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Home My WebLink About2008-10-30 - Board of Directors Meeting Agenda PacketAGENDA • YORBA LINDA WATER DISTRICT BOARD OF DIRECTORS WORKSHOP MEETING Thursday, October 30, 2008, 8:00 A.M. 1717 E. Miraloma Avenue, Placentia, CA 92870 (714) 701- 3020 ITEMS DISTRIBUTED TO THE BOARD LESS THAN 72 HOURS PRIOR TO 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 httD://www.vlwdB-vlwd.com. CALL TO ORDER PLEDGE OF ALLEGIANCE ROLL CALL John W. Summerfield, President William R. Mills, Vice President Paul R. Armstrong Michael J. Beverage Ric Collett • INTRODUCTION OF VISITORS AND 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 this 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 this agenda. Comments are limited to matters of public interest and matters within the jurisdiction of the Water District. Comments are limited to five minutes. 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. 1. Summary Report of Budget to Actual Operating Costs for Fiscal Year 2007-2008. 2. Summary Report and Status of the District's Water Operating Fund and Reserve Funds. 3. Consideration of Pass-Through Water Rate Increases in accordance with adopted Resolution No. 07-17. Recommendation: That the Board of Directors discuss and provide direction to staff. • 4. Potential Effects of Conservation on Revenue. 0 ? GINA~ 5. Proposed Modification of the Monthly Service Charge. Recommendation: That the Board of Directors discuss and provide direction to • staff. ADJOURNMENT A regular meeting of the Board of Directors is scheduled for November 12, 2008, at 8:30 a.m., at 1717 E. Miraloma Avenue, Placentia 92870. Accommodation 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 Michael A. Payne, General Manager/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. • • 2 1221 Yorba Linda Water District BOARD OF DIRECTORS WORKSHOP MEETING Thursday , October 30 , 2008 8 : 00 AM DISCUSSION ITEMS • FY 2007-08 Water Operating Budget to Actuals • Water Operating Fund and Reserve Fund Balances • FY 2008-09 Water Operating Budget & Projections • Cost Increase Factors and Equivalent Pass-Through per Resolution No. 07-17 • Potential Effect of Conservation on Revenue i FY 2007-08 WATER OPERATING BUDGET TO ACTUALS Revenues Budget Actual Variance 1$) Var. Water Sales $ 17 ,220 ,500 $ 18 ,689 ,436 $ 1 ,468 ,936 8 .5 % Annexation $4101700 $0 ($410 ,700 ) -100 .0 % Misc . other $2651500 $ 3041686 $391186 14 .8 % $ 17 ,896 ,700 $ 18 ,994 , 122 " $ 1 ,097 ,422 Expenses Budget Actual Variance ($) Nar. Salaries & Benefits $67995 ,300 $ 5 , 168 ,852 $ 1 ,826 ,448 26 . 1 % Supplies & Services $3 ,740 ,200 $4 ,010 ,377 ($270 , 177 ) -7 .2 % Variable Operating $ 10 ,520 ,000 $ 10 ,516 ,507 $ 3 ,493 0 .0% $21 ,255 ,500 $ 19 ,695 ,736 $ 1 ,559 ,764 Net Gain or (Loss ► ($701 ,614) FY 2007-08 WATER OPERATING BUDGET TO ACTUALS • The audited financials for FY2007-08 show that actual expenses were less than budget expenses by $1 .55M. • However, the budget did not include enough revenue to offset expenses, so we experienced a net operating loss of ($700,000) before depreciation. • With depreciation, the operating loss increases to ($3.76M). WATER FUND Cash & Investments Water operating Fund has been drawn down by $5.5 million over the last two years and is now trending negative $5,000,000 $4,0009000 .96 $3,000,000 $2,000,000 ® Jun-06 ■ Jun-07 $1 ,0009000 - ($545K) ■ Jun-08 ($1 ,000,000) 2006 2007 2008 WATER OPERATING FUND CASH & INVESTMENTS Fund Description 06/30108 07/31108 08/31 /08 Annexation Fund 99647,214 995779235 9 ,413,117 Water Fund -21549,421 -3,965,067 -3,9075467 Water R&R Operating Reserve 29007,091 21013 ,368 2,0177617 Reserve For Capital Projects 0 0 149,500 Restricted for 2008 Debt Service 8309278 190415912 1 ,413,102 2003 Bond Fund 6 6 6 2008 Bond Fund 321087,605 30,297,669 2896599910 imp. Dist. No. 1 4,133,807 45180,033 492159518 Imp. Dist. No. 2 91443,161 99487,663 97526,809 TOTAL $55,599,741 $52,632,819 $51 ,488,112 Cumulative Change , I $2,966,922 $4,111 ,629 i FY 2008-09 WATER OPERATING BUDGET & PROJECTIONS The following challenges will affect our revenues and expenses for FY 2008-09 and beyond: • The drought has reduced available Groundwater, OCWD has announced a reduction in the BPP and an increase in the Replenishment Assessment (RA). • The drought and state courts have reduced the imported water available, MWD and MWDOC have announced potential allocation of supply, significant increases in the cost of import water, and 3- to 5-fold penalties for exceeding supply allocation . • Edison announced a 16% rate increase effective 1 /1 /2009. COST INCREASES FROM BUDGETED PROJECTIONS POSSIBLE PASS-THROUGHS PER RE - SOLUTION NO. 07 17 • OCWD'S RA increased to $249/AF from $237 • OCWD'S BPP decreased to 69% from 75% • MWD/MWDOC rate increased to $604/AF from $529/AF • Energy costs increased by an average of 16% AFFECTS ON FY 2008-09 WATER OPERATING PROJECTIONS Revenues Budget Proiected Variance ($) Var. % Water Sales $ 1715011300 $20 ,4631300 $2 ,962,000 16 .9% Annexation $4197400 $4191400 $0 0 .0% Misc. other $2631700 $2811600 $ 177900 6 .8% $ 1811841400 $2171641300 $279791900 Expenses Budget Projected Variance ($) Var. Salaries & Benefits $773891200 $6 ,461 , 100 $928 ,100 12 .6% Supplies & Services $317731100 $317731100 $0 0.0% Variable Operating $ 11 ,156 ,500 $ 12 ,609 ,100 1 ($1 ,452)600)1 -13 .0% $2213181800 $2218431300 ($524,500) 4 I 4 Net Gain or (Loss) Operating ($ 1 ,679 ,000 ) Add Debt Obligations ($2,727,834) 3 TOTAL Projected Loss ($4 ,406 ,834 ) _ y Proposed Water Rate Pass-Throuqh Increase • Added operating costs for MWD/MWDOC, OCWD and Energy = $1 .45M . • YLWD will need a 14.5 cent increase to cover these costs for FY 2008-09. • This does not include cost recovery for depreciation . POTENTIAL EFFECT OF CONSERVATION ON REVENUE • Impact of conservation over the range of 10% to 25% affects revenue more than expenses • Impact of water allocation penalties • How to pay for penalty HOW COST INCREASE EVENTS IMPACT YLWD FORECAST OF INCREASES ON WATER RATE $22,000.000 $21,500,000 Revenue $21.000,000 M Expense N $20.500.000 Q $20,000,000 X W $lssao.000 -- ---- - --- - - L O $19,000,000 - — ---...---- -- - -- --- -- - _ $18.500,000 - - - - - - - - $18,000,000 --- -- ----- - - - -- -- -- - - - $17,500,000 - - —- -- -- --- - -- - ---- -- - ------- -- $17,000,000 1 2 3 4 5 6 7 COST INCREASE EVENTS RA up BPP down MWD up to MWD up Energy 20% Water $12/AF to 69% $566 1/2 yr to $604 Cost Up Water Cutback Full yr 16% Cutback Penalty COST INCREASES APPLIED TO THE WATER RATE OPERATING EXPENSES PASSED THROUGH AS WATER RATE INCREASES I $0.25 $0.20 Uj $0.15 Q W H Q $0.10 $0.05 $0.00 2 3 4 5 6 COST INCREASE EVENTS RA up BPP down to MWD up to MWD up to Energy 20% Allocation $12/AF to 69% from $566 for $604 for Cost Up Water penalty $249/AF 75% 1/2 yr Full yr 16% Cutback Impact of Conservation on YLWD wl BPP 69% ($IYr) $25,000,000 - -OCWD GW Cost --*--MWD IMP Cost MW DOC Fee $15,000,000 - - - - ----------- _.___-__- —YLWD Revenue — Electricity Cost $10,000,000 -- ------ __ i—f—YLWD Margin Gain/ Loss $5,000,000 I $0 I 0 5 10 15 20 25 -$5,000,000 % Reduction in Water Demand �I Impact of Conservation on YLW D w/ BPP 69% ($IYr) $9,000,000 ------ - --- - $8,000,000 � _ - _ - -OCWD GW $7,000,000 - _ Cost $6,000,000 MWD IMP Cost $5,000,000 - ---- - -- -- - - --- - - - ---- MW DOC Fee $4,000,000 - ---- ------ -------- ------- - --------- - - $3,000,000 -- _ ___- ---- ---- �f� Electricity Cost $2,000,000 ----- --- --- --f—YLW D Margin $ 1 ,000,000 --- — - _ -- _ -__ Gain/ Loss $0 -$1 ,000,00 0 Q----- --5 _- -1 7-1-5 - 20 -$2,000,000 --- --- - % Reduction in Water Demand Impact of Conservation on YLWD if BPP 69% ($/Yr) $1 ,000,000 - $800,000 - - -- _ $600,000 $400,000 $200,000 - - - -- -- - —YLWD Margin Gain/ Loss i $0 i 0 5 10 20 -$200,000 - - -- -- ---- _ I i -$400,000 � - --- -- __ _ - - -$600,000 1 --_ - -----_ i -$800,000 - ---- -- -- - -- - - - ----- ------ -- ---- - -- % Reduction in Water Demand CONSIDERATIONS IN DETERMINING WATER RATE INCREASE • Reserves — Already committed for CIP's; declining rapidly and being used to float negative cash flow in water operating fund. • Operating Expenses — substantial cuts in salaries, supplies and services will affect primary mission and result in deferred maintenance and replacements. • Capital Improvement Program — cuts to program will impact system reliability, service and operational efficiency objectives. • Maintenance and Depreciation Replacement — Currently not funded • Establish Monthly Service Charge using Volumetric Approach —improves revenue; consistent with industry practices VOLUMETRIC FIXED SERVICE CHARGE • Current rate is $8.35/mo for 5/8" up to 10" meter size. • This pricing does not account for the significant standby and water availability potential that YLWD system provides. • A volumetric price would increase proportional to the diameter of the meter size. • Rough calculations show this could generate additional revenue of $600,000 annually • 90% of the customers would see a moderate increase, because they use the 1 " service.