Year-to-Date - 3rd Quarter Financial Review

Transcription

1 Year-to-Date - 3rd Quarter 2018 Financial Review

2 Financial Overview Discussion of Financial Activities, Conditions and Projections... 3 Statement of Revenues, Expenses and Change in Net Position... 6 Combined Financial Statements Statement of Revenues, Expenses and Change in Net Position Statement of Net Position Spending Authority Annual Repayment Obligation Staffing Average Full Time Equivalent (FTE) Individual Funds General Fund Overview of Financial Activities and Projections General Fund Cash and Investments Statement of Revenues, Expenses and Change in Net Position Water Volumes, Water Revenues and Capital Charges Energy Underground Storage Operations and Maintenance Rate Reconciliation Extraordinary Maintenance and Operating Projects Central Arizona Groundwater Replenishment District (CAGRD) Account Overview of Financial Activities and Projections Statement of Revenues, Expenses and Change in Net Position Replenishment Obligation Year and Corresponding Purchased Water Reserve Balances by Rate Component and AMA Other Funds Captive Insurance Fund: Statement of Revenues, Expenses and Change in Net Position Supplemental Water Account: Statement of Revenues, Expenses and Change in Net Position Capital Expenditures Overview of Capital Expenditures Capital Expenditures Variance Summary Capital Expenditures Variance Detail Total Project Detail Page 2018 YTD Financial Review - Page 1

3 2018 YTD Financial Review - Page 2

4 The following discussion presents an overview of the financial activities and condition of the Central Arizona Water Conservation District (CAWCD or District). It summarizes the 2018 financial and budget performance through the third quarter and provides a projection for the full year. More detailed explanations are covered on the following pages. H i g h l i g h t s T O T A L RE V E N U E S : As shown on the graphs to the right, revenues through the third quarter are higher than budget. Water Operations & Maintenance (O&M) charges were lower than budget, power and other basin fund revenues, and property taxes were above budget as was Central Arizona Groundwater Replenishment District (CAGRD) revenue. General Fund other revenues and investment income were below budget. Full year revenues for 2018 are projected to be $9 million lower than budget. Water O&M charges are expected to be $16 million lower than budget primarily due to lower delivery rates. Capital charges are projected to be $0.8 million higher than budget mostly due to the availability of excess water to the AWBA for local and interstate banking. CAGRD revenue is projected to be $0.5 million below budget primarily due to lower replenishment acre-feet. Power and BDF revenues are expected to exceed budget by $4.0 million due to shaping and displacement activity. Property taxes are expected to be higher than budget by $2.2 million due to a change in accounting for tax revenues on an accrual levy basis. T O T A L E X P E N S E S : Expenses through the third quarter were under budget and are projected to be under budget for the full year. Salaries and related costs, Pumping power, depreciation, CAGRD water obligation and other expenses are projected to be below budget, slightly offset by higher materials and supplies and outside services. See Total Revenues and Total Expenses sections on pages 6-7 for further explanation. C A P I T A L E X P E N D I T U R E S : The Project Steering Committee (PSC) oversees the capital budget. Expenditures for capital projects through the third quarter are $6 million below budget as a result of schedule and scope changes. For the full year, capital expenditures are projected to be lower than budget by $2 million. Capital expenditures are further detailed in the Capital Expenditures section starting on page 51. Millions $350 $300 $250 $200 $150 $100 $50 $- Total Rev enues Total Ex penses Change in Net Position $316 Capit al Ex penditures 3rd Quarter 2018 YTD - Budget vs Actual $311 Full Yea r Spending Authority vs Projected $104 $95 $34 $36 $198 $215 $265 $283 $369 $378 $0 $50 $100 $150 $200 $250 $300 $350 $400 Millions S pending A uthority $118 $96 Total Rev enues Total Ex penses Change in Net A ctual Position Budget Projected $26 $32 Capit al Ex penditures 2018 YTD Financial Review - Page 3

5 Statements of Net Position TOTAL ASSETS AND DEFERRED OUTFLOWS Total assets and deferred outflows are projected to increase by $69 million by the end of 2018, as compared to the 2017 year-end balances. CAPITAL ASSETS: The largest component of the District s capital assets is the permanent service right (PSR) net of accumulated amortization. The PSR represents the District s right to operate the Central Arizona Project (CAP) system and collect revenues from operations, for which the District has incurred a repayment obligation to the United States. Amortization of the PSR is currently approximately $23 million per year. Property and equipment assets grow annually as a result of ongoing capital projects. For 2018, it is projected the net PSR will decrease from $1.11 billion to $1.09 billion, while net property and equipment will increase by $11 million, for a net decrease in total capital assets of $12 million. OTHER ASSETS: Other asset categories include cash and investments, receivables, funds held by or advanced to the federal government and agricultural water rights. Cash and investments are projected to decrease by $18 million. Receivables are expected to increase by $1 million. Funds held by the federal government are expected to remain flat. Other assets are expected to increase by $98 million primarily due to the anticipated $95 million purchase of long term storage credits by CAGRD. With the completion of the Arizona Water Settlements Act (AWSA) in 2007, the District acquired 96,297 AF of non-indian agricultural water rights, valued at $89 million. These agricultural water rights will not change in book value until they are assigned to the respective entities by the Department of Water Resources (DWR), which will occur periodically over the next 25 years. (Dollars in millions) 2018 Projected 2017 Act ual Change Capital Assets Permanent service right, net $ 1,089 $ 1,112 $ (23) (2.1%) Property and equipment, net % 1,385 1,397 (12) (0.9%) Other Assets Cash and investments (18) (3.5%) Receivables % Funds held by federal gov't % Agricultural water rights % Other % % D ef erred Outf lows of Resources Pension valuation and Upfront Payments % Total Assets & D ef erred Outf lows $ 2,269 $ 2,200 $ % 2018 YTD Financial Review - Page 4

6 TOTA L LI A B I LITIES A ND DE F ERRED INF L O WS LONG-TERM LIABILITIES: The three largest components of the District s liabilities are the federal repayment obligation, contract revenue bonds and the Ag Water Right debt. The federal repayment obligation decreased by $33 million as a result of the annual payment made in January. Contract revenue bonds for transmission projects were issued in February 2016 and are projected to decrease by $3 million in The Ag Water Right debt repayment will begin in As such, the $89 million liability for this debt will remain on the financial statements until then. O T HE R LIABILITIES: Other liabilities include payables, accrued interest and current principal obligations. Overall, other liabilities are projected to increase in 2018 by $32 million mainly due to an increase in current liabilities of $30 million for the CAGRD long term storage credit purchase. DEFERRED INFLOW: GASB Statement No. 65 identified areas that are to be classified as deferred inflows which include customer deposits and upfront payments. Deferred inflows of resources are projected to increase by $2 million in TOTA L NET POSITION In summary, Net Position, the difference between assets and deferred outflows, liabilities and deferred inflows is expected to increase 17.2%, or $104 million, from (Dollars in millions) 2018 Projected 2017 Act ual Change Assets Capital assets, net $ 1,385 $ 1,397 $ (12) (0.9%) Other assets % D ef erred outf lows of resources % Total Assets & D ef erred Outf lows 2,269 2, % Liabilit ie s Long-term liabilities 1,365 1,434 (69) (4.8%) Other liabilities % Tot al Liabilit ie s 1,523 1,560 (37) (2.4%) (Dollars in millions) 2018 Projected 2017 Actual Change Long-Te rm Liabilitie s Repayment obligation, net $ 1,044 $ 1,077 $ (33) (3.1%) Contract revenue bonds (3) 100.0% Ag water right debt % Other (33) (15.1%) 1,365 1,434 (69) (4.8%) Othe r Liabilitie s % Total Liabilitie s $ 1,523 $ 1,560 $ (37) (2.4%) D ef erred Inf lows of Resources Customer Deposits and Upfront Payments % Pension valuation % Total D ef erred Inf lows of Resources $ 37 $ 35 $ 2 5.7% D ef erred Inf lows of Resources Customer deposits an Upfront Payments % Pension valuation % Total D ef erred Inf lows of Resources % Net Position Investments in capital assets % Restricted, net (7) (8.2%) Unrestricted, net % % Total Liabilities, D ef erred Inf lows & Net Position $ 2,269 $ 2,200 $ % Total Liabilities & D ef erred Inf lows $ 1,560 $ 1,595 $ (35) (2.2%) 2018 YTD Financial Review - Page 5

7 Statements of Revenues, Expenses & Changes in Net Position Net position increased by $118 million compared to a budgeted increase of $96 million through Q3, but is projected to increase by $104 million for the year. The factors influencing the full-year net position changes are discussed in the sections that follow. TOTA L RE V EN U E S 3RD QUARTER 2018 BUDGET PERFORMANCE: Revenues were $316 million compared to a budget of $311 million. The positive variance of $5 million was the result of the following key factors: Water O&M revenues were $2 million lower due to lower federal, underground storage and M&I deliveries; Power and Basin Development Fund (BDF) revenues were higher by $2 million; Other operating revenue was $3 million higher than budget due to higher activation, enrollment and upfront fees for CAGRD. FULL YEAR 2018 BUDGET PERFORMANCE: By year-end, total revenues are anticipated to be $9 million below budget. Water O&M charges will be $16 million lower as a result of lower reconciled water delivery rates and a lower than budgeted Big R rate. Power and other BDF revenues are expected to be $4 million higher than budget due to higher shaping and displacement savings. Other revenues are expected to be lower as CAGRD replenishment acre-feet is less. Property taxes are expected to be $2 million higher than budget due to a change in accounting to recognize revenue on an accrual tax levy basis. Interest income & other will be $1 million higher than budget.due to a a slightly better investment market. Millions $180 $160 $140 $120 $100 $80 $60 $40 $20 $ TOTAL REVENUES 3rd Quarter 2018 YTD Full Year 2018 Spending (Dollars in millions) Proje cte d Authority Change Operating Rev enues Water O&M charges $ 189 $ 205 $ (16) (7.8%) Water service capital charges % Power & other BDF revenues % Other revenues (1) (2.5%) $ 288 $ 300 $ (12) (4.0%) Non-operating Rev enues Property taxes $ 73 $ 71 $ 2 2.8% Interest income & other % $ 81 $ 78 $ 3 3.8% Total Rev enues $ 369 $ 378 $ (9) (2.4%) Wat er O&M C apit al C harges Power & BDF Act ual ($316M) Ot her Op Rev Taxes B udge t ($311M) Int eres t 2018 YTD Financial Review - Page 6

8 TOTAL EXPENSES 3RD QUARTER 2018 BUDGET PERFORMANCE: Through September 2018 total expenses were $17 million below budget. The key variances were: $11 million decrease in power and capacity costs due to lower costs at NGS, a larger drawdown on CAP s Lake Pleasant water inventory and shaping displacement activities; $2 million lower amortization and depreciation due to the timing of capital projects; $2 million higher AWBA disbursements (accounting change moved this into expense from a contra revenue treatment); $1 million higher in interest expense due to accounting change; $7 million decrease in other expenses related to timing of outside services and water for underground storage. FULL YEAR 2018 BUDGET PERFORMANCE: Total expenses are anticipated to be $265 million which is $18 million below budget. The key factors include: $8 million lower power and capacity costs (see page for power detail); $1 million lower operating salaries and related costs; $2 million lower amortization and depreciation expense due to lower than anticipated prior year capital spending; $6 million lower other expenses due to the elimination of interfund water for CAGRD underground storage and lower overhead expenses; $1 million lower non-operating expense. Millions $90 $80 $70 $60 $50 $40 $30 $20 $10 $ S alaries and Relat ed P ower and C ap ac it y TOTAL EXPENS ES 3rd Quarter 2018 YTD Amort & Dep rec iat ion 2 0 AWBA Dis b u rs Int eres t 24 Ot her 31 Full Year 2018 Spending (Dollars in millions) Pr oje ct e d Authority Change Operating Ex penses Salaries & related costs $ 65 $ 66 (1) (1.5%) Power and capacity (8) (8.8%) Transmission % Amortization & depreciation (2) (4.2%) Other (6) (16.2%) $ 238 $ 255 $ (17) (6.7%) Non-operating Ex penses (1) (3.6%) Total Ex penses $ 265 $ 283 $ (18) (6.4%) Ac t u al ($198) Bu dget ($215M) 2018 YTD Financial Review - Page 7

9 Statement of Revenues, Expenses and Change in Net Position Combined Funds/Accounts (Dollars in Millions) 3rd Quarter 2018 Full Year 2018 Actual Budget Variance Projection Spending Authority Variance Operating Rev enues/ex penses Revenues $ $ $ 3.3 $ $ $ (12.1) Expenses (178.0) (197.2) 19.2 (239.0) (254.6) 15.6 Operating Income/Loss $ 60.4 $ 37.9 $ 22.5 $ 48.8 $ 45.3 $ 3.5 Non-operating Rev enues/ex penses Revenues Expenses (20.0) (17.2) (2.8) (26.7) (28.4) 1.7 Non-operating Income/(Loss) $ 57.6 $ 58.7 $ (1.1) $ 54.7 $ Change in Net Position $ $ 96.6 $ 21.4 $ $ 94.9 $ 8.6 Variance Analy sis: General Fund CAGRD Other (0.1) 0.6 (0.7) (0.2) 0.2 (0.4) $ $ 96.6 $ 21.4 $ $ 94.9 $ YTD Financial Review - Page 8

10 General Fund (Dollars in Millions) 3rd Quarter 2018 Full Year 2018 $ in Millions Actual Budget Variance Projection Spending Authority Variance Water Deliv eries (000 AF) 1,270 1, ,493 1, Rev enues $ $ $ 4.1 $ $ $ (4.7) Ex penses (203.5) (216.2) 12.7 (265.1) (276.5) 11.4 Change in Net Position $ $ 86.7 $ 16.8 $ 74.1 $ 67.4 $ 6.7 Variance Analy sis: Water O&M Charges $ $ $ 0.3 $ $ $ (13.4) Capital Charges Power & BDF Revenues Property Taxes Interest and Other Income (0.5) Pumping Power (71.2) (82.1) 10.9 (82.8) (91.2) 8.4 Amortization/Depreciation (33.8) (36.2) 2.4 (46.7) (48.3) 1.6 Disbursements to AWBA (1.9) (0.4) (1.5) (2.7) (2.7) - Interest & Uncollectable Tax Expense (18.1) (16.2) (1.9) (24.0) (24.0) - Other (78.4) (81.3) 2.9 (108.9) (110.3) 1.4 $ $ 86.7 $ 16.8 $ 74.1 $ 67.4 $ YTD Financial Review - Page 9

11 Central Arizona Groundwater Replenishment District (CAGRD) Account (Dollars in Millions) 3rd Quarter 2018 Full Year 2018 Actual Budget Variance Projection Spending Authority Variance Rev enues $ 16.7 $ 13.0 $ 3.7 $ 39.2 $ 39.7 $ (0.5) Ex penses (2.1) (3.7) 1.6 (9.6) (12.4) 2.8 Change in Net Position $ 14.6 $ 9.3 $ 5.3 $ 29.6 $ 27.3 $ 2.3 Variance Analy sis: Revenue-Rates (3.1) Revenue-Fees Revenue-Dues (0.3) (1.3) Interest Income Water For Recharge (6.4) (7.1) 0.7 Operating Expense (2.1) (3.7) 1.6 (3.2) (5.3) 2.1 $ 14.6 $ 9.3 $ 5.3 $ 29.6 $ 27.3 $ YTD Financial Review - Page 10

12 Statement of Revenues, Expenses and Change in Net Position All Funds/Accounts (Dollars in Thousands) 3rd Quarter 2018 Full Year 2018 Total Actual Budget Variance Projection Budget Budget Adjustments Spending A uthority Variance ($) (%) ($) (%) Operating Revenues Water O&M charges $ 170,322 $ 171,981 $ (1,659) (1.0%) $ 188,549 $ 204,330 $ - $ 204,330 $ (15,781) (7.7%) Water service capital charges 22,477 22, % 30,183 29,398-29, % Power and other Basin Fund revenues 29,111 27,405 1, % 30,253 26,190-26,190 4, % Other revenues 16,490 13,470 3, % 38,790 39,963-39,963 (1,173) (2.9%) T otal Operating Revenues $ 238,400 $ 235,084 $ 3, % $ 287,775 $ 299,881 $ - $ 299,881 $ (12,106) (4.0%) Operating Expens es Salaries and related costs $ (48,685) $ (48,628) $ (57) (0.1%) $ (64,910) $ (65,467) $ - $ (65,467) $ % Pumping power & capacity charges (71,187) (82,080) 10, % (82,772) (91,229) - (91,229) 8, % Transmission (9,486) (9,756) % (12,990) (13,137) - (13,137) % Amortization (17,371) (17,251) (120) (0.7%) (23,162) (23,002) - (23,002) (160) (0.7%) Depreciation (16,508) (19,002) 2, % (23,561) (25,336) - (25,336) 1, % Other Operating Costs: Outside services (12,235) (14,942) 2, % (21,030) (20,949) - (20,949) (81) (0.4%) Materials and supplies (6,226) (5,903) (323) (5.5%) (8,142) (7,948) - (7,948) (194) (2.4%) Water for underground storage 7,062 4,301 2, % 1,950 (2,239) - (2,239) 4, % Overhead 3,053 2, % 4,034 3,336-3, % Other expenses (6,367) (6,610) % (8,393) (8,645) - (8,645) % Subtotal other costs (14,713) (20,528) 5, % (31,581) (36,445) - (36,445) 4, % T otal Operating Expens es (177,950) (197,245) 19, % (238,976) (254,616) - (254,616) 15, % Operating Incom e/(los s) $ 60,450 $ 37,839 $ 22, % $ 48,799 $ 45,265 $ - $ 45,265 $ 3, % Non-operating Revenues/(Expens es) Property taxes $ 72,316 $ 70,680 $ 1, % $ 72,928 $ 70,680 $ - $ 70,680 $ 2, % Interest income and other 5,298 5, % 8,541 7,318-7,318 1, % Disbursements to AWBA (1,909) (403) (1,506) (373.7%) (2,738) - (2,738) (2,738) - 0.0% Interest and uncollectable tax expense (18,080) (17,179) (901) (5.2%) (23,955) (23,896) (1,758) (25,654) 1, % T otal Non-operating Revenues/(Expens es) 57,625 58,299 (674) (1.2%) 54,776 54,102 (4,496) 49,606 5, % Change in Net Position 118,075 96,138 21, % 103,574 99,367 (4,496) 94,871 8, % Net position at beginning of period 605, ,598 (45,596) (7.0%) 605, , ,598 (45,596) (7.0%) Net position at end of period $ 723,077 $ 746,736 $ (23,659) (3.2%) $ 708,576 $ 749,965 $ (4,496) $ 745,469 $ (36,893) (4.9%) 2018 YTD Financial Review - Page 11

13 Statement of Revenues, Expenses and Change in Net Position By Fund/Account (Dollars in Thousands) 3rd Quarter 2018 Eliminat ion General Fund Supplemental Water CAGRD Account Captiv e Insurance Fund Operating Rev enues Water O&M charges $ 170,322 $ (5,256) $ 175,578 $ - $ - $ - Water service capital charges 22,477 (1,664) 24, Power and Basin Development Fund revenues 29,111-29, Other revenues 16,490 (7,703) 1,529-15,830 6,834 Total Operating Rev enues $ 238,400 $ (14,623) $ 230,359 $ - $ 15,830 $ 6,834 Operating Ex penses Salaries and related costs $ (48,685) $ - $ (47,774) $ - $ (911) $ - Pumping power & capacity charges (71,187) - (71,187) Transmission (9,486) - (9,486) Amortization (17,371) - (17,371) Depreciation (16,508) (16,462) - (46) - Other operating costs: Outside services (12,235) - (11,889) - (197) (149) Materials and supplies (6,225) - (6,225) Water for recharge 7,062 7, Overhead 3,053-3,988 - (935) - Other expenses (6,368) 7,561 (7,112) - (20) (6,797) Subtotal other costs (14,713) 14,623 (21,238) - (1,152) (6,946) Tot al Ope r at ing Ex pe ns e s (177,950) 14,623 (183,518) - (2,109) (6,946) Operating Income/(Loss) $ 60,450 $ - $ 46,841 $ - $ 13,721 $ (112) Non-operating Rev enues/(ex penses) Property taxes $ 72,316 $ - $ 72,316 $ - $ - $ - Interest income and other 5,298-4, Disbursements to AWBA (1,909) (1,909) Interest expense and other (18,080) - (18,080) Total Non-operating Rev enues/(ex penses) 57,625-56, Change in Net Position 118, , ,608 (103) Net position at beginning of period 605,002 (2,350) 447,004 8, ,839 4,156 Net position at end of period $ 723,077 $ (2,350) $ 550,485 $ 8,442 $ 162,447 $ 4, YTD Financial Review - Page 12

14 Statement of Revenues, Expenses and Change in Net Position By Fund/Account (Dollars in Thousands) FY 2018 Projection Eliminat ion General Fund Supplemental Water CAGRD Account Captiv e Insurance Fund Operating Rev enues Water O&M charges $ 188,549 $ (6,184) $ 194,733 $ - $ - $ - Water service capital charges 30,183 (1,949) 32, Power and Basin Development Fund revenues 30,253-30, Other revenues 38,790 (10,287) 1,971-37,992 9,114 Total Operating Rev enues $ 287,775 $ (18,420) $ 259,089 $ - $ 37,992 $ 9,114 Operating Ex penses Salaries and related costs $ (64,910) $ - $ (63,749) $ - $ (1,161) $ - Pumping power & capacity charges (82,772) - (82,772) Transmission (12,990) - (12,990) Amortization (23,162) - (23,162) Depreciation (23,561) (23,500) - (61) - Other operating costs: Outside services (21,030) - (20,085) - (736) (209) Materials and supplies (8,142) - (8,141) - (1) - Water for recharge 1,950 8, (6,384) - Overhead 4,034 5,221 - (1,187) - Other expenses (8,393) 10,086 (9,222) - (39) (9,218) Subtotal other costs (31,581) 18,420 (32,227) - (8,347) (9,427) Tot al Ope r at ing Ex pe ns e s (238,976) 18,420 (238,400) - (9,569) (9,427) Operating Income/(Loss) $ 48,799 $ - $ 20,689 $ - $ 28,423 $ (313) Non-operating Rev enues/(ex penses) Property taxes $ 72,928 $ - $ 72,928 $ - $ - $ - Interest income and other 8,541-7, , Disbursements to AWBA (2,738) - (2,738) Interest and uncollectable tax expense (23,955) - (23,955) Total Non-operating Rev enues/(ex penses) 54,776-53, , Change in Net Position 103,574-74, ,606 (302) Net position at beginning of period 605,002 (2,350) 447,004 8, ,839 4,156 Net position at end of period $ 708,576 $ (2,350) $ 521,156 $ 8,471 $ 177,445 $ 3, YTD Financial Review - Page 13

15 Statement of Net Position (Dollars in Thousands) 2017 As of 09/30/18 Projection as of 12/31/18 ASSETS Current Assets Cash $ 8,972 $ 8,356 $ 13,639 Cash Equivalents 64,251 64,696 39,649 Total cash and cash equivalents 73,223 73,052 53,288 Receivables Due from water customers 2,784 16,538 1,711 Due from property taxes, less allowance for doubtful accounts 33,180 71,967 34,913 Other Receivables 11,190 8,322 11,343 Water inventory 104,324 89, ,074 Funds held by federal government 30,432 29,409 30,208 Other assets 7,903 11,252 10,420 Total Current Assets 263, , ,957 Non-current Assets Investments 321, , ,672 Restricted assets 121, ,801 99,489 Agriculture water rights 88,719 88,719 88,719 Capital assets, less accumulated depreciation 285, , ,268 Permanent service right, less accumulated amortization 1,112,159 1,094,788 1,088,997 Other assets 1,000 2,000 2,000 Total Non-current Assets 1,930,458 1,921,912 1,922,145 Total Assets $ 2,193,494 $ 2,221,459 $ 2,262,102 D EFERRED OUTFLOWS OF RESOURCES Pension Valuation and Upfront Payments $ 6,771 $ 6,771 6,771 Total D ef erred Outf lows of Resources 6,771 6,771 $ 6,771 Total Assets and D ef erred Outf lows of Resources $ 2,200,265 $ 2,228,230 $ 2,268, YTD Financial Review - Page 14

16 Statement of Net Position (Dollars in Thousands) LIAB ILITIES 2017 As of 09/30/18 Projection as of 12/31/18 Current Liabilities Accounts payable $ 30,356 $ 9,401 $ 63,485 Accrued payroll, payroll taxes and other accrued expenses 7,755 8,219 7,841 Water operations, capital charges, and unearned revenue 29,500 25,906 28,791 Current liabilities payable from restricted assets, advances to federal government, and other Non-current assets: Accrued interest payable 24,402 17,212 23,292 Repayment obligation, due within one year 32,929 32,929 32,929 Contract revenue bonds, due within one year 1,505 1,565 1,565 Tot al Cur r e nt Liabilit ie s 126,447 95, ,903 Non-current Liabilities: Repayment obligation, due after one year 1,076,780 1,043,850 1,043,851 Contract revenue bonds, due after one year, net 49,782 47,601 47,396 Non-Indian agricultural 9(d) debt 88,719 88,719 88,719 Other non-current liabilities 218, , ,688 S ubt ot al Non-cur r e nt Liabilit ie s 1,433,901 1,374,326 1,365,654 Tot al Liabilit ie s 1,560,348 1,469,558 1,523,557 D EFERRED INFLOWS OF RESOURCES Customer Deposits 29,932 30,612 31,757 Upfront Payments Pension Valuation 4,983 4,983 4,983 Total D ef erred Inf lows of Resources 34,915 35,595 36,740 NET POS ITION Net investment in capital assets 248, , ,524 Restricted 84, ,589 77,567 Unrestricted 272, , ,485 Tot al Ne t Pos it ion 605, , ,576 Total Liabilities, D ef erred Inf lows of Resources and Net Position $ 2,200,265 $ 2,228,230 $ 2,268, YTD Financial Review - Page 15

17 Current Assets ASSETS Statement of Net Position by Fund (Dollars in Thousands) As of 09/30/18 Elimination General Fund Supplemental Water CAGRD Account Rev enue Bond Accounts Captiv e Insurance Cash and cash equivalents $ 73,052 $ - $ 48,571 $ - $ 18,914 $ - $ 5,567 Receivables 96,827-88,845-7, Water inventory 89,007-15,475-73, Funds held by / advanced to federal government 29,409-29, Other 11,252 (644) 11, Total Current Assets 299,547 (644) 193, ,428-5,822 Non-current Assets Investments and restricted assets 441,822 (2,350) 380,565 8,442 52,915-2,250 Agriculture water rights 88,719-88, Capital assets, less accumulated depreciation 294, ,535-10, Permanent service right, less accumulated amortization 1,094,788-1,094, Other assets, less accumulated amortization 2,000-2, Bond issuance costs, net of accumulated amortization Total Non-current Assets 1,921,912 (2,350) 1,850,607 8,442 62,963-2,250 Total Assets 2,221,459 (2,994) 2,044,548 8, ,391-8,072 D eferred Outflows of Resources 6,771-6, Total Assets and D eferred Outflows of Resources $ 2,228,230 (2,994) 2,051,319 8, ,391-8,072 LIABILITIES Current Liabilities Accounts payable / accrued payroll $ 17,620 $ - $ 13,301 $ - $ 300 $ - $ 4,019 Water operations and capital charges deferred revenue 25,906-25, Other current liabilities 51,706 (644) 51, Total Current Liabilities 95,232 (644) 90, ,019 Non-current Liabilities Repayment obligation, due after one year 1,043,850-1,043, Contract revenue bonds, due after one year, net 47,601-47, Non-Indian agricultural 9(d) debt 88,719-88, Other non-current liabilities 194, , Total Non-current Liabilities 1,374,326-1,374, Total Liabilities 1,469,558 (644) 1,465, ,019 D EFERRED INFLOWS OF RESOURCES Customer Deposits and Upfront Payments 30,612-30, Pension Valuation 4,983-4, Total D eferred inflows of Resources 35,595-35, NET POSITION Net Investment in capital assets 263, ,378-10, Restricted 101,589-58,460 8,442 32,437-2,250 Unrestricted 358,062 (2,350) 238, ,962-1,803 Total Net Position 723,077 (2,350) 550,485 8, ,447-4,053 Total Liabilities, D eferred Inflow and Net Position $ 2,228,230 (2,994) 2,051,319 8, ,391-8, YTD Financial Review - Page 16

18 Statement of Net Position by Fund (Dollars in Thousands) Current Assets Cash and cash equivalents $ 53,288 $ - $ 40,116 $ - $ 7,388 $ 5,784 Receivables 47,967-37,539-10,428 - Water inventory 198,074-28, ,126 - Funds held by / advanced to federal government 30,208 30,208 Other assets 10,420 (130) 10, Total Current Assets 339,957 (130) 146, ,942 6,210 Non-current Assets ASSETS Projection 12/31/2018 Elimination General Fund Supplemental Water CAGRD Account Captiv e Insurance Investments and restricted assets 446,161 (2,350) 421,564 8,471 16,226 2,250 Agriculture water rights 88,719-88, Capital assets, less accumulated depreciation 296, ,339-9,929 - Permanent service right, less accumulated amortization 1,088,997-1,088, Other assets, less accumulated amortization 2,000-2, Bond issuance costs, net of accumulated amortization Total Non-current Assets 1,922,145 (2,350) 1,887,619 8,471 26,155 2,250 Total Assets 2,262,102 (2,480) 2,034,554 8, ,097 8,460 Deferred Outflows of Resources 6,771-6, Total Assets and Deferred Outflows of Resources $ 2,268,873 (2,480) 2,041,325 8, ,097 8,460 LIABILITIES Current Liabilities Accounts payable / accrued payroll $ 71,326 $ - $ 31,198 $ - $ 35,522 $ 4,606 Water operations, capital charges, and unearned revenue 28,791-28, Other current liabilities 57,786 (130) 57, Total Current Liabilities 157,903 (130) 117,775-35,652 4,606 Non-current Liabilities Repayment obligation, due after one year 1,043,851-1,043, Contract revenue bonds, due after one year, net 47,396-47, Non-Indian agricultural 9(d) debt 88,719-88, Other non-current liabilities 185, , Total Non-current Liabilities 1,365,654-1,365, Total Liabilities 1,523,557 (130) 1,483,429-35,652 4,606 DEFERRED INFLOWS OF RESOURCES Customer Deposits and Upfront Payments 31,757-31, Pension Valuation 4,983-4, Total Deferred inflows of Resources 36,740-36, NET POSITION Net Investment in capital assets 259, ,595-9,929 - Restricted 77,567-50,620 8,471 16,226 2,250 Unrestricted 371,485 (2,350) 220, ,290 1,604 Total Net Position 708,576 (2,350) 521,156 8, ,445 3,854 Total Liabilities, Deferred Inflows and Net Position $ 2,268,873 (2,480) 2,041,325 8, ,097 8, YTD Financial Review - Page 17

19 Spending Authority Full Year 2018 (Dollars in Thousands) General Fund Operating* General Fund Non Operating Supplemental Water Account CAGRD Account** Captive Insurance Fund Capital Budget Board Approved Budget 145,443 22,199-3,565 9,251 37,597 Additional Board Authorized Spending Accounting Changes & Adjustments GASB No 89 Capitalized Interest Adjustment - 1, (1,303) AWBA Disbursements - 2, Uncollectable Tax Expense 455 Adjusted Budget/Spending Authority 145,443 26,695-3,565 9,251 36,294 Ex pe ns e Pr oje ct ion 142,638 26,693-3,185 9,427 34,394 Variance ($) Fav/(Unfav) 2, (176) 1,900 Variance (%) 1.9% 0.0% 0.0% 10.7% -1.9% 5.2% BUD GETARY CONTROLS Expense projection is within spending authority, provided that the total expenses within each fund do not exceed budget (including adjustments) by the greater of $250,000 or 2% of the annual budget. NOTES: *Power and transmission are excluded because of market volatility and are administered by an Energy Risk Oversight Committee. **CAGRD water for recharge to meet obligations is excluded YTD Financial Review - Page 18

20 Annual Repayment Obligation Master Repayment Contract (Accrual Basis) (Dollars in Thousands) Notes: A Variance Actual Projection Budget ($) Notes Sources of Funds Navajo-related revenues SRP premium $ 28,772 $ 29,254 $ 29,271 $ (17) Other NGS net revenues (4,736) (7,268) (7,210) (58) Shaping & Displacement 1,295 4, ,977 A Net revenues - NGS 25,331 26,463 22,561 3,902 - Net Navajo misc. revenues (848) (560) 153 (713) B Hoover 4.5 mil surcharge 3,014 3,100 3,100 - Parker-Davis 2,844 2,745 2, Net CAP transmission revenues (898) (2,345) (3,654) 1,309 C Transmission line loss revenues (500) Land-related revenues: - Land use (net) Land sales (net) Interest on deposits (196) Total Credits Toward Repay ment $ 31,131 $ 30,943 $ 27,076 $ 3,867 Uses of Funds Principal $ 32,929 $ 32,929 $ 32,929 $ - Interest 23,343 22,263 22,263 - Gross Payment (Due Jan. 20th following year-end) $ 56,272 $ 55,192 $ 55,192 $ - (Net Due) / Excess Funds for Repay ment $ (25,141) $ (24,249) $ (28,116) $ 3,867 CAP NGS Energy & Navajo Transmission Reconciliation $ (699) $ (735) $ - $ (735) Net funds (due to)/from Federal Government $ (25,840) $ (24,984) $ (28,116) $ 3,132 CAP reserved more Navajo energy in the summer months of 2018, resulting in higher sales of Navajo energy during peak price periods. B C The net Navajo miscellaneous revenues are lower, due to Calpine's share of capital expenditures being charged to this account. Calpine ceased paying their transmission bills, including capital expenditures, in The net CAP transmission revenues are negative due to the loss of Calpine revenues. The variance is due to some of the lost Calpine revenues being reflected in different accounts, such as costs related to capital expenditures have been included in net Navajo miscellaneous revenues YTD Financial Review - Page 19

21 Staffing - Average Full Time Equivalent (FTE) 3rd Quarter Variance N otes Projection Budget FTEs % (*) General Manager General Manager % Water Policy CAGRD (0.2) (2.3%) Water Policy % Total Water Policy % Finance and Administration Finance & Accounting % Risk Management % Supply Chain & Facilities % Total Finance and Administration % Public Af f airs Public Affairs % General Counsel % D eputy General Manager D eputy General Manager (0.2) (2.6%) Operations and Engineering Engineering % Power Program Admin % Water Operations % Total Operations and Engineering % Centralized Maint & Reliability Centralized Maintenance % Maintenance Control % Total Centralized Maint & Reliability % Field Maintenance Maintenance Admin % South Area Maintenance % West Area Maintenance % Total Field Maintenance % Technology Information Technology % Operational Technology % Total Technology % Employ ee Serv ices Cent Learning & Development % Environment, Health & Safety % Human Resources % Protective Services % Total Employee Services % Vacancy /Salary Sav ings Equiv alent - (1.0) (15.0) (14.0) 93.3% Total FTE % 2018 YTD Financial Review - Page 20

22 Water Deliveries The General Fund ended the third quarter of 2018 with a net gain (or increase in net position) of $103 million compared to a budgeted net gain of $87 million. It is anticipated that the General Fund will end the year on budget with a net gain of $74 million. The following discussion summarizes the General Fund s 2018 budget performance through the third quarter and for the full year projection. Through September 2018, water deliveries were 33,675 AF higher than budget primarily due to higher than expected water availability and interstate deliveries. Through the full year, deliveries are projected to be higher than budget. M&I is expected to be higher due to unanticipated increases in water orders. Excess deliveries are also expected to be higher with more water available to AWBA and CAGRD and Nevada unused apportionment. Federal deliveries are expected to be close to budget. GENERA L FUND Budget Performanc e - 3rd Quart er 2018 YTD (Dollars in thousands) Act uals B udge t Change WAT ER DELIVERIES 3rd Qua rter 2018 YT D Revenues $ 306,988 $ 302,854 $ 4, % Expenses (203,507) (216,153) 12, % Change in Net Position $ 103,481 $ 86,701 $ 16,780 Beginning Net Position 447, ,763 (32,759) Ending Net Position $ 550,485 $ 566,464 $ (15,979) GENERA L FUND Budget Perf ormance - Full Year M&I Federal Ex cess Actual (1,270 KAF) Budget (1,236 KAF) 265 (Dollars in thousands) Projected Spending Authority Change Revenues $ 339,246 $ 343,907 $ (4,661) (1.4%) Expenses (265,093) (272,008) 6, % Federal Change in Net Position $ 74,153 $ 71,899 $ 2,254 Beginning Net Position 447, ,763 (32,759) Ending Net Position $ 521,157 $ 551,662 $ (30,505) M&I Ex cess Water Deliveries -Full Year 2018 Projected Ac re- Feet (000) Budget (1,441K AF) Projec t ed (1,493K AF) 2018 YTD Financial Review - Page 21

23 Total Revenues THIRD QUARTER 2018 BUDGET PERFORMANCE: Through September 2018, total General Fund revenues were $307 million compared to a budget of $303 million. Key impacts were: FULL YEAR 2018 BUDGET PERFORMANCE: The full year is projected to be $339 million compared to a budget of $344 million, which is $5 million lower then budget. The major items influencing the variance are: Capital charge revenue exceeded budget by $1 million due to more excess water availability; Power and BDF revenue exceeded budget by $2 million; Property taxes exceeded budget by $2 million; and Interest and other non-operating revenue was lower than budget by $1 million. $13 million lower water O&M revenue due to lower reconciled delivery rates; $2 million higher capital charges due to the availability of excess water; $4 million higher Power and BDF revenue as a result of higher shaping and displacement; and $2 million higher property tax revenue due to an accounting change that recognizes revenue on an accrual tax levy basis rather than a cash collection basis. $200 $180 $ G ENERAL FUND REVENUES 3rd Qua rter 2018 YT D Water O&M GENERA L FUND REVENUES Full Year Millions $140 $120 $100 $80 $60 $40 $20 $- Wat er O&M C apit al C harge Power & BDF 2 2 Ot her Op Rev Taxes Ac t ual ($307) Budget ($303) 4 5 Int eres t & Ot her Capital Charge Power & BD F Other Op Rev Tax es Interest & Other $- $50 $100 $150 $200 $250 Millions Budget ($344) Projec t ed ($339) 2018 YTD Financial Review - Page 22

24 THIRD QUARTER BUDDGET PERFORMANCE: Total General Fund expenses through September 2018 were $12 million lower than budget. This variance was due to: Total Expenses $11 million decrease in power and energy-related expenses due to favorable energy market; $2 million lower depreciation expense due to timing of capital projects; $3 million lower other expenses due to timing of outside services, and $2 million higher interest expense due to GASB 89 change. (not capitalizing interest). FULL YEAR 2018 BUDGET PERFORMANCE: Total expenses for 2018 are anticipated to be $265 million compared to spending authority of $277 million. Salaries and related costs for operations are projected to be under budget; Pumping power and capacity expense is expected to be below budget due to lower Navajo non-fuel costs and lower usage of Navajo energy. Also, a $1 million refund related to the 2017 closeout of the previous Hoover contract occurred (see pages 32 and 33 for further detail for rate purposes only, pumping power includes a Hoover Contract Transmission adjustment); Amortization and depreciation expense is projected to be $2 million below budget due to a decrease in previous capital spending; Other expense is projected to be $1 million lower due to lower MSCP and overhead costs. Millions $90 $80 $70 $60 $50 $40 $30 $20 $10 $0 48 GENERAL FUND EXPENSES 3rd Qua rter 2018 YT D Budget Performa nce 48 Salaries and Related Power Amort & D ep 2 AWBA D isburse Other Op Ex p Ac t ual ($204) Budget ($216) Interest and Other Salaries & Related Power & Capacity Amort/D ep Other Op Ex p AWBA D isb Interest and Other G ENERAL FUND EXPENSES Full Yea r $0 $20 $40 $60 $80 $100 $120 Millions S pending Aut horit y ($277) Projec t ed ($265) 2018 YTD Financial Review - Page 23

25 Strategic Reserves STRATEGIC RESERVES: Strategic reserves are cash reserves for unusual or unplanned events, such as equipment failures, business interruption or unplanned costs. These reserves may be drawn upon if unusual or unplanned events occur, or they may never be used at all. The Working Capital reserve is an exception to this rule, as it is a selfreplenishing reserve used to smooth out timing differences in revenues and spending within each year. The CAWCD Board reviews the strategic reserve target biennially and on April 5, 2018, they revised the strategic reserve target to $179 million. The Master Repayment Reserve, the Emergency OM&R and the Medical Reserve had previously been included in the strategic reserve target calculation but were removed due to the contractual requirements for these reserves. The target was previously $222 million including these reserves ($174 million excluding them). Known planned expenditures or events are included in the budget and funded on a "pay as you go" basis through water rates and taxes. Other reserves have been established for specific purposes, such as the water storage reserve or rate stabilization reserve, and are not included in the strategic reserves. The change in reserves will fluctuate depending on operational needs of the District and capital spending. At the end of 2017, strategic reserves were $118 million. As of September 2018, strategic reserves were $170 million, an increase of $52 million which reflects the Board approved reimbursement of the Federal Debt cash make-up payment from the Water Storage Reserves and the annual Federal Debt payment in January. Reserves typically decrease during the year until property taxes are received primarily in May-June and again in November-December. Year end 2018 strategic reserves are expected to be $198 million as collections based on published energy rates are higher than forecasted reconciled rates. This excess is offset by a payable to customers which will reduce the reserve in April 2019 when refunds are issued. Strategic Reserve Targets (Dollars in Millions) Assigned Reserves $250 Strategic Reserves Capital Reserve $61 Operating Reserve $75 $ Contingency Reserve $8 Unrestricted Reserves Millions $ Working Capital Reserve $35 Total $179 $100 $50 Dec Jan Feb Mar Apr May Jun Jul Aug Sep Targ et Oct Nov Dec YTD Financial Review - Page 24

26 General Fund Cash and Investments As prescribed by the District s Enabling Act, the Arizona State Treasurer holds the District s investments. These investments are held in the following investment pools: Pool 5 (Local Government Investment Pool or LGIP) Used for liquid cash equivalent needs consisting of short-term investments. Pool 12 (CAWCD Medium-Term Pool) Provides investments in medium- to long-term securities with a target duration of two to four years. The average investment yields for funds invested with the State Treasurer through September 2018 was 2.28 % for pool 12 and 2.09% for pool 5. Funds needed to meet the immediate expenses and costs of the District are held with Bank of America (BofA). General Fund Cash and Investments as of 9/30/2018 Pool 12 Med-Term 87% Pool 5 LGIP & Bank Acct 13% As shown on the following table, the District maintains several reserves to meet specific purposes: (D ollars in millions) 9/30/18 12/31/17 Strategic Reserves Restricted Reserves Major Repair & Replacement Reserve Assigned Reserves Capital Reserve 41 4 Operating Reserve Contingency Reserve 8 8 Unrestricted Reserves Working Capital Reserve Total Strategic Reserves $ 170 $ 118 Other Reserves Navajo Decommissioning $ 18 $ 2 SO 2 Rate Stabilization 8 8 Repayment Reserve $ 40 $ 40 Emergency OM&R Reserve 6 6 Rate Stabilization Voluntary Rate Stabilization 7 7 Bond Reserve Ag Forbearance 2-1 Recovery Reserve 10 Recharge O & M 6 5 Extraordinary Cost Water Storage Tax Total Other Reserves Total Reserves $ 427 $ Includes investments held with the State Treasurer and operating cash with BofA. 2 CAWCD issued bonds in the first quarter of 2016 to finance Transmission projects YTD Financial Review - Page 25

27 Statement of Revenues, Expenses and Change in Net Position General Fund (Dollars in Thousands) 3rd Quarter 2018 Full Y ear 2018 Total Budget Actual Budget Variance Projection B udget Spending Variance Adjustments Authority ($) (%) ($) (%) Notes Operating R ev enues Water O&M charges $ 175,578 $ 175, % $ 194,733 $ 208,075 $ - $ 208,075 $ (13,342) (6.4%) A Water service capital charges 24,141 23, % 32,132 30,533-30,533 1, % B Power and Basin Development Fund revenues 29,111 27,405 1, % 30,253 26,190-26,190 4, % C Other revenues 1,529 1,617 (88) (5.4%) 1,971 1,855-1, % D Total Operating R ev enues $ 230,359 $ 227,532 $ 2, % $ 259,089 $ 266,653 $ - $ 266,653 $ (7,564) (2.8%) Operating Ex penses Salaries and related costs $ (47,774) $ (47,834) $ % $ (63,749) $ (64,409) $ - $ (64,409) $ % E Pumping power and capacity charges (71,187) (82,080) 10, % (82,772) (91,229) - (91,229) 8, % F Transmission (9,486) (9,756) % (12,990) (13,137) - (13,137) % Amortization of Permanent Service Right (17,371) (17,250) (121) (0.7%) (23,162) (23,001) - (23,001) (161) (0.7%) Depreciation and Amortization (16,462) (18,956) 2, % (23,500) (25,275) - (25,275) 1, % G Other operating costs: Outside services (11,889) (13,684) 1, % (20,085) (19,417) - (19,417) (668) (3.4%) H Materials and supplies (6,225) (5,903) (322) (5.5%) (8,141) (7,948) - (7,948) (193) (2.4%) I Overhead 3,988 3, % 5,221 4,408-4, % Other expenses (7,112) (7,481) % (9,222) (9,801) - (9,801) % J Subtotal (21,238) (23,638) 2, % (32,227) (32,758) - (32,758) % Total Operating Ex penses (183,518) (199,514) 15, % (238,400) (249,809) - (249,809) 11, % Operating Income/(Loss) $ 46,841 $ 28,018 $ 18, % $ 20,689 $ 16,844 $ - $ 16,844 $ 3, % Non-Operating R ev enues/(ex penses) Property taxes $ 72,316 $ 70,680 $ 1, % $ 72,928 $ 70,680-70,680 2, % K Interest income and other 4,313 4,642 (329) (7.1%) 7,229 6,574-6, % Disbursements to AWBA (1,909) (403) (1,506) (373.7%) (2,738) - (2,738) (2,738) - 0.0% L Interest and uncollectable tax expense (18,080) (16,236) (1,844) (11.4%) (23,955) (22,199) (1,758) (23,957) 2 0.0% M Net Non-operating Income/(Loss) 56,640 58,683 (2,043) (3.5%) 53,464 55,055 (4,496) 50,559 2, % Change in Net Position 103,481 86,701 16, % 74,152 71,899 (4,496) 67,403 6, % Net Position at beginning of period 447, ,763 (32,759) (6.8%) 447, , ,763 (32,759) (6.8%) Net Position at end of period $ 550,485 $ 566,464 $ (15,979) (2.8%) 521,156 $ 551,662 $ (4,496) $ 547,166 $ (26,010) (4.8%) 2018 YTD Financial Review - Page 26

28 Statement of Revenues, Expenses and Change in Net Position General Fund Notes A B C Water O&M Charges: Water O&M Charges for 2018 are projected to be $13.3 million or 6.4% less than budget due mostly to lower than budgeted rates for Calculated fixed O&M rate and Capital replacement Big R rate components are projected to be lower than budget. This is partially offset by higher projected deliveries than budgeted. Water Serv ice Capital Charges: 2018 Capital charges are projected to be $1.6 million over budget mostly due to availability of excess water to the water bank for local and interstate banking activities as per CAWCD's excess to excess policy and USBR firming allocation that was not budgeted. Power and Other Basin Fund Rev enues: The 2018 full year Power and Other Basin Fund Revenues are projected to be $4.1 million over budget, primarily due to higher shaping and displacement savings. D Other Rev enues: 2018 is projected to end with a positive variance of $116 thousand due in part to $364 thousand positive variance in recharge lease fees due to availability of more excess water for recharging and $73 thousand increase in anticipated land use revenues. This is offset by $304 thousand in AWBA contra account for 4-cent tax use and $18 thousand from assets disposal and misc income expected. E F G H I J K L M Salaries and Related Costs: YTD salaries and benefits are in line with budget. Full year are expected to be under budget as capital projects are forecasted to be over budget. Pumping power and capacity charges: The full year projection is under budget primarily due to lower Navajo non-fuel costs and lower usage of Navajo energy, coupled with higher Navajo energy summer sales at favorable prices. Also, there was a $1.0 million refund in March associated with a closeout of the previous Hoover contract. D epreciation and Amortization: Full year positive depreciation variance of $1.8 million is due to a decrease from budget in the number of completed units within the following projects - Backup Power Systems, & Sump Pump Water levels at P.P.'s & Governor Controls Replacements at Waddell. Capital equipment is currently forecasted to be below budget impacting the forecasted amount for depreciation for the year. A major HVAC project depreciable useful life was extended from 10 to 25 years. Outside Serv ices: 2018 Outside Professional services and Other Commercial services is projected to be $668 thousand higher than the budget due in part to $948 thousand higher than expected legal fees, $93 thousand from outside commercial services from the Government and $476 thousand from consulting maintenance services and equipment costs. This is offset by $798 thousand in lower project management expenses from two extra ordinary projects (# and ) and $87 thousand savings from utilizing less outside security agents at the plants for emergency calls.. Materials and Supplies : 2018 Materials and supplies is projected to be a $193 thousand negative variance overall mainly due to a $200 thousand negative variance in fuel expenses and $152 thousand negative variance from materials/tools and equipment purchased. These are partially offset by a $152 thousand positive variance in non-capital accountable field and computer equipment materials. Other Ex penses : YTD positive variance is due in part to timing of membership subscriptions renewals. Full year is projected to be a $579 thousand positive variance due mostly to $664 thousand in lower MSCP fees and $88 thousand in lower CAWCD's Property and Casualty Insurance expenses. This is offset by a $209 thousands negative variance in employee related in state travel expenses. Property Tax es: Due to a change in accounting, property tax revenues are now recorded on an accrual tax levy basis. Also, SRP in Lieu of tax revenue which is not included in tax levy is recorded when cash is received. This resulted in full year 2018 being $2.2 million higher in tax revenues. D isbursements to AWBA: Due to a change in accounting, disbursements to AWBA are now recognized as an expense instead of a contra revenue. Interest Ex pense and Other: With the implementation of GASB Statement No.89, all 2018 interest cost that was considered capitalizational cost has been transferred to expense YTD Financial Review - Page 27

29 Water Deliveries (in Acre-Feet) 3rd Quarter 2018 Full Year 2018 Variance Variance Actual Budget Projection Budget (A/F) (%) (A/F) (%) Notes Municipal & Industrial Water Subcontract 471, ,536 (715) (0.2%) 583, ,779 9, % A Federal Contract On-reservation 129, ,323 (42,039) (24.5%) 162, ,167 (47,638) (22.7%) B Off-reservation 363, ,433 37, % 409, ,839 46, % C Subtotal Federal Contract 493, ,756 (4,473) (0.9%) 571, ,006 (1,049) (0.2%) Ex cess Ag Settlement Pool (includes Ag Forbearance) 233, ,463 7, % 245, ,445 (4,823) (1.9%) D CAGRD Obligation 29,765 24,582 5, % 33,740 26,438 7, % E CAGRD Scottsdale IWDS % 1,260 1, % AWBA 24,941 13,232 11, % 38,000 15,232 22, % F AWBA Interstate Banking Water 10,573-10,573-13,500-13,500 - G USBR Firming 4,000-4,000-5,000-5,000 - H CAGRD Replenishment Reserve Temporary water use permits % % Full Cost Excess (Unscheduled overruns) Subtotal Excess 304, ,576 38, % 337, ,835 43, % Total Water D eliv eries 1,269,543 1,235,868 33, % 1,493,245 1,440,620 52, % Transfer of credits to CAGRD - 11,128 (11,128) (100.0%) - 14,837 (14,837) (100.0%) Take or Pay/Adjustment ,000-10,000 - Total Water Volumes and Credits 1,269,543 1,246,996 22, % 1,503,245 1,455,457 47, % Notes ex plaining the v ariances are shown on the f ollowing page YTD Financial Review - Page 28

30 Water Deliveries Notes A B C D E F G H M&I Subcontract : Q3 deliveries are 715 acre-feet less than budget due to day to day needs of our customers reacting to weather and system demands full year deliveries are projected to be 9,708 acre-feet more than original budget due to unanticipated increases in M&I water orders. Federal On Reserv ation: Q3 deliveries are 42,039 acre feet under budget because of customer needs deliveries are projected to be 47,638 acre-feet under budget due to deliveries scheduled for off-reservation locations. Federal Of f Reserv ation: Q3 deliveries were 37,566 acre-feet more than budgeted due to customer needs and redirected water deliveries are projected to be 46,589 acre-feet higher than budget due to redirection of water from On-reservation uses. Ag Settlement Pool: Q3 deliveries are 7,034 acre-feet more than budgeted due to more than expected use deliveries are expected to be 4,823 acre-feet less than budget because of the Ag Forbearance 5 program approved by the CAWCD Board in August CAGRD Obligation: Q3 deliveries are 4,948 acre-feet higher than budget due to an increase in recharge and system operations. Full year CAGRD Obligation water is projected to be 7,302 acre-feet more than the budget due to availability of excess water to CAGRD according to the access to excess policy. AWBA : Q3 deliveries were 11,709 acre-feet more than budgeted due to recharge and system operations plus additional water available. Deliveries for 2018 are projected to be 22,768 acre-feet more than budget due to availability of excess water to AWBA according to the access to excess policy. Interstate B anking Water: The AWBA will be storing 13,500 acre-feet of Unused Nevada Apportionment Water in 2018 that was not budgeted for. USBR Firming: Additional water was made available for USBR firming according to the access to excess policy that was not originally budgeted. 4 thousand acre-feet have been delivered to date, and full year projection is 5 thousand acre-feet YTD Financial Review - Page 29

31 2018 YTD Financial Review - Page 30

32 Water Revenues and Capital Charges (Dollars in Thousands) 3rd Quarter 2018 Full Year 2018 Actual Budget Variance Variance Notes Projection Budget ($) (%) ($) (%) WATER REVENUES Municipal & Industrial Water Subcontract $ 74,496 $ 75,133 (637) -1% $ 85,401 92,218 (6,817) -7% A Federal Contract On-reservation $ 20,450 $ 27,240 $ (6,790) (24.9%) $ 23,828 33,778 (9,950) (29.5%) B Off-reservation 57,444 51,903 5, % 59,860 58,315 1, % C Subtotal Federal Contract 77,894 79,143 (1,249) (1.6%) 83,688 92,093 (8,405) (9.1%) Ex cess Ag Settlement Pool (includes Ag Forbearance) 14,551 13,187 1, % 15,324 14, % CAGRD Obligation 4,733 3, % 5,365 4,204 1, % CAGRD Scottsdale IWDS % % AWBA 3,966 2,104 1, % 6,042 2,422 3, % AWBA Interstate Banking Water 1,681-1,681-2,147-2,147 - USBR Firming % CAGRD Replenishment Reserve Water Revenues Contra WSTA (2,810) (325) (2,485) 764.6% (5,429) (325) (5,104) % Temporary water use permits % (70) (20.3%) Full Cost Excess (Unscheduled overruns) Subtotal Excess 23,188 19,270 3, % 24,719 21,404 3, % D Total Water D eliv eries 175, ,546 2, % 193, ,715 (11,907) (5.8%) Transfer of credits to CAGRD - 1,769 (1,769) (100.0%) - 2,359 (2,359) (100.0%) Take/Pay Adj Total Water O& M Charges $ 175,578 $ 175,315 $ % $ 194, ,074 $ (13,341) (6.4%) CAPITAL & FACILITY USE CHARGES M&I subcontractors $ 20,950 $ 20,950 $ 0 0.0% $ 27,933 27,941 $ (8) (0.0%) E M&I non-subcontract 3,162 2, % 4,118 2,592 1, % F Underground storage facilities Total Capital & Facility Use Charges $ 24,141 $ 23,190 $ % $ 32,132 30,533 $ 1, % Notes ex plaining the v ariances are shown on page YTD Financial Review - Page 31

33 Energy 3rd Quarter 2018 Full Year 2018 Actual Budget Variance Projection Budget Variance ($) (%) ($) (%) Notes ENERGY (MWH) Waddell 49,353 44,443 (4,910) (11.0%) 49,353 44,443 (4,910) (11.0%) Navajo 1,226,789 1,530, , % 1,823,204 1,898,639 75, % A Hoover B 107, ,457 (3,238) (3.1%) 135, ,000 (4,000) (3.1%) Market Purchases 423, ,591 21, % 634, ,765 70, % A Total MWH 1,807,294 2,124, , % 2,642,169 2,778, , % ENERGY RATE ($/MWH) Net Navajo $ $ $ % $ $ $ % B Hoover B % % C Market Purchases (2.58) (14.0%) (3.98) (21.7%) Grand Weighted Av erage $/MWH $ $ $ % $ $ $ % ENERGY COSTS ($000) Navajo $ 37,773 $ 53,883 $ 16, % 51,418 $ 66,909 $ 15, % D Hoover B 5,545 6,926 1, % 7,648 9,060 1, % C Market Purchases 8,900 8,198 (702) (8.6%) 14,185 12,947 (1,239) (9.6%) Gross Energy Costs ($000) $ 52,218 $ 69,008 $ 16, % $ 73,252 $ 88,915 $ 15, % Energy Scheduling Services $ 823 $ 839 $ % $ 1,093 $ 1,123 $ % Energy Balancing Services (148) n.a (198) n.a. Shaping & Displacement Adjustment % 4, (3,977) (795.4%) E MWD Agreement Expense n.a % Lake Pleasant Adjustment 20,208 13,968 (6,240) (44.7%) 8,288 3,704 (4,584) (123.8%) F Lake Roosevelt Adjustment 20 0 (20) n.a. (1,533) 0 1,533 n.a. G Total Energy Costs ($000) $ 73,502 $ 84,401 $ 10, % $ 85,859 $ 94,328 $ 8, % 2018 YTD Financial Review - Page 32

34 Energy Notes A B Full year variance due to lower than budgeted MWH usage associated with a larger volume of deliveries from Lake Pleasant. Lower than budgeted unit costs for Navajo purchases and a higher price for energy sales, result in a full year forecast for a net lower than budget unit cost. C The Hoover B unit cost and total cost are lower than budget, due to a $1,019,257 refund in March associated with a closeout of the previous Hoover contract, which ended on September 30, That refund was in addition to a September refund of $435,392. Hoover costs include Hoover B energy, Hoover Capacity Charge, and unbundled Intertie and Parker Davis transmission. D E F G Lower unit costs at Navajo Generating Station coupled with $20 million in power sales at an average price of $60.14/mwh results in a forecasted cost which is under budget. The large shaping and displacement savings is due to more Navajo reserved energy being scheduled in the summer peak months. The full year Lake Pleasant adjustment variance is due to a larger drawdown on CAP's Lake Pleasant water inventory than budgeted. Variance due to greater SRP and CAP collaboration on water operations YTD Financial Review - Page 33

35 Underground Storage Operations and Maintenance (Dollars in Thousands) 3rd Quarter 2018 Full Year 2018 Act ual B udge t Var iance Var iance Projection Budget ($) (%) ($) (%) Notes Water Deliveries (000 acre-feet) % % Rev enues Other revenues 1,265 1, % 1,611 1, % Total Rev enues $ 1,265 $ 1,160 $ % $ 1,611 $ 1,247 $ % Ex penses Salaries and related costs $ (216) $ (198) $ (18) (9.1%) $ (277) $ (260) $ (17) (6.6%) Other operating costs: Outside services (48) (555) % (250) (727) % Materials and supplies (51) (141) % (172) (169) (3) (1.7%) Other expenses (544) (530) (15) (2.7%) (730) (702) (29) (4.1%) Subtotal (643) (1,225) % (1,152) (1,597) % Total Ex penses $ (859) $ (1,423) $ % $ (1,429) $ (1,857) $ % Change in Net Position 406 (263) 669 (254.4%) 182 (610) % Net position at beginning of period $ 5,172 4,172 1,000 (24.0%) 5,172 4,172 1, % Net position at end of period $ 5,578 $ 3,909 $ 1,669 (278.4%) $ 5,354 $ 3,562 $ 1, % Ex pense Summary Agua Fria $ (89) $ (142) $ % $ (181) $ (216) $ % A Hieroglyphic Mountains (195) (442) % (362) (514) % B Lower Santa Cruz (240) (243) 3 1.2% (331) (326) (5) (1.5%) C Pima Mine Road (100) (245) % (215) (368) % D Superstition Mountain (154) (197) % (249) (269) % E Tonopah Desert (81) (154) % (91) (164) % F Tot al $ (859) $ (1,423) $ % $ (1,429) $ (1,857) $ % Notes ex plaining the v ariances are shown on the nex t page YTD Financial Review - Page 34

36 Underground Storage Operations and Maintenance Notes A B C D E F Agua Fria: 2018 projected deliveries are 10K acre-feet more than budget, resulting in $130 thousand more in revenues when compared to budget. Total project costs are projected to be $35 thousand less than budget due to lower than expected expenses in technical studies and materials and supplies expenses. Hierogly phic Mountains : 2018 projected deliveries is within budget limits. Total costs is $152 thousand less than budgeted, due mostly to $150K basin maintenance costs that was moved to next year. Lower Santa Cruz: Full year deliveries and revenues is projected to increase by 10K acre-feet or $156 thousand respectively when compared to budget. Total cost is projected to decrease by $5 thousand due mostly to a $34 thousand increase in wheeling resulting from an increase in projected deliveries. This was offset by savings in limited use of outside consultants for technical studies. Pima Mine Rd: 2018 projected deliveries are within budgeted limits. Total projected costs is $153 thousand less than budget, due mostly from reduced expenses in technical studies from lower than expected groundwater modeling in preparation for ADWR application costs. Superstition Mountain: Full year deliveries is 5K acre-feet higher than budget, resulting in $65 thousand more in revenues. FY Total cost is projected to be $20 thousand less than budget due in part to lower than expected charged salaries and wages and overhead charged to this recharge site. Tonopah D esert: There were no planned deliveries to Tonopah this year, but regularly planned maintenance, including herbicide spraying will still be done. Total cost is $73 thousand less than budget due mostly to $100 thousand for regular maintenance not done this year YTD Financial Review - Page 35

37 2018 Rate Reconciliation (Dollars in Thousands) Projection 2018 YTD Financial Review - Page 36 Budget Total General Fund Operating Ex penses $ 238, ,809 Adjustments f or O&M Ex penses Depreciation & Amortization (46,662) (48,276) Pumping power and capacity charges (82,772) (91,229) Hoover Contract Transmission Adjustment (3,087) (3,099) Underground storage site O&M (1,429) (1,858) Extra Ordinary Maintenance (when part of "Big R") (1,854) (1,320) Equipment (258) (323) Inventory Adjustment (76) (400) NIA Expenses Relating to NEPA (29) (28) Other income (497) (648) Recovery Expenses (1) - CAP's Contribution toward Ag Forbearance Programs (261) (285) Total Adjustments (136,926) (147,466) Fix ed O&M Ex penses $ 101,474 $ 102,343 Pumping Power & Hoov er capacity charges Pumping Power and capacity charges $ 82,772 $ 91,229 Power Adjustment Hoover Contract Transmission Adjustment 3,087 3,099 Net Shaping & Displacement (4,477) (500) Total Pumping Power & Hoov er capacity charges $ 81,382 $ 94,805 Calculation of Reconciled Water Rates Subcontract / Federal Rates Projected Reconciled 2018 Projected Reconciled 2018 to Published Rate Published Rate to Budget Budget Fixed O&M Expenses ($000) $ 101,474 $ 98,810 $ 101,474 $ 102,343 Total Pumping Power Expenses ($000) $ 81,382 $ 94,291 $ 81,382 $ 94,805 Billed Fixed OM&R Water Volumes & Credits (AF) 1,503,245 1,465,000 1,503,245 1,455,457 Energy Rate 1 Water Volumes (AF) 1,493,245 1,450,000 1,493,245 1,455,457 Calculated Fixed O&M Rate ($/AF) $ $ $ $ Capital Replacement Component ("Big R") Rate Stabilization Component Navajo Decommissioning Rate Calculated Energy Rate Total Rates ($/AF) $ $ $ $ Funds from reconciliation-fixed O&M ($000) $ 2,255 $ - Funds from reconciliation-energy ($000) $ 15,291 $ - Total Funds from reconciliation ($000) $ 17,546 $ - Notes are shown on the following page.

38 2018 Rate Reconciliation Notes When compared to the budget (right most column of the above chart): * Fixed O&M Expenses is lower than 2018 budget, mainly attributed to lower pumping power and capacity charges. * Pumping power is under budget due to lower energy rate. When compared to the published rates (published rate is second from left column): * Actual reconciled Fixed OM&R rate is $93.5 per acre-feet. * "Big R" rate lowered by $2/AF due to decrease in capital spending. * Actual reconciled energy rate is $54.76 per acre-feet. * $17.5 million will be available from the 2018 reconciliation Ag Consideration and Ag Incentiv e Programs Dollars in Thousands FY Actual Published Rate Budget Ag Consideration (1) ($22,966) (24,401) (24,123) Ag Incentive (2) ($416) (422) (396) Tax Us age f or Ag Pr ogr ams (3) ($23,382) ($24,823) ($24,519) Notes: 1) The actual Ag consideration is calculated using the reconciled rates. This actual includes the full Ag settlement pool volume and is reduced by the Ag forbearance volumes. 2) Incentive is given to customers who meet AWBA/CAGRD GSF and recovery goals ($2 for 2018). It excludes costs associated with Ag Forebearance 2. 3) One-cent of the 10-cent general ad valorem tax generates approximately $5.1 million in revenue. Ag consideration and Ag incentive programs use approximately 4.5-cents YTD Financial Review - Page 37

39 Extraordinary Maintenance & Operating Projects (Dollars in Thousands) 3rd Quarter 2018 Full Year 2018 Actual Budget Variance Projection Budget Variance ($) (%) ($) (%) Ex penses Salaries and related costs $ (269) $ (215) $ (54) (25.1%) $ (326) $ (236) $ (90) (38.1%) Other operating costs: Outside services (870) (774) $ (96) (12.4%) (1,170) (831) $ (339) (40.8%) Materials and supplies (22) (10) (12) (120.0%) (22) (10) (12) (120.0%) Other expenses/overhead (279) (223) (56) (25.1%) (336) (243) (93) (38.3%) Subtotal (1,171) (1,007) (164) (16.3%) (1,528) (1,084) (444) (41.0%) Total Ex penses $ (1,440) $ (1,222) $ (218) (17.8%) $ (1,854) $ (1,320) $ (534) (40.5%) EM-Manifold Relining at Little Harquahala & Hassayampa (1,206) (996) (210) (21.1%) (1,206) (996) (210) (21.1%) EM-Siphon Repairs at Salt River (234) (226) (8) (3.5%) (648) (324) (324) (100.0%) Total $ (1,440) $ (1,222) $ (218) (17.8%) $ (1,854) $ (1,320) $ (534) (40.5%) Total Project Costs Through 2018 Remaining Total Project Variance 12/31/2017 Actual Balance Projected Budget ($) (%) EM-Manifold Relining at Little Harquahala & Hassayampa (31) (1,206) (1,385) (2,622) (2,144) (478) (22.3%) EM-Siphon Repairs at Salt River - (648) (7,252) (7,900) (7,576) (324) (4.3%) Total $ (31) $ (1,854) $ (8,637) $ (10,522) $ (9,720) $ (802) (8.3%) 2018 YTD Financial Review - Page 38

40 BUDGET PERFORMANCE - Full Year 2018 (Dollars in Thousands) Projected Spending Authority Rev enues $ 39,175 $ 39,721 $ (546) (1%) Expenses (9,569) (12,403) 2,834 23% Change in Net Position 29,606 27,318 2,288 8% Beginning Net Position 147, ,026 (13,187) Ending Net Position $ 177,445 $ 188,344 $ (10,899) Total Revenues Change Total revenues are projected to be $39.2 million in 2018, which is $0.5 million lower than budget. Revenues from rates are projected to be lower than budget by $3.1 million due to lower replenishment obligation acre-feet. Revenue from fees will exceed budget by $3.2 million. Membership dues are expected to be lower than budget by $1.3 million. Interest income is expected to be higher than budget by $0.6 million as a portion of invested funds were moved form short-term to long-term investments. Total Expenses Expenses are projected to be $2.8 million lower than total spending authority. The expense for water obligations is forecasted to be $0.8 million lower than budget. Outside services are expected to be $0.6 million below budget as costs for bonding are not expected to occur in Interest expense will be $1.7 million lower than budget as bonds that were anticipated in the budget will not be issued this year. Reserves The CAGRD maintains the following cash reserves that are held by the Arizona State Treasurer: Administrative Funds are used to pay the administrative expenses of the CAGRD. Infrastructure and Water Rights Funds in this reserve are dedicated to the development of water supplies and infrastructure necessary for CAGRD to meet its replenishment obligations. In accordance with the current Plan of Operation and direction of the CAWCD Board of Directors, CAGRD is actively pursuing the development of additional water supplies that can be used to meet replenishment obligations in both the near-term and long-term. To date, CAGRD has developed several different types of water supplies through a variety of mechanisms. These supplies range from permanent CAP M&I subcontract entitlements to a long-term lease of water from an Arizona Tribal community. CAGRD also has secured a State recommendation for an entitlement to NIA-priority CAP water, has entered into several agreements to purchase long-term storage credits and has contracted for a 100-year lease of municipal effluent. These various supplies represent the equivalent of approximately 35,000 acre-feet/year of 100-year water supply. A $95 million long-term storage credit purchase is anticipated in Water and Replenishment Funds are used to purchase and recharge water to meet CAGRD s annual replenishment obligation on a cost-of-service basis. Water is not actually purchased until the revenues have been received by CAGRD. This methodology ensures CAGRD s financial health because it allows CAGRD to avoid going into debt for this activity. Replenishment Reserve Funds held in this reserve are used to accrue long-term storage credits to establish a replenishment reserve as required by state law YTD Financial Review - Page 39

41 2018 YTD Financial Review - Page 40

42 Statement of Revenues, Expenses and Change in Net Position CAGRD (Dollars in Thousands) 3rd Quarter 2018 Full Year 2018 Total Actual Budget Variance Projection Budget Budget Adjustments Spending Authority Variance ($) (%) ($) (%) Notes Operating Rev enues Other revenues $ 15,830 $ 12,603 $ 3, % $ 37,992 39,130 $ 39,130 $ (1,138) (2.9%) A Total Operating Rev enues $ 15,830 $ 12,603 3, % $ 37,992 39,130 39,130 - (1,138) - (2.9%) Operating Ex penses - - Salaries and related costs $ (911) $ (794) $ (117) (14.7%) $ (1,161) (1,058) $ (1,058) $ (103) (9.7%) Depreciation (46) (46) - 0.0% (61) (61) (61) - 0.0% Other operating costs: Outside services (197) (1,111) % (736) (1,336) - (1,336) % B Water for underground storage (6,384) (7,141) (7,141) % C Materials and supplies (1) (1) - 0.0% (1) (1) (1) - 0.0% Overhead (935) (804) (131) (16.3%) (1,187) (1,072) (1,072) (115) (10.7%) Other expenses (19) (25) % (39) (37) (37) (2) (5.4%) Subtotal (1,152) (1,941) % (8,347) (9,587) - (9,587) 1, % Total Operating Ex penses (2,109) (2,781) % (9,569) (10,706) - (10,706) 1, % Net Operating Income/(loss) $ 13,721 $ 9,822 $ 3, % $ 28,423 28,424 $ - $ 28,424 $ (1) (0.0%) Non-operating Rev enues/(ex penses) Interest income $ 887 $ 443 $ % $ 1, $ 591 $ % D Interest expense - (943) % - (1,697) (1,697) $ 1, % E Net Non-operating Income/(Loss) $ 887 $ (500) 1, % $ 1,183 (1,106) - (1,106) 2, % Change in Net assets $ 14,608 $ 9,322 $ 5, % $ 29,606 27,318 $ - $ 27,318 $ 2, % Net position at beginning of period 147, ,026 (13,187) (8.2%) 147, , ,026 (13,187) (8.2%) Net position at end of period $ 162,447 $ 170,348 $ (7,901) (4.6%) $ 177, ,344 $ - $ 188,344 $ (10,899) (5.8%) NOTES: A B C Reimbursements and Other Rev enues: YTD revenue exceeded budget by $3.3 million due to higher activation, enrollment and upfront fees. Full year revenue for 2018 is projected to be lower than budget. Revenue from rates is expected to be $3.1 million lower due to lower replenishment obligation acre-feet that budgeted. Pre-2004 subdivisions now have no minimum excess groundwater factor requirement. Revenue from membership dues are expected to be lower than budget by $1.3 million while revenue from fees are expected to exceeded budget by $3.2 million. Outside Serv ices: YTD is under budget by $0.1 million due to timing of the water acquisition program consulting services. Full year is forecast to be below budget by $0.6 million as financial analysis costs for bonding will not occur in Water f or Underground Storage: The expense for water will be lower than budget as replenishment obligation acre-feet for 2018 pumping will be below budget and a true-up of the (2017) pumping that was accrued last year will be recorded in D E Interest Income: Interest income will exceed budget as a portion of invested funds were moved from short-term to long-term investments. Interest Ex pense: The 2018 budget anticipated issuing revenue bonds with an interest expense of $1.7 million. Bonds will not issued this year, so interest expense will be $ YTD Financial Review - Page 41

43 CAGRD Replenishment Obligation Year and Corresponding Purchased Water (in Acre-Feet) R EPLENIS HMENT OB LIGATIONS (Acre-Feet by AMA) Phoe nix AMA Pinal AMA Tucs on AMA Tot al AMA's Replenishment Obligation AF - Outstanding Obligation-Year Beginning , ,132 36,496 Adjust prior year obligation accrual based on current information (14,027) (12) (806) (14,845) Annual Credits Accrued in 2018 from purchased water and credits (39,511) - (2,540) (42,051) Annual Obligation (based on estimated 2018 Pumping Report) 28, ,200 32,500 Projected Outstanding Obligation-Year Ending ,742 1,372 3,986 12,100 Phx AMA - Scottsdale Pinal AMA - None Tuc AMA - Metro Water Total AMA's Contract Replenishment Obligation by AMA Outstanding Obligation-Year Beginning Annual Obligation for 2018 (based on 2017 Pumping Report) 1, , Purchased Water (1,260) 0 0 (1,260) Projected Outstanding Contract Obligation-Year Ending YTD Financial Review - Page 42

44 CAGRD Reserve Balances - Cash Basis (Dollars in Thousands) 2017 Act ual 3rd Qtr 2018 YTD Actual 2018 Projection Administrativ e: Beginning Fund Balance $ 1,973 $ 1,632 $ 1,632 Administrative Component Revenue 1, ,227 Enrollment Fees Total Cash Collected 1, ,495 Administrative (Operating) Expenses (1,478) (1,119) (1,587) Total Cash Expended (1,478) (1,119) (1,587) Interest Income / Expense Ending Fund Balance $ 1,632 $ 1,212 $ 1,579 Inf rastructure and Water Rights: Beginning Fund Balance $ 57,748 $ 61,071 $ 61,071 Revenue 23,273 13,741 27,068 Water Rights Purchases (250) Long Term Storage Credits (18,893) (4,910) (70,505) Technical Studies & Other Operating Expenses (1,360) (919) (1,536) Temporary Transfer to Water & Replenishment - (5,820) (900) Interest Income / Expense ,044 Ending Fund Balance $ 61,071 $ 64,265 $ 16, YTD Financial Review - Page 43

45 CAGRD Reserve Balances - Cash Basis (Dollars in Thousands) 2017 Actual 3rd Qtr 2018 YTD Actual 2018 Projection Water and Replenishment: Beginning Fund Balance $ 2,218 $ 2,370 $ 2,370 Water and Replenishment Revenue 6,319 2,439 5,987 Temporary Transfer from Infrastructure - 5, Water/Credits Purchased (6,194) (7,242) (8,404) Interest Income / Expense Ending Fund Balance $ 2,370 $ 3,430 $ 913 Replenishment Reserv e: Beginning Fund Balance $ 638 $ 1,446 $ 1,446 Replenishment Reserve Revenue 3,517 1,446 3,395 Water Purchased (102) - - CAP Credits (2,625) - - Other Credits Interest Income / Expense Ending Fund Balance $ 1,446 $ 2,921 $ 4, YTD Financial Review - Page 44

46 CAGRD Reserve Balances - Cash Basis (Dollars in Thousands) Phoenix AMA Pinal AMA Full Year 2018 Tucson AMA Inf rastructure Admin Total Water and R eplenishment: Beginning Fund Balance $ 1,699 $ 65 $ 606 $ 2,370 Revenue 5, ,987 Water/Credits Purchased (7,845) - (559) (8,404) (921) (47) Transfer from Infrastructure Interest Income (Expense) Ending Balance $ 25 $ 209 $ 679 $ 913 R eplenishment R eserv e: Beginning Fund Balance $ 1,190 $ 12 $ 244 $ 1,446 Revenue 3, ,395 Water Purchased CAP Credits Other Credits , ,841 Interest Income (Expense) Ending Balance $ 4,226 $ 84 $ 571 $ 4,881 Inf rastructure and Water R ights: Beginning Fund Balance $ 61,071 $ 61,071 Revenue 27,068 27,068 Expense (1,536) (1,536) Transfer to Water (900) (900) Water Rights Long Term Storage Credits (70,505) (70,505) 15,448 15,448 Interest Income (Expense) 1,044 1,044 Ending Fund Balance $ 16,492 $ 16,492 Administrativ e: Beginning Fund Balance $ 1,632 $ 1,632 Revenue / Transfer 1,495 1,495 Expense (1,587) (1,587) 1,540 1,540 Interest Income (Expense) Ending Fund Balance $ 1,579 $ 1, YTD Financial Review - Page 45

47 2018 YTD Financial Review - Page 46

48 Statement of Revenues, Expenses and Change in Net Position Captive Insurance Fund (Dollars in Thousands) 3rd Quarter 2018 Full Y ear 2018 Actual B udget Variance Projection B udget Budget Adjustments Total Spending Authority Variance ($) (%) ($) (%) Notes Operating R ev enues Other revenues $ 6,834 $ 6,936 $ (102) (1.5%) $ 9,114 $ 9,248 $ 9,248 $ (134) (1.4%) A Total Operating R ev enues $ 6,834 $ 6,936 $ (102) (1.5%) $ 9,114 $ 9,248 $ - $ 9,248 $ (134) (1.4%) Operating Ex penses Other Operating costs: Outside services $ (149) $ (147) $ (2) (1.4%) $ (209) $ (196) $ (196) $ (13) (6.6%) B Other expenses (6,797) (6,791) (6) (0.1%) (9,218) (9,055) - $ (9,055) (163) (1.8%) C Total Operating Ex penses (6,946) (6,938) (8) (0.1%) (9,427) (9,251) - (9,251) (176) (1.9%) Net Operating Income/(Loss) $ (112) $ (2) $ (110) (5,500.0%) $ (313) $ (3) $ - $ (3) $ (310) (10,333%) Non-operating R ev enues/(ex penses) Interest income and other $ 9 $ 6 $ % $ 11 $ 7 $ 7 $ % Net Non-operating Income/(Loss) % % Change in Net Position (103) 4 (107) 2,675.0% (302) 4-4 (306) 7,650.0% Net position at beginning of period 4,156 3, % 4,156 3,790 3, % Net position at end of period $ 4,053 $ 3,794 $ % $ 3,854 $ 3,794 $ - $ 3,794 $ % Notes: A B C Reimbursements and other rev enues: Revenue from Workers Comp Insurance premiums is projected to be lower than anticipated. Outside Serv ices: Full year Letter of Credit & Bank related fees for claims management are expected to be $13 thousand higher than planned. Other Ex penses : 2018 underwriting expenses are projected to be $163 thousand over budget due to higher than expected claims YTD Financial Review - Page 47

49 2018 YTD Financial Review - Page 48

50 Statement of Revenues, Expenses and Change in Net Position Supplemental Water Account (Dollars in Thousands) 3rd Quarter 2018 Full Year 2018 Total Spending Actual Budget Var iance Projection Authority Var iance Notes ($) (%) ($) (%) Operating Ex penses Outside services $ - $ - $ - N/A $ - $ - $ - N/A Total Operating Ex penses N/A N/A Non-operating Rev enues/(ex penses) Interest income / FV Adj $ 89 $ 110 $ (21) (19.1%) $ 118 $ 146 $ (28) (19.2%) A Interest expenses and other N/A - - N/A Total Non-operating Rev enues/(ex penses) (21) (19.1%) (28) (19.2%) Change in Net Position (21) (19.1%) (28) (19.2%) Net position at beginning of period 8,353 8,369 (16) (0.2%) 8,353 8,369 (16) (0.2%) Net position at end of period $ 8,442 $ 8,479 $ (37) (0.4%) $ 8,471 $ 8,515 $ (44) (0.5%) Notes: A. The 2018 variance is attributed to an unfavorable fair value adjustment (FV) YTD Financial Review - Page 49

51 2018 YTD Financial Review - Page 50

52 The Project Steering Committee (PSC) oversees the individual projects ensuring total capital expenditures do not exceed the annual approval amount and if necessary may request approval from the Board for additional spending. The Project Management Office and Engineering with the support of the PSC reviewed the current projects and Asset Modifications. Change in scope, scheduling and timing are the main causes for project cost variances. These Projects experiencing the most significant variances during 2018 are listed in the following table. GASB No. 89 has rescinded the accounting for interest cost incurred before the end of a construction period. Both 2018 Forecast and 2018 Budget have been reduced to reflect this change. (Dollars in Thousands) 2018 Forec as t 2018 Bu d g et C hang e C apit al Eq u ip ment $3,361 $4,262 $901 C apit al P rojec t s Fire Protection at South Pumping Plants 3,543 6,067 2,524 Fire Protection CO2 Modification at Waddell Fuel System Replacement at HQ 1,791 1,558 (233) Governor Controls Replacement at Waddell 1,043 1, Industrial Water Treatment at BRD, PIC, RED 1, (904) Maintenance Building Enclosures at HQ (350) Motor Exciter and Control Repl BDY,PIC,RR (224) Sewage System Replacement at LHQ P.P (321) Transmission Line Connection at Hassayampa 4,394 4,108 (286) Other 16,956 18,539 1,583 Subtotal Capital Projects $31,033 $33,335 $2,302 TOTAL CAWCD CAPITAL PR OJECTS Many of the projects cover multiple years. Consequently, projects may be completed early and increase costs in the current year or may be delayed and push costs into later years. For this reason, the PSC monitors the project's total cost performance, in addition to annual spending. The following table lists significant projects and their total projected variances. (Dollars in Thousands) Projec t ed Budget C hange C apit al Projec t s Transmission Line APS and Hass Tap Connection $41,338 $42,955 $1,617 Fire Protection at South Pumping Plants 10,372 7,344 (3,028) Transmission Line Rebuild ED2 to Saguaro 10,374 11,990 1,616 Motor Exciter and Control Repl at West Plants 8,101 8, Condition Based Monitoring 8,581 7,692 (889) Electromechanical Relay Digital Replacement - Phase 1 7,861 7, Circuit Breakers Air System Repl at M. Wilmer 6,780 7, Elevator System Replacement - Phase 2 6,416 6, Backup Power Systems-Checks & Turnouts 5,748 5, Motor Exciter and Control Repl BDY,PIC,RR 4,951 4,475 (476) Tot al C AWC D C ap it al Expendit ures $34,394 $37,597 $3,203 GASB No. 89 Capitalized Interest Adjustment * - (1,303) (1,303) Adjus t ed Tot al C AWC D C apit al Expendit ures $34,394 $36,294 $1,900 *Individual projects reflect the GASB change for 2018 Forecast YTD Financial Review - Page 51

53 2018 YTD Financial Review - Page 52