Fiscal Year 2018 Operating and Capital Budget

Transcription

1 Fiscal Year 2018 Operating and Capital Budget Alexandria Renew Enterprises October 1, 2017 September 30, 2018 Transfor m ing Wat er to Transfo rm ity Our Commun Presented to Board of Directors: May 16, 2017 Amended: June 20, 2017 Public Meeting: September 19, 2017 Adopted: September 19, 2017

2 Table of Contents AlexRenew Leadership... 3 Chief Executive Officer s Message... 4 Board of Directors 2040 Vision... 5 Understanding the Budget... 6 Budget Timeline... 9 Expense Summary for Consolidated Enterprise Proposed Budget FY Financial Planning Model Consolidated Enterprise Proposed Budget FY Revenue Fund Proposed Budget FY Fairfax County Revenue Proposed Budget FY City Customer Rates and Charges Operating Fund Explanatory Notes Operating Fund Proposed Budget FY Organizational Competency Highlights Parity Debt Service Fund Explanatory Notes Parity Debt Service Fund Proposed Budget FY Joint Improvement, Renewal & Replacement Explanatory Notes Joint Improvement, Renewal & Replacement Proposed Budget FY General Fund Explanatory Notes General Fund Proposed Budget FY General Fund Improvement, Renewal & Replacement Proposed Budget FY Project Fund Explanatory Notes Project Fund Proposed Budget FY Project Fund Summary Sources for Joint CIP Capital Improvement Program Overview Alexandria-Only Capital Improvement Program Details Joint Capital Improvement Program Details Ten-Year Capital Improvement Program Calculation of Reserves and Debt Service Coverage pg. 2

3 AlexRenew Leadership Alexandria Renew Enterprises Board of Directors John Hill, Chairman Bruce Johnson, Vice Chairman William Dickinson, Secretary-Treasurer James Beall, Member Patricia Turner, Member Staff Karen Pallansch, Chief Executive Officer Charlie Logue, Chief of Production Stephen Schemmel, Chief of Finance and Administration Lisa Reynolds, Director of Engineering and Planning Lisa Van Riper, Director of Communications Lorna Huff, Secretary to the Board of Directors pg. 3

4 Chief Executive Officer s Message To the Board of Directors, Alexandria Renew Enterprises: In Alexandria, our city s public and environmental health, and economic growth all depend on clean and safe water now and in our future. Water is our most precious resource, and investments in the infrastructure to support our water future are critically important to the quality of life in our city. Our Fiscal Year 2018 budget is focused on ensuring that our water infrastructure keeps pace with our community s needs now and throughout the next 20 years. You will see that in our budgeting process for the coming fiscal year and through FY 2026, we have proactively planned for a bright water future for Alexandria, assuming complete ownership of the wet weather program and combined sewer outfalls 003 and 004. In Alexandria, working together to manage our water resources holistically and sustainably ensures a strong economy, vibrant community and healthy environment. A recent study by the Value of Water Campaign showed that for every job created to support clean water, 3.68 jobs are added. For every $1 invested in water and wastewater infrastructure, our nation s long-term gross domestic product increases by $6.35. Our investments in clean water will continue to create jobs in our city, and will support Alexandria s economic growth as they did in 1956 when we were first created, and for more than 60 years since we have been transforming Alexandria s wastewater. Our community s health is dependent upon clean water and a well-functioning wastewater system. Safe and clean water is the lifeblood of vibrant communities like Alexandria. While we have invested almost $1 billion in wastewater cleaning infrastructure on our 35-acre campus, there is still more work to do to ensure that our city s water infrastructure supports anticipated population growth and increased demands over the next 20 years. Updating our own infrastructure while helping to solve our City s water infrastructure legacy issues -- improvements that are now required by law to be completed in and staying ahead of maintenance needs, ensures that we can continue to provide our current levels of service, 24 hours a day, seven days a week, 365 days a year. These investments also mean we will be supporting important, highly visible efforts for even cleaner waterways in our City, and will help ensure the City meets its deadline for the necessary improvements to its four combined sewer outfalls. The investments we are planning for 2018 and over the next 20 years will provide our children with safe water for swimming and bathing, and enable our community members to continue to enjoy recreational activities, such as fishing and boating. Recently, the Potomac River received its best grade yet for water quality, and the wastewater sector met landmark nutrient pollution limits for protecting the Chesapeake Bay 10 years ahead of schedule. In spite of this progress, our waterways are still challenged from a water quality standpoint, and the only way we can support their improvement is to address our city s aging infrastructure and invest the necessary funds to ensure a sustainable water future for Alexandria. Nationally, investments in clean water support over $86 billion in consumer spending on water-based recreation annually. As a city rich in water recreation for our citizens and tourists, these investments will pay dividends for decades to come. We have a lot of work to do. Our FY 2018 budget is a starting point for our integrated approach to water stewardship in our City and region. Thank you as always for your enthusiasm, ideas, and support. Regards, Karen Pallansch, Chief Executive Officer Alexandria Renew Enterprise pg. 4

5 Board of Directors 2040 Vision pg. 5

6 Understanding the Budget What is Alexandria Renew s Budget? Alexandria Renew s budget is the documentation of the financial, policy, and capital investment decisions necessary to ensure public health and provide a clean healthy water environment for our community. AlexRenew is responsible for constructing, operating, and maintaining a water resource recovery facility, intercepting system, and pump stations that comply with state and federal laws. Current expenses and capital expenditures are estimates based on experience and judgment related to cost trends, labor, materials, and services required to operate and maintain our facilities. Alexandria Renew has no options with respect to the level of service it must provide to meet the requirements of the law, and no discretionary programs within its assigned scope of activity. The primary purpose of the budget is to ensure AlexRenew maintains its mandated level of service and satisfies the requirements of the Master Trust. 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. Fairfax County reimburses Alexandria Renew under an amended and restated Service Agreement dated October 1, Fairfax County pays a percentage of operations and maintenance expenses based upon flow volume. The County also contributes to the Improvement, Renewal & Replacement (IRR) Fund at 60%, and Capital Improvement Program (CIP) Project Fund at the same percentage to allow for the replacement and rejuvenation of capital assets as they depreciate, as well as asset additions associated with regulatory compliance. Should we assume complete ownership of the wet weather program and combined sewer outfalls 003 and 004, we will create a separate line item charge on our bill to generate the revenue necessary to fund the improvements that need to be completed by law in What is Alexandria Renew s Strategic Plan? The Alexandria Renew Strategic Plan drives the organization s budget. It is grounded in the Strategic Outcomes of the AlexRenew 2040 Vision, created by our citizen-led Board in There are three focus areas that support the 2040 Vision strategic outcomes, and long-term outcomes for our community. Focus Area: Effectively Managed AlexRenew Long Term Outcome: Alexandria has abundant clean waterways Strategic Outcome Linkage: Operational Excellence, Fiscal Sustainability Focus Area: Smart and Resilient AlexRenew Long Term Outcome: Alexandria is a clean, sustainable community and center for innovation Strategic Outcome Linkage: New ideas and innovation, enhancing organizational competency Focus Area: Community Celebrated AlexRenew Long Term Outcome: Alexandrians eat local fish and swim in local waterways Supports: Watershed Partnerships, Community Benefit pg. 6

7 Understanding the Budget How is the Alexandria Renew Budget Organized? The Consolidated Enterprise Budget combines all of the resources of Alexandria Renew. The remaining Budget documents are organized in accordance with the flow of funds provisions established in our Master Trust Indenture. The major Funds of the budget are: Revenue Fund; Operating Fund; Parity Debt Service Fund; Improvement, Renewal & Replacement (IRR) Fund; General Fund; and Project Fund. Our Operating Budget is also divided by strategic outcome for our 2040 Vision. A description of each fund is included with the related budget details in the pages that follow. For Capital Projects, budgets are prepared for each project s basis and cover the life of the project. Under the Indenture, the Revenue Fund is the depository for all revenues of Alexandria Renew. Alexandria Renew shall make transfers from the Revenue Fund in the following order of priority: I. To the Operating Fund, an amount that will cause the balance on deposit to be equal to one-sixth of the current year s budgeted amount for operating expenses. II. To the Parity Debt Service Fund, an amount that will cause the balance on deposit to be sufficient to pay the principal and interest on the respective payment dates. III. To the Joint Improvement, Renewal & Replacement Fund (IRR), an amount equal to the Alexandria portion (40%) of the annual calculation of the required contribution to the Fund. IV. To the General IRR, an amount equal to 0.5% of the total amount of the annual calculation to the Fund. V. To the General Fund, any amount that remains after making the deposits required above. pg. 7

8 Understanding the Budget Additional Information: Beginning Balance: Alexandria Renew is required, by banking agreement, to maintain a minimum balance of $100,000. Receipts: Two main sources of income are the Wastewater Treatment charges (fees charged to City customers) and Fairfax County contributions to the Operating Fund. The gallonage charge beginning on October 1, 2017, is $6.77/1000 gallons used. In 2010, Alexandria Renew adopted a "Base Charge" to ensure continued investment in required infrastructure. The approved Base Charge, as of October 1, 2017, is $9.61 per month for residential customers; a $0.62 increase over the previous year, and a monthly fee for commercial customers based on meter size. Should we assume complete ownership of the wet weather program and the City s combined sewer outfalls 003 and 004, we will add a separate line item charge to our customer s bills to generate the revenue necessary for the improvements. Investment income is expected to be minimal, given today s investment climate. Disbursements: As noted above, the Master Trust requires certain monies to be transferred to each Fund to ensure appropriate levels of support. pg. 8

9 Budget Timeline Month Customer Board of Directors Staff February April May Proposed Budget Development Departments prepare budget proposals; CEO develops a balanced proposed budget. The CEO presents the proposed budget to the Board of Directors. June Budget Review (June-July) Board of Directors requests additional information on specific budget issues from staff. July Customers are informed via public notice. Board authorizes staff to public notice proposed AlexRenew budget. Public Notice (staff advertises via newspaper) August Public Notice Public Notice (staff advertises via newspaper) September Customers have an opportunity to comment during a public hearing. Public Hearing & Final Adoption Board of Directors makes final decisions and adopts the AlexRenew budget for the upcoming fiscal year. Execute adopted FY2018 Budget starting 10/1/2017. pg. 9

10 Expense Summary: Consolidated Enterprise Proposed Budget FY 2018 The following is an overview of the expense categories for the Consolidated Enterprise Proposed Budget FY EXPENSE SUMMARY FY 2017 FY 2018 Var % Operating: Operating Fund $ 26,635,200 $ 27,229, Parity Debt Service Fund 13,492,969 14,562, IR&R Fund (Joint Projects) 4,000,000 4,000,000 - General Fund (IR&R Account) 325, , General Fund 3,091,000 2,035,000 (34.16) Capital Outlay: Project Fund (Joint-Use) 19,921,000 22,236, Total $ 67,465,169 $ 70,413, The FY 2018 proposed budget is $70.41 million, of which $22.24 million is in infrastructure construction investment, which would include $6.0 million to begin necessary work, should we assume complete ownership of the wet weather program and combined sewer outfalls 003 and 004 in the City of Alexandria. The budget also includes $4.35 million in infrastructure improvement and renewal for Alexandria Renew s facilities. The construction increase of 11.6% is driven primarily by the assumption of complete ownership of the wet weather program and combined sewer outfalls 003 and 004. AlexRenew s operating expenses are projected to increase slightly to account for inflation and operating costs associated with new project startup and operation. pg. 10

11 Financial Planning Model How our Rate Model Works Every year, our rate consultants review and update our rate model. The process and model are heavily data-driven, and use historical and projection data comprised of billing statistics, historical financial data, current budget, and capital plan forecasts. Our rate consultants perform due diligence on the data to validate it through a variety of means. For example, customer billing statistics are applied to the rates in effect for the historical period to calculate the expected revenues. Those revenues are then compared with AlexRenew s audit/financial statements to validate if the statistics produced the reported revenues. Once data entry and validation is complete, the rate consultants review findings with AlexRenew leadership to discuss observed historic trends, how they compare to prior forecasts, what the current projections are, and whether the consultants should make adjustments for known conditions, as a contingency, or as unknown expenses. The resultant net revenues and assumptions of additional debt and capital funding affect AlexRenew s cash position at the close of the year. The cycle then repeats and is iterative for each subsequent year of the forecast. This process allows AlexRenew and its rate consultants to examine how subtle changes to rates or assumptions today can materially affect the financial position towards the end of the forecast. It also allows us to examine the financial position of the utility under various hypothetical scenarios, which is instructive to management and provides a stronger basis for recommended timing of debt and/or rate adjustments. Ten-Year Financial Plan AlexRenew has developed a 10-year plan for financial sustainability to identify future needs and revenue challenges and develop strategies for addressing them. AlexRenew is a capital-intensive utility, driven by federal, state and local water-related regulations. This 10-Year Financial Plan includes the costs to assume complete ownership of the wet weather program and the City s combined sewer outfalls 003 and 004. Revenue Growth Assumptions Ten year modeled revenue is based on assumed rate increases and historical trends in billed flows. Fairfax operations and maintenance (O&M) costs are projected to grow by approximately 3.0% year over year. Expenditure Growth Assumptions Modeled expenditures are independently analyzed by line item. An inflation range of 2.4% to 3.6% is used based on historical CPI inflation factors. pg. 11

12 Consolidated Enterprise Proposed Budget FY 2018 CONSOLIDATED ENTERPRISE FY 2018 Revenues: AlexRenew Wastewater Treatment Charges $ 39,000,500 Fairfax County Operating Expense Charge 11,074,212 Fairfax County IR&R Contribution 3,084,856 Total Revenues $ 53,159,568 Expenses: Organizational Competency $ 14,219,660 Operational Excellence 5,435,700 New Ideas & Innovations 637,500 Community Benefit 1,785,000 Revenue Stewardship 1,994,050 Watershed Partnerships 3,158,000 Improvement, Renewal & Replacement (Joint Projects) 4,000,000 General Fund (IR&R Account) 350,000 Capital Projects (AlexRenew Only) 2,035,000 Capital Projects (Joint Use) 22,236,000 Total Expenses $ 55,850,910 Non Operating Revenues (Expenses): Investment Income $ 210,000 Parity Debt Interest Payments (4,763,780) Parity Debt Principal Payments (9,799,018) Parity Debt Proceeds 10,000,000 Fairfax County Capital Outlay Contribution 11,775,000 Total Non Operating Revenues (Expenses) $ 7,422,201 Excess (Deficiency) $ 4,730,860 Fund Balance - Beginning $ 29,091,282 Fund Balance - Ending $ 33,822,141 pg. 12

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14 FY 2018 Revenue Fund Proposed Budget Revenue Fund FY 2017 FY 2018 Var % FY 2019 FY 2020 FY 2021 Revenues: AlexRenew Wastewater Treatment Charges $ 38,632,500 $ 39,000, $ 39,488,006 $ 39,981,606 $ 40,481,376 AlexRenew Wastewater CSO Charges ,555,952 1,629,166 5,734,301 Fairfax County Operating Expense Charge 10,999,385 11,074, ,212,640 11,352,798 11,494,708 Fairfax County IR&R Contribution 2,923,764 3,084, ,201,314 3,329,346 3,465,147 Interest Income 30,000 30,000-4,000 4,000 7,000 Total Revenues 52,585,649 53,189, ,461,912 56,296,916 61,182,533 Expenses: Transfer to Operating Fund $ 26,635,200 $ 27,229, $ 27,774,508 $ 28,329,998 $ 28,896,598 Transfer to Operating Fund (Financial Policy) - 23,609 - Transfer to Parity Debt Service Fund 13,492,969 14,562, ,266,892 15,293,320 15,126,171 Transfer to IR&R Fund (Fairfax County Contribution) 2,923,764 3,084, ,201,314 3,329,346 3,465,147 Transfer to IR&R Fund (AlexRenew Contribution) 2,010,314 2,146, ,239,450 2,329,049 2,419,583 Transfer to General Fund (IR&R Account) 335, , , , ,200 Transfer to General Fund 7,188,402 5,791,746 (19.43) 6,593,448 6,607,903 10,832,833 Total Expenses $ 52,585,649 $ 53,189, $ 55,461,912 $ 56,296,916 $ 61,182,533 Fund Balance - Beginning $ 84,740 $ 84,740 $ 84,740 $ 84,740 $ 84,740 Fund Balance - Ending $ 84,740 $ 84,740 $ 84,740 $ 84,740 $ 84,740 pg. 14

15 FY 2018 Fairfax County Revenue Contribution Proposed Budget Fairfax County Revenue Contributions FY 2017 FY 2018 Var % FY 2019 FY 2020 FY 2021 Fairfax County Operating Expense Charge: Total Estimated Operating Expenses $ 26,635,200 $ 27,229, $ 27,774,508 $ 28,329,998 $ 28,896,598 Less Estimated "Alexandria Only" Expenses (4,151,709) (4,593,709) (4,234,743) (4,319,438) (4,405,827) Net Estimated Joint Operating Expenses $ 22,483,491 $ 22,636, $ 23,539,765 $ 24,010,560 $ 24,490,772 Estimated Fairfax County Net Flow 49.0% 49.0% % 49.0% 49.0% Estimate & Fairfaix County Operating Expense Charge 11,016,911 11,091, ,534,485 11,765,175 12,000,478 Less Alexandria Only Flow Charge (17,526) (17,526) - (17,526) (17,526) (17,526) Fairfax County Operating Expense Charge $ 10,999,385 $ 11,074, $ 11,517,000 $ 11,747,600 $ 11,983,000 IR&R Contribution: Estimated Joint Use Plant Investment $ 704,868,297 $ 747,357, $ 777,252,013 $ 808,342,094 $ 840,675,778 Estimated Joint Use IR&R Funding Percentage 0.7% 0.7% 0.7% 0.7% 0.7% Estimated Joint Use IR&R Investment $ 4,934,078 $ 5,231, $ 5,440,764 $ 5,658,395 $ 5,884,730 Investment Allocation at 60% 4,674,025 4,838, ,030,311 5,240,452 5,466,788 Investment Allocation at 49% 212, , , , ,215 Investment Allocation at 32% 47,425 63, ,237 85,727 85,727 Total IR&R Investment $ 4,934,078 $ 5,231, $ 5,440,764 $ 5,658,395 $ 5,884,730 Fairfax County Allocation at 60% 2,804,400 2,903, ,018,187 3,144,271 3,280,073 Fairfax County Allocation at 49% 104, , , , ,786 Fairfax County Allocation at 32% 15,176 20, ,342 22,289 22,289 Total Fairfax County IR&R Contribution 2,923,764 3,084, ,201,314 3,329,346 3,465,147 Alex Renew IR&R Contribution 2,010,314 2,146, ,239,450 2,329,049 2,419,583 Fairfax County Capital Outlay Contribution: Estimated Joint Capital Improvements 60% $ 15,260,000 $ 15,785, $ 13,750,000 $ 14,315,000 $ 17,555,000 Fairfax County Allocation at 60% 9,156,000 9,471, ,250,000 8,589,000 10,533,000 Estimated Joint Capital Improvements at 36% 1,260,000 6,000, ,000,000 12,000,000 25,000,000 Fairfax County Allocation at 36% 453,600 2,160, ,600,000 4,320,000 9,000,000 Estimated Joint Capital Improvements at 49% 2,800,000 - (100.00) Fairfax County Allocation at 49% 1,372,000 - (100.00) Estimated Joint Capital Improvements at 32% 600, ,000 (25.00) 250, Fairfax County Allocation at 32% 192, ,000 (25.00) 80, Total Fairfax County Capital Outlay Contribution 11,173,600 11,775, ,930,000 12,909,000 19,533,000 Total Fairfax County Contributions $ 25,096,748 $ 25,934, $ 26,648,314 $ 27,985,946 $ 34,981,147 pg. 15

16 City Customer Rates and Charges This schedule applies to all individually metered residential customers and commercial customers discharging sewage to and/or requiring wastewater treatment service by Alexandria Renew Enterprises (wastewater customers). Commercial wastewater customers include all commercial, industrial, government and other public agencies, master-metered residential, and all other accounts or customers not classified as individually metered residential customers. The wastewater customer s monthly bill for wastewater interception, treatment and disposal services (sewer service) will be based on the sum of: (1) the base charge; and (2) the wastewater treatment charge calculated based on water meter readings at the customer premise. The base charge will serve as the minimum monthly bill for sewer service for all customers receiving wastewater service from Alexandria Renew Enterprises. If AlexRenew assumes complete ownership of the wet weather program and the City s combined sewer outfalls 003 and 004, we will add a separate line item charge to our bills to support the improvements required by law to be completed in Wastewater Treatment Charge: A charge per 1,000 gallons of water consumption will be billed monthly for wastewater customers at the rates shown below. Description Meter Size October 1, 2016 Per 1,000 Gallons Current October 1, 2017 Per 1,000 Gallons Individual Meter Residential Wastewater Charge All Meters $6.77 $6.77 Commercial Wastewater Treatment Charge All Meters $6.77 $6.77 Base Charge: A charge per account predicated on the size of the meter serving the customer premise will be billed to all wastewater customers at the rates shown below. Description Meter Size October 1, 2016 Monthly Approved October 1, 2017 Monthly Residential Base Charge All Meters $8.99 $9.61 Commercial Base Charge 5/8 $26.98 $28.83 ¾ $26.98 $ $67.45 $ /2 $ $ $ $ $ $ $ $ $1, $1, $2, $2, Residential Customer Activation Fee $15.00 $15.00 pg. 16

17 Operating Fund Explanatory Notes We have segmented the FY 2018 Operating Fund budget by 2040 Vision Strategic Outcomes in order to best track programs, projects, and expenses against each outcome. Under the Master Trust, the Operating Fund shall pay the operating expenses for the administration, operation, and maintenance of the Wastewater Treatment system as they become due and in accordance with the purposes and amounts provided in the Budget. The elements of the operating fund are listed below: Operational Excellence This budget includes fuel, power, and utilities such as the natural gas, electricity, and water to run the plant. It also includes process chemicals, which are needed to control process and meet all regulatory compliance obligations. Community Benefit This budget includes community education and outreach, and customer billing and service. Watershed Partnerships This budget encompasses the costs for our legal, financial, and engineering partners. It also includes the cost of supporting the operations and maintenance associated with the City of Alexandria s allocated capacity at the Arlington County Water Pollution Control Plant. Enhancing Organizational Competency This budget covers personnel services, including all compensation related items; health and welfare; required personal protective equipment and clothing; training and professional development; licensing and dues. This element is about 51% of the total estimated operating expenditures. Revenue Stewardship The Revenue Stewardship budget covers all preventative and corrective maintenance for infrastructure assets; technology investments; general back office support; and other annual asset renewal needs. Incubator of New Ideas and Innovations This budget contains the ancillary services required to ensure clean safe water for our community and environment; including laboratory testing; biosolids reuse, and solids disposal. Beginning & Ending Balance Reserve The Financial Policy will provide an operating reserve equal to or greater than 120 days of the operating expenses budgeted for the current fiscal year. pg. 17

18 Operating Fund Proposed Budget FY 2018 The Operating Fund budget is divided by 2040 Vision Strategic Outcome to best track programs, projects, and expenses against each outcome. Operating Fund FY 2017 FY 2018 Var % Operational Excellence $ 5,436,850 $ 5,435,700 (0.00) Community Benefit 1,697,000 1,785, % Watershed Partnerships 2,826,000 3,158, % Organizational Competency 14,097,700 14,219, % Revenue Stewardship 1,988,150 1,994, % Ideas & Innovations 589, , % Total Expenses $ 26,635,200 $ 27,229, % pg. 18

19 Organizational Competency Highlights Alexandria Renew Enterprises continues to invest in its workforce in order to recruit and retain the best talent. Salaries are provided for full-time employees. Healthcare benefits, including medical, dental, and vision, are also provided. Other benefits for employees include retirement, social security, short and long term disability, life insurance, workers compensation, unemployment tax, long term care insurance, legal services, and paid time off, based on years of service. Retirement The FY 2018 retirement budget represents the contribution that AlexRenew pays toward the Virginia Retirement System (VRS). The Virginia Retirement System administers pension plans and other benefits for Virginia s public sector employees covered under VRS. We currently have 20 retirees that participate in our medical, dental and vision plans that are available to retirees. AlexRenew s contribution stays the same from FY 2017 to FY 2018 at a rate of 8.95% of salary. The VRS employer contribution is updated every other even calendar year and may change July 1, Full-time regular employees hired since January 1, 2014 have been placed into the VRS Hybrid plan unless they are already participating in VRS from previous employment. The VRS Hybrid plan does not offer disability benefits as part of its core provisions. VRS has offered the VLDP (Virginia Local Disability Plan) for jurisdictions who do not elect to opt out. However, AlexRenew has opted out of the VLDP Plan and provides a comparable disability plan with equal or greater value. We currently have 50 employees in the VRS Plan 1 retirement plan, which allowed enrollment before July 1, AlexRenew has 12 employees in the VRS 2 retirement plan, which was available between July and December 31, The VRS Hybrid plan, which started on January 1, 2014 and is still in effect, is the plan in which 33 of our employees are enrolled. Other Post-Employment Benefits Other post-employment benefits include retiree healthcare. The FY 2018 budget provides approximately $185,000 in OPEB funding. pg. 19

20 Organizational Competency Highlights Healthcare Healthcare represents the share that AlexRenew pays for employee healthcare benefits. Currently the cost share for the AlexRenew healthcare benefit is 84% employer and 16% employee. Healthcare costs continue to rise. To mitigate the effect of rising healthcare costs, AlexRenew is continuing to evaluate the cost share between employer and employee, with a strategy of gradually moving to an 80% employer and 20% employee cost share, which in line with other utilities across the United States. In addition, AlexRenew is now offering a high deductible healthcare plan. In 2017, 27 employees enrolled in the high deductible plan, shifting to this plan from the managed health plan (HMO). The high deductible healthcare plan is a lower cost plan, and also has lower rate increases than traditional healthcare plan offerings. pg. 20

21 Organizational Competency Highlights Workforce by Full Time Equivalent (FTE) As shown below, by department, the FY 2018 budget includes a net decrease of one full time equivalent from the FY 2017 approved budget. Department FY 2017 Approved FY 2018 Proposed FTE Impact Executive Communications Finance Sustainability 3 2 (1) Engineering & Planning (1) Production Human Resources Information Systems TOTAL (1) pg. 21

22 Organizational Competency Highlights Calendar Year 2016 Turnover In Calendar Year (CY) 2016, overall employee turnover increased by from 11 in CY 2015 to 24 in CY Of the 24 employees, 6 retired in CY 2016, which is an increase of 5 FTEs retiring in CY 2015 (total of 1). Many members of our workforce are nearing retirement, so we are seeing retirement numbers increase. We have planned for this eventuality, and are backfilling those positions through our apprentice program, which started in The remaining turnover included employees who relocated with their families, left their position for personal reasons, or received job opportunities that built upon their training and experience at AlexRenew. Voluntary Turnover 15 Involuntary Turnover 3 Retirement 6 Total Turnover CY out of an annual average of 98 total employees Total Turnover CY out of an annual average of 100 total employees 25.0% Total Turnover 20.0% 17.6% 19.21% 15.0% 14.7% 13.5% 13.3% 10.0% 5.0% 0.0% FY12 FY13 FY14 FY15 FY16 pg. 22

23 Organizational Competency Highlights Years of Service More than half of the current workforce (53%) has been employed with AlexRenew for 12 years or fewer. 46% have worked for AlexRenew for over 15 years or more. All Staff 0<3 3<6 6<9 9<12 12< Total Average Years of Service Employee Demographics Almost three quarters (74%) of AlexRenew s workforce fall within the ages of 30 and 60 years old. All Staff < Total Average Age of Staff In Years pg. 23

24 Parity Debt Service Fund Explanatory Notes The Parity Debt Service Fund was created by the Master Trust to pay for the principal and interest on outstanding debt. Alexandria Renew Enterprises borrowing from the Virginia Revolving Loan Fund (VRLF), through its financial administrator the Virginia Resources Authority (VRA) is considered parity debt under the Master Trust. The following notes provide additional information for the Budget: Transfers from the Revenue Fund are made to fund the required principal and interest payments on March 1 st and September 1 st. pg. 24

25 FY 2018 Parity Debt Service Fund Proposed Budget Parity Fund FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 Revenues: Transfers from Revenue Fund Transfer $ 13,500,000 $ 14,545,000 $ 15,266,892 $ 15,293,320 $ 15,126,171 Investment Income 20,000 20,000 10,000 5,000 5,000 Total Revenues $ 13,520,000 $ 14,565,000 15,276,892 15,298,320 15,131,171 Expenses: VRA Bonds 98A Interest 32,433 18,224 3,679 VRA Bonds 98A Principal 601, , ,098 - VRA Bonds 00A Interest 189, ,592 75,474 15,305 VRA Bonds 00A Principal 1,589,972 1,646,107 1,646, ,575 VRA Bonds 00B Interest 1,131, , , , ,223 VRA Bonds 00B Principal 3,439,773 3,576,985 4,040,116 5,379,375 6,462,100 VRA Bonds 04 Interest 314, , , , ,593 VRA Bonds 04 Principal 1,169,449 1,205,983 1,243,657 1,282,510 1,243,657 VRA Bonds 06 Interest 211, , , , ,550 VRA Bonds 06 Principal 781, , , , ,568 VRA Bonds 08B Interest 24,647 14,397 4,572 - VRA Bonds 08B Principal 195, , ,000 - VRA Bonds 09 Interest 289, , , , ,606 VRA Bonds 09 Principal 715, , , , ,894 VRA Bonds 11 Interest 168, , , , ,346 VRA Bonds 11 Principal 352, , , , ,864 VRA Bonds 14A Interest 254, , , , ,370 VRA Bonds 14A Principal 530, , , , ,152 VRA Bonds 14B Interest $ 49,736 $ 47,474 $ 45,164 $ 42,805 $ 66,464 VRA Bonds 14B Principal 107, , , , ,208 VRA Bonds 14C Interest 887, , , , ,250 VRA Bonds 14C Principal 15,000 15,000 15, , ,000 VRA Bonds 17A Interest 440, , , , ,000 VRA Bonds 18 Interest - 529,511 1,270,826 1,270,826 1,270,826 Bank Fees $ - $ - $ - $ - $ 2, Total Expenses: $ 13,492,969 $ 14,562,799 $ 15,266,892 $ 15,293,320 $ 15,126,171 Excess (Deficiency) $ 27,031 $ 2,201 $ 10,000 $ 5,000 $ 5,000 Fund Balance - Beginning $ 1,470,715 $ 1,497,746 $ 1,499,948 $ 1,509,948 $ 1,514,948 Fund Balance - Ending $ 1,497,746 $ 1,499,948 $ 1,509,948 $ 1,514,948 $ 1,519,948 pg. 25

26 Joint Improvement, Renewal & Replacement Explanatory Notes The Joint Improvement, Renewal & Replacement (IRR) Fund pays for capital improvements, renewals, and replacements for portions of the system and facility used jointly by the City of Alexandria and Fairfax County. Those improvements for portions of the system within the City of Alexandria are budgeted in a separate category within the General Fund. 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. A number of projects that Alexandria Renew will be working on during FY 2018 are identified. Projects include planned overhauls and maintenance on critical equipment, energy efficiency projects, information technology projects, and required asset renewals. pg. 26

27 FY 2018 Improvement, Renewal & Replacement Fund (Joint-Use) Proposed Budget Joint IR&R Fund FY 2017 FY 2018 Var (%) FY 2019 FY 2020 FY 2021 Revenues: AlexRenew Revenue Fund Transfer $ 2,010,314 $ 2,146, $ 2,239,450 $ 2,329,049 $ 2,419,583 Fairfax County Revenue Transfer 2,923,764 3,084, ,201,314 3,329,346 3,280,073 Investment Income 60,000 60, Total Revenues $ 4,994,078 $ 5,291, $ 5,440,764 $ 5,658,395 $ 5,699,656 Expenses: Interceptors, Pump Station, and Chemical Feed 848, ,200 (0.22) 500, , ,000 BRBs, Air System, UV 645, ,700 (0.22) 500, , ,000 Thickening, Prepast, Digester, Dewatering 1,331, ,500 (0.50) 500, , ,000 Campus 807, ,500 (0.12) 750, , ,000 Engineering, Non-Nutrient 34, , , , ,000 Information Systems 218, , , , ,000 Production,Sustainability, Lab, Communications 91, , Health and Environmental Safety 21, , , ,000 Total Expenses $ 4,000,000 $ 4,000,000 - $ 4,000,000 $ 4,000,000 $ 4,000,000 Excess (Deficiency) $ 994,078 $ 1,291,504 $ 1,440,764 $ 1,658,395 $ 1,699,656 Fund Balance - Beginning $ 10,395,120 $ 11,389,198 $ 12,680,702 $ 14,121,466 $ 15,779,861 Fund Balance - Ending $ 11,389,198 $ 12,680,702 $ 14,121,466 $ 15,779,861 $ 17,479,517 pg. 27

28 General Fund Explanatory Notes The General Fund is a 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. AlexRenew principally uses the General Fund to finance specific capital improvements, provide sufficient reserves in order to maintain strong credit worthiness, and account for unanticipated expenditures experienced by the organization during its normal course of operation. The General Fund is used by AlexRenew for: Alexandria-only capital improvements (CIP); Alexandria-only improvement, renewal and replacement (IRR); Alexandria CIP commitments to the Arlington County Water Pollution Control Plant; and As a resource for planning and future needs of a non-routine nature. For FY 2018, a contribution is made to the General IR&R category, equaling 0.7% the total amount of expenditures for capital improvements within the City of Alexandria only. pg. 28

29 FY 2018 General Fund Proposed Budget General Fund FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 Revenues: Revenue Fund Transfer $ 7,188, $ 5,791, $ 6,593, $ 6,607, $ 10,832, Investment Income 100, , , , ,000 Net Debt Proceeds 10,000,000 10,000,000 9,000,000 11,000,000 15,000,000 Total Revenues $ 17,288,402 $ 15,891,746 $ 15,693,448 $ 17,707,903 $ 25,932,833 Expenses: Alex-Only Capital Outlay Four Mile Run Pump Station Upgrade $ 1,100,000 $ - $ - $ - $ - Potomac Interceptor Rehabilitation 25, ,000 1,060,000 1,540,000 - Commonwealth Interceptor Rehabilitation Potomac Yards Trunk Sewer Rehabilitation Service Chamber and Pump Station Upgrade - 50, ,000 1,100,000 1,500,000 Nutrient Management Facility - Athletic Field 600, Customer Service Center Environmental Center - Lobby Enhancement - 150,000 Arlington County Capital Contribution 605,000 1,054, , , ,000 Total Expenses $ 2,330,000 $ 1,554,000 $ 2,556,000 $ 3,516,000 $ 2,183,000 Joint-Use Capital Outlay Interceptor Assessments/CCTV $ 200,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 Flow Monitoring/GIS 75, , , , ,000 Pump Station Telemetry 25,000 75,000 75,000 75,000 75,000 Total Expenses 300, , , , ,000 Operating Expenses Meters $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 Website Upgrade 25,000 25,000 25,000 25,000 25,000 Communication Equipment 15,000 15,000 20,000 20,000 20,000 Professional Studies 6,000 6,000 6,000 6,000 6,000 Line of Credit Interest 80, Bank Fees 10,000 10,000 10,000 10,000 10,000 Finance Fees 600, , , , ,000 Total Expenses $ 3,416,000 $ 2,385,000 $ 3,242,000 $ 4,452,000 $ 3,119,000 Transfer to Project Fund $ 8,747,500 $ 10,461,000 $ 12,071,000 $ 13,407,000 $ 23,023,000 Total Expenses $ 12,163,500 $ 12,846,000 $ 15,313,000 $ 17,859,000 $ 26,142,000 Excess (Deficiency) $ 5,124,902 $ 3,045,746 $ 380,448 $ (151,097) $ (209,167) Beginning Fund Balance $ 8,959,163 $ 14,084,065 $ 17,129,811 $ 17,510,259 $ 17,359,162 Ending Fund Balance $ 14,084,065 $ 17,129,811 $ 17,510,259 $ 17,359,162 $ 17,149,995 pg. 29

30 FY 2018 General Fund (IR&R Account) Proposed Budget General Fund (IR&R Account) FY 2017 FY 2018 Revenues: Revenue Fund Transfer $ 166,500 $ 191,977 Total Revenue $ 166,500 $ 191,977 Expenses: Interceptor Assessments/CCTV $ 200,000 $ 50,000 Flow Monitoring/GIS 75, ,000 Pump Station Telemetry 25,000 75,000 Website Upgrade 25,000 25,000 Total Expenses $ 325,000 $ 350,000 Excess (Deficiency) $ (158,500) $ (158,023) Fund Balance - Beginning $ 472,575 $ 314,075 Fund Balance - Ending $ 314,075 $ 156,052 pg. 30

31 Project Fund Explanatory Notes Capital Improvement Program AlexRenew manages its Project Fund, both joint and City-only, through a Capital Improvement Program (CIP). The plans for current and future capital projects, both joint and City-only, are summarized in a Ten-Year Plan. The CIP is a key element in planning and managing future regulatory compliance through large capital investments. This plan identifies cash needs as required by our Financial Policy, allowing for rate stability by forecasting future debt service. The Ten-Year Plan is an important tool. It is used for formulating future project financing plans, maximizing federal and state grant opportunities, proactively planning for the replacement or reconstruction of essential assets nearing the end of their service life, and scheduling and coordinating execution of multiple projects to minimize operational impact. This year s 10-year Capital Improvement Program projects costs should we assume complete ownership of the wet weather program and combined sewer outfalls 003 and 004. Only the first year of the Ten-Year CIP (FY 2018) represents a funding commitment for a project. Definition of Capital Projects A capital project involves expenditures to acquire or add assets of a relatively permanent nature such as property, plant, and equipment. The CIP is typically used for large capital projects, new facilities, expansions, and improvements requiring engineering and/or construction services. Examples of these projects include: Studies preceding or likely to result in new facilities; New administrative facilities, expansions, major improvements, and major renovations; New pump stations and major improvements; New pipelines, replacements, and major rehabilitations; New treatment plants, expansions, and major improvements; and Studies or projects which will take multiple years to complete. Funding of Capital Improvement Projects The joint projects CIP is funded through the Project Fund. It can be for joint projects (facilities that are joint use with Fairfax and Alexandria). Fairfax funds 60% of the cost of the project on a cash reimbursement basis unless negotiated separately. The remaining 40% is funded from the General Fund. The projected costs for assuming complete ownership of the wet weather program and combined sewer outfalls 003 and 004 are included in this year s budget and 10-year CIP, and are joint projects. The CIP for City-only projects is fully funded out of the General Fund. It does not include day-to-day maintenance expenditures or routine renewal and replacement of assets. Funding sources into the General Fund for CIP projects include loans from the Virginia Department of Environmental Quality (VA DEQ); the Wastewater Revolving Loan Fund (WRLF); the Virginia Water Quality Improvement Fund (VA WQIF) Point Source Grant; the United States Environmental Protection Agency (US EPA) Special Appropriations Grant; and AlexRenew discretionary funds. pg. 31

32 FY 2018 Project Fund Proposed Budget Project Fund - Joint FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 Revenues: Payments from Fairfax County $ 11,173,600 $ 11,775,000 $ 11,930,000 $ 12,909,000 $ 19,533,000 Transfers from General Fund 8,747,500 10,461,000 12,071,000 13,407,000 23,023,000 Total Revenues $ 19,921,100 $ 22,236,000 $ 24,001,000 $ 26,316,000 $ 42,556,000 JOINT Capital Outlay SANUP Package B - Centrate Pretreatment Facility $ 100,000 $ - $ - $ - $ - SANUP Package C - Nutrient Management Facility 1,900, ,000 Joint Wet Weather Solution (003/004) 1,260,000 6,000,000 10,000,000 12,000,000 25,000,000 Upper Holmes Run Trunk Sewer Rehabilitation 50, ,000 1,000,000 FFX Holmes Run Trunk Sewer Rehabilitation 500,000 4,000,000 Reclaimed Water Program 50, Environmental Center 2,800, Deck Connector 600, , , Preliminary and Primary Improvements 1,300,000 4,400,000 5,625,000 8,345,000 8,605,000 Pre-pasteurization System Improvements 100, , , Process Optimization Program 3,610,000 1,400,000 2,050,000 1,070,000 - Solids / Carbon Management Program 300, , , , ,000 Odor Control System Upgrade - 250, ,000,000 Campus-wide Electrical Upgrade Program 300,000 1,450,000 1,300,000 1,200,000 1,200,000 Process Control System Upgrade 1,030,000 3,190, , , ,000 Resiliency Program 1,100,000 1,200, , ,000 - Information Technology 1,875, , , Facility Master Plan and Associated Projects 2,675,000 1,250, , , ,000 Main Plant Stormwater System Rehabilitation Program 100, , , Main Plant Tunnel Improvements 400, , , ,000 - Security during Construction 370, , , , ,000 Bank Fees 1,000 1,000 1,000 1,000 1,000 Total Joint Capital Outlay $ 19,921,000 $ 22,236,000 $ 24,001,000 $ 26,316,000 $ 42,556,000 Excess (Deficiency) $ Fund Balance - Beginning $ 2,018,432 $ 2,018,532 $ 2,018,532 $ 2,018,532 $ 2,018,532 Fund Balance - Ending $ 2,018,532 $ 2,018,532 $ 2,018,532 $ 2,018,532 $ 2,018,532 pg. 32

33 Joint Project Fund Summary Sources of Revenue The Alexandria Renew Enterprises proposed Joint Capital Improvement Program for FY 2018 utilizes a combination of cash transfers from the General Fund and capital contributions from Fairfax County. Project Fund (Joint) FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 Funding Source: Fairfax County Contribution $ 11,173,600 $ 11,775,000 $ 11,930,000 $ 12,909,000 $ 19,533,000 Net General Fund Contribution (1,252,500) 461,000 3,071,000 2,407,000 8,023,000 Net Debt Proceeds 10,000,000 10,000,000 9,000, ,000, ,000, Total Contributions $ 19,921,100 $ 22,236,000 $ 24,001,000 $ 26,316,000 $ 42,556,000 pg. 33

34 FY 2018 Capital Improvement Program Overview The Alexandria Renew Enterprises proposed Joint Capital Improvement Program for FY 2018 includes increased funding for the Wet Weather Management Strategy, including AlexRenew assuming complete ownership of the wet weather program and the City s combined sewer outfalls 003 and 004. This budget is also funding necessary upgrades of key operating systems, such as our Process Control System and our Information Technology Systems. Improvements and replacement of equipment, such as Preliminary and Primary Improvements, the Process Optimization Program, and our Campus-Wide Electrical Program are also funded through the Capital Improvement Program. pg. 34

35 Revenue Stewardship Operational Excellence Organizational Competency Community Benefit Watershed Partnerships Incubator of New Ideas & Innovations Alexandria-Only Capital Improvement Program Details The following pages contain Alexandria Only Capital Improvement Program (CIP) detail sheets for each FY 2018 project. These detail sheets include a project description and summary of sources and uses of FY 2018 Capital Improvement Program Alexandria Only Projects Potomac Interceptor Rehabilitation Project Service Chamber and Pump Station Upgrade Environmental Center Lobby Enhancement funds. pg. 35

36 Potomac Interceptor Rehabilitation Project Managing Department Project Location Project Category Estimated Useful Life Engineering Old Town, Jones Point Park Alexandria Only CIP Joint Use CIP 25 years Expenditure Prior Year FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 Total 25, ,000 1,060,000 1,540, ,000,000 3,000, Financing AlexRenew Fairfax VRLF Grant Line of Credit Project Description and Justification The Potomac Interceptor was constructed in the early 1950s. An inspection and condition assessment of the Potomac Interceptor completed in FY 2016 identified defects in the sewer. Rehabilitation is necessary to address these defects. Strategic Outcome Area This project supports the Board of Directors strategic outcomes for: Operational Excellence The scope of this project includes: Rehabilitation of approximately 30 manholes Replacement of 1,450 LF of sewer Lining west of the Route 1/Route 495 interchange and north of Jones Point Park, excluding portions reconstructed in The work planned for FY 2018 will focus on the manhole rehabilitation and coordination with implementation of the City of Alexandria Long Term Control Plan related to Outfall 002. Impact on Operations The operating and maintenance costs associated with this project will remain the same. pg. 36

37 Service Chamber and Pump Station Upgrades Managing Department Project Location Project Category Estimated Useful Life Engineering City of Alexandria Alexandria Only CIP Joint Use CIP 10 years Expenditure Prior Year FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 Total 0 50, ,000 1,100,000 1,500, , ,000 1,550,000 Financing AlexRenew Fairfax VRLF Grant Line of Credit Project Description and Justification This project involves upgrades to the Slater's Lane Pump Station, the Potomac Yard Pump Station, the Mark Center Pump Station and the Bush Hill Service Chamber. The Slaters Lane Pump Station was constructed in 1997 to discharge sanitary sewage flows from future residential development in the Potomac Yards area into the AlexRenewoperated Potomac Yard Trunk Sewer. Strategic Outcome Area This project supports the Board of Directors strategic outcomes for: Operational Excellence The Potomac Yard Pump Station was constructed in 2007 to pump sanitary flows to the Potomac Yard Trunk Sewer from future residential development in the Potomac Yards Development. Impact on Operations The operating and maintenance costs associated with this facility will remain the same. The Mark Center Pump Station receives sanitary flows from the Washington Headquarter Services which is approximately 14 million square feet of office buildings and government facilities. The MGD capacity pump station is a combined wet well and dry well facility built in The Bush Hill Service Chamber was constructed in November 2002 to service the Holiday Inn located at 2460 Eisenhower Avenue. Sanitary flows from the Holiday Inn are feed into the service chamber by a 10 diameter gravity sewer line expanded from an 8 inch diameter line extended from the hotel. The Holiday Inn previously experienced sewer back-ups resulting from the surcharged Holmes Run Trunk Sewer, so the service was constructed to prevent these backups from occurring on the property. A condition assessment was conducted and recommendations were prepared in FY This project entails implementing the recommendations that were made. pg. 37

38 Environmental Center Lobby Enhancements Managing Department Project Location Project Category Estimated Useful Life Communications Environmental Center Alexandria Only CIP Joint Use CIP 10 years Expenditure Prior Year FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 Total 150,000 Financing AlexRenew Fairfax VRLF Grant Line of Credit Project Description and Justification We have an opportunity to engage preschool and young elementary school children who cannot tour our campus to learn about the value of clean water. In our fish tank room, just off our educational lobby, we have the opportunity to enhance this equipment to provide interactive educational elements that simulate our own wastewater treatment campus: UV, settling tanks, etc. Strategic Outcome Area This project supports the Board of Directors strategic outcomes for: Community Benefit Impact on Operations pg. 38

39 Revenue Stewardship Operational Excellence Organization Competency Community Benefit Watershed Partnerships Incubator of New Ideas & Innovations Joint Capital Improvement Program Details The following pages contain Capital Improvement Program (CIP) detail sheets for each FY 2018 project. Projects FY 2018 Capital Improvement Program Joint Use Joint Wet Weather Solution (003/004) Deck Connector Preliminary and Primary Improvements Pre-Pasteurization System Improvements Process Optimization Program Solids/Carbon Management Program Odor Control System Upgrade Campus-wide Electrical Upgrade Program Process Control System Upgrade Resiliency Program Information Technology Facility Master Plan and Associated Projects Main Plant Storm water System Rehabilitation Program Main Plant Tunnel Improvements Upper Holmes Run Trunk Sewer Rehabilitation Fairfax Holmes Run Trunk Sewer Rehabilitation pg. 39

40 Joint Wet Weather Solution (003/004) Managing Department Project Location Project Category Estimated Useful Life Engineering Old Town Alexandria / Main Plant Alexandria Only CIP Joint Use CIP 30 years Expenditure Prior Year FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 Total 1,260,000 6,000,000 10,000,000 12,000,000 25,000,000 23,000,000 21,000,000 11,000,000 3,000,000 Financing AlexRenew Fairfax VRLF Grant Line of Credit Project Description and Justification During wet weather events, flows in the collection system increase as a result of rainfall-derived inflows and infiltration into the combined and separate sewers located in AlexRenew s service area. These flows have the potential to result in sewer backups and flooding of basements along select interceptors. Sanitary sewer overflows (SSOs) may also occur under these conditions. Strategic Outcome Area This project supports the Board of Directors strategic outcomes for: Watershed Partnerships In 2010, AlexRenew, the City of Alexandria, and Fairfax County commissioned a study to develop feasible alternatives that could minimize SSOs and combined sewer overflows (CSOs), reduce basement backups, and provide conveyance and treatment capacity for future growth. That study recommended the design and construction of a wet weather pump station and storage tunnel, the elimination of Hooff s Run Junction Chamber SSO, and the relocation of the City of Alexandria s CSO 004 from Duke Street to just outside AlexRenew s treatment facility. This project provides a number of benefits, including reducing sanitary sewer backups in homes and businesses, and reducing the impacts of SSOs and CSOs on the environment. The results of this study now form the basis for the City s Long Term Control Plan Update (LTCPU). Costs for AlexRenew assuming complete ownership of the wet weather program and the City s combined sewer outfalls 003 and 004 are included in the joint wet weather solution project costs. Impact on Operations Assuming ownership of the wet weather program and the City s combined sewer outfalls 003 and 004 will require additional staffing resources. Work to improve the two outfalls could impact our daily operations; the impacts will require planning to ensure no interruptions in service. To ensure success of this LTCPU and wet weather program, AlexRenew needs to update and expand its influent, preliminary and primary processes and pumping, which is noted in a separate project. pg. 40

41 Deck Connector Managing Department Project Location Project Category Estimated Useful Life Engineering West Plant Alexandria Only CIP Joint Use CIP Structure: 30 years Expenditure Prior Year FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 Total 600, , , Financing AlexRenew Fairfax VRLF Grant Line of Credit Project Description and Justification In support of the development strategy for the South Carlyle area, AlexRenew constructed a connector deck to connect the Environmental Center to the adjacent, planned development. The connector deck contains garage parking for employees and a landscaped deck above the garage. Strategic Outcome Area This project supports the Board of Directors strategic outcomes for: Community Benefit The costs associated with this project will be allocated such that AlexRenew s share will be 68% and Fairfax County s share will be 32%. The final cost split between Fairfax County and AlexRenew is pending finalization of an agreement between the parties. Construction commenced in FY 2014 under a Construction Manager at Risk (CMAR) contract. Construction of the Deck Connector was completed in FY Future work encompasses engineering services and inspection related to construction on the adjacent property to ensure proper physical connection to AlexRenew s infrastructure. Impact on Operations Operations and maintenance costs will be shared with an owner s association that will be created to assume joint responsibility for the long-term maintenance of this improvement. pg. 41

42 Preliminary and Primary Improvements Managing Department Project Location Project Category Estimated Useful Life Engineering Main Plant (primarily Buildings A and K) Alexandria Only CIP Joint Use CIP Structure: 30 years Expenditure Prior Year FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 Total 1,300,000 4,400,000 5,625,000 8,345,000 8,605, ,000 2,500, Financing AlexRenew Fairfax VRLF Grant Line of Credit Project Description and Justification During wet weather events, flows in the collection system increase as a result of rainfall-derived inflows and infiltration into the combined and separate sewers located in AlexRenew s service area. These flows have the potential to result in sewer backups and flooding of basements along select interceptors. Sanitary sewer overflows (SSOs) may also occur under these conditions. Strategic Outcome Area This project supports the Board of Directors strategic outcomes for: Watershed Partnerships In 2010, AlexRenew, the City of Alexandria, and Fairfax County commissioned a study to develop feasible alternatives that could minimize SSOs and combined sewer overflows (CSOs), reduce basement backups, and provide conveyance and treatment capacity for future growth. That study recommended the design and construction of a wet weather pump station and storage tunnel, the elimination of the Hooff s Run Junction Chamber SSO, and the relocation of the City of Alexandria s CSO 004 from Duke Street to just outside AlexRenew s treatment facility. This project provides a number of benefits, including reducing sanitary sewer backups in homes and businesses, and reducing the impacts of SSOs and CSOs on the environment. The results of this study now form the basis for the City s Long Term Control Plan Update (LTCPU). Costs for AlexRenew to assume complete ownership of the wet weather program and the City s combined sewer outfalls 003 and 004 are included in the wet weather management strategy project costs. Impact on Operations Influent screen upgrades will benefit operation efficiencies by further limiting migration of debris beyond screening. Scum system upgrades will improve the reliability of the system and minimize labor costs. This project also includes the rehabilitation of the Holmes Run Trunk Sewer, a needed part of the wet weather remediation program. To ensure success of this LTCPU and wet weather program, AlexRenew needs to update and expand its influent, preliminary and primary processes and pumping, pg. 42

43 Pre-Pasteurization Improvements Managing Department Project Location Project Category Estimated Useful Life Engineering Main Plant Alexandria Only CIP Joint Use CIP 15 years Expenditure Prior Year FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 Total 100, , ,000 Financing AlexRenew Fairfax VRLF Grant Line of Credit Project Description and Justification The purpose of this project is to replace the existing exhaust fan in the pre-pasteurization tanks, add redundancy, and improve the drainage of condensation at the fans, as part of an established asset management renewal and replacement program. Strategic Outcome Area This project supports the Board of Directors strategic outcomes for: Revenue Stewardship Impact on Operations Improvements will better ensure odor control for our neighboring community and safety for our employees. pg. 43

44 Process Optimization Program Managing Department Project Location Project Category Estimated Useful Life Engineering Main Plant Alexandria Only CIP Joint Use CIP PAC Blower: 20 years UV Upgrade: 15 years Expenditure Prior Year FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 Total 3,610,000 1,400,000 2,050,000 1,070, , ,000 Financing AlexRenew Fairfax VRLF Grant Line of Credit Project Description and Justification The Process Optimization Program encompasses mainstream deammonification, replacement of the process air compressor (PAC) blowers, the ultraviolet (UV) disinfection system upgrade, and other process automation improvements. Strategic Outcome Area This project supports the Board of Directors strategic outcomes for: Operational Excellence The current Process Air Compressor (Blower) system consists of five blowers designed to provide air to the Biological Reactor Basins (BRBs) for aeration, and to the Secondary Settling Tanks (SSTs) for mixing. Now that SANUP commissioning is complete, in FY 2018, changed aeration requirements will continue being evaluated and preliminary design for an upgrade will commence. The UV upgrade project involves the design and construction of a new UV disinfection system to replace the existing system, which is nearing the end of its useful life. The new UV system is being retrofitted in existing channels, replacing one channel at a time, while still maintaining adequate treatment and redundancy. This project will contribute to AlexRenew s energy efficiency goals, as most UV models on the market are substantially more energy efficient than AlexRenew s current UV system. Construction of the UV upgrade is expected to be completed in FY Impact on Operations The PAC blower project will provide energy-related savings and result in a reduction in operating and maintenance costs. The UV Upgrade is expected to reduce operating and maintenance costs over the existing system. It will result in less electrical usage for effluent disinfection. There are also fewer lamps to replace, reducing the maintenance of the system. pg. 44

45 Solids / Carbon Management Program Managing Department Project Location Project Category Estimated Useful Life Production Main Plant Alexandria Only CIP Joint Use CIP Will be determined as specific projects are defined Expenditure Prior Year FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 Total 300, , , , , , ,500,000 5,000,000 5,000,000 5,000,000 Financing AlexRenew Fairfax VRLF Grant Line of Credit Project Description and Justification Currently, AlexRenew adds supplemental carbon (methanol) to enhance biological waste treatment. This program involves evaluating opportunities and technologies to reduce or eliminate the addition of supplemental carbon. Strategic Outcome Area This project supports the Board of Directors strategic outcomes for: Incubator of New Ideas and Innovations In FY 2018, AlexRenew will move forward on evaluating how space in the main plant could best be utilized to maximize the carbon-water-energy nexus and increase operating efficiencies. Impact on Operations This program will help AlexRenew prioritize and execute projects. pg. 45

46 Odor Control System Upgrade Managing Department Project Location Project Category Estimated Useful Life Engineering Main Plant Alexandria Only CIP Joint Use CIP Will be determined as part of design process Expenditure Prior Year FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 Total 0 250, ,000,000 1,000, Financing AlexRenew Fairfax VRLF Grant Line of Credit Project Description and Justification This project involves the assessment of the odor control system and identification of needs for new capital improvements to ensure AlexRenew is minimizing its effect on current and future neighbors. Strategic Outcome Area This project supports the Board of Directors strategic outcomes for: Community Benefit Impact on Operations This project will ensure our campus remains a good neighbor by minimizing the likelihood of receiving odor complaints. pg. 46

47 Campus-wide Electrical Upgrade Program Managing Department Project Location Project Category Estimated Useful Life Engineering Main Plant Alexandria Only CIP Joint Use CIP years Expenditure Prior Year FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 Total 300,000 1,450,000 1,300,000 1,200,000 1,200,000 1,200, , , Financing AlexRenew Fairfax VRLF Grant Line of Credit Project Description and Justification To improve electrical service reliability, AlexRenew conducted an assessment of the electrical power distribution system (including electrical equipment and feeders) at our Main Plant and remote pump stations. Strategic Outcome Area This project supports the Board of Directors strategic outcomes for: Operational Excellence Work includes preliminary design on a series of projects that involve switchgear upgrades, breaker replacement, and standby generator installation, among other activities. Projects are expected to continue through FY 2018 and beyond. In addition, a power quality study will be completed. This project also includes upgrades to uninterruptible power supply (UPS), fiber maintenance, and other networking equipment. Impact on Operations This project will result in greater operational reliability and resiliency. pg. 47

48 Process Control System Upgrade Managing Department Project Location Project Category Estimated Useful Life Production Main Plant Alexandria Only CIP Joint Use CIP years Expenditure Prior Year FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 Total 1,030,000 3,190, , , , , ,000 Financing AlexRenew Fairfax VRLF Grant Line of Credit Project Description and Justification AlexRenew completed the development of a SCADA Master Plan to guide future improvements in network infrastructure, applications, and hardware. The Process Control System Upgrade reflects recommendations in the Master Plan and is comprised of multiple projects including: fiber audit and repair, Supervisory Control and Data Acquisition (SCADA) network separation, human-machine interface (HMI) improvements, PLC and network equipment upgrades, and installation of power distribution monitors. Strategic Outcome Area This project supports the Board of Directors strategic outcomes for: Operational Excellence Impact on Operations pg. 48

49 Resiliency Program Managing Department Project Location Project Category Estimated Useful Life Production Main Campus and Remote Facilities Alexandria Only CIP Joint Use CIP Hardware/software: 10 yrs Bridge / Fencing: 20 yrs Expenditure Prior Year FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 Total 1,100,000 1,200, , , , , , ,000 Financing AlexRenew Fairfax VRLF Grant Line of Credit Project Description and Justification The Resiliency Program is comprised of multiple projects to support physical and information security. Strategic Outcome Area This project supports the Board of Directors strategic outcomes for: Physical security will be enhanced with the expansion of the Emergency Notification System (ENS), which is required by OSHA Information security will be enhanced through the implementation of a disaster recovery plan. Continuity of business is dependent on availability of both SCADA and business IT infrastructures. Organizational Competency Impact on Operations This program will help staff continue to manage risk. pg. 49

50 Information Technology Managing Department Project Location Project Category Estimated Useful Life Information Systems Main Plant Alexandria Only CIP Joint Use CIP 10 years Expenditure Prior Year FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 Total 1,875, , , , ,250,000 1,250,000 1,250,000 Financing AlexRenew Fairfax VRLF Grant Line of Credit Project Description and Justification Network replacement, security enhancements, and application upgrades are a continuing need for AlexRenew. Funds associated with the Information Technology category support these combined improvements to enhance our information technology infrastructure. Strategic Outcome Area This project supports the Board of Directors strategic outcomes for: Operational Excellence Impact on Operations Operations will be enhanced with more reliable, scalable and available IT Systems. pg. 50

51 Facility Master Plan and Associated Projects Managing Department Project Location Project Category Estimated Useful Life Engineering Main Plant Alexandria Only CIP Joint Use CIP years Expenditure Prior Year FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 Total 2,675,000 1,250, , , , , ,000 1,700,000 7,000,000 7,000,000 0 Financing AlexRenew Fairfax VRLF Grant Line of Credit Project Description and Justification The Facilities Master Plan includes plans for the relocation of our laboratory, an evaluation of options for future capital investments, and enhancing operational efficiencies. In FY 2018, the project will move forward, as will other nonprocess improvements such as roof, building enclosure and other major repairs. Strategic Outcome Area This project supports the Board of Directors strategic outcomes for: Operational Excellence The network operations center located in G Building on the Main Plant will also be upgraded and expanded. Planned improvements include reconstructing and expanding the current space; install Data Center level heating/cooling, network enclosures and separate generator. This site will also serve as a backup site for disaster recovery. Impact on Operations This planning effort will help AlexRenew prioritize projects that have the potential to improve energy efficiency, implement sustainable design features throughout our campus, and reduce operations and maintenance costs. pg. 51

52 Main Plant Storm Water System Rehabilitation Program Managing Department Project Location Project Category Estimated Useful Life Engineering Main Plant Alexandria Only CIP Joint Use CIP 30 years Expenditure Prior Year FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 Total 100, , , , ,000 Financing AlexRenew Fairfax VRLF Grant Line of Credit Project Description and Justification The Storm water Improvement Analysis Report has been completed and will be used in FY 2018 to implement rehabilitation project(s) and storm water treatment improvement(s) and demonstrate various green infrastructure technologies. Strategic Outcome Area This project supports the Board of Directors strategic outcomes for: Operational Excellence Impact on Operations Improvements in on-site storm water management will result in a reduction in operations and maintenance costs. pg. 52

53 Main Plant Tunnel Improvements Managing Department Project Location Project Category Estimated Useful Life Engineering Main Plant Alexandria Only CIP Joint Use CIP 20 years Expenditure Prior Year FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 Total 400, , , , ,000,000 1,000,000 Financing AlexRenew Fairfax VRLF Grant Line of Credit Project Description and Justification AlexRenew s walkable tunnel system, some of which was constructed as early as the 1950s, house mechanical, electrical, and plumbing utilities. Throughout the years, upgrades to treatment processes have led to the expansion of the piping network in the tunnels. The structural integrity of the tunnels also needs to be assessed. Strategic Outcome Area This project supports the Board of Directors strategic outcomes for: Operational Excellence This project involves an assessment of the tunnels and utility piping, as well as the creation of a unified and comprehensive map of utilities within the tunnel system. These unified maps will create a complete record of the existing utilities in the tunnel and provide a baseline for designers, contractors, and plant staff to move forward with future modifications. Impact on Operations This project will not affect operating or maintenance costs. pg. 53

54 Upper Holmes Run Trunk Sewer Rehabilitation Managing Department Project Location Project Category Estimated Useful Life Engineering West Alexandria Alexandria Only CIP Joint Use CIP 20 years Expenditure Prior Year FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 Total 50, ,000 1,000,000 1,800, , Financing AlexRenew Fairfax VRLF Grant Line of Credit Project Description and Justification Constructed in the early 1950s, the Holmes Run Trunk Sewer is one of the three, original large diameter sewers that were built to convey wastewater from the City of Alexandria and Fairfax County to AlexRenew s water resource recovery facility. Since that time, there have been very limited modifications and repairs along the upper portion of the Holmes Run Trunk Sewer, from Dowden Terrace to down near Paxton Street. Recent video of the sewer indicates that this portion requires rehabilitation. Rehabilitation of portions of the Holmes Run Trunk Sewer is necessary to correct deficiencies in the pipeline and manholes. These deficiencies were identified using Closed Circuit Television (CCTV) inspection and inspection reports. Potential rehabilitation strategies include point repair and cured-inplace-pipe (CIPP) lining, among other activities. Strategic Outcome Area This project supports the Board of Directors strategic outcomes for: Watershed Partnerships Impact on Operations This project will not impact operations and maintenance costs. This project will result in improvements to the condition of the Holmes Run Trunk Sewer in the upper reaches and may add some additional capacity. The Holmes Run Trunk Sewer rehabilitation is related to the joint wet weather solution. pg. 54

55 Fairfax Holmes Run Trunk Sewer Rehabilitation Managing Department Project Location Project Category Estimated Useful Life Engineering West Alexandria Alexandria Only CIP Joint Use CIP 30 years Expenditure Prior Year FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 Total ,000 4,000,000 4,000,000 4,000,000 4,000, Financing AlexRenew Fairfax VRLF Grant Line of Credit Project Description and Justification This project involves replacement of approximately 10,000 linear feet of sewer with 36-inch diameter reinforced concrete pipe, from Dowden Terrace to Ben Brenman Park (with the exception of the segment under I-395). Strategic Outcome Area This project supports the Board of Directors strategic outcomes for: Watershed Partnerships This project will result in improvements to the condition of the Holmes Run Trunk Sewer in the upper reaches and may add some additional capacity. The Holmes Run Trunk Sewer rehabilitation is related to the joint wet weather solution. Impact on Operations This project will not impact operations and maintenance costs. pg. 55

56 Ten-Year Capital Improvement Program 10-Year CIP FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2021 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 Alex-Only Capital Outlay $ 1,100,000 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - Four Mile Run Pump Station Upgrade 25, ,000 1,060,000 1,540,000-3,000,000 3,000, Potomac Interceptor Rehabilitation Commonwealth Interceptor Rehabilitation ,000 1,000,000 - Potomac Yards Trunk Sewer Rehabilitation Service Chamber and Pump Station Upgrade - 50, , , Slater's Lane Pump Station , ,000 1,250,000 Potomac Yards Pump Station , ,000 Mark Center Pump Station , , , Carlyle Mill Pump Station , , , Bush Hill Pump Station 600, Nutrient Management Facility - Athletic Field Customer Service Center - 150, Environmental Center - Lobby Expansion 605,000 1,054, , , , ,000 1,900,000 2,031,000 3,606,000 3,606,000 3,606,000 Arlington County Capital Contribution $ 2,330,000 $ 1,554,000 $ 2,556,000 $ 3,516,000 $ 2,183,000 $ 3,775,000 $ 4,900,000 $ 2,031,000 $ 4,766,000 $ 5,156,000 $ 5,156,000 Subtotal Joint-Use Capital Outlay SANUP Package B - Centrate Pretreatment Facility $ 100,000 $ - $ - $ - $ - $ - $ - $ - $ 750,000 $ 750,000 $ - SANUP Package C - Nutrient Management Facility 1,900, , , Joint Wet Weather Solution (003/004) 1,260,000 6,000,000 10,000,000 12,000,000 25,000,000 23,000,000 21,000,000 11,000,000 3,000, Upper Holmes Run Trunk Sewer Rehabilitation 50, ,000 1,000,000 1,800, , FFX Holmes Run Trunk Sewer Rehabilitation 500,000 4,000,000 4,000,000 4,000,000 4,000, Reclaimed Water Program 50, , , ,000 Environmental Center 2,800, ,200,000 - Deck Connector 600, , , Intermediate Pump Station Upgrade , Preliminary and Primary Improvements 1,300,000 4,400,000 5,625,000 8,345,000 8,605, ,000 2,500, Pre-pasteurization System Improvements 100, , , Process Optimization Program 3,610,000 1,400,000 2,050,000 1,070, , ,000 Solids / Carbon Management Program 300, , , , , ,000-2,500,000 5,000,000 5,000,000 5,000,000 Odor Control System Upgrade - 250, ,000,000 1,000, Plant Effluent (W3) System Improvements , ,000 Campus-wide Electrical Upgrade Program 300,000 1,450,000 1,300,000 1,200,000 1,200,000 1,200, , , Process Control System Upgrade 1,030,000 3,190, , , , , ,000 Resiliency Program 1,100,000 1,200, , , , , , ,000 Information Technology 1,875, , , ,000-1,250,000 1,250,000 1,250,000 Facility Master Plan and Associated Projects 2,675,000 1,250, , , , , ,000 1,700,000 7,000,000 7,000,000 - Main Plant Stormwater System Rehabilitation Program 100, , , , ,000 Main Plant Commonwealth Interceptor Pile Intrusion Repair ,000 2,000,000 Main Plant Tunnel Improvements 400, , , , ,000,000 1,000,000 Security during Construction 370, , , , , , , , , , ,000 Subtotal $ 19,920,000 $ 22,235,000 $ 24,000,000 $ 26,315,000 $ 42,555,000 $ 31,990,000 $ 30,200,000 $ 20,550,000 $ 19,260,000 $ 18,840,000 $ 11,790,000 Total $ 22,250,000 $ 23,789,000 $ 26,556,000 $ 29,831,000 $ 44,738,000 $ 35,765,000 $ 35,100,000 $ 22,581,000 $ 24,026,000 $ 23,996,000 $ 16,946,000 pg. 56

57 FY 2018 Calculations of Reserves and Debt Coverage The proposed FY Capital Improvement Program assumes $108.7 million in borrowing to fund the capital infrastructure needs identified in our Capital Improvement Program. It also includes $154.3 million in cost share from Fairfax County. The debt service on AlexRenew bonds is paid through the AlexRenew General Fund. This amount of investment will affect the Parity Fund. Over time, interest payments will reduce. Financial Policy Compliance FY 2017 FY 2018 Minimum Ending Balance 120 Days Current Year Budgeted Expenses $ 8,756,778 $ 8,952,299 Policy Compliance Transfer - 23,609 Projected Ending Balance 8,928,690 8,928,690 Excess (Deficiency) $ 171,912 - All-In Debt Service Coverage (DSC) Wastewater Treatment Charges $ 38,632,500 $ 39,000,500 Fairfax County Operating Expense Charge 10,999,385 11,074,212 Investment Income 30,000 30,000 Gross Revenue Available for Debt Service: $ 49,661, $ 50,104, Operating Expenses $ 26,635,200 $ 27,229,910 Net Revenues Available for Debt Service $ 23,026,685 $ 22,874,802 Total Annual Debt Service $ 13,492,969 $ 14,562,799 All-In Debt Service Coverage Financial Policy Minimum Target 150% 150% pg. 57

58 pg. 58