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HomeMy WebLinkAbout02. Public Hearing on the proposed FY 2023-24 District Budget Page 1 of 9 Item 2. CENTRAL SAN BOARD OF DIRECTORS POSITION PAPER MEETING DATE: JUNE 21, 2023 SUBJECT: CONTINUE THE PUBLIC HEARING ADJOURNED AT THE JUNE 1, 2023 BOARD MEETING TO RECEIVE PUBLIC COMMENT ON THE FISCAL YEAR (FY) 2023-24 CENTRAL SAN BUDGET FOR THE FOLLOWING FUNDS: OPERATIONS AND MAINTENANCE, CAPITAL IMPROVEMENT, SELF-INSURANCE, AND DEBT SERVICE. CLOSE PUBLIC HEARING AND FIND CENTRAL SAN'S BUDGET IS EXEMPT FROM THE CALIFORNIA ENVIRONMENTAL QUALITYACT (CEQA)AND THEN CONSIDER THE FY 2023-24 BUDGET FOR ADOPTION. SUBMITTED BY: INITIATING DEPARTMENT: KEVIN MIZUNO, FINANCE MANAGER ADMINISTRATION-FINANCE REVIEWED BY: EDGAR LOPEZ, PROVISIONAL DIRECTOR OF ENGINEERING AND TECHNICAL SERVICES PHI LI P LEI BER, DEPUTY GENERAL MANAGER, ADMINISTRATION Roger S. Bailey General Manager ISSUE Pursuant to Central San's Budget Policy (BP 048), prior to adoption of the budget, a public hearing must be held to receive public comment for the following funds: Operations and Maintenance (O&M), Capital Improvement, Self-I nsurance, and Debt Service. BACKGROUND Central San's draft FY 2023-24 Budget book (Attachment 1)was distributed to Board Members on May 4, 2023, at a regularly scheduled public meeting. The following is a timeline of meetings where the proposed FY 2023-24 Budget has been reviewed by the Board and its Committees and made available to the public for review and feedback: June 21, 2023 Special Board Meeting Agenda Packet- Page 21 of 29 Page 2 of 9 May 8 Engineering & Operations Committee review of Capital Improvement Budget(CI B) May 9 Finance Committee review of overall Budget with a focus on O&M, Self- Insurance, and Debt Service May 18 Presentation of Budget by staff at Board Meeting June 1 1st Public Hearing on Budget Adoption June 21 2nd / Final Public Hearing on Budget Adoption Commencing on page 47 of the FY 2023-24 draft Budget book, the Financial Summary section provides a summary of the core elements of Central San's entire budget including analysis of specific funds, revenues, expenses, and reserves. A presentation providing an overview of the proposed FY 2023-24 budget was provided to the Board at the May 18, 2023 public meeting. Additionally, a presentation providing an overview of the FY 2023-24 CIB as well as the long-term (ten-year) Capital Improvement Plan (CIP)was provided to the Board that same day. At the May 18, 2023 meeting, the Board was asked to review and provide feedback on the proposed FY 2023-24 Budget following presentations by staff. I ncorporating feedback from Board Members as well as various District staff, several revisions were made to the draft budget book provided to the Board on May 4, 2023, which are summarized in the attached Change Log (Attachment 2). An initial public hearing on the FY 2023-24 budget was scheduled and held on June 1, 2023. However, to align the budget's adoption with the approval of Central San's FY 2023-24 sewer service charge rates, the public hearing was adjourned until June 21, 2023. California Environmental Quality Act (CEQA) Staff has evaluated the FY 2023-24 O&M, Sewer Construction, Self-I nsurance, and Debt Service Fund budgets and concludes the adoption of these budgets are not projects, are ministerial in nature, and are exempt from CEQA. They are exempt under Central San's CEQA Guidelines Section 15301, since each funds the ongoing operations of Central San and the Cl B funds the operation, repair, maintenance, permitting, leasing, licensing, or minor alteration of existing public or private structures, facilities, mechanical equipment, or topographical features, involving negligible or no expansion of use beyond that existing at the present time.Approval of the FY 2023-24 Budgets will establish the Board of Directors' independent finding that these budget documents are exempt from CEQA. The Board further finds that, although the Cl P Budget will authorize amounts of individual capital improvement project spending, the adoption of the Budget does not authorize construction of any project requiring CEQA compliance documentation. Central San either has or will produce appropriate CEQA compliance documentation prior to undertaking any"project" identified in these documents. ALTERNATIVES/CONSIDERATIONS The Board has considered numerous financial planning alternatives and assumptions, including at the January 12, 2023 publicly held financial workshop. This budget reflects the policy direction provided in areas including the composition and level of the Capital Improvement Budget in the context of the Comprehensive Wastewater Management Plan (CWMP), responsibly managing unfunded liabilities, and overall guidance regarding the need for fiscal discipline and cost control. The budget also includes funding for four new full-time equivalent (FTE) positions to address ongoing service level needs, a number of term-limited and temporary positions for shorter-term needs. June 21, 2023 Special Board Meeting Agenda Packet- Page 22 of 29 Page 3 of 9 FINANCIAL IMPACTS Adoption of the proposed FY 2023-24 budget will provide Central San the resources necessary to accomplish Strategic Plan Objectives directed by the Board for that year. The FY 2023-24 budget was prepared using the sewer service charge revenue assumptions per the proposed two-year rate plan. Sewer service charge revenues in FY 2023-24 are proportioned as follows: O&M 56.0%; Capital 42.6%; Self-Insurance 1.4%. COMMITTEE RECOMMENDATION The Engineering and Operations Committee reviewed the Capital Improvement budget on May 8, 2023. The Finance Committee received a staff presentation of the FY 2023-24 O&M, Self-Insurance, and Debt Service fund budgets on May 9, 2023. Both Board Committees provided feedback to staff, which has been considered in the final version of the budget book recommended for adoption by the Board.A log of revisions made subsequent to the distribution of the initial draft of the budget book on May 4, 2023, has been attached hereto (Attachment 2). A revised version of the budget book has been posted to the Central San website, under"Financial Information". RECOMMENDED BOARD ACTION Continue the public hearing adjourned at the June 1, 2023 Board Meeting on the proposed budget and hear any public comment received. Close the public hearing, then take the following actions: A. Find that the FY 2023-24 District Budget is exempt from CEQA; and B.Adopt the FY 2023-24 District Budget for the Operations and Maintenance; Capital Improvement; Self- Insurance; and Debt Service funds, as presented. Strategic Plan Tie-In GOAL ONE: Customer and Community Strategy 1—Deliver high-quality customer service, Strategy 2- Promote initiatives to advance affordable and equitable access to services, Strategy 3- Build neighborhood and industry relations GOAL TWO:Environmental Stewardship Strategy 1 -Achieve compliance in all regulations, Strategy 2- Educate on pollution prevention and environmental protection, Strategy 3- Be a partner in regional development of local water supply, Strategy 4- Identify and advance sustainability initiatives, including reducing energy usage and emissions GOAL THREE: Workforce Diversity and Development Strategy 1 - Recruit from a diverse pool of qualified applicants, Strategy 2- Engage employees and conduct labor relations in a transparent, effective and collaborative environment, Strategy 3- Retain skilled workers by investing in resources and opportunities for all employees to grow and thrive, Strategy 4- Foster a culture of diversity, equity, and inclusion GOAL FOUR: Governance and Fiscal Responsibility Strategy 1 - Promote and uphold ethical behavior, openness, and accessibility, Strategy 2- Encourage and facilitate public participation, Strategy 3- Maintain financial stability and sustainability GOAL FIVE: Safety and Security Strategy 1 - Reduce and eliminate risks of injury or illness, Strategy 2- Protect personnel and assets from threats and emergencies, Strategy 3- Understand and reduce impacts of cybersecurity attacks June 21, 2023 Special Board Meeting Agenda Packet- Page 23 of 29 Page 4 of 9 GOAL SIX: Infrastructure Reliability Strategy 1 - Manage assets optimally, Strategy 2- Execute long-term capital renewal and replacement program GOAL SEVEN: Innovation and Agility Strategy 1 - Leverage data analytics to become a more efficient utility, Strategy 2- Implement organization-wide optimization, Strategy 3- Be adaptable, resilient, and responsive ATTACHMENTS: 1. Replacement Sheet- Draft Budget 2023-24 2. Log of Budget Book Changes (FY 23-24) June 21, 2023 Special Board Meeting Agenda Packet- Page 24 of 29 Page 5 of 9 Attachment 1 CENTRAL SAN CENTRAL CONTRA COSTA • • Final Draft Central San FY 2023-24 Budget See separate Budget Binder distributed May 4, 2023. The final draft Budget (as of June 1 , 2023) is also available on the District's website as part of the Public Hearing Board agenda item and in Public Notices section: www.centralsan.org Please contact Katie Young, Secretary of the District, with any questions: Telephone: (925) 229-7303 Email: kyoung@centralsan.org June 21, 2023 Special Board Meeting Agenda Packet- Page 25 of 29 Page 6 of 9 Attachment 2 FY 2023-24 Budget Revision Log As of June 1,2023 This log includes substantive edits made to the FY 2023-24 Budget Book distributed to the Board on May 4,2023. Section Page# Table/Paragraph Description of Change Introduction 12 2nd paragraph Updated language regarding sequencing of rate proposal Introduction 18 3rd paragraph Changed language regarding population"boomed" Introduction 23 Sewer Service Charge GM wants discussion or table to also reflect accounts,and discussion of EDUs. Table Billings by Type table also had*that was not footnoted. Added EDUs in anew column to table Introduction 27 3rd paragraph Outdated language regarding rate increases was left from the prior budget book for FY 22-23. This has now been removed. Introduction 28 1st paragraph Added sentence indicating diagram reflected typical process.This time,218 process took place in May-June Introduction 28 1st paragraph Added SSC rate adoption to June row. Introduction 46 5th paragraph Corrected 10 year CIP amount to$980.2 rather than$980. Financial Summary 47 Table lb Increase FY 23-24 CIB total spend by$300,000 to$71,202,000 and update total appropriations and budget to budget variances($and%)accordingly. The Sewer Construction fund budget is$70 Q 71.2 million,a decrease of$2119.8 Financial Summary 47 2nd paragraph,2nd bullet million(24-4-21.7%)from the prior year budget of$91.0 million. Lastly,decrease Contribution to Reserves accordingly by same amount and update variances column. Financial Summary 47 3rd paragraph Added reference to table 8a showing summary of changes to O&M budget Financial Summary 48 Figure 1 Replace figure 1 with new chart reflecting$300,000 increase to sewer construction sources and decrease to contribution to reserves. Financial Summary 49 1st bullet(SSC) Added"ADUs"in listing or rates in addition to single family and multi-family Due to increase in treatment plant program spend by$300,000,reduce FY 23-24 CIB contribution to reserve to$21,924,163 and total funding sources to$71,202,000. Financial Summary 51 Table 2a Update total column to reflect these changes,decreasing grand total contribution to reserves to$20,557,487 and total funding sources to$173,468,813. Lastly,update footnote below table to reflect new total contribution to reserves. Financial Summary 54 Table 2c Added footnote to acknowledge potential increase in capacity fees due to RHNA. Financial Summary 56 1st paragraph and table 3 Add ADU rate to table and acknowledge in text Financial Summary 58 Figure 3 Updated pie chart to reflect$300,000 increase in sewer construction spend and corres oncling decrease in contribution to reserves. The uses of funds(expenditures and contributions to reserves)for FY 2023-24 are Financial Summary 58 2nd paragraph shown in Figure 3.Two expenditure categories,0&M and Sewer Construction, account for 8r4A 83.6%of the total uses.In FY 2023-24,contribution to reserves comprises 4472410.6%of the total use of funds. Financial Summary 61 Figure 5 Change pie chart from 3-dimensional to 2-dimensional formatting. Financial Summary 66 Table 8a Added new table(8a)showing summary of changes to O&M budget Financial Summary 66 Training discussion Added text describing increase in Admin travel Financial Summary 71 Staffing Changes Paragraph 1-Fix the paragraph formatting to match other formatting Financial Summary 71 Table 11 added a row for GM Specials headcount for 5 and prior years.Updated Total Temporary Employees headcount. Staffing Changes,1st A sentence added at the end of the paragraph stating"The parameters for these Financial Summary 71 paragraph workers are under discussion with bargaining units and may have durations beyond one year." Financial Summary 71 Staffing Changes,2nd Include new sentences and verbiage clarifying how newly proposed FTE positions paragraph add value to Central San's operations. Financial Summary 72 Staffing Changes Under Administration-add a bullet point to reflect the reclassification of"Director of Administration and Finance"to"Deputy General Manager" Ad missing"as"and describe limited duration workers(The parameters for these Financial Summary 72 workers are under discussion with bargaining units and may have durations beyond one ear. Financial Summary 73 2nd paragraph Delete second sentence The $71.2 million capital improvement budget does not include anticipated carryforward from FY 2022-23,which will be communicated to the Board after the Financial Summary 73 3rd paragraph close of the current fiscal year.The FY 2023-24 capital budget,excluding carryforward,is decreasing by$244-$19.8 million(2.1%)(21.7%)from the prior year bud et of$91.0 million. Financial Summary 73 4th paragraph Central San is projected to contribute$244-$21.9 million to capital reserves in FY 2023-24 with revenues and debt proceeds exceeding expenditures by that amount. Financial Summary 73 Staffing Changes Under Operations Department-add a bullet point to reflect the reclassification of "Director of Operations to"Deputy General Manager of Engineering and Operations" Financial Summary 73 Table 11 Changed headcount under Temporary-Employee Limited Duration from 5 to 6. Financial Summary 73 Staff Changes 1st paragraph Changed 2nd to last sentence from five limited duration to six limited duration employees 1 of June 21, 2023 Special Board Meeting Agenda Packet- Page 26 of 29 Page 7 of 9 Attachment 2 Section Page# Table/Paragraph Description of Change FY 23-24 budgeted treatment plant program expenditures increase by$300,000 to a revised total of$31,300,000 to reflect change done in CIP section of budget after finalization of Financial Summary section. Updated$and%variances for treatment Financial Summary 74 Table 13 plant program accordingly. Other impacted areas of this table that are updated accordingly include FY 2023-24 CIB spend(increased to$71,202,000),updating total $and%variances accordingly,reducing Contribution to Reserves to$21,924,163, and increasing Cash Funded expenditures to$57,202,000. Staff Changes-Engineering Changed Capital Division bullet from three limited duration to four limited duration Financial Summary 74 &Technical Services bullet employees.Add One Project Safety Officer limited duration employee oint Financial Summary 74 Table 11 Changed temporary headcount and summer students,Interns Revise sentences 3-5 to state the following: The project most likely to have significant impacts on future O&M costs is the Solids Financial Summary 75 1st paragraph Handling Facilities Improvement Project as that project now contemplates transitioning. The technology to be utilized in phase II of this project is tentatively proposed to be fluidized bed incineration,a more modern and efficient approach to the existing multiple hearth furnaces. The lifecycle cost of the project,including O&M impacts,is expected to be lower than continuing with the existing technology. The Sewer Construction fund is projected to close FY 2023-24 with a working capital Financial Summary 76 2nd bullet reserve of$9&-.5-$85.2 million,exceeding minimum working capital reserves by $37.4 million. Added comment about grant funding,"To the extent that grant funding for capital Financial Summary 76 2nd bullet projects is received during FY 2023-24,this would result in an increase in the Sewer Construction Fund reserve balance,providing the ability to reduce future borrowing and reduce future rate adjustments." Reduce Sewer Construction Fund reserves as of 6/30/24 by$300,000 and update Financial Summary 78 Table 14 change year over year$and%accordingly. Also reduce Amount Over/(Under) Minimum Reserve Target at 6/30/24 b $300,000. A sentence was added to clarify absence of interest earnings for Rate Stabilization Financial Summary 79 Table 14-Reserve Fund Account stating:"This fund is a book entry to the 0&M and Sewer Construction Projections funds. Interest earnings from those funds are not separately assigned to the Rate Stabilization Account" Financial Summary 79 Table 14 Added comment about interest earnings on rate stabilization fund. Financial Summary 83 4th paragraph Cost of service completion date corrected to 2023. Financial Summary 84 3rd bullet(Other Revenues) Added comment about grant funding. Financial Summary 87 Table 15-Ten Year Financial Column added for the Total 10 Years. Plan Summary Operating Departments 89 3rd paragraph Remove Director of Operations from Central San's Executive Team.Should be two Deputy General Managers and one Director for Engineering and Technical Services. Operating Departments 90 Divisions Bullet Point Change bullet point"Office of the Director of Finance and Administration"to"Office of the Deputy General Manager of Finance and Administration" Budget Modifications, One GM special was budgeted accordingly in Operations and four GM specials were Operating Departments 95 paragraph 1 budgeted in the Office of the General Manager. Personnel Requirements Changed table name for Personnel Requirements from"Limited Duration Employees" Operating Departments 98 Table Limited Duration to"Temporary Employees to be consistent with the Financial Summary Employees Personnel Requirements Changed table name for Personnel Requirements from"Limited Duration Employees" Operating Departments 104 Table Limited Duration to"Temporary Employees to be consistent with the Financial Summary Employees Personnel Requirements Changed table name for Personnel Requirements from"Limited Duration Employees" Operating Departments 112 Table Limited Duration to"Temporary Employees to be consistent with the Financial Summary .Employees Personnel Requirements Changed table name for Personnel Requirements from"Limited Duration Employees" Operating Departments 119 Table Limited Duration to"Temporary Employees to be consistent with the Financial Summary Employees Personnel Requirements Changed table name for Personnel Requirements from"Limited Duration Employees" Operating Departments 122 Table Limited Duration to"Temporary Employees to be consistent with the Financial Summary Employees Personnel Requirements Changed table name for Personnel Requirements from"Limited Duration Employees" Operating Departments 127 Table Limited Duration to"Temporary Employees to be consistent with the Financial Summary Employees Personnel Requirements Changed table name for Personnel Requirements from"Limited Duration Employees" Operating Departments 131 Table Limited Duration to"Temporary Employees to be consistent with the Financial Summary Em to ees Operating Departments 134 3rd paragraph Updated description of office's responsibilities related to capital project work 2of4 June 21, 2023 Special Board Meeting Agenda Packet- Page 27 of 29 Page 8 of 9 Attachment 2 Section Page# Table/Paragraph Description of Change Operating Departments 137 Personnel Requirements Change"Deputy General Manager(Director of Engineering&Technical Services)"to table "Director of Engineering&Technical Services" Capital 139 Infrastructure Reliability remove the highlighted yellow from a bullet point to make it not highlighted Operating Departments 140 FY 2021 Performance Updated to actual year performance Personnel Requirements Operating Departments 142 Table Limited Duration Changed table name for Personnel Requirements from"Limited Duration Employees" Employees to"Temporary Employees to be consistent with the Financial Summary Added limited duration employee for project safety officer and rebalanced Operating Departments 142 lTemporary Employees temporary classifications. Added 1 limited duration employee and rebalanced temporary classifications. Updated Capital Division headcount from 3 limited duration employees to 4 limited Operating Departments Personnel Requirements duration employees(added Project Safety Officer)and changed Intern headcount Table Limited Duration from 4 to 2.Changed Temporary Utility Systems Engineer from 1 to 2.Added 1 142 Employees Temporary Engineering Assistant. Updated paragraph to include a limited duration project safety officer(for capital Operating Departments 143 Budget Modifications projects) Personnel Requirements Changed table name for Personnel Requirements from"Limited Duration Employees" Operating Departments 148 Table Limited Duration to"Temporary Employees to be consistent with the Financial Summary Employees Table shows loss of six staff and explanation accounts for S.The word document Operating Departments 154 Personnel Requirements table should have reflected five transfers from Planning and Development to Operations Optimizations division Personnel Requirements Changed table name for Personnel Requirements from"Limited Duration Employees" Operating Departments 155 Table Limited Duration to"Temporary Employees to be consistent with the Financial Summary Employees Operating Departments 157 Divisions Bullet Point Change bullet point from"Director of Operations"to"Office of the Deputy General Manager of Engineering and Operations" Operating Departments 158 Title of Page Change title from"Director of Operations"to"Office of the Deputy General Manager of Engineering and Operations" Operating Departments 158 Overview Change from"Director of Operations"to"Office of the Deputy General Manager of Engine rin and Operations' Operations Department 159 Personnel Requirements Change from"Director of Operations"to"Office of the Deputy General Manager of table Engineering and Operations" Operations Department 159 Budget Modifications Change from"Director of Operations"to"Office of the Deputy General Manager of En inee ing and Operations" Personnel Requirements Operations Department 159 Table Limited Duration Changed table name for Personnel Requirements from"Limited Duration Employees" Employees to"Temporary Employees to be consistent with the Financial Summary Personnel Requirements Operations Department 169 Table Limited Duration Changed table name for Personnel Requirements from"Limited Duration Employees" Employees to"Temporary Employees to be consistent with the Financial Summary Personnel Requirements Operations Department 180 Table Limited Duration Changed table name for Personnel Requirements from"Limited Duration Employees" Employees to"Temporary Employees to be consistent with the Financial Summary Personnel Requirements Operations Department 185 Table Limited Duration Changed table name for Personnel Requirements from"Limited Duration Employees" Employees to"Temporary Employees to be consistent with the Financial Summary Operations Department 186 Recycled water financial Replaced tables with new format providing sub-totals for 0&M versus capital summary tables expenses and revenues. Operations Department 186 1st and 2nd paragraphs Revised two paragraphs following the table,describing new table. Capital Improvement 196 New bullet Added potential grant funding to list of revenues Program Capital Improvement Program 198 Priority List Revised list order to reflect deletion of project 8466 Capital Improvement Last bullet(Projects Program 203 Completed) Added project#8466 to those being closed. Capital Improvement Program 204 Table 1 Updated table to reflect project changes. Capital Improvement 205 1st paragraph Removed highlight Program Capital Improvement 206 Phasing of projects Added Pleasant Hill Phase 2 to sewer renovation paragraph. Program Capital Improvement 207 2nd table on page Update order of projects to in table to be sequential. Program Capital Improvement Program 207 Budget Modifications Table Added PH phase 2,names to list,budget clarity Capital Improvement Program 214 Table 2 Project changes to Danville and PH2,which impacts overall totals Capital Improvement ,Program 215 Description Changed replacement to 8,700 and increased budget as awarded 3of4 June 21, 2023 Special Board Meeting Agenda Packet- Page 28 of 29 Page 9 of 9 Attachment 2 Section Page# Table/Paragraph Description of Change Capital Improvement Program 222 Project page Deleted DP8466,revised priority Capital Improvement Program 246 Sustainability paragraph Added to paragraph about how all CP evaluates or improves this subject Capital Improvement 248 Table 3 Corrected RAS budget Program Capital Improvement 284 Bullet points Removed highlight Program Capital Improvement 284 Project 8516 Description Updated equipment list Program Capital Improvement 285 Bullet points Removed highlight Program Capital Improvement 285 Project 8517 Description Updated vehicle list Program Capital Improvement 298 Budget modifications table 5 Increase Filter plant 7361 by 1.8 M as approved by board Program Capital Improvement 299 Budget modifications table Increase Filter plant 7361 by 1.8 M as approved by board Program Capital Improvement 301 Priority ranking table Changed Water Exchange priority TBD,as it is being evaluated Program Capital Improvement 307 n/a Added new paragraph for unfunded CIP projects Program Capital Improvement n/a n/a Added new"NetZero"project ,Program 4 of June 21, 2023 Special Board Meeting Agenda Packet- Page 29 of 29