVICE RATE IMPACT SCENARIOS
• RECYCLED WATER RATE IMPACT SCENARIOS
• RECAP OF RECOMMENDATIONS
Staff will present the attached presentation.
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:
March 12, 2020 Special Board Meeting Agenda Packet- Page 3 of 39
Page 2 of 37
1. Presentation
March 12, 2020 Special Board Meeting Agenda Packet- Page 4 of 39
Page 2 of 36
PROPOSED FISCAL YEAR
(FY) 2020-21
RATE SCENARIOS
-- Board Workshop
- March 12, 2020
- 12pm to 4pm
ITEM A
INTRODUCTION
By Roger S. Bailey, General Manager
� z
1
March 12, 2020 Special Board Meeting Agenda Packet- Page 4 of 38
Page 3 of 36
BACKGROUND
"Prior to imposing the rates set forth under this ordinance for
FY 2020-21, FY 2021-22, and FY 2022-23, the Board of
Directors shall consider, at a noticed public hearing each year
prior to June 30, Central San's proposed budget, its financial
condition, projected capital and operations and maintenance
costs, as well as other factors which bear on Central San's
revenue requirements to determine whether the increased
amounts set forth herein for each fiscal year are still
necessary."
_ ` 3
WORKSHOP PRESENTATION OUTLINE
A. Introduction
B. Financial Condition and Other Issues
C. Proposed FY 2020-21 Capital Improvement Budgets (CIB)and
corresponding Capital Improvement Plan (CIP)
D. Update on Rate Impact Scenarios
• Revenue Assumptions
• Sewer Service Rate Impact Scenarios
Recycled Water Rate(ReW)Impact Scenarios
E. Recap of Recommendations and Closing
4
CENTRAL SAN
2
March 12, 2020 Special Board Meeting Agenda Packet- Page 5 of 38
Page 4 of 36
ITEM B
FINANCIAL CONDITION AND OTHER ISSUES
By: Phil Leiber,
Director of Finance and Administration
Kevin Mizuno,
Finance Manager
CENTRALSAN
� 5
- B1 . CURRENT BUDGET STATUS
3
March 12, 2020 Special Board Meeting Agenda Packet- Page 6 of 38
Page 5 of 36
CURRENT YEAR BUDGET REVIEW— RUNNING EXPENSE Fu
FY 2019-20 Results Through January 2020:
Tea1F ne TTB r,�m, ➢ The Operations and
OeNkN'"" °"°°°�° Maintenance(O&M) Fund
TOY' 966.696.10 6.2.(13.99( 1 ♦2.6,183. 6 _.M expenditure results are
04111En—na; favorable at approximately
TCha 9 64769,064 $16.396.667 3 26.701,215 s ,.987.152 54.2%G of the total adopted
—L11-ft UAIdmi 7.OBl A,9 7.66,•6" +9.981 FY 2019-20 budget, or
""mom, '.616,666 9wy9 6672,2 6„3 7.3% ($3.7 million)under
UIIiPoee 1809,150 2,155A,I 1.515.6" (6.226) the year-to-date budget
R9 .a6L IBIBN 6212 807 61116.161 2.Td6A5. 868227 target of 58.5%O.
HeuMn66M_.l ,166,m 01'_ 532.679 159215 ➢ O&M Fund revenues are
PMe°swiA 6 Lc.l5avlas 674,3x0 509.950 211,221 167•717 also slightly above the
G° '®A.7 =00•", 12an� 6,g" year-to-date target by
1Aehrvtls66upW�es 2.162.12* 1.255269 ,1."N 9x159 1.4%, primarily attributable
° 2.161A3. 1718"71 ,.8,.966 26S.2 to favorable results for
WIOBcr SHAH 90.371 9122M 13,599) sewer service charges.
Grand Te�08M F�arieaa 96,.5&.,15 [51,213,60] i 1,17..917 S 3.739.065
CENTRALSAN
CURRENT YEAR BUDGET REVIEW— SEWER CONSTRUCTION FUND
Sewer Fund(Capital)SpendingFY19-20
53s.eoe.eeo 666.x61,596
$36,669,927
536.666.600 -
s30.106,261
525,0116,000
520.°00.000
615,0116,000
S1M000,060
55,000.000
luly August September octx0el N9 nnb2r D—fter January
—Proi-ed(100%Spend) —Actual —90%Target
➢ The Sewer Construction Fund has spent$30.6M or 91.5%of the year-to-date
capital outlay forecast for FY 2019-20 through January 2020.
➢ On the revenue side,there is a positive year-to-date variance predominantly
attributable to facilities capacity fees, interest revenue,and sewer service
charges.
➢ Preliminary estimates show the Sewer Construction Fund may close with a
favorable revenue variance of approximately$3.3 million(5%). CENTRALSAN
I�
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March 12, 2020 Special Board Meeting Agenda Packet- Page 7 of 38
Page 6 of 36
p
B2. FUTURE PROJECTIONS &
ASSUMPTIONS
b
ANNUAL O&M EXPENDITURES
SIX-YEAR HISTORY
Budgeted and Actual
$120
$100
$88.2$84.1 $87.5$84.6 $89.8 85.5 $89.7 $87.3 $89.7$87.8 $87.6
n $80
O
$60
$40
$20
$0
FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20
Notes:
• Contribution of$5 million toward Unfunded Actuarial Accrued Liability(UAAL)
was budgeted in FY 2014-15,then reduced to$2.5 million through FY 2018-
19,and$1.25 million in FY 2019-20.The financial plan continues a$1.25
million contribution through FY 2025-26.
io
VE
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March 12, 2020 Special Board Meeting Agenda Packet- Page 8 of 38
Page 7 of 36
ANNUAL EXPENDITURES
FY 2019-20 AND THREE-YEAR PROJECTION
O&M Budget Trend
Approved and per Financial Plan
$120
$100 $97.0 $102.4
$87.6 $91.7
$80
$60
O
$40
$20
$0
FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23
Assumptions:
1. Labor 5.75%(cost-of-living adjustment(COLA),step
increases,other per memorandum of understanding
(MOU))
2. Benefits(5-6%medical cost increase)
3. Other costs(3-5%) `
4. Flat staffing
ILgHNIFTIMME
ANNUAL O&M BUDGET:
OUTLOOK INITIALLY DISCUSSED AT
NOVEMBER 4, 2019 WORKSHOP
Key Assumptions K
$87.6MM- Flat with FY 2019-20
$89.8MM High point of last 6 years("essentially flat budgets')
• Salaries&Benefits per MOU
$91.3MM Assumed COLA of 3%
• Non-labor costs flat
Salaries&Benefits per MOU
$91.7MM Assumed COLA of 3.75%
Non-labor costs flat
(Previous Financial Plan Assumption)
• Salaries&Benefits per MOU
$92.1 MM Assumed COLA of 3.0%
• Non-labor costs inflated at 3-5%
4 Year Rate Adopted Financial Plan Assumption
$92.5MM Salaries&Benefits per MOU
• Assumed COLA of 3.75%
• Non-labor costs inflated at 3-5%
'MM=millions in Accounting terms 2OL21
6
March 12, 2020 Special Board Meeting Agenda Packet- Page 9 of 38
Page 8 of 36
133. IMPACT OF RECESSION ON
CENTRAL SAN
13
RECESSION OUTLOOK
• As of early February 2020, most economists were not expecting a near
term recession:
Beacon Economics:"The nation is in the midst of the longest economic expansion in recorded history
and despite headlines to the contrary,Beacon Economics sees growth continuing for at least the
next two years."
Federal Open Market Committee meeting on December 11,2019 forecast-over the next several
years,the economy will grow more slowly.Unemployment is expected to remain low,as will inflation.
U.S.Gross Domestic Product growth will slow to 2.0%in 2020,1.9%in 2021,and 1.8%in 2022(vs.
2.2%in 2019).
Annual Percent Change
2016 2017 2018 2019 2020 2021 2022 2028
California Personal 4.2 4.7 6.1 4.8 4.7 4.3 4.2 4.2
Income:%Change
Construction:Total 3.0 12.3 2.9 -2.0 11.7 10.4 9.2 7.8
Permits
htto://www.dof.ca.gov/Forecasting/Economics/Eco Forecasts Us Ca/indez.html
Contrary views:
February 5,2020:"There's a 70%chance of recession in the next six months,new study from
MIT and State Street finds."
There have been/are numerous potential triggers:COVID-19 Virus,Brexit,Political tensions/war,
trade war,Federal Reserve decisions,stock market declines/asset bubbles bursting,etc.
This said,a recession will come--timing unknown.When it does,what impact will it have on Central
San?Consider industry and entity specific factors.
14
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March 12, 2020 Special Board Meeting Agenda Packet- Page 10 of 38
Page 9 of 36
REVENUE SUSCEPTIBILITY TO THE EFFECTS OF A
RECESSION VARY STRONGLY BY INDUSTRY
• Water/Wastewater generally well positioned
• Materials/Commodities /a
• Power Utilities fil
• Information Services Education
ADVERSE IMPACT POSITIVE IMPACT
• Industrials Healthcare Discount Retailers
• Durable Goods/ Water Utilities Selected Services
Consumer Discretionary Consumer Staples(food,etc.) (bankruptcy,
(i.e. RV manufacturer) turnaround services)
• Construction/
Homebuilders
• But entity specific factors also are very important
1s
POTENTIAL RECESSIONARY
FINANCIAL IMPACTS TO CENTRAL SAN
• A recession could have adverse impacts and some positive impacts on financial health.
Volatility of Revenues Most revenues(93%;all except capacity fees,interest)
relatively insensitive to recessionary impacts.12%of the 93
is property tax-trends affected by valuations over a few years.
Assessment of revenues follow.
Pension contribution rates Recession can impact market returns,creating new LAAL
layers which would be amortized over 18 years.See analysis
on next page.
Positively Impacting
Financial Health
Lower inflation affecting Recession can mean lower inflation(not always).
COLAs and other costs
Lower interest rates on Limited value;timing important.Central San only a sporadic
borrowing borrower.
Lower contractor and Lower project costs;borrowing mitigates the direct effect on
commodity costs rates.
16
OT1130,11912,ME
8
March 12, 2020 Special Board Meeting Agenda Packet- Page 11 of 38
Page 10 of 36
PENSION PERFORMANCE
• Contra Costa County Employees'Retirement Association (CCCERA)assumes
7%earnings each year on pension assets.
• If return expectation is not met, a new layer is added to the UAAL,to be
recovered over 18 years.
2018 Under-performance
- In 2018, the system assumed a 7% return, actual return was-2.7%, or a
miss of 9.7%.
- That resulted in a UAAL layer of$5.3 million.That will necessitate an
additional required UAAL payment of$409,000 commencing in FY 2020-21.
2019 Over-performance
- 2018 performance is not problematic, in light of the turnaround in 2019
(which saw a 14.6% return).
Key Takeaways
• It's long-term performance that matters.
• CCCERA's annualized return for the 10-year period ended December 31, 2019
was 8.5%.
17
CENTRAL SAN
REVENUE OVERVIEW
• 25 years of Central San revenues were analyzed as to variability given
economic conditions (recession).
$180,000,000
$160,000,000
$140,000,000 Mar 2001-Nov 2001 Dec 2007-Jun 2009 ' .RECYC e wn*ER
"Early 2000s Recession" "Great Recession"
$120,000,000 ' •INTI—TINC-1
EAOAEn FEES
$100,000,000
"'o—ly"'o—1inx
$80,000,000 a=v�.oRo
$60,000,000 , E`
$40,000,000 1
$z0,000,00o I I I I I I
$o
. . . . . . . . . . . . . . .U�
Significant differences in volatility by type of revenue
Fixed versus customer demand dependent.Sewer Service Charge(SSC)
rates:revenue requirement and rates set by Board;80%of revenue is fixed
annual amount
No SSC rate adjustments in 1999,2006,2010,and 2011
Total revenues exclude contributed sewer lines;which are included in
Comprehensive Annual Financial Report as"Customer Contribution" is
9
March 12, 2020 Special Board Meeting Agenda Packet- Page 12 of 38
Page 11 of 36
BREAKOUT OF CERTAIN REVENUES
• Interest Income, Capacity Fees, and Property Tax are the most subject
to economic conditions/recession
Mar 2001-Nov 2001 Dec 2007-Jun 2009
"Early 2000s Recession" "Great Recession'
$zo,000,000
$18,000,000
$16,000,000
$14,000,000
$11,000,000 ......xntax
$10,000,000 -�`PnarvrErs
$a,000,000 -mrexcs,INCOME
$6,000,000
$4,000,000
$2,000,00o
$0
16 L*%— L 8 S 8
19
REVENUE ASSESSMENT
• Overall,Central San revenues are not very sensitive to recession. Nearly 90%(Sewer
Service Charge and Property Tax)are only minimally impacted:
Set Based on Costs
Influenced by Recession'
SSC Q Some inputs affected by Q Commercial 62% 62% 20%of revenue is
$97.2MM recession(COLAs,chemical costs, customers,in part commercial/flow based
and contracting costs for capital
projects)
Concord Q Some inputs affected by 0 Same as above 15% 77% Capital Project
SSC/Capital recession(COLAs,chemical costs, Reimbursements are based on
$23.2MM and contracting costs for capital size of Central San's Capital
...................:oj::s�........ ............ .... ....r:g:am
Property �Not set based on costs,but O Collected in full •12% 89% Drop of 10%($1.2M M)
•Tax growth rate affected by property based on valuations seen after great recession
$18.3MM sales&valuations (Teeter Plan) in FY 2010
• Conservatively forecast
• State budget shift of$1.3
billion from local
government in FY 2004-05
and the following year.
Central San lost$5.7MM;
recovered in FY 2006-07
....................................................................................1
*Actual Revenues for FY 2018-19 Sensitivity to Recession
Lower Higher 20
CENTRAL SAN
10
March 12, 2020 Special Board Meeting Agenda Packet- Page 13 of 38
Page 12 of 36
REVENUE ASSESSMENT (CONTINUED)
• Two of the more sensitive revenue streams(Capacity Fees and Interest)are susceptible
to material declines in recession,but are only 7%of revenue.Several tools exist to
respond:
-Adjust capital program timing,costs of CIB decline in recession, increase borrowing
Revenue* Set Based on Costs Variable Demand C I t've
of umu a"
Influenced by Affected by rotal -1.of Total
Capacity O Not set based on costs New Building Permits 5% 94% More sensitive to
Fees affected by recessionary factors Significantly impacted by
economic conditions.
$8.1MM recessions Drop of 50%or$3-
L_______________________________Ssv§1e___�
Interest Interest rates typically lower O Cash balances could be 2% 96% One of the more
Income during recession somewhat lower in recessionary sensitive
$2.6MM recession(revenues and revenue streams.
potentially reduced CIP) Dropped$2.7MM
(83%)from 2007 to
2010
Recycled O RW 3 Volumetric usage 0% 96%
Rates Based on Overall
Water Costs,but increases have been charges
$0.41VIM limited to 3%annually
All Other 0-3 Generally little impact O Minor impacts; 4% 100% 64 different minor
Revenues from recession generally not affected by revenue types;side
$61VIM recessionary factors sewer inspection,HHW,
lease revenue
Actual Revenues for FY 2018-19 Sensitivity to Recession `
Lower Higher /21
CENTRAL SAN
CENTRAL SAN IS POSITIONED TO WITHSTAND A
RECESSION
• Less vulnerable industry
• Most revenue streams not particularly sensitive to recessionary impacts
• Reasonable speed of onset/time to respond
• Some offsetting factors/natural hedges
• Some ability to adjust capital spending
• Strong financial policies/ rate structure (fully funded reserves, low debt
load, and generally fixed charges billed on tax roll)
NEXT STEPS
• Pension sensitivity modeling
• Continue steps to ensure employee related liabilities are fully funded
• Continue to advance financial planning model and integration of
financial planning tools and policies (model, eBuilder, Oracle ERP
(enterprise resource planning), reserve policies, etc.)
• Continue to develop Mitigation Plan for response to recession
(part of Enterprise Risk Management Program)
CENTRALSAN
11
March 12, 2020 Special Board Meeting Agenda Packet- Page 14 of 38
Page 13 of 36
1�
B4. BOARD POLICY ON
PENSION FUNDING LEVEL
23
111RAITIFTWE M,
PENSION AND OTHER
POST-EMPLOYMENT BENEFITS (OPEB)
LIABILITY AND FUNDING STATUS
Pension OPEB
Million $160 100% Million $90 100%
$140 90% $80 90%
80% $70 80%
$120 70%
70% $60
$100 60% $5060%
$80 50% $40L10%
50%
40%
$60 40% $3030%
$40 30% $2020%
20% $10
$20 10% $0 0%
,--
$0 0% o 0 0 o N N o
on
�UAAL —Funded% UAAL —Funded%
Notes:
Pension:2018 figure is based on CCCERA valuation presented October 9,2019 to CCCERA Board.
"OPEB-Valuations projected liabilities less assets as of June 30 of that year.
*'*Pension funded percentage excludes Section 115 Trust Assets(established in FY 2017-18).
June 2019 OPEB0011107 figure is market value of OPEB assets/January 2019 actuarial accrued liability. 24
12
March 12, 2020 Special Board Meeting Agenda Packet- Page 15 of 38
Page 14 of 36
PENSION LIABILITY CONTEXT:
COMPARATIVE FUNDING RATIOS
vFunded Ratio
California Public
Employees' Retirement 69.8%
System(CalPERS)
at 6/30/18
National Conference on
Public Employee
Retirement Systems 2018 72.6%
survey(167 plans with
$2.5 trillion in assets)
Central San CCCERA CCCERA+Pension Trust at 6/30/19
at 12/31/2018 82.1% • 84.1%
• UAAL of$74 million • UAAL of$65.6 million
CCCERA(Overall System)
at 12/31/2018 89.3%
`2s
CENTRALSAN
4 UPDATE
TABLE OF AMORTIZATION BASES
Do'. wtitir Initial C.tst-ding y— Annual
Cos{Groyp 83—Central t:cmr4 COsie 5:4nilary Djstricl
Restart&Amortizatbn December 31.2007 598,185.000 15 $77,493,077 4 54,781,830
Ad— Lues December 31.2008 3,709.835 18 2.813,137 8 41L862
Aduar, Lose December31.2000 10,118251 16 8,146.870 0 1,078.654
Assumption Change December 31.2009 2,003,000 16 1,x13,142 9 213.529
Depooling lmplementallon December 31.20M 20,037,235 10 16,137.242 0 2,136.063
Actuarial Loss December 31.2010 18,178,489 18 15,361.379 10 1,861,081
Assnmpt-Charme14 Decembe137,2010 11,478,648 18 0,700.653 10 1,175.272
Ach.n.]Loss December 31,2011 10,514 535 18 9,230,343 11 1,033,777
Actuarial Loss December 31.2012 12.564241 18 11,364.607 12 1.186.297
Assumption Charge Dewmber 31.2012 22,455,342 18 20,311,306 12 2,120201
UAAL Prepayment December 31,2012 L4,t1MAR) 18 (4,220,922) 12 (440,602)
Achraral Loss Deoemtrer 31.2013 582.962 18 541 375 13 53.033
Assumptlon Change- December 31.2013 (14.950.866) 18 113.884,300) 13 {1.360.110)
U AAL Prepayment December 31,2013 (4,682,899) 16 (4,330,257) 13 {424,193)
Aduarial Gain December 31,2014 (11,948,823) 18 111,231,275) 14 {1,038,537)
UAAL Prepayment December 31.2014 (2,331,096) 10 (2,210,360) 14 (204780)
Actuarial Gain December 31.2015 (6,504,510) 18 (6,261,483) 15 (649.273)
A—nipticn Change December 31,2615 44,220 16 42,558 15 3,734
Ach.anal Gan D—b.M.2016 (1,522,832) 18 (1,490,203) 16 (124,556)
Actuarial Gain December 31.2017 (1,621,926) 18 (1,007,103) 17 (128,477)
Actuarial Loss December 31,2018 5,331,336 18 5,331.336 16 409,016
Assumption Change December 31,2018 1,129,709 18 1.129.709 16 881670
Subtotal—Cost Group 03 $73,98Z8,12 $12.990,919
wao rea„us awr w siynlry«n.,m„„„ray
•• nsdmlaasmve3r.
ERecih hthe December 31,3010 ve6urr,1—Din—laa W emunNoneae my ba- an—ElfectlreMNthe Decalmer 31.X13 wWebm.the 1—usr,M
�sunplwu•aa i,dured m re0eeA6 197
26
CENTRAL SAN
13
March 12, 2020 Special Board Meeting Agenda Packet- Page 16 of 38
Page 15 of 36
PENSION URAL PROJECTION
Anticipated UAAL with Scheduled Amortization(Blue)and with Additional UAAL
Payments to Pension Prefunding Trust to Date and at$1.25 million prospectively(Red)
millions$40
$20
Net Asset $o
Net Liability1$20)
(540) —
($60) —
($80) 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
■UAAL(2018 Valuation) ($74) ($66) ($59) ($50) ($40) ($34) ($27) ($19) ($10) ($0)
❑ Net URAL(2018 Valuation) (68.62) (58) (49) (38) (26) (18) (9) 1 11 22
with Pension prefunding Trus[offset
Pension Prefunding Trust Balance
$120
$loo
$
ao
$60
$40
$20
$-
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
■Total Trust Balance $5 $8 $10 $12 $14 $16 $18 $20 $21 $22
LNot on 2018 CCCERA Valuation.
shows scheduled amortization of UAAL(over 18 years for each annual layer of historic UAAL),assuming no additional UAAL is generated.
dbar shows UAAL offset by Pension PrefundingTrust balance,with continuing$1.25 million discretionary contributions through 2025(at which point
onal contributions are ceased as the UAAL is forecast to be retired).
27
BOARD POLICY ON PENSION FUNDING
• It is both appropriate and responsible to pay the cost of current
utility operations in the period such costs are incurred
• Annual pension and OPEB contributions should be made to
ensure that the funded ratio is targeted at and maintained as
close to 100% as is reasonably practicable
• When the pension and OPEB funded ratios are below 100%,
efforts should be taken (beyond the minimums required by
CCCERA and/or accounting requirements)to ensure the funded
ratios are restored to 100% as soon as is practicable given
other reasonable ratemaking constraints
• Proposed Pension Funding Policy illustrated on following slide
CENTRALSAN
14
March 12, 2020 Special Board Meeting Agenda Packet- Page 17 of 38
Page 16 of 36
PROPOSED PENSION FUNDING POLICY
While the pension is less than 80%1 funded, in addition to the CCCERA amortization of
UAAL over 18 years,the District shall2 through budgeted contributions and funding from
available year-end variances3,target bringing the funded ratio to 100%over not less than a
10-yea ra period,through contributions to CCCERA5.
Pension Funding Funding Source Contributions
Level(CCCERA nl to
Trust) E =
Less than 80% Shall budgeted contributions and funding 10 years CCCERA
from available year-end variances
Between 80-90% Shall budgeted contributions and funding 7 years CCCERA or
from available year-end variances Trust
Between 90-95% Shall budgeted contributions and funding 4 years Trust
from available year-end variances
Between 95-100% May available funding from year-end 2 years Trust
variances
Greater than 100% May available funding from year-end N/A Trust
variances
29
CENTRAL SAN
FINANCIAL PLAN ASSUMPTION FOR
ADDITIONAL CONTRIBUTIONS
• Previous: $2.5 million, projected forward indefinitely
• Updated in FY 2019-20 Budget: $1.25 million
• Current CCCERA Projection: UAAL eliminated through
amortization of layers over 18 years by FY 2024-25 (inclusive of
Pension Trust fund), and two years later(by FY 2026-27)
(without Pension Trust funds)
• Recommendation:
4
- Assume$1.25 million contribution in Financial Plan until FY 2025-26
- This is compliant with the proposed pension funding policy which will
be bb6 0,rought back to the Board at a later date
30
CENTRAL SAN
15
March 12, 2020 Special Board Meeting Agenda Packet- Page 18 of 38
Page 17 of 36
ITEM C
PROPOSED FY 2020-21
CAPITAL IMPROVEMENT PLAN (CIP)
AND CORRESPONDING
CAPITAL IMPROVEMENT BUDGETS (CIB)
By Jean-Marc Petit, PE
Director of Engineering and Technical Services
Edgar J. Lopez, PE
Capital Projects Division Manager
31
CENTRALSAN
CURRENT 10 YEAR CIP FY 2019-
$867.2 Million of Projects/Improvements
In million 2019 Dollars
Ten Year CIP
1 2 3 4 5 6 7 8 9 10 11
FY19-20 FY20-21 FY21-22 FY22-23 FY23-24 FY24-25 FY25-26 FY26-27 FY27-28 FY28-29
Collections stem $27.1 $36.7 $37.7 $40.3 $35.4 $32.7 $37.2 $27.8 $30.0 $44.5
$28.6 $45.8 $52.9 $53.5 $46.4 $43.8 $44.2 $33.1 $40.1 $24.8
$5.4 $3.4 $2.9 $2.5 $2.0 $2.0 $2.0 $2.0 $2.0 $2.0
Rec led Water $4.2 $8.3 $10.3 $7.5 $3 .4
.9 $2.8 $6.4 $5.9 $5.9 $0
Contingency $0.9 $2.5 $2.5 $2.5 $2.5 $2.5 $2.5 $2.5 $2.5 $2.5 TOTAL
FY 2019-20 CIP $66.2 $96.7 $106.2 $106.3 $90.2 $83.6 $92.2 $71.2 $80.4 $74.2 $867.2
suso
51200
S�aso
590.0
Szsa
Srua -----
50.0
�rr9rzo F��az, F��u,� Fvz3n. F,zvzs �.zsns rabnr „z,na r.zan9 r.zsr�
tJfonringeuv ❑�- . v.a[eGeneral imowemems ■irea�mem Plans
DC-d-5-. 1`
Ii
CEN RALSAN
16
March 12, 2020 Special Board Meeting Agenda Packet- Page 19 of 38
Page 18 of 36
PLANNED 10 YEAR CIP FY 2020-21 41
1 . New Total extended to FY 2029-30 (Rolling 10 Years)
In million 2019 Dollars
Ten Year CIP
1 2 3 4 5 6 7 8 9 10
Y2
FY19-20 FY20-21 FY21-22 FY22-23 FY23-24 FY24-25 FY25-26 FY26-27 FY27-28 F8-29 FY29-30
Collection S stem $36.7 $37.7 $40.3 $35.4 $32.7 $37.2 $27.8 $30.0 $44.5 $33.8
Plats $45.8 $52.9 $53.5 $46.4 $43.8 $44.2 $33.1 $40.1 $24.8 $39.3
ro $3.4 $2.9 $2.5 $2.0 $2.0 $2.0 $2.0 $2.0 $2.0 $1.9
Re led Water $8.3 $10.3 $7.5 $3.9 $2.8 $6.4 $5.9 $5.9 $0.4 $0.2
COnbn enc $2.5 $2.5 $2.5 $2.5 $2.5 $2.5 $2.5 $2.5 $2.5 $2.5 TOTAL
FY 2020-21 $96.7 $106.2 $106.3 $90.2 $83.6 $92.2 $71.2 $80A $74.2 $77.6 $878.7
Planned CIP
s�sa
$60A
$ASA
53a0
$19A
I
$0.0
Fv]9!]0 [vI])II ttII/23 � _ FVMR3 FrI51I6 sYI6/I) ttP/28 FYIBIA FYI9/30
O Fnnnnge�W Ogervciee warpr ■Oanara� wempnls ■rrearmpM viani OCoi4[Ibn SYsrpm
`33
CENTRALSAN
PLANNED 10 YEAR CIP FY 2020-21
2. New Total extended to FY 2029-30(Rolling 10 Years&escalated 3%)
million 2020 dollars
Ten Year CIP
1 2 3 4 5 6 7 8 9 10
Y19-20 FY20-21 FY21-22 FY22-23 FY23-24 FY24-25 FY25-26 FY26-27 FY27-28 FY28-29 FY29-30
Collection S tem $36.7 $38.8 $41.5 $36.5 $33.6 $38.3 $28.6 $30.9 $45.9 $34.8
T $28.6 $45.8 $54.5 $55.1 $47.8 $45.1 $45.5 $34.1 $41.3 $25.6 $40.5
$3.4 $2.9 $2.6 $2.0 $2.0 $2.0 $2.0 $2.0 $2.0 $1.9
Re led Water $8.3 $10.6 $7.7 $4.0 $2.8 $6.5 $6.0 $6.0 $0.4 $0.2
Contingency $2.5 $2.6 $2.6 $2.6 $2.6 $2.6 $2.6 $2.6 $2.6 $2.6 TOTAL
Planned Cl-27P $96.7 $109.4 $109.4 $92.9 $86.1 $95.0 $73A $82.8 $76.4 $79.9 $902.1
Planned
man
$vas
$Ilaa
nos 9
swA -- --
$ASA
519A --
0.0
FYI9/NJ FY20I11 FY21/11 .4 F UI o FYI M FYIWI FYIW" "Ie. FY1$/39 FYI9/30
GConun my G J Warer eGeneral MOrmemems rrTrenmem nam GCOlkegonSKrem
16
CENTRALSAN
r`
17
March 12, 2020 Special Board Meeting Agenda Packet- Page 20 of 38
Page 19 of 36
PROPOSED 10 YEAR CIP FY 2020-21: $907.5 MILLION
3. New Total extended to FY 2029-30(Rolling 10 Years&escalated 3%)
with Updated Cash Flow
In million 2020 Dollars
Ten Year CIP
1 2 3 4 5 6 7 8 9 10
IY19-20 FY20-21 FY21-22 FY22.23 FY23.24 FY24-25 FV25.26 FY26-27 FY27.28 FY28-29 FV2"0
CallectionS tem Zli-2 $40.8 $36.0 $39.2 $35.3 $29.6 $34.8 $27.3 $27.1 $25.1
Treabnent Plant $32.3 $52.8 $57.3 $62.7 $55.3 $45.5 $37.6 $43.0 $36.7 $36.9
General Im ro $3.9 $2.5 $2.1 $2.1 $2.0 $1.9 $1.8 $1.8 $1.8 $2.5
Rec led Water $9.1 $11.7 $11.5 $0.3 $5.3 $11.3 $13.3 $1.3 $0.3 $0.3
Comingemy $2.5 $2.5 $2.5 $2.5 $2.5 $2.5 $2.5 $2.5 $2.5 $2.5 TOTAL
FY2020-21
Proposed CIP $88.0 $110A $109.5 $106.8 $100A $90.8 $90.1 $75.9 $68A $67.3 $907.5
FY 2020-21 $66.2 $96.7 $109.4 $109.4 $92.9 $86.1 $95.0 $73.4 $82.8 E76A E79.9 $902.1
Plannetl CIP
CENTRALSAN
CAPITAL
5�n
sas,o '
Sdo
wss/m rvzo{m vz,/zz rvzz/z3 n3/m vzn/zs vzs/z� vzfilzz vzz/za rvza/m rvzo(io
PROJECTS CASH FLOW
CHANGES FROM FY 2019-20
FY2421 FY21-22 FY22-23 FY23.24 FY2425 FY2S26 FY2627 FY27-78 FY28-29 FY29-30 TOWI
FY 2020.21 $96.7 $109.4 $109.4 $92.9 $86.1 $95.0 $73.4 $82.8 $76.4 $79.9 $902.1
Planned CIP
FY2020-21 $88,0 $110.4 $109.5 $106.8 $100.4 $90.8 $90.1 $75.9 $68.4 $67.3 $907.5
Proposed CIP
Cash Fl-FY2020-21
Proposed CIP Compared To FY 2020-21
Planned[IP
$oxo ma
SFOAU
snoo00
SmA00 -
S
rnonz rnrnx s.zzna nzano nzaxz n-:s/u r.zs/n nzrrza
CashFlow:FY2020-21
Proposed CIP Compared To FY 2020-21
Planned CIP
5mnm
$-- ___________________. sza.vz 514.235
S.-
S,- _______--$0.r91
__ 54Aa5
4
so.WGI
9f
$11¢0001 --SIF.aas] -------------------------------
Sl6.ss61 S[FAIn
tus.aool 36
CENTRAL SAN
18
March 12, 2020 Special Board Meeting Agenda Packet- Page 21 of 38
Page 20 of 36
MAJOR CHANGES TO FY 2020-21 CIP
Ism
Solids Handling Facility Improvements $35.0
Filter Plant and Clearwell Improvements- $7.0
Phase 1A
Large Diameter Renovation $14.0
Program(Danville)
Pump Station Improvements-Phase 1 $7.0
Pump Station Improvements-Phase 2 $3.3
Collection System Sewer Renovation- ($11.0)
Phase 2
Collection System Sewer Renovation- ($48.8)
Phase 3
All other projects ($1.1)
Total Increase
(In mill 37
COLLECTION SYSTEM RENOVATION
COMPARISON
FY 2020-21
MEN nfoMaster Proposed
CIP ,
0-5 years $14 million/ $20 million/ $19 million/ $26 million/
year year year year
5-10 years $14 million/ $36 million/ $29 million/ $28 million/
year year year year
10-20 years $46 million/ $72 million/ $37 million/
year year year
$80
m $60
v
aii $40
$5 ■■■N mill
0-5 Years 5-10 Years 10-20 Years
■Pre-CWMP ■2017 CWMP ■2020 Update ■2020-21 Proposed CIP
Comprehensive Wastewater Master Plan(CWMP) I
CENTRALSAN
19
March 12, 2020 Special Board Meeting Agenda Packet- Page 22 of 38
Page 21 of 36
MAJOR PROJECTS RECOMMENDED
FOR NEXT TWO FISCAL YEARS
TREATMENT PLANT COLLECTION SYSTEM
• Solids Handling Improvements-Phase 1(Construction) Sewer Renovation projects:
• Outfall Improvements-Phase 7(Construction) Sewer Renovation-
• Steam,Aeration and Blower System Renovations(Design) Phase 1(Design)
• UV Disinfection Replacement(Planning) Construction:
• Annual Infrastructure Replacement(Construction) Walnut Creek-Phase 14
• South Orinda-Phase 8
GENERAL IMPROVEMENTS Lafayette-Phase 14
• Danville-Phase 3
• ERP Replacement and IT Development(Construction) Martinez-Phase 6
• Security Improvements(Design and Construction)
• Vehicle Replacement and Equipment Acquisition(Purchase) Pump Stations:
• Phase 1:Moraga/Cross
RECYCLED WATER Roads/FlushKleen
(Construction)
• Filter Plant and Clearwell Improvements-Phase 1A Phase 2:Martinez/
(Construction) Fairview/Maltby(Design)
• Filter Plant and Clearwell Improvements-Phase 1B(Design)
• Distribution Systems Renovations Program(Planning)
CENTRAL SAN
`39
PROPOSED CAPITAL IMPROVEMENTS BUDGET
FOR FY 2020-21 AND FY 2021 -22
(In million 2020 dollars)
FY 2019-20
Program Amended FY 2020-21 FY 2021-22
Budget*
Collection System $26.5 $40.2 $40.8
Treatment Plant $33.9 $32.3 $52.8
General Improvements $ 8.2 $ 3.9 $ 2.5
Recycled Water $ 6.0 $ 9.1 $11.7
Contingency $ 0.0 $ 2.5 $ 2.5
Totals: $74.6 $88.0 $110.4**
*Amended Budget includes prior year carryforward
**Rounding
40
20
March 12, 2020 Special Board Meeting Agenda Packet- Page 23 of 38
Page 22 of 36
SOLIDS HANDLING FACILITY IMPROVEMENTS
SOLIDS PROJECT) UPDATE
- r
-44
-Ir
Major
Major elements include solids blending tanks, dewatering, cake pumps,
furnace modifications, new wet scrubbers, building seismic, ash handling,
new electrical, etc.
41
CENTRALSAN
SOLIDS PROJECT PROGRESS
• Black&Veatch issued 90%
Design submittal review
MWH Constructors hired for
construction and costs review
Total project costs under review,
including contingency
�� • Update State Revolving Fund
Loan Application
loll - � ■:
Developing emergency solids
hauling and disposal Request for
Proposals
• Construction of the Emergency
Sludge Loadout Facility (50%
complete)
• Solids building emergency stairs
(Awarded) —,eil_
4l
CENTRAL SAN
21
March 12, 2020 Special Board Meeting Agenda Packet- Page 24 of 38
Page 23 of 36
SOLIDS PROJECT ESTIMATED BUDGET
PROJECT
FY 2019-20 Adopted budget with $95,000,000
escalation
Draft • • ' . $130,000,000
D $35,000,000
*Budget is being reviewed by third party estimator and does not
include costs for alternative construction approaches(hauling sludge,
temporary facilities, or other impacts). Estimate to be completed in
early April.
43
FILTER PLANT AND CLEARWELL
IMPROVEMENTS - PHASE 1A
DISTRICT PROJECT 7361
• Add Utility Water Pump • 60% Design
• Replace Backwash Motors submittal review
(480V)
• Two New Storage Tanks
• Clearwell: • Pilot testing
• East Clearwell Completed
decommissioned
• West Clearwell in •
service West Clearwell
•
New Isolation Gates cell commissioned
•
Rehab lFilter and operating
Upgrade Chemical Feed
• Major electrical
renovation for the
- -.
Upgrade/Replace Electrical Gear Clearwell
• New Clearwell Electrical Facility • New storage tanks
• Replace Substation 40-2400V
•'". Total project: $41
million
44
CENTRAL SAN
22
March 12, 2020 Special Board Meeting Agenda Packet- Page 25 of 38
Page 24 of 36
OUTFALL IMPROVEMENTS — PHASE 7
• Regulatory project (Inspected
every 5-10 years)
• Received California
Environmental Quality Act
Bypass Permit to Lower
' Walnut Creek
• Bidding January 2020
• Construction summer of 2020
• Scope includes testing of
1,500 joints and repairs as
needed, corrosion control on
steel risers, replacement of
valves, Structure 9000 valve
f and seismic modifications, and
trestle repairs in Suisun Bay
• Total project: $6.2 million 45
CENTRAL SAN
ITEM D
UPDATE ON RATE IMPACT SCENARIOS
By: Danea Gemmell,
Planning and Development Services
Division Manager
23
March 12, 2020 Special Board Meeting Agenda Packet- Page 26 of 38
Page 25 of 36
FINANCIAL BASELINE MODEL ASSUMPTIONS
• Basis of Model: Updated Cost of Service Study by Raftelis in January 2019
• Updated O&M Budget:
• Based on employee contracts per MOUs
• Retirement(CCCERA data)
• CaIPERS Medical per current employee contract
• Additional annual payment of$1.25 million for unfunded liability until FY 2025-26
• Capital Budget:
• 3%escalation
• Current 10-Year CIP:$867 million for baseline
• Updated 10-Year CIP:$907.5 million based on revised cash flow
• Reserves per requirements in Fiscal Reserves Policy
• Assumes additional debt required:
• Bonds assume 30-year term with different interest rates:
• 3.0%(until FY 2023-24),3.25%(FY 2024-25 through 2026-27),3.5%(FY 2027-28+)
• State Revolving Fund(SRF)assumes 30-year term @ 1.40%until FY 2023-24 then 1.85%
• SRF provides a 0.25%discount with 20-year term
`47
CENTRALSAN
REVENUE REQUIREMENT
, • 2020-21 Change from
Budget Projections FY M (Financial Model) Budget
: • ,
Operations and
Maintenance $87,584,775 $91,706,760 4,121,985 4.7%
Sewer 66,176,000 88,024,000 21,848,000 33.0%
Construction
Debt Service 2,982,415 2,549,315 (433,100) (14.5%)
Self-Insurance 1,073,700 1,132,228 58,528 5.5%
CENTRALSANI
24
March 12, 2020 Special Board Meeting Agenda Packet- Page 27 of 38
Page 26 of 36
ADOPTED RATES
$1,000 10.0%
$775
$847
$798
$822
$717 $745
$689
$628 $658
$598
5.25% 5.25%
$500 4.75% ___ ___ ___ _ 5.0%
4.00% 4.00% 4.0
$0 0.0%
2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 2026-27 2027-28 2028-29
iiiiiiiiiiiiiSingle Family Rate —Rate Increase
JCA49
CENTRALSAN
OUR RATES CONTINUE TO BE BELOW THE AVERAGE
SFPUC
Berkeley(EBMUD for treatment)
Santa Rosa
Petaluma
Rodeo Sanitary District
Benicia
Richmond
Crockett Sanitary Department
Oakland(EBMUD for treatment)
San Leandro(EBMUD for...
Average of Agencies Surveyed
Napa Sanitation District
Live
Vallejo Sanitation and Flood
West County Wastewater...
Concord(CCCSD for treatment)
Brentwood
Novato Sanitary District
Sunnyvale
Mt View Sanitary District
Central San
Stege SO(EBMUD for treatment)
Pittsburg(Delta Diablo for...
Antioch(Delta Diablo for...
BayPoint(Delta Diablo for...
Pleasanton(DSRSD for... ■FY 2019-20 Sewer Service Charge
Fairfield(FSSD)
San Jose
Dublin San Ramon Service,
...
Castro Valley Sanitary District
Union Sanitary District
Hayward
Oro Loma Sanitary District
$0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600
Annual Charge per Single Family Home
0
CENTRAL SAN
25
March 12, 2020 Special Board Meeting Agenda Packet- Page 28 of 38
Page 27 of 36
RATE COMPARISON INCLUDING PROPERTY TAX
SFPUC
Berkeley(EBMUD for treatment)
ta
SanRosa
Petaluma
Rodeo Sanitary District
Crockett Sanitary Department
Benicia
Richmond
Oakland(EBMUD for treatment)
San Leandro(EBMUD for...
Average of Agencies Surveyed
Novato Sanitary District
Napa Sanitation District
Central San
Vallejo Sanitation andFlood...
Livermore
West County Wastewater...
Mt View Sanitary District
Stege SD(EBMUD for treatment)
Concord(CCCSD for treatment)
Brentwood
Pittsburg(Delta Dia"f-
"'
lofoSun nyra le
Antioch(Delta Diablo for...
Bay Point(Delta Diablo for...
Pleassmon(DSRSD for...
Fairfield(FSSD)
Castro Valley Sanitary District
San Jose
Dublin SanRamon services... ■FY 2019-20 Sewer Service Charge Elestimated property tax
Union Sanitary District
Hayward
Oro Loma SanitaryDistrict
So $200 $400 S600 $800 $1,000 $1,200 $1,400 S1,600
Annual Charge per Single Family Home
`51
CENTRALSAN
SEWER SERVICE RATE INCREASES APPROVED BY
OTHER BAY AREA AGENCIES
Benicia 7.00% 5.00%
Brentwood 3.02% 5.06%
Castro Valley 4.77% 4.33%
Concord 7.60% 7.06% 6.6% 6.19%
Fairfield 3.59% 3.59%
Hayward 4.47% 4.40%
Mt.View* 4.23% 30.19% 9.03% 9.00% 9.00%
Novato 3.41% 3.30%
Oro Loma 7.42% 7.42%
SFPUC 7.25% 8.26% 8.23%
Vallejo 12.27% 9.00% 4.52% 3.00%
Central San ■I 5.25% 5.25% 4.75% 4.75%
*Prop 218 notice but not yet approved
CENTRALSAN
I'
26
March 12, 2020 Special Board Meeting Agenda Packet- Page 29 of 38
Page 28 of 36
STATE REVOLVING FUND (SRF)
• Eligible projects include construction of publicly-owned treatment
facilities for wastewater treatment, local sewers, and sewer
interceptors
• Application Maximum Score = 16 points; Sum of Three Components:
• Primary Score (9)—water quality conditions
• Secondary Score (3)—applicant or project features
• Readiness Score (4)—ensure timely use of cash
➢Solids Project SRF received a score of 13 to make fundable list
• Financing terms:
• Interest rate: one-half the most recent General Obligation (GO)
Bond Rate at the time of funding approval
• Financing term: up to 30 years or the useful life of the project
• Financing amount: no maximum funding limit
• Repayment: begins one year after completion of construction `
r 53
CENTRAL SAN
SRF INTEREST RATE HISTORY
2.8%
2.6
effective 12/31/2019
2,4%
m
2.2%
m
2.0%
K
o.
y0 1.8%
1.6%
1.4%
1.2%
1.0%
07/01/09 07/01/10 07/01/11 07/01/12 07/01/13 07/01/14 07/01/15 07/01/16 07/01/17 07/01/18 07/01/19 07/01/20
General Obligation Bond Sale Date
Source:https://wwwwaterboards.ca.gov/water is ues/programs/grants loans/srf/docs/truelnterestcost.pdf ZVO 331
CENTRAL SAN
27
March 12, 2020 Special Board Meeting Agenda Packet- Page 30 of 38
Page 29 of 36
COMPARING BOND AND SRF FUNDING
Issuance Cost 2.0% None
Up to 30 years or
Term 30 years useful life up
project
1.4%
Anticipated Interest 3.25% (discounted rates
Rate may be available for
shorter loan terms)
One year after
Payback Starts Immediately construction
completed
`ss
CENTRALSAN
COMPARING BOND AND SRF FUNDING
COST OF BORROWING
HYPOTHETICAL $100,0009000
Issuance Cost $200,000 $0 $0
Term 30 years 30 years 20 years
Anticipated 3.25% 1.4% 1.15%
Interest Rate
Annual Debt
Service $5.2 million $4.1 million $5.6 million
Total Debt Service
+Issuance Cost $156.9 million $123.2 million $112.5 million
CENTRALSAN
28
March 12, 2020 Special Board Meeting Agenda Packet- Page 31 of 38
Page 38of38
CENTRAL SAN's FINANCIAL PLAN
Total Funds
...... ...... ....... ...... ...... ..... .iq
so
FY2020 FY 2M2 MM FY2026
Inflated Capital Improvement Plan Spending(in millions)
so $66
so
A019 L,
CENTRALSAN
SUMMARY OF PROPOSED SCENARIOS
Baseline—fund with $154 million in bonds (30 years @ 3.25%)
Scenario 1A—$141 million debt; fund $99 million of Solids Project
with SRF, remainder of requirement with $42 million in bonds
• Scenario 1 B —$138 million debt; fund $120 million of Solids Project
with SRF; remainder of requirement with $18 million in bonds
• Scenario 2A—$136 million debt; fund $120 million of Solids Project
and $16 million of Filter Plant 1 B project with SRF
Solids SRF: 30 years @ 1.4%
Filter Plant SRF: 30 years @ 1.85%
• Scenario 2B —$141 million debt; fund $120 million of Solids Project
and $21 million of Filter Plant 1 B project with SRF
Filter Plant SRF: 20 years @ 1.6% ZV40
CENTRAL SAN
29
Page 31 of 36
WHAT HAPPENS IF WE SHORTEN
SRF TERM TO 20 YEARS?
• Higher annual payments, but saves interest costs over the life
of the loan
• Specifics:
• Annual debt service increases to$8 million per year(+$2.4 million
per year)
• Higher annual payments cause a short-term cash flow issue
• In order to hold sewer service charge rates constant, need to increase
loan to$141 million because of cash flow(+$5 million)
• Total debt service is $159.7 million saving$9.1 million (net of
the additional $5 million borrowed to meet cash flow)
• Shown as Scenario 2B on the following slides
ANL
59
CENTRALSAN
COMPARISON OF FINANCING COSTS
qjP Total Annual Interest& tall
Scenario Bonds SRF 7 jllllllllllllllllI&6Service
DeFinanced Fees 7
bt$154 $0 $154 $8.0 $87.6 $241.6
Scenario 1A $42 $99 $141 $6.2 $46.8 $187.8
Solids SRF
Scenario 1B $18 $120 $138 $5.9 $38 $176.0
Solids SRF
Scenario 2A
Solids SRF $0 $136 $136 $5.6 $32.8 $168.8
Filter SRF
Scenario 2B
Solids SRF $0 $141 $141 $8.0 $18.7 $159.7
Filter SRF
(In million dollars)
�w
CENTRAL SAN
30
March 12, 2020 Special Board Meeting Agenda Packet- Page 33 of 38
Page 32 of 36
SUMMARY OF PROPOSED SCENARIOS
CIP($mil) 66.2 1 96.7 106.2 106.3 90.2 83.6 92.2 71.2 80.4 74.2 867.2
Sewer Service Charge
Rate Increase 5.25% 4.75% 4.75% 4.0% 4.0% 4.0% 4.0;f_
.0% 3.0% 3.0% 3.0% 47.6%
„ Bond Issuance($mil) 77 77 154
FY 2020-21L CAPITAL IMPROVEMENT PROGRAM REVENUE REQUIREMENT
CIP($mil) 88.0 110.4 109.5 106.8 100.4 90.8 90.1 75.9 68.4 67.3 907.5
Sewer Service Charge
Rate Increase 5.25% 4.75% 4.75% 4.0% 4.0% 4.0% 4.0% 3.0% 3.0% 3.0%
••••
Bond Issuance($mil) 15 15 42
SRF($milJ141
31 31 31 6 99
Bond Issuance($mil) 10 a' 18
SRF($mil) 138
3 33.5 33.5 33.5 16.5 120
Bond Issuance($mil) p
136
SRF($mil) 3 33.5 33.5 33.5 16.5 8 8 136
PROPOSED
Bond Issuance($mil) p
141
SRF($mil)
3 33.5 33.5 33.5 16.5 8 13 141 61
CENTRALSAN
UPDATED RECYCLED WATER RATE
IMPACT SCENARIOS
62
CENTRALSAN
---
31
March 12, 2020 Special Board Meeting Agenda Packet- Page 34 of 38
Page 33 of 36
FINDINGS
1. The cost of producing and distributing recycled water to Zone 1 is
4.69 per kilogallon (kgal)
2. Zone 1 customer revenue accounts for 46.7°/% of the cost to
produce and distribute recycled water to those customers
3. Central San's recycled water rates are (a) lower than the cost of
service and (b) lower than the 2002 Board-approved target of 80%
of Contra Costa Water District(CCWD) rates
• Class I rate is at 61%of CCWD treated rate and 81%of Central San cost
• Class 11 rate is at 66%of CCWD untreated rate and 39%of Central San cost
4. Increasing recycled water rates to full cost recovery for Zone 1
customers would likely result in significant increases to customer
bills (particularly Class II customers)
• Significant rate increases may exceed CCWD's untreated rate and be less
competitive
5. The cost of producing and distributing all recycled water accounts
for$7 of the annual $598 sewer service charge
• L2 of the$7 supports the Zone 1 cost of recycled water delm`
r 63
Recar)of October1
IMPACT TO CENTRAL SAN RATE PAYERS
Cost per RUE*
Utility Water Sewer Service $769,717 $4.54
Zone 1 Sewer Service Subsidy $351,326 $2.07
Residential Fill Sewer Service Subsidy $82,941 $0.49
Subtotal $1,203,984 $7.10
ReW Exchange Sewer Service $15,585 $0.09
Total $1,219,569 $7.19
*Based on a total of 169,594 Residential Unit Equivalents(RUE)
64
RecaD of October1
32
March 12, 2020 Special Board Meeting Agenda Packet- Page 35 of 38
Page 34 of 36
3% RECYCLED WATER RATE INCREASE IS
SCHEDULED ON JULY 1, 2020
• On April 18, 2019, the Board adopted four-year recycled water
rates with 3% escalation annually
• Zone 1 ReW customers are billed based on measured use
$4.50
$4.00
$3.50 _ $4.03 $4.15
$3.58 $3.69
$3.80 $3.91
$3.00 $3.38 ---$3.48 --------- -----------------
$2.50
$2.00 $1.61 $1.66 $1.71 $1.76 $1.81 $1.86 $1.92 $1.98- --
$1.50 A
$1.00
$0.50
$0.00
FY 2015- FY 2016- FY 2017- FY 2018- FY 2019- FY 2020- FY 2021- FY 2022-
2016 2017 2018 2019 2020 2021 2022 2023
-41P-Class I(Former Treated) — Class II(Former Untreated)
`65
CENTRALSAN
ITEM E
RECAP OF RECOMMENDATIONS AND CLOSING
By Roger S. Bailey, General Manager
CENTRALSAN
33
March 12, 2020 Special Board Meeting Agenda Packet- Page 36 of 38
Page 35 of 36
FACTORS FOR CONSIDERATION
"Prior to imposing the rate set forth under this Ordinance for Fiscal Year 2020-21,the
Board of Directors shall consider,at a noticed public hearing:"
Factor Discussion
the District's proposed Outlook is consistent with financial plan and budget guidance provided by
budget Board on 11/4/19
• Will distribute to Board on 5/7/20
• Presentation on 5/21/20
• Scheduled approval on 6/4/20
its financial condition Reserves fully funded
• Projected Favorable Revenue and Expense Variances of$7.8 million(as of
January 2020)
projected capital and CIP is$8.7 million lower or$88 million for FY 2020-21
operations and maintenance Overall CIP remains on target with only a 0.6%increase or$5.4 million over
costs 10 years from last year's projection
• Better interest rates through use of SRF funding
• Projected O&M costs slight increase from previous baseline,starting in FY
2020-21
as well as other factors Ramp-up of CIP spending over the next three years
which bear on the revenue Pension funding policy would direct funds towards pay down of pension
requirements of the District liability
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CENTRAL SAN
SSC RATE RECOMMENDATION
• Continue with previously adopted SSC rate of 5.25%
increase for FY 2020-21
• Conduct public hearing on April 16, 2020 accordingly
(required per 2019 rate ordinance)
$1,000 10.0%
$ns 5798
$822 $847
$658 $689
$717 $las
$598 5629
$500 __ ___ ___ __ ___ __ _– _ 5.0%
$0 0.0%
2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 2026-27 2027-28 2028-29
�Single Family Rate —Rate Increase
CENTRALSAN
34
March 12, 2020 Special Board Meeting Agenda Packet- Page 37 of 38
Page 36 of 36
NEXT STEPS
Set Public Hearing for 4/16/20 3/19/20
Draft CIB/CIP Book Review 4/14/20
(E&O Committee)
Public Hearing to consider adoption of
proposed ordinance to amend rate 4/16/20
adjustment for FY 2020-21
Draft Budget Distribution 5/7/20
E&O Review and 5/12/20
Finance Committee Review of budgets 5/19/20
Budget Presentation 5/21/20
Budget Hearing and Adoption 6/4/20
`69
CENTRALSAN
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March 12, 2020 Special Board Meeting Agenda Packet- Page 38 of 38