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Home My WebLink About03.a. Updated FY 23-24 Budget Presentation (Handout)Attachment 2 (Handout) May 9, 2023 Proposed Central San Budget Fiscal Year 2023-24 Philip Leiber Deputy General Manager, Administration T. Kevin Mizuno Finance Manager Budget Timeline January 12: Board Financial Workshop January -March: Budget data collection, calculations, analysis, and internal review/approval March -April: Budget book development May 4: Draft budget released May 8: E&O Committee review of capital May 9: Finance Committee review of O&M May 18: Budget Presentation June 1: Scheduled Budget Approval June 21: SSC Rate Public Hearing and Special Board Meeting 3 Accomplishments Received 94% customer satisfaction rating for the North Orinda Sewer Renovations, Phase 8 construction project. Received a 4.0 out of 4.0 average customer service rating for collection system emergency calls (as of Q2). Opened a new Recreational Vehicle (RV) Wastewater Receiving Station at no -charge for customers as part of a three-year pilot program. Won the 2022 Uptime Award for Best Work Execution Program — third in five years received by the Plant Maintenance Division. Maintained eligibility for the NACWA Peak Performance Award Platinum status for the 2Sth consecutive year, recognizing 100% compliance with discharge permit. Responded to 12 sanitary sewer overflows (as of Q2) —the 2nd lowest ever recorded number. Launched Central San's Diversity, Equity, and Inclusion (DEI) initiative. Achieved five consecutive years of receiving the GFOA Distinguished Budget Presentation Award, for the FY 2022-23 Budget. Achieved 22 consecutive years of receiving the Government Finance Officers Association (GFOA) Certificate of Achievement for Excellence in Financial Reporting. 4 /, 2 Accomplishments (continued) I Co -hosted a Recycled Water Townhall in Lafayette. 1 . Hosted the fifth session of citizens' academy, Central San Academy. Completed a wastewater cost of service study and recommended a new rate class for accessory dwelling units for Board consideration. Administration Department, Engineering Department, and Plant Operations Division achieved zero lost workdays.� Replaced or rehabilitated over six miles of pipes in Alamo, Walnut Creek, Lafayette, y Pleasant Hill, and Orinda. Completed the updated Asset Management Plan. ` Created the Operations Optimizations Division to improve efficiencies and effectiveness in all dimensions of performance at Central San. Continued ongoing optimization and improvement of the new enterprise resource planning (ERP) software, including commencing planning, design, and test phases for Enterprise Performance Management (EPM) capital project management. 5 I Addressing 9 Strategic Priorities IFY 2023-24 Budgeted Project(s) ®CUSTOMER AND COMMUNITY Provide exceptional service 1. Balancing the need for Continue commitment to educating customers about Public outreach, including the highly successful Central San Academy, unchanged /rom FY financial resources against required revenue and resources needed to replace aging student education programs, facilities tours, Pipeline community 2022-23 impacts to the customer infrastructure and meet regulatory requirements newsletter, and social media engagement s ENVIRONMENTAL STEWARDSHIP Meet regulatory requirements, promote sustainability, and identify and reduce contributions to climate change 2. Evolving regulatory Anticipate changing regulations and plan for alternatives to Develop a Fleet Electrification Strategic Plan to meet new state requirements maintain reliability and meet requirements requirements for zero -emission vehicles New Achieve new Environmental Laboratory Accreditation Program (ELAP) accreditation standard to maintain self -monitoring and reporting competency 3. Maintaining a sustainable Partner with agencies to find creative water solutions Continue exploring partnerships with Contra Costa Water District water supply benefiting the region and state, and identify ways to (CCWD), Santa Clara Valley Water District (Valley Water) and San Updated to maximize cost-effective resource recovery and sustainability Francisco Public Utilities Commission (SFPUC) to advance the Refinery mention Recycled Water Exchange Project to utilize recycled water at nearby focus refineries in place of raw Delta water to increase the amount of drinking beyond water available to the community, and collaborate with East Bay Refinery Municipal Utility District (EBMUD) on a potable reuse study Exchange Addressing 9 Strategic Priorities Key Budget Priority FY 2023-24 Budgeted Project(s) = ORKFORCE DIVERSITY AND DEVELOPMENT Recruit, educate, empower, and retain a workforce from diverse backgrounds 4. Driving employee Develop, retain, and equip high quality Employee recognition, training and development programs, performance and rewarding employees with the tools needed to succeed, so Central outside conferences, and professional association memberships to Unchanged from FY excellence San may become a preferred employer inspire continuous education and improvement 2021-23 S. Foster a culture of diversit Continue investing in the development of Central San's Retention of the services of a DEI consulting firm to help guide the equity, and inclusion (DEI) DEI initiative efforts of Central San's Task Force, including implementing findings of the DEI assessment conducted in FY 2022-23 New UEMMQ GOVERNANCE AND FISCAL RESPONSIBILITY Uphold integrity, transparency, and wise financial management in an effective governing model 6. Maintaining responsible Balance capital spending with affordability and rate Financial planning to forecast needs and sensible spending, as well Unchanged rates at an affordable level impact concerns, and offset infrastructure replacement, as the continued push to become a more cost-effective and efficient from FY regulatory responses, and other expenses with cost -saving operation 2022-23 efforts, efficiencies, optimizations, and innovations Operations Optimization Division established New _ O SAFETY AND SECURITY Provide a safe, secure, and healthful workplace that foresees and addresses threats 7. Protecting the safety and Increase security at the treatment plant to address Projects to construct and provide safety upgrades and to Unchanged security of both people and increased contractor and construction activity, and contract with a consultant to help develop and implement the from Fr assets implement an Process and Technology Optimization (PTO) Process and Technology Optimization (PTO) Strategic Plan I 2022-13 Strategic Plan with cybersecurity in mind M Addressing 9 Strategic Priorities INFRASTRUCTURE RELIABILITY` JL Maintain facilities and equipment to be dependable, resilient, and long lasting 8. Aging infrastructure an Make investments in capital improvements and internal Major projects include the Solids Handling Facilities Improvements and Unchanged climate resiliency resources to deliver on increased levels of capital spending Filter Plant and Clearwell Improvements from FY 2022-23 INNOVATION AND AGILITY Optimize operations for continuous improvement, and remain flexible and adaptable .tom 9: ron of Centra Continue to champion and initiate projects through the PTO Identify and implement process, chemical and energy efficiency San wide business and Strategic Plan. improvements. treatment processes, and project workflow and Advance overall business and decision support processes to Continue to work with internal stakeholders to optimize infrastructure improve efficiencies and effectiveness in all dimensions of (e.g., retrofitting the existing aeration basins to address nutrient delivery through performance at Central San. mitigation, developing a new electrical substation to address redundancy technology and reliability concerns and evaluating the feasibility of the steam Focused effort on the Operations Department to improve existing operations and develop new and innovative programs, projects, and training activities. 10 turbine generator as a means to convert steam surplus to electricity). Continue to work with internal stakeholders to develop the long-term plan for the Solids Phase 2 project. PTO Strategic Plan, including SMART2 utility initiatives and technology (e.g., geographic information systems (GIS) and SCADA) roadmaps. Refined language Refned language Newly added Newly added Budget Main Points Continued commitment to Excellence and High Level of Service Continued higher inflation impacts several expenditure categories (contributing to overall O&M increase of 7%) Capital Budget reduced in FY 2023-24 due to re - prioritization of projects recognition of carryforward Following slides show funding uses and sources at the fund level 11 Budget Summary Operations & $90,666,338 $79,520,131 $85,019,046 $90,946,671 $5,927,625 7.0% Maintenance Sewer Construction $88,024,000 $107,955,000 $90,976,000 71,202,000 (19,774,000) 21.7% (Capital Budget) Debt Service $2,517,605 $12,891,059 $13,251,922 9,160,142 (4,091,780) -30.9% Self -Insurance $1,153,500 $1,285,000 $2,170,000 2,160,000 (10,000) -0.5% Total Budget" $182,361,443 $201,651,190 $191,416,968 $173,468,813 $(17,948,155) -9.4% *As amended **Excluding contributions to reserves 12 1. I Inflation Trends and Forecast Percent Year -Over -Year inflation Year -Over -Year Inflation, CPI 9 B Narmcer F_ C.- 7 6 5 Jrcury Lpsnn 4 a 2 1 2020 =1 2022 CPI = Cmsumer N e II de 13 District -Wide: Use of Funds M, 2042 2= FY 2021-22 FY 2022-23 FY 2023-24 $201,651,190 $213,536,900 $194,026,300 $1 10,000,000 $100,000,000 $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 ■ FY 21-22 Budget 14 mmm Debt Service ■ FY 22-23 ■ FY 23-24 Budget Budget Self -Insurance Contribution to Reserves District -Wide: Sources of Funds FY 2021-22 FY 2022-23 FY 2023-24 $201,651,190 $213,536,900 $194,026,300 $140,000,000 $120,000,000 $100,000,000 $80,000,000 $60,000,000 $40,000,000 $20,000,000 ■ MEN MEN Sewer Service Debt Proceeds City of Concord Tax Revenue Capacity Fees Use of Reserves All Other Revenue Charges Sources ■ FY 2021-22 ■ FY 2022-23 ■ FY 2023-24 15 Sewer Service Charge Rates and Revenues FY FY FY SSC Rates 21-22 22-23 23-24 Change ($) Change (%) Single Family $660 $690 $697 $7 1.0% Multi Family $625 $654 $622 -$32 -4.9% Other Classes -----Charges Vary — See Ordinance No. 304----- Budget Budget Budget FY 21-22 FY 22-23 FY 23-24 Chan e $ Chan e SSC Revenues ($Thousands) $107,944 $114,657 $117,980 $3,323 2.9%" *Higher than rate increase due to dwelling unit growth, commercial water volume growth and baseline budget estimate in FY 2022-23 lower than actual. I 16 M. 17 5. Fund -Level Budgetary Highlights A J A4 0&M Fund Expenditures Other Expenses, 1.9% Other Purcha Services, 8.( Purchased Property Services, 8.5% Additional UAAL Contributions, 1.1% OPEB UAAL UAAL, 0.2 18 a 0&M Fund Expenditure Trend $50,000,000 $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 I a J MA11 "J11 J :y is� .a $5,000,000 Salaries & Wages Employee Pension UAAL OPEB UAAL Additional UAAL Purchased Other Purchased Supplies & Other Expenses Benefits Contributions Property Services Services Materials ■ FY 21-22 Budget ■ FY 21-22 Actual ■ FY 22-23 Budget ■ FY 22-23 Projection ■ FY 23-24 Budget 19 0&M Fund Spending by Department $35,000,000 aim Administration Engineering & Collection System Plant Operations** Technical Services Operations* $19,901,049 $14,880,026 $12,865,365 $27,808,771 $20,283,342 $15,208,366 $13,480,048 $31,571,861 $21,906,201 $15,257,107 $14,391,917 $34,297,520 *Function shown separatelygiven significance of service and for comparability with PY budgets **Includes Office of the Director of Operations, Plant Operations, Plant Maintenance, and Operations Optimization Functions 00111111111110 $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $0 Executive Governance • FY 21-22 Budget $2,454,169 M FY 22-23 Budget $2,778,212 •FY 23-24 Budget $3,169,121 all Recycled Water Program* $1,610,750 $1,697,217 $1,924,804 10 Budgeted Staffing Staffing of 298 proposed full-time equivalent positions Conducted exhaustive search to assess feasibility of moving positions from other divisions Four new FTE additions included: HHW Technician (Environmental & Regulatory Compliance) Pumping Stations Operator (Plant Maintenance) System Administrator (Information Technology) Management Analyst (Finance) Creation of separate Operations Optimizations Division and accompanying staffing transfers Reclassification of two Department Directors to create two Deputy General Manager positions 21 0&M Labor -Related Budget Highlights Salaries & Wages: Overall increase of $2.4 million (5.6%) COLA is 3.75% (at ceiling) for all bargaining units based on February 2023 SF -Oakland - Hayward annual CPI of 5.3% Assumed vacancy factor of 3.0%. Increase in total headcount by 4 positions to a total of 298 Benefits (Current Employee Costs): Overall increase of $1.3 million (10.9%) CCCERA Normal Cost contributions as % of payroll) increasing 0.63% for legacy ( ) ( p Y ) g g Y employees to 17.51% and increasing 0.21% for PEPRA employees to 11.67% (per December 2021 actuarial valuation) Base plan medical premium increase of 6.5% (based on 2022 to 2023 rates) Capitalized administrative overhead increasing by $0.1 million (1.9%) to $5.7 million 22 11 0&M Labor -Related Budget Highlights (Continued) UAAL Costs Overall decrease of $0.2 million (13.0%) OPEB: Significant decrease in UAAL component of ADC by $1.2 million (89.3%) Retiree healthcare premiums estimated at $4.2 million, reflecting a 8.7% decrease from the prior year. Retiree healthcare costs in excess of ADC budgeted to be reimbursed from OPEB trust consistent with the prior years 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 0.15% for admin charges to CCCERA Debt service of COPs reported in Debt Service fund Budget includes $1.0 million for "additional UAAL trust contribution" in consideration of market turmoil in 2022 23 Additional UAAL Trust Contribution History Pension Fiscal CCCERA Prefunding Year Trust Trust OPEB Trust Total Source of Funds 2013-14 5.0 5.0 Budgeted 2014-15 5.0 5.0 Budgeted 2015-16 2.5 - 2.5 Budgeted 2016-17 - - 2.5 2.5 Budgeted, subsequent Board direction 2017-18 3.4 - 3.4 Board direction on fav variances 2017-18 2.0 - 2.0 Board direction on fav variances 2017-18 2.5 2.5 Budgeted, subsequent Board direction 2018-19 - 2.5 - 2.5 Budgeted, subsequent Board direction Budgeted, subsequent Board direction; Board direction on 2019-20 - 1.3 1.3 2.5 favorable variances Budgeted, subsequent Board direction; Board action on UAAL 2020-21 70.8 1.3 - 72.1 payoff 2021-22 - - 1.3 1.3 Budgeted, subsequent Board direction 2022-23 - 1.0 1.0 Budgeted, subsequent Board direction 83.3 10.4 * 8.5 102.2 *Balance of approximately $12.8 million (including investment gains) utilized to help finance payoff of pension UAAL balance June 2021 24 12 Pension & OPEB Funding Status Pension Actuarial Results $160 100% $90 $140 / 90% $80 $120 80% 2 $70 o ' 70% o $60 $100 60% $80 60% _c $40 $60 40% 30% J¢ $30 $ao 20% Q $20 $20 10% 7 $10 $0 0% $0 .L01� 'L01�' 'LOtib 'L01y 'LOtib 'L�1^ .IO,� .L019 'LOti� .LO�y Year ended 12/31 �UAAL —Funded% 25 0&M Funding Sources Total FY 2023-24 revenue of $89.7 million Largest source of revenue is sewer service charges City of Concord proportion to flow to plant and changes in non - collection O&M expenditures Investment income captured in "other" reflecting growth in Fed rates PO OPEB Actuarial Results 100% 90% 80% 70% 60% 50% 40% 30% 20% ' - 10% 0% O,y`l, O,L'b O,yb 01h 0.1b 011 010 O,Lq O'1O O'11 O`10' o�'i ti ti ti ti ti ti ti ti ti ti ti ti Year ended 6/30 �UAAL —Funded% Permits & Inspection Fees $1.8 2% 13 Concord Reimbursement Revenue Analysis (O&M) $24 $22 o $20 00 00 10 00 10 $18 1 $16 0 00 00 00 00 00 00 00 00 00 0 00 00 00 00 1 00 00 1 $14 00 00 00 00 00 00 00 00 $32 Fy,tp1� Fy 101S 00 1p Fy-111°1 kA,LO'V0 1p1ti �1011 1yk P\101 ittiObS qk,$010 F'\tiO4'1 FJ pry9 SO FySp30 ■Actual •Projected -No UAAL Payoff AProjected -With UAAL Payoff --.w 27 Capital Budget Highlights Infrastructure Investment Over Past 10 Years: $465.6 Million EM $60.0 N5.3 $$0.0 N 1.2 $428 $4'0 $40.0 824 �_ . $zz $30.0 29.6 $30. $3.5 $0.6 813 $20.0 $25. $157 $20.0 ` $2.0 $03 $0.8 — $10.0 20.8 $203 $19.9 EI 2 10\1,\A y0\A'\5 1 0\S-\b V110\b.\'I 10\J,\8 y0\9-\9 10\930 1p101\ r_ Collection System Program Treatment Plant Program r_ Recycled Water Program r_ General Improvements Program Budget ("Estimated Expenditures" prior to FY 2017-18) a3 $108.0 V, 1p'0.. 1p111, "Imeccedl 14 29 Sewer Construction Fund Expenditures Total FY 2023-24 expenditures of $71.2 million Reduction in capital spending from prior year budget of $19.8 million Lower capital spending next year will allow for catch-up on unexpected budgetary carryforward Capital spending ramping back up in FY 2024-25, and remaining higher than this for duration of 10-year plan Sewer Construction Fund Sources Total FY 2023-24 funding sources of $93.1 million, including debt proceeds Decrease in total sources by $35.7 million from the prior year due to lower debt proceeds expected Net contribution to reserves of $21.9 million necessary for future capital program spending increases and rate smoothing General Improvements $3.4 5% City of Concord Capital Reimbursement $7.6 Recycled Water /$0.8 1% Capacity Fees Other $4.2 5% $2.6 3% (Chart in millions) (Chart in millions) 15 Self Insurance Budget Operating Revenues: $2.0 million Investment Income HHW Contribution $316,300 $24,000 31 Debt Service Expenditures Total FY 2023-24 expenditures of $9.2 million Incorporates debt service on 2018 Revenue Refunding Bonds and 2021 cops Debt service entirely secured and funded by ad valorem property taxes 32 Operating Expenses: $2.2 million Legal Services, Technical & Other $375,000 Services, $60,000 1 Expected Loss( $175,000 Trustee & Other Costs $6,000 16 6. Reserves Assessment 33 Reserve Balance Projections as of June 30, 2023 Reserve Policy Target $37,626,114 $43,235,552 $9,000,000 $89,861,666 Projected Balance $41,300,064 $121,355,886 $9,142,948 $171,798,899 Projected Balance Minus Reserve Policy Target $3,673,950 $78,120,334 $142,948 $81,937,233 Reserves comply with policy specified minimums to ensure adequate resources Impacts allocation of SSC to various sub -funds Affects rate setting, in conjunction with drivers from 10-year financial plan 34 17 Reserve Balance Projections as of June 30, 2024 Beginning Projected Reserve $41,300,064 $121,355,886 $9,142,948 $171,798,899 Increase/(Decrease) ($1,223,728) ($36,148,837) ($142,948) ($37,515,513) Ending Projected Reserve $40,076,336 $85,207,049 $9,000,000 $134,283,386 Reserve Policy Target $40,076,336 $47,791,500 $9,000,000 $96,867,836 Over/(Under) Target *Ammmm - $37,415,549 - $37,415,549 - lam` 35 K%1 Im Public Hearing on June 1, 2023 Staff recommendation for Board to approve and adopt the following ' budgets: Operations & Maintenance Capital Improvements Self -Insurance Debt Service e Coinciding with budget, Board also asked to delegate authority to Generals Manager to renew insurance 37 r W1V I'm Conclusion FY 2023-24 budget is balanced, - consistent with reserve policies r Financial health of Central San remains strong Staff will continue to monitor impact of inflation and financial markets on budget "Thank you" to all dedicated staff involved in budget development process, as well as ongoing monitoring during the year I:31j 19 Questions & Discussion