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Foothill MWD Preliminary Budget Presentation May 20, 2013.

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Presentation on theme: "Foothill MWD Preliminary Budget Presentation May 20, 2013."— Presentation transcript:

1 Foothill MWD Preliminary Budget Presentation May 20, 2013

2 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 2 May 20, 2013

3 Outline Process and Overview MWD Rates and Charges Energy Charges Preliminary O&M Projected Reserves Preliminary CIP PAYG and Financing Options Next Steps 3 May 20, 2013

4 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 May 20,

5 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). 5 May 20, 2013

6 MWD Rates – Pass-Thru Jan. 1, 2012Jan. 1, 2013Jan. 1, 2014 Tier 1 ($/AF)$794$847$890 Tier 2 ($/AF)$920$997$1,032 Readiness-to- Serve Charge ($Millions) $146$142$166 Capacity Charge ($/cfs) $7,400$6,400$8,600 Replenishment ($/AF) $651$0 6 May 20, 2013

7 MWD Preliminary RTS Charge 7 No provision if District owes more. Will need to bill agencies. May 20, 2013

8 MWD Capacity Charge Peak day = July 15, 2010 at 20.2 cfs $8,600/cfs charge prorated 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 8 May 20, 2013

9 Energy Charge – Pass-Thru For FY 2012, average energy cost was: P-1 Eastside $54/AF P-1 Westside $47/AF P-2 $84/AF Agencies invoiced for actual energy dollars based on amount of water taken that month. Assumed 2.5% rate increase in budget. 9 May 20, 2013

10 Admin and O&M Preliminary Budget 10 4rth year in a row, no increase in budget. May 20, 2013

11 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. 11 May 20, 2013

12 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. 12 May 20, 2013

13 Ten-Year Rolling Averages for Admin and O&M Charge – Current Method May 20, Shift in percentages due to purchases of Pasadena groundwater by Rubio and Lincoln

14 Admin and O&M Preliminary Charge for CY 2014 – Current Method 14 Because Lincoln and Rubio are purchasing water from Pasadena, their 10-year rolling averages are lower along with charges while other agencies are increasing. May 20, 2013

15 Admin and O&M Preliminary Charge for CY 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 May 20,

16 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 May 20,

17 Admin and O&M Preliminary Charge for CY Normalized May 20, * Does not include transfer between retailers. * Does not include Pasadena transfer to Valley since Valley serves Pasadena.

18 Admin and O&M Preliminary Charge for CY Minimum May 20, Method requested by retail agencies for review

19 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. May 20,

20 Preliminary Reserves 20 May 20, 2013

21 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. 21 May 20, 2013

22 Fiscal Year CIP Please refer to the handout for details on this years CIP. May 20,

23 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. May 20,

24 Split for CIP Budget – Current Method May 20,

25 Split for CIP Budget – Normalized Method May 20,

26 Preliminary CIP Charges – Request by Agencies May 20, PAYG No transfers, No Financing Chart on next slide shows peaks and valleys for charge Please see worksheet for numbers

27 Preliminary CIP Charge May 20,

28 Preliminary CIP – PAYG – Charges Remain the Same – Reserves Down $3.4 Million 28 May 20, 2013 In addition to the transfer, the annual CIP charge must be paid by all agencies.

29 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 29 May 20, 2013

30 Preliminary CIP – Financing Options iBank SWRCB CSDA Bank Bond financing 30 May 20, 2013

31 Preliminary CIP – Financing Example 31 May 20, 2013

32 Preliminary CIP – Financing Examples 32 May 20, 2013

33 Preliminary CIP – 30 Year Term 33 May 20, 2013

34 Preliminary CIP – 25 Year Term May 20,

35 Preliminary CIP – 20 Year Term May 20,

36 CIP – Financing Plus Buffer Example 36 May 20, 2013 Assume 30 Year Term

37 Financing at $10 Million Example May 20,

38 Preliminary CIP Review alternatives with member agencies and Finance Committee June Recommendation to Board 38 May 20, 2013

39 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. May 20,

40 Preliminary Budget Summary based on 7,975 AF of Sales 40 Please refer to handout May 20, 2013

41 Next Steps Review Capital Charge alternatives with member agencies Review alternatives with Finance Committee June Board with Recommendation 41 May 20, 2013

42 Comments/Questions 42 May 20, 2013

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