ITEM:		ACTION ITEM
5.	CONSIDER ADOPTION OF MID-YEAR FISCAL YEAR 2024-2025 BUDGET ADJUSTMENT
Meeting Date:			February 18, 2025	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 February 18, 2025 and recommended ________________.
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 half of the fiscal year (FY). District staff has reviewed income and spending patterns from July 1, 2024, through the end of December 31, 2024, and determined that adjustments to the FY 2024-2025 Budget are required. The FY 2024-2025 budget was adopted on June 17, 2024. 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
2024-2025
Mid-Year Budget Adjustment-Summary
Revenue		Adopted	Change	Amended
Property Tax		2,700,000	200,000	2,900,000
Permit Fees - WDD		150,000	-	150,000
Permit Fees - WDS		48,000	-	48,000
Capacity Fee		300,000	100,000	400,000
User Fees		6,600,000	800,000	7,400,000
Water Supply Charge		3,400,000	(3,400,000)	-
PWM Water Sales		14,619,500	-	14,619,500
Interest		390,000	310,000	700,000
Other		15,000	-	15,000
Subtotal District Revenues		28,222,500	(1,990,000)	26,232,500
Reimbursements - CAW		1,193,950	-	1,193,950
Reimbursements - PWM Project		10,107,500	1,249,330	11,356,830
Reimbursements - Watermaster		39,600	-	39,600
Reimbursements - Reclamation		79,000	-	79,000
Reimbursements - Grants		2,552,168	(1,280,475)	1,271,693
Reimbursements - Other		35,000	5,000	40,000
Reimbursements - Recording Fees		60,000	-	60,000
Reimbursements - Legal Fees		15,000	-	15,000
Subtotal Reimbursements		14,082,218	(26,145)	14,056,073
Carry Forward From Prior Year	500,000		(500,000)	-
From Capital Reserve	55,000		(55,000)	-
From Litigation/Insurance Reserve			175,000	175,000
From Fund Balance	-		993,350	993,350
From Water Supply Reserve	-		3,353,245	3,353,245
Total Revenues	42,859,718		1,950,450	44,810,168
Expenditures	Adopted		Change	Amended
Personnel	5,097,461		475,433	5,572,894
Supplies /Services (inc. WSC legal settlement)	1,957,100		625,197	2,582,297
Project Expenditures	34,270,646		(1,872,014)	32,398,632
Fixed Assets	85,000		(14,900)	70,100
Capital Equip. Reserve	313,000			313,000
General Reserve Balance	616,511		(616,511)	-
Pension Reserve	100,000			100,000
OPEB Reserve	100,000			100,000
Water Supply Charge Reserve	-		3,353,245	3,353,245
Election Expense	250,000			250,000
Contingency	70,000			70,000
Total Expenditures	42,859,718		1,950,450	44,810,168

As the table above indicates, most of the changes are attributed to decreases in project expenditures and increases in legal and personnel expenditures. Legal expenses are higher due to settlement payments for the Water Supply Charge (WSC). Additional information regarding proposed changes and their effect on reserves is detailed in the background section of this report.

RECOMMENDATION: The Finance and Administration Committee should recommend that the Board adopt the proposed mid-year budget adjustment for FY 2024-2025.

BACKGROUND: The Board of Directors adopted the original FY 2024-2025 budget on June 17, 2024. The paragraphs below summarize the original budget, proposed mid-year adjustments to the budget, and projected reserves accounts.

Revenues

The 2024-2025 adopted budget anticipated revenue sources in the amount of $42,859,718. Through December 31, 2024, actual revenue collections totaled $16,974,854, or 39.6% of the total budgeted amount. The original budget included budgeted revenues of $3,400,000 for the Water Supply Charge, which has been removed following a court ruling in September 2024. District staff has analyzed the revenue activity for the first six 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 5-A and discussed below:

1. Increase of $200,000 in Property Taxes to estimated revenues of $2.9 million. This is based on an approximately 3% increase from the actual amount of property taxes received in FY 2023-24.
2. Increase of $100,000 in Capacity fees to estimated revenues of $400,000. This is based on actual revenues of $282,702 received in the first six months of the fiscal year.
3. Increase of $800,000 in user fees to estimated revenues of $7,400,000. This is a 10% approximate increase from user fees collected in FY 2023-34 based on projected rate increases.
4. Decrease of $3,400,000 in revenues from the Water Supply Charge, which is rescinded following the court ruling in September 2025.
5. Decrease of $26,145 in reimbursements, mostly due to a decrease in grant revenues tied to the Integrated Resource Water Management (IRWM) grants, offset by an increase in estimated reimbursements for the Pure Water Expansion project.
6. Use of $3,353,245 from the Water Supply Charge Reserve, $175,000 from the Litigation/Insurance Reserve, and estimated use of $993,350 from the fund balance to meet budgeted expenditures.

The cumulative effect of these revenue adjustments is an increase of $1,950,450 in projected revenues and use of fund balance for FY 2024-2025.

Expenditures

The original budget envisioned expenditures of $42,859,718 in the fiscal year ending June 30, 2024. Through January 31, 2024, actual expenditures totaled $11,387,145 or 26.6% 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 six 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 5-B. The operations budget is proposed to be increased by $1,085,730 with adjustments as follows:
1. Increase in personnel services budget of $475,433 due to increases in salaries and associated benefits related to new labor negotiations and MOUs adopted in July 2024 as well as a minor increase in expected personnel recruitment costs.
2. Increase in Supplies and Services by $625,197, mostly due to an increase in legal fees of $545,421 for settlement for the WSC, as well as additional costs related to the repair of District facilities and vehicles.

• As presented on Exhibit 5-C, project expenditures decreased by a net amount of $1,872,015. The main adjustments in the project budget are as follows:
1. Decrease of $626,550 in the budget for the Water Operating reserve. This equates to a budget for 250 Acre Feet of water instead of 400 Acre Feet in the original budget.
2. Increase of $1,249,330 in the budget for the PWM expansion project due to higher projected spending for the remainder of the year.
3. Decrease of $1,274,500 in acquisition costs related to the Public’s acquisition of the Monterey water system.
4. Decrease of 1,200,000 in expenditures for the IRWM 1 & 2 grants due to delays by project sponsors.
5. Increase of $3,353,245 in the WSC reimbursements and a decrease of $616,511 in the estimated contribution towards the fund balance from the original budget.
6. 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 an increase of $1,950,450.

Reserves

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

	Actual	FY 2024-25
	Balance	Budget	Est. Balance
Reserves	6/30/2024	Changes	06/30/2025
Litigation/Insurance Reserve	250,000	(175,000)	$75,000
Capital Reserve	1,625,100	313,000	$1,938,100
Flood/Drought Reserve	500,000	0	$500,000
Pension Reserve	600,000	100,000	$700,000
OPEB Reserve	600,000	100,000	$700,000
General Operating Reserve	18,658,597	(993,350)	$17,665,247
Totals	$22,233,697	($655,350)	$21,578,347
Water Supply Charge Reserve	3,353,245	(3,353,245)	$0

The District estimates a total reserve balance of approximately $21.6 million on June 30, 2025. This amount meets the minimum 5% of the operating budget requirement established by the Board in 2005-06. Actual fund balances in the various funds will vary based on final revenue and expenditures in FY 2024-25.

EXHIBITS

5-A Revenues

5-B Operating Expenditures

5-C Project Expenditures

5-D Summary by Fund

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