February 14, Attention: Administrative and Finance Committee. Controller s Report on Monthly Financial Reports.

Transcription

1 February 14, 2018 Attention: Administrative and Finance Committee Controller s Report on Monthly Financial Reports. (Information) Purpose The purpose of the Controller s Report is to provide monthly financial information to the Board of Directors. Financial Reports Attached for review by the Administrative and Finance Committee and the Board of Directors are the following financial reports: 1. Water Sales Volumes, in acre-feet 2. Water Sales Revenues, in millions 3. Water Purchases and Treatment Costs, in millions 4. Budget Status Report 5. Operating Departments Expenses, in millions 6. Schedule of Cash and Investments The Budget Status Report (Attachment 4) compares actual revenues and expenses, on a budgetary basis, for the six-month period of July 1, 2017 through December 31, 2017, to the period-to-date adopted budget. Budgeted amounts for the six-month period are presented on a straight-line basis unless noted herein. Water sales and purchases are budgeted based on projected monthly volume in acre-feet. Period-to-date budgeted revenue categories were all adjusted to reflect the expected timing of receipt. In addition, certain period-to-date budgeted expense categories were adjusted for periodic items and include the following: debt service, QSA mitigation, annual insurance premiums, and contributions to the Six Agency Fund. Net Water Sales Revenue 1 Net Water Sales Revenue is the Water Authority s principal source of revenue and is the difference between the sale of water and the cost of that water. Sales include revenues from variable commodity charges for supply, treatment and transportation, as well as from fixed charges for customer service, emergency storage, infrastructure access charge, and supply reliability. Cost of water includes payments to water suppliers such as Metropolitan Water District (MWD), Imperial Irrigation District (IID), and Poseidon Resources (Channelside) LP. 1 All information regarding water sales volumes, revenues and costs are based on the Adopted Multi-Year Budget for Fiscal Years 2018 and 2019.

2 Administrative and Finance Committee February 14, 2018 Page 2 of 4 Net Water Sales Revenue for the six months ended December 31, 2017 was $84.1 million, or 8 percent higher than the period-to-date budgeted amount of $77.6 million. Water Purchase and Treatment Costs were below the anticipated amounts due to lower than projected water sales as well as reduced purchases from the Carlsbad Desalination Plant resulting from unanticipated plant downtime for repairs. Detailed information relating to Net Water Sales Revenue is described below and shown on Attachments 1, 2, and 3. Total acre-feet (AF) of water sold were budgeted to be 242,655 AF for the six months ended December 31, The actual water sales volume was 222,937 AF, 19,718 AF or 8 percent lower than budgeted (Attachment 1). Total Water Sales Revenue for the six months ended December 31, 2017 was $317.1 million, $26.4 million or 8 percent lower than the period-to-date budgeted amount of $343.5 million (Attachment 2). Lower Water Authority sales to member agencies are the result of 2 primary factors: 1) Total regional water demand remained virtually flat compared to the same period last year (a slight increase in water demand was projected); 2) Greater than projected member agency use of local surface water supplies. Total Water Purchases and Treatment costs were budgeted at $265.8 million for the six months ended December 31, costs were $232.9 million, $32.9 million or 12 percent lower than budgeted (Attachment 3). This cost category included $32.0 million for the 50,000 AF of water purchased from IID, and $41.3 million for MWD s conveyance charges related to IID, Coachella Canal and All-American Canal water. Also reflected in actual costs were water purchases from Poseidon Resources (Channelside) LP of approximately $44.8 million for the six months ended December 31, Revenues and Other Income As shown in Attachment 4, total Revenues and Other Income were budgeted at $44.4 million for the six-month period ended December 31, revenues were $51.5 million, $7.1 million higher than budgeted. The variance is explained in detail below. Categories of revenues in which actual revenues were higher than the six-month period-to-date budget included the following: Grant Reimbursements, Other Income, Property Taxes and In- Lieu Charges, Capacity Charges, and Hydroelectric Revenue. Grant Reimbursements revenue for Integrated Regional Water Management Program (IRWMP) Grants were $4.5 million more than budgeted due to the timing of reimbursements received. Other Income was $3.0 million more than budgeted due to an insurance refund received from Liberty Mutual for the Emergency and Carryover Storage Project, miscellaneous revenue reimbursements received, and shortfall revenue related to the Carlsbad Desalination Plant. Capacity Charges were $0.4 million higher than anticipated compared to the period-to-date budget due an increase in the number of permits issued. Property Taxes and In-Lieu Charges and Hydroelectric Revenue were higher than budgeted by $0.7 million and $0.1 million, respectively, for the six months ended December 31, 2017.

3 Administrative and Finance Committee February 14, 2018 Page 3 of 4 Categories of revenues in which actual revenues were less than the six-month period-to-date budget included Contributions in Aid of Capital Improvement Program (CIAC), Infrastructure Access Charges, and Water Standby Availability Charges which were lower by $0.8 million, $0.3 million, and $0.1 million, respectively, due to less than anticipated receipts. Build America Bonds Subsidy was lower than the period-to-date budget by $0.4 million. The Water Authority receives semi-annual subsidy payments from the United States Treasury equal to 35 percent of the interest payable on the Series 2010B Bonds. The IRS subsidy payment received was reduced by 6.9%, the IRS sequestration reduction rate applied to payments processed from October 1, 2016 through September 30, A yearly sequestration reduction rate will be applied unless and until a law is enacted that cancels or otherwise affects the sequester, at which time the sequestration reduction rate is subject to change. Expenses As shown in Attachment 4, total Expenses were budgeted at $96.6 million for the six-month period ended December 31, expenses were $89.0 million, $7.6 million lower than budgeted. The variance is explained in detail as follows. Overall Operating Department expenses shown in Attachment 5 were lower than budgeted by $4.9 million for the six-month period ended December 31, 2017 due to the timing of expenses. Grant Expenses were $2.4 million lower than the period-to-date budget resulting from the lower-than-projected activity levels and the timing delay in expense recognition of pass-through IRWMP grants. Equipment Replacement was lower than budget by $0.5 million due to timing. Other Expenses were $0.2 million higher than the six-month period-to-date budget. CIP Expenses Attachment 4 shows that CIP Expenses were budgeted at $29.2 million for the six-month period ended December 31, expenses were $21.3 million, $7.9 million lower than the period-to-date budgeted amount. The variance was primarily attributed to the timing of expenses. Cash and Investments As of December 31, and November 30, 2017, the overall balance in the Water Authority s cash and investments was $383.8 million and $392.6 million, respectively (Attachment 6). As of December 31, 2017, the cash and investments balance was approximately 60 percent unrestricted funds with the remaining 40 percent of funds restricted for specific purposes. To maximize investment returns, the Water Authority Treasurer pools the cash of the Pay As You Go Fund with total unrestricted funds. As of December 31, 2017, the Rate Stabilization Fund was funded at $135.8 million, approximately 97 percent of the maximum approved level of $139.9 million. Prepared by: Jocelyn Matsuo, Senior Accountant Reviewed by: Christopher W. Woidzik, Controller Approved by: Lisa Marie Harris, Director of Finance/Treasurer

4 Administrative and Finance Committee February 14, 2018 Page 4 of 4 Attachments: Attachment 1 Water Sales Volumes Attachment 2 Water Sales Revenues Attachment 3 Water Purchases and Treatment Costs Attachment 4 Budget Status Report Attachment 5 Operating Departments Expenses Attachment 6 Schedule of Cash and Investments

5 Attachment 1 WATER SALES VOLUMES Budget Versus (in Acre-Feet) for the 6 Months Ended December 31, 2017 Acre-Feet (AF) 500, , , , , , , , ,000 50,000 - Budget 242,655 AF -8% 222,937 AF *Budget (a) *Budgeted amounts are based on the Adopted Multi-Year Budget for Fiscal Years 2018 and Fiscal Year 2018 Cumulative Water Sales (AF) Months Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 *Budget (a) 50, , , , , , , , , , , ,353 41,812 85, , , , , AF Difference (b) (8,360) (14,916) (20,196) (17,372) (15,103) (19,718) Cum. AF % Difference (b/a) -17% -15% -14% -9% -7% -8%

6 Attachment 2 WATER SALES REVENUES Budget Versus (in Millions $) for the 6 Months Ended December 31, 2017 in Millions $ $700.0 $600.0 $500.0 $400.0 $300.0 $200.0 $100.0 $- Budget $ % $317.1 *Budget (a) *Budgeted amounts are based on the Adopted Multi-Year Budget for Fiscal Years 2018 and Fiscal Year 2018 Cumulative Water Sales (in Millions $) Months Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 *Budget (a) $ 68.0 $ $ $ $ $ $ $ $ $ $ $ Difference (b) $ (9.8) $ (18.1) $ (24.5) $ (22.1) $ (21.7) $ (26.4) Cum. % Difference (b/a) -14% -13% -12% -9% -7% -8%

7 Attachment 3 WATER PURCHASES AND TREATMENT COSTS Budget Versus (in Millions $) for the 6 Months Ended December 31, 2017 $600.0 $500.0 in Millions $ $400.0 $300.0 $200.0 $100.0 Budget $265.8 $ % $- *Budget (a) *Budgeted amounts are based on the Adopted Multi-Year Budget for Fiscal Years 2018 and Fiscal Year 2018 Cumulative Cost of Water Purchases and Treatment (in Millions $) Months Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 *Budget (a) $ 53.9 $ $ $ $ $ $ $ $ $ $ $ Difference (b) $ (9.0) $ (20.2) $ (30.9) $ (29.9) $ (30.2) $ (32.9) Cum. % Difference (b/a) -17% -19% -20% -15% -13% -12%

8 Attachment 4 San Diego County Water Authority Fiscal Year 2018 Budget Status Report For the 6 Months Ended December 31, 2017 [A] [B] = [A * 50%] [C] Revenues = [-B + C] Expenditures = [B - C] [C / A] FY 2018 (6 months - 50%) FY Months (50%) 6 Months to Adopted Period-to-Date Period-to-Date Variance FY 2018 Budget Adopted Budget (a) Positive (Negative) Adopted Budget Net Water Sales Revenue Water Sales $ 635,069,193 $ 343,483,251 (b) $ 317,071,492 $ (26,411,759) 50% Water Purchases & Treatment 495,079, ,849,763 (b) 232,923,296 32,926,467 47% Total Net Water Sales Revenue 139,989,462 77,633,488 84,148,196 6,514,708 60% Revenues and Other Income Infrastructure Access Charges 32,477,000 16,215,918 (l) 15,906,282 (309,636) 49% Property Taxes and In-Lieu Charges 12,555,000 (c) 5,328,002 (l) 6,000, ,352 48% Investment Income 5,175,000 (d) 2,587,372 (l) 2,614,761 27,389 51% Hydroelectric Revenue 3,535,000 (e) 1,662,913 (l) 1,785, ,805 51% Grant Reimbursements 15,470,000 3,867,500 (l) 8,375,654 4,508,154 54% Build America Bonds Subsidy 11,303,000 5,651,479 (l) 5,267,179 (m) (384,300) 47% Other Income 489, ,382 (l) 3,223,661 2,979, % Capital Contributions: Capacity Charges 16,629,000 (f) 5,820,066 (l) 6,233, ,400 37% Water Standby Availability Charges 11,114,000 (g) 2,222,800 (l) 2,095,641 (127,159) 19% Contributions in Aid of Capital Improvement Program (CIAC) 1,570,000 (h) 784,878 (l) - (784,878) 0% Total Revenues and Other Income 110,317,000 44,385,310 51,502,716 7,117,406 47% Total Revenues 250,306, ,018, ,650,912 13,632,114 54% Expenses Debt Service 138,577,000 (i) 51,038,916 (l) 51,038,916-37% QSA Mitigation 10,165,000 (j) 10,164,814 (l) 10,164, % Equipment Replacement 2,292,000 1,146, , ,961 28% Grant Expenses 15,720,000 7,860,000 5,499,918 2,360,082 35% Other Expenses 500, , ,189 (207,189) 91% Operating Departments (see below) 51,370,917 (k) 26,138,901 21,192,558 4,946,343 41% Total Expenses 218,624,917 96,598,631 88,986,434 7,612,197 41% Net Revenues Before CIP $ 31,681,545 $ 25,420,167 $ 46,664,478 $ 21,244, % CIP Expenses $ 58,323,000 $ 29,161,500 $ 21,256,436 $ 7,905,064 36% CIP Expenses by Funding Source Pay As You Go Fund $ 21,256, % Operating Departments Detail (see Attachment 5) Administrative Services $ 5,843,546 $ 3,250,295 (l) $ 2,688,287 $ 562,008 46% Colorado River Program 1,669, ,709 (l) 703, ,923 42% Engineering 3,532,727 1,766,364 1,505, ,209 43% Finance 2,437,485 1,218,743 1,098, ,564 45% General Counsel 3,480,151 1,740,076 1,445, ,942 42% General Manager & Board of Directors 4,877,034 2,438,517 1,895, ,033 39% MWD Program 2,238,155 1,119,078 1,097,707 21,371 49% Operations & Maintenance 19,642,917 9,821,459 7,648,354 2,173,105 39% Public Outreach and Conservation 3,882,715 1,941,358 1,564, ,320 40% Water Resources 3,766,604 1,883,302 1,546, ,868 41% Total Operating Departments $ 51,370,917 $ 26,138,901 $ 21,192,558 $ 4,946,343 41%

9 San Diego County Water Authority Fiscal Year 2018 Budget Status Report For the 6 Months Ended December 31, 2017 Notes to the Budget Status Report: a) Period-to-date budgeted amounts are 6/12ths (50%) of Fiscal Year 2018 adopted budget unless noted. b) Water sales and water purchases period-to-date budgeted amounts are based on projected acre-feet calculated per month. c) Property taxes are primarily received in December and April. In-lieu charges in the amount of $559,402 for Fiscal Year 2018 are received quarterly from the City of San Diego. d) Investment income excludes unrealized gains/losses, which are non-cash transactions. e) Hydroelectric revenue budget amount includes Rancho Penasquitos Pressure Control and Hydroelectric Facility (Rancho Hydro) and Lake Hodges Pumped Storage Facility (Hodges Hydro). Power generating from both locations are sold to San Diego Gas and Electric. f) Capacity charges are primarily received in July, October, January and April, after the quarterly period ends, and accrued revenue are recorded for the quarter ending June. g) Water standby availability charges are primarily received in January and May. h) Contributions in aid of capital improvement program include planned reimbursements for miscellaneous projects. i) Bonds and Certificates of Participation debt service payments due semi-annually on November 1 and May 1. Pipeline Bonds, Series 2012 debt service payments due semi-annually on July 1 and January 1. Debt Service includes principal, interest expense, and debt service fees. Amortization expense relating to longterm debt, such as discounts, premiums, and deferred loss on refunding are excluded because they are noncash transactions. j) The QSA mitigation payments includes: QSA JPA Fiscal Year 2018 contributions of $1,850,000 due July 2017 and $8,314,814 due December 2017; QSA JPA Fiscal Year 2019 contributions of $1,750,000 due July 2018 and $6,914,667 due December k) Amounts include capital equipment purchases. l) Period-to-date budgeted amounts adjusted based on items occurring on a periodic basis. m) The semi-annual subsidy payments from the United States Treasury equal to 35 percent of the interest payable on the Series 2010B Bonds were reduced under Congressionally-mandated sequestration by $389,952 for Fiscal Year 2018.

10 Attachment 5 San Diego County Water Authority Comparison of Adopted Budget and Period-to-Date Adopted Budget (50% Overall) to Operating Expenses by Departments For the 6 Months Ended December 31, 2017 Operating Expenses to Adopted Budget in Percentages (%) $ % $20.0 in Millions ($) $15.0 $10.0 $5.0 $ % Adopted Budget FY 2018 $51.4 Million Period-To-Date Adopted Budget $26.1 Million Period-to-Date Operating Expenses $21.2 Million

11 Attachment 6 San Diego County Water Authority Schedule of Cash and Investments As of December 31, and November 30, 2017 December November Target Operating Fund $ 95,554,170 $ 89,726,455 $ 83,337,000 (2) Stored Water Fund (4) - - Equipment Replacement Fund 288, ,723 Rate Stabilization Fund 135,830, ,778,159 $ 97,400,000 (3) Total Unrestricted Funds (1) 60% 231,673,389 58% 225,898,337 Pay As You Go Fund (1) 129,591, ,172,769 Debt Service Reserve Funds 22,582,788 22,572,605 Total Restricted Funds 40% 152,173,986 42% 166,745,374 Total Cash and Investments $ 383,847,375 $ 392,643,711 Notes: (1) Total Unrestricted Funds and the Pay As You Go Fund represent the Pooled Funds in the Treasurer's Report. (2) The Operating Fund is set to equal 45-days of operating expenses. (3) In 2006, the Board adopted the current policy governing the Rate Stabilization Fund (RSF) balances. The policy created a target and a maximum RSF balance. The RSF target balance is equal to the financial impact of 2.5 years of wet weather or mandatory drought regulations and the RSF maximum balance is set equal to the financial impact of 3.5 years of wet weather or mandatory drought regulations. The effect of the current policy is to create a target for fund balances that is tied to the real financial impacts/risks that the fund is designed to protect against. The current balance in this fund represents approximately 139% of the targeted value of $97,400,000 and 97% of the maximum balance of $139,900,000. (4) No cash balance is required in the Stored Water Fund (SWF) at this time. In December 2016, the Board directed the SWF to only hold a cash position if the cost to replace the 70,000 target acre feet of water is below the current value in the Fund. (The fund is comprised of water inventory and cash, if needed.) $160,000,000 $140,000,000 $120,000,000 $100,000,000 $80,000,000 $60,000,000 $40,000,000 $20,000,000 $- Discretionary Fund Balances As of December 31, 2017 Operating Fund Rate Stabilization Fund Balance Target Maximum