|
SPECIAL
MEETING/BOARD WORKSHOP |
||||
|
|
||||
|
2. |
REVIEW PROPOSED MPWMD BUDGET
FOR 2005-06 |
|||
|
|
||||
|
Meeting
Date: |
May 26, 2005 |
Budgeted: |
N/A |
|
|
|
||||
|
From: |
David A.
Berger, |
Program/ |
N/A |
|
|
|
General
Manager |
Line Item No.: |
||
|
|
||||
|
Prepared
By: |
|
Cost Estimate: |
N/A |
|
|
|
||||
General Counsel Approval: N/A |
||||
Committee Recommendation: N/A |
||||
|
CEQA Compliance: N/A |
||||
SUMMARY: At
the May 3, 2005 Board workshop staff presented the 2005-06 proposed
budget. A copy of the proposed budget
presented on that date is attached as Exhibit
2-A. After discussion of the
proposed budget, the Board requested that additional information regarding
three items in the proposed budget be presented at the May 26, 2005 Board
workshop. The requested information is
provided below:
Second Aquifer Storage & Recovery (ASR) Well & Associated
Facilities
Attached as Exhibit 2-B is a
Preliminary Cost Summary that was prepared by Water Resources Division staff in
response to Board questions about the cost to construct a second ASR well and
associated facilities. As shown on the
summary, costs to be incurred in fiscal year 2006-07 and 2007-08 are estimated
at $2,460,000 and $198,000, respectively, for a total cost of $2,658,000 to
complete Phase I, not including District staff time. Additional substantial costs would be
incurred in subsequent fiscal years to complete Phase II and Phase III of the
ASR project.
Given the projected level of the District’s general operating reserve
going into fiscal year 2006-07, it would not be feasible to fund that year’s
estimated expenditure of $2,460,000 from that source. Therefore, if the District were to continue
its practice of funding projects on a pay-as-you-go basis, the user fee would
have to be increased by approximately 8% in fiscal year 2006-07 to generate the
required funds. This would be in
addition to the 1.2% increase in the user fee proposed to fund the ASR costs in
fiscal year 2005-06.
An alternative to a high rate spike in 2006-07 would be to spread the
cost over a longer period of time through a debt issuance. There are several debt issuance pools in
which the District could participate to borrow the required funds. The benefits of participating in such a pool
include competitive, tax exempt interest rates (currently between 4% and 5%)
and level payments over an extended period of time. Also, issuance costs would be lower than if
the District were to issue the debt on its own.
Depending on interest rates at the time of issuance, and the repayment
term selected, annual debt service could be funded through a much smaller user
fee increase, possibly within the 1.2% user fee increase proposed for fiscal
year 2005-06. For example, a loan amount
of $2,660,000 plus costs of issuance would require a bond amount of
approximately $2,740,000. At an interest
rate of 4.5% and a 15 year payoff period, the annual debt service would be
about $253,000. Expenditures for Phases
II and III in subsequent years would require additional sources of funding.
Preparation & Distribution of
Annual Report
The proposed budget for fiscal
year 2005-06 includes only $2,000 for preparation of the District’s Annual
Report. The budgeted amount contemplates
production of the report by staff, with a minimal amount of copies to be
printed and distributed to libraries and other local government agencies. If the Board elects to distribute the report
to constituents throughout the District, the budget will need to be increased
accordingly. If a larger number of
copies are required, it is estimated that printing costs for the report will
range from approximately $5,500 to $6,000, depending on the exact number of
copies required. Distribution methods are still being investigated, but could
range from a low of $2,600 to insert and distribute 40,000 copies with the
Monterey County Weekly to a high of approximately $7,200 to distribute about
53,000 copies via
Expanded Rebate Program for
Conservation
At the May 3, 2005 workshop, the
Board requested additional information about the District’s rebate
program. Attached as Exhibit 2-C,
is a memorandum from Stephanie Pintar, dated May 13, 2005, that provides that
information.
RECOMMENDATION: Staff recommends that the Board discuss the proposed budget, and the additional information presented, and give sufficient direction so that staff can prepare a final draft of the budget for adoption at the June 20, 2005 Board meeting.
BACKGROUND: District budgets have been balanced in recent years by using large amounts of previously accumulated reserves. At the District’s strategic planning session on September 29, 2004, staff recommended that a balanced budget be prepared for fiscal year 2005-2006 using a combination of revenue and expenditure adjustments and a diminishing use of reserve funds. Staff also recommended changing to a program and performance-based budget and implementing necessary changes to balance the budget for fiscal year 2005-2006. At that time the Board concurred with this course of action. At the January 19, 2005 budget workshop the Board adopted an eight part strategy for balancing the 2005-2006 budget. At the May 3, 2005 Board workshop, staff presented a proposed budget that is consistent with that strategy. After presentation of that proposed budget the Board asked for additional information to be presented at the May 26, 2005 Board Workshop.
2-A Fiscal Year 2005-06 Proposed Budget
2-B Preliminary Cost Summary for Second ASR Well and Associated Facilities
2-C Memorandum Regarding Rebate Program Proposal/History
U:\staff\word\boardpacket\2005\2005boardpackets\20050526\02\item2.doc