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Foothill MWD Preliminary Budget Presentation. May 20, 2013. Points to Consider. Equity issue with agencies leasing water and shifting costs to other agencies Capital costs equity issue, peaks and valleys and total long-term costs. Outline. Process and Overview MWD Rates and Charges
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Foothill MWD Preliminary Budget Presentation May 20, 2013
Points to Consider Equity issue with agencies leasing water and shifting costs to other agencies Capital costs equity issue, peaks and valleys and total long-term costs
Outline • Process and Overview • MWD Rates and Charges • Energy Charges • Preliminary O&M • Projected Reserves • Preliminary CIP • PAYG and Financing Options • Next Steps
Process April 15 – Reviewed w/ member agencies April 22 – Reviewed w/ Finance Committee May 8 – Reviewed w/ member agencies May 15 – Reviewed w/ member agencies May 20 – Board Workshop June 5 – Review w/ member agencies June 7 – Review w/ Finance Committee June 12 – Review w/ member agencies June 17 – Recommendations to Board
Overview • Pass-thru MWD rates and charges. • Pass-thru energy costs. • Keep Admin and O&M costs same. • Replenish reserve due to payment to CalPERS. • Continue with CIP to rehabilitate system. • Review/adjust method for charges. • Obtain financing for capital and rehab. • Based on 7,975 AF sales (from agencies).
MWD Preliminary RTS Charge No provision if District owes more. Will need to bill agencies.
MWD Capacity Charge Peak day = July 15, 2010 at 20.2 cfs $8,600/cfs chargeprorated up to the 20.2 cfs equates to $9,870/cfs Preparing for CPP event, responding to two mechanical failures And two short notices for flow changes
Energy Charge – Pass-Thru Agencies invoiced for actual energy dollars based on amount of water taken that month. Assumed 2.5% rate increase in budget. • For FY 2012, average energy cost was: • P-1 Eastside $54/AF • P-1 Westside $47/AF • P-2 $84/AF
Admin and O&M Preliminary Budget 4rth year in a row, no increase in budget.
Admin and O&M Preliminary Budget • Kept current conservation program. • OPEB remains $65,000. • Separate item shows replenishment of reserves used to pay off CalPERS side fund • Cleaned up equipment replacement category. Include equipment replacement in either CIP or O&M depending on cost.
Admin and O&M Preliminary Budget 3% CPI increase for employees. Merit increases and promotions if warranted. Pay for Performance if warranted Assume 10 FTE in wages. New System Operator II included. No increase in Board per diem.
Ten-Year Rolling Averages for Admin and O&M Charge – Current Method Shift in percentages due to purchases of Pasadena groundwater by Rubio and Lincoln
Admin and O&M Preliminary Charge for CY 2014 – Current Method Because Lincoln and Rubio are purchasing water from Pasadena, their 10-year rolling averages are lower along with charges while other agencies’ are increasing.
Admin and O&M Preliminary Charge for CY 2014 - Minimum Most FMWD costs except MWD purchases are fixed whether a retailer takes 1 acre-foot or 1,000 acre-feet Variable costs have already been separated out – MWD rates and power Example of Kinneloa paying Administrative costs based on proportion of meters; No operational costs have been assigned since no physical connection
Admin and O&M Preliminary Charge for CY 2014 Lincoln and Rubio are currently rolling off FMWD however FMWD still has Admin and O&M costs and Capital and Rehab costs associated with Lincoln and Rubio What happens when groundwater leasing stops? Finance Committee directed development of a minimum payment alternative for all agencies
Admin and O&M Preliminary Charge for CY 2014 -Normalized * Does not include transfer between retailers. * Does not include Pasadena transfer to Valley since Valley serves Pasadena.
Admin and O&M Preliminary Charge for CY 2014 - Minimum Method requested by retail agencies for review
Admin and O&M Charge Recommendation By Retail Agencies Water purchases from other agencies whether groundwater transfers or other type of arrangements to be included as part of sales percentage. Keep fixed for at least five years. Review annually to ensure significant variation has not occurred.
Preliminary CIP To keep the charge the same, must use reserves or finance. If use PAYG, will impact reserves severely - up to $3.4 million based on current estimates If obtain financing, charge can be reduced for most agencies and increase is not as high for Lincoln.
Fiscal Year 2012-2013 CIP Please refer to the handout for details on this year’s CIP.
Preliminary Five-Year CIP Please refer to the handout for the preliminary five-year CIP Pipeline repair work not included as costs are unknown at this time.
Preliminary CIP Charges – Request by Agencies PAYG No transfers, No Financing Chart on next slide shows peaks and valleys for charge Please see worksheet for numbers
Preliminary CIP – PAYG – Charges Remain the Same – Reserves Down $3.4 Million In addition to the transfer, the annual CIP charge must be paid by all agencies.
Preliminary CIP - Financing Interest rates currently low Will not be drawing down reserves or increasing charges Future customers pay for benefits they receive Smoothing of rates Reduce Capital and Rehab charge Total cost over time is higher because of interest
Preliminary CIP – Financing Options iBank SWRCB CSDA Bank Bond financing
CIP – Financing Plus Buffer Example Assume 30 Year Term
Preliminary CIP Review alternatives with member agencies and Finance Committee June Recommendation to Board
Kinneloa CIP Based on late invoices and truing up expenditures, although Kinneloa is not involved in the recycled water project, there is an amount due of $40. Recommendation to release KID from this obligation.
Preliminary Budget Summary based on 7,975 AF of Sales Please refer to handout
Next Steps Review Capital Charge alternatives with member agencies Review alternatives with Finance Committee June Board with Recommendation
