FISCAL YEAR 2019 BUDGET

Transcription

1 HARRIS-GALVESTON SUBSIDENCE DISTRICT FISCAL YEAR 2019 BUDGET APPROVED BY BOARD RESOLUTION The Harris-Galveston Subsidence District was created in 1975 to provide reasonable groundwater regulation to address concerns related to groundwater use and subsidence. Since that time, the District has taken a reasonable and inclusive approach to groundwater regulation resulting in a dramatic reduction in subsidence rates within the District. Annually, the District prepares a budget for the upcoming fiscal year. The Fiscal Year 2019 Budget presented herein will provide for the expected operational needs required to fulfill the District s mission. NOVEMBER 14, 2018 November 14,

2 Harris - Galveston Subsidence District VISION STATEMENT The Harris-Galveston Subsidence District is the premier water management and subsidence authority in Texas. The District plays an integral role in regional water management strategies to insure the long-term viability of all water resources while protecting lives and property within the District from the impacts of subsidence. MISSION STATEMENT The Harris-Galveston Subsidence District protects lives and property within the District from the impacts of future subsidence by providing reasonable groundwater regulation based on the best available science. STRATEGIC GOALS Utilizing the District s mission and strategic vision, the following goals will be the focus of the District through 2025: Conduct research that enhances the understanding and effective management of the Upper Gulf Coast Aquifer System to minimize subsidence in the District Educate the community on the importance of water resources, the occurrence of subsidence in the region, and promoting water conservation Communicate effectively with regional water providers and stakeholders Provide reasonable groundwater regulation in support of the District mission Develop a diverse, highly-motivated, customer service focused organization while maintaining fiscal stability Proposed Operating Budget

3 Harris - Galveston Subsidence District TRANSMITTAL MEMORANDUM To: From: Board of Directors Michael J. Turco, General Manager Date: November 14, 2018 Subject: 2019 Proposed Operating Budget Enclosed please find the proposed operating budget for the 2019 fiscal year. This budget will provide for the funding of the Harris-Galveston Subsidence District (HGSD) programs that support our mission to protect lives and property within the District from the impact of future subsidence by providing reasonable groundwater regulation based on the best available science as directed by the Texas Legislature through the HGSD Enabling Act. The Water Conservation Program (WCP) Fund will allow the District to consistently dedicate resources to effectively administer the WCP and identify effective methods to promote water conservation within the District. WCP Fund estimated revenues are based on a conservative estimate of 41,500 students sponsored in the program. Estimated expenses associated with the WCP will be offset by $1.64 million in estimated sponsor revenue resulting in an estimated end of year decrease in the WCP unrestricted fund balance to about $965,000. WCP 2019 expenses include the grade-school education program, continued promotion of the outdoor irrigation campaign, and the development of a water conservation grant program. The Science and Research Fund provides fundamental support to the District s regulatory plan by conducting research that enhances the understanding and effective management of the Upper Gulf Coast Aquifer System to minimize subsidence and ensure the long-term viability of all the water resources within the District. Carried into the science and research budget from 2018 is the investigation of the multi-year permit methodology to provide another administrative tool to manage the uncertainty of alternative water supplies. Funds have also been budgeted for science and research information and education, as it is expected that the changes in political leadership within and adjacent to the district will require more educational outreach. Disincentive fee revenue will increase in 2019 due to the automatic increase in the disincentive fee rate from $8.75 to $8.998 per thousand gallons following the change of the City of Houston index rate in April of The estimated end of year balance in the fund is expected to decrease to $2.24 million. The proposed General Fund budget includes $3.51 million in revenue and $3.95 million in expenses resulting in a decrease in net income, before depreciation, of about $437,000. The proposed expenses include capital improvements to the building HVAC system and IT infrastructure as wells as increases in personnel costs for succession planning. The update to the regulatory plan is not expected to begin until late 2019 or early Any expected costs associated with that effort will be included in the 2019 budget once the required technical services are determined. Revenues are expected to remain relatively flat through 2020 when a proposed rate increase will be presented to the Board of Directors for consideration. Future years will include the update of the District Regulatory Plan and capital improvements that may extend through The estimated cost of the Regulatory Plan update and capital improvements is $1.70 million and $150,000 respectively. November 14,

4 WATER CONSERVATION PROGRAM FUND The proposed 2019 Water Conservation Program Fund budget represents the objectives and necessary resources to accomplish the District s strategic mission to promote water conservation and conduct daily operations related to the District s Water Conservation Program. The primary objective of the Water Conservation Program Fund is to provide for the effective administration of the Learning to be Waterwise elementary student education program, the groundwater credit program, and the outdoor irrigation campaign. The Waterwise program provides education to 4th and 5th grade students, in Harris and Galveston Counties on subjects including: water conservation, hydrology, and subsidence. Sponsors are invoiced $36.46 for each sponsored student in the program and in return, a groundwater credit is issued to the sponsor in the amount of 84,000 gallons. Continuing the progress made in 2018, the District Table estimated Water Conservation Fund revenue and expenses assuming 41,500 students sponsored in the program Budget Category Proposed Budget WCP Income 1,640,700 WCP Interest 3,500 WCP Misc. Income - TOTAL REVENUES 1,644,200 WCP Educational Curiculum 1,287,000 WCP Office Supplies 900 WCP Public Information/Education 2,500 WCP Equipment 3,000 WCP Contracts 192,000 WCP Operating Supplies 1,000 WCP Maint. Of Vehicles 4,200 WCP Grant Program 125,000 Operating Transfer Out (GF payroll reimburse) 170,000 TOTAL EXPENSES $ 1,785,600 NET INCOME $ (141,400) ESTIMATED FUND BALANCE BOY $ 1,105,455 ESTIMATED FUND BALANCE EOY $ 964, Proposed Operating Budget will continue a program to provide education and tools relating to the appropriate water use for outdoor irrigation. Based on information received from the Goldwater Project, the Sierra Club, and other conservation focused groups, water conservation efforts focused on outdoor irrigation can have an important impact on total water use. In 2019, the District will communicate with water users about the proper use of water for landscape irrigation and provide tools, such as the watermyyard.org online calculator. The online watermyyard.org calculator utilizes climate data from stations installed by the District since 2016 to provide real-time guidance to willing users on how much water is needed to maintain outdoor landscaping. Building on collaborations developed in 2018, the Water Conservation Program will provide turn-key tools and information to local water providers and end users to inform citizens of best water management practices. District efforts will continue to focus on collaboration with local water authorities, municipal utility districts, and cities to develop a unified approach while leveraging resources. REVENUE and EXPENSES The Water Conservation Program Fund will allow the District to consistently dedicate resources to effectively administer the program and identify other approaches to promote water conservation within the District. WCP estimated revenues are based on a conservative estimate of 41,500 students enrolled in the program. The 2019 WCP budget includes operating expenses and estimated contractual expenses related to the implementation of an effort to provide tools and information to the District regarding the appropriate amounts of water to use for outdoor irrigation. Contractual expenses include the cost of the elementary school education program curriculum and take-home lab kits (WCP Educational Curric-

5 ulum) as well as other estimated expenses (WCP Contracts) for the continuation of the outdoor irrigation education effort (table 1). SCIENCE AND RESEARCH FUND The Science and Research Fund was created in 2015 to purpose disincentive fee revenue for Science and Research needs in support of the District Regulatory Plan. The Science and Research Fund provides fundamental support to the District s Regulatory Plan by conducting research that enhances the understanding and effective management of the Upper Gulf Coast Aquifer System to minimize subsidence and ensure the long-term viability of all the water resources within the District. Two projects will have been completed in The Determination of the impact of brackish groundwater development on aquifer compaction and land subsidence was published in the spring of The estimation of a subsidence neutral yield of a hypothetical aquifer storage and recovery project within the District will be published by the end of Both projects have resulted in new information that will aid future Boards in developing rules and policies to ensure the responsible utilization of these water management strategies within the District. The Science and Research fund is entirely sourced from disincentive fee revenue which can be variable from year to year (figure 1). Estimated disincentive Table 2. Actual 2017, projected 2018, and proposed 2019 Science and Research Fund revenue and expenses. November 14,

6 fee income for the 2019 fiscal year, based in part on the rolling 5-year average, is $325,000. With the issues of drought, groundwater credits, and exemptions raised by several municipal and regional water providers during recent years, the District began a project in late 2018 to investigate a multi-year permit that can provide flexibility to permitees to deal with short-term interruption of alternative water supply while remaining subsidence neutral. The costs for this investigation is included in the 2019 science and research fund budget. Additionally, the science and research fund is expected to support information dissemination throughout the region. Leadership within and adjacent to the District change considerably and it will be necessary to develop and provide effective methods Figure 1. Disincentive permit fee revenue with 5 year moving average. to communicate the District mission, the issue of subsidence in the region, and the regional scope of the solution to subsidence employed by the District. The 2019 Science and Research Fund budget does not include costs beyond those committed through board action. The estimated balance of the fund will Table projected year end total general fund revenue, 2019 proposed general fund revenue budget and variance Proposed Operating Budget

7 be about $2.24 million at the end of 2019 (table 2). GENERAL FUND The General Fund provides for the day-to-day operations of the District. The District is not a taxing authority, rather, it receives all income in the General Fund through the issuance of permits based on groundwater allocation and administrative fees. This legislated funding mechanism is significantly impacted by the District s legislative mandate to reduce groundwater withdrawal. Permit fee revenue is the primary component of the overall income to the District. The District s approved regulatory plan calls for a 30 percent reduction of groundwater withdrawal by 2025 in Regulatory Area 3. Over the course of the 2016 fiscal year, the District worked with many of the largest permittees in the District to develop a plan to increase permit fees in an incremental manner to insure the regulatory conversion did not inhibit the District s ability to effectively regulate groundwater within the District. On September 14, 2016, utilizing information compiled by the District Rules Committee and statements provided by stakeholders in a public hearing, the Board of Directors increased the District s regular permit fee from $20 to $22 per million gallons of groundwater allocation, while also increasing other administrative fees of the District, to be implemented in the 2017 fiscal year. Although an incremental progression of regular permit fee rate increases was proposed (a $2 increase in 2017, 2020, and 2023) the Board s action in September of 2016 only authorized the regular permit fee increase in Any future change in the regular permit fee will require a public hearing and board Table projected year end total general fund expenses, 2019 proposed general fund expense budget and variance. November 14,

8 Figure 2. Harris Galveston Subsidence District organizational structure, January, Proposed Operating Budget

9 Table proposed budget salary detail with variance to the 2018 approved budget. approval. The proposed 2019 general fund budget includes $3.51 million in revenue (table 3) and $3.95 million in expenses, an increase of 1.9% and 19.1%, respectively when compared to the 2018 approved budget. The resulting net income before depreciation will decrease the fund balance by an estimated amount of $437,500. REVENUES General fund revenues are derived primarily from the issuance of annual permit fees and application fees. The current (2018) permit fee rate is $22.00 per million gallons of groundwater allocation. Each permittee is required to pay an application fee for new wells to be permitted or to renew a previously permitted well. Emergency application fees are applied at the permittee s request when emergency processing is required due to well failure, loss of access to water, or if a significant economic impact would occur as a result of the normal processing period which can extend to 90 days. Regular permit fees and administrative fees are unchanged from the 2018 fiscal year in the proposed budget. Enforcement of the District Rules and Regulatory Plan generate revenue annually. Any permittee in violation of District Rules and/or the Regulatory Plan are subject to violation fees and may enter into the compromise and settlement process. From Table 6. Estimated 2019 end of year general fund balance based on the proposed 2019 fiscal year budget. November 14,

10 2017, the average revenue from compromise and settlement action is about $201,000. The District operates several inter-local agreements with nearby Districts. In place since 1989, the largest of these agreements is with the Fort Bend Subsidence District for operation and administrative services. In the 2016 fiscal year, due to changes in their rules and recent conversion requirements, additional staff were added and funded entirely by the Fort Bend Subsidence District. With the addition of the new staff, modifications to the interlocal agreement were made to redistribute the work load between staff solely dedicated to Fort Bend and District staff, resulting in fixed cost and actual cost component to the agreement. The estimated 2019 interlocal agreement is $426,500 which is a 8.0% increase from It is possible that future agreements may be reduced considerably should the Fort Bend Subsidence District determine that it is in their best interest to operate their District without the aid of HGSD staff. EXPENSES The proposed 2019 General Fund Budget represents the necessary recommendations to support the District s strategic objectives and conduct daily operations. Proposed General Fund operating expenses for 2018 total about $3.95 million, representing a 19.0% increase from the 2018 approved budget. Several key positions at the District will see retirements in the coming years. Over 90 years of District experience will retire from service by To account for the loss and provide for the transfer of insti- Table 7. Detailed estimated costs of contractual services and capital outlay in the proposed 2019 fiscal year budget. Contractual services include federal cooperative agreements, professional services agreements, and fee for service engagements. Account Name Vendor Task FY Budget Amount Audit Expense Whitley Penn Annual Financial Audit Services 2019 $ 20,000 USGS Cooperative Agreement USGS Data Collection, Dissemination, and 2019 $ 326,200 Legal Expense Greg Ellis Esq. District General Counsel, paralegal expenses, litigation recovery 2019 $ 262,000 Legal Expense Multiple General Legal Support (HR, Contested 2019 $ 15,000 Consulting Services Laura Ruan Consulting Public Information 2019 $ 25,000 Consulting Services Sen. Kip Averitt Legislative Affairs 2019 $ 48,000 Consulting Services Consulting Technical Services to be 2019 $ 40,000 Consulting Services University of Houston Geodetic Technical Support 2019 $ 60,000 Consulting Services New Edge Consulting Cityworks Implementation Work Order 2019 $ 75,000 No.1 (approved 2018) Consulting Services New Edge Consulting Cityworks Implementation Work Order 2019 $ 50,000 No.2 (proposed) Consulting Services Bocci Engineering Air Handler Mechanical Owner Rep 2019 $ 25,000 Management Services General 2019 $ 50,000 Hearing Examiner Helen Truscott Hearing Examiner 2019 $ 21,000 GPS Systems/Re-leveling Installation of new moitoring sites and 2019 $ 35,000 GMA 14 Interlocal Participation GMA 14 Development of explanatory report 2019 $ 20,000 analysis (approved 2018) IT Equipment (Cap) Upgrade and Replacement of Active 2019 $ 20,000 Directory Servers Field Vehicle (Cap) Field Vehicle - Single Cab Pickup or similar 2019 $ 30,000 Building Improvements (Cap) TBD RFPQ 2019 Air Handler Replacement 2019 $ 190, Proposed Operating Budget

11 tutional knowledge to new employees, two new positions have been added to the organization structure (figure 2). Additionally staff have been reorganized and an additional 0.5 FTE has been reassigned to the water conservation program to better account for the level of effort in that program. Contractual expenses include technical and legal services necessary for the operation of the District. Table 7 shows the contracts and expected capital expenses included in the 2019 proposed budget. In 2019, about 51% of General Fund expenses are associated with employee salaries and benefits. Another 27% is proposed to be budgeted for professional and technical contractual services. The remaining categories, which include the Board of Directors, office supplies, building operation, transportation, and capital expenses comprise the remaining 22%. Labor expenses include a 10% increase in total health care costs, and salary increases and promotions based on 3% of total salary. GENERAL FUND FIVE-YEAR PROJECTION The proposed 2019 budget assumes an initial operating reserve of about $4.13 million. Two restricted accounts were established in 2017 to characterize known large future capital and regulatory projects: capital assets and improvements, and regulatory planning. The Capital Assets and Improvements account is utilized to replace fleet vehicles and replace or repair mechanical assets at the District office. The regulatory planning account identifies the estimated cost of the next regulatory plan update which will begin in In 2019 the accounts have been estimated based on historical costs, resulting in an unrestricted reserve balance of about $2.41 million (table 8). The General Fund operating reserve will fluctuate Table 8. Projected revenue and expenses Budget Category Permit Fees $ 2,356,000 $ 2,603,000 $ 2,616,000 $ 2,629,000 $ 2,905,000 Application Fees $ 462,000 $ 462,000 $ 462,000 $ 462,000 $ 462,000 Interest $ 21,000 $ 23,000 $ 25,000 $ 27,000 $ 29,000 Compromise and Settlement $ 135,000 $ 150,000 $ 150,000 $ 150,000 $ 150,000 FBSD Income $ 426,500 $ 431,000 $ 436,000 $ 441,000 $ 446,000 Legal Recovery Fees $ 107,000 $ 45,000 $ 45,000 $ 45,000 $ 45,000 Other Misc. Income $ 8,000 $ 5,000 $ 5,000 $ 5,000 $ 5,000 TOTAL REVENUE $ 3,515,500 $ 3,719,000 $ 3,739,000 $ 3,759,000 $ 4,042,000 Personnel Expenses $ 2,029,000 $ 2,060,000 $ 2,122,000 $ 2,036,000 $ 2,098,000 Board Expenses $ 124,000 $ 127,000 $ 130,000 $ 133,000 $ 136,000 Office Expenses $ 294,000 $ 275,000 $ 281,000 $ 287,000 $ 293,000 Info and Education $ 45,000 $ 46,000 $ 47,000 $ 48,000 $ 49,000 Building Operations $ 104,000 $ 106,000 $ 108,000 $ 110,000 $ 112,000 Transportation Expenses $ 44,000 $ 45,000 $ 46,000 $ 47,000 $ 48,000 Contractual Services $ 1,073,000 $ 1,305,190 $ 1,560,450 $ 1,772,054 $ 1,479,658 Capital Outlay $ 240,000 $ 40,000 $ 70,000 $ 95,000 $ 40,000 TOTAL EXPENSES $ 3,953,000 $ 4,004,190 $ 4,364,450 $ 4,528,054 $ 4,255,658 NET INCOME $ (437,500) $ (285,190) $ (625,450) $ (769,054) $ (213,658) General Fund Balance at BOY $ 4,699,174 $ 4,261,674 $ 3,976,484 $ 3,351,035 $ 2,581,981 Restricted Account: Capital Assests and Improvements $ 150,000 $ 150,000 $ 120,000 $ 60,000 $ 30,000 Restricted Account: Regulatory Plan Update $ 1,700,000 $ 1,500,000 $ 1,100,000 $ 600,000 $ - Unrestricted Gen. Fund Balance at EOY $ 2,411,674 $ 2,326,484 $ 2,131,035 $ 1,921,981 $ 2,338,322 General Fund Balance at EOY $ 4,261,674 $ 3,976,484 $ 3,351,035 $ 2,581,981 $ 2,368,322 November 14,

12 Table 9. Summary of Harris-Galveston Subsidence District Fees, Description Units New Well Application Fee per well $ $ Emergency Well Application Fee per well $ $ Temporary Well Application Fee per well $ $ Renewal Well Application Fee per well $ $ Previously Permitted Well Application Fee per well $ $ Existing Active Well Application Fee per well $ $ Amendment in Allocation Fee per well $ $ Groundwater Credit Rebate Fee per well $ $ Permit Fee Rebate Fee per well $ $ Regular Permit Fee Rate per million gallons $ $ Agricultural Permit Fee Rate per million gallons $ $ Minimum Permit Fee annually $ $ Disincentive Permit Fee Rate* per thousand gallons $ 8.75 $ 9.00 *The Disincentive Permit Fee rate is indexed to the City of Houston Rate for treated water (TU 91) (HGSD Resolution ). The 2019 disincentive permit fee is calculated as: 2*($3.739+$0.760) = $ Information about the City of Houston water rates can be found at with each annual budget based on the needs of the District. Where there is excess, those funds can be carried over into the next fiscal year to maintain stability in District fees. The 5-year projection shown in table 8, accounts for the current permit fee as well as the proposed permit fee increase in 2020 ($24 per million gallons of allocation) to continue the incremental rise in the permit fee to offset the pending conversion of Regulatory Area 3 in 2025 which will result in an estimated 30% reduction in annual revenue. Revenues are expected to remain relatively flat through 2019, increase in 2020 and remain flat through Future years will include a regulatory plan update process that will begin in 2020 (represented by the increase in contractual services in 2020 and 2021 in table 8), extend through at least 2022 with a cost of about $1.7 million. With the specification of the restricted accounts, the large capital and regulatory efforts will deplete the restricted accounts while the unrestricted reserve balance will offset other operational needs Proposed Operating Budget

13 Table 10. Summary of all 2019 budget for all funds and estimated end of year fund balances. General Fund Water Conservation Fund Science and Research Fund Revenues Permit Fees, net $ 2,356,000 $ - $ - Disincentive Fees, net ,000 Application Fees, net 462, C&S Fees 135, C&S Disincentive Fees Interlocal Agreement 426, Water Conservation Program - 1,644,200 - Interest 21, Legal Recovery Fees 107, Other Misc. Income 8, Total Revenues $ 3,515,500 $ 1,644,200 $ 325,000 Expenses Personnel $ 2,029,000 $ 170,000 $ - Board of Directors 124, Office Supplies 294,000 1,900 - Information and Education 45,000 2, ,000 Building Operations 104,000 3,000 - Transportation 44,000 4,200 - Contractual Services 1,073, , ,000 Contractual Services - Elem. School Prg. - 1,287,000 - WCP Grant Program - 125,000 Capital Outlay 240, Total Expenses $ 3,953,000 $ 1,785,600 $ 345,000 Revenues Over (Under) Expenditures $ (437,500) $ (141,400) $ (20,000) Transfer OUT to other fund Transfer IN from other fund Fund Balances - BOY $ 4,699,174 $ 1,105,455 $ 2,254,834 Fund Balances - EOY $ 4,261,674 $ 964,055 $ 2,244,834 November 14,

14 Table proposed budget expenses by account and 2018 approved budget variance Account Description Approved Budget Proposed Budget Variance 521 Member Per Diem $ 57,850 $ 57,850 $ Member Travel Expense $ 17,500 $ 17,500 $ Officer and Director Liability $ 8,000 $ 8,000 $ Member Retirement $ 8,700 $ 8,700 $ Medicare - Board Members $ 750 $ 750 $ Other Board Expenditures $ 31,000 $ 31,000 $ Office Supplies $ 14,000 $ 14,000 $ Mail and Postage $ 25,500 $ 25,500 $ IT Equipment (non-cap) $ 19,000 $ 16,500 $ (2,500) 534 IT Software $ 58,430 $ 85,430 $ 27, Telephone $ 35,000 $ 35,000 $ Legal Notice $ 80,000 $ 80,000 $ Surety Bonds $ 500 $ 500 $ Rental of Equipment $ 29,000 $ 29,000 $ Miscellaneous Supplies and Equipment $ 8,000 $ 8,000 $ Membership Dues and Subscriptions $ 11,000 $ 11,000 $ Conferences and meetings $ 13,000 $ 13,000 $ Employee Travel Expense $ 16,000 $ 16,000 $ Employee Training $ 5,000 $ 5,000 $ Utilities $ 35,000 $ 35,000 $ Insurance $ 8,000 $ 8,000 $ Janitorial Services $ 12,000 $ 12,000 $ Building Maintenance $ 57,190 $ 42,190 $ (15,000) 555 Grounds Maintenance $ 7,400 $ 6,000 $ (1,400) 561 Operating Supplies $ 12,000 $ 11,000 $ (1,000) 562 Maintenance of Vehicles $ 7,500 $ 8,000 $ Tolls, Parking $ 5,200 $ 7,500 $ 2, Insurance of Vehicles $ 5,500 $ 6,875 $ 1, Mileage Allowance $ 10,000 $ 10,000 $ Audit Expense $ 20,000 $ 20,000 $ USGS Cooperative Agreement $ 285,000 $ 326,200 $ 41, Legal Expense $ 177,000 $ 277,000 $ 100, Consulting Expense $ 293,000 $ 323,000 $ 30, Management Services $ 50,000 $ 50,000 $ Hearing Examiner $ 21,000 $ 21,000 $ GPS Systems/Releveling $ 35,000 $ 35,000 $ NGS - Geodetic Advisor $ - $ 20,000 $ 20, IT Systems Development $ - $ - $ Office Equipment (Cap) $ - $ - $ IT Equipment (Cap) $ 20,000 $ 20,000 $ Motor Vehicles (Cap) $ - $ - $ GPS Equipment (Cap) $ - $ - $ Building Improvements $ - $ 220,000 $ 220, Proposed Operating Budget