ITEM:		PUBLIC HEARING
22.	CONSIDER ADOPTION OF MID-YEAR FISCAL YEAR 2013-2014 BUDGET ADJUSTMENT
Meeting Date:			February 13, 2014	Budgeted:	N/A
From:			David J. Stoldt,	Program/	N/A
			General Manager	Line Item No.:
Prepared By:			Suresh Prasad	Cost Estimate:	N/A
General Counsel Review: N/A
Committee Recommendation: N/A
CEQA Compliance: N/A

SUMMARY: Annually, the District considers its financial position after the end of the first half of the fiscal year (FY). District staff has reviewed income and spending patterns since July 1, 2013 through the end of December 31, 2013 and determined that adjustment to the FY 2013-2014 Budget is required. The FY 2013-2014 Budget was adopted on June 17, 2013. Included in the budget adjustment process was a review of staffing levels, supplies, outside services, current work assignments and other factors affecting the current budget. The tables below summarize the proposed changes to the budget:

Monterey Peninsula Water Management District
2013-2014 Budget
Mid-Year Budget Adjustment-Summary
Revenue	Adopted	Change	Amended
Property Tax	$1,403,000	$97,000	$1,500,000
Permit Fees - WDD	175,000	0	175,000
Permit Fees - PED	56,000	0	56,000
Connection Charges	175,000	0	175,000
User Fees	100,000	0	100,000
Water Supply Charge	3,400,000	0	3,400,000
Mitigation Revenue	1,801,800	0	1,801,800
Recording Fees	6,000	0	6,000
Interest	10,000	0	10,000
Other	15,000	0	15,000
Subtotal District Revenues	7,141,800	97,000	7,238,800
Reimbursements - CAW	3,830,212	699,750	4,529,962
Reimbursements - Watermaster	94,000	0	94,000
Reimbursements - Other	38,250	1,100	39,350
Reimbursements - Legal Fees	15,000	0	15,000
Grants	1,291,133	(550,000)	741,133
Subtotal Reimbursements	$5,268,595	$150,850	$5,419,445
From Rabobank Project Fund	1,496,101	0	1,496,101
From Water Supply Charge Carry Forward	1,413,218	0	1,413,218
From Capital Equipment Reserve	0	59,200	59,200
From Other Sources (loan, interfund borrow)	0	617,991	617,991
Total Revenues	$15,319,714	$925,041	$16,244,755
Expenditures	Adopted	Change	Amended
Personnel	$3,249,150	($17,150)	$3,232,000
Supplies & Services	956,915	500	957,415
Project Expenditures	10,527,962	931,191	11,459,153
Fixed Assets	104,500	10,500	115,000
General Operating Reserve	1,187	0	1,187
Debt Service	230,000	0	230,000
Election Expense	175,000	0	175,000
Contingency	75,000	0	75,000
Total	$15,319,714	$925,041	$16,244,755

As the revenue and expenditure tables indicate, revenue and expenditure increases by $925,041 resulting in a balanced budget. In order to balance the budget and fund for continuing work on the Ground Water Replenishment Project, additional funding in the amount of $617,991 will have to be borrowed from external sources or inter-fund borrowing to complete the project. Detailed information regarding the proposed changes, as well as their effect on reserves, is detailed in the background section of this report.

RECOMMENDATION: Following a presentation by District staff and a public hearing, staff recommends adoption of the proposed mid-year budget adjustment for FY 2013-2014.

BACKGROUND: The Board of Directors adopted the original FY 2013-2014 budget on June 17, 2013. The paragraphs below summarize the original budget, proposed mid-year adjustments to the budget and projected reserves accounts.

Revenues

The 2013-2014 adopted budget anticipated revenue sources in the amount of $15,319,714. It was projected that these revenues would be the same amount as budgeted expenditures resulting in a balanced budget. As of December 31, 2013, actual revenue collections totaled $3,882,574 or about 25% of the budgeted amount. Revenues for the first half of each FY year are historically low because most of the District’s three major revenue sources, water supply charge, property taxes and reimbursements, are collected during the second half of each FY. District staff has analyzed the revenue activity for the first six months of the FY, as well as activities scheduled for the second half of the FY, and recommends various adjustments to the revenue portion of the budget as shown in Exhibit 22-A and discussed below:

• Property Tax revenues have been increased by $97,000 based on actual collections and adjustments made during the first six months.
• Project Reimbursements for conservation activities have been increased by $699,750 due to increased activity with rebate program. This is reimbursement revenue and is driven by the project expenditures.

• Other Reimbursements were increased by $1,100 due to several adjustments in the permit processing.

• Grant funds were decreased by $550,000 due to deferral of the Sleepy Hollow intake facility retrofit project.

• Capital Equipment Reserve Fund was increased by $59,200 as these accumulated funds will be used to purchase capital equipment.

• Other Sources was increased by $617,991 to fund for Ground Water Replenishment Project. The source for this fund has not been determined, but can come from external loan, inter-fund borrowing, or a combination of both.

The cumulative effect of these revenue adjustments is an increase of $925,041 in projected revenues for FY 2013-2014.

Expenditures

The original budget envisioned expenditures of $15,319,714 in the FY ending June 30, 2014. As of December 31, 2013, actual expenditures totaled $4,008,748, or approximately 26% of the budgeted amount. This low percentage at the mid-way point of the FY is not unusual because project expenditures for the first half of each FY year are historically low. District staff has analyzed the expenditure activity for the first six months of the FY, as well as activities scheduled for the second half of the FY, and recommends various adjustments to the expenditure portion of the budget as discussed below:

• The personnel portion of the budget has been reduced by $17,150 as shown on Exhibit 22-B. This reduction is due to various adjustments based on six months year-to-date expenditures. The adjustments were a result of the labor negotiations contract.

• The supplies and services portion of the budget was increased by $500 as shown on Exhibit 22-C. This increase is due to several adjustments made based on year-to-date expenditures.

• The capital assets portion of the budget was increased by $10,500 as shown on Exhibit 22-D. This increase is due to various purchase acquisitions to be made during the next six months.

• As presented on Exhibit 22-E, project expenditures increased by a net amount of $931,191. Some of the larger adjustments are as follows:
1. Expenditures for Groundwater Replenishment Project were increased by $1,118,781 based on refined estimates for the project timeline.
2. Reduction of $610,000 for CDFG Grant expenditures due to deferral of the project costs to next fiscal year.
3. Reduction of $100,000 for alternate desal project as some of the costs has been deferred to next fiscal year.
4. Reduction of $300,000 for landscape auditor program as some of the costs has been deferred to next fiscal year.
5. Increase of $1,000,000 in rebate program due to increased activities. This is reimbursed by California American Water Company.

The cumulative effect of the adjustments to the expenditure side of the budget is a net increase of $925,041 in projected expenditures for FY 2013-2014.

Reserves

The District’s reserve balance is projected to be as follows:

	Balance	FY 2013-2014	Est. Balance
Reserves	07/01/2013	Budget	06/30/2014
Prepaid Expenses	$44,743	$0	$44,743
Litigation/Insurance Reserve	250,000	0	$250,000
Capital Equipment Reserve	304,100	(59,200)	$244,900
Flood/Drought Reserve	443,944	0	$443,944
Debt Reserve	219,136	0	$219,136
General Operating Reserve	416,706	1,187	$417,893
Totals	$1,678,629	($58,013)	$1,620,616

The above adjustments will result in an estimated reserve balance of 1,620,616 at June 30, 2014 as shown on Exhibit 22-F. This amount meets the minimum 5% of the operating budget established by the Board during the 2005-06 budget process.

On January 29, 2014, the Board authorized staff to undertake additional fisheries activities based on assessed conditions, funded from Flood/Drought reserve. The above shown reserve balance does not include the additional fisheries activities in this mid-year budget adjustment. If these additional activities are undertaken in this fiscal year, it will reduce the Flood/Drought Reserve balance.

EXHIBITS

22-A Revenues

22-B Personnel Costs

22-C Supplies & Services Costs

22-D Capital Assets

22-E Project Expenditures

22-F Reserves Analysis

U:\staff\Boardpacket\2014\20140213\PubHrngs\22\item22.docx