CITY OF. Dixon. Water Enterprise Financial Plan Overview. City Council Meeting - March 27, 2018

Transcription

1 t CITY OF Dixon Water Enterprise Financial Plan Overview City Council Meeting - March 27,

2 STEPS IN CONDUCTING A RATE STUDY Financial Plan Evaluation of CIP and financing options Cash flow analysis for financial sufficiency Cost of Service & Rate Design Cost allocations Rate design Rate calculations Customer impact analyses Report Prop 218 Notice Public Hearing Rate Setting Framework Financial goals and policies Pricing objectives

3 AGENDA Preliminary Financial Plan Model Overview Inflation/escalation assumptions Proposed and projected O&M Projected growth in accounts & usage Capital Improvement Plan (CIP) Projected revenues Financial Policies Financial Plan Scenarios Dashboard review Overview of scenarios 3

4 Financial Plan Overview 4

5 ESCALATION FACTORS (FY 2019-FY 2027) Annual Escalation Budgetary Inflation Factors General 3% Salary 2.5% Benefits 8% Utilities 3% Construction 3% Insurance 3% Engineering 3% Professional Services 3% Non-Operating Revenue Growth 2% Historic CPI averages have been roughly 3%. Historic CCI (construction cost index) has been on average slightly above 3% for Northern California since

6 O&M EXPENSES Estimated Proposed Projected Projected Projected Projected Projected Projected Projected Projected FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 O&M Expense Categories General $521,958 $251,000 $258,530 $266,286 $274,274 $282,503 $290,978 $299,707 $308,698 $317,959 Salary $106,206 $247,711 $253,904 $260,251 $266,758 $273,427 $280,262 $287,269 $294,451 $301,812 Benefits $53,997 $146,834 $158,581 $171,267 $184,969 $199,766 $215,747 $233,007 $251,648 $271,779 Utilities $376,670 $413,000 $425,639 $438,668 $452,099 $465,945 $480,217 $494,931 $510,098 $525,735 Construction $0 $3,000 $3,090 $3,183 $3,278 $3,377 $3,478 $3,582 $3,690 $3,800 Engineering $85,000 $118,000 $121,540 $125,186 $128,942 $132,810 $136,794 $140,898 $145,125 $149,479 Professional Services $180,150 $431,360 $444,301 $457,630 $471,359 $485,499 $500,064 $515,066 $530,518 $546,434 Other $148,485 $161,449 $0 $0 $0 $0 $0 $0 $0 $0 Total $1,472,466 $1,772,354 $1,665,585 $1,722,471 $1,781,679 $1,843,326 $1,907,541 $1,974,460 $2,044,228 $2,116,999 6

7 ACCOUNT & USAGE GROWTH FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 Account Growth 0.81% 1.21% 1.21% 1.21% 1.21% 1.21% 1.21% 1.21% 1.21% 1.21% Water Demand Factor 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Accounts 5/8" /4" 2,609 2,641 2,672 2,705 2,738 2,771 2,804 2,838 2,872 2,907 1" /2" " " " " Total - Accounts 3,017 3,054 3,091 3,128 3,166 3,204 3,243 3,282 3,322 3,362 Water Sold (Acre-feet) 1,700 1,721 1,741 1,762 1,784 1,805 1,827 1,849 1,872 1,894 7

8 CURRENT DEBT FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 Interfund GF Loan Interest $9,250 $8,401 $6,600 $4,600 $555 Principal $80,000 $90,000 $100,000 $110,000 $120,000 Total $89,250 $98,401 $106,600 $114,600 $120,555 8

9 CIP SCHEDULE Capital Projects FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 Northeast Quadrant North #3 Facility $0 $0 $0 $0 $6,300,000 SCADA System Improvements $20,000 $110,000 $130,000 $12,000 $12,000 Water Master Plan Update $0 $10,000 $10,000 $10,000 $10,000 Chromium-6 Study $20,000 $0 $0 $0 $0 Arc Flash Study & Labeling $0 $33,500 $0 $0 $0 Water Meter Replacement Program $0 $110,000 $110,000 $110,000 $110,000 Watson Ranch Service Replacement $0 $0 $550,000 $0 $0 Watson Ranch Site Improvements $0 $0 $150,000 $0 $0 Valve Replacement Program $50,000 $110,000 $110,000 $50,000 $50,000 Chromium-6 Improvements $0 $0 $0 $0 $0 Fitzgerald Booster Pump Add $0 $93,000 $0 $0 $0 Storage Tank Piping Seismic Upgrades $0 $191,000 $0 $0 $0 Fitzgerald & Parklane Tank Cleaning $85,000 $710,000 $0 $0 $0 Fitzgerald/Parklane/Watson Booster Bypass TC $0 $112,000 $0 $0 $0 Watson Ranch Tank Cleaning $0 $0 $210,000 $0 $0 School Well Upgrades $0 $434,000 $0 $0 $0 Industrial Electrical System Upgrades $0 $581,000 $0 $0 $0 Fitzgerald VFD/Instrumentation Upgrades $0 $135,000 $0 $0 $0 Watson Ranch Well Improvements $0 $233,000 $0 $0 $0 Watson Ranch Well Replacement $0 $0 $0 $0 $2,200,000 Industrial Well Replacement $0 $0 $0 $0 $2,500,000 School Well Replacement $0 $0 $0 $0 $3,900,000 Valley Glen Instrumentation Upgrades $0 $0 $28,000 $0 $0 Industrial Well & Hydro Tank Improvements $0 $0 $552,000 $0 $0 School Well Site Upgrades $0 $0 $0 $600,000 $0 Parklane VFD & Instrumentation Upgrades $0 $0 $0 $0 $381,000 Asbestos Concrete Pipe Replacement $0 $0 $0 $0 $574,000 Distribution System Appurtenance Replacement $0 $300,000 $500,000 $700,000 $700,000 Total - Capital Projects $175,000 $3,162,500 $2,350,000 $1,482,000 $16,737,000 9

10 CIP SUMMARY Year R&R Future System CIP Total CIP FY 2018 $175,000 $0 $175,000 FY 2019 $3,162,500 $0 $3,162,500 FY 2020 $2,350,000 $0 $2,350,000 FY 2021 $1,482,000 $0 $1,482,000 FY 2022 $10,437,000 $6,300,000 $16,737,000 FY 2023 $2,460,500 $0 $2,460,500 FY 2024 $2,529,515 $0 $2,529,515 FY 2025 $2,600,600 $0 $2,600,600 FY 2026 $2,673,818 $0 $2,673,818 FY 2027 $2,749,233 $0 $2,749,233 TOTAL $30,445,116 $6,300,000 36,920,166 *CIP beyond FY 2022 based on average annual R&R from FY 2018 FY

11 REVENUES Year Revenues from Current Rates Interest Income Other Non-Rate Revenues 1 Total Revenues FY 2018 $1,701,208 $9,000 $44,695 $1,754,903 FY 2019 $1,721,792 $26,481 $41,089 $1,789,362 FY 2020 $1,742,626 $10,502 $41,910 $1,795,038 FY 2021 $1,763,712 $10,193 $42,748 $1,816,653 FY 2022 $1,785,053 $10,333 $43,603 $1,838,989 FY 2023 $1,806,652 $9,810 $44,476 $1,860,937 FY 2024 $1,828,512 $8,608 $45,365 $1,882,485 FY 2025 $1,850,637 $7,648 $46,272 $1,904,558 FY 2026 $1,873,030 $6,936 $47,198 $1,927,164 FY 2027 $1,895,694 $5,334 $48,142 $1,949,369 1 Miscellaneous fees & water revenues 11

12 Financial Policies 12

13 Importance of Financial Policies To maintain financial solvency Provide a basis for coping with fiscal emergencies (revenue short-falls, asset failure, emergencies, etc.) To provide guidelines for sound financial management with an overall long-range perspective 13

14 Why Do We Need Reserves? Nature of municipal utility system Capital intensive Highly fluctuating capital costs Risk and liability unknown liability costs Emergencies or capital infrastructure problems that may arise He althy re se rve s he lp provide financial and rate stability Healthy reserves levels better credit ratings lowe r interest rates for future debt 14

15 Financial Health Indicators 1. Reserve Balances: 1) Operating Reserve: to meet daily working capital for operating expenses 2) Capital Replacement Reserve: for future capital expenditures 3) Rate Stabilization Reserve: to be used during periods of short-term revenue shortages (recession, drought) to prevent rate-shock and phase in any necessary rate adjustments 4) Emergency Reserve: funds available in case of asset failure or natural disaster 2. Debt Coverage Ratios To meet Official Statement requirements To achieve credit ratings from rating agencies 15

16 Financial Policy Framework Debt Coverage S&P Criteria < 1.0x Insufficient 1.0x to 1.25x Adequate x to x Good > x Stro ng 16

17 Sample Financial Policy Framework Reserves Target Levels Bases Operating Reserve Capital Reserve Rate Stabilization Fund days (25-50%) of O&M % of Annual CIP Expenditure 10-20% of Volumetric Revenue Bimonthly Billing Industry Norm Revenue Sensitivity Analysis Emergency Critical Asset Repair Critical Asset Study 17

18 FINANCIAL HEALTH INDICATORS Healthy Reserves Operating Reserve results from positive cash flow Suggested/Prior policy: 25-50% of annual O&M CIP Reserves Can award contracts quickly and speed up projects if necessary Prior policy: 50% of average 5-year R&R Debt Coverage Ratio Exceed Official Statement requirements Achieve / Maintain good credit ratings 18

19 Financial Plan Scenarios 19

20 DASHBOARD: KEY VARIABLES City of Dixon - Financial Plan & Water Rate Model Dashboard FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 Revenue Adjustments 100.0% 20.0% 5.0% 5.0% Adjustment Month July July July July July Water Demand Factor 100% 100% 100% 100% 100% CIP Funding from Grants/Developer Agreements $6,300,000 Proposed Debt Issue $0 $0 $0 $0 $11,000,000 Years Displayed on Charts 10 Financial Policies Operating Fund Target 25% of Annual O&M Capital Fund Target 50% of Average 5-Year R&R Debt Coverage Target 125% Reserve Policies Required/Target Debt Coverage Key Variables: Revenue Adjustments Water Demand Factor New Debt Issues 20

21 DASHBOARD: GRAPHICAL RESULTS Blue Bars show revenue adjustments Green Line shows debt coverage Red Line shows target debt coverage Millions $6.0 $5.0 $4.0 $3.0 $2.0 $1.0 $0.0 -$1.0 -$2.0 Financial Plan FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 O&M Expenses Debt Service Rate Funded CIP Rev to Reserves Current Revenue Proposed Revenue Dark green line shows revenue at proposed levels Red Line shows revenue at current rates Stacked bars show revenue requirements 21

22 DASHBOARD: GRAPHICAL RESULTS Blue Bars show ending balances Red Line show reserve target Green Bars show Rate Funded CIP Orange Bars show Debt Funded CIP Yellow Bars show Developer Agreements/ Grant Funded CIP 22

23 FINANCIAL PLAN SCENARIO 1 20 % revenue adjustments in FY 2019 FY 2024 $ 11M d eb t issue in FY

24 FINANCIAL PLAN SCENARIO 1 20 % revenue adjustments in FY 2019 FY 2024 $ 11M d eb t issue in FY

25 FINANCIAL PLAN SCENARIO 2 Revenue adjustments: 50% in FY 2019 & FY % in FY 2021, FY 2022, FY 2026 $ 11M d eb t issue in FY

26 FINANCIAL PLAN SCENARIO 2 Revenue adjustments: 50% in FY 2019 & FY % in FY 2021, FY 2022, FY 2026 $ 11M d eb t issue in FY

27 FINANCIAL PLAN SCENARIO 3 Revenue adjustments: 100% in FY % in FY % in FY 2021, FY 2022, FY 2026 $11M debt issue in FY

28 FINANCIAL PLAN SCENARIO 3 Revenue adjustments: 100% in FY % in FY % in FY 2021, FY 2022, FY 2026 $11M debt issue in FY

29 SINGLE-FAMILY RESIDENTIAL CURRENT MONTHLY BILL COMPARISON Monthly Water Bill $ 10 0 $90 $80 $70 $60 $50 $40 $30 $20 $ 10 $24.94 $34.82 $36.86 $43.55 $62.70 $67.52 $79.24 $87.86 $- City of Dixon - CURRENT City of Vacaville City of West Sacramento City of Winters City of Fairfield City of Davis Cal. Water Serv. Co. - Dixon City of Woodland Assumes 12 ccf of monthly water usage (equal to the single-family residential average in Dixon in FY 2017) 29

30 NEXT STEPS Rate Setting Framework Financial goals and policies Pricing objectives Financial Plan Evaluation of CIP and financing options Cash flow analysis for financial sufficiency Cost of Service & Rate Design Cost allocations Rate design Rate calculations Customer impact analyses Report Prop 218 Notice Public Hearing

31 Raftelis is a Registered Municipal Advisor within the meaning as defined in Section 15B (e) of the Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder (Municipal Advisor Rule). However, except in circumstances where Raftelis expressly agrees otherwise in writing, Raftelis is not acting as a Municipal Advisor, and the opinions or views contained herein are not intended to be, and do not constitute advice within the meaning of the Municipal Advisor Rule. 31

32 Contact: Sally Van Etten / svanetten@raftelis.com 32