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Home My WebLink About05-21-12 Budget discussion - Enterprise Funds Commission Memorandum REPORT TO: Honorable Mayor and City Commission FROM: Anna Rosenberry, Finance Director Chris Kukulski, City Manager SUBJECT: Fiscal Year 2013 (FY13) Budget Work Session – Enterprise Funds MEETING DATE: May 21, 2012 AGENDA ITEM TYPE: Work Session RECOMMENDATION: Listen to staff presentations, ask questions, give direction, as you see fit. BACKGROUND: Tonight we will be going over the details of the budgets for our Enterprise Funds: 1. Water Fund (including Water Impact Fees) 2. Wastewater Fund (including Wastewater Impact Fees) 3. Solid Waste Fund 4. Parking Fund 5. Storm Water Fund (if there are further questions after our May 7 & May 14 discussions.) Worksheet materials attached to this memo do NOT currently include more details on the Storm Water Utility. See the May 14 packet material UPDATE for Storm Water information. If revisions are recommended during the May 14 meeting, we will try to issue an update that will be available for May 21st. FISCAL EFFECTS: Although the Final Budget adoption has far-reaching fiscal effects, there are no immediate fiscal effects as a result of this work session. Attachments: Budget Discussion Worksheets Report compiled on: May 13, 2012 5 May 21, 2012 ‐ Budget Discussion Sheets 1 Water & Sewer Rates – a RECAP of Last Year’s Rate Decisions. Old Status‐Quo Water & Sewer financial models with Adopted Capital Improvement Plans (CIP) for pipe replacement projects. Under old existing model, each utility funded a pipe replacement project every‐other‐year. Newly Adopted Model – Doubles amounts to Water & Sewer Pipe Replacements Water & Sewer financial models with increased dollars for pipe replacement projects. These amounts are based on our recently developed deferred maintenance project listings, which can be found in the CIP document. Option A: ~$600,000/utility/yearRequired Rate Increase Each Year FY12 FY13 FY14 FY15 FY16Annual AverageWater Pipe Replacement Projects 3%‐ 1,100,000 ‐ 1,210,000 ‐ 462,000 Sewer Pipe Replacement Projects 5% 800,000 ‐ 1,000,000 ‐ 1,200,000 600,000 Total 800,000.00 1,100,000 1,000,000 1,210,000 1,200,000 1,062,000 ProjectedOption B: ~$900,000/utility/yearRequired Rate Increase Each Year FY12 FY13 FY14 FY15 FY16 Annual Average Water Pipe Replacement Projects 4.5% 922,555 1,205,720 974,165 947,720 969,435 1,003,919 Sewer Pipe Replacement Projects 6.0% 884,600 886,000 1,003,150 952,700 803,200 905,930 Total 1,807,155 2,091,720 1,977,315 1,900,420 1,772,635 1,909,849 Projected6 May 21, 2012 ‐ Budget Discussion Sheets 2 Water Fund ‐ FY13 Budget Worksheet Both the Water Plant and the Water Operations Divisions are paid for by the Water Fund. Water Plant information begins on page 160 of the City Manager’s (CM) Recommended Budget document. Water Operations information begins on page 165 of the City Manager’s Recommended Budget document. Water Fund – FY13 Expenditure Total $22.1 Million (including plant construction) The Water Fund is an enterprise fund that supports the operations of water treatment and distribution. It is a self-funded utility; the primary source of revenue is from water customer payments. The proposed budget for FY13 is as follows: Water Fund FY13 Personnel & Benefits $ 2,036,977 Operating $ 2,353,964 Capital $ 16,956,712 Debt Service $ 786,699 Transfers $ ‐ Total Expenditures $ 22,134,352 Personnel & Benefits9%Operating11%Capital77%Debt Service3%Transfers0%Water Fund ‐FY137 May 21, 2012 ‐ Budget Discussion Sheets 3 Personnel: The FY13 budget proposes adding a position to be split between the Water and Sewer utility for a System Integrator. This position would be responsible for the automation and computer controls for the city’s water and sewer plants, collection, and distribution systems. Currently, this work has been contracted to an outside company. During the construction of the Water Reclamation Facility (WRF), a significant amount of money was spent on automated systems and the costs to have the new WRF integrated with existing systems. The new Water Treatment Plant (WTP) will also be significantly automated. Bringing this position on right now will allow the System Integrator to learn the new WRF system and be on-board for when the WTP comes on-line. Capital Projects: Capital Projects account for 77% of the Water Fund budget this year. We have been spending money on Design and Membrane purchases, and began spending for construction on the Plant itself last summer. The construction project will be the dominant budgetary feature for the Water Fund and Water Impact Fees budgets in FY12 and FY13, totaling an estimated $18,664,488. Water Fund Capital Projects Include: Plant Design & Construction (FY13 Share) = $15,589,198 Water Pipe Annual Projects = $ 1,205,720 Fixed Meter Reading System = $ 90,000 Mini-Excavator with Trailer (share) = $ 25,000 1-Ton Truck Replacement = $ 46,794 Total $16,956,712 Expenditures proposed for Water Impact Fees are: Plant Design & Construction (FY13 Share) = $ 3,075,290 Total $ 3,075,290 Water Fund – FY13 Revenues Total $26.2 Million (including plant loans) Rates: The CM Recommended Budget includes the 4.5% rate increase adopted last summer. Water Sales and Impact Fee collections impact our rate revenue estimates. a. Water sales had declined in FY09 & FY10, due weather changes (drought ending,) conservation efforts, and the local economy. With May and June still unaccounted for, we are trending ahead of our estimate for FY12, thanks to strong water sales in the summer of 2011. Annually, the months of July through October reflect the weather-related water sales changes. In wet years, we will see declining sales; in dry years (e.g. FY08) we will see expanded sales. The chart below shows water sales for those months during the past 5 years. Our most recent rate study had been based on our FY11 budgeted water sales levels, with moderate growth estimates of 1% in FY12, FY13, FY14 and 2% in FY15 & FY16. 8 May 21, 2012 ‐ Budget Discussion Sheets 4 b. Water Impact Fees are accounted for in a separate fund for budgeting purposes. However, because of the tie between the current Plant construction project and water customer rates, the amount of Water Impact Fee collections is an important factor. Because our rate models for FY12-16 assumed higher estimates of Impact Fee Revenues, we are watching to see that these estimates aren’t significantly different from actual collections. Estimating the amount of Impact Fee revenues to be collected in the months of May and June is very difficult, swinging significantly with the timing of large projects breaking ground. However, if we see collections in these months similar to May and June collections in past year, we should be close to our estimate for FY12. $703,000 $570,000 $554,000 $448,000 $532,727 $868,000 $813,000 $680,000 $939,000 $967,421 $751,000 $584,000 $716,000 $637,505 $846,638 $532,000 $653,000 $569,000 $475,526 $631,974 FY08FY09FY10FY11FY12Metered Water SalesJuly AugustSeptemberOctoberWater Impact Fee RevenuesFY09 FY10 FY11 FY12 *est FY13 EstRate Study Amount 400,000$ 300,000$ 400,000$ 850,000$ 850,000$ Actual Revenues 947,000$ 880,000$ 812,000$ 805,000$ ‐$ Fees Collected Over Our Estimates 547,000$ 580,000$ 412,000$ (45,000)$ 9 May 21, 2012 ‐ Budget Discussion Sheets 5 c. Purchase of Water Rights have been included in our rate models, with $200,000 per year in utility money to purchase water rights. This recent policy change is meant to be in addition to the current “Cash in Lieu of Water Rights” program related to annexations and development projects. At the time of budget development, we did not have any proposed expenditures related to water rights purchases for FY13. When specific purchases are identified, the budget can be administratively amended for these fee-based purchases. d. Two-Year Rate Resolutions. With rate increases already adopted to go into effect this September, we recommend that we update the rate model again next spring. This will give us time to consider the financial effects of actual collections for FY11 & FY12 and make adjustments to the rate model for changes in metered water sales, impact fee collections and other factors. 10 May 21, 2012 ‐ Budget Discussion Sheets 6 Wastewater Fund – FY13 Budget Worksheet Both the Water Reclamation Facility (WRF) and the Wastewater Operations Divisions are paid for by the Wastewater Fund. Water Reclamation Facility information begins on page 173 of the City Manager’s Recommended Budget document. Wastewater Operations information begins on page 169 of the City Manager’s Recommended Budget document. Wastewater Fund - FY13 Expenditure Total $6.7 Million The Wastewater Fund is an enterprise fund that supports the operations of water treatment and distribution. It is a self-funded utility; the primary source of revenue is from wastewater customer payments. The proposed budget for FY13 is as follows: Wastewater Fund FY13 Personnel & Benefits $1,757,903 Operating $2,732,233 Capital $999,500 Debt Service $1,237,480 Transfers $ ‐ Total Expenditures $6,727,116 Personnel & Benefits26%Operating41%Capital15%Debt Service18%Transfers0%Wastewater Fund ‐FY1311 May 21, 2012 ‐ Budget Discussion Sheets 7 Personnel: As discussed above, the FY13 budget proposes adding a position to be split between the Water and Sewer utility for a System Integrator. Contracted Services: The Solvent Site Remediation Project is paid for by sewer customers. We have incorporated the new estimates for the clean-up and monitoring, as prepared by our consultants. The FY13 budget includes $658,612 for unreimbursed expenses related to the active bio-remediation and monitoring of the site. We have included this amount budgeted for contracted services, as it will be delivered by a number of vendors currently working under contract. Capital Projects: The Wastewater fund’s capital projects have returned to a much more predictable level of pipe and equipment replacements. Wastewater Fund Capital Projects Include: Wastewater Pipe Annual Projects = $ 886,000 Wastewater Pipe Engineering/Design = $ 22,500 Mini-Excavator with Trailer (share) = $ 25,000 1/2-Ton Flex Fuel Truck $ 25,000 Digester Draft Tube Mixer $ 41,000 Total $ 999,500 Expenditures proposed for Wastewater Impact Fees are: Repayment of WRF Debt $ 820,000 Total $ 820,000 Wastewater Fund - FY13 Revenues Total $6.8 Million The CM Recommended Budget includes the 6% rate increase adopted last summer. Like water rates, the study tracks on what we have referred to as “Moderate” growth. However, unlike water rates, wastewater rates do NOT see the fluctuation related to summer weather watering. Wastewater rates are based on a customer’s “winter-quarter average” water consumption. The rate model includes customer revenues increasing by the same amounts as the Water Rate Model: 1% in FY12, FY13, FY14 and 2% in FY15 & FY16. If May and June of 2012 are similar to 2011, revenues will track slightly ahead of our estimate for FY12. 12 May 21, 2012 ‐ Budget Discussion Sheets 8 Just as with Water finances, Wastewater Impact Fees are accounted for in a separate fund for budgeting purposes. And, because of the tie between the current Plant construction project and wastewater customer rates, the amount of Wastewater Impact Fee collections is an important factor. Like with Water rates, we increased our estimates of Wastewater Impact Fee revenues for FY12 and FY13. Depending on the projects permitted for construction in May and June, we are expected to come close to our estimate for FY12. Two-Year Rate Resolutions. Like with Water rates, our wastewater rate increases already adopted to go into effect this September. We recommend that we update the rate model again next spring, giving us time to consider the financial effects of actual collections for FY11 & FY12 and make adjustments to the rate model for changes in metered sewer charges, impact fee collections, industrial fees, and other factors. Wastewater Revenues FY11 FY12 *EstimateMetered Sewer Charges ‐ Budget 5,785,000$ 6,177,733$ Metered Sewer Charges ‐ Actual 5,888,041 6,312,727 Difference in dollars 103,041 134,994 Difference as a % of Budgeted Amount 1.8% 2.2%Wastewater Impact Fee RevenuesFY09 FY10 FY11 FY12 *Est FY13 EstRate Study Amount 400,000$ 300,000$ 400,000$ 820,000$ 820,000$ Actual Revenues 932,000$ 879,000$ 669,000$ 772,000$ ‐$ Fees Collected Over Our Estimates 532,000$ 579,000$ 269,000$ (48,000)$ 13 May 21, 2012 ‐ Budget Discussion Sheets 9 Solid Waste Fund – FY13 Budget Worksheet The Solid Waste Fund accounts for our garbage collection and recycling divisions. Solid Waste Collection information begins on page 178 of the Budget Document, and Recycling begins on page 181. During this summer, the Commission will be hearing the results of our Solid Waste Rate study. Policy decisions about customer charges and the mix of services provided will be proposed at that time. For budget development, we recommend keeping the status quo for both charges and services provided. Solid Waste Fund - FY13 Revenues Total $2.55 Million Solid Waste FY13Recycling Revenue 127,150$ Collection Route Assessments 2,382,829$ Interest Income 24,000$ Roll‐off Container Rentals 7,000$ Miscellaneous Revenue 10,000$ Total Revenues 2,550,979$ Recycling Revenue5%Collection Route Assessments94%Interest Income1%Roll‐off Container Rentals0%Solid Waste Revenues14 May 21, 2012 ‐ Budget Discussion Sheets 10 Solid Waste Fund - FY13 Expenditures Total $2.59 Million Capital Item: $70,000 for the purchase of a Recycling Truck to serve as a back-up, for when the current truck is out of service for repairs or maintenance. Solid Waste FY13Personnel & Benefits 1,061,018$ Operating 1,462,728$ Capital 70,000$ Total Expenditures 2,593,746$ Personnel & Benefits41%Operating56%Capital3%Solid Waste Fund ‐FY1315 May 21, 2012 ‐ Budget Discussion Sheets 11 Parking Fund – FY13 Budget Worksheet The Parking Enterprise Fund is managed by the city’s Parking Commission. Their budget is developed with the help of the Parking Manger, and approved by the City Commission. The Parking budget discussion begins on page 141 of the Budget Document. Workload Information was not clear in the document, and is attached below. It will be corrected for inclusion in the final document. Parking Fund - FY13 Revenues Total $538,000 The Parking Fund’s largest source of revenue is also the most unpredictable source: Fines & Forfeitures. These are the revenues derived from parking ticket issued to those that violate parking regulations. For FY13, the General Fund is budgeted to loan $50,000 to the Parking Fund for construction to complete the Parking Garage Condominium, in accordance with the General Fund Capital Improvement Program that was adopted in December. In the coming months, the need for this loan will again be discussed with the Commission. It is found in “Transfers from Other Funds”. Parking Fund FY13Licenses & Permits 174,500$ Fines and Forfeitures 295,000$ Other 18,500$ Transfers from Other Funds 50,000$ Total Revenues 538,000$ Licenses & Permits32%Fines and Forfeitures55%Other4%Transfers from Other Funds9%Parking Revenues16 May 21, 2012 ‐ Budget Discussion Sheets 12 Parking Fund - FY13 Expenditures Total $464,000 Capital Item: $50,000 for construction/finishing of the Parking Garage Condo area. Parking Fund FY13Personnel & Benefits 210,637$ Operating 203,232$ Capital 50,000$ Total Expenditures 463,869$ 17 Department:PARKING Activity:Public Safety Department Performance Measures: PERFORMANCE ‐ WORKLOAD INFORMATION Workload Measures Standard FY10 Actual FY11 Actual FY12 Budget FY13 Estimate WL01 Courtsey Citations Written (no charge)n/a n/a 2526 For the first time, the Parking Commission created a Courtesy Ticket Policy for first‐ time violators of the downtown overtime parking infraction. This policy took place in January 2011 and for calendar year 2011, 2,526 courtesy tickets were issued. 2500 Source/Notes: WL02 Number of Parking Lot Spaces Managed & Maintained The Parking Department is responsible for maintaining the four downtown surface lots with a capacity of 174 spaces. Source/Notes: WL03 Number of Parking Lots Managed & Maintained 444 The Parking Department is responsible for maintaining the four downtown surface lots with a capacity of 174 spaces. 4 Source/Notes: WL04 Number of Parking Garages Managed & Maintained 1 Downtown Garage 111 Bridger Park Downtown, the 435‐space, 5‐level parking structure on East Mendenhall Street in downtown Bozeman, is managed and maintained by the Parking Department. 1 Source/Notes: WL06 Total Citations Written 8,768 9,700 9,600 Parking enforcement covers the 650 on‐street timed spaces and the 174 off‐street timed spaces in the downtown core. These 814 spaces have mostly 2‐hour restrictions. In addition, parking enforcement covers 214 blocks in the Montana State University Reside 9600 Source/Notes: 18