ITEM:		PUBLIC HEARING
12.	CONSIDER ADOPTION OF MID-YEAR FISCAL YEAR 2019-2020 BUDGET ADJUSTMENT
Meeting Date:			March 16, 2020	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: This action does not constitute a project as defined by the California Environmental Quality Act Guidelines Section 15378.

SUMMARY: Annually, the District considers its financial position after the end of the first 7-8 months of the fiscal year (FY). District staff has reviewed income and spending patterns from July 1, 2019 through the end of February 29, 2020 and determined that adjustments to the FY 2019-2020 Budget is required. The FY 2019-2020 Budget was adopted on June 17, 2019. Included in the budget adjustment process was a review of staffing levels, supplies, outside services, project expenditures, 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
2019-2020
Mid-Year Budget Adjustment-Summary
Revenue	Adopted	Change	Amended
Property Tax	$2,050,000	$0	$2,050,000
Permit Fees - WDD	175,000	0	175,000
Permit Fees - WDS	56,000	0	56,000
Capacity Fee	400,000	100,000	500,000
User Fees	5,000,000	0	5,000,000
Water Supply Charge	3,400,000	0	3,400,000
Interest	180,000	50,000	230,000
Other	15,000	0	15,000
Subtotal District Revenues	11,276,000	150,000	11,426,000
Reimbursements - CAW	1,229,700	270,000	1,499,700
Reimbursements - Watermaster	35,000	0	35,000
Reimbursements - Reclamation	20,000	0	20,000
Reimbursements - Other	126,300	0	126,300
Reimbursements - Recording Fees	6,000	0	6,000
Reimbursements - Legal Fees	16,000	0	16,000
Grants	468,000	0	468,000
Subtotal Reimbursements	$1,901,000	$270,000	$2,171,000
Carry Forward/Use of Reserves	4,862,350	3,328,900	8,191,250
Total Revenues	$18,039,350	$3,748,900	$21,788,250
Expenditures	Adopted	Change	Amended
Personnel	$4,054,100	($55,000)	$3,999,100
Supplies & Services	1,369,700	55,000	1,424,700
Project Expenditures	10,550,000	4,007,700	14,557,700
Fixed Assets	213,900	0	213,900
Debt Service	230,000	0	230,000
Capital Equip. Reserve	49,500	0	49,500
General Fund Balance	302,150	(258,800)	43,350
Pension Reserve	100,000	0	100,000
OPEB Reserve	100,000	0	100,000
Reclamation Project	1,000,000	0	1,000,000
Contingency	70,000	0	70,000
Total	$18,039,350	$3,748,900	$21,788,250

As the table above indicates, project expenditures increased by $4,007,700. Most of the expenditure increases were previously authorized by the Board after the original budget adoption and are now incorporated into the mid-year budget. Detailed information regarding all other 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 2019-2020.

BACKGROUND: The Board of Directors adopted the original FY 2019-2020 budget on June 17, 2019. The paragraphs below summarize the original budget, proposed mid-year adjustments to the budget and projected reserves accounts.

Revenues

The 2019-2020 adopted budget anticipated revenue sources in the amount of $18,039,350. Through February 29, 2020, actual revenue collections totaled $8,607,809 or about 48% of the budgeted amount. Revenues for the first half of this FY year are in line with previous year figures. District staff has analyzed the revenue activity for the first 8 months of the FY, as well as activities scheduled for the remainder of the FY, and recommends various adjustments to the revenue portion of the budget as shown in Exhibit 12-A and discussed below:

• Increase of $100,000 in capacity fee based on actual collections through the first half of the FY.
• Increase of $50,000 in interest income based on actual collections for first half of the FY plus additional income generated at 2% on invested funds throughout the remainder of the FY.
• Increase of $270,000 in reimbursement revenue based on increase in project expenditure for the remainder of FY.

The cumulative effect of these revenue adjustments is an increase of $420,000 in projected revenues for FY 2019-2020.

Expenditures

The original budget envisioned expenditures of $18,039,350 in the fiscal year ending June 30, 2020. Through February 29, 2020, actual expenditures totaled $6,799,879, or approximately 38% of the budgeted amount. The spending pattern at mid-way point of the fiscal year is not unusual because most of the project expenditures for the first half of each fiscal year are low. District staff has analyzed the expenditure activity for the first 8 months of the fiscal year, as well as activities scheduled for the remainder of the fiscal year, and recommends various adjustments to the expenditure portion of the budget as discussed below:

• The personnel services portion of the budget decreased by $55,000 as shown on Exhibit 12-B.

• The supplies and services portion of the budget increased by $55,000 as shown on Exhibit 12-C.

• There were no changes to the capital assets as shown on Exhibit 12-D.

• As presented on Exhibit 12-E, project expenditures increased by a net amount of $4,007,700. Some of the larger adjustments are as follows:
1. Increase of $200,000 for Pure Water Monterey operating reserve based on the increase in cost of water per acre foot.
2. Reduction of $200,000 for Cal-Am Desal Project financing work as the work is no longer needed.
3. Increase of $800,000 for Monterey Water System Acquisition Feasibility Study related to Phase 2 of the Measure J and Rule 19.8 previously authorized by the Board in December 2019.
4. Increase of $3,150,000 for ASR Treatment Facility work due to the increase in project costs previously authorized by the Board in October 2019.
5. Increase of $270,000 for ASR operations costs due to well rehabilitation work and increase in power costs. These costs are reimbursed by Cal-Am ratepayers.
6. Other adjustments to the project expenditures as noted in the exhibit.

The cumulative effect of the adjustments to the expenditure side of the budget is a net increase of $4,007,700. Additional use of reserve in the amount of $3,328,900 is need to balance the mid-year budget.

Reserves

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

Monterey Peninsula Water Management District
Analysis of Reserves
2019-2020
	Projected	Actual
	Balance	Balance	FY 2019-2020	Est. Balance
Reserves	6/30/2019	6/30/2019	Budget	06/30/2020
Litigation/Insurance Reserve	250,000	250,000	0	$250,000
Capital Equipment Reserve	532,000	532,000	21,000	$553,000
Flood/Drought Reserve	328,944	328,944	0	$328,944
Debt Reserve	221,656	222,098	0	$222,098
Pension Reserve	100,000	100,000	100,000	$200,000
OPEB Reserve	100,000	100,000	100,000	$200,000
General Operating Reserve	12,397,965	15,482,297	(8,119,400)	$7,362,897
Totals	$13,930,565	$17,015,339	($7,898,400)	$9,116,939

The above adjustments will result in an estimated reserve balance of 9,116,939 at June 30, 2020 as shown on Exhibit 12-F. This amount meets the minimum 5% of the operating budget established by the Board during the 2005-06 budget process. The original adopted budget had a projected reserve balance of $14,077,665 for the FY.

EXHIBITS

12-A Revenues

12-B Personnel Costs

12-C Supplies & Services Costs

12-D Capital Assets

12-E Project Expenditures

12-F Reserves Analysis

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