HomeMy WebLinkAboutAgenda Report - March 17, 2021 C-14AGENDA ITEM
CITY OF LODI
COUNCIL COMMUNICATION
TM
AGENDA TITLE: Adopt Resolution Reviewing and Maintaining the Current Electric Utility Reserve
Policy
MEETING DATE: March 17, 2021
PREPARED BY: Electric Utility Director
RECOMMENDED ACTION: Adopt a resolution reviewing and maintaining the current Electric
Utility Reserve Policy.
BACKGROUND INFORMATION: The Electric Utility (EU) Reserve Policy requires an assessment of
the targets identified with a report to the City Council every three
years. The last review was completed in March 2018.
Since 2011, the formula for establishing the EU reserve policy has remained unchanged. The actual
dollar amounts have been reviewed and updated each year by the Risk Oversight Committee (ROC) in
accordance with the approved annual budget. The approved formula for those targets as well as the
specific targets for Fiscal Year 2020/21 are as follows:
Fund Desi nation
Basis
For FY 2021
Operating Reserve
90 days cash on hand
$18,118,000
Capital Reserve
Largest distributions stem contingency
$ 1,000,000
NCPA General Operating
Reserve
Identified by NCPA plus allowance for
unantici ated studies
$ 4,540,000
Total Target
$23,658,000
Per the most recent EU Quarterly Financial Report, EU had total unrestricted cash reserves of $44.6
million and, based on the current formula, was meeting 189 percent of the current council reserve policy
target. It is important to note that EU funds its capital improvement and maintenance activities with cash
reserves and has over $20 million programmed for such efforts over the next 5 years as identified in the
City's 5 -Year Capital Improvement Plan.
A recent survey reveals that EU's operating and capital reserves fall within the reserve target ranges
established by other utilities. As such, the ROC recommends that the formula for calculating the reserve
targets be maintained as represented above.
While financial reserves are currently strong and stable, EU will continue to monitor and evaluate the
potential impacts associated with the COVID-19 pandemic, including utility bill delinquencies. Should the
ROC recommend a change to EU's reserve policy targets prior to the next required review in 2024, staff
will bring those recommendations back to Council for review and consideration.
FISCAL IMPACT: The funding needed to meet the revised Policy will be evaluated each year
as part of LEU's annual review and update of its financial forecast.
APPROVED: Steve SchwabaUer
Stephen Schwabauer, City Manager
Adopt Resolution Reviewing and Maintaining the Current Electric UtHKy Reserve Poliq
March 17, 2021
Page 2 of 2
FUNDING AVAILABLE: Not applicable.
Andrew Keys
Andrew Keys
Deputy City Manager/Internal Services Director
Jeff Berkheimer
Electric Utility Director
Signature: 00artu'r 'wT
Email: akeys@iodi.gov
=06M1111156]H R63011MIMI
A RESOLUTION OF THE LODI CITY COUNCIL
REVIEWING AND MAINTAINING THE CURRENT
ELECTRIC UTILITY RESERVE POLICY
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WHEREAS, the City Council approved Resolution No. 2011-39 approving a financial
reserve policy for the Electric Utility (EU); and
WHEREAS, this policy requires an assessment of the targets identified with a report to
the City Council every three years with the last review completed in March 2018; and
WHEREAS, since 2011, the formula for establishing the EU reserve policy has remained
unchanged; and
WHEREAS, the actual dollar amounts have been reviewed and updated each year by
the Risk Oversight Committee (ROC) in accordance with the approved annual budget; and
WHEREAS, on March 1, 2021, the ROC recommended that the formula for calculating
the reserve targets be maintained.
NOW, THEREFORE, BE IT RESOLVED that the Lodi City Council does hereby approve
the review and maintenance of the current EU Reserve Policy formula as follows with the
annual dollar targets to be updated by the ROC each year:
_ Fund Designation
Operating Reserve
Capital Reserve
NCPA General Operating
Reserve
Total Target
Dated: March 17, 2021
90 days cash on hand
Largest distribution system
contingency,
Identified by NCPA plus allowance
for unanticipated studies
For FY 2021_
$18,118,000
$ 1,000,000
$ 4,540,000
$23,658,000
I hereby certify that Resolution No. 2021-71 was passed and adopted by the City
Council of the City of Lodi in a regular meeting held on March 17, 2021, by the following vote:
AYES: COUNCIL MEMBERS — Chandler, Hothi, Khan, Kuehne, and
Mayor Nakanishi
NOES: COUNCIL MEMBERS — None
ABSENT: COUNCIL MEMBERS — None
ABSTAIN: COUNCIL MEMBERS — None
6:��JENNIF CUSMIR
City Clerk
2021-71