HomeMy WebLinkAbout2017-08-24 - Board of Directors Meeting Agenda Packet
AGENDA
YORBA LINDA WATER DISTRICT
BOARD OF DIRECTORS WORKSHOP MEETING
Thursday, August 24, 2017, 4:30 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. Long Range Financial Plan
5.2. July 2017 Budget to Actual Statements (To be provided at the meeting.)
6. ADJOURNMENT
6.1. The next Regular Board of Directors Meeting will be held Tuesday, September 12, 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.
ITEM NO. 5.1
AGENDA REPORT
Meeting Date: August 24, 2017
Subject:Long Range Financial Plan
ATTACHMENTS:
Name:Description:Type:
Presentation_-_Long_Range_Financial_Plan.pdf Backup Material Backup Material
Board of Directors Workshop
August 24, 2017
LONG RANGE FINANCIAL PLAN
169003
Has
EXISTING FOUNDATION
Strong financial position as demonstrated by several matters:
–Forecast
–History of financial performance
–Reserve balances
–Policies
–Legal Structure
–Demographics of rate base
Investors purchased bonds based upon disclosure in official
statement including forecast and credit ratings of AA/AA+
Bond holders are stakeholders in the District’s success
22
DISCLOSURE IN THE OFFICIAL STATEMENT
Fiscal Year Ending June 30*2017 2018 2019 2020 2021
Revenues
Water Sales $28,556,064 $29,446,683 $30,745,185 $32,208,709 $33,858,419
Ad Valorem Tax Revenues 1,660,025 1,629,000 1,653,435 1,686,504 1,703,369
Interest Income 278,887 175,000 145,000 120,000 123,600
Other 965,768 867,936 916,187 941,192 902,609
Total Revenues $31,460,744 $32,118,619 $33,459,807 $34,956,404 $36,587,996
Operating and Maintenance Costs
Variable Water Costs $12,539,476 $13,968,855 $14,248,233 $14,533,197 $14,823,861
Personnel Services 7,940,446 8,692,988 9,127,637 9,584,019 10,063,220
Supplies & Services 3,520,580 3,564,578 3,609,744 3,631,605 3,737,479
Total Operating and Maintenance Costs $24,000,502 $26,226,421 $26,985,614 $27,748,821 $28,624,560
Net Operating Revenues $7,460,242 $5,892,198 $6,474,194 $7,207,583 $7,963,436
Non-Operating and Maintenance Costs $23,285 $23,000 $23,000 $23,000 $23,000
Net Revenues $7,436,957 $5,869,198 $6,451,194 $7,184,583 $7,940,436
Debt Service
Series 2008 Installment Payments $2,128,396 $0 $0 $0 $0
2012A Bonds 588,488 588,313 591,213 583,713 590,713
2017 Bonds -2,141,486 2,147,044 2,143,244 2,138,669
Total Debt Service $2,716,884 $2,729,799 $2,738,256 $2,726,956 $2,729,381
Remaining Revenues $4,720,074 $3,139,399 $3,712,937 $4,457,627 $5,211,055
Debt Service Coverage 2.74 2.15 2.36 2.63 2.91
3*Footnotes located in YLWA’s Official Statement.
CREDIT RATING CONSIDERATIONS
Customers: Classification & Wealth
Governance: Establishing Policy and Rate Setting
Management: Abilities to Plan and Execute
Financial Ratios: Coverage, Days’ Cash, Free Cash/Depreciation
Capital Needs: Funding Sources, Amounts and Timing
Legal Structure: Additional Bonds Test & Rate Covenant
Policies: Debt, Reserve & Investment
Credit Rating
4
Goal: Maintain and/or improve current credit ratings.
S&P GLOBAL RESERVE METHODOLOGY
5
Liquidity And Reserves Preliminary Evaluation
Preliminary
Assessment Days' Cash Actual Cash
1 Greater than 150 More than $75 million
2 90 to 150 $20 million to $75 million
3 60 to 90 $5 million to $20 million
4 30 to 60 $1 million to $5 million
5 15 to 30 $500,000 to $1 million
6 Less than 15 Less than $500,000
Liquidity And Reserves Assessment
Days' Cash Ratio,
Preliminary
Evaluation
Actual Cash on Hand, Preliminary Evaluation
1 2 3 4 5 6
1 1 1 2 2 3 4
2 1 2 2 3 3 4
3 2 2 3 4 4 5
4 2 3 4 4 5 5
5 3 3 4 5 5 6
6 4 4 5 5 6 6
Descriptions for Financial Risk
Profile Factors
Description Corresponding
Assessment
Extremely Strong 1
Very Strong 2
Strong 3
Adequate 4
Vulnerable 5
Highly Vulnerable 6
Description of Financial Risk Profile
Factors
Description
% of Financial
Risk Profile
assessment
All-In Coverage 40%
Liquidity and Reserve 40%
Debt and Liabilities 10%
Financial Management
Assessment
10%
Total 100%
ESTABLISHING A FOUNDATION
6
Long Range
Financial Plan
Capital Costs
Policy
Objectives Governmental
Structure
Revenues &
Expenses
Who are we and what is
important to us?
What are the long term
objectives and goals?
Who do we want to be in ten
years? Why?
Will that change what is
important to us?
How do we get there?
What are the costs, risks and
the benefits?
Long Range Financial Plan (“LRFP”)is a financial roadmap that achieves
financial goals while maintaining responsible financial practices.LRFP should
be understandable to internal and external stakeholders.
LONG RANGE FINANCIAL PLAN BACKGROUND
Combines financial forecasting, strategic thinking and a long
term vision for the future
Aligns financial capacity, public policy and service objectives
Provides a flexible financial framework allowing for adjustments
due to:
–Changing water supply costs
–Capital needs
–Customer demand
Becomes a tool to prevent financial challenges
Requires annual review/maintenance and periodic consideration
77
PROCESS OF THE LRFP
8
Align Resources: Define the Planning
Process & Participation Roles
Financial Goals
& Policies
Preliminary
Analysis
Service Policies
& Capital
Priorities
Define the Purpose
& Scope
Implementation
Phase
Decision Phase
Analysis Phase
Developmental
Phase
Fiscal Environmental Analysis
Revenue
Forecast
Expenditure
Forecast
Pay-go
Vs.
Debt
Financial Balance &
Feasibility Analysis
Financial Strategy Development
Plan Conclusion & Transition
to Action
Budget &
Financing
Regular
Monitoring
Adopt Reserve & Debt
Management Policies
LONG RANGE FINANCIAL PLAN -ELEMENTS
Time Horizon:Upcoming budget year plus 10 years into the future
Scope:All Funds –water, wastewater, restricted and unrestricted reserves and
unfunded liabilities of pension and OPEB
Monitoring:Annual review of financial results and update of model;
thorough review every 5 years, e.g. revise assumptions and objectives
Content:Analysis of financial environment, revenues, expenses, capital
expenditures, rate impacts, strategies to achieve financial health and scorecard
of key indicators to measure financial health
Visibility:. Easily communicated and understandable by elected officials,
staff, investors, rating agencies and the public
9
INITIATING THE LRFP
Comprehensive review of YLWD’s finances
–Review and update financial projections
•Start with data from recent OS
Review Capital Improvement Plan and Asset
Management Plan
–Work with staff to develop timeline of needs and costs
–Identify potential funding options, including debt issuances
Review pension and OPEB liabilities
–Work with Staff and CalPERS to assess options to reduce
liabilities
10
FINANCIAL MODEL
Projections of revenues,expenses,debt service,capital
expenditures and reserve balances
–Model projects funding of CIP and AMP from appropriate sources and
demonstrates credit financial metrics as outputs
Designed to take future escalation of O&M expenses and
capital expenditures into account
Calculate and assess important credit rating metrics
11
ANALYSIS PHASE
Determine capital needs
–Costs broken down annually by projects
–CEQA timeline
–Construction period timeline: start,
completion and in-service dates
–Useful Life
Demonstrate project feasibility
–Estimates of operating expense per
project, staffing (salaries and benefits),
power, chemicals, energy, etc.
Estimate additional expenses
Project revenues needs
Analyze funding options
Estimate rates accordingly
FUNDING OPTIONS
CASH, GRANTS & DEBT
O&M EXPENSES
FUTURE
RATES & CHARGES
CAPITAL NEEDSREVENUES
12
CIP & AMP
RELEVANT CONSIDERATIONS
Philosophical Change: Greater use of debt?
–Balance spreading out of capital costs with need to meet strong credit ratings to
control cost of debt
–Balance reserves necessary for capital, liquidity and emergencies with credit rating
agencies ratios and metrics
–Evaluate credit rating criteria from all agencies (Moody’s, S&P, Fitch and Kroll)
Strategic Objective: Control Pension and OPEB Unfunded Liabilities
Opportunities
–Expand Services (water delivery, sewer cleaning, etc.) to other jurisdictions
13
PENSION AND OPEB FUNDING OPTIONS
Analyze options to accelerate payment of District’s unfunded
pension liabilities with CalPERS, and potentially increase the
District’s funding of OPEB
District’s current unfunded liabilities status results in
effectively a 25 year debt owed to CalPERS at 7.0%
Objectives / Benefits
–Reduce unfunded pension liabilities
–Achieve higher return on cash reserves
–Achieve medium-term pension operating cost savings
–Maximize long-term total pension cost savings
Review costs associated with a hypothetical termination of the
contract with CalPERS
–Approximately $52 million as of September 2016 CalPERs Valuation Report
14
DECISION PHASE
Understanding customer demands and needs
–Public outreach program
Interpreting the data
–Refining costs of CIP and AMP
–Review of financial projections
Evaluating priorities of customers vis-à-vis costs
and funding options
15
RESERVE ANALYSIS
16
CAPITAL NEEDS
REPAIRS &
REPLACEMENTS
ADMINISTRATION
STRATEGIC SUPPLY
NEW PROJECTS
DISASTER
RATE
STABILIZATION
CONTRACTUAL
LIABILITIES
UNHEDGED
VRDBS
CONTINGENCIES
LIQUIDITY NEEDS
DEBT SERVICE
RESERVE LEVELS
Target and/or minimum funding levels allows flexibility in meeting the
Reserve Policy requirements and maintaining sufficient reserve levels.
DEBT MANAGEMENT POLICY
Framework for evaluating issuance of new debt vs.
pay-as-you-go funding
Affordability
–Source of payments for operating expenses
–What impact does project have on O&M. For example staffing
(salaries and benefits), power, chemicals, land purchase etc.
Document commitment to administrative
procedures and demonstrate excellent management
Demonstrate sound financial management to rating
agencies
17
IMPLEMENTATION PHASE
Adopt long-range financial plan
Adopt debt management and reserve policy
Integrate LRFP into budget adoption next FY
Commit to annual monitoring of results
–Annually measure financial results and projections
–Assess results vs. objectives
•Achievements and shortcomings
–Identify new challenges
–Implement appropriate steps when necessary
18
RECOMMENDATION
Undergo the appropriate steps to formalize, analyze
and implement the Long Range Financial Plan prior to
making or developing significant financial decisions or
policies
19
BACKUP MATERIALS DISTRIBUTED LESS THAN 72 HOURS PRIOR TO THE MEETING
Sheet1
Page 1
Data from Annual Financial Reports (CAFRs)
Year $ per Unit 1” meter Expenses Revenue Gain/Loss “Typical” Water Bill
(Millions)(Millions)(Millions)
2010/11 $2.52 $11.73 $28.70 $27.30 -$1.40 30 units/ $87.00
2011/12 $2.52 $11.73 $31.40 $30.00 -$1.40 30 units/ $87.00
2012/13 $2.57 $12.60 $33.90 $30.90 -$3.00 30 units/ $89.70
2013/14 $2.64 $14.67 $35.10 $34.10 -$1.00 30 units/ $93.87
2014/15 $2.70 $16.67 $33.60 $32.10 -$1.50 25 units/ $84.27
2015/16 $2.70 $41.57 $32.10 $35.10 $3.00 18 units/ $90.27
$32.49
Net Loss -$5.30
ITEM NO. 5.1.
MATERIALS SUBMITTED BY: Brooke Jones
MEETING DATE: August 24, 2017