HomeMy WebLinkAbout12.a.Att.2-O&M Budget Overview Presentation (updated) Attachment 2
(Updated Presentation)
PROPOSED
CENTRAL SAN BUDGET
FISCAL YEAR 2022-23
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 16,2022 Board Meeting
Board of Directors presentation on May 26,2022
Capital Presented to:
Engineering and Operations Committee
May 11,2022
._ Operations and Maintenance Presented to:
- Finance Committee
May 9,2022
1
BUDGET SCHEDULE
January-March: Budget data collection, calculations,
analysis, and internal review/approval
March-April: Budget book development
March 24: Financial Workshop
May 5: Draft budget released
May 9: Finance Committee review of O&M
May 11: E&O Committee review of capital
May 26: Budget Presentation
June 16: Scheduled Budget Approval
Essentially the same timeline as in prior years, except
for the budget adoption date being extended.
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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
• Recap and Next Steps
3
ACCOMPLISHMENTS
• Continued providing essential services during COVID-19 pandemic,while
taking appropriate measures to keep public and employees safe
• Paid off pension unfunded liabilities and substantially reduced the other
post-employment benefits (OPEB)unfunded liabilities,while achieving a
projected savings of over$15 million over the next seven years
• Invested to address critical infrastructure needs, such as:
• Replaced or rehabilitated over six miles of pipes in Danville, Walnut
Creek, Lafayette, Martinez, Pleasant Hill, and Orinda
• Major renovations at Pumping Stations in Orinda and Moraga and
Recycled Water Filter Plant
• Constructed the Outfall Renovation project and Safety Phase 5 to add
emergency exit stairs to the Solids Conditioning Building
• Achieved the lowest-ever recorded volume of overflows.
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ACCOMPLISHMENTS (CONTINUED)
• National Association of Clean Water Agencies(NACWA)
Peak Performance Platinum Award, honoring 24 consecutive years of
100%compliance with wastewater discharge permit
• Reopened Permit Counter and launched an online scheduling system to
serve customers
• 70,000 visits to the Household Hazardous Waste(HHW)Collection
Facility and Residential Recycled Water Fill Station,with 2.2 million
pounds of HHW collected
• Served 5,800 students via the digital Pipe Protectors education program
• Continued ongoing optimization and improvement of the new enterprise
resource planning (ERP)software. Launched IT Strategic Planning
effort.
• Reimbursed $996,000 from the State Special District COVID-19 Relief
fund
• Launched Central San's Diversity, Equity, and Inclusion (DEI)initiative
• Maintained strong performance on strategic plan metrics
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5
ADDRESSING 9 STRATEGIC PRIORITIES
mcc=-"�_I Primary Response FY 2022-23 Budgeted Project(s)
CUS
X4:%.1 Provide exceptiio al seryservice
ITY
9
1.Balancing the need for Continue commitment to educating Public outreach,including the highly successful
financial resources against 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
ENVIRONMENTAL STEWARDSHIP
Meet regulatory requirements,promote sustainability,and identify and reduce contributions to climate change
2.Evolving regulatory Anticipate changing regulations and plan for Proactive participation with regulatory agencies
requirements alternatives to maintain reliability and meet as part of the Solids Handing Facilities
requirements Improvements Project
3.Maintaining a sustainable 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
ADDRESSING 9 STRATEGIC PRIORITIES
Primary Response FY 2022-23 Budgeted Project(s)
WORKFORCE DIVERSITY AND DEVELOPMENT
UP, Recruit,educate,empower,and retain a workforce from diverse backgrounds
4.Driving employee q Develop,retain,and equip high quality Employee recognition,training and
performance and rewarding employees with the tools needed to succeed, development programs,outside conferences,
excellence so Central San may become a preferred and professional association memberships to
diemployer inspire continuous education and improvement
GOVERNANCE AND FISCAL RESPONSIBILITY
Uphold integrity,transparency,and wise financial management in an effective governing model
S.Maintaining responsible rat Balance capital spending with affordability and Financial planning to forecast needs and
at an affordable level rate impact concerns,and offset infrastructure sensible spending,as well as the continued push
replacement,regulatory responses,and other to become a more cost-effective and efficient
expenses with cost-saving efforts,efficiencies, operation
optimizations,and innovations
INSAFETY AND SECURITY
provide a safe,secure,and healthful workplace that foresees and addresses threats
the safety and Increase security at the treatment plant to Projects to construct and provide safety
J.tecting
tyof both people and address increased contractor and upgrades and to contract with a consultant to
construction activity,and implement an help develop and implement the IT Master Plan
Information Technology(IT)Master Plan with
cybersecurity in mind
7 '
7
ADDRESSING 9 STRATEGIC PRIORITIES
Primary Response FY 2022-23 Budgeted Project(s)
® INFRASTRUCTURE RELIABILITY
Maintain facilities and equipment to be dependable,resilient,and long lasting
7.Aging infrastructure and Make investments in capital improvements Major projects include the Solids Handling
climate resiliency and internal resources to deliver on increased Facilities Improvements and Filter Plant and
levels of capital spending Clearwell Improvements
INNOVATION AND AGILITY
Optimize operations for continuous improvement,and remain flexible and adaptable
8.System optimization and Continue to champion and initiate projects Continued launch of the Treatment Plant
utilization of Big Data through the Central San Smart initiative to Strategic Innovation and Optimization Initiative.
optimize operations,improve asset Other optimizations include the Steam and
management,increase energy efficiency and Aeration Blower Systems Project to evaluate
safety,and reduce facility management costs efficiency options for one of the major energy
sources of the treatment process.
Smart Initiative projects include optimization of
treatment plant asset handover process and
development of an asset health indicator tool.
Continue 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
BUDGET SUMMARY
=====W
Operations& $87,584,775 $90,666,338 $79,520,131 $85,019,046 $5,498,915 6.9%
Maintenance
Sewer Construction $66,176,000 $88,024,000 $107,955,000 $90,976,000 $(16,979,000) -15.7%
(Capital Budget)
Debt Service $2,982,415 $2,517,605 $12,891,059 $13,251,922 $360,863 2.8%
Self-Insurance $1,073,700 $1,153,500 $1,285,000 $2,170,000 $885,000 68.9%
Total Budget— $157,816,890 $182,361,443 $201,651,190 $191,416,968 ($10,234,222) -5.1%
THE PROPOSED BUDGET 11111111111wo"Ni
PROVIDES THE RESOURCES
TO MEET THE GOALS OF THEA
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is
FY 2022-24 STRATEGIC PLAN
*As amendedSO P '
**Excludes contributions to reserves 9 =
9
KEY BUDGET TAKEAWAYS
• Continued commitment to Excellence and High Level of
Service
• FY 2021-22 Budget amounts presented reflect Board-
approved budget amendment following pension UAAL
paydown in June 2021
• Higher than normal inflation impacting various line items
• Capital Spending down temporarily in FY 2022-23, but
ramping up in three-year period FY 2023-24 through 2025-
26 consistent with 10-year plan
• Following slides show funding USES and SOURCES for
each of four budget subfunds (O&M, sewer construction,
self-insurance, debt)
ALL BUDGETS: USE OF FUNDS
FY 2020-21 FY 2021-22 FY 2022-23
$182,631,443 $201,651,190 $213,536,900
$uo,000,000 —
SlDqo00,o00
$90,000,000
$80,000,000
$70,000,000
$60,000,000
$50,000,000
$40,000,000
$30,000,000
$20,000,000 —-- ——
$10,000,000
Operations&Maintenance Sewer Construction Debt Service Self-Insurance Contribution to Reserves
■FY 20-21 ■FY 21-22 ■FY 22-23
Budget Budget Budget
• $5.5 million increase in O&M budget,largely attributable to cost increases
from higher than-normal inflation.
• $17.0 million reduction in capital spending with deferral of expenditures to
future years following transformation of large Solids Handling project's scope
• Net contribution to policy required reserves of$22.1 million in FY 2022-23 in
anticipation of large increase in capital spending over following three fiscal
years (this represents this difference between the budgeted spending of
$191,416,968 and total use of funds of$213,536,900)
u '
11
ALL BUDGETS: SOURCE OF FUNDS
FY 2020-21 FY 2021-22 FY 2022-23
$182,361,443 $201,651,190 $213,536,900
$140,000,000
$120,000,000
$100,000,000 —
$80,000,000
$60,OOO,o00
$40,0W,000s20,000,000 -II ,E. MEN —a_ ■— --�
Sewer Service Debt Proceeds City of Concord Tax Revenue Capacity Fees Use of Reserves All Other Revenue
Charges Sources
•FY 20-21 Budget •FY 21-22 Budget •FY 22-23 Budget
• 4-year Sewer Service Charge(SSC)rate schedule expiring in FY 2022-23,
Cost of Service study and Prop 218 hearings anticipated next FY
• Relatively flatlined reimbursements from City of Concord reflective of debt-
financed capital projects in FY 2022-23.
• Debt Proceeds:$42.0 million of SRF loan funding anticipated
No overall draw from reserves planned for next fiscal year
SEWER SERVICE CHARGE RATES AND REVENUES
FY 2020-21 THROUGH FY 2022-23
FY FY FY
SSC Rates 20-21 21-22 22-23 Change % Increase
Single Family $598" $660 $690 $30 4.5%
Multi Family $566* $625 $654 $29
Other Classes -----Char es Vary—See Ordinance No. 304-----
Change from
Budget Budget Bud FY 20-21 %Increase from
Y 20. Projected* Projected
SSC Revenues $101,201 $107,944 $114,657 $6,713 6.2%**
($Thousands)
*Customer relief measure approved by Board May 7, 2020--
waived collection of the July 1, 2020 (FY 20-21)rate increase.
**Higher than rate increase due to dwelling unit
growth, commercial water volume growth, and baseline budget
estimate in FY 2021-22 lower than actual.
13
O&M BUDGET PRESSURES
• O&M budget growth is 6.9%
• Higher than normal inflationary pressures are included
throughout the budget including in the following areas:
US AND CALIFORNIA INFLATION
FORECASTS
CPI Infleticn,year-over-year percent change&quarterly data
-CA -U.S_ forecast
e% U.S. 2021 04,._�.
actual.-6.7%
3%
2%
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ruote:oaxe are ea or moel re�enr rare�aat.
Source_U.S.Bureau of Le�or Statiatica arM Stie 11CLA Anderson Forvcasr.
• US Level Inflation 12 months through March: 8.5%
(highest since 1981)
US Level Inflation 12 months through April: 8.3%
15
O&M EXPENDITURES FY 2022-23
$85.0
($MILLIONS)
Other Expenses,1.7%
Supplies&Materials,14.6%l
Other Purchased I
Services,9.3%-, Salaries&Wages,
50.3%
Purchased Property
Services,8.1%
OPEB URAL
UAAL,1.
Pension UAAL UAAL,
0.1% Employee Benefits,14.5%
• Approximately two-thirds(66.5%)of next year's O&M budget is for
labor-related costs(including UAAL,which is not a current employee
benefit)
Prior to pension UAAL payoff,this figure was 73.1%(FY 21-22)
O&M EXPENSE TREND
$45,000,000
$40,000,000
$35,000,000
$30,000,000
$25,000,000
$20,000,000
$15,000,000
$10,000,0$0 —
$5,000,000
$0
Salaries&Wages Employee Pension UML OPEB UANL Additional UML Purchased Other Purchased Supplies& Other Expenses
Benefits Comributions Property Services Services Materials
■FY 20-21 Budget ■FY 20-21 Actual ■FY 21-22 Budget ■FY 21-22 Projection ■FY 22-23 Budget
• Budgeted labor costs overall are increasing 2.7%($1.5 million)
• Salaries&Wages up$3.0 million(7.6%)
• Benefits down$0.4 million(3.0%)
• UAAL costs down$1.2 million(46.2%)from ceasing additional contributions
All other Non-labor costs up$4.0 million(16.4%)
17
O&M SPENDING BY DEPARTMENT
$35,000,000
$30,000,000
$25,000,000
$20,000,000 —
$15,000,000 — —
$10,000,000
$5,000,000 — —
$0 Executive Engineering& Collection System Recycled Water
Governance Administration Technical Services Operations* plant Operations** program*
M FY 20-21 Budget $3,064,387 $22,084,363 $18,623,383 $14,916,566 $30,506,348 $1,471,290
■11 21-22 Budget $2,454,169 $19,901,049 $14,880,026 $12,865,365 $27,808,771 $1,610,750
■FY 22-23 Budget $2,778,212 $20,283,342 $15,208,366 $13,480,048 $31,571,861 $1,697,217
*Function shown separately given significance of service and for comparability with PY budgets
**Includes Office of the Director of Operations,Plant Operations,and Plan Maintenance Functions
• Largest increase is in Operations Department, primarily
attributable to the Treatment Plant Operations division
New FTE positions reflected in Engineering &Technical Services
and Plant Operations departments
BUDGETED STAFFING:
• Staffing of 294 proposed full-time equivalent positions (3 higher than
prior year)
• Conducted exhaustive search to assess feasibility of moving
positions from other divisions
• Staffing changes include:
Adds:
+1: Planning&Development Services Division-Engineering
Assistant Position added(increased total budgeted headcount by one position)
+1: Office of the Director of Operations-Innovation and Optimization
Program Manager added(increased total budgeted headcount by one position)
+1: Plant Maintenance Division—Electrical Technician added(increased
total budgeted headcount by one position)
- Reclasses:
Plant Maintenance Division—Vacant Utility Worker reclassified to Lead
Maintenance Crew Member
Purchasing&Materials Services—Deleted one Contract&Procurement
Specialist and addition of a Lead Contract and Procurement Specialist
19 I
19
O&M LABOR-RELATED BUDGET HIGHLIGHTS
• Salaries & Wages:
Overall increase of$3.0 million (7.6%)
Cost of Living Adjustment(COLA)is 5.0%for all bargaining units based on 5%cap and
February 2022 SF-Oakland-Hayward annual CPI of 5.2%
Assumed vacancy factor of 3.0%.
Increase in total headcount by 3 positions to a total of 294
• Benefits (Current Employee Costs):
Overall decrease of$0.4 million (3.0%)
CCCERA(Normal Cost)contributions(as%of payroll)decreasing 0.08%for legacy
employees to 16.88%and increasing 0.22%for PEPRA employees to 11.46%(per
December 2020 actuarial valuation)
Base plan medical premium increase of 5.3%in calendar year 2023
Capitalized administrative overhead rate increasing by$1.1 million(24.4%)to$5.6
million
20 = '
O&M LABOR-RELATED BUDGET HIGHLIGHTS
(CONTINUED)
• UAAL Costs
Overall decrease of$1.2 million (46.2%)
OPEB:
ADC is$3.3 million,consistent with the prior year
Retiree healthcare premiums estimated at$4.6 million,reflecting a 7.4%
increase over the prior year.
Retiree healthcare costs in excess of ADC budgeted to be reimbursed from
OPEB trust consistent with the prior year
Pension (CCCERA)
Near elimination of UAAL payments to CCCERA following issuance of 2021
COPs in June 2021 and payoff of pension UAAL
UAAL contribution rate of only 0.16%for admin charges to CCCERA
Debt service of COPs reported in Debt Service fund
No"additional UAAL contributions" planned in FY 2022-23 given healthy
_position of OPEB and pension plans and other budget priorities next year
21
"ADDITIONAL" UAAL TRUST
CONTRIBUTIONS HISTORY
Pension
CCCERA Prefunding OPEB
Fiscal Year Trust Trust Trust Total Source of Funds
2013-14 $ 5.00 $ - $ - $ 5.00 Budgeted
2014-15 5.00 - - 5.00 Budgeted
2015-16 2.50 - - 2.50 Budgeted
2016-17 - 2.50 2.50 Budgeted,subsequent Board direction
2017-18 - 3.36 - 3.36 Board direction on fav variances
2017-18 - 2.00 - 2.00 Board direction on fav variances
2017-18 - - 2.50 2.50 Budgeted,subsequent Board direction
2018-19 - 2.50 - 2.50 Budgeted,subsequent Board direction
Budgeted,subsequent Board direction;
2019-20 - 1.25 1.25 2.50 Board direction on fav variances
Budgeted,subsequent Board direction;
2020-21 70.80 1.25 - 72.05 Board action on UAAL payoff
2021-22 - - 1.25 1.25 Budgeted,subsequent Board direction
$ 83.30 $ 10.36 $ 7.50 $ 101.16
*Balance of approximately$12.8 million(including investment gains)
utilized to help finance payoff of pension UAAL balance June 2021
22 ~I
PENSION AND OPEB
LIABILITY AND FUNDING STATUS
Pension Actuarial Results OPEB Actuarial Results
$160 100% $90 100%
$140 90% $80 90%
8
0% ^$70 so%
$120 70% 2$60 71%
$100
.� 60% .=£$SO ao%
$80 "% E$40 50%
$60 40% 40%
$30 90%
Q $40 30%
zo% $20 zo%
20 10%
10
$$0 0% $$0 ' ' o%
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Year ended 12/31 Year ended 6/30
�UAAL —Funded% iiiiiiiiiiiiiUAAL —Funded%
• *Official pension actuarial reports do not yet incorporate UAAL payoff;this will
be reflected in the next valuation report available in September 2022
• Pension actuarial valuation showed Central San funded at 85.8%(88.4%using
Pension Pre-Funding Trust assets)
OPEB funded at 85.7%as of 7/1/21 per latest actuarial valuation on an actuarial
luation(not"market valuation")basis.
23 '
23
OW FUNDING SOURCEs FY 2022-23
$69.8
($MILLIONS)
Permits&Inspection Fees$1.8 3%
Otherincome$2.2 3% I HHW$1.0 1%
fconcord
$17.6 25%
Sewer Service Charge$47
68%
• Reduction in SSC reflects return to normal allocation following
replenishment of O&M reserves for pension UAAL payoff in June 2021
• City of Concord O&M reimbursement second largest revenue source,
fluctuating with OW budget and projected share of treatment plant flow
Investment income captured in'other"reflects growth in Fed interest rates
CAPITAL BUDGET HIGHLIGHTS:
INFRASTRUCTURE INVESTMENT
• Infrastructure Investment Over Past Ten Years: $430.7million
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25 I
25
SEWER CONSTRUCTION / CAPITAL BUDGET
FY 2022-23 EXPENDITURES
$91.0 MILLION
General Improvements$3.6 4% Continzencv$2.0 2%
Recycled Water$8.7
10%
Treatment
Collection Plant $40.0
System$36.6 44%
40%
• Reduction in budgeted capital spending of$17.0 million (-15.7%)
• Budget again incorporates 90% non-spend factor for cash flow
projection purposes, reducing funding need by$9.1 million
• Anticipated cash funded capital expenditures of$39.9 million
• Net budgeted contribution to reserves of$46.9 million for increase
in CIP over next three fiscal years
,. _ 21 1
SEWER CONSTRUCTION / CAPITAL BUDGET
FUNDING SOURCES FY 2022-23
$128.8 MILLION (INCLUDING DEBT PROCEEDS
City of Concord Capital Capacity Fees Other$0.6
Reimbursement$7.5 6% $4.6 4% /_ 0%
Ad Valorem Tax$8.3
6%
rSe.ervice Charges
Debt Proceeds$42.0
51%
33% 0100,
• Increase of$28.0 million(27.7%)over the prior year due to
normalization of SSC allocation to Sewer Construction Fund
• Significant funding source next year is SRF loan proceeds,
impacting/reducing reimbursement from City of Concord(they will pay
share of debt service,when that begins)
• Contribution to reserves of$46.9 million necessary to address
increase in CIB over next three fiscal years
27
SELF INSURANCE BUDGET
FY 2022-23
Operating Revenue Operating Expense
$1,734,501 $2,170,000
HHW
Interest$47,400 Contribution Technical& Legal Services,
x$25,000 Other $375,000
Services,
$70,000
Expected Insurance
Losses, Premiums,
Sewer Service Charges
$425,000. $1,300,000 _
$1,662,101
• Net impact is a draw-down of reserves of$435,499
• Budgeted Self-Insurance Operating Expense reflects an increase of
$885,000(68.9%),due to higher insurance premiums(due to"hard
market'conditions),increased budgeted loss payments and litigation
expenses.
hwi�tl
serve target increased by$2.5 million during FY 2021-22 by Board
total of$9 million '
S
DEBT SERVICE BUDGET
FY 2022-23
Operating Revenue Operating Expense
$13,251,922 $13,251,922
Interest
Payments Trustee&
$2,499,422 Other Costs
$2,500
Ad Valorem
Property Tax Principal
$13,251,922 Payments
$10,750,000
• Ad valorem property taxes are first applied to debt service with any
excess available to Sewer Construction fund
• Now includes debt service on Certificates of Participation (COPS),
esulting in significant increase over the prior year
29 f
29
CONCORD REVENUE ANALYSIS
• Concord Agreement specifies they will pay a flow-proportionate share of costs for O&M
and capital excluding collection system cost.
• Billing is issued after close of fiscal year based on actual costs,accordingly revenues
in budget are estimated.
FY 20-21 Actual ; $15,002,567 'r $10,064,155 $25,066,722
FY 2021-22(Budget) — $15,445,534 —� $8,700,914 $24,146,448
FY 2022-23 $17,600,000 $7,500,000 $25,100,000
Change $2,154,466 ($1,200,914) $953,552
13.9% (13.8%) 3.9%
13.4%increase in Operations
Department excluding CSO
(direct cost) 15.7%decrease in
Treatment Plant budget includes Capital Spending
Reflective of several costs impacted by inflation Greater use of debt for financing
(chemicals,utilities,hauling) projects in FY
Concord pays 32%share of 2022-23 vs.FY 2021-22
$10,740,000 of 2021 COPS for
pension UAAL paydown
• 33%flow assumed in FY 2021-22 and 32%in FY 2022-23.
• Overall increase of 3.9%is due to factors noted in bottom row of table.
• Amount was not adjusted upward from initial estimate that assumed a$83.5
million O&M budget rather than final amount of$85 million;deemed
appropriate given typical underspend of O&M budget. '
30
CONCORD REVENUE ANALYSIS
Annual Concord Reimbursement Trend(O&M)
$26.00
$24.00
$22.00
$20.00
y $18.00
$16.00
O $14.00
12.00
1p11 b��g 1019 1�1� '1.01 S61" ,L11'' fL 1p1p 1p1F'�
S I'll, ft 101 4y 1118 1019 10'0
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11 11 11 11 11
•Actual •Projected-No UAAL Payoff •Projected-With UAAL Payoff
• Assuming actuarial targets met,analysis projects approximately
$8.2 million of savings in 9-year timeframe FY 21-22 through FY
29-30 following UAAL payoff
• Excluding CSO and UAAL,assumes operations department cost
growth of 13%in FY 22-23,then 5%every year thereafter
31 f
31
RESERVE BALANCE PROJECTIONS
JUNE 30, 2022
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
Reserve PolicyTarget end of
2
June 30,20222 $35,424,602 $24,488,000 $9,000,000 $68,912,602
Projected Balance as of June $52,882,253 $89,707,244 $9,435,499 $152,024,996
30,2022
Projected Balance Minus
Reserve Policy Target at June $17,457,651 $65,219,244 $435,499 $83,112,394
30,2022
• Reserves projected to meet or exceed the policy required levels at year end.
• O&M reserves temporarily above policy following Board-approved SSC
reallocation after 2021 COPs issuance and pension UAAL paydown.
• Sewer Construction reserves available to meet financial policy goals and to
kind
dress ramp up in capital expenditures over next three fiscal years.
efinition of"Working Capital Reserves"includes current assets and liabilities
addition to"cash and investments".
RESERVE BALANCE PROJECTIONS
JUNE 30, 2023
1E1M`1EMM==
Projected Balance as of 52,882,253 89,707,244 9,435,499 152,024,996
June 30,2022
Projected Balance as of 37,626,114 72,676,486 9,000,000 119,302,600
June 30,2023
Change in Reserve (15,256,139) (17,030,758) (435,499) ($32,722,396)
Reserve Policy Target end 37,626,114 43,235,552 9,000,000 89,861,666
of June 30,2023
Projected Balance Minus
Reserve Policy Target at $- $29,440,934 $- $29,440,934
June 30,2023
• Allocation of SSC to O&M designed for O&M fund to precisely meet
required working capital reserve level based on preliminary projected FY
2023-24 O&M budget.
• Sewer Construction Fund reserves above policy required level,necessary
for meeting future year capital cash flow requirements per 10-year
financial plan.
33
JUNE 16, 2022 PUBLIC HEARING
Approve and Adopt Budgets
1 Operations & Maintenance
2Capital Improvement
3 Seif-Insurance
4 Debt Service
5 Insurance Renewal
NEXT STEPS FOR SSC RATES
• The latest Board-approved 4-year rate schedule expires
on July 1, 2023.
• Next important directives for staff include the following:
�_ �
Cost of Service Project Commences Spring 2022
Cost of Service Project Results Available Fall-Winter 2022
Board approves rates for FY 2023-24(and Spring 2023
potentially additional years)
35
BUDGET RECAP
• Budget is balanced, consistent with reserve
policies, and financial health of Central San
remains strong
• Budget projections for FY 2022-23 are generally
consistent with the long-term financial plan
Staff will continue to monitor inflation situation
A big "thank you" to all staff involved in the
important budget development process, as well
as ongoing monitoring during the year
QUESTIONS &
DISCUSSION
37 f
37
EXTRA SLIDES
FOR CONCORD
2021 COP BORROWING
• Overview:
• $58 million borrowed to fund capital expenditures in FY 2020-21 and FY 2021-22
• Freed-up rate funds, plus$12.8 million from Pension Prefunding Trust were used
to pay down UAAL pension liability of$70.8 million
• PFM risk analysis provided for 88.2%likelihood of savings(87%of at least$1 million),
based on a Monte Carlo analysis varying future pension system returns.
Probability of Success Results
•Us4,g the methodology described and the foal pddrig resu]ts of the bond sale,we calculate 00%
probability of the financing strategy generating a positive fnanclal benefit
•07%probability of generalingabenefil of at least$7,000,000
is Flnandal benefit of$10.7 mIfta anticipated over the 7-yr bond tens 11 CCCERAachleves its 7%
return target each year
is The bond rates are now flied,but actual savings will stlh depend an futum CCCERA net earnings
•If CCCERA misses Its 7%eamings target In any year,a new UAL will be generated
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2021 COP BORROWING
• Was not a Pension Obligation Bonds ("POB") borrowing, though
some had similarities and differences.
is Differences:
• Very significant difference between the pension discount rate(7%)and
COP interest costs(0.38%)results in a high probability of savings
• Historically low market interest rates resulting in a rare opportunity
• Use of tax-exempt bonds(POBs are taxable)
• Central San's pension funding status was favorable prior to the transaction at
85.7%with CCCERA assets and 88.4%inclusive of Pension Prefunding Trust
Assets.
• Risks assessed, discussed &disclosed clearly
• Does not provide assurance against future recurrence of UAAL;which is a risk
with or without the Pension paydown transaction.
• Periodic check-in's will be held with Board throughout term of debt
through 2028 (which matched pension UAAL paydown period).
- Central San's debt profile remains very conservative (8.1% debt to
set ratio at 6/30/21, and less than 7% now)
• s_.n...:.. 40