Meeting Date:

June 21, 2004



Staff Contact:

Rick Dickhaut

Program/Line Item No.:N/A



Cost Estimate:N/A


General Counsel Approval:N/A

Committee Recommendation:The Administrative Committee reviewed the latest draft of the 2004-2005 budget on June 7, 2004 and recommended consideration by the full Board.The Committee also recommended that the Board consider adding funds back to the budget for various EIR activities.

CEQA Compliance:N/A


SUMMARY:Exhibit 17-A is the latest draft of the 2004-2005 budget. Included in the draft are comparisons to the actual revenues and expenditures for fiscal year 2002-2003 as well as comparisons to the 2003-2004 budgeted amounts. Also included is additional information on projected revenues and expenditures including detailed listings of proposed capital asset purchases and project expenditures.The draft budget is based on requests as submitted by District staff, expenditure reductions requested by the Administrative Committee at its April meeting and additional expenditure and revenue adjustments made subsequent to the May 17, 2004 and May 27, 2004 Board meetings.Exhibit 17-B details all adjustments that have been made to the draft budget since it was first presented to the Administrative Committee on April 13, 2004.


RECOMMENDATION:District Staff recommends that the Board designated reserve for litigation be reduced from $500,000 to $250,000 as reflected in the draft budget, and that the draft budget be adopted for fiscal year 2004-2005.The Administrative Committee reviewed the latest draft of the 2004-2005 budget on June 7, 2004 and recommended consideration by the full Board.The Committee also recommended that the Board consider adding funds back to the budget for various EIR activities as detailed on Exhibit 17-C.



Expenditures: The Administrative Committee reviewed the initial draft of the 2004-2005 budget at its April 13, 2004 meeting.After discussion, the Committee requested that staffís initial expenditure request of $5,981,700 be reduced by 15%, or $897,300, before further review at the May 11, 2004 Administrative Committee meeting.The Committee also requested that staff include statements regarding the consequences of each reduction.After numerous adjustments to various budget categories, the proposed expenditure budget was reduced by $921,400, to $5,060,300.Exhibit 17-D is a listing of the adjustments that were made to the proposed budget subsequent to the April Administrative Committee meeting.The Board of Directors discussed the amended draft of the budget at its May 17, 2004 meeting and recommended that staff make additional expenditure reductions.Attached, as Exhibit 17-E, is a listing of the expenditure adjustments, in the amount of $423,800, that were made subsequent to that meeting.At its May 27, 2004 Board meeting, staff was again directed to make additional reductions to the expenditure portion of the budget.Exhibit 17-F details the additional expenditure reductions of $122,400 that have been made since that meeting.Other adjustments made during the preparation of the latest draft budget included shifting the operating costs of the current Aquifer Storage & Recovery Project well ($220,500) and the costs of a consultant to assist with the implementation of Ordinance No. 105 ($25,000) from the Capital Projects Fund to the Mitigation Fund.Staffing cost allocations to the various funds were also re-evaluated and adjusted as appropriate.Exhibit 17-G is a detail of the costs for a second well for the Districtís Aquifer Storage and Recovery (ASR) Project.These expenditure amounts on this exhibit are not included in the current draft of the budget.The Administrative Committee again reviewed the draft budget on June 7, 2004.At that time the Committee requested that the estimated costs of negotiated salary and benefit adjustments be incorporated into the draft budget.Those costs, in the amount of $65,200, are shown on Exhibit 17-H.The Committee recommended that the budget be considered for adoption by the full Board on June 21, 2004.The Committee also recommended that the Board consider adding funds back to the budget for various EIR activities as detailed on Exhibit 17-C.


Revenues:The user fee, which is currently 7.125% of water sales within the District, is the Districtís largest source of income.Of the 7.125%, 6.015% is currently allocated to the Mitigation Fund and 1.110% is currently allocated to the Conservation Fund.No portion of the user fee has ever been directly allocated to the Capital Projects Fund.The user fee, which can be adjusted by Board ordinance, has not been increased since July of 1992. Exhibit 17-I details the current user fee revenue, as well as additional revenue that can be generated by various user fee percentage increases.Exhibit 17-J shows the impact of various user fee increases on current bills of $25, $50 and $100.Property taxes are the Districtís second largest revenue source.††† However, since the 1991-1992 fiscal year, the District has lost over $4,850,000 in tax revenues that were shifted by the State of California to the Educational Revenue Augmentation Fund (ERAF).This includes just under $600,000 lost during the current fiscal year.During the next two fiscal years, the State is proposing to shift an even a larger amount of funds to ERAF.The latest estimate of the additional shift is 25% of net tax proceeds.Accordingly, $280,000 of property tax revenue has been removed from the draft budget.Exhibit 17-K details the amount of taxes that have been lost due to the ERAF shift through the current fiscal year.All revenue adjustments incorporated during the budget process are shown in Exhibit 17-L.

Reserve Use:In recent years the budget has been balanced by utilizing large amounts of reserved funds for operational and project expenditures.The original draft 2004-2005 budget presented to the Administrative Committee on April 13, 2004 projected the use of District reserves in the amount of $1,914,699.However, due to substantial expenditure reductions and other various adjustments, the amount of reserves projected for use in fiscal year 2004-2005 has been reduced to $910,300.This would result in designated reserves and general reserves to be carried over to the 2005-2006 budget in the amount of $999,527 and $1,260,173, respectively, for a total of $2,259,700.During preparation of the current draft of the budget, the projected reserve carryover to fiscal year 2004-2005 for the capital projects fund has been increased by $120,000 due to a reimbursement of reclamation project expenditures incurred by the District related to the proposed expansion of the project.The current draft also reflects a staff recommendation that the Board designated litigation reserve be reduced by 50%, to $250,000.


Other:Included as Exhibit 17-M is a memorandum from General Counsel David Laredo to General Manager Fran Farina that discusses the requirement and timeframe for the adoption and filing of a budget by the District, as well as action required if a budget is not adopted prior to the commencement of the 2004-2005 fiscal year.