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Home My WebLink About4.a. Review proposed Fiscal Year 2021-22 Central San Operations and Maintenance, Self-Insurance, and Debt Service budgets Page 1 of 20 Item 4.a. CENTRAL SAN May 17, 2021 TO: FINANCE COMMITTEE FROM: KEVIN MIZUNO, FINANCE MANAGER REVIEWED BY: PHILIPLEIBER, DIRECTOR OF FINANCE AND ADMINISTRATION ROGER S. BAILEY, GENERAL MANAGER SUBJECT: REVIEW PROPOSED FISCAL YEAR 2021-22 CENTRAL SAN OPERATIONS AND MAINTENANCE, SELF-INSURANCE, AND DEBT SERVICE BUDGETS The proposed Fiscal Year(FY) 2021-22 District Budget will be considered by the Board for adoption on June 3, 2021 upon conclusion of a scheduled public hearing to receive public comment. Central San's draft FY 2021-22 budget book was distributed to Board Members on May 6, 2021 at a regularly scheduled public meeting. Commencing on page 45 of the FY 2021-22 draft budget book, the Financial Summary section provides a comprehensive synopsis of the core elements of Central San's entire budget including analysis of specific funds, revenues, expenses, and reserves. Attached is a draft of the presentation planned to be given at the May 20, 2021 Board Meeting in regards to the Operations and Maintenance budget (Attachment 1). Following distribution of the budget book to Board members on May 6, 2021, it was identified that certain cells were inadvertently deleted when making a correction to "Table 14 Reserve Projections" (pg. 75). Staff has made the necessary corrections to this table which are reflected in Attachment 2. On May 11, 2021, the Engineering & Operations Committee reviewed the Capital Improvement Budget and Ten-Year Capital Improvement Plan portions of the draft FY 2021-22 Budget and provided input to staff. At this meeting, the Finance Committee is being asked to review and provide feedback to staff on all non- capital improvement portions of the draft FY 2021-22 Budget, namely the Operations and Maintenance, Self-I nsurance, and Debt Service budgets. To have sufficient time to produce a final budget book for distribution as part of the June 3, 2021 Board meeting agenda packet, staff is requesting that all Board Members provide any edits by the end of the day on Wednesday, May 19, 2021. Additionally, the initial May 6 draft of the Budget book had a chart on page 191 that was marked "Draft". This "FY2021-22 Capital Improvement Budget Construction Commitments" graph was completed and is provided as Attachment 3. Strategic Plan Tie-In GOAL THREE: Fiscal Responsibility Strategy 1—Maintain financial stability and sustainability,, Strategy 2—Ensure integrity and transparency in financial management May 17, 2021 Special FINANCE Committee Meeting Agenda Packet- Page 3 of 24 Page 2 of 20 ATTACHMENTS: 1. Budget Presentation FY 2021-22 2. Updated Table 14 Reserve Projections 3. FY 2021-22 C I B Construction Commitments (Pg. 191) May 17, 2021 Special FINANCE Committee Meeting Agenda Packet- Page 4 of 24 Attachment 1 (Updated Presentation) 4� , .. PROPOSED 1� CENTRAL SAN BUDGET FISCAL YEAR 2021 -22 Presented by Philip R.Leiber,Director of Finance and Administration Kevin Mizuno,Finance Manager Edgar Lopez,Capital Projects Manager Final adoption scheduled for the June 3,2021 Board Meeting Board of Directors presentation on May 20,2021 _ Capital Presented to: 'f Engineering and Operations Committee e-=_. 'A May 11,2021 ` �' - Operations and Maintenance Presented to: Finance Committee May 17,2021 1 BUDGET SCHEDULE • February: Completion of Oracle Budget Tool • February-April: Internal Budget Development • March 25: Financial Workshop • May 6: Draft budget released • May 10: E&O Committee review of capital • May 17: Finance Committee review of O&M • May 20: Board Review - June 3: Scheduled Board Approval Essentially the same timeline as in prior years PRESENTATION OVERVIEW • Accomplishments • Addressing Strategic Priorities • Budget Summary & Key Takeaways • Overall Uses and Sources of Funds • Four Budget Subfunds • Operation and Maintenance • Sewer Construction (Capital Improvements) • Self-Insurance • Debt Service • Reserves • Budget Changes y 3 ACCOMPLISHMENTS • New Enterprise Resource Planning (ERP)system • Infrastructure projects in alignment with our 20-year master plan, including: • Replaced 8 miles of aging neighborhood sewer pipes • Began work on filter plant and clearwell improvements for recycled water reliability and expanded capacity • Launched a pilot program using state-of-the-art technology to assess the condition of our largest sewers • Completed a series of critical inspections and improvements to our outfall—the 6-foot diameter,3.5-mile pipe that carries clean,treated water from our plant to Suisun Bay • Completed upgrades to the Emergency Sludge Loadout Facility,a critical step in the planned improvements to our solids handling facility • Peak Performance Platinum Award- 23 consecutive years of 100% compliance with our National Pollutant Discharge Elimination Permit • Strong performance on strategic plan metrics 4 ADDRESSING 8 STRATEGIC PRIORITIES Primary Response FY 2021-22 Budgeted Project(s) CUSTOMER AND COMMUNITY Provide exceptional customer service and maintain an excellent reputation in the community 1.Balancing the need Continue commitment to educating Public outreach,including the highly successful financial resources again customers about required revenue and Central San Academy,student education impacts to the customer resources needed to replace aging programs,facilities tours,Pipeline community infrastructure and meet regulatory newsletter,and social media engagement requirements T ENVIRONMENTAL STEWARDSHIP I ■ Meet regulatory requirements and promote sustainability 2.Evolving regulatory Anticipate changing regulations and plan for Proactive participation with regulatory agencies requirements alternatives to maintain reliability and meet and replacement of wet scrubber as part of the requirements Solids Handing Facilities Improvement Project 3.Maintaining a sustainabl Partner with agencies to find creative water Continue pursuing the Refinery Recycled Water water supply solutions benefiting the region and state,and Exchange Project to utilize recycled water at identify ways to maximize cost-effective nearby refineries in place of potable water to resource recovery and sustainability increase the amount of potable water available to the community 5 - I 5 ADDRESSING 8 STRATEGIC PRIORITIES ��M Primary Response FY 2021-22 Budgeted Project(s) FISCAL RESPONSIBILITY Manage finances wisely and prudently 4.MaintainingBalance capital spending with affordability Financial planning to forecast needs and rates at an affo:J and rate impact concerns,and offset sensible spending,as well as the continued push infrastructure replacement,regulatory to become a more cost-effective and efficient responses,and other expenses with operation cost-saving efforts,efficiencies, optimizations,and innovations WORKFORCE DEVELOPMENT Recruit,empower,and engage a highly trained and safe workforce S.Driving employeeDevelop,retain,and equip high quality Employee recognition,training and performance and rewardin employees with the tools needed to succeed development programs,outside conferences, excellence and professional association memberships to inspire continuous education and improvement ® INFRASTRUCTURE RELIABILITY Maintain facilities and equipment to be dependable,resilient,and long lasting i s.Aging infrastructure and Make investments in capital improvement Major projects include the Solids climate resiliency and internal resources to deliver on increased Handling Facility Improvements and Filter Plant levels of capital spending and Clearwell Improvements 6 ' 6 ADDRESSING 8 STRATEGIC PRIORITIES Primary Response FY 2021-22 Budgeted Project(s) WINNOVATION AND OPTIMIZATION Explore new technologies for continuous improvement 7.System optim Continue to champion and initiate projects Optimizations include the Steam and Aeration utilization of Big Data through the Central San Smart initiative to Blower Systems Project to evaluate efficiency optimize operations,improve asset options for one of the major energy sources of management,increase energy efficiency and the treatment process safety,and reduce facility management costs Smart initiative projects include optimization of the treatment plant asset handover process and development of an asset health indicator tool AGILITY AND ADAPTABILITY �.i Preserve business continuity during pandemic events or major natural disasters �MicContinue to maintain a safe working Continue to update and enforce the COVID-19 environment for employees and the public Exposure Prevention Plan while providing essential services 7 I 7 BUDGET SUMMARY Variance Operations& $89,720,456 $87,584,775 $90,666,338 $90,974,103 $307,765 0.3% Maintenance Sewer Construction $45,319,000 $66,176,000 $88,024,000 $107,955,000 $19,931,000 22.6% Debt Service $3,611,038 $2,982,415 $2,517,605 $2,511,227 ($6,378) -0.3% Self-Insurance $924,500 $1,073,700 $1,153,500 $1,285,000 $131,500 11.4% Total Budget $139,574,994 $157,816,890 $182,361,443 $202,725,330 $20,363,887 11.2% THE PROPOSED BUDGET PROVIDES THE RESOURCES TO MEET THE GOALS OF THE ris<alr.�r Z020-32 GOALS FY 2020-22 STRATEGIC PLAN 8 � s KEY BUDGET TAKEAWAYS • Commitment to Excellence and High Level of Service • Special focus to minimize O&M cost • Reflects cost of living adjustments for employees per MOUs • Capital Spending ramping up consistent with 10-year plan • UAAL paydown not reflected in this draft budget; budget amendment to follow, after transaction execution • Following slides show funding USES and SOURCES for each of four budget subfunds (O&M, sewer construction, self- insurance, debt) _. 9 I 9 ALL BUDGETS: USE OF FUNDS FY 2019-20 FY 2020-21 FY 2021-22 $159,166,815 $182,361,443 $197,942,128 Use of Funds 5120.000,000 5100,000,000 sB0,0oa,0w - 560,000,ua: 540,000,00 520,000,Bw 5j20,000,000) cp.--d sewer Cortstrtx— Oedts— 5en-vuu—e Cormibutonto PlannedCortraution MairtenarKe Budgetat9o% ReSHveS to Rae Sktiuedcn FUMing in FY 22 Account ■FY 2019-20 Budget ■FY 2020-21 Budget ■FY2021-22 Budget • Modest$0.3 million increase in O&M budget,with various strategies adopted to control costs. • $19.9 million increase in capital spending (excluding carryforwards), largely in treatment plant program (65% of increase) • Net contribution to policy required reserves is only$842K, but$5.2 million transfer to RSA is planned (related to maintaining flexibility of funds) -c 'Oel 10 ALL BUDGETS: SOURCE OF FUNDS FY 2019-20 FY 2020-21 FY 2021-22 $159,166,815 $182,361,443 $197,942,128 Sources of Funds $120,000,000 $100,000,000 $80,000,000 $60,000,000 $40,000,000 $20,000,000 $- M1 ■E■ ___ Sewer Service Charge Cityof Concord Property Tax Capacity Fees All Other Sources Loan Proceeds Dr fr Reserves Revenue (see Table 14) ■FY 2019-20 Budget ■FY 2020-21 Budget ■FY 2021-22 Budget • Sewer Service Charge (SSC) rate relief approved by Board May 7, 2020,for FY 20-21 and expiring in FY 21-22 reverting back to originally adopted SSC • Reduction in reimbursement from City of Concord reflective of increase in debt-financed projects in FY 21-22. Policy issue involved. • Loan Proceeds: $34.1 million of SRF loan funding anticipated • No overall draw from reserves planned for next fiscal year 11 SEWER SERVICE CHARGE RATES AND REVENUES FY 2019-20 THROUGH FY 2021-22 FY FY FY SSC Rates 19-20 20-21 21-22 Change % Increase Single Family $598 $598* $660* $62* 4.75%** Multi Family $566 $566* $625* $59* Other Classes -----Char es Vary—See Ordinance No. 304----- Post-Rate Change from Budget Budget Projected Relief Budget FY 20-21 %Increase FY 19-20 FY 20-21 FY 20-21 FY 21-22 Projected* from Projected SSC Revenues $101,310 $101,201 $101,866 $107,944 $6,078 6.0% ($Thousands) *Customer relief measure approved by Board May 7, 2020--waived collection of the July 1, 2020 (FY 20-21)rate increase. **System-wide averages of 5.25%from FY 2020-21 and 4.75%for FY 2021-22 increases now collected starting July 1, 2021 -1 12 OPERATING FUND EXPENDITURES FY 2021-22 $91.0 $MILLIONS) D.Supplies& D.Other Expenses, D.Other Purchased Materials,11.6% 1.3% Services,7.6% D.Purchased Property Services, 6.5 C.Additional UAAL Contributions,1.4% C.Pension UAAL, 12.7% / C.OPEB UAAL,1.4% B.Benefits&Cap 0/H Credit,13.9% • Approximately 73.1%of next year's O&M budget is for labor-related costs(including UAAL,which is not a current employee benefit) • $93 MM revenue-$91 MM expenditures=$2 million,prior to$5.2 million planned transfer to Rate Stabilization. 1s I 13 O&M BUDGET MITIGATION MEASURES • Net O&M budget growth is only 0.3% • Several measures were used to control O&M growth: () Financi,a of 'on kJAAL Ac Regulatory in As�1r1creaSL "I 17di, G)ex,,,�ding ADaC Service Charge "JocatiOn Direct to Self-ln,u 14 4. OPEB PAY-GO EXCEEDING ACTUARILYY DEFINED CONTRIBUTION (ADC) $6,000,000 $7,500,000 $7,000,000 $6,500,000 Savings $6,000,000 $5,500,000 $5,000,000 $4,500,000 $4,000,000 $3,500,000 $3,000,000 2017 2016 2019 2020 2021* 2022** 2023** Fiscal Year Ending June 30 tRetiree Premium Costs -4--Actuarially Determined Contribution(ADC) *Per FY 2020-21 Budget,using revised ADC estimates from Bartel **Per 7/1/20 actuarial valuation rence ($1.3MM)drawn from OPEB Trust(labeled "Savings"above) ratio will continue to improve; albeit at a slightly slower pace 15 OPERATING EXPENSE TREND $45,000.000 Employee Related Costs:73% Other Costs:27% $40,000,000 $35,000,000 $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 SO ��IIJI�.. Oca...—•-- DoDaV1 0 0 P Sa10 Be�t�&GaPO�Ngtse�efltz lRe��CC 16,11010 �a`C�a UPD Q J"�as cVVoge Ode p�chasedDes PPC�es&Ma�eeO\pOIL-' iher�xPe,5e5.Se\ft^SO�a�ce e''E O ■FY 2019-20 Budget ■FY 2019-20 Actual o FY 2020-21 Budget ■FY 2020-21 Projected o FY 2021-22 Budget • Employee related costs decrease 0.7%($0.5 million). • Relatively"flat"Salaries&Wages:(0.4%increase): COLA offset in part by increase in vacancy factor to 3%and a workforce attrition rate of 6.5% • Benefits up$1.1 million(9.9%) • LIAAL Contributions decrease(-11.3%)due to OPEB cost capped at ADC and reduction in LIAAL contribution rate to CCCERA • Other Costs up 3.3%or$0.8 million I 16 - 16 O&M SPENDING BY DEPARTMENT 535,00,000 525,0W,WO $2010 1" $15'='0 o S1a,aao,a0o - 5s'='000 L " 0 " �� $0 PldntO PfaliOn; B, p gineeditg and C011ettiOn System ReryUetl Water Mainlenarce, Admini5l ration Tetlnical Sarviras ppprabnnS Prpgram 03rermr of Ops Oepanment WFY2019-20 Budget $29,651,077 $24,292,708 $17,993,064 $14,639,570 $1,552,794 .'Y 2020-21 Budges $30,506,348 $25,148,751 $19,623,383 $14,916,565 $1,608,348 WFY2021-228ud8el 531467,88A S24,619,232 $18,293,799 514982,438 51,610,750 • Modest budgeted increase of$0.3 million (0.3%) • Largest increase is in Operations Department, primarily attributable to the Treatment Plant Maintenance division • Reduction in Administration Department largely driven by OPEB savings as well as an increase in the vacancy factor credit 17 BUDGETED STAFFING: • Staffing of 291 full-time equivalent positions (two term-limited positions drop off from current year budget of 293) • Based on 2015 staffing and organizational study • Changes from current year include: - Senior Administrative Technician transferred from Office of General Manager to the Office of the Director of Finance&Administration - Senior Administrative Technician position reclassified to Human Resources Analyst(Human Resources Division) - Vacant Operations Safety Specialist deleted and a Staff Engineer position created in Plant Maintenance Division - Vacant Deputy General Manager position was deleted, and a Director of Operations was added (Office of the Director of Operations) - Administrative Assistant position in the Office of Director of Operations was transferred to the Plant Maintenance Division Administrative Assistant position in the Office of Director of Operations was transferred to the Plant Operations Division 18 O&M LABOR-RELATED BUDGET HIGHLIGHTS • Salaries &Wages: - Cost of Living Adjustment(COLA)is 2.0%for MSCG &Local 1 and 1.75%for Management&Unrepresented groups - Assumed vacancy factor increased from 2.0%to 3.0%. - Reverting to 291 FTEs from 293 budgeted in the prior year - Overall increase of just under$0.2 million (0.4%) • Benefits (Current Employee Costs): - CCCERA(Normal Cost)contributions(as%of payroll) increasing 0.93% for legacy employees to 16.96% and increasing 0.18%for PEPRA employees to 11.06% (per 12/31/19 actuarial valuation) - Normal cost increases from$5.2 million to$5.4 million,or 4.1% - CalPERS Medical premium increase of 7.0% effective January 1, 2022 Delta Dental premium increase of 3.75%effective January 1, 2022 Overall increase of just over$1.1 million (9.9%) 19 O&M LABOR-RELATED BUDGET HIGHLIGHTS (CONTINUED) • UAAL Costs - OPEB: ADC is$3.3 million,a 15.1%reduction from the prior year(as restated for the transition to CalPERS Healthcare). Retiree healthcare premiums estimated at$4.3 million,increasing 4.9%over the prior year. Retiree healthcare costs in excess of ADC eligible for reimbursement from OPEB trust,thus FY 2021-22 OPEB budgeted costs are"capped"at the ADC - Pension (CCCERA) Required UAAL payment of$11.5 million,a decrease of 4.9%from the prior year UAAL contribution rate decreasing by 0.31%to 34.5%(per 12/31/19 valuation) ' - Additional UAAL Contributions .4� Remains steady at$1.25 million to either pension or OPEB at Board's discretion. Potentially available for other unbudgeted/unforeseen increases at Board's discretion 20 PENSION AND OPEB LIABILITY AND FUNDING STATUS Pension OPEB $160 100% $90 100% $140 90% $80 90% $120 80% $70 s0% 70% $60 70% $100 so% $50 60% $8090% 50% $600 ,% 40% $40 40% a0% $30 90% $40 zo% $20 zo% $2010% $10 ' 10% $0 $0 0% 01'L 'L 0S'' 'L O^1a 'L 015 'L 1,1 'L 01, I'll 0,9 0�ry 01'� 01Q 015 0,6 0'y� 01$ 01°' OTO 0'L,' 'L Year ended 12/31 Year ended 6/30 IIIIIIIIIIIIIUAAL —Funded% iiiiiiiiiiiiiUAAL —Funded% • OPEB funding valuations performed every two years to determine contributions (GASB 75 valuations performed annually,but for audited financials only) • Pension funded%excludes Section 115 Prefunding Trust Assets($12 MM as of March 2021) • Board/Staff currently exploring pension UAAL payoff for FY 2021-22 zt 1 21 OPERATING FUND - FUNDING SOURCES Budgeted F ($MILLIONS)Y 2020-21: $90.7 Budgeted FY 2021-22$93.0 Other Permits& Lease Inspection All Other Rental $2.1 $0.9 1% Recycled 2% Fees$2.0 Income Water$0.4 HHW$1.1 2% $0.7 1% 0% 1% Permits& HHW$1.0 City of Inspect! 1% Concord Fees$1.9 �- $15.8 18% 2% City of Concor Sewer Ser 15.8 17% . Charge$44.5 er Service raw from Reserves 49% arge$72.3 $25.2 28% 78% • Increase in SSC allocation to O&M, back to normal proportion following draw down of working capital reserves in the prior year • City of Concord O&M reimbursement unchanged at$15.8 million • "All Other"comprised of revenue categories individually less than$400,000 zz ' 22 CAPITAL BUDGET HIGHLIGHTS: INFRASTRUCTURE INVESTMENT • Infrastructure Investment Over Past Ten Years: $382.1 million $1o0.0 $90.0 $80.0 $70.0 $60.0 $50.0 $40.0 $30.0 $20.0 1 $10.0 $0.0 FY 2011-12 FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 Projected Recycled Water Program General Improvements Program Collection System Program iiiiiiiiiiTreatment Plant Program -Budget(FY2017-18 forward)and"Estimated Expenditures"previously • FY 2021-22 budgeted investment is $108.0 million, an increase of 23% from FY 2020-21. 23 CAPITAL IMPROVEMENT PROGRAM EXPENDITURES FY 2021-22 $108.0 MILLION General Improvements$3.8 4%� Corjtineencv 52.5 2% Recycled Water $16.6 15% Tire Plant 42 Collection System$39.8 37% • Increase in budgeted capital spending of$19.9 million (23%) • Budget incorporates 90% non-spend factor for cash flow projection purposes, reducing funding need by$10.8 million • Anticipated cash funded capital expenditures of$66.5 million (subject to change if planned COP issuance is completed) • Net budgeted contribution to reserves of$3.7 million `-1 24 CAPITAL IMPROVEMENT PROGRAM FUNDING SOURCES FY 2021-22 $100.8 MILLION Capacity Fees Other$0.6 City of Concord Capital I Reimbursement$8.7 $6.0 6% 0% 9% Ad Valorem Tax$17.3 Debt Proceeds$3 17% 34% Sewer Service Charges $34.1 34% • Increase of$2.9 million(3%)over the prior year is smaller than budgeted spending increase of$19.9 million(23%)due to: • 90%funding factor • Contribution to reserves is only$3.7 million versus$9.9 million in FY 2020-21. • Significant funding source next year is SRF loan proceeds, impacting/reducing reimbursement from City of Concord(they will pay debt service,when that begins) • Sewer Service Charge: Subject to change if COPS issued(Sewer Service Charge would go to O&M for pension UAAL paydown) -� 25 SELF INSURANCE BUDGET FY 2021 -22 Operating Revenue Operating Expense $1,651,419 $1,285,000 HHW Technical&Other Legal Services, Interest$50,000 Contribution $140,000 x$25,000 Services,$70,000 Expected Losses, $225,000 Insurance Sewer Service Charges Premiums, $1,576,419 $850,000 144 • Net impact is a contribution to reserves of$366,419 • Budgeted Self-Insurance Operating Expense reflects an increase of$131,500 (11.4%), due to higher insurance premiums(which may be increasing more than even this planned increase due to"hard market'conditions) • Sewer Service Charges allocated directly to this fund in FY 2021-22 26 DEBT SERVICE BUDGET FY 2021 -22 Operating Revenue Operating Expense $2,511,227 $2,511,227 Interest Interest Payments Income$- $706,227 Ad Valorem PropertyPrincipal Tax 400 Payments $zsu,zz7 805 000 J%W • Ad valorem property taxes are first applied to debt service with any excess available to Sewer Construction fund • Excludes debt service on Certificates of Participation (COPs),which may be issued in June 2021 27 RESERVE BALANCE PROJECTIONS FY 2020-21 • Reserves: • (1) Comply with policy specified minimums(to ensure we have adequate resources) • (2) Affects allocation of sewer service charge to various sub-funds • (3) Affects rate setting,in conjunction with drivers from 10 year financial plan `M��MWZM= Reserve PolicyTarget end of 2 June 30,20221 $37,905,876 $33,225,750 $6,500,000 $77,631,626 Projected Balance as of June $43,644,698 $61,605,266 $6,133,581 $111,383,544 30,2021 Projected Balance Minus Reserve Policy Target at June $5,738,821 $28,379,516 ($366,419) $33,751,918 30,2021 • Reserves projected to meet or exceed the policy required levels at year end. • O&M reserves above policy target level will be used for a planned contribution to rate stabilization fund account of$5.17 million. • Sewer Construction reserves available to meet financial policy goals and for spending in future years. • Definition of"Working Capital Reserves"includes current assets and liabilities in addition to"cash and investments". 28 RESERVE BALANCE PROJECTIONS FY W009=00== Projected Balance as of June 30,2021 $43,644,698 $61,605,266 $6,133,581 $111,383,544 Projected Balance as of June 30,2022 $40,464,998 $65,261,511 $6500,000 $112,226,509 Change in Reserve ($3,179,699) $3,656,246 $366,419 $842,965 Reserve Policy Target end of June 30,2022 $40,464,998 $32,506,441 $6,500,000 $79,471,439 Projected Balance Minus Reserve Policy Target at $- $32,755,070 $- $32,755,070 June 30,2022 • Planned transfer of$5.169 million to RSA results in reduction$3.179 reduction next year for O&M reserve. • O&M targeted to meet required working capital reserve level based on estimate of FY 2022-23 O&M budget. • Sewer Construction Fund reserves above policy required level,and for use in meeting future year requirements per 10-year financial plan. I 29 29 CHANGES FROM INITIAL DRAFT OF BUDGET BOOK • Certain revisions to May 6, 2021 draft of budget book have been made • Changes are tracked in a master log with the most substantive changes being the following: • Pg. 75 "Table 14— Reserve Projections"- Figures in Sewer Construction fund inadvertently shifted down in column when making a correction. The revised table is included in Attachment 3. • Pg. 191 "FY 2021-22 Capital Improvement Budget Construction Commitments"—This page was incomplete and marked "Draft' in the 5/6/21 draft of the budget book. It has since been completed and will be presented to the E&O Committee 5/11/21. 30 PENDING MATTERS LIKELY TO AFFECT BUDGET Information not available for inclusion in budget on normal timeline. The need for a budget amendment is anticipated early in FY 2021-22. 1. Pension UAAL paydown: Eliminate UAAL in O&M, increase debt service. Balance to pension trust 2. March 29 Supreme Court Ruling in Kaanaana v. Barrett Business Services, Inc: Affects "public utility, reclamation, and other special districts". Expands scope of work to be paid at prevailing wage. 31 JUNE 3, 2021 PUBLIC HEARING Approve and Adopt Budgets 1 Operations & Maintenance 2Capital Improvement 3 Self-Insurance 4 Debt Service 5 Insurance Renewal 32 QUESTIONS 33 I Page 19 of 20 Attachment 2 Table 14—Reserve Projections Sewer Self-insurance O&M Fund Construction Fund Totals Fund (Capital) Actual Balance as of June 30, 2020 $65,959,541 $73,802,435 $6,758,581 $146,520,557 Projected Balance as of June 30,2021 $43,644,698 $61,605,266** $6,133,581 $111,83,544 Change in Reserve balances during FY 2021-22: Net Increases from Revenue over Expenses: $1,989,633 $3,656,246 $366,419 $6,012,298 Planned Transfers in FY 2021-22 ($5,169,332) $- $- ($5,169,332) Projected Balance as of $40,464,998 $65,261,511 $6,500,000 $112,226,509 June 30,2022 Change year over year ($3,179,699) $3,656,246 $366,419 $842,965 Reference: Table 7 Table 13 Self-Insurance See Figure 3 Table 1 Percentage change year over year -7.3% 5.9% 6.0% 0.8% Ending balance at 6/30/21 is Funds were set projected to be aside in above policy Recent years to Explanation required level be used toward due to the funding of projected 0&M future year's savings in Capital Budgets FY 2020-21 Comparison to Policy Target-Start of Budget Year 50%of following 3 times 5/12 of annual Policy Target following year's Year's non-debt deductible of 0&M Budget funded Capital Budget $500,000 plus $5 million Reserve Policy Target end of June 30,2021 $37,905,876 $33,225,750 $6,500,000 $77,631,626 Projected Balance minus Reserve Policy Target at June 30,2021 $5,738,821 $28,379,516 ($366,419) $33,751,918 Comparison to Policy Target-End of Budget Year Reserve Policy Target end of June 30,2022 $40,464,998 $32,506,441 $6,500,000 $79,471,439 Projected Balance less Reserve Policy Target ($0) $32,755,070 ($0) $32,755,070 at June 30,2022 Reserve calculations subject to close of financial results for the year and may differ from projection. ** Excludes projected carryforward of$29,123,770(also to be adjusted for any closeout savings). Projected reserves at 6/30/2021 and 6/30/2022 would be that amount higher with inclusion of the carryforward. May 17, 2021 Special FINANCE Committee Meeting Agenda Packet- Page 21 of 24 Page 20 of 20 ATTACHMENT 3 FY 2021-22 Capital Improvement Budget Construction Commitments As of April 2021, the total construction commitments authorized by the Board to-date prior is $73.0 million for FY 2020-21 and a total of$59.8 million for future years thereafter. This includes all construction contracts, purchase orders, construction management, and supporting services to complete the construction phase within the CIB. Sewer Construction Budget, $120 Commitments and Capacity $120 r— $100 I 29.81 $100 119.9 1 1 28.9 1 1 1 1 $80 1s.0 �1 1 1 j $80 \J 1 1 1 1 1 35.8 1 1 1 1 1 1 1 1 1 $60 j $60 1 1 1 1 1 80.4 $40 ; 88.0 1 $40 1 1 1 1 1 1 1 1 1 1 1 1 $20 j j $20 1 1 1 1 1 1 1 1 20/21 21/22 Fiscal Year 22/23 23/24 ®Approved and Projected Budget per FY Committed already(contracted) 1===lRemaining capacity with existing rates R==Additional capacity with planned increases *Future years amounts may differ to the extent of reserve drawdowns.Additional analysis required. 191 May 17, 2021 Special FINANCE Committee Meeting Agenda Packet- Page 22 of 24