ITEM:		ACTION ITEM
10.	CONSIDER ADOPTION OF MID-YEAR FISCAL YEAR 2023-2024 BUDGET ADJUSTMENT
Meeting Date:			March 18, 2024	Budgeted:	N/A
From:			David J. Stoldt,	Program/	N/A
			General Manager	Line Item No.:
Prepared By:			Nishil Bali	Cost Estimate:	N/A
General Counsel Review: N/A
Committee Recommendation: The Finance and Administration Committee reviewed this item on March 11, 2024 and recommended approval.
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 seven months of the fiscal year (FY). District staff has reviewed income and spending patterns from July 1, 2023, through the end of January 31, 2024, and determined that adjustments to the FY 2023-2024 Budget are required. The FY 2023-2024 Budget was adopted on June 20, 2023. Included in the budget adjustment process is 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
2023-2024
Mid-Year Budget Adjustment-Summary
Revenue	Adopted	Change	Amended
Property Tax	$2,600,000	$0	$2,600,000
Permit Fees - WDD	150,000	$1,075,000	1,225,000
Permit Fees - WDS	48,000	$0	48,000
Capacity Fee	500,000	$0	500,000
User Fees	6,000,000	$0	6,000,000
Water Supply Charge	3,400,000	$0	3,400,000
PWM Water Sales	13,275,500	$0	13,275,500
Interest	150,000	$0	150,000
Other	15,000	$0	15,000
Subtotal District Revenues	26,138,500	1,075,000	27,213,500
Reimbursements - CAW	991,600	0	991,600
Reimbursements – Grants (PWM/IRMA)	18,940,000	(8,100,000)	10,840,000
Reimbursements - Watermaster	39,600	0	39,600
Reimbursements - Reclamation	20,000	0	20,000
Reimbursements - FEMA	165,000	0	165,000
Reimbursements - Other	35,000	0	35,000
Reimbursements - Recording Fees	25,000	60,000	85,000
Reimbursements - Legal Fees	16,000	0	16,000
Subtotal Reimbursements	$20,232,200	($8,040,000)	$12,192,200
Carry Forward From Prior Year	886,500	0	886,500
From Capital Reserve	100,000	0	100,000
From Fund Balance	1,081,050	0	1,081,050
Total Revenues	$48,438,250	($6,965,000)	$41,473,250
Expenditures	Adopted	Change	Amended
Personnel	$4,486,500	$245,000	$4,731,500
Supplies & Services	1,829,900	59,000	1,888,900
Project Expenditures	36,631,100	(6,160,142)	30,470,958
Fixed Assets	230,000	0	230,000
Capital Equip. Reserve	330,300	0	330,300
General Reserve Balance	1,089,394	(1,089,394)	0
Pension Reserve	100,000	0	100,000
OPEB Reserve	100,000	0	100,000
Water Supply Charge Reserve	3,400,000	0	3,400,000
Flood/Drought Reserve	171,056	0	171,056
Contingency	70,000	(19,464)	50,536
Total	$48,438,250	($6,965,000)	$41,473,250

As the table above indicates, most of the change is attributed to a decrease in project expenditures. Relatively smaller budget additions have been requested in operating expenditures for personnel, additional insurance costs, and vehicle repairs. Additional information regarding all other proposed changes, as well as their effect on reserves, is detailed in the background section of this report.

RECOMMENDATION: The Finance and Administration Committee recommends that the Board adopt the proposed mid-year budget adjustment for FY 2023-2024 after receiving any public comments.

BACKGROUND: The Board of Directors adopted the original FY 2023-2024 budget on June 20, 2023. The paragraphs below summarize the original budget, proposed mid-year adjustments to the budget, and projected reserves accounts.

Revenues

The 2023-2024 adopted budget anticipated revenue sources in the amount of $48,438,250. Through January 31, 2024, actual revenue collections totaled $15,060,715, or 31.09% of the budgeted amount. This includes budgeted revenues of $3,400,000 for the Water Supply Charge, which is being set aside as a reserve pending the outcome of existing litigation. 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:

1. Increase of $1,075,000 in Permit Fees. This includes $525,000 in Permit Fees for the Sand City Marriott project, $325,000 for the Ascent Project, and $225,000 for the Laguna Seca Villas project at Seaside.
2. Decrease of $8,100,000 in grant reimbursements based on projected collections through the end of the FY. The project expenditures related to the grants and related revenue have been deferred to the next fiscal year based on the timing of the projects.
3. Increase in reimbursements of $60,000 for deed-restricted recording fees.

The cumulative effect of these revenue adjustments is a decrease of $6,965,000 in projected revenues for FY 2023-2024.

Expenditures

The original budget envisioned expenditures of $48,438,250 in the fiscal year ending June 30, 2024. Through January 31, 2024, actual expenditures totaled $15,392,101 or 31.78% of the budgeted amount. The spending pattern at this point of the fiscal year is not unusual because 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:

• Changes to the operations budget are shown in Exhibit 10-B. The operations budget is proposed to be increased by $304,000 with adjustments as follows:
1. Increase in personnel services budget of $245,000 to account for existing and projected retirement payouts and the hiring of temporary staff/retirees.
2. Increase in Supplies and Services by $39,000 for additional costs related to insurance and repair of District vehicles.
3. Increase in IT Supplies and Services of $20,000 to account for disaster backup services and upgrade of servers.
4. No adjustments are proposed for the fixed assets budget.

• As presented on Exhibit 10-C, project expenditures decreased by a net amount of $6,160,142. The main adjustments in the project budget are as follows:
1. Decrease of $6,400,000 for the Pure Water Expansion project as these expenditures are deferred to the next fiscal year.
2. Decrease of $30,000 towards Cal-Am Desal and Water Allocation Process as this is deferred to next fiscal year.
3. Increase of $1,896,500 for the District’s operating water reserve. This will allow the purchase of an additional 500 Acre Feet of water from Monterey One Water based on actual supply.
4. Decrease of $1,700,000 for the Integrated Resource Water Management implementation grant. These expenditures are deferred to next year.
5. Increase of $34,158 for Seaside Basin Watermaster adjudication support.
6. Increase of $60,000 in reimbursable expenses for Deed Restriction Recording Fees.
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 $5,875,606, excluding changes to the General Reserve balance.

Reserves

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

	Actual	FY 2023-24
	Balance	Budget	Est. Balance
Reserves	6/30/2023	Changes	06/30/2024
Litigation/Insurance Reserve	250,000	0	$250,000
Capital Reserve	1,294,800	230,300	$1,525,100
Flood/Drought Reserve	328,944	171,056	$500,000
Pension Reserve	500,000	100,000	$600,000
OPEB Reserve	500,000	100,000	$600,000
General Operating Reserve	19,085,887	(1,975,894)	$17,109,993
Totals	$21,959,631	($1,374,538)	$20,585,093

The District estimates a total reserve balance of $20,585,093 at June 30, 2024, as shown on Exhibit 10-D. This amount meets the minimum 5% of the operating budget requirement established by the Board during the 2005-06 budget process. The original adopted budget had a projected reserve balance of $21,959,631 for the fiscal year. Use of the general operating reserve (carry forward of project funds from prior year) in the amount of $886,500 as detailed in Exhibit 10-D remains unchanged for the mid-year budget.

EXHIBITS

10-A Revenues

10-B Operating Expenditures

10-C Project Expenditures

10-D Reserves Analysis

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