ITEM:		ACTION ITEM
14.	CONSIDER ADOPTION OF MID-YEAR FISCAL YEAR 2022-2023 BUDGET ADJUSTMENT
Meeting Date:			March 20, 2023	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 months of the fiscal year (FY). District staff has reviewed income and spending patterns from July 1, 2022 through the end of January 31, 2023 and determined that adjustments to the FY 2022-2023 Budget is required. The FY 2022-2023 Budget was adopted on June 20, 2022. 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
2022-2023
Mid-Year Budget Adjustment-Summary
Revenue	Adopted	Change	Amended
Property Tax	$2,500,000	$0	$2,500,000
Permit Fees - WDD	150,000	0	150,000
Permit Fees - WDS	48,000	0	48,000
Capacity Fee	500,000	0	500,000
User Fees	5,500,000	0	5,500,000
Water Supply Charge	3,400,000	0	3,400,000
PWM Water Sales	12,201,000	0	12,201,000
Interest	80,000	0	80,000
Other	15,000	0	15,000
Subtotal District Revenues	24,394,000	0	24,394,000
Reimbursements - CAW	1,192,600	(164,000)	1,028,600
Reimbursements - PWM Project (Grant)	1,500,000	0	1,500,000
Reimbursements - Watermaster	39,600	0	39,600
Reimbursements - Reclamation	20,000	0	20,000
Reimbursements - Other	23,000	0	23,000
Reimbursements - Recording Fees	20,000	0	20,000
Reimbursements - Legal Fees	16,000	0	16,000
Grants	3,470,200	(3,204,000)	266,200
Subtotal Reimbursements	$6,281,400	($3,368,000)	$2,913,400
Carry Forward/Use of Reserves	1,323,000	0	1,323,000
From Flood/Drought Reserves	0	250,000	250,000
From Capital Equipment Reserve	197,000	0	197,000
From Debt Reserve	500,000	0	500,000
From Fund Balance	0	0	0
Total Revenues	$32,695,400	($3,118,000)	$29,577,400
Expenditures	Adopted	Change	Amended
Personnel	$4,488,300	$0	$4,488,300
Supplies & Services	1,740,700	16,000	1,756,700
Project Expenditures	24,095,500	(5,191,000)	18,904,500
Fixed Assets	450,000	0	450,000
Debt Service	230,000	1,920,000	2,150,000
Capital Equip. Reserve	408,500	0	408,500
General Fund Balance	262,400	387,000	649,400
Pension Reserve	100,000	0	100,000
OPEB Reserve	100,000	0	100,000
Mechanics Bank Reserve	500,000	(500,000)	0
Flood/Drought Reserve	0	250,000	250,000
Election Expense	250,000	0	250,000
Contingency	70,000	0	70,000
Total	$32,695,400	($3,118,000)	$29,577,400

As the table above indicates, most of the change is attributed to decrease in project expenditures. Additionally, this budget anticipates making a payment of $2,150,000 (principal & interest) to Mechanics Bank (formerly Rabobank) paying off debt in full. An increase in setting aside of reserves compared to the original budget because of the decrease in project expenditures. 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 2022-2023.

BACKGROUND: The Board of Directors adopted the original FY 2022-2023 budget on June 20, 2022. The paragraphs below summarize the original budget, proposed mid-year adjustments to the budget and projected reserves accounts.

Revenues

The 2022-2023 adopted budget anticipated revenue sources in the amount of $32,695,400. Through January 31, 2022, actual revenue collections totaled $16,273,275 or 50% 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 14-A and discussed below:

• Decrease of $164,000 in California American Water reimbursement revenue based on actual collections through the first half of the FY.
• Decrease of $3,204,000 in grants based on actual collections through the first half of the FY. Both the project expenditures related to the grant and the revenue have been deferred to next fiscal year based on the timing of the project.
• Increase of $250,000 in Flood/Drought Reserve Fund. Since there has been a reduction in project expenditures allowing surplus funds to be set aside towards this reserve fund to offset the authorized use towards flood damage earlier in the year.

The cumulative effect of these revenue adjustments is a decrease of $3,118,000 in projected revenues for FY 2022-2023.

Expenditures

The original budget envisioned expenditures of $32,695,400 in the fiscal year ending June 30, 2023. Through January 31, 2023, actual expenditures totaled $13,831,250, or 42% 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 had no adjustments as shown on Exhibit 14-B.

• The supplies and services portion of the budget increased by $16,000 as shown on Exhibit 14-C.

• The fixed assets portion of the budget had no adjustments as shown on Exhibit 14-D.

• As presented on Exhibit 14-E, project expenditures decreased by a net amount of $5,191,000. Some of the larger adjustments are as follows:
1. Decrease of $105,000 towards Cal-Am Desal and Water Allocation Process as this is deferred to next fiscal year.
2. Increase of $250,000 towards flood damage work as previously authorized by the Board.
3. Increase of $90,000 towards Sleepy Hollow rearing channel project.
4. Reduction of $398,000 for ASR related project as the work will not be completed in this fiscal year.
5. Reduction of $1,750,000 for near term production capacity project as this is no longer needed.
6. Reduction of $3,199,000 for IRWM implementation project as this is deferred to next fiscal year.
7. 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 decrease of $5,191,000.

Reserves

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

Monterey Peninsula Water Management District
Analysis of Reserves
2022-2023
	Projected	Actual	FY 2022-23
	Balance	Balance	Budget	Est. Balance
Reserves	6/30/2022	6/30/2022	Changes	06/30/2023
Litigation/Insurance Reserve	250,000	250,000	0	$250,000
Capital Equipment Reserve	1,083,300	1,083,300	211,500	$1,294,800
Flood/Drought Reserve	328,944	328,944	0	$328,944
Debt Reserve	222,654	222,743	0	$222,743
Pension Reserve	400,000	400,000	100,000	$500,000
OPEB Reserve	400,000	400,000	100,000	$500,000
Debt Service Reserve (Mechanics Bank)	500,000	500,000	(500,000)	$0
General Operating Reserve	15,163,095	18,199,387	(673,600)	$17,525,787
Totals	$18,347,993	$21,384,374	($762,100)	$20,622,274

The above adjustments will result in an estimated reserve balance of $20,622,274 at June 30, 2023 as shown on Exhibit 14-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 $18,198,893 for the fiscal year.

Use of reserve (carry forward of project funds from prior year) in the amount of $1,323,000 remains unchanged for the mid-year budget. Original budget had anticipated setting aside general reserve in the amount of $262,400, while the mid-year budget increased it to $649,400.

EXHIBITS

14-A Revenues

14-B Personnel Costs

14-C Supplies & Services Costs

14-D Capital Assets

14-E Project Expenditures

14-F Reserves Analysis

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