Foothill MWD Preliminary Budget Presentation May 20, 2013

Foothill MWD Preliminary Budget Presentation

May 20, 2013

Points to Consider

Equity issue with agencies leasing water and shifting costs to other agencies

Capital costs equity issue, peaks and valleys and total long-term costs

2May 20, 2013

Outline Process and Overview MWD Rates and Charges Energy Charges Preliminary O&M Projected Reserves Preliminary CIP PAYG and Financing Options Next Steps

3May 20, 2013

Process

April 15 – Reviewed w/ member agencies April 22 – Reviewed w/ Finance Committee May 8 – Reviewed w/ member agencies May 15 – Reviewed w/ member agencies May 20 – Board Workshop June 5 – Review w/ member agencies June 7 – Review w/ Finance Committee June 12 – Review w/ member agencies June 17 – Recommendations to Board

May 20, 20134

Overview

Pass-thru MWD rates and charges. Pass-thru energy costs. Keep Admin and O&M costs same. Replenish reserve due to payment to

CalPERS. Continue with CIP to rehabilitate system. Review/adjust method for charges. Obtain financing for capital and rehab. Based on 7,975 AF sales (from agencies).

5May 20, 2013

MWD Rates – Pass-ThruJan. 1, 2012 Jan. 1, 2013 Jan. 1, 2014

Tier 1 ($/AF) $794 $847 $890

Tier 2 ($/AF) $920 $997 $1,032

Readiness-to-Serve Charge ($Millions)

$146 $142 $166

Capacity Charge ($/cfs)

$7,400 $6,400 $8,600

Replenishment ($/AF)

$651 $0 $0

6May 20, 2013

MWD Preliminary RTS Charge

7

No provision if District owes more. Will need to bill agencies.

May 20, 2013

AGENCY

CY 2013 Monthly Charge

Preliminary

CY 2014 Monthly Charge Difference

CVWD $9,529 $11,933 $2,405 LCID $11,622 $14,903 $3,281 LFWC $2,798 $3,486 $688 LAWC $5,825 $6,854 $1,029 MCWC $3,025 $3,888 $863 RCLWA $3,334 $3,781 $446 VWC $11,152 $14,561 $3,408 FMWD $47,285 $59,406 $12,121

MWD Capacity Charge

Peak day = July 15, 2010 at 20.2 cfs$8,600/cfs charge prorated up to the 20.2 cfs equates to $9,870/cfs

Preparing for CPP event, responding to two mechanical failuresAnd two short notices for flow changes

8May 20, 2013

Agency

Flow for CY 2014 Charge

Percentage of Flow for

CY 2014 Charge

CY 2014 Annual Charge

Flow for CY 2013 Charge

Percentage of Flow for

CY 2013 Charge

CY 2013 Annual Charge

Annual Increase or (Decrease) in Charge

CVWD 3.4 19% 33,560$ 6.1 27% 41,427$ (7,867)$ LCID 4.9 28% 48,365$ 6.5 28% 44,143$ 4,222$ LFWC 0.9 5% 8,883$ 0.9 4% 6,112$ 2,771$ LAWC 3.7 21% 36,521$ 4.3 19% 29,202$ 7,318$ MCWC 1.4 8% 13,819$ 1.7 7% 11,545$ 2,273$ RCLWA - 0% -$ - 0% -$ -$ VWC 3.3 19% 32,573$ 3.4 15% 23,090$ 9,482$ Total 17.6 100% 173,720$ 22.9 100% 155,520$ 18,200$

Energy Charge – Pass-Thru

For FY 2012, average energy cost was:P-1 Eastside $54/AFP-1 Westside $47/AFP-2 $84/AF

Agencies invoiced for actual energy dollars based on amount of water taken that month.

Assumed 2.5% rate increase in budget.

9May 20, 2013

Admin and O&M Preliminary Budget

104rth year in a row, no increase in budget.May 20, 2013

FY 2012-2013

Adopted Budget

FY 2013-2014

Preliminary Budget Difference

Wages & Employee Benefits 1,185,207$ 1,149,000$ (36,207)$ Repairs & Maintenance 266,500$ 253,500$ (13,000)$ Administration and General 285,950$ 239,540$ (46,410)$ Professional Services 166,000$ 166,000$ -$ Replenishment of Reserves -$ 178,000$ 178,000$ Equipment Replacement 47,000$ -$ (47,000)$ Subtotal 1,950,657$ 1,986,040$ 35,383$ Depreciation 259,100$ 223,717$ (35,383)$ Subtotal 2,209,757$ 2,209,757$ (0)$ Use of Water Resource Fund 27,500$ 27,500$ -$ Other Revenues 113,000$ 113,000$ -$ Grand Total 2,069,257$ 2,069,257$ (0)$


Kept current conservation program. OPEB remains $65,000. Separate item shows replenishment of

reserves used to pay off CalPERS side fund

Cleaned up equipment replacement category. Include equipment replacement in either CIP or O&M depending on cost.

11May 20, 2013


3% CPI increase for employees. Merit increases and promotions if

warranted. Pay for Performance if warranted Assume 10 FTE in wages. New

System Operator II included. No increase in Board per diem.

12May 20, 2013

Ten-Year Rolling Averages for Admin and O&M Charge – Current Method

May 20, 201313

CY 2014 Ten-Yr Avg

CY 2014 Percentage

CY 2013 Ten-Yr Avg

CY 2013 Percentage

Acre-feet Difference

Percentage Increase/(Decrease)

CVWD 2,139.9 18.68% 2,233.4 18.45% (93.5) 0.23%

KID 0.0 0.00% 0.0 0.00% - 0.00%

LCID 2,692.5 23.50% 2,747.7 22.69% (55.2) 0.80%

Las Flores 631.8 5.51% 662.4 5.47% (30.7) 0.04%

Lincoln 1,354.1 11.82% 1,553.5 12.83% (199.4) -1.01%

Mesa 697.2 6.08% 709.1 5.86% (11.9) 0.23%

Rubio 889.2 7.76% 1,043.0 8.61% (153.8) -0.85%

Valley 3,053.2 26.65% 3,158.3 26.09% (105.1) 0.56%

Total 11,458.0 100.00% 12,107.5 100.00% (649.5) 0.00%

Shift in percentages due to purchases of Pasadena groundwater by Rubio and Lincoln

Admin and O&M Preliminary Charge for CY 2014 – Current Method

14

Because Lincoln and Rubio are purchasing water from Pasadena, their 10-year rolling averages

are lower along with charges while other agencies’ are increasing.

May 20, 2013

CY 2013 Charge

CY 2014 Preliminary

Charge DifferenceCVWD 380,339$ 385,108$ 4,770$ KID 7,234$ 7,210$ (24)$ LCID 467,915$ 484,565$ 16,650$ Las Flores 112,809$ 113,701$ 892$ Lincoln 264,557$ 243,695$ (20,862)$ Mesa 120,753$ 125,473$ 4,720$ Rubio 177,607$ 160,026$ (17,581)$ Valley 537,836$ 549,479$ 11,643$ Total 2,069,050$ 2,069,257$ 207$

Admin and O&M Preliminary Charge for CY 2014 - Minimum

Most FMWD costs except MWD purchases are fixed whether a retailer takes 1 acre-foot or 1,000 acre-feet

Variable costs have already been separated out – MWD rates and power

Example of Kinneloa paying Administrative costs based on proportion of meters; No operational costs have been assigned since no physical connection

May 20, 201315

Admin and O&M Preliminary Charge for CY 2014 Lincoln and Rubio are currently rolling

off FMWD however FMWD still has Admin and O&M costs and Capital and Rehab costs associated with Lincoln and Rubio

What happens when groundwater leasing stops?

Finance Committee directed development of a minimum payment alternative for all agencies

May 20, 201316

Admin and O&M Preliminary Charge for CY 2014 -Normalized

May 20, 201317

* Does not include transfer between retailers.* Does not include Pasadena transfer to Valley since

Valley serves Pasadena.

Current Method CY 2014 Ten-Yr Rolling Avg

Current Method CY

2014 Percentage

Current Method CY

2014 Preliminary

Charge Normalized Total Sales

Normalized Percentage

Normalized CY 2014

Preliminary Charge

Increase/(Decrease) In Charge to Actual

2013 Charge - Current Method

Increase/(Decrease) In Charge to

Preliminary 2014 Current Method

CVWD 2,140 18.7% 385,172$ 2,179 18.6% 382,995$ 2,656$ (2,177)$ KID 0 0.0% 7,210$ n/a 7,210$ (24)$ -$ LCID 2,693 23.5% 484,646$ 2,703 23.0% 474,973$ 7,057$ (9,673)$ Las Flores 632 5.5% 113,720$ 632 5.4% 111,038$ (1,771)$ (2,682)$ Lincoln 1,354 11.8% 243,736$ 1,560 13.3% 274,107$ 9,549$ 30,371$ Mesa 697 6.1% 125,493$ 697 5.9% 122,534$ 1,781$ (2,960)$ Rubio 889 7.8% 160,053$ 889 7.6% 156,278$ (21,329)$ (3,775)$ Valley 3,053 26.6% 549,570$ 3,073 26.2% 540,123$ 2,288$ (9,447)$ Total 11,458 100.0% 2,069,257$ 11,733 100.0% 2,069,257$ 207$ (343)$

Admin and O&M Preliminary Charge for CY 2014 - Minimum

May 20, 201318

Main Pump Station Flow Entitlement Percentage

CY 2014 Preliminary

Charge

CY 2014 Ten-Yr

Rolling AvgCY 2014

Percentage

CY 2014 Preliminary

Charge

Increase/(Decrease) In Charge to Actual

2013 Charge - Current Method

Increase/(Decrease) In Charge to

Preliminary 2014 Current Method

CVWD 7.8 20% 209,364$ 2,140 18.7% 192,554$ 21,579$ 16,746$ LCID 6.6 17% 176,969$ 2,693 23.5% 242,282$ (48,664)$ (65,394)$ Las Flores 2.4 6% 65,550$ 632 5.5% 56,850$ 9,592$ 8,681$ Lincoln 6.8 18% 183,201$ 1,354 11.8% 121,848$ 40,491$ 61,313$ Mesa 1.6 4% 42,140$ 697 6.1% 62,736$ (15,877)$ (20,618)$ Rubio 5.2 14% 139,456$ 889 7.8% 80,013$ 41,862$ 59,416$ Valley 8.0 21% 214,344$ 3,053 26.6% 274,739$ (48,752)$ (60,486)$ Total 38.5 100% 1,031,023$ 11,458 100.0% 1,038,234$ 207$ (343)$

Method requested by retail agencies for review

Admin and O&M Charge Recommendation By Retail Agencies

Water purchases from other agencies whether groundwater transfers or other type of arrangements to be included as part of sales percentage.

Keep fixed for at least five years. Review annually to ensure

significant variation has not occurred.

May 20, 201319

Preliminary Reserves

20May 20, 2013

BalanceEstimated Balance Target

Min Max 6/30/2012 2/28/2013 6/30/2013

Operating 1,500,000$ 2,000,000$ 2,073,000$ 1,613,000$ 1,416,000$ Water Resource and Conservation -$ -$ 111,000$ 115,000$ 99,000$

Emergency Capital 2,300,000$ 5,750,000$ 2,827,000$ 2,827,000$ 2,827,000$

Rehabilitation & Replacement -$ 1,300,000$ 665,000$ 773,000$ 924,000$ Restricted Future Capital Facilities and Improvement Fund -$ 2,000,000$ 1,160,000$ 1,536,000$ 1,614,000$ OPEB Liability -$ -$ 30,000$ 57,000$ 95,000$ Vehicle and Equipment Replacement 40,000$ 100,000$ 63,000$ 77,000$ 97,759$

Election Expense 28,500$ 85,000$ 64,000$ 73,000$ 84,000$ Total 11,235,000$ 6,993,000$ 7,072,000$ 7,158,000$

Preliminary CIP

To keep the charge the same, must use reserves or finance.

If use PAYG, will impact reserves severely - up to $3.4 million based on current estimates

If obtain financing, charge can be reduced for most agencies and increase is not as high for Lincoln.

21May 20, 2013

Fiscal Year 2012-2013 CIP

Please refer to the handout for details on this year’s CIP.

May 20, 201322

Preliminary Five-Year CIP

Please refer to the handout for the preliminary five-year CIP

Pipeline repair work not included as costs are unknown at this time.

May 20, 201323

Split for CIP Budget – Current Method

May 20, 201324

Common

Pool (AF)

Westside (AF)

Berkshire (AF)

Recycled Water Project

(AF) Common Pool %

Westside %

Berkshire %

Recycled Water

Project % CVWD 2,140 2,140 2,140 18.7% 24.9% 59.1% LCID 2,693 2,693 1,481 3,453 23.5% 31.4% 40.9% 31.4%

Las Flores 632 813 5.5% 7.4% Lincoln 1,354 1,687 11.8% 15.3% Mesa 697 697 6.1% 8.1% Rubio 889 1,323 7.8% 12.0% Valley 3,053 3,053 3,718 26.6% 35.6% 33.8% Total 11,458 8,583 3,621 10,994 100.0% 100.0% 100.0% 100.0%

Split for CIP Budget – Normalized Method

May 20, 201325

Common

Pool (AF)

Westside (AF)

Berkshire

(AF)

Recycled Water Project

(AF) Common Pool %

Westside %

Berkshire %

Recycled

Water Project

% CVWD 2,179 2,179 2,179 18.6% 25.2% 59.5% LCID 2,703 2,703 1,486 3,453 23.0% 31.2% 40.5% 31.4%

Las Flores 632 813 5.4% 7.4% Lincoln 1,560 1,687 13.3% 15.3% Mesa 697 697 5.9% 8.1% Rubio 889 1,323 7.6% 12.0% Valley 3,073 3,073 3,718 26.2% 35.5% 33.8% Total 11,733 8,652 3,666 10,994 100.0% 100.0% 100.0% 100.0%

Preliminary CIP Charges – Request by Agencies

May 20, 201326

PAYG No transfers, No Financing Chart on next slide shows peaks and

valleys for charge Please see worksheet for numbers

Preliminary CIP Charge

May 20, 201327

Preliminary CIP – PAYG – Charges Remain the Same – Reserves Down $3.4 Million

28May 20, 2013

In addition to the transfer, the annual CIP charge must be paid by all agencies.

Current Annual

Payment

Projected CY 2014 Annual

Payment

Projected CY 2015 - CY

2017 Annual Payment

Projected June 2013

Capital and Rehab Fund

Balance Total Transfers

Projected Capital and Rehab Fund

Balance December 2017

CVWD 204,665.04$ 204,665.04$ 204,665.04$ $ 461,522.66 637,442.30$ 428,630.90$ LCID 204,473.04$ 204,473.04$ 204,473.04$ $ 375,173.28 801,291.08$ 190,846.76$ Las Flores 19,937.04$ 19,937.04$ 19,937.04$ $ 44,937.15 188,238.65$ 69,687.84$ Lincoln 26,000.04$ 26,000.04$ 26,000.04$ $ 66,927.82 405,108.32$ 1,298.91$ Mesa 37,475.04$ 37,475.04$ 37,475.04$ $ 90,674.60 207,455.49$ 197,089.52$ Rubio 52,977.00$ 52,977.00$ 52,977.00$ $ 107,930.61 266,303.04$ 231,669.51$ Valley 220,872.00$ 220,872.00$ 220,872.00$ $ 467,130.79 909,161.12$ 800,362.73$ Total 766,118.30$ 766,439.38$ 766,399.20$ $1,614,397.17 3,415,000.00$ 1,919,586.18$

Preliminary CIP - Financing Interest rates currently low Will not be drawing down reserves or

increasing charges Future customers pay for benefits they

receive Smoothing of rates Reduce Capital and Rehab charge Total cost over time is higher because of

interest

29May 20, 2013

Preliminary CIP – Financing Options

iBank SWRCB CSDA Bank Bond financing

30May 20, 2013

Preliminary CIP – Financing Example

31May 20, 2013

Fiscal Year 2013-2014




Fiscal Year 2017-2018 5-Year Total

Common Projects 1,395,353$ 185,000$ 391,000$ 1,068,350$ 175,000$ 3,214,703$ Westside Projects 165,000$ 167,500$ 447,500$ 100,000$ 300,000$ 1,180,000$ Berkshire Projects 691,955$ 25,000$ 100,000$ 276,350$ 375,000$ 1,468,305$ Recycled Water 122,000$ 289,500$ 709,000$ -$ -$ 1,120,500$ Total 2,374,307$ 667,000$ 1,647,500$ 1,444,700$ 850,000$ 6,983,507$

Preliminary CIP – Financing Examples

32May 20, 2013

30 Year Term 25 Year Term 20 Year TermLoan Amount 7,000,000$ 7,000,000$ 7,000,000$ Financing Rate 4.5% 4.5% 4.5%Annual Charge 429,741$ 472,073$ 538,133$ Total Payment 12,892,224$ 11,801,830$ 10,762,660$

Preliminary CIP – 30 Year Term

33May 20, 2013

Normalized Charge Based

on Loan Current Charge

Loan Minus Current Charge

CVWD 108,747$ 204,665$ (95,918)$ LCID 126,542$ 204,473$ (77,931)$ Las Flores 15,751$ 19,937$ (4,186)$ Lincoln 36,877$ 26,000$ 10,877$ Mesa 17,606$ 37,475$ (19,869)$ Rubio 23,290$ 52,977$ (29,687)$ Valley 100,927$ 220,872$ (119,945)$ Total 429,741$ 766,399$ (336,658)$


May 20, 201334




CVWD 119,459$ 204,665$ (85,206)$ LCID 139,008$ 204,473$ (65,465)$ Las Flores 17,303$ 19,937$ (2,634)$ Lincoln 40,509$ 26,000$ 14,509$ Mesa 19,341$ 37,475$ (18,134)$ Rubio 25,584$ 52,977$ (27,393)$ Valley 110,869$ 220,872$ (110,003)$ Total 472,073$ 766,399$ (294,326)$


May 20, 201335




CVWD 136,176$ 204,665$ (68,489)$ LCID 158,460$ 204,473$ (46,013)$ Las Flores 19,724$ 19,937$ (213)$ Lincoln 46,178$ 26,000$ 20,178$ Mesa 22,047$ 37,475$ (15,428)$ Rubio 29,164$ 52,977$ (23,813)$ Valley 126,383$ 220,872$ (94,489)$ Total 538,133$ 766,399$ (228,266)$

CIP – Financing Plus Buffer Example

36May 20, 2013


on Loan Charge with

Buffer Current Charge

Charge with Buffer Minus

Current Charge CVWD 108,747$ 135,934$ 204,665$ (68,731)$ LCID 126,542$ 158,178$ 204,473$ (46,295)$ Las Flores 15,751$ 19,689$ 19,937$ (248)$ Lincoln 36,877$ 46,096$ 26,000$ 20,096$ Mesa 17,606$ 22,008$ 37,475$ (15,467)$ Rubio 23,290$ 29,112$ 52,977$ (23,865)$ Valley 100,927$ 126,159$ 220,872$ (94,713)$ Total 429,741$ 515,689$ 766,118$ (250,429)$

Assume 30 Year Term

Financing at $10 Million Example

May 20, 201337



Charge Minus Current Charge

CVWD 155,353$ 204,665$ (49,312)$ LCID 180,775$ 204,473$ (23,698)$ Las Flores 22,502$ 19,937$ 2,565$ Lincoln 52,681$ 26,000$ 26,681$ Mesa 25,152$ 37,475$ (12,323)$ Rubio 33,271$ 52,977$ (19,706)$ Valley 144,181$ 220,872$ (76,691)$ Total 613,915$ 766,118$ (152,484)$

Preliminary CIP Review alternatives with member

agencies and Finance Committee June Recommendation to Board

38May 20, 2013

Kinneloa CIP

Based on late invoices and truing up expenditures, although Kinneloa is not involved in the recycled water project, there is an amount due of $40. Recommendation to release KID from this obligation.

May 20, 201339

Preliminary Budget Summary based on 7,975 AF of Sales

40

Please refer to handout

May 20, 2013

Next Steps

Review Capital Charge alternatives with member agencies

Review alternatives with Finance Committee

June Board with Recommendation

41May 20, 2013

Comments/Questions

42May 20, 2013

Documents

Foothill MWD Preliminary Budget Presentation May 20, 2013