OPERATING BUDGET. Fiscal Year Dedicated to Satisfying our Community s Water Needs. MesaWater.org. Mesa Water District, Costa Mesa, California

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1 C OPERATING BUDGET Fiscal Year 2017 Mesa Water District, Costa Mesa, California Dedicated to Satisfying our Community s Water Needs MesaWater.org

2 ADOPTED BUDGET FISCAL YEAR 2017 Dedicated to Satisfying our Community s Water Needs 1965 Placentia Avenue, Costa Mesa, CA MesaWater.org

3 MESA WATER S VISION: To be a top performing public water agency MESA WATER S MISSION: Dedicated to Satisfying our Community s Water Needs Mesa Water s Seven Strategic Goals: Provide a safe, abundant, and reliable water supply. Practice perpetual infrastructure renewal and improvement. Be financially responsible and transparent. Increase public awareness about Mesa Water and about water. Attract and retain skilled employees. Provide outstanding customer service. Actively participate in regional water issues.

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5 Date: May 19, 2016 To: Mesa Water District Board of Directors FISCAL YEAR 2017 BUDGET MESSAGE I am pleased to present the Fiscal Year (FY) 2017 budget for Mesa Water District (Mesa Water ), beginning July 1, 2016 and ending June 30, I would like to express my appreciation to the members of the Board of Directors (Board) for your confidence in Mesa Water s management team as well as your review, advice, suggestions, and policy direction during the budget process. This document reflects the time you spent considering and analyzing the District s financial well-being and role of this community. I would also like to thank staff for their contributions and participation in the development of the FY 2017 Budget. Mesa Water s mission is Dedicated to Satisfying our Community s Water Needs, and its strategic plan fulfills the District s mission through seven equal and important strategic goals. Mesa Water provides safe, high-quality water that meets or surpasses all Federal and State drinking water standards. The improvement of the Mesa Water Reliability Facility (MWRF), allows the District to provide a 100 percent local and reliable, high-quality, and cost-effective water supply for our service area for years to come. Furthermore, Mesa Water is the most efficient water agency in Orange County with the lowest annual per capita expenditures at $272 per capita / year (Orange County industry range = $272 - $1,023 per capita / year). $1,200 Expeditures Per Capita $1,000 $800 $600 $400 $200 $0 ii

6 Mesa Water District Fiscal Year 2017 Budget Organizational Priorities In 2009, Mesa Water s Board adopted a long-range financial plan and multi-year rate increases. In addition, the Board set a credit worthiness goal as defined Fitch, Standard & Poor s and other credible rating agencies. The goal was to improve Mesa Water s AA credit rating to a strong AAA in seven years. The Board adopted additional financial goals to further measure the District s credit-worthiness at the end of each fiscal year by using the Days Cash Ratio and Cash on Hand metrics. The Days Cash Ratio is defined as total cash available divided by Operating Expenses per day and is a measurement of an agency s ability to meet known and unanticipated expenses. At this time, the Board established a Days Cash Ratio goal of 600 days and a Cash on Hand goal of $39.7 million by the end of FY The FY 2017 Budget is lower than the FY 2017 Days Cash Ratio goal of 600 days and the Cash on Hand goal of $39.7 million, with a budgeted Days Cash Ratio of 554 days and a budgeted Cash on Hand amount of $37.2 million due to lower budgeted water sales as a result of conservation because of state-wide drought conditions and higher water cost expenses. With Mesa Water s last debt issuance in December 2010, the Fitch rating agency issued a AAA credit rating. For this same debt issuance, Standard & Poor s issued a AA+ rating at the time. In the fall of 2013, Standard & Poor s issued a AAA rating for the 2010 debt issuance. Mesa Water is continuing to work towards obtaining a strong AAA credit rating from all rating agencies. In December 2013, the Board updated the long-term financial plan and adopted multi-year rate increases from FY 2015 to FY Days Cash Ratio Days FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 Days Cash Ratio Actual or Projected Days Cash Ratio Target iii

7 Mesa Water District Fiscal Year 2017 Budget Millions $50 $40 $30 $20 $26.0M $23.4M Cash on Hand $39.4M $33.1M $33.6M $28.1M $40.7M $39.7M $39.7M $37.2M $10 $0 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 Cash on Hand Actual or Projected Cash on Hand Target As the FY 2017 budget is lower than established Days Cash Ratio and Cash on Hand goals, Mesa Water will continue to fund Designated Reserves in FY 2017 in accordance with Board policy. Capital Replacement & Refurbishment (R&R) $16,000,000 $14,000,000 $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $0 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 R & R Fund Contribution R & R Capital Expenditures Minimum R & R Funding Level iv

8 Mesa Water District Fiscal Year 2017 Budget With the state of California still impacted by the effect of persistent drought and continued droughtemergency conservation, Mesa Water s proposed budget contains water sales reductions compared to recent years actual water sales; however, water sales are budgeted to increase from the prior year as less drought conservation is expected. Mesa Water s FY 2017 Operating Revenues are budgeted at $33.1 million compared to $31.0 million in the FY 2016 budget, a 6.7 percent increase. Changes by major category of Operating Revenues are summarized below: FY 2016 BUDGET FY 2017 BUDGET % CHANGE OPERATING REVENUES: Water consumption sales $ 23,213,988 $ 25,066, % Monthly meter service charge 5,954,466 6,433, % Recycled water sales 1,450,232 1,058, % Other charges and services 427, , % TOTAL OPERATING REVENUES 31,045,686 33,135, % Mesa Water s FY 2017 Operating Expenses are budgeted at $24.5 million compared to $23.4 million in the FY 2016 budget, a 4.7 percent increase. Changes by major category of Operating Expenses are summarized below: FY 2016 BUDGET FY 2017 BUDGET % CHANGE OPERATING EXPENSES: Imported sources of supply 797, , % Clear water cost 4,791,973 6,322, % Amber water cost 3,396,051 3,223, % Recycled water 538, , % Transmission and distribution 5,141,497 4,449, % General and administrative 8,712,869 8,727, % TOTAL OPERATING EXPENSES 23,378,244 24,522, % v

9 Mesa Water District Fiscal Year 2017 Budget The FY 2017 capital budget includes expenditures of $8.4 million representing a 44.2 percent increase from the FY 2016 budget of $5.8 million. Mesa Water s Strategic Plan The following seven goals are reflected in the FY 2017 budget: 1. Provide a safe, abundant, and reliable water supply. 2. Practice perpetual infrastructure renewal and improvement. 3. Be financially responsible and transparent. 4. Increase public awareness about Mesa Water and about water. 5. Attract and retain skilled employees. 6. Provide outstanding customer service. 7. Actively participate in regional water issues. Revenues Due to California s mandated drought-emergency conservation, Mesa Water has budgeted 16,111 acre feet of potable water sales and 1,375 acre feet of recycled water (total of 17,486 acre vi

10 Mesa Water District Fiscal Year 2017 Budget feet) for FY 2017, compared to 15,406 acre feet of potable water sales and 1,375 acre feet of recycled water (total of 16,781 acre feet) budgeted during FY The corresponding increase in FY 2017 budgeted revenue equates an increase of $2.1 million or 6.7% percent compared to budgeted revenue in FY Increased budgeted revenue is due to a lower rate of continued drought conservation in addition to the third year of rate increases in potable water consumption rates and monthly meter service charges within the multi-year rate schedule adopted in 2013 as detailed below: 7/1/2014 1/1/2015 1/1/2016 1/1/2017 1/1/2018 Per Unit * (CCF): Potable $3.27 $3.40 Usage Charge Rate $3.51 $3.62 $3.73 Meter Size: Bi-monthly Meter Basic Charge Rate 5/8" $21.00 $21.50 $22.50 $23.00 $23.50 *One unit equals 100 cubic feet or 748 gallons. Expenses ADOPTED SCHEDULE OF RATE CHANGES Included in this budget are several items which reflect the goals of Mesa Water s Strategic Plan. In FY 2017, Mesa Water will continue maintaining and updating Mesa Water s Computerized Maintenance Management System (CMMS) and streamlining core business processes facilitated through the Business Process Evaluation Implementation. These projects contribute to Strategic Plan goal #3, Be financially responsible and transparent. During FY 2017, Mesa Water will continue conducting outreach to its key audiences, consisting of customers (ratepayers); community members (residents, organizations, and businesses); Federal, State, County, and City elected officials representing the District s service area; industry colleagues at OC municipalities, water districts and special districts; media; and, current and former Mesa Water staff and Board members. This outreach includes facilitating clear, concise, consistent, and constant communications; producing publications about Mesa Water and water; and, running Mesa Water s News Bureau and social media campaign. Additionally, Mesa Water plans to conduct ongoing constituent relations activities such as its Speaker s Bureau program, Town Hall, and Well Wisher meetings, as well as participating in community outreach events and giving tours of the Mesa Water Reliability Facility (MWRF) in order to provide ongoing information to the District s constituents about capital improvements projects and the related benefits. Also, Mesa Water will continue offering water education programs including its Water Issues Study Group (WISG), assemblies for 5th-grade students at schools in Mesa Water s service area, and promoting water stewardship and water use efficiency. Lastly, the District will continue its government relations work including legislative affairs and advocacy activities for issues that may impact Mesa Water and its constituents. These items contribute primarily to the District s Strategic Plan goals #4, Increase public awareness about Mesa Water and about water, and #7, Actively participate in regional water issues, and secondarily to goals #3, Be financially responsible and transparent, #5, Attract and retain skilled employees, and #6, Provide outstanding customer service. vii

11 Mesa Water District Fiscal Year 2017 Budget Capital Projects Continuing Mesa Water s commitment to orderly replacement of capital infrastructure (which is Strategic Plan Goal #2), staff will focus on new well sites, and replacing and upgrading necessary water infrastructure. The proposed budget contains $2,510,000 for well automation, $1,560,000 for a new well, $1,088,549 for Operations routine capital, $618,000 for MWRF improvements, $548,000 for reservoir 1 & 2 improvements, along with other miscellaneous improvement projects. Economic and Policy Issues In FY 2017, Mesa Water is not anticipating the need to import water from the Municipal Water District of Orange County (MWDOC). Imported water is at a higher cost compared to clear or amber water as can be seen from the following table. The cost per acre foot of imported water from MWDOC excludes fixed costs charged to Mesa Water regardless of the amount of water purchased. Costs detailed below are comprised of Operating Expenses, net of Metropolitan Water District Local Resource Program (LRP) revenue. Water Source FY 2017 Budgeted Average Cost per Acre Foot Clear Water $498 Amber Water / Mesa Water Reliability Facility $760-$145 LRP= $615 (MWRF) Imported Water (No imported water in FY 2017) $942/$979 Recycled Water $392 During FY 2017, Mesa Water anticipates that Orange County Water District (OCWD) will maintain the Basin Pumping Percentage (BPP) at 75 percent of total potable supply. The Replenishment Assessment (RA) charged by OCWD on each acre foot of water pumped is expected to increase from $322 to $402 due to increased imported water purchases related to drought conditions along with increased costs to expand OCWD s Groundwater Replenishment System (GWRS). Due to development activity revenue remaining less stable and being influenced by general economic conditions, revenues related to development activity are budgeted based on an eightyear rolling historical average. Mesa Water expects this method to reduce volatility in budgeting development revenues. With the completion of the MWRF Improvements Project in FY 2013, the MWRF was fully operational in FY In FY 2017, the MWRF is budgeted to run at an approximate capacity of 4,241 acre feet per year, complementing clear water production to achieve 100 percent locallysourced water supplies. With the MWRF in operation, Mesa Water has eliminated the need to purchase imported water in almost all circumstances. The following is a summary of sources of water for budgeted FY 2017: viii

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13 TABLE OF CONTENTS Message from the President... Letter of Transmittal... Table of Contents... i ii x I. BUDGET SUMMARY Comparative Statement of Revenues, Expenses, and Changes in Net Position... 1 Statement of Cash Flows... 2 FY 2016 Departmental Statement of Revenues, Expenses, and Changes in Net Position... 3 FY 2015 Departmental Statement of Revenues, Expenses, and Changes in Net Position... 4 Capital Expenditures Summary... 5 Balance Sheet... 6 II. BASIS OF THE BUDGET Water Data... 7 Water Supply Components... 8 Revenues of Potable Water in Acre Feet, Monthly 4 Year Trend Analysis (Graph)... 9 Water Supply Needs Historical and Projected (Graph) Water Supply Needs Historical and Projected with Best Fit Line (Graph) Organizational Chart Personnel Summary Labor and Benefits Summary COP Coverage Ratios Designated Fund Levels District Overview Major Revenue Descriptions Fund Description Basis of Accounting Budget Controls and Revisions III. DEPARTMENTS General (Department 000) Water (Department 020) Board of Directors (Department 100) Office of the General Manager Department (Department 200) Water Operations Department (Department 300) Engineering Department (Department 400) Customer Services Department (Department 500) Financial Services Department (Department 600) Public Affairs Department (Department 700) Administrative Services Department (Department 800) External Affairs Department (Department 900) IV. APPENDIX Glossary of Terms x

14 Comparative Statement of Revenues, Expenses, and Changes in Net Position FY 2014 ACTUAL FY 2015 ACTUAL FY 2016 FORECAST FY 2016 BUDGET FY 2017 BUDGET OPERATING REVENUES: Water consumption sales $ 24,639,988 $ 24,371,000 $ 21,516,926 $ 23,213,988 $ 25,066,579 Monthly meter service charge 5,454,609 5,803,271 5,980,000 5,954,466 6,433,731 Recycled water sales 1,698,506 1,397,919 1,300,000 1,450,232 1,058,163 Concessions from gov. agencies (incl. CPTP) 1,238, ,138 Other charges and services 608, , , , ,000 TOTAL OPERATING REVENUES 33,639,508 33,249,888 29,300,459 31,045,686 33,135,473 OPERATING EXPENSES: Imported sources of supply 2,427,936 2,645, , , ,873 Clear water cost 4,287,888 4,273,537 4,713,469 4,791,973 6,322,553 Amber water cost 3,353,823 2,864,506 3,140,470 3,396,051 3,223,989 Recycled water 470, , , , ,824 Transmission and distribution 5,425,385 5,750,908 4,516,929 5,141,497 4,449,774 General and administrative 6,414,856 7,380,985 7,899,053 8,712,869 8,727,407 TOTAL OPERATING EXPENSES 22,380,655 23,352,348 21,596,569 23,378,244 24,522,420 OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION 11,258,853 9,897,540 7,703,890 7,667,442 8,613,053 Depreciation and amortization (4,687,352) (4,673,633) (4,777,000) (5,116,385) (5,220,000) OPERATING INCOME 6,571,501 5,223,907 2,926,890 2,551,057 3,393,053 NONOPERATING REVENUES / (EXPENSES): Investment earnings (incl. unrealized) 238, , , , ,200 Interest expense long term debt (1,595,545) (1,494,222) (1,421,966) (1,654,282) (1,286,114) Loss on sale/disposition of capital assets, net 28,155 9,639 (5,000) (25,000) (24,000) Other non operating, net 185, , , , ,408 NONOPERATING REVENUES / (EXPENSES): (1,142,787) (889,936) (879,628) (1,353,786) (775,506) INCOME BEFORE CAPITAL CONTRIBUTIONS 5,428,714 4,333,971 2,047,262 1,197,271 2,617,547 CAPITAL CONTRIBUTIONS: Capacity and installation charges 452,678 1,247, , , ,500 Capital Grants (includes LRP) 839, , , , ,634 Developers and others 479, , , , ,000 TOTAL CAPITAL CONTRIBUTIONS 1,771,170 2,552,466 2,200,000 1,694,355 2,149,134 CHANGE IN NET POSITION $ 7,199,884 $ 6,886,437 $ 4,247,262 $ 2,891,626 $ 4,766,681 Budget Summary - 1 1

15 Statement of Cash Flows FY 2015 ACTUAL FY 2016 FORECAST FY 2016 BUDGET FY 2017 BUDGET CASH FLOWS FROM OPERATING ACTIVITIES: Operating Income $ 5,223,907 $ 2,926,890 $ 2,551,057 $ 3,393,053 Adjustments Depreciation 4,673,633 4,777,000 5,116,385 $ 5,220,000 Other 199,523 (15,000) (49,504) 270,392 Changes in assets & Liabilities (Increase) / decrease in Accounts Receivable 517, , ,000 (120,000) (Increase) / decrease in Other Assets 642,677 (62,500) 280,000 (65,000) Increase / (decrease) in Accounts Payable (573,433) 245, ,444 (485,000) Increase / (decrease) in Other Liabilities 225,131 (150,000) 520,000 (138,490) OPEB Trust Contribution (250,000) (250,000) (250,000) (250,000) Pension Trust Contribution NET CASH PROVIDED BY OPERATING ACTIVITIES 10,659,020 8,056,390 8,825,382 7,824,955 CASH FLOWS FROM CAPITAL & FINANCING ACTIVITIES: Acquisition and construction of capital assets (3,165,470) (5,837,687) (5,837,687) (8,420,049) Principal Paid on long term debt (1,990,000) (2,090,000) (2,090,000) (2,190,000) Interest Paid on long term debt (1,520,124) (1,223,788) (1,223,788) (1,123,138) Other 1,985,678 2,000, ,958 NET CASH PROVIDED BY CAPITAL & FINANCING ACTIVITIES (4,689,916) (7,151,475) (8,400,517) (11,733,187) CASH FLOWS FROM INVESTING ACTIVITIES: Investment earnings 386, , , ,000 NET CASH PROVIDED BY INVESTING ACTIVITIES 386, , , ,000 NET INCREASE IN CASH & CASH EQUIVALENTS 6,355,977 1,254, ,865 (3,458,232) CASH & INVESTMENTS beginning of year 33,089,108 39,445,085 38,956,000 40,700,000 CASH & INVESTMENTS end of year $ 39,445,085 $ 40,700,000 $ 39,730,865 $ 37,241,768 Budget Summary 2 2

16 Consolidated (All Depts) Fiscal Year 2017 Budget FY 2017 (Budget) Departmental Statement of Revenues, Expenses, and Changes in Net Position General (000) Water (020) Board (100) Office of the GM (200) Water Ops (300) Engineering (400) Customer Services (500) Financial Services (600) Public Affairs (700) Administrative Services (800) OPERATING REVENUES: Water consumption sales $ 25,066,579 $ - $ 25,066,579 $ - $ - $ - $ - $ - $ - $ - $ - $ - Monthly meter service charge 6,433,731-6,433, Recycled water sales 1,058,163-1,058, Concessions from gov. agencies (incl. CPTP) Other charges and services 577, , TOTAL OPERATING REVENUES 33,135, ,000 32,558, External Affairs (900) OPERATING EXPENSES: Imported sources of supply 906, , , Clear water cost 6,322, ,322, Amber water cost 3,223, ,223, Recycled water 891, , Transmission and distribution 4,449, ,845, , General and administrative 8,727, ,120 1,521, ,470,845 1,194, ,040 1,661, ,876 TOTAL OPERATING EXPENSES 24,522,420-1,503, ,120 1,521,088 13,687, ,867 2,470,845 1,194, ,040 1,661, ,876 OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION 8,613, ,000 31,054,901 (341,120) (1,521,088) (13,687,574) (603,867) (2,470,845) (1,194,905) (879,040) (1,661,533) (658,876) Depreciation and amortization (5,220,000) (5,220,000) OPERATING INCOME / (LOSS) 3,393,053 (4,643,000) 31,054,901 (341,120) (1,521,088) (13,687,574) (603,867) (2,470,845) (1,194,905) (879,040) (1,661,533) (658,876) NONOPERATING REVENUES / (EXPENSES): Investment earnings 339, , Interest expense - long-term debt (1,286,114) (1,286,114) Loss on sale/disposition of capital assets, net (24,000) (24,000) Other non-operating, net 195, , NONOPERATING REVENUES / (EXPENSES): (775,506) (775,506) INCOME BEFORE CAPITAL CONTRIBUTIONS 2,617,547 (5,418,506) 31,054,901 (341,120) (1,521,088) (13,687,574) (603,867) (2,470,845) (1,194,905) (879,040) (1,661,533) (658,876) CAPITAL CONTRIBUTIONS: Capacity and installation charges 910, , Capital grants (includes LRP) 626,634 24, , Developers and others 612, , TOTAL CAPITAL CONTRIBUTIONS 2,149,134 1,546, , CHANGE IN NET POSITION (2017 Budget) $ 4,766,681 $ (3,872,006) $ 31,657,535 $ (341,120) $ (1,521,088) $ (13,687,574) $ (603,867) $ (2,470,845) $ (1,194,905) $ (879,040) $ (1,661,533) $ (658,876) % change - increase (decrease) 5% (2%) 6% (1%) 0% (23%) (19%) (4%) N/A CHANGE IN NET POSITION (2016 Budget) $ 2,891,626 $ (5,120,158) $ 30,220,241 $ (323,555) $ (1,557,185) $ (12,878,434) $ (612,154) $ (2,465,129) $ (1,560,708) $ (1,087,505) $ (1,723,787) N/A Budget Summary - 3 3

17 Consolidated (All Depts) Fiscal Year 2017 Budget FY 2016 (Budget) Departmental Statement of Revenues, Expenses, and Changes in Net Position General (000) Water (020) Board (100) Office of the GM (200) Water Ops (300) Engineering (400) Customer Services (500) Financial Services (600) Public Affairs (700) Administrative Services (800) OPERATING REVENUES: Water consumption sales $ 23,213,988 $ - $ 23,213,988 $ - $ - $ - $ - $ - $ - $ - $ - Monthly meter service charge 5,954,466-5,954, Recycled water sales 1,450,232-1,450, Concessions from gov. agencies (incl. CPTP) Other charges and services 427, ,000 61, TOTAL OPERATING REVENUES 31,045, ,000 30,679, OPERATING EXPENSES: Imported sources of supply 797, , , Clear water cost 4,791, ,791, Amber water cost 3,396, ,396, Recycled water 538, , Transmission and distribution 5,141, ,529, , General and administrative 8,712, ,555 1,557, ,465,129 1,555,708 1,087,505 1,723,787 TOTAL OPERATING EXPENSES 23,378,244-1,174, ,555 1,557,185 12,878, ,154 2,465,129 1,555,708 1,087,505 1,723,787 OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION 7,667, ,000 29,504,899 (323,555) (1,557,185) (12,878,434) (612,154) (2,465,129) (1,555,708) (1,087,505) (1,723,787) Depreciation and amortization (5,116,385) (5,116,385) OPERATING INCOME / (LOSS) 2,551,057 (4,750,385) 29,504,899 (323,555) (1,557,185) (12,878,434) (612,154) (2,465,129) (1,555,708) (1,087,505) (1,723,787) NONOPERATING REVENUES / (EXPENSES): Investment earnings 130, , Interest expense - long-term debt (1,654,282) (1,654,282) Loss on sale/disposition of capital assets, net (25,000) (25,000) Other non-operating, net 195, , (5,000) - - NONOPERATING REVENUES / (EXPENSES): (1,353,786) (1,348,786) (5,000) - - INCOME BEFORE CAPITAL CONTRIBUTIONS 1,197,271 (6,099,171) 29,504,899 (323,555) (1,557,185) (12,878,434) (612,154) (2,465,129) (1,560,708) (1,087,505) (1,723,787) CAPITAL CONTRIBUTIONS: Capacity and installation charges 416, , Capital grants (includes LRP) 765,342 50, , Developers and others 512, , TOTAL CAPITAL CONTRIBUTIONS 1,694, , , CHANGE IN NET POSITION (2016 Budget) $ 2,891,626 $ (5,120,158) $ 30,220,241 $ (323,555) $ (1,557,185) $ (12,878,434) $ (612,154) $ (2,465,129) $ (1,560,708) $ (1,087,505) $ (1,723,787) 4

18 Capital Expenditures Summary FY 2016 FY 2017 Description Budget Budget Well Automation $ 857,815 $ 2,510,000 New Well 9 1,560,000 Operations Routine Capital (Hyd., Valves, Meters, etc.) 1,098,187 1,088,549 MWRF Improvements 289, ,000 Reservoir 1 & 2 Improvements 245, ,000 On Call Services (Design, Const., & CM) 148, ,000 Pipeline Integrity Testing Program 439, ,000 Reservoirs Pump Controls & Chemical Systems Project 275,000 Operations Capital (Fleet, Facility Refurb., etc.) 516, ,000 Other Agency Projects 62, ,000 Human Resources Information System 60,000 90,000 Well 8 Demolition 40,000 MWRF Parking Project 344,500 MWRF Outreach Center/Boardroom/Improvements 100,000 OC 44 Pipeline 429,500 HVAC Study & Improvements 25,000 New Well Project/Properties 58,750 IT Master Plan 700,000 Well 9 Rehabilitation 156,685 Other Miscellaneous Projects 266,000 Total Capital $ 5,837,687 $ 7,741,549 Internal Labor, Material, Overhead $ 678,500 $ 8,420,049 Budget Summary 5 5

19 Balance Sheet FY 2014 ACTUAL FY 2015 ACTUAL FY 2016 FORECAST FY 2016 BUDGET FY 2017 BUDGET Cash and investments $ 33,089,108 $ 39,445,085 $ 40,700,000 $ 39,730,865 $ 37,241,768 Accounts Receivable 5,994,640 5,477,058 4,892,058 5,828,968 5,012,058 Fixed Assets 112,852, ,910, ,971, ,615, ,683,663 Other Assets 2,645,616 2,168,774 2,540,434 1,683,046 2,605,434 Total Assets $ 154,581,668 $ 159,001,844 $ 161,104,106 $ 160,857,924 $ 161,542,923 Accounts Payable & Accrued Expenses $ 5,426,925 $ 4,563,873 $ 4,808,873 $ 5,855,782 4,323,873 Short term portion, Loans 1,990,000 2,090,000 2,190,000 2,190,000 2,295,000 Other Liabilities & OPEB 4,019,909 12,689,378 12,289,378 4,375,425 10,837,010 Non current Loans 27,214,027 24,923,531 22,833,531 23,034,027 20,338,035 Change in Net Position 115,930, ,735, ,982, ,402, ,749,005 Total Liabilities and Net Position $ 154,581,668 $ 159,001,844 $ 161,104,106 $ 160,857,924 $ 161,542,923 Budget Summary 6 6

20 Water Revenue Data Fiscal Year 2017 Budget Water Data FY 2014 ACTUAL FY 2015 ACTUAL FY 2016 BUDGET FY 2017 BUDGET Revenue All Potable Water Revenue $ 24,639,988 $ 24,371,000 $ 23,213,988 $ 25,066,579 Recycled Water Revenue 1,698,506 1,397,919 1,450,232 1,058,163 Total Water Revenue $ 26,338,494 $ 25,768,919 $ 24,664,220 $ 26,124,742 Acre Feet Sold Potable 17,709 16,951 15,406 16,111 Recycled 1,302 1,159 1,375 1,375 Total Acre Feet 19,011 18,110 16,781 17,486 Revenue Per Acre Foot Potable $ 1, $ 1, $ 1, $ 1, Recycled 1, , , Total Revenue Per Acre Foot $ 1, $ 1, $ 1, $ 1, Water Cost Data Cost Imported Water $ 2,427,936 $ 2,645,852 $ 797,031 $ 906,873 Clear Water 4,287,888 4,273,537 4,791,973 6,322,553 Amber Water 3,353,823 2,864,506 3,396,051 3,223,989 Total Potable Water 10,069,647 9,783,895 8,985,055 10,453,415 Recycled Water 470, , , ,824 Total Water Cost $ 10,540,414 $ 10,220,455 $ 9,523,878 $ 11,345,239 Acre Feet Produced Imported Water (actuals include CPTP) 2,029 1,997 Clear Water 11,153 10,631 11,085 12,690 Clear & Imported Water 13,182 12,628 11,085 12,690 Amber Water 5,622 5,027 5,275 4,241 Total Potable Water 18,804 17,655 16,360 16,931 Recycled 1,302 1,159 1,375 1,375 Total Acre Feet 20,106 18,814 17,735 18,306 Cost Per Acre Foot Imported Water (Variable Costs) $ $ $ $ Clear Water Amber Water Recycled Total Cost Per Acre Foot $ $ $ $ Potable Water Losses 4.12% 4.60% 4.11% 4.00% Imported Water Variable Costs per Acre Foot $851/893 $890/923 $923/942 $942/979 Basis - 1 7

21 Water Supply Components FY 2014 ACTUAL FY 2015 ACTUAL FY 2016 BUDGET FY 2017 BUDGET Clear Water Costs Basin Replenishment Assessment $ 3,078,256 $ 3,125,367 $ 3,569,370 $ 5,101,380 Utilities Pumping 709, , , ,919 Treatment/ Labor and Materials 500, , , ,254 Total Clear Water Costs $ 4,287,888 $ 4,273,537 $ 4,791,973 $ 6,322,553 Amber Water Costs Basin Replenishment Assessment $ 1,551,755 $ 1,476,644 $ 1,698,550 $ 1,704,882 Utilities Pumping 820, , , ,760 Treatment/ Labor and Materials 981, , , ,347 Total Amber Water Costs $ 3,353,823 $ 2,864,506 $ 3,396,051 $ 3,223,989 Imported Water Fixed Costs Readiness to Serve Total Charge $ 227,704 $ 268,148 $ 209,712 $ 205,418 Capacity Charge 114, , , ,440 Choice Charges 2,755 3,000 3,000 Retail Meter Charge Total Charge 195, , , ,890 $ 541,214 $ 667,891 $ 635,964 $ 614,748 Retail Meter Charge Per Meter ($) Basin Pumping Percentage 70% 72% 70% 75% 8

22 Revenues of Potable Water in Acre Feet, Monthly 4-Year Trend Analysis 2,200 2,000 1,800 1,600 Acre Feet 1,400 1,200 1,000 FY 2014 FY 2015 FY 2016 FY July August September October November December January February March April May June Potable Water Revenue ($) July August September October November December January February March April May June Total FY ,436,413 2,518,714 2,127,421 1,889,189 1,708,232 1,704,830 1,852,499 1,758,548 1,828,528 1,964,410 2,473,364 2,377,840 24,639,988 FY ,250,000 2,209,000 2,514,000 2,121,000 2,001,000 1,474,000 2,100,000 1,827,000 2,103,000 2,020,000 1,923,000 1,829,000 24,371,000 FY ,073,456 2,144,547 1,811,313 1,608,411 1,454,381 1,451,419 1,862,269 1,463,210 2,106,902 2,142,069 2,557,944 2,538,067 23,213,988 FY ,382,486 2,461,606 2,084,265 1,846,590 1,672,443 1,665,104 2,136,348 1,682,129 2,288,276 2,125,311 2,340,238 2,381,783 25,066,579 Water Sales in Acre Feet July August September October November December January February March April May June Total FY , , , , , , , , , , , , ,709.0 FY , , , , , , , , , , , , ,951.3 FY , , , , , , , , , ,406.0 FY , , , , , , , , , , , , ,111.0 Revenue Per Acre Foot ($) FY , , , , , , , , , , , , ,391.4 FY , , , , , , , , , , , , ,437.7 FY , , , , , , , , , , , , ,506.8 FY , , , , , , , , , , , , ,

23 Fiscal 2017 Budget Water Supply Needs (Historical and Projected) Historical Water Production Budget 25,000 20,000 Water Supply (af/yr) 15,000 10,000 FY2016 Forecast FY2017 Budget 5, Fiscal Year Ending Basis

24 Fiscal 2017 Budget Water Supply Needs (Historical and Projected) 25,000 20,000 Water Supply (af/yr) 15,000 10,000 Historical Water Production Budget Best Fit Line 5, Fiscal Year Ending Basis

25 Public Board of Directors General Manager Assistant General Manager Office of the General Manager External Affairs Assistant General Manager Administrative Services Financial Services Public Affairs Customer Services Engineering Water Operations 12

26 Personnel Summary FY 2014 Budget FY 2015 Budget FY 2016 Budget FY 2017 Budget OFFICE OF THE GENERAL MANAGER Executive Office TOTAL DISTRICT MANAGEMENT ADMINISTRATIVE SERVICES Administrative Services Human Resources TOTAL ADMINISTRATIVE SERVICES CUSTOMER SERVICES Customer Service Conservation Information Technology TOTAL CUSTOMER SERVICE/IT ENGINEERING Engineering TOTAL ENGINEERING EXTERNAL AFFAIRS External Affairs TOTAL PUBLIC AFFAIRS FINANCIAL SERVICES Financial Services TOTAL FINANCIAL SERVICES PUBLIC AFFAIRS Public Affairs TOTAL PUBLIC AFFAIRS WATER OPERATIONS Supervision/Support Distribution Production Water Quality TOTAL WATER OPERATIONS TOTAL PERSONNEL Notes: Five elected officials serve on Mesa Water's Board of Directors. Interns not included in above figures: Interns

27 Labor and Benefits Summary Category FY 2013 Actuals FY 2014 Actuals FY 2015 Actuals FY 2016 Budget FY 2017 Budget Labor $5,503,401 $5,207,176 $5,091,731 $5,865,590 $6,019,657 FICA / Medicare 433, , , , ,417 Workers Comp 180, , , , ,149 Flex Credits 966, , ,928 1,023,000 1,077,600 LTD/Life Insurance/EAP 32,086 31,245 28,331 38,460 41,323 Retirement 992, , , , ,409 Total $8,109,619 $7,551,553 $7,347,066 $8,051,594 $8,497,555 Basis

28 COP Coverage Ratios FY 2014 ACTUAL FY 2015 ACTUAL FY 2016 BUDGET FY 2017 BUDGET Revenues Operating Revenue $ 33,639,508 $ 33,249,888 $ 31,045,686 $ 33,135,473 Non Operating Revenue 452, , , ,608 Total Revenues 34,092,266 33,854,174 31,371,182 33,670,081 Expenses (Excluding Interest Expense) Operating Expenses 22,380,655 23,352,348 23,378,244 24,522,420 Income available for debt service $ 11,711,611 $ 10,501,826 $ 7,992,938 $ 9,147,661 Annual Debt Service, Senior Debt (2009 COP) $ 1,972,150 $ 1,969,750 $ 1,973,750 $ 1,973,500 Coverage Ratio, Senior Debt (2009 COP) 594% 533% 405% 464% Annual Debt Service, Subordinated Debt $ 1,475,643 $ 1,475,643 $ 1,340,038 $ 1,339,638 Coverage Ratio, Total Debt 340% 305% 241% 276% When Mesa Water issued both the 2009 and 2010 Certificates Of Participation (COP), it pledged to establish rates and collect charges sufficient to provide income available for debt service equal to at least 115 percent of debt service payments. Basis 9 15

29 Designated Fund Levels FY 2014 ACTUAL FY 2015 ACTUAL FY 2016 BUDGET FY 2017 BUDGET Customer & Development Deposits $ 2,759,795 $ 2,723,761 $ 3,000,000 $ 2,250,000 Capital Funds Capital Replacement Fund 10,000,000 10,000,000 10,000,000 10,000,000 Total Capital Funds 10,000,000 10,000,000 10,000,000 10,000,000 Liquidity Funds Administrative & General Fund 1,161,675 1,161,675 1,554,120 1,428,101 Catastrophe Fund 8,712,563 8,712,563 11,189,665 10,710,758 Operating Funds 6,970,050 6,970,050 9,324,720 8,568,606 Rate Stabilization Funds 3,485,025 3,485,025 4,662,360 4,284,303 Total Liquidity Funds 20,329,313 20,329,313 26,730,865 24,991,768 Total Cash Designated Funds $ 33,089,108 $ 33,053,074 $ 39,730,865 $ 37,241,768 Days Cash Ra o Actual/Es mate Days Cash Ra o Target Fund Descriptions: Customer & Development Deposits Monies held on behalf of Mesa Water's customers as required for their utility account or as cash bonds for development projects. Capital Replacement Fund Used for the replacement of capitalized assets when they reach the end of their useful lives. The target level of the fund shall be $10 million. The maximum will be based on Mesa Water's Asset Management Plan. Administrative & General Fund One of the two capital funds used to fund certain major general, administrative and overhead projects. It is intended to fund (or partially fund) offices, fixtures, furnishings, vehicles and equipment on a pay as you go basis. The target level will equal 20 days of Mesa Water's budgeted total operating expenses and the maximum will be 25 days. The current budget figure represents 21 days. Catastrophe Fund Used to begin repair of the water system after a catastrophic event, such as a severe earthquake or fire, while long term financing is being arranged or insurance claims are being processed. The target level will equal 150 days of Mesa Water's budgeted total operating expenses and the maximum will be 180 days. The current budget figure represents 159 days. Operating Fund Used for unanticipated operating expenses. This fund is designated to maintain working capital for current operations and to meet routine cash flow needs. The target level will equal 120 days of Mesa Water's budgeted total operating expenses and the maximum will be 150 days. The current budget figure represents 128 days. Rate Stabilization Fund Used to provide flexibility to the Board of Directors when establishing rates such as absorbing temporary rate fluctuations or for one time expenditures. The target level of this fund shall be 60 days of the annual operating budget and the maximum shall be 75 days. The current budget figure represents 64 days. Basis 10 16

30 District Overview Mesa Water District (Mesa Water ) was formed on January 1, 1960, pursuant to Sections et. seq., of the California Water Code, which was designated as the Costa Mesa District Merger Law. The general provisions of this law called for the consolidation of four predecessor agencies: the Newport Heights Irrigation District; the Fairview County Water District; the Newport Mesa County Water District; and, the City of Costa Mesa Water Department. Mesa Water is located in Orange County, California, and provides water to most of Costa Mesa, parts of Newport Beach, and some unincorporated areas of Orange County, including John Wayne Airport. The District serves approximately 108,000 residents in an 18-square-mile area through 24,110 metered accounts. Potable water is produced from Mesa Water s groundwater wells. The District purchases non-potable, or recycled water, from the Orange County Water District (OCWD). Due to the District s improved Mesa Water Reliability Facility (MWRF), Mesa Water meets 100 percent of its community s water needs with locally-sourced supplies. Mesa Water also has a 100 percent reliable back-up supply of imported water, if needed, from the Municipal Water District of Orange County (MWDOC). The District s revenues result solely from its activities as a water utility and Mesa Water receives no tax revenues of any kind. A five-person Board of Directors (Board), whose members serve overlapping four-year terms, governs Mesa Water. Each Director is elected by and represents one of five geographic divisions of approximately equal population within the District s service area. The Board elects one of its members to serve as President and another to serve as Vice President. The Board appoints the General Manager, District Secretary, Assistant District Secretary, District Treasurer, and Assistant District Treasurer. The General Manager is responsible for the day-to-day operations and administration of Mesa Water in accordance with the Board's policies. Basis

31 Major Revenue Descriptions Water Sales Revenue Usage Charge (potable and recycled) This is the rate charged per unit (one hundred cubic feet or ccf) to customers based on actual consumption. Mesa Water has a uniform volumetric rate structure, which means all water use is charged at the same per-unit rate. For the first six months of the FY 2017 budget, the potable rate is $3.51 per ccf, and the recycled rate is $1.72 per ccf; and, for the second six months of the FY 2017 budget, the potable rate is $3.62 per ccf, and the recycled rate is $1.82 per ccf. Mesa Water s Board adopts water rates by resolution. In FY 2014, the Board adopted a multi-year rate resolution with rate increases each year through FY Usage charges are intended to cover the cost of treating and delivering water to Mesa Water s customers. The budget for this revenue source is based on estimated water sales which have remained consistent due to Mesa Water s service area being substantially built-out. The FY 2017 acre feet sales budgeted for both potable and recycled water are listed on page Basis - 1. Construction Water Revenues This revenue is for the use of temporary hydrant meters used during construction. The revenue includes both the daily rental rate for the meter, and the per-unit charge which is 150 percent of the potable water rate based on the Board s resolution. This revenue source is dependent solely on construction activity and is less predictable than other water revenue sources. Fireline Revenues This revenue is primarily from the stand-by charge for fireline services. Also, use of water other than for firefighting is charged at 200 percent of the potable water rate based on the Board s resolution. As Mesa Water s service area is substantially built-out, this revenue source remains relatively consistent year-to-year. Basic Charge This charge is assessed per billing period (bi-monthly) and is a set charge based on meter size. This revenue source is intended to cover fixed charges such as financial obligations, customer service, public outreach, and administrative support, per the Board s resolution. This revenue source is increasing, primarily due to the multi-year rate increase adopted by the Board in FY As Mesa Water s service area is substantially built-out, there is limited growth in service connections. LAFCO Surcharge This is a pass-through surcharge from the Orange County Local Agency Formation Commission (LAFCO) for Mesa Water s portion of LAFCO s budget. This annual surcharge is charged once annually on the customer s bill. For the FY 2017 budget, the LAFCO surcharge is a estimated total of $24,700 in revenue to Mesa Water. Basis

32 Non-Water Sales Revenue Major Revenue Descriptions, Continued Other Operating Revenues These revenues include costs related to Mesa Water s operations as a water utility that are not directly related to water sales. The major revenue sources in this category are: delinquent fees, new service establishment fees, and concessions from government agencies. Delinquent fees are a result of the delinquent activity from customers. This revenue source has increased slightly from prior years as the amount of delinquent accounts has increased and the balance owed per customer has increased. The Board periodically reviews the delinquent fees to ensure full cost recovery. The new service establishment fee is charged when a new customer establishes an account with Mesa Water. The fee is intended to recover the costs associated with reading the meter and setting up a new account. This fee is reviewed periodically to ensure full cost recovery. Non-Operating Revenues and Capital Contributions The revenues under this category include interest earned on Mesa Water s funds as well as development-related revenues such as capacity charges, inspection fees, plan check fees, and installation fees. The budget for interest earnings are based on forecasted cash balances during the year as well as anticipated interest earnings from the State of California Local Agency Investment Fund (LAIF) and Mesa Water s investment portfolio. Mesa Water is budgeting a low rate of return on its investments in FY 2017 based on current and anticipated market conditions. The Metropolitan Water District of Southern California (MWD) Local Resource Program (LRP) is a program that reimburses Mesa Water for a portion of its water production costs from the Mesa Water Reliability Facility (MWRF). By assisting in the development of local water sources, MWD s requirements to import water are reduced. In FY 2011, construction began on the MWRF to expand the facility and improve the treatment technology. The MWRF began producing water in FY The acre feet used for the budget are listed on page Basis - 1 and the reimbursement rate is budgeted at $145 per acre foot. Mesa Water is not budgeting import water for FY Basis

33 Fund Description Mesa Water reports its activities as a single enterprise fund, which is used to account for operations that are financed and operated in a manner similar to a private business enterprise, where the intent of Mesa Water is that the cost of providing water to its service area on a continuing basis be financed or recovered primarily through user charges (water sales and service charges), capital grants, and similar funding. Monies are set aside in designated funds for specific purposes based on Board policy or in reserve accounts as required by debt agreements. A listing and description of designated funds can be found on page Basis-8. Basis of Accounting Accounting basis determines when transactions and economic events are reflected in the financial statements and the budget. Mesa Water prepares its audited financial statements and budgets on the accrual basis of accounting in which revenues are recognized in the accounting period when earned and expenditures are recorded in the accounting period when incurred. Mesa Water s budget and financial statements are consistent with Generally Accepted Accounting Principles (GAAP). Budget Control and Revisions Although Mesa Water is not legally required to adopt a budget, the Board annually adopts a fiscal year budget following a series of public meetings. This budget authorizes and provides the basis for reporting, control of financial operations, and accountability. Mesa Water s budget is prepared on an annual basis using estimates and financial projections for the following fiscal year that meet the priorities and needs of the District. A quarterly review of the Comparative Statement of Revenue, Expenses and Change in Net Position is conducted and reviewed by the Board s Finance Committee and Mesa Water management and staff. A monthly review of capital expenditures is conducted by the Board of Directors and Mesa Water staff. Basis

34 Departmental Budgets FY 2014 FY 2015 FY2016 FY 2016 FY 2016 FY 2017 Dept. 000 General ACTUAL ACTUAL ACTUAL FORECAST BUDGET BUDGET THRU 2Q2016 REVENUE: New Service Establishment Fee 37,196 21,131 35,000 42, LAFCO Surcharge 23,875 23,933 23,933 24, Delinquent Fees 266, , , , , , Loss Recovery 27,329 41,749 10,000 30,000 10, Cross Connection Testing Fee 8,823 6,660 18,720 30,000 8,500 36, Plan Check Fees 37,344 39,687 45,062 70,000 36,000 96, Pressure/Fire Flow test fee 3,168 3,040 6, OC 44 HB contract revenue 62,391 87,612 70,000 21,500 90, OCWD OC 44 line reimbursement Sale of brass and scrap 11,826 16,934 3,732 7,500 12, Uncashed refund checks , Other operating revenue 29,516 26,779 18,653 35,000 39, Write off recovery 2,515 13, TOTAL OPERATING REVENUES 450, , , , , ,000 DEPRECIATION AND AMORTIZATION Amortization & depreciation 4,687,354 4,673,633 2,395,220 4,777,000 5,116,385 5,220,000 TOTAL AMORTIZATION AND DEPRECIATION 4,687,354 4,673,633 2,395,220 4,777,000 5,116,385 5,220,000 INTEREST EARNINGS Interest earned District LAIF 2, Interest earned OC Investment Pool 1,624 3,605 18,266 10,000 7, Change fair value 53,837 48,997 (75,053) (100,000) (220,000) (120,000) Interest Earned Non Negotiable CD's 1, ,843 2, Interest Earned Funds Under District Control 177, , , , , ,000 TOTAL INTEREST EARNINGS 235, , , , , ,200 EXPENSES (NON PAYROLL) Loss on disposal of equipment (28,155) (9,639) (88) 5,000 25,000 24, Non Operating Revenue (1,576) (22,511) (37,429) (40,000) (24,000) Capacity Charge Completed Projects (716,900) (350,000) (277,657) (342,000) Capacity Charge Contra 415, Installation Fees Completed Projects (126,915) (148,774) (140,043) (275,000) (42,215) (261,000) Installation fees Contra 101, Inspection Fees Completed Projects (270,984) (104,866) (221,619) (310,000) (96,238) (307,500) Inspection fees contra 145, Contributions from Developers (479,408) (566,788) (650,000) (512,903) (612,000) Historical Wells Interest Expense 19, COPs Interest expense 393, , , , , , COPs interest expense 979, , , , , , General interest expense , , COPs deferred amount 202, , , , , , Non Operating Expense 10,390 25,622 1,313 24, COPS Trustee Expense 7,500 5,000 5, Premium Amort Expense (111,663) (111,663) (55,832) (111,663) (111,660) (111,672) COPs premium amortization (88,832) (88,832) (44,416) (88,832) (88,836) (88,836) Total 443, , ,126 (393,529) 549,773 (407,794) CAPITAL GRANTS Utility Rebate Water Operations 122,554 30,826 4,567 25,000 50,000 24, Water Use Efficiency Program benchmark 53,577 7,100 7,100 TOTAL CAPITAL GRANTS 176,131 30,826 11,667 32,100 50,000 24,000 Department Total $ (4,268,970) $ (4,169,772) $ (2,207,430) $ (3,543,095) $ (5,120,158) $ (3,872,006) Departments 1 21

35 Departmental Budgets FY 2014 FY 2015 FY2016 FY 2016 FY 2016 FY 2017 Dept. 020 Water ACTUAL ACTUAL ACTUAL FORECAST BUDGET BUDGET THRU 2Q2016 REVENUE: Usage Charge Potable Water $ 24,173,696 $ 24,351,114 $ 11,009,316 $ 21,396,926 $ 23,129,484 $ 24,944, Water sold in lieu of lease payments 42,000 5, Accrued Water Sales 382,123 (126,696) (158,745) Construction Water Revenues 84, ,582 66, ,000 84, , Usage Charge Recycled Water 1,698,506 1,397, ,949 1,300,000 1,450,232 1,058, Basic Charge Domestic 5,145,300 5,475,707 2,818,766 5,635,000 5,628,744 6,072, Basic Charge Fire Line 309, , , , , , New service establishment fee 36,057 37,196 21,131 35,000 37, LAFCO surcharge 23,789 23,875 23,933 23,933 24, Coastal Pumping Trns Pgm (CPTP) 1,238, ,138 TOTAL OPERATING REVENUES 33,090,950 32,601,398 14,664,739 28,855,859 30,679,686 32,558,473 CAPITAL GRANTS (Including LRP) MWD Local Resource Program for MWRF 716, , , , , ,634 TOTAL CAPITAL GRANTS (Including LRP) 716, , , , , ,634 TOTAL REVENUE 33,807,480 33,308,383 14,985,449 29,445,859 31,395,028 33,161,107 EXPENSES (NON PAYROLL) Basin Equity Assmnt (Sgrstrm) 11, Recycled Water Costs 470, , , , , , Imported water fixed costs 345, , , , , , Imported water variable costs 1,766,301 Total 2,582,478 1,115, ,555 1,087,095 1,174,787 1,503,572 Department Total $ 31,225,002 $ 32,192,933 $ 14,403,894 $ 28,358,764 $ 30,220,241 $ 31,657,535 Departments 2 22