Board members of Alexandria Renew Enterprises

Transcription

1 INTERNAL MEMORANDUM TO: FROM: Board members of Alexandria Renew Enterprises Secretary-Treasurer DATE: July 12, 2016 SUBJECT: Regular Board of Directors Meeting The regular meeting of the Board of Directors will be held in the Administration Building, Room J-104 on Tuesday, July 19 th, at 6:00 p.m. A packet containing the July 2016 Monthly Board Meeting information is attached for your review. Currently, there are two unfinished business items which require Board action: Consideration of Changes to the Rates, Rules and Regulations and for Public Notice and Public Hearing (September 20, 2016) Consideration of FY 2017 Operating and Capital Preliminary Budget for Public Notice and Public Hearing (September 20, 2016) Currently, there are no new business items which require Board action. Page 2 of 22

2 Agenda Regular Meeting Alexandria Renew Enterprises Board of Directors Tuesday, July 19 th, 2016, 6:00 p.m. Administration Building, Room J104 No. Item Presenter Action 1. Call Meeting to Order Chairman 2. Approval of the Agenda Chairman Approve 3. Public Comment Period Chairman 4. Board Reports A. Chairman s Report B. Vice Chairman s Report C. Finance Committee D. Governance Committee 5. Chief Executive Officer s Reports and Recommendations A. Consideration of Monthly Financial Report (June) (Tab 1) B. CEO s Monthly Report (June) (Tab 2) Chairman Chairman Mr. Van Wagner Mr. Johnson Mr. Van Wagner Ms. Pallansch Mr. Robinson Ms. Pallansch Accept as Information Accept as Information 6. Consent Docket A. Approval of Minutes (Held June 21 st, 2016) (Tab 3) 7. Unfinished Business A. Consideration of Changes to the Rates, Rules and Regulations and for Public Notice and Public Hearing (September 20, 2016) (Tab 4) B. Consideration of FY 2017 Operating and Capital Preliminary Budget for Public Notice and Public Hearing (September 20, 2016) (Tab 5) 8. New Business A. Closed Session for consultation with legal counsel and briefings by staff members pertaining to actual or probable litigation and consultation with legal counsel regarding specific legal matters requiring the provision of legal advice by such counsel. (Alexandria Only) Chairman Chairman Ms. Pallansch Ms. Pallansch Chairman Approve Accept as Information 9. Adjourn Chairman If you need an interpreter, translator, materials in alternate formats or other accommodations to access this service, activity or program, please call (703) at least three business days prior to the meeting. The next regular Board meeting date is Tuesday, August 16 th, 2016 at 6:00 p.m. New location: Alexandria Renew Enterprises Environmental Center, 1800 Limerick Street, Edward Semonian Board Room, 6 th Floor Chairman- John Hill Vice Chairman-Thomas Van Wagner Secretary-Treasurer-Bruce Johnson Members- William Dickinson, James Beall. Page 3 of 22

3 Alexandria Renew Enterprises Monthly Financial Report June 2016 Report Summary The Consolidated Enterprise Financial Report combines all of the resources of Alexandria Renew Enterprises (AlexRenew). The Financial Report is organized in accordance with the flow of funds provisions included in the Master Trust. General Observations: AlexRenew continues its focus on financial stability. Expenses continue to track below the approved budget. The construction fund trend may be affected by the payment of retainages and projects near completion with large current spending. Revenue trends remain stable. Capital contributions are below budget because we have yet not billed Fairfax County for current construction charges. Overall, AlexRenew s consolidated revenues and expenditures are in line with the 2016 budget. Revenues Revenues from Wastewater Treatment Charges are slightly below target. However, we expect it to meet the budget as the year progresses. Fairfax operating fund revenues continued to meet budget. Capital contributions (Revenues) from Fairfax are in line with the budget. 1 Page 4 of 22

4 Alexandria Renew Enterprises Operating Revenue vs. Capital Contributions Revenue Thousands 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 - FY 2014 FY 2015 FY 2016 Average Total Operating Revenues 35,243,932 36,533,134 36,510,907 36,095,991 Total Capital Contributions 31,401,292 27,184,340 16,592,176 25,059,269 2 Page 5 of 22

5 Alexandria Renew Enterprises Consolidated Expenditures Total consolidated expenditures are $57.02 million as of June 30, 2016, and approximately $13.02 million below budget. Operating Fund expenditures are $1.44 million below budget. Total operating expenses are $1.61 million or 8.23% less than the same category in 2015 driven primarily by Utilities, Arlington and Sludge Disposal. (Millions of Dollars) FYTD 2016 FYTD 2016 a FY YR AVG Variance FY16 Expenses (By Fund) FY 2016 ACTUAL 3 YR AVG BUDGET % of Budget % of Budget to 3 YR AVG Operating Fund $ $ $ $ % 73.6% -4.2% Debt Service % 57.5% -3.1% General Fund % 54.0% 10.4% Joint IR & R % 43.4% -3.2% General Fund IR&R % 32.4% 18.1% Project Fund % 67.3% -6.4% Total $ $ $ $ % 65.7% -4.6% Expenditures ACTUAL VS. BUDGET Through June 30, 2016 SPEND RATE Thousands 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 - Personnel Services Utilities Total Operating Expenses Chemicals Operations Maintenance Arlington Sewage Disposal Sludge Disposal General, Administrativ e, Customer Service and Other FY2014 9,033,512 2,588,259 1,294, ,339 1,551, ,001 2,827,005 FY2015 9,220,147 2,281,564 1,044, ,420 2,006, ,377 3,642,502 FY2016 8,948,830 2,041,175 1,020, ,995 1,245, ,135 3,476,295 Average 9,067,496 2,303,666 1,119, ,585 1,601, ,504 3,315,267 3 Page 6 of 22

6 Alexandria Renew Enterprises Expenditures - continued Since June 2016 represents the 9th Period of this Fiscal Year, we expect expenditures to approximate 75% of the Budget to date. All major fund spending are less than 75% year-todate. Management continues to expect end of the year operations to finish under budget. Capital expenses in the Project, General and Joint IR&R Funds are tracking to budget. Through June, budgeted spending should track at 75% of the annual plan and all fund categories track below that target. Spending on the Four Mile Run, the Nutrient Management Facility, and increased spending on IR&R projects continue to highlight the majority of capital expenses in these categories. 4 Page 7 of 22

7 Alexandria Renew Enterprises Investments PFM Investment Advisors manage over $23.6 million of AlexRenew s $28.9 million investment portfolio. The following graphs demonstrate the current earnings on investments, approximately 118 basis points (1.18%), which is significantly higher than bank deposit interest (see three month yield below). 5 Page 8 of 22

8 Alexandria Renew Enterprises AlexRenew continues to meet the Board s financial policy requirements. Cash Reserves Actual Budget Percentage of Board Policy 120 Days operating Cash Reserve FY 2016 FY 2016 Goal As of June 30, 2016 Total Operating Cash $ 6,122,432 NA Total Certificates of Deposit (Cash Equivalent) $ 2,761,367 Total Operating Cash $ 8,883,799 $ 8,504, % The Board created a financial policy to increase its restricted cash reserves. Currently, the Bond Indenture requires that the Authority keep 60 days of operating expenses in reserve and the Authority has appropriately restricted these amounts. The Authority s internal policy sets its restricted cash reserves at 120 days of operating expenses or $8,504,250 for budget year The red line in the Cash Reserves graph demonstrates the Board policy requirements and the blue bar demonstrates how AlexRenew s available cash reserves at month end exceed the 120 day requirement. Thousands 10,000 9,000 8,000 CASH RESERVES 7,000 6,000 5,000 4,000 3,000 2,000 1,000 - JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUNE ] [ Actual Budget (120 days required) 6 Page 9 of 22

9 Alexandria Renew Enterprises Debt Service Coverage Financial Policy Compliance - All-In Debt Coverage Actual Budget (Trend of actual expenses FY 2016 = to match calculations only) FY 2016 FY 2016 Gross Revenues Available for Debt Service Coverage: Wastewater Treatment Charges - Alexandria 37,766,081 38,250,000 Fairfax County Operating Expense Charge 12,225,329 11,206,000 Reimbursement from other systems 36,127 - Investment Income - 1,300 Less Restricted Investment Income - - Total 50,027,537 49,457,300 Operating Expenses 23,905,496 25,829,891 Net Revenues 26,122,041 23,627,409 Annual Debt Service 13,797,775 13,797,775 Calculated All-In Debt Coverage Financial Policy Minimum Target Page 10 of 22

10 Alexandria Renew Enterprises Glossary: Revenue Fund All revenue receipts of Alexandria Renew are deposited in the Revenue Fund. The Operating Fund The Operating Fund accounts for the administration and maintenance of the wastewater treatment system. By Board policy, the Operating Fund shall maintain 120 days of cash in reserve as established by Board Policy. Parity Debt Service Fund The Parity Debt Fund shall have deposited in it one twelfth (1/12th) of the annual required debt payment due within the budget year. Deposits are restricted funds for use to make semiannual payments in accordance with the Alexandria Renew Trust Agreements. Joint Improvement, Renewal & Replacement (IRR) Fund The IR&R Fund receives deposits directly from Fairfax County (60% of IR&R budget) and from AlexRenew customer revenue (40% of IR&R budget) for asset renewal of joint use facilities. The contribution to the IRR Fund is 0.7% of the total amount of capital expenditures made subsequent to October 1, 1997, for the joint portion of the system, as set forth by the service agreement with Fairfax County. Project Fund The Project Fund records the cost of each joint use capital project included in the Alexandria Renew Capital Improvement Plans (CIP). The plans for current and future capital projects, both joint and City only, is summarized in a Ten-Year CIP. City use only CIP are accounted for within the General Fund. General Fund The General Fund serves as reserve fund to be used for any lawful purpose of the Authority. Deposits to the General Fund are made from the Revenue Fund after all other fund expenditures and requirements have been satisfied. Alexandria Renew principally uses the General Fund to finance specific capital improvements and to provide sufficient reserves in accordance with policy. 8 Page 11 of 22

11 CEO Board Report June 2016 Dear AlexRenew Board Members, In June, we celebrated Chesapeake Bay Awareness Week, honored the workers who steward our City s water resources, and also held our annual Safety Month program. For Safety Month, we hosted classes, demonstrations, and different events to further engage our team in the importance of safety on the job. As we celebrate over 950,000 hours without a lost time incident milestone, we continue to reinforce the importance of safety individually and as a team -- at AlexRenew. Operational Excellence Total flows to our campus in June were 1,025 billion gallons, averaging 34.2 million gallons per day. Precipitation for June was 3.68 inches, which was 35% lower than the historical long term average of 5.72 inches. Biosolids production during June was 1,727 wet tons, all of which met Class A Exceptional Quality Biosolids permit requirements. The material was land-applied to farm fields in the Virginia counties of Spotsylvania, Essex, Fauquier, and Louisa in accordance with our permit requirements. All Virginia Pollutant Discharge Elimination System (VPDES) requirements were met. Community Engagement Tours We conducted five tours during the month of June: On June 8, we conducted a tour for approximately 15 members of the Water Environment Federation Leadership Institute. The tour was a basic tour of our campus and water transformation processes. June 10 was our elected officials tour to honor Chesapeake Bay Awareness Week. We hosted approximately 15 elected officials, including a number of Alexandria City Council members, Congressman Don Beyer, Mayor Silberberg, Vice Mayor Justin Wilson and his two children and Council of Governments (COG) representatives. Board Member Bill Dickinson also attended. We began in the control room, and then split into two groups one focused on our main campus innovations and another that visited the West Site. We also hosted the City of Alexandria Planning and Zoning Department at AlexRenew on June 10. We provided the group of 12 with a tour of the West Site. Planning and Zoning has partnered with us on the West Site over the past few years and they enjoyed seeing the project as it is nears completion. On June 15, we conducted a tour for 14 T.C. Williams special needs students and their chaperones. We gave them basic tour of our campus and shared different options for careers in water. Page 12 of 22

12 A Design/Build Camp for 16 kids (with three adult visitors) also visited our West Site for a tour on June 23. Three adult chaperones and the students toured the Environmental Center to learn about the different features in our platinum LEED building. Events During June, we celebrated Chesapeake Bay Awareness Week with the elected officials tour, as well as numerous social media posts and stories on our website. We also honored our team, our colleagues with the City, and Virginia American Water during Virginia s first annual Drinking Water and Wastewater Professionals Day on June 30. To share our appreciation, we partnered with the City of Alexandria on drafting a mayoral proclamation and Board Chairman John Hill read the proclamation on video during our annual safety month conclusion event with all staff. In addition, we posted Worker Wednesday features highlighting members of our team on our website and in social media, and we published an op-ed on our website that was promoted via social media. Social Media and Website In June, our Facebook page had 1,850 likes. We posted 38 times. Our demographics for Facebook in June were 68% female and 32% male. Our Twitter page now has 2,400 followers. We tweeted 42 times. Our demographics for Twitter in June were 48% female and 52% male. Our website netted approximately 19,000 page views in June, with about 6,000 visitors. The increase in visitors was due to job search activity on indeed.com as a result of our recruiting team using indeed to publicize open roles. Customer Service We had 2,393 calls to our IVR system in June, with 43% of callers opting for the self-service option. Average answer speed was 20 seconds. We also responded to 113 s. Watershed Partnerships/Environmental Leadership Update June was a busy month for our partnership and leadership work. I attended the VAMWA board retreat on June 1, and the VML board meeting on June 3. The Eisenhower Partnership will be holding a workshop in September on Emergency Planning for the Valley and I am working to assist in that effort. Organizational Competency and Culture For June, regarding Workers Compensation lost time calculations; Alexandria Renew Enterprises (AlexRenew) has logged 957,732 hours without a lost time accident from December 10, 2010 through June 30, June was AlexRenew s Safety Month. Investment Stewardship/Diversifying Revenue The regular Board of Directors meeting was held on Tuesday, June 21. Progress continues on the CAFR after action report. The firm Grant Thornton has been hired to provide an internal review of our financial processes from accounts payable to fixed assets as well as the technology used to support our processes. They will provide improvement recommendations by the end of September. We Page 13 of 22

13 have not yet received the engagement letter from the annual financial audit firm; upon receipt, a meeting will be held with the CEO. Financial protocols are being established. Incubator of New ideas and Innovations Mainstream Anammox Since the full scale start of the Centrate Pretreatment Process, a deammonification process, the average effluent Total Nitrogen (TN) in 2016 has been reduced by approximately 0.67 mg/l to 2.9 mg/l. Additionally, power consumption has decreased by 9% as compared to June Decreases in power consumption will ultimately partially offset increases due to new equipment coming on line with the startup of the Nutrient Management Facility (NMF) and other wet weather needs. West Site Program The Nutrient Management Facility (NMF) is substantially complete with some punch list items remaining to close-out construction and optimize operations. Work to install additional waterproofing on the tank roof will continue through August. At the new Environmental Center, the contractor completed all interior work and a list of items to address prior to move-in is being developed. Furniture installation is nearly complete. The water feature will be completed in late summer. Work continues on building out the data center, targeted for early fall completion. Four Mile Run Pump Station Upgrade Performance testing for the SCADA system was conducted this month. The architectural fence will be installed in early fall, and educational exhibits will be installed immediately following fence installation. I look forward to seeing you at our board meeting next Tuesday, July 19 th. Thank you, as always, for your engaged and dedicated leadership of Alexandria Renew Enterprises. Regards, Karen Pallansch Chief Executive Officer Page 14 of 22

14 Minutes of the 833 rd Meeting Celebrating Over 60 Years of Continuous Environmental Excellence Alexandria Renew Enterprises 6:00 p.m., Tuesday, June 21 st, 2016 On Tuesday, June 21 st, at 6:00 p.m., the regular meeting of the Alexandria Renew Enterprises (AlexRenew) Board of Directors was held at Alexandria Renew Enterprises in Building J conference room 104 with the following present: Members: Staff: Mr. John Hill, Chair Mr. Thomas Van Wagner, Vice Chair Mr. Bruce Johnson, Secretary-Treasurer Mr. William Dickinson, Member Mr. James Beall, Member Ms. Karen Pallansch, Chief Executive Officer Mr. Lester Robinson, Chief Financial Officer Ms. Lisa Van Riper, Chief Enterprise Communications Mr. Charlie Logue, Chief of Production Ms. Lorna Huff, Secretary to the Board Fairfax County Representative: City Representative: Virginia American Water: Consultants: Counsel: Mr. Shahram Mohsenin, Branch Chief Fairfax County Wastewater Planning & Monitoring Division Mr. Lalit Sharma, Division Chief Environmental Quality Services Mr. Barry Suits, President Mr. Rob Ori, Principal, PRMG Mr. Thierry Boveri, Senior Analyst, PRMG Mr. Jonathan Rak, McGuireWoods, LLP The Chairman called the meeting to order at 6:00 p.m. Call to Order Approval of the Agenda There were no changes to the Agenda. Mr. Johnson moved approval and Mr. Van Wagner provided the second. The Board unanimously approved. Public Comment There were no members of the public present and the Chairman closed the public comment period. Issue Discussion The Chairman recognized Mr. Barry Suits, President of Virginia American Water (VAW). Mr. Suits provided an overview of VAW, its service area, demographics and areas of operation. He additionally highlighted its focus on safety and employee development. Mr. Suits reviewed the current topics in the water industry including lead, the need to update aging water infrastructure and how rate increases are being used to improve water Page 15 of 22

15 Alexandria Renew Enterprises Board Minutes 6/21/16 Page 2 lines and piping. He reviewed the VAW supply line and how water is distributed in its service area. Board members asked a variety of questions including whether customers can choose their water system, what is the primary type of piping used in the water system (cast iron), and if lead issues in Flint, Michigan produced an increase in water quality inquiries from customers. He reported on the steps that VAW has taken to keep customers informed on water quality. There were no additional questions or comments and the Chairman moved to the Board Officers Report. A. Chairman s Report Nothing to report. B. Vice Chairman s Report Nothing to report. Board Officers Report Board Committee Reports A. Finance Committee i. Detailed Review FY 2017 Preliminary Draft Budget Ms. Pallansch referred to the FY 2017 Draft Budget and asked if members had questions or comments on the draft. Ms. Pallansch then reviewed the Budget approval and adoption process. She reported that the Budget will be posted on the AlexRenew website once the Board approves it for public notice and public hearing. Mr. Rak reported that AlexRenew s Budget process is not mandatory, but is performed in the interest of transparency. There were no additional questions or comments and the Chairman recognized Mr. Van Wagner, Chairman of the Governance Committee. B. Governance Committee i. Review and Approve Updated Media Policy Ms. Pallansch noted the updated Media Policy and asked if members had questions or comments. The Board is required to endorse the Policy for it to become official. Mr. Hill requested clarification on how media requests to the Board are handled under the Policy. Ms. Pallansch reported that members should inform her of any requests they receive. She and Ms. Van Riper will draft a response. Mr. Dickinson inquired about the notification process in the event of an emergency at the plant. Ms. Pallansch reported that AlexRenew is a part of an emergency response group; therefore, the agencies that get contacted will depend on the type of incident that occurs. There being no further questions or comments, Mr. Van Wagner moved approval and Mr. Beall provided the second. The Board unanimously approved. The Chairman moved to the CEO Reports and Recommendations. Page 16 of 22

16 Alexandria Renew Enterprises Board Minutes 6/21/16 Page 3 A. Consideration of May 2016 Financial Report CEO s Reports and Recommendations Mr. Johnson referenced page 3 of the Financial Report, noting that AlexRenew is approximately $11.9 million under budget. Ms. Pallansch reported that was due to the spend rate for construction projects. Mr. Dickinson inquired about who pays for the repairs to the athletic field. Ms. Pallansch reported that AlexRenew pays for the field repairs and the contractor is performing the work at cost. When the field is transferred, the City becomes responsible for maintenance. B. CEO Monthly Report (May) Ms. Pallansch noted her previously submitted report and inquired if members had questions or comments. She thanked Mr. Van Wagner for his positive comments on AlexRenew s safety record. She reported that AlexRenew should reach 1 million safety hours in October Mr. Dickinson discussed the public official tour and reported that it was well done. Additionally, he clarified that the National Trust for Public Land is the Trust for Public Land. This will be corrected in the CEO Report. He reported that the City budget has eliminated a line item providing environmental education for schools and was pleased that AlexRenew continues to host tours for school children and other environmental activities. There were no additional questions or comments and the Chairman moved to the Corrective Action Plan for the Finance Department i. Review of Corrective Action Plan Ms. Pallansch noted the corrective action plan for the Finance Department. She reported that an outside consultant has been hired to perform an internal audit. She requested that the Board review the Plan. It will be placed on the July Board meeting agenda for review, discussion and a progress report. There were no additional questions or comments. The Chairman moved to Unfinished Business. Consent Docket Mr. Hill inquired whether members had any questions or comments on the Minutes. There were no questions or comments on the Minutes and Mr. Dickinson moved approval of the Minutes with Mr. Beall providing the second. The Board unanimously approved the Consent Docket which included: A. Minutes of the May Board Meeting There being no further questions, the Chairman moved to Unfinished Business. A. Rate Review and Recommendation Unfinished Business The Chairman recognized Mr. Ori and Mr. Boveri from PRMG. Mr. Ori reviewed the prior rate recommendation of a 2%, 3% and 3% increase on the base charge over the next three years through He provided an adjusted financial forecast that excluded contributions to the Long Term Control Page 17 of 22

17 Alexandria Renew Enterprises Board Minutes 6/21/16 Page 4 Plan Update (LTCPU). He reviewed the proposed debt service with this exclusion. The updated forecast scenario recommended a 1% increase on the base charge only for 2017 and Board members discussed the pros and cons of the scenarios. It was noted that uncertainty about AlexRenew s contribution to the LTCPU was the driver for proposing an additional scenario with a lower rate increase. It was noted that the proposed scenario included the elimination of the customer deposit and the adoption of a $15 activation fee. Ms. Pallansch reported that the Board sets the rates and provides staff direction on how to proceed. There were no additional questions or comments and the Chairman moved to New Business. A. None New Business There were no additional questions or comments. The Chairman requested a motion to adjourn. Mr. Beall moved approval with Mr. Van Wagner providing the second. The Board unanimously approved. The meeting adjourned at 7:30 p.m. APPROVED: Secretary-Treasurer Page 18 of 22

18 INTERNAL MEMORANDUM TO: FROM: Alexandria Renew Enterprises Board of Directors Karen Pallansch, Chief Executive Officer DATE: July 12, 2016 SUBJECT: Action Item Unfinished Business, Alexandria Only Review and Approve Changes to AlexRenew Rates, Rules and Regulations Issue: AlexRenew is at the end of its established 3-year rate period and is required to review and set rates. Recommendation: Staff respectfully recommends that the Board consider for a public hearing proposed changes to the Rates, Rules and Regulations presented by staff. This proposal will be public noticed for a public hearing on the third Tuesday in September in the Environmental Center, Edward Semonian Board Room, 6 th floor, 1800 Limerick Street, at 6:00 p.m. Budget and Funding: Rates approval determines budget funding for the next fiscal years Discussion: AlexRenew has two major sources of revenue: (1) Wastewater treatment charges paid by Alexandria customers; and, (2) reimbursement of a proportion of expenses from Fairfax County based upon flow volume. The County also contributes to the Improvement, Renewal & Replacement (IRR) Fund at a rate defined by the service agreement with Alexandria Renew and Capital Improvement Program (CIP) Project Fund, at the percentage rate of 60%, to allow for the replacement and rejuvenation of capital assets as they depreciate, as well as asset additions associated with regulatory compliance. This request for rate change focuses on charges paid by Alexandria customers only. The revenue collected by AlexRenew allows for consistent and efficient compliance with regulatory mandates, proper operations and maintenance and immediate and long term investment in its almost $900 million in infrastructure. The last rate change was an effective 2% increase effective October 1, 2013 on the volumetric charge. The proposed 1.5% base charge increase would allow AlexRenew to fund its obligations and provides stable rates for customers over time. Page 19 of 22

19 As part of the adjustments to AlexRenew Rates, Rules and Regulations, we propose eliminating the residential and commercial minimum deposits and instituting a $15.00 nonrefundable activation fee for new residential customers. All deposits will be credited to the applicable customers. Description Meter Size Current Proposed 1.5% Proposed 1.5% October 1, 2015 October 1, 2016 October 1, 2017 Monthly Monthly Monthly Residential Base Charge Commercial Base Charge Minimum Deposit Requirements New Residential Customer Activation Fee All Meters $8.38 $8.51 $8.63 5/8 $25.15 $25.53 $25.91 ¾ $25.15 $25.53 $ $62.87 $63.81 $ /2 $ $ $ $ $ $ $ $ $ $ $ $ $1, $1, $1, $2, $2, $2, Based on Meter $.0.00 $0.00 Size $0.00 $15.00 $15.00 Congruence with AlexRenew Strategic Outcomes: This action is congruent with the Revenue Stewardship strategic outcome. ACTION TAKEN: APPROVED: DISAPPROVED: APPROVED WITH MODIFICATION: MODIFICATIONS: Page 20 of 22

20 INTERNAL MEMORANDUM TO: FROM: Alexandria Renew Enterprises Board of Directors Karen Pallansch, Chief Executive Officer DATE: July 12, 2016 SUBJECT: Action Item Unfinished Business, Alexandria Only Consideration of FY 2017 Operating and Capital Preliminary Budget Issue: AlexRenew requires Board consideration of the FY 2017 Operating and Capital Preliminary Budget to Public Notice and hold a Public Hearing Recommendation: The CEO respectfully recommends board consideration of Proposed FY 2017 Operating and Capital Preliminary Budget as presented on May 24, 2016, with a public hearing to be held on the third Tuesday in September in the Environmental Center, Edward Semonian Boardroom, 6 th floor, 1800 Limerick Street, at 6:15 p.m. or immediately following the hearing on Rates, Rules and Regulations. Budget and Funding: None Discussion: AlexRenew s FY 2017 Operating and Capital Preliminary Budget reflects AlexRenew s priorities of fiscal responsibility, while maintaining operational expenses. Cost categories have been aligned with the 2040 Board Vision and Strategic Outcomes. The total estimated revenue is $82.4 which includes revenue from wastewater treatment charges of $38,632,500 and contributions from Fairfax County of $33,435,470. AlexRenew budget goals promote rate stability and a sustainable financial future. Total expenditures are $82.85 million. Highlights of the FY 2017 budget expenditures include: Parity Fund: The total for FY 2017 is $13,802,707 Joint (IR&R): The total for FY 2017 is $4,585,078 Alexandria Only (IR&R): The total for FY 2017 is $335,000 Page 21 of 22

21 Alexandria Only (Capital Improvement Program): The total for FY 2017 is $3,053,000 Joint Capital Improvement Program: The total for FY 2017 is $33,151,000 Organizational Competency: Covers the cost category of People Maintenance and includes compensation, safety needs and certification renewals and required training. The total for FY 2017 is $13,404,200. Operational Excellence: Covers categories of Fuel, Power and Chemicals, and Solids and includes Utilities, Process chemicals for compliance and SCADA services. The total for FY 2017 is $5,764,200 Revenue Stewardship: Covers the cost category of Operations and Maintenance (O&M) Equipment and includes asset servicing for basic upkeep, asset services contracts and back office support. The total for FY 2017 is $1,973,500. Incubator of New Ideas and Innovation: Covers the cost category of Product Support and includes laboratory services, permit and nutrient trading management. The total for FY 2017 is $470,500. Community Benefit: Covers cost categories of Business Support, and billing and includes community outreach and education. The total for FY 2017 is $2,029,000. Watershed Partnerships: Covers cost categories of Professional Services and External Waste Services, and includes legal, financial and other consulting and contract support services as well as O&M costs to Arlington. The total for FY 2017 is $3,516,700. Congruence with AlexRenew Strategic Outcomes: The AlexRenew FY 2017 budget is congruent with the Revenue Stewardship strategic outcome. ACTION TAKEN: APPROVED: DISAPPROVED: APPROVED WITH MODIFICATION: MODIFICATIONS: Page 22 of 22