ITEM:

PUBLIC HEARINGS

16.

CONSIDER ADOPTION OF MID-YEAR FISCAL YEAR 2009-10 BUDGET ADJUSTMENT

Meeting Date:

From:

Darby Fuerst,

Program/

N/A

General Manager

Line Item No.:

Prepared By:

Rick Dickhaut

Cost Estimate:

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 (FY).  District staff has reviewed income and spending patterns since July 1, 2009 and determined that adjustment of the FY 2009-10 budget developed last spring, and adopted June 15, 2009, 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 increases are $349,000 and net expenditure increases are$345,600 resulting in a reduction in the budgeted use of reserves of $3,400. Detailed information regarding the proposed changes, as well as their effect on general operating reserves, is detailed 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 FY 2009-10. BACKGROUND: The Board of Directors adopted the original FY 2009-10 budget on June 15, 2009. The paragraphs below summarize the original budget, proposed mid-year adjustments to the budget and projected general operating reserves. Revenues The FY 2009-10 adopted budget anticipated revenue sources in the amount of$7,172,800, including $195,000 of Line of Credit Proceeds and$104,600 from the Capital Equipment Reserve.  It was projected that these revenues would be less than budgeted expenditures resulting in the use of $780,800 from the General Operating Reserve. This use of General Operating Reserves was attributable to the decision to pay for expansion of the Aquifer Storage and Recovery (ASR) Project on a pay-as-you-go basis. As of December 31, 2010, actual revenue collections totaled$2,726,153 or about 34% of the budgeted amount.  Revenues for the first half of each fiscal year are historically low because larger portions of the District’s three major revenue sources, user fees, property taxes, and reimbursements, are collected during the second half of each 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 shown in Exhibit 16-A and discussed below:

• Line of Credit proceeds of $125,000 have been deleted from the revenue budget to offset expenditure reductions for the MPWMD 95-10 Desalination Project. • Miscellaneous reimbursements of$17,400 have been added to the revenue budget in anticipation of reimbursement from the CAWD/PBCSD Reclamation Project for programming a new reclaimed water billing system.

• Connection Charge revenues have been increased by $30,000 based on actual receipts through December 31, 2009. • Anticipated project reimbursements for conservation activities have increased by$426,600 due to changes that will be discussed in the expenditure section of this report.

The cumulative effect of these revenue adjustments is an increase of $349,000 in projected revenues for FY 2009-10. Expenditures The original budget envisioned expenditures of$7,953,600 in the fiscal year ending June 30, 2010. As of December 31, 2009, actual expenditures totaled $2,893,193 or approximately 36% of the budgeted amount. This low percentage at the mid-way point of the fiscal year 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 reduced by$92,100 as shown on Exhibit 16-B.  This reduction is due to a vacant budgeted Water Conservation Analyst position in the Water Demand Division that is not going to be filled during the current fiscal year.

• The supplies and services portion of the budget was increased by $26,500 as shown on Exhibit 16-C. The majority of the increase is a$23,500 addition for lobbyist services.

• As presented on Exhibit 16-D, project expenditures increased by a net amount of $408,400. Some of the larger adjustments are as follows: 1. Funding for the MPWMD 95-10 Desalination Project was decreased by$125,000 to reflect the cost for work that is expected to be complete during the remainder of the fiscal year.
2. The amount budgeted for Certified Landscape Irrigation Audits has been increased by $350,000 to reflect the amount that is now anticipated to be expended this fiscal year. 3. Funding in the amount of$75,000 was added to the water conservation portion of the budget for school retrofits.
4. The amount budgeted for the Water Demand Division Database Programming Project was increased by $81,800 for identified enhancements and maintenance for the remainder of the fiscal year. This includes$15,000 that was previously authorized by the Board in November 2009 and a $23,500 contingency. • Capital Assets were adjusted by a net amount of$2,800 as shown on Exhibit 16-E.  The most significant changes were the removal of $11,800 for the purchase of a large copy machine that has been deferred to next fiscal year and the addition of$17,400 for programming a new reclaimed water billing system.  This amount will be reimbursed by the CAWD/PBCSD Reclamation project and is offset in the revenue portion of the budget.

The cumulative effect of the adjustments to the expenditure side of the budget is a net increase of $345,600 in projected expenditures for FY 2009-10. General Operating Reserves The difference of the adjustments to revenues and expenditures results in a reduction in the use of general operating reserves of$3,400. After this amount is subtracted from the original budgeted use of $780,800, the result is a budgeted net decrease of$777,400 in general operating reserves during FY 2009-10.    This use of reserves added to the audited deficit of $282,943 from FY 2008-09 changes the estimated general reserve carryover at June 30, 2010 to$544,990 as shown on Exhibit 16-F.  This amount equates to about 6.6% 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

16-A    Reimbursements

16-B    Personnel Costs

16-C    Supplies & Services

16-D    Project Expenditures

16-E    Capital Assets

16-F    Reserves Analysis

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