ITEM:		ACTION ITEM
10.	CONSIDER ADOPTION OF MID-YEAR FISCAL YEAR 2020-2021 BUDGET ADJUSTMENT
Meeting Date:			March 15, 2021	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: This action does not constitute a project as defined by the California Environmental Quality Act Guidelines Section 15378.

SUMMARY: Annually, the District considers its financial position after the end of the first 7-8 months of the fiscal year (FY). District staff has reviewed income and spending patterns from July 1, 2020 through the end of January 31, 2021 and determined that adjustments to the FY 2020-2021 Budget is required. The FY 2020-2021 Budget was adopted on June 15, 2020. Included in the budget adjustment process was a review of staffing levels, supplies, outside services, project expenditures, current work assignments and other factors affecting the current budget. The table below summarizes the proposed changes to the budget:

Monterey Peninsula Water Management District
2020-2021
Mid-Year Budget Adjustment-Summary
Revenue	Adopted	Change	Amended
Property Tax	$2,050,000	$0	$2,050,000
Permit Fees - WDD	150,000	0	150,000
Permit Fees - WDS	48,000	0	48,000
Capacity Fee	400,000	0	400,000
User Fees	4,250,000	750,000	5,000,000
Water Supply Charge	3,300,000	0	3,300,000
PWM Water Sales	0	4,800,000	4,800,000
Interest	200,000	0	200,000
Other	15,000	0	15,000
Subtotal District Revenues	10,413,000	5,550,000	15,963,000
Reimbursements - CAW	1,754,700	0	1,754,700
Reimbursements - Reclamation Tank	500,000	0	500,000
Reimbursements - Watermaster	35,000	0	35,000
Reimbursements - Reclamation	20,000	0	20,000
Reimbursements - Other	126,300	0	126,300
Reimbursements - Recording Fees	6,000	0	6,000
Reimbursements - Legal Fees	16,000	0	16,000
Grants	2,495,400	0	2,495,400
Subtotal Reimbursements	$4,953,400	$0	$4,953,400
Carry Forward/Use of Reserves	7,058,100	0	7,058,100
From Capital Equipment Reserve	57,900	9,000	66,900
From Fund Balance	1,939,400	(1,412,700)	526,700
Total Revenues	$24,421,800	$4,146,300	$28,568,100
Expenditures	Adopted	Change	Amended
Personnel	$4,038,700	($40,000)	$3,998,700
Supplies & Services	1,499,600	(34,300)	1,465,300
Project Expenditures	16,639,100	4,211,600	20,850,700
Fixed Assets	220,000	9,000	229,000
Debt Service	230,000	0	230,000
Capital Equip. Reserve	324,400	0	324,400
General Fund Balance	500,000	0	500,000
Pension Reserve	100,000	0	100,000
OPEB Reserve	100,000	0	100,000
Mechanics Bank Reserve	500,000	0	500,000
Election Expense	200,000	0	200,000
Contingency	70,000	0	70,000
Total	$24,421,800	$4,146,300	$28,568,100

As the table above indicates, most of the change is attributed to increase in User Fee revenue and Pure Water Monterey (PWM) Water Sales revenue. The off-set on the expenditure side is increase in project expenditures related to PWM water purchase. Additionally, a reduction in use of reserves which was adopted with the original budget. Detailed information regarding all other 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 2020-2021.

BACKGROUND: The Board of Directors adopted the original FY 2020-2021 budget on June 15, 2020. The paragraphs below summarize the original budget, proposed mid-year adjustments to the budget and projected reserves accounts.

Revenues

The 2020-2021 adopted budget anticipated revenue sources in the amount of $24,421,800. Through January 31, 2021, actual revenue collections totaled $9,359,530 or about 38% of the budgeted amount. District staff has analyzed the revenue activity for the first seven months of the FY, as well as activities scheduled for the remainder of the FY, and recommends various adjustments to the revenue portion of the budget as shown in Exhibit 10-A and discussed below:

• Increase of $750,000 in user fee based on actual collections through the first half of the FY. Original budget had assumed reduction in revenue due to COVID-19. Actual collections for the first seven months did not have anticipated reduction in revenue.
• Increase of $4,800,000 in PWM water sales revenue. Original budget did not include this line item since the timing of water sales was unknown at the time. This is a net zero effect to District’s budget since the project expenditures line item has exactly same amount as an off-set.
• Decrease of $1,412,700 in Fund Balance use of reserves. Since revenues have increased and a reduction in project expenditures, originally proposed use of reserves is reduced.

The cumulative effect of these revenue adjustments is an increase of $4,146,300 in projected revenues for FY 2020-2021.

Expenditures

The original budget envisioned expenditures of $24,421,800 in the fiscal year ending June 30, 2021. Through January 31, 2021, actual expenditures totaled $9,587,583, or approximately 39% of the budgeted amount. The spending pattern at mid-way point of the fiscal year is not unusual because most of the project expenditures for the first half of each fiscal year are low. District staff has analyzed the expenditure activity for the first seven months of the fiscal year, as well as activities scheduled for the remainder of the fiscal year, and recommends various adjustments to the expenditure portion of the budget as discussed below:

• The personnel services portion of the budget decreased by $40,000 as shown on Exhibit 10-B.

• The supplies and services portion of the budget decreased by $34,300 as shown on Exhibit 10-C.

• The fixed assets portion of the budget increased by $9,000 as shown on Exhibit 10-D.

• As presented on Exhibit 10-E, project expenditures increased by a net amount of $4,211,600. Some of the larger adjustments are as follows:
1. Increase of $95,000 for Alternative Analysis and Sediment Management Los Padres Long Term Plan.
2. Reduction of $550,000 for PWM expansion project as the work will not be completed in this FY.
3. Increase of $4,800,000 for PWM water purchase. This is off-set to the revenue line with an exact same amount.
4. Other adjustments to the project expenditures as noted in the exhibit.

The cumulative effect of the adjustments to the expenditure side of the budget is a net increase of $4,146,300. Use of reserve in the amount of $526,700 is need to balance the mid-year budget. Original budget had anticipated use of reserve in the amount of $1,939,400.

Reserves

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

Monterey Peninsula Water Management District
Analysis of Reserves
2020-2021
	Projected	Actual
	Balance	Balance	FY 2020-2021	Est. Balance
Reserves	6/30/2020	6/30/2020	Budget	06/30/2021
Litigation/Insurance Reserve	250,000	250,000	0	$250,000
Capital Equipment Reserve	553,000	581,500	257,500	$839,000
Flood/Drought Reserve	328,944	328,944	0	$328,944
Debt Reserve	222,098	222,524	0	$222,524
Pension Reserve	200,000	200,000	100,000	$300,000
OPEB Reserve	200,000	200,000	100,000	$300,000
Mechanics Bank Reserve	0	0	500,000	$500,000
General Operating Reserve	9,677,197	16,308,941	(7,084,800)	$9,224,141
Totals	$11,431,239	$18,091,909	($6,127,300)	$11,964,609

The above adjustments will result in an estimated reserve balance of 11,964,609 at June 30, 2021 as shown on Exhibit 10-F. This amount meets the minimum 5% of the operating budget established by the Board during the 2005-06 budget process. The original adopted budget had a projected reserve balance of $10,958,339 for the FY.

EXHIBITS

10-A Revenues

10-B Personnel Costs

10-C Supplies & Services Costs

10-D Capital Assets

10-E Project Expenditures

10-F Reserves Analysis

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