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HomeMy WebLinkAboutMinutes - May 12, 2015 SSLODI CITY COUNCIL SHIRTSLEEVE SESSION CARNEGIE FORUM, 305 WEST PINE STREET TUESDAY, MAY 12, 2015 A. Roll Call by City Clerk An Informal Informational Meeting ("Shirtsleeve" Session) of the Lodi City Council was held Tuesday, May 12, 2015, commencing at 7:00 a.m. Present: Council Member Kuehne, Council Member Nakanishi, and Mayor Johnson Absent: Council Member Mounce, and Mayor Pro Tempore Chandler Also Present: City Manager Schwabauer, City Attorney Magdich, and City Clerk Ferraiolo B. Topic(s) B-1 Receive Presentation Regarding Fiscal Year 2015/16 Budget (CM) Deputy City Manager Jordan Ayers provided a PowerPoint presentation regarding the Fiscal Year 2015/16 budget. Specific topics of discussion included utility funds; electric utility overview, revenue, expenses, positions recommended, capital projects, and reserves; water utility overview, revenue, expenses, capital projects, and reserves; and wastewater utility overview, revenue, expenses, positions recommended, capital projects, and reserves. Mayor Johnson requested staff provide Council with information regarding the impact of solar energy on revenues and infrastructure, where the issue is heading, and what liability the City may have. In response to Council Member Nakanishi, Electric Utility Director Elizabeth Kirkley stated that applicants for the Lineworker apprenticeship program are typically recruited from the linemen's college, which is a 12 -week course, and many of the students attend directly out of high school. Ms. Kirkley stated the college has a website regarding the program; staff reaches out to local middle school students; the salary for an apprentice is roughly $90,000; and applicants should not fear heights and should be in good physical condition. In response to Mayor Johnson, Ms. Kirkley stated there are a number of journey level lineworkers who will be retiring in the near future, which will create promotional opportunities for the apprentice level lineworkers. She stated the apprenticeship program is four years. City Manager Schwabauer added that staff is exploring options to require those in the apprenticeship program to remain with the City for a period of time to address the training commitment. In response to Council Member Nakanishi, Mr. Schwabauer stated that lineworkers have a dangerous job and the City has a low workers compensation experience with that employee classification. Ms. Kirkley announced that Lodi's lineworkers will be competing at the lineman's rodeo this Saturday in Sacramento beginning at 7:30 a.m. In response to Council Member Nakanishi, Ms. Kirkley stated that Killelea Substation is located on Cherokee Lane near Victor Road and has two transformer banks. In further response, Electric Utility Rate Analyst Kevin Bell stated the substation was named after a former Electric Utility Director. In response to Council Member Kuehne, Mr. Ayers confirmed that the Electric Utility reserve level falls short of the goal; however, it is a fluctuating target that is based annually on the budget. As the year progresses, the rate model is set accordingly and the reserve target will be reached through rate adjustments and expense containment. Mr. Schwabauer added that the current rate model extends for a number of years and it is expected that the reserve will dip slightly as capital maintenance projects are completed but will climb back up following the rate model. Mr. Ayers pointed out that the figure fluctuates as well due to the debt service payment that is set aside on June 30 for the July 1 payment. In response to Council Member Kuehne, Mr. Ayers stated the City has a contract with Woodbridge Irrigation District (WID) for the purchase of water, which includes an escalator. In further response, Public Works Director Wally Sandelin confirmed that the City is utilizing all of the water that WID sells to the City. Council Member Kuehne questioned if the City was utilizing the water provided for under the agreement with North San Joaquin Water District, to which Mr. Schwabauer responded that the City is not paying for or receiving water because the agreement was contingent upon the amount of water allocated to North San Joaquin, which was none last year. He stated that North San Joaquin can receive an allocation of 20,000 acre feet per year; however, in a dry year it will receive zero. In response to Mayor Johnson, Mr. Schwabauer stated that the price for water from North San Joaquin is $100 per acre feet; and in response to Council Member Kuehne, Mr. Schwabauer stated the price for WID water is $200 per acre feet. In further response, Mr. Schwabauer stated that the contract with WID is for 40 years and the City could request a lower price, but he believed WID's price for water is relatively low. He explained the discrepancy between the two prices, stating that North San Joaquin struggled for many years to raise its rates for pumping groundwater, which it is obligated to replenish, but because of poor political fallout and lawsuits, it was unable to raise the money necessary to build new and replacement infrastructure. The City viewed this agreement with North San Joaquin as an opportunity to partner together to raise money for its projects and infrastructure as long as the City was not paying more than its current cost to pump groundwater, which is $100 an acre foot. In addition to the financial benefits for North San Joaquin, the water remains in the basin and is not discharged into the Delta. In response to Mayor Johnson, Mr. Sandelin stated that the PCE/TCE project expands the groundwater extraction and treatment program by moving the location to the intersection of Tokay and Church Streets. In response to Council Member Nakanishi, Mr. Sandelin stated that the neighborhood noise complaints regarding the extraction system were resolved by shutting off the blower operations in the evening and running it only during the day. Mr. Schwabauer added that a muffler was also installed on the system. In response to Council Member Nakanishi, Mr. Ayers stated that reduced water usage will affect both water and wastewater revenue because there are fixed costs that the City must cover, adding it may be necessary to increase rates. Mr. Schwabauer stated that a 36 percent reduction in water usage would roughly equate to a 36 percent decrease in revenue. He stated staff intends to meet with the rate consultants to stay on top of this issue, as well as the issue of tiered rates. In further response, Mr. Schwabauer stated that the incentive to citizens for continuing to conserve water in light of potential rate increases is that they could be faced with further penalties for failing to conserve. Mayor Johnson suggested a future Council discussion to further explore this issue and its affect on electric, water, and wastewater, adding that the drought will eventually end, but the solar issue will continue. Mr. Schwabauer stated he would return to Council with options following his discussion with the rate consultants. In response to Council Member Kuehne, Mr. Schwabauer stated that the Governor's mandate to reduce water by 36 percent is not added onto the current regulation that municipalities reduce water by 20 percent by 2020. At the request of Council Member Nakanishi, Mr. Sandelin stated he would provide Council with the phone numbers for reporting water leaks and water waste during business hours, as well as after hours and on weekends. 2 In response to Mayor Johnson, Mr. Ayers stated that the Tyler system is currently running the financial system, Human Resources functions, and payroll, adding that the business and animal licenses modules are scheduled to go live in August or September; the utility billing system will start in early December; and the fleet services system will be functional in January of next year. In further response, Mr. Schwabauer confirmed that, from the beginning, this was intended to be a phased -in implementation, it is on schedule, there were minor issues along the way, and staff is pleased with the payroll implementation. He added it is critical that the utility billing function be implemented smoothly and without glitches. B-2 Third Quarter Fiscal Year 2014/15 Water, Wastewater, and Electric Utility Department Financial Reports (CM) Public Works Director Wally Sandelin provided a PowerPoint presentation regarding the third quarter update on the water and wastewater utilities. Specific topics of discussion included wastewater fund cash flow summary, wastewater operating results, wastewater fund cash balances, water fund cash flow summary, water operating results, water fund cash balances, bad debt write off, and water/wastewater utility activities. City Manager Schwabauer stated there are growing reserves in the water and wastewater utilities because the long-term plan is to retire debt early, which would reduce the City's cost exposure on a long-term basis. He stated this plan may need to factor in issues associated with the drought. Electric Utility Director Elizabeth Kirkley provided a PowerPoint presentation regarding the third quarter update on the electric utility. Specific topics of discussion included electric fund cash flow summary, reserve policy, cash balances, power sales, energy cost adjustment revenue, operating results, power supply costs, bad debt write off, and load coverage. In response to Council Member Nakanishi, Ms. Kirkley stated the drought will have an effect on the City's hydro power and the Lodi Energy Center will be used to make up the deficit. Mr. Schwabauer added that the City will need to purchase more expensive power than hydro and it also has exposure because of sales contracts for hydro power that the City may not be able to deliver, as well as water release obligations with the State Department of Fish and Game. Ms. Kirkley confirmed that rates may be impacted, depending on the City's portfolio. In response to Myrna Wetzel, Mr. Sandelin stated the City has three part-time water conservation officers who patrol city-wide. The scheduled shifts will be changing to include patrol hours at night, as well as during the day, to better identify water waste. C. Comments by Public on Non-Aaenda Items None. D. Adjournment No action was taken by the City Council. The meeting was adjourned at 7:52 a.m. ATTEST: Jennifer M. Ferraiolo City Clerk AGENDA ITEM isCITY OF LODI COUNCIL COMMUNICATION TM AGENDA TITLE: Receive Presentation Regarding Fiscal Year 2015/16 Budget MEETING DATE: May 12, 2015 PREPARED BY: Deputy City Manager B- I RECOMMENDED ACTION: Receive presentation regarding Fiscal Year 2015/16 budget. BACKGROUND INFORMATION: The Fiscal Year (FY) 2015/16 budget is built on a number of basic economic assumptions. The budget is on schedule to be released for public review this week, with adoption of the document scheduled for early June. In advance of publication of the document, staff is planning a series of presentations that will provide Council and the public with the basic parameters that form the foundation of the budget. The Shirtsleeve Session on May 5, 2015 focused on general economic issues the City is addressing in the budget process along with General Fund revenue projections. Today's discussion will focus on the three utility funds of the City; the Electric Utility Fund, the Water Utility Fund and the Wastewater Utility Fund. FISCAL IMPACT: Revenues, expenses and increases/decreases to reserves are as noted below: Fund Revenues FY 15/16 Expenses FY 15/16 Increase/(Decrease) to Reserves Electric $76,186,780 $78,614,820 $2,428,040 Water $14,557,130 $12,264,400 $2,292,730 Wastewater $15,484,340 $17,518,680 ($2,034,340) JA/ja Jorda Ayers Deputy City Manager APPROVED: . Stephen Schwabaue , ity Manager 16 Budget City Council Shirtsleeve Session May 12, 2015 Overview ■ Utility Funds o Electric o Water o Wastewater i Electric Utility Overview Audited Audited Estimated 2012-13 2013-14 2014-15 2014-15 2015-16 Electric Utility Enterprise Fund Actuals Actuals Budget Actuals Budget Cash Balance Beginning Cash Balance * 2,143,190 6,636,200 6,351,191 5,929,528 6,140,828 Revenues 71,679,622 65,618,005 68,217,050 72,005,150 76,186,780 Expenditures 67,186,612 66,324,677 71,660,620 71,793,850 78,614,820 Net Difference (Revenues Less Expenditures) 4,493,010 (706,672) (3,443,570) 211,300 (2,428,040) Cash Balance Ending Cash Balance * 6,636,200 5,929,528 2,907,621 6,140,828 3,712,788 * Local cash, excluding NCPA General Operating Reserve (GOR) 3 Electric Utility ■ Revenues $7,969,730 higher than FY 2014/15 budget o Customer charges - $2.96M higher o Operating Transfers In - $3.5M higher o Work for Others - $1.1 M higher 0 Electric Utility ■ Expenses $6,954,200 higher than FY 2014/15 budget o Salary &benefits - $2.2M o Service/Materials/Supplies - $1.2M o Operating Transfers - $3.5M o Capital projects and equipment - $76k 5 Electric Utility ■ Positions Recommended o Lineworker Apprentice (2) - $264,000 ■ Succession planning o Electrician (2) - $291,000 ■ Operational efficiencies 11 Electric Utility Capital Projects J Vehicles $360,000 Overhead capital maintenance $4257000 Underground capital maintenance $1,080,000 Streetlight grounding & fusing $30,000 Distribution capacity program $400,000 LED Street) i hts $288,500 230 kV Interconnection $2509000 Killelea Bank 1 Replacement $915,000 MSC Improvements $264,000 Electric Utility Reserves Purpose 12015/16 Basis Target Operating Reserve 90 days cash $17,7769000 Capital Reserve Largest distribution system contingency $190009000 NCPA General Operating Reserve NCPA identified Items $490799000 Total Target $2298559000 Estimated FY 2015/16 Reserve $1697679000, Water Utility Water Utility Enterprise Fund Cash Balance Beginning Cash Balance Revenues Expenditures Net Difference (Revenues Less Expenditures) Cash Balance Ending Cash Balance Audited Audited Estimated 2012-13 2013-14 2014-15 2014-15 2015-16 Actuals Actuals Budget Actuals Budget 12,465,350 9,044,659 7,464,847 7,027,567 7,432,927 14,894,809 14,937,465 14,169,450 14,161,870 14, 557,130 18,315,500 16,954,557 17,780,464 13,756,510 12,264,400 (3,420,691) (2,017,092) (3,611,014) 405,360 2,292,730 9,044,659 7,027,567 3,853,833 7,432,927 9,725,657 9 Water Utility ■ Total revenue increase - $387,680 o Service Charges - $291,500 increase o Development Fees - $72,000 increase 10 Water Utility ■ Total expense decrease - $5.5M o Addition of Administrative Clerk position ($20,000) ■ Cost shared with Wastewater o Salary and benefits - $388,000 o Service/Materials/Supplies - $300,000 o Operating Transfer — ($439,000) o Capital projects — ($5.8M) 11 Water Utility Capital Projects J ■ Water Meter Program ($200,000) ■ Well Rehab/Replacements/Improvements ($685,000) ■ Granulated Activated Carbon ($300,000) ■ Various taps, mains and other projects ($75,000) ■ PCE/TCE projects ($825,000) ■ Vehicles ($90,000) 12 Water Utility Reserves ■ Target is 25% of operating expenses ■ Target for FY 2015/16 equals $2,545,000 ■ FY 2015/16 Estimated Reserve is $9,725,700 13 Wastewater Utility Wastewater Utility Enterprise Fund Cash Balance Beginning Cash Balance Revenues Expenditures Net Difference (Revenues Less Expenditures) Cash Balance Ending Cash Balance Audited Audited 2012-13 2013-14 Actuals Actuals Estimated 2014-15 2014-15 2015-16 Budget Actuals Budget 12,513,936 13,695,513 12,226,580 14,249,392 12,264,212 14,346,216 14,990,584 14,878,980 15,052,420 15,484,340 13,164,639 14,436,705 24,283,073 17,037,600 17,518,680 1,181,577 553,879 (9,404,093) (1,985,180) (2,034,340) 13,695,513 14,249,392 2,822,487 12,264,212 10,229,872 14 Wastewater Utility ■ Total revenue increase - $605,360 o Service Charges - $479,000 increase o Development Fees - $168,000 increase 15 Wastewater Utility ■ Total expense decrease - $6.7M o Salaries & benefits - $382,000 o Service/Materials/Supplies - $90,000 o Operating Transfers — ($250,000) o Capital projects/equipment — ($7.OM) 16 Wastewater Utility ■ Positions Recommended o Administrative Clerk ($20,000) ■ Cost shared with Water o Laboratory Supervisor ($109,000) ■ Environmental compliance o Lead Electrician ($156,000) ■ Technical supervision of the crew 17 Wastewater Capital Projects J ■ Influent Screening/UV upgrade ($2.3M) ■ Dewatering upgrades/replacement ($1.OM) ■ Storm water pump upgrades ($200,000) ■ Trash handling system ($700,000) ■ Pipe realignment ($600,000) ■ Various other projects ($170,000) ■ Equipment/vehicle replacement ($960,000) 18 Wastewater Utility Reserves J ■ Target is 25% of operating expenses ■ Target for FY 2015/16 equals $3,137,000 ■ FY 2015/16 Estimated Reserve is $10,230,000 19 f3 AGENDA ITEM as A% CITY OF LODI COUNCIL COMMUNICATION TM AGENDA TITLE: Third Quarter Fiscal Year 2014/15 Water, Wastewater and Electric Utility Department Financial Reports MEETING DATE: May 12, 2015 PREPARED BY: Deputy City Manager RECOMMENDED ACTION: Receive third quarter Fiscal Year 2014/15 Water, Wastewater and Electric Utility Department financial reports. BACKGROUND INFORMATION: In accordance with the Lodi Municipal Code, quarterly financial reports are to be prepared for the Water, Wastewater, and Electric Utilities. Highlights of the operations and financial performance of each utility will be presented at the meeting of May 12, 2015. FISCAL IMPACT: None directly related to the preparation of the report. However, the presentation is intended to keep the Council apprised of the financial conditions of the major municipal utilities. Jordan Ayers Deputy City Manager Public Works Department Water/Wastewater IFY 15 Quarterly Update (Ending March 31, 2015) City Council Shirtsleeve Session May 12, 2015 Wastewater Fund Cash Flow Summary (Ending March 31, 2015) Sales Budget 14,513,620 Actuals 10,924,659 % of Budget 75% Development Impact Mitigation Fees (wastewater & storm) 128,860 157,165 122% Other (interest, septic, misc.) 236,500 648,694 274% Total Revenues M Operating 14,878,980 6,146,720 11,730,518 4,599,054 79% I 75% Capital 13,204,823 3,198,247 24% Debt Service 3,671,530 2,986,266 81% Cost of Services Payment To General Fund 1,068,000 801,000 75% Total Expenses 23,983,293 11,584,567 48% Beginning Cash (Operations Only) 4,200,633 Ending Cash (Operations Only) 5,806,584 Days Cash (Excluding Capital) 125 % of Target 139% Wastewater Operating Results (Ending March 31, 2015) Personnel $ 3,115,650 $ 2,326,120 75% Supplies, Materials, Services $ 2,030,950 $ 1,516,623 75% Equipment, Land, Structures $ 72,500 $ 15,689 22% Other Payments $ 225,780 $ 280,562 124% Utilities $ 696,840 $ 460,060 66% Work for Others $ 5,000 $ - 0% Total Operating Expenses $ 6,146,720 $ 4,599,054 75% 3 Wastewater Funds Cash Balances (Ending March 31, 2015) E Operating (530) I 5,806,584 Utility Capital / Infrastructure Replacement (531) 7,971,669 Capital Reserve (532) (Fund used to pay White Slough COP Debt Service) (1,450,838) Wastewater IMF (533) 97,969 Rate Stabilization Reserve (534) 500,000 Storm Drain IMF (535) 787,319 Total 13, 712, 703 2 Water Fund Cash Flow Summary (Ending March 31, 2015) Sales Budget 13,070,870 Actuals 9,550,610 % of Budget 73% Development Impact Mitigation Fees 130,250 3,880 3% Other (interest, tap fees, water meters, misc.) 968,330 704,257 73% Total Revenues im 0 Operating 14,169,450 5,601,270 10,258,747 4,157,806 73% 1 74% Capital 11,421,041 2,860,564 25% Debt Service 2,969,860 1,736,583 58% Cost of Services Payment To General Fund 780,000 585,000 75% Total Expenses 17,329,465 8,489,953 49% Beginning Cash (Operations Only) 8,266,078 Ending Cash (Operations Only) 9,338,320 Days Cash (Excluding Capital) 259 % of Target 288% 5 Water Operating Results (Ending March 31, 2015) Personnel $ 2,082,630 $ 1,580,498 76% Su lies, Materials, Services $ 1,283,580 $ 709,576 55% E ui ment, Land, Structures $ 73,000 $ 30,126 41 Other Payments $ 1,402,660 $ 1,420,315 101% Utilities $ 664,400 $ 417,291 63% Work for Others $ 95,000 $ - 0% Total Operating Expenses $ 5,601,270 $ 4,157,806 74% 0 Water Funds Cash Balances (Ending March 31, 2015) 7 Bad Debt Write Off (Through March 31, 2015) Water / Wastewater Utility Activities Operational ■ Water Distribution ■ Water Production ■ Collection System ■ Wastewater Treatment Regulatory • SSo's ■ Discharge Violations ■ Monitoring and Reporting 9 Electric Utility Department IFY 15 Quarterly Update (Ending March 31, 2015) City Council Shirtsleeve Session May 12, 2015 Electric Fund Cash Flow Summary (Ending March 31, 2015) "M Sales Revenues Development Impact Fees Other Revenues interest, misc Bud et 65,214,970 100,000 2,902,080 Actuals 50,609,078 156,342 2,872,429 % of Budget 78% 156% 99% Total Revenues 68,217,050 53 637,849 79% Purchase Power 39,552,170 30,651,146 77% Non Power 11,905,940 7,962,827 67% Capital Projects 4,082,858 1,834,171 45% Debt Service 8,190,050 8,190,050 100% Cost of Service/transfer to GF Capital 2,354,000 1,765,500 75% In -lieu Transfer to General Fund 7,033,360 5,275,020 75% Total Expenses 73,118,378 55,678,714 76% Net Chg in Bal Sheet Accts 1 1 4,241,0101 Net Increase (Decrease) (4,901,328) 2,200,145 Beginning Local Cash Balance 12,632,503 12,632,503 Ending Local Cash Balance 7,731,175 14,832,648 GOR Balance 9,812,173 Total Reserve Balance 24,644,821 Reserve Policy Target 23,680,000 % of Target 104% 2 Electric Utility Reserve Policy (Ending March 31, 2015) m Operating Reserve 90 Das Cash $17,080,000 I $14,832,648 Capital Reserve Largest Distribution System Contingency $1,000,000 NCPA General Operating Reserve NCPA Identified Items $5,600,000 $6,569,796 NCPA MPP/GPP Balance MPP/GPP Security Commitments $3,242,377 Total Target 1 1 $23,680,000 1 $24,644,821 3 Electric Funds Cash Balances (Ending March 31, 2015) M Operating (500) $ I 8,2903418 Utility Outlay Reserve Fund (501) $ (53153,164) Electric Rate Stability Reserve (502) $ 211773173 Public Benefits Fund (504) $ 49182,422 IMF EU Substation and Transmission (505) $ 902,285 Solar Surcharge Fund (506) $ 235,252 Environmental Compliance (508) $ 4,1989262 NCPA — General Operating Reserve (GOR) $ 91812,173 Total $ 2496443821 0 Power Sales (Ending March 31, 2015) Residential 149,631,130 117,468,687 Small Commercial 158,637,238 122,147,686 Large Commercial/Small Industrial 46,038,101 33,619,701 Industrial 85,854,348 64,540,991 TOTAL 440,160,816 3371777,065 5 ECA Revenue (Ending March 31, 2015) Residential $ (274,436) $ 200,057 $ 527,001 $ 452,622 Small Commercial $ (234,844) $ 242,966 $ 571,871 $ 579,993 Large Commercial/Small Industrial $ (65,304) $ 75,774 $ 159,882 $ 170,353 Industrial $ (186) $ 151,167 $ 253,721 $ 404,702 Total ECA Revenue $ 574,769 $ 669,964 1 $1,512,475 $ 1,607,670 0 Electric Fund Operating Results (Ending March 31, 2015) Personnel $ 5,531,190 $ 495079864 81% Supplies, Materials, Services $ 39296,030 $ 194779128 45% Equipment, Land, Structures $ 644,930 $ 6079494 94% Other Payments $ 21365,590 $ 11331,543 56% Utilities $ 68,200 $ 38,798 57% Total Operating Expenses $ 11,905,940 1 $ 7,9621827 67% 7 Power Supply Costs (Ending March 31, 2015) Generation $ 30,3601720 $ 23,1987087 76% Transmission $ 71752,480 $ 690509807 78% Management Services $ 1,438,970 $ 1,402,252 97% Total Power Supply Costs $ 39,552,170 $ 30,651,146 77% Bad Debt Write Off (Ending March 31, 2015) 9 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 Q3-2015 Q4-2015 Q1-2016 Q2-2016 =Coverage =Target Load Load coverage meets/exceeds Risk Policy targets in all quarters. 10