As the table indicates, net revenue decreases are $1,377,300 and net
expenditure reductions are $464,800, resulting in an additional use of reserves
of $912,500 (net amount of $749,700). The
majority of the changes are due to the Board’s December 2007 decision to fund
the Aquifer Storage & Recovery (ASR) Project on a pay-as-you-go basis
rather than through a debt issuance. Detailed
information regarding the ASR Project and other proposed changes, as well as
their effect on the general operating reserves, is contained in the background
section of this staff note.
RECOMMENDATION: Following a presentation by District staff and
a public hearing, staff recommends adoption of the proposed mid-year budget
adjustment for Fiscal Year 2007-08.
BACKGROUND: The
Board of Directors adopted the original 2007-08 budget on June 18, 2007. The paragraphs below summarize the
original budget, proposed mid-year adjustments to the budget and projected
general operating reserves.
Revenue
The 2007-08 adopted budget
anticipated revenue sources in the amount of $8,522,500, including $1,703,000
in bond proceeds and $127,600 from the capital equipment reserve. It was projected that these revenues would
exceed budgeted expenditures by $162,800.
As of December 31, 2007, actual revenue collections totaled $1,737,601 or
about 20% of the budgeted amount. Revenues
for
the first half of each fiscal year are historically low because
larger portions of the District’s two major revenue sources, user fees and
property taxes, are collected during the second half of each fiscal year. Additionally, as expected, no bond proceeds
were received during the first half of the year, and the actual receipt of budgeted
state Prop. 50 Planning grant funds for the Integrated Regional Water
Management Plan is expected to occur during the second
half of the fiscal year. District staff
has analyzed the revenue activity for the first six months of the fiscal year,
as well as activities scheduled for the second half of the fiscal year, and
recommends various adjustments to the revenue portion of the budget as
discussed below:
- User fee revenues have been increased by $180,000
based on actual receipts through December 31, 2007.
- Anticipated project reimbursements have decreased by
a net amount of $14,200 (Exhibit 19-A) due to changes that
will be discussed in the expenditure section of this report.
- Grant revenues for the Integrated Regional Water
Management Plan have been increased by $159,900, to $304,900, for grant
funds that were expected to be received in Fiscal Year 2006-07, but not
received until Fiscal Year 2007-08 because that is when the offsetting
costs were incurred. The expenditure
portion of the budget has also been increased by a like amount.
- Bond proceeds in the amount of $1,703,000 have been
removed from the revenue budget due to the decision to fund the ASR
Project on a pay-as-you-go basis as mentioned above.
The cumulative effect of these revenue
adjustments is a decrease of $1,377,300 in projected revenues for Fiscal Year
2007-08.
Expenditures
The original budget envisioned
expenditures of $8,522,500 in the fiscal year ending June 30, 2008. As of December
31, 2007, actual expenditures totaled $2,221,440, or approximately 26%, of the
budgeted amount. This low percentage is
not unusual because project expenditures for the first half of each fiscal year
are historically low. District staff
has analyzed the expenditure activity for the first six months of the fiscal
year, as well as activities scheduled for the second half of the fiscal year,
and recommends various adjustments to the expenditure portion of the budget as
discussed below:
- The personnel portion of the budget has been increased
by $103,800 as shown on Exhibit 19-B. When the 2007-08 budget
was adopted, it was noted that negotiation of new Memorandums of
Understandings (MOUs) with the District’s three bargaining units were in
progress, and that any compensation increases approved by the Board would
be added to the budget during the mid-year adjustment process. Adjustments to personnel portion of the
2007-08 budget reflect increases there were approved
in the new MOUs, adjustments to the General Manager’s contract and other
miscellaneous adjustments.
- The supplies and services portion of the budget was
increased by $30,300 as shown on Exhibit 19-C. The majority of the
increase is a $25,000 addition for legal services due to the number of
pending California American Water (CAW) rate cases before the California
Public Utilities Commission and the Draft Cease and Desist Order recently
issued by the staff of the California State Water Resources Control Board.
- As presented on Exhibit 19-D, project expenditures decreased
by a net amount of $513,900. The
larger adjustments are as follows:
- The budget was decreased by $100,000 due to the
deferral of a lower Carmel
River restoration
project to next fiscal year. The
deferral included a related reduction to project reimbursements of
$60,000 on the revenue side of the budget.
- The budget was increased by $30,000 for additional
Water Distribution System Permit processing assistance, with an
offsetting increase to the revenue portion of the budget.
- As mentioned in the revenue section of this report,
grant funded expenditures in the amount of $159,900 for the Integrated
Regional Water Management Plan have been carried forward from fiscal year
2006-07.
- Project expenditures were also decreased by $40,000
due to deferring the completion of a Policy & Procedure Manual for
the Water Demand Division to a future year.
- The amount budgeted for completion of Phase 1 of
the ASR project was reduced by $550,000, from $1,703,000 to $1,153,000
due to delays in completion of a portion of the work to Fiscal Year
2008-09.
- Expenditures for materials and other non-salary
related costs for technical work to be completed for the Seaside Basin
Watermaster have been reduced by $13,700 to $26,500. The revenue amount for project
reimbursements related to these tasks has also been reduced by $52,200 to
$93,000, which is comprised of the $26,500 in non-salary related costs
plus salary costs of $66,500.
These reductions are due to the fact that some tasks to be
completed by the District were shifted to next fiscal year in the latest
contract with the Watermaster.
- A net reduction of $47,000 was made for
conservation related tasks that are now projected to be completed in this
fiscal year. A related increase of
$68,000 to project reimbursements was made because more of these
activities are now reimbursable from CAW.
- The budgeted amount of $85,000 for debt service was
deleted because no debt was issued for the ASR Project.
The cumulative effect of the
adjustments to the expenditure side of the budget is a net decrease of $464,800
in projected expenditures for Fiscal Year 2007-08.
General Operating Reserves
The difference of the adjustments to revenues and expenditures results in
an additional use of general operating reserves of $912,500. This amount, less the
original budgeted surplus of $162,800, results in a net decrease of $749,700 in
general operating reserves during Fiscal Year 2007-08. This changes the estimated general reserve
carryover at June 30, 2008 to $631,319 (Exhibit
19-E). This amount equates
to about 7.4% of the new operating budget amount, which is still above the minimum
of 5% established by the Board during the 2005-06 budget process.
EXHIBITS
19-A Reimbursements
19-B Personnel Costs
19-C Supplies & Services
19-D Project Expenditures
19-E Reserves Analysis
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