Big Bear Boulevard Pipeline Replacement Project

Transcription

1 City of Big Bear Lake Department of Water and Power Annual Report Fiscal Year Ending June 30, 2017 Big Bear Boulevard Pipeline Replacement Project

2 DEPARTMENT OF WATER Message to the Customers of the City of Big Bear Lake, Department of Water and Power and the General Public from the Chairman of the Board and General Manager During Fiscal Year 2016/17 the Board of Commissioners (the Board ) and staff of the City of Big Bear Lake, Department of Water and Power (the DWP ) pursued grants for on-going improvements to the water system infrastructure and development of key planning tools. The pipeline replacement project for Big Bear Blvd was completed in eight months and throughout the fiscal year 2,470 meters were upgraded to radio-read meters. Grants In January 2017, the DWP submitted grant applications to the United States Bureau of Reclamation (USBR) under its WaterSMART funding program to fund the Sawmill Well Pumping Plant Project, the Division Well Field Solar Power Project, another portion of the meter replacement program, and under Small Scale Water Efficiency Projects, upgrade certain production facilities. An application was also filed with the USBR under its Water Field Conservation Program to develop a Water Conservation Management Plan. In fall of 2017, the DWP was awarded two $300,000 grants; one to continue the Meter Replacement Program and one for the Division Well Field Solar Power Project. The DWP was also awarded $50,000 to develop a Water Conservation Management Plan and $75,000 to upgrade technology at certain production facilities. Proposition 1 Funding In July 2016, the DWP submitted an application with the California Infrastructure and Economic Development Bank for State Revolving Funds available to water providers as a result of Proposition 1, approved by voters in November The DWP s application was approved for $1,050,000 to partially fund construction of the Big Bear Boulevard Project and the proceeds were received in July Meter Replacement Program In Fiscal Year 2016/17, the DWP continued its meter replacement program replacing outdated and inaccurate meters with new technology. The new meters continue to improve operational efficiency and support water conservation efforts with earlier leak-detection capabilities than standard meters. As of June 30, 2017, approximately 9,083 meters have been converted to the new radio-read system. Sincerely, /s/v. Don Smith Service, Quality, Community /s/reginald A. Lamson V. Don Smith Reginald A. Lamson Chair - DWP Board of Commissioners General Manager - DWP i

3 DWP Office Garstin Drive, Big Bear Lake, California An Equal Opportunity Employer and Provider ii

4 City of Big Bear Lake Department of Water and Power Annual Report Fiscal Year Ending June 30, 2017 Table of Contents Mission... 1 Vision... 1 About the DWP... 2 Fiscal Year 2016/17 Progress Report... 3 Technical Review Team... 3 Water Production Summary... 3 Bear Valley Basin Groundwater Sustainability Agency... 5 Customer Accounts Summary... 5 Capital Improvements... 6 Summary Major Infrastructure Projects Completed Fiscal Year 2016/ Funding for Infrastructure Replacement... 6 Conservation... 7 Staffing... 8 Management Discussion and Analysis Financial Results... 9 Fiscal Year 2016/17 Objectives... 9 Revenues... 9 Expenses Non-operating Revenues and Expenses Capital Expenditures Debt Cash and Cash Equivalents Financial Statements Fund Activity Statements - Unaudited Tables and Graphs - Unaudited iii

5 City of Big Bear Lake Department of Water and Power Annual Report Fiscal Year Ending June 30, 2017 Mission The mission of the DWP is to cost effectively deliver quality water to meet the needs of our current and future customers. Vision Provide excellent service to our customers, Continue water conservation, Plan for and secure additional and diverse water supplies, Increase operating efficiency, Challenge and motivate employees and improve morale, Continue infrastructure improvements, Encourage City and interagency communication and cooperation and, Assure that revenues are adequate to meet needs. 1

6 About the DWP The DWP provides water service to over 15,600 connections in and around the Bear Valley (the Valley ). The Bear Valley is a resort community, located in the San Bernardino Mountains, providing year-round activities, including skiing, fishing, hiking, biking, camping, boating and more. One of the more unique characteristics of the area is the ratio of full-time residents to second homeowners; nearly 70% of the homes in the Valley are unoccupied except during peak periods, in July and December. Serving four separate water systems in the City of Big Bear Lake, the unincorporated areas of Moonridge, Sugarloaf, Erwin Lake, Fawnskin, and Lake William since 1989, the DWP remains focused on ensuring the safety of these communities by providing a reliable source of water for domestic use, commercial use, and fire suppression. Five water systems, (including the Rimforest System which is now operated by Lake Arrowhead Community Services District) were acquired by the City of Big Bear Lake in 1989 through condemnation proceedings against Southern California Water Company ( SCWC ). Before the condemnation, water shortages were common and there was a moratorium on new construction. The DWP has focused its resources on rehabilitating the systems. Although over $68 million in improvements have been made, the systems are still in need of significant investments to ensure safety and effectiveness. Currently, there are 29 miles of undersized distribution lines throughout the water systems. The water supply for the DWP s customers comes strictly from groundwater sources. The DWP currently operates 29 active groundwater wells and 24 active slant wells that supply the various water systems in the service area. The average capacity of these wells is 145 gallons per minute (gpm) which is reflective of the relatively low-producing aquifers and fractured bedrock conditions of the local geology. The total capacity of these wells is 4,400 gpm. Big Bear Valley, California 2

7 Fiscal Year 2016/17 Progress Report Technical Review Team The Technical Review Team (the TRT ) is charged with reviewing groundwater data semiannually to determine the best strategies for ensuring short-term and long-term water resources are available to meet the needs of the communities served. The TRT met in November 2016 and April 2017 to evaluate ground water levels. The TRT determined that ground water levels are remaining fairly stable. 90 Annual Rainfall at Big Bear Dam July 1 - June Inches per Year Year Average 35.8" Water Production Summary Total water production for Fiscal Year 2016/17 was million gallons (2,203 acre-feet). This is an increase of million gallons, (75.3 acre-feet) 3.4%, compared to the prior year. Approximately, 67 million gallons (206 acre-feet) were transferred to the Big Bear Lake/Moonridge system from the Sugarloaf/Erwin Lake system. Slant well production increased 27.3% in the Big Bear Lake/Moonridge system in Fiscal Year 2016/17, compared with the prior year. The Big Bear Lake/Moonridge system received approximately 27% of its water from gravity-fed sources in Fiscal Year 2016/17, compared with 22% in the prior year. Slant well production in Fawnskin decreased 0.41% from the prior year. The Fawnskin system received approximately 51% of its water from gravity-fed sources in Fiscal Year 2016/17 compared with 54% in the prior year. (See Table 5 on page 36). 3

8 Non-Revenue Water Non-revenue water is the Non-revenue Water difference between the total Acre Feet water that is produced by the 3,000 DWP s wells and the water 2,500 that is sold to customers. The 2,000 difference is primarily the 1,500 result of leaks in main lines. For Fiscal Year 2016/2017, the 1,000 DWP s non-revenue water was %, down from 14.0% in 0 Fiscal Year 2015/16. Water main leaks increased from seven in the prior year to eleven in Fiscal Year 2016/17. Service line leaks increased from 40 to 46. The five-year average of non-revenue water is currently 11.2%. Adjustments to non-revenue water to determine unaccounted for water (in acre feet) 2012/ / / / /17 Total Production 2,471 2,274 2,204 2,131 2,203 Consumption Billed 2,171 2,044 2,010 1,833 1,956 Non-revenue Water % 12.1% 10.1% 8.8% 14.0% 11.2% Adjustments to Non-revenue Water Lost through leaks Lost through bleeders Fire Department use 0.31 NA NA 0.11 NA DWP/Public Works/construction water Lost through well flushing Lost through Seminole Treatment plant Production net of estimated lost water 2,468 2,269 2,200 2,124 2,195 Net Unaccounted for Water % 12.0% 9.9% 8.6% 13.7% 10.9% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Production Metered Consumption Non-revenue Water % Million Gallons Non-Revenue Water 12-month Moving Average Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun FY FY FY FY

9 Bear Valley Basin Groundwater Sustainability Agency In 2014, the Governor signed into law the Sustainable Groundwater Management Act (the Act). The Act requires most regions of the state to form Groundwater Sustainability Agencies to ensure prudent management of regional water supplies which are defined as basins. In early 2015, the DWP began working with other agencies in the Bear Valley to evaluate options for retention and use of recycled water. Currently, approximately 2,200 acre feet per year of effluent is treated by the Big Bear Area Regional Wastewater Agency (BBARWA) and then sent down the mountain to irrigate alfalfa fields. The DWP teamed with BBARWA, the Big Bear City Community Services District (a retail water provider), and the Big Bear Municipal Water District (lake management and wholesale water) to evaluate options to reuse this treated water within the Bear Valley. In April 2017, a Joint Powers Agreement was executed by the participating agencies and the Bear Valley Basin Groundwater Sustainability Agency (BVBGSA) was created. BVBGSA is funded by agreed upon contributions from the member agencies and will continue to evaluate options for groundwater management within the Bear Valley as required by the Act. Customer Accounts Summary In Fiscal Year 2016/17, a total of 1,361 new accounts, or 113 per month on average, were established through change of service and new connections. New connections for the fiscal year totaled 35. At the end of Fiscal Year 2016/17, the DWP was serving water to 15,626 connections. Total Connections 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 - Connection Activity New Connections Collections Past due balances as of June 30, 2017, totaled $204,442, compared with $226,466 as of June 30, 2016, a decrease of 9.7%. The DWP places liens on properties when past due balances exceed $200. As of June 30, 2017, 88 properties were subject to DWP liens compared with 107 accounts in the prior year. Balances subject to liens totaled $182,823 as of June 30, 2017, compared with $186,010 in the prior year, a decrease of 1.7%. Balances subject to liens are usually collected by the DWP upon close of escrow when the property is sold, or earlier if the 5

10 customer pays the balance. Historically, approximately 97% of accounts subject to liens are collected through escrow upon transfer of ownership. Capital Improvements Meter Replacement Program The DWP continued its comprehensive meter replacement program throughout Fiscal Year 2016/17. Active radio-read meters as of June 30, 2017 totaled 9,083. This is an increase of 2,470 units over the prior year. On average, staff is installing 225 units per month by taking advantage of good weather conditions. The program was ahead of schedule by 849 units as of June 30, Construction Projects The other major capital improvement focus for 2016/17 was the replacement of 4,371 LF of riveted steel pipeline in Big Bear Blvd between Thrush and Catalina. This project required multiagency cooperation with CalTrans, Frontier Communications, Southwest Gas, Bear Valley Electric and Charter/Spectrum. Improvements were also made to certain well and booster sites. Summary Major Infrastructure Projects Completed Fiscal Year 2016/17 Transmission and Distribution Projects Completed FY 2016/17 Project Location Total Capital Units/Linear Investment Feet Big Bear Boulevard Pipeline Replacement Project 4,371 $ 1,461,726 Meter and Box Replacement Program 2, ,093 Georgia Main Line Extension ,383 Hydrant Replacements 6 22,757 Total Transmission and Distribution Improvements $ 2,313,959 Includes costs incurred in previous fiscal years Source of Supply Projects Completed FY 2016/17 Project Location Project Description Total Capital Investment Big Bear Lake Replace Oak Well pump & transducer $ 32,017 Sugarloaf Upgrade Telemetry Barton Boosters 14,711 Sugarloaf Upgrade Telemetry Magnolia Boosters 14,711 Big Bear Lake Repaving McAllister Well site 7,652 Big Bear Lake Replace Pontell Booster Meters with Radio Read 4,084 Fawnskin Upgrade Chlorine Analyzer Seminole Well 3,737 Total Source of Supply Improvements $ 76,912 Includes costs incurred in previous fiscal years Funding for Infrastructure Replacement In January 2016, the DWP filed four grant applications with the United States Bureau of Reclamation (USBR) under its WaterSMART initiative. The applications requested funding of $300,000 and $1,000,000 for both the Meter Replacement Program and the Big Bear Boulevard 6

11 Pipeline Replacement Project. In July 2016, the USBR finalized $300,000 in matching grant funds for the Meter Replacement Program and another $300,000 was awarded for the Big Bear Boulevard Pipeline Replacement Project. These funds were fully utilized in fiscal year 2016/17 and the final draws were completed on July 31, In April 2016, the DWP began pursuing loan funding from the California Infrastructure and Economic Development Bank for State Revolving Funds to fund construction costs for the Big Bear Boulevard Pipeline Replacement Project. The final application for $1,050,000 in loan funding was submitted in July Loan documents were finalized in January 2017 and the proceeds were drawn down July 7, New Grant Applications Encouraged by the success of its grant applications in 2016, the DWP applied for funding from the USBR for five additional projects: The Division Well Field Solar Power Project (two USBR Water SMART applications, one for $300,000 and one for $1,000,000); The Sawmill Well Pumping Plant (two USBR Water SMART applications, one for $300,000 and one for $375,000); additional AMI Meter Replacements 3,500 units (two USBR Water SMART applications, one for $300,000 and one for $1,000,000); small-scale water systems automation (one USBR Water SMART application for $75,000); and creating a Water Conservation Management Plan (one USBR Water Conservation Field Services application for $50,000). Project Location Amount Requested Amount Awarded Division Well Field Solar Power Project Big Bear Lake $300,000 and $1,000,000 $300,000 Sawmill Well Pumping Plant Sugarloaf $300,000 and $375, AMI Meter Replacement Program System-wide $300,000 and $1,000,000 $300,000 Small-scale automation System-wide $75,000 $75,000 Water Conservation Management Plan System-wide $50,000 $50,000 Conservation The DWP s Conservation Department encourages water efficiency through an extensive public outreach program including print collateral, newspaper and radio advertisements, social media and special events. Combined with state and local regulations we continue Investments in Conservation Rebate Programs to decrease water demand, increase $60,000 customer compliance and improve $50,000 community relations. Tracking, $40,000 reporting and grant writing are all on $30,000 the rise as conservation becomes more $20,000 highly regulated as a result of recent and anticipated drought cycles. $10,000 In May of 2016 Governor Brown issued Executive Order B directing state agencies to draft regulations aimed at making permanent changes to use water more wisely. In $- $ Turf Rebates $ Toilet Rebates 7

12 April of 2017 those agencies issued their final report, titled Making Water Conservation a California Way of Life. This document details a suite of actions that could be implemented to meet the executive order. We anticipate continuing legislation in this area. The Conservation Department offers two incentive programs: toilet rebates and turf buy-backs. Conservation conducted 222 total audits including 198 indoor and 24 outdoor audits in FY 2016/17. During this period a total 26,936 square feet of turf were removed and 207 high-flow toilets were replaced with low-flow toilets. Staffing The DWP s staffing fluctuates throughout the year as temporary employees are hired each summer when weather conditions are favorable. Average headcount for Fiscal Year 2016/17 was full-time equivalent employees compared with in the prior year DWP Staffing Regular Full-time Staff Temporary & Part-time Staff 8

13 Management Discussion and Analysis Financial Results Fiscal Year 2016/17 Objectives For Fiscal Year 2016/17, the DWP s primary objectives were continuing the comprehensive meter replacement program, replacing approximately 4,000 LF of pipeline in Big Bear Boulevard, pursuing additional funding for on-going infrastructure improvements through grants and loans, and improving operational efficiencies. Revenues Total operating revenues for the fiscal year ended June 30, 2017 were $11,594,208, compared with $11,205,073 for the prior year. $12,000 Total Operating Revenues ($000s) $10,000 $8,000 $6,000 $4,000 $2,000 $- Increase Revenue Source FY 2016/17 FY 2015/16 (Decrease) % Change Revenue From Rates $10,637,089 $10,187,375 $ 449, % Revenue from New Connections Revenue from Standby Assessments 618, ,381 (50,573) (7.6%) 156, ,416 (10,640) (6.4%) Administrative Fees 134, ,170 (4,325) (3.1%) Other Income 46,690 41,731 4, % Totals $11,594,208 $11,205,073 $ 389, % Revenue from Rates Revenue from rates includes periodic service charges and water usage fees for water consumed by customers. Revenue from rates totaled $10,637,089 in Fiscal Year 2016/17, compared with $10,187,375 in the prior year. Revenue from rates increased 4.4% year over year, which was due to an Percentage of Revenue from Rates by Customer Class Residential 83.5% Commercial 16.5% Total 100.0% 9

14 increase in the volume of customer water consumption by 6.7% and a planned 2% rate increase. Revenue from New Connections Revenue from Capacity Charges and Meter Installation Fees in Fiscal Year 2016/17 totaled $618,808, compared with $669,381in the prior year. The decrease of $50,573 is due to a decrease in the number of new equivalent dwelling units (EDUs) added to the water system. Revenue from Standby Assessments The DWP assesses a standby fee or readiness-to-serve charge on vacant parcels within its service area that could be served by the DWP s water mains. As parcels are developed and connect to the water system the tax levy is removed from the tax rolls. In Fiscal Year 2016/17, standby assessment revenues totaled $156,766 compared with $167,416 in the prior year. The decrease in fees is consistent with the rate of new connections to the water system and other economic trends. As new construction increases, standby fees will decrease. Administrative Fees Administrative fees are charges to customer accounts for additional services rendered to specific customers. Administrative fees totaled $134,845 as of June 30, 2017, compared with $139,170 in FY 2015/16. The decrease in administrative fees of $4,325 reflects greater compliance with the DWP s policies and payment due dates. Other Income Other income is miscellaneous income received throughout the year. In Fiscal Year 2016/17 miscellaneous income was primarily rental income received from an agreement with a cell phone service provider. Rental income totaled $24,180 of the $46,690 in other income in Fiscal Year 2016/17. The DWP also received $9,375 in grant sharing from the Big Bear Area Regional Wastewater Agency related to the Bear Valley Water Sustainability Plan. Settlement payments from the Lehman Brothers Bankruptcy case included in miscellaneous income totaled $8,220. Expenses Total operating expenses for Fiscal Year 2016/17 were $7,420,484, compared with $6,940,990 in the prior year. $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $- Total Operating Expenses ($000s) 10

15 Increase Operating Expenses FY 2016/17 FY 2015/16 (Decrease) % Change Operations and Maintenance Expenses $ 5,614,267 $ 5,234,719 $ 379, % Depreciation Expense 1,806,217 1,706,271 99, % Totals $ 7,420,484 $ 6,940,990 $ 479, % Operations and Maintenance Operations and Maintenance expenses increased $379,548. Pension expense, which is allocated to each functional area, increased $88,273 compared to the prior year. Please see the discussion below related to pension accounting and reporting. Excluding the effects of pension expense, operations and maintenance costs increased $291,275 compared to the prior year. Of this increase $151,285 is a result of a decrease in capitalized labor. The remaining increase of $139,990 is attributable to implementation costs associated with the Sedaru mobile work force program, personnel costs associated with the re-organization of the Water Operations Department, and costs incurred to comply with recent groundwater sustainability legislation. Pension Accounting In Fiscal Year 2014/15 the DWP implemented Government Accounting Standards Board Statement No. 68 Accounting and Financial Reporting for Pensions (GASB 68). Subsequently, additional GASB statements have been issued to clarify the new pension accounting rules. The DWP is a member of the San Bernardino County Employees Retirement Association s Cost- Sharing Multiple-Employer Defined Pension Plan. Total Pension Expense for Fiscal Year 2016/17 was $895,878, compared with $807,608 in the prior year. Pension expense is recorded in each functional department under Operations and Maintenance and not as a separate line item. The increase of $88,273 in pension expense is primarily due a -0.97% return on investment in 2015/16, which was offset somewhat by lower than expected salary increases. The DWP s pension liability increased $626,408 as of June 30, 2017, year over year, from $4,923,167 to $5,549,575. For more information on pension accounting and reporting please refer to the footnotes to the Comprehensive Annual Financial Report for the City of Big Bear Lake for the years ended June 30, 2016 and June 30, 2017, available at Depreciation and Amortization Depreciation and amortization expense increased as a substantial number of new capital assets were placed in service over the past five years. Many of those assets replaced older, fully depreciated assets however some are new assets: Angels Camp Reservoir, Klamath Booster and Arrastre Creek Well. The increase in depreciation expense is attributable to DWP infrastructure replacement activities. Non-operating Revenues and Expenses Intergovernmental In Fiscal Year 2016/17, the DWP realized grant income of $399,311 from the United States Bureau of Reclamation WaterSMART program. This revenue was the balance of two grants awarded in July 2016 for the Meter Replacement Program and the Big Bear Boulevard Pipeline Replacement Project that totaled $600,000 in federal funding. 11

16 Interest Income and Expense Interest revenue is earned on investment of operating funds, debt reserves and debt service account balances. In Fiscal Year 2016/17 interest income totaled $57,611, compared with $41,097 in the prior year. There has been an improvement in returns earned from the Local Agency Investment Fund as the economy has gradually improved. Interest expense incurred under the DWP s various debt issuances totaled $1,336,409 in Fiscal Year 2016/17 compared with $1,465,736 in the prior year. The decrease in this expense is associated with principal reductions associated with sinking fund payments made. Gain (Loss) on Disposal of Capital Assets In Fiscal Year 2016/17, the DWP incurred losses of $21,124 compared with $139,202 in the prior year. These losses are primarily a result of the retiring customer meters, replacing water mains and hydrants, and replacing well pumps that were retired before being fully depreciated. Capital Expenditures Capital expenditures for Fiscal Year 2016/17 totaled $2,310,430, compared with $1,998,653 in the prior year. Capital equipment purchases and facilities improvements totaled $219,987, compared with $132,426 in the prior year. This spending included upgrades to the DWP s information technology infrastructure including new server arrays with redundant back-up systems. Spending for vehicle replacements totaled $82,318 and the DWP invested $57,279 in a hydro-vactor valve exercising trailer for more effective water system maintenance. Infrastructure spending in Fiscal Year 2016/17 included $1.3 million for the Big Bear Boulevard Pipeline Replacement project and the Georgia St. Main Extension, as well as $729,000 for ongoing meter replacements associated with the radio-read meter project. $50,000 $40,000 $30,000 $20,000 $10,000 $- Capital Assets (Net of Accumulated Depreciation) ($000s) Debt As of June 30, 2017, the DWP had four outstanding debt issuances: the 1996 Revenue Refunding Bonds, the 2010 USDA Bond, the 2012 USDA Bond, and the 2013 USDA Bond. The DWP entered into a loan agreement for $1,050,000 with the California Infrastructure and Economic Development Bank (IBank) in January 2017 to partially fund construction of the Big Bear Boulevard Pipeline Replacement Project. Funding for the IBank Loan was not distributed until July

17 The principal balance of the 1996 Bonds as of June 30, 2017 was $14,335,000. The 1996 Bond obligation matures in April The principal balance of the 2010 USDA Bond as of June 30, 2017 was $3,261,000. The 2010 USDA Bond will be paid in full in The principal balance of the 2012 USDA Bond as of June 30, 2017 was $4,630,000. The 2012 USDA Bond will be paid in full in The principal balance of the 2013 USDA Bond as of June 30, 2017 was $3,020,000. The 2013 USDA Bond will be paid in full in The IBank Loan originated at $1,050,000 and bears interest at 2.7% per annum over 30 years. $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $- Outstanding Debt by Issuance ($000s) 1996 Bonds CA DWR Loan 2010 Bond 2012 Bond 2013 Bond Debt Service 2016/ /16 Principal Payments $ 2,590,000 $ 2,449,000 Interest Payments (cash basis) 1,295,486 1,560,148 Total Bond Payments $ 3,885,486 $ 4,009,148 Cash and Cash Equivalents Unrestricted cash and cash equivalent balances as of June 30, 2017 were $5,792,642 compared with $5,653,160 as of June 30, $8,000 $6,000 $4,000 $2,000 $- Cash and Investments (unrestricted) ($000s) 13

18 Financial Statements THE FOLLOWING SECTION IS DERIVED FROM AUDITED FINANCIAL STATEMENTS FOR THE CITY OF BIG BEAR LAKE, BUSINESS-TYPE ACTIVITIES ENTERPRISE FUND WATER UTILITY. THESE STATEMENTS SHOULD BE EVALUATED IN THE CONTEXT OF THE ENTIRE COMPREHENSIVE ANNUAL FINANCIAL REPORTS FOR THE CITY OF BIG BEAR LAKE, FOR THE FISCAL YEARS ENDED JUNE 30, 2017 AND JUNE 30, 2016, INCLUDING ASSOCIATED NOTES TO THE FINANCIAL STATEMENTS. THE COMPREHENSIVE ANNUAL FINANCIAL REPORT IS AVAILABLE ON THE CITY S WEBSITE UNDER CITY DEPARTMENTS FINANCE >> COMPREHENSIVE ANNUAL FINANCIAL REPORTS ARCHIVE, OR UPON REQUEST FROM THE CITY OF BIG BEAR LAKE, P.O. BOX 10000, BIG BEAR LAKE, CA 92315,

19 CITY OF BIG BEAR LAKE PROPRIETARY FUNDS STATEMENT OF NET POSITION Business-Type Activities Enterprise Fund Water Utility June 30, 2017 June 30, 2016 Assets: Current Assets: Cash and investments $ 5,792,642 $ 5,653,160 Restricted cash and investments with fiscal agent 5,202,297 5,093,032 Accounts receivable 1,622,157 1,626,220 Accrued interest receivable 22,905 12,037 Cumulative deposit refund - 7,433 Due from other governments 75, ,357 Inventories 405, ,925 Prepaid Costs 221,609 35,472 Total Current Assets 13,343,150 13,064,636 Noncurrent Assets: Noncurrent receivables 219, ,473 Capital assets not being depreciated 1,896,614 2,192,344 Capital assets net of accumulated depreciation 79,537,493 41,997,157 * Less accumulated depreciation (37,185,535) Intangible Assets 643,745 Less accumulated amortization (219,727) Total Noncurrent Assets 44,892,409 44,463,974 Total Assets 58,235,559 57,528,610 Deferred Outflows of Resources: Deferred loss on refunding 740, ,331 Deferred pension related items 3,053,590 2,290,068 Total Deferred Outflows of Resources 3,793,866 3,178,399 * As presented in audited financial statements for the year end June 30,

20 CITY OF BIG BEAR LAKE PROPRIETARY FUNDS STATEMENT OF NET POSITION CONTINUED Business-Type Activities Enterprise Fund Water Utility June 30, 2017 June 30, 2016 Liabilities Current Liabilities: Accounts payable $ 378,979 $ 358,790 Accrued liabilities 218, ,750 Accrued interest 300, ,225 Deposits payable 25,540 15,430 Due to other governments - - Compensated absences due within one year 255, ,545 * Bonds, notes, and capital leases 2,740,000 2,590,000 Total Current Liabilities 3,918,888 3,866,740 Noncurrent Liabilities: Compensated absences 45,928 - * CJPIA cumulative deposit payable 15,419 24,610 Net pension liability 5,549,574 4,923,167 Bonds, notes, and capital leases 22,922,976 25,746,373 Total Noncurrent Liabilities 28,533,897 30,694,150 Total Liabilities 32,452,785 34,560,890 Deferred Inflows of Resources: Deferred pension inflows of resources 1,609,422 1,452,014 Total Deferred Inflows of Resources 1,609,422 1,452,014 Net Position: Net investment in capital assets 19,749,890 16,741,459 Restricted for debt service 5,202,297 5,093,032 Unrestricted 3,015,031 2,859,614 Total Net Position $ 27,967,218 $ 24,694,105 * As presented in audited financial statements for the year end June 30,

21 CITY OF BIG BEAR LAKE PROPRIETARY FUNDS STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION Business-Type Activities Enterprise Fund Water Utility June 30, 2017 June 30, 2016 Operating Revenues: Sales and service charges $ 11,547,518 $ 11,163,344 Miscellaneous 46,690 41,729 Total Operating Revenues 11,594,208 11,205,073 Operating Expenses: Administration and general 2,143,968 2,049,885 Water system operations 730, ,756 Source of supply 1,459,196 1,420,957 Transmission and distribution 1,280,192 1,100,121 Depreciation expense 1,806,217 1,706,271 Total Operating Expenses 7,420,484 6,940,990 Operating Income (Loss) 4,173,724 4,264,083 Non-operating Revenues (Expenses): Intergovernmental 399, ,689 Investment Earnings 57,611 41,097 Interest expense (1,336,409) (1,465,736) Loss on disposal of fixed assets (21,124) (139,202) Total Nonoperating Revenues (Expenses) (900,611) (1,363,152) Changes in Net Position 3,273,113 2,900,931 Net Position at the beginning of the year 24,694,105 21,737,737 Net Position at the end of year $ 27,967,218 $ 24,694,105 17

22 CITY OF BIG BEAR LAKE PROPRIETARY FUNDS STATEMENT OF CASH FLOWS Business-Type Activities Enterprise Fund Water Utility June 30, 2017 June 30, 2016 Cash Flows from Operating Activities: Cash received from customers and users $ 11,663,035 $ 11,326,016 Cash paid to suppliers for goods and services (3,671,977) (3,192,984) Cash paid to employees for services (2,182,152) (2,179,853) Net Cash Provided by/(used) for Operating Activities 5,808,906 5,953,179 Cash Flows from Capital and Related Financing Activities: Capital Grants 589,025 - Acquisition and construction of capital assets (2,310,430) (1,998,653) Principal paid on capital debt (2,590,000) (2,449,000) Interest paid on capital debt (1,295,497) (1,584,313) Contributions from other governments - 4,458 Proceeds from sales from capital assets - 169,292 Net Cash Provided (Used) by Capital and Related Financing Activities (5,606,902) (5,858,216) Cash Flows from Investing Activities: Interest received 46,743 35,079 Net Cash Provided (Used) by Investing Activities 46,743 35,079 Net Increase (Decrease) in Cash and Cash Equivalents Cash and Cash Equivalents at Beginning of Year Cash and Cash Equivalents at End of Year 248, ,042 10,746,192 10,616,150 $ 10,994,939 $ 10,746,192 18

23 CITY OF BIG BEAR LAKE PROPRIETARY FUNDS STATEMENT OF CASH FLOWS CONTINUED Business-Type Activities Enterprise Fund Water Utility June 30, 2017 June 30, 2016 Reconciliation of Operating Income to Net Cash Provided by/(used) for Operating Activities Operating income (loss) $ 4,173,724 $ 4,264,083 Adjustments to reconcile operating income (loss) Net Cash Provided (Used) by Operating Activities: Depreciation 1,806,217 1,706,271 Decrease in accounts receivable 4,063 59,522 Decrease in receivables due in more than one year 54,654 57,784 Decrease in retroactive deposit refund 7,433 (7,433) (Increase) in inventories (33,972) (74,830) (Increase)/decrease in prepaid expenses (186,137) 17 (Increase)/decrease in deferred outflows from pensions (763,522) 404,770 (Increase)/decrease in deposits payable 10,110 11,070 Increase/(decrease) in accounts payable 20, ,663 Increase/(decrease) in accrued liabilities (106,221) 23,254 (Decrease) increase in compensated absences 47,744 (34,186) Decrease in claims and judgments (9,191) (21,160) Increase in net pension liability 626, ,151 Decrease in due to other governments - (40,000) (Decrease) increase in deferred inflows from pensions 157,408 (830,797) Total Adjustments 1,635,182 1,689,096 Net Cash Provided by (Used) for Operating Activities $ 5,808,906 $ 5,953,179 Non-cash Investing, Capital, and Financing Activities: Loss on disposal of capital assets $ 21,124 $ - Amortization of bond premiums 83,397 83,397 Amortization of deferred loss on refunding 148, ,055 Contributions from developers - 55,437 19

24 Reconciliation of Net Activity All Funds to Change in Net Assets Fiscal Year 2016/17 Year ended June 30, 2017 In 000s Net Activity All Funds (Page 29) $ (121) Less: Depreciation Expense (1,806) GASB 68 Pension Adjustments (20) Installments from Sale of Rimforest (58) Add: Revenue Reserved for Future Spending 326 Principal Payments on Debt 2,590 Capitalized Asset Expenditures 2,362 Adjustment to Net Fund Activity $ 3,394 Change in Net Position (Page 17) $ 3,273 20

25 Fund Activity Statements - Unaudited Budget vs. Actual Analysis Revenues Total revenues from operations were $11,620,769, more than expected by $268,017 (2.4%). Usage revenues exceeded expectations by $191,235 (11.5%) which is primarily attributable to the Governor s loosening of drought restrictions on a statewide basis. Service charges exceeded expectations by $48,183 (0.6%) because new connections added to the system were not budgeted in the revenue process. Revenue from new connections exceeded expectations by $8,590 (1.4%). Investment income exceeded projections by $10,595 (66.4%) due to unexpected improvements in returns at the Local Agency Investment Fund (LAIF). Other income included grant-sharing related to the Bear Valley Groundwater Sustainability Project and unplanned proceeds from the Lehman Brothers settlement. Operations and Maintenance Gross expenditures in the Operations and Maintenance Fund (O&M) were $5,854,006, under budget by $181,582 (3%). Production Production spending totaled $1,246,891, under budget by $99,762 (7.4%). Electricity costs were under budget $97,300 (14.4%) as a result of three factors: 1) recent infrastructure improvements have reduced the power required to transfer water from east to west, 2) replacement pumping units are operating more efficiently, and 3) water production from gravity-fed sources exceeded projections. Conservation/Public Information Conservation spending totaled $209,264 under budget by $1,257 (0.6%). Spending for printing was less than expected by $4,780 due to a reduction in printing customer bill inserts. Spending for the demand offset program fell short of expectations by $2,670. These favorable variances were offset in part by greater than expected personnel costs due to an increase in part time labor, and increased spending for educational materials. Transmission and Distribution Transmission and Distribution (T&D) spending totaled $785,677, over budget by $17,415 (2.3%). Spending for basic materials exceeded expectations by $23,738. This unfavorable variance was offset in part by surpluses in computers and telephone expenses due to a delay in acquiring ipads for field staff. Meter Department Spending for the Meter Department totaled $695,448, over budget by $26,476 (4%). Personnel costs were greater than expected by $35,780 due to greater than expected overtime shifts worked in this department and less than expected use of earned leave. Maintenance spending was less than expected by $6,330 due to the investment in newer meters. Spending for telephone service was also less than expected by $2,928 due to a delay in acquiring ipads for field staff. 21

26 Water Operations Spending in Water Operations totaled $766,359, under budget by $44,329 (5.5%). Personnel costs exceeded the original budget by $24,506 due to less than expected use of earned leave. Professional Services exceeded expectations by $18,169 due to a reclassification of certain oncall services from capital outlay to the O&M fund. Favorable variances occurred in spending for fuel, vehicle maintenance, and automotive totaling $53,117. Licenses and permits spending was less than expected by $21,409 due to an over estimation of fees expected to be implemented to fund state oversight of drought compliance. Accidents and damages, maintenance for radio equipment, and education and training costs were less than expected by $4,817, $3,370, and $3,160 respectively. Customer Accounts Spending for Customer Accounts, which includes general accounting, billing, and customer service, totaled $931,178, was under budget by $54,652 (5.5%). Personnel costs were less than expected by $32,693 due to a leave of absence and turnover in the department, which was offset in part by less than expected use of earned leave. Bad debt expense was less than expected by $33,658. We have done extensive research to explain this trend and do not have an explanation at this stage. The decrease in bad debt expense is being attributed to improvements in the economy, increased utilization of the online credit card payment portal, and minimizing the DWP s credit risk through changes in the DWP s policy for providing service to renters. That policy went into effect in January Also, the DWP collected on several large accounts that had been written off in prior years. These variances were offset in part by unplanned spending for temporary labor of $8,317 and greater than expected merchant bank charges related to the increase in credit card payments. Administration Administration spending totaled $1,219,250, under budget by $25,510 (2%). Personnel costs were greater than expected by $43,919 primarily due to less than expected use of earned leave. The DWP s share of legal fees for the Bear Valley Basin Groundwater Sustainability Agency was not budgeted and totaled $18,308. A favorable variance of $27,540 occurred in Maintenance of Buildings and Grounds which was mostly due to deferring replacement of the carpeting in the main office. This funding was re-budgeted in Fiscal Year 2017/18. Education and training was also under budget due to the deferral of contracting for a team building workshop. This funding of $15,700 was carried forward to Fiscal Year 2017/18. Legal fees were under budget by $16,386. These fees are difficult to estimate. Professional Services were under budget $10,665 because the capacity charge study budgeted for Fiscal Year 2016/17 is contingent upon the completion of the hydraulic model and capital improvement plan which are still in progress. Professional Services for IT were under budget by$5,273; the budget provided a small cushion for additional uses to be added which did not occur. Postage was under budget by $4,260 due to over estimation. There was also a favorable variance in the Water Board expense allowance of $4,050. Capitalized Costs Capitalized costs represent the efforts of DWP staff expended toward capital projects. Direct labor and overhead fell short of estimates by $86,231 (23.4%). Administrative work performed in the billing department is no longer being capitalized as it does not add value to assets of the 22

27 water system. This reduced capitalized labor by $34,000. The remaining variance is due to over estimation. Debt Service Income from investments in the Debt Service Fund was $31,051, which exceeded expectations by $18,101 (139.8%) due to an increase in the rate of return from the Local Agency Investment Fund from 0.55% to 0.978%. Total Debt Service expenditures were $3,949,115, over budget by $26,215 (0.7%). The IBank Loan funding was not included in the adopted budget. Loan origination fees totaled $10,500 and accrued interest totaled $13,500 in Fiscal Year 2016/17. Funding for Infrastructure Improvements When the budget was prepared for Fiscal Year 2016/17 the DWP had no funding awarded for infrastructure projects and spending plans anticipated using current year revenues and funds reserved for capital improvements. In July 2016 the DWP was awarded two grants from the USBR of which $399,311 was earned in Fiscal Year 2016/17. Capital Expenditures Capital expenditures in the System Rehabilitation Fund, Capital-Growth Fund and General Plant Fund were $2,709,343, which was more than budgeted by $845,377 (45.4%). The Big Bear Blvd Pipeline Replacement Project was not included in the adopted budget because financing had not yet been secured. This created an unfavorable variance of $1,183,117. Engineering for reservoirs and wells was deferred creating a favorable variance of $80,000 and $83,264, respectively. Spending for meters was $27,390 less than expected, and capitalized labor was $86,231 less than expected. Spending for assets for general plant exceeded expectations by $9,537. Spending for the upgrades to information technology were less than projected by $34,314. Purchases of field equipment exceeded expectations by $22,730. The adopted budgeted included $35,000 to replace a compressor trailer. In August 2016, staff requested and the Board approved the upgrade of that purchase from a compressor trailer to a vacuum trailer. The remaining variance is due to loss on retirement of assets not yet fully depreciated of $21,121, which is an unbudgeted line item. 23

28 Comparison of Unaudited Actual Results to Original Budget Fiscal Year Ended Budget Adopted Variance Favorable June 30, 2017 May 31, 2016 (Unfavorable) Revenue Fund Usage Fees $ 1,857,206 $ 1,665,971 $ 191, % Service Charges 8,779,883 8,731,700 48, % Administrative Fees 134, ,890 (9,045) -6.3% Meter Installation Fees 49,575 45,000 4, % Capacity Charges 569, ,217 4, % Standby Fees 156, ,767 1, % Investment Income 26,561 15,966 10, % Other Income 46,691 29,240 17, % Net Fund Activity $ 11,620,769 $ 11,352,751 $ 268, % Operations and Maintenance Fund (Actual spending includes encumbrances carried forward from prior year) Production $ 1,246,891 $ 1,346,653 $ 99, % Conservation/Public Information 209, ,520 1, % Transmission/Distribution 785, ,226 (17,451) -2.3% Meter Department 695, ,972 (26,476) -4.0% Water Operations 766, ,688 44, % Customer Accounts 931, ,830 54, % Administration 1,219,250 1,244,760 25, % Gross Expenditures $ 5,854,066 $ 6,035,648 $ 181, % Capitalized Costs (282,797) (369,028) (86,231) 23.4% Net Expenditures 5,571,269 5,666,620 95, % Net Fund Activity $ (5,571,269) $ (5,666,620) $ 95, % Debt Service Fund Investment Income $ 31,051 $ 12,950 $ 18, % Payments from the Sale of Rimforest 57,784 57, % Total Funding $ 88,835 $ 70,734 $ 18, % Principal Payments $ 2,590,000 $ 2,590,000 $ - 0.0% Interest Expense and Other Expenses 1,359,115 1,332,900 (26,215) -2.0% Total Expenditures $ 3,949,115 $ 3,922,900 $ (26,215) -0.7% Net Fund Activity $ (3,860,279) $ (3,852,166) $ (8,114) 0.2% Capital Expenditures (Actual spending includes encumbrances carried forward from prior year) Grants $ 399,311 $ - $ 399,311 N/A Total Funding $ 399,311 $ - $ 399,311 N/A General Plant $ 326,671 $ 317,135 $ (9,537) -3.0% Wells, Boosters, Reservoirs 261, , , % Mains, Meters, Hydrants 2,120,862 1,133,234 $ (987,627) -87.2% Total Expenditures $ 2,709,343 $ 1,863,966 $ (845,377) -45.4% Net Fund Activity $ (2,310,031) $ (1,863,966) $ (446,066) 23.9% Net Activity All Funds $ (120,811) $ (30,000) $ (90,811) % % 24

29 Analysis of Unaudited Actual Results to Prior Year Results Revenues Operating revenues increased $393,459 (3.5%) over the prior year. Usage fees increased $241,314 (14.9%) in response to the Governor s loosening of drought restrictions in Service charges increased $208,400 (2.4%). The DWP implemented a 2% rate increase on July 1, 2016 and the additional increase is attributable to new connections. Administrative fees declined $4,325 (3.1%), which is reflective of the DWP s efforts to reduce past due accounts and general improvement in the economy. Revenues from new connections decreased $50,573 (8.6%) as 4.5 fewer equivalent dwelling units connected to the system in Fiscal Year 2016/17. Standby fees decreased $10,641 (2.7%) which is a result of new connections being removed from the standby rolls. Other income is primarily proceeds from the Lehman Brothers settlement agreement and grant-sharing proceeds related to the Bear Valley Groundwater Sustainability Project. Operations and Maintenance Gross Operations and Maintenance spending increased $96,671 (1.7%) compared to the prior year. Production Production spending decreased $15,945 (1.3%) compared to the prior year. Spending for electricity decreased $30,103 due to improvements in the infrastructure that allows for more efficient movement of water from east to west, and the DWP paid off retroactive obligations to the electric company effective September 30, Personnel costs decreased $19,812 due to turnover in the department which resulted in lower benefits costs. Maintenance costs increased $30,687 due to cyclical scheduling of certain maintenance tasks. Lab test costs increased $3,354 as a result of additional testing required to bring the Goldmine Boosters back into the system. Conservation/Public Information Conservation spending decreased $1,380 (0.7%) compared to the prior year. Personnel costs increased $3,021 (2%) as a result of cost of living adjustments and pension cost increases. Spending for the Demand Offset program (toilet rebates and turf-buy-back) decreased $4,311. The decrease in Demand Offset is most likely due to public perception that the drought in California was over. Transmission and Distribution Spending for Transmission and Distribution decreased $5,559 (0.7%) compared to the prior year. Personnel costs increased $47,929 due to a cost of living adjustment, an increase in overtime costs, and increases in pension costs. Computers and software increased $1,246. Spending for basic materials and inventory changes decreased $19,454 and $35,459 respectively. Meter Department Spending for the Meter Department increased $62,285 (9.8%) over the prior year. Personnel costs increased $50,380 due to a cost of living adjustment, an increase in overtime costs, and increases in pension costs. Maintenance fees for the Sensus radio read collector system and software increased $8,500 compared to the prior year. Property Taxes Property taxes decreased $54,574 (100%) compared to the prior year as a result of the efforts to annex the DWP s parcels in the county to the City of Big Bear Lake. 25

30 Water Operations Water Operations spending increased $132,747 (21%). The majority of this increase was $70,183 in licensing and implementation costs for the Sedaru Mobile Workforce application. Personnel costs increased $28,365 due to a cost of living adjustment, and increase in overtime costs, and deferral of the use of earned leave. Water system licensing fees levied by the state increased $21,606 because the state increased fees to help fund the state s efforts related to drought reporting and compliance. Professional Services increased $14,054 because some oncall professional services did not qualify for capitalization. Customer Accounts Spending related to customer accounts decreased $30,625 (3.1%) compared to the prior year. Personnel costs decreased $37,996 due to turnover in the department which resulted in entrylevel pay rates for new staff who are also tier 2 pension participants. Savings was also realized in bad debt expense which decreased $21,497. Postage costs and printing costs decreased $3,400 and $2,963, respectively, as a result of implementing the OMS-500 Smart Mailing Software. Bank fees increased $11,220 as a result of more customers using the DWP s online credit card payment option. Lease expense increased $10,846 to incorporate the OMS-500 software in the mail station and also as result of replacing an owned multifunction printer with a leased printer. Costs of $8,340 were incurred for temporary staffing until a new accounting supervisor could be hired. Spending for computers increased $5,469 as a result of planned replacements. Administration Administration spending increased $9,363 (0.8%) compared to the prior year. Personnel costs increased $46,890 due to cost of living adjustments and contractual changes, deferral of the use of earned leave, and also because there was a vacancy in the human resources position for a period of time in the prior year. Professional Service for IT increased $19,387. In April the prior year the DWP secured the services of Accent Computer Solutions. The cost increase for these services is commensurate with the increase in the quality of service received. Professional Services related to the Bear Valley Sustainability Project and subsequently BVBGSA decreased $46,584 compared to the prior year when the multiple agencies invested in the preliminary facilities plan for the Bear Valley Water Sustainability. Spending for office computers decreased $6,626 compared to the prior year, which is consistent with the DWP s replacement schedule. Capitalized Costs The DWP dedicated $151,285 less of its labor costs to capital projects than the prior year. Winter weather slowed the meter replacement program which reduced the number of meters installed in Fiscal Year 2016/17 by 868 units (26%). In Fiscal Year 2015/16 the DWP rehabilitated a number of well pumping units that required in-house support totaling $27,900. Also in the prior year, the DWP completed work on the Bear Mountain Slant Wells which required over $70,000 of inhouse personnel costs. Debt Service Revenues in the Debt Service Fund increased $6,273 primarily as a result of increased returns from the Local Agency Investment Fund. Contract payments from the sale of the Rimforest system decreased $5,920 which is consistent with the contractual obligation with Lake Arrowhead Community Services District. Debt service expenditures increased $25,097 over the prior year as a result of loan origination costs and accrued interest associated with the new IBank loan. 26

31 Funding for Infrastructure Improvements In July 2016, the DWP was awarded two grants from the USBR totaling $600,000. The grants allowed for retroactive reimbursements for spending in Fiscal Year 2015/16 of $200,689. In Fiscal Year 2016/17, the DWP completed its obligations under those USBR grants and recognized the remaining grant proceeds of $399,311. Capital Expenditures In Fiscal Year 2016/17, capital outlay totaled $2,709,343 compared to $2,360,820 in the prior year. The DWP continued its focus on the Meter Replacement Program. The DWP also completed the replacement of approximately 4,000 feet of 12 steel pipeline in Big Bear Boulevard and extended a main line on Georgia St. to Big Bear Blvd to improve operational efficiencies. In Fiscal Year 2015/16 the DWP invested heavily in the meter replacement program and replaced a number of failed well pumps. 27