CITY WATER LIGHT AND POWER FY2018 CWLP BUDGET PRESENTATION. January 19, 2017 CWLP BUDGET PROCESS. Initial Budget Requests Submitted in October

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1 CITY WATER LIGHT AND POWER FY2018 CWLP BUDGET PRESENTATION January 19, 2017 CWLP BUDGET PROCESS Initial Budget Requests Submitted in October 63 Separate Business Units Participate in Budget Preparation Decentralized Process Managers and Supervisors Closest to the Work Formulate Budgets and Make Decisions About Cuts Responsible for Managing Departmental Budget and Results Final Budget Consists of +/- 6,000 Detailed Lines Balancing Decisions Made by CWLP Directors and Managers Water cut $5.4M from initial requests Electric cut $9.5M from initial requests 2 1

2 CWLP FY2018 BUDGET HIGHLIGHTS Budgeted headcount at 614 positions, same as last year Water Division expenditures lower due to capital projects nearing completion funded from 2012 bonds Water utilizing $4.4 million from existing funds to balance budget, Revenues are flat. Water budgeted debt coverage is 1.77x (1.25x is required)(1.41x After Aux) Electric retail load down based on recent trends Electric wholesale markets expected to increase due to lower coal price. Risk remains due to significant volatility in natural gas prices Electric Fund budgeted debt coverage is 1.83x (1.25x is required) (1.60x after PILOT) 3 CWLP BUDGETED EXPENSES FY2018 vs. FY2017 FY2018 FY2017 $ VARIANCE % VARIANCE Water Fund $ 46,530,297 $ 52,032,143 $ (5,501,846) -10.6% Electric Fund $ 266,197,312 $ 272,856,205 $ (6,658,893) -2.4% Total $ 312,727,609 $ 324,888,348 $ (12,160,739) -3.7% 4 2

3 CWLP HEADCOUNT TREND FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 BUDGET ACTUAL YEAR END 5 CWLP AGE COHORTS AS OF JANUARY 1, 2017 NOT RETIREMENT ELIGIBLE % RETIREMENT ELIGIBLE TODAY 56 10% ELIGIBLE IN THE NEXT 5 YEARS 78 14% TOTAL ACTUAL % 24% CWLP RETIREMENT ELIGIBILITY 10% 14% NOT RETIREMENT ELIGIBLE RETIREMENT ELIGIBLE TODAY 76% ELIGIBLE IN THE NEXT 5 YEARS 6 3

4 CWLP PILOT EXPENSES CWLP PILOT payments & services defined by City Code Electric: Set by Ordinance, Max of 3.35% of prior year operating revenues OR available after system expenses, debt service and required deposits Water: 1.39% of gross retail revenue and 2.5% of gross wholesale revenue Free Services provided by CWLP as required by ordinance: Street light maintenance & energy for approximately 17,500 lights Traffic light maintenance and electricity for ~300 intersections Information Systems Division services to City Corporate fund Water for street cleaning, sewer flushing, and fire fighting Staffing of security for municipal center complex FY2018 Budget Electric PILOT $7,958,106 Electric Services $4,510,896 Electric Total $12,469,002 Water PILOT $429,689 Water Services $394,847 Water Total $824,536 CWLP Total $13,293,538 7 CWLP BUDGET HEARING Water Fund Budget January 19,

5 FY2018 WATER FUND EXPENSES EQUIPMENT TRANSFERS 2% 1% WATER FUND EXPENSES PERSONAL SERVICES $ 15,110,897 CAPITAL IMPROVEMENTS 13,053,153 COMMODITIES & CONTRACTS 8,645,229 DEBT SERVICE 7,059,773 EQUIPMENT 819,500 TRANSFERS 429,689 OTHER 1,412,056 TOTAL $ 46,530,297 DEBT SERVICE 15% CAPITAL IMPROVE- MENTS 28% COMMODI- TIES & CONTRACTS 19% PERSONAL SERVICES 32% OTHER 3% 9 WATER FUND EXPENSES WATER FUND EXPENSES FY2018 FY2017 $ VARIANCE % VARIANCE PERSONAL SERVICES $ 15,110,897 $ 14,875,660 $ 235, % CAPITAL IMPROVEMENTS 13,053,153 17,889,251 (4,836,098) -27.0% COMMODITIES/CONTRACTS 8,645,229 9,744,351 (1,099,122) -11.3% DEBT SERVICE 7,059,773 7,063,373 (3,600) -0.1% EQUIPMENT 819, , , % TRANSFERS 429, ,950 (10,261) -2.3% OTHER 1,412,056 1,489,351 (77,295) -5.2% TOTAL $ 46,530,297 $ 52,032,143 $ (5,501,846) -10.6% 10 5

6 FY2018 WATER FUND RESOURCES WATER FUND RESOURCES RETAIL & OTHER OPERATING $ 26,842,700 BOND PROCEEDS 9,165,573 FUND BALANCE & OTHER 5,656,268 WHOLESALE 2,444,239 AUXILIARY SERVICES 1,270,289 CONTRIBUTIONS 1,185,547 TOTAL $ 46,564,616 RETAIL / OTHER OPERATING 58% FUND BALANCE & OTHER 12% BOND PROCEEDS 20% AUXILIARY SERVICES 3% WHOLESALE 5% Contribution 2% 11 WATER FUND RESOURCES WATER FUND RESOURCES FY2018 FY2017 $ VARIANCE %VARIANCE RETAIL & OTHER OPERATING $ 26,842,700 $ 27,336,724 (494,024) 1.8% BOND PROCEEDS 9,165,573 13,717,409 $ (4,551,836) 33.2% FUND BALANCE & OTHER 5,656,268 5,578,567 77, % WHOLESALE 2,444,239 2,567,296 (123,057) 4.8% AUXILIARY SERVICES 1,270,289 1,352,290 (82,001) 6.1% CONTRIBUTIONS 1,185,547 1,608,813 (423,266) 26.3% TOTAL $ 46,564,616 $ 52,161,099 $ (5,596,483) 10.7% 12 6

7 WATER FUND Water Works Improvement Project Chlorine Enclosure Room - $1.6 million completion May 2017 New Lime Feed System - $1.2 million completion May 2017 Filtration Capacity Upgrade - $500k for engineering 13 WATER FUND Maintenance vehicles & equipment - $488,000 Lake Services vehicles / equipment / building repairs - $245,000 ADA access improvements at Lake Parks - $97,000 Leak detection study 20 inch and below -$50,000 Last year completed entire 765 miles in system that started in 2008 Starting process over again, cost is lower so entire system study now takes 5 years to complete 14 7

8 WATER FUND ANNUAL LONG TERM Implement Best Management Practices Lake Springfield Watershed $250k-$300k per year for years Applying for grants Install sewer on all Lake Properties 375 properties still on septic, past averages per year $250k-$300k per year for 5-7 years ~ $1.88M Coming - Chapter 96 changes speed up conversion process Installation of Automated Meter Reading 37,300 meters out of 52,232 to install $375k-$600k Per year for 8-9 years ~ $7.5M Best if we could increase spending to get the benefit of reduced labor costs 15 WATER FUND FUTURE BONDED Supplemental Water Supply : $110M - $150M FY18 Land Purchases - $1.75 million FY18 Engineering - $3.25 million Dredging of Lake Springfield : $15M - $30M Water Main Replacement Programs $1M for 1 mile per year for next years Lead Service Line Replacement Program Future Requirement by USEPA 8,000-12,000 lead service lines $40M - $60M over next years 16 8

9 WATER SWOT ANALYSIS SWOT Strengths, Weaknesses, Opportunities, Threats Strengths Low water rates with good cash position Water treatment plant upgrades South Fork pump station Strong safety commitment/reducing accidents Weaknesses Uncertainty of Supplemental Water Supply option Age of distribution infrastructure Very little revenue available for infrastructure projects Low customer charge sensitive to changes in demand Water sales flat, debt coverage dropping 17 WATER SWOT ANALYSIS Opportunities Supplemental Water Supply progress Lake Springfield Watershed Committee Further Safety Improvement Rate restructuring desensitize to weather, smooth revenues Threats Cost of Supplemental Water Supply Option Main breaks (aging infrastructure, extended cold) High efficiency fixtures (reduce revenues) Extended drought lost revenue from water restrictions (low customer charge) Lack of State budget 18 9

10 CWLP BUDGET HEARING Electric Fund Budget January 19, 2017 FY2018 ELECTRIC FUND EXPENSES ELECTRIC FUND EXPENSES EQUIPMENT 1% TRANSFERS 3% OTHER 2% PERSONAL SERVICES $ 59,663,613 CAPITAL IMPROVEMENTS 15,997,288 DEBT SERVICE 35,458,575 COMMODITIES & CONTRACTS 141,038,055 EQUIPMENT 1,722,500 TRANSFERS 7,958,106 OTHER 4,359,175 TOTAL $ 266,197,312 COMMODI- TIES & CONTRACTS 53% DEBT SERVICE 13% PERSONAL SERVICES 22% CAPITAL IMPROVE- MENTS 6% 20 10

11 ELECTRIC FUND EXPENSES ELECTRIC FUND EXPENSES FY2018 FY2017 $ VARIANCE % VARIANCE PERSONAL SERVICES $ 59,663,613 $ 59,564,191 $ 99, % CAPITAL IMPROVEMENTS 15,997,288 12,815,492 3,181, % DEBT SERVICE 35,458,575 34,164,625 1,293, % COMMODITIES & CONTRACTS 141,038, ,906,639 (9,868,584) -6.5% EQUIPMENT 1,722,500 1,921,840 (199,340) -10.4% TRANSFERS 7,958,106 8,183,178 (225,072) -2.8% OTHER 4,359,175 5,300,240 (941,065) -17.8% TOTAL $ 266,197,312 $ 272,856,205 $ (6,658,893) -2.4% 21 FY2018 ELECTRIC FUND RESOURCES ELECTRIC FUND RESOURCES BOND, LOAN & GRANT PROCEEDS 0% CONTRI- BUTIONS 0% FUND BALANCE & OTHER 1% RETAIL & OTHER OPERATING $ 228,783,950 WHOLESALE 38,415,891 CONTRIBUTIONS 940,000 BOND, LOAN & GRANT PROCEEDS 500,000 FUND BALANCE & OTHER 1,065,455 TOTAL $ 269,705,296 WHOLESALE 14% RETAIL & OTHER OPERATING 85% 22 11

12 ELECTRIC FUND RESOURCES ELECTRIC FUND RESOURCES FY2018 FY2017 $ VARIANCE % VARIANCE RETAIL & OTHER OPERATING $ 228,783,950 $ 228,098,916 $ 685, % WHOLESALE 38,415,891 32,550,460 5,865, % CONTRIBUTIONS 940,000 1,430, , % BOND, LOAN & GRANT PROCEEDS 500,000 2,035,000-1,535, % FUND BALANCE & OTHER 1,065,455 13,835,677-12,770, % TOTAL $ 269,705,296 $ 277,950,053 $ (8,244,757) -3.0% 23 ELECTRIC FUND POWER PLANT Cyclone Restudding and Refractory - $1.5 million Dallman Control/Operating System Upgrade - $1 million Unit 4 Toshiba ST/AVR Upgrade - $725,000 Environmental Compliance Project - $500,000 Stack Upgrades - $275,000 Unit 4 Recycle Pump Upgrade - $200,000 Unit 4 SCC Chain - $200,000 Coal Piping Improvements - $200,000 UPS Replacement - $100,

13 ELECTRIC FUND TRANSMISSION & DISTRIBUTION Seven Pines Underground Rebuild (Contract Labor) - $850,000 (Material) - $150,000 Westchester Underground Rebuild (Material Only) - $250,000 Iron Bridge to Woodside Road - $100,000 Stanford Avenue Extension - $75,000 Line Clearance T&M Contract - $2.3 million Fixed Contract for certain circuits - $650,000 (First time doing this) 25 ELECTRIC FUND Grant Projects High Speed Rail Ash Street Underpass - $250,000 Laurel Street Underpass - $250,000 Developer Projects St. Johns OH to UG along 9 th & Madison - $175,000 Memorial Hospital Primary Feed Upgrade - $50,000 Pedestrian Walkway on Jackson between 5 th & 6 th - $90,000 Downtown OH to UG Rebuild - $50,

14 ELECTRIC FUND MISC ELECTRIC FUND Cyber Security NERC Compliance - $375,000 LED Streetlight Upgrade - $150,000 Vehicles - $213,750 Electric Utility Vehicles - $100,000 Trucks (Digger/Derricks, Dumps) - $425,500 Heavy Equipment - $340,000 Helping Homes Rebate Program - $150,000 Final Phase of Downtown Wifi - $54,000 CityWorks (CWLP Total) - $108,000 Municipal Center East Roof (CWLP Total) - $168, ELECTRIC FUND CWLP s share of MISO transmission projects - $4M $3.2 million budgeted for FY17 $2.4 million budgeted for FY16 $2 million budgeted for FY15 No cost recovery mechanism IOU s can recover via rates Transmission lines for socializing wind power 28 14

15 ELECTRIC FUND Future Items/Concerns Dispatch/Corporate Data Center ISD Infrastructure ELG Effluent Limitation Guidelines CCR Coal Combustion Residual $6-10 million $1-2 million $41-55 million $ million CPP Clean Power Plan??? ERIRF Environmental and Regulatory Initiatives and Rebate Fund Deposits of $3.2M expected in FY18 Current Deposits are $1.7M 29 ELECTRIC SWOT ANALYSIS Strengths Generation portfolio covers CWLP load (limited market exposure) Rate & PILOT Restructuring/Bond Refunding/Improved Ratings Reduced coal price for 5 years Investments in pollution controls (SO2, NOx, Mercury) Low number of outages & fast outage response/restoration Strong safety commitment/reducing accidents Weaknesses Lack of Specialized Rates High Load Factor, Electric Vehicle, Distributed Energy Resource Limited resources for capital projects (financial & human) Financial position slowly improving (working cash) Lack of a State Budget Shrinking workforce (knowledge loss & reduced internal succession) 30 15

16 ELECTRIC SWOT ANALYSIS Opportunities Energy and capacity sales to the market Further safety improvement Shield CWLP customers from rising energy prices Revise specialized rates High Load Factor Attract large customer, data center Electric Vehicle Incentivize Off Peak Charging Distributed Energy Resource Recover cost of infrastructure Economic Incentives Attract business, Increase our sales Threats Load decline national trend (~$30 million loss to historical growth) EPA regulations CSAPR, ELG, CCR and CPP Employee loss to competitors (compensation) Restructuring MISO capacity auction could reduce revenues 31 CWLP BUDGET HEARING The End January 19,