HomeMy WebLinkAbout2010-04-30 - Board of Directors Meeting Agenda Packet
Yorba Linda
Water District
AGENDA
YORBA LINDA WATER DISTRICT
BOARD OF DIRECTORS WORKSHOP MEETING
Friday, April 30, 2010, 9:00 AM
1717 E Miraloma Ave, Placentia CA 92870
1. CALL TO ORDER
2. PLEDGE OF ALLEGIANCE
3. ROLL CALL
William R. Mills, President
Michael J. Beverage, Vice President
Ric Collett
Phil Hawkins
John W. Summerfield
4. ADDITIONS/DELETIONS TO THE AGENDA
5. PUBLIC COMMENTS
Any individual wishing to address the Board is requested to identify themselves and state the matter on which
they wish to comment. If the matter is on the agenda, the Board will recognize the individual for their comment
when the item is considered. No action will be taken on matters not listed on the agenda. Comments are limited
to matters of public interest and matters within the jurisdiction of the Water District. Comments are limited to five
minutes.
6. DISCUSSION ITEMS
This portion of the agenda is for matters that cannot reasonably be expected to be concluded by action of the
Board of Directors at the meeting, such as technical presentations, drafts of proposed policies, or similar items for
which staff is seeking the advice and counsel of the Board of Directors. Time permitting, it is generally in the
District's interest to discuss these more complex matters at one meeting and consider formal action at another
meeting. This portion of the agenda may also include items for information only.
6.1. Fitch Ratings for YLWD 2003 & 2008 Water Bonds
6.2. Reserve Policy
6.3. Draft FY 2010/11 Budget
7. ADJOURNMENT
7.1. The next regular meeting of the Board of Directors will be held May 13, 2010 at 9:00
a. m.
Items Distributed to the Board Less Than 72 Hours Prior to the Meeting
Pursuant to Government Code section 54957.5, non-exempt public records that relate to open session agenda items
and are distributed to a majority of the Board less than seventy-two (72) hours prior to the meeting will be available for
public inspection in the lobby of the District's business office located at 1717 E. Miraloma Avenue, Placentia, CA 92870,
during regular business hours. When practical, these public records will also be made available on the District's internet
website accessible at http://www.ylwd.com/.
Accommodations for the Disabled
Any person may make a request for a disability-related modification or accommodation needed for that person to be
able to participate in the public meeting by telephoning the Executive Secretary at 714-701-3020, or writing to Yorba
Linda Water District, P.O. Box 309, Yorba Linda, CA 92885-0309. Requests must specify the nature of the disability and
the type of accommodation requested. A telephone number or other contact information should be included so the
District staff may discuss appropriate arrangements. Persons requesting a disability-related accommodation should
make the request with adequate time before the meeting for the District to provide the requested accommodation.
ITEM NO. 6.1
AGENDA REPORT
Meeting Date: April 30, 2010
Subject: Fitch Ratings for YLWD 2003 & 2008 Water Bonds
ATTACHMENTS:
Name: Dosciiption: Type:
Forbes Press Release.pdf Backup Material Backup Material
Forbes
Fitch Affirms Yorba Linda Water District, CA's Water
Rev COPs at 'AA-'; Outlook Stable
04.21.10. 4:22 PI 'd ET
BusinessWire - Fitch Ratings takes the following rating action on the Yorba Linda Water District (the
District), CA's outstanding water revenue certificates of participation (COPs) as part of its continuous
surveillance effort:
--Approximately $34 million, series 2008, affirmed at'AA-';
--Approximately $9.5 million, series 2003, affirmed at'AA-'.
The Rating Outlook is Stable.
Fitch will recalibrate the ratings on the above referenced bonds on April 30, 2010 as described in the
March 25, 2010 report 'Recal ibration of U.S. Public Finance Ratings', available at'www.fitchratings.com'.
At that time the ratings will be revised as follows:
--The rating on the 2008 certificates will be revised to'AA', with a Stable Outlook.
--The rating on the 2003 certificates will be revised to'AA', with a Stable Outlook.
RATING RATIONALE:
--Historically sound financial performance weakened in fiscal 2009, causing the district to violate its rate
covenant. Fitch expects an already implemented rate increase for fiscal 2010 will restore debt service
coverage (DSC) to satisfactory levels of roughly 1.4 times (x). Additional rate increases are likely, which
should bolster coveraae further.
--Management's willingness and ability to raise rates as demonstrated by a significant rate increase of
41 % in September 2009. While rates are currently higher than those charged by nearby utilities, rates
remain affordable when compared to income levels, helping to preserve the district's ability to raise rates
further.
--A moderate debt profile and manageable capital needs that do not reauire additional debt in the near
term.
--The district benefits from a stable, mostly residential and affluent service area coupled with participation
in the L.A.-Orange County metro area economy.
--Legal covenants are somewhat weak.
KEY RATING DRIVER:
--Fitch expects a return to a more favorable financial profile by fiscal 2010; however, if the district is
unable to produce annual financial marains and debt service coveraae levels that approach historic
norms over the next few years, there could be downward pressure on the ratina.
SECURITY:
The certificates are secured by a pledge of the ad valorem taxes received from the county, and the net
revenues of the water system, including system charges, development fees, and interest income.
CREDIT SUMMARY:
The Yorba Linda Water District (the district) is located in the northeastern portion of Orange County
approximately 35 miles southeast of downtown L.A., and 11 miles north of the city of Santa Ana, the
county seat. The service area covers 22 square miles and includes most of the city of Yorba Linda, and
portions of Anaheim, Brea, and Placentia, and unincorporated county area. The district provides water
and sewer services to roughly 23,600 mostly residential customers, though only the water system
revenues (and ad valorem taxes) are pledged to bondholders. Water resources are fairly diverse and
include local groundwater as well wholesale purchases from the Municipal Water District of Orange
County (MWDOC). Residential customers account for over 90% of total accounts and consume over 70%
of water provided. Once an agricultural community, the city of Yorba Linda (about 75,000 residents) has
since transformed into a residential bedroom community of the greater Orange County and L.A
metropolitan area. Customer growth is expected to be modest as the district is close to full build-out.
Median household income for the area is high at over $125,000.
The district's two primary sources of water supply include groundwater pumped from the operation of
eight active local wells (totaling 21 mgd of supply), and imported water purchased from the MWDOC
(totaling 25 mgd of supply). MWDOC purchases its supply from the Metropolitan Water District of
Southern California (Met Water), which is one of the largest wholesale water providers in the county and
is currently rated 'AA+' with a Negative Outlook by Fitch. Despite the diversity in water supply, the district
remains vulnerable to significant future rate increases from its wholesale provider.
The district's solid historical financial profile has long been a credit strength. However, once strong
liquidity levels, as measured by days' cash on hand, have since declined to 156 days in fiscal 2009, and
DSC has fallen below the 1.10x rate covenant (includes pledged property taxes). The weak financial
results for fiscal 2009 are a result of unexpectedly large wholesale rate increases and drought restrictions
implemented by Met Water in 2009, and the district's delay in implementing its own rate increases due to
the damaging wildfires the area experienced in late 2008. While lower DSC was expected at the time of
the previous COPs issuance in 2008, the actual 2009 DS coverage and the current projections for fiscal
2010 and going forward have not met Fitch's original expectations. A large rate increase that was
eventually adopted for fiscal 2010 is expected to sufficiently stabilize the district's financial profile, though
further increases may be necessary to restore the district's previously strona DSC and improve other
financial metrics.
At $60/month, residential rates are above average but considered affordable at less than 1 % of median
household income. Rates are set locally by the district's Board of Directors, subject to Proposition 218
notice requirements and possible challenge by ratepayers. Despite the large increases put into effect in
2009, rate increases did not meet significant challenge. Rates are structured with a base charge as well
as consumption charges. A new rate study is expected to be completed by the end of 2010, and along
with the development of a 5-year financial plan, management appears committed to establishina and
maintainina fiscal stability.
The debt burden is sliahtly hiaher than the median for the ratina cateaorv: however, the district's
manaaeable capital plan, which will likely be funded with cash, should keep debt ratios manageable over
time. Legal covenants are weaker than most utilities and include a 1.10x annual debt service rate
covenant from net revenues, and a 1.10x max annual debt service coverage test for issuing additional
bonds (can use historical or projected revenues).
Applicable criteria available on Fitch's web site at'www.fitchratings.com':
--'Revenue-Supported Rating Criteria', dated (Dec. 29, 2009);
--'Water and Sewer Revenue Bond Rating Guidelines', dated (Aug. 6, 2008).
Additional information is available at'www.fitchratings.com'.
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS.
PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK:
HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING
DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S
PUBLIC WEBSITE'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND
METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF
CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE
AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE
OF CONDUCT' SECTION OF THIS SITE.
SOURCE: Fitch Ratings
Fitch Ratings Andrew DeStefano, 212-908-0284, New York Gabriela Gutierrez, 512-215-3731, Austin or
Media Relations: Cindy Stoller, 212-908-0526, New York Email: cindy.stoller@fitchratings.com
FitchRatings i. i-c~i-~..+
KNOW YOUR RISK UUL Special Report Recalibration of U.S. Public
Finance Ratings
Analysts
David Litvack Fitch Ratings is proceeding with the recalibration of certain of its U.S. public finance
+1 212 908-0593 credit ratings, initially announced in July 2008 (see Fitch Research on "Exposure Draft:
david.litvack@fitchratings.com Reassessment of the Municipal Ratings Framework," dated July 31, 2008, available on
Richard Raphael Fitch's Web site at www.fitchratings.com). The intent of the recalibration is to ensure
+1 212 908-0506 a greater degree of comparability across Fitch's global portfolio of credit ratings. This
richard.raphaet@fitchratings.com recalibration will affect ratings in the state and local government tax-supported,
Eric Friedland water/sewer, public power distribution-only, and public higher education sectors.
+1 212 908-0632 Other U.S. public finance sectors will not be affected.
eric.friedland@fitchratings.com
• State and local general obligation ratings and those dependent on them (e.g.
Amy Laskey appropriation-backed debt) will be adjusted upward two notches if the GO rating is
+1 212 908-0568
amy.laskey@fitchratings.com currently rated `A' to `BBB-' and one notch upward if the GO is currently rated `A+'
or higher.
Laura Porter
+1 212 908-0575 • Special tax-backed bonds currently rated from `BBB-' to `AA+' will be adjusted up
[aura. porter@fitchratings.com one notch.
Karl Pfeil . Water/sewer and public power distribution-only credits will be adjusted upward in
+1 212 908-0516 the same manner as GO ratings.
karLpfeit@fitchratings.com
Douglas Scott • Public higher education ratings will be adjusted up one notch where the rating is
+1 512 215-3725 currently `AA-' to `BBB-'; no adjustment will be made on public higher education
douglas.scott@fitchratings.com ratings of `AA' and higher.
Christopher Jumper • Ratings in the affected sectors that are currently below investment grade will be
+1 212 908-0594 considered for recalibration on a case-by-case basis.
christopher.jumper@fitchratings.com
Douglas Kilcommons Recalibration Map
+1 212 908-0740
douglas.kilcommons@fitchratings.com Rating Post-Recalibration
GO, Water/Sewer, Public Appropriation- Public Higher
Current Rating Power (Distribution Only) Backed Debt' Special Tax Education
Related Research AAA AAA N.A. AAA AAA
*Fitch Ratings U. S. Public Finance AA+ AAA AA+ AAA AA+
AA AA+ AA+ AA
Transition and Default Study 1999- AA AA AA AA AA
2009, March 25, 2010
• Fitch Comments on Status of A+ AA AA AA AA
Municipal Ratings Framework A AA- A+ A+ A+
Review, March 3, 2009 A- A+ A+ A A
• Fitch Defers Final Determination on BBB+ A A A- A-
Municipal Ratings Recalibration, BBB A- A- BBB+ BBB+
Oct. 7, 2008 BBB- BBB+ BBB+ BBB BBB
• Exposure Draft: Reassessment of Below Investment Grade Case by Case Case by Case Case by Case Case by Case
the Municipal Ratings Framework, aAssumes current appropriation-backed debt rating is one notch below the corresponding GO.
July 31, 2008
All state ratings will be recalibrated on April 5. The remaining tax-supported ratings
and the water/sewer, public power distribution-only, and public higher education
ratings will be recalibrated on April 30.
VV 'VV VV ®JILa"'~i'L.1VlJLJILtAULkJ'~Ybi3~4Lw._IIlk Y'9'J'LtJtY .JVl1LL ~ ' "4J'!d'LU
ITEM NO. 6.2
AGENDA REPORT
Meeting Date: April 30, 2010 Budgeted: N/A
To: Board of Directors
Funding Source: N/A
From: Ken Vecchiarelli, General Manager
Presented By: Cindy Navaroli, Interim Finance Dept: Finance
Director
Reviewed by Legal: N/A
Prepared By: Cindy Navaroli, Interim Finance CEQA Compliance: N/A
Director
Subject: Reserve Policy
SUMMARY:
This staff report is presented to prime the discussions that will lead to a formal, Board-adopted reserve policy.
Cindy Navaroli with the Platinum Consulting Group will give a PowerPoint presentation on reserve options
and recommendations at the Board Workshop Meeting.
COMMITTEE RECOMMENDATION:
The Finance-Accounting Committee discussed this matter at their Meeting on Monday, April 12, 2010.
DISCUSSION:
The Board has designated certain amounts of investments to reserve funds through past budget approvals
and has approved the investment designations at subsequent Finance-Accounting meetings and Board
meetings. The Board has not adopted a formally structured reserve policy by specific resolution, however. It is
common practice and sound financial policy for government agencies such as the District to consider and
formally adopt a reserve policy.
The intent of the attached document is to provide background information to prime the discussions that will
lead to a formal, Board-adopted reserve policy. This policy is essential to restoring a positive financial
standing in the bond community and with District stakeholders. Additionally, the establishment of reserve
funds can provide a smoothing mechanism for yearly budget fluctuations that is more predictable and reliable
than a "pay as you go" methodology, provide the means to finance on-going asset replacements and provide
better assurance that the District will meet it's debt covenants each year.
The supporting PowerPoint presentation given at the workshop will provide options and recommendations to
consider in adopting a reserve policy as well as more detailed information about target reserve levels, sources
of funding and uses of each reserve fund.
ATTACHMENTS:
Name: Description: Type:
YL reserve policy info.docx Reserve Policy Background Information Backup Material
Reserve_Analysis.pdf PowerPoint Presentation Backup Material
STAFF REPORT
BACKGROUND:
The Board has unofficially designated certain amounts of investments to reserve funds through
the budget process and has approved the investment designations at subsequent Finance-
Accounting meetings and Board meetings. The Board has not adopted an official Reserve Policy
by resolution, however, it is common practice for Districts to do so as staff is recommending in
this report.
PROPOSED RESERVE DISCUSSIONS/POLICIES
To facilitate discussion about future reserve levels needed by the District, Staff is presenting the
following report as information for your consideration. A Board adopted reserve policy sends a
positive signal to ratepayers, bondholders, rating agencies, and regulatory agencies that the
Board is committed to the District's long-term financial health and viability. Prudent financial
management dictates that the District maintains appropriate reserves for emergency use, capital
projects, obligations accruing on a current basis that will be paid in the future, and those required
as a result of legal or external requirements. While the District currently has reserve objectives, it
does not have a delineated policy to govern decision-making and fiscal actions by its officers.
Objectives of a reserve policy
• Establish sound formal fiscal reserve policies, which will be the foundation that ensures
strong fiscal management and policies that guide future District decisions.
• Build adequate reserves over time. This action will provide the District with resources to
help stabilize the organization's finances, and position it more easily to absorb economic
downtowns or large-scale emergencies.
• Help the District to meet its short-term and long-term obligations and ensure that the
District maintains the highest possible credit rating.
As noted by Moody's Investment Services, "[agencies] need to consider whether to govern their
reserves through formal policy or through targeted levels. Most lending institutions tend to favor
formal reserve policies because they minimize political considerations of adequate reserve
levels."'
Suggested procedures for reserves:
• The Finance Department will perform a reserve analysis annually to be submitted to the
Board of Directors. In addition, a reserve analysis will be required upon the occurrence
of the following events:
(1) Board review of the annual budget; (2) presentation of the annual audited
financial statements; and (3) when a major change in conditions threatens the
reserve levels established by this policy.
i "Fiscal Management/Reserves are Essential to Fiscal Health." John Incorvais, Moody's Investment Services
1
• The annual review determines if the funding levels are still appropriate and aligned with
Board goals and objectives.
• Interest generated in each reserve goes to the Operating Fund for operating use, unless
otherwise stated.
Following are an example of the District's current reserves as well as some reserve funds that
other agencies commonly utilize. Most agencies separate their reserves into undesignated,
designated, and restricted categories, as follows:
1. Undesignated Reserves: No designations or restrictions
2. Designated Reserves: Designated reserves are reserves that are established and
set aside to be used only for a specific, designated purpose.
3. Restricted Reserves: Restricted reserves are reserves that are restricted by an
outside source, such as by statute, court, or contract.
DESIGNATED RESERVES:
OPERATING RESERVES (non-capital related)
1. Operating: Covers operating costs for an established period of time. Many Districts adopt a
minimum operating reserve balance that cover 60 - 180 days of operating expenses. This
reserve will aid in maintaining minimum day-to-day operations in the event normal cash
flows are interrupted or reduced. These funds should not be used to finance ongoing District
expenses, except in fiscal hardship periods, in order to sustain desired service levels
Following are examples of target or minimum operating reserve levels set at other agencies:
• Mesa Consolidated: minimum of 60 days of total budgeted expenses, and maximum of
120 days; these funds are routinely used with Board authorization to cover temporary
cash flow deficiencies caused be cash flow timing, and extraordinary decreases in
revenue and/or unexpected increases in expenses (YLWD equivalent is $3.6M to
$5.5M)2.
• Walnut Valley Water District: 50% of general operating expenditures excluding water
purchases (YLWD equivalent is $11M).
• Cucamonga Valley Water District: minimum of 10% of annual operating expenses
(YLWD equivalent is $2.2M).
• Monte Vista Water District: 25% of the annual operating budgeted expenses (YLWD
equivalent is $5.5M).
A small percentage of agencies have operating reserve maximums, and some agencies set a
flat target amount that may or may not be adjusted each year by other variables.
The GFOA (Government Finance Officers Association) recommends 8%-17% of operating
expenditures as a minimum in an operating reserve. The GFOA has also indicated that "the
adequacy of unreserved fund balance in the general fund should be assessed based upon a
government's own specific circumstances... and the choice of revenues or expenditures as a
basis for comparison may be dictated by what is more predictable in a government's
All Yorba Linda Water District (YWLD) equivalents are calculated using the amended budget for FY 10
2
particular circumstances. In either case, unusual items that distort trends (one time revenues
and expenditures) should be excluded..."'
In general, setting the reserve as a percentage of expenditures makes more sense since
expenditures are more predictable than revenues, which can fluctuate based on water sales,
the economy, and the whims of state funding decisions.
YL WD Current Reserves as of 2128110:
Water Operating: $(768,782)
*Note: the Water checking account is $(218,547)
Sewer Operating: $1,284,896
Source of reserve funding: To more closely match current water rates with current costs of
service placed on the existing water system, the change in this reserve minimum from year to
year may be funded each year through the water rates.
Recommendations: (see Capital Reserves section of this report for recommendations, which
include an immediate transfer of funds to make the checking account whole)
Water Operating: Following GFOA guidelines, this reserve balance should be 8%-17% of
annual operating expenses as a minimum, which would be approximately $1.8M to
$3.7M.
Sewer Operating: Following GFOA guidelines, this reserve should be 8%-17% of annual
operating expenses as a minimum, which would be approximately $148,000 - $316,000.
OTHER RESERVES
2. Water Rate Stabilization: Covers the smoothing of water rates in the event of short to mid-
term revenue loss, property tax revenue loss and higher than anticipated budget costs that cannot
be supported by normal revenues. Some districts dedicate penalty billings to this reserve to help
smooth the loss of net revenues caused by conservation efforts.
Following are examples of target or minimum reserve levels set at other agencies:
• Cucamonga Valley Water District: maintains the cost of 8,000 AF of imported water,
which is projected to be enough to cover increases in the cost of water supplies above
supply allocations (Cucamonga's current balance is $4 million).
• Walnut Valley Water District: maintains approximately $5M in this fund - flat amount.
• Mojave Water Agency: minimum of $2M, maximum of $4M - flat amount.
• Mesa Consolidated: maintained at 45 days of annual budgeted expenses ($19M), with a
maximum of 60 days (YLWD equivalent is $2.7M to $3.6M)
YLWD Current Reserve: None
Recommendation: $1. IM - As the District potentially moves to a more conservation
orientated rate structure, it is imperative to establish a rate stabilization reserve to smooth
s "Appropriate Level of Unreserved Fund Balance in the General Fund" (2002). Government Finance Officers Association.
3
effects of rate structure changes and varying conservation levels. A suggested target amount
is 10% of net revenues, which is the amount that could be lost if customers conserve at a
higher level. District gross revenues from water sales are anticipated to be approximately
$IIM ($22M in water sales less $IIM in variable costs), which would set a reserve target
level of $1.1 million.
Options: There are various amounts and levels of funding for the Committee to consider.
Another option is to not fund this type of reserve.
Potential source of funding: Penalty billings (in a tiered rate structure); excess net income
above budgeted net income might be first dedicated to achieving this target reserve level.
3. Emergency/Contingency: For immediate reconstruction and/or support from a catastrophic
event or circumstance. This fund will assist in covering emergency cash needs for any
reason.
Following are examples of target or minimum reserve levels set at other agencies:
• High Desert Water District: Goal is to maintain a minimum level in excess of 5% of
annual operating budgeted expenses. The District also has a "Supplemental Water
Reserve" to be used to fund the potential purchase of supplemental water that is
necessary to meet demand, with a goal amount of 10% of the budgeted annual operating
expenses (YLWD equivalent is $1.1M to $2.2M).
• Monte Vista Water District: Minimum of $1M to a maximum of $4M.
YLWD Current Reserve: None
Recommendation: Can be combined with other reserve funds, such as the operating reserve.
Options: There are various amounts and levels of funding for the Committee to consider. In
lieu of establishing a separate fund, this fund can be combined with other reserve funds, such
as the Operating Reserve.
4. Employee Benefits and OPEB: Covers sick and vacation leave-time liability, other post
employment benefits (OPEB), and accrued compensatory time. On 6/30/09 the District had
approximately $490K of unpaid vacation, sick, and compensatory leave due to employees,
and had an unfunded liability for the District's OPEB plan of approximately $1.7M. Note,
the District should adjust this amount periodically based on updated compensated leave
balances owed and actuarial valuations of the District's unfunded OPEB liability.
Following are examples of target or minimum reserve levels set at other agencies:
• Monte Vista Water District: Funding of $50K per year, with a target of $1.2M.
• Note: many other agencies hold these funds in a trust, which is not considered a reserve
and would not be reflected on the District financial statements or in the District's
reserves.
YLWD Current Reserve: None
4
Recommendation: Establish a goal reserve level of $2.2M, to be funded over a determined
range of time.
Options:
1. Continue the current pay-go system.
2. Fund $2.2 M over the next five ten years, or some other range of time.
3. Set up a trust immediately, which would lower the total liability but would require an
immediate transfer of cash.
Source of reserve funding: To more closely match current water rates with the current costs
of service placed on the existing water system, the change in this reserve minimum from year
to year may be funded each year through the water rates.
CAPITAL RESERVES
5. Asset R/R: For capital repair and replacement of the District facilities and equipment
(capital outlay). Ideally, this reserve would be funded each year at a level amount from water
rates, and drawn down as needed for capital repair and replacement. This ensures that
ratepayers are paying a consistent amount for asset R&R each year, even though the actual
costs will likely fluctuate from year to year.
Following are examples of target or minimum reserve levels set at other agencies:
• Monte Vista Water District: Established to provide capital replacement funding as the
District's system infrastructure deteriorates over its useful life. Funding at $1M per year
minimum, with a targeted maximum reserve of $64M.
• Cucamonga Valley Water District: 75% of annual depreciation expense, with a current
balance of $7.2 million (YLWD equivalent is $3.2M).
• Mesa Consolidated: Target is $8M, with a current balance of $2M.
YLWD Current Reserve:
Water R&R: $2,051,083
Sewer R&R: $ 492,233
Recommendation:
Water R&R: $ 1.82M each year
Sewer R&R: $ .325M each year (the District is already dedicating $1 per account per
month to this reserve, for a total of approximately $160k per year)
Source of reserve funding: To more closely match current water rates with current costs of
service placed on the existing water system, this reserve should be funded with the water rates
each year, and then as repairs are made, the funds are drawn from this reserve.
6. Capital Improvement Program (CIP): Designated for funding the acquisition and
construction of new capital assets and used in concurrence with outside funding sources.
This reserve fund is generally established for all new capital items (excluding capital
outlay/equipment) or projects with a cost of $5,000 or more and a useful life of 5 years or
5
greater. The reserves for capital projects are usually maintained with a minimum balance
equal to the estimated cost of all capital improvement projects approved by the Board
through the regular budget process. The reserve generally will not exceed the total estimated
costs of all capital projects outlined in the District's multi-year Capital Improvement Plan.
Following are examples of target or minimum reserve levels set at other agencies:
• Mojave Water Agency: The amount needed to fund Capital Projects for five years, or 2%
of the total capital assets, or whichever is greater (YLWD equivalent is $3.8M).
• High Desert Agency: This reserve was established for unforeseen capital projects that are
necessary to meet regulatory requirements, system reliability, or future needs. Goal is to
maintain a minimum level is excess of 5% of annual operating budget (YLWD equivalent
is $L IM).
• Mesa Consolidated:
a. Catastrophe Reserve: Funding is targeted at 2% of total plant and equipment, based
on current Federal Emergency Management Agency (FEMA) guidelines ($2M) -
(YLWD equivalent $3.8M).
b. Capital Replacement Reserve & Administrative/General Capital Reserve: Used for
the replacement of capitalized assets when they reach the end of their useful lives.
Target is $10M.
Note: many agencies fund CIP through a mixture of rates and debt financing, determined by
the individual agency's five year CIP plan.
Current Capital Reserves:
Water Fund:
Annexation: $ 4,383,030
Water Capital Reserve 231,204
ID 1: 4,810,732
ID 2: 9,797,205
Water Capital Reserve $19,222,171
COP Revenue 2008 14, 326, 734
Total Water Cap. Reserve $33,548,905
Sewer Fund:
Sewer Capital: $ 188,942
Recommendations:
(1) Transfer monies to the Water Operating Reserve and monies to the Water
Checking/Working Capital from Annexation Revenue to make it whole, and;
(2) Spend down existing funds for CIP plan, and include a small amount of CIP funding on
the water rate each year to allow for any unfunded portion of projects in future to be level in
the short term horizon.
Source of reserve funding: To more closely match current water rates with current costs of
service placed on the existing water system, the change in this reserve minimum from year to
year may be funded through the water rates.
6
RESTRICTED RESERVES:
7. Debt Service: Covers the District's required debt service reserve requirements per the 2008
COPS Official Statement. These funds are the minimum amount required to be held by the
trustee until the bonds are paid in full.
Current Reserve: $2,146,096
Recommendation: Amount set by trustee, no change
7
5/4/2010
to ~ Undis
riet
Reserve Discussion
Prepared by:
Cindy Navaroli, _VIPA, CPA
Platinum Consulting Group
Board of Directors Workshop April 30, 2010
IM d 1
Purpose of Today's Discussion?
To Begin Discussions about Reserve Levels
Main Points?
• Reserves are Vital to Economic Stability
• The District has Relatively Low Reserves
• It is Fiscally Responsible to Maintain Adequate
tiLevels of Reserves
1
5/4/2010
-
17 50,
Objectives of a Reserve Policv:
-Ensures Strong Fiscal Management that Guides
Future District Decisions
-Builds Adequate Reserves Over Time
➢Provides Stability for the District's Finances
➢Helps Absorb Economic Downturns/ Large-scale
Emergencies
} r
IM ~4~
-Helps the District Meet Its Financial Obligations
➢Fnsures the Highest Possible Credit Rating
➢Meet Promises Made to Rating Agencies to Be Fiscally Responsible
and to Maintain the Debt Service Ratio at a Higher Level
"A new rate study is expected to be completed by the end of 2010, and
along with the development of a 5-year financial plan, management
appears committed to establishing and maintaining Fiscal stability.'"
From hitch RathngAaencrpress release, April 21, 2010
A bank is a place that will lewd you monej, if'
you can prove that you don't need it.
-Bob Hope
t;P
2
5/4/2010
17
1. Undesiynated Reserves: No Designations or Restrictions
2. Designated Reserves: To be used only for a Specific Purpose.
3. Restricted Reserves: Restricted by an Outside Source, such as
by Statute, Court, or Contract.
ri 1
lie,
IK-
emu."
I I I I I 1. Target: Desired (Ideal) Level of Reserve.
2. Minimum: The Ideal Minimum Amount that would be
Maintained in the Reserve. Sometimes called a "Floor".
3. Maximum: The Ideal Maximum that would be Maintained
in the Reserve. Sometimes called a "Cap" or a "Ceiling".
VtA,
3
5/4/2010
17
Following are Reserves Currently Held by the District,
and Other Reserve Categories the District
May Consider Adopting in the Future
t. ,
AF-d :J,
ri 1
IK- lie,
-Covers Operating Costs for an Established Period of Time
➢Typically 60 180 days
-Aids in Maintaining Day-to-Day Operations in Fiscal Hardship Periods
-Not Used to Finance Ongoing District Expenses
YLWD Current Reserves as of'3131/10:
Mater Operating Reserve: 52,051,814
Sewer Operating Reserve: SO
4
5/4/2010
17
Recommendations
Water Operatinm Reserve:
-8`Yo-17`Yo of Annual Operating Expenses (GFOA Guidelines)
➢Approx. S1.8M to S3.7M
YLWD IVider Balance is within these Guidelines
Sewer Operatin, Reserve:
-8%-17% of Annual Operating Expenses (GFOA Guidelines)
➢Approx. S148,000 - S316,000
Water Rate Stabilization:
-Smoothes Water Rates in the Event of Short to Mid-term Revenue Loss
➢Includes Property Tax Revenue Loss
➢May Include Penalty Billings (in a Tiered Rate Structure) to Assist with
Loss of Revenue due to Conservation Efforts
Emergency/Contingency:
-Immediate Reconstruction and/or Support from a Catastrophic Event
Funds Held in the Operating Reserve could be used in the
Event of'an Emergency,
Emplovee Benefits and OPEB:
-Covers Sick and Vacation Leave-tine Liability, Other Post Employment
Benefits Obligations (OPEB), and Accrued Compensatory Time
5
5/4/2010
17
-Funded with a Portion of Monthly Billings
-Used to Pay the Current Year Debt Service Payments
Current Debt Service Payment Reserve as of 3/31/10: S. 4,11
Restricted Reserve - Debt
-Covers the 2008 COP Requirement of S2.1M as "Insurance"
-Cannot be Spent
-Must be Maintained for the Life of the Bonds
Current Required Reserve as of3131110: 82.111
Asset R/R:
-Planned Capital Repair and Replacement of District Facilities & Eqpt.
-Funded each Year at a Level Amount from Water Rates
Current Reserve as of 3131110:
Water R&R: $0
Sever R&R: $ 507,570
-Assets Management Plan (Planned Repairs & Replacement)
➢Watcr Recommendations
-S 1.5M per year, Plus Another 5320,000 For Equipment & Vehicles
➢Sewer Recommendations
-S255k per year, Plus Another 590,000 For Equipment & Vehicles
*(Cni rentlp generating ap~roa. $180UY0
V-1 -
. _ '1~ ~ ``-1 Y ~ t'yv~„ ,.T r^ ~ >'~~r( ~t ~ yrr jf"
6
5/4/2010
17
Capital Improvement Protram (CIP):
-Fielding the Acquisition and Construction of New Capital Assets
-Used in Concurrence with Outside Funding Sources
Water Fund:
Water Capital Reserve $19,346,740*
Sewer Fund:
Sewer Capital Reserve S189,010
*Excludes the 2008 COP Bond Funds of $11,413,890
I I ~jj j
Reserve Funds Comparison By Similar Agenciel
$40.00
$35.00
$30.00
$25.00
$20.00 f` Operating Reserves
€ Capital Reserves
$15.00
$.00
$5
$5.00
$0.00
YL Walnut Mesa
F'`r x *Capital Reserves do not Include Bond Funds
7
5/4/2010
60
50 Millions($)
40
30
20
10
0
FY 06/07 FY 07/08 FY 08/09 FY 09/10 FY 10/11 FY 11/12 FY 12/13
Bond Funds ■ CIP Uses ■ Ending Balance f
QUESTIONS?
8
ITEM NO. 6.3
AGENDA REPORT
Meeting Date: April 30, 2010
Subject: Draft FY 2010/11 Budget
ATTACHMENTS:
Name: Dosciiption: Type:
Draft Budget Assumptions.pdf Draft Budget Assumptions Backup Material
Draft_Budget.pdf Draft Budget Backup Material
Draft Budget FY2010-11.pdf PowerPoint Presentation Backup Material
Yorba Linda Water District Draft FY 2010/11 Budget
Draft Budget Assumptions
General Assumptions
• Operating Expenses and Revenues are divided into two enterprise funds - the
Water Fund and the Sewer Fund. Capital expenditures are also divided between
these two funds, accordingly.
• YLWD will strive to achieve a water loss factor no greater than 5% (the difference
between water purchased and water sold). This includes water used for water
quality assurance purposes, water distribution and sewer collection systems
maintenance, fire protection purposes, and unaccounted water losses due to
water main leaks.
• It is anticipated the District will receive 91 % of its share of the property tax
revenue or approximately $1.1 M.
• Regular fuel is estimated to average $3.25 per gallon.
Water Related Assumptions
Revenues
• The District will provide potable water service to an average of 23,800 metered
water services, an increase of approximately 200 service connections.
• Water supply restrictions and associated water allocations will continue to
mandate conservation efforts, resulting in demands and water sales lower than
historical norms.
• The Draft Budget assumes water demands based on 85% of historical water
usage, or 15% yearly conservation based on the three-year average from FY
2006/07 - 2008/09. The water budget assumes a yearly demand of 21,100 acre
feet (AF).
• Water Revenues are calculated with the existing rate structure of $10.20 per
month fixed charge and $2.52 per billing unit used, which is 100 cubic feet (ccf)
or approximately 750 gallons per billing unit.
Page l 1
Yorba Linda Water District Draft FY 2010/11 Budget
Variable Water Costs
• Variable Water Costs include treated and untreated import water purchased from
Municipal Water District of Orange County (MWDOC), groundwater purchased
from Orange County Water District (OCWD), and electric and gas utility costs
(energy) to pump it throughout the community. These expenses account for
nearly one half of the total water operating budget and vary with demands
throughout the year.
• MWDOC's cost of service includes a fixed charge (connection charge) based on
the number of service connections (meters) in YLWD's service area and a
demand (incremental) charge added to the rates charged by Metropolitan Water
District of Southern California (MWD). These charges amount to $214,200 in this
budget.
• MWDOC also charges a pass-through (with no additional increment) of MWD's
Readiness to Serve (RTS) and Capacity Charges. These charges amount to
$533,400 in this budget.
• MWD's rate increases, effective January 1, 2011, will increase the cost of treated
import water from $701 /AF to $739/AF and untreated water from $484/AF to
$532/AF.
• MWD's Water Supply Condition will remain at Level 3, with continued
implementation of their Water Supply Plan and Water Supply Allocation set at
Level 2 - a 15% reduction in historical imported water demands.
• Due to YLWD's increased ability to utilize local groundwater supplies, the
effective import water supply reduction equates to approximately 8% of YLWD's
total water supply for a ratio of 53% (import) to 47% (groundwater).
• YLWD's MWDOC allocation for import water will be approximately 12,320 AF.
• Approximately 10,800 AF of treated import water will be purchased from
MWDOC throughout the year at an average rate of $727/AF.
• Approximately 500 AF of untreated import water will be purchased from MWDOC
throughout the year at an average rate of $515/AF.
Page 12
Yorba Linda Water District Draft FY 2010/11 Budget
• Additional import water purchases within 10% over allocation will be charged a
rate of $2,053/AF. Additional import water beyond 10% over allocation will be
charged at $3,367/AF.
• No import water purchases will be required at rates above allocation levels since
YLWD's customers have been responsive to demand management requirements
through supportive and responsible water conservation practices.
• The Basin Production Percentage (BPP) established by OCWD for groundwater
pumped out of the basin will remain at 62% for FY 2010/11 at a cost of $249/AF.
• An additional 315 AF may be pumped from the basin with an additional Basin
Equity Assessment (BEA) charge of $501/AF for a total cost of $750/AF.
Additional groundwater pumped above these limits will be surcharged an
additional $2,400 for a total cost of $3,150/AF.
• A total of 9,800 AF will be pumped from the groundwater basin to maximize the
benefit of the BPP without incurring a penalty for over pumping the basin.
• No substantial energy increases are assumed for FY 2010/11.
Sewer Related Assumptions
• The Sewer Fund will be charged 9% of the administrative overhead.
• The District will provide sewerage collection services to an average of 17,500
sewer service connections.
• Sewer maintenance charges will remain fixed at $5.50 per month for single family
residential (SFR) customers with associated charges for multi-family and
commercial accounts.
Salaries & Benefits Assumptions
• Salaries and benefits may require modification pending execution of labor
agreements and approved memorandums of understanding (MOU's).
• The vacant Administrative Assistant position has been eliminated.
Page 13
Yorba Linda Water District Draft FY 2010/11 Budget
• The Human Resources Manager will continue to assume the duties and
responsibilities of Risk Management. The District's Safety, Training and
Wellness Programs will continue to be run and monitored through the HR
Department.
• The District will continue to hold six authorized positions vacant throughout the
budget year.
• Existing filled positions that become vacant throughout the year may be refilled at
the discretion of the General Manager in accordance with the authority granted
by the Board of Directors.
• The Draft Budget assumes staffing levels at an average of 76 full time employees
with benefits throughout the year.
Page 14
Yorba Linda Water District
Water and Sewer Enterprise
(Prior Year Budget, Forecast & Current Year Budget)
Budget Forecast Budget
FY 2009/10 FY 2009/10 FY 2010/11
Revenue (Operating):
Water Revenue (Residential) $15,008,946 $13,997,283 $17,248,481
Water Revenue (Commercial & Fire Det.) 1,579,380 1,593,571 1,522,341
Water Revenue (Landscape/Irrigation) 3,550,410 3,236,416 3,588,335
Service Charges 2,889,136 2,791,431 2,913,120
Sewer Charge Revenue 1,160, 000 1,180, 434 1,112, 574
Locke Ranch Assessments 116,000 91,395 102,828
Other Operating Revenue 586,892 638,889 607,240
Total Operating Revenue 24,890,764 23,529,419 27,094,919
Revenue (Non-Operating):
Interest 147,500 145,579 156,000
Property Taxes 1,200,000 1,092,000 1,206,000
Other Non-Operating Revenue 272,702 346,108 253,114
Total Non-Operating Revenue 1,620,202 1,583,687 1,615,114
Total Revenue 26,510,966 25,113,106 28,710,033
Expenses (Operating):
Depreciation & Amortization 4,540,800 4,734,225 5,017,876
Variable Water Costs (G. W., Import & Power) 12,259,937 11,846,661 12,667,236
Salary Related Expenses 7,355,049 6,355,739 7,455,656
Supplies & Services:
Communications 295,348 347,071 415,860
Contractual Services 1,101,345 1,077,256 888,485
Data Processing 127,635 100,484 120,435
Dues & Memberships 33,428 36,740 34,118
Fees & Permits 56,200 60,820 50,402
Board Election - - 80,000
Insurance 376,300 321,593 345,400
Materials 448,726 485,874 356,615
District Activities, Emp Recognition 15,200 14,700 12,800
Maintenance 414,150 163,611 427,200
Non-Capital Equipment 158,541 94,523 113,120
Office Expense 76,325 37,044 43,100
Professional Services 838,500 471,847 702,400
Training 70,150 33,254 51,050
Travel & Conferences 55,785 14,507 44,950
Uncollectible Accounts 52,000 38,857 50,500
Collection Agency Fee 3,500 1,365 3,000
Utilities 29,700 128,810 123,000
Vehicle Equipment 326,751 312,897 314,150
Supplies & Services Sub-Total 4,479,584 3,741,253 4,176,585
Total Operating Expenses 28,635,370 26,677,878 29,317,353
Expenses (Non-Operating):
Interest on Long Term Debt 1,981,300 1,947,098 1,940,954
Job Closing Expense 45,000 - -
Other Expense 156,80 0 181,149 103,193
Total Non-Operating Expenses 2,183,100 2,128,247 2,044,147
Total Expenses 30,818,470 28,806,125 31,361,500
Income (Loss) !4.307.5041 !3.693.0191 !2.651.4671
Principle on Long Term Debt (825,000) (825,000) (855,000)
Vehicle & Capital Equipment (628,500) (628,500) (268,550)
Contributed Capital 100,000 339,030 145,860
4/28/2010 5:17 PM
Yorba Linda Water District
Water Enterprise
(Prior Year Budget, Forecast & Current Year Budget)
Budget Forecast Budget
FY 2009/10 FY 2009110 FY 2010/11
Revenue (Operating):
Water Revenue (Residential) $15,008,946 $13,997,283 $17,248,481
Water Revenue (Commercial & Fire Det.) 1,579,380 1,593,571 1,522,341
Water Revenue (Landscape/Irrigation) 3,550,410 3,236,416 3,588,335
Service Charges 2,889,136 2,791,431 2,913,120
Other Operating Revenue 583,792 625,568 574,108
Total Operating Revenue 23,611,664 22,244,269 25,846,385
Revenue (Non-Operating):
Interest 127,900 129,201 142,000
Property Taxes 1,092,000 1,092,000 1,098,000
Other Non-Operating Revenue 205,462 323,090 227,668
Total Non-Operating Revenue 1,425,362 1,544,291 1,467,668
Total Revenue 25,037,026 23,788,560 27,314,053
Expenses (Operating):
Depreciation & Amortization 3,945,750 4,151,772 4,403,257
Variable Water Costs (G. W., Import & Power) 12,259,937 11,846,661 12,667,236
Salary Related Expenses 6,538,008 5,638,523 6,643,266
Supplies & Services:
Communications 268,694 315,548 376,576
Contractual Services 964,090 943,181 816,207
Data Processing 116,148 91,440 109,596
Dues & Memberships 30,068 33,321 30,778
Fees & Permits 50,160 55,541 44,020
Board Election - - 72,800
Insurance 342,433 292,496 314,314
Materials 427,424 469,083 337,766
District Activities, Emp Recognition 13,832 13,377 11,648
Maintenance 384,362 134,588 325,227
Non-Capital Equipment 139,910 79,917 92,611
Office Expense 66,775 32,324 39,221
Professional Services 760,575 415,456 635,494
Training 61,518 29,300 45,735
Travel & Conferences 48,892 13,182 40,602
Uncollectible Accounts 47,320 38,857 45,955
Collection Agency Fee 3,185 1,365 2,730
Utilities 27,027 117,216 111,930
Vehicle Equipment 279,683 278,673 285,877
Supplies & Services Sub-Total 4,032,096 3,354,865 3,739,087
Total Operating Expenses 26,775,791 24,991,821 27,452,846
Expenses (Non-Operating):
Interest on Long Term Debt 1,981,300 1,947,098 1,940,954
Job Closing Expense 40,000 - -
Other Expense 154,50 0 178,155 102,193
Total Non-Operating Expenses 2,175,800 2,125,253 2,043,147
Total Expenses 28,951,591 27,117,074 29,495,993
Income (Loss) (3.914.5651 (3.328.5141 (2.181.9401
Principle on Long Term Debt (825,000) (825,000) (855,000)
Vehicle & Capital Equipment (622,500) (622,500) (244,550)
Contributed Capital 91,000 291,180 92,807
4/28/2010 5:19 PM
Yorba Linda Water District
Sewer Enterprise
(Prior Year Budget, Forecast & Current Year Budget)
Budget Forecast Budget
FY 2009/10 FY 2009/10 FY 2010/11
Revenue (Operating):
Sewer Charge Revenue 1,160,000 1,180,434 1,112,574
Locke Ranch Assessments 116,000 91,395 102,828
Other Operating Revenue 3,100 13,321 33,132
Total Operating Revenue 1,279,100 1,285,150 1,248,534
Revenue (Non-Operating):
Interest 19,600 16,378 14,000
Property Taxes 108,000 108,000 108,000
Other Non-Operating Revenue 67,240 23,018 25,446
Total Non-Operating Revenue 194,840 147,396 147,446
Total Revenue 1,473,940 1,432,546 1,395,980
Expenses (Operating):
Depreciation & Amortization 595,050 582,453 614,619
Salary Related Expenses 817,041 717,216 812,393
Supplies & Services:
Communications 26,654 31,523 39,284
Contractual Services 137,255 134,075 72,278
Data Processing 11,487 9,044 10,839
Dues & Memberships 3,360 3,419 3,340
Fees & Permits 6,040 5,279 6,382
Board Election - - 7,200
Insurance 33,867 29,097 31,086
Materials 21,301 16,791 18,849
District Activities, Emp Recognition 1,368 1,323 1,152
Maintenance 29,789 29,023 101,973
Non-Capital Equipment 18,631 14,606 20,509
Office Expense 9,550 4,720 3,879
Professional Services 77,925 56,391 66,906
Training 8,632 3,954 5,314
Travel & Conferences 6,893 1,325 4,348
Uncollectible Accounts 4,680 - 4,545
Collection Agency Fee 315 - 270
Utilities 2,673 11,594 11,070
Vehicle Equipment 47,068 34,224 28,273
Supplies & Services Sub-Total 447,488 386,388 437,497
Total Operating Expenses 1,859,579 1,686,057 1,864,509
Expenses (Non-Operating):
Job Closing Expense 5,000 - -
Other Expense 2,300 2,994 11000
Total Non-Operating Expenses 7,300 2,994 11000
Total Expenses 1,866,879 1,689,051 1,865,509
Income (Loss) (392"939) (256.5051 (469"5291
Vehicle & Capital Equipment 6( ,000) 6( ,000) 2( 4.000)
Contributed Capital 91000 47,850 53,053
4/28/2010 5:19 PM
5/4/2010
'
Wr7M Yorba Linda
Water District
Proposed Draft Budget
FY 2010/11
Presented By: Ken Vecchiarelli, GM
Stephen Parker, Finance Director
Board Budget Workshop
April 30, 2010
2009/10 Highlights & Accomplishments
• Capital Improvements & Replacements
- Zone Reconfiguration Project Completed
- Solar Panel Pilot Project Completed
- Asset Management Plan Completed
- Lakeview Sewer Lift Station Upgrades
- Grant Funding Received for Recycled Water Study
- CCWD Annexation Begun
1
5/4/2010
17
0r•
• Customer Service Enhancements
- Lock Box Service for Customer Payments
- Online Bill Pay Implemented
- New "Customer-Friendly" Water Bill Statement
• Emergency Mitigation
- Enhanced Training & Table-top Exercises w/local agencies
- Purchased 2 Mobile Water Pumps & 1 Mobile Generator
- - L" `~~Y. ._`C= y.Fy-.,,. _ - ter. °r _~.14"'L.L _J~~,~
2009/10 Highlights : Accomp. •
• IT Improvements
- GIS Conversion Completed
- Financial Software in the Process of Completion
- Utility Billing Software Completed (est. June 2010)
- S.C.A.D.A. System Converted (100%)
2
5/4/2010
17
0r•
• Overall District Improvements
- Developed & Implemented Various Policies
- Positive Auditors' Letter for FY 2008/09
- Successful Recruitments
• Public Information Specialist
• Finance Director
• Water Quality Engineer
• Other Vacancies
Goals IM ~4FY 2010/11 : Objectives
• Key Business Objectives
- Complete Cost of Service/Rate Structure Alternatives Study
- Develop Five-Year Financial Plan
- Implement a Financial Reserve Policy
- Complete OCWD Annexation
- Complete IT Business Systems Implementation
- Initiate AWWA/WEF QualServe Benchmarking & Efficiencies Program
- Install Vehicle Fleet GPS Program
- Support Sewer Service Area Development
- Complete Urban Water Management Plan Update
3
5/4/2010
17
FY 2010/11 Goals & Objectives
• Customer Service Improvements
- Support Expanded Online Bill Pay
- Implement Enhanced Public Affairs and Outreach Program
• Capital Improvement and Replacement Projects
- Complete Hidden Hills Reservoir
- Complete Highland Reservoir
- Drill & Equip Well No. 20
- Complete Sewer Master Plan
t _pr- 4,
Budget Assumptions
• Variable Water Costs & Water Revenue
- Water Conservation of 15% (from average FY 2006-09)
• FY 2009/10 Conservation Goal: 10% Cut, Actual Usage: 17% Cut
- MWD Rate Increase 7.5% (eff. January 1, 2011)
• OCWD BPP
- Remains at 62% with RA held at $249/AF
• MWDOC Allocation (FY 2010/11)
- Approx. Same Allotment as FY2009/10
- Penalties for Exceeding Allotment Increase with Rate Increase
4
5/4/2010
17
Expenses Key Factors
• $477,000 Depreciation Increase
- Completion of Improvement and Replacement Projects
• $410,000 Variable Water Costs
- Net Effect of MWD Increases for Import Water Costs
- Small MWDOC Incremental and Fixed Charge Increases
• $100,000 Salary-Related Expenses
- Effects from Funding 76 FTE's for Full Year
_ - Includes Benefits, Reclassifications & Merit _
~ 'Fy-.,... _ _ ter. i° -~~r["a~ ~ j
Expenses Key Factors (Con't.)
• ($320,000) - Reduced Vehicles & Capital Equipment
Outlay
• ($300,000) - Reduced Overall Supplies & Services
- Reduced Consulting and Support Services
- Added in $80,000 Board Election for Nov. 2010
- Added in $100,000 CEQA Report for OCWD Annexation
- Added $40,000 GPS & Vehicle Tracking Project
- Added $20,000 Bottled Water for Public Affairs Programs
'ter ~ ~ ~ ~ • - - r ~ rFr
5
5/4/2010
-
17
C-~ -
Budget Summary (Water & Sewer)
Current Budget Forecast Proposed Budget
(FY 2009/10) (FY 2009/10) (FY 2010/11)
Total Operating Revenue $ 24,890.764 $ 23,529,419 $ 27,094.919
Total Non-Operating Revenue $ 1,620,202 $ 1.583.687 $ 1.615.114
Total Revenue $ 26,510,966 $25,113,106 $28,710,033
Deprecintion $ 4,540,800 $ 4,734,225 $ 5,017,876
Vonoble Watet Costs $ 12,259,937 $ 11,846,661 $ 12,667,236
Snlaty-Reinted Expenses $ 7,355,049 $ 6,355,739 $ 7,455,656
Supplies & Set vices $ 4,479,584 $ 3,741,253 $ 4,176.585
Total Operating Expenses $ 28,635.370 $ 26,677,878 $ 29,317.353
Total Von-Operating Expenses $ 2.183.100 $ 2,128,247 $ 2.044.147
Total Expenses $ 30,818,470 $28,806,125 $ 31,361,500
Income (Loss) $ (4,307,504) $ (3,693,019) $ (2,651,467)
J, * y f
k. c' ~ _ `e_ t • yFy-.,. i~ -~~•-v~ r J~ ~ fir
Total Expenses & Outlay
FY 2010/11
1%
6%
15% ■ Variable Water Costs
41%
■ Salaries& Benefits
13% Supplies&Services
■ Depreciation
24% Long Term Debt
Vehicles& Equipment
Budget: $31,101,026
i, XT z q
-Pr
6
5/4/2010
17
Variable Water Costs
FY 2010/11
20% "00,
■ Power
70% ® Import Water
Ground Water
Total Budget: $ 12,667,236
History of Variable Water Costs
FY 10/11 (Budgeted)
FY 09/10 (Forecasted)
FY"(Actual)
FY07/08 (Actual)
Millions $10.00 $11.00 $12.00 $1300
FY 07108 FY 08/09 FY 09/10 FY W11
(Actual) (Actual) (Forecasted) (Budgeted)
iB Yearly Costs $10.51 $10.54 $11.85 $12.67
7
5/4/2010 17
C_~ -
Capital Projects Outlay
FY 2010/11
0 CIP Pre-Approved ■ CIP Urgent CIP Proposed
5%
I
82%
Total: $ 9,828,000
IM ~4C7
Vehicles i Capital 300.0 p FY 2009/10 Total: $628,500
200.0 I` FY 2010/11 Total: $268,550
~ i
S 100.0
0.0
71
Ops. I.T. Fin. Eng.
Ops. I.T. Fin. Eng.
FY 2009/10 321.0 246.0 43.3 18.0
■ FY 2010/11 133.7 92.2 42.6 0.0
8
5/4/2010
17
Asset Management Plan Recommendations
• Water Reserves
- $ 1.82 Million Annually (Based on 10-Yr Horizon)
• $1.51M in Capital Repair and Replacements
• $320K in Vehicle and Equipment Outlay
• Sewer Reserves
- Current Charge of $1/month ($180,000/yr) for R&R
- $165,000 Annually (Based on 25-Yr Horizon)
• $75K additional needed for Capital Repair & Replacements
- • $90K in Vehicle and Equipment Outlay "
Fitch - L" `~~Y. ._`C= y.Fy-.,,. _ - ter. °r _~.14"'L.L _J~~,~
Ratings • YLWD Bonds
• YLWD Bonds Revised to AA from AA-, with a Stable
Outlook
Rating Rationale Based On:
• Substantial Rate Increase Eff. Sept. 2009
• No Additional Near-Term Debt
• A Rate Study in Progress/Future Rate Structure Change
• Additional Rate Increases if Expenses Increase
Return Debt Service Ratio to Historical Norms (2.0)
9
5/4/2010
Funding 17
Rate and Options for FY 2010/11
1. No Increase to Customers
May Require Additional Reductions in Expenses, Services or Reserves
2. Pass through of MWD Increase (No Prop. 218 Required)
a) $.03/Unit (Eff. July 1, 2010), or
b) $.07/Unit (Eff. January 1, 2011), or
c) $.97 to Monthly Service Charge (Eff. July 1, 2010), or
d) $1.94 to Monthly Service Charge (Eff. January 1, 2011)
t _pr- 4,
Debt Reserve Coverage
Y ZOOM
No Rate Pass-
ase
Incre W
pq1
Debt Service 1.41 1.76 1.85
Coverage Basis
* Water Fund Only
10
5/4/2010
17
Customer Bill Projections
No Rate
Option 1 Increase $75.72
$.03
Option 2a (per unit) $76.50 Based on
Average Usage
$.07 of 26 units
Option 2b (per unit) $77.54
$.94
Option 2c (Monthly Charge) $76.66
$1.94
Option 2d (Monthly Charge) $77.66 _
r _ =s 9
rr rY
QUESTIONS?
11