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Home My WebLink AboutAgenda Report - March 4, 2020 C-11AGENDA ITEM (26,ftl I CITY OF LODI COUNCIL COMMUNICATION AGENDA TITLE: First and Second Quarter Fiscal Year 2019/20 Water, Wastewater and Electric Utility Department Financial Reports MEETING DATE: March 4, 2020 PREPARED BY: Deputy City Manager RECOMMENDED ACTION: Receive utility financial reports for the first and second quarters of Fiscal Year 2019/20. BACKGROUND INFORMATION: In accordance with the Lodi Municipal Code, quarterly financial reports are to be prepared for the Water, Wastewater, and Electric Utilities. While these reports have traditionally been presented during shirtsleeve meetings of the City Council, the current proposed schedule of meetings would delay presentations on the quarterly utility updates at least one additional month. Therefore, in order to ensure the report's timely delivery, quarterly update presentations have been included for your review and a highlight of activities and progress is outlined below for each utility. In addition, staff are available to answer any questions you may have or provide additional information regarding the attached presentations. Electric Utilitv Financial Highlights • REVENUE is stable tracking at close to 60 percent of budget. ✓ Power sales are tracking at more than 50 percent of budget; not unusual as a larger percentage of sales is typically realized during the beginning of the fiscal year with warmer months and increased electric usage. ■ EXPENSES are tracking at 50 percent of budget halfway through the year. ✓ Non -power operating expenses are tracking at 40 percent of budget. ✓ Power supply costs are tracking at 56 percent of budget. It is anticipated that power supply costs will exceed original budget estimates. Unanticipated outages have left generating facilities operating less and market prices have been trending lower, resulting in less plant revenue. • RESERVES as of December 31, 2019 totaled approximately $44 million. These reserves are used to fund pay-as-you-go capital improvement and system maintenance projects. • CAPITAL IMPROVEMENT PROJECTS include nearly $23 million over the next 5 years for capital improvement efforts. Major efforts this year include the McLane Substation Renovation, underground/overhead system improvements, and renovation of LEU's main facilities. ■ 5 -YEAR FINANCIAL FORECAST indicates sufficient but declining reserves over the next 5 years as capital efforts continue. Current forecasts show the utility meeting its reserve targets through 2023. APPROVED: E 81`ep n Schwab City Manager Wastewater Utility Highlights REVENUE is stable and tracking at 50 percent of budget. ✓ Wastewater sales are tracking on target at 50 percent of budget. ✓ Other revenue is tracking significantly higher due to Prop 84 grant funds being received but was not budgeted as the project was anticipated to be finished in Fiscal Year 2019. EXPENSES are tracking well below the 50 percent of budget. ✓ Operating expenses are tracking on target at 50 percent of budget. ✓ Capital expenses are tracking well below budget at 10 percent. Included in the capital budget is $2.6 million for the Main Replacement project 8 which will be bid in the third quarter. Also included in the budget is $1.5 million for the design of the White Slough electrical building which the contract has been awarded but the majority of expense will not occur until the third and fourth quarter. RESERVES as of December 31, 2019 totaled $14 million which is 409 percent of the 90 days cash target. These reserves are used to fund pay-as-you-go capital improvement projects planned over the next several fiscal years. CAPITAL IMPROVEMENT PROJECTS include almost $32 million in planned projects over the next five years. The major projects include main replacement projects, construction of the electrical building and the storm drain trash handling systems to comply with state regulations. 5 -YEAR FINANCIAL FORECAST indicates a decline in reserves through fiscal year 2024. Water Utility Hi hii hts • REVENUE is stable and tracking just above 50 percent of budget. ✓ Water sales are tracking higher than 50 percent of budget and this is historically common for the first half of the year as the warmer months during the beginning of the fiscal year there tends to be higher water usage. ✓ Other revenue is tracking low due to the Build America Bond subsidy budgeted amount of $662,040 has not been received. • EXPENSES are tracking well below the 50 percent of budget. ✓ Operating expenses are tracking close to 50 percent of budget. ✓ Capital expenses are tracking well below budget at 7 percent. Included in the capital budget is almost 6 million for the Water Meter Project Phase 8 in which the contract has been awarded but expense will not occur until the third quarter. • RESERVES as of December 31, 2019 totaled $2.4 million which is 101 percent of the 90 days cash target. These reserves are used to fund pay-as-you-go capital improvement projects. • CAPITAL IMPROVEMENT PROJECTS include almost $15 million in planned projects over the next five years. The major projects include phase 8 and multi -family phase of the meter program as well as Well 27 and Well 28 GAC treatment projects. • 5 -YEAR FINANCIAL FORECAST indicates a decline in reserves through the current fiscal year due to the meter project and then forecasts sufficient reserves through fiscal year 2024. FISCAL IMPACT: There is no fiscal impact from the preparation of this report. FUNDING AVAILABLE: Adequate funding is available in the Fiscal Year 2019/20 budget, as amended by Council action from time to time, for the items in this report. Andrew Keys Deputy City Manager/Internal Services Director Public Works Department Water/Wastewater FY 20 Quarterly Update (Ending December 31, 2019) Wastewater Fund Cash Flow Summary (Ending December 31, 2019) 2 Budget Actuals % of Budget Revenue Sales 15,309,450 7,658,775 50% Development Impact Mitigation Fees 1,798,680 407,478 23% Other (interest, septic, misc.) 251,000 559,741 223% Total Revenues 17,359,130 8,625,994 50% Expenses Operating 8,333,827 4,201,015 50% Capital 7,240,670 739,869 10% Debt Service 3,324,590 2,435,528 73% Cost of Services Payment To General Fund 1,119,970 559,985 50% Total Expenses 20,019,057 7,936,397 I 40% Beginning Cash (Operations Only) 15,637,563 Ending Cash (Operations Only) 14,830,625 Days Cash (Excluding Capital) 379 % of Target — 90 Days Cash on Hand 421% 2 Wastewater Operating Results (Ending December 31, 2019) Budget Actuals % of Bud et Personnel $ 4,125,500 $ 2,440,965 59% Supplies, Materials, Services $ 2,690,167 1 $ 958,510 36% Equipment, Land, Structures $ 285,000 $ 50,427 18% Other Payments $ 455,200 $ 316,784 70% Utilities $ 752,150 $ 434,330 58% Work for Others $ 25,810 $ - 0% Total Operating Expenses $ 8,333,827 1 $ 4,201,015 50% Wastewater Funds Cash Balances (Ending December 31, 2019) Actual Reserves vs. Target 534' 547% 429% 421°Yo 326% 15/16 16/17 17/18 18/19 19/20 Amounts above reserve target are Target held for scheduled Actual capital maintenance Operating (530) 14,8307625 Utility Capital / Infrastructure Replacement (531) 853,930 Capital Reserve (532) (Fund used to pay White Slough COP Debt Service) 2387268 Wastewater IMF (533) 115141863 Rate Stabilization Reserve (534) 5001000 Storm Drain IMF (535) 11251,600 Total 19,189.286 Actual Reserves vs. Target 534' 547% 429% 421°Yo 326% 15/16 16/17 17/18 18/19 19/20 Amounts above reserve target are Target held for scheduled Actual capital maintenance 5 -Year Financial Forecast FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24 Budget Forecast Forecast Forecast Forecast Available Cash Days Cash (90 day target) $12,677,400 $15,835,900 $15,562,600 $12,423,900 $7,264,800 372 456 437 341 195 Minimum Reserve $3,114,500 $3,185,000 $3,258,500 $3,333,500 $3,409,500 Target (25%) Reserve Target (50%) $6,205,000 $6,344,000 $6,490,000 $6,640,000 $6,791,000 % of Days Cash Target 413% 506% 486% 379% 217% 5 Wastewater Planned Capital Projects Lockeford Street Improvements Candy Cane Park Storm Drain Trash Handling MSC Security Improvements Misc. System Relocations Misc. Wastewater Taps Collection System Capacity Enhancement Projects Main Replacement Project Sewer Lift Station Wet Well Rehab Kofu Storm Water Pump Rehab Salas Storm Water Pump Rehab Henry Glaves Storm Water Pump Rehab Lincoln Storm Pump Rehab Vehicles/Equipment Upgrade Blowers Irrigation Improvements Plant Maintenance Improvements Compliance Studies and Reports Fan Press Replacement NCPA Maintenance Generator Pump & Equipment Upgrades Electrical/Screen/SCADA Design Electrical Upgrades/SCADA Construction White Slough Recycled Water Storage Miscellaneous Future Projects Totals FY 19-20 FY 20-21 20,680 28,000 750,0 70,000 35,000 40,000 200,000- 2,600,000 75,000 150,000 750,000 845,931 68,000 200,000 150,000 265,000 900,000 354,467 100, 000 35, 40, 150,000 750,000 35,000 40,000 2,000,000 250,000 200,000 75,0001 750,000 FY 22-23 35,0 40,0 FY 23-24 750,0( 35,0( 40,0( 2,000,000 200,000 200, 000 75 170,000 100,000 110,000 200,000 200,000 200,000 150,000 150,000 150,000 600,000 1,000,000 7,000,000 75,000 100,000 200,000 1,000,000 150,000 5,500,000 $6,852,078 $2,095,000 $5,550,000 $7,810,000 $10,050,000 1.1 Water Fund Cash Flow Summary (Ending December 31, 2019) Budget Actuals % of Budget Revenue Sales 13,395,170 7,713,553 58% Development Impact Mitigation Fees 775,450 259,102 33% Other (interest, tap fees, water meters, misc.) 1,024,040 129,450 17% Total Revenues 15,194,660 8,102,105 53% Expenses Operating 7,162,147 3,400,307 47% Capital 9,559,778 806,376 8% Debt Service 2,969,760 983,658 33% Cost of Services Payment To General Fund 860,640 430,320 50% Total Expenses 20,552,325 5,620,661 27% Beginning Cash (Operations Only) 6,792,346 Ending Cash (Operations Only) 2,872,360 Days Cash (Excluding Capital) 110 % of Target — 90 Days Cash on Hand 122% Water Operating Results (Ending December 31, 2019) Budget Actuals % of Budget Personnel $ 3,180,680 $ 1,494,717 47% Supplies, Materials, Services $ 1,569,547 I $ 395,603 25% Equipment, Land, Structures $ 1051000 $ 44,690 43% Other Payments $ 1,661,480 $ 1,123,519 68% Utilities $ 536,590 $ 341,777 64% Work for Others $ 108,850 $ - 0% Total Operating Expenses 1 $ 7,162,147 $ 3,400,307 47% Water Funds Cash Balances (Ending December 31, 2019) Actual Reserves vs. Target 8,000,000 - 7,000,000 274% 6,000,000 238`%6 5,000,000 - - 4,000,000 145% u 133 /o 3,000,000 122% 2,000,000 - 1,000,000 0 15/16 16/17 17/18 18/19 19/20 Amounts above a Target reserve target are held for scheduled Actual capital maintenance Operating (560) 21872,360 Utility Capital / Infrastructure Replacement (561) 6,525,552 IMF (562) 1,9079049 PCE/TCE Settlements 91045,038 PCE/TCE Rates (565) 319781212 Total 24, 328,211 Actual Reserves vs. Target 8,000,000 - 7,000,000 274% 6,000,000 238`%6 5,000,000 - - 4,000,000 145% u 133 /o 3,000,000 122% 2,000,000 - 1,000,000 0 15/16 16/17 17/18 18/19 19/20 Amounts above a Target reserve target are held for scheduled Actual capital maintenance 5 -Year Financial Forecast FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24 Budget Forecast Forecast Forecast Forecast Available Cash $2,897,844 $3,357,744 $3,957,344 $4,825,544 $6,837,081 Days Cash (90) 75 108 125 149 207 Minimum Reserve $2,768,500 $2,829,000 $2,891,000 $2,951,500 $3,012,000 Target (25%) Reserve Target (50%) $5,537,000 $5,658,000 $5,782,000 $5,903,000 $6,024,000 % of Days Cash Target 84% 120% 139% 166% 230% 10 Water Planned Capital Projects Water Meter Program Lockeford Street Imprv. Water Taps Misc. Water Mains Water Meter Replacement Program GAC Replacement Meter Shop Design/Construction Water Plant Generator MSC Security Improvements Well 7 Pump Rehab Well 14 Pump Rehab Well 16 Pump Rehab Well 17 Pump Rehab Well 21 Pump Rehab Well 22 Pump Rehab Well 3R Pump Rehab Well 15 Pump Rehab Well 25 Pump Rehab Well 27 GAC Treatment & Standby Generator Well 28 GAC Treatment Vehicles/Equipment FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24 5,980,000 1,000,000 1,000,000 48,250 75,000 75,000 75,000 75,0001 75,000, 50,000 50,000 50,000 50,000 50,000 75,000 75,000 75,000 300,000: 300,000 300,000 300,000 300,000, 200,000 300,000 70,000 175,000 170,000 166,000 185,000 200,0001 166,000 170,000 200,000 200,000 820,000 80,000 950,000 158.000 40,000 50,000 50,000 50,000 Totals $7,926,250 $2,447,000 $1,905,000 $1,750,000 $750,000 11 e OFj ngllF0 Electric UtilityDepartment FY 20 Quarterly Update (Ending December 31, 2019) City Council Meeting March 4, 2020 Electric Utility Fund Cash Flow Summary (December 31, 2019) Revenue Budget Actual % of Budget Sales Revenues 68,088,490 40,415,227 59% Development Impact Fees 333,870 120,720 36% Other Revenues (interest, misc) 4,018,220 2,175,625 54% Total Revenues 72,440,580 42,711,572 59% Expenses Purchase Power 39,354,300 22,103,512 56% Non Power 15,005,420 5,932,323 40% Capital Projects 6,550,000 1,462,330 22% Debt Service 3,988,010 2,985,005 75% Cost of Service 2,269,670 1,134,835 50% In -lieu Transfer to General Fund 7,273,890 74,441,290 3,636,945 37,254,950 50% Total Expenses 50% Beginning Cash Balance (6/30/19) 37,009,865 Ending Cash Balance (12/31/19) 44,043,762 Reserve Policy Target % of Target 22,512,000 196% 2 Electric Utility Funds Cash Balances (December 31, 2019) 3 Operating Funds $ 29,872,439 Utility Outlay Reserve Fund $ 11000,000 Public Benefits Fund $ 3,970,436 Impact Fee Fund $ 1,007,058 Solar Surcharge Fund $ 3181874 Greenhouse Gas Fund $ 71874,955 Total $ 443043,762 3 Electric Utility Reserve Policy (December 31, 2019) *Includes cash held locally and at NCPA $50,000 $45,000 $40,000 $35,000 y $30,000 0 $25,000 $20,000 $15,000 $10,000 $5,000 Actua I Reserves vs. Target Cash balances support City Council approved reserve requirements and provide funds for pay as you go Capital Improvement Projects. 2 Capital Improvement Project 5 -Year Spending Plan* Project FY 19-20 FY ,FY 21-22 $625,000 FY 22-23 FY , $1,100,000 $1,400,000 Budget -Forecast Distribution Capacity Program $600,000 $800,000 $1,400,000 $1,400,000 Underground / Overhead Maint $1,400,000 $1,400,000 $1,400,000 $50,000 $50,000 Streetlight Maintenance / Repair $50,000 $50,000 $50,000 LED Streetlight Improvements $250,000 $500,000 $250,000 $0 $250,000 $250,000 $0 230 kV Interconnection Project** $0 $0 $0 Substation Maint / Improvements $1,400,000 f $800,000 $0 $300,000 $375,000 Building & Security Improvements*** $2,000,000 $155,000 $35,000 $550,000 $35,000 $0 Work for Others $350,000 $350,000 $550,000 $550,000 Vehicles & Equipment $0 $830,0001 $432,000 $3,342,000 $330,000 $680,000 Total Projects $6,550,000 $4,635,000 $4,015,000 $4,455,000 '`Forecast will be reviewed and updated as part of FY 2021 budget planning process **Includes planning and design costs only ***LEU Office Renovation Project will commence late FY 2020 5 5 -Year Financial Forecast Looking Ahead* "Forecast will be updated following FY 2021 budget planning process 0 FY FY 19-20 FY ,21-22 FY 22-23 FY , Budget. $34,414,155 185 $32,352,429 168 $30,925,366 1561 - Available Cash $28,187,461.1 $24,655,783 Days Cash 139 120 Reserve Target $22,512,000 $23,033,267 $23,568,483 $24,035,671 $24,188,102 % of Target 153% 140% 131 % 117% 102% "Forecast will be updated following FY 2021 budget planning process 0 Power Sales (December 31, 2019) 11 Customer Class Revenue($) $ BudgetAverage 26,926,013 $ 16,688,257' Rate $ 0.1917 Small Commercial $ 26,740,404 $ 15,510,080 $ 0.1817 Large Commercial/Small Industrial $ $ 7,131,294 7,290,779 $ 3,940,747 $ 0.1790 Industrial $ 4,276,143 1 $ 0.1306 Total $ 68,088,490 $ 40,415,227 $ 0.1779 7 ECA Revenue (December 31, 2019) Customer Class Total Residential $ 1,265,798 Small Commercial $ 1,285,684 Large Commercial / Small Industrial $ 350,216 Industrial $ 462,152 Total Revenue $ 3,363,850 Electric Utility Fund Operating Results (December 31, 2019) Budget- udget Personnel $ 9,144,530 $ 4,413,863 48% Supplies, Materials, Services $ 3,996,370 $ 1,080,527 27% Other Payments $ 1,783,020 $ 408,600 23% Utilities $ 81,500 $ 29,333 36% Total Operating Expenses $ 15,005,420 $ 5,932,323 40% Power Supply Costs (December 31, 2019) 10 BudgetBudget $ 15,609,711 55% $ 28,373,070 Transmission $ 9,635,250 $ 5,638,510 59% Management Services $ 1,345,980 $ 855,291 64% 56% Total Power Supply Costs $ 39,354,300 $ 22,103,512 10 Load Coverage 140,000 120,000 100,000 3 80,000 60,000 40,000 20,000 Q2 - 2020 Q3 - 2020 Q4 - 2020 Q1- 2021 01:11 Coverage Target -•-Load • LEU continues to meet or exceed Risk Management targets • Includes purchases approved through February 2020 as approved by the Risk Oversight Committee 11 MWh Load ROC Matrix Target Load Coverage (Including Purchases) Q2 — 2020 1 104,648 80.0% 85.9% Q3 — 2020 132,635 76.7% 79.3% Q4— 2020 99,087 66.7% 69.9% Q1— 2021 93,099 60.0% 68.1% 140,000 120,000 100,000 3 80,000 60,000 40,000 20,000 Q2 - 2020 Q3 - 2020 Q4 - 2020 Q1- 2021 01:11 Coverage Target -•-Load • LEU continues to meet or exceed Risk Management targets • Includes purchases approved through February 2020 as approved by the Risk Oversight Committee 11 Risk Oversight Committee Report Highlights • Forward energy purchases approved to cover open positions in 2020 and 2021 • Approved purchase of Portfolio Content Category 3 RPS resources • Discussed confidential Cap and Trade strategy and activities • Adopted FY 19/20 Reserve Target amount based on Council approved policy and formula • Voted to not move forward with NCPA Solar Project due to pricing received — Directed staff to proceed with lower cost alternative • Staff provided informational update on Energy Cost Adjustment trends and anticipated increase in power supply costs for FY 19/20 (as addressed in midyear budget) • Reviewed various regulatory reporting requirements including Power Content Label and Greenhouse Gas Use of Allowance Report • Approved revisions to Energy Risk Management Policy Hedging Guidelines to allow for additional coverage of open positions when forecasted prices are favorable • Discussed additional RPS resource opportunities • Approved deposit of FY 2019 Annual Billing Settlement to General Operating Reserve • Staff informed ROC of upcoming statewide point-of-purchase rebate program for electric vehicles • Staff provided ROC with status updates regarding renewal of contract for Western Base Resource — Contract will come before Council late Spring 2020 • Staff provided ROC with updates on the 230 kV Project 12 • Customer Strategic Areas of Focus Project Highlights — Public Outreach Campaign to Launch Spring 2020 as result of Customer Satisfaction Survey • Advertising on buses, bus shelters and signage throughout town • Technology — Broadband Feasibility Study to Commence April 1 — Continuing with implementation of Outage Management System — Working with vendor to secure contract for remote connect/disconnect meters to address employee safety • Financial — Risk Oversight Committee voted to not move forward with NCPA Solar Project due to proposed costs • Staff currently negotiating additional solar resource at lower cost than recent Antelope Expansion PPA 13 • Reliability Strategic Areas of Focus Project Highlights (continued) — Proposing to extend contract with existing vegetation management contractor to address Wildfire Mitigation Plan requirements • Workforce — 4 Vacancies • (2) Operations • (1) Field Services • (1) Engineering — Line Department fully staffed — Renovation of Electric Utility facilities scheduled to commence Spring 2020 14