SPECIAL MEETING/BOARD WORKSHOP

 

2.

REVIEW PROPOSED MPWMD BUDGET FOR 2005-06

 

Meeting Date:

May 26, 2005

Budgeted:

N/A

 

From:

David A. Berger,

Program/

N/A

 

General Manager

Line Item No.:

 

Prepared By:

Rick Dickhaut

Cost Estimate:

N/A

 

General Counsel Approval:N/A

Committee Recommendation: N/A

CEQA Compliance:N/A

 

SUMMARY:At the May 3, 2005 Board workshop staff presented the 2005-06 proposed budget.A copy of the proposed budget presented on that date is attached as Exhibit 2-A.After discussion of the proposed budget, the Board requested that additional information regarding three items in the proposed budget be presented at the May 26, 2005 Board workshop.The requested information is provided below:

 

Second Aquifer Storage & Recovery (ASR) Well & Associated Facilities

 

Attached as Exhibit 2-B is a Preliminary Cost Summary that was prepared by Water Resources Division staff in response to Board questions about the cost to construct a second ASR well and associated facilities.As shown on the summary, costs to be incurred in fiscal year 2006-07 and 2007-08 are estimated at $2,460,000 and $198,000, respectively, for a total cost of $2,658,000 to complete Phase I, not including District staff time.Additional substantial costs would be incurred in subsequent fiscal years to complete Phase II and Phase III of the ASR project.

 

Given the projected level of the Districtís general operating reserve going into fiscal year 2006-07, it would not be feasible to fund that yearís estimated expenditure of $2,460,000 from that source.Therefore, if the District were to continue its practice of funding projects on a pay-as-you-go basis, the user fee would have to be increased by approximately 8% in fiscal year 2006-07 to generate the required funds.This would be in addition to the 1.2% increase in the user fee proposed to fund the ASR costs in fiscal year 2005-06.

 

An alternative to a high rate spike in 2006-07 would be to spread the cost over a longer period of time through a debt issuance.†† There are several debt issuance pools in which the District could participate to borrow the required funds.The benefits of participating in such a pool include competitive, tax exempt interest rates (currently between 4% and 5%) and level payments over an extended period of time.Also, issuance costs would be lower than if the District were to issue the debt on its own.Depending on interest rates at the time of issuance, and the repayment term selected, annual debt service could be funded through a much smaller user fee increase, possibly within the 1.2% user fee increase proposed for fiscal year 2005-06.For example, a loan amount of $2,660,000 plus costs of issuance would require a bond amount of approximately $2,740,000.At an interest rate of 4.5% and a 15 year payoff period, the annual debt service would be about $253,000.Expenditures for Phases II and III in subsequent years would require additional sources of funding.

 

Preparation& Distribution of Annual Report

 

The proposed budget for fiscal year 2005-06 includes only $2,000 for preparation of the Districtís Annual Report.The budgeted amount contemplates production of the report by staff, with a minimal amount of copies to be printed and distributed to libraries and other local government agencies.If the Board elects to distribute the report to constituents throughout the District, the budget will need to be increased accordingly.If a larger number of copies are required, it is estimated that printing costs for the report will range from approximately $5,500 to $6,000, depending on the exact number of copies required. Distribution methods are still being investigated, but could range from a low of $2,600 to insert and distribute 40,000 copies with the Monterey County Weekly to a high of approximately $7,200 to distribute about 53,000 copies via US mail.Prior to the May 26, 2005 workshop, staff will attempt to get additional quotes for distribution from the Monterey County Herald and the Carmel Pine Cone.All additional information obtained will be presented at the May 26, 2004 workshop.

 

Expanded Rebate Program for Conservation

 

At the May 3, 2005 workshop, the Board requested additional information about the Districtís rebate program.Attached as Exhibit 2-C, is a memorandum from Stephanie Pintar, dated May 13, 2005, that provides that information.††††† †††

 

RECOMMENDATION:Staff recommends that the Board discuss the proposed budget, and the additional information presented, and give sufficient direction so that staff can prepare a final draft of the budget for adoption at the June 20, 2005 Board meeting.†††

 

BACKGROUND:District budgets have been balanced in recent years by using large amounts of previously accumulated reserves.At the Districtís strategic planning session on September 29, 2004, staff recommended that a balanced budget be prepared for fiscal year 2005-2006 using a combination of revenue and expenditure adjustments and a diminishing use of reserve funds.Staff also recommended changing to a program and performance-based budget and implementing necessary changes to balance the budget for fiscal year 2005-2006.At that time the Board concurred with this course of action.At the January 19, 2005 budget workshop the Board adopted an eight part strategy for balancing the 2005-2006 budget.At the May 3, 2005 Board workshop, staff presented a proposed budget that is consistent with that strategy.After presentation of that proposed budget the Board asked for additional information to be presented at the May 26, 2005 Board Workshop.†††

EXHIBITS

2-A††††† Fiscal Year 2005-06 Proposed Budget

2-B††††† Preliminary Cost Summary for Second ASR Well and Associated Facilities

2-C††††† Memorandum Regarding Rebate Program Proposal/History

 

U:\staff\word\boardpacket\2005\2005boardpackets\20050526\02\item2.doc