Presentation on theme: "Revised FY 2007 & Proposed FY 2008 Operating & Capital Budgets Retail Rates Committee January 4, 2007."— Presentation transcript:
Revised FY 2007 & Proposed FY 2008 Operating & Capital Budgets Retail Rates Committee January 4, 2007
2 Budget Calendar (Revised) MonthEvent May 2 May 31 June Distribute budget preparation materials FY 2007 – FY 2015 Final Capital Budget Submission due to Budget Office Update on capital program from DETS Revised FY 2007 & Proposed FY 2008 Operating Budget Submission due to Budget Office Departmental meetings with Budget & Finance Staff June – August August 28 – August 31 Business Planning 10-year plan update based on new capital numbers General Manager’s Budget Reviews Departmental and CIP meetings with General Manager Final meetings and General Manager’s budget decisions October 19FY 2008 Budget Decision Process Completed Week of October 26Budget due to printer October 26Submit & Review Revised FY 2007 & Proposed FY 2008 Budgets with Finance and Budget Committee October 30Meet with Wholesale Customers November 16 (Review Session I) Review Revised FY 2007 & Proposed FY 2008 Budgets with: Finance and Budget Committee Environmental Quality and Operations Committee December 7 (Review Session II) Follow up Budget Review Session Finance and Budget Committee December 21 (Review Session II)Environmental Quality & Operations Committees - Capital Budget Review Session January 4Retail Rates Committee Meeting January 18Environmental Quality & Operations Committees - Budget Review Session / Action January 25 Budget & Finance Committee - Review / Action Retail Rates Committee - Review / Action FebruaryBoard Adoption FebruarySubmission to District JuneDistrict Submission to Congress
3 Budget Request Summary Revised FY 2007 operating budget totals $311.2 million Proposed FY 2008 operating budget totals $341.2 million Proposed FY 2008 water and sewer rate increase of 7.5 percent Proposed 2008 PILOT/ROW fee increase of approximately 6.8 percent, or $0.03 per Ccf Capital Budget – Lifetime Budget totals $5.1 billion 1 – Disbursements Budget totals $2.2 billion (FY 2006 – 2015) 2 – Authority Request totals $446.6 million 3 1 Lifetime budget includes total budgeted costs for all activities planned from the inception of the project until its completion; this includes all activities whether they pre-date, or extend beyond the current 10-year CIP. 2 Capital Improvement Program (CIP) Disbursements Budget projects disbursements for various projects by fiscal year. Contingencies are not included when calculating disbursement budgets 3 Appropriations Authority – As part of WASA’s enabling legislation, Congressional appropriations authority is required before any capital design or construction contract can be entered into.
8 FY 2006 – 2015 CIP by Project Service Area (Cash Disbursements)
9 FY 2007 & FY 2008 Financial Highlights
10 FY 2006 – FY 2015 Financial Plan
11 Major Assumptions (Reference Section III, Operating Budget Book, for comprehensive discussion of budget assumptions) Board Financial Policies ̶ Rate setting ̶ Debt coverage ̶ Reserves Revenue Increases –5 percent increase in retail revenues for remaining large commercial & federal meter installations –1 to 3 percent increase in wholesale customers revenues from FY 2008 – 2015 in line with increasing cost of operations Reduced consumption due to conservation of 1 percent annually in all classes
12 Major Assumptions - continued Interest rate assumptions (Investments) –Based on current interest rate environment, interest projections conservatively assume a 4.0 percent earnings rate in FY 2007 and FY 2008 –Beyond FY 2008, interest rates are assumed at 5.0 percent Rate stabilization fund –$58.5 million balance fully utilized by FY 2012 –Utilize $2.5 million in FY 2007 and $17.8 million in FY 2008 Operation and maintenance (O&M) expenditure increases –Debt service, the fastest growing area of expenditure in the 10-year plan, grows at an annual rate of 14 percent –All other O&M expenses projected to grow at an average annual rate of 3.5 percent, due to IIP savings
13 Major Assumptions - continued Debt Service ̶ Expect to issue new debt in summer / spring 2007 ̶ Start to utilize Commercial Paper Program in second quarter FY 2007 ̶ Interest rate for new bond issuance (fixed rate debt) is projected at 6.5 percent; 4.0 percent assumed for variable rate debt
14 Major Assumptions - Continued Combined Sewer Overflow Long-Term Control Plan (CSO LTCP ) –20 year plan totals $1.9 billion including inflation ($558 million included in current CIP) –No additional federal assistance, and current rate structure assumptions Inflation – All project costs are typically inflated at three percent annually to the mid-point of construction. However, due to the exceptional increases in construction costs experienced in the recent past, some near-term projects have been inflated in the range of five to eight percent per annum.
16 Revenues, Retail Rates & Fees Proposed Retail Rate & Fee Changes Rate increases are primarily required to fund increasing debt service costs Proposed 7.5 percent rate increase in FY 2008, or a 0.5 decrease from last years’ plan with rate increases ranging from 8.0 to 9.5 percent thereafter. Proposed FY 2008 rate increase of approximately 6.8 percent, or $0.03 Ccfs in ROW / PILOT fees to ensure the Authority fully recovers the costs of this District of Columbia fee
17 Why Rate Increases Are Needed OPERATING & DEBT SERVICE EXPENDITURES FY 2006 – 2015 ($000’s) Over the ten-year period, total expenditures increase on average by 6.1 percent annually. WASA’s proposed rate increases are primarily required to fund increasing debt service costs. Operations and maintenance expenditures (excluding the payment in lieu of taxes and right of way fee) increase on average by only 3.5 percent annually Debt service expenditures grow at an annual average rate of 14.3 percent.
18 Rate Stabilization Fund Usage
19 Retail Rate Projections With and Without Additional Federal Funding for the CSO LTCP
20 Proposed FY 2008 Changes Water and sewer rate increase of 7.5 percent –Water ($0.15 per Ccf increase) Current rate - $2.03 per Ccf Proposed rate - $2.18 per Ccf –Sewer ($0.23 per Ccf increase) Current rate - $3.06 per Ccf Proposed rate - $3.29 per Ccf Right of way / PILOT fee – increase of 6.8 percent to recover full cost of District charge AVERAGE RESIDENTIAL MONTHLY BILL FY
21 WASA’s Retail Rates Are Comparable to Other Utilities Average Monthly Residential Bill Comparison (Based on Fall 2006 Rates) (1) Assumes average residential consumption of 8.33 Ccfs, or 6,231 gallons per month. Ccf= hundred cubic feet, or 748 gallons. (2)Reflects WASA’s proposed rate and fee changes in FY 2008 while other utilities’ rates are as of summer/fall However, during this period, it is anticipated that many utilities will take rate actions. The green area indicates the pass-through of the District’s right-of-way/PILOT fee, totaling $3.92 per month (projected FY 2008) and the residential stormwater rate of $0.58 per month.
22 Emerging Issues – Potential Rate Impact Ongoing CIP Implementation CSO Long-Term Control Plan Blue Plains Internal Improvement Program Review Governance Study - Implementation Blue Plains Issues ₋Chesapeake Bay Agreement changes (TN) ₋Biosolids hauling and disposal issues ₋Digesters construction Sewer System Assessment ₋Maintenance Requirements (CMOM) ₋Inclusion of Study Finding in Capital Program Water Quality Security and Emergency Preparedness New baseball stadium Main and O Site relocation M Street corridor improvements New WASA headquarters building