ITEM:

PUBLIC HEARINGS

 

19.

CONSIDER ADOPTION OF MID-YEAR FISCAL YEAR 2007-08 BUDGET ADJUSTMENT

 

Meeting Date:

February 28, 2008

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: Annually, the District considers its financial position after the end of the first half of the fiscal year.District staff has reviewed income and spending patterns since July 1, 2007 and determined that adjustment of the 2007-08 budget developed last spring, and adopted June 18, 2007, is required.Included in the process was a review of staffing levels, supplies, outside services, current work assignments and other factors affecting the budget. The tables below summarize the proposed budget changes:

 

†††††††††††


As the table indicates, net revenue decreases are $1,377,300 and net expenditure reductions are $464,800, resulting in an additional use of reserves of $912,500 (net amount of $749,700).The majority of the changes are due to the Boardís December 2007 decision to fund the Aquifer Storage & Recovery (ASR) Project on a pay-as-you-go basis rather than through a debt issuance.Detailed information regarding the ASR Project and other proposed changes, as well as their effect on the general operating reserves, is contained in the background section of this staff note.

 

RECOMMENDATION: Following a presentation by District staff and a public hearing, staff recommends adoption of the proposed mid-year budget adjustment for Fiscal Year 2007-08.

 

BACKGROUND:The Board of Directors adopted the original 2007-08 budget on June 18, 2007.The paragraphs below summarize the original budget, proposed mid-year adjustments to the budget and projected general operating reserves.

 

Revenue

 

The 2007-08 adopted budget anticipated revenue sources in the amount of $8,522,500, including $1,703,000 in bond proceeds and $127,600 from the capital equipment reserve. It was projected that these revenues would exceed budgeted expenditures by $162,800.As of December 31, 2007, actual revenue collections totaled $1,737,601 or about 20% of the budgeted amount.Revenues for the first half of each fiscal year are historically low because larger portions of the Districtís two major revenue sources, user fees and property taxes, are collected during the second half of each fiscal year.Additionally, as expected, no bond proceeds were received during the first half of the year, and the actual receipt of budgeted state Prop. 50 Planning grant funds for the Integrated Regional Water Management Plan is expected to occur during the second half of the fiscal year. District staff has analyzed the revenue activity for the first six months of the fiscal year, as well as activities scheduled for the second half of the fiscal year, and recommends various adjustments to the revenue portion of the budget as discussed below:

 

  • User fee revenues have been increased by $180,000 based on actual receipts through December 31, 2007.
  • Anticipated project reimbursements have decreased by a net amount of $14,200 (Exhibit 19-A) due to changes that will be discussed in the expenditure section of this report.
  • Grant revenues for the Integrated Regional Water Management Plan have been increased by $159,900, to $304,900, for grant funds that were expected to be received in Fiscal Year 2006-07, but not received until Fiscal Year 2007-08 because that is when the offsetting costs were incurred.The expenditure portion of the budget has also been increased by a like amount.
  • Bond proceeds in the amount of $1,703,000 have been removed from the revenue budget due to the decision to fund the ASR Project on a pay-as-you-go basis as mentioned above.

 

The cumulative effect of these revenue adjustments is a decrease of $1,377,300 in projected revenues for Fiscal Year 2007-08.

 

 

Expenditures

 

The original budget envisioned expenditures of $8,522,500 in the fiscal year ending June 30, 2008. As of December 31, 2007, actual expenditures totaled $2,221,440, or approximately 26%, of the budgeted amount.This low percentage is not unusual because project expenditures for the first half of each fiscal year are historically low.†† District staff has analyzed the expenditure activity for the first six months of the fiscal year, as well as activities scheduled for the second half of the fiscal year, and recommends various adjustments to the expenditure portion of the budget as discussed below:

 

  • The personnel portion of the budget has been increased by $103,800 as shown on Exhibit 19-B.When the 2007-08 budget was adopted, it was noted that negotiation of new Memorandums of Understandings (MOUs) with the Districtís three bargaining units were in progress, and that any compensation increases approved by the Board would be added to the budget during the mid-year adjustment process.Adjustments to personnel portion of the 2007-08 budget reflect increases there were approved in the new MOUs, adjustments to the General Managerís contract and other miscellaneous adjustments.

 

  • The supplies and services portion of the budget was increased by $30,300 as shown on Exhibit 19-C. The majority of the increase is a $25,000 addition for legal services due to the number of pending California American Water (CAW) rate cases before the California Public Utilities Commission and the Draft Cease and Desist Order recently issued by the staff of the California State Water Resources Control Board.

 

  • As presented on Exhibit 19-D, project expenditures decreased by a net amount of $513,900.The larger adjustments are as follows:

 

    1. The budget was decreased by $100,000 due to the deferral of a lower Carmel River restoration project to next fiscal year.The deferral included a related reduction to project reimbursements of $60,000 on the revenue side of the budget.
    2. The budget was increased by $30,000 for additional Water Distribution System Permit processing assistance, with an offsetting increase to the revenue portion of the budget.
    3. As mentioned in the revenue section of this report, grant funded expenditures in the amount of $159,900 for the Integrated Regional Water Management Plan have been carried forward from fiscal year 2006-07.
    4. Project expenditures were also decreased by $40,000 due to deferring the completion of a Policy & Procedure Manual for the Water Demand Division to a future year.
    5. The amount budgeted for completion of Phase 1 of the ASR project was reduced by $550,000, from $1,703,000 to $1,153,000 due to delays in completion of a portion of the work to Fiscal Year 2008-09.
    6. Expenditures for materials and other non-salary related costs for technical work to be completed for the Seaside Basin Watermaster have been reduced by $13,700 to $26,500.††The revenue amount for project reimbursements related to these tasks has also been reduced by $52,200 to $93,000, which is comprised of the $26,500 in non-salary related costs plus salary costs of $66,500.These reductions are due to the fact that some tasks to be completed by the District were shifted to next fiscal year in the latest contract with the Watermaster.
    7. A net reduction of $47,000 was made for conservation related tasks that are now projected to be completed in this fiscal year.A related increase of $68,000 to project reimbursements was made because more of these activities are now reimbursable from CAW.

 

  • The budgeted amount of $85,000 for debt service was deleted because no debt was issued for the ASR Project.

 

The cumulative effect of the adjustments to the expenditure side of the budget is a net decrease of $464,800 in projected expenditures for Fiscal Year 2007-08.††

 

General Operating Reserves

 

The difference of the adjustments to revenues and expenditures results in an additional use of general operating reserves of $912,500.This amount, less the original budgeted surplus of $162,800, results in a net decrease of $749,700 in general operating reserves during Fiscal Year 2007-08.This changes the estimated general reserve carryover at June 30, 2008 to $631,319 (Exhibit 19-E).This amount equates to about 7.4% of the new operating budget amount, which is still above the minimum of 5% established by the Board during the 2005-06 budget process.

EXHIBITS

19-A††† Reimbursements

19-B†† Personnel Costs

19-C†† Supplies & Services

19-D†† Project Expenditures

19-E†† Reserves Analysis

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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