ITEM:		PUBLIC HEARING
16.	CONSIDER ADOPTION OF MID-YEAR FISCAL YEAR 2014-2015 BUDGET ADJUSTMENT
Meeting Date:			February 18, 2015	Budgeted:	N/A
From:			David J. Stoldt,	Program/	N/A
			General Manager	Line Item No.:
Prepared By:			Suresh Prasad	Cost Estimate:	N/A
General Counsel Review: 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, 2014 through the end of December 31, 2014 and determined that adjustment to the FY 2014-2015 Budget is required. The FY 2014-2015 Budget was adopted on June 23, 2014. Included in the budget adjustment process was a review of staffing levels, supplies, outside services, current work assignments and other factors affecting the current budget. The table below summarizes the proposed changes to the budget:

Monterey Peninsula Water Management District
2014-2015 Budget
Mid-Year Budget Adjustment-Summary
Revenue	Adopted	Change	Amended
Property Tax	$1,500,000	$0	$1,500,000
Permit Fees - WDD	175,000	0	175,000
Permit Fees - PED	56,000	0	56,000
Connection Charges	175,000	0	175,000
User Fees	75,000	0	75,000
Water Supply Charge	3,400,000	0	3,400,000
Mitigation Revenue	1,982,000	145,000	2,127,000
Recording Fees	8,000	0	8,000
Interest	15,000	0	15,000
Other	15,000	0	15,000
Subtotal District Revenues	7,401,000	145,000	7,546,000
Reimbursements - CAW	1,533,100	614,000	2,147,100
Reimbursements - Watermaster	69,000	0	69,000
Reimbursements - Other	34,000	9,250	43,250
Reimbursements - Legal Fees	15,000	0	15,000
Grants	618,000	(157,200)	460,800
Subtotal Reimbursements	$2,269,100	$466,050	$2,735,150
From Flood/Drought Reserves	40,000	75,000	115,000
From Capital Equipment Reserve	87,900	0	87,900
From Fund Balance	1,138,000	70,950	1,208,950
Total Revenues	$10,936,000	$757,000	$11,693,000
Expenditures	Adopted	Change	Amended
Personnel	$3,202,600	$0	$3,202,600
Supplies & Services	1,018,400	0	1,018,400
Project Expenditures	6,211,000	757,000	6,968,000
Fixed Assets	199,000	0	199,000
Debt Service	230,000	0	230,000
Contingency	75,000	0	75,000
Total	$10,936,000	$757,000	$11,693,000

As the revenue and expenditure tables indicate, revenue and expenditure increases by $757,000 resulting in a balanced budget. In order to balance the budget and fund for continuing work on the Ground Water Replenishment Project, additional funding in the amount of $70,950 will have to be borrowed from District’s general reserve fund to complete the project. Detailed information regarding the proposed changes, as well as their effect on reserves, is detailed in the background section of this report.

RECOMMENDATION: Following a presentation by District staff and a public hearing, staff recommends adoption of the proposed mid-year budget adjustment for FY 2014-2015.

BACKGROUND: The Board of Directors adopted the original FY 2014-2015 budget on June 23, 2014. The paragraphs below summarize the original budget, proposed mid-year adjustments to the budget and projected reserves accounts.

Revenues

The 2014-2015 adopted budget anticipated revenue sources in the amount of $10,936,000. It was projected that these revenues would be the same amount as budgeted expenditures resulting in a balanced budget. As of December 31, 2014, actual revenue collections totaled $4,508,731 or about 41% of the budgeted amount. Revenues for the first half of each FY year are low because one half of the District’s three major revenue sources, water supply charge, property taxes and reimbursements, are collected during the second half of each FY. District staff has analyzed the revenue activity for the first six months of the FY, as well as activities scheduled for the second half of the FY, and recommends various adjustments to the revenue portion of the budget as shown in Exhibit 16-A and discussed below:

• Mitigation revenues have been increased by $145,000 based on settlement agreement between MPWMD and California American Water. This increase reflects full mitigation program reimbursements from January 1, 2015.

• Project Reimbursements for conservation activities have been increased by $614,000 due to increased activity with rebate program. This is reimbursement revenue and is driven by the project expenditures.

• Other Reimbursements were increased by $9,250 due to several adjustments in the permit processing.

• Grant funds were decreased by $157,200 due to deferral of the Sleepy Hollow intake facility retrofit project.

• Flood/Drought Reserve Fund was increased by $75,000 as these accumulated funds will be used to fund for conservation activities relative to impacts from ongoing drought conditions. This increase was authorized by the Board on July 21, 2014.

• Fund Balance was increased by $70,950 to fund for Ground Water Replenishment Project. The funds for this will come from District’s general reserves.

The cumulative effect of these revenue adjustments is an increase of $757,000 in projected revenues for FY 2014-2015.

Expenditures

The original budget envisioned expenditures of $10,936,000 in the FY ending June 30, 2015. As of December 31, 2014, actual expenditures totaled $3,944,259, or approximately 36% of the budgeted amount. This low percentage at the mid-way point of the FY is not unusual because project expenditures for the first half of each FY year are historically low. District staff has analyzed the expenditure activity for the first six months of the FY, as well as activities scheduled for the second half of the FY, and recommends various adjustments to the expenditure portion of the budget as discussed below:

• The personnel portion of the budget has net effect of zero as shown on Exhibit 16-B. There are some minor adjustments made between the categories, however, it does not impact the overall personnel costs.

• The supplies and services portion of the budget has net effect of zero as shown on Exhibit 16-C. There are some minor adjustments made between the categories, however, it does not impact the overall supplies and services budget.

• As presented on Exhibit 16-D, project expenditures increased by a net amount of $757,000. Some of the larger adjustments are as follows:
1. Expenditures for Groundwater Replenishment Project were increased by $1,089,000 based on refined estimates for the project timeline.
2. Reduction of $350,000 for CDFG Grant expenditures due to deferral of the project costs to next fiscal year.
3. Reduction of $175,000 for alternate desal project as some of the costs has been deferred to next fiscal year.
4. Reduction of $286,000 for ASR program as some of the costs has been deferred to next fiscal year.
5. Increase of $500,000 in rebate program due to increased activities. This is reimbursed by California American Water Company.

The cumulative effect of the adjustments to the expenditure side of the budget is a net increase of $757,000 in projected expenditures for FY 2014-2015.

Reserves

The District’s reserve balance is projected to be as follows:

	Balance	FY 2013-2014	Est. Balance
Reserves	06/30/2014	Budget	06/30/2014
Litigation/Insurance Reserve	250,000	0	$250,000
Capital Equipment Reserve	244,900	(87,900)	$157,000
Flood/Drought Reserve	443,944	(115,000)	$328,944
Debt Reserve	219,136	0	$219,136
General Operating Reserve	4,371,939	(1,208,950)	$3,162,989
Totals	$5,529,919	($1,411,850)	$4,118,069

The above adjustments will result in an estimated reserve balance of 4,118,069 at June 30, 2015 as shown on Exhibit 16-E. This amount meets the minimum 5% of the operating budget established by the Board during the 2005-06 budget process.

EXHIBITS

16-A Revenues

16-B Personnel Costs

16-C Supplies & Services Costs

16-D Project Expenditures

16-E Reserves Analysis

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