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Home My WebLink AboutAgenda Report - June 30, 2020 B-03 SMB-3AGENDA ITEM Crrv or Lour C ouNcrr-, C orvrMUNrcAT IoN AGENDA TITLE: MEETING DATE: PREPARED BY: Third Quarter Fiscal Year 2019120 Water, Wastewater and Electric Utility Department Financial Reports June 30, 2020 Deputy City Manager RECOMMENDED ACTION:Receive utility financial reports for the third quarter of Fiscal Year 2019t20. BACKGROUND INFORMATIO N ln accordance with the Lodi Municipal Code, quarterly financial reports are to be prepared for the Water, Wastewater, and Electric Utilities. Quarterly update presentations have been included in this report and a highlight of activities and progress is outlined below for each utility. Electric Utilitv Financial Hiqhliqhts REVENUE is stable tracking at 77 percent of budget. '/ Sales revenue is tracking at more than 75 percent of budget. However, it is likely impacts from COVID-19 will result in lower than anticipated energy sales for the year. Final numbers will be presented in the Q4 update for FY 19120. EXPENSES are tracking at nearly 70 percent of budget three quarters of the way through the year. '/ Non-power operating expenses are tracking at approximately 60 percent of budget.'/ Power supply costs are tracking at 75 percent of budget as updated during the midyear budget review to account for facility outages and depressed market prices resulting in less plant revenue. RESERVES as of March 31,2020 totaled approximately $41 .5 million. These reserves are used to fund pay-as-you-go capital improvement and system maintenance projects. These reserves were recently used to fund approximately $g.S million in customer bill credits to help mitigate financial hardships caused by COVID-19. CAPITAL IMPROVEMENT PROJECTS include $24.5 million over 5 years for capital improvement efforts. Major efforts budgeted this year include the recently completed Mclane Substation Renovation, underground/overhead system improvements, and renovation of LEU's main facilities likely to commence this summer. The projects listed are all in the fiscal year 20-25 Capital lmprovement Program that was included in the adopted budget. S-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 with a cost of living adjustment of approximately 2 percent needed bV 2024. fÉryì SteveSchwàBfiãr {Jun )3, )020 I /:00 PDI) a a a a APPROVED: Stephen Schwabauer, City Manager Wastewater Util itv Hiq h I iqhts REVENUE is stable and tracking at 71 percent of budget../ Wastewater sales are tracking on target at74 percent of budget. EXPENSES are as a total are tracking well below the 75 percent of budget../ Operating expenses are tracking slightly lower than target at 70 percent of budget../ Capital expenses are tracking well below budget at 12 percent. lncluded in the capital budget is $2.6 million for the Main Replacement project 8 which was bid in the third quarter and awarded in the fourth quarter. Also included in the budget ¡s $1.5 million for the design of the White Slough electrical building which the contract has been awarded but the majority of expense has not been incurred through the third quarter. RESERVES as of March 31,2020 totaled $16.5 million which is 551 percent of the 90 days cash target. These reserves are used to fund pay-as-you-go capital improvement projects planned over the next severalfiscal years. CAPITAL IMPROVEMENT PROJECTS include almost $33 million in planned projects over the next five years. The major projects include main replacement projects, construction of the electrical building, fan press replacement, aeration diffuser replacement and the storm drain trash handling systems to comply with state regulations. The projects listed are all in the fiscal year 20- 25 Capital lmprovement Program that was included in the adopted budget. 5-YEAR FINANCIAL FORECAST indicates a decline in reserves through fiscal year 2024. Water Utilitv Hiqh liqhts REVENUE is stable and tracking at74 percent of budget.'/ Water sales are tracking slightly higher than 75 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 as a total are tracking well below the 75 percent of budget.,/ Operating expenses are tracking slightly lower than the 75 percent of budget../ Capital expenses are tracking well below budget at 17 percent. lncluded in the capital budget is almost 6 million for the Water Meter Project Phase 8 in which the contract has been awarded but the majority of the expense will not occur until after the third quarter. Projects also beginning in the third quarter were Well 3R Rehabilitation and Wells 4R & 22 GAC. RESERVES as of March 31,2020 totaled $4 million which is 193 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 B and multi-family phase of the meter program as well as Well 27 and Well 28 GAC treatment projects. The projects listed are all in the fiscal year 20-25 Capital lmprovement Program that was included in the adopted budget 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 tiscal year 2024. a a a a a a a a FISCAL IMPAGT: FUNDING AVAILABLE: There is no fiscal impact from the preparation of this report. Adequate funding is available in the Fiscal Year 2019120 budget, as amended by Council action from time to time, for the items in this report Añ*Xt'w Andrew Keys Deputy City Manager/l ntern al Services Director 1 Public Works Department Water/Wastewater FY 20 Quarterly Update (Ending March 31, 2020) 2 Wastewater Fund Cash Flow Summary (Ending March 31, 2020) Budget Actuals % of Budget Revenue Sales 16,249,100 12,002,803 74% Development Impact Mitigation Fees 1,579,760 555,732 35% Other (interest, septic, misc.)771,000 606,723 79% Total Revenues 18,599,860 13,165,258 71% Expenses Operating 8,435,687 5,903,582 70% Capital 7,280,446 869,807 12% Debt Service 3,324,590 2,207,108 66% Cost of Services Payment To General Fund 1,119,970 839,978 75% Total Expenses 20,160,693 9,820,475 49% Beginning Cash (Operations Only)14,761,382 Ending Cash (Operations Only)16,453,893 Days Cash (Excluding Capital)496 % of Target –90 Days Cash on Hand 551% 3 Wastewater Operating Results (Ending March 31, 2020) Budget Actuals % of Budget Personnel $ 4,174,350 3,429,625$ 82% Supplies, Materials, Services $ 2,690,167 1,354,293$ 50% Equipment, Land, Structures $ 285,000 139,915$ 49% Other Payments $ 455,200 328,294$ 72% Utilities $ 805,160 627,455$ 78% Work for Others $ 25,810 24,000$ 93% Total Operating Expenses $ 8,435,687 $ 5,903,582 70% 4 Operating (530)16,453,893 Utility Capital / Infrastructure Replacement (531)697,677 Capital Reserve (532) (Fund used to pay White Slough COP Debt Service)238,268 Wastewater IMF (533)1,643,192 Rate Stabilization Reserve (534)500,000 Storm Drain IMF (535)1,295,160 Total 20,828,190 Wastewater Funds Cash Balances (Ending March 31, 2020) Amounts above reserve target are held for scheduled capital maintenance 326% 429% 534%547%551% 0 2,000,000 4,000,000 6,000,000 8,000,000 10,000,000 12,000,000 14,000,000 16,000,000 18,000,000 15/16 16/17 17/18 18/19 19/20 Actual Reserves vs. Target Target Actual 5-Year Financial Forecast 5 FY 19-20 Budget FY 20-21 Forecast FY 21-22 Forecast FY 22-23 Forecast FY 23-24 Forecast Available Cash $11,795,322 $11,456,600 $10,736,800 $7,680,800 $3,164,400 Days Cash (90 day target) 318 302 277 193 78 Minimum Reserve Target (25%) $3,114,500 $3,185,000 $3,258,500 $3,333,500 $3,409,500 Reserve Target (50%)$6,205,000 $6,344,000 $6,490,000 $6,640,000 $6,791,000 % of Days Cash Target 354%336%307%215%86% Wastewater Planned Capital Projects 6 FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24 Lockeford Street Improvements 20,680 Candy Cane Park 28,000 Storm Drain Trash Handling 750,000 750,000 750,000 MSC Security Improvements 70,000 MUS PW Admin Building Remodel 150,000 Misc. System Relocations 35,000 35,000 35,000 35,000 35,000 Misc. Wastewater Taps 40,000 40,000 40,000 40,000 40,000 Collection System Capacity Enhancement Projects 200,000 Main Replacement Project 2,600,000 2,000,000 2,000,000 Sewer Lift Station Wet Well Rehab 250,000 Kofu Storm Water Pump Rehab 200,000 Salas Storm Water Pump Rehab 200,000 Henry Glaves Storm Water Pump Rehab 200,000 Lincoln Storm Pump Rehab 75,000 Vehicles/Equipment 150,000 211,000 75,000 75,000 75,000 Upgrade Blowers 750,000 Irrigation Improvements 845,931 750,000 Digester #3 Cleaning 500,000 Electrical Room Reroof 92,000 Plant Maintenance Improvements 115,000 100,000 110,000 100,000 Compliance Studies and Reports 200,000 200,000 200,000 200,000 Fan Press Replacement 1,000,000 Aeration Difusser Replacement 1,000,000 NCPA Maintenance Generator 150,000 150,000 150,000 150,000 150,000 Pump & Equipment Upgrades 110,000 Electrical/Screen/SCADA Design 900,000 600,000 Electrical Upgrades/SCADA Construction 1,000,000 7,000,000 5,500,000 White Slough Recycled Water Storage 354,467 Miscellaneous Future Projects 100,000 Totals $5,784,078 $5,488,000 $5,550,000 $7,810,000 $9,050,000 7 Water Fund Cash Flow Summary (Ending March 31, 2020) Budget Actuals % of Budget Revenue Sales 13,395,170 10,608,432 79% Development Impact Mitigation Fees 775,450 334,642 43% Other (interest, tap fees, water meters, misc.)1,294,040 504,045 39% Total Revenues 15,464,660 11,447,119 74% Expenses Operating 7,162,147 4,794,602 67% Capital 10,563,678 1,819,770 17% Debt Service 2,969,760 823,375 28% Cost of Services Payment To General Fund 860,640 645,480 75% Total Expenses 21,556,225 8,083,227 37% Beginning Cash (Operations Only)2,860,037 Ending Cash (Operations Only)4,036,622 Days Cash (Excluding Capital)174 % of Target –90 Days Cash on Hand 193% 8 Water Operating Results (Ending March 31, 2020) Budget Actuals % of Budget Personnel $ 3,180,680 2,191,457$ 69% Supplies, Materials, Services $ 1,569,547 547,591$ 35% Equipment, Land, Structures $ 105,000 44,690$ 43% Other Payments $ 1,661,480 1,560,598$ 94% Utilities $ 536,590 450,266$ 84% Work for Others $ 108,850 -$ 0% Total Operating Expenses $ 7,162,147 $ 4,794,602 67% 9 Water Funds Cash Balances (Ending March 31, 2020) Operating (560)4,036,622 Utility Capital / Infrastructure Replacement (561)6,012,620 IMF (562)2,033,486 PCE/TCE Settlements 9,027,411 PCE/TCE Rates (565)3,970,681 Total 25,080,820 Amounts above reserve target are held for scheduled capital maintenance 238% 145%133% 274% 193% 0 1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 7,000,000 8,000,000 15/16 16/17 17/18 18/19 19/20 Actual Reserves vs. Target Target Actual 5-Year Financial Forecast 10 FY 19-20 Budget FY 20-21 Forecast FY 21-22 Forecast FY 22-23 Forecast FY 23-24 Forecast Available Cash $2,897,844 $3,246,744 $3,667,044 $4,526,544 $6,529,081 Days Cash (90)89 97 107 130 183 Minimum Reserve Target (25%) $2,768,500 $2,829,000 $2,891,000 $2,951,500 $3,012,000 Reserve Target (50%)$5,537,000 $5,658,000 $5,782,000 $5,903,000 $6,024,000 % of Days Cash Target 98%108%119%144%203% Water Planned Capital Projects 11 FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24 Water Meter Program 5,980,000 1,000,000 1,000,000 MUS PW Admin Building Remodel 150,000 Lockeford Street Imprv.48,250 Water Taps 75,000 75,000 75,000 75,000 75,000 Misc. Water Mains 50,000 50,000 50,000 50,000 50,000 Water Meter Replacement Program 75,000 75,000 75,000 GAC Replacement 300,000 300,000 300,000 300,000 300,000 Meter Shop Design/Construction 200,000 Water Plant Generator 500,000 MSC Security Improvements 70,000 Well 7 Pump Rehab 175,000 Well 14 Pump Rehab 170,000 Well 16 Pump Rehab 166,000 Well 17 Pump Rehab 185,000 Well 21 Pump Rehab 200,000 Well 22 Pump Rehab 166,000 Well 3R Pump Rehab 170,000 Well 15 Pump Rehab 200,000 Well 25 Pump Rehab 200,000 Well 27 GAC Treatment & Standby Generator 820,000 Well 28 GAC Treatment 80,000 950,000 Vehicles/Equipment 158,000 40,000 50,000 50,000 50,000 Totals $7,926,250 $2,481,000 $2,071,000 $1,750,000 $750,000 Electric Utility Department FY 20 Quarterly Update (Ending March 31, 2020) City Council Meeting June 30, 2020 2 Electric Utility Fund Cash Flow Summary (March 31, 2020) Budget Actual % of Budget Revenue Sales Revenues 71,082,330 54,994,875 77% Development Impact Fees 333,870 170,310 51% Other Revenues (interest, misc)4,147,580 3,213,048 77% Total Revenues 75,563,780 58,378,233 77% Expenses Purchase Power 41,609,430 31,394,092 75% Non Power 15,137,612 8,940,745 59% Capital Projects 8,621,113 3,803,987 44% Debt Service 3,988,010 3,254,401 82% Cost of Service 2,269,670 1,702,253 75% In-lieu Transfer to General Fund 7,273,890 5,455,418 75% Total Expenses 78,899,725 54,550,896 69% Beginning Cash Balance (6/30/19)37,009,865 Ending Cash Balance (3/31/20)41,494,568 Reserve Policy Target 22,512,000 % of Target 184% 3 Electric Utility Funds Cash Balances (March 31, 2020) Operating Funds $ 26,980,245 Utility Outlay Reserve Fund $ 1,000,000 Public Benefits Fund $ 4,046,043 Impact Fee Fund $ 1,056,720 Solar Surcharge Fund $ 319,945 Greenhouse Gas Fund $ 8,091,615 Total $ 41,494,568 Electric Utility Reserve Policy (March 31, 2020) 4 Purpose Target Actual* Operating Reserves $ 21,512,000 $ 40,494,568 Capital Reserve $ 1,000,000 $ 1,000,000 Total Target $ 22,512,000 $ 41,494,568 Cash balances support City Council approved reserve requirements and provide funds for pay as you go Capital Improvement Projects. *Includes cash held locally and at NCPA Capital Improvement Project 5-Year Spending Plan 5 Project FY 19-20 Budget FY 20-21 Forecast FY 21-22 Forecast FY 22-23 Forecast FY 23-24 Forecast Distribution Capacity Program $600,000 $310,000 $0 $1,100,000 $0 Underground / Overhead Maint $2,026,278 $2,701,000 $1,610,000 $1,342,700 $1,342,700 Streetlight Maintenance / Repair $58,482 $50,000 $50,000 $50,000 $50,000 LED Streetlight Improvements $100,000 $150,000 $150,000 $150,000 $150,000 230 kV Interconnection Project*$350,000 $0 $0 $0 $0 Substation Maint / Improvements $1,979,202 $104,050 $0 $300,000 $1,775,000 Building & Security Improvements**$2,570,838 $50,000 $350,000 $0 $0 Work for Others $770,000 $300,000 $550,000 $550,000 $550,000 Vehicles & Equipment $166,313 $255,000 $847,000 $330,000 $680,000 Total Projects $8,621,113 $3,920,050 $3,557,000 $3,822,700 $4,547,700 *Includes planning and design costs only **LEU Office Renovation Project will commence in FY 2021 5-Year Financial Forecast Looking Ahead 6 FY 19/20 Estimated FY 20-21 Forecast FY 21-22 Forecast FY 22-23 Forecast FY 23-24 Forecast Available Cash $30,022,293 $28,897,403 $27,637,728 $25,677,321 $22,719,975 Days Cash 161 145 140 127 111 Reserve Target $22,512,000 $23,358,000 $23,372,354 $23,796,462 $23,948,823 % of Target 133%124%118%108%95% •FY 19/20 projection includes ~$3.5 million in bill credit assistance due to COVID-19 •Current forecast indicates needed rate adjustment of approximately 2 percent by Fiscal Year 2024 to meet Council established reserve targets. •Staff will continue to evaluate and implement cost saving measures and update Council accordingly. •Current forecast assumes funding of all budgeted full-time positions. •LEU currently has 6 full-time vacancies Power Sales (March 31, 2020) 7 Power Sales (kWh) Customer Class Budget Actual Residential 156,294,837 119,883,312 Small Commercial 159,140,314 120,530,972 Large Commercial/Small Industrial 46,249,031 31,697,019 Industrial 62,480,889 47,019,534 Total 424,165,071 319,130,837 Revenue ($) Customer Class Budget Actual Average Rate Residential $ 27,853,848 $ 23,023,229 $ 0.1920 Small Commercial $ 28,167,008 $ 20,994,673 $ 0.1742 Large Commercial/Small Industrial $ 7,408,165 $ 5,217,358 $ 0.1646 Industrial $ 7,653,309 $ 5,759,615 $ 0.1225 Total $ 71,082,330 $ 54,994,875 $ 0.1723 ECA Revenue (March 31, 2020) 8 Customer Class Total ($) Residential $ 1,860,500 Small Commercial $ 1,888,396 Large Commercial / Small Industrial $ 506,841 Industrial $ 689,806 Total Revenue $ 4,945,543 9 Electric Utility Fund Operating Results (March 31, 2020) Budget Actual % of Budget Personnel $ 8,593,370 $ 6,344,225 74% Supplies, Materials, Services $ 4,679,722 $ 1,836,631 39% Other Payments $ 1,783,020 $ 708,310 40% Utilities $ 81,500 $ 51,579 63% Total Operating Expenses $ 15,137,612 $ 8,940,745 59% Power Supply Costs (March 31, 2020) 10 Budget Actual % of Budget Generation $ 29,722,900 $ 22,368,271 75% Transmission $ 10,540,550 $ 7,773,325 74% Management Services $ 1,345,980 $ 1,252,496 93% Total Power Supply Costs $ 41,609,430 $ 31,394,092 75% Load Coverage 11 •LEU continues to meet or exceed Risk Management targets •Includes purchases approved through April 2020 by the Risk Oversight Committee 12 Risk Oversight Committee (ROC) Report Highlights •Two ROC meetings held January –March 2020 –Forward energy purchases approved to cover open positions in Summer/Fall 2020 –Discussed confidential Cap and Trade strategy and activities –Provided information and updates regarding Lodi Energy Center –Approved purchase of Portfolio Content Category 3 RPS resources –Approved purchase of short-term Portfolio Content Category 1 RPS resource 13 Strategic Areas of Focus Project Highlights •Customer –Issued ~$3.5 million in customer bill credits to help mitigate financial hardships resulting from COVID-19 –Expanded CARE Program financial assistance for low-income and fixed-income customers –Public outreach campaign recently launched •Lodi Electric CARES (Community-owned, Affordable, Reliable, Electric Service) •Advertising in Lodi News-Sentinel •Advertising on buses, bus shelters and billboards throughout town •Technology –Broadband Feasibility Study underway –Final testing of “last gasp” feature for electric meters to automatically notify Outage Management System –Contract nearly complete with ITRON for remote connect/disconnect meters to address employee safety 14 Strategic Areas of Focus Project Highlights (continued) •Financial –Secured short-term agreement with Nevada Irrigation District for additional RPS hydroelectric resources through December 2021 •Reliability –Contract negotiations underway for distribution system study –Line Department completed inspection of ~40% of overhead distribution system during COVID event –Significant progress continues with vegetation management activities •Workforce Planning –3 internal promotions •(2) Engineering Tech and Lineman to Operations •(1) Lineman to Construction/Maintenance Supervisor –6 Full-Time Vacancies •(3) Engineering; (2) Line Department; (1) Field Services