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Home My WebLink About2017-06-19 - Board of Directors Meeting Agenda PacketYorba Linda Water District AGENDA YORBA LINDA WATER DISTRICT BOARD OF DIRECTORS WORKSHOP MEETING Monday, June 19, 2017, 4:00 PM 1717 E Miraloma Ave, Placentia CA 92870 1. CALL TO ORDER 2. PLEDGE OF ALLEGIANCE 3. ROLL CALL J. Wayne Miller, President Al Nederhood, Vice President Andrew J. Hall, Director Phil Hawkins, Director Brooke Jones, Director 4. 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 three minutes. 5. 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. 5.1. Presentation of 2017 Water Financial Model Update (Materials to be provided at the meeting.) 6. ADJOURNMENT 6.1. The next Regular Board of Directors Meeting will be held Tuesday, June 27, 2017. Closed Session (if necessary) will begin at 5:30 p.m. and regular business at 6:30 p.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. Meeting Date: Subject: ATTACHMENTS: Name Presentation.0 AGENDA REPORT June 19, 2017 ITEM NO. 5.1 Presentation of 2017 Water Financial Model Update (Materials to be provided at the meeting.) Ak, Description: Backup Material Type: Backup Material orba--Linda Ila TER DISTRICT 2017 Water Financial Plan Update JUNE 19, 2017 N RAFTELIS � FINANCIAL CONSULTANTS, INC. Y, Financial Plan Overview Financial and Reserve Policy Overview >; YLWD Financial Policy >. Other Inputs and Assumptions for Financial Plan > Financial Plan Model Overview ). Financial Plan Development Status Quo Financial Plan Financial Plan Updates >> Proposed Rates Framework FINANCIAL PLAN OVERVIEW Properties of Utility System Political Acceptance on Rates • Capital intensive • Highly fluctuating capital cost • Unknown liability • Increasing regulatory demand • Rate stability • Affordability • Equity • Environmental stewardship Financial Sufficiency for the Short- and Long -Term » Operating expenses Anticipated capital expenditures Preparation for the Future » Identify known facts and variables Anticipate unknown variables and evaluate associated risks Tools for the Agencies » Minimize rate fluctuations from year to year » Develop and assess financial policies, budget goals and objectives FINANCIAL PLAN OVERVIEW Yorba Linda Water District FINANCIAL AND RESERVE POLICY OVERVIEW — a I W% I 1 at I .► m Importance of Financial Policies To maintain financial solvency Mitigate risks and provide a basis for coping with fiscal emergencies (revenue short -falls, asset failure, emergency etc ...) To provide guidelines for sound financial management with an overall long-range perspective To enhance financial management transparency Improve public's confidence and elected officials' credibility )) Nature of municipal utility system Capital intensive Highly fluctuating capital costs Risk and liability 4 unknown liability costs Healthy reserves levels 4 better credit ratings 4 lower interest rates for future debt I 6 Reserve Balances: Operation Reserve: to meet daily working capital for operating expenses Rate Stabilization Reserve: to be used during periods of short-term revenue shortages to prevent rate -shock and phase in any necessary rate adjustments Capital Reserve: for future CIP and R&R expenditures Emergency Reserve: funds available in case of asset failure or natural disaster Other Restricted Reserves: to mitigate other known risks such as debt service Debt Coverage Ratios To meet Official Statement requirements To achieve credit ratings from rating agencies YORBA LINDA WATER DISTRICT FINANCIAL POLICY Operating $2.143M (% of Operating Budget) (8%) Rate Stabilization Emergency Capital Reserve COP/Debt Service Employee Benefit Liability Total Existing Target for FY 2018 Estimated Beginning Reserve for FY 2018 n/a $1M $2.02M $OM (100% of 2008 COP Debt Service, paid off in FY 2017) $546K $5.709M $28.147M Operating $9.426M $16.121M (X% of Operating Budget + 100% Annual Debt Service) (25%) (50%) Rate Stabilization Emergency Capital Reserve COP/Debt Service Employee Benefit Liability $0.962M (5% of Sales Revenues) $1.471M (1% of Net Capital Assets) $3.941M (2 years of R&R CIP) $OM (100% of 2008 COP, paid off in FY 2017) $546K $3.847M (20% of Sales Revenues) $4.414M (3% of Net Capital Assets) $5.791M (5 years of R&R CIP) $OM (100% of 2008 COP, paid off in FY 2017) $546K Total Exist! n g Ta rget for FY 2018 $16.346M $30.719M Estimated Beginning Reserve for FY 2018 $28.147M $28.147M �. Provides a set of comprehensive guidelines for the issuance and management of District's debt portfolio )> Limitations on Debt Issuance: Short-term: can not exceed 30% of total debt Senior Lien Long-term: Debt coverage min = 125% Debt coverage target = 225% for prudent financial management practice and to maintain credit ratings OTHER INPUTS AND AssumPTIONS FOR FINANCIAL PIAN General Personnel Energy Construction Other Revenues Property Tax Rev Reserve Interest New Account Growth (1 -inch) Budgeted 3.0% 3.0% 3.0% Budgeted 5.0% 5.0% 5.0% Budgeted 2.0% 2.0% 2.0% Budgeted 3.0% 3.0% 3.0% Budgeted 1.0% 1.0% 1.0% Budgeted 2.0% 2.0% 2.0% Budgeted 0.3% 0.3% 0.3% 200 200 200 200 Basin Pumping Percentage 70% 70% 70% 75% 75% 75% (% of Demand) OCWD ($/AF) $422 $446 $455 $464 $473 $483 OCWD Fixed Costs $350,000 $350,000 $350,000 $350,000 $350,000 $350,000 MWD/MWDOC Jul - Dec ($/AF) $946 $979 $1,015 $1,061 $1,108 $1,158 (56.5% of Annual Usage) Jan - Jun ($/AF) $979 $1,015 $1,061 $1,108 $1,158 $1,210 (43.5% of Annual Usage) MWD RTS $502,485 $558,187 $569,350 $580,737 $592,352 $604,199 MWD Capacity Charge $231,771 $254,125 $259,207 $264,392 $269,679 $275,073 MWDOC Retail Charge $270,509 $281,044 $286,665 $292,398 $298,246 $304,211 Total Water Supply Costs ($M) $11.657 $12.538 $12.893 $12.723 $13.092 $13.995 Water Sales (AF) 15,768 16,353 16,353 16,353 16,353 17,064 Unit Water Supply Rate ($/hcfl $1.69 $1.77 $1.81 $1.79 $1.84 $1.89 w 18.OAF .0 a 17.5AF r 17.OAF 16.5AF 16.OAF 15.5AF 15.OAF 14.5AF 14.OAF ❑ 2015 Rate Study Projected Water Sales Scenarios FY 2017 14,581 AF FY 2018 15,623 AF ■ 2017 Scenario 2 15,642 AF 16,353 AF ■ 2017 Scenario 3 15,642 AF 15,642 AF FY2019 16,664 AF 16,353 AF 15,642 AF FY 2020 17,706 AF 16,353 AF 15,642 AF FY 2021 17,706 AF 16,353 AF 15,642 AF FY 2022 17,706 AF 17,064 AF 15,642 AF 2$10 $4 $2 $0 FY 2017 2015 Rate Study CIP $6,164,755 (6-yrtotal $21.34M) 2017 Update CIP $11,761,829 (6-yrtotal $25.43M) Water CIP Comparison FY 2018 $3,417,299 FY 2019 $3,370,566 � V FY2021 $2,731,818 FY 2022 $2,813,772 $6,276,124 $4,159,561 $1,748,894 $1,297,613 $182,332 Revenue Bonds Series 2017A Issued in May 2017 - Refunding 2018 COP ($29.07M) $6M Proceeds for CIP in FY 2018 Annual debt service ~ $2.14M starting June 2018 Pay-off Line of Credit Balance in September 2016 >- Starting FY 2018: 2 debts ($2.73M) Revenue Bonds 2012A ($588K) Revenue Bonds Series 2017A ($2.14M) FINANCIAL PLAN MODEL OVERVIEW Water Revenue Adjustments & Coverage Chart Water Operating Financial Plan 100% 500% $40 80°% 216% 215% 208% 176%153% ° 300% I .2 _ $30� 60% ° 100% $20 40% -100% $10 20% -300% $0 L 7 0°% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0 -500% FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 Rev Adj FY 2017 FY 2018 FY 2019 – FY 2020 – FY 2021 FY 2022 Coverage DYLWD O&M Water Cost Overall Rev Adj Coverage Ratio (right axis) O Debt Service & Payoff Principal Non -Operating Required Coverage -125% • Alert Coverage Res Funding Current Rev ......• Target Debt Coverage 225% = —Proposed Rev Millions Total Water Reserve Ending Balances Water CIP and Funding Sources $50 T Selected CIP: 2017 Update CIP $14 $11.76 $40 p $12 $30 - $10 $8$6.28 $20 $6 $4.16 $10 4 $1.75 $1.30 ....... ...... ....... ....... ....... $2 $0.18 $0 $0It I A � FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 �i Ending Balances Proposed Min Balances I Proposed Target Balances o Alert Balances ■ Debt Funded ■ PAYGO ♦ Total CIP ...... ••••• Existing Min Balances Select CIP OptionsV 2017 Update CIP Select Water Sales Scenario 2017 Scenario 2 Select No of Yr Displayed Water Supply.: Calculated Aug Jul Jul Jul Jul Jul Jul Jul Jul Jul Jul Overall Rev Adj Rev Adjustments $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Basin Pumping Percentage (BPP) OCWD % 70.0% 70.0% 70.0% 75.0% 75.0% 75.0% 75.0% 75.0% 75.0% 75.0% Est Water Sales (AF) 100 15,768 AF 16,353 AF 16,353 AF 16,353 AF 16,353 AF 17,064 AF 17,064 AF 17,064 AF 17,064 AF 17,064 AF 17,064 AF 100% 80% 60% 40% 20% 0% Rev Adj Water Revenue Adjustments& Coverage Chart 500% 216% 215% 208% 176% 300% 153% r o 0.0% 0.0% 0.0% 0.0% 0.0% FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 100 70 -100% -300% 0.0% -500% FY 2022 Coverage Overall Rev Adj — Coverage Ratio (right axis) Required Coverage -125% • Alert Coverage ......••• Target Debt Coverage - 225% Millions $50 $40 $30 $20 $10 Total Water Reserve Ending Balances FY 2017 FY 2018 - Ending Balances Proposed Target Balances ...... Existing Min Balances FY 2019 FY 2020 FY 2021 FY 2022 — Proposed Min Balances G Alert Balances LFULF L VVrViIU5%, DI„^ bars - Overall Revenue Adjustment (left axis) (0%) ➢Green line - Projected debt coverage (right axis) ➢Red line - Required debt coverage 125% by existing debt Official Statement )l;, Broken green line - Target debt coverage byYLWD Debt Mgmt Policy (225%) ➢Red dot - Alert coverage when falling below target coverage (225%) Projected Reserve Balances ➢Green bars - Projected ending fund balances ➢Green line - Proposed target balances ➢Red line - Proposed min balances ➢Red dotted line - Existing min balances ➢Red dot - alert balances when ending balances fall below proposed min balances Ln $40 C 0 $30 $20 $10 $o Water Operating Financial Plan FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 OYLWD O&M Water Cost =Debt Service & Payoff Principal D Mon -Operating IIIIIIIIIIIIIIIIIIIIRes Funding — Current Rev — Proposed Rev Lo $14 p $12 $10 75 $8 $6 $4 $2 $0 $11.76 FY 2017 Water CIP and Funding Sources $6.28 $4.16 1 h I &_ - A $1.75 $1.30 FY 2018 FY 2019 FY 2020 FY 2021 ■ Debt Funded ■ PAYGO ■ Total CIP $0.18 FY 2022 Operating Financial Plan ➢Lines - Revenues ➢Red - Current Rates ➢Green - Proposed Rates (no revenue adjustments 4 same as current) ➢Stacked bars - Expenses ➢Blue - Water Supply Costs ➢Light Blue - Other 0&M Expenses ➢Orange - Non -Operating Expenses ➢Light Purple - Debt Service ➢Red -Reserve Funding (+) or Funding from Reserve (-) Water CIP & Funding Sources 'JI- Purple bar - Debt Funded ($6M proceeds from Rev Bond 2017A) ➢Green bar - PAYGO ➢Blue triangle - Total Water CIP Water Revenue Adjustments& Coverage Chart 100% Water CIP and Funding Sources 500% 80% 216% 215% 208% 1760153% 300% 60% 100% 40% -100°/ 20% -300% 0.0% 0.0% 0.09/. 0.090 0.0% 0.0% $4 $2 0% $1.75 $1.30 $0.18 -500% Rev Adj FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 Coverage Overall Rev Adj Coverage Ratio (right axis) FY 2017 FY 2018 Required Coverage -125% • Alert Coverage ■ Debt Funded ......••• Tar et Debt Coverage - 225% Millions $50 $40 $30 $20 $10 $0 Total Water Reserve Ending Balances FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 Ending Balances Proposed Min Balances Proposed Target 3alances o Alert Balances ...... Existing Min Balances N $40 C 0 $30 $20 $10 $0 Water Operating Financial Plan FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 OYLWD O&M IIIIIIIIIIIIIIIIIIIIIIIIIWater Cost O Debt Service & Payoff Principal O Non -Operating Res Funding —Current Rev — Proposed Rev Water CIP and Funding Sources ,n $14 $11.76 p $12 $10 $8 $6.28 $6 • $4.16 $4 $2 $1.75 $1.30 $0.18 $0 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 ■ Debt Funded PAYGO Total CIP 4% 3% 2% 1% 0% Rev Adj FY 2017 FY 2018 Overall Rev Adj Required Coverage -125% ......••• Target Debt Coverage - 22 Water Revenue Adjustments& Coverage Chart FY 2019 FY 2020 Millions $50 $410 $30 $20 $10 $0 500% 300% 100% -100% -300% -500°/ FY 2021 FY 2022 coverage Coverage Ratio (right axis) • Alert Coverage Total Water Reserve Ending Balances FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 Ln $40 C 0 $30 $20 $10 $0 Water Operating Financial Plan FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 OYLWD O&M Water Cost ODebt Service & Payoff Principal ONon-Operating Res Funding —Current Rev Proposed Rev Water CIP and Funding Sources LA $14 $11.76 C $12 $10 $8 $6.28 $6 , _ $4.16 $4 $1.75 $2 $1.30 $0.18 $0 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 ■ Debt Funded PAYGO Total CIP PROPOSED RATES FRAMEWORK REVENUE REQUIREMEN SUPPLY REVENUE REQUIREMEI Lw-j� BASE DELIVERY REVEN REVENUE REQUIRES REQUIREMENTS L -J METER MAINTENANCE CUSTOMER SERVICE i FIRE WATER RATES FRAMEWORK HOW MUCH SHOULD SERVICE CHARGES RECOVER DISTRICT'S FIXED COSTS? Yorba Linda Water District MSRB REGISTERED MUNICIPAL ADVISOR: RFC is a Registered Municipal Advisor with the MSRB and SEC under the Dodd -Frank Act and is fully qualified and capable of providing advice related to all aspects of utility financial and capital planning, including the size, timing, and terms of future debt issues. Any opinion, information, or recommendation included in this presentation, related to the size, timing, and terms of a future debt issue may be relied upon only for its intended purpose. This information is not intended as a recommendation to undertake a specific course of action related to the issuance of debt, or to indicate that a particular set of assumptions for the size, timing and terms of issuing debt will be available at the time debt is actually issued.